AGRICULTURE, RURAL DEVELOPMENT, FOOD 

AND DRUG ADMINISTRATION, AND RELATED 

AGENCIES APPROPRIATIONS FOR 2009 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND 

DRUG ADMINISTRATION, AND RELATED AGENCIES 

ROSA L. DELAURO, Connecticut, Chairwoman 

MAURICE D. HINCHEY, New York 

SAM FARR, California 

ALLEN BOYD, Florida 

SANFORD D. BISHOP, JR., Georgia 

MARCY KAPTUR, Ohio 

JESSE L. JACKSON, JR., Illinois 

STEVEN R. ROTHMAN, New Jersey 

JACK KINGSTON, Georgia 

TOM LATHAM, Iowa 

JO ANN EMERSON, Missouri 

RAY LAHOOD, Illinois 

RODNEY ALEXANDER, Louisiana 

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full Committee, and Mr. Lewis, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

MARTHA FOLEY, LESLIE BARRACK, JASON WELLER, and MATT SMITH, 

Staff Assistants 

PART 4 

Page 

Food and Nutrition Service .................................................. 1 

Rural Development ................................................................. 391 

( 

Printed for the use of the Committee on Appropriations 


jbell on PROD1PC69 with HEARING
PART 4—AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, 

AND RELATED AGENCIES APPROPRIATIONS FOR 2009 


jbell on PROD1PC69 with HEARING
AGRICULTURE, RURAL DEVELOPMENT, FOOD 

AND DRUG ADMINISTRATION, AND RELATED 

AGENCIES APPROPRIATIONS FOR 2009 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

SECOND SESSION 

SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND 

DRUG ADMINISTRATION, AND RELATED AGENCIES 

ROSA L. DELAURO, Connecticut, Chairwoman 

MAURICE D. HINCHEY, New York 

SAM FARR, California 

ALLEN BOYD, Florida 

SANFORD D. BISHOP, JR., Georgia 

MARCY KAPTUR, Ohio 

JESSE L. JACKSON, JR., Illinois 

STEVEN R. ROTHMAN, New Jersey 

JACK KINGSTON, Georgia 

TOM LATHAM, Iowa 

JO ANN EMERSON, Missouri 

RAY LAHOOD, Illinois 

RODNEY ALEXANDER, Louisiana 

NOTE: Under Committee Rules, Mr. Obey, as Chairman of the Full Committee, and Mr. Lewis, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

MARTHA FOLEY, LESLIE BARRACK, JASON WELLER, and MATT SMITH, 

Staff Assistants 

PART 4 

Page 

Food and Nutrition Service .................................................. 1 

Rural Development ................................................................. 391 

( 

U.S. GOVERNMENT PRINTING OFFICE 

48–455 WASHINGTON : 2009 


jbell on PROD1PC69 with HEARING
COMMITTEE ON APPROPRIATIONS 

DAVID R. OBEY, Wisconsin, Chairman 

JOHN P. MURTHA, Pennsylvania 

NORMAN D. DICKS, Washington 

ALAN B. MOLLOHAN, West Virginia 

MARCY KAPTUR, Ohio 

PETER J. VISCLOSKY, Indiana 

NITA M. LOWEY, New York 

JOSE ́ E. SERRANO, New York 

ROSA L. DELAURO, Connecticut 

JAMES P. MORAN, Virginia 

JOHN W. OLVER, Massachusetts 

ED PASTOR, Arizona 

DAVID E. PRICE, North Carolina 

CHET EDWARDS, Texas 

ROBERT E. ‘‘BUD’’ CRAMER, JR., Alabama 

PATRICK J. KENNEDY, Rhode Island 

MAURICE D. HINCHEY, New York 

LUCILLE ROYBAL-ALLARD, California 

SAM FARR, California 

JESSE L. JACKSON, JR., Illinois 

CAROLYN C. KILPATRICK, Michigan 

ALLEN BOYD, Florida 

CHAKA FATTAH, Pennsylvania 

STEVEN R. ROTHMAN, New Jersey 

SANFORD D. BISHOP, JR., Georgia 

MARION BERRY, Arkansas 

BARBARA LEE, California 

TOM UDALL, New Mexico 

ADAM SCHIFF, California 

MICHAEL HONDA, California 

BETTY MCCOLLUM, Minnesota 

STEVE ISRAEL, New York 

TIM RYAN, Ohio 

C.A. ‘‘DUTCH’’ RUPPERSBERGER, Maryland 

BEN CHANDLER, Kentucky 

DEBBIE WASSERMAN SCHULTZ, Florida 

CIRO RODRIGUEZ, Texas 

JERRY LEWIS, California 

C. W. BILL YOUNG, Florida 

RALPH REGULA, Ohio 

HAROLD ROGERS, Kentucky 

FRANK R. WOLF, Virginia 

JAMES T. WALSH, New York 

DAVID L. HOBSON, Ohio 

JOE KNOLLENBERG, Michigan 

JACK KINGSTON, Georgia 

RODNEY P. FRELINGHUYSEN, New Jersey 

TODD TIAHRT, Kansas 

ZACH WAMP, Tennessee 

TOM LATHAM, Iowa 

ROBERT B. ADERHOLT, Alabama 

JO ANN EMERSON, Missouri 

KAY GRANGER, Texas 

JOHN E. PETERSON, Pennsylvania 

VIRGIL H. GOODE, JR., Virginia 

RAY LAHOOD, Illinois 

DAVE WELDON, Florida 

MICHAEL K. SIMPSON, Idaho 

JOHN ABNEY CULBERSON, Texas 

MARK STEVEN KIRK, Illinois 

ANDER CRENSHAW, Florida 

DENNIS R. REHBERG, Montana 

JOHN R. CARTER, Texas 

RODNEY ALEXANDER, Louisiana 

KEN CALVERT, California 

JO BONNER, Alabama 

ROB NABORS, Clerk and Staff Director 

(II)


jbell on PROD1PC69 with HEARING
(1) 

AGRICULTURE, RURAL DEVELOPMENT, FOOD 

AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 

2009 

THURSDAY, MARCH 13, 2008. 

FOOD AND NUTRITION SERVICES 

WITNESSES 

NANCY MONTANEZ JOHNER, UNDER SECRETARY FOR FOOD, NUTRITION, AND CONSUMER SERVICES, USDA 

KATE HOUSTON, DEPUTY UNDER SECRETARY FOR FOOD, NUTRITION, 

AND CONSUMER SERVICES, USDA 

ROBERTO SALAZAR, ADMINISTRATOR, FOOD AND NUTRITION SERVICE, USDA 

W. SCOTT STEELE, BUDGET OFFICER, USDA 

Ms. DELAURO. The committee is called to order. Thank me and— 

thank you, and let me welcome all of you today, and particularly 

Under Secretary Johner. And I’m really glad to have had the opportunity. We met earlier this year to discuss a number of priorities. And like you, I always find the meetings to be helpful and 

informative and productive and are being able to move forward. 

Can you hear me? 

And let me just welcome the rest of the panel. I’m going to leave 

all the introductions to you in your opening remarks, Under Secretary. This is an important hearing from my perspective. Families 

and children should never be forced to choose between securing 

adequate food for their kids and other basics they need. I think one 

of the government’s most critical responsibilities is providing children and low-income families with access to quality food, a healthy 

diet, a positive education about nutrition, and the Food and Nutrition Service does exactly that, serving nearly one in five Americans. 

Perhaps the most important program under the Food and Nutrition Service is the school lunch program. That became very clear 

last month with the historic meat recall involving a Westland/Hallmark plant in California. Of the more than 140 million pounds of 

meat that was recalled, approximately 47 million were distributed 

to the school lunch program. There are no reports of any children 

becoming sick from consuming this meat, but it is no less alarming 

to think just how many students were put at risk. This should not 

have been allowed to happen, and must not be allowed to happen 

again. 


smartinez on PROD1PC64 with HEARING
2 

I realize that the Food Safety and Inspection Service shoulders 

much of the responsibility for allowing this recalled meat to reach 

the school lunch program. Nevertheless, I do have some serious 

questions about the Food and Nutrition Service’s role. We have a 

responsibility to determine what could have been done to stop 

these dangerous practices and subsequent recall. 

I also intend to address some questions about this year’s budget. 

While you appear to fully fund critical nutrition assistance programs such as food stamps and WIC, I remain concerned about 

some recycle proposals that would again limit the program participation. For instance, in what has now become a tiresome annual 

ritual, this Administration is once again proposing to zero out the 

commodity supplemental food program in fiscal year 2009. 

This is a program in which more than 473,000 seniors, women, 

infants and children rely. When it comes to women, infants and 

children, when it comes to that program, the WIC program, the 

President’s budget again proposes to cap grants to state agencies 

for nutrition service and administration expenses at the fiscal year 

2000 level. This reduces program costs by $145 million. However, 

if the cap is enacted, we will have to add that amount back to the 

appropriation level in the budget. 

I also want to express my disappointment at the Administration’s efforts on WIC last year. While the Administration did request a 3.5-percent increase for the WIC program in fiscal year 

2008, it still failed to acknowledge the increased participation and 

food costs. Worse still, the President threatened to veto any bill 

that increased total spending levels above his request. At the time, 

it was clear to everyone except the Administration that increased 

funding above the President’s request was essential to carry out 

the program this year. 

As you know, Madam Secretary, I’m also very concerned about 

the Food and Nutrition Service’s approval of Indiana’s decision to 

contract out virtually the entire administration of its food stamp 

program. We’ve had a number of conversations about this, and I 

understand earlier this week several groups held a news conference 

pointing to serious flaws in Indiana’s privatization plan, including 

a dysfunctional and wasteful eligibility system—difficulty in reaching call centers and navigating web pages, even the loss of benefits. 

I believe you will, but the Food and Nutrition Service and the 

state of Indiana must take these complaints seriously, and they 

must be investigated. According to initial news reports, it sounded 

like state officials were dismissive of these groups’ claims. If these 

allegations are proven true, it would seem like we’re heading for 

a repeat of the debacle that occurred in Texas. And I don’t have 

to remind anyone of the chaos that that experiment in privatization 

led to, with reduced enrollments and decreased services. 

I said this before, but I want to emphasize again, our citizens 

need to know that they will have access to the food assistance and 

health care programs during a time of crisis. While private companies serve their shareholders, the American people must be able to 

count on genuine oversight and strict accountability. 

We must be able to guarantee our most vulnerable citizens, that 

they get the adequate care they deserve. Our government has an 

obligation to its citizens to check private abuse, to set standards in 


smartinez on PROD1PC64 with HEARING
3 

the public interest. That principle must apply in all of our efforts, 

whether it’s food stamps or the school lunch program when it 

comes to creating real opportunity and protecting the public health. 

It’s our responsibility to get it right, and we cannot afford to fail. 

So, as always, we will have much to talk about today, and I look 

forward to discussing the issues with you. I might also add, and 

I’ve had some conversations with subcommittee members about 

this as well, that there will be—we don’t have a date yet—a followup hearing on nutrition which will then include a combination of 

both government witnesses and outside experts. So it’s just more 

broadly to discuss the whole issue of nutrition. 

With that, I thank you, and the ranking member, Mr. Kingston 

is here, but I’m going to assume that Ms. Emerson is going to sit 

in for him, and I ask you for opening comments. 

Ms. EMERSON. Thank you, Chairwoman. Thank you all so very 

much for being here today. And I do look forward to your testimony. I do have also a lot of questions. And, Madam Chair, I want 

to add something to your remarks. I mean, I know how disturbed 

you are about so many issues with regard to food security and hunger security and the like. 

I do want to tell you all, we just had a study done, a Missouri 

Hunger Atlas that was done by the University of Missouri, the 

Interdisciplinary Center for Food Security. And it’s really very 

frightening. In Missouri, for example, Madam Chair, Missouri is 

one of 17 states with rising rates of food insecurity with hunger. 

And the increase over the first part of this decade is among the 

highest five in the country. And so—and 15 percent of our state’s 

children, or nearly 200,000 residents below the age of 18, are food 

insecure. 

So, obviously, the issues with which you all deal on a daily basis 

are quite important to me and this entire subcommittee. But it is 

worrisome with, you know, higher gas prices, higher food prices, 

higher about everything. This is an issue which I think we need 

to pay special attention to, because I think in the short term it 

might get worse before it gets better. And certainly, the government working with all of the private—with private industry and 

charitable foundations and what work we can do here in the committee, Madam Chair, I think are going to be critical in saving 

lives. 

So I appreciate you all being here and thank you so much. I have 

lots of questions. 

Ms. DELAURO. I thank the gentlelady and also say I often think 

about the terminology of ‘‘food insecurity.’’ It essentially means that 

people are hungry, in my view, and that we ought to be able to 

have the determination, the will and the wherewithal to make sure 

that people in this country are not hungry. 

Let me ask you to make your remarks. You know the testimony 

will be put in full into the record, but you’re free to summarize and 

make any comments that you care to before we get to questions. 

Thank you. 

OPENING REMARKS

Ms. JOHNER. Thank you, Madam Chair. And we’re very grateful 

to be here too this morning, because we have a lot to share. But, 


smartinez on PROD1PC64 with HEARING
4 

Madam Chair and members of the Subcommittee, thank you for 

this opportunity to present the Food, Nutrition and Consumer 

Service budget request for fiscal year 2009. 

By your permission, I would like to introduce three key members 

of my team who are with me here who are with me today. Kate 

Houston. She’s our Deputy Under Secretary for Food, Nutrition 

and Consumer Services. And Ms. Houston also previously served as 

our Deputy Administration for Special Nutrition Programs. Roberto 

Salazar, who is our Administrator for the Food and Nutrition Service. And in the audience today but not at the witness table is Dr. 

Brian Wansink, who recently joined our mission area as Executive 

Director for the Center for Nutrition Policy and Promotion. 

My written testimony has already been submitted for the record. 

So rather than recount what is already before you, I would like to 

share with you key concepts that underlie our fiscal year 2009 

budget request. In doing so, I hope it will be clear to you why we 

at FNCS and I personally as Under Secretary have proposed the 

budget before you, and as to why we believe it is fitting and sufficient for the programs we administer. 

There are three basic themes which are fundamental in the design of the budget before you: Good stewardship, improved program 

integrity, and better access to the program benefits. I realized that 

good stewardship is not necessarily the primary factor in proposing 

a budget, yet good stewardship is demanded whether we request a 

budget increase or we propose reduced funding levels. Nevertheless, be assured that the budget before you represents a thorough, 

honest assessment of the investment. We believe we’ll fulfill the requirements of the program we administer, no more, no less, and 

that is good stewardship. 

Likewise, our budget request is based on a dedication to program 

integrity. Our commitment to you is that we will do our utmost to 

ensure that every dollar you entrust to us is used in accordance 

with law and regulations. Waste, fraud and abuse are not acceptable, and our budget proposal makes no concession to this principle. 

Our ultimate goal at FNCS is ensuring eligible participants have 

every opportunity to receive the benefits Congress intended for 

them to receive. We aspire to provide these benefits with dignity 

and compassion. I can assure you that we would not present a 

budget that we knew to be greatly lacking and detrimental to their 

well being. 

As evidence of this factor, a number of increases are in the Administration’s budget. For example, the President’s request includes an increase of $11.2 million, which is aimed at the Food 

Stamp Program. There is also a provision for $6 billion in reserve 

for the Food Stamp Program alone. Likewise, we have an increase 

of just over $550 million for the Child Nutrition Programs. 

But I do not wish to digress too far into the details. What I believe is more appropriate and closer to the business at hand is to 

answer any questions that you may have so that you can move 

quickly to approve our request. We invite an open dialogue with 

the Subcommittee, a dialogue based on mutual respect and trust, 

and it is in this spirit of encouraging constructive dialogue that I 

have shared my thoughts with you today. 


smartinez on PROD1PC64 with HEARING
5 

We are certain that good stewardship, improved integrity and 

improved program access is as important to you as it is to us. 

These are principles, in which I’m sure we can all agree on, principles as I say, that underlie the budget request before you. And 

so it is with all due respect and in mutual understanding as public 

servants we come before the Subcommittee today. 

We thank you for your time and attention, and I will be happy 

to answer any questions you may have for me or from my honorable and dedicated co-workers, Kate Houston and Roberto Salazar. 

And also we have our Budget Officer, Scott Steele, at the desk. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
6 


smartinez on PROD1PC64 with HEARINGInsert offset folio 11 here 48455A.001
7 


smartinez on PROD1PC64 with HEARINGInsert offset folio 12 here 48455A.002
8 


smartinez on PROD1PC64 with HEARINGInsert offset folio 13 here 48455A.003
9 


smartinez on PROD1PC64 with HEARINGInsert offset folio 14 here 48455A.004
10 


smartinez on PROD1PC64 with HEARINGInsert offset folio 15 here 48455A.005
11 


smartinez on PROD1PC64 with HEARINGInsert offset folio 16 here 48455A.006
12 


smartinez on PROD1PC64 with HEARINGInsert offset folio 17 here 48455A.007
13 


smartinez on PROD1PC64 with HEARINGInsert offset folio 18 here 48455A.008
14 


smartinez on PROD1PC64 with HEARINGInsert offset folio 19 here 48455A.009
15 


smartinez on PROD1PC64 with HEARINGInsert offset folio 20 here 48455A.010
16 


smartinez on PROD1PC64 with HEARINGInsert offset folio 21 here 48455A.011
17 


smartinez on PROD1PC64 with HEARINGInsert offset folio 22 here 48455A.012
18 


smartinez on PROD1PC64 with HEARINGInsert offset folio 23 here 48455A.013
19 


smartinez on PROD1PC64 with HEARINGInsert offset folio 24 here 48455A.014
20 


smartinez on PROD1PC64 with HEARINGInsert offset folio 25 here 48455A.015
21 


smartinez on PROD1PC64 with HEARINGInsert offset folio 26 here 48455A.016
22 


smartinez on PROD1PC64 with HEARINGInsert offset folio 27 here 48455A.017
23 


smartinez on PROD1PC64 with HEARINGInsert offset folio 28 here 48455A.018
24 


smartinez on PROD1PC64 with HEARINGInsert offset folio 29 here 48455A.019
25 


smartinez on PROD1PC64 with HEARINGInsert offset folio 30 here 48455A.020
26 


smartinez on PROD1PC64 with HEARINGInsert offset folio 31 here 48455A.021
27 


smartinez on PROD1PC64 with HEARINGInsert offset folio 32 here 48455A.022
28 


smartinez on PROD1PC64 with HEARINGInsert offset folio 33 here 48455A.023
29 


smartinez on PROD1PC64 with HEARINGInsert offset folio 34 here 48455A.024
30 

HALLMARK/WESTLAND BEEF RECALL

Ms. DELAURO. Again, welcome to all of you, and I thank you for 

your testimony, Secretary Johner. Let me start—before we start to 

talk about the budget, I want to ask a few questions about the recent beef recall. Let’s just start there. Of the 140 million pounds 

of beef that was recalled by Westland/Hallmark, over 50.3 million 

pounds was sold to the USDA feeding programs, with 47 million 

pounds going to the national school lunch program. Can you provide this subcommittee with a list of the school food authorities, 

the SFAs, that received beef from this recall? 

Ms. JOHNER. Yes we can. In fact, we do have that list and it’s 

in the final process of being cleared, so we—I can assure you, as 

soon as I can give that to you, we will give you a copy. 

Ms. DELAURO. Thank you. I appreciate that and I applaud that 

effort. This is the first time that anyone has been forthcoming with 

saying that we could get such a list, so I thank you for that. You 

understand this list of school food authorities will be included in 

the record and made public information. 

Ms. JOHNER. Right. 

[The information follows:] 

The Food and Nutrition Service (FNS) is committed to maintaining constant communications with our State, local and industry stakeholders. To that end, we will 

provide a list of affected School Food Authorities under separate cover and we intend to make the list available on our public Web site at http://www.fns.usda.gov/ 

fns/newsroom.htm. Of the 143 million pounds of Hallmark/Westrand recalled beef, 

approximately 51 million pounds was distributed to FNS’ nutrition assistance programs. About 94 percent of the 51 million pounds was distributed to schools. 

Ms. DELAURO. This also seems to me that you should put this 

up on your Web site. Will you do that? 

Ms. JOHNER. Yes, Madam Chair. 

Ms. DELAURO. And when do you anticipate finishing them? I believe this ought to go up immediately. 

Ms. JOHNER. Yes. As soon as we have that through final clearance, yes, you have my assurance that it will go up immediately. 

Ms. DELAURO. When do anticipate final clearance? 

Ms. JOHNER. I would hope that we can have that in the next few 

weeks. I mean, probably sooner than that. I can’t give you a specific time, so I’m kind of giving it a ballpark figure here. I would 

hope by next week. 

Ms. DELAURO. I really want to emphasize the need. I mean, we 

had folks here last week. We were told we would get some answers 

this week. I wrote to the Secretary I think on February 20th, and 

to date, I don’t believe I have had a response from the Secretary. 

This is about two lists, the retail consignees and the schools. But 

I have had no answer from Secretary Schafer. So it would seem to 

me if the list is together, its final clearance, with given the importance of this information to our school food authorities, that it 

ought to be able to be done, you know, 48 hours? I don’t know 

what’s left except for a final clearance, and that shouldn’t take very 

long if it’s been through the traps here. 

Ms. JOHNER. Madam Chair, again, we also believe that that’s important information, and so we just want to make sure that the information that’s on there is accurate. So, we’re just making sure 


smartinez on PROD1PC64 with HEARING
31 

that the i’s are dotted and the t’s are crossed. And so, I assure you 

again, as soon as we can, we will get that to you. 

Ms. DELAURO. And we will be—you need to be in touch with us, 

but we will be—— 

Ms. JOHNER. Okay. 

Ms. DELAURO (continuing). You know, just vigilant on when that 

is going to be made available. 

Ms. JOHNER. Yes. 

Ms. DELAURO. Have you accounted for all of the beef that is included in this recall that went to the national school lunch program? 

Ms. JOHNER. Yes. Yes we have. 

Ms. DELAURO. Again, thank you very, very much. 

Ms. JOHNER. And also if I can add, we have worked very closely 

with the School Nutrition Association. They were here in Washington I think last week, and we met with them to do some probably, we’ve learned lessons throughout this whole process, and you 

can always learn from your experiences. And so we’ve met with 

them, and we are putting some next steps in place to tighten up, 

to improve the process that we currently have. And we can provide 

you a list of those things if you’d like a copy of that. 

Ms. DELAURO. Yes. I would, because that’s part of, you know, 

what are requests are here today about the lessons that you 

learned and what changes are you implementing based on this recall. That is critical. That’s critical information for the subcommittee. 

Ms. JOHNER. Yes. We can get you that. 

[The information follows:] 

USDA has a long-standing commitment to school food safety. From our pioneering 

work with the School Nutrition Association to establish a food safety credentialing 

program for school food service employees, to our collaborative efforts to establish 

standard procedures for recall actions affecting foods purchased by the Department 

for school use, we have done much to ensure the safety and wholesomeness of school 

meals. The result is that in comparison to other food service alternatives, the documented incidence of food-borne illness associated with school meals is extremely low. 

We continue to work with schools to improve on this record of success. 

USDA hold and recall processes and procedures have been in place for a number 

of years and have worked efficiently and effectively in past recalls that involved 

school commodities. FNS, in cooperation with the National Food Service Management Institute (NFSMI), has provided training and technical assistance materials 

to State agencies and school food service managers on these procedures. However, 

given the magnitude of the Hallmark/Westland beef recall, FNS has identified several areas where communication can be strengthened and how information dissemination about a food recall can be improved to ensure parents and students receive 

accurate and timely information. FNS is working more closely with State agencies 

to provide additional technical assistance to effect better implementation of recall 

processes and procedures. We will seek input from our program cooperators to help 

us in this regard. The NFSMI is working to finalize guidance for State agencies to 

better manage future hold/recall situations. Once this guidance is complete, there 

will be an education and training campaign tailored to States and school districts. 

The guidance is expected to be ready in July 2008. Furthermore, we are exploring 

various communication options that will allow both FNS and our State agency partners to transmit food safety information directly to schools so they, in turn, can provide timely and accurate information to students, parents, and teachers about food 

safety matters. This was a concern we heard during the Hallmark/Westland recall, 

and we intend to be fully responsive. 

Ms. DELAURO. I will just say that there have been a number of 

complaints about the timeliness of the school food service directors 

in receiving official information about the recall. Many of the 


smartinez on PROD1PC64 with HEARING
32 

schools, as you can imagine, as parents, they received calls from 

concerned parents who learned of the recall on the news, and they 

didn’t have any information at all, and the schools didn’t have any 

information from FNS through their state agencies. 

Let me just ask you this question and get your thoughts. Should 

FNS have the capability to communicate directly with the school 

food authorities about any future recalls or other potential health 

threats in the national school lunch program? 

Ms. JOHNER. I think the current system that’s in place is where 

the FNS communicates through the rapid alert system through the 

state agencies, and the state agencies then communicate with the 

school. That’s the area where I know our conversations with SNA 

that we’re looking in how to improve and strengthen that aspect 

of it. 

Ms. DELAURO. You think that that’s the model that we should 

continue to use—— 

Ms. JOHNER. Yes, I do. 

Ms. DELAURO [continuing]. Rather than your direct communication with the school food? 

Ms. JOHNER. Yes, I do. I believe working with the state agency, 

we need to improve and strengthen that piece right there. 

Ms. DELAURO. How much is this—how much is the recall of the 

beef that was provided to the national school lunch program expected to cost, including the cost of destroying and replacing the recalled beef? 

Ms. JOHNER. Okay. We don’t have that information at this point. 

Ms. DELAURO. Can you get that information to us? 

Ms. JOHNER. Yes. And I’m going to turn this over to Kate, because she has been working extensively on the recall. So she’s—and 

she testified I think earlier on. 

Ms. DELAURO. Okay, Kate. You’re on, Kate. [Laughter.] 

Ms. HOUSTON. Now that we have accounted fully for all of the 

beef that went to the school lunch program, schools are in the process of sending information on their costs back up to the state, at 

which point that information will get bundled and the state will 

provide us a full accounting of what the local costs were, both for 

the storage during the hold and for any transportation and destruction costs. 

So, at the point at which all of that information comes to us, we 

will provide the appropriate reimbursements, and we can get you 

then the information on what the final costs were. But it’s premature to have that information at this point. 

Ms. DELAURO. What accounts are these expenses—will they be 

paid from? 

Ms. HOUSTON. Again, we work with our partners at the Agricultural Marketing Service who will be handling the reimbursements. 

I can tell you that we have provided some information about what 

costs USDA will be able to reimburse, and they include transportation of the recalled products to a disposal site, up to one month 

of storage costs, and the direct disposal costs. 

Ms. JOHNER. And Madam Chair, we are also currently replacing 

the product too at this time. They’ve already begun doing that. 

Mr. STEELE. Madam Chair, I think that the account probably 

will be Section 32, AMS. 


smartinez on PROD1PC64 with HEARING
33 

[The information follows:] 

FNS is committed to working closely with the Agricultural Marketing Service and 

States to account for all costs associated with the Hallmark/Westland recall related 

to FNS’ nutrition assistance programs. FNS is actively collecting the data necessary 

to complete a full accounting of the funds associated with the recall and will be glad 

to provide the information to the Committee once the accounting is complete. 

We will be seeking reimbursement for the expenses from the Westland/Hallmark 

Meat Company as a part of our contractual action against the company. However, 

if Hallmark/Westland is financially unable to cover the full cost of expenses incurred 

by USDA commodity programs, the difference will be paid out of Section 32 funds. 

Ms. DELAURO. Okay. Can we receive copies of communications 

provided to the state agencies in regard to the national school 

lunch recall? 

Ms. JOHNER. Sure. 

Ms. DELAURO. And, again, these communications, they include 

the types of expenses that will be reimbursed? They know what’s 

going to be reimbursed? The procedures, the timeline for reimbursement? They have all of that information? 

Ms. JOHNER. That’s correct. They should. I think it’s important 

to note that some of that information is state specific. Our clients 

obviously in this case were the state agencies. State agencies are 

responsible for providing information down to the local level regarding specific instructions for the manner in which the foods 

should be destroyed, and some of that varies from state to state, 

depending on what their public health agencies require. 

So there is some general information provided by USDA and 

then some specific, state specific information that goes to the school 

level. 

[CLERK’S NOTE.—Because of the length of these documents they 

are not printed in the hearing volume. The Subcommittee will 

maintain a copy in the official files.] 

BEEF QUALITY STANDARDS

Ms. DELAURO. I am interested in what standards—what are the 

standards that are set by FNS for the quality of the beef that 

comes into the national school lunch program. Do you set the 

standard that no beef will come from downer cattle, or is that 

AMS’s responsibility? And how do you enforce these standards? 

Ms. HOUSTON. The specs for the product that is purchased on behalf of schools by the Department are established by the Agricultural Marketing Service. They are the Departmental purchaser of 

entitlement commodities for schools. 

I can say that they really have very high quality standards that 

are comparable to those in the commercial marketplace. They were 

first adopted over a decade ago in response to concerns that were 

voiced by advocates, parents and Congress regarding the quality of 

the meat and very stringent standards and safeguards were put in 

place at that time to make sure that the product really met the 

highest quality standards. 

Ms. DELAURO. Do you have enforcement standards? How do you 

enforce these standards? Has that become part of your responsibility as well as, I mean, AMS or? The standards that are laid out 

in terms of the beef that goes into the school lunch program. Do 

you enforce standards? Do you require—do you have requirements 


smartinez on PROD1PC64 with HEARING
34 

with regard to pathogen testing, quality and so on? Is that part of 

your mission? 

Ms. HOUSTON. AMS has contractual agreements with verified 

vendors that are required to meet the specifications laid out, and 

AMS is responsible for regulating those vendors and ensuring that 

they are complying with all aspects of those contracts. 

Ms. DELAURO. So you do not have any enforcement authority or 

standards with regard to that process? 

Ms. HOUSTON. Well, my—— 

Ms. DELAURO. You are in essence the customer? 

Ms. HOUSTON. We are in essence the customer, but microbiological standards, testing requirements are included in AMS 

specifications for ground beef that is purchased for the school lunch 

program. 

Ms. DELAURO. My time—— 

Ms. HOUSTON. Every lot is tested, is my understanding. 

Ms. DELAURO. My time has expired. Let me—Ms. Emerson. 

FOOD STAMP PROGRAM OUTREACH

Ms. EMERSON. Thank you, Madam Chair. I want to start with 

kind of where I left off in just the opening statement. But I was 

being specific to Missouri with regard to the issues of hunger. And, 

you know, we have right now about 35.5 million people who have— 

suffer from one form of hunger or another, at least in 2006. 

And, you know, all of the factors that we talked about with regard to economic issues do make me very nervous. And I worry 

about increased numbers of people who become either totally hungry or food insecure. And I want to know what the agency is doing 

to prepare and to reach out to those individuals. 

Ms. JOHNER. Yes. That’s a great question. I think that we have 

done a lot in our—probably strengthening our partnerships with 

the state, because the states ultimately are responsible in administering the program. So one of the things that’s important for us 

is to make sure that the people who are eligible and wish to participate in the program have access to the program. 

So, again, working closely with partners, and not only that, but 

with community and faith-based organizations. I know personally 

I have gone out to different states, and I do roundtables, and I 

bring various people to the table. The local leadership, the state 

leadership, because it also has to be sustained. And so what I try 

to do at our level is try to bring that in cooperation to collaborate 

to say what do we do for the folks in your state? And so that’s one 

aspect of it. 

We provide outreach grants to four states to be able to come up 

with some of their own pilot projects. But this is a very important 

issue for us, because we do know that there’s underserved population, the elderly, the working poor, Hispanics that have low numbers. And so, again, if they are eligible for the program, we want 

to make sure that they get the program. 

Ms. EMERSON. Well, you know, I know in Missouri, for example, 

we have a very high participation rate. We have an excellent food 

stamp outreach program, and I’m very grateful because since my 

Congressional district happens to bear the largest number of people 

below the poverty line as well as those who are food insecure, if 


smartinez on PROD1PC64 with HEARING
35 

you look at this map here, Madam Chair and Secretary Johner, 

you’ll see all this dark blue. And this is where—this is my district. 

That shows the highest participation rate with regard to food 

stamps. 

And so we’re doing a good job in Missouri, but my worry is that 

you all may not have adequate resources necessary to respond and 

process and even approve new applications for food stamp or WIC 

or school meals. Do you feel like—do the state agencies with whom 

you work, do you feel that they have—and I meant to say state 

agencies—do you feel that they have the adequate resources to be 

doing this? 

Ms. JOHNER. And again, I think that’s part of the—again, it varies. Each state has its own individual strengths and challenges in 

their state. But I think working together again with—what we try 

to really encourage is again the local collaboration that’s there, because I do believe that there’s a lot of—the states have more resources than they realize, but they need to bring them together. 

And so if we can be part of that, that would be great. But as far 

as working with the states, and, yes, coming up with innovative 

ways, I think the modernization piece is one component that I 

think states are looking to incorporate, to be able to handle the 

number of people that are coming in, to be able to better meet their 

needs. 

FOOD STAMP PROGRAM PARTICIPATION

Ms. EMERSON. Okay. You mention in your testimony a slight increase in the participation of, what, about 200,000 recipients per 

month. 

Ms. JOHNER. Right. 

Ms. EMERSON. Is that still your all’s expectation? 

Ms. JOHNER. Yes. 

Ms. EMERSON. It is? Even in spite of, you know, more tough economic times? 

Ms. JOHNER. And given, I mean, again, given—that’s our numbers, given the data that we’ve had. And so we continue to look at 

this very closely, and the numbers change as we get the data in, 

so at this point, I have to say yes. 

FOOD STAMP PROGRAM ERROR RATE

Ms. EMERSON. Okay. You also cited in your testimony an error 

rate of—in the food stamp program of less than 6 percent. You 

know, when we discuss farm and conservation programs, we discuss improper payments where, you know, a simple mistake on a 

form can classify a payment as improper. What qualifies as an 

error with regard to food stamps? 

Ms. JOHNER. Well, I guess the food stamp error rate is actually 

dollars lost and not the procedure errors. And I can tell you that 

we do have a strong indication for this coming year that our numbers are even better than they were last year, and they continue 

to truly work on trying to improve that. 


smartinez on PROD1PC64 with HEARING
36 

FOOD STAMP PROGRAM CATEGORICAL ELIGIBILITY

Ms. EMERSON. Madam Chair, can I ask one more question? Just 

because I have to run to Energy and Water. Ms. Secretary, in past 

years, we’ve seen a proposal to end the categorical eligibility— 

sorry. That’s a very hard word for me to pronounce—eligibility of 

TANF noncash recipients for food stamps, and I don’t think there’s 

a proposal like that before us this year, but it was in the President’s farm bill recommendations. Do you know if this is still the 

Administration’s position? 

Ms. JOHNER. Yes. 

Ms. EMERSON. Well, that’s unfortunate, Madam Chair, because, 

you know, I think the GAO has stated that an analysis shows the 

vast majority of TANF noncash households may remain eligible for 

food stamp even after this change. So I know that the states are 

concerned about those administrative costs, particularly given the 

potential for increased applications. Well, I don’t—it was a GAO report from last—that GAO report identified several states which did 

allow the categorical eligibility. But has FNS—and maybe I should 

ask the Administrator, have you acted to correct that inconsistency? 

Mr. SALAZAR. We do provide technical clarifications, of course, to 

GAO reports. We have asked to wait until after Farm Bill implementation to see what recommendations at this time—— 

Ms. EMERSON. Do either of the farm bills—because I haven’t obviously seen either of the drafts—do they actually contain the 

President’s requested language on categorical eligibility? 

Mr. SALAZAR. Madam Chair and Congresswoman, they do not. 

Ms. EMERSON. They do not? Okay. Well, with that, I have exceeded my time, Madam Chair. Sorry. Thank you all very much. 

Ms. DELAURO. Thank you. Ms. Kaptur. 

LEADERSHIP AND RESOURCE COLLABORATION

Ms. KAPTUR. Thank you, Madam Chair. Welcome back to the 

subcommittee, Secretary Johner and all of your colleagues, thank 

you. And thank you for making the effort to come to Ohio. It is 

truly appreciated. And to watch your engagement with our food 

banks and our religious community and all of those who are trying 

to feed the hungry, I can’t thank you enough for that. 

I wanted to ask you, I know you had a chance to view some of 

our shellshocked food pantry operators, and you may have had a 

chance to reflect a little bit on the visit, and I know you are considering coming out again, which we would deeply welcome. I’m wondering if you have thoughts based on your visit you would want to 

share at this point? 

Ms. JOHNER. Yes, I do. And I think part of that I mentioned earlier. Again, I think after visiting Ohio, and again, putting my old 

hat on as a State Director and, you know, working in the field, it’s 

important and I think sometimes we lose sight of that, that the 

local leadership and our statement leadership as well as the Federal leadership all need to come together to be able to address in 

a collaborative manner be able to meet the needs of our population 

that is out there. 


smartinez on PROD1PC64 with HEARING
37 

And I know in Ohio there was, I’ve seen a tremendous amount 

of resources, and it was actually pretty exciting to see that many 

resources, but we need—there needs to be some coordination of 

that and how do we work on that. And I think it needs to be at 

all levels. And I think when I come back out there, we were going 

to have certain people at the table so that we can have those planning and then the next session, because, again, it needs to be sustainable. 

I think everyone has competing priorities and limited resources, 

so we need to figure out how do we still help those most in need 

with the resources we have out there. 

COMMODITY PURCHASES

Ms. KAPTUR. Well, I’m hoping that as you consider that, we can 

think together about how the Agricultural Marketing Service and 

extension might be more fully engaged in an effort like this where 

we have so many hungry people and programs not reaching those 

who are eligible. Could we get electronic benefits transfer machines 

to all of our farmer’s markets so people could take food stamps 

there if they are eligible for food stamps? And are there any legal 

or structural hurdles we need to overcome in order to do that? 

And the connection to local production agriculture, how we connect the nutrition program eligibility to local production. The food 

stamp EBT connection is one, how one engages the local community, farmers in producing, or let’s say extra food that’s needed by 

the food banks. I’m not quite sure how to do that, but if there’s a 

way that you might talk to some of your colleagues over there at 

USDA on the production side. 

We really need some new visions of how to meet the needs in 

these urban areas. And when you have food pantries that have a 

rise in need of over 30 percent and donations are down by 75 percent, because the economy is so bad, there have to be some other 

mechanisms. And we’re hoping that you will consider those. 

Yes, I agree the state needs to be involved, because, for instance, 

in our school lunch and breakfast programs, we’re losing money because the state can’t make the match, because the state of Ohio is 

nearly a billion dollars out of balance. So how can the state meet 

the match when it doesn’t have any money? And yet we have agriculture programs that on the production side that we might be able 

to link to our nutrition programs. 

That’s where I’m asking you to look, assuming the state will 

have nothing to put on the table. Maybe they will. If they don’t, 

we’re still stuck with empty shelves in our food pantries and in our 

ministries and so forth that are trying to feed the hungry. 

Do you anticipate USDA will have any other announcements to 

make about additional commodity purchases that can go to these 

food pantries for emergency purposes, where you’ve got very high 

levels of unemployment? 

Ms. JOHNER. Well, we are—the stocks for food. Are you aware of 

that? 

Ms. KAPTUR. Well, there was one announcement, what was it, 

$63 million purchase? 

Ms. JOHNER. Yes. That was the second shipment that will be 

going out starting, I believe, in May or June. If I’m correct on that, 


smartinez on PROD1PC64 with HEARING
38 

we’ll start having shipments that actually will be hitting the food 

banks. 

Ms. KAPTUR. All right. And are those—that isn’t Commodity Supplemental Food Program. That’s areas like milk or protein-based 

foods, or what form will that take? 

Ms. JOHNER. That takes, actually it’s canned meats, and I have 

a list of those that I can definitely get to you. Actually, they’re 

very, it’s a more substance. It isn’t just milk and stuff. It is actually canned meat and chicken and turkey and, I want to say beans, 

beef stew, things like that. 

Ms. KAPTUR. All right. Okay. I would be very interested if your 

department—— 

Ms. JOHNER. Yes. 

Ms. KAPTUR [continuing].—Could provide us with a projection of 

what will that mean in a state like Ohio—— 

Ms. JOHNER. Yes. 

Ms. KAPTUR [continuing].—Which is going through very difficult 

times. 

Ms. JOHNER. We can get you that information. 

[The information follows:] 

FNS is pleased to report that the innovative Stocks-for-Food barter has benefited 

The Emergency Food Assistance Program (TEFAP) nationwide. Commodities that 

will be made available to States under the second Stocks-for-Food Barter include 

canned and frozen chicken, pork and turkey hams, canned tuna and salmon, peanut 

butter, and pinto beans. 

Under TEFAP, each State’s fair share of commodities is calculated based upon a 

weighted formula that takes into account each State’s poverty and unemployment 

statistics. Ohio is expected to receive about $2 million of the roughly $50 million 

worth of commodities that will be obtained under the second barter. 

FNS supports multiple options that allow farmers’ markets to accept food stamp 

EBT benefits efficiently and securely. Between 2006 and 2007, the number of farmers’ markets participating in the Food Stamp Program increased by 22 percent from 

436 to 532. Farmers markets redeemed more than $1.6 million in food stamp benefits in 2007. Promising practices related to the use of food stamp EBT are available 

at http://www.fns.usda.gov/fsp/ebt/ebtlfarmerslmarkstatus.htm. 

There are no legal hurdles associated with placing EBT machines into farmers 

markets; however, there may be logistical hurdles. Specifically, many farmers’ markets do not have electricity and/or phone lines necessary to support regular EBT 

Point-of-Sale (POS) devices. 

To help farmers’ markets adapt to the EBT environment, alternative redemption 

systems were developed. FNS approves demonstration projects that use alternative 

forms of food stamp benefit issuance, including scrip, tokens, and receipts, in conjunction with EBT. Recipients exchange EBT food stamp benefits for scrip or tokens 

to purchase produce and other eligible food products at individual farmer stalls in 

a farmers’ market. 

Additonally, as wireless technology has improved, more markets are taking advantage of it. The major hurdles to using wireless technology are equipment and 

maintenance costs and transaction fees. Often, these costs are born by the markets 

themselves or by the organizations that sponsor the markets. Markets leverage 

grants (such as Agricultural Marketing Service grants or those from private foundations such as the Kellogg Foundation) and their affiliations with organizations such 

as the State Farm Bureau to reduce costs. The added advantage of wireless POS 

for farmers is that they run commercial debit and credit as well as EBT transactions. Commercial transactions help justify and off-set the cost of equipment and 

processing. 

TOLEDO SCHOOL LUNCH AND SCHOOL BREAKFAST

Ms. KAPTUR. All right. All right, very good. And also, Madam 

Secretary, as you look at coming out again, if you could give us— 

if you could take a look at the Toledo school system and their 


smartinez on PROD1PC64 with HEARING
39 

school lunch and breakfast program and tell us why they forego 

millions and millions of dollars of federal money because of lack of 

subscription to the programs. There’s another area where—is it the 

state’s fault that they’re not providing the match? If you could help 

us understand what’s going on there, I would greatly appreciate it. 

Ms. JOHNER. We can look into that. 

[The information follows:] 

FNS is committed to ensuring all eligible children have the opportunity to participate in the school meals programs. FNS is aware of Toledo’s desire for assistance 

in developing strategies to increase participation in the school meals programs. Consistent with the commitment made to you in our recent meeting, FNS will soon contact school district officials to begin the discussion. FNS will work with Toledo officials to identify ways to strengthen program quality, including lessons learned from 

other districts with similar characteristics. FNS will work with the district to build 

a program that attracts greater student participation and helps put Toledo’s school 

nutrition programs on solid financial ground. 

Ms. KAPTUR. Thank you, Madam Chair. 

Ms. DELAURO. Mr. Kingston. 

FOOD STAMP PROGRAM ENROLLMENT AND UNEMPLOYMENT

Mr. KINGSTON. Thank you, Madam Chair. Madam Secretary, do 

you have a chart that you could give me later on that would show 

from a better understanding the link between food stamp enrollment and unemployment? 

Ms. JOHNER. Yes, we could do that. 

Mr. KINGSTON. In a local area. 

Ms. JOHNER. In a local area? It’s a little more difficult. Is it like 

state specific, or? 

Mr. KINGSTON. Well, I think it would be—— 

Ms. JOHNER. Or a region? 

Mr. KINGSTON [continuing]. Public interest for any town or, you 

know, any political subdivision, either a county, a city, an MSA. I 

can’t believe you don’t know this off the top of your head. [Laughter.] 

Mr. KINGSTON. But just something so that by the smaller subdivision is possible, hopefully something below the state level, but 

something that would show, okay, for example, in Ohio, it has been 

unusually maybe even the hardest hit by the current economy, I 

think you have wasn’t it a 21 percent job reduction or something 

in the last couple of years? I just—but it would be interesting to 

see, you know, how the employment rate went up and food stamp 

eligibility enrollment up and went down, to make sure also that 

that line is consistent. Because if it—in some areas if you have an 

aberration, that would be interesting to know also. 

Ms. JOHNER. Okay. I tell you—I’ll commit to with working with 

you and your office and then we’ll see what we can do and then 

we’ll get some type of table out. How’s that? 

Mr. KINGSTON. You know—well, let me ask you. Let me just comment on that. I don’t know why you wouldn’t have it already. 

Ms. JOHNER. At this point, do we have this information at all? 

We have a table—a chart that shows at a national level, but not 

at the county level. 

Mr. KINGSTON. Well, my fondness for you notwithstanding—— 

Ms. JOHNER. Do you want the national—— 


smartinez on PROD1PC64 with HEARING
40 

FOOD STAMP PROGRAM EMPLOYMENT AND TRAINING

Mr. KINGSTON [continuing]. I’m going to have to pick on you, because this wasn’t a set up question, but you’re asking for $362 million for unemployment training. Why? If you don’t know the stat, 

the correlation between food stamp eligibility and your need to 

come up with $362 million, how can you ask for that much money 

if you don’t have that here’s why we need it? 

Ms. JOHNER. We do know, sir, that there is lower participation 

in the food stamp program by the working poor, and there’s a number of reasons for that, but we’ve asked for some specific targeted 

funding as part of our proposal to help improve participation 

among specific underserved populations, the working poor being 

one of them. 

Sometimes there are some myths, thinking that if you have a job 

you are not eligible for food stamps, when in fact the eligibility is 

determined based on the income level of the household. And even 

if there is a household that’s working, they may have an income 

that would enable them to receive some supplementation of their 

food budget through food stamps. 

Mr. KINGSTON. Well, on your $362 million number for job training, how did you arrive at that? 

Mr. SALAZAR. Madam Chair, Congressman Kingston, our projections for employment and training are based in large measure on 

food stamp participants calculated in our program. Participation in 

the Employment and Training Program is part of the Food Stamp 

Program, is a requirement for many participants, and based on 

those participation projections, we project funding needs for that 

program. 

Our ability to project and forecast food stamp participation is reliable on a number of economic factors, inclusive of unemployment 

rates, but recognizing that there are respective lag times in which 

that data is tracked with food stamp participation. It is somewhat 

of a science but also a complicated projection. 

Mr. KINGSTON. What is the Department of Labor asking for? 

Mr. SALAZAR. With respect to? 

Mr. KINGSTON. Job training. 

Mr. SALAZAR. I regret that I don’t have specifics on—— 

Mr. KINGSTON. Do you know if went up or down? I mean, how 

much is the overlap between what the Department of Labor job 

training programs do and what you’re doing? 

Mr. SALAZAR. Madam Chair, Congressman Kingston, the services 

provided by the Department of Labor are distinct and unique to 

those individuals seeking unemployment compensation benefits 

and the requirements of them for seeking those benefits. There 

may be a potential of overlap of those individuals seeking those 

benefits also applying for Food Stamp Program benefits. The requirements of the Food Stamp Program are to ensure for those who 

are required to participate in the employment and/or training programs that we can provide them adequate services through the 

State agency. 

Mr. KINGSTON. A person could have dual enrollment though, 

right? 


smartinez on PROD1PC64 with HEARING
41 

Mr. SALAZAR. Madam Chair, Congressman Kingston, that is correct. Likewise, their children may also be participating in the National School Lunch Program and receiving other services as well 

from a multitude of various local programs. 

Mr. KINGSTON. But if you’re taking one job training program 

from one federal agency, why would that not, you know, be a sufficient voucher for both agencies and therefore for eligibility? 

Mr. SALAZAR. Madam Chair, Congressman Kingston, again, recognizing that the populations served by Food Stamp Employment 

and Training Program is that population defined by statute as 

what we call the ABAWDS population, the adult population who is 

able to work, we rely heavily on states to coordinate the delivery 

of their services. Having been a former state director of social services, I know for a fact that as that state director, I worked very 

closely with my State Department of Labor to ensure the coordination of our services because of limited resources. 

Mr. KINGSTON. But if they are in your job training program in 

order to complete their eligibility, it still seems like a waste of time 

if they already have job training from another agency. And I don’t 

see why your job training isn’t—one can’t be as good as the other. 

I don’t understand why if you’re taking a Department of Labor job 

training program you couldn’t get a voucher that would suffice your 

eligibility. 

Ms. SALAZAR. Madam Chair, Congressman Kingston, in many 

cases, that’s exactly what does occur with the coordination by the 

state agencies to avoid the duplication of provision of services, precisely that. 

Ms. KINGSTON. And if I’m enrolled in one of those job training 

programs, am I going to learn one set of skills from your program 

and another set of skills from labor? Or, you know, is it if I don’t 

have a voucher? 

Mr. SALAZAR. Madam Chair, Congressman Kingston, the provision of services may in fact only be one program in the state. It’s 

the sources of funding that come from both Department of Labor 

and USDA’s Food Stamp Program that may provide the resources 

to administer the program. It’s not to say that there are two distinct training programs, but whether there are two distinct Federal 

programs that have the requirement for employment and training. 

The actual delivery of the services may in fact be one program 

which is in most instances the case. 

Mr. KINGSTON. So there’s not a duplication? 

Mr. SALAZAR. Not a duplication of services by any means. And 

you know, what we’re doing is making sure that we’re picking up 

the population, if not through the Department of Labor, we’re certainly capturing them through the Food Stamp Program. 

Ms. DELAURO. What is regulation with regard to food stamps in 

able-bodied adults? Aren’t they just eligible for a very restricted period of time, over a three-year period in which they’re eligible for 

food stamps? Is that accurate? 

Ms. JOHNER. Yes. Three months. 

Ms. DELAURO. So they’re only eligible to able-bodied adults—— 

Mr. SALAZAR. Without dependents. 

Ms. DELAURO. Without dependents—and this comes out of the 

welfare bill, I think, that was passed in 1996—are only allowed to 


smartinez on PROD1PC64 with HEARING
42 

receive food stamps for a three-month period of a period of three 

years. Quite frankly, it’s one of the areas which we’re trying to take 

a look at to see if there’s anything that can be done about that—— 

HALLMARK/WESTLAND BEEF RECALL

Let me if I can finish up with one or two more questions on the 

beef recall and I will then move on to some other areas. I’m interested in your views on liability, on the liability of Hallmark 

Westland in the recent beef recall. We face the possibility the Federal Government may have to make substantial expenditures to reimburse schools for expenses they incur related to the recall. The 

company was the entity that provided meat from downers to the 

Federal Government for the school lunch program. I understand 

that the company says that it is bankrupt, and I think yesterday 

in a hearing yesterday with the Energy and Commerce Center, the 

CEO of the company indicated that in fact downers did get into the 

food supply. They say that they’re bankrupt, that it may not have 

the funds to reimburse the government. 

But setting that aside, what is your view of the company’s liability to the Federal Government? 

Ms. JOHNER. Well, Madam Chair, I with all due respect I do 

think that that’s out of my scope on that, because what we focus 

on is again to school lunch, make sure that they are safe and 

they’re nutritious for our children and that they’re getting the 

school lunches. So I guess I just feel it’s out of my scope. 

Ms. DELAURO. Mm-hmm. Well, in terms of the job description, do 

you have a personal view as to what the company’s liability in this 

regard, since the responsibility, actually it may be out of your 

scope, but the costs are going to be added to or come out of your 

budget, and ultimately it’s going to come from the—you know, 

where do we go with regard to appropriations? I don’t know if this 

budget request includes funding for reimbursement, for all of this 

effort, and so forth. You know, so where do we view the company 

has any liability here? Kate. 

Ms. HOUSTON. Madam Chairwoman, I think not only is it out of 

the scope of the Food and Nutrition Service to comment on the 

issue of the liabilities, but I think it’s also important for us all to 

remember that there is ongoing investigations underway and we 

need to wait for those investigations to conclude until we have all 

of the information to be able to make a full and accurate assessment. 

We are working closely with our sister agency, the Agricultural 

Marketing Service, to address the reimbursement issues, and I 

know that AMS will be pursuing all available avenues and legal 

options that are available to them in terms of seeking funds to 

cover their costs. 

Ms. DELAURO. This is what my hope is, is that when we do have 

some conclusion of a legal investigation about which you don’t want 

to comment, that we might have a perspective from the agency and 

maybe from the Congress on what the liability of the company 

ought to be in this regard, or any company that is engaged in this 

effort. And after we find out what the investigation is—— 

Speaking of AMS, I want a quick question with regard to services, both from AMS and FSIS—from the commentary already, well 


smartinez on PROD1PC64 with HEARING
43 

let me put the question this way: How satisfied are you with the 

services you receive from AMS? And what could they have done to 

prevent this recall from happening? 

Ms. JOHNER. Madame Chair, I’ll just give you my comments and 

then turn it over to Kate, since she was much more involved in 

that. I know from where I sat, we worked very closely together 

with AMS and FSIS. We had daily meetings. I mean there was 

true collaboration and I know at several levels there was a, you 

know, a strong working partnership. 

Ms. DELAURO. That was after the fact. That was after the fact. 

Ms. JOHNER. Right. As soon as we—— 

Ms. DELAURO. What’s your view with regard to before, in terms 

of this happened under AMS’s watch, it happened under FSIS’s 

watch? You know, obviously it should not have. Was FNS served 

well by either FSIS or AMS in this regard? 

Ms. HOUSTON. I think we have had a long-term positive working 

relationship with our sister agency, the Agricultural Marketing 

Service, and we’ve worked collaboratively with them, both before 

this incident occurred, and even closer afterwards. Obviously, as 

Under Secretary Johner has previously said, we will be taking a 

close look at all aspects of this recall to identify ways in which we 

can improve upon what we—— 

Ms. DELAURO. Do you have a process in place to check whether 

AMS is meeting your specifications for purchases again on such as 

testing requirement? 

Ms. HOUSTON. We look to the Agricultural Marketing Service 

and rely upon them. 

Ms. DELAURO. Oh, you don’t. And I don’t know whether or not 

that’s going to be part of your consideration in terms of what you 

have learned from this effort. It ought to be that both with regard 

to FSIS and AMS in this sisterly relationship, or brotherly relationship, whatever the characterization of the relationship is, that 

quite frankly that—what are they doing and how could this have 

been avoided both by AMS and FSIS? I think that that is crucial 

to what you need to know and what your oversight of these efforts 

has to be in order to carry out your mission. 

Ms. JOHNER. Thank you. 

WIC BUDGET REQUESTS

Ms. DELAURO. I want to move on to WIC, if I can, and the 2008 

request. I’ll make a couple of comments and then a question. In 

2008 the Department requested $5.4 billion for the WIC program. 

Participation food costs saw dramatic increases between the time 

the President’s budget was submitted and the bill was enacted. 

Congress provided over $6 billion for WIC, which was about $633 

million more the Department requested for the program. The Administration failed to acknowledge the increased participation in 

food costs for the WIC program. The President threatened to veto 

any bill that increased total spending levels above the ones set in 

the budget. Long and the short of it, the Administration was probably—everyone but the Administration really acknowledged that— 

of money that was there was not adequate to deal with 2008. Why 

did the Department not submit a revised budget request for 2008 


smartinez on PROD1PC64 with HEARING
44 

when it became apparent that the request was not adequate to 

maintain participation in the program? 

Ms. JOHNER. Madam Chairwoman, our process is that we work 

off the projections, and at the time the projections and numbers 

that we had we believe is sufficient for WIC to be able to meet the 

need in WIC. 

Ms. DELAURO. In 2008 it was pointed to an increase. I understand the projections. My question is why when we had the facts 

before us that this was not going to be enough, satisfactory, then 

in fact what we would—any reason why you didn’t ask for a revised 

budget request? 

Ms. JOHNER. Because we believed that the funding that—— 

Ms. DELAURO. You thought it was going to be adequate. 

Ms. JOHNER. It was going to be adequate. 

Ms. DELAURO. Well, then let me get to the 2009 request. The 

2009 request again proposes to cap the amount available for grants 

and state agencies, nutrition service and administration expenses— 

are to the 2007 level. That’s $145 million. The request also proposes to use the contingency reserve of $150 million to cover estimated participation and—costs program. Your testimony states 

$150 million is requested to replenish the contingency reserve to 

ensure that the essential food, nutrition education and health service remained available to all eligible women, infants, and children 

who need them. 

It’s hard for me to understand—you’re saying that you are replenishing the contingency reserve, if you anticipating using it in 

fiscal year 2009 to meet expected participation in food costs. You 

say, ‘‘Should our estimates of program participation or costs prove 

too low, we have continued to protect program access for all eligible 

persons, a key objective of the President’s contingency reserves.’’ 

And ‘‘this flexibility is essential to our ability to deal quickly and 

effectively with unexpected increases in food costs or participation 

as were experienced in fiscal year 2007.’’ 

Yet you are proposing to use the contingency reserve to deal with 

expected participation and food costs. If you were going to deal 

with unexpected costs, that would be another $150 million. So I 

don’t understand how you can say that we’re going to be able to 

meet unexpected costs. 

Ms. JOHNER. We’re going to have Kate give you a little bit more 

details on that. 

Ms. HOUSTON. One of the advantages in this budget cycle to having use of the $150 million and the contingency fund up front is 

that it provides us some additional flexibility in getting targeted 

money to those who need it, in particular states, more quickly than 

we could otherwise if we had to go back and seek permission to use 

the contingency fund. The contingency is not subject to the standard allocation formula if we have it up front. So if we can identify 

specific needs in specific areas of the country, we can get money 

quickly to those state agencies. We see that as an advantage in a 

time when we know that there are pressing needs in terms of increased participation in the program and some fluctuations in food 

costs. 


smartinez on PROD1PC64 with HEARING
45 

Ms. DELAURO. But you’re not providing any administrative costs, 

as well. So I mean the states are in a real fix here. So you got $145 

million and no administrative costs occurring. 

Ms. HOUSTON. We do have funding for administrative costs, 

Madam Chair. 

Ms. DELAURO. But contingency you don’t pay administrative 

costs with your contingency. Is that correct? Or is that wrong? I 

mean I don’t know, is that correct? 

Ms. HOUSTON. Those funds can be used both to cover caseload 

and to the NSA cost, that’s correct. 

Ms. DELAURO. What is your view of the word ‘‘can’’? They can. 

So it could just for food costs? It could be for both—it just seems 

that once again we’re looking at how—— 

Ms. HOUSTON. There’s flexibility in the use of those contingency 

funds. So based on the specific circumstances of the State agency, 

whether they need to have additional funding support, either on 

the NSA side, or on the participant, the caseload side, that money 

can be used for either area of providing services. 

WIC PARTICIPATION

Ms. DELAURO. I will say this. It sounds a bit like—I’m hoping 

that you won’t be offended by this, but it sounds like it’s a bit of 

a shell game here, you know, we’re just moving the pieces. Ultimately we’re coming down to the potential of a real short fall—if 

the costs go up, the participation rates go up. 

And also with regard to participation, I don’t know how you explain the participation in WIC program will decrease in fiscal year 

2009 from the October 2007 participation data. We’re not looking— 

we had an increased rate from 2006 to 2007—2.4 percent, 2.8 percent projected, averaging 2.9 percent for 2009. We’ve got information or at least looking at the expectation of a rise here, but—it 

doesn’t seem to make sense that we don’t have some sort of a contingency fund available for 2009, if participation—as you currently—you expect participation to decrease. I don’t see any—— 

Ms. HOUSTON. I don’t believe we expect participation to decrease. 

I think that our budget projects there to be a slight increase in participation in WIC, and the budget that we’ve submitted would cover 

all projected participants based on our current estimates. 

Ms. DELAURO. For October 2007 actual—and I’m just—was 8. 

2009, it’s 8. 

Ms. HOUSTON. I think it’s also important to recognize that there 

are fluctuations in participation levels across various months and 

quarters. 

Ms. DELAURO. And I understand that. And you know, it goes 

down, then it spikes, it goes down, and then it spikes again. We’re 

in the down side and it would appear that the next tranche here 

is a spike, if you’re looking at current patterns, or as I look at the 

chart. 

Ms. HOUSTON. And our projected planning in terms of expected 

participation and funding requests does account for that. 

Ms. DELAURO. Will you provide a revised budget request if you 

find that your submitted request will not be adequate to cover participation, food costs for FY 2009? You did not do that in 2008. 


smartinez on PROD1PC64 with HEARING
46 

Ms. JOHNER. Madam Chair, we will continue to work closely with 

Congress and will continue, I assure you, to monitor this closely 

and when we find something, we will be working closely with—— 

Ms. DELAURO. Will you provide a revised budget request for us? 

Ms. JOHNER. At this point I can’t tell you that. 

Ms. DELAURO. You can’t say whether or not you’re going to provide me with a revised budget request if the—what you don’t have 

is adequate to deal with the increase of participation in food costs? 

Ms. JOHNER. We’ll continue to work with you and we will continue to monitor this very closely, and we—— 

Mr. STEELE. Well, Madam Chair, that we will have to work closely with OMB. We unilaterally cannot send up a budget amendment 

on our own. 

Ms. DELAURO. So it’s an OMB problem here? 

Mr. STEELE. Well, it’s a combination of us sharing our estimates 

with OMB and OMB deciding. The President submits a budget 

amendment, not the Department of Agriculture. 

Ms. DELAURO. Right. 

Mr. STEELE. So we will—— 

Ms. DELAURO. So it’s OMB and the reason why we didn’t get an 

increase, you know, we didn’t get another budget request the last 

go-round in 2008 was OMB said no. 

Mr. STEELE. Well, we will communicate our feelings to OMB. 

Ms. DELAURO. Communicate our feelings, as well, Scott. 

Mr. STEELE. Okay. 

Ms. DELAURO. Communicate our feelings as well. 

Mr. STEELE. I got the message. 

Ms. DELAURO. Well. Mr. Farr. 

FRESH FRUITS AND VEGETABLES IN THE NUTRITION ASSISTANCE

PROGRAMS

Mr. FARR. Thank you, Madam Chair, thank you for having this 

hearing. Food, Nutrition, and Consumer Services ought to be at the 

top of the triangle, the pyramid of the Department of Agriculture 

because it is what it’s all about. And I think this committee has 

expressed over the years the real concern we have with obesity occurring particularly in children in America, and then this kind of 

warped concept of creating a distribution system for our commodity 

programs, but not for our specialty programs. And I’m pleased to 

see that in the newly updated WIC food packages, you’ll soon provide vouchers for fruits and vegetables. Madam Chair, we’re going 

to put some vouchers for food and vegetables, this is for the WIC 

program—for the past 30 years only carrots and fruit juice were included in WIC food packages. Now they’re going to give an $8 

voucher per month for women and $6 voucher per month for children to provide WIC recipients for any fruits and vegetables of 

their choice. 

What percentage of the entire voucher is then allowed to be 

spent on fruits and vegetables? One—question. Let me get an answer to that one first. 

Ms. JOHNER. That would be the entire, the voucher that’s to be 

used for fruits or vegetables. And it’s $10 for breast-feeding mothers. 

Mr. FARR. And when will that all be implemented? 


smartinez on PROD1PC64 with HEARING
47 

Ms. JOHNER. We’re hoping, in, I think, in 2009? August 5 of 

2009. And it’s the latest date that they’ve given us. We just met 

with, or we kicked off a meeting with the WIC Association that 

were here this week, and they’re working very hard together in 

partnerships at all levels to try and make sure that they can implement this. 

Mr. FARR. Do you have any incentives—here because she’d be 

asking this question—some of our farmers’ markets are receiving, 

using WIC vouchers at the market, but there has to be a distribution of the vouchers on site. So if you show up in my area in 

Watsonville, California, you show up at the farmer’s market and 

there’s a little card table there with the people that give out the 

vouchers, and they—if your name’s there, you get your voucher and 

you can use it in the farmer’s market. I don’t know whether the 

Department has done any active outreach to try to encourage that 

kind of process. 

Ms. JOHNER. Well, we do want to encourage our participants 

to—— 

Mr. FARR. Have you done anything like that with farmers’ markets? 

Ms. JOHNER. Farmers’ markets—but we are working on improving that, and we can probably get you something as to what we are 

doing. 

Mr. FARR. Yeah. I’d like—— 

Ms. JOHNER. Because that’s an important component for us. 

Mr. FARR. Would you also include how you could receive food 

stamps at farmers’ markets? 

Ms. JOHNER. They can use their EBT—— 

Mr. FARR. That seems to be an issue, so how we could—— 

Ms. JOHNER. We could also add that in there too of what we’re 

doing. 

[The information follows:] 

FNS supports multiple options that allow farmers’ markets to accept food stamp 

EBT benefits efficiently and securely. Between 2006 and 2007, the number of farmers’ markets participating in the Food Stamp Program increased by 22 percent from 

436 to 532. Farmers markets redeemed more than $1.6 million in food stamp benefits in 2007. Promising practices related to the use of food stamp EBT are available 

at http://www/fns/usda.gov/fsp/ebt/ebtlfarmerslmarkstatus.htm. 

There are no legal hurdles associated with placing EBT machines into farmers 

markets; however, there may be logistical hurdles. Specifically, many farmers’ markets do not have electricity and/or phone lines necessary to support regular EBT 

Point-of-Sale (POS) devices. 

To help farmers’ markets adapt to the EBT environment, alternative redemption 

systems were developed. FNS approves demonstration projects that use alternative 

forms of food stamp benefit issuance, including scrip, tokens, and receipts, in conjunction with EBT. Recipients exchange EBT food stamp benefits for scrip or tokens 

to purchase produce and other eligible food products at individual farmer stalls in 

a farmers’ market. 

Additionally, as wireless technology has improved, more markets are taking advantage of it. The major hurdles to using wireless technology are equipment and 

maintenance costs and transaction fees. Often, these costs are born by the markets 

themselves or by the organizations that sponsor the markets. Markets leverage 

grants (such as Agricultural Marketing Service grants or those from private foundations such as the Kellogg Foundation) and their affiliations with organizations such 

as the State Farm Bureau to reduce costs. The added advantage of wireless POS 

for farmers is that they run commercial debit and credit as well as EBT transactions. Commercial transactions help justify and off-set the cost of equipment and 

processing. 


smartinez on PROD1PC64 with HEARING
48 

Mr. FARR. Okay. 

Part of the food stamp nutrition education program encourages 

education about fruits and vegetables, but I understand that this 

focuses only on the underserved population. In fresh fruits and 

vegetables—in some schools offer free produce to students so that 

they can be exposed to fresh fruits and vegetables. The Farm Bill 

is going to determine how many schools in the future—the schools 

are now requiring—in California they required each school district 

to come up with a nutritional program for feeding their schools. It’s 

sort of getting rid of all the coke machines and trying to get other 

kinds of vending machines—fruits and vegetables, fresh fruits and 

vegetables can be now sold in vending machines. 

But these wellness policies receive some USDA lunch reimbursements. I just wondered what progress has been made on the fronts 

at the local level, given the important role of fruits and vegetables 

can play in reducing the risk of obesity and other chronic diseases. 

Do you have any outreach or education program at the entire population level through expanded work with the media and health professionals? 

Ms. JOHNER. Actually we’re doing, Congressman, we’re doing 

quite a bit out there with Center for Nutrition Promotion and Policy. We have a national, well, pyramid—we have Dr. Brian 

Wansink who has just joined us a few months ago and he is working very hard in promoting the My Pyramid, and coming up with 

other Federal tools that the schools and others can use. I do know 

in the school nutrition programs, they have many things that they 

use to help train the menu planners, the nutrition directors on how 

to use more fruits, vegetables, and whole grain. 

Mr. FARR. Would you share that outreach program with us? 

Ms. JOHNER. Sure. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
49 


smartinez on PROD1PC64 with HEARINGInsert graphic folio 81 here 48455A.025
50 


smartinez on PROD1PC64 with HEARINGInsert graphic folio 82 here 48455A.026
51 


smartinez on PROD1PC64 with HEARINGInsert graphic folio 83 here 48455A.027
52 


smartinez on PROD1PC64 with HEARINGInsert graphic folio 84 here 48455A.028
53 

Mr. FARR. And is it done bilingually? 

Ms. JOHNER. Yes. They do have—I’m sure they have something 

that’s done in some Spanish, especially for the instructors. 

Mr. FARR. What—I mean what I’m really curious the bottom line 

here is what is the Department doing to take—I mean we’ve—this 

obviously the nation knows we need to have a diet of more fresh 

fruits and vegetables, and as the leading advocate for the United 

States Government Food and Nutrition program, you’re the lead 

advocacy agency, and I’m very interested in what is the agency 

doing? What is the Department doing to really encourage consumptions of fruits and vegetables in all populations? Not just WIC and 

mothers—— 

Ms. JOHNER. Congressman, we have in our proposal for our—in 

our Farm Bill we have $500 million over ten years for increasing 

fruits and vegetables through the school lunch programs because 

we serve 31 million school children a day. So we thought that that 

infrastructure was already in place to be able to get that out there. 

Mr. FARR. $500 million and what do you use that money for? 

Ms. JOHNER. For fruits and vegetables—in the school—— 

Mr. FARR. To buy them? 

Ms. JOHNER. Through the domestic nutrition assistance programs. But we would have 2.7—I’m sorry let me just go back— 

$2.75 billion through the nutrition assistance programs, and that 

would go through TEFAP and food banks and others. And then the 

$500 million was separate, that would go through the schools. And 

that would be money that they would be able to buy fruits and 

vegetables to be able to serve that in the school breakfast and the 

school lunch program. 

Mr. FARR. That’s not a lot of money for all the schools in the 

United States. 

Ms. JOHNER. Well, it was in addition to what we already have 

in place. 

Mr. FARR. Well, could you pull out those budgets they’re used 

for? 

Ms. HOUSTON. Mm-hmm. Mr. Farr, we have obviously fruit and 

vegetable increasing fruit and vegetable consumption is a key priority of the nutrition and consumer services, particularly given that 

the 2005 dietary guidelines recommended increased fruit and vegetable consumption. We have a comprehensive strategy that combines work both in the Food and Nutrition Service working through 

our nutrition assistance programs, where we have an opportunity 

to target information, nutrition education, as well as benefits to 

millions of Americans every day, as well as information and nutrition education that is targeted to the general population through 

the Center for Nutrition Policy and Promotion. And we’d be happy 

to provide you a list of the full range of efforts that are ongoing 

within FNCS to develop plans for promotion of fruits and vegetables. 

Mr. FARR. The Committee would like that very much. 

Ms. HOUSTON. It’s an extensive list and we’d happy to provide it. 

Mr. FARR. Who buys the food? We have a—as I understand it, 

the food that is provided for school lunch—breakfast is all bought 

through a military depot in Philadelphia. Because the military 

buys the most food and we piggyback on those resources. Who in 


smartinez on PROD1PC64 with HEARING
54 

the Department of Agriculture is responsible for deciding to be involved in that acquisition program? Is it your department? 

Ms. HOUSTON. About 15–20 percent of the food that’s provided 

for the school lunch program is acquired through the Department 

of Agriculture in the form of commodity entitlements. Of our commodity entitlements, we are required by law to spend not less than 

$50 million for the purchase of fresh fruits and vegetables, and not 

less than $50 million per year. What FNS has done is contracted 

with Department of Defense through the procurement division in 

Philadelphia. They are then responsible. We give them the $50 million—— 

Mr. FARR. So it’s your services, your agency that does that? 

Ms. HOUSTON. Correct. We contract with the Department of Defense who then procures fresh fruits and vegetables and provides 

delivery to state agencies, who have chosen to receive a portion of 

their commodity entitlement in the form of fresh fruits and vegetables. 

Mr. FARR. Could you give the percentage of breakdown compared 

to the commodities of how much of that fresh fruits and vegetables 

is the percentage of the total acquisition? 

Ms. HOUSTON. We’d happy to get you that information. 

Mr. FARR. Because I believe it’s going to be very, very small. 

Ms. HOUSTON. It is a relatively small amount of the total of commodity purchases. It is not—however I will also make the comment 

that we’re just talking about the fresh fruits and vegetables in 

terms of the DOD procurement angle, not all fruits and vegetables. 

Eighty percent of food is procured at the local level directly by 

schools, and there are additional fruits and vegetables that are also 

secured in that manner. 

[The information follows:] 

Based on 2007 levels, we estimate the USDA will make over $350 million in direct 

purchases of fruits and vegetables for distribution in the nutrition assistance programs under the President’s 2009 budget request, including over $50 million purchased through the DoD Fresh program. This represents 40 percent of the funds 

budgeted for commodity purchases in FY 2009. 

In addition, we anticipate that program providers will use over $3 billion to purchase fruits and vegetables for the Child Nutrition Programs, and that nearly $8.5 

billion in funding for Food Stamps, WIC, and the Farmers’ Market Nutrition Programs will support participant purchases of fruits and vegetables in the marketplace. All told, we project that under the President’s budget, FNS programs will provide over $11.5 billion in 2009 in support of fruit and vegetable consumption. 

But we are taking additional action to maximize the results of this investment 

in increasing consumption for children and others, such as: 

• Updating the WIC food packages to better reflect the needs of current participants—including the addition of fruits, vegetables and whole grains; 

• Offering free fresh and dried fruits and vegetables to students in 8 States 

and in 3 Indian tribes as part of the Fresh Fruit and Vegetable Program; 

• Publishing Fruit and Vegetables Galore, a Team Nutrition guide that helps 

schools offer and encourage consumption of a variety of fruits and vegetables 

through the school meals programs; 

• Conducting national nutrition campaigns such as USDA’s Team Nutrition 

and Eat Smart. Play Hard. that promote fruits and vegetables as part of a 

healthy lifestyle through motivational and behavior-oriented messages and materials, including the new MyPyramid for Kids; and 

• Expanding the HealthierUS Schools Initiative, which supports and recognizes schools that seek to improve their nutrition environment with better 

school meals, nutrition education in the classroom, and more healthful eating 

and physical activity choices throughout the school day. To date, about 200 

schools have been recognized. 


smartinez on PROD1PC64 with HEARING
55 

Proposals offered by USDA in the Farm Bill reauthorization process to further 

strengthen the nutrition assistance programs in delivering and promoting consumption of fruits and vegetables: 

• $100 million, 5-year competitive grant program to address obesity through 

the Food Stamp Program, including a test of the impact of food stamp incentives to encourage fruit and vegetable purchases; 

• An increase of $50 million annually for the purchase of fruits and vegetables for school meals; and 

• An increase in the overall Section 32 fruit and vegetable purchase minimum to $2.75 billion over 10 years. 

Mr. FARR. And schools can’t get food from the food banks, I understand. 

Ms. HOUSTON. That is correct. 

Ms. DELAURO. Mr. Farr, just an addendum, and I won’t—but to 

let you know that the President’s budget does not request funding 

for the state management information systems. That has to do with 

how we do implement the new food package changes. My understanding is that is where the states are going to get those funds 

to deal with those changes—packages, especially if the cap is enacted as requested in the budget. And again, those MIS funds in 

my view, are needed. 

Mr. Kingston. 

FOOD STAMP PROGRAM

Mr. KINGSTON. Thank you, Madam Chair. Madam Secretary, are 

food stamps intended to be the difference between what a recipient 

household can afford for food out of their own pocket and what they 

need? 

Ms. JOHNER. It’s supplemental. 

Mr. KINGSTON. It is a supplemental? 

Ms. JOHNER. It’s a supplemental. 

Mr. KINGSTON. Now, we’ve had a number of people take the food 

stamp challenge, and it’s a little bit misleading when they say this 

lasts for 21⁄2 weeks out of the month. What are you doing to educate people that the intent is a supplemental? And I know that, 

you know, like social security is supposed to be a supplemental, but 

it is not a supplement for all people. So I mean you know somewhere between the real world of—some people are using it for their 

higher budget of food, and yet the intention is different. So what 

are you doing to engage in that discussion? 

Ms. JOHNER. Well, Madam Chair and Congressman, one of the 

things that again we try to look at what is out there. When I talk 

about the community and the state partnerships, I know people get 

tired of hearing me say this, but it truly is again going back into 

their backyard. We work with—we ran into this organization that’s 

really great, it’s called Angel Food Ministry. And again, that’s 

partnering with this, is a non-government entity, 501(c)(3). They 

serve over 550,000 a month, and they have a food box like you 

wouldn’t believe. And they focus a lot on protein because they know 

like food banks and sometimes families can’t afford meats, cuts of 

meats. And for $30, you can buy this box that can last up to a 

month for an elderly person, or up to a week for a family of four. 

And they also take food stamps. And that’s one of the things we’re 

working very closely with them, and how do we partner with other 

folks like that, to be able to help with the needs of the community. 


smartinez on PROD1PC64 with HEARING
56 

Mr. KINGSTON. But when people take the food stamp challenge 

and they go, you know, telling folks that it’s not enough, I don’t 

know that the USDA is saying, ‘‘You’re correct, it is not enough, 

because that’s not the intention of it.’’ Are you doing that? 

Ms. JOHNER. Supplemental. 

Mr. KINGSTON. Are you doing that? 

Ms. JOHNER. Yes. We try to do that. It doesn’t get out as much 

as we would like for it to get out, but we do have different programs. We have—like in the food stamp program, the nutrition 

education, loving your family and feeding their future. It’s to help 

people learn how to cook and to stretch that dollar, and still make 

nutritious meals, and . . . 

Mr. KINGSTON. Okay. 

Ms. JOHNER. So we try to get the word out as much as we can. 

FOOD STAMP PROGRAM CATEGORICAL ELIGIBILITY

Mr. KINGSTON. All right. And something else that you can answer for the record, but in terms of the automatic eligibility on food 

stamps, some people receive TANF and yet there really are different eligibility requirements. But often some states if you’re on 

TANF you can be on food stamps, where there’s really a different 

threshold. What are you doing to address that? And you may want 

to answer that for the record if—because you have some questions, 

right? Okay. That would be one of—that’s a question that I’d like 

you to examine for the record. And then—I don’t want to deny you; 

I can answer that. 

Ms. HOUSTON. Well, we can provide you more information for the 

record, certainly. But under current rules, individuals who are participating in the TANF program are categorically eligible to receive 

food stamps. We have proposed to the Administration to say that 

those participating in TANF must be receiving cash benefits in 

order to be categorically eligible for food stamps. Other TANF participants who are not receiving cash benefits would of course be 

able to apply for the benefit, that’s for the food stamp program—— 

Mr. KINGSTON. Yes. 

Ms. HOUSTON. And if they were eligible for the benefits, they 

would be able to participate. 

Mr. KINGSTON. How much money do you think you’re losing because of that automatic eligibility? Do you have any idea? You can 

answer that—— 

Ms. HOUSTON. I don’t have the estimate in front of me, but we’d 

be happy to provide that projection. 

[The information follows:] 

The cost of allowing participation in a non-cash TANF funded program to confer 

categorical eligibility for the Food Stamp Program is estimated to be $1.3 billion 

over 10 years. 

HEALTHIER U.S. SCHOOLS CHALLENGE

Mr. KINGSTON. That’s fine. But let me ask you, Ms. Johner, Mr. 

Farr’s question about school nutrition and fruits and vegetables, as 

you may know, Ms. DeLauro and I on a really bipartisan basis put 

in some report language last year about USDA school nutrition 

programs and the Department of Education, physical education 

program, better tracking and better communication and tying into 


smartinez on PROD1PC64 with HEARING
57 

exercise with the proper dieting. Do you have something to report 

to us on that? 

Ms. JOHNER. And that’s what I think we’re talking about the 

HealthierUS School Challenge and things. So again, Kate was over 

that program and I know she’ll have more details for you on that. 

Mr. KINGSTON. Do you want to answer that for the record, because we would love to hear some good progress. 

Ms. HOUSTON. Sure, I’d be happy to provide information for the 

record, but I will tell you that we have reached out to other departments with some jurisdiction over education and physical activity. 

We have been in the process of updating our standards for the 

HealthierU.S., which is a voluntary school challenge for improving 

both the nutrition environment and physical activity in schools. 

We’ve been working closely with the Centers for Disease Control 

and Prevention on those revised standards. 

[The information follows:] 

FNS supports efforts to improve the health and fitness of our program participants consistent with the Dietary Guidelines for Americans. While the agency’s education and promotion efforts focus primarily on healthy eating in alignment with its 

nutrition mission, FNS’s policy is to integrate physical activity into nutrition education materials and initiatives for the nutrition assistance programs at both the 

national and State levels. As a result, FNS program-based nutrition education efforts also encourage physical activity for program participants from preschoolers to 

older adults as part of an overall ‘‘healthy lifestyle’’. 

FNS supports and encourages its program partners to integrate physical activity 

into program operations and settings. For example, through the HealthierUS School 

Challenge and technical support for school wellness policies, FNS encourages 

schools to voluntarily implement policies and programs that promote both healthy 

eating and physical activity. In the same vein, competitive grant awards have been 

used to develop and support replicable strategies to better promote healthy behaviors in WIC. 

FNS also works in partnership with other Federal and non-governmental groups 

to address barriers to physical activity including program, policy and environmental 

issues. For example the agency is a part of the Centers for Disease Control and Prevention’s Nutrition and Physical Activity Work Group, a team of national, State, 

and local public health and education partners that seek to advance implementation 

of comprehensive nutrition and physical activity programs. FNS has also collaborated with other Federal agencies to formulate a Memorandum of Understanding 

to Promote Public Health and Recreation such as Kids in the Woods and outdoor 

activities in the Nation’s parks. FNS also participates in activities coordinated by 

the Department of Health and Human Services in support of development of the 

Physical Activity Guidelines for Americans. 

Mr. KINGSTON. Yeah. Tell us some good stuff, and I think we 

would like to put that language back in the bill this year, and we’re 

going to continue to push that. I don’t want to speak for the committee, but I think that would probably be their consensus. 

Ms. DELAURO. I think we would. 

I’ll make a quick comment, and I’m going to try to do one or two 

very short questions because we have to vote. 

FOOD STAMP PROGRAM

On the food stamp program, the eligibility, as I understand it, is 

130—poverty. That’s people probably making about $12,500-something, around that amount of money. The average first-quarter 

benefit per person per month is $101. If you just take days or 

months, meals per day, meals per month, we’re talking about the 

average benefit per person per meal is about $1.13. Warren Buffet 

is not getting the benefit of the food stamp program. These are peoVerDate Nov 24 2008 01:13 Apr 21, 2009 Jkt 048455 PO 00000 Frm 00057 Fmt 6633 Sfmt 6602 E:\HR\OC\A455P2.XXX A455P2

smartinez on PROD1PC64 with HEARING
58 

ple that are 130 percent—poverty, and the benefit and my hope is 

that in the Farm bill, if we ever get a Farm bill—and I don’t know 

where you think we are on that, but that in fact what we can do 

is to raise that standard benefit, and also to be able to index that 

food stamp benefit to inflation, which ended in 1996—and Jack, in 

terms of being bipartisan under a democratic Administration, I 

might add, to cut out the indexing to inflation with regard to the 

food stamp benefit. $1.13 per person per meal. The Farm bill, the 

nutrition title—the House and Senate had passed a Farms bill. 

Where do you think we’re going to end up on this? 

Ms. JOHNER. Well, I think we got word yesterday that there was 

an extension on that, and so we’re still hoping that—— 

Ms. DELAURO. Well, my hope on that—— 

Mr. KINGSTON [continuing]. Only until April 15th. 

Ms. DELAURO. Yeah. 

Mr. STEELE. No, it’s a 33-day extension. 

Ms. JOHNER. Thirty-three days. 

Ms. DELAURO. Well—my hope on that. I’ll be very clear. And 

Jack I hope you—this as well, is that we asked for over the tenyear period $11.4 billion. That would include this fruits and vegetables snack program. It includes TEFAP, it includes the food stamp 

program, it increases the benefit, and it also starts to talk about 

the indexing and the asset levels. In comparison with everything 

else in that Farm bill, this is probably one of the smallest areas. 

I’m asking you to advocate, to really advocate for that money not 

to be dropped as we move through this process of a conference. The 

House put it there, the Senate has been less generous on nutrition, 

but I’m hoping that the Administration, as they are requiring and 

demanding some other efforts, will demand that the nutrition levels stay where they are. And I’d like your commitment on helping 

us to do that, Madame Secretary. 

Ms. JOHNER. Well, this nutrition title is an important program. 

Obviously it’s the safety net for the Americans who are hungry. So 

this is an important for us. An important piece of legislation that 

. . . 

Ms. DELAURO. Aggressive advocacy is what we need at this time. 

Mr. KINGSTON. I have to say this to my good friend, Rose, and 

my good friend—— 

Ms. DELAURO. We have four minutes. 

Mr. KINGSTON. I think she’s far more in your camp than mine 

on some of these issues. So let me just say—— 

Ms. DELAURO. Amen, brother. [Laughter.] 

Mr. KINGSTON [continuing]. With affectionate suspicion—— 

Ms. JOHNER. Hey, I’m coming to see you after this. Thank you 

so much. 

Ms. DELAURO. Can’t run off. We’re going just to recess here for 

the moment. 

[Recess.] 

Ms. DELAURO. I’m waiting to have another member. We had Mr. 

Kingston—had to just step out earlier, which was what allowed me 

to move forward without there being enough members, but we left. 

Can you hear me now? Oh. Okay. Thank you, my friend. We make 

you crazy! 


smartinez on PROD1PC64 with HEARING
59 

We will reconvene the hearing. And I want to say a thank you 

to the Madam Secretary and to our other guests for your patience. 

As Mr. Farr just pointed out to me, the same thing is going on 

pretty much in committees all over, just trying to get through a 

number of these hearings at the same time. Let me yield to you, 

Mr. Farr. 

FRESH FRUIT AND VEGETABLE PROGRAM

Mr. FARR. Thank you. I apologize. Across the hall the same thing 

is happening. Only two people are there, and you can’t have a hearing without at least three people. In 2008 we provided authority for 

the funding to expand the fresh fruit and vegetable growth program to all states, and many of those states were not already 

served by the authorized prior. I wonder if you could tell the committee what is the timeline for implementation of the national 

fresh fruit and vegetable program? 

Ms. JOHNER. Yes. We can provide that. 

[The information follows:] 

FNS is committed to implementing the expansion of the Fruit and Vegetable Program (FFVP) authorized under the fiscal year (FY) 2008 Consolidated Appropriations Act (P.L. 110–161). FFVP was first authorized as a permanent program under 

the Child Nutrition and WIC Reauthorization Act of 2004 (P.L. 108–265) with annual funding of $9 million for 8 States and 3 Indian Tribal Organizations. The FY 

2006 Appropriations Act (P.L. 109–97) appropriated $6 million to expand the program to 6 additional States. The FY 2008 Consolidated Appropriations Act provided 

$9.9 million to expand the program to all remaining States, and also allocated $3.4 

million of recovered FFVP funds to allow the non-permanent States to continue 

their FFVP operations. 

Funds for operation of the FFVP will be made available to new States on July 

1, 2008, and will be available through September 30, 2009. This will allow all States 

to begin operation of the program in School Year 2008–09. Beginning in early February 2008, USDA conducted regional conference calls with State agencies to provide information on FFVP procedures, operations, and oversight responsibilities and 

provided a question and answer session during the calls. 

Each new State received a written summary of the information provided through 

the FFVP calls, including guidance materials and sample forms. In addition, all 

FFVP general information, guidance materials, sample forms, and resources for participants are available on the Child Nutrition Programs Website at: http:// 

www.fns.usda.gov/cnd/FFVP/FFVPdefault.htm. 

Mr. FARR. And getting it implemented in all states? 

Ms. HOUSTON. We have already begun our implementation efforts to make the program nationwide. We’ve held a series of conference calls with the state agencies who have not currently participated, who have not previously participated in the program. We 

are also working to establish some technical assistance between 

states that have previously participated in the program and new 

states, so that we can do some information exchange on best practices. 

Mr. FARR. I mean what is your priority here? I mean just, personally, in the committee this is the thing I think that frustrates 

us all. That we read the title of being nutrition, and then we find 

that we’re really essentially have a way of dispensing commodity 

products, which are not fresh fruits and vegetables. They’re the 

products that distort them, or put in silos. Grains, beans, corn. 

Commodity program—also rice. For instance cotton. We don’t eat 

cotton. But then we have these other support programs for peanuts 

that are in sugar. 


smartinez on PROD1PC64 with HEARING
60 

And so it seems to me that what we unload in our feeding programs is all those things, because we’re involved with supporting 

those commodities. We package them; we store them; we own these 

things, and we have to get rid of them. We have never provided 

any kind of subsidy for fruits and vegetables, so it’s just marketdriven. And yet all the advice we get here in this committee is that 

we need to shift the dietary eating habits. I mean it’s very hard 

for people to change their ways, but with all the dietary programs 

and concentration on the healthy person is changing the diet of 

America. 

And people are demanding these things. And fresh fruits and 

vegetables have learned how to package their goods; they should 

keep lettuce in a bag for considerable amount of time; you can put 

carrots and things like that, and they serve them as packages on 

airlines. And the fast food chains are now putting all in salad bars, 

because that’s what the customers want. 

What seems to be lacking here is a voice in the Department of 

Agriculture, because you don’t really deal with the politics of fresh 

fruits and vegetables. It’s just outside the system. And yet the one 

area that claims to be responsible for them is the department that 

has the title nutrition on it. And I think that this frustration is 

that there’s no advocacy out there, strong advocacy to say that we 

ought to equalize the consumption of the whole gamut of fresh 

fruits and vegetables with what we’ve done initially with the commodity program. We’re going to have to do it. It’s what has to be 

in the diets of other persons. 

Why can’t the government be this advocate and be more of a promoter of getting—rather than having it mandated by Congress on 

a piecemeal basis award? I mean you got to point out as part of 

your nutrition evaluation of what’s happening. And we’re the program. We spend a lot of money determining on what is nutritious 

to eat, and then we don’t buy what we tell people they should eat. 

And that’s the frustration that I have with this committee. And 

you’re the agency that comes here every year with the responsibility to get nutritional into all the public places. 

Ms. HOUSTON. I think we are working extremely hard to increase 

consumption of fruits and vegetables in our programs. We’re currently spending over $10 billion a year in our nutrition assistance 

programs on fruits and vegetables. 

Mr. FARR. Out of 52 billion, about? 

Ms. HOUSTON. In addition, we have some aggressive farm bill 

proposals to increase fruit and vegetable 2.7 billion over 10 years. 

We’re proposing to increase spending in Section 32 for distribution 

of fruits and vegetables to our nutrition assistance programs. Additionally, we are proposing to spend an increase in $50 million a 

year on fruits and vegetables for distribution through the National 

School Lunch and Breakfast Programs. 

COMMODITY ENTITLEMENT PURCHASES

Mr. FARR. Can you explain why last year you spent $70 million 

on mozzarella cheese and about $6 million on lettuce and tomatoes? 

Ms. HOUSTON. There are about 180 different commodity entitlement foods that are available for schools, and it is the school that 


smartinez on PROD1PC64 with HEARING
61 

makes the decision as to what commodity entitlement they select 

to purchase from the department. So while we make a variety of 

foods available that include fruits and vegetables, we are working 

with schools to try to encourage them to select some of those more 

healthful options that are available to them. But I think it is important to recognize that the decision in terms of what commodity 

entitlements are selected are done at the school level, not at the 

department level. 

Mr. FARR. But there are advantages to selecting the commodities, 

because they are—we have them. Right? I mean when it’s cheaper, 

and it’s traditional, and the delivery service is there it’s easier to 

serve pizza then it is to serve fresh fruits and vegetables or salad. 

Ms. HOUSTON. We have nutrition standards for school meals that 

are required to be met at the local level, so whether—depending on 

whatever the meal that’s served is and the composition of the foods 

that make up that meal, combined they must meet those nutrition 

requirements. So it is incumbent upon schools at the local level to 

be selecting a wide range of foods, including fruits and vegetables 

that would make up a nutritional meal pattern. 

Mr. FARR. Right. But my point, and you’ll see it when you start 

putting the data together, that the percentages of fresh fruits and 

vegetables compared to everything is really low and paltry. And so 

the voice is loud; the action in buying and implementing and distributing is very weak. Thank you, Madam Chairwoman. 

DIETARY GUIDELINES FOR AMERICANS/MYPYRAMID

Ms. DELAURO. Thank you, Mr. Farr. Ms. Johner, if you don’t 

mind, let me just follow that up on that, because I think—the 

budget request includes $2 million for data collection and analysis 

of the fourth nutrition and dietary assessment. Now the third assessment was released in November of 2007 and found that many 

schools are still not serving lunches that meet current USDA 

standards. Our USDA began working with the Institute of Medicine, IOM, last November on recommendations for updating the 

meal pattern based on the 2005 dietary guidelines. 

Let me just—if you can answer—let me lay out these three or 

four questions. Why did it take the USDA two years to begin working with the IOM on updating meal pattern based on the 2005 dietary guidelines? When do you think the IOM will issue a recommendation for the child nutrition program? What guidance are 

you providing the schools that need time for updating meal patterns based on the 2005 dietary guideline? What percentages of 

schools are currently serving meals based on the 2005 dietary 

guidelines? And to get to Mr. Farr’s comment, what enforcement 

does FNCS have to make sure schools serve meals based on those 

2005 dietary guidelines. If we can, why did it take two years? 

When do we think we’re going to get their recommendation? 

Ms. JOHNER. Given the complexity of what we needed to 

produce—we wanted to make sure that we had it at the end. We 

had started with it, and yes, it did take two years because of, 

again, I have to go back that it was very, very—it’s a balance that 

we have to find, that we want to make sure that we have the best 

product, but at the same time we want to know that it’s going to 

impact the children and the school system. So that’s when we deVerDate Nov 24 2008 01:13 Apr 21, 2009 Jkt 048455 PO 00000 Frm 00061 Fmt 6633 Sfmt 6602 E:\HR\OC\A455P2.XXX A455P2

smartinez on PROD1PC64 with HEARING
62 

cided that we probably needed to have IOM come in and give us 

recommendations, because they did such a great job with the WIC 

we packaged. We probably should have done that sooner, but, you 

know, we didn’t. And so, but we decided that this—I don’t think 

we knew how complex it was going to be when we first began. 

Ms. DELAURO. When will they issue their recommendation? 

Ms. JOHNER. Well, we’re looking at 18 to 24 months from the 

time we contracted with them in November. That’s the timeframe, 

so about 2010. And the guidance—I know that we’re doing some 

guidance on that, and I will let Kate give you a little bit more detail on that. 

Ms. DELAURO. Kate, with the guidance, what guidance are you 

giving folks at the moment? What percentage of schools are currently serving meals based on the 2005 dietary guide? 

Ms. HOUSTON. Recognizing that there is going to be some time 

delay until we can issue the new meal pattern requirements we did 

think it was incumbent upon the agency to provide as much guidance and technical assistance as we could to school districts so that 

they could do the best that they could to meet the new 2005 dietary 

guidelines. What we have initiated, and the first of these pieces of 

guidance went out I believe last week, is to do a series of facts 

sheets for school food service authorities at the local level on how 

they can incorporate the dietary guidelines into their existing meal 

patterns. 

Ms. DELAURO. Can we get copies of that? 

Ms. HOUSTON. We can send those out in short order. The first 

one that I just released is on low fat milk. We plan to follow up 

with fact sheets on a host of issues, including incorporating more 

whole grains, reducing sodium, reducing fat levels, et cetera. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
63 


smartinez on PROD1PC64 with HEARINGInsert offset folio 110 here 48455A.029
64 


smartinez on PROD1PC64 with HEARINGInsert offset folio 111 here 48455A.030
65 


smartinez on PROD1PC64 with HEARINGInsert offset folio 112 here 48455A.031
66 


smartinez on PROD1PC64 with HEARINGInsert offset folio 113 here 48455A.032
67 

Ms. DELAURO. Do you have any sense of what schools are currently serving meals based on the 2005 guidelines? 

Ms. HOUSTON. I don’t have the information, but we can get you 

that, unless—Phillip, pass that up to me, please. According to our 

SNDA study we do have some work to do to make sure that all 

schools are meeting the existing meal pattern requirements. 

Ms. DELAURO. Do you have any data there that tells you what 

the percentages are at the moment? And if you can’t, please get it 

us? 

Ms. HOUSTON. Sure. Why don’t we send you a comprehensive report of our SNDA results. 

[The information follows:] 

Based on information from the 2004–2005 school years, most schools (over 70 percent) served meals in the National School Lunch Program (NSLP) that met standards for many nutrients that contribute to healthy diets, including protein, iron, calcium, and vitamins A and C. NSLP participants consume more of 6 key nutrients 

at lunch than nonparticipants. But very few schools (6–7 percent) met all nutrition 

standards. This is primarily because most meals served contained too much fat, too 

much saturated fat, or too few calories. 

Significantly, most schools offered the opportunity to select balanced meals, but 

few students made the healthful choice. In 9 of 10 schools, a knowledgeable and motivated student could select items for a low-fat lunch, but most students took such 

lunches in only 2 of 10 schools. 

A summary of the School Nutrition Dietary Assessment-III is available on the 

FNS Web site at http://www.fns.usda.gov/oane/MENU/Published/CNP/FILES/ 

SNDAIII-SummaryofFindings.pdf. 

Ms. DELAURO. Okay. What enforcement do you have to make 

that schools are serving meals that meet guidelines? 

Ms. HOUSTON. Certainly we work with our state agencies on 

doing random reviews. 

Ms. DELAURO. What’s the enforcement mechanism? 

Ms. HOUSTON. Well, the first thing that we do is we provide technical assistance. If we have persistent problems and schools are not 

working with us, obviously those meals are not eligible for reimbursement. But before we would go down that route we would—— 

Ms. DELAURO. Have you ever done that? 

Ms. HOUSTON. Yes. We have. 

Ms. DELAURO. And you were saying before you go down that 

route you will? 

Ms. HOUSTON. We provide technical assistance working through 

our regional offices, and also in coordination with the state agencies, so that we can help school food service to improve the nutritional quality of meals. And of course there are the standards that 

they are required to meet by law. 

Ms. DELAURO. How many times have you denied reimbursement? 

Ms. HOUSTON. A handful. 

Ms. DELAURO. One hand? 

Ms. HOUSTON. We can get you follow up information of the specific circumstances. 

[The information follows:] 

FNS is committed to administering the nutrition assistance programs at the highest standards for program integrity. State agencies are responsible for evaluating 

compliance with National School Lunch Program (NSLP) meal element requirements (food items/components, menu items or other items, as applicable) during Coordinated Review Effort (CRE) administrative reviews, and, potentially, for recovering any improper reimbursements. NSLP regulations require State agencies to review every School Food Authority (SFA) at least once during a five year review 


smartinez on PROD1PC64 with HEARING
68 

cycle. State agencies observe meals being served on the day of the review to determine if meals are complete, and review menu and production records for a prior review month to determine if meals claimed for that month contained all required 

meal elements. State agencies must establish a claim for recovery of reimbursement 

paid for any incomplete meals served on the day of review or during the review 

month. 

During School Year 2005–2006 (the most recent data available) 1.2 percent of 

meals observed on the day of a CRE review and 0.15 percent of meals served in 

a CRE review month were found to be incomplete. The total reimbursement associated with these incomplete meals was approximately $211,000 resulting from reviews conducted in 6,170 schools (an average of about $34 per school). The actual 

amount recovered by States was likely less than this, as State agencies are allowed 

to waive recovery when the total claim from a CRE review for all non-reimbursable 

meals identified in an individual SFA totals less than $600. 

Ms. DELAURO. That would be great. Mr. Hinchey. 

SIMPLIFIED SUMMER FOOD SERVICE PROGRAM

Mr. HINCHEY. Thank you very much, Madam Chairwoman. I appreciate all the attention that you bring to this issue. And I thank 

you very much for being here and giving us the opportunity to 

work with you and find out a little bit more about what’s going on 

with some of these important issues. 

The Simplified Summer Food program is something that we were 

able to incorporate in the OMNIBUS appropriations bill last year, 

to provide additional funding for a program that is very much 

needed. And just to give an indication of what it is and how much 

is needed, this food program has been around since 2001, and in 

those states where it has been operating effectively the number of 

people participating in it, children participating in this summer 

food program, has grown by almost 45 percent. 

And the several states that were not included the number that 

are participating in it has been reduced, cut back by almost 15 percent. So you have approximately 17 million students who are 

served by free and reduced lunch during the school year. That’s 

how many get it during the school year. But when the school year 

ends that number is cut back to 3 million. So the reason the simplified summer food program is so important is because you have 

14 million kids who are not getting the breakfast, and particularly 

the lunches, at least, that they normally would get during the 

course of the school year. 

Now this is something that we need to focus our attention on. 

One of the things that we know is the amount of people who are 

living in poverty in this country is growing. It’s up now around 27 

million. And the number of young people who are suffering as a result of malnutrition, even the loss of life in this country as a result 

of malnutrition among young people—and I’m starting to get so excited about it as I mention it, but I just can’t help it. You know, 

it’s just something that is very serious. So I’m wondering what 

we’re doing, what is the USDA doing through regions or through 

the national office, locally or nationally, to educate about the program and to attract sponsors into it. How many people have been 

notified? 

Ms. JOHNER. That’s an excellent question. And I know that the 

summer food service program is also an area of emphasis of mine. 

One of the things that I have done last year is we tried to get top 

level officials to go out and kickoff the summer food program to get 


smartinez on PROD1PC64 with HEARING
69 

more attention to, more media attention. But our regional folks are 

starting to work on this, usually in the December/January months, 

because you have to have these people sign these sites, ready to go, 

so when school’s out it’s ready to go. But I know on the simplified 

piece, we’ve issued notification and guidance to all states’ agencies 

regarding the process. That was done in January, January 2nd of 

this year. All seven regional conference calls we’ve had with our 

seven region offices. We’ve had conference calls with the state 

agencies making sure we’re explaining the process or the change. 

We want to answer any question, and again working in partnership 

and collaboration with them. And then we also want to share best 

practices, because I think some areas are a lot stronger than others. 

Mr. HINCHEY. Okay. 

Ms. JOHNER. And so we’ve also updated our handbooks and our 

Web site. And this is a big area of concern of ours too, because that 

is a stark—it’s a difference between when the school year is going 

on and the summer needs, so we know that those kids are not getting—— 

Mr. HINCHEY. Well, I appreciate that very much. And I appreciate your background and history this. You know, the Health and 

Human Services back in Nebraska, you had a lot of good work to 

do. So I don’t doubt that you’re really focused on this. But we’re 

just facing a situation now where the President has recommended 

dramatic cuts in his budget on this program. So I’m wondering— 

you probably can’t give us the number now, but I’d like to know 

how many people have been notified. How many people have been 

notified? How effective is this outreach program that you just 

talked about? And when we know how many have been notified 

then we’d like to know who remains to be notified. Who is it out 

there that hasn’t been notified who needs to be paid attention to? 

And what can we do to do a better job to get this word out? This 

is something that I’m sure that our Chairwoman is going to paying 

attention to, as she always does on these critical issues. But we’d 

like to have your advice on this too, because you’re directly involved in it on a daily basis. Has the web site—you said the web 

site has been updated? 

Ms. JOHNER. Yes. We’ve updated handbooks and the web site. 

Mr. HINCHEY. And has that update been done in way to reflect 

the change in the program, notify people about the change in the 

program? And to what extent has that been done, and how has it 

been done to draw attention to the change in the program? 

Ms. JOHNER. Yes. It has been updated, and we can add that to 

the report that we’ll be sending to you on the other information. 

Mr. HINCHEY. Do you know? 

Mr. SALAZAR. We take a number of best practices, Congressman 

Hinchey, to ensure that both potential participants are aware of 

summer sites, and well as potential sponsors. Obviously we go 

through a process of recruiting both sponsors and sites early in the 

year before summer starts so that those sites can be established 

and identified, so that we can promote them. We encourage the 

states to continue the best practice of notifying parents and children in school before school is out where those summer sites will 

be through the summer months, because that’s our best opporVerDate Nov 24 2008 01:13 Apr 21, 2009 Jkt 048455 PO 00000 Frm 00069 Fmt 6633 Sfmt 6602 E:\HR\OC\A455P2.XXX A455P2

smartinez on PROD1PC64 with HEARING
70 

tunity to capture that audience, while they are still in school, before they leave. 

One of the remaining challenges of feeding children in the summer is that they are not captured everyday in one site as they are 

during the school year, and so our ability to reach them becomes 

a challenge in terms of congregate feeding. We continue to see a 

steady increase in the number of meals served and children served 

every summer because of our continued outreach efforts. 

Mr. HINCHEY. Okay. All right. So I’d just thank you very much, 

and I’d like to just follow up with this. If you could provide us with 

that information—I’d just like to know how this program is working. It’s obviously because of the negative results that we’re receiving this is something that’s very important. Whatever you can tell 

us about it will be very helpful. Thank you very much. Thank you, 

Madame Chairwoman. 

[The information from USDA follows:] 

FNS is committed to expanding the Simplified Summer provisions of the Summer 

Food Service Program (SFSP) authorized through the 2008 Consolidated Appropriations Act (PL 110-161). The Act made the Simplified Summer provisions nationwide 

effective January 1, 2008, by adding the 24 States not previously authorized. The 

Simplified Summer procedures enable SFSP sponsors to receive reimbursement 

based on the number of meals served times the maximum combined administrative 

and operations reimbursement rate. Previously, sponsors were required to submit 

cost documentation used by States to determine reimbursement. Additionally, reimbursements can now be used to pay for any allowable operational or administrative 

expense, whereas previously the reimbursements could not be intermingled. 

FNS has updated the SFSP Web site and online materials, and has asked State 

agencies to do the same. We have also encouraged States to incorporate the new 

program flexibility into outreach efforts. Both community sponsors and school systems see the development as a significant reduction to administrative burden, by 

allowing more time to be spent on support and outreach activities for families and 

children. 

The Child Nutrition and WIC Reauthorization Act of 2004 required FNS to evaluate the Simplified Summer provisions. The evaluation, published in April 2007, 

found an increase in sponsors and meals served during 2001–2006 for the 26 States 

and the Commonwealth of Puerto Rico that were then authorized to operate under 

Simplified Summer procedures. States not authorized to operate under the Simplified Summer provisions showed a decline. 

In addition to the Simplified Summer provisions, the FNS has been promoting the 

Seamless Summer option, which allows schools to provide SFSP-like benefits 

through the National School Lunch Program and School Breakfast Program. Although the reimbursement for a lunch is about $.50 less than under the SFSP, some 

schools find the convenience of operating under the normal school program procedures meets schools’ specific summer needs and is worth the rate difference. While 

Seamless Summer sponsors and meals are not reported as part of the SFSP, the 

schools make an important contribution to our goal of increasing meal service to 

low-income children during summer months. 

FNS believes that taken together, the two different approaches provide the flexibility schools and communities need to provide nutrition benefits to children in a 

wide variety of situations during the summer months. 

Ms. DELAURO. Mr. Farr. 

COMMODITY ENTITLEMENT PURCHASES

Mr. FARR. Thank you. I wanted to follow up again on this. The 

way that food is purchased—it seems to me what you have is a 

two-tiered system here. You have a system that says to schools, 

‘‘You have to provide a healthy meal. And you have to met those 

guidelines.’’ But when it comes to what kinds of foods you help 

them acquire, that the government buys and distributes, you leave 

out the fresh fruits and vegetables. 


smartinez on PROD1PC64 with HEARING
71 

Ms. JOHNER. No, I’ll just briefly say something, then I will let 

Kate answer, give you more details on that. I know that 20 percent 

of the purchase, as you know, commodities come from USDA, 80 

percent of the items are purchased by the local school districts. And 

I can tell you though, I just wanted to make this comment: I visited 

many schools across the country as I traveled, because I think the 

best way to get a pulse of how things work is actually going to the 

field and talking to people and seeing for yourself. 

I have seen so many more salad bars in the schools, the cafeterias; that has been very impressive. In fact, Arizona just got a 

gold score award. And there was this beautiful salad bar that had 

all this great, nice lettuce. And this was all free, they didn’t even 

charge it through the school program. But there is such a—there 

is much more of a push for schools to be served the fresh fruits and 

vegetables in their diets. 

Mr. FARR. Sure, but they are having to buy that locally, whereas 

you supplement. And here it is, your total commodity entitlement 

last year is $1.1 billion. And those are things like, that’s just 

cheese, different kinds of cheese and corn, and corn mill flower. Soy 

bean oil, vegetable oil, peanut butter, rice, shortening, spaghetti— 

you know, I am not sure that those are all in what we are talking 

about is high nutritional values. 

Ms. JOHNER. You know, commodities are, they are, they have 

been improved, lower in fat, lower in sugar. But I am going to let 

Kate give you a little more information on the commodities aspect 

of that. 

Mr. FARR. But do you see my point, because you have got an entitlement program for commodities and that’s what it’s called, it’s 

called the Commodity Entitlement Program. And you go out and 

the government, we buy that and then we distribute it to school. 

But the makeup of the difference, which is all those effort that we 

have talked about the last year is getting other types of food in the 

menu. And we don’t—you just say you have to do that with the 

money that you have. You are not entitled to it, so you don’t get 

these entitlements. 

And that is where the unequal playing field is. We are distributing things that are causing the obesity, and we are making people buy the things that prevent obesity. And that is just a proportion unfair and unrealistic, and not defendable in your nutritional 

program. 

Ms. HOUSTON. Congressman Farr, we have about 180 foods 

through our Commodity Entitlement Program that are available as 

a shopping list to schools. It is a demand-driven system. This list 

includes fruits and vegetables. 

Mr. FARR. Show me on that list, I have it right here. 

Ms. HOUSTON. Sure, right at the top of the list: apple slices, applesauce, apricots. Going down, blueberries, carrots, cherries, corn, 

peaches—— 

Mr. FARR. Yeah, apples, the $871,000. 

Ms. HOUSTON [continuing]. Pears, potatoes, raisins. And this is 

just on the first page. 

Mr. FARR. Where is the vegetables and where is the lettuce? 


smartinez on PROD1PC64 with HEARING
72 

Ms. HOUSTON. We have, you know we have a variety of primarily 

shelf stable through our commodity entitlement list. And then of 

course, the additional fresh—— 

Mr. FARR. Shelf-stable? The other things you are saying are not 

shelf-stable? 

Ms. HOUSTON. And then we have fresh fruits and vegetables that 

are available also as commodity entitlement through our DOD program. 

Mr. FARR. But the point is that your list, I have it, the thin, 

green page you are looking at, both pages, because I have the other 

one too. And it also shows the distribution by state. Is that I can’t 

find any of the things that I have been told are necessary to be 

healthy to eat, particularly salads. There is not any salads on here. 

Ms. HOUSTON. We continue to work with schools to put on our 

commodity list the items for which they are requesting. And I 

think it is again, important to emphasize that only about 15 to 20 

percent of the foods that are part of the meals come from the 

USDA commodity entitlement list, the rest we provide cash-free 

‘‘reimbursements’’. And schools at the local level are purchasing the 

other foods for meals. And we have statistics that show about 21 

percent of the foods that are purchased in total for the school lunch 

program are fruits and vegetables. 

Mr. FARR. I mean, let’s finish with this list. The two highest 

items on here, the highest amount you spend was beef bulk-coarse, 

$123 million. The second highest is mozzarella cheese, $90 million. 

Ms. HOUSTON. Again, these are school-selected. 

Mr. FARR. Schools want cheese, not—— 

Ms. HOUSTON. These are items that are—it’s a demand-driven 

system. We would be happy to work with you. We have an initiative underway to continually improve the nutritional quality of the 

foods available through the commodity program. And we would be 

happy to share with you our technical assistance efforts. But I 

think you were correct, that we need to get schools to be selecting 

the most nutritious items available, and—— 

Mr. FARR. With all due respect, California has required, and I 

think you ought to award states too that required, but each school 

district has to come up with a nutritional plan. This is new. Parents are starting to ask, you know they used to want to know what 

is going to be teaching in the classroom, now they want to know 

what you are feeding them in the lunchroom. 

And what happens, you go to these school administrators and 

they say yes, but we can’t get those items because those aren’t part 

of the program. They are not given to, they are not on this list. 

Ms. HOUSTON. Well again, we would be happy to work with you 

to make sure that the foods—— 

Mr. FARR. Work with us? 

Ms. HOUSTON [continuing]. That schools want are on the commodity list. We also do have a nationwide requirement for a 

wellness policy, so every school district in the country, those in 

California and around the country—— 

Mr. FARR. You put a mandate on them but you don’t give them 

the supplies to fulfill that mandate. That is not a way to operate 

a nutritional program. 


smartinez on PROD1PC64 with HEARING
73 

TEXAS FOOD STAMP PROGRAM

Ms. DELAURO. Let me—we are going to have to vote and I promise you, you will not have to stay, we will—let me just see if I can 

wrap up with a couple of questions here. And then I want to do 

two things. I have some questions for immediate answer and then 

a question—but let me just get to the program, and we know the 

background. We, I want to know what has happened,—stamps over 

there and what is—to get the problem corrected. 

In terms of the problem back in March 2006, the system had a 

backlog of 6,000 unprocessed applications. The problem then is the 

state implemented the new system and there were not enough people trained in handling the program under the policy—determine 

eligibility for 2007, experiencing backlogs of applications and the 

explanation is for the workload issue. An Austin mother of two said 

she has been waiting for food stamps after applying to renew in 

June. I want an answer to Texas, but I also have a question with 

regard to Indiana. 

Ms. JOHNER. Chairwoman, we have been working closely with 

Texas, and I know yes, there has been some concern with the timeliness piece. And so I know our administrator was just out there 

I think a few weeks ago. And we are going to be doing even, we 

are going to aggressively increase our oversight in Texas, because 

we have again, identified some problems. So we have been doing 

regular conference calls with them, review of state reports, the 

multiple site reviews, which is going to increase. 

And then I myself will be going out and meeting with the state 

commissioner and their management team. We did get a corrective 

action plan from them, because we did send them a letter and so 

we did get one last week. So again, I agree with you, Texas is—— 

Ms. DELAURO. Just in general, because I want to get on to Indiana. 

Ms. JOHNER. Okay. 

Ms. DELAURO. When is it apparent that this is failed, I mean, 

what is the tipping point? We continue with corrective action, you 

know. I mean, in 2007 they canceled—I am just saying what is it 

that you think that we can’t go on any longer, this is a failed process here? Do you have a construct? 

Ms. JOHNER. Do we have something in place to be able to measure—— 

Ms. DELAURO. No. I mean to say when you are the agency you 

are looking at this, you are seeing what’s happened, you are seeing 

the progression, you see where we are now. When do you say to 

yourself this is a failure, it can’t work this way, let’s go back to 

what we were doing? 

Ms. JOHNER. And they have, they have moved the responsibility 

back to the state workers. But they are identifying some of that 

lapse in Texas. 

Ms. DELAURO. How much more time are we giving Texas to 

make this work or not work? 

Ms. JOHNER. Well, I think that is something I will continue to 

monitor. And at this point—I understand your question in regard 

that—— 


smartinez on PROD1PC64 with HEARING
74 

Ms. DELAURO. This is like when do we say enough—a never-ending tale. Well, I mean we have got to have sense with some banality here that this is a go, and it hasn’t succeeded. Lots of good 

ideas don’t succeed. But did they tell us all the time end programs 

that don’t work. And Congress has you know has to do that as well. 

Sometimes we have even been less successful with that. But I am 

hoping the philosophy here is to end this if it doesn’t work. 

Ms. JOHNER. If this is acceptable to you, I know I will be in 

Texas the first week of April. When I go down there, can I come 

back with—— 

Ms. DELAURO. Yes, absolutely. 

Ms. JOHNER. I mean, we can get together or something. 

INDIANA FOOD STAMP PROGRAM

Ms. DELAURO. But let’s get an update, let’s see what we think 

it can go. Indiana, I know you are monitoring it, et cetera. But 

look, yesterday, Indiana, a local news reported a state house conference where leaders of three senior groups presented their concerns. ‘‘The situation was dire for senior citizens, people with disabilities, other low-income clients both had difficulty phoning in to 

centralized call center, navigating web pages that were put in place 

to expedite the application.’’ 

‘‘People being denied benefits. Wheelchair-bound mother of two 

children lost food stamps. Surveys of food pantries, nursing homes, 

hospitals, minister’s groups, United Way and other social service 

providers found demand for those private services shot up because 

people have been bumped off the food stamp rolls.’’ ‘‘. . . services, 

a chief who was in charge of the . . . said that the roll-out is due 

to expand from its original 12 counties to 27 or more on March 24, 

in about a week’s time.’’ 

Are we going to an expanded rollout before we have corrective action and are we going the Texas route again? Have you seen in 

your oversight the issues that the senior citizen folks are talking 

about? 

Ms. JOHNER. No, I have not and I was just out there last week 

to make a visit. And I can tell that it’s changed from the time I 

was out there last fall and then again, last week. And what I saw 

when I was there was a streamlined function of the workers. I 

talked to some of the family members that were in the waiting 

room. They liked the new setup. I didn’t see—I guess—I walked 

through the process myself as coming in as someone who needed 

food stamps. 

We would take anywhere from six to eight days for them to process my applications. We have two-tier systems. Our first tier is 

that the call centers to be able to answer questions that are more 

generic. And then when they got more specific on the policy and 

programs, then you have the second tier. We were going to ask 

them—— 

Ms. DELAURO. Did these folks just congregate and make these 

claims? What is the investigative progress on these senior citizen 

groups? Are you going to—are the people who are being, do we 

know how many people are being denied benefits? And do we think 

unless these issues are fixed, do we answer these or investigate 

these efforts that we ought to move to a rollout on the 24? 


smartinez on PROD1PC64 with HEARING
75 

Ms. JOHNER. Definitely, Madam Chairwoman, we will be looking 

into that. I have not read this article that you are referencing to. 

The thing is that they have delayed already once because we 

weren’t comfortable with them moving forward on this. 

Ms. DELAURO. But do I have your word, and we would be talking 

in the next several days that these issues that have been laid out: 

not enough case workers to help Medicaid clients and applicants, 

new eligibility system dysfunctional, wasteful, out of sync. This is 

a person who manages the domestic violence shelter for Alternatives, Inc., that she had two clients, one a teenager in high 

school, another—who had lost food stamps, other benefits. 

I mean, the list goes on. What I am just saying is that you are 

monitoring it, it seems to me that these questions have got to be 

answered and addressed before we move to any roll-out. 

Ms. JOHNER. You have my word that I will look into this. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
76 


smartinez on PROD1PC64 with HEARINGInsert offset folio 135 here 48455A.033
77 


smartinez on PROD1PC64 with HEARINGInsert offset folio 136 here 48455A.034
78 


smartinez on PROD1PC64 with HEARINGInsert offset folio 137 here 48455A.035
79 

NUTRITION EDUCATION

Ms. DELAURO. Okay, this is what I going to do unless there is— 

there are three or four areas that I have that I really would like 

immediate answers on. One is this report that is a requirement 

that was laid out in a conference report directing the department 

to provide monthly reports on program performance and estimated 

funding requirements. I have a great deal of respect for you Miss 

Secretary, but I was disappointed with the letter that came in. 

And I actually do have a list, and I won’t go through it, and we 

will get it to you, of what we believe these letters ought to include. 

And so that we will get to you. In addition to that, the—programs 

that exist within schools and what our opportunities are to look at 

inspection requirements, what enforcement authority, those kinds 

of issues. But we will get that to you right away. There is also nutrition education. There is $788 million being spent on nutrition 

education promotion. 

Now, we had research and education, and economics people in 

here the other day. They answered that there was no correlation 

between the—and obesity. But on nutrition education, when we 

asked them about this, so I don’t know what is happening with 

$788 million—— 

Ms. JOHNER. We can give that to you. 

[The information follows:] 

Of the $788 million in nutrition-related expenditures reflected in the President’s 

2009 budget request for USDA’s Food, Nutrition, and Consumer Services, $777 million are used for nutrition education through the nutrition assistance programs. 

• Over 95 percent of this funding is provided as payments to State agencies, including a projected $305 million to Food Stamp Program agencies, and about $445 

million to WIC agencies. 

• Another $19 million is used to support nutrition and food safety education and 

technical assistance to schools through USDA’s Team Nutrition and the National 

Food Service Management Institute. 

• $1 million has been requested to support nutrition education in the Food Distribution Program on Indian Reservations. 

• The remaining $7 million supports FNS activity to develop nutrition education 

interventions and technical assistance materials. 

Of the remaining $11 million in the request, about $7 million is designated to support the Center for Nutrition Policy and Promotion in developing nutrition guidance 

for all consumers, including those served by Federal nutrition assistance programs. 

The other $4 million is to support 2 nutrition-related studies—the next in our series 

of assessments of the nutrient content of school meals, and an assessment of promising practices in food stamp nutrition education. 

Ms. DELAURO [continuing]. And that information. But there may 

be one or two more in terms of immediate answers. The rest we 

will ask for the record. We have I think five minutes, Maurice, go 

ahead. 

NUTRITION ASSISTANCE PROGRAMS

Mr. HINCHEY. Very briefly. One of the problems that we are facing nationally is the fact that we are in an economic recession. And 

one of the most uncomforting aspects of this economic recession 

that we are experiencing is the dramatic increase in the cost of living for middle- and lower-middle income people and people below 

that. 

It is a very, very significant issue. And one of the most dramatic 

aspects is the increase in cost of living of course, is the increase in 


smartinez on PROD1PC64 with HEARING
80 

energy and the increase of the cost of food. Cost of food has risen 

up dramatically because of the increase in the price of energy. And 

that is causing a lot of problems for a lot of low-income people. 

And I am just wondering how your activities are impeded. And 

I know that you are focused on this in the right way based upon 

your experience and understanding. But the things that you are 

dealing with are making it difficult for you. For example, for the 

third year in a row, the President has proposed eliminating funding for the Commodity Supplemental Food Program. How has that 

attitude from the Administration impeded your ability to deal with 

issues, because this is an issue that on an average month provides 

nutrition to something in the neighborhood of excess of 473,000 

low-income mothers and children under the age of six and senior 

citizens. The largest part of that number is senior citizens. 

And we also have the fact that the President now for the last 

four years in a row has proposed changes that would eliminate food 

stamps for more than 300,000 people. Increase in the availability 

of food stamps is one of the things that some of us tried to get in 

this so-called stimulus package, which was passed here and signed. 

The President said no way, he wasn’t going to sign the stimulus 

package that provided more nutrition to low-income people. 

So I am just wondering about your ability to deal with this issue? 

The issue is dramatic increase in the cost of living, particularly the 

cost of food for more and more are low-income people across the 

country, mothers and their young children, senior citizens, others 

who are suffering from these—— 

Ms. JOHNER. Thank you for that question. One of the things that 

I look at with competing priorities and again, limited resources as 

we all have, is I try to look at what our largest programs are. And 

they are the food stamp program, the WIC program, the school 

breakfast and lunch program. And so I have to look at is it’s a very 

challenging job, because the CSFP program is a good program, but 

it is also one of my smaller programs. 

And so what I need to do is I need to look at how do I invest 

in my bigger programs that could maybe impact more people. And 

so, and the other side of that is I also look at my local community 

because I come from the grassroots. But I know the power and influence of your local leadership, of your state leadership. I am always looking at our community-based or faith-based, and so Angel 

Food Ministry has been one area. And I know I talked about that 

earlier, but this is a 501(c)3, it’s—they deliver food packages. 

And in 35 states, they served 550,000 people a month and we 

would like to help, we want to partner with them to help them expand. And they serve a box of groceries that would last an elderly 

person for up to 30 days, and a family of four for up to a week. 

And they really focus on the protein piece. So it is partnership and 

collaborations like that we need to continue to work with. 

Ms. DELAURO. Thank you, secretary. We probably have a minute 

left in order for us to go to vote. We appreciate your time and your 

patience with the delays. 

Ms. JOHNER. Thank you. 


smartinez on PROD1PC64 with HEARING
81 

Ms. DELAURO. And I look forward to the response of the questions and I look forward to sitting down with you again. Thank you 

all very much. 

Ms. JOHNER. Thank you very much. 

Ms. DELAURO. The hearing is adjourned. 


smartinez on PROD1PC64 with HEARING
82 


smartinez on PROD1PC64 with HEARINGInsert offset folio 144 here 48455A.036
83 


smartinez on PROD1PC64 with HEARINGInsert offset folio 145 here 48455A.037
84 


smartinez on PROD1PC64 with HEARINGInsert offset folio 146 here 48455A.038
85 


smartinez on PROD1PC64 with HEARINGInsert offset folio 147 here 48455A.039
86 


smartinez on PROD1PC64 with HEARINGInsert offset folio 148 here 48455A.040
87 


smartinez on PROD1PC64 with HEARINGInsert offset folio 149 here 48455A.041
88 


smartinez on PROD1PC64 with HEARINGInsert offset folio 150 here 48455A.042
89 


smartinez on PROD1PC64 with HEARINGInsert offset folio 151 here 48455A.043
90 


smartinez on PROD1PC64 with HEARINGInsert offset folio 152 here 48455A.044
91 


smartinez on PROD1PC64 with HEARINGInsert offset folio 153 here 48455A.045
92 


smartinez on PROD1PC64 with HEARINGInsert offset folio 154 here 48455A.046
93 


smartinez on PROD1PC64 with HEARINGInsert offset folio 155 here 48455A.047
94 


smartinez on PROD1PC64 with HEARINGInsert offset folio 156 here 48455A.048
95 


smartinez on PROD1PC64 with HEARINGInsert offset folio 157 here 48455A.049
96 


smartinez on PROD1PC64 with HEARINGInsert offset folio 158 here 48455A.050
97 


smartinez on PROD1PC64 with HEARINGInsert offset folio 159 here 48455A.051
98 


smartinez on PROD1PC64 with HEARINGInsert offset folio 160 here 48455A.052
99 


smartinez on PROD1PC64 with HEARINGInsert offset folio 161 here 48455A.053
100 


smartinez on PROD1PC64 with HEARINGInsert offset folio 162 here 48455A.054
101 


smartinez on PROD1PC64 with HEARINGInsert offset folio 163 here 48455A.055
102 


smartinez on PROD1PC64 with HEARINGInsert offset folio 164 here 48455A.056
103 


smartinez on PROD1PC64 with HEARINGInsert offset folio 165 here 48455A.057
104 


smartinez on PROD1PC64 with HEARINGInsert offset folio 166 here 48455A.058
105 


smartinez on PROD1PC64 with HEARINGInsert offset folio 167 here 48455A.059
106 


smartinez on PROD1PC64 with HEARINGInsert offset folio 168 here 48455A.060
107 


smartinez on PROD1PC64 with HEARINGInsert offset folio 169 here 48455A.061
108 


smartinez on PROD1PC64 with HEARINGInsert offset folio 170 here 48455A.062
109 


smartinez on PROD1PC64 with HEARINGInsert offset folio 171 here 48455A.063
110 


smartinez on PROD1PC64 with HEARINGInsert offset folio 172 here 48455A.064
111 


smartinez on PROD1PC64 with HEARINGInsert offset folio 173 here 48455A.065
112 


smartinez on PROD1PC64 with HEARINGInsert offset folio 174 here 48455A.066
113 


smartinez on PROD1PC64 with HEARINGInsert offset folio 175 here 48455A.067
114 


smartinez on PROD1PC64 with HEARINGInsert offset folio 176 here 48455A.068
115 


smartinez on PROD1PC64 with HEARINGInsert offset folio 177 here 48455A.069
116 


smartinez on PROD1PC64 with HEARINGInsert offset folio 178 here 48455A.070
117 


smartinez on PROD1PC64 with HEARINGInsert offset folio 179 here 48455A.071
118 


smartinez on PROD1PC64 with HEARINGInsert offset folio 180 here 48455A.072
119 


smartinez on PROD1PC64 with HEARINGInsert offset folio 181 here 48455A.073
120 


smartinez on PROD1PC64 with HEARINGInsert offset folio 182 here 48455A.074
121 


smartinez on PROD1PC64 with HEARINGInsert offset folio 183 here 48455A.075
122 


smartinez on PROD1PC64 with HEARINGInsert offset folio 184 here 48455A.076
123 


smartinez on PROD1PC64 with HEARINGInsert offset folio 185 here 48455A.077
124 


smartinez on PROD1PC64 with HEARINGInsert offset folio 186 here 48455A.078
125 


smartinez on PROD1PC64 with HEARINGInsert offset folio 187 here 48455A.079
126 


smartinez on PROD1PC64 with HEARINGInsert offset folio 188 here 48455A.080
127 


smartinez on PROD1PC64 with HEARINGInsert offset folio 189 here 48455A.081
128 


smartinez on PROD1PC64 with HEARINGInsert offset folio 190 here 48455A.082
129 


smartinez on PROD1PC64 with HEARINGInsert offset folio 191 here 48455A.083
130 


smartinez on PROD1PC64 with HEARINGInsert offset folio 192 here 48455A.084
131 


smartinez on PROD1PC64 with HEARINGInsert offset folio 193 here 48455A.085
132 


smartinez on PROD1PC64 with HEARINGInsert offset folio 194 here 48455A.086
133 


smartinez on PROD1PC64 with HEARINGInsert offset folio 195 here 48455A.087
134 


smartinez on PROD1PC64 with HEARINGInsert offset folio 196 here 48455A.088
135 


smartinez on PROD1PC64 with HEARINGInsert offset folio 197 here 48455A.089
136 


smartinez on PROD1PC64 with HEARINGInsert offset folio 198 here 48455A.090
137 


smartinez on PROD1PC64 with HEARINGInsert offset folio 199 here 48455A.091
138 


smartinez on PROD1PC64 with HEARINGInsert offset folio 200 here 48455A.092
139 


smartinez on PROD1PC64 with HEARINGInsert offset folio 201 here 48455A.093
140 


smartinez on PROD1PC64 with HEARINGInsert offset folio 202 here 48455A.094
141 


smartinez on PROD1PC64 with HEARINGInsert offset folio 203 here 48455A.095
142 


smartinez on PROD1PC64 with HEARINGInsert offset folio 204 here 48455A.096
143 


smartinez on PROD1PC64 with HEARINGInsert offset folio 205 here 48455A.097
144 


smartinez on PROD1PC64 with HEARINGInsert offset folio 206 here 48455A.098
145 


smartinez on PROD1PC64 with HEARINGInsert offset folio 207 here 48455A.099
146 


smartinez on PROD1PC64 with HEARINGInsert offset folio 208 here 48455A.100
147 


smartinez on PROD1PC64 with HEARINGInsert offset folio 209 here 48455A.101
148 


smartinez on PROD1PC64 with HEARINGInsert offset folio 210 here 48455A.102
149 


smartinez on PROD1PC64 with HEARINGInsert offset folio 211 here 48455A.103
150 


smartinez on PROD1PC64 with HEARINGInsert offset folio 212 here 48455A.104
151 


smartinez on PROD1PC64 with HEARINGInsert offset folio 213 here 48455A.105
152 


smartinez on PROD1PC64 with HEARINGInsert offset folio 214 here 48455A.106
153 


smartinez on PROD1PC64 with HEARINGInsert offset folio 215 here 48455A.107
154 


smartinez on PROD1PC64 with HEARINGInsert offset folio 216 here 48455A.108
155 


smartinez on PROD1PC64 with HEARINGInsert offset folio 217 here 48455A.109
156 


smartinez on PROD1PC64 with HEARINGInsert offset folio 218 here 48455A.110
157 


smartinez on PROD1PC64 with HEARINGInsert offset folio 219 here 48455A.111
158 


smartinez on PROD1PC64 with HEARINGInsert offset folio 220 here 48455A.112
159 


smartinez on PROD1PC64 with HEARINGInsert offset folio 221 here 48455A.113
160 


smartinez on PROD1PC64 with HEARINGInsert offset folio 222 here 48455A.114
161 


smartinez on PROD1PC64 with HEARINGInsert offset folio 223 here 48455A.115
162 


smartinez on PROD1PC64 with HEARINGInsert offset folio 224 here 48455A.116
163 


smartinez on PROD1PC64 with HEARINGInsert offset folio 225 here 48455A.117
164 


smartinez on PROD1PC64 with HEARINGInsert offset folio 226 here 48455A.118
165 


smartinez on PROD1PC64 with HEARINGInsert offset folio 227 here 48455A.119
166 


smartinez on PROD1PC64 with HEARINGInsert offset folio 228 here 48455A.120
167 


smartinez on PROD1PC64 with HEARINGInsert offset folio 229 here 48455A.121
168 


smartinez on PROD1PC64 with HEARINGInsert offset folio 230 here 48455A.122
169 


smartinez on PROD1PC64 with HEARINGInsert offset folio 231 here 48455A.123
170 


smartinez on PROD1PC64 with HEARINGInsert offset folio 232 here 48455A.124
171 


smartinez on PROD1PC64 with HEARINGInsert offset folio 233 here 48455A.125
172 


smartinez on PROD1PC64 with HEARINGInsert offset folio 234 here 48455A.126
173 


smartinez on PROD1PC64 with HEARINGInsert offset folio 235 here 48455A.127
174 


smartinez on PROD1PC64 with HEARINGInsert offset folio 236 here 48455A.128
175 


smartinez on PROD1PC64 with HEARINGInsert offset folio 237 here 48455A.129
176 


smartinez on PROD1PC64 with HEARINGInsert offset folio 238 here 48455A.130
177 


smartinez on PROD1PC64 with HEARINGInsert offset folio 239 here 48455A.131
178 


smartinez on PROD1PC64 with HEARINGInsert offset folio 240 here 48455A.132
179 


smartinez on PROD1PC64 with HEARINGInsert offset folio 241 here 48455A.133
180 


smartinez on PROD1PC64 with HEARINGInsert offset folio 242 here 48455A.134
181 


smartinez on PROD1PC64 with HEARINGInsert offset folio 243 here 48455A.135
182 


smartinez on PROD1PC64 with HEARINGInsert offset folio 244 here 48455A.136
183 


smartinez on PROD1PC64 with HEARINGInsert offset folio 245 here 48455A.137
184 


smartinez on PROD1PC64 with HEARINGInsert offset folio 246 here 48455A.138
185 


smartinez on PROD1PC64 with HEARINGInsert offset folio 247 here 48455A.139
186 


smartinez on PROD1PC64 with HEARINGInsert offset folio 248 here 48455A.140
187 


smartinez on PROD1PC64 with HEARINGInsert offset folio 249 here 48455A.141
188 


smartinez on PROD1PC64 with HEARINGInsert offset folio 250 here 48455A.142
189 


smartinez on PROD1PC64 with HEARINGInsert offset folio 251 here 48455A.143
190 


smartinez on PROD1PC64 with HEARINGInsert offset folio 252 here 48455A.144
191 


smartinez on PROD1PC64 with HEARINGInsert offset folio 253 here 48455A.145
192 


smartinez on PROD1PC64 with HEARINGInsert offset folio 254 here 48455A.146
193 


smartinez on PROD1PC64 with HEARINGInsert offset folio 255 here 48455A.147
194 


smartinez on PROD1PC64 with HEARINGInsert offset folio 256 here 48455A.148
195 


smartinez on PROD1PC64 with HEARINGInsert offset folio 257 here 48455A.149
196 


smartinez on PROD1PC64 with HEARINGInsert offset folio 258 here 48455A.150
197 


smartinez on PROD1PC64 with HEARINGInsert offset folio 259 here 48455A.151
198 


smartinez on PROD1PC64 with HEARINGInsert offset folio 260 here 48455A.152
199 


smartinez on PROD1PC64 with HEARINGInsert offset folio 261 here 48455A.153
200 


smartinez on PROD1PC64 with HEARINGInsert offset folio 262 here 48455A.154
201 


smartinez on PROD1PC64 with HEARINGInsert offset folio 263 here 48455A.155
202 


smartinez on PROD1PC64 with HEARINGInsert offset folio 264 here 48455A.156
203 


smartinez on PROD1PC64 with HEARINGInsert offset folio 265 here 48455A.157
204 


smartinez on PROD1PC64 with HEARINGInsert offset folio 266 here 48455A.158
205 


smartinez on PROD1PC64 with HEARINGInsert offset folio 267 here 48455A.159
206 


smartinez on PROD1PC64 with HEARINGInsert offset folio 268 here 48455A.160
207 


smartinez on PROD1PC64 with HEARINGInsert offset folio 269 here 48455A.161
208 


smartinez on PROD1PC64 with HEARINGInsert offset folio 270 here 48455A.162
209 


smartinez on PROD1PC64 with HEARINGInsert offset folio 271 here 48455A.163
210 


smartinez on PROD1PC64 with HEARINGInsert offset folio 272 here 48455A.164
211 


smartinez on PROD1PC64 with HEARINGInsert offset folio 273 here 48455A.165
212 


smartinez on PROD1PC64 with HEARINGInsert offset folio 274 here 48455A.166
213 


smartinez on PROD1PC64 with HEARINGInsert offset folio 275 here 48455A.167
214 


smartinez on PROD1PC64 with HEARINGInsert offset folio 276 here 48455A.168
215 


smartinez on PROD1PC64 with HEARINGInsert offset folio 277 here 48455A.169
216 


smartinez on PROD1PC64 with HEARINGInsert offset folio 278 here 48455A.170
217 


smartinez on PROD1PC64 with HEARINGInsert offset folio 279 here 48455A.171
218 


smartinez on PROD1PC64 with HEARINGInsert offset folio 280 here 48455A.172
219 


smartinez on PROD1PC64 with HEARINGInsert offset folio 281 here 48455A.173
220 


smartinez on PROD1PC64 with HEARINGInsert offset folio 282 here 48455A.174
221 


smartinez on PROD1PC64 with HEARINGInsert offset folio 283 here 48455A.175
222 


smartinez on PROD1PC64 with HEARINGInsert offset folio 284 here 48455A.176
223 


smartinez on PROD1PC64 with HEARINGInsert offset folio 285 here 48455A.177
224 


smartinez on PROD1PC64 with HEARINGInsert offset folio 286 here 48455A.178
225 


smartinez on PROD1PC64 with HEARINGInsert offset folio 287 here 48455A.179
226 


smartinez on PROD1PC64 with HEARINGInsert offset folio 288 here 48455A.180
227 


smartinez on PROD1PC64 with HEARINGInsert offset folio 289 here 48455A.181
228 


smartinez on PROD1PC64 with HEARINGInsert offset folio 290 here 48455A.182
229 


smartinez on PROD1PC64 with HEARINGInsert offset folio 291 here 48455A.183
230 


smartinez on PROD1PC64 with HEARINGInsert offset folio 292 here 48455A.184
231 


smartinez on PROD1PC64 with HEARINGInsert offset folio 293 here 48455A.185
232 


smartinez on PROD1PC64 with HEARINGInsert offset folio 294 here 48455A.186
233 


smartinez on PROD1PC64 with HEARINGInsert offset folio 295 here 48455A.187
234 


smartinez on PROD1PC64 with HEARINGInsert offset folio 296 here 48455A.188
235 


smartinez on PROD1PC64 with HEARINGInsert offset folio 297 here 48455A.189
236 


smartinez on PROD1PC64 with HEARINGInsert offset folio 298 here 48455A.190
237 


smartinez on PROD1PC64 with HEARINGInsert offset folio 299 here 48455A.191
238 


smartinez on PROD1PC64 with HEARINGInsert offset folio 300 here 48455A.192
239 


smartinez on PROD1PC64 with HEARINGInsert offset folio 301 here 48455A.193
240 


smartinez on PROD1PC64 with HEARINGInsert offset folio 302 here 48455A.194
241 


smartinez on PROD1PC64 with HEARINGInsert offset folio 303 here 48455A.195
242 


smartinez on PROD1PC64 with HEARINGInsert offset folio 304 here 48455A.196
243 


smartinez on PROD1PC64 with HEARINGInsert offset folio 305 here 48455A.197
244 


smartinez on PROD1PC64 with HEARINGInsert offset folio 306 here 48455A.198
245 


smartinez on PROD1PC64 with HEARINGInsert offset folio 307 here 48455A.199
246 


smartinez on PROD1PC64 with HEARINGInsert offset folio 308 here 48455A.200
247 


smartinez on PROD1PC64 with HEARINGInsert offset folio 309 here 48455A.201
248 


smartinez on PROD1PC64 with HEARINGInsert offset folio 310 here 48455A.202
249 


smartinez on PROD1PC64 with HEARINGInsert offset folio 311 here 48455A.203
250 


smartinez on PROD1PC64 with HEARINGInsert offset folio 312 here 48455A.204
251 


smartinez on PROD1PC64 with HEARINGInsert offset folio 313 here 48455A.205
252 


smartinez on PROD1PC64 with HEARINGInsert offset folio 314 here 48455A.206
253 


smartinez on PROD1PC64 with HEARINGInsert offset folio 315 here 48455A.207
254 


smartinez on PROD1PC64 with HEARINGInsert offset folio 316 here 48455A.208
255 


smartinez on PROD1PC64 with HEARINGInsert offset folio 317 here 48455A.209
256 


smartinez on PROD1PC64 with HEARINGInsert offset folio 318 here 48455A.210
257 


smartinez on PROD1PC64 with HEARINGInsert offset folio 319 here 48455A.211
258 


smartinez on PROD1PC64 with HEARINGInsert offset folio 320 here 48455A.212
259 


smartinez on PROD1PC64 with HEARINGInsert offset folio 321 here 48455A.213
260 


smartinez on PROD1PC64 with HEARINGInsert offset folio 322 here 48455A.214
261 


smartinez on PROD1PC64 with HEARINGInsert offset folio 323 here 48455A.215
262 


smartinez on PROD1PC64 with HEARINGInsert offset folio 324 here 48455A.216
263 


smartinez on PROD1PC64 with HEARINGInsert offset folio 325 here 48455A.217
264 


smartinez on PROD1PC64 with HEARINGInsert offset folio 326 here 48455A.218
265 


smartinez on PROD1PC64 with HEARINGInsert offset folio 327 here 48455A.219
266 


smartinez on PROD1PC64 with HEARINGInsert offset folio 328 here 48455A.220
267 


smartinez on PROD1PC64 with HEARINGInsert offset folio 329 here 48455A.221
268 


smartinez on PROD1PC64 with HEARINGInsert offset folio 330 here 48455A.222
269 


smartinez on PROD1PC64 with HEARINGInsert offset folio 331 here 48455A.223
270 


smartinez on PROD1PC64 with HEARINGInsert offset folio 332 here 48455A.224
271 


smartinez on PROD1PC64 with HEARINGInsert offset folio 333 here 48455A.225
272 


smartinez on PROD1PC64 with HEARINGInsert offset folio 334 here 48455A.226
273 


smartinez on PROD1PC64 with HEARINGInsert offset folio 335 here 48455A.227
274 


smartinez on PROD1PC64 with HEARINGInsert offset folio 336 here 48455A.228
275 


smartinez on PROD1PC64 with HEARINGInsert offset folio 337 here 48455A.229
276 


smartinez on PROD1PC64 with HEARINGInsert offset folio 338 here 48455A.230
277 


smartinez on PROD1PC64 with HEARINGInsert offset folio 339 here 48455A.231
278 


smartinez on PROD1PC64 with HEARINGInsert offset folio 340 here 48455A.232
279 


smartinez on PROD1PC64 with HEARINGInsert offset folio 341 here 48455A.233
280 


smartinez on PROD1PC64 with HEARINGInsert offset folio 342 here 48455A.234
281 


smartinez on PROD1PC64 with HEARINGInsert offset folio 343 here 48455A.235
282 


smartinez on PROD1PC64 with HEARINGInsert offset folio 344 here 48455A.236
283 


smartinez on PROD1PC64 with HEARINGInsert offset folio 345 here 48455A.237
284 


smartinez on PROD1PC64 with HEARINGInsert offset folio 346 here 48455A.238
285 


smartinez on PROD1PC64 with HEARINGInsert offset folio 347 here 48455A.239
286 


smartinez on PROD1PC64 with HEARINGInsert offset folio 348 here 48455A.240
287 


smartinez on PROD1PC64 with HEARINGInsert offset folio 349 here 48455A.241
288 


smartinez on PROD1PC64 with HEARINGInsert offset folio 350 here 48455A.242
289 


smartinez on PROD1PC64 with HEARINGInsert offset folio 351 here 48455A.243
290 


smartinez on PROD1PC64 with HEARINGInsert offset folio 352 here 48455A.244
291 


smartinez on PROD1PC64 with HEARINGInsert offset folio 353 here 48455A.245
292 


smartinez on PROD1PC64 with HEARINGInsert offset folio 354 here 48455A.246
293 


smartinez on PROD1PC64 with HEARINGInsert offset folio 355 here 48455A.247
294 


smartinez on PROD1PC64 with HEARINGInsert offset folio 356 here 48455A.248
295 


smartinez on PROD1PC64 with HEARINGInsert offset folio 357 here 48455A.249
296 


smartinez on PROD1PC64 with HEARINGInsert offset folio 358 here 48455A.250
297 


smartinez on PROD1PC64 with HEARINGInsert offset folio 359 here 48455A.251
298 


smartinez on PROD1PC64 with HEARINGInsert offset folio 360 here 48455A.252
299 


smartinez on PROD1PC64 with HEARINGInsert offset folio 361 here 48455A.253
300 


smartinez on PROD1PC64 with HEARINGInsert offset folio 362 here 48455A.254
301 


smartinez on PROD1PC64 with HEARINGInsert offset folio 363 here 48455A.255
302 


smartinez on PROD1PC64 with HEARINGInsert offset folio 364 here 48455A.256
303 


smartinez on PROD1PC64 with HEARINGInsert offset folio 365 here 48455A.257
304 


smartinez on PROD1PC64 with HEARINGInsert offset folio 366 here 48455A.258
305 


smartinez on PROD1PC64 with HEARINGInsert offset folio 367 here 48455A.259
306 


smartinez on PROD1PC64 with HEARINGInsert offset folio 368 here 48455A.260
307 


smartinez on PROD1PC64 with HEARINGInsert offset folio 369 here 48455A.261
308 


smartinez on PROD1PC64 with HEARINGInsert offset folio 370 here 48455A.262
309 


smartinez on PROD1PC64 with HEARINGInsert offset folio 371 here 48455A.263
310 


smartinez on PROD1PC64 with HEARINGInsert offset folio 372 here 48455A.264
311 


smartinez on PROD1PC64 with HEARINGInsert offset folio 373 here 48455A.265
312 


smartinez on PROD1PC64 with HEARINGInsert offset folio 374 here 48455A.266
313 


smartinez on PROD1PC64 with HEARINGInsert offset folio 375 here 48455A.267
314 


smartinez on PROD1PC64 with HEARINGInsert offset folio 376 here 48455A.268
315 


smartinez on PROD1PC64 with HEARINGInsert offset folio 377 here 48455A.269
316 


smartinez on PROD1PC64 with HEARINGInsert offset folio 378 here 48455A.270
317 


smartinez on PROD1PC64 with HEARINGInsert offset folio 379 here 48455A.271
318 


smartinez on PROD1PC64 with HEARINGInsert offset folio 380 here 48455A.272
319 


smartinez on PROD1PC64 with HEARINGInsert offset folio 381 here 48455A.273
320 


smartinez on PROD1PC64 with HEARINGInsert offset folio 382 here 48455A.274
321 


smartinez on PROD1PC64 with HEARINGInsert offset folio 383 here 48455A.275
322 


smartinez on PROD1PC64 with HEARINGInsert offset folio 384 here 48455A.276
323 


smartinez on PROD1PC64 with HEARINGInsert offset folio 385 here 48455A.277
324 


smartinez on PROD1PC64 with HEARINGInsert offset folio 386 here 48455A.278
325 


smartinez on PROD1PC64 with HEARINGInsert offset folio 387 here 48455A.279
326 


smartinez on PROD1PC64 with HEARINGInsert offset folio 388 here 48455A.280
327 


smartinez on PROD1PC64 with HEARINGInsert offset folio 389 here 48455A.281
328 


smartinez on PROD1PC64 with HEARINGInsert offset folio 390 here 48455A.282
329 


smartinez on PROD1PC64 with HEARINGInsert offset folio 391 here 48455A.283
330 


smartinez on PROD1PC64 with HEARINGInsert offset folio 392 here 48455A.284
331 


smartinez on PROD1PC64 with HEARINGInsert offset folio 393 here 48455A.285
332 


smartinez on PROD1PC64 with HEARINGInsert offset folio 394 here 48455A.286
333 


smartinez on PROD1PC64 with HEARINGInsert offset folio 395 here 48455A.287
334 


smartinez on PROD1PC64 with HEARINGInsert offset folio 396 here 48455A.288
335 


smartinez on PROD1PC64 with HEARINGInsert offset folio 397 here 48455A.289
336 


smartinez on PROD1PC64 with HEARINGInsert offset folio 398 here 48455A.290
337 


smartinez on PROD1PC64 with HEARINGInsert offset folio 399 here 48455A.291
338 


smartinez on PROD1PC64 with HEARINGInsert offset folio 400 here 48455A.292
339 


smartinez on PROD1PC64 with HEARINGInsert offset folio 401 here 48455A.293
340 


smartinez on PROD1PC64 with HEARINGInsert offset folio 402 here 48455A.294
341 


smartinez on PROD1PC64 with HEARINGInsert offset folio 403 here 48455A.295
342 


smartinez on PROD1PC64 with HEARINGInsert offset folio 404 here 48455A.296
343 


smartinez on PROD1PC64 with HEARINGInsert offset folio 405 here 48455A.297
344 


smartinez on PROD1PC64 with HEARINGInsert offset folio 406 here 48455A.298
345 


smartinez on PROD1PC64 with HEARINGInsert offset folio 407 here 48455A.299
346 


smartinez on PROD1PC64 with HEARINGInsert offset folio 408 here 48455A.300
347 


smartinez on PROD1PC64 with HEARINGInsert offset folio 409 here 48455A.301
348 


smartinez on PROD1PC64 with HEARINGInsert offset folio 410 here 48455A.302
349 


smartinez on PROD1PC64 with HEARINGInsert offset folio 411 here 48455A.303
350 


smartinez on PROD1PC64 with HEARINGInsert offset folio 412 here 48455A.304
351 


smartinez on PROD1PC64 with HEARINGInsert offset folio 413 here 48455A.305
352 


smartinez on PROD1PC64 with HEARINGInsert offset folio 414 here 48455A.306
353 


smartinez on PROD1PC64 with HEARINGInsert offset folio 415 here 48455A.307
354 


smartinez on PROD1PC64 with HEARINGInsert offset folio 416 here 48455A.308
355 


smartinez on PROD1PC64 with HEARINGInsert offset folio 417 here 48455A.309
356 


smartinez on PROD1PC64 with HEARINGInsert offset folio 418 here 48455A.310
357 


smartinez on PROD1PC64 with HEARINGInsert offset folio 419 here 48455A.311
358 


smartinez on PROD1PC64 with HEARINGInsert offset folio 420 here 48455A.312
359 


smartinez on PROD1PC64 with HEARINGInsert offset folio 421 here 48455A.313
360 


smartinez on PROD1PC64 with HEARINGInsert offset folio 422 here 48455A.314
361 


smartinez on PROD1PC64 with HEARINGInsert offset folio 423 here 48455A.315
362 


smartinez on PROD1PC64 with HEARINGInsert offset folio 424 here 48455A.316
363 


smartinez on PROD1PC64 with HEARINGInsert offset folio 425 here 48455A.317
364 


smartinez on PROD1PC64 with HEARINGInsert offset folio 426 here 48455A.318
365 


smartinez on PROD1PC64 with HEARINGInsert offset folio 427 here 48455A.319
366 


smartinez on PROD1PC64 with HEARINGInsert offset folio 428 here 48455A.320
367 


smartinez on PROD1PC64 with HEARINGInsert offset folio 429 here 48455A.321
368 


smartinez on PROD1PC64 with HEARINGInsert offset folio 430 here 48455A.322
369 


smartinez on PROD1PC64 with HEARINGInsert offset folio 431 here 48455A.323
370 


smartinez on PROD1PC64 with HEARINGInsert offset folio 432 here 48455A.324
371 


smartinez on PROD1PC64 with HEARINGInsert offset folio 433 here 48455A.325
372 


smartinez on PROD1PC64 with HEARINGInsert offset folio 434 here 48455A.326
373 


smartinez on PROD1PC64 with HEARINGInsert offset folio 435 here 48455A.327
374 


smartinez on PROD1PC64 with HEARINGInsert offset folio 436 here 48455A.328
375 


smartinez on PROD1PC64 with HEARINGInsert offset folio 437 here 48455A.329
376 


smartinez on PROD1PC64 with HEARINGInsert offset folio 438 here 48455A.330
377 


smartinez on PROD1PC64 with HEARINGInsert offset folio 439 here 48455A.331
378 


smartinez on PROD1PC64 with HEARINGInsert offset folio 440 here 48455A.332
379 


smartinez on PROD1PC64 with HEARINGInsert offset folio 441 here 48455A.333
380 


smartinez on PROD1PC64 with HEARINGInsert offset folio 442 here 48455A.334
381 


smartinez on PROD1PC64 with HEARINGInsert offset folio 443 here 48455A.335
382 


smartinez on PROD1PC64 with HEARINGInsert offset folio 444 here 48455A.336
383 


smartinez on PROD1PC64 with HEARINGInsert offset folio 445 here 48455A.337
384 


smartinez on PROD1PC64 with HEARINGInsert offset folio 446 here 48455A.338
385 


smartinez on PROD1PC64 with HEARINGInsert offset folio 447 here 48455A.339
386 


smartinez on PROD1PC64 with HEARINGInsert offset folio 448 here 48455A.340
387 


smartinez on PROD1PC64 with HEARINGInsert offset folio 449 here 48455A.341
388 


smartinez on PROD1PC64 with HEARINGInsert offset folio 450 here 48455A.342
389 


smartinez on PROD1PC64 with HEARINGInsert offset folio 451 here 48455A.343

smartinez on PROD1PC64 with HEARING
(391) 

TUESDAY, APRIL 1, 2008. 

RURAL DEVELOPMENT 

WITNESSES 

THOMAS C. DORR, UNDER SECRETARY, USDA RURAL DEVELOPMENT 

BEN ANDERSON, ADMINISTRATOR, BUSINESS AND COOPERATIVE 

PROGRAMS 

RUSSELL T. DAVIS, ADMINISTRATOR, RURAL HOUSING SERVICE 

JAMES M. ANDREW, ADMINISTRATOR, RURAL UTILITIES SERVICE 

W. SCOTT STEELE, BUDGET OFFICE, DEPARTMENT OF AGRICULTURE 

Ms. DELAURO. Good morning. The hearing will come to order. 

And I want to welcome you, Mr. Under Secretary and the rest 

of your team here, Mr. Anderson, administrator for rural business—cooperative service; Mr. Davis, administrator for rural housing services; Mr. Andrew, administrator for rural utilities service, 

and our perennial and favorite here, W. Scott Steele, budget officer. 

Thank you all very, very much, and Mr. Secretary, I’m really delighted that I had the opportunity to meet with you yesterday before today’s hearing to discuss this year’s Rural Development budget request. 

Thank you for coming today with the team to discuss the budget 

with the subcommittee. 

Federal efforts to strengthen rural America and to preserve the 

strength that it provides our entire nation are really critical to facilitate growth, and soften the impact of population loss. 

Indeed, Rural Development is one of the most important areas in 

USDA’s broad portfolio. It touches almost every aspect of people’s 

lives in rural America, and I believe you share this view, that we 

have an obligation to get it right. 

To be sure, not all rural areas are alike culturally or economically, and each has its own unique challenges. What is clear, however, is that the challenges are growing. 

Under Secretary Dorr, your mission could not be more important. 

Our goals are straightforward. We seek not only to sustain our 

rural communities, but also to create new possibilities for growth 

and development in their small town economies. 

I look forward to your comments in today’s discussion as we consider how the budget should strive to meet those goals. 

As the current economic downturn continues to weigh very heavily on families in every region of our nation, I believe we have a 

particular responsibility to ensure our rural communities have the 

tools to survive. I believe government has a duty to help provide 

the same quality of life opportunities to rural America that are 

shared by other parts of this country. 

I have some concerns about the USDA’s ability to meet that task. 

I outlined some of those concerns I have about the administration’s 


smartinez on PROD1PC64 with HEARING
392 

rural development budget with you already. But let me just address a few of them in a little greater depth. Overall Rural Development funding is about $805 million below 

the amount provided in 2008, excluding the increase in the rental 

assistance account. 

In particular, the budget request provides $24 million for the rural community facilities program. That’s a $45 million or 65 percent cut below the amount provided in 2008. The budget request provides $30 million for the Rural Business program, $57 million, or 65 percent below the amount provided in 

2008, and $269 million for the Rural Water and Waste Disposal 

program, or $290 million, 52 percent below 2008. 

It eliminates funding for Community Facility Grants and the 

Rural Business and Enterprise Opportunity programs. It does the 

same when it comes to housing, eliminating funding for the direct 

single family housing loan program, zeroing out the Section 515, 

multi-family housing direct loan program. 

These programs offer interest assistance and focus primarily on 

the very low and low-income borrower. At the same time, the budget again proposes to increase fees for the guaranteed program from 

2 to 3 percent, making it even more expensive to the borrower, 

while reducing the budget for its program costs. 

Ultimately, between the fee proposal and eliminating the direct housing program, the budget request provides $21 million, or $207 

million, 91 percent below the amount provided in 2008. 

These cuts to rural housing are particularly troubling in the context of today’s sub-prime mortgage crisis. Programs like these are 

supposed to offer a safe alternative to sub-prime mortgages for 

creditworthy low and moderate-income rural home buyers. Now is 

not the time to undermine. 

In addition to serious questions about the budget, I also believe 

we must take a hard look at the announcement last week that 

Open Range has been approved to receive a $267 million loan to 

provide broadband service to 518 rural communities in 17 states. 

This loan represents 90 percent of the funds provided in fiscal 

2008 for the broadband program, and I think we should discuss the 

Rural Development office’s ability to manage a project of this size. 

There are no easy solutions to the big challenges facing rural 

America. Indeed, building a healthy rural economy requires more 

than simple supports for farm products. 

It means investing in entrepreneurship in rural areas, early 

childhood centers, rehabilitation, medical centers, providing infrastructure for electricity, clean water, water treatment, and yes, 

Internet, broadband that connects rural communities to the global 

community and the global economy. 

It means harnessing innovation, pursuing energy independence, 

making a bold new commitment to renewable energy. And the list 

goes on. 

But if we are going to make rural America as productive and sustainable in the 21st century as it was in the last, we are going to 

have to step up and use federal policy as a valuable tool to put 

middle and working class rural families center stage. 

Today’s hearing is about examining this budget through that 

lens. Does it soften the impact of population loss and take delibVerDate Nov 24 2008 01:13 Apr 21, 2009 Jkt 048455 PO 00000 Frm 00392 Fmt 6601 Sfmt 6601 E:\HR\OC\A455P2.XXX A455P2

smartinez on PROD1PC64 with HEARING
393 

erate steps to foster new growth? Does it reflect our priorities as 

a nation? And does it meet our obligation to rural America? 

I thank you again, Under Secretary Dorr, for being here, and I 

now would like to recognize our ranking member, Mr. Kingston. 

Mr. KINGSTON. Thank you, Madam Chair. 

I don’t have any real opening statement, but I do want to underscore that on the farm bill, there’s a proposed increase on mandatory rural health care facilities, and frankly, I don’t see how we’re 

ever going to balance the budget with all the new mandatory 

spending that the president has proposed on the farm bill. 

The farm bill, as you know, is 63 percent food and nutrition, and 

there’s a big expansion of mandatory eligibility under that, and 

then you have this mandatory spending. 

And I don’t quite follow how the administration can spend so 

much time on the commodity program of the farm bill, which I 

think is 17 percent, and act like payment limitation is the biggest 

problem that’s out there, when, with a sleight of hand, the remaining balance of the farm bill is getting dedicated more and more, 

year after year, to mandatory spending, and, as you know, that’s 

just one bill of lots and lots of bills that we have to fund. 

And I think if we’re going to have more flexibility, we can’t lock 

ourselves into all this mandatory spending. 

And I just wanted to make that point. 

Ms. DELAURO. Thank you, Mr. Kingston. 

And Under Secretary Dorr, we await your testimony, and obviously, everyone’s testimony will be part of the record, the official 

record, so I’ll ask you to commence and to summarize your remarks 

in any way that you so choose. 

Thank you. 

OPENING STATEMENT

Mr. DORR. Thank you, Madam Chairwoman and Ranking Member Kingston, members of the subcommittee. I do appreciate the 

opportunity to again appear before you to discuss USDA Rural Development’s budget for fiscal year 2009. 

Before beginning, I would like to once again pay tribute to the 

6,100 men and women across the country who together are USDA 

Rural Development. 

We are an agency in transition. That is both a challenge, but I 

believe an opportunity. And I am proud to report that our associates have risen to both, all across the country. 

We are now implementing new business plans in every state. We 

have already reached our new FTE, full-time equivalent target of 

6,100. We are completing our office realignments, which will bring 

our field structure to 448 offices. These are reductions of 13 percent 

and 44 percent, respectively, since 2001. 

At the same time, we are investing in training and technology to 

support a leaner staff in a restructured technologically intensive 

environment. We are reaching out to new partners and seeking to 

engage untraditional lenders. We are simplifying and streamlining 

program delivery to accelerate this process. 

We continue to shift our emphasis from grants to loans and loan 

guarantees in order to leverage our resources and serve more people, and at the same time, we are developing new tools, such as 


smartinez on PROD1PC64 with HEARING
394 

SEBAS, the Socio-Economic Benefits Assessment System, which 

enables us to improve program evaluation as well as help us do a 

better job of targeting our investments in the future. 

These things ultimately will make us a leaner, more efficient, 

more responsive partner for rural businesses, rural families, and 

rural communities. 

So as I come before you for the last time to present the budget 

on behalf of the Bush administration, I would like to say simply 

that I am immensely proud of the way our employees have met 

these challenges. 

Change is hard. It takes good people to get it done. We have good 

people, and they are in fact getting it done. 

The President’s fiscal year 2009 budget proposes $2.1 billion in 

budget authority to support a program level of $14.9 billion for 

USDA Rural Development. 

As was the case last year, this budget request does not include 

significant additional funding contained in the President’s separate 

Farm Bill proposal. 

Mandatory funding for rural health care facilities, renewable energy loans and grants, rural water and waste water disposal systems, broadband access loans, distance learning, and telemedicine 

grants are all in the Farm Bill, and obviously, those we’ll not be 

discussing today. 

The fiscal year 2009 budget is not, though, a status quo proposal. 

It accommodates the institutional and programmatic transformation which I’ve just noted. It recognizes the opportunities inherent in distributed computing and broadband, and renewable energy, and in an ever more diversified rural economy. 

It recognizes the need to engage rural America’s wealth in a 

transparent, responsible, and fiduciarily sound manner, to not just 

create wealth, but to actually capture and leverage it for sustainable growth in rural communities. 

And it recognizes that we cannot remain a static provider of traditional programs via traditional methods and hope to remain relevant in this new, dynamic, and ultimately increasingly competitive environment. 

The budget protects the most vulnerable rural residents by fully 

funding multi-family housing rental assistance, while allocating 

$100 million for a new pilot program of rental assistance vouchers, 

and at the same time, it shifts funding for both single and multifamily housing construction to guarantee platforms to serve more 

people more efficiently. 

The budget funds critical infrastructure priorities, while focusing 

electric program lending on transmission, distribution, and system 

improvements along with environmental improvements rather than 

solely on baseload generation, and it seeks a $49 million budget authority to support $738 million in direct and guaranteed loans and 

grants for Rural Business and Cooperative programs. 

Without question, the budget does make hard choices. It recognizes and accepts the challenges of this budget cycle and focuses 

resources on new challenges and opportunities. 


smartinez on PROD1PC64 with HEARING
395 

I appreciate the support of the subcommittee for rural America. 

We look forward to working with you to carry on this important 

work. And I thank you for the opportunity to work with you. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
396 


smartinez on PROD1PC64 with HEARINGInsert offset folio 462 here 48455A.344
397 


smartinez on PROD1PC64 with HEARINGInsert offset folio 463 here 48455A.345
398 


smartinez on PROD1PC64 with HEARINGInsert offset folio 464 here 48455A.346
399 


smartinez on PROD1PC64 with HEARINGInsert offset folio 465 here 48455A.347
400 


smartinez on PROD1PC64 with HEARINGInsert offset folio 466 here 48455A.348
401 


smartinez on PROD1PC64 with HEARINGInsert offset folio 467 here 48455A.349
402 


smartinez on PROD1PC64 with HEARINGInsert offset folio 468 here 48455A.350
403 


smartinez on PROD1PC64 with HEARINGInsert offset folio 469 here 48455A.351
404 


smartinez on PROD1PC64 with HEARINGInsert offset folio 470 here 48455A.352
405 


smartinez on PROD1PC64 with HEARINGInsert offset folio 471 here 48455A.353
406 


smartinez on PROD1PC64 with HEARINGInsert offset folio 472 here 48455A.354
407 


smartinez on PROD1PC64 with HEARINGInsert offset folio 473 here 48455A.355
408 


smartinez on PROD1PC64 with HEARINGInsert offset folio 474 here 48455A.356
409 


smartinez on PROD1PC64 with HEARINGInsert offset folio 475 here 48455A.357
410 


smartinez on PROD1PC64 with HEARINGInsert offset folio 476 here 48455A.358
411 


smartinez on PROD1PC64 with HEARINGInsert offset folio 477 here 48455A.359
412 


smartinez on PROD1PC64 with HEARINGInsert offset folio 478 here 48455A.360
413 


smartinez on PROD1PC64 with HEARINGInsert offset folio 479 here 48455A.361
414 


smartinez on PROD1PC64 with HEARINGInsert offset folio 480 here 48455A.362
415 


smartinez on PROD1PC64 with HEARINGInsert offset folio 481 here 48455A.363
416 


smartinez on PROD1PC64 with HEARINGInsert offset folio 482 here 48455A.364
417 


smartinez on PROD1PC64 with HEARINGInsert offset folio 483 here 48455A.365
418 


smartinez on PROD1PC64 with HEARINGInsert offset folio 484 here 48455A.366
419 


smartinez on PROD1PC64 with HEARINGInsert offset folio 485 here 48455A.367
420 


smartinez on PROD1PC64 with HEARINGInsert offset folio 486 here 48455A.368
421 


smartinez on PROD1PC64 with HEARINGInsert offset folio 487 here 48455A.369
422 


smartinez on PROD1PC64 with HEARINGInsert offset folio 488 here 48455A.370
423 


smartinez on PROD1PC64 with HEARINGInsert offset folio 489 here 48455A.371
424 


smartinez on PROD1PC64 with HEARINGInsert offset folio 490 here 48455A.372
425 

Ms. DELAURO. Thank you very, very much, Mr. Under Secretary. 

Let me just begin the questioning with something that I said in 

my opening remarks. 

And the budget request proposes—it’s also something you said in 

your testimony, that this is, it’s a budget that is very, very similar 

to what we saw last year, so maybe I would characterize it as ‘‘deja 

vu all over again’’ plus more, and in this context. 

ELIMINATION OF PROGRAMS

The budget request proposes to eliminate the following programs: 

community facility grants, rural business opportunity grants, rural 

business enterprise grants, Section 502 direct single family housing 

loans, Section 515 direct multi-family housing loans. 

New to be eliminated are the multi-family housing revitalization 

loans, mutual self-help housing grants, farm labor housing loans, 

farm labor housing grants, rural economic development loans, rural 

economic development grants, value added agricultural product 

marketing development grants—that’s new, rural empowerment 

zones and enterprise communities—that was there last year, new 

renewable energy loans, renewable energy grants—same as last 

year, broadband telecommunication grants. 

Also, the budget request proposes to significantly cut the following programs: Section 504 direct housing repair loans, rural 

electric loans, distance learning and telemedicine grants, and water 

and waste grants. 

This year, you’re proposing to rescind prior new year funds for 

multi-family housing revitalization and broadband loans. 

The list grows every year on the direct loan and grant programs 

you are proposing to eliminate or significantly cut in your evolution 

from grants and direct loans to loan guarantees. 

It will take almost $670 million to restore these programs to the 

2008 levels. 

Now, last year, most of the increase that we had in the bipartisan bill that this subcommittee produced put back much of this 

money. 

And let me just ask you about the program elimination. 

Aren’t the eliminations, cuts, are they more about the fact that 

you were not given the dollars from the OMB sufficient to fund 

these programs rather than, in my view, an indefensible policy decision to shift from grants to loans; and how will the farm bill offset all of these loan and grant program eliminations; and what are 

your contingency plans if—I don’t know any piece of legislation in 

this institution that gets all that it asks for, what you will not get 

from the farm bill, if we produce a farm bill at all. 

Mr. Secretary. 

Mr. DORR. Well, I appreciate your concerns, and I realize that 

this is a budget that is in transition. 

Number one, resources are tight. When you look at the aggregate 

amount of grants that are directed in this budget, as opposed to a 

year ago, we’re at nearly the same amount of money. 

We have worked very hard to make sure that, in the multi-family 

housing portfolio, that we aggressively work to protect those who 

need the greatest protection, and that is the tenants of our multifamily portfolio. 


smartinez on PROD1PC64 with HEARING
426 

As a result, we’ve put several hundred million dollars of assistance back into rental assistance, as well as added another $100 

million to the voucher program. 

Obviously, we had to take it from somewhere. We had to look at 

what was working and what wasn’t. 

We, I believe, in our housing efforts, have done a marvelous job, 

our staff has done a marvelous job of fixing a multi-family portfolio 

that had a lot of challenges, and so that when we’re done, ultimately, we will have a portfolio that has been restructured, that 

will have nearly maintained upwards of 90 percent of all the available units, and that will have maintained housing for those who 

need it the most in rural America. 

Probably 55 to 60 percent of our tenants are single, elderly, female and single parents. 

And in so doing, if we continue on this path that we are on, I 

believe we will get it done. 

We will have also restructured the portfolio so that we will have 

rehabilitated the majority of these properties so they have another 

20-year life span at a cost of something in the neighborhood of 

$26,000 to $30,000 a unit, as opposed to rebuilding them at a cost 

of in excess of $100,000 to $125,000. That obviously required making changes. 

In the process of doing that, we looked at our other programs, 

and you alluded to the value added producer grant program, which 

I believe we put into the Farm Bill proposal as a discretionary 

funding item, not a mandatory funding item. We did not attach 

funding to it. 

We also have substantive grants added in the Farm Bill proposal. We obviously don’t know where the Farm Bill is going to be 

at at this point. 

But in that context, we have also recognized that once we begin 

to effectively engage the equity that is in rural America, and I believe I’ve stated this in my testimony submitted earlier, over the 

last five years, farmer and rancher-enforced private properties have 

increased an aggregate of about $1 trillion in value. There is an inordinate amount of investment capital in rural America. 

And we think that one of the most effective things that we can 

do is engage the owners, the private property owners, the community bankers, the farm credit systems, to essentially put skin in the 

game, and if we can provide loan guarantees, whether it is in housing, whether it’s in multi-family housing, whether it is in energy 

or other developmental projects, the likelihood of success, extraordinary success, is much greater. 

So yes, we’ve made some decisions. We’ve made some choices. 

We may have some philosophical differences on the choices that 

we made. But we do believe that, long-term, this is a good direction 

and an appropriate direction to go. 

Ms. DELAURO. Thank you. 

My time is up. 

Mr. Kingston. 

RURAL ECONOMY

Mr. KINGSTON. Thank you, Madam Chair. 


smartinez on PROD1PC64 with HEARING
427 

Mr. Dorr, in terms of the rural situation in America right now, 

the rural economic situation, commodities are going up, and I guess 

let me ask you this, in terms—we all know corn has gone up. 

Haven’t other commodities, as well, as evidenced by the fact that 

I think you’re not paying that many counter-cyclical payments? 

Mr. DORR. I believe in general commodities have gone up, yes. 

Mr. KINGSTON. And in general, land is going up? 

Mr. DORR. That’s correct. 

Mr. KINGSTON. How does that—is that benefitting the farmers? 

Do you have statistical data to show that the economic picture 

in rural America is perhaps better than it’s been in 10 years or 

whatever? 

Mr. DORR. Well, probably the two easiest numbers, our net farm 

income was a record last year, is projected to be another record this 

year. Net farm exports were a record. 

I believe that net farm equity, as I just alluded to, is an all-time 

high, and the debt to equity ratios are I believe 8 or 9 percent debt 

to the equity. 

So I believe those, as two basic figures, would indicate the rural 

economy, from an agricultural standpoint, is in pretty good shape. 

Mr. KINGSTON. Can you get me those specifics? 

Mr. DORR. Certainly. 

We can—we will work with our Office of Chief Economist, who 

pulled together the latest numbers. 

Mr. KINGSTON. And since those are statistics, it’s a fact, then, 

that the rural economy is strong? 

Mr. DORR. Well, I mean, there are obviously always particular 

situations where you might challenge that, but generally speaking, 

yes, I think the rural economy is very strong. 

Mr. KINGSTON. The reason why I’m asking that is, the Federal 

Government is always quick to find something that’s broken and 

say, ‘‘We need a new program, we need new money,’’ and I say the 

Federal Government, meaning each branch, the executive and the 

legislative branch. 

Do you agree with that? 

Mr. DORR. Well, I would agree that appears to be the tendency. 

I don’t know that I agree with that approach. 

Mr. KINGSTON. Well, that being the case, though, is there something if the economy is strong that you can back off from? 

And I know you’re backing off on the labor program, but are 

there things that maybe we don’t need to be doing in this economy 

that we’ve done in other economies? 

Mr. DORR. I guess I’m not—I mean, are you talking about agriculturally, rural, in the general sense? 

Mr. KINGSTON. No, on rural development. 

Mr. DORR. In rural development? 

I mean, I think we have—if you look at our numbers, when we 

started, when this Administration came to town in 2001, Rural Development was investing about $9 billion annually in rural America 

at a budget cost of around $2.1 or $2.2 billion. 

This year, we are in a position to invest in fiscal year 2008 about 

$17.5 billion at a budget cost of about exactly the same as it was 

in 2001. 


smartinez on PROD1PC64 with HEARING
428 

The thing that we have done more than anything else is taken 

an approach that it is appropriate for the Federal Government to 

provide loan guarantees, if that’s what’s necessary to facilitate the 

startup of these new economic opportunities in rural America. 

Consequently, I think that’s been a reasonable shift. I think it’s 

appropriate. 

I believe I’ve said this in the past, but I’ll repeat it. 

For 75 years, we in the Federal Government have literally financed most everything in rural America, and consequently—and 

for good reason. I’m not being critical of that. 

I mean, everything from beginning to wire rural America with 

electricity to running the telephone lines, to digging the ponds, to 

tiling it, to building the terraces, subsidizing agribusiness through 

Title I. 

As a result, I think what we ultimately have done is stifled the 

innovativeness and the entrepreneurial activity in rural America in 

ways that we didn’t anticipate. We didn’t do any of this maliciously. 

Loan guarantees actually facilitate your traditional lenders, your 

farm credit system and others, to really step up. 

And you have bright, entrepreneurial, innovative people who say, 

‘‘We want to start an ethanol plant, we want to start a wind farm, 

we want to start some sort of a food processing system.’’ 

Historically, there was not really many places to go to get some 

additional assistance to assure these lenders, who typically weren’t 

used to working in this environment, to engage, and that is now 

happening on a more regular basis, and I think that is an appropriate policy approach in the direction that we’re going. 

Mr. KINGSTON. I just want to give you a chance to make that 

point, because I think it is important for these people to hear. 

$2 billion used to leverage out to 9, and now it leverages out to 

17, perhaps because of the strong economy, but in recognition of 

the programs that you’ve initiated. 

Mr. DORR. You know, I appreciate that, and one of the comments 

that I frequently make is that our budget is roughly $2 billion in 

Rural Development, net farm equity is over $2 trillion. That essentially tells you who is the dog and who is the tail. 

Mr. KINGSTON. Okay. Well, I’ll yield back. 

But I really do want to get those numbers on net export and equity—— 

Mr. DORR. We will certainly get those numbers to you. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
429 


smartinez on PROD1PC64 with HEARINGInsert offset folio 500 here 48455A.373
430 


smartinez on PROD1PC64 with HEARINGInsert offset folio 501 here 48455A.374
431 


smartinez on PROD1PC64 with HEARINGInsert offset folio 502 here 48455A.375
432 

Mr. KINGSTON. Thanks. 

Ms. DELAURO. Mr. Jackson. 

Mr. JACKSON. Thank you, Madam Chair, and thank you, Mr. Secretary. 

ASSISTANCE FOR LOW-INCOME SUBURBAN COMMUNITIES

The second congressional district of Illinois that I represent is 

very unique. 

I represent both Chicago, the urban metropolis, and suburban 

communities with populations ranging from 4,000 to 40,000. 

One of the suburban communities I represent is Fort Heights. 

In 2001, Fort Heights was in desperate need of new drinking 

water. Their system was producing unsafe water that was literally 

brown. 

And because of the small population of Fort Heights, USDA 

Rural Development was able to come into the community through 

loans and grants and installed a new water system for the community, including a new water tower. 

At the completion of the project, I toasted, alongside with Illinois 

Rural Development staff, clear, cool, drinking water. 

This was a great day for the residents of Fort Heights. I appreciated the help of the Illinois Rural Development department, and 

I look forward to working with them, as well. 

But there are many other communities that need the same help. 

With that said, what programs exist to help other low-income 

suburban communities like Fort Heights that are caught between 

large municipalities, not quite rural areas, but just beyond their 

borders, enormous and vast pockets, if you will, or parts of our 

country that are rural? 

The suburbs I represent are obviously eligible for help from 

Rural Development because their population is under 50,000, but 

does their proximity to big cities sometimes prevent them from getting help? 

And I want to close with just a small anecdote. 

When I first got here, and I was trying to get fresh water for 

Fort Heights, many of my colleagues, even my colleagues on the 

Democratic side of the aisle, kept referring to me as the congressman from Chicago, the congressman from Chicago. 

And in their minds, whenever they were helping Mayor Daley or 

helping Chicago, they were helping members of the Illinois Chicago 

delegation. 

But between Chicago and the congressional district that I specifically represent, Chicago at one level of another has much representation here in the Congress, but it’s these small rural communities 

that fit your definition, that fit the other elements of my congressional district’s definition, that have absolutely nothing to do with 

the municipality of Chicago. 

And so when I would make arguments for these small municipalities that fit the definition of rural and therefore qualified for 

Rural Development activities, I might as well have been talking to 

a wall, because many Members of Congress could not recognize or 

did not see me as representing a rural area. They see me as urban 

is what it is. 


smartinez on PROD1PC64 with HEARING
433 

Your thoughts, please, about what these communities can do, 

what Rural Development can do, and does their proximity to big 

cities prevent them from getting necessary help? 

Mr. DORR. Well, let me say at the outset that when the Washington Post was writing their series of articles on Rural Development, I wish they would have discussed this with you, because 

you’ve clearly identified one of the significant challenges that we’re 

engaged in, the population definitions of rural, and what happens 

to those small communities that somehow find themselves positioned adjacent to or too close to a large metropolitan area to qualify for a variety of Rural Development programs. 

Mr. JACKSON. I’m sure the Washington Post saw me as representing Chicago, and not rural areas, but thank you, Mr. Secretary. 

Mr. DORR. Well, nevertheless, there was a great deal of discussion about that very issue. 

And quite honestly, it’s been my experience, for the short term 

that I’ve been here, that defining rural is becoming a, and has always been, a significant challenge. 

All I would suggest is that we are in the process of working 

through the Farm Bill to try to streamline to make a more effective 

definition of rural, one that would allow us to then have the authority to prioritize certain components of this, particularly when 

it gets to the things like water and environmental programs and 

other things that are very essentially to these small communities. 

I don’t know that that’s a good answer. It is a difficult issue, one 

that we deal with all the time, and we’re fully aware of it. 

We’re continually trying to do what we can to not only streamline and better define, but to shoehorn, where we have to, communities in to fit programs when there are these defined needs. 

Mr. JACKSON. Thank you, Mr. Secretary. 

Thank you, Madam Chair. 

Ms. DELAURO. Thank you. 

FARM COMMUNITY VERSUS RURAL COMMUNITY

I just would take a second to say, and hopefully we can get into 

it later, that there really is a difference in the farm economy versus 

the rural economy, and often those two things get elided as to what 

is happening, and I think there is a real distinction there which we 

ought to probe in terms of the statistics, if you will, in terms of the 

wealth of rural America versus the wealth of a farm economy. 

Mr. Latham. 

Mr. LATHAM. Thank you, Madam Chairman, and you just took 

the words out of my mouth. 

But first of all, I want to—this is your last hearing before the 

subcommittee. 

I want to thank you for your service, and as a fellow Iowan, I 

really do appreciate what you’ve done in thinking outside the box, 

and made rural development something that is really developing 

rural America, and it’s a big change from what it used to be. 

And I appreciate the activity, the being visible, being available, 

that the department has been. 

And the chairwoman really hit on what was my point. At Alexander, Iowa today, when land was three, four years ago, $2,500 


smartinez on PROD1PC64 with HEARING
434 

maybe, an acre, today $6, 7, 8,000 an acre, you’ve got commodity 

prices, corn is well over $5 a bushel, soybeans probably $12, 13 a 

bushel, cash. 

But Alexander, my, you know, home town, is—you can’t buy a 

gallon of gasoline, you can’t buy a gallon of milk there. 

So there is all of this new-found wealth in rural Iowa, and rural 

America, but for a lot of people, the communities are dying, yet. 

We’ve had a real change with the energy production, ethanol, 

wind energy, like you mentioned before, biofuels. There’s some real 

problems on the horizon, I think. 

We’ve got in my district today a $60 million new biodiesel plant 

that they did a test run and they have never started it up because 

of the cost of soybean oil today. 

I think we’ve got some real challenges. 

I just, not really a specific question, but what do you see as far 

as the opportunities and challenges that are out there? 

Because there is this division, like the chairwoman said, between, well, how the farmers are doing and how the communities 

are doing. 

Mr. DORR. Well, I don’t think there’s any question that that’s the 

brain drain, the out-migration in rural areas, disassociated with 

the aggregating increase in size of farms. There’s always been a 

challenge. 

I do believe that there are some fundamental things that are 

changing, and they’re not going to be perhaps self-evident overnight. 

But, for example, when the highways, when the interstates and 

the railroads bypassed the community, it was effectively redlined, 

and that precipitated its demise. 

We are, in many respects, doing a better job, but I would be the 

first to admit we’re still struggling with trying to figure out how 

to use government to effectively deploy broadband access to rural 

communities. 

But if we do that, you essentially give these rural communities 

the opportunity to engage in a global economy in ways that they’ve 

never had prior to this time. 

That being the case, broadband, in and of itself, in my view, mitigates a lot of the traditional redline issues. 

Secondly, alternative energy, renewable energy, and I know you 

collectively are aware that I have focussed a lot on that, but I read 

an interesting article just a couple of days ago where T. Boone 

Pickens made the observation that he had historically not supported renewable biofuels and now thought it made a significant 

amount of sense, given where the industry has migrated to. 

And the real simple fact is that right now today we’re exporting 

well over $500 billion, maybe $600 billion annually to import oil. 

Most of that money ultimately could slosh around right back in 

rural America in ways that I don’t think we’ve ever thought about 

in the past and would not require a quid pro quo in a foreign policy 

arena. We could just keep it here. 

If we get to the president’s 20 and 10 initiative by 2022 of 36 billion, that’s almost a billion barrels of oil equivalent. That’s the 

same as greater than net farm income. 


smartinez on PROD1PC64 with HEARING
435 

When you do that, all at once a number of other things happen. 

These create high-value jobs, but it’s not just the jobs at the plant. 

They create a whole host of changes in regard to how do you integrate legacy, or how do you integrate distributed energy systems 

into these legacy systems? 

The bottom line is that all of these things that are going on in 

rural America are largely a function of distributed computing. 

You can put up a price competitive 100 million gallon ethanol 

plant as opposed to a 400,000 barrel a day refinery, and you can 

make them cost effective in rural America. 

That’s going to require policy change, it’s going to require state 

public utility commission change, it’s going to require a whole host 

of distribution and logistics management issues. 

These are all going to be dependent upon jobs that are very intellectual in nature. They’re going to give young people an opportunity to return to these rural areas if they so choose. 

And I think that, in the front end of this, it’s probably difficult 

to try to ascertain what exactly they’re going to be. 

But in the long run, I just look at it in the context of a half a 

trillion dollars. 

A half a trillion dollars that we could perhaps keep in rural 

America over a long period of time is obviously going to create a 

lot of opportunity, and I think that probably is the sum and substance of it. 

Mr. LATHAM. Does that filter down, though, I mean, outside of 

the landowners and the farmers themselves? That, to me, is—— 

Mr. DORR. Well, I think it can. 

Mr. LATHAM. Okay. Thanks. 

Obviously, our timer is not working very well. 

Mr. JACKSON. It told me to stop. 

Ms. DELAURO. Interesting that median income is 25 percent 

lower and the poverty rate is 28 percent higher than in the metro 

areas, so your point is well taken. 

Mr. Bishop. 

HELPING SMALL COMMUNITIES

Mr. BISHOP. Thank you, Madam Chairman, and welcome to you 

and I thank you for your service. 

Mr. Dorr, you may know my district has some of the poorest 

counties in the entire state of Georgia on a per capita basis, including Chatahoochie, Baker, Calhoun, Clay, Randolph, Stewart, Carroll, Clipman, and Webster Counties. 

Over the past several years, my staff has attempted to work with 

your agency to provide much-needed assistance in these communities, particularly in the areas of housing, infrastructure development, including water and sewer improvements, as well as economic development and job creation. 

And this is particularly true in Chatahoochie City County, which 

is now a consolidated city county, which has a base population of 

approximately 3,000 or 4,000 if you exclude the military population 

that is stationed at Fort Benning, and this community is in desperate need of a water tank as well as sewer improvements. 

Last year, the subcommittee report directed the department to 

take a closer look at this and other needs in the district, including 


smartinez on PROD1PC64 with HEARING
436 

the Zion City housing project and America Sumter County, Georgia, and we haven’t seen very much movement on it. We haven’t 

seen much cooperation or assistance in this regard. 

Tell me, where can some of our poorest rural communities turn 

if they can’t get help from USDA, can’t navigate the bureaucratic 

maze that USDA has, and they can’t afford the matching requirements for grants, and most of the other challenges? 

I was struck by the movement, particularly in your appropriations, to guaranteed loans as opposed to direct loans, and of course 

small and disadvantaged communities, particularly those communities that have minority populations, they’re not going to have the 

relationships with those financial institutions that will give them 

the guaranteed loans, and historically, they’ve always had to come 

directly to USDA. 

You’re abandoning a program which is the last and the only hope 

of small, disadvantaged communities and farmers, for that matter, 

to this guaranteed program, which is really shifting responsibility, 

which I would think that rural development would want to assume 

and to discharge very, very zealously, because historically, it has 

not been done by the private sector otherwise, and it’s still not 

being done, even with the guaranteed program, because you don’t 

get the participation, particularly from the people who need the 

help. 

Mr. DORR. We will certainly follow up on this particular issue. 

I appreciate the concerns that you’ve outlined and the challenges. 

We are and have worked with a group called the Southern Foundation, I believe it is, out of Helena, Arkansas, that has established 

a series of banks that are largely being developed to work with minority communities to effectively provide these kinds of assistance 

and services with, I think, some very, very, the leader of that organization, a fellow by the name of Joe Black, I would suggest that 

perhaps we could work out something with Mr. Black to have an 

opportunity to work with some of the folks in these communities. 

I do believe that, longer term, to the extent that—and our state 

directors do have the flexibility to shift some of these grants 

around and to leverage them more or less as certain circumstances 

warrant. 

But I do believe, in the long run, that direct loans and grants 

from the Federal Government tend to stifle entrepreneurial activity 

and innovative activity in these communities. 

I realize that some of them have greater challenges, and I think 

we need to try to do what we can in a straightforward and honest 

way to work with them, and I’d be more than willing to do it. 

But again, as I indicated at the very outset, one of the big challenges that we—— 

Mr. BISHOP. Mr. Dorr, I don’t mean to interrupt you, but it seems 

to me that you’re just adding another layer of bureaucracy when 

you do the guarantee. 

That does more to stifle entrepreneurship, except for the banking 

end of it. 

The entrepreneur that wants to do something in a rural community, that can go directly to USDA and get a loan and go to work 

with his investment of capital directly from USDA, that cuts out 

a whole lot of that bureaucratic red tape. 


smartinez on PROD1PC64 with HEARING
437 

And I don’t know about the entrepreneurial creation, but it 

seems to me like it’s just creating activity for financiers, as opposed 

to the people who really are going to be doing the nitty gritty, 

where the rubber meets the road, work. 

Mr. DORR. In our B&I program, the direct loan had a, the direct 

loan program in 2001 had a default rate of 47 percent. 

Our guaranteed portfolio has a default rate of about 53⁄4 percent 

today. 

Mr. BISHOP. That’s because they don’t make the loans to the people who need them. That’s exactly, that underscores the point. 

Ms. DELAURO. Mr. LaHood. 

BROADBAND IN RURAL AMERICA

Mr. LAHOOD. Mr. Dorr, thank you for your service. 

I want to be one of those who also thanks the staff that you have 

in Illinois. They’ve done an extraordinary job. 

Doug Wilson heads up the operation there, and he and his staff 

have done a terrific job. 

We’ve taken advantage of about every program that rural development has offered. 

I hope you’ll convey to Doug our sentiments, that at least in the 

20 counties that I represent, almost all rural, we are involved with 

new water supplies, new sewers, and lots of opportunities for different alternatives. So we appreciate the work that you all do. 

I agree with you 1,000 percent on the way to make rural communities relevant is through broadband. 

I would have hoped that, and I know it’s something that you’re 

interested in, I would have hoped it would have been the priority 

of this administration, I hope it’s the priority of the next administration, if we’re going to keep people in rural communities, we have 

to connect them to the world. The only way to do that is through 

broadband. 

I mean, many of these communities, as you’ve said, were redlined, either by the elimination of a road or a railroad or whatever, 

and that’s where rural areas are losing, because there’s a disconnect between them and the world. 

And, you know, some of them have computers, many of them 

don’t, but I’d like to know, you know, your feeling in this budget 

on where we’re going with broadband and if it—what kind of a priority it is for the remainder of your term and the term of this administration. 

Mr. DORR. Well, I think we can state unequivocally that the administration and those of us involved in rural development are 

very, very supportive of deployment of broadband accessibility 

wherever we can possibly get it. 

I would also, as I have in the past, be less than forthright if I 

didn’t say that it has been a distinct challenge. 

I think when policymakers in general envisioned deploying 

broadband to rural America, it was envisioned in the context of 

how we were able to do it with rural electrification or deployment 

of rural telecom, and had it been that way, I think it would have 

been far less complicated. 

The problem that we’ve run into is that we have a number of 

competitors, and where we have absolutely no service or maybe a 


smartinez on PROD1PC64 with HEARING
438 

very underserved environment, we have difficulty developing a 

business model or a business plan for those that come in and desire 

to provide service that will ultimately fly. 

And so consequently, trying to build this out in that kind of a 

competitive or semi-competitive environment has been a much 

more challenging issue than we had anticipated. 

As I know that you’re probably all aware, we just recently, as a 

matter of fact last week, announced an award of a broadband loan 

to a company called Open Range. It was a $266 million loan. 

The company put up $109 million of their own equity. It is using 

WiFi or Wimax technology in conjunction with low Earth orbit satellites, so that there will be a terrestrial component, as well as a 

satellite component. They’re going to deploy broadband in 17 

states. 

Their original five-year plan addresses nearly 500 communities, 

potentially a half a million recipients. 

It’s an interesting one, because I think in the long run we’re 

going to get questions from anyone, regardless of how we do it, but 

the fascinating part of it, as far as I’m concerned, is that, for the 

first time, we have people bringing a scaleable model to something 

that looks like it has a very good chance of working. 

Our people started working on this loan two years ago. It is 

much different than when it started out. 

That loan process wasn’t static. It’s very definitive, and I think 

it’s a good business plan. 

We’re going to closely monitor it, and hopefully it works, and if 

it does, I think it will give us some good indicators of how we can 

better deliver these broadband services down the road. 

Mr. LAHOOD. Thank you. 

Ms. DELAURO. Mr. LaHood, I’m going to get you a copy of an article that was in the International Herald Tribune, which talks 

about the European Union taking the lead in broadband growth, 

and where the various countries are, because I think I know that 

this is an area that is very, very important for you, and it makes 

some description of the kinds of things that they are doing. 

Mr. Farr. 

Mr. FARR. Thank you, Madam Chair. 

COMMUNITY FACILITIES IN CALIFORNIA

I have three questions, one about a loan guarantee and the other 

about farmworker housing, and I’ll try to get to them, because I 

can’t stay for a second round. 

I represent a very rural area of California, the central part of 

California. 

We have a hospital in the southern end of my county called Memorial in King City, and it’s about 70 miles from any other hospital. 

It serves a rural population, a lot of farmworkers, and from time 

to time, the large military training base there, that has no medical 

facilities, other than just a check-in clinic. 

And this hospital has gotten into some financial problems and 

has applied for a loan guarantee, and the guarantee that they’ve 

applied for has worked out a waiver of a tangible balance sheet eqVerDate Nov 24 2008 01:13 Apr 21, 2009 Jkt 048455 PO 00000 Frm 00438 Fmt 6601 Sfmt 6602 E:\HR\OC\A455P2.XXX A455P2

smartinez on PROD1PC64 with HEARING
439 

uity requirement for $8.5 million in the business and industry loan 

guarantee. 

The USDA’s California rural development office has apparently 

approved all of this, has submitted it to Washington, and here is 

where it’s got stuck in the bureaucracy. 

I wrote a letter to Mr. Anderson last month asking him to get 

it unstuck, and I understand that the national office executive loan 

committee convened on March 17th to consider this request. 

It was determined by them that the OGC, the Office of Attorney 

General, or of General Counsel was necessary to further consider 

the request, and it was promised that the OGC approval would be 

sought in very short order. 

Well, it seems that nobody can find the papers, OGC has not received any request, it remains unclear, after multiple conference 

calls from the folks in the district and in Region 9, and e-mails and 

dialogues, that the rural business cooperative services has not even 

made the determination of whether to present this to OGC. 

Can you get unstuck for me and get it done? The office, you 

know, is very good, they put out about $100 million worth of loan 

guarantees, they’re solidly behind this, and this hospital, without 

this loan guarantee, will go bankrupt. 

Mr. DORR. I am aware of the situation, and I will assure you that 

we’ll look into it. 

I understand that there has been a new management team recently brought into this hospital, and my understanding was that 

there was some revisiting of some of these plans and the numbers. 

Mr. Anderson, do you have any other comments? 

Mr. FARR. Just whatever it is. 

Mr. DORR. Right. 

Mr. FARR. Can we get it done, so we can get some information 

back to them? 

Mr. DORR. We will certainly take a look at it. We will get back 

to you, and we will get back to them. 

[The information follows:] 

Rural Development National Office staff met with Congressman Farr in person 

to discuss the Hospital’s application on April 17, 2008. The agency provided details 

on its analysis of the Hospital’s financial status and discussed various prospects for 

improving that status. Rural Development indicated it was receptive to participating 

in a meeting with the hospital, hospital financial advisors, and potential lenders to 

discuss the application further and explore options for further consideration of the 

proposal. 

Mr. FARR. Thank you. I mean, hopefully, in a very timely fashion. 

FARM LABOR HOUSING

The second issue I have is the followup on this discussion of 

rural development. 

An example, the city of Salinas. We have city centered growth, 

because we want to have people live in the cities, not on top of ag 

lands. You know, protect the ag lands, have people commute out 

to the fields. 

And so we get down to a couple of questions. 


smartinez on PROD1PC64 with HEARING
440 

One is, what is a farmworker community? We’ve had to have 

waivers, and those have happened before to get farmworker housing. 

But the other problem is really one of just a definition of what 

is a farmworker. California has a different definition than USDA. 

And what we would like to do, and I don’t know how we’re going 

to solve this, but I’ll have to meet with you to get a waiver or to 

work out some new language. 

We have people that are in the processing sheds, and they’re 

known as processors, but they’re not like—you know, they’re not 

really processing. 

The food doesn’t change its status. It’s essentially still raw food 

when it comes in and raw food when it goes out. It’s just packaged. 

Lettuce is put in a bag, a lot of that—that’s the processing of 

kind of the shipping and preservation of it, and these, mostly 

women, in these processing places, don’t qualify as farmworkers, 

although they are. They’re under the same wages and contracts 

and are working for the same ag growers. 

So I’d like to see if we could get a waiver using the state’s definition of farmworker or language change that includes the processing 

of raw vegetables, and I want to meet with you to see if we can 

work that out, as soon as possible. 

Mr. DORR. We’ll be delighted to sit down with you. 

Mr. FARR. And maybe to bring to us what your difficulties are 

with that kind of change. 

And lastly, I don’t think there’s anybody in the Congress that’s 

more interested in affordable housing. We’re in the coast of California. 

The future is that if we—we’re in, you know, what I call the in 

and out economy. 

I live in an area where you got to get fresh produce out. We sell $3 billion worth of crops. We harvest 85 crops. 

They’re all fresh crops. They got to get on trucks. Pick today, 

out—and they’re out tonight, and in the stores tomorrow or the 

next day. 

Our roads are all rural, they’re two lane, they’re going to get 

clogged with everybody now commuting to work, and so what happens is that what we need to do is what I call inclusionary housing. 

We got to build the jobs’ housing balance. 

If you provide a job, and we’re making companies do that now, 

you move in as a corporation to our area, which we love to have 

you, but you have to provide the housing close to where you work. 

So we include affordable housing. 

The difficulty is that that is usually all done through HUD, the 

HUD stuff, not with farmworkers, because that’s your jurisdiction. 

So what I really want to do is to get a greater outreach in the 

rural communities as to what you can do to help for farmworker 

housing. 

And what we ask here is essentially to find out exactly what 

you’re doing to promote the farmworker housing, whether the state 

rural development offices are promoting it through community 

meetings, encouraging applications to industry groups, and asking 

if there are any plans to do a portfolio assessment similar to the 

assessment done for multi-family housing loan portfolio to find out 


smartinez on PROD1PC64 with HEARING
441 

what population and housing needs are for the rural labor housing 

program. 

I can tell you it’s keen in California, and we’d like to have you, 

the department, being as aggressive in this field as HUD is working with the county housing authority. 

Mr. DORR. We will certainly look into that. 

Russ, do you have any—— 

Mr. DAVIS. Sure. 

If I could just say that farm labor housing new construction is 

something actually where we no longer have a monopoly. 

The largest builder is the low-income housing tax credit program, 

and in fact, the developers have found it to be, being a younger, 

newer program, it is more flexible and is very attractive to the developers. 

Our program has just become too expensive. We’re spending 

$150,000 per unit on average to build one apartment unit, essentially, plus we’re adding rental assistance to it. 

We could help far more people with the same amount of money. 

We’re finding it’s much more efficient to leave that construction 

to market rate housing, the tax credit use of vouchers, which is one 

thing we are proposing—— 

Mr. FARR. But I tell you, the combination works best of all, and 

I put together the first time that we’d ever worked with a housing 

authority and HUD on property owned by you in Soledad, California where we brought and dedicated for farmworker housing. 

Because we brought the whole gamut of loan portfolios and incentives together, we were able to build twice as much housing—— 

Mr. DAVIS. Oh, it is very nice for the people who get the funding, 

because there is a lot of concentrated grant money, essentially. 

The problem is that it doesn’t go very far. We only built 17 properties last year in the whole country. 

Mr. FARR. Well, let’s get together and figure out how to make 

this work. 

Mr. DAVIS. We’d be happy to talk about updating it. 

Mr. FARR. Thank you. 

Ms. DELAURO. Mrs. Emerson. 

Mrs. EMERSON. Thank you, Chairwoman. 

Thanks for being here, Mr. Dorr. 

HOUSING LOAN CRISIS

I think it was in your testimony that you referred to rural development as an investment bank for rural America. And given the 

state of the nation’s investment banks, that comparison alone may 

be cause for some concern. 

Tell us a little bit about what rural development’s risk exposure, 

in your home loan programs, might be, and what steps you all take 

to protect homeowners as well as taxpayers from the lending crisis. 

Mr. DORR. Actually, our risk exposure is really quite good, and 

I think maybe it would be best to turn it over to Mr. Davis and 

let him explain this. 

But the bottom line is that, in our single family housing programs, we essentially have never offered ARMs, we have not offered teaser rates. 


smartinez on PROD1PC64 with HEARING
442 

We have made it very clear at the get-go, whether they were direct or whether they were guaranteed loans, exactly what would be 

the homeowner’s payment, and in the environment when interest 

rates were dropping and home values were escalating and homeowners had considerable equity, we actually urged folks to get out 

of our program, to go to private financing, to lock in the lower 

rates, to mitigate the fact that if they had a direct loan, in which 

case if they stuck with it, or wanted to get out on their own, a lot 

of that appreciated equity would go back to the government, and 

we felt it was important to try to get them to end up with as much 

of that equity as possible. 

Russ, do you have anything else? 

Mr. DAVIS. If I can just say that 100 percent of our loans are not 

sub-prime, 100 percent loan-to-value. We’ve never had a lower delinquency rate in our history. 

And a large part of that is because we didn’t have the automatic 

ARM resets, but also because rural America really never got the 

bubble. 

There’s a lot of outmigration, there’s a lot of economies hurt by 

manufacturing pullback and so forth. 

And so we really are providing what the private sector has pulled 

out of. 

Our volume has almost doubled in the past year. Private sector 

lenders are leaving, we’re coming in. We’ll go up about 25,000 loans 

in volume this year. 

And one thing that is really important, and that is how careful 

we are to try to get the low credit borrowers into the program. 

Twenty-three percent of our borrowers have a FICO score of 

under 619, or no FICO score at all, so a quarter of our borrowers 

are locked out of the private sector, anyway. 

So we’re doing our job as lender of last resort in a big way, and 

that’s why we’re really focusing on the guarantees. 

Mrs. EMERSON. That’s good news. 

Fortunately, in my very rural area, people just don’t have—we 

don’t have that housing crisis that St. Louis or even Kansas City 

might have. 

PERSISTENT POVERTY COUNTIES

Last year at this hearing, Mr. Dorr, we discussed what rural development was doing for persistent poverty counties, and I’m very 

sad and distressed to say that so many of mine happen to fall into 

that category. 

And I had mentioned at that time that there was a need for an 

increased focus on the roughly 340 non-metro persistent poverty 

counties, and we did hear what rural development does to target 

these counties. 

However, about a month after this conversation, I read in the 

Washington Post this article that I know you all are aware of, that 

quotes, since 2001, quote, ‘‘more than three times as much money 

went to metropolitan areas with populations of 50,000 or more, 

$30.3 billion, as to poor or shrinking rural counties, $8.6 billion. 

Recreational or retirement communities alone got $8.8 billion.’’ So 

I have a few questions. 

Number one, is this a reasonable ratio? 


smartinez on PROD1PC64 with HEARING
443 

Two, does rural development need new or different tools to reach 

into these communities? 

According to your testimony, since 1999, rural development’s budget authority has increased by $100 million, and the program 

level has nearly doubled to $18.5 million. 

Is there any relationship between this increase in the program 

level and the apparent lack of investment in persistent poverty 

counties? 

So I’d like you to answer those questions, but with the caveat 

that believe me, I understand that you all are only a partner with 

local communities, and I need you to help us with the answers to 

those questions, but also help us figure out what I and my colleagues and other local leaders could be doing to help these communities who are persistent poverty communities capitalize on 

USDA rural development resources. 

Sorry, that’s a long question with some—— 

Mr. DORR. No, it is, and it’s a tough question, and I frankly 

would be disingenuous if I told you I had an answer for it. 

I do believe that our approach, one of the things, for example, 

that we’re doing in our B&I program is making a very, and that’s 

the business and industry loan guarantee program in conjunction 

with a number of our renewable energy, or the value added program or other things, is we are taking I believe 20 or 22 states in 

which we historically have not had aggressive relationships and 

B&I development relationships with the local lenders, and we are 

actually going out and making an effort to contact every rural lender in those 20 states. 

Giving you one example, we had one state that, about two-anda-half years ago, made about $20 million in annual loan guarantees 

to the B&I program. 

This year, through a very aggressive outreach effort, they will, 

presently six months into the year, have $120 million of loan guarantees on the books. 

I believe that the only way we ultimately get through this persistent poverty issue is that we have to generate economic activity 

in those communities based on whatever the structural strengths 

of them are. 

The long-term infrastructure issues will be addressed if you have 

strong economic activity, and whether or not we can address it in 

every one of these counties, whether or not, as the Post articles 

point out, we can redirect how that occurs, is an ongoing challenge. 

Rural definitional issues, there are a number of challenges that 

we have historically dealt with, and we’re trying to redefine our 

rural definition to give us greater flexibility in identifying those 

priority areas. 

If we’re successful at getting that done, we can, and better define 

those priority areas, perhaps we can do a better job of targeting the 

resources that we have in some of these areas. 

But a lot of it has to do with the way in which we historically 

have been structured. 

Historically, we were structured such that we waited for people 

to come into our offices. We’re not doing that any more. 

What we have done through our restructuring process is specifically designed to get our people cross-trained to be able to deliver 


smartinez on PROD1PC64 with HEARING
444 

more than one program, and we have great expectation that they 

will spend a great deal of their time out looking for business, working with constituents, exploring opportunities with local lenders, 

local developers, local councilmen, whatever the case might be. 

And to the extent that we’re able to carry through on that, I believe we’ll begin to generate a lot more interest and activity in 

these areas that you’re talking about. 

Mrs. EMERSON. Thank you. 

Ms. DELAURO. Ms. Kaptur. 

Ms. KAPTUR. Thank you, Madam Chair. 

Welcome, Mr. Secretary, and your associates. Glad to have you 

here today. And thank you for the special effort you made to stop 

by and see members prior to your testimony today. 

Thank you. We deeply appreciate it. 

OPEN RANGE COMMUNICATIONS BROADBAND LOAN

Just for the record, the Open Range communications proposal 

that you’ve been heavily involved in includes 17 states. 

I take it Ohio is not one of those states. Am I correct in that understanding? 

Mr. DORR. I believe it is. 

Ms. KAPTUR. It is one of the states? So any part of Ohio that’s 

rural would qualify? 

Mr. DORR. There are—the loan application and the approval 

process specifically designated certain counties and certain communities. 

Ultimately, as this plan is built out and they attain the buildout designated in their plan, my expectation is that they will wish 

to expand to other areas that are underserved adjacent to the areas 

that they’re presently serving. 

Ms. KAPTUR. If there’s any information about Ohio, I would 

greatly appreciate that as part of the record. 

Mr. DORR. Sure. 

Mr. Andrew indicates that we are—they are going to be building 

out in 50 communities in Ohio, they’ll be investing about $24 million of this project in Ohio. 

Ms. KAPTUR. Do we know—Ohio has 88 counties. Do you know 

how many counties that may touch? 

Mr. DORR. I don’t, but we can get that information to you. 

Ms. KAPTUR. All right. 

Mr. DORR. We would be delighted to. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
445 


smartinez on PROD1PC64 with HEARINGInsert graphic folio 534 48455A.376
446 


smartinez on PROD1PC64 with HEARINGInsert graphic folio 535 48455A.377
447 

Ms. KAPTUR. Thank you for your leadership on that. 

RENEWABLE ENERGY

I agree with the statement that you made not so long ago. Renewable energy is the biggest opportunity for economic growth and 

wealth creation in our country. I totally agree with that. 

The facts are that since this president has assumed office, America is importing a billion more barrels of oil per year than at the 

beginning of this decade. 

Whereas in the past, we had about a third of our trade deficit 

was comprised of petroleum imports, today it is 51 percent. So it’s 

getting worse. 

So all of us have an enormous role to play in that. I’m glad you 

see the Department of Agriculture’s in that, Mr. Secretary. 

And I’m very interested in the fact that in the budget submission, and I realize we have a farm bill out there, but in the budget 

submission, the administration, in terms of energy, zeroed out 

rural economic development loans, value added grants, renewable 

energy efficiency grants, renewable energy efficient loans. 

I know your interest and your deep commitment to energy independence. Could you sketch for this committee how you view your 

role in that, as a result of this budget submission. 

And also in answering that question, in last year’s appropriation 

bill, we had specifically identified wind production as a priority 

area for the utilities program. Could you address that, as well, as 

you respond to this question? 

And I thank you so much. 

Mr. DORR. Well, certainly. 

Yes, you’re correct, in terms of what is in the 2009 budget submission. 

I also, however, wish to point out that the Farm Bill proposal 

that was presented by the president and Secretary Johanns now 

well over a year ago clearly had a large component committed in 

what we call a new platform structure for energy programs. 

I believe the request was for a budget authority that would support a $2.1 billion loan guarantee program for biofuels, particularly 

in cellulosic refining, enviro-refineries. 

We had submitted a budget request for $500 million for the research title. 

We had included another, I believe, $500 million for what was 

the old energy efficiency and renewable energy portfolio, and I believe there was another $150 million submitted in that for research 

in the old 9008 biomass research and development portfolio. 

Clearly, we don’t know where the farm bill is at this point. I sincerely hope we have a bill that will support what the president has 

laid out in this. 

The thing that I think is also important to point out, and obviously we’re on different sides of the aisle, but I believe the President has had an extraordinarily strong commitment to renewable 

energy, and in that vein, early on, we got very engaged at USDA 

working collaboratively with the Department of Energy, and I believe that the relationship that we have developed with the Department of Energy using their technical and research assistance in the 

implementation of our energy efficiency and renewable energy proVerDate Nov 24 2008 01:13 Apr 21, 2009 Jkt 048455 PO 00000 Frm 00447 Fmt 6601 Sfmt 6602 E:\HR\OC\A455P2.XXX A455P2

smartinez on PROD1PC64 with HEARING
448 

gram, or the 9008 biomass R&D program, has been extraordinarily 

beneficial. We’re not duplicating things that they do and vice versa. 

So that collaboration has actually evolved now to a greater extent through the biomass R&D board in which we have co-chairs, 

and the Secretary of Agriculture and the Secretary of Energy cochair that committee. 

I’m the designee from Agriculture. Alexander Karsner is the designee from Energy. 

But we also meet monthly with representatives from EPA, CEQ, 

and all the other agencies very much involved with this entire 

issue, and I think it’s bringing a lot of focus to the entirety of the 

efforts. 

In response to your last question about wind, clearly, wind is a 

large component of renewable. 

Mr. Andrew’s programs allocate $200 million a year to renewables as a set-aside. Jim, do you want to address that issue? 

Mr. ANDREW. It is not specifically designated. I mean, we did 

specifically designate for renewables. 

We have done several wind projects. We have several that we’re 

looking at right now with at least 500 megawatts of power that will 

be incorporated—$200 million out of our budget set aside for renewables—— 

Ms. KAPTUR. Are those mostly west of the Mississippi rivers, sir? 

Mr. ANDREW. No. Two of them are in Missouri, one of them is 

in North Dakota, one is going to be in parts of South Dakota. 

Ms. DELAURO. Thank you, Ms. Kaptur. 

We will move to a second round, and obviously, more questions. 

Just a couple of points, I think, for clarification. 

And I’m not going to ask you to do this now, Mr. Secretary, but 

I think that there’s over-reliance on what is going to come from the 

farm bill, and we are going to be in very, very serious shape if the 

extent to which you are hoping that the farm bill is going to provide you with all of these resources. 

As I said earlier on, there isn’t any request that is 100 percent, 

and I haven’t yet heard anything about contingencies as to what 

we do with all of these programs if there is no farm bill. 

ELIMINATION OF PROGRAMS

But let me move to a couple of other areas. 

This is—the Economic Research Service was here about three 

weeks ago. I want to just give you this quote. 

‘‘Analysis shows that poor rural counties generally receive more 

grants and fewer guaranteed loans than rural counties in general. 

Poor communities often lack the ability to repay loans, given their 

limited tax base. 

This problem is exacerbated in small communities where the per 

person costs of providing public services are high. Consequently, 

the recent shift from rural development grants to direct or guaranteed loans may make it more difficult for low-income rural communities to finance local environmental infrastructure, telecommunication services, and community facilities.’’ 

ERS, sitting where you are not three weeks ago. 


smartinez on PROD1PC64 with HEARING
449 

The rural development budget proposes to eliminate most of the 

grant programs, some of the direct loan programs, in favor of guaranteed loan programs. 

But budget justifications say more communities can take on debt 

to address needs in this low interest rate environment. 

How do you plan to assist the other communities that cannot afford to take on debt, the more impoverished communities that need 

environmental infrastructure, telecommunication services, and 

community facilities? 

Mr. DORR. I was not aware of that document until after the fact, 

and had I been asked to edit it, I probably would have at least 

asked where they pulled all of that together. 

Again, we all know that there are certain communities that have 

significant problems. 

We have limited resources. We have aggressively tried to address 

many of the housing issues that we felt we could address within 

the context of this budget. 

Our grant levels are nearly, including the rental assistance, 

nearly at the same level that they were a year ago, and we will 

continue within the framework of the limited resources we have to 

try to mitigate those, but also try to facilitate mechanisms to create 

opportunities that historically haven’t been looked at. 

Ms. DELAURO. Without rental assistance, which you’re correct 

about that, but you also talk about your mission as to, and first 

priorities, as to dealing with the most vulnerable and the lowestincome areas, and clearly, I’m going to have you talk to ERS as to 

where they got their data, but that’s data that they provided us 

here. 

LOW-INCOME HOUSING

In terms of rural housing, again, a proposal to eliminate direct 

Section 502 single family housing, direct Section 515 rural rental 

housing. 

The budget says that we will receive a legislative proposal to increase the guarantee from 2 to 3 percent. 

Budget request is also proposing to remove the subsidized interest authorization and the fee component of the Section 538 guaranteed multi-family housing loan program. 

How will these guaranteed programs provide the same home 

ownership or rental opportunities that are provided through the direct Section 502 single family housing, direct Section 515 rural 

housing loan programs that you propose to eliminate? 

Also, you are also going to increase fees in the guaranteed programs. It would seem that you have given up on helping very lowincome achieve housing assistance. 

Mr. DORR. I’m actually going to ask Mr. Davis to respond to that, 

but before he does, I just want to say at the outset, I don’t think 

there is, we have not given up at all. 

As a matter of fact, I believe that our housing programs have 

been extraordinarily aggressive and successful over the last few 

years. 

We know that we can clearly reduce costs and access a lot more 

potential homeowners, even in these very low-income categories, as 

we have already been doing through the guarantee portfolio. 


smartinez on PROD1PC64 with HEARING
450 

We believe that, properly structured, we can continue that trend 

with perhaps some more level of enhanced subsidy. 

But, for example, just to access that market, you have 2,300 

bankers that are involved in our programs, as opposed to 448 offices. 

Just merely to be able to contact people and to get them into the 

program alone through these kinds of marketing strategies makes 

a big difference in the number of people you can contact, plus 

we—— 

Ms. DELAURO. Before we move to Mr. Davis, let me just add, on 

February, I believe it was February 28th, the secretary wrote to 

the president of the Senate, the vice president, ‘‘I’m submitting— 

Rural Housing Section 502 Guaranteed Loan Enhancement Act of 

2007.’’ 

In the letter itself it says that the average income of a direct home ownership customer 2007 is approximately $25,000, because 

you’ve got—it says that we’re going to deal with direct home ownership programs targeted to very low-income home owners. 

Now, the data that is then presented indicates that the average 

income of a guaranteed home ownership customer in fiscal 2007 

was approximately $45,000, and the majority of customers are in 

the moderate income range. 

The statute allows USDA to guarantee only fixed rate 30-year 

term loans to ensure long-term affordability. 

Through the proposed new subsidized guaranteed home ownership program, USDA anticipates helping families with an income 

of approximately $35,000 at a lower cost than providing direct 

loans. 

You’re not going to deal with the people who are at the lower income people. This is the recent legislation sent up here to deal with 

this 502 program. 

So one more time, you are not going to be dealing with the lowincome people, the lowest-income people that you lay out as your 

first and foremost responsibility. 

Mr. DORR. Well, and I appreciate your concerns on this. I think 

therein lies the crux of this entire sub-prime issue. 

Obviously, there are all kinds of debates about whether or not, 

in a general sense, we were placing people into homes who couldn’t 

afford homes, who would have been better off in apartments, and 

consequently, whether we’re going from 25 to 35 thousand, but we 

are in fact funding rental assistance in a way that would make affordable multi-family housing—— 

Ms. DELAURO. My time has expired. 

Mr. DORR. Okay. 

Ms. DELAURO. We’re going to get to that, and we’re going to get 

to the sub-prime before this hearing is concluded. 

Mr. Kingston. 

DEFAULT RATE FOR BUSINESS PROGRAMS

Mr. KINGSTON. Mr. Dorr, you had mentioned earlier that there 

was a default rate on the direct loan of 47 percent and 5.75 percent 

on guarantee? 

Mr. DORR. That was on the business and industry loan portfolio, 

not the housing portfolio. 


smartinez on PROD1PC64 with HEARING
451 

Mr. KINGSTON. That statistic caught my attention, anyhow. Can 

you talk about that, why the default rate is so high? 

Mr. DORR. Well, I think this is anecdotal and subjective on my 

part, but it would appear to me, as a farmer and a businessman, 

that what was occurring, obviously, were well-intended people presenting opportunities in which government employees were making 

a determination as to whether or not a business opportunity was 

viable, and so it was a decision that was made between a government lender and a private investor as opposed to a decision that’s 

made between the private investor enticing an originator, his local 

banker, and perhaps other investors to look at the project, to really 

flesh it out, make sure that it’s viable, and then ultimately, if they 

concurred, to originate a loan that they ultimately bring to Rural 

Development to lay off some of the risk through the guarantee. 

Clearly, what you do, it’s much like the Open Range loan. 

It took two years to make the Open Range loan, and in that process, it effectively got scrubbed—more technology, more refinements 

in the business plan, and a whole host of other things took place. 

That’s essentially what happens in the guarantee process, and I 

believe that because you’ve got local investors, local business people, and local originators involved in the process, there’s a much 

higher level of chance of success, and consequently, the long-term 

benefits are substantively reduced default rates. 

Ms. DELAURO. Mr. Kingston, can you yield for a second? 

Mr. KINGSTON. Yes. 

Ms. DELAURO. I will give you the additional time. 

I think there’s a—isn’t this a product of an administrator who 

was pushing bad loans against staff advice, and my understanding 

was that he subsequently has resigned, but he even had asked 

staff, when they began to find out about what he was doing here, 

that he asked to have the documents shredded. He has subsequently resigned. 

But I mean, part of what you’re saying in terms of this rate was 

an administrator who was in fact pushing bad loans. 

I’ll increase your time, and I’m sorry to take away, but I think 

this is an appropriate time to mention this. 

Mr. DORR. Well, I believe that occurred prior to this administration. 

I’m not aware of a staffer who was doing that during this administration, and we are still working through those loans—— 

Ms. DELAURO. Wasn’t B&I killed after that, though, wasn’t that 

the case? 

Mr. DORR. No. No, I mean, we still have the business and industry loan program going forward aggressively. 

Ms. DELAURO. But the direct piece, the direct piece. 

Mr. DORR. We, when we got there, we made a decision that we 

would disengage from making direct loans, as a result of the portfolio that we had. 

I was not aware of the prior activity of the prior staff people. 

RENEWABLE ENERGY WEALTH IN RURAL AMERICA

Mr. KINGSTON. Okay. Mr. Dorr, on a different subject, you had 

mentioned that there would be a half a trillion dollars in wealth 

moving to rural America? 


smartinez on PROD1PC64 with HEARING
452 

Mr. DORR. What I was indicating was that, if we’re importing 

roughly 51⁄2 to 6 billion barrels of crude oil a year, at $100 a barrel 

is a half a trillion to 600 billion, if we can displace a billion barrels 

of that, or over a period of decades, much larger percentage of that, 

that’s income that can be largely generated from rural resources. 

I mean, biomass, wind is generally cited in rural areas, 

photovoltaics can frequently be put on buildings, large solar generation projects are rural in origin. So yes, a lot of that would be 

originated in rural areas. 

Mr. KINGSTON. Well, in terms of the money that’s going there 

now, the new wealth, how much money actually gets to the hand 

of smaller farmers and the general population versus large corporate players? 

Mr. DORR. That’s a terrific question. It’s one that I’ve spent a lot 

of time thinking about. 

I’m not sure we have enough time here at the committee to go 

through it. 

But I will give you one very quick example. 

Mr. KINGSTON. I want to say, Ms. Kaptur, I think, would probably be interested in this answer, as well, so if it is something that 

you can—— 

Mr. DORR. I’d be delighted to—I’ll give you one example. 

My home town of Marcus, Iowa, started development of an ethanol plant in 2001 about the time I left. I was not in a position to 

participate in it. It went on line in 2003. The original shares, of which they raised locally about $15 million, they needed some investors to put in some additional money, 

local shares were sold for $1,000 a share. 

Today, more or less, they’ve split, but back to the old basis, they’re now worth something in the neighborhood of $9,000 to 

$10,000 a share. 

The company has now doubled its capacity to 100 million gallons. 

I believe that they have paid out nearly, at least 10 and maybe 

more thousand dollars in dividends against those original shares, 

so everybody has got their money back more than once. 

Land values have obviously escalated in the area. The community has built a new truck stop. They’re building a new motel. 

They’re building several new homes in the community. 

That plant has, I believe, probably in excess, nearly four dozen 

jobs, all high-value jobs. 

That plant was built at the very outset, at the front end of the 

ethanol, the dry mill process. 

To raise $80 million of capital in a rural community is a very 

cost-prohibitive thing, when you have to go out and do that many 

transactions. 

And so now, when you have technology and a business model 

that works, it’s easier to go to Sioux City or Omaha or Des Moines 

or Washington or Toledo or wherever. You can raise the money in 

four or five or six transactions. 

My concern is not that rural Americans can no longer invest in 

this. 

What we have to do in the context of policy makers is figure out 

ways to make it less onerous for local people to invest in funds that 

developers can go to so that ultimately, 20 or 30 or 40 percent of 


smartinez on PROD1PC64 with HEARING
453 

these funds can actually be local funds, but run through a local investment vehicle. 

Those are going to be state issues as well as investment and security regulatory issues at the Federal level. 

I think we need to address those and ultimately, if we do, we can 

keep a lot of this wealth in these rural areas if we’re creative about 

how we do it. 

Mr. KINGSTON. Thank you. 

Ms. DELAURO. Mr. Bishop. 

Mr. BISHOP. Thank you very much. 

Mr. Dorr, I know you’re a short-timer, but I would like very 

much if you or some of your staff could come and visit my district 

and actually sit down with some of the communities like Chattahoochee County, to work through some of these issues, so that we 

can have—their basic need is just a well, so they can provide water 

and sewer. 

BUSINESS AND INDUSTRY LOAN GUARANTEES

But let me turn to the loan guarantees and the rural banks, following up on some of what was alluded to earlier. 

The rural development business and industry loan guarantee 

program guarantees loans for banks in rural communities and the 

businesses that will provide economic growth for our rural communities. 

There have been several instances where USDA has been accused of hanging these small banks out to dry, and where you have 

actually defaulted on the guarantee. 

One example, which of course makes small banks reluctant to 

participate in the guarantee program, the example is in the First 

State Bank of Blakely, Georgia. 

The complaints in my office have been that the program regulations placed all the responsibility on the lender to determine the 

eligibility of a proposed borrower and a loan for a guarantee, and 

in short, once the lender has certified that a loan is eligible, the 

agency must issue a guarantee, and it has no discretion to undertake its own review to refuse a guarantee. 

Shouldn’t the agency have some of that responsibility? We’ve got 

a First State Bank participating in the guarantee loan program. 

There was a default. 

And of course, when they turned to USDA to make them whole, 

USDA said, ‘‘No, you shouldn’t have made the loan.’’ And so they 

were left hung out to dry. 

And of course, we tried to intercede to assist them, to no avail. 

They went all the way up through the process, but still, you 

know, it left a very, very—a real chilling effect on local community 

banks getting involved in a guarantee program when they’re worried about, if they do participate, being left out to dry in case they 

need the guarantee that’s supposed to be brought out as a backup 

for them. 

Mr. DORR. Well, I’m not familiar with this particular situation. 

I also know that there have been some of these kinds of cases that 

have arisen over the years. 

We have, at least I have aggressively tried to institute processes 

and oversight in a way that would preclude these sorts of things 


smartinez on PROD1PC64 with HEARING
454 

from happening, but I would be glad to sit down and review it with 

you or, you know, get into this. 

I do know that it is, historically, it has been the requirement in 

the guarantee program that the banks provide servicing of these 

guaranteed loans. They originate them. 

We know that they can sell off part of the loan. But we also know 

that by servicing, they can also generate revenue. 

But we do expect them to service the loan, because we don’t have 

people out there next door to whomever this new company might 

be. 

I suspect in this particular case there were probably some disagreements as to, you know, how the servicing was handled. I don’t 

know. 

But I do know that we’re doing everything we can to try to make 

certain that those kinds of issues don’t occur on a regular basis—— 

Mr. BISHOP. Do you understand then the concern that the subcommittee has with the shift of the guarantee program away from 

the direct programs which seem to be backing away from providing 

the service to the people who actually need it, and, you know, it’s 

almost passing the buck, and not really actually grabbing the bull 

by the horns to help our rural communities that need the help, 

where there is the poverty, where there’s the greatest need for economic development, the greatest need for the broadband and the 

Internet to try to equalize that playing field, but it seems as if the 

policies that you’re putting in place are actually doing the opposite 

to what you profess to be your objective. 

Mr. DORR. These issues that you raise relative to this First State 

Bank of Blakely are, in all sincerity, rather rare, and so I mean, 

I understand your concerns, but I do believe that, in the long run, 

and it takes some time to transition into these, but in the long run, 

the wealth that we create, that’s created by this partnership of 

local participants, the local banks, the local entrepreneurs, that the 

loan guarantee from the Federal Government in the long run pay 

pretty substantive dividends. 

We certainly would be delighted to come down and spend some 

time, even in the short time we have, to see if there is something 

that we can do that would address some of these issues. 

Mr. BISHOP. Thank you. But may I just make one statement, 

Madam Chairman? 

The problem is that, and when you look at rural communities, 

you don’t have a lot of rural banks, and they all know each other 

and they all are aware when one of their brother banks, brother 

or sister banks gets burned, and they try to learn from those experiences, and if they don’t trust USDA, the guarantee program, 

they’re not going to participate, because they don’t want to be stuck 

like their neighbor was stuck. 

Ms. DELAURO. Mr. Lahood. 

Mr. LAHOOD. Thank you, Madam Chair. 

BROADBAND FUNDING

Let me go back to this broadband issue. 

The chairwoman brought to my attention, that you had the authority to provide broadband loans at 4 percent, but none of those 

funds have been requested for this program, and so we’re curious 


smartinez on PROD1PC64 with HEARING
455 

as to your explanation why these funds have not been requested for 

these broadband loans at 4 percent to rural communities. 

Mr. DORR. I believe in the budget that we proposed we were also, 

excuse me, in the Farm Bill proposal, we had added, I believe it 

was about 375 million as proposed infrastructure issues that would 

have been utilized in the broadband area in conjunction with the 

anticipated carryover funds that we had in the existing program. 

Mr. LAHOOD. So are you saying that because you were writing— 

participating in the writing of the farm bill, you decided to use this 

money and lop it over into that program, or lop it over into the new 

farm bill, or what? 

I don’t understand—— 

Mr. DORR. We were, we have embarked on something called the 

Delivery Enhancement Task Force, which could get pretty muddy, 

but essentially what it is is a process to, and I may have mentioned 

this last year, but we historically say we have somewhere between 

40 and 50 programs in rural development. 

Essentially what we have are grant programs, direct loan programs, and loan guarantee program. 

They were so convoluted and complex that it seemed to make 

sense that we ought to look at how we could mitigate the delivery, 

the ease of delivery, both for our constituents and for our associates 

and their ability to deal and roll out these new programs. 

What we’ve done essentially is aligned them, what we call platforms, a loan platform, a direct loan platform, a loan guarantee 

platform, and a grant platform. 

In the Farm Bill proposal, as we laid this out, we delivered, we 

developed a grant platform approach, and in that, we put, and a 

loan guarantee approach, and we plugged in a number of these new 

options and new approaches in the context of the Farm Bill proposal with the budget authority, what I believe in the overall president’s proposal was about $4.8 billion over baseline. That obviously 

is a subject for debate that’s still going on. 

So no, we did not displace funds. In fact, we enhanced our rural 

development programs with the way in which we approached that 

and layered on the 2009 budget approach. 

Mr. LAHOOD. Well, you’re from Iowa and I’m from Illinois. I just 

want a simple answer to the question. 

Why didn’t you request the funds? Why weren’t the funds that 

were a part of your budget at a 4 percent rate, why weren’t they 

requested? 

Just give me a simple answer. Don’t do bureaucracy speak to me 

here. 

Mr. DORR. We thought we had adequate funds and we thought 

it was appropriate the way we budgeted them into the Farm Bill 

proposal. 

Mr. LAHOOD. So you didn’t want to spend them under the current program, you wanted to put them into the new farm bill? 

Mr. DORR. We had authority under the current program with 

carryover dollars, and we felt that, in conjunction with what we 

would get through the Farm Bill proposal, would be more than 

enough to take care of that program. 


smartinez on PROD1PC64 with HEARING
456 

Mr. LAHOOD. So rather than requesting the money, you decided 

to take that money and include it as a part of the new farm bill? 

Is that right? 

Mr. DORR. I believe that’s probably one way of viewing it, yes. 

Mr. LAHOOD. Look, if your previous answer to my question earlier under the first round was that you’re committed to broadband, 

which I believe you are, coming from Iowa, I know you know the 

value of it, and you expressed that, I don’t understand why, you 

know, if there are—I know in Illinois there’s some broadband proposals out there. Senator DURBIN has been leading the charge on 

this with our delegation. 

I don’t quite understand why, when you know there are proposals out there, you wouldn’t make the request for the money for 

those states that are ready to go or at least want to get this program started, rather than moving it into a new farm bill. I don’t 

get it. 

Mr. DORR. That was the decision that was made. That’s—— 

Mr. LAHOOD. By the secretary or who? 

Mr. DORR. It was a decision that we made as we put together our 

budget in the context of the entire budget proposal for both the 

2009 budget and obviously what we felt was an appropriate and a 

progressive Farm Bill proposal that was submitted in January of 

2007. 

Mr. LAHOOD. I’ll be honest with you. 

You know, your answer in the first round showed a strong commitment to broadband. 

Mr. DORR. That’s correct. 

Mr. LAHOOD. This mechanism, by transferring the money, shows 

no commitment to broadband. 

You had money. It was never requested. There are states out 

there that are ready to go with broadband. And yet you’re lopping 

it over to a new farm bill, which we can’t get agreement on. 

You know what? I don’t understand the logic of that, at all. 

Was that your decision or was that—I’m asking, was that your 

decision or the decision of somebody higher up? 

Mr. DORR. It was a decision that we worked out within the department. 

Mr. LAHOOD. Did you agree with it? 

Mr. DORR. Yes. I mean, it was a decision that we concurred on. 

Mr. BISHOP. Will the gentleman yield? 

Mr. LAHOOD. of course. 

Mr. BISHOP. You’re saying that when you were working out your 

budget, Mr. DORR, for that particular project’s programs, you didn’t 

consult with OMB at all? 

OMB had no part in your decision not to request it and the decision to carry it over rather than request it? 

Mr. DORR. Certainly there are a number of people involved in 

these decisions. 

Mr. BISHOP. I’m talking about the agency, OMB, Office of Management and Budget—— 

Mr. DORR. Certainly. 

Mr. BISHOP [continuing]. White House. 

Mr. DORR. Mr. Steele’s office, the Office of Management and 

Budget, a number of us worked together on these projects, and 


smartinez on PROD1PC64 with HEARING
457 

when we get down working through them, we clearly come to a 

conclusion. 

I think that there was—wait a minute, what’s this? 

Mr. STEELE. Excuse me. 

In the budget, we have $298 million of direct loan activity for 

broadband. 

Mr. DORR. Right. 

Mr. STEELE. In the budget. 

Mr. DORR. Right. 

Mr. STEELE. We’re not eliminating anything, we’re trying to continue—— 

Mr. DORR. Exactly. 

Mr. STEELE [continuing]. The broadband direct loan program. 

Mr. LAHOOD. Madam Chair, can I just ask my question again? 

I’m going to just read this to you. 

You have authority—you have authority to provide broadband 

loans at 4 percent to rural communities where broadband services 

do not currently exist, yet you have not requested funding for this 

program. 

It would seem this subsidized program would help get broadband 

to rural, underserved areas, so why are you not requesting funding? 

And your answer is, because you took the money—well, fine. 

Shake your head no. Give me a better answer, then. If you—are 

you telling me there’s $270 million in the current budget? 

Ms. DELAURO. But it is at Treasury rate. It’s at Treasury rate. 

It is not at the 4 percent rate. 

You’re using the Treasury rate dollars and, the Treasury rate, 

and not the 4 percent rate. 

Mr. DORR. That’s right. And the Treasury rate money is very, 

very close to the 4 percent money. 

Mr. LAHOOD. Well, look, please don’t tell me that you’re committed to broadband when you haven’t requested the money and 

you took the money and lopped it over into a new farm bill that 

we haven’t passed yet. 

So please, sir, don’t tell me that you’re committed to broadband 

when you haven’t requested the money, and there are states out 

there that are ready, including Illinois. 

The silence is deafening. Thank you. 

[The information from USDA follows:] 


smartinez on PROD1PC64 with HEARING
458 


smartinez on PROD1PC64 with HEARINGInsert offset folio 561 here 48455A.378
459 

Ms. DELAURO. Thank you, Mr. LaHood. 

Ms. Kaptur. 

Ms. KAPTUR. Thank you, Madam Chair. 

DEFINING RURAL AREAS

In last year’s questioning, Mr. Secretary, I asked you about certain dysfunctions inside of the rural development budget where you 

have agricultural enterprises that are operating within cities, and 

obviously cities aren’t eligible for agriculture funds. 

For example, greenhouses. I represent the two largest 

greenhousing, floriculture, nursery counties in Ohio. 

The response of the agency last year to me when I said, ‘‘Can you 

look at site specific agricultural enterprises that, through no fault 

of their own, are inside city limits and are neglected enterprises,’’ 

the answer the administration submitted back to me was that, 

‘‘Rural development is aware that, for example, greenhouses are 

among those entities that have been feeling the effects of population growth and increasing density in formerly rural areas. We 

are hoping we can complete our research and consider alternatives 

to our current methods of determining location-based eligibility 

issues.’’ 

Could you tell me, or someone from the agency, have you made 

any progress on that research, and what do we have to offer rural 

enterprises that, through no fault of their own, end up being inside 

a city or inside an urban county? 

Mr. DORR. We’ve actually laid on the table in the Farm Bill debate a proposal that would make available B&I loan guarantees to 

a city or town with a population of 50,000 or more, that would exclude communities of 50,000 or more, and the urbanized area that 

is contiguous and adjacent to it. 

To the extent that these communities of 50,000 with urbanized 

areas contiguous to it are where these operations are located, then, 

frankly, we are precluded statutorily from making loans to them. 

Ms. KAPTUR. But if they are under the IRS Code in every other 

measure an agricultural enterprise, all I’m asking you to do is to 

look at their conundrum. 

Most of our small truck farmers and our orchard producers, our 

greenhouse growers, are near their market, and I’m not asking you 

to make a major change in the way that you deliver programs, but 

if you look at these struggling enterprises that are the major farms 

that feed our—that give donations to our food banks, that operate 

without any government subsidy—these are unsubsidized, they’re 

not necessarily row crop producers, but they are growing vegetables, they’re growing fruits, they’re growing herbs, they’re operating their greenhouse floriculture nursery—there’s some dysfunction within USDA. 

I understand the definition, and I heard what Congresswoman 

Emerson said about all this money goes to urban areas. 

Well, there’s quite a bit of money that goes to rural areas for row 

crop producers. But if you are an unsubsidized farmer and you are 

out there in the market and USDA ignores you, that’s not right. 

That’s not right. 


smartinez on PROD1PC64 with HEARING
460 

There ought to be some kind of way to make a, we used to just 

call it nonconforming use in city planning. If they’re operating as 

agriculture, see them as agriculture. 

Mr. DORR. We are precluded by statute from making these loans. 

If the statute is changed, then we could address this issue. 

But if they are statutorily precluded, I’m not certain what either 

Rural Development or anyone else in USDA can do to mitigate— 

Ms. KAPTUR. But there ought to be a waiver, there ought to be 

ability for a waiver. I would appreciate any advice. 

We don’t want to mess up your operations, but it’s unfair to 

these people, most of whom are small businesses, small family run 

enterprises, to treat them any different than somebody who is outside, you know, the border of the city limits or the county limits, 

when they’re in the same business. 

So I would really, I’m urging you, please, give me ideas. 

Mr. DORR. Well, I think it is an, it requires some sort of statutory fix. 

I suspect if I waived statutes that you and your members put in 

place, I would be spending time someplace else. 

So we can waive a reg, but I’m not aware—— 

Ms. KAPTUR. Maybe you need a waiver authority is what I’m saying. I can’t believe that other members don’t have this issue. 

And it’s come up time and time again, if a greenhouse is located 

five miles down the road, they’re eligible, if they live in a town of 

5,000, but if somebody happened to end up in the city next to this 

area, and they’re stuck there with all the other—I mean, hey, I got 

farmers with tractors being stolen inside the city limits. 

I mean, there’s all kinds of issues these people face, and yet 

USDA turns their back on them. 

I think there ought to be some type of waiver authority. Maybe 

we have to write it into law. 

I know my time has expired, Madam Chair, but this is really 

frustrating. And America today has over 300 million people. 

When I was born, they had 146 million people. We’re just getting 

more and more—we’ll have 500 million people by 2050 in this country. 

And, you know, our objective is so help the farmers that want to 

stay in business, so something is not right there, and I was just 

looking for any suggestions you might have. 

We’ll write legislation up here, but your vast experience might 

help us tailor it in a way that would not be terribly difficult for you 

to implement. That’s what I was—— 

Mr. DORR. I would be delighted—if you would send a request to 

us, we would be delighted to provide whatever assistance we could 

in drafting. 

Ms. KAPTUR. Thank you. 

Ms. DELAURO. Ms. Kaptur, let me just say as well, that when we 

get the information, we ought to sit down and have committee 

members and so forth take a look at this and see what might make 

sense, because your point is well taken that there’s probably a lot 

of communities that are facing the difficulty. 


smartinez on PROD1PC64 with HEARING
461 

BUSINESS AND INDUSTRY PROGRAM

Let me make a point about the guaranteed business and industry 

loan program that’s been talked about a lot today. The President’s 

budget proposes to reduce funding for the guaranteed business and 

industry loan program by $300 million. The budget also proposes 

to eliminate rural business enterprise grants, rural business opportunity grants, renewable energy loan and grant program, the 

value-added producer grants. 

I continue to say that given that the farm bill may not be passed 

before fiscal year 2009, though we all hope it will be, I have not 

seen any indication, any information, and I suppose what I’d like 

to do is to understand from you and for the record, if you will, if 

you will lay out for us how do we plan to fund all of these programs 

while reducing the guaranteed business and industry loan program? So if you could provide that information for us, it would be 

helpful. 

[The information follows:] 

RURAL BUSINESS PROGRAM FUNDING

When the President’s FY09 budget was formulated, we anticipated that a new 

Farm Bill would be in place by FY09. The Administration’s Farm Bill proposal includes provisions and funding for the Renewable Energy loans and grants program. 

The Farm Bill also proposes authority for a business grant platform. If mandatory 

funding does not materialize for the programs proposed in the Farm Bill, they can 

be operated with discretionary funding at the levels that Congress appropriates. 

RENTAL ASSISTANT PILOT PROGRAM

Let me ask about the rental assistance pilot program. The President’s budget request is for a new $100 million pilot program for 

rental assistance vouchers to target rental assistance to low-income 

tenants rather than the property owners. Why is the pilot program 

necessary? Wouldn’t the existing voucher program allow you the 

same flexibility that you are seeking? 

Mr. DORR. Russ, do you want to deal with that one? 

Mr. DAVIS. Yes. You’ve asked two questions. First of all, why is 

it necessary? And two, could the current program handle it? The 

necessity is that there have been great changes in the population 

in rural America, and where we built the houses 40 years ago is 

not necessarily where the people or the need is any more. 

We’re asking that about a tenth of our portfolio have the flexibility essentially to have the subsidies follow the people instead of 

being stuck in—nothing against Western Kansas, but there are 

places in the country that have had serious migration. So there’s 

a flexibility aspect of that. 

Also, there’s a cost aspect, that there are markets where a voucher would be cheaper than the property that is there, particularly 

the older, obsolete properties that have high energy costs and so 

forth. So, more flexible and cheaper. 

As to whether we could use the current voucher program, we 

only have a one-year demonstration, and we thank the committee 

for that. We’re actually saving, we saved 1,700 families last year 

from eviction or loss of their home by having those vouchers. But 

right now their only protection vouchers. They can only be used for 


smartinez on PROD1PC64 with HEARING
462 

somebody who is in a property that’s being lost to the program. So 

we can’t use those vouchers for anything greater. 

Ms. DELAURO. So what will—the properties that are there, what 

will happen to those properties? 

Mr. DAVIS. According to our engineering study, about a tenth of 

our portfolio is economically or physically obsolete. Properties get 

old, and we have properties—— 

Ms. DELAURO. And you don’t have the current tools to put those 

properties in shape? 

Mr. DAVIS. Well, the biggest tool we have right now is the revitalization program. Again, that’s a demo that this committee has 

given us, and we’re saving about a hundred properties a year with 

that, so that’s a great program. But there are properties that 

they’re just too old, and it would cost too much to fix them. 

Ms. DELAURO. So you would raze them? R–a–z–e. 

Mr. DAVIS. Well, we wouldn’t do that. We would sell them off 

into the private sector essentially through whatever mechanism, 

foreclosure or whatever. The private sector would take those and 

we would use the vouchers to—— 

Ms. DELAURO. Can you get for us, you know, examples of the 

properties that you are describing, and—— 

Mr. DAVIS. Sure. 

Ms. DELAURO [continuing]. You know, where they are, what 

they’re—— 

Mr. DAVIS. We would be happy to. And—go ahead. 

[The information follows:] 

Rural Development’s primary priority is to protect tenants, either through provision of the affordable rental housing itself or through vouchers that will make it 

easier for tenants to have access to affordable housing. 

A small percentage of Rural Development’s Multi-Family Housing properties have 

come into disrepair and require substantial funding to rehabilitate in order to make 

them decent, safe and sanitary. We are uncertain of the exact scope of this type of 

property within our portfolio at this time. Sometimes, the cost of rehabilitation far 

exceeds the cost to build new housing, or it is not economically viable to rehabilitate 

a property due to economic conditions impacting demand for rental units in a particular market. 

The following are several recent examples of properties where it was determined 

to be more practical to provide alternatives through the use of vouchers than repair 

existing units. 

A property in Alaska suffered structural damages. Alaska’s harsh weather and 

negligence by the owner combined to create serious physical problems that made the 

units uninhabitable. This is a 40-unit property, currently less than half filled. The 

estimated cost to bring this property to acceptable condition was $6.5 million, or 

$163,000 a unit. USDA Rural Development has executed foreclosure and plans to 

sell the property to mitigate losses. The tenants will be provided Rural Development 

vouchers when the foreclosure is finalized. 

In Oregon, a 38-unit property which had suffered from years of neglect resulted 

in USDA Rural Development taking the property into inventory through receivership. As the Receiver, Rural Development has worked to find an acceptable owner 

to take over the debt and pay the cost of repairs to this property, which is estimated 

to be $2,965,000 or about $78,000 a unit. No such buyer who will operate the property under federal standards can be found. Since a viable owner cannot be identified, USDA Rural Development has executed foreclosure and plans to sell the property to mitigate losses. Tenants are eligible for Rural Development vouchers which 

may be used elsewhere to obtain affordable housing. 

In Louisiana, a 16-unit property was severely damaged by Hurricanes Katrina 

and Rita. Insurance proceeds were minimal. While waiting for the insurance appeal 

to be resolved, the property suffered additional damage from mold that was not covered by insurance. The pervasive mold could only be mitigated by tearing down the 

structure. The owner was unable to obtain tax credits to help finance rebuilding the 

property. The new construction cost of this property is estimated to be $1,733,000 


smartinez on PROD1PC64 with HEARING
463 

or $108,000 a unit. Cited by the town because the property was a health and safety 

hazard, the owner has demolished the property. Rural Development vouchers for 

displaced tenants have been provided that may be used to secure other affordable 

housing. 

Ms. DELAURO. No, no. You go ahead. 

Mr. DAVIS. I was just going to say that there’s two preservations 

problems we face. One is preservation of the subsidies, but preservation of properties. Properties get old, roofs fall in, there’s fires. 

And we’re trying to, it’s that second category that actually has a 

bigger risk to us. Ninety percent of our properties have inadequate 

reserves to last another 20 years. We’re very concerned about the 

physical protection of the program. 

Ms. DELAURO. I will just express our concern here is that are we 

looking at a proposal to reduce the amount of rental assistance necessary in future years? And that is truly what concerns me with 

this effort, because as I take a look at what happened with HUD, 

with the Housing and Urban Development, we did move from 

project-based contracts, and then we moved to tenant-based focus, 

and now what we have seen is the scaling, drastically scaling back 

of those tenant-based vouchers and Section 8, et cetera. Are we 

looking at a similar trajectory here of a project tenant moving 

downward to less rental assistance? 

Mr. DAVIS. Absolutely not. Our policy is to renew contracts and 

to protect all of our low-income tenants. Our budget increase is I 

believe $500 million for rental assistance. 

Ms. DELAURO. It’s $518 million. So let me just add this for a second and have my colleagues bear with me. You say that that’s to 

renew 82 percent of the 2009 expiring RA contracts. Are you proposing to not renew 18 percent of the expiring contracts in 2009? 

Mr. DAVIS. Well, the dollar amount is sufficient to handle 100 

percent of the subsidized units. What we’re saying is that there is 

a portion of the portfolio that we can house those people cheaper 

and more flexibly with vouchers. But this is not a major drastic 

change. This is for the small part of our portfolio, 10 percent that 

we think is obsolete, misplaced, overpriced. And this is a fix, not 

a change. 

Ms. DELAURO. But one-tenth is about 18 percent. 

Mr. DAVIS. I’m not sure about the 18 percent. 

Ms. DELAURO. I mean, no, there’s the one-tenth that—18 percent—— 

Mr. DAVIS. The difference is that there is about 10 percent of the 

portfolio has long-term contracts. They had five or 20-year contracts, and those don’t need to be renewed. They have enough cash 

in the bank to go for another 5 or 20 years. So we’re talking about 

just a small portion of the portfolio. 

Ms. DELAURO. Mr. Kingston. 

FARM LABOR HOUSING

Mr. KINGSTON. Thank you, Rosa. Mr. Davis, you had mentioned 

earlier about you found that it was costing $150,000 a unit for 

apartments. Do you want to expand on that? 

Mr. DAVIS. Well, this is the farm labor housing program. There 

are a couple of things that add to the cost. Number one, it’s subject 

to Davis-Bacon 515 isn’t. There are a lot of things like that. But 


smartinez on PROD1PC64 with HEARING
464 

also farm labor housing has to be made stronger. There’s a lot more 

turnover in the units, and so we have to use heavier materials and 

just build them stronger because people are in and out of there 

with boots, mud, whatever. It has to be built tough to last. 

Mr. KINGSTON. How much extra does Davis-Bacon cost? 

Mr. DAVIS. I could get you numbers on that. I’m not—I know 

that there are a series of different provisions for new construction 

of farm labor that we don’t have in 515. 

[The information follows:] 

The section 516 Farm Labor Housing (FLH) grant program requires that all 

projects utilizing grant funds must certify that laborers building or rehabilitating 

the property must receive prevailing wages as required under Davis-Bacon. Projects 

that utilize only the section 514 Farm Labor Housing loan program do not have this 

requirement, nor does the section 515 Multi-Family Housing new construction or rehabilitation programs. However, the majority of the FLH projects financed by Rural 

Development utilizes a combination of both section 514 FLH loans and section 516 

FLH grants, and consequently must abide by Davis-Bacon wage determinations. 

USDA Rural Development does not have precise figures on the additional costs 

the prevailing wage requirement adds to the overall costs of the FLH projects. It 

is estimated that labor is approximately 30 percent of the cost of building a FLH 

project and that the prevailing wage requirement adds approximately 20–30 percent 

to the cost of the labor. With the average cost of building a FLH unit at approximately $150,000 based on the 2006 data, the labor component is estimated to be 

approximately $45,000 per unit. The impact of Davis-Bacon is estimated to add approximately $10,500 per unit or approximately 7.5 percent of the cost per unit. 

Mr. KINGSTON. And when you say that they have to be built 

stronger, stronger than what? What are you comparing it to? 

Mr. DAVIS. Well, I’m comparing it to our Section 515 new construction. But a lot of it is just the type of the units have changed. 

We used to build a lot of dormitories. You could put four bunks in 

a room. Now we’re building four- or five-bedroom units because 

we’re seeing large families instead of single migrant workers, we’re 

seeing a lot of families who have large numbers of children and 

then the parents go work farther out. It’s just a different product. 

Mr. KINGSTON. Are these for H2A workers or for anybody? 

Mr. DAVIS. We have—and Section 514 and 516 of the Housing 

Act restricts us to only citizens or permanently admitted aliens 

with green cards. H2A doesn’t fall under that, and so we’re limited. 

Mr. KINGSTON. Do you have any other problems that you want 

to bring up on it? 

Mr. DAVIS. On farm labor housing? 

Mr. KINGSTON. Yeah. 

Mr. DAVIS. You know, obviously, we support the idea of farm 

labor housing. It’s just in its current configuration, we can’t put the 

money out responsibly and in a way that we think is—we can do 

it other ways a lot cheaper. Let me put it that way. 

Mr. KINGSTON. Okay. Let me yield back. 

Ms. DELAURO. Let me just take—well, Mr. Bishop. 

RURAL COOPERATIVE DEVELOPMENT GRANTS

Mr. BISHOP. Thank you very much. Rural cooperative development grants program is small, but it’s very effective in funding coop development centers that provide critical technical assistance to 

co-ops that are revitalizing rural communities. Despite annual demand, which more than doubles the amount that’s been given out 


smartinez on PROD1PC64 with HEARING
465 

annually, the program has never received more than around $6 

million or $6.5 million. 

Given this fact, given the fact that the program has leveraged 

millions of dollars for cooperative development in rural areas, created hundreds of jobs and businesses, and providing grants to far 

fewer centers that are seeking to be funded, wouldn’t it make sense 

for you guys to be requesting more money for this program by rural 

areas? 

Mr. DORR. I believe that the way the program is presently operating, we are addressing the majority of the needs. 

Mr. BISHOP. You’re saying that you didn’t have a greater demand 

than you were able to fulfill? 

Mr. DORR. We always have greater demands than we can fulfill, 

on virtually any program at a particular point in time or in whatever set of unique circumstances. 

Mr. BISHOP. Isn’t this acute? I mean, don’t you always have that 

repetitively every year? A greater than demand than you have 

funds? And wouldn’t that suggest in your planning that you would 

ask for more money? 

Mr. DORR. There is always an acute demand for grants. There’s 

no question about that. Grants are obviously something that people 

look at a great deal. What we have tried to do with this Rural Development grant program is foster an appropriate utilization of 

those funds to build out other economic opportunities, and I am 

certain that if we had more grant funds, there would undoubtedly 

be requests for them. We believe this is an appropriate level for 

that program. 

Mr. BISHOP. But if you run out, and if the program is delivering 

the desired results, wouldn’t that magnify your results if you asked 

for more money and you were able to magnify your output? 

Wouldn’t that give you greater results? 

Mr. DORR. If that was the result, yes, that would. 

Mr. BISHOP. Are you saying that they’re not working? 

Mr. DORR. No. I’m not saying that they’re not working. I’m saying that there are challenges to any grant program, and we believe 

that, I think we’ve requested this year about $5 million for the program. We work closely with those that are engaged in the program. 

We’re actually trying to work on a couple of agendas, not agendas, 

but a couple of projects that enhance the productivity from producers that are involved in—— 

Mr. BISHOP. Isn’t that a drop in the bucket, though, compared to 

many of your other programs? This is a small amount of money 

that has the capacity and the potential and has apparently proven 

to be exponential in the results that it gives. So why would you cut 

back on that when—I mean, it’s like being penny wise and pound 

foolish. 

Mr. DORR. Well, certainly there are challenges for resources, and 

this was a decision that we made, and we may disagree on it, but 

we believe that this is—this is a program that continues to function 

pretty well the way we have it, and we continue to work with the 

participants. 

Mr. BISHOP. I just—I’m just baffled that you have such lofty 

goals and objectives, yet you, when it comes to acting on them, you 

seem to be actually doing the opposite. You know, you’re cutting 


smartinez on PROD1PC64 with HEARING
466 

back your requests for resources to deliver on the programs that 

you say are so important and that are so workable. It sounds like 

doublespeak. 

Mr. DORR. Well, Mr. Anderson just sent me a note, and he indicated, because he administers the program, but he had indicated 

that this is pretty consistent with the demand. And I believe that’s 

true. We have not had substantively greater demand for that program than, I think we’ve got $5 million in the budget for that this 

year. 

Mr. BISHOP. And last year it was six, six and a half? 

Mr. DORR. No. I think it was five. What was it, five last? Okay. 

It was $9 million last year. Excuse me. 

Mr. BISHOP. You reduced it 40 percent. 

Ms. DELAURO. Ms. Kaptur. 

RENEWABLE ENERGY OPPORTUNITIES

Ms. KAPTUR. Thank you, Madam Chair. Mr. Secretary, again I 

repeat your quote, which I really like, ‘‘renewable energy is the biggest opportunity for economic growth and wealth creation in our 

lifetimes.’’ 

And I’m glad my colleague, Congressman Kingston, has returned, 

because I wanted to follow up on his excellent questioning a little 

bit earlier, and our mutual desire to keep wealth and grow wealth 

so that those who are most involved in agriculture and in production benefit. And I don’t believe we have the financial structure yet. 

It’s evolving, but we don’t have it yet, that permit them to buy in 

and to benefit. 

We’ve had several, for example, in Ohio, that have tried to raise 

the capital you talked about and found themselves unable to do 

this so some of the big players in the market come and get involved 

and are moving forward. 

I want to share a quote. You mentioned the Anderson Company 

in our discussions yesterday. And there was a great—one of the 

Andersons was Bob Anderson, who is no longer living. And he said 

to me, you know, Marcy, he said—and they’ve been involved in agriculture and farming in our community for generations—he said 

where we went wrong in farming years ago is, he said we didn’t 

allow the farmer to buy up the chain of production. 

We didn’t have the financial means for them to do that, and so 

now we face an agriculture in America where two or three companies own the ability to control the chicken market, the poultry market, three or four the beef market. I mean, if you really look at the 

way this is structured. And in many cases, our farmers are becoming sharecroppers again rather than—this may not be happening 

in Iowa, but I think it is to some extent—where people become contract farmers rather than freeholders. 

And this is a system I personally do not like, especially with East 

European background, I know what that system feels like at its 

worst, and it’s not a good system. We always—our country was 

founded on freeholding. This was the idea. And what I am concerned about in the energy market and where I think you are in 

a unique role, because of your combination of farming and business 

background, we need a mechanism to permit farmers and others 


smartinez on PROD1PC64 with HEARING
467 

who support the development of this energy industry across rural 

America to buy in. 

I think back to the old Roosevelt model of postal savings stamps. 

This will sound a little strange. But we found a way to get a denomination that people could buy, no matter what their income, 

and they ended up buying into that security, that bond. 

We need something that will permit individuals, perhaps even 

communities that want to come together and help, to buy into this 

industry that is just growing at such a fast rate it sort of scares 

me sometimes, because I think maybe this is going to go the route 

of the dot.coms. And because we don’t have the financial mechanism in place, we’re going to have a lot of collapses. Bad things are 

going to happen, because we don’t have the financial architecture 

in place. 

We’ve had situations where foreign companies are coming into 

Ohio and trying to strike deals with our Farm Bureau, for example, 

to just lease, say to our farmers, you know, well, we’ll lease a corner of your acreage there. You know, we’ll pay you fifty bucks a 

month or a hundred. You know, it sounds great, right? No. Because 

they don’t own it. 

So my question to is, in your meetings, are you thinking about 

a way of creating a financial mechanism so that individuals and 

farmers can—and those who would want to help this industry 

grow, where we could either securitize or bond or find a means for 

them to buy in to create that financial platform? We had a biodiesel plant just blow up in our region. Thank God nobody was 

killed. But they were scraping pennies to try to make this thing 

work. It shouldn’t be that hard. USDA should be there. And they 

actually got one of those 900—— 

Mr. DORR. Six. 

Ms. KAPTUR [continuing]. Six? Five hundred thousand dollar 

grants, you know. They got used equipment. They were trying to 

do this, and I think, you know, these are inventive people. They 

shouldn’t have to go through—it shouldn’t be this hard when they 

want to do this. 

Our counties, that our urban counties want to buy some of what 

they’re producing to power, let’s say our downtown civic center, 

there’s no means to connect the city to the producers out there, to 

take the biomass material and bring it in. It’s too hard. It’s too 

hard to—we’ve got to find ways to connect rural to urban procurement, and we’ve got to find a financial means to help them invest 

and to let these deals go forward. 

You have guarantee authority. You have some loan authority. I 

know you’re thinking about this already. Can you share any of that 

with us at a big enough level where it would make a difference in 

communities that are trying to bring up these new, and invest in 

these new wind farms and solar fields and so forth? 

Mr. DORR. Well, we have given a lot of thought to it. I think 

these are of statutory and ultimately regulatory issues that probably have to be addressed at some point. The reason largely—and 

I’ve said this earlier—the reason that many of these distributed energy systems are cost effective is because you have distributed computing. That means that in a general sense, the size and the scope 

of these various projects will be considerably smaller, yet they’ll be 


smartinez on PROD1PC64 with HEARING
468 

multi-million-dollar projects than if you were dealing with a 400 

megawatt nuclear or coal-fired generation plant or a more traditional fossil fuel refinery of some sort or a coal mine. 

Once they begin to work, then it becomes very easy to finance 

them. The transaction costs involved in trying to get local investment in small sums is a dealbreaker. It kills it. So what you have 

to try to do in the bigger sense, in the bigger picture, is figure out 

ways to mitigate the transaction cost, to mitigate the business 

model and regulatory issues to aggregating those resources so that 

you can allow local ownership or local participation in these 

projects. 

And that, frankly, in many cases, is as much a state issue as it 

is a Federal issue. For example, how do you integrate a 20 megawatt wind farm into a legacy REC or investor-owned utility transmission system? They react and say, you know, we can’t put this 

in our net metering basis because we already have contracts. We 

already have commitments. And they’re right. Does that mean that 

they’re wrong or that they’re nasty because they won’t let you in? 

No. It does mean that we have to sit down and get realistic and 

sensitive about what do we have to do to develop new regulations 

and new business models that acknowledge the kind of consistent 

demand in electric growth that occurs in Toledo or wherever and 

that part of that can be met by these community-owned wind 

projects or these other distributed owned energy opportunities in 

ways that make that sense. I think it can be done, but it’s just 

going to take a lot of hard regulatory and public policy work to develop the mechanisms to do this. 

Ms. DELAURO. Thank you. I just have two or three questions to 

finish up. I don’t know if my colleagues do. If we do, we will get 

these questions answered. I think Mr. Kingston doesn’t have any 

more questions. But if one should come to your mind, Mr. Kingston. And we are over the time, but we won’t take your time much 

longer, Mr. Secretary. 

BROADBAND PROGRAM

On the broadband issue, just a couple of comments. It looks—the 

OIG in their audit in September 2005 found that the program had 

not maintained its focus on rural communities without preexisting 

service. Eight hundred ninety-five million dollars in loans, grants, 

funded at the time are reviewed—OIG reviewed 599 million and 

questioned the use of over 340 million, almost 57 percent of the approved funds reviewed. 

I’m still concerned that RUS is not focusing the loan program on 

unserved communities, and there is going to be another OIG review, as I understand it. Publishing the final rule that would incorporate changes recommended in the 2005 OIG report has been delayed by the Department to incorporate additional changes made to 

the program once again in the farm bill. 

Will you move forward and publish the final rule if the farm bill 

is not signed into law by April 30th, 2008? 

Mr. DORR. We will certainly proceed, depending upon what happens with the Farm Bill, to get the final reg out, yes. I believe that 

is incumbent upon us to do that. 


smartinez on PROD1PC64 with HEARING
469 

I would like to just for a moment go back to the discussion that 

I had with Mr. LaHood. 

Ms. DELAURO. Yeah. Let me just—— 

Mr. DORR. Sure. Certainly. Go ahead. 

OPEN RANGE LOAN

Ms. DELAURO. Could you have made the open range loan under 

the new rule as the loan is currently structured? 

Mr. DORR. In all likelihood, it may have been very difficult. And 

therein again gets to the issue of why this program is so difficult 

to administer. Because trying to identify those areas that could 

stand on their own or they’re completely unserved and underserved 

is very difficult. 

Ms. DELAURO. Well that is—it would appear that your answer is 

a no in that respect or it would have been more difficult. So I don’t 

know what additional modifications would be necessary to make 

the loan agreement meet the requirements of the final rule, which 

is more unserved areas, less competitors allowed into underserved 

areas. 

And I’m going to submit for the record, which is one of the reasons why in terms of the vigilance and the monitoring of this loan 

is something that I believe that this committee has an obligation 

to look very, very carefully at, and in terms of what would be useful to us in terms of that monitoring and the reporting requirements on this loan, because I think we have—are within a month 

of a new rule with regard to this, and then we have just negotiated 

the largest loan in the history of this project—of this program that 

will not conform to a new rule. And it has been delayed because 

of a farm bill. 

And it would seem to me that we have almost allowed something 

to happen without the new set of rules and regulations that we 

want to implement, and it is of a magnitude and scope that is beyond anything else that we have done and that we may have the 

ability to monitor in the way that would ensure that federal dollars 

and taxpayer dollars and everybody else’s dollars are going to be 

safeguarded. 

Mr. DORR. You make some good points. But let me point the following out. This loan has ultimately become, we believe, a very 

strong loan. It took over two years to make the loan, as I indicated 

before. It is using very unique new technology. There are certain 

prescriptions that suggest that if they are, if in, and I believe your 

staff has seen a copy of the letter of conditions or the attachments 

that went with that loan—if certain conditions are not met by September 1 of 2008, we clearly have the ability to, if we so choose, 

rescind the obligation of that loan. And I can assure you that we 

are going to monitor this very closely. 

For the first time in a loan of this nature, I have specifically indicated that we will assign three of our general field representatives 

who will do nothing but live, eat and breathe this loan from the 

time they break ground, and it is a go, until it is done. We will 

work with the firm and work with our State Rural Development directors to make sure that all rural citizens are aware of this opportunity as it’s spelled out in those states. 


smartinez on PROD1PC64 with HEARING
470 

Again, I go back to the fact that we all want broadband deployment, and we all realize that we are effectively redlined without access to the Internet. And yet there are a varying number of competitive technologies that are out there that make it very complicated for the Federal Government to intrude in the private sector’s realm of opportunity. And whether we’re doing it, in the final 

analysis, right or wrong I guess history will judge. But we’re doing 

the best we can and our staff is doing I think an extraordinary job 

of trying to pull this together. 

Ms. DELAURO. I don’t deny that, but I do say this, and I will repeat, because I think it’s important to know that we have spent 

how long in terms of putting together this new rule. And the rule 

has been delayed, and delayed, and delayed. And now once more 

delayed because of the farm bill. And in the interim, we are not 

abiding by what good minds, a myriad of diverse views and opinions felt was the direction in which we ought to proceed in terms 

of achieving the goal that you want to achieve and what this nation 

needs to achieve in this area. And we may be at cross purposes 

with this loan and with the final rule. 

Mr. DORR. Well—— 

Ms. DELAURO. And that is—I mean, I really do believe that that 

is, you know, it really is, if you will, a dereliction of what our obligations are in terms of the—what it is that we are trying to 

achieve. 

Mr. BISHOP. Will the gentlelady yield? 

Ms. DELAURO. Yes. 

Mr. BISHOP. To underscore what the gentlelady is saying, isn’t 

this loan going to usurp just about all of the authority and capacity 

for this particular broadband program so that there’s nothing left 

for other communities that are not covered by open range to have 

access? 

Ms. DELAURO. It’s about 90 percent of what we have appropriated. But there is carryover money there, but your point is well 

taken, because we did this when we—and I might add, and I would 

just say this in compliments to this committee, on a bipartisan 

basis—the review of that loan, the review of that loan came, I believe, directly out of the questions asked on both sides of the aisle 

from this subcommittee. That loan was to have been finalized 

months ago, but it was taken in for a review based on the questions that came out of this committee. 

So we are—our responsibility is to be vigilant with the money 

that we appropriate. Ninety percent of the appropriated money is 

being used for this loan. Yes, you have carryover. We are concerned 

as to what happens to the appropriated tax dollars. I think we 

have—you’ve stated your position. We have stated our position, and 

it will—is going to be—we’re taking it on as to monitor and evaluate what happens with this loan. 

Mr. DORR. I just have one question. You indicated that there was 

dereliction of our duty or responsibilities, and if you would care to 

lay those out at some point, I would be most interested in finding 

out where we’ve been derelict. 

Ms. DELAURO. Well, I would just say this about—and I—because 

I want to be precise in language. It seems to me not exactly coincidental that the final rule is not enacted and you felt a moment ago 


smartinez on PROD1PC64 with HEARING
471 

that it was the obligation if we’re not getting anywhere with the 

farm bill, that in fact we would proceed to having a final rule by 

the end of April. And yet, in March—in March, we granted a loan 

that by your words say it would have been difficult to finalize the 

negotiations on because of the new requirements that have, as I 

said, been discussed for a very long time. And they have been—apparently we have sorted it out. 

Mr. DORR. Well, let me make this observation. The number of 

calls that I received from the members in this loan, I had none that 

were in opposition to this loan. We probably took a tougher look 

at this loan in our office than any other loan for some of the reasons that you’re laying out. 

In fact, we have $700 million of existing appropriated and carryover authority. This does not deplete the program. We will have 

$395 million available next year in our telecom and treasury programs. This is new technology. This is a way to mitigate some of 

those availability issues, and we are going to monitor it very, very 

closely, and we will share that information with you on a regular 

basis. 

Ms. DELAURO. I appreciate that, but I will also say that I do not 

believe it is coincidental that the final rule was not enacted prior 

to this contract being let. That’s my point. If somebody can persuade me to the contrary, it doesn’t have to be here today. Afterward, I would be happy to be persuaded, but I do believe that 

this—there was someone someplace somewhere who had in mind 

that, wow, we are going to have a rule that would preclude us 

doing this, new technology and all. Let’s examine it. Let’s look at 

it. Let’s get it done. But we are going to delay the final rule until 

this is done. Now, I don’t see how that—— 

Mr. DORR. I would respectfully differ from you completely on that 

matter. That was not the intent. What we were waiting for was a 

number of things that we believe may come through the legislation 

that would conform with the way the rule was and would mitigate 

elongating the difficulty in making additional loans. If that was an 

error in judgment, I’ll subscribe to that. But there was nothing at 

all in the discussion in our office in the way in which we approached this that was subject to making a loan predicated on prior 

to a new rule being imposed. And, frankly, that bothers me that 

you would assume that that’s the way we approached it, because 

that was definitely not the case. 

Ms. DELAURO. Well, I hadn’t approached it until this point, till 

I find out that, yes, in fact we’ll move forward with the final rule 

by the end of April if the farm bill doesn’t generate that. But I take 

you at your word, and I hope that you do understand my concern, 

serious concern, that it just seems—I would be derelict in my duty 

if I did not ask the question, given specifically that the size of this 

loan—the size of it—and the historical size of it, I would not be 

doing my job, Mr. Secretary. 

Mr. DORR. Well, I appreciate your comments, and on the lighter 

side, I informed almost everyone that I was involved with in making this loan that I anticipated the respected chairwoman would 

probably have some of these concerns, so this does not surprise me, 

and I anticipated your oversight. 


smartinez on PROD1PC64 with HEARING
472 

Ms. DELAURO. Thank you. Does anyone have any further questions? I do have one or two things I would want to—Ms. Kaptur? 

BIOENERGY AND RENEWABLE ENERGY

Ms. KAPTUR. Thank you very much, Madam Chair. I just wanted 

to place on the record the cross-cutting budget that we requested 

in the area of bioenergy, renewable energy programs, we estimate 

this year $103,975,000 in those programs. The proposed budget is 

a cut of $85,436,000. I respect what you’re saying, that you’re waiting for the farm bill, I don’t agree with the decision that was made 

in the bioenergy area. So I do want to place that on the record. 

You also mentioned in your testimony, your questioning, that 

you’re involved with the Department of Energy and other agencies 

in interagency cooperation on the energy issue. I want to encourage 

you on in those efforts. 

Mr. DORR. Thank you. 

Ms. KAPTUR. And make a suggestion. I’ve not been able to get 

this done. I have a bill to do it. You know, we have a strategic petroleum reserve, and I really react when I hear that middle word. 

And I really believe America should have a strategic energy reserve, including biofuels. I have one mechanism to get there. 

I would encourage you to perhaps take a look at that bill, and 

in your discussions with the Department of Energy, consider how 

the Department of Agriculture could help transform America from 

a petroleum-based economy, a carbon-based economy, to a carbohydrate-based economy, along with other alternatives that we have 

before us. So I just wanted to mention that to you. And you’re in 

a unique position in that interagency group. 

Also, I wanted to ask Mr. Andrews—Mr. Andrew—in the area of 

renewables—solar, wind, geothermal—you mentioned several proposals that you have been funding through the utility service. 

Could you give me a sense of how many—the volume of the requests that you receive in the growing market of renewable energy, 

what total dollar volume you might be being asked for versus what 

you’re able to fund? And then could you just very briefly describe 

one or two projects underway that you consider successful that 

have been launched by local consortias of farmers or farmers in cooperation with municipal powers, for example, or rural electrics 

that are generating energy through wind, through solar, through 

geothermal? So the first question is on the volume of requests 

versus what you’re able to fund in the renewables area, and then 

could you discuss a couple of projects you consider model around 

the country? 

Mr. ANDREW. First of all, the volume is picking up. The $200 million that I mentioned earlier that we’ve been setting aside for several years, we’ve only put out about $190-some million. But the volume is picking up because we’re pushing it very hard through our 

state offices. 

The wind farms I mentioned earlier, which by the way are west 

of the Mississippi—— 

Ms. KAPTUR. Thank you. 

Mr. ANDREW. Knowing where you’re from, I just assumed you 

were talking about east, but you were talking about west. They are 

west of the Mississippi. 


smartinez on PROD1PC64 with HEARING
473 

Ms. KAPTUR. Some people mix us up with Iowa, Idaho—— 

Mr. ANDREW. You’re right. 

Ms. KAPTUR [continuing]. Ohio. We all have a lot of vowels. 

Mr. ANDREW. Anyway, I’m glad I had the opportunity to clear 

that up. In Georgia, for example, I’ll use that as an example. We 

have a project there where we’re taking, there’s a farmer, there’s 

a gentleman up in north Georgia who recognized that we had a lot 

of chicken manure, they couldn’t get rid of it. We’re building, we 

have funded a process where they’re going to be burning chicken 

manure and wood waste out of construction to generate electricity, 

that will be about 20 megawatts of power that that will be generating, and the electric co-ops are going to put that into their green 

power—— 

Ms. KAPTUR. Will the gentleman yield? I’m glad you’re talking 

about that because in Ohio, we have a problem with dairy manure. 

And I don’t see the kind of leadership there that you’re describing 

in Georgia in terms of your poultry farmers. 

Mr. ANDREW. Well, frankly, that came from the farmer—I mean, 

the individual himself, if that’s what you’re referring to. 

Ms. KAPTUR. All right. 

Mr. ANDREW. In the Dakotas, we’ve got a dairy farm that was 

down there by Dairyland Power, which is a generation transmission co-op. They’re located in Wisconsin, excuse me. My geography is bad today. But anyway, they’ve got a dairy farmer was 

buying the methane gas that comes out of the farm, they’re burning it and generating electricity and putting it on the grid. 

We have several projects that we’re talking to now. For example, 

wood biomass. There’s three sites in Georgia as a matter of fact. 

We’ll be taking wood and burning it. It would be renewable. 

Ms. KAPTUR. Sir, may I ask you, could you—could somebody in 

your agency give me a little summary of those so I could send them 

to some of our farmers and say, look, this is what’s being done—— 

Mr. ANDREW. Sure. 

Ms. KAPTUR [continuing]. Are you aware of this program? Do you 

do both grants and loans, or just loans? 

Mr. ANDREW. Just loans. 

Ms. KAPTUR. Just loans. And what is the interest rate on those 

loans? 

Mr. ANDREW. Treasury. We’ll be glad to, because we’re proud of 

it. And we’re trying to do more and more and more. Our outreach 

that Tom mentioned earlier, is going to have a great deal to do 

with this, too, because we’re telling more people that we’ve got 

these things available. 

Ms. KAPTUR. If you’re trying to urge farmers to do this, sir, even 

though they may be paying Treasury rate on the loan, they’re getting a payback through energy generation aren’t they? 

Mr. ANDREW. Yes, if they’re putting—yes. 

Ms. KAPTUR. Yes. You see, and they really have to—we have to 

help them understand how this works so they don’t feel like they’re 

going to lose their shirts if they get involved in this. 

Mr. ANDREW. Right. 

Ms. KAPTUR. So I would appreciate information we could share 

with Ohio farmers. I’d really appreciate that. 


smartinez on PROD1PC64 with HEARING
474 

Mr. ANDREW. The state director, Randy, has done a good job of 

this. We’ve done a lot of work with Randy on this project. 

[The information follows:] 


smartinez on PROD1PC64 with HEARING
475 


smartinez on PROD1PC64 with HEARINGInsert offset folio 598 here 48455A.379
476 

Ms. KAPTUR. Thank you. 

WATER AND WASTE PROGRAM BACKLOG

Ms. DELAURO. Under Secretary, this is a question about rural 

water and waste and the long-term needs. I know that the Department has put forth a one-time funding increase proposal in the 

farm bill to address this. But it doesn’t close—it’s not close to meeting the need. The proposal would have only covered about a quarter of the current backlog, as I understand it, of the projects. 

How does Rural Development anticipate lowering the water and 

waste grant backlog and considering that rural development studies show the need for the program to be in excess of $80 billion 

over the next 20 years, are there any proposals you’re considering 

to ensure this backlog will not continue to grow? 

Mr. DORR. Well, there has historically been a backlog in this program. As you recall, the 2002 Farm Bill did in fact give additional 

funds that allowed us to address about $700 million of that. And 

as you correctly indicate, we have proposed some additional resources to do that in the Farm Bill. 

I frankly don’t know that the backlog will ever go away. We have 

had an ongoing outmigration out of rural America. That has meant 

that we have not sustained or invested in new water and waste infrastructure. We are now beginning to see a stabilization in some 

areas where this is changing or areas where these systems are 

worn out. And it’s all catching up with us. And it’s an issue that 

I suspect we will continue to work on for some time. 

One of the things we have clearly done, and I know you’re well 

aware of this, is we have adjusted our loan grant relationship, taking advantage of the lower cost of money over these last few years, 

to try to extend these funds, and yet maintain a very affordable 

water and sewer rate in the communities that participate. 

We’ll probably have some disagreements on the approach we’ve 

taken on this, but we’ll continue to do what we can with the funds 

that we have available, and we believe that we are addressing this 

as aggressively as is reasonable. 

SINGLE FAMILY HOUSING LOANS

Ms. DELAURO. This is my final question. This is again about the 

Section 502 guaranteed single-family housing loan program. I think 

you would concur a safe alternative for subprime mortgages, for 

creditworthy low- and moderate-income rural home buyers. The 

subcommittee provided about $5.3 billion in fiscal year 2008 for the 

direct and guaranteed section of 502 single-family housing loan 

programs. 

Given the unprecedented demand the guaranteed program is experiencing, do you expect that demand will remain strong and grow 

throughout the rest of the fiscal year as the market continues to 

adjust from the diminished availability of subprime loans for home 

purchase loans? Will you have sufficient funds to meet this demand? 

Mr. DORR. I would turn to Russ on that. We evaluate that 

monthly, sometimes biweekly. There was a period of time early in 

the fiscal year when we thought we weren’t, then the market 


smartinez on PROD1PC64 with HEARING
477 

slowed down, we thought we would. Russ, where do you think we 

are at this point? 

Mr. DAVIS. Our demand is accelerating every month. We now are using $700 million of carry forward from last year, and Katrina 

money will get us just barely into September. We’re looking at options for how we get through the fiscal year, but we are experiencing accelerating demand. 

Ms. DELAURO. Well, will you then need to—are you planning— 

you’re transferring authority to move funds from other housing programs to this program. What programs will you transfer from? 

Mr. DAVIS. Well, obviously, we’ll use that as a last resort if we 

can’t find some other way to smooth out the demand or so forth. 

But we would look to see if there are any programs that don’t have 

100 percent demand. Actually, it happens that we have programs 

that don’t get 100 percent applications, and we would look to those. 

Ms. DELAURO. What programs are you thinking of? 

Mr. DAVIS. Well, an example was in previous years has been 

farm labor housing. Developers have been going to low-income 

housing tax credits, and we’ve had extra money. 

Ms. DELAURO. Is the direct single-family housing loan program 

seeing the same unprecedented demand in 2008 over last year’s activities? And if so, how much demand has increased over the previous fiscal year? 

Mr. DAVIS. We’re seeing pretty much flattened demand. One 

thing that’s interesting is that there is competition between direct 

and guaranteed. And people come into our offices and they say, oh, 

I can get a house today in the guaranteed program or I can wait 

and get a direct loan a year from now and buy $20,000 more house. 

Some people decide to wait for the subsidy and buy a bigger house. 

We would prefer that they go into the guarantee program, which 

is stronger and has a better record of home ownership. 

Ms. DELAURO. Mm-hmm. And maybe I know the answer to this 

already, but I think you’ve got a request of $4.8 billion. 

Mr. DAVIS. Mm-hmm. 

Ms. DELAURO. The adequacy of 4.8, you know, with the demand, 

do we see it dropping from 7 billion to 4.8? That’s—— 

Mr. DAVIS. If I could throw in a commercial for the fee increase. 

The entire mortgage industry has realized that it has mispriced 

mortgages. And 2 percent is our fee right now, and for 2 percent, 

we’re taking all the risks of a hundred and two percent mortgage. 

By going to 3 percent, we would have essentially a break-even credit subsidy rate. We could do a trillion dollars. I mean, we would 

be not limited by budget authority. We really think the fee increase 

would make this a program forever. 

Ms. DELAURO. Well, but there again, you know, we could—and 

I don’t want to get back into this again because I think it—but it 

bears the conversation then that you’re then looking at the inability of people to, you know, deal with an escalated fee cost. I mean, 

so there you’ve got, you know, a market issue as well there in 

terms of going to 3 percent and the inability then of people who are 

at the low end to be able to deal with that kind of an increase. 

Mr. DAVIS. There is a tradeoff, but we view it as—the fee increase comes out to about $5.20 a month or so. That means you 

buy a house, you know, without the garbage disposal or something. 


smartinez on PROD1PC64 with HEARING
478 

You know, it buys $600 less house. Or view it as a loan that you 

would not have been able to get in the private sector. We are doing 

loans that the private sector won’t touch. And that has value. 

Ms. DELAURO. Well, I think that that is, you know, part of the 

continued debate. And I guess in terms of a final comment that I 

would make, it goes back to the beginning conversation a couple of 

hours ago. 

I think it’s true that the more rural a place is, the more difficult 

the circumstances are. And we see that borne out by the statistics. 

I mentioned median income is 25 percent lower. Poverty rate is 28 

percent higher than in the metro areas. You’ve got today 31 percent of food stamp beneficiaries are living in rural areas. 

When you talk about the wealth of the communities, yeah, I concur that there are pockets where that is occurring. But I think that 

that is the exception, is my view, and not the norm, for rural communities, which gets me back to the mission and role of this agency, which is I think substantial and one that we all have a very, 

very keen interest in. And when I look to both my colleagues who 

are here with me now, who are from Georgia, and these issues are 

more critical in the South, and rural poverty is probably—the 

South has the highest percentage in that area, that we have to 

take a hard look at the programs and the direction that we are taking these programs based on economic research and their data, et 

cetera about what direction our programs take in order to be able 

to meet the needs that would state that we want to try to meet. 

And I thank you all very, very much for your time and for, you 

know, staying over, et cetera, and appreciate your work, and I appreciate the committee members in hanging in there as well. 

Thank you very, very much to all of you, Mr. Secretary and your 

team. 


smartinez on PROD1PC64 with HEARING
479 


smartinez on PROD1PC64 with HEARINGInsert offset folio 606 here 48455A.380
480 


smartinez on PROD1PC64 with HEARINGInsert offset folio 607 here 48455A.381
481 


smartinez on PROD1PC64 with HEARINGInsert offset folio 608 here 48455A.382
482 


smartinez on PROD1PC64 with HEARINGInsert offset folio 609 here 48455A.383
483 


smartinez on PROD1PC64 with HEARINGInsert offset folio 610 here 48455A.384
484 


smartinez on PROD1PC64 with HEARINGInsert offset folio 611 here 48455A.385
485 


smartinez on PROD1PC64 with HEARINGInsert offset folio 612 here 48455A.386
486 


smartinez on PROD1PC64 with HEARINGInsert offset folio 613 here 48455A.387
487 


smartinez on PROD1PC64 with HEARINGInsert offset folio 614 here 48455A.388
488 


smartinez on PROD1PC64 with HEARINGInsert offset folio 615 here 48455A.389
489 


smartinez on PROD1PC64 with HEARINGInsert offset folio 616 here 48455A.390
490 


smartinez on PROD1PC64 with HEARINGInsert offset folio 617 here 48455A.391
491 


smartinez on PROD1PC64 with HEARINGInsert offset folio 618 here 48455A.392
492 


smartinez on PROD1PC64 with HEARINGInsert offset folio 619 here 48455A.393
493 


smartinez on PROD1PC64 with HEARINGInsert offset folio 620 here 48455A.394
494 


smartinez on PROD1PC64 with HEARINGInsert offset folio 621 here 48455A.395
495 


smartinez on PROD1PC64 with HEARINGInsert offset folio 622 here 48455A.396
496 


smartinez on PROD1PC64 with HEARINGInsert offset folio 623 here 48455A.397
497 


smartinez on PROD1PC64 with HEARINGInsert offset folio 624 here 48455A.398
498 


smartinez on PROD1PC64 with HEARINGInsert offset folio 625 here 48455A.399
499 


smartinez on PROD1PC64 with HEARINGInsert offset folio 626 here 48455A.400
500 


smartinez on PROD1PC64 with HEARINGInsert offset folio 627 here 48455A.401
501 


smartinez on PROD1PC64 with HEARINGInsert offset folio 628 here 48455A.402
502 


smartinez on PROD1PC64 with HEARINGInsert offset folio 629 here 48455A.403
503 


smartinez on PROD1PC64 with HEARINGInsert offset folio 630 here 48455A.404
504 


smartinez on PROD1PC64 with HEARINGInsert offset folio 631 here 48455A.405
505 


smartinez on PROD1PC64 with HEARINGInsert offset folio 632 here 48455A.406
506 


smartinez on PROD1PC64 with HEARINGInsert offset folio 633 here 48455A.407
507 


smartinez on PROD1PC64 with HEARINGInsert offset folio 634 here 48455A.408
508 


smartinez on PROD1PC64 with HEARINGInsert offset folio 635 here 48455A.409
509 


smartinez on PROD1PC64 with HEARINGInsert offset folio 636 here 48455A.410
510 


smartinez on PROD1PC64 with HEARINGInsert offset folio 637 here 48455A.411
511 


smartinez on PROD1PC64 with HEARINGInsert offset folio 638 here 48455A.412
512 


smartinez on PROD1PC64 with HEARINGInsert offset folio 639/800 here 48455A.413
(i) 

W I T N E S S E S 

Page 

Anderson, Ben .......................................................................................................... 391 

Andrew, J. M ............................................................................................................ 391 

Davis, R. T ................................................................................................................ 391

Dorr, T. C ................................................................................................................. 391

Houston, Kate .......................................................................................................... 1 

Johner, N. M ............................................................................................................ 1 

Salazar, Roberto ....................................................................................................... 1 

Steele, W. S .............................................................................................................. 1,391 


rfrederick on PROD1PC67 with HEARING

rfrederick on PROD1PC67 with HEARING
(iii) 

I N D E X 

Page 

Food and Nutrition Service ............................................................................... 1 

Beef Quality Standards ........................................................................................... 33 

Child Nutrition Programs ................................................................................. 14, 25, 82 

Commodity Entitlement Purchases ........................................................................ 60, 70 

Commodity Purchases ............................................................................................. 37 

Commodity Supplemental Food Program...................................... 17, 27, 140, 384, 389 

Dietary Guidelines for Americans/MyPyramid ..................................................... 61 

Emergency Food Assistance Program .................................................................... 18, 28 

Food Stamp Program .................................................................. 14, 24, 55, 57, 152, 382 

Categorical Eligibility....................................................................................... 36, 56 

Employment and Training ............................................................................... 40 

Enrollment and Unemployment ...................................................................... 39 

Error Rate ......................................................................................................... 35 

Fraud ................................................................................................................. 385 

Outreach ............................................................................................................ 34 

Participation ..................................................................................................... 35 

Food Stamp Program, Indiana ............................................................................... 74 

Food Stamp Program, Texas ................................................................................... 73 

Fresh Fruit and Vegetable program ...................................................................... 59 

Fresh Produce Program ........................................................................................... 157 

Hallmark/Westland Beef Recall...................................................................... 30, 42, 247 

Healthier U.S. Schools Challenge .......................................................................... 56 

High Performance Bonuses ..................................................................................... 167 

Improper Payments................................................................................................ 22, 164 

Indian Reservations, Food Distribution Program.............................................. 157, 175 

Leadership and Resource Collaboration ................................................................ 36 

Nutrition Assistance Programs............................................................................... 46, 79 

Nutrition Education ................................................................................................. 79 

Nutrition Programs Administration ....................................................................... 19, 28 

Opening Remarks, Ms. Johner ............................................................................... 3 

Proposed Legislation ................................................................................................ 181 

Puerto Rico and American Samoa, Funding .......................................................... 173 

Quality Standards ................................................................................................... 359 

Questions Submitted by Ms. DeLauro ................................................................... 82 

Questions Submitted by Mr. Farr .......................................................................... 374 

Questions Submitted by Mr. Latham ..................................................................... 385 

Questions Submitted by Ms. Kaptur ...................................................................... 382 

School Lunch Program ............................................................................................ 387 

Senior Farmer’s Market .......................................................................................... 383 

Simplified Summer Food Service Program ............................................................ 68 

Studies, Completed .................................................................................................. 197 

Studies, Ongoing ...................................................................................................... 187 

Toledo School Lunch and School Breakfast ........................................................... 38 


rfrederick on PROD1PC67 with HEARING
Page

iv 

WIC............................................................................................................. 15, 26, 95, 105

WIC Budget Requests ............................................................................................. 43 

WIC Participation .................................................................................................... 45 

Written Statement, Nancy Montanez Johner, Under Secretary, FNS ................ 6 

Written Statement, Roberto Salazar, Administrator, FNS .................................. 21 

Rural Development .............................................................................................. 391 

Administration’s Budget Requests ......................................................................... 480 

Alternative Energy Policy and Commodity Prices ................................................ 482 

Broadband ............................................................................................ 437, 454, 468, 511 

Business and Cooperative Programs ...................................................................... 405 

Business and Industry Guaranteed Loan Program .................................. 409, 453, 461 

Community Facilities in California ........................................................................ 438 

Community Programs ............................................................................................. 417 

Default Rate for Business Programs ...................................................................... 450 

Defining Rural Areas ............................................................................................... 459 

Direct Loans and Guaranteed Loans ..................................................................... 500 

Electric Programs .................................................................................................... 421 

Elimination of Programs ..................................................................................... 425, 448 

Energy Independence .............................................................................................. 493 

Evaluation of Rural Development Programs ......................................................... 499 

Expanding Rural Development’s Portfolio ............................................................. 494 

Farm Community versus Rural Community ......................................................... 433 

Farm Labor Housing ................................................................................... 439, 463, 504 

FY 2009 Budget ....................................................................................................... 398 

Helping Small Communities ................................................................................... 435 

HIV/AIDS ................................................................................................................. 480 

Housing and Community Facilities ........................................................................ 402 

Housing Grants and Loans ..................................................................................... 502 

Housing Loan Crisis ................................................................................................ 441 

Intermediary Relending Program ........................................................................... 409 

Loan Guarantees/Rural Banks ............................................................................... 481 

Low-Income Housing ............................................................................................... 449 

Low-Income Suburban Communities, Assistance ................................................. 432 

Minority Programs ................................................................................................... 484 

Multi-Family Housing Programs ........................................................................ 413, 414 

Multi-Family Revitalization of Existing Stock ...................................................... 506 

Mutual and Self-Help New Construction .............................................................. 507 

Open Range Communications Broadband Loan .................................................... 444 

Open Range Loan .................................................................................................... 469 

Opening Statement, Mr. Dorr ................................................................................. 393 

Overall State of the Rural Economy ...................................................................... 501 

Persistent Poverty Counties ................................................................................... 442 

Population Limits .................................................................................................... 497 

Promotion of Locally-Owned Development ............................................................ 496 

Questions for the Record Submitted by Mr. Bishop ............................................. 479 

Questions for the Record Submitted by Mr. Latham ............................................ 499 

Questions for the Record Submitted by Ms. Kaptur ............................................. 493 

Renewable Energy ............................................................................... 447, 451, 466, 472 

Rental Assistance Funding Levels ......................................................................... 507 

Rental Assistance Pilot Program ............................................................................ 461 

Role of Rural Development ..................................................................................... 398 

Rural Business-Cooperative Service ...................................................................... 509 

Rural Cooperative Development Grant .............................................................. 409, 464 

Rural Economy ......................................................................................................... 426 

Rural Healthcare ..................................................................................................... 479 


rfrederick on PROD1PC67 with HEARING
Page

v 

Rural Housing .......................................................................................................... 492 

Rural Utility Service ............................................................................................... 510 

Rural Water Challenges .......................................................................................... 481 

Rural Water Waste Project ..................................................................................... 500 

Single Family Housing Programs ....................................................................... 416, 476 

Small Business Administration Programs ............................................................. 499 

Small, Socially Disadvantaged Producers Grant Program ................................... 409 

Telecommunications Programs ............................................................................... 421 

Utilities Programs ................................................................................................... 404 

Water and Environment Programs ........................................................................ 423 

Water and Waste Program Backlog ....................................................................... 476 

Written Statement by Ben Anderson, Administrator of the Rural BusinessCooperative Service, USDA ................................................................................. 408 

Written Statement by James M. Andrew, Administrator of the Rural Utilities 

Service ................................................................................................................... 420 

Written Statement by Russell T. Davis, Administrator of the Rural Housing 

Service ................................................................................................................... 411 

Written Statement by Thomas Door, Under Secretary for Rural Developent, 

USDA .................................................................................................................... 396 

Æ 


rfrederick on PROD1PC67 with HEARING