[Senate Hearing 108-629]
[From the U.S. Government Publishing Office]
S. Hrg. 108-629
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2005
=======================================================================
HEARINGS
before a
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
on
H.R. 4766/S. 2803
AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD
AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 2005, AND FOR OTHER PURPOSES
__________
Department of Agriculture
Department of Health and Human Services: Food and Drug Administration
Nondepartmental witnesses
__________
Printed for the use of the Committee on Appropriations
Available via the World Wide Web: http://www.access.gpo.gov/congress/
senate
__________
U.S. GOVERNMENT PRINTING OFFICE
92-131 WASHINGTON : 2004
_________________________________________________________________
For sale by the Superintendent of Documents, U.S. Government Printing
Office Internet: bookstore.gpo.gov Phone: toll free (866)512-1800;
DC area (202) 512-1800 Fax: (202) 512-2250 Mail: Stop SSOP,
Washington, DC 20402-0001
COMMITTEE ON APPROPRIATIONS
TED STEVENS, Alaska, Chairman
THAD COCHRAN, Mississippi ROBERT C. BYRD, West Virginia
ARLEN SPECTER, Pennsylvania DANIEL K. INOUYE, Hawaii
PETE V. DOMENICI, New Mexico ERNEST F. HOLLINGS, South Carolina
CHRISTOPHER S. BOND, Missouri PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky TOM HARKIN, Iowa
CONRAD BURNS, Montana BARBARA A. MIKULSKI, Maryland
RICHARD C. SHELBY, Alabama HARRY REID, Nevada
JUDD GREGG, New Hampshire HERB KOHL, Wisconsin
ROBERT F. BENNETT, Utah PATTY MURRAY, Washington
BEN NIGHTHORSE CAMPBELL, Colorado BYRON L. DORGAN, North Dakota
LARRY CRAIG, Idaho DIANNE FEINSTEIN, California
KAY BAILEY HUTCHISON, Texas RICHARD J. DURBIN, Illinois
MIKE DeWINE, Ohio TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas MARY L. LANDRIEU, Louisiana
James W. Morhard, Staff Director
Lisa Sutherland, Deputy Staff Director
Terrence E. Sauvain, Minority Staff Director
------
Subcommittee on Agriculture, Rural Development, and Related Agencies
ROBERT F. BENNETT, Utah, Chairman
THAD COCHRAN, Mississippi HERB KOHL, Wisconsin
ARLEN SPECTER, Pennsylvania TOM HARKIN, Iowa
CHRISTOPHER S. BOND, Missouri BYRON L. DORGAN, North Dakota
MITCH McCONNELL, Kentucky DIANNE FEINSTEIN, California
CONRAD BURNS, Montana RICHARD J. DURBIN, Illinois
LARRY CRAIG, Idaho TIM JOHNSON, South Dakota
SAM BROWNBACK, Kansas MARY L. LANDRIEU, Louisiana
TED STEVENS, Alaska ROBERT C. BYRD, West Virginia
(ex officio) (ex officio)
Professional Staff
Pat Raymond
Fitz Elder
Hunter Moorhead
Galen Fountain (Minority)
Jessica Arden (Minority)
William Simpson (Minority)
Administrative Support
Dianne Preece
Meaghan L. McCarthy (Minority)
C O N T E N T S
----------
Thursday, March 25, 2004
Page
Department of Agriculture: Office of the Secretary............... 1
Thursday, April 1, 2004
Department of Agriculture........................................ 107
Department of Health and Human Services: Food and Drug
Administration................................................. 184
Wednesday, April 7, 2004
Department of Agriculture........................................ 273
Nondepartmental witnesses........................................ 409
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2005
----------
THURSDAY, MARCH 25, 2004
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 1:36 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Robert F. Bennett (chairman)
presiding.
Present: Senators Bennett, Bond, Craig, Kohl, Harkin,
Dorgan, and Durbin.
DEPARTMENT OF AGRICULTURE
Office of the Secretary
STATEMENT OF ANN M. VENEMAN, SECRETARY
ACCOMPANIED BY:
KEITH COLLINS, CHIEF ECONOMIST
STEPHEN DEWHURST, BUDGET OFFICER
Senator Bennett. The Subcommittee will come to order, and
we welcome you all here to the first hearing of the Agriculture
Subcommittee of the Senate Appropriations Committee.
Last year was a very challenging year, because our
allocation was almost $1 billion less than the previous year in
fiscal 2003, but with some heavy lifting and a lot of help by
Senator Kohl, we managed to write a balanced bill that seemed
to solve the problems, and we congratulated ourselves and
thought that we had set the level that we might be asked to
hold this year.
However, the budget request for this year is over a half a
billion dollars less than last year. So maybe there is no
virtue, Senator Kohl, in having given at the office. They come
back to us again. But we do not have our formal allocation, but
at least from the budget request, it looks as if it is going to
be even more challenging this year than it was last, and I very
much appreciate the cooperation and continuing support that
Senator Kohl has given.
Before we begin, I would like to acknowledge the efforts of
Secretary Veneman with respect to recently announced 110 metric
tons of wheat destined for export to Iraq. This is a
significant contribution toward moving Iraq in the direction
which we want it to move, and we are grateful to the Secretary
for her efforts in bringing that to pass.
We have a host of issues that we are facing and expect to
talk about many of them this afternoon, and so, with a lot of
ground to cover, I would ask the witnesses if they would
summarize their statements. And we will be using the 5 minute
timer, both for opening statements and for questioning. We can
do additional rounds if Senators wish to do that, but given the
number of things we need to talk about, I would like to have
the discipline of the 5 minute timer.
And to try to set the example, I will now cease here and
recognize Senator Kohl.
Senator Kohl. I thank you, Mr. Chairman, Senator Bennett. I
want to congratulate you for the superb job you and your staff
have done in guiding this Subcommittee last year and for
crafting the fiscal year 2004 bill under trying circumstances.
Secretary Veneman, we want to welcome you and your
colleagues to appear before us once again this year. We just
passed through a most challenging year for USDA and all of us
involved in U.S. agriculture. The year ahead shows no signs of
relief. We will continue to focus on the needs of farmers and
ranchers, invasive pests and disease, demands for food
assistance, threats to public health and consumer confidence,
notably the December discovery of mad cow disease, and many
other challenges.
However, the President has submitted a budget proposal for
us for the second year in a row with major reductions,
reductions which are among the very largest of any Federal
department. Madam Secretary, we hope that you will be able to
explain to us today why the budget for the Department of
Agriculture continues on a severe downward slope. You are the
primary spokesperson in this country for rural America, and
your voice needs to be heard and heard loudly within the
highest levels of the administration.
As challenging as your tasks continue to be, Madam
Secretary, our job this coming year will be no less difficult.
Downward budget pressures on this Subcommittee will continue to
make our choices difficult and leave our opportunities
diminished.
So, Mr. Chairman, I look forward to continuing our strong
working relationship in order to meet the problems ahead of us.
Thank you very much.
Senator Bennett. Thank you, Senator. I appreciate that very
much.
Senator Craig.
Senator Craig. Mr. Chairman, thank you. I will be brief.
We are anxious to hear your testimony. As I have done
privately, let me publicly again congratulate you, Madam
Secretary, for your leadership in several areas, but most
important to my state and I expect to the State of Utah and to
Senator Kohl's state was I think the masterful way that USDA
and you handled the issue of mad cow.
I say so because it was a volatile issue. You stayed on top
of it. You were quick to demonstrate to the American consumer
the safety of the American meat supply while at the same time
moving judiciously and responsibly to get it under control. So
my congratulations to you on that.
I am, as most of us are, extremely frustrated by some
things going on in farm country today against production
agriculture; that is, outside their control. While we look at
the increase of $4 billion in mandatory spending in your budget
and about a $720 million decrease in discretionary outlays,
that is no small sum and a very real frustration as we try to
solve a couple of issues or work with Agriculture to do so.
Let me point out a couple of them. In the 2002 Farm Bill,
we worked hard to improve the energy title. We were not able to
do that. We will work again to be able to do that this year, to
extend larger loans, guarantees and grants to farmers and
ranchers and rural businesses purchasing renewable energy
systems, because energy has become a huge factor in production
agriculture at this moment, and it will be in the near future.
Yesterday, Madam Secretary, I was visiting with a banker
from Idaho who extends a lot of lines of credit to Idaho
agricultural producers. He said he had just called all of his
managers of the branches together on a conference call and
asked them to examine all of the lines of credit of his farmers
this year, and if those lines would handle at least a 20
percent increase based on one sole input factor: energy and the
cost of energy.
Energy as an input part of production agriculture this year
will go up between 25 and 30 percent at the farm gate. Nothing
will offset that. There is not a commodity out there that is
going to increase enough this year in any way to offset that.
And that is a direct response to the inability of this Congress
to produce a national energy policy and get us back into the
business of production.
Let me give you one other figure that has just come out. In
the 46 months since 2000 until today, increased natural gas
prices have taken $130 billion out of this economy: in
industrial consumers, $66 billion; residential consumers, $39
billion; commercial consumers, $25 billion. Shame on Congress.
Shame on those who stand in the way of energy production in
this country today.
And what does that do to the farmer? You and I both know.
The input cost of fertilizer this year, 100 percent up from a
year ago; 100 percent. Now, that will do one of two things.
First of all, the farmers I talk to are saying we are not
buying forward; we are buying it as delivered. We will use much
less fertilizer this year than we did last. Maybe in some
areas, that is okay. But it runs the risk of the overall
production in agriculture dropping this year as it relates to
the ability to produce at certain levels, and those margins of
production, in some instances, were the margin of
profitability, and now, you drive that cost of production up,
and so, you ultimately drive production down because of its
cost factors.
You have no control of the price of energy, nor does this
administration. But the Congress has fumbled and fumbled and
fumbled once again, and for 10 years, we have debated national
energy policy. We have done nothing since 1992 in any positive
way as it would relate to the increased production of energy.
How do we, then, for the American farmer, offset those
dramatic increases in production costs? That is a phenomenal
challenge for you and for this Congress in difficult budget
times. So shame on Congress for standing in the way of this
country beginning to produce once again for its consumer and
especially for American agriculture.
Thank you, Mr. Chairman.
prepared statements
Senator Bennett. Thank you very much, Senator Craig.
The Subcommittee has received statements from Senators Byrd
and Johnson which will be placed in the record.
[The statements follow:]
Prepared Statement of Senator Robert C. Byrd
Secretary Veneman, thank you for coming before this committee
today.
Over the past 3 years, I have made funding for the proper
enforcement of the Humane Methods of Slaughter Act one of my top
priorities. In the fiscal year 2001 supplemental appropriations bill, I
secured $1.25 million for the hiring of 17 District Veterinary Medical
Specialists at the Food Safety Inspection Service. Report language
accompanying that bill instructed these new inspectors to work solely
on the enforcement of the Humane Methods of Slaughter Act. Prior to my
securing this funding for DVMS personnel, there were no inspectors
employed by the USDA exclusively for this purpose.
During the consideration of the fiscal year 2003 omnibus
appropriations bill, the Senate included, at my request, $5 million for
the hiring of at least 50 full-time equivalent humane slaughter
inspectors also for the sole purpose of humane slaughter enforcement.
The fiscal year 2004 omnibus appropriations bill includes continued
funding for the 50 full-time equivalent humane slaughter inspectors and
the 17 District Veterinary Medical Specialists.
Last year, Secretary Veneman, when you testified before this
committee, I expressed my deep concern about the proper use of the $5
million for at least 50 full-time equivalent humane slaughter
inspectors by the U.S. Department of Agriculture. The purpose of this
funding is to ensure that the industry works to minimize pain and
suffering of defenseless animals. By adding 50 full-time equivalent
inspectors devoted exclusively to enforcing humane slaughter methods,
along with 17 District Veterinary Medical Specialists, the USDA will
finally have the resources to enforce a law that was enacted nearly 25
years ago.
Earlier this year I was pleased to learn that the 50 FTE inspectors
are now in place at the USDA. The Department is now heading down the
right path with regard to humane slaughter enforcement. But there is
still more that can and needs to be done to eliminate operations that
raise and slaughter livestock in unspeakable conditions--conditions
where the animals do not even have room to lie down and where animals
are not properly stunned before beginning the process of dismemberment.
Such facilities are operating illegally and it is the responsibility of
the USDA to identify these violations and stop the production line when
violations are observed. Today it is my hope that we will hear from
you, Madame Secretary, about the progress that has been made by the
USDA over the last year regarding humane slaughter enforcement with the
funding this committee provided, and how the USDA plans to continue to
improve its enforcement of the Humane Methods of Slaughter Act with
future funding.
______
Prepared Statement of Senator Tim Johnson
Mr. Chairman and Members of the Agriculture Appropriations
Subcommittee, I appreciate the opportunity to submit a statement at
today's hearing, and address important issues for our Nation's farmers
and ranchers. As the Senate considers the fiscal year 2005 Agriculture
Appropriations bill, I find several issues at the forefront for the
producers in my home state of South Dakota and across the Nation. I
would like to take this opportunity to address these important issues,
and question United States Department of Agriculture Secretary Ann
Veneman on the Department's action, or in some unfortunate
circumstances, inaction, on these concerns.
Country of origin labeling (COOL) remains an overwhelmingly popular
concept with American consumers and producers. Not only would this
provision facilitate consumer choice and confidence, it would also be
greatly beneficial for our Nation's producers and the agricultural
economy in general. The General Accounting Office (GAO) study that I
requested during the summer of 2002, along with my colleague Senator
Tom Daschle, confirms that COOL would be feasible to implement not only
from a budget perspective, but also by incorporating existing regional
and state programs for record-keeping and tracking purposes. GAO found
that ``USDA used higher estimates of the hourly cost of complying with
the recordkeeping requirements of the COOL law than it used in
developing similar estimates for other programs and it has no
documented evidence to justify these differences.''
The Administration's handling of the country of origin labeling
delay, in addition to their position on the country of origin labeling
debate, has consistently been problematic and difficult. While
opponents of COOL were successful in securing a 2-year delay on
implementation of labeling for meat and produce, many unanswered
questions still exist regarding what type of delay was enacted. While
the mandatory date of implementation was postponed for 2 years, I
believe the rulemaking process has remained unhindered by the delay
language included in the 2004 Omnibus Appropriations measure. I wrote
USDA on December 11, 2003, requesting clarification of the department's
interpretation of the language delaying the implementation of COOL. I
was greatly disappointed by the vague and ambiguous response in the
letter I received dated February 10, 2004.
To deny country of origin labeling to America's consumers and
producers is unacceptable; for USDA to remain evasive and unresponsive
in attending to this issue is inexcusable. I intend to seek
clarification of the rule pertaining to the delay. My first meat
labeling bill was introduced in the House of Representatives 12 years
ago, in 1992, and I will persist in working to speed up implementation
of this invaluable and effective law with my colleagues. A majority of
producer groups support implementation of COOL and consumers are
expecting swift implementation. Country of origin labeling should be
implemented for all products in a timely fashion, not only for the fish
producers whose special interests were represented during closed-door
consideration of the fiscal year 2004 Omnibus Appropriations bill.
Furthermore, I am very concerned that an adequate amount of funds
be available for small and medium-sized producers. Our family farmers
and ranchers in South Dakota and across the Nation deserve adequate
representation in the fiscal year 2005 Agriculture Appropriations bill.
I was pleased to see that Senator Charles Grassley's (R-Iowa)
amendment, which would alter payment limitations and cap excessive
compensation to large farms, was adopted on this year's budget
resolution. I support this amendment. This funding would instead be
channeled toward worthwhile and essential conservation and development
programs, which are beneficial to producers in South Dakota and across
the Nation.
With respect to the President Bush's budget recommendation, the
President has cut spending to seven of the fifteen Cabinet level
agencies, including an unacceptable 8.1 percent cut to agriculture and
an astounding 10 percent cut to rural development programs.
Conservation programs have experienced a 12 percent cut, and research
has been cut by 3 percent. Our rural communities are irreplaceable, and
regardless of budgetary constraints, we must place a high priority on
rural America. It is an essential component for a stable and productive
Nation.
Furthermore, we must ensure that a marketplace exists for the
quality products our Nation's farmers produce, and we must ensure that
consumer confidence in our food supply remains high. I sent a letter to
President Bush requesting that he make funding for meat and livestock
testing a priority in his fiscal year 2005 budget request. USDA's
budget includes $60 million in new spending for Bovine Spongiform
Encephalopathy (BSE) related programs, while allotting $17 million for
an additional 40,000 BSE tests a year. While I am pleased to see an
increase in funding for animal disease measures, there are several
problematic aspects of testing which must be resolved. Animals can only
be tested after slaughter, and it can take up to two weeks to receive
test results. USDA should be committed to the development of a rapid,
live test, which is an endeavor that we cannot afford to compromise.
Producers in my home state of South Dakota continue to suffer from
closed export markets, and USDA must do everything they can to ensure
the viability of our agriculture economy.
Additionally, the President's budget includes $33 million for the
development of a national animal identification program. I am concerned
that we have no information as to how this money will be spent, nor do
we have any knowledge of how this system will work. It is my
understanding that at the March 4, 2004, Senate Marketing, Inspection,
and Product Promotion Subcommittee oversight hearing on a national
animal identification plan, USDA's testimony left a lot to be desired.
The broad statement that was given provided little substantive
information on issues of cost and transparency. Cost estimates are all
over the board, and are often twice the amount allotted by the
President's budget. This lack of consistency is disturbing.
Implementing a national animal identification program is a
substantial endeavor with direct impacts on our Nation's farmers and
ranchers, and we must ensure that the process by which this system is
established is open and transparent. It is imperative that an animal
identification system is effective and feasible for all parties
involved. Questions regarding confidentiality and cost to the producer
are still answered. It is my hope that USDA will work jointly with the
affected parties to arrive at a sound system.
In conclusion, I am hopeful that USDA will respond appropriately to
the looming concerns for our Nations' farmers and ranchers. I will do
everything possible to ensure they get a fair deal and are well-
represented as Congress considers such important issues, which will
affect their bottom line and productivity.
Senator Bennett. Secretary Veneman, when I talked about
opening statements to 5 minutes, I did not mean you.
Secretary Veneman. Oh, good. I was panicking.
Senator Bennett. You were panicking; all right.
We will give you 6\1/2\ minutes.
No, we appreciate your being here, and we recognize that
while you will, I am sure, submit your written statement for
the record, we want to give you ample time for your verbal
statement, and we now turn to you and very much appreciate your
appearing here.
STATEMENT OF ANN M. VENEMAN
Secretary Veneman. Thank you very much, Mr. Chairman and
members of the Committee. It is a pleasure to be with you
today. I appreciate the opportunity to appear before you today.
Senator Bennett. I do not think your microphone is on.
There is a button to press.
Secretary Veneman. Okay.
Senator Bennett. That helps, yes.
Secretary Veneman. I want to thank the Subcommittee and
each of you for the support of the Department and for the
support of American agriculture, and we look forward to
continuing to work with all of you as we craft the 2005 budget.
As you indicated, we have a longer statement for the
record, and we would ask that it be included in the record. But
I wanted to provide a quick overview of what our budget does
provide. First, it is consistent with the policy book that we
put out at the beginning of this Administration, Food and
Agriculture Policy: Taking Stock for the 21st Century, and it
supports USDA's strategic plan, both of which are designed to
enhance economic opportunities for agricultural producers,
support increased economic opportunities and improve the
quality of life in rural America, protect America's food supply
and our agriculture system, improve nutrition and health; and
conserve and enhance our natural resources and environment.
As you know, we are in a time of fiscal constraint. The
President has proposed a responsible budget across the Federal
Government, which holds non-defense and non-homeland security
discretionary spending increases to no less than 1 percent. At
the same time, his budget funds key priorities such as
continuing the war on terror, protecting homeland security,
strengthening the economy and jobs and health care
affordability.
His budget puts our Nation on track to reduce the deficit
by one-half within 5 years. The budget for USDA faces those
same fiscal realities. Our proposals focus and maintain
resources to meet our strategic goals. The numbers and data we
present today build upon the Omnibus Appropriations Bill for
2004, and of course this means we do not have the confusion we
had last year when we were working on the 2004 budget without a
2003 budget, which made comparison very difficult.
The 2005 budget focuses on our key priorities, as I
indicated, including strengthening food safety and pest and
disease prevention and eradication, continuing the
administration of the 2002 Farm Bill, and that includes many
increases in conservation funding, providing an unprecedented
funding for a food and nutrition safety net, expanding
agricultural trade, investing in our rural sector, supporting
basic and applied sciences, and improving USDA's program
delivery and customer service.
The 2005 USDA budget calls for $82 billion in spending.
This is an increase of $4 billion or about 5 percent above the
2004 level. The Department's request for discretionary
appropriations for ongoing programs within the jurisdiction of
the Subcommittee is $16.2 billion. Due to some user fee
proposals and other adjustments reflected in the budget, the
net amount requested is $14.9 billion.
And now, I would like to review some of the details: first,
looking at the safeguarding of America's homeland and
protecting the food supply, the President's 2005 budget funds
an interagency initiative to improve the Federal Government's
capability to rapidly identify and characterize a bioterrorist
attack. This initiative will improve national surveillance
capabilities in human health, food, agriculture and
environmental monitoring.
In keeping with the President's commitment to homeland
security, the USDA budget for 2005 includes $381 million, to
support the Food and Agriculture Defense Initiative. These
funds would enhance monitoring and surveillance of pests and
diseases in plants and animals, support research on emerging
animal diseases, increase the availability of vaccines,
establish a system to track select disease agents of plants;
expand the Regional Diagnostic Network to all 50 States; and
the bulk of the funding goes to completing the National Centers
for Animal Health in Ames, Iowa, which is the single largest
item under this initiative at $178 million.
The research and diagnostic activities at the Ames complex
are a critical part of our Bovine Spongiform Encephalopathy
(BSE) response as well as our work on other animal diseases. In
light of the discovery of a BSE-positive cow, first in Canada
last May 20 and another on December 23 in Washington State, I
announced on December 30 a series of actions to strengthen
protection of the food supply, public health and animal health.
USDA's actions are based on our BSE response plan, which
has been in place since 1990, and it has continuously evolved,
based on current knowledge of the disease. We are committed to
ensuring that there is a strong BSE surveillance program in
place in this country, and in that regard, on March 15, I
announced the details of an expanded surveillance program which
reflects the recommendations of the international scientific
panel.
Our goal is to greatly expand the testing of high-risk
cattle as well as testing a sampling of the normal, older
cattle population. The budget also requests increases in
funding for other BSE-related activities in the amount of $60
million, which includes increases for advanced animal testing,
acceleration of the National Animal Identification System and
some funds for the Grain Inspection, Packers and Stockyards
Administration to enable rapid response teams to deal with BSE-
related complaints regarding contracts or lack of prompt
payment.
It would also include some funds for our Food Safety and
Inspection Service to conduct monitoring and surveillance of
compliance with regulations for specified risk materials and
advanced meat recovery.
As we have responded to the BSE situation, we have been
constantly guided by what has been in the best interests of
public health. We received a report from an international panel
of experts about how the BSE incident in Washington was handled
which indicated that the Department had done a comprehensive
and thorough epidemiological investigation, and the
investigation was concluded on February 9.
Protecting the food supply and public health is one of the
primary missions of USDA, and this focus is reflected in the
budgets of this Administration. The budget for 2005 seeks a
record level of support for USDA's Food Safety and Inspection
Service, or what we call FSIS, meat and poultry food safety
programs as well as increases to strengthen food and
agriculture protection systems. These areas of our budget have
been top priorities for the Administration since we came into
office.
This additional funding continues to build upon a solid
record of achievement to further strengthen our agricultural
protection systems to ensure the integrity of our food supply.
The FSIS funding request would increase to a program level of
$952 million, which would be an increase of $61 million over
the 2004 level. This represents an increase of $170 million or
22 percent in food safety programs since the Administration
took office in 2001.
The $952 million for FSIS comprises $828 million in
appropriated funds and the continuation of existing user fees
as well as $124 million in new user fees for inspection
services that are provided beyond one approved inspection
shift. The FSIS funding would support 7,690 meat and poultry
inspectors, and it would provide specialized training for the
inspection work force, increase microbiological testing and
sampling, strengthen foreign surveillance programs and increase
public education efforts.
USDA is working on the Nation's fastest growing public
health problem--obesity. As part of the President's Healthier
US Initiative, USDA is working with the Department of Health
and Human Services to promote good nutrition and physical
activity. The Department's 2005 budget includes just over $700
million for nutrition research, education and promotion
programs, including an increase of $33 million, most of which
is focused on obesity-related initiatives.
I also would like to point out that for the first time, the
subject of a healthier food supply and the topic of obesity
were major issues at this year's Agricultural Outlook Forum. As
I said in my Outlook speech, we need to make people more aware
of the dangers of being overweight and figure out ways to
reverse what is becoming an increasingly dangerous trend in
America's eating habits.
Next, the President's budget supports the continued
implementation of the 2002 Farm Bill. Our employees at USDA
have worked very, very hard to implement this Farm Bill, and
they have done so quickly and efficiently. We appreciate their
outstanding efforts, both from our staff here in Washington,
DC, as well as the staff all over the country in our county and
state offices.
Funds are provided in the budget to support continued
implementation of the Farm Bill, and we are in the process of
implementing the largest and most far-reaching Farm Bill
conservation title ever. It represents an unprecedented
investment in conservation that will have significant and long-
lasting environmental benefits. Total program-level funding for
Farm Bill conservation programs increases from about $2.2
billion in 2001 when this Administration took office to $3.9
billion in the 2005 budget proposal. This is an increase of
$385 million or almost 11 percent over the amount of 2004.
The expanded programs include $2 billion for the
Conservation Reserve Program, an increase of $76 million over
2004; $1 billion for the Environmental Quality Incentives
(EQIP) Program, which is an increase of $25 million over 2004;
$295 million for the Wetlands Reserve Program, to enroll an
additional 200,000 acres, which is an increase of $15 million;
$209 million for the new Conservation Security Program, which
is an increase of $168 million; and $125 million for the Farm
and Ranch Lands Protection Program, an increase of $13 million.
The 2005 budget also reflects the Bush Administration's
continued commitment to nutrition and fighting hunger by
including a record $50.1 billion for domestic food assistance
programs, which is a $2.9 billion increase over 2004. Our
continued support for these programs follows the course of
compassion that has been set by President Bush. The Food and
Nutrition Service's budget supports an estimated 24.9 million
Food Stamp participants, and that compares to 23.7 million in
2004; a record level of 7.86 million low-income nutritionally
at-risk Women, Infants and Children Program (WIC) participants,
which compares to 7.8 million in fiscal year 2004; and an
average of 29.2 million school lunch children each day in the
school lunch program, and that compares to 28.7 million in
fiscal year 2004.
Particularly with the WIC and School Lunch Programs, we are
reaching more Americans and helping to educate them about
healthy eating and the importance of balanced diets. These
efforts help support the President's Healthier US Initiative,
and many of these services are delivered in cooperation with
our partners under the President's Faith-Based and Community
Initiatives. The budget includes a $3 billion contingency
reserve for the Food Stamp Program and $125 million contingency
reserve for the WIC program to be available to cover
unanticipated increases in participation in these programs.
One of the most important ways to expand opportunities for
American agriculture is through trade, by maintaining and
opening markets for our products. We have seen this close tie
between agriculture and markets with the BSE situation. The
2005 budget continues a strong commitment to export promotion
and foreign market development efforts by proposing $6.6
billion for our international programs and activities.
Since this Administration took office, these programs have
experienced significant growth by increasing by more than $1.4
billion or 27 percent since 2001. Funding for USDA's market
development programs, including the Market Access Program and
Cooperator Program are maintained at the current year level of
$173 million. Funding is provided for a new initiative to
modernize FAS's IT systems and applications and improve
telecommunications systems in order to provide more effective
and efficient services to cooperators and the public and to
help bolster our trade policy and trade expansion efforts.
A program level of $4.5 billion is provided for the
Commodity Credit Corporation export credit guarantees
activities. Concerning global food aid, the efficiency and
productivity of American farmers has allowed the United States
to lead the world in this important area. More than $1.5
billion is requested for U.S. foreign food assistance
activities, including $75 million for the McGovern-Dole
International Food for Education and Child Nutrition Program, a
50 percent increase over 2004. So clearly, this budget
continues to provide strong support for development of markets
and assistance to those most in need around the world.
We have also worked hard in this budget to provide funding
for infrastructure and to enhance economic opportunities and
the quality of life in rural America. The Administration
proposes $11.6 billion for rural development programs, down
from the 2004 level, due in large part from lower projections
of the demand for loans, particularly electric and distance
learning loans.
Of the total amount, $3.8 billion is for direct and
guaranteed Section 502 single-family housing loans. These
programs are a crucial part of USDA's effort to support the
President's Minority Homeownership Initiative, which has the
goal of homeownership for an additional 5.5 million minority
families by the end of the decade. In addition, $1.4 billion is
requested for the Water and Waste Disposal Loan Program, which
will provide about 650,000 rural families with new or improved
water and waste disposal facilities.
The budget proposes $331 million for broadband loans and
loan guarantees in 2005, building upon the $2.2 billion in
funding that has been provided over the last several years.
Finally, the budget supports the Department's strategic plan
and our continued efforts to implement the President's
management agenda, which focuses on improving performance and
results in government. USDA is one of only eight out of a total
of 26 Federal agencies to be scored at green, or the highest
level, for our progress toward all five of the major areas in
the President's management agenda, and for the second year in a
row and only the second time ever, USDA again received a clean
audit of our financial statements.
As part of our implementation of the President's management
agenda, USDA is working on several initiatives to better
integrate computer systems and technology support functions. In
so doing, we are providing employees with the tools necessary
to quickly and efficiently deliver services and to benefit our
customers. The 2005 budget will allow us to build on our
program delivery progress and our management priorities by
providing resources needed to improve customer service through
continued modernization of technology.
This includes $137 million in 2005, an increase of $18
million, to upgrade technology in the county office service
centers in order to continue to improve administration of farm
programs and customer service. Electronic government is a major
focus for USDA in 2004. By increasing our customers' ability to
interact with us over the Internet, we can save them and USDA
time and money. As part of these efforts, we are nearing
completion of a new basic computing infrastructure for all of
our field agencies so that employees and customers will be able
to share data electronically.
The budget also proposes to strengthen the security of the
Department's facilities and information technology. The budget
increases funds to focus on strengthening civil rights and
equal treatment under our programs. We need to ensure there are
adequate resources to implement our civil rights initiatives.
The budget proposes $22 million for USDA's Office of Civil
Rights, an increase of $4 million over 2004. This includes an
increase of $2 million to process complaints in a more timely
manner and an increase of $1 million to improve our tracking
and analyses of civil rights complaints.
That completes my overview of some of the key points in
this budget. Again to summarize: the 2005 budget is a
responsible budget, and it funds key priorities and programs at
USDA by focusing on the Food and Agriculture Defense
Initiative, BSE-related activities, record level support for
farm conservation programs, food safety and nutrition programs.
PREPARED STATEMENT
With that, Mr. Chairman and members of the Committee, I
want to again thank you for the opportunity to be here today.
We look forward to working with the Committee, and we would be
pleased, along with our team, to answer the questions posed by
the Committee.
Thank you very much.
[The statement follows:]
Prepared Statement of Ann M. Veneman
Mr. Chairman, Members of the Committee, it is an honor for me to
appear before you today to discuss the 2005 budget for the Department
of Agriculture (USDA). I have with me today Chief Economist, Keith
Collins; and our Budget Officer, Steve Dewhurst.
I want to thank the Committee again this year for its support of
USDA and for the long history of effective cooperation between this
Committee and the Department in support of American agriculture. I look
forward to working with you, Mr. Chairman, as well as the other Members
to make progress on these issues during the 2005 budget process and
ensure strong programs for our Nation's farm sector--but as well--the
many other USDA mission areas.
The 2005 budget calls for $82 billion in spending, an increase of
$4 billion, or about 5 percent, above the level for 2004. Discretionary
outlays are estimated at $20.8 billion, a decrease of $720 million,
over 3 percent below the 2004 level. The Department's request for
discretionary appropriations for 2005 before this Committee is $16.2
billion. Due to some user fee proposals and other adjustments reflected
in the budget the net amount requested is $14.9 billion.
The Department's budget for 2005 is consistent with this
Administration's policy book ``Food and Agricultural Policy for the
21st Century'' and it supports the USDA's Strategic Plan. Both are
designed to enhance economic opportunities for agricultural producers;
support increased economic opportunities and improved quality of life
in rural America; protect America's food supply and agriculture system;
improve nutrition and health; and conserve and enhance our natural
resources and environment.
As you know, we are in a time of fiscal constraint. The President
has proposed a responsible budget across the Federal Government which
holds non-defense and non-homeland security discretionary spending
increases to less than 1 percent. At the same time, the budget funds
key priorities, such as the continuing War on Terror, protecting
Homeland Security, strengthening the economy and jobs as well as health
care affordability. It puts the Nation on track to reduce the deficit
by one-half within 5 years.
The budget for USDA faces those same fiscal realities. Because the
budget is constrained, the Department's request is focused on key
priorities which include:
--Ensuring a safe and wholesome food supply and safeguarding
America's homeland.
--Continuing administration of the 2002 Farm Bill--the major
provisions of which we have implemented in the past year--and
includes providing historic increases for conservation funding.
--Providing record funding for a food and nutrition safety net.
--Expanding agricultural trade.
--Providing housing for rural citizens and investing in America's
rural sector.
--Providing continued support for basic and applied sciences in
agriculture.
--Improving USDA's program delivery and customer service.
With this as an overview, I would now like to focus on the specific
budget proposals for 2005.
food and agriculture defense
The infrastructure developed in response to September 11, 2001, has
enabled the Department to become a strong partner in the
Administration's biodefense initiative. The Department has worked
closely with other Government agencies participating in the Homeland
Security Council to prepare for any potential bioterrorist acts. The
2005 budget funds an interagency initiative to improve the Federal
Government's capability to rapidly identify and deal with such threats.
This initiative will improve national surveillance capabilities in
human health, food, agriculture, and environmental monitoring. It will
promote data sharing and joint analysis among these sectors at the
Federal, State, and local levels and also will establish a
comprehensive Federal-level multi-agency integration capability led by
the Department of Homeland Security (DHS) to rapidly compile these
streams of data and preliminary analyses and integrate and analyze
them.
The highlights of the $381 million USDA request to support the Food
and Agriculture Defense Initiative include:
Strengthening food defense by requesting increases totaling $38
million to:
--Establish a Food Emergency Response Network (FERN) with
participating laboratories, including implementation of the
Electronic Laboratory Exchange Network (eLEXNET) and an
electronic methods repository;
--Develop diagnostic methods to quickly identify pathogens and
contaminated foods;
--Improve surveillance and monitoring of pathogens and other hazards
in meat, poultry and eggs and establishing connectivity with
the integration and analysis function at DHS; and
--Upgrades laboratories, improve physical security; and enhance
biosecurity training and education.
Strengthening agriculture defense by requesting increases of:
--$178 million to complete the consolidated state-of-the-art
biosafety level-3 (BSL-3) animal research and diagnostic
laboratory at Ames, Iowa;
--$50 million for the Animal and Plant Health Inspection Service
(APHIS) to substantially enhance the monitoring and
surveillance of pests and diseases of plants and animals,
increase the availability of vaccines through the national
veterinary vaccine bank, increase State Cooperative Agreements
to better identify plant and animal health threats, provide
biosurveillance connectivity with the integration and analysis
function at DHS, and establish a system to track select disease
agents of plants.
--$27 million for the Cooperative State Research, Education, and
Extension Service (CSREES) to expand the Regional Diagnostic
Network, and to establish a Higher Education Agrosecurity
Program that will provide capacity building grants to
universities for interdisciplinary degree programs to prepare
food defense professionals.
--$9 million for the Agricultural Research Service (ARS) to establish
a National Plant Disease Recovery System that will quickly
coordinate with the seed industry to provide producers with
resistant stock before the next planting season, and to conduct
research on identifying, preventing and controlling exotic
plant diseases.
bse related activities
The Department has taken aggressive actions to deal with the recent
detection of a cow that tested positive for bovine spongiform
encephalopathy (BSE) in the State of Washington. The actions taken were
based on a BSE response plan which has been in place since 1990 and has
been continuously updated to reflect the latest available knowledge
about this disease. As late as August 2003, Harvard University
reaffirmed the findings of an initial 2001 study that the risk of BSE
spreading extensively within the United States is low because of the
firewalls already in place. In general, we have effectively responded
to this incident.
--Our tracing efforts were remarkably successful. After an
international panel of experts indicated that the Department
had done a comprehensive and thorough epidemiological
investigation, our investigation was concluded on February 9.
The panel also indicated that actions the Department announced
on December 30 and subsequent the Food and Drug Administration
announcements have further enhanced the protections for human
and animal health.
--We also traced the products from the slaughter of these animals and
determined that high-risk products such as brain and spinal
cord did not enter the food system. Nevertheless, all of the
beef that came out of that plant on the day in question was
recalled.
--Throughout the investigation, we regularly held briefings to inform
the public about the incident. In one week's time we announced
a series of actions to further enhance the Department's already
strong safeguards. These included, among other actions, an
immediate ban on nonambulatory or so-called downer animals from
the food system and further restrictions on specified risk
materials such as brain and spinal cord from entering the food
supply. Retailers and food service outlets are reporting
virtually no adverse effects on consumer demand as a result of
the BSE finding.
--The Department's Chief Information Officer is overseeing the design
of a National Animal Identification Program. Every effort is
being taken in the design of this system to ensure it is
technology neutral, cost effective, and does not place an undue
cost burden on the producer.
--We are also in the process of approving the use of BSE rapid test
kits to enhance our national surveillance efforts.
--We have continued to work with trading partners. Regaining export
markets is a top priority for the Administration, and the
international response must reflect what science tells us.
Unfortunately, most export markets for U.S. beef, including key
buyers--Japan, Mexico, Korea and others--immediately closed
their markets to U.S. beef, accounting for 10 percent of U.S.
beef production that now must be absorbed in the domestic
market. The loss of exports had an immediate impact on the
cattle market, resulting in an initial drop of 15 to 20 percent
in cattle prices on cash and futures markets while remaining
above year-ago levels. Despite this decline, USDA's current fed
cattle price forecast of $74 to $79 per hundredweight remains
above the previous 5-year average and would be the second
highest average price in the past 11 years.
--We are committed to ensuring that a robust BSE surveillance program
continues in this country. On March 15, we announced the
details of our expanded surveillance program which is based on
recommendations of an international scientific review panel.
The enhanced program has a goal to test as many cattle as
possible in the high-risk population, as well as to test a
sampling of the normal, aged cattle population. USDA has begun
to prepare for the increased testing, with the anticipation
that the program will be ready to be fully implemented on June
1, 2004. In the meantime, BSE testing will continue at the
current rate, which is based on a plan to test 40,000 animals
in 2004. Testing will be conducted through USDA's National
Veterinary Services Laboratory in Ames, Iowa, and a network of
laboratories around the country.
As part of the President's Budget for 2005, we are requesting $60
million, an increase of $47 million which will permit us to:
--Further accelerate the implementation of a verifiable National
Animal ID System;
--Increase the current BSE surveillance program;
--Conduct advanced research and development of BSE testing
technologies;
--Strengthen the monitoring and surveillance of compliance with the
regulations for specified risk materials and advanced meat
recovery; and
--Dispatch rapid response teams to markets experiencing BSE related
complaints regarding contracts or lack of prompt payment.
better nutrition for a healthy us
USDA is also working on the Nation's fastest growing public health
problem--obesity. The Department has a special responsibility to ensure
that participation in nutrition assistance programs such as the School
Lunch and Breakfast programs, the Special Supplemental Nutrition
Program for Women, Infants and Children (WIC) and Food Stamps,
contributes as much as it can to healthier diets and improved health
outcomes. USDA research is essential in understanding the role of the
diet in obesity and healthy weight management. USDA along with its
Federal partners at the Department of Health and Human Services (DHHS)
is responsible for developing the revised Dietary Guidelines for
Americans to be issued jointly by USDA and DHHS in January 2005. On a
parallel track, the Department is undertaking a complete reassessment
and update of the Food Guide Pyramid. These documents are the
cornerstone of Federal nutrition promotion efforts directed at all
Americans. With these efforts, USDA plays a key role in the President's
Healthier US initiative. And as part of this, USDA is working closely
with DHHS to promote good nutrition and adequate physical activity.
The Department's 2005 budget includes about $700 million for
nutrition research, education, and promotion programs, including an
increase of $33 million which is focused mainly on obesity-related
initiatives. Spending for nutrition education and promotion programs
accounts for the largest share of this spending, over $540 million or
almost 80 percent in 2005. These Federal funds are augmented by
significant spending by State and local partners who conduct a wide
range of nutrition education and promotion activities designed by local
officials to meet local needs.
Spending for basic research on nutritional requirements, monitoring
food consumption patterns, analyzing social and behavioral factors
affecting diets, and conducting demonstration projects accounts for the
rest of our spending. We are a partner with the National Center for
Health Statistics for the food consumption data that supports research
on diets conducted by the growing number of Federal and non-Federal
scientists looking at the causes and possible ways to curb the obesity
epidemic.
farm and foreign agricultural services
Currently, major sectors of the diverse farm economy are
experiencing favorable market conditions. Net cash farm income was at a
record level in 2003. The President's budget for 2005 supports
continued administration of the Farm Bill which has now been largely
implemented, although work is proceeding on the substantial expansion
of the conservation programs provided by the bill. In addition, the
budget supports a strong crop insurance program and an aggressive
international trade program that will be critical to the continued
improvement on farm economy in the next few years.
Farm Program Delivery
The Farm Service Agency (FSA) salaries and expenses are funded at
$1.3 billion in 2005, an increase of $50.9 million over 2004. This
would support staffing levels of about 6,000 Federal staff years and
nearly 10,300 county non-Federal staff years, including about 1,000
temporary staff years. Temporary staff will be reduced from the high
levels required in 2003 and 2004 because the heavy workload associated
with the initial implementation of the new farm programs has been
completed. However, we expect the ongoing workload for FSA to remain at
significant levels in 2005. Therefore, permanent county non-Federal
staff levels are maintained at current levels. In addition, the budget
provides for an additional 100 Federal staff years to improve service
provided to farm credit borrowers. The budget also requests continued
funding for FSA's information technology (IT) efforts related to the
Service Center Modernization Initiative.
International Trade
Trade is vitally important for American agriculture. The United
States is the world's largest agricultural exporter. The value of our
agricultural exports equals nearly one-fourth of farm cash receipts,
making the agricultural sector twice as dependent on trade as the
overall U.S. economy. With gains in productive capacity continuing to
outpace growth in demand here at home, the economic growth and future
prosperity of America's farmers and ranchers depend heavily upon our
continued success in reducing trade barriers and expanding overseas
markets. Accordingly, the expansion of international market
opportunities is one of the key objectives set forth in the
Department's strategic plan.
The 2005 budget proposals fully support the Administration's
commitment to export expansion and overseas market development by
providing a program level of over $6.6 billion for the Department's
international programs and activities. These programs have increased
significantly since this Administration took office and have increased
by more than $1.4 billion, or 27 percent, since 2001.
The Foreign Agricultural Service (FAS) is the lead agency for the
Department's international activities. Through its network of 80
overseas offices and its headquarters staff here in Washington, FAS
carries out a wide variety of activities that contribute to expanding
and preserving overseas markets. Our budget requests $148 million for
FAS activities in 2005. This is an increase above the 2004 level of
nearly $12 million and is designed to ensure the agency's continued
ability to conduct its activities effectively and provide important
services to U.S. agriculture. This funding would enable FAS to meet
higher overseas operating costs, improve telecommunications systems,
and implement a high priority initiative to modernize the agency's IT
systems and applications.
The Department's export promotion and market development programs,
which FAS administers, play a key role in our efforts to expand
international market opportunities. Commodity Credit Corporation (CCC)
export credit guarantees are the largest of these programs. As overseas
markets for U.S. agricultural products continue to improve, that
improvement will be reflected in export sales facilitated under the
guarantee programs. For 2005, the budget projects a program level of
$4.5 billion for the guarantee programs, an increase of just over $250
million above the current estimate for 2004.
The budget continues funding for the Department's market
development programs, including the Market Access Program and
Cooperator Program, at the current level of $173 million. It also
includes $53 million for the Dairy Export Incentive Program and $28
million for the Export Enhancement Program.
The efficiency and productivity of our producers allows the United
States to be a leader in global food aid efforts. For 2005, the budget
supports a program level of over $1.5 billion for U.S. foreign food
assistance activities. This includes $1.3 billion for the Public Law
480 Title I credit and Title II donation programs. For the McGovern-
Dole International Food for Education and Child Nutrition Program,
funding is increased to $75 million, a 50 percent increase over 2004.
The budget also includes an estimated program level of $149 million for
the CCC-funded Food for Progress program, which is expected to support
400,000 metric tons of assistance as required by the authorizing
statute.
Farm Credit
The budget supports a program level of about $3.8 billion in farm
credit programs to enhance opportunities for producers to obtain, when
necessary, federally-supported operating, ownership, and emergency
credit. The program level is about $300 million higher than last year.
Due to lower subsidy costs for the direct loan programs, the amount of
subsidy requested is less than for 2004. In addition, funding has been
realigned to better accommodate the actual demand in these programs.
The budget also includes a request of $25 million for the emergency
loan program. Also, any unused funding from prior year appropriations
will carry over for use in 2005.
Crop Insurance
The budget provides full funding for the crop insurance program.
The budget includes ``such sums as may be necessary'' for the mandatory
costs associated with program delivery and the payment of indemnities.
The current estimate of the mandatory costs is about $3.7 billion.
The budget includes a request of $92 million for the discretionary
costs of the Rural Management Agency (RMA), an increase of $21 million
above the level provided in 2004. The increased funding is urgently
needed for the modernization of the RMA IT infrastructure as well as to
provide for 30 additional staff years. The additional staffing will be
used, in part, to monitor companies and producers participating in the
crop insurance program, to detect and prevent fraud, waste, and abuse.
marketing and regulatory programs
Marketing and Regulatory Program agencies provide basic
infrastructure to protect and improve agricultural market
competitiveness for the benefit of both consumers and U.S. producers.
Pests and Diseases
Helping protect the health of animal and plant resources from
inadvertent as well as intentional pest and disease threats is a
primary responsibility of APHIS. The 2005 budget requests an
appropriation of $828 million for salaries and expenses, an increase of
about $112 million (16 percent) above the 2004 estimate. The majority
of this increase is for the Food and Agriculture Defense Initiative and
for BSE related activities.
Increases are also requested for efforts to deal with low-
pathogenic avian influenza, emerging plant pests (especially citrus
canker and Emerald Ash Borer), Mediterranean fruit fly, tuberculosis,
scrapie and a $6.6 million increase is requested to enhance the
Department's ability to strengthen its regulatory system for the
testing of biotechnology based crops.
Marketing
For 2005, the Agricultural Marketing Service (AMS) budget proposes
a program level of $732 million, of which $87 million or 12 percent, is
funded by appropriations and the remainder through user fees and
Section 32. AMS, in cooperation with the Food and Nutrition Service and
FSA, purchases commodities to meet the needs of domestic feeding
programs and to help stabilize market conditions. The 2005 budget
includes an increase of $10 million in appropriated funds to begin the
critically needed replacement of our outdated IT systems used by three
USDA agencies to manage and coordinate commodity orders, purchases, and
delivery.
Another important proposal in the marketing and regulatory programs
area involves the Grain Inspection, Packers and Stockyards
Administration (GIPSA). For 2005, the budget proposes a program level
for salaries and expenses of about $44 million. Of this amount, $20
million is devoted to grain inspection activities for standardization,
compliance, and methods development and $24 million is for Packers and
Stockyards Programs. The 2005 budget includes $7.7 million in increases
to:
--Conduct market surveillance and ensure that marketing and
procurement contracts are honored in the aftermath of the BSE
finding.
--Significantly upgrade the agency's IT functions, including the
ability to securely accept, analyze, and disseminate
information relevant to the livestock and grain trades.
--Monitor the various technologies that livestock and meatpacking
industries use to evaluate carcasses to ensure fair and
consistent use of those technologies. Producer compensation is
increasingly dependent not simply on the weight of the animals
they bring to slaughter, but the characteristics of the
carcasses as well (e.g., fat content).
--Enable GIPSA to better address and resolve international grain
trade issues, thus precluding disruption of U.S. exports.
The GIPSA budget includes two user fee proposals which have been
submitted to the authorizing committees. New user fees would be charged
to recover the costs of developing, reviewing, and maintaining official
U.S. grain standards used by the grain industry. Those who receive,
ship, store, or process grain would be charged fees estimated to total
about $6 million to cover these costs. Also, the Packers and Stockyards
Programs would be funded by new license fees of about $23 million that
would be required of packers, live poultry dealers, poultry processors,
stockyard owners, market agencies, and dealers as defined under the
Packers and Stockyards Act.
food safety
USDA plays a critical role in safeguarding the food supply and
plays a pivotal role in protecting the Nation's food supply from
bioterrorist attack. This Administration believes that continued
investment in the food safety infrastructure is necessary to achieve
USDA's goal of enhancing the protection and safety of the Nation's
agriculture and food supply.
For 2005, the budget for the Food Safety and Inspection Service
(FSIS) provides a program level of $952 million, an increase of $61
million over 2004. The budget includes an increase for pay to support
7,690 meat and poultry inspectors, which are necessary to provide
uninterrupted inspection services to the industry.
The budget for FSIS requests $5.0 million to continue the work
funded in 2003 and 2004 to fully enforce the Humane Methods of
Slaughter Act. With this funding, the agency has allocated 63 staff-
years to ensuring the humane treatment of livestock in 900 federally
inspected establishments. With the increased emphasis on humane
handling verification, the agency was able to increase humane handling
inspection procedures from 86,810 performed in 2002 to 111,117
performed in 2003, a 28 percent increase. Although difficult to
estimate, FSIS reports that a resultant increase in the number of
enforcement actions and violations was the result of training and
correlation efforts of FSIS District personnel, Front Line Supervisors
and veterinarians to better understand the application of the Agency's
rules and enforcement process to inhumane handling situations. As
recommended by the General Accounting Office, FSIS will continue to
make improvements in the inspection process to ensure proper
enforcement of the law and accurate tracking of both verification
activities and enforcement actions.
The budget includes an increase of approximately $33.6 million to
support programmatic improvements aimed at achieving FSIS' strategic
objective to reduce the prevalence of foodborne hazards from farm to
table. The majority of this increase is for the Food and Agriculture
Defense Initiative and BSE related activities.
The budget provides an increase of $7.1 million for a broad-based
training initiative for meat and poultry inspection personnel. This is
more than a 50 percent increase in the FSIS training budget from 2004.
Under this initiative, all entry level inspectors will receive formal
classroom training for performing basic inspection duties within one
year of employment. Currently, only 20 percent of new employees receive
this type of training. In addition, current inspectors will receive
supplemental training to improve the enforcement of the Pathogen
Reduction/Hazard Analysis and Critical Control Point Systems regulation
and food safety sampling. The increased level of training will improve
the consistency and effectiveness of inspectors in the performance of
their duties and ensure a safer food supply.
The 2004 budget also reproposes legislation submitted to Congress
in August 2003 to collect an additional $124 million in user fees
annually by recovering 100 percent of the cost of providing inspection
services beyond an approved primary shift. Assessing user fees in this
manner promotes equity among producers that have enough production for
a full second shift paid for by the Government and other establishments
that may only have enough production for a partial shift which they
must currently pay for themselves. Recovering a greater portion of
these funds through user fees would result in savings to the taxpayer.
These fees will have a minimal impact on prices received by producers
or prices paid at retail by consumers.
food, nutrition, and consumer services
The budget includes $50.1 billion for USDA's domestic nutrition
assistance programs, an increase of $2.9 billion, and the highest level
ever requested. The budget will ensure access to nutrition assistance
for low-income families and individuals as they work toward economic
self-sufficiency. USDA is working hard to provide information to help
improve nutritional intakes, increase breastfeeding rates, and reduce
obesity and overweight among Americans. In addition to its work with
the President's Healthier US Initiative, USDA will work with nutrition
assistance program stakeholders to identify strategies to improve
health outcomes for eligibles.
The WIC program is expected to be reauthorized this year and is
budgeted at $4.8 billion. This is a record high funding request, which
will help record numbers of low-income, at-risk participants. The
request continues special increments to fast track State information
systems development, increase breastfeeding rates through the use of
peer counselors, and increase support of childhood obesity prevention
projects. Ensuring a WIC Program that yields healthy birth outcomes and
nutritional habits with the best possible outcomes is a top
Administration priority.
The Food Stamp Program, the cornerstone of America's effort to
ensure access to an adequate diet for low-income people, is funded at
$33.6 billion. The budget anticipates modest food cost inflation and
participation growth of about 1.2 million participants or a 5 percent
increase above 2004 estimates. The budget includes a $3 billion
contingency reserve, $1.4 billion for Nutrition Assistance for Puerto
Rico, $2.4 billion for the Federal share of State administrative
expenses, and about $300 million to support employment and training.
Significant progress has been made in reducing payment errors in the
program. In 2002, 91.74 percent of payments were made accurately, with
overpayment error at 6.16 percent of benefits. Changes in financial
incentives to States for good management as authorized by the 2002 Farm
Bill are on track for implementation in 2005. This is the time line
anticipated by the Farm Bill, and this will help improve program access
as well as program integrity.
Child Nutrition Programs are funded at $11.4 billion with increases
provided for food cost inflation, growth in the number of meals served
and program integrity. Also, the budget includes funding for several
key provisions that are expiring such as the exclusion of military
housing allowances for eligibility determination. The Administration
will continue work with Congress on a reauthorization bill this Spring
to ensure that all aspects of the program continue without
interruption, including those key provisions expiring at the end of
March.
The Administration is committed to ensuring that funds for school
meals are well targeted to those in need and that any savings achieved
in reauthorization will be reinvested in the program.
natural resources and environment
The 2002 Farm Bill represents an unprecedented commitment to
conservation and its continued implementation is an ongoing challenge
as well as a high priority for the Department. To do this successfully,
the budget proposes not only to increase funding for Farm Bill programs
but also to continue support for the underlying conservation programs
that form the basis for the Department's ability to address the full
range of conservation issues at the national, State, local and farm
levels.
The 2005 budget request for the Natural Resources Conservation
Service (NRCS) includes $1.9 billion in mandatory CCC financial
assistance funding for Farm Bill conservation programs in addition to
$2.0 billion for the Conservation Reserve Program administered by FSA.
This represents an increase of more than $200 million over the 2004
level and includes $1 billion for the Environmental Quality Incentives
Program that will allow nearly 40,000 producers to participate in this
vital program. It also includes $295 million for the Wetlands Reserve
Program to enable the Department to enroll an additional 200,000 acres.
Another $209 million will support expansion of the new Conservation
Security Program that supports ongoing conservation stewardship and
rewards those producers who maintain and enhance the condition of their
natural resources. The remaining $351 million in CCC funding will
support the other Farm Bill programs including the Grassland Reserve
Program, the Wildlife Habitat Incentives Program and the Farm and Ranch
Lands Protection Program.
On the appropriated side, the 2005 budget proposes a total funding
level of $908 million which includes $604 million for conservation
technical assistance (CTA) that forms the base program that supports
the Department's conservation partnership with State and local
entities. The budget also proposes a separate account totaling $92
million to fund technical assistance activities in support of the
Wetlands Reserve and Conservation Reserve Programs. This would limit
the amount of funding that would have to be redirected from other Farm
Bill programs and maximize the financial assistance made available to
producers. Overall CTA funding will also enable the Department to
continue to address natural resource issues such as maintaining
agricultural productivity and improving water quality and grazing
lands.
In the watershed programs area, the budget proposes reductions in
funding for watershed implementation, planning and rehabilitation. This
will enable NRCS to redirect some resources to address the more
pressing Farm Bill implementation issues while still funding the most
critical watershed work. With emergency spending being so difficult to
predict, the budget proposes to not seek appropriated funding for
emergency work and instead to address disaster funding as emergencies
arise.
Finally, the Department's 2005 budget will maintain its support for
all 375 Resource Conservation and Development areas that are now
authorized. This important activity will continue to improve State and
local leadership capabilities in planning, developing and carrying out
resource conservation programs.
rural development
Rural America is home to over 60 million people, most of whom are
not farmers. It is a place of employment for workers in numerous
industries that contribute to the Nation's wealth. It is also very
diverse, including areas that are facing declining population and
employment opportunities as well as areas that are growing at a rapid
pace and becoming urbanized. Thus, the challenges differ from area to
area, and require planning and coordination, to ensure that State and
local priorities are served along with national goals. USDA embraces
this reality and is committed to supporting increased economic
opportunities and improved quality of life in rural America.
The Department's rural development programs are both traditional
and forward looking. Many of these programs were created to bring
electricity, telephone service and other amenities to the Nation's
farms and rural towns. These programs have made enormous contributions
to economic productivity and quality of life of rural America. In
addition, USDA has played a significant role in providing homeownership
opportunities and rental housing for rural residents, and support for
rural business and industry.
Modern technology has brought new challenges. Perhaps the most
striking example is in the area of telecommunications. Basic telephone
service is no longer adequate. High speed broadband communications,
including data as well as voice transmission, are needed to stay
abreast of the ever changing world of information for both business and
personal use. In addition, new approaches are needed to diversify rural
economies, for example, through value-added processing of agricultural
products.
The 2005 budget supports $11.6 billion in loans, grants and
technical assistance for rural development. This is a realistic level
of support in light of the need to balance budgetary constraint against
the demands for program assistance. While it is significantly below the
level available for 2004, more than half of the reduction is due to
lower projections of the demand for selected loans.
In particular, the 2005 budget reflects a reduction in electric
loans from almost $5 billion in 2004 to $2.6 billion in 2005. In recent
years, Congress appropriated much higher levels for such loans than the
Administration requested. The additional funding, including the amount
available for 2004, has helped meet the needs of rural electric
cooperatives for upgrading their systems. Although more remains to be
done, it is anticipated that the high levels of lending in recent years
will provide a cushion that will result in fewer applications for 2005.
Also in the electric area, the 2005 budget does not include a $1
billion add-on by Congress to the 2004 Appropriations Act for
guaranteeing electric and telephone notes of certain private lenders.
This program was authorized in the 2002 Farm Bill. USDA published a
proposed rule for implementing the program on December 30, 2003, with a
60-day comment period. Until the public comments are reviewed and a
final rule published, it is difficult to know the extent of demand for
the program and for that reason the program was not included in the
2005 budget.
The 2005 budget also does not include funding for distance learning
and telemedicine loans, which accounts for a $300 million reduction
from 2004, because there has been little demand in the past few years
for these loans. Further, there is a reduction in discretionary funding
for broadband loans from $598 million in 2004 to about $331 million in
2005 because there remains a substantial amount of unused mandatory
carry-over funding that was provided by the 2002 Farm Bill. Currently,
there is about $1.6 billion available for such loans and about $1.0
billion in applications, many of which will require additional work
before they are complete and can be considered for funding.
For single family housing loans, the 2005 budget includes $1.1
billion for direct loans and $2.5 billion in guaranteed loans for
purchases and $225 million in guaranteed loans for refinancing. While
there is a proposed reduction in direct loans, guaranteed loans are
maintained at the 2004 levels. Further, legislation is being proposed
to allow guaranteed loans to exceed 100 percent of appraised value by
the amount of the fee on such loans. This proposal will make the
program more accessible to families with limited resources for paying
closing costs and will contribute to the President's Initiative to
Increase Minority Homeownership. The combined level of almost $3.8
billion in direct and guaranteed loans is expected to provide up to
40,000 homeownership opportunities for rural residents. Continuation of
recent increases in housing costs will reduce the number of
homeownership opportunities that can be provided in 2005 compared to
prior years.
The total water and waste disposal loan and grant program for 2005
is $1.42 billion compared to $1.67 billion for 2004. Within this total,
loans are maintained at about $1.1 billion. It should be noted that the
subsidy rate for these loans has increased such that we are asking you
to increase the budget authority for loans from $34 million in 2004 to
$90 million in 2005 just to reach the $1.1 billion level. This increase
is due to a rise in the Government's cost of financing the loans.
Grants would be reduced from $563 million in 2004 to $346 million in
2005. With interest rates remaining low, more projects are viable at a
higher loan to grant ratio.
In addition, the 2005 budget for rural rental housing continues the
Administration's policy to focus on servicing the existing portfolio
which includes about 17,000 projects that provide housing for about
450,000 rural households. Many of these projects require repair and
rehabilitation, for which the 2005 budget includes $60 million in
direct loans. It also includes $100 million in guaranteed loans for new
rental projects. In addition, the 2005 budget includes $592 million for
rental assistance payments, up from $581 million available in 2004.
Most of this funding is for the renewal of expiring contracts,
consistent with the policy established by Congress in the 2004
Appropriations Act to renew contracts on a 4-year cycle. About a
quarter of a million rural households receive this assistance. We are
nearing completion of a comprehensive study of the existing portfolio
to help identify opportunities for revitalizing the management of these
projects.
The budget includes $300 million in direct loans and $210 million
in guaranteed loans for essential community facilities that meet a wide
range of public safety, health and other purposes. This reflects a
reduction in direct loans, from $500 million in 2004, but exceeds the
2003 level of $261 million. This pattern mirrors a change in subsidy
costs which went from 6 percent in 2003 to zero in 2004 and up to 4
percent for 2005, due largely to very small differences in interest
rates. For business and industry programs, the 2005 budget supports
$600 million in guaranteed loans, up from $552 million in 2004 and $34
million for the intermediary re-lending program, compared to $40
million for 2004. Together, these programs are expected to account for
most of an estimated 66,000 jobs that will be created or saved by a
combination of rural development programs that assist business and
industry. This estimate reflects direct employment. Many rural
development programs also impact on employment indirectly by creating a
demand for products and services.
research, education, and economics
Publicly supported agricultural research has provided the
foundation for modern agriculture and is an important component of
virtually all of our strategic objectives. Research will lead to
commercially feasible renewable energy and biobased products with
benefits to the environment, national security, and farm income.
Genetic and molecular biology hold promise to reduce plant and animal
diseases that threaten U.S. agriculture as the movement of plants and
animals increases and as bioterrorism becomes a matter of increasing
concern. There are technology-based opportunities to make our food
supply safer and more wholesome.
The 2005 budget for the four Research, Education and Economics
(REE) agencies is approximately $2.4 billion. The budget proposes
reductions in unrequested earmarks of about $335 million, and program
increases in high priority areas, such as food and agriculture
security, genomics, human nutrition and climate change, where national
needs and returns are the greatest.
One increase directly related to the Food and Agriculture Defense
Initiative is to fund the remaining $178 million required to complete
the modernization of the National Centers for Animal Health in Ames,
Iowa. These funds will allow the completion of the $460 million project
that will provide a world-class research and testing facility
commensurate with the magnitude and economic importance of the $100
billion U.S. livestock industry. Upon completion in October 2007, there
will be nearly one million gross square feet of new and renovated
laboratory and support space. Extensive site and infrastructure
upgrades and miscellaneous office, animal care, and support facilities
will also be integrated into the design.
The 2005 budget for ARS calls for increases to support
participation in genome mapping and sequencing projects and enhance the
agency's bioinformatics capacity to transfer this information into
research programs. There are increases for research on invasive species
and animal diseases, such as bovine spongiform encephalopathy and foot
and mouth disease; as well as research which will lead to improved
vaccines and therapeutics, rapid diagnostic tests, and genome data on
biosecurity threat agents. The budget includes an increase of $5
million for research in support of the President's Healthier US
Initiative. And, as part of this, USDA will work closely with the
Department of Health and Human Services to promote good nutrition. In
support of the Administration's Food and Agriculture Defense
Initiative, food safety research will see an increase of $14 million to
support the development of rapid diagnostic tests that will accurately
detect and identify pathogenic bacteria, viruses and chemicals of food
safety concern. Finally, the ARS budget will provide $5 million to
support the President's Climate Change Research Initiative. These funds
will be used to conduct interagency research that will build the
scientific foundation for forecasting responses of ecosystems to
environmental changes and for developing resources that can be used to
support decision making.
The 2005 budget for CSREES includes funds to continue the formula
programs at current levels. There are proposed increases in funds for
the 1994 Tribal Land Grant schools and an increase in the CSREES
graduate fellowship program that will allow more funding for
fellowships at the masters degree level which is especially important
for the recruitment of minority graduate students. Additional increases
are proposed for the Expanded Food and Nutrition Education Program
which assists low income youth and low-income families with children in
acquiring the skills, attitudes, and changed behavior necessary to
formulate nutritionally sound diets.
The proposal for the National Research Initiative (NRI) in the 2005
budget is consistent with the greater overall constraints of the 2005
budget. The proposal includes $180 million as compared to $164 million
in 2004, for the NRI to finance work that will have a far reaching
impact on such issues as genomics, nutrition, and obesity.
The budget for the Economic Research Service (ERS) includes an
increase of $8.7 million to develop a consumer data information system,
to provide information to support decision making in the food, health,
and consumer arenas. There are three components: a food market
surveillance system that will provide information to identify and
explain consumer food consumption patterns; a rapid consumer response
module that will provide real-time information on consumer reactions to
unforeseen events such as the recent discovery of BSE; and a flexible
consumer behavior survey module that will assess the relationship
between individuals' knowledge and attitudes about dietary guidance and
food safety and their food choices, complementing the Centers for
Disease Control and Prevention and ARS data on health outcomes and food
consumption.
The budget for the National Agricultural Statistics Service (NASS)
includes an increase for two initiatives to improve its statistical
programs, and a decrease of $2.6 million for the Census of Agriculture,
reflecting the decrease in staffing and activity levels to be realized
in 2005 due to the cyclical nature of the 5-year census program.
To improve NASS' statistical accuracy, an increase of $7.4 million
is requested to continue the restoration and modernization of its core
survey and estimation program for U.S. agricultural commodities and
other economic, environmental and rural data. These data are used by a
variety of customers for business decisions, policy making, research,
and other issues. They are also necessary for the calculation of
national countercyclical payment rates provided under the 2002 Farm
Bill.
The second initiative requires an increase of $2.5 million for
NASS' Locality-Based Agricultural County estimates program to continue
the improvements begun in 2003. These local estimates are one of the
most requested data sets, and are especially important to RMA for their
risk rating process, (affecting premium levels paid by producers), and
to FSA for calculating national loan deficiency payments.
civil rights
This budget will allow the Assistant Secretary for Civil Rights to
continue making progress in addressing Equal Employment Opportunity
(EEO) and Program-related civil rights issues. The Assistant Secretary
for Civil Rights also has responsibility for outreach and conflict
prevention and resolution. The challenging task of implementing changes
within USDA's civil rights organization is now underway. A
comprehensive action plan has been developed to address structural,
operational, procedural accountability and systems challenges.
This budget is critical in ensuring adequate resources to implement
Civil Rights initiatives. Specifically, the budget will support a
reduction in the time it takes to process both EEO and Program-related
complaints. The Department continues to make progress toward meeting
regulatory timeframes for complaint processing. Tracking and analysis
of complaints will be improved and analytical information will be used
to identify further improvements and allocate resources. Additional
funds will be devoted to technical assistance, training, and outreach
activities.
This budget clearly reflects the high priority that the Department
places on providing equal opportunity, equal access and fair treatment
for all USDA customers and employees. .
departmental management
The Departmental staff offices provide leadership, coordination and
support for all administrative and policy functions of the Department.
These offices are vital to USDA's success in providing effective
customer service and efficient program delivery.
Due to the efforts of these offices, the Department has made
significant progress in improving management. For example, the
Department received its first-ever unqualified or ``clean'' opinion on
the 2002 financial statements and received a clean opinion again in
2003. To meet the mandate of the Government Paperwork Elimination Act,
USDA agencies are deploying new departmentwide electronic signature
technologies that allow customers to conduct business transactions over
the Internet, saving both customers and the Department time and money.
The 2005 budget builds upon that progress by continuing funding
levels for these offices and providing key funding increases in order
to:
--Continue efforts to modernize the Service Center agencies (FSA,
NRCS, and the Rural Development) IT activities to improve
efficiency and customer service. As part of this initiative,
efforts to expand the use of the Geographic Information Systems
continue and will lead to improved soil and land-use analyses.
A scheduled integration of the IT support functions of the
Service Center agencies into a single organization under the
Chief Information Officer will further improve these
activities.
--Strengthen the security of the Department's facilities and IT
systems through certifying and accrediting USDA systems,
improving a Departmentwide Information Survivability program,
implementing an automated risk management system, and
establishing a Cyber-Security Operations Center.
--Support the creation of remote backup capabilities to protect the
National Finance Center accounting, payroll and related
services data for USDA and other agencies from malicious
intrusions and natural catastrophes.
--Implement an electronic commodity market information system that
will consolidate all of the Department's commodity data,
analyses and forecasts into a single public website.
--Support the Administration's goal to increase procurement of
biobased products, with the purpose of creating new economic
opportunities in rural areas while reducing our dependence on
fossil energy-based products derived from foreign oil and
natural gas. The Office of the Chief Economist (OCE) will
implement and administer a government-wide biobased product
procurement program, mandated by the 2002 Farm Bill. OCE will
work with Departmental Administration to develop a model
biobased product procurement plan that can be adopted by
Federal agencies, and will support interagency biobased product
procurement efforts.
--Continue renovations of the South Building to ensure that employees
and customers have a safe and modern working environment.
That concludes my statement. I look forward to working with the
Committee on the 2005 budget so that we can better serve those who rely
on USDA programs and services.
NATIONAL ANIMAL IDENTIFICATION PROGRAM
Senator Bennett. Thank you very much, Madam Secretary. We
appreciate your statement, and we appreciate your being here.
I understand you are working to design a National Animal
Identification Program. Can you tell us how you envision such a
program being implemented? Any timing that you might have on
this? And do you expect it to be mandatory or voluntary? And do
you have statutory authority to implement this, or when you
have got the work done, are you going to come back to the
Congress and ask for additional authority? Could you explore
that whole area with us?
Secretary Veneman. I will, Mr. Chairman, and thank you for
that question.
As you know, on December 30, I announced aggressive actions
that we were taking in response to the BSE find on December 23.
One of the things I said we would do is accelerate a national
verifiable system of animal identification. A tremendous amount
of work had been done over the past 18 months involving an
effort by a number of agriculture producing groups, and
government employees to look at the kinds of standards that
should be applied in an animal identification system.
So we were fortunate that the work had already been done. I
then asked our Chief Information Officer to begin to look at
how do we put together the architecture for such a system. As
we continued into this process, we expanded our CIO's group to
include Keith Collins, our Chief Economist; and Nancy Bryson,
our General Counsel, because of the legal issues involved, and
they are now in the process of putting together an overall plan
with recommendations. I will have Keith comment on that.
With regard to the authorities, we have also been looking
at that issue, and as I have testified at other hearings, the
one issue that is of concern to many of the producers is making
sure that they can maintain confidentiality of the information
that will be put into this system. We have been working with a
number of the Committees to determine the kind of statutory
language we may need to ensure that information provided into
this system can be maintained as confidential information.
I would like Keith Collins to comment briefly on what the
USDA committee has been doing on this system.
Mr. Collins. I would be happy to do that, Madam Secretary.
A lot of work has been done, as the Secretary said,
particularly by a group called the USAIP, United States Animal
Identification Plan team, which represents some 100 people and
70 organizations. They have developed a tremendous amount of
infrastructure recommendations such as data standards for
identifying premises, for identifying animals, and for tracking
movements.
What we have envisioned is to be able to implement a
national plan, first on a voluntary basis because we have such
a complicated animal agricultural sector in the United States
with very little experience with individual animal
identification. A survey taken in 1997 indicated that about
half of all operations had no experience whatsoever with
individual animal identification.
When you consider that we have over 1 million cattle
operations alone, and we have some 3,000 meat packing and feed
lot operations in excess of that, we felt it was important to
start this program on a voluntary basis. We believe that for it
to work over time, all animals will have to be in the system,
so at some point, this could very well become a mandatory
program.
The first thing we want to do is to look at the USDA-funded
programs that have operated over the last couple of years and
select one of those systems to serve as the national animal
allocator for premise numbers and a national animal allocator
for individual animal numbers. Once we scale up one of the
existing systems to be able to operate in that capacity, then,
we plan to work with states, with tribes, and eventually with
third parties to, through cooperative agreements, and some
funding by USDA, enable them to interface with the national
premise allocator and with the animal number allocator.
Our first priority would be to issue premise numbers,
identify places where animals are located, develop a uniform
definition of a premise, sign up states, tribes and third
parties and issue premise numbers. As you know, in this budget,
there is a request for $33 million for 2005 to continue the
development of that process that I just described. That
initiative would grow in 2005.
Senator Bennett. Fine, thank you very much.
Senator Kohl.
HUNGER TASK FORCE PILOT PROGRAM
Senator Kohl. Madam Secretary, in March 2003, I was able to
assist a nonprofit in Milwaukee, the Hunger Task Force, in
receiving approval from the USDA to carry out an innovative
pilot program. They received nonfat dry milk from USDA and
worked with a local Wisconsin dairy to turn this into about
20,000 pounds of mozzarella cheese.
The cheese was distributed to needy families at food
pantries throughout the region, and it was very popular.
Ninety-three percent of the recipients surveyed said that they
would much rather receive cheese than nonfat dry milk. Because
it was such a popular program, the Hunger Task Force has asked
USDA to let them continue their program. They would propose to
use 516,000 pounds of nonfat dry milk every year, less than
one-half of 1 percent of the 960 million pounds USDA has in
storage.
As you know, we have been working on this together for a
year now, and we have talked about it, you and I and your
Department a great deal. It would be nice if we could reach a
conclusion. Is it possible that you have anything to say to us
on this issue?
Secretary Veneman. Well, Senator, as you and I discussed, I
indicated to you that after a review of this pilot program,
there are significant concerns that have been raised regarding
the operation of the program from the perspective of how it
interrelates with the dairy price support program, particularly
if the pilot goes beyond the limited application it now has.
Given the conversations that you and I had yesterday, we
will be agreeing to extend the pilot program for a year, under
the limited basis, to further evaluate the pilot. But again,
there are some significant concerns over the long term that are
being looked at both in terms of the price support program and
the overall impact on the dairy program.
Senator Kohl. Well, I consider that to be a very positive
development, and I want to thank you for your willingness to be
so cooperative and supportive. I know that the Hunger Task
Force, and more importantly, the people they serve, will be
very gratified by your response and will feel indebted to you
for this. Thank you so much.
WIC CONTINGENCY FUNDS
Madam Secretary, it is my understanding that states are
already starting to take action to conserve WIC dollars because
they are afraid they do not have enough money to finish out
this year. As you know, we have a $125 million contingency fund
to prevent things like this from happening, and states need to
be given as much advance notice as possible if additional money
will be made available. Do you anticipate using any of the
contingency fund this year, and if so, will an announcement be
made with regard to this?
Secretary Veneman. We are reviewing the possibility, for
the very reasons that you state, of tapping into that
contingency fund primarily because of increased prices for
formula. That has been the primary driver in the increased cost
of the WIC program. So we are looking very carefully at the
possibility of tapping into that contingency reserve. Of
course, that would have implications for the budget you are now
considering, because it is anticipated in the 2005 budget
proposal that the reserve would not have been tapped into and
would roll forward.
So all of that has to be considered, but given the
difficulty that many of the states are having, I think we will
be looking very carefully at tapping into some of that reserve
for 2004.
ANIMAL WELFARE ACT VIOLATIONS
Senator Kohl. All right. As you know, included in the
fiscal year 2004 bill is $800,000 to help address violations of
the Animal Welfare Act, including illegal animal fighting.
Along with other problems, bird fighting played a key role in
spreading Exotic Newcastle Disease in 2002 and 2003, which
ultimately cost taxpayers about $200 million to contain. I know
your department has tried to develop some cases against people
who have participated in this activity but has had a tough time
because the Federal law provides only misdemeanor penalties,
and the U.S. attorneys are reluctant to prosecute misdemeanor
cases.
Does the administration support legislation, S. 736, to
upgrade the penalties for Federal animal fighting violations
from a misdemeanor to a felony, and if not, do you have
suggestions on how to deal with this problem?
Secretary Veneman. Senator Kohl, I absolutely agree with
you that this is a serious issue. We encountered the outbreak
of Exotic Newcastle Disease, that was focused in the area of
Southern California. Not only did we begin to better understand
the problem of birds that were being transported for bird
fighting purposes but also I think all of our regulatory
agencies and the state agencies, including the state regulatory
agencies, were surprised to find out just how many--what we
call backyard birds--were in homes around Southern California,
in the L.A. area, which made the task of controlling Exotic
Newcastle Disease and looking for the problems much more
difficult.
We worked with our Inspector General and with our Animal
and Plant Health Inspection Service and with local law
enforcement to see how we could better control some of the
movement of these animals and birds. Of course, another problem
with the birds is the live bird markets. There has been a lot
of concern expressed about that, particularly with the
outbreaks of avian influenza here on the East Coast.
I am not familiar with the penalties legislation that you
have indicated. We would be happy to review it to determine
whether or not, with our authorities, it would provide the
kinds of assistance that would help us better control some of
this movement of birds that can cause these animal diseases. As
you know, these outbreaks have a tremendous impact on our
international trade when we get these diseases of poultry and
other animals. We have had several disruptions over the past 2
or 3 years, and we have been doing everything we can to address
these issues as completely and effectively as we can.
CENTRAL FILING SYSTEM PROGRAMS
Senator Kohl. All right. Mr. Chairman, I had just one other
question regarding current central filing system programs and
the need to eliminate any potential for identity theft, which
was brought to my attention by the Wisconsin Department of
Financial Institutions.
However, in the interest of preserving time, I will submit
that for the record and look for a response. Thank you, Mr.
Chairman.
Senator Bennett. Thank you. We can get to it in the next
round if you are so inclined.
Senator Craig.
Senator Craig. Thank you, Mr. Chairman.
NATIONAL ANIMAL IDENTIFICATION SYSTEM
Madam Secretary, the Chairman asked the first question that
I had planned to, and I appreciate your response to a national
ID system. Senator Hagel, myself, and a good number of others
are looking at different approaches. But we do appreciate your
sensitivity to it, the Department's. A lot of work--you are
right--has already been done. The vet sciences and all of that
type of thing; I am glad you are approaching it with caution in
the sense of timing and testing things.
We here in the Congress sometimes think we are pretty
smart, but we are not as smart as the cattlemen when it comes
to knowing how something will work on the ground that can
effectively develop a chain of identification, and I
appreciate, and I have had the concern of confidentiality
expressed to me by a variety of our cattlemen. At the same
time, they know, and they are ready to respond to a national ID
system as long as it is the right system and it works, and it
is something that is manageable and cost-effective.
We dare not, in a marginal industry at times, drive up the
costs simply because we are going to command and control a
system. It has to function.
NATIONAL RURAL DEVELOPMENT PARTNERSHIP
Through the decade of the nineties, Idaho was not unlike
other States. Many of our urban areas prospered, and many of
our rural areas floundered. And as a result of that executive
order by President Bush in 2002 to look at rural economic
development was the right thing to do. And we here on the Hill
responded; I responded with legislation to develop a National
Rural Development Partnership. It happened. And we have it
implemented, now, across America and beginning to work.
Unfortunately, although I have tried hard to secure stable
funding for this what I believe is a common sense vision of
bringing together varieties of resources and focusing them
effectively in a teaming approach as the kind that the
executive order and our President proposed, we are still
struggling to be able to effectively do that with natural
resources or with resources. I have discussed the issue with
former Rural Development Secretary Tom Dorr, and frankly, we
have not seen much change.
With resources as scarce as they are, what are your
thoughts in regard to the NRDP with its role in helping rural
communities and states better coordinate and understand the
resources that are available to them?
Secretary Veneman. As you indicate, our Rural Development
programs are an important part of the USDA portfolio, one that
many people often forget, and I think that one of the things
that former Under Secretary Dorr was able to do was to help
people to understand that we need to look at these programs as
the venture capital for rural America. And I think that concept
is very appropriate as we look at these kinds of programs.
One of the things that our Rural Development team has done
is they have begun to put together a new partnership of all of
the Rural Development agencies and programs, so that they are
working in much more of a coordinated effort with rural
communities. I think this partnership will be very positive as
we implement it and go forward with it because rural
communities are often going to one of our housing programs, for
one thing, and somewhere else for an economic development
grant.
If we can begin to integrate our efforts more with specific
communities, I think it will help to bring together a number of
the kinds of issues that you are talking about with the Rural
Development Partnerships where we are also trying to work with
the States and the local communities.
We have tried to be very forward looking in terms of our
Rural Development programs. Our housing initiatives,
especially, have been ones where we have really tried to target
towards homeownership. We have our business development loans
and our business loans and grants for rural businesses that can
help stimulate economic activity. We also have a range of
utility loans and water and sewer loans, which are very
popular, and all of these programs help rural America have the
kind of infrastructure they need to attract capital and attract
jobs that they need to thrive for the future.
So we certainly will continue to work with you on the
issues of rural development as we move forward.
Senator Craig. Well, thank you, Mr. Chairman.
Teaming in this issue is phenomenally important. The
coordination of bringing them all together, instead of
communities rushing one place and another to try to find
resources is clearly the right approach, and I do believe the
partnership is moving in that direction to do a comprehensive,
coordinated effort, and so, I encourage you to pursue that. We
will try to find the bucks to help you pursue it a little more
aggressively than your budget reflects, because many of our
rural communities are really struggling to come alive in a new
context that agriculture will just not provide them anymore.
Thank you.
Senator Bennett. Thank you.
Senator Durbin.
Senator Durbin. Thanks, Mr. Chairman.
Secretary Veneman, welcome, and I welcome all those who are
with you, especially your chief economist, Dr. Keith Collins,
and your budget officer, Stephen Dewhurst. They are gifted,
patient, long-suffering stalwarts of the U.S. Department of
Agriculture who have in their careers seen more of Congressmen
and Senators than any living American----
With the possible exception of the attending physician in
the Capitol.
And I am glad that they are with you today.
SINGLE FOOD SAFETY AGENCY
We spend a lot of time talking about food safety, and we
certainly have since we found that one sick cow. And I have
been pushing for a single food safety agency to combine the 12
different agencies of the Federal Government that have some
mandate when it comes to food safety and the 35 different laws
and the scores of committees. I have really been able to
convince every aspiring Secretary of Agriculture and every
retiring Secretary of Agriculture. I just had my problem with
current Secretaries of Agriculture who do not want to support
it.
So this is your chance to step out and to say it is time
for us to get together on a single, science-driven food safety
agency; that it is mindless to have the Food and Drug
Administration responsible for the feed given to cattle and the
USDA responsible for the cattle once fed, and it is time to put
it all under one roof. I give you that chance at this moment.
Secretary Veneman. Well, Senator, you and I have talked
about this issue on other occasions, and as you know, I think
it is very important for us to coordinate very carefully on
food safety issues. We have made a concerted effort in this
Administration to do just that, and in fact, we have been
working very, very closely with the Food and Drug
Administration throughout the issue of the BSE find.
The FDA has been involved in our briefings with the press
and they have been involved in our meetings in determining
where we go from here. Again, we have worked very, very closely
with them. There has been a lot of discussion about forming a
separate agency, taking, for example, the Food Safety and
Inspection Service out of USDA, and along with FDA, putting it
into a brand new agency.
There are pros and cons to that strategy, but I would say
to you that I think that the BSE situation has illustrated one
reason why it has been so important to have the Food Safety and
Inspection Service in the U.S. Department of Agriculture, and
that is the intersection with BSE between animal health and
human health and the safety of the food supply given an animal
health issue. As you know, these two agencies were under the
same Undersecretary or Assistant Secretary for a number of
years in USDA. They were split apart about 10 years ago but are
still under the same department in USDA.
We have found that these agencies have had to work
seamlessly throughout this BSE incident. I think that as hard
as we are working with FDA, it would not have been as easy to
begin the traceback, which we were doing through the Animal and
Plant Health Inspection Service, when we found the BSE cow and
then the trace forward to the product, which we were doing
through the Food Safety and Inspection Service.
All of these things have been very, very well coordinated
as a result of the fact that we have had the agencies together
in USDA.
Senator Durbin. Well, I will not dwell on the question,
because as I said, no current Secretary of Agriculture every
supports it.
Once you have retired, you will be in my corner.
But that will be many years from now.
BSE TESTING
Let me say, though, that the logic behind the creation of
the Department of Homeland Security is the same logic behind
bringing together food safety. I want to ask you specifically
about the announcement of the USDA about testing for BSE:
200,000 cattle from high risk, 20,000 from normally old cattle.
I have written to you three different letters, three different
subjects, I should say, on BSE, soybean rust and childhood
obesity, and I am hoping that your Department can get me a
response soon to all of those letters.
In the meantime, though, as I understand it, we do not know
the ambulatory status of the Washington State holstein cow that
tested positive. I understand an investigation by the OIG has
been opened. If it turns out that the only animal that has been
tested for BSE in the United States was clinically normal and
was found only through chance, then we must question the USDA's
BSE surveillance program that focuses only on suspect,
nonambulatory and dead cattle.
So I would like to ask you, how do you happen to believe
that it makes sense for us, since we have millions of cattle,
mostly aged dairy cows in the United States, that are older
than the FDA ruminant feed restrictions of August 1997 not to
be universally testing those older animals; instead, taking a
very small sample which may not even tell the story of what
happened in Washington State?
Secretary Veneman. Senator, as you know, we recently
announced our expanded surveillance plan on March 15. One of
the reasons that we wanted to wait to make an announcement and
to decide on our surveillance plan is that we wanted to wait
for the international review committee to return with their
analysis of how we conducted the BSE investigation and what
steps we should undertake in addition to what we have already
done to move forward.
We had already said we were going to increase our
surveillance, but we asked them for specific recommendations on
surveillance. What they recommended was an expanded
surveillance plan for a period of about a year to get a
baseline of what the extent of the BSE problem is in the United
States. As a result of that, we worked with our Animal and
Plant Health Inspection Service as well as our Chief
Economist's Office to get a statistically valid sampling
process established. Now, that is still targeting, as the
international organizations recommend, the highest-risk
animals: those with central nervous system disorder signs,
those that are dead, dying, or downers.
We know from the countries that have had a much greater
incidence of BSE than we obviously have had in North America,
that these are the cows that are most likely to have BSE. But
as you indicate, we included in our surveillance plan a random
sampling of older, healthy animals, and the importance of that
is to target the animals you are talking about, that is, those
animals that are older than the feed ban primarily. Not just to
say that if animals are over 30 months, we are going to
randomly sample them but to really target those animals that
are over the age of the feed ban. We think it is important to
get a random sampling of that group of animals.
I think you have probably seen a lot of the debate about
this particular instance in Moses Lake in Washington State.
There has been a great amount of debate about whether or not
this cow was indeed a downer. I have to say that as our OIG is
investigating it, the Government Reform Committee has been very
involved in looking into this.
Our veterinarian from FSIS clearly deemed this cow to be
nonambulatory, a downer, thereby putting it in the higher risk
category. But apparently, according to this process, this
company was bringing in animals that they called, ``back door
animals'' and many of those animals were tested under the BSE
testing protocol, but the company was not calling them downers
because they were saying that we do not kill any downers in our
plant, because they had customers who did not want downer cows.
Senator Durbin. It has been 4 months, and we still cannot
answer that basic question: what was the ambulatory status of
this diseased cow?
Secretary Veneman. Our veterinarian deemed it to be a
downer.
Senator Durbin. Nonambulatory.
Secretary Veneman. Right.
Senator Durbin. Mr. Chairman, I know my time has expired. I
have a series of questions on BSE, soybean rust, which was not
mentioned in the Secretary's remarks, but I have spoken to her
personally, and on the whole question of school lunch programs
dealing with childhood obesity, which I would like to submit to
her for response.
Thank you, Mr. Chairman.
Senator Bennett. Be happy to do that, and we do intend to
have another round if you----
Senator Durbin. Thank you.
Senator Bennett. If you have got an opportunity.
Senator Dorgan.
Senator Dorgan. Mr. Chairman, thank you very much.
Madam Secretary, thank you for being here and thanks to
your staff.
BSE AND CATTLE FROM CANADA
I want to just make a couple of comments and then follow
with a question, and the comments will not surprise you. One is
the issue of BSE or mad cow disease. You know I have written to
you, and I hope very much that we will not move quickly to open
the border to live cattle with Canada. We know there is
discussion going on, there is a process, but I feel very
strongly about that issue. I regret very much that a case of
mad cow disease was found in Canada; a case of BSE was found in
the United States, apparently with a cow that was imported from
Canada.
But first and foremost, our objective must be to protect
our beef industry, and I really hope you will move cautiously.
I do not think this is the time to open the market to the
import of live cattle from Canada. Second, I want to again say,
many of us, as you know, feel very strongly about country of
origin labeling. And we have had a long, tortured debate about
this legislation, and, you know, this has kicked around a long
while. We need to move on that and get that done.
AGRICULTURAL TRADE AND CAFTA
And third, I want to discuss something that you are not
directly involved in in terms of responsibility, but I know you
have an acquaintance of, and that is the agricultural trade
issue. I would just say for the interest of the administration,
the negotiation of CAFTA, the negotiation of US-Australia falls
far short, from my standpoint. I regrettably would oppose CAFTA
if it is brought to the floor, and with respect to Australia,
the promise by the trade ambassador to deal with the
elimination of state trading enterprises was not done with
Australia, and I regret that.
STANDARD REINSURANCE AGREEMENT
So those are just a couple of things, and I know that it is
not your primary responsibility to deal with ag trade. That is
a message, really, for the Trade Ambassador.
I would like to mention to you, the Risk Management Agency
of USDA is engaged in negotiations with the crop insurance
providers for a new product called SRA or Standard Reinsurance
Agreement, and I have been visited by farm organizations and
others about it. One major farm organization that came in to
talk to me about the first draft of the SRA, were very
concerned about it.
They said that draft was so onerous that a number of
private companies and reinsurers could abandon their
participation in the program, leaving farmers and ranchers with
less competitiveness than they have today. I do not admit to
being an expert in this area, but I will just ask you to take a
look at what is happening there, because having crop insurance
that works, that is good for producers, is very important to
us, and we do not want to leave farmers and ranchers without
the choices that they need and deserve.
IMPORTATION OF LIVE CATTLE FROM CANADA
We, I believe, are going to be meeting on another subject
dealing with the issue of broadband loans, which is a program,
I know, that you are beginning to initiate, and I am anxious to
get that done. We will talk about that at a later time. But I
did want to just mention those issues, and if you would give me
just an answer on the issue of the importation of live cattle
from Canada, given the BSE situation. Would you respond to
that?
Secretary Veneman. I would be happy to, Senator.
As you know, when Canada announced that it had a single
find of BSE on May 20, our standard protocol was to close the
border, which we did. We then looked from a risk-based
perspective, a scientific perspective, at reopening the border
for the lowest-risk product, which was deemed to be boneless
boxed beef from animals under 30 months, and we did that. The
effective time of that was about the end of August, the
beginning of September.
We then also published a proposed rule that would allow
live cattle to reenter the U.S. market that were under 30
months of age and that were going directly to slaughter. I know
that you said in your remarks that we need to protect our beef
industry. This would have not put these cattle into the general
population, but they would have had to be destined directly for
slaughter.
The comment period on that rule was to close on January 5.
This, as you know, was just after we discovered BSE in this
country. So on January 2, I announced that we would allow the
comment period to close, but that we would not take action on
the proposed rule until we had time to finish our
investigation, which we did in February. In March, we
reproposed the same, or a very similar rule, I should say, and
opened the comment period again for 30 days. The comment period
will close, I think, on April 7, and we will then evaluate the
comments that we have received.
But again, this border opening would be limited, and as I
have been around the country lately, I realize there is a lot
of confusion about what this importation rule would do. This
rule, as it is proposed, would limit importation to those
animals under 30 months destined for slaughter. My Canadian
counterpart indicates that we should move quickly to allow all
cattle to come into the United States, but the way we set this
up is in a two-stage process based upon the risk.
So I think that it is very important that we take actions
with regard to trade on sound science. We have also been
working with other countries. Obviously, we have lost most of
our beef trade because of the BSE find here. We have had some
success in partially reopening the Mexican market. We are
working hard with our markets in Asia and other places. But it
is very important that we set a good example in terms of basing
our decisions that pertain to border opening and other issues
on sound science, and that is what we have attempted to do
throughout this BSE situation.
Senator Dorgan. If I might just make a final comment, Mr.
Chairman, I understand that. I also believe that in Japan, they
have discovered animals with BSE, mad cow disease, under 30
months of age. I wish no ill for the Canadian producers. Our
heart breaks for them as well. But our first and foremost job
is to protect our country's industry. And with the release a
week or so ago of information about two Canadian feed plants,
you know, the question is what were British cows, cows that
were banned for importation into the United States since 1988,
doing in Canadian cattle feed in 1997, 9 years later?
All of those things just raise a lot of questions, and I
would just ask that we not rush to open that border to the
import of live cattle from Canada. I think it is very
important.
Madam Secretary, thanks for all of the work that you do. We
from time to time agree on things and disagree on things, but
your office is always responsive, and I appreciate that.
Secretary Veneman. Thank you.
Senator Bennett. Senator Bond.
Senator Bond. Thank you very much, Mr. Chairman.
EXPORTS TRANSPORTATION INFRASTRUCTURE
Madam Secretary, I do not know if you remember or if you
saw the December 1 last year Wall Street Journal. The headline
on the front page said railroad log jams threaten boom in the
farm belt, delays in grain shipments reduce potential profits,
may affect overall economy. Log jams worst since 1997. Corn and
soybean on the ground; rail prices doubled over the past 6
months, close quotes.
In general, in your view, how critical is it that we have
efficient shipment transportation options for our exporters,
and is an efficient waterways system essential if we are going
to export in an increasingly competitive international
marketplace?
Secretary Veneman. Well, Senator, I believe it is. As you
know, we are very dependent in our agriculture sector on the
export market. We produce much more than we consume, and so,
the global market is very important. We are projecting that our
agricultural exports for this year, 2004, will be at $59
billion. This is even with the difficulties we have had because
of our beef exports and our poultry exports with BSE and avian
influenza. That exports projection is nearing our record high
level of exports of $60 billion in 1996.
But one of the reasons we are able to be such an abundant
producer and be such an important exporter in the world market
is because we do have an infrastructure that allows us to move
that product. Whether it is on the railroads, and I would like
to point out that I did send a letter to all of the railroad
executives asking them to make sure that they were addressing
the issue of agricultural commodities when the transportation
infrastructure issue was going on, but we also depend, to a
great extent, on the waterways as well for the movement of
agricultural commodities.
Senator Bond. Thank you. And I think the best way to
assure--we need all forms of transportation, and the more
competition we have the more efficient and more economical
every one of them is going to be. You are probably aware the
Mississippi River has locks and dams built 70 years ago that
were designed to last 50 years. I have seen them leak and the
water flow through. They are a source of congestion. It is a
straitjacket on our shipping growth in a region where two-
thirds of our corn and almost half our beans for export must
travel.
I am working with Senators Harkin, Durbin, Grassley and
others, because it takes 870 trucks to carry the same amount of
corn as one single medium-size tow on the Mississippi. The
Corps of Engineers is now in the 12th year of their 6 year, $70
million study and in great need of some adult supervision and
guidance from USDA. AMS and Deputy Hawks have been working on
this to ensure that farmers are not left to the mercy of a
dilapidated water transport system and a railroad monopoly. I
appreciate your keeping an eye on this to ensure that we
maintain an efficient means of getting our farm products to
market.
TRANSPORTATION EFFICIENCY
Let me turn to Dr. Collins. How do you see the relationship
between transportation efficiency and the ability of farmers to
win markets at higher prices?
Mr. Collins. I think they are fundamentally related,
Senator Bond. A great example of that is simply what has
happened in the world soybean market over the last 10 years or
so. Everyone knows that Brazil has a very low cost of
production of soybeans. However, we have an advantage in
transportation infrastructure. And that has enabled us, despite
the large growth in soybean production in Latin America, to
continue to increase our exports and be competitive around the
world. So I think they are closely related.
CORN SHIPMENTS
Senator Bond. I just hope we maintain that edge.
Over the next 10 years, Dr. Collins, what would you
estimate the increase in corn shipped through the Gulf to be?
Mr. Collins. Senator, we have recently completed a 10-year
analysis that forecasts through the 2013 crop year. We do not
project specific exports through the Gulf. I know you have
asked me this question. Our exports of corn in total over the
next 10 years are projected to rise about 45 percent, and about
70 percent of all corn export increases would be expected to go
out through the Gulf. So we would say something in the range of
about 435 to 550 million bushels of corn, over and above where
we are now, would be going out through Gulf ports by the year
2013.
Senator Bond. I was interested that you do your baseline
projections for 10 years. The Corps has tried to figure out
what is going to happen 50 years from now. Why do you do it for
10, not 20, 30 or 50?
Mr. Collins. Doing it for 10 is heroic enough.
Senator Bond. You are joined in that by the National
Academy of Sciences, which said nobody can predict anything 50
years from now, and I very much appreciate your projections and
your interest.
Mr. Collins. I think that is right. There are just too many
risk factors for us to go much beyond a decade.
Senator Bond. Thank you.
Senator Bennett. Senator Harkin.
CONSERVATION SECURITY PROGRAM
Senator Harkin. Thank you very much, Mr. Chairman.
I apologize for being late, but I thank you for this
opportunity.
I welcome you again, Madam Secretary, and I want to cover a
couple of programs with you, the Conservation Security Program
and the bio-based proram which includes, the Federal
requirement to purchase bio-based products, both of which were
in the Farm Bill.
Secretary Veneman, as you know, the Conservation Security
Program is an important new program included in the 2002 Farm
Bill. It embodies all the important features included in your
own Food and Agricultural Policy report. The payments fall
under the WTO green box for trade purposes. It encourages not
only maintenance of conservation practices, but additional new
conservation, and it is a voluntary national program to
diminish the need for environmental regulations for farmers and
ranchers.
Despite the promise of CSP, despite the clear wording in
the law that we passed and the President signed, USDA has drug
its feet and has issued a proposed rule that provides such
limited payments and very difficult eligibility requirements
with multiple obstacles that almost no producers can get in,
and the few that can may find it financially impossible to
participate.
The program in your proposed rule bears little resemblance
to what was passed in the Farm Bill. Quite frankly, Madam
Secretary, you have made up the rules out of thin air. Now, not
only have members of Congress told you that; I have here a
recent letter that 56 members of the Senate signed. Last
summer, we sent you another bipartisan letter. This later one
was bipartisan, too with 56 members. I could have gotten more,
but I ran out of time.
But every Senator I have talked to has heard from their
farm groups, the major groups, the Farm Bureau, the Farmers
Union and also the other crops: the corn growers, soybean
producers, cotton, rice, everybody. And as I understand it, you
have gotten over 12,000 comments, sent to you expressing
similar sentiments and disappointment.
Now, after you published the proposed CSP rule, Congress
passed and the President signed into law the fiscal 2004
Consolidated Appropriation Act that restored the CSP funding to
what it was in the Farm Bill. Now, in your proposed rule, you
have said here, that Congress is currently considering
legislation that amends funding for the CSP. Pending the
enactment of the legislation, NRCS intends to publish a
supplement to this proposed rule. Well, we changed the law, but
there is no supplement to the proposed rule.
So now, USDA's rulemaking, simply, it seems to me, is going
on in some kind of a black box. We do not know what is going
on. For example, I was shocked to find out that despite the
fact that the comment period closed on March 2, the public and
the press still does not have access to the comments. My staff
that I deputized to do this have repeatedly requested and asked
for access to the comments, and we have been denied. The press
has been denied.
Madam Secretary, with all due respect, I have never in all
my 20 some years here encountered an agency denying access to
public comments in this way, never. And so, you know my
frustration. I am saying it this way because the farmers I have
talked to are extremely frustrated by this, so I am asking you
for the record whether you will commit to America's farmers and
ranchers, to our Nation's citizens, to your own words in your
farm policy report that you will revise the CSP rules and carry
out the program as written in the Farm Bill and which the
President signed.
Will you commit yourself to that?
Secretary Veneman. Senator, let me just say that this CSP
is part of the larger Farm Bill, as we have talked about. We
have had a tremendous amount of work to do with regard to this
Farm Bill, and as we have discussed on many occasions, the CSP
was not described in detail in the Farm Bill, and there were
many decisions left to be made. We have gone out and had a
number of public hearings, a number of processes to get public
input, and as you say, our proposed rule was then published.
The comment period has now closed, and as you have
rightfully indicated, there were over 12,000 comments. We are
now in the process of evaluating those comments to determine
what the final rule should look like. I certainly can commit to
you that we are going to review all of the comments that we
received. I frankly had been unaware of the fact that you had
not had access to the comments, and I commit to you that I will
look at that issue to determine whether or not we can get you
the comments that you are requesting. I was not aware that the
comments were not available.
Senator Harkin. I would also hope that you would let the
press have access--these are public comments.
Secretary Veneman. I understand.
Senator Harkin. There should be no secrecy. There are no
state secrets.
Secretary Veneman. I understand, Senator. I just was
unaware that there was a problem.
Senator Harkin. Well, it is a big problem.
Secretary Veneman. I will go back and try to determine what
is the issue there.
Senator Harkin. All right; I appreciate it.
Secretary Veneman. But I think as you indicate, this has
been a long process primarily because it is a new program, and
we want to do it right. I have not seen the comments. I do not
know what the various issues are, but I can tell you that
because the funding has been limited, we have had to make some
decisions about how we structure this CSP program. Are they the
right ones? I do not know. But this is what you have: a notice
of proposed rulemaking and we have comments for the proposal
and so, as we go forward, I cannot tell you what the final rule
is going to look like, but certainly, we will review the
comments and take into account as much as we possibly can in
developing a final rule.
Now, Dr. Collins has been part of our overall group that
has been responsible for implementing the Farm Bill, and he may
want to make a couple of other comments about how we have tried
to work to get to where we are on the CSP rule.
Senator Bennett. Let me warn you, Dr. Collins, the vote is
on, so that we need to be as brief as we can. We will not have
another round, after I have been promising it all afternoon,
because we have to go vote.
Mr. Collins. I did not know that.
Senator Bennett. But go ahead.
Mr. Collins. Mr. Chairman, I would only say very quickly
that there has been a different balance that the agency has had
to cast here. We have a statute with a legislative history of
it being capped. It is capped for fiscal year 2004. It also has
a limitation on technical assistance funds.
Senator Harkin. Is it capped beyond fiscal year 2004?
Mr. Collins. It is not capped beyond 2004.
Senator Harkin. Thank you. I want that for the record to be
clear. Fiscal year 2005 and beyond is not capped.
Mr. Collins. It is not. But we have had a legislative
history of caps in the out years, and the Administration has
proposed a cap in the out years, although statutorily, it is
not capped in the out years.
Senator Harkin. Thank you, the law we are following in the
law in effect now.
Mr. Collins. Correct. There is also a 15 percent limitation
on technical assistance, which also does serve as a constraint
in the Natural Resources Conservation Service's ability to deal
with the potential 1.8 million farms that would be eligible for
a wide-open environmental stewardship program. So I think there
were those kinds of constraints that the agency felt they
needed to deal with in developing this regulation.
Senator Harkin. Well, I know we have to go, Mr. Chairman,
but when were the rules supposed to come out under law? What
date? February of 2003. We are now more than a year past that.
I think we, all of us here and on the authorizing committee,
have been more than understanding of saying, okay, fine, things
take time.
But we are getting to the point now where farmers are just
saying you are scoffing at the law. The Department of
Agriculture is just scoffing at the law that we wrote and not
doing anything to implement this. The proposed rules bear no
resemblance to what is in the law. That is why you have got
over 12,000 comments. I have not read them. I take you at your
word you are going to try to let us have access to those. As I
have said, I have never had an agency ever say that we could
not look at public comments.
But all I know is that the agricultural producers and
groups have contacted me who have sent in comments. To a
person, I am sure that close to 100 percent were opposed to the
rules that you proposed, so I just am hoping that you do have a
revision of these rules. I would forego the supplement at this
point to the proposed rule. You do not need a supplement. That
will just delay the final rule some more. But if you get these
rules out and carefully follow the comments, then, perhaps we
can start signing people up soon.
And I am glad, Mr. Collins, you have pointed out that it
was capped this year; the law got changed. We got it put back
the way it was in the Farm Bill, and it will not, I can assure
you, change again until this Farm Bill is up again. And so you
should prepare for a program that reflects the law beyond this
year.
Thank you, Mr. Chairman.
Senator Bennett. Thank you.
Senator Harkin. I did not get to the bio-based products
program.
Senator Bennett. Well, you can submit those for the record.
Senator Harkin. I appreciate it. Thank you.
Senator Bennett. And she will be happy to respond in
writing.
SECTION 521 RENTAL ASSISTANCE
Madam Secretary, I have two quick items; also, you can
respond in writing for the record. GAO recently reviewed the
Rural Housing Service's Section 521 Rental Assistance Program,
and the information that I am seeking is very specific, so I
will provide a written request and would ask that you respond
in writing both to myself and to Senator Kohl by the 6th of
April if you possibly can.
CYBER SECURITY
And then, the second quick item, this is a hobby horse of
mine, but I cannot resist it: cyber security, IT weakness. GAO
did a study on the cyber security of the department and found,
quote, significant and pervasive, close quote, information
security weaknesses. And we will give you again some
information in writing, and the only comment I want to make
about this based on my experience with Y2K, when we had that
challenge governmentwide, the mantra I repeated over and over
again, to which the Clinton administration responded, was this
is not a CIO problem; this is a CEO problem.
When the Secretary or the administrator or whoever the CEO
of the agency was made it clear that this was her priority or
his priority, then it got done. If it got turned over to the
CIO and say, well, this is a technical thing, you fix it, then,
it did not get done, because nobody recognized how important it
was, and the GAO report indicates the many problems they found
are fixable, and I am sure that it can be fixable.
I simply wanted to call it to your attention as the CEO, to
ask you to give it the kind of leadership of which you are more
than capable and which I think the problem demands.
Secretary Veneman. Mr. Chairman, if I might make one
comment on that. I do take cyber security very seriously, as
does our CIO. We had money in the 2004 budget for cyber
security, and it was denied by the Congress. We have money
again in the 2005 budget request for cyber security, and we
hope that, given your strong interest in this, that we will be
able to maintain that money in the budget so that we can do the
things that we know we need to do.
Senator Bennett. Properly noted, and I will be a bulldog on
it this year.
Senator Harkin. Just 60 seconds, please.
ADDITIONAL COMMITTEE QUESTIONS
Senator Bennett. All right. I will time you.
Senator Harkin. Secretary Veneman, the learing I did not
want to leave on that note. I told you I was going to be hard
on you on the CSP, and I am going to continue to be hard on
you. But I wanted to end it on a positive note. I want to thank
you, Madam Secretary, for what you have done for the Ames Lab
and for coming out for the dedication of it. You have been
great. You have put money into this critical project.
It is needed, Mr. Chairman, to make sure that we have the
best laboratory facilities in the world in answering animal
disease problems and especially with the issues about BSE. We
are moving ahead at Ames, and I just wanted to thank you, Mr.
Chairman, Senator Kohl and your staff, along with Secretary
Veneman, very much for all of your support and help with the
Ames lab.
Secretary Veneman. Thank you for being there with us.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Robert F. Bennett
rd state offices
Question. We understand that RD state offices have been told that
there will not be sufficient money to fund all rental assistance needs
this year--in particular, that some rehabilitation and repair loans may
be funded without rental assistance. We also understand that the state
offices have been told to reexamine their unused rental assistance and
to consider using unused rental assistance funds for rehabilitation and
repair loans. Your calculations for rental assistance needs seem
inconsistent.
Please explain your fiscal year 2004 calculations and provide us
with documented information that explains the discrepancy between your
original and current calculations. Also, please document what new
information, if any, has resulted in the change regarding your ability
to fund rehabilitation and repair loans.
Answer. The fiscal year 2004 calculation of $740,000,000 was
reduced by Congress to $730,000,000. Then 20 percent was taken off to
account for 4-year contracts instead of 5 years. There was a rescission
to bring the number to $580,550,000. Of the total, $10,000,000 was
allocated to new construction, farm labor and preservation, which left
$570,550,000 for renewals. At $14,000 per unit for 4 years, we
estimated 40,754 contracts could be renewed. This resulted in no rental
assistance for rehabilitation. We expect to use $55.8 million of the
$116 million available for the Sec. 515 loan program for repair
rehabilitation process.
rhs/gao report on rental assistance
Question. The Rural Housing Service (RHS) has reported that in
implementing its new automated budget estimation process, 3 to 4 staff
will work together on generating the budget estimates and allocating
the resulting funds to rental assistance contracts.
In light of the concerns reported in the GAO report,
``Standardization for Budget Estimation Processes Needed for Rental
Assistance Program'' (GAO-04-424), over the lack of segregation of
duties at RHS, how will you document that these key duties have been
divided among 3 to 4 different people to reduce the risk of error or
fraud? Furthermore, will these 3 or 4 staff come from different offices
within Rural Development, e.g., budget, finance, and program offices,
or will they all be from the program office? If from the same office,
please comment on how you plan to maintain the segregation of duties.
Answer. The agency has not made a decision on how to address this
issue. Several options are being considered. One of the options would
include a national office staff person responsible for the day-to-day
administration of rental assistance and a supervisory-level person to
handle the policy issues. The allocation process would be developed in
the national office and then presented to a ``Rental Assistance
Advisory Committee'' made up of the national office staff who
administer the rental assistance program and a person from RD Budget
Staff, a person from the Finance Office, and the Deputy Administrator
for Multi-Family Housing. This committee would concur with the proposed
allocation method presented by the national office staff. The concurred
allocation method would be presented to the Administrator for approval.
Question. To what extent is the RHS national office monitoring the
activity of rental assistance transfers at the state and local levels?
For example, how many units and how much rental assistance funding was
transferred in fiscal year 2003? How does RHS ensure that units are
transferred according to the regulations, and that transferred units
are used in a timely manner?
Answer. The national office provides procedures and advice to the
field staff for the proper administration of rental assistance. We also
perform Management Control Reviews (MCR) of the program, which consist
of visits to four representative states to see if the program is being
correctly administered. The MCR results and recommendations are
provided to all states for educational and consistency purposes.
In fiscal year 2003 5,166 rental assistance units and $48,436,455
were transferred.
To address the issue of unused rental assistance, we are reviewing
and providing monthly reports to the field staff and the management
team to ensure this valuable resource is properly and promptly used.
Question. Last year this subcommittee was told that USDA had
acquired a team of professionals from inside and outside of government
to create a new rental assistance forecasting tool. Who were the
outside professionals that helped create the tool and what did they do?
Answer. The Agency developed a working group consisting of staff
from the Department's IT Systems Services Division, the Financial
Management Division, national office and field staff, and private
contractors from Unisys, IBM and Rose International. This team
developed a model based on relevant informational elements using
several software applications. The Rental Assistance Forecasting Tool
was completed in November 2003, was reviewed by GAO in December 2003,
and has undergone several months of testing to ensure accuracy and
debugging. The Department expects to use the Forecasting Tool to
develop the fiscal year 2006 Rental Assistance Renewal budget estimate.
rural programs
Question. There are currently different definitions of rural among
various rural development programs throughout USDA and the Federal
Government. A town needs to have a population under 2,500 to be
eligible for some USDA rural development programs and rural towns with
populations of 20,000 or 50,000 are eligible for other USDA rural
programs. Rural health programs in HHS use non-metropolitan criteria.
Also, some programs use county data, others use census tract
information, and still others use commuting area designations.
Should there be a more consistent definition with common criteria
for rural programs throughout USDA and the Federal Government?
Answer. Due to the diversity of rural communities across the
country and the wide variety of programs funded by the Federal
Government for rural residents, businesses, and communities, it is
difficult to develop one definition for ``rural'' that is appropriate
for all purposes. Past efforts have been found to be harmful to some
segment of the population or overly generous to another segment.
Nevertheless, we support simplification of the myriad of definitions
and criteria used to define and allocate resources to rural areas.
Question. I understand that RHS has started a capital needs
assessment and, as outlined in the GAO report (GAO-02-397), is
developing a protocol for evaluating the physical, financial, and
market needs of the section 515 multifamily portfolio. I also
understand that a private contractor is evaluating a 3 percent sample
of the portfolio to develop the protocol. Who selected the 3 percent
sample, and what methodology was used for the selection? In particular,
(1) did all properties have an equal chance of being selected, or (2)
were other factors, such as the age of or the percentage of rental
assistance in each property considered in the sampling process?
Answer. The Agency consulted with Department economists who, after
reviewing the data, provided us with the sample size that would result
in a 90 percent confidence level. The 333 Section 515 properties
selected were a mix of family and elderly complexes in operation for
more than 5 years, and categorized by property size (less than 12
units, 12-24 units, 25-50, 51-100 and 101 units or more). All of these
factors were used to sort the total database to develop a
representative sample. The percentage of rental assistance was not a
factor in selecting the sample.
rd information technology
Question. In July 1993 testimony, GAO stated ``USDA has
substantially increased its use of information technology. But most of
the information system expenditures to date have been for automating
the systems associated with providing program benefits. However, these
systems are not providing managers with the data they need to manage
and make decisions, nor is the information produced in a form that can
easily be shared with other agencies.''
How much have we progressed in the past 11 years? For example, how
many different information systems are used to manage the various
housing and community development programs in USDA's Rural Development
Mission Area?
Answer. Over the past 11 years, Rural Development has progressed
significantly beyond the automation capabilities supporting the mission
area at that time. Several new, modern state-of-the-art systems have
been constructed and deployed in support of Agency business needs. Some
key major accomplishments in this area include:
--The Agency purchased and deployed a new commercial-off-the-shelf
mortgage servicing system in support of the Single Family
Housing Direct Loan Program and in support of the Centralized
Servicing Center in St. Louis. Deployed in support of this
commercial system were several new technologies including
document management technologies including scanning and
imaging, workflow management, and content management; automated
mail handling; and automated call center technologies including
voice response and predictive dialing. These capabilities have
not only been extended to other business processes within Rural
Development but to other USDA agencies and the Department.
--A new guaranteed loan system supporting all Rural Development loan
programs (and Farm Services Agency guaranteed loans) has been
fully deployed and major new enhancements have already been
completed. This system now includes a funds reservation
application, an electronic data interchange capability with
participating lenders, and a web-enabled user interface.
Application and project tracking capabilities for Business &
Industry and Community Facility loans and grants have been
added to this system.
--A new system is in the process of being designed, developed, and
deployed to replace obsolete legacy systems dating back to the
Rural Electrification Agency. The initial capabilities of this
new system have been deployed and key financial and program
management capabilities are in development.
--In a joint effort with the Farm Services Agency, Rural Development
has purchased and deployed a new program funds control system
that is compliant with the Joint Financial Manager's Integrity
Act.
--A new Multi-Family Housing project management system has been
deployed and new enhancements are being added to meet emerging
needs identified to improve the overall management and
oversight of this program. This new web-enabled system
permitted the retirement of three, stove-pipe legacy systems.
While much progress has been made in RD's information technology
(IT) capabilities, the 2005 Budget requests an additional $14.1 million
to upgrade IT systems. Upgrades are needed to improve RD program
accountability and customer service, and to correct a material
deficiency in RD direct loan systems.
Question. How compatible are the systems?
Answer. Each system is designed to meet the unique needs of the
loan and grant programs they support. However, all new systems and
applications are built using ``re-useable components'' and technologies
that are relatively easy to extend to other systems and applications.
Integration of data is achieved through the construction of a data
warehouse that will eventually become the single source of all Rural
Development management data. Although much Agency data has been
extracted and moved into the data warehouse and made available to
Agency managers and staff, there is much more to accomplish. Also
included in the data warehouse is census data which allows program
managers to better monitor the effectiveness of their programs. Tabular
data has been geo-coded to permit the graphical display of data by
creating maps; maps showing eligibility areas for specific programs
have already been developed. Rural Development systems are being built
through a vision of a fully-open technology architecture and data
integration is being achieved by moving all data required to support
Agency loan and grant programs into a single data warehouse.
coordination of usda rural programs
Question. What efforts have you implemented to facilitate the
coordination of programs across USDA for the benefit of rural
communities?
Answer. Within USDA, we have developed guidelines regarding the
delivery of all Rural Development programs and required the state
offices to reorganize themselves to meet those guidelines in order to
bring consistency to how programs are delivered nationwide.
Question. What is the Department's rural policy?
Answer. The Department's rural policy recognizes the diversity of
rural America and that there is no single recipe for prosperity that
will be applicable nationwide. It further recognizes that agriculture
is no longer the anchor for most rural communities and the availability
of non-farm jobs and income are the drivers of rural economic activity.
The creation of an economic environment to save or create jobs in rural
areas is the challenge and doing so will require attracting private
investment; creating a rural population with the education and skills
needed by businesses; and the development of the technology,
infrastructure and community facilities needed to make rural
communities attractive to new businesses is critical if the communities
are to prosper. Finally, there is the recognition that we need to
enhance the market base for agricultural producers to find new markets
for their products, including the development of alternative fuels. A
more thorough discussion of the Department's rural policy is outlined
in the USDA publication ``Food and Agricultural Policy--Taking Stock
for the New Century'' which was published in September 2001.
Question. USDA Rural Development is mandated under the Farm Bill to
create the National Rural Development Coordinating Committee. What is
the status of that effort?
Answer. Rural Development is developing a course of action
regarding creating the National Rural Development Coordinating
Committee. The Farm Bill mandates certain representation on the
Coordinating Committee, but implementation of that mandate could be
pursued in a variety of ways. Rural Development may publish a notice in
the Federal Register requesting public comment and input on how to
accomplish that mandate.
Question. The Farm Bill also mandates that USDA present a report to
Congress on the National Rural Development Partnership. What is the
status of that report?
Answer. Section 6021(b)(3)(B) of the Farm Security and Rural
Investment Act states that the Governing Panel in conjunction with the
National Rural Development Coordinating Committee and state rural
development councils shall prepare and submit to Congress an annual
report on the activities of the Partnership. This annual report cannot
be submitted this year because neither the Governing Panel nor the
National Rural Development Coordinating Committee yet exists.
pilot program
Question. In September 2000, GAO noted that in some rural areas,
new agribusiness jobs are available in off-farm processing plants, such
as aquaculture and poultry processing operations. In response to the
GAO report, USDA noted that it had undertaken a pilot program in
California and was considering a potential demonstration program in the
future. What resulted from the pilot program and has USDA undertaken
any similar pilots?
Answer. In the fiscal year 2001 Agriculture Appropriations Bill,
Congress authorized the Rural Housing Service (RHS) to provide almost
$5 million in housing assistance (grants) for agriculture, aquaculture,
and seafood processing workers in the states of Mississippi and Alaska.
On February 12, 2001, RHS published a Request for Proposals in the
Federal Register and on September 14, 2001, six proposals were selected
for funding. The six selected proposals are in different stages of
development. Some have completed construction and are now providing
housing to processing workers. Other proposals have not completed
construction.
In the fiscal year 2004 Agriculture Appropriations Bill, Congress
authorized RHS to provide almost $5 million in housing assistance
(grants) for processing and/or fishery workers in the states of Alaska,
Mississippi, Utah and Wisconsin. On April 6, 2004, RHS published a
Request for Proposals in the Federal Register. The deadline to submit a
proposal is July 6, 2004.
national board on rural america
Question. What is the status of the National Board on Rural America
created under the Farm Security and Rural Investment Act of 2002? Is
such a board needed to promote business and community development in
rural America?
Answer. The Board was to implement the Rural Strategic Investment
Program. Funding for the program was rescinded by Congress. Without
funding to cover their administrative expenses, the Board cannot
function and has, therefore, not been named.
The promotion of business and community development in rural areas
occurs in a variety of ways through outreach from government, non-
profit and profit organizations. The establishment of the National
Board on Rural America is not critical to this function.
multi family housing
Question. How effective has the agency been in encouraging more
lenders to get involved with the Section 538 guaranteed multifamily
housing program? Is anything being contemplated through regulation, or
through a statutory change to allow the program to provide more
multifamily affordable housing for moderate-income families?
Answer. Lender participation in the program has been increasing
because the industry has created a secondary market for the program.
The Section 538 lender pool currently consists of 15 Approved Lenders,
which are lenders with closed Section 538 loans, and 16 Eligible
Lenders, which are lenders that are processing a Section 538 loan. The
eligible lenders will become approved once they close the 538 loan. In
addition, the publication of the program's final rule this summer will
allow Ginnie Mae lenders to participate in the program.
The purpose of the Section 538 Proposed Rule, which was published
for comment on June 10, 2003, was to make the program more industry
friendly to the secondary market. We expect the final rule to be
published this summer.
In addition to moderate-income families, the program also serves
very-low-income (with section 8 vouchers) and low-income families.
Eighty-five percent of the Section 538 housing portfolio has been
financed with Low-Income Housing Tax Credits (LIHTC) equities and,
therefore, must follow the LIHTC low-income occupancy restrictions.
rural business and cooperative service
Question. The Inspector General has reported that the Rural
Business Cooperative Service's business and industry loan program
continues to have problems in applying its own policies and procedures
for underwriting and managing the loans and performing adequate lender
oversight. What can be done to ensure that the loan approval process
and monitoring of the loans will reduce the number of defaults and
better protect the government's financial interests?
Answer. The Agency revamped its internal control review of the
State Offices. The review is called a Business Program Assessment
Review. We contracted with another Agency (experienced in completing
Safety and Soundness reviews) to improve upon the National Office
review. National Office reviewers have been trained and we are working
with the contractor agency in conducting these reviews.
As a result of these reviews, we are evaluating:
--the need for reducing/removing loan approval authorities delegated
to individual State Offices,
--the need for implementing changes to protect the portfolio,
--the need for training/closer monitoring of loan approval(s),
--changes to the regulations to improve portfolio development, and
--the need for lender training.
business and industry program
Question. Considering the problems with the business and industry
program and the complex nature of the deals, does your field staff have
the training and capacity to effectively negotiate with lenders and the
borrowers?
Answer. The level of expertise varies between states. Several
initiatives are underway to provide staff with tools and training that
will ensure more timely and consistent analysis in the processing of
applications/servicing actions.
The Agency has purchased and distributed Moody's financial analysis
software to field staff to improve and provide consistent credit
analysis of loans that are considered for funding.
We have had national meetings with the National Office and selected
State Office Program Directors/Loan Specialists and we have contracted
with other institutions, i.e. Farm Credit Association, to provide
specific training. With budget constraint, we have explored ways to
provide telephonic training, regional teleconferences, web cast,
Intranet and etc., to provide guidance to our field personnel.
The Agency has identified the need for a core curriculum of
training that will provide staff the training necessary for them to
perform their assigned duties. An accreditation plan that will identify
this core curriculum is under development. Current field staffs are
being surveyed to determine the basic core training needs.
Each delegation of authority to State Offices for loan processing
and servicing actions is based on experience as well as the performance
record of the personnel in the state. We will continue to make every
effort to ensure authorities are issued to employees with the necessary
skill set to protect the taxpayer's investment.
farm credit administration review
Question. How effective has the Farm Credit Administration been in
identifying problems with nontraditional lenders using the B&I program?
What is the annual cost of this contract? Has the cost of the contract
been justified based on Farm Credit Administration reviews?
Answer. The Farm Credit Administration (FCA) has been quite
effective in its review of nontraditional lenders. The particular arm
of FCA with which the agency has contracted conducts safety and
soundness examinations not only of the banks within FCA but has also
contracted with the Small Business Administration (SBA) to perform the
same function for specific SBA lenders. FCA is a recognized expert in
lender examinations, internal controls, and program oversight. These
examinations provide the agency and the nontraditional lenders with
recommendations. We monitor the lenders to assure that recommendations
are implemented.
The cost for lender examinations by FCA in fiscal year 2004 is
$104,501.
We believe the involvement of FCA in the examination of lenders
participating in the B&I Guaranteed Loan Program has been cost
effective. Improvements in lender loan underwriting, risk
identification, and servicing as well as a better understanding of the
Agency's regulations are examples of the benefit of FCA's lender
reviews. FCA reviews have supported the Agency's actions to debar an
individual from participation in Government programs. The results of
FCA reviews have been instrumental in identifying weaknesses in lender
practices and have assisted the Agency in determining lender fraud,
misrepresentation or negligent servicing. This assistance helps save
millions of dollars for taxpayers.
centralized servicing center
Question. The Centralized Servicing Center in St. Louis reported a
32.5 percent reduction in the number of loans serviced from the year
the center opened in 1997 to 2003. Have any staff reductions occurred
as a result? Has the Centralized Servicing Center in St. Louis
attracted any additional work from other Federal agencies? If not, what
efforts are underway to attract any new business? Without new business,
at what point will the loan volume become too small to keep the
operation viable?
Answer. Thank you for recognizing the success of our Single Family
Housing program and Centralized Servicing Center. As you are aware,
customers are required to ``graduate'' to other credit when they no
longer require Federal assistance. We are pleased that over 30 percent
of our direct homeownership customers were able to graduate to the
private sector. In response to your specific questions, we offer the
following explanation:
In 1997, the Centralized Servicing Center (CSC) supplemented its
permanent workforce with 100 private-sector temporary staff and the
equivalent of 50 staff with overtime. The CSC no longer uses private-
sector temporaries and has reduced overtime usage by 50 percent. This
is equivalent to a reduction of 125 staff years or 20 percent, without
negatively impacting service to our customers.
The CSC has acquired additional work. It recently began the
centralization process for approving loss mitigation plans and
processing loss claims for National Lenders participating in our
guaranteed homeownership program. The guaranteed homeownership program
has the second largest dollar portfolio within Rural Development. By
providing a single point of contact at CSC, loan servicers are provided
greater consistency and efficiency in obtaining approval for loss
mitigation plans and processing of claims. The Agency also benefits
through better internal controls and improved monitoring of losses.
More than 40 percent of all loss mitigation activity for guaranteed
lenders will be handled at CSC by the end of May and more than 60
percent by year-end. This is an ongoing and growing initiative.
In addition, the graduation process for direct loan customers has
been centralized at CSC. This is the process used to identify, notify
and support customers who are eligible for private financing. An
average of 10 percent of our customers graduate annually. Naturally
this supports self-sufficiency, while reducing ongoing costs for the
government.
CSC is also working with Rural Development's Business and Industry
(B&I) program to service a portion of its receivables. CSC's Real
Estate Owned (REO) website has also been expanded to include B&I, as
well as Multi-Family Housing and guaranteed program properties. CSC is
also working with the Veterans Administration and the Department of
Housing and Urban Development to establish a common government website
for all government-owned housing.
CSC is currently using its imaging technology to archive historical
executive correspondence files on behalf of the USDA Office of the
Executive Secretariat. CSC is also participating in the project to
establish a web-based correspondence tracking system for Department-
wide use.
CSC is devoting approximately 75 staff years to these and other new
initiatives.
Since CSC's inception, the rate of delinquent loans has declined to
a new record of 12.93 percent as of March 30, 2004. This is a 37.5
percent reduction in delinquency since 1998. The delinquency rate net
of foreclosures is 9.24 percent which compares favorably to the latest
reported Federal Housing Administration (FHA) delinquency rate net of
foreclosures of 12.23 percent.
In summary, CSC staff years have declined by 20 percent, important
new work has been and continues to be assumed, while dramatic
improvements in program results are being attained. The combination of
reduction in FTE and new work acquired is equivalent to savings of 200
staff years or 32 percent.
With the existing portfolio, new loans being added every day, and
new business, CSC will continue to be an efficient and effective
operation and asset to USDA. CSC continues to look for other services
that can be provided to other USDA Agencies and throughout the
government.
merging of urban and rural housing and community development programs
Question. When the Congress decided to separate rural development
from urban development programs in the 1930s, the world was different.
Today we have superhighways, information highways, and the boundaries
of rural and urban areas are often unclear. Access to credit, a major
factor behind the creation of rural specific programs, is no longer a
major issue in rural areas. Today, affordability is the key problem in
rural as in urban areas.
Given the changes in rural demographics, the current budget
constraints, and your need to focus on food security and safety issues,
is it time to merge both urban and rural housing and community
development programs into one housing and community development agency?
Answer. Rural areas, like urban areas, are constantly changing, but
for many parts of the country, the rural areas continue to be far
different places than urban communities. We do not believe one housing
and community development agency for both rural and urban areas would
be helpful to rural families and communities. Most rural communities,
especially the smallest and the poorest, do not have the staff to
develop the loan and grant requests needed to effectively compete for
limited funding against larger, more urban communities. These requests
are often developed by the elected officials of small communities who
are totally inexperienced in such an effort. Providing this type of
assistance is a key function of USDA Rural Development field staff.
Access to credit, especially private credit, continues to be very
limited in the poorest communities. We have found there are pockets
throughout the country where private lenders are not interested in
making single family housing loans in rural areas. In some areas,
private lenders are not even available. Rural Development has several
pilots underway in rural areas that have no local banking facilities to
involve the state housing authorities. Rural Development staff works
with the family to prepare their application and then submits it to the
state housing authority for consideration as a guaranteed loan.
rental assistance preservation
Question. We understand you are committed to preserving rural
rental housing. We also understand that you cut half of the $5.9
million that this subcommittee set aside for rental assistance
preservation funding. How do you plan to address the waiting list for
rental assistance preservation?
Answer. We have successfully reduced this waiting list over the
last 12 months to the point where few borrowers are currently on the
list.
Question. We understand that as a result of legal action, 2
properties in Oregon have prepaid their Section 515 loans resulting in
44 households at risk of being displaced. I understand that RHS has the
authority to issue vouchers under section 542 of the Housing Act of
1949 to tenants in such a situation. Why has no funding ever been
requested for this voucher authority that could be used in this type of
emergency situation?
Answer. Until recently, the need for RHS rental assistance vouchers
was not recognized for the preservation program. Currently, the Agency
is conducting a comprehensive property assessment of its multi-family
housing portfolio. Upon completion of that study, the Agency expects to
consider many policy options, which may include the use of vouchers for
the situation you have described above.
usda key information security weaknesses
Question. GAO reported that a key reason for USDA's weaknesses in
information security system controls was that it had not yet fully
developed and implemented a comprehensive security management program.
What steps are you taking to ensure that an effective information
security management program is implemented?
Answer. Beginning in 2000, using initial funds provided by the
Congress as well as existing resources, USDA embarked on a new approach
to securing its critical information assets. Since its formation, the
Department's Cyber Security Program has engaged in a number of
activities and projects designed to address USDA's most serious cyber
security deficiencies. I will provide some additional details for the
record.
[The information follows:]
Examples of progress made during the past year include:
--Initiation of a USDA Certification and Accreditation Program that
will position USDA mission critical systems to comply with
Federal system certification requirements. In fiscal year 2004,
USDA compiled a Departmental inventory of over 500 systems that
we are now using to track the certification and accreditation
(C&A) of these systems. OCIO has challenged USDA agencies to
schedule accreditation of each of these systems by the end of
the fiscal year 2004. To assist agencies with the certification
and accreditation process, OCIO has established a contract
vehicle through which agencies can acquire contract support.
--Development and establishment of a Risk Management Program that
incorporates the widespread use of security self-assessment
tools that address both overall security management and
specific technical platforms. OCIO has developed a
comprehensive USDA Risk Assessment Methodology that addresses
the full spectrum of risk management, including sensitivity,
assessment, remediation, and business case.
--With a contract vehicle established for conducting independent risk
assessments according to OCIO methodology, dozens of risk
assessments have been conducted on the Department's more
important systems. This activity has positioned agencies to
move forward with full certification and accreditation, a major
priority for fiscal year 2004.
--Release of guidance and tools to USDA agencies that provide the
ability to analyze existing information security controls and
technical environments.
--Establishment and management of an enterprise-wide Intrusion
Detection System and procedures for detecting and reporting
intrusion incidents. OCIO is requesting funds in fiscal year
2005 to further strengthen this system by establishing a
Departmental security operation center to continuously evaluate
and manage gathered security information.
--Development and issuance of new or revised policies and interim
guidance on specific security areas and provide precise
requirements. These include policies addressing: (1) mainframe
security, (2) incident reporting, (3) security plan guidance,
(4) security requirements for the use of private Internet
access providers, (5) user ID and password requirements, (6)
server and firewall security, use of network protocol
analyzers, and (7) physical security standards and use of
configuration management.
Guidance issued during fiscal year 2003 and 2004 includes
policies addressing: (1) Privacy Impact Assessments, (2)
Encryption of Sensitive But Unclassified (SBU) Information, (3)
Revised Capital Planning and Investment Control Requirements,
(4) Security Awareness and Training, (5) Contingency Planning,
( 6) Telework and Remote Access Security, (7) Trusted
Facilities Manual Requirements, (8) Security Features Users
Guide Requirements, (9) Portable Electronic Devices (PED) and
Wireless Technology Security, and (10) Life Cycle Approach to
Security Controls.
--For the broader USDA security community, and to meet the Federal
requirement for on-going training for security specialists,
OCIO is providing instruction in the areas of security
controls, forensics, intrusion detection, risk management,
vulnerability assessments, contingency planning and other
security-related issues.
More recent security training has been provided in the areas of
systems security scanning, patch management, Certification and
Accreditation, and Federal Information Security Management Act
(FISMA) requirements.
--Development of an enhanced security awareness program that includes
partnership with the Government-wide eLearning initiative. This
program provides Department-wide web-based training on security
issues to all USDA staff. As of September 30, 2003, over 39,000
employees (of 60,000 total), including the Secretary, have
logged on and completed this course. Other objectives of the
Department's Security Awareness and Training Program include:
defining a security and awareness scope, identifying executive
briefing package materials, surveying and assessing security
and awareness products, and identifying security and awareness
assessment methodologies.
In 2003, the Secretary declared September as USDA Cyber Security
Awareness Month. The Secretary recorded a video focusing on the
need for every employee to be aware of and comply with
Departmental security requirements.
--Oversight has been increased for both Capital Investment Planning
and technology deployment to ensure that security is considered
throughout the entire life-cycle of system development. Annual
reporting instructions are issued and requests for approval to
invest in technology are carefully scrutinized to ensure
security is adequately addressed.
--A rigorous reporting and monitoring process has been established to
oversee USDA's activities related to the Federal Information
Security Management Act (FISMA). In particular, OCIO manages
the Department's annual self-assessment process and oversight
of the action plans and schedules designed to address weakness
discovered.
--OCIO has negotiated and executed USDA-wide contracts for security
services and products. These contracts, managed by OCIO,
provide USDA agencies with access to quality security controls
and expertise in the areas of scanning devices, virus detection
and protection, software security patch management,
vulnerability assessments, and security planning.
--The Department has initiated an Information Survivability Program
through which Disaster Recovery and Business Resumption Plans
will be developed and tested. Software that supports the
development of these plans has been purchased for use by all
USDA agencies and offices. Contract support has been engaged to
support agency personnel in this endeavor.
While much remains to be done to improve USDA's information
security program, these steps and strategies provide evidence
that the Department is committed to eliminating its long-
standing security deficiencies.
holding senior management accountable for information security
Question. How does USDA hold senior management of the department
and its component agencies accountable for ensuring adequate
information security? For example, does it affect their performance
evaluations?
Answer. We have taken a number of steps, both directly and through
delegated authority to the CIO, to ensure program and IT executives and
managers understand and perform their information security
responsibilities. These include:
--Establishing an information security performance measure within the
performance plan of each under and assistant secretary, agency
head, and staff office director. Performance in this measure is
rated and considered in each executive's annual performance
review.
--Focusing senior management attention on certifying and accrediting
all USDA IT systems. The USDA CIO briefed the Subcabinet on
this critical effort, and agency management have been advised
that funding will not be approved for any new systems
development efforts until agencies identify the resources and
milestones to certify and accredit their systems.
--Evaluating and approving each investment in the USDA IT Portfolio
to ensure cyber security is addressed, staffed, budgeted, and
assessed for compliance with USDA Cyber Security Policies.
After approval by the Department's Executive Information
Technology Investment Review Board, the Deputy Secretary
recommends approval of the Major IT Investment Portfolio to the
Secretary.
--Ensuring decisions on all USDA IT acquisitions, above a $25,000
threshold, are approved by the Department CIO. OCIO reviews
each acquisition to ensure cyber security is addressed,
staffed, budgeted, and assessed for compliance with USDA Cyber
Security Policies.
--Establishing security responsibilities and authorities for Program
Officials, CIO's, security officers, IT technical specialists
and IT users through departmental guidance and policy.
ensuring effectiveness of security management
Question. How will the Department ensure that security management
positions have the authority and cooperation of agency management to
effective implement and manage security programs?
Answer. The Department has established controls and performance
measures to ensure the cooperation of agency management.
In addition, USDA's Office of the Chief Information Officer makes
great effort to ensure security managers are engaged in IT investment
decisions throughout the system life cycle. The Department's Capital
Planning and Investment Control process is designed to ensure security
issues are considered at every phase of investment. OCIO reviews each
acquisition to ensure cyber security is addressed, staffed, budgeted,
and assessed for compliance with USDA Cyber Security Policies.
OCIO reaches beyond USDA's security community to the Department's
most senior mangers to keep them abreast of topical and important
security issues. Our current effort to certify and accredit (C&A) all
USDA IT systems is a good example of this process. Discussions
regarding C&A are held regularly with the Department's most senior
management. Executive training and materials for the C&A process have
been developed and presented to agency heads and program
administrators.
Weekly status reports that score progress toward attaining
accreditation are prepared and shared with senior management to ensure
objectives are attained. In addition, OCIO's senior management counsels
individual agency managers on specific C&A strategy, procedures and
progress.
filling acio for cybersecurity
Question. What actions are planned to fill the role of Associate
CIO for Cyber Security, given that the person that held this position
is recently retired?
Answer. The advertisement to recruit a new USDA Associate CIO for
Cyber Security will close in early May 2004. The Department will
carefully review all applications in its search to fill this critical
position.
budget impact of information security requirements
Question. Is there a budget impact to ensure that information
security requirement are met?
Answer. The Department's Capital Planning and Investment Control
process is designed to ensure security issues are considered at every
phase of investment. OCIO reviews each acquisition to ensure cyber
security is addressed, staffed, budgeted, and assessed for compliance
with USDA Cyber Security Policies.
USDA is currently operating under a moratorium that requires a
waiver for all IT acquisitions above $25,000. OCIO reviews each
acquisition waiver request to ensure cyber security is addressed,
staffed, budgeted, and assessed for compliance with USDA Cyber Security
Policies. Failure to adequately address security throughout the system
life cycle will result in delay or denial of funding approval.
Additionally, OCIO has advised agency management that funding for
any new system development efforts will not be approved until agency
management identifies the resources and milestones to certify and
accredit their systems.
completing risk assessments
Question. Addressing risk is necessary to implementing appropriate
security controls. According to the USDA OIG, 8 of 10 agencies that it
reviewed during fiscal year 2003 had not completed risk assessments for
mission essential information technology resources. What actions is the
Department taking to ensure that risk assessments are completed?
Answer. USDA is addressing the issue of risk management on a number
of separate fronts. First, with agency and contractor assistance, USDA
has developed a comprehensive Risk Assessment Methodology to assist
USDA agencies in determining information sensitivity, identifying
threats and vulnerabilities, designing mitigation strategies, and
developing business cases for necessary security costs. Additionally,
risk assessment training and counseling has been provided to agency
security managers by both Cyber Security Program Staff and contracted
risk management specialists.
Second, to meet the requirements of the Federal Information
Security Management Act, agencies are charged with performing self-
assessments of their respective IT systems and security programs. To
address these requirements, USDA uses the National Institute of
Standards and Technology (NIST) Self-Assessment Guide. Weaknesses
discovered during these assessments form the basis for mitigation plans
that guide agency security activities throughout the year.
Third, an initiative that addresses risk management is OCIO's
aggressive strategy to certify and accredit all of its IT systems in
fiscal year 2004. A fundamental component of system certification is a
thorough risk assessment. Agencies will be using USDA and Federal risk
assessment guidance to ensure security controls are adequate prior to
submitting systems for accreditation.
Fourth, OCIO has established vehicles through which USDA agencies
and offices can obtain contract expertise to perform risk assessments.
Over the past 2 years, dozens of USDA IT systems have been
independently assessed for risks and vulnerabilities by highly
qualified and experienced security contractors, a reflection of the
high priority USDA management places on thorough security analysis.
plans to finalize security policies and procedures
Question. Although the department's Office of Cyber Security has
developed numerous policies and procedures that address information
security over the last couple of years, many remain in draft, or
interim guidance, some for over a year. What plans does the department
have for finalizing these policies and procedures?
Answer. Individual information security policies, particularly
those that prescribe technical controls must be vetted thoroughly to
resolve issues of incompatibility and unnecessary expense. Often this
vetting process requires additional analysis and compromise to achieve
maximum effectiveness and economy. Nevertheless, OCIO has been
successful in issuing a wide array of security guidance. New guidance
issued during fiscal year 2003 and 2004 include policies addressing:
(1) Privacy Impact Assessments, (2) Encryption of Sensitive But
Unclassified (SBU) Information, (3) Capital Planning and Investment
Control Requirements, (4) Security Awareness and Training, (5)
Contingency Planning, (6) Telework and Remote Access Security, (7)
Trusted Facilities Manual Requirements, (8) Security Features Users
Guide Requirements, (9) Portable Electronic Devices (PED) and Wireless
Technology Security, and (10) Life Cycle Approach to Security Controls.
It should be noted that even guidance issued as ``Interim''
provides the standard by which USDA agencies must operate. Interim
guidance is used as criteria for IT investment reviews, risk
assessments, FISMA self-assessments, and other compliance exercises.
employee security awareness training
Question. How does the Department plan to ensure that all employees
receive security awareness training?
Answer. During the past year, OCIO has developed a more rigorous
security awareness program that includes partnership with the
Government-wide eLearning initiative. During fiscal year 2004, OCIO
purchased on on-line security awareness course through which all
Department end-users could meet their awareness training requirements.
By using this course, USDA was able to report over 60,000 USDA
employees had been trained. While this was only 53 percent of all
employees, we anticipate the percentage will increase for this year.
Performance related to this issue will be a consideration in each
executive's annual performance review.
Other objectives of the Department's Security Awareness and
Training Program include: defining a security and awareness scope,
identifying executive briefing package materials, surveying and
assessing security and awareness products, and identifying security and
awareness assessment methodologies--all designed to assist agencies in
their attempt to meet Federal security awareness requirements. For the
technical security community, on-going training is provided in the
areas of security controls, forensics, intrusion detection, risk
management, vulnerability assessments, contingency planning and other
security-related issues.
systems testing and evaluation
Question. The department has reported that just over a third of its
systems have undergone test and evaluation within the past year, and
only 16 percent of its systems had been certified and accredited. What
action has the department taken to ensure that testing and evaluating
controls becomes an ongoing element of agencies' overall information
security management programs?
Answer. The testing and evaluation of the security controls is a
critical component of the Department's current certification and
accreditation (C&A) initiative. The C&A process requires testing and
evaluation of all system controls to ensure they function as planned.
To ensure the independence of system testing, agencies must enlist the
services of a third party to undertake the testing who was not involved
in the design or development of the security controls.
In addition, in order to reduce or eliminate these risks, OCIO has
established guidance for conducting Security Vulnerability Scans (SVS)
of all USDA networks, systems and servers. These SVS scans are a vital
component of the overall security protection plan being deployed within
the department. OCIO guidance requires USDA organizations to accomplish
these SVSs on a monthly basis. In addition, to the vulnerability scans,
each agency/staff office is required to conduct and maintain
information technology (IT) inventories of networks, systems, servers,
software and Internet Protocol Addresses for all areas within their
responsibility.
To assist agencies with their scanning responsibilities, OCIO
provides scanning tools, training, and on-going support. OCIO also
conducts oversight reviews of agencies and staff offices to review
vulnerability reports and corrective actions taken to ensure that
networks, systems, and servers are protected in accordance with this
policy.
ensuring systems are certified and accredited
Question. What action has the department taken to ensure that
systems are certified and accredited?
Answer. OCIO has initiated an aggressive program to certify and
accredit (C&A) all of USDA's IT systems and position the Department to
comply with Federal system certification requirements. To prepare
agencies for C&A, OCIO developed a USDA Certification and Accreditation
Guide, document templates, and procedures for managing the broad set of
activities involved. Training sessions have been conducted to educate
all levels of managers and technicians involved in the C&A process.
In fiscal year 2004, USDA compiled a Departmental inventory of over
500 systems that we are now using to track the certification and
accreditation of these systems. In fiscal year 2004, USDA will spend in
excess of $25 million on systems certification and accreditation.
A fundamental step in accreditation is a thorough risk assessment,
conducted through self-assessments for low impact systems and through
independent assessments for all others. To achieve this independent
review, OCIO has developed contract vehicles by which agencies can
engage external expertise to assist them. USDA management and agency
technical staffs have become fully involved in the Certification and
Accreditation Program, scheduling activities and executing contracts
that will lead to accreditation of the systems for which they are
responsible.
OCIO's fiscal year 2005 budget request of $687,000 relative to
certification and accreditation does not reflect the cost of individual
agency C&A activities. Funding for these activities is expected to be
borne by agencies from funds provided for IT investments, and from
unobligated balances allocated for this purpose. OCIO's funding request
is directed toward corporate-level activities such as common toolsets,
oversight and counsel, and Independent Verifications and Validation
exercises.
OCIO recognizes this aggressive schedule places an enormous burden
on the Department's technical staffs, both from a personnel and budget
perspective. Nevertheless, OCIO is committed to moving the Department
to a more secure baseline from which new technologies and methodologies
can be employed safely and effectively, while at the same time meeting
Federal security mandates.
how usda budget corrects security weaknesses
Question. Given the pervasive extent of the Department's
information security weaknesses, how will the Department's request for
budgetary resources address the issues involved in correcting the
problems?
Answer. OCIO is working with the agencies to ensure funding for
security requirements are included in all budget requests for system
development and operation. In addition, OCIO's budget request for
fiscal year 2005 includes increases for the following security
initiatives:
--An increase of $687,000 is needed to manage the USDA Information
System Certification and Accreditation Program.--OCIO's highest
priority is to certify and accredit all USDA systems to ensure
they are properly secured from theft and destruction, in
compliance with Federal security laws and guidelines. Funding
provided to-date from the Department's fiscal year 2003
unobligated balances, as well as from the OCIO base is being
used to pay for the certification and accreditation (C&A) of
specific high-priority systems that are owned and operated by
USDA agencies and staff offices. These additional requested
funds will enable OCIO to manage this program in fiscal year
2005 at the needed level of detail and help ensure that USDA IT
systems are properly secured and in compliance with Federal
security guidelines.
The result of the OCIO C&A Program will be a large collection of
security documentation and artifacts (security plans, risk
assessments, contingency plans, etc), most of which will be
essential to future C&A activities. In addition to compliance
activities, training, evaluation, and Independent Verification
and Validation, OCIO will investigate the value of acquiring
enterprise C&A management tools that will allow USDA to re-use
C&A artifacts, thereby reducing future C&A costs. Because
Federal guidance requires certification of systems at least
every 3 years, savings obtained through re-use could be
substantial.
--An increase of $2,373,000 is needed to maintain an Information
Survivability program to minimize disruptions caused by
attempted intrusions and catastrophic interruptions.--OCIO's
Information Survivability Program addresses both prevention of
attack on USDA IT systems and recovery in the event of
disruption.
OCIO currently manages USDA's corporate Intrusion Detection
System (IDS). This system monitors traffic over the
Department's backbone network to detect incidents of possible
unauthorized access and policy/legal violations. The system is
instrumental in detecting viruses, worms, and other mechanisms
intended to disrupt IT systems. OCIO's IDS operates 24 hours
per day, 365 days per year.
OCIO's request for increased funding for Information
Survivability includes $1,000,000 for the expansion of the IDS
to lower level networks operating within the Department that
support mission-critical applications and communications. In
addition, the increased funding will allow USDA to improve and
expand its detection tools to expand the range of monitoring
and reduce detection time.
Recognizing that no prevention measures are perfect, OCIO's
Information Survivability Program also addressed the
disciplines of disaster recovery and business resumption.
Procedures and policies have been established to ensure that
USDA's business processes will continue to function and serve
its customers, regardless of the degree of damage sustained
from an attack. Features of the Information Survivability
program include: tools, policies and procedures designed to
understand the extent and source of an intrusion; protection,
and if needed, restoration, of sensitive data contained on
systems; protection of the systems, the networks, and their
ability to continue operating as intended; recover systems;
information collection to better understand what happened; and,
if necessary, legal investigations support.
OCIO has entered into a Department-wide contract that provides
software tools and training for agencies as they begin
developing contingency plans. However, the funding for this
effort was provided through the Department's Homeland Security
budget, which provides for no long-term support. As agencies
begin development of their recovery plans, counseling, support,
testing and training will become an on-going effort. In
addition, contractor support to perform Independent
Verification and Validation of contingency plans will be
needed.
OCIO currently devotes one FTE to manage its contingency planning
effort. Over the past year, two contract FTE's have also
provided support with funding provided through the Department's
Homeland Security budget. However, since Homeland Security
funds are no longer available for this contract support, OCIO
is requesting $1.373 Million to continue this critically
important effort.
--An increase of $937,000 is needed to obtain, implement, and manage
an automated Risk Management toolset.--Risk determination and
risk management are the foundation for all successful security
programs. The Department currently relies heavily on manual
tools and forms to conduct risk assessments that identify
security deficiencies in our system controls. This increase is
requested to fund the acquisition of automated software tools,
training, oversight, maintenance and support that provide
continuous updates to existing threats and provide users with
methods to determine information value, vulnerability
predictions, and mitigation strategies. USDA agency employees
will be the predominant users of the tools.
--An increase of $1,561,000 is needed to establish a Security
Operational Center.--While USDA's Intrusion Detection System
captures and handles an ever-growing stream of information on
cyber security related events, no single USDA organization is
trained and equipped to fully utilize the information captured
to determine the true nature and extent of risk to critical
USDA information systems. By providing the requested funding in
fiscal year 2005, Congress will enable OCIO to reduce the time
delay in detecting and responding to security events, improving
the efficiency and effectiveness of USDA's security controls.
ensuring adequate funding for fisma remediation
Question. In preparing remediation plans as required by the Federal
Information Security Management Act--FISMA, what is your process to
ensure that adequate funds are identified to correct the Department's
information security weaknesses?
Answer. By ensuring responsible agency officials identify the funds
to certify and accredit USDA's systems, we are focusing agency
management on addressing a majority of the remediation actions
identified in their FISMA plan of actions and milestones or POA&Ms. In
a review of USDA Agency POA&Ms, approximately seventy percent of the
identified security vulnerabilities are being addressed by agency
system certification and accreditation efforts, which is being funded
through a combination of agency IT funding, the Department's fiscal
year 2003 unobligated balances, and from the OCIO base.
Additionally, OCIO is working with USDA agencies on all non C&A
related activities, such as providing security awareness training to
all employees and improving intrusion detection and response, on a
project-by-project basis. In the case of security awareness training,
OCIO has acquired an online training course, which will be available to
all agencies to use in security awareness training requirements.
bovine spongiform encephalopathy (bse)
Question. On March 15, 2004, the Department of Agriculture
announced details for an expanded surveillance effort for BSE. The
release also stated that $70 million is being transferred from the
Commodity Credit Corporation (CCC) to test cattle in the high risk
population.
Can you take a moment to provide Committee Members with a detailed
explanation of how the Department intends to conduct this increased
surveillance program?
Answer. For more than a decade, USDA has taken aggressive measures
to prevent the introduction and potential spread of BSE. On March 15,
USDA announced a plan to significantly augment those efforts by
strengthening BSE surveillance in the high-risk cattle population and
establishing a small proportion of random surveillance in the aged
cattle population. We are taking these proactive steps to further
assure consumers, trading partners, and industry that the risk of BSE
in the United States is low. By expanding surveillance, we will have
even greater confidence in the health of the U.S. cattle population.
USDA's primary focus and the goal for this new program is to obtain
samples from as many of the targeted high-risk adult cattle population
as possible, plus obtain a small random sample of apparently normal,
aged animals. Under this surveillance plan, USDA will test as many of
the targeted high-risk cattle as possible for a 12- to 18-month period.
This effort will help better define whether BSE is present in the
United States and, if so, at what level. After that time period, USDA
will evaluate the results of the program and determine what future
actions may be appropriate.
We have already begun ramping up our surveillance system and expect
to be at full capacity by June 1. Whereas all BSE testing in the United
States has historically been performed at USDA's National Veterinary
Services Laboratories (NVSL), the new program incorporates a network of
State and university laboratories into the testing program. Their
geographic distribution will help ensure adequate turn-around time for
sample testing and reporting of results.
USDA will continue to build on previous cooperative efforts with
renderers and others to obtain samples from the targeted high-risk
populations. Samples will be collected by authorized State or Federal
animal or public health personnel, accredited veterinarians, or trained
State or USDA contractors. The random sampling of apparently normal,
aged animals will come from the 40 U.S. slaughter plants that currently
handle more than 86 percent of the aged cattle processed for human
consumption each year in the United States. The carcasses of these
animals will be held and not allowed to enter the human food chain
until negative results are received.
USDA anticipates using rapid test technology during the enhanced
surveillance program. However, any rapid test that identifies a non-
negative result will be subject to additional confirmatory testing by
NVSL. A BSE implementation team has been established and is working to
ensure the program meets its goals. The team is currently drafting more
specific guidelines that will be used during the course of the enhanced
surveillance program. These guidelines will address questions regarding
cost recovery and participation in the program.
USDA anticipates pursuing a variety of approaches with regard to
cost recovery, including contracts, cooperative agreements, direct
payments, and fee-basis agreements.
A more detailed version of the plan is available through the APHIS
Web site at http://www.aphis.usda.gov/lpa/issues/bse/BSE_Surveil-
Plan03-15-04.pdf.
testing of animals prior to export
Question. The livestock industry and Department of Agriculture are
working toward reopening export markets in Japan, Mexico, and other
exporting countries. Establishing animal testing guidelines for export
markets continues to be a point of controversy that is preventing any
agreement to open markets. The controversy arises over testing each
animal and whether or not animals under the age of 30 months should be
tested.
Do you believe each animal, including those under 30 months of age
should be tested prior to export? Also, if an agreement requires
testing each animal, what is the expected cost of such a program?
Answer. We do not believe each animal, including those under 30
months of age, should be tested prior to export. Science does not
support the testing of every animal, regardless of age, for BSE.
Further testing apparently healthy animals is the most inefficient
method of finding disease if it were present.
The cost for each rapid test kit is about $25 per test. If we were
to test every animal that goes to slaughter each year (in excess of 35
million), the approximate cost for the test kits alone would be $875
million. However, there are other costs involved in testing the
animals. These costs include sample collection, shipping, handling,
processing, lab support, equipment, disposal, etc. Because of these
other costs, we have estimated that the total cost of testing would be
$175-$200 for each animal. Thus our total cost of testing every animal
would be between $6 billion and $7 billion.
low pathogenic avian influenza
Question. The Administration's fiscal year 2005 Budget request
includes an increase in funding of nearly $12 million to address Low
Pathogenic Avian Influenza (LPAI).
Can you update the Committee in regard to ongoing action related to
avian influenza and explain how the Department would utilize the
additional funding?
Answer. APHIS has been working to establish a national LPAI program
by incorporating this program into the National Poultry Improvement
Plan (NPIP); scheduled to be discussed and adopted at the NPIP meeting
in July 2004. The Uniform Methods and Rules (UM&R) for the live bird
marketing portion of the program has been drafted and is currently
being reviewed by a subcommittee of the U.S. Animal Health Association
in order to obtain their recommendations for program improvement.
APHIS would utilize the additional funding for cooperative
agreements with states that will support the LPAI prevention and
control program; indemnities; for additional field personnel,
equipment, and other resources necessary to assist states with long-
term prevention and control; educational materials and training for
recognition of avian influenza and for biosecurity practices to protect
against the disease; development and administration of vaccine to
support industry when infected with LPAI; and provide reagents and
other laboratory support to incorporate the commercial program through
the National Poultry Improvement Program (NPIP). This program is
currently testing poultry breeder flocks and will continue to expand
its activities until all segments of the commercial industry are
monitored and certified as avian influenza clean.
avian influenza
Question. With the discovery of avian influenza (AI), a number of
countries have banned poultry imports from the United States.
Can you provide the Committee with an update on poultry export
markets and exactly what actions USDA is taking to reopen these
markets?
Answer. USDA responded quickly and effectively to control the
spread of AI in the AI-affected states. Throughout this process, USDA
officials were in constant contact with their foreign counterparts to
provide timely information about the outbreaks and quarantine control
measures. As a result of these efforts, USDA was able to free pipeline
shipments in Japan and Hong Kong valued at over $40 million, and head
off the actions of many trading partners to impose nationwide bans on
U.S. poultry meat. The good news is that countries representing 47
percent, or $941 million of our export markets, have banned products
only from affected areas and another 18 percent, or $337 million, did
not impose any ban. Therefore, taken together 65 percent of U.S.
poultry exports to the world have been unaffected by the AI situation.
On April 2, the USDA Chief Veterinary Officer (CVO) announced the
completion of the required surveillance and testing protocols per the
World Animal Health Organization (OIE) guidelines. An official request
from the CVO has been sent to major U.S. poultry export markets
requesting the removal of all import bans on U.S. poultry and poultry
product imports. The Department at all levels is diligently pursuing
with its trading partners the lifting of all AI trade restrictions on
products from the United States. By the summer of 2004 or earlier, the
remaining countries imposing nationwide bans on U.S. poultry meat are
expected to at least regionalize their import bans to those states
affected by Low Pathogenic Avian Influenza (LPAI) now that the United
States is free of High Pathogenic Avian Influenza (HPAI).
beef export markets
Question. Livestock producers continue to be concerned with the
loss of export markets following the outbreak of BSE.
Will you take a moment to update the Committee in regard to the
efforts being made by the Department of Agriculture to open export
markets?
Answer. USDA continues to work closely with its foreign trading
partners to re-establish U.S. ruminant and ruminant product exports as
quickly as possible. We work with foreign officials at all levels to
reassure them of the safety of U.S. beef and beef products. USDA
officials encourage foreign governments to follow World Animal Health
Organization guidelines regarding BSE. The Animal and Plant Health
Inspection Service (APHIS) has been in constant contact with its
counterparts providing them with updates on the BSE investigation, as
well as new USDA regulatory policies imposed on BSE testing and
specified risk material (SRM) removal.
As a result of USDA's efforts, a number of countries have opened
their markets to selected U.S. beef, beef products, and ruminant by-
products exports. Mexico and Canada have agreed to accept U.S. boneless
beef from cattle less than 30 months of age. Although export
certification issues continue to impede U.S. beef exports to Canada,
USDA and Canadian officials are expected to resolve the problem very
soon. We expect Mexico to lift its ban on selected U.S. beef variety
meats and veal. Mexico had already lifted its ban on U.S. boneless beef
imports earlier and exempted low-risk ruminant product imports based on
OIE guidelines. Mexico and Canada are the second and fourth largest
U.S. beef export markets, respectively, valued at over $1.2 billion in
2003.
Japan and South Korea, the first and third largest U.S. beef export
markets, continue to ban U.S. beef imports. Senior USDA officials
communicate with their respective government officials and have
traveled there to discuss their concerns with USDA BSE controls and
testing procedures. USDA has extended an invitation to Korean officials
to visit Washington for further discussions. USDA is also planning
another high-level visit to Japan in late April to continue discussions
and resolve issues regarding BSE testing and SRM removal.
In addition, USDA continues to work with governments in secondary
markets to lift their bans to U.S. bovine products as a result of the
finding of a BSE case in Washington State. USDA has sent a letter to
selected secondary countries requesting they open their markets to no
risk and low-risk products. These export markets, while smaller in
total export value, provide significant opportunities to resume U.S.
exports in rendered products, animal genetics, dairy products and other
ruminant by-products.
Question. According to the livestock industry, economic losses to
export markets following the discovery of BSE are estimated to be over
$10 billion.
Has the Department conducted a thorough investigation of the
economic impact of the lost export markets?
Answer. The Office of the Chief Economist and the Foreign
Agricultural Service independently evaluated the situation and
concluded that there will be minimal effects on U.S. meat production
and domestic consumption. U.S. consumers continue strong demand for
beef and beef products, and coupled with tight U.S. beef supplies, beef
and cattle prices remain relatively high. The trade impact will be
significant. In 2003, the United States exported approximately $7.5
billion worth of ruminant and ruminant by-products. U.S. export value
of these products for January-February 2004 alone was down 53 percent,
or over $582 million compared to the 3-year average January-February
period for 2001-2003. The severity of the overall trade impact will
depend upon the number of countries that continue to impose import
bans, their importance to U.S. trade, and the length of time the bans
remain in place.
bovine spongiform encephalopathy (bse)
Question. The Administration's Budget request for the Department of
Agriculture includes a total of $60 million for BSE related activities.
Can you provide the Committee with the most up to date information
in regard to ongoing activities related to BSE and then take a moment
to explain the increase that has been requested for fiscal year 2005?
Answer. On December 25, 2003, USDA received verification from the
Veterinary Laboratories Agency in Weybridge, England, of the finding of
BSE in an adult Holstein cow slaughtered in the State of Washington.
The epidemiological investigation and DNA test results confirm that the
infected cow was not indigenous to the United States, but rather born
and became infected in Alberta, Canada. Above and beyond OIE standards,
animals with known or potential risk for having been infected with the
BSE agent in Canada have been depopulated, as have all progeny from the
index cow in the United States. All carcasses were properly disposed of
in accordance with Federal, State, and local regulations. Between
January 1, 2004 and March 31, 2004, USDA tested approximately 5,500
cattle for BSE, and all results were negative.
The United States concluded active investigation and culling
activities on February 9, 2004, and has redirected resources toward
planning, implementing, and enforcing national policy measures to
promote BSE surveillance and protect human and animal health.
An international panel of scientific experts appointed by the
Secretary was complimentary of the scope, thoroughness, and
appropriateness of the epidemiological investigation and concluded that
the investigation conformed to international standards. The review team
members concurred that the investigation should be terminated and made
several key policy recommendations. USDA and the Department of Health
and Human Services have already taken significant actions to address
these recommendations, many of which build on mitigation measures that
were previously in place.
The response actions have focused on (1) preventing inclusion of
specified risk materials in human food and ruminant feed, (2) enhancing
targeted and passive BSE surveillance systems, (3) improving
traceability through a comprehensive national animal identification
system, and (4) reinforcing educational and outreach efforts.
On March 26, 2004, USDA's Animal and Plant Health Inspection
Service provided the results of its BSE investigation to foreign chief
veterinary officers. The information included in the letter
demonstrates that any remaining trade restrictions against U.S. beef
and beef products can be lifted without compromising safety.
On March 15, 2004, USDA announced an enhanced surveillance plan
with a goal of testing as many cattle in the targeted, high-risk
population as possible during a 12- to 18-month period. We plan to
evaluate future actions based on the result of this effort. USDA will
continue to focus on the cattle populations considered to be at highest
risk for the disease--adult cattle that exhibit some type of clinical
sign that could be considered consistent with BSE. This includes non-
ambulatory cattle, those exhibiting signs of central nervous system
disorders, and those that die on farms. We also plan on testing at
least 20,000 BSE slaughter samples from apparently healthy aged
animals.
More intensive surveillance will allow USDA to refine estimates of
the level of disease present in the U.S. cattle population and provide
consumers, trading partners, and industry better assurances about our
BSE status.
As an example, if a total of at least 268,444 samples is collected
from the targeted population, we believe this level of sampling would
allow USDA to detect BSE at a rate of 1 positive in 10 million adult
cattle (or 5 positives in the entire country) with a 99 percent
confidence level.
Historically, all BSE testing in the United States has been
performed exclusively at USDA's National Veterinary Services
Laboratories (NVSL) in Ames, Iowa. The new program incorporates a
network of State and Federal veterinary diagnostic laboratories into
the testing program. Their geographic distribution will help ensure
adequate turn-around time for sample testing and reporting of results.
Appropriate rapid screening tests will be used to test time-
critical samples. USDA recognizes the possibility of false positives;
any non-negative results on the rapid screening tests will be forwarded
to NVSL for additional confirmatory testing.
A BSE implementation team has been established and is working to
ensure the program meets its goals. The team is currently drafting more
specific guidelines that will be used during the course of the enhanced
surveillance program. These guidelines will address questions regarding
cost recovery and participation in the program.
The President's fiscal year 2005 Budget request includes $60
million for BSE related activities, an increase of $47 million over
fiscal year 2004. The increase will allow USDA to further its research
efforts, improve animal traceability, enhance surveillance, ensure
compliance with food safety regulations, and answer BSE-related
complaints at markets regarding contracts or prompt payment. The total
requested includes:
--$33 million to further accelerate the development of a national
animal identification system;
--$17 million for the Animal and Plant Health Inspection Service
(APHIS) to enhance BSE surveillance at rendering plants and on
farms;
--$5 million for the Agricultural Research Service (ARS) to conduct
advanced research and development of BSE testing technologies;
--$4 million for the Food Safety and Inspection Service (FSIS) to
conduct monitoring and surveillance of compliance with the
regulations for specified risk materials and advance meat
recovery; and
--$1 million for the Grain Inspection, Packers and Stockyards
Administration (GIPSA) to dispatch rapid response teams to
markets experiencing BSE related complaints regarding contracts
or lack of prompt payment.
Question. What actions have you taken to better coordinate the
Department of Agriculture's response to BSE?
Also, if this $60 million is provided, will one person coordinate
the various components?
Answer. USDA's response to the BSE detection has been overarching
and has included contributions from all affected agencies, particularly
the Animal and Plant Health Inspection Service (APHIS), the Food Safety
and Inspection Service (FSIS), and the Foreign Agricultural Service
(FAS). APHIS, FAS, and FSIS communicate regularly, and an FSIS liaison
has been assigned to APHIS. USDA also communicates and coordinates with
the Food and Drug Administration (FDA), and we requested FDA's input
when developing the enhanced BSE surveillance plan.
APHIS' Transmissible Spongiform Encephalopathy (TSE) Working Group
monitors and assesses all ongoing events and research findings
regarding TSEs, including BSE. Members are in regular contact with the
Agricultural Research Service, the research arm of USDA, to ensure
regulatory actions are in line with the most current science.
To ensure a consistent trade message between the United States and
our North American trading partners, USDA has been working with Mexico
and Canada to enhance ongoing efforts to increase harmonization and
equivalence of BSE regulations. In January 2004, each government agreed
to establish a sub-cabinet group to coordinate ongoing interagency
efforts toward resumption of exports based on a harmonized framework.
Currently, Dr. J.B. Penn, Under Secretary for Farm and Foreign
Agricultural Services, is leading USDA's efforts in this area. He is in
regular contact with other members of USDA's leadership council,
including the Under Secretary for Food Safety, the Under Secretary for
Marketing and Regulatory Programs, and the Under Secretary for
Research, Education, and Economics.
The sub-cabinet group is serving as a coordinating body for the
three countries, giving guidance to existing work groups, many of which
are already working on harmonization and other activities. A meeting
among the sub-cabinet members was held in mid-February, and a meeting
among the chief veterinary officers from all three countries took place
in mid-March 2004. The three parties are committed to working towards
the normalization of trade and the harmonization of regulations on a
North American basis. We plan to use the harmonized regulations to
present a unified front to the international community.
standard reinsurance agreement
Question. The Risk Management Agency (RMA) is currently working to
renegotiate the Standard Reinsurance Agreement (SRA). This agreement
establishes the terms and conditions under which the Federal government
will provide subsidies and reinsurance on eligible crop insurance
contracts.
Can you provide the Committee with an update on the negotiation
process and have you set a deadline for completion?
Answer. The Department announced on December 31, 2003 that the
current standard reinsurance agreement would be renegotiated effective
for the 2005 crop year. The first proposed reinsurance agreement was
made publicly available at that time. Based on the advice of the
Department of Justice, RMA established a process by which we meet with
each company individually and renegotiate the agreement in detailed
negotiating sessions. Interested parties had until February 11, 2004 to
provide written comments about the proposed agreement. RMA reviewed
comments from insurance companies and interested parties to revise the
first draft. On Tuesday, March 30, RMA announced the release of the
second SRA proposal. RMA believes that the second draft demonstrates
responsiveness to concerns raised by companies and interested parties.
The proposed SRA will enhance the Federal crop insurance program by:
encouraging greater availability and access to crop insurance for our
nation's farmers; providing a safe and reliable delivery system; and
reducing fraud, waste, and abuse, while achieving a better balance of
risk sharing and cost efficiencies for taxpayers.
As part of the process, RMA will meet with the insurance providers
in individual negotiating sessions the last 2 weeks of April and will
receive public comments until April 29. At that point RMA will evaluate
the comments and negotiating session materials and develop another
draft for discussion with the companies. There are several remaining
issues of substance to resolve before a final draft may be completed.
While it is the agency's desire to resolve them and complete the
process before July 2004, given that this is a negotiation, RMA is not
able to determine how long it will take to resolve issues to all
parties' satisfaction. Prior SRA negotiations have taken well past July
to conclude, but have not affected the continuing delivery of the
program.
fraud and abuse
Question. The Administration's Budget request for the Risk
Management Agency includes an increase of over $20 million to improve
information technology. Within the increase, the Budget requests
funding to monitor companies and improve current procedures to detect
fraud and abuse.
Can you explain how the department will monitor companies and
improve detection of fraud and abuse?
Answer. The current systems are based on technology that is more
than 20 years old. The information that is collected from the Insurance
Companies is distributed to a collection of 100+ databases. Any
subsequent updates or changes to this information received from the
Insurance Companies overlays the original information. This
architecture does not allow RMA to track changes in the submissions
from the external entities.
As the data requirements of the current data structures change from
year to year, new databases are created for each crop year. The prior
years' databases are problematic due to the intense effort needed to
convert the historical information to formats that are consistent with
the more recent years. This creates problems in data analyses when
trying to use data from multiple crop years.
The requested increase in funds is directed at the establishment of
a consistent enterprise architecture and enterprise data model. This
would replace the 100+ databases with a single enterprise data model
that would be consistent across the organization. This enterprise data
model would allow data mining operations to be conducted without first
converting the data to a consistent useable format.
By moving the data to a modern relational database system, RMA will
be able to track detailed changes that are made to the data that is
received from the Insurance Companies. This will allow RMA to monitor
the timing of the changes as they occur and identify those changes that
could potentially be related to fraud and abuse.
assistance on public lands
Question. Currently, the Natural Resources Conservation Service is
prohibited from performing conservation work on public lands. This
limits participation to farms and ranches with private lands and puts
Utah, other public land states, and ranchers who graze on the public
lands at a disadvantage.
As a matter of policy, does the Department believe that the Natural
Resources Conservation Service should be able to provide technical and
financial assistance to ranchers to make improvements to their BLM and
Forest Service grazing allotments?
Answer. The Department believes that legislative intent limits the
conservation programs that the Natural Resources Conservation Service
(NRCS) administers to primarily providing financial and technical
assistance on private lands. However, NRCS does work with other
agencies, individuals, and groups using the Coordinated Resource
Management (CRM) approach to provide technical assistance on Bureau of
Land Management (BLM) and Forest Service lands. CRM is a voluntary,
locally-led planning process to address the natural resource issues
which involves all the stakeholders. The Federal and State agencies
work through a Memorandum of Understanding to support the use of the
CRM approach.
Financial assistance, for applicable NRCS programs, is available
for use on BLM and Forest Service grazing allotments when the land is
under private control for the contract period, included in the
participant's operating unit, and when the conservation practices will
benefit nearby or adjacent agricultural land owned by the participant.
Question. Public lands dominate many of Utah's counties and many
states in the West. In addition to their impact on agriculture, public
lands severely reduce the tax base in many communities, restrict and in
some cases discourage development, and affect the way-of-life in rural
public land counties.
Do you think farm programs, rural development programs, and
conservation programs offered by USDA, take into account regional
differences generally, and the impact of public lands specifically?
Answer. The Natural Resources Conservation Service (NRCS)
administers conservation programs. The agency allocates conservation
program funds to states based on National program priorities and the
scope of natural resource needs in the individual states. The process
used to allocate conservation program funds to states includes factors
that account for the fact that natural resource conditions are often
similar within the same physiographic region, but may have natural
resource differences with other regions. The Department believes that
legislative intent limits the conservation programs that NRCS
administers to primarily providing financial and technical assistance
on private lands. Resource concerns on Federal acreage would not
typically contribute to the scope of resource factors used to allocate
funds to states for a particular conservation program.
FSA Conservation Programs are adapted to local and regional
conditions. Seeding and planting requirements are tailored to the local
climatic and ecosystem for that region. FSA utilizes State Technical
Committees and County Committees in the development and implementation
of conservation policies.
Conservation programs, such as the Conservation Reserve Program
(CRP), help address the most critical resources on private land. Sound
resource planning on private land assists producers to better manage
their other resources including range resources on public land. In
addition, programs such CRP can have a significant positive impact on
hydrology and water resources in the West. Water yields off of CRP can
be of greater quantity and longer duration than water yields on
cropland.
USDA Rural Development allocation formulas generally take into
account: (1) rural population in comparison to national rural
population; and (2) rural population in poverty in comparison to
national rural population in poverty. While that does not make an
adjustment for a regional area that is impacted by a large amount of
public lands, it also does not punish an area. The lack of population
concentration could give a state like Utah and other western states an
advantage because of the rural nature of the areas. Grant programs like
the Distance Learning and Telemedicine, Community Connect and the Water
and Waste Disposal loan and grant program give those areas additional
points in the scoring process.
national finance center/tsp competitive bidding
Question. Madam Secretary, the National Finance Center did an
admirable job in late 1986 to get ready to assume responsibility for
the record keeping functions associated with the new Thrift Savings
Plan which started receiving participants investment selections in
April 1987. Many people didn't think it could be done but the NFC did
it.
It has recently been brought to my attention that the Federal
Retirement Thrift Investment Board has begun to explore the competitive
outsourcing of the services related to the TSP. Earlier this year, the
Board decided to solicit a Request for Proposals for both software
maintenance and mainframe installation and housing. I am told that
these actions were taken because the NFC was ``slow to assume control
for software maintenance and to install the TSP's new mainframe
computer.'' The Board has also stated that while they intend to leave
the remaining TSP record keeping functions at the NFC, they will
periodically conduct a cost/benefit analysis to make sure that TSP
participants get the best value for their money.
What percentage of the NFC operations has been associated with
management and operations of the Thrift Savings Plan?
Answer. Approximately 425 employees, 35 percent of the National
Finance Center's (NFC) total staff, supported the Thrift Savings Plan
(TSP) in fiscal year 2003.
Question. What is the impact of the decisions to outsource software
maintenance and the location of the mainframe?
Answer. Outsourcing software maintenance resulted in a reduction of
31 programmers and analysts. Moving the mainframe will reduce the data
center mainframe support staff by 7.
Other cutbacks in service recently directed by the Federal
Retirement Thrift Investment Board (FRTIB) will eliminate 20 additional
positions in NFC's Thrift Savings Plan Division in fiscal year 2004 and
120 additional call center employees by 2006. The administrative and
other general support staff for these employees will also be reduced.
NFC anticipates 65 administrative and general support staff positions
to also be reduced by 2006. Another 15 contract positions will also be
lost. In total, between 2004 and 2006, decisions by FRTIB to outsource
work historically performed at NFC will result in a loss of 243 Federal
and 15 contract positions in New Orleans.
Question. Will the NFC compete to retain these functions?
Answer. NFC was not given an opportunity to compete for the
software maintenance and mainframe operations work.
Question. What steps is the NFC taking now to make sure that they
are the best facility to continue the remaining vital record keeping
functions for this program?
Answer. NFC is attempting to redefine the FRTIB/NFC relationship
and develop principles of operation for TSP that help clarify roles,
responsibilities, and service level expectations for the future.
NFC has multiple initiatives underway to ensure that its facilities
are secure and that they meet or exceed customer expectations. The
United States Department of Agriculture (USDA) performed an extensive
security assessment in 2002 on the current facility. As a result of
that assessment, NFC has undertaken 31 multi-year facility improvement
initiatives, most of which are now completed. The facility improvements
include such things as increasing the number of guards; adding x-ray
machines, fencing, and bollards; and building guard stations.
NFC also received an appropriation to develop data mirroring
capability at NFC, which will address known network vulnerabilities,
high availability and immediate recovery time objectives, and the
enterprise-wide vulnerabilities to weather and other threats that
jeopardize NFC's service to its customers.
usda's center for veterinary biologics
Question. Madam Secretary, on February 10 of this year, UPI
published a story which stated that many Federal meat inspectors had
lost confidence in the testing conducted by the National Veterinary
Services Laboratories in Ames, Iowa. There were allegations of secrecy
and collusion with the beef industry, as well as inaccurate test
results. We are aware that the USDA Inspector General has been looking
into these allegations as part of their larger investigation into
issues surrounding the December discovery of a BSE-contaminated cow in
Washington State.
The fiscal year 2005 budget requests $178 million to expand this
facility. Obviously, with resources as tight as they are, it would be
imprudent for us to provide this level of funding to upgrade and expand
a facility if it provides unreliable testing.
What is the USDA reaction to this article?
Answer. USDA's Center for Veterinary Biologics, National Animal
Disease Center, and National Veterinary Services Laboratories (NVSL)
are all located in Ames, Iowa. The laboratories included in the Ames
complex, now identified as the National Centers for Animal Health, are
recognized nationally and internationally for their scientific
expertise and professional ability. They continue to receive
recognition from various science-based organizations, including the
United States Animal Health Association (USAHA) and the American
Association of Veterinary Laboratory Diagnosticians (AAVLD).
The President's fiscal year 2005 Budget request includes $178
million to modernize the Ames complex, a request that has received the
full support of organizations such as USAHA and AAVLD, as well as the
Animal Agriculture Coalition and the American Farm Bureau Federation.
With regard to the February 10, 2004, UPI article, USDA believes
the allegations made are inaccurate and that the article itself does
not represent a balanced profile of the work carried out by scientists
at NVSL. USDA is confident in the quality and competence of all
laboratory staffs in Ames, and we regret that the reporter did not
include the viewpoints of any staff members currently employed at NVSL,
which has been responsible for BSE testing at the national level.
NVSL has quality assurance standards in place, as well as standard
operating procedures to track samples that are sent in for testing. The
facility is recognized as the United States' national and international
reference diagnostic laboratory for animal diseases, as designated by
the World Organization for Animal Health (OIE) and the Food and
Agriculture Organization of the United Nations. NVSL staff members have
participated with full transparency in a review by the USDA Office of
the Inspector General, just as they operate with full transparency in
carrying out program operations.
USDA continues to stand behind the work of its laboratory staffs in
Ames, and we plan to move forward with an enhanced BSE surveillance
program that incorporates a network of approved State and Federal
veterinary diagnostic laboratories throughout the United States. NVSL
will provide leadership, confirmation testing, proficiency testing,
quality assurance inspections, and training throughout this program.
Question. When do you expect the IG to complete the investigation?
Answer. The Office of Inspector General's (OIG) investigators and
auditors are working collaboratively to determine the facts involving
BSE-related allegations that have been circulating in the public
domain, including those in the article you mention. OIG's investigative
work involves the condition of the BSE-infected cow before slaughter.
OIG auditors are separately conducting a broader review involving USDA
BSE Surveillance Programs. The audit is looking at the surveillance
program in use when the BSE-infected cow in the State of Washington was
identified. It is also looking into changes made to the surveillance
plan (New Surveillance Plan) after the BSE-infected cow was discovered.
This also includes looking at the role and responsibilities of the
National Veterinary Services Laboratory in Ames, Iowa. Within the next
few weeks, OIG will be in a better position to estimate a completion
date for reporting its findings from those reviews.
______
Questions Submitted by Senator Christopher S. Bond
risk factors
Question. Dr. Collins, in our questions regarding forecasting, you
mentioned that, ``There are just too many risk factors going on for us
to go much beyond a decade.''
Can you please identify some of the risk factors or uncertainties?
Answer. Long-term forecasting models are generally based on long-
term relationships among explanatory variables, such as income and
population, and variables to be projected or forecast, such as corn
demand and trade. These relationships are also based on a number of
other factors, ranging from infrastructure to government policy, which
are not usually explicit in models. Therefore, long-run projections can
go wrong when projections of explanatory variables are wrong or there
are changes in the underlying structures that invalidate the
relationships between explanatory variables and variables to be
projected. As examples, the longer the projection period, the larger
the error is likely to be in projecting income, population, exchange
rates, yield per acre and other such explanatory variables. These are
all risk factors. Similarly, changes in governments, government
policies, infrastructure such as available transportation routes and
modes, weather and climate, war and peace, availability and prices of
substitute or competing products, and availability and prices of
production inputs are all risk factors as well. The longer the forecast
period, the more likely these underlying factors will change and reduce
the accuracy of the projections. Statistical projection models estimate
the range (confidence interval) within which the projection is expected
to be. The further the projection is into the future, the larger is the
confidence interval.
Question. Dr. Collins, given all the risk factors that you identify
and changes that have transpired in the world in recent years, is it
necessarily so that to embrace a forecasting model looking ahead, that
same model would need to accurately predict recent experience when
applied to the same time period looking backward?
Answer. A long-term projection model is normally validated against
historical data. If the model cannot explain past trends, then there is
little reason to embrace it. However, a model may be useful for
projecting trends, or central tendencies, and still miss some year-to-
year variation due to transitory factors. If the model errors are for
the most recent years, the challenge is to know whether these misses
are due to transitory factors that will correct over time or whether
the underlying assumptions on which the model is based have changed.
______
Questions Submitted by Senator Ted Stevens
budget cuts
Question. Thank you Secretary Veneman for appearing before this
committee today. I understand that your department is operating under
challenging funding constraints, and you had to make some difficult
decisions in preparing your budget. However, I am extremely concerned
with the level of funding you chose to allocate to certain programs,
and how those choices will affect constituents in my state.
The Rural Utilities Program was established to provide rural
communities with assistance to support basic needs of its residents.
This includes many of the things that we take for granted such as
running water, electricity, and waste disposal. These basic amenities
are vital to the health of these rural communities and yet the USDA has
slashed the funding of this program.
In Alaska alone, funding was reduced for water and waste disposal
systems from $28 million in fiscal year 2004 to $11.8 million in fiscal
year 2005, a reduction of $16.2 million.
Funding was also eliminated to develop a regional system for
centralized billing, operation and management of water and sewer
utilities, which will streamline operations, reduce overhead, and
ensure efficient management.
And funding was eliminated for high cost energy grants--a reduction
of $28 million. Alaska's rural communities experience some of the
highest energy costs in the nation--paying up to 9 times higher than
the national average. Rural areas rely on expensive diesel fuel which
must either be barged or flown in.
These cuts will have devastating consequences on rural communities,
particularly in my state. Why are these cuts proposed?
Answer. The Department is aware that high energy costs in Alaska
and other states can be a barrier to the economies and quality of life
in rural communities. It also recognizes that there are a host of other
barriers that can have similar consequences. In a tight budget
situation, it is very difficult to make the necessary choices that will
provide effective results for the most people. Grants for rural
development purposes are particularly difficult to budget because they
have a dollar for dollar impact on the limited amount of budget
authority that we have available. Loans, on the other hand, require
budget authority for only the amount of subsidy costs. In most cases,
these costs are relatively low. A small amount of budget authority used
for loans can leverage a substantial amount of financing for the types
of projects that will be the most help for rural communities. This was
a significant factor in the decisions that were made in developing the
2005 budget.
distance learning, telemedicine and broadband
Question. Additionally, USDA reduced funding for the Distance
Learning, Telemedicine and Broadband program by $14 million.
With respect to the telemedicine program, most of Alaska's rural
communities are not on a road system and so do not have access to
healthcare facilities. These communities rely on the telemedicine
program, which provides them access to doctors and healthcare
professionals.
The distance learning program is also important to Alaska's rural
communities because it provides residents with tools necessary for
education. These residents don't have access to the more populated
urban centers and rely on distance learning programs to meet their
educational needs.
Similarly, the broadband program connects schools, libraries,
homes, and health clinics to the information highway. Without funding
for this program, the residents have limited access to the outside
world. Why was funding cut for these programs?
Answer. The $14 million reduction was not a cut. Congress, in
fiscal year 2004 appropriations, added $14 million in funding under the
DLT program specifically for the purpose of providing grants to Public
Broadcast Stations serving rural areas with funding to meet the Federal
Communications Commission mandate to convert their analog broadcast
signals to digital. None of that funding was for DLT or broadband
grants. The $25 million request for DLT grant funding is within
historical funding level requests. With regard to broadband grants, the
deployment of broadband facilities in rural areas is very capital
intensive. Typically, limited grant authority provides a very small
number of communities nation-wide with the ability to deploy broadband
service on a limited scale within the community. There isn't enough
grant funding available to make a significant dent in achieving
universal broadband service deployment in rural areas. The best model
is one built on a company that has a strong business plan and that
seeks to take advantage of economies of scale in its business model.
The Broadband Loan program is designed to specifically meet this
challenge. With reasonably low subsidy rates and low loan interest
rates, the loan program will be the vehicle by which broadband
infrastructure is deployed on a wide scale basis in all of rural
America.
transshipment of beef from the lower 48 to alaska
Question. I am pleased that USDA has increased funding for APHIS
for animal diseases. I understand that you are currently negotiating
with the Canadian government regarding the reopening of our borders.
This is particularly important to my state, which relies on the Alaska-
Canada highway, or ALCAN to transport live cattle and beef products to
Alaska.
In the February BSE hearing which Senator Specter held, I raised
the issue of transshipment. The inability of transporting cattle and
beef products from the Lower 48 to Alaska is having a devastating
impact on ranchers, dairy farmers and truckers in Alaska.
At that time, I requested that the USDA take steps to address this
issue and to negotiate an agreement to permit the safe passage of
cattle and beef products through Canada.
Has the USDA taken any steps to address this situation? If so, what
is the status of your negotiations and how soon can we expect a
resolution on this issue?
Answer. We appreciate the position of Alaskan ranchers, dairy
farmers, and others who wish to transport U.S. cattle, beef, and beef
products through Canada to Alaska. USDA continues to work with Canadian
colleagues to reach an agreement on a regulatory protocol that would
allow the safe transiting of U.S. cattle and beef products through
Canada to and from Alaska. United States and Canadian officials have
had a series of discussions regarding this issue--the latest in early
March 2004--and we hope to resolve the matter in a timely fashion.
In a broader context, USDA continues to push for a more reasoned
international dialogue on the need for countries to devise more
flexible, commercially viable solutions to allow safe trade in low risk
products. We are working with the World Animal Health Organization to
both clarify the international guidelines for trade and ensure a
consistent application of these guidelines. In addition, USDA continues
to work with both of our tripartite partners, Canada and Mexico, to
harmonize North America's approach to handling trade in certain
commodities that present minimal BSE risk.
______
Questions Submitted by Senator Herb Kohl
health care cooperative pilot
Question. Recent studies by the University of Wisconsin-Madison and
others demonstrate that farmers pay an average of three times as much
for their health care coverage as salaried employees and pay twice as
much as other self-employed individuals. These plans carry high
premiums and high deductibles and do not contain preventive health
care. Furthermore, 41 percent of our farm families cannot afford to
insure every member of their family and nearly half of those families
have no insurance at all.
One or more family members must often work off of the farm to
obtain less expensive group health insurance. This acts as a
significant labor barrier when the farm operation is determining
whether or not to modernize. The net result is a loss of farm
operations. We know this because farmers say that the lack of
affordable quality health care is a primary reason why they will no
longer farm.
Because of the lack of affordable health insurance, farm supply
cooperatives and other small businesses in rural areas are working to
help their farmer-members stay on the farm by creating a cooperative
healthcare purchasing alliance. This purchasing alliance is designed to
provide a group coverage alternative to individual coverage. The
healthcare co-op could serve as a model for other rural and urban
cooperatives to provide access to group coverage for individuals that
otherwise would not be able to access affordable health care.
Secretary Veneman, are you supportive of the creation of a pilot
health care cooperative purchasing alliance for farmers and small
businesses in rural communities?
Answer. We would certainly support every appropriate and realistic
effort to fill the serious gaps in health insurance coverage available
to farmers and other rural residents. Purchasing alliances,
cooperatives, and mutuals have a demonstrated track record of lowering
costs and responding to the special needs of their members. A properly
structured pilot healthcare cooperative purchasing alliance could be a
very useful tool for shaping effective and efficient solutions.
Question. A ``stop-loss'' fund will be needed to attract potential
insurers and healthcare providers and ``buy down'' the risk for farmers
and other individuals who are currently considered to be ``high risk''
because they have not been insured during the last 12 months or longer
or have only carried a catastrophe healthcare plan. Cooperative
councils in Wisconsin and Minnesota are working to create these
healthcare cooperatives. They report to me that insurers and
reinsurance carriers do not want to offer healthcare insurance to the
cooperative if they include ``high risk'' members without the assurance
of a stop-loss fund.
Overall, this demonstration project would potentially help
thousands of agricultural producers. This demonstration project would
provide affordable, quality group healthcare coverage as an alternative
to individual coverage for farmer members of rural, agriculturally-
based cooperatives. By doing so, this removes a primary barrier for
growing agriculture across the nation.
Will you support appropriations to help create a stop-loss fund to
move these healthcare cooperatives forward?
Answer. Our support would depend upon certain conditions. First,
our support would be limited to funding that is used in the start-up
process. We do not believe this should become a perpetual support
program that takes on the nature of an entitlement. Second, extensive
input and oversight in the use of the funds would be appropriate. This
is a new and untested effort whose success or failure may well be
determined by the quality of the decisions made by its management. If
we provide funding, we have an obligation to do what we can to make
sure the overall effort is well conceived, well organized, and well
managed. Third, we need the authority and resources to properly analyze
the effectiveness of the program. We need to make sure, for example,
that Government funding does not distort the real economic costs of the
system or give false impressions about the likely success of future,
self supporting systems. Any such appropriation should include funding
for adequate USDA staffing to assist and monitor this initiative.
cooperative services technical assistance
Question. The Committee is concerned that over the last several
years State Directors have not been held accountable to meet the
Department's Cooperative Services technical assistance goals as
outlined in the Rural Development Strategic Plan. This plan states that
in order to achieve rural development's goals, the Department
emphasizes the use of cooperatives to develop the institutional
framework to leverage rural America's assets.
Madam Secretary, will you hold your State Directors accountable to
meet the Department's goals as stated in the strategic plan to provide
technical assistance for cooperatives?
Answer. We will make ourselves accountable for the directions we
are laying out for ourselves in our strategic planning process.
Building accountability into the Rural Development system, at all
levels, is critical if our planning process is to be of any value. We
have developed and distributed an administrative notice directing our
State Rural Development Directors to provide regular and prescribed
reports on the cooperative development assistance activities being
undertaken by their staffs. This regular reporting system will provide
the basis for holding our State Directors accountable for cooperative
development work.
Question. Will you commit to requiring State Directors to dedicate
at least one full time employee per State for cooperative services
technical assistance?
Answer. We are taking steps to determine the appropriate resources
and staffing mix in providing Cooperative Services technical assistance
within each State. We are engaged in a set of reviews and analyses of
our Cooperative Services program that will enable us to develop sound
guidance and directions on how we can best deploy cooperative technical
assistance assets, particularly in light of our strategic goals and
objectives. A high level external program review team is initiating a
formal review of the Cooperative Services technical assistance
programs, resource mix and requirements, priority area of focus, and
fit within the Rural Development program portfolio. We have also
established a cooperative advisory committee composed of Rural
Development field and National Office staff to provide an internal
review and suggestions for strengthening the effectiveness of Rural
Development's field level delivery systems for Cooperative Services
programs and activities. We will use the products of these review
activities in conjunction with the Rural Development strategic plan to
better position ourselves to make specific commitments to alternative
resource deployment for providing Cooperative Services technical
assistance.
Question. Beyond ensuring a minimum of one FTE per state, staffing
resources should be reflective of the number of cooperatives in the
state and the number of small farm producers.
Are you supportive of working to ensure that state offices are held
accountable to have staffing that reflects the level of need for
cooperative services technical assistance in each State, based on the
number of coops in each state?
Answer. There are several factors we believe are necessary to
consider in deciding how to deploy resources to cooperative services
technical assistance programs. While the existing number of
cooperatives in a given State or region is certainly one criterion, we
would also want to take a broader needs and opportunities based
approach to designing program delivery. We want to make sure small and
underserved farmers have appropriate access to technical assistance;
and we want to make sure that new markets and industries growing out of
value added and energy products receive due attention.
______
Questions Submitted by Senator Tom Harkin
conservation programs
Question. Madame Secretary, I noticed that you state in your
testimony that the Administration is increasing funding for
conservation for fiscal 2005. However, if you compare the President's
budget proposal to what Congressional Budget Office estimates should be
spent on 2002 farm bill conservation programs, the President's budget
represents a cut of over $400 million for fiscal 2005. This includes
the $92 million for technical assistance for the Conservation Reserve
Program and the Wetlands Reserve Program because the President's budget
does not propose new funding to fix the technical assistance problem
created by this Administration.
Would the President support providing new funding for conservation
technical assistance without an offset so the other conservation
programs, like the Environmental Quality Incentives Program, will no
longer need to lose funding to support other programs?
Answer. The President's fiscal year 2005 Budget proposes a brand
new Farm Bill Technical Assistance account to provide separate and
distinct technical assistance funding to support the Conservation
Reserve Program and the Wetlands Reserve Program. The President's
fiscal year 2005 Budget reflects the change in law that was initiated
by the Subcommittee to ensure programs that historically could fund
their own technical assistance, could continue to do so. We feel that
the Administration's approach is the best way to ensure that adequate
funding resources are available to implement all conservation programs.
Question. What are the underlying assumptions for the $249 million
estimate for the Conservation Security Program (CSP)? Does this $249
million estimate reflect the law as it is in effect following the
enactment of the 2004 Consolidated Appropriations Act?
Answer. We have been able to design the Conservation Security
Program (CSP) in a way that provides funding obligations similar to the
way that the Conservation Reserve Program obligations are structured.
We estimate that there is a potential applicant pool of 700,000
producers nationwide to sign-up for CSP. Given the $41 million
available for this fiscal year and undetermined amounts for fiscal year
2005 and beyond, USDA has had to design a program that is flexible
enough to be able to function at any funding level. To accomplish this
we have proposed making the program available in selected watersheds
and emphasizing enrollment categories.
The NRCS approach also deals with the constraint placed in statute
on technical assistance at 15 percent of expended CSP funding. If USDA
was to conduct a nationwide sign-up for CSP, technical assistance costs
would far exceed the $41 million made available in fiscal year 2004 for
the program just for the signup. The Administration's budget assumes
that all watersheds would be offered a CSP sign-up within an 8 year
rotation; about one-eighth of the total watersheds would be offered
sign-ups annually.
The 10 year spending cap is no longer in effect.
bovine spongiform encephalopathy (bse)
Question. You suggested that the revised BSE surveillance plan will
require $70 million (that will be obtained from CCC) to test at least
201,000 cattle. The President's fiscal year 2005 budget proposed to
test 40,000 cattle at a cost of $17 million. APHIS now plans to
increase the number of animals tested by more than five-fold and that
the new surveillance plan will include incentives paid to farmers and
veterinarians to collect and submit samples to APHIS.
Is a four-fold increase in funding adequate to cover the costs of
this increased surveillance, testing and incentives?
Answer. In fiscal year 2003, APHIS tested approximately 20,000
samples for BSE, the majority of which were collected from animals at
slaughter facilities. When the fiscal year 2005 budget request was
submitted, the Secretary had announced that certain new regulations
were going into effect--such as the banning of non-ambulatory cattle
from slaughter facilities--but USDA had not yet received the
international review panel's recommendations with regard to an enhanced
surveillance program.
The fiscal year 2005 President's Budget request, therefore,
included enough funding for APHIS to double the number of samples
collected from 20,000 to 40,000 samples and to provide for certain
cost-recovery options. However, since the fiscal year 2005 budget was
submitted, USDA has revised its BSE surveillance program for fiscal
year 2004 and fiscal year 2005 to allow for more than 200,000 samples
to be collected and tested over a 12 to 18 month period. We will now be
utilizing a network of approved laboratories and will achieve certain
economies of scale with regard to other costs, such as shipping and
test kit costs. We anticipate that funding will be adequate to cover
the costs of the enhanced surveillance and testing program.
Question. The downed cattle population represents a large portion
of USDA's BSE proposed test population.
Since downed cattle have been removed from the human food supply,
and it will be more difficult to obtain access to these cattle for
testing, will the $70 million be adequate to pay for the additional
expected costs of incentives for downed animals that do not come to
slaughter plants?
Answer. A BSE implementation team has been established and is
working to ensure the enhanced surveillance program meets its goals.
The team is currently drafting more specific guidelines that will be
used during the course of the program. These guidelines will address
questions regarding cost recovery and participation in the program.
USDA anticipates pursuing a variety of approaches with regard to
cost recovery, including contracts, cooperative agreements, direct
payments, and fee-basis agreements. For example, costs for transporting
an animal or carcass to the collection site from a farm or slaughter
establishment may be reimbursed, or disposal expenses for ``suspect''
cattle that test non-negative or that cannot be rendered may also be
covered. Other expenses may also be addressed in the program.
We anticipate that the $70 million provided to APHIS through an
emergency transfer will be adequate to cover the cost of the enhanced
surveillance program during the course of the 12-18 month effort.
meat and poultry safety
Question. As you know, USDA still does not have a nationally
representative, statistically robust, baseline surveillance program for
pathogens on meat and poultry products. We still do not know the
prevalence of common foodborne pathogens, such as E. coli O157:H7 and
others that kill thousands of people in the United States each year.
While it is critical to implement a national surveillance program for
BSE, it is equally critical to know the prevalence of pathogens on meat
and poultry products.
Can you provide me with your plans for developing a national
baseline surveillance program for pathogens on meat and poultry
products?
Answer. FSIS is committed to developing baseline studies that will
help the agency and the industry to better understand what
interventions are working or how they could be improved. Currently,
FSIS is developing protocols to enable us to conduct continuous
baseline studies to determine the nationwide prevalence and levels of
various pathogenic microorganisms in raw meat and poultry.
To achieve the agency's goal of applying science to all policy
decisions, the fiscal year 2004 appropriations bill provided $1.65
million for an initiative to establish a continuous baseline program.
After the fiscal year 2004 appropriations bill was enacted, the agency
quickly developed a Request for Proposals. On February 12, 2004, the
agency posted the pre-solicitation notice, and then on February 29, and
March 2, 2004, the solicitation and accompanying materials were posted
on the web site, FedBizOpps.gov, which is the point-of-entry for
Federal government procurement over $25,000. The official solicitation
issue date was March 1, 2004, and all offers were due on April 1, 2004.
FSIS is currently evaluating offers and expects to award a contract in
June 2004.
Baseline studies will provide information on national trends and
are a tool to assess performance of initiatives designed to reduce the
prevalence of pathogens in meat and poultry products. These baseline
studies will also yield important information for conducting risk
assessments that can outline steps we can take to reduce foodborne
illness. These surveys will also be important in establishing the link
between foodborne disease and ecological niches, as well as levels and
incidence of pathogens in meat and poultry. The net result will be more
targeted interventions and the effective elimination of sources of
foodborne microorganisms.
Question. What would be the estimate of the cost of such a program?
Answer. FSIS estimates that each year, it can complete one baseline
and begin a second one using the $1.65 million appropriated in fiscal
year 2004. Since there are at least 15 different products for which
baselines could be considered (e.g. beef trimmings, beef carcasses,
ground beef, chicken carcasses, and ground chicken), FSIS could
complete a full cycle of baselines in about 10 years at a cost of
approximately $16.5 million. If baselines were repeated every 3 to 5
years, the yearly costs would be higher.
national animal identification system
Question. The USDA budget proposes $33 million for the development
of a National Animal Identification system, even though most estimates
for implementation of the system are well above $100 million. I have
repeatedly stressed the need for this system to ensure animal health,
consumer confidence, export markets and public health. The proposed
budget amount falls far short of the full implementation costs and will
impede USDA's ability to implement a system that will meet these goals.
Given the limited funding, which parts of the system do you plan to
fund, and which parts of the system will you leave to states and the
private sector?
Answer. The President's Budget for fiscal year 2005 requests $33
million for animal identification. This funding would support the
national repositories for identification of premises, animals and non-
producer participants; cooperative agreements with states, tribes, and
third parties; communication and outreach efforts, and some staff to
support the effort. The cooperative agreements would be one-time
allocations for initial implementation and integration with the
national repositories. USDA would look to state or state consortiums
for additional contributions, depending on the integration needs. It is
also expected that producers and other market participants would share
in the system's cost.
There is an important role for private industry in the National
Animal Identification System. One of the key elements of the National
Animal ID program is to be technology neutral in the requirements of a
national system. This objective was to provide flexibility to producers
and to prevent the stagnation of innovation in technology. Private
industry will be critical in providing technology and service to
producers and markets. Grass-roots interface with producers, states and
other parties will be needed to support the successful implementation
of a national animal identification system.
Question. How did you arrive at this decision?
Answer. The recommendations reflect the complex structure of the
livestock industry and previous efforts to design and implement a NAIS.
The decision process was chaired by the Chief Information Officer with
assistance from USDA's BSE response coordinator, the Deputy Under
Secretary for Farm and Foreign Agricultural Services; USDA General
Counsel; and USDA Chief Economist. The group relied heavily on the
excellent information developed as part of the U.S. Animal
Identification Plan (USAIP) and on the expertise of the USAIP Steering
Committee; the Under Secretary for Marketing and Regulatory Programs;
and the Administrator and the staff of the Animal and Plant Health
Inspection Service. The group also met with a broad spectrum of
organizations and companies representing the meat supply system, from
production through retailing.
mcgovern-dole international food for education program
Question. I want to ask you about the McGovern-Dole International
Food for Education Program that we permanently established in the 2002
Farm Bill. We provided $100 million for fiscal 2003 for the program in
mandatory funds, but we were only able to provide $49.7 million for
fiscal 2004.
Please describe to me how the program has to be scaled back to fit
within the lower funding level for fiscal 2004, and how many fewer
children will be served compared to fiscal 2003?
Answer. The fiscal year 2003 program, which totaled $100 million,
supported a total of 130,000 tons of commodity donations for 21
programs with the total beneficiaries estimated at 2.2 million. It is
estimated that the fiscal year 2004 funding level of $49.7 million will
provide approximately 60,000 tons of commodities for 10-15 programs
with approximately 1.1 million beneficiaries.
Question. Also, please describe to what extent USDA has been able
to recruit participation in the program by other donor countries.
Answer. Under the pilot Global Food for Education Initiative and
the McGovern-Dole International Food for Education and Child Nutrition
program over $1 billion has been donated to school feeding programs
from other donors. These contributions have been primarily via the
World Food Program but also in coordination with private voluntary
organizations. In addition, the in-kind contributions in recipient
countries have been significant.
Question. In the last few months, we have seen significant
increases in key commodity prices in the United States. On a season-
average basis, 2003/04 prices for corn, wheat, rice, and soybeans have
increased between 2 and 10 percent just since December 2003, with cash
soybean prices now spiking near $10/bushel. While that is certainly a
beneficial development for American farmers who still have crops from
last fall in their storage bins, it will also increase the cost of
acquiring commodities for USDA and USAID food aid programs.
Given that the President's budget does not include an increase to
compensate for these higher prices, will it be necessary to curtail the
scope of these food aid programs? And, if so, to what extent?
Answer. Yes, it will be necessary to curtail the scope of these
food aid programs. USDA calculated the potential impact of price
increases of both commodities and freight on USDA food aid programs for
fiscal year 2004. I will provide a table which shows the expected
decrease in tonnages and people fed under the programs, based on four
different price scenarios.
[The information follows:]
POTENTIAL IMPACT OF PRICE INCREASES ON USDA FOOD AID PROGRAMS FOR FISCAL YEAR 2004
--------------------------------------------------------------------------------------------------------------------------------------------------------
Tonnage Assuming Tonnage Assuming
Tonnage with a 10 percent a 20 percent
Commodity Value Freight Cap ($ prices from Tonnage with Dec/ price increase price increase
Program ($ Million) Million) President's Feb prices \1\ from 12/2003/02/ from 12/2003/02/
Budget Estimates (000 MT) 2004 prices (000 2004 prices (000
(000 MT) MT) MT)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Title I \2\........................... $117.70 ................. 740.0 616.4 560.6 512.8
Food for Education \3\................ 21.47 ................. 66.1 60.6 55.1 50.5
Food for Progress \4\................. ................. $40.00 257.6 225.1 204.6 187.5
-----------------------------------------------------------------------------------------------------------------
Total........................... 139.17 40.00 1,063.7 902.1 820.3 750.8
=================================================================================================================
Millions of People Fed................ ................. ................. 5.9 5.0 4.6 4.2
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Title I uses price estimates based on Feb. 2004 crop report. Food for Education uses average of actual purchase prices for Dec. 2003--Feb. 2004.
\2\ Includes Title I funded Food for Progress. Tonnages and values do not include the $21.9 million reserve.
\3\ McGovern Dole Food for Education and Child Nutrition Program.
\4\ CCC funded Food for Progress.
designate biobased products
Question. What are your plans to designate biobased products for
Federal agencies to purchase?
Answer. Under the Federal Biobased Products Preferred Procurement
Program, we currently are gathering test data on individual biobased
products in a number of separate items (generic groupings of products).
This data will be used to support the designation of one or more items
for preferred procurement in a draft rule we expect to begin preparing
soon. We will first publish a draft rule with a thirty day public
comment period, to be followed by a final rule. Once a final rule is
published designating this first group of items, we will begin a draft
designation rule for a second grouping of items. The process of
designating items by rule for preferred procurement will then continue
as quickly as manufacturers can be identified and test data developed.
We expect that the bulk of the items thus far identified by the CTC
study will be designated by rule over the next 3 or 4 years. We also
recognize that new items or generic groupings of biobased products will
emerge in the market place from time to time, as the industry grows. As
that occurs, we will gather the necessary information to designate
those new items as well.
Question. Can you provide me with a schedule of what products you
are planning to designate and when?
Answer. We expect to include one or more items-generic groupings of
products-in the first regulation to designate items. Among the items on
which we are currently gathering product and test data for individual
products are:
--hydraulic fluids for stationery equipment
--hydraulic fluids for mobile equipment
--formulated industrial cleaners
--all other formulated cleaners
--formulated solvents
We expect to be able to include one or more of these items in our
first draft rule to designate items for preferred procurement. We
expect to publish a draft rule, with a 30 day public comment period
this summer. We hope to have a final rule in place this fall.
Question. Also, can you update me briefly on the labeling program?
My understanding is that you have created a draft label. What else are
you doing to move this component of Section 9002 of the farm bill
forward?
Answer. We do have a draft label in review in USDA's Office of the
General Counsel. We currently are working through Federal contracting
procedures to obtain a contractor to provide support in writing draft
and final rules for the labeling program. We hope to have that draft
rule cleared for publishing in the Federal Register by the end of the
current calendar year. We expect to have a 30 or 60 day public comment
period on the draft rule, and will follow as quickly as possible with a
final rule before the middle of 2005.
renewable energy systems
Question. What does the Department plan to do to vigorously promote
and implement Section 9006 of the farm bill this spring and summer? The
Department used a Notice of Funds Availability to implement section
9006 of the farm bill in fiscal year 2003 and fiscal year 2004. I
understand that the Department intends to issue a rule for the fiscal
year 2005 program. Can the Department commit to issuing the final rule
by January 2005, in order to give potential applicants sufficient time
to review and apply for the program?
Answer. The Under Secretary for Rural Development designated Rural
Energy Coordinators from each USDA Rural Development State Office to
coordinate outreach, implementation and delivery of the program. An
Interagency Agreement between DOE's Office of Energy Efficiency and
National Renewable Energy Laboratory (NREL) and USDA Rural Development
has been executed. This agreement provides a vehicle for funding NREL
activities to assist USDA in writing the technical requirements of the
program, to develop tools to assist applicants and Rural Development
State offices in addressing the technical requirements, and to assist
in public outreach activities. Through this interagency agreement, a
strong partnership has been established with the National Renewable
Energy Laboratory (NREL) to establish a technical team of
internationally recognized experts in the fields of solar, wind,
biomass, geothermal, hydrogen, and energy efficiency technologies to
provide training, technical review of applications and comments on the
program. These experts are from the following Department of Energy
(DOE) Laboratories: National Renewable Energy Laboratory, Sandia
National Laboratory, and Oak Ridge National Laboratories. We have also
developed a close partnership with EPA's AgStar Program.
With the help of NREL, the State and Local Initiative Staff, we
have developed the following resources: Outreach materials for Rural
Development State Offices and technology interest groups to conduct
outreach workshops, informational meetings and agricultural conferences
were developed and a comprehensive one-stop web-site addressing the
opportunities for renewable energy development provided by Section
9006. The website consists of a series of web pages designed to
increase program awareness and aid prospective applicants in
determining basic eligibility requirements. This website will be
continually updated as new information and opportunities and case
studies come available. The website also provides useful guidance to
farmers and ranchers on how to go about developing these projects by
technology and scale.
Most recently, a national training web-cast for our USDA Rural
Development Rural Energy Coordinators for the fiscal year 2004 Program
delivery was held. The training conference was broadcasts from the NREL
headquarters in Golden, Colorado, on April 7, 2004. Training included
presentations from DOE, EPA, NREL, the Sandia National Laboratories,
Rural Utilities Service, and Rural Business-Cooperative Service.
USDA Rural Development has drafted a proposed rule that is in
clearance within the Department. We anticipate publishing the proposed
rule in the Federal Register within the next few months. A 60-day
public comment period is included in the proposed rule.
We hope to publish this final rule early in calendar year 2005.
renewable energy
Question. Will the Department lower the minimum grant or loan size
to allow more farmers and rural small businesses to participate in the
section 9006 program, especially for energy efficiency projects? This
is something that I, and others, would support. What else is the
Department considering to encourage more applications for energy
efficiency projects?
Answer. In the fiscal year 2004 notice of funding availability, we
have lowered the minimum grant request threshold from $10,000 to
$2,500. We will consider similar changes to the minimum threshold in
the rule.
We are considering ways to streamline and reduce application
requirements for energy efficiency improvements for smaller project
requests. We are developing guidance to assist smaller project
applicants in preparation of applications.
Question. Will the Department streamline the application
requirements, especially for small farmers? Section 9006 funds should
go only to deserving applicants, but I strongly encourage you to open
up the program to a broader audience. One way of doing this would be to
ensure that the detail necessary for the feasibility study commensurate
with the size of the project. In other words, a smaller project ought
not to have to provide the same level of information and analysis as a
larger one.
Answer. The Department is proposing ways to streamline application
requirements in the proposed rule.
Question. Will the Department allow in-kind contributions to count
towards the funds leveraging requirement? If not, why not? This seems
like a potential change that could help spur additional participation
in the program and put it within the reach of many smaller producers,
who are clearly among the intended beneficiaries of the program.
Answer. The Department will address this issue in the proposed
rule.
Question. What is the Department planning to do to coordinate the
section 9006 program with state energy offices and the U.S. Department
of Energy?
Answer. USDA has entered into an Interagency Agreement with DOE and
the National Renewable Energy Laboratory (NREL). This agreement
provides a vehicle for funding NREL activities to assist USDA in
writing the technical requirements of the program, to develop tools to
assist applicants and Rural Development State offices in addressing the
technical requirements, and to assist in public outreach activities.
Through this interagency agreement, a strong partnership has been
established with the National Renewable Energy Laboratory (NREL) to
establish a technical team of internationally recognized experts in the
fields of solar, wind, biomass, geothermal, hydrogen, and energy
efficiency technologies to provide training, technical review of
applications and comments on the program. These experts are from the
following Department of Energy (DOE) Laboratories: National Renewable
Energy Laboratory, Sandia National Laboratory, and Oak Ridge National
Laboratories. We have also developed a close partnership with EPA's
AgStar Program.
With the help of NREL, the State and Local Initiative Staff, we
have developed the following resources: Outreach materials for Rural
Development State Offices and technology interest groups to conduct
outreach workshops, informational meetings and agricultural conferences
were developed and a comprehensive one-stop web-site addressing the
opportunities for renewable energy development provided by Section
9006. The website consists of a series of web pages designed to
increase program awareness and aid prospective applicants in
determining basic eligibility requirements. This website will be
continually updated as new information and opportunities and case
studies come available. The website also provides useful guidance to
farmers and ranchers on how to go about developing these projects by
technology and scale.
Most recently, a national training web-cast was held for our USDA
Rural Development Rural Energy Coordinators for the fiscal year 2004
Program delivery. The training conference was broadcast from the NREL
headquarters in Golden, Colorado, on April 7, 2004. Training included
presentations from DOE, EPA, NREL, the Sandia National Laboratories,
Rural Utilities Service, and Rural Business-Cooperative Service.
Our Rural Development State Offices are working with the State
Energy Offices and others in conducting outreach activities, workshops,
using materials we have discussed previously. The DOE, through NREL,
has assisted in developing the regulation and conducting technical
reviews of applications and in preparing outreach materials. Also,
these materials have been used by DOE to conduct workshops such as
those conducted by the wind working groups.
national center for animal health
Question. I am concerned about possible shrinkage in the
capabilities of the National Center for Animal Health that might be
necessary to avoid exceeding OMB's present budget limit of $459 million
on which the $178 million in the Administration request is premised.
What reductions in the capabilities of the facility have either been
decided on or are likely, and what are the costs of restoring those
capabilities over the past year and the past 2 years?
Answer. There is no shrinkage in the capabilities of the Centers
for Animal Health. The primary difference between the initial plan and
the current plan is how animal and laboratory support space will be
acquired--either by renovating existing space or constructing new
space. By consolidating ARS and APHIS functions into a single complex
the USDA will achieve efficiencies in both staffing and space needs
over the existing campus. New animal and laboratory space is configured
to accommodate both agencies and be shared by a number of programs to
improve usage efficiencies. The $461 million program provides for the
needs of the 280 NADC program staff and the 286 APHIS program staff
located in Ames.
The Department will meet the animal health program needs within the
$461 million estimated for this project. Because construction costs for
the Ag large animal facility and the initial laboratory segment were
higher than originally estimated in 1999 during the preliminary program
efforts, the size of the new low containment large animal facility has
been reduced; however, these programs will be accommodated within
existing low containment facilities. A number of the existing field
barns and miscellaneous support structures (feed storage, hay storage,
vehicle maintenance) will also remain in operation.
sound scientific information for regulatory decisionmaking
Question. There has recently been much discussion about ``sound
science.'' I am concerned that proposed changes to the review process
of scientific information used by agencies, including the USDA, would
create the perception that the acceptance of scientific findings are
subject to review by political and special interests. I am also
concerned that the proposed review process would also unnecessarily
slow down the implementation of regulations to protect human health.
Of particular concern are changes that would (1) move the
coordination of scientific review out of the agencies and into the
Office of Management and Budget, where the administration would have
greater political influence, and (2) specifically restrict the
participation of scientists receiving funding from agencies such as the
USDA in the review of scientific findings, but not similarly restrict
participation of scientists receiving funding from regulated
industries.
Can you please explain what steps you have taken to make certain
politics and special interests will not affect the quality of
scientific information used to make important regulatory decisions?
Answer. Following recommendations from a Report by the National
Research Council entitled ``Improving Research Through Peer Review,''
and language in The Agricultural Research Extension, and Education
Reform Act of 1998, USDA/ARS overhauled its prospective peer review
process. The Office of Scientific Quality Review (OSQR), which was
established in 1999, coordinates independent external peer panel
reviews of each of the research projects that make up the Agency's 22
National Programs at the beginning of their 5-year cycle. This
prospective review of the proposed project plans has contributed to a
strengthening of the ARS research program.
We are currently developing new procedures for a retrospective
evaluation of each of ARS' 22 National Programs at the end their 5-year
program cycle. While we are piloting several different approaches to
achieve this objective, all of our pilots involve an independent
external peer panel made up of scientists, customers, stakeholders, and
partners who will determine if the research is relevant, of high
quality, and that it produced research products that benefited American
agriculture. Additionally, results of ARS' research are peer reviewed
when they are submitted to scientific journals for publication.
The information provided to regulatory agencies to serve as the
basis for regulation is also submitted to scientific journals in the
form of scientific manuscripts. The editorial boards of the journals
subject these manuscripts to peer review, which usually occurs
anonymously. Researchers do not get their papers published unless the
papers pass the scientific scrutiny of the peer review process.
The Cooperative State Research, Education, and Extension Service
(CSREES) funds research relevant to the mission of USDA at
universities, Federal laboratories, private research institutions, and
other organizations. All research projects, including those funded by
base programs, undergo scientific peer review prior to initiation, as
required by law. Proposals are reviewed by peer panels that are
composed of expert scientists from universities, industry, government
and stakeholders as appropriate. Conflict of interest criteria are
applied to ensure that proposals from an institution are not reviewed
by a panel member from that institution and that there are no real or
perceived financial conflicts. The review criteria include scientific
merit and relevance to U.S. agriculture. Research results are peer
reviewed again when published in the scientific literature, as
described above. This peer review process ensures that the highest
quality scientific information is continually supplied to those who
would make regulatory decisions. However, CSREES does not control or
limit in any way publications or other communication of research
results from projects it funds. Finally, the relevance, quality, and
performance of research portfolios will be subjected to rigorous
assessment by experts on a 5-year basis.
Every regulation published by USDA must comply with applicable
Executive Orders, the Administrative Procedures Act, and other
applicable statutes. The procedures in place establish an open and
transparent process that requires regulatory agencies to clearly and
concisely outline the basis for regulatory decisions, including the
scientific information used to make those decisions. USDA follows
procedures common to all Federal regulatory agencies to ensure all
interested parties as well as the general public have an opportunity to
participate in the rulemaking process and comment on regulatory
decisions made by the agency.
______
Questions Submitted by Senator Byron L. Dorgan
empowerment zones
Question. For the third year in a row, the Administration proposes
no funding to follow through on the commitment that USDA made to rural
empowerment zones even though this Subcommittee has thankfully rejected
this recommendation for 2 years in a row. I have one of those zones in
my state, the Griggs-Steele Empowerment Zone, focused on out
migration--a very serious problem in North Dakota.
Why has the Administration continued to oppose this funding even
after Congress restored it in the fiscal year 2003 and fiscal year 2004
bills?
Answer. The Administration has provided substantial earmarks and
technical assistance in support of the EZ/EC communities in the past. A
larger amount of resources can be made available by utilizing the
Budget Authority for loans rather than funding specialized grants.
Question. Can you please give me a substantive reason why this
funding has been eliminated again this year?
Answer. The President's fiscal year 2005 budget proposes $103.8
million of earmarked loan and grant funds for the EZ/EC communities.
Considering the tight nature of the fiscal year 2005 overall budget,
this amount of funding, plus technical assistance, is a substantial
investment on the part of the Federal Government in rural communities.
obesity prevention initiative grand forks ars
Question. I see that this year, you have announced Food-Based
Obesity Prevention as a top departmental priority. It is my
understanding that you also included an additional $5 million in ARS to
implement this priority.
Can you tell me where that ARS research will be conducted?
Answer. The new funds will be used to support research on obesity
prevention at the following proposed locations: Baton Rouge, LA;
Beltsville, MD; Boston, MA; Davis, CA; and Houston, TX.
Question. I would have expected that some of that research would
happen at the Grand Forks Human Nutrition Center, which is one of our
nation's most outstanding human nutrition research facilities. But when
I look at the budget for the Grand Forks ARS, I only see a reduction of
$515,317 which is the funding I've been able to add for the last
several years through this Subcommittee for the Center's Healthy Food
Initiative.
Why isn't ARS better utilizing this facility, particularly given
your emphasis on human nutrition and obesity?
Answer. The Grand Forks Human Nutrition Research Center has
developed a much deserved reputation as an outstanding Center for the
study of trace elements, which is the mission of the Center. That work
will continue to be supported. ARS is developing its strategic plan to
attack the problem of obesity using a focus on foods. The Grand Forks
Human Nutrition Research Center has been part of that process, and ARS
will develop a role for its research capacity to address obesity
issues.
Question. I am concerned about reports that the Grand Forks ARS has
lost 40 percent of its staff since 1985 and flat budgets will probably
force 8-10 layoffs a year.
Why hasn't ARS been supporting this top notch facility?
Answer. Funding at the Grand Forks Human Nutrition Research Center
has increased since 1985. The impact on the center is similar to the
impacts on all of the other human nutrition research centers, as well
as on all ARS units. The funding for the center, or any unit in ARS,
can be used as best determined by the Center Director, who can use
discretion in deciding to expand a program, purchase new equipment,
develop new facilities, or change the number of personnel. At each of
the human nutrition research centers, there has been significant
leveraging of resources with funding from industry and other Federal
agencies, and this has resulted in much stronger research programs.
In recent years there have been a number of outstanding scientists
hired at the center and, with the existing budget, ARS has been able to
maintain the high visibility and impact of the research that is
conducted at the center. There has not been a reduction in force in ARS
since 1985, and any reductions in the number of personnel that have
occurred throughout the agency are based on decisions to not fill
positions in favor of using the money for new programs, new equipment,
etc.
bse surveillance program
Question. Madam Secretary, I noted in your testimony that USDA is
requesting $60 million, an increase of $47 million, which will permit
it to further accelerate the implementation of a verifiable National
Animal ID system, increase BSE surveillance, conduct technology of BSE
testing technologies and strengthen the monitoring and surveillance of
advanced meat recovery. I wanted to bring to your attention some
technology that has been developed at North Dakota State University
that I understand APHIS may be interested in pursuing.
NDSU and its private sector partners have the unique capability to
participate in this, and I'm curious what to know about the technology
that USDA plans on using?
Answer. USDA is interested in technologies that may meet the needs
of the BSE surveillance program and the implementation of a national
animal identification system.
On January 9, 2004, USDA announced that the Center for Veterinary
Biologics would begin accepting license applications for BSE tests. The
decision to formally accept license applications for BSE test kits and
rapid tests has better positioned USDA to quickly implement
modifications to our current BSE surveillance program.
Several test kits have been issued licenses or permits by APHIS,
and more may be approved in the future. Distribution and use of BSE
test kits in the United States shall be under the supervision or
control of the USDA's Animal and Plant Health Inspection Service.
Distribution in each state shall be limited to authorized recipients
designated by proper state officials, under such additional conditions
as the APHIS administrator may require. Regarding the national animal
identification system, USDA's goal is to create an effective, uniform,
consistent, and efficient system by:
--Allowing producers, to the extent possible, the flexibility to use
current systems or adopt new ones, but not burden them with
multiple identification numbers, systems, or requirements;
--Building on the data standards developed in the United States
Animal Identification Plan; and
--Remaining technology neutral in order to utilize all existing forms
of effective technologies and new forms of technology that may
be developed.
The specific technologies used to link a unique animal number to an
animal, record the movement in commerce, and report the movement to a
national database will be determined by industry. We welcome North
Dakota State University's participation in this developing program.
broadband funding
Question. It has been almost 2 years since the new broadband title
to the Rural Electrification Act (REA) was enacted. More than $2
billion in loan authority has been provided under this new program and
the Senate reinforced its bipartisan support for this initiative in a
series of amendments to the Agriculture Appropriations bill.
Unfortunately, less than $200 million in loans have been allocated so
far while more than a $1 billion in demand has been made known to the
agency.
Specifically, I would like to know: how many broadband loan
applications are pending; how many loans have been approved; how many
loan applications have been rejected; what states have projects
pending, rejected or approved; how long loan processing takes; how many
staff are allocated to the broadband program and how many staff are
allocated to the Telecommunications and Distance Learning and
Telemedicine programs; and how many rural broadband connections you
expect to make under the new program?
Answer. There are 40 loan applications pending totaling $438.8
million; 14 loans have been approved totaling $201.8 million; 20 loan
applications totaling $300.3 million have been returned as ineligible
and 17 loan applications totaling $195.3 million have been returned as
incomplete. It takes RUS approximately 60 days to process a loan
application provided the application is reasonably complete when it is
submitted. Initially, a team of 14 headquarters individuals have been
assigned to the broadband program. Under a recently approved
reorganization plan, approximately 25 individuals will be assigned to
it, pending filling vacancies which currently exist. The number of
headquarters employees assigned to the Telecommunications and DLT
program is approximately 40. Over 1 million potential connections to
broadband service have been made possible with the approval of the
first 14 loans. Future connections will vary depending on loan size,
service territory, and project costs. Our goal is the full utilization
of the funding available to hook up as many rural customers as
possible.
rural telecommunications
Question. I am also profoundly concerned about reports that suggest
that the agency avoid rather than manage risk. The risk I hope you
avoid is the risk of leaving rural Americans behind in the digital
economy. In creating and funding a new broadband title to the REA,
Congress sought to re-ignite the ``can-do'' spirit of the early days of
rural electrification and the rural telephone program. Historically,
the agency worked with applicants in a cooperative, not adversarial way
to find solutions.
Can I get assurances from you that you see our mission as using the
tools of this new loan program to spur rapid and meaningful deployment
of broadband services?
Answer. Yes. In concert with the President's recently announced
goal of universal broadband by 2007, USDA's Rural Development is ready
to meet this goal in rural America. The ``meaningful deployment of
broadband services'' can only be met by making quality loans. As stated
before, universal broadband deployment has been recognized as a
national policy goal. In light of this, we still face challenging
domestic spending decisions. In order to balance fiduciary
responsibility with mission delivery, USDA is focusing on ``quality
loans'' that produce exponential benefits through reduced subsidy rates
and greater lending levels and that strengthen not only rural
economies, but our national economy and its role in the global economic
system. A failed business plan translates not only into loss of
taxpayer investment, but deprives millions of citizens living in rural
communities of the technology needed to attract new businesses, create
jobs, and deliver quality education and health care services. I can
assure you that every effort is being made to expedite the deployment
of broadband service to rural America in a ``meaningful'' way.
northern great plains regional authority
Question. Can you tell me how the Department is proceeding with the
establishment of the Northern Great Plains Regional Authority and which
agency within USDA will be charged with administering the Authority?
Also, when can we expect the fiscal year 2004 funding to be released?
The legislation also calls for the appointment of a Federal and a
tribal co-chair. Can you tell me what the process will be to make these
appointments and what the status of this process is?
Answer. Rural Development has been tasked with providing the report
requested in the fiscal year 2004 Appropriations Act and working with
the Governors of the five states to establish the Northern Great Plains
Regional Authority. A taskforce of State Directors has been established
to develop the report and coordinate the numerous activities required
to establish the Authority.
Funds will be available once the Authority is fully established.
The Authority cannot be established until the Federal and Tribal co-
chairs have been named and confirmed.
The statute requires those appointments to be made by the President
and confirmed by the Senate. It is our understanding that the White
House will follow the normal procedure for filling such positions.
standard reinsurance agreement
Question. When can we expect a new SRA?
Answer. RMA anticipates establishing an agreement for the 2005
reinsurance year by the July 1, 2004 deadline.
Question. Why did RMA eliminate the developmental fund within the
crop insurance program?
Answer. The first draft of the SRA was designed to raise many ideas
and concepts to address long-standing program delivery issues. RMA has
listened carefully to all the responses from insurance providers,
interested parties via submitted written comments, and discussions with
trade associations. RMA believes the second draft addresses most of the
concerns raised in the first round of negotiations. There were strong
concerns about the suggested elimination of the developmental fund.
Therefore, in the second draft RMA restored the developmental fund and
reverted back to seven reinsurance funds.
underwriting gains tax
Question. Why did RMA propose a 25 percent tax of underwriting
gains for the reinsurance companies involved in crop insurance?
Answer. The proposed SRA encourages companies to provide broader
service to farmers by RMA assuming a larger share of the non-profitable
business in high-risk areas. It also allows greater flexibility for
companies to share risk with FCIC in the pilot phase of new products,
encouraging companies to make new products available to producers.
The 25 percent global quota share arrangement permitted RMA to take
a greater share of the losses as well as gains to stabilize the program
and secure a better balance of risk sharing between the government and
the companies. This provision was intended to add capital support and
stability to the program to supplement private sector reinsurance that
often is less available for drought stricken, and therefore less
profitable areas of the country. The second draft retains this
provision but at a much reduced, 5 percent level.
multi-peril crop insurance
Question. RMA is proposing to penalize companies who deliver Multi-
Peril Crop Insurance above the cost of Federal reimbursement of
Administration and Operations. This proposal would have a
disproportionate affect on smaller companies and may force them out of
the program. Why would RMA want fewer companies in the crop insurance
program? What evidence do you have that the current rate of A&O
reimbursement is adequate?
Answer. RMA does not want to have fewer companies in the program,
but is also concerned about companies over spending and harming the
livelihood of the customers, agents and loss adjusters. In the second
draft, we have removed the penalty for companies that exceed their A&O
reimbursement allowance, but will continue to exert careful and active
oversight over company financial condition and operational
effectiveness. RMA will take appropriate regulatory action to safeguard
farmers and the delivery system against another company failure due to
financial excesses. The failure of American Growers cost taxpayers
approximately $40 million to date above and beyond indemnities paid for
farmer losses. The proposed SRA establishes additional reporting to RMA
of critical business information needed to anticipate company financial
weaknesses such as those that caused the failure of American Growers.
Expense reimbursement payments have grown over time in total and on
a per policy basis. For example, the number of policies serviced by
companies in 1998 and 2003 remained at 1.2 million, but RMA paid the
companies a total of $444 million in expense reimbursement in 1998 and
$734 million in 2003. On a per policy basis, expense reimbursements
increased from $358 per policy in 1998 to $592 per policy in 2003. This
is a 65 percent increase over 5 years--an average compound increase of
over 10 percent per year. For 2004, it is estimated that premium income
will be substantially higher reflecting generally higher commodity
prices and that the related total and per policy expense reimbursement
will rise dramatically without a significant increase in the cost of
selling or servicing the policies.
standard reinsurance agreement
Question. Does RMA intend on providing the industry with a complete
proposal, including all necessary supporting manuals to review when the
second draft is released?
Answer. On Tuesday, March 30, RMA announced the release of the
second SRA proposal along with subsequent appendices (Appendix I:
Program Integrity Statement, Appendix II: Plan of Operations, and
Appendix IV: Quality Standards and Control). This additional
information will allow the companies to evaluate the agreement in a
more comprehensive way. A document detailing the required data
processing formats and instruction, Appendix 3 (formerly Manual 13),
will be published at the end of the process to reflect the new
agreement.
Question. Will the SRA contain terms to make it financially viable
for companies to operate in every state?
Answer. RMA has proposed changes allowing for future growth of the
delivery system, such as permitting greater flexibility for companies
to shift more risks to RMA on policies that are in high-risk areas as
well as the risk of new products in their pilot phase. Traditionally,
the Federal Government takes on the bulk of non-profitable business in
all areas and allows insurance companies to retain more of the
profitable business. In addition, the SRA proposes raising state
session limits in many states allowing for the viability of more
service in those areas.
Question. What happens if RMA doesn't have the SRA wrapped up by
May 1?
Answer. RMA fully anticipates having a signed agreement by the July
1, 2004 deadline. As with prior negotiations, if the new agreement is
not signed by that time, RMA will continue to provide the necessary
reinsurance support until the new agreement is signed. Once the new
agreement is signed, all policies issued for the 2005 reinsurance year
will be covered by the new agreement.
Question. Do you believe RMA will pursue the establishment of a
guarantee fund in the second draft of the SRA?
Answer. Yes, in the second draft, the purpose of the guarantee fund
was clarified and the fund was also renamed the Contingency Fund.
During the company discussions and with others, it became clear that
many misunderstood the purpose of the fund and even questioned the
authority to have such a fund.
The purpose of the fund is simply to use existing penalty and fee
provisions, due to company performance issues, to help pay for any
future company failures, such as the American Grower situation. The
estimated funds that would be put in this fund on an annual basis is
between $1-2 million. The Office of General Counsel firmly believes RMA
has the authority to make what is essentially a bookkeeping change for
this purpose. It should also be noted that this fund cannot be used by
the RMA as a resource to fund agency expenses.
Question. It is my understanding there were numerous provisions in
the first SRA proposal in which RMA was exerting more regulatory
authority. I believe RMA currently has very extensive regulatory
authority and I would urge the agency to use such authority in a
responsible manner. Additionally, I am concerned the crop insurance
program is currently a very complex highly regulated program. Has the
agency done any analysis regarding the costs these regulations place on
the delivery system and the savings, which could be generated by
removing some of these burdensome procedures?
Answer. Although RMA has not performed a formal analysis regarding
regulatory costs, RMA is striving to put into place regulatory
provisions that do not put an undue burden on the agency or the
companies. In addition, RMA has revised its Appendix IV (Quality
Control and Standards) to incorporate more efficient processes for
oversight activities, and to better utilize the existing resources of
the companies in such efforts. However, it is imperative that RMA apply
its learning gained from the demise of American Growers. RMA will
continue to work closely with the companies to responsibly fulfill its
vital role as a steward of the program.
In the proposed SRA, RMA is fairly and equitably exercising its
given authority and responsibility to oversee the financial and
operational safety, soundness and effectiveness of the Federal crop
insurance program to ensure program integrity and a reliable, effective
delivery system. This is good for farmers, companies, agents and all
others concerned and will not impose ``massive'' new burdens or costs.
The proposed SRA establishes additional reporting to RMA of
critical business information needed to anticipate company financial
weaknesses such as those that caused the failure of American Growers.
The companies are already preparing much of the requested information
for other purposes. This information includes financial statements,
statement of earnings and cash flow, commission and other expense
details, reinsurance agreements and management evaluations of major
financial and operating risks facing a company. Any well-run, fiscally
responsible company will already be developing and using this kind of
information and should be willing to provide it to its regulator.
In farmer listening sessions throughout the country, RMA has
received an overwhelming number of requests to ensure that agents and
loss adjusters are knowledgeable and well trained. The proposed SRA
requires insurance companies to verify that agents and loss adjusters
are trained in accordance with RMA standards and are delivering the
best and most complete and accurate information possible to farmers.
The proposed SRA also strengthens the companies' focus on training
agents and loss adjusters to better serve limited resource, minority
and women farmers.
Any concern over the cost associated with agent and loss adjuster
oversight and training fails to recognize the benefits and efficiencies
of well-trained agents and loss adjusters. Farmers benefit from making
informed sound risk management decisions, while agents, loss adjusters
and insurance companies benefit from increased customer satisfaction
and customer retention, and reduced exposure to fraud, waste and abuse,
and litigation risks and costs.
The proposed SRA provides for disclosure of information to allow
RMA to assess the financial strength and performance of insurers and
their service providers. RMA is asking that companies disclose more
leading indicators of their insurer and service provider operational
and financial soundness and risks. Many of these disclosures were
requested informally last year in the wake of the failure of American
Growers. Current insurance companies serving farmers should have this
information and be willing to share it with their regulators. Companies
conducting good business practices and assessing their risks should
incur no additional cost. Companies that are not already using this
information should begin to develop it to ensure their soundness and
safety.
agricultural trade
Question. The United States Trade Representative (USTR) has
recently completed free trade agreements with Central America (CAFTA)
and Australia, with the benefits to American agriculture being
miniscule.
Can you identify any specific benefits to American agriculture that
these and future free trade agreements provide?
Answer. On March 22, 39 leading agriculture-related associations,
federations, councils, and institutes representing a broad spectrum of
American agriculture, sent a letter to President Bush expressing their
support for the CAFTA and Dominican Republic agreements. The signators
of the letter expressed the view that the agreements would lead to
``significant'' increases in exports of a wide range of agricultural
products.
American agriculture will benefit from the Australia FTA because
Australia will immediately eliminate all agricultural tariffs. In
particular this will benefit U.S. exports of: processed foods; oilseeds
and oilseed products; fresh and processed fruits and fruit juices;
vegetables and nuts; and distilled spirits. Also the FTA establishes an
SPS Committee that will enhance our efforts to resolve SPS barriers to
agricultural trade, in particular for pork, citrus, apples and stone
fruit.
Under the Caribbean Basin Initiative and the Andean Trade
Preferences Act, agricultural imports from nearly all of our FTA
partners already receive duty free treatment from the United States. By
negotiating Free Trade Agreements with these countries we will level
the playing field, affording our exporters similar duty free access to
those markets for their products.
Question. The USTR has recently announced intentions to negotiate
free trade agreements with Colombia and Thailand.
Will sugar be included in the negotiations and do you support the
inclusion of sugar in regional and bilateral free trade agreements?
Answer. To maximize the benefits for U.S. agriculture from these
negotiations, we seek increased market access for all of our export
commodities, including those that our negotiating partners want to
protect. We can only pursue this strategy effectively if we are willing
to negotiate increased foreign access to our own sensitive markets. We
will continue to take steps to ensure that the interests of U.S. sugar
producers are taken into account. For example, in the CAFTA, we
insisted that the out-of-quota duty for sugar not be eliminated or even
reduced. This provision for sugar was unique, but it was deemed
necessary to defend our domestic sugar program.
asian soybean rust
Question. I am very concerned about the risk of importing Asian
soybean rust into the United States. The movement into the United
States could devastate our soybean crop and impose a heavy economic
burden on American farmers and consumers. We cannot afford to take
unreasonable risks given the adverse impact soybean rust would have on
soybean production and growers in the United States. If a temporary ban
on the importation of beans from infected nations is the only answer
that government can come up with in the short term, I believe that it
is better than jeopardizing our entire soybean industry.
Will you halt soy imports until the Department can find a sway to
ensure that this devastating fungus doesn't infiltrate our domestic
soybean crops as a result of lax import standards?
Answer. We do not plan to halt soy imports. APHIS officials are
looking closely at our country's importation of soybean seed, meal, and
grain. Our analysis to date has shown that clean soybean seed and
soybean meal--which is a heat-treated, processed product--pose a
minimal, if any, risk of introducing this disease. Historically, there
has never been a documented instance of soybean rust spread through
trade. Rather, it is spread naturally through airborne spore dispersal.
We are currently conducting a risk assessment to study the viability of
the pathogen and verify that it does not survive in commercial grade
soybean products. The preliminary results of the assessment indicate a
very low risk, if any, of introducing this disease through imports.
interest assistance loans
Question. Money for interest assistance loans to farmers has been
used up for 2004. Many producers depend on interest assistance to
obtain the financing necessary to plant their crops. It is my
understanding that interest assistance was cut by 35 percent from 2003
to 2004.
What steps are being taken by USDA to meet the demands of the
program? Will USDA provide alternative funding for the program in 2004?
Answer. The fiscal year 2004 allocation of guaranteed operating
with interest assistance loan funds was $271.2 million. As of March 31,
2004 guaranteed operating with interest assistance loan obligations
totaled $244 million. In accordance with statutory requirements,
remaining funds are targeted for exclusive use by socially
disadvantaged farmers.
The direct operating loan program is one alternative that could
provide aid to family farmers unable to obtain guaranteed OL with
interest assistance loan funds. This program, with its availability of
a lower interest rate for terms of up to 7 years, provides family
farmers a means of financing their business operations at rates and
terms comparable to the guaranteed OL with interest assistance loan
program. As one would expect, demand for this program is also high.
However, with historically low interest rates available through
commercial lenders, many family farmers are able to utilize the
guaranteed operating unsubsidized loan program. Use of funds in this
program has increased by eleven percent compared to a year ago at this
time, but there are still sufficient funds available to meet additional
demand.
Because the subsidy rate for the interest assistance program is
significantly higher than for other farm loan programs, it is not cost
beneficial to transfer funds for interest assistance loans.
country of origin labeling
Question. Madam Secretary, when the Omnibus Appropriation bill
became law, it delayed the implementation date of Country of Origin
Labeling from September of this year until September of 2006, except
for certain fish. The Omnibus bill did not, however, change the date at
which the actual regulations governing COOL need to be concluded, which
is also September of 2004. The Department has nearly 2 years to work on
the COOL regulation, so I am hopeful that USDA will, in fact, have
those regulations completed. As you know there are many of us in
Congress, in fact a bipartisan majority in the Senate, who want the
COOL regulations completed and the date changed back. In fact, the date
may be changed back to September of 2004, and I want to ensure that the
Department is ready in that event, as the law currently requires. I
read with interest some comments that the President made in Ohio
recently. The President said, and I quote: ``I want the world to `buy
America.' The best products on any shelf anywhere in the world say,
`Made in the USA.' '' His comments were followed by applause. I think
the President is right.
If he says that, why does the Bush Administration oppose the COOL
law that would ensure that consumers have the opportunity to buy
American?
Answer. In general, the Administration believes that providing more
information for consumers on which to base their purchasing decisions
is better than less information. However, if the costs of providing the
additional information exceed the benefits, then there is no economic
rationale for providing it. We are reviewing the comments received on
the proposed regulations and will finalize the regulations to implement
COOL as mandated by the 2002 Farm Bill and the Omnibus Bill.
bovine spongiform encephalopathy (bse)
Question. Do you still intend to open the U.S. border to live
Canadian cattle, especially in light of the discovery that two Canadian
feed mills were the cause of the outbreak of mad cow disease?
Answer. Today, the Animal and Plant Health Inspection Service
(APHIS) closed the comment period on a proposed rule that would amend
the regulations regarding the importation of animals and animal
products to recognize, and add Canada to, a category of regions that
present a minimal risk of introducing BSE into the United States via
live ruminants and ruminant by-products. USDA will take into account
the comments received on the proposed rule as we review this matter.
resignation of administrator bobby acord
Question. On March 23, Bobby Acord, head of USDA's Animal and Plan
Health Inspection Service (APHIS), resigned effectively immediately.
Was his resignation the result of a disagreement over policy?
Answer. Bobby Acord resigned after almost 38 years of Federal
service due to a number of factors, including illness in his family and
his desire to spend more time in the places and with the people that he
cares about most. In a letter to all APHIS employees dated March 24,
2004, Mr. Acord stated, ``Those of you who know me well know that if
nothing else, I am a decisive person. And this weekend, I decided it is
simply time for me to pass the torch.''
During Mr. Acord's tenure as APHIS Administrator, he led the Agency
through the aftermath of the September 11, 2001, terrorist attacks, an
outbreak of exotic Newcastle disease and its eradication, and the
country's first detection of bovine spongiform encephalopathy. While
Mr. Acord was administrator, the employees of APHIS were also named
``2003 People of the Year'' by Progressive Farmer magazine.
Mr. Acord is succeeded by Dr. Ron DeHaven, who joined APHIS in 1979
and most recently served as the deputy administrator of APHIS for
Veterinary Services.
bse policy
Question. We understand that there are a wide range of policy
proposals to address various BSE issues.
What are you doing to ensure that our decisions are science based
and don't rest upon short-term political or public relations benefits?
Answer. In addition to employing scientific and technical experts
with working knowledge of transmissible spongiform encephalopathies,
USDA has consulted with international experts through the Secretary's
Foreign Animal and Poultry Disease Advisory Committee and with
scientists at the Harvard Center for Risk Analysis to review the BSE
surveillance plan and response. USDA bases its policy decisions on
sound science and the advice we receive from such experts.
Question. Japanese officials say that despite USDA officials'
statements to the contrary, ``Ag Department officials from the United
States have not been in recent contact with their Japanese
counterparts. We're confused as to why some USDA officials have been
saying otherwise.''
Is the Japanese claim true and what is the status of the
negotiations regarding the reopening of the Japanese market to U.S.
beef imports?
Answer. The Department has been and remains in close contact with
Japanese government officials. Immediately following USDA's
announcement of the BSE case, senior USDA officials and Japanese
officials held talks in Tokyo, Japan, on December 29 and January 23. A
Japanese technical team visited USDA in Washington, D.C., and the BSE-
incident command center in Yakima, Washington, during January 9-15. On
March 23, the Agricultural Affairs Office, American Embassy in Tokyo,
reported meetings with the Japanese Ministry of Health and Welfare
(MHLW), Ministry of Agriculture, Fish and Food (MAFF), and the Food
Safety Commission (FSC).
There is still a significant difference in our official positions
regarding BSE testing and specified risk material removal. On March 29,
I sent a letter to Japanese Agriculture Minister Kamei proposing to
have a technical panel made up of experts from the World Animal Health
organization meet before April 26 to discuss a definition of BSE and
related testing methodologies as well as a common definition of
specified risk materials. On April 2, Japan rejected the proposal
reasoning that the United States first needed to reach a bilateral
scientific understanding on BSE. USDA is planning another high-level
visit to Japan to continue talks in late April. The United States
exported over $1.3 billion in beef to Japan in 2003, representing over
50 percent of Japan's total beef imports. The import ban has severely
impacted Japan's market supplies and beef prices. Given Japan's need
for beef imports and the importance of beef exports to Japan for the
U.S. beef and cattle industry, we are hopeful that a solution can be
found.
durum and spring wheat yields
Question. Recently, the Risk Management Agency mandated that durum
yields be split out from spring wheat yields. The method which RMA is
proposing to do this is causing durum growers to have disproportionate
yield reductions in their actual production histories. It is also
causing farmers to take an inordinate amount of time to retrace these
yields. One solution to this problem is to allow producers to replicate
yields.
What are USDA's plans to resolve this problem and will USDA allow
farmers to replicate yields?
Answer. The U.S. Durum Wheat Growers Association (USDGA) requested
Risk Management Agency (RMA) recognize spring and durum wheat as
separate crop types due to quality and price differences, thus allowing
each to be insured as a separate unit beginning with the 2004 crop
year. This was done via publication in the Federal Register at 7CFR
457.101 June 9, 2003.
Insured areas most affected are all North Dakota counties, 18
counties in Northern South Dakota, and 18 counties in Northeastern
Montana. Some insured's will have increased spring wheat yields and
some insured's will have increased durum wheat yields. The impact will
vary depending upon individual yield history.
On average 25-30 percent of all wheat in North Dakota is durum
wheat. RMA's experience for 1999-2003 shows durum loss ratios in North
Dakota under the APH yield based coverage are higher than that of
spring wheat, 2.69 verses 1.09 for spring wheat.
RMA explored viable options to alleviate some producers concerns
while still maintaining program integrity.
While producers have requested to be allowed to use replicated
yields in their history database, this will generally overstate
guarantees for durum wheat and will most likely generate significant
complaints from insured's negatively impacted by replication, and from
agents and insurance providers who have undergone considerable work to
implement the procedures for splitting out the yields by type, and
increase the risk of loss to companies and re-insurers providing
protection in these areas.
RMA is implementing a 10 percent yield limitation to provide relief
to those that may experience declining yields. Implementing yield
limitations is consistent with existing procedures for other situations
that protect insured's from declining yields, and provides immediate
protection while avoiding replicated yields that are too high that will
adversely affect actuarial soundness for several years to come.
wool for berets in iraq
Question. Madam Secretary, it has come to my attention that the
Coalition Provisional Authority (CPA) in Iraq has let a contract for
berets for Iraqi security forces. While the CPA has indicated that the
contract is open to all bidders, the contract's parameters have put
American wool producers at a distinct disadvantage by specifying that
the berets be made of 100 percent Australian wool! Such preferential
treatment is not only unfair but is a serious concern that deserves
immediate attention. There are 64,170 U.S. wool producers, including
over a thousand in North Dakota, that produce some of the finest wool
in the world. Given a fair field on which to compete, I am certain they
will win such a contract.
Given the time-sensitive nature of this issue, I want to know if
you will work with others in the Administration to ensure that the CPA
is directed to re-let that contract to ensure that no country receives
preferential treatment?
Answer. Thank you for this question which has brought this issue to
our attention. We have been in contact with USDA personnel in Iraq and
were able to learn a great deal about this contract and procurement.
Unfortunately, the contract has been awarded and the tender
specifications did, in fact, specify Australian wool. This tendering
was not done by the CPA directly and did not involve U.S. government
funds.
As part of our reconstruction efforts in Iraq, we are trying to
bring greater transparency and predictability to the public tendering
process. This is of vital importance if we are to regain market share
for American agricultural products in this potentially significant
export market. Bringing about a market based, open and transparent
public tendering process is an uphill battle and this is a perfect
example. We will be working closely with CPA and Iraqi authorities to
ensure that oversights like this do not happen again.
______
Questions Submitted by Senator Dianne Feinstein
specialty crops
Question. The crop insurance program has expanded significantly
over the past 10 years providing farmers and ranchers with increased
financial security. Even in California it is now commonplace for
bankers to require crop insurance prior to approval of operating loans.
However, there are still many specialty crops that have no crop
insurance program available. Many of these crops are grown on
relatively few acres nationwide compared to the more traditional
commodity crops.
How does the USDA plan to expand the insurance programs to the
remaining specialty crops not currently covered?
Answer. Through the use of feasibility studies and pilot programs,
RMA plans to expand the insurance programs to cover additional
specialty crops. Risk Management Agency has made significant progress
in providing new crop insurance programs available to specialty crop
growers. For example, during 1998-2002: The number of insurable
specialty crops increased 29 percent The number of active policies
increased 28 percent The amount of coverage (liability) increased 98
percent
Since 2001, RMA has entered into over 90 contracts and partnerships
with the majority focusing on providing crop insurance or other non-
insurance risk management tools for producers of specialty crops.
Feasibility studies to determine whether crop insurance programs can be
developed have been completed for direct marketing of perishable crops,
fresh vegetables, Hawaii tropical fruits and trees, lawn seed, and
quarantine insurance. The fresh vegetables project is in the
development stage with crop year 2007 as the target year for
implementing a pilot program. Insurance programs for Hawaii tropical
fruits and trees and quarantine insurance are in the development stage
with crop year 2006 as the target year for implementing pilot programs.
The feasibility study for lawn seed is projected for completion in the
fourth quarter of fiscal year 2004. The feasibility study for direct
marketing of perishable crops is projected for completion in the first
quarter of fiscal year 2005.
Most specialty crops of significant size or value have either a
program already developed or are a future project on RMA's Prioritized
Research and Development Plan. The ten highest valued specialty crops
not insured are listed below with the current plan for addressing each:
[In dollar amount]
------------------------------------------------------------------------
Crop Insurance
Crop Status Value
------------------------------------------------------------------------
Bedding/Garden Plants............. Target 2007 crop $2,392,495
year.
Lettuce........................... Target 2007 crop 2,261,185
year.
Mushrooms......................... Industry not 911,509
interested.
Sod............................... Industry not 800,694
interested.
Cut Flowers & Cut Greens.......... No action based on 717,612
Feasibility Study.
Carrots........................... No action based on 551,433
Feasibility Study.
Broccoli.......................... Target 2007 crop 536,226
year.
Cut Christmas Trees............... Target 2005 crop 441,604
year.
Cantaloupes....................... Target 2007 crop 404,685
year.
Melons............................ Target 2007 crop 328,550
year.
------------------------------------------------------------------------
Note: Pilot program is scheduled for implementation in the target year.
In addition, RMA recently issued a statement of objectives request
for proposals for innovative and cost effective approaches to providing
crop insurance for crops with small value. The purpose is to develop a
program that responds to small value crop producers, provides a minimal
requirement transaction between a producer and insurance provider, and
identifies the vulnerabilities for waste, fraud and abuse. A contract
was awarded in March 2004 to begin research for possible development of
a new approach that provides crop insurance coverage for crops with
small value. One possible approach that may be proposed is some form of
whole farm program, perhaps similar to the existing Adjusted Gross
Revenue program, which is being piloted in a limited number of counties
in California.
revenue based programs
Question. The crop insurance program has been piloting a number of
new programs which address not only production losses, but revenue
losses as well. However, most of these programs have been made
available to only the major commodities: corn, wheat, cotton, rice etc.
I understand that in certain states in the mid-west a corn grower has
up to 6 different options in insuring their crop.
When will these new revenue based programs be made available to
specialty crop growers?
Answer. RMA conducted a feasibility study for developing a revenue
model of insurance for certain specialty crops, which is currently in
the process of development for revenue based programs tailored to those
specialty crops. The new revenue based programs should be made
available to specialty crop producers for the following crops in the
proposed pilot program states for the crop year 2007, pending approval
by the FCIC Board of Directors. The list of crops and states include:
Apples, NY, PA, OR, VT, and WA; avocados, grapefruit, and oranges, FL;
dry beans (Baby Lima, Blackeye Peas, and Large Lima), CA: dry peas and
lentils, ID; maple syrup, ME, NH, NY, and VT; and revenue product
modification (corn), IA, IL, and IN.
adjusted gross revenue program
Question. There is currently a pilot crop insurance program
available in a very limited number of counties Nation wide called the
``Adjusted Gross Revenue'' (AGR) program. The program is available in 8
counties in California. However, I understand the Agency has put a hold
on further expansion of the program pending an evaluation.
When is the evaluation expected to take place and when is the
earliest that expansion of this program can be expected?
Answer. The Adjusted Gross Revenue (AGR) pilot program began in
1999 in five States (36 counties). In 2000, six more States and 52 new
counties were added. In 2001, RMA made a number of significant changes
to the program in order to increase the number of eligible producers,
coverage available, and producer acceptance. At the same time, AGR was
expanded into six additional States and 126 new counties to provide a
broader base upon which to test the pilot program.
The Agricultural Risk Protection Act (ARPA) required the expansion
of AGR into at least eight counties in California and into at least
eight additional counties in Pennsylvania. RMA worked with the
respective State Departments of Agriculture to select the expansion
counties, gathered the data necessary for expansion and the FCIC Board
of Directors approved expansion into eight counties in both states for
2003. Effective for 2003, AGR was available in 17 states and 214
counties.
RMA is currently in the process of contracting for an evaluation to
be conducted of the AGR pilot program. The evaluation will commence
during 2004 using 2001-2003 AGR experience data reflecting the program
changes and broad expansion made in 2001. Once the evaluation is
completed, the results will be made available to the Board of
Directors, who will determine any future direction and expansion of
this pilot program.
technical assistance for specialty crops program
Question. The Technical Assistance for Specialty Crops (TASC)
program, authorized in the 2002 Farm Bill, was developed exclusively to
provide the specialty crop industry with financial assistance to help
overcome trade barriers such as sanitary, phytosanitary, and technical
barriers that prohibit or threaten exports. Funds are applied for by
industry and distributed upon approval by USDA. The need for the
program is great as noted by the overwhelming requests by industry for
assistance. During the past 2 years, since the program's inception,
USDA has received 111 proposals totaling $20 million in funding
requests--compared to actual funding of only $4 million. The $2 million
annually, while beneficial, is clearly insufficient.
What is USDA doing to expand this program and encourage growth of
specialty crop exports?
Answer. The Technical Assistance for Specialty Crops (TASC) program
was established in the Farm Security and Rural Investment Act of 2002.
As program managers, the Foreign Agricultural Service (FAS) is
responsible for ensuring all funds are used in the most effective way
to maximize benefits to U.S. specialty crops. To accomplish that
objective, FAS has taken several steps to maximize the use and
effectiveness of this program that include:
--outreach to the U.S. specialty product industries to maximize
awareness of the program;
--established regulations to ensure fair and equitable allocation of
the funds to worthy projects;
--program flexibility to address unexpected trade barriers, enabling
the availability of funds throughout the year; and
--selected projects that had the highest expected return in value to
expanding exports.
In addition, FAS continues to support the specialty crops through
ongoing activities such as market intelligence, trade policy, and
export market development. The Market Access Program (MAP) includes
over 30 nonprofit associations that represent specialty crops and
received $40 million of MAP funds in fiscal year 2003.
fruit and vegetable pilot program
Question. The 2002 Farm Bill authorized a $6 million Fruit and
Vegetable Pilot program in fiscal year 2003 to provide free fruit and
vegetable snacks to students in 25 schools each in Michigan, Ohio,
Indiana, Iowa, and seven schools in the Zuni Nation in New Mexico.
Results of the program have been positive. According to a report by the
USDA Economic Research Service, the pilot has shown consumption
increases in school children by at least one serving a day.
Various nutrition groups, the United Fresh Fruit and Vegetable
Association, and other anti-obesity advocates have been pushing for
expansion of this successful fresh fruit and vegetable pilot program
under the Child Nutrition Reauthorization Bill.
However, due to funding technicalities, the expansion of the pilot
has been removed from the House bill. The Child Nutrition
Reauthorization Bill is being written so it contains very little
opportunity for participants to access fresh fruit and vegetables, at a
time when childhood obesity is becoming an enormous issue.
What is the USDA doing to increase the consumption of fresh fruits
and vegetables in the school lunch, school breakfast, WIC and related
programs?
Answer. The Department shares your interest in the fruit and
vegetable initiative, and would support its expansion provided Congress
is able to fund it through savings or offsets that do not compromise
access to school meal benefits. USDA, as part of the Department's
Strategic Goal 4: ``Improve the Nation's Nutrition and Health,''
established a specific performance measure to improve the diets of
children and low-income people by at least five points as measured by
their Healthy Eating Index (HEI) scores; and to increase the score for
the broader U.S. population by at least two points. USDA is working
harder than ever with stakeholders to devise program initiatives to
achieve these changes. Since fruit consumption and vegetable
consumption are two of the ten elements of the HEI on which the most
progress can and should be made, I am particularly keen to see
innovations addressing these areas.
The Department believes that the Federal nutrition assistance
programs are an effective way to support and promote the consumption of
fruits and vegetables. For example, I know that children who
participate in the National School Lunch Program eat nearly twice as
many servings of vegetables at lunch as non-participants and School
Breakfast Program participants eat twice as many servings of fruit at
breakfast as non-participants. USDA nutrition assistance programs
provide over $8 billion in support for fruit and vegetable consumption
annually by supporting consumer purchases in the marketplace through
the Food Stamp Program; purchasing and distributing these foods
directly to schools, food banks, and other institutions; and through
nutrition education and promotion. I will provide some additional
information for the record.
[The information follows:]
To maximize the results of this investment in increasing
consumption for children and others, the Department is taking action to
motivate all consumers to eat more of these healthful foods. We are
expanding the Department of Defense fresh produce program to distribute
fresh fruits and vegetables to schools, enhancing the variety and
availability of fruits and vegetables in the school meals, as well as
expanding the Food Distribution Program on Indian Reservations fresh
produce initiative.
The Department has recently published Fruit and Vegetables Galore,
a guide developed as part of Team Nutrition that helps schools offer
and encourage consumption of a variety of fruits and vegetables. In
addition, the Department is expanding dissemination of the EAT SMART.
PLAY HARD.TM (ESPH) materials that promote vegetable and
fruit consumption. One theme of ESPH--Grab Quick and Easy Snacks--
promotes fruits and vegetables as snacks.
More broadly, we continue to pursue our partnership with the
National Cancer Institute (NCI) and the Centers for Disease Control and
Prevention (CDC) in the expanded national 5-A-Day for Better Health
program. The 5-A-Day campaign's goal is to increase consumption of
fruits and vegetables to 5 to 9 servings every day, and inform
consumers of the health benefits gained from eating fruits and
vegetables.
Regarding the WIC Program, the WIC food package currently plays a
key role in contributing to fruit and vegetable consumption by
providing 100 percent fruit and vegetable juices to program
participants. In addition, WIC nutrition education emphasizes the
relationship between nutrition and health, and fruits and vegetables
are promoted as part of a complete diet. Both the Dietary Guidelines
and the Food Guide Pyramid are foundation nutrition education materials
used by WIC to emphasize the importance of fruit and vegetable
consumption. Also, many WIC State agencies have adopted the National
Cancer Institute Campaign, Five A Day, to promote the intake of fruits
and vegetables. WIC's nutrition education approach is designed to teach
participants and caregivers about the important role nutrition plays in
health promotion and disease prevention as well as overcoming specific
risk conditions.
Finally, a contract was awarded in September 2003, to the Institute
of Medicine (IOM), through the Food and Nutrition Board to review the
WIC food packages in a 22-month study. This study will use current
scientific information to review the nutritional requirements and
assess the supplemental nutrition needs of the population served by
WIC. IOM is currently scheduled to provide the Department with a final
report in February 2005. Assuming the report is received on schedule,
USDA expects to publish a Notice of Proposed Rulemaking for public
comment in December 2005, and a final rule in December 2006.
The WIC Farmers' Market Nutrition Program (FMNP) provides WIC
participants with coupons that can be exchanged at authorized farmers'
markets for fresh fruits and vegetables. The FMNP is currently in
operation at 44 sites--36 States, the District of Columbia, Guam,
Puerto Rico and 5 Indian Tribal Organizations. During fiscal year 2002,
just over 2.1 million participants were served. The FMNP educates WIC
participants on selecting, storing, and preparing fresh fruits and
vegetables and how to make fruits and vegetables part of healthy meals.
training of dhs employees
Question. As the Department of Homeland Security (DHS) was being
organized, a significant part of USDA's funding for import inspections
was placed within DHS. There remains significant concern that DHS will
not place a high enough priority on invasive pest and disease detection
at the border and that inspectors that are cross trained in other types
of import inspections will not be sufficiently vigilant to prevent
importation of pest on imported produce.
The agriculture industry, and in particular fresh fruit and
vegetable growers, have been very vocal that it is not acceptable for
Customs agents to be cross-trained to detect pests and diseases in
imported products. That capability is a specialized skill. Given the
enormous increases in fresh fruit and vegetable imports over the last 5
years, it is very unwise to reduce the Federal Government's capability
to detect invasive species.
Costs of eradication and elimination are higher than taking
preventive measures, if pests enter the United States the Federal
Government will need to pay for increased pest and disease eradication,
due to failures to interdict these threats at the border.
What is the U.S.D.A. doing to ensure that inspectors will have
sufficient training and experience to detect and prevent entry of new
pests on imported produce?
Answer. To facilitate the transfer of the agricultural inspection
force, USDA and the Department of Homeland Security (DHS) signed a
Memorandum of Agreement that specifies the functions and funding
transferred to DHS and establishes mechanisms between the two agencies
regarding the training of employees, use of employees, and other areas
described in the Homeland Security Act of 2002. The Agreement is meant
to emphasize the importance of continuing and enhancing the
agricultural import and entry inspection functions.
As specified in the Agreement, USDA continues to train DHS
inspectors who conduct agricultural inspections. DHS is maintaining an
inspection force of agricultural specialists, who must meet certain
educational requirements and go through a 2-month training course in
our import requirements and pest and disease identification, among
other things, at APHIS' Professional Development Center in Frederick,
Maryland. APHIS and DHS' Bureau of Customs and Border Protection (CBP)
are also implementing a joint quality assurance program to ensure that
the inspection process continues to function effectively. As part of
this effort, APHIS will provide on-the-job training for both
agricultural specialists and primary inspectors. APHIS also provides
basic training in the agricultural inspection process for general CBP
inspectors at CBP's training center in Atlanta.
sudden oak death
Question. Sudden Oak Death (SOD) is a serious, often fatal disease
of California native oaks, and has been found in two nurseries
(Monrovia, Azusa and Specialty Plants, San Marcos) in Southern
California. The discovery of this disease in the nursery trade, in
warm, dry Southern California and many miles from the epicenter of the
disease in the Bay Area has caused five states to quarantine California
nursery products. Monrovia nursery is one of the largest nursery
producers in the United States and ships plants throughout the United
States and Canada as well as other foreign destinations. Current
economic losses to Monrovia at this juncture are estimated at $4.3
million. A general embargo on California nursery stock will cause the
state incalculable economic damage.
What is the USDA doing to assess the extent of the disease both
within California and within the United States and take action to
contain the spread and prevent new areas from being affected by the
disease?
Answer. To assess the extent of SOD, we are conducting
``tracebacks'' to determine the nursery or nurseries from which
infected plant material originated, and ``trace forwards'' to determine
where a particular nursery has sent infected plant material. Also, we
are conducting a national survey of nurseries and forests. These
activities will help us determine the extent of SOD migration within
California and to other States. In addition, we plan to impose a
Federal quarantine on the interstate movement of known and
``associated'' SOD hosts from all California nurseries. This quarantine
will be based on sound science and a measured risk response. Associated
hosts are plants which are not technically hosts, but are nevertheless
susceptible to SOD. This action would preclude States from imposing
their own quarantines, and would provide for the resumption of safe
trade in California nursery plants--albeit under strict conditions. As
a result, we would be able to prevent further SOD spread via shipments
from California nurseries, while still allowing the interstate movement
of healthy plants.
glassy-winged sharpshooter
Question. Other pests like the Vine Mealy bug and Glassy winged
sharpshooter are impacting crops in California and elsewhere. What is
U.S.D.A. doing to contain the spread of and eliminate these pests?
Answer. Since fiscal year 2000, we have led an extremely successful
cooperative Glassy winged sharpshooter (GWSS) research and control
program in California. This program includes nursery stock inspections,
a Statewide survey, and site-specific urban treatments. These
activities help us quickly detect, control, and mitigate the GWSS.
Also, we develop strategies to reduce the pest problem in agricultural
production areas. This approach supports Statewide activities to
promote trade, and remove the pest from State commerce routes. In areas
where 100 or more GWSS had been found in traps each week, the program
now finds approximately five. This success demonstrates the benefits
not only of rapid response to a pest introduction, but also of
cooperating with stakeholders, universities, extension services,
agricultural researchers, and growers.
In addition, we are continuing a successful pilot program
throughout Kern County and conducting a similar program in infested
areas of Riverside, Tulare, and Ventura Counties. In addition, we have
expanded area-wide control activities into crucial production areas in
Tulare County, Ventura County, and Coachella Valley in Riverside
County. Our prompt implementation of these area-wide strategies has
significantly reduced the incidence of GWSS in the new areas. This
year, we continue to (1) develop management strategies and conduct
area-wide treatments; (2) monitor the impact of GWSS control strategies
on the environment; (3) mitigate Pierce's Disease spread in vineyards;
(4) transfer control strategies to County Agriculture Departments; and
(5) conduct regulatory activities through increased nursery stock
inspections.
At this time, APHIS does not have a program to control the Vine
Mealybug. Since this non-native pest has no natural predators,
eradication is not likely. Currently, producers are working to contain
its spread using sanitation and chemical control.
However, APHIS and the CDFA are continuing the highly successful
California Mediterranean Fruit Fly (Medfly) Preventative Release
Program. Since fiscal year 1996, only four Medflies have been detected
in California. The most recent of these was a single adult found in
late fiscal year 2002. This detection demonstrated the program's
continued reduction of captured wild Medflies, while mitigating
pesticide concerns. In fiscal year 2003, the program detected Mexican
Fruit Flies (MFF) in San Diego County. This detection necessitated an
emergency funds transfer, but we eradicated this infestation last
September--less than a year after the pest was first detected in the
area.
environmental impact of on-farm burial of downer/dead cattle
Question. The new regulations issued by USDA to address BSE will
help improve the safety of human food and animal feed and will help to
keep export markets open. Two of the recently announced changes in
regulations though may result in environmental issues for states with
large dairy and cow-calf industries.
Cattle carcasses buried on farm land can have adverse impact on
watersheds and pose other issues to the environment and ecosystems
should wildlife or other animals access the buried cattle.
Because of the potential for creation of an environmental hazard,
in Europe many countries have instituted regulations prohibiting the
on-farm burial of dead and downer cattle. The collection and disposal
of these animals is often subsidized by the government.
This issue has potential to have substantial environmental impact
for states with large dairy and cow-calf industries. There is potential
for substantial economic impact on farmers and others needing to
dispose of these animals.
Has there been an evaluation of these impacts? If so what are the
solutions and at what level of government do these solutions need to be
addressed? Is there a research need to identify effective disposal
options?
Answer. USDA has had an aggressive BSE surveillance plan in place
since the 1990's, and scientific experts--including those at Harvard
who conducted the risk assessment for BSE--agree that, even given the
find in Washington State, the disease would be circulating at extremely
low levels in the U.S. cattle population if at all. With such a low
prevalence rate, we do not anticipate large numbers of affected animal
carcasses needing disposal during the next 12 to 18 months. Our
recently announced enhanced surveillance plan should instead allow us
to further assure consumers, trading partners, and industry that the
risk of BSE in the United States is very low.
With regard to concerns about cattle carcass disposal options,
burying animals on the farm is not the only option for producers whose
animals are non-ambulatory disabled. Other alternatives for disposal
continue to be available to producers. These include rendering
facilities, salvage slaughter facilities (i.e., not slaughtered for
human consumption), and other animal disposal industries.
USDA welcomes additional research into carcass disposal options and
will continue to make decisions based on the most current science
available.
Question. Finally, is there a need to subsidize the collection and
proper disposal of dead and downer animals, first to ensure inclusion
in surveillance programs for disease, second to offset increases in
costs associated with disposal of these animals and finally to ensure
they do not create a hazard for other transmissible diseases? What is
U.S.D.A. doing to assess and control this situation from becoming a
potential hazard?
Answer. Scientific experts from Harvard conducted risk assessment
for BSE and concluded that, even given the find in Washington State,
the disease would be circulating at extremely low levels in the U.S.
cattle population if at all. With such a low prevalence rate, we do not
anticipate large numbers of affected animal carcasses needing disposal
during the next 12 to 18 months. Our recently announced enhanced
surveillance plan allows us to further assure consumers, trading
partners, and industry that the risk of BSE in the United States is
very low.
There are a number of options available to producers to dispose of
animals that are non-ambulatory disabled. Options for disposal include
burying animals on the farm, use of rendering facilities, salvage
slaughter facilities (i.e., not slaughtered for human consumption), and
other animal disposal industries.
USDA has included cost recovery options in the budget for its
enhanced BSE surveillance program. Payment for certain services will
help cover additional expenses incurred by producers and the industries
participating in the surveillance program and encourage participation.
For example, costs for transporting an animal or carcass to the
collection site from a farm or slaughter establishment may be
reimbursed, or disposal expenses for ``suspect'' cattle that test non-
negative or that cannot be rendered may also be covered. Other expenses
may also be addressed in the program.
Question. The collection of these animals is important for tracking
and surveillance for Mad Cow. Collection and inclusion of these animals
in tracking and surveillance sampling is important.
Has consideration been given as to how to achieve inclusion of dead
on the farm and downer cattle in the monitoring program?
Answer. Throughout the history of our surveillance program, USDA
has worked to obtain samples from the targeted animal population,
wherever these samples may be located. In order to obtain the samples,
USDA-APHIS has worked with facilities other than federally inspected
slaughter establishments as part of BSE surveillance efforts. These
facilities included renderers, salvage slaughter facilities (i.e., not
slaughtered for human consumption), and other animal disposal
industries.
Under our new surveillance program, we will build on these efforts
to ensure that we maintain access to our targeted surveillance
population. We will also be reinforcing our educational and outreach
efforts to producers, so they will know who to contact about testing
dead or downer animals on the farm.
USDA-APHIS-Veterinary Services' officials across the country will
work closely with their State counterparts to build on existing
relationships at these locations so that we can obtain the necessary
samples.
Payment for services will help cover additional costs incurred by
producers and the industries participating in our surveillance program.
For example, costs for transporting an animal or carcass to the
collection site from a farm or slaughter establishment may be
reimbursed, or disposal expenses for ``suspect'' cattle that test non-
negative or that cannot be rendered may also be covered.
national animal identification database
Question. The USDA announced the immediate implementation of a
National Animal Identification program. The pilot for this system has
been underway with USDA for more than a year and a half to ensure
uniformity, consistency and efficiency across this national system.
Will this be a mandatory or voluntary system? If it is not
mandatory could it satisfy requirements for international trade in beef
and cattle?
Answer. At the present time, participation with a national animal
identification program would be on a voluntary basis while the USDA
moves forward with the beginning stages of implementation. As the USDA
learns more during the implementation of the system, USDA would likely
move into rule-making.
Implementing a national identification system that records animal
movements will enable APHIS officials to complete the tracing of
animals potentially exposed to a disease as timely as possible.
Demonstrating our ability to contain and control the disease will
provide the scientific data to document appropriate trade status
issues. The animal tracking system will play a critical role in
maintaining and/or restoring our export markets for U.S. livestock and
animal products during and after an animal disease outbreak.
Question. What considerations for maintaining the privacy of this
information in a national animal identification database are being
made?
Answer. The USDA recognizes that producers are concerned about the
confidentiality of the national system. USDA is not seeking marketing
or production information, but only information that would help us
track animals for disease purposes. We are examining all applicable
laws and regulations, as well as the potential need for additional
legislative authority, in our efforts to address this issue.
Question. In 2002 many states, including California, suffered
outbreaks of low-pathogenic avian influenza. USDA indemnified poultry
producers in each of the affected states, except for California. In
Virginia, West Virginia and North Carolina, USDA provided over $50
million for indemnification. Despite inclusion of Report language
directing USDA to indemnify California, Nicolas Turkey Breeders in
Sonoma, California remains the only poultry operator omitted from this
program.
I would like to know what steps are you taking to rectify this
situation?
Answer. In 2002, when positive cases of Low Pathogen Avian
Influenza had been found in New York; New Jersey, Texas, Maine,
Michigan, and California; State authorities had taken the
responsibility of controlling and eliminating the disease with no
assistance provided from Federal authorities. In the case of Virginia,
West Virginia, and North Carolina, LPAI was spreading at a rate that
State officials could not control. At the request of the State of
Virginia the USDA stepped in to provide assistance with depopulation,
indemnities, cleaning and disinfection of premises; disposal of
carcasses; epidemiology support; data management; and information
dissemination. The California outbreak was relatively isolated and the
State officials were able to control further spread. As a result, USDA
does not intend to indemnify Nicolas Turkey Breeders for their turkey
breeder flock.
______
Questions Submitted by Senator Richard J. Durbin
single food safety agency
Question. Currently, Federal oversight for food safety is
fragmented with at least 12 different Federal agencies and 35 different
laws governing food safety. There are also dozens of House and Senate
subcommittees with food safety oversight. With overlapping
jurisdictions and scattered responsibilities, Federal agencies often
lack accountability on food safety-related issues and resources are not
properly allocated to ensure the public health is protected. Our
Federal food safety statutes also need to be modernized to more
effectively ensure that food safety hazards are minimized.
President Bush and Secretary Ridge have both publicly discussed the
concept of combining Federal food safety responsibilities into a single
agency. In the past, USDA has stated its opposition for such a move.
Assuming USDA's position has not changed, what do you see as the
disadvantages of combining the Federal food safety agencies into a
single agency? Are there any advantages?
Answer. Over the years, there has been much discussion about
consolidating all food safety, inspection, and labeling functions into
one agency in an effort to increase the effectiveness of the food
safety system. In 2002, the White House established a Policy
Coordinating Committee (PCC), led by the Domestic Policy Council and
the National Economic Council, to look into the single food agency
issue. The PCC concluded that the goals of the Administration are
better advanced through enhanced interagency coordination rather than
through an effort to create a single food agency.
USDA routinely communicates and coordinates with other government
entities to ensure a safe and secure food supply. With authority over
meat, poultry, and egg products, USDA's FSIS plays an integral role in
ensuring the safety of America's food supply. As a partner in the U.S.
food safety effort, FSIS strives to maintain a strong working
relationship with its sister public health agencies. Cooperation,
communication, and coordination are absolutely essential to effectively
address public health issues.
The present statutory framework recognizes distinctions associated
with the relative risks and hazards of foods and the food safety and
food security issues that bear on public health. USDA's mission is to
provide leadership on food, agriculture, and natural resources based on
sound public policy, the best available science, and efficient
management. Within USDA, the nearly 10,000 employees of the FSIS
dedicate their careers and lives to protecting public health. USDA
inspectors are in plants every day enforcing our nation's food safety
laws. The statutes that are administered are clear and demand
unwavering attention to ensuring that consumers continue to enjoy the
safest and most abundant food supply in the world. It is this focused
attention to food safety, food security, and public health that is best
supported by the current organizational placement of the USDA food
safety mission.
FSIS bases its policy decision on science, so the single food
agency discussion boils down to one
Question. will there be a measurable benefit to public health? In
other words, would such an effort save lives and reduce foodborne
illness rates? As with any new food safety and security effort, we must
make sure that we maintain and continue improving on any progress that
has been made to improve public health. It is important to make sure
that any disruption to the current food safety system effectively
improves food safety and public health. USDA looks forward to working
with Congress to examine these issues and to continue to keep the
nation's food supply safe and secure and strengthen public health.
Question. We have recently witnessed the consolidation and creation
of the Department of Homeland Security. Do you believe the creation of
DHS could serve as a model for the creation of a single food safety
agency?
Answer. The outcome of the policy discussion concerning a single
food safety agency may be addressed in answering one key
Question. Will there be a measurable benefit to public health? We
must assure that any disruption to the current food safety system
effectively improves food safety and public health. Additionally, the
costs associated with any major overhaul to the U.S. food safety system
must be considered. It is important to determine what the financial and
human costs associated with a single food safety agency might be and to
determine if this cost will best leverage funding for food safety.
Question. Secretary Veneman, I believe you have been noted as
saying that the statutes governing meat inspection ``pre-date the Model
T'' and have implied that these statutes need to be modernized. I agree
with you. Please identify what efforts you have made in the past year
to accomplish this goal.
Answer. During the past year, we have taken a hard look at our
statutory authorities, and have held meetings with consumer and
industry groups to ensure that we received the input of a variety of
sources. Our efforts culminated in the development of ``Enhancing
Public Health: Strategies for the Future,'' the Food Safety and
Inspection Service's (FSIS') 2003 Vision Paper, which was published in
July 2003. In outlining the Department's food safety vision, steps have
been identified that must be taken before consideration of changes to
our statutory authorities.
soybean rust
Question. I am very concerned about the risk of importing Asian
soybean rust into the continental United States. This could be a
potentially devastating situation to our soybean crop and impose heavy
economic burden on American farmers and consumers. I noticed this
particular disease was not mentioned in your statement regarding APHIS'
plan to deal with intentional and unintentional disease.
I understand various pathways of entry for rust spores have been
suggested which range from natural wind current to human or maritime
transport. I am particularly concerned about the movement of soybeans
and soybean meal through import channels. Soybean and soybean material
produced in soybean rust-infected areas have the potential to carry
viable spores when they are transported. I understand the potential
viability of soybean rust spores can be eliminated if the soybean
material is processed, heat-treated and handled properly.
I, along with a number of my colleagues, wrote your office (a month
ago) stating our concern on allowing imports from diseased areas until
APHIS completes its risk assessment and has a plan in place to ensure
we do no inadvertently import this devastating fungus. I would
appreciate a response to these concerns. In addition, I would like to
hear what the agency is doing to prevent the importation of soybean
rust.
Answer. Our response to your concerns about this disease was sent
on March 25, 2004. As we indicated in the letter, APHIS officials are
looking closely at our country's importation of soybean seed, meal, and
grain. Our analysis to date has shown that clean soybean seed and
soybean meal--which is a heat-treated, processed product--pose only
minimal, if any, risk of introducing this disease.
APHIS officials conducted site visits to soybean grain elevators in
New Orleans on January 7, 2004, and to grain elevators and processing
facilities in Brazil from February 10-12, 2004, to examine how the
storage, loading, and shipping of export-quality soybeans are handled
in the two countries. APHIS officials have determined that soybean leaf
debris associated with the ``foreign material'' found in soybean grain
shipments could present a potential pathway for the introduction of
soybean rust. However, foreign material in soybean grain shipments
typically amounts to less than 2 percent of the shipment. Moreover, as
it is normal commercial practice to harvest soybeans after the plants
have been defoliated, leaf debris should compose only a very minute
part, if any, of the foreign material. Therefore, the foreign material
found in soybean grain is an unlikely pathway for the introduction of
soybean rust.
APHIS has developed a strategic plan to minimize the impact of the
introduction and establishment of soybean rust in the United States.
The strategic plan describes our four-pronged approach to the disease,
focusing on protection, detection, response, and recovery. We developed
the plan in cooperation with our State cooperators, other USDA
agencies, and industry representatives.
Our protection efforts focus on preventing the human-assisted entry
of soybean rust through the collection of off-shore pest information, a
pathway pest risk assessment currently underway, and commodity entry
standards. In this regard, Customs and Border Protection officials are
inspecting imported shipments of soybeans to make sure that they meet
our entry standards and notifying APHIS of these incoming shipments.
We are currently conducting the risk assessment to evaluate the
levels of risk involved with soybean imports and to develop mitigation
measures to reduce any such risks. We have completed the first step in
this process, a review of available scientific evidence on the risk of
soybean rust's entry, and posted the document on APHIS' Web site. The
collection of off-shore information from trading partners and APHIS
personnel overseas is helping us to understand possible reservoirs and
routes for infection and will enhance our detection, response, and
recovery efforts.
Our goal for the detection, response, and recovery aspects of the
strategic plan is to ensure that a wide variety of stakeholders,
including growers, crop consultants, State officials, extension agents,
and many others can recognize the disease and know how to report
possible introductions. We are monitoring sentinel soybean fields in
eastern seaboard and southeastern States, the areas where we believe
the disease would most likely enter the country, for the presence of
soybean rust and have also begun training stakeholders in detection,
identification, and disease management. We are also supporting the
development of forecasting methods that would help predict where the
disease would spread once it arrived in the United States.
APHIS has established a Soybean Rust Detection Assessment Team, a
rapid response team composed of scientific experts and State and
regulatory officials. Team members met in January 2004 to plan specific
emergency actions that would be immediately activated in response to a
detection of soybean rust. Most recently, USDA officials participated
in a soybean rust conference that was cooperatively organized by USDA,
five pesticide companies, and the American Soybean Association. The
primary goal of the conference was to disseminate to soybean farmers
the knowledge, information, and techniques they will need to manage
this pathogen when it reaches in the continental United States.
childhood obesity
Question. To address this issue, many schools have explored
creative approaches to promote healthy eating, and some of those
approaches have been successful.
These include efforts to: integrate nutrition education into the
school curriculum; experiment with food packaging; and expose students
to different fruits and vegetables.
Efforts in some states are promising, and a number of schools have
reported increased vegetable consumption and student acceptance of
other healthier food choices.
Unfortunately, such efforts remain limited and are often
compromised by budget pressures. Recognizing this, on February 5, 2004,
I sent a letter to your office, expressing my desire to work with you
and your department to establish demonstration projects in several
Illinois school districts to identify effective strategies to increase
student acceptance of healthy foods.
My staff has been in contact with your office in efforts to obtain
a response to this letter. I would like to know if it is going to be
possible to establish these demonstration projects. What new programs
does the USDA plan to initiate to combat this growing threat of
childhood obesity?
Answer. I asked Undersecretary Bost to respond to your letter,
which I understand he did on March 15. USDA's Team Nutrition
administers a competitive grant program that assist States on
initiatives that promote the nutritional health of the Nation's
children. Team Nutrition has worked with the State of Illinois in the
administration of the seven grants awarded to the State over the past 9
years totaling $1.2 million. The Department is preparing to review new
proposals for the fiscal year 2004 Team Nutrition grant program. These
proposals could include mini-grants for funding school districts
interested in developing innovative programs to promote healthy eating
choices.
In addition, the Food and Nutrition Service has joined the working
group you have launched to deal with childhood obesity; I understand
they will begin to meet in the very near future to discuss the group's
goals and potential opportunities to address this important issue.
USDA did receive funds in fiscal year 2004 to pursue a number of
initiatives, and has proposed additional ones for fiscal year 2005 to
address obesity and promote healthy weight. With this additional
funding, the Department is developing new interventions in WIC to
promote healthy eating for infants and children--efforts that will help
our youngest participants develop healthy habits for the long term.
USDA received $14.9 million in its fiscal year 2004 appropriation to
enhance WIC breastfeeding promotion through peer counseling. The use of
peer counselors has proven effective in increasing initiation and
duration of breastfeeding--the feeding practice best suited to giving
most babies a healthy start. USDA also received $4 million in fiscal
year 2004 to initiate WIC Childhood Obesity Prevention Projects, which
build on the success of the Fit WIC to work in partnership with States
on innovative strategies to use WIC to prevent and reduce childhood
obesity. Ongoing funding for these initiatives is critical to ensuring
continuous improvement; and a $5 million increase has been requested
for each initiative in fiscal year 2005. In fiscal year 2004, $2
million in WIC Special Project grant funding is being used to promote
consumption of fruits and vegetables.
In addition, $2.5 million was requested in fiscal year 2005 to
expand the Eat Smart. Play Hard.? campaign and establish a cross-
program nutrition framework to help ensure a comprehensive, integrated
approach to nutrition education in all nutrition assistance programs.
The Department has efforts underway in other programs as well.
USDA, as part of the Department's Strategic Goal 4: ``Improve the
Nation's Nutrition and Health,'' established a specific performance
measure to reduce overweight and obesity among Americans. As a partner
with the U.S. Department of Health and Human Services and other public
and private sector stakeholders, USDA will take actions to encourage a
reduction in overweight and obesity such that adult obesity will be not
greater than 20 percent by 2010 (it is currently 30 percent), and child
and adolescent overweight will be no greater than 8 percent (when last
measured 15 percent of the Nation's children ages 6 to 19 years of age
were overweight). The efforts underway in all the Federal nutrition
assistance programs promote proper nutrition and healthy weight.
However, to help ensure progress on this performance measure, the
Department is reshaping nutrition education in the Food Stamp Program
to target activities that promote healthy weight; exploring new ways to
support healthy weight through the WIC Program; and promoting increased
fruit and vegetable intake through partnership with other Federal
agencies and the National 5-A-Day Program.
bovine spongiform encephalopathy (bse)
Question. We still don't have a firm grasp of the prevalence of BSE
in the nation's cattle herd. The USDA announcement on March 15th
proposed an expansion of BSE testing to include over 200,000 cattle
from the ``high risk'' group and 20,000 from clinically normal older
cattle.
Sampling approximately half of the high-risk group of cattle
provides meaningful statistics on the prevalence of BSE in the sub-
population of cattle. However, 20,000 samples from an estimated
population of 1 million older, clinically normal cows is not enough to
validate disease prevalence for a population of that size.
There are millions of cattle, mostly aged dairy cows, that are
older than the FDA ruminant feed restrictions of August 1997. Many of
these cows received potentially contaminated meat and bone meal, much
of it imported from the EU, well into 1998. It is this sub-population
of cattle that must be tested for BSE as they are processed into the
human food supply.
However, questions remain as to how the USDA can gain access to
enough samples to meet the proposed number of cattle tested for BSE.
I have sent you two letters which have yet to be addressed. I would
appreciate a response to these letters and specifically these
questions:
You stated you did not know the ambulatory status of the Washington
state Holstein cow that tested positive for BSE. I understand an
investigation by the OIG has been opened. If it turns out the only
animal that has tested positive for BSE in the United States was
clinically normal and was found only through chance, then we must
question the USDA's BSE surveillance program that focuses only on
suspects, non-ambulatory and dead cattle.
Answer. Prior to the passage of FDA ruminant feed restrictions in
1997; USDA prohibited the import of ruminant-origin meat and bone meal
from countries known to be affected by BSE beginning in 1989, and in
1997 we prohibited the importation of ruminant-origin meat and bone
meal from all of Europe. This was done to minimize the likelihood of
aged dairy cattle in the United States being exposed to potentially
contaminated meat and bone meal. Even more importantly, the United
States has traditionally been a net exporter of rendered protein
products. Our records simply do not show that there were significant
imports of meat and bone meal from Europe for incorporation into
livestock feed even when our regulations permitted such products to be
imported.
In addition, USDA has maintained an aggressive surveillance program
since 1990. This surveillance has been targeted at the population where
we are most likely to find the disease if it is present--adult animals
that have some type of clinical signs that could be consistent with
BSE. The index cow in Washington State fit in our targeted population,
as she was not clinically normal. According to Agency records, when the
index cow arrived at the plant, a Food Safety Inspection Service
veterinarian conducted a clinical assessment and classified her as non-
ambulatory disabled. The Department stands behind that assessment.
USDA continues to target its BSE surveillance efforts on cattle
populations at the highest risk of having BSE. Specifically,
surveillance has been targeted at cattle exhibiting signs of neurologic
disease; condemned at slaughter for neurologic reasons; testing
negative for rabies and submitted to public health laboratories and
teaching hospitals; and appearing non-ambulatory (including those
exhibiting general weakness severe enough to make it difficult but not
impossible to stand), also known as ``downer cattle.'' We also target
cattle that die on the farm for unexplained reasons.
USDA's testing regime for BSE will follow our prescribed plan
regardless of whether the afflicted animal in Washington State was a
downer cow. There is a very important distinction to be made between
``ambulatory'' cattle and ``apparently healthy'' cattle. An animal may
be ambulatory but have other signs of disease that make it an
appropriate animal to test. In addition, non-ambulatory cattle may be
completely and entirely unable to walk, or intermittently so. It is not
uncommon for a downer cow to be ``down'' then ``up'' several times over
the course of the journey from farm to slaughter. Weak animals--either
with a specific weakness, such as in their hind legs, or a general
weakness--may be considered non-ambulatory for surveillance purposes
because they cannot stand or walk completely normally. All evidence to
date indicates that the animal in Washington State was selected
appropriately for our targeted surveillance.
As we recently announced, we plan to test as many cattle in the
targeted high-risk population as possible in a 12-month to 18-month
period and then evaluate future actions based on the results of this
effort. The plan also incorporates a small random sampling of
apparently normal aged animals at slaughter.
The international standard setting organization--the World
Organization for Animal Health--recognizes that focusing all BSE
surveillance efforts on testing apparently healthy animals is the most
inefficient and ineffective method of actually finding disease.
In addition, no matter what the prevalence of the disease in the
United States, there is a series of firewalls in place that
dramatically reduce any possible risk to consumers. These safeguards
include the ban on all parts of animals from high-risk populations from
the food supply, along with potentially infective tissues--specified
risk materials--from all cattle over 30 months of age.
Question. If states are not allowed to do their own testing, then
how does the USDA plan a ``robust'' expansion of its BSE testing from
20,000 in 2003 to over 200,000 during the next 12-18 months?
Answer. Throughout the history of our surveillance program, USDA
has worked to obtain samples from the targeted animal population,
wherever these samples may be located. In order to obtain the samples,
USDA-APHIS has worked with facilities other than federally inspected
slaughter establishments as part of BSE surveillance efforts. These
facilities included renderers, salvage slaughter facilities (i.e., not
slaughtered for human consumption), and other animal disposal
industries.
Under our new surveillance program, we will build on these efforts
to ensure that we maintain access to our targeted surveillance
population. We will also be reinforcing our educational and outreach
efforts to producers, so they will know who to contact about testing
dead or downer animals on the farm.
USDA-APHIS-Veterinary Services' officials across the country will
work closely with their State counterparts to build on existing
relationships at these locations so that we can obtain the necessary
samples. Payment for services will help cover additional costs incurred
by producers and the industries participating in our surveillance
program. Historically, all BSE testing in the United States has been
performed exclusively at the National Veterinary Services Laboratories
(NVSL) in Ames, Iowa. Under the new surveillance program, USDA plans to
use a network of State and Federal veterinary diagnostic laboratories
to conduct BSE surveillance tests. Confirmatory BSE testing will still
be conducted at NVSL.
Question. If state veterinary diagnostic laboratories or private
companies meet or exceed the USDA standards for BSE test quality
control and sample chain of custody, then why should states and private
companies not be allowed to test animals for BSE within their states?
Answer. USDA's targeted surveillance program is designed to
identify the presence of BSE in the U.S. cattle population if it
exists. Under our current surveillance plan, using APHIS' National
Veterinary Services Laboratories and participating Animal Health
Network laboratories, we can assure trading partners of the program's
scientific legitimacy. We may not be able to make the same case to the
international community if industry dictates the parameters of the
testing program. Further, the use of a rapid test would imply a
consumer safety aspect that is not scientifically warranted. Also,
because USDA will be restricting BSE testing to public laboratories, we
can ensure that our testing remains transparent but does not cause
undue public concern if a rapid test produces a false positive
reaction.
Question. Given the limited access to suspect and non-ambulatory
cattle, how many cows have been tested for BSE since January 1st of
2004?
Answer. Between January 1, 2004 and March 31, 2004, approximately
5,500 cattle were tested for BSE. USDA anticipates the number of cattle
tested per month to increase substantially once the enhanced
surveillance plan is fully implemented on June 1, 2004.
Question. Since there are no incentives for producers to submit
non-ambulatory or sick animals for BSE testing, how can the USDA expect
to test over 200,000 of these ``high risk'' animals during the next 12
to 18 months?
Answer. Throughout the history of our surveillance program, USDA
has worked to obtain samples from the targeted animal population,
wherever these samples may be located. In order to obtain the samples,
USDA-APHIS has worked with facilities other than federally inspected
slaughter establishments as part of BSE surveillance efforts. These
facilities included renderers, salvage slaughter facilities (i.e., not
slaughtered for human consumption), and other animal disposal
industries.
Under our new surveillance program, we will build on these efforts
to ensure that we maintain access to our targeted surveillance
population. We will also be reinforcing our educational and outreach
efforts to producers, so they will know who to contact about testing
dead or downer animals on the farm.
USDA-APHIS-Veterinary Services' officials across the country will
work closely with their State counterparts to build on existing
relationships at these locations so that we can obtain the necessary
samples.
Payment for services will help cover additional costs incurred by
producers and the industries participating in our surveillance program.
For example, costs for transporting an animal or carcass to the
collection site from a farm or slaughter establishment may be
reimbursed, or disposal expenses for ``suspect'' cattle that test non-
negative or that cannot be rendered may also be covered. Other expenses
may also be addressed in the program.
Question. How will the $70 million earmarked for expanded BSE
surveillance be distributed among costs for tests, laboratory
expansion, certification and manpower needs, sample collection and
shipping, education, communications and incentives for collection of
samples?
Answer. We estimate that the full cost of the enhanced surveillance
program will be approximately $76.4 million. However, USDA was able to
offset some of these costs by directing funds from previous Commodity
Credit Corporation transfers towards this 12- to 18-month effort.
Of the total need identified, USDA anticipates spending the funds
as follows:
[In thousands of dollars]
------------------------------------------------------------------------
Program Component Cost
------------------------------------------------------------------------
Personnel and Benefits (Includes investigators, 9,078
laboratory inspectors and manager, pathologists,
program analysts, sample collectors in the field, staff
veterinarians, etc.)...................................
Travel (includes trips for meetings, training sessions, 1,445
outreach)..............................................
Transportation (Includes shipment of samples for testing 19,013
and the transportation of animals, animal parts,
carcasses, etc. for sampling and/or disposal)..........
Rent, Communication, Utilities (Includes offsite 400
collection/storage facilities).........................
Other Services (Includes agreements with contract labs, 36,994
laboratory training set-up, costs associated with
carcass/offal storage until test results confirmed,
disposal of non-negative and certain other carcasses,
database costs, printing, and indirect costs, etc.)....
Supplies and Materials (Includes shipping supplies-- 4,400
cooler box, centrifuge tubes, etc.; test kits).........
Equipment (Includes robotics and other equipment for 5,059
cooperating labs, additional equipment for NVSL and
Center for Vet Biologics)..............................
---------------
Total............................................. 76,389
------------------------------------------------------------------------
______
Questions Submitted by Senator Tim Johnson
country of origin labeling
Question. I have the February 10th response from Bill Hawks, Under
Secretary for Marketing and Regulatory Programs, to my December 2003
letter. I ask you, Secretary Veneman, for a more substantial response
to my initial question. How are you interpreting the 2-year delay on
COOL, and will the delay apply to the rulemaking process?
Answer. The Omnibus Bill delayed the implementation of mandatory
COOL for all covered commodities except wild and farm-raised fish and
shellfish until September 30, 2006. Accordingly, USDA is precluded by
law from immediately implementing a mandatory COOL program for all
commodities. Currently, we are reviewing the comments received on the
proposed regulations and will continue to implement COOL as mandated by
the 2002 Farm Bill and the Omnibus Bill.
Question. Secretary Veneman, with respect to the feasibility of
country of origin labeling, have you and your department reviewed the
GAO report that Senator Daschle and I requested?
Answer. Yes, my staff and I have reviewed the report.
Question. Has the United States Department of Agriculture reviewed
the multiple assertions on the part of GAO that deem country of origin
labeling to be entirely feasible and much more cost effective than your
department originally contended?
Answer. Yes, we have reviewed the GAO assertions. The GAO report
recognizes that the existing Federal, State, and foreign country
programs that were suggested for use as models in implementing
mandatory COOL will not be particularly useful for meat, fish, and
shellfish due to the law's unique definitions of a U.S. product. The
preliminary recordkeeping burden estimate that AMS published in
conjunction with the voluntary country of origin program, which served
as the basis for GAO's report, was $1.9 billion. While the report
questions the assumptions used by AMS in formulating this estimate, it
also recognizes that this estimate did not include the costs of
segregating and storing foods and for labeling products.
developing the animal identification program
Question. How do you intend to develop the animal identification
program, and what parties will you include in the process? Will
producers and scientists be adequately represented and consulted?
Answer. Implementation of a national animal identification system
will begin through cooperative agreements to assist state and other
entities to develop the capacity to interface with the national
repositories. Federal funds would not be earmarked for hardware such as
identification tags or electronic readers. Cooperators would decide to
develop the interface and solicit producer and non-producer
participation into the system. USDA expects that the funding level
would start at the highest levels in Phases I and II as cooperators and
species are added but then decline into a steady state maintenance
level over time. USDA does not envision the Federal funding being used
for hardware purchases in the long term, except for maintenance and
additional development of the national allocators and repositories.
USDA also expects that competition among vendors for adoption of their
technologies by producers would result in private technology vendors
also making investments in the system infrastructure to position their
technologies.
A major factor contributing to the success of this program will be
state participation and communication with and educating producers and
other stakeholders as to the operation of the program and their
responsibilities. Some states have started activities that mirror, to
various degrees, the identification of premises and animals. Many of
these activities are supported by USDA funds. Cooperative agreements
would support the interface of these systems with the National Animal
Identification System. Some agreements with early cooperators would be
established early in Phase I. USDA recommends that additional
agreements with a broad range of cooperators be established later in
Phase I and into Phase II.
The decision process for these recommendations included a group
effort of USDA's BSE response coordinator, the Deputy Under Secretary
for Farm and Foreign Agricultural Services; USDA General Counsel; and
USDA Chief Economist assisting the Chief Information Officer in
developing a plan and strategy to implement a National Animal
Identification System. The group relied heavily on the excellent
information developed as part of the U.S. Animal Identification Plan
(USAIP), and on the expertise of the USAIP Steering Committee; the
Under Secretary for Marketing and Regulatory Programs; and the
Administrator and staff of the Animal and Plant Health Inspection
Service. The group also met with a broad spectrum of organizations and
companies representing the meat supply system, from production through
retailing. The recommendations of the group reflect the complex
structure of the livestock industry and previous efforts to design and
implement NAIS.
bse testing
Question. Secretary Veneman, a rapid, live test will be
instrumental in reestablishing our trading opportunities in key
markets. How much money would the department need to develop this test,
and have you in fact initiated the process?
Answer. The Agricultural Research Service is conducting research to
develop live animal tests for transmissible spongiform
encephalopathies. ARS has successfully developed such a test for
scrapie in sheep and has contributed to such a test for CWD in farmed
deer using non-brain tissues accessible in live animals. Unlike the
sheep third eyelid and the deer tonsil tests, cow material does not
contain prions at concentrations that can be detected with current
technologies. Using current funding, ARS is enhancing the sensitivity
of current tests to look for prions in blood where they may be present
at very low levels. ARS is also developing novel proteomic approaches
to prion detection. This research will be enhanced by an additional $1
million included in the President's fiscal year 2005 budget which will
support the studies to determine the genetic susceptibility of cattle
to BSE. Such information will be helpful in identifying what peripheral
tissues might be used to detect prions and/or what alternative genetic
markers might be indicative of a cow being infected with BSE-causing
prions.
energy balance of ethanol
Question. Dr. Collins, the United States Department of Agriculture
has conducted extensive analysis on estimating the net energy balance
of corn ethanol. Technological advances in ethanol conversion and
increased efficiency in farm production have produced demonstrated
improvements and a positive net energy balance.
At a time of increasing prices for some inputs and the continued
expansion of ethanol plants and capacity throughout the country, could
you please summarize the USDA's latest conclusions as to the positive
net energy balance of ethanol?
Answer. Although it takes energy to produce ethanol, repeated USDA
research shows a positive net energy balance of corn ethanol. the
energy in ethanol exceeds the amount of energy used to produce it, and
this energy balance has improved over time.
Technological innovations in corn production and ethanol conversion
are important factors in this improvement. Corn yields have improved,
and ethanol plants are rapidly adopting innovations which substantially
reduce the energy required to convert corn into ethanol. Our most
recent estimate of the energy ratio is 1.67, up from 1.22 in 1995. This
indicates that the energy content of ethanol is 67 percent greater than
the energy used to grow, harvest, and transport corn, and to produce
and distribute the ethanol. USDA will be presenting our most recent
study at the Corn Utilization Conference, June 7-9, 2004 in
Indianapolis, Indiana.
Question. Dr. Collins, the Reformulated Gasoline Program (RFG) is a
key contributor toward mitigating ozone problems in some of America's
largest metropolitan areas. The principal oxygenate used in the RFG
Program, MTBE, is linked to underground water contamination and several
states have taken action to phase-out and then ban the use of MTBE as
an oxygenate.
Dr. Collins, as the Congress works to pass a renewable fuel
standard, can you please summarize for the Committee the latest
benefits of using ethanol as an oxygenate under the existing RFG
Program?
Answer. Ethanol contains 35 percent oxygen, and adding oxygen to
fuel results in more complete fuel combustion, thus reducing harmful
tailpipe emissions. Ethanol also displaces the use of toxic gasoline
components such as benzene, a carcinogen. Ethanol is non-toxic, water
soluble, and quickly biodegradable.
According to the National Research Council, blending ethanol in
gasoline reduces carbon monoxide tailpipe emissions. Additionally, RFG,
including ethanol-blended fuels, reduce tailpipe emissions of volatile
organic compounds, which readily form ozone in the atmosphere. Thus,
the use of ethanol can play an important role in smog reduction.
Importantly, where smog is of most concern, gasoline blended with
ethanol must meet the same evaporative emission standard as gasoline
without ethanol. This ensures that these ethanol blends provide further
emissions reductions that limit ozone formation.
Ethanol is produced from grains and other biomass in much the same
way as beverage alcohol. MTBE, on the other hand, is a toxic additive
produced from natural gas and methanol. Exposure to ethanol vapors
coming from ethanol-blended gasoline is very unlikely to have any
adverse health consequences. Because ethanol is naturally present in
blood and the body rapidly eliminates ethanol, exposure to ethanol
vapors is unlikely to be a health hazard.
standard reinsurance agreement
Question. With respect to the Standard Reinsurance Agreement, my
office has heard substantial complaints regarding the Risk Management
Agency's proposed draft.
Where are you in the process of reviewing these complaints, and how
do you propose to change the SRA to ensure it is friendlier to
producers and agents alike?
Answer. RMA reviewed comments from insurance companies and
interested parties to revise the first draft. On Tuesday, March 30, RMA
announced the release of the second SRA proposal. RMA believes that the
second draft demonstrates responsiveness to concerns raised by
companies and interested parties in the first round of negotiations.
______
Questions Submitted by Senator Mary L. Landrieu
national finance center--e-payroll initiative
Question. What, if any, action do you plan to take with respect to
this proposal?
Answer. USDA has worked with the Office of Personnel Management
(OPM) to review and respond to the State of Louisiana's ``e-Government/
e-Payroll Project Initiative.'' OPM's e-Government Initiatives Office
took the lead in working with the Payroll Advisory Council, the Office
of Management and Budget (OMB), the various Federal councils, and
others involved in the e-Payroll initiative to respond to the proposal.
On April 19, 2004, OPM wrote the Honorable Don J. Hutchinson, Secretary
of Louisiana's Department of Economic Development, to share with him
the results of this review. A copy of this memorandum is attached.
[The information follows:]
Office of Personnel Management,
Washington, DC, April 19, 2004.
Hon. Don I. Hutchinson,
Secretary, Department of Economic Development, Baton Rouge, LA.
Dear Secretary Hutchinson: Thank you again for the opportunity to
review your ``e-Government/e-Payroll Project Initiative'' proposal. As
a part of the evaluation process, you permitted our Payroll Advisory
Council (PAC) the opportunity to review the proposal and provide
comments. In February 2004, members of the PAC (that includes
representatives from the Office Personnel Management, the Office of
Management and Budget, 6-Payroll Providers, and Federal Councils)
reviewed the proposal, and I would like to share the results with you.
In general, the PAC determined that the proposal was very well
thought out and contains valuable ideas. However, it does not appear to
meet the needs of the Federal Government at this time and is not in
alignment with the strategic goals of the e-Payroll initiative. For
example, while it discusses including the Department of Agriculture's
National Finance Center (NFC) in some loosely defined development
activities, it merely mentions NFC's partnership with the Department of
Interior, National Business Center (NBC). Additionally, the proposal is
unclear in regard to considerations for the employees at the NBC and
NFC who will be affected by the proposal. The proposal also indicates
that the State of Louisiana and private concerns will provide $200
million for the advancement of the facility. Not stated in the proposal
is what, if any, obligations the Federal Government would have to
reimburse that amount. It is also not evident how the proposed
corporation will interact with OPM, other authority agencies; or
customers. An established process for collaboration with Federal
authority agencies and customers is extremely critical since competing
needs could place significant demands on the provider. The PAC was also
extremely concerned with how the proposed corporation would address key
national security concerns, especially those of the Intelligence
community. Additionally, the PAC was also unclear as to how the
proposal complied with the principles of fair and open competition,
considering that thee-Payroll Providers operate out of several
different States.
The proposal indicates that software development is one of the
first priorities of the corporation. The PAC construed this to mean
that the State does not have a viable product readily available to the
Federal Government. Today, the e-Payroll Providers have independent
systems; replacement of these four systems is targeted for fiscal year
2007. To achieve replacement in fiscal year 2007, e-Payroll and the
Providers are exploring options today by conducting a feasibility study
to assess commercial off-the-shelf (COTS) and Government off-the-shelf
(GOTs) products. Upon completion of this study, it is planned to test
these applications under a structured demonstration lab. Should the
State of Louisiana have a product available in the next several months,
it could be considered for inclusion in the demonstration lab.
Again, thank you for the opportunity to review the proposal. I
would welcome any information that you might provide regarding the
availability of software the State of Louisiana might have for
inclusion in the upcoming demonstration lab.
Sincerely,
Norman Enger,
Director, e-Government Initiatives Office.
Question. Since the activities of the NFC are outside the normal
scope of business of the U.S. Department of Agriculture, in the event
the Department cannot support this cost-effective approach to meeting
the PMA, are you considering the possibility of the transition of the
NFC to a structure or ``ownership'' that will facilitate this proposal?
Answer. As part of the e-Payroll initiative, USDA/NFC in
conjunction with the Department of the Interior's National Business
Center (NBC), its e-Payroll business partner, submitted to OPM in
August 2004, a proposal to combine the Government-wide, cross-servicing
business lines of NFC and NBC into an organization characterized as:
--Commercial-like, Federal corporate entity
--Providing a wide range of services targeted at supporting the
President's e-Government Agenda
--Operational flexibilities defined; i.e., human resource and finance
This proposal is under review by OPM and OMB.
Question. What specific actions can you take from here to make sure
the Louisiana proposal receives the full attention of the Department of
Agriculture?
Answer. OPM's e-Government Initiatives Office has taken the lead in
working with the Payroll Advisory Council, the Office of Management and
Budget (OMB), the various Federal councils, and others involved in the
e-Payroll initiative to respond to the proposal.
Question. If Congress were to direct you, or suggest that you, your
Department and the Department of Interior have authority to move out on
a proposal like Louisiana's, would you support such legislative
authority?
Answer. We would work with OPM and OMB in support of any direction
provided and work with them to implement this direction in line with
the goals and objectives of the President's Management Agenda to
further delivery of cost-effective services to Federal employees and
agencies.
Question. Is specific legislation necessary before you, your
Department and the Department of the Interior proceed with some type of
public/private partnership initiative like that proposed by the State
of Louisiana?
Answer. We believe that specific legislation would be necessary to
charter and authorize the new entity as well as provide the necessary
structure, human resource, and financial flexibilities necessary for
the organization to be successful. OPM has identified the need for
legislation as a primary critical path item if the merged proposal
proceeds.
national finance center--thrift savings plan
Question. Ms. Secretary, as you are aware, the Federal Retirement
Thrift Investment Board (FRTIB) Chairman, Andrew Saul, in his February
20, 2004 letter to you, said the Board is ``giving notice of
termination of software maintenance services and mainframe operations
by NFC'' for the Thrift Savings Plan. It is estimated that this action
could result in the loss of as many as 35 to 40, if not more, of the
highest paying jobs at NFC, and may lead to a subsequent decision by
the ``Thrift'' Board to terminate the NFC's ``case management' of the
TSP which involves another 400 jobs at the NFC. It is my understanding
that according to some preliminary information received thus far from
the ``Thrift'' Board and the NFC, the actions by the ``Thrift'' Board
may not be warranted or justified at this point.
Has your office considered what, if anything, can be done to
reverse this action by the Federal Retirement Thrift Investment Board?
Answer. The decision to purchase service from NFC is under FRTIB's
control. USDA believes strongly that continued use of NFC is still a
cost-effective, sound business decision. We have taken steps to improve
communication between USDA/NFC and FRTIB in an effort to rebuild the
strategic partnership and retain the business. However, we do not know
all of the factors influencing the Board's decision, and therefore do
not know if our actions will influence the outcome.
Question. What have your offices, specifically in DC, done in reply
to the February 20th letter?
Answer. Tom Dorr, Senior Advisor to the Secretary, was appointed to
represent USDA and to meet personally with senior FRTIB officials and
to help clarify and resolve the issues. Mr. Dorr, as well as other
executives of OCFO, has been in continuing contact with FRTIB and NFC
since his assignment.
Question. I am concerned that changing the operations of critical
elements of the Thrift Savings Plan operations and functions from the
National Finance Center to ``possible entities'' in Washington, D.C.
may cause even more customer problems and be less cost effective.
Please provide for the record any and all cost comparison studies
or analyses the Department of Agriculture, the Thrift Board, or any
other entities have done regarding ``outsourcing,'' moving,'' or
``changing'' any and all TSP activities versus maintaining them at the
National Finance Center.
Answer. FRTIB has had several studies conducted over the years.
Hewitt Associates prepared an analysis, Defined Contribution
Outsourcing Feasibility Study, for FRTIB in November 1992. Continued
service from NFC was the top ranked alternative under consideration.
The Hewitt Associates experts concluded that keeping the TSP
recordkeeping function at NFC with the existing software and management
structure best met FRTIB's and TSP participant needs at that time.
Logicon 4GT prepared a system review and recommendation report for
FRTIB in 1995. NFC's services were again rated favorably. According to
the consultants in 1995, the benefits that TSP participants received
relative to the costs paid at NFC were excellent. TSP participants were
paying less than one-half of the private sector cost. The industry
standard for comparing mutual/retirement fund administrative expense
ratios between competitors is percent of assets--typically referred to
as basis points. (One percent equals 100 basis points.) At the time of
the Logicon review, NFC's basis points were 7.7 of the 12 total TSP
basis points.
NFC's TSP costs are still low when compared to comparable efforts
in industry. In his opening statement at the March 1, 2004, Senate
Committee on Governmental Affairs, Senator Fitzgerald referenced the
recent expense ratio of TSP and comparable private sector funds. In
2003, the expense ratio of the average TSP fund was 11 basis points.
Per Lipper Services, comparable index funds in the private sector have
an average expense ratio of 63 basis points. Between 1994 and 2003 when
TSP's basis points dropped from 12 to 11, NFC's share of the basis
points decreased from 7.7 to only 4.4, a decrease of 43 percent.
Without the increased cost efficiencies of NFC, total TSP
administrative costs would have been significantly higher than 11
points in 2003.
On March 4, 2004, FRTIB issued a multi-year contract to a private
vendor for a parallel call center. This will result in the eventual
movement of 50 percent of the call center workload from NFC in New
Orleans to the vendor located in the Washington, D.C., metropolitan
area. NFC paired with its e-Payroll partner, Department of the
Interior's National Business Center in Denver, to compete but lost the
bid.
Question. Also, please provide for the record, or to the
Subcommittee staff and our offices all relevant correspondences,
notices, and memos between the Federal Retirement Thrift Investment
Board and any offices in USDA (in Washington or at the National Finance
Center) from January 1999 to today, relating to TSP management and
operations with respect to this issue.
Answer. The information has been provided to the Subcommittee
staff.
national finance center--data mirroring
Question. The fiscal year 2005 USDA budget request provides
$12,850,000 in additional funding for the ``acquisition of disaster
recovery and continuity of operations technology of the National
Finance Center's data.'' This additional funding may be necessary to
complete the effort begun in fiscal year 2003 to fund a back-up, or
data mirroring, center for the NFC. In fiscal year 2003, $12 million
was appropriated for this center, subject to reporting requirements by
Congress.
As it appears that the Budget justification for fiscal year 2005
submitted to the Subcommittee by the Department only provides a four-
sentence explanation with no budget table breakout, please provide for
the record details and a specific breakout of what the $12.85 million
request in fiscal year 2005 includes.
Please provide for the record what has been obligated and or spent
to date from the funds appropriated in fiscal year 2003 and for what
purposes. In addition, please provide any relevant details.
Answer. NFC delivers critical service to the entire Federal
community. Its highest impact business lines are Thrift Savings Plan
recordkeeping for 3.1 million participants and payroll/personnel
support to 122 Federal agencies. Disruption in either of these services
due to a disaster would have wide, significant repercussions across the
nation. NFC has undertaken a multi-year initiative with appropriated
funds to address short-term vulnerabilities and as well as to begin
longer-term actions required to implement a more secure remote
alternate data center at another location.
The initial $12 million was to be used on immediate improvements to
NFC's security and recovery infrastructure and to begin the actions
required to establish the remote computing facilities. The immediate
improvements were estimated at $3.6 million--$0.8 million for
implementation of enhancements to network security and technical
solutions to known network vulnerabilities and $2.8 million for interim
implementation of high availability mirroring through expansion of the
current commercial recovery center contract. The remaining $8.4 million
was to begin implementation of the alternate computing facility.
Details on the projects follow.
--Implementation of enhancements to network security and technical
solutions to known network vulnerabilities: Estimated $800,000
--Access control--no expenditure of appropriation required; will be
achieved through the upgrade of the operating system on May
29, 2004
--Logging and monitoring--$26,977 expended for Blue Lance logging
and monitoring software; installed and fully operational;
$52,000 anticipated for intrusion detection enhancements
and installation/configuration of Tripwire (in the
procurement process)
--Vulnerability management--$284,000 anticipated for vulnerability
scanning and management software (in the procurement
process)
--Remote access--$157,689 expended, $157,787 obligated for Citrix
hardware and software
--Encryption--$26,468 expended for Cisco encryption equipment;
installation in progress
--Authentication--$95,000 anticipated; smart cards, technical
support, and server to support two-factor authentication
(estimated $75,000; in the procurement process); Sygate
Security Portal for remote connection policy enforcement
(estimated $20,000; in the procurement process)
--Implementation of mirroring to provide high availability and
recovery of payroll/personnel data in NFC's reporting center
within 24 hours of a declared disaster: Estimated $2.8 million
--Mirroring solution for payroll/personnel data in NFC's reporting
center--NFC has received the proposals from vendors and is
now in the process of evaluating them.
--Network equipment upgrade at the recovery backup site to support
mirroring solution--$60,000 anticipated; in the procurement
process
NFC initially estimated a one-time investment of approximately
$34.1 million to establish a Federally controlled alternate site within
350 miles of New Orleans that included collocation of business
resumption capability. Final plans depended upon on the availability of
facilities for lease or sublease in the targeted area that have already
been outfitted for data center operations and the availability of
funding. If NFC were able to secure space on an existing Federal
facility that already meets Department of Homeland Security physical
security standards, it could reduce costs below those shown in the
original estimates. NFC is currently pursuing site location and
business continuity options that would enable establishment of an
alternate computing facilities environment that manages the risks
associated with discontinued service. Final cost estimates are pending
receipt of the responses from the Federal community. However, the
remaining $8.4 million of the fiscal year 2003 appropriation and the
$12.85 million proposed for fiscal year 2005 are expected to fund much
of this critical investment.
This one-time capital investment will address the following
critical objectives:
--Undertake actions to reduce enterprise risk and support data
mirroring capability. NFC is currently awaiting responses from
prospective Federal sources to its statement of requirements
seeking excess computing facility space.
--Buy and install hardware and software needed to support the effort,
set up a new tape library system, and design and implement
point-in-time remote backup capability.
--Evaluate emerging backup and recovery options and their associated
costs.
The details of the initial $34.1 million capital investment
estimates are below. These were included in our September 2003 report
to Congress. We will update this budget once we receive feedback from
the prospective Federal site sources.
ONE-TIME CAPITAL INVESTMENT REQUIREMENT/SERVICEBASE COST
------------------------------------------------------------------------
Requirement/Service Base Cost
------------------------------------------------------------------------
Alternate Data Center:
Mainframe hardware/software......................... $2,650,000
Distributed servers hardware/software............... 2,775,000
Storage............................................. 10,550,000
Tape................................................ 3,450,000
Firewalls/Virtual Private Network................... 675,000
Telecommunications/LAN equipment.................... 2,000,000
Build-out cost/furniture for 16,000 sq. ft. data 6,444,000
center space (including 11 employee workstations)..
Design/engineering/project management contractual 2,854,000
services...........................................
---------------
Subtotal.......................................... 31,398,000
===============
Collocation of Business Resumption Capability:
Build-out cost for 52,000 sq. ft. office space...... 1,352,000
Furniture/workstations for 300 employees............ 1,200,000
Design/engineering/project management contractual 135,000
services...........................................
---------------
Subtotal.......................................... 2,687,000
===============
Total............................................. 34,085,000
------------------------------------------------------------------------
Question. As of today, what specific sites are under consideration
for this data mirroring center?
Answer. We are preparing for solicitation from Federal sources. No
specific sites are under consideration at this time.
Question. The fiscal year 2003 Continuing Appropriations Conference
Report section of the Agriculture Appropriations Bill, 108-10, Pages
551-552, included report language directing the Secretary of
Agriculture ``to submit a feasibility study to the Committee on
Appropriations on the need for remote mirroring backup technology of
the National Finance Center's data. This study should include a
breakdown of the costs and time frame associated with acquiring such
technology, and should designate an appropriate physical location for
the site. . . .''
This ``feasibility study'' did not make any specific
recommendations but it did provide a timeline for specific site
determination that included a ``competitive site selection for a
secondary backup data center'' starting in fiscal year 2004. Has this
process begun?
Answer. Site specifications are complete. The next step is
solicitation from Federal agencies, which will occur shortly.
Question. What is the current timeline and plan for this site
selection process?
Answer. We anticipate sending the solicitation package to three
Federal agencies and getting responses by the end of June 2004.
Question. The ``feasibility'' report essentially claims as the key
reason for site selection and criteria for that selection the
elimination of the ``NFC's extreme vulnerability to the hurricanes
common to the Gulf Coast.'' In fact, the report continually sites this
reason as a critical factor.
Please provide for the record the number of times the NFC has been
completely shut down because of hurricane events over the last 20
years. Also, provide for the record the number of times, over the same
time period that the Department of the Interior's National Business
Center, General Service Administrations comparable data center and the
Department of Defense pay and personnel functions have been shut down
for weather related reasons as well as any other factors. This should
also include the Office of Personnel Management operations in
Washington, D.C.
Answer. Over the past 20 years, NFC was shut down on two occasions
due to weather for a total down time of approximately 15 hours. On a
third occasion, operations were limited due to weather conditions
associated with a hurricane. Each of these occurrences took place since
1998. Regarding other agencies and Departments of interest to the
Committee, we learned that the Department of the Interior's National
Business Center reports no complete building shutdowns. We have been
unable to obtain up-to-date information from the other agencies
identified.
______
Questions Submitted by Senator Robert C. Byrd
humane slaughter operations
Question. In fiscal year 2003, $5 million was provided to the Food
Safety and Inspection Service to increase, by 50 full time equivalents,
resources dedicated to enforcement of the Humane Methods of Slaughter
Act (HMSA). The President's request for fiscal year 2005 includes $5
million to continue this purpose.
Please describe how the $5 million appropriated in fiscal year 2003
was allocated, and how the $5 million proposed for fiscal year 2005
will be allocated.
Answer. The fiscal year 2003 Appropriations conference agreement
provided $5 million over 2 years for at least 50 FTE's to enforce the
HMSA. In 2003, FSIS directed the District Veterinary Medical
Specialists (DVMSs) to evaluate the time spent conducting humane
handling verifications. The DVMSs determined that FSIS inspectors and
veterinarians would spend an estimated 130,000 hours conducting ante-
mortem and humane handling inspections, which translates to more than
50 FTEs. Based on the survey data, USDA believes that the requirements
are being met as evidenced by the increased hours of humane slaughter
activities. At the time the funding was provided, FSIS was developing
Humane Activities Tracking (HAT) system to allow the agency to more
accurately capture the time spent on humane handling and slaughter
enforcement activities by FSIS inspection personnel.
In fiscal year 2005, the Administration has requested $5 million
for FSIS to continue the work funded only for fiscal years 2003 and
2004. This includes staffing and benefit costs directly associated with
humane handling and slaughter enforcement activities.
Question. Please explain why you believe the manner you have taken
to meet the additional 50 full time equivalent requirement will provide
more effective HMSA enforcement than by using the appropriation to hire
50 individual inspectors dedicated solely to HMSA enforcement.
Answer. USDA considers humane handling and slaughter a top
priority, and FSIS veterinarians and inspectors are required to enforce
humane handling and slaughter regulations at all of the more than 900
federally inspected establishments. FSIS continues to improve training
and education efforts to ensure that all field personnel understand
their authority, obligation and accountability to rigorously enforce
the Humane Methods of Slaughter Act (HMSA). The fiscal year 2003
Appropriations conference agreement provided $5 million over 2 years
for at least 50 full time equivalents (FTEs) to enforce the HMSA. FSIS
secured at least 50 FTEs dedicated to HMSA enforcement during Calendar
Year 2003. Based on the DVMS survey data, USDA believes that the HMSA
requirements are being met as evidenced by the increased hours of
humane slaughter activities across all federally inspected
establishments. Because of the importance of this top priority to the
entire field workforce, in fiscal year 2005, the Administration has
requested $5 million for FSIS to continue the work funded in fiscal
year 2003 and 2004.
Question. Critics of current HMSA enforcement suggest that unless
FSIS personnel are always present at animal handling and slaughter
sites, there is no way to know if HMSA violations occur. Further, it
has been suggested that plant employees use communication methods to
warn handling and slaughter employees when FSIS personnel are
approaching their work stations and, only then, is stricter compliance
with HSMA requirements pursued by plant employees.
Would you please respond to these criticisms?
Answer. Humane handling activities and food safety systems are both
under on-going regulatory activities as part of FSIS inspection
personnel's everyday responsibilities. FSIS employees use a variety of
methods to determine compliance with the HMSA and do not rely upon a
single mode of evaluation. Some of these methods include standing in
establishments where they cannot be observed, listening to unusual
livestock vocalizations, viewing any changes in carcasses (e.g.,
bruising), communicating with plant employees to ask how they handle
certain situations, and conducting off hours inspections (e.g.,
observing humane handling during off-loading at a plant that receives
animals during the evening hours. The Veterinary Medical Officer (VMO)
is authorized administrative overtime to come back for unscheduled
observation during the evening).
The DVMSs routinely work with the VMOs on the importance of
utilizing different approaches to verifying humane handling
requirements. DVMSs work with FSIS inspection personnel to emphasize
the importance of, and methods of, observing humane handling in
locations where inspection personnel are not readily identified. If
there is not a location to verify animal handling without being
observed, the VMO is instructed to stand in a location to listen for
vocalization by the livestock, or excessive yelling by plant employees.
Both are indicators that plant employees may be using excessive force
to move the animals.
Question. How many plants under the jurisdiction of HMSA have the
capability to allow FSIS personnel to observe undetected plant animal
handling slaughter operations?
Answer. Most of the approximately 300 largest livestock operations
have safe areas with minimal visibility where FSIS personnel can and do
observe plant animal handling and slaughter operations without being
observed by plant employees. In addition, DVMSs and VMOs are authorized
to conduct off hours inspections to observe humane handling during off-
loading at a plant that receives animals during the evening hours.
However, continuous visibility is the most effective method to observe
HMSA compliance in small and very small operations. VMOs are trained to
listen for changes in an animal's behavior and to look for indicators
while observing carcasses. The need to be able to make this type of an
assessment is part of the information provided by the DVMSs and is
included in the new employee training for newly hired veterinarians.
Question. What is USDA doing to increase this capability?
Answer. FSIS inspection personnel have a continuous, on-going,
daily presence in all livestock slaughter operations. The fact that
FSIS personnel are constantly present and observing animal handling and
slaughter procedures for compliance with the HMSA keeps the industry
aware of the regulatory presence. DVMSs work with FSIS inspection
personnel to emphasize the importance of, and methods of, observing
humane handling in locations where inspection personnel are not readily
identified. It is also addressed in the new training developed for
newly hired veterinarians, and is addressed by the mentors provided to
assist newly hired FSIS veterinarians. In addition, DVMSs and VMOs are
authorized to conduct off hours inspections to observe humane handling
during off-loading at a plant that receives animals during the evening
hours.
Question. Would USDA support a requirement to require such a
capability?
Answer. USDA has a continuous regulatory presence through its FSIS
inspection personnel in all livestock slaughter operations under
official inspection. FSIS conducts humane handling and slaughter
verification using a complete array of inspection procedures and
professional judgment to verify compliance with the HMSA. Requiring
FSIS personnel to observe undetected plant animal handling slaughter
operations would likely be a burden on small and very small plants.
Question. Would USDA support a requirement for, as an option, the
installation of a closed-circuit television monitor to allow FSIS
personnel to make these observations from a remote location? If not,
why?
Answer. As the law requires, FSIS inspection personnel, including
veterinarians, are in all federally inspected slaughter plants every
day and every minute that they are in operation. An establishment may
not slaughter without the presence of inspection personnel. Inspection
personnel conduct humane slaughter verification procedures at these
establishments on a daily basis. These procedures include observation
of the establishment's stunning methods.
Cost must also be considered as the installation of a closed-
circuit television monitor could place a burden on small and very small
plants. If USDA were to bear the cost for such a system, substantial
funding would be needed. In addition, maintenance costs would likely be
problematic due to the potential difficulty in maintaining such a
system in a high humidity environment.
USDA does not believe that the addition of cameras would improve
the observation capability of trained inspectors. FSIS veterinarians
are technically trained to observe subtle signs indicative of humane
handling and slaughter methods, which may not be identifiable under
video surveillance. For example, ensuring animals are either dead or at
the level of surgical anesthesia is critical when evaluating stunning
effectiveness. This requires hands-on evaluation of the animal. If
these very subtle signs are missed, animals can return to consciousness
within a few seconds. The presence of FSIS inspectors in a plant is
much more integral to enforcing the HMSA. All in-plant FSIS personnel
are expected to enforce this Act and are held accountable for taking
corrective and/or enforcement actions if it is violated.
Question. Please provide information regarding the fiscal year 2005
cost of integrating the Humane Animal Tracking System within the FAIM
architecture.
Answer. FSIS upgraded its electronic Animal Disposition Reporting
System (eADRS) with the incorporation of HAT in February 2004. HAT will
allow the agency to more accurately capture the time spent on humane
handling and slaughter enforcement activities by FSIS inspection
personnel. Fiscal year 2005 costs will be covered within base funding.
Question. Please provide information regarding the number of FSIS
personnel, in fiscal year 2003, who may have received agency
reprimands, or similar actions, for taking any HMSA regulatory action
against a plant operation which was later found to be inappropriate or
unnecessary.
Answer. All in-plant FSIS personnel are expected to enforce the
HMSA and are held accountable for taking corrective and/or enforcement
actions if it is violated. In fiscal year 2003, FSIS employees did not
take any HMSA regulatory actions that were later found to be
inappropriate or unnecessary. In fact, certificates of recognition have
been provided to FSIS personnel for acting responsibly in certain HMSA
enforcement situations.
Question. Conversely, please provide information regarding
recommendations by FSIS personnel to take an HMSA regulatory action
against a plant operation which was subsequently rejected by an FSIS
supervisor.
Answer. USDA is not aware of any recommendations by FSIS personnel
to take an HMSA regulatory action against a plant operation which was
subsequently rejected by an FSIS supervisor. Because FSIS trains all
in-plant Veterinary Medical Officers (VMOs) and slaughter line
inspectors about humane handling responsibilities, the agency is
confident in their ability to properly enforce the HMSA.
Question. On pages 29 and 30 of GAO report 04-247, dated January
30, 2004, on the subject of the Humane Methods of Slaughter Act, six
specific recommendations are listed for you to further strengthen HMSA
regulatory actions.
Please describe steps you have taken to carry out each of these
recommendations.
Answer. USDA places a very high priority on ensuring that animals
produced for food are treated in a humane manner and has taken swift
action in instances where establishments have been found in violation
of the Humane Methods of Slaughter Act (HMSA). FSIS has already
incorporated many of the recommendations made by GAO that will improve
the quality and consistency of our enforcement efforts. Below is FSIS'
action plan in regards to the recommendations.
GAO Recommendation
To provide more quantifiable and informative data on violations of
the HMSA, GAO recommends that the Secretary of Agriculture direct FSIS
to supplement the narrative found in noncompliance reports with more
specific codes that classify the types and causes of humane handling
and slaughter violations.
USDA Response
Noncompliance reports are stored electronically in the Performance
Based Inspection System (PBIS). FSIS will determine whether it is
feasible and appropriate to modify the PBIS to incorporate additional
humane handling violation codes. The current database format contains
detailed narratives from FSIS Noncompliance Records (NRs). These
narratives contain a wealth of information beyond what is provided in a
simple classification code and provide the basis for a thorough
analysis.
In addition, DVMSs are now using procedures and tracking tools to
continually monitor regional trends and anomalies in establishment
compliance. These procedures and tracking tools are currently separate
from PBIS. All noncompliance reports are now being sent to the District
Office where they are reviewed and analyzed by the DVMS.
GAO Recommendation
To ensure that district officials use uniform and consistent
criteria when taking enforcement actions, GAO recommends that the
Secretary of Agriculture direct FSIS to establish additional clear,
specific, and consistent criteria for District Offices to use when
considering whether to take enforcement actions because of repetitive
violations.
USDA Response
FSIS is developing guidance for inspection personnel which will (1)
provide clear, specific, and consistent criteria for the District
Offices when taking enforcement actions because of repetitive
violations, (2) require the clear documentation of the basis for the
decision regarding enforcement actions of repetitive HMSA violations
and (3) provide criteria for determining when inspection personnel
would issue an NR and when immediate suspension is warranted. FSIS
expects to issue a Notice to inspection personnel this summer.
In addition, FSIS Directive 5000.1, ``Enforcement of Regulatory
Requirements in Establishments Subject to HACCP Systems Regulations''
issued on May 21, 2003, and the Food Safety Regulatory Essentials
courses provide guidance and direction to inspection personnel to
ensure consistent use of enforcement actions. These materials emphasize
a thought process rather than fixed criteria for initiating enforcement
action. They pose a series of questions for inspection personnel to
consider when determining whether a second violation is an isolated
incident or a trend of noncompliance is developing.
GAO Recommendation
To ensure that district officials use uniform and consistent
criteria when taking enforcement actions, GAO recommends that the
Secretary of Agriculture direct FSIS to require that District Offices
and inspectors clearly document the basis for their decisions regarding
enforcement actions that are based on repetitive violations.
USDA Response
FSIS is developing guidance for inspection personnel which will (1)
provide clear, specific, and consistent criteria for the District
Offices when taking enforcement actions because of repetitive HMSA
violations, (2) require the clear documentation of the basis for the
decision regarding enforcement actions of repetitive violations and (3)
criteria for determining when inspection personnel would issue an NR
and when immediate suspension is warranted. FSIS expects to issue a
Notice to inspection personnel this summer.
FSIS is using the Administrative Enforcement Report (AER) process
to ensure that the proper case support files and documents are in place
when an enforcement action is taken. A key component of this case file
is documentation generated by the FSIS in-plant employees. Properly
documented NRs and memos of pertinent plant meetings, conversations,
and other documentation are vital, and are important parts of the AER
reporting process.
GAO Recommendation
To ensure that FSIS can make well-informed estimates about the
resources it needs to enforce the HMSA, GAO recommends that the
Secretary of Agriculture direct FSIS to develop a mechanism for
identifying the level of effort that inspectors currently devote to
monitoring humane handling and slaughter activities.
USDA Response
FSIS has developed a new computer database, Humane Activities
Tracking, to provide detailed and current data related to time spent on
specific humane handling and slaughter verification activities by
inspectors. HAT is one component of the Agency's updated electronic
Animal Disposition Reporting System (eADRS) and e-gov initiative. eADRS
will replace the current use of FSIS paper forms to report information
about animals presented for slaughter. FSIS will utilize information
and data from the new tool to determine the adequacy of its resources
for enforcing humane handling and slaughter requirements at the
individual plants.
GAO Recommendation
To ensure that FSIS can make well-informed estimates about the
resources it needs to enforce the HMSA, GAO recommends that the
Secretary of Agriculture direct FSIS to develop criteria for
determining the level of inspection resources that are appropriate on
the basis of plant size, configuration, or history of compliance.
USDA Response
FSIS will use HAT and eADRS to document the number of animals
slaughtered each day and the amount of time spent monitoring various
aspects of humane handling and slaughter requirements. Information
maintained in the eADRS will be regularly examined by FSIS managers to
assist in inspection resource planning.
GAO Recommendation
To ensure that FSIS can make well-informed estimates about the
resources it needs to enforce the HMSA, GAO recommends that the
Secretary of Agriculture direct FSIS to periodically assess whether
that level is sufficient to effectively enforce the Act.
USDA Response
FSIS will use eADRS and HAT to document the number of animals
slaughtered each day and the amount of time spent monitoring various
aspects of humane handling and slaughter requirements. Information
maintained in the eADRS and HAT will be regularly examined by FSIS
managers to assist in inspection resource planning, and to determine if
staffing levels are adequate. Additionally, FSIS will periodically
assess whether the staffing level is sufficient to effectively enforce
the Act.
Question. With funds provided by this Committee in fiscal year
2001, USDA established 17 District Veterinary Medical Specialist (DVMS)
positions dedicated solely to HMSA activities.
Please describe the activities of these DVMS personnel in fiscal
year 2003, how they intend to carry out their responsibilities in
fiscal year 2004, and how they will carry out their responsibilities in
fiscal year 2005, and in particular, describe, if any, activities that
are not related to HMSA enforcement including the percentage of time
spent on non-HMSA enforcement. Specifically, what percentage of their
time is spent in plants subject to HMSA jurisdiction?
Answer. USDA considers humane handling and slaughter a high
priority and is committed to ensuring compliance with the HMSA. In
fiscal year 2003, each DVMS attended training and then conducted
assessments of each livestock facility within their district. The DVMSs
provided leadership for humane handling and slaughter activities by
conducting on-site training for field personnel during their visits.
They disseminated new information to field personnel and coordinated
humane handling and slaughter non-compliance actions for their
District.
The DVMSs also participated in monthly conference calls and in
working groups to assist the agency in humane handling strategies. The
DVMSs have developed the Humane Interactive Knowledge Exchange (HIKE)
tool, which provides humane handling and slaughter scenarios to help
improve the uniform understanding of humane enforcement throughout the
field. The DVMSs participated in the development of the Humane
Activities Tracking system and have developed tools to analyze humane
handling data within their District to ensure that Frontline
Supervisors are informed of any data trends. The DVMSs developed and
utilized established protocols for following up on humane handling
violations. The efforts and recommendations made by the DVMSs have
improved the consistency of humane handling enforcement among all
Districts.
In fiscal year 2004, DVMSs continue strengthening the humane
handling and slaughter enforcement and education of FSIS inspection
personnel. Thus far, in fiscal year 2004, each DVMS continues to
conduct on-site training with field personnel and coordinate humane
handling and slaughter non-compliance actions for their District. The
DVMSs are utilizing HAT to document and capture the time spent by
veterinarians and other FSIS inspection personnel conducting humane
handling and slaughter activities. The DVMSs have provided expert
advice for the development of new Directives and Notices used to inform
inspection personnel of the requirements, verification activities, and
enforcement actions for ensuring that the handling and slaughter of
livestock is humane. The DVMSs have also surveyed field employees on
their knowledge of and training needs for humane handling and slaughter
verification, so that the agency can determine what additional needs it
may have in these areas. The DVMSs continue developing the HIKE
scenarios to help improve the uniform understanding of humane
enforcement throughout the field. The DVMSs also distributed up-to-date
information to industry and FSIS personnel about new FSIS policies and
provided FSIS field employees with information on industry's Humane
Good Management Practices and auditing systems so that they may
encourage industry to not only follow FSIS regulations, but to also
adopt a systems approach to continually improve livestock handling
practices. In fiscal year 2004, the DVMSs also began a strategic
planning process to continually improve their service to the field.
The DVMSs will continue to build on the activities carried out in
2004, expand their ability to analyze trends, improve the tracking of
the time spent by FSIS personnel on humane handling and slaughter
activities, and continually improve the effectiveness of FSIS' humane
handling and slaughter verification activities. All DVMSs focus on
humane handling and slaughter verification and will continue to do so.
During 2004, DVMSs spent approximately 75 percent of their time
conducting in-plant assessments at plants subject to HMSA jurisdiction.
Question. To what extent do DVMS personnel visit locations in
Districts other than their own?
Answer. DVMS personnel visit other Districts on an as needed basis.
Each FSIS District Manager evaluates the needs of the District in order
to effectively utilize DVMSs and ensure that needs are fully met. DVMSs
have also crossed District lines when the Agency must follow-up on
specific concerns that have been brought to the Agency's attention.
Question. Will USDA support assigning additional FSIS personnel to
assist DVMS's in order to increase the frequency of plant visits?
Answer. Currently, the DVMSs enable the Agency to fully ensure
enforcement of the HMSA. However, as the need arises, FSIS will adjust
accordingly. For example, to ensure adequate humane handling
verification in Puerto Rico, FSIS trained a veterinarian in the DVMS
methodology to assist in this remote location.
pasture-raised beef project
Question. The February 2004, edition of Agriculture Research
Solving--Problems for the Growing World, published by the Agricultural
Research Service, contained a story entitled Grass Fed Cattle Follow
the Appalachian Trail. It is a story about a project that I have been
proud to secure funds for over the course of the past few years. It is
doing important research regarding pasture-raised beef.
Now that Mad Cow Disease has reared its ugly head here in the
United States, the markets for pasture-raised beef, naturally grown
without hormones or antibiotics, will continue to grow. That is causing
hope for Appalachia's family farmers who are participating in this
program. The goal of the project is to reduce foreign imports of beef
by increasing the supply of healthy, grass-raised beef from Appalachia.
This sounds like a wise use of the taxpayers dollars that will directly
benefit the family farmers of West Virginia.
With the Department highlighting the benefits of this project, can
you then explain to me why this Administration, and the President, sent
up a budget in February, the very month of the publication of this
magazine, that would cut this program by 81 percent, from $1,625,024 to
$301,312?
Answer. We fully recognize the accomplishments of this project and
its potential benefits to the family farmers of West Virginia. This
project is part of the $169.4 million in unrequested projects
appropriated to ARS between fiscal years 2001 through 2004. These
unrequested projects were proposed for termination in the fiscal year
2005 President's budget to redirect these resources towards the need to
implement higher National priority initiatives, such as obesity
research, food safety, emerging animal and plant diseases, controlling
invasive species in plants and animals, and other research initiatives
critical to advancing this Nation's food and agriculture economy.
Setting priorities requires that these kinds of choices be made.
funding for food safety/animal health inspections and research
Question. In the fiscal year 2002 Supplemental Appropriations Bill,
the Congress provided the President with resources to increase
surveillance, inspections, and research to reduce the likelihood that
diseases, such as Mad Cow Disease, would threaten American consumers.
That bill included $5 million for animal health research, $13 million
for food safety inspections (notably for imported products), and $39
million for enhanced animal health inspection and surveillance
programs. In several instances, these funds were specifically directed
for Mad Cow Disease-related activities.
However, when given the opportunity to make those funds available,
the President refused to designate those needs as an emergency. As a
result, you were deprived of significant resources to fight problems
like Mad Cow Disease. I don't mean to imply that the use of those funds
in fiscal year 2002 would have prevented the recent incident in
Washington State, but it would have contributed toward greater
surveillance and a better understanding of how to identify and control
problems like Mad Cow disease.
On January 6, 2004, I wrote President Bush a letter of admonishment
pointing out that he let slip through his fingers resources which could
have assisted him, and you, and the American people, be better prepared
to meet the challenges that the introduction of a disease, such as Mad
Cow Disease, would pose to this country.
However, I note that the President's fiscal year 2005 budget
request includes increases for what he is calling a Food and
Agriculture Defense Initiative to carry out some of these same
activities that he rejected 3 years earlier. It appears that the
President is more properly trying to play catch up in areas that
Congress tried to initiate before the public's attention was more
brought to focus on these problems and the President began to feel the
political heat. Even if the full Food and Agriculture Defense
Initiative is funded in the fiscal year 2005 appropriations bill, those
resources still will not be available until next fiscal year. Instead
of immediate action, the President is proposing additional delay.
Secretary Veneman, when the President was faced with the choice of
using or rejecting those supplemental funds in 2002, did you make the
case to President Bush that those resources should be utilized? If you
didn't think those funds were needed in 2002, why do you think they are
needed in 2005?
Answer. Each year, the Department submits a budget request based on
program area needs at the time, and the Administration developed a
funding request that it thought was appropriate in view of fiscal
realities. The additional funds Congress added above the request were
deemed not necessary given the timeframe related to the supplemental.
FSIS, in conjunction with other Federal agencies, has conducted
vulnerability assessments along the farm-to-table continuum for
domestic and imported products in order to protect against intentional
or unintentional contamination of the food supply. Based, in part, on
the vulnerability assessments, USDA, the Department of Health and Human
Services and the Department of Homeland Security are working together
to create a comprehensive food and agricultural policy, known as the
food and agriculture defense initiative. The Department's fiscal year
2005 budget request includes funding to support FSIS' components of the
food and agriculture defense initiative--biosurveillance, the Food
Emergency Response Network, data systems to support the Food Emergency
Response Network, enhancing FSIS laboratory capabilities, and follow-up
biosecurity training for front-line staff.
______
Questions Submitted by Senator Daniel K. Inouye
brown tree snake
Question. We understand that USDA-APHIS participated in a cross-cut
budget process for invasive species funding with other departments and
agencies and that brown tree snake was selected to be one of the ten
issues to be focused on for enhanced effort.
What level of new funding has been provided in the fiscal year 2005
budget request to address the urgent needs of Wildlife Services
Operations and Wildlife Services Methods Development efforts dealing
with the brown tree snake on Guam and in the U.S.-affiliated Pacific?
Answer. In the fiscal year 2005 budget request, APHIS had to
address areas that posed the highest levels of risk and potential
losses to American agriculture, such as enhancing efforts to prevent
the introduction of foreign animal diseases and foreign plant pests
from entering the United States; we could not address all identified
needs and as such the fiscal year 2005 budget request does not include
additional funding to address brown tree snakes on Guam.
preclearance inspections in hawaii
Question. While fiscal year 2005 budget request seems to include
funding for direct and interline preclearance inspections in Hawaii,
the specifics are not clear.
Please provide details on the funds requested for fiscal year 2005
for direct and interline preclearance inspections in Hawaii, and
provide a comparison for funds appropriated for fiscal year 2004.
Answer. APHIS conducts pre-departure, agricultural inspections of
passengers and cargo traveling from Hawaii and Puerto Rico to the
mainland United States. To assist Hawaii, we also conduct inspections
of passengers traveling from outlying Hawaiian Islands to the mainland.
Prior to fiscal year 2003, Hawaii funded this service through a
reimbursable agreement for $3 million. In fiscal year 2003, Congress
provided $2 million for the interline inspection program, and Hawaii
paid the remaining $1 million. Congress provided additional funding for
the interline program in fiscal year 2004, bringing the total available
for the program to $2.771 million. APHIS is not requesting funds for
Hawaii interline inspections in fiscal year 2005 and will rely on a
reimbursable agreement with Hawaii to conduct the program.
coqui frog
Question. The coqui frog is an alien invasive pest with no natural
enemies in Hawaii and is now established in many areas throughout the
State of Hawaii. Their presence and population levels are disruptive to
the export of potted flowers and foliage and to the peace and quite of
many communities in the State.
Has APHIS made any estimates of the funds needed to control the
coqui frog in Hawaii? Has APHIS included any funds in its fiscal year
2005 budget request to control coqui frog populations in Hawaii?
Answer. APHIS Wildlife Services (WS) estimates it would take $1.85
million annually to enhance management and methods development efforts
for the control of Caribbean tree frogs in Hawaii. In the fiscal year
2005 budget request, APHIS had to address areas that posed the highest
levels of risk and potential losses to American agriculture, such as
enhancing efforts to prevent the introduction of foreign animal
diseases and foreign plant pests from entering the United States; we
could not address all identified needs and as such the fiscal year 2005
budget request does not include additional funding to control coqui
frogs in Hawaii.
SUBCOMMITTEE RECESS
Senator Bennett. On that happy note, the subcommittee is
recessed.
[Whereupon, at 3:01 p.m., Thursday, March 25, the
subcommittee was recessed, to reconvene to subject to the call
of the Chair.]
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2005
----------
THURSDAY, APRIL 1, 2004
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 1:08 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Robert F. Bennett (chairman)
presiding.
Present: Senators Bennett, Burns, and Kohl.
DEPARTMENT OF AGRICULTURE
STATEMENTS OF:
ERIC M. BOST, UNDER SECRETARY, FOR FOOD NUTRITION AND CONSUMER
SERVICES
WILLIAM T. HAWKS, UNDER SECRETARY FOR MARKETING AND REGULATORY
PROGRAMS
ELSA A. MURANO, UNDER SECRETARY FOR FOOD SAFETY
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT
Senator Bennett. The subcommittee will come to order.
And may I begin by thanking everyone for your willingness
to rearrange your schedule and come at this slightly early hour
and apologize for being a little late. Senator Byrd cast his
17,000th vote today on the floor and we lingered to pay tribute
to him and give him our congratulations.
This is the second hearing to review the fiscal year 2005
budget request. We had Secretary Veneman here last week and we
appreciate how responsive she was on the various topics we
covered. This week we have several of the Under Secretaries at
USDA, as well as the Acting Commissioner of the Food and Drug
Administration.
So we look forward to hearing your testimonies. I am going
to try to keep this fairly quick because I do have an
unavoidable conflict at 2 o'clock and I would like to be
through before then if we can. If we cannot, we can go over
that time but I will be unable to participate in that.
So I have no other further opening statement, other than to
say welcome to all of you. Thank you for your service to the
United States of America, your willingness to interrupt other
careers to render public service.
This is the last time in this administration we will have
the opportunity to offer our thanks for what you do. And it
goes unappreciated and unnoticed too much. So I would like to
be sure on this occasion to do that.
Senator Kohl.
Senator Kohl. I thank you, Mr. Chairman, and we welcome Mr.
Bost, Dr. Murano, Mr. Hawks and Dr. Crawford.
For the sake of time, Mr. Chairman, I will forego my
opening statement but look forward to testimony and to ask
questions.
Thank you, Mr. Chairman.
PREPARED STATEMENT
Senator Bennett. The subcommittee has received a statement
from Senator Durbin which we will insert into the record.
[The statement follows:]
Prepared Statement of Senator Richard J. Durbin
Chairman Bennett, thank you for holding this important hearing
today. I look forward to working with you and my Subcommittee
colleagues on the fiscal year 2005 (fiscal year 2005) Agriculture
budget. Mr. Chairman, I would like to welcome our witnesses Eric Boast,
Under Secretary for Food, Nutrition, Consumer Services, Elsa Murano,
Under Secretary for Food Safety, William Hawks, Under Secretary for
Marketing and Regulatory Programs and Lester Crawford, Acting
Commissioner for Food and Drug Administration.
I'd like to take a few minutes this morning to talk about some very
important issues under USDA's jurisdiction.
An issue of great importance to me is dietary supplements.
Obviously, I was pleased about the ban on ephedra and Dr. McClellan's
commitment to look at citrus autantium, aristolochic acid and usnic
acid: all supplement ingredients I believe are dangerous. I was also
pleased to see FDA take action against anabolic steroids.
I want to see progress toward protecting the public from dangerous
supplements continue. However, I believe several critical changes need
to be made to the Dietary Supplement Safety and Education Act to make
your job easier. First, I believe we need to require that supplement
manufacturers report to the FDA when serious adverse events occur. I'm
not talking about someone getting a little dizzy from taking a
supplement. I'm talking about death, incapacity and hospitalization.
It is absolutely necessary that we know when a product is harming
people. The Office of the Inspector General at HHS estimates that the
FDA receives reports of less than 1 percent of all adverse event
associated with dietary supplements. How can the FDA effectively
protect the public if it doesn't know when a product is causing harm?
The Institute of Medicine's report that came out today supports a
mandatory system of adverse event reporting. It says, ``while
spontaneous adverse event reports have recognized limitations, they
have considerable strength as potential warning signals of problems
requiring attention, making monitoring by the FDA worthwhile''.
The second change I would like to see made to DSHEA is a
requirement to pre-market safety review of supplements containing
stimulants. I don't believe that every natural substance needs to be
subject to pre-market safety testing, but at the very least, DSHEA
should be changed so stimulants are tested before marketed. When a
supplement raises people's blood pressure, increases their metabolism
and constricts their blood vessels, it is only prudent that we test the
product before it is marketed.
Another issue of importance deals with childhood obesity. Under
Secretary Bost, I know that you've been working with my staff to
develop a school-based demonstration project in Illinois to help
students make better food choices while they are at school.
I've been in school cafeterias. I've watched students pass by the
fresh vegetables and go straight for the fries. I've also seen them put
fruit on the tray and then dump the tray after lunch, fruit untouched.
We have to do a better job of helping our young people understand
nutrition and why it matters.
I want to commend you and your staff for your efforts to work with
us to develop some innovative demonstration projects in Illinois
schools to help students make better food choices.
Chairman Bennett and Senator Kohl, thank you again for the
opportunity to talk about these issues and the fiscal year 2005 Budget.
Senator Bennett. Thank you very much. Let us go in the
following order: Mr. Bost, who is the Under Secretary for Food,
Nutrition, and Consumer Services of the USDA; William Hawks who
is the Under Secretary for Marketing and Regulatory Programs;
Elsa Murano, who is the Under Secretary for Food Safety. And
then, with the USDA having been heard from, we will turn to the
Acting Commissioner of the FDA, Dr. Lester Crawford.
Mr. Bost.
STATEMENT OF ERIC M. BOST
Mr. Bost. Good afternoon and thank you very much, Mr.
Chairman. Good afternoon, Senator Kohl.
Thank you for this opportunity to present the
Administration's budget request for fiscal year 2005 for the
Food, Nutrition, and Consumer Services.
You have my written testimony so I will try to be brief.
Since I have been Under Secretary, I have focused my
attention and energy on these priority challenges facing the
nutrition assistance programs: expanding access to programs so
that all eligible persons may participate; addressing the
epidemic of obesity that threatens the health of individual
Americans, our economy and health care system; and improving
the integrity with which our programs are administered at all
levels.
Let me just briefly review some of our accomplishments over
the course of the last 3 years. We have reached substantially
more participants in each of our major programs, 5.8 million
more people in Food Stamps; 1.6 million more children receiving
a free or reduced priced lunch; over 1.4 million more children
receiving a school breakfast; and over 400,000 more women,
infants and children participate in the WIC program each month
since January of 2001.
We have successfully implemented the provisions of the 2002
Farm Bill that met the Administration's goals, including the
important steps of restoring Food Stamp benefits to legal
immigrants and increasing flexibility for the States.
We have also expanded the Electronic Benefits Transfer,
EBT, to all 50 States, the District of Columbia, Puerto Rico
and the Virgin Islands. EBT now delivers over 95 percent of all
food stamp benefits. At some point in time we are going to have
to change the name because there will no longer be any food
stamps.
We reduced food stamp payment errors for the 4th year in a
row, the lowest that it has ever been in the history of the
Food Stamp Program, at 8.26. We also reduced food stamp
trafficking to less than 2.5 cents for each benefit dollar
issued, down by a third since 1996-1998.
We also promoted healthy lifestyles as a top priority
through the President's HealthierUS initiative, working with
public and private partners to promote healthy eating and
physical activity and to foster a healthy school nutrition
environment.
We promoted a healthy way for children and adults across
the program to increase emphasis on nutrition education. We are
currently working in concert with the Department of Health and
Human Services to update the Dietary Guidelines and a revision
of the Food Guide Pyramid.
We achieved a clean financial statement for FNS for the
fifth consecutive year in support of the President's initiative
to improve financial management across the Government.
I am very proud of these accomplishments, however much more
work remains to be done.
In terms of supporting the goals of the President's budget,
the President's budget for fiscal year 2005 requests $50.1
billion in new budget authority.
FOOD STAMP PROGRAM
Food Stamps, at $33.6 billion would serve an average of
24.9 million people each month. The Administration's budget
continues the $3 billion reserve appropriated in fiscal year
2004.
CHILD NUTRITION PROGRAM
In terms of the Child Nutrition Programs, the request of
$11.4 billion supports an increase in school lunch
participation from 28 million children to over 29 million
children. It also supports an increase in school breakfast
participation of over 1 million children from 8 million to 9
million children.
WIC PROGRAM
In our WIC Program, the President's budget proposes $4.8
billion for WIC Program to provide food nutrition, education
and a linkage to health care to a record level monthly average
of 7.86 million needy women and young children. I think this
speaks clearly to the President's commitment to this program.
Additionally, the $125 million contingency reserve fund is
available if there is a need for a increase if participation or
food cost exceeds our projection.
One of the things that I believe is very important that we
are spending a great deal of time on, not only in my area but
across the country, is addressing the overweight and obesity.
Poor dietary choices and sedentary lifestyles are having a
serious impact on the health and well being of this entire
country.
The most recent figures indicate that 62 percent of all
adults in this country are overweight. Estimated health care
costs at $123 billion, and also 400,000 deaths are directly
related to us being overweight.
Senator Bennett. Excuse me. Is that an annual cost of $123
billion?
Mr. Bost. $123 billion, that is correct.
Senator Bennett. Annually?
Mr. Bost. Annually.
Senator Bennett. That would pay for a lot of health care.
Mr. Bost. Yes, but we are eating ourselves to death.
$20 million for breast feeding peer counseling, $2.5
million to expand the successful Eat Smart Play Hard campaign
so we can integrate the nutrition assistance programs to
promote healthy eating and physical activity. $1.65 million is
requested to fund the updated 2005 Dietary Guidelines and the
Food Guide Pyramid. We believe this is very important, given
the fact that Americans are spending on average $33 billion a
year on weight loss products, books and et cetera, to help them
lose weight. We are spending that money even though we are
getting heavier.
NUTRITION PROGRAMS ADMINISTRATION
In addition, the President's request includes an increase
of $7 million in our administrative budget which will be
targeted at improving integrity in the Food Stamp Program,
improving the accuracy of certifications for free and reduced
price school meals and invigorating our oversight, training and
technical assistance activities with our State and local
partners.
As a part of our Nutrition Programs Administration, we are
requesting $152 million, an increase of $14.7 million.
Our total request for Federal administrative resources,
including those activities funded directly from the program
accounts, represents only 0.39 percent of the program resources
for which we are responsible.
prepared statements
In conclusion, the President's direction has been very
clear. The Administration request sets priorities to ensure
access, maintain and improve integrity and supports our efforts
to address the public health threat of overweight and obesity
among all Americans in this country.
Thank you, Mr. Chairman.
[The statements follow:]
Prepared Statement of Eric M. Bost
Thank you Mr. Chairman and members of the subcommittee for this
opportunity to present the Administration's budget request for fiscal
year 2005 for the Food, Nutrition and Consumer Services (FNCS).
During the past 3 years as Under Secretary for the Food, Nutrition
and Consumer Services, I have focused my attention and my energy on
three central challenges facing the Federal nutrition assistance
programs: expanding access to the programs so that all eligible persons
can make informed decisions about whether to participate; addressing
the epidemic of obesity that threatens the health of individual
Americans, and our economy and health care system collectively; and
improving the integrity with which our programs are administered, at
all levels, so that we are the best possible stewards of the public
resources with which we are entrusted.
Let me first review briefly some key accomplishments achieved over
the last 3 years:
--We are reaching substantially more participants in each of our
major programs: 5.8 million more people in food stamps, 1.6
million more children receiving a free or reduced price school
lunch, over 1.4 million more in school breakfast, and over
400,000 more women, infants and children each month in WIC
since January 2001.
--We successfully implemented the provisions of the 2002 Farm Bill
that met the Administration's goals of simplifying policies,
improving access, and ensuring program integrity, including the
important steps of restoring benefits to legal immigrants and
increasing flexibility for the States.
--We expanded electronic benefits transfer (EBT) to all 50 States,
the District of Columbia, Puerto Rico, and the Virgin Islands;
EBT now delivers over 95 percent of all food stamp benefits.
--We have seen food stamp payment errors fall for the 4th year in a
row, reaching the lowest level ever--8.26 percent--in 2002.
--We have reduced food stamp trafficking to less than 2.5 cents of
each benefit dollar issued, down by one-third since 1996-1998.
--We have made healthy lifestyles a top priority through the
President's HealthierUS initiative. We are working with public
and private partners, such as the National 5 to 9 a Day
Partnership, to increase fruit and vegetable consumption and
have developed a soon to be released kit for schools entitled
``Fruits and Vegetables Galore: Helping Kids Eat More.'' We are
also expanding school-based efforts to promote healthy eating,
and to foster a healthy school nutrition environment through
technical assistance, training and nutrition education
materials that help schools assess and improve the school
nutrition environment, including improvements in school meals
and overall food policies.
--We have focused on promoting healthy weight for children and adults
across programs through the Eat Smart. Play Hard.TM
campaign, and within programs through Team Nutrition, the Fit
WIC obesity prevention projects, and efforts to improve Food
Stamp Program nutrition education.
--We are working in concert with the Department of Health and Human
Services to update the Dietary Guidelines for Americans, and we
are revising the Food Guide Pyramid to ensure that each
reflects the most comprehensive, up-to-date science available
in order to provide clear and useful nutrition information to
American consumers.
--We achieved a clean financial statement for FNS for the 5th
consecutive year, in support of the President's management
agenda initiative to improve financial management across
government.
I am proud of these accomplishments, and the hard work that they
represent from USDA staff, from the Congress, and from our State and
local program partners. But much important work remains to be done. I'd
like now to review the budget request and the improvements in
performance and results that it is designed to support.
The President's budget for fiscal year 2005 requests $50.1 billion
in budget authority to continue this critical work. This record request
reflects the Administration's long-standing commitment to protect our
children and low-income households from hunger and the health risks
associated with poor nutrition and physical inactivity through the
Nation's nutrition safety net. The purposes to which we will put this
substantial public commitment are clear: first, we seek to improve the
public's awareness of our programs and ease of access for all eligible
persons, and second, through both the Federal nutrition assistance
programs and the Center for Nutrition Policy and Promotion (CNPP), we
will continue to do our part to address the growing public health
threat that overweight and obesity poses to all Americans. Finally, we
will strive to enhance the efficiency and accuracy with which these
programs are delivered.
ensuring program access
This Administration has demonstrated a long-term commitment to the
Federal nutrition assistance programs and to the Americans whom they
assist. The most fundamental expression of this commitment is making
certain that sufficient resources are provided for these programs so
that all who are eligible and in need have ready access to these
critical benefits. We have delivered to you a budget that funds
anticipated levels of program participation, while acknowledging the
inherent difficulties in making such projections.
For the Food Stamp Program, the budget continues the $3 billion
contingency reserve appropriated in fiscal year 2004 but also offers,
as an alternative, a proposal for indefinite budget authority for
program benefits. This authority would be an efficient way to ensure
that benefits are funded even as economic circumstances change, a goal
we all share. In WIC, the $125 million contingency reserve appropriated
in fiscal year 2003 continues to be available to the program should
participation or food costs exceed the levels anticipated in the
budget. Should this not be sufficient, we are committed to working with
you to ensure that WIC is properly funded.
Adequate program funding, however, is not enough to ensure access
to program services for those who need them. Program structure and
delivery methods must be designed so as not to create the types of
barriers to program participation that can result in their
underutilization. As we move forward with the reauthorization of the
Child Nutrition and WIC Programs, improving program delivery and
ensuring the access of eligible people who wish to participate will
remain fundamental principles.
addressing overweight and obesity
Poor dietary choices and sedentary lifestyles are having a serious
impact on the health and well being of all Americans. Obesity and
overweight are widely recognized as a public health crisis. The costs
of these conditions are enormous--reduced productivity and increased
health care costs estimated at over $123 billion, and, most sadly,
unnecessarily premature deaths for over 300,000 Americans annually. The
Federal nutrition assistance programs can play a critical role in
combating this epidemic by promoting better diets through nutrition
education and promotion. These program services, along with the work of
the Center for Nutrition Policy and Promotion, are an integral part of
the President's HealthierUS initiative, and the budget reflects our
continuing commitment to this effort. It includes $5 million for
ongoing demonstration projects to explore new ways for the WIC program
to reduce and prevent unhealthy weight among our children. We are also
seeking $2.5 million to expand our very successful Eat Smart. Play
Hard.TM campaign, and to develop an integrated, family-
oriented approach to nutrition education that cuts across all of the
Federal nutrition programs and complements efforts in schools and other
program settings to encourage healthy eating and physical activity.
Our request also supports FNCS' CNPP, which works with the
Department of Health and Human Services and other agencies to promote
good nutrition across all segments of the population. The budget
includes resources that are critical to the development and promotion
for the updated 2005 Dietary Guidelines for Americans and the
concurrently revised food guide system, providing essential tools to
communicate the Guidelines in ways that motivate Americans to improve
their eating and physical activity behaviors. The requested funding for
CNPP will enable us to capitalize on the investments we have already
made with a new opportunity to build upon public awareness of basic
nutrition messages with an enhanced food guide system that will target
individual needs.
enhancing program integrity and delivery
With this budget request, we are asking the Nation to entrust us
with over $50 billion of public resources. We are keenly aware of the
immense responsibility this represents. To maintain the public trust,
we must demonstrate our ongoing commitment to be good stewards of the
resources we manage, as an essential part of our mission to help the
vulnerable people these programs are intended to serve.
This is not a new commitment. As I noted earlier, in fiscal year
2002, the most recent year for which data is available, the Food Stamp
Program achieved a record high payment accuracy rate of 91.74 percent.
We have also been working to develop strategies to improve the accuracy
of eligibility determinations in our school meals programs--an issue of
mutual concern to all those that care about these programs. The budget
features dollar and staff year resources which will allow us to
continue to work closely with our State and local partners on both of
these essential integrity initiatives--continuing both our successes in
the Food Stamp Program and our intensified efforts in school meals.
In the WIC program, we are requesting $20 million to continue our
initiative to assist States with the modernization of their information
technology infrastructure. These systems are essential underpinnings
for the improvements in program management, program integrity, and,
most importantly, program delivery that need to be achieved. The
Administration has worked closely with the Office of Management and
Budget (OMB) and the WIC community to fashion a procurement strategy
that will ultimately produce a series of core model WIC systems. States
updating their WIC systems will be able to select from among these
model core systems as starting points for their own implementation,
thus reducing their costs.
In the remainder of my remarks, I'd like to touch on several key
issues:
food stamp program
The President's budget anticipates serving a monthly average of
24.9 million persons in fiscal year 2005, an increase of 1.2 million
over our projections of the current fiscal year. Our $33.6 billion
request supports this level of service. In addition, the budget
continues the $3 billion contingency reserve appropriated in fiscal
year 2004. While the President's budget anticipates continuing
improvement in the Nation's economy, Food Stamp Program participation
traditionally continues to rise for some time after the aggregate
employment begins to improve. Moreover, we have made a concerted effort
over the last 3 years to raise awareness of the benefits of program
participation and encourage those who are eligible, especially working
families, senior citizens, and legal immigrants, to apply. The rate of
participation among those eligible to participate increased 2 years in
a row, after 5 years of declines, reaching 62 percent in September
2001. However, many eligibles remain who could be participating but are
not. We have been aggressive in promoting the message that the Food
Stamp Program Makes America Stronger in the sense that the program puts
healthy food on the tables of low-income families and has a positive
impact on local economies. We have just recently embarked on a media
campaign to carry this message and to reach those who are eligible but
not participating. We have also paid particular attention to those
legal immigrants who have had their eligibility restored by the Farm
Bill by carrying messages on Hispanic radio stations across the
country.
These factors make this a particularly challenging period to
forecast program participation and costs. To ensure the adequacy of
resources available to the program, and as an alternative to the
traditional contingency reserve, we have proposed indefinite authority
for program benefits and payments to States and other non-Federal
entities.
child nutrition programs
The President's budget requests $11.4 billion to support the
service of appealing, nutritious meals to children in public and
private schools and child care facilities through the Child Nutrition
Programs in fiscal year 2005. In the National School Lunch Program, we
anticipate serving over 29 million children per day in fiscal year
2005. Similarly, the School Breakfast Program will serve approximately
9 million children each school day. The request for budget authority is
a slight decrease from levels appropriated in fiscal year 2004. This is
because the rate of program growth in fiscal year 2004, to date, has
been slightly less than anticipated. As a result, the anticipated
carry-over resources, in conjunction with the budget request, will
fully fund the projected level of program activity.
Several components of the Child Nutrition Programs expire at the
end of March. We urge the Congress to move quickly to extend these
provisions before they expire to ensure that all aspects of the Child
Nutrition Programs continue to operate without interruption. We also
want to work with the Congress to reauthorize and improve the entire
range of Child Nutrition Programs, consistent with the principles
outlined last year. These principles include ensuring that all eligible
children have access to program benefits as well as streamlining the
administration of programs to minimize burdens, supporting healthy
school environments and strengthening program integrity.
Reauthorization provides an opportunity to address our continuing
concern that the certifications of children to receive free and reduced
price meals are not performed as accurately as they reasonably could
be. Correct certifications are a priority to ensure that school meal
funds go to those most in need, and the many other Federal, State, and
local resources that use this same data are properly targeted as well.
In sum, we are committed to working with Congress to reauthorize
the Child Nutrition Programs and to reinvesting any savings achieved in
the process back into these important programs for program
improvements.
wic
In fiscal year 2005, the President's budget request of $4.79
billion anticipates providing essential support to a monthly average of
7.86 million women, infants and children through the Special
Supplemental Nutrition Program for Women, Infants and Children (WIC).
This is an increase of 60,000 participants per month from anticipated
fiscal year 2004 participation levels. Additionally, the $125 million
contingency reserve, appropriated in fiscal year 2003, remains
available to the program should participation or food costs exceed our
projections. The Administration remains steadfast in its support of WIC
and is committed to working with Congress to ensure its proper funding.
Finally, the request includes $20 million to continue our peer
counseling initiative that is designed to enhance both rates of
initiation and duration of breastfeeding among WIC participants.
the emergency food assistance program (tefap)
Through TEFAP, USDA plays a critical supporting role for the
Nation's food banks. This support takes the form of both commodities
for distribution and administrative funding for States' commodity
storage and distribution costs. Much of this funding flows from the
States to the faith-based organizations that are a cornerstone of the
food bank community. The President's budget requests the fully
authorized level of $140 million to support the purchase of commodities
for TEFAP. Additional food resources become available through the
donation of surplus commodities from USDA's market support activities.
In recent years, these donations have increased the total Federal
commodity support provided to the Nation's food banks by almost 300
percent. State administrative costs, a critical form of support to the
food bank community, are funded at $50 million in the President's
request.
nutrition programs administration
We are requesting $152 million in our Nutrition Programs
Administration account, which reflects an increase of $14.7 million in
our administrative funding. This increase supports the Child Nutrition
and Food Stamp Programs integrity activities mentioned earlier, as well
as a number of nutrition guidance initiatives under the Center for
Nutrition Policy and Promotion. These resources are absolutely critical
to our ability to successfully execute the mission of the Food,
Nutrition and Consumers Services. Our total request for Federal
administrative resources, including those activities funded directly
from the program accounts, represents only about 0.39 percent of the
program resources for which we have stewardship. I believe that we need
this modest increase in funding in order to maintain accountability for
our $50 billion portfolio and to assist our State and local partners in
effectively managing the programs.
Mr. Chairman, I appreciate the opportunity to share my thoughts
with you, and would be happy to answer any questions you may have.
______
Prepared Statement of Roberto Salazar, Administrator, Food and
Nutrition Services
Thank you, Mr. Chairman, and members of the Subcommittee for
allowing me this opportunity to present testimony in support of the
fiscal year 2005 budget request for the Food and Nutrition Service.
The Food and Nutrition Service is the agency charged with managing
the Nation's nutrition safety net and providing Federal leadership in
America's ongoing struggle against hunger and poor nutrition. Our
stated mission is to increase food security and reduce hunger in
partnership with cooperating organizations by providing children and
low-income people access to nutritious food and nutrition education in
a manner that inspires public confidence and supports American
agriculture.
In fiscal year 2005, the President's budget requests a total of
$50.1 billion in new budget authority to fulfill this mission through
the Federal nutrition assistance programs. With this record request we
will touch the lives of more than 1 in 5 Americans over the course of a
year. This includes providing nutritious school lunches to an average
of 29 million children each school day (NSLP), assisting with the
nutrition and health care needs of 7.86 million at risk pregnant and
postpartum women (WIC) and children each month, and ensuring access to
a nutritious diet each month for 24.9 million people through the Food
Stamp Program (FSP). These are just 3 of our 15 Federal nutrition
assistance programs, which also include such important programs as the
School Breakfast Program (SBP), The Emergency Food Assistance Program
(TEFAP), the Summer Food Service Program (SFSP), the Child and Adult
Care Food Program (CACFP), the Food Distribution Program on Indian
Reservations (FDPIR), and the Commodity Supplemental Food Program
(CSFP). Through the range of design and delivery methods these programs
represent, FNS seeks to serve the children and low-income households of
this Nation and address the diverse ways and circumstances in which
hunger and nutrition-related problems present themselves.
The resources we are here to discuss must be viewed as an
investment--an investment in the health, self-sufficiency, and
productivity of Americans who, from time to time, find themselves at
the margins of our prosperous society. Under Secretary Bost, in his
testimony, has outlined the three critical challenges which the Food,
Nutrition and Consumer Services team has focused on under his
leadership: expanding access to the Federal nutrition assistance
programs, promoting healthy weight to address the problems of
overweight and obesity; and, improving the integrity with which our
programs are administered. In addition to these fundamental priorities
specific to our mission, President Bush has laid out an aggressive
agenda for management improvement across the Federal Government as a
whole--the President's Management Agenda. This agenda seeks to protect
the taxpayers' investment in all Federal activities by enhancing the
accuracy and efficiency of program delivery and reducing improper
payments, by improving decision-making through the integration of
performance information into the budget process, by building
partnerships with faith and community based organizations, and by
planning carefully and systematically for the human capital challenges
looming near for all of the Federal service.
the challenge of improper payments
Benefits of the Federal nutrition assistance programs must be
carefully targeted and delivered to those who are eligible, in need,
and wish to participate. Benefit payments made in error increase the
cost of these programs to the taxpayers and can divert needed
assistance from eligible participants seeking services. Today I am
pleased to report to you, for the second year in a row, record high
payment accuracy rates for the Food Stamp Program. In fiscal year 2002,
the most recent year for which data is available, the Food Stamp
Program achieved an accuracy rate of 91.74 percent, 0.4 percent higher
than fiscal year 2001's record achievement. Despite this success, much
remains to be done to improve the accuracy and efficiency of benefit
delivery in all the Federal nutrition assistance programs, not just the
Food Stamp Program. The President's budget requests additional funding
to strengthen integrity and program management both at the Federal and
State levels. Our request includes an increase of $7 million in our
administrative budget which will be targeted at maintaining our
continuing success in the Food Stamp Program, improving the accuracy of
certifications for free and reduced price school meals, and improving
delivery of program benefits and reinvigorating our oversight, training
and technical assistance activities for our State and local partners.
budget and performance integration
The President's Management Agenda recognizes that good decision-
making depends on both the availability of relevant, high quality data
and using that information in an analytical, business-like approach to
problem solving. The Food and Nutrition Service has long been a leader
in the Federal arena. Our entitlement programs are performance funded.
This requires us to balance, through analysis and insight, an uncertain
dynamic program demand with the constraints of a fixed appropriation.
In this year's budget explanatory notes, you will find expanded
performance information and analysis with clear connections linking
USDA's strategic plan, our budget request, and program performance.
Vital to the success of the President's vision of improved Federal
decision-making and seamless budget and performance integration is an
adequately funded, properly positioned agenda of performance
measurement and program assessment. Funding proposed in the request
would support a range of important program assessment activities:
focused studies of program operations, development of comprehensive
measures of program performance to inform and foster outcome-based
planning and management; and technical assistance to States and
communities for practical demonstrations of potential policy and
program improvements. These activities provide a crucial foundation for
strategic planning and program innovation. This request will allow the
programs to respond to emerging performance management issues
identified by the Performance Assessment Rating Tool of the National
School Lunch Program and Food Stamp Program as well as support
effective stewardship of the taxpayer investment in nutrition
assistance.
reaching out to those in need through faith-based and other community
organizations
To meet our commitment to improve access for all who are eligible,
we must work closely with our program partners--individuals and
organizations in communities across America who deliver the Federal
nutrition assistance programs, and work to make them accessible and
effective. Faith-based organizations have long played an important role
in raising community awareness about program services, assisting
individuals who apply for benefits, and delivering benefits. President
Bush has made working with the faith-based community an Administration
priority, and we intend to continue our outreach efforts in fiscal year
2005. The partnership of faith-based organizations and FNS programs,
including TEFAP, WIC, NSLP, and the CSFP, is long-established. Indeed,
the majority of organizations such as food pantries and soup kitchens
that actually deliver TEFAP benefits are faith-based. Across the
country, faith-based organizations have found over the years that they
can participate in these programs without compromising their mission or
values. They are valued partners in an effort to combat hunger in
America.
human capital management
The General Accounting Office (GAO), have demonstrated that
recruiting, developing and retaining a highly-skilled workforce is
critical to sustaining our public service. This is especially true for
the Food and Nutrition Service. We currently estimate that up to 80
percent of our senior leaders are eligible to retire within five years,
as is nearly 30 percent of our total workforce. FNS must address this
serious challenge by improving the management of the agency's human
capital, strengthening services provided to employees, and implementing
programs designed to improve the efficiency, diversity, and competency
of the work force. With just nominal increases for basic program
administration in most years, the Food and Nutrition Service has
reduced its Federal staffing levels significantly over time. We have
compensated for these changes by working smarter--re-examining our
processes, building strong partnerships with the State and local
entities which administer our programs, and taking advantage of
technological innovations. We are extremely proud of what we have
accomplished, but seek additional funding in a few targeted areas to
address specific vulnerabilities. Full funding of the nutrition
programs administration requested in the President's budget,
approximately 0.39 percent of our program portfolio, is vital to our
continued success.
Now, I would like to review some of the components of our request
that relate to these outcomes under each program area.
food stamp program
The President's budget requests $33.6 billion for the Food Stamp
account including the Food Stamp Program and its associated nutrition
assistance programs. These resources will serve an estimated 24.9
million people each month participating in the Food Stamp Program
alone. Included in this amount, we propose to continue the $3 billion
contingency reserve provided for the program in fiscal year 2004. The
importance of this reserve is especially critical in fiscal year 2005.
While we anticipate that the improvement we are now seeing in the
general economy will at some point begin to impact the program,
predicting the turning point of participation is challenging. Our
request also presents, as an alternative to the traditional contingency
reserve, a proposal of indefinite authority for program benefits and
payments to States and other non-Federal entities.
child nutrition programs
The budget requests $11.4 billion for the Child Nutrition Programs,
which provide millions of nutritious meals to children in schools and
in childcare settings every day. This level of funding will support an
increase in daily School Lunch Program participation from the current
28.7 million children to over 29.2 million children. This funding
request also supports an increase in daily School Breakfast Program
participation from the current 8.8 million to 9.0 million children.
Requested increases in these programs also reflect rising school
enrollment, increases in payment rates to cover inflation, and
proportionately higher levels of meal service among children in the
free and reduced price categories. We are proposing to extend
provisions that would expire on March 31, 2004.
wic
The President's budget includes $4.8 billion for the Special
Supplemental Nutrition Program for Women, Infants and Children, the WIC
program. The request will allow local communities to provide food,
nutrition education, and a link to health care to a monthly average of
7.86 million needy women, infants and children during fiscal year 2005.
We also propose to continue our vital initiatives, begun in fiscal year
2004, to enhance breastfeeding initiation and duration, improve State
information technology infrastructure, and to maximize WIC's potential
to combat childhood obesity. The $125 million contingency fund provided
for in the fiscal year 2003 appropriation continues to be available to
the program. These resources are available if costs exceed current
estimates.
commodity supplemental food program (csfp)
The Commodity Supplemental Food Program (CSFP) serves elderly
persons and at risk low-income pregnant and post-partum and
breastfeeding women, infants and children up to age six. The budget
requests $98.3 million for this program, the same level appropriated in
fiscal year 2004. This request may not support the same level of
program services as in fiscal year 2004 due to the availability of one-
time carry-over funds from 2003. However, we will take all available
administrative actions to minimize any program impact. We face a
difficult challenge with regard to discretionary budget resources. CSFP
operates in selected areas in 32 States, the District of Columbia, and
two Indian Tribal Organizations. The populations served by CSFP are
eligible to receive similar benefits through other Federal nutrition
assistance programs. We believe our limited resources are best focused
on those program available in all communities nationwide.
the emergency food assistance program (tefap)
As provided for in the Farm Bill, the budget requests $140 million
for commodities in this important program. Our request for States'
storage and distribution costs, critical support for the Nation's food
banks, is $50 million. The Food and Nutrition Service is committed to
ensuring the continuing flow of resources to the food bank community
including directly purchased commodities, administrative funding, and
surplus commodities from the USDA market support activities. Surplus
commodity donations significantly increase the amount of commodities
that are available to the food bank community from Federal sources.
nutrition programs administration (npa)
We are requesting $152.2 million in this account, which includes an
increase of $7 million for the program integrity initiative described
earlier. Included are also a number of initiatives, under the Food and
Nutrition Service and the Center for Nutrition Policy and Promotion,
designed to combat obesity and improve the dietary quality of all
Americans. Our total request for Federal administrative resources
represents only about 0.39 percent of the program resources for which
we have responsibility and sustains the program management and support
activities of our roughly 1,545 employees nationwide. I believe we need
these modest increases in funding in order to maintain accountability
for our $50 billion portfolio and to assist States to effectively
manage the programs and provide access to all eligible people.
Thank you for the opportunity to present this written testimony.
Senator Bennett. Thank you very much. Mr. Hawks.
STATEMENT OF WILLIAM T. HAWKS
Mr. Hawks. Thank you, Mr. Chairman, Senator Kohl.
It is indeed a pleasure to be with you today to discuss the
activities of the Marketing and Regulatory Programs.
Senator Bennett. Would you pull the microphone a little
closer to you?
Mr. Hawks. Turning it on will help, as well.
Senator Bennett. That also helps.
Mr. Hawks. As I said, it is certainly a pleasure to be with
you today to discuss the activities of the Marketing and
Regulatory Programs and the 2005 budget for those agencies
within Marketing and Regulatory Programs. Those are the Animal
and Plant Health Inspection Service, Agricultural Marketing
Service and the Grain Inspection, Packers and Stockyards
Administration.
My motto has been working together works. I am holding my
agencies accountable to make sure that they work.
I have five goals that I hold them accountable for. The
first one is to build broader bridges. The second one is to
move more product. The third goal is to invest in
infrastructure. The fourth goal is to grow our people. The
fifth goal is to sell agriculture as a profession.
The Marketing and Regulatory Program activities are funded
both by beneficiaries of the program services and by the
taxpayers. They carry out programs costing nearly $1.8 billion
with $418 million funded by fees paid by the beneficiaries of
the services and $449 million collected from Customs receipts.
On the appropriations side, the APHIS is requesting $893
million, GIPSA is requesting $44 million, and AMS is requesting
$87 million.
APHIS' primary mission is to safeguard animal and plant
health, address conflicts with wildlife, faciliate safe
Agricultural trade, promote environmental stewardship, and
improve animal well being. APHIS has been working to enhance an
already vigilant animal and plant health monitoring system.
APHIS trade issues resolution management efforts enabled us to
negotiate fair trade in the international market. APHIS also
regulates the movement and field release of biotechnology
derived plants. Recent developments in biotechnology hold great
promise as long as we are able to ensure the protection of the
environment and the safety of the foods.
GIPSA facilitates the marketing of livestock, meat,
poultry, cereals, oil seeds and related agricultural products
and promotes fair and competitive trade. GIPSA is requesting
increased funding for strengthening efforts to resolve
international grain trade issues and to provide improved
technology for the evaluating the value of livestock carcasses.
AMS activities assist U.S. agricultural industry in
marketing their products and in finding ways to improve their
profitability. AMS budget request seeks an increase of $10
million of appropriated funds to begin investing in a new
multi-agency web-based supply chain management system to manage
purchases of $2.5 billion of commodities used in all food
assistance programs every year. When fully implemented, this
system will decrease the time for purchases from 24 days down
to 5 days.
prepared statements
In light of time, this is going to conclude my statement.
You have my full written statement and I look forward to
responding to questions.
Senator Bennett. Thank you very much.
For the record, without objection, the written statement of
all of you will be included in the record. Dr. Murano.
[The statements follow:]
Prepared Statement of William T. Hawks
Mr. Chairman and members of the Committee, I am pleased to appear
before you to discuss the activities of the Marketing and Regulatory
Programs of the U.S. Department of Agriculture and to present our
fiscal year 2005 budget proposals for the Animal and Plant Health
Inspection Service (APHIS), the Grain Inspection, Packers and
Stockyards Administration (GIPSA), and the Agricultural Marketing
Service (AMS).
With me today are Dr. Charles Lambert, Deputy Under Secretary for
MRP; Mr. Peter Fernandez, Associate Administrator of APHIS; Mrs. Donna
Reifschneider, Administrator of GIPSA, and Mr. A.J. Yates,
Administrator of AMS. They have statements for the record and will
answer questions regarding specific budget proposals.
Under my leadership, the Marketing and Regulatory Programs have
addressed several broad goals and objectives to increase marketing
opportunities and to protect American agriculture from damages caused
by pests and diseases.
Building Broader Bridges.--We strengthened cooperation and
strategic partnerships with farmers and ranchers, States, foreign
governments, congressional offices, agricultural commodity and industry
associations, agricultural scientific groups, and other interested
parties. We want to ensure that our policies and programs provide the
most benefits they can to the affected people which demonstrates that
working together works.
Moving More Product.--We expanded domestic and international market
opportunities for U.S. agriculture products including value enhanced
products and products of biotechnology. We have worked closely with the
Foreign Agricultural Service and the U.S. Trade Representative to
aggressively and creatively resolve sanitary, phytosanitary,
biotechnology, grain inspection, commodity grading and other trading
issues that limit our potential for growth in international trade.
Investing in Infrastructure.--We invested in stronger border
security, pest and disease surveillance and monitoring, laboratory
capacity such as the National Veterinary Science Lab in Ames, Iowa. We
increased market news on export markets, made improvements in e-
Government, enhanced investigations of anti-competitive market
practices and provided greater support for biotechnology. Agriculture
that is healthy, both biologically and economically, is a marketable
agriculture.
Growing Our People.--We made a concerted effort to recruit,
recognize and reward accomplishment and inspire current and future
leaders within MRP. We are making MRP a place where the best and
brightest want to be, including promising men and women in diverse
fields such as journalism, accounting, and economics.
Selling Agriculture as a Profession.--We are creatively marketing
the vital role that agriculture plays in every American's life to
assist our efforts to recruit and retain the highest caliber workforce
for MRP and USDA.
funding sources
The Marketing and Regulatory Program activities are funded by both
the taxpayers and beneficiaries of program services. The budget
proposes that the MRP agencies carry out programs costing $1.8 billion;
with $418 million funded by fees charged to the direct beneficiaries of
MRP services and $449 million from Customs receipts.
On the appropriation side, under current law, the Animal and Plant
Health Inspection Service is requesting $828 million for salaries and
expenses and $5 million for repair and maintenance of buildings and
facilities; the Grain Inspection, Packers and Stockyards Administration
is requesting $44 million, and the Agricultural Marketing Service is
requesting $87 million.
The budget again proposes user fees that, if enacted, would recover
about $40 million. Legislation was submitted in 2003 which would
authorize new license fees to recover the cost of administering the
Packers and Stockyards (P&S) Act and authorize additional grain
inspection fees for developing grain standards. Legislation will be
submitted soon to enable additional license fees for facilities
regulated under the Animal Welfare Act. I will use the remainder of my
time to highlight the major activities and our budget requests for the
Marketing and Regulatory Programs.
animal and plant health inspection service
The fundamental mission of APHIS is to anticipate and respond to
issues involving animal and plant health, conflicts with wildlife,
environmental stewardship, and animal well-being. Together with their
customers and stakeholders, APHIS promotes the health of animal and
plant resources to facilitate their movement in the global marketplace
and to ensure abundant agricultural products and services for U.S.
customers. We believe that safeguarding the health of animals, plants,
and ecosystems makes possible safe agricultural trade and reduces
losses to agricultural and natural resources.
APHIS builds bridges by working in concert with its stakeholders--
States, Tribes, industry, and the public--to maintain and expand export
market opportunities and to prevent the introduction and/or to respond
to new threats of plant and animal pests and diseases. APHIS invests in
the agricultural marketing infrastructure that helps protect the
agricultural sector from pests and diseases while at the same time
moving more U.S. product.
I would like to highlight some key aspects of the APHIS programs:
Safeguarding the Agricultural Sector and Resource Base.--While
APHIS continues to work closely with the Department of Homeland
Security (DHS) to exclude agricultural health threats, it retains
responsibility for promulgating regulations related to entry of
passengers and commodities into the United States. APHIS' efforts have
helped keep agricultural health threats away from U.S. borders through
increased offshore threat-assessment and risk-reduction activities.
APHIS has also increased an already vigilant animal and plant health
monitoring and surveillance system to promptly detect outbreaks of
foreign and endemic plant and animal pests and diseases.
Management Programs.--Because efforts to exclude foreign pests and
diseases are not 100 percent successful, APHIS also assists
stakeholders in managing new and endemic agricultural health threats,
ranging from threats to aquaculture to cotton and other crops, tree
resources, livestock and poultry. In addition, APHIS assists
stakeholders on issues related to conflicts with wildlife and animal
welfare.
Moving More Product.--The Trade Issues Resolution and Management
efforts are key to ensuring fair trade of all agricultural products.
APHIS' staff negotiates sanitary and phytosanitary (SPS) standards,
resolves SPS issues, and provides clarity on regulating imports and
certifying exports which improves the infrastructure for a smoothly
functioning market in international trade. Ensuring that the rules of
trade are based on science helps open markets that have been closed by
unsubstantiated SPS concerns. APHIS' efforts contributed to the opening
or retention of $2.5 billion in export markets in fiscal year 2003 by
helping resolve individual trade issues abroad.
Biotechnology.--Recent developments in biotechnology underscore the
need for effective regulation to ensure protection of the environment
and food supply, reduce market uncertainties, and encourage development
of a technology that holds great promise. APHIS' Biotechnology
Regulatory Services unit coordinates our services and activities in
this area and focuses on both plant-based biotechnology and transgenic
arthropods. We also are examining issues related to transgenic animals.
aphis' 2005 budget request
In a year of many pressing high-priority items for taxpayer
dollars, the budget request proposes about $828 million for salaries
and expenses. There are substantial increases to support the
Administration's Food and Agriculture Defense Initiative and to protect
the agriculture sector from bovine spongiform encephalopathy (BSE). A
brief description of key initiatives follows.
A total of about $173 million for Foreign Pest and Disease
Exclusion.--Efforts will be focused on enhancing our ability to exclude
Mediterranean fruit fly and foreign animal diseases. We also request
funds to regulate the possession and transfer of Select Agents, toxins
and pathogens necessary for research and other beneficial purposes
which could be deadly in the hands of terrorists.
A total of about $224 million for Plant and Animal Health
Monitoring.--APHIS plays a critical role in protecting the Nation from
deliberate or unintentional introduction of an agricultural health
threat, and the budget requests $94 million, a $49 million increase, as
part of the Food and Agriculture Defense Initiative. This includes
initiatives that enhance plant and animal health threat monitoring and
surveillance; bolster a National Animal Identification Program; ensure
greater cooperative surveillance efforts with States; improve
connectivity with the integration and analysis functions at DHS for
plant and animal health threats; and boost animal vaccine availability;
and other efforts. In addition, $50 million is requested for bovine
spongiform encephalopathy (BSE) activities to accelerate the
development of a National animal ID effort and to increase testing to
detect the presence of BSE in the U.S. livestock herd.
A total of $320 million for pest and disease management programs.--
Once pests and disease are detected, prompt eradication reduces
longterm damages. In cases where eradication is not feasible (e.g.,
European gypsy moth), attempts are made to slow the advance, and
damages, of the pest or disease. APHIS provides technical and financial
support to help control or eradicate a variety of agricultural threats.
The budget proposes $57 million of increased funding for efforts
against low-pathogenic avian influenza, emerging plant pests (such as
Citrus Canker and Emerald Ash Borer), tuberculosis, scrapie, and
chronic wasting disease.
Other programs offer offsets to those increases. Successes in boll
weevil eradication efforts allow a reduction in that program. Decreased
funding is requested for Asian Long-horned Beetle based on the ongoing
levels of State contributions. Funding is reduced for Johne's Disease
since it is rather endemic and funds need to be rationed for other
program needs. The budget also assumes that State cooperators will fund
a greater share of wildlife management programs.
A total of $17 million for the Animal Care programs.--APHIS will
maintain its animal welfare and horse protection programs. The budget
includes a proposal, similar to fiscal year 2004, to collect $10.9
million in additional fees charged to facilities and establishments
required to be registered under the Animal Welfare Act but not
currently subject to a fee. This includes research facilities,
carriers, and in-transit handlers of animals. Since these facilities
are the direct beneficiaries of taxpayer assistance, it is appropriate
that a portion of the costs be funded by these beneficiaries.
A total of about $82 million for Scientific and Technical
Services.--Within USDA, APHIS has chief regulatory oversight of
genetically modified organisms. To help meet the needs of this rapidly
evolving sector, the budget includes a request to, in part, enhance the
regulatory oversight of field trials of crops derived with
biotechnology. Also, APHIS develops methods and provides diagnostic
support to prevent, detect, control, and eradicate agricultural health
threats, and to reduce wildlife damages (e.g., coyote predation). It
also works to prevent worthless or harmful animal biologics from being
marketed.
A total of $12 million for management initiatives.--This includes
building upon efforts started with Homeland Security Supplemental funds
for improving physical and operational security, It also includes
providing the State Department funds to help cover higher security
costs for APHIS personnel abroad. A portion of the increase would also
be used for enhanced computer security and eGov initiatives.
grain inspection, packers and stockyards administration
GIPSA's mission is to facilitate the marketing of livestock, meat,
poultry, cereals, oilseeds, and related agricultural products and to
promote fair and competitive trade for the benefit of consumers and
American agriculture. It helps move more U.S. product both domestically
and abroad by investing in domestic infrastructure that supports
marketing within the grain and livestock industry. GIPSA fulfills this
through both service and regulatory functions in two programs: the
Packers and Stockyards Programs (P&SP) and the Federal Grain Inspection
Service (FGIS).
Packers and Stockyards Programs.--The strategic goal for P&SP is to
promote a fair, open and competitive marketing environment for the
livestock, meat, and poultry industries. Currently, with 166 employees,
P&SP monitors the livestock, meatpacking, and poultry industries,
estimated by the Department of Commerce to have an annual wholesale
value of over $118 billion. Legal specialists and economic, financial,
marketing, and weighing experts work together to monitor emerging
technology, evolving industry and market structural changes, and other
issues affecting the livestock, meatpacking, and poultry industries
that the Agency regulates.
We conducted over 1,700 investigations in fiscal year 2003 to
enforce the Packers and Stockyards Act for livestock producers and
poultry growers, of which about 95 percent were closed in a year.
Financial recoveries were $27.2 million.
The Swine Contract Library began operation on December 3, 2003.
Producers can see contract terms, including, but not limited to, the
base price determination formula and the schedules of premiums or
discounts, and packers' expected annual contract purchases by region.
Since December 3, GIPSA has experienced approximately 27 ``hits'' each
day to view the Contract Summary reports and approximately 6 ``hits''
per day to view the Monthly reports.
Federal Grain Inspection Service.--FGIS facilitates the marketing
of U.S. grain and related commodities under the authority of the U.S.
Grain Standards Act and the Agricultural Marketing Act of 1946. As an
impartial, third-party in the market, we advance the orderly and
efficient marketing and effective distribution of U.S. grain and other
assigned commodities from the Nation's farms to domestic and
international buyers. We are part of the infrastructure that undergirds
the agricultural sector.
GIPSA works with government and scientific organizations to
establish internationally recognized methods and performance criteria
and standards to reduce the uncertainty associated with testing for the
presence of biotechnology grains and oil seeds. It also provides
technical assistance to exporters, importers and end users of U.S.
grains and oilseeds, as well as other USDA agencies, USDA Cooperator
organizations, and other governments. These efforts help facilitate the
sale of U.S. products in international markets.
Our efforts to improve and streamline our programs and services are
paying off for our customers, both in terms of their bottom lines and
in greater customer satisfaction. FGIS' service delivery costs average
$0.30 per metric ton, or approximately 0.23 percent of the $14 billion
value of U.S. grain exports. In fiscal year 2003 alone, more than 1.8
million inspections were performed on more than 222 million tons of
grains and oilseeds.
One indicator of the success of our outreach and educational
initiatives is the number of foreign complaints lodged with FGIS
regarding the quality or quantity of U.S. grain exports. In fiscal year
2003, FGIS received only 13 quality complaints and no quantity
complaints from importers on grains inspected under the U.S. Grain
Standards Act. These involved 229,587 metric tons, or about 0.2 percent
by weight, of the total amount of grain exported during the year.
gipsa's 2005 budget request
For 2005, the budget proposes a program level for salaries and
expenses of $44 million. Of this amount, $20 million is devoted to
grain inspection activities for standardization, compliance, and
methods development and $24 million is for Packers and Stockyards
Programs.
The 2005 budget includes the following program increases:
--$1 million for rapid response teams to closely examine livestock
marketing to ensure that producers are not unfairly
disadvantaged by the BSE situation. USDA will use the funds to
conduct market surveillance and ensure that marketing and
procurement contracts are honored in the aftermath of the BSE
finding.
--About $5 million to significantly upgrade the agency's IT
functions, including the ability to securely accept, analyze,
and disseminate information relevant to the livestock and grain
trades. About $4 million is a one-time increase for investment.
Currently, GIPSA receives more than 2.5 million submissions
from stakeholders, all of which are done on paper. The request
also includes $150,000 to maintain the Swine Contract Library.
--$1.2 million to monitor the various technologies that livestock and
meatpacking industries use to evaluate carcasses to ensure fair
and consistent use of those technologies. Producer compensation
is increasingly dependent not simply on the weight of the
animals they bring to slaughter, but the characteristics of the
carcasses as well (e.g., fat content).
--$0.5 million to enable GIPSA to better address and resolve
international grain trade issues, thus precluding disruption of
U.S. exports. GIPSA has experienced a growing demand for
cooperative participation with other agencies with
international trade responsibilities to help expand markets for
U.S. agricultural products and removing barriers to trade.
New User fees.--New user fees, similar to those proposed for fiscal
year 2004, would be charged to recover the costs of developing,
reviewing, and maintaining official U.S. grain standards used by the
grain industry. Those who receive, ship, store, or process grain would
be charged fees estimated to total about $6 million to cover these
costs. Also, the Packers and Stockyards program would be funded by new
license fees of about $23 million that would be required of packers,
live poultry dealers, stockyard owners, market agencies and dealers, as
defined under the Packers and Stockyards Act.
agricultural marketing service
The mission of the AMS is focused on facilitating the marketing of
agricultural products in the domestic and international marketplace,
ensuring fair trading practices, and promoting a competitive and
efficient marketplace to the benefit of producers, traders, and
consumers of U.S. food and fiber products. The Agency accomplishes this
mission through a wide variety of publicly and user funded activities
that help their customers improve the marketing of their food and fiber
products and ensure that food and fiber products remain available and
affordable to consumers. The following are just some of the ways that
AMS is doing its job better in serving its customers.
Customer Service and Technology.--AMS continues to improve its
service delivery by taking advantage of new technology to improve
public electronic access to information and services and to increase
operational efficiency. For example, the Livestock Mandatory price
reporting system processes huge amounts of raw data received from
slaughter facilities that report their transactions involving purchases
of livestock and sales of boxed beef and lamb, lamb carcasses, and
imported boxed lamb cuts. These data, including prices, contracts for
purchase, and other related information, are publicly disseminated in
over 100 daily, weekly, and monthly reports on fed cattle, swine, lamb,
beef and lamb meat. AMS continues to make enhancements to existing
reports and to introduce new reports in consultation with industry
stakeholders.
In 2003, AMS began offering automatic e-mail delivery of
comprehensive Market News information to subscribers. This free email
subscription service, provided in partnership with the Mann Library at
Cornell University, provides access to nearly 1,500 daily, weekly and
monthly market reports covering the six major AMS commodity groups. AMS
also is developing a Market News web portal that will allow users to
establish their own unique web pages through which they can immediately
access preferred market news reports, have the capability to build
specialized reports, and add customized features including nationwide
weather reports and metric data conversions. Users will be able to
access 5 years of data and download it in usable formats, including
charts, spreadsheets, and graphs. The portal will be available to
public users later this year for fruit and vegetable reports, and they
hope to expand it to market reports for other commodities soon
thereafter.
Partnerships.--AMS depends on strong partnerships with cooperating
State agencies and other Federal agencies to carry out many of our
programs. State agency partners collect data, provide inspection,
monitoring, and laboratory services for AMS, and otherwise maximize the
value of both State and Federal resources through sharing and
coordination. For instance, AMS' Market News program maintains
cooperative agreements with 40 States to coordinate local market
coverage with the regional and national coverage needed for AMS market
reporting. State employees who inspect shipments of seed within a State
provide information on potential violations in interstate shipments to
AMS' Federal Seed program. Thirty-three States and territories
participate with AMS in Pesticide Recordkeeping education and record
inspection activities and are reimbursed for their services.
Furthermore, the Pesticide Data program depends on its 10-12 State and
three Federal partners to collect and test the product samples on which
the program results are based. In fact, the Pesticide Data program
directs 80 percent of its funding to its State partners in
reimbursement for services provided. Another source of support for
State agriculture programs is AMS' Federal-State Marketing Improvement
Program (FSMIP), otherwise known as the Payments to States Program. In
2003, AMS allocated FSMIP grant funds to 20 States for 28 projects of
local and regional importance, such as marketing studies or developing
innovative approaches to the marketing of agricultural products.
Under the National Organic program, AMS program personnel accredit
State, private, and foreign certifying agents who certify that organic
production and handling operations are in compliance with the national
organic standards. As of February 2004, AMS received 137 applications
for accreditation. Of these, the program has thus far accredited a
total of 90 certifying agents, including 15 States, and 37 foreign
certifying agents. AMS also administers two cost share programs through
agreements with the States that help to offset certification costs for
organic producers. Additional resources provided in fiscal year 2004
will allow us to strengthen our support of the National Organic
Standards Board activities, including technical advisory panel
evaluations of materials and program evaluations--or peer reviews--and
to strengthen program enforcement.
Market Analysis.--In 2003, AMS supported wholesale or farmers
market facility projects in Mississippi, Georgia, Florida, Oregon,
Arizona, New York, Texas, American Samoa, Hawaii, and Kentucky. AMS
also supports marketing and market technology research projects which
were presented at numerous marketing conferences and workshops. AMS
supports farmers markets by conducting research on emerging trends in
market operations and practices and providing research reports,
reference material and fact sheets to farm vendors, farm market
managers, and the general public through the AMS website and a
telephone hotline.
AMS' Transportation Services Program works with Federal, State, and
local policy-makers to maintain an efficient national transportation
system that supports the needs of farmers, agricultural shippers, and
rural America. AMS conducts and sponsors economic studies of domestic
and international transportation issues and provides technical
assistance and information to producers, shippers, carriers, government
agencies, and universities. Program experts have generated studies and
reports on U.S. waterways, rail lines and rail car availability; rail
and shipping rate analyses; geographically disadvantaged farmers and
ranchers, and many others.
AMS transportation specialists are often called upon to provide
information and advice when agricultural transportation is disrupted.
After September 11, 2001, AMS has increasingly been asked to provide
more analyses on transportation security for agricultural products. In
2003, AMS developed a Transportation Security Briefing Book using the
information currently available. The book provides an overview of the
agricultural transportation system, existing safety measures, and
discusses the adverse effects of past disruptions in the system. While
this is a good start, we have found that much more study is needed in
this area for all modes of transport, but particularly for trucking,
which moves 90 percent of agricultural freight for at least one segment
of its transportation to destination.
Commodity Purchases.--AMS works in close cooperation with both the
Food and Nutrition Service (FNS) and the Farm Services Agency (FSA) to
administer USDA commodity purchases that stabilize markets and support
nutrition programs, such as the National School Lunch Program, the
Emergency Food Assistance Program, the Commodity Supplemental Food
Program, and the Food Distribution Program on Indian Reservations. To
maximize the efficiency of food purchase and distribution operations,
AMS, FNS, and FSA each provide a component of program administration
according to their organizational structure and expertise, but the
system is complex and requires close coordination. To better coordinate
the operations between the three agencies and control the vast array of
details inherent to the procurement process, the Processed Commodities
Inventory Management System (PCIMS) was developed more than 10 years
ago to track bids, orders, purchases, payments, inventories, and
deliveries of approximately $2.5 billion of commodities used in all
food assistance programs every year and another $1 billion in price
support commodity products maintained in inventory. PCIMS is still
being used by the three agencies with modifications having been made
over the years, when feasible, to add capabilities such as financial
tracking or to meet changes in program delivery.
ams' 2005 budget request
For AMS, the budget proposes a program level of $732 million, of
which over 88 percent will be funded by user fees and Section 32 funds.
The budget requests an appropriation of $87 million for Marketing
Services and Payments to States. The 2005 budget includes an increase
of $10 million in appropriated funds to improve the information
technology systems used to manage and control commodity orders,
purchases, and delivery. Under this proposal, PCIMS would be replaced
by the Web-based Supply Chain Management System (WBSCM). Implementation
of WBSCM will improve the efficiency of Federal procurement of
commodities by reducing ordering and delivery times from 24 days to 5
days. The 2005 budget also includes an increase of $0.3 million to
conduct studies aimed at improving the security of the U.S.
transportation system for agricultural commodities and supplies. The
budget includes a decrease of $2 million for FSMIP to reflect a
reduction for a one-time increase in 2004 for creation of specialty
markets in Wisconsin.
conclusion
This concludes my statement. I am looking forward to working with
the Committee on the 2005 budget for the Marketing and Regulatory
Programs. We believe the proposed funding amounts and sources of
funding are vital to protecting American agriculture from pests and
diseases, both unintentional and those caused by terrorist action, and
for moving more product to foreign markets. It will provide the level
of service expected by our customers--the farmers and ranchers, the
agricultural marketing industry, and consumers. We are happy to answer
any questions.
______
Prepared Statement of A.J. Yates, Administrator, Agricultural Marketing
Service
Mr. Chairman and Members of the Committee, I am pleased to have
this opportunity to represent the Agricultural Marketing Service in
presenting our fiscal year 2005 budget proposal. To provide some
context for our budget proposal, I would like to begin by reviewing our
agency's mission and describing some of the customer service
improvements we have made in delivery of our programs.
mission
The mission of the Agricultural Marketing Service--AMS--is focused
on marketing: to facilitate the marketing of agricultural products in
the domestic and international marketplace, ensure fair trading
practices, and promote a competitive and efficient marketplace to the
benefit of producers, traders, and consumers of U.S. food and fiber
products.
We accomplish this mission through a wide variety of publicly
funded activities that help our customers better market their food and
fiber products and ensure that food and fiber products remain available
and affordable to consumers. More specifically, AMS helps to make the
nation's agricultural markets work efficiently by providing wide and
equal access to market information for all producers and traders; by
developing agricultural product descriptions that provide a common
language for commercial trade; by providing data on pesticide residues
and microbiological pathogens that support science-based risk
assessment; by providing ``how to'' technical expertise to growers,
transporters, and others in the marketing chain; and by helping to
develop alternative or improved market outlets.
AMS also offers voluntary fee-based services such as product
quality grading, contract certification, export verification, and
quality control services such as plant inspections, equipment reviews,
and production quality or process control certification. Because these
voluntary services are available to verify the quality of agricultural
products and the efficacy of production processes, they support private
contractual arrangements and marketing claims that can improve
profitability for U.S. producers in both domestic and international
markets. In delivering these voluntary services, we remain vigilant
about their costs, while working in partnership with our customers to
ensure that marketplace needs are met.
customer service and technology
We continue to improve our service delivery by taking advantage of
new technology--to improve public electronic access to information and
services and to increase our operational efficiency. For example, the
Livestock Mandatory price reporting system processes huge amounts of
raw data--some 2 to 3 million data items each week--received from 112
slaughter facilities, that report their transactions involving
purchases of livestock and sales of boxed beef and lamb, lamb
carcasses, and imported boxed lamb cuts. These data, including prices,
contracts for purchase, and other related information, are publicly
disseminated in over 100 daily, weekly, and monthly reports on fed
cattle, swine, lamb, beef and lamb meat. AMS continues to make
enhancements to existing reports and to introduce new reports in
consultation with industry stakeholders.
In 2003, AMS began offering automatic email delivery of
comprehensive Market News information to subscribers. Market News
reports cover prices, volume, quality, condition, and other market data
on farm products in production areas and at specific domestic and
international markets. This free email subscription service, provided
in partnership with the Mann Library at Cornell University, provides
access to nearly 1,500 daily, weekly and monthly market reports
covering the six major AMS commodity groups--cotton, dairy, fruit and
vegetable, livestock and seed, poultry, and tobacco. Users can search
by keyword or browse by commodity, then subscribe to and receive
selected reports via email whenever an update is published. This
initiative is part of the Federal e-government effort to streamline
government-to-citizen communications.
AMS also is developing a Market News web portal that will allow
users to establish their own unique web pages through which they can
immediately access preferred market news reports, have the capability
to build specialized reports, and add customized features including
nationwide weather reports and metric data conversions. Users will be
able to access 5 years of data and download it in usable formats,
including charts, spreadsheets, and graphs. The portal will be
available to public users later this year for fruit and vegetable
reports, and we hope to expand it to market reports for other
commodities soon thereafter.
partnerships
AMS depends on strong partnerships with cooperating State agencies
and other Federal agencies to carry out many of our programs. State
agency partners collect data, provide inspection, monitoring, and
laboratory services for AMS, and otherwise maximize the value of both
State and Federal resources through sharing and coordination. For
instance, AMS' Market News program maintains cooperative agreements
with 40 States to coordinate local market coverage with the regional
and national coverage needed for AMS market reporting. State employees
who inspect shipments of seed within a State provide information on
potential violations in interstate shipments to AMS' Federal Seed
program. Thirty-three States and territories participate with AMS in
Pesticide Recordkeeping education and record inspection activities and
are reimbursed for their services. Furthermore, our Pesticide Data
program depends on its State and Federal partners to collect and test
the product samples on which the program results are based. In fact in
fiscal year 2004, the Pesticide Data program will direct about 80
percent of its funding to its eleven State partners in reimbursement
for services provided. The resulting information generated by AMS can
be utilized by other Federal agencies such as EPA and FDA for policy
and regulatory actions, as well as other USDA agencies, academia,
agricultural industry, international organizations, and global traders.
We work with local and city agencies to improve wholesale, farmers,
and other direct marketing opportunities. In 2003, our Wholesale,
Farmers, and Alternative Markets program supported wholesale or farmers
market facility projects in Mississippi, Georgia, Florida, Oregon,
Arizona, New York, Texas, American Samoa, Hawaii, and Kentucky. The
program also supports marketing and market technology research projects
as well as numerous marketing conferences and workshops. In an effort
to help link farm direct sales with school nutrition programs, for
example, AMS organized a workshop focused on farm to school marketing
in fiscal year 2003 at the first national ``Farm to Cafeteria
Conference'' in Seattle, Washington.
Farmers markets directly benefit local producers and continue to be
an important farm product outlet for agricultural producers nationwide.
Farmers markets have risen in popularity due to growing consumer
interest in obtaining fresh products directly from the farm. The number
of farmers markets has grown by 79 percent between 1994 and 2002 to
more than 3,100 facilities nationwide. AMS supports farmers markets by
conducting research on emerging trends in market operations and
practices and providing research reports, reference material and fact
sheets to farm vendors, farm market managers, and the general public
through the AMS website and a telephone hotline. We also participate in
industry, producer, and academic conferences and training sessions
across the country.
Another source of support for local agriculture programs is AMS'
Federal-State Marketing Improvement Program, or FSMIP. These matching
grant funds, made available to State departments of agriculture and
other State agencies, fund 25 to 35 projects each year. In 2003, we
allocated FSMIP grant funds to 20 States for 28 projects of local and
regional importance, such as marketing studies or developing innovative
approaches to the marketing of agricultural products.
Our National Organic program, in partnership with its advisory
committee, provides nationwide standards and a certification system for
the U.S. organic food industry, which has over $8 billion in sales and
has seen annual growth in excess of 22 percent. Between 1995 and 2000,
the U.S. organic market expanded by 175 percent and is expected to more
than double its 2000 value of $7.8 billion to approximately $16 billion
by 2005. AMS works with the National Organic Standards Board to develop
standards for substances used in organic production, maintain a
National List of approved and prohibited substances for organic
production, and convene technical advisory panels to provide scientific
evaluation of materials considered for the National List. AMS program
personnel accredit State, private, and foreign certifying agents who
certify that organic production and handling operations are in
compliance with the national organic standards. As of February 2004,
AMS received 137 applications for accreditation. Of these, the program
has thus far accredited a total of 90 certifying agents--53 domestic
certifying agents, including 15 States, and 37 foreign certifying
agents. AMS also administers two cost share programs through agreements
with the States that help to offset certification costs for organic
producers. Additional resources provided in fiscal year 2004 will allow
us to strengthen our support of Board activities, including technical
advisory panel evaluations of materials and program evaluations--or
peer reviews--and to strengthen program enforcement.
Our Transportation Services Program works with Federal, State, and
local policy-makers to maintain an efficient national transportation
system that supports the needs of farmers, agricultural shippers, and
rural America. The program helps to support farm income, expand
exports, and maintain the flow of food to consumers. AMS conducts and
sponsors economic studies of domestic and international transportation
issues and provides technical assistance and information on
agricultural transportation, rural infrastructure and access, and food
distribution to producers, shippers, carriers, government agencies, and
universities. Program experts have generated studies and reports on
U.S. waterways, rail lines and rail car availability; rail and shipping
rate analyses; and geographically disadvantaged farmers and ranchers,
and many others. The program also produces periodic publications that
provide information for agricultural producers and shippers on various
modes of transportation, such as the weekly Grain Transportation
Report, the Refrigerated Transport Quarterly, quarterly issues of the
Ocean Rate Bulletin and Agricultural Container Indicators, and the
semiannual Agricultural Ocean Transportation Trends.
Our transportation specialists are called upon to provide
information and advice when agricultural transportation is disrupted,
such as late in 2002, when a labor stoppage closed the West Coast ports
and threatened millions of dollars of losses for agriculture from
commodities spoiled in transit. After 9/11, we are increasingly asked
to provide more analyses on transportation security for agricultural
products. In 2003, AMS developed a Transportation Security Briefing
Book using the information currently available. The book provides an
overview of the agricultural transportation system, existing safety
measures, and discusses the adverse effects of past disruptions in the
system. While this is a good start, we have found that much more study
is needed in this area for all modes of transport, but particularly for
trucking, which moves 90 percent of agricultural freight for at least
one segment of its transportation to destination.
Finally, AMS works in close cooperation with both the Food and
Nutrition Service (FNS) and the Farm Services Administration (FSA) to
administer USDA's nutrition assistance and surplus commodity programs.
AMS purchases agricultural commodities under authority of Section 32 of
the Act of August 24, 1935, which permanently authorized an
appropriation equal to 30 percent of customs receipts to encourage the
exportation and domestic consumption of agricultural commodities. These
funds, plus unused balances up to $500 million from the previous fiscal
year, may be authorized by the Secretary to support markets by
purchasing commodities in temporary surplus, for domestic nutrition
assistance programs, for diversion payments and direct payments to
producers, for export support, and disaster relief.
AMS retains only about 13 percent of the funds appropriated under
Section 32. In 2005, AMS expects to retain $800 million, half of
which--$400 million--will be spent on purchases for the Child Nutrition
Programs. Most of the rest is available to AMS' commodity purchases
program for emergency surplus removal. Eighty-six percent of the $6.2
billion total appropriation will be transferred to FNS to administer
the Child Nutrition Programs and 1 percent to the Department of
Commerce to develop fishery products.
The commodities purchased by AMS are donated to various nutrition
assistance programs such as the National School Lunch Program, the
Emergency Food Assistance Program, and the Food Distribution Program on
Indian Reservations, according to their needs and preferences. In
fiscal year 2003, AMS purchased 1.46 billion pounds of commodities that
were distributed by FNS through its nutrition assistance programs.
AMS purchases the non-price supported commodities--meat, fish,
poultry, egg, fruit and vegetable products--and FSA supplies the price-
supported commodities--flours, grains, peanut products, cheese and
other dairy products, oils and shortenings--that supply the National
School Lunch Program and other nutrition assistance programs
administered by FNS.
To maximize the efficiency of food purchase and distribution
operations, AMS, FNS, and FSA each provide a component of program
administration according to their organizational structure and
expertise, but the system is complex and requires close coordination.
AMS and FSA purchase for FNS the entitlement commodities provided to
schools. Schools and other nutrition assistance programs can also
receive bonus commodities that are purchased to support agricultural
markets through AMS' surplus commodity program. AMS and FSA are
responsible for issuing and accepting bids, and awarding and
administering contracts. FNS is responsible for taking commodity orders
from the States, monitoring purchases and entitlements throughout the
year, and the overall administration of the commodity nutrition
assistance programs. Before a purchase is announced, AMS and FSA
specialists work with potential vendors, FNS, and food safety officials
to develop a specification for each product purchased that details
product formulation, manufacturing, packaging, sampling, testing, and
quality assurance. After market conditions, availability, and
anticipated prices are assessed, and recipient preferences determined,
AMS and FSA invite bids for particular U.S. produced and domestic
origin food products under a formally advertised competitive bid
program. Bids received from responsible vendors are analyzed and
contracts are awarded by AMS and FSA. FSA administers the payments to
vendors, ensures the proper storage of commodities when needed, and
assists in their distribution.
To better coordinate the operations between the three agencies and
control the vast array of details inherent to the procurement process,
the Processed Commodities Inventory Management System, or PCIMS, was
developed more than 10 years ago to track bids, orders, purchases,
payments, inventories, and deliveries of approximately $2.5 billion of
commodities used in all domestic and foreign food assistance programs
every year and another $1 billion in price support commodity products
maintained in inventory. PCIMS is still being used by the three
agencies with modifications having been made over the years, when
feasible, to add capabilities such as financial tracking or to meet
changes in program delivery.
fiscal year 2005 budget request
This leads us to the first of our two budget requests for fiscal
year 2005, which involves both a multi-agency partnership and an
electronic (e-) government initiative that will significantly improve
customer service.
web-based supply chain management system
AMS, FNS and FSA are working together to replace PCIMS with a Web-
Based Supply Chain Management System, or WBSCM. For fiscal year 2005,
AMS is requesting funding of $10 million in our Marketing Services
appropriated account to begin developing the entire new system rather
than each of the three agencies separately requesting portions of the
funding needed.
WBSCM has undergone extensive reviews within USDA and was approved
as one of the Department's selected e-government ``smart choice''
initiatives. WBSCM is designed to greatly reduce the time required for
processing purchases; shorten delivery times; improve USDA's ability to
collaborate with other Departments; improve reporting capability;
reduce transportation, inventory, and warehousing costs; and enable
future system updates as needed. Furthermore, the system will create a
singe point of access for customers, allow us to share information more
quickly and conveniently, automate internal processes, and assist in
breaking down bureaucratic divisions. Eventually, WBSCM will be able to
support agencies that manage similar commodity distribution programs
for export. The Foreign Agricultural Service, the Agency for
International Development, and the Maritime Administration, have been
included in the development phases to ensure the new system can address
the needs of export programs.
Over the last few years AMS, FNS, and FSA have undertaken extensive
business practice reengineering efforts. Since PCIMS was developed and
``hard coded'' to automate the business practices of the time, it often
cannot be modified to accept significant changes in process without
undue costs. As a result, agency employees frequently have to develop
electronic entries external to PCIMS and then update the system with
the results. In contrast, WBSCM is designed to use commercial off the
shelf software which will speed up implementation, incorporate industry
and commercial best business practices, and give the agencies the
flexibility to reconfigure the system after implementation when
processes change. We expect that increased efficiency, better
coordination, and improved services will begin as soon as the basic
system is in place in mid-fiscal year 2007, when WBSCM will provide
those services being performed by PCIMS. Until then, we must continue
to maintain the PCIMS system.
agricultural transportation security
Our second proposal this year is to strengthen our agricultural
transportation security expertise within the Transportation Services
program. We are requesting $300,000 to produce more in-depth analyses
of agricultural transportation security. Transportation is a critical
link in the food supply chain. Closer analysis of the sector will
provide the information needed for critical assessments of the
strengths and vulnerabilities of the various transportation modes used
to move farm inputs, food, and other agricultural products from farm to
market. These funds will strengthen USDA's Homeland Security efforts by
helping to safeguard the U.S. food supply and supporting the Department
of Homeland Security. We will be better able to provide the information
requested by policy officials in planning strategies to prevent
potential disruptions, and to provide comprehensive information more
quickly when any emergencies occur. Our current expertise and
established contacts with transportation providers give us a distinct
advantage in addressing agricultural transportation security issues.
The transportation industry also has a serious interest in protecting
shipments. For example, the Agricultural and Food Transporters
Conference (AFTC) recently requested help from AMS in developing
voluntary security guidelines. AMS is supporting a cooperative effort
between USDA and the AFTC to prepare a guidebook. With expanded
information and analysis, we will also be better able to advise
agricultural producers and shippers on improving their own security.
budget request summary
Our total budget request includes $86 million for Marketing
Services, which includes an increase for pay costs partially offset by
a decrease for savings associated with information technology. We also
include a decrease of $2 million in Federal-State Marketing Improvement
Program grants funding under Payments to States and Possessions. These
funds were provided in fiscal year 2004 to support Wisconsin specialty
products. We request $11 million in Section 32 Administrative funds for
commodity purchasing and $16 million for Marketing Agreements and
Orders. These requests also include an increase for pay costs. Thank
you for this opportunity to present our budget proposal.
______
Prepared Statement of Dr. Peter Fernandez, Acting Administrator, Animal
and Plant Health Inspection Service
Mr. Chairman and members of the Subcommittee, it is indeed a
pleasure for me to represent the Animal and Plant Health Inspection
Service (APHIS) before you today. APHIS is an action-oriented agency
that works with other Federal agencies, Congress, States, agricultural
interests, and the general public to carry out its mission to protect
the health and value of American agriculture and natural resources.
APHIS strives to assure its customers and stakeholders that it is on
guard against the introduction or reemergence of animal and plant pests
and diseases that could limit production and damage export markets. At
the same time, APHIS monitors for and responds to potential acts of
agricultural bioterrorism, invasive species, diseases of wildlife and
livestock, and conflicts between humans and wildlife. APHIS also
addresses sanitary and phytosanitary trade barriers and certain issues
relating to the humane treatment of animals. Finally, APHIS ensures
that biotechnology-derived agricultural products are safe for release
in the environment. We have developed a strategic plan to help us
accomplish these objectives, and I would like to report on our fiscal
year 2003 protection efforts and our fiscal year 2005 budget request in
that context.
APHIS' protection system is based on a strategic premise that
safeguarding the health of animals, plants, and ecosystems makes
possible safe agricultural trade and reduces losses to agricultural and
natural resources. All nine objectives in the protection system are key
components of this strategic premise. Failing to succeed in any one
objective will eventually lead to overall failure, and American farmers
will not reach their potential export markets. Additionally, the
protection system is a key component of USDA's Homeland Security role.
The United States has a vital stake in the health of American
agriculture, both economically and in terms of feeding our people and
many throughout the world. Terrorists could well recognize that vital
stake and seek to attack it.
Five Objectives for Safeguarding Health of Animals, Plants, and
Ecosystems
Objective 1.1--Conduct offshore threat assessment and risk
reduction activities.--In this era of increasing globalization and
advancing technologies, APHIS must constantly assess the exotic health
threats approaching our borders, and engage in offshore pest or disease
eradication activities when the threat is imminent and the potential
impact severe.
To prevent the introduction of costly foreign animal diseases into
the United States, our Foreign Animal Diseases (FAD) and Foot-and-Mouth
Disease (FMD) program works to detect and control outbreaks of animal
diseases in foreign countries far from our shores. This is our first
line of defense against foreign animal diseases and has become more
significant as international trade and travel have increased. APHIS
conducts operations overseas through bilateral agreements and works
with multilateral organizations, such as the World Organization for
Animal Health (OIE). Last year, for example, through an agreement with
Panama and Mexico, we collected 1,260 samples of suspected vesicular
disease throughout Central America from field investigations and tested
the samples in Panama. Fortunately, all tested negative for FMD, while
639 were diagnosed as vesicular stomatitis.
Through our Fruit Fly Exclusion and Detection program, we cooperate
with the Governments of Mexico, Guatemala, and Belize on the Moscamed
program to eradicate and control the Mediterranean Fruity Fly (Medfly),
which could cause $2 billion in losses if it became established in the
United States. Moscamed's current top priorities are to eradicate the
Medfly from Chiapas, Mexico, and move the barrier south into Guatemala
in an effort to achieve APHIS' and its cooperators' goal of eradicating
Medfly from Central America and thereby providing more secure
prevention against the threat Medfly poses to the United States. A
major component of the program is the production and release of sterile
flies to disrupt normal reproduction. In fiscal year 2003, the Central
America Medfly program produced 2.2 billion sterile fruit flies a week,
exceeding its goal of producing 2 billion per week. This production
increase allowed more flies to go to the preventive release program in
the United States.
Through our Tropical Bont Tick program, APHIS employees are
preventing the introduction of heartwater and other diseases
transmitted by tropical bont ticks into the livestock industry and
wildlife populations of the United States from affected Caribbean
islands. The cooperative program has eradicated ticks from six of the
nine islands involved so far, bringing us closer to our goal of
eradicating this pest from the Western Hemisphere.
Objective 1.2--Regulate and monitor to reduce the risk of
introduction of invasive species.--APHIS regulates the import of
agricultural products, including commercial shipments and items carried
into the United States by travelers, to prevent the entry of foreign
pests and diseases. We work closely with the Department of Homeland
Security (DHS) to monitor and intercept items that arrive at ports of
entry.
In fiscal year 2003, APHIS and DHS agricultural employees inspected
the baggage of nearly 74 million arriving passengers. Passenger baggage
is inspected manually, with x-ray technology, or through the use of
detector dogs. Agricultural inspectors also cleared 54,033 ships and
3,128,660 cargo shipments. In cooperation with DHS, we increased the
number of cargo inspections by 43 percent over fiscal year 2002 because
of the high entry risk of exotic wood boring and bark beetles, like
Asian long-horned beetle and emerald ash borer. In total, agricultural
inspectors intercepted 82,631 reportable pests at land borders,
maritime ports, airports, and post offices. At plant inspection
stations, our inspectors cleared 176,761 shipments containing over 1.2
billion plants units (cuttings, whole plants, or other propagative
materials) and intercepted 4,260 pests.
Part of APHIS' safeguarding strategy is to prevent the intentional
introduction of illegal products through market surveys,
investigations, and enforcement action. In fiscal year 2003, our
Safeguarding, Intervention, and Trade Compliance (SITC) staff and field
personnel seized 15,706 illegal plant products and 488 illegal meat,
poultry, and dairy products and found 112 reportable pests. When SITC
detects a prohibited item, we identify the item's origin and the
responsible shippers, importers, and broker. By maintaining the
relevant information in databases, the program can target specific
commodities and importers. This year, SITC investigations led to the
detection of 82 violations at markets and distributors' warehouses.
APHIS' Animal and Plant Health Regulatory Enforcement program
conducts regulatory enforcement activities to prevent the spread of
animal and plant pests and diseases in interstate trade. These
activities include inspection, surveillance, animal identification, and
prosecution. This year, APHIS continued the development of a multi-year
project to improve a headquarters-based, on-line computer system to
track investigations and automate the enforcement process. The database
will help our enforcement efforts by allowing APHIS programs and other
agencies such as the Departments of Homeland Security and Treasury to
share critical information and identify individuals, companies,
cargoes, carriers, or pathways posing risk.
In fiscal year 2003, APHIS conducted 1,782 investigations involving
plant quarantine violations resulting in 142 warnings, 682 civil
penalty stipulations, seven Administrative Law Judge decisions, and
approximately $1 million in fines. Regarding animal health programs, we
conducted 1,425 investigations, resulting in 210 warnings, 39 civil
penalty stipulations, five Administrative Law Judge decisions, and
approximately $44,900 in fines. Also during fiscal year 2003, the
program conducted 76 investigations of alleged Swine Health Protection
Act violations in Puerto Rico. This was slightly less than the target
of 80 investigations, mostly due to providing support for the exotic
Newcastle disease outbreak in California.
Objective 1.3--Ensure safe research, release, and movement of
agricultural biotechnology events, veterinary biologics, and other
organisms.--The growth of agricultural biotechnology hinges on the
public's acceptance of this technology as safe, and APHIS' regulatory
role is key to ensuring global acceptance. In addition to agricultural
biotechnology, the Agency monitors and regulates to ensure safe
agricultural research and commercialization activities involving the
movement of non-indigenous organisms and veterinary biologics.
APHIS' Biotechnology Regulatory Services (BRS) program, created in
August 2002, regulates the introduction (importation, interstate
movement, and field release) of genetically engineered organisms such
as plants, insects, microorganisms and any other organism that is known
to, or could be, a pest. APHIS also has determined that BRS may
potentially regulate animals, insects, and other disease agents
relevant to livestock health. Through a strong regulatory framework,
BRS determines the conditions under which genetically engineered
organisms can be introduced into the United States and allows for the
importation, interstate movement, and field release of these materials
only after rigorous conditions and safeguards are put into place. Under
the authority of the Plant Protection Act of 2000, APHIS can pursue
penalties for failure to adhere to our regulations, permit conditions,
and requirements.
With the creation of our new biotechnology compliance program, we
have chosen measures that will accurately and visibly reflect the
effectiveness of our inspection efforts for the testing of products
that carry a higher degree of perceived risk. We believe that increased
frequency of inspections--especially at high risk sites--coupled with
efforts to improve the quality of inspections through expanded
training, will translate into a high degree of stakeholder and public
confidence that these products will be safely confined and not
inadvertently enter the food supply. Our performance target for fiscal
year 2004 is to inspect 10 percent of low risk sites, 40 percent of
medium risk sites at least once during the growing season, and 100
percent of pharmaceutical and industrial sites a total of seven times--
five times during the growing season and two times afterwards.
Our Veterinary Biologics program continues to ensure that
veterinary biologics products are pure, safe, potent, and effective.
Our goal is to ensure the availability of quality veterinary biological
products for the diagnosis, prevention, and treatment of animal
diseases. The program will continue to respond to emerging diseases
with expedited reviews and inspections for new veterinary biologics,
and it will follow a risk-based approach to inspect and test other
products.
In fiscal year 2003, APHIS performed 78 regulatory actions
following routine inspections and 24 investigations of possible
regulation violations. APHIS' Center for Veterinary Biologics found the
marketing of unlicensed veterinary biologics and false or misleading
advertising of licensed veterinary biologics in over half of these
investigations. Through education, cooperation, and regulatory actions,
APHIS helped industry achieve increased compliance with the Virus-
Serum-Toxin Act.
Objective 1.4--Manage issues related to the health of U.S. animal
and plant resources and conflicts with wildlife. Agricultural
stakeholders also expect APHIS to help solve many types of health-
related production issues in the United States. For example, producers
need help in dealing with area-wide wildlife damage control problems.
Indigenous pest problems affecting multiple States, such as boll weevil
and grasshoppers, also require APHIS' attention. We are not alone in
these efforts and have good relationships are with our State and Tribal
partners in conducting these eradication and control programs. That
cooperation, in addition to support from academia and industry, is
essential for these types of programs to succeed.
We continue to make progress on a number of other animal health
programs as well. At the beginning of fiscal year 2003, there was one
pseudorabies-quarantined premise in the United States, compared to 12
at the beginning of fiscal year 2002. By the end of fiscal year 2003,
there were no swine commercial production premises under quarantine for
pseudorabies. As of September 30, 2003, there were 1,776 flocks
participating in the Scrapie Flock Certification Program of which 105
are certified, 1,663 are completely monitored, and 8 are selective
monitored flocks. This is in comparison to 1,539 flocks enrolled, 78
flocks certified, 1,452 flocks completely monitored, and 9 flocks
selectively monitored as of September 30, 2002. To continually improve
on the 46 States, Puerto Rico, and the Virgin Islands as accredited
Tuberculosis-free, the program depopulated three dairy herds in
California, four beef herds in Michigan, and one beef herd in Texas
during fiscal year 2003.
Among a number of protection efforts, APHIS' Wildlife Services (WS)
Operations program works to protect agricultural crops from wildlife
damage, to protect livestock from predation, and to protect human
safety by preventing wildlife collisions with aircraft. In fiscal year
2003, the Agency's beaver damage management activities in several
States averted $25 million in impending damage to forest and
agricultural resources, waterways and highway infrastructures. As wolf
populations continue to increase, so do requests for assistance with
wolf predation. As a result, APHIS responded to 179 requests for
assistance with wolf predation on livestock or domestic dogs during
fiscal year 2003 in Minnesota alone. In the west, APHIS responded to 41
requests for assistance with gray wolf predation in Idaho and 87
requests in Montana. Airports reported approximately 6,100 wildlife
strikes to civil aircraft in 2002, with the U.S. Air Force alone
reporting more than 3,800 strikes to military aircraft. Wildlife
strikes cost civil aviation in the United States over $480 million in
damages in 2002. The requests for APHIS assistance in managing wildlife
hazards at airports and military air bases continue to increase. In
fiscal year 2003, APHIS wildlife biologists provided wildlife hazard
management assistance to over 500 airports nationwide for the
protection of human safety and property, compared to only 42 airports
in fiscal year 1990 and 409 airports in fiscal year 2002. At JFK
International Airport, APHIS biologists have reduced gull strikes by
over 80 percent in 2000-2003 compared to strike levels in the early
1990s.
APHIS' Wildlife Services (WS) Methods Development program, through
the National Wildlife Research Center (NWRC), functions as the research
arm of APHIS' Wildlife Services program by providing scientific
information for the development and implementation of effective,
practical, and socially acceptable methods for wildlife damage
management. This helps ensure that high-quality technical and
scientific information on wildlife damage management is available for
the protection of crops, livestock, natural resources, property, and
public health and safety. The program provides technical support for
the development of 5 drug/vaccine products through Investigational New
Animal Drug Authorizations under the Food and Drug Administration.
These materials are under development as wildlife immobilizing agents
and contraceptive products. APHIS continued to develop and evaluate
non-lethal methods for managing blackbird damage to sunflowers and rice
by conducting extensive laboratory testing of registered chemicals for
bird repellency characteristics. Scientists continued multi-year
research studies at various airports in the United States to reduce
wildlife strike hazards. These scientists researched turf management,
non-lethal repellents, and dispersal techniques to minimize strikes by
gulls, waterfowl, turkey vultures, hawks, and other species that
threaten aviation safety. In fiscal year 2003, we met our performance
target of testing and/or improving 18 wildlife damage management
methods and will maintain this target for fiscal year 2004.
APHIS' Animal Welfare program carries out activities designed to
ensure the humane care and handling of animals used in research,
exhibition, the wholesale pet trade, or transported in commerce. The
program places primary emphasis on voluntary compliance through
education with secondary emphasis on inspection of facilities, records,
investigation of complaints, reinspection of problem facilities, and
training of inspectors. However, when necessary, APHIS personnel
investigate alleged violations of Federal animal welfare and horse
protection laws and regulations and oversee and coordinate subsequent
prosecution of violators through appropriate civil or criminal
procedures. In fiscal year 2003, we conducted 365 animal welfare
investigations resulting in 172 formal cases submitted for civil
administrative action. We also issued 90 letters of warning and
resolved 44 cases with civil penalty stipulations resulting in $56,373
in fines. Administrative Law Judge Decisions resolved another 58 cases
resulting in $668,995 in fines.
Objective 1.5--Respond to emergencies--response planning,
surveillance, quick detection, containment, and eradication.--Even
though we devote many resources to pest and disease prevention and
regulatory compliance to safeguard agricultural health, it is
impossible to intercept every potential biological threat. APHIS must
have the capacity to quickly respond in order to limit the spread of
the outbreak and to eradicate it so that production losses are
minimized and exports of affected commodities do not suffer long-term
disruptions.
APHIS' Emergency Management System (EMS) is a joint Federal-State-
industry effort to improve the ability of the United States to deal
successfully with animal health emergencies, ranging from natural
disasters to introductions of foreign animal diseases. The EMS program
identifies national infrastructure needs for anticipating, preventing,
mitigating, responding to, and recovering from such emergencies. By
Presidential Homeland Security Directive, APHIS is restructuring its
emergency response systems according to the National Incident
Management System, or NIMS. APHIS implemented the incident command
structure in response to the exotic Newcastle disease (END) outbreak in
California, Arizona, Nevada, and Texas during fiscal year 2003. During
the END outbreak, APHIS followed the NIMS structure and established
five incident command posts in three States.
This same structure was put into place when, on December 23, 2003,
laboratory testing at the National Veterinary Services Laboratories
indicated that a single cow, slaughtered on December 9, 2003, in
Washington State, tested positive for BSE. The world reference
laboratory in the United Kingdom confirmed these presumptive positive
results on December 25 for BSE, and we immediately began a swift and
comprehensive investigation.
The epidemiological tracing and DNA evidence proved that the BSE
positive cow was born on a dairy farm in Alberta, Canada in 1997. She
was moved to the United States in September 2001 along with 80 other
cattle from that dairy. The epidemiological investigation to find
additional animals from the source herd led to a total of 189 trace-out
investigations. These investigations resulted in complete herd
inventories on 51 premises in three States: Washington, Oregon and
Idaho.
On February 9, 2004, APHIS announced that we had completed our
field investigation of the BSE case in Washington. During our
investigation, a total of 255 ``Animals of Interest''--animals that
were or could have been from the source herd--were identified on 10
premises in Washington, Oregon and Idaho. All 255 animals were
depopulated and sampled for BSE testing. Results were negative on all
samples. The carcasses from all of the euthanized animals were properly
disposed of in accordance with all Federal, State, and local
regulations. Consistent with international guidelines on BSE, we
focused on tracing the 25 animals born into the birth herd of the index
cow during a 2-year window around her birth. Based on normal culling
practices of local dairies, we estimated that we would be able to
locate approximately 11 of these animals. In fact, APHIS definitively
located 14 of these animals.
We are confident that the remaining animals represent very little
risk. Even in countries like the United Kingdom where the prevalence of
BSE has been very high, it has been very uncommon to find more than one
or maybe two positive animals within a herd.
Thus far in fiscal year 2004, USDA has transferred $80.4 million
from the Commodity Credit Corporation (CCC) to APHIS for BSE-related
activities. APHIS is using these funds to respond to the Washington
State incident and to enhance BSE surveillance around the country. This
CCC funding will supplement the funds already set aside for BSE
surveillance in APHIS' base appropriation. This enhanced surveillance
plan incorporates recommendations from the international scientific
review panel and the Harvard Center for Risk Analysis; both have
reviewed and supported the plan.
On December 30, 2003, Secretary Veneman announced that an
international panel of experts would be convened to review our BSE
investigative efforts and recommend enhancements to our BSE program.
The panel delivered their report on February 4, 2004, and commended
USDA for conducting such a comprehensive epidemiological investigation.
The panel also made recommendations for further enhancements to the BSE
program. The Secretary applied all of this information in considering
future actions with regard to BSE, and on March 15, she announced a
plan to enhance the BSE surveillance program. Previous targeted
surveillance efforts were designed to detect BSE in the adult cattle
population at the level of at least one infected animal per million
adult cattle with a 95 percent confidence level. The goal of the new
plan is to test as many cattle in the targeted high-risk population as
possible in 12 to 18 months, and then evaluate future actions based on
the results of this effort.
The plan also incorporates random sampling of apparently normal,
aged animals at slaughter. More than 86 percent of all adult cattle
processed annually are slaughtered in 40 plants; random sampling
efforts will be focused on these plants.
More intensive surveillance will allow us to refine our estimates
of the level of disease present in the U.S. cattle population and
provide consumers, trading partners, and industry better assurances
about our BSE status. Testing will be conducted at USDA's National
Veterinary Services Laboratories and at participating network contract
laboratories. As an example, if a total of at least 268,444 samples is
collected from the targeted population, we believe this level of
sampling would allow USDA to detect BSE at a rate of 1 positive in 10
million adult cattle (or 5 positives in the entire country with a 99
percent confidence level). We also plan on testing at least 20,000 BSE
slaughter samples from apparently healthy, aged bulls and cows. During
this effort, we will be utilizing approved rapid screening tests,
working with industry on disposal issues, and enhancing our BSE
education and outreach activities.
USDA remains confident in the safety of the U.S. beef supply. Out
of an abundance of caution, USDA recalled all meat products processed
in the affected slaughter plant the same day as the positive cow.
However, the meat presents an extremely low risk to consumers, because
all of the central nervous system related tissues--those most likely to
contain the BSE agent--were removed from the affected animal during
slaughter and did not enter the human food supply.
Even with the recent detection, the United States continues to have
a very low BSE risk. An independent assessment conducted by Harvard
University in 2001 and again in 2003 demonstrated that even with a
detection of BSE in this country, United States control efforts would
minimize any possible spread of the disease and ultimately eliminate it
from the U.S. cattle population. These controls include a long-standing
ban on imports of live cattle, other ruminants, and most ruminant
products from high risk countries; the Food and Drug Administration's
1997 prohibition on the use of most mammalian protein in cattle feed;
and an aggressive surveillance program that has been in place for more
than a decade. In each of the past 2 years, the United States tested
over 20,000 head of cattle for BSE, which is 47 times the recommended
international standard.
We opened the APHIS Emergency Operations Center (AEOC) in March
2003. The AEOC is a state-of-the-art facility that allows a national
management response team to communicate with field personnel and USDA
leadership during an outbreak situation. Communications capabilities
include video teleconferencing, advanced computer interfaces,
geographical information system mapping, and a strong multimedia
component.
Through the Pest Detection program, APHIS and its State cooperators
work to ensure the early detection of harmful or invasive plant pests
and weeds through the Cooperative Agricultural Pests Survey (CAPS)
program. The CAPS program provides the domestic infrastructure
necessary to conduct national surveys for plant pests and weeds and
document the results in a national database, the National Agricultural
Pest Information System (NAPIS). NAPIS provides a summary of pest
survey results and allows APHIS to track the spread of pests within the
United States, demonstrate their presence or absence, plan their
control, and support the export of agricultural commodities. APHIS is
currently engaged in a multi-year effort to enhance its early detection
program through an increased level of communication and cooperation
with its State partners, increased staffing levels, the use of new
technology, and a new focus on international pest risk analysis. These
efforts will help us meet our goal of detecting significant pest
introductions before a new pest can cause serious damage. Finding newly
arrived exotic pests before they spread will reduce the money spent on
costly eradication programs and prevent losses to farmers and our
natural ecosystems.
APHIS has completed pest risk assessments for ten of the 18 pests
on the national CAPS list for fiscal year 2003 and 2004 and is working
with State cooperators to develop State CAPS lists. We are also
instituting CAPS committees at the State, regional, and national levels
to ensure that stakeholders are involved in the process of targeting
pests for survey. In fiscal year 2003, APHIS and 21 States conducted
the Exotic Wood-Borer and Bark Beetle Survey, one of our new commodity-
or resource-based surveys. While the data is still not complete, this
year's survey turned up evidence of three new forest pests previously
not known to exist in the United States. We believe that these new
pests provide strong evidence of the need for the nationally directed
and risk-based detection program that we are currently implementing.
APHIS' Animal Health Monitoring and Surveillance program continues
to conduct activities such as: monitoring and surveillance of various
animal disease programs, foreign animal disease surveillance and
detection, emergency disease preparedness and response, animal health
monitoring, and epidemilologic support and delivery for both ongoing
disease programs and post-disease eradication programs. For example,
APHIS completed the Scrapie Ovine Slaughter Surveillance project sample
collection by gathering 12,508 samples from 22 slaughter plants and one
slaughter market. Losses from affected flocks cost producers
approximately $20 to $25 million annually.
APHIS has been challenged with numerous emergencies over the last
several years. However, we took quick and aggressive action to address
the following plant and animal situations: Asian Longhorned Beetle,
Chronic Wasting Disease, Citrus Canker, Emerald Ash Borer, Exotic
Newcastle Disease, Karnal Bunt, Mediterranean Fruit Fly, Mexican Fruit
Fly, Pierce's Disease/Glassy-winged Sharpshooter, Rabies, Spring
Viremia of Carp, and Tuberculosis. The Secretary used her authority to
transfer over $378 million to battle these pests and diseases. Without
the quick detection and early, rapid response, the cost to control
these outbreaks would have undoubtedly been higher.
Four Objectives for Facilitating Safe Agricultural Trade
APHIS' two goals of safeguarding U.S. agriculture and facilitating
international agricultural trade reinforce each other. By protecting
and documenting the health of our agricultural products, we can retain
existing markets and open new markets for our farmers. By facilitating
safe trade with other countries (including activities such as
monitoring world agricultural health and helping developing countries
build regulatory capacity), we help ensure that imported products will
not threaten our domestic production capability and health status.
Objective 2.1--Verify and document the pest and disease status of
U.S. agriculture and related ecosystems.--The World Trade
Organization's (WTO) Sanitary and Phytosanitary (SPS) Agreement and the
North American Free Trade Agreement commit countries to recognizing
disease- and pest-free areas within a country even if a particular pest
or disease exists elsewhere in the nation. This concept of
regionalization has resulted in APHIS' becoming increasingly involved
in demonstrating our pest and disease free status to allow agricultural
exports to trading partners.
APHIS' Pest Detection program conducted 150 surveys to document the
pest status of our plant resources and support U.S. producers' ability
to export their products. For example, by collecting extensive survey
data demonstrating the limited distribution of Karnal bunt in the
United States, APHIS provides assurance to our trading partners that
the disease is not present in major wheat-producing areas of the United
States, thereby ensuring annual agricultural exports of up to $5
billion and supplying the raw ingredients for domestic and foreign
customers of flour, pasta, and other wheat products. Plum pox is
another case in which the collection of national data has helped to
keep budwood markets open by demonstrating the absence of the pest from
various areas around the United States.
APHIS officials collaborate with State and other Federal agencies
to conduct animal health surveillance activities through the Animal
Health Monitoring and Surveillance (AHMS) program. These activities
include pre- and post-entry testing of imported animals, sample
collection at slaughter, and routine testing of animals for export and
interstate movement. APHIS also conducts surveillance for domestic
animal disease eradication programs, like brucellosis, tuberculosis,
chronic wasting disease, and others. This surveillance information
allows APHIS to make key regulatory decisions. In doing so, APHIS
strives to preserve U.S. exports markets, protect livestock or poultry
producers in disease-free areas, and provide the best options possible
for those producers who are affected by our regulatory decisions.
When foreign animal disease outbreaks occur in the United States,
our trading partners routinely ban U.S. animal and animal product
exports until APHIS has the opportunity to confirm the extent of the
disease's spread and demonstrate what regulatory actions are being
taken to contain it. Last year, the poultry breeding and hatchery
industry lost approximately $1 million per week due to bans by various
trading partners on U.S. poultry exports because of exotic Newcastle
disease. Our trading partners will lift such bans in unaffected and
unregulated areas only if we can convince them that measures are being
taken to mitigate the risk of the disease's spread via host commodity
exports. Providing our trading partners accurate and detailed
information about a foreign animal disease outbreak and the subsequent
Federal/State disease management response is critical. This information
gives our trading partners the assurances they need without exposing
them to undue risk. Such a regionalized approach helps minimize trade
disruption and negative market reactions.
Objective 2.2--Certify the health of animals and plants and related
products for export and interstate commerce.--In carrying out this
role, APHIS spends well over $100 million on disease diagnostics and
epidemiology and pest detection infrastructure. This infrastructure
makes our health certificates credible for trading partners, but it
also is instrumental for quickly detecting and limiting the spread of
outbreaks of new pests and diseases, part of our emergency response
strategy (Objective 1.5).
The Import/Export program promotes simple, science-based export
conditions and negotiates requirements based on technical-level
mitigation and guidelines established by OIE. The program is working
hard to strengthen its evaluation and risk assessment capabilities to
meet international and domestic responsibilities and respond to
international and domestic requests for regionalization in a timely
manner. For example, during fiscal year 2003 the Import/Export program
increased its capacity to conduct regionalization analyses for foreign
markets (import purposes) and domestic markets (export purposes).
During the early stages of the exotic Newcastle disease outbreak in
fiscal year 2003, many countries--including all members of the European
Union--suspended poultry imports from all regions of the United States.
APHIS, however, identified END-free regions of the country and helped
these regions regain market access. These actions helped protect the
entire U.S. poultry export industry, which has an estimated annual
worth of $2.5 billion.
APHIS' Agricultural Quarantine Inspection program facilitates the
export of agriculture shipments through EXCERT, an electronic database
containing plant health import requirements for over 200 countries.
APHIS export certifications ensure that U.S. products meet the
agricultural requirements of the country of destination. In fiscal year
2003, APHIS issued over 400,000 Federal plant health export
certificates for agriculture shipments, including the issuance of heat
treatment certificates for coniferous solid wood packing materials to
the People's Republic of China.
Objective 2.3--Resolve trade barrier issues related to animal and
plant health.--Because of APHIS' expertise in animal and plant health
issues and our regulatory role (Objective 1.2), the Agency serves as a
key resource for trade policy agencies, like the Foreign Agricultural
Service and the U.S. Trade Representative, in resolving sanitary and
phytosanitary issues that often become trade barriers (Objective 2.3).
The negotiations that occur to resolve these issues often result in
trading partners providing additional information about the pests or
diseases in question, and this information in turn leads to more
effective preventive regulatory strategies.
Officials with the Trade Issue Resolution and Management program
work to minimize trade disruptions caused by animal and plant health
issues. In fiscal year 2003, APHIS retained poultry markets in Japan,
Korea, and the Philippines worth over $169 million, expanded market
access for apples in Mexico worth $88 million, and opened new markets
for seed potatoes to Uruguay and apricots from the Pacific Northwest to
Mexico. Additionally, APHIS expanded market access for U.S. cherries,
canola seed, and potatoes in Mexico, and with the concerted efforts of
APHIS, Foreign Agricultural Service, and the Office of the United
States Trade Representative, we retained markets for wheat in Argentina
and Peru.
When individual agricultural shipments are held up at foreign
ports, APHIS attaches correct problems and negotiate with host
government officials to facilitate the shipment's acceptance. APHIS
obtained authorization for apples at four additional ports of entry in
Mexico resulting in the release of a $5 million apple shipment. In
addition, APHIS facilitated $1 million worth of U.S. cotton in Chile,
three rice shipments in Costa Rica and Guatemala, the release of $13
million in citrus shipments held by Japanese officials, and the waiving
of phytosanitary certification with Romanian officials for soy beans,
allowing a shipment of 14,000 tons of soybeans valued at over $3
million.
Objective 2.4--Provide expertise and training in animal and plant
health.--The WTO's SPS Agreement requires member countries to provide
technical assistance to developing countries to enable those countries
to participate more fully in the global trade arena. Using cooperative
agreements, preclearance trust fund agreements, and other international
arrangements, APHIS provides many countries with technical assistance
to strengthen their animal and plant health infrastructure, risk
assessment capacity, and food production capabilities (Objective 2.4).
By doing this, APHIS not only fulfills requirements for the SPS
Agreement but also improves offshore threat assessment and risk
reduction capabilities (Objective 1.1).
APHIS attaches continue to identify specific weaknesses in foreign
regulatory systems and provide technical assistance where appropriate.
Capacity building improves foreign countries' regulatory
infrastructure, U.S. relationships with key foreign officials, United
States regulatory concepts and approaches, and, ultimately, the
agricultural health status of the foreign country.
In fiscal year 2003, the Veterinary Biologics program continued
working with the Committee of the Americas for the Harmonization for
Registration and Control of Veterinary Medicines (CAMEVET). The
objectives of this committee include coordinating technical information
for the registration and control of veterinary medicines. The intention
of this program is to exchange information and harmonizes technical
procedures to improve the quality of veterinary medicines and the trade
of products among countries in the Americas.
A part of APHIS' Veterinary Diagnostics program assists foreign
governments in the diagnosis of animal diseases by maintaining national
and international laboratory recognition with the highest quality
reference assistance and by conducting developmental projects for
rapidly advancing technologies. In fiscal year 2003, as an OIE
reference laboratory, APHIS' National Veterinary Services Laboratories
(NVSL) continued to use their diagnostic expertise to provide training,
consultation, and assistance to both domestic and international
laboratories. NVSL prioritized the evaluation/validation of new
technologies such as the exotic Newcastle disease and Avian Influenza
polymerase chain reaction and Chronic Wasting Disease kits to offer new
tools for control of certain key diseases. NVSL also shipped 117,095
vials of reagents to domestic and foreign customers to meet critical
testing needs. And, NVSL acquired a new chemistry analyzer for blood
screening purposes and doubled the number of fraudulent cases detected
over those detected in fiscal year 2002. The fraudulent blood testing
program at NSVL helps to assure confidence in the health of animals
exported from the United States to other countries.
new direction
After evaluating the current challenges and opportunities that
exist today, APHIS has developed a new strategic plan of action that
will set the Agency's course over the next 5 years. During this time,
APHIS is committed to focusing on the following overarching goals:
safeguarding the health of animals, plants, and ecosystems in the
United States; facilitating safe agricultural trade; and ensuring
effective and efficient management of programs to achieve its mission.
As part of its new strategic plan, APHIS intends to strengthen key
components of its protection system by focusing on the following
objectives:
--Ensuring the safe research, release, and movement of agricultural
biotechnology;
--Strengthening the Agency's emergency preparedness and response;
--Resolving trade barriers related to sanitary and phytosanitary
requirements;
--Reducing domestic threats through increased offshore threat-
assessment and risk-reduction activities;
--Reducing the risk of invasive species introductions by enhancing
risk-analysis capabilities; and,
--Managing issues related to the health of U.S. animal and plant
resources and conflicts with wildlife.
fiscal year 2005 budget request
APHIS has developed its fiscal year 2005 Budget Request in the
context of the Strategic Plan, the overriding imperative of Homeland
Security, and the need to restrain Federal spending. The fiscal year
2005 Budget Request for Salaries and Expenses under current law totals
$828.4 million or $112 million more than the fiscal year 2004
Consolidated Appropriations Act. About $8.5 million is for the cost of
the pay raise.
The fiscal year 2005 increase, approximately 15.5 percent above the
fiscal year 2004 appropriation, is for initiatives designed to address
the increasing threats to the health of American agriculture and
Homeland Security and to support the President's Food and Agriculture
Defense Initiative. About 40 percent of the increase, approximately
$45.4 million, is an investment to substantially reduce the over $378
million fiscal year 2003 emergency transfers and to protect and expand
the $53 billion annual agricultural export market by fully funding
Federal costs up front in the budget. Other notable increases stem from
the highest priority components of APHIS' Strategic Plan and the Food
and Agriculture Defense Initiative. APHIS' request for fiscal year 2005
contains $94.36 million for programs that support the Food and
Agriculture Defense Initiative, an increase of nearly $50 million over
fiscal year 2004.
highest priority components of the strategic plan and homeland security
APHIS proposes to increase funding for the Biotechnology Regulatory
Services program by $6.544 million. This will enable us to inspect all
high risk fields five times during the growing season and two times in
the subsequent season to provide the maximum confidence level that
pharmaceutical and industrial developments are managed safely. Such a
confidence level is necessary to convince skeptics and trading partners
that these, and other biotechnologically derived products, are safe.
That confidence is vital to the growth of the industry and American
agriculture.
We propose to increase the Import-Export program by $3 million and
the Pest Detection program by $1.5 million to fulfill APHIS'
responsibilities under the Bioterrorism Preparedness and Response Act
of 2002. APHIS must regulate possessors and users of ``select agents,''
toxins and pathogens necessary for research and other beneficial
purposes which could be deadly in the hands of terrorists.
In light of the first BSE case in the United States, we propose
increasing the Animal Health Monitoring and Surveillance program by an
additional $8.641 million to support enhanced BSE surveillance to
maintain the confidence of the American people in the safety of the
beef supply and allow us to continue our efforts to prevent the
introduction and spread of BSE in the U.S. cattle population. In this
program, we also request $33.197 million to accelerate implementation
of a National Animal Identification program. Timely tracebacks of
animals are integral to a rapid response and recovery to incursions of
animal illness and foreign animal disease.
Early detection of new animal and plant pest or disease
introductions has the potential to significantly reduce eradication
costs and producer losses and, accordingly, is a high priority for
APHIS. We propose to increase the funding available to our State
cooperators through cooperative agreements for plant pest surveys and
animal health monitoring efforts by $15.2 million (including $9.1
million for the Pest Detection program and $6.1 million for the Animal
Health Monitoring and Surveillance program). In addition to requesting
increased funding to provide to our cooperators, we are proposing a
$6.202 million increase for the Pest Detection program to enhance our
pest detection infrastructure and national coordination efforts. By
establishing basic capacity in all 50 States now, we will enhance our
ability to find and contain pests and diseases like citrus canker,
Asian longhorned beetle, emerald ash borer, Karnal bunt, exotic
Newcastle disease, and avian influenza before they become widespread
and require expensive emergency eradication programs. Similarly, we
request an increase in the Wildlife Services Operations program by $5
million to expand infrastructure to monitor and gather data on the
disease status of free-ranging animals and integrate this data with
existing agricultural animal health monitoring systems. APHIS will use
this information to detect and respond to disease outbreaks in wildlife
populations and mitigate the risk of wildlife diseases transmission to
farmed livestock.
The budget requests a $5 million increase for the Biosurveillance
program to enhance several data collection systems already in use,
allowing us to improve our surveillance capabilities and establish
connectivity with the integration and analysis function at DHS.
The increase of $3.149 million in the Trade Issue Resolution and
Management program will allow APHIS to place more officials overseas to
facilitate the entry of U.S. agricultural products and to help
establish international standards based on sound science. Having APHIS
attaches on site in foreign countries pays dividends weekly. They can
intervene when foreign officials raise false barriers to the entry of
individual American export shipments. In 2002, APHIS attaches
successfully intervened to clear shipments worth $53 million in such
cases.
We propose to increases the Low Pathogenic Avian Influenza (LPAI)
program by $11.783 million to conduct a vigorous surveillance and
control program in the live bird markets in the Northeast--the most
threatening continuing reservoir of LPAI in the United States.
Eliminating LPAI in these markets would help prevent costly eradication
programs like the one we conducted in Virginia in 2002. It also would
remove a barrier to poultry exports--a $2.2 billion market--that many
countries have or are threatening to invoke. OIE is likely to upgrade
LPAI status to ``List A,'' which could result in more restrictions on
our exports if we do not move to eradicate LPAI in the United States.
We also propose to increase the Foot and Mouth Disease/Foreign
Animal Disease program by $4.229 million to further our goal of
reducing domestic threats through increased offshore threat assessment
and risk-reduction activities by placing more officers overseas to
monitor animal disease incidence and assist foreign countries in
controlling outbreaks. We propose to increase the Pest Detection
program by $3.875 million to do the same for plant pests and diseases.
We request an increase in the Tropical Bont Tick (TBT) program by
$2.495 million to eradicate TBT from Antigua completely and quickly
prevent threats to other islands already free, to control and eradicate
TBT from St. Croix, and establish surveillance on other U.S. islands
and mainland to determine if TBT has spread.
We propose to increase the Emergency Management Systems program by
$10.625 million to enhance animal health emergency preparedness
throughout the United States and to establish a vaccine bank to
complement the North American Foot and Mouth Disease Vaccine Bank. This
additional resource would include vaccines or preventives for other
foreign animal disease of significance. These efforts will help protect
our Nation's meat, poultry, and livestock exports, which are valued at
$7.7 billion annually, and the livestock and poultry industries
overall, which are valued at $87 billion.
The budget proposes an increase in the Veterinary Biologics program
by $1.861 million to increase inspections, licensing, and testing of
biotechnology-derived veterinary biologics and to enhance tools
available to the national animal health laboratory network that would
fulfill international standardization requirements. United States sales
of agricultural biotechnology products (transgenic seeds [excluding
rice and wheat], animal growth hormones, biopesticides, and other
products) are projected to increase from $2.4 billion in 2003 to $2.8
billion by 2006, an increase of $144 million annually.
The budget proposes an increase in the Veterinary Diagnostics
program by $4.347 million to enhance the national animal health
laboratory network and continue its diagnostic work at the Foreign
Animal Diseases Diagnostic Laboratory on Plum Island to provide
critical services to the animal industry and help protect the United
States herd against potential acts of bioterrorism.
The request increases the Agricultural Quarantine Inspection
program by $3 million to enhance operations at the National Germplasm
and Biotechnology Laboratory to develop technology to detect and
identify high-risk plant pathogens as well as protocols for quarantine
testing. These efforts support APHIS' emergency response capabilities,
eradication programs, pest exclusion activities, biotechnology
permitting programs, and the newly mandated Select Agents program. This
increase is offset by a decrease of $2.771 million associated with
inter-line inspections in Hawaii and a decrease of $1.246 million for
fiscal year 2004 equipment investments.
The budget increases the Import/Export program by $1.355 million to
fully develop and begin implementing an automated system to track
animal and animal product movements. We are developing this tool in
response to increasing global trade and travel and demands for
increased efficiency in tracking animals and animal products entering
and leaving the country.
funding to continue emergency programs
APHIS has been battling several pests and diseases that have
entered or unexpectedly spread to new areas of the United States over
the past few years. Finishing the job is important if we are to achieve
the goals we established when these programs began. Chief among these
goals is maintaining export markets. Only by aggressively attacking
pest and disease introductions can we assure trading partners that the
problems are not endemic to the United States and thus not a reason to
ban our products from their markets. The budget requests, and the value
of the industries and markets at stake, follow.
--Emerald ash borer, $12.5 million, an increase of $11.009 million.
This pest has emerged as a serious pest in the Northern Midwest
States and threatens the ash saw timber industry, with a value
of $25 billion. Much like the Asian Longhorned Beetle, this
pest probably arrived via non-agricultural imports and reflects
a new threat; not only do the contents of a container pose a
risk, so does the container itself. The budget request would
provide for Federal cost-sharing of 75 percent for this
program.
--Glassy-winged sharpshooter (vector of Pierce's Disease), $24
million, an increase of $1.881 million. Without a program to
control Pierce's Disease, the U.S. wine industry could face
losses of $33 billion. The budget request would provide for
Federal cost-sharing of 57 percent for this program.
--Citrus Longhorned Beetle (CLHB), $325,000. The CLHB attacks over 40
varieties of hardwood and fruit trees and has no natural
enemies. The CLHB could cause $41 billion in losses to forest
resources nationwide. The budget request would provide for
Federal cost-sharing of 100 percent for this program.
--Citrus Canker, $52.5 million, an increase of $19.071 million. This
program protects the Florida citrus industry worth over $9
billion. The budget request would provide for Federal cost-
sharing of 57 percent for this program.
--Infectious Salmon Anemia, $235,000. This program protects a part of
the burgeoning aquaculture industry--salmon exports of over
$100 million annually. The budget request would provide for
Federal cost-sharing of 47 percent for this program.
--Spring Viremia of Carp, $285,000. This program protects the common
and silver carp industries, with a value of $2.8 billion. The
budget request would provide for Federal cost-sharing of 77
percent for this program.
--Chronic Wasting Disease, $20.1 million, an increase of $1.478
million. In addition to the potential spread to other species,
this program directly protects the elk farming and antler
industry (with annual gross receipts of $150 million) and
white-tailed deer farms (with capital investments estimated at
$2.5 billion). The budget request would provide for Federal
cost-sharing of 77 percent for this program.
--Bovine Tuberculosis, $20.9 million, an increase of $5.998 million.
This program protects the entire livestock industry, which has
annual earnings from exports of $5.4 billion. The budget
request would provide for Federal cost-sharing of 57 percent
for this program.
--Scrapie, $20.9 million, an increase of $5.106 million. This program
minimizes losses to sheep and goat producers, who currently
incur annual losses of $20-25 million because of scrapie. The
budget request would provide for Federal cost-sharing of 67
percent for this program.
other increases
We recognize the need for fiscal restraint, but believe that the
following additional investments are important if we are to meet the
challenges facing us.
--To support the Biotechnology priority, we request an increase of
$441,000 for the Animal and Plant Health Regulatory Enforcement
program to help ensure compliance by investigating alleged
violations of permit restrictions regarding pharmaceutical and
industrial plants.
--To further improve our pest and disease surveillance and detection
capability--both to protect and gain export markets and to
prevent recurring, costly emergency programs--we request $6.171
million for the Fruit Fly Eradication and Detection Program to
increase detection trapping in Florida and California.
--To provide the funding requested by the State Department in
providing adequate security for APHIS personnel overseas and to
continue security and mission critical facilities, we request
$7.133 million in our Physical/Operational Security program.
--To establish and maintain liaison positions at key government
agencies and to investigate and evaluate disposal techniques
for contaminated biological materials, e.g., animal carcasses,
we request $932,000 for our Biosecurity program.
--To continue to modernize our information technology infrastructure
to include network capacity planning and management,
implementation of eGov initiatives, and cyber security
compliance and management, we request $891,000 in our APHIS
Information Technology Infrastructure program.
--To increase nematode resistant potato varieties and regulatory
treatments, we request $184,000 for the Golden Nematode program
and to maintain current efficiencies, we request $451,000 in
the Screwworm program.
decreases
To allow us to fund these high priority programs, we offer key
offsets:
With $15.585 million in reduced funding for the Johne's program,
APHIS would rely more on the collaborative working relationship between
Federal and State animal health workers. For the Boll Weevil program,
we are proposing that the Federal Government assume 15 percent of
program costs, which in conjunction with the projections of lower
nationwide needs, will result in a request of $17 million, a reduction
of $33.4 million. To offset the $5 million increase for the wildlife
surveillance system, we assume a $5.556 million increase for State
cooperators to fund a larger share of the cost of other wildlife
management programs such as predator, bird, and invasive species
damage. Funding for the Asian longhorned beetle program is requested to
be $9.3 million, or a reduction of $20.670 million. The fiscal year
2005 request is based on an overall program level consistent with the
$4 million traditionally provided by cooperating (non-Federal)
agencies. This would change the program from an eradication program to
a control program. The aim is still to protect $41 billion of U.S.
forest resources while facilitating the $122 billion trade market with
China, the source of the pest.
We also propose a reduction of $10.857 million associated with
animal welfare user fees. This will allow the industry to cover an
estimated 66 percent of the cost of enforcing the animal welfare
regulations.
conclusion
APHIS' mission of safeguarding U.S. agriculture is becoming ever
more critical. Although the processes by which we protect America's
healthy and diverse food supply are being increasingly challenged,
APHIS is committed to taking the lead in building and maintaining a
world-class system of pest exclusion, surveillance, detection,
diagnosis, and response. Like the APHIS Strategic Plan, the APHIS
Budget consists of interdependent components that only when taken
together can truly protect the health and value of American agriculture
and natural resources.
On behalf of APHIS, I appreciate all of your past support and look
forward to even closer working relationships in the future. We are
prepared to answer any questions you may have.
______
Prepared Statement of Donna Reifschneider, Administrator, Grain
Inspection, Packers and Stockyards Administration
introduction
Mr. Chairman and Members of the Committee, I am pleased to
highlight the accomplishments of the Grain Inspection, Packers and
Stockyards Administration (GIPSA), and to discuss the fiscal year 2005
budget proposal.
GIPSA is part of USDA's Marketing and Regulatory Programs, which
works to support a competitive global marketplace for U.S. agricultural
products. GIPSA's mission is to facilitate the marketing of livestock,
poultry, meat, cereals, oilseeds, and related agricultural products,
and to promote fair and competitive trading practices for the overall
benefit of consumers and American agriculture.
GIPSA serves in both service and regulatory capacities. The Packers
and Stockyards Programs promote a fair, open, and competitive marketing
environment for the livestock, meat, and poultry industries. The
Federal Grain Inspection Service provides the U.S. grain market with
Federal quality standards, a uniform system for applying these
standards, and impartial, accurate grain quality measurements that
promote an equitable and efficient grain marketing system. Overall,
GIPSA helps promote and ensure fair and competitive marketing systems
for all involved in the merchandising of livestock, meat, poultry, and
grain and related products.
organization
GIPSA comprises 737 employees. Grain inspection services are
delivered by the national inspection system, a network of Federal,
State, and private inspection personnel that is overseen by GIPSA. The
system includes 12 GIPSA field offices, 2 Federal/State offices, and 8
State and 58 private agencies that are authorized by GIPSA to provide
official services. This network insures the availability of official
inspection and weighing services anywhere in the United States. GIPSA
also maintains 3 Packers and Stockyards Programs regional offices that
specialize in poultry, hogs, and cattle/lamb.
packers and stockyards programs
GIPSA's Packers and Stockyards Programs (P&SP) administers the
Packers and Stockyards Act (P&S Act) to promote fair and open
competition, fair trade practices, and financial protection in the
livestock, meat packing, meat marketing, and poultry industries. The
objective of the P&S Act is to protect producers, growers, market
competitors, and consumers against unfair, unjustly discriminatory, or
deceptive practices that might be carried out by those subject to the
P&S Act. To meet this objective, GIPSA seeks to deter individuals and
firms subject to the P&S Act from engaging in anti-competitive
behavior, engaging in unfair, deceptive, or unjustly discriminatory
trade practices, and failing to pay livestock producers and poultry
growers. GIPSA initiates appropriate corrective action when there is
evidence that firms or individuals have engaged in anti-competitive,
trade, payment or financial practices that violate the P&S Act.
The livestock, meatpacking, and poultry industries are important to
American agriculture and the Nation's economy. With only 166 employees,
GIPSA regulates these industries, estimated by the Department of
Commerce in fiscal year 2002 to have an annual wholesale value of $118
billion. At the close of fiscal year 2003, 5,287 market agencies and
dealers, and 2,067 packer buyers were registered with GIPSA. In
addition, there were 1,429 facilities that provided stockyard services,
with an estimated 6,000 slaughtering and processing packers, meat
distributors, brokers and dealers, and 128 poultry firms running 202
poultry complexes operating subject to the P&S Act.
Our regulatory responsibilities are the heart of our mission to
administer the P&S Act. To this end, GIPSA closely monitors practices
that may violate the P&S Act. Our top priority continues to be
investigating complaints alleging anti-competitive, unjustly
discriminatory, or unfair practices in the livestock, meat, and poultry
industries. Last year, GIPSA conducted over 1,700 investigations. As a
result of these investigations, the Packers and Stockyards Programs
helped restore over $27 million to the livestock, meatpacking, and
poultry industries. While this is not the largest amount GIPSA has ever
reported to Congress, it constitutes more than the amount that P&SP
received in appropriated funding.
GIPSA divides its regulatory responsibilities into three areas:
financial protection, trade practices, and competition. In the area of
financial protection, GIPSA continued to provide payment protection to
livestock producers and poultry growers in a year where the livestock,
meatpacking, and poultry industries faced tremendous financial
pressures. Financial investigations last year resulted in $3.2 million
being restored to custodial accounts that are established and
maintained for the benefit of livestock sellers. Livestock sellers
recovered over $1.5 million under the P&S Act's packer trust
provisions. During fiscal year 2003, 55 insolvent dealers, market
agencies and packers corrected or reduced their insolvencies by $6.6
million. In addition, GIPSA's financial investigators analyzed more
than 400 bond claims exceeding $7 million. However, GIPSA has no
statutory authority to compel payment by the trustee or bond surety.
In its Trade Practices Programs, GIPSA continued to promote fair
trading between industry participants. Much of GIPSA's work in the
Trade Practices Program focuses on insuring accurate weights and
prices. GIPSA continued to work with local states weights and measures
programs to provide scale training and to secure testing of every scale
used to weigh livestock or live poultry twice a year. In addition,
GIPSA initiated or completed 41 investigations of weight and price
manipulation of livestock. Some of these investigations are on-going.
GIPSA also investigated the operations of 143 live poultry dealers;
most of these investigations examined whether live poultry dealers were
in compliance with contracts entered into with poultry growers. With
members of the regulated industries, we developed industry standards on
new technologies that are entering the marketplace to evaluate and
price livestock purchased on a carcass merit basis. We anticipate
implementing two more voluntary standards in the next 6 months.
GIPSA continues to develop its Competition Program. During fiscal
year 2003, the Competition Branch began or continues evaluations of 31
complaints regarding attempted restriction of competition, failure to
compete, buyers acting in concert to purchase livestock, apportionment
of territory, unlawful price discrimination, and predatory pricing. Of
these complaints, one firm was brought into compliance, and a second
firm went out of business. Six of the investigations revealed that the
concerns raised were not supported by evidence. 23 complaints were
still pending at the end of the fiscal year. GIPSA continues to work
closely with the CFTC, attending CFTC Commissioner briefings on the
cattle, hog, and meat markets.
GIPSA's Rapid Response Teams remain a powerful tool to address
urgent industry issues that place the industries in imminent financial
harm. Last year, GIPSA rapid response teams investigated 59 situations
across the Nation. During fiscal year 2003, these rapid response
investigations contributed to returning $5.9 million to livestock
producers and poultry growers at a cost of $413,010 in salary and
travel expenses.
GIPSA continues to work with violating firms to achieve voluntary
compliance, and GIPSA continues to initiate appropriate corrective
action when we discover evidence that the P&S Act has been willfully
violated. During fiscal year 2003, GIPSA, with assistance from the
Office of the General Counsel, filed 22 administrative or justice
complaints alleging violations of the P&S Act. This number, similar to
last year, represents more than a 50 percent increase over the number
of complaints filed in fiscal year 2001.
To ensure that producers and growers are aware of the protections
the P&S Act provides, the Agency provides a hotline (1-800-998-3447) by
which stakeholders and others may anonymously voice their concerns.
Last year GIPSA responded to and investigated issues raised by 88
callers. These calls were in addition to calls received in our regional
offices. GIPSA also increased its outreach activities. GIPSA conducted
28 orientation sessions for new auction market owners and managers and
4 feed mill orientations to educate them about their fiduciary and
other responsibilities under the P&S Act.
It is important to note some of the activities that GIPSA has been
engaged with in recent months. Following the discovery of the bovine
spongiform encephalopathy (BSE) positive cow in December, 2003, GIPSA
created Financial Protection, Trade Practices and Competition Task
Forces to provide protection to livestock producers and members of the
cattle industry commensurate with its authority under the Packers and
Stockyards Act. These task forces are based in Denver, Colorado,
GIPSA's cattle office, and include technical experts from each of
GIPSA's regional offices and headquarters. The task forces have
developed strategies to identify and respond to potentially unlawful
practices unique to current market conditions. Daily Agency-wide
meetings are being held to inform and share all BSE related information
so that employees, task forces, and headquarters are all current on the
latest issues.
GIPSA's Financial Protection Task Force is monitoring livestock
markets for financial failures. The Task Force has identified scheduled
sales at auction markets that were cancelled in the days and weeks
following the BSE announcement. It's monitoring firms likely to be more
vulnerable to impacts of the BSE incident, identifying industry changes
in payment practices, and standing ready to deploy rapid response teams
to investigate financial concerns in the industry. GIPSA is currently
conducting several investigations of particularly financially
vulnerable firms.
GIPSA's Trade Practices Task Force is reviewing changes in
marketing and procurement practices implemented by packers in response
to the BSE incident. GIPSA has been in contact with major packers and
industry groups to stay current on packer responses. GIPSA is reviewing
notices sent by packers to livestock producers informing producers of
purchasing and pricing changes implemented as a result of BSE. GIPSA
has received complaints from producers who claim that packers have
changed the payment terms of their contracts and has deployed rapid
response teams to investigate these complaints. GIPSA's Competition
Task Force is analyzing, and when warranted, investigating cattle
markets when anti-competitive practices may be occurring. Several
investigations have been initiated. The Competition Task Force analyzes
reported fed-cattle prices in various geographic markets to identify
abnormal patterns that may indicate violations of the P&S Act. The task
force assesses whether price differences are the result of normal
market forces, or packer behavior that may violate Section 202 of the
P&S Act. When normal market forces fail to explain abnormal prices, the
Competition Task Force conducts a rapid response investigation to
determine whether the P&S Act has been violated.
GIPSA has also communicated with the Commodity Futures Trading
Commission (CFTC), the Agricultural Marketing Service, Food Safety and
Inspection Service, the Animal and Plant Health Inspection Service, and
local and State governmental organizations to discuss issues and
coordinate plans. GIPSA attends CFTC's surveillance meetings and is
prepared to work with CFTC on any investigation that may involve a
potential violation of the P&S Act. GIPSA is actively responding to the
BSE incident and is prepared to continue enforcement of the Packers and
Stockyards Act and regulations in light of this situation.
In addition, this year GIPSA made significant progress on the
Livestock and Meat Marketing Study for which Congress appropriated $4.5
million in fiscal year 2003. The study will look at issues surrounding
a ban on packer ownership. GIPSA, through APHIS, is in the process of
contracting out the study. Since packers' use of non-spot arrangements
is intertwined with other advance marketing arrangements throughout the
supply chain, the study has a broad focus.
The issues addressed by the study are complex. The research is
expected to involve several academic disciplines, varied research
methods, and large amounts of data that are not already available.
Business schools, economics departments, and agricultural economics
departments at universities have indicated an interest in bidding, as
have consulting firms. GIPSA expects to see collaborations of
disciplines in the bids.
Contractors are expected to complete the study in phases over 2
years, with the first reports due 1 year after contract award. Some
descriptive findings will be released prior to completion of the
analytical parts of the study. Information about the study, including
the Federal Register notice, the public comments, and RFP notices, is
available on GIPSA's website at: www.usda.gov/gipsa, by following the
``marketing study'' icon.
Also in fiscal year 2003, GIPSA completed development of the Swine
Contract Library as an internet application that meets the requirements
of the Livestock Mandatory Reporting Act of 1999's amendments to the
Packers and Stockyards Act. Packers are required to file swine purchase
contracts with GIPSA, and monthly reports about the number of swine
expected to be delivered, under contract, to packers.
The Swine Contract Library includes information from swine packing
plants with a slaughter capacity of 100,000 swine or more per year. 31
firms operating 51 plants accounting for approximately 96 percent of
industry slaughter are subject to the SCL. GIPSA has received over 530
contracts to date. In the first 2 months of operation, the SCL recorded
more than 1,400 hits. Through the SCL, producers have the ability to
see contract terms, including, but not limited to, base price
determination formula and the schedules of premiums or discounts, and
packers' expected annual contract purchases by region.
The Swine Contract Library went live with information on contract
provisions available to the public in early fiscal year 2004, and is
available on the GIPSA web site at http://www.usda.gov/gipsa/.
federal grain inspection service
GIPSA's Federal Grain Inspection Service (FGIS) facilitates the
marketing of U.S. grain in domestic and international markets by
providing the market with services and information that effectively and
accurately communicate the quality and quantity of grain being traded.
GIPSA administers its inspection and weighing programs under the
authority of the U.S. Grain Standards Act, as amended, and the
Agricultural Marketing Act of 1946 (AMA) as it relates to the
inspection of rice, pulses, lentils, and processed grain products.
Providing reliable, high quality inspection and weighing services
at a reasonable price remains a key commitment of GIPSA and the State
and private officials comprising the official inspection system.
Federal export inspection services average $0.30 per metric ton, or
approximately 0.23 percent of the $14 billion value of U.S. grain
exports. In fiscal year 2003, more than 1.8 million inspections were
performed on more than 222 million metric tons of grains and oilseeds.
Over 84,000 weighing certificates were issued on 91.5 million metric
tons of grain.
There have been many changes in official inspection services over
the past several years to respond to changing market demands. GIPSA has
programs and services in place to facilitate the loading of shuttle
trains; to address greater product differentiation; and to provide
customers with inspection results electronically. These all represent
steps in the right direction, but we recognize that the market is
changing daily and we must change with it to remain relevant.
GIPSA is focusing on a number of key areas to better facilitate the
marketing of U.S. grain. We are enhancing our international outreach
capabilities to remove obstacles to U.S. grain reaching world markets.
We are bringing standardization to domestic and international markets.
We are focusing on providing the market with the information it needs
on the end-use functional quality attributes of grain that determine
its true value in an increasingly quality-specific market. We are
improving service delivery, and the efficiency and cost-effectiveness
of the official system.
International outreach is one component of our efforts to
facilitate the marketing of U.S. grain. We will continue to expand our
outreach efforts to support market development around the world. Our
international customers are making great use of the wide array of
recently produced multimedia educational materials.
In recent years, we have significantly expanded our outreach
efforts to ensure open markets for U.S. grain in Asia and Mexico. Last
year, GIPSA initiated two 3-month regional assignments, one in Asia and
one in Mexico, to address immediate and long-term grain marketing
issues in each region. In Mexico, GIPSA has worked extensively with
APPAMEX (an organization of Mexican grain importers), the USDA/Foreign
Agricultural Service (FAS), and USDA cooperator organizations to
address Mexico's concerns about U.S. grain quality. We have conducted
in-depth grain grading seminars to educate Mexican buyers, traders, and
end users on the U.S. grain marketing system, GIPSA's impartial grain
quality assessment, and U.S. grain standards, sampling procedures, and
inspection methods. In fiscal year 2003, GIPSA also helped several of
Mexico's private sector grain elevators and processing facilities set
up grain inspection laboratories mirrored after GIPSA's. Last fiscal
year, we also worked with Mexican and Canadian officials to secure a
trilateral agreement on implementation of the Biosafety Protocol.
Our international outreach program also includes technical
consultative services for international customers. In fiscal year 2003,
GIPSA responded to 17 requests for technical assistance from exporters,
importers, and end users of U.S. grains and oilseeds, as well as other
USDA agencies, USDA Cooperator organizations, and other governments.
Our international outreach are not the only initiatives we have
underway to improve the standardization of, and in turn, facilitate
marketing in, domestic and international markets. In the biotech arena,
GIPSA is helping bring standardization, consistency, reliability, and
accuracy to the biotech testing entities and tools used by the market.
GIPSA's test kit evaluation program validates the performance of rapid
tests for biotechnology-derived grains and oilseeds. Our Proficiency
Program improves the performance and reliability of government and
private laboratories in the United States and worldwide that test for
biotechnology-derived grains. Under this voluntary program,
participants are evaluated based on results of their quantitative and/
or qualitative testing of samples of all commercially available corn
and soybean biotechnology events. More than 88 organizations
participated in the program in fiscal year 2003, a threefold increase
from 22 organizations in February 2002.
In fiscal year 2002, GIPSA established formal research
collaboration with the National Institute of Science and Technology
(NIST) to investigate DNA-based testing for biotechnology-derived
grains and oilseeds, and to investigate the development of reference
materials and methods for DNA-based testing. Using information obtained
through confidentiality agreements with life science organizations,
GIPSA and NIST produced event-specific plasmids for evaluation as
reference materials and potentially to be in the development of
reference methods. In fiscal year 2003, GIPSA and NIST hosted a
workshop entitled AStandard Reference Materials for Biotechnology
Crops.'' Thirty-six representatives from the life science
organizations, testing laboratories, test kit manufacturers, food
processors, Canada, European Union, and Japan attended.
In fiscal year 2004, GIPSA will continue to collaborate with NIST
to investigate challenges associated with Polyermase Chain Reaction
(PCR) technology and develop reference materials to improve the
reliability and accuracy of DNA-based testing and to harmonize testing
on a global basis, and will continue to work with NIST to establish
global agreement on the development of reference materials for
biotechnology-derived grains and oilseeds.
Our market facilitation efforts also include bringing standardized
information to markets. In 1999, wheat importers and exporters asked
GIPSA to declare that the United States does not produce transgenic
wheat. In September 1999, GIPSA began, in accordance with the authority
provided under the U.S. Grain Standards Act (7 U.S.C. 79), issuing the
following letterhead statement upon an applicant's request: ``There are
no transgenic wheat varieties for sale or in commercial production in
the United States.'' The potential deregulation of Round-Up Ready wheat
added potential uncertainty to world markets. Wheat industry
representatives anticipate that continued issuance of the current
statement will be essential to ensure the continued marketing of U.S.
wheat. To facilitate the marketing of U.S. wheat if deregulation
occurs, GIPSA has agreed to continue issuing the non-transgenic wheat
statement, upon request, provided that Monsanto meets several
requirements verifying that seed has not been sold for commercial
production.
GIPSA also continues to ensure that the official United States
standards are responsive to the needs of the domestic marketplace.
Developments in plant breeding, the use of new marketing strategies
such as identity preservation, increasingly complex processing, food
manufacturing, and feed formulation, and other factors will
continuously challenge GIPSA to promote current, market-relevant grades
and standards that reflect required quality characteristics for
specific end uses. In fiscal year 2003, GIPSA proposed creating two
subclasses in the class Hard White wheat, which would differ based on
seed coat color. Seed coat color can be an important quality factor
depending on the target flour product and the miller's flour extraction
goal. Also underway are reviews of the soybean standards with a focus
on test weight, and the sorghum standards to clarify the various class
definitions and to revise the definition of non-grain sorghum.
Working closely with barley producers and the barley malting
industry, GIPSA began developing new official criteria called
``Injured-by-Sprout'' in malting barley. Sprouting occurred in barley
in the U.S. Northern Plains region during 2002, which prevented malting
barley production contracts from being honored. Barley producers'
insurance claims also were denied because official procedures to assess
barley sprout damage differ from those used by the malting industry.
GIPSA's response is facilitating the marketing of malting barley by
enabling USDA's Risk Management Agency to implement the new procedure
for the 2004 barley crop year.
Other standards enhancements undertaken to facilitate marketing in
fiscal year 2003 include amendments to the U.S. Standards for Rice to
establish and add Ahard milled ``rice as a new milling degree level and
to eliminate the reference Alightly milled.'' These changes better
align the GIPSA standard with current industry processing and marketing
standards.
GIPSA knows that customers also need more information about the
specific end-use qualities of the products they are purchasing. We are
focusing on providing rapid testing of end-use functionality factors to
differentiate the functional qualities that meet specific end-use
needs.
GIPSA continues cooperative efforts with groups from Canada,
Australia, and several European countries to develop and evaluate
global artificial neural network (ANN) near-infrared transmittance
(NIRT) calibrations for wheat and barley protein. GIPSA conducted a
field study on current partial least squares (PLS) wheat protein
calibrations and the global ANN calibration. GIPSA also evaluated the
field performance of the ANN barley protein calibration. In fiscal year
2004, GIPSA will finalize individual instrument standardization
procedures to support implementation of an ANN calibration for wheat
and barley protein.
In April 2003, GIPSA convened a meeting of leading North American
wheat researchers to generate new avenues of research that would lead
to rapid tests for wheat end-use functional characteristics, applicable
at the time of inspection and at other points in the value chain.
Participants developed a list of quality factors and possible technical
approaches for measuring them, with the overarching goal of having a
market applicable test ready for use by May 2006. To help keep
researchers focused on the task, GIPSA will establish a virtual
discussion room for researchers to further collaboration on and support
for this effort, and to help researchers find extramural grant sources.
GIPSA is working with the United Soybean Board on their ``Better
Bean Initiative,'' a program directed at improving the nutritional
composition of U.S. soybean meal and oil. USDA/ARS currently is
receiving funding to develop measurement technology for meal and oil.
GIPSA is taking part in the Soybean Quality Trait initiative that is
seeking to standardize soybean protein, oil, moisture, and fatty acid
measurements. GIPSA is part of an inter-laboratory collaborative study
to evaluate the consistency of soybean protein, oil, and moisture
reference methods. GIPSA is also helping to assemble a soybean sample
library suitable for use in developing and evaluating near-infrared
(NIR) calibrations.
GIPSA is also exploring new approaches to compliment and supplement
our traditional array of services. In fiscal year 2003, GIPSA continued
developing a process verification service for grains in response to
market demand.
Our efforts to develop new programs did not preclude us from making
significant improvements to existing ones. During fiscal year 2003,
GIPSA revised the regulations on reinspections and appeal inspections
under the U.S. Grain Standards Act to better reflect market needs and
to remove an inefficient, costly, and unnecessary regulatory
requirement. Previously, reinspections and appeal inspections for grade
included a review of all official factors that may determine the grade,
are reported on the original certificate, or are required to be shown.
The revised regulations allow interested parties to specify which
official factor(s) should be redetermined during the reinspection or
appeal inspection service. To safeguard against inadvertent misgrading,
official personnel may determine other factors, when deemed necessary.
In fiscal year 2004, GIPSA plans to propose a similar action for rice
and pulses and other commodities that are inspected for quality factors
under the authority of the Agricultural Marketing Act of 1946.
Improving service delivery is essential, as is improving the
efficiency and cost-effectiveness of the official system. This will
include many initiatives, ranging from harnessing technology to improve
operational efficiency and service delivery to making needed program
policy changes.
In addition, GIPSA has dedicated resources to homeland security
efforts. GIPSA continues to work closely with the USDA Office of Crisis
Planning and Management (OCPM) to refine the Department's and the
Agency's Continuity of Operations Plan (COOP) and to support and staff
the Department's Crisis Action Team (CAT). In fiscal year 2003, GIPSA's
COOP and CAT representatives participated in numerous USDA and
Marketing and Regulatory Program-sponsored disaster-related exercises
and training sessions. They also completed the GIPSA Supplement to the
USDA Headquarters COOP Plan, which provides guidance for the
continuation/reestablishment of GIPSA's COOP essential functions,
including identifying GIPSA's emergency relocation facilities where
these functions will be performed and GIPSA personnel who will be
required to perform them. The provisions of the GIPSA Supplement, which
mirrors the USDA Headquarters COOP Plan, applies only to GIPSA
headquarters offices in Washington, D.C.
GIPSA provided technical assistance related to homeland security
issues to a number of industry and governmental groups, including the
National Grain and Feed Association Safety Committee, the Security
Analysis System for U.S. Agriculture (SAS-USA) Technical Advisory
Committee, the Interagency Food Working Group, and the USDA Homeland
Security Working Group. The Agency is currently working with the
National Food Laboratory Steering Committee to coordinate and integrate
resources to support the key components of the Food Emergency Response
Network (FERN).
GIPSA also continued to face challenges in maintaining an
appropriate operating cushion in its user fee account. During fiscal
year 2003, GIPSA transferred $2 million from our appropriated account
to preclude fiscal over-obligation in violation of the Anti-Deficiency
Act. As of May 31, 2003, the cash balance of GIPSA's user fee account
had fallen to $2.9 million, a dangerously low amount considering
GIPSA's monthly obligations of about $3.0 million.
Due to flat or decreasing exports, and marketing trends that are
reducing revenue generated by our current fee structure, there has been
a persistent gap between costs and revenue. GIPSA has absorbed losses
in its reserve user fee funds. GIPSA has executed many cost-cutting
measures to reduce obligations. The Agency has cut employment levels,
closed field and sub-offices, streamlined support staffs, and
introduced new technology to improve program efficiency.
In the longer term, GIPSA is pursuing several options to preclude
future funding difficulties, including implementing a new fee schedule.
Program efficiencies, such as streamlining the official inspection
processes using a web-based technology and re-engineering program
delivery, and opening discussions with stakeholders on how and by whom
official inspection services should be delivered to American
agriculture were undertaken. 2005 Budget Request
To fund important initiatives and address the Agency's
responsibilities, GIPSA's budget request for fiscal year 2005 is $44.1
million under current law for salaries and expenses and $42.5 million
for our Inspection and Weighing Services. There is an increase of
$662,000 for employee compensation. GIPSA already submitted legislation
last fall which would collect $29.0 million in new user fees in fiscal
year 2005, $5.8 million for the grain standardization activities and
$23.2 million for the Packers and Stockyards Programs. A substantial
portion of the IT increases will be one-time only requests.
For grain inspection, the President's fiscal year 2005 budget
proposes a current law request of $20.0 million; a total increase of
$1.8 million.
An increase of $1,300,000 would allow GIPSA to merge data from
several Agency computer information systems for efficient oversight and
management of the official grain inspection system and to provide on-
demand, Web based access to this data by our partners, customers, and
GIPSA personnel. Management needs a single source to capture
information about each inspection provided to track work
accomplishment, technical analysis, and compliance verification. With
the information reported, GIPSA will be able to automate the generation
of billings records that will be used by the NFC FFIS to generate the
invoice for each customer. GIPSA will also use the data system to
automatically document and generate a statement of fees owed by each
customer on a monthly basis.
By implementing this application, GIPSA will be able to retire two
Unix applications and the computer equipment that it runs on. Retiring
these Unix applications will allow GIPSA to move towards achieving its
goal of a common computing environment within and between FGIS and
P&SP, free up one half of a staff year required today for support, and
eliminate dependency for support of this application to a single
developer.
Also requested is $500,000 to expand GIPSA's technical outreach in
key international markets, which is required because GIPSA has
experienced a growing demand for cooperative participation with other
agencies with international trade responsibilities--for example, State
Department, U.S. Trade Representative (USTR), Foreign Agricultural
Service (FAS), and the Animal and Plant Health Inspection Service
(APHIS)--toward achieving our overall mutual objective of expanding
markets for agricultural products and removing barriers to trade.
Modern biotechnology has presented new challenges to U.S. grain
markets as many countries develop domestic regulations regarding
biotech grains. GIPSA has served the international grain trade
community by developing programs to address these emerging needs, and
working with related agencies--State, USTR, FAS, and APHIS, among
others--to share information regarding these programs and contribute
our expertise. For example, China announced broad biosafety regulations
2 years ago that continue to threaten U.S. soybean exports. Partner
agencies have sought GIPSA's active participation in negotiations
challenging this technical barrier to trade. Such issues are likely to
increase in number and frequency in the future.
As another example, a new international environmental treaty, the
Biosafety Protocol, which entered into force in September 2003,
requires new documentation on biotech grain shipments, and many
countries already are developing regulations that are unnecessarily
trade-disruptive. During the years ahead, it will be essential for
GIPSA to continue in what has been its integral role in an interagency
process for implementation of the Protocol by contributing expertise in
grain handling, transportation, and marketing, to prevent unnecessary
trade disruption.
The funding increase will enable GIPSA to provide personnel on
overseas temporary duty to better address and resolve grain trade
issues, precluding market disruption due to technical differences in
analytical methods and standards; expand U.S. market share due to
increased customer satisfaction; and continue to provide critically
important technical support as the U.S. government seeks to ensure
practical implementation of new regulatory requirements being developed
by a growing number of trading partners.
For the Packers and Stockyards Programs, the President's fiscal
year 2005 budget proposes a current law request of $24.2 million; a
total increase of $3.81 million.
An increase of $1,460,000 for the development of web applications
which is required because the current database and application
architecture will not support the volume, security, or recovery
requirements of GIPSA and USDA as GIPSA moves to support GPEA and OMB
and USDA eGov initiatives. Further, the Enterprise Architecture project
completed in 2003 identified fifteen (15) business functions that are
not supported by any applications within the Packers & Stockyards
Programs area, seven of those being key business functions. In
addition, the current applications lack integration on the information
that is common between the applications, hence requiring duplication
(albeit minimal) information entry by program users.
To enable the timely implementation of customer-centric
applications within the Packers and Stockyards Program, additional
Information Technology developmental resources are required. Currently
the Packers and Stockyards Program does not have the web designers or
programmers that would allow it to rapidly and accurately deploy Web-
based applications. To supplement the current information technology
staff and to bring new technology into the program area, GIPSA is
requesting contracting funds.
These funds would be used to contract-out the design, development,
implementation, and maintenance of important Web initiatives as
identified as part of GIPSA's overall Enterprise Architecture and
approved by USDA's OCIO. For example, with the requested funding,
entities regulated under the Packers and Stockyards Act would be able
to register with GIPSA via the internet, electronically file annual
reports, and submit bond claims and complaints via the internet. GIPSA
would be able to increase its efficiency by electronically verifying
bond and trust accounts with banks, the integration of three stove
piped applications, and the real-time tracking of the status and cost
of an investigation. (The submission of annual reports alone would save
GIPSA over 1,500 hours annually by personnel that are GS14s and 15s.)
This would allow the Resident Agents to complete an additional 200
investigations in the future.
An increase of $150,000 is required to operate and maintain the
Swine Contract Library (SCL), which is one of GIPSA's Packers and
Stockyards Programs' (P&SP) first e-government initiatives. As such,
GIPSA has developed an Internet web site that offers packers the
opportunity to submit their contracts and anticipated number of hogs
procured under contract to GIPSA via a secured connection and producers
the opportunity to view contract information via the Internet.
The funding increase will be used to operate and maintain the SCL
system. This position will monitor, review, and analyze the contract
information and monthly reports submitted by packers, ensure that
packers are in compliance by examining submissions for completeness,
consistency, and accuracy, conduct confidentiality analysis on
information before release, and make the information available at the
P&SP regional office and on the GIPSA web site. The increase will also
fund Information Technology services and the annual renewal cost for
computer software licenses. This IT position will provide software,
hardware, and web site maintenance for the SCL program.
An increase of $1,200,000 to support fair and transparent product
differentiation and valuation which is required because packers
significantly reduced the numbers of livestock purchased based on live
weight in recent years. In a stated effort to better meet consumer
demand and provide greater ``value,'' packers and producers began
trading livestock through contract and marketing agreement or formula-
priced transactions. In conjunction with this change in marketing
methods, packers explored and began using new means of automating the
evaluation of live cattle and hogs, and carcasses based on new
technologies, including among other methods, ultrasound and
photographic imaging.
Technologies and their applications for evaluating the quality of
both live animals and carcasses are changing at an accelerating pace.
Previously, carcass merit purchases were generally based on a carcass
weight and often one or two grades assigned by USDA graders. Today,
packers increasingly rely on internally assigned measures of carcass
quality using modern and complex technologies.
Live poultry dealers, as well, are exploring new technologies to
assist in evaluating the quality of birds obtained from poultry
growers. Implementation of new technologies in the poultry industry may
supplement or replace the current methods used by live poultry dealers
to determine bird quality and payment to growers, including contract
growers.
The technologies now being implemented by packers have a direct
effect in determining the prices paid to producers for livestock.
Technologies being developed by live poultry dealers will likely affect
prices paid to poultry growers. These changes introduce new risks for
producers and growers, because these new technologies are not
standardized and their accuracy is inconsistent.
This lack of standardization and inconsistent accuracy makes it
difficult for producers and growers to detect errors and deliberate
changes in the way the technology is used, leaving producers and
growers vulnerable to unfair and unjustly discriminatory practices by
members of the meat packing and poultry industries. A change that
affects as little as one half of 1 percent of the value of livestock in
a multi-billion dollar industry can have a huge impact on producers and
growers over time. Therefore, P&SP needs to dramatically increase its
monitoring and regulatory presence.
This increase in funding will provide P&SP ongoing funding to
obtain industrial engineering expertise in the operation of these new
electronic evaluation technologies and the methods in which packers and
live poultry dealers use them; to develop enforcement tools,
investigation techniques and regulatory policies necessary to continue
to effectively regulate the meat packing and poultry industries, and
when appropriate, initiate enforcement action; to educate and inform
the meat packing and poultry industries about responsibilities under
the P&S Act with regard to these new technologies; and to educate and
inform livestock producers and poultry growers about how the electronic
evaluation technologies are used in the meat packing and poultry
industries, and how the technologies are regulated by P&SP.
An increase of $1,000,000 is required because immediately following
the announcement that a U.S. cow tested positive for BSE, P&SP created
task forces to provide protection to livestock producers and members of
the cattle industry. These task forces are developing strategies to
identify and respond to anti-competitive practices unique to current
market conditions; monitor markets for financial failures and
investigate any livestock sale barn or slaughtering facility that
closes to ensure that any unpaid cattle sellers are identified and
appropriately compensated and investigate complaints related to
livestock marketing and procurement contracts.
P&SP regulates 1,429 posted stockyards, 5,287 market agencies and
dealers, 2,067 packer-buyers, and 340 bonded packers (those purchasing
over $500,000 worth of livestock per year). An additional group of
packers that purchase less than $500,000 are also subject to P&SP
jurisdiction. A large number of these entities may be adversely
impacted as the BSE situation develops, creating circumstances that
require immediate P&SP action.
P&SP is developing strategies to identify anti-competitive
practices that could occur as a result of current market conditions.
These strategies will be implemented and appropriate responses will be
initiated where anti-competitive conduct is suspected.
P&SP is looking closely at suspect livestock transactions to ensure
that market participants are not taking advantage of the unique market
conditions created by the BSE situation. P&SP will deploy rapid
response teams to investigate BSE-related complaints. Costs for rapid
response investigations related to BSE could easily exceed amounts
typically expended on all other rapid response investigations. In the
past three fiscal years, P&SP spent $1,372,210 conducting 150 rapid
response investigations, or an average of 50 investigations per year at
a cost of $457,403.
An increase of $1,200,000 will allow the Agency to establish
computer industry standard hardware, software, and facilities to
implement the development of customer oriented electronic interfaces to
the Federal Grain Inspection Program and the Packers and Stockyards
Program. This will allow for a common Information Technology
environment for the receipt and delivery of electronic data necessary
to efficiently conduct the Agency's programs.
These capabilities will by necessity need to be closely integrated
with the existing Information Technology Architecture in GIPSA and
conform to the USDA Enterprise Architecture. The computer equipment
will be composed of multiple, high performance servers which must
accommodate the transfer of very large amounts of data securely and
transparently between themselves and the existing Agency information
systems. These computer servers must be developed to have the
capability to implement a wide range of Web based interactive
applications.
Finally, an increase of $1,000,000 is needed because in order to
bring the Information Technology Systems security up to an acceptable
level within GIPSA, the Agency's network infrastructure must be brought
up to the standards as depicted in the USDA Enterprise Architecture.
The Agency will need to add network switches, routers and firewalls to
bring the network infrastructure up to an acceptable security standard.
To insure thorough security planning, the Agency will need funding for
additional contractor support in the development of disaster recovery
plans, continuity of operations plans, risk analysis, and the
certification and accreditation of existing information systems.
conclusion
Mr. Chairman, Members of the Committee, I would like to conclude my
testimony on the fiscal year 2005 budget proposal for the Grain
Inspection, Packers and Stockyards Administration with an observation.
Technological advances in new products and in business practices
create remarkable opportunities and challenges for producers,
marketers, and consumers. GIPSA is uniquely situated to facilitate the
marketing of products at a time when assurances of product content or
production processes are in demand. Further, GIPSA helps ensure that
market power by some is not abused. Responding effectively to the needs
of our stakeholders requires dynamic activity.
We continue to adapt our efforts, look toward our capabilities,
work to understand and accommodate the changes, and serve American
agriculture through our efforts to ensure a productive and competitive
global marketplace for U.S. agricultural products.
I would be pleased to address any issues or answer any questions
that you may have.
Thank you.
STATEMENT OF ELSA A. MURANO
Dr. Murano. Thank you, Mr. Chairman, Senator Kohl.
I am glad to have the opportunity to speak to you this
afternoon regarding the status of the Food Safety and
Inspection Service programs and on our fiscal year 2005 budget
request for food safety within the U.S. Department of
Agriculture.
As we begin the new year at USDA, I am proud to highlight
several areas in which we have used science to improve public
health during the past year.
BSE
First, though, I want to briefly touch on the Bovine
Spongiform Encephalopathy or BSE issue. Since December 23rd of
last year, BSE has been front and center with us, as it has
with everyone who has concerns about public health and food
safety. Upon learning of the BSE find, we immediately took
action to protect the public's health. New regulations were
published on January 12th, a mere 2 weeks after the BSE case
was announced, truly a remarkable example of how quickly the
Bush Administration responded to this threat.
The removal of specified risk material from the food
supply, which was the hallmark of these new regulations, was
indeed the single most significant step we could have taken to
protect the public's health.
SIGNIFICANT FOOD SAFETY ADVANCEMENT OF 2003
The American public remains confident in the safety of the
U.S. meat supply, and with good reason. The confidence is due
in part to the significant advancements that we have made
during 2003. For example, we have seen a dramatic decline in
pathogen levels and regulatory samples for Listeria
monocytogenes, E. coli O157:H7, and Salmonella. In addition, we
had a striking decline in the number of meat and poultry
product recalls last year. In fact, the number of class one
recalls has nearly been cut in half from the total during 2002.
These are dramatic indicators that our scientifically-based
policies and programs are working to ensure that the American
public receives the safest food possible.
CHALLENGES FOR 2004
Despite these advancements, there is always room for
improvement and FSIS has identified challenges for 2004.
Through reflection and refinement we have outlined specific
initiatives to ensure that we continue to improve health
outcomes for American families. These include improving
training through the Food Safety Regulatory Essentials program,
using the recently established New Technologies Office to
promote and accelerate the use of innovative food safety
technologies, improving risk assessment coordination to ensure
the best available information and science is used in policy
development, continuing to conduct baseline studies to
determine the nationwide prevalence and levels of various
pathogenic organisms in raw meat and poultry, and coordinating
with other Federal agencies to strengthen existing efforts to
prevent, detect and respond to food related emergencies
resulting from acts of terrorism.
FISCAL YEAR 2005 BUDGET REQUEST
I will now turn to the fiscal year 2005 budget request for
FSIS. FSIS is requesting a program level of $951.9 million, a
net increase of about $61 million from the levels for fiscal
year 2004. Under current law, we are requesting an
appropriation of $838.7 million with an additional $113 million
in existing user fees.
The budget request will fund increased BSE surveillance
programs as well as additional training for inspection
personnel and numerous programs that will continue to keep us
among the leading public health agencies in the world.
The budget request includes a $15.5 million increase for
pay raises in Federal and State programs. The budget request
includes a $17.3 million increase for humane slaughter
enforcement and the full cost of in-plant inspection. Included
in this request is $5 million to continue the humane slaughter
enforcement work funded in fiscal year 2003.
The remaining $12.3 million of the $17.3 million is for
staff support costs that are critically important to
maintaining front-line inspection.
The fiscal year 2005 request includes a $33.6 million
increase for new initiatives that support our goals at FSIS.
First, we include an increase of $3 million for BSE
surveillance. The BSE inspection program will add permanent BSE
control measures in 2005.
Second, our budget requests $23.5 million to increase
support for our Food and Agriculture Defense Initiative. Food
contamination and animal and plant diseases and infestations
can have catastrophic effects on human health and the economy.
So, our portion of the Food and Agriculture Defense Initiative
has five components: the Food Emergency Response Network or
FERN; data systems to support the Food Emergency Response
Network; enhancing FSIS laboratory capabilities;
biosurveillance; and follow-up biosecurity training.
To improve the infrastructure under FERN, the budget
request calls for a $10 million expansion. Of that funding,
$6.1 million would be spent on contracts with state and local
laboratories and $2.6 million would be used to establish five
regional hubs and a national operating center to coordinate
FERN's efforts and conduct training.
The budget request also includes initiatives to support
FERN. The Electronic Laboratory Exchange Network, eLEXNET, is a
national web-based system that allows laboratories to rapidly
report and exchange standardized data. So the budget request of
$4 million will be used to make eLEXNET available to additional
FERN and other food testing laboratories nationwide.
The budget request includes $2.5 million to enhance our
laboratory capabilities for detecting new bioterror-associated
agents and to ensure that our capability and capacity to
perform toxin and chemical testing is maintained.
The final new initiative is training, which is a very
important issue for us. FSIS has been criticized in the past
for having insufficiently trained field employees. So, we are
working very, very hard to address these concerns and need
additional resources in order to significantly improve our
training. We are requesting $7.1 million, over a 50 percent
increase in the FSIS training budget for fiscal year 2005.
Included in the requested training budget is $3.1 million for
our Food Safety Regulatory Essentials training to supplement
training for current on and off-line field employees to improve
enforcement of HACCP and food safety sampling.
prepared statements
Thank you again, Mr. Chairman and Senator Kohl, for your
attention. And we certainly look forward to responding to your
questions.
[The statements follow:]
Prepared Statement of Dr. Elsa A. Murano
Mr. Chairman and Members of the Subcommittee, I am glad to have the
opportunity to speak with you regarding the status of the Food Safety
and Inspection Service (FSIS) programs and on the fiscal year 2005
budget request for food safety within the U.S. Department of
Agriculture (USDA).
In Washington, people talk about their inspiring view of the
Capitol or the monuments, and the sights that inspire them to work
harder and better. The view in my office is quite awesome--at once
humbling and challenging. I am referring to a famous portrait on my
wall of Louis Pasteur, examining a spinal cord sample. Pasteur
disagreed with the popular attitude of the day, ``science for science's
sake;'' he felt that science as a purely academic exercise did not
properly serve the people of the 19th century. Instead, he believed
that science should have practical applications that could be used to
improve the lives of others. As we begin the new year at USDA, I am
proud to highlight several areas in which we have used science to
improve public health during the past year. I also will share with you
our goals for this year, and will conclude with a discussion of the
fiscal year 2005 budget request.
First though, I want to briefly touch on the Bovine Spongiform
Encephalopathy (BSE) issue. Since December 23, 2003, BSE has been
``front and center'' with us, as it has with everyone who has concerns
about public health and food safety. Upon learning of the BSE find, we
immediately took action to protect the public's health. New regulations
were published on January 12th, a mere 2 weeks after the BSE case was
announced--truly a remarkable example of how quickly the Bush
Administration responded to this threat. The removal of specified risk
material (SRM) (brain, spinal cord, etc.) from the food supply, which
was the hallmark of these new regulations, was indeed the single most
significant step we could have taken to protect the public's health. To
ensure that these measures are implemented effectively, part of the
fiscal year 2005 budget request that I will discuss later consists of
$3 million for the agency to conduct surveillance of SRM and advanced
meat recovery (AMR). We are confident that the aggressive BSE measures
we have developed will continue to protect the U.S. food supply.
significant food safety advancements of 2003
The American public remains confident in the safety of the U.S.
meat supply--and with good reason. The confidence is due, in part, to
the significant advancements that we made during 2003. One such
advancement has been the dramatic decline in pathogen levels in
regulatory samples. Late last year, we released data that showed a 25
percent drop in the percentage of positive Listeria monocytogenes
samples from the previous year, and a 70 percent decline compared with
years prior to the implementation of the Hazard Analysis and Critical
Control Point (HACCP) program. In June 2003, to further reduce the
incidence of Listeria monocytogenes, we issued regulations for
establishments producing ready-to-eat products.
Our measures to prevent E. coli O157:H7 contamination of ground
beef have yielded similar results. In September 2002, based on evidence
that E. coli O157:H7 is a hazard reasonably likely to occur at all
stages of handling raw beef products, FSIS issued a directive requiring
all establishments that produce raw beef products to reassess their
HACCP plans. Last year, FSIS' scientifically trained personnel
conducted the first-ever comprehensive audits of more than 1,000 beef
establishments' HACCP plans. A majority of those plants made major
improvements based on their reassessments, and, as a result, we are
seeing a substantial drop in the percentage of ground beef samples that
are positive for E. coli O157:H7. In 2003, of the ground beef samples
collected and analyzed for E. coli O157:H7, only 0.30 percent tested
positive, compared to 0.78 percent in 2002--a 62 percent reduction.
This is a definite improvement, and the strongest signal that science
can drive down the threat from pathogens.
In 2002, we issued new enforcement procedures for the Salmonella
performance standard that are paying off. Instead of waiting for three
cycles of tests for Salmonella, the failure of the first set now
triggers an FSIS review of an establishment's HAACP plan. Due to this
process and other science-based initiatives, the percentage of ``A''
samples (a sample from a randomly scheduled initial set) positive for
Salmonella in raw meat and poultry has dropped by 65 percent over the
past 6 years. Out of the number of random ``A'' samples collected and
analyzed by FSIS during 2003, only 3.8 percent of the samples were
positive for Salmonella, as compared with 10.6 percent in 1998. Again,
this is very good news. The data for these three pathogens validate our
scientific approach to improving public health through safer food.
We also had a striking decline in the number of meat and poultry
product recalls last year. In fact, the number of Class I recalls has
nearly been cut in half from the total during 2002. This is a dramatic
indicator that our scientifically-based policies and programs are
working to ensure that the American public receives the safest food
possible.
FSIS has also had great success with its food safety education
programs. Through new and innovative methods, FSIS is sharing its food
safety message with the general public, including culturally diverse
and underserved populations and those at highest risk for foodborne
illnesses. From March to November 2003, the USDA Food Safety Mobile
traveled over 24,000 miles and participated in 87 events in 64 cities
across the country, providing information and publications on food
safety to approximately 179,000 people face-to-face and making an
estimated 64.4 million media impressions. Another success story is a
public service announcement (PSA) featuring former Miss America Heather
Whitestone McCallum, which has aired 14,448 times since September 2003.
This PSA ranked in the top 3 percent of all PSA's shown during the
month of January 2004 along with PSA's by the American Red Cross, the
Federal Emergency Management Agency (FEMA), and the Department of
Homeland Security (DHS). We are very proud of these far-reaching FSIS
food safety education campaigns.
challenges for 2004
Despite the advancements we made last year, there is always room
for improvement, and FSIS has identified challenges for 2004. Louis
Pasteur said, ``In the realm of science, luck is only granted to those
who are prepared.'' Food safety is too important to be left to guess
work or luck; we must be prepared to identify and meet challenges head-
on.
When I joined USDA over 2 years ago, I established five goals--a
roadmap of improvements for our food safety mission:
--To improve the management and effectiveness of our regulatory
programs;
--To ensure that policy decisions are based on science;
--To improve coordination of food safety activities with other public
health agencies;
--To enhance public education; and
--To protect FSIS regulated products from intentional contamination.
Through reflection and refinement, we have outlined specific
initiatives to make sure we fulfill those goals, thereby improving
health outcomes for American families. These initiatives were outlined
in our food safety vision document, Enhancing Public Health: Strategies
for the Future. This detailed plan will continue to drive our policies
and actions during this calendar year.
Initiative One: Training
In April 2003, FSIS inaugurated new Food Safety Regulatory
Essentials (FSRE) training, which is designed to better equip
inspection personnel in verifying an establishment's HACCP food safety
system. All trainees received training in the fundamentals of
inspection, covering the Rules of Practice, Sanitation Performance
Standards, and Sanitation Standard Operating Procedures. FSIS also
provides food safety training based on the types of products being
produced at the establishments where inspectors are assigned. As of the
end of last year, more than 1,000 individuals had completed this
training regime.
During 2004, FSIS will continue to train all new entry level
slaughter establishment inspectors and veterinary medical officers in
technical, regulatory and public health methods. We are also looking at
expanding the types of training in the future to meet evolving agency
needs and challenges.
Initiative Two: Furthering the Use of Innovative Food Safety
Technologies
I believe that we must encourage the use of safe and effective
interventions. One way we can encourage such intervention is by hosting
public meetings. In January, in Omaha, Nebraska, FSIS held a public
meeting to discuss the development and use of new food safety
technologies to enhance public health. The meeting generated useful
ideas regarding how plants can best utilize new technologies in their
operations.
FSIS established a New Technology Office in August 2003. This group
is tasked with reviewing new technologies and, where appropriate,
expediting the use of new technologies at meat and poultry official
establishments and egg products plants. Our New Technology staff is an
experienced team of 9 veteran FSIS employees who serve as the single
portal for all new technology submissions. We designed this group to
better manage the new technology process and allow for implementation
as quickly as possible. They also ensure that FSIS personnel are aware
of new technologies and where they are being used.
To increase the pool of new technology submissions to the agency,
we have established an e-mail address, [email protected],
through which parties may submit their information. I am happy to
report that we have received over 30 Notifications and Protocols for
new food safety technologies since we have streamlined the submission
process. Of the 27 Notifications received, 19 have been issued letters
indicating that FSIS has no objections, and 4 are still pending. Once
the agency issues a no objection letter, the firm that submitted the
proposal may use the new technology.
Initiative Three: Risk Assessment Coordination
In order to better focus its resources on food safety risk
assessment activities, FSIS established a risk assessment coordination
team with USDA-wide membership. As risk assessment becomes increasingly
important as a means of providing the science behind policy decisions,
the need for such a group within USDA is clear. This group will promote
scientifically sound risk assessments and foster research to support
risk assessments.
Microbial risk assessment is still in its infancy compared to
chemical risk assessments, so the need to share ideas and resources is
critical. In November 2003, we started this interactive process by
holding a public meeting to discuss how the government uses the three
components of the risk analysis framework--risk assessment, risk
management, and risk communication--to inform and implement risk
management decisions. In particular, we examined several crucial
elements for FSIS to consider in its risk assessments, including how:
--FSIS can improve the transparency of the risk analysis process;
--FSIS can balance the need for transparency, stakeholder involvement
and peer review with the need for timely scientific guidance;
and
--Risk assessments can better inform policy development and decision-
making.
Initiative Four: Developing a Research Agenda
In November 2003, FSIS and the Research, Education and Economics
mission area, announced a unified research agenda to coordinate USDA
food safety research priorities and needs. For FSIS, research is
critical to achieving its public health vision. Although FSIS does not
conduct research itself, the agency must identify its research needs
based on its public health goals so that the research community can
meet them. The unified agenda includes research to:
--Investigate the ecology, epidemiology, virulence and genetic
characteristics related to pathogenicity for E. coli O157:H7,
Salmonella, Listeria monocytogenes, and other foodborne
pathogens to identify targeted control measures;
--Develop effective on-farm, feedlot, transportation, handling, and
other pre-processing intervention strategies for reducing the
incidence and levels of antibiotic resistant microorganisms and
key foodborne pathogens in meat, poultry, eggs and fresh
produce;
--Develop, validate, and transfer technology of new and improved
processing methods to reduce or eliminate key foodborne
pathogens in meat, poultry, fresh produce, seafood, and ready-
to-eat foods; and
--Develop rapid and sensitive detection methods for abnormal prions
to prevent the possible spread of transmissible spongiform
encephalopathies.
Initiative Five: To Develop Best Practices for Animal Production
In consultation with producers, researchers, and other
stakeholders, FSIS is developing a list of best management practices
for animal production in order to provide guidance for reducing
pathogen loads before slaughter.
Last September, FSIS arranged a symposium with USDA partners to
discuss ways to significantly reduce the levels of E. coli O157:H7 in
live animals before slaughter. We understand that preventing the spread
of E. coli and other pathogens on the farm is vital to increasing food
safety and protecting public health. The dialogue generated at the
meeting helped us develop guidelines outlining the best management
practices at the pre-harvest stage, which we expect to publish this
year. Once these guidelines are published, FSIS will initiate an
aggressive outreach effort to distribute them to producers.
Initiative Six: Baseline Studies
It is imperative that FSIS develops baseline studies. FSIS is
developing protocols to conduct continuous baseline studies to
determine the nationwide prevalence and levels of various pathogenic
microorganisms in raw meat and poultry. The studies will help the
agency and the industry to better understand what interventions are
working or how they could be improved. To achieve the agency's goal of
applying science to all policy decisions, the fiscal year 2004 budget
included a new $1.7 million initiative to establish a continuous
baseline program for risk assessments and performance measurement.
In the past, baseline studies have been used to establish pathogen
reduction performance standards, which are an important part of
verifying the sanitary operation of meat and poultry establishments.
The new baseline studies will take into account regional variation,
seasonality and other critical factors.
The continuing nature of the baseline studies will provide
information on national trends and a tool to assess performance of
initiatives designed to reduce the prevalence of pathogens in meat and
poultry products. These baseline studies will also yield important
information for conducting risk assessments that can outline steps we
can take to reduce foodborne illness.
These surveys will also be important in establishing the link
between foodborne disease and ecological niches, as well as levels and
incidence of pathogens in meat and poultry. The net result will be more
targeted interventions and the effective elimination of sources of
foodborne microorganisms.
Initiative Seven: Food Biosecurity
While the events of September 11, 2001, brought the issue of the
vulnerability of our food supply to the forefront, FSIS' food
biosecurity efforts did not start on September 12, 2001. FSIS' 100 plus
years worth of experience in dealing with food emergencies have allowed
the agency to develop the expertise to protect the U.S. meat, poultry,
and egg products supply wherever and whenever emergencies or new
threats arise.
It is imperative that FSIS coordinates with other public health
agencies to protect the food supply against intentional harm. The
agency has improved such coordination, as well as strengthened existing
efforts to prevent, detect, and respond to food-related emergencies
resulting from acts of terrorism. With a strong food safety
infrastructure already in place, FSIS has been able to focus on
strengthening existing programs and improving lines of communication,
both internally and externally. Later, when I discuss the fiscal year
2005 budget request, I will describe the components of our food and
agriculture defense initiative.
achieving the next level of food safety
The emergence of previously unrecognized pathogens, as well as new
trends in food distribution and consumption, highlights our need for
new strategies to reduce the health risks associated with pathogenic
microorganisms in meat, poultry and egg products. Through analysis and
discussions with stakeholders, we have identified three issues that
need to be addressed to attain the next level of public health
protection.
Issue One: To anticipate/predict risk through enhanced data integration
To better anticipate risks involving meat and poultry products, we
must have the best available data to clearly identify the extent and
nature of these risks, so that we may determine an effective response.
These data consist of regulatory samples, as well as samples collected
by food processing establishments. Thus, we must improve data analysis
while encouraging data sharing from all reliable sources.
With regard to food biosecurity, FSIS works closely with the White
House Homeland Security Council, DHS, the Food and Drug Administration
(FDA) and the USDA Homeland Security Staff to develop strategies to
protect the food supply from an intentional attack. For example, FSIS,
along with FDA and industry partners, is working with DHS to establish
new food information sharing and analysis activity for the food sector.
This public/private partnership will aid in the protection of the
critical food infrastructure by centralizing the information about
threats, incidents, and vulnerabilities.
Issue Two: To improve the application of risk analysis to regulatory
and enforcement activities
Food safety problems need to be documented as they occur, so that
conditions may be analyzed and, if need be, corrected. A better
understanding of the prevalence and causes of food safety failures
could allow better assessment of how to best address them. Data
regarding the causes of food safety violations, either within a
specific establishment, or within a class of establishments, can be
utilized in order to better focus prevention and regulatory enforcement
strategies.
FSIS is exploring the development of a real-time measure of how
well an establishment controls the biological, chemical, and physical
hazards inherent in its operations. Such a predictive model would help
the agency make resource allocation decisions across the country's more
than 6,000 meat and poultry establishments to maximize food safety and
public health protection.
Issue Three: To better associate program outcomes with public health
surveillance data
We have seen notable advances in preventing foodborne illness,
which the Centers for Disease Control and Prevention (CDC) have
attributed, in part, to the implementation of HACCP. However, there
still is a need to determine how specific policies affect public
health. In order to accomplish this, we need to obtain and document
data that links foodborne illness outbreaks with specific foods. It may
then be linked with prevalence data of specific pathogens in specific
foods. However, to complete the linkage with public health outcomes, we
need accurate and timely human health surveillance data.
We have already taken steps to secure such surveillance data, and
we continue to update our systems. In 1995, FSIS worked with CDC, FDA,
and public health laboratories in several States to establish FoodNet,
the Foodborne Diseases Active Surveillance Network, as part of CDC's
Emerging Infections Program.
FoodNet includes active surveillance of foodborne diseases, case-
control studies to identify risk factors for acquiring foodborne
illness, and surveys to assess medical and laboratory practices related
to foodborne illness diagnosis. FoodNet provides estimates of foodborne
illness and sources of specific diseases that are usually found in the
United States, and interprets these trends over time. Data are used to
help analyze the effectiveness of the Pathogen Reduction/Hazard
Analysis and Critical Control Point rule and other regulatory actions,
as well as public education aimed at decreasing foodborne disease in
the United States. We are also considering establishing a joint task
force with CDC to determine ways to improve FoodNet.
In addition to data collected through FoodNet, FSIS is a partner
with CDC and State agencies in PulseNet, a national computer network of
public health laboratories that helps to rapidly identify outbreaks of
foodborne illness. Laboratories perform DNA ``fingerprinting'' on
bacteria that may be foodborne, then the network permits rapid
comparison of the ``fingerprint'' patterns through a CDC database.
PulseNet is an early warning system that links seemingly sporadic
illnesses, and enables public health officials to more quickly identify
and react to the emergence of multi-State illness outbreaks.
FSIS is also working with CDC's National Center for Infectious
Diseases to design and support studies that enable definite connections
to be made between occurrence of specific pathogens in specific foods
and the occurrence of human foodborne illness.
FoodNet, PulseNet and other similar programs are excellent examples
of Federal and State agencies working together to accomplish public
health goals. These programs will help FSIS and other regulatory
agencies to focus inspection and enforcement on those practices where
risk is deemed to be highest, resulting in a more efficient use of
government resources.
fiscal year 2005 budget request
I will now turn to the fiscal year 2005 budget request for FSIS. In
fiscal year 2005, FSIS is requesting a program level of $951.7 million,
a net increase of about $61 million from the enacted level for fiscal
year 2004. Under current law, we are requesting an appropriation of
$838.7 million, with an additional $113 million in existing user fees.
The budget request will fund the increased BSE surveillance programs I
mentioned earlier, as well as additional training for inspection
personnel and numerous programs that will continue to keep FSIS among
the leading public health agencies in the world. By continuing the
principle of making policy based on sound science, we will modernize
our inspection system to handle the challenges of food safety in this
century. Implementation of these budget initiatives is imperative to
help us attain the public health vision we have set for FSIS.
Supporting FSIS' Basic Mission
The FSIS budget request for fiscal year 2005 supports the agency's
basic mission of providing continuous food safety inspection in each
meat, poultry, and egg products establishment in the United States. The
budget request includes a $15.5 million increase for pay raises in
Federal and State programs. In addition, the budget supports an agency-
wide staff-year ceiling of 9,641, an 84 staff year increase from the
2004 appropriation level. The budget reflects the proposed calendar
year 2005 pay raise of 1.5 percent for Federal and State personnel, a
0.2 percent increase for employee rewards, and the annualized cost of
the 4.1 percent pay increase for calendar year 2004. The costs also
include a total net increase of approximately $721,000 for state food
safety and inspection.
Two critical elements of FSIS' mission are to continue the
enforcement of humane slaughter regulations and to provide for the full
cost of front-line inspection. FSIS will continue strict enforcement of
its regulations for the humane handling and slaughter of livestock. In
fiscal year 2003, over 7,600 inspection personnel stationed in over
6,000 federally inspected meat, poultry, and egg products plants
verified that the processing of 43.6 billion pounds of red meat, 49.2
billion pounds of poultry, and 3.7 billion pounds of liquid egg
products complied with statutory requirements. The fiscal year 2005
budget request includes a $17.3 million increase for humane slaughter
enforcement and the full cost of in-plant inspection. Included in the
request is $5.0 million to continue the work funded in fiscal year 2003
for fiscal year 2003 through fiscal year 2004.
The remaining $12.3 million of the $17.3 million is for staff
support costs that are critically important to maintaining front line
inspection. Over 80 percent of FSIS costs are for salaries, benefits,
and travel costs for inspectors to travel between plants. Increases in
benefit and travel costs cannot be deferred to another year. The
agency's share of employee benefits costs has been rising in recent
years by over $4 million annually. The agency has also experienced
large increases in retirement costs, hiring incentives, and employee
allowances for the purchase of safety equipment and related items. The
increase is needed to avoid employment restrictions in the inspection
program, which would result if unavoidable cost increases are not fully
funded and must be absorbed.
New Initiatives
The fiscal year 2005 request includes a $33.6 million increase for
new initiatives that support the Department's goals for FSIS.
First, as I discussed in my opening, the fiscal year 2005 budget
request includes an increase of $3 million for BSE surveillance. FSIS'
BSE inspection program will add permanent BSE control measures in
fiscal year 2005. These control measures will include increased in-
plant verification of slaughter plant designs for controlling SRMs,
overtime inspection, and travel for Veterinary Medical Officers to test
non-ambulatory disabled livestock when they arrive at small slaughter
plants that do not have a resident veterinarian. In fiscal year 2005,
FSIS will also perform about 60,000 screening tests at processing
plants that use AMR equipment, to ensure that SRMs do not enter the
food supply.
The fiscal year 2005 budget also requests a $23.5 million increase
to support our food and agriculture defense initiative. Food
contamination and animal and plant diseases and infestations can have
catastrophic effects on human health and the economy. USDA, the
Department of Health and Human Services and DHS are working together to
create a comprehensive food and agriculture policy that will improve
the government's ability to respond to the dangers of disease, pests
and poisons, whether natural or intentionally introduced. FSIS' portion
of the food and agriculture defense initiative has five components:
--Biosurveillance;
--The Food Emergency Response Network;
--Data systems to support the Food Emergency Response Network;
--Enhancing FSIS laboratory capabilities; and
--Follow-up biosecurity training.
To finance the biosurveillance component of the food and
agriculture defense initiative, the fiscal year 2005 budget requests $5
million. The Homeland Security Council (HSC) Biodefense End-to-End
Assessment, in cooperation with all relevant U.S. Government agencies,
identified early attack warning and surveillance as a top priority to
prepare against a potential bioterrorist attack. The HSC supports an
interagency biosurveillance initiative to improve the Federal
Government's ability to rapidly identify and characterize such an
attack. This initiative will improve Federal surveillance capabilities
in human health, food, agriculture, and environmental monitoring. It
will also allow Federal agencies to establish integration capability at
DHS so that DHS may rapidly compile these streams of data and integrate
them with threat information.
FSIS has conducted its own vulnerability assessments of regulated
domestic and imported products. The assessments identify potentially
vulnerable products and processes, likely threat agents, and points
along the production/consumption continuum where attack is most likely
to occur. The agency will focus its resources on the points of greatest
vulnerability.
The second component of the food and agriculture defense initiative
is the Food Emergency Response Network (FERN). A nationwide laboratory
system with sufficient capacity to meet the needs of anticipated
emergences is integral to any bioterror surveillance and monitoring
system. FERN consists of Federal and State governmental laboratories
which are responsible for protecting citizens and the food supply from
intentional acts of biological, chemical, and radiological terrorism.
Currently, over 60 laboratories, including public health and veterinary
diagnostic laboratories, representing 27 States and five Federal
agencies, have agreed to participate in FERN. The goal is to establish
100 FERN laboratories, creating a network of Federal, State and local
laboratories that FSIS could call upon to handle the numerous samples
that would be required to be tested in the event of a terrorist attack
on the meat, poultry or egg supply.
To improve the infrastructure under FERN, the budget request calls
for a $10 million expansion. Of that funding, $6.1 million would be
spent on contracts with State and local laboratories, and $2.6 million
would be used to establish five Regional Hubs and a National Operating
Center to coordinate FERN's efforts and conduct training. In addition,
during fiscal year 2005, FSIS would also use $1.3 million to establish
five to seven State laboratories for screening of microbiological
agents, with more laboratories in the future, based on the availability
of funds. The staff of these laboratories will receive training,
perform methods validation, and analyze surveillance and check samples.
The third and fourth components of the food and agriculture defense
initiative support FERN. The electronic laboratory exchange network
(eLEXNET) is a national, web-based system that allows laboratories to
rapidly report and exchange standardized data. The fiscal year 2005
budget request of $4 million will be used to make eLEXNET available to
additional FERN and other food-testing laboratories nationwide. Access
to properly validated methods used for screening, confirmation, and
forensic analysis is critical to all laboratories, and laboratories
need rapid access to new or improved methods that use emerging
technologies, have greater sensitivity, or are more efficient. FSIS is
working with FDA to develop a web-based repository of analytical
methods that is compatible with eLEXNET. The budget request also
includes $2.5 million to enhance FSIS' laboratory capabilities for
detecting new bioterror-associated agents, and to ensure FSIS'
capability and capacity to perform the toxin and chemical testing that
will be standardized across all FERN laboratories.
The final component of the food and agriculture defense initiative
is follow-up biosecurity training for the workforce. Follow-up training
is essential as part of the ongoing effort to protect the public by
educating the workforce regarding the latest threat agents and
countermeasures to those agents. The budget request includes $2 million
for follow-up training for fiscal year 2005.
The final new initiative I will discuss is training. FSIS has been
criticized over the years by the General Accounting Office and the
Office of the Inspector General for having poorly trained field
employees. We have been addressing these concerns over the last year,
but need additional resources in order to significantly improve our
training. We are requesting $7.1 million--over a 50 percent increase--
in the FSIS training budget for fiscal year 2005. Of the requested
training budget, $4.0 million would be used to increase the number of
entry level inspectors receiving formal classroom training from 20
percent to 100 percent. Under this proposal, all new inspectors will
receive formal training on how to identify and respond to food safety
problems. New employees will be required to demonstrate mastery of
training in order to be certified to assume inspection duties.
The requested training budget also includes $3.1 million for Food
Safety Regulatory Essentials training, to supplement training for
current on- and off-line field employees to improve enforcement of
Pathogen Reduction/Hazard Analysis and Critical Control Point
regulations and food safety sampling. These frontline employees are
responsible for making the critical decisions to ensure that products
are safe to eat, so it is essential to have a scientifically and
technically trained workforce.
User Fee Proposal
FSIS' fiscal year 2005 budget also includes a legislative proposal
to recover the costs of providing inspection services beyond an
approved 8-hour primary shift. The proposal was submitted to Congress
last August. If the proposal is enacted, the level of appropriated
funds needed would be reduced by an estimated $124 million, making the
FSIS budget request $714.7 million. Under current law in 2005, FSIS
estimates it will collect $113 million in annual user fees to recover
the costs of overtime, holiday, and voluntary inspection.
closing
We intend to continue to engage the scientific community, public
health experts and all interested parties in an effort to identify
science-based solutions to public health issues to ensure positive
public health outcomes. It is our intention to pursue such a course of
action this year in as transparent and inclusive a manner as is
possible. The strategies I discussed today will help FSIS continue to
pursue its goals and achieve its mission of reducing foodborne illness.
Mr. Chairman, thank you again for providing me with the opportunity
to speak with the Subcommittee and submit testimony regarding the steps
that FSIS is taking to remain the world leader in public health. I look
forward to working with you to improve our food safety system, ensuring
that we continue to have the safest food supply in the world.
______
Prepared Statement of Dr. Barbara J. Masters, Acting Administrator,
Food Safety and Inspection Service
Mr. Chairman and distinguished members of the Subcommittee, I am
pleased to be here today as we discuss public health and the U.S.
Department of Agriculture's (USDA) fiscal year 2005 budget request for
the Food Safety and Inspection Service (FSIS).
Infrastructure
FSIS has a long, proud history of protecting public health.
Although the Agency under its current name was established by the
Secretary of Agriculture on June 17, 1981, its history dates back to
1906. FSIS' mission is to ensure that meat, poultry, and egg products
prepared for use as human food are safe, secure, wholesome, and
accurately labeled. FSIS is charged with administering and enforcing
the Federal Meat Inspection Act (FMIA), the Poultry Products Inspection
Act (PPIA), the Egg Products Inspection Act (EPIA), and the regulations
that implement these laws.
Ensuring the safety of meat, poultry, and egg products requires a
strong infrastructure. To accomplish this task, FSIS has a large
workforce of approximately 10,000 employees, most of who are stationed
in the field, dedicated to inspection. In fiscal year 2003, over 7,600
inspection personnel stationed in over 6,000 federally inspected meat,
poultry, and egg products plants verified that the processing of 43.6
billion pounds of red meat, 49.2 billion pounds of poultry, and 3.7
billion pounds of liquid egg products complied with statutory
requirements. In addition, we re-inspected 3.8 billion pounds of
imported meat, poultry and processed egg products from 28 of 33
countries that we determined have inspection systems equivalent to our
own. Assuring that these products are safe and wholesome is a serious
responsibility.
As you are well aware, these are compelling times in food safety,
and it is because of your support that we are making real progress in
improving the safety of the U.S. food supply. I would like to thank you
for the past support you have given us in our budget requests. Now, I
would like to tell you how we are fulfilling our responsibilities
through FSIS' food safety vision and about our initiatives for better
ensuring the safety of meat, poultry, and egg products.
Fulfilling the Vision
The continued mission of FSIS is to ensure that consumers have the
safest possible food supply. To fulfill this vision, we have set out to
continuously modernize FSIS' ability to improve the safety of meat,
poultry, and egg products. Our efforts are paying off, as seen by the
16 percent decline in foodborne illness over the last 6 years. The
Centers for Disease Control and Prevention (CDC) attributes these
results in part to the implementation of the Hazard Analysis Critical
Control Point (HACCP) system in all meat and poultry plants in the
United States. However, in spite of these positive trends towards a
safer food supply, FSIS recognizes that intensified efforts are needed
to reach the next level of food safety. That is why the agency has
diligently worked to carry out Dr. Murano's five core goals:
--To improve the management and effectiveness of our regulatory
programs;
--To ensure that policy decisions are based on science;
--To improve coordination of food safety activities with other public
health agencies;
--To enhance public education; and
--To protect FSIS regulated products from intentional contamination.
Improving the Management and Effectiveness of Regulatory Programs
In order for policies and programs to be successful, they must be
uniformly and correctly applied. Thus, proper training of the workforce
is essential. In addition, communication to field personnel needs to be
timely and accurate, with proper supervision from the district and from
headquarters in order to foster accountability in the system.
Training and Education
The key to improving the management and effectiveness of FSIS'
considerable infrastructure is to ensure that the agency is well
prepared with the tools necessary to protect the food supply. Training
is a top priority of the agency. FSIS can only achieve its public
health, food safety, and food security mission with adequate
preparation of its workforce through scientific and technical training.
In April 2003, FSIS began the Food Safety Regulatory Essentials
(FSRE). The goal of the training is to teach inspection personnel how
to do their jobs properly, and emphasizes the regulatory decision-
making thought process both through lecture and workshop examples. In
fiscal year 2003, FSIS exceeded its goal to train 800 inspectors under
FSRE. A comparison between pre-test and post-test scores has shown that
the knowledge improvement of our inspectors has increased by an average
of 20 percent. Feedback from our inspectors has been extremely
positive, and industry representatives have noted the positive
difference that these courses are having on how inspection procedures
are performed.
FSIS has also initiated a comprehensive 2-year training and
education effort designed to ensure that every FSIS employee fully
understands their role in preventing or responding to an attack on the
food supply. Last year, over 1,600 employees received food security
training. By the end of fiscal year 2004, over half of our workforce
will have received this training. The Law Enforcement Academic Research
Network (LEARN), which is carrying out the training, has stated that
this training effort is unparalleled in the Federal sector since it is
being provided to such a broad base of our employees.
Another initiative the agency has undertaken to enhance FSIS'
training effort is taking training opportunities closer to our
employees. In August 2003, the agency announced new regional training
centers designed to bring comprehensive workforce training programs to
FSIS field employees throughout the country. FSIS has established the
regional training centers in five field locations: Atlanta, GA; Dallas,
TX; Philadelphia, PA; Des Moines, IA; and Boulder, CO. FSIS has hired
three of the regional trainers to head the new centers, and expects to
hire the remaining two trainers by April. In addition, FSIS will be
providing distance learning that will be easily accessible to our field
employees. These approaches will allow FSIS to train more inspectors
each year in various skills to enhance their technical and regulatory
abilities.
Another step we've taken is to increase our cadre of scientifically
trained personnel, known as Consumer Safety Officers (CSOs). CSOs have
a scientific and technical background and receive additional FSIS
training that enables them to use a disciplined methodology to assess
and verify the design of food safety systems. FSIS has trained every
entering CSO--150 of them--in a cooperative agreement through the Texas
Agricultural Experiment Station. In fiscal year 2004, the agency plans
to train 200 additional employees in this program, including employees
who have been promoted to CSOs, Veterinary Medical Officers, Program
Investigators, and others.
Accountability
FSIS inspection personnel are held accountable for ensuring that
public health is protected. To emphasize the importance of
accountability, FSIS created the Office of Program Evaluation,
Enforcement and Review (PEER) during the agency's recent
reorganization. PEER serves as a quality control team by ensuring that
FSIS functions, such as reviews of plants for compliance and food
safety investigations, are carried out in a way most conducive to
protecting the public health. PEER retains the role of ensuring prompt
and appropriate enforcement of the inspection laws. The work of the
field Program Investigators in PEER places them on a daily basis in
close proximity to performance and compliance problems and concerns at
the in-plant level, which affords the agency the ability to deal with
necessary adjustments and problems in a much more immediate and direct
fashion than in the past. PEER was formed because a strong quality
assurance program that uses reviews, evaluations, and audits as its
tools can have a significant impact on management effectiveness,
efficiency and policy development.
Because accountability is crucial in delivering programs in a
consistent and effective manner, FSIS implemented the Humane Activities
Tracking (HAT) program in February 2004. This new electronic tracking
system will document inspection activities to ensure that livestock are
humanely handled and slaughtered in federally inspected facilities. The
HAT program will provide FSIS with more accurate and complete data on
the time spent by FSIS personnel performing nine specific humane
handling related tasks to ensure humane handling and slaughter
requirements are met.
In addition, in November of 2003, FSIS issued an updated directive
to all inspection personnel and district offices providing specific,
detailed information about requirements of the Humane Methods of
Slaughter Act to ensure that verification and enforcement requirements
are clearly and uniformly understood. In May of 2003, FSIS also issued
a directive to provide guidance and direction to inspection personnel
to ensure consistent use of enforcement actions.
ensure that policy decisions are based on science
FSIS continuously reviews its existing authorities and regulations
to ensure that emerging food safety challenges are adequately
addressed. In addition, FSIS is committed to continuing its emphasis on
the use of science, research, and technology in the development of
improved food safety policies, focused on prevention whenever possible.
Risk Assessment
Risk assessment is one tool that can provide FSIS with the solid
scientific foundation on which to base regulatory and policy decisions.
In fact, the Agency has used risk assessment to estimate the likelihood
of exposure to various hazards, and to estimate the resulting public
health impact. For example, in February 2003, FSIS released a draft of
a quantitative risk assessment conducted on Listeria in ready-to-eat
(RTE) meat and poultry products. On February 26, 2003, FSIS held a
public meeting to discuss the design of the risk assessment, the
results, and conclusions that could be drawn from it regarding the risk
of contamination of RTE products with this pathogen during processing.
The Listeria risk assessment, in conjunction with a previously
released Food and Drug Administration (FDA)/FSIS risk ranking, peer
review, and public comment, provided important data enabling FSIS on
June 6 to publish a final Listeria rule originally proposed in early
2001. This risk-based regulation will serve as the cornerstone of the
FSIS efforts to prevent listeriosis from RTE meat and poultry products.
The rule requires all establishments that produce RTE products that are
exposed to the environment after cooking to develop written programs to
control Listeria monocytogenes and to verify the effectiveness of those
programs through testing. Establishments must share testing data and
plant-generated information relevant to their controls with FSIS. The
rule also encourages all establishments to employ additional and more
effective Listeria monocytogenes control measures.
Innovative Testing Methods
In October 2003, FSIS announced the adoption of the BAX system to
screen for Salmonella in raw meat and poultry products. The Microbial
Outbreak and Special Projects Laboratory, in collaboration with three
FSIS field service laboratories, evaluated the BAX system to determine
whether it would be beneficial to the agency and to determine its
validity and reliability. FSIS determined that the BAX system was as
sensitive as the existing method of detecting Salmonella in raw meat
and poultry products, but also reduced the reporting time for negative
samples by one to 2 days. FSIS has been using the BAX screening system
for Salmonella in ready-to-eat meat, poultry and pasteurized egg
products since February 2003, and for Listeria monocytogenes since
April 2002. This new measure increases efficiency in detecting
pathogens and saves valuable agency time and resources.
Reducing E. coli O157:H7
FSIS has instituted major changes in its E. coli O157:H7 policy to
further ensure that beef plants address and reduce the presence of E.
coli O157:H7. In October 2002, the agency took strong steps to address
E. coli O157:H7 contamination based on USDA's Agricultural Research
Service's data and FSIS' draft risk assessment. Those measures are
starting to pay dividends to the American consumer. Our scientifically
trained personnel have examined prevention mechanisms at more than
1,000 beef establishments and a majority of those plants have made
major improvements based on reassessments of their HACCP plans. As a
result, we are seeing a drop in the number of E. coli O157:H7 positive
samples in ground beef. For instance, in E. coli O157:H7 samples
collected and analyzed during 2003, 0.30 percent tested positive,
compared to 0.78 in 2002--or a 62 percent reduction.
improve coordination of food safety activities with other public health
agencies
With primary authority over meat, poultry, and egg products, FSIS
plays an integral role in ensuring the safety of America's food supply.
As one partner in the U.S. food safety effort, FSIS strives to maintain
a strong working relationship with its sister public health agencies.
Cooperation, communication, and coordination are absolutely essential
if we are to be effective in addressing public health issues.
BSE Coordination
The December 2003 discovery of a single case of Bovine Spongiform
Encephalopathy (BSE) in Washington State provides an excellent example
of the strong communication ties and the cooperation between USDA and
its Federal and State food safety partners. The Federal Government's
swift and substantial reaction to the BSE diagnosis played a vital role
in maintaining high consumer confidence. FSIS and its sister agencies
moved effectively and forcefully upon the discovery of a BSE case in
this country, further strengthening already formidable BSE preventive
measures. Being a part of the continuous briefings, planning meetings,
international trade discussions, and all the other events surrounding
this situation has been both challenging and rewarding. FSIS has worked
closely with USDA's Animal and Plant Health Inspection Service (APHIS)
and other mission areas in USDA, FDA, state governments, industry and
consumers to ensure our BSE prevention and response measures are fully
effective in the United States.
MOU with FDA
Since 1999, FSIS and the Food and Drug Administration (FDA) have
had a Memorandum of Understanding (MOU) to exchange information on an
on-going basis about establishments that fall under both jurisdictions.
FSIS will continue engaging in substantive discussions with FDA and
other agencies who share public health and food safety
responsibilities. The Bioterrorism Act of 2001 (Public Law 107-188)
further enhanced this cooperation by authorizing FDA to commission FSIS
employees to conduct inspection at dual jurisdiction facilities.
Public Health Service Commissioned Corps Officers
In addition to its partnerships with the White House and Federal
agencies, FSIS has entered into a working relationship with the U.S.
Public Health Service (PHS) and the Office of the Surgeon General. In
April 2003, FSIS signed a Memorandum of Agreement with the Surgeon
General and the PHS that allows expanded numbers of PHS Commissioned
Corps Officers to be detailed to the agency. FSIS currently has 19 PHS
Commissioned Corps Officers detailed to the agency and will incorporate
additional PHS Officers nationwide across all program areas under the
agreement. Not only will these officers help FSIS respond to foodborne
disease outbreaks and assist in preventing foodborne illness, but they
will assist in the agency's homeland security efforts as well. Since
the Commissioned Corps Officers are available 24 hours a day, 7 days a
week, this affords a greater flexibility to respond immediately during
heightened security alerts or an actual threat to the food supply.
USDA's Unified Food Safety Research Agenda
Another example of FSIS' commitment to communication, cooperation,
and coordination was the November 2003 announcement of a unified food
safety research agenda to improve the efficiency and effectiveness of
food safety programs. USDA also released a list of additional research
needs specific to meat, poultry and egg products that FSIS will
encourage non-governmental entities to address. The government research
agenda will complement these efforts by industry and academia. USDA's
Research, Education, and Economics (REE) mission area worked with
USDA's Office of Food Safety, other government food safety agencies,
and stakeholders to develop the unified research agenda. The unified
agenda prioritizes research needs and maximizes use of available
resources.
enhance public education efforts
Because everyone has a responsibility for food safety, educating
the public about this responsibility is a crucial element in FSIS' food
safety mission. All food preparers, from consumers to food service
employees, must know and understand basic safe food-handling practices.
These efforts must be broad enough to ensure that no segment of the
public is uninformed about safe food handling practices, yet at the
same time, target various segments of the population to positively
influence those behaviors that pose the greatest potential risk.
Communicating with the public about food safety must be accomplished in
a manner that is easily understandable so that it is useful to every
segment of the population. Thus, FSIS has considered innovative and
collaborative methods for delivering the food safety message.
The Food Safety Mobile
One such innovative way of spreading the food safety message is
USDA's Food Safety Mobile, which was introduced in March 2003. This
eye-catching ``food safety educator-on-wheels'' brings food safety
information to consumers and builds on our partnerships in communities
across the country. Through the Food Safety Mobile, FSIS is sharing its
food safety message with the general public as well as culturally
diverse and underserved populations and those with the highest risk
from foodborne illnesses. From March to November 2003, the Mobile
traveled over 24,000 miles and participated in 87 events in 64 cities
across the country. These events ranged from county fairs and grocery
store demonstrations, to the Taste of Minnesota and the Philadelphia
Thanksgiving Day Parade. FSIS used these opportunities to provide
information and publications on food safety to approximately 179,000
people face-to-face at Mobile events. FSIS estimates 64.4 million media
impressions from the Mobile, and that does not include internet
exposure.
Educational Campaign
FSIS has also been conducting an educational campaign through
public events and media interviews with national and regional media
organizations in order to reach more of the population with important
public health messages. Recent events were held in Houston,
Philadelphia, Portland, San Francisco, Miami, and the Flathead
Reservation in Montana. National television interviews have been
conducted with major television networks, including Fox News, Telemundo
and Univision. National celebrities, such as former Miss America
Heather Whitestone McCallum, pop music legend Olivia Newton-John, and
country singer Wynonna Judd, have also been recruited to help FSIS
reach even larger audiences with food safety messages through special
events and the filming of Public Service Announcements (PSA). The
results have been impressive. The Heather Whitestone McCallum PSA has
aired 14,448 times since September 2003. This PSA ranked in the top 3
percent of all PSA's shown during the month of January 2004 along with
PSA's by the American Red Cross, the Federal Emergency Management
Agency (FEMA), and the Department of Homeland Security (DHS).
USDA's Meat and Poultry Hotline
USDA's Meat and Poultry Hotline is an additional tool that FSIS
uses to share its food safety message. The Hotline handled over 98,000
calls and 80 media and information multiplier calls during fiscal year
2003. Calls included requests from newspapers, magazines, radio,
television, and book authors, and included live interviews with radio
and television stations. The Hotline also provides recorded information
and live assistance for our Spanish-speaking callers. Additionally, the
Hotline was a key resource for keeping the public informed about the
BSE situation in Washington and has handled approximately 4,000 calls
and 1,000 emails concerning BSE since December 23, 2003.
protect meat, poultry, and egg products against intentional
contamination
In the aftermath of September 11, 2001, there is recognition that
threats to the well being of the Nation's citizens can come in the form
of terrorist attacks, including the intentional contamination of food.
With a strong food safety infrastructure already in place, FSIS has
been focusing on fortifying existing programs and improving internal
and external lines of communication. By partnering with other agencies,
including CDC, FDA, USDA's Agricultural Research Service (ARS), DHS,
APHIS, the Environmental Protection Agency (EPA), as well as
international partners such as the Canadian and Mexican governments'
food inspection agencies, and State and local health agencies, FSIS is
in a pivotal position to share information and to strengthen critical
infrastructure protection activities concerning food from farm to
table.
FSIS Office of Food Security and Emergency Preparedness
To date, FSIS has undertaken a number of initiatives to protect
meat, poultry, and egg products from the potential of a terrorist
attack. Immediately following September 11, 2001, FSIS established the
Food Biosecurity Action Team (F-BAT). The charge of F-BAT was to
coordinate all activities related to biosecurity, counter-terrorism,
and emergency preparedness within FSIS. These activities are
coordinated with USDA's Homeland Security Council, other government
agencies, and industry. Currently, FSIS' newly created Office of Food
Security and Emergency Preparedness (OFSEP) has assumed the
responsibilities of F-BAT and serves as the centralized office within
FSIS for food security issues.
OFSEP interacts closely with USDA's Homeland Security Council and
represents the agency on all food security matters throughout the
Federal Government, as well as in State and local activities. The
Office's mission is to lead in the development of the agency's
infrastructure and capacity to prepare for, prevent, and respond to,
deliberate attacks or other threats to the U.S. food supply. As the
lead coordinator and primary point of contact on all food security and
emergency preparedness activities within FSIS, OFSEP focuses primarily
on:
--Emergency preparedness and response;
--Federal/State/Industry Relations;
--Continuity of operations (COOP);
--Scientific expertise in chemical, biological, and radiological
terrorism; and,
--Security clearance and safeguarding classified information.
To ensure coordination of these activities involves all program
areas of the agency, OFSEP established a new standing advisory group,
the Food Security Advisory Team (FSAT), comprised of representatives of
the major program areas within FSIS, to provide program-specific
technical support.
Expanding Coordination with Federal, State, and Local Agencies
FSIS collaborates and coordinates closely with its State partners
to ensure an effective prevention and response program. Some of the
many state organizations FSIS works with include the Association of
Food and Drug Officials (AFDO); the Association of State and
Territorial Health Officials (ASTHO); and the National Association of
State Departments of Agriculture (NASDA). Most recently, FSIS teamed
with FDA in cosponsoring a joint meeting between ASTHO and NASDA,
entitled ``Homeland Security: Protecting Agriculture, the Food Supply,
and Public Health--The Role of the States.'' The purpose of this
meeting was to enhance collaboration between State public health and
agriculture agencies and the Federal Government. Both the Secretary of
Agriculture and the Secretary of Health and Human Services (HHS) were
on hand for this joint meeting.
FSIS also works closely with the White House Homeland Security
Council, DHS, FDA, and the USDA Homeland Security Staff to develop
strategies to protect the food supply from an intentional attack. For
example, FSIS, along with FDA and industry partners, is working with
DHS to establish a new food information sharing and analysis activity
for the food sector. This public/private partnership will aid in the
protection of the critical food infrastructure by centralizing the
information about threats, incidents, and vulnerabilities.
Consumer Homeland Security Education
Because everyone has a stake in a safe and secure food supply, FSIS
published Food Safety and Food Security: What Consumers Need to Know in
November 2003, as part of the agency's continuing effort to protect
public health by preventing and responding to contamination of the food
supply throughout the farm-to-table continuum. The brochure, developed
by FSIS, is available in both English and Spanish. In a concise and
easy-to-follow format, Food Safety and Food Security: What Consumers
Need to Know, lays out comprehensive and practical information about
safe food handling practices, foodborne illness, product recalls,
keeping foods safe during an emergency and reporting suspected
instances of food tampering. This publication is the latest in a series
of food security guidelines issued by FSIS that includes FSIS Security
Guidelines for Food Processors and FSIS Safety and Security Guidelines
for the Transportation and Distribution of Meat, Poultry and Egg
Products.
Ensuring the Safety of Imports
To further strengthen our import inspection program, we established
a new position called the import surveillance liaison inspector, using
funds provided in the fiscal year 2001 Homeland Security Supplemental
Appropriations Act. These inspectors augment the current activities of
traditional import inspectors at locations across the country. The
import surveillance liaison inspectors conduct a broader range of
surveillance activities, and they coordinate with other agencies, such
as the APHIS, FDA, and the U.S. Customs and Border Protection within
the DHS. Currently, 20 of these new inspectors are on board, and we
anticipate more will be added.
Laboratories
Laboratories play a key role in our ability to quickly detect
contamination of the food supply. FSIS has four ISO accredited
laboratories--three regulatory laboratories that conduct testing on
samples of meat, poultry and egg products, and a fourth laboratory that
focuses on microbial outbreaks. FSIS has increased security at all of
our laboratories. This includes instituting procedures to ensure proper
chain of custody and other controls on all samples and materials
received by the labs. The labs participate in the Electronic Laboratory
Exchange Network (eLEXNET), which is a system designed to provide a
secure network in which food safety labs at various levels of
government can share test data on food samples.
Furthermore, FSIS laboratories have enhanced analytical capability
for compounds of concern and developed surge capacity. Our four labs
have expanded capability to test for non-traditional microbial,
chemical and radiological threat agents. In addition, the Agency has
also begun construction of a Bio Security Level 3 facility that will be
able to conduct analyses on a larger range of potential bioterrorism
agents.
FSIS is also represented on the interagency Laboratory Response
Network and has worked to develop the Food Emergency Response Network
(FERN) for potential foodborne contamination incidents. FERN was formed
in 2002 and currently has about 61 members, including FSIS, FDA, and
state labs. Participation is open to Federal, State, and local
government labs that are capable of conducting food testing and
forensic analysis for a wide variety of chemical, biological and
radiological agents. FERN can help respond to national emergencies,
including terrorist threats that might affect the food supply. In
fiscal year 2005, FSIS plans to significantly expand its participation
in FERN.
fiscal year 2005 budget request
I appreciate having the opportunity to discuss a number of FSIS'
accomplishments with you. Now I would like to present an overview of
the fiscal year 2005 budget request for FSIS. Implementation of these
budget initiatives is imperative to helping us attain FSIS' public
health mission. In fiscal year 2005, FSIS is requesting a program level
of $951.7 million, a net increase of about $61 million from the enacted
level for fiscal year 2004. Under current law, we are requesting an
appropriation of $838.7 million, with an additional $113 million in
existing user fees.
Supporting FSIS' Basic Mission
The FSIS budget request for fiscal year 2005 supports the Agency's
basic mission of providing continuous food safety inspection in each
meat, poultry, and egg products establishment in the United States. The
fiscal year 2005 budget includes $15.5 million in increases for
mandatory pay raises in Federal and State programs. This includes
annualization of the calendar year 2004 pay raise, as well as the
anticipated calendar year 2005 pay raise.
The fiscal year 2005 budget request includes a $17.3 million
increase for the full cost of in-plant inspection and enforcement of
humane handling and slaughter. FSIS employee salary, benefits, and
inspector travel between plants make up a large portion of the FSIS
budget and have a serious affect on our ability to staff plants if not
fully funded. Thus, FSIS requires a $12.3 million increase to avoid
detrimental employment restrictions within the agency, which would
result if unavoidable cost increases are not fully funded and must be
absorbed. An additional $5 million is requested so that FSIS'
inspection workforce can continue its strict enforcement of regulations
for humane slaughter and handling of livestock, a top priority at FSIS.
New Initiatives
The fiscal year 2005 request includes a $33.6 million increase for
new initiatives that support the Department's goals for FSIS.
BSE Surveillance
First, the fiscal year 2005 budget request includes an increase of
$3 million for BSE surveillance. FSIS' BSE inspection program will add
permanent BSE control measures in fiscal year 2005, which include:
increased in-plant verification of slaughter plant designs for
controlling specified risk materials (SRMs), overtime inspection, and
travel for Veterinary Medical Officers to test non-ambulatory disabled
livestock when they arrive at small slaughter plants that do not have a
resident veterinarian. FSIS will also perform about 60,000 screening
tests in fiscal year 2005 at processing plants that use advanced meat
recovery (AMR) equipment, to ensure that SRMs do not enter the food
supply.
Food and Agriculture Defense Initiative
The fiscal year 2005 budget also requests a $23.5 million increase
to support a food and agriculture defense initiative in partnership
with USDA, HHS, and DHS. Food contamination and animal and plant
diseases and infestations can have catastrophic effects on human health
and the economy. The three Federal Departments involved are working
together to create a comprehensive food and agriculture policy that
will improve the government's ability to respond to the dangers of
disease, pests and poisons, whether natural or intentionally
introduced. Our food and agriculture defense initiative has five
components:
--Biosurveillance;
--The Food Emergency Response Network;
--Data systems to support the Food Emergency Response Network;
--Enhancing FSIS laboratory capabilities; and
--Follow-up bio-security training.
First, the food and agriculture defense initiative will allow FSIS
to participate in an interagency biosurveillance initiative that would
improve the Federal Government's ability to rapidly identify and
characterize a potential bioterrorist attack. Funding this initiative
will improve Federal surveillance capabilities and enable FSIS to
integrate with DHS to compile FSIS surveillance information rapidly
with threat information. This funding would also allow FSIS to focus
its resources on the vulnerable products and processes identified
during the agency's vulnerability assessments of imported and domestic
products; increase regulatory sampling for three additional threat
agents; add five Import Surveillance Liaison Inspectors, 30 program
investigators for transportation, distribution, and retail
surveillance, and two Public Health and Epidemiology Liaison Officers
to our workforce; and establish a Foodborne Disease Surveillance
Communication system to coordinate with DHS systems.
The second component of the food and agriculture defense initiative
is the Food Emergency Response Network (FERN), which I discussed
earlier. A nationwide laboratory system with sufficient capacity to
meet the needs of anticipated emergences is integral to any
bioterrorism surveillance and monitoring system. The goal is to
establish 100 FERN laboratories, creating a network of Federal, State
and local laboratories that FSIS could call upon to handle the numerous
samples that would be required to be tested in the event of a terrorist
attack on the meat, poultry or egg products supply. The fiscal year
2005 budget request would expand FERN to contract with State and local
laboratories, and to establish five regional hubs and a National
Operating Center to coordinate FERN's efforts and conduct training. In
addition, FSIS would also fund the establishment of five to seven State
laboratories for screening of microbiological agents, with more
laboratories in the future, based on the availability of funds.
The third and fourth components of the food and agriculture defense
initiative provide further support to FERN. The electronic laboratory
exchange network (eLEXNET), which I mentioned previously, is a
national, web-based, electronic data reporting system that allows
analytical laboratories to rapidly report and exchange standardized
data. The fiscal year 2005 budget request would provide funding needed
to make eLEXNET available to additional FERN and other food-testing
laboratories nationwide. In turn, the budget request would enhance
FSIS' laboratory capabilities in order to detect new bioterror-
associated agents, and to ensure FSIS' capability and capacity to
perform the toxin and chemical testing that will be standardized across
all FERN laboratories.
Because the realm of biosecurity is ever changing, FSIS must
provide its workforce with the most up-to-date information necessary to
ensure that meat, poultry, and egg products are protected from
intentional contamination. Therefore, the final component of the food
and agriculture defense initiative is follow-up biosecurity training of
the workforce. This additional training is essential as part of the
ongoing effort to protect the public by educating the workforce
regarding the latest threat agents and countermeasures to those agents.
Training and Education
Training is a top priority at FSIS. Our inspection workforce is our
greatest asset, and this is why FSIS is dedicated to establishing and
maintaining a comprehensive and fully integrated training program. The
agency is continuing its extensive training effort by requesting
approximately $7.1 million, or an increase of 50 percent over fiscal
year 2004, to train all new inspection personnel and to expand existing
training programs in fiscal year 2005.
To ensure that newly hired inspection personnel receive the proper
orientation and training to perform their jobs when they report to
duty, FSIS is requesting approximately $4 million in fiscal year 2005.
The agency has been criticized in the past for not immediately training
all new employees. This initiative will provide the formal training
needed to ensure that inspection procedures are performed consistently
and appropriately under agency policies. This initiative will also
enable FSIS to place 10 district trainers, in addition to five already
funded in the agency's baseline, throughout the Nation, to orient and
train FSIS employees.
Last year, FSIS began retooling and expanding its existing training
programs by incorporating a public health focus and integrating
scientific and technical principles with training on technical and
regulatory approaches to inspection. Through the $3.1 million requested
by FSIS in fiscal year 2005, the agency would continue to provide Food
Safety Regulatory Essentials (FSRE) training to field employees,
including food inspectors, CSOs, Inspectors-in-Charge, and Compliance
Officers. The agency will offer the training regionally to accommodate
inspection staff. Additional computer-based-training will be provided
to implement the training, and will be catered to the inspection
personnel's specific food safety responsibilities.
User Fee Proposal
Under current law, in 2005 FSIS estimates it will collect $113
million in annual user fees to recover the costs of overtime, holiday,
and voluntary inspection. FSIS' fiscal year 2005 budget includes a
legislative proposal to recover the costs of providing inspection
services beyond an approved 8-hour primary shift. The proposal was
submitted to Congress last August. If enacted, the level of
appropriated funds needed would be reduced by an estimated $124
million, making the FSIS budget request $714.7 million. This will
result in significant savings for the American taxpayer.
closing
The goals and initiatives that FSIS has laid out as its vision
represent a monumental task. But let me assure you; this is a task that
we are ready and willing to take on. I believe that with the
appropriate support, FSIS will be able to achieve its public health
vision and strengthen the safety of meat, poultry, and egg products.
Mr. Chairman, this concludes my prepared statement. Thank you for
your continued support. Thank you also for the opportunity to submit
testimony to the Subcommittee on how FSIS is working with Congress and
other partners to achieve its public health vision.
ADDITIONAL COMMITTEE QUESTIONS
Senator Bennett. Thank you very much for your testimony.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Robert F. Bennett
bse
Question. On March 15, 2004, the Department of Agriculture
announced details for an expanded surveillance effort for BSE. The
release also stated that $70 million is being transferred from the
Commodity Credit Corporation (CCC) to test cattle in the high risk
population. According to the announcement, the $70 million will allow
testing of 268,000 animals. Using the Department estimate, testing all
animals destined for export could cost at or near $1 billion.
In your opinion, do you believe testing 100 percent of the export
market is possible? Also, any additional comments or updates in regard
to the cost of animal testing would be appreciated.
Answer. Although it is logistically possible to test 100 percent of
the cattle slaughtered in the United States every year, USDA does not
recommend following this course of action. Testing predominantly young,
healthy animals beyond the bounds of a scientific surveillance plan
would create a false sense of security for consumers and could lead to
either a tiered system (testing for exports but not for domestic
consumption) or, more probably, testing all cattle slaughtered.
USDA's targeted surveillance program is designed to identify the
presence of BSE in the U.S. cattle population if it exists. We
understand that some in industry have suggested blanket-testing all
animals presented at slaughter as a means of providing ``BSE-screened
products'' and easing trade barriers. However, it is our contention
that current barriers against U.S. beef are scientifically unwarranted,
and we continue working at the highest levels to reopen foreign markets
for U.S. producers.
We must clarify that surveillance testing for BSE--especially if it
is performed on clinically normal animals at slaughter--is not an
efficient risk mitigation measure for protecting public health. USDA is
confident that the removal of specified risk materials, along with
other measures such as feed practices regulated by the Food and Drug
Administration address the potential health risk of BSE.
USDA's BSE surveillance program has always focused testing efforts
on those animals that fall into the highest-risk category for the
disease. These include cattle exhibiting signs of neurologic disease;
condemned at slaughter for neurologic reasons; testing negative for
rabies and submitted to public health laboratories and teaching
hospitals; and appearing non-ambulatory (including those exhibiting
general weakness severe enough to make it difficult but not impossible
to stand), also known as ``downer cattle.'' We also sample adult cattle
that have died for unexplained reasons.
We estimate that approximately 35 million cattle are slaughtered in
the United States annually. If each one of these animals were to be
tested, and we included the cost of the test kit, sample collection,
shipping and handling, laboratory processing and support, training,
equipment, and other associated fees, USDA estimates that the total
cost would be between $175 and $200 per animal. Thus, the total cost
for testing every animal slaughtered could reach as high as $6 to $7
billion per year.
Question. The livestock industry and Department of Agriculture are
working toward reopening export markets in Japan, Mexico, and other
exporting countries. The controversy arises over testing each animal
and whether or not animals under the age of 30 months should be tested.
Do you believe each animal, including those under 30 months of age,
should be tested prior to export?
Answer. USDA's targeted surveillance program is designed to
identify the presence of BSE in the U.S. cattle population if it
exists. We do not agree that blanket-testing all animals prior to
export, including those under 30 months of age, is a scientifically
sound approach to disease surveillance.
USDA's BSE surveillance program has always focused testing efforts
on those animals that fall into the highest-risk category for the
disease. These include cattle exhibiting signs of neurologic disease;
condemned at slaughter for neurologic reasons; testing negative for
rabies and submitted to public health laboratories and teaching
hospitals; and appearing non-ambulatory (including those exhibiting
general weakness severe enough to make it difficult but not impossible
to stand), also known as ``downer cattle.'' We also sample adult cattle
that have died for unexplained reasons.
avian influenza
Question. The Administration's fiscal year 2005 Budget request
includes an increase in funding of $11.783 million to address Low
Pathogenic Avian Influenza (LPAI) in live bird markets.
Can you update the Committee in regard to ongoing action related to
avian influenza and explain how the Department would utilize the
additional funding?
Answer. APHIS has been working to establish a national LPAI program
and incorporate it into the National Poultry Improvement Plan (NPIP).
The national LPAI program will be discussed and hopefully adopted at
the NPIP meeting in July 2004. The program has drafted a Uniform
Methods and Rules (UM&R) for the live bird marketing portion of the
program and the subcommittee of the U.S. Animal Health Association is
currently reviewing the draft to obtain their recommendations for
program improvement.
APHIS would utilize the additional funding for cooperative
agreements with states that will support the LPAI prevention and
control program; for indemnities; for additional field personnel,
equipment, and other resources necessary to assist states with long-
term prevention and control; for educational materials and training for
recognition of avian influenza and for biosecurity practices to protect
against the disease; for development and administration of vaccine to
support industry when infected with LPAI; and for reagents and other
laboratory support to incorporate the commercial program through the
National Poultry Improvement Program (NPIP). This program is currently
testing poultry breeder flocks and will continue to expand its
activities until all segments of the commercial industry are monitored
and certified as avian influenza clean.
Question. With the discovery of avian influenza, a number of
countries have banned poultry imports from the United States.
Can you provide the Committee with an update on poultry export
markets and exactly what actions USDA is taking to reopen these
markets?
Answer. The USDA is currently working with countries that have
imposed bans on taking the necessary actions to remove the bans on
exports and reopen all poultry markets. Our actions include:
depopulating positive testing flocks, cleaning and disinfecting those
flocks, providing additional surveillance activities to ensure that all
positive have been removed, and responding to inquiries and
questionnaires to prove that areas are free of avian influenza and
trade bans can be removed.
On April 6, the Canadian Food Inspection Agency (CFIA) recognized
the United States as free of highly pathogenic avian influenza (HPAI)
and lifted all HPAI-related importation bans on U.S.-origin birds,
poultry, and poultry products. Other countries including Armenia,
Macedonia, and Serbia have removed their bans and have allowed exports
to enter their country. Several other countries including: Chile, Czech
Republic, Hungary, Israel, Poland, and Taiwan have reduced their
restrictions to allow poultry exports from all states except for Texas.
childhood obesity
Question. Childhood obesity is a growing health concern for many
Americans. The Department of Agriculture has and continues to conduct
research to further understand the factors that contribute to obesity.
Can you update the Committee in regard to actions that the
Department is taking to inform consumers and to combat obesity?
Answer. The Department is making a substantial commitment to
promoting healthy weight through nutrition education and promotion. In
the Food, Nutrition, and Consumer Services (FNCS) mission area, the
Food and Nutrition Service (FNS) nutrition education efforts are
targeted primarily to participants or potential participants in the
nutrition assistance programs it administers, while the Center for
Nutrition Policy and Promotion (CNPP) provides nutrition education and
information for the general public. In addition, the Cooperative State
Research, Education and Extension Service (CSREES) has a significant
commitment to nutrition education, as well as the Agricultural Research
Service and the Economic Research Service, who perform basic and
applied research supporting this effort.
FNCS undertakes a range of ongoing activities each year to deliver
nutrition education and promotion to program recipients; all of these
include maintenance of proper weight as one component of a healthy
lifestyle, including:
--Integrating nutrition and physical activity promotion within and
across the programs.--The Eat Smart. Play Hard.TM
campaign for children and their caregivers stresses the need to
balance what you eat with how active you are, and Team
Nutrition provides nutrition education for the Nation's
schoolchildren. Materials such as brochures, activity sheets
and posters, coordinated with nutrition curricula, are used to
help children, their parents, and caregivers learn healthy
eating and active living behaviors.
--Reshaping nutrition education in the Food Stamp Program.--To target
activities that promote healthy weight. For example, we are
developing new nutrition education materials that program staff
can use to motivate low-income elderly people and women with
children to improve their eating behaviors.
--Developing new ways to support healthy weight through the WIC
program.--The Fit WIC project developed five intervention
programs that WIC and other community agencies can implement to
prevent overweight in young children. Educational packages such
as Fathers Supporting Breastfeeding are used in WIC clinics to
support breastfeeding. Breastfed babies are less likely to
become overweight as they grow, and mothers who breastfeed may
return to pre-pregnancy weight more easily.
--Promoting healthy school nutrition environments.--Unhealthful
beverage and food choices at school can undermine children's
ability to learn and practice healthy eating. We developed and
are distributing the Changing the Scene action kit to help
local schools and communities to support healthier eating and
active living behaviors.
--Promoting increased fruit and vegetable intake.--Through
partnerships with other Federal Agencies and the National 5-A-
Day Program. For example, we worked together to develop the
Fruits and Vegetables Galore-Helping Kids Eat More tool kit,
which helps foodservice professionals with planning,
preparation, and promotion strategies to encourage the children
they serve to consume more fruit and vegetables. For fiscal
year 2005, the President's Budget proposes several initiatives
to enhance these efforts to better address obesity and promote
healthy weight. These include:
--The budget requests $20 million, a $5 million increase, to enhance
WIC breastfeeding promotion efforts through peer counseling.
The use of breastfeeding peer counselors has proven to be an
effective method of increasing initiation and duration of
breastfeeding, and breastfed babies are more likely to maintain
a healthy weight as they grow.
--The budget requests $5 million to initiate a new series of WIC
Childhood Obesity Prevention Projects, which build on the
success of the Fit WIC projects to work in partnership with
States on innovative strategies to use WIC to prevent and
reduce childhood obesity through enhanced nutrition and
education, physical activity promotion, and environmental
efforts. Ongoing funding for such projects is critical to
ensuring continuous improvement in this area.
--It requests $2.5 million to expand the Eat Smart. Play
Hard.TM Campaign and establish a cross-program
nutrition framework to help ensure a comprehensive, integrated
approach to nutrition education in all FNS nutrition assistance
programs.
--The budget includes $1 million for the Center for Nutrition Policy
and Promotion (CNPP) plans to build on previous work to
implement the consumer messages developed and pilot tested with
20- to 40- year-old women, especially low-income women, to help
consumers aim for a healthy weight.
--The budget requests as additional $655,000 to complete the
development of the 6th edition of the Dietary Guidelines for
Americans, as well as an additional $1 million to update and
promote the new food guidance system which will update the Food
Guide Pyramid. CNPP also plans to develop obesity prevention
materials based on the Dietary Guidelines and the new food
guidance system, as well as promote the consumption of fresh
fruit and vegetables. Plans include the development of print
materials and interactive tools, such as the Interactive
Healthy Eating Index, that direct dietary guidance to the
individual to facilitate healthful behavior change.
indefinite funding in the food stamp act
Question. The Administration's fiscal year 2005 Budget includes a
request for new legislative language to allow for indefinite funding
authority for the Food Stamp Act.
Can you provide the Committee with an explanation of why this
legislative language has been requested?
Answer. The indefinite authority proposal in this year's Food Stamp
Program budget would provide such sums as necessary to fund program
benefits and payments to States, in the last 4 months of the fiscal
year if program needs exceed the anticipated level. It would ensure
that sufficient resources will always be available to provide access to
the program for all eligible persons who wish to participate. It can be
difficult to estimate program needs or the size of an adequate
contingency reserve, particularly when there are changes in the
economy. With indefinite authority, if program costs should
significantly exceed budget estimates, it would never be necessary to
seek a supplementary appropriation or implement a benefit reduction.
This proposal would bring the structure of this critical program in
line with other major social welfare programs that already have
indefinite authority.
______
Questions Submitted by Senator Christopher S. Bond
guidelines on fat consumption
Question. There is a linear relationship between high transfatty
acid and high saturated fat intake and chronic disease. We also know
that the consumption of foods high in these two elements likely
contribute to the statistics on obesity.
Does USDA intend to draft guidelines or standards for the
consumption of these fats?
Answer. The 2005 Dietary Guidelines Advisory Committee (DGAC) is in
the process of evaluating the most recent scientific evidence on fatty
acids and health and is preparing to make science-based recommendations
specifically for saturated and trans fatty acids consumption. At its
most recent public meeting held on March 30 and 31, 2004, members of
the Committee discussed the possibility of setting intake goals for
both types of these fatty acids--saturated and trans--and also
discussed the implications these proposed recommendations would have
for the general public. It is expected that the dietary fat
recommendations will emphasize the reduction of current intake for
saturated and trans fatty acids. The Committee is also expected to
address the need for encouraging product reformulations by food
manufacturers to reduce unhealthy fats in food products. It should be
noted that on July 11, 2003, the Food and Drug Administration published
a final rule requiring food manufacturers to list the amount of trans
fatty acids on product nutrition labels by January 1, 2006. Some
manufacturers have already responded to the rule by implementing the
labeling requirement or by eliminating trans fatty acids from their
products.
The Committee is continuing its deliberations on specific fatty
acid recommendations. However, the final advisory report is expected to
be submitted to USDA and HHS by June 30, 2004. The final science-based
recommendations on saturated and trans fatty acids will be incorporated
in the agency's education and communication efforts after completion of
the DGAC report.
In an effort to help Americans reduce their risk of cardiovascular
disease and improve their health, USDA's proposed new Food Guidance
System, to be released in 2005, emphasizes consumption of oils instead
of solid fats in the diet and differentiates between saturated and
unsaturated fats. The guidance recommends that Americans choose fats
mostly from foods higher in polyunsaturated or monounsaturated fat, and
particularly Omega-3 fats such as those found in fish.
Question. Since not all oils are equally healthy, will USDA provide
guidelines and or regulations to restaurants and other food
manufacturers and--more importantly--provide them a roadmap to
increasing the nutritional content and decrease trans and saturated fat
levels of their products?
Answer. The 2005 Dietary Guidelines Advisory Committee (DGAC) is in
the process of evaluating the most recent scientific evidence on fatty
acids and health and is preparing to make science-based recommendations
specifically for saturated and trans fatty acids consumption. The
Committee is also expected to address the need for encouraging product
reformulations by food manufacturers to reduce unhealthy fats in food
products.
Additionally, researchers from the Agricultural Research Service
are working with agricultural producers and the fats and oils industry
to find alternative ingredients and develop oils such as canola and
sunflower oils with higher levels of the fatty acids that may help
reduce levels of low-density lipoproteins--or bad cholesterol--without
reducing the high-density lipoproteins--or good cholesterol. Through
Federal research and education efforts, these ``heart-friendlier'' oil
products are expected to be utilized by the food industry, offering
trans fatty acid-free products in the marketplace.
Question. Does USDA intend to provide specific guidelines and or
regulations on the characteristics of healthy oils highlighting those
oils that have low saturated fat and transfat profiles that can be used
in most food manufacturing to improve overall health and nutrition of
those foods?
Answer. The 2005 Dietary Guidelines Advisory Committee (DGAC) is in
the process of evaluating the most recent scientific evidence on fatty
acids and health and is preparing to make science-based recommendations
specifically for saturated and trans fatty acids consumption. At its
most recent public meeting held on March 30 and 31, 2004, members of
the Committee discussed the possibility of setting intake goals for
both types of these fatty acids and also discussed the implications
these proposed recommendations would have for the general public. It is
expected that the dietary fat recommendations will emphasize reduction
in saturated fatty acids and trans fatty acids. The Committee is also
expected to address healthy fats and provide intake recommendations on
how consumers can incorporate ``healthy'' oils in their diets. The USDA
will incorporate the recommendations from the DGAC into its education
and communication efforts after completion of the DGAC report. The USDA
will provide consumers with information on the most common sources for
``healthy'' oils to offer them healthy choices in selecting a balanced
diet.
Question. Does USDA have this authority?
Answer. USDA has authority to provide consumers with information on
the nutritional content of foods, including oils and common sources for
``healthy'' oils. USDA attempts to help consumers, producers and
industry by offering information regarding healthy choices when
selecting a balanced diet.
Question. How does USDA intend to incorporate the information it
hopes to disseminate through the campaigns mentioned in Mr. Bost's
testimony into USDA run food programs?
Answer. Nutrition promotion efforts such as the Eat Smart.Play
Hard.TM campaign and Team Nutrition are designed
specifically to be delivered through the Federal nutrition assistance
programs. Materials are developed by the Food and Nutrition Service
(FNS) and disseminated to State and local program partners through the
web and direct delivery. Program cooperators also order campaign
materials through the Department of Commerce's National Technical
Information Service (NTIS).
Most of the materials developed to date are designed for use in
specific programs. Part of the requested $2.5 million increase for
cross-program nutrition activities will support development of
nutrition promotion materials that can be integrated into more than one
program, maximizing the impact of limited nutrition education funding.
FNS and the Center on Nutrition Policy and Promotion (CNPP) also
work closely together to ensure that program-based nutrition education
activities are fully consistent with the Dietary Guidelines for
Americans and the food guidance system intended to deliver the
Guidelines to the general population. These agencies confer directly,
and participate together in the Dietary Guidance Working Group, which
reviews nutrition education materials to ensure their consistency with
Federal nutrition policy and guidance. When the new Guidelines and food
guidance system are finalized, FNS will review all of its nutrition
education interventions to ensure that they are consistent with the
updated guidance, and make any needed changes.
soybean rust
Question. In part due to a short U.S. soybean crop in 2003, the
U.S. livestock industry is expected to import a larger amount of
soybean meal this year than in the recent past. The usual source for
U.S. soymeal imports is Brazil, which experienced the arrival of Asian
soybean rust a few years ago. Since Asian soybean rust has not yet
arrived in the United States, it is important that we do everything we
can to delay that arrival as long as possible.
When will APHIS make a decision about any additional quarantine
steps for imported soybeans or soybean meal that it will impose, and
will APHIS consult with the relevant stakeholder groups, such as the
American Soybean Association and livestock groups, before making a
final decision?
Answer. APHIS officials are looking closely at our country's
importation of soybean seed, meal, and grain. Our analysis to date has
shown that clean soybean seed and soybean meal--which is a heat-
treated, processed product--is unlikely to pose any risk of introducing
this disease. Historically, there has never been a documented instance
of soybean rust spread through trade. Rather, it is spread naturally
through airborne spore dispersal. We are currently conducting a risk
assessment to study the viability of the pathogen. The preliminary
results of the assessment indicate a very low risk, if any, of
introducing this disease through imports. We posted our initial risk
document on the APHIS' Web site and requested public comments. The
comment period closed April 12, 2004.
We have been working very closely with the American Soybean
Association and other stakeholders throughout our efforts to prevent
and prepare for the introduction of soybean rust. Most recently, USDA
officials participated in a soybean rust conference that was
cooperatively organized by USDA, five pesticide companies, and the
American Soybean Association. The primary goal of the conference was to
disseminate to soybean farmers the knowledge, information, and
techniques they will need to manage this pathogen when it reaches the
continental United States. We are committed to continuing and expanding
this outreach, including working with the livestock industry, in our
efforts develop policies for preventing the human-assisted entry of the
disease. We will ensure that any new regulations regarding soybean
imports are based on the best available scientific information.
______
Questions Submitted by Senator Herb Kohl
combating childhood obesity
Question. Mr. Bost, both USDA and FDA have recently announced new
efforts to combat the increasing problem of obesity. FDA announced the
``Calories Count'' program, and USDA has money in several programs,
including WIC, to help battle this problem. However, for all of the
government's efforts, all of the money being put into this effort pales
in comparison to the food industry's billions of dollars worth of
advertising.
How can the government successfully get its message out when, at
first glance, its efforts appear to be dwarfed by the food industry?
How do your agencies compete with that?
Answer. USDA has a strong partnership with the Department of Health
and Human Services, including CDC and FDA, which helps ensure that the
Federal investment to combat obesity is a collaborative effort with
consistent messages to the public. USDA plans to capitalize on the
Federal infrastructure working with the vast network of State, county,
and other local government agencies and groups to extend the reach of
their messages and materials. USDA is participating in the creation of
a new Food Guidance System which would be the cornerstone of other
Federal nutrition assistance programs. USDA is also actively exploring
options for partnerships and seeking opportunities to collaborate with
other health organizations, advocacy and industry groups to help carry
the Federal Government messages.
Question. Mr. Bost, the Senate report of the fiscal year 2004
Agriculture Appropriations bill encouraged the USDA to work with Share
Our Strength and its Operation Frontline (as well as other innovative
organizations) to improve eating habits and food budgeting skills of
program participants. In view of growing concern about obesity and
health, those objectives seem as valid as ever.
What progress can the Department report in response to this
encouragement?
Answer. Share Our Strength SOS provided my office with a proposal
for Operation Frontline to provide nutrition education to nutrition
assistance program participants. I also met with Bill Shore, the
Executive Director of SOS, to discuss it with him personally before it
was sent to the Food and Nutrition Service for a more thorough review.
In our discussion, I learned that the project shares many of the same
goals as USDA's nutrition education efforts, and uses a model similar
to that used by State agencies in providing nutrition education and
promotion to Food Stamp recipients.
As you know, nearly all of the nutrition education funding provided
to FNS must be used for grants to State agencies that operate the
programs, often for specifically earmarked purposes. The Department's
ability to provide direct funding for organizations such as SOS is thus
highly constrained, and we were unable to offer a grant to support
Operation Frontline in response to their proposal. However, I was
pleased to learn more about their efforts, and value SOS as a non-
profit sector partner in our shared effort to promote healthy eating
and wise use of food resources among low-income people.
commodity supplemental food program fiscal year 2004 funding
Question. The Commodity Supplemental Food Program was forced to cut
nearly 30,000 participants in fiscal year 2004. The current budget flat
lines program funding, but the carryover funding from the previous
years is no longer available. It has been estimated that this will
cause another 30,000 people taken off the roles--all senior citizens.
How do you propose people at the state level, who actually carry
out these programs, deal with a cut this deep?
Answer. About 29,500 fewer caseload slots were assigned in 2004
than in 2003. However, the caseload of 536,196 allocated in 2004
exceeds actual participation in any month to date, including the peak
participation of 526,955 achieved in September 2003. Thus, the caseload
available in 2004 covered actual nationwide program participation.
In reference to the President's fiscal year 2005 budget request,
the $98.335 million requested for the Commodity Supplemental Food
Program (CSFP) equals Congress' fiscal year 2004 program appropriation,
and is higher than the $94.991 million requested in the budgets for
fiscal years 2002 through 2004. However, variables beyond the
Administration's control have yielded significantly fluctuating levels
of total program resources over the same period. These variables are
the amounts that Congress appropriates and cash carryover from the
previous year, which is determined primarily by the extent to which
States utilize their assigned caseloads. Even though the fiscal year
2005 budget request includes an increase over the prior year's request,
the anticipated lack of cash carryover would result in a projected
participation decrease of 60,700 nationally.
The Department will pursue all means to minimize the impact of
straight-line funding for the program. We also wish to point out that
we are implementing major initiatives, including more extensive and
varied Food Stamp Program outreach efforts, which address the
nutritional needs of the population served by the CSFP. People eligible
for the program should also be eligible to receive benefits under the
Emergency Food Assistance Program and the Nutrition Services Incentive
Program now administered by the Department of Health and Human
Services. The Food and Nutrition Service will work closely with State
agencies to help affected individuals meet their nutritional needs
through these other Federal nutrition assistance programs.
food guide pyramid
Question. Mr. Bost, you mentioned in your statement that the FNS is
currently working on updating the food guide pyramid. I understand that
you have received a significant number of comments so far on your
efforts.
How many comments has FNS received on the proposed food guide
pyramid?
Answer. Last September, a Notice was published in the Federal
Register requesting comments from all stakeholders on the proposed
technical revisions to the current Food Guide Pyramid. USDA is using an
open and transparent process to revise the science base and
communications elements for the current Food Guidance System, the Food
Guide Pyramid. This process resulted in 255 response letters with 1,101
separate comments from a broad array of nutrition professionals, health
organizations, academic faculty, food industry organizations and the
general public. To continue this transparent process, we have made
these comments available for anyone to view on our website at http://
www.usda.gov/cnpp/pyramid-update/index.html.
Question. Do you believe you will be able to make the June deadline
for publication?
Answer. The report to the Secretaries of Agriculture and Health and
Human Services from the Dietary Guidelines Advisory Committee is
expected to be finalized by June 30, 2004. The scientific advisory
report will be published in electronic format on the USDA and HHS
websites. The two Departments will then jointly review and publish the
revised Dietary Guidelines, which is anticipated to be released in
January 2005. The revised Food Guidance System is scheduled to be
released approximately a month later, in February 2005.
low-carbohydrate diets
Question. How is USDA working to take into consideration the
various low-carbohydrate diets that have become so popular in this
country?
Answer. USDA continues to rely on consensus science from
authoritative bodies and reports such as the report from the Dietary
Guidelines Advisory Committee, the National Academy of Sciences, and
USDA's food consumption surveys. USDA's Agricultural Research Service
has six nutrition research centers that continually explore timely
nutrition issues. As new weight-loss diet trends emerge, USDA works in
collaboration with HHS as well as reputable organizations such as the
American Dietetic Association and the Society for Nutrition Education,
to plan communications strategies to help guide the American public to
make healthy food choices.
Question. Is USDA, NIH or CDC doing any research on the safety and
validity of these diets?
Answer. USDA's research is focused on energy balance and nutrient
adequacy to effect long-term health. For optimal nutrient adequacy, the
research continues to look at the nutrition requirements that ensure a
healthy life, maximum vigor and well being and reduced risk of chronic
disease, not to study the comparative effects of weight-loss diets.
Where many new diet programs capture the interest of the public and
come and go, nutritional requirements remain constant regardless of any
particular diet. Much of our Federal research includes the role of
carbohydrates, proteins, and fats and other nutrients play in a healthy
diet.
national organic standards board
Question. Mr. Hawks, the Organic Foods Production Act is very clear
that the NOSB should be able to hire their own Executive Director, and
that that person should report to the NOSB directly. Is the job
announcement published by USDA intended to meet the requirements of the
statute in this regard?
Answer. AMS intends to meet the requirements of the Organic Foods
Production Act (OFPA) which provides that the Board shall have a staff
director.
The General Provisions of the Consolidated Appropriations Act,
2004, (Title VII) limit the Department's spending authority to ``not
more than $1.8 million for all advisory committees within USDA. Of this
total, AMS has been allotted $90,000 for the National Organic Standards
Board. This means that AMS can spend up to $90,000 of the funds
appropriated for Organic Standards on the expenses of the NOSB. The
Organic Foods Production Act requires that Board members be reimbursed
for their travel expenses, including per diem. AMS cannot transfer
appropriated funds to the Board to hire its own staff, nor do we have
the authority to hire or contract for an employee who is not
responsible to AMS.
Consequently, AMS recently filled an Advisory Board Specialist
position. All of the specialist's time is dedicated to NOSB support
under the direction of the National Organic Program (NOP) Manager. A
complete description of the Advisory Board Specialist's duties will be
provided for the record.
The increased funding provided by Congress in fiscal year 2004 will
enable the Department to hire additional staff which will further
increase the program's quantity and timeliness of service.
[The information follows:]
Advisory Board Specialist Responsibilities:
--Bi-annual re-establishment of the NOSB Charter
--Development and publication of news releases and Federal Register
notices seeking nominees for NOSB membership
--Preparation of nominations packages and supporting documents for
NOSB appointments
--Development and publication of news releases and Federal Register
notices alerting the public to NOSB meetings
--Arranging public meetings; travel, hotel and meeting
accommodations, and contracting for Court Reporters and Audio
Visual Equipment
--Arranging guest speakers at NOSB meetings
--Reimbursing NOSB members for travel expenses in accordance with
Federal travel regulations
--Development, maintenance, and administration of an NOSB website
--Reporting on Board activities
--Arranging and participating in NOSB committee conference call
meetings
--Developing and publishing rulemaking actions to implement NOSB
recommendations
--Contracting with vendors for Technical Advisory Panel (TAP) review
of petitioned materials
--Reviewing petitions for compliance with OFPA, its implementing
regulations, and the petition procedures
--Communicating with petitioners and the TAP vendors
--Identifying program needs for which the NOSB can provide advice
--Reviewing the work of the NOSB for completeness, accuracy, and
compliance with OFPA, its implementing regulations, and the
requirements of other Federal entities
--Performing all activities required for compliance with FACA
--Representing USDA at all meetings of the NOSB and its committees
Question. I understand that AMS has contracted with the American
National Standards Institute to review the National Organic Program.
Will the ANSI effort be a one-time audit or ongoing oversight panel,
which is what was envisioned by the statute and the organic community.
If the ANSI effort is a one-time review, what steps, if any, are being
taken to create an ongoing Peer Review Panel, to oversee the
accreditation activities of the National Organic Program?
Answer. We are in the process of completing an initial peer review
of the NOP and hope to complete that review later this fiscal year.
After this review is completed, we will make the results public and
invite members of industry and the Board to work with us to develop a
process for ongoing Peer Reviews of the NOP.
Question. Could you please provide the Committee with a list of the
policy recommendations made by the NOSB since passage of the final
organic rule, and what action has been taken by the Department in
response to those recommendations?
Answer. The information is submitted for the record.
NOSB NON-MATERIALS RECOMMENDATIONS SINCE MARCH 2000
------------------------------------------------------------------------
NOSB Recommendations AMS Response
------------------------------------------------------------------------
June 2001:
Recommended regulations pertaining to The recommendation is
labels with principal display panel, covered by existing
ingredient deck and information panel standards. Should AMS
all on a single labeling panel. determine that there are
problems with application
of the standards; AMS will
engage in rulemaking to
clarify the requirements.
June 2001:
Recommended Peer Review Panel Review of AMS' accreditation
procedures for review of program could not begin
accreditation program. until after certifying
agents were accredited. AMS
has contracted with the
American National Standards
Institute for review of
AMS' accreditation program.
The review is underway.
June 2001:
Recommended technical corrections to AMS has acted on several of
the final rule. the recommended corrections
and AMS is still working
with the NOSB on others AMS
will soon take action on
the remainder.
September 2001:
Recommended Apiculture Standards...... The recommendation is
covered by existing
standards. Should AMS
determine that there are
problems with application
of the standards; AMS will
engage in rulemaking to
clarify the requirements.
September 2001:
Recommended guidance for preservatives The recommendation did not
used in vaccines. need AMS action beyond
acceptance and posting on
the Web. The recommendation
is posted on the Web.\1\
October 2001:
Recommendations on Aquatic Animals.... AMS accepted the
recommendations. The
recommendations are posted
on the Web.\1\
October 2001:
Recommendations on Pasture............ The recommendation is
covered by existing
standards. Should AMS
determine that there are
problems with application
of the standards; AMS will
engage in rulemaking to
clarify the requirements.
October 2001:
Recommendation, Principles of Organic The recommendation did not
Production and Handling. need AMS action beyond
acceptance posting on the
Web. The recommendation is
posted on the Web.\1\
October 2001:
Recommended procedures for amending AMS follows the Federal
the National List. Rulemaking procedures for
amending regulations.
October 2001:
Recommended Greenhouse Standards...... The recommendation is
covered by existing
standards. Should AMS
determine that there are
problems with application
of the standards; AMS will
engage in rulemaking to
clarify the requirements.
October 2001:
Recommended Mushroom Standards........ The recommendation is
covered by existing
standards. Should AMS
determine that there are
problems with application
of the standards; AMS will
engage in rulemaking to
clarify the requirements.
October 2001:
Recommended removing handlers from the AMS has not accepted the
$5,000 exemption. recommendation because it
would violate the Organic
Foods Production Act.
October 2001:
Recommended adding ``certified'' in AMS has not accepted the
front of ``distributor'' in 3 places. recommendation because
distributors are not
required to be certified.
May 2002:
Recommended guidelines for determining The recommendation is posted
whether a processing technology shall on the Web.\1\ When AMS
be reviewed by the NOSB. further defines what
materials are subject to
NOSB review, it may take
further action on the
technology recommendation.
May 2002:
Recommended guidelines for US/EU AMS has considered all
equivalency. points within this
recommendation. USDA and
USTR are in equivalency
negotiations with the EU.
May 2002:
Recommended that certifying agents use AMS fully supports the
the Organic Farm Plan documents recommendation. The
developed under an AMS cooperative recommendation did not need
agreement. AMS action beyond
acceptance and posting on
the Web. The recommendation
is posted on the Web.\1\
May 2002:
Recommended that certifying agents use AMS fully supports the
the Organic Handling Plan documents recommendation. The
developed under an AMS cooperative recommendation did not need
agreement. AMS action beyond
acceptance and posting on
the Web. The recommendation
is posted on the Web.\1\
May 2002:
Recommended clarification on ``access AMS accepted the
to the outdoors'' for poultry. recommendation and used it
to develop an ``access to
the outdoors'' policy
statement for livestock
which is posted on the
Web.\1\
May 2002:
Recommended a handling operation The recommendation did not
ingredient affidavit as guidance to need AMS action beyond
handlers and certifying agents. acceptance and posting on
the Web. The recommendation
is posted on the Web.\1\
May 2002:
Recommended clarification for section AMS is working with the NOSB
205.606 relative to commercially on this issue. The NOSB is
available. scheduled to provide a new
recommendation on section
205.606 at its April 2004
meeting.
May 2002:
Recommended clarification regarding The recommendation did not
planting stock for perennial crops need AMS action beyond
grown as annual crops. acceptance and posting on
the Web. The recommendation
is posted on the Web.\1\
May 2002:
Recommended guidance on transitional The recommendation is
products. outside the National
Organic Standards. AMS will
take no action beyond
posting the recommendation
on the Web.\1\
May 2002:
Recommended compost production methods AMS is working with the
beyond those specifically addressed chair of the NOSB Compost
in the NOP. The recommendation is Task Force on this issue.
intended as guidance. Specifically, AMS has
requested scientific
justification for the
recommendations. AMS is
concerned about the
potential for human
pathogens in the compost.
October 2002:
Recommended regulation changes for The Organic Trade
origin of livestock; dairy animals. Association (OTA) filed its
own recommendations
relative to dairy animal
replacement at the October
2002 NOSB meeting. The OTA
and NOSB recommendations
differ substantially. AMS
is reviewing this issue.
May 2003:
Approved a new recommendation on The Organic Trade
origin of dairy animals. Association (OTA) filed its
own recommendations
relative to dairy animal
replacement at the October
2002 NOSB meeting. The OTA
and NOSB recommendations
differ substantially. AMS
is reviewing this issue.
October 2002:
Recommended criteria for certification AMS is reviewing this issue.
of grower groups.
May 2003:
Recommended publication of AMS is reviewing this issue.
clarification management of breeder
stock.
May 2003:
Recommended regulation change on AMS is working on a
chlorine contacting organic food. rulemaking docket that will
address this
recommendation.
------------------------------------------------------------------------
\1\ Website: http://www.ams.usda.gov/nop/indexIE.htm.
beaver control
Question. How does APHIS/Wildlife Services plan to uphold their
cooperative responsibility with the Wisconsin Department of Natural
Resources to provide beaver damage management activities that are being
requested of them to restore trout streams that have been damaged by
beavers?
Answer. APHIS/Wildlife Services (WS) cooperates with the Wisconsin
Department of Natural Resources (WDNR) to conduct beaver damage
management on high quality trout streams in Wisconsin. Beaver dam
building activities can greatly alter the natural flow of a trout
stream, destroying its ability to support trout. Beaver dams and the
impoundments they create cause decreased water flow, water warming, and
increased siltation. They also pose a barrier to trout, interfering
with spawning. One component of the WS trout habitat protection program
is to maintain select trout streams in free flowing, natural condition
in order to improve or restore trout habitat and protect habitat
improvement structures. The fiscal year 2005 budget will continue to
fund these programs at current levels.
Question. Beaver damage to roads, bridges, crops, forests and
property are also increasing in Wisconsin resulting in an increasing
number of requests to Wildlife Services for assistance. The State of
Wisconsin, some counties and some townships provide cooperative funding
to Wildlife Services for their assistance with beaver damage problems.
How does Wildlife Services plan to fulfill their cooperative
responsibilities in responding to Wisconsin citizens' requests for
beaver damage assistance?
Answer. APHIS/Wildlife Services (WS) cooperates with a number of
northern Wisconsin county highway and forestry departments, and
numerous local township road departments, to provide beaver damage
management services for the protection of roads and road structures,
and forestry resources. The fiscal year 2005 budget will continue to
fund these programs at current levels.
bovine spongiform encephalopathy recall
Question. Dr. Murano, during the BSE scare, USDA announced that
approximately 38,000 pounds of beef were recalled, after originally
stating that the recall was only 10,400 pounds. Over the course of the
following few weeks, we read stories about consumers who feared that
they ate the contaminated meat because they were never informed that
they purchased a part of the recalled amount, because proprietary
information, including sales and distribution records, is kept secret
during a voluntary recall. Further, there was a 3 week delay between
the time the recall was announced and the time retailers found out
about it.
How much of the recalled beef was actually found?
Answer. FSIS field personnel worked cooperatively with other
Federal and State partners to conduct recall effectiveness checks on
100 percent of the establishments that sold or distributed the product
associated with the recall. FSIS is confident that the product was
quickly removed from the marketplace. FSIS determined that the
recalling firm and its customers made extensive efforts to retrieve and
dispose of the recalled product.
FSIS announced the recall at 1:00 a.m. on December 24, 2003. Less
than 18 hours later, over 325 locations--primarily grocery stores--had
received notifications from their suppliers.
On February 9, 2004, FSIS issued an update to the recall stating
that approximately 21,000 pounds of product had been returned. This
estimate was developed in late January 2004 using information from the
FSIS investigation, including recall effectiveness checks.
Question. How long did it take between the time USDA announced the
recall and the time individual grocery stores found out they had part
of the contaminated beef? Was the responsibility on the grocers to find
out for themselves, or were they all informed by either their state
governments or USDA?
Answer. FSIS announced the recall at 1:00 a.m. on December 24,
2003. FSIS issued a press release that was distributed nationally.
Simultaneously, its recall management division began collecting
distribution information from the establishments that slaughtered and
processed meat from the affected animal. Less than 18 hours later, over
325 locations--primarily grocery stores--had received notifications
from their suppliers. It is the responsibility of the recalling company
to notify its customers, including grocers, that they had received
recalled product. FSIS then conducted effectiveness checks on the
recall to confirm that the responsibilities of the recalling firm were
met.
Question. If USDA had the authority to initiate mandatory recalls,
do you think consumers would have found out more quickly? Why or why
not?
Answer. No establishment has refused to comply with a recall
requested by FSIS. Should they refuse, then FSIS has the legal
authority to detain and/or seize meat, poultry and egg products in
commerce. The current recall process is the quickest way to determine
where the affected product has been distributed because companies are
familiar with who their customers are and can notify them much more
quickly than the Federal Government could. Public health would not
likely be enhanced by the addition of mandatory recall authority
because the Agency already has the means to remove product quickly from
commerce.
Question. After all of the dust has settled, is USDA looking again
at its policy of not wanting the authority for mandatory recalls?
Answer. Through effectiveness checks, public meetings and other
means, FSIS is constantly reviewing and looking for ways to improve the
recall process. In December 2002, FSIS held a public meeting to discuss
improving the process for recalls of meat, poultry and egg products and
to gather useful input on related topics. FSIS expects to issue a
revised recall directive in fiscal year 2004 taking into account the
comments it received at the public meeting. The directive will discuss
how public notification of recalls is to take place and will provide
information on the new risk-based system the agency will use for
determining the scope of effectiveness checks.
sound science
Question. Dr. Murano, in your testimony you stated that there was a
significant drop in E.coli 157:H7 between 2002 and 2003, and credited
this drop to reassessment of plants' HACCP plans and increased audits.
Were the same plants that were sampled in 2002 sampled in 2003? If
not, how can you make a comparison between the two years? Unless the
exact same plants were sampled, how can you be statistically certain
that the plants sampled in 2002, but not sampled in 2003 have shown any
improvement?
Answer. There are valid methods for analyzing a time series of data
even though, as in this dataset, there are changes in the
establishments being sampled from year to year. The analysis conducted
by FSIS compares over 6,000 scheduled samples of ground beef production
from fiscal year 2002 with over 6,000 samples of ground beef production
from fiscal year 2003 and tests whether the populations are the same
from year to year with respect to the presence of E. coli O157:H7.
Statistical analysis was done using the Chi-square test to show the
association between positive E. coli O157:H7 samples and laboratory
method, season and year. A Poisson regression model was used to
demonstrate the significant decline in percent positive samples from
2002 to 2003, after controlling for season and laboratory method. The
conclusion is that the reduction in E. coli O157:H7 in raw ground beef
from fiscal year 2002 to fiscal year 2003 was statistically
significant.
On April 29, 2004, the Centers for Disease Control and Prevention,
in its annual report on the incidence of infections from foodborne
pathogens, noted a decline of 42 percent of illness caused by E.coli
O157:H7 from 1996 to 2003. Most significantly, between 2002 and 2003,
illnesses caused by E.coli O157:H7, typically associated with ground
beef, dropped by 36 percent.
Question. Further, I have been informed that of the 58,000 samples
collected for Salmonella in 2002, nearly 40,000 were collected from
beef products, which have a lower rate of Salmonella than poultry
products. It would appear that due to the high percentage of beef
products sampled relative to other products, FSIS would be more likely
to find a lower rate of positive Salmonella samples than if the
percentages were weighted for equal comparison. Can you comment on
this?
Answer. The agency has seven Salmonella performance standards for
classes of raw product, and the highest number of samples is for raw
ground beef because more establishments are subject to this standard
than other standards.
On April 29, 2004, the Centers for Disease Control and Prevention,
in its annual report on the incidence of infections from foodborne
pathogens, noted that from 1996 to 2003, illnesses caused by Salmonella
decreased 17 percent and Salmonella Typhimurium (typically associated
with meat and poultry) decreased 38 percent.
Question. You mention the new need for new baseline studies in your
statement. In fiscal year 2004 FSIS received funding for these
activities.
What will you do, or are you currently doing, to ensure that these
studies do not have some of the same problems as the previous studies,
as outlined by the National Academy of Science? Will FSIS be using any
of its fiscal year 2005 funding to continue conducting new baseline
studies?
Answer. For the current baseline project, using the funds provided
for fiscal year 2004, the agency developed a study protocol that was
reviewed by the National Advisory Committee on Microbiological Criteria
for Foods (NACMCF). FSIS modified the current plans based on NACMCF
recommendations and will continue to seek comments from the National
Advisory Committee on Microbiological Criteria for Foods on future
baseline projects.
FSIS considers the fiscal year 2004 $1.65 million baseline
initiative to be an addition to its base program and will continue to
review funding needs for fiscal year 2005.
inspector travel
Question. Dr. Murano, it has been suggested that FSIS inspection
personnel would benefit greatly from exposure and visits to slaughter
facilities in different parts of the country, in order to compare
differing methods of animal handling and slaughter practices to help
them better enforce HMSA.
Would you consider making changes to your travel policy to provide
an employee per diem for time spent visiting slaughter facilities, if
done as part of an unrelated personal or business trip?
Answer. USDA is committed to strong enforcement of the HMSA. FSIS
continually assesses its HMSA oversight and enforcement, primarily
through the activities of the District Veterinary Medical Specialists
(DVMSs). As methods are available to improve our HMSA efforts, the
DVMSs develop strategies for incorporating them into the overall roles
and responsibilities of the agency. Currently, DVMSs have authority and
opportunity to travel across district boundaries for humane activities
when necessary.
sausage casings
Question. Dr. Murano, this question involves a very specific issue
related to food safety and sausage production in this time of concern
about BSE. FSIS interim final regulations issued January 12 identify
the distal ileum section of beef cattle small intestine as Specified
Risk Material (SRM) in U.S. animals. In practice FSIS requires that the
entire small intestine be removed and disposed of as inedible--
presumably to ensure that the distal ileum is removed--even though I am
told that the distal ileum can be definitively identified and removed
without destroying the entire small intestine. This situation has the
potential to cause harm to that segment of the sausage industry that
relies on beef rounds as casing for their products.
Is there a way to ensure that the distal ileum SRM is completely
removed, while still ensuring the safety and availability of beef
rounds used as sausage casings?
Answer. FSIS is aware of the various methods for ensuring that the
distal ileum is properly removed. FSIS specifically asked for comment
in a Federal Register notice (January 12, 2004, Docket #03-025IF) on
this issue and will be analyzing the comments. Meanwhile, FSIS also is
aware that more than the distal ileum of the small intestine may
demonstrate infectivity based on preliminary studies from the United
Kingdom. FSIS is interested in gaining more information about this new
development as FSIS analyzes the comments.
Question. I am told that current inventories for sausage casings
could be exhausted within 2 months. Is it possible to provide further
regulatory refinements to address this issue within that time frame?
Answer. Casings made from the small intestine of cattle slaughtered
after January 12, 2004, are not currently allowed for human
consumption. FSIS is aware of the demand for sausage casings made from
the small intestine of cattle. However, in the interest of public
health, FSIS will be analyzing the comments received on the interim
final rule published on January 12, 2004, and further considering the
potential ramifications of new findings that additional sections of the
small intestine may demonstrate infectivity. FSIS will not change the
restriction on the use of the small intestine in human food until after
review of comments received.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
STATEMENT OF LESTER M. CRAWFORD, D.V.M., Ph.D., ACTING
COMMISSIONER
Senator Bennett. Dr. Crawford, we welcome you. I think this
is your first time in this particular assignment and we look
forward to hearing from you.
Mr. Crawford. Thank you, Mr. Chairman and Senator Kohl. It
is a pleasure for me to be here with my colleagues from USDA.
I want to thank you for the opportunity to discuss the
Administration's fiscal year 2005 budget for the Food and Drug
Administration.
As we approach our 100th birthday in 2006, our mission of
promoting and protecting the public health has never been more
vital. Likewise, the challenges and opportunities we face have
never been greater.
This committee's generous support of FDA's mission over the
past few years testifies to your recognition of the essential
role our agency plays in the well being of all Americans.
The President's budget for proposal for fiscal year 2005
asks you to continue that support. It seeks $1.85 billion, $1.5
billion in budget authority and $350 million in user fees.
The budget authority increases total $138.9 and savings
from administrative efficiencies and deferred facilities
repairs and improvements of $30.1 million for a net increase of
$108.8 million.
The President's budget request also asks you to build on
your past support by increasing FDA funding in several priority
areas. For Food Defense and Counterterrorism, we are seeking an
increase of $65 million. Working with the White House Homeland
Security Council, FDA and USDA have created a Joint Food
Defense Budget that will strengthen our ability to protect the
Nation's food and agriculture supply from threats whether
deliberate or accidental.
$35 million is requested to establish a national laboratory
network to test food samples. $15 million is requested for
research to protect the food supply by such measures as better
and faster tests to detect toxic agents in food. $7 million to
increase FDA's food import examinations to nearly 100,000, six
times the number we did in 2001. $3 million to increase our
crisis management capabilities and $5 million to support the
Administration's biosurveillance initiative.
For BSE, or mad cow disease, we are requesting an increase
of $8.3 million.
Mr. Chairman, FDA is proud, and I think justifiably so,
that we were able to trace and control all of the meat and bone
meal associated with the BSE-infected cow discovered late last
year in the Pacific Northwest. All of the rendering facilities
we inspected as part of this one BSE case were in full
compliance with our rules designed to create firewalls against
BSE in this country. Nevertheless, we can and should do more.
We have already announced several measures to make those
firewalls even stronger. With this increased funding, which if
you approve it would bring our total BSE resources to $30
million, we will do three things. We will increase our State-
funded BSE inspections by 2,500, we will add more than 900
risk-based BSE inspections and 600 targeted animal feed
inspections, and we will conduct a total of 10,000 BSE
inspections, 52 percent more than planned for the current year.
For our Medical Device Program, we are asking for an
increase of $25 million. We are committed to ensuring that the
Medical Device User Fee and Modernization Act is implemented in
a manner that meets its performance goals and that ensure the
strongest and most effective medical device review program
possible under the law with available resources. We need this
increase to meet the appropriations triggers required for the
Agency to collect medical device user fees. With these
resources, FDA will meet all of the performance goals by fiscal
year 2008.
For the Center for Drug Evaluation and Research move to
White Oak in Maryland, we are requesting an increase of $20.6
million in new budgetary authority and $10 million in user
fees. We will use these resources to relocate the 1,700 review
staff in the Center for Drug Evaluation and Research to the
White Oak Campus.
For medical countermeasures, we seek an increase of $5
million. We are seeking this amount to bolster FDA's ability to
help companies develop new medical countermeasures against
terrorist attacks and to review those products quickly. FDA
will use this increase to expedite the review of new drug
applications, biologics license applications, generic drugs and
over-the-counter medical product countermeasures.
For the pay increase we request an increase of $14.4
million. Fully 60 percent of our budget pays the salaries of
FDA's dedicated expert employees. I need not emphasize here how
important this money is for our ability to carry out our public
health mission.
For administrative efficiencies, this budget request
includes a reduction of $30 million. These funds will be used
to partially fund the high priority initiatives I just
mentioned as well as to support the goals of the President's
Management Agenda.
Mr. Chairman, by focusing on the President's highest
priorities for FDA, in some respects I have only scratched the
surface of all that we do every day to protect the health of
Americans.
An additional agency priority of particular interest to the
Subcommittee, is lowering the rate of obesity, one of the most
serious public health issues facing America today. We have just
finished an FDA obesity working group which prescribes a number
of recommendations and public input to reforming the food label
to make it more amenable to the control of obesity, and also
for demystifying some of the myths that now occur with respect
to our food supply, not the least of which is confusion about
carbohydrates and various classifications of carbohydrates.
prepared statement
I can list other additional program priorities, but in the
interest of time I will submit my statement for the record and
I appreciate very much the time accorded me.
Thank you.
[The statement follows:]
Prepared Statement of Lester M. Crawford
Introduction
Good morning. Mr. Chairman and distinguished members of the
Subcommittee, I'm pleased to have the opportunity to speak with you
today and present to you the Food and Drug Administration's fiscal year
2005 budget request. I am Dr. Lester M. Crawford, DVM, Ph.D. Acting
Commissioner, Food and Drug Administration.
The FDA is responsible for protecting the public health by assuring
the safety, efficacy, and security of human and veterinary drugs,
biological products, medical devices, our Nation's food supply,
cosmetics, and products that emit radiation. The FDA is also
responsible for advancing the public health by helping to speed
innovations that make medicines and foods more effective, safer, and
more affordable; and helping the public get the accurate, science-based
information they need to use medicines and foods to improve their
health.
I'd like to begin by conveying my appreciation to the Subcommittee
members and their staffs for providing FDA with several key increases
in the fiscal year 2004 appropriation such as those funds for generic
drugs, food defense, and medical device review. In a moment, I will
elaborate on how we have spent or plan to spend those funds in the
current year. I can assure you that funds appropriated in the current
year and additional increases appropriated in fiscal year 2005 will
continue to be spent wisely. The American people would be impressed if
they really knew how much bang for their buck they get out of FDA.
I am fully aware of the difficult funding decisions all of you must
face in the current session, but I want to remind you that marginal
investments in FDA's programs can have such a positive ripple effect
across all of your constituencies--from the consumer to the farmer to
the manufacturer and beyond. FDA is working diligently to reduce
administrative and IT costs in fiscal year 2004 and 2005. In fiscal
year 2004, we offered $57 million in IT and administrative savings and
we have again proposed another $23 million in administrative savings in
fiscal year 2005, which we are realizing through efficient
administrative resource management. We will continue to seek
administrative resource savings in order to support our critical
mission requirements.
Executive Summary
FDA makes substantial and meaningful differences in the lives of
over 290 million Americans. I am extremely thankful for the
professional dedication, creativity, and expertise of our staff.
Through a combination of dedicated and skilled staff, new authorities
of recently passed legislation, and the resources this Subcommittee
provides us to carry out our mission, we will be in a better position
to meet our challenges than ever before.
The Administration and Congress have an obligation to the American
public to ensure that adequate and properly targeted resources are
available for the continued success of the Agency and the success of
the Federal Government's efforts to promote quality health care. The
importance and complexity of FDA's work will only increase in the years
to come as FDA continues to carry out its primary mission of protecting
and promoting the public health. This means that while more medical
products and therapies will be available to save and improve lives, FDA
also must think critically and carefully about how it uses its
resources to improve the public wellbeing. In guiding us through our
new Strategic Action Plan that attempts to balance demands with limited
resources, we will constantly follow the practice of ``efficient risk
management.''
FDA's Strategic Plan
On August 20, 2003, FDA released a 5-Part Strategic Action Plan
entitled ``Protecting and Advancing America's Health: A Strategic
Action Plan for the 21st Century.'' This is a dynamic and evolving
document that outlines how the Agency is taking new steps to protect
and advance America's public health. In response to various public
health threats, the Agency developed a core set of consumer-focused
goals that includes the following: helping consumers get truthful and
non-misleading information about FDA regulated products; promoting
quick access to new medical technologies that are safe and effective;
improving patient and consumer safety; responding to the new challenges
of bioterrorism and food defense, and building a stronger, science-
based FDA. These goals were developed and refined in conjunction with a
number of key healthcare stakeholders, and were based on important
feedback from the consumer and patient communities. These are among the
many critical challenges the Agency faces as it moves forward into the
21st century. I will first discuss these challenges and progress within
our strategic planning effort, and then will discuss the specifics of
FDA's 2005 budget request.
Efficient, Science-Based Risk Management
In fiscal year 2005, FDA will be charged with regulating over
150,000 drugs and devices, overseeing the development of almost 3,000
investigational new drugs, monitoring 125,000 domestic product
establishments including over 10,000 firms involved in the animal drugs
and feed process, reviewing and acting upon an estimated 13 million
import line entries, and the list goes on and on. On top of this
workload, we cover the full life cycle of nearly all food and medical
products, and also interact on a daily basis with all facets of Federal
and State governments, consumers, public and private institutions, and
foreign entities. Our proposed budget includes the equivalent of 10,844
full-time employees, including reimbursables. The numbers speak for
themselves and they explain why we must practice efficient, science
based risk management in fulfilling our increasingly complex mission.
FDA's approach entails the use of the best scientific data, the
development of quality standards, and the use of efficient systems and
practices that provide clear and consistent decisions and
communications to the American public and the regulated industries.
This is achieved by employing principles and technologies that can
reduce avoidable delays and cost in product approvals, overhauling and
updating the way medical products are manufactured, implementing more
effective strategies for food imports and food safety, and by
implementing an enforcement strategy that combines clear communications
to industry backed up by effective civil and criminal enforcement, FDA
will achieve quicker access to safe and effective new products, and
reduce public health risks without unnecessary costs. Over the past
year, our work resulted in a wealth of success stories related to
enforcement, new medical product development, imports and the safety of
our food supply.
Our science based enforcement strategy is one based on clarity,
science, leveraging resources with our enforcement partners in Justice,
Homeland Security, and the states, and most importantly, deterrence. In
fiscal year 2003, our efforts led to 341 arrests, 199 convictions,
fines and restitutions of more than $800 million submitted to the U.S.
Treasury (including a multimillion dollar settlement for health care
fraud), 17 injunctions of firms/individuals, nearly 400 criminal cases
opened, 25 seizures of violative products, and more than 500 Warning
Letters. Additionally, we took action against drug counterfeiters,
unscrupulous parties in the dietary supplement industry, and those who
spread misinformation or commit fraud via false labeling and
advertising. We remain vigilant when necessary but hold the belief that
our regulations and the enforcement of the regulations should be no
more burdensome than necessary. In addition, FDA remains concerned
about the public health implications of unapproved prescription drugs
from entities seeking to profit by getting around U.S. legal standards
for drug safety and effectiveness. Many drugs obtained from foreign
sources that either purport to be or appear to be the same as U.S.-
approved prescription drugs are, in fact, of unknown quality. Consumers
are exposed to a number of potential risks when they purchase drugs
from foreign sources or from sources that are not operated by
pharmacies properly licensed under state pharmacy laws. Although some
purchasers of drugs from foreign sources may receive genuine product,
others may unknowingly buy counterfeit copies that contain only inert
ingredients, legitimate drugs that are outdated and have been diverted
to unscrupulous resellers, or dangerous sub-potent or super-potent
products that were improperly manufactured. The Agency has responded to
the challenge of importation by employing a risk-based enforcement
strategy to target our existing enforcement resources effectively in
the face of multiple priorities, including homeland security, food
safety and counterfeit drugs. However, the number of incoming packages,
as it works today, already overwhelms the system, and this presents a
significant ongoing challenge for the Agency. The Agency understands
Congress' desire to address importation of drugs and appreciates their
understanding of FDA's responsibility to uphold he current law.
New drug development is an extremely costly process. Today, we see
cases where the cost of developing a novel drug may reach $800 million
and take a decade to get from discovery to the marketplace. According
to a Tufts University study, only 21.5 percent of new drugs
successfully pass through the clinical phase and gain FDA approval. FDA
must foster and encourage new product development by ensuring that its
review and approval processes are efficient, transparent, consistent,
and predictable. We need to ensure that biomedical innovation leads to
the quick development of safe and effective medical products. As
recently discussed in our report entitled ``Innovation or Stagnation?--
Challenge and Opportunity on the Critical Path to New Medical
Products,'' FDA, together with academia, patient groups, industry, and
other government agencies, must embark on an aggressive, collaborative
research effort to create a new generation of performance standards and
predictive tools that will provide better answers about the safety and
effectiveness of investigational products, faster and with more
certainty. This action promises not only to bring medical breakthroughs
to patients more quickly, but to do so in ways that ensure greater
understanding about how to maximize patient benefits and minimize their
risks. This can be accomplished by developing quality systems for the
Agency's review procedures, developing guidances in new areas of
technology development, and continuing encouragement of quality
improvement in the manufacturing sector.
We want to build on the past success of industry-supported programs
such as the drug review process, which is funded by a combination of
appropriated dollars and user fees defined by the Prescription Drug
User Fee Act that will allow FDA to collect up to $284 million in
fiscal year 2005. This program's support helped bring median approval
times for standard new drug applications from 26.9 months in 1993 to
15.4 months in 2003. Increased funding for the past several years in
the generic drugs program has allowed median approval times to drop
from 39.7 months in 1993 to 17.3 in 2003, and an estimated time under
17 months with the fiscal year 2004 appropriation. We plan on this kind
of support translating into similar success for the medical device
review program with the help of budget authority and user fee dollars
in fiscal year 2004 and beyond. Increased funding in fiscal year 2005
will allow the Agency to expedite the speed and quality of the medical
device review process.
In the past year, highlights of our medical product review process
include:
--in total, approved 483 new and generic drugs and biological
products, including 21 New Molecular Entities with active
ingredients never before marketed in the United States;
--approved 85 new drug applications;
--approved 373 generic drug applications;
--approved 25 biologic license applications;
--generic approvals included drugs for the treatment of hypertension
and heart failure, the treatment and prevention of
Cytomegalovirus Retinitis in AIDS and transplant patients; a
treatment for major depressive disorder; and another for
impetigo, an infection of the skin;
--accelerated approvals of a drug used for the treatment of pediatric
patients with a type of myeloid leukemia--a rare, life-
threatening form of cancer that accounts for approximately 2
percent of all leukemias in children, and another for use in
combination therapy for chronic Hepatitis C;
--over-the-counter drug approvals including Claritin for allergies
and Prilosec for frequent heartburn;
--device approvals included the first drug-eluting stent for
angioplasty procedures to open clogged coronary arteries,
clearance of the first device for diabetics which integrates a
glucose meter and an insulin pump with a dose calculator into
one device, and an innovative rapid HIV diagnostic test kit
that provides results with 99.6 percent accuracy in as little
as 20 minutes.
Lastly, FDA continues to pursue the most cost effective allocation
of resources to identify food safety hazards and reduce injury and
illness associated with food products. In 2003, building on an HHS
strategic goal, FDA implemented new food security regulations that
amount to the most substantial expansion of FDA's food safety
activities in three decades. The Agency also instituted various new
risk communications to improve upon more routine food safety for
consumers. Additionally, the Agency continues to practice a cost
effective allocation of resources through the targeting of field
resources to imports that present the most significant risk. With no
sign of import entries decreasing, FDA will intensify these efforts by
implementing preventative food safety measures through collaborative
arrangements with domestic and foreign governmental bodies.
Patient and Consumer Safety
As beneficiaries of the world's premiere heath care system,
Americans should not have to endure preventable medical errors and
adverse events related to medical products, dietary supplements, and
foods that are responsible for thousands of deaths, millions of
hospitalizations, and tens of billions in added health care costs.
Americans deserve better than settling for serious health consequences
that can't be spotted until many years after a product has been on the
market. And Americans and their physicians deserve better than having
to rely on limited and often outdated information about risks,
benefits, and costs of medical treatments when they are making medical
decisions--which, these days, are among the costliest and most
important decisions in their lives. So we are taking new steps to make
our systems and processes for assuring the safety of food and medical
products work better than ever, and to build new ways to assure better
patient safety by taking advantage of modern information technology
tools. We are thankful for the appropriated increases for patient,
medical product safety and our various adverse event systems in the
food and medical product centers that we have received in past years.
Preventing medical errors is a top priority at the Department of
Health and Human Services and at FDA, and over the past year, FDA has
introduced a number of solutions that are enabling a more sophisticated
and effective 21st century patient safety system, thus helping lower
healthcare costs and ensure longer, healthier lives for Americans. As a
result of these new strategic initiatives, more programs are now in
place to improve consumer safety than at any time in the Agency's
history. In fiscal year 2003, FDA issued a new proposed requirement for
bar codes on nearly all prescription drugs and some over-the-counter
drugs, as well as machine-readable information on blood and blood
components intended for transfusion, that will result in an estimated
413,000 fewer adverse events over the next 20 years. FDA has initiated
partnerships that will allow use of external medical databases to
investigate specific product safety issues. We continue to encourage
the development of ``active'' reporting systems that use fast, easy
web-based reports and systems to get more extensive and timely
information on new drugs, important complications, and adverse events
that are not well understood. In fiscal year 2003, we also proposed new
safety standards to further reduce the incidence of adverse events,
such as proposed amendments to radiation-safety standards for
diagnostic x-ray equipment and new antibiotic labeling to prevent drug-
resistant bacterial strains.
Through enhanced testing and other improvements in blood safety,
the risk of transmission of viruses such as HIV, hepatitis B and C has
been dramatically reduced. While a blood supply with zero risk of
transmitting infectious disease may not be possible, the blood supply
is safer than it has ever been. The agency's Center for Biologics
Evaluation and Research, worked closely with other FDA Centers, the
Center for Disease Control and Prevention, the National Institutes of
Health, academic scientists, and the blood and diagnostic industries,
in an unprecedented team effort that resulted in the development and
implementation of investigational blood donor screening for West Nile
Virus within 8 months of when the threat was first recognized. As a
result, over 1,000 units of potentially WNV infected blood were
identified and removed this past year before they could be transfused.
Lastly, the Agency's Center for Food Safety and Applied Nutrition
launched the CFSAN Adverse Event Reporting System covering all food,
dietary supplement, and cosmetic products. Consumers submitted and FDA
reviewed more than 6,000 adverse events and consumer complaints in an
attempt to ensure consumers are alerted quickly to any potential new
dangers. Recently, the CFSAN Adverse Event Reporting System provided
information on the dangers of ephedra, which has been banned by FDA.
Better Informed Consumers So many of our stakeholders focus their
attention on our mission to protect public health, and ensure the
safety of the food supply and the safety and effectiveness of medical
products or therapies. However, at the beginning of my testimony I
restated FDA's mission which includes mention of our duty to promote
public health and ``[help] the public get the accurate, science-based
information they need to use medicines and foods to improve their
health.'' The public entrusts our subject matter experts and public
affairs specialists in Congressional districts across the country at
the state and local level to provide consumers with the tools they need
to make better-informed choices. These choices range from diet to
medical practice recommendations to disease management on the part of
the individual. Our role as an educator or informer of the public will
become evermore important as patients make more independent decisions
about their health and medical care. We must continue to assist the
public in how to use their health care dollars as we have done with our
generic drug campaigns, and at times protect them from misleading
information that could endanger the public's health.
Providing information on diabetes care and prevention is a top
priority of FDA and the Administration. In recent years, diabetes rates
among people ages 30 to 39 rose by 70 percent. Research shows that good
nutrition lowers people's risk for many chronic diseases, including
obesity, heart disease, stroke, some types of cancer, diabetes, and
osteoporosis. For at least 10 million Americans at risk for type 2
diabetes, proper nutrition along with physical activity can sharply
lower their chances of getting the disease.
FDA is also attempting to enhance the consumer understanding of the
relationship between diet/obesity and chronic disease. A recently
released report by FDA's Obesity Working Group includes recommendations
to strengthen food labeling, to educate consumers about maintaining a
healthy diet and weight and to encourage restaurants to provide calorie
and nutrition information. It also recommends increasing enforcement to
ensure food labels accurately portray serving size, revising and
reissuing guidance on developing obesity drugs and strengthening
coordinated scientific research to reduce obesity and to develop foods
that are healthier and low in calories. This effort is important, as a
new study from Centers for Disease Control and Prevention (CDC) shows
poor diet and inactivity are poised to become the leading preventable
cause of death among Americans--causing an estimated 400,000 deaths in
2000. CDC estimates that 64 percent of all Americans are overweight,
including more than 30 percent who are considered obese. In addition,
about 15 percent of children and adolescents, aged 6 to 19, are
overweight--almost double the rate of two decades ago. FDA must promote
good nutrition by allowing consumers access to credible, science-based
information, and fostering competition based on the real nutritional
value of foods rather than on portion size or spurious and unreliable
claims. Such labeling can promote better public health by empowering
consumers to make smart, healthy choices about the foods that they buy
and consume. This is a high priority for the Administration to ensure
that health claims are supported by scientific information. President
Bush continues to emphasize the improvement of health through better
diets and lifestyles.
FDA is undertaking major new efforts to ensure consumers have the
most up-to-date, truthful information on the benefits and risks of FDA
regulated products. In this arena, FDA fulfills two complementary
roles: ensuring that the information sponsors provide about products is
accurate and allows for their safe use; and, communicating directly
with the public concerning benefits and risks of products FDA
regulates.
FDA's strategic plan calls for the Agency to learn how to more
effectively communicate the risks and benefits of FDA regulated
products to consumers, as well as those in the health and medical
professions. The goal is a well-informed public, empowered to make
better choices to improve their health. Just this past year, FDA has
been involved in a number of consumer education campaigns related to
the prudent use of antibiotics, the misuse of pain relievers, the
parity between generic and name brand drugs, buying medicines and
medical products online, and several other campaigns aimed at
addressing a number of areas where the consumer needs to minimize the
risks and maximize the benefits of medicine use. FDA also teamed up
with women's health organizations to raise awareness about hormone
replacement therapy (HRT). The previous year, we conducted a similar
campaign to raise awareness about diabetes. We spread the word widely
about these efforts and we almost always try to provide these messages
in Spanish to reach as much of the public as possible.
Counterterrorism
FDA is improving its capability to assess and respond effectively
to its mission of protecting the security of the Nation's food supply,
and ensuring the safety and effectiveness of medical products used to
prepare and respond to biological, chemical, or radiological attacks.
As Secretary Thompson reported in the July 2003 report entitled,
``Ensuring the Safety and Security of the Nation's Food Supply,'' the
Agency is working with other government agencies and the private sector
to develop and implement a comprehensive strategy to protect the food
supply from attack. These include additional staff for food safety
field activities, greater import presence at our Nation's borders,
threat assessments, and additional money for food security research.
FDA's medical product centers are also working harder and more
creatively than ever to speed the availability of the next generation
of safer, more effective countermeasures to protect Americans against
biological, chemical, nuclear, and radiological agents of terrorism.
In fiscal year 2003, FDA implemented a number of fundamental
enhancements on both the food defense and medical countermeasures
fronts, in meeting the objectives of this strategic goal. In direct
response to this heightened threat, and in conjunction with the
Department of Health and Human Service's larger counterterrorism
initiatives, FDA has implemented new steps in food defense that
represent the most fundamental enhancements in the Agency's food safety
activities in many years. FDA's implementation of four new food
security regulations prompted by the Public Health Security and
Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act),
will be fundamental and long lasting. Two additional regulations are
expected to be finalized in the near future. The Bioterrorism Act gave
the Agency some potentially effective tools in identifying, preparing
for or responding to terrorist attacks on the food supply. The design
and implementation of these four regulations has also spawned a closer
working relationship with the U.S. Customs and Border Protection Agency
(CBP). Our close relationship led to a recent Memorandum of
Understanding (MOU) between FDA and CBP in December 2003 that allows
FDA to commission thousands of CBP officers to conduct, on FDA's
behalf, investigations and examinations of imported foods in accordance
with the prior notice requirements. This cooperative arrangement with
FDA's sister enforcement agency was in addition to a more than six-fold
increase in the number of field examinations of imported foods from
fiscal year 2001 to fiscal year 2003 (78,000) conducted by FDA
inspectors and our state partners. Much more needs to be done in this
area as we note in our Congressional budget request for an increase of
$65 million.
Protecting consumers against terrorism also requires that Americans
have access to safe and effective medical countermeasures. This year,
FDA has worked closely with scientists and product developers and has
taken new steps to speed the development of these safe, effective
treatments and preventive vaccines. FDA works closely with NIH, CDC,
DHHS, DOD and industry to develop new and improved treatments and
vaccines to counter smallpox, anthrax, and other potential emerging
biowarfare and public health threats.
FDA has had to become more proactive in identifying possible
products for approval for medical countermeasures due to the fact that
no known group of patients are currently affected by many of the
conditions linked to biological, chemical, or radiological agents. So,
in fiscal year 2003, the Agency issued new guidance on the development
of Radiogardase (``Prussian Blue'') for treatment of internal
contamination with thallium or radioactive cesium. Several months
later, a firm submitted an application and FDA approved Radiogardase to
treat people exposed to radiation contamination from harmful levels of
cesium-137 or thallium after identifying existing safety and efficacy
data. FDA has worked with other government agencies to facilitate the
development of counter-terrorism products, such as vaccines and immune
globulins against anthrax, smallpox, and botulism, by resolving
regulatory issues and developing assays for potency testing. FDA also
took various steps to make sure that manufacturers of medical
countermeasures are following Current Good Manufacturing Practices
(CGMPs). In 2003, FDA determined that CGMP inspections were lacking for
27 manufacturers of identified medical countermeasures, and the Agency
took action to address this. Even without the legislation creating
Project BioShield, an act designed in part to provide incentives for
developing safer, more effective countermeasures, FDA will remain the
only governmental Agency involved with the approval of products
necessary to prevent or treat human exposure to these terrorist agents.
We hope this Subcommittee supports our $5 million request in fiscal
year 2005.
A Strong FDA
The final goal of our Strategic Plan revolves around our world-
class, professional workforce that is highly dedicated and committed to
making a difference. FDA is aware of the need to maintain the highest
level of public trust in its activities. I believe this component of
our plan is the bedrock and the most critical component for the success
of the Agency. For that reason, the Agency must adequately develop and
support its cadre of experienced physicians, toxicologists, chemists,
biologists, statisticians, mathematicians, and other highly qualified
professions. Since 2001 and into the foreseeable future, we have
continually sought new opportunities to improve our management, and
efficiencies in our organization, infrastructure and information
technology. The practice of efficient risk management certainly applies
here as we must strive to adopt management practices that make the
Agency's core programs most efficient. The fiscal year 2005 request
fully funds the $33.1 million ($20.6 million of which is budget
authority) to complete a part of the work force consolidation at White
Oak, Maryland.
FDA's adherences to the strategies and goals of the President's
Management Agenda have brought about real and positive change toward
improving the management of the Agency. These five goals are Strategic
Management of Human Capital, Competitive Sourcing, Improved Financial
Performance, Expanded E-government, and Budget and Performance
Integration. Over the past year, FDA management achieved a number of
milestones in the area of ``Strategic Management of Human Capital,''
including the development and phased stand-up implementation of the new
shared service organization (SSO). Consolidation into the SSO, combined
with improved business processes, will allow FDA to maintain
administrative service levels with substantially fewer staff. Another
area of continued progress is towards the goal of ``improved financial
performance.'' Due to this Subcommittee's continued support, the Agency
is making progress towards the eventual replacement of its obsolete
legacy accounting systems. The Department-wide Unified Financial
Management System will integrate financial management to provide more
timely and consistent information, and promote the consolidation of
accounting operations that will substantially reduce the cost of
accounting services. In addition, FDA has continued its progress
towards the consolidation of its IT infrastructure by collaborating
with HHS toward achieving its ``One HHS'' goals and objectives. FDA
also competed six agency support functions in fiscal year 2003 to
determine the most efficient organization for running and managing each
function. The agency determined that the in-house operations for all
six functions were the most efficient organizations for providing their
respective services. We estimate savings of $16.3 million over a 5 year
performance period from just these six organizations. These are just a
few examples of FDA's outstanding progress in making efficient use out
of limited resources, and practicing efficient risk management.
Fiscal year 2005 Budget Request
As I noted earlier, adequate funding of the Agency's highest
priorities is vital to our success. Our fiscal year 2005 President's
budget request totals $1.845 billion, including $1.495 billion in
budget authority and $350 million in user fees. The Administration
proposes both increases and savings related to the President's
initiatives for a net budget authority increase of $108.8 million above
the fiscal year 2004 Appropriation. Requested increases cover: Cost of
Living, Food Defense, Medical Device Review, Medical Countermeasures,
Bovine Spongiform Encephalopathy prevention, and the Agency's
relocation of the Center for Drugs to the consolidated campus.
Additionally, the budget includes management savings achieved through
administrative efficiencies and savings achieved by using carryover
funds from our Buildings and Facilities account. The user fee increases
total more than $40 million. This proposed budget will support a total
of nearly 10,800 full time employees.
Cost of Living
Adequate annual pay increases are essential to allow FDA to fully
utilize programmatic increases. More than 60 percent of FDA's budget
goes toward paying our highly skilled scientific workforce, far more
than some Agencies. FDA's labor percentage is higher due to a number of
reasons, but most importantly because the Agency's diverse workload
requires numerous interdependent specialists in each of the Agency's
product areas, the inspectional responsibilities require great
geographic diversity to perform duties across the country and around
the world, and the number of personnel necessary to monitor the entire
life-cycle of all products under the Agency's purview (e.g., clinical
drug trials to drug application review to advertising of approved
product to actual effect of drug on patient's health). The lack of cost
of living increases has the potential to limit or nullify other
targeted increases towards high priority Administration, Congressional
and/or mission critical initiatives.
FDA is thankful for this Subcommittee's involvement in providing
the Agency with additional funding to cover the cost of inflationary
pay increases between fiscal year 2002 and fiscal year 2004. We
approach you once again and request that you provide a $14.4 million
increase representing a congressionally approved 4.1 percent cost of
living increase for calendar year 2004 as well as a 1.5 percent
increase for calendar year 2005 as proposed by the President.
Food Defense
As I noted earlier, Food Defense is a major component of FDA's
strategic goal to protect America from terrorism as it relates to foods
and medical products under our purview. I am also pleased to report
that this Subcommittee's support in the hiring of 655 new field staff
through the fiscal year 2002 supplemental appropriation as well as the
increases provided in fiscal year 2003 is beginning to produce positive
results.
Despite some significant progress over the past year with the rapid
implementation of the food registration and prior notice regulations
and systems, increased training and outreach, record amounts of import
examinations, expanded research programs, daily intelligence briefings
of FDA officials, etc., additional steps need to be taken to fully
prepare our Nation to handle various types of intentional attacks on
the food supply.
FDA has spent an extensive amount of time over the past year
coordinating this multifaceted plan with the White House Homeland
Security Council, the Department of Homeland Security, and the USDA.
The result is a joint budget developed with USDA and DHS for food
defense to protect the agriculture and food sectors. Based upon the
Administration's current knowledge, ability to respond, and capacity to
handle an actual attack, FDA requests $65 million in increased funding
to shore up five key areas--$35 million for the Food Emergency Response
Network [FERN], $15 million for research, $7 million for inspections,
$3 million for incident management, and $5 million for biosurveillance.
The investments in these particular areas will help develop awareness
amongst the various components of the food sector, build upon existing
surveillance tools, institute prevention techniques to shield against
an attack, prepare for an attack, and provide the capacity to respond
if such an event should occur.
It is also vital that the Agency has the capability to coordinate
and handle a food defense response with state and local governments and
other Federal agencies. We are seeking to build a food defense
laboratory network among states, part of a system called FERN. FERN is
comprised of labs specializing in food testing for biological, chemical
and radiological threat agents and these laboratories will have the
capacity to rapidly test a large number of food products. We need to
make a distinction here between a corresponding network of labs handled
by the Centers for Disease Control and Prevention. CDC is in charge of
the Laboratory Response Network that primarily handles clinical testing
of human specimens such as blood or urine.
Another system we will build upon with our fiscal year 2005 request
is the Electronic Laboratory Exchange Network or eLEXNET. This network
is the Nation's first seamless, integrated, secure, web-based data
exchange system for food testing information. eLEXNET allows health
officials at multiple government agencies engaged in food safety
activities to compare, share, and coordinate laboratory analysis
findings on food products. Whereas FERN laboratories are involved in
the actual analysis of food samples, eLEXNET provides a forum for the
exchange of laboratory data. FDA is continuing efforts to expand
eLEXNET to provide better nationwide data on food product analyses by
regulatory agencies.
Between fiscal year 2001-2005, FDA will increase the number of
import food inspections from approximately 12,000 to 97,000. Along with
increased inspectional needs, FDA must take the lead in conducting or
overseeing research projects that help us understand the effects of
contaminated food supplies on people. There are some hostile agents
capable of entering our food supply that we don't know how they will
react in humans. This is a complex challenge and we must conduct
calculated risk assessments and then use limited resources to study
human food consumption contaminated with these agents. Our food defense
task is challenging and we will make a concerted effort to gain a
greater understanding of these threats to the food supply. We currently
have over 90 research projects devoted to identifying food adulteration
and we hope to improve testing and identification with these projects.
Bovine Spongiform Encephalopathy (BSE)
Although 150 deaths in Europe from variant Creutzfeldt-Jakob
disease (vCJD) are linked to consumption of beef from cows with BSE,
the economic impact to the farming communities was also devastating.
The European Union estimated the cost of BSE contamination in affected
countries to reach $107 billion and Canada's recent discovery was
costing an average of $11 million a day in lost exports. The
Administration is acting vigorously to limit the distribution or spread
of any products suspected of carrying BSE following the December 23,
2003 discovery of a Holstein cow with BSE in the state of Washington.
On January 26 of this year, FDA announced several new public health
measures to strengthen the five existing firewalls that protect
Americans from exposure to the agent thought to cause BSE. FDA intends
to ban from human food, dietary supplements, and cosmetics a wide range
of bovine-derived material so that the same safeguards that USDA
implemented for meat products, also apply to food products that FDA
regulates. FDA will also prohibit certain feeding and manufacturing
practices involving feed for cattle and other ruminant animals. The
Agency will strengthen its current controls and implement these new
protections by publishing two interim final rules.
In fiscal year 2004, the base budget is $21.5 million for BSE
activities across all FDA programs. In fiscal year 2005, we request
$8.3 million for a total of $29.8 million in total funding for this
initiative. With the increased funding, we will undertake a trilateral
approach of increased inspections, enforcement activities, and
education. The requested resources will enable the Agency to increase
field BSE inspections, sample collections and analyses; increase
targeted sample collections and analyses of both domestic and imported
animal feed or feed components; fund 2,500 more state inspections of
animal feed firms; conduct industry outreach to better inform industry
of responsibilities and opportunities to prevent BSE from contaminating
animal feed; and strengthen the states' infrastructures to monitor, and
respond to, potential feed contamination with prohibited materials. The
Administration believes that an $8.3 million request is a relatively
modest increase in light of the potential health benefits and cost
savings that can be achieved with these resources.
Medical Device
Review FDA is committed to ensuring that the Medical Device User
Fee and Modernization Act (MDUFMA) performance goals are met and that
the strongest and most effective medical device review program possible
is available. The Administration requests a budget authority increase
of $25.5 million for a total of $217 million, the amount needed to
match the original levels specified by law for fiscal year 2005. On
October 29, 2003, OMB Director Josh Bolten wrote to Congress describing
the Administration's commitment to support this program at the level
intended by MDUFMA in fiscal year 2005 and beyond. Within the approach
outlined by Mr. Bolten, the Agency is committed to meeting the original
MDUFMA performance goals.
As you know, MDUFMA requires that $205.7 million be appropriated in
budget authority each year for FDA's Center for Devices and
Radiological Health and related field activities, adjusted for
inflation (CPI). The President's fiscal year 2005 budget meets the
MDUFMA threshold for fiscal year 2005 appropriations requirements. We
look forward to working with Congress to modify MDUFMA to preclude the
requirement to appropriate the entire ``shortfall'' from fiscal year
2003 and fiscal year 2004, in order to continue the user fee program
beyond fiscal year 2005. FDA is committed to achieving the performance
goals of MDUFMA.
In fiscal year 2005, FDA will utilize the appropriated increases to
build upon the success in fiscal year 2003 and fiscal year 2004. In
fiscal year 2003, FDA invested user fee and appropriated dollars in a
number of ways that will contribute to the ultimate improvement in the
review process in later years, including the hiring of more than 50 new
scientific, medical, engineering, and other review staff and the
development of process improvements to speed review from beginning to
end.
Medical Countermeasures
Counterterrorism is a major priority for the FDA and the Department
of Health and Human Services. Speeding the development of safe medical
countermeasures to improve protection against terrorism and emerging
diseases requires that Americans have access to safe and effective
medical treatments. Prior to September 11th, FDA had been engaged in
coordinated efforts with other Departments to develop and make
available better countermeasures for biological, chemical and
radiological attacks. The urgency is far greater now and so in fiscal
year 2005, FDA will continue to work closely with scientists and
product developers and take new steps to speed the development of these
safe, effective treatments. FDA requests $5 million to expedite the
review of new drug applications, biologics license applications,
generic drugs and over-the-counter medical product countermeasures. The
Agency must get involved in each facet of the process from animal
studies to dosing requirements to the development of postmarket systems
that will be in place to ensure rapid reaction to adverse events. These
initiatives are all necessary to ensure that adequate treatments are
available for a wide assortment of threats. One of these initiatives is
Project BioShield, a program designed to help ensure that medical
products are reviewed and approved for safety and effectiveness in the
event of war or catastrophic events. The first request for proposals
for procurement of a new generation anthrax vaccine through Project
BioShield will be initiated shortly.
Center for Drugs Relocation
I can only imagine that it is difficult for members of this
Subcommittee to write home about the funding you helped secure for
FDA's consolidation of its Washington, D.C. metro area Headquarters
Offices from 16 locations to three. However, I think they would be
happy to hear that the eventual settling into the three new sites in
White Oak, Laurel, and College Park, MD, create greater economies of
scale and operational efficiencies. The bottom line is that you will
save the American taxpayers money when this project is complete.
Although substantial facility needs at White Oak are mostly addressed
through the GSA appropriation, FDA must continue to seek your support
for relocation costs. In accordance with the President's Management
Agenda, the FDA plans to modernize document handling, use shared
library and conference facilities, reduce redundancies in a wide range
of administrative management tasks, convert to a single computer
network, and reduce management layers. Without the requested funds,
these management improvements and efficiency gains would be
jeopardized.
This current plan calls for the relocation of 1,700 drug review
personnel in April of 2005. The budget funds the total need for this
move, $33.1 million, and the request includes an increase of $20.6
million in new budget authority. The remainder would come from $2.4
million in the base budget, and $10 million in PDUFA user fees. The
General Services Administration has requested $89 million in their
fiscal year 2005 budget request to continue construction on the campus.
If GSA's subcommittee approves the full request, the building
construction would proceed as schedule. However, if GSA does not
receive its full request for White Oak, it would have severe financial
consequences for FDA. In a 2003 GAO report entitled ``Federal Real
Property: Executive and Legislative Actions Needed to Address Long-
Standing and Complex Problems,'' the report spells out the Federal
Government's problems in managing property, including the inefficient
use of space. FDA would be faced with paying unnecessary rental
payments for multiple properties unless the funding of construction and
relocation costs are synchronized as is currently the plan.
User Fees
In fiscal year 2005, the Agency expects to collect $350 million in
user fees, primarily from PDUFA, MDUFMA, and ADUFA fee programs. These
user fee programs provide substantial funding that compliment budget
authority resources and allow FDA to meet agreed upon performance
measures that allow for more rapid reviews of human drugs, medical
devices and animal drugs. Additionally, the Agency collects modest fee
amounts for the Mammography Quality Standards Act program as well as
export certification and color certification programs.
President's Management Agenda & Administrative Consolidation
FDA has been very proactive in streamlining its operations and
reducing its administrative expenses. Since November 2001, the Agency
has worked with the Department of Health and Human Services to do its
part to comply with the President's goal to improve the Strategic
Management of Human Capital across the Federal Government. We have
demonstrated tremendous success in efforts to delayer our
organizational structure, consolidate FDA's decentralized Human
Resources (HR) services to a single FDA HR office which has
consolidated into the HHS Rockville HR Center; implement a shared
services organization that makes best use of administrative resources;
plan for consolidated facilities at White Oak Maryland, consolidation
of IT activities, and, find efficiencies via competitive sourcing or A-
76 studies. Thanks to your support, we also continue to improve
financial management at FDA through the planned implementation of a new
financial system. In fiscal year 2005, FDA proposes its second straight
year of reductions by way of $23.1 million in savings achieved through
a seven and a half percent reduction in administrative staff, or a
combined reduction of 15 percent between fiscal year 2004 and fiscal
year 2005. In addition, no request is being made this year in the
Buildings and Facilities appropriation. This represents a savings of $7
million that was devoted to higher priority programs. Approximately
$4.6 million in carryover funds will sustain the program through fiscal
year 2005.
Conclusion
I thank you for your commitment and continued support of FDA. I am
confident that the information I provide to you today, and any
additional information provided to the Subcommittee following this
hearing, will give you further evidence of the Agency's needs in fiscal
year 2005, and justify the requested increases these priorities. Thank
you for the opportunity to testify today. I look forward to working
with all of you and your staffs in the months ahead.
Senator Bennett. Thank you, sir.
We appreciate all of you.
PROPOSED LEGISLATION
Mr. Bost, there are several requests in the budget for
legislative language. One, you have requested a legislative
proposal to exclude special pay for military personnel deployed
in a designated combat zone if that pay was not received
immediately prior to deployment. And second, a request for new
legislative language to allow for indefinite funding authority
for the Food Stamp Act.
Could you furnish the committee with a written explanation
in both of these cases? Senator Kohl and I have determined that
we are not going to legislate on an Appropriations Bill without
the complete cooperation of the members of the authorizing
committee. You have asked us to do this when it is within the
purview of the authorizing committee. So I think a clear
written statement on those two things would be helpful to us as
we make our decision as to whether or not we are going to
proceed on that.
Mr. Bost. Certainly Mr. Chairman. I would be more than
happy to do so.
[The information follows:]
The President's fiscal year 2005 budget includes a provision to
exclude ``special'' military pay when determining food stamp benefits
for deployed members of the armed services. Current rules count all
military pay received by the household as earned income in determining
household eligibility and benefits. Military personnel receive
supplements, such as combat or hazardous duty pay, to their basic pay
when they serve in combat, which could reduce a family's benefits or
make them ineligible.
The proposal excludes this income as long as it was not received
immediately prior to deployment. It supports the families of servicemen
and servicewomen fighting overseas by ensuring that they do not lose
food stamps as a result of the additional income resulting from their
deployment.
This change is being sought in appropriations language for fiscal
year 2005 when it is most needed. The cost in fiscal year 2005 is $3
million. Total cost for fiscal year 2005 to 2009 is $12 million if it
is needed and enacted in all those years. In fiscal year 2005, we
expect to help 2,900 military families.
The indefinite authority proposal in the fiscal year 2005 budget
request for the Food Stamp Program would provide such sums as necessary
to fund program benefits and payments to States. It would ensure that
sufficient resources were always available to provide access to the
program for all eligible persons who wish to participate. Unlike the
contingency reserve funds, if program costs should significantly exceed
budget estimates, it would never be necessary to seek a supplementary
appropriation or implement a benefit reduction. This proposal would
bring the structure of this critical program in line with other major
entitlement programs that already have indefinite authority.
Senator Bennett. Thank you.
FOOD GUIDE PYRAMID
We have talked to you about the pyramid. I seemed to get a
lot of publicity the last time I did that. You say it is
currently undertaking a reassessment. Should we just leave it
at that and say that it is still being reassessed or do you
have any progress reports you want to share with us?
Mr. Bost. We do not really have any progress to report at
this point but I think it is real important to know that the
first aspect of that is a review of the Dietary Guidelines.
Secretary Veneman and Secretary Thompson appointed a group of
leading scientists and they are in the midst--I think they have
had two meetings and one is upcoming to review the Dietary
Guidelines. A review of the Dietary Guidelines will fold into a
review of the Pyramid itself.
It is going to come as a result of the challenges we are
facing concerning obesity and it continues to come under a
great deal of scrutiny.
I think the challenge is trying to be everything to
everyone and that is the biggest challenge. Essentially, we eat
too much and exercise too little. We are trying to move
everybody in this country toward a healthy lifestyle.
Senator Bennett. Thank you.
LIVE BIRD MARKETS AND AVIAN INFLUENZA
Mr. Hawks, the Washington Post has run some stories on live
bird markets and the fact that these markets may be a breeding
ground for bird flu or avian influenza. Do you have any
information you could provide to us here about that issue?
Should we expect the Department to be taking any action with
respect to the live bird markets?
Mr. Hawks. Yes, sir, you sure should. As a matter of fact,
there is almost $13 million in our 2005 budget request to
address avian influenza. That encompasses the live bird
markets.
We are actually, as we speak, moving forward with plans to
do more surveillance in those live bird markets, and to do more
surveillance in general with respect to low path avian
influenza. We are engaged with the States involved and
certainly recognize the significance of the live bird markets
and the need to address them.
We have already, in the past, actually closed those live
bird markets. We have what we call a holiday in those bird
markets. We close them for 3 days. We clean, disinfect and
depopulate those birds that are there.
It certainly is an area that is of concern to us.
Senator Bennett. What about those countries that have
banned poultry exports from the United States because the bird
flu? Are we doing anything to try to get those markets
reopened?
Mr. Hawks. Yes sir, we sure are. We are very much engaged
in that.
We have submitted a significant amount of information to
our trading partners about what we are doing about the
epidemiological investigations that are ongoing.
The one that is the most significant is the high path avian
influenza in Gonzalez, Texas. We have completed our
surveillance programs there and have found no additional avian
influenza.
I will personally be in Mexico City on April 13th, the week
after next, to engage in continued discussions with my Mexican
counterparts to try to reinforce our desire for them to open
the market and follow the appropriate path.
BOVINE SPONGIFORM ENCEPHALOPATHY
Senator Bennett. While we are on the subject of markets,
that brings us now to BSE, and the request on the part of some
countries that there be a 100-percent testing of the export
market. I understand you are working, as you say, with Mexico,
also Japan. Is 100-percent testing of the export market
physically possible? Is that a feasible thing?
Mr. Hawks. Mr. Chairman, we do not think that is the
prudent thing to do, to test 100 percent for BSE. As a matter
of fact, Mexico has opened parts of its market to us. We
continue to move there. But the Japanese market is the one that
seems to be the most insistent on an increased level of
testing. We have communicated earlier this week with the
Japanese our desire to go to the OIE, the Office of
International Epizootics, with a panel there to look at our
proposals and their proposals to make sure that we are taking
the appropriate scientific measures. But we do not believe that
100-percent testing is the appropriate path.
Senator Bennett. Thank you.
RECALL REPORT BY OFFICE OF INSPECTOR GENERAL
Dr. Murano, I was pleased to hear you talk about the
dramatic decline in recall, but the Office of Inspector General
has recently released a report--not that recently, but
September of 2003--a report critical of several aspects of a
specific recall in Colorado. Is that a one-of-a-kind situation
that has been dealt with, or do you feel that the OIG has
raised some issues that should be examined Department-wide?
Dr. Murano. Thank you, Mr. Chairman. As you know, that
particular recall took place in the summer of 2002, and as that
recall was taking place, we identified right away things that
we needed to correct to improve our effectiveness at overseeing
how recalls are conducted by companies.
We identified a lot of the things that ended up in the OIG
report, many months later. We certainly did not wait for the
OIG report to start doing something about it, and I think that
is what has made a big difference in the results that we see
now.
Of course, the OIG takes quite a while to put out their
reports. I think the report came out, as you said, last fall.
We obviously had been working very, very diligently to address
a lot of the issues. We have revised a lot of our directives.
We have put in place new policies, and instituted new training
modules for our inspectors. I think the proof of it is the
recent BSE-related recall that we oversaw, because I think in
that particular case, we were able to conduct effectiveness
checks in a way that was certainly an improvement over what was
done back in 2002.
MEDICAL DEVICE USER FEE AND MODERNIZATION ACT
Senator Bennett. Thank you.
Dr. Crawford, you and I have visited about MDUFMA--I am
learning the acronyms and how to pronounce them--and as you
know, I was very supportive of that program, got a commitment
from OMB. I am pleased to note--and you mention it in your
testimony--how that is being followed through on.
There is speculation that we here on Capitol Hill may have
to go to a year-long continuing resolution if we cannot get the
appropriations bill through. If they left it to Senator Kohl
and me, we would get them all through. But people above our pay
grade seem to have some problem.
If there is a year-long continuing resolution, what would
be the impact on MDUFMA?
Dr. Crawford. Well, Mr. Chairman, we believe that under the
law we would be required and obligated to continue with the
user fee program. The problem would be--within the scope of my
testimony, I mentioned that we will increase the funding for
the medical device program. The President has asked for the
increase of funding to $25 million to fully fund this
particular program.
Also, within the context of the Administration's budget
request, we would seek relief from the shortfalls in fiscal
year 2003 and fiscal year 2004. That probably would not be met
under a continuing resolution, and so we would have to have
another plan in place. If the continuing resolution did not
last too long, I think it would be all right in correcting
that.
However, we would be working with OMB to try to get an
exception under the continuing resolution for this. And I can
commit to doing that. Working with them is something we always
do, but we would be particularly interested in getting this
accomplished.
I was Acting Commissioner before when we got MDUFMA passed,
and even though I was here then, I never did learn about the
acronym. And I appreciate being educated on it.
I have a real commitment to making this thing work before
this administration year is up, and I would feel pretty good
about that.
GENERIC BIOLOGICS
Senator Bennett. A final question. Let's talk about both
generic versions of biotech drugs and counterfeit drugs. The
Wall Street Journal ran an article a month or so ago: ``FDA
Takes Step Towards Allowing Generic Versions of Biotech
Drugs.'' Are you familiar with that?
Dr. Crawford. Yes, I am.
Senator Bennett. Okay. Well, it is clear from reading the
article that there is much to be learned, and it seems unusual
to me that FDA is developing scientific guidance on how to do
something when there is no legal structure by which to do it.
There are some serious intellectual property and patient safety
questions.
First, wouldn't everybody be better off if there was an
open, transparent, and science-driven process before the FDA
announces its conclusions?
Dr. Crawford. Yes, I agree. And I also agree that we will
need to pay special attention to the regulatory and legal
framework that will enable this or not enable it to take place.
When I first testified on this subject some time ago, FDA
had been in the mode of saying that generic biologics were not
possible for a number of reasons. Some of them were
pharmacological, that is, characterizing what is actually in
the biologic so that it can be transferred from one
manufacturer to another one, that is, from the pioneer to the
generic manufacturer. And the second thing was the very legal
and regulatory constraints that you mentioned.
But as the science improves, we have no recourse, Mr.
Chairman, but to be open-minded about it and to receive input
from the public and from experts in the field, as well as the
manufacturers. And although we do not know what the path is at
this point to achieve that or even if it is achievable, we are
open to suggestions.
We announced just last week a new initiative at FDA called
the Critical Path Initiative, in which we are trying to take
basic research developments and get them from the laboratory to
the bedside quicker. So we intend a large investment, as much
as we can afford, in trying to get that kind of thing done. It
used to be called technology transfer. It is now much more
complex than that and the tools are better.
I do not know what the outcome will be. All I can say to
you is that we are open to suggestions from this committee, of
course, but from all others.
COUNTERFEIT DRUGS
Senator Bennett. Thank you. And, very quickly, the FDA
earlier this year issued a report on the issue of counterfeit
drugs, the efforts of a counterfeit task force. Is that task
force report now available?
Dr. Crawford. Yes, it is, and we can make one available to
the committee. And if we haven't already done that, I
apologize, Mr. Chairman. But it will be done before very much
more time passes by, I assure you.
Senator Bennett. All right. I was going to ask you to list
the recommendations and so on, but that can be done with the
submission.
Dr. Crawford. We will submit that for the record,
separately if we may.
[The information follows:]
Combating Counterfeit Drugs: A Report of the Food and Drug
Administration
executive summary
The counterfeiting of currency and consumer products are common
problems that plague governments and manufacturers around the world,
but the counterfeiting of medications is a particularly insidious
practice. Drug counterfeiters not only defraud consumers, they also
deny ill patients the therapies that can alleviate suffering and save
lives. In some countries the counterfeiting of drugs is endemic--with
some patients having a better chance of getting a fake medicine than a
real one. In many more countries, counterfeit drugs are common. In the
United States, a relatively comprehensive system of laws, regulations,
and enforcement by Federal and State authorities has kept drug
counterfeiting rare, so that Americans can have a high degree of
confidence in the drugs they obtain through legal channels. In recent
years, however, the FDA has seen growing evidence of efforts by
increasingly well-organized counterfeiters backed by increasingly
sophisticated technologies and criminal operations to profit from drug
counterfeiting at the expense of American patients.
To respond to this emerging threat, Commissioner of Food and Drugs
Mark McClellan formed a Counterfeit Drug Task Force in July 2003. That
group received extensive comment from security experts, Federal and
State law enforcement officials, technology developers, manufacturers,
wholesalers, retailers, consumer groups, and the general public on a
very broad range of ideas for deterring counterfeiters. Those comments
reinforced the need for FDA and others to take action in multiple areas
to create a comprehensive system of modern protections against
counterfeit drugs. FDA discussed those ideas, and considered
alternatives and criticisms at its public meetings, to develop a
comprehensive framework for a pharmaceutical supply chain that will be
secure against modern counterfeit threats. The specific approach to
assuring that Americans are protected from counterfeit drugs includes
the following critical elements:
1. Implementation of new technologies to better protect our drug supply
Because the capabilities of counterfeiters continue to evolve
rapidly, there is no single ``magic bullet'' technology that provides
any long-term assurance of drug security. However, a combination of
rapidly improving ``track and trace'' technologies and product
authentication technologies should provide a much greater level of
security for drug products in the years ahead. Similar anti-
counterfeiting technologies are being used in other industries, and FDA
intends to facilitate their rapid development and use to keep drugs
secure against counterfeits.
a. The adoption and common use of reliable track and trace
technology is feasible by 2007, and would help secure the integrity of
the drug supply chain by providing an accurate drug ``pedigree,'' which
is a secure record documenting the drug was manufactured and
distributed under safe and secure conditions.
Modern electronic technology is rapidly approaching the State at
which it can reliably and affordably provide much greater assurances
that a drug product was manufactured safely and distributed under
conditions that did not compromise its potency. FDA has concluded that
this approach is a much more reliable direction for assuring the
legitimacy of a drug than paper recordkeeping requirements, which are
more likely to be incomplete or falsified, and that it is feasible for
use by 2007. Radiofrequency Identification (RFID) tagging of products
by manufacturers, wholesalers, and retailers appears to be the most
promising approach to reliable product tracking and tracing.
Significant feasibility studies and technology improvements are
underway to confirm that RFID will provide cost-reducing benefits in
areas such as inventory control, while also providing the ability to
track and trace the movement of every package of drugs from production
to dispensing. Most importantly, reliable RFID technology will make the
copying of medications either extremely difficult or unprofitable. FDA
is working with RFID product developers, sponsors, and participants of
RFID feasibility studies to ensure that FDA's regulations facilitate
the development and safe and secure use of this technology. FDA is also
working with other governmental agencies to coordinate activities in
this area.
b. Authentication technologies for pharmaceuticals have been
sufficiently perfected that they can now serve as a critical component
of any strategy to protect products against counterfeiting.
Authentication technologies include measures such as color shifting
inks, holograms, fingerprints, taggants, or chemical markers embedded
in a drug or its label. The use of one or more of these measures on
drugs, starting with those considered most likely to be counterfeited,
is an important part of an effective anti-counterfeiting strategy.
Because counterfeiters will adapt rapidly to any particular measure and
because the most effective measures differ by product, the most
effective use of authentication technology will vary by drug product
over time. FDA intends to clarify its policies and procedures to help
manufacturers employ and update these technologies safely and
effectively. In particular, FDA plans to publish a draft guidance on
notification procedures for making changes to products (e.g., addition
of taggants), their packaging, or their labeling, for the purpose of
encouraging timely adoption and adaptation of effective technologies
for detecting counterfeit drugs. FDA also intends to continue to
evaluate and provide information to stakeholders on forensic
technologies (e.g., use of product fingerprinting, addition of markers)
and other analytical methods that allow for rapid authentication of
drug products. FDA also plans to support the development of criteria
that contribute to counterfeiting risk, and/or the development of a
national list of drugs most likely to be counterfeited based on these
criteria, to assist stakeholders in focusing their use of anti-
counterfeiting technologies as effectively as possible.
2. Adoption of electronic track and trace technology to accomplish and
surpass the goals of the Prescription Drug Marketing Act
At the time PDMA was enacted the only way to pass on a pedigree for
drugs was to use paper, which has posed practical and administrative
challenges. RFID technology, which would provide a de facto electronic
pedigree, could surpass the intent of PDMA and do so at a lower cost.
In light of the rapid progress toward much more effective electronic
pedigrees that can be implemented within several years, FDA intends to
continue to stay its regulations regarding certain existing pedigree
requirements to allow suppliers to focus on implementing modern
effective pedigrees as quickly as possible.
3. Adoption and enforcement of strong, proven anti-counterfeiting laws
and regulations by the States
Because States license and regulate wholesale drug distributors
they have an important role in regulating the drug distribution supply
chain. The FDA is working with the National Association of Boards of
Pharmacy on its effort to develop and implement revised state model
rules for licensure of wholesale drug distributors. Such rules will
make it difficult for illegitimate wholesalers to become licensed and
transact business, thus making it easier to deter and detect channels
for counterfeit drugs. Some states have already reduced counterfeit
threats by adopting such measures. FDA will continue working with NABP
and states to facilitate adoption of the Model Rules.
4. Increased criminal penalties to deter counterfeiting and more
adequately punish those convicted
Although increased criminal penalties would not affect FDA's
regulatory framework for overseeing the U.S. drug supply, they would
provide an added deterrent to criminals who work to counterfeit our
citizens' medications. FDA has requested that the United States
Sentencing Commission amend the sentencing guidelines to increase
substantially the criminal penalties for manufacturing and distributing
counterfeit drugs and to provide for enhanced penalties based on the
level of risk to the public health involved in the offense.
5. Adoption of secure business practices by all participants in the
drug supply chain
Effective protection against counterfeit drugs includes actions by
drug producers, distributors, and dispensers to secure their business
practices such as ensuring the legitimacy of business partners and
refusing to do business with persons of unknown or dubious background,
taking steps to ensure physical security, and identifying an individual
or team in the organization with primary responsibility for ensuring
that effective security practices are implemented. The wholesalers have
already drafted a set of secure business practices and FDA will
continue to work with other major participants of the drug supply chain
to develop, implement, and disseminate such business practices, through
such steps as issuing guidance and supporting the development of
industry best practices. To help ensure secure business practices, FDA
intends to increase its inspection efforts of re-packagers whose
operating procedures place them at increased risk for the introduction
of counterfeit drugs.
6. Development of a system that helps ensure effective reporting of
counterfeit drugs to the agency and that strengthens FDA's
rapid response to such reports
If counterfeit drugs do enter the American marketplace, procedures
should be in place to recognize the hazard and alert the public quickly
and effectively. FDA plans to take new steps to encourage health
professionals to report suspected counterfeit drugs to FDA's MedWatch
system. FDA also intends to create a Counterfeit Alert Network to
provide timely and effective notification to affected health
professionals and the public whenever a counterfeit drug is identified.
7. Education of consumers and health professionals about the risks of
counterfeit drugs and how to protect against these risks
FDA will develop educational materials, including new tools on the
FDA website at www.fda.gov, new public service announcements, and new
educational partnerships with consumer and health professional
organizations, to help consumers avoid counterfeits. FDA will enhance
its educational programs for pharmacists and other health professionals
about their role in minimizing exposure to, identifying, and reporting
counterfeits.
8. Collaboration with foreign stakeholders to develop strategies to
deter and detect counterfeit drugs globally
Counterfeit drugs are a global challenge to all nations, and
criminal counterfeiting operations are increasingly operating across
national borders. FDA intends to work with the World Health
Organization, Interpol, and other international public health and law
enforcement organizations to develop and implement worldwide strategies
to combat counterfeit drugs.
The steps described in this report are intended to secure the
safety and of the U.S. drug supply, which the FDA regulates. The FDA
does not have the legal authority or resources to assure the safety and
efficacy of drugs purchased from other countries outside our domestic
drug distribution system, or from unregulated Internet sites that are
not run by pharmacies licensed and regulated by U.S. States.
A. Purpose of the Anti-Counterfeiting Initiative
The actions described in this report are based on the work of an
internal FDA Counterfeit Drug Task Force \1\, which was formed in July
2003 by Commissioner of Food and Drugs Mark McClellan, M.D., Ph.D.,
with the goals of:
---------------------------------------------------------------------------
\1\ The Task Force consists of senior agency staff from the Office
of the Commissioner (Office of Policy and Planning, Office of External
Affairs, and Office of the Chief Counsel), Office of Regulatory
Affairs, the Center for Drug Evaluation and Research, and the Center
for Biologics Evaluation and Research.
---------------------------------------------------------------------------
--Preventing the introduction of counterfeit drugs and biologics into
the U.S. drug distribution chain;
--Facilitating the identification of counterfeit drugs and biologics;
--Minimizing the risk and exposure of consumers to counterfeit drugs
and biologics; and
--Avoiding the addition of unnecessary costs to the prescription drug
distribution system, or unnecessary restrictions on lower-cost
sources of drugs.
B. Scope of the Problem
FDA believes that counterfeiting is not widespread within the
system of manufacturing and distributing pharmaceuticals legally in the
United States, as a result of an extensive system of Federal and State
regulatory oversight and steps to prevent counterfeiting undertaken by
drug manufacturers, distributors, and pharmacies. However, the agency
has recently seen an increase in counterfeiting activities as well as
increased sophistication in the methods used to introduce finished
dosage form counterfeits into the otherwise legitimate U.S. drug
distribution system. FDA counterfeit drug investigations have increased
to over 20 per year since 2000, after averaging only 5 per year through
the late 1990's. (See Figure 1--Chart of FDA investigations)
Increasingly, these investigations have involved well-organized
criminal operations that seek to introduce finished drug products that
may closely resemble legitimate drugs yet may contain only inactive
ingredients, incorrect ingredients, improper dosages, sub-potent or
super-potent ingredients, or be contaminated. Thus, drug counterfeiting
poses real public health and safety concerns today, and may pose an
even greater threat in the future if we fail to take preventative
measures now. As counterfeiters continue to seek out new technologies
to make deceptive products and introduce them into legitimate commerce,
our systems for protecting patients must respond effectively.
Although exact prevalence rates in the United States are not known,
outside the U.S. drug counterfeiting is known to be widespread and
affect both developing and developed countries. In some countries more
than half of the drug supply may consist of counterfeit drugs. For
example, recent reports have detailed that more than 50 percent of
anti-malarials in Africa are believed to be counterfeit. In virtually
all countries, counterfeit drug operations have been uncovered in
recent years.
C. What is in this Report
The body of this report contains a range of findings that have
broad support from industry stakeholders and the public to identify and
address the vulnerabilities in the U.S. drug distribution system to
counterfeit drugs.
This report is based on the potential options discussed in the Task
Force's Interim Report, the comments FDA received in response to that
report, our internal discussions, and on information gathered and
reviewed by the Task Force including:
--Meetings with government agencies, manufacturers, wholesalers,
retailers, professional and trade associations, standard-
setting organizations, consumer groups, and manufacturers of
anti-counterfeiting measures;
--Reviewing reports prepared by, or on behalf of, Federal and State
governments;
--Sponsoring a public meeting where 72 presentations were made
--Sponsoring a technology forum which included 54 exhibits
--Reviewing public comments to the anti-counterfeiting initiative
docket
--Site visits to manufacturing facilities, wholesale distribution
centers, retailers, radio-frequency identification (RFID)
laboratories and pilot facilities;
--Attendance at stakeholder task force meetings and industry RFID
feasibility study meetings
--Meetings with academic and industry experts
Appendix A contains the Counterfeit Alert Network Co-sponsorship
agreement. See www.fda.gov/oc/initiatives/counterfeit/ for background
information that was included in the Task Force's Interim Report
(released on October 2, 2003) as well as a detailed discussion of the
comments FDA received. Appendix B contains a more detailed discussion
of the comments FDA received and considered in developing the final
report.
The FDA is grateful for the input and universal support, not only
with regard to the creation of the task force, but also with regard to
the need for securing the Nation's drug supply.
D. Securing our Nation's Drug Supply
To secure the U.S. drug supply chain, there are several areas that
deserve attention, including the areas of technology, business
practices, legislation, regulation, public awareness and education,
creation of an alert network, and international cooperation.
1. technology
a. Unit of Use Packaging
(1) What FDA sought comment on:
Whether to package all finished dosage form drugs in unit of use
packaging as appropriate for the particular product (e.g., tablet,
multi-dose vial) at the point of manufacture?
(2) What the comments said:
Comments cited a large number of benefits, including eliminating
the need for re-packaging and improved patient compliance, as well as a
large number of costs, including those associated with shifting
production from bulk packaging. The cost hurdle to counterfeiters,
created by unit of use packaging, was said not to be high enough for it
to be effective as a stand-alone anti-counterfeiting measure. A
detailed discussion of the comments is in Appendix B.
(3) Discussion:
Although single unit containers (e.g., blister packs) usually come
to mind, unit of use packaging is any container closure system designed
to hold a specific quantity of drug product for a specific use and
dispensed to a patient without any modification except for the addition
of appropriate labeling.
Unit of use packaging does not create a sufficiently high level of
security to justify its use as a stand-alone anti-counterfeiting
measure. However, because of its many other benefits, which may vary on
a product specific basis (e.g., tablets, liquid forms), manufacturer
initiated cost-benefit analyses of particular products, starting with
newly approved products and products that are likely to be
counterfeited, are likely to show that unit of use packaging could be
effective as one layer in a multi-layered anti-counterfeiting strategy.
(4) FDA Conclusions:
Unit of use packaging can be beneficial in fighting counterfeit
drugs.
--It would be beneficial for all manufacturers and re-packagers to
analyze the costs and benefits of using unit of use packaging
for each product, starting with newly approved products and
products that are likely to be counterfeited, and to consider
implementing unit of use packaging for products where the
benefits are equal to or outweigh the costs;
--Unit of use packaging can be helpful, but only as one layer in a
multi-layered anti-counterfeiting strategy;
--FDA intends to encourage adoption of unit of use packaging by:
inviting stakeholders and other interested individuals and
organizations to submit research on the relative costs and
benefits of unit of use packaging to assist FDA in developing
future policy; and encouraging standard setting bodies to
develop standards for unit of use packaging with the goal of
reducing its costs (e.g., in areas such as size, shape, and
pill organization).
b. Tamper Evident Packaging
(1) What FDA sought comment on:
Whether to use tamper evident packaging from the point of
manufacture, for all dosage forms, active pharmaceutical ingredients
(APIs), and bulk chemicals?
(2) What the comments said:
The comments on tamper evident packaging mirrored the comments on
unit of use packaging.
(3) Discussion:
Decisions to employ tamper evident packaging on prescription drug
containers as an anti-counterfeiting measure require a product specific
cost-benefit analysis. As with unit of use packaging, FDA does not
believe that tamper evident packaging presents a high enough hurdle for
counterfeiters to make it effective as a stand-alone anti-
counterfeiting measure.
(4) FDA Conclusions:
Tamper evident packaging may be beneficial in fighting
counterfeiting of prescription drugs.
--It would be beneficial for manufacturers and re-packagers to
consider using tamper evident packaging for prescription
product containers, starting with products likely to be
counterfeited or newly approved products, where the benefits
are equal to or outweigh the costs;
--Tamper evident packing can be helpful, but only as one layer in a
multi-layered anti-counterfeiting strategy.
c. Authentication Technology
(1) What FDA sought comment on:
Whether to incorporate at least two types of anti-counterfeiting
technologies into the packaging and labeling of all drugs, at the point
of manufacture, with at least one of those technologies being covert
(i.e., not made public, and requiring special equipment or knowledge
for detection) starting with those products at high risk of being
counterfeited and where the introduction of counterfeit product poses a
serious health risk;
Whether to incorporate a taggant, chemical marker, or other unique
characteristics into the manufacturing process of all drugs that is
only identifiable with the use of sophisticated analytic techniques
starting with those products at high risk of being counterfeited and
where the introduction of counterfeit product poses a serious health
risk; and
Whether to issue FDA guidances concerning the appropriate use of
anti-counterfeiting technologies and the application and review process
for labeling and packaging changes or product changes such as
incorporation of taggants, chemical markers, or other unique
characteristics into the product for the purpose of product
authentication.
(2) What the comments said:
The comments stressed that there was no ``silver bullet'' anti-
counterfeiting technology because sophisticated, well-financed
counterfeiters can defeat any anti-counterfeiting measure. Therefore,
the best strategy is to use multiple, periodically changing,
authentication measures on a product specific basis after doing a risk
analysis that takes into account the risk that the product will be
counterfeited and the public health risk if the product is
counterfeited.
Given the rapid developments in anti-counterfeiting technology and
the dangers of aiding counterfeiters by locking in or requiring certain
technologies, most comments stressed that the FDA should not mandate
the use of specific anti-counterfeiting technologies.
FDA issuance of guidance concerning the agency's application and
notification policies and procedures related to incorporating anti-
counterfeiting measures into products (e.g., taggants), or labeling and
packaging (e.g., inks, holograms) was universally supported.
A detailed discussion of the comments is in Appendix B.
(3) Discussion:
FDA agrees that the danger of unwittingly assisting counterfeiters
and stifling technologic development outweigh the benefits that would
accrue if it were to mandate the use of a specific authentication
technology at this time. Furthermore, the decision to deploy
authentication technologies is best made by the manufacturer, based on
a product specific risk-benefit analysis that, in the future, should
take into account whether mass serialization and radio-frequency
identification technology (see below) is being used for tracking and
tracing the drug.
However, due to the high costs and technical barriers that
authentication technologies create for counterfeiters, their use is a
critical component of any effective multi-layered anti-counterfeiting
strategy, especially for products that are likely to be counterfeited.
Therefore, FDA believes that an appropriate role for it is to
facilitate the use of authentication technologies by reducing any
regulatory hurdles that may exist relating to their use.
(4) FDA Conclusions:
Existing authentication technologies have been sufficiently
perfected they can now serve as a critical component of any strategy to
protect products against counterfeiting.
--The use by manufacturers and re-packagers of one or more
authentication technologies on their products, particularly
those likely to be counterfeited, would protect the public
health and diminish counterfeiting;
--To facilitate the use of authentication technologies on existing
products, FDA plans to publish a draft guidance on notification
procedures for making changes to products (e.g., addition of
taggants) their packaging, or their labeling for the purpose of
deterring and detecting counterfeit drugs;
--FDA plans to continue to evaluate and disseminate information to
stakeholders on developing forensic technologies (e.g., use of
product fingerprinting, addition of markers) and other
analytical methods that allow for rapid authentication of drug
products.
d. Identification of Products likely to be counterfeited
(1) What FDA sought comment on:
Are all products at high risk for being counterfeited?
How can products at high risk for being counterfeited be
identified?
What criteria should be used to determine if a product is at high
risk for being counterfeited?
(2) What the comments said:
Although a few comments suggested that all products were at high
risk for being counterfeited, most of the comments FDA received
supported the idea of developing criteria by which stakeholders could
determine which products are likely to be counterfeited and/or
developing a national list of products likely to be counterfeited based
on these criteria. There was general agreement that the existence of
state specific lists, each with its own regulatory requirements, could
inhibit commerce and adversely affect the availability of drugs. FDA
notes that the State of Florida has already published a list of
``specified products'' (i.e., a list of drugs most likely to be
counterfeited) that is being used to implement state pedigree
requirements. A detailed discussion of the comments is in Appendix B.
(3) Discussion:
Due to the large number of drugs with the potential to be
counterfeited, FDA does not believe it is possible to create a
comprehensive list of all such drugs. However, FDA does believe that a
national list of those drugs most likely to be counterfeited and/or a
set of criteria to use for determining those drugs would be useful for
stakeholders to use at their discretion. Uses could include:
--Assisting manufacturers and re-packagers in making decisions
whether to use authentication technologies and unit of use
packaging;
--Assisting wholesalers in developing purchasing policies and
allocating resources for detecting counterfeits;
--Assisting retailers in targeting certain drugs for authentication
and patient education prior to dispensing;
--Assisting states in implementing regulatory requirements;
--Assisting stakeholders in developing migratory paths to adoption of
mass serialization and electronic track and trace technology.
FDA strongly supports the development of such a set of criteria, or
a list based on these criteria, that has the support and participation
of all stakeholders. Regular input from interested parties as well as
the ability to add or delete drugs from the list on short notice are
important parts of the process.
FDA believes that members of regulated industry are better
positioned at this time than FDA to develop a process for creating,
maintaining, and updating such a list (and/or set of criteria).
(4) FDA Conclusions:
FDA has concluded that there would be great value in the creation
of a national list of drugs most likely to be counterfeited based on
factors that are likely to contribute to counterfeiting risk.
--FDA intends to encourage stakeholders and standards setting
organizations to work together to create a national list of
drugs most likely to be counterfeited, based on an assessment
of criteria for determining counterfeit risk;
--The best result would be achieved if all stakeholders, including
FDA, and other interested parties participate in developing a
list, or criteria for determining, drugs most likely to be
counterfeited;
--Any such list, and/or criteria, would be most effective if made
publicly available to all stakeholders.
FDA is aware of only one national list of drugs most likely to be
counterfeited. The list was developed by the National Association of
Boards of Pharmacy and is available at www.nabp.org.
e. Radio-frequency Identification (RFID) Technology
(1) What FDA sought comment on:
Whether a pedigree for all drug products can be achieved by phasing
in track and trace technology (i.e., electronic pedigree) starting at a
case and pallet level for products likely to be counterfeited and
progressively including all products at the case, pallet, and package
level; and
Whether, as an interim measure, prior to widespread adoption of
track and trace technology all drugs and biologics likely to be
counterfeited should be tracked and traced either by limiting the
number of transactions of the product or by using available track and
trace technology, identifying the drug at the case and pallet level,
and preferably at the product level, throughout the distribution
system.
(2) What the comments said:
There was universal support for the adoption of electronic track
and trace technology. RFID was cited as being the technology with the
strongest potential for securing the supply chain but that it was not
ready for widespread commercial use with pharmaceutical products. Many
costs, potential benefits, and unresolved issues related to RFID were
cited. The potential benefits included the ability to control inventory
and conduct rapid, efficient recalls, while costs that could hinder the
adoption of RFID included purchase of tags and other hardware,
integration into existing information systems, and compliance with
regulatory requirements (e.g., labeling, electronic records). Important
unresolved issues included the need to develop standards and business
rules for RFID, the need to address database management issues, and the
need to determine the effect of RFID on product quality.
FDA was also informed that some companies are planning feasibility
studies concerning business uses of RFID for early this year and that
other activities related to creating standards, business rules, and
migratory pathways for RFID are also ongoing. A detailed discussion of
these activities and other comments concerning RFID is in Appendix B.
(3) Discussion
Use of mass serialization to uniquely identify all drug products
intended for use in the United States is the single most powerful tool
available to secure the U.S. drug supply. Mass serialization involves
assigning a unique number (the electronic product code or EPC) to each
pallet, case, and package of drugs and then using that number to record
information about all transactions involving the product, thus
providing an electronic pedigree from the point of manufacture to the
point of dispensing. This unique number would allow each drug purchaser
to immediately determine a drug's authenticity, where it was intended
for sale, and whether it was previously dispensed.
Although there is general agreement that widespread use of mass
serialization is inevitable, several important issues remain
unresolved, including the migratory paths that participants in the drug
distribution system will follow as they begin to serialize their
products, and the most likely timeline for widespread commercial use.
It currently appears that the technology most likely to bring mass
serialization into widespread commercial use by the pharmaceutical
industry is RFID, although two-dimensional bar codes may be used for
some products. RFID technology includes not only the silicon tags
containing the EPC, but also antennas, tag readers, and information
systems that allow all users to identify each package of drugs and its
associated data. This data can be used not only to authenticate drugs
but also to manage inventory, conduct rapid, targeted recalls, prevent
diversion, and ensure correct dispensing of prescriptions.
Acquiring and integrating RFID technology into current
manufacturing, distribution, and retailing processes will require
considerable planning, experience, and investment of resources.
Currently, some manufacturers, wholesalers, and retailers are
developing business plans and testing mass serialization using RFID
while others are taking a wait and see approach. Due to rapid
technologic advancements, the lack of significant market place
experience with it in the pharmaceutical supply chain, each participant
is best situated to determine his optimal paths to adopting it.
Therefore, FDA has identified near term actions, described below,
for it to take in order to facilitate the performance of mass
serialization feasibility studies using RFID, and to assist
stakeholders as they migrate towards the use of RFID technology.
In the long term, after there is significant market place
experience with RFID, FDA plans to propose or clarify, as necessary and
appropriate, policies and regulatory requirements relating to the use
of RFID. Labeling, electronic records, product quality, and Current
Good Manufacturing Practices (cGMP) requirements are issues that have
arisen in connection with RFID. However, regulatory or policy
determinations regarding these, or other, issues should not be made
until they can be informed by sufficient data and significant
marketplace experience with RFID. FDA has also identified a series of
actions, discussed below, that would help industry stakeholders and
standard-setting organizations achieve this goal.
Lastly, stakeholders will need to ensure that they comply with the
patient privacy protections provided by the Health Insurance
Portability and Accountability Act as they implement use of RFID
technology.
(4) FDA Conclusions:
The adoption and common use of RFID as the standard track and trace
technology, which is feasible in 2007, would provide better protection.
--Due to industry's current initiatives, mass serialization and RFID
technology is likely to be adopted according to the following
timeline:
January--December 2004
--Performance of mass serialization feasibility studies using RFID on
pallets, cases, and packages of pharmaceuticals;
January--December 2005
--Mass serialization of some pallets and cases of pharmaceuticals
likely to be counterfeited;
--Mass serialization of some packages of pharmaceuticals likely to be
counterfeited; and
--Acquisition and use of RFID technology (i.e., ability to read and
use the information contained in RFID tags and the associated
database) by some manufacturers, large wholesalers, some large
chain drug stores, and some hospitals.
January--December 2006
--Mass serialization of most pallets and cases of pharmaceuticals
likely to be counterfeited and some pallets and cases of other
pharmaceuticals;
--Mass serialization of most packages of pharmaceuticals likely to be
counterfeited; and
--Acquisition and use of RFID technology (i.e., ability to read and
use the information contained in RFID tags and the associated
database) by most manufacturers, most wholesalers, most chain
drug stores, most hospitals, and some small retailers.
January--December 2007
--Mass serialization of all pallets and cases of pharmaceuticals;
--Mass serialization of most packages of pharmaceuticals; and
--Acquisition and use of RFID technology (i.e., ability to read and
use the information contained in RFID tags and the associated
database) by all manufacturers, all wholesalers, all chain drug
stores, all hospitals, and most small retailers.
--FDA plans to assist, to the extent necessary and appropriate, in
facilitating the rapid, widespread adoption of RFID in the drug
distribution system by working with stakeholders in the
following areas:
--Addressing any regulatory and policy issues related to the
performance of feasibility studies;
--Addressing any regulatory and policy issues relating to the
notification requirements associated with implementation of
RFID;
--Addressing any product quality concerns and data issues related
to the performance of feasibility studies;
--Reviewing protocols for feasibility studies;
--Working with other governmental agencies to coordinate
activities;
--Encouraging stakeholders to convene meetings of supply chain
participants to identify, discuss, and propose solutions to
technical, business, and policy issues related to the use
of RFID technology in the pharmaceutical distribution
system; and
--Exploring the need for any other processes and venues that might
be needed to assist stakeholders as they migrate towards
the use of RFID technology.
--FDA intends to regularly review the pace at which RFID is being
adopted in the U.S. drug distribution system;
--FDA plans to publish or clarify, as appropriate, regulatory
requirements, policy guidance, and product quality testing
requirements related to the use of RFID after sufficient data
and marketplace experience with RFID are available to
adequately inform our decision-making; and
--FDA intends to consider taking further steps to facilitate the
adoption of mass serialization.
1. Business steps for industry
Each industry stakeholder interested in implementing RFID would
benefit from the following steps:
--Create an internal team focused on the adoption of mass
serialization and use of RFID technology;
--Perform internal feasibility studies to gain experience with mass
serialization and RFID technology and to identify internal
business issues requiring resolution;
--Perform external pilot studies with stakeholders across the supply
chain to gain experience using mass serialization and RFID and
to identify opportunities, barriers and external business
issues associated with them;
--Develop policy and a business case for the use of mass
serialization and RFID;
--Cooperate and work with other stakeholders and government agencies
to develop infrastructure and information systems to use with
mass serialization of pallets, cases, and packages of drugs;
--Participate on standard setting groups developing technical
standards and business rules for use of mass serialization and
RFID;
--Work with government agencies and other members of the supply chain
to identify and address regulatory and economic issues that
could delay the adoption of mass serialization and RFID; and
--Educate other members of the supply chain and government agencies
about mass serialization and RFID.
To the extent possible, it would be most useful for interested
firms to perform these actions concurrently. For example, standards
development requires knowledge gained from feasibility studies in order
to move forward, and vice versa.
2. Standards Setting Issues
Any effort to develop standards for mass serialization of pallets,
cases, and packages would be most effective if it addressed the
following issues:
--Minimum Information Requirements for the serial number--in the case
of RFID tags this means containing a mass serialization code
that uniquely identifies the object to which it is attached
(e.g., minimum of 96 bits of information);
--Communication protocol standards--in the case of RFID this means
standard protocols for interrogating and reading tags;
--Reader Requirements--Readers of mass serialization codes should be
interoperable (e.g., readers must use protocols that allow them
to read multiple classes of tags or bar codes, as applicable)
and should be able to automatically upgrade software over an
information network;
--Pedigree requirements--this means that databases containing
transaction information should be compatible (e.g., format,
mark-up language);
--Information Network Requirements
--1. Database Structure (e.g., centralized vs. distributive)
--2. Data ownership
--3. Data access (to meet business, track and trace, and recall
needs)
--4. Data Access controls to assure information security;
--Software Requirements--all applications should be compatible and
compliant to assure global interoperability; and
--Best use of Frequencies--(e.g., 13.56 megahertz on packages and 915
megahertz on cases and pallets due to interference and read
range issues).
2. regulatory initiatives and state model rules
All levels of government, in addition to the private sector, should
take responsibility for ensuring the safety and security of the U.S.
drug distribution system. Each level has a role in deterring and
preventing the introduction of counterfeit drugs into the Nation's drug
supply chain. To complement and build on the technology measures
described above, regulatory and legislative steps at all levels of
government may be necessary. At the Federal level, FDA is taking steps
to meet the objectives of the Prescription Drug Marketing Act (PDMA),
which is intended to address vulnerabilities in the U.S. drug
distribution system. At the State level, it would be beneficial for
states to strengthen their provisions governing wholesale distribution,
as described below in the revised Model Rules for Licensure of
Wholesale Distributors. And, FDA plans to pursue increased criminal
penalties for counterfeiting in the United States Sentencing
Commission's sentencing guidelines.
A. Prescription Drug Marketing Act (PDMA)
(1) What FDA sought comment on:
What are the most effective ways to achieve the goals of PDMA and,
given recent or impending advances in technology discuss the
feasibility of using an electronic pedigree in lieu of a paper
pedigree?
(2) What the Comments Said:
Many of the comments that discussed PDMA acknowledged the
limitations and concerns of full implementation of PDMA. However, many
comments also supported the use of paper pedigrees for their deterrent
value and as a means to verify prior sales through due diligence. A
risk-based approach to implementing PDMA, which focuses on those drugs
that are at high risk of being counterfeited, was suggested, as well as
maintaining a full pedigree that documents all sales and transactions
back to the manufacturer for drugs and high risk. One comment suggested
an interim solution of ``one forward, one back'' pedigree for high-risk
drugs. However, a number of the comments noted the high cost and
incomplete protection provided by such paper requirements, especially
as a general interim measure; by the time these costly requirements
were phased in, they could be replaced by a more modern system. A
majority of the comments supported the eventual use of an electronic
pedigree for all drug products in the supply chain and indicated that
an electronic pedigree should be considered as a modern solution to
fulfilling and exceeding the PDMA goals, and urged FDA to take steps to
help achieve a reliable pedigree solution as quickly as possible. As
noted above, FDA believes that substantial progress toward a more cost-
effective solution than incomplete and costly paper pedigrees is
possible within the next several years. A detailed discussion of the
comments is in Appendix B.
(3) Discussion:
FDA has worked closely with affected parties to identify and
resolve concerns related to the implementation of the pedigree
requirements of the PDMA. Through the various public comment
opportunities over the years, the agency has heard mixed reviews about
the value, utility, and difficulty of implementing a paper pedigree
that identifies each prior sale, purchase, or trade of such drug. The
comments received in response to questions raised in the Interim Report
confirm that these concerns continue.
FDA is encouraged by the enthusiasm and interest that stakeholders
in the U.S. drug supply chain have expressed toward the adoption of
sophisticated track and trace technologies that are more reliable than
paper pedigrees. As discussed above, there appears to be movement by
industry toward implementation of electronic track and trace capability
in 2007. When this is in place, RFID should be able to function as a de
facto electronic pedigree that follows the product from the place of
manufacturer through the U.S. drug supply chain to the final dispenser.
If developed properly, this electronic pedigree could be used to meet
the statutory requirement in 21 U.S.C. 353(e)(1)(A) to provide a
pedigree under certain circumstances.
In the interim, until the electronic pedigree is in widespread use,
voluntary adoption of multi-layer strategies and measures discussed in
this report would reduce the likelihood that counterfeit drugs will be
introduced into the U.S. drug distribution system. These measures,
combined with RFID technology, can help provide effective long-term
protections that will minimize the number of counterfeit drug products
in the United States distribution system.
As discussed in a notice published in the Federal Register in
conjunction with the publication of this report, FDA plans to continue
to stay the implementation of 21 CFR 203.3(u) and 203.50. However,
the agency intends to continue to reassess the stay of implementation
on an annual basis. The agency will monitor closely whether progress
toward the implementation of electronic pedigrees continues at the
rapid pace evident in this task force analysis. Our plan to reassess
the stay annually is part of the agency's strong commitment to see that
effective product tracing is implemented as quickly as possible. The
agency also encourages wholesalers to provide pedigree information that
documents the prior history of a drug product, particularly for drugs
most likely to be counterfeited, even when the passing of such a
pedigree is not required by the Act. The suggestion from the comments
that there be a one-forward, one-back pedigree for high-risk drugs in
the interim, until an electronic pedigree is uniformly adopted, may
have merit. However, FDA believes that Congress would have to amend
section 503(e) of the Act if such a system is to become a requirement.
(4) FDA Conclusion:
Adoption of electronic track and trace technology would help
stakeholders meet and surpass the goals of PDMA. Therefore, FDA intends
to focus its efforts on facilitating industry adoption of this
technology within the next few years.
--To allow stakeholders to continue to move toward the goal of an
electronic pedigree, FDA intends to delay the effective date of
21 CFR 203.3(u) (definition of ADR criterion) and 203.50
(specific requirements regarding pedigree) until December 2006;
--By December 2006, FDA intends to determine whether to further stay
the regulations or take other appropriate regulatory action.
B. Model Rules for Wholesale Distributor Licensing Strengthened
(1) What FDA sought comment on:
How should the NABP Model Rules for Licensure of Wholesale
Distributors (Model Rules) be updated?
Whether FDA regulations at 21 CFR Part 205, should be updated, as
appropriate, to make it consistent with updates to the NABP Model
Rules?
(2) What the Comments Said:
The comments overwhelmingly supported strengthening state
requirements governing the licensure and oversight of wholesale
distributors. Many comments cited the systemic weaknesses in the
oversight of the wholesale drug industry and that existing inspection
and due diligence processes are often insufficient to detect criminal
activity. Some comments noted the positive steps already taken by some
states, such as Florida, toward more effective regulation of wholesale
distributors. For example, Florida has implemented more stringent
requirements for licensure, stronger penalties, and due diligence
requirements. Most comments stated that the full adoption of revised
NABP model rules would improve security nationwide, and that stricter
uniform standards were desirable across all 50 states so as not to
create 50 different sets of criteria and rules for licensing. FDA was
encouraged to revisit the current minimum standards requirements
described in 21 CFR Part 205 to assess whether a ``Federal floor'' for
states would enhance or diminish state efforts to meet the NABP
recommendations. A detailed discussion of the comments is in Appendix
B.
(3) Discussion
FDA is pleased to recognize the recent efforts by NABP in revising
the Model Rules. The revised Model Rules significantly strengthen the
requirements for licensure, as well as put in place or fortify
requirements that will ensure and protect the integrity of drug
products as they travel through the U.S. drug supply chain from the
manufacturer to the consumer.
NABP sought comment from FDA, as well as interested stakeholders,
in developing the revised Model Rules. The comments that FDA received
as part of the anti-counterfeiting initiative have been discussed with
NABP.
The revision of the Model Rules sought to enhance the protections
included in the original version of the Model Rules and close existing
gaps. The table below contains highlights of the revised Model Rules:
NABP is taking steps to facilitate implementation of the revised
Model Rules, including: (1) publishing a list of susceptible products
and calling for a coalition of national organizations to develop a
process to maintain and update the list; (2) serving as bondholder for
wholesalers in order to consolidate the need to hold a bond in all
states where a wholesaler may do business; and (3) establishing a
clearinghouse that will list wholesalers who receive accreditation by
NABP and who have passed an inspection by their newly created
inspection service, which NABP will conduct in partnership with the
states. FDA supports NABP's efforts to facilitate adoption and
implementation of the enhanced Model Rules.
Counterfeiting is a problem that is not isolated to one state. If a
state strengthens its licensing requirements while a bordering state
does not, the counterfeiters and illegitimate wholesalers will likely
move into the bordering state. Widespread state adoption,
implementation, and enforcement of the Model Rules would help combat
counterfeiting.
(4) FDA Conclusion:
Because States have an important role in regulating drug
distributors, adopting and enforcing stronger state anti-counterfeiting
requirements would help in our collective effort to detect and deter
counterfeiting.
--FDA strongly supports the efforts taken by NABP to enhance the
Model Rules and other actions taken to facilitate
implementation;
--FDA supports all efforts by the States to adopt these Model Rules.
Adoption of the model rules by all States would have a
significant impact on protecting the Nation's drug supply by
ensuring that all persons and entities involved in wholesale
distribution of drug products meet stringent licensing criteria
and maintained high ethical and business standards;
--FDA encourages these state actions and the agency intends to
explore whether and to what extent to revise the current
minimum standards for state licensing of wholesale prescription
drug distributors in 21 CFR Part 205.
C. Higher Penalties for Drug Counterfeiting
(1) What FDA sought comment on:
Discuss the advantages and disadvantages of increased penalties for
counterfeiting drugs
(2) What the Comments Said:
There was overwhelming support and unanimous agreement that higher
penalties for counterfeiting are needed.
(3) Discussion:
FDA agrees with comments suggesting that higher penalties deter
drug counterfeiters.
Current sentencing guidelines for counterfeit drug distribution are
not commensurate with the public health threat posed by this criminal
activity and strengthening the guidelines should help deter such
conduct in the first instance. Despite the significant threat to public
health posed by counterfeit drug products, current law provides
penalties far below the level of some purely economic crimes. For
example, counterfeiting a prescription drug label (bearing a registered
trademark) is punishable by up to 10 years in prison, while
counterfeiting the drug itself is punishable by a maximum of only 3
years in prison. Therefore, FDA plans to continue to pursue its request
that the United States Sentencing Commission consider amending the
sentencing guidelines to substantially increase criminal penalties for
manufacturing and distributing counterfeit drug products and to
specifically provide for enhanced penalties based on the level of risk
to the public health involved in the offense.
(4) FDA Conclusion
FDA intends to pursue its request that the United States Sentencing
Commission consider amending the sentencing guidelines to increase
substantially criminal penalties for manufacturing and distributing
counterfeit drugs and to provide specifically for enhanced penalties
based on the level of risk to the public health involved in the
offense.
3. Creation of a Counterfeit Alert Network for Information
Dissemination and Education
(1) What FDA sought comment on:
Whether a counterfeit alert network should be created through use
of existing, or newly developed, communication tools, that allow
reception, dissemination, and sharing of information about counterfeit
drugs in a timely manner;
What are the capabilities of current communication network, what a
communication network should have in order to part of a counterfeit
alert network, and costs associated with developing or adapting current
systems.
(2) What the Comments Said:
The agency received many comments supporting the creation of a
counterfeit alert network. Most of the comments suggested that the
agency take steps to build on existing networks and several comments
offered their organizations' distribution lists or network as a conduit
for the counterfeit alert network. The agency was advised that the
counterfeit alert network should not be overused in order to avoid
alert ``fatigue,'' which could create indifference or doubt regarding
the importance of the messages. The agency was encouraged to consider
cost-effective public/private partnerships to design communication
strategies and facilitate efforts to standardize anti-counterfeit
communications and to augment and coordinate communication systems. A
detailed discussion of the comments is in Appendix B.
(3) Discussion:
The FDA is committed to informing the public, particularly
consumers, pharmacists, other health professionals, wholesalers, and
others involved in the U.S. drug distribution system, about counterfeit
drug incidents in a timely manner. FDA is also committed to educating
them about ways to identify and prevent counterfeits from entering into
this system. To increase awareness of counterfeit drugs and safeguard
the Nations drug supply, FDA is creating a network of national
organizations, consumer groups, and industry representatives to deliver
time-sensitive messages and information about specific counterfeit
incidents and educational messages about counterfeits in general. The
network is called the ``Counterfeit Alert Network.''
Partners in the Counterfeit Alert Network will be required to enter
into a co-sponsorship agreement with FDA that lays out roles and
responsibilities. Partners agree to disseminate the FDA time-sensitive
messages to their members/subscribers/readers in the manner outlined in
the co-sponsorship agreement, to partner in delivering educational
messages, and in the case of health professionals, provide a link to
the MedWatch website to report suspect counterfeits. A copy of the co-
sponsorship agreement can be found in Appendix C.
The agency plans to maintain a list (as it does now) of additional
health professional, consumer, and industry organizations, and media
outlets to notify when an actual counterfeit incident is confirmed and
what steps to take to minimize risks and remove the product from the
U.S. distribution system. This will help ensure the widest possible
distribution to the appropriate audience's.
FDA met with consumer groups, pharmacy groups, and physician groups
to determine the type of information that would be most useful to
receive from FDA in the event of a counterfeiting incident. FDA intends
to create templates for standardizing the format and content of health
professional and consumer information in the event of a counterfeit
incident that can guide outreach efforts in an efficient manner, while
assuring the flexibility FDA needs to formulate the messages.
(4) FDA Conclusions:
FDA will create a Counterfeit Alert Network that links together and
enhances existing counterfeit notification systems, to provide for
timely and effective notification to health professionals and consumers
of a counterfeit event.
--FDA is creating a counterfeit alert network to partner with
national healthcare organizations, consumer groups, and
industry representatives to deliver time-sensitive messages
about specific counterfeit incidents and educational messages
about counterfeits in general, and information about how and
when to report suspect counterfeit drug products;
--FDA plans to develop and execute multi-media informational
strategies for specific audiences to ensure that the messages
reach the largest number of interested people possible through
the network;
--FDA plans to develop internal guidelines for the informational
contents of outgoing FDA messages that will bemost useful to
communicate a counterfeiting incident to individual stakeholder
groups.
4. Health Professional Reporting Encouraged via MedWatch
(1) What FDA sought comment on:
Whether FDA's MedWatch system should be used as a tool to receive
and disseminate timely information about counterfeit drug products,
especially identification of suspect drug product?
(2) What the Comments Said:
Most of the comments supported the use of MedWatch for reporting
suspect counterfeit drugs. These comments stated that health
professionals are familiar with MedWatch and it would be too cumbersome
and expensive to develop a new system, which people would have to be
educated to use. One comment believed that reports of possible
counterfeiting should be separate from MedWatch because it is not
designed for criminal activity reporting and oversight. Another comment
stated that because MedWatch is a voluntary reporting system, there
could be significant under-reporting.
(3) Discussion:
For nearly 10 years, MedWatch has been FDA's reporting portal for
adverse drug reactions and ``product problems.'' These include problems
with product quality that may occur during manufacturing, shipping, or
storage, such as product contamination, defective components, poor
packaging or product mix-up, questionable stability, and labeling
concerns. If a pharmacist or consumer notices an unexplained change in
size, shape, color, or taste of their dosage form, or notices that the
coating is chipped or tablets are cracked, or that the drug is not
working like it usually does, they may consider that to be a problem
with their product. These are also characteristics that could occur if
the product was a counterfeit drug. In fact, in the past, FDA has
received some reports of suspect counterfeit drugs through MedWatch.
If a consumer suspects that his or her medicine is counterfeit,
they are encouraged to contact the pharmacist who dispensed the drug,
rather than report directly to MedWatch. The pharmacist may have
information from the manufacturer that the shape, color, or taste of
the product may have changed, or other information that may be helpful
in determining if the product may be counterfeit or if the suspicious
characteristic of the product or its packaging is expected.
The use of MedWatch is for health professional reporting. This
would not affect the agreement with the Pharmaceutical Research and
Manufacturers of America (PhRMA), whereby manufacturers have agreed to
report counterfeits of their products to FDA's Office of Criminal
Investigations, within 5 days of becoming aware of the counterfeit.
FDA has streamlined procedures for processing reports of suspect
counterfeit drugs. The MedWatch Central Triage Unit (CTU) standard
operating procedures (SOPs) have been amended to include ``suspect
counterfeit product'' as a category of reports, so the CTU will know
where to send the report for expedited processing.
It is easy and convenient to file a report with MedWatch. All
reports are confidential and the identity of the reporter is not
disclosed. FDA encourages reporting using the online reporting form
that can be found at www.fda.gov/medwatch.
(4) FDA Conclusion:
FDA plans to encourage and educate health professionals to report
suspect counterfeit drugs to MedWatch.
--FDA plans to encourage and educate health professionals to report
suspect counterfeit drugs to MedWatch as an overarching
mechanism to report such information;
--FDA plans to change the instructions for the MedWatch reporting
form, both paper and online versions, so reporters will know
how and when to report suspect counterfeits. Additionally, FDA
plans to amend the MedWatch website description of product
problems to include suspect counterfeits.
5. Secure Business Practices
(1) What FDA sought comment on:
Whether to develop sets of ``secure business practices'' which
would be voluntarily adopted by manufacturers, wholesalers, re-
packagers, and pharmacies?
Whether stakeholders should designate an individual or team to
coordinate security and anti-counterfeiting activities?
Issuance of an FDA guidance document concerning physical site
security and supply chain integrity?
There was no proposal specific to re-packagers. However, FDA
identified independent re-packaging operations, through several ongoing
investigations, as a point of entry for counterfeit drugs into the
distribution system, and some of the proposed options would have had
the effect of limiting those re-packaging operations.
(2) What the comments said:
The comments supported the need for development of secure business
practices by all stakeholders in the drug distribution chain because
each stakeholder has a responsibility to ensure that pharmaceutical
products are authentic. The comments suggested that such practices
include ensuring the legitimacy of business partners and refusing to do
business with persons of unknown or dubious background, taking steps to
ensure physical security, and identifying an individual or team in the
organization with primary responsibility for ensuring that effective
security practices are implemented.
It is critically important that the physical facilities involved in
the production, distribution, or dispensing of pharmaceuticals are
secure against counterfeit drugs. In the area of food safety, our
Center for Food Safety and Nutrition (CFSAN) has issued guidance for
the food industry on preventive measures that establishments may take
to minimize the risk that products under their control will be subject
to tampering or other malicious, criminal, or terrorist actions.
Although it was acknowledged that re-packagers were required to
comply with Current Good Manufacturing Practices as set forth in 21 CFR
210 and 21 CFR 211, due to the involvement of re-packaging operations
in some recent counterfeiting schemes, FDA was asked to provide more
oversight and to conduct more frequent inspections of re-packagers.
See Appendix B for a detailed discussion of actions taken by
manufacturers, wholesalers, and pharmacists to develop secure business
practices.
(3) Discussion:
Recent counterfeiting cases demonstrate that the current business
practices of participants in the U.S. drug distribution system are in
some cases inadequate to prevent the introduction of counterfeit drugs.
Implementation of secure business practices by participants in the U.S.
drug supply chain is critical for deterring and detecting counterfeit
drugs. Therefore, FDA commends and strongly supports efforts to develop
and implement secure business practices for these participants. FDA
plans to facilitate and encourage the development of innovative
approaches to securing business transactions in the drug supply chain.
The number of stakeholders who have told FDA they are already
implementing the business practices discussed above is very
encouraging. In addition to identifying effective security measures,
the designation of an individual or team to have primary responsibility
for coordinating security activities helps ensure effective
implementation.
FDA agrees that re-packaging operations can be a significant
vulnerability in the drug supply chain. Although current statutory and
regulatory requirements allow for appropriate oversight of re-
packagers, FDA agrees that enforcement of those requirements could be
strengthened.
(4) FDA Conclusions:
For government efforts against counterfeit drugs to be successful,
drug producers, distributors, and dispensers will have to take
effective actions to secure their business practices.
--Efforts by stakeholders to develop the secure business practices
listed above would help protect the public health and diminish
counterfeiting;
--FDA plans to work with individual stakeholders and groups
representing stakeholders, as necessary and appropriate, to
continue to develop, make publicly available, and widely
disseminate secure business practices;
--Good security practices include designation of an individual or
team, reporting directly to the organization's senior
management, to coordinate the security and anti-counterfeiting
activities for the organization;
--FDA supports efforts by pharmaceutical manufacturers, wholesalers,
and retailers to secure their physical facilities against
counterfeit drugs. FDA plans to issue guidance on physical site
security that applies to participants in the U.S. drug
distribution system.
--FDA plans to make its oversight over re-packagers of drugs a higher
priority. FDA expects to increase the frequency with which it
inspects re-packagers whose operations are found to be at
increased risk for the introduction of counterfeit drugs. The
increase in frequency will be based on the degree of risk, as
determined by applying to re-packaging operations the risk
based model FDA is developing for prioritizing inspections of
drug manufacturing sites.
6. FDA'S Rapid Response to Reports of Suspect Counterfeit Drugs
Streamlined
(1) What FDA sought comment on:
Enhancing FDA's internal processes for responding to and
investigating reports of suspected counterfeit products
(2) What the Comments Said:
The comments unanimously supported any efforts by the agency to
rapidly respond to reports of suspect counterfeit drugs.
(3) Discussion:
FDA takes reports of suspect counterfeit products very seriously.
The agency is proud of its investigative tools and talents and its
quick response to the public health needs when a counterfeit has been
reported and has been confirmed. To improve this process, the agency
evaluated its policies and procedures for responding to reports of
counterfeit drugs to determine if FDA's response could be more
efficient. Although FDA has had many positive experiences in responding
and working with manufacturers and the public, FDA identified several
ways to further enhance coordination and communication among all
initial responders within the agency.
Because different parts of the agency throughout the country may
receive the potential counterfeiting report, in some instances, it may
take time for the information to flow to the appropriate people who
need it to respond efficiently. Therefore, FDA has established an FDA-
wide rapid response protocol for suspect counterfeit drugs that will
ensure that specified persons/offices/divisions within the agency are
notified and engaged as soon as possible after the report is made to
the agency. Policies and procedures have been or will be amended to
reflect this streamlined information flow and coordination of agency
response. Increased coordination and communication will help FDA to
initiate rapidly any criminal or civil investigation, as well as to
assess the health hazard of the counterfeit situation so the public
health response can be launched.
(4) FDA Conclusion:
To respond rapidly to a report of a suspect counterfeit, FDA is
further streamlining its internal processes to respond quickly to
reports of suspect counterfeit drugs by improving coordination and
communication among all initial responders in the agency.
--FDA intends to amend its internal SOPs, where appropriate, to
provide for more rapid response when a suspect counterfeit is
reported;
--FDA intends to build on lessons learned from working with
manufacturers in past counterfeiting experiences to determine
how industry/agency collaboration can and should be
strengthened.
7. Educating the Public and Health Professionals
a. Consumers
(1) What FDA sought comment on:
As the sophistication of the ``final product'' drug counterfeiting
operations has increased, the public needs to be more aware of ways to
identify the risk of counterfeit drugs, receive instructions on ways to
minimize the chance of receiving fake products and to identify
potential counterfeits.
(2) What comments said:
The comments stated that it is imperative that consumers be
encouraged to be more proactive in managing their health and be given
useful tools to be vigilant to help avoid potential counterfeit drugs.
Consumers should be educated to be aware of noticeable differences in
their medication, the packaging, or any adverse events. In addition,
consumers should understand the important role that their pharmacist
and healthcare providers can play in identifying, reporting, and
responding to counterfeit drug events. However, the comments warned
that care should be taken in any education campaign to not
unnecessarily alarm the public.
(3) Discussion:
Despite the growing sophistication of counterfeit drug threats,
many consumers are not fully aware of these risks. The Agency, in
conjunction with consumer and patient advocates, as well as industry
representatives is eager to find additional creative ways to educate
the public of the potential threat of counterfeit drugs. The messages
should alert consumers to the risk, offer ways consumers can recognize
the signs of a potentially counterfeit product, teach them how to
reduce the risk of exposure and tell them what to do if they suspect
they have encountered one. Of course, FDA wants to strike an
appropriate balance in the need to proactively educate consumers
without causing unnecessary alarm that could interfere with their use
of prescribed drug regimes. Most important, it is critical to focus
awareness, and education programs should focus on issues that consumers
can control.
FDA has an ongoing educational campaign that is intended to educate
consumers about the risks of buying medicines online. FDA intends to
reaffirm this message and focus the educational campaign on teaching
safe purchasing methods. Particular focus will be placed on encouraging
the public to seek out the Verified Internet Pharmacy Practice Site
(VIPPS) seal when purchasing from an online pharmacy.
In addition, stakeholders indicated that there is a need for
better, timelier, accurate information about specific counterfeit
situations. FDA plans to create a counterfeit drug resource page on our
website. The objective of this webpage is to concentrate customized
education tools into a resource library that can empower individual
stakeholder groups.
(4) FDA Conclusions:
Educating the consumers about the risks of counterfeits is a
critical piece in the effort to stop counterfeits from entering the
stream of commerce.
--FDA plans to develop additional, multi-layer, consumer-oriented
educational materials that will help them learn about
counterfeits, what to watch for, and where to turn for useful
information if they think they have encountered a suspected
counterfeit;
--FDA plans to re-launch the FDA public service announcement (PSA)
campaign for best online buying practices to educate consumers
about how to buy drugs online safely, and risks to avoid in
online purchasing;
--FDA plans to house on its www.fda.gov website a comprehensive,
consumer-friendly online library that will contain both general
and specific counterfeit drug information. It will also contain
targeted educational materials for various interest groups that
discuss counterfeit issues generally. In addition, the agency
intends to develop a new FDA anti-counterfeiting resources icon
to increase familiarity with the issue.
b. Pharmacists and Other Health Care Professionals
(1) What FDA sought comment on:
Pharmacists need improved tools to receive information and to
educate themselves about how to handle these situations and to keep
abreast of current counterfeit events. They need to know how to
identify and counsel consumers who might have received counterfeit
products.
Physicians, nurses and other health professionals also have contact
with consumers taking pharmaceuticals and can help identify and counsel
patients that could have accessed a counterfeit. This will require
these groups keep up to date on current counterfeit events and know
steps to take to report situations if a counterfeit is suspected.
(2) What the comments said:
Groups representing pharmacists and pharmacies recognize the need
for pharmacists to take a leadership role in the identification of
counterfeits, prevention of their introduction into the distribution
chain, and education of consumers about counterfeits.
The healthcare community indicated that awareness and education
campaigns are important if its health professionals are to be active
participants in the fight against counterfeit drugs.
(3) Discussion:
Pharmacists and health professionals can play a major role in
helping identify counterfeits and preventing their introduction into
the distribution chain. FDA has been working with pharmacy and medical
professional groups to develop educational materials for pharmacists
and other healthcare professionals, including doctors, nurses, and
physician assistants.
(4) FDA Conclusion:
FDA plans to enhance its educational programs for pharmacists and
other health professionals about their role in minimizing exposure to,
identifying, and reporting counterfeits.
--FDA intends to work with pharmacy and health care professional
groups to develop materials to help educate their profession on
the risk of counterfeits, what to do in case a counterfeit is
suspected and ways to aid in educating consumers. This will
include development of clear, concise messages and protocols,
as well as the establishment of a delivery mechanisms that will
help them learn about the threat of counterfeits, what to watch
for, and where to turn for useful information in the case of a
suspected counterfeit;
--FDA intends to encourage pharmacy and health care professionals to
become partners in the agency's newly established Counterfeit
Alert Network;
--FDA intends to expand its outreach efforts by presenting at or
participating in conferences and by publishing articles in
professional journals and periodicals that target audiences of
doctors, nurses, pharmacist and hospital administrators to
educate them about counterfeits and raise awareness of the
risks;
--FDA intends to work with health professional trade groups to
identify or improve data collection/reporting systems that
could help identify counterfeits as they enter the stream of
commerce (i.e, include appropriate questions on the ER patient
admission questionnaire that might help diagnose usage of a
counterfeit drug.)
8. International Approach
(1) What FDA sought comment on:
Strengthening international cooperation in law enforcement efforts,
identifying counterfeit products, using anti-counterfeiting
technologies, and educating stakeholders and consumers
Whether there should be global standards for packaging of
pharmaceuticals and the use of anti-counterfeiting technologies
(2) What the comments said:
The comments supported FDA involvement in global efforts to deter
and detect counterfeit drugs.
(3) Discussion:
The growing global prevalence of counterfeit drugs must be
curtailed. The steps described in this report are intended to secure
the U.S. domestic drug supply. However, as long as counterfeit drugs
exist worldwide, opportunities could arise for counterfeit drugs to
find their way into the United States. Many countries have taken steps
to secure their Nation's drugs supply, while others struggle because of
limited resources, inadequate regulatory infrastructure, or competing
national health priorities. The World Health Organization (WHO) has
taken the lead to increase worldwide collaboration and to develop
strategies to deter and detect counterfeit drugs. There are several
international criminal enforcement collaborations, such as the
Permanent Forum on International Pharmaceutical Crime and the Interpol
Intellectual Property Crimes Action Group. FDA intends to work with WHO
and other international organizations to develop and implement
worldwide strategies to combat counterfeit drugs.
(4) FDA Conclusions:
FDA will collaborate with foreign stakeholders to develop
strategies to deter and detect counterfeit drugs globally.
Below is a table showing when certain anti-counterfeiting measures
will be available:
appendices
Appendix A: Counterfeit Alert Network Co-sponsorship Agreement
Appendix B: More detailed description of the comments received for
certain issues (where the comments were diverse or lengthy)
appendix a
counterfeit alert network co-sponsorship agreement
Background
The U.S. Food and Drug Administration (FDA) is committed to
informing the public, particularly consumers, pharmacists, other health
care professionals, wholesalers, and others involved in the U.S. drug
distribution system, about counterfeit drug incidents in a timely
manner and educating these parties on ways to identify and prevent
counterfeits from entering into this system. To increase awareness of
counterfeit drugs and safeguard the Nations drug supply, FDA will
create a network of national organizations, consumer groups, and
industry representatives to deliver time-sensitive messages and
information about specific counterfeit incidents and educational
messages about counterfeits in general. FDA also will develop and
execute informational strategies for specific audiences to ensure that
the messages reach the largest number of interested people possible
through the network. The network will be called the ``Counterfeit Alert
Network.''
The goals of the Counterfeit Alert Network include, but are not
limited to:
--disseminating alert messages to a wide audience about specific
counterfeit drug incidents in the United States and measures to
take to minimize exposure (e.g., recall information);
--outlining the roles and responsibilities of consumers, pharmacists,
other health professionals, and wholesalers must play to
identify counterfeit drugs, report suspect counterfeit drugs,
and prevent them from entering the U.S. distribution system;
and
--developing a network of national organizations, consumer groups,
and industry representatives to help disseminate the
information.
[INSERT CO-SPONSIOR ORGANIZATION INFORMATION]
Importance of the Partnership to FDA and [Organization]
This partnership will increase the potential audience of FDA's
important notifications about specific counterfeit drug incidents and
messages about how and when to report suspect counterfeit drugs. By
distributing FDA developed messages through the [ORGANIZATION]
information system, these messages can reach more than [#] people.
Responsibilities of FDA and [Organization]
FDA will develop targeted messages, with a particular focus on
consumers, pharmacists, and other health care professionals when a
counterfeit drug is found in the U.S. distribution system. FDA will
also develop educational and informational materials about how to
detect a counterfeit drug, what to do if a drug is believed to be
counterfeit, how to report the suspect counterfeit to the FDA, and ways
to minimize the risk of receiving a counterfeit drug. These materials
may include: web-based documents, print ads, posters, prepared
newspaper articles, fact sheets, consumer brochures/pamphlets, and
informational packets. FDA will provide any logistical and technical
support, such as writing, layout, designing, and preparing
illustrations for the products.
FDA will ensure that all materials are cleared through the Agency
and the U.S. Department of Health and Human Services before releasing
material to the [ORGANIZATION] for public distribution FDA will provide
these materials in a format (hard copy, digital, or electronic) that
[ORGANIZATION] can use, as appropriate, to create, manufacture, and/or
have printed in enough quantities to distribute to various audiences.
FDA will not be responsible for any costs outside of the materials
already produced by FDA.
[ORGANIZATION] will distribute in a timely manner FDA's
notifications about specific counterfeit incidents as an alert through
an active messaging system (separate email or fax alert
correspondence). [ORGANIZATION] will facilitate the ability of their
members/subscribers/website visitors to report suspect counterfeit drug
products to FDA, e.g., via a link to the FDA Counterfeit Drugs webpage
or FDA's MedWatch webpage. [ORGANIZATION] will distribute relevant FDA-
educational messages about counterfeits, covering such issues as
awareness, recognition, prevention, tracking, and authentication of
drug products.
The [ORGANIZATION] will pay for the cost, if any, of printing
materials, posting materials on its website, email distribution,
renting ad space, and securing print placement in magazines and
newspapers, as appropriate. [ORGANIZATION] will make clear, in any
solicitation for funds to cover its share of the distribution costs
that it, not FDA, is asking for the funds. [ORGANIZATION] will not
imply that FDA endorses any fundraising activities in connection with
the event. [ORGANIZATION] will make clear to donors that any gift will
go solely toward defraying the expenses of [ORGANIZATION], not FDA.
FDA and the [ORGANIZATION] I will develop a dissemination plan that
outlines where and how the educational materials and alert messages
about specific counterfeit incidents will be distributed to various
audiences.
FDA and the [ORGANIZATION] will review this agreement in 2 years
from the original date of this agreement, but either party to this
agreement can terminate its participation at any time by notifying the
other party of its intent to do so in writing.
Charges
The [ORGANIZATION] will not sell any educational materials related
to this joint effort. [ORGANIZATION] will not impose an enrollment or
registration fee for subscribers to receive this information.
Independently Sponsored Portions and Endorsements
All materials and efforts related to the Counterfeit Alert Network
will be jointly sponsored. FDA staff will not be used to develop,
promote, or otherwise support any event that is independently sponsored
by the co-sponsor, although official announcements and brochures may
contain factual references to the available materials and Counterfeit
Alert Network messages.
The [ORGANIZATION] will not use the name or logo of FDA except in
factual publicity. Factual publicity includes materials provided to
[ORGANIZATION] on FDA's program and Counterfeit Alert Network
materials. Such factual publicity shall not imply that the involvement
of FDA serves as an endorsement of the general policies, activities, or
products of the [ORGANIZATION]. Where confusion could result, a
disclaimer should accompany publicity to the effect that no endorsement
is intended. The [ORGANIZATION] will clear all publicity materials with
FDA to ensure compliance.
Records
Records concerning this partnership shall account fully and
accurately for any financial commitments and expenditures of FDA and
[ORGANIZATION]. Such records shall reflect, at a minimum, the amounts,
sources, and uses of all funds.
Public Availability
This co-sponsorship agreement, as well as any financial records for
this partnership, shall be publicly available.
Co-Sponsorship Guidance
FDA and the [ORGANIZATION] will abide by the memorandum of August
8, 2002, ``Co-sponsorship Guidance,'' issued by the Associate General
Counsel for Ethics. DATE FDA Signee DATE NIZAI Director,
Ethics and Integrity Staff Office of Management and Programs Office of
Management Food and Drug Administration DATE deg.
appendix b
expanded description of comments received
Technology
Unit of Use Packaging
Comments supporting widespread utilization of unit of use
technology cited:
--The decreased need for repackaging which is a point of entry for
counterfeit drugs;
--Authentication technologies applied by the manufacturer would reach
the dispensing pharmacy and the patient;
--The lower cost for utilizing unit of use packaging on newly
approved drugs;
--The deterrent value to counterfeiters of the higher costs of
duplicating unit of use packages;
--Improvement in patient safety due to reduction in dispensing errors
and better patient compliance; and
--Increased pharmacist availability for patient counseling (due to
reduction in time needed to fill prescriptions).
Some comments cautioned the FDA against mandating unit of use
packaging for all drugs citing:
--The high cost, and length of time, it would take to change
production lines from bulk to unit of use packaging;
--The investment made by many pharmacies in re-packaging and pill
counting equipment;
--The difficulty of packaging certain products (e. g. vaccines,
multi-dose liquid formulations) in unit of use form;
--The need to differentiate repackaging performed under contract to a
manufacturer or by a pharmacy (which may achieve market
efficiencies) from repackaging by other entities;
--The need to perform a careful product-by-product cost-benefit
analysis on unit of use packaging before creating any
requirements;
--The minimal hurdle that unit of use packaging creates for
sophisticated drug counterfeiters;
--The need to comply with the Consumer Product Safety Commission
(CPSC) regulatory requirements for child resistant unit of use
packaging;
--The difficulty some consumers (e.g., arthritic patients) may have
in opening unit of use packaging such as some blister packs;
--The need for pharmacists to modify prescribed quantities to
correspond with available unit of use packages which could
require changes in state law; and
--The need to establish standards for such things as size and shape
of unit of use packaging in order to minimize patient confusion
and address shelf space issues.
Authentication Technologies
They supported use of authentication technologies as part of an
overall anti-counterfeiting strategy and stated that authentication
technologies serve two purposes:
They make it more difficult and expensive to produce a copy of the
drug or its packaging and labeling, and
They provide a means for determining if a specific drug, package,
or label is authentic.
Manufacturers of specific anti-counterfeiting technologies provided
us with descriptions of their products that were extremely valuable in
helping us understand how they work, their cost, and how they might be
incorporated into pharmaceutical products, packaging, and labeling or
used to detect counterfeit products through forensic and other
analytical methods, including rapid methods.
Many comments supported the issuance of an FDA guidance document on
the use of authentication technologies. They stated that there was no
clear FDA policy specifically targeted to this important subject. They
suggested that current FDA policies and practices for New Drug
Applications (NDAs), Abbreviated New Drug Applications (ANDAs), and
Biologics License Applications (BLAs), supplements, and other
notification procedures should be clarified so the policies and
procedures applicable to use of anti-counterfeiting technologies are
clearly articulated and available in a single document.
The following points were made regarding the use of authentication
technologies on drug products, their packaging and labeling:
--There is no ``silver bullet'' solution--all anti-counterfeiting
technologies can be defeated;
--Because all anti-counterfeiting technologies can be defeated, a
more extensive approach utilizing layered overt and covert
technologies that are changed on a regular basis is frequently
required;
--Authentication technologies are expensive;
--Manufacturers should determine which authentication technologies to
use, on a product specific basis. The FDA should not require
the use of any specific anti-counterfeiting technology. For
example: the number and type (e.g., overt, covert) of
technologies utilized for a given product need to take into
account the type of product (e.g., solid, liquid), use, cost,
history of counterfeiting etc.;
--Repackaging destroys anti-counterfeiting technologies employed by
the manufacturer;
--Incorporation of anti-counterfeiting measures into the product,
packaging, and labeling may be subject to application and
notification requirements which means that initiating or
changing such technology could require a significant time and
expense;
--Although all products are at risk for being counterfeited there is
a need to develop criteria or a classification system to help
identify those products at highest risk for being counterfeited
and thereby assist stakeholders in identifying products that
might derive a greater benefit from the incorporation of
authentication technologies;
--The large number of available technologies coupled with the number
of different products stocked in pharmacies and the need to
change anti-counterfeiting measures make it difficult for
pharmacists to be knowledgeable about the technologies used for
a product at any given time;
--Technologies that do not allow for ``real time'' or consumer
authentication (e.g., covert technologies known only to the
manufacturer and/or the FDA) may have an uncertain benefit in
rapid identification of counterfeit drugs.
List of Drugs Likely to be Counterfeited
Many comments stated that it was important for stakeholders to
allocate financial resources to protect those products that are most
likely to be counterfeited. There was agreement that the criteria we
suggested to identify drugs that were likely to be counterfeited were
correct. These included:
--Impact on public health if the drug were counterfeited;
--Drugs history of counterfeiting;
--Drugs price;
--Drugs volume;
--Drugs dosage form;
--Drugs clinical uses; and
--Whether similar products had a history of being counterfeited.
However, there was no consensus on how to apply these, or other,
criteria in creating a list of such products.
As stated above, some comments suggested that instead of developing
a list of drugs likely to be counterfeited, a set of criteria for
determining whether a drug was at likely to be counterfeited should be
created. One proposal for such criteria was:
A drug has been subjected to a seizure or stop sale notice because
of counterfeiting, or
There is documentation that a drug was counterfeited and is the
subject of an investigation by Federal or State authorities AND
The product is high cost (e.g., over $200 per dose) or high volume
(e.g., top fifty drugs), or
The product is used extensively for treatment of HIV/AIDS or
cancer, or
The product is injectable, or
The product distributed in a special or limited way, or
There are multiple documented instances of pedigrees not being
passed with the product
Radiofrequency Identification Technology
We received a large amount of information on the benefits, costs,
and unresolved issues relating to RFID. These include:
Benefits
--Ability to deter and detect counterfeit drugs;
--Ability to conduct efficient targeted recalls;
--Ability to manage inventory;
--Ability to identify theft;
--Ability to identify diverted drugs; and
--Improvement in patient safety by assuring correct dispensing of
drugs.
Costs
--Purchasing hardware (e.g., tags, readers) and software;
--Integration into legacy information systems;
--Database creation, security, and maintenance;
--Integration of RFID technology into existing manufacturing
processes, distribution procedures;
--Compliance with regulatory requirements (e.g., cGMP, notification,
product integrity); and
--Feasibility studies.
Unresolved Issues
--Need for all stakeholders to embrace the technology in similar
timeframes in order to realize the full potential of RFID
technology including provision of a universal electronic
pedigree;
--Need to develop standards and business rules;
--Need to address database issues such as structure (e.g., central
vs. distributive), ownership, access, and security;
--Clarification of regulatory requirements pertaining to use of RFID
(e.g., cGMP, electronic records, notification); and
--Need for a flexible migration path to the use of RFID in order to
meet the needs of different stakeholders.
Stakeholder Activities
We have been informed of several feasibility studies, starting in
early 2004, that should give members of the supply chain experience
using RFID as well as provide them with an opportunity to test its
business uses and identify potential barriers to its acceptance. These
studies include:
--Wal-Mart.--Drug manufacturers and wholesalers will attach RFID tags
to all bottles of controlled substances;
--Accenture.--Coordinating a study of RFID involving manufacturers,
wholesalers, and retailers that will explore the use of RFID
for tracking, tracing, recalls and theft of selected
pharmaceuticals;
--CVS.--Is studying the potential benefits that tagging and tracing
pharmaceuticals and prescriptions in a retail pharmacy would
have on operating efficiency, quality of patient care, and
customer service; and
--Other feasibility studies using RFID are being planned in Europe to
study the use of serialization for authentication at the point
of dispensing.
In addition to feasibility studies, we understand that several
groups representing many supply chain participants have been meeting to
discuss ways to facilitate the adoption of RFID. For example the
Product Safety Task Force (PSTF) convened under the auspices of the
Healthcare Distribution Management Association (HDMA) is developing
business requirements and identifying business issues relating to RFID
technology.
The PSTF and other stakeholders have informed us that the migratory
path (or phase in) to widespread use of RFID at a package level could
vary by stakeholder based on the place of that stakeholder in the
supply chain (e.g., manufacturer vs. retailer) and on specific costs
and benefits accruing to that stakeholder (e.g., types of products
manufactured, number of distribution centers, technology cost per
product).
Several migratory paths were mentioned, including:
--Phasing in use of RFID technology with use at the case and pallet
preceding use at the package level;
--Phasing in use of RFID technology starting with use on pallets,
cases, and packages of ``high risk'' products with gradual
inclusion of other products at all levels; and
--Use of RFID technology at the pallet and case level coupled with
use of 2-D Bar Codes at the package level with gradual phase in
of RFID technology at the package level.
According to stakeholders, these paths are not mutually exclusive
and it is likely all of these, and other, paths will be utilized as
RFID technology becomes more widely adopted.
Secure Business Practices
Below are some of the secure business practices that have been
developed by participants in the U.S. drug distribution system.
Manufacturers
Several manufacturers have announced policies intended to secure
the supply chain. These policies include:
--Limiting sales to authorized wholesalers. Authorized wholesalers
are defined either as wholesalers who purchase a manufacturers
products exclusively from that manufacturer or as wholesalers
who purchase a manufacturers product directly from the
manufacturer or from other authorized wholesalers;
--Making the list of authorized distributors publicly available;
--Ability to audit the sales records of wholesale distributors;
--Working with dispensing pharmacies to ensure they are aware of the
identities of authorized distributors; and
--Designation of an individual or team to coordinate security and
anti-counterfeiting activities.
Wholesalers
The Healthcare Distribution Management Association (HDMA) released
a document entitled ``Recommended Guidelines for Pharmaceutical
Distribution System Integrity'' which set forth a series of recommended
actions for wholesalers to take prior to and while conducting business
transactions with other wholesalers. In essence they comprise a ``due
diligence'' checklist which includes items such as:
--Obtaining detailed information about the wholesalers licensure,
inspection results, history of disciplinary actions, corporate
officers, owners, and management personnel;
--Performing a criminal background check on the wholesaler, its
officers, owners, and other key personnel;
--Obtaining a credit history and information about its business
activities, financial status, and liability insurance;
--Performing a detailed physical site inspection; and
--Ensure that the wholesaler is in compliance with Federal and State
requirements, verifies that the wholesaler is an authorized
distributor for the products being transferred or has a process
in place for verifying pedigrees.
Individual wholesalers supported the HDMA guidelines and provided
FDA with ideas for additional secure business practices including:
--Not selling pharmaceuticals to other wholesalers at all; and
--Completely separating the functions of quality assurance and
compliance from sales and marketing and requiring quality
assurance and compliance staff to perform due diligence on
potential business partners.
Pharmacies and Pharmacists
We have been informed that several organizations representing
pharmacies and pharmacists are developing secure business practices as
a guide for pharmacies and pharmacists. One pharmacy group notified us
that they have already published a list of strategies to use for
assuring the integrity of pharmaceuticals. This list includes:
--Staying informed about reports of counterfeit drugs;
--Contacting wholesalers to get information about the status of their
licensure, whether they are authorized distributors, and where
they source their drugs;
--Evaluate pharmacy security;
--Educate hospital staff;
--Follow up on patient complaints; and
--Report suspect products.
Prescription Drug Marketing Act (PDMA)
A majority of the comments that discussed PDMA noted the
limitations and concerns of full implementation of PDMA. Such
limitations include:
--Paper pedigrees can be forged and counterfeited;
--Paper pedigrees are logistically difficult to accommodate in the
drug distribution system;
--ADRs are not required to pass pedigree information on to the next
purchaser, so subsequent wholesalers are unable to obtain the
pedigrees needed to sell their products;
--The pedigree for a product that circulates several times through
the supply chain loses all prior sales history if the drug
product is sold to an ADR;
--The net effect is that secondary wholesalers who cannot obtain
pedigrees necessary to legally market drugs could be driven out
of business; reducing the number of legitimate distributors in
the system, decreasing competition and increasing prices;
--Manufacturers do not update their lists of ADRs so it is difficult
for a wholesaler to obtain ADR status; and
--Costs of paper pedigrees outweigh the benefits.
A number of other comments, however, supported the use of paper
pedigrees for their deterrent value and as a means to verify prior
sales through due diligence. Comments noted that even forged pedigree
papers provide an additional opportunity to identify counterfeiters and
block introduction of counterfeit drugs into the drug supply if
wholesalers exercise due diligence by tracing the sales through the
pedigree and identifying the place where the forgery occurred. A few
comments suggested that FDA should exercise enforcement discretion and
not take enforcement action against a wholesaler who fails to provide
pedigree information back to the manufacturer as long as the wholesaler
provides pedigree information back to the first ADR who received the
drug from the manufacturer.
Several comments suggested a risk-based approach to implementation
of the PDMA, which focuses on those drugs that are at high-risk of
being counterfeited. Many of these comments suggested that high-risk
drugs maintain a full pedigree that documents all sales and
transactions back to the manufacturer. One comment suggested an interim
solution of ``one forward, one back'' pedigree for high risk drugs.
This system would be analogous to recent bioterrorism legislation for
food distributors, whereby participants in the food distribution system
maintain only those records necessary to identify immediate previous
sources and immediate subsequent recipients of food. However, comments
on FDA's food regulations have suggested it will take at least several
years to phase in the paper recordkeeping requirements. Moreover, in
contrast to drugs, there are no major steps in development now to
provide widespread electronic pedigrees for drug products. Finally, as
noted throughout the riskiest drug products are the ones for which
modern anti-counterfeiting and track-and-trace methods should be
implemented soonest.
Most comments supported the development of an electronic pedigree
for all drug products in the supply chain and that an electronic
pedigree should be considered as a long-term solution to fulfilling the
PDMA requirements codified at 21 CFR 203.50. Given the costs of
implementing the partial anti-counterfeiting measures included in the
PDMA, and the expectation of continued significant progress toward
implementation of modern pedigree systems for drugs, more effective
modern pedigree systems are likely to be available before it would be
possible to phase in and achieve compliance with paper pedigree
requirements.
Model Rules for Wholesale Distributor Licensing
The comments overwhelmingly supported strengthening requirements
governing the licensure and oversight of wholesale distributors. Many
comments cited the systemic weaknesses in the oversight of the
wholesale drug industry, prior to Florida's implementation of licensing
reform, that were described in the Florida Grand Jury Report, such as
issuing licenses without proper background checks and granting licenses
despite one or more felony convictions. The comments also stated that
existing inspection and due diligence processes are often insufficient
to detect criminal activity. As mentioned above, there was uniform
agreement that the penalties for counterfeiting drugs are insufficient
to serve as an adequate deterrent.
Many comments supported the concept of tighter requirements
generally, while others gave specific suggestions for improvement. Some
of the specific suggestions included:
--Detailed and robust applications that provide greater disclosure of
information about the applicant and their prior history;
--Criminal background checks for applicant and company principals;
--List of prescription drug-related or fraud-related activities that
are ``not in the public interest'' such that states should deny
licenses to persons with criminal records for these activities;
--Pre-license inspection of wholesale distribution facilities;
--Periodic and unannounced inspections;
--National clearinghouse for information on wholesale licensure
status, debarments, exclusions, and/or results of criminal
background checks;
--Bonds of up to $100,000;
--Requiring all wholesalers to transmit pedigree tracing transactions
back to the manufacturer for susceptible products;
--Non-ADRs must pass pedigree with all drugs with transaction
information back to an authorized distributor;
--Amending the definition of ADR to include those on the
manufacturers list, have a written agreement currently in
effect with the manufacturer, or has a verifiable account with
the manufacturer and minimal transactional or volume
requirement thresholds from the manufacturer of 5,000 sales
units within 12 months or 12 purchases (invoices) within 12
months;
--Requiring authentication of pedigree if there is reason to suspect
that the product may be counterfeit, as well as on a random
basis;
--Migrating to electronic pedigree;
--More aggressive penalties and enforcement on state and national
level;
--Quickly suspending and/or revoking licenses of violators; and
--Including due diligence requirements for wholesalers to conduct on
its suppliers.
Most comments stated that the stricter standards should be uniform
across all 50 states so as not to create 50 different sets of criteria
and rules for licensing.
Concerns about several provisions in the new Florida and Nevada
laws regarding licensing of wholesale distributors were expressed. Some
of the comments described implementation and logistical problems that
wholesalers have experienced in these states as a result of the new
law.
Some comments encouraged FDA to revsit the minimum standards
requirements described in 21 CFR Part 205 to create a ``Federal floor''
for States to meet. The comments were not uniform, however, on whether
such a Federal floor might enhance or deter state efforts to implement
the complete set of NABP recommendations.
Counterfeit Alert Network for Information Dissemination and Education
The agency received many supportive comments about the counterfeit
alert network concept. Most of the comments suggested that the agency
use existing networks and several comments offered their organizations
distribution list or network as a conduit for the counterfeit alert
network.
Some comments offered strategic approaches for the development of
such a network, including suggested concepts for message delivery.
Suggestions include using active notification via ``push'' e-mail
technology, validated and secure systems, easily understood language
with clear and unambiguous messages, multiple notification systems,
accessible to all stakeholders, no cost for users, timely, visual alert
to flag importance, redundant delivery vehicles such as email, fax,
direct mail, and phone, and have an embedded link to take user back to
FDA or MedWatch website. The comments also suggested that consistency
is an important element so there is familiarity in times of emergency
situations. The agency was warned not to overuse the counterfeit alert
network in order to avoid alert ``fatigue,'' which could create
indifference or doubt regarding the importance of the messages.
The agency was encouraged to consider public/private partnerships
to design communication strategies and facilitate efforts to
standardize anti-counterfeit communications and to augment and
coordinate communication systems. The comments also said that costs to
FDA and private partners should be kept to a minimum.
Senator Bennett. Thank you. I appreciate the opportunity to
ask questions of all four of you, and, again, thank you for
your service.
Senator Kohl.
WIC CONTINGENCY FUND
Senator Kohl. Thank you, Mr. Chairman.
Mr. Bost, last week, when Secretary Veneman was here, I
noted that States are already starting to take action to
conserve WIC dollars because they are afraid they do not have
enough money to finish out this year. I said we have a
contingency fund to prevent things like this from happening and
States need to be given as much advance notice as possible if
contingency fund money will be made available.
At that time the Secretary said that USDA was aware of the
problem and was looking into it. It has been a week now and we
have not heard anything, so I would like to ask you the
question that we asked her: Do you anticipate using any of the
contingency fund this year? And when will an announcement be
made with respect to this issue?
Mr. Bost. Well, Senator Kohl, it is interesting that you
ask the question because the money was released to several
States last night.
Senator Kohl. Last night.
Mr. Bost. Last night.
Senator Kohl. That is great. You know, I cannot imagine----
Senator Bennett. He knew you were going to ask the
question.
Senator Kohl. You cannot respond any more quickly than
that.
Mr. Bost. Beg your pardon?
Senator Kohl. That is terrific.
Mr. Bost. Well, I think to be perfectly----
Senator Kohl. So the contingency funding is being made
available.
Mr. Bost. Well, actually the States should have it in their
letter of credit as we speak. They probably received it at
midnight last night.
Senator Kohl, I think it is really important to note, too,
that the issue of tracking that information from the States in
terms of looking at participation and looking at the food cost
is it is not an exact science. And we have been following it
for some time. And we were trying to look at being as judicious
as we possibly could with those contingency funds, but we did
release them last night to those States that were in need, and
they will not have to stop serving any clients that are
eligible.
WIC FOOD COSTS
Senator Kohl. A follow-up on that. Can you confirm that WIC
food costs have been higher than anticipated and that the food
cost assumptions upon which the fiscal year 2005 funding
request was based are now outdated?
Mr. Bost. Well, I don't know if I would say that they were
outdated, but I think the preliminary information that we
currently have available to us and that we have been reviewing
would lead us to believe that the overall food costs are a
little bit higher than estimated.
The other point I would like to make is that it is not only
an issue of food cost, but it is also participation rates. In
some States, the food costs are a little bit higher; in some
States, it is not. We are watching and tracking it very, very
closely. It is something that we are very concerned about.
Senator Kohl. And do you anticipate that this updated data
and increased participation rate will make it likely that we
will have to provide some additional resources in fiscal year
2005 for WIC?
Mr. Bost. I don't think I have drawn those conclusions at
this point. It is something we are watching very closely. If we
see that is indeed the case, we will come and work with you and
Congress to ensure that the needs of these persons are met.
Senator Kohl. Good.
NATIONAL ORGANIC PROGRAM
Mr. Hawks, in fiscal year 2004, we provided a significant
increase in funding to the National Organic Program and
required that part of the funding be used to meet several
statutory requirements of the Organic Foods Production Act of
1990 that have not yet been met. These include directives to
hire an executive director for the National Organic Standards
Board, to create an ongoing peer review panel, and to improve
scientific technical support for the Organic National Standards
Board.
Could you comment on the progress of the agency with
respect to each of these three funding directives?
Mr. Hawks. Yes, sir. We are making extremely good progress
toward hiring. I think the executive director is very close to
being hired. My staff tells me that we are moving judiciously
in all of these areas with regard to organic.
Senator Kohl. The peer review panel, do you know if that is
ongoing or are you moving in that direction? Have you created
an ongoing peer review panel?
Mr. Hawks. We are in the process of completing initial peer
review as we speak.
Senator Kohl. And, finally, to improve scientific technical
support for the National Organic Standards Board, any comment?
Mr. Hawks. Yes, sir. We are doing that. The funds that were
provided in our 2004 budget are helping us on the technical
scientific review as well.
Senator Kohl. That is great.
Mr. Hawks. We appreciate those funds.
ANIMAL FEED INSPECTIONS
Senator Kohl. Yes, thank you.
Dr. Crawford, FDA recently announced that they would be
implementing new rules regarding animal feed as a result of
BSE, including increasing inspections of rendering plants and
feed mills. An increase of over $8 million is provided in the
budget for this purpose. How many rendering plants and feed
mills are in the United States? Of those, how many handle
ruminant material prohibited from being used in animal feed?
And will these inspections, specifically of plants that handle
ruminant material be physical inspections or paper audits? And
what about plants that do not handle ruminant material?
Dr. Crawford. With respect to the number of plants and what
they handle, if it is agreeable, I would like to submit that
for the record.
The second thing is the inspections will be doubled next
year. We are asking for that in this budget. The kinds of
inspections will be both physical and also audit types. We
expect for the plants to know where the material came from and
where it is going, and we have records access for that. And we
will be evaluating that.
The other thing is that we want to know what kinds of
materials went in there and what the feed was used for and
whether or not we can trace that in order to be sure that it
isn't going to the wrong species.
So it is a fairly complex inspection process that is
reflected in that $8.3 million more that we want for BSE. One
of the major things we are trying to do is to control BSE
because the most likely source of infection is animal feed, as
you know.
[The information follows:]
Animal Feed
As of February 6, 2004, there are 235 rendering plants, 1,085 FDA
licensed feed mills, and 5,071 non-FDA licensed feed mills in the
United States. Of these, 157 rendering plants, 310 FDA licensed feed
mills, and 759 non-FDA licenses feed mills handle materials prohibited
from being used in animal feed.
Senator Kohl. All right. Dr. Murano, your budget requests
an additional $23,500,000 for the Food and Agriculture Defense
Initiative. Funding is also requested in FDA and other agencies
for this. It sounds like the increases are going for computer
system upgrades, increased surveillance, bio-surveillance and
training.
For those of us who are not steeped in the language of
homeland security, can you explain in laymen's terms what this
money will be used for?
Dr. Murano. Certainly. As you said very well, this is a
coordinated effort between ourselves and FDA and other agencies
as well, because we understand that we must do several things
to maintain the safety of our food supply from intentional
attack. One is surveillance, so both we and FDA need funds to
survey the food supply for specific agents that we do not
normally test for, for what we deem to be normal contamination
of food. These are threat agents for which both of these
agencies have conducted vulnerability assessments to see where
we are the most vulnerable. We have determined where we are the
most vulnerable, and are trying to close those gaps and then
test for the threat agents that we believe are most likely to
be used.
Secondly, the Food Emergency Response Network that I
described very briefly in my opening remarks, is also a joint
effort with FDA. It is a network of laboratories throughout the
entire country that have to work together and be well
coordinated to respond to an event. More importantly, it must
do the important surveillance work that needs to be done even
before an event takes place. All of these labs have to be
coordinated in terms of using the same methods and the
information has to be shared among all the laboratories. That
is why part of the funds are being asked for eLEXNET, which is
a web-based information sharing platform.
For all of these reasons, we have our budget request and
FDA has their budget request, but funds are to be used jointly
to establish a very robust network of 100 labs in this coming
year.
WIC-ONLY STORES
Senator Kohl. All right. Mr. Bost, I have recently been
informed about a growing problem that is costing the WIC
program several million dollars a year. The WIC-only stores
that, as you know, serve only WIC clients and accept only WIC
certificates, are increasing in numbers very rapidly. In
California alone, there were 82 WIC-only stores in 1996, and
now there are more than 600 across that State.
The problem with these stores is that they do not have to
compete in the normal market, and so they are able to charge
extremely high prices for their products. In California, the
estimates are that the WIC-only stores charge 15 percent or
more in addition to normal price for WIC food packages than
other stores. This is a growing problem, and the WIC program
obviously is suffering additional, unnecessary, and
unprogrammed costs because of it.
With money so tight, obviously, Mr. Bost, we need to do as
much as we can to control this problem. Can you comment on the
problem? And to what extent are you aware and consider it
serious and what you may be doing about it?
Mr. Bost. Well, interestingly enough, Senator Kohl, I think
it is important to note that only 2 percent of all the
authorized WIC vendors are essentially WIC-only. Right now we
have the WIC-only stores only in California and in the
Commonwealth of Puerto Rico. So, one, it is not widespread.
The second point is the fact that we have heard anecdotally
that the cost to the Federal Government is more. However, the
service is better than our clients are receiving other places.
So we are in the process of reviewing that data to make a
determination, if it is accurate information, generally
speaking, is the cost more. So we have just started that
review. I think we actually have two of my senior staff that
are going to go into some of the stores in California over the
course of the next couple of months and ascertain exactly what
the situation is. We are concerned given the fact that we are
seeing an increase in our overall WIC costs.
CRITICAL PATH INITIATIVE
Senator Kohl. Yes.
Dr. Crawford, FDA recently announced that they are going to
use new technologies to help reduce the cost of developing new
drugs. While the goal of this announcement is definitely
worthy, announcements such as these raise a question of how
closely the FDA should be working with the industry that it
regulates.
What considerations are being taken before FDA makes a
decision on something that will cause them to work in close
collaboration with the industry that you are regulating?
Dr. Crawford. Thank you, Senator Kohl. As you know, we are
bound by very strict ethical guidelines to keep us from acting
and colluding with the industry that we regulate. We have to be
very careful about that.
Our record has been good over the years, but we want to
keep it good and even better. So we are separated from working
directly with the industry, either in a consulting capacity or
in any other kind of capacity to improve their bottom line,
their profitability, and even the approval of these drugs.
The genesis of this program, which we are very pleased
with, is some years ago, as you know, there was a move to
double the National Institutes of Health budget. And so that
budget went from between $13 and $14 billion, to $27 billion.
This is expected with some concomitant increases in industrial
research and development to produce a large number of new
technologies and scientific developments that could and I
believe will lead to the capability of this country and its
pharmaceutical industry producing more useful products, not
just in the human drug category but probably in other
categories.
The bottleneck for these breakthroughs periodically in
terms of getting the technology from the laboratory to the
patient and, therefore, saving lives and improving the well-
being of people in this country and in other countries has
sometimes been the Food and Drug Administration. Obviously, if
a large number of new products are developed as a result of the
NIH research and the research that is taking place in the
pharmaceutical world, we have to be ready for them. We have to
know what kinds of categories of products are coming. We have
to have the personnel that can rapidly, accurately review these
products so that we are sure they are safe and effective, but
also to get them to the market as quickly as we possibly can,
consistent with their safety and efficacy. That needs a new
mind-set, a new model at FDA, and we call it the Critical Path
from the laboratory to the patient. It is a modest program to
begin with, but it does require us to rethink how we do this.
Now, in saying that, although we will not be divorced from
cooperating with NIH, we will be distanced from the
pharmaceutical industry that we regulate as we try to get
together a new system. So thank you for the question, and I
assure you we will be separated to the maximum ethical extent.
BIOTERRORISM REGULATIONS
Senator Kohl. Thank you.
Dr. Crawford, it was recently announced that FDA would
delay publishing a final rule on contaminated food tracking by
2 months. The purpose of this rule, as you know, is to help FDA
track down contaminated food and food ingredients as quickly as
possible, and it has been lauded by consumer groups.
Why did the FDA postpone publishing the rule? Can you give
us a date certain by which the rule will be published?
Dr. Crawford. Thank you for the question. When the
Bioterrorism Act was passed in June of 2002, we did get the
authority to do this kind of thing, the recordkeeping authority
that you are talking about, as well as three other new
authorities which enable us to police the food supply better
than ever before, thanks to the wisdom of the Congress. This is
something that had been developing for a long time, but the
advent of the terrorist threats that we are all aware of moved
the Congress and also moved the agency to work together to try
to get this passed.
We are delayed a bit from what we projected in December
with publishing this final regulation. Exactly when it will
come out we are not sure at this point. It shouldn't be very
much longer. We are putting the finishing touches on it, and we
are working with the administration to get it forward.
But I wanted you to know and I wanted to say for the record
that the authority to take these kinds of action exists. We
just have not implemented the regulations which set out how we
will do it. But we are acting already and we are protecting the
food supply through the authorities that were vested in us by
the Bioterrorism Act.
BSE
Senator Kohl. Finally, Mr. Hawks, the Secretary announced
on March 15th that USDA would greatly enhance BSE testing over
a year to a year and a half period, 12 to 18 months. Do we
understand that this enhanced testing is scheduled only for
this limited length of time? And if test results show any
additional BSE-positive cases in the United States, will USDA
further enhance testing and continue it for an indefinite
amount of time? And if so, will CCC funds be used for that
purpose, or how will these costs be covered?
Mr. Hawks. Thank you, Senator Kohl. You are exactly right,
we did announce on March the 15th our enhanced surveillance
package. We also announced that $70 million would be
transferred from CCC to implement this enhanced surveillance
plan. This is in keeping with the international review team
report, which recommended that we conduct very intensive
surveillance of the targeted population for a period of 1 year.
So that is what we have to do. Determinations will be made
about where we move from here when we see what we find with
this surveillance plan.
Our objective is to try to get as many of these samples as
we possibly can. If we collect approximately 268,000, we
believe this sampling will show one BSE positive animal in 10
million adult cattle a 99-percent confidence level. We are very
committed to this. We are also testing a random sampling of
normal animals in this process. We are working with the
industry to make sure that we are able to get these samples as
well.
So I think the answer is we will have to see where we are,
see what the surveillance turns up, and then it would be
appropriate to make determinations about how to proceed after
that.
Senator Kohl. What happens in the public eye, Mr. Hawks? We
tested one animal for BSE, and there was a panic across our
country. Suppose you find one other animal or two other animals
out of--how many do you intend to test?
Mr. Hawks. We are going to test as many of the target
population as we possibly can. We have been testing roughly
20,000 per year for the last 2 years. This year, we had
intended to test 40,000. Now our goal is to test as many as we
possibly can for the next 12 to 18 months.
Senator Kohl. Well, suppose you test 5 million and you find
five and you announce that. I suppose you would announce that,
right?
Mr. Hawks. Well, I think statistically speaking, if we test
268,000 from the target population, it is almost as good as
testing----
Senator Kohl. All right. Suppose you do and you find three
more or four more.
Mr. Hawks. The measures that we have already taken to
protect food safety, including the removal of specified risk
materials, those measures have been taken to ensure that the
food supply is safe. And I think whether we find one more, or
whether we find three more, or if we don't find any more, the
measures that are in place are there to adequately protect our
public.
The U.S. case is totally unlike what happened in Asia. In
Japan, there was a total loss of consumer confidence. As we
have seen in this country and in Canada as well, our consumers
believe that we are doing a good job in protecting food safety.
I will eat beef quite often. So I think it is very important to
understand that I have total confidence, Dr. Murano has total
confidence, because that is her responsibility as well. We
share those responsibilities.
Senator Kohl. I thank you so much, Mr. Hawks.
Senator Burns.
Senator Burns [presiding]. Senator Kohl, how are you this
afternoon? I noticed that the chairman here asked me to come
down here and to really mess up this whole hearing. He sent the
right guy. And he has already covered a lot of these things:
obesity, as if he had a problem.
Senator Burns. And I am glad he took care of that before I
got here. So let's go down the line.
By the way, first of all, since I have got you here, Mr.
Hawks, and most of you, we all know that we probably dodged a
humongous bullet last December the 23rd and again May the 4th
up in Canada. We didn't have to go through the situation the
Canadians went through up there.
I appreciate your actions, and I know it was the cow that
stole Christmas, but, nonetheless, it was one of those things.
And I don't know what my telephone log looks like, but it was
pretty full.
I talked to the Secretary yesterday, and I expressed my
gratitude, and I think it was done as well as it could be done
for a bureaucracy. So I am happy about that. However, we still
come under some criticism, but, nonetheless, it is usually
criticism that probably does not quite understand how the
system works and what we did.
If we tested 100 percent--I don't know. You might have
already been asked this question, and I apologize if you have
been. If we started testing tomorrow 100 percent of our
production in the beef market right now, do you think that
export market would just snap back overnight?
Mr. Hawks. No, sir, I do not. We did discuss this earlier.
I think 100 percent testing has absolutely no scientific
justification. I believe that the path that we are on with the
aggressive surveillance, with the measures that we have taken
to remove SRMs and the measures that FDA is announcing to put
additional firewalls in place are more than adequate to prevent
the spread of BSE if it is here and also to protect food
safety.
NATIONAL ANIMAL IDENTIFICATION
Senator Burns. Let me ask you another question. How are you
moving on the national ID system?
Mr. Hawks. We are moving very well. As you know, we have
been developing a plan over a period of years. USAIP has been
working for over 2 years. They have done a tremendous amount of
work. The Secretary asked our Chief Informational Officer,
Scott Charbo, as well as Nancy Bryson, and our Chief Economist,
Keith Collins to look at this, with each one of them looking
from their respective viewpoints, the legal, the technological
and the economic.
We have put together a plan drawing heavily upon what USAIP
is doing. It is certainly our intent later this year to be able
to issue premises identifications, and early next year to do
individual identifications. We have a few principles that we
are working on, such as being technology neutral. We want to
make sure that any system that we put in place does not add
burden to our producers, as you and I both know and appreciate
those concerns. We protect confidentiality of information. So
those are some of the things we are addressing.
Senator Burns. When can we expect to see that plan?
Mr. Hawks. You should be able to see that plan real soon.
It is going through final review at the Department now, and so
we hope to have that plan to you in the very near future.
BSE TESTING
Senator Burns. Give me an idea of those packing facilities
that want 100 percent test in order to maybe get into the
international market or see what they could do. We have seen a
reluctance from the USDA for that. Can you give me an update on
that situation and the position that you have taken?
Mr. Hawks. Yes, sir. Certainly that is continually under
review. We do not believe there is, as I have said, a
scientific justification for doing 100 percent testing. We have
recently approved some rapid-test test kits for use in our
surveillance plan. We will continue to review those requests
that are before us now in the Department of Agriculture, but we
certainly do not believe there is scientific justification for
doing 100 percent testing.
Senator Burns. Tell me, on the test itself, have you
settled on a particular test?
Mr. Hawks. No, sir. We have recently approved two rapid
tests for the surveillance plan. We are continuing to review
other tests as we speak and hope to have, in the very near
future, additional test kits approved for use.
Senator Burns. When will we see those?
Mr. Hawks. I would hope to see those, as I said, in the
very near future. I am like you, coming into Government out of
the private sector. It is very difficult to nail down those
exact dates as we could when you and I are out there on the
farm.
DENTICIAN
Senator Burns. We look at those things. I am not an expert
on that and I would have none, but I can tell you that I know
some people that do know the difference. I think false
positives are always out there, those kinds of situations in
that respect. Now, age. You have first come out with a system
to mouth the cattle. That has not been the most accurate
procedure sometimes. In other words, it all depends on a little
bit of heredity and genetic makeup of the animal. Also, whether
it calved and where they are raised. And so, Dr. Murano, you
want to----
Mr. Hawks. She is our dentician expert.
Senator Burns. Are you pretty good on horses?
Dr. Murano. Sir, I will tell you that we have had to come
up with a system that would help us determine the age of these
cattle, and you are correct in that the dentician method is not
perfect. We all know that. We have instructed our inspectors
that what they do first and foremost is look, at the records
that come with the animals, and use that as their main gauge of
the age of the animal. If those records are complete, that is
what we go by because that is the most accurate. When those
records are not accurate or not available--and I presume that
will be corrected once this animal ID system is all in place--
the only other method that we have available to us that we know
is the dentician.
However, having said that, the regulations that we
published January 12th are still under an open comment period,
and we have actively sought the input of the industry, any
stakeholders, and anyone who may have information and evidence
on what might be a better method than dentician. We are surely
open to whatever other suggestions the experts in the field
have for us, and we will move to do the best job we can and be
as accurate as possible.
NATIONAL ANIMAL IDENTIFICATION
Senator Burns. With a national ID system and a producer
that keeps records--and most do now and especially in
performance herds; we are doing it more with range cattle more
every day to identify those animals who excel in their
production and this type thing, I would say--and if we go to
some sort of a digital ear tag, that at least the week the
animal was born, it would also be part of that record on that
ear tag. That is the only thing that I think the ear tag has an
advantage over a hot iron brand, but that is a westerner
talking and not the general run of the cattle business.
So I think we have to approach that because I will tell
you, being in that business, I sat up there the other day, and
just to see if I had any talent left at the auction when they
were selling cattle the other day at the auction. I sat up
there and I still got the touch, I want you to know, right now.
Mr. Hawks. Are you looking for a job, Senator?
Senator Burns. No.
I tell you how it can go. A farmer came in and set down
beside me, and there was a little package of calves come in,
and they probably weigh, I do not know, pretty close to 6 and
pretty green. And he just leaned over and he said, ``Conrad,
what do you think those things will weigh?'' And I said, ``Do
not ask me. I missed the weight of a chicken by 7 pounds one
time.''
But I really believe that the national ID system, I think
you have a working group out there right now that is headed by
Gary Wilson out of Ohio, and I have talked with him--he was in
town about a week, week and a half ago--on the national ID
system, and also on the age, because I will tell you, that age
is critical. It is critical because we know of people that some
feed calves, some feed yearlings, and then there is a little
thing called a heiferette, and we know about those kind of
stock, but it is critical as far as the return to the producer,
and also critical to the man who sends them to market for
slaughter, and how they are graded and this type of thing.
Right now it is a pretty rapid market out there right now,
especially on that class of cattle and livestock.
We would like to see what you have proposed. We would like
to work with you on that, especially that working group on
national ID and on age. I also talked to some people that want
to do some work as far as verification of the animal from birth
to the grocery store, tests along the way. Because there are
some plans and programs in the private sector that are being
developed, but they will depend on--they want to work with the
Department of Agriculture, because we know when we go into the
export market, it is the Department of Agriculture who really
carries the message into the international market. So we want
to do that if we possibly can.
ADDITIONAL COMMITTEE QUESTIONS
As far as the chickens, I know there are probably some
people in this room that think chickens is awfully important. I
am not one of them.
Only on Sunday every now and again. But I am really
concerned about the cattle business.
I do not have any more questions. Senator, are you all
done?
Senator Kohl. Yes.
Senator Burns. I would just be like any other chairman. The
record will be kept open for a couple of weeks. We may have
some questions from other committee members that will be
directed your way. We would appreciate if you would respond to
those questions both to the committee and to the individual
member of the committee. We appreciate that very much.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Robert F. Bennett
drug information web site
Question. I noted that the FDA recently launched a web site to
allow both consumers and the medical community to find comprehensive
information about FDA-approved drugs quickly and easily. Since the web
site was launched on March 3, how many ``visitors'' has it had?
Answer. Drugs@FDA has had 154,065 visitors for the period March 3
through April 12, 2004.
Question. Has the FDA received any feed-back from consumers and
health care professionals about the ease of access, and whether the
information is comprehensive and useful?
Answer. Since March 1, 2004 we have received 70 comments on
Drugs@FDA, version 1. It's important to note that there were two
previous beta versions of Drugs@FDA on the Internet: beta 1 in June
2003, and beta 2 from September 2003-March 2004. We received a
significant volume of very helpful feedback which was incorporated into
Drugs@FDA, version 1.
The nature of the comments Drugs@FDA, version 1, ranged from the
general (5) we liked it or didn't like it to questions about specific
drug products (25) that were referred to CDER's Division of Drug
Information for response. Most comments pertinent to Drugs@FDA (40)
fall in the category of requesting new features. For example, users
requested the ability to search by indication or drug class, wanted
more labels added, to obtain NDC numbers and imprint information, to
have more regulatory terms added to the glossary, links to the Orange
Book, and even the ability to download the database for analysis.
medical device review
Question. According to the 2003 Annual Report of the Office of
Device Evaluation, the Center for Devices and Radiological Health was
meeting or exceeding most of its MDUFMA-prescribed performance goals in
2002. As previously noted, the fiscal year 2005 budget request includes
$25.555 million for this user fee program. What will the FDA actually
do with this increased funding?
Answer. The FDA commitment letter defines the performance
objectives FDA is pursuing under MDUFMA. It requires FDA to meet
challenging objectives for both cycle and decision goals and to pursue
a variety of other goals that do not involve quantifiable measures of
progress, such as maintaining current performance in areas where
specific performance goals are not identified, working with its
stakeholders to develop appropriate performance goals for modular
review of PMAs, and working to improve the scheduling and timeliness of
pre-approval inspections.
The appropriation requested by the President's fiscal year 2005
Budget will provide FDA the resources needed to move forward to
effectively implement MDUFMA. Substantial improvement will be required
to meet both the fiscal year 2005 performance goals and to lay the
foundation for the increasingly challenging performance goals of fiscal
year 2006 through fiscal year 2007.
The additional funding will be used to:
--Cover the cost of living increases so that FDA can maintain
staffing levels and scientific capabilities to meet the demands
of an increasing workload and new challenges;
--Enhance the IT systems that support the current review process and
develop system capabilities to facilitate the submission and
acceptance of electronic premarket applications;
--Enhance reviewer training and skill maintenance so that FDA
reviewers are able to keep pace with rapidly developing and
increasingly complex device technologies;
--Employ research and science based activities that provide support
critical to the device product approval process;
--Invest in office and laboratory infrastructure to keep pace with
rapid technological and scientific change in diverse fields of
expertise;
--Work with outside experts to develop guidance and standards to help
industry understand and meet FDA requirements, and to help
support FDA's role in international harmonization on emerging
technologies.
--Expand FDA's small business assistance program as required by the
FD&C Act. Approximately 35 percent of the PMAs approved last
year were from first time submitters who needed FDA's
assistance;
--Conduct pre-approval inspections of device manufacturers;
--Enhance policy guidance document development, emergency response,
review management and risk communication for products developed
and used to respond to terrorist threats and national security
crisis; and
--Contract with professional societies and agencies to address the
agency's needs, including the need for adequate laboratory
facilities, to plan bio-effects research, and to develop
requirements for the safe use of devices.
Question. Since the agency has already reached most of its MDUFMA
performance goals, should the FDA be working toward more aggressive
goals?
Answer. Although FDA is making satisfactory progress towards
achieving the ambitious performance goals established under MDUFMA, the
fiscal year 2003 Office of Device Evaluation/Office of In Vitro
Diagnostic Device Evaluation and Safety (ODE/OIVD) Annual Report does
not claim or imply that we ``have already reached most'' of MDUFMA's
performance goals. MDUFMA's goals are based on receipt cohorts; for
example, the fiscal year 2003 receipt cohort includes applications
received from October 1, 2002 through September 30, 2003. For PMAs and
PMA supplements, the receipt cohort performance data shown for fiscal
year 2003 in the ODE/OIVD Annual Report represents only receipts
through March 31, 2003 (6 months of data); for 510(k)s, the receipt
cohort performance data shown for fiscal year 2003 represents only
receipts through June 30, 2003 (9 months of data). See the footnotes on
pages 48, 53, 56, and 68 of the fiscal year 2003 report. Furthermore,
the results applicable to our MDUFMA performance goals will change over
time as FDA completes work on pending applications. As of March 31,
2004, the following fiscal year 2003 applications were still pending
(the numbers were substantially higher when the fiscal year 2003 report
was prepared):
--PMAs--21
--Expedited PMAs--1
--180-day PMA Supplements--2
--510(k)s--316
Also, the goals become more stringent beginning in fiscal year
2005.
The ODE/OIVD Annual Report shows promising progress towards
achieving MDUFMA's objectives, but those results represent only
preliminary indicators of performance. FDA will provide quarterly
reports updating our progress towards achieving MDUFMA's performance
goals on our MDUFMA web site (www.fda.gov/cdrh/mdufma).
medical device/drug marketing
Question. We have all heard that a particular DC laser surgeon
fixed Tiger Woods' eyesight, and that former Senator Bob Dole has
benefited from a particular prescription drug. Now we learn that golfer
Jack Nicklaus has a new hip made by a particular company. The
implications here are if it is good enough for Tiger/Bob/Jack, its good
enough for me. What role does the FDA play in monitoring these types of
advertisements?
Answer. FDA regulates drugs and medical devices in the United
States under the authority of the Federal Food, Drug, and Cosmetic Act
(FDCA). This authority extends to promotional labeling for all drugs
and devices and advertising for prescription drugs and so-called
``restricted'' devices. (21 U.S.C. 342(a); 352(a), (n), (q), (r);
362(a).) The Federal Trade Commission (FTC) also has legal authority to
regulate advertising (15 U.S.C. 52), and takes the lead in regulating
the advertising of OTC drugs and non-restricted devices. FDA takes the
lead in regulating the labeling of over-the-counter (OTC) and
prescription drugs and non-restricted and restricted devices, and the
advertising of prescription drugs and restricted devices.
Advertisements for prescription drugs must include, among other
things, ``information in brief summary relating to side effects,
contraindications, and effectiveness,'' as specified in FDA
regulations. (21 U.S.C. 352(n); see also 21 CFR 202.1.) Advertisements
for restricted devices must include ``a brief statement of the intended
uses of the device and relevant warnings, precautions, side effects,
and contraindications. . . .'' (21 U.S.C. 352(r).) Both prescription
drug and restricted device advertisements also must not be false or
misleading, meaning they must disclose material risk information. (21
U.S.C. 352(q)(1) & 321(n); 21 CFR 202.1(e)(5).) FDA's rules for
prescription drug and restricted device advertising are the same,
whether the advertising is aimed at a consumer audience or at health
care professionals.
The FDCA contains no special rules for celebrity endorsements in
advertising. In general, an endorsement could be subject to the general
rules for advertising set forth above. Thus, if a celebrity
spokesperson were to make a statement in an advertisement for a
prescription drug or restricted device that is false or misleading, or
if an advertisement contained a celebrity testimonial but lacked the
risk information required under the above provisions, FDA likely would
have authority to initiate enforcement action under the FDCA.
Statements by independent individuals not speaking on behalf of a drug
firm are not subject to FDA's advertising jurisdiction. Oral
representations by paid representatives of drug firms concerning the
safety or effectiveness of a product might also within FDA's regulatory
authority if they create a new intended use for a product, for which
adequate directions would be required in labeling and for which
premarket approval might be required. (See 21 U.S.C. 352(f)(1), 355.)
FDA believes consumer-directed advertisements play an important
role in advancing the public health by encouraging consumers to seek
treatment. Since 1997, consumer-directed advertisements have been aired
(on television or radio) for about 98 prescription drugs. Of those, 14
are intended for under-treated conditions, such as high cholesterol,
heart disease, and mental health problems like depression. Others are
for serious conditions such as asthma, Alzheimer's disease, arthritis,
chronic obstructive pulmonary disease, diabetes, insomnia, migraine,
obesity, osteoporosis, overactive bladder, serious heartburn, smoking
cessation, and sexually transmitted diseases.
FDA held a public meeting to discuss the results of FDA surveys and
other research on consumer-directed advertising on September 22-23,
2003. Based in part on discussion at that meeting, FDA has developed
guidance to encourage advertising that provides risk and benefit
information appropriate to support conversations between consumers and
their health care providers. On February 4, 2004, the agency issued
three draft guidance documents, addressing (1) options for presenting
risk information in consumer-directed print advertisements for
prescription drugs, to encourage use of consumer-friendly language and
formats (2) criteria FDA uses to distinguish between disease awareness
communications and promotional materials, to encourage manufacturers to
disseminate disease educational messages to the public, and (3) a
manner in which restricted device firms can comply with the rules for
disclosure of risk information in consumer-directed broadcast
advertising for their products, to help encourage compliance in this
emerging area of medical product promotion.
FDA has adopted a comprehensive, multi-faceted, and risk-based
strategy for regulating consumer-directed advertising of medical
products. This strategy includes legally sustainable letters, guidance
development, frequent informal communications with industry and
advertisers, and research on the public health effects of consumer-
directed promotional materials. We continue to monitor the impact of
consumer-directed promotion on the public health.
methylmercury advisory for seafood
Question. As you will recall, Dr. Crawford, in the Statement of the
Managers to accompany the fiscal year 2004 Omnibus Appropriations bill,
the conferees encouraged coordination between the FDA and the EPA on
what is considered a safe level of methylmercury exposure. I was
pleased to note that an updated consumer advisory regarding fish
consumption and methylmercury was released in mid-March. How does this
new advisory differ from that which was released by the FDA in July of
2002?
Answer. The FDA issued an advisory for mercury in fish in March of
2001; this advisory was then reviewed by the FDA's Food Advisory
Committee (FAC) in July 2002. There was no new advisory issued in July
2002. The FAC made six recommendations at their meeting in July 2002 as
follows:
--Better define what is meant by ``eat a variety of fish'' so that
consumers can follow this recommendation effectively;
--Work with other Federal and State agencies to bring commercial and
recreational fish under the same umbrella;
--Publish a quantitative exposure assessment used to develop the
advisory recommendations;
--Develop specific recommendations for canned tuna, based on a
detailed analysis of what contribution canned tuna makes to
overall methylmercury levels in women;
--Address children more comprehensively in the advisory to relate
dietary recommendations in the advisory to the age/size of the
child; and,
--Increase monitoring of methylmercury to include levels in fish and
the use of human biomarkers.
Based on these recommendations, meetings with stakeholders, focus
group testing as well as further input from the FACs in December 2003,
the FDA issued a revised advisory on March 19th 2004. The revised
advisory differed from the 2001 advisory in a number of ways as
follows:
--The 2004 Advisory is a joint advisory by FDA and EPA that addresses
both commercial caught and locally caught fish and shellfish;
--The 2004 Advisory more strongly emphasizes the positive benefits of
eating fish;
--The 2004 Advisory provides examples of commonly eaten fish that are
low in mercury;
--The 2004 Advisory and the Question and Answers section specifically
addresses canned light tuna and canned albacore (``white'')
tuna, as well as tuna steaks;
--The 2004 Advisory recommends not eating any other fish in the same
week as locally caught fish are consumed (the Advice on the
amount of locally caught fish to eat is the same as in the 2001
EPA advisory); and,
--The 2004 Advisory contains a section that addresses the frequently
asked questions about mercury in fish.
The 2004 advisory was revised to provide useful information for
keeping fish as part of a healthy diet and at the same time reduce the
exposure to mercury. The 2004 Revised Advisory more accurately reflects
the purpose of the information.
new drug approval process
Question. The FDA recently issued a report which described the
decrease in the number of new innovative drug application, and
recommends reform to the existing regulatory process. I would
appreciate it if you could explain just exactly what the FDA plans to
do in this regard.
Answer. The ``critical path'' is best described as the crucial
steps that determine whether and how quickly a medical discovery
becomes a reliable medical treatment for patients. There are certain
points on this path where difficulties are occurring. FDA believes that
a major problem in today's drug development process is that the new
science and scientific tools being used in the discovery process are
not being harnessed to guide the development process that brings
products to market. FDA has called for a new focus on modernizing the
tools that applied biomedical researchers and product developers use to
assess the safety and effectiveness of potential new products, and the
manufacturing tools necessary for high-quality mass production of
cutting-edge therapies. FDA is in a unique position to identify
scientific challenges that cause delays and failures in product testing
and manufacturing because of its experience overseeing medical product
development, assessment, and manufacturing/marketing; its vast clinical
and animal databases; and its close interactions with all the major
players in the critical path process.
FDA, through collaboration with academia, patient groups, industry,
and other government agencies, will play a major role in identifying
systemic medical product development problems via development of a
Critical Path Opportunities List, and in conducting or collaborating on
research to create a new generation of performance standards and
predictive tools that will provide better answers about the safety and
effectiveness of investigational products, faster, with more certainty,
and at lower costs. Specific examples of critical path efforts include:
developing guidances and scientific workshops on ``best practices'',
developing new animal or computer-based predictive models, developing
new biochemical and genomic assays as biomarkers for safety and
effectiveness, collaboration on the design of new clinical evaluation
techniques, and facilitating multi-company studies of technologies
which no one company could mount. FDA will identify and prioritize the
most pressing product development problems and the areas that provide
the greatest opportunities for rapid improvement and public health
benefits across the three dimensions of the ``critical path''--safety
assessment, evaluation of medical utility, and product
industrialization and will facilitate collaborative research in these
areas.
Question. A consumer group has expressed the opinion that the FDA
should approve only drugs which show concrete advantages to drugs
currently on the market. What is your response to that suggestion?
Answer. Our present and future mission remains constant: to ensure
that drug products available to the public are safe and effective. If
the drug is effective and we are convinced its health benefits outweigh
its risks, we approve it for sale. Statutory requirements dictate that
we review products submitted to us requesting approval. From a medical
perspective, it is desirable for physicians and consumers to have a
variety of drug treatment choices. Not all people can tolerate a
specific drug. Not all drugs have the intended affect in every person.
From an economic perspective, it is also useful to have a market
featuring a variety of products so that prices are competitive.
seafood inspection/gao report
Question. The General Accounting Office recently issued a report on
the FDA's imported seafood safety program. Basically, GAO found that
although the FDA has made some progress in the number of foreign firms
being inspected and the number of seafood products being tested at U.S.
ports of entry, there is more work to be done. Among other things, GAO
recommends that the FDA work with NOAA to have NOAA employees provide
various services under their Seafood Inspection Program. Have you
reviewed this GAO report? Do you agree with their observations? What
steps has the FDA taken to work with NOAA in this regard?
Answer. FDA reviewed the GAO report and provided a lengthy comment
to the GAO on this particular recommendation. The comment was published
in the Appendices to the report. In summary, FDA noted that it has a
long and collegial working relationship with the seafood inspection
program within the National Marine Fisheries Service (NMFS) and that
the two agencies will be working together to find better ways of
integrating their programs. Potential areas of integration were
described, including the use of NOAA laboratory capacity to carry out
analyses of seafood samples that FDA takes during the normal course of
work; the commissioning of NMFS inspectors; the use of NMFS inspectors
who might already be on site in distant locations; and the issuance by
NMFS of European Health Certificates for a fee to U.S. industry that
ships fish and fishery products to Europe. The latter would free up FDA
resources that are now devoted to that activity.
We have recently worked with NOAA Fisheries' National Seafood
Inspection Laboratory (NSIL) located in Pascagoula, MS and the NOAA
Fisheries' Northwest Fisheries Science Center in Seattle, WA to assess
the use of NOAA laboratory capacity to carry out analyses of seafood
samples that FDA takes during the normal course of our work, or during
``crisis'' situations. Specifically for chloramphenicol analysis, our
discussions have resulted in FDA's provisional approval (pending on
site review) of these laboratory's methods for sample submission,
custody, routing, and accounting and documentation procedures necessary
to maintain the regulatory chain of custody and tracking required for
import collections. While FDA is not able to fund this initiative this
fiscal year, we hope that we will be able to implement this proposal in
the future.
agricultural products
Question. The White House Office of Science and Technology Policy,
(OSTP) had recommended approximately 2 years ago (August 2, 2002) that
various agencies--including the FDA--complete guidelines regarding the
early safety assessment of agricultural products developed through
biotechnology for food and feed use. To date, there is no evidence that
the FDA has acknowledged this mandate nor made any progress towards
finalizing a policy. The U.S. regulatory system currently imposes a
zero tolerance on the presence of unapproved biotech-enhanced events in
food and feed, regardless of the risk level. It does not recognize the
realities of a biological system. This zero-tolerance' policy exposes
grain handlers, food processors and feed manufacturers to the risk that
any trace amounts of biotech-enhanced events in general commodity crops
that have not been approved for food and feed under the U.S. regulatory
process could render such crops adulterated and subject to seizure
under Federal law. Such a policy is inconsistent with other food purity
standards which have established thresholds for trace amounts of
unexpected materials. Without having a policy in place, the United
States risks significant disruptions in global agricultural trade. What
is the FDA doing to meet their obligations and will they be able to
complete their work by year's end?
Answer. On August 2, 2002, OSTP announced proposed Federal actions
to update field tests requirements for biotechnology derived plants and
to establish early food safety assessments for new proteins produced by
such plants. As part of this proposal, FDA announced that it would
publish for comment draft guidance to address the possible
intermittent, low level presence in food and feed of new non-pesticidal
proteins from biotechnology-derived crops under development for food or
feed use, but that have not gone through FDA's pre-market consultation
process. FDA is preparing draft guidance and expects to publish the
draft guidance for comment this year.
transgenic animals in cvm
Question. The FDA has resources in place for regulation of
transgenic animals in CVM. However, the agency has to date not provided
any guidance to industry for the regulation of transgenic animals. What
is the FDA doing to refine and clarify the regulatory process for
transgenic animals, and when can we expect to see specific regulatory
guidance published?
Answer. It is true that CVM has not issued any general guidance to
industry for the regulation of transgenic animals. Instead, CVM has
worked with investigators one-on-one to ensure safe and efficient
development of animal biotechnology products while an interagency group
led by the White House Office of Science and Technology Policy (OSTP)
develops a coordinated framework that is appropriate to animal
biotechnology.
In 1984, the Federal Government embarked on project to develop a
Coordinated Framework for regulation of biotechnology products. The
early efforts focused on plant biotechnology for agricultural purposes.
The effort has resumed at various times as new categories of products
became feasible. For example, in May 2000, the White House directed its
Council on Environmental Quality, ``CEQ'', and Office of Science and
Technology Policy to conduct an interagency assessment of Federal
environmental regulations pertaining to agricultural which includes
both plants and animals, biotechnology and, if appropriate, make
recommendations to improve them. Information is available on the
internet at http://www.ostp.gov/html/ceq_ostp_study1.pdf.
The White House-directed interagency process continues with respect
to animal biotechnology products. The OSTP has convened over the last
year an interagency group--which was similar to the group convened in
May 2000--with FDA, APHIS, EPA, and OMB, represented. The group is
focusing on the application of the Coordinated Framework to the wide
range of animal biotechnology products that have been developed since
the framework was created in the 1980's. There were very few examples
of animal biotechnology products available to consider in the 1980's
and only a limited number in 2000. The discussions are continuing,
using various product examples, and including listening sessions with
various stakeholders. Ultimately, a seamless Federal oversight system
for animal biotechnology products is expected.
Both as part of this interagency process and separately, FDA has
examined--and continues actively to consider--the many complex legal,
scientific, and policy issues related to animal biotechnology. FDA has
a variety of authorities potentially applicable to transgenic animals,
including FDCA authorities over foods, food additives, and new animal
drugs. In 2000, FDA commissioned the National Academy of Sciences/
National Research Council Committee on Agricultural Biotechnology,
Health, and Environment, (NAS) to identify and rank, where possible,
potential risks associated with the introduction of animal
biotechnology into commerce. FDA is using the resulting report
recommendations, issued in the fall of 2002, as guidance in developing
an action plan for the future. FDA is also preparing a risk assessment
on animal clones and considering risk management measures that might be
appropriate as a condition for marketing animal clones for use in the
human food chain.
FDA is also involved in considering issues relating to particular
applications of animal biotechnology. In March 2003, FDA began
investigating and contacting universities engaged in genetic
engineering research to ensure that genetically engineered animals do
not enter the food or animal feed--as rendered animals--supply. In May,
FDA issued a letter to the Presidents of the Land Grant Universities
and posted the letter for more general access on its website.
Information on the ``Letter from FDA to Land Grant University'', from
May 13, 2003, may be found on the internet at http://www.fda.gov/cvm/
biotechnology/LandGrantLtr.htm. Roughly 2 dozen organizations have
responded to FDA's outreach and identified multiple projects with
transgenic animals. FDA is monitoring these and other projects as
appropriate.
food safety
Question. The Chicago Tribune recently published an article
regarding the rising threat to the U.S. food supply. Many of the quoted
experts used the word ``scary'' in describing our vulnerability. What
strategy, if any, has the FDA adopted to counter intentional tampering
with the U.S. food supply. An additional $65 million was requested in
the fiscal year 2005 budget request for food defense. What exactly does
the FDA plan to do with these funds? What outputs will these funds
provide?
Answer. FDA employs five food defense strategies:
--Development of increased food security awareness among Federal,
State, local, and tribal governments and the private sector by
collecting, analyzing, and disseminating information and
knowledge (awareness);
--Development of capacity for identification of a specific threat or
attack on the food supply (prevention);
--Developing effective protection strategies to ``shield'' the food
supply from terrorist threats (preparedness);
--Developing a rapid, coordinated response capability to a terrorist
attack (response); and,
--Development of capacity for a rapid, coordinated recovery from a
terrorist attack (recovery).
FDA's plan to protect the food supply will be executed on both the
import and domestic fronts.
The fiscal year 2005 requested increase of $65,000,000 for
Counterterrorism food defense includes $35,000,000 (including eLEXNET)
to establish the Food Emergency Response Network (FERN) for increasing
lab testing capacity in the event of a threat to the food supply.
Roughly $23,000,000 of FERN funds will be available to States for
establishing food lab emergency response capabilities and $5,500,000
for infrastructure costs. The request also includes $15,000,000 to
address a significant research need for ensuring that we have the
capability of detecting or inactivating a broad range of agents that
could pose serious threats to the food supply; $7,000,000 to increase
import and domestic inspections activities; $5,000,000 to coordinate
with and establish connectivity of our existing food surveillance
efforts to the Department of Homeland Security as part of the
Administration's bio-surveillance initiative; and $3,000,000 for the
Emergency Operations Network project to upgrade our crisis/incident
management capabilities in the event of a potential threat to the food
supply.
Funds requested for FERN would establish 15 State food emergency
response labs, and will also provide an additional 25 labs connected to
the eLEXNET, plus necessary infrastructure such as a national
operations center to support participating labs. Research funds would
ensure that we have the capability of detecting or inactivating a broad
range of agents that could pose serious threats to the food supply. The
funds for inspections would result in an additional 37,000 import field
exams over the projected 60,000 projected level in fiscal year 2004 for
a total of 97,000 import field exams. It would also allow for increased
surveillance of our food supply by funding an additional 750 domestic
establishment inspections. Funds would also upgrade our Emergency
Operations Center by investing in the Emergency Operations Network, and
would increase coordination of our food surveillance efforts with the
Department of Homeland Security.
Question. Last year, the FDA joined with the U.S. Bureau of Customs
and Border Protection to develop a program to protect the American
public from food bioterrorist attacks. There were high hopes that as
many as 420,000 manufacturing, processing, packing, and holding
facilities, both in the United States and abroad, would quickly
register under this program and provide advance notice of imports in
order to expedite the entry process. According to press reports, only
about half of those facilities have registered, and food shipments are
still arriving without prior notice. Why haven't all covered facilities
complied with these requirements? What efforts have the FDA and the
Customs Bureau undertaken to make sure that covered facilities
register? It is estimated that 25,000 shipments of imported food arrive
at U.S. ports of entry every day. Does the FDA have sufficient
resources to adequately inspect these shipments?
Answer. In the Registration Interim Final Rule (IFR), FDA estimated
that about 420,000 facilities would be covered by the requirements of
the rule. In the Prior Notice IFR, FDA estimated that it would handle
25,000 prior notice submissions per day. To clarify the above question,
FDA has not estimated that the approximately 420,000 facilities
estimated in the Registration IFR would necessarily provide prior
notice to FDA.
FDA is unsure why it has only received approximately 200,000 of the
expected registrations to date. Because registration is a completely
new requirement and covers so many food facilities, FDA believes many
small facilities may still be unaware of the registration requirement.
FDA continues to place a high emphasis on notifying as many affected
entities as possible of the registration requirements through outreach.
On April 1, 2004, FDA completed nine city domestic outreach meetings
for small businesses and other stakeholders on the registration and
prior notice IFRs. FDA's international component of Phase II outreach
has been conducted through the collaboration and cooperation of the
Department of State through a foreign press conference, Voice of
America video teleconference, and USDA's Foreign Agricultural Service.
Worldwide attaches disseminated the Registration and Prior Notice
interim final rules, compliance policy guidance, and Questions and
Answers. FDA, with Customs and Border Protection participation, is also
conducting a series of four outreach meetings in Asia from April 21-29,
2004. FDA will continue to conduct outreach in order to notify affected
entities of the registration requirement.
In response to the question regarding whether FDA has sufficient
resources to adequately inspect the estimated 25,000 daily shipments of
imported food arriving at U.S. ports, FDA would like to clarify that
the goal is not to physically inspect each shipment associated with a
prior notice submission. However, it is important to note that these
shipments are reviewed electronically to determine if the shipment
meets identified criteria for physical examination or sampling and
analysis or warrants other reviews by FDA personnel. This electronic
screening allows FDA to concentrate its limited inspection resources on
high-risk shipments while allowing low-risk shipments to proceed into
commerce.
Prior to receiving our prior notice authority, FDA already was
receiving much of the entry information contained in the prior notice
submission. However, FDA was not receiving the entry information in
advance of the shipment arriving in the United States. With the new
prior notice authority, FDA is receiving the entry information in
advance of the shipment arriving in the United States (timeframe
depends on mode of transportation), and thus, the Agency is better able
to focus inspection resources on those shipments for which there is
reason to believe they may pose a danger to the food supply.
monograph drug approval system
Question. The Senate Committee Report to accompany the fiscal year
2004 Agriculture appropriations bill discussed the interest in the
establishment of a monograph system for prescription drug products. The
FDA was asked to provide a report regarding the feasibility and cost of
such a new monograph system for prescription drug products. What is the
status of the FDA review of this proposal? If a monograph system is not
the appropriate way to go, what efforts has the FDA undertaken to find
a way to preserve health and safety while at the same time encourage
competition, keep prescription drug prices low, and keep small
businesses open?
Answer. In 2003, the Senate Committee on Appropriations asked FDA
to prepare a report regarding the feasibility and cost of a new
monograph system for prescription drugs that have been marketed to a
material extent or for a material time without pre-market approval. The
agency is currently preparing that report. The report will analyze
critical issues that would need to be addressed if FDA were to develop
monographs for the approval of marketed prescription drugs. The report
will evaluate the cost and feasibility of developing such a system.
Question. The FDA just extended the comment period for
consideration of a guidance document regarding enforcement priorities
for older prescription drugs marketed outside of the current new drug
approval system. In examining comments, will the FDA examine
alternative approaches to the enforcement policy, such as a
prescription drug monograph for these older prescription drugs?
Answer. In October 2003, the Agency issued a draft Compliance
Policy Guide (CPG) outlining FDA policies to encourage companies to
sponsor unapproved drugs through the agency's drug approval process.
The draft CPG requests public comment and sets forth the agency's
enforcement approach, explaining that FDA will continue to give
priority to enforcement actions involving three categories of
unapproved drugs: Those that pose safety risks; those that lack
evidence of effectiveness; and those that constitute health fraud. It
also explains how the agency intends to address those situations in
which a firm obtains FDA approval to sell a drug that other firms have
long been selling without FDA approval.
FDA received requests to reopen the comment period and has reopened
the comment period until April 27, 2004. The Agency will carefully
examine all comments, including comments relating to alternative
approaches that are submitted on the matter.
prescription drug abuse
Question. Mr. Crawford, last month the FDA joined with the Office
of National Drug Control Policy, the DEA, and the Surgeon General in
releasing the President's National Drug Control Strategy. As noted in
the ONDCP press release, this marks the first time that any
Administration has included the issue of prescription drug abuse in
this Strategy. What, exactly, is the FDA's role in this effort? Will
the FDA be able to fulfill this mission with existing funds and
authorities? If not, were additional resources requested in the fiscal
year 2005 budget? Does the FDA need additional statutory authorities?
Answer. The strategy for reducing prescription drug abuse focuses
on three core tactics:
First, Business Outreach and Consumer Protection: FDA will work to
ensure product labeling that clearly articulates conditions for safe
and effective use of controlled substances so that commercial
advertising fully discloses safety issues associated with the drug's
use. A specific example of this is labeling that properly identifies
patients for whom these products are appropriate and that recommend a
``stepped care'' approach to the treatment of chronic pain, in
accordance with treatment guidelines.
FDA will consider Risk Management Programs (RMPs). The Agency will
evaluate the need for a RMP during the approval process for Schedule II
opiate drug products. RMPs help ensure the safe prescribing and use of
these drugs through identification of appropriate patients and
monitoring for adverse outcomes.
FDA in conjunction with the DEA and the White House Office of
National Drug Control Policy (ONDCP) will work with physician
organizations to encourage comprehensive patient assessment prior to
prescription of opiate therapy.
FDA and other Federal agencies are enlisting the support of
responsible businesses affiliated with online commercial transactions.
These legitimate businesses will be asked to alert law enforcement
officials to suspicious or inappropriate activities related to these
products.
Second, Investigation and Enforcement: The Internet is one of the
most popular sources of diverted prescription drugs. An increasing
number of rogue pharmacies offer controlled substances and other
prescriptions direct to consumers online.
FDA's Office of Criminal Investigation (OCI) and DEA work together
on criminal investigations involving the illegal sale, use, and
diversion of controlled substances, including illegal sales over the
Internet. Both FDA and DEA have utilized the full range of regulatory,
administrative, and criminal investigative tools available, as well as
engaged in extensive cooperative efforts with local law enforcement
groups, to pursue cases involving controlled substances.
FDA and U.S. Customs and Border Protection (CBP), with assistance
from DEA, continue to conduct spot examinations of mail and courier
shipments for foreign drugs to U.S. consumers to help FDA and CBP
target, identify, and stop illegal and potentially unsafe drug from
entering the United States from foreign countries via mail and common
carriers.
Finally, Protecting Safe and Effective Use of Medications: FDA will
support DEA's efforts with medical associations to identify existing
best practices in physician training in the field of pain management.
DEA and FDA plan to develop a mechanism to support the wider
dissemination and completion of approved Continuing Medical Education
(CME) courses for use of opioids that include information on the risk
of abuse and addiction.
FDA in conjunction with ONDCP and DEA will develop public service
announcements that appear automatically during Internet drug searching
to alert consumers to the potential danger and illegality of making
direct purchases of controlled substances online. Currently, FDA, along
with its sister agency, the Substance Abuse and Mental Health Services
(SAMHSA), have jointly developed a public service announcement campaign
to better educate consumers on the abuse of prescription pain killers.
FDA did not request additional resources in the fiscal year 2005
budget in order to participate in the activities stated above. This
initiative does not require additional regulatory authority.
obesity
Question. In your prepared remarks you discuss the FDA Obesity
Working Group whose recommendations were recently released as part of
HHS Secretary Thompson's overarching new national education campaign
for combating obesity. What is the FDA role in these anti-obesity
efforts? Which of your Centers is responsible for these efforts? What,
specifically, is the FDA doing to make sure labels on food is correct,
and that claims made about food are factual and science-based? What, if
any, additional plans will be implemented in fiscal year 2005?
Answer. In support of the President's Healthier U.S. initiative,
the DHHS established a complementary initiative, Steps to a Healthier
United States, which emphasizes personal responsibility for the choices
Americans make for healthy behaviors. One aspect of this initiative
focuses on reducing the major health burden created by obesity and
other chronic diseases. Following DHHS' July 2003 Roundtable on Obesity
and Nutrition, on August 11, 2003, FDA established an Obesity Working
Group, or OWG, to prepare a report that outlines an action plan to
cover critical dimensions of the obesity problem from FDA's perspective
and authorities. This report was released on March 12, 2004.
There is no simple answer to the problem of obesity. Achieving
success in reducing and avoiding obesity will occur only as a result of
efforts over time by individuals as well as various sectors of our
society. It should be noted, however, that most associations, agencies,
and organizations believe that diet and physical activity should be
addressed together in the fight against overweight and obesity.
The OWG report provides a range of short and long-term
recommendations to address the obesity epidemic with a focus on a
``calories count'' emphasis for FDA actions. These recommendations are
based on sound science and address multiple facets of the obesity
problem under FDA's purview, including developing appropriate and
effective consumer messages to aid consumers in making wiser dietary
choices; establishing educational strategies and partnerships to
support appropriate messages and teach people, particularly children,
how to lead healthier lives through better nutrition; developing
initiatives to improve the labeling of packaged foods with respect to
caloric and other nutrition information; encouraging and enlisting
restaurants in efforts to combat obesity and provide nutrition
information to consumers, including information on calories, at the
point-of-sale; developing new therapeutics for the treatment of
obesity; designing and conducting effective research in the fight
against obesity; and continuing to involve stakeholders in the process.
Regarding food labeling, the OWG report contains several
recommendations based on sound science. I will provide these
recommendations for the record.
[The information follows:]
Publish an advance notice of proposed rulemaking, or ANPRM, to seek
comment on the following:
--How to give more prominence to calories on the food label, for
example, increasing the font size for calories, including a
column in the Nutrition Facts panel of food labels for percent
Daily Value for total calories, and eliminating the listing for
calories from fat;
--Whether to authorize health claims on certain foods that meet FDA's
definition of ``reduced'' or ``low'' calorie. An example of a
health claim for a ``reduced'' or ``low'' calorie food might
be: ``Diets low in calories may reduce the risk of obesity,
which is associated with type 2 diabetes, heart disease, and
certain cancers.''
--Whether to require additional columns on the Nutrition Facts panel
to list quantitative amounts and percent Daily Value of an
entire package on those products and package sizes that can
reasonably be consumed at one eating occasion--or declare
quantitative amounts and percent Daily Value of the whole
package as a single serving if it can reasonably be consumed at
a single eating occasion; and,
--Which, if any, reference amounts customarily consumed of food
categories appear to have changed the most over the past decade
and hence require updating.
File and respond in a timely way to petitions the agency has
received that ask FDA to define terms such as ``low,'' ``reduced,'' and
``free'' carbohydrate; and provide guidance for the use of the term
``net'' in relation to carbohydrate content of food--these petitions
were filed on March 11, 2004. Encourage manufacturers to use dietary
guidance statements, an example of which would be, ``To manage your
weight, balance the calories you eat with your physical activity.''
Encourage manufacturers to take advantage of the flexibility in
current regulations on serving sizes to label as a single-serving those
food packages where the entire contents of the package can reasonably
be consumed at a single eating occasion. Encourage manufacturers to use
appropriate comparative labeling statements that make it easier for
consumers to make healthy substitutions.
We believe that if the report's recommendations are implemented
they will make a worthy contribution to confronting our Nation's
obesity epidemic and helping consumers' lead healthier lives through
better nutrition.
We also believe that the regulatory scheme for claims in food
labeling, whether health claims, nutrient content claims, or other
types of claims, are science based, and we continue to consider
modifications to our regulations to keep up with recent scientific
developments. Some of the modifications FDA is currently considering
are described above in the list of topics to be covered by the ANPRM
the agency intends to issue.
albuterol metered-dose inhalers
Question. As noted in the Senate Report last year, there are a
number of organizations which support the removal of ozone-destroying
CFC albuterol metered-dose inhalers from the market. The FDA has
indicated in its regulatory plan that it intends to issue a rule on
this matter. Proponents of this rule had expected a proposed rule by
now. When can this Committee expect the FDA to issue a proposed rule to
remove albuterol metered-dose inhalers from the U.S. market? Can you
tell us at this time what you expect the effective date would be for
that rule? When do you expect the FDA will issue a final rule?
Answer. FDA is currently working on the CFC albuterol proposed rule
and expects it to publish shortly. The rulemaking process prohibits FDA
from describing the contents of the proposed rule, so the Agency cannot
state the effective date of the rule at this time. FDA expects the
final rule to publish in March 2005.
biotech-enhanced events in food and feed
Question. The U.S. regulatory system currently imposes a zero
tolerance on the presence of unapproved biotech-enhanced events in food
and feed, regardless of the risk level. It does not recognize the
realities of a biological system. This zero-tolerance' policy exposes
grain handlers, food processors and feed manufacturers to the risk that
any trace amounts of biotech-enhanced events in general commodity crops
that have not been approved for food and feed under the U.S. regulatory
process could render such crops adulterated and subject to seizure
under Federal law. Such a policy is inconsistent with other food purity
standards which have established thresholds for trace amounts of
unexpected materials. Without having a policy in place, the United
States risks significant disruptions in global agricultural trade. What
is the FDA doing to meet their obligations and will they be able to
complete their work by year's end?
Answer. On August 2, 2002, OSTP announced proposed Federal actions
to update field tests requirements for biotechnology derived plants and
to establish early food safety assessments for new proteins produced by
such plants. As part of this proposal, FDA announced that it would
publish for comment draft guidance to address the possible
intermittent, low level presence in food and feed of new non-pesticidal
proteins from biotechnology-derived crops under development for food or
feed use, but that have not gone through FDA's pre-market consultation
process. FDA is preparing draft guidance and expects to publish the
draft guidance for comment this calendar year.
generic biologicals
Question. In your testimony you stressed the importance of being
``open-minded'' about the science ``as the science improves.'' Can you
assure the Subcommittee that the Agency will not adopt an approach that
resurrects old science, and that the Agency intends to remain open
minded as it evaluates application of the vast innovation in analytical
tools to the development and evaluation of follow-on biologicals?
Answer. We can assure the subcommittee that the Agency will not
adopt an approach that resurrects or relies on outdated scientific
techniques in the development and evaluation of follow-on biologics.
Indeed, the Agency has been very proactive in striving to understand
and embrace the latest technology used in the characterization of
biotechnological products. For example, the Agency supports active
research programs that utilize current technologies in addressing
mission related research and in developing technologies that help
address regulatory and scientific issues. These efforts are important
to ensure that FDA scientists remain current with the latest advances
in analytical techniques. Scientific staff also participates in
scientific symposia and extensively interact with colleagues. Indeed,
many of our scientific staff involved in the regulation of biotech
products, are located on the NIH campus, which provides an enriched
research environment utilizing advanced technology that is second to
none.
In June 2003, the Agency cosponsored, along with the International
Association of Biologicals and the National Institute for Biological
Standards and Control, a conference on the ``State of the Art
Analytical Methods for the Characterization of Biological Products and
Assessment of Comparability''. This meeting focused on what current
analytical technologies can and cannot tell us about the
physicochemical structure and function of biological therapeutics;
The Agency's scientists participate yearly in the annual Symposium
on ``Well Characterized Biotechnological Products'' cosponsored by FDA
and the California Separation Sciences Society. This symposium includes
highly technical seminars, workshops, and poster sessions that
introduce the latest analytical technologies for the evaluation of
biotechnological products. These technologies are presented by the
leading academic, Industrial (pharmaceutical and equipment vendors),
and government scientists;
The Agency's scientists actively participate in many International
conferences sponsored by biotech and pharmaceutical organizations (Bio,
Pharma, and DIA) and other organizations that provide scientific,
technological and regulatory information to the pharmaceutical
industry. These conferences frequently present the application of the
latest analytical methods for the characterization of protein and
glycoproten therapeutics;
The Agency also invites innovative scientists from academia and
industry to present and discuss with FDA scientists the latest advances
in analytical technology and the development of animal models that
address some of the current limitations of physicochemical
characterization of protein products.
Regarding immune responses to biological therapeutics
(immunogenicity), which can cause serious adverse events and limit
product effectiveness, the agency co-sponsored a meeting entitled
``Immunogenicity of Therapeutic Biological Products'' in October 2001,
and has participated in numerous symposia on this topic in national
meetings. Agency research scientists work with industry and academia in
bringing to bear, on biological product development, informative animal
models (transgenic, knockout, and knock-in) to more accurately predict
the human immune response to various biotech products.
Question. In your testimony you highlighted the extraordinary
strides made over the past few years in developing instrumentation and
other analytical tools that have vastly improved the ability to
evaluate follow-on biologicals. Please identify for the Subcommittee
the type of new analytical tools now available to industry and the
Agency to conduct rigorous evaluations of follow-on biologics.
Answer. Over the last several years there have been many advances
in analytical tools that have improved the ability to evaluate follow-
on Biologicals.
Electrospray, matrix assisted laser desorption (ES-MS), and fast
atom bombardment mass spectrometry (MALDI-TOF) have been use in
conjunction with advances in separation technologies (Reverse Phase-
High Performance Liquid Chromatography (RP-HPLC), Ion Exchange
Chromatography, Hydrophobic Interaction Chromatography, Affinity
Chromatography, and Size Exclusion Chromatography) to identify protein
and carbohydrate heterogeneities and are very powerful tools for
characterizing variations in a protein that are typically present in a
single product.
Recent advances in mass spectrometry (time of flight, fourier
transform) have greatly improved the resolving powers of the technology
and now provide the capability to resolve to within a 1 Da mass
accuracy, the mass of a protein. In conjunction with powerful
deconvulution software, this technology allows for very accurate mass
data and a more comprehensive assessment of the carbohydrate profiles.
This technology has resulted in a new approach called ``top down'' that
allows for the analysis of intact proteins. In contrast, the
traditional approach analyzes protein fragments generated by digestion
with proteases, making it difficult to provide assurance that minor
modifications to the protein have been identified.
Protein aggregates can compromise the quality of a product as it
relates to its safety and efficacy and are thought to be the most
important product characteristic in generating immune responses. Such
aggregates have typically been analyzed by size exclusion
chromatography (SEC), an analytical method with limitations that result
in the detection of only a very narrow spectrum of aggregates that can
form in a protein product. Technological advances in a number of other
analytical methods such as sedimentation velocity obtained by
analytical ultracentrifugation and field flow fractionation can detect
a much wider spectrum of aggregates, many of which are not detected by
SEC.
Advances in gel electrophoresis primarily various forms of
capillary electrophoresis, now provide excellent resolution between
protein species which differ slightly in net charge and can be coupled
to various detention methods (UV, fluorescence, MS) for enhanced
product characterization.
Surface plasmon resonance technology monitors molecular interaction
in real time and allows for the accurate detection and quantification
of the on and off rates (kinetic rate constants) of protein-to-protein
interactions. This technology has been applied to the design of
immunoassays used for the detection of host antibodies formed against
biotechnology products and to the characterization of mAB product
interactions with their therapeutic target.
Advances in the understanding of signal transduction mechanisms for
many protein products have provided for the development of more precise
in vitro bioassays that monitor an early event in the biological
function of a protein rather then a cellular response, such as cell
growth, that is subject to greater variability in outcomes.
Protein products are not rigid structures and frequently the
ability to flex and change conformations is critical to a protein's
function. This property is difficult to detect by convention
physicochemical techniques. However, advances in scanning probe
microscopy particularly Atomic Force Microscopy (AFM), facilitate the
mapping of biological samples to three-dimensional images and are
capable of detecting multiple conformations. AFM-generated surface
topology maps can portray in explicit detail the surface features of
proteins and DNA. The application of this technology is broad and
includes the study of protein and DNA structure, protein folding/
unfolding, protein-to-protein interactions, protein-to-DNA
interactions, enzyme catalysis and protein crystal growth.
Dynamic light scattering and multi-angle light scattering (LS) are
beginning to be used in conjunction with advances in separation systems
such as field flow fractionation and size exclusion chromatography. LS
can provide absolute molecular weight, root-mean square radius and
hydrodynamic radius of individual species of product.
Microcalorimetry allows one to assess the thermodynamic profile of
a protein, which provides a measurement of the structural stability of
the protein product or interactions with other proteins. The method can
determine affinity constants, enthalpy, entropy, heat capacity, Gibbes
free energy and the number of binding sites, parameters that help
characterize proteins but have not been routinely employed in the
biotech industry.
Fluorescence spectroscopy has been useful in monitoring flexibility
of proteins and conformational stability.
Nuclear Magnetic Resonance Spectroscopy (NMR) has traditionally
been used to identify small molecules and their structures are now
being applied to solving the structure of much larger and more complex
biological macromolecules.
Question. Please outline for the Subcommittee the history of FDA's
regulation of biologicals, the range and volume of biological approvals
issued by the Agency over the course of that history, and any other
factors you consider relevant to FDA's vast scientific expertise that
is being applied to development of the draft Guidance and that
ultimately would be brought to bear in evaluating follow-on
biologicals.
Answer. The regulation of biologics began in the United States in
1902, when Congress passed the Virus, Serum and Antitoxin Act (also
known as the Biologics Control Act of 1902 and as the Virus Toxin Law).
This law was enacted following the deaths of ten children who had
received injections of diphtheria antitoxin contaminated with tetanus.
In 1901, there was a serious epidemic of diphtheria resulting in a
great demand for the diphtheria antitoxin. At the time, there was no
requirement for safety testing and none was performed, and the
manufacturing process was not controlled properly. The tetanus
contamination was traced to an infected horse whose serum was used in
producing the antitoxin.
The 1902 Act required biologics to be manufactured in a manner that
assured safety, purity, and potency. Provisions of the Act included:
--Establishment license requirements;
--Product license requirements;
--Labeling requirements;
--Inspection requirements;
--Suspension/revocation of licenses; and,
--Penalties for violations.
The responsibility for implementing this new law was given to the
Hygienic Laboratory of the Public Heath Service (PHS). In 1903, PHS
issued regulations that included requirements that inspections would be
unannounced and licenses were to be issued and re-issued on the basis
of an annual inspection. The 1902 Act was amended in 1944. One change
included a requirement that a biological license could be issued only
upon demonstration that the product and the establishment met standards
to ensure the continued safety, purity and potency of such products.
This evaluation was to be made during pre-licensure inspections. These
provisions are codified in section 351 of the PHS Act (42 U.S.C. 262).
Another change that occurred at this time was the focal point for
administering the Act. This responsibility was given to the National
Institute of Health's National Microbiological Institute. Changes in
responsibility for regulating biological products under the PHS Act
occurred in the mid-1950 with the advent of polio vaccines. From 1955
to 1972, biologics were regulated within the National Institutes of
Health (NIH), in the Division of Biologics Standards (DBS). In 1972,
biologic regulation was transferred to the FDA's Bureau of Biologics.
After this transfer to the FDA began a merger of the regulatory
requirements of the PHS Act and the Federal Food, Drug and Cosmetic
(FD&C) Act (21 U.S.C.). Biologics were viewed as biological products
under the PHS Act, and as drugs under the FD&C Act, subject to
inspection under the Good Manufacturing Practices (GMP) regulations for
drugs. The reagent manufacturers were also inspected under drug GMPs
because there were no device regulations until 1976. Among the several
changes that occurred, blood banks were required to register with the
FDA and GMPs for blood and blood products were promulgated. Today one
of the major responsibilities of FDA is to ensure the safety of the
Nation's blood supply.
In 1982, the FDA merged the Bureau of Biologics and the Bureau of
Drugs into the Center for Drugs and Biologics. After a subsequent
reorganization the responsibility for biologics regulation was placed
under the Center for Biologics Evaluation and Research (CBER). The
responsibilities for regulating biological products has grown and
become more complex from its beginning in 1902, when technologies for
producing biological products were in their infancy and the primary
role was vaccine regulation. Today the regulation of a wide variety of
novel biological products and their use as therapeutics requires
knowledge of new scientific developments and concepts of research in
the relevant biological disciplines. The therapeutic biological
products that the FDA regulates are on the leading edge of technology.
Rapid scientific advances in biochemistry, molecular biology, cell
biology, immunology, genetics, and information technology are
transforming drug discovery and development, paving the way for
unprecedented progress in developing new medicines to conquer disease.
As a representative sample of the range and volume of biological
products approved, we offer below the fiscal year 2003 approvals.
CBER's fiscal year 2003 major approvals include all approvals for
original new BLAs (except those for blood banking), and other approvals
for original biologic, drug, or device applications or supplements
(e.g., for new/expanded indications, new routes of administration, new/
improved tests, new dosage formulations and regimens). Although most of
the Office of Therapeutics Research and Review's applications were
transferred to the Center for Drug Evaluation and Research on June 30,
2003, all major BLA approvals are included in this list for both
centers.
[The information follows:]
BIOLOGICS LICENSE APPLICATIONS
------------------------------------------------------------------------
Tradename/Proper Name Indication for Use Manufacturer
------------------------------------------------------------------------
Pegasys
Peginterferon alfa-2a....... Treatment of Hoffmann-La Roche
adults with Inc. Nutley, NJ
chronic hepatitis
C who have
compensated liver
disease and who
have not been
previously
treated with
interferon alfa.
COBAS Ampliscreen HCV
Hepatitis C Virus (Hepatitis For the detection Roche Molecular
C Virus/Polymerase Chain of HCV RNA, in Systems, Inc.
Reaction/Blood Cell human plasma. Pleasanton, CA
Derived).
Pediarix
DTaP & Hepatitis B Combination GlaxoSmithKline
(Recombinant) & Inactivated vaccine for Biologicals
Polio Virus Vaccine. childhood Rixensart,
immunization. Belgium
COBAS Ampliscreen HIV-1
Human Immunodeficiency Virus For detection of Roche Molecular
Type 1 (HIV-1/Polymerase Human Systems, Inc.
Chain Reaction). Immunodeficiency Pleasanton, CA
Virus (HIV-1) in
human plasma
using Polymerase
Chain Reaction.
Aralast
Alpha-Proteinase Inhibitor Chronic Alpha Therapeutic
(Human). replacement Corporation Los
therapy Angeles, CA
(augmentation) in
patients having
congenital
deficiency of
Alpha-1-
Proteinase
Inhibitors with
clinically
evident emphysema.
HUMIRA
Adalimumab.................. Reducing signs and Abbott
symptoms and Laboratories
inhibiting the Abbott Park, IL
progression of
structural damage
in adult patients
with moderately
to severely
active rheumatoid
arthritis who
have had an
inadequate
response to one
or more disease
modifying
antirheumatic
drugs (DMARDs).
Amevive
Alefacept................... Treatment of adult Biogen, Inc.
patients with Cambridge, MA
moderate to
severe chronic
plaque psoriasis
who are
candidates for
systemic therapy
or phototherapy.
Crosseal
Fibrin Sealant (Human)...... Adjunct to OMRIX
hemostasis during Biopharmaceutical
liver surgery. s, Ltd. Fairfax,
VA
Peroxidase Conjugate ORTHO
Antibody to HBsAG ELISA Test
System 3
Antibody to Hepatitis B Detection of Ortho-Clinical
Surface Antigen (Mouse hepatitis B Diagnostics, Inc.
Monoclonal) Enzyme-Linked surface antigen Raritan, NJ
Immunosorbent Assay (ELISA) in human serum or
(Antibody to HBsAg/Enzyme plasma as a
Immuno Assay (EIA), Version screening test
3.0/Monoclonal). and an aid in the
diagnosis of
potential
hepatitis B
infection.
Fabrazyme
agalsidase beta............. For use in Genzyme
patients with Corporation
Fabry disease to Cambridge, MA
reduce
globotriasylceram
ide (GL-3)
deposition in
capillary
endothelium of
the kidney and
certain other
cell types.
Aldurazyme
Laronidase.................. For treatment of Biomarin
patients with Pharmaceutical,
Hurler and Hurler- Inc. Novato, CA
Scheie forms of
Mucopolysaccharid
osis I (MPS I)
and for patients
with the Scheie
form who have
moderate to
severe symptoms.
FluMist
Influenza Virus Vaccine For active MedImmune
Live, Intranasal. immunization for Vaccines, Inc.
the prevention of Mountain View, CA
disease caused by
influenza A and B
viruses in
healthy children
and adolescents,
5-17 years of
age, and healthy
adults, 18-49
years of age.
XOLAIR
Omalizumab.................. For adults and Genentech, Inc.
adolescents (12 South San
years of age and Francisco, CA
above) with
moderate to
severe persistent
asthma who have a
positive skin
test or in vitro
reactivity to a
perennial
aeroallergen and
whose symptoms
are inadequately
controlled with
inhaled
corticosteroids.
BEXXAR
Tositumomab and Iodine I 131 Treatment of Corixa Corporation
Tositumomab. patients with Seattle, WA
CD20 positive,
follicular, non-
Hodgkin's
lymphoma, with
and without
transformation,
whose disease is
refractory to
Rituximab and has
relapsed
following
chemotherapy.
Zemaira
Alpha-1-Proteinase Inhibitor To use as chronic Aventis Behring
(Human). augmentation and L.L.C. King of
maintenance Prussia, PA
therapy in
individuals with
Alpha-1-
Antitrypsin
Deficiency and
evidence of
emphysema.
Advate
Antihemophilic Factor Indicated in Baxter Healthcare
(Recombinant), Plasma/ hemophilia A Corporation
Albumin Free Method. (classical Westlake Village,
hemophilia) for CA
the prevention
and control of
bleeding
episodes, and in
the perioperative
management of
patients with
hemophilia A.
Genetic Systems HIV-1/HIV-2 Plus
O EIA
Human Immunodeficiency Virus For detection of Bio-Rad
Types 1 and 2 (HIV-1 and antibodies to Laboratories,
HIV-2/Enzyme Immunoassay human Inc. Hercules, CA
(EIA)/Recombinant and immunodeficiency
Synthetic). types 1 and 2.
GAMUNEX
Immune Globulin Intravenous Indicated in Bayer Corporation
(Human), 10 percent by primary humoral Berkeley, CA
Chromatography Process. immunodeficiency
and idiopathic
thrombocytopenic
purpura.
------------------------------------------------------------------------
BIOLOGICS LICENSE SUPPLEMENTS (FOR NEW INDICATIONS, NEW ROUTES OF
ADMINISTRATION, NEW DOSAGE FORMS, IMPROVED SAFETY)
------------------------------------------------------------------------
Tradename/Proper Name Indication for Use Manufacturer
------------------------------------------------------------------------
Prevnar
Pneumococcal 7-valent New indication for Lederle
Conjugate Vaccine the prevention of Laboratories
(Diphtheria CRM197 Protein). otitis media. Division Pearl
River, NY
Avonex
Interferon beta-1a.......... Package insert Biogen, Inc.
revised to Cambridge, MA
include updated
information
regarding serum
neutralizing
antibodies.
Pegasus
Peginterferon alfa-2a....... Combination Hoffmann-La Roche
therapy with Inc. Nutley, NJ
Ribavirin, USP
(COPEGUS), for
the treatment of
chronic Hepatitis
C Virus infection
in adults.
Aranesp
Darbepoetin alfa............ Darbepoetin alfa Amgen, Inc.
Albumin (human) Thousand Oaks, CA
formulation in
single dose
prefilled
syringes for six
dosage strengths
(60, 100, 150,
200, 300 and 500
micrograms).
Simulect
Basiliximab................. Addition of new Novartis
single dose 10 mg Pharmaceuticals
strength of drug Corporation East
product. Hanover, NJ
Avonex
Interferon beta-1a.......... Package insert Biogen, Inc.
revised to Cambridge, MA
include safety
and efficacy data
from a study of
patients who
experienced a
single clinical
exacerbation of
multiple
sclerosis and to
provide a
Medication Guide.
Betaseron
Interferon beta-1b.......... To revise the Chiron Corporation
Clinical Studies Emeryville, CA
section to
include data from
two studies
conducted in
patients with
secondary
progressive
multiple
sclerosis (MS),
also to update
the Adverse
Reactions and
Warnings sections
to include new
safety
information, and
to provide a
Medication Guide.
Remicade
Infliximab.................. For reducing the Centocor, Inc.
number of Malvern, PA
draining
enterocutaneous
and rectovaginal
fistulas and
maintaining
fistula closure
in patients with
fistulizing
Crohn's disease.
Rebif
Interferon beta-1a.......... Final pivotal Serono, Inc.
study report that Rockland, MA
confirms the
results of 48
week data.
Avonex
Interferon beta-1a.......... HAS-free liquid Biogen, Inc.
formulation in a Cambridge, MA
prefilled syringe
as an alternate
dosage form and
to provide for a
Medication Guide.
Dryvax
Smallpox Vaccine, Dried, Active Wyeth
Calf Lymph Type. immunization Laboratories,
against smallpox Inc. Marietta, PA
disease.
Dryvax
Smallpox Vaccine, Dried, Include new safety Wyeth
Calf Lymph Type. information for Laboratories,
the recent Inc. Marietta, PA
reports of
cardiac events
and updated
storage period
for the vaccine
after
reconstitution
from 15 days to
90 days.
Infanrix
Diphtheria & Tetanus Toxoids To include in the GlaxoSmithKline
& Acellular Pertussis indication a Biologicals
Vaccine Adsorbed. fifth dose at 4-6 Rixensart,
years of age Belgium
after 4 prior
doses of Infanrix.
Enbrel \1\
Etanercept.................. To expand the Immunex
rheumatoid Corporation
arthritis Seattle, WA
indication to
include improving
physical function.
Enbrel \1\
Etanercept.................. For reducing signs Immunex
and symptoms in Corporation
patients with Seattle, WA
active ankylosing
spondylitis.
Enbrel \1\
Etanercept.................. To expand the Immunex
indication to Corporation
include Seattle, WA
inhibiting the
progression of
structural damage
of active
arthritis in
patients with
psoriatic
arthritis.
Kineret \1\
Anakinra.................... To expand the Amgen, Inc.
indication to Thousand Oaks, CA
include slowing
the progression
of structural
damage in
moderately to
severely active
rheumatoid
arthritis, in
patients 18 years
of age or older
who have failed
one or more
DMARDs.
Synagis \1\
Palivizumab................. To expand the MedImmune,Inc
indication to Gaithersburg, MD
include children
with
hemodynamically
significant
congenital heart
disease.
------------------------------------------------------------------------
\1\ OTRR product applications transferred to CDER on 6-30-03.
NEW DRUG APPLICATIONS
------------------------------------------------------------------------
Tradename/Proper Name Indication for Use Applicant
------------------------------------------------------------------------
TriCitrasol Anticoagulant Sodium
Citrate Conc. 46.7 percent
Trisodium Citrate, 30 mL
Anticoagulant Sodium Citrate triCitrasol, after Cytosol
Solution. dilution of a Laboratories,
rouleaux agent, Inc. Braintree,
is an MA
anticoagulant
used in
granulocytapheres
is procedures.
Anticoagulant Citrate Dextrose
Solution, Solution A, U.S.P.,
(ACD-A). 50 mL, PN 6053
Anticoagulant Citrate To provide for the Cytosol
Dextrose Solution (ACD). use of Laboratories,
Anticoagulant Inc. Braintree,
Citrate Dextrose MA
Solution,
Solution A,
U.S.P., (ACD-A)
50 mL for the
extracorporeal
processing of
blood with
Autologous PRP
systems in
production of
platelet rich
plasma (PRP) for
in vitro use.
------------------------------------------------------------------------
SUPPLEMENTAL NEW DRUG APPLICATIONS
------------------------------------------------------------------------
Tradename/Proper Name Indication for Use Applicant
------------------------------------------------------------------------
Abbokinase
Urokinase................... Improvements in Abbott
the manufacture Laboratories
and testing of Abbott Park, IL
the bulk drug
substance and
drug product, and
withdrawal of the
indication for
coronary artery
thrombosis
indication (CAT)
and the Open-Cath
dosage strengths.
------------------------------------------------------------------------
DEVICE APPLICATIONS
------------------------------------------------------------------------
Description and
Tradename Indication for Applicant
Device
------------------------------------------------------------------------
OraSure OraQuick Rapid HIV-1 For the detection OraSure
Antibody Test of antibodies to Technologies
HIV-1 in human Bethlehem, PA
finger-stick
whole blood
specimens.
MedMira Rapid HIV Test For detection of MedMira labs
HIV-1 and HIV-2 Bayers Lake
Antibodies. Halifax, Canada
Ortho ProVue, Software Version: Modular, Micro Typing
2.10 Microprocessor- Systems Inc.
controlled Pompano Beach, FL
instrument
designed to
automate in vitro
immunohematologic
al testing to
human blood
utilizing the ID
MTS/Gel
Technology.
Vironostika HIV-1 Plus O For the BioMerieux, Inc.
Microelisa System qualitative Durham, NC
detection of
antibodies to
Human
Immunodeficiency
Virus Type 1 (HIV-
1), including
Group O, in human
specimens
collected as
serum, plasma, or
dried blood spots.
------------------------------------------------------------------------
DEVICE SUPPLEMENTS (FOR NEW INDICATIONS, IMPROVED SAFETY)
------------------------------------------------------------------------
Description and
Tradename Indication for Applicant
Device
------------------------------------------------------------------------
Calypte HIV-1 Urine EIA HIV-1 Urine EIA to Calypte Biomedical
include changes Corporation
to the black box Alameda, CA
warning statement.
------------------------------------------------------------------------
______
Questions Submitted by Senator Christopher S. Bond
nutritional guidelines
Question. There is a linear relationship between high transfatty
acid and high saturated fat intake and chronic disease. We also know
that the consumption of foods high in these two elements likely
contribute to the statistics on obesity. Does FDA intend to draft
guidelines or standards for the consumption of these fats?
Answer. FDA issued on July 11, 2003 final rules to require that
trans fatty acids be listed in mandatory nutrition labeling.
Manufacturers must have this information in Nutrition Facts panels on
all food packages entering interstate commence by January 1, 2006. On
July 11, 2003, FDA also published an advance notice of proposed
rulemaking (ANPRM) to solicit data and information that could be used
to establish new nutrient content claims about trans fatty acids; to
establish qualifying criteria for trans fat in current nutrient content
and health claims; and to consider statements about trans fat, either
alone or in combination with saturated fat and cholesterol to enhance
consumers' understanding about such cholesterol-raising lipids and how
to use the information to make healthy food choices. The agency has
reopened the comment period to this ANPRM to receive comment on the
Institute of Medicine's (IOM) December 2003 report on Dietary Reference
Intakes in which the IOM included a suggested approach for establishing
a daily value for trans fat. In addition, FDA has scheduled a Food
Advisory Committee Nutrition Subcommittee meeting at the end of April
2004 to consider scientific questions related to saturated fat and
trans fat that may help determine the agency's course for food labeling
of these fats.
Question. Will FDA provide guidelines and or regulations to
restaurants and other food manufacturers and--more importantly--provide
them a roadmap to increasing the nutritional content and decrease
saturated fat levels of their products?
Answer. An important goal of the Nutrition Labeling and Education
Act of 1990 was to provide incentives to manufacturers to improve the
nutritional composition of food products. Studies have shown that the
implementing regulations, which required nutrition labeling on most
packaged foods, resulted in a significant increase in the number of
low- and reduced-fat products in the marketplace. We anticipate that
the new labeling regulations requiring that trans fat be listed will
have a similar effect, reducing total intake of trans fat. In fact,
since publication of the final rule requiring the listing of trans fat,
several food manufacturers and at least one major fast food restaurant
chain have announced that they are changing the type of fats used in
order to reduce levels of trans fats.
Question. Does FDA intend to provide guidelines and or regulations
on the characteristics of healthy oils' that can be used in most food
manufacturing to improve overall health and nutrition of those foods?
Answer. By requiring the saturated and trans fat content to be
declared in Nutrition Facts panels on most packaged foods, FDA is
providing an incentive for manufacturers to reduce the levels of those
fats whose consumption is associated with increased levels of LDL-
cholesterol.
Question. Does FDA have this authority?
Answer. Manufacturers may choose between different food ingredients
to use in their food products, provided that such ingredients are safe
for such use under the Federal Food, Drug, and Cosmetic Act (the Act).
FDA has authority, under section 403(q) of the Act, to require
nutrition labeling on packaged food products. Restaurant foods are
exempt unless they make a nutrition claim.
Question. How will FDA ensure that as they move forward with trans-
fat labeling that saturated fats will not come back into the diet?
Answer. Nutrition labeling will indicate the levels of both
saturated fat and trans fat in most packaged foods. Consumer education
programs will encourage consumers to look at both types of fats and to
consider the combined total amount in making purchasing decisions.
______
Questions Submitted by Senator Herb Kohl
obesity
Question. Dr. Crawford, both USDA and FDA have recently announced
new efforts to combat the increasing problem of obesity. FDA announced
the ``Calories Count'' program, and USDA has money in several programs,
including WIC, to help battle this problem. However, for all of the
government's efforts, all of the money being put into this effort pales
in comparison to the food industry's billions of dollars worth of
advertising. How can the government successfully get its message out
when, at first glance, its efforts appear to be dwarfed by the food
industry? How do your agencies compete with that?
Answer. In support of the President's Healthier U.S. initiative,
the DHHS established a complementary initiative, Steps to a Healthier
U.S., which emphasizes personal responsibility for the choices
Americans make for healthy behaviors. One aspect of this initiative
focuses on reducing the major health burden created by obesity and
other chronic diseases. Following DHHS' July 2003 Roundtable on Obesity
and Nutrition, on August 11, 2003, FDA established an Obesity Working
Group, or OWG, to prepare a report that outlines an action plan to
cover critical dimensions of the obesity problem from FDA's perspective
and authorities. This report was released on March 12, 2004.
There is no simple answer to the problem of obesity. Achieving
success in reducing and avoiding obesity will occur only as a result of
efforts over time by individuals as well as various sectors of our
society. It should be noted, however, that most associations, agencies,
and organizations believe that diet and physical activity should be
addressed together in the fight against overweight and obesity.
The OWG report provides a range of short and long-term
recommendations to address the obesity epidemic with a focus on a
``calories count'' emphasis for FDA actions. These recommendations are
based on sound science and address multiple facets of the obesity
problem under FDA's purview, including developing appropriate and
effective consumer messages to aid consumers in making wiser dietary
choices; establishing educational strategies and partnerships to
support appropriate messages and teach people, particularly children,
how to lead healthier lives through better nutrition; developing
initiatives to improve the labeling of packaged foods with respect to
caloric and other nutrition information; encouraging and enlisting
restaurants in efforts to combat obesity and provide nutrition
information to consumers, including information on calories, at the
point-of-sale; developing new therapeutics for the treatment of
obesity; designing and conducting effective research in the fight
against obesity; and continuing to involve stakeholders in the process.
Regarding food labeling, the OWG report contains several
recommendations based on sound science. I will provide these
recommendations for the record.
[The information follows:]
Publish an advance notice of proposed rulemaking, or ANPRM, to seek
comment on the following:
--How to give more prominence to calories on the food label, for
example, increasing the font size for calories, including a
column in the Nutrition Facts panel of food labels for percent
Daily Value for total calories, and eliminating the listing for
calories from fat;
--Whether to authorize health claims on certain foods that meet FDA's
definition of ``reduced'' or ``low'' calorie. An example of a
health claim for a ``reduced'' or ``low'' calorie food might
be: ``Diets low in calories may reduce the risk of obesity,
which is associated with type 2 diabetes, heart disease, and
certain cancers.''
--Whether to require additional columns on the Nutrition Facts panel
to list quantitative amounts and percent Daily Value of an
entire package on those products and package sizes that can
reasonably be consumed at one eating occasion--or declare
quantitative amounts and percent Daily Value of the whole
package as a single serving if it can reasonably be consumed at
a single eating occasion; and,
--Which, if any, reference amounts customarily consumed of food
categories appear to have changed the most over the past decade
and hence require updating.
In addition, FDA will file and respond in a timely way to petitions
the agency has received that ask FDA to define terms such as ``low,''
``reduced,'' and ``free'' carbohydrate; and provide guidance for the
use of the term ``net'' in relation to carbohydrate content of food--
these petitions were filed on March 11, 2004.
FDA will also encourage manufacturers to use dietary guidance
statements, an example of which would be, ``To manage your weight,
balance the calories you eat with your physical activity.'' In
addition, the Agency will encourage manufacturers to take advantage of
the flexibility in current regulations on serving sizes to label as a
single-serving those food packages where the entire contents of the
package can reasonably be consumed at a single eating occasion and
encourage manufacturers to use appropriate comparative labeling
statements that make it easier for consumers to make healthy
substitutions.
FDA believes that if the report's recommendations are implemented
they will make a worthy contribution to confronting the Nation's
obesity epidemic and helping consumers' lead healthier lives through
better nutrition.
FDA also believes that the regulatory scheme for claims in food
labeling, whether health claims, nutrient content claims, or other
types of claims, are science based, and we continue to consider
modifications to our regulations to keep up with recent scientific
developments. A benefit of standardized, science-based terminology, as
with other terms that FDA has defined that consumers may use to make
health-based dietary choices--e.g., terminology concerning fat content-
, is that it allows consumers to compare across products and it
encourages manufacturers to compete based on the nutritional value of
the food. However, FDA does not regulate television and other media
marketing of food products. Some of the modifications FDA is currently
considering are described above in the list of topics to be covered by
the ANPRM the agency intends to issue.
With respect to conveying the report's messages to the public, FDA
believes that all parties, including the packaged food industry,
restaurants, academia, and other private and public sector
organizations in addition to government agencies at all levels, have an
essential role to play. On April 22, 2004, FDA's Science Board focused
on specific recommendations from the OWG report. These recommendations
call on FDA to work through a third-party facilitator to engage all
involved stakeholders in a dialogue on how best to construct and convey
obesity messages in the restaurant setting and in the area of pediatric
obesity education.
This approach is one example of how the Agency intends, by means of
public and private partnerships, to leverage its ability to convey
appropriate messages on obesity to the public with the goal of changing
behavior and ultimately reversing obesity trends in the United States.
import inspections
Question. Dr. Crawford, the FDA budget this year includes a $7
million increase to fund 97,000 food import examinations. This is a big
increase in inspections over any previous year--still, however, less
than one percent of all of the food imported into this country will be
inspected. How would you respond to charges that you still aren't
inspecting nearly enough imported food, especially in light of events
during the past year where bad food has gotten in and people have died?
How do we ensure consumers that their food is indeed safe?
Answer. FDA is appreciative of the additional funding we have
received for the inspection of domestic firms and for inspections of
imported foods. FDA believes it is more effective to focus our
resources in a risk-based manner than to focus simply on increasing the
percentage of imported food shipments that are physically inspected. It
is important to note that every shipment of FDA-regulated food which is
entered through Customs and Border Protection as a consumption entry is
electronically reviewed by FDA's Operational and Administrative System
for Import Support to determine if it meets identified criteria for
further evaluation by FDA reviewers and physical examination and/or
sampling and analysis or refusal. This electronic screening allows FDA
to concentrate its limited inspection resources on high-risk shipments
while allowing low-risk shipments to proceed into commerce.
Due to constantly changing environments of operation, e.g.,
counterterrorism and BSE, our domestic inspection and import strategy
cannot be defined in terms of a percentage of coverage through
inspections, physical examinations and sample analyses. It needs to be
a flexible blend of the use of people, technology, information and
partnerships to help protect Americans from unsafe imported products.
Accordingly, the Agency is developing and using strategies for
mitigating risks prior to importation through partnerships and
initiatives based on best practices and other science based factors
relevant to the import life cycle, i.e., from foreign manufacturer to
the U.S. consumer. Recently this principle has been applied in the
``Canadian Facility Voluntary Best Management Practices for Expediting
Shipments of Canadian Grains, Oilseeds and Products to the United
States'' implemented February 24, 2004, and designed to mitigate the
potential of mammalian protein prohibited from being fed to cattle or
other ruminants under BSE-prevention regulations promulgated by CFIA
and FDA.
Another piece of the long term solution to a higher level of
confidence in the security and safety of food products lies in
information technology that will merge information on products and
producers with intelligence on anticipated risks to target products for
physical and laboratory examination or refusal. This strategy would
rely on data integrity activities that reduce the opportunity for
products to be incorrectly identified at ports. It would also rely on
cooperation from producers so that FDA can identify sources that are
unlikely to need physical testing. However, even with such targeting,
improvements are limited by the available methodologies for assessing
threat agents and our ability to predict which tests ought to be used.
We are ramping up our food inspections, but we recognize that we
also need to inspect smarter, not just inspect more. That is why FDA is
making significant investments in technology and information resources
such as the development of the Mission Accomplishment and Regulatory
Compliance Services System, MARCS. MARCS is a comprehensive redesign
and reengineering of two core mission critical systems at FDA: FACTS
and the Operational and Administrative System for Import Support,
OASIS. OASIS supports the review and decision making process of
products for which entry is sought into the United States. We are using
funds to work to further improve targeting and using force multipliers
such as IT.
FDA also has a proof of concept project, called ``Predict,'' with
New Mexico State University under a Department of Defense contract
which is being designed to enhance agency capability to rapidly assess
and identify import entries based on risk using relevant information
from various sources including regulated industry, trade, other
Federal, State, and local entities, and foreign industry and
governments. This project, if successful, will greatly enhance FDA's
capability to be smarter in directing field activities on products of
greater risk to public health and safety. The proof of concept project
is projected to be completed in the Fall of 2004. The relentless growth
in the volume of domestic as well as imported food products, which are
increasingly in ``ready for consumer sale packaging.'' Food imports are
now growing at 19 percent per year. FDA needs to use all the potential
tools available to improve its efficiency in food security and safety
coverage.
In addition, FDA has several strategic initiatives to enhance
safety. One of these is ``Agency Initiatives to Improve Coverage,''
which includes the creation of the Southwest Import District to better
coordinate import activities on the southern border. Another is
reciprocal FDA and U.S. Customs and Border Protection training to
improve product integrity of goods offered for import and increase
enforcement actions by Customs to deter willful violations of U.S. laws
and regulations. While foreign inspections and border operations
provide some assurance that imported foods are safe, the agency
continues to work to foster international agreements and harmonize
regulatory systems. For instance, we actively participate in the
Canada/U.S./Mexico Compliance Information Group, which shares
information on regulatory systems and the regulatory compliance status
of international firms to protect and promote human health.
It is very important that American consumers trust the safety of
the food supply. FDA has made fundamental changes in how we implement
our mission of protecting the food supply, so that all Americans can
have confidence that their food has been handled under secure
conditions that provide assurance of its safety.
fda foia policies
Question. Dr. Crawford, my office has been working with a non-
profit patient advocacy group, the TMJ Association, in their efforts to
have two FOIA requests that are well over a year old responded to.
Their original FOIA request was made on November 1, 2002 (request
number 02017071), more than 17 months ago, and the subsequent request
was made on March 25, 2003 (request number 03004361). They have not yet
received the information requested, and have been unable to get a date
commitment by FDA as to when the information will be provided. It is my
understanding that they have been informed that FOIA requests are
severely backlogged, and the FDA has no idea when they will be able to
process their request. What is the current backlog for FOIA requests?
Answer. As of April 28, 2004, FDA has 19,369 pending FOIA
requests--17,555 have been pending more than 20 days and 1,814 have
been pending 20 days or less. The Denver District Office is responsible
for responding to the two requests from the TMJ Association. As of
April 28, 2004, Denver District Office has 369 pending FOIA requests--
357 requests have been pending more than 20 days, and 12 requests have
been pending 20 days or less.
Question. How many FDA staff are responsible for handling these
requests? Is this their sole responsibility, or do they have other
responsibilities as well?
Answer. For fiscal year 2003 the total number of personnel
responsible for processing FOIA requests was 91 FTE, 75 full time
employees, and 16 FTE work years representing personnel with part-time
FOIA duties in addition to other responsibilities.
Question. Does FDA need additional staff or resources in order to
process these requests on a timely basis?
Answer. In some agency components FOIA is a collateral duty. For
example, in most FDA field offices, Compliance Officers whose primary
responsibilities are related to the Agency's regulatory enforcement
activities also perform FOIA duties as permitted by time and regulatory
workload. Additional staff devoted to FOIA could shorten the amount of
time for processing requests.
Question. What do you believe is a reasonable length of time for a
group to wait for an information request to be processed and responded
to?
Answer. Requests are processed by the agency component that
maintains the requested records. There are a number of factors that
must be considered in order to predict a reasonable amount of time for
a request to be processed. Those factors include the volume of requests
received by the component, the complexity of requests received, the
amount of time required to search for records, the amount of time
require to review the records to determine whether information is
releasable under FOIA, and the resources available to process requests.
Question. What is the average length of time it takes to process a
FOIA request? Can you please explain the severe delay in processing
this specific one, which has taken over 2 years and apparently has no
end in sight? Can you please provide me a timeframe within which the
FDA will respond to these two particular FOIA requests?
Answer. Under the Electronic Freedom of Act Amendments of 1996,
agencies are permitted to establish multiple tracks for processing FOIA
requests based on the complexity of the requests and the amount of work
and time required to process requests. Some FDA components have
established multiple processing tracks. Requests are processed on a
first in, first out basis within each track. The median number of days
to process requests in the simple processing track is 19 days. The
median number of days to process requests in the complex processing
track, for more complicated requests, is 363 days. For requests that
are not processed in multiple processing tracks, the median number of
days to process is 44 days.
Due to a heavy load of regulatory cases in the Denver District
Office that must be handled by the Compliance Officers in addition to
staff shortages, FOIA work in the Denver District is being performed by
one individual on a part-time basis. This has resulted in a significant
backlog of FOIA requests. The Denver District Office expects to fill
request 02-17071 from the TMJ Association in six months, and request
03-4361 in one month.
Question. What additional efforts can this group undertake in order
to speed up their request?
Answer. The Denver District Office expects to fill request 02-17071
from the TMJ Association in 6 months, and request 03-4361 in one month.
In addition, the Denver District is reviewing and evaluating its
FOIA workload and will develop a strategy aimed at reducing the backlog
of FOIA requests.
Question. What is the FDA's policy on charging for FOIA requests
made by non-profit patient advocacy groups?
Answer. The FOIA sets forth criteria that agencies must follow with
respect to charging for processing FOIA requests. Non-profit
organizations are considered Category III requesters. Such requesters
receive 100 pages of duplication and 2 hours of search at no charge. If
the number of pages exceed 100 and/or if the amount of search time
exceeds 2 hours, Category III requesters are charged based on the FOIA
fee schedule of the Department of Health and Human Services. The fee
for duplication is $.10 per page, and the fee for search is based on
the grade level of the individual who processes the request. I will be
happy to provide the current grade rates for the record.
[The information follows:]
Current Grade Rates
GS-1 through 8--$18.00 per hour
GS-9 through 14--$36.00 per hour
GS-15 and above--$64.00 per hour
In addition, requesters may make a request for waiver or reduction
of fees if their request meets the following criteria: disclosure of
the information is in the public interest because it is likely to
contribute significantly to public understanding of the operations or
activities of the Government; and, disclosure is not primarily in the
commercial interest of the requester.
implicit pre-emption
Question. Adverse reactions to prescription drugs and other
medicines take the lives of more than 100,000 Americans each year, and
millions more are seriously injured. For many years, state tort laws
have enabled some victims to receive compensation for their injuries.
It has been brought to my attention that the Food and Drug
Administration (FDA) has stepped in to protect drug companies from
liability in some of these lawsuits, potentially robbing individuals of
their only means of compensation. FDA's actions are even more troubling
when you consider that these lawsuits have other important purposes,
such as deterring future bad behavior and providing the American public
with access to important health and safety information. How many times
has the FDA interfered in lawsuits, arguing that implicit pre-emption
prohibits a plaintiff from receiving compensation for their injuries?
In how many of these cases has a court held that the plaintiff's tort
claim was implicitly pre-empted by Federal law?
Answer. In the past several years, the Department of Justice (DOJ)
has represented the United States in four cases involving state-law
challenges to the adequacy of FDA-approved risk information
disseminated for FDA-approved new drugs.\1\ In each case, DOJ contended
that the state-law claim was preempted by Federal law. In addition, in
some cases, DOJ argued that the state-law claim was not properly before
the court by operation of the doctrine of primary jurisdiction.\2\
---------------------------------------------------------------------------
\1\ FDA also periodically becomes involved, through the Department
of Justice, in cases involving preemption of state-law requirements
under the medical device provisions of the FDCA, which include an
express preemption provision, 21 U.S.C. 360k(a).
\2\ Primary jurisdiction allows a court to refer a matter to an
administrative agency for an initial determination where the matter
involves technical questions of fact and policy within the agency's
jurisdiction. See, e.g., Israel v. Baxter Labs., Inc., 466 F.2d 272,
283 (D.C. Cir. 1972); see also 21 CFR 10.60.
---------------------------------------------------------------------------
The legal basis for preemption in these cases is FDA's careful
control over drug safety, effectiveness, and labeling according to the
agency's comprehensive authority under the FDCA and FDA implementing
regulations. If state authorities, including judges and juries applying
state law, were permitted to reach conclusions about the safety and
effectiveness information disseminated with respect to drugs for which
FDA has already made a series of regulatory determinations based on its
considerable institutional expertise and statutory mandate, the Federal
system for regulation of drugs would be disrupted. I will be happy to
include information on the four cases for the record.
[The information follows:]
Bernhardt
In 2000, two individual plaintiffs filed product liability actions
in a New York court against Pfizer, Inc., seeking a court order
requiring the company to send emergency notices to users of the
prescription antihypertensive drug CARDURA (doxazosin mesylate) and
their physicians. The notices would have described the results of a
study by a component of the National Institutes of Health (NIH) that,
the plaintiffs alleged, demonstrated that Cardura was less effective in
preventing heart failure than a widely used diuretic. FDA had not
invoked its authority to send ``Dear Doctor'' letters or otherwise
disseminate information regarding a drug that the agency has determined
creates an ``imminent danger to health or gross deception of the
consumer.'' (21 U.S.C. 375(b).) The plaintiffs, nevertheless, filed a
lawsuit under state common law seeking relief that, if awarded, would
have pressured the sponsor to disseminate risk information that FDA
itself had not disseminated pursuant to its statutory authority.
FDA's views were submitted to the Federal district court in the
form of a Statement of Interest.\3\ The Statement relied on the
doctrine of primary jurisdiction. The Statement also took the position
that the plaintiffs' request for a court order requiring the
dissemination of information about NIH study results to users and
prescribers of CARDURA was impliedly preempted. According to the
Statement, the court order ``would frustrate the FDA's ability
effectively to regulate prescription drugs by having the Court
substitute its judgment for the FDA's scientific expertise.'' The
Statement also noted that, if the court granted the requested order, a
direct conflict would be created between the information required to be
disseminated by the court and the information required to be
disseminated by FDA under the FDCA (in the form of the FDA-approved
labeling).
---------------------------------------------------------------------------
\3\ Statement of Interest of the United States; Preliminary
Statement, Bernhardt v. Pfizer, Inc., Case No. 00 Civ. 4042 (LMM)
(S.D.N.Y. filed Nov. 13, 2000).
---------------------------------------------------------------------------
The Statement contended that state law could not provide a basis
for requiring a drug manufacturer to issue drug information that FDA
had authority to, but did not, require. Importantly, the submission did
not argue that the state-law claim was preempted because FDA had
reached a determination that directly conflicted with the plaintiff's
view. Nor did it assert that FDA had specifically determined that the
information on the NIH study requested by the plaintiffs was
unsubstantiated, false, or misleading. In this sense, the Statement of
Interest in Bernhardt was the most aggressive, from a legal
perspective, than the three subsequent DOJ submissions on FDA's behalf
in preemption cases made during the present Administration.
The United States District Court for the Southern District of New
York accepted the primary jurisdiction argument made on FDA's behalf.
(Bernhardt v. Pfizer, Inc., 2000 U.S. Dist. LEXIS 16963, *9 (whether
the additional warnings sought by the plaintiffs were appropriate ``is
a decision that has been squarely placed within the FDA's informed
expert discretion'').) It did not address the preemption issue. The
case was voluntarily dismissed on April 22, 2003.
Dowhal
In 1998, an individual plaintiff in California asked that State's
attorney general to initiate an enforcement action against SmithKline
Beecham and other firms marketing OTC nicotine replacement therapy
products in California. (These products are marketed pursuant to an
approved new drug application.) The plaintiff contended that the FDA-
approved warnings for the defendants' products did not meet the
requirements of a state statute called the Safe Drinking Water and
Toxic Enforcement Act (Cal. Health & Safety Code 25249.5 et seq.),
also known as Proposition 65. From 1996 through 2001, FDA had
repeatedly advised the defendants that they could be liable under the
FDCA for selling misbranded products if they deviated from the FDA-
approved warning labeling for their products. FDA also advised the
state attorney general in writing in 1998 that the defendants' warning
in the labeling clearly and accurately identified the risks associated
with the products and, therefore, met FDA requirements under the FDCA.
After receiving the letter, the attorney general declined to initiate
enforcement action.
Nevertheless, in 1999, the individual plaintiff initiated a lawsuit
of his own in California state court under Proposition 65's ``bounty-
hunter'' provision, which empowers individuals to file enforcement
actions under that statute on behalf of the people of the State of
California. The lawsuit asked the court to award civil money penalties
and restitution, and to issue an injunction requiring the defendants to
disseminate warnings for their products that differed from the warnings
required by FDA. In 2000, the plaintiff filed a citizen petition with
FDA requesting that the agency require the defendants to change their
warnings to reflect the language sought by the plaintiff in the
lawsuit. FDA rejected the proposed language, determining that it lacked
sufficient support in scientific evidence and presented a risk of
mischaracterizing the risk-benefit profile of the products in a way
that threatened the public health. Although the trial court found for
the defendant, the California Court of Appeal rejected the defendant's
contention that the plaintiff's claim was preempted under the FDCA, and
allowed the lawsuit to proceed. (Dowhal v. SmithKline Beecham Consumer
Healthcare, 2002 Cal. App. LEXIS 4384 (Cal. Ct. App. 2002), argued,
Case No. S-109306 (Cal. Feb. 9, 2004).)
FDA's views were presented to the Court of Appeal of California in
an amicus curiae (``friend of the court'') brief and to the Supreme
Court of California in a letter brief and an amicus brief.\4\ All three
documents explained that the warning language sought by the plaintiffs
had been specifically considered and rejected by FDA as scientifically
unsubstantiated and misleading. Including the language would,
therefore, misbrand those products and cause the defendants to violate
the FDCA. The documents explained, further, that principles of conflict
preemption applied to the plaintiffs' claim because it was impossible
for defendants to comply with both Federal and State law and because
the state law posed an obstacle to the accomplishment of the full
purposes and objectives of the FDCA.
---------------------------------------------------------------------------
\4\ Letter from Robert D. McCallum, Jr., Ass't Attorney General, et
al., to Frederick K. Ohlrich, Supreme Court Clerk/Administrator, Dowhal
v. SmithKline Beecham Consumer Healthcare LP, et al., Case No. S-109306
(Cal. filed Sept. 12, 2002); Amicus Curiae Brief of the United States
of America in Support of Defendants/Respondents SmithKline Beecham
Consumer Healthcare LP, et al., Dowhal v. SmithKline Beecham, Case No.
A094460 (Cal. Ct. App. filed Mar. 22, 2002); Amicus Curiae Brief of the
United States of America in Support of Defendants/Appellants SmithKline
Beecham Consumer Healthcare LP, et al., Dowhal v. SmithKline Beecham,
Case No. S109306 (Cal. filed July 31, 2003).
---------------------------------------------------------------------------
The California Court of Appeal rejected the preemption argument.
(Dowhal v. SmithKline Beecham Consumer Healthcare, 2002 Cal. App. LEXIS
4384, . . . 16-17 (Cal. Ct. App. 2002) (reversing trial court decision
granting summary judgment for defendants on preemption grounds).) On
April 15, 2004, the California Supreme Court reversed the appeals court
decision, finding a direct conflict between FDA requirements and the
state-law warning requirement advocated by the plaintiff. (Dowhal v.
SmithKline Beecham Consumer Healthcare, 2004 Cal. LEXIS 3040.)
Motus
Also in 2000, an individual plaintiff sued Pfizer in a California
court alleging, among other things, that the company had failed to
fulfill its state common law duty to warn against the risk of suicide
the plaintiff alleged was presented by ZOLOFT (sertraline HCl), an FDA-
approved drug in the selective serotonin reuptake inhibitor (SSRI)
class indicated to treat depression (among other things). On numerous
occasions, FDA had specifically considered and rejected such language
for SSRIs as scientifically unsupportable and inconsistent with FDA
determinations as to the safety and effectiveness of the products.
The United States District Court for the Central District of
California (to which the case had been removed on the ground of
diversity) rejected the defendant's preemption argument, allowing the
lawsuit to proceed. (Motus v. Pfizer Inc., 127 F. Supp. 2d 1085 (C.D.
Cal. 2000).) The court later granted the defendant's motion for summary
judgment on non-preemption grounds (196 F. Supp. 2d 984, 986 (C.D. Cal.
2001)), and the plaintiff appealed. DOJ submitted an amicus curiae
brief to the United States Court of Appeals for the Ninth Circuit on
FDA's behalf.\5\ The brief's arguments were essentially the same as the
arguments advanced in Bernhardt. In contrast to the situation in
Bernhardt, however, in Motus, FDA had specifically considered, and
rejected, the language requested by the plaintiff under state law. The
appeals court affirmed the trial court's decision earlier this year
(2004 U.S. App. LEXIS 1944 (9th Cir. February 9, 2004)).
---------------------------------------------------------------------------
\5\ Amicus Brief for the United States in Support of the Defendant-
Appellee and Cross-Appellant, and in Favor of Reversal of the District
Court's Order Denying Partial Summary Judgment to Defendant-Appellee
and Cross-Appellant, Motus v. Pfizer, Case Nos. 02-55372 & 02-55498
(9th Cir. filed Sept. 3, 2002).
---------------------------------------------------------------------------
In re PAXIL
In 2001, individuals filed suit in a California court on behalf of
past or current users of PAXIL (paroxetine HCl) against the drug's
manufacturer, GlaxoSmithKline (GSK), alleging that the company's
direct-to-consumer (DTC) broadcast advertisements for the drug failed
adequately to warn about the consequences of discontinuing the drug. In
reviewing the new drug application for the drug, FDA had found no
evidence that it was habit-forming and did not require GSK to address
that risk in FDA-approved labeling. FDA did, however, require GSK to
include in labeling statements regarding discontinuation syndrome, and
the labeling consequently recommends that doctors gradually reduce
dosages and monitor patients for syndrome symptoms. FDA reviewed
proposed DTC advertisements GSK had submitted for Paxil that said that
the drug was not habit-forming. The agency at no time determined that
this statement was misleading. In August 2002, notwithstanding FDA's
determination, the court issued a preliminary injunction prohibiting
GSK from running DTC advertisements stating that Paxil is not habit-
forming. (In re Paxil Litigation, 2002 U.S. Dist. LEXIS 16221 (C.D.
Cal. Aug. 16, 2002).)
On reconsideration, the court declared that the preliminary
injunction challenged only ``FDA's . . . determination that the public
is not likely to equate the words `not habit forming' as used in
direct[-]to[-]consumer advertisements with no withdrawal symptoms.''
According to the court, ``The question of how members of the general
public are likely to interpret (or misinterpret) a statement is within
one of the courts' core competencies.'' Declaring itself ``unwilling to
blindly accept FDA's ultimate determination here,'' the court rejected
the defendants' preemption and primary jurisdiction arguments. It
nevertheless denied the injunction on the ground that the plaintiff was
not likely to succeed in demonstrating that ``non-habit forming''
statement in the advertisement is misleading. Thus, although the court
ultimately declined to award the injunctive relief sought by the
plaintiff, it continued to distinguish between FDA's determinations as
to the adequacy of drug warnings under Federal law, and its own view of
warnings adequacy under state common law. (In re Paxil Litigation, 2002
U.S. Dist. LEXIS 24621 (C.D. Cal. Oct. 16, 2002).)
DOJ submitted to the court a Statement of Interest and a brief
asserting preemption.\6\ The Statement of Interest contended that a
court order requiring GSK to remove the ``non-habit-forming'' claim
from its advertisements for Paxil would be inconsistent with FDA's
determination that the company's advertisements were proper and that
Paxil is not, in fact, ``habit-forming.'' The brief contended that the
court should find the plaintiff's state-law request for a court order
preempted because it poses an obstacle to achievement of the full
objectives of Congress ``by attempting to substitute th[e] Court's
judgment for FDA's scientific expertise.'' As the brief pointed out,
FDA had specifically reviewed the advertisements, made suggestions
concerning the proper manner of presenting information relating to
whether Paxil is ``habit-forming,'' and, in the exercise of its
scientific and medical expertise, found the advertisements acceptable.
The brief also included a primary jurisdiction argument. The court
reversed its earlier award of an injunction prohibiting the
manufacturer from running advertisements that had been reviewed and
approved by FDA, but the reversal was based on a ground other than
preemption. (In re Paxil Litigation, 2002 U.S. Dist. LEXIS 24621 (C.D.
Cal. 2002).) \7\
---------------------------------------------------------------------------
\6\ Statement of Interest of the United States of America, In re
PAXIL Litigation, Case No. CV 01-07937 MRP (CWx) (C.D. Cal. filed
August 20, 2002); Brief of the United States of America, In re PAXIL
Litigation, Case No. CV 01-07937 MRP (CWx) (C.D. Cal. filed Sept. 4,
2002).
\7\ In December 2003 (296 F. Supp. 2d 1374), the litigation,
consisting of twelve action in eleven Federal judicial districts, was
centralized for pretrial proceedings in the United States District
Court for the Central District of California.
---------------------------------------------------------------------------
Conclusion
As these cases illustrate, courts entertaining lawsuits filed under
state law do not always defer to FDA on matters that Congress has
placed squarely within the agency's authority. In FDA regulatory areas
characterized by comprehensive regulation and requiring a careful and
expert evaluation of scientific data and public health issues, state
coregulation can stand as an obstacle to or directly conflict with the
agency's administration of its statutory mandate. Preemption is the
constitutionally prescribed mechanism for resolving these conflicts.
The practice of citing preemption and primary jurisdiction under
the FDCA in litigation in which the United States is not a party is
well-established and substantially predates the current Administration.
DOJ and FDA participation in these cases is unusual. In the current
Administration, DOJ has participated in private state-law actions on
FDA's behalf only following a judicial finding that the action should
proceed, and only to address a state-law finding that, left
undisturbed, would undermine FDA's execution of its statutory mission
or directly conflict with Federal law. Responsibility for making final
decisions whether to make submissions in private lawsuits, on
preemption, primary jurisdiction, or any other issue, rests with the
Department of Justice--not FDA itself.
Question. These arguments conflict with long-standing FDA policy.
The law appears to contradict what the FDA has argued. What motivated
FDA to change its policy?
Answer. The Government's participation in cases arising under
state-law and presenting preemption issues is consistent with past FDA
practice and with the pertinent law.
The principal enabling statute of the Food and Drug Administration
is the Federal Food, Drug, and Cosmetic Act, FDCA. Under this statute,
FDA has broad authority to protect the public health by ensuring that
foods are safe, wholesome, sanitary, and properly labeled, and that
drugs and medical products are safe and effective. (See 21 U.S.C.
393(b)(2)(A)-(C).) By operation of the Supremacy Clause of the United
States Constitution (U.S. Const. Art. VI, clause 2), the FDCA nullifies
conflicting requirements established by the States in legislation,
regulations, or common law. (See Gibbons v. Ogden, 22 U.S. (9 Wheat.)
1, 211 (1824) (Marshall, C.J.).)
In the past, FDA has addressed conflicting state requirements in
the context of rulemaking. In 1982, for example, FDA promulgated
regulations requiring tamper-resistant packaging for over-the-counter
drugs. In the preamble accompanying the regulations, FDA stated its
intention that the regulations preempt any state or local requirements
that were ``not identical to . . . [the rule] in all respects.'' (47
FR 50442, 50447; Nov. 5, 1982.) Similarly, in 1986, FDA issued
regulations requiring aspirin manufacturers to include in labeling a
warning against use in treating chicken pox or flu symptoms in children
due to the risk of Reye's Syndrome. In the accompanying preamble, FDA
said the regulations preempted ``State and local packaging requirements
that are not identical to it with respect to OTC aspirin-containing
products for human use.'' (51 FR 8180, 8181; Mar. 7, 1986.) In 1994,
FDA amended 21 CFR 20.63 to preempt state requirements for the
disclosure of adverse event-related information treated as confidential
under FDA regulations. (59 FR 3944; Jan. 27, 1994.)
In addition, for many years, conflicting state requirements have
been addressed by FDA through case-by-case participation in selected
lawsuits to which the
United States has not been a party. Because FDA lacks independent
litigating authority, this participation has been by the Department of
Justice (DOJ) on FDA's behalf. The practice of addressing conflicting
state requirements through participation in litigation dates back many
years. For example, DOJ participated on FDA's behalf in favor of
preemption in both Jones v. Rath Packing Company, 430 U.S. 519 (1977),
and Grocery Manufacturers of America, Inc. v. Gerace, 755 F.2d 993 (2d
Cir. 1985). In addition, as discussed in our response to the previous
question on preemption, FDA has recently participated in several cases
involving state-law requirements for the communication of risk
information for prescription drugs. Of note, the first--and most
aggressive, from a legal perspective--of these submissions occurred
during the previous Administration--Bernhardt case included in
materials for the record.
narms
Question. What is the total amount of funding for NARMS, and from
what account does it come?
Answer. The total amount of funding for NARMS in fiscal year 2004
is $7.634 million. This funding is located in the Salaries and
Expenses, or S&E, account.
Question. How much is FDA giving to USDA and CDC in fiscal year
2005? How does that compare to fiscal year 2004? Please describe what
factors are used to determine the division of funds.
Answer. At this time, FDA has not determined the exact funding for
CDC and USDA for NARMS for fiscal year 2005 but plans to make decisions
by Fall 2004. In fiscal year 2004, FDA funding on NARMS will be reduced
due to government-wide rescissions. In fiscal year 2004, FDA provided
funds of approximately $1.6 million to USDA and $2 million to CDC. It
is important to point out that a large portion of the funds provided to
CDC is given to the states for the collection, isolation and
identification of bacterial isolates, which are then shipped to CDC and
the Food and Drug Administration's Center for Veterinary Medicine--
NARMS retail arm--for susceptibility testing. In determining the funds
provided to CDC and USDA, we analyze the entire NARMS program,
including the retail food arm of NARMS, and strive to fill in data gaps
and avoid duplication of organisms to be tested.
Question. How much NARMS money is currently being spent in foreign
countries, specifically Mexico? How is this money being used?
Answer. FDA is not spending any current year NARMS funding in
Mexico or other foreign countries.
Question. Does USDA or CDC spend any of their NARMS money in
foreign countries?
Answer. In fiscal year 2004 FDA is providing USDA and CDC, $1.6
million and $2 million respectively. FDA does not keep detailed records
of USDA and CDC funding for NARMS.
counterfeit drugs
Question. In February, FDA released a report on combating
counterfeit drugs. Several new technologies were mentioned that could
be used to this effect, including Radiofrequency Identification
tagging, color shifting inks, and holograms. Specifically regarding
color shifting inks, which I understand are currently available, has
FDA taken any action, or do you have any plans to pursue this option?
Answer. It is true that color shifting ink technology is currently
available for use on drug packaging and labeling. However, we heard
uniformly from all stakeholders that this technology is expensive and
requires significant investment of resources and time prior to
implementation. Due to the wide variety of products, packaging, and
labeling on the market, we heard from manufacturers, wholesalers, and
retailers that the decision to use color shifting inks, or any other
authentication technology, should be made by the manufacturer after a
manufacturer initiated product risk assessment. Without such an
analysis, use of color-shifting ink, or other authentication
technology, could lead to an unnecessary increase in the cost of drugs
to consumers. For example, we heard that color-shifting ink could be
appropriate for use on a very expensive, high volume brand name drug
product that is likely to be counterfeited, but not on a generic or low
volume drug product that is less likely to be counterfeited.
Based on our discussions with manufacturers, we estimate that it
would take a minimum of six to twelve months to implement a technology
such as color shifting ink from the time a decision is made to use the
authentication technology on the packaging and/or labeling of a drug
product. It could take longer if the technology, e.g., color-shifting
ink, is used on the product itself because safety studies might have to
be performed to ensure that the technology, e.g., the ink, does not
affect the safety or stability of the product.
animal drug compounding
Question. Dr. Crawford, on February 10, I submitted a letter to Dr.
McClellan regarding FDA's new Compliance Policy Guidelines, issued July
14, 2003, regarding animal drug compounding. I received a response from
FDA on March 31st, and I thank you for that. However, I do have a few
more questions in light of the response.
First, the letter stated that FDA issued the CPG for immediate
implementation because of the ``urgent need to explain how it intended
to exercise its enforcement discretion regarding compounded drugs for
animal use in light of Thompson v. Western States Medical Center.''
However, this case dealt only with compounding in human drugs, not
animal drugs. How does this create an urgent need to deal with animal
drugs?
Answer. After the Western States decision, FDA revised its
enforcement policy on pharmacy compounding of human drugs. FDA was
concerned that without updated guidance regarding compounding of animal
drugs, the public would remain uncertain about whether and how FDA
would change its enforcement policy with respect to compounded animal
drugs. In addition, agency staff would lack clear guidance on
enforcement matters.
As FDA stated in its letter, although prior public comment was not
sought in this case, pursuant to the good guidance practices
regulations the public was invited to comment on the CPG when it was
issued and may comment on it at any time (68 FR 41591 (July 14, 2003)).
FDA has been reviewing those comments and will revise the guidance as
appropriate upon completion of our review.
Question. Second, the response states that two Federal appeals
court decisions have held that ``the Federal Drug & Cosmetic Act does
not permit veterinarians to compound unapproved finished drugs from
bulk substances, unless the finished drug is not a new animal drug.
These cases support FDA's position that new animal drugs that are
compounded from bulk substances are adulterated under the FD&C Act and
may be subject to regulatory action.'' I have been informed that the
cases cited deal only with veterinarians compounding drugs, not
pharmacists. Why do you limit pharmacists as well as veterinarians? Is
this supported by any congressionally-enacted statutory authority,
legislative history or case law?
Answer. The principle established by the courts applies equally to
compounding by pharmacists and veterinarians.
Veterinary medicine has not traditionally utilized the services of
compounding pharmacies to the extent that they have been utilized
within human medicine. The increasing activities and presence of
compounding pharmacies in veterinary medicine is a relatively recent
development.
The Federal Food Drug and Cosmetic Act, or ``the Act'', and its
implementing regulations do not exempt veterinarians or pharmacists
from the approval requirements in the new animal drug provisions of the
Act, 21 U.S.C. Section 360b. In the absence of an approved new animal
drug application, the compounding of a new animal drug from any
unapproved drug or from bulk drug substances results in an adulterated
new animal drug within the meaning of section 21 U.S.C. Section
351(a)(5). The compounding of a new animal drug from an approved human
or animal drug also results in an adulterated new animal drug within
the meaning of 21 U.S.C. Section 351(a)(5), unless the conditions set
forth in 21 CFR 530.13(b) relating to extralable use are met.
FDA is concerned about veterinarians and pharmacists that are
engaged in manufacturing and distributing unapproved new animal drugs
in a manner that is clearly outside the bounds of traditional pharmacy
practice and that violates the Act--such as compounding that is
intended to circumvent the drug approval process and provide for the
mass marketing of products that have been produced with little or no
quality control or manufacturing standards to ensure the purity,
potency, and stability of the product.
Pharmacists and veterinarians who engage in activities analogous to
manufacturing and distributing drugs for use in animals may be held to
the same provisions of the Act as manufacturers.
Question. Finally, the final paragraph of the FDA response states
``Accordingly, the regulations that implement AMDUCA provide that
extralabel use by compounding applies only to compounding of a product
from approved drugs, and that nothing in the regulations is to be
construed as permitting compounding from bulk drugs.'' Is there in the
agency's view anything in AMDUCA's regulations or the Act that is to be
construed as not permitting compounding from bulk substances?
Answer. As previously noted, under the Federal Food, Drug and
Cosmetic Act, in the absence of an approved new animal drug
application, the compounding of a new animal drug from a bulk substance
results in a new animal drug that is adulterated as a matter of law.
This has been FDA's longstanding position, which is supported by two
Federal appeals court decisions, United States v. Algon Chemical Inc.,
879 F.2d 1154 (3d Cir. 1989) and United States v. 9/1 Kg. Containers,
854 F.2d 173 (7th Cir. 1988).
______
Questions Submitted by Senator Byron L. Dorgan
drug reimportation
Question. In Canada and the European Union, all drugs sold in those
countries must meet the safety requirements of those countries. Given
that, why is the FDA opposed to legalizing the importation of drugs
that stayed within their systems? In what areas does the FDA believe
that the Canadian or European drug regulatory systems are inferior to
its own? Please provide specific examples.
Answer. We have concerns about medicines purchased outside of the
United States because they are typically not FDA-approved and they have
been manufactured, processed, shipped, and/or held outside the reach of
the domestic Federal and State oversight systems intended to ensure
that all drugs are safe and effective for their intended uses. The
Medicare Prescription Drug, Improvement and Modernization Act of 2003,
directed the Secretary of Health and Human Services to conduct a study
on the importation of drugs. The Conference Report detailed the
information to be included in the study. The information you have
requested as to assurances of the safety of imported drugs from Canada
and the European Union is information requested as part of the study.
We have been actively involved in collecting, analyzing and assessing
information, including the safety of such products, the economic
implications, the cost of implementation, and expect to provide a
comprehensive study to Congress before or by the due date.
Question. How much funding and new personnel do you estimate that
the FDA needs in order to implement a safe system of drug importation?
[In 2000, FDA estimated that it would need $23 million for the first
year of implementation.] What specific additional authorities does the
FDA feel it needs to ``police imports''?
Answer. FDA made several cost estimates during consideration of the
MEDS Act in 2000 and during consideration of other importation
legislation. In 2000, FDA estimated that implementation of the MEDS Act
would cost $21 million in each of the first 2 years following passage
of the legislation, as the agency drafted implementing regulations.
Other figures were provided in direct response to particular inquiries.
It should be noted that the figures previously calculated were specific
to the different legislation and programs reviewed and include
limitations on the types of importations. For the MEDS Act, if the
program was fully implemented, the cost estimates rose to more than
$100 million per year. The information you have requested as to what
additional authorities FDA needs to ``police imports'' is information
that is being assessed as part of the Medicare Section 1122 study.
Question. The drug importation provision in the new Medicare law
(Section 1121) gives the HHS Secretary the authority to write
regulations that ``contain any additional provisions determined by the
Secretary to be appropriate as a safeguard to protect the public health
or as a means to facilitate the importation of prescription drugs.'' Is
this not enough additional authority to allow FDA to police imports?
Answer. This information will also be assessed as part of the
Medicare study, as noted above.
Question. Recently, edible bean shipments were stopped by at the
U.S. border from Canada because the beans were contaminated with the
chemical ``Ronilan,'' which is banned from use on edible beans in the
United States. I come to find out that according to the Food and Drug
Administration, less than one-half of 1 percent of the edible beans
imported into the United States are inspected. North Dakota is the
number one State in dry edible bean production in the country. My
farmers have a vested interest in seeing that their industry is
protected the importation of contaminated edible beans. What will the
FDA do to increase inspections to insure that our edible bean industry
is protected?
Answer. Based on sampling conducted and residues found, FDA does
not believe that additional testing/sampling beyond what is currently
planned is warranted. The common violations involve a pesticide use on
a food for which no United States tolerance has been established for
that particular food although that pesticide has been registered with
EPA and has a tolerance established on other foods. If new information
becomes available indicating a compliance problem, whether from FDA
sampling or other valid sampling, the FDA will consider increasing the
priority for pesticide testing for dried edible beans.
______
Questions Submitted by Senator Dianne Feinstein
larium (mefloquine)
Question. Mefloquine is an anti-malarial product that is approved
and prescribed in the United States but is used by consumers overseas
to prevent or treat malaria infections. There have been many reports in
the press about mefloquine's potentially dangerous side effects and FDA
issued a press release describing these side effects. With most of the
consumers of mefloquine using the product abroad how can we be certain
that the reporting of adverse events experienced overseas is occurring
sufficient for adequate assessments of risk and benefit during the
post-marketing period?
Answer. Adverse event reporting is voluntary for consumers and
health care providers. Health care providers or consumers may report to
the drug manufacturer (who is required to forward the report to FDA
under 21CFR 314.80) or directly to FDA. The reports received are then
entered into the AERS database, which is used to evaluate the adverse
events associated with a particular drug in the aggregate. This data is
used to identify potential drug safety concerns, on which FDA can
either take immediate action, or study further in some way. In the case
of mefloquine hydrochloride, the response to your next question
demonstrates that we are receiving reports of serious adverse events,
even though the drug is primarily used while patients are overseas.
Question. How many and what types of adverse events are being
reported? Who is submitting the reports, the consumer experiencing the
adverse event or the practitioner? Given the serious nature and
potential for long term side effects is there a registry or follow-up
of consumers of this product, either during use or after finishing use
of the product?
Answer. As of April 13, 2004, the FDA's Adverse Event Reporting
System (AERS) post marketing database contains 2,786 cases with Lariam
(mefloquine hydrochloride) as a suspect drug. Case reports have been
received since Lariam was approved in 1989 and continue to come to the
Agency at a rate of more than 100 per year. For example, AERS has
received 139 posts marketing adverse event cases1 associated with
Lariam since April 1, 2003. As with most drugs, many types of adverse
events are reported for Lariam. However, the largest number of reports
is for neuropsychiatric events; of the 2,786 Lariam cases in AERS,
1,821 contain at least one event categorized as neurological and/or
psychiatric in nature. Seven of the ten events most frequently reported
for Lariam (see below) are neuropsychiatric in nature:
Dizziness 381 cases; \1\ Headache 235; Anxiety 360; Fever 196;
Depression 303; Hallucination 179; Insomnia 268; Diarrhea 169; Nausea
238; Abnormal dreams 148.
---------------------------------------------------------------------------
\1\ This raw count from AERS probably contains some duplicate
cases, as well as cases resulting from literature articles and studies.
---------------------------------------------------------------------------
The Lariam labeling (package insert) was recently updated to
include stronger warnings about neuropsychiatric events. In addition,
an official Medication Guide discussing neuropsychiatric and other
adverse events, and describing malaria chemoprevention, is required by
law to be given to every patient to whom Lariam is dispensed.
Lariam reports are being submitted from multiple sources.
According to AERS, of the 2,786 reported cases, 512 cases were reported
by consumers and 1,540 by health professionals.\2\
---------------------------------------------------------------------------
\2\ The categorization by source includes a large number of cases
with null values. In addition, more than one source can be indicated
for a given case (for example, both ``health professional'' and
``literature'').
---------------------------------------------------------------------------
Although most Lariam adverse events occur while the users are
traveling, more than 1,500 of the 2,786 Lariam cases were reported
from the United States. This indicates that travelers are notifying
their health practitioners, Roche Pharmaceuticals, and/or the FDA
directly of adverse events associated with Lariam upon their return to
this country.
There is no registry for follow-up of Lariam adverse events. It
should be noted that post-market reporting is only one component of
FDA's adverse event monitoring. Controlled comparative trials give us
the most reliable data, and there are many such trials in the published
literature. In addition, there are publications describing active
surveys, which provide information on very large numbers of patients in
a relatively controlled manner.
Question. DOD has begun an investigation into psychiatric adverse
events in soldiers and plans a study of mefloquine. DOD has stated that
it has not included in its assessments several incidents in soldiers
who have taken mefloquine or soldiers who do not demonstrate blood
levels of the drug. FDA's News Release of July 9, 2003 states that
``Sometimes these psychiatric adverse events may persist even after
stopping the medication.'' What is being done by FDA to investigate the
incidents of suicides in soldiers while on or returning from
deployment?
Answer. As a general matter, FDA takes numerous steps to improve
product and patient safety and reduce medical errors. Suicides in the
military are not investigated by FDA and would fall presumably within
the purview of DOD. Frequent discussion between DOD and FDA has
occurred related to antimalarial prophylaxis, and DOD has not
communicated concerns regarding soldier suicides and the use of
Lariam. Since Lariam was approved in 1989, AERS has identified 17
cases of suicide worldwide, associated with Lariam use. These cases
are reviewed on an ongoing basis. Many of the cases lack sufficient
evidence to conclude that the suicide was related to Lariam. The
relationship between suicide and Lariam is not conclusive since many
of the cases involve previous psychiatric disease or other confounding
factors. Only five of the reported cases occurred in U.S. residents,
and none of them were soldiers. One, however, was a former Marine who
had taken Lariam while serving in Somalia, more than 6 years before
his eventual suicide. Suicides have also been reported with other
antimalarial agents including chloroquine and malarone.
Current labeling of Lariam includes the following warning:
Mefloquine may cause psychiatric symptoms in a number of patients,
ranging from anxiety, paranoia, and depression to hallucinations and
psychotic behavior. On occasions, these symptoms have been reported to
continue long after mefloquine has been stopped. Rare cases of suicidal
ideation and suicide have been reported though no relationship to drug
administration has been confirmed. To minimize the chances of these
adverse events, mefloquine should not be taken for prophylaxis in
patients with active depression or with a recent history of depression,
generalized anxiety disorder, psychosis, or schizophrenia or other
major psychiatric disorders. Lariam should be used with caution in
patients with a previous history of depression. During prophylactic
use, if psychiatric symptoms such as acute anxiety, depression,
restlessness or confusion occur, these may be considered prodromal to a
more serious event. In these cases, the drug must be discontinued and
an alternative medication should be substituted.
A Medication Guide was developed that communicates these issues to
the patient.
emergency contraception
Question. There are reports in the press that decisions about OTC
approval of Plan B contraception are being made differently than
decisions about other products, made outside the Center, at the
Commissioner level or above. Could you explain if this is true, if FDA
is politicizing the approval process and why this is the case? Why is
the Plan B OTC approval being handled differently from other products?
Answer. The review and decision-making for the Plan B application
is not being made differently than other applications. The review is
occurring within the FDA's Center for Drug Evaluation and Research. FDA
will have signatory authority of the application. The Center commonly
involves the Office of the Commissioner in prominent regulatory
decisions.
Question. Given that advisory committee members voted unanimously
that Plan B Emergency contraception was safe under OTC conditions of
use and that studies investigating the OTC instructions, including
contraindications, side effects and precautions were well understood by
users of the product and that there was low abuse and misuse potential,
why has the decision to approve OTC use of Plan B emergency
contraception been delayed? When does FDA plan to make a decision on
OTC use of Plan B emergency contraception?
Answer. Since the December 2003 joint meeting of two FDA advisory
committees, the sponsors of the supplemental new drug application (NDA)
submitted additional information to FDA in support of their application
to change Plan B from a prescription to an over-the-counter product.
This additional information was extensive enough to qualify as a major
amendment to the NDA. Under the terms of the PDUFA, major amendments
such as this automatically trigger a 90-day extension of the original
PDUFA deadline. The PDUFA extension will permit the FDA to complete its
review of the application, including additional data on adolescent use
that was submitted by Barr and WCC in support of the application. The
new PDUFA deadline is May 21st. Such extensions are required so that
FDA staff has adequate time to review the additional medical and
scientific evidence. FDA's final decision will be based on sound
science and in full compliance with the applicable laws and
regulations, while taking into consideration the recommendations of
these advisory committees.
Question. Plan B, levonorgestrel, has been proven most effective
when taken within 24 hours of coitus. Retaining prescription status of
this drug impedes the ability of consumers to use the product when it
is most effective. If FDA does not anticipate approving Plan B
emergency contraception for OTC status, please explain the rationale,
when the product has been identified as safe and effective and eligible
for transfer to OTC status under the 1951 Durham-Humphrey Amendment to
the Food Drug and Cosmetic Act, that this change in status was not
approved?
Answer. FDA is still reviewing the application, so therefore we are
unable to answer this question until the review is complete and a
decision has been made based on this review.
Question. Some questions were raised by groups against the approval
of Plan B as an OTC product, that use of an OTC emergency contraceptive
may promote promiscuity in teens. Studies indicated that this was not
the case. Is this still an issue for the FDA?
Answer. FDA is still reviewing the application, so therefore we are
unable to answer this question until the review is complete and a
decision has been made that is based on the safety and efficacy in an
OTC setting, which includes comprehension of the label and usage of the
product.
______
Questions Submitted by Senator Richard J. Durbin
dietary supplements
Question. Do you agree it would be easier for the FDA to remove
unsafe dietary supplements from the market if supplement manufacturers
were required to submit serious adverse event reports your agency?
Answer. Adverse event reports are one way that FDA may become aware
of a potential safety problem.
In evaluating the safety of dietary supplements containing a
particular dietary ingredient, we consider evidence from a variety of
sources, including: (1) the well-known, scientifically established
pharmacology of the ingredient or its constituents; (2) peer-reviewed
scientific literature on the effects of the dietary ingredient or its
constituents; and (3) adverse events reported to have occurred
following consumption of dietary supplements containing the dietary
ingredient or its constituents. Therefore, a conclusion that a
particular dietary supplement or dietary ingredient should be removed
from the market will still rest upon a determination that the available
scientific information supports a finding that is adulterated.
Question. How do you respond to the IOM's conclusion in their
recent dietary supplement report that ``a core issue that constrains
the development and utility of a scientifically based framework for
evaluating the safety of dietary supplements is the lack of data
readily available for evaluation? Without amendment to DSHEA by
Congress, the FDA is not empowered to require the submission to the
agency of such key information as adverse events.''
Answer. In evaluating the safety of dietary supplements, FDA relies
on all available information including, the well-known, scientifically
established pharmacology of an ingredient or its constituents, peer-
reviewed scientific literature on the effects of the dietary ingredient
or its constituents, and adverse events reports. Certainly, FDA
welcomes the submission of any safety-related information that a firm
may have, and such information may facilitate FDA's evaluation of the
potential hazards of a dietary ingredient.
Such information often does not resolve the safety questions about
an ingredient, however, that is because the major limitation to
establishing that a particular dietary ingredient or dietary supplement
presents a significant or unreasonable risk is the relatively
incomplete scientific information about the pharmacology and effects of
many dietary ingredients rather than lack of FDA access to the
information a firm may have assembled.
Amending DSHEA to provide FDA access to a firm's safety information
would not resolve the basic issue that in many cases there is
inadequate information to understand the risk, if any, that a
particular dietary ingredient may present to consumers. FDA believes
that actions to facilitate the conduce of scientific studies of the
composition, pharmacology, and effects of dietary ingredients would be
useful in generating the data that the IOM believes is necessary to
develop a scientifically based framework for evaluating the safety of
dietary supplements.
Question. The definitions of ``unreasonable risk'' used by FDA in
the ephedra rule and the IOM in their report require that only a
likelihood of future risk be shown, which would allow the FDA to take
supplements that are harmful off the market faster. Do you agree?
Answer. Yes. As FDA stated in the ephedra rule, ``unreasonable
risk'' does not require a showing that a dietary supplement has caused
actual harm to specific individuals, only that scientific evidence
supports the existence of risk.
Question. I am concerned that the FDA does not have the proper
tools, systems, and resources to promptly implement the new
``unreasonable risk'' standard for dietary supplements in future
situations. For example, the agency's interpretation of the
``unreasonable risk'' standard relies in part on an evaluation of the
benefits (or lack of benefits) of a particular supplement. What
mechanisms, if any, does FDA have in place to evaluate the benefits of
dietary supplements?
Answer. In evaluating the benefits of dietary supplements, FDA
reviews published studies and other relevant sources of scientific
information. Collaboration with academic centers such as the National
Center for Natural Products Research (NCNPR), Federal partners such as
the National Institutes of Health and the National Center for
Toxicological Research, and our consumer and industry stakeholders is
important in developing a comprehensive risk-benefit evaluation of
dietary supplement products. We believe that efforts to strengthen our
relationship with scientific centers that emphasize primarily efficacy
research is the best approach to ensure that such information is
available, when needed, for safety evaluations under the ``unreasonable
risk'' standard. Further, it is important to recognize that in
circumstances in which there is clear and persuasive evidence of a
substance's risks but information on its benefits is incomplete or
absent there is no barrier to FDA action. Under the risk-benefit
analysis that FDA described in the ephedra rulemaking, having efficacy
data is not a prerequisite for acting against unsafe dietary
supplements; that is, if there is adequate evidence that a product
presents a known or reasonably known or reasonably likely risk but
there is no data sufficient to show that the product has known or
reasonably likely benefits, FDA can take action against the product
based on unreasonable risk.
Question. Commissioner McClellan promised enforcement action
against bitter orange and usnic acid in the wake of the ephedra
decision. Yet, all the agency has done so far is to reiterate its
warnings to the public that these supplements pose hazards. Is the lack
of efficacy information for these substances hindering prompt FDA
regulatory action?
Answer. In a speech at the University of Mississippi in January,
Dr. McClellan indicated that FDA might ``take a closer look'' at the
safety of other dietary supplements, specifically naming some ephedra
substitutes, such as bitter orange (citrus aurantium) as well as usnic
acid. FDA is actively engaged in coordinating research on bitter
orange.
At the present time, FDA is examining the available scientific
information to determine what safety concerns, if any, may be
associated with the use of dietary supplements containing bitter orange
and usnic acid. Although FDA cannot predict ahead of time what the
findings of this review will be, FDA can assure you that if the
evidence establishes that the use of these ingredients in dietary
supplements presents an unreasonable risk of injury or illness, FDA
will take action to address those risks. In the interim, the Agency
feels it is important to keep consumers informed of safety concerns
about these substances so that they may make informed decisions about
whether or not to use dietary supplements containing them.
Question. The May 2004 edition of Consumer Reports Magazine
contains a list of 12 dietary supplement ingredients they recommend
consumers stay away from. One of the ingredients is andostenedione, and
anabolic steroid, which has already been banned. Will you commit to a
full scientific safety review of eleven remaining substances listed by
Consumer Reports?
Answer. We continually monitor the marketplace and the scientific
literature to identify dietary supplements and dietary ingredients that
may present safety concerns. The potential risks presented by different
dietary ingredients vary widely. Depending on the specific facts
surrounding the characteristics and use of each substance and the risks
it may present, FDA will make every attempt to allocate resources to
address those that present the most significant public health concerns.
As part of on-going dietary supplement marketplace monitoring efforts,
FDA will critically examine the list of substances identified by
Consumer Reports Magazine and consider the safety risks that they
present and what action by FDA may be warranted.
SUBCOMMITTEE RECESS
Senator Burns. Dr. Crawford, I did not have a question for
you. We can get together offline, sir.
Mr. Bost, nice to see all of you here today, and again,
thanks for your good work. I think you all are to be commended.
That is not to say that we should let our guard down because we
know that we still have--any time that you deal in this area of
food and food safety and especially for our consumers. They
come first. I think the industry is of a mindset they want to
do the right thing but make sure it is the right thing to do,
that we just do not give some cosmetic look at it and not
address the real problems.
Thank you for coming. These hearings are closed.
[Whereupon, at 2:21 p.m., Thursday, April 1, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2005
----------
WEDNESDAY, APRIL 7, 2004
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 3:33 p.m., in room SD-192, Dirksen
Senate Office Building, Hon. Robert F. Bennett (chairman)
presiding.
Present: Senators Bennett, Kohl, and Harkin.
DEPARTMENT OF AGRICULTURE
STATEMENTS OF:
KEITH COLLINS, CHIEF ECONOMIST
J.B. PENN, UNDER SECRETARY FOR FARM AND FOREIGN AGRICULTURAL
SERVICES
MARK REY, UNDER SECRETARY FOR NATURAL RESOURCES AND ENVIRONMENT
GILBERT G. GONZALEZ, ACTING UNDER SECRETARY FOR RURAL
DEVELOPMENT
JOSEPH J. JEN, UNDER SECRETARY FOR RESEARCH, EDUCATION AND
ECONOMICS
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT
Senator Bennett. The Subcommittee will come to order.
Last week, we had a budget hearing with a number of Under
Secretaries of the Department of Agriculture which was very
informative, and this week, we are going to continue with the
rest of the Under Secretaries as well as the Chief Economist.
We welcome you all, thank you for your service, thank you for
your willingness to work in a situation that sometimes is
stimulating and exciting and rewarding and sometimes makes you
the target of the slings and arrows of outrageous constituents
or Congressmen, and we are trying not to do that here today.
Since this will be the last hearing you will appear at in
this Administration in this capacity, I want to take the
occasion to thank each of you for your willingness to serve
your country in this way. We look forward to hearing your
testimony. Senator Kohl is tied up in another hearing and will
be joining us as quickly as he can but has indicated that he
would be comfortable with our proceeding with the testimony
without him and will be brought up to date on what we have to
say.
So we will hear from the following witnesses in the
following order: Keith Collins, who is the Chief Economist at
USDA; J.B. Penn, who is the Under Secretary for Farm and
Foreign Agricultural Services; Mark E. Rey, who is the Under
Secretary for Natural Resources and Environment; Gilbert
Gonzalez, who is acting as Under Secretary for Rural
Development; and then Joseph Jen, who is the Under Secretary
for Research, Education and Economics.
I remember our previous conversations in last year's
hearing with some pleasure and look forward to what each of you
has to say here today. So, Dr. Collins, we will begin with you,
and welcome to the Subcommittee.
STATEMENT OF KEITH COLLINS
Dr. Collins. Thank you very much, Mr. Chairman, and thanks
for the chance to start this hearing by providing a brief
overview on the economic situation in agriculture, which I
think will help set at least part of the context for the
comments of our mission area leaders who will follow mine.
U.S. AGRICULTURAL ECONOMY
The U.S. agricultural economy is showing remarkable
strength after several years of weakness. Last week, you may
know that we released the index of prices received by farmers
for the month of March, and that was the highest price ever
received for farmers for any month since we started keeping
records in 1910. And that price occurred despite generally good
harvests in 2003 and disease-caused disruptions in livestock
and poultry trade.
Consequently, as we look forward to this year, we expect
that farm income will have another reasonably strong year. The
improvement in agriculture is a result of some transitory
factors on the supply side, such as last year's poor grain
crops in Europe and in the former Soviet Union, but several
demand factors, I think, will persist. First, we predict farm
exports at $59 billion this year, and that nearly equals the
all-time record high. And had it not been for the finding of
BSE and the lost beef exports, total U.S. agricultural exports
surely would have been or would be an all-time record by
several billion dollars. The improving world economy, the
weaker dollar and China's growing net imports are all factors.
The second factor is domestic demand, which is very strong.
If you consider sales by grocery stores and restaurants for the
month of February, the most recent data, they were up 6 percent
year over year. And for some foods such as meat and poultry,
dietary changes seem clearly to be affecting demand trends.
A third factor is the industrial uses of agricultural
products are growing; in particular, ethanol production reached
another record in January.
If you look at the supply side, USDA's Planting Intention
Survey released last week gives some indication of how farmers
might respond to this year's tight markets compared with last
year. Producers said they plan to plant 8 percent more rice, 7
percent more cotton, 3 percent more soybeans but about the same
level of corn. The wheat area, however, will be down because of
poor fall weather and better prospects for these other crops.
With average weather, we could have record high corn and
soybean crops this year, good cotton and rice crops, but wheat
would be down over 10 percent from last year's record high
yield. But even with large U.S. production in prospect, and
even with a rebound in production overseas, world markets are
likely to remain firm. World grain demand is expected to exceed
production for the fifth consecutive year this year. So by the
end of this summer, we expect the grain stocks, global grain
stocks as a percent of use, will be the lowest since 1981 for
rice, the lowest since 1972 for wheat, and the lowest ever
recorded for coarse grains. And stocks are also low for cotton
and soybeans as well.
Regarding animal agriculture, U.S. production of meat and
poultry was down last year, and we think it will be flat this
year. So if you combine that with stronger consumer demand,
livestock prices remain above historical levels despite the
discovery of BSE and the outbreaks of avian influenza in the
United States. And we had stable milk production last year; we
expect stable milk production this year, and with strong demand
for dairy products, that has resulted in surging milk prices.
With these kinds of markets, farm cash receipts are
expected to be a record high $215 billion this year; however,
with higher spending on energy-based inputs this year as well
as lower government payments and the reduction in cattle
revenue due to the BSE finding, net cash farm income is going
to decline from the record high 2003 level, but it would still
equal the average of the last 2 years.
This reduction in earnings from farm sources will have a
small effect on the majority of households that operate
residential and intermediate-sized farms, because their incomes
are mostly derived off the farm. The incomes of households that
run commercial-sized operations will be somewhat lower in 2004,
although their average incomes will remain well above the
average of nonfarm households.
PREPARED STATEMENT
With another sound income year in prospect, farm land
values will likely rise again, which would continue the
improvement in the farm sector balance sheet that we saw in
2003. Finally, consumers will continue to have abundant and
affordable food, although with the strong farm prices I
mentioned, retail food prices are expected to be up 3 to 3.5
percent this year compared with 2.2 percent in 2003 as dairy
products, poultry and fats and oils prices increase.
That completes my statement, Mr. Chairman.
[The statement follows:]
Prepared Statement of Keith Collins
Mr. Chairman and members of the Committee, I appreciate the
opportunity to appear at this hearing to discuss the current situation
and outlook for U.S. agriculture. The agricultural economy continues to
show improvement after several years of low prices. Farm prices for
major crops have reached levels unseen in several years and livestock
prices generally remain well above levels of 2 years ago, despite the
sharp reduction in beef exports following the discovery of a cow in
Washington with Bovine Spongiform Encephalopathy (BSE) in December of
last year. While cash receipts are expected to register another strong
gain in 2004, rising prices for energy-related inputs and higher feed
costs along with sharply lower government payments will likely cause
net cash farm income to decline from last year's record, although it
would equal the average of the past 2 years. Despite a pull back in
farm income, cash flow and balance sheet prospects suggest the farm
economy will remain on a solid footing in 2004.
Outlook for United States and World Economies and the Implications for
Agriculture
After several years of a weak and variable global economy that
constrained the demand for U.S. agricultural products, the U.S. economy
and the world economy had a very positive year in 2003. Both the U.S.
economy and the world economy are poised to experience another sound
and prosperous year ahead, which will bolster the demand of U.S.
agricultural products domestically and abroad.
In 2003, we saw the U.S. economy grow 3.2 percent. Expansionary
fiscal policy resulting from the budget deficit and the Jobs and Growth
Act of 2001; the lowest interest rates since the 1950's leading to
rising consumer confidence and spending; and, during the second half of
the year, increasing business fixed investment all boosted growth. With
these factors all in place again in 2004, combined with an expectation
of even stronger business investment, a depreciating dollar, few signs
of inflation and stronger foreign economic growth, macroeconomic
forecasters foresee U.S. Gross Domestic Product (GDP) growth of 4.5 to
5 percent.
The improving domestic demand base may be seen in the demand for
food, which also drives demand for animal feed. Monthly retail sales of
grocery stores, food and beverage stores and food service
establishments are usually higher than sales a year earlier. The U.S.
economic slowdown in 2002 noticeably slowed sales. As the U.S. economic
recovery took hold in 2003, sales moved up nicely and strong sales are
again likely for 2004. Sales in February were 6 percent above a year
earlier.
In addition to rising food demand, domestic industrial demand for
farm products is also increasing. As an example, monthly ethanol
production is setting new record highs almost every month. In 2004,
spurred by phase-outs of Methyl Tertiary Butyl Ether (MTBE) in
California, New York and Connecticut, U.S. ethanol production from corn
should reach 3.25 billion gallons and account for over 1.1 billion
bushels of corn use.
Foreign GDP is projected to grow about 3 percent this year, after
averaging less than 2 percent annually over the past 3 years. Japan is
finally growing, and Asia and Latin America are expected to propel
developing country growth to the highest rate in 4 years. With the
European economies lagging, foreign economic growth likely will not
push over the 3 percent rate, which has often been a level associated
with an upward surge in U.S. agricultural exports.
Although the dollar remains relatively strong, it has depreciated
against the euro, Canadian dollar and the yen. On a weighted-average
basis, against the currencies of our major markets, the dollar has
fallen steadily since early 2002. A further drop is anticipated in 2004
reflecting the trade deficit and the continuation of low real interest
rates in the United States.
U.S. agricultural exports are forecast to reach $59 billion in
fiscal year 2004, up $2.5 billion from the previous year. This forecast
is $0.5 billion below USDA's forecast published prior to the finding of
a cow with BSE at the end of last year. The new export forecast
reflects, in part, the assumption that the markets that are now closed
to U.S. beef exports will remain closed in 2004. This is not a forecast
of what foreign countries will do. It simply reflects our standard
forecasting procedure to assume the policies of foreign countries
remain in place until they are changed.
At $59 billion, U.S. farm exports would experience the 5th
consecutive annual increase since hitting the cyclical low of $49
billion in fiscal year 1999, following the onset of the Asian currency
crisis. A strengthening world economy, the declining value of the
dollar, low global commodity stocks, and expanding U.S. crop acreage
will all support export growth in 2004. During the first three months
of fiscal year 2004, U.S. agricultural exports were up $3 billion over
a year earlier. Also notable is the upward trend we are beginning to
see in bulk exports, which, since 1980, have been experiencing a long,
slow downward trend.
United States meat exports experienced explosive growth in the
1990s but have faced slower growth over the past few years due to
animal diseases and policy-driven import limitations in some countries.
The United States finding of BSE has resulted in the closing of over 80
percent of U.S. export markets for beef and related products, and U.S.
poultry exports are expected to be flat in fiscal year 2004, as
outbreaks of Avian Influenza in several States has resulted in a number
of countries placing restrictions on poultry imports from the United
States. However, this, stronger global incomes, and restrictions on
poultry trade due to outbreaks of Avian Influenza abroad are expected
to create additional export opportunities for pork.
Outlook for Major Crops
For major crops, the supply-demand balances are favorable for
strong markets again in 2004, even with normal yields and a rebound in
global production. With relatively low world and U.S. stocks going into
the 2004/2005 marketing year, crop prices could move higher if adverse
weather lowers production prospects over the coming months.
In 2003/2004, total use is generally exceeding total supplies of
major crops, leading to higher prices and reduced world and United
States carryover. Wheat is an exception, as a sharp increase in U.S.
production is expected to lead to a slight increase in United States
carryover. However, world wheat stocks are expected to decline from 166
million tons at the end of the 2002/2003 marketing year to 125 million
tons at the end of the 2003/2004 marketing year. At the end of this
marketing year, world stocks of coarse grains are forecast to be 44
million tons lower than 1 year ago, world stocks of oilseeds are
forecast to fall from 43 million tons to 40 million tons and world
cotton stocks are projected to decline from 36 to 32 million bales.
For wheat, plantings in 2003 increased by 1.2 million acres to 61.7
million acres. Reflecting the increase in acreage and a record yield,
U.S. wheat production rose from 1.6 billion bushels in 2002 to 2.3
billion bushels in 2003. Total wheat supplies increased by 430 million
bushels, as lower beginning stocks partially offset the increase in
production. Despite the sharp increase in wheat production and total
supplies, U.S. wheat carryover is forecast to increase by only 53
million bushels, as increases in domestic use and exports are expected
to absorb nearly all of the increase in domestic supplies. U.S. wheat
exports are forecast to increase by nearly 300 million bushels to 1.15
billion bushels in 2003/2004. In 2003/2004, U.S. wheat exports expanded
to fill production shortfalls created by a 38-million-ton drop in
foreign wheat production. For the current marketing year, the farm
price of wheat is projected to average $3.30-$3.40 per bushel compared
with last season's $3.56 per bushel.
U.S. rice acreage was off 7 percent in 2003, as rice producers
responded to two consecutive years of very weak prices and returns. The
decline in acreage and reduced beginning stocks lowered total supplies
from 265 million cwt in 2002/2003 to 241 million cwt in 2003/2004.
Ending stocks at the end of the current market year are forecast at 23
million cwt, down from 27 million cwt at the end of the 2002/2003
marketing year. The farm price of rice is forecast to average $7.45-
$7.75 per cwt this marketing year, compared with $4.49 per cwt during
the 2002/03.
In 2003, the corn crop was a record 10.1 billion bushels, causing
total corn supplies to increase from 10.6 billion bushels in 2002/2003
to 11.2 billion bushels this season. Despite the increase in total
supplies, carryover stocks are projected to decline from 1.1 billion
bushels at the end of the 2002/2003 marketing year to 0.9 billion
bushels at the end of the current marketing year. U.S. corn exports are
forecast to increase to 2.0 billion bushels, up 0.4 billion bushels in
2002/2003, as reduced foreign supplies have increased export
opportunities. Domestic use is also up this marketing year, reflecting
increase feed and industrial use. This marketing year the farm price of
corn is projected to average $2.35-$2.55 per bushel, compared with
$2.32 per bushel last season.
Hot, dry weather during pollination reduced soybean production to
2.4 billion bushels in 2003, and total soybean supplies fell from 3.0
billion bushels in 2002/2003 to 2.6 billion bushels in 2003/2004. The
drop in soybean supplies has boosted U.S. farm prices and is lowering
domestic use, exports and carryover stocks. U.S. carryover stocks are
projected to fall to 125 million bushels, which would be the lowest
carryover in 27 years. In recent weeks the Brazilian crop potential has
been reduced, and that putting further demand pressure on the limited
U.S. supplies, driving up recent cash prices to over $10.00 per bushel,
the highest in over 15 years. Reflecting the expected decline in
carryover stocks, the farm price of soybeans is projected to increase
from last season's average of $5.53 per bushel to $7.15-$7.55 per
bushel this marketing year.
In 2003, the United States produced 18.2 million bales of cotton,
compared with 17.2 million bales in 2002. Lower supplies coupled with
increased exports have lowered projected carryover and pushed prices
higher this season. Increased exports to China are projected to boost
U.S. exports of cotton to a record-high 13.8 million bales, up 1.9
million from last season's 11.9 million. Carryover stocks at the end of
this season are projected to fall to 3.6 million bales, the lowest in 8
years. During the first 6 months of the current marketing year, cotton
prices have averaged 62.8 cents per pound, compared with last season's
average of 44.5 cents per pound.
As we look to the 2004-crop spring planting season, prices for
corn, rice, soybeans and cotton will be the highest at planting time
since 1998. Despite this, USDA's survey of spring planting intentions
of producers that was taken in early March 2004, showed little
prospective change in total acreage of principal crops. One reason is
that fall seedings of winter wheat, combined with intended spring wheat
planted area, indicate a 3.6-percent decline in total wheat planted
area for the 2004 crop, compared with the 2003 crop. The survey
indicated strong prices are expected to lead to record high soybean
planted area of 75.4 million acres, up nearly 3 percent. Producers
indicated little change in corn planted area, nearly a 7-percent
increase in cotton area and an 8-percent increase in rice planted area.
These acreages and trend yields would result in record high corn and
soybean crops of 10.2 billion and 2.97 billion bushels, respectively, a
cotton crop of 18.0 million bales, about the same as last year, and a
rice crop of 218 million cwt, near last year's level. The wheat crop
would be about 11 percent below 2003's level, which had a record-high
yield.
These production levels could cause corn farm prices to rise again
for the 2004/2005 crop as demand remains at or above production,
soybean prices to decline somewhat under some stock rebuilding, and
wheat prices to remain about the same as this season, as foreign
production rebounds, assuming trend yields. While we should expect
production rebounds in 2004/2005 from poor weather in Europe, the
former Soviet Union (SU) and Brazil, there are several reasons to think
global markets will remain robust. First, there is a very strong
foundation under global grain demand. For the 2003/2004 crop years,
global grain demand is expected to exceed global grain production for
the 5th consecutive year.
Second, this gap means that by the end of the summer, global grain
stocks as a percent of use will be at the lowest level since 1972 for
wheat, 1981 for rice and the lowest on record for coarse grains. Stocks
are also low compared with history for soybeans and cotton. With low
stocks and the improving global economy, it is likely that even with a
return to normal yields in the key producing countries, crop stocks
will remain low and prices firm for most major commodities.
A third factor has been China's production and trade changes. After
emphasizing self-sufficiency in the early 1990s and building large
grain stocks, China has sharply reduced their grain surpluses. China's
role as a U.S. competitor in grain markets declined in 2003 and could
drop further in 2004. In addition, their growing oilseed crushing and
textile export industries have resulted in soaring soybean and cotton
imports. China is likely to continue to be a positive factor for U.S.
agriculture in 2004/2005. USDA forecasts U.S. farm exports to China in
fiscal year 2004 of $5.4 billion, imports from China of $1.4 billion,
for a trade surplus of $4 billion.
United States producers will continue to face significant
competition from a host of foreign producers. For example, Brazil has
increased its soybean planted area by 25 million acres since the mid
1990s. They have also increased production of beef, broilers, corn,
cotton and pork by 25 to 75 percent since the late 1990s. Summing up
the soybean exports of Brazil and Argentina, the coarse grain exports
of China and the former SU, and the wheat exports of India and the
former SU provides an indication of the recent increase in competition
facing U.S. crop producers. Exports from these countries grew from less
than 10 million tons in 1994 to about 85 million in 2002--from 2
percent of world grain and soybean trade to 25 percent. This growth
limited U.S. exports and market prices. However, in 2003, exports from
these competitors has fallen back following lower production in the
former SU, China and India, helping to boost U.S. exports and farm
prices.
Horticultural markets have become an important contributor to farm
income for all size producers. For 2003, cash receipts from fruits,
vegetables and greenhouse and nursery crops are forecast to be $45.3
billion, up 2 percent from last year and 17 percent over 1998. In 2004,
we look for larger crops of citrus and processing vegetables while
prices for deciduous fruits are strong on tight world supplies. With
average weather, farm receipts for fresh vegetables are expected to
decline as prices retreat from the strong levels of the past couple of
years. Exports for fiscal year 2004 are forecast at $12.8 billion, up
substantially from last year's $11.9 billion.
Outlook for Livestock, Poultry and Dairy
Reduced supplies of red meat and nearly stable production of
poultry and milk combined with increasing demand led to higher
livestock and milk prices in 2003. The livestock sector was poised for
another boom year in 2004, as red meat production continued its
cyclical decline and milk production continued to lag. While the
discovery in Washington of BSE in late December has severely reduced
beef exports and outbreaks of Avian Influenza have lowered poultry
exports, livestock prices continue to remain well above 2 year ago
levels and market fundamentals generally remain quite strong. Higher
feed costs could also lower returns in 2004, especially if feed grain
and soybean yields fall below trend.
Beef supplies became progressively tighter throughout 2003 and
markets were forced to adjust to these tight supplies by rationing
product. Production for the year was down about 3 percent, with fourth-
quarter production down 12 percent. Beef prices rose through mid-
October and sharply higher prices encouraged cattle feeders to market
cattle ahead of schedule. Fewer of these lighter weight animals graded
Choice and Prime. Monthly fed cattle prices peaked in October at
$105.50 per cwt, up nearly 62 percent from a year earlier. Over the
entire year, the price of choice steers averaged a record $84.69 per
cwt in 2003, compared with $67.04 per cwt one year earlier.
Strong demand for meat protein by consumers; the improving global
economy; the improving restaurant and hotel business, which uses
higher-valued meat cuts such as Choice beef; and Japan's consumer
recovery after its BSE issues, combined with a steadily declining U.S.
cattle inventory, all pointed toward another year of record-high cattle
prices in 2004. With the finding of BSE and subsequent loss in beef
exports, which are currently projected to decline by 83 percent in
2004, more beef will have to be consumed in the U.S. market, and that
means a decline in prices must occur to absorb the higher domestic
supplies. USDA has reduced its 2004 fed cattle price projection from
$87.50 per cwt before BSE to its current forecast of $76.50 per cwt,
down 13 percent. Despite the projected drop, fed cattle prices would
still be the second highest on record.
The fed cattle price forecast assumes that the countries that have
bans on the importation of U.S. beef will continue to do so throughout
2004. This is an assumption for forecast purposes and reflects the
current policies of importing countries, which could change over the
coming months. Mexico recently announced they are lifting the ban on
boneless U.S. beef from animals under 30 months and, over the next
several months, additional restrictions could be lifted allowing for
increased exports that would lend further support to cattle prices in
2004.
In 2003, pork production increased 1.6 percent to a record 20
billion pounds. Hog imports from Canada climbed to more than 7.4
million head last year, up 30 percent from a year earlier. Two-thirds
of these imported hogs were feeder pigs destined for finishing
operations in the Midwest. Despite the increase in pork supplies, the
price of slaughter hogs averaged $39.45 per cwt in 2003, up from $34.92
in 2002, as tight supplies of beef boosted the demand for pork.
Pork production is expected to reach a record 20.3 billion pounds
in 2004, an increase of 1.3 percent. During the first quarter, hog
prices averaged about 20 percent above a year ago, while pork
production ran 3 percent ahead of last year. Consumer interest in high
protein diets, relatively high prices for substitute animal proteins,
and strong Asian demand for U.S. pork products are the major factors
contributing to the increase in hog prices. For the entire year, the
price of slaughter hogs is forecast to average about $1 per cwt higher
than last year.
In 2004, U.S. pork exports are forecast to increase 6 percent to
1.8 billion pounds, which follows nearly a 7 percent increase in 2003.
Major factors supporting the increase in pork exports are the lower
valued U.S. dollar, global economic growth, and disease-related foreign
market closures to beef and poultry.
In 2003, broiler production increased 1.6 percent to 32.7 billion
pounds. The production increase reflected higher average weight at
slaughter as total broiler slaughter declined slightly. Relatively
small growth in broiler production, higher prices for competing meat
products and an improving domestic economy pushed broiler prices well
above year-earlier levels. In 2003, whole-bird broiler prices averaged
62 cents per pound, up from 55.6 cents per pound in 2002.
Strong United States demand for chicken is expected to lead to
record high broiler prices in 2004, despite a 3.6-percent increase in
production and little growth in exports. In 2003, broiler exports grew
2.6 percent and were expected to grow 7 percent in 2004 prior to the
outbreaks of Avian Influenza in Delaware, New Jersey, Pennsylvania,
Texas and Maryland. These outbreaks led several countries to restrict
the importation of all U.S. poultry, causing USDA to lower its poultry
export forecast. It is likely that the countries currently banning all
U.S. poultry shipments will eventually allow exports of U.S. poultry
from selected States, provided there are no further outbreaks. The
timetable for this regionalization process will vary from country to
country. For example, Mexico recently announced that it would allow
broiler shipments from selected States.
In 2003, milk production increased by just 0.1 percent, as cow
numbers fell by 0.6 percent and milk production per cow rose by 0.8
percent. Factors contributing to the sluggish growth in milk production
per cow included low milk prices relative to concentrate feed prices,
tight supplies of good quality hay, an unusually large share of first-
calf heifers, and somewhat conservative use of recombinant bovine
somatotropin (rBST). Low milk prices, especially during the first half
of 2003, probably made producers leery of using rBST on below-average
producing cows.
Milk cow numbers declined rapidly during the last three quarters of
2003. During the first quarter, the number of milk cows averaged 0.3
percent above a year earlier but averaged 1.4 percent below a year
earlier during the final three quarters of 2003. Tightening milk
supplies caused milk prices to average $13.80 per cwt during the second
half of 2003, compared with $11.22 per cwt during the first half of
2003. For the entire year, the all-milk price averaged $12.51 per cwt
in 2003, up from $12.19 per cwt in 2002.
The Commodity Credit Corporation (CCC) continues to purchase large
quantities of nonfat dry milk under the price support program, and
during most of 2003, made payments to producers under the Milk Income
Loss Contract (MILC) program. In 2003, the CCC purchased 670 million
pounds of nonfat dry milk, down slightly from the 680 million pounds
purchased last year. In 2003, the payment rate under the MILC program
averaged $1.09 per cwt.
Milk production is expected to be about unchanged in 2004, as cow
numbers continue to decline and the expansion in milk production per
cow continues to be below trend. Monsanto has announced that it will
accept no new rBST customers in 2004 and that established users will be
allowed only half their normal purchases. Stagnant production combined
with stronger demand for dairy products is expected to lead to much
higher milk prices in 2004. The all-milk price is projected to average
$14.30 per cwt in 2004, which would be the fifth highest on record.
Still, USDA will probably again purchase in excess of 500 million
pounds of nonfat dry milk, as that market continues in surplus.
Outlook for Farm Income
For major commodities, the current USDA published forecasts for the
2003/2004 marketing year for crops and the 2004 calendar year for
livestock are all well above the previous 5-year average farm prices.
The only commodity showing a decline is hogs.
With trend production and a continuing close balance between supply
and demand in most crop markets, we forecast the value of crop
production will be record high in 2004. Also, despite the adverse
effects of BSE and Avian Influenza on U.S. beef and poultry exports,
the value of livestock and poultry production is expected to exceed
$100 billion for only the third time in history. The drop in cattle and
calf receipts, somewhat higher production expenses and lower government
payments will reduce farm income from 2003's record high of $63 billion
in 2002. Net cash farm income is forecast at about $56 billion, down 11
percent from 2003. However, this income level would be the same as the
average of the past two years.
An indicator of the underlying fundamental strength of commodity
markets is farm income excluding government payments. In 2000, net cash
farm income excluding government payments hit a cyclical low of $34
billion. This year, net cash farm income excluding government payments,
is forecast at over $45 billion, up 35 percent since 2000. As markets
have strengthened, payments based on prices have declined, so that more
of net cash income is now coming from market sales. Government payments
in 2004 are forecast at $10.3 billion, down from more than $17 billion
in 2003, and the lowest level since 1997.
Farm production expenses are expected to register another gain in
2004. In 2003, total farm production expenses increased $11 billion to
$204 billion. Higher prices for feed and feeder livestock accounted for
about one-third and higher prices for energy-related inputs comprised
about 40 percent of the increase in production expenses in 2003. In
2004, total production expenses are forecast to reach a record $207.5
billion, as prices of a variety of farm inputs are projected to
register gains.
The reduction in earnings from farm sources will have a small
effect across the majority of households that operate residential and
intermediate size farms, as their incomes are derived mostly off the
farm. The incomes of households that run commercial-size operations
will be lower in 2004, yet their average incomes will likely remain
well above the average incomes of other farm households and all U.S.
households.
With another sound income year in prospect, farmland values may
rise 3.5 percent in 2004, compared with 4 percent annual gains in the
1990s and 5 percent in recent years. This increase would continue the
improvement in the farm sector balance sheet that we saw in 2003. While
this is a positive economic picture for U.S. production agriculture in
2004, risks to the outlook include potential consequences of continued
production growth in Brazil and other emerging competitors, tight oil
supplies and high prices for energy-related inputs, the closure of
export markets due to animal diseases and, as always, the weather here
and abroad.
That completes my statement, and I will be happy to respond to any
questions.
Senator Bennett. Thank you very much. Dr. Penn.
STATEMENT OF J.B. PENN
Dr. Penn. Thank you, Mr. Chairman.
It is a pleasure to be with you again this year and to
present the budget for the Farm and Foreign Agricultural
Services mission area of the Department. If you will recall,
this mission area is comprised of the Farm Service Agency, the
Risk Management Agency, and the Foreign Agricultural Service.
I understand that you have already had an opportunity to
review my prepared statement, so I will be very brief in my
opening remarks.
Senator Bennett. All of the prepared statements will be
printed in the record.
Dr. Penn. Thank you.
Let me begin by mentioning the role of the Farm and Foreign
Ag Services mission area within the entire Department. Our
agencies provide a broad array of services that are the
foundation for USDA's efforts to ensure the continued economic
health and vitality of American agriculture. During the past
year, the FFAS agencies continued to be heavily involved in
these activities. We continued implementation of the far-
reaching and complex 2002 Farm Bill and the supplemental
emergency disaster assistance that was included in the 2003
Omnibus Appropriations Act.
We maintained our strong commitment to keeping the Federal
Crop Insurance Program a vital component of the overall safety
net for our Nation's farmers and ranchers. The Risk Management
Agency is currently renegotiating the Standard Reinsurance
Agreement for delivering the risk management products through
private companies. At the same time, we have actively supported
the very ambitious trade agenda that will reduce trade barriers
and open new markets overseas, and we have expanded our efforts
to keep existing markets open.
For the past three and a half months, we have been working
very hard to reopen the markets that were closed due to the BSE
and avian influenza incidents. The budget proposals that we are
discussing today fully support continuation of these
activities.
FARM SERVICE AGENCY
I would first turn to the Farm Service Agency. This is our
key agency for delivering farm assistance. This agency is
located in about 2,400 offices throughout the country, and it
is the one that farmers and ranchers deal with most frequently.
The budget that we are proposing places a priority on
maintaining FSA's ability to provide efficient, responsive
services to our producers. It provides $1.3 billion for FSA
salaries and expenses, which will support about 6,000 Federal
staff years and approximately 10,300 county non-Federal staff
years. The budget also provides an additional 100 Federal staff
years to improve service to farm credit borrowers in our
service centers.
Implementing new technology is absolutely critical to our
continued efficiency gains and to providing increasingly better
services in the future. This includes new automation tools and
the geospatial information system, GIS. The budget for the
Office of the Chief Information Officer includes an $18 million
increase that will provide for essential investments in the
capability of FSA and the other service center agencies to
improve services.
RISK MANAGEMENT AGENCY
Turning now to the Risk Management Agency, the Federal Crop
Insurance Program plays a very key role in helping producers
manage their risk. The 2005 budget requests an appropriation of
such sums as may be necessary for the mandatory costs of the
program, and this will provide the necessary resources to meet
program expenses at whatever level of coverage producers choose
to purchase.
The budget provides $92 million for RMA salaries and
expenses. That is an increase of $21 million over 2004, and
this net increase includes additional funding for information
technology, increased staff years to improve monitoring of the
insurance companies, and pay costs. About $16 million of the
$21 million increase is for new information technology for RMA.
The core information technology systems that RMA now uses are
over 15 years old, and that is very ancient by IT standards.
Over that time, the size and scope of the crop insurance
program has increased dramatically, dramatically placing
incredible strain on this aging system. So about $7 million of
this increase will provide for the development of a new IT
system, and $9 million will be for IT infrastructure
improvements.
FOREIGN AGRICULTURAL SERVICE
And finally, Mr. Chairman, turning to the Foreign
Agricultural Service and our international activities, the
importance of trade for American agriculture cannot be
overstated, as Dr. Collins indicated in his remarks. If we are
to ensure continued income growth for our producers, we must
expand market opportunities overseas.
Now, our budget proposals provide a program level of $148
million for FAS activities in 2005. That is an increase of $12
million over 2004. These increases include funding to meet
higher overseas operating costs and improved telecommunications
systems at FAS overseas offices. And as we have noted before,
FAS carries out its activities through a network of 80 overseas
offices and the headquarters here in Washington.
Recent significant declines in the value of the dollar
coupled with overseas inflation and rising wage rates have led
to sharply higher costs that must be accommodated if FAS is to
maintain its overseas presence. That presence is vital for FAS
to represent the interests of American agriculture on a global
basis and implement the Department's trade promotion programs
effectively.
Funding is also included for an FAS global computing
environment initiative to modernize the agency's information
technology systems. There is an urgent need for this additional
funding. Our current systems are outdated; they have proven to
be outdated, and they are inhibiting the ability of the agency
to communicate effectively between Washington and the foreign
posts.
Also, this ancient system does not allow participation in
the new e-government initiatives with other U.S. trade agencies
that are designed to provide more efficient services to the
public and help bolster our trade expansion efforts. So this
proposed initiative would allow FAS to modernize its IT systems
and improve its services to agricultural producers, exporters,
and the various market development organizations.
And I want to mention in closing, Mr. Chairman, that the
United States continues to be a leader in global food aid
efforts. We provide over one half of all of the food assistance
that is provided in the world. That commitment is demonstrated
by the fact that Public Law 480 program, the Food for Peace
program, will observe its 50th anniversary in July of this
year.
Now, our 2005 budget proposal supports a program level of
over $1.5 billion for U.S. foreign food assistance activities.
This includes $1.3 billion for Public Law 480 credit and
donation programs. The newest of the food assistance activities
is the McGovern-Dole International Food for Education and Child
Nutrition Program. This program was successfully implemented in
2003. We had projects in 21 countries that fed 2.3 million
women and children. The budget provides for a request of $75
million for the program, which is an increase of 50 percent
over 2004.
PREPARED STATEMENTS
So in closing, Mr. Chairman, I would note that we think
that these are very modest and very positive budget proposals
that ensure we can continue to provide service to our
producers. We appreciate the support of this Committee for our
mission area in the past, and we look forward to working with
you in the future on behalf of the agricultural sector.
Thank you, sir.
[The statements follow:]
Prepared Statement of J.B. Penn
Mr. Chairman and Members of the Committee, I am pleased to appear
before you this afternoon to present the 2005 budget and program
proposals for the Farm and Foreign Agricultural Services (FFAS) mission
area of the Department of Agriculture (USDA). The FFAS mission area is
comprised of three agencies: the Farm Service Agency; Risk Management
Agency; and Foreign Agricultural Service.
Statements by the Administrators of the FFAS agencies, which
provide details on their budget and program proposals for 2005, have
already been submitted to the Committee. My statement will summarize
those proposals, after which I will be pleased to respond to any
questions you may have.
Mr. Chairman, one of the five primary goals in the Department's
strategic plan is to ``enhance economic opportunities for American
agricultural producers.'' The programs and services of the FFAS mission
area are at the heart of the Department's efforts to achieve that goal.
Through the wide range of services provided by our agencies--price and
income supports, farm credit assistance, risk management tools,
conservation assistance, and trade expansion and export promotion
programs--we provide the foundation for ensuring the future economic
health and vitality of American agriculture.
This past year, the FFAS agencies and programs were challenged by a
number of significant developments to which they responded effectively.
They continued to implement the far reaching and complex Farm Security
and Rural Investment Act of 2002 (2002 Farm Bill), and they implemented
the supplemental emergency disaster assistance provisions of the 2003
omnibus appropriations act. At the same time, the workload associated
with our trade negotiation and enforcement responsibilities has
continued to grow, and 2004 will be a critical year for negotiations
aimed at further reducing trade barriers and opening new markets
overseas, as well as reestablishing export markets following the recent
incidents of bovine spongiform encephalopathy (BSE) and avian
influenza.
The 2005 budget proposals we are discussing today fully support
continuation of these activities and ensure our continued efforts on
behalf of America's agricultural producers. In particular, the budget
supports the operations of the domestic commodity and income support,
conservation, trade, and related programs provided by the Farm Bill. It
fully funds our risk management and crop insurance activities. It
supports the Administration's export expansion goals by providing a
program level of over $6 billion for the Department's international
activities and programs. Also, it provides for the continued delivery
of a large and complex set of farm and related assistance programs,
while improving management and the delivery of those programs.
Farm Service Agency
The Farm Service Agency (FSA) is our key agency for delivering farm
assistance. It is the agency that the majority of farmers and ranchers
interact with most frequently. Producers rely on FSA to access farm
programs such as direct and countercyclical payments, commodity
marketing assistance loans, loan deficiency payments, farm ownership
and operating loans, disaster assistance, and certain conservation
programs such as the Conservation Reserve Program (CRP). Because FSA is
the primary delivery agency for most of the major farm assistance
programs, the budget places a priority on maintaining and enhancing
FSA's ability to provide efficient, responsive services to our
producers.
Farm Program Delivery
The 2002 Farm Bill required the FSA to undertake a massive task of
implementing a complex set of new farm programs within a short time
period. FSA has successfully put these programs in place in less than 2
years since the Bill was enacted. Nearly two million producers were
signed up quickly under the new direct and countercyclical payments
program. Several billion dollars of direct and countercyclical payments
have been paid out; a new Milk Income Loss Contract program was
implemented and over $1.8 billion has been paid so far to eligible
producers; and the peanut program has been radically transformed and
$1.2 billion of peanut quota buyout payments have been made. At the
same time as these and other new programs were being implemented, FSA
successfully programmed over $3 billion in disaster assistance required
by the Agricultural Assistance Act of 2003. These programs and
improving markets combined to provide the Nation's farmers with a
record level of net cash income in 2003.
The massive workload associated with implementing these programs
over the past 2 years is now moderating. As a consequence, FSA has
begun to reduce the number of temporary, non-Federal county office
staff years from the roughly 3,000 staff years in 2003, to about 1,000
staff years provided for in the 2005 budget. The proposed 2005 level
for FSA salaries and expenses of $1.3 billion will support about 6,000
Federal staff years and nearly 10,300 county non-Federal staff years,
including the 1,000 temporary staff years. Permanent non-Federal
staffing will remain near the levels of 2003 and 2004 to accommodate
the essential ongoing workload of the agency. The budget also will
provide an additional 100 Federal staff years to improve service to
farm credit borrowers in our Service Centers.
High priority is being placed on enhancing services to FSA's
clientele by improving agency operations and expanding diversity of the
customer base and staff. Improvements in operations based on new
automation tools and Geospatial Information Systems (GIS) are coming on
line and promise increasingly better services in the future. The budget
for the Office of the Chief Information Office includes an $18 million
increase for Service Center Modernization that will provide for
essential investments in the capability for FSA and the other Service
Center agencies to improve services to producers.
FSA has already utilized newly modernized systems for a recent
sign-up for the CRP to reduce costs and improve timeliness. Work is
underway to continue modernization improvements in other program areas,
including farm loan servicing.
Conservation
The 2002 Farm Bill provided for significant growth in the
Department's conservation programs. The CRP, which is funded by the
Commodity Credit Corporation (CCC) and administered by FSA, was among
the programs that expanded. A general sign-up in 2003 added nearly 2
million acres to the CRP. Also, 430,000 acres were added under
continuous and Farmable Wetlands Program (FWP) sign-ups.
The 2005 budget assumes a general sign-up in 2004 of about 800,000
acres, and none in 2005. In addition, about 450,000 acres are projected
to be enrolled under continuous sign-up and the Conservation Reserve
Enhancement Program (CREP) in each of 2004 and 2005. The FWP is
estimated to be expanded by about 50,000 acres in each of 2004 and
2005. In total, CRP is projected to increase gradually from 34.1
million acres at the end of 2003 to 39.2 million acres by 2008.
Commodity Credit Corporation
Domestic farm commodity price and income support programs are
financed through the CCC, a Government corporation for which FSA
provides operating personnel. The CCC also provides funding for
conservation programs including the CRP and certain programs
administered by the Natural Resources Conservation Service. In
addition, CCC funds many of the export programs administered by the
Foreign Agricultural Service.
CCC net expenditures were $17.4 billion in 2003. This level is
expected to decline to an estimated $14.8 billion in 2004, and then
increase slightly to $15.0 billion in 2005. However, these estimates
are sensitive to changing supply and demand conditions for the
supported farm commodities and may change as we move forward.
Annual appropriations acts authorize CCC to replenish its borrowing
authority as needed from the Treasury up to the amount of realized
losses at the end of this preceding year.
Farm Loan Programs
FSA plays a critical role for our Nation's agricultural producers
by providing a variety of direct loans and loan guarantees to farm
families who would otherwise be unable to obtain the credit they need
to continue their farming operations. By law, a substantial portion of
the direct loan funds are reserved each year for assistance to
beginning, limited resource, and socially disadvantaged farmers and
ranchers. For 2005, 70 percent of direct farm ownership loans are
reserved for beginning farmers, and 20 percent are reserved for
socially disadvantaged borrowers, who may also be beginning farmers.
The 2005 budget includes funding for about $937 million in direct
loans and $2.9 billion in guarantees. In recent years, the Department
has used its authority to shift funding from guaranteed operating loans
to meet excess demand in the direct loan programs. The levels requested
for 2005 reflect those shifts and are expected to reflect actual
program demand more accurately. The overall increase in loan levels is
reflective of generally stable to lower subsidy rates for the farm loan
programs, which make those programs less expensive to operate. We
believe the proposed loan levels will be sufficient to meet the demand
in 2005.
The 2005 budget maintains funding of $2 million for the Indian Land
Acquisition program. For the Boll Weevil Eradication loan program, the
budget requests $60 million, a reduction of $40 million from 2004. This
reduction is due to the successful completion of eradication efforts in
several areas. The amount requested is expected to provide full funding
for those eradication programs operating in 2005. For emergency
disaster loans, the budget requests $25 million. No additional funding
was requested for emergency loans in 2004 due to carryover funding from
2003. About $191 million is currently available for use in 2004, and a
portion of that is likely to carry over into 2005. The combined request
and anticipated carryover are expected to provide sufficient credit in
2005 to producers whose farming operations have been damaged by natural
disasters.
risk management agency
The Federal crop insurance program represents one of the strongest
safety net programs available to our Nation's agricultural producers.
It reflects the principles contained in the Department's Food and
Agricultural Policy report of 2001 by providing risk management tools
that are compatible with international trade commitments, creates
products and services that are market driven, harnesses the strengths
of both the public and private sectors, and reflects the diversity of
the agricultural sector.
In 2003, the crop insurance program provided about $41 billion in
protection on over 218 million acres, which is about one million acres
more than were insured in 2002. Our current projection is that
indemnity payments to producers on their 2003 crops will be about $3.3
billion which is about $800 million less than in 2002.
The crop insurance program has seen a significant shift in business
over the past several years--producers have chosen to buy up to higher
levels of coverage as a result of increased premium subsidies provided
in the Agricultural Risk Protection Act of 2000 (ARPA). The number of
policies, acres, liability, and premium all increased more than 40
percent for coverage levels 70 percent and higher.
Our current projection for 2005 shows a modest decrease in
participation. This projection is based on USDA's latest estimates of
planted acreage and expected market prices for the major agricultural
crops, and assumes that producer participation remains essentially the
same as it was in 2003.
The 2005 budget requests an appropriation of ``such sums as may be
necessary'' as mandatory spending for all costs associated with the
program, except for Federal salaries and expenses. This level of
funding will provide the necessary resources to meet program expenses
at whatever level of coverage producers choose to purchase. For
salaries and expenses of the Risk Management Agency (RMA), $92 million
in discretionary spending is proposed, an increase of $21 million above
the 2004 level of $71 million. This net increase includes additional
funding for information technology (IT), increased staff years to
improve monitoring of the insurance companies, and pay costs.
Nearly every RMA function or activity is in some part dependent on
IT. All of their databases, internal controls, payments to producers
and companies are tied to IT. All of RMA's rates, prices, products,
training and financial activity also depend on this technology.
Because RMA core IT systems are 15 years old, they no longer meet
the minimum requirements mandated by the Department for security,
architecture, and e-Government initiatives. In addition, ARPA funds
that were earmarked for data mining and other compliance activities
will be depleted at the end of this fiscal year, and there are no
alternative funding sources available.
ARPA mandated and funded a substantial increase in the number and
reach of risk management tools for America's producers and the RMA is
meeting the challenge. Approximately 80 new risk management tools are
in various stages of development and deployment. However, RMA's ability
to maintain the integrity and effectiveness of the critical systems
that support the growing portfolio of risk management tools that serve
America's agricultural producers is being threatened due to an aging IT
system. Unless the situation is corrected, RMA will be required to make
some difficult resource choices that will unavoidably and negatively
affect its ability to support safe and effective development,
deployment and regulation of these important risk management tools.
Several major changes have also occurred over that time in the way
producers protect their operations from losses. In 1994, there were no
plans of insurance which offered protection against changes in market
prices. Today, over 50 percent of the covered acreage has revenue
protection, and nearly 62 percent of the premium collected is for
revenue based protection. In addition, ARPA authorized the development
of insurance products to protect livestock. Because livestock
production occurs year-round, these products must be priced and sold in
a different manner than traditional crop insurance. The advent of new
types of insurance, not contemplated when the IT system was designed,
has placed tremendous strain on the aging system.
ARPA also instituted new data reconciliation, data mining and other
anti-fraud, waste and abuse activities that require the data to be used
in a variety of new ways. The current IT system was not designed to
handle these types of data operations. Consequently, the data must be
stored in multiple databases which increases data storage costs and
processing times and increases the risk of data errors.
The development of the new IT system will result in some additional
up-front costs to the Government. Until the new system is fully
operational, we will be required to finance both the developmental
costs as well as the increasingly expensive maintenance costs of the
legacy system. However, once the new system is operational, the legacy
system will be eliminated and a substantial reduction in maintenance
costs is projected.
Finally, I would note that this budget for the RMA includes a
request for 30 additional staff years. The additional staff will
provide needed support in employing advanced technology-based methods
to detect and prosecute fraud, waste and abuse; following up on
referrals from FSA, OIG and the public; making recommendations for
formal fraud investigations to OIG; and supporting OIG and U.S.
Attorneys' offices on fraud cases. They also will address outstanding
OIG and GAO recommendations to improve oversight and internal controls
over insurance providers; monitor and manage contractual agreements and
partnerships with the public and private business sectors; and support
the review and evaluation by the FCIC Board of Directors of the
increasing number of new private product submissions received each
year. All of these activities result in savings to the program far in
excess of their cost through enhanced program oversight and avoidance,
detection and remediation of program fraud, waste and abuse.
foreign agricultural service
Trade is critically important for American agriculture, and the
Department's work to expand overseas markets and promote trade is one
the primary means we have to enhance economic opportunities for our
farmers and ranchers. With gains in productive capacity continuing to
outpace growth in demand here at home, the economic growth and future
prosperity of America's farmers and ranchers will depend heavily upon
our continued success in reducing trade barriers and expanding exports.
The Department's efforts to expand trade are carried out on
multiple fronts. At the center of these activities is the negotiation
of trade agreements that will reduce barriers and improve access to
overseas markets. We continue our efforts to reach a new agreement
through the World Trade Organization (WTO) that will provide for
further, significant liberalization of global agricultural trade.
Although the Cancun Ministerial was a missed opportunity, the benefits
of a successful negotiation for all trading partners remain clear and,
on that basis, we continue our efforts to advance the negotiating
process. Negotiations on agriculture resumed last month, and we are
hopeful that a Ministerial meeting to set the stage for a conclusion to
the negotiations can be held by the end of this year. Our objectives
for the negotiations remain the elimination of export subsidies,
improvement in market access through substantial reductions in tariffs,
and reduction in trade-distorting domestic support.
Regional and bilateral trade agreements also provide an important
avenue for opening new markets, and the Department is an important
participant in the ambitious agenda that has been established for
negotiating such agreements. Recently, the United States concluded
successful negotiations for a Central American Free Trade Area that
will create new opportunities in this nearby and growing market of over
35 million consumers. Negotiations also have been concluded recently
with Australia and Morocco. Other negotiations currently underway will
establish the Free Trade Area of the Americas and an agreement with the
Southern African Customs Union. Negotiations expected to begin later
this year will involve the Andean countries, as well as bilateral
agreements with Bahrain, Panama, and Thailand.
While these important efforts to negotiate market-opening
agreements move forward, we also are increasing our activities to
monitor compliance with existing agreements and ensure that U.S. trade
rights are protected. During the past year, we have worked to solve a
significant number of trade problems, including China's implementation
of its WTO accession commitments on tariff-rate quota administration
and export subsidy obligations, and Mexico's implementation of the
provisions of the North American Free Trade Agreement.
At the same time, we are addressing other technical barriers to
trade that arise because the adoption of non-science based standards
and resistance to the adoption of new technologies, such as
biotechnology. In this regard, we were encouraged by China's
announcement in February that it had completed its regulatory review
and issued permanent safety certificates for Roundup Ready soybeans, as
well as for two corn and two cotton products. This is extremely
positive news as China is now the leading foreign customer for U.S.
soybeans and cotton.
At present, we are confronted with the challenge of reopening
foreign markets that have been closed due to the discovery of the one
case of BSE and the recent outbreaks of avian influenza in the United
States. We understand the critical importance of reopening these
markets as soon as possible, and we have committed, and will continue
to commit, the resources and energy necessary to resolve these
situations and resume normal trade. With that as our goal, we were very
pleased with last month's announcement by Mexico of the reopening of
their border to U.S. beef products.
FAS Salaries and Expenses
The Foreign Agricultural Service (FAS) is the lead agency for the
Department's international activities and is at the forefront of our
efforts to expand and preserve overseas markets. Through its network of
80 overseas offices and its headquarters staff here in Washington, FAS
carries out a wide variety of activities that contribute to the goal of
expanding overseas market opportunities.
Our budget proposals provide a program level of $148 million for
FAS activities in 2005. This is an increase above the 2004 level of
nearly $12 million and is designed to ensure the agency's continued
ability to conduct its activities effectively and provide important
services to U.S. agriculture.
The proposed increase includes funding to meet higher overseas
operating costs and improve telecommunications systems at FAS' overseas
offices. FAS is unique as a USDA agency because a sizeable component of
the agency's operational costs are vulnerable to macroeconomic
developments beyond its control. Recent significant declines in the
value of the dollar, coupled with overseas inflation and rising wage
rates, have led to sharply higher costs that must be accommodated if
FAS is to maintain its overseas presence. That presence is critical for
FAS to represent the interests of American agriculture on a global
basis, for its continued reporting and analysis of agricultural
developments around the world, and for effective implementation of
USDA's trade promotion and market development programs.
Funding also is included for an FAS Global Computing Environment
initiative to modernize the agency's information technology systems and
applications. There is an urgent need for additional funding because
the current systems are outdated, have proven to be unreliable, and are
inhibiting our ability to communicate effectively between Washington,
D.C. and foreign posts. They also do not allow participation in e-
Government initiatives with other U.S. trade agencies that are designed
to provide more efficient services to the public and help bolster U.S.
trade expansion efforts. The proposed initiative will allow FAS to
modernize and restructure its IT systems, and improve the services it
provides to U.S. agricultural producers, exporters, and market
development organizations.
Finally, the budget also provides increased funding for FAS to meet
the higher pay costs in 2005.
Export Promotion and Market Development Programs
FAS administers the Department's export promotion and market
development programs which play a key role in our efforts to assist
American producers and exporters to take advantage of new market
opportunities, including those created through market-opening trade
agreements.
The largest of these programs are the CCC export credit guarantees,
which help to ensure that credit is available to finance commercial
exports of U.S. agricultural products. As overseas markets for U.S.
agricultural products continue to improve, that improvement will be
reflected in export sales facilitated under the guarantee programs. For
2005, the budget projects a program level of $4.5 billion for the
guarantee programs, an increase of just over $250 million above the
current estimate for 2004.
For the Department's market development programs, including the
Market Access Program and Foreign Market Development Cooperator
Program, the budget provides funding of $173 million, unchanged from
this year's level. The budget also includes $53 million for the Dairy
Export Incentive Program and $28 million for the Export Enhancement
Program.
Trade Adjustment Assistance for Farmers
For the newly implemented Trade Adjustment Assistance (TAA) for
Farmers Program, the budget includes a program level of $90 million, as
authorized by the Trade Act of 2002. The TAA program provides
assistance to producers of raw agricultural commodities who have
suffered lower prices due to import competition, and to fisherman who
compete with imported aquaculture producers. In order to qualify for
assistance, the price received by producers of a specified commodity
during the most recent marketing year must be less than 80 percent of
the national average price during the previous 5 marketing years. Also,
a determination must be made that increases in imports of like or
competitive products ``contributed importantly'' to the decline in
prices.
Since the program was implemented last August, 12 petitions for
assistance have been approved involving five different products--wild
blueberries, salmon, shrimp, catfish, and lychee fruit. Once a petition
is approved, producers have 90 days to apply for benefits. Eligible
producers receive technical assistance and cash benefits of up to
$10,000 per producer. We expect to begin making the first payments
under the program within the next several months once the producer
application periods have closed.
International Food Assistance
The efficiency and productivity of our producers allows the United
States to be a leader in global food aid efforts, and the United States
continues to provide over one-half of the world food assistance. The
commitment of the United States to these activities is demonstrated by
the fact that the Public Law 480 program, our primary vehicle for
providing food assistance overseas, will observe its 50th anniversary
in July of this year.
The 2005 budget supports a program level of over $1.5 billion for
U.S. foreign food assistance activities. This includes $1.3 billion for
the Public Law 480 Title I credit and Title II donation programs, which
is expected to support the export of 3.2 million metric tons of
commodity assistance.
The newest of our food assistance activities is the McGovern-Dole
International Food for Education and Child Nutrition Program, which was
authorized in the 2002 Farm Bill. FAS successfully implemented the
program in 2003, and projects were approved in 21 countries where
nearly 2.3 million women and children will benefit. Beginning in 2004,
the Farm Bill requires the McGovern-Dole program to be funded through
discretionary appropriations, and the 2004 Omnibus Appropriations Act
provides a program level of $50 million for the program. The 2005
budget requests that program funding be increased by 50 percent to $75
million.
In addition, the budget includes an estimated program level of $149
million for the CCC-funded Food for Progress program. This is expected
to support 400,000 metric tons of assistance consistent the authorizing
statute. The budget also assumes that donations of nonfat dry milk with
continue under the authority of section 416(b) of the Agricultural Act
of 1949. The total value of the commodity assistance and associated
costs is projected to be $147 million.
That concludes my statement, Mr. Chairman. I would be pleased to
answer any questions that you and other Members of the Committee may
have. Thank you.
______
Prepared Statement of James R. Little, Administrator, Farm Service
Agency
Mr. Chairman and Members of the Subcommittee, I appreciate the
opportunity to present the fiscal year 2005 budget for the Farm Service
Agency (FSA). Since we met last year, I am pleased to report that FSA
successfully completed its implementation of the most complicated farm
bill ever--the Farm Security and Rural Investment Act of 2002 (Farm
Bill)--as well as the 2003 ad hoc disaster bill--the Disaster
Assistance Act of 2003 (Disaster Bill). We signed up nearly 2 million
producers in one of the most complex yet quickly implemented signups
ever conducted and also began and completed the multi-faceted and
extremely complicated Disaster Bill. In total, we have paid out over
$19 billion--$11.1 billion in direct and countercyclical payments, over
$1 billion in benefits to the livestock industry, over $1.8 billion in
Milk Income Loss Contract payments, $1.2 billion in peanut quota buyout
payments, and $2.4 billion in disaster assistance. These and other
programs contributed significantly to record farm income in 2003.
For the first time since 1997, FSA is not absorbed in
simultaneously implementing multiple provisions of either ad hoc
disaster legislation or a new farm bill, and our employees deserve
considerable recognition for a job well done. As we look forward to
fiscal year 2005 and beyond, we are taking stock and directing our
attention to enhancing customer service. We have begun a number of
projects and initiatives designed to achieve substantial and systemic
improvements that will position us for more rapid implementation of the
next farm bill or any ad hoc provisions that might come our way. Our
fiscal year 2005 budget request supports these initiatives. Before
discussing specifics of the budget, however, I would like to briefly
highlight some of the efforts we already have under way which will be
bolstered by our fiscal year 2005 request.
With the ultimate goal of better serving our customers, FSA is
focusing on four areas, all coupled with the President's Management
Agenda: Budget and Performance Integration, eGovernment, Human Capital,
and improving Financial Performance.
Budget and Performance Integration
FSA is overhauling its existing 5-year Strategic Plan to create a
much more effective tool for telling our story--the results FSA will
deliver to the American public. The new plan will be used to guide the
way we carry out our mission. The plan will better support and link to
our budget in how we identify and justify the financial, personnel, and
other resources necessary to best deliver our programs and measure
results. For the fiscal year 2005 Budget process, we worked with OMB to
identify four of FSA's programs--Commodity Credit Corporation (CCC)
Direct Payments, CCC Marketing Loans, Guaranteed Farm Loans, and
Bioenergy--to take part in OMB's Program Assessment Rating Tool (PART)
evaluation process. On a rating scale ranging from a lowest of
``Ineffective'' to the highest of ``Effective,'' the PART reviews rated
CCC Marketing Loans and Guaranteed Farm Loan programs as ``Moderately
Effective'' and our CCC Direct Payments and Bioenergy programs as
``Adequate.'' These ratings indicate that we have to improve our
integration of budget and performance to better demonstrate results.
For example, the guaranteed farm loan PART evaluation found that while
the program serves a clear need, improvements in performance
measurement are needed to more fully understand program impact and the
effectiveness of targeted assistance. As a result, FSA is conducting a
performance-focused review of its loan portfolio, which could lead to
development of additional measures of efficiency and effectiveness.
To make FSA a more results-focused and customer-driven agency, we
are refining our key goals designed to improve agency mission
effectiveness; identifying workable strategies for accomplishing the
goals; and establishing quantifiable measures, so we can effectively
and convincingly gauge our progress. Through a process that started
last fall, we expect by this summer to have a new 5-year Strategic Plan
with a set of credible measures that will be used to support and
justify FSA's fiscal year 2006 Budget and beyond.
eGovernment
Most of the FSA information technology systems used to implement
the Farm Bill and Disaster Bill are COBOL-based and date back to the
1980's, and some of the processes we used date back as many as 40 or 50
years. Through several years of effort, FSA has already begun migrating
these legacy systems under the Service Center Common Computing
Environment initiative. For example, our Geospatial Information System
(GIS) initiative is progressing well. Currently, we have about 50
percent of counties digitized and expect to have the entire Nation
completed in fiscal year 2005. GIS technology will be the cornerstone
of all future FSA system architecture, which I will speak to in a
moment. Also, last year, we completely redesigned the way we conducted
the Conservation Reserve Program general signup held in May and June.
By applying new automation tools, utilizing GIS tools where available,
and linking with Natural Resources Conservation Service databases, we
were able to reduce:
--signup-related technical assistance needs for an estimated savings
of $11.2 million.
--the number of Environmental Benefits Index data entries by 90
percent and the time spent on each offer by 60-70 percent. In
offices with GIS, additional time was saved by outlining
eligible acreage boundaries and calculating acreage by soil map
unit symbol. The calculation of field boundaries saved
producers approximately $160 thousand in measurement service
fees.
--the error rate and validation and cleanup processes by about 80
percent.
--the time between the end of signup and the completion of data for
offer acceptance decision making by about 30 percent, from 10
weeks to 7 weeks.
Last fall, we also purchased a new Farm Business Plan (FBP) that
will completely change the way we interact with our credit customers,
analyze and evaluate farm loan requests, and provide farm business
planning and credit risk analysis for our farmers and ranchers. This
new system, which will significantly improve our overall ability to
provide improved customer service for our most needy customers, will be
phased in Nationwide over the course of the spring and summer and will
require a major training effort that begins the first week in April.
As we continue to migrate all of our legacy systems, we are
undergoing a self-evaluation and are engaged in a range of business
process reengineering (BPR) initiatives to improve the way we operate
in the 21st century, using GIS as the cornerstone. Throughout the
agency, program managers are examining innovative ways to improve their
processes and reduce duplication of effort through automation, web-
based systems, and collaboration.
While BPR generally revolves around automation improvements, we are
looking at processes. The Internet has created great opportunities to
identify better ways to deliver services on-line, giving our farmers
and ranchers more time to be in the field and less time in our Service
Center offices. For example, our Electronic Loan Deficiency Payment
(LDP) process will allow producers to apply for LDP's on-line from
their home or place of business and receive their payments through
electronic funds transfer. This year, FSA is conducting a top-to-bottom
review of all of its business processes to ensure the services we
deliver are the most effective and customer-centered, utilizing today's
technology.
Financial Management
In fiscal year 2003, CCC received, for the second year in a row, an
unqualified audit opinion on its financial statements. We continue to
improve our financial performance by developing system improvements and
establishing controls that will not only maintain the clean opinion,
but also resolve management control weaknesses identified through the
annual financial audit process and other internal and external reviews.
We are also aggressively addressing erroneous payments to ensure
controls are in place to improve the financial integrity of all of
FSA's program delivery and payment processes.
Human Capital
Last year we aligned our human capital plan to support our
strategic plan and the accomplishment of our programmatic goals. One of
the major tasks included a basic analysis of our workforce. That
analysis revealed that over the next 5 years, we are facing the
potential of losing 34 percent of our workforce--a little over 5,100
employees, many in leadership positions--due to retirements alone.
Targeted investments and corrective measures must be implemented in the
coming years to replace the skills, talents, and historical knowledge
of departing employees. The results of our workforce analysis now drive
the major human capital initiatives under way in leadership
development, talent management, and performance management.
For leadership development, we have implemented several management
training programs and are developing others, including leadership
succession programs. To ensure that our current and future employees
have the right talent or skills, especially in mission critical
occupations, we have re-tooled existing training programs and have
begun to develop programs to sustain a better learning environment. In
terms of managing talent, our new 5-year recruitment strategy calls for
annual plans that target specific occupations, improvements in hiring
processes and flexibilities, and steps to become an employer of choice.
And, to ensure a results-driven performance workforce, we have launched
a performance culture initiative to address specific areas where our
managers can more effectively manage people and drive continuous
improvement. In addition, we have begun aligning management performance
plans to the agency's mission, goals and outcomes. This effort will
cascade into the workforce over time. We are also enhancing our efforts
to hold employees accountable for results and differentiate among
levels of performance to improve overall program delivery.
In conjunction with our Human Capital Plan, FSA is committed to
equal employment opportunity in our workforce. Where minorities are
underrepresented among our ranks, FSA is engaging in some aggressive
initiatives to address this deficiency. We are utilizing regional
recruitment teams that will:
--capitalize on our recruitment flexibilities by ensuring that
managers are well versed in appointment authorities such as the
Career Intern Program and the Student Career Experience
Program.
--locate a diversity of quality candidates by working with
institutions of higher education that serve minority
populations; the National Society for Minorities in Agriculture
and Natural Resources and Related Sciences (MANRRS), which is
dedicated to educating minorities about career opportunities in
agriculture; and various minority professional organizations
representing more experienced workers to fill higher level
positions.
--advertise career opportunities through magazines, news
publications, and websites targeted to the relevant minority
audiences.
Achieving a workforce that reflects the population it serves is not
only the right thing to do in principle, it will improve FSA's
reputation and foster an increased sense of trust that will enhance
customer relations.
Civil Rights and Outreach
Equal access to agency programs is fundamental to customer service.
Where problems of disparate treatment exist, our civil rights staff is
working to meet the issue head on. We have conducted reviews in 11
States that had not been reviewed in the last few years. In eight of
those States a corrective action plan is in place to address the
problems discovered. We are continuing to monitor the remaining three,
and we are determined to hold senior management in those States
accountable for providing the leadership needed to eliminate problems
of discrimination. FSA remains dedicated to ensuring that all
employees, regardless of level, are held accountable for superior
customer service, effective communications, and providing all
participants equal access to all FSA programs.
We have established an Office of Minority and Socially
Disadvantaged Farmer Assistance to work with minority and socially
disadvantaged farmers who have concerns and questions about loan
applications they have filed in their Service Centers. Through a
national toll-free telephone help line, we answer producer inquiries
about loan programs and other FSA programs.
To rectify instances where certain producer populations are
underserved, our outreach staff is working to increase participation of
minorities in FSA programs. The staff utilizes a network of State
outreach coordinators and works in conjunction with community-based
organizations, non-profit groups, educational institutions that serve
minorities, and USDA's Cooperative State Research, Education, and
Extension Service to reach small farm operators in local communities.
Some of our activities for 2004 include continued participation in
the highly successful American Indian Credit Outreach Initiative,
refining our translation of FSA program forms into Spanish, and
reaching out to underserved groups by participating in conferences such
as the NAACP National Convention, the Hmong National Conference, the
Asian Pacific American Federal Career Advancement Summit, and the
National Hispanic Farmers and Ranchers Conference.
budget requests
Turning now to the specifics of the 2005 Budget, I would like to
highlight our proposals for the commodity and conservation programs
funded by the Commodity Credit Corporation the (CCC); farm loan
programs of the Agricultural Credit Insurance Fund; our other
appropriated programs; and administrative support.
commodity credit corporation
Domestic farm commodity price and income support programs are
administered by FSA and financed through the CCC, a government
corporation for which FSA provides operating personnel. Commodity
support operations for corn, barley, oats, grain sorghum, wheat and
wheat products, soybeans, minor oilseed crops, upland cotton and extra
long staple cotton, rice, tobacco, milk and milk products, honey,
peanuts, pulse crops, sugar, wool and mohair are facilitated primarily
through loans, payment programs, and purchase programs.
The 2002 Farm Bill authorizes CCC to transfer funds to various
agencies for authorized programs in fiscal years 2002 through 2007. It
is anticipated that in fiscal year 2004, $1.7 billion will be
transferred to other agencies.
The CCC is also the source of funding for the Conservation Reserve
Program (CRP) administered by FSA, as well as many of the conservation
programs administered by the Natural Resources Conservation Service. In
addition, CCC funds many of the export programs administered by the
Foreign Agricultural Service.
Program Outlays
The fiscal year 2005 budget estimates largely reflect supply and
demand assumptions for the 2004 crop, based on November 2003 data. CCC
net expenditures for fiscal year 2005 are estimated at $15.0 billion,
up about $0.2 billion from $14.8 billion in fiscal year 2004.
This small net increase in projected expenditures is attributable
to increases for the counter-cyclical and loan deficiency payment
programs, as well as the Noninsured Assistance Program and CRP, all of
which are mostly offset by decreases in other programs.
Reimbursement for Realized Losses
CCC is authorized to replenish its borrowing authority, as needed,
through annual appropriations up-to-the amount of realized losses
recorded in CCC's financial statements at the end of the preceding
fiscal year. For fiscal year 2003 losses, CCC was reimbursed $22.9
billion.
Conservation Reserve Program
The Conservation Reserve Program (CRP), administered by FSA, is
currently USDA's largest conservation/environmental program. It is
designed to cost-effectively assist farm owners and operators in
conserving and improving soil, water, air, and wildlife resources by
converting highly erodible and other environmentally sensitive acreage,
normally devoted to the production of agricultural commodities, to a
long-term resource-conserving cover. CRP participants enroll acreage
for 10 to 15 years in exchange for annual rental payments as well as
cost-share assistance and technical assistance to install approved
conservation practices. The 2002 Farm Bill increased enrollment under
this program from 36.4 million acres up to 39.2 million acres.
The 2003 general signup I mentioned earlier brought nearly 2
million acres into the CRP. Also in 2003, under continuous and Farmable
Wetlands Program (FWP) signups, a combined total of 430,000 acres was
enrolled. We issued incentive payments totaling approximately $104
million under continuous signup, Conservation Reserve Enhancement
Program (CREP), and FWP under the incentives program that began in May
2000 to boost participation.
The fiscal year 2005 budget assumes general signups in fiscal years
2004 and 2006 to enroll approximately 800,000 acres and 2.5 million
acres, respectively. No general signup is expected in 2005. However, in
each of fiscal years 2004 and 2005, we anticipate enrolling 450,000
acres under continuous signup and the CREP. About 50,000 acres are
estimated to be enrolled in the FWP in fiscal years 2004 and 2005.
Overall, CRP enrollment is assumed to gradually increase from 34.1
million acres at the end of fiscal year 2003 to 39.2 million acres by
fiscal year 2008, and to remain at 39.2 million acres through fiscal
year 2014, maintaining a reserve sufficient to provide for enrollment
of 4.2 million acres in continuous signup and CREP.
farm loan programs
The loan programs funded through the Agricultural Credit Insurance
Fund provide a variety of loans and loan guarantees to farm families
who would otherwise be unable to obtain the credit they need to
continue their farming operations.
The fiscal year 2005 Budget proposes a total program level of about
$3.8 billion. Of this total, approximately $0.9 billion is requested
for direct loans and nearly $2.9 billion for guaranteed loans offered
in cooperation with private lenders. These levels should be sufficient
to provide adequate funding for our most needy farmers and ranchers
throughout the year.
For direct farm ownership loans we are requesting a loan level of
$200 million. The proposed program level would enable FSA to extend
credit to about 1,700 small and beginning farmers to purchase or
maintain a family farm. In accordance with legislative authorities, FSA
has established annual county-by-county participation targets for
members of socially disadvantaged groups based on demographic data.
Also, 70 percent of direct farm ownership loans are reserved for
beginning farmers, and historically about 35 percent are made at a
reduced interest rate to limited resource borrowers, who may also be
beginning farmers. Recently, however, the reduced-rate provisions have
not been utilized since regular interest rates are lower than the
reduced rates provided by law. For direct farm operating loans we are
requesting a program level of $650 million to provide nearly 14,000
loans to family farmers.
For guaranteed farm ownership loans in fiscal year 2005, we are
requesting a loan level of $1.4 billion. This program level will
provide about 4,800 farmers the opportunity to acquire their own farm
or to preserve an existing one. One critical use of guaranteed farm
ownership loans is to allow real estate equity to be used to
restructure short-term debt into more favorable long-term rates. For
guaranteed farm operating loans we propose an fiscal year 2005 program
level of approximately $1.5 billion to assist over 8,000 producers in
financing their farming operations. This program enables private
lenders to extend credit to farm customers who otherwise would not
qualify for commercial loans and ultimately be forced to seek direct
loans from FSA.
We are particularly proud of all of our loan programs. As a matter
of fact, since fiscal year 2000, our direct and guaranteed loans to
minorities and women have increased every year. And in fiscal year
2003, there was an increase in direct loans to each minority group and
we set a record for guaranteed farm ownership loans.
In addition, our budget proposes program levels of $2 million for
Indian tribal land acquisition loans and $60 million for boll weevil
eradication loans. For emergency disaster loans, our budget proposes
program levels of $25 million to provide sufficient credit to producers
whose farming operations have been damaged by natural disasters.
other appropriated programs
State Mediation Grants
State Mediation Grants assist States in developing programs to deal
with disputes involving a variety of agricultural issues including
distressed farm loans, wetland determinations, conservation compliance,
pesticides, and others. Operated primarily by State universities or
departments of agriculture, the program provides neutral mediators to
assist producers--primarily small farmers--in resolving disputes before
they culminate in litigation or bankruptcy. States with certified
mediation programs may request grants of up to 70 percent of the cost
of operating their programs. Authority for State Mediation Grants
expires at the end of fiscal year 2005. The Department plans to propose
extending the program through fiscal year 2010.
For fiscal year 2004, grants have been issued to 30 States. With
the requested $4 million for fiscal year 2005, we anticipate that
between 30 and 33 States will receive mediation grants.
Emergency Conservation Program
Since it is impossible to predict natural disasters, it is
difficult to forecast an appropriate funding level for the Emergency
Conservation Program. No funding was provided for the program in 2002
or 2003; however, it continued to operate throughout the two fiscal
years using unobligated funds carried forward together with recoveries
of unused funds previously allocated to the States.
For fiscal year 2004, the Consolidated Appropriations Act provides
$11.9 million for use in southern California only. Emergency cost-
sharing for the nationwide program has continued into 2004 through
recoveries from the States. As of March 26, we have issued allocations
totaling about $8.1 million. No other funding is currently available to
provide assistance nationally to producers who have suffered losses due
to natural disasters. Unfunded pending requests from producers for
damage from ice storms, drought, tornadoes, hurricane and other natural
disasters total about $63.5 million. The fiscal year 2005 President's
Budget does not request funding for this program.
Dairy Indemnity Program
The Dairy Indemnity Program (DIP) compensates dairy farmers and
manufacturers who, through no fault of their own, suffer income losses
on milk or milk products removed from commercial markets due to
residues of certain chemicals or other toxic substances. Payees are
required to reimburse the Government if they recover their losses
through other sources, such as litigation. As of March 26, we have paid
fiscal year 2004 DIP claims totaling $309,000 in 12 States.
The fiscal year 2005 appropriation request of $100 thousand,
together with unobligated carryover funds expected to be available at
the end of fiscal year 2004, would cover a higher than normal, but not
catastrophic, level of claims. Extended through 2007 by the 2002 Farm
Bill, DIP is a potentially important element in the financial safety
net for dairy producers in the event of a serious contamination
incident.
Tree Assistance Program
The Tree Assistance Program (TAP) provides financial assistance to
qualifying orchardists to replace eligible trees, bushes, and vines
damaged by natural disasters.
No TAP outlays were made during fiscal year 2003. The fiscal year
1998 program expired at the end of fiscal year 2003, and all
unobligated funds were returned to Treasury. The fiscal year 1999
program will expire at the end of fiscal year 2004. The Consolidated
Appropriations Act, 2004, provides $12.4 million in appropriated
funding for southern California. Separate legislative provisions have
also made available CCC funding of $5 million for New York and $9.7
million for Michigan. No funding is requested for fiscal year 2005.
administrative support
The costs of administering all FSA activities are funded by a
consolidated Salaries and Expenses account. The account comprises
direct appropriations, transfers from loan programs under credit reform
procedures, user fees, and advances and reimbursements from various
sources.
The fiscal year 2005 Budget requests $1.3 billion from appropriated
sources including credit reform transfers. The request reflects
decreases in non-Federal county staff-years and operating expenses, as
well as increases in pay-related costs to sustain essential program
delivery.
The fiscal year 2005 request reflects a ceiling of 6,017 Federal
staff years and 10,284 non-Federal staff years. Temporary non-Federal
county staff years will be reduced to 1,000--from the fiscal year 2004
level of 2,067--due to completion of initial farm bill implementation
and disaster activities. Permanent non-Federal county staff years are
estimated to remain at the 2004 level.
Federal staff years will increase by 100 to enhance farm loan
servicing in the field. The additional staff will be assigned to high
volume county offices throughout the country. We anticipate that the
additional staff will bring about decreased loan-processing times,
improve servicing of existing loans, and help avert increases in direct
loan delinquency and loss rates. The additional employees will also
help meet the needs of minority applicants, who often require
considerable technical assistance from FSA staff to complete financial
documents and formulate business plans. The resources to furnish this
assistance are critical in supporting FSA's outreach effort.
Before closing I would like to note that support of FSA's
modernization effort is provided through the Department's Common
Computing Environment account. Funding made available to FSA under this
account will provide needed telecommunications improvements and permit
us to continue implementation of the GIS, which is so crucial to rapid
and accurate program delivery.
Mr. Chairman, this concludes my statement. I will be happy to
answer your questions and those of the other Subcommittee Members.
______
Prepared Statement of A. Ellen Terpstra, Administrator, Foreign
Agricultural Service
Mr. Chairman, members of the Subcommittee, I appreciate the
opportunity to review the work of the Foreign Agricultural Service
(FAS) and to present the President's budget request for FAS programs
for fiscal year 2005. Our budget request reflects several initiatives
needed to ensure FAS' continued ability to accomplish its mission and
provide service to U.S. agriculture.
Last year, FAS had much to celebrate--its 50th anniversary as an
agency, implementation of the new McGovern-Dole International Food for
Education and Child Nutrition Program, the Secretary's successful
Ministerial Conference and Expo on Agricultural Science and Technology,
a recovery in U.S. agricultural exports, and the conclusion of
negotiations on a historic free trade agreement (FTA) with Central
American countries. This year, FAS also has much to highlight--a near
record export forecast, the 50th anniversary of Public Law 480, the
conclusion of negotiations for free trade agreements with Australia and
Morocco, and the anticipated conclusion of negotiations for a Free
Trade Area of the Americas (FTAA) and FTAs with the Dominican Republic
and five Southern African countries.
These events demonstrate FAS' commitment to fulfilling its mission
of expanding and maintaining export opportunities for U.S.
agricultural, fish, and forest products and helping to alleviate world
hunger and food insecurity. The agency's mission is critical to U.S.
farmers as our agriculture sector is twice as dependent on exports as
the rest of the U.S. economy.
Last fiscal year, U.S. agricultural exports reached $56.2 billion,
an increase of nearly $3 billion over 2002. USDA predicts near-record
U.S. agricultural exports of $59 billion in fiscal year 2004, more than
5 percent above exports in 2003 and nearly equal to the record $59.8
billion set in fiscal year 1996. The Western Hemisphere remains the
largest regional market for U.S. agricultural products, with exports
projected at $22.6 billion. Canada is now the largest U.S. agricultural
export market, with sales to Canada forecast at $9.9 billion. Exports
of corn, wheat, soybeans, and horticultural products are expected to
increase over fiscal year 2003.
While the anticipated recovery in exports is good news for U.S.
farmers and exporters, the U.S. beef and cattle industry lost export
markets in late 2003 since a single case of Bovine Spongiform
Encephalopathy (BSE) or mad cow disease was discovered in Washington
state. More than 70 U.S. trade partners closed their markets to U.S.
beef, cattle, sheep, and goats, and other products. Since late
December, FAS has worked tirelessly to inform our trade partners about
the steps we are taking to investigate the situation and the additional
safeguards we have implemented. We have been successful in keeping a
portion of the Canadian and Philippine markets open to U.S. beef and
had productive discussions with Mexican officials, as evidenced by
Mexico reopening its market to U.S. beef products earlier this month.
We are working with our Canadian and Mexican counterparts to enhance
and coordinate a consistent North American response to the animal
health and trade issues that BSE raises. We have dispatched high-level
officials and technical teams from USDA and the Food and Drug
Administration to Japan, South Korea, Hong Kong, and the Philippines
and have hosted technical teams from Japan and Mexico here. We will
continue such efforts to exchange information in the hope of eventually
resuming trade.
Here in Washington and at U.S. embassies abroad FAS staff continues
to inform foreign governments of actions taken and to reassure them of
the safety of our beef. Our efforts to restore our foreign markets
continue to be our top priority, and we urge our trading partners to
resume trade based on sound scientific principles.
An additional wrinkle was added to the U.S. broiler export outlook
when an outbreak of Low Pathogenic Avian Influenza (LPAI) was reported
in several U.S. States in early February, followed by the confirmation
of a Highly Pathogenic Avian Influenza (HPAI) case in Texas on February
23. U.S. trading partners immediately imposed bans on imports of U.S.
chicken and turkey meat. The HPAI case was the first one in the United
States in 20 years and it may keep us out of some of our larger markets
for several months because this version of the disease is recognized
internationally as highly contagious and import restrictions may be
valid as long as they are limited to the state of Texas.
FAS Program Activities
Last year, we continued to use our long-standing export programs
vigorously and have implemented new initiatives mandated in the Farm
Security and Rural Investment Act of 2002 (2002 Farm Act).
The 2002 Farm Act established the Technical Assistance for
Specialty Crops program and authorizes $2 million in Commodity Credit
Corporation (CCC) funds for each fiscal year from 2002 to 2007. Last
year, we allocated $2 million to 19 entities for projects to help
address unique barriers that prohibit or threaten the export of U.S.
specialty crops.
The Farm Act also increased funding for the Market Access Program.
For fiscal year 2003, we allocated $110 million to 65 trade
organizations to promote their products overseas. The Farm Act also
increased funds for the Foreign Market Development Program, and FAS
approved marketing plans totaling $38.0 million for 23 trade
organizations for fiscal year 2003.
The Emerging Markets Program is authorized at $10 million each year
and provides funds for technical assistance activities that will
increase market access for U.S. commodities and products in emerging
markets. A total of 75 projects were approved for fiscal year 2003. The
Quality Samples Program provides funds so U.S. organizations can
provide commodity samples to foreign buyers to help educate them about
the characteristics and qualities of U.S. agricultural products. FAS
allocated more than $1.7 million in fiscal year 2003 to 21
organizations under this program.
The GSM-102 short-term export credit guarantee program facilitated
sales of more than $2.5 billion in U.S. agricultural products last year
to 12 countries and five regions. At the same time, U.S. exporters
continue to discover the benefits of the Supplier Credit Guarantee
Program. We issued $670 million in credit guarantees under this program
in 2003, a more than 33-percent increase over last year, demonstrating
increased awareness of the usefulness of this program.
With the aid of the Dairy Export Incentive Program, U.S. exporters
sold more than 86,000 tons of dairy products in fiscal year 2003. The
CCC awarded more than $31 million in bonuses to help U.S. dairy
exporters meet prevailing world prices and develop foreign markets,
primarily in Asia and Latin America.
The 2002 Trade Act established a new program, which is being
administered by FAS--Trade Adjustment Assistance (TAA) for Farmers.
Under this program, USDA provides technical assistance and cash
benefits to eligible U.S. producers of agricultural commodities if
increased imports have contributed to a specific price decline over
five preceding market years. Last fiscal year, we got the program up
and running and began accepting petitions for evaluation of eligibility
for the program. Trade Adjustment Assistance petitions for 12 producer
groups have been approved: catfish producers in 18 states; shrimp
producers in Alabama, Arizona, Florida (the 2nd Florida petition),
Georgia, North Carolina, South Carolina, and Texas; wild blueberry
producers in Maine; salmon fishermen in Alaska and Washington; and
fresh lychee producers in Florida.
On the trade policy front, we are working to open, expand, and
maintain markets for U.S. agriculture. We are actively pursuing what
U.S. Trade Representative (USTR) Robert Zoellick has called the
competition for liberalization by seeking trade agreements in
multilateral, regional, and bilateral contexts.
Although the outcome of the World Trade Organization (WTO)
negotiations in Cancun last September was a lost opportunity, the
United States has not given up its efforts to achieve an international
agreement that will liberalize agricultural trade. The United States
and many other countries remain committed to eliminating trade
distorting subsidies and tariffs, but we must do so together. The
Cancun meetings resulted in a text that establishes a good basis for
continuing negotiations. We will continue to work with all players,
including countries that raised objections in Cancun, to seek common
ground.
In the meantime, we are pressing ahead with efforts to reach
regional and bilateral trade agreements.
In September, the President signed legislation to implement FTAs
with Chile and Singapore. In December, we concluded negotiations on a
historic and comprehensive Central American Free Trade Agreement
(CAFTA) with El Salvador, Honduras, Guatemala, and Nicaragua. This
agreement will strip away barriers to trade, eliminate tariffs, open
markets, and promote investment, economic growth, and opportunity.
Costa Rica joined CAFTA in January.
While pursuing new negotiations, we have begun to see the benefits
of earlier agreements. For example, on January 1, 2004, the United
States, Canada, and Mexico celebrated the tenth anniversary of the
implementation of the North American Free Trade Agreement (NAFTA). This
groundbreaking agreement made North America the world's largest free
trade area. The success of the agreement for agriculture has been quite
remarkable. Since 1994, Canada and Mexico have been our two top
agricultural growth markets in the world--by a wide margin. Exports to
Canada rose by about $3.1 billion over those years, while sales to
Mexico rose about $2.7 billion. U.S. exports to the rest of the world
rose by only $1.1 billion. In 2002, U.S. consumer-oriented products
made up the lion's share of all U.S. agricultural exports to Canada (70
percent) and Mexico (39 percent). Demand in both Canada and Mexico
continues to look promising. Real economic growth in Canada is
projected at roughly 3 to 3.5 percent a year over the next 10 years,
while the Mexican economy is expected to grow by 4 to 4.5 percent a
year. As incomes grow, food demand will likely follow, making NAFTA
beneficial to U.S. agricultural exporters for years to come.
As with all trade agreements, however, progress is not always
straightforward. FAS monitors and enforces trade agreements to ensure
that the benefits gained through long, hard negotiations are realized.
Last year, our monitoring of the Uruguay Round Agreement on Agriculture
and the Sanitary and Phytosanitary Agreement preserved an estimated
$1.6 billion in U.S. trade. We continue to work to ensure that China
adheres to its WTO accession commitments to change its tariff-rate
quota system. In 2003, China purchased U.S. cotton and soybean oil
exports of $330 million and $48 million, respectively. We also worked
to help win a WTO case against Japan's unscientific import restrictions
on U.S. apples, thus saving a potential $30-million market; and are
working to preserve almost $400 million in U.S. exports of animal by-
products to the European Union (EU).
In addition, we helped resolve Russia's technical issues related to
poultry plant inspections, thus saving a market worth more than $300
million and restored access for U.S. dry beans to Mexico, resulting in
the resumption of trade valued at $60 million last year.
July 10, 2004, marks the 50th anniversary of Public Law (Public
Law) 480, the Agricultural Trade Development and Assistance Act of
1954. This landmark program is the U.S. Government's primary vehicle to
meet humanitarian food needs; it also helps to spur economic and
agricultural growth in developing countries, leading to expanded trade.
Last year, we used this program to ship commodities from the United
States to needy people around the world. Under numerous programs, FAS
programmed nearly 575,000 metric tons of food assistance in fiscal year
2003 under Public Law 480, Title I credit agreements and Title I--
funded Food for Progress donations. These products, valued at $122
million, went to 15 countries. The U.S. Agency for International
Development (USAID), which manages the Title II program of Public Law
480, provided about 3.7 million metric tons (grain equivalent basis) of
food to needy people.
Also last year, FAS launched the McGovern-Dole International Food
for Education and Child Nutrition Program allowing us to build on the
success of the Global Food for Education (GFE) pilot program, which
began in fiscal year 2001. It is designed to both encourage education
and deliver food to improve nutrition for preschoolers, school
children, mothers, and infants in impoverished regions. The 2002 Farm
Act authorized the program through fiscal year 2007, providing $100
million in CCC funding for fiscal year 2003. Under fiscal year 2003
programming, Food for Education donations were announced for 21
countries, totaling 131,000 metric tons valued at about $42 million.
In addition to these food assistance programs, last year FAS
employees were deployed to Afghanistan and Iraq to help rebuild those
countries' agricultural sectors. The reconstruction challenges in these
two countries are enormous, the security and logistical challenges
tremendous, and the obstacles to progress great. However, we are
committed, along with USAID, the Department of State (DOS), and the
Department of Defense, to do all that we can in the reconstruction
effort.
In Afghanistan, we provided technical guidance to help establish an
Afghan Conservation Corps. This corps will provide jobs to thousands of
unemployed Afghans, putting them to work to grow and plant trees,
collect and conserve water, and stop soil erosion. FAS led the
Department's assistance efforts for the corps, sending three technical
teams on short-term assignments last year. In addition, FAS placed
three USDA staff employees in provincial reconstruction teams, with the
goal of placing a total of eight, to work in rural agricultural areas
rehabilitating Afghanistan's agricultural sector.
In Iraq, USDA is playing a key role in the United States' overall
efforts to create a democratic, market driven economy. With DOS and
USAID, USDA is assessing food needs and providing expertise on
restoring water, agriculture, forestry, and rangelands. Rebuilding
Iraq's agricultural infrastructure continues to be a major priority. To
that end, USDA continues to work on the revitalization of Iraq's
agriculture ministry and is working with other U.S. Government agencies
on reconstruction and development priorities, looking forward to
commercial trade with Iraq. In recognition of Iraq's many needs, FAS
sent a U.S. agricultural officer there in February 2004 to work as a
senior advisor for food trade issues in the Ministry of Trade. This
comes at a critical time, when Iraq begins to take more responsibility
for its important agricultural and trade programs.
Last year, the United States committed a total of $478 million for
food assistance to Iraq, shipping a total of 255,320 tons of U.S.
commodities including wheat, flour, rice, soybean oil, nonfat dry milk,
and pulses (Great Northern beans, chickpeas, and black-eyed peas) under
Public Law 480, Title II and Section 416(b) of the Agricultural Act of
1949.
Another example of our continuing efforts to help countries help
themselves was Secretary Veneman's historic Ministerial Conference and
Expo on Agricultural Science and Technology last June. The conference
focused on how science and technology and a supportive policy
environment can drive agricultural productivity and economic growth to
alleviate world hunger and poverty.
About 1,000 participants attended including 119 ministers of
agriculture, science and technology, health, environment, and commerce.
It was one of the largest, most diverse gatherings of decision-makers
from around the world to address global hunger. One-hundred seventeen
countries were represented. Other attendees came from the private
sector, academia, research institutes, foundations, and non-
governmental and international organizations.
The Ministerial provided an extraordinary opportunity for dialogue,
knowledge sharing, and the creation of partnerships. It sparked
tremendous enthusiasm among ministers and other developing-country
representatives for science and technology to deliver solutions.
Given the tremendous energy the event generated, many ministers
from developing countries have agreed to partner with USDA to keep the
momentum going in finding technology- and policy-based solutions to
global food insecurity. For example, ministers from Africa and Latin
America offered to host follow-up conferences for their regions. A
Central American regional conference will be held in Costa Rica in May
in partnership with the Inter-American Institute for Cooperation on
Agriculture (IICA). A regional conference for West Africa will take
place this summer in Ouagadougou, Burkina Faso. Other conferences and
follow-up activities are planned throughout the coming years.
As we work to organize and conduct follow-up activities, we are
building invaluable relationships with developing countries that will
help us work together in the future to resolve trade disputes and
prepare developing countries for global trade. Our longstanding
training program, the Cochran Fellowship Program was used to introduce
853 Cochran Fellows from 82 countries to U.S. products and policies in
2003. These Fellows met with U.S. agribusiness; attended trade shows,
policy, and food safety seminars; and received technical training
related to market development. The Cochran Fellowship Program provides
USDA with a unique opportunity to educate foreign government and
private sector representatives not only about U.S. products, but also
about U.S. regulations and policies on critical issues such as food
safety and biotechnology.
During Secretary Veneman's visit to Afghanistan in November, she
announced the first Cochran Fellowship Program with Afghanistan to
provide short-term, U.S.-based training for eight Afghan women to study
agricultural finance. They will learn about business plans, financial
management, farmers' cooperatives, and micro-credit programs to promote
food security and income-generating small businesses.
We also collaborated with a diverse group of U.S. institutions in
research partnerships with more than 50 countries to promote food
security and trade. These research and exchange activities made
practical use of biotechnology and other scientific techniques to help
solve critical problems affecting food, agriculture, fisheries,
forestry, and the environment. Activities also were conducted to
evaluate the food, nutritional, and water needs of vulnerable
populations in rural and urban areas to help expand the livelihoods of
small and limited-resource farmers, ranchers, and communities.
In the end, the technical assistance that we provide will help
build the institutions needed for developing countries to attract
investment and grow their economies. When our efforts are successful,
our food and agricultural producers will benefit by access to more and
better markets.
Challenges Ahead
Faced with continued growth in our agricultural productivity,
intense competition, and continued aggressive spending on market
promotion by our competitors, we must redouble our efforts to improve
the outlook for U.S. agricultural exports. I would like to discuss our
top priorities for the year.
Continuing Trade Liberalization for Agriculture
At the top of our list is moving forward in multilateral, regional,
and bilateral trade negotiations on agriculture. Although getting the
WTO negotiations restarted and on a positive path will not be easy, we
must resume the long journey toward worldwide multilateral trade
liberalization.
The Doha Round will not likely meet its deadline of having an
agreement completed by January 2005. However, all countries have much
to gain from successful reform of the international trading system, and
we must continue our efforts to resolve the issues that stalled the
talks in Cancun.
In January, Ambassador Zoellick sent a letter to his counterparts
in the WTO suggesting a ``common sense'' approach to advance the
negotiations in 2004. Ambassador Zoellick recommended that the
negotiations focus on core market access topics of agriculture, goods,
and services.
In the area of agriculture, the letter suggests that WTO members
agree to eliminate export subsidies by a date certain, agree to
substantially decrease and harmonize levels of trade-distorting
domestic support, and provide a substantial increase in market access
opportunities. The letter notes that the United States stands by its
2002 proposal to eliminate all trade distorting subsidies and barriers
to market access.
To hammer home the points he made in his letter, Ambassador
Zoellick traveled extensively at the end of February, meeting with more
than 30 countries in Asia, Africa, and Europe. He also attended the
Cairns Group meeting, which gave him a good opportunity to talk with
many Latin American countries. In addition, Secretary Veneman had a
very fruitful meeting with EU Commissioner Franz Fischler during which
she pressed for the resumption of the Doha Agenda talks. The response
to Ambassador Zoellick's proposal has been very positive, and most
countries appear to be genuinely interested in moving the negotiations
forward. Serious, substantive discussions will resume in Geneva next
week. We are optimistic that we will have a framework in place by July
and possibly a Ministerial conference by the end of the year.
In addition, we will continue to press ahead with our efforts to
reach regional and bilateral trade agreements. During the last year, we
implemented FTAs with Chile and Singapore and concluded negotiations
with Central America. Earlier this year, we concluded free trade talks
with Australia and Morocco. We also hope to bring the Dominican
Republic into the CAFTA agreement, and we will continue to work towards
establishing an FTA with the Southern African Customs Union--which
includes the countries of Botswana, Lesotho, Namibia, South Africa, and
Swaziland. We have recently launched negotiations with Bahrain and will
soon begin discussions with Panama, Colombia, and Peru.
Another major trade initiative is the FTAA. Launched in 1998, these
negotiations could establish a free trade zone, covering 800 million
people in 34 countries that stretch from the Arctic Circle to Tierra
del Fuego. These negotiations have proven to be quite challenging
because of the large number of participants, each with its own
interests and external relationships. An important breakthrough was
made at the Miami Ministerial meeting in November at which trade
ministers established a new framework that will allow countries with
greater ambition for trade liberalization to pursue those goals with
like-minded partners within the FTAA, while ensuring that all
participants will be covered by a common set of rights and obligations.
Concluding these negotiations on schedule will be a challenge, but it
can be done as long as we all remain committed to regional integration
as a tool to stimulate economic growth in the hemisphere.
We will continue to work with the countries that would like to join
the WTO, such as Russia and Saudi Arabia. Although increasing the
number of members in the WTO is a high priority, we will continue to
insist that these accessions be made on commercially viable terms that
provide trade and investment opportunities for U.S. agriculture. And
when membership in the WTO is achieved, we must continue to monitor
aggressively those countries' compliance with their commitments. We
must ensure that acceding countries implement trade policies and
regulations that are fully consistent with WTO rules and obligations.
The effort to keep markets open in the face of unscientific or
artificial trade barriers is inherent in the FAS mission. This is
perhaps our most important task, yet it is the least visible. It is a
measure of our success that so many issues are resolved so quickly,
with so little public awareness. Virtually every day, our overseas and
Washington staff work as a team on a variety of concerns--first to
prevent crises from developing and then to resolve thorny issues should
they arise. They coordinate efforts with a number of USDA agencies, as
well as with private sector companies and associations. FAS' overseas
officers work continuously to prevent trade problems from occurring or
to resolve them as soon as they crop up.
Every year, these activities preserve millions of dollars in trade
that potentially could have been lost by countries imposing new
barriers. Some problems may be resolved quickly with a phone call or a
meeting; others are more complex, and involve multiple U.S. agencies.
Our priority this year is reopening our major export markets for U.S.
beef and poultry exports. As a result of the single BSE case in
Washington state, most U.S. export markets have banned our cattle,
beef, and beef product exports, including rendered products, pet foods,
and cattle genetics. At the same time, most U.S. export markets have
banned or partially banned U.S. poultry and poultry exports because of
outbreaks of LPAI.
Another priority is how we deal with the issues surrounding
products produced through biotechnology. The increasing number of
countries around the world that are issuing regulations relating to
products of biotechnology present a particular challenge, both for our
infrastructure and for our food and agricultural exports. We are using
every available forum to ensure countries adopt science-based policies
in this area.
To focus our efforts, FAS formed a new office last year to work
with a myriad of public and private, domestic and international
organizations on a broad array of biotech issues. Activities this year
include working to ensure that the Cartagena Protocol on Biosafety does
not disrupt grain trade; participating in the third annual Asia Pacific
Economic Cooperation policy dialogue on biotechnology; working with
USTR on the U.S. case against the EU's moratorium on biotech products;
and a host of other issues and activities too long to mention.
As you see, we will be working on many fronts to continue to
improve export opportunities for the American food and agriculture
sector, but we cannot do it alone.
Strengthening Market Development Partnerships and Programs
The challenges we face in multilateral, regional, and bilateral
trade negotiations make it imperative that we work closely with our
foreign market development cooperators to strengthen our partnership
and keep the lines of communication open. This will help us become an
even more potent force in improving the competitive position of U.S.
agriculture in the global marketplace.
We will continue to use our export assistance programs--Emerging
Markets Program, Market Access Program, Quality Samples Program,
Technical Assistance for Specialty Crops program, and Foreign Market
Development Cooperator Program--to open and maintain export
opportunities for U.S. farmers and exporters.
We are working on a Global Broad-Based Initiative (GBI) to better
utilize our marketing resources. GBI will allow FAS cooperator groups
to address a broad range of issues that may be regional in scope. Under
the GBI process, proposals for program funding from cooperator groups
in concert with input from our overseas posts will address key
priorities, such as market access and unfair competition;
biotechnology, sanitary and phytosanitary issues, and food safety; best
growth markets; high-value products; capacity building; and food
security and trade financing.
Proposals that cut across multiple product or industry lines--as
well as multiple markets--will have greater impact than those that
focus on one product or one market. Under GBI, FAS and cooperators have
a unique opportunity to address common strategic challenges and
opportunities.
We will continue to encourage U.S. exporters to develop and refine
their marketing strategies, look to new market opportunities, and fully
use all the FAS tools at their disposal.
Building Trade Capacity
Hand-in-hand with our negotiating efforts are our activities to
help developing countries participate more fully in the trade arena.
Our trade-capacity building efforts are aimed at helping countries take
part in negotiations, implement agreements, and connect trade
liberalization to a program for reform and growth. We will work closely
with USTR and USAID in this effort.
If we are to achieve success in the negotiating process, we must
engage the developing world in the creation and implementation of
appropriate trading rules and guidelines. This will take time, but it
will be worth the investment. These countries represent our future
growth markets. We must address the concerns of developing countries, a
requirement made evident in Cancun. Without their support, there will
be no new multilateral agreement.
FAS provides technical expertise to enhance developing countries'
abilities to engage in two-way trade. FAS recruits expertise from USDA
agencies, universities, and the private sector. We have been
particularly active in providing information about science-based animal
and plant health and food safety rules and systems. We also are working
with countries to help them build information systems that provide
accurate agricultural production, trade, and price data. Providing
technical advice on cold storage, handling, and transportation systems
facilitates two-way trade in high-value, perishable foods. By helping
countries understand the advantages of using efficient biotechnology
tools, we help lower costs and improve the quality of farm products.
Throughout the year, we will use all our available tools--the
Cochran Fellowship Program, the Emerging Markets Program, and our
involvement in international organizations such as IICA--to educate and
assist countries seeking to reform and improve their economies so they
can participate in the world marketplace.
Ensuring World Food Security
During the past 2 years, the U.S. contribution of global food aid
has reached about 60 percent of total world aid, and we remain
committed to these efforts that address world food insecurity and help
to alleviate hunger, malnutrition, and poverty.
During 2004, we will be working closely with the World Food Program
and our private voluntary organization partners to ensure that the new
McGovern-Dole International Food for Education and Child Nutrition
program builds on the success achieved by the Global Food for Education
Initiative. USDA will donate approximately 66,000 metric tons of
commodities to provide nutritious school meals to school and pre-school
children, as well as nutritional assistance to mothers and infants. In
addition, we estimate that the United States will be able to distribute
about 3.8 million metric tons of commodities through Public Law 480,
Food for Progress, and other programs in fiscal year 2004.
But we know food aid is not the only tool to achieve world food
security. Developing countries must strengthen their agricultural
policies and institutions and increase their investments in
agricultural productivity if they are to find their way out of the
seemingly endless cycle of hunger, poverty, and economic stagnation.
Agricultural science and technology transfer and extension along with
supportive policy and regulatory frameworks are critical.
Budget Request
Mr. Chairman, our fiscal year 2005 budget proposes a funding level
of $147.6 million for FAS and 1,005 staff years. This represents an
increase of $11.9 million above the fiscal year 2004 level and supports
several initiatives needed to ensure the agency's continued ability to
conduct its activities and provide services to U.S. agriculture.
The budget proposes an increase of $4.8 million for support of FAS
overseas offices. The FAS network of 80 overseas offices covering over
130 countries is vulnerable to the vagaries of macro-economic events
that are beyond the agency's control. The significantly weakened U.S.
dollar and higher International Cooperative Administrative Support
Services (ICASS) payments to DOS have caused overseas operating costs
to increase sharply. Specifically, these increases include:
--$2.0 million to replenish the Buying Power Maintenance Account
(BPMA). FAS has the authority to carry over up to $2.0 million
in exchange rate gains from current year appropriations in a
BPMA to offset future exchange rate losses. The account was
fully funded at the end of fiscal year 2002, but was depleted
by the end of fiscal year 2003 due to the weakness of the
dollar. Continued weakness of the dollar implies that future
exchange rate gains are unlikely.
--$1.76 million to fund higher payments to DOS. DOS provides overseas
administrative support for U.S. foreign affairs agencies
through ICASS. FAS has no administrative staff overseas, and
thus relies entirely on DOS/ICASS for this support. Based on
current cost growth trends, we are estimating that our ICASS
assessment will increase by about 10 percent or $1,104,000.
Additionally, for security reasons, and as a precondition to
moving into the new embassy in Beijing, all agencies are
required to purchase new furniture through DOS. DOS has
assessed individual agency charges on a per-capita basis; the
FAS assessment is $655,000.
--$581,000 to fund mandatory costs of participating in the Capital
Security Cost Sharing Program. Beginning in fiscal year 2005,
DOS will implement a program through which all agencies with an
overseas presence in U.S. diplomatic facilities will pay a
proportionate share for accelerated construction of new,
secure, safe, and functional diplomatic facilities. These costs
will be allocated annually based on the number of authorized
positions. This plan is designed to generate a total of $17.5
billion to fund 150 new facilities over a 14-year period. The
FAS assessment starts at $3.6 million in fiscal year 2005;
however, $3 million of this amount will be offset though a
credit for overseas rental costs currently incurred by FAS. The
FAS assessment is estimated to increase annually in roughly $3-
million increments until fiscal year 2009, at which time the
annual assessed level will total an estimated $15 million. This
level is assumed to remain constant for the following 9 years.
--$490,000 for the costs of overseas telecommunications improvements.
This increase will allow for the upgrade from 9.6 KBPS to 128
KBPS on the State Department's Diplomatic Telecommunications
Service (DTS) communication lines where DTS is the only option.
A crosscutting departmental priority is expanding our eGov
capability. Secretary Veneman recently announced that USDA would focus
on eGovernment initiatives this year. This multi-faceted initiative
will change the way we in FAS communicate with each other, with the
rest of government, and most importantly, with the customers we serve
here and around the world. In this regard, the budget proposes an
increase of $5.3 million to implement an FAS Global Computing
Environment initiative. The 4-year initiative will modernize FAS
information technology systems and applications to ensure compliance
with eGovernment objectives and standards for Federal agencies. Under
the Global Computing Environment initiative, FAS will modernize
existing systems, restructure its agricultural production and trade
databases, and improve the timeliness and efficiency of its reporting
systems. The FAS information technology system is aging and in danger
of failing. As examples:
--Of the 35 servers currently providing e-mail and network services
for FAS, 25 are 5 or more years old, operating well beyond
their normal life cycle.
--Over 2/3's of FAS desktop PC's (about 900) are already 5-years old
and are only running at one-third the current industry standard
operating speed. (800 mh vs. 2.4 gh)
--More than half of the agency's mission-critical information
systems--which are of highest interest to USDA customers--are
more than 7 years old.
Our goal is to improve the services provided to U.S. agricultural
producers and exporters by electronically sharing information,
providing FAS program interfaces in real time, with no delays, and in
easy to manipulate formats.
As our information systems are modernized, FAS will move
aggressively to integrate its information systems with those in Federal
and State agencies involved in similar lines of business, i.e.,
international commerce and trade, international development, trade-
capacity building, food aid, trade negotiations, and participation in
international organizations.
This will include integration with other USDA agencies through
USDA.gov, which will provide the Department's customers with the
ability to customize the information they receive from the Department
through a personalized web portal. FAS will also need to integrate with
DOS' information management system for communications within U.S.
embassies and between embassies and Washington. This will give USDA
officials access to internal government communications and policy
papers on relevant issues such as agricultural trade, food aid, and
biotechnology.
Finally, the budget includes an increase of $1.8 million to cover
higher personnel compensation costs associated with the anticipated
fiscal year 2005 pay raise and efforts to recognize employee
performance. Pay cost increases are non-discretionary and must be
funded. Absorption of these costs in fiscal year 2005 would primarily
come from reductions in agency personnel levels, which would
significantly affect FAS' ability to contribute to USDA's strategic
goal of enhancing economic opportunities for agricultural producers.
Export Programs
Mr. Chairman, the fiscal year 2005 budget includes over $6 billion
for programs administered by FAS that are designed to promote U.S.
agricultural exports, develop long-term markets overseas, and foster
economic growth in developing countries.
Export Credit Guarantee Programs
The budget includes a projected overall program level of $4.5
billion for export credit guarantees in fiscal year 2005.
Under these programs, the CCC provides payment guarantees for the
commercial financing of U.S. agricultural exports. As in previous
years, the budget estimates reflect actual levels of sales expected to
be registered under the programs and include:
--$3.4 billion for the GSM-102 short-term guarantees;
--$5.0 million for the GSM-103 intermediate-term guarantees;
--$1.1 billion for Supplier Credit guarantees, and
--$10.0 million for Facility Financing guarantees.
Market Development Programs
Funded by CCC, FAS administers a number of programs that promote
the development, maintenance, and expansion of commercial export
markets for U.S. agricultural commodities and products. For fiscal year
2005, the CCC estimates include a total of $173.0 million for the
market development programs, unchanged from fiscal year 2004 these
include:
--$125.0 million for the Market Access Program;
--$34.5 million for the Foreign Market Development Cooperator
Program;
--$10.0 million for the Emerging Markets Program;
--$2.5 million for the Quality Samples Program; and
--$2.0 million for the Technical Assistance for Specialty Crops
Program.
International Food Assistance
The fiscal year 2005 budget continues the worldwide leadership of
the United States in providing international food aid. The fiscal year
2005 request for foreign food assistance totals more than $1.5 billion
including $1.3 billion for Public Law 480 to provide approximately 3.2
million metric tons of commodity assistance. For Title I, the budget
provides for a program level of $123.0 million, which will support
approximately 500,000 metric tons of commodity assistance. For Title II
donations, the budget provides for a program level of $1.185 billion,
which is expected to support 2.7 million metric tons of commodity
donations
--$149 million for CCC-funded Food for Progress. This level is
expected to meet the minimum level of 400,000 metric tons
established in the 2002 Farm Bill;
--$147 million for Section 416(b) donations. Under this authority,
surplus commodities that are acquired by CCC in the normal
course of its domestic support operations are available for
donation. For fiscal year 2005, current CCC baseline estimates
project the availability of surplus nonfat dry milk that can be
made available for programming under section 416(b) authority;
and
--$75.0 million for the McGovern-Dole International Food for
Education and Child Nutrition Program. This represents an
increase of $25 million over the fiscal year 2004 appropriation
and will assist an estimated 1.9 million participants.
Export Subsidy Programs
FAS administers two export subsidy programs through which payments
are made to exporters of U.S. agricultural commodities to enable them
to be price competitive in overseas markets where competitor countries
are subsidizing sales. These include:
--$28 million for the Export Enhancement Program (EEP). World supply
and demand conditions have limited EEP programming in recent
years and, as such, the fiscal year 2005 budget assumes a
continuation of EEP at the fiscal year 2004 level. However, the
2002 Farm Bill does include the maximum annual EEP program
level of $478.0 million allowable under Uruguay Round
commitments that could be utilized should market conditions
warrant.
--$53 million for the Dairy Export Incentive Program (DEIP), $31
million above the current fiscal year 2004 estimate of $22
million. This estimate reflects the level of subsidy currently
required to facilitate exports sales consistent with projected
United States and world market conditions and can change during
the programming year as market conditions warrant.
Trade Adjustment Assistance for Farmers
Under the Trade Act of 2002, the TAA authorizes USDA to make
payments up to $90.0 million annually to eligible producer groups when
the current year's price of an eligible agricultural commodity is less
than 80 percent of the national average price for the 5 marketing years
preceding the most recent marketing year, and the Secretary determines
that imports have contributed importantly to the decline in price. As
of the beginning of March, petitions from eight producer groups had
been certified as eligible for TAA and an additional 10 petitions were
under review to determine eligibility. Payments under the program will
begin later this year once the benefit application period has closed.
This concludes my statement, Mr. Chairman. I will be glad to answer
any questions.
______
Prepared Statement of Ross J. Davidson, Jr., Administrator, Risk
Management Agency
Mr. Chairman and members of the Subcommittee, I am pleased to
present the fiscal year 2005 budget for the Risk Management Agency
(RMA). RMA continues to make rapid progress in meeting its legislative
mandates to provide an actuarially sound crop insurance program to
America's agricultural producers. Crop insurance is USDA's principal
means of helping farmers survive a crop loss. In 2005, the program is
expected to provide producers with more than $42 billion in protection
on approximately 220 million acres through about 1.2 million policies.
To improve service to our customers and stakeholders, in 2003, we
began an evaluation of crop insurance business processes to integrate
performance and create higher productivity, and to achieve key
performance goals. To hear first-hand the challenges affecting
producers in the crop insurance program, we have conducted listening
sessions with producers and grower groups throughout the United States;
over 26 listening sessions have been held to date. It is no coincidence
that the top concerns expressed by our customers and stakeholders have
become the foundation of our key performance objectives in support of
the Agency's mission. These objectives are: (1) Provide widely
available and effective risk management solutions; (2) Provide a fair
and effective delivery system; (3) Ensure customers and stakeholders
are well-informed; (4) Maintain program integrity; and (5) Provide
excellent service.
To effectively address the concerns and challenges within the crop
insurance program, RMA's total fiscal year 2005 budget request is $3.09
billion. The funding level proposed for the Federal Crop Insurance
Corporation (FCIC) Fund is $3,000,443,000 and for the Administrative
and Operating Expenses, the request is $91,582,000.
FCIC Fund
The fiscal year 2005 budget proposes that ``such sums as may be
necessary'' be appropriated to the FCIC Fund. This ensures the program
is fully funded to meet producers' needs. The current estimate of
funding requirements is based on USDA's latest projections of planted
acreage and expected market prices. The budget request includes $2.1
billion for Premium Subsidy, $782.4 million for Delivery Expenses, and
$77.3 million for mandated Agricultural Risk Protection Act of 2000
(ARPA) activities.
Administrative and Operating Expenses (A&O)
RMA's fiscal year 2005 request of $91.6 million for Administrative
and Operating Expenses represents an increase of about $20.6 million
from fiscal year 2004. This budget supports increases for information
technology (IT) initiatives of $15.5 million.
These IT funds are targeted toward the infrastructure improvements
and enhancement of the corporate operating systems necessary to support
growth in the program as new products are developed and existing
products are improved and offered for sale. Due to the rapid growth in
the program, it has been difficult to maintain adequate funding for
RMA's information technology system. The Agency's IT infrastructure
supports the crop insurance program's business operations at the
national and local levels, provides risk management products to
producers nationwide and is the basis for payments to private companies
reinsured by the FCIC. RMA is using system and database designs
originally developed in 1994. There have been few hardware and software
upgrades and business process analysis and re-engineering of the entire
business delivery system are needed to support current and future
program growth. The IT systems do not meet the minimum requirements
mandated by the USDA Office of the Chief Information Officer due to
advanced age and architecture. Without adequate funding of the IT
requirements, the Agency will not be able to safely sustain additional
changes required by new product development or changes in existing
products. Future program expansion will increase the risk of system
failure and possible inability to handle day-to-day processing of
applications and indemnity payments.
Also, included in the total request is $1.0 million to expand the
monitoring and evaluation of reinsured companies. RMA is requesting
funds to establish a systematic process of monitoring, evaluating, and
auditing, on an annual basis, the performance of the product delivery
system. These funds will be used to support insurance company expense
audits, performance management audits and reinsurance portfolio
evaluations to ensure internal and management controls are a basic part
of reinsured companies' business operations.
To support an increase of 30 staff years, $3.0 million is requested
to raise RMA's employment ceiling from 568 to 598. Funding for
additional staff years is necessary to strengthen the safety net for
agricultural producers through sound risk management programs. The
fiscal year 2005 budget request includes five additional staff years
for the Research and Development Offices, to provide necessary support
to evaluate, monitor and manage contractual agreements and partnerships
with public and private business sectors. The additional staff years
will aid in the review and evaluation of the increasing number of new
private product submissions received by the Agency each year. They will
also provide oversight of privately contracted product development
needed to fulfill ARPA mandates that RMA provide risk management tools
for producers of specialty crops, livestock, forage pasture, hay and
other underserved commodities, areas and producers.
To support the increased workload for the Compliance function, a
request for 15 staff years is included. The additional staff years will
provide the Compliance function the necessary support to address
outstanding OIG and GAO recommendations to improve oversight and
internal controls over insurance providers. In response to several OIG
audit reports, RMA needs to establish a systematic process of auditing
insurance providers to detect and correct vulnerabilities to
proactively prevent improper payment of indemnities. RMA's studies
suggest that additional resources in this area would provide a minimum
of $4 in reduced fraud cost for every dollar spent. The additional
staffing will provide the necessary oversight to ensure taxpayers'
funds are expended as intended.
In addition, 10 staff years are requested for the Insurance
Services Offices, to implement good farming practice determinations,
and to adequately evaluate claims based on questionable farming
practices. ARPA requires RMA to establish a process to reconsider
determinations of goods farming practices. The Regional Offices of
Insurance Services are in a unique position by virtue of their
education in production agriculture, agronomy and related fields, and
knowledge of local crops and growing conditions to effectively carry
out the important function of determining good farming practices. RMA
data indicate that approved insurance providers rarely assess uninsured
causes of loss against a producer for failure to follow good farming
practices. With approved insurance providers operating in an
environment of risk sharing, there is a tremendous need for support and
incentives for tightening loss adjustment, particularly in the good
farming practices area to ensure that payments for losses is consistent
with the requirements of Federal Crop Insurance Act. For example in
crop year 2002, of approximately 1.25 million policies earning premium,
about .03 percent were assessed uninsured causes of loss. This small
percentage appears to be inconsistent with data uncovered through
various oversight activities. Based on 2002 indemnities of over $4
billion, if RMA determinations and reconsiderations of good farming
practices had prevented only 3 percent of indemnities from being paid
improperly, the resulting savings would be an estimated $121 million.
Lastly, an increase of $1.1 million is requested for pay cost.
These funds are necessary to maintain required staffing to carry out
RMA's mission and mandated requirements.
The fiscal year 2005 budget request supports the President's
Management Initiatives and is aligned with the Agency's five
performance objectives.
Provide Widely Available and Effective Risk Management Solutions.--
The FCIC Board of Directors (Board) will continue its work to maintain
an aggressive agenda focused on addressing producer's issues and
challenges in the crop insurance program. This agenda increases
participation in the program, ensures outreach to small and limited
resource farmers, expands programs where appropriate, affirms program
compliance and integrity, and ensures equity in risk sharing.
The Board is focusing on the overall FCIC portfolio of insurance
products, with new strategies to provide the greatest amount of
protection. We are actively working with the private sector to find new
and better ways to provide risk protection for forage, rangeland, and
pasture and to address the long term production declines that result
from extended drought in many areas. Priority also is directed towards
identifying opportunities to expand participation in current crop
insurance programs in areas with below average participation.
In addition, many of the new product development contracts,
authorized by Section 508(h) of the Federal Corp Insurance Act, are
coming to fruition. The Board will review these private product
submissions and decide on the appropriateness of pilot testing the
products.
Beginning February of 2002, RMA initiated a series of listening
sessions throughout the United States to gather market feedback on
issues and concerns that affect the agricultural community. From this
initiative, 26 listening sessions have been organized by the Regional
Offices in various locations. The focus of the meetings was to obtain
feedback from farmers on what is working well in our program, factors
that impact product acceptance and market penetration, what program
issues need to be addressed, and whether products were meeting the
needs of the agricultural sector. To gather the widest possible
representation, we focused on inviting the various regional Grower
Associations and agricultural interest groups, both private and
governmental. The feedback from the listening sessions identified a
broad theme of issues such as requests to expand products such as
Adjusted Gross Revenue (AGR/AGR-Lite) and Crop Revenue Coverage (CRC),
simplify prevent planting regulations, and extend crop dates. In
addition, irrigation issues and the knowledge and training of insurance
agents were topics of discussion.
RMA is already engaged in working toward solutions to resolve many
of the issues identified at these listening sessions and, is evaluating
the feasibility of many others with the legal limitations and
parameters established in statute to operating an actuarially sound
insurance program. In addition, the FCIC Board of Directors
commissioned a Product Portfolio Review to assist in evaluating and
developing a strategic product development plan. Our initial plan
growing out of that review focuses on identifying and pursuing
opportunities to more comprehensively provide risk coverage and other
risk management solutions for producers, regions, commodities and
risks. It gives priority to the development of new insurance products
and other risk management solutions to fill identified gaps, including
coverage for livestock, forage, rangeland, long-term drought and
specialty crops; and simplifies and improves the effectiveness of
revenue and other insurance products that will meet the needs of the
agriculture sector.
Provide a Fair and Effective Delivery System.--RMA relies on
private sector insurance companies to deliver and service risk
management tools to producers. The financial agreement that compensates
insurers for their service and established standards for performance is
the Standard Reinsurance Agreement (SRA). The current agreement has
been in effect since 1998 and needs to be updated to reflect the
changing nature and scope of the program as well as recent development
of the delivery system.
ARPA gave RMA the authority to renegotiate the current SRA once
during the 2001 through 2005 reinsurance years. On December 31, 2003,
RMA provided the required notice of cancellation of the current
agreement effective July 1, 2004 and its intent to renegotiate the
agreement for the 2005 reinsurance year, which begins on July 1, 2004.
On December 30, 2003, RMA issued the draft of the proposed SRA to
insurance providers. The first round of negotiations with insurance
providers has been completed. A range of issues was identified and a
second draft of the SRA addressing those issues is near completion for
review and negotiation with the companies. We are working with all
insurers to have a new and equitable SRA in place by the 2005
reinsurance year.
Through this private sector delivery system, in crop year 2003, RMA
provided approximately $41 billion of protection to farmers, and
expects indemnity payments for crop year losses of approximately $3.3
billion. The participation rate for major program crops was
approximately 82 percent. An important part of the delivery system is
having effective and useable products. RMA continues to efficiently
evaluate risk management products, review and approve private sector
products to be reinsured by the FCIC, to promote new risk management
strategies, and ensure effective delivery of these products to
agricultural producers. RMA's education, outreach, and non-insurance
risk management assistance initiatives, delivered through the public
and private sector organizations, further contribute to the producer's
ability, skill and willingness to access and effectively use RMA's
growing portfolio of risk management tools to protect their financial
stability.
Under the Agricultural Management Assistance Program (AMA), Section
524(b) of the Federal Crop Insurance Act, financial assistance is
authorized for producers in 15 ``Targeted'' States. Under this
authority, and in response to the need to improve crop insurance
delivery and acceptance in these States, for fiscal year 2003 RMA
offered a cost-share program for producers purchasing AGR, AGR-Lite,
and spring policies with sales closing dates on or after February 21,
2003. The States in which this program was offered were: Connecticut,
Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, New
Jersey, Nevada, Pennsylvania, Rhode Island, Utah, Vermont, West
Virginia, and Wyoming. The primary goal of the program was to enable
producers to buy-up to higher levels of insurance coverage, and to
provide an incentive for new producers to purchase insurance. To meet
this objective, RMA paid a portion of the producer premium remaining
after the normal USDA subsidy was applied. Moreover, to encourage buy-
up, RMA paid a higher percentage of this premium for higher levels of
coverage. USDA has received many positive letters from producers,
producer groups and insurance agents in many States who are pleased
with the program. RMA recently announced the availability of financial
assistance for crop year 2004 spring crops for the same States,
consistent with new statutory requirements for the application of these
funds.
In early 2004, RMA approved Occidental Fire & Casualty (OFC) and
its Managing General Agent, Crop1 to sell and service crop insurance
under a premium reduction plan as allowed by Federal statute, and in
accordance with standards and procedures established and approved by
the FCIC Board. The States for which OFC was approved are: Illinois,
Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North
Dakota, Ohio, South Dakota, Texas (State approval pending), and
Wisconsin. OFC is required to offer Premium Discount Plan (PDP) on FCIC
insurance covering all crops in these States. Farmers who purchase crop
insurance under OFC's Premium Discount Plan (PDP) will receive a
discount on their portion of the insurance premium of up to 10 percent
or more depending on the level of coverage they purchase. The discount
(equal to 3.5 percent of the total unsubsidized premium) results from
OFC passing along the cost savings generated by its cost efficient
approach to delivering crop insurance.
We continue to work with the private sector to improve producers'
ease of access to and awareness of risk management products; increase
the emphasis on improving service coverage for underserved producers
and regions; and expand the ability to reach underserved producers,
areas and commodities through traditional channels and developing
technologies.
Ensure Customers and Stakeholders are Well-Informed.--RMA has
implemented an extensive national outreach and education program,
including several initiatives to increase awareness and service to
small and limited resource farmers and ranchers and other underserved
groups and areas.
In 2003, RMA sponsored the second national outreach conference
titled: Survival Strategies for Small and Limited Resource Farmers and
Ranchers, in San Diego, California. Public and private professionals,
who provide agricultural services to underserved groups, were the
targeted audience. Over 300 professionals representing 45 States, 22
universities and three foreign countries convened at this conference to
share ideas and develop strategies to benefit the underserved
communities. During 2004, regional and local workshops will be
customized in several regions to deliver proven survival strategies
directly to producers. RMA is also partnering with community-based
organizations, 1890, 1994, 1862 land grant colleges and universities,
and Hispanic Serving Institutions (HSIs) to provide program technical
assistance and risk management education on managing farming risks
associated with the many legal, production, marketing, human resources
and labor aspects of farm operation. RMA funded 49 outreach projects in
fiscal year 2003 totaling $4 million to provide outreach and assistance
to women, small and limited resource farmers and ranchers.
During fiscal year 2003, our education program focused on
underserved States, specialty crop producers, and grants through the
Cooperative State Research, Education, and Extension Service. RMA
Regional Offices held 833 outreach and educational meetings during
2003, which attracted 42,020 participants.
In June 2003, RMA announced a Request for Applications for two
programs. The first was to establish cooperative education agreements
in States that have been historically underserved with respect to crop
insurance. As a result of this announcement, 15 cooperative agreements
were established totaling $4.5 million. These agreements were executed
with State departments of agriculture, universities, and non-profit
organizations to deliver crop insurance education to producers in
Connecticut, Delaware, Maine, Pennsylvania, Rhode Island, Maryland,
Massachusetts, Nevada, New Hampshire, New Jersey, New York, Utah,
Vermont, West Virginia, and Wyoming. Specifically, these cooperative
agreements will: expand the amount of risk management information
available; promote risk management education opportunities; inform
agribusiness leaders of increased emphasis on risk management; and
deliver training on risk management to producers with an emphasis on
reaching small farms.
The second program was for commodity partnership agreements to
reach producers of specialty crops. A total of 35 commodity partnership
agreements were established at a cost of $4.6 million. These agreements
were executed with State departments of agriculture, universities,
grower groups, and non-profit organizations in Alabama, Arizona,
Arkansas, California, Colorado, Florida, Georgia, Hawaii, Idaho,
Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota,
Mississippi, Missouri, Montana, Multi-state Area 1 (NV, UT, WY), Multi-
state Area 2 (ME, NH, VT, CT, RI, MA, NY), Multi-state Area 3 (PA, NJ,
DE, MD, WV), Nebraska, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, South Carolina, South Dakota, Tennessee, Texas, Virginia,
Washington, and Wisconsin. These agreements will reach specialty crop
producers with broad risk management education. In addition, efforts
were continued with the Future Farmers of America organization to
educate and encourage youths' participation in agriculture.
Maintain Program Integrity.--Our Compliance function workload has
increased substantially due to the expansion of the Crop Insurance
Program and the implementation of ARPA. In order to deal with the
increased referral activity and to fulfill the responsibilities of data
reconciliation with Farm Service Agency (FSA), RMA has sought to manage
the increase in workload by emphasizing the use of data mining, remote
sensing, Geospatial Information technologies and other computer-based
resources. During the 12-month period from January 2002 through
December 2002, RMA projects more than $125 million was saved by
deterring or preventing potentially fraudulent claims through data
mining and other related activities. Similar savings were realized for
2003 as we expanded data mining capabilities.
In 2004, we continue to develop data management and integration
tools to effectively evaluate, track, and improve program compliance,
integrity and to reduce the potential for erroneous payments. The need
for the authority to regulate certain insurance provider business
activities associated with the Federal Crop Insurance Program and the
ability to perform timely and effective reviews of insurance providers
became apparent in 2002 with the failure of the American Growers
Insurance Company. The fiscal year 2005 budget request includes $1.0
million for monitoring and evaluating the reinsured companies.
Improving RMA's ability to monitor the reinsured companies will provide
the means to perform the necessary analysis and pursue any needed
corrective actions to reduce the likelihood and cost of future
failures.
Recent progress in the Compliance area has been concentrated on the
mission-critical tasks of evaluating and improving new processes
established to prevent and deter waste, fraud and abuses. In addition,
extensive progress has been made in building and adapting RMA's
compliance investigation caseload reporting, tracking, and feedback
systems to meet the requirements that were mandated by ARPA. RMA, the
FSA, the Office of Inspector General, U.S. Attorneys' offices
throughout the Nation, and the insurance providers continue to work
together to improve program compliance and integrity of the Federal
crop insurance program by: fine tuning the RMA/FSA data reconciliation
and matching process; evaluating and amending the procedures for
referring potential crop insurance errors or abuse between FSA and RMA;
creating an anti-fraud and distance learning training package to
complete the requirements of ARPA; and detecting, prosecuting and
sanctioning perpetrators of crop insurance fraud. We also have
dedicated additional efforts to integrating data mining analysis into
all Agency functions to assist in proactive preemption of fraud through
effective underwriting and product design; exploring ways to expedite
increasing sanctions requests; and establishing a fraud investigation
case management and issue tracking system.
During fiscal year 2003, RMA published ARPA mandated revisions to
the Common Crop Insurance Policy, also known as the Basic Provisions.
RMA proposed many changes to the Basic Provisions, including changes
mandated by ARPA or requested by OIG, as well as changes related to
program integrity and administrative issues. Due to the large number of
comments received, and in order to implement the changes mandated by
ARPA for the 2004 crop year, RMA chose to implement the proposed
changes in two separate regulations.
The first final rule was published in the Federal Register on June
25, 2003. It contained all of the proposed changes mandated by ARPA and
a change requested by OIG for an earlier notice of loss for prevented
planting.
RMA is finalizing the second final rule that addresses all of the
proposed changes that were not contained in the first final rule. RMA
expects publication of this final rule in time to implement for the
2005 crop year, provided all departmental and other necessary
concurrences can be obtained.
American Growers Insurance Corporation
In addition to accomplishing APRA mandated compliance regulations,
RMA has maintained program integrity despite the fallout of the largest
policy issuing company in the Federal crop insurance program. On
November 22, 2002, L. Tim Wagner, Director of the Nebraska Department
of Insurance, placed American Growers Insurance Company under
supervision by issuing an Order of Supervision and List of Requirements
to Abate Supervision and Notice of Hearing. RMA immediately,
thereafter, entered into a memorandum of understanding with the State
of Nebraska to insure that the interests of the government and the
policyholders were protected.
Senior RMA officials were placed on site with the State appointed
rehabilitator to keep focus on the priorities. Despite an enormous
claims caseload caused by the drought of 2002, the policyholders were
paid in a timely manner. Only a handful of claims are pending, which is
typical at this juncture for any operating company. The policies of
American Growers (Am Ag) were also successfully transferred to other
reinsured companies ensuring that coverage remained in force for the
2003 crop year. This seamless transfer has provided confidence to all
our customers, within the Federal crop insurance program, that their
interest will be protected.
And, I am happy to say, the interests of the taxpayers also have
been protected. RMA's onsite presence and supervision of the claims
processing has resulted in cost avoidance of several millions dollars.
RMA continues to work with the State of Nebraska to bring finality to
our work on Am Ag.
Provide Excellent Service.--RMA continues to pursue initiatives to
make higher levels of crop insurance protection more affordable and
useful to producers, provide better protection to farmers experiencing
multi-year losses, expand risk management education opportunities, fund
and oversee development of new risk management products and improve
program integrity.
RMA's product portfolio includes coverage for 362 different
commodities in over 3,060 counties covering all 50 States, and Puerto
Rico. RMA will conduct regular market assessments to establish a
baseline for customer satisfaction and to measure progress in achieving
key elements of customer service to ensure the needs of our customers
are being addressed. Also, we plan to address the needs and changes to
products, programs and processes to improve service to customers as
identified from our listening sessions and RMA's product portfolio
evaluation.
program highlights
Now, I would like to conclude with an update on some of our key
products and initiatives:
Livestock Insurance Plans
The FCIC approved two pilot insurance programs for Iowa swine
producers to protect them from declines in hog prices. The new
programs, which began in 2002, were authorized under the provisions of
Section 132 of the Agricultural Risk Protection Act of 2000 (ARPA).
Until ARPA, federally backed insurance plans providing livestock
protection were prohibited by law. The livestock insurance programs
provide livestock producers with risk management tools for reducing
their price risks. Livestock revenue represents about one-half of the
total farm cash receipts.
The two programs approved are: The Livestock Gross Margin (LGM)
pilot, submitted by Iowa Agricultural Insurance Innovations, and the
Livestock Risk Protection (LRP) pilot for Swine submitted by the
American Agri-Business Insurance Company. The LGM pilot provides
coverage to swine producers from price risks for 6 months and up to
15,000 hogs per period. The product protects the gross margin between
the value of the hogs and the cost of corn and soybean meal. Prices are
based on hog futures contracts and feed futures contracts. LGM protects
producers if feed costs increase and/or hog prices decline, and depends
on the coverage level selected by the producer. Coverage levels range
from 85-100 percent.
The LRP pilot protects producers against a decline in hog prices.
Swine can be insured for 90, 120, 150, or 180 days, and up to a total
of 32,000 animals per year. Unlike traditional crop insurance policies,
which have a single sales closing date each year, LRP is priced daily
and available for sale continuously throughout the year. The LRP policy
protects producers against declining hog prices if the price index
specified in the policy drops below the producer's selected coverage
price. Coverage levels range from approximately 70-95 percent of the
daily hog prices. LRP Swine and LGM Swine have been available to
producers for over a year and have protected over 60,000 head of swine
in Iowa. Both products are available from private insurance agents. The
length of the pilot programs will be determined by farmer
participation, and the financial performance of the programs. In crop
year 2003, the FCIC Board did not approve any requests for expansion of
the LRP Swine. Consideration for expansion is deferred until testing is
completed and the program demonstrates that the premium rates are
actuarially sufficient, the interests of the producers are protected,
and that there are no adverse affects on program integrity.
LRP was expanded to fed and feeder cattle for the 2003 crop year.
LRP Fed Cattle protects producers in Illinois, Iowa, and Nebraska. LRP
Feeder Cattle protects producers in Colorado, Iowa, Kansas, Nebraska,
Nevada, Oklahoma, South Dakota, Texas, Utah and Wyoming. Both products
use similar methodology to LRP Swine and protect producers against a
decline in cattle prices.
Livestock Risk Program (LRP) and Livestock Gross Margin (LGM)
Suspensions
Upon the discovery of Bovine Spongiform Encephalopathy (BSE) in the
State of Washington, RMA determined it was prudent to suspend the sales
of LRP cattle policies to new policyholders. When originally developed,
the LRP premium structure was based on the relatively stable futures
market prices, which existed prior to the discovery of BSE in
Washington State. However, the discovery of BSE destabilized the
futures market resulting in large price swings and increased the
probability that a producer would receive an indemnity. The crop
insurance program is statutorily required to operate on an actuarially
sound basis. The volatility present in the market after the discovery
of BSE caused the product to no longer be actuarially sound. Current
policyholders are not affected by the suspension of sales. The FCIC
Board believes RMA acted quickly and responsibly to protect the
integrity of the crop insurance program. At present, RMA is actively
evaluating the rating structure and other design components of the
program that may be affected by the BSE development. Sales will be
restored when it is determined by the FCIC Board that the LRP is
operating an actuarially sound manner and will serve the best interests
of the producers.
On December 17, 2003, the FCIC Board discontinued new sales of the
LGM Swine. The Board determined LGM Swine presented excess risk for the
FCIC. Coverage price is determined two weeks prior to sales closing.
Because LGM coverage prices are determined using the Chicago Mercantile
Exchange and the Chicago Board of Trade, insureds may speculate as
price on either exchange drops (hogs) or rises (corn and soybeans meal)
and purchase LGM; RMA refers to this phenomena as stale pricing. While
this strategy is sound, (buy low, sell high) for speculative purposes,
LGM is a risk management tool and reinsured by FCIC; this strategy is
not appropriate for insurance purposes. As directed by the Board, RMA
will work with the submitter of the LGM to address the concerns
regarding the program for subsequent insurance periods. Current
policyholders of this plan of insurance are not affected by the
discontinuance.
Forage and Rangeland
We recently solicited private sector participation in proposing and
developing new products and changes to existing products and programs
involving pasture, rangeland, forage and hay that are vital to
livestock producers. The agency is providing $3 million in funding for
these projects, and may provide more depending on the number and
quality of submissions that meet program objectives.
Declining Yield
For most FCIC insurance plans, an individual insured's yield
guarantee (approved actual production history (APH) yield) is
principally based on a simple average of 4 to 10 years of actual
yields. Producers and others have argued that insureds are underserved
when guarantees decline following successive years of poor growing
conditions. The reduction in guarantee adversely affects the viability
of future crop insurance coverage and discourages continued
participation in the program. RMA's goal is to contract for: (1)
research and development of new and innovative approaches to mitigating
declines in yield guarantees following successive years of low yield,
or provide improvements to existing procedures; and/or (2) research and
development of new and innovative procedures for determination of
approved APH yields. Through this approach, RMA will seek proposals for
new or modified approaches to establishing approved APH yields that are
less subject to decreases during successive years of low yields as
compared to current procedures; and that are equitable across insureds
with differing average yields; and broadly applicable to all crops and
regions; affordable to insureds; feasible and cost-effective for RMA
and reinsured companies; and is actuarially sound.
Extend Drought Coverage
RMA is constantly evaluating the impact of consecutive years of
drought or other natural disasters on declining yields, which affect
available coverage, on producers in those States affected. RMA has held
meetings in drought stricken States to explain RMA policy and has
published a fact sheet regarding prevented planting provisions in FCIC
insurance policies and to assist producers, insurance agents, and
reinsured companies in understanding how that coverage addresses some
of the challenges of drought. Prevented planting coverage is generally
straightforward on its face, but it becomes very complex when applied
to specific planting situations. RMA has sought producer and insurer
input on this issue in a series of prevented planting forums held in
2003. Recommendations from these sessions are being evaluated for
possible inclusion in a proposed rule that will make constructive
changes in the program. RMA is also preparing to seek private sector
assistance in evaluating possible product modifications or new products
to address declining yield experience caused by extended drought.
Adjusted Gross Revenue-Lite
The FCIC approved the Adjusted Gross Revenue-Lite (AGR-Lite)
insurance plan in late 2002 and began sales for 2003. This product was
also submitted to FCIC through Section 508(h) of the Act and was
authorized by ARPA. AGR-Lite is available in most of Pennsylvania and
covers whole farm revenue up to $100,000, including revenue from
animals and animal products. AGR-Lite covers the adjusted gross revenue
from the whole farm based on 5 years of tax forms and a farm plan. AGR-
Lite was expanded for the 2004 crop year to include selected counties
of Connecticut, Delaware, Maine, Maryland, Massachusetts, New
Hampshire, New Jersey, New York, Rhode Island, Vermont, and West
Virginia. Program changes were approved that will increase
participation, qualify producers for higher coverage levels, increase
insurable adjusted gross revenues, and allow for expansion of farms,
beginning with the 2004 crop year.
Pilot Programs
Currently, RMA has 31 pilot programs. The pilot programs are:
Adjusted Gross Revenue (AGR/AGR-Lite), Apple Pilot Quality Option,
avocado APH, avocado revenue, avocado/mango tree, cabbage, cherry,
citrus dollar (navel oranges only), Coverage Enhancement Option,
crambe, cultivated clams, cultivated wild rice, Florida fruit trees,
forage seed, fresh market snap beans, Income Protection Plan of
Insurance (IP), livestock (swine) gross margin, livestock risk
protection (swine/cattle), mint, mustard, Onion Pilot Stage Removal
Option, pecans, processing chile peppers, processing cucumbers,
rangeland GRP, raspberry/blackberry, strawberries, sweet potatoes, and
winter squash/pumpkins.
The FCIC Board of Directors approved the expansion of the millet
pilot program and conversion from a pilot program to permanent status
for the 2003 crop year. The Board also approved expansion of the pecan-
revenue pilot program to be offered in eighty-two counties for the 2003
crop year and subsequently approved the program to permanent status for
the 2004 crop year. Additionally, the Board approved conversion of the
blueberry pilot program to permanent status effective beginning the
2004 crop year.
Revenue Insurance
Revenue insurance programs include Group Revenue Insurance Policy
(GRIP), Adjusted Gross Revenue (AGR), Crop Revenue Coverage (CRC),
Revenue Assurance (RA), and Income Protection (IP). Under CRC, RA, and
IP revenue insurance programs, indemnities are triggered by low
revenues for an individual producer (caused either by low yields, or
low prices, or both). Under AGR, indemnities are triggered by low
revenue for an entire farm's operations, based on the producer's
Schedule F Federal tax forms. Under GRIP contracts, indemnity payments
are triggered by low county-wide crop revenues. Two of these
alternatives, CRC and RA, allow producers the option of insuring
separate areas of land either under separate insurance contracts or
under the same insurance contract. Each of these alternate contracts
requires that producers establish an approved Actual Production History
(APH) yield for the crop to be insured.
Effective for the 2003 crop year, changes to CRC and RA-High Price
Option (HPO) rating methodologies were implemented for corn and
soybeans to respond to dissimilar rates being charged for similar
coverage protection. RMA is currently evaluating the feasibility of
merging CRC, RA and IP into a master product with several options. This
will reduce market confusion over these separate but similar products
and should significantly reduce administrative costs associated with
their sales, service and administration.
Research and Development
During fiscal year 2003, over $24 million was obligated and
approximately 45 contracts and partnership agreements were awarded to
further program goals for expanding and improving risk management
opportunities for producers. Examples include a contract to review
RMA's product portfolio, fifteen research and development partnership
agreements such as Organic Price Index, development of a Forage and
Rangeland Decision Support System and a number of other program
research, development, and evaluation projects to expand and improve
the risk management tools for American producers.
conclusion
RMA provides agricultural producers with the opportunity to achieve
financial stability through effective risk management tools. RMA
strives to foster, at reasonable cost, an environment of financial
stability, safety, and confidence, enabling the American agricultural
producer to manage the perils associated with nature and markets. The
private sector crop insurance industry markets, delivers, and services
many USDA risk management products. RMA also provides the educational
opportunities to help producers choose and employ effective risk
management tools. RMA works with the Farm Service Agency, Commodity
Futures Trading commission, and other private and public organizations
to provide producers with an effective safety net.
I ask that you approve this budget to enable RMA to continue
providing an actuarially sound crop insurance program to America's
agricultural producers. Thank you,
Mr. Chairman and members of this committee. This concludes my
statement. I will be happy to respond to any questions.
Senator Bennett. Thank you, sir. Mr. Rey.
STATEMENT OF MARK REY
Mr. Rey. Good afternoon, Mr. Chairman.
Our prepared statement for the record highlights our
funding request for fiscal year 2005, and in the interest of
time, I will not go into great detail except to assure you that
we are continuing to work diligently in accountability and
results measurement for the funds provided by Congress. I am
proud of the strong efforts that NRCS continues to make their
programs more accessible to farmers, ranchers and the general
public.
CONSERVATION SECURITY PROGRAM
What I would like to do in the short time available today
is focus my remarks on our continuing efforts to implement the
Conservation Security Program as provided for in the fiscal
year 2004 budget and as requested in the fiscal year 2005
request. The Department is moving forward aggressively to
implement the program, and we are enthusiastic about the
prospects of the Conservation Security Program and look forward
to making it available in farms and ranches across America.
The proposed rule was published for public comment on
January 2, 2004, with a comment period that closed in the
beginning of March. The response from the public was
extraordinary, with 14,010 comments plus one seed order and a
misdirected check responding to a fundraising request from a
group that was opposing the regulation. You will be happy to
know that the seed order was returned, and the check was
forwarded to the appropriate party.
Mr. Rey. In addition to the comments we received, the
agency conducted 10 national listening sessions around the
country and many individual sessions in States on the proposed
rule. Our staff has worked diligently to assemble the docket of
comments and assure that each comment will receive fair
consideration and review. We have made the comments available
for public viewing and copying down in the Department of
Agriculture. And while we are not in a position today to debate
the contents of the proposed rule, I would like to put the
contents of the proposed rule in a broad perspective in terms
of our approach and rationale in discussing three areas which
were highlighted in the comments that we received.
The first is the budgetary aspects of the CSP program. When
the President signed the 2002 Farm Bill into law, the
Conservation Security Program was estimated to cost $2 billion
over 10 years. Just as a matter of perspective, this would be
400 times the amount originally authorized for the Wildlife
Habitat Incentive Program and 571 times greater than the
original funding for the Farm and Ranch Lands Protection
Program.
So as envisioned, it was a significant program. Congress
has seen fit to amend the program three times since signing of
the Farm Bill in the last 21 months; that would be an amendment
on the average of every 7 months, making program implementation
a somewhat difficult task as some of the direction was changed
as we went. Under the most recent revised law, the Congress
expected an expenditure of less than $7 billion on the program
over a 10-year period, with a cap of only $41.4 million for
fiscal year 2004.
Through the work of the NRCS, we have been able to design
the program in a way that provides funding obligations in a
fashion similar to the way that the Conservation Reserve
Program obligations are structured. For example, the
President's budget request of $209 million for CSP in fiscal
year 2005 will represent about a $2 billion total in funding
provided for farmers and ranchers as the contracts signed in
2005 play out. If unchanged by either us or the Congress, the
proposed CSP would provide more than $13 billion in CSP
assistance to farmers and ranchers over 7 years, which is an
amount greater than proponents of an open-ended program have
been discussing.
A WATERSHED APPROACH TO CSP
A second area of considerable discussion in the public
comments is our proposed approach to focusing on priority
watersheds. Even though we have been able to maximize funding
obligations, the dollars available will not even begin to
satiate the immediate demand for the program. There is a
potential applicant pool of 700,000 producers to sign up for
CSP. The CSP statute, the Farm Bill language, prohibits ranking
applications but would instead mandate that all applicants be
accepted into the program and potentially receive a payment.
Given the $41 million available for this fiscal year, and
of course, unknown amounts for fiscal year 2005 and beyond, we
have proposed a program that is flexible enough to match
funding available for any given fiscal year by making the
program available in watersheds and emphasizing enrollment
categories. Our approach also deals with the constraint placed
in statute on technical assistance at a maximum of 15 percent
of the expended CSP funding.
It is clear that we have proposed the best course of action
in designing a staged program that can be expanded based upon
available funding, and what you see in the map before you is a
map of all of the watershed units in the United States. As the
program is drafted now, it will start in the first year by
identifying priority watersheds, the criteria for which will be
published for public review shortly.
If and as funding expands, more watersheds can be made
available, and using the watershed-based approach, the program
could be theoretically expanded to the entirety of the land
area of the United States. So it is a staged program that can
be made into--is intended to be made into--a national program
commensurate with whatever funding support that this Congress
and subsequent Congresses provide.
CSP BASE PAYMENT
A third area which enjoyed considerable discussion in the
comments regards the way the CSP base payment is structured
under the proposed rule. In order to ensure defensible
environmental results for the program, we have proposed placing
increased emphasis on increased conservation. That is to say
those farmers and ranchers who agree to do more, get more in
the way of financial support from the program.
It is our goal to design a program that is easy to
understand for farmers, ranchers and those implementing the
program. We also want to make sure that the program produces
demonstrable conservation results that will show the American
taxpayer the value of good conservation on working agricultural
lands so that this program can be expanded and developed into
the base program to affect working conservation in the future.
PREPARED STATEMENTS
As I mentioned, our next step is to undertake a thorough
review and consideration of comments from the public. It will
be this input that assists us in finalizing the program design.
The task will be massive, but we have dedicated appropriate
staff expertise to tackle the job. Our goal is to publish a
final rule with a sign-up period occurring in fiscal year 2004.
USDA is ready to deliver the program to the public and begin to
see results.
We consider CSP to be a brand new day for conservation
policy. With that, I would be happy to respond to your
questions at the appropriate time.
[The statements follow:]
Prepared Statement of Mark Rey
Mr. Chairman and Members of the Committee, I am pleased to appear
before you today to present the fiscal year 2005 budget and program
proposals for the Natural Resources Conservation Service (NRCS) of the
Department of Agriculture (USDA). I am grateful to the Chairman and
members of this body for its ongoing support of private lands
conservation and the protection of soil, water, and other natural
resources.
Performance and Results
Mr. Chairman, before I highlight our funding request for fiscal
year 2005, let me assure you that we are continuing to work diligently
in accountability and results measurement for the funds provided by
Congress. I am proud of the strong efforts that NRCS has made on
performance and making NRCS more accessible to farmers, ranchers and
the general public. I believe we are offering value and accountability
to both American taxpayers and to Congress. Our performance management
system was recently featured in two publications that focus on
government management and accountability.
In past testimony before this Subcommittee, I have discussed the
excellent score that NRCS received in a measure of customer
satisfaction for conservation assistance. This year, I am proud to
report that NRCS was ranked as one of the best places to work in the
Federal Government, including the highest score for a natural resource
agency. The scores in the report were derived from the Office of
Personnel Management's government-wide 2002 Federal Human Capital
Survey. Also, this year we have worked hard on the Program Assessment
Rating Tool (PART) to evaluate and improve our performance measures
with a focus on outcomes and results. As we move forward this fiscal
year, and into fiscal year 2005, we will continue to improve operations
and accountability systems so that we may best serve our customers and
protect and improve natural resources.
As you know, the NRCS is proposing a reorganization to improve its
operational, technology support, and resource assessment functions to
strengthen our ability to help America's farmers and ranchers reach
their conservation goals and offer them the latest science-based
technologies. We look forward to continue working with you to move
forward with implementation.
Looking Ahead
The 2002 Farm Bill contained many new conservation programs
designed to protect and enhance the environment. The Department
continues to focus efforts on implementing the conservation programs in
the Farm Bill. The 2005 President's budget request in the conservation
area recognizes the importance of this task, as well as the need to
continue to support underlying programs to address the full range of
conservation issues at the national, State, local and farm levels.
The 2005 budget request for NRCS includes $908 million in
appropriated funding, and $1.86 billion in mandatory CCC funding for
the Farm Bill conservation programs, including $1 billion for the
Environmental Quality Incentives Program. The appropriation request
includes $604 million for Conservation Technical Assistance, the base
program that supports the Department's conservation partnership with
State and local entities and the conservation planning needed to
successfully implement farm bill programs.
The 2005 budget for NRCS will also enable the agency to maintain
support for important ongoing activities such as addressing the
problems associated with runoff from animal feeding operations and
providing specialized technical assistance to land users on grazing
lands.
Another element in the NRCS account structure is a Farm Bill
Technical Assistance Account that will fund all technical assistance
costs associated with the implementation of two Farm Bill conservation
programs--the Conservation Reserve Program and the Wetlands Reserve
Program. In 2005, this new appropriation account is requested at $92
million.
Technical Assistance
Technical assistance funding for conservation programs has been the
subject of ongoing discussion for several years and a topic of interest
to this Subcommittee. We appreciate Congress taking steps to deal with
the long-standing problem of technical assistance for Farm Bill
conservation programs in the Consolidated Appropriations Act, 2003. The
long term solution to the technical assistance issue is proposed in
fiscal year 2005 with the establishment of a new Farm Bill Technical
Assistance account for CRP and WRP and dedicating resources for this
purpose. This will allow the agency to provide more financial
assistance to farmers and ranchers in the other mandatory farm bill
programs.
Conservation Operations (CO).--The 2005 budget proposes $710
million for CO which includes $582 million for Conservation Technical
Assistance (CTA) and $21.5 million for technical assistance targeted
specifically for the Grazing Lands Conservation Initiative. This will
continue the agency's activities that support locally led, voluntary
conservation through the unique partnership that has been developed
over the years with each conservation district. This partnership
provides the foundation on which the Department addresses many of the
Nation's critical natural resource issues such as maintaining
agricultural productivity and water quality and leverages additional
investment from non-Federal sources. The CTA budget will enable NRCS to
maintain funding for ongoing high priority work.
Mr. Chairman, I believe that NRCS can continue and build upon this
level of excellence, if they are provided the support and the resources
as provided in the President's budget request.
Given the challenges presented in the Farm Bill, I suggest the
following highest priority areas of emphasis:
--Provide adequate support for Conservation Reserve and Wetlands
Reserve programs implementation through a separate Technical
Assistance discretionary account.
--Further leverage assistance through our conservation partners and
the new Technical Service Provider system. These new sources of
technical assistance will complement our existing delivery
system.
--Provide the support in the President's budget for Conservation
Operations, with an emphasis on developing technical tools and
streamlining efforts to gain efficiencies where possible.
Conservation Security Program
Mr. Chairman, I also want to take a few moments to highlight our
work on the Conservation Security Program (CSP). A keystone of the 2002
Farm Bill conservation title, the CSP has the potential to
revolutionize the way we approach conservation assistance. We have been
working hard to design a program that is farmer friendly, provides
demonstrable environmental benefits, and matches the funding available
to operate the program.
There has been a lot of discussion here on Capitol Hill, and around
farm production and conservation organizations about the amount of
resources available for the program. Needless to say, this has been a
moving target for those of us attempting to develop a program under
ever-changing funding scenarios. At the time the President signed the
Conservation Security Program into law, there was a Congressional
Budget Office (CBO) estimate of $2 billion over ten years attached to
the CSP. As such, our Department began implementation discussions with
that funding figure in mind.
Subsequently, the Omnibus Appropriations Act of 2003 (Public Law
108-7) transformed the CSP into a capped entitlement at $3.773 billion
over a 10-year period between fiscal year 2003-2013. This change in
statute led to further revisions of the CBO score. Most recently, the
Omnibus Appropriations Bill for fiscal year 2004 (Public Law 108-199)
contains language that once again has impacted the funding authority
for the Conservation Security Program. The fiscal year 2004 Omnibus
removed the $3.773 Billion funding limitation for the program over 10
years, while establishing funding for the CSP at $41.443 million for
fiscal year 2004.
Another challenge that the Department faced was how to implement
CSP with a statutory cap on the amount NRCS could spend to pay for
technical assistance. Language in the 2002 Farm Bill limits technical
assistance spending to 15 percent. This statutory cap on technical
assistance has driven NRCS to develop innovative information technology
tools and technical assistance management techniques to help the agency
implement CSP as widely, efficiently, and effectively as possible.
We have attempted to meet these challenges in the CSP proposed
rule, by designing a program that is flexible enough to match whatever
funding that Congress might approve for the program. The President's
budget request will provide assistance to a large number of producers
across the country. The budget's proposal of $209 million represents
the amount of assistance the Department will provide in one year to
approximately 15,000 producers on millions of acres of crop and grazing
land. We are proud of what we are accomplishing, and are looking
forward to making CSP available to producers this year.
Mr. Chairman, in summary, we all know that we are trying to plan
for the future under an atmosphere of increasingly austere budgets and
with a multitude of unknowns on the domestic and international fronts.
But I believe that the Administration's fiscal year 2005 request
reflects sound policy and provides stability to the vital mission of
conservation on private lands. The budget request reflects sound
business management practices and the best way to utilize valuable
conservation dollars as we look forward to the future.
I thank Members of the Subcommittee for the opportunity to appear,
and would be happy to respond to any questions that Members might have.
______
Prepared Statement of Bruce I. Knight, Chief, Natural Resources
Conservation Service
Thank you for the opportunity to appear before you today to discuss
our fiscal year 2005 budget request.
Last year, I focused much of my remarks on implementation of the
Farm Bill and the challenges that we faced in carrying out that
legislation. I am very proud of the performance of our agency in
getting the work done. To date, NRCS has published rules for nine major
programs, with the Conservation Security Program proposed rule comment
period recently completed and the receipt of over 12,000 letters we are
currently analyzing. In addition, we have three new rules soon to be
released as well.
We challenged NRCS staff throughout the Nation in fiscal year 2003.
And when the year drew to a close it was clear that our field staff had
answered the call. Roughly $2.3 billion in discretionary and mandatory
conservation dollars successfully reached farmers, ranchers and other
customers. This represents a half-billion dollar increase over last
year. In turn, the streamlining and efficiencies NRCS has gained meant
that even more conservation funding could be utilized for financial
assistance to producers. But beyond the successes measured in terms of
funds, the work NRCS completed this year will have a lasting impact on
the nation's land, water, and air resources for generations to come.
Along with the Farm Service Agency, NRCS successfully deployed the
Grassland Reserve Program, with more than $1.7 billion in potential
projects offered up by producers. All of these milestones were realized
while the agency was developing and utilizing a nationwide cadre of
technical service providers, and continuing to strive toward even
greater efficiencies and organizational improvements. NRCS staff has
worked tirelessly to meet the demands and opportunities presented by
the Farm Bill legislation and we are proud of their accomplishments.
These accomplishments have also come within the context of the
challenges that we face on funding for technical assistance. As you are
aware, the current situation has necessitated that we utilize funding
from various Farm Bill program accounts to support other conservation
programs including the Wetlands Reserve Program and Conservation
Reserve Program. The President's budget request proposes to address
that issue by establishing a discretionary account for technical
assistance for CRP and WRP.
Our focus remains to provide excellent service to our customers,
and I am very proud of what we accomplished. Last year, NRCS and our
partners:
--Provided technical assistance on over 32.5 million acres of working
farm and ranch land to reduce erosion, sedimentation and
nutrient runoff, enhance water quality, restore and create
wetlands, and improve and establish wildlife habitat;
--Developed and applied more than 8,000 comprehensive nutrient
management plans;
--Served nearly 3.8 million customers around the country;
--Completed or updated soil survey mapping on 22.5 million acres;
--Logged over a million hours of Earth Team volunteer time for the
second year in a row;
--Executed over 30,000 Environmental Quality Incentives Program
contracts with more than $483 million in financial assistance
provided to producers;
--Funded more than 500 easements in the Farm and Ranch Lands
Protection Program, protecting 119,000 acres of prime farmland;
--Funded over 2,100 Wildlife Habitat Incentives Program contracts;
and,
--Helped land managers create, restore or enhance 334,000 acres of
wetlands;
--Helped local sponsors complete construction of 60 flood protection
structures.
Mr. Chairman, I also want to take a moment to highlight important
work in Western states that NRCS has undertaken surrounding to the Sage
Grouse habitat and population. NRCS is actively reviewing the 11
primary habitat states (WA, CA, UT, CO, ND, SD, OR, NV, ID, WY, and
MT). Private lands comprise 30 percent of the total acreage where
existing habitat populations occur and this agency plays a critical
role in the conservation of existing habitat through the Farm and
Ranchland Protection, Wildlife Habitat Incentives Program (WHIP) and
the Environmental Quality Incentives Program (EQIP) Program (FRPP) as
well as our general conservation technical assistance. NRCS staff are
currently reviewing all existing projects that have a primary or
secondary benefit to sage grouse as well as quantifying the total acres
and total dollars in support of this species. Some states are also
giving more program focus for sage grouse projects under the EQIP
program and the NRCS state technical committee.
As we move forward in fiscal year 2005, there are many challenges
and opportunities ahead, with NRCS playing a central role in meeting
the Administration's conservation objectives. We will look to you to
build upon the fine accomplishments achieved this year to reach an even
brighter future.
Increasing Third-Party Technical Assistance
With the historic increase in conservation funding made available
by the 2002 Farm Bill, NRCS will look to non-Federal partners and
private technical service providers to supply the technical assistance
needed to plan and oversee the installation of conservation practices.
I am proud to report that, as of the beginning of February 2004, NRCS
has over 1,500 individuals certified as TSPs, with 1,100 more
individuals pending. In terms of businesses, NRCS has certified 130,
with over 200 more applications in process. In fiscal year 2003, NRCS
set aside $20 million for utilization of TSPs, with that funding
quickly utilized across the nation. For fiscal year 2004, we are
goaling a figure of $40 million for TSPs. We are excited about the
prospect of TSP expertise continuing to complement our ongoing work.
Streamlining and Cost Savings
In 2003, NRCS devoted considerable effort to streamline our
operations, becoming leaner and more efficient in delivering our core
work. Last year, NRCS:
--Updated nearly 70 conservation technical standards;
--Deployed the NRCS Electronic Field Office Technical Guide;
--Streamlined program delivery, resulting in reduced costs without
compromising quality;
--Worked closely with FSA to implement Conservation Reserve Program
technical assistance cost savings that resulted in an
additional $38 million in allocations to Environmental Quality
Incentives Program, Wildlife Habitat Incentives Program,
Grassland Reserve Program and the Wetlands Reserve Program;
--Developed new software called PROTRACTS to speed up and keep up
with the processing of the large increase in farm bill program
contracts to allow more time and dollars to be directed toward
planning and applying conservation on the land; and
--Transitioned from an offset to a direct charge method of accounting
to be better able to identify and control costs.
In 2005, we will continue working on many fronts. We will continue
streamlining and getting more efficient in working with our partners as
well.
discretionary funding
The President's fiscal year 2005 Budget request for NRCS reflects
our ever-changing environment by providing resources for the ongoing
mission of NRCS and ensuring that new opportunities can be realized.
Conservation Operations
The President's fiscal year 2005 Budget request for Conservation
Operations proposes a funding level of $710 million which includes $604
million for Conservation Technical Assistance (CTA). The CTA budget
will enable NRCS to maintain funding for ongoing high priority work.
High priority ongoing work that will be maintained includes
addressing water pollution associated with animal agriculture. In
addition to regular technical assistance support provided to grazing
land customers, the budget proposes to provide funding for the Grazing
Land Conservation Initiative (GLCI) at $21.5 million in 2005 which is
included in the $604 million for CTA. The GLCI is a private coalition
of producer groups and environmental organizations that supports
voluntary technical assistance to private grazing land owners and
managers.
The Conservation Operations account funds the basic activities that
make effective conservation of soil and water possible. It funds the
assistance NRCS provides to conservation districts, enabling people at
the local level to assess their needs, consider their options, and
develop plans to conserve and use their resources. Conservation
Operations supports the site-specific technical assistance NRCS
provides to individual landowners to help them develop and implement
plans that are tailored to their individual goals. It also includes
developing and implementing the technology and standards that are used
by everyone managing private lands natural resources. It includes our
Soil Survey and Snow Survey Programs and other natural resources
inventories, which provide the basic information about soil and water
resources that is needed to use these resources wisely.
We have made great strides in developing an effective
accountability system with the support of Congress. This accountability
system has allowed us to accurately track our accomplishments and
costs.
Farm Bill Technical Assistance
As I described earlier in my statement, technical assistance
funding for farm bill programs continues to be a challenge as we look
ahead to fiscal year 2005. Fully funding technical assistance for the
Farm Bill programs is essential to ensure the environmental benefits
that are expected from the significant increase in conservation
spending. The 2005 Budget proposes to establish a Farm Bill Technical
Assistance (FBTA) account at a level of $92 million and would provide
technical assistance funding for two of the 2002 Farm Bill conservation
programs, the Conservation Reserve Program and the Wetlands Reserve
Program.
This new account will be used to develop contracts, design, and
oversee the installation of conservation practices and maximize the
amount of dollars available to help farmers and ranchers install on-
the-ground conservation projects. Establishing a technical assistance
account for these two programs will also increase the financial
assistance dollars available to carry out other Farm Bill programs.
Watershed and Flood Prevention Operations.--The 2005 Budget
proposes funding for the Public Law 566 Watershed Program, but requests
no funding for the Emergency Watershed Protection program. With
emergency spending being so difficult to predict from year to year, the
budget proposes instead to direct available resources to those projects
that are underway and for which Federal support is critical to their
successful implementation. The fiscal year 2005 budget proposes
$40,173,000 for this program.
Watershed Surveys and Planning.--NRCS works with local sponsoring
organizations to develop plans on watersheds dealing with water
quality, flooding, water and land management, and sedimentation
problems. These plans then form the basis for installing needed
improvements. The Agency also works cooperatively with State and local
governments to develop river basin surveys and floodplain management
studies to help identify water and related land resource problems and
evaluate alternative solutions. The 2005 Budget requests $5.1 million
to ensure that this important work is continued.
Watershed Rehabilitation Program.--One of the agency's strategic
goals is to reduce risks from drought and flooding to protect community
health and safety. A key tool in meeting this goal is providing
financial and technical assistance to communities to implement high
priority watershed rehabilitation projects to address dam safety. The
budget proposes $10.1 million to continue the work begun in 2002.
Resource Conservation and Development (RC&D).--The purpose of the
RC&D program is to encourage and improve the capability of State and
local units of government and local nonprofit organizations in rural
areas to plan, develop, and carry out programs for resource
conservation. NRCS also helps coordinate available Federal, State, and
local programs that blend natural resource use with local economic and
social values. The 2005 Budget proposes a level of $50.7 million which
will support the 375 RC&D areas now authorized.
farm bill authorized programs
Environmental Quality Incentives Program (EQIP).--The purpose of
EQIP is to provide flexible technical and financial assistance to
landowners that face serious natural resources challenges that impact
soil, water, and related natural resources, including grazing lands,
wetlands, and wildlife habitat management. We have seen that producer
demand continues to far outpace the available funding for EQIP. At the
end of January 2003, we published revised resource concerns and program
rules for EQIP resulting from the changes enacted in the new Farm Bill.
We believe that the increased program flexibility and improved program
features will continue to make EQIP one of the most popular and
effective conservation efforts Federal Government-wide. The budget
proposes a level of $1 billion for EQIP. Mr. Chairman, I would also
note that NRCS recently announced nearly $20 million in EQIP assistance
to support salinity control in the Colorado River Bain.
Wetlands Reserve Program (WRP).--WRP is a voluntary program in
which landowners are paid to retire cropland from agricultural
production if those lands are restored to wetlands and protected, in
most cases, with a long-term or permanent easement. Landowners receive
fair market value for the land and are provided with cost-share
assistance to cover the restoration expenses. The 2002 Farm Bill
increased the program enrollment cap to 2,275,000 acres. In fiscal year
2003, the administration apportioned a total of 213,280 acres for the
year. The fiscal year 2005 Budget request estimates that about 200,000
acres will be enrolled in 2005, an appropriate level to keep us on
schedule to meet the total acreage authorization provided in the Farm
Bill.
Grassland Reserve Program (GRP).--The 2002 Farm Bill authorized the
GRP to assist landowners in restoring and protecting grassland by
enrolling up to 2 million acres under easement or long term rental
agreements. The program participant would also enroll in a restoration
agreement to restore the functions and values of the grassland. The
2002 Farm Bill authorized $254 million for implementation of this
program during the period 2003-2007. The fiscal year 2005 Budget
proposes funding GRP at $84 million.
Conservation Security Program (CSP).--CSP, as authorized by the
2002 Farm Bill, is a voluntary program that provides financial and
technical assistance for the conservation, protection, and improvement
of natural resources on Tribal and private working lands. The program
provides payments for producers who practice good stewardship on their
agricultural lands and incentives for those who want to do more. While
NRCS is currently in the rule making process, this program will round
out the portfolio of conservation programs. The fiscal year 2005 Budget
proposes funding the CSP at $209.4 million and would enroll nearly
12,000 contracts. Although the cap of 15 percent on technical
assistance funding established in statute continues to be a serious
obstacle, through the hard work of the Administration in designing a
flexible program, the President's budget request of $209 million will
result in nearly $1.7 billion in obligations.
Wildlife Habitat Incentives Program (WHIP).--WHIP is a voluntary
program that provides cost-sharing for landowners to apply an array of
wildlife practices to develop habitats that will support upland
wildlife, wetland wildlife, threatened and endangered species,
fisheries, and other types of wildlife. The budget proposes a funding
level for WHIP of $60 million.
Farm and Ranch Lands Protection Program (FRPP).--Through FRPP, the
Federal Government establishes partnerships with State, local, or
tribal government entities or nonprofit organizations to share the
costs of acquiring conservation easements or other interests to limit
conversion of agricultural lands to non-agricultural uses. FRPP
acquires perpetual conservation easements on a voluntary basis on lands
with prime, unique, or other productive soil that presents the most
social, economic, and environmental benefits. FRPP provides matching
funds of no more than 50 percent of the purchase price for the acquired
easements. The budget proposes a level of $125 million for FRPP in
fiscal year 2005.
Conclusion
As we look ahead, it is clear that the challenge before us will
require dedication of all available resources--the skills and expertise
of the NRCS staff, the contributions of volunteers, and continued
collaboration with partners. Conservation Districts, Resource
Conservation and Development Councils, State and local agencies, and
other valuable partners continue to make immeasurable contributions to
the conservation movement. In fiscal year 2003, these organizations
contributed over $1 billion to NRCS programs. It is this partnership at
the local level that makes a real difference to farmers and ranchers.
And as we move forward, we will accelerate the use of third-party
sources of technical assistance as well. We recognize that the workload
posed by future demand for conservation will far outstrip our capacity
to deliver, and seek to complement our resources with an appropriate
system of qualified expertise.
But it will take a single-minded focus and resolve if we are to be
successful. I am proud of the tenacity that our people exhibit day in
and day out as they go about the work of getting conservation on the
ground. I believe that we will be successful. But it will require the
continued collaboration of all of us, especially Members of this
Subcommittee because available resources will ultimately determine
whether our people have the tools to get the job done. I look forward
to working with you as we move ahead in this endeavor.
This concludes my statement. I will be glad to answer any questions
that Members of the Subcommittee might have.
Senator Bennett. Thank you very much. Mr. Gonzalez.
STATEMENT OF GILBERT G. GONZALEZ
Mr. Gonzalez. Good afternoon, Mr. Chairman.
Mr. Chairman, thank you for the opportunity to come before
you to discuss the fiscal year 2005 appropriation for Rural
Development. I would like to submit for the record my written
testimony and share a few highlights and indicate my focus on
helping individuals, families and organizations within rural
communities.
We are all aware of the priorities of the war on terror,
homeland security, and deficit reduction. I am committed to
leveraging the precious USDA Rural Development assets to create
economic opportunity and improve the quality of life of rural
America. Since the beginning of the Bush Administration, USDA
Rural Development has provided over $37 billion in investment
financing and has assisted with the creation or saving of over
500,000 jobs. We have expanded our investment from $9.6 billion
in 2000 to $13 billion this past year.
USDA Rural Development is one of the few Federal agencies
that can essentially build a rural community from the ground up
through its investment in infrastructure, housing and business
programs. However, that is not always enough. I want to
leverage the resources that you have provided to work with all
agencies, organizations and the private sector in an effort to
bring more economic opportunity to rural America.
RURAL DEVELOPMENT ACCOMPLISHMENTS
I have implemented a major marketing effort to improve
customer service while expanding our outreach to underserved
and qualified individuals and organizations. I am putting
especial emphasis on our efforts to increase minority
participation in all of our programs. We talk a lot about
numbers, but Rural Development is really about people: people
who want to find better jobs, people who want better schools
and hospitals, people who want to own a home and give their
sons and daughters that first room of their own.
I had the opportunity last April to meet with Matt and
Riley Reed of Payson, Utah. They had been married 2 years and
had one little girl with another baby on the way and no hope
for qualifying for a home loan for several years. Matt was an
electrician with little construction experience. Under the
direction of a construction supervisor, the Reed family started
building their own home in September of 2000. They moved into
their new house in June of 2001.
Imagine the pride these families must have felt when they
walked into their home for the very first time. We are pleased
to announce that the number of contracts offered under the
self-help program almost doubled from 2002 to 2004.
Through our utility programs, we invested nearly $18
billion in the past 3 years for technology, water, wastewater
treatment, and electric infrastructure through loans and
grants. These investments have benefitted 2.7 million people in
rural areas, providing nearly 2,000 rural educational
facilities with expanded access to telecommunications
technologies and over 800 health care institutions with
enhanced medical care.
We have helped numerous rural communities through value-
added grant awards. One interesting project is the United
Wisconsin Grain Producers, which received a $450,000 grant for
working capital startup costs for a 40 million gallon annual
capacity corn ethanol production facility to be built in
Freesden, Wisconsin.
In total, there were 184 value-added grants, totaling
nearly $29 million, helping stimulate economic opportunity and
create jobs in rural America. In support of these local
investment efforts, I am working towards the implementation of
two key business programs: The Rural Business Investment
Program and the Low Documentation Business and Industry
Guarantee Program. Both will bring much-needed capital to rural
communities to support the development of small businesses and
to support the President's efforts to create jobs across rural
areas.
These two programs, along with our ongoing efforts to
support value-added agriculture and the development of
renewable energy will increase the opportunities for
communities to thrive and to compete domestically and globally.
PREPARED STATEMENTS
In summary, I would like to thank the members of this
Subcommittee and you, Mr. Chairman, for the continued support
to USDA Rural Development and the many important programs that
we administer.
Mr. Chairman, that concludes my remarks.
[The statements follow:]
Prepared Statement of Gilbert G. Gonzales
Mr. Chairman, Members of the Committee, it is a pleasure to present
to you the President's fiscal year 2005 Budget request for USDA, Rural
Development.
This is my first opportunity to appear before you as Acting Under
Secretary of Agriculture for Rural Development. I am honored to serve
in this position, and to have the opportunity to work with you to carry
out Rural Development's fundamental mission to increase economic
opportunity and improve the quality of life in rural America.
Everyday, we bring people and resources together.
As Secretary Veneman recently testified, a primary component in
USDA's efforts to better serve rural Americans is through greater
customer service and efficiency in the delivery of our programs. At
Rural Development we are seeking to accomplish these objectives through
better marketing of our programs to qualified applicants and through
developing a consistent structure of operation that lends itself to
better customer service and improved outreach.
I believe that given the opportunity, Americans will create
strength through investments in their own economic future. And I
believe it is our role at Rural Development to support these efforts in
ways that will maximize the benefits of rural economies.
With the assistance of this subcommittee, the Bush Administration
has established a proud legacy of accomplishments in rural areas.
The Bush Administration has committed over $37 billion in rural
development investments in the last 3 years to support rural Americans'
pursuit of economic opportunities and an improved quality of life.
Rural Development delivers over 40 different loan, loan guarantee,
and grant programs enhancing business development, cooperative
development, housing, community facilities, water supply, waste
disposal, electric power, and telecommunications, including distance
learning and telemedicine. Rural Development staff also provide
technical assistance to rural families, and business and community
leaders to ensure the success of those projects. In addition to loan-
making responsibilities, Rural Development is responsible for the
servicing and collection of a loan portfolio that exceeds $86 billion.
Rural Development is the only Federal organization that can
essentially build a town from the ground up through investments in
infrastructure, homeownership and job creation through business
development programs. We help rural Americans achieve their part of the
American Dream.
To further support these efforts, we are working to build a
collaborative group of Federal agencies that will act to strategically
put Federal resources in place to serve as a catalyst for private
investment. Partners in this effort include: Rural Development; Housing
and Urban Development (HUD); the Small Business Administration; the
Economic Development Administration; and the National Credit Union
Association. In addition, we are working to increase the ability of
faith-based organizations that partner with Rural Development to also
support rural communities and their economic development efforts.
Successful economic development in rural areas is driven by local
strategies where communities take ownership and focus on developing
leadership, technology, entrepreneurship, and higher education
opportunities.
This new direction of collaborative effort follows the model the
President established with the successful minority homeownership
initiative he unveiled 2 years ago. This initiative is yielding
tangible positive results and creating achievements we all take pride
in.
responsibilities
Rural Development provides rural individuals, communities,
businesses, associations, and other organizations with financial and
technical assistance needed to increase economic opportunities and
improve the quality of life in rural America. This financial and
technical assistance may be provided solely by Rural Development or in
collaboration with other public and private organizations promoting
development in rural areas.
vision
To achieve our dual mission of creating greater economic
opportunities and improving the quality of life for rural citizens, we
understand the need to structure the delivery of Rural Development
programs so that those who are most qualified receive investment
assistance. Reaching maximum efficiency and utilization also requires
that Rural Development do a better job of outreach and education on the
programs that are available. Last year, during our testimony before
this Committee, we stated that the marketing of Rural Development
programs is a critical component in better serving rural areas. Today,
we have embarked upon an aggressive outreach and marketing effort
focused on the programs receiving appropriations rather than on the
names of individual agencies receiving the appropriations. This effort
is a key priority and we believe it will help ensure greater
utilization of program investment dollars by those who are most
qualified.
Over the last 3 years (fiscal year 2001-fiscal year 2003) with your
assistance Rural Development has delivered over $37 billion in loans
and grants to rural Americans. Through this infusion of infrastructure
investment and local area income stimulus, many rural areas are primed
to attract an increase in private sector investment. We expect to see
these Federal investments returned many times over in the form of new
private ventures, with their associated multiplier effects on household
incomes and local quality of life.
Other primary goals include:
Homeownership.--The bedrock of this Administration's commitment to
rural America is homeownership and you are key to fulfilling this
commitment. A safe, secure home is the foundation for the family unit
and owning a home is the oldest and best form of building equity. I am
proud of the fact that Rural Development has invested over $10.2
billion in the last 3 years in single family housing, which supports
the President's minority homeownership goal.
Entrepreneurship.--I believe there are two key economic drivers for
building competitiveness in rural communities. One is our ability to
grasp and utilize the power of technology. The Internet, and the
technology that has flowed from it, has resulted in the free flow of
capital and easy access to knowledge across borders. It has made it
possible for competition to develop and build production and value-
added systems. The second economic driver is supporting the growth of
small businesses in rural communities.
That is why we are focusing our energies on implementing a new low-
documentation Business & Industry guarantee loan program, implementing
the Rural Business Investment Program, underwriting broadband loans,
and employing other new economic development tools to make the most of
these key economic drivers.
rural development budget request
The President's commitment to rural America remains strong, and our
request will support a total program level of $11.6 billion in loans
and grants. This program level is very close to the fiscal year 2004
budget request, in spite of elevated priorities in other areas and the
increased interest costs of our credit programs.
I will now discuss the requests for specific Rural Development
programs.
rural utility programs
Through the Rural Utilities Service, USDA Rural Development
provides financing for electric, telecommunications, and water and
waste disposal services that are essential for economic development in
rural areas. The utilities program requests a total loan level of $4.9
billion, which is comprised of $2.6 billion for electric loan programs,
$495 million for rural telecommunication loans, $25 million for
Distance Learning and Telemedicine grants, $331 million in loans for
broadband transmission, over $1 billion for direct and guaranteed Water
and Waste Disposal loans, $346 million for Water and Waste Disposal
Grants, and $3.5 million for Solid Waste Management Grants.
The Rural Telephone Bank (RTB) was established in 1972 to provide a
supplemental source of credit to help establish rural telephone
companies. This has proved to be remarkably successful, and efforts
have been underway to privatize the bank. In 1996, the RTB began
repurchasing Class ``A'' stock from the Federal Government, thereby
beginning the process of transformation from a Federally funded
organization to a fully privatized banking institution. The fiscal year
2005 budget reflects the Administration's commitment to a fully
privatized RTB that does not require Federal funds to finance the loans
it makes.
I would like to underscore two points in our Rural Utilities budget
request. With the broadband program, we are building on over $2 billion
in mandatory and discretionary loan funding that was provided over the
last 2 years. To date, approximately 90 applications totaling $1.1
billion have been received and are in the review pipeline. Of those
received, $134 million in loans have been approved. Due to the
uniqueness of this new program, from evaluating the pricing mechanism
and ever-advancing technology component, to the ongoing subsidy debate
associated with the prerequisite level of equity requirements, and the
built-in commercial nature of the lending competition associated with
this program, review of the applications has not been as swift as we
would have hoped. However, we do believe that careful deliberation of
these elements is required if we are to ensure the credit worthiness
and soundness of the loans we make, especially since many of these
companies are start-ups. This Administration is firmly committed to
developing rural technology infrastructure and we are working hard to
meet the expectations of the Congress and the public. For fiscal year
2005, we are requesting $9.9 million in discretionary budget authority,
which will sustain an additional $331 million of loans. This level of
funding, coupled with the remaining balances from prior years, will
provide ample support for the continued expansion of broadband services
in rural areas.
Second, we are able to support the funding of water and wastewater
infrastructure through heavier reliance on loans rather than grants due
to more affordable interest rates which allow rural communities to
assume a greater portion of the infrastructure debt.
rural business-cooperative programs
Since 2001, USDA Rural Development has provided over $3.3 billion
for rural business development in the form of loans, grants and
technical assistance.
The Rural Development business and cooperative program budget
request for fiscal year 2005 is about $738 million, the bulk of which
is comprised of $600 million for the Business & Industry loan guarantee
program.
As I stated earlier in my testimony, creating economic
opportunities is a primary pillar supporting the Rural Development
mission. One of my priorities, which I have personally been working to
implement, is the Rural Business Investment Program, authorized in the
2002 Farm Bill. This program is being developed in partnership with the
Small Business Administration and is critical to economic growth in
rural areas. Further, we are working to create a low-documentation
version of the business and industry guarantee loan program that has
less reliance on paperwork and more flexibility in providing smaller
loan amounts to help more smaller businesses access much needed
capital.
We are requesting $40 million for the Rural Business Enterprise
Grant program, $3 million for the Rural Business Opportunity Grant
program, over $34 million for the Intermediary Relending Program, $25
million for Rural Economic Development loans, $5.5 million for Rural
Cooperative Development grants, $10.8 million in discretionary budget
authority for renewable energy loans and grants, and $15.5 million of
discretionary funding for the Value-Added grant program.
The $10.8 million of discretionary budget authority for renewable
energy loans and grants will assist in fulfilling the President's
Energy Policy that encourages a clean and diverse portfolio of domestic
energy supplies to meet future energy demands. In addition to helping
diversify our energy portfolio, the development of renewable energy
supplies will be environmentally friendly and assist in stimulating the
national rural economy through the jobs created and additional incomes
to farmers, ranchers, and rural small businesses. The allocation of
this budget authority among direct loans, guaranteed loans, and grants
is not determined at this time. Once the subsidy rates for the loan
programs are finalized we will determine the distribution of loans and
grants. This is important for rural communities and our country's
ability to rely less on imported energy. I am committed to this program
and the benefits it holds for America.
Rural Development has administered the value-added grant program
since its inception as a pilot in fiscal year 2001. Over that time, we
have concentrated on improving outreach to assist in stimulating the
most effective projects, and improving the application review process
to ensure an empirically based, evenhanded review. We instituted a
contract effort with highly educated and experienced academicians to
make certain the scoring was unbiased. Geographic dispersion was not
included as an evaluation criterion. However, I am concerned that the
distribution of the latest awards does not reflect the breadth of
innovative talent that I know is spread across rural America. I am
instituting a review of our outreach and technical assistance
provisions, to determine if improvements are needed in Rural
Development's assistance to potential applicants. I have also initiated
a review of project results. We would like to identify the
characteristics of successful projects, and what benefits are accruing
to rural areas.
As we stated during our testimony last year, one of our top
priorities is to review the current cooperative service delivery
structure. I am committed to completing this review and ensuring that
we have a program that not only meets the current cooperative needs,
but also focuses on helping new generations of cooperatives develop
structures that will increase bottom lined profitability and allow them
to be more competitive in domestic and global markets.
rural housing programs
The budget request for USDA Rural Development's housing programs
totals $5.3 billion in loan and grant funds. This funding commitment
will improve housing conditions in rural areas, and continue to promote
homeownership opportunities for minority populations. In support of the
President's homeownership initiative, Rural Development's goal is to
increase minority participation in housing programs by 10 percent over
the next few years.
The request for single-family direct and guaranteed homeownership
loans exceeds $3.8 billion, which will assist almost 42,800 households,
who are unable to obtain credit elsewhere.
The housing program request maintains the program level for housing
repair loans and grants, $35 million for housing repair loans and
almost $32 million for housing repair grants, which will be used to
improve 10,000 existing single-family houses, mostly occupied by low-
income elderly residents.
This budget maintains Rural Development's commitment to focus on
repair, rehabilitation, and preservation of multi-family housing
projects. We have placed a very high priority on completing review and
development of a comprehensive strategy for delivering this important
program. I am committed to seeing this review completed as quickly as
possible. Additionally, we are working to complete the promulgation of
revised multi-family housing regulations that we believe will increase
program efficiency. We are proposing a multi-family housing request of
$60 million for direct loans, $100 million for guaranteed loans, $42
million for farm labor housing loans, $17 million for farm labor
housing grants, and $592 million in rental assistance. Rural
Development has an existing multi-family housing portfolio of $12
billion that includes 17,800 projects. Many of these projects are 20
years old or older, and face rehabilitation needs. In the face of the
demands for repair/rehabilitation and preservation of existing
projects, and our ongoing study of program alternatives, we are
deferring requesting new construction funding this year. I would add,
however, that we are working with the secondary market to increase
utilization of the guaranteed loan program, for which the
Administration has requested $100 million for new construction needs.
This budget sustains the farm labor-housing program at an aggregate
level of $59 million--$42 million of loans and $17 million of grants.
Maintaining this level is necessary to support agriculture's need for
dependable labor to harvest the abundance produced by rural farms, and
provide housing to the poorest housed workers of any sector in the
economy.
Rental Assistance payments are used to reduce the rent in multi-
family and farm labor housing projects to no more than 30 percent of
the income of very low-income occupants (typically female heads of
households and the elderly, with annual incomes averaging about
$8,000). The budget includes $592 million for Rental Assistance, which
will be delivered through 4-year agreements. This level of funding will
provide rental assistance to over 42,000 households, most of which
would be used for renewing expiring contracts in existing projects.
With the fiscal year 2004 reduction in contract term to 4 years, the
appropriations act allows Rural Development to utilize unliquidated
balances at the end of that contract term for many other eligible
multi-family housing purposes. For the history of this program,
unliquidated balances remained with the contract, and continued to be
expended on that contract until exhausted. This budget reflects a
return to that arrangement. We are concerned that providing this extra
program flexibility to Rural Development may, in fact, reduce the
confidence of future Section 515 participants that necessary Rental
Assistance will be provided in the future.
The Community Facilities request totals $527 million, including
$300 million for direct loans, $210 million for guaranteed loans, and
$17 million for grants. A portion of the direct loan program will be
directed to homeland security health and safety issues in rural areas.
Community facilities programs finance rural health facilities,
childcare facilities, fire and safety facilities, jails, education
facilities, and almost any other type of essential community facility
needed in rural America. We intend to target $100 million to homeland
security uses, such as first responders.
administrative expenses
Delivering these programs to the remote, isolated, and low-income
areas of rural America requires administrative expenses sufficient to
the task. From fiscal year 1996 through fiscal year 2003 Rural
Development's annual delivered program level increased by 89 percent.
Over that same period Rural Development's Salaries and Expenses
appropriation increased only 16 percent. Rural Development has the
staff and the dispersed distribution mechanism to reach the ambitious
program targets outlined above, but adequate administrative support
must be made available.
With an outstanding loan portfolio exceeding $86 billion, fiduciary
responsibilities mandate that Rural Development maintain adequately
trained staff, employ state of the art automated financial systems, and
monitor borrowers' activities and loan security to ensure protection of
the public's financial interests. Limited S&E funding could jeopardize
our ability to provide adequate underwriting and loan servicing to
safeguard the public's interests.
For 2005, the budget proposes a total of $665.6 million for Rural
Development S&E, or an increase of $38.9 million over fiscal year 2004.
Of this increase, $11.6 million will fund pay costs and related
expenses; and $13 million is for increasing Departmental charges
(Greenbook and Working Capital Fund increases) and funding to continue
to support the move of St. Louis staff to the Goodfellow facility. An
additional $14 million will support Information Technology (IT) needs,
including data warehousing, continued expansion and upgrading of
systems supporting the multi-family housing program, enhancement of the
Rural Utilities Loan Servicing system to meet rural utilities program
needs, e-Gov requirements, and IT security needs.
Mr. Chairman and Members of the Committee, this concludes my formal
statement. We would be glad to answer any questions you may have. Thank
you for the opportunity to appear before you to discuss the Rural
Development budget request.
______
Prepared Statement of Hilda Gay Legg, Administrator, Rural Utilities
Service
Mr. Chairman, Members of the Subcommittee, thank you for the
opportunity to present the President's fiscal year 2005 budget for the
USDA Rural Development, rural utilities program. We appreciate the work
and support you and other members of this subcommittee have provided
for a strong, dependable infrastructure in the rural United States.
All aspects of a rural society are work together to make a strong
Nation. Safe, affordable, modern utility infrastructure is an
investment in economic competitiveness and serves as a fundamental
building block of economic development. Changes in the landscape of
rural America, along with developments in technology, and changes in
the market structure are combined with an aging utility infrastructure.
These changes are occurring in the electric, telecommunications, and
water sectors. Without the help of USDA Rural Development rural
utilities program, rural citizens face monumental challenges in
participating in today's economy and improving their quality of life.
The $42 billion rural utilities program loan portfolio includes
investments in approximately 2,000 electric and telecommunications
systems and 7,500 small community and rural water and waste disposal
systems serving rural communities. This local and Federal partnership
is an ongoing success story. Eighty percent of the Nation's landmass
continues to be rural, encompassing 25 percent of the population. In a
recovering economy, this infrastructure investment spurs economic
growth, creates jobs, and improves the quality of life in rural
America.
electric program
The rural utilities program budget proposes $5 million in budget
authority (BA) to support a program level of $2.6 billion. This
includes $3.6 million in BA for a hardship program level of $120
million, over $1 million in BA for a $100 million program level for
direct municipal rates loans, $700 million program level for the direct
Treasury rate loans, $60 thousand BA for $100 million program level for
guaranteed electric loans, and $1.6 billion for Federal Financing Bank
(FFB) direct loans. The Treasury loans are made at the cost of money to
the Federal Government; therefore the FFB loans do not require BA.
Because Congress has provided very generous loan levels over the past 3
years, we have been able to eliminate most of the backlog in loan
applications; and we feel the President's budget level will meet the
demand during fiscal year 2005.
To meet the demands of economic growth across our Nation, the need
for transmission lines to deliver electric power where it is needed is
placing new demands on cooperatives providing transmission service. To
protect the quality of our environment while meeting growing power
generation needs, the costs of maintaining and building power
generation capacity is ever growing. We are seeing requests for large
loan generation loans for the first time in almost 15 years.
advanced telecommunications in rural america
No aspect of the rural utilities infrastructure faces more changes
than the area of telecommunications. Congress, with the leadership of
this Committee, has shown great confidence in the rural utilities
program Telecommunications Program's ability to empower rural America
with the most modern telecommunication tools to participate in today's
global, digital economy. Job growth, economic development, and
continued quality of life in rural America is directly tied to access
to today's high-speed telecommunications.
I would like to take this opportunity to tell you where we stand
with our Broadband Program in terms of (1) program delivery; (2) our
drive to balance fiduciary responsibility with mission delivery; (3)
our expertise in administering a very complex lending program; and (4)
the administration's continued support for the deployment of Nation-
wide broadband service.
The Broadband loan program is distinctive from all other lending
programs within the agency's portfolio. Nearly half of the applicants
are ``start-up'' companies with little, if any, history of doing
business in this industry. In addition, two distinctly different
characteristics are at play--competition (rather than a monopolistic
environment) and multi-state businesses (rather than a single
cooperative or independent company serving a single rural community).
Very few of the applications are designed to serve a single rural
community or even a small grouping of geographically close rural
communities. Most are applications requesting to serve 50, 75, or in
excess of 100 rural communities in multiple states. In these multiple
community applications, the vast majority of the communities already
have broadband service available in some of the proposed service area;
in some instances, from more than one provider. Therefore, to determine
financial feasibility, the agency must determine what portion, if any,
of a competitive market the applicant will be able to penetrate. As you
can imagine, these factors contribute to increased review and
processing efforts.
I am pleased to report that, as of today, the agency has made 12
loans totaling $134 million which will serve 215 communities with more
than 670,000 rural citizens. The agency has also completed its review
of every application received in this program. It should be noted that
nearly 70 percent of those applications were received within a one-
month timeframe between mid-July and mid-August of 2003.
Our country is facing challenging domestic spending decisions. In
order to balance fiduciary responsibility with mission delivery, USDA
is focusing on ``quality loans'' that produce exponential benefits
through reduced subsidy rates and greater lending levels and that
strengthen not only rural economies, but our national economy and its
role in the global economic system. A failed business plan translates
not only into loss of taxpayer investment, but deprives millions of
citizens living in rural communities of the technology needed to
attract new businesses, create jobs, and deliver quality education and
health care services.
Building on USDA's experience and local presence in serving rural
communities, we bring a unique lending expertise that includes the
tools necessary to examine, and provide solutions for, the financial
and the technical challenges facing entities dedicated to serving rural
America. This model has resulted in a lending agency with unprecedented
success in our other programs and we are dedicated to bringing that
same level of success to this program.
From the beginning, the President has recognized the importance of
broadband technology to our rural communities. The President stated,
``we must bring the promise of broadband technology to millions of
Americans and broadband technology is going to be incredibly important
for us to stay on the cutting edge of innovation here in America.'' The
Bush Administration has been unwavering in its support for this and
other programs that will revitalize and strengthen our rural
communities.
Let me assure you that we are on track, we remain focused, and we
will complete our mission. We must continue to balance fiduciary
responsibility with mission delivery everyday. Our unique lending
expertise--the marriage of financial and technical analysis--helps to
maximize the success rate of borrowers' business models. And we will
strive to do our part for rural America in fulfilling the President's
promise of bringing broadband service to millions of citizens. Making
bad loans helps no one, making successful loans helps everyone.
telecommunications budget
This year's budget proposes approximately $35 million in budget
authority for an overall broadband and distance learning and
telemedicine telecommunications program level of $356 million. The
fiscal year 2005 budget proposes a broadband loan program level of
approximately $331 million. This level of funding, coupled with the
remaining balances from prior years, will provide ample support for the
continued expansion of broadband services in rural areas. Included in
the broadband loans request is approximately $36 million in direct 4
percent loans, $255 million in direct Treasury Rate Loans, and $40
million in guaranteed loans.
In the regular telecommunications program, the fiscal year 2005
budget proposes a program level of $495 million. Included is $145
million in direct 5 percent loans, $250 million in direct treasury rate
Loans, and $100 million in Federal Financing Bank (FFB) direct loans
guaranteed by the rural utilities program. All of this is driven by
$100 thousand in budget authority.
The budget also reflects the Administration's commitment to
privatize the Rural Telephone Bank and does not request any budget
authority or loan level for fiscal year 2005.
Distance learning and telemedicine (DLT) technologies are having a
profound impact on the lives of rural residents by assisting rural
schools and learning centers in taking advantage of the information age
and enabling rural hospitals and health care centers to have access to
quality medical services only found in large hospitals. The distance
learning and telemedicine program pulls together the best of Federal
assistance and local leadership.
The DLT grants are budgeted at $25 million, the same as Congress
appropriated for fiscal year 2004. The Budget proposes to zero out the
loan program, simply because loan repayment is out of reach for most
applicants, which are schools and hospitals. Even with increased
marketing efforts over the past 2 years, less than $21 million in loans
were made in fiscal year 2003.
water and environmental programs
The water and environmental programs provide two of the most basic
of infrastructure needs for rural citizens which are clean, safe, and
affordable drinking water and ecologically sound waste disposal. The
Centers for Disease Control and Prevention in Atlanta, Georgia, reports
there are still over 1,000 deaths each year from water borne diseases.
The budget request seeks approximately $439 million in budget
authority for a program level of $1.4 billion in water and waste
disposal loans and grants. The program consists of $90 million in
budget authority to support $1 billion in direct loans and $75 million
in loan guarantees and nearly $346 million in water and waste disposal
grants. In addition, the budget requests $3.5 million in solid waste
management grants.
summary
Rural utility infrastructure programs are interwoven in the fabric
of USDA Rural Development programs. They are utilized to provide clean
and safe water; modernize communications; create reliable electric
power so that businesses can develop and homes can have lighting and
heating, as well as open up access to information from the rest of the
world.
______
Prepared Statement of Arthur A. Garcia, Administrator, Rural Housing
Service
Mr. Chairman and Members of the Committee, thank you for the
opportunity to testify on the proposed fiscal year 2005 budget for the
USDA Rural Development, rural housing program. As an integral part of
Rural Development, rural housing program assists rural communities in
many fundamental ways. We provide a variety of both single and multi-
family housing options to residents of rural communities. We also help
to fund medical facilities, local government buildings, childcare
centers, and other essential community facilities.
Rural Development programs are delivered through a network of 47
state offices and approximately 800 local offices. In addition,
approximately 2,000 guaranteed lenders participate in the guaranteed
single-family housing (SFH) program.
The proposed budget for rural housing program in fiscal year 2005
supports a program level of approximately $5.3 billion in loans, grants
and technical assistance. The fiscal year 2005 budget for the rural
housing program maintains the Administration's strong commitment to
addressing the needs of rural America, including the needs of minority
homeownership. We believe that our efforts, combined with the best of
both the nonprofit and private sectors, will ensure that this budget
makes a tremendous difference in rural communities. Let me share with
you how we plan to continue improving the lives of rural residents
under the President's fiscal year 2005 budget proposal for our rural
housing programs.
single family housing programs
The single-family homeownership programs provide several
opportunities for rural Americans with very low-to moderate-incomes to
obtain homes of their own. Of the $3.8 billion in program level
requested for the SFH programs in fiscal year 2005, $2.5 billion will
be available as loan guarantees of private sector loans. An additional
$225 million in loan guarantees will be used to refinance more
affordable loans for rural families.
The 2005 budget reflects an increase in the fee on new SFH
guaranteed loans from 1.5 to 1.75 percent. To offset this increase, the
proposed legislation will not only allow the loan amount to exceed 100
percent of approved value by the amount of the fee. This proposal will
help ensure that families with limited resources are not prevented from
participating in the program.
Our commitment to serving those most in need in rural areas through
our direct homeownership program remains strong. The fiscal year 2005
budget includes $1.1 billion in loans to create housing opportunities
for low and very low-income families.
self-help technical assistance and other single family housing programs
The fiscal year 2005 proposed budget requests $76.7 million in
budget authority to make over $120 million in program level funding
available to assist up to 12,000 families with incomes below 50 percent
of the area median income. This includes $35 million in program level
for home repair loan funds for 5,800 very low-income families and $31.5
million for grants to assist approximately 6,000 elderly homeowners.
The fiscal year 2005 proposed budget for SFH programs also includes $34
million to support the Section 523 mutual and self-help technical
assistance grant program, $5 million in loan level for each of two site
loan programs, and $10 million in loan level for sales of acquired
properties, and $1 million for supervisory and technical assistance
grants.
multi-family housing programs
The Multi-Family Housing (MFH) budget preserves Rural Development's
commitment to maintaining the availability of affordable housing for
the many rural Americans who rent their homes.
With a total request of $822.5 million program level, of this
amount $592 million would be used for rental assistance payments. The
majority of these funds will be used to renew more than 42,000 4-year
RA contracts. Most of the remainder will be used to provide new rental
assistance contract for farm labor housing programs. We estimate using
$60 million for MFH direct loans to provide much needed repairs or
rehabilitation to approximately 3,400 units of the 17,800 rental
properties in the portfolio. These apartments provide decent, safe,
sanitary, and affordable residences for more than 450,000 tenant
households.
The budget request will fund $100 million in guaranteed loans that
may be used for new construction. In addition, the request funds $42
million in loans and $17 million in grants for the Section 514/516 Farm
Labor Housing program, $1.5 million in loans for MFH credit sales, and
$10 million for housing preservation grants.
Under the President's fiscal year 2005 budget, MFH guarantee loans
will enable 2,500 rental units to be built. In the farm labor-housing
program, about 3,000 units will be built or repaired. Both programs
provide year-round homes to migrant and farm workers.
community programs
The Community Facilities budget will enable rural housing program
to provide essential community facilities, such as educational
facilities, fire, rescue and public safety facilities, health care
facilities, and childcare centers in rural areas and towns of up to
20,000 in population. The total requested program level of $527 million
includes $300 million for direct loans, $210 million for loan
guarantees, and $17 million for grants.
In fiscal year 2003, we assisted 83 communities by investing over
$66 million in educational and cultural facilities, over $54 million in
public safety facilities in 359 rural communities, and over $162
million in health care facilities in 124 rural communities. Funding for
these types of facilities totaled $282 million. The remaining balance
was used for other essential community facilities.
In partnership with local governments, state governments, and
Federally-recognized Indian Tribes, the fiscal year 2005 Community
Facilities budget will support more than 375 new or improved public
safety facilities, 140 new and improved health care facilities, and
approximately 100 new and improved educational facilities.
program highlights & initiatives
I am pleased to provide you with an update on several highlights
from our major programs, as well as key initiatives being undertaken.
single family housing update
section 523 mutual and self-help housing
Funding for our mutual and self-help housing technical assistance
(TA) program increased significantly in the 1990s from $13 million per
year to $35 million per year. I am proud to report that fiscal year
2003 was the best year ever for our mutual and self-help housing
program. A total of $40 million was awarded in contracts and two-year
grants to conduct self-help housing programs or assist sponsor groups.
The demand for TA funding continues to grow rapidly. There were 46
``pre-development'' grants awarded in fiscal year 2002-03, including
many first-time sponsors and groups in states with no self-help housing
programs. Pre-development funds may be used for market analysis,
determining feasibility of potential sites and applicants, and as seed
money to develop a full-fledged application. Groups in the pre-
development phase typically need 6 to 12 months before they are ready
to apply for full funding. We expect a considerable portion of these
groups to seek full funding in fiscal year 2005.
section 502 guaranteed program
Demand for our section 502 guaranteed program continues to be
strong based upon:
--Aggressive outreach and customer service by Rural Development
staff;
--Growing recognition and acceptance of the program by the mortgage
industry as an outstanding loan product for lower income rural
families. The program requires no down payment and no monthly
mortgage insurance premiums;
--Historic low interest rates, which coupled with a Rural Development
guarantee, have helped moderate income families achieve
homeownership;
--Rural Development's commitment to reducing barriers to
homeownership, especially for lower-income and minority
families;
--Redirecting low-income families who can afford current low interest
rates from our Direct homeownership program to our Guaranteed
program;
--The Secretary's Five-Star Commitment to increase homeownership,
including minority homeownership.
We developed an Automated Underwriting System (AUS), which will
allow lenders to input customer application data and determine
immediately whether the Agency will issue a commitment. This system
should be fully operational by next summer.
Our Centralized Servicing Center in St. Louis, Missouri will soon
begin centralizing loss claims submitted by lenders under our guarantee
SFH program. This process is currently being done in State Offices.
Centralization will improve efficiency, consistency, and provide better
management data to program officials.
usda's five star commitment to increase minority homeownership
The rural housing program is committed to increasing homeownership
for all Americans, including minorities. Approximately 13 percent of
rural America is comprised of minorities. We are pleased to report that
over 20 percent of our housing resources reach minority families.
Several of our programs, most notably our mutual and self-help housing
program, serve over 50 percent minorities. In response to the
President's minority homeownership goals, USDA is committed to
increasing its success. In October 2002, USDA issued a Five Star
Commitment to expand homeownership opportunities for all Americans. We
believe this plan will also expand minority homeownership by 10 percent
by 2010. Our Five Star Commitment includes the following:
--Doubling the number of self-help participants by 2010;
--Increasing participation by minority lenders through outreach;
--Lowering fees to reduce barriers to minority homeownership;
--Promoting credit counseling and homeownership education; and
--Monitoring lending activities to expand minority homeownership
opportunities.
Since announcing the Five-Star Commitment, USDA has:
--Awarded a total of $40 million in self-help housing grants in
fiscal year 2003, which was the best year ever for the program.
Demand for funding continues to grow. There were 46 ``pre-
development'' grants awarded in fiscal year 2002-2003,
including many first-time sponsors and groups in states with no
self-help programs.
--Entered into a memorandum of agreement with the Federal Deposit
Insurance Corporation (FDIC) to promote and utilize their
``Money Smart'' training program. FDIC assisted us by providing
training to all of our State Offices on delivery of this
valuable financial literacy program.
--Lowered the fee for the guaranteed SFH loan program from 2 percent
to 1.5 percent for purchase loans and 0.5 percent for refinance
transactions. This change, coupled with record low interest
rates, has increased demand for the program. Although the
Administration's fiscal year 2005 budget proposes a small
increase in the fee (25 basis points), this is coupled with
proposed legislation that will allow the Agency to include the
entire fee in the loan. This small increase (less than $500 per
loan) will help reduce government outlays and the accompanying
legislative proposal ensures that families will not be
adversely impacted.
--Obtained commitment from Rural Development State Offices to
increase the number of American homeowners, including minority
homeowners, served through our direct and guaranteed programs.
All states have developed individual plans to increase
homeownership levels for all Americans, including minority
homeownership, and to expand the availability of the self-help
program. We met our overall objectives for fiscal year 2003 and
are on target for fiscal year 2004.
multi-family update
comprehensive program assessment
We are addressing concerns about our aging portfolio of multi-
family housing properties through a Comprehensive Program Assessment
(CPA). The CPA was designed to evaluate the multi-family housing
programs from several perspectives, including program delivery,
organizational structure, effectiveness of programs and alternative
financing tools, and a comprehensive analysis of the Section 515
properties in our portfolio.
We selected a statistically random sample of properties from the
portfolio (333 of 17,800 or about 2 percent) and they are being
evaluated for:
--Assessment of a property's physical condition;
--Assessment of a property's financial health;
--Assessment of a property's position in the real estate rental
market;
--Determination of continuing need for this rental housing;
--Assessment of needed capital improvements and cost;
--Assessment of future capital reserves needs;
--Analysis of prepayment potential and;
--Analysis of prepayment incentive costs to retain properties and use
restrictions.
From this assessment and analysis, we will develop a model to apply
to all portfolio properties. It will tell us the cost of capital needs,
the current funds available in reserve accounts, and where
revitalization efforts should be concentrated.
The CPA review is on schedule. All sample properties were inspected
last year. We expect a report on the physical and market analyses by
this spring.
The CPA is also evaluating the organizational structure of the MFH
division and determining better ways of delivering our loan programs.
Through discussions with stakeholders and HUD, the CPA will determine
the best organizational method to address prepayment issues. The
evaluations are being done by our contractor, ICF Consulting, in
concert with Rural Development senior management and our MFH Advisory
Board, consisting of National and State Office staff. As the
comprehensive program assessment concludes, we will present results and
recommendations to the Subcommittee.
rental assistance
During the past year, the Agency undertook an initiative to
automate the forecasting of the cost of renewals of Rental Assistance
(RA) contracts. This automated system uses actual operating and rental
data from each MFH property that receives RA and predicts the cost of
RA needed for these very low and low-income tenants. The automation
initiative started in March 2003 and is currently being tested. We
expect the forecasting tool to be available by March of fiscal year
2004.
In other efforts to improve internal controls, we plan to add
several staff members to the RA program and to develop an internal
operating manual. This month, the Department will undertake a
Management Control Review of the Section 521 Rental Assistance program,
which entails auditing the performance of State Offices in program and
funds delivery, and in compliance with program and National Office
policy requirements.
We will continue our efforts to more efficiently deliver RA. Last
year, we reported on outstanding unliquidated obligations from prior
years' RA contracts. The majority of the unliquidated obligations come
from RA contracts entered into between 1978 and 1982. These contracts
were vastly overestimated at the time by a methodology that
incorporated the lowest social security payment, a 25 percent tenant
contribution (since increased to 30 percent), and double-digit
inflation. Additionally, over 50 percent of these contracts are
concentrated in areas that continue to experience low rents, low tenant
incomes, and out migration of the population. These factors combined to
yield an extremely low rate of RA usage. In the end, the funds for
those contracts between 1978 and 1982 have lasted much longer than
originally planned. The funds remain in the form of unliquidated
obligations on our books, and will continue to be drawn on until they
have been exhausted. For those units, this alleviates having to renew
the contract until they have exhausted all funds.
The removal of the 20-year time frame for projections coupled with
an improved and automated forecasting methodology over the last 4-5
years has contributed to better accuracy in providing just the right
amount of RA to last through the term of the contract. We believe that
only a very small amount of the fiscal year 2005 funds, if any, will
last longer than 4 years. Administratively, continuation of the
original purpose of these funds is the most efficient way to handle any
of these small and unanticipated surpluses.
Concerning the unliquidated obligations for the old 20-year
contracts, last year, the House Financial Services Committee--Oversight
and Investigations Subcommittee asked us to investigate using these
outstanding balances. When a rental assistance agreement is terminated
because the project owner no longer needs units that are receiving RA
or by means of a loan payoff or foreclosure, the unexpended funds are
applied to other units in the MFH program. However, our Office of the
General Counsel has advised that we do not have the authority to
recapture obligated, but unexpended RA funds associated with a still
active RA agreement. Even if we had that specific authority, there
would be substantial litigative risks that affected project owners
would be able to successfully bring breach of contract action against
rural housing program under the agreement and the ability to use these
funds would be the same as if the funds were appropriated from the
General Fund.
proposed rule 3560
Proposed Rule 3560 consolidates 13 regulations and a number of
administrative notices affecting Sections 514, 515, 516, and 521 MFH
programs. RHS received 3,000 comments on the proposed rule. We have
completed our review and consideration of these comments and are
working on drafting the final rule.
section 538 guaranteed rural rental housing program
Currently, the Section 538 Loan Guarantee Program has 16 properties
containing 1,111 units that are built and occupied. There are 26
properties containing 1,345 units under construction and another 65
properties containing 3,610 units with the funds obligated. Also, there
are applications representing 32 projects containing 2,569 units
awaiting approval.
In the built and occupied units, the average monthly rent is $481.
This translates to a median income of about 17 percent of area median
income. We also have Section 8 vouchers in about 10 percent of the
units to serve low and very-low income residents.
This program can be combined with several other funding sources,
such as, Low Income Housing Tax Credits; HOME; and Federal Home Loan
Bank Affordable Housing Program funds to provide affordable housing to
rural residents presently not assisted.
mfh automation initiatives
In addition to the automation of RA forecasting, rural housing
program has continued to improve its management information systems.
The Agency is developing a data warehouse for both its SFH and MFH
loans, which will dramatically improve our reporting capabilities. The
data warehouse is now functional and continues to be populated with
data from several existing databases.
Phase 4 of the Multi-Family Information System (MFIS), scheduled
for implementation in May 2004, will provide for electronic debiting
and crediting of borrowers' accounts, thereby eliminating funds
handling in area offices. Phase 4 will also provide the public with a
website to locate all the MFH properties, with pictures, property
information, contact information, and links to property or management
company websites.
Another automation improvement is the Management Agent Interactive
Network Connection, which allows property managers to transmit tenant
and property data to RHS via the Internet. This data goes directly into
the MFIS database and the data warehouse. This web-based system is now
being used voluntarily, and is scheduled to become mandatory this
summer with the publication of the MFH Final Rule 3560.
prepayment
The efforts to preserve the Section 515 multifamily portfolio are a
top priority of the rural housing program. These efforts are needed
because of the increasing age of the portfolio and the need for
existing owners to seek viable exit strategies. However, exceptional
efforts are needed by existing owners, potential purchasers, non-rural
housing program housing financiers, and rural housing program to make
these efforts work. At stake is an irreplaceable affordable housing
option in rural America that addresses a critical need for rural
residents with few housing alternatives.
Owners wishing to sell their Section 515 properties or their
ownership interests in a borrower entity may do so at any time. If the
property is sold to another owner who will keep their project in the
program, we may make resources available or agree to allow third-party
resources to be used to compensate the seller for its equity and make
repairs to the buildings. If the owner seeks to sell the property to
another owner outside the section 515 program, we offer incentives to
the owners to stay in the program or provide a 100 percent equity loan
to sell it to a non-profit or public body.
Key factors that affect many owners when selling their property is
the effect of exit taxes and expectations for equity. We continue to
work with owners to develop realistic exit strategies within the
limited resources available to affordable housing providers.
In our efforts to preserve the portfolio, a ``revitalization tool
kit'' is being developed that will enable us to offer several
alternatives to rural housing program borrowers in financing, debt
write-off and subordination, third party financing, and transfer
approvals. Rural housing program is currently working to accelerate the
loan approval process at the state level by reducing the number of
exceptions and waivers, and streamlining the overall transfer approval
process.
We are continuing to work with lenders and nonprofits to leverage
our subsidy dollars to the maximum extent. For example, we partnered
with Fannie Mae to preserve a 44-unit apartment complex in Saranac
Lake, NY by subordinating our debt. We eliminated underwriting
duplication and established processes going forward that would permit
acceptance of underwriting, appraisals, inspections, and reserve
account requirements between partners. This is our first joint effort
and it will establish a precedent that we intend to use with other
partners in preserving the portfolio.
We continue to work with industry partners to develop options for
the preservation of the portfolio. Completion of the comprehensive
program assessment and implementation of recommendations to improve
program efficiency will enable us to better utilize existing resources
such as Fannie Mae, HUD, the Federal Home Loan Bank Board, and others.
rural partners
In our programming for fiscal year 2005, we are stretching the
rural housing programs' resources and its ability to serve the housing
needs of rural America through increased cooperation with the
Department of Housing and Urban Development (HUD) and other partners.
We are committed to working with these partners to leverage resources
for rural communities. For example, we expect to adopt HUD's TOTAL
scorecard for single-family loans. This cooperation between USDA and
HUD will save time and money in system development.
In our multi-family housing program, HUD has been extremely helpful
in sharing data on their own rural portfolio. We were able to access
this information to use in developing comparable properties to those in
our section 515 portfolio for our comprehensive property assessment.
Additionally, we have approximately 1,700 properties with a rural
housing program mortgage and project-based Section 8 from HUD. On these
properties, we have an established agreement with HUD that the rural
housing program will review and approve operating budgets and rent
increases. This eliminates duplicative work and ensures better
consistency. In addition, last June USDA and HUD entered into a
Memorandum of Agreement committing our mutual efforts and resources to
improving the quality of life in the Southwest Border Region. USDA and
HUD have also formed an Interagency Task Force that now includes other
federal agencies to better direct limited resources to the region,
address jurisdictional issues, and further enhance our collaborative
efforts.
conclusion
Mr. Chairman and members of the Committee, we thank you for your
support, and with your continued support, Rural Development looks
forward to improving the quality of life in rural America by providing
housing opportunities and building competitive, active rural
communities.
We recognize that we cannot address the homeownership and rural
community facilities issues alone, and will continue to identify and
work with partners who have joined with the President to improve the
lives of rural residents. We will continue to reach out to and partner
with lenders, the many non-profit organizations, as well as federal,
state, local, and Indian Tribal governments to meet the housing and
community needs of low-income families and individuals in rural
America.
______
Prepared Statement of John Rosso, Administrator, Rural Business-
Cooperative Service
Mr. Chairman and Members of the Subcommittee, I am pleased to
appear before you today to present the Administration's fiscal year
2005 budget for Rural Development's rural business and cooperative
programs.
Mr. Chairman, the programs and services of Rural Development, in
partnership with other public and private sector businesses, continue
to improve the economic climate of rural areas through the creation or
preservation of sustainable business opportunities and jobs. Rural
Development continues to invest in rural America, especially in under-
served rural areas and populations. Rural Development programs help
close the gap in opportunity for these under-served rural areas and
populations, moving them toward improved economic growth by providing
capital, technology and technical assistance. The budget requests $738
million for Rural Business-Cooperative Service programs.
cooperative services
The functions of our cooperative programs are authorized under both
the Cooperative Marketing Act of 1926, and the Agricultural Marketing
Act of 1946. Our programs serve as the focal point of national activity
to help farmers and other rural residents help themselves by providing
the necessary advice and assistance. We endeavor to enhance the quality
of life for rural Americans by encouraging the use of cooperatively
owned business as a self-help tool in the marketplace. Our programs of
research, technical assistance, education and information, statistics,
and assistance in starting new cooperatives are designed to establish
viable business entities that help individual farm operators and other
rural residents retain access to markets and sources of supplies and
services in a sector that is becoming rapidly vertically coordinated
and industrialized. Cooperatives are a means for helping to ensure that
rural people are treated more fairly in the marketplace by providing
structural strength in dealings with buyers and suppliers.
Some of our State Office technical assistance efforts involve non-
agricultural cooperative development. For example, in Wisconsin, our
cooperative development specialist was instrumental in developing an
effective home health-care cooperative called Cooperative Care.
Cooperative Care is a group of home and personal care providers in
rural Wisconsin that joined forces with county officials, community
leaders, a Federal agency, a technical college, and a community action
agency. Together they organized a worker-owned cooperative where the
members have a voice and share profits. This program addresses growing
concerns about the care of elderly and disabled individuals and
provides an efficient alternative to nursing home care.
rural cooperative development grant program
For the Rural Cooperative Development Grant (RCDG) Program, the
fiscal year 2005 budget requests $21 million. Of this amount, up to
$1.5 million would be used for projects focusing on assistance to
small, minority producers through their cooperative businesses. This
program, along with our other Rural Cooperative Development grants,
complements our national and state office technical assistance efforts
by encouraging the establishment of centers for cooperative
development. The centers provide expertise for conducting feasibility
analysis, outreach, and other forms of technical assistance for new and
existing cooperatives.
One example is the Family Farm Opportunity Center in Missouri. The
Center has helped form, through feasibility and market analysis, the
Gateway Beef Cooperative, the Southwest Missouri Natural Dairy, and the
Osage Independent Pork Producers. Several other cooperatives are
receiving assistance from the Center, most involving the processing and
marketing of value-added agricultural products. Among others, the
Center targets Missouri counties with the highest percentage of poverty
and unemployment.
We are requesting $500,000 for cooperative research agreements to
encourage research on critical issues vital to the development and
sustainability of cooperatives as a means of improving the quality of
life in America's rural communities. These will address the need for a
solid information base on which to render judgments on critical
cooperative operational and organizational issues, such as alternative
ways of sourcing equity capital from within and outside the
cooperative.
The Farm Bill formalized the value-added grant program. Over the
past 3 years, 478 grants have been awarded for approximately $86
million. This program has four components including Value-Added
Producer Grants (VAPG), Agriculture Innovation Centers (AIC),
Agricultural Marketing Resource Center (AgMRC), and university research
on the impact of value-added projects. Eligibility for this grant
program was greatly expanded in the Farm Bill and the program
encourages applications for grants less than the $500,000 maximum
allowed to provide benefits to as many producers as possible.
For fiscal year 2005, the budget requests $15.5 million for the
value-added grant program. This amount will provide funding for the
VAPG and the AgMRC. Funding is not needed in fiscal year 2005 for the
AIC program or university research on the impact of value-added
projects.
One example of a successful VAPG venture is the Pacific Coast
Producers cooperative of Lodi, California. This cooperative used grant
funds to pay for the production and marketing of single-serving fruit
bowls under the private labels of U.S. retailers. Initially, the
cooperative produced single-serving fruit bowls for a national food
company under that company's label. The company canceled the contract
and began purchasing these items from a foreign company. Pacific Coast
Producers viewed this lost contract as an opportunity to capture the
emerging market in private label fruit bowls. They have since shipped
fruit bowls to 40 customers under 32 different store brands. Those 40
customers have ordered 2 million cases using over 70 tons of fruit. The
cooperative has plans to add at least 10 more retail chains to its
customer list over the next year.
Another example is Missouri Food and Fiber (MOFF), the first new
generation Identity-Preserved (IP) marketing cooperative organized
across an entire State. MOFF delivers the highest quality soybeans,
rice, corn, wheat, grain sorghum, and cotton to worldwide locations. It
specializes in identifying the customer's product needs, matching input
seed stock with premium growing environments and managing the IP
product during planting, growing, harvesting, storing, transporting,
processing, and distributing to the customer's global locations. While
MOFF has been extremely successful in the premium IP business, the
farmer-owned company is seeking entrance into one of the world's most
exclusive and profitable agricultural markets: super-premium, identity-
preserved, food-grade tofu beans for the Asian market. MOFF recently
received a grant award of approximately $82,000 from USDA Rural
Development that will allow it to enter this lucrative market.
business and industry guaranteed loan program
For the Business and Industry (B&I) Program, the fiscal year 2005
budget includes $30.2 million in budget authority to support $600
million in guaranteed loans. We estimate that the funding requested for
fiscal year 2005 would create or save about 15,020 jobs and provide
financial assistance to 367 businesses. We anticipate continued strong
demand for this program.
The B&I program allows lenders to better meet the needs of rural
businesses. Through the lender's reduced exposure on guaranteed loans,
they are able to meet the needs of more businesses at rates and terms
the businesses can afford. B&I guaranteed loans may also be used by
individual farmers to purchase cooperative stock in a start-up or
existing cooperative established for value-added processing.
I would like to share a story to illustrate how this program,
partnering with a local lender, allowed a locally owned and operated
ethanol producing business in rural Wisconsin to expand, providing
security for 35 existing jobs and creating 4 new jobs. ACE Ethanol, LLC
received a $10 million B&I Loan guarantee that was used in conjunction
with other funding to refinance existing debt and expand the capacity
of the ethanol plant to 30 million gallons per year. This expanded
plant will purchase 1.5 million bushels of corn from the local market
and in effect increase the price of local corn by $0.20 per bushel.
This plant provides an alternate market for the corn that historically
has been marketed for the declining livestock operations.
intermediary relending program
The fiscal year 2005 budget also includes $15.9 million in budget
authority to support $34.2 million in loans under the Intermediary
Relending Program (IRP). We estimate the proposed level of funding will
create or save about 26,175 jobs over the 30-year loan term.
Participation by other private credit funding sources is encouraged
in the IRP program, since this program requires the intermediary to
provide, at a minimum, 25 percent in matching funds. The demand for
this program continues to be strong. To illustrate the benefits IRP
provides to rural America, I would like to share with you a success
story from rural Louisiana. The Coordinating and Development
Corporation (CDC) of Shreveport, Louisiana was awarded a $750,000 IRP
Loan. Rural Development funds were used to recapitalize a revolving
loan fund to be administered by CDC. CDC is a non-profit, private
corporation that was organized in 1954 to administer a wide range of
Federal, State, and loan development programs and initiatives. CDC's
coverage area includes Bienville, Bossier, Caddo, Claiborne, DeSoto,
Lincoln, Natchitoches, Red River, Sabine, and Webster Parishes in
northeast Louisiana as well as peripheral counties in northeast Texas
and southwest Arkansas.
CDC's coverage area includes a special emphasis parish (Lincoln
Parish) in the Lower Mississippi Delta Development Initiative and
Persistent Poverty Area (Claiborne, DeSoto, Lincoln, Natchitoches, Red
River, and Sabine Parishes). In addition, businesses and residents in
this area experienced devastating agriculture losses due to Hurricane
Isadore and Hurricane Lili in September and October of 2002.
As a result of Rural Development funding, CDC was able to provide
low-interest loan funds to area businesses--in turn growing,
sustaining, and expanding businesses throughout their coverage area.
Because of Rural Development funding, CDC was able to provide critical
financial resources to area businesses resulting in 26 jobs created and
205 jobs saved.
rural business enterprise grant program
For the Rural Business Enterprise Grant (RBEG) program, the fiscal
year 2005 budget includes $40 million. We anticipate that this level of
funding will create or save about 17,200 jobs and impact over 7,900
businesses. The demand for this grant program continues to be strong.
The purpose of this program is to assist small and emerging businesses.
It is estimated that for each dollar of investment of an RBEG, another
$2.40 in private capital is generated.
Among the many eligible grant purposes under this program is the
renovation of existing facilities by the grantee to support small and
emerging business development in rural areas. I would like to share
with you an example of how these funds are being used to support small
and emerging business opportunities in rural Idaho. A $59,752 RBEG was
awarded to the NEZ Perce Tribe in Lapwai to fund a study on the
feasibility of oil seed production as a substantial alternate crop for
farming operations in North Central Idaho. Farmers in this highly
productive dryland-farming region have demonstrated the land's capacity
to grow a range of oil seed crops. The study will determine if it would
be feasible to produce and process these crops into value added
products such as bio-diesel, meal, edible oil, etc. If the results of
this study are favorable, this would provide stabilization to the
regions farming operations while creating employment opportunities.
rural economic development loan and grant programs
The fiscal year 2005 budget includes $25 million in Rural Economic
Development Loans (REDL) and $4 million in Rural Economic Development
Grants (REDG). This program represents a unique partnership, since it
directly involves the rural electric and telecommunications borrowers
in community and economic development projects. It provides zero-
interest loans and grants to intermediaries, who invest the funds
locally. In fiscal year 2003, each dollar invested through these
programs attracted an estimated $6.00 in other capital.
The return on our equity investment in rural America is strong. Two
examples demonstrate the impact of REDL and REDG. In Missouri, the REDG
program has been utilized by the Intercounty Electric Cooperative to
provide improved health care and fire protection to rural residents by
using a $200,000 REDG grant to provide a portion of the financial
assistance needed by the Salem Memorial District Hospital to relocate
and expand the emergency room and the Raymondville Fire Department to
construct a new fire station. In Iowa, the REDL program assisted
business development by enabling the Franklin County Rural Electric
Cooperative to utilize a $450,000 loan to assist with financing the
construction of a $3.2 million industrial facility in the Hampton Air
Industrial Park, which was in turn leased to Northern Pipe Products. As
a result of this business locating in the facility, there have been 11
jobs initially created with a potential for a total of 50 jobs.
rural business opportunity grant program
The fiscal year 2005 budget includes $3 million for Rural Business
Opportunity Grants (RBOG) to provide much-needed technical assistance
and capacity building in rural areas. The demand for this program
continues to grow. We anticipate that this level of funding will create
or staff over 8,500 jobs and impact 730 businesses. Many rural areas
need to develop economic and community development strategies that will
attract private investment capital and Federal and State assistance.
Also, the vast majority of rural communities are served by part-time
officials who do not have the time or training necessary to compete
with large communities for funding that may be available to them. The
funds requested under this program will provide invaluable assistance
to communities as they take their first step toward overcoming these
impediments. The following is an example of how this grant program has
been utilized to assist the Qglala Oyate Woitancan Tribe in South
Dakota with sustainable economic development on the reservation. The
tribe used a $39,000 grant to provide technical assistance and training
for tribal business development and planning activities identified in
the Tribe's comprehensive strategic plan. The project goal is to start
five businesses and create 15 job opportunities on the reservation.
renewable energy grants program
The Renewable Energy Systems and Energy Efficiency Improvements
Program was authorized by the Farm Security and Rural Investment Act of
2002. The program authorizes loans, loan guarantees, and grants to
farmers, ranchers, and rural small businesses to (1) purchase renewable
energy systems, and (2) make energy efficiency improvements. The fiscal
year 2005 budget proposes $10.8 million in discretionary funds. The
program supports the President's Energy Policy by helping to develop
renewable energy supplies that are environmentally friendly. In
addition, the program contributes to local rural economies through the
jobs created and additional income to rural small businesses, farmers,
and ranchers. In addition, we anticipate that 15,000 households will be
served, and 156 million-kilowatt hours of energy will be generated,
while greenhouse gasses will be reduced by 39,000 metric tons. The
following is an example of how this program was utilized in fiscal year
2003 to support renewable energy development in rural Illinois. The
Illinois Rural Electric Cooperative was awarded a $438,544 renewable
energy grant to construct a 1.65-megawatt wind turbine in rural Pike
County. The energy that will be generated from this wind turbine, once
constructed and operational, will be distributed to the cooperative
members as part of the overall electric power supply to a six county
area in west central Illinois served by the cooperative.
Mr. Chairman, and Members of the Subcommittee, this concludes my
testimony for the Rural Development fiscal year 2005 budget for rural
business and cooperative programs. I look forward to working with you
and other Committee members to administer our programs. I will be happy
to answer any questions the Committee might have.
Senator Bennett. Thank you, sir. Dr. Jen.
STATEMENT OF JOSEPH J. JEN
Dr. Jen. Mr. Chairman, thank you for the opportunity to
testify before you about important research efforts at the
USDA.
GENOMIC SCIENCE
I, too, have submitted written testimony for the record.
Due to the limited time here, I will discuss briefly two areas
of research: genomics and obesity prevention. Genomic science
is the core of 21st Century biology. From the DNA sequencing of
genomes to the functional genomic research to translation of
genome research to applied biotechnology, genomic science holds
the key to agriculture and food research now and for the next
several decades.
Genomic science has the potential to provide food to
alleviate world hunger, to practice environmentally-friendly
production, to create new, nutritious foods, to eliminate
animal and plant disease and to conserve the limited resources
on Earth, the water, air and land.
I am happy to report that USDA has been very successful in
leveraging limited funds to advance genomic research. For
example, we launched the DNA sequencing of the bovine genome
last December. USDA contributed $11 million toward a total cost
of a $53 million project. USDA's contribution would not have
been possible without your generous support of the fiscal year
2003 National Research Initiative funding. We hope that you
will continue to support more funding for genomic science and
the NRI. In particular, we need funding for bioinformatics
research, which includes interpreting the results of genomic
science data.
OBESITY PREVENTION
Obesity is now epidemic in our nation. USDA would like to
be the leader of the Federal agencies in conducting obesity
prevention research. We have asked for a modest increase in
research funds for the six ARS human nutrition centers in the
Presidential fiscal year 2005 budget. We will apply part of the
NRI increases in the CSREES budget toward obesity prevention
research as well. Most importantly, we are asking for $8.7
million, Mr. Chairman, for ERS to establish a consumer
consumption database. This database is essential for us to
understand consumer behavior toward eating and consumption.
Obesity prevention must be handled through integrated
programs that involve medical, nutritional, and physical
activity research, as well as behavioral science research.
However, until we are able to have quality behavioral science
research to complement the other fields of research, obesity
prevention is unlikely to be successful.
PREPARED STATEMENTS
Lastly, investment in agriculture and food research not
only solves problems we face today, but it also builds the
groundwork for solutions to problems our children, our
grandchildren and our great-grandchildren will face in the
future.
Thank you for your attention, sir.
[The statements follow:]
Prepared Statement of Dr. Joseph J. Jen
Mr. Chairman, members of the Committee, it is my pleasure to appear
before you to discuss the fiscal year 2005 budgets for the Research,
Education, and Economics (REE) mission area agencies of the USDA. I
have with me today Deputy Under Secretary Brown, Acting Administrator
of the Agricultural Research Service (ARS) Knipling, Administrator of
the Cooperative State Research, Education, and Extension Service
(CSREES) Hefferan, Administrator of the Economic Research Service (ERS)
Offutt, Administrator of the National Agricultural Statistics Service
(NASS) Bosecker and Office of Budget and Program Analysis Director
Dewhurst. Each Administrator has submitted written testimony for the
record.
First of all, I appreciate the support received from Congress in
our appropriations for fiscal year 2004. With the continuation of a
tight domestic, non-homeland security budget, the President's fiscal
year 2005 budget proposes $2.403 billion for the four REE agencies,
about $66 million less than the level appropriated in fiscal year 2004.
However, the agency budgets include important and valuable increases in
Food and Agriculture Defense, Bovine Spongiform Encephalopathy or BSE
related activities and Better Nutrition for a Healthy US, all strategic
target areas within the entire Department.
The budget that we are discussing today obviously relates to
requested funds for the four agencies in the REE. In reality, the REE
budget is a reflection of the Department budget. An important role for
the REE agencies is to provide the science-based information and
technology needed by the Department's regulatory and action agencies.
To meet this mission, the REE agencies' programs are very broad and
numerous. REE is the only mission area that contributes to all five
goals and 17 objectives of the USDA strategic plan.
We take our role as the science provider for policy and regulatory
decisions very seriously and are proactive in making sure our research
agendas are responsive to the needs of fellow agencies. For example,
ARS has an annual meeting with Food Safety and Inspection Service
(FSIS) to jointly identify research needs and set priorities. ARS and
NASS are cooperating with the Natural Resources Conservation Service
(NRCS) in an ambitious program to evaluate the effect of the
conservation programs in the 2002 Farm Bill. CSREES is working closely
with the Animal and Plant Health Inspection Service (APHIS) in
developing a national diagnostic laboratory network. ERS routinely
provides economic analyses for the Foreign Agricultural Service (FAS)
and the Chief Economist, among others, and plays a major role in the
analysis of our nutrition assistance programs and policies. The Risk
Management Agency (RMA) and the Farm Service Agency (FSA) use NASS
statistics heavily. The net effect is that the REE agency budgets not
only influence the size and shape of our research, education, and
statistical programs, but also our capacity to serve the rest of the
Department. The public is calling on the government to provide the
scientific evidence in decision-making and science-based solutions for
specific production, nutrition, security, and environmental challenges.
Secretary Veneman and other USDA officials repeatedly used REE-
generated information to guide USDA policy decisions.
It is no news to this subcommittee that the success of the American
food and agricultural system over many decades has been built on
agricultural research and technology. Numerous studies have found that
the return on investment in agriculture research is high. Whether
measured in productivity, competitive strength in global markets, use
of environmentally sustainable production practices, or new science-
based food safety technology, research and development underpins
essentially all advances in the food and agriculture system. High
quality, relevant research cannot guarantee a successful, competitive
food and agricultural business. Natural events, markets conditions, and
resistance to the adoption of new technologies can be barriers to the
translation of new knowledge and technology into sector gains. At the
same time, in the absence of such research, the food and agricultural
sector runs the risk of losing its competitive edge in global markets.
As scientific opportunities continue to expand and the agricultural
and food system becomes even more scientifically and technologically
dependent, the reliance on research to stay competitive is likely to be
even greater. The advance of molecular biology and resulting remarkable
manner in which plants and animals can be modified to enhance their
nutritional value, resistance to disease, or ability to grow in adverse
conditions hold amazing possibilities in the near future. In fact, we
are already benefiting from such advances with Bt corn and cotton. But
advances like these do not happen overnight. Studies show there is a
lag of as much as 15 years for the payoffs from research to reach the
marketplace. Wonderful advances are coming out of the research and
development pipelines today, from programs in universities and colleges
across the country and within USDA and other Federal laboratories.
Often they are the product of investments started several years, if not
decades ago. We must keep up our investment in agriculture now, so our
children and grandchildren will benefit years from now. I hope you keep
this fact in mind as you appropriate research funds budgets for this
and future years.
The REE agency fiscal year 2005 budgets include long-term
investments, as well as others that will yield a return in the
immediate or near future. Before turning to the specific agency
budgets, I would like to highlight three programs.
The Food and Agriculture Defense Initiative.--The fiscal year 2005
budget provides a funding increase of $201 million for ARS and $27
million for CSREES to participate in this interagency Food and
Agriculture Defense Initiative, focused on strengthening the Federal
Government's capacity to identify and characterize bioterriorist
attacks. These increases represent investments that would result in
strengthened homeland security.
Under the Food Defense component of the initiative, ARS will
conduct research to develop tests that rapidly detect and accurately
identify pathogens, toxins and metal contaminants in foods. The actual
tests should be available for adoption by APHIS and other agencies
within a short time.
The Animal Defense component includes $178 million for ARS to
complete the largest facility construction project in USDA history, the
modernization of the National Centers for Animal Health in Ames, Iowa
by October 2007. This consolidated ARS/APHIS facility, including
biosecurity level or BSL-2, BSL-3, and BSL-3 Ag space, will house and
support an integrated, multidisciplinary scientific capability,
combining animal disease research with the development of diagnostic
tools and vaccines. It will produce benefits immediately by replacing
inefficient and obsolete facilities.
Other agricultural defense funds for ARS would support research on
controlling exotic and emerging diseases and a new National Plant
Disease Recovery System that would develop the capacity to help the
agriculture sector recover from catastrophic outbreaks of plant
diseases, whether naturally occurring or intentionally introduced.
Working cooperatively with APHIS, the budget provides CSREES $30
million, which is an increase of $22 million from last year's
appropriation, to maintain and enhance the recently established,
unified Federal-State network of public agricultural institutions that
serves as a backup to APHIS diagnostic laboratories. The initiative
also includes $5 million in CSREES' Higher Education Program for a new
competitive program that would promote the training of food system
defense professionals who will be critical national assets in the years
to come.
BSE Related Activities.--As you know, USDA is responding
aggressively to the recent detection of BSE in a cow in Washington
State. REE agencies and the knowledge and technology resulting from
past research were important to the Department in its actions to deal
with the positive BSE test results. ARS also supported APHIS in running
several back-up tests to confirm the diagnosis, to validate that the
tissue sample was bovine, and to establish the parentage of the index
animal. Looking forward, the budget provides ARS an increase of $1
million over last year's appropriation to discover genetic resistance
to BSE that could be bred into cattle and other livestock.
Better Nutrition for a Healthier US.--One need only read almost any
newspaper in almost any week to be reminded of the epidemic of obesity
in this Nation. The causes are many and complex, such as a reduction in
physical exercise, greater reliance on the convenience of fast food and
restaurants, and consumption of more calories. The consequences of
obesity and overweight are well documented in the higher incidence of
weight-associated diseases, greater health care costs, and billions of
dollars in lost productivity. What is less clear is how to help
individuals and families gain and maintain healthy weights with the
right balance of nutritious diets and exercise. As a Nation, we spend
billions of dollars on diets with little sustained success.
USDA and its research agencies have a valuable role in addressing
the obesity challenge. As part of the Department initiative, Better
Nutrition for a Healthier US, and the White House ``Healthier US''
Initiative, the fiscal year 2005 budget proposes increases for ARS,
CSREES, and ERS to address this major national health problem and
associated issues. The increases will focus principally on gaining a
better understanding of the factors influencing food consumption
patterns and developing effective and culturally appropriate diet
strategies and interventions.
An ARS increase of $5 million will support research on the benefits
of self-selected healthy diets in achieving healthy weight and
preventing obesity as input to developing and evaluating culturally
relevant behavioral strategies to promote healthy diets. The CSREES
budget provides an increase of $7 million in the NRI to gain a better
understanding of the factors influencing obesity and their interaction,
including how they vary by gender, race, age, ethnicity and
socioeconomic characteristics. Issues relating to the nutrition value
of functional foods will also be addressed. Funding for the Expanded
Food and Nutrition Education Program is also provided in the CSREES
budget to increase the number of low-income individuals participating
in this program, one that has a very impressive track record in
achieving sustained, positive changes in behavior related to food and
diets.
The President's budget proposes $8.7 million for ERS to establish a
new consumer information system designed to gain a better understanding
of our increasingly consumer-driven food and agricultural system. An
important component of the new system will be a survey on individuals'
knowledge and attitudes about healthy diets and how those factors are
associated with the quality of their diet and their health status. In
collaboration with the Department of Health and Human Services and ARS,
the survey will be conducted as part of the National Health and
Nutrition Examination Survey or NHANES.
Other survey data and analysis in the proposed information system
will be used to identify, track and gain a better understanding of
changes in food supply and consumption patterns, valuable input for
making policy decisions in the food, consumer and health arenas. While
the Department has a robust data system on the production agricultural
system, far less is available for understanding the linkages between
the farm gate and the consumer. The data and the analysis will be
valuable to production agriculture and the processing industry in their
adjustment to the growing emphasis on health and nutrition in the
consumer-driven food and agricultural system of today.
Before turning to the agency budgets, I would like to express my
appreciation for your past support of genomics research. This research
continues to be critical to our overall research portfolio, providing
the base knowledge on which much of our problem solving research is
built. The future of agriculture is in genomics and related fields such
as proteomics and functional genomics. Sequencing the genome of
important agricultural plants and animals and learning about the
functions of different genes hold the promise of a whole new generation
of agricultural and food products that are nutritionally enhanced,
disease resistant, higher yield, less dependent on fertilizers and
herbicides and facilitate better use of land. Genetic research is also
central to the development of rapid diagnostic tests, such as the one
used by APHIS to identify avian influenza and exotic Newcastle disease.
Genomics is a prime example of research that takes years to carry out
and realize many of the benefits, but we are well on the way.
USDA has once again been very successful in leveraging our limited
genomics research funds with funds from other Federal agencies, the
private sector, State government, and foreign partners. Funding for the
sequencing of the first large domestic animal, the bovine genome, was
secured, with USDA providing $11 million of the total $53 million. The
USDA contribution would not be possible without your generous
appropriations for the NRI. The actual sequencing began at Baylor
University last December. This revolutionary research project will be
completed in 18 months. The resulting genome sequence will give animal
science researchers new tools for decades to come. USDA also continues
to work with the National Science Foundation on the National Plant
Genome Initiative and the Microbial Genomics Project.
Both the ARS and CSREES proposed budgets include increases in their
genomics programs. The President's fiscal year 2005 budget proposes
increases of $12 million in ARS and $9 million in the NRI of CSREES.
ree agency fiscal year 2005 budgets
I would now like to turn briefly to the budgets of the four REE
agencies.
Agricultural Research Service.--The Agricultural Research Service
fiscal year 2005 budget requests approximately $1.2 billion, or
slightly more than in fiscal year 2004. Within this total $988 million
is proposed for research and information programs, approximately $100
million less than in fiscal year 2004. A total of $178 million for
buildings and facilities is devoted entirely to the modernization of
the ARS/APHIS facilities at Ames.
The ARS budget proposes increases for high priority program
initiatives of national and regional importance. In order to
accommodate these high priority increases, including homeland security,
the budget proposes redirection or termination of approximately $169
million in current programs. As the principal intramural biological and
physical science research agency in the Department, ARS continues to
play a critical role for the Department and the larger agricultural
community in conducting both basic and mission-oriented research.
Results from ARS' basic research provide the foundation for applied
research carried out by ARS, academic institutions and private
industry. ARS' applied research and technology development address the
research needs of other USDA agencies, as well as those of the broader
producer and processor community.
In addition to the increases previously described, the ARS budget
proposes increases for climate change, invasive species research, and
for the Abraham Lincoln National Agricultural Library (NAL).
Independent of cause, agriculture is vulnerable to changes in climate,
such as rising temperatures, changing amounts of precipitation,
increased variability in weather, and increases in the frequency and
intensity of extreme weather events. While agriculture is vulnerable to
these environmental changes, it also offers significant opportunities
to mitigate the increase in greenhouse gases in the atmosphere. An
increase of $5.2 million in the President's budget for climate change
will support research providing information on balancing carbon
storage, emissions, and agricultural productivity in different
agricultural systems across the Nation.
Invasive species, including weeds, insects and pathogens, are
responsible for losses in agricultural productivity, environmental
quality and biodiversity. An ARS increase of $5 million will support
research to develop new target specific bio-intensive approaches to
control invasive weeds, such as purple loosestrife, and insects, such
as the Asian longhorn beetle. The increase will also support research
for developing highly specific, potent, and inexpensive synthetic
agents for controlling the red invasive fire ant and the southern
cattle tick.
In the age of digital information, the NAL is providing national
leadership through the development of the National Digital Library of
Agriculture that will deliver pertinent agriculture-related information
and knowledge to the American agricultural community. The requested
increase of $2 million will enhance NAL's ability to offer integrated
services for accessing, managing, and preserving agricultural
information through the application of advanced network technologies.
Advances in information technology, including the ability to share
information instantaneously, are enabling agencies such as ARS to gain
significant efficiencies and collaborative power in conducting research
programs and projects. However, these advances have also made ARS more
vulnerable to cyber security attacks. The safety of sensitive research
information from unauthorized intruders is critical to the agency's
research program. The fiscal year 2005 budget proposes $1.5 million to
strengthen ARS' cyber security program.
Cooperative State Research, Education, and Extension Service.--The
President's fiscal year 2005 budget provides just over $1 billion for
the Cooperative State Research, Education, and Extension Service.
Compared to fiscal year 2004, the budget includes an increase of $62
million in on-going programs and the elimination of $166 million in
Congressional add-ons and project terminations. The Administration's
request places a strong emphasis on increases in the REE mission area
for Food and Agriculture Defense and peer-reviewed competitive grants.
In providing critical funding for the research, education, and
extension programs of the Land Grant system and other universities and
organizations across the country, CSREES continues to play a central
role in the generation of new knowledge and technology and the transfer
of that knowledge and technology to stakeholders.
As described above, the budget provides an increase of $16 million
for genomics and nutrition research under the NRI, CSREES' flagship
competitive research program. The NRI continues to be a very valuable
avenue for supporting cutting-edge research conducted by the finest
scientists across the country. In addition to the increases in the NRI
and the higher education program under the Food and Agriculture Defense
Initiative, the budget calls for an increase of $1.6 million in the
CSREES Graduate Fellowship Grant Program. Despite recent gains in
support of minority-serving institutions and programs encouraging
diversity in higher education and the work force, the Nation faces
chronic challenges in promoting human capital development that enables
all citizens to realize their educational potential and promise of
contributing to the food and agricultural system. The proposed increase
will allow CSREES to further expand the number of fellowships offered
at the Master of Science level essential for recruiting minority
graduate students.
Economic Research Service.--The Economic Research Service is
provided $80 million in the President's fiscal year 2005 budget. As the
Department's principal intramural economics and social science research
agency, ERS conducts research and analysis on the efficiency, efficacy,
and equity aspects of issues related to agriculture, food safety and
human nutrition, the environment, and rural development.
The Consumer Data Information System described above and supported
with an increase of $8.7 million will provide the Department, for the
first time ever, the data and analytical capacity to understand the
quickly evolving consumer driven food and agricultural system.
Knowledge about the dynamics of the system and its relationship to
consumer behavior is critical for producers and processors to continue
to compete effectively in domestic and global markets and for
policymakers to identify and develop strategies addressing nutrition
and obesity issues at different stages of the food system chain.
National Agricultural Statistics Service.--The National
Agricultural Statistics Service budget requests $138 million, an
increase of $10 million over fiscal year 2004. NASS' comprehensive,
reliable, and timely data are critical for policy decisions and stable
agricultural markets, and to ensure a level playing field for all users
of agricultural statistics. The budget includes a decrease of $2.6
million for the Census of Agriculture, due to the cyclical basis of the
Census. Preliminary results from the 2002 census were released early
last month. Final results will be released in June.
The budget provides $7 million for continuing a multiyear
initiative begun in fiscal year 2004 to restore and modernize NASS'
core estimates program to meet data users' needs with an improved level
of precision. A second increase of $2.5 million will incrementally
improve statistically defensible survey precision for small area
statistics that are widely used by USDA agencies, such as RMA for
indemnity calculations. An additional $.8 million increase will allow
NASS to support Presidential, Departmental, and agency eGovernment
initiatives.
summary
In summary, I want to reiterate that, given an overall very tight
but sensible fiscal year 2005 budget, the REE budget reflects a
continuing commitment to investment in agricultural research,
economics, statistics, education, and extension. It also reflects an
understanding that research and education are critical for solving both
the problems agriculture and its producers and consumers are facing
today, as well as emerging problems and opportunities of the 21st
century. With continued strong investment, we will be ready to meet
future problems and take advantage of new opportunities presented by
cutting-edge science. This concludes my statement. Thank you for your
attention.
______
Prepared Statement of Dr. Edward B. Knipling, Acting Administrator,
Agricultural Research Service
Mr. Chairman, and members of the Subcommittee, I appreciate this
opportunity to present the Agricultural Research Service's (ARS) budget
recommendations for fiscal year 2005. The President's fiscal year 2005
budget request for ARS is $1.166 billion. This represents a net
increase of $20 million from the fiscal year 2004 funding level. Within
that total, there is a net reduction of $95 million for research
projects and a net increase of $115 million for buildings and
facilities. The fiscal year 2005 budget includes increases for new and
expanded program initiatives and pay and operational costs. The fiscal
year 2005 budget also proposes $178 million to finance the completion
of the building and modernization of USDA's National Centers for Animal
Health in Ames, Iowa.
The proposed initiatives include research to maintain a viable U.S.
food and fiber system and strengthen the Nation's Food and Agriculture
Defense in the fight against terrorism. The budget proposes an increase
of $23.4 million in support of the Food and Agriculture Defense
Initiative for research in food safety, and exotic and emerging
diseases of animals and plants, and initiates a National Plant Disease
Recovery System. The President's budget also includes increased funding
of $34.7 million for: animal and plant genomics; genetic resources;
invasive species affecting livestock and crops; obesity prevention;
climate change; information technology cyber security; and a National
Digital Library for Agriculture.
proposed program initiatives
Food Safety ($14,375,000).--ARS research will assist other Federal
agencies in providing the technical means to ensure that our food
supply is safe for American consumers. Research will focus on the
reduction of hazards, both introduced and naturally occurring toxicants
in food and feed, including pathogenic bacteria, viruses and parasites,
chemical contaminants, mycotoxins produced by fungi growing on plants,
and naturally occurring toxins produced by plants. ARS will work with
other USDA/Federal agencies to implement a comprehensive Food and
Agriculture Defense Initiative.
Exotic and Emerging Diseases of Animals and Plants ($10,722,000).--
The globalization of trade, increased international travel of people
and movement of goods, changing weather patterns, genetic shifts in
pathogen populations, and changes in crop management practices and
animal management systems all provide opportunities for the emergence
or reemergence and spread of animal and plant diseases. Porcine
Reproductive Respiratory Syndrome (PRRS) in swine and virulent forms of
Marek's Disease virus in chickens are two examples of diseases that
have suddenly emerged. West Nile Virus and Monkey Pox are examples of
exotic diseases which have been introduced from other countries. The
methods for detecting, preventing, and suppressing animal and plant
diseases, whether emergent, exotic, or intentionally introduced, are
similar. ARS will use the proposed increase to develop vaccines for
high priority threats, such as Foot and Mouth Disease, West Nile Virus,
Rift Valley Fever, and Equine Encephalopathy, that could devastate the
Nation's livestock. In addition, flexible and responsive surveillance
systems that maximize rapid detection, and better methods to prevent
and control plant and animal pathogens will be developed and tested. Of
the proposed $10.722 million increase, $7.7 million will finance part
of USDA's Homeland Security efforts.
Genomics ($12,000,000).--Genetic improvements have been largely
responsible for the productivity and quality of America's crops and
livestock. Additional research is now needed to exploit the inherent
potential in genomes. With the proposed increase, ARS will identify and
characterize genes that influence important traits in plants (e.g.,
plant growth, disease resistance, and stress tolerance) and in animals
(e.g., reproduction, feed efficiency, and well-being). ARS will also
characterize available germplasm for traits of economic and behavioral
importance in cattle, swine, and poultry (e.g., Marek's Disease Virus
in poultry).
Genetic Resources (4,000,000).--The prosperity of U.S. agriculture
depends on the preservation of plant and animal germplasm collections.
The current support of the germplasm program is inadequate to maintain
animal and plant germplasm that is threatened or to prevent the loss of
genetic diversity. With the availability of new genomic tools, genetic
diversity is extremely valuable for improving plant and animal
productivity and other important traits. ARS will use the proposed
increase to collect, catalog, and preserve selected germplasm of
cattle, swine, poultry, and fish. Also, it will collect, identify,
characterize, and incorporate plant germplasm into centralized
genebanks, and evaluate it for useful qualities (e.g., disease
resistance). In addition, official insect and microbial germplasm
repositories will be established.
National Plant Disease Recovery System ($6,000,000).--In case of a
national emergency involving a disease outbreak in a major economically
important crop, a National Plant Disease Recovery System will provide
the infrastructure and technology for recovery. With the proposed
increase, ARS will establish and coordinate a network of the technology
capabilities within Federal, State, and private sector organizations to
prevent, slow, or stop the spread of a high consequence pathogen with
resistant seed varieties and other pest control measures. This network
will utilize the genetic resources contained in the U.S. National Plant
Germplasm System which is administered by ARS. The proposed increase
will also be used to identify and develop new sources of genetic
resistance in crops to important disease pathogens.
Invasive Species Affecting Animals and Plants ($5,000,000).--
Invasive weeds, insects, and other pests cost the Nation over $137
billion per year. Weeds, including leafy spurge, melaleuca, salt cedar,
water hyacinth, purple loosestrife, and jointed goat grass, infest over
100 million acres in the United States. They reduce crop yields by
approximately 12 percent and forage yields by 20 percent. The red
invasive fire ant, whose venom can kill young animals, has steadily
spread through all the Gulf States and is now reported in Southern
California and New Mexico. The southern cattle tick and the disease it
causes, once eradicated from the Nation, may reinvade the United States
from Northern Mexico. The tick has become increasingly resistant to
insecticides and there is no vaccine for the disease it carries. With
the proposed increase, ARS will target its research on the southern
cattle tick (by identifying the genes responsible for pesticide
resistance) and the fire ant (by studying its genomics and developing
more effective pesticides and pathogens). In addition, ARS will develop
systematics for weeds and arthropods, and develop biologically-based
integrated pest management components for pests.
Obesity Prevention ($5,000,000).--Obesity is the Nation's fastest
growing public health problem, which is affecting every segment of the
American population. Obesity contributes to many diseases, such as
heart disease, cancer, and diabetes, resulting in hundreds of thousands
of deaths, as well as hundreds of billions of dollars in health care
costs each year. The deterioration of American dietary habits has
occurred with the increased consumption of low cost, convenient, fast
foods that are typically nutrient diluted. ARS will use the proposed
increase to assess the benefits from long-term consumption of self-
selected ``healthy'' diets to prevent obesity. Also, ARS will develop
and evaluate culturally relevant behavioral strategies that promote the
selection of healthy foods.
Climate Change ($5,189,000).--Climate change encompasses global and
regional changes in the earth's atmospheric, hydrological, and
biological systems. Agriculture is vulnerable to these environmental
changes. The objective of ARS' global change research is to develop the
information and tools necessary for agriculture to mitigate or adapt to
climate change. ARS has research programs on carbon cycle/storage,
trace gases (methane and nitrous oxide), agricultural ecosystem
impacts, and weather/water cycle changes. ARS will use the proposed
increase to develop climate change mitigation technologies and
practices for the agricultural sector. Specifically, ARS will: conduct
interdisciplinary research leading to technologies and practices for
sustaining or enhancing food and fiber production and carbon
sequestration by agricultural systems exposed to multiple environmental
and management conditions; expand the existing network of ARS sites
conducting measurements of greenhouse gas fluxes between the atmosphere
and the land; and identify ways to decrease methane emissions
associated with livestock.
National Digital Library for Agriculture ($2,000,000).--ARS will
use the proposed increase to enhance the National Agricultural
Library's (NAL) ability to offer integrated services for assessing,
managing, and preserving agricultural information through the
application of advanced network technologies. The volume, quality, and
timelines of information available to NAL's customers will be
increased. In 2001, a ``Blue Ribbon Panel'' concluded that NAL needed
increased resources to take advantage of technological innovations.
Information Technology Cyber Security ($1,507,000).--Information
technology is critical for the delivery of ARS' research programs. The
use of web-based technology commonly referred to as ``e-Government,''
offers ARS the opportunity to improve the way it conducts business and
exchanges information in achieving its research mission and objectives.
As technology has enhanced the ability to share information
instantaneously, it has also made ARS more vulnerable to cyber security
attacks. ARS' mission critical information systems and networks are
increasingly exposed to an unprecedented level of risk. Of particular
importance is the safety of pathogenic, genomic, and other sensitive
research information from being acquired or destroyed by unauthorized
intruders through unprotected or undetected cyber links. ARS will use
the proposed increase to increase the number of cyber security
officers, and to implement cyber security management plans and
strategies.
proposed operating increases
In addition to the proposed program initiatives, ARS' budget
provides funding to cover costs associated with pay raises and employee
performance. These funds, $13,188,000 for pay costs and $1,013,000 for
employee performance, are critically needed to avoid erosion of the
agency's base resources. Absorption of these costs would reduce the
number of scientists and staff who are essential for conducting viable
research programs critical to the Nation's security.
proposed program decreases
The President's budget for fiscal year 2005 addresses a number of
national needs and priorities. Protecting the Nation's food and
agricultural systems against terrorist attacks is a major concern. In
order to finance these high priority initiatives related to Homeland
Security and the Food and Agriculture Defense Initiative, the funding
for important but lesser priority research must be reduced. Growing
Federal deficits also dictate the need to generate savings by
termination of unrequested research projects.
The fiscal year 2005 budget proposes $169,472,000 in program
reductions. This entire amount represents unrequested research projects
added in fiscal years 2001, 2002, 2003 and 2004. The savings achieved
will be redirected to finance the higher priority research initiatives
related to Homeland Security and the Food and Agriculture Defense
Initiative, and to reduce overall Federal spending.
proposed increase for buildings and facilities
The fiscal year 2005 budget recommends $178,000,000 for the ARS
Buildings and Facilities account. In accordance with a previously
documented and accepted master plan, the entire amount will be used to
complete the modernization of the National Centers for Animal Health in
Ames, Iowa. This $460 million construction project is already well
underway. The program of work being carried out in the current
inadequate facilities is internationally recognized for preventing and
controlling animal diseases, and protecting the Nation's food supply
and public health. The new facility is critical to supporting and
sustaining the Administration's Homeland Security and Food and
Agriculture Defense Initiative.
The new facility combines ARS' National Animal Disease Center with
two Animal and Plant Health Inspection Service facilities: the National
Veterinary Services Laboratory and the Center for Veterinary Biologics.
The new facility will provide an integrated, multidisciplinary
scientific capability, combining animal disease research with the
development of diagnostic tools and vaccines.
Mr. Chairman, this concludes my statement. I will be happy to
respond to any questions the Committee may have.
______
Prepared Statement of Dr. Colien Hefferan, Administrator, Cooperative
State Research, Education, and Extension Service
Mr. Chairman and Members of the Committee, I appreciate the
opportunity to submit the proposed fiscal year 2005 budget for the
Cooperative State Research, Education, and Extension Service (CSREES),
one of the four agencies in the Research, Education, and Economics
(REE) mission area of the United States Department of Agriculture
(USDA).
The CSREES fiscal year 2005 budget proposal is just over $1
billion. CSREES, in concert with the Secretary of Agriculture and the
intent of Congress, works in partnership with the land-grant university
system, other colleges and universities, and public and private
research and education organizations to initiate and develop
agricultural research, extension, higher education, and related
international activities. In addition, CSREES implements grants for
organizations to better reach and assist disadvantaged farmers in
accessing programs of USDA. These partnerships result in a breadth of
expertise that is ready to deliver solutions to problems facing U.S.
agriculture today.
The broad portfolio of CSREES supports scientific discovery from
idea to application. Formula and other base funds leverage dollars from
other sources, provide the start-up funds needed for investigators to
establish research programs and build the capacity to compete
successfully in competitive programs, and allow for rapid responses to
emerging problems. Competitively funded research from the National
Research Initiative (NRI) supports individual investigators undertaking
basic research aimed at generating new knowledge and supports
integrated programs and activities focused on solutions to short- and
intermediate-term problems. Research-based guidance is delivered
through the Cooperative Extension System's educational efforts. Because
these efforts occur primarily at universities, a very broad range of
expertise is available to address increasing complex problems, and the
research process contributes to an environment that prepares students
to meet the ongoing needs of agriculture, the environment, human health
and well-being, and communities. Funding for outreach and assistance
for socially disadvantaged farmers encourages and assists those farmers
by providing technical assistance and education for fuller
participation in all USDA programs.
The fiscal year 2005 CSREES budget request aligns funding and
performance with the USDA strategic goals. CSREES manages its many
budget elements in support of research, education, extension, and
outreach programs as part of a cohesive whole supporting all five of
the Department's strategic goals. Distinct performance criteria,
including strategic objectives and key outcomes with identified annual
targets, are defined for each program or activity. As part of an
integrated budget and performance process, periodic portfolio reviews
by external experts to monitor overall program progress, suggest
alternative approaches, and propose management improvements are
planned. Although the overall budget supports the breadth of USDA's
goals and objectives, the funding increase requested in the CSREES
fiscal year 2005 budget proposal emphasizes USDA Strategic Goal 3:
Enhance Protection and Safety of the Nation's Agriculture and Food
Supply, and Strategic Goal 4: Improve the Nation's Nutrition and
Health.
In continuing and expanding our efforts for agricultural security
and in support of the President's Food and Agriculture Defense
Initiative, CSREES, through cooperative efforts with the Animal and
Plant Health Inspection Service, has established a unified Federal-
State network of public agricultural institutions to identify and
respond to high risk biological pathogens in the food and agricultural
system. The network is comprised of 13 State animal diagnostic
laboratories and 6 plant diagnostic laboratories, dispersed
strategically around the country. These 19 key laboratories are
developing a two-way, secure communications network with other
university and State Department of Agriculture diagnostic laboratories
throughout their respective regions. The diagnostic laboratories are
responsible for identifying, containing, and minimizing the impact of
exotic and domestic pests and pathogens that are of concern to the
security of our food and agricultural production systems. The budget
proposal requests an increase of $22 million for a total of $30 million
to maintain the national diagnostic laboratory network and increase the
number of State plant diagnostic laboratories linked with the National
Agricultural Pest Information System. The network will continue its
link with the Extension Disaster Education Network (EDEN) to
disseminate information to producers and professionals at the county
level, and to expand these activities to provide more current and
timely educational resources.
As a benefit of the research and education information gained
through the Animal and Plant Diagnostic networks in conjunction with
dissemination efforts of EDEN, an influx of new knowledge will be used
to fill gaps in addressing agrosecurity issues, and to educate students
in increasing their risk assessment and mitigation skills in order to
help manage large scale animal and plant disease outbreaks. CSREES
proposes $5 million for the Agrosecurity Education Program that will
support educational and professional development for personnel in
securing the Nation's agricultural and food supply. The program will
develop and promote curricula for undergraduate and graduate level
higher education programs that support the protection of animals,
plants, and public health. The program also is designed to support
cross disciplinary degree programs that combine training in food
sciences, agricultural sciences, medicine, veterinary medicine,
epidemiology, microbiology, chemistry, engineering, and mathematics
(statistical modeling) to prepare food system defense professionals.
CSREES continues to provide new opportunities for discoveries and
advances in knowledge through our programs such as the NRI and
Integrated Research, Education, and Extension Competitive Grants.
Funding for agricultural research, particularly for competitive or
basic science programs, has lagged dramatically behind funding for
other disciplines. The fiscal year 2005 budget request of $180 million
for the NRI reflects the same underlying policy objectives of fiscal
year 2004, but in a way that is consistent with increasing overall
constraints on the Department's budget. The NRI will continue to
support current high priority programs with an emphasis on critical
areas. Expanded partnerships with other Federal agencies on research
topics of mutual interest will be possible. For example, we may be able
to expand working relationships with the National Institutes of Health
and others on animal genomics. Current cooperation on the Bovine Genome
Sequencing program will contribute to a working draft sequence
(approximately 6-fold sequence coverage) of 90 percent of the bovine
genome. Sequencing the bovine genome provides the gateway to studies of
gene function and improved methods of selection of animals based on
genotype. This knowledge will then be used to increase the efficiency
and profitability of animal production systems by enhancing animal
health and the quality and safety of food production. The goal of the
NRI participation in the program is to assure the generation of high
quality sequence data, that the assembly of the sequence reads into
contiguous sequences, the annotation, and the deposition of all
information into a publicly accessible, pre-existing database.
We also will continue our partnership with the National Science
Foundation on the Microbial Genome Sequencing program. The program
supports high-throughput sequencing of the genomes of microorganisms
that are of fundamental biological interest, and are important to the
national interest, the productivity and sustainability of agriculture
and forestry, or the safety and quality of the Nation's food supply.
The fiscal year 2005 budget requests an increase of $9 million in the
NRI to support genomics research. Support of animal genomics will
increase fundamental knowledge of the composition, organization, and
function of the genome and increase the ability to genetically improve
the productivity, efficiency, and quality of agriculturally important
animals, including horses and aquaculture species. Research also will
contribute to reducing adverse environmental changes, preserving
genetic diversity of wild stock, addressing new and re-emerging disease
and pest threats, and providing new and renewable products to meet
consumer needs.
According to the President's Health and Fitness Initiative,
Healthier US, too many Americans are overweight, have poor dietary
habits, and do not exercise enough. Five chronic diseases associated
with obesity--heart disease, cancer, stroke, chronic obstructive
pulmonary disease (e.g. bronchitis, emphysema, asthma), and diabetes--
account for more than two-thirds of all deaths in the United States. In
addition to claiming more than 1.7 million American lives each year,
these diseases hinder daily living for more than one out of every ten
Americans, or 25 million people. More than 100 million Americans live
with chronic disease, and millions of new cases are diagnosed each
year. Healthier US concluded that the health of Americans would improve
with modest but regular better eating habits and physical activity.
Under the NRI, an increase of $7 million in NRI funding is proposed in
fiscal year 2005 to address nutrition, food choices, and the growing
obesity epidemic. Research will focus specifically on investigating
underlying causes of obesity, including physiological, environmental,
cultural, social, and biological factors; factors controlling the onset
of obesity; determining differences in obesity groups defined by race,
age, gender, etc.; and developing and evaluating the weight loss
potential of functional foods.
Also within the fiscal year 2005 budget request is a proposed
increase of $6 million for the Expanded Food and Nutrition Education
Program (EFNEP). This would restore funding to approximately the fiscal
year 2003 funding level. The EFNEP program reaches predominantly
minority low-income youth and families with nutrition education that
leads to sustainable behavior changes. EFNEP works with various
partners in providing its services, which include collaborating with
the National Institute of Health on the 5-A-Day program promoting
increased consumption of fruits and vegetables, and the Centers for
Disease Control and Prevention on their VERBtm program sharing
curriculum material directed at teaching young people about the
importance of nutrition and physical activity. Increased funding also
will allow EFNEP to move forward with efforts to add a physical
activity focus to help combat the rising problem of obesity in children
and adults.
CSREES continues to expand diversity and opportunity with
activities under 1890 base and educational programs, and 1994 and
Hispanic-Serving Institutions educational programs. Funding for our
1890 base programs provides a stable level of support for the
implementation of research and extension programming. Funding for the
1994 Institutions strengthens the capacity of the Tribal Colleges to
more firmly establish themselves as partners in the food and
agricultural science and education system through expanding their
linkages with 1862 and 1890 Institutions. Sustained funding for the
Hispanic-Serving Institutions promotes the ability of the institutions
to carry out educational training programs in the food and agricultural
sciences. This proven path of research, extension, and educational
program development rapidly delivers new technologies into the hands of
all citizens, helping them solve problems important to their lives.
CSREES also will more effectively reach underserved communities
through sustained support for the Outreach and Assistance for Socially
Disadvantaged Farmers and Ranchers Program (OASDFR). CSREES will award
competitive multi-year projects to support outreach to disadvantaged
farmers and ranchers. Funds for the OASDFR program will encourage and
assist socially disadvantaged farmers and ranchers in their efforts to
become or remain owners and operators by providing technical
assistance, outreach, and education to promote fuller participation in
all USDA programs.
Sustained support through our base programs, including formula
funding for research and extension, is providing the foundation for the
Federal/State partnership that links science and technology development
directly to the needs and interests of people. The formula and other
base programs provide discretionary resources that foster regional and
national joint planning, encourage multi-State planning and program
execution, and minimize duplication of efforts. Formula and other base
funding is the foundation from which a competitive grant funded program
can be built by developing institutional infrastructure, supporting
preliminary studies to strengthen competitive proposals, and bridging
gaps related to the scope and continuity of grant supported programs.
These funds, along with matching funds from the States, assure
responsiveness to emerging issues such as foot-and-mouth disease, E.
coli, Salmonella, Listeria, sorghum ergot, potato late blight, Russian
wheat aphid, and swine waste. For example, leveraging funds from the
Hatch Act with other sources, researchers at Ohio State University are
continuing work with bacteriocins, naturally occurring substances in
foods that inhibit pathogens. The researchers found that a type of
``good'' bacteria in milk makes a bacteriocin that appears to inhibit
E. coli and Salmonella. The researchers are working with a food
packaging company to infuse bacteriocins into packaging material,
making containers with a built-in, natural way to help keep food safe.
The higher education programs contribute to the development of
human capacity and respond to the need for a highly trained cadre of
quality scientists, engineers, managers, and technical specialists in
the food and fiber system. The fiscal year 2005 budget provides a $1.6
million increase in the Food and Agricultural Sciences National Needs
Graduate Fellowship program. This program will prepare graduates to
deal with emerging challenges in such areas as agricultural biosecurity
to ensure the safety and security of our agriculture and food supply,
new issues in natural resources, and human health and nutrition
including problems related to obesity, such as diabetes, cardiovascular
health, and osteoporosis. The International Science and Education
Grants program (ISEP) will support the land-grant community and other
campuses in their efforts to prepare students and help American
agriculture to maintain our global competitiveness by
internationalizing their agricultural programs. ISEP is designed to
assist land-grant and other campus faculty in bringing world issues and
awareness into their agricultural teaching, research, and outreach
programs. Other higher education programs will provide important and
unique support to Tribal Colleges, the 1890 Land-Grant Colleges and
Universities, and the 1862 Land-Grant Universities as they pilot
important new approaches to expanding their programs.
Peer-reviewed competitive programs that meet national needs are a
much more effective use of taxpayer dollars than earmarks that are
provided to a specific recipient for needs that may not be national.
The scope of the NRI, and the Integrated Research, Education, and
Extension Competitive Grants is broad enough to provide a peer-reviewed
forum for seeking and assessing much of the work funded through
earmarks. For example in the past 4 years, CSREES supported research in
animal identification and/or animal tracking under earmarked projects
which fit within the scope of the NRI. In addition, earmarked projects
for human nutrition are within the program areas of the NRI, and
earmarked food safety projects can be supported through the CSREES
Integrated Food Safety program. In order to ensure the highest quality
research for these national needs within available funding, the fiscal
year 2005 budget has therefore proposed to eliminate earmarked
projects.
CSREES, in collaboration with university and other partners
nationwide, continually meets the many challenges facing the food and
fiber system. The programs administered by the agency reflect the
commitment of the Administration to further strengthen the problem-
solving capacity of Federally-supported agricultural research,
extension, higher education, and outreach and assistance programs. In
addition, we continue to enhance our responsiveness and flexibility in
addressing critical agricultural issues.
Mr. Chairman, this concludes my statement. I will be glad to answer
any questions the Committee may have.
______
Prepared Statement of Susan E. Offutt, Administrator, Economic Research
Service
Mr. Chairman and members of the Committee, I am pleased to have the
opportunity to present the proposed fiscal year 2005 budget for the
Economic Research Service (ERS).
mission
The Economic Research Service informs and enhances public and
private decision making on economic and policy issues related to
agriculture, food, the environment, and rural development.
budget
The agency's request for 2005 is $80 million, which includes
increases for one initiative and pay costs. The agency is requesting an
$8.7 million increase to develop an integrated and comprehensive data
and analysis framework of the food system beyond the farm-gate to
provide a basis for understanding, monitoring, tracking, and
identifying changes in food supply, consumer behavior and reactions,
and consumption patterns.
ers contributions to mission area goals
ERS supports the five USDA strategic goals to: (1) enhance economic
opportunities for agricultural producers; (2) support increased
economic opportunities and improved quality of life in rural America;
(3) enhance protection and safety of the Nation's agriculture and food
supply; (4) improve the Nation's nutrition and health; and (5) protect
and enhance the Nation's natural resource base and environment.
Goal 1: Enhanced Economic Opportunities for Agricultural Producers
ERS helps the U.S. food and agriculture sector adapt to changing
market structure in rapidly globalizing, consumer-driven markets by
analyzing the linkages between domestic and global food and commodity
markets and the implications of alternative domestic and international
policies on competitiveness. ERS economists analyze factors that drive
change in the structure and performance of domestic and global food and
agriculture markets; provide economic assessments of structural change
and competition in the agricultural sector; analyze the price impacts
of evolving structural changes in food retailing; analyze how
international trade agreements and foreign trade restrictions affect
U.S. agricultural production, exports, imports, and income; and provide
economic analyses that determine how fundamental commodity market
relationships are adjusting to changing trade, domestic policy, and
structural conditions. Policy makers and the food and agriculture
industry benefit from research contained in reports such as
International Evidence on Food Consumption Patterns released in October
2003, that analyze forces shaping the demand for food in global
markets, in this case in rapidly growing developing countries, and The
Structure of Global Markets for Meat released in September 2003, that
analyze the economic forces behind the emergence of specialized trade
patterns and new food marketing chains.
ERS will continue to work closely with the World Agricultural
Outlook Board (WAOB) and USDA agencies to provide short- and long-term
projections of United States and world agricultural production,
consumption, and trade. In 2004, several initiatives will increase the
accessibility, timeliness and breadth of the data and analysis. We are
creating dynamic web pages that offer the latest outlook information,
data, and links through a central location on the ERS website. In
addition, USDA's agricultural baseline projections will be available on
a timelier basis through the release of components as they are
completed. ERS continues to work closely with the WAOB and other USDA
agencies in developing a commodity market information system that would
provide ``one-stop shopping'' for key USDA data. The breadth of data
was expanded in 2002 when ERS launched a unique data series of average
monthly retail prices for red meat and poultry based on electronic
supermarket scanner data.
ERS continues to expand research on how the dynamics of consumer
demand, notably growing consumption and trade in high value products,
are shaping global markets. In 2003, ERS organized workshops on global
markets for high-value foods, such as meat, processed cereals, fruits,
vegetables and specialized markets for grains. These workshops brought
together international experts on the food system to discuss the
economic implications of the growing importance of high value products
and trade for the food and agricultural sector. A report analyzing the
forces shaping trade in high value products was released in 2003. These
activities enhance our analytic understanding of these fundamental
market relationships and continue to improve the analytical base for
USDA's foreign market analysis and projections activity.
New appropriations received in 2004 allow ERS to explore in greater
depth the market for organic products and other commodities and foods
that are differentiated in the marketplace by virtue of how or where
they are produced. This form of product differentiation accommodates
consumers' preferences (or producers' beliefs about consumers'
preferences) for products that guarantee that particular production
practices are (or are not) undertaken, or that are assured to be
produced in particular countries or regions. In 2004, we plan to
document the evolution, structure and function of differentiated
product markets, and derive the implications of alternative extents,
forms, and timing of government intervention in markets for products
that embody production process or location characteristics.
Food price determination is increasingly important for
understanding domestic and international market events and
opportunities that promote the security of the U.S. food supply. ERS
food markets research focuses on enhancing knowledge and understanding
of food prices, both their objective measurement and how they are set
by firms at different stages of the food system, and of the performance
of the food system to most efficiently supply consumers' needs.
ERS research examined whether produce markets' retail
consolidation, technological change in production and marketing, and
changing consumer demand have altered the traditional market
relationships between producers, wholesalers, and retailers. As the
market for retail food has changed over time, so has the dynamics of
market competition. ERS has begun to use micro-level household and
store scanner data to measure the impact of changing store formats on
food prices to focus on the changing environment and how these changes
could impact our view of how customers make economic decisions in
retail food stores. ERS research continues on understanding why food
prices change over time and forecasting how they will change in the
future. ERS research on the linkage of food and agriculture to the
general economy in terms of employment and income provides a
statistical foundation for describing both the changing nature of the
Food and Fiber System and the economy-wide effects of agriculture.
ERS continues to conduct research to improve understanding among
decision makers of changes in the agricultural sector structure (for
example, the implications for producers of the increasing replacement
of open markets by contractual arrangements and vertical integration).
ERS is currently examining the potential efficiency-enhancing motives
for the increasing use of contracts by food manufacturers and
processors. Hog production, highlighted in Economic and Structural
Relationships in U.S. Hog Production released in February 2003,
provides a good example of how economic factors can change animal
industry structure and practices, and how these changes might affect
the environment. Following up on the 2001 reports, Concentration and
Technology in Agricultural Input Industries and Public Sector Plant
Breeding in a Privatizing World, ERS will publish The Seed Industry in
U.S. Agriculture in 2004. This report reviews the factors affecting
seed production, consumption, and seed markets, and summarizes the
regulatory policy, including the intellectual property rights (IPR)
relating to new plant varieties, the role of public and private R&D
expenditures in plant breeding for U.S. agriculture, and the influence
of concentration on market power and cost efficiency in the seed
industry. At the farm level, the new Family Farm Report--Structural and
Financial Characteristics of U.S. Farms, which will be published in
2004, documents the ongoing changes in farms' structure, financial
performance, and business relationships in response to consumer
demands, competitive pressures, and changing opportunities for farm
families.
ERS analysis has supported implementation of the 2002 Farm Security
and Rural Investment (FSRI) Act, and our ongoing research will provide
objective analysis of the impacts of specific programs. Among the
studies mandated by this Act is the report Characteristics and
Production Costs for Dairy Operations to be released in 2004. This
report examines how production costs vary among dairy producers and
will indicate possible reasons for the cost variation of different
commodities.
In addition, ERS will continue to work closely with the Foreign
Agricultural Service (FAS) and the Office of the U.S. Trade
Representative to ensure that ongoing negotiations on the Doha
Development Agenda under the auspices of the World Trade Organization
(WTO) and regional trade agreements are successful and advantageous for
U.S. agriculture. In the negotiations, the United States seeks to
minimize farm trade distortions while maintaining some level of
domestic support. Central to a successful agreement is domestic and
international consensus on the trade distorting impacts of various
types of domestic agricultural policies, and a recent ERS publication
is the first output from ongoing research on the potential distortions
caused by U.S. policies. The report, Decoupled Payments: Household
Income Transfers in Contemporary U.S. Agriculture, released in February
2003, analyzes the production and trade impacts of the Production
Flexibility Contract (PFC) payments enacted under the 1996 Farm Act.
Using the data on farm households from the Agricultural Resource
Management Survey (ARMS), the report provides the first data-based
analysis of direct payments, and finds little evidence that the PFC
payments distorted markets.
The Department's implementation of the final rule for organic
production and marketing in October 2002 ensured that the goals of the
Organic Foods Production Act of 1990 were met, including certification
by a State or private agency accredited under the national program of
all but the smallest organic farmers and processors. ERS had a large
impact on the program through its research and data collection on pre-
existing State and private organic certifying organizations, organic
production practices, and organic food marketing. Updating an initial
report of organic production statistics in 2001 is the report U.S.
Organic Farming in 2001: Adoption of Certified Systems, released in
April 2003.
ERS analyses can help guide and evaluate resource allocation and
management of public sector agricultural research--a key to maintaining
increases in productivity that underlie a strong competitive position
for U.S. farmers. ERS continues to study the economics of adopting
genetically modified seed, the role of patents and intellectual
property rights in fostering innovation, and the potential for
technology transfer to less developed countries.
Seed genetically engineered to control insects and weeds, initially
introduced in 1995, now accounts for nearly 70 percent of U.S. soybean
plantings and nearly half of major crop acreage (corn, soybeans, and
cotton). An ERS report, Size and Distribution of Market Benefits From
Adopting Biotech Crops, released in November 2003, estimated the size
and distribution of benefits to consumers and the agricultural sector
from adopting Bacillus thuringiensis (Bt) cotton, herbicide-tolerant
cotton, and herbicide-tolerant soybeans in 1997. A more comprehensive
study of seed industry changes was reported in The Seed Industry in
U.S. Agriculture, released in February 2004, which examined the
composition of United States and international seed markets,
regulations affecting agricultural seeds, the structure and evolution
of the seed industry, and trends in private and public R&D in plant
breeding. Particular emphasis was placed on seeds for the major field
crops: corn, cotton, soybeans, and wheat.
In the publication The Effect of Information on Consumer Demand for
Biotech Foods: Evidence from Experimental Auctions, released in March
2003, ERS examined consumer attitudes toward biotechnology and the role
of consumer preferences in shaping market trends. Research anticipating
the next wave of biotechnology products for crops modified to target
consumer needs, such as food with altered nutritional qualities (such
as canola with high beta-carotene content), crops with improved
processing characteristics (such as naturally-colored cotton), or
plants that produce specialty chemicals or pharmaceuticals (such as
rabies vaccine in corn), is also being undertaken. This sound research
base has been invaluable in tempering exaggerated claims of costs and
benefits from both sides of the debate.
Recent innovations in agricultural biotechnology have raised
significant policy questions concerning potential research delays, the
optimal intellectual property design for maximizing dynamic innovation
when innovation is sequential, and the potential effects of
concentration of research and market power in the agricultural inputs
industry. In cooperation with researchers at Rutgers University and the
U.S. Patent Office, ERS created in 2003 a classification system and on-
line searchable database of agricultural biotechnology patents and
licensing arrangements. This project identifies who generates the
innovations, who controls the innovations and, to the extent possible,
who has access to the innovations.
Data from the Agricultural Resource Management Survey (ARMS)
underlie important estimates of farm income and well-being, and
constitute an essential component in much of ERS' research. Reflecting
the 2003 budget initiative, in 2003 the ARMS survey sample was expanded
sufficiently to allow ERS, with the National Agricultural Statistics
Service (NASS), to produce State level estimates for the largest
fifteen States (as measured by value of farm output). Also in 2003, ERS
collaborated with NASS to develop new survey instruments and data
collection approaches that merge mail surveys with in-person surveys,
thereby reducing respondent burden and improving the efficiency of data
collection. In addition, ERS has developed a path breaking, web-based,
secure ARMS data retrieval and summarization prototype tool that is
attractive and easy to use despite the complex tasks it performs on
this massive data set. When implemented in 2004, this system will
retrieve ARMS data in formats customized to the customers' needs while
assuring that sensitive data are not disclosed.
Goal 2: Support Increased Economic Opportunities and Improved Quality
of Life in Rural America
ERS research explores how investments in rural people, businesses,
and communities affect the capacity of rural economies to prosper in
the new and changing global marketplace. The agency analyzes how
demographic trends, employment opportunities, educational improvements,
Federal policies, and public investment in infrastructure and
technology enhance economic opportunity and quality of life for rural
Americans. Equally important is our commitment to help enhance the
quality of life for the Nation's small farmers who are increasingly
dependent on these rural economies for their employment and economic
support. The rural development process is complex and sensitive to a
wide range of factors that, to a large extent, are unique to each rural
community. Nonetheless, ERS assesses general approaches to development
to determine when, where, and under what circumstances rural
development strategies will be most successful.
ERS analyzes changing economic and demographic trends in rural
America, with particular attention to the implications of these changes
for the employment, education, income, and housing patterns of low-
income rural populations. Data from the 2000 Census and other Federal
information sources provide the most up-to-date information on the
current conditions and trends affecting rural areas and provide the
factual base for rural development program initiatives. In 2003, the
agency continued its series of publications that report the most
current indicators of social and economic conditions in rural areas for
use in developing policies and programs to assist rural people and
their communities. Rural America at a Glance and Rural Education at a
Glance, designed for a policy audience, summarize the most current
information on population and migration, labor and education, poverty,
race and ethnicity, infrastructure, and rural development policy. The
ERS website (www.ers.usda.gov) serves as a major repository of rural
data, offering unique mapping utilities and comprehensive county-level
data bases. In January 2004, ERS joined Cornell University in
sponsoring a conference on ``Population Change and Rural Society''.
This conference showcased an integrated set of demographic studies by
leading social scientists that analyzed critical demographic trends
from the 2000 Census and drew conclusions about their implications for
economic and social life in rural America. The conference focused on
the policy implications of changing demographic composition, economic
restructuring, changing land use patterns, and geographic patterns of
chronic disadvantage and emerging growth. This conference marked the
first comprehensive look at rural America based on data from the 2000
Census.
ERS is at the forefront of analysis assessing the critical role of
education in local, regional, and national economic development. Rural
communities view increased educational investments as an important part
of economic development, but are sensitive to the partial loss of their
investment, in the form of youth outmigration to areas with better
opportunities. ERS is partnering with land-grant universities in a
research program designed to measure the relationship between education
and economic outcomes, both for the individual worker and rural
community, to help local communities better target their economic
development and school improvement efforts.
For over 30 years, ERS has captured aspects of the broad economic
and social diversity among rural areas in various county
classifications. These typologies have been widely used by policy
analysts and public officials to determine eligibility for and the
effectiveness of Federal programs to assist rural America. In 2003, ERS
redesigned a county typology that maps out a geographic portrait of the
rich diversity of rural America in ways that are meaningful for
developing public policies and programs. ERS will now address how the
economic, demographic, and policy themes identified in this typology
translate into effective rural development strategies for enhancing
rural economic opportunities and well being.
ERS also continues its long tradition of economic research on the
welfare of disadvantaged population groups in rural areas, including
low-income families, children, the elderly, and racial/ethnic groups,
as well as the Federal assistance programs that serve them. Through its
research on the measurement and dimensions of rural poverty, ERS helps
to better target and improve the effectiveness of Federal assistance
programs. One ERS study, Comparisons of Metropolitan-Nonmetropolitan
Poverty During the 1990s, documents the greater incidence of poverty in
nonmetro relative to metro areas, but finds that metro-nonmetro
differences in the depth and severity of poverty are less striking and
more variable over time. These findings and differences in the
characteristics of the metro and nonmetro poor, suggest that poverty-
reduction policies will be most effective when tailored to specific
local areas. A second ERS study, published in ERS' new magazine, Amber
Waves, assessed the effect of major demographic, economic, and Federal
policy changes on the magnitude and dimensions of poverty during the
1990s. Race and ethnicity, family structure, and the ability to work
are critical determinants of poverty in rural areas. In 2004, ERS will
publish findings from a study assessing the factors affecting
geographic and racial/ethnic concentration of high poverty in rural
areas. Characteristics such as education, employment, family structure,
disability, and language proficiency differentiate these areas with
poverty rates of over 20 percent.
The agency focuses research on the implications of changing racial/
ethnic composition in rural areas. Hispanics were the fastest growing
racial/ethnic group in rural America, and accounted for over 25 percent
of the rural population growth during the 1990s. One ERS study on the
impacts of Hispanic population growth on rural wages, found that the
growth of Hispanics in rural areas has negatively affected the wages of
local workers with a high school education and some college, due
largely to changes in labor demand in specific industries. A second ERS
study examined changing Hispanic settlement patterns over the last two
decades, and found extensive Hispanic population dispersion into non-
traditional Hispanic settlement regions. These patterns reduced
residential separation at the national level between Hispanics and non-
Hispanic Whites, but led to increased residential separation at the
neighborhood level, especially in rapid-growth counties.
ERS conducts ongoing research on the impact and effectiveness of
Federal programs in rural areas. For example, ERS assists USDA's Rural
Development mission area in efforts to improve the delivery and
effectiveness of rural development programs. In 2003, ERS worked with
Rural Development staff to help design measurable performance
indicators for their rural development programs. ERS also conducted
analyses to help Rural Development staff assess the economic impacts of
proposed changes in their rural business loan programs. In addition, in
2004, ERS will focus attention on the effects of Federal farm policy on
rural areas and farm households by co-hosting a workshop with the
National Center for Food and Agricultural Policy. This workshop will
provide policymakers with a better understanding of the linkages
between farm policy, farm households, and rural communities well in
advance of the next farm bill.
The farm typology developed by ERS researchers, coupled with a new
accounting stance that views the farm household as a more relevant
decision unit than just the farm business, have been keys to greater
insight into the factors affecting the well-being of farmers. A
condensed version of the farm typology was an important feature in
Secretary Veneman's statement of principles for farm policy, and it
continues to inform debates about the incidence of farm profits and
government payments. In 2003, ERS researchers developed a new
department-wide definition of limited resource farms that will lead to
a change in the farm typology in 2004.
Goal 3: Enhance Protection and Safety of the Nation's Agriculture and
Food Supply
ERS research is designed to support food safety decision-making in
the public sector and to enhance the efficiency and effectiveness of
public food safety policies and programs. The program focuses on
valuing societal benefits of reducing and preventing illnesses caused
by microbial pathogens; assessing the costs of alternative food safety
policies; assessing industry incentives to enhance food safety through
new technologies and supply chain linkages; evaluating regulatory
options and change; and exploring linkages between food safety and
international trade. ERS has worked closely with various USDA agencies
and the Centers for Disease Control and Prevention (CDC) on various
pathogen risk assessments and on analyzing the benefits and costs of
implementing the Hazard Analysis and Critical Control Points (HACCP)
rule. ERS and the Food Safety and Inspection Service (FSIS) work
together to identify research projects and activities that address the
needs of the Department.
ERS, in cooperation with Washington State University, completed the
first post-HACCP national survey of meat and poultry slaughter and
processing plants. The survey finds that implementing the 1994 Pathogen
Reduction (PR)/HACCP rule raised costs about 1 percent, or about $850
million for the industry. Survey results will allow companies to assess
their own adaptation performance vis-a-vis the industry average. While
larger than pre-regulation estimates of PR/HACCP costs, the estimated
costs are still considerably smaller than expected benefits. Results
showed plants with branded products, strong customer requirements, and
export orientation made the largest post-PR/HACCP investments in new
food safety management processes or technologies, indicating market
forces are at work to raise food safety above regulatory requirements
in some cases. In 2003, ERS completed a study that summarizes the
survey results and made the survey questions and summary results
available on the ERS website.
ERS has become well-known for its pioneering estimates of the
societal costs associated with foodborne illnesses due to E. coli and
other known pathogens. In Spring 2003, ERS launched its first
interactive web-based data product, the foodborne illness cost
calculator. The calculator allows users to choose a pathogen of
interest, the number and severity of illnesses, and from among several
alternative methodologies employed by economists for calculating
societal costs.
In 2003, ERS researchers completed a project that developed an
economic framework for analyzing linkages between food safety and
international trade. The project produced an ERS report, International
Trade and Food Safety: Economic Theory and Cases Studies, which
explores global trends in food safety regulation and food safety-trade
policies, and analyzes food safety and trade conflicts and resolutions
in various commodity sectors.
In 2004, ERS will publish a study analyzing the private incentives
for improving food safety in the U.S. Case studies include innovations
the industry has developed and is using to produce safer beef,
including new equipment, new testing technologies, and new management
systems. Interviews with firms were used to determine the most
significant factors contributing to the innovation. The collaborative
and contractual relationships among firms in the meat, equipment,
microbial testing, and restaurant industries are found to be key.
Recently, policymakers have begun weighing the usefulness of
mandatory traceability to address issues ranging from food safety and
bioterrorism to the consumer right to know, as well as to inform
consumers about food attributes including country of origin, animal
welfare, and biotech content. Industry interviews, backed by industry-
level market studies, have been used to establish a description of the
extent and type of traceability maintained by private sector firms.
This information reveals that financial incentives are leading forms to
develop a significant capability to trace. The findings indicate that
mandatory traceability--possibly a one-size-fits-all regulation can be
costly as firms already trace many product attributes. Further, other
policies may be better targeted toward augmenting product
differentiation or traceback for food safety.
In response to increased risks to the Nation's agriculture and food
supply due to bio-terrorism, ERS embarked on an ambitious new project
in July of 2002. Security Analysis System for U.S. Agriculture (SAS-
USA) establishes a framework to systematically tie all food supply
processes from farm production, food manufacturing, distribution of
food products, to the food consumption in every region of the country.
SAS-USA is capable of quickly distilling massive detailed regional
information and displaying the information visually in user-friendly
formats. These capabilities mean that emergencies can be managed
efficiently and expeditiously by assessing vulnerabilities and
predicting outcomes. SAS-USA is truly unique, filling a niche that
previously required weeks and months of data assembly, analysis, and
interpretation. In 2004, ERS will: continue to integrate agriculture,
food, and transportation data to make the system more realistic in
simulations; connect the U.S. agricultural/food supply chain to imports
and exports; and continue to develop scenarios based on animal and
plant diseases and food contamination.
Goal 4: Improve the Nation's Nutrition and Health
ERS studies the relationships among the many factors that influence
food choices and eating habits and their health outcomes. The roles of
income, aging, race and ethnicity, household structure, knowledge of
diet and health relationships, nutrition information and labeling, and
economic incentives and policies that affect food prices and
expenditures are of particular interest. Obesity--including
understanding its costs to individuals and society, how income, diet
and health knowledge affect obesity status, and considering private
versus public roles in reducing obesity--is a priority for this
Administration.
ERS research has a major focus on the economic dimensions of
obesity, including understanding the societal costs of obesity,
explaining obesity trends among different demographic and income
groups, and assessing the benefits and costs of alternative options for
influencing Americans' food choices and dietary behaviors, including
roles for nutrition education and Federal food and nutrition assistance
programs. In April 2003, ERS organized the first national workshop on
the economics of obesity. The workshop brought together leading health
economists in the Nation and was attended by researchers from Federal
agencies such as the CDC, Council of Economic Advisers, the Food and
Drug Administration (FDA), the Federal Trade Commission (FTC), and the
National Cancer Institute (NCI). Topics encompassed nearly all of the
cutting-edge health economics research on the causes and consequences
of the rise in U.S. obesity. A conference report has been drafted and
is being edited for publication in 2004. Additionally, in 2004 studies
will be completed on the effects of snack and fat taxes on food choices
and diet quality; the demand for fruits and vegetables by consumers
from different income groups; the effectiveness of labeling foods
consumed away from home; and the link between obesity and awareness of
Federal nutrition information programs.
As part of our effort to improve the timeliness and quality of the
Department's food consumption data, in 2003 ERS launched an interagency
effort to develop a proposal for an external review of USDA's food
consumption data needs and gaps. Enhancements to the food consumption
data infrastructure are critical to understanding and addressing many
market and policy issues in the Department. The interagency effort led
to the funding of a review by the National Research Council's Committee
on National Statistics. A panel of experts is being compiled, and the
first stage of the data review will be a workshop to be held in spring
2004.
Through the Food Assistance and Nutrition Research Program (FANRP),
ERS conducts studies and evaluations of the Nation's food and nutrition
assistance programs. FANRP research is designed to meet the critical
information needs of USDA, Congress, program managers, policy
officials, clients, the research community, and the public at large.
FANRP research is conducted through internal research at ERS and
through a portfolio of external research. Through partnerships with
other agencies and organizations, FANRP also enhances national surveys
by adding a food and nutrition assistance dimension. FANRP's long-term
research themes are dietary and nutritional outcomes, food program
targeting and delivery, and program dynamics and administration.
ERS completed a Congressionally mandated study of USDA's Fruit and
Vegetable Pilot Program (FVPP). Section 4305 of the 2002 Farm Act
provided $6 million to the FVPP for the 2002-2003 school year to
improve fruit and vegetable consumption among the Nation's school
children. The FVPP provided fresh and dried fruits and fresh vegetables
free to children in 107 elementary and secondary schools--100 schools
in 4 States (25 schools each in Indiana, Iowa, Michigan, and Ohio) and
7 schools in the Zuni Indian Tribal Organization (ITO) in New Mexico.
The intent of the pilot was to determine the feasibility of such a
program and its success as assessed by the students' interest in
participating. The ERS monograph, Evaluation of the USDA Fruit and
Vegetable Pilot Program: Report to Congress (May 2003), provides an
early review of the pilot.
Food pantries and emergency kitchens play an important role in
feeding America's low-income and needy populations. During a typical
month in 2001, food pantries served about 12.5 million people, and
emergency kitchens served about 1.1 million people. These organizations
are part of the Emergency Food Assistance System (EFAS), a network run
largely by private organizations with some Federal support. As part of
the first comprehensive government study of EFAS, the ERS monograph,
The Emergency Food Assistance System--Findings From the Client Survey
(August, 2003), presents findings from a national study of EFAS clients
who received emergency food assistance from selected food pantries and
emergency kitchens.
ERS has continued to fund a national survey of food security and
hunger, conducted by the Census Bureau as a supplement to the Current
Population Survey (CPS). The survey is designed to measure whether U.S.
households always have access to enough food to meet basic needs. ERS
focuses its efforts on improving the measurement of food security,
promoting the use of the CPS 18-item food security index, and
contributing to a better understanding of the determinants and
consequences of food insecurity in the United States. ERS released the
annual report, Household Food Insecurity in the United States, 2002,
that provides statistics on the food security of U.S. households, as
well as on how much they spent for food and the extent to which food-
insecure households participated in Federal and community food and
nutrition assistance programs.
ERS delivered the Congressionally mandated study, Assessment of WIC
Cost-Containment Practices: A Final Report to Congress in February,
2003. WIC State agencies adopt various cost-containment practices to
reduce food costs, such as limiting food-item selection by WIC
participants, limiting authorized food vendors, and negotiating rebates
with food manufacturers or suppliers. The study found that cost-
containment practices can be relatively inexpensive to operate, reduce
food package costs, and have few adverse impacts on WIC participants in
terms of participant satisfaction, program participation, and product
availability.
consumer data and information system
The request for an increase of $8,676,000 will fund the development
of an integrated and comprehensive data and analysis framework of the
post-farm food system to identify, understand and track changes in food
supply and consumption patterns and to explore the relationship between
consumers' knowledge and attitudes and their consumption patterns. The
centerpieces of this framework are nationally representative consumer
and retail surveys of food prices, retail sales, consumption and
purchases of food for at home and away-from-home eating, as well as
data on consumer behavior, reactions, attitudes, knowledge, and
awareness. This information system will provide market surveillance and
insights into price changes, market demand, and consumer reactions to
unforeseen events and disruptions such as the recent discovery of
Bovine Spongiform Encephalopathy (BSE). In addition, the data and
analysis framework will provide intelligence on diets, knowledge and
awareness levels, helping policymakers respond to current events, such
as the rise in obesity and overweight, and their interactions with the
U.S. food and agriculture system. Such understanding will provide a
basis for ensuring that consumers enjoy a low-cost, safe, secure, and
nutritious food supply, as well as enhancing their health and
productivity, and enabling farmers to prosper with new ways of doing
business in diverse and ever-changing food markets by identifying
changing consumer demand.
The Consumer Data and Information System has four components
providing intelligence across and within the food and agricultural
complex. The first component, a Food Market Surveillance System, is an
integrated set of surveys and supporting analysis concentrating on
production and linkages in agriculture beyond the farm-gate. It would
be the foundation of a research and monitoring program to: provide
timely price, purchase, and sales data; identify food consumption
patterns of consumers and how they change; provide consumers with
improved information; quickly survey consumers about new issues or
developments; and measure and identify strategies for managing food
losses and waste. The second component, a new Rapid Consumer Response
Module, would provide real-time information on consumer reactions to
unforeseen events and disruptions, current market events, and
government policies. This module would be integrated into several
proprietary consumer data panels currently maintained by private
vendors. The third component, a Flexible Consumer Behavior Survey
Module (FCBSM), would complement data from the National Health and
Nutrition Examination Survey (NHANES). The FCBSM would provide
information needed to assess linkages between individuals' knowledge
and attitudes about dietary guidance and food safety, their food-choice
decisions, and their nutrient intakes. Combining the NHANES with this
new module allows analysis of how individual attitudes and knowledge
about healthful eating affect food choices, dietary status, and health
outcomes. The last component is additional staff to ensure the
successful design and implementation of the Consumer Data and
Information System.
As a Nation, we face challenges to our health, safety, and food
arising from rapid changes in technology, social structure, and a
globalizing economy. The cumulative effect of these issues and others
is to strain and erode a general understanding of the role food and
diet plays in our society. USDA's ability to assure nutritious foods
and respond to these issues is grounded on investments in the creation
of knowledge.
Goal 5: Protect and Enhance the Nation's Natural Resource Base and
Environment
In this area, ERS research and analytical efforts, in cooperation
with the Natural Resources Conservation Service (NRCS), support
development of Federal farm, conservation, environmental, and rural
policies and programs. These efforts require analyses of the
profitability and environmental impacts of alternative production
management systems in addition to the cost-effectiveness and farm
income impacts of public sector conservation policies and programs.
With passage of the 2002 Farm Bill, USDA looked to ERS to provide
comprehensive and detailed, yet understandable, information to public
and private users, including information on programs in the
Conservation Title. In addition, ERS provided extensive support to
other USDA agencies in developing rules for implementation of 2002
conservation programs. ERS participated in Farm Service Agency (FSA)
and NRCS working groups on the Conservation Reserve Program (CRP), the
Environmental Quality Incentives Program (EQIP), the Conservation
Security Program (CSP), and implementation of conservation technical
assistance by third-party technical service providers. ERS contributed
substantially to the NRCS benefit-cost assessments for EQIP, CSP and
the third-party technical service provider rule. For instance, ERS
participated in the EQIP Benefit-Cost Analysis Team and helped to
prepare the NRCS report Environmental Quality Incentives Program:
Benefit Cost Analysis released in May 2003. ERS assisted FSA with
rulemaking for the CRP program by suggesting ways to decrease the
complexity of the Environmental Benefits Index (EBI) used by USDA
county office staff, as well as methods to expand the EBI to include
program impacts on nutrient loadings in ground and surface waters.
Since 1985, U.S. agricultural producers have been required to
practice soil conservation on highly erodible cropland and conserve
wetlands as a condition of farm program eligibility. Compliance
mechanisms have been criticized, however, for low standards and lax
enforcement. A report to be released in 2004, Environmental Compliance
in U.S. Agricultural Policy: Past Performance and Future Potential,
discusses the general characteristics of compliance mechanisms, their
effectiveness in their current form, and the potential for expanding
compliance to address nutrient runoff from crop production. This report
will empirically assess the extent of erosion reduction that is likely
to be the direct result of compliance. NRCS has indicated that the data
and analysis developed for the report will be useful in carrying out
the benefit-cost analysis of compliance that the agency has been
ordered to undertake.
The Congressionally-mandated study, The Conservation Reserve
Program's Economic and Social Impacts on Rural Counties, transmitted to
Congress in January 2004, addresses a number of concerns about the
unintended consequences of high levels of enrollment in the CRP. Long
run trends in rural employment and population are influenced by a
variety of characteristics, and some have argued that high levels of
CRP enrollment exacerbate the declines suffered by many rural
communities. However, the report finds no statistically significant
evidence that high enrollments in the CRP have had a systematic,
adverse effect on population or community services in rural counties
across the country. High CRP enrollments were associated with a
negative effect on jobs in the years immediately following program
introduction, but this effect generally was short-lived as communities
adjusted to changing demands and new economic opportunities. In
addition, CRP has improved hunting and fishing opportunities in rural
areas. Changing the way CRP participants are compensated can affect the
productivity profile of enrolled soils, but these changes would be
small and represent a necessary cost of enrolling environmentally
sensitive land.
ERS researchers have actively assisted NRCS and the Environmental
Protection Agency (EPA) in assessing the economic costs and benefits of
changes to the rules governing Confined Animal Feeding Operations
(CAFOs) under the Clean Water Act, signed on December 16, 2002, with
revisions proposed to the Total Maximum Daily Load (TMDL) provisions.
Following up on the report Confined Animal Production and Manure
Nutrients, published in 2001, is a new report, Manure Management for
Water Quality: Costs of Land Applying Nutrients from Animal Feeding
Operations, released in June 2003, which analyzes the farm-, regional-,
and national-level costs to the livestock and poultry sector of meeting
manure management requirements similar to those in the December 2002
rule. Results indicate that meeting a manure nutrient application
standard increases the costs of managing manure. Costs are a function
of farm size, acres of cropland on the farm, regional land use,
willingness of landowners to substitute manure nutrients for commercial
fertilizer, and whether a nitrogen or phosphorus standard is met.
As rising populations and incomes increase pressure on land and
other resources around the world, agricultural productivity plays an
increasingly important role in improving food supplies and food
security. The report, Linking Land Quality, Agricultural Productivity
and Food Security, released in June 2003, explores the extent to which
land quality and land degradation affect agricultural productivity, how
farmers respond to land degradation, and whether land degradation poses
a threat to productivity growth and food security in developing regions
and around the world.
In fiscal year 2003, ERS initiated the Program of Research on the
Economics of Invasive Species Management (PREISM). PREISM promotes
economic research and the development of decision support tools that
have direct implications for USDA policies and programs for protection
from, control/management of, regulation concerning, or trade policy
relating to invasive species. Accomplishments in PREISM's first year
included organizing the Economics of Invasive Species Workshop (May 12-
13) and conducting a competitive grants and cooperative agreements
program. The workshop brought together invasive species experts from
the USDA and other Federal agencies, State governments, universities,
industry, and non-governmental organizations to identify research
priorities that would inform USDA invasive species policy and program
decisions. The competitive grants and cooperative agreements program
funded 12 research projects in the areas of bioeconomic modeling and
risk assessment, trade and invasive species, and the economics of
alternative approaches to managing invasive species. When completed,
these projects will provide insights, information, and practical
decision tools to help USDA policy makers deal with the uncertainties
and risks associated with invasive species outbreaks, jointly account
for biological and economic factors in prioritizing invasive species
threats, allocate resources between exclusion and control activities,
and evaluate new approaches to addressing invasive species threats
(including insurance schemes and producer purchased bonds).
customers, partners, and stakeholders
The ultimate beneficiaries of ERS' program are the American people,
whose well-being is improved by informed public and private
decisionmaking, leading to more effective resource allocation. ERS
shapes its program and products principally to serve key decision
makers who routinely make or influence public policy and program
decisions. This clientele includes White House and USDA policy
officials and program administrators/managers; the U.S. Congress; other
Federal agencies, and State and local government officials; and
domestic and international environmental, consumer, and other public
organizations, including farm and industry groups interested in public
policy issues.
ERS depends heavily on working relationships with other
organizations and individuals to accomplish its mission. Key partners
include: NASS for primary data collection; universities for research
collaboration; the media as disseminators of ERS analyses; and other
government agencies and departments for data information and services.
closing remarks
I appreciate the support that this Committee has given ERS in the
past and look forward to continue working with you and your staff to
ensure that ERS makes the most effective and appropriate use of public
resources. Thank you.
______
Prepared Statement of R. Ronald Bosecker, Administrator, National
Agricultural Statistics Service
Mr. Chairman and members of the Committee, I appreciate the
opportunity to submit a statement for this Committee's consideration in
support of the fiscal year 2005 budget request for the National
Agricultural Statistics Service (NASS). This agency administers the
U.S. agricultural statistics program, created in USDA in 1863, and,
beginning in 1997, conducts the U.S. Census of Agriculture, first
collected in 1840. Both programs support the basic mission of NASS to
provide timely, accurate, and useful statistics in service to U.S.
agriculture.
The continual progression of American farms and ranches to make
greater use of agricultural science and technology increases the need
for more detailed information. The periodic surveys and censuses
conducted by NASS contribute significantly to the overall information
base for policy makers, agricultural producers, handlers, processors,
wholesalers, retailers, and ultimately, consumers. Voids in relevant,
timely, accurate data contribute to wasteful inefficiencies throughout
the entire production and marketing system.
Official data collected by NASS are used for a variety of purposes.
Absence or shortage of these data may result in a segment of
agriculture having to operate with insufficient information; therefore,
NASS strives to continuously produce relevant and timely reports, while
at the same time reviewing priorities in order to consider emerging
data needs. The Farm Security and Rural Investment Act of 2002 created
the need for several new data series. For example, NASS designed a new
survey in cooperation with the Natural Resources Conservation Service
(NRCS) and the Farm Service Agency (FSA) to collect information on land
management and conservation practices. This assessment will be used by
NRCS and FSA to report annual progress on the Farm Bill conservation
program implementation. Additionally, the Act introduced several other
new agricultural data needs and reinforced the importance of existing
data series to ensure the continuation of farm security and rural
investments. For example, counter-cyclical payments are determined in
part by market year average prices determined by NASS. Each $0.01
change in the average corn price can result in a change of more than
$80 million in counter-cyclical payments. Similarly, large payment
changes also apply for the other program crops. These are only a few
specific data needs required by the Act, but they clearly highlight the
importance of a strong, reliable agriculture statistics program.
The NASS works cooperatively with each State Department of
Agriculture throughout the year to provide commodity, environmental,
economic, and demographic statistics for agriculture. This cooperative
program, which began in 1917, has served the agricultural industry well
and is often cited by others as an excellent model of successful State-
Federal cooperation. This joint State-Federal program helps meet State
and national data needs while minimizing overall costs by consolidating
both staff and resources, eliminating duplication of effort, and
reducing the reporting burden on the Nation's farm and ranch operators.
The success of this partnership was demonstrated by NASS, through its
State-Federal cooperation, during the planning, collection, and
preliminary release of the 2002 Census of Agriculture. Improved
quality, an 88 percent response rate, and professional customer service
through the use of a toll-free telephone number are direct results of
the State-Federal partnership. NASS's 46 field offices, which cover all
50 States and Puerto Rico, provide statistical information that serves
national, State, and local data needs.
NASS statistics contribute to providing fair markets where buyers
and sellers alike have access to the same official statistics, at the
same pre-announced time. This prevents markets from being unduly
influenced by ``inside'' information which might unfairly affect market
prices for the gain of an individual market participant. Empirical
evidence indicates that an increase in information improves the
efficiency of commodity markets. Information on the competitiveness of
our Nation's agricultural industry has become increasingly important as
producers rely more on the world market for their income.
Through new technology, the products produced in the United States
are changing rapidly as producers continue to become more efficient.
This also means that the agricultural statistics program must be
dynamic and able to respond to the demand for coverage of newly
emerging products and changing industries. For example, during fiscal
year 2003, NASS issued the U.S. Broiler Industry Structure report. This
report provided a summary of the changes in the structure of the U.S.
broiler industry from 1934 to present.
Not only are NASS statistical reports important to assess the
current supply of and demand for agricultural commodities, but they are
also extremely valuable to producers, agribusinesses, farm
organizations, commodity groups, economists, public officials, and
others who use the data for decision making. For example, a special
report titled Corn, Soybeans, and Wheat Sold Through Marketing
Contracts 2001 Summary was released in February 2003. This report
included information on marketing contracts at the United States and
regional levels by Economic Sales Classes and by Farm Production Region
and was developed to help identify changes in the structure of the
Nation's grain and oilseed markets.
All reports issued by NASS's Agricultural Statistics Board are made
available to the public at previously announced release times to ensure
that everyone is given equal access to the information. NASS has been a
leader among Federal agencies in providing electronic access to
information. All of NASS's national statistical reports and data
products, including graphics, are available on the Internet, as well as
in printed form. Customers are able to electronically subscribe to NASS
reports and can download any of these reports in a format easily
accessible by standard software. A summary of NASS and other USDA
statistical data are produced annually in USDA's Agricultural
Statistics, available on the Internet through the NASS Home Page, on
CD-ROM disc, or in hard copy. All of NASS's 46 field offices have Home
Pages on the Internet, which provide access to special statistical
reports and information on current local commodity conditions and
production.
Beginning in fiscal year 1997, NASS received funding to conduct the
Census of Agriculture on a 5-year cycle. The transfer of the
responsibility for the Census of Agriculture to USDA streamlines
Federal agricultural data collection activities and has improved the
efficiency, timeliness, and quality of the census data. Preliminary
results of the 2002 Census of Agriculture were released on February 3,
2004. The preliminary release included selected demographic data at the
National and State level and are available by request via CD-Rom, the
NASS Website, or in paper copy. The final National, State, and county
level data are scheduled to be released on June 3, 2004. The 2002
Puerto Rico Census of Agriculture was also released on February 3,
2004.
Statistical research is conducted to improve methods and techniques
used in collecting and processing agricultural data. This research is
directed toward providing higher quality census and survey data with
less burden to respondents, producing more accurate and timely
statistics for data users, and increasing the efficiency of the entire
process. For example, NASS has implemented statistical methodology to
measure and adjust for the incompleteness of its list sampling frame.
This allows for more complete coverage of farms traditionally difficult
to identify during list building activities, mainly small and
disadvantaged farm operations. The NASS statistical research program
strives to improve methods and techniques for obtaining agricultural
statistics with improved levels of accuracy. The growing diversity and
specialization of the Nation's farm operations have greatly complicated
procedures for producing accurate agricultural statistics. Developing
new sampling and survey methodology, expanding modes of data collection
including Internet contacts, and exploiting computer intensive
processing technology enables NASS to keep pace with an increasingly
complex agricultural industry. NASS is making considerable advancements
in providing respondents the option of reporting via the Internet with
the ultimate goal of giving the Nation's farmers and ranchers the
opportunity to electronically respond to the 2007 Census of
Agriculture.
The fiscal year 2004 budget included $4.8 million for agricultural
estimates restoration and modernization. These funds provided a much
needed foundation for quality improvements in forecasts and estimates
and are greatly appreciated. The 2004 funds are being used to improve
the precision level from commodity surveys conducted by NASS. The
majority of the funding is being allocated to increased sample sizes
and the data collection activities of local interviewers throughout the
Nation.
major activities of the national agricultural statistics service (nass)
The primary activity of NASS is to provide reliable data for
decision making based on unbiased surveys each year, and the Census of
Agriculture every 5 years, to meet the current data needs of the
agricultural industry. Farmers, ranchers, and agribusinesses
voluntarily respond to a series of nationwide surveys about crops,
livestock, prices, chemical use and other agricultural activities each
year. Periodic surveys are conducted during the growing season to
measure the impact of weather, pests, and other factors on crop
production. Many crop surveys are supplemented by actual field
observations in which various plant counts and measurements are made.
Administrative data from other State and USDA agencies, as well as data
on imports and exports, are thoroughly analyzed and utilized as
appropriate. NASS prepares estimates for over 120 crops and 45
livestock items which are published annually in over 400 separate
reports.
The Census of Agriculture provides national, State, and county data
for the United States on the agricultural economy every 5 years. The
Census of Agriculture is the only source for this information on a
local level which is extremely important to the agricultural community.
Detailed information at the county level helps agricultural
organizations, suppliers, handlers, processors, and wholesalers and
retailers better plan their operations. Important demographic
information supplied by the Census of Agriculture also provides a very
valuable data base for developing public policy for rural areas.
Approximately 65 percent of NASS's staff are located in the 46
field offices; 23 of these offices are collocated with State
Departments of Agriculture or land-grant universities. NASS's State
Statistical Offices issue approximately 9,000 different reports each
year and maintain Internet Home Pages to electronically provide their
State information to the public.
NASS has developed a broad environmental statistics program under
the Department's water quality and food safety programs. Until 1991,
there was a serious void in the availability of reliable pesticide
usage data. Therefore, beginning in 1991 NASS cooperated with other
USDA agencies, the Environmental Protection Agency (EPA), and the Food
and Drug Administration, to implement comprehensive chemical usage
surveys that collect data on certain crops in specified States. NASS
data allows EPA to use actual chemical data from scientific surveys,
rather than worst case scenarios, in the quantitative usage analysis
for a chemical product's risk assessment. Beginning in fiscal year
1997, NASS also instituted survey programs to acquire more information
on Integrated Pest Management (IPM), additional farm pesticide uses,
and post-harvest application of pesticides and other chemicals applied
to commodities after leaving the farm. These programs have resulted in
significant new chemical use data, which are important additions to the
data base. Surveys conducted in cooperation with the Economic Research
Service (ERS) also collect detailed economic and farming practice
information to analyze the productivity and the profitability of
different levels of chemical use. American farms and ranches manage
nearly half the land mass in the United States, underscoring the value
of complete and accurate statistics on chemical use and farming
practices to effectively address public concerns about the
environmental effects of agricultural production. Through funding
provided by this Committee in fiscal year 2003, data on the status of
the farm economy will now be expanded to the State level for 15 major
agricultural States.
NASS conducts a number of special surveys as well as provides
consulting services for many USDA agencies, other Federal or State
agencies, universities, and agricultural organizations on a cost-
reimbursable basis. Consulting services include assistance with survey
methodology, questionnaire and sample design, information resource
management, and statistical analysis. NASS has been very active in
assisting USDA agencies in programs that monitor nutrition, food
safety, environmental quality, and customer satisfaction. In
cooperation with State Departments of Agriculture, land-grant
universities, and industry groups, NASS conducted 148 special surveys
in fiscal year 2003 covering a wide range of issues such as farm
injury, nursery and horticulture, farm finance, fruits and nuts,
vegetables, and cropping practices. All results from these reimbursable
efforts are publicly available to benefit all of agriculture.
NASS provides technical assistance and training to improve
agricultural survey programs in other countries in cooperation with
other government agencies on a cost-reimbursable basis. NASS's
international programs focus on developing and emerging market
countries in Asia, Africa, Central and South America, and Eastern
Europe. Accurate information is essential for the orderly marketing of
farm products. NASS works directly with countries by assisting in the
application of modern statistical methodology, including sample survey
techniques. This past year, NASS provided assistance to Brazil, China,
Ecuador, El Salvador, Ethiopia, Kazakhstan, Mexico, Russia, South
Africa, and the Ukraine. In addition, NASS conducted training programs
in the United States for 168 visitors representing 27 countries. These
assistance and training activities promote better quality data and
improved access to data from other countries.
NASS annually seeks input on improvements and priorities from the
public through the Secretary of Agriculture's Advisory Committee on
Agriculture Statistics, displays at major commodity meetings, data user
meetings with representatives from agribusinesses and commodity groups,
special briefings for agricultural leaders during the release of major
reports, and through numerous individual contacts. As a result of these
activities, the agency has made adjustments to its agricultural
statistics program, published reports, and expanded electronic access
capabilities to better meet the statistical needs of customers and
stakeholders.
fiscal year 2005 plans
The fiscal year 2005 budget request is for $137,594,000. This is a
net increase of $9,433,000 from fiscal year 2004.
The fiscal year 2005 request includes increases for the
continuation of restoration and modernization of NASS's core survey and
estimation program ($7,045,000); improvement in the statistical
integrity and standardization of the data collection and processing
activities of the Locality Based Agricultural County Estimates/Small
Area estimation program ($2,500,000); collaborative Presidential and
Departmental eGovernment initiatives ($785,000); funding for increased
pay costs ($1,812,000) and funding to recognize employee performance
($465,000). The request also includes a decrease due to the cyclical
activities associated with the Census of Agriculture program
(-$3,174,000).
An increase of $7,045,000 and 10 staff years are requested to fund
phase II of the restoration and modernization of NASS's core survey and
estimation program. This increase will be directed at continuing to
restore and modernize the core survey and estimation program for NASS
to meet the needs of data users at an improved level of precision for
State, regional, and national estimates. The program covers most
agricultural commodities produced in the United States, as well as
economic, environmental, and demographic data. Funding in fiscal year
2004 is primarily being used to restore sample sizes for greater
statistical defensibility. These changes are designed to increase
precision at the State and regional levels to promote the NASS goal for
fiscal year 2004 of reaching precision target levels at least 60
percent of the time for major survey indications. The additional
funding requested in fiscal year 2005 will allow continued improvements
and provide the necessary resources to reach precision target levels an
estimated 77 percent of time.
An increase of $2,500,000 and 4 staff years are requested to
provide for data acquisition for the annual integrated Locality Based
Agricultural County Estimates/Small Area estimation program. Local area
statistics are one of the most requested NASS data sets, and are widely
used by private industry, Federal, State and local governments and
universities. This funding supports the NASS goal to incrementally
improve survey precision for small area statistics. Proper follow-up
data collection activities and redesign of survey systems will improve
the critical annual county-level data. The Risk Management Agency (RMA)
uses these statistics in indemnity calculations for Group Risk Plans
and the Group Risk Revenue Plans as part of the risk rating process.
This affects premium levels paid by producers. The FSA uses county
estimates to weight posted county prices to national loan deficiency
payments, and as an input to assist producers to update their base
acreage and yields as directed by the 2002 Farm Bill. In addition,
financial institutions, agriculture input suppliers, agricultural
marketing firms, and transportation utilize county level data to make
informed business decisions.
An increase of $785,000 for collaborative eGovernment efforts is
requested to support Presidential and Departmental eGovernment
initiatives. Specifically, the funding will support NASS's share of the
USDA Presidential initiatives, the continued development of the USDA
Enterprise Architecture, and the USDA Enablers initiative. Without this
funding, NASS's efforts to increase the percentage of questionnaires
available via the Internet will be negatively impacted.
A net decrease of $2,610,000 and 7 staff-years is requested for the
Census of Agriculture. The Census of Agriculture budget request is for
$22,520,000. This includes a cyclical program cost decrease of
$3,174,000, partially offset by $564,000 for employee compensation. The
available funding includes monies to finalize analysis, summary, and
dissemination of the 2002 Census of Agriculture. The reduction reflects
the decrease in staffing and activity levels to be realized due to the
cyclical nature of the 5-year census program and the postponement of
the Census of Horticultural Specialties. Historically the Census of
Horticultural Specialties has been conducted every 10 years, but due to
the dynamic growth of this industry, NASS was planning to measure this
component of agriculture every 5 years. Competing funding priorities
have precluded this accelerated schedule. The annual program covering
selected horticultural commodities will continue to be available.
This concludes my statement, Mr. Chairman. Thank you for the
opportunity to submit this for the record.
Senator Bennett. Thank you all for your testimony.
FACILITY FEASIBILITY STUDIES
Dr. Jen, in the Senate report that accompanied our bill
last year and the narrative that accompanied the conference
report, we both included direction to ARS to provide
feasibility reports on various buildings and facilities
projects. Took a little heat on that from some of my colleagues
who said we want our building money right now without having to
go through a feasibility report.
But the House and Senate Committees both agreed that
funding requests for construction projects would not be
considered until a feasibility study and forwarded to the
Committee by March 1, and we requested that FAS prioritize
these projects. To date, we have not received your reports. I
do not think that that means that there are not going to be any
ARS appropriations, but I would like to know what the status of
the preparation of these reports are and why they have not been
forwarded to the Committee.
Dr. Jen. Mr. Chairman, it is my understanding that those
feasibility study reports have been delivered already to the
Committee members. Is that correct?
Senator Bennett. They came up by courier last Friday? Okay;
has the courier reached us?
Well, the report is in the mail.
I think we better find out where it is, because obviously,
if we are going to act on that basis, we need the reports, so I
assume you kept a copy.
Dr. Jen. We did. We will check on the courier.
Senator Bennett. Send us another one.
Dr. Jen. Yes.
Senator Bennett. And when the courier shows up, wherever he
or she may have wandered, why, then, we will have two, but we
would appreciate getting those as quickly as we possibly could.
Dr. Jen. We will make sure that you have them, Mr.
Chairman.
CONGRESSIONAL ADD-ONS
Senator Bennett. Okay; now, while I have you, let us
concentrate on the impact on ARS. The fiscal year 2005 budget
request assumes the termination of all additional funding
provided by Congress during the last four appropriations
cycles; that is, where the initiative came from the Congress.
We are talking about $170 million roughly. Setting aside for
the moment the debate about whether members of Congress have a
better idea of the needs of their particular areas than the
Department does, let us concentrate on the impact on ARS.
If Congress were to agree to these terminations, we
calculate 312 ARS scientists, researchers and support staff in
42 States would lose their jobs, which is roughly 3 percent of
the total ARS staffing. That is not a huge amount of people
unless you happen to be one of the 312, but that does not count
the people that ARS is currently in the process of hiring with
fiscal year 2004 monies, nor does it include the impact on
cooperative agreements with the various universities.
I have been out and visited the universities and found the
ARS to be probably the most popular single program at various
agricultural schools, because of the synergy that they feel
between their faculty and ARS people. When universities say we
really do not know or care whether a researcher is an ARS type
or a member of our faculty, the cooperation is so close.
So this would be a very serious reduction, and how would
you plan to go about conducting a reduction in force of this
size, and do you have any ideas what it would cost?
Dr. Jen. Mr. Chairman, I think I appreciate particularly
your comments about the fact that ARS scientists are very well
respected in the university campuses. In my travels, I have
found it to be the same. Many universities would prefer that
ARS scientists would never be relocated or change direction,
and many of them wish ARS scientists would become university
faculty members.
Senator Bennett. Is that how we are going to do the RIF is
get them all hired by the universities?
Dr. Jen. No, I do not believe so, sir. Some of them
probably will have that opportunity. Other ARS scientists would
be offered reassignment in funded vacant positions either at
the location or at other ARS locations throughout the country.
We are under a very difficult budget situation. Personally,
I recognize that this is a very difficult situation.
Senator Bennett. Well, does that mean we no longer need to
provide funding for diet, nutrition and obesity research at the
Pennington Biomedical Research Center or Pierce's Disease
research in California or Sudden Oak Disease research in
Maryland? These are all projects that are terminated apparently
because Congress thought of them rather than the
Administration. Do we consider that these projects are now
complete?
Dr. Jen. Yes and no, sir. Some of the projects are being
carried out in more than one location, so some of the slack
will be picked up by the other research locations.
ARS has over 1,100 projects. Some of the projects will have
to be terminated after the job has been completed. However, if
you allow researchers to determine when projects have been
completed, they will never be done.
Senator Bennett. I understand that.
Dr. Jen. And so, sometimes, you know we have to make that
hard choice.
Senator Bennett. I understand that. I would just hope, and
it does not appear, that the controlling factor as to which
projects get terminated and which ones do not is which ones
came from the Congress and which ones did not. I would like to
think maybe Congress knows a little bit about some of these
things and has a role to play as to who gets funded and who
does not. There is an uncertainty here if, in every instance,
and your Administration is not the first, in every instance
where they request termination of every Congressionally-
originated project, Congress somehow finds the money to fund
them anyway, but this is a year-to-year funding situation
without the stability that comes elsewhere, and I would think
it would have an unfortunate impact on the efficiency and
continuity of some of these programs. Do you have any sense
that the Congressionally-sponsored programs are, by definition,
inferior to the others?
Dr. Jen. I do not believe so, sir. In fact, we make a very
conscious effort to coordinate the projects that were initiated
by Congress with the base programs.
Senator Bennett. Well, we will look at this closely. I note
that the budget requests termination of the diet research and
obesity research program at Pennington Biomedical Research
Center at ARS headquarters and then requests funding for an
Administration initiative to do similar research at the same
facility. I am not sure we are going to do that. We will have
this discussion as we go forward, and I appreciate your candor
and your sensitivity to this issue.
CONSERVATION SECURITY PROGRAM
Mr. Rey, you have estimated the cost for the CSP at $13.4
billion. Did I get that number right?
Mr. Rey. That would be our computation of the cost of the
proposed rule projected forward through the life of the
program. That is a theoretical estimate, obviously.
Senator Bennett. That is a theoretical estimate.
Mr. Rey. Right.
Senator Bennett. All right; never mind. I had another name
for it, but I will not put it on the record.
Mr. Rey. Theoretical works better in a public hearing.
Senator Bennett. Yes, yes; well, okay, if the program
becomes an open-ended entitlement, as some have suggested, do
you have any estimate of the cost?
Mr. Rey. That is somewhat difficult to anticipate. I do not
think anyone really knows what the total cost would be at that
point. One of the limitations would be the limitation of a 15
percent cap on the use of technical assistance in delivering
the program. That will limit how many NRCS employees and hours
could be spent delivering it, because there are, as I said in
my remarks, 700,000 farmers and ranchers that would be
eligible.
So I think it is conceivable that there would be an excess
of what we have projected the proposed rule forward to cost.
But that would be hard to predict based on what we know today.
Senator Bennett. All right. Senator Kohl has joined us, so
I will stop in this round and turn it over to Senator Kohl,
reserving the option of a second or third round.
Senator Kohl. Thank you, Senator Bennett.
DAIRY FORWARD CONTACTING
Dr. Collins, in 1999, Congress passed legislation to set up
a dairy forward contracting pilot program, which is set to
expire at the end of this year. Dairy forward contracting, as
you know, allows buyers and sellers to voluntarily agree upon
delivery of a specific amount of milk for a set price over a
specified period. About 655 of Wisconsin's dairy farmers have
participated in the pilot program. Many of them recommend
making this voluntary program permanent because it gives them a
new way to manage their risk.
Can you tell us the Administration's position on this
program? Do they support legislation that would make the dairy
forward contracting program permanent?
Dr. Collins. Senator Kohl, to answer that directly, I think
I would have to see the legislation and get the Secretary's
view on that. I would say that, however, we have looked at this
program a couple of times. We did a mandated study of the
program in 2001. We followed that up with a supplement to the
report based on the experience of 2002. And in those cases we
found that the forward contracting program worked perfectly
fine. In 2001, producers actually were slightly worse off than
they would have been had they not participated in forward
contracting. In 2002, we found just the opposite, that
producers were slightly better off than had they not
participated in forward contracting.
The only issue that the Department has raised with respect
to this is, while it sees no problem with continuing a forward
contracting program for milk used for Class III and Class IV
purposes, it has been concerned about legislative proposals
that would allow forward contracting for milk used for Class I
purposes. So that would be the one reservation that I would
raise on legislation on this issue.
REOPENING EXPORT MARKETS FOR BEEF AND POULTRY
Senator Kohl. All right. Secretary Penn, following the BSE
discovery in Washington State last December, our beef export
markets, as you know, were badly shaken. Similarly, we have
seen problems with certain poultry export markets due to avian
influenza. In both these cases, the problem originated in
another country and was imported to the United States. Open
markets are a two-way street. They allow our products to move
in foreign commerce, but they also raise the possibility that
we are importing serious problems.
Could you update us on what USDA is doing to reopen export
markets for our beef and poultry products? And can you please
comment on how we protect our export markets from problems
which are themselves foreign in origin?
Dr. Penn. Well, thank you for the question, Senator. I
think you characterized the situation very aptly. Since the
discovery of this one cow on December 23rd in Washington State,
and since early-year outbreaks of avian influenza on the east
coast and the hi-path avian influenza case in Texas, we have
seen our export markets summarily closed for beef and a large
amount of our poultry products.
Before the BSE outbreak, we had anticipated exporting $3.8
billion worth of beef and beef products this year, and we had
anticipated our poultry products to be $2.3 billion. Together,
that is about 10 percent of the total amount of exports that we
had forecast for the year.
So this is very important to us, and we have set about
immediately trying to engage our customers, our trading
partners, and to try to get the markets reopened.
In every case, we have tried to make sure that we do this
on the basis of sound science, that is, that we try to make
sure that we have taken all of the amelioration measures that
are warranted, and then we have gone to great lengths to
explain to our trading partners what we have done and why that
ensures the safety of the product that we are trying to sell to
them and the safety of the product for our own consumers.
We have provided a large amount of technical information to
all of these markets. We have sent technical teams to several
of these countries to more fully explain what we have done and
why our products are safe. And in several cases, we have
invited technical teams from various countries to come and
review our procedures and visit our plants and facilities. This
has certainly been the case with Japan and Mexico. We
anticipate a technical team to come from Korea in the very near
future.
Again, the international standards that govern trade in
both of these products indicate that once certain measures have
been taken, then it is okay for trade to resume. We think that
we have taken all of the measures that are appropriate to take,
all the measures that are based upon science, and we are now in
the process of encouraging these countries to resume trade as
quickly as possible.
I am pleased to say that in the case of Canada, much of
that market for beef has reopened. In the case of Mexico, we
have restored about 65 percent of what we were formerly
exporting to Mexico. And in the case of poultry, we have
managed to get most of the pipeline shipments--those shipments
that were caught on the water between the export point and the
delivery point moved into the country. And we have managed to
get many of those markets to regionalize, to only ban products
from States in which we have had actual outbreaks of avian
influenza, rather than banning all exports from the United
States.
So we are continuing to work diligently on this, and I hope
that we get a substantial portion of these markets restored in
the very near future.
Senator Kohl. You said at the outset of your statement that
we were predicting exports of beef products--did you say three-
point----
Dr. Penn. $3.8 billion for beef.
Senator Kohl. And poultry at?
Dr. Penn. $2.3 billion.
Senator Kohl. Yes. So what is your anticipation now for the
year? Are you prepared to make some estimate?
Dr. Penn. I have not done a new rack-up in a while, but we
think that for beef, out of the $3.8 billion, we have about $1
billion restored at the moment. We are hoping to get more of
that restored, of course, with our big markets like Japan and
Korea and Hong Kong, in the very near future.
For poultry, the situation is much better. I don't know the
percentages, but of the $2.3 billion, we now have trade flowing
for a substantial part of that. We are not exporting from the
State of Texas, where we had hi-path avian influenza, and a few
other States. But we are doing much better for poultry than we
are for beef at the current moment.
TRADE IMPLICATIONS OF GENETICALLY MODIFIED CROPS
Senator Kohl. Dr. Penn, given the fact that there has been
a tremendous increase in U.S. production of genetically
modified crops, and given the trade implications, do you think
that we have allowed for too much production of biotech crops
before we had the knowledge and the tools in hand to make sure
contamination would not occur? If we have moved so quickly on
biotech crops that we placed some of our export markets at
risk, what steps are you taking to meet concerns of some
countries that will not even accept those genetically modified
crops as food aid?
Dr. Penn. Well, this question has a connection to the
previous question, and that is, we are increasing our exports
of agricultural products almost every year, and more and more
of our agricultural products involve genetically modified
products. These are products that have gone through the
regulatory system in this country, and we think that we have
got one of the best, strictest regulatory systems anywhere in
the world.
We continue to insist that these trading rules must be
based on solid scientific underpinnings, and there are
international organizations that are involved more and more in
helping to establish these trading rules--the OIE or the
International Organization for Animal Products, the IPPC, which
relates to plants, CODEX, which relates to food products--and I
think more and more we are going to have to rely on these
international standard-setting bodies to be the ones that
govern rules for trading in various kinds of products.
Now, with respect to biotech products, as you correctly
note, biotechnology in a very substantial way burst upon U.S.
agriculture in 1996, sort of all of a sudden, with Roundup
Ready soybeans. In our most recent crop report, the acreages
for corn, cotton, and soybeans, the proportion of the acreage
that is biotech has substantially increased: 46 percent of the
corn acreage for the coming year, farmers are indicating, will
be biotech, and about three-quarters of our soybean and cotton
acreage will be biotech.
Now, these products have been approved by our regulatory
authorities. They are as safe as other products. And we see no
reason why there should be any restraint of trade in those
products. We continue to have problems with some markets, most
notably the European Union, of course, but we are continuing to
try to educate and persuade in that case.
You mentioned specifically food aid. I think that is very,
very unfortunate that we have people who are literally starving
and who are being denied perfectly safe food simply because
their authorities are insisting that for various reasons no
genetically modified food aid be allowed.
Now, I am aware of the case, the most recent case in Angola
that you mentioned, and our USDA authorities are working with
the World Food Program and with the nongovernmental
organizations that are supplying food in Angola. And we are
trying to work around this problem because literally people's
lives are at stake in this case. So we are trying to work
through this, and then we are also trying to educate other
countries about the safety of genetically modified food so that
we don't have these kinds of disruptions of food aid in the
future.
GEOSPATIAL INFORMATION SYSTEM
Senator Kohl. All right. Finally, Dr. Penn, in the Common
Computing Environment account, there is a request for $9
million for FSA to complete digital data maps for rural farm
communities across the country. These maps are an important
tool to the farmer and for the agency to effectively administer
farm, conservation and disaster programs and also to provide
critical information with animal or plant disease outbreaks.
It is my understanding that the data must be digitized and
as a last step certified before this information can be of any
use to the farmer or agency. In my own State of Wisconsin, not
a single county has been certified.
Can you tell us how many of the 3,051 counties in the
United States targeted by FSA have been digitized and
certified? When do you expect to finish this work?
Dr. Penn. I cannot tell you that right now off the top of
my head, but I will certainly be happy to get that information
and we will provide it to you. We won't use Dr. Jen's courier.
We will try to make sure that we hand-carry that
information so that you have it in a short period of time.
But I can say that this is, as you note, a very important
step forward, being able to have these maps. They are important
not only for FSA, but they have benefits for our colleagues in
the natural resources conservation area and in the crop
insurance area. It is very important that we complete this
project, which is a multi-year task. We not only have money in
the FSA budget, but there is also a request for support of the
Geospatial Information System within the $18 million increase
in the budget of the Office of the Chief Information Officer
for USDA, which funds our common computing environment. And we
very desperately need to get that funding because our
efficiency gains in the future very much depend on being able
to implement a lot of this new technology. Our budget does not
support additional numbers of people, so we really do need the
new technology.
Senator Kohl. I do appreciate your willingness to supply a
progress report on where we are.
Dr. Penn. We will do that.
[The information follows:]
Geospatial Information System (GIS) Progress
As of April 7, 2004, 1,767 counties have digitized common
land units (CLU's) and 381 of these counties have been
certified. Of the 72 counties in Wisconsin, 20 counties have
digitized CLU's. While no counties in Wisconsin are currently
certified, about 10 counties are planned for certification by
the end of fiscal year 2004.
Approximately 2,100 to 2,200 counties should be digitized
by the end of the fiscal year. At the current rate, we would
expect to have as many as 700 to 800 counties certified by the
end of the fiscal year.
Senator Kohl. Thank you so much, and thank you, Mr.
Chairman.
Senator Bennett. Thank you, sir.
Senator Harkin.
Senator Harkin. Thank you very much, Mr. Chairman.
NATURAL RESOURCES AND ENVIRONMENT
First, I would like to start, if I could, with Under
Secretary Rey. Mr. Rey, you are obviously the top official at
the Department of Agriculture in the area of conservation and
natural resources and environment. Dr. Penn sitting next to you
there, he is the lead when it comes to commodities, like corn
and wheat and beans and other products that are important to
society.
Mr. Rey, your responsibilities, I believe, also involve
products or commodities that farmers and ranchers produce and
which are very important to society and for which society has
said that it is willing to pay. Those products or commodities
include, of course, clean water and air, productive soil,
wildlife habitat, and so forth.
This idea of conservation and environmental benefits as
commodities or products was part of our thinking in the Farm
Bill. And as you know, it has further evolved, for example,
when we envisioned carbon credit trading.
CSP PROPOSED RULE
So, Mr. Rey, with that in mind, I want to convey my thanks
to the Secretary, to you, to Mr. Knight, for providing public
access to the comments on the CSP proposed rule. Farmers,
ranchers, and the general public have sent more than 14,000
comments, as I understand it, and I understand virtually all
expressing disappointment in the proposed rule. I also know
that you attended the listening session on the proposed rule in
Des Moines in February, where over 250 people attended, again,
which I understand most of whom opposed the proposed rule and
everybody who spoke was against the proposed rule.
So I guess I would just start off by saying that I am sure
you acknowledge that there is a very high level of interest in
the CSP and that there is a widespread disagreement with the
proposed rule and that these are serious and substantive
concerns. And I would just ask, you know, again, for any
comments you have on what I have just said and what is
happening to the proposed rules and when we can expect to see a
final rule.
Mr. Rey. First of all, I don't disagree with your
characterization of how the comments were transmitted to us. As
I said before you arrived, I think many of the comments
expressed concerns which we have an obligation to address in
clarifying our intent about how the rule is drafted and how it
will work in practice. Other comments are concerns that are
going to drive changes to the proposed rule, and that is why we
have comment periods, to get those kinds of comments.
We are trying to bring forward a final rule in time for
there to be a CSP sign-up this year so that we can use the
money that you and other Members of Congress appropriated in
the fiscal year 2004 Agriculture and Related Agencies
Appropriations bill. And I would be happy to share with the
Committee for the record our current schedule, which we think
will get us there in time to start a sign-up this year.
[The information follows:]
TIMELINE TO FIRST CSP SIGN-UP
------------------------------------------------------------------------
------------------------------------------------------------------------
Mid May................................... Complete analysis of the
Public Comments on CSP
proposed Rule
Mid June.................................. Clear and Publish CSP Final
Rule
Early July................................ Conduct First CSP Signup
End of July............................... Complete Signup
August.................................... Begin enrolling CSP
contracts
September................................. Complete full obligation of
fiscal year 2004 CSP
funding
------------------------------------------------------------------------
Mr. Rey. I won't repeat my summary of some of the basic
concerns and where we think we can either clarify our intent to
address those concerns or make some changes to address those
concerns. But I will share them with your staff today and later
as we move forward in the rulemaking process.
I will say that the Des Moines hearing was, I thought, a
good one. I remarked to all of the assembled commentors that,
because of their numbers, we had asked them to be very brief in
their comments. And I told them that I was pleased that they
were respectful of the time limits that we imposed on them, if
not the regulatory proposal on which they were commenting. But
we got a lot of good comments. I took somewhere in the
neighborhood of eight or nine pages of notes from the session.
Senator Harkin. I appreciate that, and I have heard from
other States where you have had the forums, and I understand
they were also well attended in other States and that the
general consensus was that most of the farmers were very upset,
ranchers that came in were very upset with the proposed rules,
thinking that it really was going to cut a lot of them out of
the program. That seems to be the general consensus, at least
as I have heard from the input that I got.
CSP FUNDING CAP
Now, again, in the proposed rule, USDA complains about the
difficulties that come from running a program open to all
producers but with a strict funding limit. The proposed rule
says, ``The greatest challenge was to design a new conservation
entitlement program with a cap.'' Well, as we both know, CSP
does not have a set funding limit starting October 1st of this
year.
Mr. Rey. Right. At the time that the rule----
Senator Harkin. And you talked about that in your
statement. I read that. I read that. But the President's budget
proposes one.
Mr. Rey. We propose a cap for fiscal year 2004 and--well,
Congress provided one for 2004.
Senator Harkin. Yes.
Mr. Rey. We are proposing an amount of money for 2005.
Senator Harkin. Well, do you see the irony that I have
just--the irony that USDA is complaining about the difficulty
of implementing a rule that is open to all with a cap, okay?
But we took off the cap. Then the Administration turns around
and requests a cap for next year.
Mr. Rey. But I think the order of sequence was that the cap
was taken off after our budget was sent forward. It was taken
off in the Omnibus Appropriations Bill for fiscal year 2004.
Senator Harkin. Well, that is true. That is true. I don't
know the sequence of events, but that is true. It was taken off
in the Omnibus Appropriation before the budget.
Mr. Rey. So, I mean, I think that is an issue----
Senator Harkin. So is the Administration requesting a
change then in their budget proposal to reflect what we did?
Mr. Rey. Well, I don't think we have to. That is now before
you, and I assume that Congress will continue to give us clear
direction.
FISCAL YEAR 2005 FUNDING REQUEST
Senator Harkin. Well, I mean, the Administration could come
back and say look, you know, we do not need a cap now since
Congress has taken it off, that--what, $205 million, I think it
was, if I am not mistaken.
Mr. Rey. $209 million for fiscal year 2005.
Senator Harkin. For next year, yes, right.
Mr. Rey. I think the more useful thing for us to provide to
the Congress at this juncture as you consider the 2005 bill is
our best estimate of what the different program options would
cost.
Senator Harkin. So you are no longer requesting a cap?
Mr. Rey. We are going to abide by whatever Congress
eventually tells us to do, which we should do.
Senator Harkin. Which we said no cap.
Mr. Rey. Right.
Senator Harkin. I appreciate that. So, again, to continue
this, the full funding was restored, as you pointed out, in the
Omnibus Appropriations Bill. But the proposed CSP rule--I am
getting back to that proposed rule again--would bar the vast
majority of producers from participating.
I wanted to do an analogy of what it would be like if we
took the commodity program, which is an uncapped entitlement
program. And I said, What would be the equivalent? In Iowa,
with the proposed rule, if we did this on the commodity
program, it would be like USDA arbitrarily limiting commodity
payments only to those Iowa farmers who produce more than 200
bushels an acre of corn and only if they live in one of 12 of
our 99 counties chosen here in D.C. And, further, these farmers
would receive no payments for their soybeans. To top it off,
the payments would only be one-tenth of what is in the Farm
Bill. And any farmer who does not qualify for the commodity
program 1 year has to wait another 8 years to apply again.
So I am just saying, if we think about conservation as a
commodity, compared to the commodity programs, and one for
which society has said it is willing to pay, then it would seem
that we need some kind of equivalency. We need to start looking
at this a little bit differently than what we have in the past.
ACCESS TO CSP BY PRODUCERS
USDA says only 14,000 producers will get into CSP a year.
Is that not your--you are looking at me quizzically. Did I
misstate myself?
Mr. Rey. No, that is----
Senator Harkin. 14,000 a year. Again, in Iowa, with this
percentage only 700 Iowa farmers out of 93,000 would get into
the CSP a year.
Now, I have tried to figure that out, and I figure it would
take about a little over 100 years for them to get into the
program if that is what we are going to do. My point is it
would not be acceptable for a commodity program to do that, and
it should not be acceptable for this kind of commodity program.
TECHNICAL ASSISTANCE
Mr. Rey. But, again, to talk about terms of equivalency,
one of the key limitations to the rate of entry of the program
is how we provide NRCS technical assistance to producers who
want to come into the program. That 14,000-producer limit is as
much a reflection of the cap on the use of technical assistance
funding in implementing the program as it is anything else. And
with the commodity programs, we do not have such a limit on how
the agency brings people into the program. That is something we
can obviously work on and fix.
Senator Harkin. I heard about that, and I read it in your
testimony, and I heard you mentioned it earlier, too, I think,
in answer to a question here. I thought about that. And so I
asked my staff, I said, What do we provide, what is the
technical assistance under EQIP? I think it is 19 percent.
Mr. Rey. Yes, it is a little higher.
Senator Harkin. Nineteen, but I am told that it has been
much less than 19 percent.
Mr. Rey. In the past, we have had the latitude to use
conservation assistance funds to provide part of the support
for EQIP, which is something that we have separately argued
about over the last couple of appropriations cycles.
Senator Harkin. My staff informs me that it was capped at
19 percent in the past, the EQIP funding, my point being that
if you can implement EQIP at that rate--I just want to take
issue with you on the 15 percent being some kind of a problem
for you. For the life of me, I do not understand that. I mean,
15 percent is, I think, a considerable amount of money to
implement a program. And keep in mind, this is a program,
albeit a new one, but relying upon a lot of things that you
have already developed in the past, Bruce, and all of you. You
have got these things. You know what they are. It is not like
it is making something out of whole cloth. I mean, this is
something that you have all done in the past.
So I cannot believe that a 15 percent limitation is any
kind of a real onerous limit.
Mr. Rey. Well, it is based on things that NRCS has done in
the past.
Senator Harkin. Sure.
Mr. Rey. But it is clearly a new program that farmers are
going to be facing for the first time, including, if the
program works as Congress has intended, and we would like it to
work, farmers that have not participated in some of the basic
conservation programs like EQIP.
Last year, I am told that we used 24 percent, which was the
level for technical services in EQIP. I think, for a new
program, it is not a reasonable assumption to assume that you
can do it for 10 percent less. Much of the cost of technical
assistance that is going to be provided for a new program is
not going to be things that NRCS does by itself in developing
the program, but rather the time NRCS field agents spend with
farmers explaining how a new program works, particularly
farmers who have not participated in EQIP or any of the other
basic conservation programs in the past. So this is a problem
we can fix working together, but I think it is a problem.
TECHNICAL SERVICE PROVIDERS
Senator Harkin. And we also provided, if I am not mistaken,
and I am reaching back now, we also provided in the Farm Bill
that in this regard I believe you can use people outside of
NRCS for the technical--what is the word I am looking for?
Mr. Rey. Technical service providers.
Senator Harkin. Technical service providers can be used for
that that also have this knowledge and can assist in doing
that. So, again, I just have a hard time thinking that 15
percent is going to be a real onerous limitation on providing
this because a lot of the practices that we are talking about
are already being done by some farmers, not by others, but by
some. So, therefore, since NRCS has got this history, they know
the practices, it just does not seem to me to be a problem to
transfer this over to others besides using the availability of
outside people that we allowed you to use in the Farm Bill.
Mr. Rey. The Technical Service Providers program is going
to be instrumental in helping us deliver conservation programs,
but that program itself has a ramp-up period to get technical
service providers certified. And, moreover, they are going to
be most useful in helping us apply specific conservation
practices in existing programs. Now, that will help because
that means that we can transfer some of our staff time out of
EQIP, out of the Wetlands Reserve Program, out of the programs
that are better established and use that time and effort to
work on CSP, but that is going to be a ramp-up period as well.
I think this is an issue that we should continue to
discuss. It is not going to be a problem in fiscal year 2004.
We will begin to see the effect of the limitation on technical
services in 2005 and beyond, and I think we will have time to
adjust, if we need to.
But, at this point, I think I would say there is, if not
the reality, then a high potential for a disconnect between the
desire to bring as many producers into the program as quickly
as possible and a limitation on how much NRSC staff time we can
devote to going out and educating people about a new program
and what their interests in it are and why they should be
participants. That is a very resource-intensive process.
TIME LAG ON CSP IMPLEMENTATION AND RULEMAKING
Senator Harkin. I appreciate that, and I have not--Mr.
Chairman, I thank you for your indulgence--I have not been too
hard on this in the past. I have worked with the Secretary and
others. But when we passed the Farm Bill, we put in a 270-day
requirement to get the rule out. That did not happen. Then,
they said, ``Well, we will get it out in a year.'' That did not
happen. And they said, well, they had a lot of other things to
do. And I understand that. They had new commodity programs and
everything like that. So I think we have been fairly indulgent
on this.
We are now coming up on 2 years since the Farm Bill was
passed--2 years--and not one farmer has been signed up in the
CSP program. Now, you can understand why I am a little
quizzical about the pace at which this is proceeding and
whether or not--and I said this to the Secretary when she was
here. Is there an attempt by some to kill the suborning--to
kill it before it even gets off the ground?
Mr. Rey. No such attempt.
Senator Harkin. Well, it looks like that. I am just telling
you. It is 2 years and not one farmer.
Mr. Rey. Senator Harkin, you can usually explain most
things by malfeasance rather than conspiracies. There is no
conspiracy to do away with this program. It is a difficult
program to implement. It is essential that we get it right
because I believe we agree that it is the future of
conservation on working lands. My testimony has said that. That
is not a hollow commitment.
We are grateful for the Committee's indulgence. You could
do just one more thing to help us, and that is not help us
again by changing it one more time between now and when we get
the final program out.
Senator Harkin. There are few things that I can assure you
of. But because of what happened last year and the assurances I
have from the Chairman of the Appropriations Committee, it will
not happen again until the Farm Bill is up.
Mr. Rey. Excellent.
Senator Harkin. Take it to the bank--as long as I am here.
I mean, you know----
And as long as the Chairman is here. The Chairman has been
very, very helpful on this, and I would not let this
opportunity pass without thanking Chairman Bennett for his
strong support of conservation programs, and I appreciate it
very much.
Mr. Chairman, I spent all of my time on this. Are you going
to have a second round?
Senator Bennett. Well, I was going to, but I find most of
the burning questions that I had Senator Kohl has asked. If you
want to pursue another issue, we can do that.
Senator Harkin. Just a little bit, I would appreciate it.
Senator Bennett. Yes.
Senator Harkin. Thank you, Mr. Chairman.
STANDARD REINSURANCE AGREEMENT
J.B., late last year, USDA cancelled the Standard
Reinsurance Agreement--and I am sorry I am late. Has this been
talked about? They cancelled the Standard Reinsurance Agreement
with the crop insurance industry. I understand you are now in
the process of negotiating a new one. I have heard a second
draft of the SRA would impose $40 million in cuts annually from
the delivery system.
We have lost five companies in the last few years--five
companies, the largest writer, American Growers, Fireman's Fund
is now a reinsurer. Anyway, we have lost all of these
companies. Two major reinsurers left the reinsurance market,
and I understand there are a number of areas that are just
served by only one company. So I am concerned about the
proposed $40-million cut and what will that do to any
competition that we might even have left in the crop insurance
industry.
Dr. Penn. Well, Senator Harkin, as you know, this is a
process. It is a negotiation. And as you go through the
negotiation, everybody makes their case, and everybody puts
their most compelling arguments forward. And these are some of
the arguments that are being put forward by some of the
companies as we go through the negotiation.
Since the passage of ARPA in 2000, the risk management area
or crop insurance area has changed substantially. We have had a
large expansion in the crop insurance program. Last year we
covered about 218 million acres. The liability insured was
about $40 billion. We have tremendously expanded the number of
products that are available. There is continued expansion
underway as the board reviews and approves new products, and
the overall operating environment has changed.
So we thought it was prudent to review and renegotiate the
insurance agreement. This is the agreement by which we deliver
all of the services to the producers in this very unique
public-private partnership. I mean, this is a public program
that is delivered through the private sector. And we thought
that it was time that we reviewed that contract, and we take
account of all of these changes that have occurred.
As you said, it is a dynamic industry. There are companies
that leave the industry. There are companies that come back
into the industry. There are reinsurers that leave, reinsurers
that come back. But we had one chance in the legislation and a
5-year period to revise this standard reinsurance agreement.
This is the last opportunity that we had. So we thought we
should do it.
RMA prepared a first draft to begin the process. And I have
to say that first draft was pretty roundly criticized. We spent
a lot of time with the companies, we listened to their
concerns, and we have now prepared a second draft. That draft
was made available last week to the companies, and they are
beginning to review and to go through that now, and we are
starting the process of having individual sessions with them to
go through the second round.
We have proposed some $40 million in savings. We think that
we have a good basis for doing that, of course, or we would not
have done it. Of course, it will be resisted. But there is more
to it than just savings. There are some regulatory aspects of
the agreement that we think need to be reviewed and revised,
and a lot of the companies have said that they think it is good
for the industry, that it is time that we try to achieve some
new efficiencies, that we try to tighten up the possibilities
for fraud, waste and abuse, and that we also try to give RMA a
better opportunity to monitor the financial health of the
companies.
As you said last year, the largest insurer in the business
left the business, and the American taxpayer had to step up and
sweep up after that----
Senator Harkin. I know.
Dr. Penn [continuing]. It cost some $35 million of taxpayer
money to do that. And we think that, by rights, RMA ought to
have a little more authority to anticipate that kind of
situation and to avoid that happening in the future. So we have
tried to make some changes in the SRA to account for that.
So we are in the middle of this process, and it is a
negotiation. In a negotiation everybody wants to paint the
situation in the most compelling way they can that would be to
the greatest advantage to them. And so I think that is what you
are hearing, but we are in the middle of a process. All we are
asking now is to give us a little more time and let us work
through this draft, and then we will come forward with a third,
and we hope final, version of this.
RURAL BUSINESS INVESTMENT CORPORATION
Senator Harkin. Thank you very much, Dr. Penn.
Two quick ones. Mr. Gonzalez, will you have the final rules
out on the RBIC Program this summer, the Rural Business
Investment Corporation?
Mr. Gonzalez. Yes, Senator Harkin. We will have that
application window open in the summer or at least the fall of
2004.
Senator Harkin. Summer or early fall. How about summer?
Mr. Gonzalez. Well, we are trying our hardest. We are
looking at the fall of 2004 to have the application window for
that program.
Senator Harkin. So the first applications would be
available this fall.
Mr. Gonzalez. Yes, sir.
Senator Harkin. Well, okay. I wish it was earlier.
Dr. Jen, are you working with HHS and with maybe FDA--well,
that is in HHS--maybe NIH to revise the food pyramid? Is that
underway now?
Dr. Jen. Senator Harkin, the USDA is responsible for the
Food Guide Pyramid. It is Under Secretary Eric Bost's group,
CNPP.
Senator Bennett. We discussed that at the last hearing.
Dr. Jen. Yes, last week.
Senator Harkin. What is that, Mr. Chairman?
Senator Bennett. We discussed that at the last hearing with
the other Under Secretary.
Senator Harkin. It is being done.
Dr. Jen. Yes.
Senator Bennett. Yes, we are monitoring that.
Senator Harkin. Thank you, Mr. Chairman. I appreciate that.
With that affirmation, I do not have any more questions.
Thank you, Mr. Chairman.
Senator Bennett. Having gotten the attention of all of the
fat doctors in the world----
I raised that a year ago, why we have to keep on top of it.
Senator Harkin. So it is being--I mean, it is actually
under review.
Senator Bennett. Yes.
Senator Harkin. That is good. Thank you.
Senator Bennett. Are you through, sir?
Senator Harkin. Yes, I am. Thank you.
SUPERCOMPUTER RESOURCES
Senator Bennett. Dr. Jen, I have one last question. I was
recently contacted about USDA's access to supercomputing
resources, and I would appreciate it if you would furnish to
the Committee information about the supercomputing resources
that you currently have access to, I assume, in conjunction
with universities, and how frequently you need this kind of
power. And do you believe that you would benefit from a
dedicated supercomputer facility?
If you can answer that quickly, why we can do that now or
you can furnish it.
Dr. Jen. Genomic science research benefits from the use of
supercomputers, particularly when the research moves from the
DNA sequence, the nucleics, into the proteomics. Our need for
analysis by supercomputers will increase in the future
especially due to the extreme complexity of protein research.
Currently, some universities have supercomputers, but I
think we will also work with Department of Energy. A dedicated
facility probably would be desirable a few years down the line,
especially considering the other research that USDA has. At
this point I could not even think about it because the cost is
not only the cost of the computer itself, but it also includes
associated operation and maintenance costs. That would be
something that would worry me because I have absolutely no idea
how much it costs.
Senator Bennett. Thank you very much. That is helpful.
Senator Kohl, do you have any last questions?
Senator Kohl. Just one. Mr. Gonzalez, in fiscal year 2003,
Wisconsin had four applications for funding through the Section
525 Technical Assistance Account to provide homeownership
education for people in rural areas.
Wisconsin has historically received funding for our good
work in this area. In fiscal year 2003 funding, I understand
the Administration selected priority States primarily within
one region of the country, with justification that there was
not enough funding to reach more applicants for other regions.
I included language in the fiscal year 2004 bill that
increased funding, and provided limits any one State could
receive under this account.
How will you ensure that States like Wisconsin receive a
fair consideration for funds available this year?
Mr. Gonzalez. Thank you, Senator Kohl.
In terms of the 525, there was a $2-million grant amount
that was allocated to that program for homeownership training
and credit counseling. And we are closely following the
conferees' report in terms of administering that program. There
was a 10-percent cap to those 10 States in terms of providing
that technical assistance, and we are looking at a NOFA being
published May of 2004.
Senator Kohl. I appreciate your consideration.
Mr. Gonzalez. Thank you, sir.
Senator Kohl. Thank you.
Senator Bennett. Thank you. I do have one last question for
Dr. Collins. You say the ag economy is booming, exports,
consumption, industrial use, all the rest of it. Any chance
that this can mean lowering of mandatory payments, mandatory
support payments to help us out with the budget?
Dr. Collins. Sure, Mr. Chairman. I think that is exactly
what is going to happen. When you say ``mandatory payments,''
if you look at Commodity Credit Corporation expenditures on
price support and related activities, in the year 2000, it hit
an all-time record of $32 billion. In 2003, it was down to
about $17.5 billion. In 2004, the President's fiscal year 2005
budget released in February estimated a spending level of about
$14.8 billion. I think that that number is more likely to come
in closer to $10 to $11 billion rather than $14.8, which is in
the President's budget. That will be updated in the President's
Mid-Session Review of the Budget that will be released in July.
Clearly, there are a couple of expenditure categories that
do not change, such as direct payments, which are not a
function of prices, and they are about $5.5 billion a year.
And then there is also conservation spending, such as the
CRP, which is about $2 billion a year. Those things are not
going to change, but the loan deficiency payments, the loan
programs, the countercyclical payments all are coming down
dramatically, including the milk income contract payment
program as well. So, yes, I think we are looking at a several-
billion dollar decline below the President's budget and a
number that is probably about a third of what it was in the
year 2000.
Senator Bennett. I would like to find a way to get that
into discretionary funds. I am not sure we can.
You have a last question?
Senator Harkin. Let me just follow up on that because I
think it is an interesting story. When we passed the Farm Bill
in 2001--I think that is right, 2001--we were given a budget to
work with by the Budget Committee for 10 years for our
programs. We stayed within that. We did not go beyond what was
allotted to our Committee for our mandatory programs, and so we
passed that.
In that estimate, there was an estimate for how much the
outlays would be for 2002, 2003, 2004 or 2005, et cetera. And,
Dr. Collins, you can correct me if I am wrong, but I believe,
Mr. Chairman, that if you look at just the 2002, 2003, 2004
estimate, basically, since we kind of know what 2004 is going
to be, that we have spent about $15 billion less than what we
were allotted; in other words, what the Budget Committee gave
us to spend, we have spent about $15 billion less; is that
about correct?
Dr. Collins. I have not done that calculation, but I can
tell you that what we are spending is tracking very closely to
what we would have expected spending to be with an extension of
the 1996 Farm Bill, that is, before you even added on the
programs of the 2002 Farm Bill. So, yes, it is running below
the spending levels that were projected in the spring of 2002
for the life of the 2002 Farm Bill.
Senator Harkin. Well, my figures show about $15 billion
less, so I think agriculture has got a good story to tell
there. Of course, I come back to things like the other
commodity program, the Conservation Security Program, that when
people start talking about capping and stuff, we have saved $15
billion less than what we were allotted to spend. I think that
is pretty darn good. Surely, we could get a couple of billion
out of that or a billion-and-a-half at least to help on the
conservation program. I just want to make that point. I think
it is a good story.
Senator Bennett. We may make an attempt at that. I am not
sure whether we will get----
My comment is, repeating what I say in my role as Chairman
of the Joint Economic Committee, I do not know various
estimates about the economy. People ask me about it. Can we cut
the deficit in half in 5 years? Will the Kerry numbers hold up?
Are the Bush numbers accurate?
And I say the one thing I know about them is that they are
all wrong.
They have always been proven wrong. Any attempt to make a
forecast in an $11 trillion economy that goes out much more
than 6 months fits into the category that we decided not to use
earlier as we were describing one of the other estimates. It is
basically a guess, and it may be a very well-educated guess,
but it is basically a guess. And I think this illustrates,
also, we made the best guess we could, and then the economy
behaved differently.
And for those who say, ``Well, why can you not be more
accurate?'' I will use the phrase with which all politicians
are very familiar, ``The numbers are all within the margin of
error.''
The difference between surplus and deficit on a $2.7
trillion budget, when you move a couple of hundred billion
either way, is within the margin of error that a pollster might
use. And we get carried away with our rhetoric around here
about we created this huge deficit or are we not wonderful, we
have created this huge surplus. The economy has done what it
has done, and we are kind of following along on the trail of
that and hoping to take credit when it is good, and hoping to
point and assume blame when it is bad.
ADDITIONAL COMMITTEE QUESTIONS
But, apparently, this is the same kind of situation, and I
am glad that this one was wrong on the right side of things
instead of wrong on the other side of things.
Senator Harkin. Mr. Chairman, it is just not pencil dust.
Let us just be careful of that phrase.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Robert F. Bennett
consumer data and information system initiative
Question. Dr. Jen, the Economic Research Service is looking for a
significant increase in fiscal year 2005--$9 million and 6 additional
research staff. The majority of this increase and all of the new staff
would be for the Consumer Data and Information System initiative. The
components of this initiative are a food market surveillance system, a
rapid consumer response module, and a flexible consumer behavior survey
module. What exactly, do you hope to accomplish with these additional
information-gathering capabilities?
Answer. Data and analysis from this initiative would provide a
basis for understanding, monitoring, tracking, and identifying changes
in food supply and consumption patterns. Without this increase in
funding, many problems facing Americans will go unsolved. The data and
analysis capability embodied in this forward-looking initiative will
prove invaluable for policymakers in addressing issues ranging from
obesity prevention to understanding market opportunities to food
safety. Currently, large gaps exist in USDA's data and analysis system
in the areas of consumer and industry behavior. Our Nation does not
have timely consumer information upon which to base policy decisions
and program actions. The centerpieces of this budget initiative are
nationally representative consumer and retail surveys of food prices,
retails sales, consumption and purchases of food for at-home and away-
from-home eating, as well as data on consumer behavior, reactions,
attitudes, knowledge, and awareness.
This information system will provide market surveillance and
insights into price changes, market demand, and consumer reactions to
unforeseen events and disruptions such as the recent discovery of
bovine spongiform encephalopathy (BSE). In addition, the data and
analysis framework will provide intelligence on the public's diets,
knowledge and awareness levels helping policymakers respond to current
events, such as the rise in obesity and overweight, especially in
minority populations, and their interactions with the U.S. food and
agriculture system.
In addition, as our country faces bio-terrorist threats, increased
knowledge about American eating behavior and its implications for food
markets are of heightened importance. Understanding, where food is
eaten and purchased and the amounts of different foods consumed by
various demographic groups is important for understanding how to best
protect our food supply, for designing and implementing rapid and
effective government responses to unforeseen food related events, and
for the management of events after they have occurred.
The four components of the initiative in order of priority are:
--The Flexible Consumer Behavior Survey Module would complement data
from the National Health and Nutrition Examination Survey
(NHANES). This module provides information needed to assess
linkages between individuals' knowledge and attitudes about
dietary guidance and food safety, their food-choice decisions,
and their nutrient intakes. Combining the NHANES with this new
module allows analysis of how individual attitudes and
knowledge and healthful eating affect food choices, dietary
status, and health outcomes. Cost: $3 million.
--The Rapid Consumer Response Module would provide real-time
information on consumer reactions to unforeseen events and
disruptions, current market events, and government policies.
This module would be integrated into several proprietary
consumer data panels currently maintained by private vendors.
Consumer reactions would be linked to actual food purchases,
sales, consumption, and price information. For example, the
module could be executed to gather information on consumer
reactions to food safety problems and issues. Cost: $1 million.
--The Food Market Surveillance System would consist of an integrated
set of surveys and supporting analysis concentrating on
linkages in the food and agriculture system. This system would
be the foundation of a research and monitoring program designed
to: provide timely price, purchase, and sales data; identify
food consumption patterns of consumers and how these change as
people age, households change, new products are introduced, and
new information is acquired; identify and develop consistent
strategies for consumers to adopt the Dietary Guidelines for
Americans; better understand the market dynamics of food safety
and other consumer health issues; and understand links between
foods, physical activity and health outcomes. Cost: $4.176
million.
--Funding is needed to support 6 additional staff to ensure the
successful design and implementation of the initiative. Cost:
$500,000.
Question. Is this a one-time expenditure, or are you envisioning
continuing this level of funding in fiscal year 2006 and later?
Answer. I envision that this level of funding will continue in
fiscal year 2006 and beyond. This data system is a continuous, real
time surveillance, tracking, and research vehicle whose demand will
only grow over time as it becomes completely integrated into USDA
operations.
agricultural estimates restoration
Question. The National Agricultural Statistics Service is
requesting a healthy increase in fiscal year 2005--almost $9.5 million
and 14 new staff. Of this amount, $7 million and 10 new staff would go
to the Agricultural Estimates Restoration and Modernization project.
This is on top of $4.8 million provided in fiscal year 2004 for this
purpose. Why is this additional funding necessary?
Answer. Escalating survey expenses, unfunded pay costs, and
declining response rates have forced adjustments to many of the
Agency's survey and estimates programs, reducing the quality of survey
data on which NASS estimates are based. The consequences of poor
estimates can involve millions of dollars. For example, inaccurate crop
and livestock forecasts may result in unstable market conditions for
producers and consumers resulting in large price fluctuations. Funds
are needed to increase area frame survey sample sizes to meet precision
targets for major estimates from the base survey conducted in June,
improve non-response follow-up for specialty commodities, increase
sample sizes for surveys to measure coverage error, and increase list
sample sizes to further improve commodity yield forecasts and
production estimates. The fiscal year 2005 request will allow for
continued progress in these areas, in addition to supporting adequate
resources necessary to process, analyze, and disseminate vital
statistical data.
Question. Do you expect to request additional funds in fiscal year
2006?
Answer. At the present time, we do not know what will be reflected
in the fiscal year 2006 budget request.
horticultural specialties
Question. The National Agricultural Statistics Service is
responsible for conducting the Census of Horticultural Specialties
every 5 years. The fiscal year 2005 budget recommends that this program
be delayed and, as a result, reduces the NASS budget by $3 million and
the staffing by 6 staff years (FTE). When was the last Census of
Horticultural Specialties conducted?
Answer. The 1998 Census of Horticultural Specialties was conducted
following the 1997 Census of Agriculture. This Census of Horticultural
Specialities is completed on a 10 year schedule.
Question. Why was the decision made to delay this next Census?
Answer. The Census of Horticultural Specialities has traditionally
been conducted every 10 years. Due to the dynamic growth of this
industry, NASS was planning, pending available funding, to measure this
component of agriculture every 5 years. Due to the tight budget
constraints placed on all discretionary Federal spending, difficult
decisions were necessary to maximize use of the available funds for
improving and modernizing our base agricultural statistics, which are
indispensable to the entire agricultural sector. The annual program
covering selected horticultural commodities will continue to be
available.
Question. Who benefits from these updated statistics? How will they
get their information absent this Census?
Answer. The information provided by NASS surveys and the Census of
Agriculture help to ensure an orderly flow of goods and services among
agriculture's producing, processing, and marketing sectors. Many
segments of the horticulture sector utilize NASS census data to make
informed business decisions at the local level. Additionally,
policymakers use NASS data in assessing the impact of potential
legislation. In the absence of the Census of Horticultural
Specialities, the NASS annual program provides information for selected
horticultural commodities at the State level.
The annual statistics program includes several reports on the
production, value, and chemical usage for nursery and floriculture
crops. Three main reports constitute the annual program. The
Floriculture Crops Annual Summary is released each April and includes
production, price, and wholesale value for growers having $100,000 or
more in sales in 36 selected States. It also includes the number of
growers and growing area for growers with $10,000 or more in sales.
This report can be accessed via the Internet at http://
usda.mannlib.cornell.edu/reports/nassr/other/zfc-bb/. The Nursery Crops
Summary is conducted periodically in tandem with the Agricultural
Chemical Usage--Nursery and Floriculture Summary. The Nursery Crops
Summary includes gross sales and the number of trees/plants sold for 17
selected States and growers having $100,000 or more in sales. It also
includes area in production and the number of growers and workers for
operations having $10,000 or more in annual gross sales. The next
summary will be released on July 26, 2004 and will be available at
http://usda.mannlib.cornell.edu/reports/nassr/other/nursery/index.html.
The Agricultural Chemical Usage--Nursery and Floriculture Summary is
scheduled for release on September 15, 2004. This summary includes
chemicals used (by active ingredient) and to what crop the chemicals
were applied, the amount of chemicals applied, the method of
application, who made the application, and the pest management
practices used on operations for six selected States. Agricultural
Chemical Usage Summaries are available at http://www.usda.gov/nass/
pubs/estindx1.htm#A.
In addition to the annual program, the Census of Agriculture
provides basic data on the area of nursery and floriculture crops
grown, by crop, under protection or in the open, the total area
irrigated, and an aggregate value of sales for nursery, greenhouse,
floriculture, and sod. These data will be available in June 2004 at the
National, State, and county level.
small area estimation
Question. Dr. Jen, $2.5 million and 4 new staff are requested by
NASS for data acquisition for the Small Area Estimation Program. It is
my understanding that this information is used by the Risk Management
Agency and the Farm Service Agency. How will these USDA agencies
benefit by this increased funding and staff?
Answer. The Risk Management Agency and the Farm Service Agency are
two of the major users of the NASS small area estimates. Due to the
dynamic growth of the agricultural insurance programs and the farm bill
utilization of these estimates, both agencies rely heavily on the
precision of county level estimates produced by NASS. Due to limited
funding, current estimates are derived through a survey process that
does not allow for full implementation of the probability design that
produces statistically defensible survey precision. This funding will
be used to allow follow-up data collection activities to support the
probability design in an initial one-third of the U.S. counties.
Therefore, users of NASS small area statistics will be able to
accurately define the statistical precision of each estimate.
Question. What additional data will be acquired?
Answer. This funding will allow the initial implementation of
follow-up data collection activities necessary to calculate
statistically defensible survey precision for the current program. The
county estimates program continues to grow in scope and importance for
Federally administered farm programs, thus increasing the need for
defensible survey precision.
Question. What is the impact on these agencies if these funds are
not provided?
Answer. These agencies will be forced to continue to administer
Federal farm programs based on data which does not have a calculated
level of precision. As the number of farm programs, and Federal
outlays, which depend on these estimates continues to grow, the
absolute level of precision must be known. Without a calculated level
of precision, some payment decisions to farm operators may result in
either an overpayment to farmers at the taxpayers expense or an
underpayment to farmers who have a legitimate claim.
bse trade restrictions
Question. Last week Secretary Veneman sent Japan a proposal to
break the impasse over BSE trade restrictions. The Japanese in turn
sent a letter rejecting the proposal. In a joint statement released
Thursday, Secretary Veneman and Trade Representative Zoellick expressed
their disappointment in the Japanese response. Would you care to
comment on the current situation regarding Japan's trade restrictions
on the import of U.S. beef?
Answer. The Department has been and remains in close contact with
Japanese government officials. Immediately following USDA's
announcement of the BSE case, senior USDA officials held talks with
Japanese officials in Tokyo, Japan, on December 29 and January 23. A
Japanese technical team visited USDA in Washington, D.C., and the BSE-
incident command center in Yakima, Washington, during the period
January 9-15. On March 23, the Agricultural Affairs Office, American
Embassy in Tokyo, reported meetings with the Japanese Ministry of
Health and Welfare (MHLW), Ministry of Agriculture, Fish and Food
(MAFF), and the Food Safety Commission (FSC).
There is still a significant difference in our official positions
regarding BSE testing and specified risk materials (SRM) removal. On
March 29, Secretary Veneman sent a letter to Japanese Agriculture
Minister Kamei proposing to have a World Animal Health Organization
(OIE) technical experts panel meet before April 26 to discuss a
definition of BSE and related testing methodologies as well as a common
definition of SRM. On April 2, Japan rejected the proposal, reasoning
that the United States first needed to reach a bilateral scientific
understanding on BSE. USDA is planning another high-level visit to
Japan to continue talks in late April. The United States exported over
$1.3 billion in beef to Japan in 2003, representing over 50 percent of
Japan's total beef imports. The import ban has severely impacted
Japan's market supplies and beef prices. Given Japan's need for beef
imports and the importance of beef exports to Japan to the U.S. beef
and cattle industry, we are hopeful that a solution can be found.
genetically modified food
Question. A recent Wall Street Journal article states that last
week Angola decided to ban imports of genetically modified grain, even
though it will disrupt the country's food aid. In 2002, 13 member
countries of the Southern African Development Community all balked at
accepting genetically modified food aid. Last year 17 scientists from
the same Development Community conducted a fact-finding mission and
concluded that genetically modified foods posed no danger to people or
animals. What is FAS doing to educate countries regarding genetically
modified foods?
Answer. FAS is actively engaged in the interagency process to
provide accurate information on the benefits and risks of agricultural
biotechnology to food aid recipient countries. In the wake of the food
crisis in southern Africa in the summer of 2002, USDA, the State
Department, and the U.S. Agency for International Development committed
to identifying food aid recipient countries where the issue of
biotechnology could hamper relief efforts. Since being formed in the
fall of 2002, this interagency group has also addressed new challenges
to the delivery of food aid, including the entry into effect of the
Cartagena Protocol on Biosafety in September 2003. This group has and
will continue to work with foreign countries, international
organizations and the private voluntary community to ensure that safe
and wholesome U.S. food aid reaches those in need.
Issues related to biotechnology are both varied and complex,
affecting every country to differing degrees. FAS attaches are often
relied upon in their host countries to provide answers to questions
regarding the benefits and risks of agricultural biotechnology. A high
premium is thus placed on ensuring that FAS attaches are properly
trained in all facets of agricultural biotechnology and that they
receive updated information regarding political, scientific, and trade
developments affecting biotechnology.
One of the most effective ways to encourage the acceptance and
adoption of agricultural biotechnology around the world is to provide
foreign regulators, policy makers, farmers, consumers, and members of
the media with accurate information on agricultural biotechnology. FAS
understands this and is heavily involved in developing exchange
projects that showcase the U.S. regulatory system for agricultural
biotechnology and allow foreigners to see firsthand how the technology
is being used to benefit Americans. These programs are extremely
effective in creating advocates for the technology at all levels of
society, from farmers to high ranking government officials.
International standards play an integral role in the movement in
international trade of agricultural products of all types, including
those containing the products of biotechnology. FAS plays the critical
role of representing U.S. interests in a number of international fora
that promulgate standards affecting agricultural biotechnology. FAS
works with interested stakeholders to develop and advance U.S.
positions within CODEX, the Cartgena Protocol on Biosafety, the World
Trade Organization, the Organization for Economic Cooperation and
Development, and the Food & Agriculture Organization, among others.
Playing a prominent role in these international standards setting
bodies is one of the many ways FAS encourages other countries to adopt
science-based, transparent approaches to the regulation of agricultural
biotechnology.
Question. Is USDA currently conducting any research on the effects
of genetically modified foods?
Answer. The Agricultural Research Service (ARS) has identified
three general areas for research on the effects of genetically
engineered foods: environmental effects of crops, genetic effects from
the introduction of new DNA into crop plants, and food safety/quality.
The ARS research portfolio encompasses all three areas. Safety
evaluations are currently focused on genetically engineered foods
created by ARS research.
The most notable genetically engineered food currently undergoing
scrutiny by ARS is a soybean genetically engineered to reduce allergic
reactions by two-thirds. Soy is one of the ``big eight'' sources of
food allergies, estimated to affect 6 to 8 percent of children and 1 to
2 percent of adults. The issue is especially important to vegetarians,
for whom soy protein often serves as a staple of their diet. This
example shows that genetically engineered foods can have highly
beneficial effects, and they can in fact be less risky to human health
than conventional foods.
The Cooperative State Research, Education, and Extension Service
(CSREES) also manages a Biotechnology Risk Assessment Competitive
Grants Program that supports research to examine the effects of
genetically engineered crops. This program, funded by a 2 percent set-
aside from all biotechnology research funding in USDA, is mandated to
target only environmental risks.
iraq food aid
Question. Last month it was reported that 110,000 metric tons of
wheat is destined for export to Iraq. This is good news and will
certainly be beneficial to the Iraqi people. Can you update the
Committee on the current situation regarding food aid for Iraq?
Answer. There are no U.S. plans to provide additional food aid to
Iraq this year. The renegotiated Oil for Food contracts and some
additional World Food Program commercial tenders, using Iraqi funds,
are expected to keep the pipeline sufficiently supplied into the
summer. The Ministry of Trade, through the Iraqi Grain Board, is
expected to take over commodity purchasing this spring and to buy
commodities commercially for delivery during the remainder of the year.
Additional food aid would simply displace the emerging commercial
markets in Iraq.
fsa farm loan portfolio
Question. Dr. Penn, in fiscal 2003 the delinquency rate for direct
farm operating loans was 12.5 percent and the default rate was 4.7
percent. Fiscal 2003's delinquency and default rates are similar to
past years even though last year was a good year for farm prices. Can
you explain why this is?
Answer. FSA has made considerable progress during the past 5 years
in reducing both delinquency and loss (default) rates. In fiscal year
1998, the direct farm operating loan program delinquency rate was 16.78
percent; at the end of fiscal year 2003, it was 12.5 percent. The loss
rate in 1998 was 5.6 percent, and in 2003 was 4.7 percent.
A portion of the loss rate can be attributed to long-term
indebtedness from the farm crisis period of the late 1980's and early
1990's that had never been written off the Agency's books. Some of
these debts had been reduced to judgments, which were still
uncollected. Other loans could not be finally written off because of
litigation and other circumstances.
Implementation of the Debt Collection Improvement Act of 1996 in
the past few years has resulted in more efficient and effective
collection from the judgment accounts and delinquent debtors. This has
allowed both greater recovery and final determination that some
accounts are uncollectible, resulting in writing off of the latter
debt, which had the effect of inflating losses during this period.
Question. Does USDA believe these rates are acceptable?
Answer. While the Agency would certainly like to see lower
delinquency and default rates, the current numbers represent a vast
improvement over historical rates. FSA will continue to make efforts to
reduce these numbers. However, as the Government's ``lender of last
resort,'' FSA can lend only to farmers who cannot obtain commercial
credit. Providing credit to those who do not meet standard lending
criteria will inevitably result in higher default and delinquency rates
than are experienced by commercial lenders.
Question. What specific actions are you taking to lower the
delinquency and default rates?
Answer. FSA has purchased and begun implementation of an automated,
web-based farm business planning system widely used by commercial farm
lenders. The new system will permit FSA staff to easily identify
borrowers who, as the result of economic or production issues, will
likely have financial problems. FSA loan personnel will then be able to
proactively work with them to avoid delinquencies or mitigate them
before financial problems become insurmountable. It will also help
staff work with applicants and borrowers to identify potential risks
and formulate risk management strategies.
For those cases that do go into default, FSA and the Department of
the Treasury continue to work together to enforce collection of
delinquent debt through offset of Federal payments and salaries, income
tax refunds, and a statutorily authorized portion of Social Security
benefits, as well as other methods. In some cases, offset provides
sufficient funds to cure the default, thereby reducing the delinquency
rate.
Through the cross-servicing program, Treasury contracts with
private collection agencies to locate and attempt collection from
delinquent debtors. Where the borrowers have no assets or prospects
from which collection can be made, those accounts can then be written
off, further reducing the delinquency rate.
FSA also provides primary loan servicing to delinquent borrowers,
through which their accounts can be restructured or written down to an
amount they can repay, eliminating the default.
Question. What level of delinquency and default are you aiming for?
Answer. We aim for the lowest levels possible, given the type of
customer we serve. FSA establishes goals for reduction of delinquency
and loss rates, and has already exceeded those goals for the current
year. Goals are revisited and adjusted each year, and the Agency will
continue to make efforts to reduce these rates to the greatest degree
possible.
Question. FSA is requesting a loan level of $25 million for
emergency disaster loans for fiscal year 2005. The default rate in
fiscal 2002 was 20.3 percent and 11.5 percent in fiscal 2003. Based on
historical data, we know there will be high loss rates on emergency
loans. Do the benefits of these loans justify the high levels of loss?
Answer. This assistance is available only to borrowers who have
suffered losses through natural disasters and cannot obtain credit from
commercial lenders. As in the Operating Loan program, this means that
losses will always exceed those experienced by commercial lenders.
Further, loans made to recover from disasters carry inherent risks that
do not apply to normal operating and ownership loans. However, this
program does appear to be the best method of providing assistance to
those who have suffered disaster losses, especially considering that
the alternative--grants and other aid that does not have to be repaid--
would increase the cost to the Federal Government.
Question. What specific actions are you taking to lower the default
rate?
Answer. FSA has purchased and begun implementation of an automated,
web-based farm business planning system widely used by commercial farm
lenders. The new system will permit FSA staff to easily identify
borrowers who, as the result of economic or production issues, will
likely have financial problems. FSA loan personnel will then be able to
proactively work with them to avoid delinquencies or mitigate them
before financial problems become insurmountable. It will also help
staff work with applicants and borrowers to identify potential risks
and formulate risk management strategies.
For those cases that do go into default, FSA and the Department of
the Treasury continue to work together to enforce collection of
delinquent debt through offset of Federal payments and salaries, income
tax refunds, and a statutorily authorized portion of Social Security
benefits, as well as other methods. In some cases, offset provides
sufficient funds to cure the default, thereby reducing the delinquency
rate.
performance review
Question. Based on an OMB assessment, FSA is conducting a
performance review of its loan portfolio. When will this review be
complete?
Answer. The Program Effectiveness Study of the FSA direct loan
portfolio will be complete by June 2005. Preliminary data is expected
by August 1, 2004.
Question. What do you hope to learn from this review?
Answer. We expect to learn more about financial characteristics of
program participants as a group and how those characteristics change
during the time borrowers have debts with FSA; how many participants
``graduate'' to commercial credit and subsequently return to FSA for
loans; the effectiveness of statutory assistance targets; potential
improvements for administering the ``credit elsewhere'' requirement;
and alternatives for reducing program subsidy rates.
Question. Will you please share the results of the review with this
Subcommittee?
Answer. Yes, FSA will share the findings with the Subcommittee when
the program effectiveness study is complete.
farm loan staffing
Question. FSA is requesting 100 new staff years to administer its
farm loan programs. In the FSA administrator's testimony, he states
that the new staff will ``help avert increases in direct loan
delinquency and loss rates.'' Is that the best we can do--attempt to
stop the rate of increases? Why won't these staff contribute to
decreasing the overall level of defaults and delinquencies?
Answer. The FTE request is intended to avert increases in loan
delinquency and loss rates, and continue improvement in loan
performance. FSA's Farm Loan Program has an urgent need to establish a
training ``pipeline'' of loan officers and technicians to replace large
numbers of anticipated retirees, to maintain a cadre of experienced
loan program delivery personnel. Adequate training for a loan officer
takes at least 2 years. Inadequately trained staff cannot be efficient
because they must learn as they work, and they make more and
potentially more serious errors. Because FSA farm loan programs are
complex, poorly or partially trained loan officers are prone to errors
that create substantial program vulnerability and result in higher loss
rates. Merely replacing retirees with new hires is ineffective in the
short run and will adversely affect program performance in the long
run.
Question. How was this level determined?
Answer. In determining the request, the agency took into account
the fact that resources are limited and proposed an increase that,
while not completely solving the trained loan officer ``pipeline''
problem, will be a major step in that direction.
Question. Does it not make sense to wait for the results of the
performance review before creating 100 new positions?
Answer. No, these two issues are not directly related. The Program
Effectiveness Study will provide data that will allow more informed
policy decisions, and possibly result in administrative or policy
adjustments to make the programs more effective. The FTE request is
necessary to maintain a cadre of fully trained staff which will
maintain and enhance current performance, protect the government's
financial interest in existing loans and guarantees, and help existing
borrowers stay on the path to financial success.
Question. How do you know this is the agency's most pressing need?
Answer. The Agency has a combined guaranteed and direct loan
portfolio of nearly $17 billion, annual loan and guarantee commitments
approaching $4 billion, and a commitment to assist nearly 120,000
borrowers. Farm loan programs make FSA the largest single farm lender
in the country. Given the level of financial exposure and the
anticipated scope of retirements of seasoned staff in the farm loan
programs, the need for this additional staff is critical.
crop insurance
Question. The Risk Management Agency (RMA) is currently working to
renegotiate the Standard Reinsurance Agreement (SRA). This agreement
establishes the terms and conditions under which the Federal Government
will provide subsidies and reinsurance on eligible crop insurance
contracts. Can you provide the Committee with an update on the
negotiation process and have you set a deadline for completion?
Answer. The Department announced on December 31, 2003 that the
current standard reinsurance agreement would be renegotiated effective
for the 2005 crop year. The first proposed reinsurance agreement was
made publicly available at that time. Based on the advice of the
Department of Justice, RMA established a process by which we
renegotiate the agreement individually with each company and meet with
each company in detailed negotiating sessions. Interested parties had
until February 11, 2004 to provide written comments about the proposed
agreement. RMA reviewed comments from insurance companies and
interested parties to revise the first draft. On Tuesday, March 30, RMA
announced the release of the second SRA proposal. RMA believes that the
second draft demonstrates responsiveness to concerns raised by
companies and interested parties. The proposed SRA will enhance the
Federal crop insurance program by: encouraging greater availability and
access to crop insurance for our nation's farmers; providing a safe and
reliable delivery system; and reducing fraud, waste, and abuse, while
achieving a better balance of risk sharing and cost efficiencies for
taxpayers.
As part of the process, RMA will meet with the insurance providers
in individual negotiating sessions the last 2 weeks of April and will
receive public comments until April 29. At that point RMA will evaluate
the comments and negotiating session materials and develop another
draft for discussion with the companies. There are several remaining
issues of substance to resolve before a final draft may be completed.
While it is the agency's desire to resolve them and complete the
process before July 2004, given that this is a negotiation, RMA is not
able to determine how long it will take to resolve issues to all
parties' satisfaction. Prior SRA negotiations have taken well past July
to conclude, but have not affected the continuing delivery of the
program.
Question. The Administration's Budget request for the RMA includes
an increase of over $20 million to improve information technology.
Within the increase, the Budget requests funding to monitor companies
and improve current procedures to detect fraud and abuse. Can you
explain how the department will monitor companies and improve detection
of fraud and abuse?
Answer. The current systems are based on technology that is more
than 20 years old. The information that is collected from the Insurance
Companies is distributed to a collection of 100+ databases. Any
subsequent updates or changes, received from the Insurance Companies,
to this information overlays the original information. This
architecture does not allow RMA to track changes in the submissions
from the external entities.
As the data requirements of the current data structures change from
year to year, new databases are created for each crop year. The prior
years databases are problematic due to the intense effort needed to
convert the historical information to formats that are consistent with
the more recent years. This creates problems in data analyses when
trying to use data from multiple crop years.
The requested increase in funds is directed at the establishment of
a consistent enterprise architecture and enterprise data model. This
would replace the 100+ databases with a single enterprise data model
that would be consistent across the organization. This enterprise data
model would allow data mining operations to be conducted without first
converting the data to a consistent useable format.
By moving the data to a modern relational database system RMA will
be able to track detailed changes that are made to the data that is
received from the Insurance Companies. This will allow RMA to monitor
the timing of the changes as they occur and identify those changes that
could potentially be related to fraud and abuse.
adventitious presence
Question. The U.S. government's intent to implement a science-based
policy with respect to adventitious presence (AP) was announced by the
Office of Science and Technology Policy (OSTP) in August 2002 (Federal
Register Notice 67 FR 50578). The seed, grain, and food industry
continue to face the possibility of disruptions in trade due to
uncertainty around low levels of biotech events in conventional and
biotech products. Can you update the Committee on this situation and
what actions USDA may take this year?
Answer. The biotechnology, food, and grain industries have all
identified adventitious presence (AP) as a priority issue and
development of an AP policy is a priority for APHIS as well. AP refers
to the intermittent low-levels of biotechnology derived genes and gene
products occurring in commerce as a result of the field testing of
biotechnology crops. In August 2002, OSTP began coordinating a
government-wide approach to AP, which involves updating APHIS field
testing requirements and establishing early food safety assessments at
the Environmental Protection Agency and the Food and Drug
Administration. APHIS has participated in the Agricultural
Biotechnology Working Group (ABWG) to develop an AP policy under the
auspices of the White House and OSTP. APHIS is working as quickly as
possible to establish an AP policy as part of its upcoming regulatory
revisions.
rental assistance
Question. Mr. Gonzalez, GAO has recently assessed the Rural Housing
Service's rental assistance program. I understand that USDA does not
generally agree with GAO's conclusions. Does USDA agree with the idea
that rental assistance contracts should last only as long as the life
of the contract, that is, in our current situation, for 4 years?
Answer. RHS has worked diligently over the last 6-7 years to
estimate rental assistance (RA) needs as closely as possible to the
contract term. However, it is impossible to estimate the contracts
exactly due to tenant turnover and market conditions in the last 2
years of the contract. Therefore, requiring a set term provides an
additional burden to both the borrower and the Agency in the monitoring
of these contracts. Within the last year, automated technology has made
it possible for the Agency to drill down to a per-property basis to
determine the most current usage rate of rental assistance. Development
of an automated rental assistance forecasting tool, now completing the
testing phase, will enable RHS to establish a more accurate per
property cost of RA over the life of the contract.
Question. Do you believe that the fiscal 2005 request will be
completely spent within 4 years (If not, why not?)
Answer. RHS believes that the fiscal 2005 request will be
completely spent within 4 years.
management control review
Question. Mr. Gonzalez, I understand that the rental assistance
program will undergo a ``Management Control Review'' this month. Who
will conduct this review?
Answer. The Financial Management Division of the Rural Development
mission area oversees the conduct of all Management Control Reviews
(MCRs) within RD done on all programs deemed assessable. This includes
most loan and grant programs, including the Section 521 Rental
Assistance Program. The review is performed by subject matter experts,
generally 8-10 field staff who work in the particular program area, as
well as Civil Rights personnel, who conduct their review from a
perspective of fair housing regulations and civil rights compliance.
Question. Why did you choose to begin this review?
Answer. MCRs are generally done on a 5-year cycle. In this case,
the last MCR done on the Section 521 program was in 1999 and is due
again in 2004.
Question. What are the goals of this review?
Answer. The general goals of a MCR are to improve the
accountability and effectiveness of USDA's programs and operations
through the use of sound systems of internal and management controls.
The specific objectives of the MCR on Section 521 assistance are to
ensure:
--Priority of Rental Assistance (RA) applications properly processed
in accordance with RD Instruction 1930-C Ex. E IV;
--That any denial of RA requested is in accordance with RD
Instruction 1930-C Ex. E V C 4;
--Recordkeeping responsibilities are in accordance with RD
Instruction 1930-C Ex. E VII & X;
--That borrower's administration of the RA program is in accordance
with RD Instruction 1930-C Ex. E VIII;
--That assigning RA to tenants is in accordance with RD Instruction
1930-C Ex. E XI;
--Suspending or transferring existing RA is in accordance with RD
Instruction 1930-C Ex. E. XV;
--That unused RA units are reviewed and transferred in accordance
with RD Instruction 1930-C Ex. E XV B 5;
--That AMAS (the automated multifamily accounting system) is
maintained to support the Rental Assistance program.
Question. Will you please share the results of the review with this
subcommittee?
Answer. The MCR is expected to be completed this summer, and the
report should be available by August 2004. RHS will provide the
subcommittee with a copy of the report at that time.
comprehensive program assessment
Question. Mr. Gonzalez, the Section 515 housing program is
currently undergoing a ``Comprehensive Program Assessment''. When will
the Comprehensive Program Assessment be complete?
Answer. Our target date for completion of the physical inspections
and market analysis portions of the study is the summer of 2004.
Question. How much did this assessment cost?
Answer. The assessment cost is $1.8 million
multifamily housing
Question. As part of this review, why did USDA choose to evaluate
the organizational structure of the Multifamily Housing division?
Answer. The Section 515 Rural Rental Housing program has 17,314
properties in its portfolio as of April 2003. We have undertaken an
effort to develop a comprehensive assessment of these properties. The
Rural Housing Service has initiated an effort to determine the
condition of the portfolio from several perspectives. The Comprehensive
Property Assessment (CPA) has several objectives, all of which are
designed to provide an all-encompassing evaluation of the state of the
portfolio. These objectives include:
--Assessment of property's physical condition,
--Assessment of property's financial health,
--Assessment of property's position in the real estate rental market,
--Determination of continuing need for this rental housing,
--Assessment of needed capital improvements and cost,
--Assessment of future capital reserve needs,
--Analysis of prepayment potential, and
--Analysis of prepayment incentive costs to retain properties/use
restrictions.
The Department convened a Multifamily Advisory Group to oversee
completion of the study, and ICF Consulting, Inc. was hired in
September 2003 to undertake the study. At the completion of this study,
we will be able to determine the long-term capital needs of the
portfolio for budget purposes.
The study will make recommendations on needed modifications to the
program delivery system to meet the long-term capital needs of the
portfolio.
broadband
Question. The Rural Broadband Program has received a great deal of
interest from Congress, rural communities, and the broadband industry.
Of particular interest is the status of many of the loan applications.
Could you please provide us with an update on the loan program and some
of the issues you are dealing with?
Answer. There are 40 loan applications pending totaling $438.8
million; 14 loans have been approved totaling $201.8 million; 20 loan
applications totaling $300.3 million have been returned as ineligible;
and 17 loan applications totaling $195.4 million have been returned as
incomplete.
The Broadband loan program is distinctive from all other lending
programs within the RUS portfolio. Broadband is currently viewed as a
commodity that must be properly marketed and potential customers must
be made aware of the benefits of broadband service if they are to spend
their discretionary dollars on it. As such, it is difficult to predict
what penetration rates will be today and in the future.
Nearly half of the applicants are ``start-up'' companies with
little, if any, history of doing business in this industry. There are
two distinctly different characteristics at play-competition (rather
than a monopolistic environment) and multi-state businesses (rather
than a single cooperative serving a single rural community).
Applications for the Broadband Program are different from those in
the other RUS infrastructure programs. Very few of these applications
are designed to serve a single rural community or even a small grouping
of geographically close rural communities. Most are applications
requesting to serve 50, 75, or in excess of 100 rural communities in
multiple states.
Furthermore, the vast majority of the communities already have
broadband service available in some of the proposed service area; in
some instances, from more than one provider. To determine financial
feasibility, RUS must determine what portion, if any, of a competitive
market the applicant will be able to penetrate. As a result, working
with each applicant is also uniquely time consuming.
Finally, many of the first applications submitted were assembled
hastily to secure positions due to our first-in first-out review
procedures. Valuable time was used helping applicants assemble complete
loan application packages.
Based on this experience, RUS changed its review procedures to
expedite reviews and has instituted new techniques to determine whether
an application is complete and can be processed; is incomplete but can
be completed with the submission of additional information; is
incomplete and will require a significant amount of additional work and
must, therefore, be returned; or is ineligible and must be returned.
______
Questions Submitted by Senator Herb Kohl
dairy forward contracting
Question. Dr. Collins, in 1999, Congress passed legislation to set
up a dairy forward contracting pilot program, which is set to expire at
the end of this year. Dairy forward contracting allows buyers and
sellers of milk to voluntarily agree upon delivery of a specific amount
of milk for a set price over a specified period of time. About 655 of
Wisconsin's 16,000 dairy farmers have participated in this pilot
program. Many of them recommend making this voluntary program permanent
because it gives them a new way to manage risk. What is the
Administration's position on this program? Does the Administration
support legislation that would make the dairy forward contracting
program a permanent program?
Answer. The Consolidated Appropriations Act of 2000 required USDA
to conduct a study to determine the impact of the Dairy Forward Pricing
Pilot Program on milk prices paid to producers. Data from the mandated
study indicates that the program can help stabilize the price dairy
producers receive for their milk and thereby be a valuable risk
management tool. For this reason, USDA does not oppose extending or
making permanent the current Dairy Forward Pricing Pilot Program.
export market problems
Question. Following the BSE discovery in Washington State last
December, our beef export markets were badly shaken. Similarly, we have
seen problems with certain poultry export markets due to avian
influenza. In both of these cases, the problem originated in another
country and was imported to the U.S. Open markets are a two way street,
they allow our products to move in foreign commerce, but they also
raise the possibility that we are importing serious problems.
Please update us on what USDA is doing to reopen export markets for
our beef and poultry products. Also, can you please comment on how we
protect our export markets from problems which are, themselves, foreign
in origin?
Answer. Re-opening foreign markets for U.S. beef and beef products
is a top priority for USDA. As a result of USDA's efforts, Mexico and
Canada, which are the second and fourth largest U.S. beef export
markets, have opened their markets to selected U.S. beef, beef
products, and ruminant by-products exports. Further, USDA is working
very closely with NAFTA trading partners to harmonize animal health
standards and regulations with regard to Bovine Spongiform
Encephalopathy (BSE).
USDA continues to work closely with foreign trading partners to re-
establish U.S. beef and beef product exports as quickly as possible. We
are working with foreign officials at all levels to personally assure
them of our robust safeguards and to indicate that trade can safely
resume. The Animal and Plant Health Inspection Service (APHIS) was in
constant contact with its counterparts providing them with updates on
the BSE investigation, as well as new USDA regulatory policies imposed
on BSE testing and specified risk material (SRM) removal. USDA
continues to be engaged with foreign governments at the technical level
responding to all of their questions and encouraging them to make trade
decisions based on sound science.
With respect to poultry exports, USDA responded quickly and
effectively to control the spread of Avian Influenza (AI) in the AI-
affected states. Throughout this process, USDA officials were in
constant contact with their foreign counterparts to provide timely
information about the outbreaks and quarantine control measures. U.S.
export markets accounting for 66 percent of total U.S. poultry meat
export value continue to import U.S. poultry meat. In 2003, the export
value of poultry meat to these markets was $1.31 billion.
On April 1, the USDA Chief Veterinary Officer (CVO) announced the
completion of the required surveillance and testing protocols per the
World Animal Health Organization (OIE) guidelines. An official request
from the CVO has been sent to major U.S. poultry export markets
requesting the removal of all import bans on U.S. poultry and poultry
product imports. The Department, at all levels, is diligently pursuing
with its trading partners the lifting of all AI trade restrictions on
products from the United States. By the summer of 2004 or earlier, the
remaining countries imposing nationwide bans on U.S. poultry meat are
expected to at least regionalize their import bans to those states
affected by Low Pathogenic Avian Influenza (LPAI).
The U.S. Department of Agriculture takes protecting U.S.
agriculture from animal and plant diseases very seriously. APHIS makes
its regulatory decisions using a science-based evaluation. Before
approving a product for import from a given country, a rigorous risk
assessment is conducted to determine the risk associated with
introducing a particular disease. Once approved, APHIS continues to
monitor that country's animal health standards to ensure implementation
is enforced. Because of these standards and controls, USDA can assure
countries that imports of agricultural and food products from the
United States are wholesome and fit for human consumption.
genetically modified crops
Question. USDA has pointed out the ever-increasing importance of
biotechnology and its implications for U.S. agricultural trade. The
more U.S. agricultural production includes elements of genetically
modified (GM) materials, the more at risk our foreign markets become as
long as there is a general reluctance throughout the world to accept
such products.
Over the past several weeks, items appeared in the Washington Post
and the New York Times reporting that genetically modified traits are
appearing in traditional seed supplies with unknown consequences.
Secretary Penn, given the fact that there has been a tremendous
increase in U.S. production of GM crops, and given the trade
implications, do you think that we have allowed for too much production
of biotech crops before we knew we had the knowledge and tools in hand
to make sure contamination would not occur? In other words, have we
moved so quickly on biotech crops that we have placed our exports
markets at risk?
Answer. USDA's Prospective Plantings report, released on March 31,
2004, indicates that U.S. production of crops produced using modern
biotechnology will continue to increase in 2004. However, U.S. farmers
are not alone in their rapid adoption of this technology. According to
the International Service for the Acquisition of Agri-biotech
Applications, 2003 saw the 7th year of double-digit global growth in
the production of biotech crops. Over 7 million farmers in 18 countries
produce 167 million acres of crops enhanced though modern
biotechnology. Farmers are increasingly using biotechnology for
improved control of pests and weeds. In addition to these economic
benefits, in some instances, farmers are realizing environmental
benefits through increased use of no-till' and reduced use of chemicals
and fuel.
USDA will continue to work very hard to promote U.S. crops in
overseas markets and is engaged on many levels to provide trading
partners with accurate information regarding the benefits and risks
associated with agricultural biotechnology.
Question. What steps are you taking to meet concerns of some
countries that won't even accept GM crops as food aid?
Answer. FAS is actively engaged in the interagency process to
provide accurate information on the benefits and risks of agricultural
biotechnology to food aid recipient countries. In the wake of the food
crisis in southern Africa in the summer of 2002, USDA, the State
Department and the U.S. Agency for International Development committed
to identifying food aid recipient countries where the issue of
biotechnology could hamper relief efforts. Since being formed in the
fall of 2002, this interagency group has also addressed new challenges
to the delivery of food aid, including the entry into effect of the
Cartagena Protocol on Biosafety. This group has and will continue to
work with foreign countries, international organizations, and the
private voluntary community to ensure that safe and wholesome U.S. food
aid reaches those in need.
Issues related to biotechnology are both varied and complex,
affecting every country to differing degrees. USDA's Foreign
Agricultural Service (FAS) attaches are often relied upon in their host
countries to provide answers to questions regarding the benefits and
risks of agricultural biotechnology. A high premium is thus placed on
ensuring that FAS attaches are properly trained in all facets of
agricultural biotechnology and that they receive updated information
regarding political, scientific, and trade developments affecting
biotechnology.
One of the most effective ways to encourage the acceptance and
adoption of agricultural biotechnology around the world is to provide
foreign regulators, policy makers, farmers, consumers, and members of
the media with accurate information on agricultural biotechnology. FAS
understands this and is heavily involved in developing exchange
projects that showcase the U.S. regulatory system for agricultural
biotechnology and allow officials from other countries to see firsthand
how the technology is being used to benefit Americans. These programs
are extremely effective in creating advocates for the technology at all
levels of society, from farmers to high-ranking government officials.
International standards play an integral role in the movement in
international trade of agricultural products of all types, including
those containing the products of biotechnology. FAS plays the critical
role of representing U.S. interests in a number of international fora
that promulgate standards affecting agricultural biotechnology. FAS
works with interested stakeholders to develop and advance U.S.
positions within CODEX, the Cartgena Protocol on Biosafety, the World
Trade Organization, the Organization for Economic Cooperation and
Development, and the Food & Agriculture Organization, among others.
Playing a prominent role in these international standards setting
bodies is one of the many ways FAS encourages other countries to adopt
science-based, transparent approaches to the regulation of agricultural
biotechnology.
sound science
Question. I agree that these crops provide the opportunity for much
improved food security throughout the world, and possibly, reduced
pesticide use. But world-wide acceptance of these products will depend
on world-wide acceptance of the science used to establish their safety.
This is true for plant science, this is true for animal science, this
is true for all science.
Dr. Jen, would you please respond to the questions that have been
raised regarding the use, or abuse, of science in the pursuit of
certain policy objectives? What are you doing at USDA to ensure that
the term ``sound science'' is a truly scientific term and not a
political term?
Response. USDA is committed to an open and transparent regulatory
process that reflects the latest science to protect America's
agricultural and natural resources. One of the purposes of our Office
of Risk Assessment and Cost Benefit Analysis is to review risk
assessments for certain regulatory actions. As part of the regulatory
process, risk assessments are also made available for comment and input
from stakeholders, industry, and the general public. Further, in the
area of biotechnology policy and regulations, we have requested input
from the National Research Council of the National Academy of Sciences.
On the question of BSE risks, we have requested analyses by Harvard
Center for Risk Analysis. These examples illustrate that we attempt to
find and use the best science based information available in a
transparent process to help guide our decisions.
downed animal risk management tools
Question. Dr. Penn, it was recently announced that downed cattle
will no longer be accepted for slaughter at plants destined for the
food chain. Since that announcement, producers have pointed to their
potential lost income as a result of this policy. Would you recommend
that RMA develop a risk management tool to help these producers seek
compensation for lost income resulting from this new policy, as crop
producers have tools for similar losses?
Answer. Section 523(a)(2) of the Federal Crop Insurance Act (Act),
states the Corporation shall not conduct any pilot program that
provides insurance protection against a risk if insurance protection
against the risk is generally available from private companies. It is
my understanding there are a number of private insurance products in
the market that cover livestock from injury or disease loss, which
would prohibit the Federal Crop Insurance Corporation Board of
Directors from approving such a product. However, if it is determined
that insurance protection for downed cattle is not generally available,
the Risk Management Agency could contract for a feasibility study to
determine if an appropriate insurance product may be developed to
protect against the risk of loss due to downed cattle.
farm loan staffing
Question. Dr. Penn, you have requested an increase of $7,395,000
for 100 new Federal permanent employees. Your justification indicated
these new employees will prevent direct loan delinquency and loss rates
from increasing and assist in loan processing and servicing. We also
understand that FSA faces tremendous problems in the future related to
large numbers of senior loan officers eligible for retirement. How will
you allocate these resources, will it be used primarily to backfill
senior loan officers in the field that retire?
Answer. The staff years would be deployed first to States with the
highest attrition rates of loan officers and secondly to high loan
volume offices.
Question. Will other factors, for example loan processing delays,
servicing of large loan portfolios be considered?
Answer. Offices with larger portfolios and those that are
experiencing difficulty in delivering farm loan programs due to lack of
trained staff will be considered. It should be noted that new hires
must complete a training program that can last up to 2 years, so the
workload in these offices will not be immediately affected.
Question. Will racial, ethnic and gender diversity be considered
when filling these positions in the field?
Answer. Certainly, there will be discussion about hiring employees
who represent the States' underserved constituencies. The States are
being encouraged to use outreach efforts to ensure that qualified
diverse individuals are hired for these positions.
Question. The farm credit programs have remained relatively flat in
the past few years. Isn't there a need to address retirement or work
flow needs in other areas of FSA that are outside of the positions
devoted to farm credit programs?
Answer. There are definitely attrition and workflow issues in other
programs within FSA. However, the farm loan program area is unique in
that adequate training for loan officers can take up to 2 years. Many
of the other jobs in FSA have training programs that would allow the
employee to be fully functional in their jobs much sooner. In the farm
loan program area, retirees cannot be replaced with untrained new
hires.
digital data maps
Question. In the Common Computing Environment account, there is a
request for $9,000,000 for FSA to complete digital data maps. In my
home State of Wisconsin, not a single county has been certified and it
is my understanding the only State that has every county certified is
Minnesota. This has been an ongoing effort for several administrations.
How many counties are certified, when do you expect to finish this
work, and what has been spent to date by FSA to complete this effort?
Answer. As of April 7, 2004, 1,767 counties have digitized common
land units (CLU's) and 381 of these counties have been certified. Of
the 72 counties in Wisconsin, 20 counties have digitized CLU's. While
only one county in Wisconsin is currently certified, certification is
planned for about 10 counties by the end of fiscal year 2004.
Within current funding constraints, approximately 2,200 counties
should be digitized by the end of the fiscal year. At the current rate,
we would expect to have as many as 600 to 800 counties certified by the
end of the fiscal year. Minnesota, Nebraska, Oregon, and Massachusetts
are fully certified, and Kansas has 102 of 105 counties certified.
To date, USDA has spent about $16,000,000 on contracts to digitize
the Common Land Unit. The expectation is that all of the CLU will be
completed except for some areas in Alaska and the territories by the
end of fiscal year 2005. Not all of the $9,000,000 in the current
request is for the CLU. Most of this request is for annual expenses for
obtaining compliance imagery (National Agricultural Imagery Program).
Question. What other Federal agencies have this capability, and can
you use their information for your purposes?
Answer. Many other Federal agencies have GIS capability and the
ability to digitize information, either directly or through contract
support. However, the Common Land Unit is information collected and
managed only by USDA. No other Federal Agency tracks this kind of
information for private (non-Federal) land nationwide. U.S. Department
of Interior, Bureau of Reclamation tracks similar information for
watersheds in the Western United States and USDA has worked with them
to share information. There are similarities between this information
and information tracked by some State and local agencies, but there is
no consistency across States and local areas and no single
authoritative source for this information outside of the Farm Service
Agency.
broadband loan program
Question. Secretary Gonzalez, please elaborate upon the RUS
broadband loan program internal review process. Your response should
detail the average timeframe for: (a) acknowledgement of an application
by RUS; (b) the actual review of an application including review by the
RUS senior loan review committee; (c) the preparation of
recommendations to the Administrator; (d) the consideration of the
recommendations by the Administrator; and (e) notification to the
applicant regarding the final ruling upon an application including
instances when any further action is requested of the applicant.
Answer. When an application is received, RUS performs an initial
review for eligibility and completeness within 20 working days. When
that review is complete, a letter is sent to the applicant detailing
the results of the review: (1) the application is complete and will be
processed; (2) the application is incomplete, including details needed
for making the application complete; or (3) the application has been
determined ineligible in accordance with program regulations. If the
application is determined to be complete, upon assignment, the
application should be processed within 60 days, including the following
committee reviews. If the application is feasible and adequately
secured, the loan is presented to the Assistant Administrator's Loan
Committee (AALC) for recommendation. At a minimum, this committee meets
twice a week or as necessary to review loans. Upon approval from the
AALC, the loan is forwarded to the Senior Loan Committee (SLC) for
review and recommendation. Again, at a minimum, this committee meets
twice a week or as necessary to review loans. The Administrator
participates as chair of the Senior Loan Committee. Upon final action
from the SLC, applicants are immediately notified of the status of
their application. If the SLC approval is conditional upon the
applicant agreeing to complete further action, then the action is
stated in the letter notifying the applicant of the status of the
application.
Question. Please provide an accounting of the total number of
applications that have been received, approved, returned, currently
under review and not yet reviewed under the RUS broadband program.
Please include detailed information about the corresponding loan levels
for each category.
Answer.
[Dollars in millions]
------------------------------------------------------------------------
Applications Number Amount
------------------------------------------------------------------------
Received................................ 93 $1,157
Approved................................ 18 216
Returned................................ 40 538
Under review............................ 34 386
Not yet reviewed........................ 1 17
------------------------------------------------------------------------
Question. When will the RUS announce the opening of the application
process for funds appropriated in fiscal year 2004? What will be the
deadline for submitting applications for fiscal year 2004 loans? What
actions have been taken by RUS to ensure that potential RUS applicants
submit complete and thorough applications?
Answer. The ``application window'' for fiscal year 2004 has been
open since the beginning of the year, since mandatory funding from the
previous year was carried forward to fiscal year 2004. There is no
``deadline'' for the submission of applications--applications are
accepted year-round. On March 24, 2004, RUS published a Notice of Funds
Availability that detailed the amount of funding available, including
the mandatory funding and the fiscal year 2004 appropriation. The
notice also detailed the amount of funding available by category (4
percent direct, direct cost-of-money, and guaranteed). The notice also
sets forth the maximum and minimum loan levels as well as the
definition of broadband service to be used for loans made this fiscal
year.
To ensure timely loan processing, RUS has been diligent in
reviewing and re-engineering its Broadband Program loan processing
procedures in an effort to expedite loan processing. The agency has
instituted new triaging techniques to more rapidly review applications
upon submission to determine whether the application is complete and
can be processed; is incomplete but can be completed with the
submission of additional information; is incomplete and will require a
significant amount of additional work and must, therefore, be returned;
or is ineligible and must be returned. In addition, field personnel
have been trained and instructed in working with potential applicant
borrowers to facilitate the submission of completed applications.
Question. Please detail the overall number of applications that
have been received by RUS under each of the various RUS Rural Broadband
Access Loan and Loan Guarantee Programs loans: (1) direct cost of money
loans; (2) direct 4 percent loans; (3) private lender guaranteed loans.
How many applications have been approved under each category of loans?
Answer. The overall number of applications received by RUS under
the requested categories follows: (1) Under the direct cost of money
category, 92 applications totaling $1,153 million. Of those, 18
totaling $216 million have been approved. (2) Only one application has
been received under the 4 percent direct program totaling $4.2 million.
This application has been approved. (3) No applications for private
lender loan guarantees have been received.
Question. Please detail the current and planned allocation of your
staffing resources among the various RUS administered programs
including how many FTE's are solely devoted to loan processing and
servicing for the broadband loan program.
Answer. The RUS telecommunications program currently has a total of
128 assigned FTEs (including the broadband program), of which 113
positions are filled. This office is responsible for the
telecommunication loan program, DLT, Broadband loans and grants and
other programs like the weather radio grant program. No new FTEs have
been added since receiving the broadband program and the Local to Local
TV loan guarantee program.
A team of 14 headquarters individuals were initially assigned to
the Broadband program. Under a recently approved reorganization plan,
approximately 25 individuals will be assigned to it, pending filling
vacancies which currently exist.
Question. Secretary Gonzalez, please provide the private contracts
for services including the dollar amount and purpose that were provided
in fiscal year 2003 and fiscal year 2004 to date. Please include carry-
over funds from previous appropriations that have been placed in the
FISERV and GOVWORKS accounts.
Answer. The information is provided for the record.
[The information follows:]
RBS--BUSINESS PROGRAMS
----------------------------------------------------------------------------------------------------------------
FISCAL YEAR PERFORMING AGENCY AMOUNT PROJECT
----------------------------------------------------------------------------------------------------------------
2003.................................... Mineral Management Service $60,000 Enhancement to RBS Data
(GovWorks). Project.
2003.................................... GSA/FEDSIM................ 97,000 Web-delivery of Moody's
Financial Analyst
software training.
2003.................................... Farm Credit Administration 542,600 Assist redevelopment of
the Business Programs
Assessment Review
process.
2003.................................... GovWorks.................. 30,000 Assist in development of
regulations for Section
9006 of the Farm Bill.
2004.................................... MACTEC (GovWorks)......... 25,712 Assist in development of
regulations for special
project for Under
Secretary.
----------------
Total............................. 755,312
----------------------------------------------------------------------------------------------------------------
guaranteed single-family housing program
Question. Secretary Gonzales, the President's budget request for
the Section 502 Guaranteed Single-Family housing program for fiscal
year 2003 was below what your agency really needed. I have been told
you face similar problems for fiscal year 2004. In fiscal year 2003,
this Committee, at USDA's informal request, provided an additional $900
million in loan authority. Now, we are told by concerned housing
lenders that the President's request for fiscal year 2005 will once
again fall short and you will be forced to shut this program down prior
to the end of the fiscal year.
Since this program is highlighted as part of the President's
Homeownership Initiative, why haven't you asked for a reasonable
program level to carry you through this year? Will this program run out
of money before the end of the year? If so, when?
Answer. The Agency is considering administrative measures to
supplement its program level this fiscal year. Early this year, we
discussed funding management options with the Office of Management and
Budget and Senate and House staffs. We are in the process of approving
and implementing some of the options we discussed, including a 25 basis
point increase in the fee on guaranteed loans. Certain administrative
transfers of funds are also being considered. These should alleviate
any problems that might have arisen due to the demand for funds
exceeding the amount of funds available in 2004.
Question. Will you ask this Committee again to increase this
program during this current fiscal year or in fiscal year 2005 prior to
the depletion of funds?
Answer. There are no plans to request an increase in the Guaranteed
Loan Program funding during the current fiscal year and we do not
anticipate requesting an increase to GLP funding during fiscal year
2005.
Question. The President's fiscal year 2005 budget request increases
the origination fee from 1.5 percent to 1.75 percent. Additionally, I
understand that you may consider raising this fee administratively to 2
percent during the current fiscal year to stretch your funding. In
fiscal year 2003, the President's Housing Initiative at RHS entitled
``Lowering Fees to Reduce Barriers to Minority Homeownership'' reduced
the fee for this program from 2 percent to 1.5 percent. What impact
will reinstating what you previously considered a ``barrier'' have on
borrowers?
Answer. The 25 basis point increase in the fee will be negligible
for homebuyers. The increase of less than $250 per loan will not be a
barrier to homeownership. The resultant monthly payment increase will
be about $2, on average. Raising the fee will allow about 1,000 more
families to be served this year than would have been possible
otherwise.
Question. When you run out of funding before the end of the year,
do you lose many rural lenders you have worked so hard to bring into
the program? What will you do to keep these lenders in the program?
Answer. We are currently exploring the potential of transferring
unused budget authority to the program.
section 515 multi-family housing program
Question. Transfers of Sec. 515 properties typically require new
financing from sources other than USDA--from banks, Low Income Housing
Tax Credit equity investors and public agencies. RD typically does not
give any indication prior to the transfer itself that it will approve
the resources and other items it must provide required for the transfer
to work. Would the Department be able to provide formal binding
commitments (with reasonable conditions for final approval and closing,
as other lenders do) at a stage earlier in the transfer process in
order to facilitate the approvals of other parties to transfer
transactions?
Answer. The Department has tried to be sensitive to the timing
requirements of our lending partners, while at the same time,
performing the required due diligence for underwriting transfers and
maintaining as much flexibility as possible. We have modified our
proposed regulations and will soon issue an Administrative Notice (AN)
designed to improve and streamline transfer processing. In addition,
the Department has been actively working to develop methods to ease the
transfer process. We are currently working with Fannie Mae and the
Federal Home Loan Mortgage Corporation (FHLMC) to create a standardized
process to accommodate transfers that involve multiple parties. This
process, once completed, will remove duplication of effort for each
agency and allow for work done by either Fannie Mae or FHLMC to be
accepted by Rural Development and vice versa. Another step that has
been taken by the Agency is the proposed transfer that will replace RD
AN 3767 (1965-B). The new AN outlines standardized processing
guidelines and a checklist for the transfer process. This will ensure
that all transfers completed by Rural Development are consistent across
the country. The Agency is attempting to utilize more creative and
innovative approaches and is developing alternative tools to leverage
other financing in our multifamily properties. Through these steps, we
hope to expedite the transfer process.
Question. Under what conditions will Rural Development approve
forgiveness of Section 515 debt? What has been RD's historical
experience--under what circumstances and for what amounts has RD
approved debt forgiveness and when has the Department not approved
this? Is there national policy (regs, ANs) providing guidance? What are
the constraints? Is debt forgiveness viewed as a tool to facilitate
transfers of Sec. 515 properties?
Answer. Rural Development has approved forgiveness of debt in
circumstances where the appraised value of the property no longer
supports the debt and the borrower intends to make substantial
improvements to the property to prevent loss of affordable housing.
This has occurred when the property is being rehabilitated or when
transfers are required due to administrative or legal actions. In these
instances, no equity exchange is made. Historically, Rural Development
has written off $171,800,000 since inception of the housing loan
programs. This represents 1,013 loans. This is 1.45 percent of the
$11.8 billion multifamily portfolio. Most recently, RD has received 5
debt forgiveness requests in the last 3 years: three of those were
disapproved and two were approved. The National policy governing debt
forgiveness is in regulation 7 CFR Ch. XVIII 1956 Subpart B, which is
provided for the record. Debt forgiveness is not viewed as a tool to
facilitate transfers of Section 515 properties but rather a method by
which to retain properties that would otherwise no longer be available
because of severe deterioration, bankruptcy or foreclosure, or legal
action against the borrower. [The information follows:] 1956.54 Debt
forgiveness. For the purposes of servicing Farm Loan Programs
(FPL)loans, debt forgiveness is defined as a reduction or termination
of a direct FLP loan in a manner that results in a loss to the
Government. Included, but not limited to, are losses from a writedown
or writeoff under subpart S of part 1951 of this chapter, debt
settlement, after discharge under the provisions of the bankruptcy
code, and associated with release of liability. Debt cancellation
through conservation easements or contracts is not considered debt
forgiveness for loan servicing purposes.
Question. Nonprofit owners of Sec. 515 properties are not permitted
any distributions of project surplus cash as are for profit owners.
What would be the Department's position on establishing a national
policy allowing non profit owners a fee from surplus cash in order to
cover the costs of asset management, accounting, compliance reporting
and other obligations to government, lenders and investors which
participate in the financing of transfer and rehabilitation of older
properties? Currently, there is a mixture of state RD guidance in this
area.
Answer. The proposed regulation 3560 included a provision for
nonprofit borrowers to earn an asset management fee in lieu of a return
to owner. This fee is intended to pay expenses directly attributable to
ownership responsibilities. Many nonprofit borrowers also serve as the
property management agent and, as such, are entitled to a management
fee. In these identity of interest situations, we must ensure that
duties as outlined in the management plan are appropriate to earn a
management fee but are not also charged as an asset management fee. A
final rule on the regulation is being developed.
rental assistance
Question. What do you do with rental assistance in projects that
prepay? How is it distributed?
Answer. Rental assistance in properties that prepay their mortgage
is returned to the State for distribution in accordance with Regulation
1930 Subpart C, Exhibit E, paragraph XV A 2.
Question. I understand that you have indicated there is not enough
rental assistance for preservation efforts. Have you or will you
consider unobligated transfers to this account similar to your activity
in the last 2 years with the Section 502 guaranteed program? Isn't
preservation a priority with this administration?
Answer. Preservation of the multifamily portfolio has been and
continues to be a priority with this Administration; however, the
Agency does not have the authority to convert other appropriated funds
to rental assistance.
section 502 single-family housing programs
Question. It has come to the Committee's attention that RHS has
different policies for making section 502 direct and guarantee loans
available under continuing resolutions. We understand that, in general,
less money is made available for direct loans under continuing
resolutions and that this policy has made it more difficult for
builders to plan for and deliver houses for construction under the
direct program. We understand that this is particularly a problem for
self help housing.
Please describe for the Committee the differences between the
policy for direct loans and guarantee loans, and the spending for the
two programs under the fiscal year 2004 continuing resolutions. Also,
please explain why RHS has different policies. Finally, please make
recommendations to the Committee on ways in which section 502 direct
loans could be administered during continuing resolutions so that
delays in obligation of funds and construction may be minimized.
Answer. Priority is given to all Rural Development housing programs
during periods covered during continuing resolutions (CR). However,
there is a difference between our direct and guaranteed programs. In
the direct program, since Rural Development controls the application
process, we can notify applicants to not be actively signing contracts
to purchase a home. In the guarantee program, Rural Development does
not work directly with the homebuyer. These homebuyers work with real
estate agents, builders, and over 2,000 private sector lending
institutions that are unfamiliar with a lender not having available
funding. When 502 guaranteed funds are not available, it is not just
the consumer who is affected but also private sector lenders and the
financial markets that are vital to the economy. Thus, while 502 direct
loan customers are a priority, a higher priority during continuing
resolutions is given to section 502 guaranteed customers, private
sector lenders, and the secondary markets.
Realizing the realities of the annual appropriations process, the
Agency does its best to manage its programs within the authorities
available. We would be happy to work with the committee to come up with
solutions to keep both programs operating through the CR process.
Question. According to the USDA Economic Research Service, 4
million, or 17 percent of the households in non-metro areas, are
classified as being in housing poverty. Households are defined as being
in housing poverty when their housing has at least one of four
important indicators of housing disadvantage:
--Economic need--housing costs over 50 percent of household income;
--Inadequate quality--physical quality defined as moderately or
severely inadequate using the HUD measure based on 26
indicators of physical problems;
--Crowding--more household members than rooms; and
--Neighborhood quality--perception of poor quality in at least 2 out
of 4 neighborhood conditions (crime, noise, inadequate public
services, and litter/deteriorating housing).
How many units of housing will the Rural Housing Service finance
with the budget authority requested in the fiscal year 2005 budget? How
does this relate to the need?
Answer. USDA expects to finance approximately 11,900 units of
Section 502 Single Family Housing through the Direct loan program and
approximately 27,000 units through the Guaranteed program in fiscal
year 2005.
Question. What is the dollar value of Section 502 direct loan
applications on hand?
Answer. As of May 24, 2004, there is a backlog of demand totaling
approximately $3.3 billion.
Question. Last year, the Administration made much of the increase
in homeownership spending and its priority for home ownership. Now, a
year later, RHS proposes to reduce section 502 loans by more than $200
million. Is homeownership less important than last year?
Answer. For fiscal year 2005, an expectation of increasing interest
rates causes the subsidy rate for the Direct Section 502 program to
increase. Therefore, while we are dedicating slightly higher budget
resources to the Direct program, the supportable program level is down.
For fiscal year 2004, we were able to support a dramatic increase in
the Direct loan program and we proposed a 30 percent increase in the
program level. For fiscal year 2005, the proposed program level of $1.1
billion is still higher than the fiscal year 2003 program level.
Despite the budget constraints, we were also able to keep the Section
523 Mutual and Self-Help Technical Assistance program at level funding.
The Administration is committed to increasing rural homeownership and
in particular, meeting our minority homeownership goals. We plan to
manage our resources responsibly and to maximize the results in order
to meet our program goals.
subsidy rates
Question. I understand that the subsidy rate for rural housing
loans has increased. What is the basis for the increase in subsidy
costs? What are the elements of the subsidy cost calculations?
Answer. The subsidy rates for Federal loan programs are affected
annually by changes in technical assumptions such as default rates,
prepayments, or fees and also by the economic assumption of interest
for the term of the loan. The technical assumptions for every program
are updated annually to reflect the most recent year's performance.
Additionally, new interest rates are set by OMB annually. The change in
interest rates affects all Federal credit programs and is not unique to
USDA. These changes are routine upward or downward changes that reflect
the cost of borrowing by the Federal Government to finance its credit
programs. I will provide for the record a more detailed summary of the
changes by program.
[The information follows:]
The change in the subsidy rates for the following Rural Housing
Service (RHS) programs is due primarily to the change in interest
costs. Changes were also due to technical changes, but those changes
were minimal.
Increased Subsidy Rate from 2004 to 2005:
--Section 504 Very Low-Income Housing Repair Loans;
--Section 515 Multi-Family Housing Loans; and
--Multi-Family Housing Credit Sales.
Decreased Subsidy Rate from 2004 to 2005:
--Section 502 Guaranteed Refinance Single Family Housing Loans
The change in the subsidy rate for the following RHS programs is
due primarily to changes in technical assumptions such as defaults,
fees, and prepayments. Changes were also due to the interest rate
change, but that change did not account for the primary shift in cost.
Increased Subsidy Rate from 2004 to 2005:
--Direct Section 502 Single Family Housing Loans;
--Direct Section 514 Farm Labor Housing Loans; and
--Single Family Credit Sales of Acquired Property Loans.
Decreased Subsidy Rate from 2004 to 2005:
--Section 502 Guaranteed Single-Family Housing Purchase Loans;
--Section 538 Guaranteed Multi-Family Housing Loans;
--Section 524 Housing Site Development Loans; and
--Section 523 Self-Help Land Development Loans.
The Direct Section 502 Single Family Housing Loan program has a
higher subsidy rate due to the increase in payment assistance.
The Direct Section 514 Farm Housing Loan program has a higher
subsidy rate due to the increase in the net default component.
The Single Family Housing Credit Sales program has a higher subsidy
rate due to the change in prepayments and the subsequent change in the
unpaid principal balance.
The Section 502 Guaranteed Single Family Housing Purchase Loans
program has a lower subsidy due to the increase in the upfront fee
percentage from 1.50 percent in 2004 to 1.75 percent in 2005.
The decrease in the subsidy rate for the Guaranteed Section 538
Multi-Family Housing Loan program was the result of an increase in the
annual fee percentage to 0.50 percent in 2005 and a slight increase in
the percentage of program level receiving interest assistance.
Methodologies used for calculating defaults, recoveries, and
scheduled collections changed for both the Section 524 Site Development
and Section 523 Self-Help Development programs. Program performance
assumptions are based on historical program performance on a loan-by-
loan basis. Prior to this, program assumptions were based on the
historical trend of the total portfolio.
repair and rehabilitation
Question. The budget requests $60 million for rural rental housing.
This amount does not include any funding for new construction. This is
the third consecutive year that the Administration has not requested
funds to finance new rental housing units. Does the Administration plan
to seek new construction any time in the future?
Answer. Over 45 percent of the Section 515 portfolio is 20 years
old. Many of our apartment complexes are in need of repair and
rehabilitation. The average apartment complex has reached the age where
major components such as roofs, cabinets, siding, and heating and
cooling systems need to be replaced. Ensuring that our residents
continue to be housed in decent, safe, and sanitary rental housing
continues to be one of the Agency's top priorities and will be our
focus in fiscal year 2005. We believe it is appropriate for the Agency
to focus its efforts on maintaining the existing stock of housing.
Question. I understand that the Sec. 515 portfolio is aging and
that close to 10,000 of the 17,000 developments across the country are
more than 20 years old. Does RHS have an estimate of the overall dollar
need for restoration of existing Section 515 developments?
Answer. We estimate that approximately 45 percent of the portfolio
has been in operation for 20 years or more. We do not have an estimate
of the overall dollar need for restoration of existing section 515
developments. However, below is the recent history and projections of
requests and funding for rehabilitation loans.
REPAIR AND REHABILITATION LOANS
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year Requests Funded Not Funded
----------------------------------------------------------------------------------------------------------------
2000............................................................ 128,900 54,900 74,000
2001............................................................ 128,900 50,900 78,000
2002............................................................ 139,500 49,000 90,500
2003............................................................ 139,000 60,000 79,000
2004 (est.)..................................................... 167,100 55,800 111,300
2005 (est.)..................................................... 160,000 60,000 100,000
-----------------------------------------------
Total..................................................... 863,400 330,600 532,800
----------------------------------------------------------------------------------------------------------------
Question. The Department has recently hired a consulting firm to
assess the Section 515 portfolio. What is the status of that report?
Can you share with the Committee any preliminary findings?
Answer. The fieldwork has been completed. The report will not be
available until late this summer. At that time we would be more than
willing to share the report and its recommendations with the Committee.
Question. In recent years, due to budget cuts RHS has offered
little in the way of incentives for section 515 owners to maintain
long-term use. This lack of funding has prompted both the courts and
the Congress to consider the provision of the law that regulates
section 515 and provides incentives. All section 515 tenants are low
income--with an average annual income of approximately $9,000--and two-
thirds are elderly or disabled households. What is RHS doing to resolve
this issue so that owners are compensated consistent with the law and
tenants are not displaced?
Answer. The Agency is working with Fannie Mae, Freddie Mac,
nonprofit organizations and public housing authorities to alleviate
some of the demand for preservation incentives. These efforts are slow
in providing relief because due diligence must be done to ensure that
each participant maintains integrity to its authorizing statute,
charter and/or by-laws. The Agency is working very closely with
partners such as Fannie Mae and Freddie Mac to realize some
preservation and rehabilitation deals yet this year.
prepayments in section 515 program
Question. If Congress, or the courts, lifted the restrictions in
the 1987 Housing Act, what is your estimate of the number of units that
would be lost and the number of households that are likely to be
displaced?
Answer. It is difficult to project the number of borrowers who will
prepay their mortgage. Considerations such as motivation, real estate
market, and economic conditions all play a role in determining the
likelihood of prepayment. While approximately 11,000 properties are
eligible to prepay (mortgages made prior to 1989), our most recent
prepayment history has been averaging about 100 properties a year or
less than 1 percent of those eligible.
rental assistance program
Question. The fiscal year 2004 Appropriations Conference Agreement
and the fiscal year 2005 budget request reduce the total for rural
rental assistance, by reducing term of contracts from 5 years to 4
years. What are the implications of this change for future budgets?
What are the annual estimates of costs for the contracts expiring
fiscal year 2004? Is the appropriation adequate to cover more than the
4-year period?
Answer. The objective of RD's estimation of rental assistance needs
is to predict as closely as possible the exact amount of rental
assistance needed at each property. However, predicting these costs is
not an exact science, especially in recent years as property and health
insurance, and benefits and utility costs have driven up property
expenses and increased the rate of rental assistance usage. In theory,
the 4-year contracts written in fiscal year 2004 should last 4 years,
until fiscal year 2008. In reality, the rate at which contracts use
rental assistance changes every month and their funds'exhaustion date
changes as well. However, the impact of fixed terms on these contracts
is that all fiscal year 2004 contracts, except those which exhaust
funds prior to fiscal year 2008, will be renewed in fiscal year 2008.
These fiscal year 2004 renewal contracts will be added to the expected
number of renewals needed for contracts written prior to fiscal year
2004 and expected to expire in fiscal year 2008. Our estimate at this
time is that all 40,754 fiscal year 2004 contracts will need renewals
in fiscal year 2008 and 33,435 contracts written prior to fiscal year
2004 will need renewals in fiscal year 2008 for a total number of
contracts requesting renewals in fiscal year 2008 of 74,189.
Question. The recent GAO Study ``Standardization of Budget
Estimation processes Needed for Rental Assistance Program'' and
testimony before the House of Representatives last year indicated that
there is a large sum of unspent rental assistance funds in existing
contracts. What is the status of these funds, how much is unspent? Have
you or will you work with owners that have large unobligated rental
assistance funds to voluntarily change existing contracts for
preservation and other purposes?
Answer. The amount of unliquidated obligations on rental assistance
contracts entered into between 1978 and 1999 was $597,000,000 as of
December 30, 2003. RHS does not have the authority to amend the current
RA Agreements to allow rental assistance funds obligated for a project
to be used for other purposes. Such a use of funds would be a violation
of the legislation that appropriated the funds. To allow RHS to enter
into such amendments, Congress would have to specifically authorize the
expenditure of such funds for other purposes as the Congress would like
to authorize.
Question. Secretary Gonzalez, in fiscal year 2003, my State of
Wisconsin had four applications for funding through the Section 525
Technical Assistance Account to provide homeownership education for our
rural residents. Wisconsin has historically received funding for our
good work in this area. In the fiscal year 2003 selection process, I
understand the Administration selected priority states primarily within
one region of the country with the justification that there was not
enough funding to reach more applicants for other regions of the
nation. I included language in the fiscal year 2004 bill that doubled
the account and provided limits any one state could receive under this
account.
How will you ensure that states like Wisconsin will receive a fair
playing field for consideration for the funds available this fiscal
year?
Answer. A Notice of Funding Availability (NOFA) for the fiscal year
2004 funding will be published soon in the Federal Register, outlining
the competitive application process. In accordance with our published
regulations, priority must be given for funding to targeted states. To
meet the requirements of our regulations, we intend to target up to
half of the funds to 10 states, based on the 2000 Census, including:
Texas, California, North Carolina, Georgia, Mississippi, Louisiana,
Kentucky, Alabama, Florida and Pennsylvania. States may receive no more
than one grant from target funds.
For remaining funds, a scoring system will favor programs serving
rural counties with high rates of poverty and deficient housing, as
well as those operating most efficiently. No grant may exceed $100,000
(except multi-state or group programs, to $200,000). Funding to any
state or territory will be limited to 10 percent of available funds.
We believe the proposed award method will meet the objectives of
the TSA program by funding projects in the most needy areas and
supporting the most effective programs throughout the nation. The
language you suggested in the fiscal year 2004 Appropriations Bill will
help further ensure that all states, including Wisconsin, have better
access to funding.
cooperative services
Question. What is the number of full-time permanent positions in
the field devoted to providing cooperative technical assistance for
fiscal year 2002 through fiscal year 2005?
Answer. While only a couple of States currently have full-time
staff providing technical assistance for cooperatives, 12 States have a
staffer who works at least 50 percent of their time in Cooperative
Services (CS) activities. The remaining States have individuals who
perform a range of technical assistance, outreach, and CS administered
grant program activities as a collateral duty.
Question. I understand you have a current analysis ongoing to
review the cooperative service mission. Can you share your results to
date?
Answer. We are in the early stages of a review of our Cooperative
Services Program. We have assembled a review team, representing a
diverse range of cooperative and rural perspectives, to take a
comprehensive look at the role of CS, review of present activities and
priority areas, resource history and allocation, and recommendations
for pursuing cooperative strategies within the Rural Development
portfolio. Scheduling for review activities is underway and we expect
the review process and completion of the final report to take
approximately 3 months. We will be happy to share results as they are
completed by the review team.
______
Questions Submitted by Senator Tom Harkin
conservation security program
Question. Mr. Rey, the press has recently reported that USDA plans
to spend $13.4 billion on the Conservation Security Program (CSP) over
the next ten years. I have also been told that other numbers attributed
to USDA are out there. Most recently, you testified that USDA will
spend $13.4 billion on CSP for the life of the program, from fiscal
2004-fiscal 2007. I have looked at the cost information NRCS is
distributing on CSP. According to the NRCS charts, USDA plans to spend
only $1.372 billion during the farm bill, not $13.4 billion.
While I recognize the difference between obligations and actual
spending, this question is strictly about how much USDA plans to spend.
Can you please confirm that the total spending for CSP during the
farm bill time period are actually estimated by USDA to be $1.372
billion, or approximately that amount?
Answer. The Administration's proposed funding approach for the
Conservation Security Program is to fund only the annual payment for an
active CSP contract plus the technical assistance out of each
respective year's budget authority. This approach is similar to the
funding approach for the Conservation Reserve Program, unlike all other
USDA conservation programs where the total financial assistance for the
life of a contract is obligated to the Federal budget in the first
year. This approach will allow greater participation by farmers and
ranchers in CSP at the proposed budget levels and represents a
significant commitment and investment over the life of the contracts by
USDA. The $1.374 billion in budget authority through fiscal year 2007
will result in $6.92 billion in estimated payments to farmers and
ranchers over the life of their individual CSP contracts. The $4.411
billion in baseline projections through 2010 will result in $13.32
billion in estimated payments to farmers and ranchers over the life of
their contracts. Keep in mind that this represents a theoretical
estimate at this point in time based on certain program design
assumptions that could change in the final rule. The current USDA
baseline budget projections for CSP is submitted for the record.
[The information follows:]
[Dollars in millions]
------------------------------------------------------------------------
Estimated
Commitment for
the CSP Contract
Fiscal year Budget Authority Life to Farmers &
Ranchers
(Financial
Assistance Only)
------------------------------------------------------------------------
2004.............................. 41.4 430.6
2005.............................. 209.4 1,742.2
2006.............................. 457.4 2,579.2
2007.............................. 665.4 2,163.2
2008.............................. 873.4 2,163.2
2009.............................. 1,045.6 2,070.8
2010.............................. 1,118.5 2,173.7
-------------------------------------
Total fiscal year 2004-2007. 1,373.6 6,915.2
-------------------------------------
Total fiscal year 2004-2010. 4,411.1 13,322.9
------------------------------------------------------------------------
forest service management plans
Question. The Administration's proposed rule for National Forest
System Land and Resource Management Planning would make substantial
changes to the extent in which the public is involved in Forest Service
management plans. Most importantly, the proposed rule would allow
forest supervisors to categorically exclude new forest plans as well as
plan amendments and changes from environmental analysis under NEPA.
The proposed rule would also make a significant change to existing
rules by explicitly stating that agency-wide management policy and
procedure relevant to planning and resource management should be issued
through the Forest Service Directive system. This means that major
management policy would be issued in Forest Service manuals, handbooks,
or white papers which are subject to only very limited public review or
comment and would not be subject to NEPA. I am aware that the Forest
Service is currently looking at comments to the proposed rule and is in
the process of drafting a new final rule.
Given that the overall goal of managing the National Forest System
as stated in the proposed rule is ``to sustain in perpetuity the
productivity of the land and the multiple use of its renewable
resources,'' and that multiple uses may involve many different types of
public users, why has the Administration chose to limit public input
for long term forest management plans?
Answer. The Forest Service has completed review of public comments
on the December 6, 2002 proposed planning rule. The Agency is in the
process of drafting the final rule. The proposed rule included National
Forest Management Act (NFMA) requirements for public involvement, which
were the same as for previous rules. The Department strongly supports
active public participation and collaboration in planning.
Question. Since sustainable management is by definition a long-term
goal, how do you expect members of the public to have input into the
Forest Service's plans for sustainable management if entire forest
plans can be categorically excluded from NEPA?
Answer. The Forest Service has completed review of public comments
on the December 6, 2002 proposed planning rule. The Agency is in the
process of drafting the final rule. The proposed rule included National
Forest Management Act (NFMA) requirements for public involvement, which
were the same as for previous rules. The Department strongly supports
active public participation and collaboration in planning.
Question. Furthermore, by limiting public input into the
establishment and revision of long-term management goals and
objectives, won't this simply encourage members of the public to object
to every project that appears to go against their particular interests,
thus decreasing the efficiency of the Forest Service planning and
increasing costs?
Answer. The Department strongly supports public involvement in
planning. For the proposed 2002 rule, the Department used the input
provided by the Committee of Scientists for the 2000 rule. The current
rulemaking process has retained this Committee's recommendation for
emphasis on public involvement, adaptive management, monitoring and
evaluation, use of science, and sustainability. There are requirements
for use of science in the proposed rule, and the final rule will also
include science requirements.
Question. In addition, your proposed regulations were developed
without the formal input of an independent Committee of Scientists, in
contrast to the development of all previous versions of these
regulations. You also proposed eliminating most requirements for
independent scientific input into forest plans themselves, making the
involvement of independent scientists optional on the part of the local
forest manager.
Won't this approach lead to less scientifically based forest
management and less credibility with the scientific community and the
public in general? And won't it therefore lead to more controversy and
difficulty in implementing forest plans? Most importantly, won't
limiting scientific input increase the chance that poor management
decisions will harm the forest resources we seek to maintain?
Answer. The Department strongly supports public involvement in
planning. For the proposed 2002 rule, the Department used the input
provided by the Committee of Scientists for the 2000 rule. The current
rulemaking process has retained this Committee's recommendation for
emphasis on public involvement, adaptive management, monitoring and
evaluation, use of science, and sustainability. There are requirements
for use of science in the proposed rule, and the final rule will also
include science requirements. The planning rule will result in
management based on science.
high fructose corn syrup
Question. Last month, the Office of the Trade Representative
announced that they would pursue a WTO case against the government of
Mexico for its blatantly unfair imposition of a 20 percent tax on
beverages using high fructose corn syrup (HFCS) that has kept U.S. HFCS
exports out of its previously largest market for more than 2 years.
Under WTO rules, parties to the dispute are supposed to undertake
bilateral discussions to see if a formal dispute panel can be avoided.
I understand that representatives of the sweeteners sectors in both
countries have also been engaged in negotiations to try to reach a
resolution of this issue and also the issue of Mexican sugar exports to
the United States. Do you think either of these sets of discussions
will be successful in the next few months, and if they are not, will
the U.S. government go ahead and request the formation of a WTO dispute
resolution panel later this spring?
Answer. We are not optimistic about the bilateral discussions,
since prior efforts to resolve the disagreements between Mexico and the
United States involving trade in sugar, high fructose corn syrup, and
corn have not been fruitful. We will only be able to evaluate the
results of the private sector discussions once they are concluded. The
U.S. government will request the formation of a WTO dispute resolution
panel if that appears to be the best course of action once
consultations have been exhausted.
payment limitation
Question. The Commission on the Application of Payment Limitations
for Agriculture recommended that more resources should be allocated for
payment limit administration in USDA's Farm Service Agency (FSA) and
Office of the Inspector General (OIG). The commission recognized the
integrity and determination of FSA county office staff, but noted that
more resources could augment current efforts to train staff on payment
limits and monitor compliance. What efforts, if any, have you taken to
implement this recommendation?
Answer. As part of FSA's initiative to improve the delivery of
programs with the available county office staffing, the agency is re-
engineering its business processes dealing with program eligibility and
payment limitations. An important component of the re-engineering is
the development of software to improve the efficiency and
implementation of payment limitations and other related payment
eligibility provisions. The first phase of the re-engineering, payment
eligibility, will be piloted in the next few months and is anticipated
to be deployed nationally in late fall 2004. This deployment will be
followed next year with the rollout of the re-engineered payment
limitation system, which includes many automated validations and
decision points that will assist the County Committees in their person
determinations. Training on the software and payment limitations will
be held for the pilot counties in August. If piloting goes well, the
national training will be held shortly thereafter.
Question. The Commission also recommended that FSA track all
benefits through entities to individuals as required in section 1614 of
the 2002 farm bill. Often program benefits are delivered indirectly
through complex business arrangements or through marketing
associations. To enable Congress to better understand the complexity of
payment limitations, the 2002 farm bill included a requirement to track
benefits--both direct and indirect--to individuals and entities:
``SEC. 1614. TRACKING OF BENEFITS.
``As soon as practicable after the date of enactment of this Act,
the Secretary shall establish procedures to track the benefits
provided, directly or indirectly, to individuals and entities under
titles I and II and the amendments made by those titles.''
What steps have you taken to begin tracking commodity and
conservation benefits as required by law?
Answer. The payment database is currently being revised to enable
the tracking. The reporting capability will be completed no later than
September 30, 2004.
soybean rust
Question. Although Asian soybean rust has not yet arrived in the
United States, its recent arrival in major soybean producing countries
in South America has caught the attention of American soybean framers.
Given the ability of the soybean rust spores to move on air currents,
we know it is only a matter of time until the disease arrives on U.S.
fields. One of the research activities that will be key to combating
soybean rust over the long run will be the identification or
development of soybean varieties that are resistant or tolerant to
soybean rust, and incorporation of such traits into commercially
available varieties.
Since there are restrictions from the Bioterrorism Act limiting
work on viable rust spores to the Fort Detrick facility, will those
hinder USDA's research effort, and what steps are you taking to relieve
that constraint?
Answer. Soybean rust has been reported in numerous countries
throughout the world including Australia, China, India, Taiwan,
Philippines, and Thailand in the Eastern Hemisphere; Brazil, Argentina,
Paraguay, Uruguay, Costa Rica, Columbia, and Puerto Rico in the Western
Hemisphere; and in Zimbabwe and South Africa on the African continent.
ARS researchers at Fort Detrick are screening approximately 18,000
accessions of soybean varieties for soybean rust resistance. This
material represents a worldwide collection of ancestral soybean that is
maintained in the USDA Soybean Germplasm collection in Urbana,
Illinois. In addition to these soybean lines, ARS scientists at Fort
Detrick are screening 1,000 commercial soybean lines for broad spectrum
soybean rust resistance using a mixture of four soybean rust strains
with varying levels of virulence.
To relieve the constraints at Fort Detrick, international
agreements are in place with cooperators in Brazil, China, Thailand,
South Africa and Paraguay to evaluate soybean varieties currently grown
in the United States for tolerance to soybean rust and to screen exotic
soybean germplasm for resistance to soybean rust under field
conditions. The international cooperations, now in their second year,
will identify varieties that exhibit broad spectrum resistance.
ARS is also working with cooperators in South America to monitor
and map the incidence of soybean rust outbreaks in South America. This
information will be used to develop models to predict possible routes
of entry into the United States.
national research initiative
Question. I am pleased to hear that the CSREES National Research
Initiative, in response to language in the fiscal year 2004
appropriations bill, will soon be issuing a supplemental Request for
Applications to solicit integrated research, education, and extension
proposals that respond to the goals of the Initiative for Future
Agriculture and Food Systems to enhance farm profitability, small and
medium-size farm viability, and rural economic development. I commend
you for this effort and would like to have two questions answered. It
is my understanding that this will be more than a token effort, and
will be at least in the range of $5 million or more. First, I would
like to know the projected funding level for this supplemental RFA?
Answer. The projected funding level for the supplemental RFA is $5
million. These funds will primarily come from the fiscal year 2004
budget; however, part of the RFA may be funded by fiscal year 2005
funds, if necessary. All funds will be made available within calendar
year 2004.
Question. Second, as we are already now half way through the fiscal
year, I am wondering what the timeline is for the issuance of the RFA,
the proposal deadline, the review process, and the ultimate grant
awards?
Answer. Since passage of the Agriculture appropriation in February,
we have been actively engaged in consulting with stakeholders and
expert groups through a series of workshops to help shape the ideas in
the RFA. The RFA is planned to be released in June 2004 with a
September 2004 deadline. Following peer review of the applications in
the Fall of 2004, it is anticipated that awards will be made no later
than December 2004.
Question. Is the RFA imminent and what can you tell me about the
timeline for the full grantmaking process?
Answer. The RFA is currently being prepared, having benefited from
stakeholder input and internal discussions concerning this complex area
of research. The RFA is planned for release in June 2004 with a
September 2004 deadline for applications. Peer review of all
applications will occur in the Fall of 2004, with awards being made by
the end of calendar year 2004.
organic agriculture research and extension initiative
Question. As you know, the 2002 farm bill contains modest mandatory
funding for a new Organic Agriculture Research and Extension
Initiative. I am anxious to see this program get started, and I know
many of my colleagues are also quite interested in this initiative. Can
you tell me when the Request for Applications will be issued?
Answer. The Cooperative State Research, Education, and Extension
Service-CSREES--published the Request for Applications for the
Integrated Organic Program on our website on April 15, 2004, at http://
www.csrees.usda.gov/fo/fundview.cfm?fonum=1141. The Request for
Applications offers two program areas: the Organic Transitions Program
and the Organic Agriculture Research and Extension Initiative.
Together, the two programs will fund integrated research, education,
and extension projects that address critical organic agriculture
issues, priorities or problems. The deadline for applications for both
program areas is June 10, 2004.
Question. Also, more broadly, can you tell me what plans ARS or
CSREES has for expanding its research effort on organic production and
marketing?
Answer. Since 2001, the Organic Transition Program has provided
approximately $3.9 million for competitive grants to fund the
development and implementation of organic production practices and
improve the competitiveness of organic producers.
In 2004, approximately $1.9 million of funding for the Organic
Transition Program will be combined with an additional $3 million of
mandatory funding provided by the 2002 Farm Bill for the Organic
Agriculture Research and Extension Initiative (OAREI). The 2004 funding
level for organic research, education and extension programs is $4.9
million. As authorized by the 2002 Farm Bill, OAREI will provide a
total of $15 million through fiscal year 2008, $3 million per year for
4 years, to fund studies that will help producers and processors grow
and market certified organic food, feed, and fiber products.
ARS has been actively increasing its efforts to better serve
organic producers over the last several years. Much of this research
has been in cooperation with organic producers and organizations,
particularly the Organic Farming Research Foundation (OFRF). In many
instances research is conducted jointly with scientists at land grant
universities including 1890 institutions. In addition, National Program
Leaders from ARS and CSREES regularly discuss research on organic
farming and sustainable agriculture at joint meetings such as those
held by the USDA Sustainable Development Council, the Sustainable
Agriculture Research and Education (SARE) Program and the informal USDA
organic agriculture interest group. ARS and CSREES scientists and
National Program Leaders also continue to participate with OFRF and
organic producers in the Scientific Congress for Organic Agricultural
Research (SCOAR) meetings and related activities to identify research
priorities for organic agricultural.
ARS has assembled a database of its researchers that are doing or
are interested in doing research on organic agriculture. More than 140
ARS scientists are doing research that could benefit organic producers.
In addition ARS is doing research on many topics such as biological
control, integrated pest management (IPM), weed control, and soil
management that may fit well with organic farming practices. Organic
growers, therefore, could reap benefits even though the research may
not have originally been specifically directed towards organic systems.
ARS is planning on holding a workshop later this year to improve its
focus, interactions and coordination of its research on organic
farming. Representatives from CSREES and OFRF will be invited.
A few examples of ARS research on organic production include the
following. All of these examples are on systems that are certifiably
organic under the new USDA organic standards.
--In Salinas, California ARS has a scientist dedicated solely to
organic agriculture. Some of his research is studying how to
best incorporate cover crops in organic systems for fertility
and weed management. University of California researchers,
extension agents and producers are all cooperating in this
research.
--ARS scientists in Weslaco, Texas in cooperation with producers,
organic organizations and university colleagues are researching
a broad number of organic systems including olive, melon,
citrus and grain crop production systems. One unique aspect of
this research is to determine if organically produced crops
have higher levels of beneficial compounds.
--ARS researchers from Beltsville, Maryland and Wyndmoor,
Pennsylvania are cooperating with the Rodale Institute in
Pennsylvania to develop improved weed management and fertility
using for example, mycorrhizae inoculation. Three of the five
systems of the Beltsville Farming System Project are
certifiably organic. This research receives input from a group
of farmers, extension agents and university cooperators.
--Other Beltsville scientists are cooperating with farmers and others
across the United States on organic practices. The system they
have developed based on cover crops has been shown to be
successful for a variety of crops from Maryland to Florida to
California. Furthermore, it can eliminate the need for methyl
bromide and plastic for those producers interested in
transitioning into organic agriculture.
--ARS led research in Georgia in cooperation with university
scientists and organic farmers is investigating insect and
fertility management. Other significant research on organic
systems is occurring in Iowa, Minnesota, Washington and
Florida.
All these are examples of an expanded ARS effort to address the
needs of organic producers and almost all have CSREES partners.
A proposed new effort involves ARS in cooperation with sustainable
and organic organizations (e.g., Michael Fields Agriculture Institute,
Practical Farmers of Iowa, Land Stewardship of Minnesota). We are
organizing a cooperative project on how to better integrate forage and
animal production in grain crop systems in the cornbelt. This planned
project involves ARS units and sustainable and organic NGOs in Iowa,
Wisconsin, Minnesota, North Dakota, South Dakota and Illinois and will
include university researchers as well. The extent of this effort is
dependent on obtaining increased funding.
rural business investment program
Question. The 2002 Farm Bill established the Rural Business
Investment Program in order to attract venture capital financing to
businesses located in rural areas. It is the only Federal program of
its kind to target rural areas for venture capital investments.
For decades, venture capital has helped develop industries of the
new economy and is responsible for creating or maintaining as many as
12.5 million jobs and generating business revenues of as much as $1.1
trillion. Most of these jobs, however, have been established in cities
and states along the two coasts and not in the rural communities of
America's heartland.
Congress authorized $280 million of investment capital debentures
for the Rural Business Investment Program however the Administration's
proposal would sharply cut this program to $60 million for fiscal year
2005.
I understand that USDA may release a program design in May so
comments can be received. I think a stakeholder meeting would be highly
advantageous if it can occur soon thereafter.
I believe the RBIP program should clearly use the New Markets
Venture Capital Program debenture model. That is the type of debenture
that Congress used in developing the program. That is how the cost was
estimated. There are some rumors that the Department may act otherwise.
Is the New Markets model type of debentures your plan for the program?
Answer. USDA is working with the Small Business Administration in
developing regulations for this program, consistent with the statutory
requirements. It is anticipated that a proposed rule will be published
for public comment before the end of fiscal year 2004.
Sec. 384E of the statute authorizes the Secretary to guarantee
debentures issued by a rural business investment company, including a
provision for the use of discounted debentures.
As stated in the related Conference Report, Congress modeled RBIP
after the Small Business Administration's Small Business Investment
Company program, where considerable expertise in operating the program
that provides capital for equity investments has been developed. The
Managers noted that the RBIP grant provisions are similar to the New
Markets Venture Capital program.
For the RBIP, the Small Business Administration has recommended the
guarantee of either standard debentures or discounted debentures,
pursuant to Sec. 384E.
Question. The President's budget limits the program to $60 million
in debentures for fiscal year 2005, equivalent to $12 million in Budget
Authority. And, the President's budget Appendix calls for an
elimination of $65 million in BA in fiscal year 2005. Is this
elimination a proposal to end the program after 2005 or is it simply an
accounting item? Does the Department believe that the RBIP program
should continue for the long term?
Answer. The President's fiscal year 2005 budget proposal for this
program does not discuss subsequent program years. However, Rural
Development, in association with our program partner, the Small
Business Administration, intends to design and implement a program that
will produce measurable results, on behalf of America's rural
entrepreneurs, for the long-term.
broadband
Question. I appreciate your letter to mine concerning Broadband. As
your statement indicated, this is a very important need, crucial for
rural America.
I wanted to briefly raise a few points: (1) I think the next time
the Department sends out a NOFA that it would be very useful to adopt a
two-step process: preliminary applications that could be reviewed by
RUS staff and for those applications that appeared to have viability, a
second stage application that would be complete. I think a lot of small
entities are putting a lot of funds into a complete application and
that is limiting applications. (2) That the Department adjust its 20
percent cash rule to count ongoing receipts within this sum. I
understand that the Department wants equity in place by applicants. But
I think ongoing recurring revenue streams should be counted. I am not
talking about speculative possible receipts, but mainly the monthly
billings from existing customers. (3) We need to be careful to manage
risk in this program. But, we should not become excessively risk
adverse.
If these things are done, I believe we could see a considerable
improvement and increase in applications. And, I would like to work
with you on this important need. What will you do to address the points
that I have outlined above?
Answer. The required components of a completed application, taken
as a whole, form the basis for determining the viability of a project.
Each is dependent upon the other to evaluate the technical and
financial feasibility of a project. Before a project is undertaken, it
is critical to determine if a market exists for the product and, if so,
to what extent and what are potential customers willing to pay for that
product. This market study provides the basis for a determination of
potential revenue streams and the size and capability requirements of
the system. To properly estimate the cost of the system, and,
ultimately, the amount of the loan request, the system must be designed
and quotes gotten from venders. Operational expenses must be estimated
to determine whether the project is sustainable from a financial
perspective. Each of these aspects of a business plan is critical in
the determination of viability. Therefore, it would be difficult to
provide a potential applicant with a meaningful determination without
each of these components.
It is important to note that RUS' field and headquarters staffs are
available to assist potential applicants in developing a loan package.
RUS has general field representatives (GFR) located throughout the
country who will visit potential applicants, review their business
plans, and assist them in developing a completed application. During
this process, if a business plan does not appear viable, the GFR will
be able to inform the applicant.
RUS' 20 percent credit support requirement is intended to improve
the sustainability of a project by ensuring that it is not 100 percent
debt financed. The credit support requirement may be satisfied with
cash, cash equivalents, undepreciated assets that would otherwise be
eligible for financing, licenses, and an unconditional letter of
credit. An applicant must have, as part of the 20 percent requirement,
cash equal to the first full year's operating expenses. RUS will waive
this requirement for entities with 2 years of positive cash flow. RUS
is a facilities-based lender and does not, therefore, lend for
operating costs. As such, the applicant must have the ability to fund
its operating expenses without RUS assistance. If an applicant is a
start-up entity or is experiencing negative cash flow, the 1-year cash
requirement ensures the entity's ability to sustain operations and to
make principle and interest payments.
We agree that risk must be properly managed which entails assuming
the appropriate amount of risk. RUS works very diligently to
appropriately manage risk and its fiduciary responsibility to the
American taxpayers with its mission of extending broadband service into
the most remote, highest cost rural areas of our country. RUS
recognizes that an appropriate amount of risk must be taken if we are
to succeed in our mission. However, the meaningful deployment of
broadband services can only be met by making quality loans that produce
exponential benefits through reduced subsidy rates and greater lending
levels. A failed business plan translates not only into the loss of
taxpayer investments, but deprives millions of citizens living in rural
communities of the technology needed to attract new businesses, create
jobs, and deliver quality education and health care services.
CONCLUSIONS OF HEARINGS
Senator Bennett. I know a politician who used that phrase
and maybe regretted it, but I will be appropriately admonished.
Thank you all for your testimony and your attendance here
today. And, again, than you for your service to the country in
the various positions that you hold.
The hearing is recessed.
[Whereupon, at 5:03 p.m., Tuesday, April 7, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]
AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2005
----------
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
NONDEPARTMENTAL WITNESSES
[The following testimonies were received by the
Subcommittee on Agriculture, Rural Development, and Related
Agencies for inclusion in the record. The submitted materials
relate to the fiscal year 2005 budget request for programs
within the subcommittee's jurisdiction.]
Prepared Statement of the Ad Hoc Coalition
Mr. Chairman, Members of the Subcommittee, this statement is
respectfully submitted on behalf of the ad hoc coalition \1\ composed
of the organizations listed below. The coalition supports sustained
funding for the concessional sales program under Title I of Public Law
480 at a baseline level that will ensure the continued viability of the
program.
---------------------------------------------------------------------------
\1\ The ad hoc coalition is composed of American Maritime Congress,
American Soybean Association, International Organization of Masters,
Mates & Pilots, Liberty Maritime Corporation, Marine Engineers'
Beneficial Association, Maritime Institute for Research and Industrial
Development, National Association of Wheat Growers, National Corn
Growers Association, National Council of Farmer Cooperatives, Sealift,
Inc., TECO Transport Corporation, Transportation Institute, USA Dry Pea
& Lentil Council, USA Rice Federation, U.S. Wheat Associates, Inc., and
Wheat Export Trade Education Committee.
---------------------------------------------------------------------------
In recent years, funding appropriated for Title I has declined
sharply. The direct appropriation to the Title I account in fiscal year
2003 was $118 million. In fiscal year 2004, it declined to $106
million. In the administration's fiscal year 2005 budget, the requested
funding is just under $90 million. According to the fiscal year 2005
USDA Budget Summary, these appropriated amounts supported a fiscal year
2003 program level of $163 million in commodity and (separately funded)
freight costs, and are expected to support a Title I program level
(with an additional $38 million in carryover funding) of $197 million
in fiscal year 2004. The administration's request for fiscal year 2005
establishes a program level of only $123 million.
Mr. Chairman, our coalition has noted that funding for the Title I
account in recent years increasingly has been used to support Food for
Progress (FFP) grants. In fiscal year 2003, for example, Title I
funding was used under FFP authority to ship 321,000 metric tons of
commodities, with a value of $62.4 million, to some 13 countries. While
FFP is an essential component of our overall food aid system, the
coalition nonetheless believes that the Foreign Agricultural Service
(FAS) should make a determined effort to increase participation in the
traditional Title I concessional sales program. As discussed more fully
below, Title I has important policy objectives that are unique and
deserving of sustained support.
In the statement that follows, our coalition recommends aggressive
marketing of the Title I concessional sales program, higher funding
levels for Title I, and sustained funding for other food aid programs
that fulfill our humanitarian obligations and promote the long-term
interests of recipient countries in becoming commercial customers.
guiding principles of food aid policy
Mr. Chairman, the coalition recognizes that American food
assistance policy is well-established and founded on certain guiding
principles, including the following:
--Meeting America's humanitarian obligation to sustain food
assistance programs, U.S. participation in which should
constitute more than 50 percent of all food aid worldwide.
--Employing food assistance programs as stepping stones for economic
growth and development.
--Employing food assistance programs to promote respect worldwide for
American values and our economic system, thereby enhancing
goodwill toward America among disadvantaged populations that
may be breeding grounds for terrorism.
the sharp decline in overall food aid program levels
Mr. Chairman, the programs needed to implement these principles
have enjoyed broad, bipartisan support for many decades. The strength
of our commitment has made the United States the world's leading food
aid supplier. In the process, American agriculture is bolstered as food
aid recipients strengthen and stabilize their economies, ultimately
proving to be valuable long term customers for U.S. products.
In recent years, however, food aid shipments have declined sharply.
In fiscal year 2000, the United States programmed more than 6.7 million
tons of food aid to 95 countries, consisting of 35 different
commodities with a value of $1.4 billion. In fiscal year 2001, our food
aid program declined to 6.36 million tons of assistance to 45
countries, valued at $1.28 billion. In fiscal year 2002, the United
States programmed 4.67 million tons of food aid for shipment to 84
countries. This assistance consisted of 26 different products with a
commodity value of $1.091 billion. In fiscal year 2003, FAS reports
that 4.56 million tons were programmed for shipment, with a commodity
value of $1.288 billion.
While data for fiscal year 2004 are necessarily incomplete, the
administration's budget estimates that food aid shipments under Public
Law 480, Titles I and II, will decline to 3.4 million metric tons of
grain equivalent, down from 4.3 million metric tons in fiscal year
2003. Unfortunately, as discussed below, the administration recommends
further overall reductions in food assistance in fiscal year 2005.
the administration's budget for fiscal year 2005
The administration proposes Title I funding that would support a
program level of only $123 million. This is well below the
appropriation for fiscal year 2003, which supported a program level of
$154.7 million and is even below the fiscal year 2004 appropriation,
designed to support a program level of $132 million. Our coalition
regrets the continued erosion of the Title I program, and believes that
funding should be restored to levels which will ensure the program's
viability as a flexible and significant policy initiative.
The baseline for the Food for Peace Title II program has been
increased from $850 million in fiscal year 2002 (and prior years) to
$1.185 billion. The coalition supports this increase as an essential
component of our donated food assistance to the most needy countries
and regions in the world. As required by the 2002 Farm Bill, the
administration has announced that it will meet the annual minimum
tonnage level of 400,000 metric tons for that portion of the Food for
Progress grant program carried out with CCC funding.
Under authority provided by Section 416(b) of the Agricultural Act
of 1949, the administration states that surplus nonfat dry milk will be
made available for donation in fiscal year 2005, with a commodity value
and associated costs estimated at $147 million. This represents another
year of diminished reliance on the 416(b) program, which is CCC-funded.
Finally, the administration has requested $75 million for the McGovern-
Dole International Food for Education and Child Nutrition Program
(IFEP), an increase of 50 percent over the fiscal year 2004 level, but
less than the $100 million requested by a broad-based commodities
coalition.
The administration's recommendations, taken together, would lead to
further reductions in food aid. Because of the availability of
supplemental and carryover funding in prior years, the food aid
programmed under Public Law 480 reached 4.3 million metric tons in
fiscal year 2003; it is estimated to decline to 3.4 million metric tons
in the current fiscal year; and the fiscal year 2005 budget provides
for only 3.2 million metric tons. Increases in IFEP and FFP will not
offset the declines in the Public Law 480 and Section 416(b) programs.
restoration of overall food assistance program levels
Mr. Chairman, the coalition recommends that food aid be restored
over time to sustainable levels in the range of 4.0 million to 6.0
million metric tons of grain equivalent in each fiscal year. In fiscal
year 2005, this would require an incremental increase in Title I
baseline funding, enactment of the administration's request for Title
II, an increase to $100 million for the IFEP, and greater use of
existing authorities of the Commodity Credit Corporation. The Title I
program must be restored if the United States is to take full advantage
of the unique potential of this historic initiative. The special
features of Title I remain significant elements of U.S. food aid
policy, as discussed below.
advantages of the title i program
Mr. Chairman, the Title I program offers countries long-term loans
and concessional payment terms for the purchase of U.S. agricultural
commodities. As such, Title I has advantages over other food aid
programs.
--Resource Efficient.--Because Title I is a concessional sales
program, appropriations required to support Title I, under the
terms of the Federal Credit Reform Act of 1990, cover only the
subsidy cost, and not the full commodity value. In the
President's budget for fiscal year 2005, the subsidy cost of
the Title I program is established for the fiscal year at 86.42
percent. Thus, under the Title I program, Congress ensures the
shipment of $1.00 worth of U.S. agricultural products at an
appropriated cost of about 86 cents. Moreover, Title I
currently recovers more dollars for the U.S. Treasury in loan
repayments than it expends in annual outlays.
--Bridge to Economic Independence.--The Title I program is designed
to operate in markets which are neither poor enough to warrant
donations nor rich enough to purchase commodities on commercial
terms. Of the top 50 consumer nations of American agricultural
products, 43 were once recipients of U.S. foreign aid in some
form. The Title I program historically has been an essential
component of our humanitarian food assistance program, and
should be retained.
Unfortunately, Mr. Chairman, Title I concessional sales have been
reduced to their lowest levels in half a century. According to the
administration's budget, Title I loans in fiscal year 2003 generated
only $81 million in commodity sales; this amount will decline to an
estimated $38 million in fiscal year 2004. The fiscal year 2005 budget
proposes only $30 million in concessional commodity sales. The balance
of Title I funding supports FFP grants. Our analysis of the fiscal year
2003 program shows that Title I-funded FFP shipments were made to
Cambodia, Togo, Pakistan, Afghanistan, Bolivia, Eritrea, Ethiopia,
Honduras, Kenya, Mongolia, Peru, Sri Lanka and Yemen. The total
commodity value of these FFP grants, as stated above, was $62.4
million. According to the administration's budget, the FAS plans to
obligate $93 million for Title I-funded FFP grants in fiscal year 2004,
and another $60 million from the account for FFP grants in fiscal year
2005.
Mr. Chairman, the potential demand for donated food will always
exceed the supply. The coalition recognizes that recipient countries
would prefer grants over concessional sales--even sales at extremely
favorable terms. In order to ensure that the most desperate countries
have sufficient donated food aid, the coalition recommends that FAS
aggressively market the Title I concessional sales program to other
countries that can afford the terms. Among the countries receiving
Title I-funded FFP grants in fiscal year 2003, there are surely some
who reasonably could afford to make the transition from grant
assistance to concessional sales, using the direct loan authority of
Title I.
conclusions and recommendations
Mr. Chairman, the coalition is committed to maintaining U.S. food
assistance programs at responsible levels in order to meet humanitarian
needs and enhance the potential for economic growth in recipient
countries. Our recommendation is to increase over time annual food
assistance at combined program levels of between 4.0 million and 6.0
million metric tons of grain equivalent. This can be accomplished, as
in the past, with a blend of programs supported by direct
appropriations and CCC program authorities.
The coalition recommends the following:
--Title I program levels should be increased in fiscal year 2005, and
responsibly increased again in succeeding years, so that the
unique advantages of the program, highlighted above, are not
lost. The Senate Appropriations Committee should accompany such
increased funding with strongly-worded report language
directing FAS to market the Title I program aggressively to
those countries that reasonably can afford the terms.
--IFEP should be increased in fiscal year 2005 to the $100 million
level established by Congress for the fiscal year 2003 program.
This action, together with full funding of the administration's
Title II request, will help ensure that the United States
fulfills its moral obligation to provide not less than one-half
of the world's donated food aid.
--In committee report language, the Senate Appropriations Committee
should direct the FAS to make greater use of existing CCC
authorities to expand food aid to regions in critical need.
Mr. Chairman, the Title I program has been a bulwark of American
food aid policy since the days of the Marshall Plan. It deserves the
strong support of your subcommittee, the Congress and the entire
nation.
The Title I program delivers more food assistance per dollar of
investment than any other program. The Title I program, moreover, is
fully consistent with the administration's position that aid to
developing countries be tied to their adoption of reforms and policies
that make development both lasting and effective. With strong
Congressional support, the Food for Peace Title I program will continue
to promote American humanitarian values. The funding of Title I,
accordingly, should be increased to ensure that this historic program
is restored to its proper place in U.S. food assistance policy.
______
Prepared Statement of the American Farm Bureau Federation
The American Farm Bureau Federation supports full funding for the
Farm Security and Rural Investment Act of 2002 (FSRIA).
Unpredictable weather conditions and markets, uncertainties
involved with international trade, and variable input costs can produce
turbulent and difficult times for agriculture. The FSRIA helps American
farmers and ranchers weather financial storms and it provides
unprecedented funds for our nation's conservation needs. Changes in
programs would be devastating not only to farmers and ranchers, but to
the rural economy as well.
Full funding of commodity programs is essential. It is imperative
that counter-cyclical payment rates, loan rates and direct payments be
preserved as adopted in FSRIA. We are adamantly opposed to any changes
in the current payment limitations.
Farm Bureau has selected the following four items as our priorities
for funding in fiscal year 2005: (1) Programs key to protecting animal
and plant health; (2) full funding and implementation of the
Conservation Security Program; (3) programs key to the proper
regulation of the Food Quality Protection Act and crop protection
regulations; and (4) programs key to expanding and protecting markets
for agricultural products.
programs key to protecting animal and plant health
The threat of bioterroism and the discovery of Bovine Spongiform
Encephalopathy (BSE) in the United States has prompted increased action
by USDA and others to step up animal and pest disease surveillance and
funding for critical programs such as animal identification. Farm
Bureau places great priority on efforts to safeguard our food supply
and requests increased resources be appropriated to APHIS and FSIS for
these activities.
Farm Bureau supports the Administration's Food and Agriculture
Defense Initiative of $381 million. These funds will enhance food and
agriculture defense by:
--Providing funds for completing the consolidated BSL-3 animal
research and diagnostic laboratory at Ames, Iowa;
--Establishing a National Plant Disease Recovery System that will
quickly coordinate with the seed industry to provide producers
with resistant stock before the next planting season in the
event of a natural or intentional catastrophic disease or pest
outbreak; and
--Substantially enhancing the monitoring and surveillance of pests
and diseases in plants and animals, including targeted national
wildlife surveillance.
BSE.--Farm Bureau supports BSE-related funding proposed by USDA
that calls for $5 million for the Agricultural Research Service (ARS)
to conduct advanced research and development of BSE testing
technologies; $17 million for the Animal and Plant Health Inspection
Service (APHIS) to continue collecting 40,000 samples, including
sampling at rendering plants and on farms; $4 million for the Food
Safety and Inspection Service (FSIS) to conduct monitoring and
surveillance of compliance with the regulations regarding specified
risk materials and advanced meat recovery; and $1 million for Grain
Inspection, Packers and Stockyards Administration (GIPSA) to enable
them to dispatch rapid response teams to markets experiencing BSE-
related complaints regarding contracts or lack of prompt payment.
We do, however, have serious concerns about the Administration's
proposal for $33 million to help implement an animal identification
system. For over 2 years, the industry has been working to develop the
U.S. Animal Identification Plan (USAIP). USIAP estimates an ongoing
cost of $122 million per year to implement such a system. This is a far
cry from a one-time $33 million appropriation. Farmers and ranchers
simply cannot afford to bear the brunt of the cost of this program,
especially when most of the benefit will accrue to consumers. We
strongly encourage the Committee to significantly increase funding for
this critical program. Implementation of the program will not only add
to our ability to trace a diseased animal back to the source but will
also reassure the public and our trading partners of a safe food
supply.
Soybean Rust (Phakopsora pachyrhizi).--Soybean Rust (SBR), a fungal
disease that attacks the foliage of a soybean plant, is a potential
threat to the United States. Only two fungicides are currently approved
for use on soybean rust and manufacturers have indicated that there
would not be enough chemical available to treat a nationwide outbreak.
Soybean check-off and government-funded research activities are
underway, however, approximately $2.8 million additional funds are
urgently needed.
Avian Influenza.--Avian flu is a respiratory virus spread among
chickens by nasal and eye secretions and manure. Adequate funding for
detection, control and eradication of low and high pathogen Avian
Influenza is critical. Farm Bureau supports an additional $12 million
above the Administration's request for $13 million ($25 million total)
to combat this deadly poultry disease. We support USDA's development of
a high-containment facility to study this disease.
National Animal Health Emergency Management System.--Farm Bureau
supports full funding for the National Animal Health Emergency
Management System that was developed in cooperation with the states,
industry and the veterinary profession. These funds will enhance
APHIS's emergency preparedness and response capabilities to address
emergency animal disease issues that threaten the U.S. food supply.
Food Animal Residue Avoidance Databank (FARAD).--Farm Bureau
supports funding for FARAD. Adequate funding for FARAD will allow for
continued, fair, immediate expert consultation to livestock owners and
veterinarians in the event of accidental drug or toxin exposure to
livestock or poultry.
Plant and Animal Health Monitoring, Pest Detection and Control.--
Plant and animal health monitoring and surveillance are important
programs. We support a $48 million increase for improved plant pest
detection, management of animal health emergencies and to increase the
availability of animal vaccines. Expansion of Plant Protection and
Quarantine (PPQ) personnel and facilities is necessary to protect U.S.
agriculture from new and often-times virulent pest problems.
full funding and implementation of the conservation security program
(csp)
Prompt implementation of the Conservation Security Program (CSP) is
critical. This program recognizes the costs associated with sound
conservation practices and provides assistance to producers who have
historically practiced good stewardship as well as provide incentives
to those that who want to do more. The CSP must be implemented as
authorized by FSRIA in order to achieve the program's full potential.
All farmers and ranchers should have the opportunity to participate is
CSP as intended by FSRIA. No restrictions or limitations should be
placed on this important new conservation program.
Ongoing USDA conservation programs should be fully funded. No
limitations should be placed on funding for the Environmental Quality
Incentive Program (EQIP). EQIP is key to assisting agricultural
producers in complying with environmental regulations and addressing
important conservation issues. Maximum conservation technical
assistance should be provided for both FSRIA conservation programs and
for Conservation Operations to help landowners in planning for and the
application of conservation treatments to control erosion and improve
natural resources.
programs key to the proper regulation of the food quality protection
act and crop protection regulations
USDA must continue to work with EPA, agricultural producers, food
processors and registrants to provide farm data required to ensure that
agricultural interests are properly considered and fully represented in
all pesticide registration, tolerance reassessment re-registration, and
registration review processes. In order to participate effectively in
the process of ensuring that crop protection tools are safe and remain
available to agriculture, USDA must have all the resources necessary to
provide economic benefit, scientific analysis and usage information to
EPA. To this end, funding should be maintained or increased to the
following offices and programs:
Office of Pest Management Policy (OPMP).--OPMP has the primary
responsibility for coordination of USDA's FQPA and crop protection
obligations and interaction with EPA. Proper funding is vital for the
review tolerance reassessments, particularly dietary and worker
exposure information; to identify critical use, benefit and
alternatives information; and to work with grower organizations to
develop strategic pest management plans. The funding to OPMP should be
designated under the Secretary of Agriculture's office, rather than as
an add-on to the Agricultural Research Service budget.
Agriculture Research Service (ARS).--Integrated Pest Management
(IPM) research, minor use tolerance research (IR-4) and research on
alternatives to methyl bromide must continue to receive adequate
funding to fully address the unique concerns of these programs.
Research is also needed to identify new biological pest control
measures and to control pesticide migration.
Cooperative State Research, Education and Extension Service
(CSREES).--Full funding should be provided for Integrated Pest
Management (IPM) research grants, IPM application work, pest management
alternatives program, expert IPM decision support system, minor crop
pest management project (IR-4), crops at risk from FQPA implementation,
FQPA risk avoidance and mitigation program for major food crop systems,
methyl bromide transition program, regional crop information and policy
centers and the pesticide applicator training program.
Economic Research Service (ERS).--ERS programs provide USDA and EPA
with unique data information and they should be properly funded
including IPM research, pesticide use analysis program and the National
Agriculture Pesticide Impact Assessment Program (NAPIAP).
FQPA and Crop Protection Regulation.--Additional funding for proper
regulation of pesticides is needed in the following programs: National
Agriculture Statistics Service (NASS) pesticide use surveys; Food
Safety Inspection Service (FSIS) increased residue sampling and
analysis; Agricultural Marketing Service (AMS); and the Pesticide Data
Program (PDP).
programs key to expanding and protecting markets for agricultural
products
Creating new overseas markets and expanding existing markets is
essential for a healthy agricultural economy. Continued funding of
export development programs is fundamental to improving farm income.
Farm Bureau recommends maximum funding of all export development
programs consistent with our commitments under World Trade Organization
(WTO) rules. USDA programs that protect U.S. agricultural exports from
unfair trade barriers are also critical and should receive priority
funding.
CODEX.--The U.S. CODEX office must have sufficient funding to
adequately represent American interests in this important body that
develops the international food safety standards used as guidance by
the WTO. Increasingly CODEX focuses on issues such as biotechnology,
traceability/product tracing, and acceptable farm practices. An ongoing
international effort is being led by the European Union to place limits
on our ability to produce food and fiber.
APHIS Biotech Regulatory Service (BRS).--Agricultural biotechnology
is an extremely promising development and all reasonable efforts must
be made to allow it to be realized. BRS plays an important role in
overseeing the permit process for products of biotechnology. Funding
and personnel are essential for ensuring public confidence and
international acceptance of biotechnology products.
APHIS Trade Issues Resolution and Management. Full funding is
needed for APHIS trade issues resolution and management. As Federal
negotiators and U.S. industry try to open foreign markets to U.S.
exports, they consistently find that other countries are raising pest
and disease concerns, real or contrived, to resist allowing American
products to enter. Officials from other countries often attempt to
refuse entry to American products under the guise of a technicality or
flimsy suspicion. Only APHIS can respond effectively to these issues.
This requires placing more APHIS officers overseas where they can
monitor pest and disease situations, negotiate protocols with other
countries, and intervene when foreign officials wrongfully prevent the
entry of American imports. It is essential that APHIS be positioned to
swiftly and forcefully respond to such issues when and where they
arise.
Export Development Programs.--We recommend fully funding all export
development programs consistent with our commitments under the WTO.
Farm Bureau supports General Sales Manager (GSM) credit guarantee
programs. These important export credit guarantee programs can help
make commercial financing available for imports of U.S. food and
agricultural products via a deferred payment plan. The Market Access
Program (MAP) and Foreign Market Development Program (FMD) are also
worthwhile programs. The Foreign Agricultural Service (FAS) will
require sufficient funding to expanded services to cover all existing
and potential market posts.
Direct export subsidies of U.S. agricultural products are
authorized through the Export Enhancement Program (EEP) to counter
unfair trading practices of foreign countries. Farm Bureau supports the
funding and use of this program in all countries, and for all
commodities, where the United States faces unfair competition. The
Dairy Export Incentive Programs (DEIP) allows U.S. dairy producers to
compete with foreign nations that subsidize their commodity exports.
The International Food for Education Program (IFEP) will be an
effective platform for delivering severely needed food aid and
educational assistance. Finally, the Public Law 480 programs serves as
the primary means by which the United States provides foreign food
assistance. The Public Law 480 programs provide humanitarian and public
relations benefits, positively impacts market prices and helps develop
long-term commercial export markets.
______
Prepared Statement of the American Honey Producers Association, Inc.
I am Lyle Johnston of Rocky Ford, Colorado, President of the
American Honey Producers Association. The American Honey Producers
Association (``AHPA'') is a national organization of commercial
beekeepers actively engaged in honey production throughout the country.
I am here today to request your assistance in continuing to support
full funding for honey bee research.
First, we wish to thank the Subcommittee for the strong support it
has provided in the past for agricultural research activities on behalf
of the beekeeping industry. For example, in the fiscal year 2003 cycle,
the Subcommittee fully restored proposed cuts in honey bee research
that would have resulted in the elimination of three Agricultural
Research Service (``ARS'') laboratories that are indispensable to the
survival of our industry. Such support has enabled the ARS to meet the
critical needs of the industry. To continue this valuable research, the
AHPA requests that for the fiscal year 2005 cycle Congress not only
restore proposed rescissions of add-on funding from previous years for
the two ARS Honey Bee Research Laboratories at Baton Rouge, Louisiana
and Weslaco, Texas, but also approve specific funding increases
proposed in the Administration's budget both for honey bee genome
research at the ARS laboratory in Baton Rouge (under the category of
invasive species affecting plants), and for invasive honey bee pest
control research at the ARS laboratory in Beltsville, Maryland. We also
urge the Congress to maintain honey bee research funding at fiscal year
2004 levels for the ARS laboratory in Tucson, Arizona.
the president's budget proposal
The American Honey Producers Association applauds the President's
fiscal year 2005 budget proposal for recommending funding increases for
the Honey Bee Research Laboratories located at Baton Rouge, Louisiana,
and Beltsville, Maryland, and also for proposing a continuation of
funding at fiscal year 2004 levels for the Honey Bee Research
Laboratory in Tucson, Arizona. However, we are concerned that the
President's budget also calls for significant funding decreases for the
two Honey Bee Research Laboratories at Baton Rouge and at Weslaco.
These cuts are proposed rescissions of funding increases included by
Congress in previous appropriation cycles. Specifically, the
Administration is suggesting $397,000 in cuts for the Baton Rouge
facility and $249,000 in cuts for the Weslaco facility. These cuts to
the ARS Honey Bee Research Laboratories would have a severe effect on
the honey industry as well as on all pollination-dependent agriculture
and many native plants. This seems particularly inappropriate
considering the substantial benefits that flow from this program, which
helps assure the vitality of the American honey bee industry and U.S.
agriculture.
These four ARS laboratories provide the first line of defense
against exotic parasite mites, Africanized bees, brood diseases and
other new pests and pathogens that pose serious threats to the
viability and productivity of honey bees and the plants they pollinate.
If the rescissions proposed this year by the President were to be
enacted, scientists at the Baton Rouge and Weslaco laboratories will be
overburdened and forced to discontinue essential research, thereby
jeopardizing the U.S. honey bee industry and the production of
agricultural crops that require pollination by honey bees.
the importance of honey bees to u.s. agriculture
Honey bees fill a unique position in contemporary U.S. agriculture.
They pollinate more than 90 food, fiber, and seed crops. Honey bees are
necessary for the production of such diverse crops as almonds, apples,
oranges, melons, vegetables, alfalfa, soybeans, sunflower, and cotton,
among others. A Cornell University study, published in 2000, estimated
that the annual value of agriculture production attributable to honey
bee pollination exceeds $14.6 billion. The increased value of such
crops comes in the form of both better yields and improved quality. In
addition, honey bees are responsible for the production of an average
of 200 million pounds of honey annually in the United States, the sales
of which helps sustain this nation's beekeepers.
Since 1984, the survival of the honey bee has been threatened by
continuing infestations of mites and pests for which appropriate
controls are being developed by scientists at the four ARS
laboratories. The industry is also plagued by a honey bee bacterial
disease that has become resistant to antibiotics designed to control it
and a honey bee fungal disease that has no known medication to control
it. These pests and diseases, especially Varroa mites and the bacterium
causing American foulbrood, are now resistant to chemical controls in
many regions of the country. Such resistance is increasingly becoming a
problem, as most of the major chemical controls are ineffective in
treating such pests and diseases. Further, we have seen that honey bees
are building resistance to newly-developed chemicals more quickly than
in the past, thereby limiting the longevity of chemical controls.
Unfortunately, there is no simple solution to these problems, and
the honey bee industry is too small to support the cost of the needed
research, particularly given the depressed state of the industry in
recent years. Further, there are no funds, facilities, or personnel
elsewhere available in the private sector for this purpose.
Accordingly, the beekeeping industry is dependent on research from
public sources for the scientific answers to these threats. Since the
honey bee industry is completely comprised of small family-owned
businesses, it relies heavily on the ARS for needed research and
development. The key to the survival of the honey industry lies with
the honey bee research programs conducted by ARS.
The sequencing of the honey bee genome at Baylor University has
opened the door to creating highly effective solutions to these
problems via marker assisted breeding. Marker assisted breeding would
permit the rapid screening of potential breeders for specific DNA
sequences that underlie specific desirable honey bee traits. The
sequenced honey bee genome is the necessary key which will allow
scientists to discover the important DNA sequences. Because of the
sequenced honey bee genome, it is now possible to apply molecular
biological studies to the development of marker assisted breeding of
honey bees. Good success can be expected in several areas: honey bee
tracheal mite resistance, certain aspects of Varroa mite resistance
such as grooming behavior (mite removal from the hive), bacterial and
fungal disease resistance, and the optimization of pollination
behavior.
Furthermore, research on honey bees, one of five animals chosen by
the National Institutes of Health for genome sequencing, may provide
important insight into other areas of science. The honey bee is the
first agricultural species to be sequenced, and such work may provide
breakthrough advances in many areas of science. In fact, honey bees are
being studied by the U.S. Department of Defense as sentinel species
that could detect and locate agents of harm, such as chemical or
biological threats. According to one researcher, it appears that honey
bees' olfactory capabilities are at least on par with a dog, if not
more sensitive. Thus, the scientific advances achieved by ARS will
provide an array of benefits across many disciplines.
the work of the ars honey bee research laboratories
The ARS Honey Bee Research Laboratories work together to provide
research solutions to problems facing businesses dependent on the
health and vitality of honey bees. The findings of these laboratories
are used by honey producers to protect their producing colonies and by
farmers and agribusinesses to ensure the efficient pollination of
crops. Each of the four ARS Honey Bee Research Laboratories (which are
different in function from the ARS Wild Bee Research Laboratory at
Logan, Utah) focuses on different problems facing the U.S. honey
industry and undertakes research that is vital to sustaining honey
production in this country. Furthermore, each honey bee research
laboratory has unique strengths and each is situated and equipped to
support independent research programs which would be difficult, and in
many cases impossible, to conduct elsewhere.
Research at the ARS Weslaco Laboratory
Because the AHPA recommends that the appropriation for the Weslaco
laboratory be approved at not less than current levels, we respectfully
request Congress to reject the President's proposal to eliminate
$249,000 in funding added by Congress for the ARS Honey Bee Laboratory
at Weslaco, Texas. Retaining the current (fiscal year 2004) level of
funding for the Weslaco laboratory will enable it to continue its work
in finding a chemical solution to parasitic mites that are causing a
crisis for the U.S. beekeeping and pollination industries. Varroa mites
are causing the loss of hundreds of thousands of domestic honey bee
colonies annually as well as devastating wild bee colonies. The only
chemical which has received a general registration for Varroa mite
control, fluvalinate, is being rendered ineffective by the development
of resistant mite populations. The ARS laboratory at Weslaco has been
developing alternative chemicals to control the Varroa mite. The
laboratory has found a chemical, coumaphos, with the potential of being
equally effective as fluvalinate. Unfortunately, the mites are also
rapidly developing a resistance to this latest chemical product,
coumaphos. Presently, there are no other chemicals available for
controlling the Varroa mite, and the laboratory is working frantically
to develop other means of control.
Additionally, the laboratory is researching methods that may
control the small hive beetle. Since its discovery in Florida in 1998,
this pest has caused severe bee colony losses in California, Florida,
Georgia, South Carolina, North Carolina, Pennsylvania, Ohio, and
Minnesota. Estimates put these losses in just one season at over 30,000
colonies. The beetles are now spreading all across the United States.
Although it seems that coumaphos may help control this insect as well
as the Varroa mite, it has not yet received a Section 3 registration
for general use. The ARS honey bee research scientists at the Weslaco
laboratory have been working overtime to find chemicals, techniques,
pheromones, or other methods of controlling the beetle. Time is of the
essence and a control must be found immediately, because all the bee
colonies in the Western Hemisphere are at risk.
This facility also focuses its research efforts on developing
technologies to manage honey bees in the presence of Africanized honey
bees, parasitic mites, and other pests. In order to ensure that further
pests are not introduced into the United States, scientists at the
Weslaco facility provide technical assistance to agriculture
departments in foreign countries on the control of parasitic mites. The
laboratory has worked with officials in Guatemala, Costa Rica, Mexico,
and South Africa to protect the U.S. honey bee population from further
devastation by infestation of foreign parasites, diseases, and other
pests. This inter-governmental cooperation is necessary to ensure the
continued viability of the U.S. honey bee industry.
Research at the ARS Baton Rouge Laboratory
While we are pleased that the President has requested an increased
funding in the amount of $250,000 for honey bee genome research at the
ARS Baton Rouge Laboratory, we are dismayed by and opposed to the
Administration's simultaneous request for $397,000 in cuts for this
facility, eliminating previous Congressional increases in funding. In
light of the importance of genome research, we hope that Congress will
support the President's recommended increase for the ARS laboratory at
Baton Rouge, Louisiana, while opposing the rescission proposed by the
Administration. An increase in funding will allow the vital genome
research conducted in Baton Rouge to achieve more quickly the
breakthrough successes that are closer than ever to realization. The
Baton Rouge facility is the only laboratory in the United States
developing long-term, genetic-based solutions to the Varroa mite.
Existing stocks of U.S. honey bees are being tested to find stocks
which exhibit resistance to the parasitic mites.
Research scientists with the laboratory have also been to the far
corners of the world looking for mite resistant bees. For example, in
eastern Russia, they found bees that have co-existed for decades with
the mites and survived. Using these bees, the laboratory develops
stocks of honey bees resistant to the parasites. Before these new
stocks are distributed to American beekeepers, the laboratory ensures
that the resistance holds up under a wide range of environmental and
beekeeping conditions, testing attributes such as vigor, pollination,
and honey production. We believe recent scientific breakthroughs with
this genomic research will allow scientists in the near future to breed
honey bees that are resistance to the Varroa mite and other parasites.
The Baton Rouge facility also operates the only honey bee
quarantine and mating station approved by the Animal and Plant
Inspection Service. These stations are necessary to ensure that new
lines of bees brought into the United States for research and
development are free of diseases unknown in the United States. In
addition, Baton Rouge research scientists are focused on the
applications of new technologies of genomics. This work has the
potential to enhance the proven value of honey bee breeding for
producing solutions to the multiple biological problems that diminish
the profitability of beekeeping.
Research at the ARS Tucson Laboratory
The American Honey Producers Association supports the
Administration's request that funding for the ARS Honey Bee Research
Laboratory in Tucson be kept at the current level for fiscal year 2005.
This research center is the only ARS honey bee laboratory serving the
needs of beekeepers and farmers in the western United States. The
facility works to improve crop pollination and honey bee colony
productivity through quantitative ecological studies of honey bee
behavior, physiology, pest and diseases, and feral honey bee bionomics.
Because more than one million colonies are transported from across
the country for pollination into crops grown in the western United
States (primarily California), the Tucson research center addresses
problems that arise from transporting and introducing colonies for
pollination of crops such as almonds, plums, apricots, apples,
cherries, citrus, alfalfa, vegetable seed, melons, and berries. This
research center has been instrumental in disseminating information on
technical issues associated with the transport of bee colonies across
state lines. Additionally, in order to ensure that transported colony
populations remain stable during transport and also during periods
before the crop to be pollinated comes into bloom, scientists at the
laboratory have developed an artificial diet that stimulates brood
production in colonies. A large bee population is necessary to ensure
that efficient pollination occurs, creating superior quality crops.
Research at the ARS Beltsville Laboratory
Again, we support the President's proposal to increase funding at
the ARS Honey Bee Research Laboratory in Beltsville by $100,000 to
boost current research efforts aimed at eliminating invasive honey bee
pests. This facility, the oldest of the federal bee research centers,
conducts research on the biology and control of honey bee parasites,
diseases, and pests to ensure an adequate supply of bees for
pollination and honey production. Using biological, molecular,
chemical, and non-chemical approaches, scientists in Beltsville are
developing new, cost-effective strategies for controlling parasitic
mites, bacterial diseases, and emergent pests that threaten honey bees
and the production of honey.
The laboratory also develops preservation techniques for honey bee
germplasm in order to maintain genetic diversity and superior honey bee
stock. Scientists at the facility also provide authoritative
identification of Africanized honey bees and diagnosis of bee diseases
and pests for Federal and State regulatory agencies and beekeepers on a
worldwide basis. In operating this bee disease diagnosis service, the
Beltsville facility receives over 2,000 samples annually from across
the United States.
conclusion
In conclusion, we wish to thank you again for your support of honey
bee research in the past and for your Committee's understanding of the
importance of these laboratories. The American Honey Producers
Association would appreciate your continued support by (1) increasing
the level of funding for the ARS Honey Bee Research Laboratory in Baton
Rouge, Louisiana, by $250,000, as proposed by the Administration in its
fiscal year 2005 budget; (2) increasing the level of funding for the
ARS Honey Bee Research Laboratory in Beltsville, Maryland, by $100,000,
as proposed by the Administration in its fiscal year 2005 budget; (3)
restoring the proposed rescissions from previous years of $397,000 for
the Baton Rouge facility and $249,000 for the Weslaco, Texas, facility;
and (4) maintaining the current level of funding for the ARS Honey Bee
Research Laboratory in Tucson, Arizona. Only through research can we
have a viable U.S. beekeeping industry and continue to provide stable
and affordable supplies of bee pollinated crops which make up fully
one-third of the U.S. diet.
Furthermore, we urge you to reject any effort to cut the operating
budgets of these vitally important research laboratories by
consolidating their functions. Any proposed cuts and their resulting
budget and staff reductions would significantly diminish the quality of
research conducted by these laboratories, harming bee keepers as well
as farmers who harvest pollination-dependent agriculture. Congress
cannot allow these cuts to occur and must continue to provide
sufficient funding for the ARS Honey Bee Research Laboratories to
perform their vital role.
I would be pleased to respond to any questions that you or your
colleagues may have.
______
Prepared Statement of the American Indian Higher Education Consortium
Mr. Chairman and Members of the Subcommittee, on behalf of the
American Indian Higher Education Consortium (AIHEC) and the 32 Tribal
Colleges and Universities that comprise the list of 1994 Land Grant
Institutions, thank you for this opportunity to share our funding
requests for fiscal year 2005.
This statement is presented in three parts: (a) a summary of our
fiscal year 2005 funding request, (b) a brief background on Tribal
Colleges and Universities, and (c) an outline of the 1994 Tribal
College Land Grant Institutions' plan for using our land grant programs
to fulfill the agricultural potential of American Indian communities,
and to ensure that American Indians have the skills needed to maximize
the economic development potential of their resources.
summary of requests
We respectfully request the following funding levels for fiscal
year 2005 for our land grant programs established within the USDA
Cooperative State Research, Education, and Extension Service (CSREES)
and Rural Development mission areas. In CSREES, we specifically
request: $12 million payment into the Native American endowment fund;
$3.1 million for the higher education equity grants; $5 million for the
1994 institutions' competitive extension grants program; $3 million for
the 1994 Institutions' competitive research grants program; and in the
Rural Development-Rural Community Advancement Program (RCAP), that $5
million for each of the next five fiscal years be targeted for the
tribal college community facilities grants. RCAP grants help to address
the critical facilities and infrastructure needs at the colleges that
impede our ability to participate fully as land grant partners. Since
fiscal year 2001, the RCAP tribal college competitive program has
received an annual appropriation of $4 million.
background on tribal colleges and universities
The first Morrill Act was enacted in 1862 specifically to bring
education to the people and to serve their fundamental needs. Today,
over 140 years after enactment of the first land grant legislation, the
1994 Land Grant Institutions, as much as any other higher education
institutions, exemplify the original intent of the land grant
legislation, as they are truly community-based institutions.
The Tribal College Movement was launched in 1968 with the
establishment of Navajo Community College, now Dine College, serving
the Navajo Nation. Rapid growth of tribal colleges soon followed,
primarily in the Northern Plains region. In 1972, the first six
tribally controlled colleges established the American Indian Higher
Education Consortium to provide a support network for member
institutions. Today, AIHEC represents 34 Tribal Colleges and
Universities--32 of which now comprise the list of 1994 Land Grant
Institutions--located in 12 states created specifically to serve the
higher education needs of American Indian students. Annually, they
serve approximately 30,000 full- and part-time students from over 250
Federally recognized tribes.
Thirty-one \1\ of the 1994 Land Grant Institutions are accredited
by independent, regional accreditation agencies and like all
institutions, must undergo stringent performance reviews on a periodic
basis to retain their accreditation status. Tribal colleges serve as
community centers by providing libraries, tribal archives, career
centers, economic development and business centers, public meeting
places, and child care centers. Despite their many obligations,
functions, and notable achievements, tribal colleges remain the most
poorly funded institutions of higher education in this country. Most of
the 1994 Land Grant Institutions are located on Federal trust
territory. Therefore, states have no obligation and in most cases,
provide no funding to tribal colleges. In fact, most states do not even
fund our institutions for the non-Indian state residents attending our
colleges, leaving the tribal colleges to absorb the per student
operational costs for non-Indian students enrolled in our institutions,
accounting for approximately 20 percent of our student population.
Under these inequitable financing conditions and unlike our state land
grant partners, our institutions do not benefit from economies of
scale--where the cost per student to operate an institution is
diminished by the increased size of the student body.
---------------------------------------------------------------------------
\1\ White Earth Tribal & Community College is in the pre-candidacy
stage of accreditation.
---------------------------------------------------------------------------
As a result of 200 years of Federal Indian policy--including
policies of termination, assimilation and relocation--many reservation
residents live in abject poverty comparable to that found in Third
World nations. Through the efforts of Tribal Colleges and Universities,
American Indian communities are receiving services they need to
reestablish themselves as responsible, productive, and self-reliant
citizens. It would be regrettable not to expand the very modest
investment in, and capitalize on, the human resources that will help
open new avenues to economic development, specifically through
enhancing the 1994 Institutions' land grant programs, and securing
adequate access to information technology.
1994 land grant programs--ambitious efforts to reach economic
development potential
Sadly, due to lack of expertise and training, millions of acres on
our reservations lie fallow, under-used, or have been developed through
methods that render the resources non-renewable. The Equity in
Educational Land Grant Status Act of 1994 is our hope for rectifying
this situation. Our current land grant programs are small, yet very
important to us. It is essential that American Indians learn more about
new and evolving technologies for managing our lands. We are committed
to being productive contributors to the agricultural base of the nation
and the world.
Native American Endowment Fund.--Endowment installments paid into
the 1994 Institutions' account remain with the U.S. Treasury, only the
annual interest, less the USDA's administrative fee, is distributed to
the colleges. The latest gross annual interest yield (fiscal year 2003)
is $1,929,849, after the USDA's administrative fee of $77,194 is
deducted; $1,852,655 remains to be distributed among the 31 eligible
1994 Land Grant Institutions by statutory formula. We believe that the
annual administration fee is excessive. Last year, the USDA's
administrative fee of $70,863 was larger than the interest yield
payments distributed to 74 percent of the 1994 Land Grant Institutions.
After the distribution amounts are determined for this year's
disbursement we fully expect similar results and therefore ask the
Subcommittee to review the administration fee and consider reducing it.
More critical funding can then be put to work at the 1994 Land Grant
Institutions in order to accomplish the goals of their community based
programs.
Just as other land grant institutions historically received large
grants of land or endowments in lieu of land, this endowment assists
1994 Land Grant Institutions in establishing and strengthening our
academic programs in such areas as curricula development, faculty
preparation, instruction delivery, and as of fiscal year 2001, to help
address our critical facilities and infrastructure issues. Many of the
colleges have used the endowment funds in conjunction with the
Education Equity Grant funds to develop and implement their academic
programs. As earlier stated, tribal colleges often serve as primary
community centers and although conditions at some have improved
substantially, many of the colleges still operate under deplorable
conditions. Most of the tribal colleges cite improved facilities as one
of their top priorities. Several of the colleges have indicated the
need for immediate and substantial renovations to replace construction
materials that have long exceeded their effective life span, and to
upgrade existing buildings due to accessibility and safety concerns.
An increased endowment payment would enhance the size of the corpus
and thereby increase the annual interest yield available to the 1994
land grant colleges. This additional funding would be very helpful in
our efforts to continue to support faculty and staff positions and
program needs within Agriculture and Natural Resources departments, as
well as to continue to help address the critical and very expensive
facilities needs at our institutions. Currently, the amount that each
college receives from this endowment is not enough to adequately
address curricula development and instruction delivery, as well as make
even a dent in the necessary facilities projects at the colleges. In
order for the 1994 Institutions to become full partners in this
nation's great land grant system, we need and frankly deserve the
facilities and infrastructure necessary to engage in education and
research programs vital to the future health and well being of our
reservation communities. We respectfully request the subcommittee build
upon this much needed base fund by increasing the fiscal year 2005
endowment fund payment to the $12 million recommended in the
President's Budget.
1994 Institutions' Educational Equity Grant Program.--Closely
linked with the endowment fund, this program currently provides
approximately $50,000 per 1994 Institution to assist in academic
programs. Through the modest appropriations made available since fiscal
year 1996, the tribal colleges have been able to begin to support
courses and plan activities specifically targeting the unique needs of
our respective communities.
The 1994 Institutions have developed and implemented courses and
programs in natural resource management; environmental sciences;
horticulture; forestry; bison production and management; and especially
food science and nutrition to address epidemic rates of diabetes and
cardiovascular disease on reservations. If more funds were available
through the Educational Equity Grant Program, tribal colleges could
channel more of their endowment yield to supplement other facilities
funds to address their critical infrastructure issues. Authorized at
$100,000 per eligible 1994 Institutions, in fiscal year 2004, this
program was appropriated at just $1,679,000, or about $54,000 per 1994
institution. We respectfully request full funding of $3.1 million to
allow the colleges to build upon the courses and activities that the
initial funding launched.
Extension Programs.--The 1994 Institutions' extension programs
strengthen communities through outreach programs designed to bolster
economic development; community resources; family and youth
development; natural resources development; agriculture; as well as
health and nutrition awareness.
In fiscal year 2004, $2,929,000 was appropriated for the 1994
Institutions' competitive extension grants, a 13 percent decrease from
fiscal year 2003, by far the largest percentage decrease of all Smith
Lever programs, as the 1862 and 1890 programs received a reduction of
just 0.59 percent. Reductions in already sparse funding will
significantly limit the 1994 Institutions' ability to maintain existing
programs and to respond to emerging issues such as food safety and
homeland security especially on border reservations. Additional funds
are needed to support these vital programs designed to address the
inadequate extension services provided to Indian reservations by their
respective states. It is important to note that the 1994 extension
program is specifically designed to complement and build upon the
Indian Reservation Extension Agent program, and is not duplicative of
other extension activities. For the reasons outlined above, we request
the Subcommittee support this competitive program by appropriating $5
million to sustain the growth and further success of these essential
community based programs.
1994 Research Program.--As the 1994 Land Grant Institutions have
begun to enter into partnerships with 1862/1890 land grant institutions
through collaborative research projects, impressive efforts to address
economic development through land use have come to light. Our research
program illustrates an ideal combination of Federal resources and
tribal college-state institutional expertise, with the overall impact
being far greater than the sum of its parts. We recognize the budget
constraints under which Congress is functioning. However, $1.1 million,
the fiscal year 2004 appropriated level of funding, is clearly
inadequate for a competitive pool of 31 institutions. This research
program is vital to ensuring that tribal colleges may finally become
full partners in the nation's land grant system. Many of our
institutions are currently conducting agriculture-based applied
research, yet finding the resources to conduct this research to meet
their communities' needs is a constant challenge. This research
authority opens the door to new funding opportunities to maintain and
expand the research projects begun at the 1994 Institutions, but only
if adequate funds are appropriated. The following is an example of the
projects funded under this program:
--Southwestern Indian Polytechnic Institute (SIPI) serves American
Indian/Alaska Native students from across the nation.
Currently, SIPI is studying the feasibility of an intensive,
extended production of high value crops. This research project
compares the economic returns from growing raspberries and
strawberries under high tunnels to returns from open-field
growing conditions, under organic management at three sites
that consider variations in harvest time and duration, and
total production.
Other project areas include soil and water quality, amphibian
propagation, pesticide and wildlife research, range cattle species
enhancement, and native plant preservation for medicinal and economic
purposes. We strongly urge the Subcommittee to fund this program at $3
million to enable our institutions to develop and strengthen their
research potential.
Rural Community Advancement Program (RCAP).--Beginning in fiscal
year 2001, each year $4 million of the RCAP funds appropriated for
loans and grants to benefit Federally recognized Native American tribes
have been targeted for community facility grants for improvements at
Tribal Colleges and Universities. As stated earlier, the facilities at
many of the 1994 Land Grant Institutions are in serious need of repair
and in many cases replacement. We urge the Subcommittee to designate $5
million of the Native American RCAP funds to address the critical need
for improving the facilities at the 1994 Tribal College Land Grant
Institutions. Additionally, we respectfully request report language
directing the Department of Agriculture to target a minimum of $5
million for each of the next five fiscal years to allow our
institutions the means to aggressively address critical facilities
needs.
conclusion
The 1994 Land Grant Institutions have proven to be efficient and
effective tools for bringing educational opportunities to American
Indians and hope for self-sufficiency to some of this nation's poorest
regions. The modest Federal investment in the 1994 Land Grant
Institutions has already paid great dividends in terms of increased
employment, education, and economic development. Continuation of this
investment makes sound moral and fiscal sense. American Indian
reservation communities are second to none in their need for effective
land grant programs and as earlier stated no institutions better
exemplify the original intent of the land grant concept than the 1994
Land Grant Institutions.
We appreciate your support of the Tribal Colleges and Universities
and we ask you to renew your commitment to making our communities self-
sufficient. We look forward to continuing our partnership with you, the
U.S. Department of Agriculture, and the other members of the nation's
land grant system--a partnership that will bring equitable educational,
agricultural, and economic opportunities to Indian Country.
Thank you for this opportunity to present our funding proposals to
this Subcommittee. We respectfully request your continued support and
full consideration of our fiscal year 2005 appropriations requests.
______
Prepared Statement of The American Legion
National School Lunch Program
Since 1941, The American Legion has supported programs of nutrition
for children, including the National School Lunch Program. This
federally-assisted meal program operates in more than 99,000 public and
non-profit private schools and residential child care institutions,
providing nutritionally balanced, low-cost or free lunches to more than
25 million children each school day.
The importance of this nutrition assistance program is underscored
by these facts: A poor diet is a significant factor in 4 of the 10
leading causes of death in the United States--coronary heart disease,
cancer, hypertension, stroke and diabetes.
--Poor nutrition and lack of physical activity account for 300,000
deaths per year.
--The economic cost of poor nutrition accounts for at least $200
billion per year in medical costs and lost productivity.
--Participation in school feeding programs leads to improved
educational outcomes.
There continues to be expressions of concern by health authorities
and various national organizations with an interest in the status of
proper nutrition among young people. A USDA analysis of the 1994-1996
Continuing Survey of Food Intakes for Individuals (CSFII) noted these
alarming trends in children's eating patterns:
--Only 2 percent of school-aged children meet the Food Guide Pyramid
serving recommendations for all five major food groups.
--Girls, ages 14 to 18, have especially low intakes of fruits and
dairy products.
--More than two-thirds of females, ages 14 to 18, exceed the
recommendations for intake of total fat and saturated fat, but
even greater percentages of children exceed these
recommendations among the other age/gender groups.
--Children's diets are high in added sugars. For all children, added
sugars--including sugars used as ingredients in processed foods
or added to foods as they are consumed--contribute an average
of 20 percent of total food energy.
--Children are heavy consumers of regular or diet soda. Overall, 56
to 85 percent of children (depending on age and gender) consume
soda on any given day. Teenage males are especially heavy
consumers of soda, with over a third consuming more than three
servings a day.
--All of the age/gender groups experienced a shift from milk products
to soda and fruit drinks. The decrease in milk consumption
tended to be larger for females than for males.
--These trends have contributed to some serious diet-related health
concerns.
--The prevalence of overweight among youth ages 5-17 years in the
United States has more than doubled in the past 30 years; most
of the increase has occurred since the late 1970's.
--Current evidence suggests that childhood overweight and obesity
continue into adulthood.
--One of the most serious aspects of overweight and obesity in
children is Type II diabetes. Type II diabetes accounted for 2
to 4 percent of all childhood diabetes before 1992, but
skyrocketed to 16 percent by 1994. Overweight adolescents are
more likely to become overweight adults, with increased risk
for developing heart disease and stroke, gallbladder disease,
arthritis, and endometrial, breast, prostate and colon cancers.
--Failure to meet calcium requirements in childhood can hinder the
achievement of maximal skeletal growth and bone mineralization.
Getting enough calcium in the diet during childhood,
adolescence, and young adulthood, to reduce the risk for
osteoporosis later in life is particularly important for
females.
Nutrition clearly has a major impact on children--on their health,
their ability to learn and on their potential for becoming healthy and
productive adults. School meals make an important contribution to the
nutrition of school-aged children. The School Nutrition Dietary
Assessment Study-II indicates that reimbursable meals selected by
students exceeds the Recommended Dietary Allowances (RDA) standards for
key nutrients. According to the USDA analysis of the 1994-1996 CSFII
data:
--National School Lunch Program (NSLP) participation is associated
with higher average intakes of many nutrients, both at lunch
and over 24 hours.
--NSLP participants have substantially lower intakes of added sugars
than do non-participants.
--NSLP participants are more likely than non-participants to consume
vegetables, milk and milk products, and meat and other protein-
rich foods, both at lunch and over 24 hours; they also consume
less soda and fruit drinks.
Federal nutrition assistance programs have a critical role to play
in promoting health and preventing diet-related health problems by
ensuring access to nutritious food to those who need it, and by
promoting better diets and physical activity through nutrition
education and promotion to program participants. The American Legion
urges Congress to appropriate $10.6 billion for school nutrition
programs to reflect the increased cost of food and to provide for
needed facilities and trained personnel for the purpose of conducting
an adequate school lunch program.
______
Prepared Statement of the American Public Power Association
The American Public Power Association (APPA) is the national
service organization representing the interests of over 2,000 municipal
and other state and locally owned utilities throughout the United
States (all but Hawaii). Collectively, public power utilities deliver
electricity to one of every seven electric consumers (approximately 40
million people), serving some of the nation's largest cities. However,
the vast majority of APPA's members serve communities with populations
of 10,000 people or less.
We appreciate the opportunity to submit this statement outlining
our fiscal year 2005 funding priorities within the jurisdiction of the
Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies Subcommittee.
Department of Agriculture: Rural Utility Service Rural Broadband Loan
Program
APPA urges the Subcommittee to fully fund the Rural Utility
Service's (RUS) Rural Broadband Loan Program at $20 million, as
authorized in the 2002 Farm Bill, and to take all appropriate steps to
assist the RUS in facilitating the processing of loan funds provided in
fiscal year 2002 through fiscal year 2004. A funding level of $20
million would produce approximately $700 million in RUS loans for
fiscal year 2005.
APPA believes it is important to provide incentives for the
deployment of broadband to rural communities, many of which lack
broadband service. Increasingly, access to advanced communications
services is considered vital to a community's economic and educational
development. In addition, the availability of broadband service enables
rural communities to provide advanced health care through telemedicine
and to promote regional competitiveness and other benefits that
contribute to a high quality of life. Approximately one-fourth of
APPA's members are currently providing broadband service in their
communities. Several APPA members are planning to apply for RUS
broadband loans to help them finance their broadband projects, and one
member--Grant County Public Utility District in Washington--applied for
an RUS loan last year.
______
Prepared Statement of the American Sheep Industry
The American Sheep Industry Association (ASI) is a federation of
state member associations representing over 64,000 sheep producers in
the United States. The sheep industry views numerous agencies and
programs of the U.S. Department of Agriculture as important to lamb and
wool production. Sheep industry priorities include rebuilding and
strengthening our infrastructure primarily through the National Sheep
Industry Improvement Center, critical predator control activities,
fully funded our national animal health efforts, and expanding research
capabilities.
The rapid changes that have occurred in the domestic sheep industry
and continue to take place put further emphasis on the importance of
adequately funding the U.S. Department of Agriculture programs
important to lamb and wool producers.
We appreciate this opportunity to comment on those portions of the
USDA fiscal year 2005 budget.
rural development
The National Sheep Industry Improvement Center is critical to the
industry and we fully support appropriations for the balance of
authorized spending of $22 million. The Sheep Center is currently
involved with an Intermediary Low Interest Direct Loan Program, which
became operational in 2000 and has committed $14 million for lamb, wool
and goat projects. Loans are being used to fund a variety of large and
small projects in every region of the country with emphasis on
targeting different marketing challenges through value added and niche
marketing initiatives. The second focus area is a direct grant program
that was started in 2002. The Center has approved a grant solicitation
process with an increased funding amount for fiscal year 2004, which
ought to be considered again in fiscal year 2005 with additional
appropriations.
We understand that loan proposals currently under consideration
will fully use the available funds. The demand for the Center's funds
is increasing and additional appropriations will be required to meet
the new project requests. Furthermore the authority of the Center to
receive Federal funds allows for another $22 million during the next 2
fiscal years. The Center is a premier vehicle of the U.S. sheep
industry's adjustment plan and adequate funding is critical to the
industry.
animal and plant health inspection service (aphis)
Scrapie
The American Sheep Industry Association is very appreciative for
the increased appropriations approved in fiscal year 2003 and fiscal
year 2004 of $15.47 million. USDA/APHIS, along with industry and State
regulatory efforts, is now in the position to eradicate scrapie from
the United States with a multi-year attack on this animal health issue.
As the collective and aggressive efforts of Federal and State
eradication efforts are expanding into slaughter-surveillance and other
methods and systems, the costs are, as expected, escalating. We urge
the subcommittee to support the President's request of $21 million for
scrapie eradication in the 2005 budget.
Scrapie is one of the family of transmissible spongiform
encephalopathies (TSEs), all of which are the subject of great
importance and interest around the globe. USDA/APHIS, along with the
support and assistance of the livestock and allied industries, began an
aggressive program to eradicate scrapie in sheep and goats three years
ago. The plan USDA/APHIS is implementing will eradicate scrapie by 2010
and with subsequent monitoring and surveillance would allow the United
States to be declared scrapie-free by 2017. Becoming scrapie-free will
have significant positive economic impact to the livestock, meat and
feed industries and, of course, rid our flocks and herds of this fatal
animal disease.
Essential to the eradication effort being accomplished in a timely
manner, is adequate appropriated funds. The program cannot function
properly without additional personnel, diagnostic support and
surveillance activities that depend upon appropriated funds. We
strongly urge you to support the level of funding that is specified for
scrapie in the President's budget request. Funding of $21 million will
provide for an achievable scrapie eradication program and the eventual
scrapie-free status for the United States. As with the other successful
animal disease eradication programs conducted by USDA/APHIS in the
past, strong programs at the State level are key. We therefore urge the
subcommittee to send a clear message to USDA to budget significant
funding toward cooperative agreements with the State animal health
regulatory partners.
Wildlife Services
With well over one-quarter million sheep and lambs lost to
predators each year, the Wildlife Services (WS) program of USDA-APHIS
is vital to the economic survival of the sheep industry. The value of
sheep and lambs lost to predators and predator control expenses are
second only to feed costs for sheep production. Costs associated with
depredation currently exceed our industry's veterinary, labor and
transportation costs.
Wildlife Service's cooperative nature has made it the most cost
effective and efficient program within Federal Government in the areas
of wildlife management and public health and safety. Wildlife Services
has more than 2,000 cooperative agreements with agriculture, forestry
groups, private industry, state game and fish departments, departments
of health, schools, county and local governments to mitigate the damage
and danger that the public's wildlife can inflict on private property
and public health and safety.
ASI strongly supports the fiscal year 2004 appropriations for
Wildlife Services operations and methods development programs,
particularly as related to livestock protection. We request the
Committee restore the funding levels that are decreased in the
Administration's fiscal year 2005 budget. We encourage continued
recognition in the appropriations process for fiscal year 2005 of the
importance of aerial hunting as one of Wildlife Service's most
efficient and cost-effective core programs and ASI supports continued
appropriations. It is used not only to protect livestock, wildlife and
endangered species, but is a crucial component of the Wildlife Services
rabies control program.
Similar to the increasing needs in the aerial hunting program we
encourage continued emphasis in the programs to assist with management
of wolf depredation in the states of Montana, Idaho, Wyoming,
Minnesota, Wisconsin, Michigan, New Mexico and Arizona. Additionally,
program expenses are expected in the states surrounding the Montana,
Idaho and Wyoming wolf populations. It is strongly supported that
appropriations be provided for $586,000 for additional wolf costs
anticipated in Washington, Oregon, Nevada, Utah, Colorado and North
Dakota. A regional helicopter proposed for use in the affected areas is
supported at $980,000.
The following additional appropriations are urged for consideration
in fiscal year 2005:
--Wildlife Services must document its operations in order to conduct
program analysis and comply with Federal reporting
requirements. The agency's current information technology
support system has become antiquated, which could result in
incomplete data collection and analysis. To update and maintain
the information system, an additional $700,000 is needed.
--Research and Development is needed to improve existing techniques,
find new methods for capturing and/or discouraging wildlife
from preying on livestock or other wildlife species, and
explore fertility methods (i.e., sterilization and
immunocontraception) that are economically and socially
acceptable. An additional $1,150,000 is needed to meet the
research and personnel needs of the National Wildlife Research
Center Predator Research Unit.
--Implementation of Newly Developed Methods including new
technologies that deal with electronic devices or
immunocontraception require significant funds to implement. It
is recommended that a fund of $2,300,000 be established to take
the newly developed techniques and test them in actual field
conditions to determine their practicability in terms of
effectiveness and cost.
--Livestock protection is the major emphasis of the WS western
program and the agency frequently receiving requests to assist
other types of wildlife damage related issues. For example,
concerns over declining native wildlife are being expressed by
many state wildlife agencies. WS is being requested to provide
assistance to reduce impacts of predation on these species to
allow for recovery and to avert threatened and endangered
species listings. With limited resources and employees to
accommodate these requests, additional infrastructure and
equipment is needed to meet these demands. An additional
$6,900,000 is necessary to purchase equipment, meet personnel
needs to maintain and implement programs, update the data
collection system, develop and implement a public communication
plan, and meet NEPA planning requirements.
agricultural marketing service
Lamb Market Information and Price Discovery Systems
The sheep industry strongly supports the fiscal year 2005 budget
for Market News of USDA-Agricultural Marketing Service. Furthermore ASI
supports necessary increases in appropriations for the full
implementation of the mandatory price-reporting system for livestock.
We expect AMS to continue efforts to fully implement the price
reporting system this fiscal year with the inclusion of the imported
lamb meat price report.
foreign agricultural service (fas)
The sheep industry participates in FAS programs such as the Market
Access Program (MAP), Quality Samples Program and the Foreign Market
Development Program. ASI strongly supports appropriations at the full
authorized level for these critical Foreign Agricultural Service
programs. ASI is the cooperator for American wool and sheep pelts and
has achieved solid success in increasing exports of domestic product.
Exports of American wool have been increased dramatically with
approximately 60 percent of U.S. production now competing overseas.
natural resources conservation service (nrcs)
ASI urges increased appropriations for the range programs of the
Soil Conservation Service to benefit the private range and pasture
lands of the United States with conservation assistance. We support the
budget item and recommend an increased level for the Grazing Lands
Conservation Initiative, which ASI has worked with, along with other
livestock and range management organizations, to address this important
effort for rangelands in the United States.
research, education and economics
Our industry is striving to be profitable and sustainable as a user
of and contributor to our natural resource base. Research, both basic
and applied, and modern educational programming is essential if we are
to succeed. We have been disappointed in the decline in resources USDA
has been targeting toward sheep research and outreach programs. With
net increases in the animal systems category of the agriculture
research budget, for example, sheep and wool research has either
declined or remained static for the past several years. In order for
the sheep industry to be more globally competitive in the future, we
must invest in the discovery and adoption of new technologies for
producing, processing and marketing lamb and wool. We urge the
subcommittee to send a strong message to USDA supporting sheep research
and education funding increases.
Agricultural Research Service
We continue to vigorously support the administration's funding of
research concerning emerging and exotic diseases. Emerging and exotic
diseases continue to have significant impact on our industry due to
animal health and trade issues. The animal disease portion should be
substantial and is urgently needed to protect the U.S. livestock
industry. We agree that BSE is an extremely important disease issue
globally and believe that research is needed. With this in mind, we
remind the subcommittee that scrapie is a TSE that is endemic in the
United States and we recommend that these monies for BSE research be
utilized in such a manner that the resultant research assists with
scrapie eradication needs. We also respectively remind the subcommittee
that scientists in the Animal Disease Research Unit (ADRU), ARS,
Pullman Washington, have made significant progress in the early
diagnosis of TSEs, in understanding genetic resistance to TSEs and in
understanding mechanisms of TSE transmission, which are important in
eradication of all TSEs. The programs of these scientists at ADRU
should be enhanced and expanded to include, for instance, the
development of further improvements in rapid and accurate TSE detection
methods and to provide an understanding of the role of environmental
sources of the TSE agent in the transmission of TSEs within the United
States and world and to further understand the basis of genetic
resistance and susceptibility to these devastating diseases.
We appreciate and support the President's budget request of $1
million for Animal Genomics at ARS/ADRU. Since 2001, Congress has had
the foresight to appropriate $775,000 each year to this unit for
``Microbial Genomics.'' Microbial genomics is the cornerstone project
for their genomic research infrastructure and has resulted in very
important genome projects for infectious diseases of livestock such as
scrapie. The $250,000 enhancement of the genomics program at ADRU over
the fiscal year 2004 would enhance the program to include defining the
genes involved in the immune response of sheep to important emerging
diseases such as MCF and ovine progressive pneumonia virus.
We also urge the subcommittee to recommend the restoration of
$496,000 for Malignant Catarrhal Fever (MCF) at the ARS/ADRU in Pullman
for the fiscal year 2005 budget. MCF is a viral disease of ruminants
that is of great concern to our livestock industries. The exotic
variant of MCF is considered a high priority select agent. This funding
is provided for collaborative research with the U.S. Sheep Experiment
Station, Dubois ID, for vaccine development directed at preventing
transmission of MCF.
Research into Johne's disease has received additional funding
through ARS over the past several years, focusing on cattle. Johne's
disease is also endemic in the U.S. sheep population and is not well
understood as a sheep disease. The same food safety concerns exist in
both sheep and cattle; other countries are also very concerned about
Johne's in sheep. We urge the subcommittee to send a strong message to
ARS that Johne's disease in sheep should receive more attention at the
National Animal Disease Research Center (NADC) with an emphasis on
diagnostics.
Economic Research Service
ASI appreciates the subcommittees' support of USDA/ERS and the
accomplishment of publicly available retail price data on lamb as
initiated last year. We urge continued support of funding for mandatory
price reporting including collection and reporting of retail lamb price
data.
cooperative state research, education, and extension service (csrees)
The Minor Use Animal Drug Program is funded through a ``Special
Research Grant'' that has had great benefit to the U.S. sheep industry.
The research under this category and the companion ``NRSP-7'' program
through FDA/CVM has provided research information on therapeutic drugs
that are needed for the approval process. Without this program,
American sheep producers would not have effective products to keep
their sheep healthy. We appreciate the Administration's request of
$588,000 for this program, and we urge the subcommittee to recommend
that it be funded at least at this level to help meet the needs of our
rapidly changing industry and increasing costs for research necessary
to meet the requirements for approving additional therapeutics for
sheep.
On-going funding for the Food Animal Residue Avoidance Databank
(FARAD) program is critically important for the livestock industry in
general and especially for ``minor species'' industries such as sheep
where extra-label use of therapeutic products is more the norm rather
than the exception. FARAD provides veterinarians the ability to
accurately prescribe products with appropriate withdrawal times
protecting both animal and human health. We urge the subcommittee to
restore funding for FARAD at least to the level of $800,000.
Ongoing research in wool is critically important to the sheep and
wool industry. ASI urges the subcommittee's support of $294,000 for
fiscal year 2005 through the special grants program of the CSREES for
wool research.
Ongoing research for the Montana Sheep Institute is important to
the sheep and wool industry. Sheep grazing is being used as an
important tool for natural resource management to improve the
competitiveness of lamb and wool in the marketplace. ASI encourages the
subcommittee's support of funding at $556,360.
The research and education programs conducted through the Joe Skeen
Institute for Rangeland Restoration provide valuable information for
sheep producers in the western United States. ASI urges the
subcommittee to restore the funding to the originally proposed
$1,000,000 in fiscal year 2003.
The industry greatly appreciates this opportunity to discuss these
programs and appropriations important to the sheep industry.
______
Prepared Statement of the American Society for Microbiology
The American Society for Microbiology (ASM), the largest single
life science society with a membership of over 43,000, appreciates the
opportunity to submit testimony in support of the fiscal year 2005
budget for the Food and Drug Administration (FDA). The FDA serves as
the science-based protector of public health by assuring the safety,
efficacy, and security of human and veterinary drugs, biological
products, medical devices, the food supply, consumer products and by
responding to new challenges of bioterrorism and food defense. The FDA
also advances health care by taking steps to improve and ensure new
medical product development based on biomedical research. It is
critical that FDA maintain the highest level of public trust in all of
its activities and increased funding is vital to its success and its
critical mission initiatives.
The ASM supports the Administration's fiscal year 2005 budget
request of $1.8 billion which represents an 8.8 percent increase over
the fiscal year 2004 funding level. This increase will enhance security
of the nation's domestic and imported food supply and support stronger
FDA review of medical devices, better protection against bovine
spongiform encephalopathy (BSE), and more efficient work output through
further consolidation of FDA facilities. The increase recognizes the
important activities of the FDA in improving patient and consumer
safety and responding to new challenges of bioterrorism and food
defense. The FDA is a principal partner in inter-agency homeland
security strategies.
Science-based decision making and a well-trained workforce make the
FDA an effective and reliable guardian of public health. As the U.S.
population grows and threats to public safety persist, demands on the
FDA are multiplying in number and complexity. Changes in global trade
and international politics affect the FDA mission as well. Last year
for instance, the FDA conducted nearly 80,000 imported food
examinations, up from 12,000 in 2001. The agency must remain highly
responsive both to on-going consumer needs and to unexpected emergency
situations. In 2003 the FDA activated its Emergency Operations Center
to respond to the first reported United States case of BSE and to
participate in a two-city, full-scale counterterrorism exercise of a
simulated detonation of a nuclear device and the release of the
pneumonic plague pathogen.
Food Defense and National Security
Over the past three years, the FDA has worked to improve food
security by adding more inspections of imported food, trained
investigators, and port of entry security measures. Protecting the food
consumed by over 290 million Americans demands major effort from the
FDA and its staff. The agency directly oversees the safety of about 80
percent of the nation's food supply and assists the U.S. Department of
Agriculture (USDA) on the remainder. Nearly half of the proposed $149
million budget increase, an amount of $65 million, would further
broaden the FDA's capabilities to guarantee and defend the national
food supply to an fiscal year 2005 total of $181 million.
This allocation would support the key food defense strategies
already being implemented by the agency: increase food security
awareness among public and private stakeholders; develop advanced
capacities to identify specific threats or attacks on the food supply;
design additional protection to shield the food supply from terrorist
attack; fine-tune rapid coordinated response capability in the event of
a foodborne terrorist attack; and enhance the capacity for a quick
recovery if such an attack did harm any residents of the United States.
Of the proposed $65 million increase, $35 million would establish a
joint FDA-USDA network of qualified investigative laboratories, the
Food Emergency Response Network (FERN). Throughout its long history,
the FDA has optimized consumer protection by collaborating with states,
other Federal agencies, law enforcement, industry, academic
institutions and others in the areas of research, information exchange,
and emergency responses. The FERN program will continue this tradition
by creating a nationwide network of Federal and State laboratories
capable of testing thousands of food samples for biological, chemical,
and radiological threat agents. It will add 15 FDA-funded state
laboratories to the 10 labs planned for fiscal year 2004, all to
possess advanced instrumentation and pathogen containment capabilities.
The program also incorporates FDA research on new testing methods that
could shorten the time needed to detect foodborne threats. The FDA will
expand to 104 the number of state health and agricultural laboratories
connected through its electronic network, eLEXNET, to facilitate
exchange of lab data critical in first-alert situations.
Basic research underlies every application applied by the FDA in
its search for possible foodborne health hazards. Within the fiscal
year 2005 increase, $15 million would fund intramural and extramural
research on methods development, characteristics of specific foodborne
pathogens, and new prevention technologies to improve food safety--
results subsequently would help shape new guidelines and performance
standards for the food production industry. Better understanding of how
pathogens survive in foods during processing and storage and of the
doses of pathogens needed to cause disease will provide superior
prevention protocols. FDA funded research also discovers new
microbiological, chemical, and radiological methods to detect and
identify biothreats found in food.
Surveillance constitutes a large part of the FDA's protection of
the food supply. In fiscal year 2005, the FDA intends to conduct nearly
26,000 inspections of domestic food production firms, almost 11 times
the investigations done in fiscal year 2001. FDA inspectors also will
perform 97,000 import-food field inspections, more than 60 percent over
last year and seven times the number in fiscal year 2001. The $7
million within the proposed fiscal year 2005 increase earmarked for
increased food inspections would help alleviate the burgeoning
potential of contaminated food imports, though many thousands of
imported food shipments would remain left unchecked. The FDA will soon
implement its component of the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002, which among other measures will
require the registration of food facilities and advance notice of food
imports. In the fiscal year 2005 food defense increase, the FDA also
would receive $5 million for its role in the new interagency
Biosurveillance Initiative developed to improve the Federal
Government's capability to rapidly identify and characterize
bioterrorist attacks. When in place, the Biosurveillance Initiative
will shorten the time needed to alert the nation to such an attack.
Towards this goal, the FDA will coordinate existing state and Federal
food surveillance networks to facilitate communications on outbreaks
and other events related to foodborne illness. The remaining $3 million
of the proposed funding increases for food defense would upgrade the
FDA's intra-agency communication system used by personnel during
emergencies.
Contamination of the food supply not only threatens public health;
the economic and political ramifications are enormous, as evidenced by
costly export embargoes recently triggered by fear of BSE in meat
products. More than 30 countries have banned the import of American
beef, in response to last December's discovery of an imported BSE-
infected dairy cow. The Federal Government just announced that up to
300,000 U.S. cattle may be tested for BSE each year, which would
require some new, FDA-approved rapid screening test to succeed. The
President's budget includes more than $8 million to fund new FDA
safeguards against BSE. This would increase FDA's funding to stop BSE
to $30 million in fiscal year 2005.
Most of the $8 million will be used for field activities under the
FDA's Animal Drugs and Feeds program, including an additional 920 risk-
based inspections, 600 targeted sample collections/analyses, and at
least 2,500 state inspections of animal feed firms. Animal feed
contaminated with the BSE agent is the only known route of BSE
transmission. As the agency responsible for animal feeds used in food
production, this year the FDA will inspect 100 percent of feed mills
and renderers. The FDA's more aggressive approach to BSE also will
involve evaluating new commercial BSE screening tests like polymerase
chain reaction techniques and educating even more food producers on new
and updated regulations. In January, the FDA announced additional,
more-rigid safeguards to prevent potentially BSE-contaminated animal
parts from entering either the food supply or health care products.
Medical Products and Public Safety
The ASM supports the Administration's proposed fiscal year 2005
funding levels for FDA regulation of medical-use products, including
medical devices, human drugs, and biologics such as vaccines and gene
therapies. The budget includes $252 million for the Medical Devices
program, a $26 million increase over fiscal year 2004. The program
plans to more rapidly review new products, while increasing the number
of products reviewed in a time period. The Human Drugs program would
receive $499 million, an increase of $23 million, and the Biologics
program, $173 million, or $4 million more than last fiscal year. All
medical products are evaluated by the FDA for safety and efficacy
before entering the U.S. marketplace. In fiscal year 2003, the FDA
approved 466 new and generic drugs and biological products, following
extensive science-based evaluations. Agency personnel also monitor the
10,000 drugs already on the market. FDA oversight of these products has
both public health and national security significance, under the goal
of more quickly reviewing new products and making them available to the
nation's health care systems and defense agencies and to the public.
FDA is the only government agency involved with the approval of
products necessary to prevent or treat human exposure to terrorist
agents. Given the unpredictability of emergencies, the FDA must be able
to respond to product needs at any point along the product production
pipeline. The Administration has included $5 million in the fiscal year
2005 budget proposal to support the FDA's role in Project Bioshield, an
inter-agency initiative to ensure medical readiness in the event of war
or a catastrophic event. The FDA's role in Project Bioshield is the
expedited review of specialized products and medical countermeasures
for at-risk populations, such as the military, first responders, those
near nuclear facilities, and others. FDA plans collaboration with the
CDC on plague in African countries, and with the National Institute of
Allergy and Infectious Diseases on studies to determine the lowest
effective antibiotic dose to treat pneumonic plague. Like the other
Federal agencies involved in Project Bioshield, the FDA must be able to
respond quickly and correctly to emergencies, using its best science-
based capabilities.
The ASM recommends continuing commitment and support by Congress
for the important public health protection work of FDA. Increased
funding will help enable FDA to perform its responsibilities to ensure
access to safe and effective medical countermeasures against potential
biological, chemical or radiological terrorism, consumer product
safety, food safety, accurate product information and safe and
effective drug and device evaluations. Additional funding will help to
ensure that FDA can develop and maintain a highly skilled scientific
workforce and that science based decision-making continues to be strong
at all of FDA's research centers.
______
Prepared Statement of the American Society for Microbiology
The American Society for Microbiology (ASM) appreciates the
opportunity to submit testimony on the fiscal year 2005 appropriation
for the United States Department of Agriculture (USDA). The ASM is the
largest single life science organization in the world, with more than
43,000 members who work in academic, industrial, medical, and
governmental institutions worldwide. The ASM's mission is to enhance
the science of microbiology, to gain a better understanding of life
processes, and to promote the application of this knowledge for
improved health, and for economic and environmental well-being.
The USDA sponsors research and education programs which contribute
to solving agricultural problems of high national priority and
sustaining safe food and a competitive agricultural economy. United
States agriculture faces new challenges, including threats from
emerging infectious diseases in plants and animals, climate change, and
public concern about food safety and security. It is critical to
increase the visibility and investment in agriculture research to
respond to these challenges. The following testimony will focus on
USDA's research and education programs.
The ASM supports increases proposed for the USDA Food and
Agriculture Defense Initiative, the Bovine Spongiform Encephalopathy
(BSE) Initiative, and the Genomics Initiative. The ASM recommends
greater emphasis on funding for research in these programs.
Microbiological research in agriculture is vital to understanding and
finding solutions to foodborne diseases, new and emerging plant and
animal diseases, and the development of new agriculture products and
processes. Unfortunately, Federal investment in agricultural research
has not kept pace with the need for additional agricultural research to
solve emerging problems. According to National Science Foundation (NSF)
data, agriculture research makes up only 4 percent of Federal funds
devoted to basic research. ASM urges Congress to provide increased
funding for research programs within the USDA.
USDA National Research Initiative Competitive Grants Program
The National Research Initiative Competitive Grants Program (NRI)
was established in 1991 in response to recommendations outlined in
Investing in Research: A Proposal to Strengthen the Agricultural, Food
and Environmental System, a 1989 report by the National Research
Council's (NRC) Board on Agriculture. This publication called for
increased funding of high priority research, that is supported by USDA
through a competitive peer-review process directed at:
--Increasing the competitiveness of U.S. agriculture.
--Improving human health and well-being through an abundant, safe,
and high-quality food supply.
--Sustaining the quality and productivity of the natural resources
upon which agriculture depends.
Continued interest in and support of the NRI is reflected in two
subsequent NRC reports, Investing in the National Research Initiative:
An Update of the Competitive Grants Program of the U.S. Department of
Agriculture, published in 1994, and National Research Initiative: A
Vital Competitive Grants Program in Food, Fiber, and Natural Resources
Research, published in 2000.
Today, the NRI, housed within USDA's Cooperative State Research,
Education, and Extension Service (CSREES), supports research on key
problems of national and regional importance in biological,
environmental, physical, and social sciences relevant to agriculture,
food, and the environment on a peer-reviewed, competitive basis.
Additionally, NRI enables USDA to develop new partnerships with other
Federal agencies that advance agricultural science. An example of such
collaboration is USDA's partnership with the NSF on the Microbe
Project.
In fiscal year 2004, funding for NRI suffered a decrease of $2
million from fiscal year 2003, providing just $164 million.
Comparatively, the USDA requested $180 million for NRI in fiscal year
2005, a decrease of $20 million from the request for fiscal year 2004,
and a decrease of $60 million from the request for fiscal year 2003.
NRI can fund only between 14-15 percent of the high quality research
proposals received, while agencies such as the National Institutes of
Health (NIH) and the NSF fund between 20-30 percent of the research
proposals. ASM urges Congress to fund NRI at the President's requested
level for fiscal year 2003 of $240 million in fiscal year 2005.
Increased funding for competitive, peer reviewed grants is needed to
increase the size and number of awards and to pursue more research
opportunities. Additional funding for the NRI is needed to expand
research in microbial genomics and to provide more funding for merit
reviewed basic research with long-term potential for new discoveries.
Without an increase in funding for NRI, the following critical research
will be severely limited:
--Research showing linkages between food and human diseases;
--Research showing new ways to combat insects, weeds, plant and
animal disease in fields and ranches;
--Research that helps keep pathogens and other dangers out of our
air, water, soil, plants, and animals;
--Research establishing new crops, improved livestock and economic
opportunities;
--Research that creates new food and processing techniques, producing
greater value and profitability;
--Research on air culture to adapt to and mitigate climate change.
USDA Food and Agriculture Defense Initiative
The Food and Agriculture Defense Initiative is an interagency
initiative to improve the Federal Government's capability to rapidly
identify and characterize a bioterrorist attack, by improving the
national surveillance capabilities in human health, food, agriculture,
and environmental monitoring. The President's request for this
initiative within the USDA budget is $381 million for fiscal year 2005,
an increase of $79 million over fiscal year 2004. This funding will go
towards:
Enhancing food defense by:
--Increasing surveillance and monitoring of pathogens and other
hazards in meat, poultry and eggs and establishing connectivity
with the integration and analysis function at the Department of
Homeland Security (DHS);
--Establishing a Food Emergency Response Network (FERN) with
participating laboratories including implementation of the
Electronic Laboratory Exchange Network (eLEXNET) and an
electronic methods repository; and strengthening research to
develop diagnostic methods for quickly identifying various
pathogens and contaminated foods; and
--Developing diagnostic methods to quickly identify pathogens and
contaminated foods.
Enhancing agriculture defense by:
--Providing funds for completing the consolidated state-of-the-art
BSL-3 animal research and diagnostic laboratory at Ames, Iowa;
--Establishing a National Plant Disease Recovery System that will
quickly coordinate with the seed industry to provide producers
with resistant stock before the next planting season in the
event of a natural or intentional catastrophic disease or pest
outbreak;
--Expanding the Regional Diagnostic Network with links to the
National Agricultural Pest Information System;
--Establishing a Higher Education Agrosecurity Program that will
provide capacity building grants to universities for
interdisciplinary degree programs to prepare food defense
professionals;
--Substantially enhancing the monitoring and surveillance of pests
and diseases in plants and animals, including targeted National
wildlife surveillance;
--Increasing State Cooperative Agreements to better select and
identify plant and animal health threats;
--Increasing biosurveillance of pests and diseases in plants and
animals and establishing connectivity with the integration and
analysis function at DHS;
--Establishing a system to track select disease agents of plants; and
--Increasing the availability of vaccines through the National
veterinary vaccine bank.
ASM believes there should be greater emphasis on research in the
Food and Agriculture Defense Initiative, which provides just a small
portion of funding, $31 million, for research of the overall $381
million requested for this initiative. ASM recommends an increase in
funding, both extramurally and intramurally, for research on pathogenic
microorganisms as part of the Food and Agriculture Defense Initiative.
USDA BSE Initiative
In the wake of the discovery of the first incident of BSE in a
Holstein cow from Washington State, the USDA has requested an increase
for BSE related activities of $47 million in fiscal year 2005 over
fiscal year 2004, for a total of $60 million. USDA has allocated only
$5 million of the total request for BSE activities related to research.
This level of funding for research is inappropriately low. ASM urges
Congress to increase the funding level for BSE research above the $5
million requested. Basic research is essential in this area for the
development of scientifically sound prevention strategies.
Food Safety
The USDA plays a key role in the government's effort to reduce the
incidence of foodborne illness. Continued and sustained research is
important to safeguarding the nation's food supply and focusing on
methods and technologies to prevent microbial foodborne disease and
emerging pathogens. Although increases are provided for the Food and
Agriculture Defense Initiative, for the Food Safety and Inspection
Service, and for BSE activities, we note that funding for food safety
is level within ARS and only a small increase is provided within
CSREES.
Genomics Initiative
The NRI and the ARS fund USDA collaborative efforts in the field of
genomics. There are opportunities to leverage USDA investments with
those of the NIH, the Department of Energy, and the NSF in projects to
map and sequence the genomes of agriculturally important species of
plants, animals, and microbes. USDA plays an important role in
coordinating and participating in interagency workgroups on domestic
animal, microbial, and plant genomics. Access to genomic information
and the new tools to exploit it have implications for virtually all
aspects of agriculture. In 2005, the NRI will support investments in
functional genomics and databases. The USDA budget requests a $12
million increase in animal and plant genomics research within the ARS,
although the current funding levels are not specified in the budget
request. There is no specific increase in the NRI for this initiative
which suggests the program may have to reallocate from other under-
funded programs to support this initiative.
Emerging Infectious Diseases in Plants and Animals
The food production and distribution system in the United States is
vulnerable to the introduction of pathogens and toxins through natural
processes, global commerce, and intentional means. The ASM supports
increases in the USDA research budget for emerging diseases and
invasive species. Nearly 200 zoonotic diseases can be naturally
transmitted from animals to man. For emerging diseases to be
effectively detected and controlled, the biology and ecology of the
causal pathogens must be understood and weaknesses exploited to limit
their spread. This research will help address the risk to humans from
zoonotic diseases and the safety of animal products. Additionally,
expanded research is needed to accelerate the development of
information and technologies for the protection of United States
livestock, poultry, wildlife and human health against zoonotic
diseases.
Antimicrobial Resistance Research
The USDA plays a key role in addressing the national and global
increase in antimicrobial resistance and the complex issues surrounding
this public health threat. The ARS Strategic Plan for 2003-2007 states
the need to ``determine how antimicrobial resistance is acquired,
transmitted, maintained, in food-producing animals, and develop
technologies or altered management strategies to control its
occurrence.'' In 1996, the Department of Health and Human Services
(HHS) and the USDA established the National Antimicrobial Resistance
Monitoring System (NARMS) to monitor trends in antimicrobial resistance
in foodborne pathogens. USDA support for this project should continue.
USDA research also has a vital role to play in controlling the
emergence of resistance in pathogens associated with food through NRI
funded grants. ASM urges Congress to increase support for antimicrobial
resistance surveillance, research, prevention, and control programs.
Conclusion
The USDA's mission and goals include leadership on food,
agriculture, and natural resources, based on sound public policy, the
best available science, and efficient management. With a significant
investment in research, USDA will be better able to meet its goals. ASM
urges Congress to provide sufficient funding for research at USDA
increasing funding for agricultural research programs, including
providing $240 million for NRI.
The ASM appreciates the opportunity to provide written testimony
and would be pleased to assist the Subcommittee as the Department of
Agriculture bill is considered throughout the appropriations process.
______
Prepared Statement of the American Society for Nutritional Sciences
(ASNS)
The American Society for Nutritional Sciences (ASNS) is the
principal professional organization of nutrition research scientists in
the United States representing 3,000 members whose purpose is to
develop and extend the knowledge and application of nutrition science.
Our members include scientists involved in human as well as animal
nutrition research. ASNS members hold positions in virtually every land
grant, private institution, and medical school engaged in nutrition-
related research in the United States as well as industrial enterprises
conducting nutrition and food-related research.
research funding mechanisms and issues
Competitive Grants
The NRC report, National Research Initiative (NRI), suggests that
inadequate funding for competitive research has ``limited its potential
and placed the NRI program at risk.'' \1\ A competitive system for
allocating government research funds is the most effective and
efficient mechanism for focusing efforts on cutting edge research aimed
at improving the health of the American people. Competitive grants
provide the highest economic return to the public. ASNS strongly
supports the competitive grants process as reflected in the NRI and
believes that an open, merit and peer review process, applied as
extensively as possible throughout the research system, is the
preferred way to distribute research funds among qualified scientists
and to support the most meritorious new concepts. ASNS also supports
the finding in the National Academies Report, Frontiers in Agricultural
Research that total competitive grants should be substantially
increased to and sustained at 20-30 percent of the total portfolio. For
these reasons, we strongly urge this subcommittee to consider an
appropriation of $200 million for the NRI competitive grants program as
an important step toward the original authorized level of $500 million.
---------------------------------------------------------------------------
\1\ National Research Initiative: A Vital Competitive Grants
Program in Food, Fiber, and Natural Resources Research. National
Research Council, National Academy Press, Washington, D.C. 2000.
---------------------------------------------------------------------------
Indirect Costs Cutting-edge research requires substantial
investment in buildings and instrumentation. The USDA provides partial
reimbursements for these indirect, but necessary, costs of research as
part of grant funding. While we appreciate the efforts to raise the
Congressionally mandated cap to 20 percent, the partial reimbursement
for buildings and instrumentation still remains a significant
disincentive for many university faculty to seek USDA funding.
Furthermore, a diminutive facilities reimbursement significantly
impairs the ability of universities to meet their fixed obligations
such as, building and facility maintenance, and prevents them from
further investing in needed facilities in the future. ASNS strongly
urges that the USDA indirect costs rate be raised and made commensurate
with the rate of other federal agencies. The best and brightest
scientists in the United States are being deterred from agricultural
research to the detriment of U.S. agriculture and the consumers of its
commodities because universities discourage their researchers to apply
for grants that when full indirect costs cannot be recovered.
Furthermore, increasing the cap on fixed costs from 20 percent should
not come at the expense of the overall agricultural research budget and
its competitive grant programs.
Nutrition Monitoring
Under an agreement between the Department of Health and Human
Services (DHHS), the Center for Disease Control and Prevention (CDC),
the National Center for Health Statistics (NCHS), and the USDA
Agricultural Research Service (ARS/USDA), the ARS and NCHS has agreed
to collaborate on a program of nutrition monitoring. This agreement
establishes a cooperative diet and nutrition monitoring program
integrating previously conducted Continuing Survey of Food Intakes by
Individuals (CFSII) and the National Health and Nutrition Examination
Survey (NHANES), which was designed to assess food consumption and
related behavior in the U.S. population using personal interviews. The
most recent survey was conducted in 1998. This appropriations sub-
committee has long supported USDA's role in food security, progress on
foot and mouth disease, WIC, and prevention of diseases such as
diabetes, cancer, and heart disease. ASNS requests your support for
data collection via nutrition monitoring which is essential to policy
making in all of these areas.
The Human Nutrition section of the 2005 budget proposal includes an
increase of $5 million for research in support of the Administration's
Healthier U.S. Initiative. This research ``will be pursued to define
the role of nutrients and other food components in promoting health and
preventing obesity and related diseases.'' Additionally, we support the
$3 million slated for the Economic Research Service (ERS) to carry out
a Flexible Consumer Behavior Module to assess the relationship between
individuals' knowledge and attitudes about dietary guidance and food
safety and their food-choices. Data for this survey will be collected
in conjunction with the National Health and Nutrition Examination
Survey. Finally, we request $8.7 million for the Consumer Date and
Information Initiative proposed for USDA's Economic Research Service
(ERS). This data and analysis framework will provide information on
diets, knowledge and information levels, and health status. Such
information will help policymakers respond to current events, such as
the rise in obesity which is especially troublesome in minority
populations.
the need for federally funded nutrition-related research
The need for increased nutrition science and research is critical
within the USDA. As stated in the recent report of the National
Academies, ``despite food and nutrition assistance programs, hunger and
food insecurity persist in the United States . . . in addition,
prevalence of overweight and obesity among U.S. adults has increased
over the last three decades . . . and the percentage of overweight
children and adolescents has also increased.'' We already know that
many chronic diseases are weight-related, including diabetes, cancer,
heart disease, stroke, and hypertension. There is an urgent need for
increased research to ``guide and evaluate food and nutrition policies
and interventions at multiple levels and settings, including
individual, family, school, worksite, retail, marketing, and
production.'' \2\
---------------------------------------------------------------------------
\2\ Frontiers in Agricultural Research: Food, Health, Environment,
and Communities, National Research Council of the National Academies,
2002.
---------------------------------------------------------------------------
Increasing populations, international economic competitiveness,
improving the environment and minimizing healthcare costs through
disease prevention are all areas that will continue to demand solutions
for the future. These solutions will include advances in the
understanding of the genetic basis of disease and the genetic basis of
nutrient requirements for optimal health, which will require greater
understanding of how nutrition and dietary information can be used for
disease prevention in at-risk populations.
The economic impact on society in healthcare costs produced by
advances in nutrition research is significant in the number of dollars
saved by the American taxpayer. As health costs continue to rise, it is
imperative that our medical practices take a preventive approach. This
requires a thorough understanding of the role of nutrients in foods in
preventing chronic illnesses such as heart disease, cancer and
diabetes. Most of the recent work on nutrient content and availability
in various foods has come from USDA-National Research Initiative
Competitive Grants Program (NRICGP) supported research.
nutrition-related research opportunities and accomplishments
Obesity
Nutrition and physical activity are the two most important factors
in the prevention of many chronic diseases such as diabetes, heart
disease, stroke, and cancer. The United States Center for Disease
Control (CDC) calls obesity the number one health problem in America.
Current estimates show that half the American population will be
clinically obese by the year 2030. The direct costs of treating
complications of obesity, plus the indirect costs from lost
productivity, represent a $100 billion annual burden on the U.S.
economy. For these reasons the Federal Government needs to play a
larger role in finding more effective treatments and ways to prevent
this disease that is linked to so many other chronic diseases.
NRICGP--funded obesity research that has made significant advances
in nutrition and human health include:
--Using mice as research models to study mechanisms of obesity; USDA
NRI-funded researchers are studying the compromised hormone
recognition in diet-induced obesity (http://www.reeusda.gov/
nri/pubs/highlights/2001PDFs/No6.pdf).
--NRI researchers have observed that prepregnant overweight or obese
women were associated with failure to initiate and sustain
lactation. They concluded that a reduction in the prolactin
response to suckling represents one biological mechanism that
could help to explain the early lactation failure observed in
overweight and obese women.
--Food, Phytonutrients and Health
Research in areas of bioactive food components will lead to a
better understanding of the most promising food compounds that can
address major health threats. Other areas offering great promise
include improving the nutrient content of foods by modifying fats in
plant and animal products to reduce cardiovascular disease, cancer and
diabetes risk as well as research on how consumers select and use food
and how food intake is linked to health.
--The USDA was the lead U.S. agency in the International Rice Genome
Sequencing Project, which led to the published initial
sequences for two varieties of rice (Science 296:32-35 (2002)).
--USDA-NRI supported studies in recent years have led to a new
understanding of folate requirements and health effects.
Dietary studies of nonpregnant women provided strong evidence
that folate intakes similar to the previously-held RDA were not
adequate to support metabolic needs. Other studies have shown
that an adequate folate intake in women of child-bearing age
minimizes the risk of certain birth defects should they become
pregnant. Ongoing studies are examining the role of an adequate
folate intake in maintaining health by reducing the risk of
cardiovascular disease and certain cancers.
--Flavonoids are non-essential nutrients found in all plant foods and
plant-derived beverages. Epidemiological studies have shown
that these compounds are protective against various cancers.
USDA-funded researchers have found that a flavonoid-inducible
enzyme is important in inactivation of the major cooked-food
mutagen and colon carcinogen in cell cultures. Studies to
determine the bioavailability of the active flavonoids in rats
and humans are ongoing.
--Soy isoflavones and vitamin E may reduce the risk of fractures in
osteoporotic women. Osteoporosis-related fractures are an
enormous public health problem. Scientists are studying the
effects of soy isoflavones and vitamin E on fracture healing
and bone quality in a rat model that mimics osteoporotic
fracture in postmenopausal women. They found that the
combination of soy isoflavones and vitamin E at 1,000 and 525
mg/kg diet, respectively, was effective in bringing bone
mineral content of the femur to levels similar to those of
intact, non-ovarian hormone deficient rats.
--Dietary omega-3 fatty acids affect immune function. Omega-3 fatty
acids are essential for the normal development and function of
the neonatal brain and retina. However, the consumption of a
diet rich in omega-3 fatty acids may impair infectious disease
resistance against certain pathogens. Results can be used to
formulate future recommendations for dietary omega-3 fatty acid
intakes for human.
--Cows that eat fish oil as part of their feed produce milk with
higher concentrations of conjugated linoleic acid, a compound
shown to help prevent cancer. USDA-funded research shows that
butter, yogurt, and ice cream produced from this milk also
contains healthful compounds and that consumers like the taste.
--Efforts are under way to develop a corn hybrid that will synthesize
genistein, an isoflavone in soybeans that protects against
breast, prostate, and colon cancers.
Conclusion
ASNS appreciates the proactive approach to the Subcommittee in
supporting research at the USDA in the past and looks forward to the
continued growth of research at and through the USDA in the critical
areas of nutrition and disease prevention issues. Thank you for
considering our request for the NRI and other important research
programs within the USDA. We hope that you will call upon the expertise
of our members as the Committee continues to deliberate these very
important research areas.
______
Prepared Statement of the American Society of Plant Biologists (ASPB)
The American Society of Plant Biologists (ASPB), representing
nearly 6,000 plant scientists, appreciates this opportunity to submit
comments to the Subcommittee for its consideration of fiscal year 2005
appropriations for research sponsored by the Department of Agriculture.
ASPB supports the fiscal year 2005 budget request of the Department
of Agriculture of $180 million for the National Research Initiative
Competitive Grants Program (NRI). The NRI supports research into
fundamental questions that lead to new enhanced crops, technologies and
practices in agriculture. These research findings help address critical
needs of the nation's farmers. NRI-sponsored plant research is needed
to help prevent future losses of crops to pests, diseases and adverse
weather conditions, such as drought and freezing.
Advances in science made possible through the NRI will enable
farmers to reduce their dependency on pesticides and antibiotics and to
protect the water supply, soils and fragile ecosystems.
Research sponsored by the NRI contributes to higher yields and
safer foods. The NRI contributes to the talent pool of agricultural
scientists in the states and nation to better serve the needs of
producers and consumers. Without grant support from the NRI, the
agricultural research community in our nation would be severely
weakened.
The National Research Council Board on Agriculture and Natural
Resources Committee report on the NRI in 2000 strongly endorsed support
for this competitive grants program. The NRC committee recommended that
a major emphasis of the NRI continue to be the support of high-risk
research with potential long-term payoffs. Much of this research would
be classified as fundamental in the traditional use of this term.
A major conclusion of the NRC committee was that, ``Without a
dramatically enhanced commitment to merit-based peer-reviewed, food,
fiber and natural resources research, the nation places itself at
risk.''
Continued support for a balanced research portfolio in the
Department including intramural and extramural research is needed to
address the many and sometimes devastating problems farmers face in
growing crops. The Department of Agriculture's Agricultural Research
Service (ARS) continues to address very effectively many important
research questions for American agriculture.
Helping America's farmers meet the food production needs of the
nation's people and millions more overseas places huge demands on the
research community. Researchers supported by the NRI and ARS are called
upon to help farmers produce higher yields while farming the same or
less acres of land. At the same time, the research community is asked
to help make farming friendlier to the environment.
Scientists supported by the NRI and ARS are responding to these
needs. For example, research sponsored by the NRI and ARS is leading to
plants engineered to tolerate higher levels of salinity. This will help
farmers salvage more of their crops in dry seasons. Increased tolerance
of future engineered plants to environmental stresses of cold and
freezing will be beneficial to growers, consumers, and the environment.
Much progress has been made in fighting plant diseases with crops
engineered to resist pests. At the same time, the usage of harsh
chemical pesticides has been reduced through the use of genetically
engineered crops. Research sponsored by the NRI and ARS contributed
knowledge leading to the development of these superior crops. Increased
support for the NRI and ARS will lead to more varieties of enhanced
crops resistant to devastating diseases.
Human nutrition depends upon plants. Vitamins, minerals, and other
important compounds such as essential amino acids come from plants
directly or indirectly. There remain substantial questions about how
minerals are taken up and essential compounds are made. As these
questions are answered by basic plant research it will be possible to
determine how plants can be used to assist in providing a healthier mix
of nutrients in the diet both in developed and developing countries.
Substantial progress can be made in understanding the role of plant
products in human nutrition with additional funding for the NRI and
ARS.
We urge the Subcommittee to increase support for the NRI and ARS in
fiscal year 2005. As requested by the President, ASPB urges
appropriating $180 million to the NRI in fiscal year 2005. We urge a
significant increase for ARS over the fiscal year 2004 appropriation.
We deeply appreciate the Subcommittee's support for research
sponsored by the Department of Agriculture. The Subcommittee's support
has been essential to producing and securing the nation's food supply.
______
Prepared Statement of the American Veterinary Medical Association
Dear Mr. Chairman: On behalf of the 70,000 members of the American
Veterinary Medical Association (AVMA) we thank you and the committee
for the past support of issues and programs of importance to our
nation's veterinarians. AVMA membership is comprised of 86 percent of
the veterinarians in the United States. These members direct the
activities and policies of the AVMA. These Doctors of Veterinary
Medicine are trained scientific experts in the fields of agriculture,
animal health, public health, food safety, medical and veterinary
research, epidemiology, toxicology, microbiology, and a host of other
activities necessary for the continued safety and prosperity of our
nation.
Policy item 8c of the Homeland Security Presidential Directive
HSPD-9 states, ``(8) The Secretaries of the Interior, Agriculture,
Health and Human Services, the Administrator of the Environmental
Protection Agency, and the heads of other appropriate Federal
departments and agencies shall build upon and expand current monitoring
and surveillance programs to: . . . (c) develop nationwide laboratory
networks for food, veterinary, plant health, and water quality that
integrate existing Federal and State laboratory resources, are
interconnected, and utilize standardized diagnostic protocols and
procedures.'' In order for American veterinarians to successfully
continue in their traditional roles, as well as to aid in the
fulfillment of the HSPD-9 policy we respectfully request the following
appropriations in fiscal year 2005 for the U.S. Department of
Agriculture (not ranked by priority).
The National Veterinary Medical Service Act (NVMSA)
$20 million for the funding of the NVMSA. NVMSA (Public Law 108-
161) was enacted on December 6, 2003 to correct the serious shortage of
veterinarians in rural agricultural areas, agencies of the Federal
Government, and certain disciplines such as public health, food safety
and research. High student loan debt precludes veterinarians from
accepting lower-paying positions in these areas. NVMSA authorizes the
Secretary of Agriculture to conduct a student loan repayment program
for veterinarians who agree to work in these shortage situations. This
law will also repay student loan debt for those veterinarians who
volunteer to provide services to the Federal Government in emergency
situations as determined by the Secretary of Agriculture. NVMSA will
improve national preparedness by placing veterinarians at locations
where agricultural emergencies occur. $60 million is needed over a 3-
year period to allow 400 veterinarians to participate in this program.
This would provide a net of $25,000 per year for 3 years for service in
a shortage situation plus an additional $10,000 per year for volunteer
service in emergency situations.
Food Animal Residue Avoidance Databank
$1.5 million for the Food Animal Residue Avoidance Bank (FARAD).
FARAD is a highly cost-effective, federal/multi-university extension
program that provides assistance to veterinarians, extension agents,
and regulatory personnel throughout the country in preventing
contaminated milk, meat, and eggs from reaching the consumer through
publications, continuing education, a web-site, and a toll free hot-
line. Staffed by highly trained veterinary pharmacologists/
toxicologists, FARAD provides assistance ranging from explaining which
drugs can legally be used in food animals to creating computer models
for cases of herds or flocks exposed to toxins such as pesticides or
dioxins.
National Animal Health Laboratory Network
$107 million for the National Health Laboratory Network (NAHLN). In
June 2002, President Bush signed HR 3448 into law as the Public Health
Security and Bioterrorism Preparedness and Response Act of 2002 (Public
Law 107-188). This law authorized the Secretary of Agriculture to
develop an agriculture early warning surveillance system, enhancing the
capacity and coordination between state veterinary diagnostic
laboratories, Federal and State facilities, and public health agencies.
It also provided authorization for Congress to appropriate funding to
the NAHLN. A pilot NAHLN, involving 12 state/university diagnostic
laboratories was funded through USDA in May 2002 for a 2-year period to
develop capacity and surveillance programs for eight high priority
foreign animal diseases considered to be bioterrorist threats. However,
these funds fell short of developing a true national network that will
effectively provide surveillance for zoonotic and foreign disease,
bioterrorist agents, and newly emergent diseases.
USDA 1433 Formula Funds for Animal Health
$100 million for USDA 1433 Formula Funds for Animal Health.
Animal health protection requires an effective veterinary response at
the local level. In the event of a disease outbreak, veterinarians are
responsible for diagnosis and risk management leading to disease
control or elimination. The failure to accurately and rapidly diagnose
foreign animal diseases, emerging infectious diseases and zoonotic
agents, whether intentionally introduced or naturally occurring, can
lead to catastrophic economic losses and loss of human and animal
lives. Thus, new methods for rapid diagnosis, prevention and
eradication of these diseases must be developed. The nation's
veterinary medical colleges can develop new diagnostic methods with
increased funding.
Foreign Animal Disease Laboratory
$400 million for the Foreign Animal Disease Laboratory (FADL). The
Foreign FADL was transferred to the Department of Homeland Security in
June 2003 as directed by the Homeland Security Act of 2002 (Public Law
107-296). The United Department of Agriculture (USDA) continues to
perform its functions of research and diagnostics within the FADL.
Currently, 180 employees at the FADL are helping to lead a research and
development program to protect America's food supply against the
intentional or natural introduction of foreign animal diseases and to
develop improved methods to diagnose foreign animal diseases. FADL is
in critical need of renovation and upgrades to be able to maintain its
capabilities in foreign animal disease detection and research.
Once again thank you for the support you and your staff have
extended in the past.
______
Letter From D. Larry Anderson
State of Utah,
Department of Natural Resources,
Salt Lake City, UT, March 26, 2004.
Hon. Robert Bennett,
Chairman, Subcommittee on Agriculture, Committee on Appropriations,
U.S. Senate,
Washington, DC.
Chairman Bennett: As the Governor of Utah's representative on
Colorado River Issues and the senior Utah member of the Colorado River
Salinity Control Forum, I wish to convey Utah's support for funding the
Salinity Title II Program, authorized in 1995 (Public Law 104-20) at
the level of 2.5 percent of the Environmental Quality Incentives
Program (EQIP) of the United States Department of Agriculture with EQIP
being funded at the amount sought in the President's 2005 budget. In
addition, Utah requests funds be provided to the Natural Resources
Conservation Service at sufficient levels to provide the technical
assistance necessary to efficiently spend these funds.
This vital program has been a mainstay in improving water use
efficiency in the Colorado River Basin of Utah. During the past 5 years
of drought, the facilities funded by the salinity earmark of the EQIP
program have been a significant reason for agriculture in the Uinta and
Price/San Raphael basins maintaining productivity and stimulating these
rural economies.
In addition, the Salinity Control Program helped to meet the
salinity related water quality standards for the Colorado River and
U.S. treaty obligation with Mexico. This important program helps meet
national and international obligations and needs to be funded at the
aforementioned level.
Thank you,
D. Larry Anderson, P.E.,
Director.
______
Prepared Statement of the Association of State Dam Safety Officials
The Association of State Dam Safety Officials is pleased to offer
this testimony on the President's proposed budget for the Department of
Agriculture Natural Resource Conservation Service (NRCS) for fiscal
year 2005, specifically in support of the Watershed Rehabilitation
Program.
The Association of State Dam Safety Officials is a national non-
profit organization of more than 2000 State, Federal and local dam
safety professionals and private sector individuals dedicated to
improving dam safety through research, education and communications.
Our goal simply is to save lives, prevent damage to property and to
maintain the benefits of dams by preventing dam failures. Several
dramatic dam failures in the United States called attention to the
catastrophic consequences of failures. The failure of the federally-
owned Teton Dam in 1976 caused 14 deaths and over $1 billion in
damages, and is a constant reminder of the potential consequences
associated with dams and the obligations to assure that dams are
properly constructed, operated and maintained.
The Administration's proposed budget includes only $10 million in
discretionary appropriations to fund rehabilitation of unsafe and
seriously deficient dams that were originally constructed under USDA
Watershed Programs. The Association of State Dam Safety Officials
respectfully requests that this Subcommittee increase the
Administration's proposed appropriation to $65 million of the total
$120 million authorized in the 2002 Farm Bill which includes
discretionary funds and Commodity Credit Corporation (CCC) funding.
The Problem
The United States Department of Agriculture (USDA) under
authorities granted by Congress beginning in the 1940s provided
technical and financial assistance to local sponsors and constructed
small watershed dams. These dams, completed primarily under the
authority of Public Law 534 and Public Law 566 provided important
benefits including flood protection, municipal and rural water
supplies, irrigation, recreation, water quality, sediment removal and
habitat. The USDA, in partnership with these local sponsors constructed
nearly 11,000 small watershed dams across the country in 47 states.
Dams constructed under these USDA programs have provided local
communities with years of critical service. They have provided flood
protection for many homes and businesses, and the local transportation
infrastructure. Many communities rely on watershed dams for drinking
water and many farmers depend on the those dams for necessary
irrigation water to grow food and fiber.
However, these dams are aging and many are starting to reach the
end of their design life. Many watershed dams no longer are able to
continue to provide the benefits that the local communities have
counted on for so many years, such as the expected level of flood
protection. Many dams are unable to continue to provide the same
storage volume for drinking water; and many of them are so filled with
sediment that they cannot provide water quality and sediment removal
functions. More alarming is the recognition that as these dams continue
to age and deteriorate they threaten the very same local communities
that have relied on them for protection and for quality of life
improvements. Nearly 450 small watershed dams will reach the end of
their expected design life by 2005; and this number will increase to
over 1,800 by year 2010.
The challenge is enormous, as the local sponsors cannot shoulder
the entire burden alone. Without a fully funded Watershed
Rehabilitation Program, the flood protection provided by these dams
will be diminished, irrigation and drinking storage will be reduced and
water quality will continue to decline. However, the most dramatic
consequences from the aging and deterioration of these dams without
their rehabilitation will undoubtedly be to increase the probability of
a tragic failure. Dam failures cause lives to be lost, downstream
property to be destroyed and damage to critical public infrastructure
(roads, bridges, water treatment facilities). The cost of just one dam
failure, measured in loss of life, property damage and clean up costs,
could easily exceed the entire cost of the Watershed Rehabilitation
authorization.
Many of the small watershed dams do not have Emergency Action
Plans, essential for saving lives in the event of a dam failure. These
plans provide for surveillance of the dam, notification of emergency
management officials, evacuation plans, and most importantly they
identify the areas below the dam that would be flooded in the event of
a dam failure. Without these plans, a local downstream community would
have little chance of receiving adequate and timely warning in order to
evacuate their homes and businesses. Critical to this plan is the
completion of dam failure modeling to clearly map the downstream area
flooded form a failure, often called the ``danger reach''.
Rehabilitation funded under this program should include this, as part
of the rehabilitation design and planning package. Considering the
security threat alerts that so often include potential actions against
dams, these plans are even more critical.
Often, development, attracted by the benefits provided by the dam,
has significantly altered the upstream watershed and increased runoff
and sediment transport to the dam. In addition, it is very common to
see major downstream development in the area below the dam, within the
dam failure flood zone, which dramatically changes the consequences of
a potential failure to now include loss of life. This significantly
alters the minimum safety requirements and causes dam safety officials
great concern. These development consequences are typically beyond the
control of the local sponsoring organizations, yet they are responsible
for compliance with the state dam safety standards.
Table 1, attached to this testimony lists by state the number of
USDA Watershed dams, the estimated number of people as risk below the
dams, the infrastructure at risk, as well as an estimate of the number
of watershed dam rehabilitation projects and their projected costs over
the period fiscal year 2004 through fiscal year 2009. There have been
118 watershed rehabilitation projects initiated in 20 states which
include 18 completed rehabilitation projects and 100 projects either in
the planning or design phase. It is clear from these 118 projects as
well as the 54 projects which requested assistance but were unable to
be funded in fiscal year 2004, just how much demand exists; and how
successful this USDA program is. It is essential to continue this
program funding at a level that recognizes this demand, the size of the
problem and the importance of maintaining the Federal Government's
leadership role.
Mr. Chairman, in your home state of Utah, there are 25 USDA
Watershed Dams that provide important irrigation water, critical flood
protection and many other benefits. Ten of these watershed dams are
expected to request assistance during the period fiscal year 2004
through fiscal year 2009 and totaling an estimated $17,000,000 in
rehabilitation costs.
In Wisconsin there are 86 watershed dams built between 1956 and
1970, with many reaching the end of their design life over the next 10
years. Wisconsin has had several watershed rehabilitation success
stories with 11 of the initial 118 projects. Of these 11 projects 6 are
completed and 5 have been authorized and are in design or construction
phases. Over the period fiscal year 2004 through fiscal year 2009
Wisconsin expects to receive another 10 requests for rehabilitation
assistance costing an estimated $1.5 million.
Example of Success
Pilot rehabilitation projects in Wisconsin on Plum Creek, Alma-Mill
Creek, Glen Hills Creek and Bad Axe Watershed repaired unsafe
conditions, restored flood control benefits, extended the service life
another 50 years and enhanced water quality. The Glen Hills Creek
project highlights a very frequent problem as a home was constructed
below the dam, threatening the home should the dam fail and requiring
significant design modifications due to increased safety standards. The
funding was used to relocate the home from below the dam to reduce the
consequences of a failure and substantially lowering the repair costs
should the home have remained.
Request
Mr. Chairman and Members of this subcommittee, the Association of
State Dam Safety Officials is convinced that funding of this program as
critical to the safety of the nation's dams as well as the lives and
property downstream. Identifying a funding source for rehabilitating
and securing our country's dams is a major challenge. For the 11,000
small watershed dams created through a highly successful program
administered by the Federal Government, Congress and the Administration
should reconfirm their commitment to the structures and the American
people who depend on the continuing benefits provided by these dams.
These same people need to be secure that the dams the United States
help them build will not fail or diminish their function.
ASDSO asks that the Subcommittee to view funding the Rehabilitation
of Watershed Dams as a significant re-investment in the benefits of the
program and an investment in the safety of these dams. Therefore, this
Association respectfully requests that this Subcommittee provide
additional appropriations beyond the Administration's request to $65
million for fiscal year 2005.
Thank you Mr. Chairman and members of the Subcommittee for this
opportunity to submit this testimony. We look forward to working with
the Subcommittee and staff in any way to advance the safety of dams in
the United States.
TABLE 1.--USDA WATERSHED DAMS DATA
--------------------------------------------------------------------------------------------------------------------------------------------------------
Data from limited 2001 survey of 1500 dams \1\ Estimated rehab Estimated project
Total no. of --------------------------------------------------------- projects fiscal costs fiscal year
STATE watershed dams Population at Infrastructure at Annual benefits year 2004-fiscal 2004-fiscal year
risk risk in dollars in dollars \2\ year 2009 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
AK.................................... 0 ................. ................. ................. 0 $0
AL.................................... 105 3,805 $19,380,000 $5,634,000 6 3,425,000
AR.................................... 170 245 8,655,000 2,131,743 25 43,541,000
AZ.................................... 25 75,560 178,330,000 28,440,000 8 31,773,000
CA.................................... 3 10,000 25,000,000 3,000,000 1 7,070,000
CO.................................... 144 55,580 70,000,000 3,743,000 6 3,800,000
CT.................................... 31 1,000 3,000,000 150,000 0 0
DE.................................... 0 ................. ................. ................. 0 0
FL.................................... 10 ................. ................. ................. 0 0
GA.................................... 357 5,931 1,583,258,241 17,465,239 107 158,200,000
HI.................................... 4 ................. ................. ................. 0 0
IA.................................... 1,325 180 3,311,000 551,000 11 8,239,000
ID.................................... 3 5,000 10,000,000 675,000 0 0
IL.................................... 64 840 2,050,000 106,900 0 80,000
IN.................................... 110 1,101 38,150,000 1,344,460 0 0
KS.................................... 809 39 4,051,700 1,820,100 20 9,848,000
KY.................................... 200 12,100 16,700,000 2,902,800 16 8,808,880
LA.................................... 35 ................. ................. ................. 20 3,525,000
MA.................................... 29 61,108 3,300,000 12,175,000 8 3,160,000
MD.................................... 16 ................. ................. ................. 0 0
ME.................................... 16 ................. ................. 6,000 0 100,000
MI.................................... 13 ................. ................. ................. 1 540,000
MN.................................... 44 18 380,000 29,000 3 575,000
MO.................................... 770 ................. 2,829,825 1,299,810 11 1,750,000
MS.................................... 578 1,953 18,355,000 3,764,600 30 10,694,000
MT.................................... 16 365 21,000,000 2,465,900 7 4,615,000
NC.................................... 98 688 1,337,520 717,300 0 0
ND.................................... 48 250 5,500,000 1,200,000 15 14,650,000
NE.................................... 723 1,401 15,937,000 10,327,691 63 12,600,000
NH.................................... 24 ................. ................. ................. 0 0
NJ.................................... 20 25 60,000 21,500 2 825,000
NM.................................... 78 2,256 154,900,000 1,333,000 30 15,752,000
NV.................................... 8 ................. ................. ................. 0 0
NY.................................... 55 76,428 1,747,949 2,240,455 15 1,638,000
OH.................................... 61 720 13,250,000 2,355,000 27 7,120,000
OK.................................... 2,087 5,245 27,625,000 2,823,706 257 69,762,779
OR.................................... 5 125 1,100,000 1,400,000 0 0
PA.................................... 87 14,640 414,000,000 10,735,000 6 1,143,000
PR.................................... 2 ................. ................. ................. 0 90,000
RI.................................... 0 ................. ................. ................. 0 0
SC.................................... 86 69,335 62,868,000 1,532,700 7 2,918,500
SD.................................... 55 0 140,000 125,000 0 0
TN.................................... 140 ................. ................. ................. 6 250,000
TX.................................... 2,038 19,677 87,104,000 13,315,700 40 74,711,900
UT.................................... 25 ................. ................. ................. 10 17,000,000
VA.................................... 145 1,183 17,906,216 355,201 16 11,286,000
VT.................................... 4 960 25,000,000 292,000 4 0
WA.................................... 3 ................. ................. ................. 0 0
WI.................................... 86 292 1,623,100 444,500 10 1,462,000
WV.................................... 167 13,969 76,587,670 7,658,767 80 19,800,000
WY.................................... 13 ................. ................. ................. 12 14,195,769
-----------------------------------------------------------------------------------------------------------------
TOTALS.......................... 10,935 442,019 2,914,437,221 144,582,072 880 564,948,828
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ This data was collected from 1,500 watershed dams in 2001.
\2\ The total annual benefits from all of the Watershed Dams in $1.7 billion.
______
Prepared Statement of Bernard H. Berne, M.D., Ph.D
I am a resident of Arlington, Virginia. I serve the Food and Drug
Administration (FDA) as a Medical Officer and as a reviewer medical
device approval applications. I am testifying as a private individual.
I ask your Subcommittee to deny the Administration's request to
provide funds for costs related to the occupancy of a new FDA Human
Drugs facility in White Oak, Maryland. These funds are included within
the $1,820,849,000 that the President's Budget for fiscal year 2005
requests on page 421 under the heading ``Department of Health and Human
Services'', ``Food and Drug Administration'', ``Federal Funds, General
and special funds'', ``Salaries and Expenses''. The Budget states on
page 422 under this heading that ``the budget requests increased
funding for . . . moving expenses for a new Human Drugs facility in
White Oak, Maryland''.
The General Services Administration (GSA) is now constructing this
facility. Please deny these funds for the following reasons:
Economic Considerations
FDA will need to pay rent to GSA if FDA occupies this facility.
FDA's future budgets, which your Subcommittee would fund, would pay
these rents. The rents would likely be higher than rents that GSA and
FDA pay to private property owners, since GSA would not need to enter
into competitive bidding processes.
Congressional authorizing committees need to evaluate the current
costs of the consolidation and compare them to the costs of maintaining
FDA's current facilities. No Congressional committee has done this
during the past 15 years.
Lack of Need for Relocating FDA to White Oak Facility
All or nearly all of FDA's offices are presently located in
satisfactory leased facilities. Some, such as my own, are in excellent
buildings. There is no urgent need or economic reason to relocate these
offices to White Oak.
Despite this, the requested funds would support the relocation of a
large number of offices in FDA's Center for Drug Evaluation and
Research (CDER) to White Oak. There is no clear need for this
relocation, since it would put 20 miles between this office and all
other FDA offices, including the Office of the Commissioner. The
relocation would clearly decrease FDA's efficiency by decreasing
interactions between this office and related ones.
White Oak is an unsatisfactory location for FDA's headquarters
consolidation. The project would promote urban sprawl.
FDA's White Oak facility would occupy 125 acres next to a golf
course in a suburban residential neighborhood in Montgomery County,
Maryland. The FDA site is outside of the Capital Beltway on a largely
forested 750-acre property surrounded by heavily congested roads and
highways. The site is three miles from the nearest Metro station, and
has only infrequent bus service.
An FDA consolidation at White Oak would bring 6,000 FDA employees
to this Washington area suburb. Most would need to commute for much
longer times and distances than they presently do. White Oak is more
than 20 miles from most present FDA facilities.
I and thousands of other FDA employees presently commute to work by
Metrorail, as our workplaces are near Metro stations. This will be
impossible at White Oak.
FDA employees driving to White Oak will add traffic congestion and
air pollution to the Washington Metropolitan Area. This is especially
unfortunate because the Washington Metropolitan Area already has the
second worst traffic congestion of all urban areas in the United
States.
FDA employee surveys have revealed widespread opposition to this
relocation. Three years ago, a survey of those employees who would
relocate first to White Oak showed that 70 percent opposed the move.
Many stated that the relocation would impair FDA's ability to regulate
drugs and medical devices.
It is clear that the location of the facility will have long-
lasting adverse effects on FDA's ability to recruit and retain
qualified employees. Further, many more FDA employees will telecommute
than presently do. They will rarely work at the new facility. This will
greatly diminish FDA's efficiency and will contradict a major goal of
the FDA consolidation at White Oak.
The Washington Metropolitan area has a number of better sites at
which FDA can consolidate. Among these is the Southeast Federal Center
in downtown Washington, D.C. This underutilized 50-acre federally-owned
property is adjacent to the Navy Yard Metro Station. It is only one
mile from the U.S. Capitol and the headquarters of the U.S. Department
of Health and Human Services.
Legal Issues
On February 23, 2001, I and a number of other FDA employees joined
the Sierra Club and the Forest Conservation Council in a law suit that
is intended to stop the White Oak project. For a number of reasons,
FDA's occupancy of any buildings at White Oak would be illegal. The
Federal district court for the District of Columbia is presently
considering this suit.
The White Oak facility would house the Office of the Commissioner
of Food and Drugs, as well as most other FDA headquarters offices. This
would violate 4 U.S.C 72, which states: ``All offices attached to the
seat of government shall be exercised in the District of Columbia, and
not elsewhere, except as otherwise expressly provided in law.'' 4
U.S.C. 72 is derived from the 1790 Act that established the District
of Columbia as the Nation's capital. The first Congress enacted this
law, which President George Washington signed.
There is no law that expressly provides that FDA's headquarters
offices shall be exercised outside of the District of Columbia.
The FDA Revitalization Act (Public Law 101-635; 21 U.S.C. 369b),
authorizes the Secretary of HHS to award contracts to acquire property
and to construct an operate a consolidated FDA headquarters facility.
This Act does not provide the location of the consolidated facility.
I ask Congress not to appropriate funds to support an illegal
activity. The 1790 Act had the worthy purpose of ensuring that all
central offices of the Federal Government would consolidate in the
Federal capital District, and not elsewhere. The consolidated FDA
facility would be one such office that is ``attached to the seat of
government''.
Article 1, Section 8, of the Constitution gives Congress exclusive
jurisdiction over the District of Columbia. Your Committee should take
no action to support the location of FDA's headquarters at a location
that is outside of the District. Any such action would tend to vitiate
this section of the Constitution, which 4 U.S.C. 72 is intended to
support.
Executive Order 12072, August 16, 1978, states in Section 1-1,
Subsection 101: ``Federal facilities and Federal use of space in urban
areas shall serve to strengthen the Nation's cities and to make them
attractive places to live and work. Such Federal space shall conserve
existing urban resources and encourage the development and
redevelopment of cities.''
White Oak is not in or near any city. An FDA consolidation at White
Oak (which is in an ``urban area'', the Washington Metropolitan Area)
would not strengthen any cities. The FDA facility would not encourage
the development or redevelopment of any cities.
Executive Order 12072, Section 1-1, Subsection 101, contains the
word ``shall'' in several locations. FDA therefore can not legally
locate its headquarters in suburban White Oak.
Executive Order 12072 and several Federal statutes require that
heads of Federal agencies consult with local city officials to obtain
their recommendations for and objections to all proposed new Federal
facilities. Neither GSA nor FDA officials ever consulted with officials
of the District of Columbia or of the City of Rockville in Montgomery
County, Maryland, concerning the White Oak facility.
This lack of consultation violated Executive Order 12072 and
several laws. It prevented District and Rockville officials from
recommending alternative sites for the consolidated facility within
their own jurisdictions and from objecting to the selection of the
White Oak site.
The Public Buildings Act of 1959 requires that the Committee on
Environment and Public Works of the U.S. Senate approve prospectuses
that describe the location and maximum costs of any large buildings
that GSA may wish to construct before Congress can appropriate funds to
design and construct such buildings. That Committee has never approved
a prospectus that describes FDA's White Oak facility.
The Consolidated Appropriations Act, 2001 (Public Law 106-544)
appropriated funds that GSA is presently using to construct the new FDA
Human Drugs facility at White Oak. However, Public Law 106-544 contains
the following restrictive provision at 114 Stat. 2763A-143: ``Provided
further, That funds available to the General Services Administration
shall not be available for expenses of any construction, repair,
alteration, or acquisition project for which a prospectus, if required
by the Public Buildings Act of 1959, as amended, has not been approved,
except that necessary funds may be expended for each project for
required expenses for the development of a proposed prospectus.''
The Public Buildings Act of 1959 requires a prospectus that
describes FDA's White Oak facility. No prospectus that described this
facility had been approved before Public Law 101-58 was enacted into
law. Therefore, GSA may only legally use the funds appropriated in
these Acts for ``required expenses for the development of a proposed
prospectus''. GSA cannot legally use the funds to design and construct
any buildings.
Despite this prohibition, GSA is presently designing and starting
to construct the new FDA Human Drugs facility in White Oak without an
approved prospectus. This is illegal.
The President's Budget is therefore asking Congress to appropriate
funds in the Agriculture, Rural Development, and Food and Drug
Administration Appropriations Act, 2005, that would enable FDA to
occupy new facilities at White Oak that GSA is now constructing
illegally. Your Committee should not initiate the appropriation of any
such funds.
The prospectus approval process is designed to assure that Congress
evaluates the need, location, and maximum cost for all GSA building
projects. Congress has never done this for any of the facilities that
FDA would occupy at White Oak.
The National Environmental Policy Act (NEPA) of 1969 requires that
Federal agencies compare in an Environmental Impact Statement (EIS)
alternative locations for any large new Federal facility. However, the
EIS for the White Oak FDA facility did not make any such comparisons.
The EIS only compared the environmental impacts of an FDA
consolidation at White Oak with the ``no action'' alternative.
Following this legally inadequate comparison, GSA and FDA officials
selected White Oak as the location for the facility.
GSA and FDA officials therefore violated NEPA when they selected
the White Oak site. Congress should not appropriate funds to support
this illegal selection.
A Federal court may prevent FDA from consolidating its facilities
at White Oak for one or more of the above reasons. Congress should not
provide funds for FDA to occupy the White Oak facility until the
Federal courts decide whether the project can proceed.
I therefore ask that your Committee not provide the requested to
FDA in this legislation. Thank you.
______
Prepared Statement of the Calaveras County Water District
Calaveras County is located on the eastside of the Central Valley
of California and encompasses approximately 1,028 square miles of land,
stretching across more than 50 miles of valleys, foothills, and
mountain peaks. The topography ranges from approximately 200 feet above
mean sea level (ft-msl) in the northwestern region of the County, to a
peak height of 8,170 ft-msl near Alpine County.
The communities of West Point, Wilseyville and Bummerville are
located in the northeastern portion of the county in the sparsely
populated higher foothills. The topography ranges from approximately
2,500 feet in Wilseyville to 3,200 feet in Bummerville. Mild summers
and cold winters characterize the region, with temperatures ranging
from the low 20's to the middle 80's. Snow accounts for a large
percentage of the precipitation in the watersheds supplying the study
area.
In the fall of 1946, the Calaveras County Water District (CCWD) was
organized under the laws of the State of California as a public agency
for the purpose of developing and administering the water resources in
Calaveras County. Therefore, CCWD is a California Special District and
is governed by the California Constitution and the California
Government and Water Codes. CCWD is not a part of or under the control
of the County of Calaveras. CCWD was formed to preserve and develop
water resources and to provide water and wastewater service to the
citizens of Calaveras County.
Under state law, CCWD, through its Board of Directors, has general
powers over the use of water within its boundaries. These powers
include but are not limited to: the right of eminent domain, authority
to acquire, control, distribute, store, spread, sink, treat, purify,
reclaim, process and salvage any water for beneficial use, to provide
sewer service, to sell treated or untreated water, to acquire or
construct hydroelectric facilities and sell the power and energy
produced to public agencies or public utilities engaged in the
distribution of power, to contract with the United States, other
political subdivisions, public utilities, or other persons, and subject
to the California State Constitution, levy taxes and improvements.
CCWD provides water service to over 10,000 connections throughout
Calaveras County. CCWD operates five independent treatment facilities
with a combined treatment capacity of over 13 million gallons per day.
The water facilities include approximately 290 total miles of
transmission and distribution pipelines ranging from 4 to 20 inches in
diameter and 31 storage tanks with capacity of over 14.5 million
gallons. CCWD provides water and/or wastewater service to 65 percent of
the residents of Calaveras County.
west point, wilseyville and bummerville system history
CCWD owns and operates the domestic water system in the rural
communities of West Point, Wilseyville, Bummerville and part of Sandy
Gulch. This water system is located in the District's West Point
Service area, located in the Mokelumne River Watershed, Calaveras
County, Central California, in the foothills of the Sierra Nevada
Mountains. Population growth in the service area has generally averaged
less than one percent annually over the last 15 years. This low growth
rate may be attributed in part to the reduction in industry within the
service area. Presently, the economic base of the community is
principally related to retirement living with some of the population
commuting to larger nearby communities for employment opportunities.
The communities of West Point and Wilseyville developed over the
last 150 years, initially as mining companies and later as logging
communities. Originally, these areas were served water through a series
of mining ditches associated with these activities. The decline of
these industries, which were critical to the area economy, brought
about CCWD's purchase of the water and conveyance systems.
The West Point water system was purchased in 1954 by CCWD from the
West Point Ditch Company. The predecessor to Sierra Pacific Logging
Company owned and built the Wilseyville system and sold it to CCWD in
1964. The Bummerville system was connected to the West Point system in
1959. Between 1964 and 1974 the system was brought into compliance with
state and Federal regulations for operation by CCWD.
The existing water system serves 520 connections, a total
population of 1,298, including a local Native American Reservation. The
current facilities include two raw water reservoirs (Wilson Lake and
the Regulating Reservoir); two raw water diversion facilities (Bear
Creek gravity and Middle Fork Mokelumne pumped); one water treatment
plant (West Point); two treated water pump stations (Bummerville and
Upper Wilseyville); and the associated distribution and storage
systems.
The two main sources for water supply for the West Point water
treatment plant are the Bear Creek diversion, which is a gravity
source, and the pumped source from the Mokelumne River. Both raw
sources are generally of good quality and are very easily treated to
potable standards. Water rights for the West Point/Wilseyville water
system are derived from existing water rights for diversion of flow
from Bear Creek and from an agreement for diversion from the Middle
Fork of the Mokelumne River. These provisions allow for adequate water
to serve the present water customers, as well as future full buildout
of the adjacent areas. In the case of drought, the Bear Creek supply
can be supplemented with water from the Middle Fork of the Mokelumne
River. In addition, the District maintains the 50 acre-foot Regulating
Reservoir (also referred to as the West Point Reservoir), which may be
called upon to supplement and augment supply during dry periods.
The West Point/Wilseyville water system and related facilities were
primarily constructed before 1960 and many system components are either
inadequate or in need of replacement. Several changes have been made to
the systems in response to more stringent regulations, which allowed
the abandonment of the Wilseyville plant. In addition, the West Point
water treatment plant and pump stations have been upgraded and an
intertie has been installed between West Point and Wilseyville.
Distribution system deficiencies are evident when evaluated against
current water industry standards for publicly owned and operated
systems. The 1996 Master Plan was completed to address these
deficiencies. Specific recommendations were presented to bring the
system into compliance with current and anticipated water industry
standards. In 1998, a Master Plan Supplement provided additional
analysis for improvements to the West Point Wilseyville, and
Bummerville systems.
West Point, Wilseyville and Bummerville have infrastructure
requirements that far exceed their financial capabilities. However, the
infrastructure is crucial to the health, safety, and existence of these
small, rural communities. In addition, rising water and wastewater
rates have been necessary due to new regulatory requirements and these
rising rates have been difficult for the community to face. The closing
of lumber mills in Calaveras and neighboring Amador County (over the
last 10 years) has also made a difficult situation worse for those
dependent on that industry for employment, especially in this current
climate of high unemployment rates. In an effort to begin addressing
these needs at the state and local level, a $500,000 feasibility study
state grant and a $1.9 million Bear Creek state construction grant have
recently been provided. In order to build on these state and local
efforts and to meet the critical infrastructure needs and the needs of
the community, we respectfully request assistance for the following
project components:
water supply infrastructure rehabilitation project request
The small rural communities of West Point, Wilseyville, and
Bummerville are faced with unaffordable water system replacement costs
for aging supply and distribution systems. Water pressure and fire flow
are inadequate in much of the service area. The raw water storage and
transmission facilities are in need of immediate repairs.
Seven projects have been identified to provide the West Point water
system with a safer and more reliable level of service. These projects
include:
--West Point Clearwell Replacement.--The upgraded West Point Water
Treatment Plant is operational; however, the current clearwell
will not provide sufficient contact time for compliance with
disinfection regulations. This project will demolish and
replace the old 500,000 gallon tank with a new 600,000 gallon
steel tank.
--Bummerville Treated Water Storage Tank Replacement.--Replacement of
small redwood tank with a single 150,000 gallon steel tank.
--Wilson Lake Embankment.--Assessment and reconstruction of a primary
storage reservoir that is no longer functional.
--West Point-Wilseyville Distribution System.--Replace the aging
``backbone'' transmission and distribution piping and provide a
second intertie between West Point and Wilseyville service
areas to improve fire flow and system reliability.
--Bummerville Treated Water Distribution System.--Replacement of old,
leaking, small-diameter piping to improve flow and fire
protection.
--Mokelumne River Intake and Pump Station.--Relocation of the pump
station out of the flood plain, replacement of the raw water
line to the treatment plant, and modification of the existing
river diversion structure.
--Regulating Reservoir.--Remediation projects to improve water
quality problems at a primary storage reservoir.
The funding we are requesting here is necessary to assist in the
upgrade, reconstruction, and repair of water system infrastructure
critical for basic water pressure and fire flow. The District,
therefore, respectfully requests the Committee's support for a
$2,000,000 appropriation in fiscal year 2005 under the U.S. Department
of Agriculture's Rural Development Program (Rural Utility Service), so
that efforts to initiate construction for the much-needed Downtown West
Point Distribution System Improvements may move forward.
______
Prepared Statement of Wine America, the Wine Institute, the California
Association of Winegrape Growers, and Winegrape Growers of America
Dear Chairman Bennett and Senator Kohl: Our organizations are
pleased to provide recommendations for the funding of important
programs that greatly impact the wine and winegrape industry in the
United States. We are attaching a description of the contributions made
by this great industry.
Recommendations: Funding for Winegrape Research
The Viticulture Consortium
Our organizations strongly support increasing the funding for the
very successful Viticulture Consortium to $2.5 million.
Due to budgetary constraints last year the funding of the
Viticulture Consortium by the Cooperative State Research Education
Extension Service (CSREES) was reduced to $1.6 million from the
previous level of $1.78 million. The Consortium was initiated in fiscal
year 1996 and is administered by Cornell University, Pennsylvania State
University and the University of California (Davis). The consortium
funds grants for state researchers in about twenty states through a
competitive process. It is a keystone of grape related research in the
United States.
The consortium addresses unmet national research needs important to
our industry. As an active partnership of Federal, State, and industry
resources, the consortium enhances research coordination,
collaboration, improves efficiency and eliminates duplication of
effort. Explicit matching funds from both industry and state sources
have increased dramatically in response to growing Federal support.
Research proposals have been received from nearly 20 states, including
California, Pennsylvania, Michigan, Missouri, Virginia, New York, Ohio,
Michigan, Oregon, and Washington and are funded on a competitive basis.
Research priorities are developed by a national network of key
industry, research and extension representatives known as AVERN
(American Viticulture and Enology Research Network). Because the
consortium integrates and coordinates grape research throughout the
nation it is recognized as the most important mechanism for advancing
knowledge and providing the capability for American grape growers to
remain competitive in a world marketplace.
Sustainable Viticulture Scientist and Grape Genetics Research Leader
For fiscal year 2005, we are requesting that Congress increase
funding by $300,000 for an ARS scientist entomologist to be part of the
sustainable viticulture group at (Davis, California). We also request
$325,000 for an ARS grape genetics research leader at Geneva, New York.
ARS sponsored grape research must keep pace with the needs of a
research intensive, high value crop facing global competition based on
product quality. Congress has been building important grape research
capabilities for sustainable vineyard practices (Davis, California) and
grape genetics (Geneva, New York).
ARS Sustainable Viticulture Center
We are requesting $10 million to begin the first phase of this
center
Sustainable viticulture and other work at Davis, California has
been a major new initiative for the ARS with several new positions that
have been added over the last decade. In order to provide laboratory
and green house space for these personnel and to properly develop an
appropriate interdisciplinary team approach to sustainability a new
building is required. Engineering and architectural funds were provided
in the fiscal year 2004 appropriation.
ARS Center for Grape Genetics
We respectfully request that $10 million be provided in fiscal year
2005 to begin construction of the ARS Center for Grape Genetics in
Geneva.
There is a serious need to add laboratory and office space for ARS
grape genetics research at Geneva, New York This will represent a
critical investment to enable ARS to assume a proper role of national
and world leadership in grape research. Engineering and architectural
funds were provided in the fiscal year 2004 appropriation.
Recommendation: Pierce's Disease Control, Containment, and Research
Our organizations support an increase in funding from the Animal
and Plant Health Inspection Service for the containment and control
program to $28.5 million--an increase of $6.25 million over funding for
fiscal year 2004.
We also support a continuation of CSREES funding of work on
Pierce's disease at the University of California in the amount of
$2.235 million (the fiscal year 2003 funding level).
We also recommend that Congress increase Agricultural Research
Service (ARS) funding of research on Pierce's Disease and the GWSS by
$600,000.
Pierce's disease, a fatal infection of grape vines by the bacterium
Xyella fastidiosa (Xf), is being spread throughout California by the
glassy winged sharpshooter (GWSS). GWSS was first detected in
California in 1989. It has invaded much of Southern California and is
established in the southern San Joaquin Valley.
This vigorous and difficult-to-control insect vector, indigenous to
the southeastern United States and northern Mexico, threatens
California's entire grape and wine-producing community. Commercial
grape varieties grown in California cannot tolerate infection by the Xf
bacterium and are quickly killed or rendered uneconomical. There is no
cure for Pierce's disease.
The onslaught of the GWSS and its spread of Pierce's disease has
triggered a massive and expensive cooperative response by Federal and
State agencies, California nurseries, citrus and winegrape growers to
contain, control and eventually eradicate the GWSS in California. The
risks to California agriculture presented by the GWSS were recognized
by a USDA declaration of emergency June 23, 2000 and subsequent
allocation of CCC funds to conduct research, manage and fight the
disease.
There are many crops and commodities threatened by the agents that
cause Pierce's disease, including almonds, citrus, stone fruits,
alfalfa and oleander.
Congress has appropriated money to fund GWSS and Pierce's disease
research beginning in fiscal year 2001 and every year thereafter. To
date in California, winegrape growers have assessed themselves
approximately $15 million to fund research programs to combat this
deadly disease.
Recommendation: Market Access Program
We respectfully request that the full amount of authorized funding,
$140 million, be provided for this program in fiscal year 2005.
The Market Access Program (MAP) provides export assistance to over
70 different agricultural industries, most producing specialty crops.
This assistance is frequently the only kind of government export
assistance given these producers to allow them to compete in world
markets against highly subsidized European producers. The wine industry
has made excellent use of the MAP program, increasing its exports by
over 225 percent in the past 10 years. Yet, our industry has less than
6 percent of the world's export market. There is still considerable
potential to increase our share.
Current funding for the MAP pales in comparison to the support
given other major world producers. The Farm Bill recognized the need to
increase MAP funding consistent with the growing exports of these
specialty crop producers. The authorized funding of $140 million needs
to be restored in order for momentum to be maintained.
Recommendation: Cooperative Bio-Control Program for Vine Mealy Bug
We respectfully request that $1.2 million be provided to address
this dangerous invasive pest before it gets more established and
spreads widely.
The vine mealy bug, Planococcus ficus, is an exotic pest first
found in the Coachella Valley, Riverside County in 1994. Since then, it
has spread to an additional 15 counties. The pest feeds on grape
(winegrapes, table grapes, and raisins), fig, pomegranate, avocado,
date palm, apple, quince, and certain ornamental plants. Not only does
the pest feed on sap, it also excretes large amounts of honeydew as it
feeds, fouling the plant. The pest's activities provide a food source
for sooty mold, attracts ants and reduces the quality of harvested
grapes.
The vine mealy bug threatens over 900,000 acres of grapes and over
$3 billion in derivative annual income in California. To meet this
threat, a cooperative work group has been formed, including
representatives of the grape industry, the Animal and Plant Health
Inspection Service, the University of California, the California
Department of Food and Agriculture, and California County Agricultural
Commissioners. This group has developed a program that includes public
education; detection, monitoring and mapping surveys; research; and a
control program implementation plan.
The California Association of Winegrape Growers was created in 1974
to be an advocate for California winegrape growers on state, national
and international issues. CAWG represents the growers of more than 60
percent of the state's annual tonnage of grapes crushed for wine and
concentrate. WineAmerica is the national trade association of American
wine producers representing more than 750 American wineries in 48
states. Wine Institute is the voluntary association of more than 700
California wineries and affiliated businesses that represent 92 percent
of California wine shipments and 80 percent of all U.S. wine shipments.
Winegrape Growers of America is a federation of state winegrape grower
organizations representing America's production of grapes for wine.
wine facts
Winegrape growing contributes to the U.S. economy in diverse ways.
It generates jobs, exports, tax revenues, tourism and, of course,
outstanding wines. Wine is also the center of intense global
competition that may seriously affect the ability of American vintners
to compete in this very global marketplace. The industry's future
success will hinge on public and private policies that facilitate
rather than impede responses to new competitive conditions.
The U.S. grape crop, now grown in over 40 states, has more than
tripled in 15 years from $955 million in 1985 to almost $3 billion in
2000. Winegrapes have increased far faster than the overall grape crop
and now represent almost two-thirds of the total crop. Grapes are the
highest value fruit crop in the nation and the seventh largest crop
overall.
As vineyards continue to expand, so do the number of producing
wineries. There are nearly 3,000 wineries in all fifty states. Wine
production, which typically adds value of approximately $2-$4 for each
$1 of farm gate value, is closely integrated with grape growing
operations. Wineries with tasting rooms contribute another $4-$10 per
$1 of farm gate value to the rural economy by selling their wine
directly to consumers.
The nation's top wine producing states are (in production order):
California, New York, Washington, and Oregon. California produces more
than 90 percent of the volume.
Wineries are almost always located in rural areas, near the source
of the grapes. The combination of vineyards and wineries provides a
stable, year-round, and flexible base of rural employment. Winery
tourism is very popular and contributes significantly to the rural
economy; in many cases state tourism departments feature their wineries
as a major tourist attraction.
The economic activity directly generated by the wine industry in
turn creates additional jobs, wages and economic activity as services
are purchased and wages are spent. In aggregate, wine contributes more
than $45 billion to the U.S. economy, along with 556,000 jobs, which
account for $12.8 billion in wages and $3.3 billion in state and local
tax revenues.
Wineries and grape growers have made a major commitment to
implement sustainable practices, which are environmentally sound,
economically viable and socially responsible. Formal programs are being
implemented in New York (agriculture environmental management program),
California's Central Coast Vineyard Team and Lodi-Woodbridge Winegrape
Commission, Oregon LIVE (Low Input Viticulture and Enology) and
Washington's Walla Walla Valley Wine Alliance. Wine Institute and the
California Association of Winegrape Growers have developed a California
Code of Sustainable Winegrowing Practices with an accompanying 490-page
self-assessment workbook of best management practices that is being
embraced by growers and vintners throughout the state.
Foreign competition is formidable. The U.S. accounts for 9.7
percent of the world grape production (third after Italy, France)
accomplished on only 5 percent of the world's vineyard acreage.
The United States represents about 8 percent of world wine
production (fourth after Italy, France, and Spain). Our 2003 exports of
wine, at 94 million gallons, were about 5.6 percent of the world export
market.
Imports of wine into the United States (2003) represent about 170
million gallons, an increase of more than 6 percent from 2002. Imports
now account for 25 percent of the U.S. wine market.
______
Prepared Statement of the California Industry and Government Central
California Ozone Study Coalition
On behalf of the California Industry and Government Central
California Ozone Study Coalition, we are pleased to submit this
statement for the record in support of our fiscal year 2005 funding
request of $500,000 through the U.S. Department of Agriculture (USDA)
Cooperative State Research, Education, and Extension Service (CSREES)
for the Central California Ozone Study (CCOS).
Most of central California does not attain federal health-based
standards for ozone and particulate matter. The San Joaquin Valley has
recently requested redesignation to extreme and is committed to
updating their 1-hour ozone State Implementation Plan (SIP) in 2004,
based on new technical data. In addition, the San Joaquin Valley,
Sacramento Valley, and San Francisco Bay Area exceed the new federal 8-
hour ozone standard. SIPs for the 8-hour standard will be due in the
2007 timeframe--and must include an evaluation of the impact of
transported air pollution on downwind areas such as the Mountain
Counties. Photochemical air quality modeling will be necessary to
prepare SIPs that are approvable by the U.S. Environmental Protection
Agency.
The Central California Ozone Study (CCOS) is designed to enable
central California to meet Clean Air Act requirements for ozone SIPs as
well as advance fundamental science for use nationwide. The CCOS field
measurement program was conducted during the summer of 2000 in
conjunction with the California Regional PM10/
PM2.5 Air Quality Study (CRPAQS), a major study of the
origin, nature and extent of excessive levels of fine particles in
central California. This enabled leveraging of the efforts of the
particulate matter study in that some equipment and personnel served
dual functions to reduce the net cost. From a technical standpoint,
carrying out both studies concurrently was a unique opportunity to
address the integration of particulate matter and ozone control
efforts. CCOS was also cost-effective since it builds on other
successful efforts including the 1990 San Joaquin Valley Ozone Study.
CCOS includes an ozone field study, data analysis, modeling
performance evaluations, and a retrospective look at previous SIP
modeling. The CCOS study area extends over central and most of northern
California. The goal of the CCOS is to better understand the nature of
the ozone problem across the region, providing a strong scientific
foundation for preparing the next round of State and Federal attainment
plans. The study includes five main components:
--Developing the field study;
--Conducting an intensive field monitoring study from June 1 to
September 30, 2000;
--Developing an emission inventory to support modeling;
--Developing and evaluating a photochemical model for the region; and
--Evaluating emission control strategies for upcoming ozone
attainment plans.
The CCOS is directed by Policy and Technical Committees consisting
of representatives from Federal, State, and local governments, as well
as private industry. These committees, which managed the San Joaquin
Valley Ozone Study and are currently managing the California Regional
PM10/PM2.5 Air Quality Study, are landmark
examples of collaborative environmental management. The proven methods
and established teamwork provide a solid foundation for CCOS. The
sponsors of CCOS, representing state, local government, and industry,
have contributed approximately $9.4 million for the field study. The
Federal Government has contributed $4,874,000 to support some data
analysis and modeling. In addition, CCOS sponsors are providing $2
million of in-kind support. The Policy Committee is seeking federal co-
funding of an additional $2.5 million to complete the remaining data
analysis and modeling. California is an ideal natural laboratory for
studies that address agriculture-related issues, given the significant
agriculture industry in the state.
For fiscal year 2005, our Coalition is seeking funding of $500,000
through the U.S. Department of Agriculture (USDA) Cooperative State
Research, Education, and Extension Service (CSREES). Domestic
agriculture is facing increasing international competition. Costs of
production and processing are becoming increasingly more critical. With
the current SJV PM10 SIP and the upcoming ozone and
PM2.5 SIPs, the agricultural industry within the study area
is facing many new requirements to manage and reduce their air quality
impacts. The identification of scientifically validated, cost-effective
options for reducing the environmental impacts of tilling, discing,
cultivation, and livestock related air emissions will contribute
significantly to the long-term health and economic stability of local
agriculture. Funding will support livestock and crop-related research
that will help maintain a vital agricultural industry within the state.
Research will be focused to measure baseline emissions, and to study
the most economical and effective approaches for reducing the impacts
of agriculture on air quality. These studies also have nationwide
benefits.
The San Joaquin Valley of California is one of the few areas of the
country to be classified as extreme in failing to meet the federal
Clean Air Act's attainment standards. Agricultural production practices
are considered to be a contributor to the air quality problem. Farmers
in the San Joaquin Valley are facing, for the first time, obligations
to obtain permits to farm from government agencies. Ongoing research is
essential to identify scientifically validated and cost-effective
options for reducing the environmental impacts of tilling, discing,
cultivation, and livestock related air emissions. Research will measure
baseline emissions and study the most economical and effective
approaches to reducing the impacts of agriculture on air quality. While
such research is critical to the long-term health and economic
stability of local agriculture, it will yield state-of-the-art benefits
derived from a unique agricultural study site that will have national
application and benefit.
There is a national need to address data gaps and California should
not bear the entire cost of addressing these gaps. National data gaps
include issues relating to the integration of particulate matter and
ozone control strategies. Federal assistance is needed to effectively
address these issues and CCOS provides a mechanism by which California
pays half the cost of work that the Federal Government should pursue.
We appreciate the Subcommittee's consideration of our request.
Thank you very much.
______
Prepared Statement of the California Table Grape Commission
Mr. Chairman and Members of the Subcommittee: The California Table
Grape Commission respectfully urges this subcommittee to fund the
Market Access Program (MAP) at the $140 million level for fiscal year
2005 as approved in the 2002 Farm Security and Rural Investment Act
(FSRIA).
The Importance of Agricultural Exports
By passing the FSRIA, Congress-recognized the importance of
agriculture to the U.S. economy. With increased funding for the Market
Access Program, the FSRIA also acknowledged the vital role of exports
in the long-term growth and overall well-being of the country's
agricultural sector. Agriculture is the only sector of the U.S. economy
that consistently runs a trade surplus. Moreover, exports account for
25 percent of U.S. farm cash receipts and for over $1 billion per week
in sales to more than 100 countries. The benefit to rural U.S.
economies across the country, in employment and revenue, is immense.
California Within the Broader Picture
California, perhaps more than any other state, has benefited from
the MAP program, among other Federal export assistance programs.
California is the leading state in agricultural exports, with export
shipments totaling over $6.5 billion annually. Exports represent
roughly 14 percent of California's agricultural production, though for
many commodities, including grapes, this figure is much higher. The
importance of exports to many California commodities are growing. Last
year alone, export shipments for California walnuts, pistachios,
prunes, peaches, nectarines, almonds and grapes increased considerably.
This is not to mention the long-term increases accrued over the last 10
years. Federal export assistance programs such as MAP made these
exports successes possible.
California Table Grapes
The California table grape industry is just one of the
aforementioned industries that has benefited considerably from export
development. Over the past 10 years, California table grape exports
increased 58 percent by volume and nearly 70 percent by value. Record
export shipments were achieved in each of the last 4 years. These
records coincided with the opening of new markets such as China,
Australia, Vietnam, and India. The MAP program enabled the commission
to pursue export development activities in each of those markets,
thereby helping the California industry take full advantage of these
opportunities.
MAP funds also allow the commission to support export development
efforts in other emerging and developing markets. As a result, the
California table grape industry now exports significantly larger
volumes to Mexico, Malaysia, Central America, Thailand, Indonesia,
Vietnam and the Middle East among others. At the same time, programs
funded in more developed export markets such as Japan, Korea, and the
United Kingdom enable the commission to preserve California's position
as the leading supplier of fresh grapes despite increased competition.
The significance of exports to the California table grape industry
cannot be overstated. Exports now account for 40 percent of production.
The Changing Export Environment
Based on the growth figures cited above, the California table grape
industry has clearly benefited from the MAP program, and similar export
assistance programs. However, global developments are creating a myriad
of new challenges and opportunities for U.S. agricultural producers.
Bilateral and multilateral trade agreements are opening markets that
once prohibited the import of California table grapes and other U.S.
agricultural products. While California benefits from access to these
new markets, the same is true for competing grape producers in Chile,
South Africa, Israel, and China. However, growers in many of these
countries receive government subsidies and other supports that place
California grapes at a disadvantage. Increased competition from global
table grape suppliers therefore threatens the export gains previously
made by the California table grape industry and could limit new
opportunities in emerging markets.
Conclusion
Congress recognized the dynamic nature of global agricultural
trade, and the growing challenges faced by U.S. agricultural producers,
when passing the FSRIA in 2002. To meet the long-term needs of U.S.
agricultural producers, Congress approved incremental increases in
funding for the MAP program. Those long-term needs have not changed. If
anything, the challenges and opportunities have intensified. For this
reason, the commission asks Congress to again recognize the importance
of U.S. agriculture and address its resource needs by allocating the
full $140 million to fund the MAP program in 2004.
______
Prepared Statement of the Coalition on Funding Agricultural Research
Missions
Dear Chairman Bennett: The Coalition on Funding Agricultural
Research Missions (CoFARM), representing 130,000 members from
professional scientific organizations, dedicated to assuring the safe
and secure availability of food, feed, and fiber, is united by a
commitment to advance and sustain investment in our nation's research
portfolio.
Recommendation 1.--We understand that the Agriculture
Appropriations bill has many valuable and necessary components, and
urge you to continue to support the National Research Initiative
Competitive Grants Program (NRI), USDA's premier, peer-reviewed,
competitive grants program. We request that you build on the
President's $180 million funding request for the NRI in the fiscal year
2005 budget cycle. A study conducted by USDA's Economic Research
Service (http://www.ers.usda.gov/publications/aer735/) to study)
highlights the annual rate of return to publicly fund agricultural
research at 35 percent.
Recommendation 2.--CoFARM requests that any new monies appropriated
for the NRI, as in fiscal year 2004, allow the Secretary the discretion
to apply up to 20 percent towards carrying out integrated research,
extension and education competitive grants program as requested by the
Administration in fiscal year 2005.
As you lead the Congress in deliberation on funding levels for
agricultural research, we urge you to build on the President's proposal
of $180 million for the NRI. Please consider CoFARM as a resource for
information in your efforts to improve the agricultural research
capacity of our nation. The expertise of our collective membership is
available to help in your efforts.
cofarm member societies
American Dairy Science Association
American Institute For Biological Sciences
American Phytopathological Society
American Society of Agricultural Engineers
American Society of Agronomy
American Society of Animal Science
American Society for Horticultural Science
American Society for Microbiology
American Society for Nutritional Sciences
American Society of Plant Biologists
Council on Food, Agricultural and Resource Economics
Crop Science Society of America
Council of Entomology Department Administrators
Federation of Animal Science Societies
Genetics Society of America
Institute of Food Technologists
Poultry Science Association
Rural Sociological Society
Society of Nematologists
Soil Science Society of America
Weed Science Society of America
______
Prepared Statement of the Coalition to Promote U.S. Agricultural
Exports
As members of the Coalition to Promote U.S. Agricultural Exports,
we commend the Chairman and members of the Subcommittee for their
interest and support of U.S. agriculture and express our appreciation
for this opportunity to share our views.
The Coalition to Promote U.S. Agricultural Exports is an ad hoc
coalition of over 80 organizations, representing farmers and ranchers,
fishermen and forest product producers, cooperatives, small businesses,
regional trade organizations, and the State Departments of Agriculture.
We believe the United States must continue to have in place policies
and programs that help maintain the ability of American agriculture to
compete effectively in a global marketplace still characterized by
subsidized foreign competition.
During consideration of the 2002 Farm Bill, Congress sought to
bolster U.S. trade expansion efforts by approving an increase in
funding for the Market Access Program (MAP) and the Foreign Market
Development (FMD) Program, which will begin to reverse the decline in
funding for these important export programs that occurred over the last
decade. For fiscal year 2005, the Farm Bill authorizes funding for MAP
at $140 million, and FMD is authorized at $34.5 million. The Coalition
strongly urges that both programs be funded at the full authorized
levels in order to carry out important market development activities.
Farm income and agriculture's economic well-being depend heavily on
exports, which account for one-third or more of domestic production,
provide jobs for millions of Americans, and make a positive
contribution to our Nation's overall trade balance. In fiscal year
2004, U.S. agriculture exports are projected to reach $59 billion,
which is still below the high of roughly $60 billion that was achieved
in fiscal year 1996. Exports could be significantly higher if it were
not for a combination of factors, including continued subsidized
foreign competition and related artificial trade barriers. U.S.
agriculture's trade surplus is also expected to be about $9.5 billion,
down approximately 66 percent from fiscal year 1996, with imports
continuing at record levels. In fiscal year 1999, the United States
recorded its first agricultural trade deficit with the EU of $1
billion. In fiscal year 2004, USDA forecasts that the trade deficit
with the EU will grow to $4.3 billion, the largest agriculture deficit
the United States runs with any market.
According to recent information from USDA, the European Union (EU)
spends more than $2 billion annually on agricultural export subsidies
compared to less than $100 million by the United States. In other
words, the United States is being outspent by more than 20 to 1 or more
by the EU alone with regard to the use of export subsidies.
In recent years, the EU, the Cairns group, and other foreign
competitors also devoted more than $1 billion on various activities to
promote their exports of agricultural, forestry, and fishery products.
Information compiled by USDA also shows that such countries are
spending over $100 million just to promote sales of their products in
the United States. In other words, they are spending almost as much to
promote their agricultural exports to the United States, as USDA
budgets ($125 million in fiscal year 2004) through MAP to promote
American-grown and produced products worldwide!
Because market promotion is permitted under World Trade
Organization (WTO) rules, with no limit on public or producer funding,
it is increasingly seen as a centerpiece of a winning strategy in the
future trade battleground. Many competitor countries have announced
ambitious trade goals and are shaping export programs to target
promising growth markets and bring new companies into the export arena.
European countries are expanding their promotional activities in Asia,
Latin America, and Eastern Europe. Canada, Australia, New Zealand, and
Brazil have also budgeted significant investments in export promotion
expenditures worldwide in recent years. As the EU and our other foreign
competitors have made clear, they intend to continue to be aggressive
in their export efforts.
Both MAP and FMD are administered on a cost-share basis with
farmers and other participants required to contribute up to 50 percent
of their own resources. These programs are among the few tools
specifically allowed under WTO rules to help American agriculture and
American workers remain competitive in a global marketplace still
characterized by subsidized foreign competition. The over 70 U.S.
agricultural groups that share in the costs of the MAP and FMD programs
fully recognize the export benefits of market development activities.
In fact, they have sharply increased their own contributions to both
programs over the past decade while use of USDA funds has actually
dropped. Since 1992, MAP participants have increased their
contributions from 30 percent (30 cents for every dollar contributed by
USDA) to almost 175 percent ($1.75 in industry funds for every USDA
dollar). For FMD, the contribution rate has risen from 76 percent to
the current level of 146 percent. By any measure, such programs have
been tremendously successful and extremely cost-effective in helping
maintain and expand U.S. agricultural exports, protect American jobs,
and strengthen farm income.
Competing in the agricultural export market carries new challenges
and opportunities for U.S. agriculture. Not only is the competition
becoming more intense with increased funding being brought to bear, but
we also face a world where new trade agreements are being developed
almost daily. The United States is also negotiating trade agreements
with the goal of opening new market opportunities for U.S. agriculture.
In addition, the opening of the Iraq market and the markets of other
previously sanctioned countries will offer further opportunities and
challenges.
For all these reasons, we want to emphasize again the need to
strengthen the ability of U.S. agriculture to compete effectively in
the global marketplace. American agriculture is among the most
competitive industries in the world, but it cannot and should not be
expected to compete alone against the treasuries of foreign
governments. As a Nation, we can work to export our products, or we can
export our jobs. USDA's export programs, such as MAP and FMD, are a key
part of an overall trade strategy that is pro-growth, pro-trade and
pro-job.
Again, as members of the Coalition to Promote U.S. Agricultural
Exports, we appreciate very much this opportunity to share our views
and we ask that this statement be included in the official hearing
record.
______
Prepared Statement of the Colorado River Basin Salinity Control Forum
colorado river basin salinity control program, title ii
Forum's Recommendation Concerning: Funding for Environmental
Quality Incentives Program
Support funding of this nationwide program at the President(s
requested amount of $985 million for fiscal year 2005.
Request there be designated to the Colorado River Basin Salinity
Control Program 2.5 percent of the EQIP Funding.
The Congress concluded that the Colorado River Basin Salinity
Control Program (Program) should be implemented in the most cost-
effective way and, realizing that agricultural on-farm strategies were
some of the most cost-effective strategies, authorized a program for
the Department of Agriculture (Department) within the Colorado River
Basin Salinity Control Act (Act). With the enactment of the Federal
Agriculture Improvement and Reform Act of 1996 (FAIRA), the Congress
directed that the Program should be implemented as one of the
components of the Environmental Quality Incentives Program (EQIP).
Since the enactment of the Farm Security and Rural Investment Act
(FSRIA) in 2002, there is, for the first time, an opportunity to
adequately fund the Program within the EQIP.
The Program, as set forth in the Act, is to benefit Lower Basin
water users hundreds of miles downstream from salt sources in the Upper
Basin. There are very significant economic damages caused by high salt
levels in this water source. Agriculturalists in the Upper Basin where
the salt must be controlled, however, don(t first look to downstream
water quality standards but realize local benefits. They submit cost-
effective proposals to the State Conservationists in Utah, Wyoming and
Colorado and offer to cost share. The Act provides that the seven
Colorado River Basin States will also cost share in this effort,
providing 30 percent of the funding. This has brought together a
remarkable partnership.
After longstanding urgings from the states and directives from the
Congress, the Department has concluded that this program is different
than small watershed enhancement efforts common to the EQIP. In this
case, the watershed to be considered stretches more than 1,200 miles
from the river's headwater in the Rocky Mountains to the river's
terminus in the Gulf of California in Mexico. The Department has now
determined that this effort should receive a special fund designation
and has appointed a coordinator for this multi-state effort.
The NRCS, in fiscal year 2003, earmarked $13.6 million and in
fiscal year 2004 there was earmarked $19.8 million to be used for the
Program. The Forum appreciates the efforts of the subcommittee in this
regard. The plan for water quality control of the Colorado River was
prepared by the Colorado River Basin Salinity Control Forum (Forum),
adopted by the states, and approved by the EPA. In the water quality
plan it is required that the USDA (Federal) portion of the effort be
funded at a level of at least $17.5 million. In fiscal year 2004, for
the first time, funding reached this level. State and local cost-
sharing is triggered by the Federal appropriation. In fiscal year 2004,
it is anticipated that the states will cost share with about $8.4
million and local agriculture producers will add another $7.6 million.
Over the past few years, the NRCS has designated that 2.5 percent
of the EQIP funds be allocated to Colorado River Salinity Control. The
Forum believes this is the appropriate future level of funding as long
as it does not drop below $17.5 million. The Basin states have cost
sharing dollars available to participate in on-farm salinity control
efforts. The agricultural producers in the Upper Basin are waiting for
their applications to be considered so that they might also cost share
in the Program.
overview
The Program was authorized by Congress in 1974. The Title I portion
of the Act responded to commitments that the United States made,
through a Minute of the International Boundary and Water Commission, to
Mexico with respect to the quality of water being delivered to Mexico
below Imperial Dam. Title II of the Act established a program to
respond to salinity control needs of Colorado River water users in the
United States and to comply with the mandates of the then newly enacted
Clean Water Act. This testimony is in support of funding for the Title
II program.
After a decade of investigative and implementation efforts, the
Basin states concluded that the Act needed to be amended. Congress
agreed and revised the Act in 1984. That revision, while keeping the
Department of the Interior as lead coordinator for Colorado River Basin
salinity control efforts, also gave new salinity control
responsibilities to the Department of Agriculture. Congress has charged
the Administration with implementing the most cost-effective program
practicable (measured in dollars per ton of salt removed). It has been
determined that the agricultural efforts are some of the most cost-
effective opportunities.
Since Congressional mandates of nearly three decades ago, much has
been learned about the impact of salts in the Colorado River system.
The Bureau of Reclamation has conducted studies on the economic impact
of these salts. Reclamation recognizes that the damages to United
States' water users alone are hundreds of millions of dollars per year.
The Forum is composed of gubernatorial appointees from Arizona,
California, Colorado, Nevada, New Mexico, Utah and Wyoming. The Forum
has become the seven-state coordinating body for interfacing with
Congress to support the implementation of a program necessary to
control the salinity of the river system. In close cooperation with the
Federal agencies and under requirements of the Clean Water Act, every 3
years the Forum prepares a formal report analyzing the salinity of the
Colorado River, anticipated future salinity, and the program necessary
to keep the salinities at or below the levels measured in the river
system in 1972 so as to control damages to downstream users.
In setting water quality standards for the Colorado River system,
the salinity concentrations measured at Imperial and below Parker and
Hoover Dams in 1972 have been identified as the numeric criteria. The
plan necessary for controlling salinity has been captioned the ``plan
of implementation.'' The 2002 Review, Water Quality Standards for
Salinity, Colorado River System, includes an updated plan of
implementation. In order to eliminate the shortfall in salinity control
resulting from inadequate Federal funding for the last several years
for USDA, the Forum has determined that implementation of the Program
needs to be accelerated. The level of appropriation requested in this
testimony is in keeping with the agreed to plan. If adequate funds are
not appropriated, state and Federal agencies involved are in agreement
that damage from the higher salt levels in the water will be more
widespread and very significant in the United States and Mexico.
Although the Program thus far has been able to implement salinity
control measures that comply with the approved plan, recent drought
years have caused salinity levels to rise in the river. Predictions are
that this will be the trend for the next several years. This places an
added urgency for the acceleration of the implementation of the
Program.
state cost-sharing and technical assistance
The authorized cost sharing by the Basin states, as provided by
FAIRA, was at first difficult to implement as attorneys for the USDA
concluded that the Basin states were authorized to cost share in the
effort, but the Congress had not given USDA authority to receive the
Basin states' funds. After almost a year of exploring every possible
solution as to how the cost sharing was to occur, the states, in
agreement with the Bureau of Reclamation, state officials in Utah,
Colorado and Wyoming and with NRCS State Conservationists in Utah,
Colorado and Wyoming, agreed upon a (parallel( salinity control program
wherein the states' cost sharing funds are being contributed and used.
We are now several years into that program and, at this moment in time,
this solution to how cost sharing can be implemented appears to be
satisfactory.
With respect to the states' cost sharing funds, the Basin states
felt that it was most essential that a portion of the Program be
associated with technical assistance and education activities in the
field. Without this necessary support, there is no advanced planning,
proposals are not well prepared, assertions in the proposals cannot be
verified, implementation of contracts cannot be observed, and valuable
partnering and education efforts cannot occur. Recognizing these
values, the ``parallel'' state cost sharing program expends 40 percent
of the funds available on these needed support activities. Initially,
it was acknowledged that the Federal portion of the Program funded
through EQIP was starved with respect to needed technical assistance
and education support. The Forum is encouraged with a recent
Administration acknowledgment that technical assistance must be better
funded.
______
Prepared Statement of Easter Seals
Easter Seals appreciates the opportunity to report on the notable
accomplishments of the USDA Cooperative State Research, Education, and
Extension Service (CSREES) AgrAbility Program and request that funding
for the AgrAbility Program be increased to $4.6 million in fiscal year
2005.
The AgrAbility Program is an essential, unduplicated, hands-on
resource for farmers, ranchers, and farmworkers with disabilities and
their families. AgrAbility is the only USDA program dedicated
exclusively to helping agricultural producers with disabilities. It
demonstrates the value of public-private partnership by securing
donations of funds, talent, and materials to magnify the impact of a
modest federal investment. The fiscal year 2004 appropriation of $4.147
million is funding 24 state projects.
disability & agriculture
Agricultural production is one of the nation's most hazardous
occupations. According to the National Institute on Occupational Safety
and Health, each year, approximately 182,500 agricultural workers
sustain disabling injuries, about 5 percent of which permanently impair
their ability to perform essential farm tasks. Tens of thousands more
become disabled as a result of non-farm injuries, illnesses, other
health conditions, and the aging process. Nationwide, over 13 million
Americans living in rural areas have a chronic or permanent disability.
Hundreds of thousands of farmers, ranchers, and agricultural workers
who have disabilities are a vital part of rural America and the
agricultural workforce.
The presence of a disability jeopardizes rural and agricultural
futures for many of these individuals. Rural isolation, a tradition of
self-reliance, and gaps in rural service delivery systems frequently
prevent agricultural workers with disabilities from taking advantage of
growing expertise in modifying farm operations, adapting equipment,
promoting farmstead accessibility, and using assistive technologies to
safely accommodate disability in agricultural and rural settings. Yet,
with some assistance, the majority of disabled agricultural workers can
continue to earn their livelihoods in agriculture and participate fully
in rural community life.
agrability's role and accomplishments
The AgrAbility Program was established under the 1990 Farm Bill in
response to the needs of farmers, ranchers, and farmworkers with
disabilities. The Farm Bill authorizes the Secretary of Agriculture to
make grants to Extension Services for conducting collaborative
education and assistance programs for farmers with disabilities through
state projects and related national training, technical assistance, and
information dissemination. Easter Seals is proud to be a partner with
the University of Wisconsin-Extension Cooperative Extension to provide
the national training and technical assistance portion of the
AgrAbility Program. Thousands of people in states with and without
state AgrAbility projects are aided through this initiative.
AgrAbility combines the expertise of the Extension Service and
disability organization staffs to provide people with disabilities
working in agriculture the specialized services that they need to
safely accommodate their disabilities in everyday farm and ranch
operations. AgrAbility received strong bipartisan support during the
2002 reauthorization of the Farm Security and Investment Act of 2002,
and was extended through fiscal year 2007. The $6 million authorization
level for AgrAbility was continued.
Under the statute, state and multi-state AgrAbility projects engage
Extension Service agents, disability experts, rural professionals, and
volunteers to offer an array of services, including: identifying and
referring farmers with disabilities; providing on-the-farm technical
assistance for agricultural workers on adapting and using farm
equipment, buildings, and tools; restructuring farm operations;
providing agriculture-based education to prevent further injury and
disability; and, upgrading the skills of Extension Service agents and
other rural professionals to better promote success in agricultural
production for people with disabilities.
In 2004, USDA received an allocation from Congress of $4.147
million. These funds are supporting 24 state projects serving 27 states
(due to several projects serving multiple states), the national
project, and USDA-CSREES administration of the Program. The state
projects funded with fiscal 2004 money are California, Colorado,
Delaware, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland,
Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire,
New York, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah,
Vermont, Virginia, West Virginia, and Wisconsin.
AgrAbility provides customized assistance to farmers, ranchers, and
farmworkers with disabilities and their families. The nature and degree
of assistance depends on the individual's disability, needs, and
agricultural operation.
Between April 1991 and March 2002, AgrAbility Projects in 31 states
along with the national project accomplished the following:
--Provided assistance, including nearly 10,000 on-site visits, to
over 11,000 farmers, ranchers, farmworkers or their family
members affected by disability.
--Educated over 200,000 agricultural, rehabilitation, and health
professionals on safely accommodating disability in
agriculture.
--Recruited and trained more than 6,000 volunteers and peer
supporters to assist agricultural producers with disabilities
and their families.
--Reached 9,500,000 people through more than 8,500 exhibits,
displays, and demonstrations to increase awareness of the
challenges affecting and resources available to people with
disabilities working in agriculture.
--In 2000, the National AgrAbility technical assistance and education
grant was awarded to Easter Seals national headquarters and the
University of Wisconsin-Extension Cooperative Extension. This
new partnership is generating innovative and effective
activities at the national level that will have a significant
impact on the effectiveness of the state AgrAbility projects
and the lives of agricultural workers with disabilities.
impact of current funding levels
A funding floor of $150,000 per state was set in the 1990 Farm Bill
to assure that the state programs were appropriately resourced to meet
diverse, statewide agricultural accommodation needs. In the 2002
reauthorization of the Farm Bill, the Committee reaffirmed a commitment
to that funding floor of $150,000 per state. Because funding had not
approached the $6 million authorized level prior to fiscal year 2002,
however, state projects had only received on average slightly under
$100,000 per state. The funding increase for AgrAbility in fiscal year
2002 provided USDA with the ability to fund projects at the $150,000
base level. Easter Seals strongly supports full funding of state
projects to assure that they continue to be effective for farmers with
disabilities.
AgrAbility projects are underfunded relative to need and objective.
At the current funding level, only a few staff can be hired to provide
statewide education and assistance to farmers with disabilities,
educate rural professionals, recruit volunteers, and work with rural
businesses on disability-related issues. Rising demand for services and
the great distances that must be traveled to reach farmers and ranchers
severely strains even the most dedicated of AgrAbility's outstanding
staff. Easter Seals fears that failure to invest adequately in this
worthwhile program will ultimately cause it to falter.
An additional consequence of limited funding is that in every grant
cycle some states with existing AgrAbility programs and a demonstrated
need for services are not renewed and are forced to discontinue
services to farmers with disabilities in that state. These states often
have difficulty obtaining the access to the limited public and private
funding sources that the federal seed money granted them. More than a
dozen states have sought AgrAbility funding without success. Each of
these states can demonstrate significant unmet needs among farm and
ranch families affected by disability that AgrAbility could potentially
address.
The fiscal year 2005 request of $4.6 million would allow USDA to
(a) continue to fund states up to the $150,000 base level and add new
projects in states currently unserved by AgrAbility or (b) increase the
budgets of currently funded projects to allow much-needed expansion of
existing services.
funding request
The need for AgrAbility services has never been greater, and its
accomplishments to date are remarkable by any standard. Easter Seals is
proud to contribute to the ongoing success of the USDA-CSREES
AgrAbility Program. Please support the allocation of at least $4.6
million for AgrAbility in fiscal year 2005 to ensure that this valuable
public-private partnership continues to serve rural Americans with
disabilities and their families. Thank you for this opportunity to
share the successes and needs of the USDA AgrAbility Program.
grant disclosure
Easter Seals receives the following federal grants:
--Project ACTION.--$3.0 million from the U.S. Department of
Transportation to help transit providers implement the
Americans with Disabilities Act (ADA) and to promote
transportation accessibility for people with disabilities;
--AgrAbility.--$290,554 from the U.S. Department of Agriculture to
promote success in agriculture for people with disabilities and
their families; and
Eater Seals' state and local affiliated organizations, which are
separately incorporated, receive funding from a variety of federal and
state agencies to support their local programs. We do not, however,
have specific information regarding their funding sources.
______
Prepared Statement of the Federation of American Societies for
Experimental Biology
The Federation of American Societies for Experimental Biology
(FASEB) is a coalition of 22 scientific societies who together
represent more than 66,000 biomedical research scientists. The mission
of FASEB is to enhance the ability of biomedical and life scientists to
improve, through their research, the health, well-being and
productivity of all people. We appreciate the opportunity to submit
testimony on the critical research and scientific training being
conducted at the United Stated Department of Agriculture (USDA) and
will primarily focus our remarks on the National Research Initiative
Competitive Grants Program (NRICGP), an extramural, peer-reviewed
program, ensuring that funds are invested in the highest quality
research projects at universities throughout the nation.
Basic and applied research in agriculture establishes the
scientific foundation required to provide a safe, nutritious food
supply in a manner that reduces environmental pollution, promotes
sustainable yields, improves human health and promotes the competitive
position of U.S. agriculture in the global marketplace. Agricultural
research also plays a critical role in homeland security, providing the
essential knowledge needed to strengthen the protections of our food
supply from natural or bioterrorist threats. NRICGP funding levels have
remained far below the authorized level of $500 million. This level of
funding limits fundamental and applied research, thereby threatening
the progress of the U.S. agricultural sector and the associated
economic, health and security benefits to Americans.
NRICGP peer-reviewed research focuses on increasing productivity of
crops and livestock, enhancing human and animal health and nutrition
and ensuring food safety. The recent discovery of a cow with Bovine
Spongiform Encephalopathy (BSE, or ``mad cow disease'') highlights the
importance of increased investment in agricultural research. The
ability to rapidly identify infected animals, a better understanding of
how BSE and related diseases affect the food supply, discovering how
prions function in healthy animals, perhaps leading to comprehension
and treatment of equivalent human diseases--these are all areas that
could benefit from NRICGP funding. Basic research into plant and animal
pathogens not only prepare us to combat naturally occurring epidemics,
such as BSE, chronic wasting disease (CWD) and West Nile virus, but
lead us towards powerful tools to battle bioterror agents, as well.
Guarding the U.S. food supply against the threats of bioterrorism is
absolutely critical to the security of the nation.
Mad cow disease is only one of numerous areas of scientific
opportunity and pressing public need that justify an increase in peer-
reviewed research funding at the USDA. According to the Centers for
Disease Control and Prevention, obesity will soon become the leading
cause of preventable death in the United States. Through its research
programs, the USDA has historically supported human nutrition studies
emphasizing the maintenance of good health. They have taken the lead
as, during the past two decades, the incidence of obesity--especially
among children and adolescents--has become a rapidly accelerating
public health problem. This problem has been particularly striking
among certain minority populations. The obesity epidemic has been
directly responsible for the dramatic increase in diabetes in both
children and adults which, if unchecked, will overwhelm our heath care
system. Prevention of obesity is the key strategy, and requires both
basic and applied knowledge to advance our understanding of potentially
successful interventions. Projects funded by the NRICGP are using
animal models to study the basic mechanisms of obesity, as well as
investigating how school lunches and childhood eating patterns
contribute to the prevalence of overweight children and adolescents.
NRICGP funded research is breaking new ground in genomic and
molecular biology. This basic research allows us to understand disease
resistance in plants, antibiotic resistance in bacteria and to decipher
genetic methods to augment the nutritional value of crops, thereby
contributing to agricultural advancement and human health. Functional
genomic initiatives directed toward agriculturally important organisms,
including animals, plants and microbes, represent major opportunities
as well. The International Rice Genome Sequencing Project, in which the
USDA was the lead U.S. agency, is being completed and will soon enhance
global human nutrition and health. Funding to link the NRICGP and the
National Institute of Health's National Human Genome Research Institute
is essential to a paradigm shift from gene cloning to genome scale
biology. The challenge is to understand the genetic bases for
biological variation responsible for desirable health and production
traits in plant and animal agriculture. Genomic biology is the magnet
that will attract outstanding students to the agricultural sciences
that are the foundation of ensuring a safe and stable food supply.
Molecular and genomic discoveries made though projects funded by
the NRICGP stand to have major impacts on U.S. agriculture. USDA-funded
researchers have identified genes in wheat that may significantly boost
production yields. Key factors that promote bacterial resistance in
cattle have been identified and can be used to develop new agents to
control infectious diseases. Scientists have elucidated the genetics of
wood, which will lead to substantial improvements in quality and
quantity produced. Genetically modified soybeans have been created that
produce more oleic acid, a critic dietary fat for improving the human
diet. These soybeans are also resistant to bean pod mottle virus, a
devastating crop disease. NRICGP researchers have developed viruses
that can deliver disease resistant genes to catfish, which reduces
dependence on medicated feeds while enhancing animal health. In a
similar but potentially higher impact discovery, antimicrobial peptides
have been found in pigs that may kill swine pathogens without the need
for conventional antibiotics. This may decrease the risk of antibiotic-
resistance infections in human acquired through exposure to live
animals or meat.
In addition to research, the USDA plays a vital role in development
of future researchers. Training students in the agricultural sciences
is critical if the United States is to maintain its leadership position
in an increasingly competitive, global food and agriculture industry.
Unfortunately, the number of doctorates awarded in agricultural
sciences has decreased significantly in recent years. The National
Needs Graduate Fellowships Program trains excellent researchers who can
interact effectively with both agricultural producers and consumers.
This program allows institutions to recruit outstanding graduate
students in targeted areas of research, including plant and animal
biotechnology, agricultural engineering and food science or human
nutrition. Despite its importance, this program is funded at low
levels, allowing only a fraction of the qualified Ph.D. applicants to
be supported. Additionally, the USDA supports innovation in teaching
methods and materials through the Higher Education Challenge Grants
program. The decreasing pool of young scientists with backgrounds in
agriculture, and the critical need to recruit and train the next
generation of agricultural researchers, make it imperative that these
two programs be supported at levels sufficient to accomplish their
goals effectively.
The best and brightest scientists in the United States are also
being deterred from agricultural research by the current cap on
indirect costs, to the detriment of both producers and consumers. FASEB
urges that the USDA indirect costs rate be raised and made commensurate
with the rate used by other Federal agencies. Cutting-edge research
requires substantial investment in buildings and instrumentation. The
USDA provides partial reimbursements for these indirect, but necessary,
costs of research as part of grant funding. Currently the
Congressionally mandated 19 percent facilities and administrative (F&A)
costs cap results in a significant disincentive for many university
faculty to seek USDA funding. Additionally, an insufficient facilities
reimbursement significantly impairs the ability of universities to meet
their fixed obligations and prevents them from further investing in
needed facilities in the future. However, increasing the cap on F&A
costs from 19 percent should not come at the expense of the overall
agricultural research budget and its competitive grant programs.
FASEB strongly supports funding the NRICGP at the $200 million
level recommended in the President's fiscal year 2004 budget.\1\
Furthermore, we are concerned that the President's fiscal year 2005
budget requests funding below this level. The NRICGP has been
underfunded since it was created by the 1990 Food, Agriculture,
Conservation and Trade Act with an authorized annual expenditure of
$500 million. This limitation in funding constrains the size and
duration of essential research projects. As a consequence of the
NRICGP's limited funding and constrictive indirect cost policies, FASEB
is concerned that researchers are directing their efforts away from
agricultural needs towards the goals of other funding programs, because
the number of applications in several NRI areas has decreased in recent
years. In order to achieve scientific progress in agriculture, it is
crucial that young investigators are not discouraged from these
critical areas of research. Greater investment in basic and applied
agricultural research is critical, as the demand for a safe and
nutritious food supply continues to increase.
---------------------------------------------------------------------------
\1\ Federation of American Societies for Experimental Biology.
2004. Federal Funding for Biological Sciences and Related Life Sciences
Research--Fiscal Year 2005. http://www.faseb.org/opa/fund2005/
fedfund05.pdf.
---------------------------------------------------------------------------
______
Prepared Statement of Florida State University
Mr. Chairman, I would like to thank you and the Members of the
Subcommittee for this opportunity to present testimony before this
Committee. I would like to take a moment to briefly acquaint you with
Florida State University.
Located in Tallahassee, Florida's capitol, FSU is a comprehensive
Research I university with a rapidly growing research base. The
University serves as a center for advanced graduate and professional
studies, exemplary research, and top quality undergraduate programs.
Faculty members at FSU maintain a strong commitment to quality in
teaching, to performance of research and creative activities and have a
strong commitment to public service. Among the current or former
faculty are numerous recipients of national and international honors
including Nobel laureates, Pulitzer Prize winners, and several members
of the National Academy of Sciences. Our scientists and engineers do
excellent research, have strong interdisciplinary interests, and often
work closely with industrial partners in the commercialization of the
results of their research. Florida State University had over $162
million this past year in research awards.
FSU recently initiated a new medical school, the first in the
United States in over two decades. Our emphasis is on training students
to become primary care physicians, with a particular focus on geriatric
medicine--consistent with the demographics of our state.
Florida State University attracts students from every county in
Florida, every state in the nation, and more than 100 foreign
countries. The University is committed to high admission standards that
ensure quality in its student body, which currently includes some 345
National Merit and National Achievement Scholars, as well as students
with superior creative talent. We consistently rank in the top 25 among
U.S. colleges and universities in attracting National Merit Scholars to
our campus. At Florida State University, we are very proud of our
successes as well as our emerging reputation as one of the nation's top
public research universities.
Mr. Chairman, let me tell you about a two projects we are pursuing
this year through the U.S. Department of Agriculture.
The first project involves the reduction of agricultural crop risk.
The Federal Government, the entity which sets crop insurance rates,
needs access to new cost-effective ways to reduce crop risk. In the
S.E. United States, El Nino and La Nina climate variability are major
factors of crop risk. By using new methods of predicting, more
appropriate and fair pricing of premiums for crop insurance can be set.
The Southeast Climate Research Consortium, which consists of Florida
State University, the University of Florida, the University of Miami,
the Universities of Georgia, Auburn University and University of
Alabama at Huntsville has been at the forefront of this climate
prediction work. The Consortium has worked in Florida and throughout
the Southeastern United States, with support from NOAA, to develop new
methods to predict the consequences of climate variability.
In this consortium, Florida State University provides the climate
forecasts and risk reduction methodology. The University of Florida,
the University of Georgia, and Auburn University translate this climate
information into risks associated with production and environmental
impacts and work with Extension Services in each state to provide
information to the agricultural community. The University of Miami
provides the economic modeling of the agricultural system and evaluate
use and impacts of the products. Each university works with farmers to
communicate outcomes. New tasks for fiscal year 2005 include: Assessing
climate forecasts to reduce risks of ground water contamination from
agricultural practices in the S.E. United States; investigating how to
better manage crops to maintain or increase profitability and
simultaneously reduce risks of environmental damage; and evaluating
agricultural risks associated with water policy changes.
FSU, on behalf of the FL Climate Consortium, is seeking $4 million
in fiscal year 2005 for this activity through the U.S. Department of
Agriculture.
Our second project involves the utilization of sugarcane by-
products, also know as bagasse.
Sugarcane has been identified as an essential world food source and
is mainly used for sugar production. The United States produces over
seven million metric tons sugar annually--85 percent of which is grown
in Florida and Louisiana. Bagasse, a fibrous agricultural residue that
is a by-product of sugarcane processing, is for the most part
overlooked at this time. Thousands of tons of sugar industry waste by-
products are generated annually in the form of bagasse. Florida State
University, in conjunction with Louisiana State University and the
University of Tennessee, are furthering development and production of
industrial textile products from bagasse that will enhance the value
and use of this potentially important agricultural commodity. Working
with cane producers and cooperatives, this project will demonstrate
mill-to-market bio-based value-added products. Previous work has
demonstrated that fibers can be extracted from bagasse and formed into
non-woven mats for significant and successful erosion control. This
multi-state research project will scale up the previous pilot process
to extract larger volumes of sugarcane fibers from bagasse for the
production and evaluation of industrial textile products from the
extracted fibers.
Two prototype continuous reactors--one at Florida State University
and one at Louisiana State University--will be used to process bagasse
fibers that will be characterized and made into carded webs for
spinning fibers. Processing parameters for carding and spinning the
fibers will be optimized and dyeability of the fibers, yarns and mats
will be investigated. The carded webs will also be subjected to a
process that results in non-woven mats with enhanced strength.
Operating conditions will be established and costs assessed. These
products from renewable resources have industrial applications based on
their biodegradability for environmental purposes. Additional efforts
will focus on developing value-added products from sugarcane bagasse
with production methods that ensure environmental compatibility.
Results of this research and development will increase the economic
value and potential applications for sugarcane fiber products.
The development of new products from sugar cane bi-products can be
a tremendous economic benefit for the farmers and the region.
Historically, this segment of the agricultural economy has had a
limited variety of products from the cane. This research will hopefully
increase the marketability of cane and its enhanced bi-products in a
wider range of commercial areas and applications.
Florida State University, as project coordinator, is seeking $1.5
million in fiscal year 2005 for this activity through the U.S.
Department of Agriculture.
Mr. Chairman, these are just of couple of the many exciting
activities going on at Florida State University that will make
important contributions to solving some key concerns our nation faces
today. Your support would be appreciated, and, again, thank you for an
opportunity to present these views for your consideration.
______
Prepared Statement of the Forest Landowners Association
The Forest Landowners Association (3776 Lavista Road, Suite 250,
Tucker, Georgia, 30084; telephone 404-325-2954), an association of over
10,000 private forest landowners throughout eighteen southern and
eastern states, appreciates this opportunity to submit written
testimony to the Senate Committee on Appropriations, Subcommittee for
Agriculture, regarding appropriations for the Cooperative State
Research, Education, and Extension Service (Department of Agriculture),
and in particular funding for the following programs.
--Formula Programs.--McIntire-Stennis Cooperative Forestry (proposed
funding by administration in fiscal year 2005 Budget:
$21,884,000).
--Extension Programs.--Renewable Resources Extension Act (proposed
funding by administration in fiscal year 2005 Budget:
$4,093,000).
Formula Programs: McIntire-Stennis Cooperative Forestry
The Cooperative Forestry Research Program (McIntire-Stennis Act)
supports long-term research and scientist training efforts at the
nation's public land-grant universities and colleges.\1\ The McIntire-
Stennis program increases the efficiency and productivity of private
forestland by providing ``for cutting-edge research on productivity,
technologies for monitoring and extending the resource base, and
environmental quality.'' \2\ In addition, the program has assisted in
the completion of over 7,500 masters degrees and 2,200 doctoral degrees
in forest resources fields.\3\
---------------------------------------------------------------------------
\1\ National Council on Private Forests (NCPF). (2001). Working
Paper on Farm Bill Forestry Title Priorities. Unpublished manuscript,
p. 6. See also National Coalition for Sustaining America's Nonfederal
Forests (NCSANF). (2000). A National Investment in Sustainble Forestry:
Addressing the Stewardship of Nonfederal Forestlands through Research,
Education, and Extension/Outreach, p. 7.
\2\ Brown, Dr. Perry J. (2001). Testimony submitted to the
Subcommittee on Agriculture, Rural Development, FDA, and Related
Agencies of the House Appropriations Committee, fiscal year 2001 CSREES
Budget. Online: www.napfsc.org/creestest02.htm, p. 2.
\3\ National Coalition for Sustaining America's Nonfederal Forests
(NCSANF). (2000). A National Investment in Sustainble Forestry:
Addressing the Stewardship of Nonfederal Forestlands through Research,
Education, and Extension/Outreach, p. 7.
---------------------------------------------------------------------------
The program's objectives fulfill several areas of need within the
forestry community. The McIntire-Stennis Cooperative Forestry Research
program:
--``Significantly enhance[s] sustainability and productivity of
nonfederal forests;
--``Increase[s] the financial contributions of nonfederal forests to
benefit landowners, the rural community, state and national
economies, and environmental values; and
--``[Helps] conserve and sustain the nonfederal forests and other
natural resources for future generations.'' \4\
---------------------------------------------------------------------------
\4\ Brown (2001), p. 2.
---------------------------------------------------------------------------
The McIntire-Stennis program has a funding authorization of $105.0
million per year.\5\ However, the program has never been funded at its
authorized level; the enacted fiscal year 2004 budget only allocated
$21,755,000 for the program (approximately one-fifth of its authorized
level),\6\ and below the fiscal year 2001 budget of $21,932,000. This
reduced funding is even more disturbing when viewed through the
knowledge that McIntire-Stennis funds are matched by three dollars from
states and universities for every Federally supplied dollar provided by
Congress.\7\
---------------------------------------------------------------------------
\5\ NCSANF, p. 16.
\6\ Brown (2001), p. 1.
\7\ Ibid., p. 2; NCPF, p. 6.
---------------------------------------------------------------------------
FLA recommends that Congress fully fund the McIntire-Stennis
Cooperative Forestry Research program at its authorized level of $105.0
million per year. We believe that this funding is vital to the eventual
sustainability of America's forests. As stated in a National Coalition
for Sustaining America's Nonfederal Forests report, ``[These] funds
would be used to create about 500 new campus-based faculty positions
addressing forest resources needs.'' \8\ The needs addressed in the
report are just as critical 4 years later. FLA is cognizant of the
enormity of such a request; therefore, we would request a ten percent
increase over fiscal year 2004 levels, to a fiscal year 2005
appropriations level of $23,930,500.
---------------------------------------------------------------------------
\8\ NCSANF, p. 16.
---------------------------------------------------------------------------
Extension Programs: Renewable Resources Extension Act
The Renewable Resources Extension Act (RREA) is the nation's
leading forestry extension program, tackling critical forestry and
related natural resources extension and stewardship needs in states,
while also addressing critical issues of forest management for
productivity and environmental quality on non-Federal private
forestlands.\9\ The program, administered by CREES,\10\ is the
foundation of university outreach and extension efforts.\11\ RREA
programs help to ``(1) solve immediate problems; (2) transfer research
technologies and new knowledge; and (3) increase [forest landowner]
awareness of the benefits of active [forest] management.'' \12\
---------------------------------------------------------------------------
\9\ Ibid., p. 4.
\10\ Brown (2001), p. 3.
\11\ ``[RREA] funds extension efforts that are a model of
partnership between the U.S.D.A. and State Universities and Land Grant
Colleges.'' NCPF, p. 4.
\12\ Brown (2001), p. 3.
---------------------------------------------------------------------------
RREA has received consistent support from forestry organizations,
including the National Council on Private Forests (NCPF) and the
National Association of Professional Forestry Schools and Colleges
(NAPFSC). However, the program is consistently funded below its
congressional authorized level of $30.0 million per year; the enacted
fiscal year 2004 budget only allocated $4,040,000 for the program. It
is apparent that funding levels must be increased to fulfill the
extension and outreach objectives of RREA. Once again, FLA is cognizant
of the enormity of such a request; therefore, we would request a ten
percent increase over fiscal year 2004 levels, to a fiscal year 2005
appropriations level of $4,444,000.
The Forest Landowners Association thanks the Appropriations
Subcommittee for Agriculture for the opportunity to submit written
testimony regarding fiscal year 2005 appropriations for the Cooperative
State Research, Education, and Extension Service (Department of
Agriculture). If the subcommittee has any questions or comments
regarding this written testimony, it should contact Dr. Vernon R.
Hayes, Jr., FLA's government affairs director, at his office (8204
Foxhall Road, Clinton, Maryland, 20735; telephone 301-877-6898; fax
301-877-6899).
______
Prepared Statement of Friends of Agricultural Research--Beltsville,
Inc.
Mr. Chairman, and Members of the Subcommittee, thank you for this
opportunity to present our statement supporting funding for the
Department of Agriculture's Agricultural Research Service (ARS), and
especially for the Agency's flagship research facility, the Henry A.
Wallace Beltsville Agricultural Research Center (BARC), in Maryland.
Our organization-Friends of Agricultural Research--Beltsville--is
dedicated to supporting and promoting the Center's agricultural
research, outreach, and educational mission.
Our testimony addresses four central themes.
First, we begin with our highest recommendation for an item within
the President's budget--Identification, Prevention, and Control of
Invasive Species.
Second, we turn to the urgent need to continue support for specific
research areas mandated by the Congress in fiscal years 2001, 2002,
2003, and 2004. These projects address critical research needs that
have enormous impact. They have been strongly endorsed and supported by
this Subcommittee and many others. We list them below with brief
descriptions and our recommendations for continued funding.
Third, we briefly discuss the BARC and the Maryland Technology
Development Corporation (TEDCO) partnership for transferring technology
from the laboratory to the marketplace. We fully support the goals and
accomplishments of this special relationship.
Last, we will address our recommendation for construction funds to
complete Phase III of the Beltsville Human Nutrition Research Center
invasive species
The President's budget proposes a $2 million increase for invasive
species research at BARC. In our view, the urgency for supporting
invasive species research could hardly be overstated. Invasive
species--insects, fungi, nematodes, and animal parasites--have never
posed a greater threat to American agricultural security than they do
today.
What's more, the threat is growing, accelerated by rising
international travel and immigration, expanding globalization and
trade, and the ominous threat of international bioterrorism.
Ironically, our nation faces this growing challenge when Federal
support for invasive species research has reached dangerously low
levels after decades of decline. Resources are barely adequate to keep
up current programs, much less adequate to cover skyrocketing demands
for new research and services. To make matters worse, universities and
others have cut back sharply also. The net effect is to leave America
weak and vulnerable in an area that urgently needs strengthening.
In November 2002, BARC convened a distinguished panel of scientists
and stakeholders, headed by Dr. Peter H. Raven, Director of the
Missouri Botanical Garden, to address these issues. They focused
basically on the threat of invasive species to agricultural
biosecurity, pest management and control, and regulation/quarantine.
The panel noted that BARC houses personnel, collections, and
information systems that are unduplicated anywhere in the world. BARC's
internationally recognized experts and collections underwrite the
scientific basis for the action programs of the Animal and Plant Health
Inspection Service, the Forest Service, and state departments of
agriculture. BARC experts spend substantial parts of their time
identifying alien species that action agencies have intercepted at our
ports and borders.
In the concluding remarks of its report, the panel foresees BARC as
a national and global leader for protecting the security and
productivity of American agriculture against the threat of invasive
species. The panel sees BARC as a future center of unparalleled
excellence providing the cohesive and responsive knowledge base for
protecting United States and global agriculture.
The funding increase proposed in the President's budget is a
necessary step in the right direction.
congressionally mandated programs at barc
For fiscal years 2001 though 2004, Congress designated funding for
the 14 BARC projects that we briefly describe below. Total funding for
these projects was $7,772,585. We understand that the President's
budget for fiscal year 2005 proposes to eliminate all 14 projects and
replace them with new projects that would receive $7,575,000 of total
funding. Though the net difference of total proposed funding is
relatively small, the impact on vital research would be dramatic.
In our view, the 14 on-going projects should be funded to
completion before new projects are added to the BARC portfolio. We
would also point out that there is no simple way to re-assign
scientists from the on-going projects to the proposed new projects,
which are considerably different in emphasis and required scientific
skills. We strongly recommend continued funding for the projects listed
below.
Animal Improvement Programs Laboratory.--For many years America's
dairy cows have steadily increased milk production at the rate of about
45 gallons per year. Approximately two-thirds of those increases can be
traced to genetic progress. Much of the credit for that success stems
from the cooperative national and international genetic evaluation
programs of BARC's Animal Improvement Programs Laboratory. The future
of dairy industry will be greatly influenced by the research of the
Animal Improvement Programs Laboratory. In recent years, the Laboratory
staff has decreased because inflation and salary increases have
consumed operating funds. We recommend continued funding support for
the Laboratory.
Barley Health Foods Research.--Barley contains carbohydrates called
beta-glucans that help control blood sugar and cholesterol. We
recommend continued support for research to determine if barley-
containing foods may affect the risks of such chronic conditions as
cardiovascular disease, obesity, and diabetes. This research is needed
to assess the bioavailability and efficacy of food components found in
barley and to identify foods, health practices, and attitudes
associated with successful maintenance of weight loss. We recommend
continuation of this funding.
Biomineral Soil Amendments for Nematode Control.--Losses to soil
nematodes cost farmers billions every year. The soybean cyst nematode
alone can cut soybean yields by 30 percent, often more. Citrus and
vegetable crops also are vulnerable to intensive nematode damage.
Growers are squeezed by expanding nematode infestations, nematicide
resistance, and de-registration of traditional nematicides because of
environmental concerns. BARC in cooperation with industry and others is
pursuing new, more effective approaches to nematode control. Promising
research lines include using such re-cyclable soil amendments as animal
wastes, composts, and mineral by-products. We recommend continuing the
increased funding for these promising approaches.
Foundry Sand By-Products Utilization.--Municipalities and
industries generate vast quantities of by-products. By-products, such
as foundry sand from the metal castings industry, have potential uses
in agricultural and horticultural production processes. The Animal
Manure and By-Products Laboratory will use the funding to identify
beneficial new uses and assess risks to human health, safety, or the
environment from using foundry sand in agriculture. We recommend
continuation of this funding.
Poultry Diseases.--The mission of the Parasite Biology,
Epidemiology, and Systematics Laboratory is to reduce the economic
costs of parasites in livestock and poultry. Coccidiosis causes the
greatest economic loss to the chicken meat industry from disease. But
traditional chemical controls are becoming ineffective. New non-
chemical control methods are needed. Funding will be used to conduct
functional genomics and proteomics analysis of coccidia to identify
potential proteins that can be used in diagnostic tests and as targets
for potential vaccine development. We recommend continuation of this
funding.
Biomedical Plant Materials.--There is a growing need for
functionally active, protective molecules for human and animal
pathogens. We need them at lower cost and without risk to humans,
animals, or the environment. Such agents include recombinant
antibodies, vaccines, and enzymes. Also, we need non-contaminated,
lower-cost, more reliable diagnostic reagents.
In recent years, scientists have produced biomedical reagents from
plants in the laboratory. The potential benefits are huge. For one
example, replacing costly poultry vaccine injections with edible plant-
produced vaccines would substantially lower poultry production costs.
Beltsville is uniquely equipped to develop necessary systems and to
test their efficacy in cooperation with other ARS facilities working on
livestock and poultry diseases. This is a cooperative project with the
Biotechnology Foundation, Inc., in Philadelphia. We recommend
continuation of this funding.
National Germplasm Resources System.--This laboratory supports the
national database that provides data storage and retrieval systems for
collecting and disseminating germplasm information. It provides
accurate taxonomy, transport, geographic evaluation, inventory, and
cooperator information for plant and animal germplasm holdings
nationwide. This is an ARS mission-critical activity. We recommend
continuation of funding.
Bovine Genetics.--Somatic cell nuclear transfer (cloning)
technology has tremendous biomedical and agricultural potential. Yet
the frequency of successful births from cloning has been relatively
low. Many pregnancies fail before completing gestation. Funding will
support collaborative research by the Gene Evaluation and Mapping
Laboratory, the University of Illinois, and the University of
Connecticut aimed at improving cloning efficiency. We recommend
continuation of this funding.
IR-4: Registration of Minor Use Pesticides.--``Minor crops'' have
great economic value, but are not among the top ten crops like corn and
soybeans that provide huge markets for pesticide manufacturers.
Manufacturers often do not see a large enough market to justify the
expense of doing the research needed to register a pesticide for a
``minor crop.'' Without the IR-4 program, growers would have fewer
options for pest control. The Beltsville Environmental Quality
Laboratory operates a minor crop pesticide residue laboratory. This lab
vigorously enforces EPA-prescribed protocols for all experimental
procedures, and prepares comprehensive final reports. New funds enhance
the overall mission of the Agency's IR-4 program. We recommend that
this funding be continued.
Nutrition monitoring system.--BARC's Food Survey Research Group
monitors food and nutrient intake for the nation in collaboration with
HHS and the NHANES study (National Health and Nutrition Examination
Survey). We recommend continuation of this funding.
The approximate $500,000 of new money will enable the collection of
a second day of dietary intake data from human subjects. This
information is critical for increasing the statistical reliability of
the food intake survey data. These data are important for supporting
such public policy programs as school lunch, food stamps, WIC, senior
meals programs, etc. They are also important when the Institute of
Medicine's Food and Nutrition Board (part of NAS) sets recommended
intakes for essential nutrients. We recommend continuation of this
funding.
Coffee and Cocoa.--These funds support research to control a range
of fungal diseases and pests that attack coffee and cacao (chocolate).
More profitable production systems for these crops will make them more
attractive alternatives to some producers of coca (cocaine). We
recommend continuation of this funding.
Johne's Disease.--This disease is also called bovine
paratuberculosis. It is a contagious disease that causes chronic
wasting or debilitating enteritis and eventual death in cattle, sheep,
goats, deer, and other wild and domestic ruminants. Infected animals
intermittently shed the microorganism into milk and feces. The research
at BARC will provide a better understanding of the pathogenicity of the
organism so that better diagnostic tests and vaccines can be developed.
We recommend continuation of this funding.
Food Safety.--This is funding for studying transmission of
Listeria, a human pathogen and food safety contaminant. Certain
cheeses, including some popular French imports, are made from fresh
unpasteurized milk, and can carry Listeria. Listeria can make anybody
sick, but it's a particular risk for pregnant women because it can
cause miscarriage or other problems. We recommend continuation of this
funding.
Weed Management.--These funds support a cooperative project with
Rodale Institute on weed management in organic farming. Organic farming
is a very rapidly growing sector of agriculture, and organic foods
often command a price premium. Organic farming makes it possible for
small farmers to make a living with high-value products from a small
piece of land. Weeds are one of the biggest problems encountered by
organic farmers, and a serious threat to their economic viability.
These research funds will improve non-chemical weed control.
barc-tedco partnership
The Maryland Technology Development Corporation (TEDCO) and BARC
have created a partnership to speed the transfer and commercialization
of technologies from BARC laboratories to the private sector. Goals
include fostering new industries, creating or re-vitalizing businesses,
stimulating economic growth, and creating new, stable jobs.
We understand that TEDCO has approached the Congress regarding a $1
million appropriation to support technology transfer. The funds are
needed to continue on-going BARC-TEDCO technology transfer activities.
Approximately one half of the appropriation would be made available to
BARC laboratories to complete research needed to commercialize new,
valued-added products made from poultry feathers.
Potential economic and environmental benefits from the successful
commercialization of products made from poultry feathers are
substantial, not only for Maryland but well beyond. Environmentally,
finding an economic outlet for waste poultry feathers would relieve the
tremendous burden of disposing an unusable material. Economically,
estimates predict that as many as 80 new poultry-feather plants, each
generating 80-100 new jobs, could be created across the nation. The
first such plant may appear on Maryland's Eastern Shore, where there is
substantial commercial interest.
FAR-B heartily endorses support for this innovative approach to
technology transfer and commercialization.
buildings and facilities
Phases I and II of the three-planned phases of construction and
modernization for the Beltsville Human Nutrition Research Center have
been completed. Phases I and II provided for constructing two new
buildings for human nutrition research. The new buildings are now fully
functional and are contributing to the research mission of the
Beltsville Human Nutrition Research Center. They were officially opened
last August in a dedication ceremony at BARC. With the opening of these
buildings, BARC now has the largest capacity for free-living volunteer
studies in the United States.
Phase III is for renovating the original human nutrition building,
which after almost seven decades of heavy use is in poor condition. Its
interior badly needs modernization. Externally, the building remains
generally sound. BARC is committed to preserving the building's
historical exterior and appearance. Once renovated, the building will
house the Food Composition Lab, the Nutrient Data Lab, the Food Surveys
Research Group, and the Community Nutrition Research Group--all
research. BARC then will have all of the BHRNC staff in one complex of
buildings, all modern and meeting current needs and building standards.
In fiscal year 2001, Congress provided $1.9 million to design the
building's interior renovation. Though the design work is about 35
percent complete, the process is on hold pending approval of $26
million needed for construction. BARC may not begin construction before
all of the construction funding has been approved. Should Congress
approve partial construction funding for fiscal year 2005, BARC will
hold the partial funding until full funding may be approved in a later
appropriation. We commend BARC's flexibility regarding the renovation
project, and we encourage Congress to approve funding for Phase III.
Mr. Chairman, that concludes our statement. We again thank you for
the opportunity to present our testimony and for your generous support.
______
Prepared Statement of the Great Lakes Indian Fish and Wildlife
Commission
Agency Involved.--Natural Resource Conservation Service
Summary of fiscal year 2005 Testimony.--The Commission requests
Congress support funding for conservation programs as authorized under
the Farm Security and Rural Investment Act of 2002 including:
--$1 billion in for the Environmental Quality Incentives Program
(EQIP), and
--$60 million for the Wildlife Habitat Incentives Program (WHIP).
The Commission also requests Congress restore $275,000 in funding
for the Wisconsin Tribal Conservation Advisory Council (WTCAC)
eliminated by the Administration in fiscal year 2005.
Disclosure of USDA Grants Contracted.--The Commission is an
intertribal organization which, under the direction of its member
tribes, implements federal court orders governing tribal harvests of
off-reservation natural resources and the formation of conservation
partnerships to protect and enhance natural resources within the 1836,
1837, and 1842 ceded territories. Under the USDA's Environmental
Quality Incentives Program, the Commission contracted $10,000 in fiscal
year 1998 and an additional $40,000 in fiscal year 1999. In addition,
the Commission also contracted EQIP Education Grants funded by USDA and
the University of Wisconsin Extension Service for $29,940 in fiscal
year 1998 and $20,000 in fiscal year 2001. Under the WHIP program,
GLIFWC contracted $2,400 in fiscal year 2003.
Mr. Chairman, Members of the Committee, my name is James H.
Schlender. I am the Executive Administrator of the Great Lakes Indian
Fish and Wildlife Commission (Commission). Our eleven member tribal
governments thank you for considering our testimony regarding programs
funded by USDA's Natural Resource Conservation Service. The
Commission's testimony stresses three major objectives:
--provide funding for the Environmental Quality Incentives Program
(EQIP) at $1 billion nationally and support intertribal and
tribal efforts to participate in conservation partnerships;
--provide funding for the Wildlife Habitat Incentives Program at $60
million nationally to support efforts to protect and enhance
wildlife and fish habitats; and
--restore funding for the Wisconsin Tribal Conservation Advisory
Council (WTCAC) at $275,000 annually.
Background.--The Commission is comprised of eleven sovereign tribal
governments located throughout Minnesota, Wisconsin, and Michigan. The
Commission's purpose is to protect and enhance treaty-guaranteed rights
to hunt, fish, and gather on inland territories ceded under the
Chippewa treaties of 1836, 1837, and 1842; to protect and enhance
treaty guaranteed fishing on the Great Lakes; and to provide
cooperative management and protection of these resources. The
Commission participates in a wide range of cooperative management
activities with local, state, federal, and foreign governments. Some of
these activities arise from court orders, while others are developed in
general government-to-government dealings between tribes and other
governments.
EQIP Supports Tribal Partnerships to Control Purple Loosestrife in
the Bad River and Chequamegon Bay watersheds.--Purple loosestrife
(Lythrum salicaria L.) is an exotic perennial plant first recorded in
Wisconsin in 1940. As purple loosestrife spread throughout wetland
ecosystems, it reduced carrying capacities for muskrats, water birds,
and mink and degraded the quality of migratory waterfowl production
sites.
In 1998, the Commission began a 5-year project under USDA's
Environmental Quality Incentives Program (EQIP) to control purple
loosestrife in the Bad River and Chequamegon Bay watersheds. Under this
project, the Commission utilized funding from the BIA's Noxious Weed
Program to control loosestrife on public lands located in the Chippewa
ceded territories and utilize funding from EQIP to control loosestrife
on private lands with land owner consent--orchards, dairy farms, etc.
This program integration promotes conservation partnerships to protect
critical habitat on a watershed basis including:
--Kakagon and Bad River Sloughs--the largest, healthiest, fully
functioning estuarine system in the upper Great Lakes Basin and
is listed as a National Natural Areas Conservancy Landmark
(National Registry 1983)--Bad River Tribe;
--Fish Creek Sloughs Refuge--an important area for waterfowl nesting/
staging, and northern pike spawning; and Sioux River Refuge--
important wetland, waterfowl staging area, and critical steel
head trout spawning habitat--WI DNR;
--Whittlesey Creek--this newly established refuge possesses critical
habitat for salmon spawning and reintroduction of rare native
brook trout strains--USFWS, and
--Apostle Islands National Park--National Park Service.
In addition to its EQIP Purple Loosestrife Control program, the
Commission has also completed two EQIP education grants. Under these
grants, the Commission: (1) prepared and published educational
materials to prevent the spread of purple loosestrife, leafy spurge,
and other invasive plants; (2) established an Internet GIS web site
(i.e. see www.glifwc-maps.org) to assist landowners, state and federal
agencies, non-profit conservation organizations, and tribes in
developing and implementing invasive plant control strategies within
watersheds; and (3) promoted cooperative control projects through
technical assistance and educational materials/presentations.
The Establishment of the Wisconsin Tribal Conservation Advisory
Council and EQIP Funding Set-asides have Increased Program
Participation by Indian Nations in Wisconsin.--The Wisconsin Tribal
Conservation Advisory Council (WTCAC) was established for the purposes
of: (1) identifying tribal conservation issues, (2) advising the USDA
Natural Resources Conservation Service on more effective ways to
deliver USDA programs, and (3) assisting the Indian Nations of
Wisconsin in accessing USDA resources. This Tribal Conservation
Advisory Council was organized in March 2001 and is the first such
council formed in the country as authorized under the 1995 Farm Bill.
One of the responsibilities of the WTCAC, at the request of the
NRCS State Conservationist, is to review and recommend funding for
conservation proposals from the 11 federally recognized tribes in
Wisconsin. In fiscal year 2003, the WTCAC was allocated $440,000 for
this effort and recommended numerous tribal EQIP contracts including:
Supporting Tribal Aquaculture Development.--The St. Croix Tribe
contracted $43,162 in EQIP funding to assist the tribe in installing an
aquaculture effluent treatment system at its St. Croix Waters
Aquaculture facility. St. Croix also contracted $19,918 in EQIP funding
to improve water volume and quality for the rearing of food fish and
walleye and perch fingerlings for restocking efforts on local lakes.
Decommissioning Abandoned Wells.--The Bad River Tribe contracted
$5,550 and Lac du Flambeau contracted $10,026 in EQIP funding to
decommission abandoned wells on their Reservations that are a potential
source of groundwater contamination.
Controlling Shoreline Erosion.--The Lac du Flambeau Tribe
contracted $40,000 in EQIP funding to provide stream bank and shoreline
stabilization, critical area planting, tree and shrub establishment,
grade stabilization structure, and heavy use area protection on
Flambeau and Pokegama Lakes. The erosion is causing sedimentation,
adverse effects on water quality, as well as aquatic and riparian
habitat damage.
The St. Croix Chippewa Tribe contracted $18,750 in EQIP funding to
install a grade stabilization structure to control soil erosion
upstream of the confluence of the Yellow River and the St. Croix River.
This erosion is impairing wild rice beds downstream on the St. Croix
River.
Stream Corridor, Wetland, and Wild Rice Restoration Project.--The
Sokaogon Chippewa Community contracted $47,780 in EQIP funding to
restore the natural flow that was altered in Swamp Creek, remove
nuisance plant species, reseed wild rice, remove debris from stream
banks and beds, and control erosion on a tribal access road.
Forest Restoration Project.--The Bad River Tribe contracted $40,000
in EQIP funding to plant white pine, red pine, balsam fir, and white
spruce on 1,120 acres of tribal lands that, left untreated, would
regenerate to aspen and increase erosion problems. This is the first
step in promoting and restoring forest biodiversity on lands cut-over
in the 1920's.
Wildlife Habitat Incentives Program (WHIP).--NRCS's WHIP program
provides a flexible funding resource to Wisconsin that enables local
communities to form conservation partnerships between private
landowners, local conservation districts, counties, and tribal
governments. Again the WTCAC combined with a WHIP program set-aside of
$33,000 in Wisconsin resulted in numerous tribal WHIP contracts in
fiscal year 2003. Through this process NRCS was able to establish
Tribal WHIP contracts for such diverse projects as wild rice seeding,
walleye spawning habitat restoration, stream bank protection, and
native grass seeding.
Unfortunately, the success of Wisconsin Tribes in contracting
fiscal year 2003 EQIP and WHIP funding from NRCS is not found among
GLIFWC's member tribes in Michigan as documented by the table below.
------------------------------------------------------------------------
EQIP Funding WHIP Funding
GLIFWC/Member Tribes Contracted fiscal Contracted fiscal
year 2003 year 2003
------------------------------------------------------------------------
Michigan:
Lac Vieux Desert............ None.............. None
Keweenaw Bay................ None.............. None
Bay Mills................... None.............. None
---------------------------------------
Michigan Total............ $0--contracted by $0--contracted by
3 MI GLIFWC 3 MI GLIFWC
tribes tribes
$0--contracted all $0--contracted all
MI tribes MI tribes
=======================================
Wisconsin:
Bad River................... $40,000 forest None
restoration/
erosion control
$5,550
decommission
abandoned wells
Red Cliff................... Did not apply for $1,350 stream bank
fiscal year 2003 protection
projects project
St. Croix................... $43,162 $10,000 walleye
aquaculture waste spawning habitat
storage facility restoration
$2,000 aquaculture
hatchery well
project
$18,750 erosion
control project
Sokaogon.................... $47,780 stream $3,000 Rice Lake
corridor & wild rice seeding
wetland
restoration
project
Lac Courte Oreilles......... Did not apply for $3,000 wild rice
fiscal year 2003 seeding
projects
Lac du Flambeau............. $40,000 to address $3,000 Powell
shoreline erosion Marsh native
concerns grass seeding
$10,026
decommission
abandoned wells
GLIFWC...................... Did not apply for $1,200 Jackson Box
fiscal year 2003 Flowage wild rice
projects seeding;
$1,200 Manitowish
River wild rice
seeding
---------------------------------------
Wisconsin Total........... $207,268--contract $22,750--contracte
ed by GLIFWC d by GLIFWC and 5
member tribes in member tribes
Wisconsin $33,000--allocated
$440,000--allocate for 11 tribes
d to 11 Tribes statewide
statewide
------------------------------------------------------------------------
GLIFWC takes the following lessons from these circumstances:
--Funding for tribal projects in Wisconsin is directly attributable
to active outreach toward and integration of tribes into the
budgeting process of NRCS state offices.
--A tribal advisory council consisting of the tribal representatives
and funded by NRCS can effectively link tribes with the NRCS
and result in more funding directed toward tribal projects.
--Set asides for tribal projects from NRCS state office funding
allocations is critical to ensure that tribes are able to
access their fair share of those allocations.
GLIFWC requests Congress restore funding for WTCAC at $275,000 in
fiscal year 2005 thereby ensuring tribal communities in Wisconsin have
the technical resources needed to address their conservation needs.
______
Prepared Statement of The Humane Society of the United States
As the largest animal protection organization in the country, we
appreciate the opportunity to provide testimony to the Agriculture,
Rural Development and Related Agencies Subcommittee on fiscal year 2005
funding items of great importance to The Humane Society of the United
States and its more than 8 million supporters nationwide.
We are grateful for the Committee's outstanding support during the
past few years for improved enforcement by the U.S. Department of
Agriculture of key animal welfare laws, and we urge you to sustain this
effort in fiscal year 2005. Your leadership is making a great
difference in helping to protect the welfare of millions of animals
across the country, including those at commercial breeding facilities,
laboratories, zoos, circuses, airlines, and slaughterhouses. As you
know, better enforcement will also benefit people by helping to
prevent: (1) orchestrated dogfights and cockfights that often involve
illegal gambling, drug traffic, and human violence, and can contribute
to the spread of costly illnesses such as Exotic Newcastle Disease and
bird flu; (2) injuries to slaughterhouse workers from animals
struggling in pain; (3) the sale of unhealthy pets by commercial
breeders, commonly referred to as ``puppy mills''; (4) laboratory
conditions that may impair the scientific integrity of animal based
research; (5) risks of disease transmission from, and dangerous
encounters with, wild animals in or during public exhibition; (6)
injuries and deaths of pets on commercial airline flights due to
mishandling and exposure to adverse environmental conditions; and (7)
the spread of ``mad cow'' disease and bacterial infections that people
can get from eating contaminated meat.
For fiscal year 2005, we want to ensure that the important work
made possible by the fiscal year 2004 budget is continued and that
resources will be used in the most effective ways possible to carry out
these key laws. Specific areas of concern are as follows:
Office of Inspector General/$1.2 million for Animal Fighting
Enforcement
We very much appreciate the inclusion of $800,000 in fiscal year
2004 for USDA's Office of Inspector General to focus on animal fighting
cases. Congress enacted provisions in 2002 (as part of the Farm Bill)
that were overwhelmingly supported in both chambers to close loopholes
in the Animal Welfare Act (AWA) regarding cockfighting and dogfighting.
Since 1976, when Congress first prohibited most interstate and foreign
commerce of animals for fighting, USDA has pursued only a handful of
dogfighting and cockfighting cases, despite rampant activity across the
country. USDA continues to receive frequent tips from informants and
requests to assist with state and local prosecutions, and is beginning
to take seriously its responsibility to enforce the portion of the AWA
dealing with animal fighting ventures. Dogfighting and cockfighting are
barbaric practices in which animals are drugged to heighten their
aggression and forced to keep fighting even after they've suffered
grievous injuries. Animal fighting is almost always associated with
illegal gambling, and also often involves illegal drug trafficking and
violence toward people. Dogs bred and trained to fight endanger public
safety, and some dogfighters steal pets to use as bait for training
their dogs. Cockfighting has been linked with the outbreak of Exotic
Newcastle Disease in 2002-2003 that cost taxpayers more than $200
million for containment and compensation, and with the death of at
least two children in Asia this year who were exposed through
cockfighting activity to avian influenza.
Given the potential for further costly disease transmission, as
well as the animal cruelty involved, we believe it would be a sound
investment for the federal government to increase its efforts to combat
illegal cockfighting and dogfighting activity, working closely with
state and local law enforcement personnel to complement their efforts.
We therefore respectfully request that $1.2 million be designated for
the OIG to focus on animal fighting cases in fiscal year 2005.
Food Safety and Inspection Service/$5 million for Humane Methods of
Slaughter Act (HMSA) Inspectors
We are grateful that Congress provided $5 million in fiscal year
2003, and bill language to sustain the initiative in fiscal year 2004,
for USDA to hire at least 50 inspectors whose sole responsibility is to
ensure that livestock are treated humanely and rendered unconscious
before they are killed. This initiative was undertaken following
reports of lax enforcement of the HMSA and animals being skinned,
dismembered, and scalded while still alive and conscious. We are
pleased that the President's budget recommends $5 million in fiscal
year 2005 for enforcement of this law. We are quite concerned, however,
that these funds are not being used by USDA as Congress intended.
Rather than hiring new inspectors, the department has apparently opted
to apply these resources broadly across its existing personnel,
indicating in the explanatory notes accompanying the President's fiscal
year 2005 budget that the $5 million will cover ``an estimated 63 staff
years annually, distributed over hundreds of employees in hundreds of
inspected establishments.'' When Congress provided this funding, the
goal was to establish a separate cadre of humane slaughter inspectors
because we recognized that it was not working to have the regular food
safety inspectors--those responsible for the important job of checking
body parts and carcasses in order to protect consumer health--also
responsible for compliance with humane slaughter requirements. We were
concerned that food safety inspectors were often stationed far down the
production line, well past where the animals were killed. In some
cases, slaughter plants had even built barriers that made it impossible
for food safety inspectors to see the animals while they were still
alive.
While we welcome any USDA efforts to ensure that every inspector
maintains a watchful eye for humane slaughter violations, including
this task as part of each existing inspector's routine should not
require additional funds. We therefore respectfully request that $5
million be designated in fiscal year 2005 bill language for USDA to
hire an additional 50 inspectors who will work solely on enforcement of
the Humane Methods of Slaughter Act through full-time ante-mortem
inspection, particularly unloading, handling, stunning, and killing of
animals at slaughter plants. We also request language re-stating that
the mission of 17 District Veterinary Medical Specialists hired as a
result of $1 million provided in the fiscal year 2001 Supplemental
should be limited to HMSA enforcement.
APHIS/Animal Welfare Act (AWA) Enforcement
We commend the Committee for responding over the past few years to
the urgent need for increased funding for the Animal Care division to
improve its inspections of approximately 10,000 sites, including
laboratories, commercial breeding facilities, zoos, circuses, and
airlines, to ensure compliance with AWA standards. Thanks to the
Committee's strong support, Animal Care now has 106 inspectors,
compared to 66 at the end of the 1990s. While there is certainly room
for continued improvement, the Committee's actions have made a major
difference. We are pleased that the President's budget contains a
sustained level of support for this program in fiscal year 2005,
including allowance for pay costs. We urge you to provide $16.818
million, as recommended by the President, for Animal Welfare in fiscal
year 2005.
APHIS/Horse Protection Act Enforcement
Congress enacted the Horse Protection Act in 1970 to end the
obvious cruelty of physically soring the feet and legs of show horses.
In an effort to exaggerate the high``)stepping gate of Tennessee
Walking Horses, unscrupulous trainers use a variety of methods to
inflict pain on sensitive areas of the feet and legs for the effect of
the leg-jerk reaction that is popular among many in the show-horse
industry. This cruel practice continues unabated by the well-
intentioned but seriously understaffed APHIS inspection program. We
appreciate the Committee's help providing modest increases to bring
this program close to its authorized annual funding ceiling of
$500,000. We hope you will provide the $497,000 requested by the
President for fiscal year 2005. We also urge the Committee to oppose
any effort to restrict USDA from enforcing this law to the maximum
extent possible.
Downed Animals and BSE
We are pleased that the Bush Administration proposed an interim
final rule to ban the use of downed cattle for human food, in the wake
of the discovery of a cow in Washington State that was infected with
Bovine Spongiform Encephalopathy (BSE or ``mad cow'' disease). We
greatly appreciated the Committee's help last year agreeing to
incorporate Senator Akaka's downer ban during floor debate on the
fiscal year 2004 bill. We hope the Committee will codify the
Administration's ban--and extend it to other livestock besides cattle--
with language barring the Food Safety and Inspection Service from
spending funds to certify meat from downed livestock for human
consumption. While the science to date has only clearly indicated BSE
transmission from infected cows to people, downer pigs and other downer
livestock are at a significantly higher risk of transmitting other
serious and sometimes fatal illnesses, such as E. coli and Salmonella.
It is very difficult to determine the reason an animal is non-
ambulatory, whether illness, injury, or a combination of the two.
Hence, it would not adequately protect public health if inspectors were
required to distinguish downers who are injured vs. sick. As Secretary
Veneman has testified several times before various congressional
committees, USDA need not rely on slaughter plant testing for disease
surveillance purposes. They can conduct a viable surveillance program
at rendering plants and farms to track the potential progression of BSE
in this country.
Furthermore, a ban on use of all downers for human food provides an
incentive for producers to treat animals humanely and prevent livestock
from going down. Even before the administrative ban, USDA estimated
that less than 1 percent of all cows processed annually were non-
ambulatory. The downer ban encourages producers and transporters to
engage in responsible husbandry and handling practices, so that this
percentage may be reduced to levels approaching zero. As Temple
Grandin--advisor to the American Meat Institute and others in the meat
industry--long ago explained in Meat & Poultry Magazine, ``Ninety
percent of all downers are preventable.''
In addition to the downer issue, we urge the Committee to provide
adequate funding to ensure meaningful enforcement by the Food and Drug
Administration of its ``feed ban,'' designed to prevent BSE-
contaminated animal products from being fed to other animals. We are
concerned that inspectors visit facilities infrequently and rely on
self-reporting by those facilities and paperwork checking rather than
first-hand evaluation of feed content and dedicated production lines.
We are also concerned that FDA relies a great deal on state agencies to
conduct this oversight, when most states face severe budget constraints
that may compromise their ability to handle this job. Preventing the
spread of BSE is vital to the nation as a whole, for public health, the
agricultural industry, and animal welfare. Vigorous enforcement of the
feed ban is an essential component of this effort. We hope adequate
federal funds will be provided in fiscal year 2005 to meet this
challenge.
Again, we appreciate the opportunity to share our views and
priorities for the Agriculture, Rural Development and Related Agencies
Appropriation Act of fiscal year 2005. We appreciate the Committee's
past support, and hope you will be able to accommodate these modest
requests to address some very pressing problems affecting millions of
animals in the United States. Thank you for your consideration.
______
Prepared Statement of the International Association of Fish and
Wildlife Agencies
USDA-COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal Year--
-----------------------------------------------
Program/Division 2005
2004 Enacted President's 2005 IAFWA
Budget Recommended
----------------------------------------------------------------------------------------------------------------
Research and Education:
Formula Programs:
McIntire-Stennis Cooperative Forestry................... 21,755 21,844 \1\ 25,000
Special Research Grants:
Global Change UV-B Monitoring............................... 2,000 2,500 \2\ 2,500
National Research Initiative Competitive Grants............. 164,027 180,000 \3\ 240,000
Extension Activities:
Formula Programs:
Smith-Lever Formula 3(b) and (c)........................ 277,742 275,940 \4\ 277,742
Other Extension Programs:
Renewable Resources Extension Act........................... 4,040 4,093 \5\ 30,000
Section 406 Legislative Authority:
Water Quality............................................... 11,530 12,971 \6\ 20,000
----------------------------------------------------------------------------------------------------------------
\1\ The Association strongly encourages that McIntire-Stennis Forestry Research funds be increased from the
$21.755 million appropriated in the fiscal year 2004 budget to a level of $25 million. These funds are
essential to the future of resource management on non-industrial private forestlands. The rapid reduction in
timber harvests from public lands brings expanded opportunities for small private forest owners to play an
increasingly important role in the Nation's timber supply. In some places, these added opportunities are
creating pressures and situations where timber harvest on private ownerships exceeds timber growth.
\2\ We support the $2.5 million appropriation for global change and urge that special effort to combat
greenhouse gases through carbon sequestration be conducted in such a way as to not adversely impact fish and
wildlife habitat. Carbon sequestration that also results in soil, water and wildlife conservation will
maximize public benefits and minimize the need to spend separately and additionally to achieve other
conservation needs.
\3\ There are few truly competitive programs in wildlife science and USDA NRI has a great opportunity to make a
unique contribution with this type of program. This program will fund creative and new ideas in ways that
``formula'' funding cannot. The Association supports funding at the fiscal year 2003 level of $240 million.
\4\ We are concerned that there is no budget line item specifically for education programs addressing water
quality concerns targeted at agricultural producers. We recommend a minimum of $3.5 million be allocated for
this purpose.
\5\ The Association strongly recommends that for fiscal year 2005 the Renewable Resources Extension Act be
funded at $30 million as authorized in the 2002 Farm Bill. The RREA funds, which are apportioned to State
Extension Services, effectively leverage cooperative partnerships at an average of four to one, with a focus
on development and dissemination of information needed by private landowners (in rural and urban settings).
The need for RREA educational programs is greater than ever today because of fragmentation of ownerships,
urbanization, the diversity of landowners needing assistance, and increasing societal concerns about land use
and its effect on soil, water, wildlife and other environmental factors. Even though the RREA has been proven
to be effective in leveraging cooperative state and local funding, it has never been fully funded.
\6\ The Association appreciates the proposed increase in funding to $12.97 million in the budget for Water
Quality Integrated Activities, but believes that this amount remains insufficient considering the growing
public concern over water quality, particularly on agricultural landscapes. Therefore, the Association
recommends the appropriation be increased to $20 million.
USDA-NATURAL RESOURCES CONSERVATION SERVICE
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-----------------------------------------------------
Appropriation/Activity 2005 President's 2005 IAFWA
2004 enacted Budget Recommended
----------------------------------------------------------------------------------------------------------------
Technical Assistance for CRP and WRP...................... ( \1\ ) 92,000 \2\ 92,000
Environmental Quality Incentives Program (EQIP)........... 975,000 1,000,000 \3\ 1,200,000
Ground and Surface Water Conservation..................... 51,000 60,000 60,000
Klamath Basin............................................. 10,000 8,000 8,000
Wetlands Reserve Program (WRP)............................ \4\ 280,000 \5\ 295,000 ( \6\ )
Wildlife Habitat Incentives Program (WHIP)................ 42,000 60,000 \3\ 85,000
Farm and Ranch Lands Protection Program (FRPP)............ 112,000 125,000 \3\ 125,000
Grassland Reserve Program (GRP)........................... 115,000 84,000 \7\ 84,000
Conservation Security Program (CSP)....................... 41,000 209,000 ..............
Technical Assistance Cost Adjustments..................... ................. ................. ( \8\ )
EQIP...................................................... -76,000 -15,000 \9\ -23,000
G&SW...................................................... 15,000 20,000 \9\ 0
Klamath Basin............................................. 2,000 3,000 \9\ 0
WRP....................................................... 18,000 ( \10\ ) \9\ 0
WHIP...................................................... -7,000 -1,000 \9\ 0
FRPP...................................................... -24,000 -5,000 \9\ 0
GRP....................................................... -13,000 -2,000 \9\ 0
CRP....................................................... 83,000 ( \10\ ) ..............
----------------------------------------------------------------------------------------------------------------
\1\ Funding for WRP and CRP technical assistance provided from EQIP, WHIP, FRPP and GRP--see technical
assistance cost adjustments
Specific Comments
\2\ The Association appreciates the efforts of the administration to address the problem of technical assistance
funding for CRP and WRP by establishing a technical assistance account for these two programs.
\3\ The Association supports program funding at levels authorized by the 2002 Farm Bill.
\4\ Enrollment of 189,144 acres.
\5\ Enrollment of 200,000 acres.
\6\ The Association appreciates the continued targeting of 200,000 acres annually for enrollment in WRP.
However, we recognize that if 200,000 acres are not enrolled every year (fiscal year 2004 limited to 189,000
acres), enrollment must increase in future years to reach the authorized level of 2,275,000 acres. Full WRP
enrollment is needed if the Administration intends to achieve no-net-loss of wetlands by building on the WRP
successes of the 1990's that reduced wetland losses to 32,600 acres/year as reported in the USDA National
Resource Inventory (NRI).
\7\ With the estimated expenditure of $115 million in fiscal year 2004, the proposed funding level of $84
million in fiscal year 2005 will meet the authorized cap of $254 million for the GRP. GRP should focus on
grasslands of high biodiversity that are at risk of conversion and that support grazing operations as directed
by Congress in the Farm Bill. In addition, enrollment should increasingly focus on long-term enrollment since
no more than 40 percent of authorized funding can be used for short-duration rental agreements and short-
duration agreements have been emphasized to date.
\8\ CSP should not receive expanded funding at the expense of other conservation programs.
\9\ Klamath Basin and G&SW are subsets of EQIP and we recommend that all technical assistance funding for these
two programs should come from EQIP, rather than from FRPP, WHIP and GRP.
\10\ WRP and CRP technical assistance funded from a technical assistance account on discretionary side.
General Comments
The Association recommends funding of Farm Bill conservation programs at levels authorized by the 2002 Farm
Bill.
farm service agency (fsa)
An adequately funded budget for the FSA is essential to implement
conservation related programs and provisions under FSA administration
and/or in cooperation with the Natural Resources Conservation Service
(NRCS) as a result of passage of the Farm Security and Rural Investment
Act of 2002. The Association strongly advocates that the budget include
sufficient personnel funding to service a very active program and
strongly believes that the past erosion of staffing levels has been
inconsistent with the demonstrated need of agricultural producers.
Although non-Federal temporary staffing levels have been reduced due to
completion of some Farm Bill implementation workloads, the Association
is concerned that the staffing level of (16,301 FTE) proposed by the
Administration is far too low to adequately address the need.
Conservation Reserve Program (CRP).--The continued administration
of CRP is a very significant and valuable commitment of USDA and the
FSA. The Association applauds FSA efforts to fund and extend CRP
contracts for the multiple benefits that accrue to the public as well
as the landowner. The Association provides special thanks to FSA for
planning another CRP general sign up for 2004 and for the continuous
CRP sign-up of high value environmental practices including the bottom
land hardwood tree initiative. The Association recommends that FSA
adopt additional program options such as wildlife field borders as part
of continuous CRP to benefit bobwhite quail and other early
successional species and incentives to ensure enrolled acres deliver
optimum soil, water, wildlife and other natural resource benefits
through the use of more wildlife friendly cover mixes. The required
management for CRP should also be applied to CCRP.
The commitment of FSA to provide high wildlife benefits in CRP
contracts has been obvious since the advent of the Environmental
Benefits Index (EBI) in the 15th sign-up. The Association applauds FSA
for placing special emphasis on native grasses, endangered species and
enlightened pine planting and management and urge that strong emphasis
on the establishment and management of wildlife friendly cover be
continued and where possible strengthened. Recurring management as
provided in the 2002 Farm Bill, with cost share is essential to ensure
continuation of soil, water and wildlife benefits throughout the life
of the CRP contract. The Association encourages FSA to quickly develop
necessary programmatic mechanisms as well as reimbursement for the cost
of recurring management performed when needed to manage plant
succession that continues wildlife benefits throughout the contract
period.
The new managed haying and grazing aspect of CRP is a permissive
use that could provide an added benefit to participants while still
achieving the natural resource purposes of the program. However, one
size will not fit all when it comes to the wildlife purpose of CRP and
it is important that FSA tailor managed haying and grazing to each
state to ensure that the frequency (among years) and timing of haying
and grazing is compatible with the wildlife needs in each state.
USDA-APHIS VETERINARY SERVICES
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-----------------------------------------------
Appropriation/Activity 2005 IAFWA
2004 Enacted President's Recommended
Budget Funding Levels
----------------------------------------------------------------------------------------------------------------
Aquaculture..................................................... 178 871 871
Brucellosis..................................................... 10,244 8,861 11,000
Chronic Wasting Disease......................................... 18,522 20,067 30,067
Import/export Invasive Species.................................. 11,074 15,792 15,792
----------------------------------------------------------------------------------------------------------------
Aquaculture
The Association supports the increased funding of Veterinary
Services to a level of $871,000 for surveillance and eradication of
farmed fish diseases, such as infectious salmon anemia and spring
viremia of carp, that may threaten valuable natural resources.
Brucellosis
The Association recommends Congress restore Brucellosis funding by
$2,000,000 to a level of $11,000,000 in order to continue working
collaboratively with the Greater Yellowstone Interagency Brucellosis
Committee, including the states of Idaho, Montana, and Wyoming, as well
as with other Federal agencies to eliminate brucellosis in bison and
elk in the Greater Yellowstone Area.
Chronic Wasting Disease
The Association commends APHIS-Veterinary Services' cooperation and
funding for state wildlife management agencies for CWD surveillance and
management in free-ranging deer and elk. Additionally, the Association
strongly supports APHIS efforts to eliminate CWD from captive cervids
in order to eliminate the risk of spread of the disease from these
animals to free-ranging deer and elk. The Association supports
increased CWD funding to a total of $20,067,000 in fiscal year 2005.
However, this $20 Million is inadequate to effectively address
management of CWD, and the Association urges an additional $10 million
be appropriated to CWD, with a total of $20 Million made available to
the states for surveillance and management of CWD in free-ranging deer
and elk.
Import/Export Invasive Species
The Association supports increased funding to prevent the potential
introduction and for surveillance of exotic ticks, including the
tropical bont tick, in the United States because these ticks and the
microbes they carry represent a disease threat to free-ranging
wildlife.
USDA-APHIS WILDLIFE SERVICES
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-----------------------------------------------
Appropriation/Activity 2005 IAFWA
2004 Enacted President's Recommended
Budget Funding Levels
----------------------------------------------------------------------------------------------------------------
Operations...................................................... 71,313 71,684 89,284
Methods Development............................................. 16,999 13,876 16,999
Aquaculture..................................................... 1,042 776 1,042
----------------------------------------------------------------------------------------------------------------
General Comments
The Association is concerned with the Administration's proposal to
decrease overall funding for Wildlife Services (WS) activities. The
Association was pleased that Congress provided a $200,000 increase in
fiscal year 2004 to expand the Berryman Institute for Wildlife Damage
Management at Mississippi State University, and recommends that
Congress continue this support by maintaining adequate future funding
levels.
Operations
The Administration's proposes a program reduction of $5.5 million
from fiscal year 2004 levels. This reduction is proposed to offset a
$5.0 million increase in fiscal year 2005 for a wildlife disease
surveillance system. The Association strongly recommends that Congress
restore the $5.5 million reduction in order to maintain existing
operations and cautiously provide an additional $5.0 million to
initiate the new surveillance system. The new wildlife disease
surveillance system must be accompanied by close coordination and
respect for the State's management authority over resident wildlife,
and Congress should direct that this relationship be institutionalized
in a cooperative agreement between each state fish and wildlife agency
and APHIS-WS. The Association also recommends that Congress provide an
additional $4.6 million to continue the oral rabies vaccination program
to stop the spread of rabies in coyotes, foxes, raccoons and other
wildlife.
The Association is pleased that Congress provided $1.2 million in
fiscal year 2004 to address increasing wolf conflicts in Minnesota,
Wisconsin, Michigan, Arizona and New Mexico and recommends continued
support to provide adequate funding to manage increasing wolf damage
complaints across the country. The Association also supports the
continuing request in the President's Budget ($1.3 million) for wolf
issues in Montana, Idaho, and Wyoming.
WS Methods Development
In 1997, the United States and European Union entered into an
Understanding (Agreed Minute and Annex) that identified a process for
developing and evaluating more effective and humane trapping devices
used to manage certain wildlife populations (e.g. for research, for
mitigating wildlife damage, to reestablish species extirpated from
prior habitats, and to protect endangered species). An active research
program is being developed at the USDA's National Wildlife Research
Center in Fort Collins, Colorado. The Association strongly objects to
the proposed elimination of $3.35 million for the Methods Development
program, and urges Congress to restore this funding.
The Association recommends the Congress restore funding for
research of non-lethal methods to mitigate wildlife damage and that
Congress provide additional funding to WS to conduct research in order
to better manage invasive species such as the brown tree snake and the
Coqui frog that threaten local agriculture, fragile electrical systems,
and threatened and endangered species in Guam and Hawaii.
Aquaculture
The Association recommends that Congress restore WS funding for
aquaculture by increasing the budget request by $275,000 in order to
continue telemetry and population dynamics studies on depredating
wildlife species in the Southeast without placing undue strains on WS
Cooperators.
______
Prepared Statement of the InterTribal Bison Cooperative
introduction and background
My name is Ervin Carlson, a Tribal Council member of the Blackfeet
Tribe of Montana and President of the InterTribal Bison Cooperative.
Please accept my sincere appreciation for this opportunity to submit
testimony to the honorable members of the Department of Agriculture
Appropriations Sub-Committee. The InterTribal Bison Cooperative (ITBC)
is a Native American non-profit organization, headquartered in Rapid
City, South Dakota, comprised of fifty-four federally recognized Indian
Tribes located within 16 States across the United States.
Buffalo thrived in abundance on the plains of the United States for
many centuries before they were hunted to near extinction in the 1800s.
During this period of history, buffalo were critical to survival of the
American Indian. Buffalo provided food, shelter, clothing and essential
tools for Indian people and insured continuance of their subsistence
way of life. Naturally, Indian people developed a strong spiritual and
cultural respect for buffalo that has not diminished with the passage
of time.
Numerous tribes that were committed to preserving the sacred
relationship between Indian people and buffalo established the ITBC as
an effort to restore buffalo to Indian lands. ITBC focused upon raising
buffalo on Indian Reservation lands that did not sustain other economic
or agricultural projects. Significant portions of Indian Reservations
consist of poor quality lands for farming or raising livestock.
However, these wholly unproductive Reservation lands were and still are
suitable for buffalo. ITBC began actively restoring buffalo to Indian
lands after receiving funding in 1992 as an initiative of the Bush
Administration.
Upon the successful restoration of buffalo to Indian lands,
opportunities arose for Tribes to utilize buffalo for tribal economic
development efforts. ITBC is now focused on efforts to assure that
tribal buffalo projects are economically sustainable. Federal
appropriations have allowed ITBC to successfully restore buffalo the
tribal lands, thereby preserving the sacred relationship between Indian
people and buffalo. The respect that Indian tribes have maintained for
buffalo has fostered a serious commitment by ITBC member Tribes for
successful buffalo herd development. The successful promotion of
buffalo as a healthy food source will allow Tribes to utilize a
culturally relevant resource as a means to achieve self-sufficiency.
amended language request to food stamp act
The InterTribal Bison Cooperative respectfully requests an
amendment to the Department of Agriculture's Food Stamp Act to amend
the earmark language for purchase of buffalo from ``Native American
producers or producer owned cooperatives'' to ``exclusively from Native
American producers'' in the current fiscal year 2004 amount of
$4,000,000. Specifically, ITBC requests the following amended language
to the Food Stamp Act:
For necessary expenses to carry out the Food Stamp Act (7 U.S.C.
2011 et seq.), $26,289,692,000, of which $2,000,000,000 shall be placed
in reserve for use only in such amounts and at such times as may become
necessary to carry out program operations: Provided, That of the funds
made available under this heading and not already appropriated to the
Food Distribution Program on Indian Reservations (FDPIR) established
under section 4(b) of the Food Stamp Act of 1977 (7 U.S.C. 2013 (b)),
$4,000,000 shall be used to purchase bison and/or bison meat for the
FDPIR and other food programs on the reservations, exclusively from
Native American bison producers: Provided further, That all bison
purchased shall be labeled according to origin and the quality of cuts
in each package: Provided further, That the Secretary of Agriculture
shall make every effort to enter into a service contract, with an
American Indian Tribe, Tribal company, or an Inter Tribal organization,
for the processing of the buffalo meat to be acquired from Native
American producers: Provided further, That funds provided herein shall
be expended in accordance with section 16 of the Food Stamp Act:
Provided further, That this appropriation shall be subject to any work
registration or workfare requirements as may be required by law:
Provided further, That funds made available for Employment and Training
under this heading shall remain available until expended, as authorized
by section 16(h)(1) of the Food Stamp Act.
preventative health care initiative
The Native American Indian population currently suffers from the
highest rates of Type 2 diabetes. The Indian population further suffers
from high rates of cardio vascular disease and various other diet
related diseases. Studies indicate that Type 2 diabetes commonly
emerges when a population undergoes radical diet changes. Native
Americans have been forced to abandon traditional diets rich in wild
game, buffalo and plants and now have diets similar in composition to
average American diets. More studies are needed on the traditional
diets of Native Americans versus their modern day diets in relation to
diabetes rates. However, based upon the current data available, it is
safe to assume that disease rates of Native Americans are directly
impacted by a genetic inability to effectively metabolize modern foods.
More specifically, it is well accepted that the changing diet of
Indians is a major factor in the diabetes epidemic in Indian Country.
Approximately 65-70 percent of Indians living on Indian
Reservations receive foods provided by the USDA Food Distribution
Program on Indian Reservations (FDPIR) or from the USDA Food Stamp
Program. The FDPIR food package is composed of approximately 58 percent
carbohydrates, 14 percent proteins and 28 percent fats. Indians
utilizing Food Stamps generally select a grain-based diet and poorer
quality protein sources such as high fat meats based upon economic
reasons and the unavailability of higher quality protein sources.
Buffalo meat is low in fat and cholesterol and is compatible to the
genetics of Indian people. ITBC intends to promote buffalo meat on
Indian Reservations as a healthy source of protein. First, ITBC is
developing a preventative health care initiative to educate Indian
families of the health benefits of buffalo meat. ITBC believes that
incorporating buffalo meat into the FDPIR program will provide a
significant positive impact on the diets of Indian people living on
Indian Reservations. Further, ITBC is exploring methods to make small
quantities of buffalo meat available for purchase in Reservation
grocery stores. A healthy diet for Indian people that results in a
lower incidence of diabetes will reduce Indian Reservation health care
costs and result in a savings for taxpayers.
itbc goals and initiatives
In addition to developing a preventative health care initiative,
ITBC intends to continue with its buffalo restoration efforts and its
Tribal buffalo marketing initiative.
In 1991, seven Indian Tribes had small buffalo herds, with a
combined total of 1,500 animals. The herds were not utilized for
economic development but were often maintained as wildlife only. During
ITBC's relatively short 10-year tenure, it has been highly successful
at developing existing buffalo herds and restoring buffalo to Indian
lands that had no buffalo prior to 1991. Today, through the efforts of
ITBC, over 35 Indian Tribes are engaged in raising over 15,000 buffalo.
All buffalo operations are owned and managed by Tribes and many
programs are close to achieving self-sufficiency. ITBC's technical
assistance is critical to ensure that the current Tribal buffalo
projects are sustainable within their Tribal communities. Further,
ITBC's assistance is critical to those Tribes seeking to start a
buffalo restoration effort.
Through the efforts of ITBC, a new industry has developed on Indian
reservations utilizing a culturally relevant resource. Hundreds of new
jobs directly and indirectly revolving around the buffalo industry have
been created. Tribal economies have benefited from the thousands of
dollars generated and circulated on Indian Reservations.
ITBC has also been strategizing to overcome marketing obstacles for
Tribally raised buffalo. ITBC is presently assisting the Assiniboine
and Gros Ventre Tribes of the Fort Belknap Reservation, who recently
purchased a U.S.D.A. approved meat-processing plant, with a
coordination scheme to accommodate the processing of range-fed Tribally
raised buffalo.
conclusion
ITBC has proven highly successful since its establishment to
restore buffalo to Indian Reservation lands to revive and protect the
sacred relationship between buffalo and Indian Tribes. Further, ITBC
has successfully promoted the utilization of a culturally significant
resource for viable economic development.
ITBC has assisted Tribes with the creation of new jobs, on-the-job
training and job growth in the buffalo industry resulting in the
generation of new money for Tribal economies. ITBC is actively
developing strategies for sustainable Tribal buffalo operations.
Finally, and most critically for Tribal populations, ITBC is developing
a preventive health care initiative to utilize buffalo meat as a
healthy addition to Tribal family diets.
ITBC strongly urges you to support its request for the amended
language as specifically provided above to the Food Stamp Act to allow
$4,000,000 for the purchase of Native American produced buffalo and
buffalo meat, to improve the diet of Tribal members.
______
Prepared Statement of the Oklahoma Farmers Union
invasive species affecting animals and plants imported red fire ant
ars-research
Mr. Chairman and members of the Subcommittee, I appreciate the
opportunity to submit testimony with respect to the increasing invasive
species of the red imported fire ant. I am an agriculture producer in
southern Oklahoma, employed with the Oklahoma Farmers Union and a 19-
year advocate for research initiatives to combat this growing problem
impacting both agriculture and the daily lives of citizens in impacted
states and counties. Oklahoma Farmers Union is a general farm
organization representing over 100,000 families in the State of
Oklahoma.
My work on the issues goes back to the 1980's as the red imported
fire ant as a House Agriculture Appropriations Subcommittee associate
staff member, later as an agriculture producer/research cooperator and
now as an association representative and participant in numerous
committees and fire ant conferences and meetings.
The Red Imported Fire Ant Problem
The imported fire ants now inhabit more than 320 million acres in
the southern United States and Puerto Rico. The average densities of
fire ant populations in the United States are more than 5 times higher
than in their native South America, where natural enemies keep the fire
ant population under control. Imported fire ants destroy many other
ground-inhabiting arthropods and other small animals, reducing the
biological diversity in many areas. Fire ants cause a multitude of
problems for humans, domestic animals, and agriculture. Between 30
percent and 60 percent of the people in the infested areas are stung
each year. More than 200,000 persons per year may require a physician's
aid for fire ant stings. Anaphylaxis occurs in 1 percent or more of
those people as a result of bites.
The fire ant impact on the American economy is approximately $5.5
billion dollars per year. Agriculture producers are economically hurt
with the loss of animals due to stings, shorting of electrical
equipment due to ant buildup in switch boxes, damage to farm equipment
from ant mounds in pastures and fields and personal discomfort and risk
to life from frequent exposure and contact with the ants in the normal
course of working on the farm or ranch. According to data from Dr. Curt
Lard with Texas A&M University, the estimated impact of fire ants on
different states is: $1.3 billion in Florida, $1.2 billion in Texas,
$210 million in South Carolina, $164 million in Mississippi and $18
million in Oklahoma.
This past year in the State of Oklahoma we saw the spread of fire
ants during research surveys in counties where citizens had reported
possible fire ant mounds. Surveys and sampling was done and fire ants
were found for the first time in five additional counties for a total
of 13 counties of which 8 counties are completely infested. Future
surveys to determine expansion will be hampered this year given the
fiscal year 2004 APHIS budget reduced funding to the states for this
purpose. The focus will now shift to educational outreach only on a
requested basis.
The Research Solution
The lead research agency on the national level for this issue is
the USDA-Agricultural Research Service with most work centered at the
Center for Medical, Agricultural and Veterinary Entomology in
Gainesville, Florida. I have the highest respect and admiration for the
scientists, the administration and the methods of basic and applied
research utilized by this agency and this research location.
I and others have advocated for many years the need to increase
funding for the site where key research for red imported fire ants is
conducted and from where field activities across the United States is
directed. We are delighted to see that the President's fiscal year 2005
budget request includes $5 million for Invasive Species Affecting
Animals and Plants. As ARS Acting Administrator Dr. Edward B. Knipling
indicated in his testimony to the committee, the red imported fire ant
is a growing problem that ``has steadily spread through all the Gulf
States and is now reported in Southern California and New Mexico.
The proposed increase will allow ARS to target its research with
respect to the fire ant by studying its genomics and developing more
effective pesticides and biological control agents. Additionally, this
will allow ARS to continue in concert with the aforementioned to
continue to develop biologically-based integrated pest management
components. The latter has shown a marked impact on fire ant research
locations but more work must be continued in this area to identify more
cold-hardy species that can be utilized in more northern environments
where the advancing fire ant line continues to spread.
To date, the researchers in the USDA-ARS Imported Fire Ant Research
Unit in Gainesville, FL, have continued to search for new biological
control agents that could be used as self-sustaining bio-control agents
against the imported fire ants. Biological control agents are the only
long-term and self-sustaining solution for the fire ant problem in the
United States.
Self-sustaining biological control agents cause direct mortality
and/or stress, reducing the ecological dominance of fire ants and can
be useful in natural habitats where pesticide use is not tolerated. The
successful establishment of biological control agents of fire ants
would be a major benefit throughout the southern United States.
Biological control has the potential to offer long-term suppression of
fire ants over large areas in the United States and save millions of
dollars annually by reducing the use of pesticides.
Biological control agents could also help slow the spread of these
pests into other susceptible states, such as Kentucky, Maryland,
Virginia, Delaware, New Mexico, Arizona, Nevada, other parts of
California, and up the Pacific Coast.
For long-term success, investment in genomics research to develop
more effective pesticides and pathogens is crucial if biological
controls are to be fully effective.
New developments in fire ant biological control
I'm excited about new developments In fire ant biological control.
The protozoan Vairimorpha invictae, a specific pathogen of fire ants in
South America, is being tested in quarantine in Gainesville, FL. This
disease should be released in the field in the coming years.
A new isolate of the fire ant pathogen Thelohania solenopsae is
being tested in quarantine in Gainesville, FL. This isolate may be
better adapted to black and hybrid fire ants, than the present isolate
found in the United States. It may also have a more detrimental effect
on the ants than the United States isolate. Scientists hope to have
this new isolate released in the field in the coming years.
Viruses have been identified from fire ant populations in Florida.
Molecular biology studies may reveal opportunities for the use of these
viruses as biological agents against fire ants. Besides the viruses,
during the past 3 years, three other new diseases of fire ants have
been identified from ants in Florida. These discoveries serve as
indications that new diseases can be identified in the South American
range of the fire ants, and developed for use in the biological control
of U.S. fire ants.
Three different species of the fire ant decapitating flies have
been released so far in the United States. Two species are established
in Florida and South Carolina. One species is established in other
southeastern states. New decapitating fly species are being tested in
quarantine in Gainesville, FL, and should be ready for field release in
the coming months. Other species will be collected in South America,
tested in quarantine.
Area-wide suppression of fire ants research programs are being
conducted at locations In Florida, Texas, Mississippi, Oklahoma, and
South Carolina. These research efforts combine both biological and
chemical methods to achieve an integrated pest management approach.
Conclusion and Request for Funding
Much progress has been made but to continue this aggressive,
results-oriented research at the same or perhaps excelled pace, it is
imperative that additional funding be directed--preferably in permanent
base funding to the Gainesville, FL location. On behalf of the
producers and consumers who make up the membership of the Oklahoma
Farmers Union, we support the Administration's $5 million research
initiative contained in the ARS budget for further targeted research
for Invasive Species Affecting Animals and Plants.
Thank you for this opportunity. I would appreciate the
Subcommittee's consideration of this most important issue.
______
Prepared Statement of the Mid-America International Agri-Trade Council
(MIATCO) and Food Export USA--Northeast
As Executive Director of MIATCO (Mid-America International Agri-
Trade Council) and Food Export USA--Northeast, I am pleased to offer
this written testimony as to how Market Access Program funds are being
optimized to help Midwest and Northeast U.S. food and agricultural
exporters extend their reach and penetration of foreign markets
resulting in incremental business, enhanced export sales, and new jobs
here in the United States.
Secretary Veneman has outlined that expanding trade is the
Administration's top priority for U.S. agriculture. Continued support
for the trade promotion through the Market Access Program is critical
part of that effort.
The MAP is designed to focus on these high-value products. There
are approximately 70 non-profit industry groups across this country
representing all sectors of agriculture that participate in this
program.
The 50 state departments of agriculture participate in MAP through
four State Regional Trade Groups (MIATCO, Food Export USA--Northeast,
SUSTA and WUSATA). These groups coordinate the export promotion efforts
of the states, and focus on assisting smaller food and agricultural
processor.
While remaining separate trade non-profit trade associations,
MIATCO and Food Export USA--Northeast are strategically and
operationally aligned in order optimize cost efficiencies while
leveraging cross-regional opportunities abroad.
MIATCO and Food Export USA--Northeast contract with 14 overseas in-
market representatives to provide promotional support and to help local
importers and buyers more fully leverage all of our resources
In combination with significant state and private investment, MAP
funding allows MIATCO and Food Export USA--Northeast to focus on three
key areas of exporter assistance:
--Education & Outreach
--Market Entry
--In-Market Promotion
Education & Outreach
MIATCO and Food Export USA reach out to both existing and potential
exporters of food and agriculture products through numerous
communications vehicles including a bi-monthly newsletter, The Global
Food Marketertm, monthly email updates and periodic broadcast faxes.
Our current combined database includes 12,000 U.S. food and
agricultural suppliers.
Another key Education & Outreach initiative is our Food Export
Helplinetm, a free service that helps companies in secondary market
research and in achieving export readiness by addressing regulations
and pricing challenges inherent in selling to foreign buyers.
Market Entry
Once an export company has decided to pursue a specific foreign
market, MIATCO and Food Export USA--Northeast provide assistance in a
number of ways, including:
--Distributor Development Service.--Providing assistance with primary
market research specific to a market (country) and a United
States supplier particular product's.
--Food Show PLUS!TM.--Enhancing specific tradeshow
participation with translation of their promotional material,
interpreters, publicity, buyer introductions, guided retail
tours, etc.
--Buyers Missions.--Bringing foreign buyers to the United States to
meet with suppliers in the Midwest and Northeast.
--Trade Missions.--Facilitating export company visits with potential
foreign market buyers through organized trips, tours etc.
--Trade Lead Service.--A new initiative which provides to U.S.
suppliers pre-qualified, product-specific leads in foreign
markets.
In-Market Promotion
Helping exporters successfully promote and sell their agricultural
products once they've penetrated a foreign market is a key component to
our overall support. Through participation in our Branded Program,
qualified small companies can receive reimbursements of up to 50
percent of eligible international marketing expenses such as trade show
participation, advertising, public relations, promotions, marketing and
point-of-sale material and label modifications (as necessary by local
regulations).
The MAP focuses on value-added agricultural products, including
branded foods. Overseas consumers, like those here in the United States
tend to buy product based on brand names. By promoting brand names that
contain American agricultural ingredients, we build long-term demand
for our products. These value-added product support jobs and encourage
investment in our own processing industries.
Following are examples of testimonials of our current participants:
--``Our ability to build solid foundations for long-term export
growth is greatly dependent on the funding we receive from
MIATCO's Branded Program. It goes a long way towards helping us
set up effective marketing campaigns in many of our overseas
markets''. Garrett Smith, Vice President of Sales, American
Popcorn Company.
--``Food Export USA--Northeast has done a great job helping us export
and exposing us to international markets. We used funds from
the Branded Program to hold products demos in other countries
and to attend food shows. The product sampling has helped us
facilitate a great deal of business in Singapore.'' Marty
Margherio, President, M&V Global Foods.
The MAP also stimulates private investment. While the MAP requires
that companies match all federal dollars on a one-for-one basis, in
fact most companies spend much more than that. Last year, participants
in our programs contributed an additional $2.58 for each MAP dollar
invested in our programs.
As foreign market opportunities shift and change, MIATCO and Food
Export USA's programs and services have never been more important to
midwestern and northeastern food, agricultural, and wood exporters.
American products are seen worldwide as high quality and safe
products. Selling higher quality products requires promotion. The MAP
is an investment in promotion that pays off. It is for this reason that
we support funding for MAP in fiscal year 2005 at the $140 million
level legislated in the Farm Security and Rural Investment Act (FSRIA)
of 2002. We also urge the subcommittee to support a strong USDA Foreign
Agricultural Service (FAS), our partner in promoting increased U.S.
agricultural exports.
Following are our results for the fiscal year from October 2002
through the end of September 2003.
Thank you.
------------------------------------------------------------------------
Food Export
MIATCO USA--Northeast
------------------------------------------------------------------------
Total Number of U.S. Export Companies 632 360
Participating in Programs..............
Number of New Distributor Relationships 1,000 274
Established............................
Number of Companies with Resulting 153 85
``First-Time'' Export Sales in a Market
Actual Reported Increases in Export $84,630,356 $41,394,170
Sales As Result of Program
Participation..........................
Total Private Investment Generated $19,754,462 $8,482,566
Through Program Participation..........
------------------------------------------------------------------------
______
Prepared Statement of the National Association of Professional Forestry
Schools and Colleges (NAPFSC)
The Growing Importance of NonFederal Forest Lands
Society continues to place diverse and increasing demands on the
nation's 740 million acres of forest (nearly one-third of the U.S. land
base). This acreage includes the public lands and the more than 400
million acres of private forest lands now providing most of the
nation's forest-based products. However, forest ownerships face many
pressures including fires, floods, insect and disease losses,
urbanization, fragmentation, and missed employment and economic
opportunities. Countering the threats and achieving the full promise of
these forests will require an enhanced effort from the combined
research and outreach activities of the USDA Forest Service and our
nation's public universities. Ten million landowners, their families,
their communities, forest based industries, more than a million primary
forest products industry employees, and many millions of resource users
and consumers have a major stake in the promise of these lands.
Fortunately, the full promise CAN be achieved with well-planned and
carefully executed investments in research and education. This message
from the National Association of Professional Forestry Schools and
Colleges (NAPFSC) describes key parts of such a plan including
recommendations for the fiscal year 2005 budget.
Investing in USDA Cooperative State Research, Education, and Extension
Service (CSREES) Programs
Priority 1: The Cooperative Forestry Research (McIntire-Stennis)
Program.--Is the foundation of forest resources research and scientist
education efforts at universities. The program provides cutting-edge
research on productivity, technologies for monitoring and extending the
resource base, and environmental quality--efforts that are critically
important since universities provide a large share of the nation's
research. Program funding is currently at $21.755 million and matched
more than three times by universities with state and nonFederal funds.
NAPFSC recommends $25 million for fiscal year 2005 with the increase
targeted at:
--Sustainable and productive forest management systems.--For private
lands to address issues of global change, international
competition and economic growth;
--Forest health and risk.--To address fire, pest species, and other
disturbances affecting domestic resource security, downstream
impacts, and restoration of complex systems;
--Assessing social values and tradeoffs.--To identify realistic
policy options, economic impacts, and to inform decisions, at
all levels of government, with effective science; and
--New biobased products, improved processing technologies, and
utilization of small trees.--To extend the forest resource and
enhance environmental quality;
In the long run, it is important to advance this program to its
full authorization--50 percent of the funding for USDA Forest Service
R&D. NAPFSC requests this support with direction to focus on new or
existing approved projects to achieve rapid progress on one or more of
these research targets in each school's state, region, or nationally.
Portions of this funding will also be used to educate critically needed
new scientists.
Priority 2: The National Research Initiative Competitive Grants
Program (NRI).--Is a significant source of funding for basic and
applied research on forest resources including their management and
utilization. This program is currently funded at $164 million of which
approximately 10 percent goes to successful forestry research
proposals. NAPFSC supports the Administration's efforts to increase the
funding for the NRI to $180 million providing at least an additional
$10 million is directed to research on:
--Woody plant systems.--Including genetic improvement and increased
tree growth rates and yields, and improved utilization;
--Managed forest ecosystems.--Including issues of forest health,
productivity, economic sustainability, and restoration; and
--Assessing alternative management systems.--With emphasis on risk
analysis, geospatial analysis including landscape implications,
and associated decision support systems.
Priority 3: The Renewable Resources Extension Program (RREA).--Is
the foundation of outreach and extension efforts at universities. This
program is critically important today since universities provide a
large share of the nations outreach and extension. Audiences for the
products of outreach and extension are as diverse as the stakeholders.
The highest priority are the owners of nonFederal forest lands and
those involved in implementing forest management. After cuts in 2004,
the program is currently funded at $4.04 million. We urge restoration
of funding to the fiscal year 2003 level of $4.516 million. NAPFSC
further recommends focusing this program on:
--Best management practices.--Together with information on programs,
services, and benefits of natural resources management and
planning to integrate water, wildlife, timber, fish,
recreation, and other products and services;
--Risk management/forest health.--Approaches addressing management of
fire, insects and diseases, invasive species, fragmentation,
and other disturbances at local to larger scales for working
forests and landscapes;
--Opportunities for economic development.--For individuals and
communities including landowner cooperatives and other
organizations linked to professional services and marketing,
and conservation strategies to address local issues within the
framework of landowner's objectives.
In the long run, it is important to advance this program to its
full $30 authorization. NAPFSC further recommends focusing this funding
to achieve rapid progress on one or more of these extension targets in
each school's state, region, or nationally.
Partner Programs
USDA Forest Service R&D.--NAPFSC recommends strengthening Forest
Service research to address the full complexity of forest systems and
their importance to society including issues of global change and the
domestic security. At the same time, we see the most direct routes to
this strengthening being through increased ties to university forestry
research programs, for example through the funding of cooperative
agreements and competitive grant programs. Forest Service R&D funding
of Cooperative agreements with universities has become a very effective
way to engage university science capability. Additionally, this vehicle
is critically important to the training 3 of eventual agency scientists
and in achieving the necessary critical mass for major research
problems. Funding to schools through such mechanisms also improves
agency linkages to stakeholders and the technology transfer capability
within universities. Competitive grants are a means of improving
targeted basic and multidisciplinary research. However, cooperative
agreement funding has fallen from near 20 percent of the R&D budget to
less than 10 percent today. Consequently, NAPFSC urges Forest Service
R&D to:
--Increase cooperative agreement opportunities, incrementally over
the next 5 years, to attain a percentage of the total research
budget that returns to historic levels of approximately 20
percent. In the fiscal year 2005 budget we recommend an
increase of $5 million in the share of Forest Service research
dollars committed by the Forest Service for cooperative
agreements. This increase would reverse the downward trend in
the percentage of funds utilized for cooperative agreements and
would move toward a better balance between internal Forest
Service research and external collaboration with research
universities.
--Establish a major external competitive grant program in forest and
natural resources research to engage the broader research
community in addressing critical research and outreach needs.
In the fiscal year 2005 budget we recommend designation of $10
million for this purpose, eventually building to $40 million.
Recommended target areas of research are those noted above for
the NRI in the USDA CSREES.
--Additionally, we see it important to elevate research university
linkages by assigning staff responsibility for advocacy and
oversight of this key partnership and associated funding.
USDA Forest Service State & Private Forestry (S&PF).--Has strong
formal linkages to state forestry agencies. However, there is no formal
link between S&PF and the forestry school based research, extension,
and technology transfer capabilities in states. NAPFSC believes such a
link would greatly strengthen cooperation among S&PF, state forestry
agencies, forestry schools, industry, and landowners in states. Also,
such a link would greatly improve the targeting, timeliness, and
effectiveness of technology transfer focused on state needs relating to
stewardship. Consequently, NAPFSC proposes the creation of a technology
transfer line under Cooperative Forestry Programs in the agency's
budget. We further urge this line be funded at $5 million and suggest
staff be directed to establish criteria for grant and cooperative
programs by consulting with university forestry and related natural
resources schools and other educational or technology transfer
entities. Criteria may include linkage to state forestry agency
efforts, ties to basic and applied research, addressing critical state
needs, and multi-school or multi-state cooperation. Suggested themes
for this new line include productivity improvement, critical forest
management information and analysis, and forest fire.
The National Fire Plan (USDA and USDI).--Has become a major area of
activity for Federal agencies and partners. This billion-dollar program
also has significant research and technology transfer needs. NAPFSC
believes important elements of these needs can best be accomplished
through the existing research, extension and technology transfer
capabilities of forestry schools. Consequently NAPFSC urges the
addition of a science, education, and technology transfer line under
Wildland Fire Management to effect this role.
USDI Cooperative Ecosystem Studies Units (CESUs).--The seventeen
new CESUs are proving to be a cost-effective means of engaging
university science and training capabilities regionally to achieve
Federal agency goals. However, schools cannot carry the cost of
partnering and information sharing activities themselves. Consequently,
NAPFSC recommends $1.275 million in support of the CESU program in the
U.S. Department of Interior. We suggest this funding under the
Department's CESU cooperative/joint venture agreements with CESU host
universities to provide research, technical assistance, and education
consistent with the mission of these units. This would provide $75,000
annually to each host institution and $75,000 for the national office
for the purposes of partnering activities to support essential
conservation and information sharing through websites and other
technologies. This funding could be placed within the National Park
Service under external programs on behalf of all the Federal agencies
involved with the CESU program. Annual work plans would be developed by
the host universities and participating Federal agencies per guidelines
established by the CESU Council.
Other Competitive Grant Programs (NASA, NSF, DOE, & EPA).--
Competitive grant programs in non-USDA science agencies have been very
important to the progress of forest resources research efforts in
universities. We urge the Administration and Congress to recognize the
importance and effectiveness of these programs in efforts to address
the issues of nonFederal forests. Specifically we urge programs,
subprograms, and funding that can compliment and supplement USDA
research programs, notably in the areas of remote sensing and
information technologies, basic tree biology, ecosystem structure and
function, climate change, water resources management, and the social
sciences underpinning natural resources and environmental management.
Agenda 2020.--The American Forest and Paper Association has
proposed a program of research to address our nation's needs for wood
and fiber products and issues of industry and national competitiveness.
Scientists from NAPFSC schools have played a key role in research
addressing this agenda. We seek support for the base programs,
cooperative agreements and competitive grants noted above to make this
agenda a continued success story.
Workforce Needs.--The changing makeup of our society and a looming
shortage in forest science research capacity also argue for including
the full range of partners as stakeholders, and notably including 1890
and 1994 institutions and others serving minorities.
Summary.--The plan and investments outlined here are substantial,
but the potential savings and returns are far greater. NAPFSC urges
cooperation at Federal, State, and university levels to make this
investment and its promise a reality.
______
Prepared Statement of the National Association of State Departments of
Agriculture
My name is Gene Hugoson, Commissioner of the Minnesota Department
of Agriculture and President of the National Association of State
Departments of Agriculture (NASDA). I present my statement on behalf of
my fellow commissioners, secretaries and directors from the 50 states
and four U.S. territories.
Fund Specialty Crop Block Grant Program
We respectfully ask that the Senate provide funding for a block
grant program in the fiscal year 2005 Agricultural Appropriations Bill.
Congress first approved a specialty crop block grant program in 2001
(H.R. 2213, Public Law 107-25). Congress chose States to administer the
$159.4 million block grant program which was directed at the specialty
crop industry to address difficult circumstances caused by disease, low
prices, and lack of funding in several areas including: research,
promotion, and inspection. NASDA members believe that this block grant
program has improved the specialty crop industry's ability to sustain,
expand and enhance their production systems.
The program provided state block grants to assist the specialty
crop industry, not in the traditional manner of farm assistance
programs, but through a focus on projects to improve the industry's
competitiveness. The demands for the grant funds were overwhelming;
more than 3,900 requests for grant funding were made totaling $1.52
billion.
State Departments of Agriculture took advice from their local
constituency groups and ultimately made investments in more than 1,400
projects in significant issue areas including marketing, nutrition,
education, research, pest and disease programs, and food safety. We
would like to point out that an important factor in many states' grant
funding criteria was commitment to matching funds. Together, states and
grant recipients contributed more than $45 million in matching funds.
Knowing that Congress would have a keen interest in the success of
the 2001 block grant program, we surveyed the states and compiled a
progress report. It is available on NASDA's website at www.nasda.org or
copies can be requested from NASDA's office. Each member of the
subcommittee will be provided their own copy of the report.
We would like to bring to your attention that current legislation
in the U.S. House of Representatives, H.R. 3242, ``The Specialty Crop
Competitiveness Act of 2003,'' provides $470 million for a specialty
crop block grant program. NASDA supports the passage of this
legislation.
Changing Times
As you know, times are changing in the agriculture industry. No
longer are bulk commodities the only crops that come to mind when
people think about American agriculture. In the early 1900's, bulk
commodities like wheat, corn, and cotton were the dominant crops grown
on the majority of America's farms. While bulk commodities will always
remain essential components of America's agricultural industry, today
specialty crops have grown significantly in economic importance. During
the last century, farmers and ranchers have become much more
diversified and more involved with marketing their products from the
farmgate to the consumer.
Specialty Crops--A Strong Economic Engine
The contribution of the specialty crop industry to the economic
health of the United States and to our agricultural economy becomes
clear when you consider the cash receipts the industry generates. For
the year 2002, the United States Department of Agriculture's Economic
Research Service (ERS) reported that, ``Vegetables, Fruit and Nuts, All
other Crops, and Hay'' generated $57.7 billion in cash receipts. This
figure is important as it outpaces the cash receipts generated by the
remaining plant crops. In 2002, ``Oil Crops, Tobacco, Cotton, Feed
Crops, and Food Grains'' generated $45.7 billion in cash receipts.
The Challenges--Low Income & Trade Deficit
As times have changed, so have the needs of farmers and ranchers in
our country. Specialty crop growers are faced with a variety of
challenges--many of them brought about by the diversity of the
specialty crop industry. Just like any farmer or rancher, specialty
crop growers face the risk of their crop being destroyed by a pest,
disease or natural disaster. But they also carry additional risk due to
compliance with ever changing regulatory requirements, high labor
costs, high fuel costs and exotic pest pressures while competing on a
non-level playing field against imports from outside the United States.
The USDA ERS reported in ``Agriculture Economy Improves in 2003''
that specialty crop producers should expect lower than average income:
``Producers of specialty crops (vegetables, fruits, nursery products)
are especially susceptible to higher energy and labor costs (the
fastest rising expense categories in 2003). Lower average income is
expected for these farms, since modest gains in receipts will not be
enough to compensate for higher expenses.''
However, not all growers in other sectors are experiencing the same
challenges. The report stated, ``The financial condition of U.S.
farmers and other agricultural stakeholders is expected to improve in
2003. Net farm income, a measure of the sector's profitability, is
forecast to be up $17 billion (49 percent) from the $35.6 billion
earned in 2002 and about 10 percent above the 10-year average.''
While we recognize the importance of global trade in agricultural
commodities and recognize the complexity of the global economy, we are
alarmed at the disparity between the explosive growth in importation of
specialty crops into the United States versus the relatively flat
growth in the exportation of our products to other countries. The
USDA's Foreign Agricultural Service's ``Foreign Agricultural Trade of
the United States'' reports that for the period 1997-2002 that:
--Imports--increased 39 percent to a total of $14.7 billion in 2002;
while,
--Exports--increased 6.5 percent to a total of $11.7 billion in 2002.
While these trends certainly raise questions regarding ``fair
trade'', it's also important to emphasize the issue of ``safe trade.''
Can our industry remain competitive when they are asked to absorb the
cumulative risk of introduction of unwanted foreign pests and diseases
imported on foreign commodities that are deemed to be ``safe?''
Block Grants--An Investment in Critical Infrastructure
It's time for the public sector to realize the value of specialty
crops and make long term investments in the competitiveness of the
industry. Public investment in critical infrastructure will benefit not
only the economy but public health and the environment. This investment
can be used to support on-going research that is furthering the
development of new varieties of specialty crops and contributing to
advances in fighting foreign pests and diseases brought in by imports.
It will help continue statewide marketing and promotion campaigns that
are increasing the consumption of fruits and vegetables across the
nation. It will help maintain competitive prices, both domestically and
internationally. And more importantly, Federal resources will support
nutritional education programs in our schools which will give our
children the tools to make healthy eating choices ? helping us all
battle the obesity epidemic that is affecting each and every one of our
states.
Farmers and ranchers need government policies that make it possible
for them to remain competitive. When farmers earn a profit, they are
better equipped to adapt to change. These changes bring better results
for the environment, for workers, for consumers and for the economy.
Everyone benefits from the support of specialty crops. I ask you to
please take a minute to think about what you want agriculture to look
like in the next 5, 10 or even 25 years. We can shape that vision today
by committing to a long-term investment in our specialty crop producers
and ensuring they continue to feed the nation and the world.
The State Departments of Agriculture are ready to continue this
important dialog and be a part of the solution in keeping specialty
crops producers competitive and viable. Thank you for the opportunity
to express NASDA's strong support for the Specialty Crop Block Grant
Program.
______
Prepared Statement of the National Association of State Foresters
introduction
The National Association of State Foresters (NASF) is pleased to
provide testimony on the U.S. Department of Agriculture (USDA) budget
request for fiscal year 2005. Representing the directors of state
forestry agencies from all fifty states, eight U.S. territories, and
the District of Columbia, our testimony centers around those Deputy
Areas most relevant to the long term forestry operations of our
constituents: Natural Resources and Environment and Research,
Education, and Economics. We believe the USDA budget for fiscal year
2005, which offers opportunities for advancing the sustainable
management of private forestland nationwide, can be strengthened
through our recommendations.
farm bill conservation programs
NASF believes that the conservation programs enacted in the 2002
Farm Bill are integral for protecting water quality, erodible soils,
wildlife habitat, and wetlands associated with agricultural and
forestry operations. Trees and forestry practices are often the best
solution to many of the conservation challenges arising from these
operations. We support the continued funding and development of the
Environmental Quality Incentives Program (EQIP) by providing $1.2
billion for fiscal year 2005, full funding for the Conservation Reserve
Program (CRP), $85 million for the Wildlife Habitat Improvement Program
(WHIP), targeting of 250,000 acres under the Wetlands Reserve Program
(WRP), $150 million for the Emergency Watershed Program (EWP), and $26
million for the Conservation Security Program (CSP). These programs are
important for landowners with both forest and agricultural land, as
well as farmers who wish to plant trees for conservation purposes on
their agricultural lands. Nearly two-thirds of the land in the United
States is forested, the majority of which is privately owned. NASF
recommends that the Subcommittee encourage the Secretary of Agriculture
and the NRCS to reinforce the importance of including and expanding
forestry practices in EQIP and the other Farm Bill Conservation
Programs.
usda research and extension programs
NASF recommends funding the Cooperative Forestry Research
(McIntire-Stennis) Program (CFR) at $25 million, the National Research
Initiative Competitive Grants Program (NRI) at $180 million, and the
Renewable Resources Extension Program (RREA) at $4.5 million. The
proposed increase in CFR will help the program continue to serve as the
cornerstone of forest research in universities, providing knowledge
central to sound management from environmental, economic, and social
perspectives. NASF supports the funding provided in the
Administration's fiscal year 2005 budget for NRI and encourages more
funds be targeted to forestry research. A small increase in RREA
funding will improve the program's ability to address critical
extension and stewardship needs.
conclusion
The National Association of State Foresters seeks the
Subcommittee's support for a USDA fiscal year 2005 budget that will
make sure the conservation needs of private landowners--both forest and
agriculture--are met. Thank you for the opportunity to provide our
testimony.
______
Prepared Statement of the National Association of University Fisheries
and Wildlife Programs
The National Association of University Fisheries and Wildlife
Programs (NAUFWP) appreciates the opportunity to submit testimony
concerning the fiscal year 2005 budgets for the U.S. Department of
Agriculture. NAUFWP represents approximately 55 university programs and
their 440 faculty members, scientists, and extension specialists and
over 9,200 undergraduates and graduate students working to enhance the
science and management of fisheries and wildlife resources. NAUFWP is
interested in strengthening fisheries and wildlife education, research,
extension, and international programs to benefit wildlife and their
habitats on agricultural and other private land.
The following table summarizes NAUFWP's recommendations:
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-----------------------------------------------
USDA Agency/Program 2005
2004 Enacted President's 2005 NAUFWP
Budget Recommended
----------------------------------------------------------------------------------------------------------------
Coop. St. Research, Education, and Extension Serv.:
Hatch Act................................................... 179,085 180,148 180,148
Renewable Resources Extension Act........................... 4,040 4,093 15,000
McIntire-Stennis Cooperative Forestry....................... 21,755 21,844 30,000
Natural Resources Inventory................................. 164,027 180,000 180,000
Natural Resources Conservation Service:
Forest Land Enhancement Program............................. 10,000 .............. 80,000
Technical Service Provider training......................... .............. .............. 100
Conservation Program Monitoring and Evaluation.............. .............. .............. 1,000
----------------------------------------------------------------------------------------------------------------
Cooperative State Research, Education and Extension Services
Hatch Act.--The Hatch Act supports agricultural research in the
states at college and university agriculture experiment stations.
Experiment stations conduct research, investigations, and experiments
that relate directly to the establishment and maintenance of an
effective agricultural industry and promote a sound and prosperous
agricultural and rural life. These stations are essential for their
work on food and fiber systems, environmental impacts of these systems,
and resource issues relating to the future of agriculture in each state
and the nation. We support the administration's request for this base
program in fiscal year 2005.
Renewable Resources Extension Act.--We strongly recommend that the
Renewable Resources Extension Act be funded at $15 million in fiscal
year 2005. RREA funds, which are apportioned to State Extension
Services, leverage (at an average of 4:1) cooperative partnerships with
a focus on development and dissemination of information needed by
private landowners. The need for RREA educational programs is greater
than ever today due to fragmentation of ownerships, urbanization, and
increasing societal concerns about land use and its impact on soil,
water, air, and wildlife. Though RREA has been proven to be effective
in leveraging cooperative state and local funding, it has never been
fully funded.
McIntire-Stennis.--We encourage Congress to increase McIntire-
Stennis Cooperative Forestry funds to $30 million. These funds are
essential to the future of resource management on non-industrial
private forestlands, supporting state efforts in forestry research to
increase the efficiency of forestry practices and to extend the
benefits that come from forest and related rangelands. McIntire-Stennis
calls for close coordination between state colleges and universities
and the Federal Government, and is essential for providing research
background for other Acts, such as RREA.
National Research Initiative.--National Research Initiative
Competitive Grants (NRI) are open to academic institutions, federal
agencies, and private organizations to fund research on improving
agricultural practices, particularly production systems that are
sustainable both environmentally and economically, and to develop
methods for protecting natural resources and wildlife. Innovative grant
programs such as NRI help broaden approaches to land management, such
as integrating timber and wildlife management on private lands. We
request $180 million for National Research Initiative Competitive
Grants in fiscal year 2005.
Natural Resources Conservation Service
Forest Land Enhancement Program (FLEP).--The Forest Land
Enhancement Program was created through the 2002 Farm Bill to provide
financial, technical, educational, and related assistance to promote
sustainable management of non-industrial private forestlands. The
program is authorized at $100 million for 2002-2007, to be distributed
through state forestry agencies. We request restoration of the full
funding balance, $80 million, for this program in fiscal year 2005.
Technical Service Provider Training.--NRCS is building a Technical
Service Provider program of certified professionals who can assist the
agency in delivering conservation services to agricultural producers.
Training will be needed to effectively prepare Technical Service
Providers to assist these producers. NAUFWP recommends that Congress
direct NRCS to appropriate $100,000 for a pilot training program at a
university in cooperation with professional societies (Society for
Range Management, The Wildlife Society, American Fisheries Society) and
the USDA Cooperative State Research, Education, and Extension Service
that subsequently can be used at land grant universities and colleges
across the country to train Technical Service Providers. This program
is critical to the effective delivery of Farm Bill Conservation
Programs.
Conservation Program Monitoring and Evaluation.--Monitoring Farm
Bill conservation programs and evaluating their progress toward
achieving Congressionally established objectives for soil, water, and
wildlife will enable NRCS to ensure successful program implementation
and effective use of appropriated funds. Thus far, limited monitoring
efforts have been focused on soil and water achievements, and NRCS and
the Agricultural Research Service have done all the evaluations. It is
important for assessments to address wildlife and habitat impacts, and
for external parties to be included to ensure credibility and
objectivity. We recommend Congress direct $1 million toward a pilot
watershed-based monitoring and evaluation project that can serve as a
model for conservation program assessment nationwide.
Thank you for considering the views of university fisheries and
wildlife scientists. We look forward to working with you and your staff
to ensure adequate funding for wildlife conservation.
______
Prepared Statement of the National Coalition for Food and Agricultural
Research
Dear Chairman Bennett, Ranking Member Kohl and Members of the
Subcommittee: On behalf of the National Coalition for Food and
Agricultural Research (National C-FAR), we are pleased to submit
comments in strong support of enhanced public investment in food and
agricultural research, extension and education as a critical component
of Federal appropriations for fiscal year 2005 and beyond.
interest of national c-far
National C-FAR serves as a forum and a unified voice in support of
sustaining and increasing public investment at the national level in
food and agricultural research, extension and education. National C-FAR
is a nonprofit, nonpartisan, consensus-based and customer-led coalition
established in 2001 that brings food, agriculture, nutrition,
conservation and natural resource organizations together with the food
and agriculture research community. A list of current members is
provided as Exhibit 1. More information about National C-FAR is
available at http://www.ncfar.org.\1\
---------------------------------------------------------------------------
\1\ National C-FAR seeks to increase awareness about the value of,
and support for, food and agricultural research. For example, National
C-FAR circulates a series of one-page Research Success Profiles
highlighting some of the many benefits already provided by public
investment in food and agricultural research. Each provides a contact
for more information. Profiles released to date are titled ``Anthrax,''
``Mastitis,'' ``Penicillin,'' ``Witchweed,'' and ``Making Wine.'' The
Profiles can be accessed at http://www.ncfar.org/research.asp.
---------------------------------------------------------------------------
demonstrated value of public investments in food and agricultural
research, extension and education
Public and private investments in U.S. agricultural research have
paid huge dividends to the United States and the world, especially in
the latter part of the 20th century. However, these dividends are the
result of past investments in agricultural research.
If similar research dividends are to be realized in the future,
then the nation must commit to a continuing investment that reflects
the long-term benefits of food and agricultural research.
Food and agricultural research to date has helped provide the
United States with an agricultural system that consistently produces
high quality, affordable food and natural fiber, while at the same
time:
--Creating Jobs and Income.--The food and agricultural sector and
related industries provide over 20 million jobs, about 17
percent of U.S. jobs, and account for nearly $1 trillion or 13
percent of GDP.
--Helping Reduce the Trade Deficit.--Agricultural exports average
more than $50 billion annually compared to $38 billion of
imports, contributing some $12 billion to reducing the $350
billion trade deficit in the nonagricultural sector.
--Providing many Valuable Aesthetic and Environmental Amenities to
the Public.--The proximity to open space enhances the value of
nearby residential property. Farmland is a natural wastewater
treatment system. Unpaved land allows the recharge of the
ground water that urban residents need. Farms are stopovers for
migratory birds. Farmers are stewards for 65 percent of non-
Federal lands and provide habitat for 75 percent of wildlife.
--Sustaining Important Strategic Resources.--This nation's abundant
food supply bolsters national security and eases world tension
and turmoil. Science-based improvements in agriculture have
saved over a billion people from starvation and countless
millions more from the ravages of disease and malnutrition.
Publicly financed research is a necessary complement to private
sector research, focusing in areas where the private sector does not
have an incentive to invest, when (1) the pay-off is over a long term,
(2) the potential market is more speculative, (3) the effort is during
the pre-technology stage; and (4) where the benefits are widely
diffused. Public research also helps provide oversight and measure
long-term progress. Public research also acts as a means to detect and
resolve problems in an early stage, thus saving American taxpayer
dollars in remedial and corrective actions.
By any standard, the contribution of publicly supported
agricultural research to advances in food production and productivity
and the resulting public benefits are well documented. For example, an
analysis by the International Food Policy Research Institute of 292
studies of the impacts of agricultural research and extension published
since 1953 (Julian M. Austin, et al, A Meta-Analysis of Rates of Return
to Agricultural Research, 2000) showed an average annual rate of return
on public investments in agricultural research and extension of 81
percent!
national c-far urges enhanced federal funding for food and agricultural
research, extension and education
National C-FAR appreciates the longstanding support this
Subcommittee and the full Committee have demonstrated through funding
food and agricultural research, extension and education programs over
the years that have helped the U.S. food and agricultural sector be a
world leader and provide unprecedented value to U.S. citizens, and
indeed the world community.
National C-FAR is deeply concerned that shortfalls in food and
agricultural research funding in recent years jeopardize the food and
agricultural community's continued ability to maintain its leadership
role and more importantly respond to the multiple, demanding challenges
that lie ahead. Federal funding of food and agricultural research,
extension and education has been flat for over 20 years, while support
for other Federal research has increased substantially. At the same
time, public funding of agricultural research in the rest of the world
during the same time period has reportedly increased at a nearly 30
percent faster pace. This reduced public investment in food and
agricultural research may be the result of the U.S. food and
agricultural system working so well that the sector is a victim of its
own success. However, societal demands and expectations placed upon the
food and agricultural system are ever-changing and growing. Simply
stated, Federal funding has not kept pace with identified priority
needs.
National C-FAR is deeply concerned that shortfalls in food and
agricultural research funding in recent years jeopardize the food and
agricultural community's continued ability to maintain its leadership
role and more importantly respond to the multiple, demanding challenges
that lie ahead.
National C-FAR believes it is imperative to lay the groundwork now
to respond to the many challenges and promising opportunities ahead
through Federal policies and programs needed to promote the long-term
health and vitality of food and agriculture for the benefit of both
consumers and producers. Stronger public investment in food and
agricultural research, extension and education is essential in
producing research outcomes needed to help bring about beneficial and
timely solutions to multiple challenges. Multiple examples, such as
those listed below, serve to illustrate current and future needs that
arguably merit enhanced public investment in research:
--Strengthened bio-security is a pressing national priority. There is
a compelling need for improved bio-security and bio-safety
tools and policies to protect against bio-terrorism and dreaded
problems such as foot-and-mouth and ``mad cow'' diseases and
other exotic plant and animal pests, and protection of range
lands from invasive species.
--Food-linked health costs are high. Some $100 billion of annual U.S.
health costs are linked to poor diets, obesity, food borne
pathogens and allergens. Opportunities exist to create
healthier diets through fortification and enrichment.
--Research holds the key to solutions to environmental issues related
to global warming, limited water resources, enhanced wildlife
habitat, and competing demands for land and other agricultural
resources.
--There was considerable debate during the last farm bill
reauthorization about how expanded food and agricultural
research could enhance farm income and rural revitalization by
improving competitiveness and value-added opportunities.
--Energy costs are escalating, dependence on petroleum imports is
growing and concerns about greenhouse gases are rising.
Research can enhance agriculture's ability to provide renewable
sources of energy and cleaner burning fuels, sequester carbon,
and provide other environmental benefits to help address these
challenges, and indeed generate value-added income for
producers and stimulate rural economic development.
--Population and income growth are expanding the world demand for
food and improved diets. World food demand is projected to
double in 25 years. Most of this growth will occur in the
developing nations where yields are low, land is scarce, and
diets are inadequate. Without a vigorous response demand will
only be met at a great global ecological cost.
--Regardless of one's views about biotechnology and genetic
resources, an effective publicly funded research role is needed
for oversight and to ensure public benefits.
Finally, there is a continuing need to build the human capacity of
expertise to conduct quality food and agricultural research and
education, and to implement research outcomes in the field and
laboratory where such outcomes benefit consumers and others who need
the research results. The food and agricultural sciences face the same
daunting task of supplying the nation with the next generation of
scientists and educators that many of the scientific disciplines face
today. If these basic needs are not met, then the nation will face a
shortage of trained and qualified individuals.
Public investment in food and agricultural research, extension and
education of today and the future must simultaneously satisfies needs
for food quality and quantity, resource preservation, producer
profitability and social acceptability. National C-FAR supports the
public funding needed to help assure that these needs are met.
A Sense of the Congress resolution endorsed by National C-FAR to
double research funding within 5 years was incorporated into the 2002
Farm Bill that was enacted into law. However, the major commitment to
expanded research has not yet materialized. National C-FAR urges the
Subcommittee and Committee to fund the Administration's request for
food and agricultural research for fiscal year 2005, and to augment
this funding level to the maximum extent practicable, as an important
first step toward building the funding levels needed to meet identified
food and agricultural research needs.
conclusion
In conclusion, National C-FAR restfully submits that--
--The food and agricultural sector merits Federal attention and
support;
--Food and agricultural research, extension and education have paid
huge dividends in the past, not only to farmers, but to the
entire nation and the world;
--There is an appropriate and recognized role for Federal support of
research and education;
--Recent funding levels for food and agricultural research, extension
and education have been inadequate to meet pressing needs; and
--Federal investments in food and agricultural research should be
enhanced in fiscal year 2005 and beyond.
National C-FAR appreciates the opportunity to share its views and
stands ready to work with the Chair and members of this Committee in
support of these important funding objectives.
______
Prepared Statement of the National Commodity Supplemental Food Program
(CSFP) Association
Mr. Chairman and subcommittee members, I am Kathleen Devlin,
President of the National Commodity Supplemental Food Program (CSFP)
Association. Our Association of state and local CSFP operators works
diligently with the Department of Agriculture Food, Nutrition and
Consumer Service to provide a quality nutritionally balanced commodity
food package to low income persons aged sixty and older, and low income
mothers, infants, and children. The program, which was authorized in
1969, serves approximately 536,000 individuals every month in 32
states, 2 Tribal Organizations and the District of Columbia.
--Within the last 5 years, CSFP has added 10 new States to the
Program serving 113,792 new program participants, the vast
majority being low-income seniors.
--Of special note is the unprecedented growth of this program in
fiscal year 2003, during which an additional 84,160 people were
served.
--This unprecedented growth was the direct result of the fiscal year
2003 Conference Report that said: ``The conferees expect the
Department to make the full amount of these budgetary resources
available to support participation and caseload. The intention
of the conferees is to ensure at a minimum that the final
caseload in September 2003 can be maintained in 2004, while
meeting the requirements to protect the states that joined the
program in 2003.''
--The fiscal year 2005 President's Budget has proposed $98 million
for the CSFP. This is a 13 percent cut to the program and will
require 69,941 low-income seniors be removed from receiving
much needed nutritious commodities. This follows a 19 percent
increase in participation among existing CSFP states provided
last year as a direct result of Congressional Directives set
forth by Conferees in the Conference Report.
The CSFP's 35 years of service stands as testimony to the power of
partnerships between community and faith-based organizations, private
industry and government agencies. The CSFP offers a unique combination
of advantages unparalleled by any other food assistance program:
The CSFP specifically targets our nation's most nutritionally
vulnerable populations: the young children and the low-income
seniors.
The CSFP provides a monthly selection of food packages specifically
tailored to the nutritional needs of the population we serve.
Each eligible participant in the program is guaranteed [by law]
a certain level of nutritional assistance every month in
addition to life-changing nutrition education.
The CSFP purchases foods at wholesale prices, which directly supports
the farming community. The average food package for fiscal year
2004 is $13.20, and the retail cost would be approximately
$50.00.
The CSFP involves the entire community in the problems of hunger and
poverty. Thousands of volunteers as well as many private
companies donate money, equipment, and most importantly time to
deliver food to homebound seniors. These volunteers not only
bring food but companionship and other assistance to seniors
who might have no other source of support.
The Senate Agriculture Appropriations Sub-Committee has
consistently been supportive of CSFP, acknowledging it as a cost-
effective way of providing nutritional supplemental food packages to
low income eligible seniors, mothers and children. This year, your
support is needed urgently to prevent unprecedented 69,941 low-income
participants from being removed from this vital nutrition program.
commodity supplemental food program
national csfp association caseload & budget request for fiscal year
2005
$134 million requested
Fiscal year 2005 Caseload Slots, Including Seven New States.--
660,599 Slots
Fiscal year 2005 Funding Request.--$134.0 million
Base Caseload Requirements Existing States.--535,756 Slots
Total Cost Per Caseload Slot.--$158.40 ($13.20 blended monthly food
package cost 12 months) + $53.53 = $211.93 per
slot = $113.5 million
Expansion in Current States.--100,343 Slots
$118.80 ($13.20 blended monthly food package cost 9
months) + $40.14 ($158.40 prorated for 9 months) = $158.94
per slot = $15.9 million
New States.--24,500 Slots
Arkansas--5000; Delaware--2500; Oklahoma--5000; Maine--3000;
Virginia--3000; Utah--3000; Wyoming--3000 and this would
equal an additional $118.80 ($13.20 blended monthly food
package cost 9 months) + $40.14 ($158.40 prorated
for 9 months) = $158.94 per slot = $3.9 million
Estimated USDA Costs for Procuring Commodities.--$.8 million
Note: The National CSFP Association would like to bring to your
attention a comparison between the CSFP FFY 2004 Appropriation & FFY
2005 Proposed Appropriation.
--FFY 2004.--$98.9 million Appropriation + (approximately) $11.295
million cash carryover + (estimated) $6 million Commodity
Inventory = Total Program Resources fiscal year 2004 of $116
Million
--FFY 2005.--President's Proposed $98 Million (loss of 85,728 or 16
percent of the national caseload)
--Total Program Resources in fiscal year 2005 of $104.8 million (loss
of 69,941 senior slots or 13 percent national caseload)
restore senior income guidelines to 185 percent of poverty
Current income eligibility for senior clients is 130 percent of the
poverty income guidelines, as opposed to 185 percent of poverty as
originally established in 1981. We proposed that they be re-established
to 185 percent of poverty to be consistent with CSFP women, infants and
children and other Federal nutrition programs. Many seniors are
struggling with high housing, medical, and utility costs, and at the
lower poverty guideline, the slightest inflation increase in Social
Security income renders many seniors ineligible for CSFP.
Prepared Statement of the National Council of Farmer Cooperatives
Thank you, Mr. Chairman, and members of the Subcommittee. The
National Council of Farmer Cooperatives (NCFC) appreciates this
opportunity to submit its views regarding the fiscal year 2005
agriculture appropriations bill, and respectfully requests this
statement be made part of the official hearing record.
america's farmer cooperatives
NCFC is the national trade association representing America's
farmer cooperatives. There are nearly 3,000 farmer cooperatives across
the United States whose members include a majority of our Nation's more
than 2 million farmers. They exist for the mutual benefit of their
farmer members and provide them with increased opportunity to improve
their income from the marketplace and compete more effectively in the
global marketplace.
These farmer owned businesses handle, process and market virtually
every type of agricultural commodity grown and produced, along with
many related products; manufacture, distribute and sell a variety of
farm inputs; and provide credit and related financial services,
including export financing. Earnings derived from these activities are
returned by farmer cooperatives to their farmer members on a patronage
basis thereby enhancing their overall income.
America's farmer cooperatives also provide jobs for nearly 300,000
Americans with a combined payroll over $8 billion, further contributing
to our Nation's economic wellbeing. Many of these jobs are in rural
areas where employment opportunities are sometimes limited.
fiscal year 2005 budget proposal and recommendations
The administration's fiscal year 2005 budget proposal with regard
to USDA recommends maintaining support and funding for basic farm and
commodity programs as contained in the 2002 Farm Bill. We commend the
administration for its recommendation as these programs represent an
important safety net for producers and should continue to be fully
funded. There are also a number of other important programs within USDA
that should be given a high priority as summarized below.
USDA Farmer Cooperative Programs
There is a long history of congressional support for public policy
to enhance the ability of farmers to join together in cooperative self-
help efforts to improve their overall income from the marketplace,
capitalize on new market opportunities, and to compete more effectively
in the global marketplace.
USDA's Rural Business-Cooperative Service (RB-CS) mission area
includes responsibility for carrying out a variety of programs to help
achieve such objectives, including research, education and technical
assistance for farmers and cooperatives. Since the elimination of a
separate agency with responsibility for such programs, it is our
understanding that funding for such purposes has generally been
provided through the salary and expense budget relating to rural
development.
For fiscal year 2005, the administration's budget proposal provides
$666 million in both budget authority and program level for salaries
and expenses for the rural development mission area, compared to $627
million for fiscal year 2004. Since there is no separate line item
relating to programs in support of cooperative self-help efforts by
farmers and their cooperatives, we believe Congress should include as
it has in the past specific language directing that funding and
resources to carry out such programs be given a high priority.
Value-Added Agricultural Product Market Development Grants
USDA's Value-Added Agricultural Product Market Development Grants
Program is aimed at encouraging and enhancing farmer participation in
value-added businesses, including through farmer cooperatives, to help
them capture a larger share of the value of their production and
improve their overall income from the marketplace. It also helps
promote economic development and create needed jobs in rural areas.
The program is administered on a matching basis, thereby doubling
the impact of such grants and helping encourage needed investment. As a
cost-share program, it has served as an excellent example of an
effective public-private partnership that has been extremely successful
by any measure.
The 2002 Farm Bill significantly expanded this important program to
a level of $40 million. In fiscal year 2004, the program was reduced to
$15 million. For fiscal year 2005, the administration's budget proposal
recommends the program be maintained with a slight increase to $16
million. While this represents a significant change from last year's
budget proposal, which we are pleased to see, we continue to believe
this important program should be fully funded at $40 million.
Commodity Purchase Programs
USDA annually purchases a variety of commodities for use in
domestic and international feeding programs, including the school lunch
program. NCFC strongly supports such programs to: (1) meet the food and
nutrition needs of eligible consumers and (2) help strengthen farm
income by encouraging orderly marketing and providing farmers with an
important market outlet, especially during periods of surplus
production.
In addition to providing needed funding for such programs, it is
important to ensure that farmers who choose to cooperatively market
their production and related products, as well as their cooperatives,
are not limited or excluded, but remain fully eligible under such
programs. This is consistent with USDA's historical mission in support
of such cooperative efforts and essential to ensure the continued
availability of high quality products on a competitive basis.
B&I Loan Guarantee Program and Farmer Cooperatives
One of the major challenges facing farmer cooperatives in helping
farmers capture more of the value of what they produce beyond the farm
gate is access to equity capital. In approving the 2002 Farm Bill,
Congress made a number of changes to USDA's Business and Industry (B&I)
guaranteed loan program to better meet the needs of farmer cooperatives
and their farmer members. These included changes to allow farmers to
qualify for guaranteed loans for the purchase of stock in both new and
existing cooperatives to provide the equity capital needed to encourage
more involvement and participation in value-added activities.
For fiscal year 2005, the administration's budget proposal provides
an overall program level of $738 million, which represents a slight
increase over fiscal year 2004. Accordingly, we recommend that funding
be not less than this level.
Rural Business Investment Program
The Rural Business Investment Program was authorized under the 2002
Farm Bill to help foster rural economic development by encouraging and
facilitating equity investments in rural business enterprises,
including farmer cooperatives.
In fiscal year 2004, program funding was limited to $4 million for
the development of regulations and review of applications. We
understand, however, that such regulations remain pending. While the
fiscal year 2005 budget proposal would provide an increase to $11
million, this is still well below the level authorized in the 2002 Farm
Bill. Again, providing improved access to equity capital is essential
if farmers are going to be able to capitalize on value-added business
opportunities through cooperative self-help efforts. For these reasons,
we urge that the program be fully funded as authorized and that USDA be
encouraged to complete the rulemaking process in order for it to be
fully implemented as Congress intended.
International and Export Programs
USDA's export programs are vital to helping maintain and expand
U.S. agricultural exports, counter subsidized foreign competition, meet
humanitarian needs, protect American jobs, and strengthen farm income.
We believe such programs should be fully funded and aggressively
implemented to achieve these important objectives.
The administration's fiscal year 2005 budget proposal would provide
an overall increase in U.S. international and export programs. At the
same time, however, it would reduce or freeze several key programs.
In particular, we are very concerned over the proposal to freeze
USDA's Market Access Program (MAP) at $125 million instead of allowing
it to increase to $140 million as provided under the 2002 Farm Bill.
The program, which is administered on a cost-share basis, continues to
be tremendously effective in encouraging and promoting U.S.
agricultural exports. At a time when our foreign competitors are
spending nearly as much to promote their products in just the U.S.
domestic market as the United States is spending world-wide, clearly
now is not the time to engage in any unilateral reduction in our export
programs. As a member of the Coalition to Promote U.S. Agricultural
Exports, we urge that funding be provided at $140 million as
authorized, together with $34.5 million for the Foreign Market
Development program as recommended.
Again, it is extremely important that USDA's export programs
continue to be fully funded, including the Export Credit Guarantee
Programs, the Export Enhancement Program, Dairy Export Incentive
Program, Technical Assistance for Specialty Crops, Food for Progress,
as well as Public Law 480 and other food assistance programs, including
McGovern-Dole.
Finally, we also want to take this opportunity to urge support to
ensure there is adequate funding and resources for USDA's Foreign
Agricultural Service to continue to effectively carry-out such programs
and to provide the technical assistance and support needed to help
maintain and expand U.S. agricultural exports.
Agricultural Research
Another important area of emphasis when it comes to enhancing the
global competitiveness of farmer cooperatives and American agriculture
is research. NCFC endorses the recommendations of the National
Coalition for Food and Agricultural Research, which has set an
objective of doubling Federal funding over the next 5 years.
Conservation Programs
The administration's fiscal year 2005 budget proposal includes
funding for a variety of conservation and related programs administered
by USDA's Natural Resources Conservation Service (NRCS). Many of these
programs were significantly expanded under the 2002 Farm Bill and
provide financial and technical assistance to help farmers and others
who are eligible to develop and carry out conservation and related
activities to achieve important environmental goals.
NRCS is also the lead technical agency within USDA offering ``on-
farm'' technical and financial assistance. We strongly support such
programs, including technical assistance activities that may be carried
out in partnership with the private sector involving farmer
cooperatives. Farmer cooperatives have invested heavily in developing
the technical skills of their employees to help their farmer members
address environmental concerns. It is estimated that 90 percent of all
members of the Certified Crop Advisor (CCA) program, for example, are
employed by the private sector and majority of those are employed by
farmer cooperatives.
Conclusion
Thank you again, Mr. Chairman and members of the Subcommittee, for
the opportunity to share our views. We appreciate this statement being
included in the official hearing record.
______
Prepared Statement of the National Potato Council
My name is Dwight Horsch. I am a potato farmer from Idaho and
current Vice President, Legislative/Government Affairs for the National
Potato Council (NPC). On behalf of the NPC, we thank you for your
attention to the needs of our potato growers.
The NPC is the only trade association representing commercial
growers in 50 states. Our growers produce both seed potatoes and
potatoes for consumption in a variety of forms. Annual production is
estimated at 437,888,000 cwt. with a farm value of $3.2 billion. Total
value is substantially increased through processing. The potato crop
clearly has a positive impact on the U.S. economy.
The potato is the most popular of all vegetables grown and consumed
in the United States and one of the most popular in the world. Annual
per capita consumption was 136.5 pounds in 2003, up from 104 pounds in
1962 and is increasing due to the advent of new products and heightened
public awareness of the potato's excellent nutritional value. Potatoes
are considered a nutritious consumer commodity and an integral,
delicious component of the American diet.
The NPC's fiscal year 2005 appropriations priorities are as
follows:
The NPC recognizes the difficult budget situation that the Congress
is facing and has carefully targeted its fiscal year 2005 priorities.
Potato Research
Cooperative State Research Education and Extension Service
(CSREES)
The NPC supports an appropriation of $1.75 million for the Special
Potato Grant program for fiscal year 2005. The Congress appropriated
$1.417 million in fiscal year 2004, a decrease from the fiscal year
2003 level of $1.584 million. This has been a highly successful program
and the number of funding requests from various potato-producing
regions is increasing.
--The NPC also urges that the Congress, once again, include Committee
report language as follows:
--``Potato research.--The Committee expects the Department to ensure
that funds provided to CSREES for potato research are utilized
for varietal development testing. Further, these funds are to
be awarded competitively after review by the Potato Industry
Working Group.''
Agricultural Research Service (ARS) Report Language
The NPC urges that the Congress once again add Committee report
language urging the ARS to work with the NPC on how overall research
funds can best be utilized for grower priorities.
ARS-CSREES Overall Funding
Congressionally Mandated Potato Research
The NPC urges that the Congress reject the Administration's budget
request to rescind all fiscal year 2004 Congressional increases for
research projects.
Foreign Market Development
Market Access Program (MAP)
The NPC also urges that the Congress maintain the spending level
for the Market Access Program (MAP) at its authorized level of $140
million for fiscal year 2005 and not support the Administration's
budget request to cap this valuable export program at the fiscal year
2004 level of $125 million.
Food Aid Programs
McGovern Dole
The Administration has requested $75 million for the McGovern-Dole
Food International Food Aid Program. The Administration requested and
the Congress provided $50 million in fiscal year 2004. The NPC supports
an appropriation of at least $100 million in fiscal year 2005.
Pest and Disease Management
Animal and Plant Health Inspection Service (APHIS)
Golden Nematode Quarantine.--The NPC supports $985,000 which is the
Administration's fiscal year 2005 budget request. The Congress
appropriated $792,000 in fiscal year 2004.
Pest Detection.--The NPC supports $45 million in fiscal year 2005,
which is the Administration's budget request. The Congress appropriated
$24 million in fiscal year 2004. Now that the Agriculture Quarantine
Inspection (AQI) program is within the new Homeland Security Agency,
this increase is essential for the Plant Protection and Quarantine
Service's (PPQ) efforts against potato pests and diseases such as
Ralstonia.
Trade Issues Resolution and Management.--The NPC supports $16
million for this program which is the Administration's budget request.
The Congress appropriated $12.4 million in fiscal year 2004. However,
language must be included that designates all or a part of such
increase for plant protection and quarantine activities. As new trade
agreements are negotiated, the agency must have the necessary staff and
technology to detect and to deal with the threat of pests and diseases.
The NPC relies heavily on APHIS-PPQ resources to resolve phytosanitary
trade barriers.
Funding Pest Eradication Programs.--The NPC supports having the
Congress once again include language to prohibit the issuance of a
final rule that shifts the costs of pest and disease eradication and
control to the states and cooperators.
Agricultural Statistics
National Agricultural Statistics Service (NASS)
The NPC supports sufficient funds and guiding language to assure
that the potato objective yield and grade and size surveys are
continued. The fiscal year 2004 Omnibus Bill included the following
language:--``The conferees also expect that both the potato objective
yield survey and the potato size and grade survey will be continued.''
______
Prepared Statement of the National Rural Housing Coalition
Mr. Chairman and members of the House Subcommittee on Agriculture,
my name is Robert Rapoza and I am the executive secretary of the
National Rural Housing Coalition.
The National Rural Housing Coalition (the Coalition) has been a
national voice for rural low-income housing and community development
programs since 1969. Through direct advocacy and policy research, the
Coalition has worked with Congress and the Department of Agriculture to
design new programs and improve existing programs serving the rural
poor. The Coalition also promotes a non-profit delivery system for
these programs, encouraging support for rural community assistance
programs, farm labor housing grants, self-help housing grants, and
rural capacity building funding. The Coalition is comprised of
approximately 300 members nationwide. We hope to work with you to
assure that the voices of rural America are heard and its needs met.
Our concerns are focused on rural housing and rural water and sewer
systems.
A disproportionate amount of the Nation's substandard housing is in
rural areas. Rural households are poorer than urban households, pay
more of their income for housing that their urban counterparts, and are
less likely to receive government-assisted mortgages. They also have
limited access to mortgage credit and the secondary mortgage market,
making them prime targets for predatory lending. Rural America needs
programs that focus on the issues facing it. The Rural Housing Service
of Rural Development provides many of these needed programs.
According to the 2000 Census, there are 106 million housing units
in the United States. Of that, 23 million, or 23 percent, are located
in non-metro areas. Many non-metro households lack the income for
affordable housing. The 2000 Census reveals that 7.8 million of the
non-metro population is poor, 5.5 million, or one-quarter of the non-
metro population, face cost overburden, and 1.6 million of non-metro
housing units are either moderately or severely substandard.
Renters in rural areas are the worst housed individuals and
families in the country. Thirty-five percent of rural renters are cost-
burdened, paying more than 30 percent of their income for housing
costs. Almost one million rural renter households suffer from multiple
housing problems, 60 percent of whom pay more than 70 percent of their
income for housing. The Section 515 rural rental housing loan program
at USDA serves low and very-low income families with safe affordable
housing.
Although issues around rental housing are of vital concern,
homeownership is the principal form of housing in rural America.
However, there are a number of obstacles to improving homeownership in
rural areas including high rates of poverty and poor quality of
housing. According to a 1999 Economic Research Service report, the
poverty rate in rural America was 15.9 percent, compared to 13.2
percent in urban areas.
Rural residents also have limited access to mortgage credit. The
consolidation of the banking industry that accelerated throughout the
1990s has had a significant impact on rural communities. Mergers among
lending institutions have replaced local community lenders with large
centralized institutions located in urban areas. Aside from shifting
the locus of loan making, this has resulted in the diminishment of a
competitive environment that, in the past, encouraged rural lenders to
offer terms and conditions that were attractive to borrowers.
rural housing service
Rural Rental Housing Program
Although we often talk about the surge in homeownership and all of
its benefits, not all us are or are prepared to be homeowners. USDA's
Rural Housing Service Section 515 rural rental housing program is
invaluable to low-income residents in rural areas. The portfolio
contains 450,000 rented apartments in Section 515 developments. The
delinquency rate is a low 1.6 percent. The average tenant income is
little more than $9,000, which is equal to only 30 percent of the
Nation's rural median household income. Sixty percent of the tenants
are elderly or disabled and one-quarter are minority.
The Federal Government's current investment in rural rental housing
is at its lowest level in more than 25 years. In fact, last year and
this year the Administration's budget included no funding for rural
rental housing production. Over the last 15 years, Congress and
Administrations of both parties have engaged in unwise budget cutting
of rural rental housing. Lending has declined from over $500 million a
year in 1994 to $114 million in fiscal year 2003 and 2004. As a result,
there is little production of new rental housing in rural areas.
As Congress considers future policy for rural housing, it faces two
challenges regarding rural rental housing. The first is to maintain the
existing stock of Section 515 units. The second is to increase the
production of affordable rental housing units in rural communities. The
current portfolio of Section 515 units represents an important resource
to low-income families in rural America. At a time of declining Federal
resources for rental housing, it is hard to envision a time in which
Federal policy will finance the development of a large number of rental
housing developments. It is important to preserve the existing stock.
RHS is facing an aging Section 515 portfolio. Of the 17,000
developments across the country, close to 10,000 are more than 20 years
old. To maintain those projects, it will take an investment of Federal
funds for restoration. That appears to be the focus of the
Administration's request for $60 million for servicing the existing
portfolio.
The Housing Act of 1987 regulated rural rental housing principally
financed under Section 515. This legislation placed a low-income use
restriction on Section 515 and also established financial incentives to
owners to maintain their properties for low-income housing. In general,
at the end of the initial 20-year use restriction, an owner could seek
an incentive to extend long-term low-income use, or sell the project to
a nonprofit organization or public body that would operate the housing
for low-income use.
A principal source of financing for incentives was the Section 515
and the use of these funds for equity loans authorized under Section
515. Roughly two-thirds of the Section 515 portfolio is regulated under
the 1987 Act. The lack of adequate funding for incentives has raised a
great concern among the owners. For the most part, the law limits their
options of seeking incentives or selling to a nonprofit organization or
public body. The demand for incentives is estimated at approximately
$100 million for equity loans alone. But cuts in Section 515 have
limited the ability of the USDA to implement a good preservation
program. However, as Congress and the Administration reduced funding
for Section 515, USDA reduced preservation funding to only about $5
million per year.
Section 521 rental assistance is used in conjunction with Section
515 to help families who cannot afford even their reduced rent. In
recent years, mostly in response to an escalating number of expiring
contracts, appropriations for rental assistance have gone up.
In the fiscal year 2004 appropriations conference report and the
fiscal year 2005 budget Congress and the Administration have reduced
the term on expiring rental assistance contracts from 5 years to 4
years. One possible result of this is to pile larger appropriations for
rental assistance to the out years.
This policy may solve a short term budget need but does not address
the need for rental assistance for the 90,000 low income households
living in section 515 units paying more than 30 percent of income for
rent. It also does not provide any assistance for the few newly
constructed units financed under section 515.
We urge the Committee to provide at least $250 million for section
515 loans and allocate at least $100 million of that amount for
preservation and rehabilitation of rural rental housing. We also urge
the Committee to restore rental assistance contracts to 5 years and
restore funding that is adequate to meet the needs of preservation and
new construction commitments contained in the appropriation of $250
million for section 515.
Section 502 Single Family Direct Loan Program
In recent years, the major trend in rural housing has been to
guarantee home ownership loans. The fiscal year 2005 level for
guarantees is approximately $2.75 billion. This program serves families
with incomes at 125 percent of median, substantially higher than that
of direct loans.
To qualify for the direct loan program, borrowers must have very
low or low incomes but be able to afford mortgage payments. Also,
applicants must be unable to obtain credit elsewhere, yet have
reasonable credit histories. The average income of households assisted
under Section 502 is $18,500. About 3 percent of households have annual
incomes of less than $10,000. Since its inception, Section 502 has
provided loans to almost 2 million families.
Under Section 502 home ownership, the current loan level totals
$1.367 billion. This will provide subsidized, direct loan financing for
about 15,000 units. Under this program, families receive a subsidized
loan for a period of 33 years. There is unprecedented demand for
section 502 direct loans in 2003; RHS closed 13,222 loans totaling
$1.037 billion. However, at the end of the fiscal year the agency had
on hand over 33,000 applications from qualified families totaling over
$2.5 billion.
The fiscal year 2004 lending level for Section 502 direct loans is
$1.366 billion, the largest in several years. These additional funds
are important in the Administration effort to improve minority home
ownership. However, this higher level will only address about 50
percent of the demand on hand in RHS offices across the country.
The fiscal year 2005 request reduces section 502 lending to $1.1
billion, a reduction of over $250 million. This cut is due to an
increase in subsidy rates without a corresponding increase in section
502 direct budget authority.
The section 502 program is an extremely low cost program. For
Direct 502, USDA will finance about 15,300 for a budget authority cost
of $8,170 per unit.
We urge the Committee to restore section 502 to loans to the
current rate $1.367 million.
Non-Profit Organizations
With dramatic program reductions and continued strength in the
Nation's real estate market, the private sector delivery system is no
longer dominant as it was when funding levels were higher, and in many
rural communities does not even exist. In some rural areas, non-profits
have picked up the slack and pursued a multiple funding strategy.
Skilled local organizations meld Federal, State, local and private
resources together to provide affordable financing packages to low-
income families. But there is not a dedicated source of Federal support
to promote a non-profit delivery system for rural housing.
As one way to improve its programs, USDA has expanded its
cooperation with non-profit housing and community development
organizations. Two successful programs are Mutual and Self-Help Housing
and the Rural Community Development Initiative.
Under Mutual and Self-Help Housing, with the assistance of local
housing agencies, groups of families eligible for Section 502 loans
perform approximately 65 percent of the construction labor on each
other's homes under qualified supervision. This program, which has
received growing support because of its proven model, has existed since
1961. The average number of homes built in each year over the past 3
years has been approximately 1,500. The budget request is for $34
million. We support this request.
The Rural Community Development Initiative (RCDI) program enhances
the capacity of rural organizations to develop and manage low-income
housing, community facilities, and economic development projects. These
funds are designated to provide technical support, enhance staffing
capacity, and provide pre-development assistance--including site
acquisition and development. RCDI provides rural community development
organizations with some of the resources necessary to plan, develop,
and manage community development projects. Using dollar-for-dollar
matching funds and technical assistance from 19 intermediary
organizations, some $12 million in capacity building funds were
distributed to 240 communities. This valuable program is also at risk
in the budget request this year--it has been eliminated. For fiscal
year 2005, we recommend $6 million for the Rural Community Development
Initiative to continue level funding for fiscal year 2002.
Farm Labor Housing
Two additional rental housing programs specifically address the
needs of farm laborers. Migrant and seasonal farmworkers are some of
the Nation's most poorly housed populations. The last documented
national study indicated a shortage of some 800,000 units of affordable
housing for farmworkers.
Farmworker households are also some of the least assisted
households in the Nation. Some 52 percent of farmworker households'
incomes are below the poverty threshold, four times the national
household poverty rate, and 75 percent of migrant farmworkers have
incomes below the poverty line. Yet little more than 20 percent of
farmworker households receive public assistance; most commonly food
stamps, rarely public or subsidized housing.
There are only two Federal housing programs that specifically
target farmworkers and their housing needs: Sections 514 and 516 of the
Housing Act of 1949 (as amended). Borrowers and grantees under Rural
Housing Service Sections 514 and 516 receive financing to develop
housing for farmworkers. Section 514 authorizes the Rural Housing
Service to make loans with terms of up to 33 years and interest rates
as low as 1 percent. Section 516 authorizes RHS to provide grant
funding when the applicant will provide at least 10 percent of the
total development cost from its own resources or through a 514 loan.
Non-profit housing organizations and public bodies use the loan and
grant funds, along with RHS rural rental assistance, to provide units
affordable to eligible farmworkers. These funds are used to plan and
develop housing and related facilities for migrant and seasonal
farmworkers.
Rural Utility Service
Hundreds of rural communities nationwide do not have access to
clean drinking water and safe waste disposal systems. According to the
2000 Census, approximately 1.9 million people lack indoor plumbing and
basic sanitation services, including potable water and sewer. According
to 1999 EPA Safe Drinking Water Needs Survey, $48 billion will be
required over the next 20 years to ensure that communities under 10,000
have safe drinking water supplies. According to EPA's 2000 Clean Water
Needs Survey $16 billion is required over the next 20 years to provide
wastewater treatment facilities communities under 10,000, and over
19,000 wastewater facilities will be needed for these communities. In
all, small communities will need to identify some $64 billion in order
to meet their water and wastewater needs.
Many projects that the Rural Utilities Service funds are under
consent order from the state EPA office for immediate action. The
problems that the agency deals with range from communities and systems
that are out of compliance with health and pollution standards, to
communities without sewer systems where raw sewage runs in ditches
after a heavy rainfall. Because so much time and money are spent on
critical needs, the state offices spend less time on prevention. The
programs and communities do not have enough resources to address issues
before they become larger problems.
The issue of affordability moves to the forefront with waste
disposal systems, which are generally more expensive than water
systems. Waste systems naturally succeed water systems--with central
water comes indoor plumbing, washing machines, dishwashers, etc., all
of which eventually require an efficient wastewater disposal system.
Low-income communities often already pay as much as they can afford for
water service alone and are unable to manage the combined user fees for
water and waste. According to EPA data, ratepayers of small rural
systems are charged up to four times as much per household as
ratepayers of larger systems. In some extreme situations, some
households are being forced out of homeownership because they cannot
afford rising user costs.
Small water and wastewater systems lack the economies of scale
needed to reduce costs on their own. In order for communities to cut
back on project costs and have affordable rates, operation and
maintenance are typically underestimated in the budgets for many new
systems. This often results in limited or no capital improvement
accounts for future upgrades and expansions needed for community
development including stabilization of local small business, affordable
housing development, and other needed industrial development.
USDA's Rural Utilities Service (RUS) is the primary Federal force
in rural water and waste development, providing loans and grants to
low-income communities in rural areas. The agency assists low-income
rural communities that would not otherwise be able to afford such
services. Nearly all the communities RUS served last year had median
household income below that state non-metro median household income.
In providing these important services, the program also protects
public health and promotes community stabilization and development.
Aging municipal sewage systems alone are responsible for 40,000
overflows of raw sewage each year. The overflows cause health hazards
including gastrointestinal problems and nausea, as well as long-term
damage to the environment. Businesses and industries are unable or
reluctant to locate in areas without functioning water and sewer
systems. But with the assistance of RUS, communities are able to have
the services they need so that their health and economies may benefit.
Through Federal and State initiatives, RUS is working to confront
the challenges faced by rural communities. With increasingly restricted
time and money, state offices are using other resources such as
leveraged funds and technical assistance from the Rural Community
Assistance Program (RCAP). Funds are being leveraged through HUD's
Community Development Block Grant program and the EPA's State Revolving
Loan Funds, as well as some private lenders. RCAP provided services to
over 2000 communities last year in 50 States, including Puerto Rico and
leveraged over $200,000,000 in additional funding for water and
wastewater infrastructure projects in the communities served. The RCAP
program has proven to be an effective and efficient way of ensuring
that small rural communities receive the information, technical
assistance, and training needed to provide for the water and waste
disposal needs of their residents.
We urge the Committee to restore funding to the fiscal year 2004
rate.
Other Federal Agencies
Other Federal agencies have not picked up the slack in providing
assistance for rural areas. Rural households have limited access to
mortgage credit and the secondary mortgage market. Rural households are
less likely to receive government-assisted mortgages than their urban
counterparts. According to the 1995 American Housing Survey, only 14.6
percent of non-metro residents versus 24 percent of metro residents
receive Federal assistance. Moreover, poor rural renters do not fair as
well as poor urban renters in accessing existing programs. Only 17
percent of very low-income rural renters receive housing subsidies,
and, overall, only 12 percent of HUD Section 8 assistance goes to rural
areas. Only 7 percent of Federal Housing Administration (FHA)
assistance goes to non-metro areas. On a per-capita basis, rural
counties fared worse with FHA, receiving only $25 per capita versus
$264 per capita in metro areas. Programs such as HOME, CDBG and FHA may
have the intention of serving rural areas, but fail to do so to the
appropriate extent. One of the few programs at HUD targeted to rural
areas is the Rural Housing and Economic Development (RHED) program. The
budget proposes to eliminate the program.
Mr. Chairman and members of the Committee, we look to you for
continued support of the efforts of Rural Development. These programs
are vital to the survival of our small communities nationwide. They
address the most basic needs of affordable housing and clean water that
still exist all over the country.
We appreciate your past support and your attention to this matter.
______
Prepared Statement of the National Rural Telecom Association
summary of testimony requests
Project involved: Telecommunications lending programs administered
by the Rural Utilities Service of the U.S. Department of Agriculture
Actions proposed:
--Supporting loan levels for fiscal year 2005 in the amounts
requested in the President's budget for 5 percent direct, cost
of-money and guaranteed loans and the associated subsidy, if
required, to fund those programs at the requested levels.
Supporting Rural Telephone Bank loans in the same amount, as
contained in the fiscal year 2004 Agriculture Appropriations
Act. Opposing the budget recommendation to not fund new Rural
Telephone Bank loans in fiscal year 2005.
--Supporting continued funding, as requested in the President's
budget, in the amount of $25 million in grant authority
designated for distance learning and medical link purposes.
--Supporting the budget request for $331 million in direct loans for
broadband facilities and internet service access provided
through discretionary funding.
--Supporting elimination of the restriction on retirement of Rural
Telephone Bank Class A stock, as requested in the President's
budget. Supporting an extension of the prohibition against the
transfer of Rural Telephone Bank excess funds to the general
fund as well as the requirement that Treasury pay interest on
all Bank funds deposited with it. Opposing the proposal
contained in the budget to transfer funds from the unobligated
balances of the liquidating account of the Rural Telephone Bank
for the bank's administrative expenses.
Mr. Chairman, Members of the Committee: My name is John F. O'Neal.
I am General Counsel of the National Rural Telecom Association. NRTA is
comprised of commercial telephone companies that borrow their capital
needs from the Rural Utilities Service of the U.S. Department of
Agriculture (RUS) to furnish and improve telephone service in rural
areas. Approximately 1000, or 71 percent of the nation's local
telephone systems borrow from RUS. About three-fourths of these are
commercial telephone companies. RUS borrowers serve almost 6 million
subscribers in 46 states and employ over 22,000 people. In accepting
loan funds, borrowers assume an obligation under the act to serve the
widest practical number of rural users within their service area.
Program Background
Rural telephone systems have an ongoing need for long-term, fixed
rate capital at affordable interest rates. Since 1949, that capital has
been provided through telecommunications lending programs administered
by the Rural Utilities Service and its predecessor, the Rural
Electrification Agency (REA).
RUS loans are made exclusively for capital improvements and loan
funds are segregated from borrower operating revenues. Loans are not
made to fund operating revenues or profits of the borrower system.
There is a proscription in the Act against loans duplicating existing
facilities that provide adequate service and state authority to
regulate telephone service is expressly preserved under the Rural
Electrification Act.
Rural telephone systems operate at a severe geographical handicap
when compared with other telephone companies. While almost 6 million
rural telephone subscribers receive telephone service from RUS borrower
systems, they account for only four percent of total U.S. subscribers.
On the other hand, borrower service territories total 37 percent of the
land area--nearly 1.5 million square miles. RUS borrowers average about
6 subscribers per mile of telephone line and have an average of more
than 1,000 route miles of lines in their systems.
Because of low-density and the inherent high cost of serving these
areas, Congress made longterm, fixed rate loans available at reasonable
rates of interest to assure that rural telephone subscribers, the
ultimate beneficiaries of these programs, have comparable telephone
service with their urban counterparts at affordable subscriber rates.
This principle is especially valid today as the United States endeavors
to deploy broadband technology and as customers and regulators
constantly demand improved and enhanced services. At the same time, the
underlying statutory authority governing the current program has
undergone significant change. In 1993, telecommunications lending was
refocused toward facilities modernization. Much of the subsidy cost has
been eliminated from the program. In fact, most telecommunications
lending programs now generate revenue for the government. The subsidy
that remains has been targeted to the highest cost, lowest density
systems in accordance with this administration's stated objectives.
We are proud to state once again for the record that there has
never been a default in the RUS/REA telephone program! All loans have
been repaid in accordance with their terms, over $11 billion in
principal and interest at the end of the last fiscal year.
Need for RUS Telecommunications Lending Continues
The need for rural telecommunications lending is great today,
possibly even greater than in the past. Technological advances make it
imperative that rural telephone companies upgrade their systems to keep
pace with improvements and provide the latest available technology to
their subscribers. And 2 years ago, Congress established a national
policy initiative mandating access to broadband for rural areas. But
rapid technological changes and the inherently higher costs to serve
rural areas have not abated, and targeted support remains essential.
Competition among telephone systems and other technological
platforms has increased pressures to shift more costs onto rural
ratepayers. These shifts led to increases in both interstate subscriber
line charges and universal service surcharges on end users to recover
the costs of interstate providers' assessments to fund the Federal
mechanisms. Pressures to recover more of the higher costs of rural
service from rural customers to compete in urban markets will further
burden rural consumers. There is a growing funding crisis for the
statutory safeguards adopted in 1996 to ensure that rates, services and
network development in rural America will be reasonably comparable to
urban telecommunications opportunities.
The FCC and the states have yet to honor the balance Congress
achieved in the 1996 policy, as regulators (a) radically revise the
mechanisms for preserving and advancing universal service, (b)
interpret the Act's different urban and rural rules for how incumbent
universal service providers and their competitors connect their
networks and compensate each other (c) respond to pressures to
deregulate. Regulators continue to give new entrants advantages at the
expense of statutory universal service provisions. The FCC appears to
remain committed to further extending its wholly inadequate way to
measure the costs of modern, nationwide access to telecommunications
and information. The FCC needs to reorder its priorities to ensure that
rural Americans are not denied the ongoing network development and new
services the Act requires.
Expanded Congressional Mandates for Rural Telecommunications
Considerable loan demand is being generated because of additional
mandates for enhanced rural telecommunications standards contained in
the authorizing legislation. We are, therefore, recommending the
following loan levels for fiscal year 2005 and the appropriation of the
associated subsidy costs, if required, to support these levels:
------------------------------------------------------------------------
------------------------------------------------------------------------
5 percent Direct Loans.................................. $145,000,000
Cost-of-Money Loans..................................... 250,000,000
Guaranteed Loans........................................ 100,000,000
Rural Telephone Bank Loans.............................. 175,000,000
---------------
Total............................................. 670,000,000
------------------------------------------------------------------------
These are essentially the same levels established in the fiscal
year 2004 appropriations act for the 5 percent direct, cost-of-money
and Rural Telephone Bank loan programs and the same amounts for 5
percent direct, cost-of-money and guaranteed loans as requested in the
President's budget for fiscal year 2005. The authorized levels of loans
in each of these programs were substantially obligated in fiscal year
2003 and the administration estimates that authorized program levels
will be fully met in fiscal year 2004. We believe that the needs of
this program balanced with the minimal cost to the taxpayer make the
case for its continuation at the stated levels.
Rural Telephone Bank Loans
The administration again proposes to not fund new Rural Telephone
Bank (RTB) loans in fiscal year 2005.
The Rural Telephone Bank was established by Congress in 1971 to
provide supplemental financing for rural telephone systems with the
objective that the bank ultimately would be owned and operated by its
private shareholders. Privatization of the RTB began in 1995 under the
current law and the retirement of Class A government stock is
proceeding annually at the rate of approximately $25 million per year.
The Bank has now retired over 32 percent of the government's $592
million investment, leaving a current balance of $400 million. As
pointed out in our testimony in previous years, not funding new loans
in the next fiscal year could actually impede privatization of the Bank
since the law requires that the Bank annually retire government stock
at the rate of at least 5 percent of the amount of Class B stock sold
in connection with new loans. If no new loans were made, there would be
no minimum requirement for retirement of additional government stock.
We are supporting the administration request to eliminate the 5 percent
annual restriction on the retirement of government stock giving it
additional flexibility to accelerate privatization of the bank. No
additional incentives are necessary. In the meantime, while the
administration develops a comprehensive plan for bank privatization, we
believe the direct loan program should continue, at existing levels,
without disruption.
The current loan level of $175 million has remained the same for
many years. As a matter of fact, after factoring in the eroding effect
of inflation, loan levels over the years have actually been reduced
systematically. Despite this fact, we believe that the $175 million
level is adequate to meet current program needs and strikes a cost
effective balance for the taxpayer. If no bank loans were made in
fiscal year 2005, the budgetary outlay savings would be minimal because
RTB loans are funded over a multi-year period. Moreover, if
administration interest rate predictions are accurate, RTB loans will
generate revenue for the government because of the minimum statutory
interest rate of 5 percent!
Broadband Loans Under the 2002 Farm Act (Public Law 101-171)
The administration is recommending again this year that the
mandatory funding of loans for the deployment of broadband technology
in rural areas provided in the recent farm act in the amount of $20
million (new section 601(j)(1)(A) of the Rural Electrification Act of
1936) be rescinded in fiscal year 2005 and in its place the budget
requests $9.9 million in new discretionary authority for these
purposes. Given the fact that the program is operating in fiscal year
2004 with carry over balances from mandatory authority of $38.8 million
and discretionary authority of $13 million, providing $2.2 billion in
loan levels in fiscal year 2004, we do not object to this reduction for
next year. We are, therefore, supporting the administration's budget
request of $9.9 million for this program that will provide
approximately $331 million in loan levels for fiscal year 2005.
Specific Additional Requests
--Eliminate the Restriction on Retirement of Class A Government Stock
in the Rural Telephone Bank (RTB) but Continue the Prohibition
Against Transfer of RTB Funds to the General Fund and Require
the Payment of Interest by Treasury
The Administration has recommended in the budget that the 5 percent
annual statutory restriction on the retirement of Class A government
stock in the Rural Telephone Bank be eliminated. The association
supports that proposal. However, we urge the Committee in the general
provisions of the bill to continue the prohibition against the transfer
of any unobligated balance in the bank's liquidating account, in excess
of current requirements, to the general fund of the Treasury along with
the requirement that the bank receive interest on those deposited
funds. The private Class B and C stockholders of the Rural Telephone
Bank have a vested ownership interest in all assets of the bank
including its funds and Congress should assure that their rights are
protected. Previous appropriations acts (fiscal years 1997 through
2004) have recognized the ownership rights of the private Class B and C
stockholders of the bank by prohibiting a similar transfer of the
bank's excess unobligated balances which otherwise would have been
required under the Federal credit reform act.
The current statutory provision, also contained in previous years'
appropriations acts, that requires Treasury to pay interest on bank
funds deposited with it should be continued in fiscal year 2005 in the
same general provision of the bill.
--Reject Budget Proposal to Transfer Funds from RTB Liquidating
Account for Administrative Costs
The President's budget proposes that the bank assume responsibility
for its administrative costs by a transfer of funds from the
unobligated balances of the bank's liquidating account rather than
through an appropriation from the general fund of the Treasury. This
recommendation is contrary to the specific language of Sec. 403(b) of
the RTB enabling act and would require enactment of new authorizing
legislation as a prerequisite to an appropriation. It would not result
in budgetary savings and has been specifically rejected by this
Committee in previous years. No new justification is contained in this
year's budget and once again we request its rejection.
--Loans and Grants for Telemedicine, Distance Learning and Internet
Access
We support the continuation in fiscal year 2005 of the $25 million
in grant authority provided in the President's budget for medical link
and distance learning purposes. The purpose of these grants is to
accelerate deployment of telemedicine and distance learning
technologies in rural areas through the use of telecommunications,
computer networks, and related advanced technologies by students,
teachers, medical professionals, and rural residents.
Conclusion
Thank you for the opportunity to present the association's views
concerning this vital program. The telecommunications lending programs
of RUS continue to work effectively and accomplish the objectives
established by Congress at a minimal cost to the taxpayer.
______
Prepared Statement of the National Telecommunications Cooperative
Association
summary
NTCA makes the following fiscal year 2005 funding recommendations
with regard to the Rural Utilities Service Telecommunications Loan
Program and related programs.
--Support the provisions of the President's budget proposal calling
for the required subsidy to fully fund the RUS
Telecommunications Loan Program's Hardship Account at a $145
million level, Cost of Money Account at a $250 million level,
and the Guaranteed Account at a $120 million level.
--Reject the provisions of the President's budget proposal calling
for zero funding for the Rural Telephone Bank (RTB). Instead,
provide the required subsidy to fully fund the bank at last
fiscal year's $175 million level.
--Support an extension of language that temporarily sets aside the 7
percent interest rate cap on loans made through the RUS Cost of
Money fund.
--Support an extension of the restriction against RTB Liquidating
Account funds from being transferred into the general Treasury.
--Support an extension of language prohibiting the expenditure of RTB
Liquidating Account funds to provide for the subsidy or
operational expenses of the bank.
--Reject the provisions of the President's budget proposal calling
for funding the Rural Broadband Access Loan and Loan Guarantee
Program to be funded through discretionary funding and instead
funded at a level consistent with authorizing language and
reject efforts to sweep carryover balances.
--Support the provision of the President's budget funding Distance
Learning and Telemedicine Grants.
--Preserve RBCS Rural Development Grant and Loan Programs as well as
the Rural Economic Development Loan and Grant Program.
background
NTCA is a national association representing more than 560 small,
rural, cooperative and commercial, community-based local exchange
carriers (LECS) located throughout the Nation. These locally owned and
operated LECS provide local exchange service to more than 2.5 million
rural Americans. While serving close to 40 percent of the geographic
United States, NTCA members serve only 4 percent of the country's
access lines. Since the creation of the RUS Telecommunications Loan
Program, more than 80 percent of NTCA's member systems have been able
to utilize the Federal program to one degree or another.
NTCA's members, like most of the country's independent LECS,
evolved to serve high-cost rural areas of the Nation that were
overlooked by the industry's giants as unprofitable. On average, NTCA
members have approximately 6 subscribers per mile of infrastructure
line, compared with 130 for the larger urban-oriented LECs. This
results in an average plant investment per subscriber that is 38
percent higher for NTCA members compared to most other systems.
Congress recognized the unique financing dilemma confronting
America's small rural LECS as early as 1949, when Congress amended the
Rural Electrification Act (REA) to create the Rural Electrification
Administration Telephone Loan Program. Today, this program is known as
the RUS Telecommunications Loan Program. Through the years Congress has
periodically amended the REA to ensure that original mission--to
furnish and improve rural telephone service--was met. In 1971, the
Rural Telephone Bank (RTB) was created to as a supplemental source of
direct loan financing. In 1973, the RUS was provided with the ability
to guarantee Federal Financing Bank (FFB) and private lender notes. In
1993, Congress established a fourth lending program--the Treasury Cost
of Money account. In 2002, Congress again met the changing demands of
the telecommunications industry with the establishment of the Rural
Broadband Access Loan and Loan Guarantee Program.
rus helps meet infrastructure demands
While the RUS has helped the subscribers of NTCA's member systems
receive service that is comparable or superior to that available
anywhere in the Nation, their work is far from complete. As the
Telecommunications Act of 1996 and other Federal policies continue to
evolve, and as policymakers and the public alike continue to clamor for
the deployment of advanced telecommunications services, the high costs
associated with providing modern telecommunications services in rural
areas will not diminish.
RUS telecommunications lending has stimulated billions of dollars
in private capital investment in rural communications infrastructure.
In recent years, on average, less than a few million in Federal subsidy
has effectively generated $690 million in Federal loans and guarantees.
For every $1 Federal funds that was invested in rural communications
infrastructure, $4.50 in private funds was invested.
In addition, two other RUS-related programs are making a difference
in rural America. Formerly known as the Zero Interest Loan and Grant
Program, the Rural Economic Development Grants Programs, and the Rural
Economic Development Loans Programs are now managed by the Rural
Business Cooperative Service. The two programs provide funds for the
purpose of promoting rural economic development and job creation
projects, including for feasibility studies, start-up costs, incubator
projects and other expenses tied to rural development.
ntca's fiscal year 2005 appropriations recommendations
Fully Fund The Entire RUS Telecommunications Loan Program
It is imperative that the entire RUS Telecommunications Loan
Program be funded at the following levels:
------------------------------------------------------------------------
------------------------------------------------------------------------
Hardship Account........................................ $145,000,000
Cost of Money/Treasury Account.......................... 250,000,000
Guaranteed Account...................................... 120,000,000
Rural Telephone Bank Account............................ 175,000,000
------------------------------------------------------------------------
Included in the Farm Bill (Public Law 107-171) was authorization of
the Rural Broadband Access Loan and Loan Guarantee program. Built upon
a record of strong demand during its pilot status, congressional
language was explicit in its intent to assist in broadband deployment
in the smallest and most rural communities in the United States. In
2003, USDA and RUS officials unveiled the regulations and were able
make available $1.4 billion in loans (fiscal year 2002 and 2003 funds).
An appropriate level of funding must be maintained in this program to
meet the continually growing needs of advanced telecommunications
services across the United States.
Additionally, to support the operations of the RUS, it is critical
that Congress provide at least $41.562 million in administrative
appropriations the president's budget proposal envisions.
Reject the President's Proposal To Provide Zero RTB Funding
The president's budget contains a proposal recommending the Rural
Telephone Bank should not be funded in fiscal year 2005. In presenting
last year's budget, the administration stated that the RTB had outgrown
its need and usefulness. NTCA adamantly disagrees as the demand for
advanced telecommunications services continues to grow and our members
continue to meet this demand. To this end, we believe the president's
decision to zero out funding for the RTB is without merit.
NTCA remains committed to privatization and this transition to a
private entity will require legislative changes to the Rural
Electrification Act. NTCA believes this should occur with minimal
disruptions to existing capital markets. In light of this fact, as well
Congress' decision to reject the president's previous proposal to zero
out RTB funding, we urge Congress to again reject this ill-conceived
proposal and instead fully fund the bank at its regular $175 million
annual level.
Extend Removal Of the Interest Rate Cap On Treasury-Rate Loans.
NTCA is also requesting that Congress again include language
removing the 7 percent interest rate cap on Treasury-rate loans. This
provision has been included in recent appropriations measures to
prevent the potential disruption of the program in the case where
interest rates exceed 7 percent and insufficient subsidy cannot support
authorized lending levels.
Prohibit The Transfer Of Unobligated RTB Liquidating Account Balances
NTCA also recommends that Congress continue the prohibition against
the transfer of any unobligated balances of the Rural Telephone Bank
liquidating account to the general fund of the Treasury. This language
has routinely been included in annual appropriations measures since the
enactment of the Federal Credit Reform Act (FCRA, Public Law 101-508)
that allows such transfers to potentially occur. Restatement of this
language will ensure that the RTB's private class B & class C
stockholders are not stripped of the value of their statutorily
mandated investment in the Bank.
While USDA has worked with the industry to ensure an RTB
privatization that does not harm the rural telecommunications sector,
NTCA remains concerned about the Office of Management and Budget and
the Department of Treasury. The industry is well aware of the
difficulties that have occurred as part of the joint USDA-OMB-Treasury
Privatization Task Force. NTCA remains extremely skeptical of OMB and
Treasury's good faith efforts and has worked very closely with the RTB
Directors and the RUS Administrator through the privatization process.
We believe that OMB and Treasury have yet to fully engage on the issue
of privatization and work with USDA. For these reasons, we believe
language extending the prohibition of more than 5 percent of Class A
stock to be retired, must be included.
Prohibit RTB From Self Funding Subsidy and Administrative Costs
NTCA urges Congress to maintain its prohibition against unobligated
RTB Liquidating Account Balances being used to cover the bank's
administrative and operational expenses for the following reasons: (1)
such action would require amending the REA, (2) the proposal appears to
be in conflict with the intent of the FCRA, (3) the proposal will not
result in Federal budgetary savings, (4) it is unnecessary to the
determination of whether the bank could operate independently, and thus
would amount to wasting the resources of the bank which could be put to
better use upon its complete privatization.
Reject the President's Proposal to fund the Rural Broadband Access Loan
and Loan Guarantee Program through discretionary funding and
reject efforts to sweep carryover balances
Acting on the tremendous demand for advanced rural
telecommunications, the Congress authorized the Rural Broadband program
as part of the 2002 Farm Bill and provided for $100 million for the
program until 2007. The mandate from Congress was to provide loans to
the most underserved areas of rural America. Since enactment, RUS has
received over $1 billion in loan applications and has struggled to
approve loans and meet the demand. Accordingly, we believe the
President's proposal to sweep carryover balances do not recognize the
current demand for funding and is NTCA believes the President's budget
request to cancel the $20 million in mandatory funding, and instead
fund through discretionary spending, should be rejected and the Rural
Broadband Access Loan and Loan Guarantee Program should be funded
consistent with congressional authorization.
NTCA's annual member survey shows our members are offering
broadband (200 kbps) to 70 percent of their customer base, members have
expressed interest in using the Broadband program to augment broadband
availability to their ``last mile'' customers. While we are concerned
about the number of loans approved by RUS, NTCA believes that calls for
statutory or regulatory changes are extremely premature.
Support the President's request for Distance Learning and Telemedicine
grants
The DLT grant program has had tremendous success in rural America
and NTCA believes such grants add to NTCA members long standing efforts
to their local communities. For NTCA's 50 years, our members have
utilized the Rural Utilities Service to provide basic telephone
service, advanced telecommunications services, and economic development
to rural America. Our members have also been prudent stewards of the
taxpayer funds and are extremely concerned about the loan defaults
within the DLT Loan program. While extremely well-intended, the DLT
Loan program has yet to live up to the high level of expectations
envisioned by Congress. Consistently, DLT Loan levels falling
significantly short of authorized loan levels. NTCA believes that
overwhelmingly those entities interested in the DLT program, lack the
legal authority to secure loans and are dependant upon grants. NTCA
believes such taxpayer's funds could be better spent in rural America.
Preserve RBCS Rural Development Grant and Loan Programs as well as the
Rural Economic Development Loan and Grant Program
These loans and grants, which are administered at the local level
by rural telephone and electric systems, help fund economic and
community development--business expansion and start-up, community
facilities, schools and hospitals, emergency vehicles, etc.--in some of
the most rural areas of the country. Our member companies have used a
variety of these programs to further their economic commitment to the
community and we are extremely supportive of these programs and
Congress to ensure adequate funding is at levels that meets the
expandingdemand for the programs.
conclusion
The RUS Telecommunications Loan Program bears a proud record of
commitment, service and achievement to rural America. Never in its
entire history has the program lost a dollar to abuse or default--
unparalleled feat for any government-sponsored lending program. Cleary
such a successful program should remain in place to continue ensuring
rural Americans have the opportunity to play a leading role in the
information age in which we live. After all, an operational and
advanced rural segment of the Nation's telecommunications
infrastructure is critical to truly ensuring that the national
objective of universal telecommunications service is fulfilled. We look
forward to working with you to accomplish this objective.
______
Prepared Statement of the National Treasury Employees Union
Mr. Chairman, Senator Byrd, and Members of the Subcommittee, I am
pleased to present the testimony of the National Treasury Employees
Union (NTEU) concerning the fiscal year 2005 appropriation for the Food
and Drug Administration (FDA).
NTEU represents more than 150,000 Federal employees across the
Federal Government, including the employees who work at the Food and
Drug Administration. I want to thank you for giving me the opportunity
to present testimony on behalf of these dedicated men and women who
work to ensure the safety of our food, drugs, cosmetics, and medical
devices. It has been the FDA employees, day in and day out, who have
responded to the call of the American people to ensure that our food
supply is safe and that more effective drugs and medical products are
brought to consumers quickly. In fact, the FDA regulates more than $1
trillion worth of products that account for about 25 cents out of every
dollar of American consumer spending. The FDA is staffed with experts
in an extraordinary range of fields. Microbiologists, chemists,
consumer safety officers, and others are working around the clock
testing, approving, and regulating new drugs, robotics, and other
medical devices, that will not only improve the health conditions for
millions of Americans, but in many cases actually save lives. They are
working to ensure that the food we eat is safe and free of disease-
causing contaminants, and working to ensure that new food products,
food additives, and dietary supplements pose no threat to our health.
And the FDA employees who work in the field offices and
laboratories located throughout the country have developed valuable
working relationships with top scientists, health officials, and local
industries. These employees help protect consumers from mislabeled
foods, food borne diseases, defective medical devices, or unsafe
cosmetics or drugs. And they work very closely with Customs, USDA, and
others at our borders and ports, to inspect and test imported foods and
drugs.
FDA would be one of the last parts of government where one would
want to hire employees on the cheap. When I talk with our NTEU members
at FDA, I am amazed not only at the professionalism and extraordinary
talent and quality of these employees, but their commitment to public
service. Scientists, chemists, and professionals of every sort tell me
that they prefer working in public service. However, they also tell me
that if forced to choose between public service or, for example, being
able to send their children to college, they would reluctantly feel
forced to accept a position in the private sector in order to obtain
such legitimate desires. I know this Subcommittee has the wisdom to see
that FDA remain the employer of choice for dedicated, trustworthy
professionals interested in working in public service.
Employees at the FDA, both professionals and administrative staff,
lag behind their private sector peers in compensation. In fiscal year
2004, the Administration proposed a 2.0 percent pay raise for Federal
employees on the GS scale. Congress rejected this miserly pay
adjustment and legislated a 4.1 percent increase. It would have been
wiser fof the Administration to have included the assumption of a fair
pay raise in their fiscal year 2004 budgeting. However, better late
than never, they have included funding in this year's FDA budget to
fund the fiscal year 2004 4.1 percent pay raise. Yet, once again, the
FDA budget submitted to Congress assumes only a 1.5 percent pay
adjustment for fiscal year 2005. NTEU has called upon Congress to
provide Federal employees with a 3.5 percent pay raise, reflecting the
historic parity between civilian and military pay. We will be working
for this parity in Congress and believe that the FDA budget should
reflect this more appropriate amount.
The Administration's Budget proposal also provides funding for
relocation costs to the White Oak facility. During fiscal year 2005,
1,700 drug review personnel will be relocated to the White Oak
facility. The Administration has asked for $20.6 in new budget
authority and $10 million in PDUFA user fees for relocation expenses.
NTEU strongly supports this request. Consolidation of the various FDA
facilities in the Washington metropolitan area is sensible and will add
obvious improvements to FDA operations. However, NTEU opposes any plans
to consolidate certain out of region field laboratories, particularly
the St. Louis laboratory, with the White Oak facility. As the President
of NTEU, I can tell you that these highly skilled employees will not
relocate to White Oak. The result of such out of region consolidation
will be the loss of these prized professionals. This is not in the
public interest. In past years, the Congress has included a provision
directing FDA management not to to close these field laboratories. NTEU
would ask that Congress again do so this year.
I want to mention, Mr. Chairman, that while on the above matter we
have a disagreement with management at FDA, on a host of other issues,
labor and management at FDA have been successful in working together to
find win-win solutions and to jointly address very real problems FDA
faces. NTEU and FDA management have negotiated a number of innovative
and cutting edge initiatives to make sure the agency has the best and
brightest employees available. It would be a shame if after such
collaboration, these initiatives suffered from inadequate funding. NTEU
and FDA have negotiated a Student Loan Repayment Program. This has been
designed to aid FDA's recruitment and retention. Permanent and term
employees with at least 3 years remaining on their appointment are
eligible. Employees must remain at FDA for 3 years to receive this
benefit. It allows FDA to repay part or all of a federally insured
student loan.
NTEU has also negotiated with FDA management a program of Quality
Step Increases (QSIs) which provide incentives and recognition for
excellence and has reformed several other awards and special pay
provisions so to better achieve agency goals and retain quality
employees. All of these initiatives need sufficient and improved
funding.
Thank you for giving NTEU the opportunity to share our views on the
FDA budget for fiscal year 2005. We thank this subcommittee for its
support of FDA programs in the past, and we urge you to work with the
Administration to provide FDA with the staffing and resources necessary
to protect and improve the health of the American public.
______
Prepared Statement of the National Turfgrass Evaluation Program
Mr. Chairman and Members of the Subcommittee: On behalf of the
National Turfgrass Evaluation Program (NTEP), I appreciate the
opportunity to provide the Subcommittee with the turfgrass industry's
perspective in support of the continuation of the $55,000 appropriation
for the National Turfgrass Evaluation Program (NTEP), included in ARS's
baseline within the President's fiscal year 2005 budget request for the
Agricultural Research Service (ARS). Also, I appreciate the opportunity
to present to you the turfgrass industry's need and justification for
continuation of the $490,000 appropriated in the fiscal year 2004
budget for the full-time turfgrass scientist position within ARS. In
addition, I appreciate the consideration of an additional appropriation
of $5,400,000 for the first installment on the $32.4 million National
Turfgrass Research Initiative developed by ARS and the turfgrass
industry with twelve new research scientist positions at ARS stations
across the country.
Justification of $55,000 Appropriation Request for Program Support
Once again, NTEP and the turfgrass industry come to the
appropriations process to request continuation of the $55,000 basic
program support in the ARS budget for NTEP's activities at Beltsville.
We appreciate the Subcommittee's continuation of this amount as in
previous fiscal years, and hope that you will agree with us that this
request is justified for the ensuing fiscal year.
The National Turfgrass Evaluation Program (NTEP) is unique in that
it provides a working partnership that links the Federal Government,
turfgrass industry and land grant universities together in their common
interest of turfgrass cultivar development, improvement and evaluation.
NTEP provides unbiased information on turfgrass cultivar adaptations,
disease and insect resistance and environmental stress tolerance to
home owners, sod producers, sports turf and parks managers, golf course
superintendents and highway vegetation managers.
Turfgrass provides multiple benefits to society including child
safety on athletic fields, environmental protection of groundwater,
reduction of silt and other contaminants in runoff, and green space in
home lawns, parks and golf courses. Therefore, by cooperating with
NTEP, USDA has a unique opportunity to take positive action in support
of the turfgrass industry. While the vast majority of the USDA's funds
have been and will continue to be directed toward traditional ``food
and fiber'' segments of U.S. agriculture, it is important to note that
turfgrasses (e.g., sod production) are defined as agriculture in the
Farm Bill and by many other departments and agencies. It should also be
noted that the turfgrass industry is the fastest growing segment of
U.S. agriculture, while it receives essentially no Federal support.
There are no subsidy programs for turfgrass, nor are any desired.
For the past 75 years, the USDA's support for the turfgrass
industry has been modest at best. The turfgrass industry's rapid
growth, importance to our urban environments, and impact on our daily
lives warrant more commitment and support from USDA. USDA's support of
NTEP at the $55,000 level does not cover all costs. In fact, NTEP
represents an ideal partnership of the public and private sectors in
terms of program cost sharing. Therefore, it is essential that the USDA
maintain its modest financial support of NTEP.
Justification of $490,000 Appropriation Request for the existing ARS
Scientist Position and related support activities
NTEP and the turfgrass industry are requesting the Subcommittee's
support for $490,000 to continue funding for the full-time scientist
staff position at ARS, focusing on turfgrass research, that was
appropriated in the fiscal year 2004 budget, and in the two previous
budget cycles.
A new turfgrass research scientist position within USDA/ARS was
created by Congress in the fiscal year 2001 budget. Additional funding
was added in fiscal year 2002 with the total at $490,000. A research
scientist was hired, and is now working at the ARS, Beltsville, MD
center. A research plan was developed and approved by ARS. This
scientist has used the funding for a full-time technician, equipment
and supplies to initiate the research plan and for collaborative
research with universities. We have an excellent scientist in place and
he is making good progress in establishing a solid program. At this
point, losing the funding for the position would be devastating to the
turf industry as significant research has begun.
Justification of $5,400,000 Appropriation Request for the first
installment on the National Turfgrass Research Initiative: 12
ARS scientist positions at ARS installations around the United
States
The turfgrass industry also requests that the Subcommittee
appropriate an additional $5,400,000 for the first installment on the
$32.4 million National Turfgrass Research Initiative. This Initiative
has been developed by USDA/ARS in partnership with the turfgrass
industry. We are asking for twelve priority research positions at nine
locations across the United States. These twelve positions address the
most pressing research needs, namely water use/efficiency and
environmental issues.
The USDA needs to initiate and maintain ongoing research on
turfgrass development and improvement for the following reasons:
--The value of the turfgrass industry in the United States is $40
billion annually. There are an estimated 50,000,000 acres of
turfgrass in the U.S. Turfgrass is the number one or two
agricultural crop in value and acreage in many states (e.g.,
MD, PA, FL, NJ, NC).
--As our society becomes and more urbanized, the acreage of turfgrass
will increase significantly. In addition, state and local
municipalities are requiring the reduction of water, pesticides
and fertilizers on turfgrass. However, demand on recreational
facilities will increase while these facilities will still be
required to provide safe turfgrass surfaces.
--Currently, the industry spends about $10 million annually on
turfgrass research. However, private and university research
programs do not have the time nor resources to identify
completely new sources of beneficial genes for stress
tolerance. ARS turfgrass scientists will enhance the ongoing
research currently underway in the public and private sectors.
--Water management is a key component of healthy turf and has direct
impact on nutrient and pesticide losses into the environment.
Increasing demands and competition for potable water make it
necessary to use water more efficiently. Also, drought
situations in many regions have limited the water available and
therefore, have severely impacted the turf industry as well as
homeowners and young athletes. Therefore, new and improved
technologies are needed to monitor turf stresses and to
schedule irrigation to achieve the desired quality.
Technologies are also needed to more efficiently and uniformly
irrigate turfgrasses. Drought tolerant grasses need to be
developed. In addition, to increase water available for
irrigation, waste water (treated and untreated) must be
utilized. Some of these waste waters contain contaminants such
as pathogens, heavy metals, and organic compounds. The movement
and accumulation of these contaminants in the environment must
be determined.
--USDA conducted significant turfgrass research from 1920-1988.
However, since 1988, no full-time scientist has been employed
by USDA, Agricultural Research Service (ARS) to conduct
turfgrass research specifically.
The turfgrass industry has met on several occasions with USDA/ARS
officials to discuss the new turfgrass scientist position, necessary
facilities, and future research opportunities. In January 2002, ARS
held a customer workshop to gain valuable input from turfgrass
researchers, golf course superintendents, sod producers, lawn care
operators, athletic field managers and others on the research needs of
the turfgrass industry. As a result of the workshop, ARS and the
turfgrass industry have developed, the National Turfgrass Research
Initiative. The highlights of this strategy are below:
national strategy for ars turfgrass research
Research Objectives.--Conduct long-term basic and applied research
to provide knowledge, decision-support tools and plant materials to aid
in designing, implementing, monitoring and managing economically and
environmentally sustainable turfgrass systems including providing sound
scientifically based information for use in the regulatory process.
Research Focus.--To make a significant contribution in developing
and evaluating sustainable turfgrass systems, ARS proposes developing
research programs in six major areas:
Component I. Water Management Strategies and Practices
Rationale.--New and improved technologies are needed to monitor
turf stresses and to schedule irrigation to achieve desired turf
quality but with greater efficiency or using other water sources.
Component II. Germplasm: Collection, Enhancement and Preservation
Rationale.--Grasses that better resist diseases, insects, drought,
traffic, etc. are desperately needed. Also, a better understanding of
the basic biology of turfgrass species is essential.
Component III. Improvement of Pest Management Practices
Rationale.--New tools and management practices are needed to
adequately control weeds, diseases, insects and vertebrate pests while
reducing input costs and pesticide use.
Component IV. The Environment: Understanding and Improvement of
Turfgrass' Role
Rationale.--The need is great to quantify the contribution of turf
systems to water quality and quantify of vital importance in addressing
the potential role of turf systems in environmental issues.
Component V. Enhancement of Soil and Soil Management Practices
Rationale.--Research is needed to characterize limitations to turf
growth and development in lessthan optimum soils and to develop cost-
effective management practices to overcome these limitations.
Component VI. Integrated Turf Management
Rationale.--To develop needed tools for turf managers to select the
best management practices for economic sustainability as well as
environmental protection.
ARS, as the lead agency at USDA for this initiative, has graciously
devoted a significant amount of time to the effort. Like the industry,
ARS is in this research endeavor for the long-term. To ARS's credit,
the agency has committed staff, planning and technical resources to
this effort. However, despite ARS's effort to include a budget request
in the overall USDA budget request, USDA--at higher levels--has not
seen fit to include this research as a priority. Thus, the industry is
left with no alternative but to come directly to Congress for
assistance through the appropriations process.
The role and leadership of the Federal Government and USDA in this
research are justifiable and grounded in solid public policy rationale.
ARS is poised and prepared to work with the turfgrass industry in this
major research initiative. However, ARS needs additional resources to
undertake this mission.
The turfgrass industry is very excited about this new proposal and
wholeheartedly supports the efforts of ARS. Since the customers at the
workshop identified turfgrass genetics/germplasm and water quality/use
as their top priority areas for ARS research, for fiscal year 2005, the
turfgrass industry requests that the following positions be established
within USDA/ARS:
------------------------------------------------------------------------
------------------------------------------------------------------------
Position 1: Component I: Water: Agricultural Engineer-- $450,000
Irrigation Southwest--Phoenix, AZ......................
Position 2: Component II: Germplasm: Molecular Biologist 450,000
Southwest--Lubbock, TX.................................
Position 3: Component IV: Environment: Agricultural 450,000
Engineer--Fate & Transport Southwest--Phoenix, AZ......
Position 4: Component I: Water: Stress Physiologist-- 450,000
Salinity Southwest--Riverside, CA......................
Position 5: Component II: Germplasm: Geneticist--Stress 450,000
Transition Zone--Beltsville, MD........................
Position 6: Component I: Water: Agricultural Engineer-- 450,000
Irrigation Transition Zone--Florence, SC...............
Position 7. Component IV: Environment: Agricultural 450,000
Engineer--Fate & Transport Northeast--University Park,
PA.....................................................
Position 8: Component III: Pest Management: Weed 450,000
Scientist Northeast--University Park, PA...............
Position 9: Component IV: Environment: Agricultural 450,000
Engineer--Fate & Transport North Central--Ames, IA....
Position 10: Component III: Pest Management: Pathologist 450,000
Transition Zone--Beltsville, MD........................
Position 11: Component II: Germplasm: Geneticist-- 450,000
Biodiversity Upper West--Logan, UT.....................
Position 12: Component III: Pest Management: 450,000
Entomologist North Central--Wooster, OH................
---------------
TOTAL............................................. 5,400,000
------------------------------------------------------------------------
For this research we propose an ARS-University partnership, with
funding allocated to ARS for in-house research as well as in
cooperation with university partners. We are asking for $300,000 for
each ARS scientist position with an additional $150,000 attached to
each position to be distributed to university partners. We are also
asking that the funding be given to ARS and then distributed by ARS to
those university partners selected by ARS and industry representatives.
[In millions of dollars]
------------------------------------------------------------------------
------------------------------------------------------------------------
FUNDING BREAKDOWN:
ARS Scientist Positions ($300,000 ea. 12). 3,600,000
University Cooperative Research Agreements ($150,000 1,800,000
ea. 12) (administered by ARS)............
---------------
TOTAL REQUEST..................................... 5,400,000
------------------------------------------------------------------------
In conclusion, on behalf of the National Turfgrass Evaluation
Program and the turfgrass industry across America, I respectfully
request that the Subcommittee continue the vital $55,000 appropriation
for the National Turfgrass Evaluation Program (NTEP) as well as the
$490,000 appropriated in fiscal year 2004 for the new turfgrass
scientist position within the Agricultural Research Service. I also
request that the Subcommittee appropriate an additional $5,400,000 for
twelve new turfgrass scientist positions within ARS.
Thank you very much for your assistance and support.
______
Prepared Statement of the New Mexico Interstate Stream Commission
summary
This Statement is submitted in support of appropriations for the
Department of Agriculture's Colorado River Basin salinity control
program. Until last year, the salinity control program had not been
funded in recent years at the level necessary to control salinity with
respect to water quality standards. Also, inadequate funding of the
salinity control program negatively impacts the quality of water
delivered to Mexico pursuant to Minute 242 of the International
Boundary and Water Commission. Adequate funding for the Environmental
Quality Incentives Program (EQIP), from which the Department of
Agriculture funds the salinity program, is needed to implement salinity
control measures. The Farm Security and Rural Investment Act (FSRIA) of
2002 authorized a funding level of at least $1 billion for EQIP in
fiscal year 2005. I urge the Subcommittee to support funding from
Commodity Credit Corporation (CCC) of $1 billion to be appropriated for
EQIP. I request that the Subcommittee designate 2.5 percent of the EQIP
appropriation, but at least $17.5 million, for the Colorado River Basin
salinity control program. I request that adequate funds be appropriated
for technical assistance and education activities directed to salinity
control program participants.
statement
The seven Colorado River Basin states, in response to the salinity
issues addressed by Clean Water Act of 1972, formed the Colorado River
Basin Salinity Control Forum (Forum). Comprised of gubernatorial
appointees from the seven Basin states, the Forum was created to
provide for interstate cooperation in response to the Clean Water Act,
and to provide the states with information to comply with Sections 303
(a) and (b) of the Act. The Forum has become the primary means for the
seven Basin states to coordinate with Federal agencies and Congress to
support the implementation of the salinity control program.
The Colorado River Basin salinity control program was authorized by
Congress in the Colorado River Basin Salinity Control Act of 1974.
Congress amended the Act in 1984 to give new responsibilities to the
Department of Agriculture. While retaining the Department of the
Interior as the lead coordinator for the salinity control program, the
amended Act recognized the importance of the Department of Agriculture
operating under its authorities to meet the objectives of the salinity
control program. Many of the most cost-effective projects undertaken by
the salinity control program to date have occurred since implementation
of the Department of Agriculture's authorization for the program.
Bureau of Reclamation studies show that damages from the Colorado
River to United States water users are about $300,000,000 per year.
Damages are estimated at $75,000,000 per year for every additional
increase of 30 milligrams per liter in salinity of the Colorado River.
It is essential to the cost-effectiveness of the salinity control
program that Department of Agriculture salinity control projects be
funded for timely implementation to protect the quality of Colorado
River Basin water delivered to the Lower Basin States and Mexico.
Congress concluded, with the enactment of the Federal Agriculture
Improvement and Reform Act of 1996 (FAIRA), that the salinity control
program could be most effectively implemented as a component of the
Environmental Quality Incentives Program (EQIP). The salinity control
program, since the enactment of FAIRA, has not been funded at an
adequate level to protect the Basin State-adopted and Environmental
Protection Agency approved water quality standards for salinity in the
Colorado River until fiscal year 2004. Appropriations for EQIP have
been insufficient to adequately control salt loading impacts on water
delivered to the downstream states, and to Mexico pursuant to Minute
No. 242 of the International Boundary and Water Commission, United
States and Mexico.
EQIP subsumed the salinity control program without giving adequate
recognition to the responsibilities of the Department of Agriculture to
implement salinity control measures per Section 202(c) of the Colorado
River Basin Salinity Control Act. The EQIP evaluation and project
ranking criteria target small watershed improvements that do not
recognize that water users hundreds of miles downstream are significant
beneficiaries of the salinity control program. Proposals for EQIP
funding are ranked in the states of Utah, Wyoming and Colorado under
the direction of the respective State Conservationists without
consideration of those downstream, particularly out-of-state, benefits.
Following recommendations of the Basin States, the Department of
Agriculture's Natural Resources Conservation Service (NRCS) designated
the Colorado River Basin an ``area of special interest'' including
earmarked funds for the salinity control program. The NRCS concluded
that the salinity control program is different from the small watershed
approach of the EQIP program. The watershed for the salinity control
program stretches almost 1,200 miles, from the headwaters of the river
through the salt-laden soils of the Upper Basin to the river's
termination at the Gulf of California in Mexico. NRCS is to be
commended for its efforts to comply with the Department of
Agriculture's responsibilities under the Colorado River Basin Salinity
Control Act of 1974. Irrigated agriculture in the Upper Basin realizes
significant local benefits of the salinity control program and
agricultural producers have succeeded in submitting cost-effective
proposals to NRCS.
However, the Basin States, including New Mexico, were very dismayed
that funding for EQIP has been inadequate since the enactment of FAIRA
in 1996. Several years of inadequate Federal funding for the Department
of Agriculture resulted in the Forum finding that the salinity control
program needs acceleration to maintain the water quality criteria of
the Colorado River water quality standards for salinity. Since the
enactment of FSRIA in 2002, an opportunity to adequately fund the
salinity control program exists for the first time since the enactment
of FAIRA.
State and local cost sharing is triggered by and indexed to the
Federal appropriation. The requested funding of at least $17.5 million
for fiscal year 2005 will continue to be needed each year for at least
the next few fiscal years.
The Department of Agriculture projects have proven to be the most
cost-effective component of the salinity control program. The
Department of Agriculture has indicated that a more adequately funded
EQIP program would result in more funds being allocated to the salinity
program. The Basin States have cost sharing dollars available to
participate in on-farm salinity control efforts. The agricultural
producers in the Upper Basin are willing to cost-share their portion
and waiting for adequate funding for their applications to be
considered.
I urge the Congress to appropriate at least $1 billion from the CCC
in fiscal year 2005 for EQIP. Also, I request that Congress designate
2.5 percent of the EQIP appropriation, but at least $17.5 million, for
the Colorado River Basin salinity control program.
Finally, I request that adequate funds be appropriated to NRCS
technical assistance and education activities for the salinity control
program participants, rather than requiring the NRCS to borrow funds
from CCC for these direly needed and under funded support functions.
Recent history has shown that inadequate funding for NRCS technical
assistance and education activities has been a severe impediment to
successful implementation of the salinity control program. The Basin
States parallel funding program, implemented as a means of cost sharing
with NRCS, expends 40 percent of the states' funds available to meet
the needs of NRCS for technical assistance and education activities. I
urge the appropriation of adequate funds for these essential
activities.
______
Prepared Statement of the Nez Perce Tribe
The Nez Perce Tribe requests the following funding amounts for
fiscal year 2005, which are specific to the Nez Perce Tribe:
--$253,000 through the United States Department of the Agriculture,
Animal Plant, Health Inspection Service, Plant Protection and
Quarantine Program to support its efforts to combat noxious
weed infestations using biological control technologies.
Biological control of weeds utilizes the weeds' natural enemies
to reduce the target weeds' ability to compete with desired
vegetation. Use of biological control of weeds in the western
United States has been employed since the 1940s to reduce weed
densities on range and wildlands where cultural and chemical
control methods are not economically practical or feasible.
Although biological control has been utilized for many years,
there are limited agents available for widespread distribution.
As a result, the transfer of biological control technology to
the users has been slow.
Through this appropriation, the Nez Perce Bio-Control Center will
continue to manage and establish nurseries to increase biological
control organisms, mainly insects, for distribution throughout the
Pacific Northwest. In addition, this funding will assist in identifying
weed infestations, monitor the impacts of biocontrol, and provide
annual technology transfer workshops to our partners in Federal and
State agencies and other private landowners/managers regionally. The
program will continue ongoing research efforts developed through
collaborative partnerships with USDA staffs, local universities and
regional experts.
The Nez Perce Tribe's strong cultural tie to natural resources
creates a good foundation from which to build such a program.
Biological control offers long-term management of invasive weeds that
cannot be controlled by other means. As biological control organisms
reduce the weeds' competitive edge over desirable and native
vegetation, both Tribal and non-tribal users of the region's wild land
resources will benefit. The problems created by noxious weeds cannot be
fixed quickly. The Nez Perce Tribe is viewing solutions to this problem
from a long-term perspective and are asking for a similar commitment
from Congress and the Department of Agriculture.
______
Prepared Statement of the Northwest Indian Fisheries Commission
Mr. Chairman and Members of the Committee, I am Billy Frank, Jr.,
Chairman of the Northwest Indian Fisheries Commission (NWIFC), and on
behalf of the twenty-Western Washington member Tribes, I submit this
request for appropriations to support the research, sanitation and
marketing of Tribal shellfish products. We request the following:
--$500,000 to support seafood marketing costs which will assist the
Tribes in fulfilling the commercial demands for their shellfish
products both domestically and abroad;
--$1,000,000 to support water and pollution sampling, sampling and
research for paralytic shellfish poisoning and coordination of
research projects with State agencies; and,
--$1,000,000 to support data gathering at the reservation level for
the conduct of shellfish population surveys and estimates.
Treaty Shellfish Rights
As with salmon, the Tribes' guarantees to harvest shellfish lie
within a series of treaties signed with representatives of the Federal
Government in the mid-1850s. In exchange for the peaceful settlement of
what is today most of Western Washington, the Tribes reserved the right
to continue to harvest finfish and shellfish at their usual and
accustomed grounds and stations. The Tribes were specifically excluded
from harvesting shellfish from areas ``staked or cultivated'' by non-
Indian citizens. Soon after they were signed, the treaties were
forgotten or ignored.
The declining salmon resource in the Pacific Northwest negates the
legacy Indian people in Western Washington have lived by for thousands
of years. We were taught to care for the land and take from it only
what we needed and to use all that we took.
We depended on the gifts of nature for food, trade, culture and
survival. We knew when the tide was out, it was time to set the table
because we live in the land of plenty; a paradise complete. Yet,
because of the loss of salmon habitat, which is attributable to
overwhelming growth in the human population, a major pacific coastal
salmon recovery effort ensues. Our shellfish resource is our major
remaining fishery.
At least ninety types of shellfish have been traditionally
harvested by the Tribes in Western Washington and across the continent
Indian people have called us the fishing Tribes because of our rich
history of harvesting and caring for finfish and shellfish. Our
shellfish was abundant and constituted a principal resource of export,
as well as provided food to the Indians and the settlers, which greatly
reduced the living expenses.
Shellfish remain important for subsistence, economic, and
ceremonial purposes. With the rapid decline of many salmon stocks, due
to habitat loss from western Washington's unrelenting populous growth,
shellfish harvesting has become a major factor in Tribal economies.
The Tribes have used shellfish in trade with the non-Indian
population since the first white settlers came into the region a
century and a half ago. Newspaper accounts from the earliest days of
the Washington Territory tell of Indians selling or trading fresh
shellfish with settlers. Shellfish harvested by members of western
Washington's Indian Tribes is highly sought after throughout the United
States and the Far East. Tribal representatives have gone on trade
missions to China and other Pacific Rim nations where Pacific Northwest
shellfish--particularly geoduck--is in great demand. Trade with the Far
East is growing in importance as the Tribes struggle to achieve
financial security through a natural resources-based economy.
Treaty language pertaining to Tribal shellfish harvesting included
this section:
``The right of taking fish at usual and accustomed grounds and
stations is further secured to said Indians, in common with all
citizens of the United States; and of erecting temporary houses for the
purposes of curing; together with the privilege of hunting and
gathering roots and berries on open and unclaimed lands. Provided,
however, that they not take shell-fish from any beds staked or
cultivated by citizens.''
Treaty with the S'Klallam, January 26, 1855
In exchange for the peaceful settlement of what is today most of
western Washington, the Tribes reserved the right to continue to
harvest finfish and shellfish at all of their usual and accustomed
grounds and stations. The Tribes were specifically excluded from
harvesting shellfish from areas ``staked or cultivated'' by non-Indian
citizens.
Tribal efforts to have the Federal Government's treaty promises
kept began in the first years of the 20th Century when the United
States Supreme Court ruled in United States v. Winans, reaffirming that
where a treaty reserves the right to fish at all usual and accustomed
places, a state may not preclude Tribal access to those places.
Sixty years later, the Tribes were again preparing for battle in
court. After many years of harassment, beatings and arrests for
exercising their treaty-reserved rights, western Washington Tribes took
the State of Washington to Federal court to have their rights legally
re-affirmed. In 1974, U.S. District Court Judge George Boldt ruled that
the Tribes had reserved the right to half of the harvestable salmon and
steelhead in western Washington.
The ``Boldt Decision,'' which was upheld by the U.S. Supreme Court,
also re-established the Tribes as co-managers of the salmon and
steelhead resources in western Washington. As a result of this ruling,
the Tribes became responsible for establishing fishing seasons, setting
harvest limits, and enforcing Tribal fishing regulations. Professional
biological staffs, enforcement officers, and managerial staff were
assembled to ensure orderly, biologically-sound fisheries.
Beginning in the late 1970s, Tribal and state staff worked together
to develop comprehensive fisheries that ensured harvest opportunities
for Indians and non-Indians alike, and also preserved the resource for
generations to come.
It was within this new atmosphere of cooperative management that
the Tribes sought to restore their treaty-reserved rights to manage and
harvest shellfish from all usual and accustomed areas. Talks with their
state counterparts began in the mid-1980s, but were unsuccessful. The
Tribes filed suit in Federal court in May 1989 to have their shellfish
harvest rights restored.
The filing of the lawsuit brought about years of additional
negotiations between the Tribes and the state. Despite many serious
attempts at reaching a negotiated settlement, the issue went to trial
in May 1994.
In 1994, District Court Judge Edward Rafeedie upheld the right of
the treaty Tribes to harvest 50 percent of all shellfish species in
their usual and accustomed fishing areas. Judge Rafeedie also ordered a
shellfish Management Implementation Plan that governs Tribal/state co-
management activities. After a number of appeals, the U.S. 9th Circuit
Court of Appeals let stand Rafeedie's ruling in 1998. Finally, in June
1999, the U.S. Supreme Court denied review of the District court
ruling, effectively confirming the treaty shellfish harvest right.
Assist the Tribes in Marketing Efforts to Fulfill the Demands for their
Shellfish Products, $500,000
Shellfish harvested by members of Western Washington Indian Tribes
are of extreme quality and are highly sought after throughout the
United States, Europe and the Far East. Unfortunately, because Tribes
are not centrally organized and it is the individual Tribal fisher who
harvests the resource, such markets have never fully materialized.
We request $500,000, which will assist the Tribes in promoting our
shellfish products, both in domestic and international markets. Tribes
anticipate the need to provide necessary health training to harvesters,
possibly develop cooperative seafood ventures, develop marketing
materials and engage in actual marketing operations. Specific earmarked
funding from the Committee can jump start Tribal efforts in these
areas. We also anticipate participating in intertribal consortiums that
generally promote Tribal products, and urge the Committee to support
necessary funding for those efforts. Funding from the Committee will
allow the Tribes to realize the fair value for their product, help
employ more Tribal members, and allow the Tribes to fulfill their
treaty rights.
Water and Pollution Sampling, Sampling and Research for Paralytic
Shellfish Poisoning and Coordination of Research Projects with
State and Federal Agencies, $1,000,000
Shellfish growing areas are routinely surveyed for current or
potential pollution impacts and are classified based on the results of
frequent survey information. No shellfish harvest is conducted on
beaches that have not been certified by the Tribes and the Washington
Department of Health. Growing areas are regularly monitored for water
quality status and naturally-occurring biotoxins to protect the public
health.
However, both Tribal and non-Indian fisheries have been threatened
due to the lack of understanding about the nature of biotoxins,
especially in subtidal geoduck clams. Research targeted to better
understand the nature of biotoxins could prevent unnecessary illness
and death that may result from consuming toxic shellfish, and could
prevent unnecessary closure of Tribal and non-Indian fisheries.
Data Gathering at the Reservation Level for the Conduct of Shellfish
Population Surveys and Estimates, $1,000,000
Very little current data and technical information exists for many
of the shellfish fisheries now being jointly managed by state and
Tribal managers. This is particularly true for many free-swimming and
deep-water species. This lack of information can not only impact
fisheries and the resource as a whole, but makes it difficult to assess
50/50 treaty sharing arrangements. Additionally, intertidal assessment
methodologies differ between state and Tribal programs, and can lead to
conflicts in management planning.
Existing data systems must be enhanced for catch reporting,
population assessment and to assist enhancement efforts. Research on
methodology for population assessment and techniques also is critical
to effective management.
Onsite beach surveys are required to identify harvestable
populations of shellfish. Regular monitoring of beaches is also
necessary to ensure that the beaches remain safe for harvest.
Additional and more accurate population survey and health certification
data is needed to maintain these fisheries and open new harvest areas.
This information will help protect current and future resources and
provide additional harvest opportunities.
Conclusion
We ask that you give serious consideration to our needs. We are
available to discuss these requests with committee members or staff at
your convenience. Thank you.
______
Letter From the Oceanic Institute
Waimanalo, Hawaii, March 24, 2004.
Hon. Robert Bennett,
Chairman, Subcommittee on Agriculture, Committee on Appropriations,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: We would like to bring to your attention the
success of the U.S. Marine Shrimp Farming Consortium and the value to
the nation in increasing the current funding level from $3.746 million
to $6 million.
The Consortium consists of institutions from seven states:
University of Southern Mississippi/Gulf Coast Research Laboratory,
Mississippi; The Oceanic Institute, Hawaii; Tufts University,
Massachusetts; Texas Agricultural Experiment Station, Texas; Waddell
Mariculture Center, South Carolina; University of Arizona, Arizona; and
Nicholls State University, Louisiana. These institutions have made
major advances in technology to support the U.S. shrimp farming
industry, and the program's excellent performance has been recognized
by the USDA in its recent program reviews. The Consortium is at a point
of opportunity to make significant contributions to building the U.S.
industry, reducing the trade deficit, and satisfying increasing
consumer demand for shrimp. Seafood imports constitute the second
largest trade deficit item for the United States at $7.1 billion and
shrimp represents half of this deficit.
The Consortium, in cooperation with private industry, industry
associations and government agencies, has generated new technologies
for producing premium quality marine shrimp at competitive prices. To
date, the program has: (1) established the world's first and currently
most advanced breeding and genetic selection program for marine shrimp;
(2) completed pioneering research and development of advanced
diagnostic tools for disease screening and control; (3) described the
etiology of shrimp diseases associated with viral pathogens; (4)
fostered shrimp production at near-shore, desert, and inland/rural farm
sites; (5) played a lead role in the Joint Subcommittee on
Aquaculture's efforts to assess the threat of foreign and viral
pathogens; (6) supplied the U.S. industry with genetically improved and
disease-resistant shrimp stocks; (7) developed advanced technology
biosecure shrimp production systems to protect both cultured and native
wild stocks from disease; and (8) developed new feed formulations to
minimize waste generation.
While exceptional progress has been made, the emerging industry is
immature and continually confronted with new challenges. It depends on
the U.S. Marine Shrimp Farming Program for high-health and genetically
improved stocks, disease diagnosis and production technologies. There
is a growing realization that our advanced biosecure shrimp production
systems will allow the expansion of shrimp farming away from the
environmentally sensitive coastal zone and into near-shore, inland/
rural, and desert sites.
As a result of these efforts, investor confidence is increasing--
notably, within the last 3 years, new shrimp farm startups have begun
in Mississippi, Hawaii, Texas, Arizona and South Carolina, and are
being considered in other states. Importantly, these new production
technologies produce the highest quality shrimp at world competitive
prices, consume U.S. grains as feed, and pose no threat to the
environment.
Shrimp farming is the newest agricultural industry for the United
States. Allocation of $6 million per year for the next few years to
work in cooperation with the private sector to support and build this
new industry, with its associated jobs and economic benefits, is in the
best interests of the nation.
Sincerely,
Thomas E. Farewell,
President and CEO, The Oceanic Institute.
William E. Hawkins,
Executive Director, University of Southern Mississippi, Gulf Coast
Research Laboratory.
Colin Kaltenbach,
Vice Dean and Director, Agricultural Experiment Station, University
of Arizona.
Bobby R. Eddleman,
Resident Director of Research, Texas A&M University, Agricultural
Research & Extension Center.
Joseph McManus,
Associate Dean of Finance, Tufts University.
Craig L. Browdy,
Marine Scientist, Marine Resources Research Institute, South
Carolina Department of Natural Resources.
Marilyn B. Kilgen,
Head, Department of Biological Sciences, Nicholls State University.
______
Prepared Statement of the U.S. Marine Shrimp Farming Consortium, The
Oceanic Institute, Gulf Coast Research Laboratory, Tufts University,
Waddell Mariculture Center, Texas Agricultural Experiment Station,
University of Arizona, and Nicholls State University
Mr. Chairman, we greatly appreciate the opportunity to provide
testimony to you and the Subcommittee, to thank you for your past
support, and to discuss the achievements and opportunities of the U.S.
Marine Shrimp Farming Program (USMSFP), funded under the Federal
initiative, Shrimp Aquaculture.
We bring to your attention the success of the U.S. Marine Shrimp
Farming Consortium and its value to the nation. The Consortium consists
of institutions from seven states: the University of Southern
Mississippi/Gulf Coast Marine Laboratory, Mississippi; The Oceanic
Institute, Hawaii; Tufts University, Massachusetts; Texas Agricultural
Experiment Station, Texas A&M University, Texas; Waddell Mariculture
Center, South Carolina; the University of Arizona, Arizona; and
Nicholls State University, Louisiana. These institutions, which oversee
the USMSFP, have made major advances in technology development and
services to support the U.S. shrimp farming industry. The USDA in its
program reviews has recognized the program's excellent scientific
performance, output, and multi-state collaborative efforts. The
Consortium is at the crossroads of contributing to major growth of the
U.S. industry, consolidating its competitive advantages, and satisfying
consumers' demands for safe and wholesome seafood products. Shrimp is
the number one consumed seafood product in the United States, yet
contributes to a $3.2 billion trade deficit, second only to the import
of oil for the deficit contributed by natural resource products.
Accomplishments
The Consortium, in cooperation with private industry, industry
associations and government agencies, has generated new technologies
for producing safe and premium quality marine shrimp at competitive
prices. To date, the program has: (1) established the world's first and
currently most advanced breeding and genetic selection program for
marine shrimp; (2) completed pioneering research and development of
advanced diagnostic tools for disease screening and control; (3)
described the etiology of shrimp diseases associated with viral
pathogens; (4) fostered shrimp production at near-shore, inland/rural
farm, and even desert sites; (5) served a lead role in the Joint
Subcommittee on Aquaculture's efforts to assess the threat of globally
transported shrimp pathogens; (6) served on the Office of International
Epizootics, recommending country-of-origin labeling of imported shrimp
products to combat the spread of exotic disease pathogens, subsequently
adopted by the USDA in its 2002 Farm Bill; (7) supplied the U.S.
industry with selectively bred and disease-resistant shrimp stocks; (8)
developed advanced technology for biosecure shrimp production systems
to protect both cultured and native wild stocks from disease; and (9)
developed new feed formulations to minimize waste generation and
enhance the use of domestic grains and oilseed products. These
substantial accomplishments advance the continued growth of the
domestic industry, place an important emphasis on environmental
sustainability, address concerns for the safety and quality of our
seafood supply, and increase market competitiveness.
Judging from the state of the industry today, USMSFP efforts
continue to have measurable positive effect. Coastal farming continues
to lead in the production of cultured shrimp in the United States, and
inland farming has added new dimensions and growth to the industry.
Improvements in farm management practices, coupled with the widespread
use of disease-resistant stocks, have resulted in bumper crops for the
industry over the last several years. The year 2003 resulted in the
largest harvest ever for U.S. farmers of near 13 million pounds. This
represents over a three-fold increase in domestic production with the
last 5 years, averaging over 25 percent growth of the industry per
annum.
Industry Vulnerability
While exceptional progress has been made, this emerging industry is
continually confronted with new challenges. The industry depends on the
USMSFP for leadership and innovative technology development. As a
result of development of high-health and improved stocks, disease
diagnosis, new feeds, and new production technologies and farming
approaches, the domestic industry has maintained relative stability,
while other countries have had major losses in their production due to
diseases and environmental problems. Disease losses due to exotic
viruses in Asia and Latin America during the past 5 years have
approached $6 billion USD. There have been no outbreaks of notifiable
viruses in the United States over the last 4 years, with a commensurate
increase in shrimp production over the same period. With reliable
production in place, we have also seen a commensurate geographic
expansion of the industry within the United States from three to seven
states in the last 10 years. A broader industry base, while increasing
production through the addition of new farms, also provides additional
protection to the industry by geographically isolating different
regional sectors in the event of disease outbreaks or natural disaster.
Significant amounts of shrimp are now being produced in Texas, South
Carolina, Florida, Hawaii, Arizona, Alabama, and Arkansas. Several
other states are now beginning to explore production with the newer
technologies being developed.
While significant progress has been made in risk assessment and
risk management with visible success, the industry and the USMSFP must
remain constantly vigilant and proactive to further improve global
competitiveness. In addition to providing significant input on the
development of national and international regulatory standards for
shrimp farmers, important service work for governmental agencies and
NGOs keeps us continuously apprised of new developments pertaining to
emerging regulations so that USMSFP research plans can be kept
proactively responsive to dynamic shifts in industry needs.
The overwhelming threat facing the U.S. marine shrimp farming
industry today is in the surge of foreign imports that have severely
lowered market prices for shrimp. Average U.S. farm gate prices have
fallen over 25 percent within the last 2 years, constraining
profitability and plans for industry expansion. Domestic production
estimates for 2005 are decidedly lower, as farmers have already opted
not to stock as many ponds and acreage as previously projected.
Inquiries into unfair trading practices impacting the U.S. shrimp
industry have begun. Concerns also have been heightened over food
safety issues associated with unregulated use of antibiotics and fecal-
borne contaminants due to questionable production practices in certain
countries. Further, due to disease outbreaks worldwide, several foreign
countries have switched production to the dominant species in the
United States, eroding a previous competitive advantage. While it is
important that a level playing field be created through reexamination
of trade and food safety issues, more technologically advanced and
innovative approaches are now critically needed to leverage U.S.
industry gains, create competitive advantage, and improve
profitability. Innovative ways need to be sought to offset low prices
and to distinguish and add value to the domestic product to provide a
competitive edge in the marketplace and to ensure the safety of the
domestic seafood supply.
Industry Independence
As a result of the work of the Consortium, investor confidence is
increasing despite recent price trends. In addition to supporting
today's industry, our advanced biosecure shrimp production systems are
now developed to the point for further expansion of shrimp farming into
near-shore, inland/rural and desert sites away from the environmentally
sensitive coastal zone. We now have in place the economic models that
will appropriately direct research to ensure economic viability taking
in consideration all associated biological, regional, and economic risk
factors. Importantly, these new production technologies produce the
highest quality and safest shrimp, utilize U.S. grain and oilseed
products for feed production, and do not pose any threat to the
environment. There is hidden value in the domestic industry that can be
exploited to gain competitive edge, offset declining prices, and ensure
the quality and safety of shrimp for the consumer. Clearly, the U.S.
shrimp farming industry has emerged solid from near collapse in the
early 1990s, and appears well poised for a new phase of growth provided
the technologies and innovations are in place to support a larger, more
diverse, and more competitive domestic industry for the new millennium.
To support existing efforts and technology transfer and plans for
new dimensions to the research to address recent profitability issues,
an increase in the current funding level from $3.746 million to $6
million is requested. The increase will support an enhanced profile
for: application of molecular biotechnologies to maintain the United
States lead in disease monitoring and genetic selection efforts;
development and application of sophisticated techniques for genetic
selection of advanced and specialized lines of shrimp for U.S.
exploitation; expansion of work to determine the mechanisms of disease
immunity in shrimp for protection of both farmed and wild shrimp
stocks; demonstration, validation, and commercialization of high
density, biosecure farming systems to provide advanced, competitive
production technologies particularly applicable to the United States;
and determination of market and product quality issues for food safety
assurances, and development of U.S. label to leverage existing
standards for high quality production. In addition to these needed
technological innovations, increased funding will support new efforts
to promote institutional innovations that will enable expansion and
vertical integration of the domestic industry, including examination of
regulatory impediments to shrimp aquaculture; the effect of farm
insurance; development of cooperatives; and the socioeconomics of
existing and advanced, high density production systems.
Mr. Chairman, the U.S. shrimp farming industry and our Consortium
deeply appreciate the support of the Committee and respectfully ask for
a favorable consideration of this request.
______
Ceatech USA, Inc,
Honolulu, Hawaii, February 2, 2004.
Dr. Anthony Ostrowski,
Director, U.S. Marine Shrimp Farming Consortium, The Oceanic Institute,
Waimanalo, HI.
Dear Tony: We appreciate the past provision of a broodstock line
from OI for evaluation under commercial scale. Those animals were used
to produce seed that were stocked into two production ponds for the
assessment of growth performance during this year.
The outcome of these production trials have been discussed between
James Sweeney and Shaun Moss, manager of OI's shrimp research program.
Both individuals see benefit from additional evaluations.
We continue to look forward to a site visit to Ceatech's farm by
you and your scientists to discuss further collaborative research
activities. We strongly support such technical exchange, and look
forward to making arrangements to accomplish it.
Thank you for your support.
Sincerely,
Paul Bienfang, Ph.D,
Senior Vice President.
______
Darden Restaurants,
Orlando, Florida, February 23, 2004.
Dr. Anthony C. Ostrowski,
Director, U.S. Marine Shrimp Farming Program, The Oceanic Institute,
Waimanalo, Hawaii.
Dear Dr. Ostrowski: I am writing this letter in support of the U.S.
Marine Shrimp Farming Program and Oceanic Institute's continued efforts
in the development of a United States based shrimp farming industry.
Shrimp farming has become a large and growing global business. In
2003, shrimp consumption in the United States hit and all time high of
3.7 pounds per capita, surpassing Tuna as the number one seafood
consumed in the United States. This is directly the result of
technological advances made in shrimp aquaculture, and lays a solid
foundation for the future of the shrimp business.
However, there is much work to be done. It will be challenging for
the U.S. industry to compete based on current technology with many
foreign producers of shrimp which have land, labor and construction
costs much lower than the United States. The opportunity in shrimp
farming in the United States is huge, but will require further research
to make it practical and sustainable.
The U.S. shrimp farming industry will need to compete based on
advanced technology which allows it to overcome some of the land and
labor cost disadvantages. The U.S. industry can also differentiate
itself in quality and freshness. This means that systems to grow shrimp
year round which offer rapid delivery of fresh, never frozen shrimp are
also key to the future of this business in the United States.
Oceanic Institute recognizes these two needs and opportunities and
is already working on the science to achieve them. Stock enhancement
programs are also an area that Oceanic Institute. Is expert in
developing and can be part of the solution faced by our Gulf and
Atlantic shrimp fishing industry.
We at Darden Restaurants, support the research being done by the
U.S. Marine Shrimp Farming Program and Oceanic Institute, and believe
that new and exciting business opportunities for United States based
aquaculture operations will evolve from your continued research.
Sincerely,
Bill Herzig,
Vice President Seafood, Regional & Capital Equipment Purchasing.
______
Harlingen Shrimp Farms, Ltd.,
Los Fresnos, TX, February 13, 2004.
Dr. Tony Ostrowski,
Director, U.S. Marine Shrimp Farming Program, The Oceanic Institute,
Waimanalo, HI.
Dear Dr. Ostrowski: At your request I am writing a letter of
support for the U.S. Marine Shrimp Farming Program (USMSFP) so that our
U.S. government can renew funding for this valuable program I am proud
to note that Texas had a record production year in 2003, with
approximately nine million pounds of farmed shrimp produced.
Unfortunately, our good production was offset by the lowest shrimp
prices the United States has seen in decades, resulting in financial
losses for some producers and marginal profits for the rest. U.S.
shrimp farmers have had an especially tough time competing with imports
from foreign producers. Many of the costs for labor, insurance and
taxes as well as costs associated with permitting and compliance with
regulations on discharge water quality are greatly reduced or not
encountered in other countries. The U.S. shrimp farmers need innovative
research from the USMSFP, which will allow our industry to stay
competitive.
I believe that the good production of farmed shrimp in Texas last
year was, to a great extent, a direct result of benefits received over
the years through the USMSFP. The use of domesticated, specific
pathogen free (SPF) brood lines as well as the diagnostic services,
required to monitor and maintain pathogen free production practices
have been a major advantage for U.S. producers. Research on shrimp
disease continues and information regarding the occurrence and
characteristics of these diseases can be utilized to increase and
maintain biosecure production practices on U.S. farms.
It is especially important that research objectives, which directly
benefit and bolster the profitability of existing, open pond production
systems, which are the mainstay of U.S. marine shrimp farming must be
prioritized at this time. I encourage the U.S. government to continue
to support the USMSFP and am hopeful that the resulting research can
benefit the profitability of U.S. shrimp farming, which can help to
reduce the huge shrimp trade deficit.
Sincerely,
Fritz Jaenike,
General Manager.
______
High Health Aquaculture, Inc.,
February 6, 2004.
Dr. Anthony C. Ostrowski,
Director, U.S. Marine Shrimp Farming Program, The Oceanic Institute,
Waimanalo, HI.
Dear Tony: I am writing to express my support for the U.S. Marine
Shrimp Farming Program. Its efforts in shrimp science have contributed
to the expansion of the U.S. shrimp farming industry.
The global shrimp industry is facing difficult times. The U.S.
industry is poised to lead the way through the Consortium's top-flight
science.
Let me know if you need any further information.
Best regards,
Jim Wyban, Ph.D.,
President.
______
Kona Bay Marine Resources, Inc.,
Honolulu, HI, March 10, 2004.
Dr. Anthony C. Ostrowski,
Director, U.S. Marine Shrimp Farming Program, The Oceanic Institute,
Waimanalo, HI.
Dear Dr. Ostrowski: I am writing in support of the U.S. Marine
Shrimp Farming Program (USMSFP). The program is essential to the
continued growth and health of a domestic shrimp industry. The USMSFP
has been instrumental in the development of SPF shrimp, the development
of disease control strategies and helping shrimp farmers to improve
their farming practices.
Continued full funding from the U.S. government is critical to
maintaining and building upon the good work done thus far by USMSFP.
Best regards,
Brian Goldstein,
President.
______
Lowcountry Seafarms, LLC,
Beaufort, SC, March 10, 2004.
Dr. Anthony C. Ostrowski,
Director, U.S. Marine Shrimp Farming Program, The Oceanic Institute,
Waimanalo, HI.
Dear Dr. Ostrowski: This letter is in support of the efforts of the
U.S. Marine Shrimp Farming Program. I have followed the research work
done by the USMSFP over the years. The results of that work, and that
of the Waddell Mariculture Research and Development Center in Bluffton,
SC, were instrumental in my planning our project to be located here in
SC.
As our project is to entail the use of super-intensive closed-loop
raceway production systems, the development of lines of SPF shrimp and
work in disease control methods and water management techniques by the
USMSFP are especially valuable. We will be following new developments
as they occur.
We hope to see your continued support to the shrimp farming
industry in the United States.
Regards,
Mills Rooks,
CEO.
______
Southern Star, Inc.,
Rio Hondo, Texas, February 6, 2004.
Dr. Anthony C. Ostrowski,
Director, U.S. Marine Shrimp Farming Program, The Oceanic Institute,
Waimanalo, HI.
Dear Tony: Thanks for your thinking of my opinion. Basically, I
still think American shrimp farmers are working fine. The government
regulation did not bother us too much. The system we used is good
enough. American shrimp farmers only produce 0.5 percent of market
needs. That is the reason we are affected by the market so much when
overseas shrimps flood in with cheaper price.
The reason overseas has lower cost is because of their facilities
full utilized. In Texas valley, we may have chance to grow two crops.
Anywhere else is one crop only. Under this weather condition, we are
not compatible.
There are three things you can help us:
--Find another species that can grow faster and last longer which
will be accepted by government agents.
--Find a new line of P. Vannamei which can tolerate the water
temperature colder.
--Ask government to buy P/L from private hatcheries for releasing
into gulf which will help shrimpers.
Should you have any question, please feel free to call me.
Truly yours,
Felix Fu,
Vice President.
______
Swimming RockFish and Shrimp Farm,
Meggett, SC, March 23, 2004.
Dr. Antony C. Ostrowski,
Waimanalo, HI.
Dear Ostrowski: I write today in support of the U.S. Marine Shrimp
Farming Program. I do so as a consumer, stakeholder, and surviving
member of North American entrepreneurs still engaged in shrimp farming.
I say surviving because the numbers of shrimp farmers, at least in
South Carolina, has drastically declined. The decline, I believe, is
because of the USMSFP and its past good works. I understand that
statement, supporting the organization that has caused the decline in
my industry, is confusing and seemingly contradictory . . . so please
read on and allow me to explain.
American shrimp farmers, as well as harvesters of wild stocks, are
in financial trouble today primarily because of the low price of shrimp
worldwide. In great measure, this is due to the advances in pond
culture attributable to the research conducted by USMSFP partner
organizations and to the dissemination and subsequent use of the
information gained to the world. In other words, the USMSFP programs
have been so extraordinarily successful that shrimp has moved from a
high dollar luxury status to nearly a commodity staple item.
My current support for the USMSFP stems from the fact that the
program is now moving toward hyper-intensive production technology with
concomitant genetics research that ultimately will enable surviving and
new American entrepreneurs to be competitive again at home. It is my
hope that future work will marry native species, particularly east
coast white shrimp production, with the developing extreme density
production systems. This seems to me to be the least environmentally
risky and best marketing strategy for coastal production.
With my best wishes for your continuing achievements, I offer my
support for your continued funding.
Sincerely,
Richard B. Eager.
______
Zeigler Bros., Inc.,
Gardnes, PA, February 23, 2004.
Dr. Anthony C. Ostrowski,
Director, U.S. Marine Shrimp Farming Program, The Oceanic Institute,
Waimanalo, HI.
Dear Dr. Ostrowski: We are most pleased, again this year, to write
a letter of support for the U.S. Marine Shrimp Farming Program. By this
letter, we are asking Congress to continue expanded support for this
important program for U.S. Aquaculture.
In my letter last year, which is attached, we indicated many
reasons why this program is important to U.S. aquaculture and to
businesses like ourselves. We recommend that you attach these two
letters.
For the past 2 years, we have received additional benefits from the
U.S. Marine Shrimp Farming Program through its contribution of
technical knowledge to intensive shrimp farming. This is especially
important to our company for as you know, we are one of four members of
a consortium which received a very large ATP grant for the development
of very high intensive re-cycle shrimp farming, known as the BioZest
System. Scientific and technical information available through your
program has allowed us to proceed with feeds development at a more
rapid rate bringing intensive shrimp farming closer to economic
feasibility for the United States.
If we can provide additional support in any way for this most
important program, please advise.
Very truly yours,
Thomas R. Zeigler, Ph.D.,
President & CEO.
______
Prepared Statement of the Organization for the Promotion and
Advancement of Small Telecommunications Companies (OPASTCO)
Summary of Request
The Organization for the Promotion and Advancement of Small
Telecommunications Companies (OPASTCO) seeks the Subcommittee's support
for fiscal year 2005 loan levels for the telecommunications loans
program and Rural Telephone Bank (RTB) program administered by the
Rural Utilities Service (RUS) in the following amounts:
[Millions of dollars]
------------------------------------------------------------------------
------------------------------------------------------------------------
5 percent hardship loans................................ 145
Treasury rate loans..................................... 250
Guaranteed loans........................................ 100
RTB loans............................................... 175
------------------------------------------------------------------------
In addition, OPASTCO requests the following action by the
Subcommittee: (1) a prohibition on the transfer of unobligated RTB
funds to the general fund of the Treasury and a requirement that
interest be paid on these funds; and (2) funding of the distance
learning, telemedicine, and broadband grant and loan programs at
sufficient levels.
General
OPASTCO is a national trade association of more than 550 small
telecommunications carriers serving primarily rural areas of the United
States. Its members, which include both commercial companies and
cooperatives, together serve over 3.5 million customers in 47 states.
Approximately half of OPASTCO's members are RUS or RTB borrowers.
Perhaps at no time since the inception of the RUS (formerly the
REA) has the telecommunications loans and RTB programs been so vital to
the future of rural America. The telecommunications industry is at a
crossroads, both in terms of technology and public policy. Rapid
advances in telecommunications technology in recent years have begun to
deliver on the promise of a new ``information age.'' Both Federal and
State policymakers have made deployment of advanced telecommunications
services a top priority. However, without continued support of the
telecommunications loans and RTB programs, rural telephone companies
will be hard pressed to build the infrastructure necessary to bring
their communities into this new age, creating a bifurcated society of
information ``haves'' and ``have-nots.''
Contrary to the belief of some critics, RUS's job is not finished.
Actually, in a sense, it has just begun. We have entered a time when
advanced services and technology--such as broadband, fiber-to-the-home,
high-speed packet and digital switching equipment, and digital
subscriber line technology--are expected by customers in all areas of
the country, both urban and rural. Unfortunately, the inherently higher
costs of upgrading the rural wireline network, both for voice and data
communications, has not abated.
Rural telecommunications continues to be more capital intensive and
involves fewer paying customers than its urban counterpart. Nationally,
the average population density in areas served by rural carriers is
only about 13 persons per square mile. This compares to a national
average population density of 105 persons per square mile in areas
served by non-rural carriers. The FCC's February 2002 report on the
deployment of advanced telecommunications capability noted that a
positive correlation persists between population density and the
presence of subscribers to high-speed services. The report stated that
there are high-speed subscribers in 97 percent of the most densely
populated zip codes but in only 49 percent of the zip codes with the
lowest population densities. In order for rural telephone companies to
modernize their networks and provide consumers with advanced services
at reasonable rates, they must have access to reliable low-cost
financing.
The relative isolation of rural areas increases the value of
telecommunications services for these citizens. Telecommunications
enables applications such as high-speed Internet connectivity, distance
learning, and telemedicine that can alleviate or eliminate some rural
disadvantages. A modern telecommunications infrastructure can also make
rural areas attractive for some businesses and result in revitalization
of the rural economy. For example, businesses such as telemarketing and
tourism can thrive in rural areas, and telecommuting can become a
realistic employment option.
While it has been said many times before, it bears repeating that
RUS's telecommunications loans and RTB programs are not grant programs.
The funds loaned by RUS are used to leverage substantial private
capital, creating public/private partnerships. For a very small cost,
the government is encouraging tremendous amounts of private investment
in rural telecommunications infrastructure.
Most importantly, the programs are tremendously successful.
Borrowers actually build the infrastructure and the government is
reimbursed with interest. There has never been a default in the history
of the telecommunications lending programs.
The Telecommunications Act of 1996 has Heightened the need for the RUS
and RTB Loan Programs
The Telecommunications Act of 1996 only increases rural
telecommunications carriers' need for RUS assistance in the future. The
forward-looking Act defines universal service as an evolving level of
telecommunications services that the FCC must establish periodically,
taking into account advances in telecommunications and information
technologies and services. RUS has an essential role to play in the
implementation of the law, as it will compliment high-cost support
mechanisms established by the FCC, thus enabling rural America to
achieve the federally mandated goal of rural/urban service and rate
comparability.
1A $175 Million Loan Level should be maintained for the RTB Program
As previously discussed, the RTB's mission has not been completed
as rural carriers continue to rely on this important source of
supplemental financing in order to provide their communities with
access to the next generation of telecommunications services. Pursuant
to Section 305(d)(2)(B) of the Rural Electrification (RE) Act, Treasury
rate loans are to be made concurrently with RTB loans. Thus, if lending
is not authorized for the RTB, the overall telecommunications loans
program will be significantly reduced, to the detriment of rural
Americans. The ongoing need for the RTB program makes it essential to
establish a $175 million loan level for fiscal year 2005.
The Prohibition on the Transfer of any Unobligated Balance of the RTB
Liquidating Account to the Treasury and requiring the Payment
of Interest on these Funds should be Continued
OPASTCO urges the Subcommittee to reinstate language prohibiting
the transfer of any unobligated balance of the RTB liquidating account
to the Treasury or the Federal Financing Bank which is in excess of
current requirements and requiring the payment of interest on these
funds. As a condition of borrowing, the statutory language establishing
the RTB requires telephone companies to purchase Class B stock in the
bank. Borrowers may convert Class B stock into Class C stock on an
annual basis up to the principal amount repaid. Thus, all current and
former borrowers maintain an ownership interest in the RTB. As with
stockholders of any concern, these owners have rights which may not be
abrogated. The Subcommittee's inclusion of the aforementioned language
into the fiscal year 2005 appropriations bill will ensure that RTB
borrowers are not stripped of the value of this required investment.
The Distance Learning, Telemedicine, and Broadband Programs should
Continue to be Funded at Adequate Levels
In addition to RUS's telecommunications loans and RTB programs,
OPASTCO supports adequate funding of the distance learning,
telemedicine, and broadband grant and loan programs. Through distance
learning, rural students gain access to advanced classes which will
help them prepare for college and jobs of the future. Telemedicine
provides rural residents with access to quality health care services
without traveling great distances to urban hospitals. In addition, the
broadband program will allow more rural communities to gain high-speed
access to the Internet and receive other advanced services. In light of
the Telecommunications Act's purpose of encouraging deployment of
advanced technologies and services to all Americans--including schools
and health care providers--sufficient targeted funding for these
purposes is essential in fiscal year 2005.
Conclusion
The development of the nationwide telecommunications network into
an information superhighway, as envisioned by policymakers, will help
rural America survive and prosper in any market--whether local,
regional, national, or global. However, without the availability of
low-cost RUS funds, building the information superhighway in
communities that are isolated and thinly populated will be untenable.
By supporting the RUS telecommunications programs at the requested
levels, the Subcommittee will be making a significant contribution to
the future of rural America.
______
Prepared Statement of People for the Ethical Treatment of Animals
(PETA)
Dear Chairman Bennett, Ranking Member Kohl, and Members of the
Subcommittee: People for the Ethical Treatment of Animals (PETA) is the
world's largest animal rights organization, with 800,000 members and
supporters. We greatly appreciate this opportunity to submit testimony
regarding the fiscal year 2005 appropriations for the Food and Drug
Administration (FDA). Our testimony will focus on four chemical tests
allowed or required by the FDA to be conducted on animals.
As you may know, the FDA requires substances such as drugs,
medicated skin creams, and others to be tested for their rates of skin
absorption, skin irritation, phototoxicity, and/or pyrogenicity
(potential to cause fever). Traditionally, these tests involve smearing
chemicals on animals' shaved backs (often causing painful lesions), or
injecting a substance into an animal's bloodstream (often causing
breathing problems, organ failure, or fatal shock).
Fortunately, there are non-animal test methods that are just as
effective, if not more so. Various tissue-based methods have been
accepted in Europe as total replacements for skin absorption studies in
living animals. Government regulators in Canada accept the use of a
skin-patch test in human volunteers as a replacement for animal-based
skin irritation studies (for non-corrosive substances free of other
harmful properties). The Organization for Economic Cooperation and
Development (OECD), of which the United States is a key member, has
accepted a cell culture test for light-induced (``photo'') toxicity,
and a test using donated human blood has been validated in Europe as a
total replacement for animal-based fever, or pyrogenicity, studies.
However, the FDA continues to require the use of animals for all
four of these endpoints, despite the availability of non-animal tests.
We respectfully request that the subcommittee include the following
report language: ``The Commissioner of the FDA is required to report to
Congress no later than December 1, 2004, regarding the use of in vitro
methods using skin from a variety of sources (e.g. human cadavers) for
skin absorption studies, human volunteer clinical skin-patch tests (for
chemicals first determined to be non-corrosive and free of other
harmful properties) for skin irritation studies, the 3T3 Neutral Red
Uptake Phototoxicity Test for phototoxicity studies, and the in vitro
Human Pyrogen Test for pyrogenicity studies. The Commissioner should
describe the reasons for which the agency has delayed accepting the
aforementioned methods for regulatory use as total replacements for
their animal-based counterparts, exactly what steps the agency is
taking to overcome those delays, and a target date by which the agency
intends to accept these methods for regulatory use.''
Animal tests cause immense suffering
Traditionally, the rate at which a chemical is able to penetrate
the skin has been measured by shaving the backs of rats and smearing
the substance on them for an exposure period of up to 24 hours. They
are eventually killed, and their skin, blood, and excrement are
analyzed. A similar method is used to test for skin irritation, except
it usually done to rabbits, who are locked in full-body restraints. A
test chemical is applied to their shaved backs, and the wound site is
then covered with a gauze patch for normally four hours. A chemical is
considered to be an irritant if it causes reversible skin lesions or
other clinical signs, which heal partially or totally by the end of a
14-day period. Phototoxic chemicals cause inflammation of the skin when
applied to skin that is subsequently exposed to sunlight or ultraviolet
radiation. To test for phototoxicity, a similar body-restraint, shaved-
back procedure is used, but this time it is mice and guinea pigs who
are the subjects, and they are kept restrained for several days while
enduring the pain, swelling, and sores that develop on their skin.
Pyrogenicity is the potential of a substance to cause fever and
inflammation. Once again, the traditional pyrogenicity test method
involves locking rabbits in full-body restraints. After having a test
substance injected into their bloodstream, the rabbits can suffer
fever, breathing problems, circulatory and organ failure, and fatal
shock. Animals used in the above tests are not given any painkillers.
These tests have never been proven to be relevant to humans
None of the animal tests currently used for skin absorption,
irritation, phototoxicity, or pyrogenicity has ever been scientifically
validated for its reliability or relevance to human health effects.
Animal studies yield highly variable data and are often poor predictors
of human reactions. For example, one study, which compared the results
of rabbit skin irritation tests with real-world human exposure
information for 65 chemicals, found that the animal test was wrong
nearly half (45 percent) of the time in its prediction of a chemical's
skin damaging potential (Food & Chemical Toxicology, Vol. 40, pp. 573-
92, 2002). For phototoxicity, the animal-based tests have never even
been codified into a standardized test guideline, meaning that the
protocols can vary widely from laboratory to laboratory, rendering the
results virtually uninterpretable. There are well-documented drawbacks
to the rabbit pyrogen test, including marked differences in sensitivity
between species and strains of rabbits.
Validated methods exist which do not harm animals
Fortunately, test methods have been found to accurately predict
skin absorption, irritation, phototoxicity and pyrogenicity without
harming animals.
The absorption rate of a chemical through the skin can be measured
using skin from a variety of sources (e.g. human cadavers). The
reliability and relevance of these in vitro methods have been
thoroughly established through a number of international expert
reviews, and have been codified and accepted as an official test
guideline of the OECD.
Instead of animal-based skin irritation studies, government
regulators in Canada accept the use of a skin-patch test using human
volunteers. (The chemical is first determined to be non-corrosive and
free of other harmful properties before being considered for human
studies.)
A cell culture test has been validated in Europe and accepted at
the international level as a total replacement for animal-based
phototoxicity studies. The 3T3 Neutral Red Uptake Phototoxicity Test
involves exposing cells to a test chemical in the presence and absence
of light, and cell viability is measured by the degree to which they
are able to absorb the dye, neutral red. This method is the only test
for phototoxicity that has been accepted as an official test guideline
of the OECD, yet the FDA continues to use thousands of animals to test
for phototoxicity.
Using human blood donated by healthy volunteers, an in vitro
pyrogen test has been validated in Europe as a total replacement for
animal-based pyrogenicity studies.
Non-animal test methods can save time, money, and yield more useful
results
Tissue culture methods to test for skin absorption allow
researchers to study a broader range of doses, including those at the
actual level of exposure that occurs in the occupational or ambient
environment, which is not possible with the animal-based method.
According to the European Centre for the Validation of Alternative
Methods, the in vitro Human Pyrogen Test out-performs the rabbit-based
test, and does so at one-fifth of the labor cost and less than one-
tenth of the labor cost.
Many non-animal methods can yield results with greater sensitivity
and at a lower cost than animal-based methods. Protocols are more
easily standardized, and the variations among strains and species are
no longer a factor.
The FDA continues to require the use of animals
Despite the ethical, financial, efficiency, and scientific
advantages of the above non-animal methods, the FDA continues to
require and accept the unnecessary use of animals in tests for skin
absorption, irritation, phototoxicity, and pyrogenicity.
Summary
Non-animal methods are available now to replace animal-based
methods to test substances for skin absorption, irritation,
phototoxicity, and pyrogenicity. There simply is no excuse for
continuing to cause animals to suffer when non-animal tests are
available.
We therefore hereby request, on behalf of all Americans who care
about the suffering of animals in toxicity tests, that you please
include language in the report accompanying the fiscal year 2005
Agriculture, Rural Development, Food and Drug Administration and
Related Agencies bill stating that:
``The Commissioner of the FDA is required to report to Congress no
later than December 1, 2004, regarding the use of in vitro methods
using skin from a variety of sources (e.g. human cadavers) for skin
absorption studies, human volunteer clinical skin-patch tests (for
chemicals first determined to be non-corrosive and free of other
harmful properties) for skin irritation studies, the 3T3 Neutral Red
Uptake Phototoxicity Test for phototoxicity studies, and the in vitro
Human Pyrogen Test for pyrogenicity studies. The Commissioner should
describe the reasons for which the agency has delayed accepting the
aforementioned methods for regulatory use as total replacements for
their animal-based counterparts, exactly what steps the agency is
taking to overcome those delays, and a target date by which the agency
intends to accept these methods for regulatory use.''
______
Prepared Statements of the Pickle Packers International, Inc.
The pickled vegetable industry strongly supports and encourages
your committee in its work of maintaining and guiding the Agricultural
Research Service. To accomplish the goal of improved health and quality
of life for the American people, the health action agencies of this
country continue to encourage increased consumption of fruits and
vegetables in our diets. Accumulating evidence from the epidemiology
and biochemistry of heart disease, cancer and diabetes supports this
policy. Vitamins (particularly A, C, and folic acid) and a variety of
antioxidant phytochemicals in plant foods are thought to be the basis
for correlation's between high fruit and vegetable consumption and
reduced incidence of these debilitating and deadly diseases. The
problem is that many Americans choose not to consume the variety and
quantities of fruits and vegetables that are needed for better health.
As an association representing processors that produce over 87
percent of the tonnage of pickled vegetables in North America, it is
our goal to produce new products that increase the competitiveness of
U.S. agriculture as well as meet the demands of an increasingly diverse
U.S. population. The profit margins of growers continue to be narrowed
by foreign competition. Likewise, the people of this country represent
an ever-broadening array of expectations, tastes and preferences
derived from many cultural backgrounds. Everyone, however, faces the
common dilemma that food costs should remain stable and preparation
time continues to be squeezed by the other demands of life. This
industry can grow by meeting these expectations and demands with
reasonably priced products of good texture and flavor that are high in
nutritional value, low in negative environmental impacts, and produced
with assured safety from pathogenic microorganisms and from those who
would use food as a vehicle for terror. With strong research to back us
up, we believe our industry can make a greater contribution to better
product cost, diets and better health.
Many small to medium sized growers and processing operations are
involved in the pickled vegetable industry. We grow and process a group
of vegetable crops, including cucumbers, peppers, carrots, onions,
garlic, cauliflower, cabbage (Sauerkraut) and Brussels sprouts, that
are referred to as minor' crops. None of these crops is in any
``commodity program'' and as such, do not rely upon taxpayer subsidies.
However, current farm value for just cucumbers, onions and garlic is
$2.3 billion with an estimated processed value of $5.8 billion. These
crops represent important sources of income to farmers, and the
processing operations are important employers in rural communities
around the United States. Growers, processing plant employees and
employees of suppliers to this industry reside in all 50 states. To
realize its potential in the rapidly changing American economy, this
industry will rely upon a growing stream of appropriately directed
basic and applied research from four important research programs within
the Agricultural Research Service. With strong research to back us up,
we believe our industry can make a greater contribution to better diets
and better health.
vegetable crops research laboratory, madison, wisconsin
First, I would like to thank the Committee for $200,000 additional
funding it provided the fiscal year 2002 budget to carry out field and
processing research vital to the membership of PPI. However, to
continue this important work it is necessary for the Congress restore
this funding in fiscal year 2005, since the funds were not included in
the budget sent to the Congress. The USDA/ARS Vegetable Crops Research
Unit at the University of Wisconsin is the only USDA research unit
dedicated to the genetic improvement of cucumbers, carrots, onions and
garlic. Three scientists in this unit account for approximately half of
the total U.S. public breeding and genetics research on these crops.
Their past efforts have yielded cucumber, carrot and onion cultivars
and breeding stocks that are widely used by the U.S. vegetable industry
(i.e., growers, processors, and seed companies). These varieties
account for over half of the farm yield produced by these crops today.
All U.S. seed companies rely upon this program for developing new
varieties, because ARS programs seek to introduce economically
important traits (e.g., virus and nematode resistance) not available in
commercial varieties using long-term high risk research efforts. The
U.S. vegetable seed industry develops new varieties of cucumbers,
carrots, onions, and garlic and over twenty other vegetables used by
thousands of vegetable growers. The U.S. vegetable seed, grower, and
processing industry, relies upon the USDA/ARS Vegetable Crops Research
Unit for unique genetic stocks to improve varieties in the same way the
U.S. health care and pharmaceutical industries depend on fundamental
research from the National Institutes of Health. Their innovations meet
long-term needs and bring innovations in these crops for the United
States and export markets, for which the United States has successfully
competed. Past accomplishments by this USDA group have been
cornerstones for the U.S. vegetable industry that have resulted in
increased profitability, and improved product nutrition and quality.
Both consumers and the vegetable production and processing industry
would like to see fewer pesticides applied to food and into the
environment in a cost-effective manner. Scientists in this unit have
developed a genetic resistance for many major vegetable diseases.
Perhaps the most important limiting factor in the production of
cucumbers has been its susceptibility to disease. New research progress
initiated in the 1990s and continuing today in Madison has resulted in
cucumbers with improved pickling quality and suitability for machine
harvesting. Viral and fungal diseases threaten much of the U.S.
cucumber production. New sources of genetic resistance to these
diseases have recently been mapped on cucumber chromosomes to provide a
ready tool for our seed industry to significantly accelerate the
development of resistant cultivars for U.S. growers. Likewise, new
cultivar resistances to environmental stress like cold, heat and salt
stress discovered by these scientists will help cucumber growers
produce a profitable crop where these stressful conditions occur. The
development of DNA markers that are associated with traits for
tolerance of biological stress will help public and private breeders
more efficiently develop stress-resistant varieties because selection
for improved varieties can be done in the laboratory as well as in the
field saving time and the costly expenses associated with field
testing. Nematodes in the soil deform carrot roots to reduce yield from
10 percent to over 70 percent in major production areas. A new genetic
resistance to nematode attack was recently discovered and found to
almost completely protect the carrot crop from one major nematode. This
genetic resistance assures sustainable crop production for growers and
reduces pesticide residues in our food and environment. Value of this
genetic resistance developed by the vegetable crops unit is estimated
at $650 million per year in increased crop production, not to mention
environmental benefits due to reduction in pesticide use. This group
improved both consumer quality and processing quality of vegetables
with a resulting increase in production efficiency and consumer appeal.
This product was founded on carrot germplasm developed in Madison,
Wisconsin. Carrots provide approximately 30 percent of the U.S. dietary
vitamin A. With new carrots that have been developed, nutritional value
of this crop has tripled, including the development of nutrient-rich
cucumbers with increased levels of provitamin A. Using new
biotechnological methods, a system for rapidly and simply identifying
seed production ability in onions has been developed that reduces the
breeding process up to 6 years. A genetic map of onion flavor and
nutrition will be used to develop onions that are more appealing and
healthy for consumers. Garlic is a crop familiar to all consumers, but
it has not been possible to breed new garlic varieties until a new
technique for garlic seed production was recently developed and is now
being bred like other crops.
There are still serious vegetable production problems, which need
attention. For example, losses of cucumbers, onions, and carrots in the
field due to attack by pathogens and pests remains high, nutritional
quality needs to be significantly improved and U.S. production value
and export markets could certainly be enhanced. Genetic improvement of
all the attributes of these valuable crops are at hand through the
unique USDA lines and populations (i.e., germplasm) that are available
and the new biotechnological methodologies that are being developed by
the group. The achievement of these goals will involve the utilization
of a wide range of biological diversity available in the germplasm
collections for these crops. Classical plant breeding methods combined
with bio-technological tools such as DNA marker-assisted selection and
genome maps of cucumber, carrot and onion will be the methods to
implement these genetic improvements. With this, new high-value
vegetable products based upon genetic improvements developed by our
USDA laboratories can offer vegetable processors and growers expanded
economic opportunities for United States and export markets.
u.s. food fermentation laboratory, raleigh, north carolina
The USDA/ARS Food Fermentation Laboratory in Raleigh, NC is the
major public laboratory that this industry looks to as a source for new
scientific information and development of new processing concepts
related to fermented and acidified vegetables. This industry has a
critical need for an increased level of food safety research do to the
recognition that there are acid tolerant food pathogens, including E.
coli, listeria and salmonella, that can survive and cause illness in
acid foods like apple and orange juice. We need to determine the extent
to which the acidified foods we produce are vulnerable to these
pathogens. If vulnerabilities are found to exist, practical means must
be found to assure that these pathogens are killed, while maintaining
the quality of our products that our customers expect. The Food
Fermentation Laboratory has unique capabilities in this area because
the scientists are very knowledgeable with the processing operations
used in this industry and the practical problems processors must deal
with in making high quality products from cucumbers, peppers, cabbage
and other vegetables. Scientists from this laboratory have been working
cooperatively with the industry and with FDA to develop new guidelines
for filing safe processes to assure that acid tolerant pathogens are
killed in current products. These new guidelines are currently being
implemented. The scientists are actively engaged in research projects
to develop improved approaches to eliminate these food pathogens from
fermented and acidified vegetable products. However, success will
require sustained effort as we learn more about the ways in which these
pathogens can enter our food supply and discover new approaches to
eliminating them from our products. PPI thanks the Congress for
$270,000 additional funding it provided in the fiscal year 2004 budget
so that a microbial physiologist can be hired into this unit to carry
out this research, which is critical for the membership of PPI.
However, to continue this important work it is necessary for the
Congress restore this funding in fiscal year 2005, since the funds were
not included in the budget sent to the Congress.
The competitive environment from world markets in which our
processors operate today requires that research on new processing
techniques and product quality issues must also be maintained and
enhanced. Over the years this laboratory has been a source for
innovations in this industry, which have helped us remain competitive
in the current global trade environment. We expect the research done in
this laboratory to lead to new processing and product ideas that will
increase the economic value of this industry and provide consumers with
high quality, more healthful vegetable products. In addition to the
newer challenges, this industry needs better technology for waste
minimization related to salt and organic waste generated in our
processing plants.
This laboratory is conducting research on cucumbers, peppers,
cabbage, sweetpotatoes, and other produce. A restructuring technology
has been developed that offers a potential for development of
convenient to use sweetpotato products that are high in nutritional
value. Minimal processing techniques for refrigerated products from
cucumbers and sweetpotatoes are also under development. Continued
technological advancement must occur so that U.S. farmers and
processors can meet competition from emerging countries that often have
less strict environmental standards and lower labor costs. To enhance
the processing and waste minimization research of this unit we request
creation of a new position for a Food Process Engineer to work with the
Food Technologists and Microbiologists in the unit to design and
improve processes and packaging systems that are used for acidified,
fermented, and minimally processed vegetables.
sugarbeet and bean research unit, east lansing, michigan
USDA/ARS Cucumber Sanitation and Vegetable Post Harvest Quality and
Food Safety Engineering Research is a component of the Sugarbeet and
Bean Research Unit, East Lansing, Michigan. The Vegetable Post Harvest
Quality Research Program is the only Federally funded research program
that uses engineering principles and technology to address post harvest
sanitation and food quality of vegetable concerns on a sustained and
programmatic basis. The goals of this research are reflected in the
Mission Statement of the CRIS, which is to apply engineering solutions
to ameliorate post harvest losses of pickling cucumbers from soil borne
plant pathogens and develop new wash water systems for ensuring the
sanitation of cucumbers from rot type pathogens.
The Vegetable Post Harvest Quality Research CRIS is severely under
funded and because of the shortage of base funds no full time scientist
(SY) is working on the critical problems facing the industry. In fiscal
year 2000, a postdoctoral research associate worked to address the
chlorine dioxide problem and initiated the dump tank treatment
experiments. However, the postdoctoral resigned to take another
position. In 2003, the Vegetable Post Harvest Quality Research CRIS
hired another postdoctoral research associate to explore alternative
methodologies via genetics and genomics to maintain long-term food
safety and sustainable production of pickling cucumbers. Goals of this
2-year project are to: (1) Develop genomic infrastructure for pickling
and other cucumbers by developing genomic and cDNA libraries; (2)
Determine the nucleotide sequence code for as many pickling cucumber
genes to be represented as Expressed Sequence Tags as practical; (3)
Examine changes in gene expression during fruit development and in
response to attack by fruit rotting pathogens; and (4) Develop genetic
intervention strategies to combat fruit rot caused by Phytophthora
capsici. These goals dovetail with recent infrastructure and equipment
investments in both breeding and genomic responsibilities of the
Sugarbeet CRIS. Phytophthora fruit rot is the most serious threat to
Michigan growers since symptoms are not generally evident until after
harvest, Phytophthora fruit rot can render entire lots of pickling
cucumbers worthless during the 3 days of transport and handling just
before to processing. Effective disease management is currently
unavailable, and the disease is spreading rapidly throughout Michigan
cucumber and snap bean growing regions.
Post harvest rotting is a major concern to the pickled vegetable
industry. Growers and processors go to great lengths to sanitize the
surface of vegetable produce through a variety of methods including
washing, spraying, brushing, chemical treatments, etc. These sanitizing
systems may be losing effectiveness, and they can also be costly to
implement and maintain and may be environmentally hazardous. New
equipment and systems need to be developed, tested, and evaluated in
order to ensure produce safety for all growers, retailers, and
consumers. New pickling cucumber germplasm that is resistant to its
major post-harvest pathogens is urgently needed. Such germplasm is
currently unavailable, and understanding the basic biology of the
infection processes is needed to transfer information from model plant
genomes for practical application in limiting post-harvest loss of
pickling cucumbers.
This CRIS urgently needs an additional $100,000 in Federal
appropriations to conduct the critical research at the scope expected
for a permanent scientist to solve basic problems and make an impact on
the cucumber industry.
u.s. vegetable laboratory, charleston, south carolina
The research program at the USDA/ARS, U.S. Vegetable Laboratory in
Charleston, SC addresses established national problems in vegetable
crop production and protection with emphasis on the southeastern United
States. This research program is internationally recognized for its
accomplishments, which have resulted in development of over 150 new
vegetable varieties and lines along with the development of many new
and improved disease and pest management practices. This laboratory's
program currently addresses 14 vegetable crops including those in the
cabbage, cucumber, and pepper families, which are of major importance
to the pickling industry. The mission of the laboratory is to (a)
develop disease and pest resistant vegetable crops and (b) develop new,
reliable, environmentally sound disease and pest management programs
that do not rely on conventional pesticides.
Continued expansion of the Charleston program is crucial. Vegetable
growers must depend heavily on synthetic pesticides to control diseases
and pests. Cancellation and/or restrictions on the use of many
effective pesticide compounds are having a considerable influence on
the future of vegetable crop production. Without the use of certain
pesticides, growers will experience crop failures unless other
effective, non-pesticidal control methods are found quickly. The
research on improved, more efficient and environmentally compatible
vegetable production practices and genetically resistant varieties at
the U.S. Vegetable Laboratory continues to be absolutely essential.
This gives U.S. growers the competitive edge they must have to sustain
and keep this important industry and allow it to expand in the face of
increasing foreign competition.
funding needs for the future
It remains critical that funding continue to maintain the forward
momentum in pickled vegetable research the United States now enjoys and
to increase funding levels as warranted by planned expansion of
research projects to maintain United States competitiveness. We also
understand that discretionary funds are now used to meet the rising
fixed costs associated with each location. Additional funding is needed
at the Wisconsin and South Carolina programs for genetic improvement of
crops essential to the pickled vegetable industry, and at North
Carolina and Michigan for development of environmentally-sensitive
technologies for improved safety and value to the consumer of our
products. The fermented and acidified vegetable industry is receptive
to capital investment in order to remain competitive, but only if that
investment is economically justified. The research needed to justify
such capital investment involves both short term (6-24 months) and long
term (2-10 years or longer) commitments. The diverse array of companies
making up our industry assumes responsibility for short-term research,
but the expense and risk are too great for individual companies to
commit to the long-term research needed to insure future
competitiveness. The pickled vegetable industry currently supports
research efforts at Wisconsin and North Carolina and anticipates
funding work at South Carolina and Michigan as scientists are put in
place. Donations of supplies and processing equipment from processors
and affiliated industries have continued for many years.
U.S. Vegetable Laboratory, Charleston, South Carolina
The newly constructed laboratory-office building at the U.S.
Vegetable Laboratory was occupied in April 2003. Design of the
accompanying greenhouse and headhouse research space is underway using
the funds appropriated for this purpose in fiscal year 2003. In fiscal
year 2004, construction of the headhouse component was funded, but
$10.9 million is still needed to construct the greenhouses. This new
facility replaces and consolidates outmoded laboratory areas that were
housed in 1930s-era buildings and trailers. Completion of the total
research complex will provide for the effective continuation and
expansion of the excellent vegetable crops research program that has
been conducted by the Agricultural Research Service at Charleston for
over 60 years. It is most critical to the mission of the U.S. Vegetable
Laboratory that the fiscal year 2003 and fiscal year 2004 appropriated
funds for expansion of the Charleston research staff be maintained in
fiscal year 2005. In addition, new funds are still needed to hire
additional scientists to expand the research program. An Entomologist
is needed to facilitate development of host resistance and new
management approaches to a wider range of established insect pests of
vegetable crops; a Molecular Biologist is needed to develop and utilize
molecular techniques for pathogen and pest population studies necessary
to development of new management approaches and resistant genetic
stocks. Both of these new scientific positions will greatly contribute
to the accomplishment of research that will provide for the effective
protection of vegetable crops from disease and pests without the use of
conventional pesticides. Each of these positions requires a funding
level of $330,000 for their establishment.
------------------------------------------------------------------------
Current status from New funds
Appropriations to restore new fiscal year 2003 and needed
scientific staff needed 2004 $770,000.00
------------------------------------------------------------------------
Entomologist...................... Needed.............. $330,000
Molecular Biologist............... Needed.............. 330,000
---------------
Total new funds............. .................... 660,000
------------------------------------------------------------------------
Food Fermentation Laboratory, Raleigh, North Carolina
With the additional funds provided in the fiscal year 2004 budget,
current base funding for four scientists at the laboratory is
$1,183,000. However, the $270,000 increase that raised fiscal year 2004
funds to this level are not in the fiscal year 2005 budget submitted to
congress. Thus, restoration of the $270,000 is urgently requested. An
additional $317,000 is needed to create a new position for a Food
Process Engineer, and to fully fund the unit scientists, clerical and
technical help, including graduate and post-doctorate students.
------------------------------------------------------------------------
Scientific Staff Current Status Funds Needed
------------------------------------------------------------------------
Microbiologist.................. Active............. $300,000
Chemist......................... Active............. 300,000
Food Technologist/Biochemist.... Active............. 300,000
Microbial Physiologist.......... Hiring process 270,000
initiated.
Food Process Engineer........... Needed............. 300,000
------------------
Total funding required.... ................... 1,500,000
==================
Current funding........... ................... -1,183,000
==================
Proposed reduction........ ................... 270,000
------------------
Additional funding needed. ................... 621,000
------------------------------------------------------------------------
Vegetable Crops Research Laboratory Unit, Madison, Wisconsin
Current base funding for three scientists is $832,400, of which
$200,000 was added in fiscal year 2002. An additional $245,400 is
needed to fully fund the scientists and support staff, including
graduate students and post-doctorates.
------------------------------------------------------------------------
Scientific Current status Funds needed
------------------------------------------------------------------------
Geneticist........................ Active.............. $300,000
Horticulturist.................... Active.............. 300,000
Geneticist........................ Active.............. 300,000
---------------
Total required.............. .................... 900,000
===============
Current funding............. .................... -832,400
===============
Proposed reduction.......... .................... 200,000
---------------
Additional funding needed... .................... 267,600
------------------------------------------------------------------------
A temporary addition of $200,000 was provided to enhance the
research effort of this program in fiscal year 2002, and we greatly
appreciate that additional support, but that addition is being proposed
for reduction in fiscal year 2004. Thus, the restoration of the funds
proposed for reduction, is urgently requested. We request a $267,600
permanent addition this year to sustain the long-term research of this
group.
Sugarbeet And Bean Research Unit, East Lansing, Michigan
A $100,000 increase in the current base funding level of the CRIS
would permit ARS to recruit a full-time scientist (SY) to
programmatically investigate the complex nature cucumber sanitation and
vegetable post harvest quality.
------------------------------------------------------------------------
Scientifc staff Current status Funds needed
------------------------------------------------------------------------
Post Doctorate to full SY......... Active.............. $200,000
Total Required.................... .................... 300,000
Additional funding needed......... .................... 100,000
------------------------------------------------------------------------
Thank you for your consideration of these needs and your expression
of support for the USDA/ARS.
______
Prepared Statement of the Red River Valley Association
Mr. Chairman and members of the Committee, I am Wayne Dowd, and I
am pleased to represent the Red River Valley Association as its
President. Our organization was founded in 1925 with the express
purpose of uniting the citizens of Arkansas, Louisiana, Oklahoma and
Texas to develop the land and water resources of the Red River Basin.
The Resolutions contained herein were adopted by the Association
during its 79th Annual Meeting in Bossier City, Louisiana on February
19, 2004, and represent the combined concerns of the citizens of the
Red River Basin Area as they pertain to the goals of the Association.
As an organization that knows the value of our precious water
resources we support the most beneficial water and land conservation
programs administered through the Natural Resources Conservation
Service (NRCS). We understand that attention and resources must be
given to our national security; however, we cannot sacrifice what has
been accomplished on our Nation's lands. NRCS programs are a model of
how conservation programs should be administered and our testimony will
address the needs of the Nation as well as our region.
The President's fiscal year 2005 budget for NRCS indicates a
decrease of $216 million from what Congress appropriated in fiscal year
2004. In reality, NRCS is taking a major decrease in program funding
and staff years. Inadequate Technical Assistance (TA) funding for
mandatory support to CCC Farm Bill programs compounds this reduction of
direct funding. The fiscal year 2005 budget reflects a serious
shortfall in services for landowner assistance that will not be
available in fiscal year 2005. This is also reflected in the fact that
NRCS manpower for fiscal year 2005 would have to decrease by 1,450
staff years if the President's budget is implemented. This is
unacceptable.
This means that NRCS assistance to landowners will not be
adequately funded, to the detriment of the Nation and our natural
resources. We would like to address several of the programs
administered by NRCS. Failure to adequately fund these initiatives
would reduce assistance to those who want it and the resources that
need protection.
Conservation Operations.--This has been in steady decline, in real
dollars, over the past several years. It has occurred partly as a
result of funds being reduced from Conservation Operations to balance
increases in technical assistance for mandatory conservation financial
assistance programs.
The President's budget included $710.4 million, which is a decrease
of $142.6 million from fiscal year 2004. This is the largest 1 year cut
made by any administration in recent memory.
We request a total of $930 million be appropriated for Conservation
Operations for NRCS to meet the demands it faces today.
Conservation Technical Assistance is the foundation of technical
support and a sound, scientific delivery system for voluntary
conservation to the private users and owners of lands in the United
States. It is imperative that we provide assistance to all working
lands' not just those fortunate few who are able to enroll in a Federal
program. Working lands are not just crops and pasture (commodity
staples) but includes forests, wildlife habitat and coastal marshes.
The problem is that NRCS personnel funded from mandatory programs' can
only provide technical assistance to those enrolled in these programs,
leaving the majority of the agricultural community without technical
assistance. We recommend that adequate funding, for technical
assistance, be placed in ``Conservation Technical Assistance'', and
allow NRCS to provide assistance to everyone.
We do not support the use of third party vendors for technical
assistance as a replacement of career NRCS public servants, but they
may be utilized ``in addition to''. We have to address the question of
quality assurance and administration for these programs. Why establish
a new process that will ultimately cost more than using the in-house
expertise that now exists and has proven to be successful? We believe
third party vendors can be made available only after NRCS staffing is
brought up to levels commensurate with the increase in workload caused
by the Farm Bill, not to replace NRCS staffing.
Watershed and Flood Prevention Operations (Public Laws 566 &
534).--We are greatly disappointed that the President's Budget provided
only $40.2 million for watershed operations. There is no doubt that
this is a Federal responsibility, in conjunction with a local sponsor.
We ask our legislators to support the local sponsors in this national
issue. This funding level is too low to support a national program, as
important as this one.
We are very appreciative for the funding level of $87 million
enacted in the fiscal year 2004 appropriations bill. It is reassuring
to know that both the House and Senate realize the importance of this
program to the agricultural community.
There are many new projects, which are awaiting funds for
construction under this program. We strongly recommend that a funding
level of $200 million be appropriated for Watershed Operations
Programs, Public Law 534 ($20 million) and Public Law 566 ($180
million).
The Red River has proven, through studies and existing irrigation,
to be a great water source for ``supplemental'' irrigation. The two
projects mentioned below, will use existing, natural bayous to deliver
water for landowners to draw from. The majority of expense will be for
the pump system to take water from the Red River to the bayous. This
project will provide the ability to move from ground water dependency
to surface water, an effort encouraged throughout the Nation. Both will
enhance the environmental quality and economic vitality of the small
communities adjacent to the projects.
--Walnut Bayou Irrigation Project, AR.--This project received
$300,000 in the fiscal year 2004 appropriations. Plans and
specifications have been completed and it is ready to proceed
into the construction phase. An irrigation district has been
formed and they are prepared to take on the responsibility to
generate the income for the O&M required to support this
project. We request that $4,000,000 be appropriated for this
specific project in fiscal year 2005.
--Red Bayou Irrigation Project, LA.--The plans and specifications
will be completed in fiscal year 2004 making this project ready
for construction in fiscal year 2005. An irrigation district
has been formed and is prepared to collect funds to support the
O&M for this proposed system. We request that $2,500,000 be
specifically appropriated to begin construction in fiscal year
2005.
Watershed Rehabilitation.--More than 10,400 individual watershed
structures have been installed nationally. They have contributed
greatly to conservation, environmental protection and enhancement,
economic development and the social well being of our communities. More
than half of these structures are over 30 years old and several hundred
are approaching their 50-year life expectancy. Today you hear a lot
about the watershed approach to resource management. These programs
offer a complete watershed management approach and should continue for
the following reasons:
--They protect more people and communities from flooding now than
when they were first constructed.
--Their objectives and functions sustain our Nation's natural
resources for future operations.
--They are required to have local partners and be cost shared.
--The communities and NRCS share initiatives and decisions.
--They follow NEPA guidelines and enhance the environment.
--They often address the need of low income and minority communities.
--The benefit to cost ratio for this program has been evaluated to be
2.2:1.
What other Federal program can claim such success?
There is no questioning the value of this program. The cost of
losing this infrastructure exceeds the cost to reinvest in our existing
watersheds. Without repairing and upgrading the safety of existing
structures, we miss the opportunity to keep our communities alive and
prosperous. It would be irresponsible to dismantle a program that has
demonstrated such great return and is supported by our citizens. We
cannot wait for a catastrophe to occur where life is lost to decide to
take on this important work.
A 1999 survey, conducted in 22 states, showed that 2,200 structures
are in need of immediate rehabilitation at an estimated cost of $543
million. The President's budget neglects the safety and well being of
our community needs by placing only $10.1 million for this program.
This is drastically lower than the levels authorized in the 2002 Farm
Bill. We request that $65 million be appropriated to provide financial
and technical assistance to those watershed projects where sponsors are
prepared to commence rehabilitation measures, as directed in the 2002
Farm Bill.
Watershed Survey and Planning.--In fiscal year 2004 $10.6 million
was appropriated to support this extremely important community program.
NRCS has become a facilitator for the different community interest
groups, state and Federal agencies. In our states such studies are
helping identify resource needs and solutions where populations are
encroaching into rural areas. The Administration decided to fund this
program with only $5.1 million. We strongly disagree with this low
level and ask Congress to fund his important program at the appropriate
level. As our municipalities expand, the water resource issue tends to
be neglected until a serious problem occurs. Proper planning and
cooperative efforts can prevent problems and insure that water resource
issues are addressed. We request this program be funded at a level of
$35 million.
We request that the following two studies be specifically
identified and funded in the fiscal year 2005 appropriations bill.
--Maniece Bayou Irrigation Project, AR.--This is a project in its
initial stage of planning. An irrigation district is being
farmed to be the local sponsor. This project transfers water
from the Red River into Maniece Bayou where landowners would
draw water for supplemental irrigation. We request that
$200,000 be appropriated to initiate the plans and
specifications.
--Lower Cane River Irrigation Project, LA.--The transfer of water
from the Red River to the Lower Cane River will provide
opportunities for irrigation and economic development. Funds
are needed to initiate a Cooperative River Basin Study. We
request that $350,000 be appropriated for this study.
Emergency Watershed Protection Program.--This program has
traditionally been funded through Emergency Supplemental Appropriations
and administered by NRCS through its Watershed and Flood Prevention
Operations. It has traditionally been a zero budget line item, because
it relies on a supplemental appropriation.
As our populations expand and shift, land use changes and
intensifies. Impacts of severe weather events are becoming more intense
on our communities, rivers and related eco-systems. These major weather
events will have an adverse impact requiring urgent NRCS assistance. It
is important that NRCS is prepared for a rapid response, not waiting
for legislative action to provide funds for emergency work. With some
funds available, they would be able respond immediately to an emergency
when it occurs and not have to wait for an emergency supplemental to be
passed.
We request that $20 million be appropriated as ``seed'' funding to
allow NRCS to react to an emergency while the full need is determined
and added through a supplemental appropriation.
Resource Conservation and Development (RC&D).--This has always been
a well-received program by the Administration. Their budget proposal of
$50.8 million is adequate to accomplish the needs of the Nation and we
support this level of funding.
Mandatory Accounts (CCC) Technical Assistance (TA).--Request for
assistance through the CCC programs has been overwhelming. Requests far
exceed the available funds and place an additional workload on NRCS's
delivery system. Adequate funding for TA must be provided at the full
cost for program delivery. This includes program administration,
conservation planning and contracting with each applicant. Congress, in
the 2002 Bill, wisely increased conservation programs each year. This
increased investment with the multi-year CCC programs will increase the
NRCS workload; therefore, NRCS must receive the TA funds to administer
these programs.
The mandatory CCC programs for fiscal year 2005 have been
appropriated at a level of $3.9 billion. Only $465 million (12 percent)
has been allocated in TA for NRCS. Historically 19 percent of total
program cost has been required. NRCS will have to fund this TA
requirement at a level of $741 million. The short fall will no doubt
leave program monies unexpended because NRCS will not have enough funds
to service the multiyear contracts written to date under this and the
previous farm bill plus service the fiscal year 2005 program
applicants. This makes landowners the real losers.
We request that the CCC Program budget TA in the fiscal year 2005
Appropriations Bill at the full cost of technical assistance, for each
program, which must be at least $741 million (19 percent).
Over 70 percent of our land is privately owned. This is important
in order to understand the need for NRCS programs and technical
assistance. Their presence is vital to ensuring sound technical
standards are met in conservation. These programs not only address
agricultural production, but sound natural resource management. Without
these programs and NRCS properly staffed to implement them, many
private landowners will not be served adequately to apply conservation
measures needed to sustain our natural resources for future
generations.
There have been new clean water initiatives, but why do we ignore
the agency that has a proven record for implementing watershed
conservation programs? Congress must decide; will NRCS continue to
provide the leadership within our communities to build upon the
partnerships already established? It is up to Congress to insure NRCS
is properly funded and staffed to provide the needed assistance to our
taxpayers for conservation programs.
All these programs apply to the citizens in the Red River Valley
and their future is our concern. The RRVA is dedicated to work toward
the programs that will benefit our citizens and provide for high
quality of life standards. We therefore request that you appropriate
the requested funding within these individual programs, to insure our
Nation's conservation needs are met.
I thank you for the opportunity to present this testimony on behalf
of the members of the Red River Valley Association and we pledge our
support to assist you in the appropriation process. Please direct your
comments and questions to our Executive Director, Richard Brontoli,
P.O. Box 709, Shreveport, LA 71162, (318) 221-5233, E-mail:
[email protected].
Grant Disclosure.--The Red River Valley Association has not
received any Federal grant, sub-grant or contract during the current
fiscal year or either of the two previous fiscal years.
______
Prepared Statement of the Society of American Foresters
The Society of American Foresters (SAF) represents approximately
17,000 forestry professionals in all sectors of the profession. SAF
members pledge to use their conservation ethic to ensure the continued
health and use of forest ecosystems and the present and future
availability of forest resources to benefit society. The programs of
the Natural Resource Conservation Service (NRCS), the U.S. Department
of Agriculture (USDA) research budget, and the Cooperative State
Research, Education and Extension Service (CSREES) contribute to the
achievement of these ideals by supporting education, research, and
technology associated with the practice of forestry and the stewardship
and sustainability of this country's forest resources. Through these
Agencies, partnerships are built with other government entities,
universities, and private organizations to advance forest management
objectives on both public and private forest land to improve the
management of these valuable resources. Federal appropriations
facilitate these collaborative partnerships.
Renewable Resources Extension Act Program (RREA)
Forest resource management is increasingly complex, as we place
increasing demands on our forest resources, the number of family forest
landowners grow while the total acreage these families own decreases,
urban sprawl and development pressures persist, and forest health
issues persist on both public and private forest lands. Family forest
owners need information and assistance to be able to address these
problems.
Current budget deficits demand we leverage the most value from
every dollar invested. Research funding is no exception. Outreach and
extension, which assists in the translation of research findings to
solve real world problems, greatly increases the value of our research
investment. Through the RREA program, much needed outreach and
extension is provided at universities around the country. These efforts
utilize research findings, making investments in research increasingly
important.
When Congress reauthorized the RREA program in the 2002 Farm Bill,
legislation was included to create a new Sustainable Forestry Outreach
Initiative (SFOI). SFOI would capitalize on and coordinate private
sector initiatives aimed at achieving sustainable forestry. The program
will assist landowners in understanding the broad array of choices
before them, and facilitate their use of one or more of these programs
designed to improve forest management.
SAF strongly supports increased funding for the Renewable Resources
Extension Act program and the Sustainable Forestry Outreach Initiative
for fiscal year 2005. We would like to see the program funded at the
recently authorized level of $30 million. Though we are asking for a
modest increase, we believe there is great potential for success with
the RREA and SFOI programs.
The Natural Resource Conservation Service (NRCS)
Through NRCS, family forestland owners can receive assistance for a
variety of conservation practices, influencing the stewardship of these
valuable resources. Several programs administered by NRCS are key to
assisting family forest owners, including the Environmental Quality
Incentives Program, the Wildlife Habitat Incentives Program, the
Conservation Reserve Program, and the Wetlands Reserve Program. We
strongly support full funding for these programs and will continue to
work with NRCS to address family forest owner needs through these
programs.
With the passage of the 2002 Farm Bill, NRCS responsibilities have
greatly increased. However, the proposed budget for fiscal year 2005
does not reflect these increases, and instead decreases funding for
Conservation Operations to $710 million. We recommend increasing this
funding to at least that of the fiscal year 2004 enacted level, $848
million. This will better enable the Agency to meet the increasing
demands for the technical expertise and address critical resource
concerns on private lands.
The proposed budget creates a separate account to fund conservation
technical assistance for two Farm Bill programs, the Conservation
Reserve Program and the Wetlands Reserve Program. We hope this solution
will resolve the issues associated with technical assistance and allow
implementation of all the 2002 Farm Bill programs at authorized levels
without compromising the delivery of these important programs to
millions of private landowners in need of assistance.
Forestry Research
As populations grow, the demands we place on our forest resources,
both tangible and intangible, continue to increase. Forestry Research
is crucial to enable forest managers to make decisions and continue to
sustainably meet the demands on our forest resources. This research
provides new and innovative ways to manage forests and address the
environmental, social, and economic concerns that forest managers are
faced with. The SAF believes forestry research should be funded through
both public and private investments. Two programs within the USDA
budget provide public funding for forestry research: The Cooperative
Forestry Research (McIntire Stennis) Program and the National Research
Initiative.
The Cooperative Forestry (McIntire-Stennis) Research Program
supports university-based research on critical forestry issues and is
an important part of the collaborative forestry research effort among
Federal, state, and private sector scientists. The SAF supports
increasing funding for this program to $30 million. The research
accomplished with this funding is critical to the development of new
information and technologies that increase not only the efficiency and
productivity of forest management on all forest ownerships for the full
range of forest benefits, but also provide information for developing
natural resource management policy. McIntire-Stennis research funds are
granted directly to public colleges and universities on a matching
basis, leveraging more than three state and university dollars for
every Federal dollar. This program has provided funding for research
demands that have not been met through other private and public sector
programs. We believe at least $30 million is justified to meet these
needs.
The National Research Initiative (NRI), a competitive grant
program, provides funding for research on various issues in the
biological and environmental sciences arena. Through this program,
grants are awarded on a matching basis to university researchers in
biological, environmental, and engineering sciences to address critical
problems in agriculture and forestry. The SAF strongly supports the
increase in funding proposed in the fiscal year 2005 budget, and
recommends this funding be allocated with an increased focus on
renewable natural resource areas. We strongly believe this combination
of formula-based and competitive-based research funding to be
appropriate if we are to maintain the long-term stability and focus
required in forestry research, and to foster new and innovative
thinking characteristic of competitive grants.
Thank you for your consideration.
______
Prepared Statement of the U.S. Agricultural Export Development Council
U.S. agricultural exporters want to compete on a level playing
field. However, foreign governments continue to manipulate markets and
production which means U.S. agricultural exporters need Washington's
support to overcome this inequity. The record shows that U.S.
agriculture takes this public-private partnership very seriously and
contributes significant amounts of its own resources to the effort.
Further, U.S. agriculture and the U.S. Department of Agriculture
(USDA) are using strategic planning, program evaluation, quantifiable
goals, and a competitive award process to ensure that taxpayer's money
is being used in a way which generates the biggest returns for the U.S.
economy and its 850,000 citizens who depend on a healthy agricultural
export sector for their livelihood.
The U.S. Agricultural Export Development Council (USAEDC)
respectfully urges this subcommittee to fully support fiscal year 2005
export promotional efforts at the level legislated in the Farm Security
and Rural Investment Act (FSRIA) of 2002: the Foreign Market
Development (FMD) Program at a level of $34.5 million and the Market
Access Program (MAP) at a level of $140 million. We also urge the
subcommittee to support a strong USDA Foreign Agricultural Service
(FAS), our partner in promoting increased U.S. agricultural exports.
First and foremost, it is important to revisit the role
agricultural exports play in the health of our national economy and the
well being of our citizenry. Every $1 billion in agricultural exports
supports approximately 15,000 United States direct and indirect jobs.
With our $56.2 billion in agricultural exports in 2003, this means a
successful U.S. agriculture export effort was responsible for 850,000
jobs. (These figures do not include forestry or fishery products which
increase export sales by an additional $7.9 billion or 120,000 jobs.)
Agricultural exports play an important role in every region of the
country, including the South (117,000 jobs), the Pacific Northwest
(53,000 jobs), and the Midwest (305,000 jobs). Ninety percent of
America's agricultural operations are still run by individuals or
families and most are still small farms.\1\
---------------------------------------------------------------------------
\1\ ``Preliminary Census Results Give First Look at Changing Face
of Agriculture''. USDA Release No. 0063.04
---------------------------------------------------------------------------
These jobs not only ensure family incomes, but also help grow the
national tax base, increasing revenue to the Treasury and contributing
in no small way to the reduction of our rising national debt. At a time
when job creation is at a minimum, everything that can be done to
maintain this sector is vital. Without a healthy agricultural export
sector, we all lose.
Ensuring the long-term vitality of U.S. agricultural exports is one
of the missions of the U.S. Agricultural Export Development Council
(USAEDC). A national, non-profit, private sector trade association
funded solely by its members, USAEDC's 75 members are U.S. farmer
cooperatives, agricultural trade associations and state regional trade
groups that in turn represent the interests of farmers, agribusinesses
and manufacturers in every state of the Union. Our members represent
producers of both bulk and high-value processed products, including
grains, fruits and vegetables, cotton, livestock, dairy products,
seeds, fish, wood products, wine, poultry, nuts, and rendered products,
among others.
Our members continually strive to ensure the United States remains
one of the most active agricultural exporting countries in the world.
We proudly produce among the world's highest quality and valued
products as evidenced by our ability to be one of the few sectors of
the U.S. economy to consistently run a positive balance of trade. In
2003, U.S. agriculture racked up a record year in exports: over $1
billion per week in sales to more than 100 countries. Put another way,
every 60 minutes, nearly $6.5 million of U.S. agricultural products
were consigned for export.
Why Trade is Important to U.S. Agriculture
Demand.--96 percent of the world's food consumers live outside of
the United States.
Supply.--Farm production far exceeds United States demand/
consumption.
Capacity.--United States productivity is increasing due to
improvements in technology and science.
Market.--Two-thirds of the world's purchasing power is outside of
the United States.
Sales.--Export market sales are growing at twice the rate of
domestic sales.
Export market sales account for over $1 billion per week to over
100 countries.
Jobs.--Trade supports 850,000 badly needed jobs, 60 percent of
which are in urban areas.
Farm Income.--Trade generates 25 percent of farm cash receipts.
Dependency.--Trade is one of the most export-dependent industries
in the United States as domestic consumption levels off.
Business.--Trade supports small businesses that employ three of
four workers.
Local Impact.--$1 of exports creates $1.50 in economic activity
Production.--One of every three cropland acres is grown for export.
Economy.--Agriculture is the only sector that posts a trade surplus
year after year.
The Potential for Future Growth
U.S. agricultural exports reached $56.2 billion in 2003. The
largest single markets were Canada and Japan, followed closely by
Mexico. Trade with Canada has grown 186 percent in the past 10 years
and with Mexico by 200 percent for the same period. While China
represents only 3 percent of exports today, trade has grown 700 percent
in 10 years and likely to continue apace.
Projections show that the vast majority of world population growth
will take place in developing countries. The middle class in key
emerging markets is expected to grow by 600 million by 2006. This
transition from a subsistence existence to ``middle class'' creates
increased demand for quantity, quality and diversity of food. United
States trade in high value products has increased sharply, another
indicator of the growing buying power of our customers. China and India
have been identified as the two nations that will grow the most
exponentially and outstrip all others. The potential value to U.S.
agricultural exports and the overall economy is clear and the means to
access these markets with changing consumer tastes and preferences must
be supported. As trade liberalization occurs, greater market
development and marketing activities must be undertaken by U.S.
agricultural groups to capture these new market opportunities and
consumer demands. U.S. agriculture needs to be poised to take advantage
of these opportunities.
But Some Things Stand in Our Way
U.S. agriculture has done well in a climate where international
conditions remain extremely competitive. Foreign governments still
bolster agricultural production, to the competitive disadvantage of the
United States in foreign markets. The European Union alone currently
spends more than $2 billion annually on agricultural export subsidies
compared to less than $100 million by the United States, outspending
the United States by more than 20 to 1. With the accession of
additional countries into the EU, more and more countries will turn
their attention to support for agricultural production for both their
domestic and export markets. Through their spending and production
decisions, foreign governments continue to strengthen traditional, and
create new, competitors for U.S. exports.
United States exporters also face ongoing unreasonably high tariffs
in those markets that have been identified as the ``growth'' markets of
the future. Regionally, South Asia's tariffs are at 118 percent and the
average agricultural tariff worldwide is 62 percent. The WTO and
Regional Trade Agreements are working to break down these ``classic''
barriers but even when success is achieved, new non-tariff barriers are
often substituted, impeding what could be significantly higher exports.
Many countries have turned to sanitary and phytosanitary (S/PS)
requirements as market entry barriers to U.S. agricultural products.
Although said by their proponents to be based on sound science and thus
objective, many of these S/PS barriers are in actuality an attempt to
use practices that are not universally accepted to establish import
regimes which effectively halt or severely restrict U.S. imports. The
recent BSE (beef) and AI (poultry) incidents are cases in point.
A myriad of other types of non-tariff barriers exist which prevent
U.S. agriculture from reaching the exports levels of which it is
capable. FAS, the ally of agricultural exports, and its overseas
offices have compiled information on numerous cases of foreign
assistance for agricultural production as well as barriers to trade.
The National Trade Estimate of the Office of the U.S. Trade
Representative catalogues this loss to U.S. agricultural exports from
unfair foreign competition. Despite a significant commitment of their
own resources, the United States private sector cannot overcome such
extensive barriers alone.
A U.S. Public-Private Partnership is Necessary and Appropriate
American agriculture is 2\1/2\ times more reliant on trade than the
general economy; every effort should be made to insure its access to
the world marketplace.
Given the magnitude of the challenge, it would be unrealistic to
expect either the United States private sector or the United States
public sector to be able solely to overcome the barriers to foreign
trade that U.S. agriculture faces. Since 1954, U.S. agriculture has
worked successfully with the U.S. Government to remedy instances of
foreign unfair competition and overcome market access barriers that
have prevented U.S. exports from realizing their potential. To those
who say there is no appropriate role for Washington in this fight,
former U.S. Under Secretary of Commerce Jeffrey Garten, now dean of the
Yale School of Management, sums up the situation quite well: ``In the
best of worlds, governments ought to get out of this business [of
export promotion] altogether. But the marketplace is corrupted by the
presence of government. So do you sit on the side and pontificate about
Adam Smith, or do you enter the fray?'' \2\ Mr. Garten argues that
Washington must enter into the battle or risk losing more U.S. jobs.
---------------------------------------------------------------------------
\2\ ``Don't Be Salesmen'', The Economist, Jan. 2, 1997.
---------------------------------------------------------------------------
USDA proposes funding a number of programs for U.S. agriculture
which help the sector overcome these foreign trade barriers and market
distortions. USAEDC commends the actions of this subcommittee in the
past to fund these programs. We strongly support efforts by this
Congress, as provided for in the Food Security and Rural Investment Act
of 2002, to again provide a dynamic arsenal of programs to boost the
efforts of U.S. agricultural producers to maintain current, and
establish new, markets around the world. It is essential that the full
range of USDA's export programs be fully funded and aggressively
implemented this coming year, including the Foreign Market Development
(FMD) program at $34.5 million and the Market Access Program (MAP) at
$140 million.
Nowhere is the record of success of the public-private partnership
more evident than in the FMD and MAP programs. USAEDC members consider
these programs the ``heavy artillery'' in the USDA arsenal. These
complementary programs have been instrumental in our record export
performance. The Foreign Market Development Program is aimed at long-
term marketing efforts, i.e., making infrastructural changes to foreign
markets through training and educational efforts among members of the
foreign trade and developing long-standing relationships with the
trade. Successful efforts result in a modification of the foreign
market structure so that U.S. products become an available, attractive,
well understood alternative to other sources of competing products. FMD
activities help the foreign importer, processor, and retailer to
understand not only how to properly store, handle, process, and market
the U.S. product, but also to appreciate its unique characteristics,
high quality, and reliability of supply.
The Market Access Program (MAP) complements the FMD program. Where
FMD is aimed at building market relations, MAP is aimed at building
market access and presence. Where FMD targets the importers/processors/
retailers, MAP targets the end-user--the consumer. Through activities
such as nutrition seminars, in-store promotions, contests, advertising,
cooking demonstrations and the like, MAP participants create or
capitalize on new trends in foreign consumption and increase the
consumers' awareness and level of comfort with the imported U.S.
product. MAP provides the small United States branded companies and the
United States specialty crops with the necessary funds to assist them
in their efforts to gain their fair share in the global marketplace.
The FMD program helps create new markets for U.S. agricultural
exports.--For example, the American Soybean Association (ASA) has
convinced three Malaysian companies to produce full fat soybean meal
(FFSBM) from imported U.S. soybeans for the local swine and poultry
diets. Using FMD funds, ASA provided technical data, carried out team
visits to other FFSBM facilities and conducted seminars on FFSBM
benefits at feedmill and farm level, creating awareness and demand for
FFSBM. As a result of ASA's work, the three companies purchased 20,000
metric tons of U.S. soybeans valued at $6 million. The potential market
for FFSBM in Malaysia is estimated at 200,000 MT, valued at $79 million
per year. In a similar vein, the U.S. Wheat Associates (USWA) used FMD
funds to demonstrate to Brazilian bakers potential wheat blends and
end-use qualities of U.S. wheat. Through a special education and
training program, USWA brought new baking techniques to a miller who
grinds one million metric tons of wheat per year and has 15 percent of
the flour market in Brazil. This company saw that using 40 percent of
United States hard winter wheat in the flour blend--instead of 100
percent Argentine--would improve the final product. An initial sale of
25,000 MT of U.S. wheat is expected to lead to even more sales as more
Brazilian bakers take part in the education and training sessions.
The MAP program helps build market penetration for U.S.
agricultural exports.--One example of this is the California Tree Fruit
Agreement (CTFA). Faced with the required perennial renegotiations of
the California growers' access agreement with Mexico, CTFA used grower
assessments and MAP funds to craft an aggressive advertising and in-
store promotion campaign that was ready to launch as soon as the
agreement was inked. This resulted in a record 2.3 million cartons
(26,422 metric tons) of peaches, plums and nectarines, valued at $19
million in just a 4 month period. Similarly, a Missouri-based firm has
partnered with the Mid-America International Agri-Trade Council
(MIATCO) to export feed additives for livestock. Through a technically-
oriented promotional campaign to educate and attract new customers,
sales to Korea and Japan recently jumped 212 percent and 270 percent
respectively. The company has a fermentation processing plant in Iowa,
feed plants in Indiana and Nebraska, sources its yeast from Illinois,
and purchases soymeal from farms throughout the Midwest, providing jobs
to countless individuals.
Numerous examples of other FMD and MAP program ``success stories''
are available on-line at www.usaedc.org. Therefore, USAEDC strongly
supports an FSRIA 2002 funding level of $34.5 million for FMD and $140
million for MAP for fiscal year 2005. These amounts represent the
levels that the House and Senate Agriculture Committees believed to be
essential to the growth and maintenance of U.S. agricultural export
markets.
It is important to realize that the program participants contribute
their industry's money and manpower to participate in these programs.
Contributions are requirements of both the FMD and MAP programs; no one
is getting a ``free ride.'' Thus, the program participants have just as
much, if not more, impetus to conduct responsible and effective FMD and
MAP marketing programs. In fiscal year 2002, MAP participant
contributions were 176 percent of total MAP dollars spent and FMD
cooperator contributions were 146 percent of total FMD dollars spent.
Another way to view this is that U.S. agriculture contributed $1.76 for
every MAP program dollar spent and $1.46 for every FMD dollar expended.
These numbers clearly illustrate the private sector's strong belief in
and commitment to the essential nature of the FMD and MAP programs, and
that the public-private partnership approach is effective.
U.S. agriculture is also active on other fronts to maximize
opportunities for export increases, working with Washington in the
trade policy arena. U.S. trade policy efforts have met with success in
opening new markets to U.S. agricultural products. However, trade
policy alone is not enough. Bringing down barriers to trade is only
truly effective at increasing U.S. agricultural exports when followed
by intensive marketing efforts. The FMD and MAP programs help U.S.
agriculture do just that.
Fine Tuning of the FMD and MAP Programs has Enhanced Effectiveness
USAEDC members are as concerned as everyone in America about the
ballooning federal budget deficit and the long-term fiscal health of
this country. The public-private partnership in the FMD and MAP
programs allows us to be proactive, increasing U.S. agricultural
exports beyond that which U.S. agricultural interests would be able to
do on their own. Increased exports generate increased tax revenues
throughout the system and reduce farm payments as producers rely
increasingly on the marketplace for their revenue.
Annual independent evaluations are required by USDA to determine
the past impact and future direction of their marketing programs. This
evaluation is in addition to that conducted independently by many of
the associations themselves as part of their own strategic planning.
Program evaluations are reviewed jointly by USDA and program
participants to determine the appropriate promotional programs for
particular markets in the future and to demonstrate that program
participants are serious about getting the best possible return on FMD
and MAP funds.
The programs have gone through a series of reforms that have
resulted in application and allocation criteria being much more widely
known and transparent for all potential applicants. Other changes in
response to General Accounting Office and Office of Management and
Budget recommendations to ensure the best possible return to the U.S.
taxpayer and the U.S. Treasury have been executed. FAS is to be
commended for its work in implementing these changes as well as its
continuing efforts to support efforts by U.S. agriculture to expand our
exports. A continued strong and well-funded FAS is an important part of
our successful public-private partnership. Without a strong overseas
presence that is supported in Washington by sufficient staff with
access to adequate technology, success in the global marketplace will
be much more difficult to achieve. USAEDC supports the fiscal year 2005
request of the President for full FAS funding at $148 million.
The U.S. Agricultural Export Development Council (USAEDC)
appreciates this opportunity to submit written testimony in support of
an aggressive United States effort in fiscal year 2005 to increase U.S.
agricultural exports, specifically with an FMD program funded at $34.5
million, and an MAP program funded at $140 million.
members of the u.s. agricultural export development council (usaedc)
Alaska Seafood Marketing Institute
Almond Board of California
American Forest & Paper Association
American Peanut Council
American Seafood Institute
American Seed Trade Association
American Sheep Industry Association
American Soybean Association
Blue Diamond Growers
California Agricultural Export Council
California Asparagus Commission
California Cherry Advisory Board
California Cling Peach Growers Advisory Board
California Dried Plum Board
California Kiwifruit Commission
California Pistachio Commission
California Strawberry Commission
California Table Grape Commission
California Tomato Commission
California Tree Fruit Agreement
California Walnut Commission
Catfish Institute
Cherry Marketing Institute
Chocolate Manufacturers Association
Cotton Council International
Cranberry Marketing Committee
Florida Department of Citrus
Florida Tomato Committee
Food Export USA--Northeast
Ginseng Board of Wisconsin
Hop Growers of America
Intertribal Agriculture Council
Leather Industries of America
Mid-America International Agri-Trade Council
Mohair Council of America
National Association of State Departments of Agriculture
National Dry Bean Council
National Hay Association
National Honey Board
National Renderers Association
National Sunflower Association
National Watermelon Promotion Board
New York Wine & Grape Foundation
North American Export Grain Association, Inc.
North American Millers' Association
Northwest Horticultural Council
Northwest Wine Coalition
Oregon Seed Council
Organic Trade Association
Pear Bureau Northwest
Pet Food Institute
Popcorn Board
Produce Marketing Association
Raisin Administrative Committee
Southern U.S. Trade Association
Texas Produce Export Association
U.S. Apple Export Council
U.S. Dairy Export Council
U.S. Grains Council
U.S. Hide, Skin & Leather Association
U.S. Highbush Blueberry Council
U.S. Livestock Genetics Export, Inc.
U.S. Meat Export Federation
U.S. Rice Producers Association
U.S. Wheat Associates United Fresh Fruit & Vegetable Association
United States Potato Board
USA Dry Pea & Lentil Council
USA Poultry & Egg Export Council
USA Rice Federation
Washington Apple Commission
Washington State Fruit Commission
Western United States Agricultural Trade Association Wine Institute
______
Prepared Statement of the U.S. Apple Association
The U.S. Apple Association (U.S. Apple) appreciates the opportunity
to provide this testimony on behalf of our nation's apple industry.
Our testimony will focus on the following three areas: the Market
Access Program (MAP); Food Quality Protection Act (FQPA)
implementation; Cooperative State Research, Extension and Education
Service (CSREES) and Agricultural Research Service (ARS) funding.
U.S. Apple is the national trade association representing all
segments of the apple industry. Members include 36 state and regional
apple associations representing the 7,500 apple growers throughout the
country as well as more than 500 individual firms involved in the apple
business. Our mission is to provide the means for all segments of the
U.S. apple industry to join in appropriate collective efforts to
profitably produce and market apples and apple products.
Market Access Program (MAP)
U.S. Apple encourages Congress to appropriate $140 million in MAP
funds, the level authorized in the farm bill for fiscal 2005.
The apple industry receives $3.2 million annually in export
development funds from the U.S. Department of Agriculture's (USDA)
Market Access Program (MAP). These funds are matched by grower dollars
to promote apples in more than 20 countries throughout the world. Since
this program's inception in 1986, the U.S apple industry has expanded
fresh apple exports by nearly 150 percent, due in large part to the
foreign promotions made possible by MAP. One-quarter of U.S. fresh
apple production is exported, with an annual value of approximately
$370 million.
Strong MAP funding is critical to the U.S. apple industry's efforts
to maintain and expand exports, and to increase grower profitability.
Congress recognized the importance of MAP by authorizing increased
funding in the 2002 farm bill. Over the past 2 years, congressional
appropriations have kept pace with the farm bill's authorized level.
Food Quality Protection Act (FQPA) Implementation
U.S. Apple urges full funding for the following U.S. Department of
Agriculture (USDA) administered programs to mitigate the negative
impact of FQPA implementation on apple growers.
--$16 million for the Pesticide Data Program, administered by the
Agricultural Marketing Service (AMS);
--$8.0 million for the National Agricultural Statistics Service
(NASS) pesticide-usage surveys;
--$2.0 million for the Office of Pest Management Policy administered
by the Agricultural Research Service (ARS);
--$3.7 million for minor-use registration of crop protection tools
(IR-4) administered by ARS;
--$7.2 million for area-wide IPM research administered by ARS;
--$13.5 million for the Integrated Pest Management Research Grant
Program administered by the Cooperative State Research,
Extension and Education Service (CSREES);
--$10.8 million for minor-use registration of crop protection tools
(IR-4) administered by CSREES; and
--$12.5 million for the Pest Management Alternatives Program,
Regional Pest Management Centers, Crops at Risk and Risk
Avoidance and Mitigation Program also administered by CSREES.
National Tree Fruit Technology Roadmap
U.S. Apple urges the Committee to support the apple industry's
efforts to improve its competitiveness by providing increased federal
funding for the development and application of new technologies as
outlined below.
Dramatic change in the global apple market over the past decade is
threatening the livelihood of U.S. apple growers and the viability of
the U.S. apple industry. Low cost producers of apples in the People's
Republic of China, South Africa and Eastern Europe are displacing our
domestic industry worldwide. A race to survive is now underway among
global apple competitors, and for the first time in its history, U.S.
industry success is not guaranteed. In response to this competitive
threat, the apple industry is seeking federal support of a National
Tree Fruit Technology Roadmap that invests in development of new
technologies to automate orchards and fruit handling operations,
optimize fruit quality, nutritional value and safety.
Each of the following research positions is part of an integrated
approach to solving critical research problems that will help make the
industry more competitive. The broad-based need to solve these problems
requires systematic work across a number of problem areas
simultaneously in different locations. Therefore, it is critically
important that each of these programs is fully funded.
Postharvest Quality Research--East Lansing, Mich.--U.S. Apple
proposes increasing USDA, Agricultural Research Service (ARS) funding
at the East Lansing, Mich. postharvest fruit quality research
laboratory by $350,000 for fruit postharvest technology research to
better evaluate internal fruit quality characteristics, such as sugar
content and fruit firmness. While this research is already underway in
a limited capacity, the increase is needed to expand the capability of
the lab to make faster progress in solving complex research issues.
National Research Initiative--Sensor And Automation Research.--U.S.
Apple proposes increasing funding in the National Research Initiative
program in USDA CSREES by $1,000,000 for automation and sensor
research, and establishment of $2,000,000 special grants program for
fruit quality instrumentation. This research will develop sensors that
help growers sense and respond to insect and disease pests and
temperature extremes that reduce the value of apple production. It will
have additional applications in processing and packing operations to
improve fruit quality and food safety.
Apple Rootstock Breeding Program--Geneva, N.Y.--U.S. Apple proposes
increasing funding for the USDA, ARS apple rootstock breeding program
in Geneva, N.Y. by $350,000. This research will focus on rootstock
improvements that make apple trees more resistant to diseases or pests
that may reduce pesticide use and lead to development of more
productive and efficient apple trees.
Genetics Of Fruit Quality Program--Wenatchee, Wash.--U.S. Apple
proposes increasing funding at the USDA, ARS Wenatchee, Wash. facility
by $350,000 for new genetics of fruit quality research. This research
will provide the fundamental scientific knowledge that will allow
development of new apple varieties that are juicier, sweeter and more
nutritious and attractive to consumers.
National Research Initiative--Genomics, Genetics And Plant
Breeding.--U.S. Apple proposes increasing funding in the CSREES
National Research Initiative program in the area of apple, cherry and
peach genomics by $2,500,000. This research will provide essential
genomics and genetics research that will help solve production problems
that result in lower profitability and help develop better apple
varieties for consumers.
Other Research Requests:
Temperate Fruit Fly Research Position--Yakima, Wash.
U.S. Apple requests continued funding of $300,000 to conduct
critical research at the USDA ARS laboratory in Yakima, Wash. on
temperate fruit flies, a major pest of apples.
The Yakima, Wash., USDA ARS facility is conducting research
critical to the crop protection needs of the apple industry. FQPA
implementation has reduced the number of pesticides currently available
to growers for the control of pests, such as cherry fruit fly and apple
maggot. Left unchecked, these temperate fruit flies can be devastating.
Thus, research is needed to develop alternative crop protection methods
as growers struggle to cope with the loss of existing tools. While
Congress appropriated $300,000 last fiscal year for this critical
research, the administration's proposed budget for fiscal 2005 rescinds
this funding.
Post Harvest Quality Research Position--East Lansing, Mich.
U.S. Apple urges Congress to maintain baseline funding of $309,600
in the USDA ARS fiscal year 2005 budget for the postharvest quality
research position in East Lansing, Mich., and to increase funding for
this program by $350,000 to make faster progress in solving complex
research problems. This increase is a specific request as part of the
industry's National Tree Fruit Technology Roadmap initiative.
The East Lansing, Mich., USDA ARS facility is conducting research
critical to the future survival of the apple industry. Using a series
of new sensing technologies, researchers at this facility are
developing techniques that would allow apple packers to measure the
sugar content and firmness of each apple before it is offered to
consumers. Research indicates consumer purchases will increase when
products consistently meet their expectations, suggesting consumers
will eat more apples once this technology is fully developed and
employed by our industry. While Congress appropriated $309,600 last
fiscal year for this critical research, the administration's proposed
budget for fiscal 2005 rescinds this funding. This is a request not
only to preserve funding for this program, but also to expand it by
appropriating an additional $350,000 in research funding.
The U.S. Apple Association thanks the committee for this
opportunity to present testimony in support of the U.S. apple
industry's federal agricultural funding requests.
______
Prepared Statement of the United States Telecom Association
Summary of Request
Project Involved.--Telecommunications Loan Programs Administered by
the Rural Utilities Service of the U.S. Department of Agriculture.
Actions Proposed.--Supporting RUS loan levels and the associated
funding subsidy, if required, for the hardship program, cost of money
and loan guarantee programs in fiscal year 2005 in amounts requested in
the President's budget. Opposing the Administration's proposal to not
fund Rural Telephone Bank loans in fiscal year 2005. Supporting Rural
Telephone Bank loans in the same amount as contained in the fiscal year
2004 Appropriations Act. Also supporting an extension of the language
removing the 7 percent interest rate cap on cost of money loans. Also
supporting an extension of the prohibition against the transfer of
Rural Telephone Bank funds to the general fund as well as the
requirement that Treasury pay interest on all Bank funds deposited with
it. Opposing the proposal contained in the budget to transfer funds
from the unobligated balances of the liquidating account of the Rural
Telephone Bank for the Bank's administrative expenses. Supporting
continued funding, as requested in the President's budget, in the
amount of $25 million for distance learning and telemedicine loan and
grant authority. Supporting $20 million in mandatory funding for direct
loans for broadband deployment.
I am Walter B. McCormick, Jr., President and CEO of the United
States Telecom Association (USTA), the Nation's oldest trade
organization for the local exchange carrier industry. USTA's carrier
members provide a full array of voice, data and video services over
wire and wireless networks. I submit this testimony in the interests of
the members of USTA and their subscribers.
USTA members firmly believe that the targeted assistance offered by
a strong RUS telecommunications loan program remains essential to a
healthy and growing rural telecommunications industry that contributes
to the provision of universal telecommunications service. We appreciate
the strong support this Committee has provided for the
telecommunications program since its inception in 1949 and look forward
to a vigorous program for the future.
A Changing Industry
We are now more than 8 years out from passage of the
Telecommunications Act of 1996, a landmark piece of legislation in its
time, and calls are multiplying for the Act to be revisited to address
today's reality of intermodal competition. The current system of
government-managed competition in the telecom industry is a tremendous
obstacle to investment, economic growth and jobs creation which are
important to all Americans, but particularly for those living in
telecom-dependent rural America. The financial markets recognize that
the current system of inequitable government-managed competition cannot
stand. That recognition is reflected in the availability and pricing of
capital to telecommunications entities. Dramatic changes in technology,
such as Voice Over Internet Protocol (VOIP), and the wide use of
wireless service to the point of market parity, have caused great
uncertainty for carriers serving the most challenging areas of our
Nation. During these changing times, access to a reliable source of
capital such as the RUS loan programs is key to the system upgrades
which will enable rural areas to experience the economic growth and job
creation that a freely competitive market with ready access to fairly
priced capital can provide.
The need for modernization of the telecommunications technology
employed by RUS borrower rural telecommunications companies has never
been greater. In addition to upgrading to next generation networks to
allow new services to be extended to rural subscribers, it is
critically important that rural areas be included in the nationwide
drive for greater bandwidth capacity. In order to provide higher speed
data services, such as Digital Subscriber Line (DSL) connections to the
Internet, outside plant must be modernized and new electronics must be
placed in switching offices. With current technology, DSL services
cannot be provided to customers located on lines more than a few miles
from the switching office. Rural areas have a significant percentage of
relatively long loops and are therefore particularly difficult to serve
with higher speed connections. Rural telecommunications companies are
doing their best to restructure their networks to shorten loops so that
DSL may be provided, but this is an expensive proposition and may not
be totally justified by market conditions. However, these services are
important for rural economic development, distance learning and
telemedicine. RUS-provided financial incentives for additional
investment encourage rural telecommunications companies to build
facilities which allow advanced services to be provided. The
externalities measured in terms of economic development and human
development more than justify this investment in the future by the
Federal Government.
Greater bandwidth and switching capabilities are crucial
infrastructure elements which will allow rural businesses, schools and
health care facilities to take advantage of the other programs
available to them as end users. The money spent on having the most
modern and sophisticated equipment available at the premises of
businesses, schools or clinics is wasted if the local
telecommunications company cannot afford to build facilities that
quickly transport and switch the large amounts of data that these
entities generate. RUS funding enhances the synergies among the FCC and
RUS programs targeted at improving rural education and health care
through telecommunications.
The RUS program helps to offset regulatory uncertainties related to
universal service support, interstate access revenues and
interconnection rules with a reliable source of fairly priced, fixed-
rate long term capital. After all, RUS is a voluntary program designed
to provide incentives for local telecommunications companies to build
the facilities essential to economic growth.
RUS endures because it is a brilliantly conceived public-private
partnership in which the borrowers are the conduits for the Federal
Government benefits that flow to rural telephone customers, the true
beneficiaries of the RUS program. The government's contribution is
leveraged by the equity, technical expertise and dedication of local
telecommunications companies. The small amount of government capital
involved is more than paid back through a historically perfect
repayment record by telecommunications borrowers, as well as the
additional tax revenues generated by the jobs and economic development
resulting from the provision and upgrading of telecommunications
infrastructure. RUS is the ideal government program--it generates more
revenues than it costs, it provides incentives where the market does
not for private companies to invest in infrastructure promoting needed
rural economic development, it allows citizens to have access to
services which can mean the difference between life and death, and it
has never lost a nickel of taxpayer money.
Recommendations
For fiscal year 2005, this Committee should set the loan levels and
necessary associated subsidy amounts for the hardship, RUS cost of
money and guaranteed telecommunications loan programs consistent with
the levels recommended in the President's budget. These levels would
maintain our members' ability to serve the Nation's telecommunications
needs, maintain universal service and bring advanced telecommunications
services to rural America.
USTA strenuously objects to the recommendation in the
Administration's budget to not fund Rural Telephone Bank loans in
fiscal year 2005. The proposal is fundamentally flawed. The RTB's
mission is far from complete. Loans made today are to provide state of
the art telecommunications technology in rural areas. If no bank loans
were made in fiscal year 2005, the budgetary outlay savings would be
minimal, because RTB loans are funded over a multiyear period.
Moreover, because of the minimum statutory interest rate of 5 percent,
the RTB stands an excellent opportunity of actually generating a profit
for the government!
The Administration budget proposes that funds be transferred from
the unobligated balances of the Bank's liquidating account to fund the
Bank's administrative expenses, instead of those expenses being funded
through an appropriation from the general fund of the Treasury. This
proposal would not result in budgetary savings. As it has in previous
years, this Committee should specifically reject this recommendation.
For a number of years, through the appropriations process, Congress
has eliminated the 7 percent ``cap'' placed on the insured cost-of-
money loan program. The elimination of the cap should continue.
Although the prospects for this happening in fiscal year 2005 seem
remote at this time, if long term Treasury interest rates exceeded the
7 percent ceiling contained in the authorizing act, the subsidy would
not be adequate to support the program at the authorized level. This
would be extremely disruptive and hinder the program from accomplishing
its statutory goals. Accordingly, USTA supports continuation of the
elimination of the seven percent cap on cost-of-money insured loans in
fiscal year 2005. The Committee should also continue to protect the
legitimate ownership interests of the Class B and C stockholders in the
Bank's assets by continuing to prohibit a ``sweep'' of any unobligated
balance in the bank's liquidating account that is in excess of current
requirements funds into the general fund.
Recommended Loan Levels
USTA recommends that the telephone loan program loan levels for
fiscal year 2005 be set as follows:
[Millions of dollars]
------------------------------------------------------------------------
------------------------------------------------------------------------
RUS Insured Hardship Loans (5 percent).................. 145
U.S. Insured Cost-of-Money Loans........................ 250
Rural Telephone Bank (RTB) Loans........................ 175
Loan Guarantees......................................... 100
---------------
Total............................................. 670
------------------------------------------------------------------------
Loans and Grants for Telemedicine and Distance Learning
USTA supports the continuation of $25 million for distance learning
and telemedicine, as provided in the President's budget. As we move
into the Information Age with the tremendous potential of the Internet
to increase productivity, economic development, education and medicine,
such funds can help continue the historic mission of RUS to support the
extension of vital new services to rural America.
Broadband Loans Under the 2002 Farm Act (Public Law 101-171)
Congress has recognized the tremendous potential of broadband
technology to enhance human and economic development in rural areas by
providing mandatory funding of loans for the deployment of such
technology in rural areas. This funding was included in the 2002 Farm
Act in the amount of $20 million. USTA urges the provision of full
funding for this program as authorized in the Farm Act. The capital
intensive nature of the telecommunications industry, particularly with
respect to implementation of broadband, requires a stable and
predictable source of capital.
Conclusion
Our members take pleasure and pride in reminding the Committee that
the RUS telecommunications program continues its perfect record of no
defaults in over a half century of existence. RUS telecommunications
borrowers take seriously their obligations to their government, their
Nation and their subscribers. They will continue to invest in our rural
communities, use government loan funds carefully and judiciously, and
do their best to assure the continued affordability of
telecommunications services in rural America. Our members have
confidence that the Committee will continue to recognize the importance
of assuring a strong and effective RUS Telecommunications Program
through authorization of sufficient loan levels.
______
Prepared Statement of the University of Southern Mississippi and the
Mississippi Polymer Institute
Mr. Chairman, distinguished Members of the Subcommittee, I would
like to thank you for this opportunity to provide testimony describing
ongoing research and commercializing efforts of The University of
Southern Mississippi (USM) and the Mississippi Polymer Institute. I am
very grateful to the Subcommittee for its leadership and the continued
support of the Institute and its work. This testimony will include an
update on the progress of the Institute since my testimony of
approximately 1 year ago. During the past year, our efforts have
focused principally on two commercialization thrusts. One effort
involves our novel, agricultural-based inventions in emulsion
polymerizations, and the other is to produce a commercial quality,
formaldehyde-free, soybean derived adhesive for composite board
materials, i.e., particleboard. During the past year, we have continued
to refine the adhesive and have prepared lab scale particleboards that
meet commercial specifications. It is my strong belief that additional
research can expand the commercial use of the products and technology
this project has produced. However, much more needs to be done in order
to exploit the many uses of our novel technology. I will discuss the
progress made with the two inventions separately in order to offer more
clarity.
In the case of castor and soy oils, we have designed and
synthesized novel vegetable oil macromonomers (VOMM) or polymer
building blocks that offer state-of-the-art technology. The success of
the technology depends on the use of agricultural materials as a
building block of emulsion-derived polymers and offers opportunities
for using ag-derived materials as a raw material in the polymer
industry. The process technology for synthesizing VOMMs has been
revised to produce more than 95 percent conversion of the oil to VOMM.
Thus, the revised, and now accepted, synthetic procedure affords an
acceptable and useful polymerizable VOMM. Our previous synthetic
efforts to prepare emulsion or latex polymers containing significant
amounts of VOMM monomers (>20 percent by weight) were complicated by
synthetic and stability issues. However, during the past year, we have
been successful in developing latexes with VOMM content as high as 30
percent by weight by modifying the emulsion recipe and process
parameters. Currently, these high VOMM latexes are being evaluated for
a variety of applications, but particularly in coating formulations.
Furthermore, significant progress has been made in the synthesis of
novel VOMMs that copolymerize more readily with commercial monomers.
The new VOMMs provide latexes with improved stability and reduced
yellowing on aging. The fundamental scientific principles regarding its
mode of action have been confirmed, yet additional data must be
collected as more of these novel monomers, or polymer building blocks,
are being designed and synthesized.
Our sustained efforts to patent the technology developed in this
project has resulted in a total of eight patents, including one
international patent. Seven patent applications are pending with the
U.S. Patent Office and more applications will certainly be submitted
during the coming year.
Another novel application for vegetable oils is the development of
derivatives for use in ultraviolet (UV) curable coatings using thiol-
ene chemistry. Castor and soybean oil derivatives were synthesized and
crosslinked with commercial thiols in UV curable formulations. The
coatings produced showed excellent flexibility but lower hardness
values than the controls. Research efforts are in progress to
synthesize derivatives that will improve product hardness while
retaining other coating properties.
Commercial nail polishes contain very high amount of solvents which
constitute volatile organic compounds (VOCs) and negatively impact the
environment. Novel VOMM-based latexes have been designed for use in
nail polishes. Previous latexes prepared for this application gave poor
adhesion to the fingernail and were easily chipped during use. Nail
polishes formulated with the new and improved latex emulsions have
given consistent adhesion to the fingernail even after one week of
application. Rheology studies are in progress to achieve optimum flow
and leveling properties of the finished product. Nail polishes
constitute a low-volume, high-profit niche market. Presently, there are
no low-VOC waterborne products with sufficient adhesion to fingernails.
VOMM-based emulsions have been formulated as coatings for paper
coating applications and show promising results in screening tests. At
this writing, additional paper coating testing equipment has been
ordered for more definitive performance testing.
We have successfully synthesized a soybean oil acrylate monomer
(SAM) for incorporation into a permanent press treatment to replace the
castor oil acrylate monomer (CAM). Warmkraft, a Mississippi-based
company, has tested the new latex and will begin using the soy-based
latex this year in their permanent press treatment for use on the U.S.
Marines military uniforms. The U.S. Air Force has received 7,500
permanent pressed uniforms for field tests by military personnel. This
novel product increases military uniform durability by 30+ percent and
minimizes laundry costs creating a significant savings for service
personnel and the DOD. Research efforts are now being directed to
providing antimicrobial properties to the military uniform treatment
formulation to add protection for combat forces.
In summary, commercialization efforts have continued over the past
year with waterborne architectural coatings and polymer for textile
treatments. Patents have been approved; new patent applications have
been submitted; several toll manufacturing runs have been completed;
new coatings have been designed, manufactured, formulated, and tested;
and formulation efforts have been directed toward the generation of
high performance, low odor, and low VOC coatings. We are optimistic
that commercialization and sales of these ag-derived products will
expand over the next year.
In yet another of our novel ag based technologies, we have
developed formaldehyde-free adhesives for use in particleboard
composites. The developmental adhesive is composed of 80+ percent soy
protein isolate (SPI) and lab produced particleboards made with this
formaldehyde-free adhesive meet or exceed industry performance
requirements as defined by ANSI standards for M-S grade boards. Efforts
are underway to reduce the water content of the current adhesive to
decrease dry time and increase line speeds. The new adhesive is
scheduled for scale-up to quantities required for commercial scale
testing. A leading particleboard manufacturer has requested a
commercial trial of the adhesive and we plan to complete the trial in
the 2nd quarter of 2004. Kenaf and wood flour are being investigated as
alternative sources of wood furnish in our composites. Additional novel
soybean oil-based derivatives are also being investigated in an effort
to continue to improve the performance properties of the composite
particleboards even further. These developments represent major
technical advancements during the past year.
A vegetable oil based waterborne, waterproofer polymer has been
developed and formulated into wood stain and coating systems. The
weathering characteristics of this product are currently being
evaluated. The material functions as a waterproofer yet is carried in
water. However, after application to the intended substrate, typically
wood or cementitious products, the material becomes hydrophobic and
highly water resistant. VOC emission regulations need to be tightened
to facilitate the movement towards new, environmentally friendly,
products. We will continue our efforts to promote the use of ag-based
products offering improved environmental attributes, i.e., high
performance accompanied by low odor and low VOCs.
In 1983, the Mississippi Legislature authorized the Polymer
Institute at USM to work closely with emerging industries and other
existing polymer-related industries to assist with research, problem
solving, and commercializing efforts. The institute has maintained that
thrust during the past year with much success. In fact, while
manufacturing jobs alone in Mississippi have declined over the past 10
years, manufacturing jobs in the plastics sector have risen 45 percent
and continue to rise.
The Institute provides industry and government with applied or
focused research, development support, and other commercializing
assistance. This effort complements existing strong ties with industry
and government involving exchange of information and improved
employment opportunities for USM graduates. Most importantly, through
basic and applied research coupled with developmental and
commercializing efforts of the Institute, the School of Polymers and
High Performance Materials continues to address national needs of high
priority.
The focus of our work has been the development of a technology
platform that will lead to the commercialization of alternative
agricultural crops in the polymer industry. The polymer industry is the
single largest consumer of petroleum chemical intermediates in the
world. However, petroleum resources are in finite supply, are non-
biodegradable in many cases, and therefore do not represent a
sustainable economic development alternative for the polymer industry.
The theme of our work is to develop high performance, and
environmentally friendly technology utilizing agriculturally produced
intermediates. In this way, we as a Nation can improve our environment,
reduce our dependence on imported petroleum, and keep America's
farmlands in production. As farm products meet the industrial needs of
the American society, rural America is the benefactor. Heretofore, this
movement to utilize alternative agricultural products as industrial raw
materials has received some attention but much less than opportunities
warrant. Your decisions are crucial to the accomplishment of these
goals as funding from this Subcommittee has enabled us to implement and
maintain an active group of university-based polymer scientists whose
energies are devoted to commercializing alternative crops. We are most
grateful to you for this support, and ask for your continued
commitment.
The faculty, the University, and the State of Mississippi are
strongly supportive of the Mississippi Polymer Institute and its close
ties with industry. Most faculty maintain at least one industrial
contract as an important part of extramural research efforts.
Polymers, which include fibers, plastics, composites, coatings,
adhesives, inks, and elastomers, play a key role in the materials
industry. They are used in a wide range of industries including
textiles, aerospace, automotive, packaging, construction, medical
prosthesis, and health care. In the aerospace and automotive
applications, reduced weight and high strength make them increasingly
important as fuel savers. Their non-metallic character and design
potentials support their use for many national defense purposes.
Moreover, select polymers are possible substitutes for so-called
strategic materials, some of which come from potentially unreliable
sources.
As a polymer scientist, I am intrigued by the vast opportunities
offered by American agriculture. As a professor, however, I continue to
be disappointed that few of our science and business students receive
training in the polymer-agricultural discipline as it offers enormous
potential. The University of Southern Mississippi, the School of
Polymers and High Performance Materials, and the Mississippi Polymer
Institute are attempting to make a difference by showing others what
can be accomplished if appropriate time, energy, and resources are
devoted to the understanding of ag-based products.
I became involved in the polymer field 40 years ago and since that
time, have watched its evolution where almost each new product
utilization offered the opportunity for many more. Although polymer
science as a discipline has experienced expansion and a degree of
public acceptance, alternative agricultural materials continue to be an
underutilized national treasure for the polymer industry. There is less
acceptance of petroleum-derived materials today than ever before, and
consequently the timing is ideal for agricultural materials to make
significant inroads as environmentally friendly, biodegradable, and
renewable raw materials. These agricultural materials have always been
available for our use, yet society for many reasons has not recognized
their potential.
U.S. agriculture has made the transition from the farm fields to
the kitchen tables, but America's industrial community continues to be
frightfully slow in adopting ag-based industrial materials. The prior
sentence was included in my last three testimonies but continues to
ring true, even as I write this report. However, we are making progress
and we must persist. We must aggressively pursue this opportunity and
in doing so:
--Intensify United States efforts to commercialize alternative crops
and dramatically reduce atmospheric VOC emissions and odor. The
result will be much cleaner and less noxious air for all
Americans.
--Reduce United States reliance on imported petroleum.
--Maintain a healthy and prosperous farm economy.
--Foster new cooperative opportunities between American farmers and
American industry.
--Create advanced polymer technology-based manufacturing jobs that
can not be easily exported to other countries.
Mr. Chairman, your leadership and support are deeply appreciated by
the entire University of Southern Mississippi community. While I can
greatly appreciate the financial restraints facing your Subcommittee, I
feel confident that further support of the Mississippi Polymer
Institute will continue dividends of increasing commercialization
opportunities of agricultural materials in American industry. Advances
in polymer research are crucial to food, transportation, housing, and
defense industries. Our work has clearly established the value of ag
products as industrial raw materials and we must move it from the
laboratories to the industrial manufacturing sector. Only then can the
United States enjoy a cleaner and safer environment which these
technologies offer, as well as new jobs, and expanded opportunities for
the U.S. farmer. We are most grateful for the support you have provided
in the past. The funding you have provided has allowed laboratory work
to be conducted, pilot commercial manufacturing to be completed, and
limited sales of products derived from this technology. However,
additional funds are needed to make these technologies cost effective
while maintaining the high performance standards of which we are
accustomed. Pilot scale processes are necessary to move this technology
into the market place and this will be the principal focus of our
upcoming work. Of course, while working to achieve commercialization,
continued technology advancement will be in effect, as will basic
research on those topic areas where knowledge is required.
Since our testimony last year we have reached new levels of
commercializing efforts in that we have manufactured final and finished
products for sale. Indeed, the technology has matured and marketing and
sales must move parallel with continued commercial development of new
products. Thus, we are in need of additional resources to take these
technologies to the market place and to continue our developments of
other exciting technologies. We therefore respectfully request $1.5
million in Federal funding to more fully exploit the potentials of
commercializing the technologies described herein. We have shown that
we can be successful, yet we need additional resources in order to
optimize the potential of this technology. Our efforts will be
recognized as instrumental in developing a ``process'' for
commercialization of new ag-based products. That is, we will have taken
a technology from the ``idea'' stage to commercialization in several
market areas. The development of this process, and to show it
successful, is extremely important to all entrepreneurs who believe in
ag-based products. Thank you Mr. Chairman and Members of the
Subcommittee for your support and consideration.
______
Prepared Statement of the Upper Mississippi River Basin Association
The Upper Mississippi River Basin Association (UMRBA) is the
organization created in 1981 by the Governors of Illinois, Iowa,
Minnesota, Missouri, and Wisconsin to serve as a forum for coordinating
the five States' river-related programs and policies and for
collaborating with Federal agencies on regional water resource issues.
As such, the UMRBA has an interest in the budget for the U.S.
Department of Agriculture's conservation programs and technical
assistance.
Prior to enactment of the Farm Security and Rural Investment Act of
2002, conservation spending was lower in constant dollars than during
the depths of the Great Depression. In passing the 2002 Farm Bill,
Congress made a bold, multi-year commitment to reinvigorate
agricultural conservation in this country. In particular, the Farm Bill
recognized the importance of providing adequate funding levels and
balancing programs that remove land from production with those that
support sound practices on working lands. There was also explicit
recognition that the USDA's conservation programs and technical
assistance are crucial alternatives to a totally regulatory approach to
addressing agriculture-related water quality impairments. Now, as the
Nation faces an increasingly difficult budget climate, it is essential
that Congress maintain its commitment to the vision for agricultural
conservation articulated in the Farm Bill. This will involve not only
providing adequate funding, but also ensuring effective administration
and geographic distribution of those resources.
Of particular importance to the UMRBA is funding for the
Conservation Reserve Program (CRP), Wetlands Reserve Program (WRP),
Environmental Quality Incentives Program (EQIP), and Conservation
Security Program (CSP). Taken together, these four Commodity Credit
Corporation-funded programs provide an invaluable means for the USDA to
work with landowners, local conservation districts, and the States to
maintain agricultural productivity while protecting the Nation's soil
and water resources. Moreover, they do this in a voluntary, non-
regulatory fashion. CRP, WRP, EQIP, and CSP will be key non-regulatory
elements in the States' efforts to address agricultural sources of
water quality impairment through the Total Maximum Daily Load program.
Successful application of conservation programs to this region's water
quality problems will also help address the growing national concern
with hypoxia in the Gulf of Mexico, which has been linked to nutrient
loads from agriculture and other sources. As stewards of some of the
Nation's most productive agricultural lands and important water
resources, the five States of the Upper Mississippi River Basin believe
these programs are vital. Strong farmer interest and state support
demonstrate the region's commitment to the objectives of these
programs. In fiscal year 2003, non-NRCS sources contributed $88.3
million in financial assistance and $27.9 million in technical
assistance to help plan and implement natural resource conservation
systems in the five basin States, with almost 94 percent of this money
coming from state government.
Conservation Reserve Program
Under President Bush's fiscal year 2005 budget request, funding for
the CRP would increase modestly to $1.96 billion. While this increase
is certainly welcome, it is not adequate to fund the expanded CRP
provided for in the 2002 Farm Bill. The CRP acreage cap is now 39.2
million acres. Yet, as of January 2004, only 34.6 million acres were
enrolled in the program, below even the program's previous cap. In the
most recently completed general sign-up, USDA was able to accept less
than half of the acreage offered for enrollment.
Since its inception, enhancements to the CRP have increased its
effectiveness in improving water quality, soil conservation, and
habitat. These same enhancements, which include noncompetitive
enrollment for filter strips, riparian buffers, and similar measures,
as well as establishment of the Conservation Reserve Enhancement
Program (CREP), have made the program more flexible and thus more
attractive to farmers. Most recently, USDA announced a new continuous
sign-up for 500,000 acres of bottomland hardwood trees. Targeted toward
the Mississippi, Missouri, and Ohio Rivers, this initiative offers a
valuable tool in floodplain restoration efforts on some of this
Nation's most important rivers.
In Illinois, Iowa, Minnesota, Missouri, and Wisconsin, CRP general
sign-up enrollment currently totals 5.5 million acres, or approximately
17 percent of the national total. All five States also have active CREP
programs tailored to meet their priority conservation needs. Current
CREP enrollment in the UMRB States is approximately 233,000 acres, or
42 percent of the national total. These rates of participation clearly
demonstrate the importance of the CRP and CREP in the Nation's
agricultural heartland and reflect the compatibility of these programs
with agricultural productivity.
Wetlands Reserve Program
Equally pressing is the need to provide sufficient resources for
the WRP. The 2002 Farm Bill more than doubled the WRP acreage cap to
almost 2.3 million acres, with a goal of enrolling 250,000 acres
annually. Yet the President's fiscal year 2005 budget proposes $295
million for the WRP. While a slight increase from fiscal year 2004,
this would be enough to enroll only about 200,000 acres, or 80 percent
of the authorized enrollment rate. Since the WRP's establishment in
1996, its easements have proven to be important tools for restoring and
protecting wetlands in agricultural areas. This is clearly evident from
the overwhelming landowner response and the resulting improvements to
water quality and habitat. At the end of fiscal year 2003, WRP
enrollment in Illinois, Iowa, Minnesota, Missouri, and Wisconsin
totaled more than 273,000 acres, or 18 percent of the national total.
In fiscal year 2003 alone, landowners in the five States enrolled more
than 43,000 acres in the WRP. However, there were eligible, but
unfunded, applications to enroll another 147,000 acres from the five
States in fiscal year 2003. This represents 20 percent of the national
backlog of applications for that year. As with the CRP and CREP, the
WRP is a vital tool in the agricultural conservation toolbox. The UMRBA
continues to support funding the WRP at a level sufficient to fully
enroll the program as authorized.
Environmental Quality Incentives Program
The CRP and WRP have been extremely effective in helping Midwest
farmers to protect land and water resources by curtailing production on
some of their most sensitive land. And there are certainly many more
opportunities to make good use of the CRP and WRP in the region.
However, it is also essential to support sound conservation practices
on the far greater amount of land that remains in production. EQIP is
the USDA's largest and most effective means of assisting farmers and
ranchers to implement conservation practices on land currently in
production. EQIP assistance can, for example, help operators balance
the new dynamics of livestock production with the need to protect soil
and water resources.
Like many other conservation programs, EQIP funding has not kept
pace with demand. In fiscal year 2003, the backlog of unmet requests
for EQIP assistance in Illinois, Iowa, Minnesota, Missouri, and
Wisconsin alone was estimated at $249.1 million. This is more than 3
times the $74.1 million in EQIP funding actually allocated to the five
States in fiscal year 2003, and is 8 percent of the Nation's total
unfunded EQIP applications. While this is a slight decrease from the
level of unmet need in fiscal year 2002, it is not clear whether there
is modest progress in addressing the backlog or whether farmers are
simply increasingly disinclined to submit applications to an over-
subscribed program. The 2002 Farm Bill authorizes EQIP at $1.2 billion
for fiscal year 2005, but the President is proposing to fund the
program at only $1.0 billion. The UMRBA urges Congress to maintain EQIP
at its full authorized level, while recognizing that, even at full
funding, there will likely be significant numbers of unfunded EQIP
applications.
Conservation Security Program
Newly authorized in the 2002 Farm Bill, the CSP also focuses
conservation efforts on working lands. A tiered program, it encourages
landowners to implement advanced, cost-effective measures. The States
are concerned that several early developments may limit the CSP's
ultimate effectiveness. First, USDA still has yet to finalize its
implementation rule for the program. As a result, little, if any, CSP
enrollment will be possible in fiscal year 2004. Of greater long term
significance, the fiscal year 2003 omnibus spending measure capped the
CSP at $3.77 billion over 10 years. Congress has since lifted that
restriction. However, in his fiscal year 2005 budget, the President
assumes that the program will be limited to $4.4 billion in financial
and technical assistance through 2010. This approach would represent a
substantial shift in a program that Congress and the Administration
agreed in the 2002 Farm Bill to fund without a fixed cap through the
Commodity Credit Corporation. It remains to be seen what the ultimate
level of landowner interest will be in the CSP, but the States are
reluctant to have the program reduced so dramatically prior to its
implementation.
Conservation Technical Assistance
The UMRBA has consistently expressed the States' concern with the
adequacy of funding and staffing levels for conservation technical
assistance. With the expansion of conservation programs under the 2002
Farm Bill, the issue has become both more complicated and more
important. For fiscal year 2005, the President is proposing a $138
million, or almost 19 percent, decrease in the Conservation Operations
Technical Assistance account. This is the funding that supports NRCS's
voluntary conservation planning with landowners. It addresses critical
concerns including nutrient management and other water quality issues.
The President's budget also includes a revised version of his
previous proposal for a new Farm Bill Technical Assistance account.
Under the new proposal, this account would fund technical assistance
for the Conservation Reserve Program and the Wetlands Reserve Program.
In fiscal year 2005, the President is requesting $92 million for this
new account, which would be subject to annual appropriations. The
States certainly recognize that adequate technical assistance is
absolutely essential to the success of the USDA's conservation
programs, and believe that it is important to address the strain that
funding CRP and WRP technical assistance from other conservation
programs has placed on those programs. However, the States do not
believe that the President's proposal reflects Congressional intent in
the 2002 Farm Bill. Instead, the States share the perspective of many
Members that the intent was to fund the necessary technical assistance
for the various conservation programs separately, through mandatory
funding rather than annual appropriations. The UMRBA urges that
sufficient resources for technical assistance be provided using an
approach consistent with this intent.
Watershed Programs
The UMRBA is pleased that the President has once again budgeted for
three critical watershed programs--i.e., Watershed and Flood Prevention
Operations, Watershed Surveys and Planning, and the Watershed
Rehabilitation Program--for which he did not request any funds in
fiscal year 2003. However, the President's requests still fall far
below recent funding levels for these programs. The three programs all
provide significant local, regional, and national benefits in the areas
of erosion, sediment, and flood damage reduction; conservation; water
supply; and development. They are soundly within USDA's tradition of
working with States and local communities to enhance rural America.
Specifically, the budget proposal includes only $40.2 million for
Watershed and Flood Prevention Operations, an important proactive
program for which Congress approved $86.3 million in fiscal year 2004.
Even at the more generous appropriated levels from recent years, the
Watershed and Flood Prevention Operations program falls far short of
meeting demand. In fiscal year 2004, there are $191.2 million in Public
Law 534 and Public Law 566 flood control projects ready for
construction, and the total project backlog is estimated at $1.557
billion. The 2002 Farm Bill authorized significant new funding for the
Watershed Rehabilitation Program, through which the NRCS assists local
sponsors in rehabilitating aging Public Law 534 and Public Law 566
structures. Of the more than 11,000 such structures nationwide, more
than 1,800 will reach the end of their design life by 2010. A 1999
estimate put national rehabilitation needs at $543 million, with needs
in Illinois, Iowa, Minnesota, Missouri, and Wisconsin accounting for
more than 10 percent of the total. These are very real needs, with very
real potential public health and safety implications. This important
program received $29.8 million in fiscal year 2004, but would be funded
at only $10.1 million in fiscal year 2005 under the President's plan.
Also of concern, the Watershed Surveys and Planning account would be
reduced by more than half under the President's budget. The President's
fiscal year 2005 request of $5.1 million for Watershed Surveys and
Planning compares with pending projects totaling $18.8 million in
fiscal year 2004. The States urge Congress to provide adequate funding
for these three important watershed programs.
______
Prepared Statement of the USA Rice Federation
This is to convey the rice industry's request for fiscal year 2005
funding for selected programs under the jurisdiction of your respective
subcommittees. The USA Rice Federation appreciates your assistance in
making this a part of the hearing record.
The USA Rice Federation is a federation of U.S. rice producers,
millers and allied businesses working together to address common
challenges, advocate collective interests, and create opportunities to
strengthen the long-term economic viability of the U.S. rice industry.
USA Rice members are active in all major rice-producing states:
Arkansas, California, Florida, Louisiana, Mississippi, Missouri, and
Texas. The U.S.A. Rice Producers' Group, the USA Rice Council, and the
U.S.A. Rice Millers' Association are charter members of the USA Rice
Federation.
USA Rice understands the budget constraints the committee faces
when developing the fiscal year 2005 appropriations bill. We appreciate
your past support for initiatives that are critical to the rice
industry and look forward to working with you to meet the continued
needs of research, food aid and market development in the future.
A healthy U.S. rice industry is also dependent on the program
benefits offered by the 2002 Farm Security and Rural Investment Act of
2002. We oppose any attempts to modify the support levels provided by
this vital legislation through more restrictive payment limitations or
other means and encourage the committee to resist such efforts during
the appropriations process.
USA Rice's top priority for 2004 is to regain market access in our
former number one export market, Iraq. We realize the Committee's
limitations on this issue but encourage you to seek opportunities to
increase U.S. agricultural exports to the Iraqi people. Whether through
increased MAP and FMD funds for market development or other means, we
seek U.S. rice sales to Iraq and urge all options be exhausted.
A list of the programs the USA Rice Federation supports for
Appropriations in fiscal year 2005 are as follows:
Funding Priorities
Research and APHIS
The Dale Bumpers National Rice Research Center should receive
continued funding at the fiscal year 2004 approved level. This center
conducts research to help keep the U.S. rice industry competitive in
the global marketplace by assuring high yields, superior grain quality,
pest resistance, and stress tolerance.
The Western Regional Research Center should receive continued
funding at fiscal year 2004 levels for operating funds. In addition, we
support $3.4 million in construction funds for Phase 3 of the
modernization project. The center has already completed 25 percent of
the modernization project and we feel it is vitally important to
complete the remaining updates to this facility.
For APHIS-Wildlife Services, we encourage the committee to fund the
Louisiana blackbird control project at $333,000. This program annually
saves rice farmers in southwest Louisiana over $4,000 per farm, or $2.9
million total. No increases have been provided to the program since
1994 and inflation is reducing the overall impact. A slight increase
from the $150,000 baseline is justified.
Market Access
Exports are critical to the U.S. rice industry. Historically, 40-60
percent of annual U.S. rice production has been shipped overseas. Thus,
building healthy export demand for U.S. rice is a high priority.
The Foreign Market Development program allows USA Rice to focus on
importer, food service, and other non-retail promotion activities
around the world. For fiscal year 2005, FMD should be fully funded at
$34.5 million, consistent with the President's Budget request.
The Market Access Program allows USA Rice to concentrate on
consumer promotion and other activities for market expansion around the
world. For fiscal year 2005, MAP should be funded at $140 million as
authorized by the 2002 Farm Security and Rural Investment Act of 2002.
This is $15 million above the President's Budget request.
In addition, the Foreign Agricultural Service should be funded to
the fullest degree possible to ensure adequate support for trade policy
initiatives and oversight of export programs. These programs are
critical for the economic health of the U.S. rice industry.
Food Aid
We encourage the committee to fund Public Law 480 Title I at fiscal
year 2004 levels. This program is our top food aid priority and we
support continued funding in order to meet international demand.
For Public Law 480 Title II we support a slight increase in the
program over fiscal year 2004 levels due to increased freight costs and
higher commodity prices. We encourage the committee to fund Title II at
$1.2 billion in order to ensure consistent tonnage amounts for the rice
industry.
USA Rice supports continued funding at fiscal year 2004 levels for
Food for Progress. Funding for this program is important to improve
food security for food deficit nations.
The Global Food for Education Initiative is a proven success and it
is important to provide steady, reliable funding for multi year
programming. USA Rice supports $100 million for this education
initiative because it efficiently delivers food to its targeted group,
children, while also encouraging education, a primary stepping-stone
for populations to improve economic conditions.
Other
Farm Service Agency.--We encourage the Committee to provide
adequate funding so the agency can deliver essential programs and
services. The Agency has been hard hit by staff reductions and our
members fear a reduction in service if sufficient funds are not
allocated.
Please feel free to contact us if you would like additional
information about the programs we have listed. Significant background
information is available for all of the programs we have referenced,
however, we understand the volume of requests the committee receives
and have restricted our comments accordingly.
Thank you for consideration of our recommendations.
______
Prepared Statement of VeriPrime, Inc.
Mr. Chairman and Members of the Committee, it is a tremendous
pleasure and a privilege to provide testimony on this important topic
on behalf of VeriPrime, a member-owned and member-operated cooperative.
I would like to offer the insights of our members, which may be helpful
as Congress and the USDA address these issues.
As a practicing veterinarian I work closely with feedyards and
ranchers. I see about a million head of cattle each year in my
practice. As a businessman I helped develop and organize an animal
tracking company listed on the NASDAQ exchange. My experience relates
both to the pragmatic concerns of the animal producer as well as to the
bottom-line concerns of business, and consumer concerns about food
safety.
My comments are in no way intended as criticism of the U.S.
Department of Agriculture or the Congressional Committees of
jurisdiction. I believe the government has done a responsible job of
BSE surveillance. When the infected animal was found in Washington
State, the government responded quickly and efficiently to address
industry concerns and to safeguard consumer confidence.
As we move from this point forward, I am hopeful we can do so in a
coordinated government-industry effort. VeriPrime is a member-owned and
member-operated cooperative created two and one-half years ago to
address situations exactly like this. Membership presently consists of
two-thirds of the nation's fed cattle supply. We are also a partner
with PigCHAMP, a division of farms.com, which gives us access to 75
percent of the pork supply. Having secured a majority of the beef and
pork supplies as partners, we are moving forward to recruit members
from the packing industry and food retailers. Swift & Co. has joined as
a founding member in the packer sector, and Burger King is our founding
retailer.
Needless to say, this amalgamation of producers, packers and
retailers is watching closely as government ponders what to do next to
ensure food safety, consumer confidence, foreign trade, and the
economic well being of the $75 billion beef industry.
USDA's call for a national animal identification system, its
decision to evaluate rapid BSE screening methods and, its willingness
to reexamine the complicity of Suspected Risk Material, are important
and relevant steps. However, speaking from the perspective of the
private sector, I respectfully suggest these initiatives and others
could more efficiently, effectively, and economically be accomplished
by the industry itself.
Overlaying all these issues and solutions is the ever-present
question of cost. Both the USDA and Congress are concerned, and rightly
so, about adopting costly programs that will increase tax burdens. But
an industry-financed alternative, regulated by the USDA, should be
considered a viable option. Animal ID and traceability are the backbone
of any reliable, responsible food safety system, and we believe the
private sector can add value to this discussion as well as self-finance
any number of solutions.
At VeriPrime, for example, we employ a licensing strategy in which
a fee paid by retailers reimburses the cattle production side for the
cost of compliance with an animal identification program. The system
would be, and should be technology neutral and have the flexibility to
accommodate virtually all vendors. Once established, the revenue stream
will make possible evolution to electronic ID and the economies and
efficiencies those systems can offer. Moreover, because we are member-
directed, we can guarantee adoption of the least-cost, highest-
efficiency systems. A competitive marketplace will encourage innovation
and as new, better, and cheaper systems evolve, the membership will
naturally move to adopt them.
The issue of BSE testing is particularly worrisome to us. No
rational view can suppose there was only one BSE-infected animal in
this country and we were lucky enough to find it through our very
limited test protocols. If in response to the discovery of BSE, the
USDA now decides to require increased testing--as has been suggested--
the consequences could be severe. The more we test, the more likely we
are to discover additional cases. And without a safety net, the
economic consequences to the U.S. beef industry would surely be
calamitous. After the Washington incident, even though the USDA's
response was quick and efficient, cattle prices quickly dropped by 20
percent. We need only look at the economic consequences of BSE in
Canada, Japan, and Europe to imagine the catastrophic effect we could
anticipate in this country.
Our industry objective must be this: When a consumer prepares to
bite into a burger, if a news flash reports another BSE discovery, the
announcement should be accompanied by the statement, ``the affected
meat has been quarantined, and all meat now in the marketplace has
passed BSE testing.''
Rapid test-hold-release programs have shown excellent results in
Asia and in Europe, restoring consumer confidence and economic
stability to those beef industries. Our consumers and our marketplace
need similar protections. It has been widely stated that testing 100
percent of the beef supply would be prohibitively expensive. From the
government's perspective, that is probably true. But the tremendous
power of the American economic marketplace could easily support such a
program.
A number of models can be employed. At VeriPrime, we would propose
to use our licensing system to finance such an endeavor, giving
retailers the opportunity to market BSE-screened beef products in
response to consumer preferences. We would regard this function as
screening only. Suspected test samples would be referred to the USDA
for its ``gold standard'' testing while the source product is withheld
from the food supply.
Some will no doubt argue that the United States does not have a BSE
problem. Let's assume they are correct, and that rapid testing as I
have discussed is not a food safety issue. I would then suggest that
rapid testing is important to the private sector as a marketing
attribute. Surveys uniformly show that consumers would prefer the
safety margin this screening provides, and are willing to pay much more
than the two-pennies-per-burger cost of screening. And to the beef
industry, from the cattle rancher all the way through the supply chain,
the economic protections BSE screening offers are very attractive and
highly desirable.
Mr. Chairman, this is a time of great uncertainty. The threats to
our food supply from natural, inadvertent, and malicious sources are of
great concern to us. And we face an uncertain future. Ten years ago,
none of us had heard of ``Mad Cow'' disease. What will it be 10 years
from now? We need a system that provides responsive, flexible, cost-
effective consumer protections. The U.S. Congress, in its rightful role
of oversight; the U.S. Department of Agriculture, in its rightful role
as regulator; and the U.S. food industry in its rightful role as
purveyor of safe, fresh, nutritious products, can form a powerful
partnership. We look forward to working together to achieve a balance
of responsibility that properly serves our constituents, our customers,
and our industry.
______
Prepared Statement of the Wildlife Management Institute
The Wildlife Management Institute (WMI) is pleased to submit this
testimony for your consideration in determining the fiscal year 2005
budgets for the United States Department of Agriculture (Natural
Resources Conservation Service, Farm Services Agency, and Animal and
Plant Health Inspection Service). Established in 1911, the Institute is
staffed by professional wildlife managers and scientists. Its purpose
is to promote the restoration and improvement of wildlife in
populations and their habitats throughout North America.
natural resources conservation service (nrcs)
General comments.--The USDA's 2005 Budget Summary states the
following: ``The Department's 2005 budget supports achievement of the
five USDA strategic goals and the commitment to provide first-class
service, state-of the art science, and consistent management excellence
across the board responsibilities of USDA. The Department promotes . .
., protection of natural resources . . .'' Out of the 5 listed goals,
two of them reflect budget decreases. Ironically both deal with Natural
Resources and Environmental issues (quality of life in rural America
and protecting and enhancing the nation's natural resource base and
environment). As we review this budget, we continue to see a
deterioration in funding and manpower necessary to address this
nation's natural resource needs, in particular, programs concerning and
fish and wildlife. If we are to meet goals and objectives of the 2002
Farm Bill Conservation Title (as set by Congress), we will need to
ensure adequate funding for these programs.
Conservation Operations/Conservation Technical Assistance.--WMI
recognizes that there has been a decrease in the number of positions
within NRCS over the past several years. Our concern continues to be
for the resource and the ability to deliver quality technical
assistance (TA) to private landowners across this nation. We observe
that TA will decrease by $138 million in fiscal year 2005 under the
Administration's proposed budget. In a briefing to the conservation
community on the agency's budget on February 19, 2004, it was stated
``there is a policy shift in the Administration'' towards TA. This
shift will result in creating a further backlog in the delivery of the
conservation programs. This ultimately will lead to further confusion
among the very constituents (private landowners) we desire to serve,
thereby preventing us from contributing to the goals set by Congress
when it approved the Farm Bill in May, 2002.
Farm Bill Technical Assistance.--Compared to the fiscal year 2004
estimate there is a decrease of $28 million. The Administration's
proposed fiscal year 2005 budget allocates $92 million to Wetland
Reserve Program and Conservation Reserve Program for TA. WMI requests
TA funding for these programs to be supported by the Commodity Credit
Corporation oppose to annual appropriations.
The Technical Services Provider (TSP) program also needs attention.
Level of allocations to Conservation Districts, State fish and wildlife
agencies and Conservation organization's is good, but there is a need
to evaluate effectiveness of TSP funds when achieving conservation
goals for soil, water and wildlife enhancements. Therefore, $2 million
additional dollars should be allocated to do just that. In fiscal year
2003 and 2004, NRCS respectively received $30 million and $40 million
to implement TSP. According to the Administration's fiscal year 2005
proposed budget request no money is set aside for TSP; at least $40
million should be allocated.
Performance measures on page 9 of a February 2, 2004 budget
briefing book listed targets for 2004 and 2005. These targets are
activities and will not contribute to the Administration's and OMB's
Performance Control Standards. They are not RESULT oriented and will
NOT enable NRCS to communicate achievements specifically on soil, water
and wildlife enhancements. WMI recommends that Congress require such
standards as part of the NRCS budgetary process. WMI also recommends
that $10 million specifically be targeted to conduct comprehensive
monitoring and evaluation studies on all Farm Bill Conservation
programs. Results of such studies will help the USDA and Congress
identify future spending priorities under the Farm Bill.
Wildlife Habitat Incentives Program (WHIP).--WMI supports the $25
million increase in funding. This funding greatly needed to address
over subscriptions in the program, especially in the country's
Northeast and Northwest regions.
Grassland Reserve Program (GRP).--The Administration has requested
a $31 million decrease for this program in fiscal year 2005. WMI
suggests that with a backlog of private landowners involved in this
program, it is unwise to decrease funding for GRP. Because this is a
new program, its financial growth curve should extend beyond its first
2 years of implementation.
farm service agency (fsa)
Staff Years: FSA is slatted to lose 967 positions by fiscal year
2005. These are primarily temporary positions and the Administration
has justified these losses as the result of completed Farm Bill
activities. The next scheduled sign up of 800,000 acres in the
Conservation Reserve Program (CRP) is slated for the spring of 2004. It
is expected a similar effort in 2005 will occur. Thus, there is a need
to have sufficient staff to process these additional contracts for the
CRP program, as well as the expected increase for the Conservation
Reserve Enhancement Program (CREP) agreements. WMI is concerned about
the delivery of CRP to private landowners and seeks Congressional
support for retention of FSA's 967 positions.
wildlife services, animal and plant health inspection services (aphis)
Wildlife Services Methods Development: In 1997, the United States
and the European Union (EU) entered into a Memorandum of Understanding
that identified a process for developing and evaluating more effective
and humane trapping devices used to manage certain wildlife populations
(e.g. for research and mitigating wildlife damage, to reestablish
species extirpated from prior habitats, and to protect endangered
species). An active research program is being developed at the USDA's
National Wildlife Research Center in Fort Collins, CO. WMI strongly
objects to the proposed elimination of $3.35 million for the Methods
Development program, and urges Congress to restore this funding.
WMI also recommends Congress restore funding for research of non-
lethal methods to mitigate wildlife damage and that Congress provide
additional funding to Wildlife Services (WS) to conduct research for
improved management of invasive species (such as the brown tree snake
and the Coqui frog that threatens local agriculture, fragile
ecosystems, and threatened and endangered species in Guam and Hawaii).
______
Prepared Statement of The Wildlife Society
The Wildlife Society (TWS) appreciates the opportunity to submit
testimony concerning the fiscal year 2005 budgets U.S. Department of
Agriculture agencies. The Wildlife Society is the association of almost
9,000 professional wildlife biologists and managers dedicated to sound
wildlife stewardship through science and education. The Wildlife
Society is committed to strengthening all federal programs that benefit
wildlife and their habitats on agricultural and other private land.
The following table summarizes The Wildlife Society's
recommendations for USDA, compared with fiscal year 2004 enacted and
the President's fiscal year 2005 request:
[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-----------------------------------------------
USDA Agency/Program 2005
2004 Enacted President's 2005 TWS
Budget Recommended
----------------------------------------------------------------------------------------------------------------
Natural Resources Conservation Service:
Wildlife Habitat Incentives Program......................... 42,000 60,000 100,000
Grassland Reserve Program................................... 115,000 84,000 84,000
Wetlands Reserve Program.................................... 280,000 295,000 295,000
Forest Land Enhancement Program............................. 10,000 .............. 80,000
Technical Service Provider training......................... .............. .............. 100
Conservation Program Monitoring and Evaluation.............. .............. .............. 1,000
Animal & Plant Health Inspection Service:
Wildlife Services--Operations............................... 71,313 71,684 77,184
Wildlife Services--Methods Development...................... 16,999 13,876 17,266
Veterinary Services--Chronic Wasting Disease................ 18,522 20,067 30,067
Coop. St. Research, Education, and Extension Serv.:
Renewable Resources Extension Act........................... 4,040 4,093 15,000
McIntire-Stennis Cooperative Forestry....................... 21,755 21,844 30,000
Natural Resources Inventory................................. 164,027 180,000 180,000
----------------------------------------------------------------------------------------------------------------
Natural Resources Conservation Service
Wildlife Habitat Incentives Program (WHIP).--The 2002 Farm Bill
included landmark increases for conservation, but annual appropriations
have not been commensurate the 80 percent increase passed in the bill.
The authorized level for WHIP cost-share payments and technical
assistance in fiscal year 2005 is $325 million. Given the important
impacts of WHIP in providing technical and financial support to farmers
and ranchers to create high quality wildlife habitat, we request a
minimum of $100 million.
Grassland Reserve Program (GRP).--With estimated expenditure of
$115 million in fiscal year 2004, the proposed funding level of $84
million in fiscal year 2005 will meet the Farm Bill-authorized cap of
$254 million for GRP. GRP should focus on grasslands of high
biodiversity that are at risk of conversion and support grazing
operations. In addition, enrollment must increasingly focus on long-
term enrollment, since no more than 40 percent of authorized funding
can be used for short-duration rental agreements, which have been
emphasized to date.
Wetland Reserve Program (WRP).--The continued target of enrolling
200,000 acres annually in WRP is essential; if 200,000 acres are not
enrolled every year (fiscal year 2004 was limited to 189,000 acres),
enrollment must increase in future years to reach the authorized level
of 2,275,000 acres. Full WRP enrollment is necessary for the
Administration to achieve no-net-loss of wetlands by building on the
WRP successes of the 1990's that reduced wetland losses to 32,600
acres/year (as reported in the USDA National Resource Inventory).
Forest Land Enhancement Program (FLEP).--The Forest Land
Enhancement Program was created through the 2002 Farm Bill to provide
financial, technical, educational, and related assistance to promote
sustainable management of non-industrial private forestlands. The
program is authorized at $100 million for 2002-2007, to be distributed
through state forestry agencies. We request restoration of the full
funding balance, $80 million, for this program in fiscal year 2005.
Technical Service Provider Training.--NRCS is building a Technical
Service Provider program of certified professionals who can assist the
agency in delivering conservation services to agricultural producers.
Training will be needed to effectively prepare Technical Service
Providers to assist these producers. TWS recommends that Congress
direct NRCS to appropriate $100,000 for a pilot training program at a
university in cooperation with professional societies (Society for
Range Management, The Wildlife Society, American Fisheries Society) and
the USDA Cooperative State Research, Education, and Extension Service
that subsequently can be repeated at land grant universities and
colleges across the country to train Technical Service Providers. This
program is critical to the effective delivery of Farm Bill Conservation
Programs.
Conservation Program Monitoring and Evaluation.--Monitoring Farm
Bill conservation programs and evaluating their progress toward
achieving Congressionally established objectives for soil, water, and
wildlife will ensure successful program implementation and effective
use of appropriated funds. Thus far, limited monitoring efforts have
been focused on soil and water achievements, and NRCS and the
Agricultural Research Service have done all the evaluations. It is
important for assessments to address wildlife and habitat impacts, and
for external parties to be included to ensure credibility and
objectivity. We recommend Congress direct $1 million toward a pilot
watershed-based monitoring and evaluation project, which would include
participation by state conservation and agriculture agencies and the
state land-grant university, that can serve as a model for conservation
program assessment nationwide.
Animal and Plant Health Inspection Service
Wildlife Services.--The Wildlife Services Unit is responsible for
controlling wildlife damage to agriculture, aquaculture, forest, range
and other natural resources, for controlling wildlife-borne diseases,
and for controlling wildlife at airports. The Administration proposes a
program reduction of $5.5 million from fiscal year 2004 levels to
offset a $5 million increase in fiscal year 2005 for a wildlife disease
surveillance system. We recommend Congress restore the $5.5 million
reduction to maintain existing operations. We also recommend that
Congress restore the $3.35 million (need $17,266) decrease in the
Methods Development program, which provides the credible means to
identify and improve publicly acceptable methods of wildlife control.
Veterinary Services.--We commend APHIS-Veterinary Services for
working with the state wildlife management agencies on Chronic Wasting
Disease (CWD) surveillance and management in free-ranging deer and elk.
Additionally, we support APHIS efforts to eliminate CWD from captive
cervids to eliminate the risk of spread of the disease from these
animals to free-ranging deer and elk. We recommend increasing CWD
funding to a total of $30.067 million in fiscal year 2005 to fully
address management of CWD in the states, with emphasis on preventing
the spread of CWD from captive cervid operations.
Cooperative State Research, Education and Extension Services
Renewable Resources Extension Act.--We strongly recommend that the
Renewable Resources Extension Act be funded at $15 million in fiscal
year 2005. RREA funds, which are apportioned to State Extension
Services, leverage (at an average of 4:1) cooperative partnerships with
a focus on development and dissemination of information needed by
private landowners. The need for RREA educational programs is greater
than ever today due to fragmentation of ownerships, urbanization, and
increasing societal concerns about land use and its impact on soil,
water, air, and wildlife. Though RREA has been proven to be effective
in leveraging cooperative state and local funding, it has never been
fully funded.
McIntire-Stennis.--We encourage Congress to increase McIntire-
Stennis Cooperative Forestry funds to $30 million. These funds are
essential to the future of resource management on non-industrial
private forestlands, supporting state efforts in forestry research to
increase the efficiency and sustainability of forestry practices and to
extend the benefits that come from forest and related rangelands.
McIntire-Stennis calls for close coordination between state colleges
and universities and the Federal Government, and is essential for
providing research background for other Acts, such as RREA.
National Research Initiative.--National Research Initiative
Competitive Grants (NRI) are open to academic institutions, federal
agencies, and private organizations to fund research on improving
agricultural practices, particularly production systems that are
sustainable both environmentally and economically, and to develop
methods for protecting natural resources and wildlife. Innovative grant
programs such as NRI help broaden approaches to land management, such
as integrating timber and wildlife management on private lands. The
Wildlife Society requests $180 million for National Research Initiative
Competitive Grants in fiscal year 2005.
Thank you for your past support of conservation funding and for
considering the views of wildlife professionals. We look forward to
working with you and your staff to ensure adequate funding for wildlife
conservation.
______
Prepared Statement of the Wine Institute
This statement is in support of the Market Access Program and the
need to fully fund it for fiscal year 2005 at $140 million, the level
established in the Food Security and Rural Investment Act of 2002.
The California wine industry has benefited significantly from the
MAP, and previous USDA export promotion programs since 1986. At that
time our exports were only $34.9 million. Last year, we exported over
$633 million. Despite this growth, we have a huge potential remaining
as our international market share is only about 5 percent. Wine imports
to the United States still outweigh exports by a factor of 4-1 but we
are determined to level this balance of payments in the next few years.
We need the full amount authorized by the 2002 Farm Bill in order to
maintain our growth and accomplish our objectives.
The MAP allows our industry to counter the significant trade
barriers we face in all foreign markets. In Europe, our major market,
we face high tariffs, expensive certification procedures, and
restrictions to our winemaking practices. In addition, we face
competition from the European wine industry which is heavily subsidized
and backed with export credits and other significant government support
programs. In Asia, our industry faces high tariffs in all countries and
protective systems that allow preference for local bottlers and wine
products.
International wine marketing requires substantial costs of
additional labeling requirements, testing and certification procedures.
To be competitive, companies must attend major trade shows, conduct
educational programs and produce expensive promotional materials. Every
competitive wine industry relies on a government program to back its
export efforts. Small U.S. wineries simply do not have the resources to
compete in this arena without the support of the MAP.
The increase in funding authorized by 2002 Farm Bill for the MAP is
necessary for new market entry and expansion into current markets. The
Administration's active international trade agenda has allowed for
opportunities that all exporters need to address as quickly as
possible. Creating opportunities without providing resources is
ineffective policy. Our wine industry needs to expand its efforts into
China, South America, Eastern Europe, and Russia. We need additional
resources to fuel this expansion.
The MAP is a cost share program. Our industry's annual contribution
has increased from 50 percent to its current level of 150 percent. We
are more than willing to pay our share. However, we also need the
resources and support that our competitors enjoy. Therefore, we
strongly support the authorized, full funding for the MAP at $140
million for fiscal year 2005.
______
Prepared Statement of the Wyoming State Engineer's Office
This statement is sent in support of the designation of 2.5 percent
of the fiscal year 2005 Environmental Quality Incentive Program (EQIP)
funding for the Department of Agriculture's Colorado River Salinity
Control (CRSC) Program. Pursuant to Public Law 104-127, the USDA's CRSC
Program is a component program within EQIP. Wyoming views the inclusion
of the CRSC Program in EQIP as a direct recognition on the part of
Congress of the Federal commitment to maintenance of the water quality
standards for salinity in the Colorado River--and that the Secretary of
Agriculture has a vital role in meeting that commitment.
The State of Wyoming is a member state of the seven-state Colorado
River Basin Salinity Control Forum. Established in 1973 to coordinate
with the Federal Government on the maintenance of the basin-wide Water
Quality Standards for Salinity in the Colorado River System, the Forum
is composed of gubernatorial representatives and serves as a liaison
between the seven States and the Secretaries of the Interior and
Agriculture and the Administrator of the Environmental Protection
Agency. The Forum advises the Federal agencies on the progress of
efforts to control the salinity of the Colorado River and annually
makes funding recommendations, including the amount believed necessary
to be expended by the USDA for its on-farm CRSC Program. Overall, the
combined efforts of the Basin States, the Bureau of Reclamation and the
Department of Agriculture have resulted in one of the nation's most
successful non-point source control programs.
The Colorado River provides municipal and industrial water for 27
million people and irrigation water to nearly four million acres of
land in the United States. The River is also the water source for some
2.3 million people and 500,000 acres in Mexico. Limitations on users'
abilities to make the greatest use of that water supply due to the
River's high concentration of total dissolved solids (hereafter
referred to as the salinity of the water) are a major concern in both
the United States and Mexico. Salinity in the water source especially
affects agricultural, municipal, and industrial water users. While
economic detriments and damages in Mexico are unquantified, the Bureau
of Reclamation presently estimates salinity-related damages in the
United States to amount to $330 million per year. The River's high salt
content is in almost equal part due to naturally occurring geologic
features that include subsurface salt formations and discharging saline
springs; and the resultant concentrating effects of our users man's
storage, use and reuse of the waters of the River system. Over-
application of irrigation water by agriculture is a large contributor
of salt to the Colorado River as irrigation water moves below the crop
root zone, seeps through saline soils and then returns to the river
system. The Department of Agriculture's CRSC Program is an important
proven and cost-effective tool in improving irrigation water
application and thus reducing salt loading into the Colorado River
system.
For the past 20 years, the seven-state Colorado River Basin
Salinity Control Forum has actively assisted the U.S. Department of
Agriculture in implementing its unique, collaborative and important
program. At its recent October 2003 meeting, the Forum recommended that
the USDA CRSC Program should expend 2.5 percent of the Environmental
Quality Incentive Program funding. In the Forum's judgment, this amount
of funding is necessary to implement the needed program. ``Catch-up''
funding in the future will require expending greater sums of money,
increase the likelihood that the numeric salinity criteria are
exceeded, and create undue burdens and difficulties for one of the most
successful Federal/State cooperative non-point source pollution control
programs in the United States.
The State of Wyoming greatly appreciates the Subcommittee's support
of the Colorado River Salinity Control Program in past years. We
continue to believe this important basin-wide water quality improvement
program merits support by your Subcommittee. We request that your
Subcommittee direct the allocation of 2.5 percent of the Environmental
Quality Incentives Program funding for the USDA's CRSC Program during
fiscal year 2005. Thank you in advance for your consideration of this
statement and its inclusion in the formal record for fiscal year 2005
appropriations.
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
----------
Page
Ad Hoc Coalition, Prepared Statement of.......................... 409
American:
Farm Bureau Federation, Prepared Statement of................ 412
Honey Producers Association, Inc., Prepared Statement of..... 415
Indian Higher Education Consortium, Prepared Statement of.... 419
Legion, Prepared Statement of................................ 422
Public Power Association, Prepared Statement of.............. 423
Sheep Industry, Prepared Statement of........................ 423
Society:
For Microbiology, Prepared Statements of...............427, 429
For Nutritional Sciences (ASNS), Prepared Statement of... 432
Of Plant Biologists, (ASPB), Prepared Statement of....... 435
Veterinary Medical Association, Prepared Statement of........ 436
Association of State Dam Safety Officials, Prepared Statement of. 438
Bennett, Senator Robert F., U.S. Senator from Utah:
Opening Statements.........................................107, 273
Questions Submitted by.................................38, 171, 380
Berne, Bernard H., M.D., Ph.D., Prepared Statement of............ 443
Bond, Senator Christopher S., U.S. Senator from Mississippi,
Questions Submitted by...................................59, 174, 256
Bosecker, R. Ronald, Administrator, National Agricultural
Statistics Service, Department of Agriculture, Prepared
Statement of................................................... 358
Bost, Eric M., Under Secretary for Food Nutrition and Consumer
Services, Department of Agriculture............................ 107
Prepared Statement of........................................ 111
Statement of................................................. 109
Byrd, Senator Robert C., U.S. Senator from West Virginia:
Prepared Statement of........................................ 4
Questions Submitted by....................................... 99
Calaveras County Water District, Prepared Statement of........... 445
California:
Association of Winegrape Growers, Prepared Statement of...... 447
Industry and Government Central California Ozone Study
Coalition, Prepared Statement of........................... 450
Table Grape Commission, Prepared Statement of................ 451
Coalition:
On Funding Agricultural Research Missions, Prepared Statement
of......................................................... 452
To Promote U.S. Agricultural Exports, Prepared Statement of.. 453
Collins, Keith, Chief Economist, Office of the Secretary,
Department of the Secretary, Department of Agriculture.........1, 273
Prepared Statement of........................................ 275
Statement of................................................. 274
Colorado River Basin Salinity Control Forum, Prepared Statement
of............................................................. 454
Crawford, Lester M., D.V.M., Ph.D., Acting Commissioner, Food and
Drug Administration Department of Health and Human Services.... 184
Prepared Statement of........................................ 186
Davidson, Ross J., Jr., Administrator, Risk Management Agency,
Department of Agriculture, Prepared Statement of............... 304
Dewhurst, Stephen, Budget Officer, Office of the Secretary,
Department of the Secretary, Department of Agriculture......... 1
Dorgan, Senator Byron L., U.S. Senator from North Dakota,
Questions Submitted by........................................71, 267
Durbin, Senator Richard J., U.S. Senator from Illinois:
Prepared Statement of........................................ 108
Questions Submitted by.................................87, 270, 273
Easter Seals, Prepared Statement of.............................. 456
Federation of American Societies for Experimental Biology,
Prepared Statement of.......................................... 458
Feinstein, Senator Dianne, U.S. Senator from California,
Questions Submitted by........................................80, 267
Fernandez, Dr. Peter, Acting Administrator, Animal and Plant
Health Inspection Service, Department of Agriculture, Prepared
Statement of................................................... 129
Florida State University, Prepared Statement of.................. 460
Forest Landowners Association, Prepared Statement of............. 462
Friends of Agricultural Research--Beltsville, Inc., Prepared
Statement of................................................... 463
Garcia, Arthur A., Administrator, Rural Housing Service,
Department of Agriculture, Prepared Statement of............... 329
Gonzalez, Gilbert G., Acting Under Secretary for Rural
Development, Department of Agriculture......................... 273
Prepared Statement of........................................ 322
Statement of................................................. 320
Great Lakes Indian Fish and Wildlife Commission, Prepared
Statement of................................................... 467
Gulf Coast Research Laboratory, Prepared Statement of............ 516
Harkin, Senator Tom, U.S. Senator from Iowa, Questions Submitted
by............................................................63, 401
Hawks, William T., Under Secretary for Marketing and Regulatory
Programs, Department of Agriculture............................ 107
Prepared Statement of........................................ 119
Statement of................................................. 118
Hefferan, Dr. Colien, Administrator, Cooperative State Research,
Education, and Extension Service, Department of Agriculture,
Prepared Statement of.......................................... 346
Humane Society of the United States, Prepared Statement of....... 469
Inouye, Senator Daniel K., U.S. Senator from Hawaii, Questions
Submitted by................................................... 106
International Association of Fish and Wildlife Agencies, Prepared
Statement of................................................... 472
InterTribal Bison Cooperative, Prepared Statement of............. 475
Jen, Joseph J., Under Secretary for Research, Education and
Economics, Department of Agriculture........................... 273
Prepared Statement of........................................ 339
Statement of................................................. 338
Johnson, Senator Tim, U.S. Senator from South Dakota:
Prepared Statement of........................................ 4
Questions Submitted by....................................... 92
Knight, Bruce I., Chief, Natural Resources Conservation Service,
Department of Agriculture, Prepared Statement of............... 317
Knipling, Dr. Edward B., Acting Administrator, Agricultural
Research Service, Department of Agriculture, Prepared Statement
of............................................................. 343
Kohl, Senator Herb, U.S. Senator from Wisconsin, Questions
Submitted by............................................176, 256, 389
Landrieu, Senator Mary L., U.S. Senator from Louisiana, Questions
Submitted by................................................... 95
Legg, Hilda Gay, Administrator, Rural Utilities Service,
Department of Agriculture, Prepared Statement of............... 326
Little, James R., Administrator, Farm Service Agency, Department
of Agriculture, Prepared Statement of.......................... 290
Masters, Dr. Barbara J., Acting Administrator, Food Safety and
Inspection Service, Department of Agriculture, Prepared
Statement of................................................... 163
Mid-America International Agri-Trade Council (MIATCO) and Food
Export USA--Northeast, Prepared Statement of................... 479
Murano, Elsa A., Under Secretary for Food Safety, Department of
Agriculture.................................................... 107
Prepared Statement of........................................ 153
Statement of................................................. 150
National:
Association of:
Professional Forestry Schools and Colleges (NAPFSC),
Prepared Statement of.................................. 481
State Departments of Agriculture, Prepared Statement of.. 484
State Foresters, Prepared Statement of................... 485
University Fisheries and Wildlife Programs, Prepared
Statement of........................................... 486
Coalition for Food and Agricultural Research, Prepared
Statement of............................................... 488
Commodity Supplemental Food Program (CSFP) Association,
Prepared Statement of...................................... 490
Council of Farmer Cooperatives, Prepared Statement of........ 492
Potato Council, Prepared Statement of........................ 494
Rural Housing Coalition, Prepared Statement of............... 495
Rural Telecom Association, Prepared Statement of............. 500
Telecommunications Cooperative Association, Prepared
Statement of............................................... 503
Treasury Employees Union, Prepared Statement of.............. 506
Turfgrass Evaluation Program, Prepared Statement of.......... 507
New Mexico Interstate Stream Commission, Prepared Statement of... 511
Nez Perce Tribe, Prepared Statement of........................... 512
Nicholls State University, Prepared Statement of.................
Northwest Indian Fisheries Commission, Prepared Statement of..... 513
Oceanic Institute:
Letter From.................................................. 515
Prepared Statement of........................................ 516
Offutt, Susan E., Administrator, Economic Research Service,
Department of Agriculture, Prepared Statement of............... 349
Oklahoma Farmers Union, Prepared Statement of.................... 478
Organization for the Promotion and Advancement of Small
Telecommunications Companies (OPASTCO), Prepared Statement of.. 522
Penn, J.B., Under Secretary for Farm and Foreign Agricultural
Services, Department of Agriculture............................ 273
Prepared Statement of........................................ 284
Statement of................................................. 281
People for the Ethical Treatment of Animals (PETA), Prepared
Statement of................................................... 524
Pickle Packers International, Inc., Prepared Statement of........ 526
Red River Valley Association, Prepared Statement of.............. 531
Reifschneider, Donna, Administrator, Grain Inspection, Packers
and Stockyards Administration, Department of Agriculture,
Prepared Statement of.......................................... 141
Rey, Mark, Under Secretary for Natural Resources and Environment,
Department of Agriculture...................................... 273
Prepared Statement of........................................ 314
Statement of................................................. 312
Rosso, John, Administrator, Rural Business-Cooperative Service,
Department of Agriculture, Prepared Statement of............... 334
Salazar, Roberto, Administrator, Food and Nutrition Services,
Department of Agriculture, Prepared Statement of............... 115
Society of American Foresters, Prepared Statement of............. 534
Stevens, Senator Ted, U.S. Senator from Alaska, Questions
Submitted by................................................... 59
Terpstra, A. Ellen, Administrator, Foreign Agricultural Service,
Department of Agriculture, Prepared Statement of............... 295
Texas Agricultural Experiment Station, Prepared Statement of..... 516
Tufts University, Prepared Statement of.......................... 516
U.S.:
Agricultural Export Development Council, Prepared Statement
of......................................................... 536
Apple Association, Prepared Statement of..................... 540
Marine Shrimp Farming Consortium, Prepared Statement of...... 516
United States Telecom Association, Prepared Statement of......... 543
University of:
Arizona, Prepared Statement of............................... 516
Southern Mississippi and the Mississippi Polymer Institute,
Prepared Statement of...................................... 545
Upper Mississippi River Basin Association, Prepared Statement of. 548
USA Rice Federation, Prepared Statement of....................... 551
Veneman, Ann M., Secretary of Agriculture, Office of the
Secretary, Department of Agriculture........................... 1
Prepared Statement of........................................ 11
Statement of................................................. 6
VeriPrime, Inc., Prepared Statement of........................... 552
Waddell Mariculture Center, Prepared Statement of................ 516
Wildlife:
Management Institute, Prepared Statement of.................. 554
Society, Prepared Statement of............................... 555
Wine:
America, Prepared Statement of............................... 447
Institute, Prepared Statements of..........................447, 557
Winegrape Growers of America, Prepared Statement of.............. 447
Wyoming State Engineer's Office, Prepared Statement of........... 558
Yates, A.J., Administrator, Agricultural Marketing Service,
Department of Agriculture, Prepared Statement of............... 125
SUBJECT INDEX
----------
DEPARTMENT OF AGRICULTURE
Page
Access to CSP by Producers....................................... 372
Achieving the Next Level of Food Safety.......................... 156
Additional Committee Questions.............................38, 171, 380
Addressing Overweight and Obesity................................ 112
Adjusted Gross Revenue Program................................... 81
Administrative:
Expenses..................................................... 326
Support...................................................... 295
Advanced Telecommunications in Rural America..................... 327
Adventitious Presence............................................ 387
Agricultural:
Estimates Restoration........................................ 381
Marketing Service............................................ 123
Trade........................................................ 76
And CAFTA................................................ 30
Transportation Security...................................... 129
AMS' 2005 Budget Request......................................... 124
Animal:
And Plant Health Inspection Service.......................... 120
Welfare Act Violations....................................... 24
APHIS' 2005 Budget Request....................................... 121
Asian Soybean Rust............................................... 77
Assistance on Public Lands....................................... 56
Avian Influenza.................................................52, 172
Beaver Control................................................... 181
Beef Export Markets.............................................. 53
Better Nutrition for a Healthy US................................ 14
Bovine Spongiform Encephalopathy (BSE).51, 54, 63, 78, 90, 151, 171 182
And Cattle From Canada....................................... 30
Policy....................................................... 78
Related Activities........................................... 13
Surveillance Program......................................... 72
Testing......................................................28, 93
Trade Restrictions........................................... 382
Broadband......................................................389, 407
Funding...................................................... 73
Loan Program................................................. 393
Brown Tree Snake................................................. 106
Budget........................................................... 349
And Performance Integration.................................. 116
Cuts......................................................... 59
Impact of Information Security Requirements.................. 47
Request Summary.............................................. 129
Requests..................................................... 292
Business and Industry:
Guaranteed Loan Program...................................... 336
Program...................................................... 42
Central Filing System Programs................................... 25
Centralized Servicing Center..................................... 43
Challenges for 2004............................................151, 154
Child Nutrition Program...................................110, 114, 117
Childhood Obesity...............................................89, 173
Civil Rights..................................................... 21
Combating Childhood Obesity...................................... 176
Commodity:
Credit Corporation........................................... 292
Supplemental Food Program.................................... 117
Fiscal Year 2004 Funding................................. 177
Community Programs............................................... 330
Completing Risk Assessments...................................... 47
Comprehensive Program Assessment...............................331, 388
Congressional Add-Ons............................................ 363
Conservation:
Programs..................................................... 63
Security Program..................................34, 312, 364, 401
Consumer Data and Information System............................. 356
Initiative................................................... 380
Cooperative Services...........................................334, 401
Technical Assistance......................................... 62
Coordination of USDA Rural Programs.............................. 41
Coqui Frog....................................................... 106
Corn Shipments................................................... 33
Country of Origin Labeling.......................................77, 92
Crop Insurance................................................... 386
CSP:
Base Payment................................................. 314
Funding Cap.................................................. 371
Proposed Rule................................................ 369
Customer Service and Technology.................................. 125
Customers, Partners, and Stakeholders............................ 358
Cyber Security................................................... 37
Dairy Forward Contacting.......................................365, 389
Decreases........................................................ 141
Departmental Management.......................................... 21
Designate Biobased Products...................................... 68
Developing the Animal Identification Program..................... 93
Digital Data Maps................................................ 393
Discretionary Funding............................................ 318
Distance Learning, Telemedicine and Broadband.................... 60
Downed Animal Risk Management Tools.............................. 392
Durum and Spring Wheat Yields.................................... 79
Electric Program................................................. 327
Employee Security Awareness Training............................. 48
Empowerment Zones................................................ 71
Energy Balance of Ethanol........................................ 94
Enhance Public Education Efforts................................. 167
Enhancing Program Integrity and Delivery......................... 113
Ensure That Policy Decisions are Based on Science................ 165
Ensuring:
Adequate Funding for FISMA Remediation....................... 51
Effectiveness of Security Management......................... 47
Program Access............................................... 112
Systems are Certified and Accredited......................... 49
Environmental Impact of On-Farm Burial of Downer/Dead Cattle..... 85
ERS Contributions to Mission Area Goals.......................... 349
Export Market Problems........................................... 390
Exports Transportation Infrastructure............................ 32
Facility Feasibility Studies..................................... 362
Farm:
And Foreign Agricultural Services............................ 14
Bill Authorized Programs..................................... 319
Credit Administration Review................................. 43
Loan:
Programs................................................. 293
Staffing...............................................386, 392
Service Agency............................................... 282
Federal Grain Inspection Service................................. 144
Filling ACIO for Cybersecurity................................... 47
Fiscal Year 2005:
Budget Request..............................128, 138, 152, 157, 169
Funding Request.............................................. 371
Plans........................................................ 361
Food:
And Agriculture Defense...................................... 12
Guide Pyramid................................................ 178
Safety....................................................... 16
Stamp Program.........................................110, 113, 117
Food, Nutrition, and Consumer Services........................... 17
Foreign Agricultural Service...................................283, 287
Forest Service Management Plans.................................. 402
Fraud and Abuse.................................................. 56
Fruit and Vegetable Pilot Program................................ 82
FSA Farm Loan Portfolio.......................................... 384
Funding:
For Food Safety/Animal Health Inspections and Research....... 105
Sources...................................................... 120
To Continue Emergency Programs............................... 140
Genetically Modified:
Crops........................................................ 390
Food......................................................... 383
Genomic Science.................................................. 338
Geospatial Information System (GIS).............................. 368
Progress..................................................... 369
GIPSA's 2005 Budget Request...................................... 122
Glassy-Winged Sharpshooter....................................... 84
Grain Inspection, Packers and Stockyards Administration.......... 121
Guaranteed Single-Family Housing Program......................... 395
Guidelines on Fat Consumption.................................... 174
Health Care Cooperative Pilot.................................... 61
High Fructose Corn Syrup......................................... 403
Highest Priority Components of the Strategic Plan and Homeland
Security....................................................... 138
Holding Senior Management Accountable for Information Security... 46
Horticultural Specialties........................................ 381
How USDA Budget Corrects Security Weaknesses..................... 49
Human Capital Management......................................... 116
Humane Slaughter Operations...................................... 99
Hunger Task Force Pilot Program.................................. 23
Importation of Live Cattle From Canada........................... 31
Improve Coordination of Food Safety Activities With Other Public
Health Agencies................................................ 166
Indefinite Funding in the Food Stamp Act......................... 174
Inspector Travel................................................. 183
Interest Assistance Loans........................................ 77
Intermediary Relending Program................................... 336
Iraq Food Aid.................................................... 384
Low:
Carbohydrate Diets........................................... 178
Pathogenic Avian Influenza................................... 52
Major Activities of the National Agricultural Statistics Service
(NASS)......................................................... 360
Management Control Review........................................ 388
Marketing and Regulatory Programs................................ 15
McGovern-Dole International Food for Education Program........... 65
Meat and Poultry Safety.......................................... 64
Merging of Urban and Rural Housing and Community Development
Programs....................................................... 44
MFH Automation Initiatives....................................... 333
Mission........................................................125, 349
Multi Family:
Housing.....................................................42, 388
Programs................................................. 329
Update....................................................... 331
Multi-Peril Crop Insurance....................................... 74
National Animal Identification:
Database..................................................... 86
Program...................................................... 22
System.......................................................25, 65
National:
Board on Rural America....................................... 42
Center for Animal Health..................................... 70
Finance Center:
Data Mirroring........................................... 97
E-Payroll Initiative..................................... 95
Thrift Savings Plan...................................... 96
Competitive Bidding.................................. 57
Organic Standards Board...................................... 178
Research Initiative.......................................... 404
Resources and Environment...................................18, 369
Rural Development Partnership................................ 26
New Direction.................................................... 138
Northern Great Plains Regional Authority......................... 74
Nutrition Programs Administration.........................111, 115, 118
Obesity Prevention............................................... 338
Initiative Grand Forks ARS................................... 72
Organic Agriculture Research and Extension Initiative............ 405
Organization..................................................... 142
Other:
Appropriated Programs........................................ 294
Increases.................................................... 140
Packers and Stockyards Programs.................................. 142
Partnerships..................................................... 126
Pasture-Raised Beef Project...................................... 104
Payment Limitation............................................... 403
Performance Review............................................... 385
Pilot Program.................................................... 41
Plans to Finalize Security Policies and Procedures............... 48
Preclearance Inspections in Hawaii............................... 106
Prepayment....................................................... 333
In Section 515 Program....................................... 399
Program Highlights............................................... 309
And Initiatives.............................................. 330
Proposed:
Increase for Buildings and Facilities........................ 345
Operating Increases.......................................... 345
Program:
Decreases................................................ 345
Initiatives.............................................. 343
Rule 3560.................................................... 332
Protect Meat, Poultry, and Egg Products Against Intentional
Contamination.................................................. 167
RD:
Information Technology....................................... 40
State Offices................................................ 38
Reaching Out to Those in Need through Faith-based and Other
Community Organizations........................................ 116
REE Agency Fiscal Year 2005 Budgets.............................. 341
Renewable Energy................................................. 69
Grants Program............................................... 337
Systems...................................................... 68
Rental Assistance.........................................332, 387, 397
Preservation................................................. 44
Program...................................................... 400
Reopening Export Markets for Beef and Poultry.................... 366
Repair and Rehabilitation........................................ 399
Research, Education, and Economics............................... 20
Resignation of Administrator Bobby Acord......................... 78
Responsibilities................................................. 323
Revenue Based Programs........................................... 81
RHS/GAO Report on Rental Assistance.............................. 38
Risk:
Factors...................................................... 59
Management Agency..........................................282, 286
Rural Business:
And Cooperative Service...................................... 42
Enterprise Grant Program..................................... 336
Investment:
Corporation.............................................. 376
Program.................................................. 406
Cooperative Programs......................................... 324
Development Grant Program.................................... 335
Opportunity Grant Program.................................... 337
Rural Development................................................ 18
Accomplishments.............................................. 321
Budget Request............................................... 323
Rural:
Economic Development Loan and Grant Programs................. 337
Housing Programs............................................. 325
Partners..................................................... 334
Programs..................................................... 39
Telecommunications........................................... 73
Utility Programs............................................. 323
Sausage Casings.................................................. 184
Section:
502 Guaranteed Program....................................... 330
502 Single-Family Housing Programs........................... 397
515 Multi-Family Housing Program............................. 395
521 Rental Assistance........................................ 37
523 Mutual and Self-Help Housing............................. 330
538 Guaranteed Rural Rental Housing Program.................. 332
Self-Help Technical Assistance and Other Single Family Housing
Programs....................................................... 329
Significant Food Safety Advancement of 2003....................151, 153
Single Family Housing:
Programs..................................................... 329
Update....................................................... 330
Single Food Safety Agency........................................27, 87
Small Area Estimation............................................ 382
Sound:
Science....................................................183, 391
Scientific Information for Regulatory Decisionmaking......... 70
Soybean Rust...............................................88, 176, 404
Specialty Crops.................................................. 80
Standard Reinsurance Agreement..................31, 55, 74, 75, 94, 375
Subsidy Rates.................................................... 398
Sudden Oak Death................................................. 84
Summary........................................................328, 343
Supercomputer Resources.......................................... 377
Systems Testing and Evaluation................................... 48
Technical:
Assistance................................................... 372
For Specialty Crops Program.............................. 81
Service Providers............................................ 373
Telecommunications Budget........................................ 328
Testing of Animals Prior to Export............................... 52
The Challenge of Improper Payments............................... 115
The Emergency Food Assistance Program (TEFAP)..................114, 117
Time Lag on CSP Implementation and Rulemaking.................... 374
Trade Implications of Genetically Modified Crops................. 367
Training of DHS Employees........................................ 83
Transportation Efficiency........................................ 33
Transshipment of Beef From the Lower 48 to Alaska................ 60
U.S. Agricultural Economy........................................ 274
Underwriting Gains Tax........................................... 74
USDA Key Information Security Weaknesses......................... 45
USDA's:
Center for Veterinary Biologics.............................. 58
Five Star Commitment to Increase Minority Homeownership...... 331
Vision........................................................... 323
Water and Environmental Programs................................. 328
Watershed Approach to CSP........................................ 313
Web-Based Supply Chain Management System......................... 128
WIC............................................................114, 117
Contingency Funds............................................ 24
Program...................................................... 110
Wool for Berets in Iraq.......................................... 79
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
Additional Committee Questions................................... 237
Agricultural Products............................................ 242
Albuterol Metered-Dose Inhalers.................................. 247
Animal:
Drug Compounding............................................. 265
Feed......................................................... 230
Inspections.................................................. 230
Biotech-Enhanced Events in Food and Feed......................... 247
Bioterrorism Regulations......................................... 232
Bovine Spongiform Encephalopathy...............................198, 233
Testing...................................................... 235
Combating Counterfeit Drugs: A Report of the Food and Drug
Administrat-
ion............................................................ 200
Counterfeit:
Alert Network Co-Sponsorship Agreement....................... 221
Drugs......................................................200, 265
Critical Path Initiative......................................... 231
Dentician........................................................ 236
Dietary Supplements.............................................. 270
Drug:
Information Web Site......................................... 237
Reimportation................................................ 267
Emergency Contraception.......................................... 269
Executive Summary................................................ 200
Expanded Description of Comments Received........................ 222
FDA FOIA Policies................................................ 259
Food:
Guide Pyramid................................................ 197
Safety....................................................... 243
Generic Biologicals............................................199, 248
Implicit Pre-Emption............................................. 260
Import Inspections............................................... 258
Larium (Mefloquine).............................................. 267
Live Bird Markets and Avian Influenza............................ 197
Medical Device:
Drug Marketing............................................... 239
Review....................................................... 238
User Fee and Modernization Act............................... 198
Methylmercury Advisory for Seafood............................... 240
Monograph Drug Approval System................................... 245
NARMS............................................................ 265
National:
Animal Identification......................................235, 236
Organic Program.............................................. 229
New Drug Approval Process........................................ 241
Nutritional Guidelines........................................... 256
Obesity........................................................246, 256
Prescription Drug Abuse.......................................... 245
Proposed Legislation............................................. 196
Recall Report by Office of Inspector General..................... 198
Regulatory Initiatives and State Model Rules..................... 210
Seafood Inspection/GAO Report.................................... 241
Technology....................................................... 205
Transgenic Animals in CVM........................................ 242
WIC:
Contingency Fund............................................. 228
Food Costs................................................... 229
Only Stores.................................................. 231
-