S. HRG. 109–323, PT. 3 

Senate Hearings 

Before the Committee on Appropriations 

Agriculture, Rural 

Development, and Related 

Agencies Appropriations 

Fiscal Year 2007 

109th CONGRESS, SECOND SESSION 

H.R. 5384 

PART 3 

DEPARTMENT OF AGRICULTURE 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

NONDEPARTMENTAL WITNESSES 
Agriculture, Rural Development, and Related Agencies Appropriations, 2007 

(H.R. 5384)—Part 3 
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27–147 PDF 2006

S. HRG. 109–323, PT. 3

AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2007 

HEARINGS 

BEFORE A

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

SECOND SESSION 

ON

H.R. 5384 

AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2007, 

AND FOR OTHER PURPOSES 

PART 3 

Department of Agriculture 

Department of Health and Human Services 

Nondepartmental Witnesses 

Printed for the use of the Committee on Appropriations 

( 

Available via the World Wide Web: http://www.gpoaccess.gov/congress/index.html 
(II) 

COMMITTEE ON APPROPRIATIONS 

THAD COCHRAN, Mississippi, Chairman 

TED STEVENS, Alaska 

ARLEN SPECTER, Pennsylvania 

PETE V. DOMENICI, New Mexico 

CHRISTOPHER S. BOND, Missouri 

MITCH MCCONNELL, Kentucky 

CONRAD BURNS, Montana 

RICHARD C. SHELBY, Alabama 

JUDD GREGG, New Hampshire 

ROBERT F. BENNETT, Utah 

LARRY CRAIG, Idaho 

KAY BAILEY HUTCHISON, Texas 

MIKE DEWINE, Ohio 

SAM BROWNBACK, Kansas 

WAYNE ALLARD, Colorado 

ROBERT C. BYRD, West Virginia 

DANIEL K. INOUYE, Hawaii 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

BARBARA A. MIKULSKI, Maryland 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

PATTY MURRAY, Washington 

BYRON L. DORGAN, North Dakota 

DIANNE FEINSTEIN, California 

RICHARD J. DURBIN, Illinois 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

J. KEITH KENNEDY, Staff Director 

TERRENCE E. SAUVAIN, Minority Staff Director 

SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, AND RELATED AGENCIES

ROBERT F. BENNETT, Utah, Chairman 

THAD COCHRAN, Mississippi 

ARLEN SPECTER, Pennsylvania 

CHRISTOPHER S. BOND, Missouri 

MITCH MCCONNELL, Kentucky 

CONRAD BURNS, Montana 

LARRY CRAIG, Idaho 

SAM BROWNBACK, Kansas 

HERB KOHL, Wisconsin 

TOM HARKIN, Iowa 

BYRON L. DORGAN, North Dakota 

DIANNE FEINSTEIN, California 

RICHARD J. DURBIN, Illinois 

TIM JOHNSON, South Dakota 

MARY L. LANDRIEU, Louisiana 

ROBERT C. BYRD, West Virginia 

(ex officio) 

Professional Staff 

FITZHUGH ELDER IV 

HUNTER MOORHEAD

STACY MCBRIDE

DIANNE PREECE

GALEN FOUNTAIN (Minority) 

JESSICA ARDEN FREDERICK (Minority) 

WILLIAM SIMPSON (Minority) 

TOM GONZALES (Minority) 
(III) 

C O N T E N T S 

THURSDAY, MARCH 9, 2006 

Page 

Department of Agriculture: Office of the Secretary .............................................. 1 

TUESDAY, MARCH 14, 2006 

Department of Health and Human Services: Food and Drug Administration ... 133 

THURSDAY, MARCH 30, 2006 

Department of Agriculture ...................................................................................... 297 

Nondepartmental Witnesses ................................................................................... 527 

(1) 

AGRICULTURE, RURAL DEVELOPMENT, AND 

RELATED AGENCIES APPROPRIATIONS FOR 

FISCAL YEAR 2007 

THURSDAY, MARCH 9, 2006 

U.S. SENATE, 

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 8:34 a.m., in room SD–192, Dirksen 

Senate Office Building, Hon. Robert F. Bennett (chairman) presiding. 

Present: Senators Bennett, Bond, Burns, Craig, Kohl, and Dorgan. 

DEPARTMENT OF AGRICULTURE 

OFFICE OF THE SECRETARY

STATEMENT OF HON. MIKE JOHANNS, SECRETARY 

ACCOMPANIED BY: 

CHARLES CONNER, DEPUTY SECRETARY 

KEITH COLLINS, CHIEF ECONOMIST 

W. SCOTT STEELE, BUDGET OFFICER 

OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

Senator BENNETT. The subcommittee will come to order. 

I will tell our witnesses and spectators, as well as senators, that 

the full committee has a meeting scheduled at 9:30 to hear Secretary Rumsfeld and Secretary Rice discuss the appropriations 

with respect to Katrina. So we will do our best to be finished with 

this hearing in time to go to the full committee for that hearing. 

And we are grateful to Secretary Johanns for his willingness to 

appear at this hour in the morning. There are some senators who 

say it isn’t even light yet at 8:30, and what are we doing convening 

this early? But we are grateful, Mr. Secretary, that you would meet 

our schedule with respect to that, and we welcome you before the 

subcommittee. 

This is the Secretary’s second appearance before the subcommittee, and we understand you celebrated your 1-year anniversary as the Secretary in January. 

And with you, we welcome Mr. Conner, Dr. Collins, and Mr. 

Steele. 

Before I speak about the specifics of USDA’s budget request, I 

would like, Mr. Secretary, to take the opportunity to thank you and 

your Department for your efforts in the wake of Hurricane Katrina. 
2 

Secretary JOHANNS. Thank you. 

Senator BENNETT. We have heard a great deal of criticism about 

Katrina with respect to a number of other agencies, but the work 

that was done by USDA employees in feeding and housing thousands of people has gone unnoticed and unremarked upon in the 

national media. So I want to take this occasion to congratulate 

them through you for the work that all of your employees did. 

The Natural Resources Conservation Service and the Farm Service Agency are working to restore watersheds and farms and 

ranches throughout the region, which is vitally important. 

On a personal note, I would also like to thank you for your department’s help in Utah, when we had a natural disaster. January 

of 2005, just a little over a year ago, Washington County experienced some of the worst flooding in its history. And NRCS rose to 

the challenge. It has helped restore the damage caused by those 

floods. 

And then, particularly, I want to recognize the efforts of Sylvia 

Gillen, one of your employees. She is the Utah State Conservationist. And she has been creative and helpful and responsive, and 

she does a great job for you, and she has done a great job for the 

people of Utah. And we want to recognize that. 

Now the USDA request for the subcommittee is approximately $15.6 billion, and this represents a 7 percent or $1.263 billion decrease from last year. We don’t usually deal with decreases around 

here, and these are the OMB numbers. We are awaiting more information from CBO that might change these numbers a little up 

or down, but basically, they will stay in the same ballpark. 

And quite frankly, Mr. Secretary, this is a fairly significant hole 

that this subcommittee is going to have to try to climb out of. The 

President’s budget eliminates approximately $378 million of Federal support for agriculture research at the Nation’s land grant colleges and universities, as well as USDA’s own in-house research 

agency. That is something that concerns me. I am a strong supporter of research and the value that we get for that long term. 

Another $176 million is eliminated for conservation and watershed projects throughout the country. And one of the unfortunately 

standard budget tricks that every OMB, regardless of who is President or regardless of which party controls it, is in this budget. The 

budget includes $182 million in new user fees, which are not likely 

to be enacted by the Congress, which means we have got to find 

another $182 million in cuts to offset that projected revenue increase. 

Finally, funding is eliminated for the Grazing Lands Conservation Initiative, housing for very low-income families, and the Commodity Supplemental Food Program, among others. And I am sure 

members of the subcommittee will raise these issues with you this 

morning and give you the opportunity to talk about that. 

Now the budget does put an added emphasis on the Food and 

Agriculture Defense Initiative and activities related to avian flu, 

the highly pathogenic possible pandemic that we may be facing. 

So I will now turn to Senator Kohl, the Ranking Member. Members will be able to submit questions for the record if they are not 

here. And I will tell members through their staffs who are here; we 

hope that all questions to the subcommittee can be submitted by 
3 

the close of business on Friday, March 17. And then we will forward those to you, Mr. Secretary. 

Senator Kohl. 

Senator KOHL. I thank you, Mr. Chairman. 

Secretary Johanns, we welcome you, and it is good to see you 

again. Mr. Conner, Dr. Collins, and Mr. Steele, we also extend our 

welcome to you. 

Mr. Secretary, at the outset, I think it is important that we recognize some of the very good work that you and the Department 

have done this last year. By all reports, the USDA response to the 

terrible storms in the Gulf Coast, especially from your nutrition 

and rural development programs, was among the very best in the 

Government. 

Your quick action meant lives saved and families placed firmly 

on the path toward recovery. So we congratulate you on your good 

work. But we all know that there have been some missteps at the 

Department over the past several months, which have too often 

crowded out the good work that you have done. 

Chairman Bennett and I face a tremendous challenge to craft a 

bill under the current budget constraints. The President’s budget 

assumes too many unrealistic or unacceptable deficit reduction 

measures. It assumes more than $300 million in unauthorized user 

fees that Congress has rejected time and time again, and it calls 

for the elimination of a small, but vital feeding program for the elderly. 

And although this is in the authorizing arena, the President’s 

proposal to tax dairy farmers in order to offset tax breaks for 

multi-millionaires is not acceptable. 

These are all topics we are likely to visit today, and I look forward to your statement. 

Mr. Chairman, I want to thank you and publicly state how grateful I am for the relationship that you and I have developed over 

the past 2 years on this subcommittee, and I look forward to working with you. 

Senator BENNETT. Thank you very much. 

I will echo the comments about the working relationship. You 

and your staff have been a joy to work with, and we don’t have any 

partisan differences here. Wish the rest of the Congress could get 

along as well as we do. 

Normally, we do not have additional opening statements. But 

since there is only one other member of the subcommittee here, 

Senator Craig, do you have something you would like to say before 

we hear from the Secretary? 

Senator CRAIG. Well, Mr. Chairman, thank you very much. 

I guess I was under some odd illusion that this was the Ag Committee, and at this hour, you were probably going to serve breakfast. 

But that doesn’t appear to be the case. 

Senator BENNETT. That is an illusion, sir. 

Senator CRAIG. All right. All right. Well, it is possible that the 

Secretary could have brought examples of products of a variety of 

States. 

Anyway, let me echo what both our Chairman and our Ranking 

Member have said about the performance of the Department over 
4 

the last year and during, Mr. Secretary, some of these most difficult times. I am always amazed that one agency that was not designed to do what the press expected it to do, be a first responder, 

largely got criticism while so many others did so very well. 

The Chairman and the Ranking Member have expressed how 

USDA performed in Katrina. I chair the authorizing committee of 

Veterans Affairs, another unbelievable example of true heroism. 

Thousands of people rescued. No one lost their lives. We evacuated 

3 hospitals and the pharmaceuticals and the families of the employees and the pets. 

And yet that has made no headlines as, once again, another 

agency of our Federal Government in a time of tremendous difficulty responded very gallantly, with its staff refusing to leave the 

hospitals in care of their patients. Concerned about their families, 

obviously, but not leaving. 

So there are great stories out there, and it is important that we 

recognize them because somehow they don’t rise to the level of attention on the part of others. 

We are on the eve of a 2007 Farm Bill. It is looming large on 

the horizon, Mr. Secretary, at a time when the Chairman has already expressed the cuts that are proposed in this budget. And I 

think he was modest in saying a hole in which one will attempt to 

dig ourselves out. It is a hole, and we will see how we can handle 

it. 

At the same time, I think you and I were expressing the oddity 

this morning of a record snow storm in western Oregon and range 

fires in Kansas, all on the same morning, reported on the same 

news clip. Record drought in northern Texas and Oklahoma and 

Arizona and parts of Kansas, and it doesn’t appear to be alleviating 

at this moment. There will probably be some extraordinary needs 

there that my guess is not in this budget. 

So with that, let us get to your testimony and the beginning of 

a very positive working relationship on this budget to resolve our 

differences and serve American agriculture. 

Thank you. Thank you, Mr. Chairman. 

PREPARED STATEMENTS

The subcommittee has received statements from Senators Cochran and Durbin which will be placed in the record. 

[The statements follow:] 

PREPARED STATEMENT OF SENATOR THAD COCHRAN

Mr. Chairman, thank you for holding this hearing on the fiscal year 2007 United 

States Department of Agriculture budget. I welcome Secretary Johanns back to the 

Committee. 

I want to thank Secretary Johanns and his staff for their work throughout the 

Gulf Coast region for their assistance in the effort to recover from the devastating 

impact of Hurricanes Katrina and Rita. The Department has a large presence in the 

hurricane affected region which is an important asset to the communities of the 

Gulf Coast. 

The employees of the National Forest Service, Natural Resource Conservation 

Service, Rural Development, and Farm Service Agency were all ready to assist immediately following the hurricanes. These agencies are to be commended for their 

swift action and ability to not let ‘‘red tape’’ get in the way of providing immediate 

help to thousands of Mississippi residents devastated by Hurricanes Katrina and 

Rita. The efficient manner in which USDA was able to respond after the Hurricane 

Katrina should be an example for all agencies during times of crisis. 
5 

All of Mississippi’s agriculture industries were hurt by the hurricanes last summer. Producers and the residents of the rural areas of Mississippi appreciate the 

continued support USDA has provided for hurricane related losses. But, much more 

help is needed to get the disaster victims back on their feet. I look forward to continuing to work with USDA to further assist these family farms and ranches. 

An important aspect of the Agriculture Appropriations bill is the funding it provides for agriculture research. This research is a critical part of ensuring that U.S. 

producers remain the leaders in food and fiber production. The funding this bill invests in agriculture research is a small sum compared to the economic benefit it has 

on a farmer’s bottom line. I thank Chairman Bennett and the Ranking Member Senator Kohl for their continued leadership to assist America’s farmers and ranchers. 

Mr. Chairman, I thank you for holding this hearing and I look forward to the testimony. 

PREPARED STATEMENT OF SENATOR RICHARD J. DURBIN

Mr. Chairman, I thank you for holding this hearing on the President’s fiscal year 

2007 Budget. I thank Secretary Johanns for giving his testimony and agreeing to 

be here. 

I see two main problems with the administration’s budget proposal for programs 

within the jurisdiction of the U.S. Department of Agriculture (USDA). First, the 

budget does not give farmers the certainty they need from the Federal Government. 

Farmers and ranchers are engaged in a risky industry, and they do their best to 

mitigate these risks. Irregular weather systems, crop and livestock diseases that can 

travel across a continent in a matter of months, and crop and energy prices are 

among the variables that are out of the hands of individual producers. Farmers understand these risks and build them into their plans by purchasing crop insurance, 

planting more than one variety of a crop, and keeping up with advances in technology that make them more profitable. However, there’s one source of uncertainty 

that should not tamper with the viability of farming: the Federal Government’s 

spending priorities. 

We passed a Farm Bill in 2002 that made a commitment to farmers through 2007 

when the bill expires. Now we all understand the need to reduce the deficit. However, farmers and the programs within the jurisdiction of the USDA are bearing the 

brunt of budget savings plans. Last year, mandatory programs within the mandate 

of the USDA took a $2.7 billion hit over 5 years. This cut amounted to 7 percent 

of the budget reconciliation savings, even though spending on USDA programs accounted for far less of a share of the Federal Government’s budget. In addition, it’s 

important to note that the Farm Bill has been far less expensive than its original 

price tag. 

On top of these cuts, the administration is now asking for a 5 percent across-theboard cut in direct payments, counter-cyclical payments, and marketing loans. By 

my estimations, a 5 percent cut will mean that producers in the State of Illinois 

stand to take a hit of $65 million. This cut would follow a crop year in which Illinois 

suffered from one of the worst droughts in the 100 years since modern records have 

been kept. With all the uncertainty surrounding the expiration of the Farm Bill in 

2007, I can’t understand why the administration is focusing so much of its budgetsavings plans on agricultural producers that already have to be thinking constantly 

of their risks. 

Second, I believe that this budget demonstrates the administration’s failure to 

support rural America. One of the most promising developments for rural America 

in recent years is the momentum behind biofuels and alternative energy sources. 

With soaring gasoline and diesel prices and an increasing acceptance of the fact that 

dependence on Middle Eastern oil is not a good thing, it has become clear to us all 

that we must develop alternative fuel sources. More E–85 pumps and more plants 

processing biofuels mean more jobs and development for rural areas. However, at 

this historic time, I’m afraid to say that the administration’s budget actually cuts 

funding for the Clean Cities Program, a program that partners with local governments to encourage the use of clean non-petroleum fuels and alternative fuel vehicles. This type of program provides incentives to local communities to expand biofuel 

infrastructure, and, in doing so, increases demand for the production and processing 

of alternative energy sources. 

I thank the Chairman again for holding this hearing and hope that this subcommittee will consider giving farmers greater certainty and committing to true 

rural development in this year’s appropriations bill. 
6 

Senator BENNETT. Mr. Secretary, we will be pleased to hear your 

statement. 

STATEMENT OF SECRETARY MIKE JOHANNS

Secretary JOHANNS. Well, thank you very much, Mr. Chairman, 

and I do appreciate the opportunity to be here in front of this subcommittee. 

I also appreciate the compliments relative to the Katrina response. I want to assure each of you that those compliments will 

be passed on to our employees, who were the ones who were truly 

at the front lines. And we always accept the criticism of missteps 

and see that as a challenge to get better. 

It has been a year since I became Secretary, and it has been 

quite a year. We have expanded farm exports. We have worked on 

new trade agreements. We have reopened beef markets, and we 

have witnessed strength throughout the farm economy. 

During 2005, we have also confronted some very serious issues— 

hurricanes, natural disasters, AI pandemic, and rising energy costs. 

USDA has played a significant role in responding to these challenges. 

President Bush and I are very proud of the efforts of our employees relative to the hurricanes in the Gulf Coast region. They provided food and shelter, protection, emergency assistance rapidly, 

and did so very professionally. And those are just a few of the ways 

that we assisted in that region. 

There does remain a great deal yet to be done to normalize their 

lives. People are struggling to get their homes back, their farms 

and ranches, and their communities. That is why I am pleased to 

announce that on January 26, 2006, based upon congressional action and the use of existing authorities, USDA made available $2.8 

billion to assist those impacted by hurricanes. This additional funding brings our effort at USDA to $4.5 billion. 

On February 16, the President submitted a supplemental that includes $55 million for the USDA to recover additional costs of operating the National Finance Center, which is there in New Orleans, 

restore the ARS research lab in New Orleans, and to fund floodplain easements. A second supplemental submitted the same date 

includes $350 million for Public Law 480, Title II, international 

food assistance to meet emergency food needs. 

The President’s 2007 budget for USDA does meet important priorities while exercising fiscal discipline in order to deal with the 

Federal deficit. Reducing the deficit is a critical part of the President’s economic plan. It strengthens the economy and creates jobs. 

Farmers and ranchers know the importance of a healthy economy. It raises income, and it increases demand for the products 

that they raise. Farmers and ranchers also know that the deficit 

and resulting burden of debt have a profound impact on their way 

of life and the ability of future generations to participate in agriculture. 

Because of the overriding need to reduce the Federal deficit, 

USDA is sharing in the governmentwide effort. There are proposals 

in the budget that will produce real savings in both mandatory and 

discretionary spending. The President’s 2007 budget, which was re-
7 

leased about a month ago, indicates that USDA expenditures are 

expected to decrease about $3 billion. 

The decrease in 2007 is due to CCC reductions from program 

changes, the legislative proposals, and because one-time supplemental funding is not continued. The discretionary appropriation 

request pending before this subcommittee which does not include 

Forest Service, as you know—is for $15.6 billion. 

Some of the highlights, if I could just quickly run through those. 

Avian influenza. We have been closely monitoring the alarming 

spread of highly pathogenic AI around the world. I do want to assure you that USDA is a full partner in dealing with this potential 

pandemic. 

In response to the President’s request, Congress provided over 

$91 million in 2006 emergency supplemental funding for USDA, 

and we thank you for that. That money will be used for our AI efforts. We are using those funds for international efforts, domestic 

surveillance of poultry and migratory birds, diagnostics, emergency 

preparedness and response, and research. 

The 2007 budget includes $82 million for avian influenza. Setting 

aside that one-time emergency supplemental, the $82 million represents an increase of $66 million over 2006 funding levels. 

The budget proposes $322 million in USDA funding for the 

multi-agency Food and Agriculture Defense Initiative, which is 

funded now at nearly $540 million governmentwide. The USDA 

portion represents a $127 million increase over 2006. That figure 

does not include last year’s one-time funding for the construction 

project in Ames, Iowa, for the National Centers for Animal Health 

because that project has been funded. 

But funding increases do exist. There is $23 million in increases 

to strengthen the Food Emergency Response Network and Regional 

Diagnostic Network. There’s also $42 million in increases for research to ensure food safety, identify pathogens, develop improved 

animal vaccines, and better understand the genes that provide disease resistance. And then there’s $62 million in increases to enhance surveillance and monitoring activities. That helps us detect 

pest and disease threats to improve response capabilities. 

Moving on to another priority, energy. I recently announced a 

comprehensive energy strategy. As I talked to farmers all across 

the country, they emphasized the high cost of energy, and so we 

went to work on that. I am pleased that this budget continues to 

provide tools that help producers with energy costs. It also funds 

the development of renewable energy resources and new energy-efficient technology. 

In 2007, we will have at least $345 million available for loans, 

grants, and other support for energy projects. Within this total, 

USDA’s core investment in energy-related projects increases to $85 

million from $67 million in 2006. This includes resources available 

to support renewable energy research and demonstration projects, 

as well as additional efforts to support energy development. 

In addition, we are targeting renewable energy and energy efficiency projects through our rural development loan and grant programs. We anticipate investments in excess of about $250 million 

each year in fiscal years 2006 and 2007. 
8 

Throughout 2007, USDA will continue its many successful partnerships with the Energy Department, Department of the Interior, 

and the EPA. USDA’s efforts will be coordinated by a newly created Energy Policy Council. 

In a related matter, I am pleased to be before this subcommittee 

today to make an announcement. I am pleased to announce the 

issuance of the final rule designating the first six items under the 

Federal Biobased Products Preferred Procurement Program. This 

rule is available for viewing at the Federal Register today. It will 

be published tomorrow. 

Under the biobased program, all Federal agencies will have to 

give the designated items preference in their procurement. We believe the designation of these six biobased items initiates a new, 

economic opportunity for farmers and ranchers. Increased Federal 

procurement will lead to greater acceptance of biobased products, 

lower prices, and more variety of products in the market. 

The final rule is the first of a series of rules that we expect to 

publish in 2006 that will designate biobased items consisting of 

hundreds of branded products. If I might just take a little personal 

privilege and thank Senator Tom Harkin. He worked very hard on 

this. When I sat down with him a year ago or more to talk about 

the biobased program, it was at the top of his list. 

We thank everybody who has been a part of this effort. If you 

will remember, this came out of the 2002 Farm Bill. So there has 

been a lot of effort to finalize the rule. We thank Congress for 

pushing this forward. I think it is really a good item. 

In terms of farm programs, last year, as we released the budget, 

there was an expectation by some that the Farm Bill expenditures 

would end up below 2002 projections. That is what we heard last 

year. This is not the case. 

In 2007, even with the proposed reductions, we expect to spend 

nearly $7 billion more than was projected in the 2002 Farm Bill. 

And the Reconciliation Act passed weeks ago delays, but it does not 

reduce farm commodity programs. The one exception is the Step 2 

program, which is the cotton program. 

We acknowledge that there are real reductions in Reconciliation, 

but they affect other programs, such as rural development, research, conservation. Thus, the administration is reproposing 

changes to reduce farm program spending. They include reducing 

commodity payments by 5 percent; reducing the payment limit, implementing small marketing assessments on sugar and milk; and 

operating the Dairy Price Support Program at minimum cost. 

In order to improve the effectiveness of providing good service to 

farmers, USDA also continues to work with Congress to modernize 

the field office structure of FSA. Although improvements have been 

made in modernizing a portion of the computer system, such as 

Web-based computing systems and the GIS, further investments 

are needed to replace the remaining outdated and obsolete legacy 

systems. 

This will also permit the full use of Web-based Common Computing Environment. This subcommittee has supported and funded 

that initiative, and I want you to know how much we appreciate 

that. 
9 

FSA will also work with farmers and ranchers at the local level 

and with Congress to identify how to consolidate offices where appropriate and ensure that future investments are prudent and done 

so in a manner that uses tax dollars wisely. 

In reference to crop insurance, net expenditures for crop insurance are expected to grow since the reform of 2000 by about 50 percent between 2001 to 2007. At the same time, producers have continued to receive disaster payments, as you know, in ad hoc disaster programs. From 2001 to 2007, when crop insurance payouts 

did start to rise dramatically, we also delivered about $9 billion to 

producers in ad hoc actions. 

The budget again includes proposals to enhance crop insurance 

and reduce costs to deliver the program in order to reduce dependence on ad hoc disaster programs. The budget also requests such 

sums as necessary for mandatory costs associated with the program and includes funding for additional staffing that would focus 

on reducing fraud, waste, and any abuse that may exist in this program. 

In reference to trade, expanding access to global markets is important for agriculture. Trade plays a critical role. Our budget proposals for 2007 support our continued commitment to trade expansion. Increased funding is provided for the Foreign Agricultural 

Service to maintain its overseas office presence and continue its 

representation on behalf of American agriculture. 

The new FAS Trade Capacity Building initiative is funded for 

technical assistance and training activities to assist developing 

countries. The goal is to strengthen their agricultural policy-making and regulatory systems so they can become better trading partners in other parts of the world. 

For the foreign food assistance programs, the budget places increased emphasis on meeting the highest priority emergency and 

economic development needs, including maintaining funding for the 

McGovern-Dole International Food for Education and Child Nutrition Program. 

Regarding food safety, in order to continue the protection of the 

Nation’s supply of meat, poultry, and egg products, the budget requests funds needed to maintain Federal support of inspection systems. The budget also requests funding to expand the Food Emergency Response Network to support the Food and Agriculture Defense Initiative. With this funding, FSIS will increase the capability of State and local laboratories to handle large volumes of 

testing. 

The budget proposes over $4 billion in mandatory funding to continue implementation of conservation programs arising out of the 

2002 Farm Bill. Within the conservation total, $83 million in additional resources are requested to extend the Conservation Security 

Program into additional watersheds and to service prior year contracts. I would like to mention that the 2006 CSP sign-ups began 

on February 13. They will continue through the end of March. 

To help meet the President’s commitment to create, improve, and 

protect at least 3 million wetland acres over a 5-year period, beginning in 2004, the budget includes over $400 million for Wetlands 

Reserve Program. This will allow for an additional 250,000 acres 

to be enrolled in the program in 2007. That is 100,000 more acres 
10 

than estimated for 2006 and the largest 1-year enrollment since 

the program started in 1992. 

In the aggregate, funding in the budget will support enrollment 

of an additional 23 million acres in conservation programs, largely 

in EQIP. This brings total enrollment to about 197 million acres. 

That is the highest enrollment in conservation programs in our Nation’s history. The budget also includes discretionary funding for 

ongoing conservation work to meet high-priority natural resources 

concerns. 

For rural development, that part of the budget includes $14.4 billion in direct loans, loan guarantees, and grants to improve economic opportunities in rural areas. This assistance could be used 

for everything from financing rural businesses, electric and telecommunications facilities, water and waste disposal projects, and 

other community facilities. It will also provide home ownership opportunities and assist in revitalizing our multi-family housing 

projects. 

The 2007 budget maintains the administration’s commitment to 

revitalize multi-family housing and provides rent protection for tenants of projects that are withdrawn from the program. 

Senator, you mentioned research. In the research area, the 2007 

budget funds the highest-priority research facing American agriculture. It also increases the use of competition to improve the 

quality of research. 

The budget includes a $66 million increase for the National Research Initiative. The budget also includes $107 million in increases for high-priority research conducted by ARS scientists in 

areas such as food and agriculture defense, bioenergy, plant and 

animal genomics and genetics, and human nutrition and obesity 

prevention. 

Speaking of nutrition, we fully fund the expected requirements 

of the 3 major nutrition assistance programs—WIC, Food Stamps, 

and Child Nutrition. For WIC, which is the Department’s largest 

discretionary program, the budget proposes $5.4 billion in program 

level to support the estimated level of WIC participation. Included 

in the budget is a $125 million contingency fund. 

For the Food Stamp Program, the budget includes resources to 

totally fund estimated participation and also provides a $3 billion 

contingency fund should costs exceed what we are estimating. We 

expect an increased level of school lunch participation of about 2 

percent, so the budget includes a $700 million increase for that. 

There is also a new proposal for a $300 million contingency fund 

for the Child Nutrition Programs. 

PREPARED STATEMENTS

I just want to wrap up and say we are deeply committed to working on this deficit. We recognize that that is your challenge also. 

We look forward to working with this Subcommittee in that endeavor. 

Mr. Chairman, thank you. 

[The statements follow:] 
11 

PREPARED STATEMENT OF MIKE JOHANNS

Mr. Chairman and distinguished members of this Committee, I am pleased to appear before you to discuss the fiscal year 2007 budget for the Department of Agriculture (USDA). 

I am joined today by Deputy Secretary Chuck Conner; Scott Steele, our Budget 

Officer; and Keith Collins, our Chief Economist. 

It has been a year since I was given the honor to serve our country as Secretary 

of Agriculture. It has been an eventful and challenging year. We have expanded 

farm export opportunities through new trade agreements; re-opened beef export 

markets that were closed after finding Bovine Spongiform Encephalopathy (BSE); 

responded immediately to severe natural disasters; and witnessed continued 

strength in the farm economy. 

A major priority has been working to achieve growth in the farm economy through 

trade. We continue to open foreign markets to U.S. agricultural exports. Since 2001, 

the administration completed free trade agreements with 15 countries, including the 

recently completed agreements with Peru, Colombia, and Oman and the Central 

America-Dominican Republic Free Trade Agreement (CAFTA–DR). The agriculture 

industry estimates that CAFTA–DR could boost our farm exports by $1.5 billion. 

Negotiations for free trade agreements with a host of other important markets are 

continuing, and we look forward to initiating free trade negotiations with Korea, our 

sixth largest agricultural export market, in the near future. 

During the past year, we also have increased our efforts to reform agricultural 

trading practices. The United States presented an ambitious proposal to advance 

the World Trade Organization (WTO) agriculture negotiations and unleash the full 

potential of the Doha Development Agenda. Reforming global agriculture trade will 

create new jobs and promote economic development. Our goal is to open new markets by reducing or eliminating unfair competition from production and trade distorting agricultural subsidies and import barriers. We are now working very hard 

to reach agreement on the terms of an agricultural agreement by the end of April, 

as agreed to by WTO Members at the recent Hong Kong Ministerial. 

Another priority has been our efforts to re-open overseas markets for U.S. beef 

and beef products. We have achieved a great deal of progress. We have regained at 

least partial access to 28 markets. As you know, recently a shipment to Japan did 

not comply with the terms of our export agreement. We are working aggressively 

to secure a resumption of trade in the near future. 

During 2005, we also had to confront other serious issues, such as hurricanes and 

other natural disasters, the threat of an avian influenza pandemic, and rising energy costs. USDA has played a significant role in responding to these challenges and 

has made a tangible and positive difference in American lives. 

President Bush and I are very proud of the efforts USDA employees have made 

to provide assistance throughout the Gulf Coast Region in the immediate aftermath 

of recent hurricanes. These employees helped to rescue more than 600 survivors in 

Louisiana. We made available more than 22 million pounds of food and 2 million 

pounds of baby formula for use by the Red Cross, Salvation Army, and other organizations. USDA assisted over 10,000 evacuees obtain temporary housing in 45 States. 

USDA also aided in the transport of over 13,000 evacuees and our employees fanned 

out across the region to clear debris from farms, ranches and other watersheds. During the initial days and weeks following the storm, USDA worked closely with the 

Federal Emergency Management Agency to set up and support 80 disaster recovery 

centers in Louisiana and Mississippi. The Forest Service played a critical role by 

utilizing its incident management abilities, managing evacuation centers and base 

camps, providing logistical support, clearing roadways, helping with search and rescue operations, and operating mobilization centers and trailer staging areas. 

These are just a few of the ways that USDA was able to provide immediate assistance to that region. But there still remains a great deal to be done to normalize 

life for those struggling to take back their homes, their farms or ranches, and their 

communities. That is why I was pleased to announce on January 26, 2006, that 

based on Congressional action and the use of existing authorities, USDA has made 

available $2.8 billion to assist those impacted by the hurricanes. Of this amount, 

$1.2 billion will be made available to agricultural producers through various programs. In addition, $1.6 billion will be used to restore homes and rural communities. This additional funding brings total USDA aid to hurricane disaster victims 

to more than $4.5 billion since September 2005. Finally, the supplemental request 

submitted on February 16 includes $55 million in funding to cover additional costs 

of operating the National Finance Center, repair damages to the Agricultural Research Service (ARS) laboratory in New Orleans and fund floodplain easements. 
12 

2007 BUDGET

The President’s 2007 budget for USDA meets our most important priorities, while 

exercising the kind of fiscal discipline that is absolutely necessary to reduce the Federal deficit. Reducing the deficit is a critical part of the President’s economic plan. 

It will strengthen the economy and create more jobs. Farmers, ranchers, and rural 

citizens know the importance of a healthy economy, which raises household incomes 

and increases demand for their products. 

Farmers, ranchers, and rural citizens also know that the deficit and resulting burden of debt have a profound impact on the economy and, thus, on their way of life 

and the ability of future generations to participate in agriculture. In the past few 

months, I had the opportunity to participate in over 20 Farm Bill forums. It provided me the opportunity to meet many producers and hear their ideas on farm policies and the economy. One aspect of the Farm Bill forums focused on the development of farm policy that supports future generations of farmers and ranchers. During these forums, I discussed with producers and community leaders how deficits 

increase the national debt and debt service costs and displace private consumption 

and investment, which can be roadblocks to future generations trying to enter agriculture. Producers across the country applauded us for that focus and encouraged 

us to take down roadblocks that stand in the way of young people. We cannot—on 

one hand—close our eyes to the deficit—while on the other hand claim to be supporting future generations of producers. 

USDA recognizes the overriding need to reduce the Federal deficit, and shares the 

responsibility of controlling Federal spending. There are proposals in the budget for 

USDA that will produce real savings in both mandatory and discretionary spending. 

With that said, the President’s 2007 budget request for USDA does meet the Nation’s priorities by growing the farm economy through trade; protecting America’s 

food and agriculture; supporting sound land management practices and conservation; providing nutrition assistance to the needy at home and abroad; and creating 

economic opportunity in rural America. It also makes Government more effective by 

improving management and accountability and by eliminating, reforming, or phasing out programs that are not cost-effective or do not show measurable results. 

The President’s 2007 budget, which was released on February 6, indicates that 

USDA expenditures are estimated to decrease from about $96 billion in 2006 to 

nearly $93 billion in 2007. For the Department’s discretionary budget, the overall 

budget authority request is $19.7 billion. This compares to $21.9 billion provided in 

2006. There are two main reasons for these reductions. One is that we assume we 

will not need the emergency disaster assistance funding and other emergency supplemental funding that was needed in 2006. The second reason is proposed program 

reductions, which include some legislative changes. The discretionary appropriation 

request pending before this Committee, which does not include the Forest Service, 

is $15.6 billion. 

I would now like to focus on some specific program highlights. 

PATHOGENIC AVIAN INFLUENZA (AI)

For more than two decades, USDA has worked to prepare for and prevent an outbreak of dangerous strains of AI in our country. The greatest concern is the potential for highly pathogenic AI to develop into a human pandemic. We appreciate the 

$91.4 million in emergency supplemental funding provided in December 2005. Those 

funds are being used for specific one-time activities aimed at controlling the disease 

abroad and keeping it away from U.S. borders; enhancing surveillance of wildlife 

and domestic poultry; improving diagnostics; and enhancing preparedness. 

The 2006 Appropriations Act made $16 million available for on-going programs 

to deal with low pathogenic AI and other AI research. Low pathogenic AI is of concern for its potential costs to the poultry industry and potential ability to mutate 

into highly pathogenic AI. The 2007 budget requests a total of $82 million for AI, 

an increase of $66 million over the amount appropriated in 2006. Of this amount, 

$57 million is related to highly pathogenic activities, including: surveillance and 

diagnostics work; preparedness and response efforts; and international veterinary 

capacity building. An additional increase of more than $6 million is requested for 

the development of methods to detect AI in the environment and further AI research, including development of poultry vaccines. An increase of $3 million is requested to expand activities related to the program for on-going low pathogenic AI. 

FOOD AND AGRICULTURE DEFENSE INITIATIVE

In order to protect American agriculture and the food supply from intentional terrorist threats and unintentional introductions, the budget proposes $322 million for 
13 

USDA’s part of the President’s Food and Agriculture Defense Initiative, which is 60 

percent of total governmentwide funding for the initiative. Funding for ongoing programs includes a $127 million increase, or 65 percent above 2006. This does not include funding for construction of the Ames, Iowa facility for animal research and 

diagnostics, which was fully funded in 2006. Of the total amount, an increase of 

about $30 million for Food Defense would enhance the Food Safety and Inspection 

Service’s (FSIS) ability to detect and respond to food emergencies and for USDA research agencies to conduct related research. For Agriculture Defense, the budget includes an increase of about $97 million to improve the Animal and Plant Health Inspection Service’s (APHIS) ability to safeguard the agricultural sector through enhanced monitoring and surveillance of plant and animal health, including wildlife; 

improve response capabilities, including provisions for the National Veterinary 

Stockpile; and further research on emerging and exotic diseases. 

ENERGY

I have heard from farmers and ranchers as I traveled around the Nation about 

the burden of the high cost of energy. We are taking action to help farmers, ranchers, and rural businesses reduce their energy consumption and make alternative 

fuels more available. USDA is providing technical assistance and incentives for conservation practices that can result in substantial energy savings. The Natural Resources Conservation Service has recently provided an online tool that clearly demonstrates how costs can be reduced by using alternative tillage practices. In addition, I have directed the Farm Service Agency (FSA) to maximize the use of our 

guaranteed and direct farm loan programs to help eligible producers who face credit 

challenges due to increased energy-related operating costs. Because it is likely that 

energy prices will continue to remain high and fluctuate in the future, the Risk 

Management Agency will also examine risk management tools that can help farmers 

limit the negative impact of energy cost increases. To make sure that USDA is effectively using its resources to address energy issues confronting U.S. agriculture, I 

have recently announced a comprehensive energy strategy to help producers with 

high energy costs and to coordinate USDA’s energy initiatives. 

These investments include: research and development, farmer and rancher education programs and using public lands to facilitate the generation and transmission 

of energy. We are seeking increases in research and development (R&D) and farmer 

and rancher education programs. We are also targeting renewable energy investments in Rural Development programs where we anticipate making loans and 

grants of $250 million or more depending on specific proposals received. USDA is 

continuing its successful biomass research and development partnership with the 

Department of Energy in 2007. Past projects funded through this collaborative effort 

have focused on improving the conversion of switchgrass and other cellulosic materials to ethanol as a replacement for gasoline. These R&D investments will pay off 

as the efficiency and cost effectiveness of using switchgrass increases. 

FARM COMMODITY PROGRAM SPENDING

As part of the President’s program to exercise fiscal discipline and reduce the deficit, the budget proposes, once again, that the farm commodity programs funded 

through the Commodity Credit Corporation (CCC) contribute to the governmentwide 

deficit reduction effort. Despite record levels of net cash farm income and record agricultural exports, commodity subsidies are significant and near record highs. Payments are at the highest since the enactment of the 2002 Farm Bill. Compared to 

the original 2002 Farm Bill estimate, lower than expected expenditures from 2003 

to 2004 are estimated to be offset by much higher net outlays during 2005 through 

2007. Government farm support from 2005 to 2007 is at historically high levels. 

This recent trend reflects higher than expected program costs that are raising the 

deficit. 

Since the recent Reconciliation Act achieved only very limited savings in CCC programs, the 2007 budget proposes legislative changes similar to the ones included in 

the 2006 budget. The proposals, which are spread across commodity sectors, include: 

reducing farm program payments across the board by 5 percent; reducing the payment limitation to $250,000; operating the dairy price support program at the least 

cost; and applying small marketing assessments to sugar and dairy. 

Similar to last year, these proposals are designed to work within the existing 

structure of the 2002 Farm Bill to achieve savings of about $1 billion in 2007 and 

about $7.7 billion over 10 years. Even with the proposed reductions, CCC expenditures in 2007 are projected to remain $7 billion above the estimates made when the 

Farm Bill was enacted. 
14 

FARM PROGRAM DELIVERY

Recognizing the importance of our farm programs to the livelihood and ongoing 

operations of farmers and ranchers throughout the Nation, we are continuing to review the farm program delivery system to ensure we are providing the highest level 

of customer service. In addition to the funding needed to support an adequate level 

of staffing to deliver program benefits in a timely manner, our budget proposes resources to make the IT investments that are critical to modernizing the delivery of 

these programs. I appreciate the Committee’s support for efforts that have been 

made in recent years to design and implement a common computing environment 

(CCE) that allows the service center agencies to communicate via the internet and 

take advantage of shared services. However, critical needs remain in updating the 

so-called legacy farm program delivery systems that are currently operated with 

decades-old software and hardware that is no longer produced. It is imperative that 

these systems be updated so they can also take advantage of the CCE, a modern 

web-based system, and make the fullest use of investments being made to improve 

geographic information systems and data. The budget proposes $14 million to continue an effort to enhance the efficiency of program delivery by redesigning business 

processes and developing the IT systems to carry out those processes. I would appreciate the Committee’s favorable consideration of this proposal. 

CROP INSURANCE

Crop insurance is designed to be the primary Federal risk management tool for 

farmers and ranchers. Crop insurance expenditures are expected to grow by more 

than 50 percent between 2001 and 2007 with the implementation of crop insurance 

reforms in 2000, the expansion of the program to new crops, and the development 

of new types of coverage. Despite this growth, since 2000, four ad hoc disaster programs have been authorized, covering 6 crop years. These ad hoc payments add up 

to over $9 billion. The continued reliance on disaster assistance stems, in part, from 

the low coverage level of catastrophic crop insurance (CAT), which provides a maximum of 27.5 percent of the crop value for a total crop loss. When natural disasters 

occur, that low level of protection creates the demand for additional disaster assistance. 

In continuing the administration’s efforts to more effectively budget and administer crop disaster programs, the 2007 budget reproposes changes included in the 

2006 budget to encourage producers to purchase more adequate crop insurance coverage by tying the receipt of direct payments or any other Federal payment for crops 

to the purchase of higher levels of crop insurance. This change would ensure that 

the farmer’s revenue loss would not be greater than 50 percent. Other changes include making catastrophic coverage more equitable in its treatment of both large 

and small farms, restructuring premium rates to better reflect historical losses, and 

reducing delivery costs. The combination of changes is expected to significantly improve the program and save the Government approximately $140 million per year, 

beginning in 2008. In total, this change should ensure that the majority of producers 

have crop insurance and that the minimum coverage level is sufficient to sustain 

the producer in times of loss. 

The 2007 budget includes about $81 million in discretionary funding to administer 

the Federal Crop Insurance Program, compared to about $76 million for 2006. In 

support of our efforts to strengthen oversight and improve management efficiency, 

the budget includes funding for the replacement of a decade old IT system that has 

reached the end of its useful life. Funding is also included for additional staffing 

needed to reduce fraud, waste and abuse in the crop insurance program. Additionally, a legislative proposal will be submitted to collect a participation fee from insurance companies to help share in the cost of modernizing the existing IT system beginning in fiscal year 2008. 

TRADE

As I mentioned, a top priority has been to restore access to the Japanese and 

other markets for American beef overseas. Having achieved positive results, we are 

disappointed that the Japanese market has temporarily closed again. The failure to 

meet all of the requirements of our export agreement with Japan is unacceptable. 

We are taking this matter seriously, recognizing the importance of our beef export 

market, and we have taken swift and firm action to address the situation. 

Last January after this incident occurred, I announced a series of follow-up actions we are taking to address this situation and outlined those actions in discussions with Japanese officials, including the Minister of Agriculture, Forestry, and 

Fisheries. Since then, the Department has conducted two detailed investigations of 
15 

the incident, and we have provided the results to the Japanese Government for their 

review. 

We look forward to an expedited review of the situation by the Japanese Government and the resumption of beef trade in the near future. It is also worth noting 

that, despite the problems we have encountered with Japan, we are making 

progress in reopening other markets. Hong Kong, Taiwan, and Singapore have reopened their markets while Korea formally announced its plans to resume imports 

by March. 

Expanding access to global markets is important for all U.S. food and agricultural 

products, and plays a critical role in our efforts to ensure a prosperous future for 

America’s farmers and ranchers. Our budget proposals for 2007 support our continued commitment to trade expansion activities. Increased funding is provided for the 

Foreign Agricultural Service (FAS) to maintain its overseas office presence and continue its representation and advocacy activities on behalf of American agriculture. 

A new FAS Trade Capacity Building initiative is funded for technical assistance 

and training activities that will assist developing countries to strengthen their agricultural policy-making and regulatory systems and become better trading partners. 

By assisting these countries to adopt policies that meet World Trade Organization 

standards and adopt regulatory systems that are transparent and science-based, we 

will improve access for U.S. products to their markets. Also, by enhancing their ability to benefit from trade, we encourage them to become more forthcoming and supportive in market access negotiations. These activities would complement the steps 

APHIS will take to open offices in strategic foreign locations to address technical 

sanitary and phytosanitary issues that can impede trade between the United States 

and other countries. 

For the foreign food assistance programs, the budget places increased emphasis 

on meeting the highest priority emergency and economic development needs. Funding for the McGovern-Dole International Food for Education and Child Nutrition 

Program is maintained at this year’s level, with a modest increase in participation 

expected. The program is helping children in countries with severe needs in education and nutrition, such as Afghanistan. Over a 5-year period, USDA is providing 

over $50 million of assistance through the McGovern-Dole Program to Afghanistan 

where it is helping to build schools, improve attendance, and feed about 60,000 students each year. 

Food for Progress programming carried out with CCC funding is projected to increase slightly in 2007. The program provides assistance to developing countries and 

emerging democracies that have made commitments and are taking steps to introduce and expand free enterprise in their agricultural economies. 

To address emergency needs this year, the supplemental appropriations request 

submitted by the President on February 16 includes an additional $350 million for 

Public Law 480 title II food aid donations, which is needed to bolster our response 

to urgent food needs in several regions of Africa. With this funding, the United 

States will be able to meet our target of providing 50 percent of the identified food 

needs in Darfur and other regions of Sudan. It will also help us to respond to what 

appears to be a burgeoning food crisis in East and Central Africa, which has been 

brought on by disappointing rains and other problems. 

The budget further enhances our ability to respond to emergency situations overseas in which food aid is critical to preventing famine and saving lives. In light of 

a heightened demand for emergency food aid in recent years, all funding for Public 

Law 480 food assistance in 2007 is requested for the Title II donations program 

which is increased by $80 million. To help improve the timeliness, efficiency, and 

effectiveness of the U.S. Government’s response to emergency situations, increased 

flexibility is requested in the purchasing of Title II commodities. The budget proposes that the Administrator of the Agency for International Development (AID) 

have the authority to use up to 25 percent of Title II funding to purchase commodities in locations closer to where they are needed, such as neighboring countries. 

FOOD SAFETY

The Nation’s current food safety inspection system has demonstrated that our 

food supply is among the safest in the world. Recent data released by the Centers 

for Disease Control and Prevention continues to show improvements based on historical reductions in the incidence of foodborne illness. The continued reduction in 

illnesses from pathogens like E. coli O157:H7 is a tremendous success story and 

USDA is committed to continuing this positive trend in the future. These results 

demonstrate that we are moving in the right direction. We have increased the focus 

of our policies on the goal to reduce human foodborne illness by measuring the prevalence and types of food safety failures and using this knowledge to focus resources 
16 

and attention where the risks are the greatest. Through these actions, we are protecting the public’s health through a safer food supply. 

The 2007 budget provides for continued protection of the Nation’s supply of meat, poultry and egg products and includes a program level of $987 million for FSIS. 

This is an increase of $35 million over 2006. Approximately half of the increase in 

funds is for pay, including monies required to maintain Federal support of State inspection programs to meet the demand for inspection services. The remaining 

amount is for program changes, including funding to allow FSIS to move towards 

a more robust risk-based inspection system. 

In order to take further steps towards a more enhanced risk-based inspection system, funds are requested to develop risk-based verification and enforcement strategies that take into account the hazards posed by products and how well establishments are controlling those hazards. This would include additional microbiological 

sampling, inspector training, and the creation of an establishment database. Information from these initiatives will enable FSIS to wisely allocate resources to priority areas and provide increased understanding of which food safety systems prevent foodborne illness and promote the public’s health. In addition, funding is requested to increase the speed at which the agency collects, analyzes, and reports 

Salmonella testing data, which will improve the agency’s response to outbreaks of 

foodborne illness. 

The budget also requests funding to expand the Food Emergency Response Network (FERN) in support of the Food and Agriculture Defense Initiative. With this 

funding FSIS will continue to develop the network of food laboratories and the result will be an increase in the capability of a network of coordinated Federal, State 

and local laboratories to handle large volumes of testing that would be needed for 

biosurveillance or in the event of a widespread food emergency. 

For FSIS, the budget requests an appropriation of $863 million and $124 million 

in existing fees. In addition, the budget includes $105 million that would be derived 

from new user fees to recover the cost of providing inspection services beyond an 

approved 8-hour-primary shift. 

CONSERVATION

The 2002 Farm Bill represented an unprecedented commitment to conservation. 

The 2007 budget continues to support this commitment with a record level $4 billion 

request in mandatory funding to expand enrollment in these programs by an additional 23 million acres. Under the proposal, USDA would provide conservation assistance on 197 million acres, the greatest amount of conservation assistance in history. 

Within the total amount, the budget proposes over $400 million for the Wetlands 

Reserve Program (WRP), an increase of $153 million, or 61 percent over 2006. The 

projected WRP enrollment for 2007 would be the largest ever, involving 250,000 

acres, and will bring the total acreage enrolled in the program to over 2.2 million 

acres. The WRP is the principal supporter of the President’s goal to restore, protect, 

and enhance 3 million acres of wetlands over 5 years beginning in 2004. 

Funding for the Conservation Security Program would be increased by $83 million, or 32 percent, to continue to extend the program to additional watersheds in 

2007. Finally, the 2007 budget supports a net increase in enrollment of 2.7 million 

acres in the Conservation Reserve Program (CRP), which would bring total program 

enrollment to 38.9 million acres by the end of 2007, a 7 percent increase in coverage. CRP funding represents more than one-half of the total for all Farm Bill conservation programs. 

The 2007 budget also includes $788 million in discretionary funding for on-going 

conservation work. This is a decrease of $207 million below the 2006 enacted level 

and reflects the realignment of the administration’s priorities to direct limited conservation funding to the highest priority natural resource concerns. USDA will be 

able to deliver high quality and timely technical assistance to farmers and ranchers 

to address natural resource concerns on their operations. The budget does not request funding for watershed operations and planning, Grazing Lands Conservation 

Initiative, and earmarked projects. The budget also proposes to reduce the number 

of Federal coordinator positions funded under the Resource Conservation and Development (RC&D) program, for a savings of $25 million. Under this proposal, the 

number of authorized RC&D areas would be maintained at the current level of 375 

but coordinators will be responsible for providing assistance to multiple areas. 

RURAL DEVELOPMENT

The 2007 budget includes $14.4 billion in direct loans, loan guarantees and grants 

to improve the economic opportunities and quality of life in rural America. This as-
17 

sistance will be used to finance rural businesses, electric and telecommunications 

facilities, water and waste disposal projects and other community facilities; provide 

homeownership opportunities; and revitalize USDA’s portfolio of multi-family housing projects. Most of the on-going rural development programs are maintained at 

current levels. There is a $3.6 billion reduction in 2007, which is due primarily to 

the exclusion of $1.6 billion in 2006 supplemental emergency funding for the Gulf 

Coast hurricanes and $1.5 billion for a 2002 Farm Bill program to guarantee notes 

of private sector electric and telephone borrowers. 

The on-going electric and telecommunications programs are funded at the anticipated level of demand, over $4.9 billion in direct loans. About $200 million of this 

amount is expected to be used for new power supply projects for renewable energy 

that will support the President’s energy policy. 

The community facilities program provides direct loans, guarantees, and grants 

to finance essential community facilities, with priority given to health and safety facilities. The 2007 budget provides $297 million in direct loans, $208 million in guarantees, and $17 million in grants for this program—the same as was available for 

2006. This level of funding will support over 560 new or improved health care facilities, child care, fire and emergency services and other facilities lacking in rural 

America. 

The proposed budget for the water and waste disposal programs would support 

almost $1.1 billion in direct loans. The program would be supported through loan 

subsidies and grants at about the same level in 2006—$514 million for 2007 compared to $525 million for 2006. However, a greater portion of the subsidy would be 

applied to reducing interest rates charged to borrowers rather than providing 

grants. For most communities, which normally receive a combination of loan and 

grant assistance, the reduction in interest rates would be of greater benefit in terms 

of lowering the overall debt servicing costs of their projects, than they would otherwise receive from an equivalent amount of grant. 

The 2007 budget would support $4.8 billion in direct and guaranteed loans for single-family housing, about the same level as available for 2006. This level of assistance will provide homeownership opportunities for nearly 41,000 rural families. 

The business and industry program is maintained at a level of about $1 billion 

in loan guarantees. The value-added program is also maintained at its current level 

of $19 million in grants. Overall, the rural development business programs are expected to create or save over 56,000 rural jobs. 

The 2007 budget reproposes the administration’s initiative to revitalize its portfolio of multi-family housing projects, which are home to close to half a million lowincome families. A recent Supreme Court decision allows project sponsors to prepay 

their loans and convert their projects to uses other than low-income housing, putting tenants at risk of higher rents and potential loss of housing. A priority under 

the administration’s initiative will be on providing housing vouchers to protect the 

rents of tenants of projects that are withdrawn from the portfolio. The administration will also pursue enactment of legislation it has already submitted to Congress 

to authorize debt restructuring and other incentives for project sponsors to remain 

in the program and make necessary repairs. 

RESEARCH

The 2007 budget funds the highest priority research issues facing American agriculture and increases the use of competition to improve the quality of research. The 

budget includes a $66 million increase for the National Research Initiative, the Nation’s premier competitive, peer-reviewed research program for fundamental and applied sciences in agriculture. The increase includes funding for high priority initiatives in food and agricultural security, gene mapping, the ecology and economics of 

biological invasions, plant biotechnology and water security. The budget also includes $107 million in increases for high priority research conducted by ARS scientists in areas such as food and agricultural defense, bioenergy, plant and animal 

genomics and genetics, and human nutrition and obesity prevention. These lines of 

investigation have great potential to benefit producers and consumers; assure an 

abundant, safe, and inexpensive supply of food; and ensure the preservation of our 

natural resource base. 

While the 2007 budget continues overall funding for both the Hatch and McIntireStennis programs at the 2006 appropriated level, the budget proposes an increase 

in the use of competition to improve the quality of USDA supported research. The 

2007 budget includes a proposal to modify the Hatch and McIntire-Stennis formula 

programs so that over half of the funds would be competitively awarded by 2011. 

Under the proposal, the Hatch formula program would be modified by expanding 

the multi-State research component from the current base of 25 percent to about 
18 

55 percent of total Hatch funding. In 2007, 35 percent of Hatch funds will be awarded competitively to multi-State/multi-institutional projects. Over the course of the 

next 4 years, the remaining multi-State formula funds would be phased into competitive funding through an additional 5 percent increase each year as existing 

projects are completed. Therefore, by 2011, about 55 percent of funding under the 

Hatch program will be for competitively awarded multi-State projects and about 45 

percent would be allocated as formula funds. 

The 2007 budget also modifies the McIntire-Stennis formula program by creating 

a multi-State research program that will comprise 59 percent of program funding. 

The proposal calls for all McIntire-Stennis multi-State funds to be distributed 

through competitively awarded grants in 2007. These proposals take into account 

the expressed concerns of USDA partners in the land grant community, including 

smaller institutions, regarding the proposal in the 2006 budget. As a result, this 

new approach would sustain the use of Federal funds to leverage non-Federal resources, maintain program continuity, facilitate responsiveness to State and local 

issues, and leverage and sustain partnerships across institutions and States. Our 

intention is to craft the details of the programs in consultations with our land grant 

and forestry college partners. 

NUTRITION ASSISTANCE

The budget contains sufficient resources to fully fund expected participation, food 

cost inflation and contingency funds for the Department’s three major nutrition assistance programs: Food Stamps; Women, Infants and Children (WIC); and Child 

Nutrition. Participation levels fluctuate with economic conditions and the budget 

keeps pace. WIC participation is expected to grow slowly in 2007 to a total of 8.2 

million participants. Food Stamp participation is expected to decrease about 4 percent from the 2006 projection to about 25.9 million in 2007 as people affected by 

the hurricanes in the Gulf States get back on their feet. School Lunch participation 

is estimated to grow about 2 percent to keep pace with the growing student population, as it has in recent years, to a new record level of 30.9 million children per 

day. 

For Food Stamps, legislation will be proposed that would exclude all qualified retirement savings accounts from eligibility determinations regardless of how other 

programs treat them. By 2009, this would allow about 100,000 additional people to 

participate who otherwise would have been ineligible unless they spent down their 

retirement savings. This would add an estimated $48 million in costs for 2007 and 

about $146 million in 2009 when fully implemented. The 2007 budget also reproposes legislation to restrict participation among certain households with incomes or 

resources above normal eligibility thresholds. Affected households are those that do 

not receive cash Temporary Assistance for Needy Families (TANF) benefits, but become categorically eligible for food stamps because they receive a TANF-funded 

service, including one-time information and referral. This change would reduce costs 

by an estimated $71 million in 2007, with additional savings in subsequent years. 

The WIC request provides full funding for all those estimated to be eligible and 

seeking services. At the same time, the Department will work with stakeholders to 

contain costs and continue to improve the program’s performance. WIC legislative 

proposals include limiting administrative funding to 25 percent of total program 

costs, and limiting categorical eligibility to those with incomes under 250 percent 

of poverty. Also, the budget proposes legislation to require 20 percent State matching for WIC administrative costs. The proposal would take effect in 2008, after State 

legislatures have had time to appropriate the matching funds. WIC is one of the few 

Federal programs that does not require States to provide matching funds for administrative costs. 

The 2007 budget does not request funding for the Commodity Supplemental Food 

Program (CSFP), which is not available nationwide and duplicates two of the Nation’s largest Federal nutrition assistance programs—Food Stamps and WIC. Eligible women, infants and children participating in CSFP will be encouraged to migrate to the WIC Program. Eligible elderly CSFP recipients will be encouraged to 

migrate to the Food Stamp Program, where most are believed to be eligible. The 

budget includes temporary transitional benefits for CSFP participants 60 years of 

age or older equaling $20 per month for the lesser of 6 months or until the recipient 

starts participating in the Food Stamp Program. 

DEPARTMENT MANAGEMENT

The 2007 budget builds upon our progress in improving overall management of 

the Department. Increased funding is being sought for selected key priorities: 
19 

—Beginning the acquisition of a modern core financial system to replace USDA’s 

outdated system, which is no longer supported by a vendor. The current system 

relies on software that no longer meets financial management standards. The 

adoption of technology that meets these standards will increase the efficiency 

of the system, allow for less costly updates and strengthen internal controls. 

—Completing the expansion of the successful Equal Employment Opportunity 

complaints processing system to include complaints of discrimination levied by 

participants in the Department’s programs. 

—Continuing renovations of USDA facilities in order to ensure that employees 

and customers have a safe and modern working environment. 

Over the course of the past year, USDA has continued to achieve success in implementing the President’s Management Agenda (PMA). The PMA focuses our efforts 

on those things that are most critical to good management, including sound financial systems, innovative uses of IT, and ensuring the effective use of human resources. A major part of this effort has been the use of Program Assessment Rating 

Tool (PART) to inform funding and management decisions. Under PART, USDA has 

evaluated 70 programs and developed plans to improve their performance. These 

improvement plans are available to the public on the recently released 

ExpectMore.gov website. The website provides the public with easily accessible information about Federal programs, their performance, and actions the administration is taking to improve performance in the coming year. The website is a new tool 

to help increase transparency and accountability in Federal programs. 

In summary, I want to emphasize that the President is serious about reducing 

the deficit to help maintain strong economic growth. This budget sets clear priorities 

for U.S. agriculture, conservation, and nutrition while responsibly restraining 

spending. This budget puts us in the right direction for reducing the deficit and protecting future generations of American producers by establishing the foundation for 

a strong economy. 

That concludes my statement. I look forward to working with members and staff 

of the Committee and will be glad to answer questions you may have on our budget 

proposals. 

PREPARED STATEMENT OF ANNABELLE ROMERO, DEPUTY ASSISTANT SECRETARY FOR

CIVIL RIGHTS, OFFICE OF ASSISTANT SECRETARY FOR CIVIL RIGHTS

Mr. Chairman and members of the Subcommittee, thank you for the opportunity 

to submit this statement supporting the President’s fiscal year 2007 budget proposal 

for the United States Department of Agriculture’s (USDA) Office of the Assistant 

Secretary for Civil Rights (ASCR). 

The Office of the ASCR provides policy guidance, leadership, outreach, coordination, training, and complaint prevention and processing for USDA. Our mission is 

to provide equal opportunity, equal access and fair treatment for all USDA customers and employees. 

The Office of Civil Rights has made significant progress in addressing major civil 

rights challenges at USDA since the establishment of the ASCR position. The Office 

of Civil Rights began fiscal year 2005 with 1,331 pending EEO complaints and 

ended fiscal year 2005 with 1,402 EEO complaints. During fiscal year 2005, 662 new 

EEO complaints were received, and a total of 591 EEO complaints were closed. The 

Office started the fiscal year 2005 year with 363 pending program complaints and 

ended fiscal year 2005 with 404 program complaints. 

FISCAL YEAR 2007 OBJECTIVES

The Office of Civil Rights has the following four overarching strategic objectives 

for fiscal year 2007 that contributes to the Department’s success. They are to: 

—Ensure equal opportunities for employees and applicants and equal access for 

USDA customers. 

—Ensure that equal employment opportunity and civil rights complaints are processed timely, efficiently, and in a cost effective manner. 

—Increase USDA-wide awareness and use of Alternative Disputes Resolution 

(ADR) for early resolution of civil rights complaints and non-civil rights disputes. 

—Establish effective outreach programs in USDA. 

FISCAL YEAR 2007 KEY OUTCOMES

The Office of Civil Rights plans to achieve the following key outcomes in fiscal 

year 2007: (1.) A reduced number of equal employment opportunity and civil rights 
20 

program complaints. Increasing the education and awareness of civil rights is likely 

to decrease the number of EEO and civil rights program complaints filed. (2.) Efficient and cost effective processing of equal employment opportunity and civil rights 

program complaints within the regulatory timeframes. (3.) Timely and effective resolution of a larger number of civil rights and non-civil rights complaints through increased awareness and use of Alternative Dispute Resolution. (4.) Effective outreach 

programs in every agency. Strengthening the agencies’ outreach efforts, developing 

outreach policies, and providing training on best outreach practices to ensure timely 

access to all customers, thereby improving minority and underserved population 

participation in USDA programs. 

FISCAL YEAR 2007 BUDGET REQUEST

The fiscal year 2007 Appropriation request for the Office of Civil Rights is $22.7 

million. This is an increase of $2.7 million over fiscal year 2006. The funding request includes increases for the following: 

—Civil Rights Enterprise System Improvement—$1.987 million.—Funds for the 

Civil Rights Enterprise System are requested to continue the expansion of the 

complaints processing system. USDA agencies will be able to interface on a 

web-based system that will provide customers and employees real-time data regarding their discrimination complaints. 

—Compliance Monitoring Activities $0.354 million.—The Office of Civil Rights is 

mandated to conduct compliance reviews in the employment and program division. However, funding is needed to meet new requirements designed to meet 

the affirmative employment goals of the Equal Employment Opportunity Commission’s Management Directive 715. Compliance reviews will result in civil 

rights complaint prevention and reduction. 

—Pay cost $0.401 million.—The request for pay cost is for the anticipated fiscal 

year pay raise. 

I would like to emphasize the importance of the Committee’s approval of the 

President’s $22.7 million budget for USDA’s Office of Civil Rights. The proposed 

budget will help ensure that USDA continues progress in providing fair and equitable delivery of its services and programs to our customers and also protects the 

civil rights of USDA employees. 

PREPARED STATEMENT OF PETER J. THOMAS, DEPUTY ASSISTANT SECRETARY, 

DEPARTMENT OF ADMINISTRATION

Mr. Chairman and members of the Subcommittee, I want to thank you for the 

opportunity to submit this statement supporting the President’s budget proposal for 

fiscal year 2007 for the Department of Agriculture’s (USDA) Departmental Administration. 

Departmental Administration (DA) is responsible for a wide range of activities. 

Our mission is to promulgate Department-wide policies in areas such as Human Resources, Procurement, Property Management, Ethics, Security, and similar key administrative areas. DA also provides comprehensive facilities support services for 

the owned and leased offices that USDA has throughout the National Capital Area. 

Furthermore, DA directly provides the Secretary, his Subcabinet, and the principal 

staff offices with a full suite of administrative support. Because of DA’s direct responsibilities over USDA’s headquarters operations, and its policy oversight of 

USDA’s vast property and human assets, it is also responsible for providing security 

both for worksites and, more importantly, for the employees housed in those worksites. Since September 11, 2001, DA has, largely using funds provided in the 2002 

homeland security supplemental appropriations, greatly enhanced its protection of 

USDA’s staff and its critical infrastructure. 

My statement covers three appropriations: The Departmental Administration Direct Appropriation, which funds most of our offices; the Agriculture Buildings and 

Facilities and Rental Payments Appropriation for the National Capital Area facilities and rental payments to the General Services Administration (GSA) for space 

occupied nationwide by USDA agencies except the Forest Service; and the Hazardous Materials Management Appropriation which funds clean-up activities under 

the Comprehensive Environmental Response, Compensation, and Liability Act 

(CERCLA). I would like to address the Agriculture Buildings portion first since our 

South Building renovation project, a key priority, is funded from this source. 
21 

AGRICULTURE BUILDINGS AND FACILITIES

The fiscal year 2007 budget request for Agriculture Buildings and Facilities and 

Rental Payments of $209.8 million includes $155.9 million for rental payments to 

GSA and, $53.9 million for operations, maintenance, repair, and security of our existing four-building headquarters’ facilities, including $14.1 million towards repairing and renovating the aging South Building. 

Consistent with our goal to ensure a safe and functional USDA workplace, the 

$14.1 million funding to continue the repair and renovation of the South Building 

is critical. Funding for this project was not available in fiscal years 2004—2006 and 

it is important to resume funding for these renovations. This is a massive, multiyear project, and every year that we lose lengthens the period during which 6,500 

employees and thousands of visitors per year are exposed to health and safety hazards. The project began in 1998 and was designed to be accomplished in eight 

phases. Three phases have been completed and are occupied. Design of Phase 4A 

and construction of the new mail center facility began in September 2004. Among 

other things, critical work is being done on fire protection systems, abatement of 

hazardous materials and replacement of aged, unreliable and inefficient utility systems. The requested fiscal year 2007 funding will allow USDA to conclude construction of Phase 4 and to design Phase 5. 

DEPARTMENTAL ADMINISTRATION DIRECT APPROPRIATION

The fiscal year 2007 request for the Departmental Administration (DA) Direct Appropriation is $28.3 million. We have made significant progress in a number of 

areas funded by the Departmental Administration Direct Appropriation, and I 

would like to outline some of them here and explain our proposals for continued improvement in fiscal year 2007. 

PHYSICAL SECURITY

As previously discussed, physical security in the National Capital Region is addressed within the Agriculture Building and Facilities Appropriation. DA also has 

responsibility for physical security policy for USDA owned and leased facilities 

worldwide. USDA conducts its programs in approximately 25,000 structures at more 

than 7,000 sites around the world. The Office of Procurement and Property Management within DA provides overall leadership and direction to USDA agencies in the 

management and coordination of security for these facilities. Major activities include 

policy development, education and training, and security assessments of facilities. 

After September 11, USDA understood there was a need to rethink the way it had 

historically approached physical security enhancements at its facilities. Given the 

number of buildings and sites at which USDA conducts its business and the finite 

resources available, we needed to find a process that would link available resources 

to our most critical needs and priorities. Partnering with each of our agencies, we 

developed an inventory of mission critical facilities where we should first focus our 

security efforts. Among the sites reviewed were labs conducting research involving 

biohazardous materials; labs responsible for protecting the Nation’s food supply; facilities housing valuable germplasm collections; labs in foreign countries; USDA 

computer centers processing payroll, vendor, and program payments; and facilities 

housing aircraft. We hired a small staff of physical security specialists and retained 

contractors to perform security assessments at our critical facilities using a riskmanagement approach advocated by the Government Accountability Office. We also 

retained contractors to install security enhancements and develop a database, the 

Geographic Security Information System, to help us manage and track the progress 

in enhancing security to our mission critical facilities at the various locations. Following the guidance within Homeland Security Presidential Directive (HSPD) 7, this 

database was integrated into a Geographical Information System. To date we have 

completed security assessments at approximately 90 percent of ‘‘mission critical’’ facilities. We have also developed a comprehensive manual that provides our agencies 

with standards and guidelines as we continue to assess and improve our security 

posture with regard to: chemical, biological and radiological agents; information 

technology; food safety; animal and plant research; water resources; and aviation assets. 

In accordance with HSPD 7 (facility security assessment required) and HSPD 9 

(facility security assessment conducted every 2 years), USDA is developing a selfassessment tool to be used by facility managers at any USDA location. This tool will 

serve as standard guidance for managers of smaller offices and facilities across the 

country. The site directors at these smaller facilities will have the capability to remotely provide critical site-specific security information to a security analyst in one 
22 

central office and then be provided security guidance for their site. This guidance 

will enhance the protection of their facility and mission critical assets. 

In late 2005, DA began implementing HSPD–12 (Smart Card), following OMB and 

USDA guidance, for Personal Identification Verification (PIV). Under PIV, all new 

employees and new contractors must have a successful fingerprint processed by the 

FBI and a successful ‘‘National Agency Check with Inquiries’’ (NACI) by Office of 

Personnel Management (OPM), in order to receive a permanent badge with access 

rights to Federal facilities. In fiscal year 2006, the Office of Operations within DA 

provided guidance to all USDA agencies in the National Capital Region on issuing 

identification badges for new employees and contractors. DA will be determining 

which current USDA employees need to have a NACI processed in order to receive 

their permanent badge. This will be completed following a set schedule over the 

next 2 years. DA procedures are in full compliance with HSPD–12 PIV Stage I. 

CONTINUITY OF OPERATIONS PLANNING

DA continues to be an active participant in the Continuity of Government (COG) 

and Continuity of Operations (COOP) programs in the Department. One of our primary functions is to review the Department’s and USDA agencies’ COOP Plans on 

a regular basis to ensure responsiveness to current threat situations. To ensure plan 

viability, formal revision of all USDA COOP Plans will continue as a biennial requirement. In order to maintain readiness, USDA continues to conduct functional 

exercises and planning workshops. In fiscal year 2005, revisions to the USDA Headquarters COOP Plan were based on the updated Federal Preparedness Circular 65 

requirements to develop devolution, reconstitution, and human capital plans. A 

functional exercise was conducted in June 2005 to disseminate lessons learned from 

the previous planning cycle. USDA had a robust participation in an interdepartmental exercise conducted in late June 2005. In fiscal year 2006, the USDA Headquarters plan will be revised to include pandemic influenza planning, refinement of 

devolution, reconstitution and human capital plans will continue, functional exercises will consist of a major interagency COOP exercise, evaluation of agency-sponsored exercises and COOP activities, Department-wide COOP awareness training, 

and the beginning of a formal revision of the HQ COOP Plan and agencies’ supplements. In addition, support to the National Emergency Management Team will continue. In fiscal year 2007, agency supplement COOP plans will be formally reviewed; functional exercises will consist of testing pandemic influenza planning and 

participation in a major interagency COOP exercise, evaluation of agency-sponsored 

exercises and COOP activities, and the continuation of Department-wide COOP 

awareness training. Our fiscal year 2007 request includes $760,000 to ensure USDA 

is compliant with Executive Orders and Presidential Directives dealing with Emergency Preparedness and the requirements for Federal Executive Branch Continuity 

of Operations. With this increase, DA will have the funding needed to maintain the 

COOP for the Office of the Secretary, provide guidance and training to mission 

areas, and provide support and training to USDA’s National Emergency Preparedness Team. 

PERSONNEL AND INFORMATION SECURITY

USDA will continue to improve the personnel security program in fiscal year 2007 

through re-engineering and modernization efforts. The fiscal year 2005 in-house adjudication and processing time averaged 22 workdays after receipt of the final background investigation report. These efforts are closely aligned with the President’s 

Management Agenda eGovernment Initiative ‘‘e-QIP’’ (electronic processing of security questionnaires). Key Departmental personnel are now fully trained and capable 

of using the e-QIP system to electronically submit investigative requests. This system has resulted in further improvements in staff efficiency and additional reductions in processing and handling time for personnel security cases. Restoring our 

personnel security program has increased the reliability of public trust positions and 

ensures that staff members are cleared for national security classified information 

in positions needing such access. Annually, the Department requires approximately 

2,400 investigations and reinvestigations each year to maintain the currency of its 

employees. 

USDA revitalized an information security assurance program intended to safeguard national security information. The post-September 11 environment has made 

it clear that all Federal agencies have to make sure that national security information is properly safeguarded. Adding further importance, the USDA has been granted original classification authority to classify national security information to the secret level. To implement an effective program to safeguard this information, USDA 

has added information security specialists to the staff, launched an information se-
23 

curity web site, drafted a security classification guide, briefed senior leadership on 

national security classification, and provided supplemental training to managers 

and front line staff. Finally, USDA established an inter-agency work group that includes nine additional Departments/agencies to address common issues, including 

development of an automated on-line security awareness refresher briefing for government-wide use 

The fiscal year 2007 request includes an increase of $1,840,000 to provide funds 

to ensure the Personnel and Document Security Program is operational and compliant with the Executive Orders and Presidential mandates. USDA plans include: development of training programs for employees who have security clearances; meeting the requirement that adjudicative results are furnished to the Office of Personnel Management within 90 days of receipt of a closed background investigations; 

and operating and maintaining an enterprise data base on national security clearances issued by the Department. 

HUMAN CAPITAL MANAGEMENT

The Office of Human Capital Management (OHCM) in DA provides policy guidance to USDA agencies on human capital management, one of the five initiatives 

of the President’s Management Agenda. USDA faces a number of human resources 

challenges. Over the next few years, it is anticipated that an unprecedented number 

of executives and managers will retire, as will many of our cadre of researchers, veterinarians, and other critical professionals. Our workforce must be competent, reliable and dedicated to new business and scientific challenges in research, food safety, 

trade, and agricultural production and conservation. During fiscal year 2005, this 

office published the Strategic Human Capital Plan that set direction and frameworks for measuring accomplishments achieved in workforce planning, employee 

and leadership development, recruitment and retention, and performance management. USDA agency plans provide workforce assessments and strategies to narrow 

skill gaps in agency mission critical occupations, and link them to recruitment, hiring, and retention strategies to help meet succession plans. OHCM and other USDA 

agencies are developing an annual Recruiting Plan, including an evaluation process 

for cost-effectiveness to improve hiring and recruitment strategies. OHCM is leading 

USDA to strengthen its performance appraisal programs by aligning individual employee performance expectations with agency goals. As of the fourth quarter of fiscal 

year 2005, over 60 percent of USDA’s employee performance plans are aligned with 

agency goals, as reflected in the PMA scorecard for human capital. Departmental Administration is requesting an increase of $2,348,000 for providing support to policies and technical guidance for enhancements to HR performance programs. DA plans to review the current performance systems in USDA and 

evaluate possible alternatives that are available to Federal employees. More emphasis will be placed on contemporary performance-based solutions rather than historic 

processes. 

ENTERPRISE HUMAN RESOURCES SYSTEM

In order to secure the benefits of improved human resources management programs and to capture the data needed for workforce planning and organizational restructuring, DA has committed to building a Department-wide Human Resources 

Enterprise System (HRES). The system holds great promise to unify the manner in 

which agencies process personnel transactions, provide more timely and consistent 

workforce information, and enable improved management of USDA’s Human Capital. In our commitment to building a Department-wide HRES, DA is actively engaged in the Department-wide implementation and deployment of Automated Recruitment Web-based Systems to streamline the hiring process to meet the 45 day 

hiring model set forth by OPM in order to meet the requirements of the Recruitment 

One-Stop initiative under the Presidential Management Agenda for eGovernment. 

DA is actively participating in other OPM Presidential Management Agenda initiatives including the Human Resources Line of Business to fulfill the vision of an HR 

shared service center complete with common solutions to standardized HR business 

processes, and the implementation of the Enterprise Human Resources Integration 

suite of products. DA is also collaborating with mission areas and staff agencies on 

the feasibility of a Department-wide web-based Worker’s Compensation system with 

a direct link to the Department of Labor in an effort to meet the requirements of 

the President’s ‘‘Safety, Health and Return to Work’’ initiative. 

GOVERNMENT ETHICS PROGRAM

The Office of Ethics succeeded in reviewing virtually all of the nearly 1,000 financial disclosure reports submitted by USDA officials in a timely manner. We have 
24 

implemented a web-based ethics training program that is used throughout the Department and in several Executive Branch organizations outside USDA. The majority of these training modules were migrated to AgLearn in fiscal year 2005. The Office of Ethics has developed an Ethics Orientation module for new USDA employees. 

The module is in a final testing phase and will be available in 2006. Also in final 

stages of testing is a self-service ‘‘walk through’’ guide to post-employment. More 

than 98 percent of the USDA employees required to submit financial disclosure reports completed ethics training in 2005. 

PROCUREMENT POLICY

DA continues to lead the implementation of the Integrated Acquisition System 

(IAS). IAS is a web-based commercial off-the-shelf procurement and contract management generation and administration tool. It provides USDA with an enterprise 

solution for requisitioning, automated workflow, commitment accounting, funds control, and contract closeout functions used by the procurement and financial communities. Additionally, it provides real-time interface to the Department’s financial system in accordance with the Joint Financial Management Improvement Program. 

IAS supports e-Government legislation, Presidential Initiatives to improve the operation of government, and complements the Federal Integrated Acquisition Environment. Several USDA agencies have been implemented and we are working toward 

full deployment across the Department by the end of fiscal year 2006. 

USE OF BIOFUELS

The Department’s continuing commitment to biofuels resulted in an estimated 

207,600 gasoline gallon equivalents of biofuels (ethanol and biodiesel) used in USDA 

fleet vehicles, equipment, and facilities in fiscal year 2005 an increase of 72 percent 

over fiscal year 2004. Use of E85 ethanol fuel reached a new high in fiscal year 

2005, to 179,625 gallons. This continued increase is a successful result of the E85 

promotion program USDA initiated in fiscal year 2003, which included awareness 

training for Departmental headquarters and field fleet managers, providing them 

with E85 bumper stickers and other materials for use with USDA’s ethanol-gasoline 

flexible fuel vehicles. USDA’s flex-fuel E85 fleet inventory grew from 3,079 vehicles 

in fiscal year 2004 TO 3,267 vehicles in fiscal year 2005. In fiscal year 2006, USDA 

is focusing on further increasing the use of B20 biodiesel and E85 ethanol as a 

prime strategy to meet the new alternative fuel use requirements of the Energy Policy Act of 2005 and the Executive Order 13149 of 20 percent petroleum reduction 

target for fleet vehicles. 

FEDERAL BIOBASED PRODUCTS PROCUREMENT PREFERENCE PROGRAM

Section 9002 of the 2002 Farm Security and Rural Investment Act of 2002 (Public 

Law 107–171) directed the USDA to develop and implement a procurement preference program for biobased products. DA is leading the design, development, testing, and USDA implementation of what is now known as the Federal Biobased 

Product Preferred Procurement Program (FB4P). The FB4P will consist of: 

—a biobased product preference program; and 

—a biobased product procurement promotion program. Section 9002 of the 2002 

Farm Security and Rural Investment Act of 2002 (Farm Bill) (Public Law 107– 

171) mandates Federal agencies to have a biobased product procurement preference program in place within 1 year after guidelines pertaining to procurement preferences for these products are published. These guidelines were published as a final rule in the Federal Register on January 11, 2005. 

On January 10, 2006, USDA completed its Affirmative Procurement Program 

(APP) and posted it on its biobased website at http://www.usda.gov/biobased. The 

APP formally establishes USDA’s Biobased Procurement Program for USDA-designated biobased items and provides agency-wide guidance for implementing an effective program. USDA’s Biobased APP ensures items composed of biobased material will be purchased to the maximum extent practicable and meets the requirements of the final rule. The APP will also serve as the government-wide model to 

achieve the Section 9002 goals of the 2002 Farm Bill. Early in fiscal year 2006, 

USDA conducted a 3-month Biobased Pilot Project designed to test biobased/biodegradable food-service products such as cups, plates, cutlery, etc. During the pilot, 

over 33,000 patrons were served and cafeteria operations and services were not adversely impacted by the change to biobased products. The full-cycle approach of the 

pilot project: (1) replaced 100 percent of current Styrofoam and plastic food service 

items with biobased products wherever possible; (2) provided training to patrons on 

how to dispose of waste to prevent contamination with non-compostables and to 

compost the cafeteria residuals; (3) diverted cafeteria-derived organic recyclables 
25 

from landfill disposal to a beneficial horticultural use; and (4) resulted in the production of over 44 cubic yards of compost to be used in the Whitten Building gardens. Overall USDA considers the pilot a success and will continue to promote 

biobased products in the future. 

REAL PROPERTY ASSET MANAGEMENT

USDA is proactively implementing Executive Order 13327, Federal Real Property 

Asset Management, which establishes a Presidential Management Initiative promoting the efficient and economical use of America’s real property assets to assure 

management accountability for implementing Federal real property management reforms. USDA will focus on six major areas as the foundation for future efforts and 

compliance: real property management organization; real property planning and 

budgeting activities; utilization of inventory data in decision-making; performance 

measures and continuous monitoring asset inspection and condition index; and divesting ourselves of un-needed real property. 

In fiscal year 2004, USDA designated a Senior Real Property Officer (SRPO) to 

oversee implementation of this Executive Order. The SRPO established a Real Property Council within USDA to assist with this effort. By the end of fiscal year 2006, 

USDA will have an Asset Management Plan, incorporating final guidance provided 

by the Federal Real Property Council, in place and will have established a strategy 

for implementation of the performance measurements to achieve the goals and objectives outlined in the Asset Management Plan. USDA’s goal is to achieve a yellow 

rating on the President’s Management Agenda Asset Management scorecard in fiscal year 2006. 

USDA initiated a major corporate project to implement the first department-wide 

real property automated information system to improve management controls and 

accountability. This new department-wide system, Corporate Property Automated 

Information System (CPAIS), which was implemented in May 2004, provides an integrated solution, which standardizes USDA real property accounting (subsidiary 

ledger to the Foundation Financial Information System (FFIS)), real property business processes and provides management of the entire real property portfolio including owned real property, commercial leases, and General Services Administration 

assignments. In fiscal year 2006 and 2007, USDA will integrate personal property 

into CPAIS, thereby eliminating old legacy systems, and managing its assets to 

make maximum use of resources provided. 

EXCESS PERSONAL PROPERTY PROGRAM

Section 923 of the Federal Agriculture Improvement and Reform Act of 1996, authorized the Secretary of Agriculture to transfer excess Federal personal property 

to any of the 1994 Tribal Institutions, Hispanic-Serving Institutions, and the 1890 

colleges and universities, including Tuskegee University. In fiscal year 2005, USDA 

transferred $2.3 million worth of excess personal property under the program, bringing the total to greater than $20.9 million since the program began in fiscal year 

1998. This program provides much needed property and equipment to institutions 

that otherwise would not be able to acquire property due to limited funds and will 

improve the institutions’ capability in the areas of research, education, and technical 

and scientific activities. 

SMALL & DISADVANTAGED BUSINESS UTILIZATION

USDA is a leader in the Federal Government in achieving small business program 

contracting goals. The Office of Small and Disadvantaged Business Utilization 

(OSDBU) utilizes an active outreach program to identify available small, small and 

disadvantaged, Historically Underutilized Business Zone (HUB Zone), service disabled veteran-owned, and women-owned businesses; to expand the number of small 

businesses securing contracts with USDA; to identify and provide assistance to underserved areas; and to identify and eliminate contracting barriers that prevent or 

restrict small business access to USDA procurements. During fiscal year 2005, 

OSDBU was the winner of two prestigious awards from the Small Business Administration: the Federal Gold Star Award and the Agency Goaling Award of Excellence. These awards recognize the exemplary performance of USDA agencies for attaining or exceeding the federally mandated small business goals that grow small 

business capacity and create jobs. 

OSDBU is aggressively taking steps to significantly increase contracting and subcontracting opportunities for Service Disabled Veteran-Owned Small Businesses and 

to carry out the requirements of Executive Order 13360 and Public Law 108–183— 

The Veterans Benefits Act of 2003. OSDBU is tracking the Service Disabled Veteran-Owned Small Business goal achievement for all USDA agencies. OSDBU con-
26 

tinues to work with USDA agencies to secure contracts for Service Disabled Veteran-Owned Small Businesses. 

In addition, OSDBU continues its rural small business outreach efforts to increase 

small business opportunities and create jobs in rural areas. Small firms are paired 

in mentor-prote ́ge ́ relationships with experienced Federal contractors to engage in 

USDA and other Federal Departments’ contracting opportunities. OSDBU reviews 

contract opportunities to locate those suitable for directing to Tribal 8(a)s and other 

categories of small firms in rural America. 

Another important aspect of OSDBU’s work is our support for people with severe 

disabilities working through the Javits-Wagner-O’Day (JWOD) program. The JWOD 

Program helps to meet Federal procurement needs while generating employment 

and providing training opportunities for Americans who are blind or have other severe disabilities. USDA’s demand for JWOD products has grown over the past several years to include packaged food products that support USDA food programs inc 

HAZARDOUS MATERIALS MANAGEMENT

The purpose of the Hazardous Materials Management Program is to clean up and 

restore USDA-managed lands, and sites contaminated from past USDA activities; 

to enhance USDA’s environmental performance in current operations; and to participate in Federal, State, and local efforts to plan for and respond to hazardous materials incidents. Since the Hazardous Materials Management Appropriation was established in 1988, USDA has cleaned up over 2,250 sites. Many of these were underground storage tanks that did not meet current standards. On average, the program 

is completing about 30 site cleanups a year through a combination of Hazardous 

Materials Management Appropriation and agency funding. 

We currently estimate that uncontrolled releases of hazardous substances have occurred or may have occurred at more than 2,000 additional sites. Many of these contaminated sites threaten human health or the environment, and make valuable resources unavailable for public use. Addressing these sites will, in general, be more 

complex and costly than those we have cleaned up so far. 

Program activities are aligned with USDA’s Strategic Goal 6: to protect and enhance the Nation’s natural resource base and environment. In addition, the program 

directly supports three USDA Objectives: (1) homeland security, through efforts to 

improve hazardous materials management and by representing USDA on the National Response Team for oil spills and hazardous material releases, and participating in the National Response Plan’s Emergency Support Function 10 and 11, (2) 

management of natural resources, and (3) the quality of life in rural America by coordinating USDA efforts for the President’s Brownfields program. This year our performance focus will shift from the number of cleanups we complete to the significance of the public benefits the cleanups create and the impact they have in relation 

to USDA and agency missions, goals, and program initiatives. The fiscal year 2007 

budget seeks $12.0 million to continue this program. 

CONCLUSION

Although administrative programs such as those conducted within DA are frequently not thought of by themselves usually considered, high visibility or high priority, Mission-area programs, cannot effectively meet the expectations of the Congress, the Administration or the public without a stable base of good administrative 

systems, policies and support functions. DA is committed to achieving and maintaining a high quality of mission program support and asks your assistance in this effort. Mr. Chairman and members of the Subcommittee, this concludes my statement 

on the Departmental Administration Budget for fiscal year 2007. 

PREPARED STATEMENT OF NANCY C. PELLETT, CHAIRMAN AND CHIEF EXECUTIVE

OFFICER, FARM CREDIT ADMINISTRATION

Mr. Chairman, Members of the Subcommittee, I am Nancy C. Pellett, Chairman 

and Chief Executive Officer of the Farm Credit Administration (FCA or Agency). On 

behalf of my colleagues on the FCA Board, Doug Flory of Virginia and Dallas 

Tonsager of South Dakota, and all the dedicated men and women of the Farm Credit Administration, I am pleased and honored to provide this testimony to the Subcommittee. 

At the FCA we are focused on ensuring a dependable source of credit and related 

services for agriculture and rural America as we maintain a flexible regulatory environment that allows the cooperative Farm Credit System to meet the credit needs 

of all eligible borrowers while ensuring safety and soundness. 
27 

I would like to thank the subcommittee staff for its ongoing assistance during the 

budget process, and before I discuss the role and responsibility of the Farm Credit 

Administration and our budget request, I would respectfully bring to the Subcommittee’s attention that the FCA’s administrative expenses are paid for by the 

institutions that we regulate and examine. Said differently, the FCA does not receive a Federal appropriation, but is funded through annual assessments on Farm 

Credit System (System) institutions and the Federal Agricultural Mortgage Corporation (Farmer Mac). We fully support the proposed 2007 Budget Submission of the 

President. 

Mr. Chairman and Members of the Subcommittee, I will highlight the FCA’s accomplishments during the past year; report to you briefly on the System, as well 

as Farmer Mac—the other Government-Sponsored Enterprise (GSE) that we regulate which serves agricultural lenders in the secondary market; and, in conclusion, 

I will present our fiscal year 2007 budget request. 

MISSION OF THE FARM CREDIT ADMINISTRATION

As directed by Congress, the FCA’s mission is to ensure a safe, sound, and dependable source of credit and related services for agriculture and rural America. 

The Agency accomplishes its mission in two important ways. First, FCA ensures 

that the System and Farmer Mac remain safe and sound and that they comply with 

the applicable law and regulations. Specifically, our risk-based examinations and supervisory strategies focus on an institution’s financial condition and any material 

existing or potential risk, as well as its board’s and management’s abilities to direct 

its operations. Supervisory strategies also evaluate each institution’s efforts to serve 

all eligible borrowers, including young, beginning, and small farmers and ranchers. 

Secondly, the FCA approves corporate charter changes, and researches, develops, 

and adopts regulations, policies, and other guidelines that govern how System institutions conduct their business and interact with their customers. If a System institution violates a law or regulation, or operates in an unsafe or unsound manner, 

we can use our enforcement authorities to ensure appropriate corrective action. 

We constantly strive to maintain a regulatory environment that enables System 

institutions and Farmer Mac to remain financially strong so they can meet the 

changing demands of agriculture and rural America for credit and related services. 

In doing so, our primary focus is to ensure the long-term safety and soundness of 

the two GSEs that serve rural America and to develop rules and policies that reflect 

changing market forces. 

Finally, the FCA Board is committed to maintaining the public’s trust and confidence in the Agency, the System, and Farmer Mac. The public is invited to attend 

the FCA Board Meetings, and we are committed to following the requirements of 

the Government in the Sunshine Act. 

The public can read on our Web site the comments received on current proposed 

rules and notices published in the Federal Register. Comments on regulations can 

also be submitted to the Agency electronically or through regular mail. 

FISCAL YEAR 2005 ACCOMPLISHMENTS

In 2005 we continued our efforts to achieve our Agency strategic goals through: 

(1) responsible regulation and public policy, and (2) effective risk identification and 

corrective action. The FCA has worked hard to maintain the System’s safety and 

soundness and is continually exploring options to reduce regulatory burden on the 

FCS and ensure that System institutions provide agriculture and rural America continuous access to credit and related services. 

To ensure that the FCA is appropriately focused on economic and agricultural 

issues that are relevant to rural America, as well as to ensure that the Agency is 

operating in an effective and efficient manner, the FCA contracted with an independent consulting firm to conduct an extensive strategic study of the Agency. Of 

particular interest was the need to identify potential challenges that may arise in 

agriculture, the Farm Credit System, or the marketplace over the next 5 to 7 years 

and to realign the Agency where appropriate to enable it to proactively address 

these issues. The major outcomes of the study have been a realignment of the examination structure, a new team-oriented approach in the regulatory development office, and a merging of the major support functions of the Agency including technology, financial, and human resource functions. 

EXAMINATION PROGRAMS FOR FCS BANKS AND ASSOCIATIONS

One of the Agency’s highest priorities is the development and implementation of 

efficient and effective risk-based examination and oversight programs that meet the 

high standards and expectations of the Congress, investors in System debt obliga-
28 

tions, the farmers, ranchers, and cooperatives that own System banks and associations, and the public at large. Our examination programs and practices have worked 

well over the years and have contributed to the present safe and sound overall condition of the System, but the results of our strategic study are clear—we must 

evolve and prepare for the increasingly complex nature of agricultural and rural 

America lending and financing. The FCA Board adopted a new policy statement reaffirming its commitment to risk-based supervision. This policy statement directs 

the maintenance of a ‘‘risk-based’’ approach to oversight and examination for System 

institutions, which will maximize our effectiveness and allow us to strategically address the System’s safety and soundness and compliance with laws and regulations. 

We have taken initial steps to implement the new policy statement through realignment of our organizational structure. We believe the changes in the System 

coupled with pending retirements and normal attrition of staff necessitates a flexible organizational structure but also provides a unique opportunity to prepare for 

the future. Toward this goal, the Agency’s Office of Examination (OE) is shifting its 

regionally based field office structure to division examination teams that are organized on a national basis. In the new structure, existing office locations will be retained, but the examination programs will be managed nationally to better match 

examiner skills to risks presented by institutions. 

On a national level, we actively monitor risks that may affect groups of System 

institutions or even the entire System, including risks that may arise from the agricultural, financial, and economic environment in which the System institutions operate. Our job is not to forecast specific events, but to understand the environment 

so that we can take steps in advance to help System institutions take pre-emptive 

actions before adverse trends develop. 

The FCA uses a risk-based examination and supervision program to differentiate 

the risks and special oversight needs of FCS institutions. We set the scope and frequency of each examination based on the level of risk in the institution. We continuously identify, evaluate, and proactively address these risks. The Farm Credit Act 

requires the Agency to examine each FCS institution at least once every 18 months. 

However, we monitor the performance of all FCS institutions on an ongoing basis 

and conduct interim examination activities as risk and circumstances warrant in 

each institution. 

As part of our ongoing efforts, we monitor each institution’s risk profile. The Financial Institution Rating System (FIRS) is the primary risk delegation used by the 

Agency to indicate the safety and soundness threats in an institution. The rating 

system is similar to other Federal financial regulators’ CAMELS (capital, assets, 

management, earnings, liquidity, and sensitivity) rating scale. FIRS ratings range 

from 1 (for a sound institution) to 5 (for an institution that is likely to fail). Beginning in 2006, in addition to FIRS, examiners will use a new set of assessment criteria that focus on risk areas including credit, interest rate, liquidity, operational, 

compliance, strategic, and reputation. 

Throughout fiscal year 2005, FIRS ratings as a whole continued to reflect the stable financial condition of the FCS. The overall trend in FIRS ratings continued to 

be positive, with nearly 4 times as many 1-rated institutions (79 percent) as 2-rated 

institutions (21 percent). Significantly, there were no 3-, 4-, or 5-rated institutions. 

In addition, no FCS institutions were under enforcement action at the end of fiscal 

year 2005 or during the previous 3 years and no FCS institutions are in receivership. The overall financial strength maintained by the System reduces the risk to 

investors in FCS debt, the Farm Credit System Insurance Corporation (FCSIC), and 

FCS institution stockholders. 

Risks are inherent in lending, and managing risks associated with a single sector 

of the economy, such as agriculture, is particularly challenging for lenders. If the 

FCA discovers unwarranted risks, it works with an institution’s board and management to establish a plan of action to mitigate or eliminate those risks. Appropriate 

actions may include reducing risk exposures, diversifying its portfolio of risks, increasing capital, or strengthening risk management. In those cases where the board 

and management are unable or unwilling to take appropriate action, the Agency has 

the authority to take a variety of actions including supervisory letters, written 

agreements, and cease and desist orders. In extreme cases, we also can remove 

management, issue civil money penalties, and/or liquidate the institution. 

During fiscal year 2005, FCA also performed various examination, training, and 

other services for the Small Business Administration (SBA), the United States Department of Agriculture (USDA), FCSIC, and the National Cooperative Bank (NCB). 

Each of these entities reimburses the FCA for its services. The safety and soundness 

of the System and Farmer Mac remain our primary objectives. However, we believe 

the continuing use of FCA examination resources by other agencies is a positive reflection on the expertise of FCA examiners and serves to broaden their examination 
29 

skills while increasing job satisfaction and employee retention. It also helps us defray some of the costs of our operations while providing a valuable service. 

REGULATORY ACTIVITY

Congress has given the FCA Board statutory authority to establish policy and prescribe regulations necessary to ensure that FCS institutions comply with the law 

and operate in a safe and sound manner. The Agency’s regulatory philosophy articulates our commitment to establishing a flexible regulatory environment that enables 

the System to offer high quality, reasonably priced credit to farmers and ranchers, 

their cooperatives, rural residents, and other entities on which farming operations 

depend. This translates into developing balanced, well-reasoned, flexible, and legally 

sound regulations. We strive to ensure that the benefits of regulations outweigh the 

costs; to maintain the System’s relevance in the marketplace and rural America; 

and ensure that FCA’s policy actions encourage member-borrowers to participate in 

the management, control, and ownership of their GSE institutions. 

For 2005 and early 2006, the Agency’s regulatory and policy projects included the 

following: 

—A rule to allow a qualified lender to obtain a waiver of borrower rights when 

a loan is part of a loan syndication with non-System lenders that are otherwise 

not required by the Farm Credit Act to provide borrower rights. 

—A capital adequacy preferred stock rule to amend the Agency’s preferred stock 

regulations, which are designed to ensure the stability and quality of capital at 

System institutions, to ensure the fair and equitable treatment of all shareholders of FCS preferred stock, and to minimize the potential for insider abuse. 

—A capital adequacy risk weighting final rule to more closely match the Agency’s 

risk-based capital requirements with FCS institutions’ credit exposures. The 

changes make the FCA’s regulatory capital treatment more consistent with that 

of the other financial regulatory agencies and address financial structures and 

transactions developed by the market. 

—A liquidity rule to amend the Agency’s previous liquidity reserve requirements 

for System banks. The purpose of the rule is to ensure that System banks have 

adequate liquidity in the case of market disruptions or other extraordinary situations, as well as to improve the flexibility of Farm Credit banks to meet liquidity reserve requirements and provide credit in all economic conditions. 

—A receivership repudiation final rule, specifying the conditions under which the 

FCSIC will not attempt to pull back specific assets into the conservatorship or 

receivership estate if a transaction meets certain conditions. 

—A bookletter issued by the Agency to all System institutions providing guidance 

on how they can utilize the Tobacco Buyout Program to meet their borrowers’ 

financial needs by offering them the option to immediately receive Tobacco 

Buyout contract payments. 

—A bookletter on bank director compensation limits that makes a one-time adjustment to the bank director compensation limit to allow System banks to pay 

fair and reasonable director compensation for 2006. 

—A final rule on governance of FCS institutions providing for enhanced oversight 

of management and operations by strengthening the independence of System institution boards and incorporating best governance practices. The rule also supports borrowers’ participation in the management, control, and ownership of 

their respective FCS institutions. 

In addition, relative to Farmer Mac, the Agency finalized a rule governing its investments and setting a liquidity standard and has undertaken a proposed regulatory project to update the Farmer Mac Risk-Based Capital Stress Test. The regulatory project is intended to incorporate a more accurate reflection of risk in the 

model in order to improve the model’s output—Farmer Mac’s regulatory minimum 

capital level. 

The Agency has also adopted an ambitious regulatory and policy agenda for 2006 

and anticipates pursuing a number of issues, including: 

—Evaluating regulatory options for assessment and apportionment of FCA administrative expenses. 

—Continuing a pilot program that allows System institutions to make investments that further support their mission of providing credit to agriculture and 

rural America. 

—Continuing to review current regulatory requirements governing eligibility and 

scope of lending to determine if these requirements are reasonable in light of 

agriculture’s changing landscape. Agency staff will identify issues and explore 

options for the Board’s consideration. 
30 

—Evaluating comments on a proposed termination rule that would amend and 

update the existing regulations that govern the termination of System status. 

Issues such as costs, timing, communication, voter quorums, tax implications, 

directors’ rights, equitable treatment of dissenting stockholders, and overall effect on the System are considered in the proposal. 

—Considering regulatory changes for disclosure and reporting requirements for 

System institutions. We approved a proposed rule that is designed to improve 

the transparency of public disclosures, strengthen board and management accountability and auditor independence, and increase shareholder and investor 

confidence in the System. The proposed changes reflect the cooperative nature 

and unique structure of the System, while incorporating the best industry practices of public companies and recent changes in the reporting requirements of 

other Federal financial regulators, provisions in the Sarbanes-Oxley Act of 2002, 

and the Securities and Exchange Commission regulations. 

—Continuing the Agency’s effort to streamline its regulations so the System can 

more efficiently fulfill its mission to provide a dependable source of credit to 

America’s farmers, ranchers, aquatic producers, cooperatives, and rural residents. We approved a proposed rule to be published in March 2006 to reduce 

regulatory burden on System institutions by repealing, clarifying or updating 

current regulations. 

—Continuing a study on loan syndications and assignment markets that will help 

determine whether the Agency’s approach to these issues should be modified. 

CORPORATE ACTIVITIES

The pace of System restructuring remained slow in fiscal year 2005. The number 

of corporate applications submitted for FCA Board review and approval during fiscal 

year 2005 declined to four applications, compared with seven applications the prior 

year. As of January 1, 2006, there were 109 Farm Credit System institutions, including 96 associations, five banks, and eight service corporations and special purpose entities. Through mergers, the number of FCS associations has declined by 28 

percent over the previous 5 years (37 associations) and the number of FCS banks 

has dropped by 29 percent (2 banks). Generally, these mergers have brought larger, 

more cost efficient, and better capitalized institutions with a broader, more diversified asset base, both by geography and commodity. The Agency estimates that within the next 5 years, the process of expansions and mergers will result in an increase 

in the size and complexity of System entities, with the average association exceeding 

$1 billion in assets. 

STRATEGIC PLANNING AND PERFORMANCE PLANS

The FCA Strategic Plan for fiscal years 2004 through 2009 guides the Agency’s 

long range efforts. The FCA Board adopted the strategic plan unanimously and believes that it is vital to achieving the Agency’s mission and goals by providing all 

staff with a clear focus and direction as well as prioritizing the issues, functions, 

and programs that require an investment of resources. 

During fiscal year 2005, our work focused on implementing initiatives to accomplish FCA’s three strategic goals and on measuring the Agency’s performance. Goal 

1 is our public mission of ensuring that the FCS and Farmer Mac fulfill their public 

mission for agriculture and rural areas. Goal 2 is evaluating risk and providing 

timely and proactive oversight to ensure the safety and soundness of the FCS and 

Farmer Mac. Goal 3 is implementing the President’s Management Agenda. In order 

to meet the goals of the strategic plan, the Agency continues to comply with the 

Government Performance and Results Act of 1993 by integrating the budgeting 

process into the planning and performance management process. We link performance goals with resource needs, so that we are in a better position to use the strategic plan to align the organization and budget structures with our mission, goals, 

and objectives. Other Activities and Accomplishments 

I would also like to note a few other Agency activities and accomplishments for 

2005. First, an audit of the FCA’s fiscal year 2005 financial statements has been 

completed and I am pleased to report that—for the 12 year in a row—we have received an unqualified audit opinion. 

Second, for the fifth consecutive year, FCA’s annual Federal Information System 

Management Act review reported no significant weaknesses in our information security program. We have, in the past year, taken several measures to strengthen our 

information security program. These measures include ensuring secure transmission 

of sensitive information over the Internet by providing our staff with an option to 

encrypt sensitive e-mail sent over the Internet. We also provided our computer users 
31 

the capability to encrypt a portion of their portable storage devices for protection 

of sensitive stored information. 

Third, we continue to improve our ability to ensure continuity of our operations 

through refining our business continuity plan and through testing our disaster recovery plan. We also focused on business continuity and disaster recovery planning 

with the Farm Credit System through a series of visits to FCS banks and data centers. During these visits we encouraged membership in the Financial Services Information Sharing and Analysis Center (FS/ISAC) and sponsored FCS institutions’ 

membership in the Government Emergency Telecommunications System (GETS). 

The FS/ISAC is an organization that provides information security and threat assessment information across the financial sector. The GETS provides priority access 

to landline telecommunications to support response in the event of an emergency. 

Fourth, we continue to develop our e-government capabilities. Our accomplishments in the area of e-government include: 

—A redesign of our Web site to be more user-friendly and more easily navigable. 

—Implementation of the use of electronic signature to facilitate the approval process among geographically—dispersed staff. 

—Enhancement of the ability of Farm Credit System institutions to easily and securely transfer examination-related information to FCA examination staff. 

During fiscal year 2005 we: 

—Implemented a machine-readable privacy policy on our Web site. 

—Enhanced the FCA Exam Manual on our Web site by adding a section on Information Technology. 

—Established a process for collecting survey data from FCS institutions on our 

Web site. 

—Established a process to begin sending bookletters and informational memorandums via electronic means to System institutions. 

CONDITION OF THE FARM CREDIT SYSTEM

I will now turn to the condition of the Farm Credit System. I am pleased to report 

that the System’s overall condition and performance was solid and steady during 

2005. Capital levels continued to increase, mostly through retained earnings and 

stock sales. Asset quality remained high, loan volume growth was strong, and favorable credit quality enabled the System to achieve $2.096 billion in earnings for the 

12 months ended December 31, 2005. By and large, the System has knowledgeable 

and experienced managers at all levels. 

The FCS is fundamentally sound in all material respects, and it continues to be 

a financially strong, reliable source of affordable credit to agriculture and rural 

America. The quality of loan assets, risk-bearing capacity, stable earnings, and capital levels collectively reflect a healthy Farm Credit System. 

Loan volume continued to grow during 2005 while loan quality remained high. 

Gross loans increased by 10.3 percent to $106.3 billion. The level of nonperforming 

loans, including nonaccrual loans, decreased to 0.56 percent of gross loans. Delinquencies also remained minimal. 

Since 1993, the System has steadily earned more than $1 billion each year. This 

has resulted in a capital position that is at an all-time high. We believe this level 

of capital should enable the System to remain a viable and dependable lender to 

agriculture and rural America during any near term downturns in the agricultural 

economy. 

Despite an increase in total capital, the amount of total capital as a percentage 

of total assets declined from 17.1 percent to 16.3 percent as of December 31, 2005. 

This was due to the substantial increase in loan volume. However, despite the increased loan volume, all institutions continued to exceed their minimum regulatory 

capital requirements, remaining well-capitalized. Permanent capital ratios at System banks and associations ranged from a low of 11.1 percent to a high of 28.9 percent—all well above the 7.0 percent minimum regulatory capital requirement. 

While the overall condition of the System continued to improve during 2005 and 

remains strong, I also must offer a cautionary note regarding several risks that 

could adversely affect borrower repayment capacity in the future: 

—Two major cost risks—high and volatile energy costs and rising interest rates— 

reduce borrower incomes and increase lender credit risks. 

—Government payments to agricultural producers have accounted for between 16 

percent and 40 percent of net cash farm income in recent years. Reductions in 

farm subsidy payments could have a significant impact on farm incomes and on 

farmland values, especially in areas dependent on farm program crops. 
32 

—Outbreaks of animal and plant diseases, especially Avian Influenza, and concerns over possible terrorist attacks on the food supply could increase costs and 

reduce access to export markets. 

—The structure of agriculture and rural America is changing in many ways and 

thus so is the nature of the System’s market place. While the System’s financial 

health is not threatened, it will be challenged as it adjusts to serving the changing needs of customers whose livelihood is increasingly dependent on the offfarm economy. 

FEDERAL AGRICULTURAL MORTGAGE CORPORATION

The FCA also has oversight, examination, and regulatory responsibility for the 

Federal Agricultural Mortgage Corporation, which is commonly known as Farmer 

Mac. Congress established Farmer Mac in 1988 to provide secondary market arrangements for agricultural mortgage and rural home loans. In this capacity, Farmer Mac creates and guarantees securities and other secondary market products that 

are backed by mortgages on farms and rural homes. Through a separate office required by statute (Office of Secondary Market Oversight), the Agency examines, regulates and monitors Farmer Mac’s disclosures, financial condition, and operations 

on an ongoing basis and provides periodic reports to Congress. 

Like the Farm Credit System, Farmer Mac is a Government-Sponsored Enterprise 

devoted to agriculture and rural America. The FCA and the financial markets recognize Farmer Mac as a separate GSE from the System’s banks and associations. 

Farmer Mac is not subject to any intra-System agreements or to the joint and several liability of the FCS banks, nor does the Farm Credit System Insurance Fund 

back Farmer Mac’s securities. However, by statute, in extreme circumstances Farmer Mac may issue obligations to the U.S. Treasury Department to fulfill the guarantee obligations of Farmer Mac Guaranteed Securities. 

The majority of Farmer Mac’s common stock is publicly traded on the New York 

Stock Exchange. (In contrast, the cooperative Farm Credit System institutions are 

owned by their member-borrowers and their common stock is not publicly traded.) 

Accordingly, Farmer Mac is subject to certain Securities and Exchange Commission 

regulatory requirements and must file comprehensive disclosures that are available 

to its shareholders and the general public. 

Generally, secondary market GSEs, including Farmer Mac, operate at lower capital ratios than primary market lenders in recognition of differences in their risk 

profiles, as their business is targeted to specific types and quality of loans. Accordingly, regulating and monitoring Farmer Mac’s capital and risk management are 

central components of FCA’s oversight activities. 

In conclusion, FCA is proud of its efforts and accomplishments in promoting a 

constructive and dependable source of credit to farmers, ranchers, and their cooperatives. We will remain vigilant in our efforts to ensure that the Farm Credit System 

and Farmer Mac remain financially strong and focused on serving agriculture and 

rural America. 

FISCAL YEAR 2007 BUDGET REQUEST

Earlier this fiscal year, the Agency submitted a proposed total budget request of 

$45,500,000 for fiscal year 2007, which is the same as our fiscal year 2006 total 

budget request. The Agency’s proposed budget includes an assessment on System 

institutions for fiscal year 2007 of $40,500,000, the same as the fiscal year 2006 assessment. The total amount of assessments collected from the FCS and Farmer Mac 

with carryover funds equals $44,250,000. Since approximately 83 percent of the 

Agency’s budget goes for salaries, wages, and related costs, almost all of the total 

budget amount will be used for these purposes. 

While the budget presented to you today is our best estimate of our future needs, 

it is just that—an estimate. Agriculture and rural America are undergoing rapid 

change, as is the Farm Credit System. It is such changes, along with administrative 

challenges, such as recruiting and maintaining a well-trained and motivated workforce, that the Farm Credit Administration is striving to keep up with. We appreciate the committee’s past assistance and we ask for your continued help in the future. 

It is our intent to stay within the constraints of our fiscal year 2007 budget as 

presented and we continue our efforts to be good stewards of the resources entrusted to us in order to meet our responsibilities. The Agency has worked hard to 

hold down the assessment to the System for our operations, and I believe we have 

achieved that objective over the past several years. Incidentally, the cost of FCA’s 

operations to System borrowers is approximately 2.6 basis points, or about 2.6 cents 

for every $100 of assets, the lowest relative cost to the FCS in decades. The FCS 
33 

is financially healthy and is poised to serve agriculture and rural America for years 

to come. 

While we are proud of our record and accomplishments, I assure you that the 

Agency will continue its commitment to excellence, effectiveness, and cost efficiency 

and remain focused on our mission of ensuring a safe, sound and dependable source 

of credit for agriculture and rural America. 

On behalf of my colleagues on the FCA Board and the Agency, this concludes my 

statement and I thank you for the opportunity to share this information. 

PREPARED STATEMENT OF ROGER J. KLURFELD, NATIONAL APPEALS DIVISION

INTRODUCTION

The National Appeals Division (NAD) was established by the Secretary of Agriculture pursuant to the Reorganization Act of 1994. The act consolidated the appellate functions and staffs of several USDA agencies under a single administrative appeals organization. NAD appeals involve program decisions of the Commodity Credit 

Corporation, the Farm Service Agency, the Risk Management Agency, the Natural 

Resources Conservation Service, and Rural Development agencies. In States within 

the jurisdiction of the United States Court of Appeals for the Eighth Circuit, NAD 

Hearing Officers adjudicate and the Director makes final determinations on applications for fees under the Equal Access to Justice Act (EAJA). NAD is headquartered 

in Alexandria, Virginia, and has regional offices located in Indianapolis, Indiana; 

Memphis, Tennessee; and Lakewood, Colorado. NAD’s staff of 108 includes 64 Hearing and Appeals Officers. 

MISSION

NAD’s mission is to conduct evidentiary administrative appeals hearings and reviews arising out of program decisions of certain USDA agencies. Our strategic goal 

is to conduct independent evidentiary hearings and issue timely and well-reasoned 

determinations that correctly apply USDA laws and regulations. NAD’s mission is 

statutorily specific, but its operation is dynamic and challenging, given the complexities of changing laws, regulations and policies affecting USDA program decisions. NAD’s budget request for fiscal year 2007 is $14.8 million, which is $416 thousand 

above the fiscal year 2006 appropriation. The increase is for increases in pay costs. 

That concludes my statement, and I look forward to working with the Committee 

on the 2007 National Appeals Division budget. 

PREPARED STATEMENT OF R. RONALD BOSECKER, ADMINISTRATOR, NATIONAL

AGRICULTURAL STATISTICS SERVICE

Mr. Chairman and members of the Committee, I appreciate the opportunity to 

submit a statement for this Committee’s consideration in support of the fiscal year 

2007 budget request for the National Agricultural Statistics Service (NASS). This 

agency administers the U.S. agricultural statistics program, which began in USDA 

in 1863. Since 1997, NASS has conducted the U.S. Census of Agriculture, first collected by the Department of Commerce in 1840. Both programs are aligned with the 

basic mission of NASS to provide timely, accurate, and useful statistics in service 

to U.S. agriculture. 

FISCAL YEAR 2007 BUDGET

The agency’s fiscal year 2007 budget request is $152.6 million. This is a net increase of $13.3 million from the fiscal year 2006 adjusted appropriations. The fiscal 

year 2007 request includes programmatic increases to continue the restoration and 

modernization of the NASS core survey and estimation program ($3.9 million), and 

to fund cyclical activities associated with preparing and conducting the Census of 

Agriculture ($7.3 million). 

AGRICULTURAL ESTIMATES

NASS statistical reports are critically important to assess the current supply and 

demand in agricultural commodities. They are also extremely valuable to producers, 

agribusinesses, farm organizations, commodity groups, economists, public officials, 

and others who use the data for decision-making. The statistics disseminated by 

NASS support fairness in markets where buyers and sellers have access to the same 

official statistics at the same pre-announced time. This prevents markets from being 

unduly influenced by ‘‘inside’’ information, which might unfairly affect market prices 
34 

for the gain of an individual market participant. The efficiency of commodity markets is enhanced by the free flow of information, which minimizes price fluctuations 

for U.S. producers. Statistical measures relating to the competitiveness of our Nation’s agricultural industry have become increasingly important as producers rely 

more on world markets for their sales. 

In fiscal year 2007, NASS is requesting an increase of $3.9 million and 6 staff 

years to fund the continuation of the restoration and modernization of the NASS 

core survey and estimation program. This increase is directed to continuing the 

modernization of the core survey and estimation program for NASS to meet the 

needs of data users at professionally acceptable levels of precision for State, regional, and National estimates. Decisions affecting billions of dollars in the U.S. food 

and agricultural sectors are facilitated in both public and private venues through 

access to reliable statistical information. The USDA–NASS statistical program 

serves most agricultural commodity data needs in the United States, as well as supplies important economic, environmental, and demographic data that are used for 

policy that will impact the livelihood and quality of life of rural residents. Funding 

received in the fiscal year 2004 through fiscal year 2006 appropriations have been 

used to successfully improve the precision level from commodity surveys conducted 

by NASS for State, regional, and National estimates through sample size increases 

and better survey response. Funding requested in fiscal year 2007 promotes data 

quality by encouraging voluntary response through increased respondent awareness 

of market and policy reliance upon USDA-NASS statistical measures and by improving the data collection capabilities by local interviewers throughout the Nation. 

CENSUS OF AGRICULTURE

NASS is currently preparing for the 2007 Census of Agriculture scheduled to be 

mailed to the Nation’s farmers and ranchers in December 2007. The Census of Agriculture is taken every 5 years and provides comprehensive data at the national, 

State, and county level on the agricultural sector. The Census of Agriculture is the 

only source for this information on a local level, which is extremely important to 

the agricultural community. Detailed information at the county level helps agricultural organizations, suppliers, handlers, processors, and wholesalers and retailers 

better plan their operations. Demographic information supplied by the Census of 

Agriculture also provides a very valuable database for developing public policy for 

rural areas. The 2007 Census of Agriculture is the first time respondents have the 

option of reporting electronically through the Internet. It also includes improved 

coverage of American Indians and expanded data on organic agriculture. Many additional improvements are being implemented to enhance the data from this comprehensive data source. Census of Agriculture programs are also conducted in Puerto Rico, Guam, and the Commonwealth of the Northern Mariana Islands as part of 

the census cycle. Results from all of the censuses are made available on the NASS 

website. 

NASS is requesting a cyclical increase of $7.3 million and 10 staff-years for the 

Census of Agriculture. The total Census of Agriculture budget request is $36.6 million. The available funding includes monies to continue preparations for the 2007 

Census of Agriculture. The increase will be used to collect data to measure coverage 

of the census mail list, prepare census mail packages, and prepare for data collection activities in fiscal year 2008. This increase is comparable to a $10.0 million increase required during the same period in the 2002 Census cycle. 

MAJOR ACTIVITIES OF THE NATIONAL AGRICULTURAL STATISTICS SERVICE (NASS)

The ongoing expansion of global markets for U.S. goods and services continues to 

increase the need for modern and reliable statistical information. The periodic surveys and censuses conducted by NASS contribute significantly to economic decisions 

made by policymakers, agricultural producers, lenders, transporters, processors, 

wholesalers, retailers and, ultimately, consumers. Lack of relevant, timely, and accurate data contributes to wasteful inefficiencies throughout the entire production 

and marketing system. 

The need for timely, accurate, and useful statistics on U.S. agriculture has been 

highlighted in recent years due to several natural disasters. The catastrophic hurricanes which moved through Florida during the end of 2004 heavily impacted the 

citrus industry. The degree of this impact was measured by NASS through a special 

November forecast of citrus production. Normal processes do not include a November forecast. The special forecast allowed for a timely unbiased assessment of the 

damage resulting from the hurricanes. Likewise, the discovery of Asian Soybean 

rust in the United States resulted in heightened speculation of how growers would 

react to the fast-spreading, yield-reducing disease. Data collected by NASS allowed 
35 

for an early assessment of farmer awareness of soybean rust and how its discovery 

would affect planting decisions for the 2005 crop. Results were published in the 

2005 Prospective Plantings report. 

NASS works cooperatively with each State Department of Agriculture throughout 

the year to provide commodity, environmental, economic, and demographic statistics 

for agriculture. This cooperative program, which began in 1917, has served the agricultural industry well and is recognized as an excellent model of successful StateFederal cooperation. Working together helps meet both State and national data 

needs while minimizing overall costs by consolidating staff and resources, eliminating duplication of effort, and reducing the reporting burden on the Nation’s farm 

and ranch operators. The forty-six field offices in NASS, covering all fifty States and 

Puerto Rico, provide statistical information that serves national, State, and local 

data needs. 

NASS has been a leader among Federal agencies in providing electronic access to 

information. All reports issued by NASS’s Agricultural Statistics Board are made 

available to the public at a previously announced release time to ensure that everyone is given equal access to the information. All national statistical reports and data 

products, including graphics, are available on the Internet, as well as in printed 

form, at the time they are released. Customers are able to electronically subscribe 

to NASS reports and can download any of these reports in a format easily accessible 

by standard software. A summary of NASS and other USDA statistical data are produced annually in USDA’s Agricultural Statistics, available on the Internet through 

the NASS home page, on CD–ROM disc, or in hard copy. All forty-six NASS field 

offices have home pages on the Internet, which provide access to special statistical 

reports and information on current local commodity conditions and production. 

NASS’s Statistical research program is conducted to improve methods and techniques used for collecting, processing, and disseminating agricultural data. This research is directed toward achieving higher quality census and survey data with less 

burden on respondents, producing more accurate and timely statistics for data 

users, and increasing the efficiency of the entire process. For example, NASS has 

developed and released a new interactive mapping tool on the Internet. Data users 

can now customize maps using various data items from the Census of Agriculture. 

The growing diversity and specialization of the Nation’s farm operations have greatly complicated procedures for producing accurate agricultural statistics. Developing 

new sampling and survey methodology, expanding modes of data collection, including electronic data reporting, and exploiting computer intensive processing technology enables NASS to keep pace with an increasingly complex agricultural industry. 

The primary activity of NASS is to provide reliable data for decision-making 

based on unbiased surveys each year, and the Census of Agriculture every 5 years, 

to meet the current data needs of the agricultural industry. Farmers, ranchers, and 

agribusinesses voluntarily respond to a series of nationwide surveys about crops, 

livestock, prices, chemical use and other agricultural activities each year. Periodic 

surveys are conducted during the growing season to measure the impact of weather, 

pests, and other factors on crop production. Many crop surveys are supplemented 

by actual field observations in which various plant counts and measurements are 

made. 

Administrative data from other State and USDA agencies, as well as data on imports and exports, are thoroughly analyzed and utilized as appropriate. NASS prepares estimates for over 120 crops and 45 livestock items which are published annually in more than 400 separate reports. 

Approximately 60 percent of the NASS staff are located in the 46 field offices; 21 

of these offices are collocated with State Departments of Agriculture or land-grant 

universities. NASS field offices issue approximately 9,000 different reports each year 

and maintain Internet pages to electronically provide their State information to the 

public. 

NASS has developed a broad environmental statistics program under the Department’s water quality and food safety programs. Until 1991, there was a serious void 

in the availability of reliable pesticide usage data. Therefore, beginning in 1991 

NASS cooperated with other USDA agencies, the Environmental Protection Agency 

(EPA), and the Food and Drug Administration, to implement comprehensive chemical usage surveys that collect data on certain crops in specified States. NASS data 

allows EPA to use actual chemical data from scientific surveys, rather than worst 

case scenarios, in the quantitative usage analysis for a chemical product’s risk assessment. Beginning in fiscal year 1997, NASS also instituted survey programs to 

acquire more information on the post-harvest application of pesticides and other 

chemicals applied to commodities after leaving the farm. These programs have resulted in significant new chemical use data to help fill the void of reliable pesticide 
36 

usage data. Surveys conducted in cooperation with the Economic Research Service 

(ERS) collect detailed economic and farming practice information to analyze the productivity and the profitability of different levels of chemical use. American farms 

and ranches manage nearly half the land mass in the United States, underscoring 

the value of complete and accurate statistics on chemical use and farming practices 

to effectively address public concerns about the environmental effects of agricultural 

production. 

NASS conducts a number of special surveys, as well as provides consulting services for many USDA agencies, other Federal or State agencies, universities, and agricultural organizations on a cost-reimbursable basis. Consulting services include assistance with survey methodology, questionnaire and sample design, information resource management, and statistical analysis. NASS has been very active in assisting 

USDA agencies in programs that monitor nutrition, food safety, environmental quality, and customer satisfaction. In cooperation with State Departments of Agriculture, land-grant universities, and industry groups, NASS conducted 151 special 

surveys in fiscal year 2005 covering a wide range of issues such as farm injury, 

nursery and horticulture, farm finance, fruits and nuts, vegetables, and cropping 

practices. All results from these reimbursable efforts are made publicly available. 

NASS provides technical assistance and training to improve agricultural survey 

programs in other countries in cooperation with other government agencies on a 

cost-reimbursable basis. The NASS international program focuses on the developing 

and emerging market countries in Asia, Africa, Central and South America, and 

Eastern Europe. Accurate foreign country information is essential for the orderly 

marketing of U.S. farm products throughout the world. NASS works directly with 

countries by assisting in the application of modern statistical methodology, including sample survey techniques. This past year, NASS provided assistance to Armenia, Belize, Brazil, China, El Salvador, Georgia, Guatemala, Honduras, Mexico, 

Nicaragua, Panama, Russia, Sudan, and the Ukraine. In addition, NASS conducted 

training programs in the United States for 220 visitors representing 30 countries. 

These assistance and training activities promote better United States access to quality data from other countries. 

NASS annually seeks input on improvements and priorities from the public 

through the Secretary of Agriculture’s Advisory Committee on Agriculture Statistics, 

interaction with producers at major commodity meetings, data user meetings with 

representatives from agribusinesses and commodity groups, special briefings for agricultural leaders during the release of major reports, and through numerous individual contacts. As a result of these activities, the agency has made adjustments to 

its agricultural statistics program, published reports, and expanded electronic access 

capabilities to better meet the statistical needs of customers and stakeholders. 

This concludes my statement, Mr. Chairman. Thank you for the opportunity to 

submit the statement for the record. 

PREPARED STATEMENT OF CHARLES CHRISTOPHERSON, CHIEF FINANCIAL OFFICER, 

OFFICE OF THE FINANCIAL OFFICER

Mr. Chairman and members of the Subcommittee, I am pleased to present the fiscal year 2007 budget request for the United States Department of Agriculture 

(USDA), Office of the Chief Financial Officer (OCFO) and the Department’s Working 

Capital Fund (WCF). 

My remarks today address: 

—Results we have achieved recently; 

—Results on which we are currently focused;—Our fiscal year 2007 budget request; and 

—The Department of Agriculture’s Working Capital Fund. 

The Office of the Chief Financial Officer is responsible for the financial leadership 

of an enterprise, which if it were in the private sector would be one of the largest 

companies in the United States with almost $95 billion in annual spending, almost 

110,000 full time equivalents (Staff Years) and over $132 billion in assets. 

These responsibilities are fulfilled by a headquarters staff in Washington, DC, 

with accounting operations support provided by USDA’s Controller Operations Division in New Orleans, Louisiana. 

The National Finance Center (NFC), also located in New Orleans, provides payroll 

processing and related services for approximately 31 percent of the Federal civilian 

workforce in more than 130 government entities. In fiscal year 2005, the NFC processed $32 billion in payroll for more than 565,000 Federal employees. NFC also 

services the Office of Personnel Management performing health benefit reconciliations and health care premium processing on a Government-wide level. 
37 

RESULTS ACHIEVED RECENTLY

In fiscal year 2005, OCFO continued to make substantial progress in improving 

financial management, financial information, and financial/corporate systems 

throughout USDA. OCFO also actively worked on government-wide financial management issues affecting USDA to ensure we could achieve substantive and sustainable results. Some of the significant results USDA achieved in financial management, financial systems and related areas in fiscal year 2005 include: 

—Attained another clean financial audit opinion. Our ability to sustain this critical performance benchmark is powerful evidence of the Department’s improved 

accountability, internal control and data integrity. 

—This year Hurricane Katrina had a major impact on the NFC and OCFO functions located in the New Orleans area. Thanks to the well-practiced continuity 

of operations plan (COOP), NFC and the other OCFO operations in New Orleans were able to recover operations quickly and to meet commitments to their 

customers without interruption. Critical information technology services were 

recovered within 24 hours; other essential operations were recovered as planned 

over the next 10 days. We are most proud that NFC was able to pay 565,000 

employees accurately and on time from their alternate locations. More noteworthy, NFC converted two new customers, Transportation Safety Administration and U.S. Coast Guard to its payroll system during the 2 weeks following 

the storm and paid these new payroll employees on time. The swiftness and accomplishment of the recovery is a tribute to the employees of the NFC and 

OCFO who deployed to remote locations, some leaving their families behind, 

worked extended hours and assumed non-traditional jobs to get the job done. 

—The NFC and OCFO are now reconstituting operations back to the New Orleans 

location. Due to the personal impact on the employees’ homes and the New Orleans infrastructure, the reconstituting is proving to be as difficult as the deployment. More than 96 percent of the 1,250 employees of the NFC and OCFO 

have returned to New Orleans with some 400 of the employees located in trailers in a trailer park or at their homes. The overall productivity of the New Orleans-based operations have been impacted by the loss of a large number of experienced employees due to separations and retirements (13-percent of the workforce has retired or separated after Katrina to work on their homes or relocate 

from the area). OCFO operations have also been impacted by (1) the Postal 

Service releasing mail from three different Katrina storage facilities which contain potentially thousands of undelivered invoices each; (the first warehouse 

was released in February 2006) and (2) the loss of knowledgeable employees 

from earlier reductions in force. The payroll and human resources serviced by 

the NFC has been impacted by a doubling in the volume of retirements and separation transactions of its customer base and the loss of knowledge through 

staff adjustments in repeated reduction-in-force actions in 2005. Although they 

have difficult personal lives, the New Orleans staff is determined to eliminate 

the workload backlog through extensive overtime. OCFO in Washington D.C. 

continues to assist the operation and believes that the backlog will be cured in 

the coming months. 

—Met OMB interim and year-end accelerated deadlines for preparing the financial statements. Year-end statements were provided 45 days after the close of 

the fiscal year, that is, by November 15. USDA met these ambitious dates while 

sustaining data quality and provided USDA executives and program managers 

with financial results information more timely than ever before; 

—Reduced existing material internal control weaknesses from 32, 4 years ago, to 

2 existing deficiencies at the end of fiscal year 2004. Although one new material 

weakness was reported in the fiscal year 2005 Performance and Accountability 

Report, for a total of three remaining for fiscal year 2006, we continue to aggressively work to resolve the underlying internal control and system issues. We 

will continue to work diligently to eliminating material weaknesses; 

—Improved quality assurance of financial data by continuing to focus on fixing 

‘‘root causes’’ of data flow and accuracy problems. Regularly monitored a set of 

metrics to ensure data is timely and accurate and useful to USDA managers; 

—Closed 102 of 164 audits in fiscal year 2005 as compared to 96 in fiscal year 

2004, a 6 percent increase in audit closures;—Successfully consolidated and 

standardized departmental travel procedures and policies; 

—Continued to monitor for travel card misuse, these efforts resulted in lowering 

the Department-wide individually billed accounts delinquency average of 4.68 

percent in fiscal year 2004, to 4.06 percent in fiscal year 2005, representing a 

13 percent improvement; 
38 

—During fiscal year 2005, the Forest Service submitted a competitive sourcing 

plan to OMB for approval. In addition, USDA completed 2 competitive sourcing 

studies with results estimated to avoid costs of $8.1 million over a 5-year period 

with annualized amounts of over $1.62 million. 

—Implemented the real-time interface between the financial system and procurement system, integrating the financial and procurement systems for the first 

time and enhancing internal funds control and streamlining operations; and 

—Enhanced through a technology modernization the data warehouse reporting to 

provide more timely and useable financial and performance information to 

USDA executives and managers to manage daily operations. 

In addition to the above, during fiscal year 2005, USDA collected $1.1 billion of 

delinquent debt, $862 million through agencies using our internal tools and $238 

million through the Department of Treasury Administrative Offset Program and 

other Debt Collection Improvement Act (DCIA) techniques. Since 1996, annual collections of delinquent USDA debt using DCIA tools have increased more than 276.6 

percent from $63.2 million in fiscal year 1996 to $238 million in fiscal year 2005. 

As of September 30, 2005, USDA had referred to the Treasury Offset Program 96 

percent of the $1.2 billion of eligible receivables and 97 percent of loans eligible for 

cross servicing compared to only 14 percent in 2001. 

Results on which we are Currently Focused 

We continue to be focused on delivering valuable results in fiscal year 2006 as 

a context for consideration of our fiscal year 2007 budget request. Three areas of 

focus are: internal control and management information; support and develop 

shared services to the Departments of the Federal Government; and the President’s 

Management Agenda. 

In the area of internal control and management information, we are committed 

to: 

—Continuing to enhance USDA’s system of internal controls and data integrity 

as reflected in sustaining in fiscal year 2006 USDA’s unqualified ‘‘clean’’ opinions on the consolidated financial statements and component agency financial 

statements; 

—Meeting OMB’s interim and year-end deadlines for financial statement and the 

Performance and Accountability Report; 

—Eliminating material weaknesses in internal controls and systems nonconformances with the requirements of the Federal Financial Management Improvement Act (FFMIA); 

—Implementing an online USDA corporate financial and performance reporting, 

system that the Secretary of Agriculture and his senior executives will use to 

drive program results; 

—Continuing to develop financial management and accounting operations leadership talent in-depth throughout all our agencies so as to enhance further 

USDA’s culture of sound financial management and to sustain management results already achieved; and 

—Expanding the use of data warehousing technology to improve data integrity 

and timely availability of financial and performance information to USDA’s executives and managers for the management of their daily operations. 

To support and develop shared services to the Departments of the Federal Government, we are focused on: 

—Completing the reconstitution and rebuilding the OCFO operations and the 

NFC operations in New Orleans to support the functions of the Federal Government and the USDA; 

—Structuring a Human Resources Line of Business (HR LoB) venture for the 

NFC while continuing to implement new customers into ePayroll. The HR LoB 

will provide a new business growth opportunity for NFC in providing human 

resources systems and services to all civilian Federal agencies; 

—Completing the transfer of the accounting and paralegal functions of the Thrift 

Savings Plan to the Federal Retirement Thrift Investment Plan; 

—Securing a location for the alternate worksite and computing center, which reduces the operational risk through continuous improvement of and practice in 

recovery operations for NFC and accounting operations; 

—Working with Office of Personnel Management (OPM) on retaining employees 

in critical positions with long-term learning curves and cycles at the NFC; and 

—Reviewing additional USDA sponsored financial services that can create savings 

in the Federal Government through a consolidated service center. These services include a Financial Management Line of Business. 

For President’s Management Agenda (PMA) initiatives, we are: 
39 

—Implementing the eTravel initiative throughout USDA to consolidate travel 

processes at the Department level and centrally manage them through a customer-centric, self-service, web-based environment providing end-to-end travel 

services; 

—Adding the personal property components to the Corporate Property Automated 

Information System (CPAIS). CPAIS was implemented in fiscal year 2004 and 

currently tracks all USDA real property whether owned or leased. Incorporating 

personal property into CPAIS will allow USDA, in one place, to have a full view 

and accounting of our property assets; 

—Taking aggressive action to implement the Improper Payments Information Act 

(IPIA), Public Law 107–300 by establishing measurements for programs that 

meet the required payment criteria. We strengthened guidance to agencies requiring detailed plans with key milestones and quality deliverables. We are 

monitoring accomplishments through monthly workgroup meetings, assessment 

of deliverables, evaluation of risk assessments, and agency scorecards for executives and managers; 

—Conducting Independent Verification and Validation (IV&V) review activities for 

the following: Feasibility studies conducted and submitted by USDA Agencies 

and Offices in support of the USDA Competitive Sourcing Green Plan; post-competition assessments for completed performance reviews along with the cost 

comparison; and independent validation verification of prior year achieved savings; 

—Collaborating with Departmental Administration to use competitive sourcing, 

where appropriate, to address core competency and skills gaps; 

—Sponsoring training sessions for USDA Agencies and Offices on various A–76 

related topics including: FAIR Act Inventory; Feasibility Studies; Performance 

Work Statements; and Most Efficient Organizations; and 

—Facilitating departmental-wide collaboration efforts and working group sessions 

to develop standards for FAIR Act Inventory coding process: FAIR Act Inventory function code definitions are being standardized and Reason Code Justifications and Analyses are being evaluated to ensure compliance with OMB regulations. 

Fiscal Year 2007 Budget Request 

I would like to thank the Committee for your confidence in entrusting us with the 

basic resources required to provide stewardship over USDA financial processes. 

USDA’s excellent results in sustaining and enhancing financial accountability in fiscal year 2005 were only possible because of your support. I would now like to focus 

on our fiscal year 2007 operating budget request, which is for $19,931,000, an increase of $14,116,000 or 242.8 percent more than the fiscal year 2006 budget of 

$5,815,000. Approximately 90 percent of the Office of the Chief Financial Officer’s 

current obligations are for the salaries and benefits of the OCFO employees. As part 

of this increase request, of $176,000 is to fund pay costs. The pay-related increases 

requested are necessary for us to accomplish key outcomes and to successfully meet 

our goals for fiscal year 2007. The remaining $13,940,000 of the request is for procurement of hardware and software to improve the financial management performance through implementation of a new core financial management system. OCFO 

is pursuing significant modernization of its technically outdated corporate financial, 

administrative payments and program general ledger systems. These outdated systems are no longer supported by the vendor and pose an unacceptable risk for 

USDA. Due to the current transaction services offered to other Federal Government 

entities, USDA has discussed with OMB the opportunity to offer a full financial solution to smaller agencies in the Federal Government. 

USDA Working Capital Fund 

The Working Capital Fund (WCF) serves as the Department’s principal investment engine to achieve progress in developing and implementing new corporate systems. Last year, we again made use of authority granted to us by the Committee 

in the appropriations language to use unobligated balances as part of this developmental effort. In 2005, our plan for use of these resources was reviewed by Congress—as required under appropriations language—and executed to continue our 

progress in implementing an enterprise human resources information system, an integrated acquisition system, and a management information tracking tool. For 2006, 

we have prepared a plan to Congress to obligate funds in pursuit of further efforts 

in development of an integrated procurement system and an enterprise human resources system. That plan will be delivered to the Committees on Appropriations 

shortly. We are grateful for the support and look forward to working with the Committee as our efforts to improve corporate systems proceed. 
40 

In addition to the investments in corporate systems, the WCF supports services 

in the areas of financial management, information technology, communications, administration, as well as record keeping and item processing. It is our objective to 

use this financing mechanism to provide to agencies of the Department, the most 

effective cost-efficient centrally managed services available. 

The President’s fiscal year 2007 budget estimates that total operating costs for the WCF in fiscal year 2007 will be $515.1 million—net of intrafund transfers between 

WCF activities—a $13.0 million increase, or 2.6 percent over the fiscal year 2006 

estimate. Costs to USDA agencies will increase more slowly, about 2.4 percent from 

fiscal year 2006 to fiscal year 2007. 

The increases in cost estimates reflect the fact that the WCF recovers costs on 

the basis of user demand for services with the objective of lowering total costs 

through centrally-managed services. Historically, the largest of the USDA-wide services has been the National Finance Center. However, its menu of services has been 

changing to reflect the changing needs of customers both inside and outside USDA. 

Information Technology Services will be the largest WCF activity in terms of cost 

in fiscal year 2006. Examples of other services supported by the WCF include mainframe computing and information technology services at the National Information 

Technology Center in the Office of the Chief Information Officer, and video and teleconferencing production services provided by the Broadcast and Media Technology 

Center in the Office of Communications. Departmental Administration provides a 

wide variety of personal property, mail, and duplicating services to USDA and nonUSDA customers. Among the corporate systems activities supported by the WCF include: Corporate Financial Management Systems and Integrated Procurement Systems. The source of funds for these investments in systems includes direct billings, 

purchase card rebates, and the use of unobligated balances. 

I would like to point out that the WCF financing mechanism, as a reimbursement 

for goods and services provided, gives us an opportunity to refine our estimates as 

newer and better information becomes available regarding customer demand and 

costs. Our office is currently engaged in reviewing fiscal year 2007 estimates with 

the goal of reducing estimates wherever possible in costs for core services to USDA 

agencies. It was with this objective in mind that we were able to submit an operating estimate for fiscal year 2007 that is consistent with expected inflation. I think 

it is important to note that costs for core services—those corporate services in which 

all agencies share—will see cost increases of only 1.2 percent from fiscal year 2006 

to fiscal year 2007. As we begin development of the fiscal year 2008 budget this 

spring, we will be reexamining fiscal year 2007 estimates for more economies and 

savings. As we did last year, we will establish spending targets for WCF activities 

that take into account the Department’s spending priorities among its agencies reflected in the President’s budget. 

I would also like to express my appreciation to the Committee for all of the assistance and support provided to the Department in the wake of Hurricane Katrina. 

Specifically, the resources provided to us to address disaster recovery and resumption of business operations were essential to our success in bringing the National 

Finance Center and other activities in New Orleans back on line. The story of our 

recovery in New Orleans is primarily a story of people—dedicated workers who 

through their long hours of effort ensured that operations were resumed as quickly 

as possible. That we have been able to resume payrolling and financial operations 

activity to the extent we have is a reflection on their efforts and the support we 

have received from the Congress. 

Thank you, Mr. Chairman, for the opportunity to share the results we have 

achieved and our fiscal year 2007 budget request with the Committee. We especially 

look forward to working together with you and the Committee in fulfilling the vision 

for financial management we all have for the United States Department of Agriculture. 

PREPARED STATEMENT OF TERRI TEUBER MOORE, DIRECTOR OF COMMUNICATIONS, 

OFFICE OF COMMUNICATIONS

Mr. Chairman and members of the Subcommittee, I am pleased to discuss the fiscal year 2007 budget request for the Department of Agriculture’s Office of Communications (OC). 

When Congress wrote the law establishing the U.S. Department of Agriculture in 

1862, it said the department’s ‘‘... general designs and duties shall be to acquire 

and to diffuse among the people of the United States useful information on subjects 

connected with agriculture in the most general and comprehensive sense of the 

word.’’ OC coordinates the implementation of that original mandate. 
41 

OC coordinates communications with the public about USDA’s programs, functions, and initiatives, providing vital information to the customers and constituency 

groups who depend on the Department’s services for their well-being. For example, 

OC is coordinating the Department’s communications efforts relating to the threat 

of avian influenza and is prepared to activate a Joint Information Center (JIC), 

which would support the Department in meeting its obligations in the event of an 

avian influenza outbreak. In addition, OC also coordinates the communications activities of USDA’s seven major mission areas and provides leadership for communications within the Department to USDA’s employees. 

OC is adopting new technologies to meet the increased demands for the dissemination of accurate information in a timely manner. Using the internet, radio, television and teleconference facilities, we are able to ensure that the millions of Americans whose lives are affected by USDA’s programs receive the latest and most complete information. As the continuing concern over avian influenza demonstrates, 

these technologies are a critical resource used by the Secretary and the agencies to 

provide timely information, which helps to maintain consumer confidence and stabilize agricultural markets. 

OC’s 5-year strategic goal is to support the Department in creating full awareness 

among the American public about USDA’s major initiatives and services. This is essential to providing effective customer services and efficient program delivery. As 

a result, we expect more citizens, especially those in underserved communities and 

geographic areas, to access helpful USDA services and information. 

A central element of this support is OC’s active participation in the Department’s 

eGovernment initiative. OC plays a key role in ensuring that the Department’s 

eGovernment implementation results in the public’s improved access to more current, accurate, relevant, and organized USDA products, services, and information. 

The USDA.gov portal, managed by OC, is customer- or citizen-centric, allowing OC 

to target information by audience preference, subject and personalization. On average, the USDA.gov portal reaches 1.5 million citizens weekly. The demand by citizens and other constituencies for information, via the USDA.gov portal, web casting, 

electronic mail distribution, teleconferences, and publications, is expected to continue to increase. 

OC will continue to take an active part in policy and program management discussions by coordinating the public communication of USDA initiatives. We will continue to provide centralized operations for the production, review, and distribution 

of USDA information to its customers and the general public. Also, we will monitor 

and evaluate the results of these communications. Our staff is instructed to use the 

most effective and efficient communications technology, methods, and standards in 

carrying out communications plans. 

Also, we are focusing on improved communications with USDA employees, especially those away from headquarters. This will enhance their understanding of 

USDA’s general goals and policy priorities, programs and services, and cross-cutting 

initiatives. 

Our office will continue to work hard to meet our performance goals and objectives. We will work to communicate updated USDA regulations and guidelines, conduct regular training sessions for USDA communications staff about using communication technologies and processes to enhance public service, foster accountability 

for communications management performance throughout USDA, and continue to 

work to create a more efficient, effective and centralized OC. Increasing availability 

of USDA information and products to underserved communities and geographic 

areas through USDA’s outreach efforts is integral to our performance efforts. OC 

will also provide equal opportunity for employment and promote an atmosphere that 

values individuals. 

FISCAL YEAR 2007 BUDGET REQUEST

OC is requesting a budget of $9.7 million. This is a net increase of $0.28 million 

for the annualization of the fiscal year 2006 pay increase and the anticipated fiscal 

year 2007 pay increase. 

As more than 88 percent of OC’s obligations are for salaries and benefits, the requested increase is vital to support and maintain staffing levels for current and projected demands for our products and services. While OC has realized some cost savings by replacing high grade employees who have retired with lower grade employees, our current budget leaves little flexibility for absorbing increased costs. In fact, 

OC would not be able to absorb the increased salary costs in fiscal year 2007 without placing considerable constraints on daily operations or impacting staff size and 

therefore the timely delivery of information to the public. 
42 

Our central task is to ensure the development of communications strategies, 

which are vital to the overall formation, awareness and acceptance of USDA programs and policies. The World Wide Web is firmly established as an effective means 

by which the Department can provide information and receive comments on the 

whole range of agricultural programs, functions and issues of interest to the public 

here or around the world. 

OC will continue to strive to make the most effective use of this medium. OC has 

led the adoption of content management software which speeds the addition of new 

material, improves our quality control measures to ensure the accuracy of the information available through the USDA.gov portal, and reduces the staff time required 

for overall maintenance of the site. 

This improved control greatly reduces the time necessary to post important information to the media and the public while providing a greater ability to ensure the 

accuracy of the information. This allows OC to use a large document and web repository, sharing resources and information with mission areas and agencies as well 

as the public. 

OC looks forward to continuing our commitment to the American public by providing timely, accurate information about our programs and services. 

This concludes my statement, Mr. Chairman. I will be pleased to respond to any 

questions. 

PREPARED STATEMENT OF DAVID M. COMBS, CHIEF INFORMATION OFFICER, OFFICE

OF THE CHIEF INFORMATION CENTER

INTRODUCTION

Mr. Chairman and members of the Subcommittee, thank you for the opportunity 

to share with you our progress on using information technology (IT) to improve service delivery to the customers of the Department of Agriculture (USDA), while at the 

same time implementing Enterprise Architecture (EA) principles and eGovernment 

with IT. 

The Office of the Chief Information Officer (OCIO) is changing how USDA invests 

in and uses IT. Instead of single agency-centric systems, we are investing in common government-wide and Department-wide IT solutions. OCIO is leading USDA 

participation in 21 of the 25 government-wide Presidential Electronic Government 

(eGovernment) initiatives. At the same time, under the framework of the Department’s Enterprise Architecture, we are managing USDA IT investments to promote 

collaboration across common lines-of-business, reduce duplication with our internal 

‘‘Smart Choices,’’ and finding savings by leveraging the USDA’s size/economies-ofscale in Department-wide IT acquisitions. 

The President’s fiscal year 2007 budget request for OCIO totals about $16.9 million. We are requesting an increase of approximately $639,000 to cover pay costs. 

USDA’S FISCAL YEAR 2007 INFORMATION TECHNOLOGY BUDGET SUMMARY

During the fiscal year 2007 USDA budget preparation process, OCIO staff scrutinized agency IT investment plans to ensure alignment with USDA program delivery 

plans as well as the USDA Enterprise Architecture. In fiscal year 2007, the Department is requesting about $2.1 billion for IT. Components of the IT budget include: 

—37 percent of fiscal year 2007 IT spending—estimated at $783 million, is transferred to the States for the development and maintenance of automated systems 

to support Food Stamps, WIC, and related programs 

—The following is a breakdown of the remaining $1.4 billion in IT discretionary 

funding: 

—35 percent—estimated at $483 million—will be used for advisory services (e.g. 

consultants) 

—27 percent—estimated at $372 million—will be used for Federal IT personnel 

costs 

—18 percent—estimated at $242 million—will be used for equipment 

—12 percent—estimated at $167 million—will be used for advisory services (e.g. 

telecommunications) 

—8 percent—estimated at $95 million—will be used for software. 

Overall, the IT related proposals in the USDA request represent about 3 percent 

of the total $64 billion proposed for IT investments for the Federal Government in 

fiscal year 2007. 
43 

SERVICE CENTER MODERNIZATION INITIATIVE—(SCMI)

Mr. Chairman, the modernization of our Service Center Agencies’ (SCA) technology infrastructure continues to be one of USDA’s highest IT priorities. The Common Computing Environment (CCE) initiative is managed by OCIO working in collaboration with the SCA. CCE supports over 45,000 SCA employees, volunteers and 

partners in the delivery of over $55 billion in programs through our field office delivery system. The new infrastructure is flexible and built around maximizing information sharing both within USDA and with other Federal, State and Local agencies, the private sector, and USDA customers. 

I would like to take a few minutes to update you on the status of the CCE technology, as well as our progress in merging the three SCA IT support staffs into a 

single organization under OCIO. 

The OCIO selected Information Technology Services (ITS) as the name of the converged organization, which came into being on November 28, 2004. There were 785 

full time equivalents transferred to the new ITS organization—264 were transferred 

from the Farm Service Agency, 351 from the Natural Resources Conservation Service, 164 from the Rural Development mission area, and 6 from other OCIO organizational elements. A total of 684 personnel were transferred out from the SCA. 

ITS was established under the Department’s Working Capital Fund to process 

revenue and obligations for ITS. The CCE appropriated dollars are to be utilized for 

capital expenditures, while the WCF will be used to pay ITS operating expenses for 

the CCE. Notifications to OMB and Congress were made to address the expansion 

of existing activities in our Working Capital Fund. 

The purpose of creating ITS was to have one unified organization dedicated to 

supporting both the shared and the diverse IT requirements of the SCA and their 

partner organizations. On the one hand, the agencies were already sharing and investing in a common computing environment (and its infrastructure, network systems, and associated hardware, software, and training); on the other hand, each 

agency had to manage its own distinct computing systems, software, and IT support 

teams. 

By converging both technology resources and skilled IT staff into one organization, ITS can efficiently focus a broad range of technology investment and diverse 

support, planning, and management services, spread equitably back to the agencies 

and replacing what might be considered triplicate efforts. 

The fiscal year 2007 CCE budget request is for $108,900,000. A net decrease of 

$1,172,000, comprising: 

An increase of $5,212,000 for the CCE Basic Infrastructure, the increase will restore CCE basic infrastructure funding to a level needed to provide a stable level 

of service, while increasing Web Farm capacity. 

A net decrease of $4,504,500 in the Farm Service Agency (FSA) Specific Funds. 

FSA is in the middle of a multi-year modernization project to reengineer its legacy 

application systems. The goals of modernization are twofold: (1) to eliminate FSA’s 

dependency on a proprietary and restrictive operating environment by developing 

applications that are platform independent; and (2) to achieve a customer-centric 

focus, providing ease of access and convenience to FSA customers. As these applications are developed, they will be hosted on the CCE infrastructure. In fiscal year 

2007, FSA is requesting a decrease of $4,504,500 in IT support to the $73,260,000 

CCE fiscal year 2006 base for agency specific needs. This decrease has occurred due 

to contract efficiencies realized with several of our support services contracts for infrastructure support. In addition, this decrease has occurred due to the completion 

of business modernization efforts in the Farm Loan Program area. 

An increase of $1,845,000 for the Natural Resources Conservation Service 

(NRCS). This increase will pay for increased telecommunications and related costs. 

A decrease of $2,277,000 in the Rural Development mission area. Now that ITS 

is operational, all the Web Farms are part of the ITS organization. The RD agency 

specific funds supports activities including the telecommunications support associated with Service Center modernization activities and the continued development 

and operation of the ITS Web Farms. RD has moved all of its major applications 

to the Web. A common infrastructure integrates Web services for RD customers, employees, and trading partners, making the Web a main stream for doing RD business. The public will be able to access more information and services online. The 

funds for this initiative will provide the continued support, enhancement of the common infrastructure hosting all applications for RD, regular software and hardware 

maintenance and the daily costs for operations and security. 

A net decrease of $347,000 in the OCIO Interagency e-Gov Funds. More of the 

interagency e-Gov costs are becoming operational in nature and less infrastructure 

related. Therefore, the amount of interagency e-Gov costs borne by the SCMI is de-
44 

creasing. The e-Gov operational costs will be part of the service level agreements 

between the ITS and the Service Center Agencies. An offsetting decrease of $1,101,000 to reflect the permanent reduction of the fiscal year 2006 rescission from budget authority in fiscal year 2007. 

Congressional support for the CCE initiative has been key to its success. As we 

move forward with ITS, Congressional support will remain critical. 

INFORMATION SECURITY

Mr. Chairman, for many years USDA has been remiss in its responsibility to meet 

all Federal information security requirements. To address this situation, we have 

significantly improved the posture of our security program. FISMA and OMB Circular A–130 require all Federal agencies, including USDA, to certify and accredit 

(C&A) their systems. This effort has improved our security plans, updated and corrected our security documentation, tested our networks and applications for security 

weaknesses, and successfully engaged our business organizations in the discipline 

of security management. 

USDA IT security staffs are now in the process of addressing security issues that 

arose through our C&A activities. Action plans have been establish to mitigate specific security weaknesses and implement improved controls, and to meet the FISMA 

performance measures designed by OMB. Within the OCIO, we have established a 

rigorous process to track these corrective actions and ensure they are completed in 

a timely and efficient manner. 

As USDA’s information security program matures, automated tools are necessary 

to quickly and efficiently address cyber risks. We continue to provide our agency security staffs with monitoring devices and automated patching processes that assist 

in preventing disruption by intrusion or the introduction of malicious programs. 

During fiscal year 2006, we will deploy an improved incident tracking systems help 

us better manage and report detected breaches and we will continue to maintain 

a rigorous security training and awareness program which requires annual participation by all USDA and contract personnel. 

Through good preventative planning, such as system C&A combined with improving the Department’s overall operational response to security Challenges, we are reducing the risk associated with the electronic use and delivery of USDA information 

and services. 

ELECTRONIC GOVERNMENT

Mr. Chairman, we continue to move aggressively to implement interagency and 

interdepartmental services to support common needs. The primary goals of our approach are to reduce costs and improve the quality of interactions with our customers. 

USDA, along with our partners in the other Federal agencies, has worked hard 

over the past 5 years to simplify citizens’ access and interaction with their government. The results of these efforts are remarkable. Our efforts reduced the burden 

on citizens, partners, and employees by simplifying access to the Department’s information and services and streamlining internal processes. For example: 

USDA helped citizens determine their eligibility for USDA benefits by incorporating pre-eligibility surveys onto a government-wide Web site, 

www.govbenefits.gov. Citizens are able to save time at a government office by completing the online survey in advance. They can learn ahead of time if they do not 

have go to the office, thereby saving unnecessary travel time. USDA provides access 

to 34 benefits programs on GovBenefits.gov. For the 12-month period ending August 

2005, the site generated over 140,000 referrals to USDA State and Federal programs’ Web sites for more information. 

USDA simplified citizens’ access to government recreational facilities through its 

leadership in developing www.recreation.gov. The government’s online service provides a single point of access to accurate information about Federal recreation destinations. Citizens using www.recreation.gov can access information from the Forest 

Service, such as cabin/campsite materials, maps, facts and figures, and permit 

forms. Soon, advance reservations for Forest Service facilities can be made online 

through the National Recreation Reservation Service. 

USDA gives businesses easy, online access to resources that help them understand how to meet the compliance requirements for regulations affecting them. Currently, 13 USDA agencies are using www.business.gov to provide businesses with 

access to over 500 guidance resources and forms, plus compliance and regulatory information and relevant links. 

We worked with our Federal partners at www.regulations.gov to make it easier 

for the public to comment online about Federal regulations. The 
45 

www.regulations.gov currently allows citizens to search and provide comments online on all regulations open for comment. USDA employees benefit from streamlined 

and consistent internal processes to review and process public comments. Currently, 

four USDA agencies have successfully moved from paper-based processes to the Federal Docket Management System (FDMS). USDA’s other rule-making agencies are 

preparing to move to the online service in the near future. 

USDA is a major geospatial data producer and contributor to the Federal Government’s www.geodata.gov. The Geospatial One-Stop site provides online access to 

geospatial data collected by the FSA, the Natural Resources Conservation Service, 

and the Forest Service. This online access enables the public and other Federal 

agencies to both avoid costs and realize cost savings. Recently, USDA added a link 

to the National Agricultural Imagery Program’s vast library so that researchers, 

businesses, and the general public can now directly order data sets thus greatly improving the availability of this in-demand data. 

We streamlined the process of locating grant opportunities and applying for 

grants by working with our Federal partners to deploy a single, online access point 

for over 900 grant programs across the Federal Government on www.grants.gov. 

Citizens and business benefit through a simplified application process and reduced 

paperwork as the result of using the online service. As of December 2005, USDA 

had posted 404 funding opportunities and 57 application packages on 

www.grants.gov. USDA has received 340 electronic applications from the grants 

community via www.grants.gov. 

We have adopted the tools and services provided by the Federal Government’s Integrated Acquisition Environment (IAE). This improves our ability to make informed and efficient purchasing decisions across USDA and helped us eliminate 

paper-based and labor-intensive processes. IAE allows us to avoid the cost of building and maintaining separate systems to post procurement opportunities and to 

record vendor and contract information. Our purchasing officials have access to 

databases from other Federal agencies on vendor performance. 

USDA consolidated its disaster relief information by posting it on 

www.disasterhelp.gov with similar information from agencies across the Federal 

Government. First responders can search for assistance from across the government 

in one place. USDA’s disaster designations are prominently available on the site. 

This makes it easy for citizens and businesses to locate this critical information. 

The USDA eAuthentication Service currently protects more than 160 of our applications. USDA employees and customers use a secure, single sign-on to access these 

applications, thereby reducing our customer support needs through improved security and usability. Every USDA employee that needs access to any of these integrated systems has a credential. USDA’s eAuthentication Service was recently certified to be compliant with the government-wide standard for interoperability and 

was approved as a government-wide service provider. We integrated our 

eAuthentication Service with Exports.gov in December 2005. 

Our National Finance Center (NFC) is one of four Payroll Partner Providers selected by the Office of Personnel Management. NFC has a 30-year track record providing payroll services to more than 130 Federal organizations, representing all 

three branches of the government. Through the ePayroll Initiative, NFC is 

partnered with the Department of Interior’s National Business Center to provide 

payroll services to approximately 50 percent of Federal employees. 

NFC was selected as a Federal Government human resources service provider for 

the Human Resources Management Line of Business. We provide services to the Department of Homeland Security, Library of Congress, and Government Accountability Office. 

USDA proudly implemented a newly designed USDA Web site that presents the 

Department’s information and services by topic rather than on an organizational 

basis (www.usda.gov). As part of our support of the President’s Management Agenda’s promise of easy access to the government, customers may now easily locate 

USDA’s online information and services. No longer do they have to traverse multiple 

agency Web sites to track down what they need. In addition, ‘‘MyUSDA’’ permits 

visitors to customize USDA’s site to provide immediate access to the information 

they regularly want to see. Our visitors are pleased that our agencies are rapidly 

adopting the USDA ‘‘look and feel.’’ Currently, 24 Web sites have moved to the Department’s Web standards, and another 36 agency sites are in the process of doing 

so. 

USDA provided its employees with expanded educational opportunities by deploying AgLearn, www.aglearn.usda.gov, in partnership with the Office of Personnel 

Management’s, USALearning—part of the E-Training Presidential Initiative. 

AgLearn provides employees around the world with access to a robust, competencybased library of courses. Geographically disparate offices are now able to easily col-
46 

laborate in developing learning services to meet common needs and reduce costs. 

Employees and managers have constant access to their training curriculum and 

training records. In an average month, 20,348 employees completed 4,599 courses. 

AgLearn currently offers more than 2,300 agency-specific courses. 

Our enterprise approach prevented USDA agencies from making independent investments in multiple systems for each of these services and numerous others. In 

addition, it greatly simplified the delivery of services to the public, unifying information from services from across the government. 

ENTERPRISE ARCHITECTURE

Mr. Chairman, USDA is managing its enterprise architecture as an enterprisewide roadmap to achieve our mission within an efficient information technology environment. USDA’s Enterprise Architecture Program identifies similar processes 

and opportunities to unify IT solutions across our agencies. A Budget and Performance integration conceptual data model has been created to improve consistency 

across Departmental systems. Information on Federal and USDA e-Gov architectures is being collected for easy dissemination throughout the Department. We are 

also assembling the data needed, at both the Departmental level and within individual agencies, to better organize and analyze all our business processes, information needs, and supporting technologies. Through the Enterprise Architecture Repository, a shared view of the Department’s current and future business and IT environment are available for USDA decision-makers to leverage IT services, avoid redundant IT investments, improve information security, and align technology and 

business processes more closely to the Federal Enterprise Architecture. 

The USDA Enterprise Architecture Program complements the Department’s IT 

Capital Planning and Investment Control (CPIC) process. USDA’s central CPIC 

body reviews, monitors and approves all major IT investments to ensure alignment 

with the Department’s strategic goals and objectives. The enterprise architecture 

provides a formal basis for evaluating a single investment against other investments 

in terms of its contribution to enhanced delivery of customer services and opportunities for collaboration and reuse. In addition to strengthening the CPIC process, the 

EA will enable USDA to improve key Department-wide enterprise hardware, software, and service agreements. In addition, USDA’s E-Board reviews and makes 

final approval decisions regarding the Department’s IT investment decisions. This 

board is comprised of the Under-Secretaries of the various Mission Areas. It is 

chaired by the Deputy Secretary. 

IT MANAGEMENT

Mr. Chairman, we at USDA understand our responsibility to manage our IT assets and to ensure that major IT investments are completed on time, and within 

scope and budget. To support these responsibilities, USDA established an IT Investment and Project Management training program. This program provides project 

managers and project staff with the skills and competencies needed to ensure that 

all projects have a strong business case, meet organizational goals and are completed within their established cost and schedule goals. This training covers Federal 

best practices such as capital planning and investment control, information assurance, project management (PM), enterprise architecture, acquisition, eGovernment, 

and telecommunications issues as well as the nine knowledge areas specified by the 

Project Management Institute (PMI) in the Project Management Body of Knowledge, 

the industry standard for project management training. At the end of the training, 

participants are eligible to take the examination administered by PMI for certification as a Project Management Professional (PMP). This training has provided us 

with a growing number of PMI-certified project managers. Currently, USDA has 200 

PMPs. 

To supplement the 5-week PM training, we have identified and delivered shorter 

classes to address more specific needs including: Earned Value Management, the 

Project Management Lifecycle (a high-level PM introduction) and PerformanceBased Acquisition. These classes expand the level of understanding of PM concepts 

and ensure that the skills of our trained PMs are kept up to date. 

We believe that all agencies can benefit from this training and that USDA staff 

benefit from understanding other agencies’ experiences. In addition to USDA employees, we have trained staff from the Environmental Protection Agency, the Department of Treasury, the Department of Homeland Security and the Department 

of Education. 
47 

CONCLUSION

Mr. Chairman, as I mentioned earlier, we are working hard to use technology to 

transform service delivery to USDA customers while reducing costs. With the continued support of the Congress, I am confident that we will continue to be successful 

in achieving these objectives. 

PREPARED STATEMENT OF JAMES MICHAEL KELLY, DEPUTY GENERAL COUNSEL, OFFICE OF THE GENERAL COUNSEL

INTRODUCTION

Mr. Chairman and members of the Subcommittee, I am pleased to have this opportunity to present our fiscal year 2007 budget request, provide you with an overview of our agency, and address some of the current activities and issues facing the 

Department. 

The Office of the General Counsel (OGC) is the law office for the Department. As 

an independent, central agency within the Department, OGC determines legal policy 

and provides legal advice and services to the Secretary of Agriculture and other officials of the Department of Agriculture with respect to all USDA programs and activities. 

OGC(s services are provided through 14 Divisions in Washington, D.C. and 17 

field locations. The headquarters for OGC is located in Washington, D.C. The Office 

is directed by a General Counsel, a Deputy General Counsel, a Director for Administration and Resource Management, and six Associate General Counsels. The attorneys located in headquarters are generally grouped in relation to the agency or 

agencies served. Our field structure consists of four regional offices, each headed by 

a Regional Attorney, and 13 branch offices. The field offices typically provide legal 

services to USDA officials in regional, State, or local offices. 

CURRENT ACTIVITIES AND ISSUES

INTERNATIONAL AFFAIRS AND COMMODITY PROGRAMS DIVISION

During this past year, OGC has provided a significant amount of assistance in 

connection with USDA’s international activities. With respect to World Trade Organization (WTO) matters, OGC worked extensively with the Office of the United 

States Trade Representative (USTR) to prepare the United States’ brief in support 

of its claims challenging the European Communities’ (EC) suspension of approvals 

of all applications for biotech products. This action is being brought under the WTO 

Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement). The United States also challenged nine safeguard measures that have been 

enacted by six EC member States banning several biotech products that were already approved for sale in the European Union (EU) prior to 1998. The United 

States contended that the EU has imposed ‘‘undue delay’’ in connection with product 

approvals in violation of Article 8 of the SPS Agreement; has not made decisions 

based on risk assessments as required under Article 5.1; and has violated Article 

5.5 which prohibits Members from adopting arbitrary or unjustifiable distinctions in 

their level of protection in ‘‘different’’ but comparable situations. A confidential interim report was issued by the WTO in this case on February 7, 2006. OGC attorneys have also continued to provide support to the USTR in connection with the 

challenge brought in the WTO by the Government of Brazil against virtually all aspects of the Department’s domestic and export-related cotton programs. This case 

has major implications for the manner in which these programs are administered 

regarding cotton, and the legal principles at stake may also affect other commodity 

programs. 

In other WTO matters, OGC attorneys have provided advice to Departmental officials, primarily those in the Foreign Agricultural Service (FAS), with respect to various sanitary and phytosanitary issues, including reviewing responses to WTO notifications of proposed regulatory changes. These attorneys also advised FAS personnel in the review of various proposed changes to existing WTO agricultural provisions that would be the framework for future WTO negotiations. 

During the past year, OGC has also been involved in the implementation of a 

large number of foreign assistance agreements under which agricultural commodities acquired by the Commodity Credit Corporation (CCC) are donated overseas. 

This includes involvement in relief efforts addressing the humanitarian needs in 

Iraq and the Darfur region of Sudan. This work has involved extensive review of 

draft agreements, commodity procurement agreements, ocean transportation issues, 

and cargo loss and damage claims. OGC has also provided legal advice to FAS in 
48 

relation to the operation of the Bill Emerson Humanitarian Trust through which reserves of commodities may be made available to meet unanticipated emergency 

needs and has assisted CCC’s Kansas City Commodity Office in reviewing the commodity procurement processes under which agricultural commodities are acquired 

for their donation overseas. In the area of international food assistance, OGC reviewed and helped draft numerous agreements with private voluntary relief organizations, the World Food Program of the United Nations, and various foreign governments. This assistance included a combination of donations and concessional credit 

sales of grains, oilseeds, and other U.S. agricultural commodities. 

The Trade Adjustment Assistance Program for Farmers has also continued to require a significant amount of assistance from OGC attorneys. In general, this program assists agricultural producers who have incurred reductions in commodity 

prices due to increased imports of agricultural products into the United States as 

the result of trade agreements. At this point, a substantial number of appeals have 

been filed with the U.S. Court of International Trade challenging FAS’s decisions 

on applications for payment. OGC attorneys are providing assistance to the Department of Justice (DOJ) in responding to these appeals. 

OGC also provides advice to FAS concerning cost-reimbursable agreements entered into by FAS and other USDA agencies with foreign governments or other U.S. 

government agencies that are engaged in international agricultural activities. 

During the past year, OGC attorneys provided extensive assistance with respect 

to the numerous commodity and conservation programs implemented by the Department under various statutes, including the Agricultural Adjustment Act of 1938, the 

CCC Charter Act, the Food Security Act of 1985, and the Farm Security and Rural 

Investment Act of 2002. Most notably, with respect to 2004 hurricanes, OGC provided major support to the efforts of the President to provide assistance to agricultural producers affected by the unprecedented damage in Florida caused by the occurrence of 3 successive hurricanes. Working with senior Departmental officials and 

representatives of the Executive Office of the President, OGC attorneys were able 

to provide the legal framework under Section 32 of the Act of August 24, 1935 (Section 32) so that payments could be made to producers within weeks of the hurricane 

damage. Similarly, OGC has provided legal advice to the Farm Service Agency 

(FSA) in the development of regulations and program documents needed to deliver 

several billion dollars of disaster assistance payments to producers under the Military Construction Appropriations and Emergency Hurricane Supplemental Appropriations Act, 2005, and under Section 32 with respect to Hurricanes Ophelia, Dennis, Katrina, Rita, and Wilma. OGC also continues to expend considerable time in 

providing assistance on legal issues involving the sugar, peanut, and dairy programs. 

Title VI of the America Jobs Creation Act sets forth amendments to existing statutes to terminate the Tobacco Price Support and Marketing Quota Programs. In addition, this act establishes a 10-year, $10 billion program to provide payments to 

tobacco quota holders and tobacco producers with the funds coming from assessments on tobacco product manufacturers and importers. Implementation of this very 

complex and important program is requiring the substantial devotion of assistance 

by OGC. 

FOOD AND NUTRITION DIVISION

With respect to USDA’s nutrition assistance programs, OGC has been heavily involved in: (1) the development, drafting and review of legislative reports and congressional testimony; (2) the implementation and enforcement of new legislation 

aimed at welfare reform and other program improvements; and (3) the ongoing program integrity and compliance initiatives. We expect the demand for legal services 

in connection with these and other activities to remain constant in fiscal years 2006 

and 2007. 

More specifically, during this past year, OGC attorneys provided formal and informal advice on a number of issues affecting the administration of the nutrition assistance programs. OGC provided assistance in the drafting and subsequent enactment of section 780 of the Consolidated Appropriations Act, 2005, which prohibits 

the use of funds appropriated under that act to reimburse the administrative costs 

of States under the Special Supplemental Nutrition Program for Women, Infants 

and Children (WIC) for stores that receive more than 50 percent of their revenue 

from WIC transactions. This prohibition represents a significant cost savings for the 

WIC Program. OGC also worked effectively in the development of legislative proposals to limit categorical eligibility for the Food Stamp Program (FSP) to persons 

who receive actual cash benefits under the Temporary Assistance for Needy Families program and to authorize access, for program verification purposes, to the Na-
49 

tional Directory of New Hires. These legislative proposals supported the budgetary 

objectives of the administration. OGC also provided advice to the Center for Nutrition Policy and Promotion in connection with roll-out activities with respect to 2005 

Dietary Guidelines for Americans and the associated MyPyramid. 

During the past year, OGC assisted in the defense of several legal challenges to 

the nutrition assistance programs. Among other issues, OGC worked closely with 

the DOJ Antitrust Division in the preparation of a lawsuit to challenge the merger 

of two dairy companies which would have severely restricted competition in the procurement of milk contracts for the National School Lunch Program in Arkansas and 

substantially contributed to the successful defense against allegations of denial of 

due process raised by a Child and Adult Care Food Program sponsor. 

OGC participated in the preparation and review of numerous significant documents, memoranda, rules, notices, and correspondence during this past year. As examples, OGC reviewed a substantial number of proposed and final Federal Register 

publications, including: (1) interim and final rules establishing new standards for 

the approval and operation of FSP electronic benefit transfer systems; (2) a proposed 

rule to amend the FSP regulations to implement the discretionary quality control 

provisions of Title IV of Public Law 107–171; (3) a proposed rule to revise regulations governing WIC food packages; and (4) a final rule to amend WIC regulations 

to address issues raised by WIC State agencies, members of the WIC community 

and the U.S. Government Accountability Office. Similarly, OGC provided legal review of the documentary basis for the Department’s nutrition assistance response 

to disaster conditions caused by hurricanes Katrina, Rita, and Wilma along the Gulf 

Coast. 

OGC also provided advice on a number of issues affecting the efficient administration of the nutrition assistance programs. OGC provided valuable assistance and advice to Department officials regarding the preparation of a joint letter signed by the 

Secretaries of Agriculture and Health and Human Services issuing guidance to 

State Governors regarding the eligibility of faith-based drug and alcohol abuse treatment programs to act as retail food stores under the FSP. This effort required close 

coordination with the White House Counsel’s Office and Office of Faith-Based and 

Community Initiatives, as well as the Office of Management and Budget. OGC provided legal advice to FNS in connection with the denial by FNS of the request of 

a State school district to impose gender-specific seating requirements in cafeterias 

operated under the National School Lunch Program. OGC also worked closely with 

Department officials in the review of a State proposal for the fundamental restructuring of the FSP application process with a focus on improved efficiency and effectiveness of the delivery of program benefits. This review required careful analysis 

of authorities related to electronic signatures and record-keeping and to authorities 

regarding merit pay requirements for State officials involved in the certification of 

applicants. OGC continues to work closely with Department officials engaged in 

evaluating and sanctioning States for their performance in administering the FSP 

under the quality control system. 

MARKETING, REGULATORY AND FOOD SAFETY PROGRAMS

OGC staff are providing the strongest possible legal support to the Food Safety 

and Inspection Service (FSIS) to ensure the safety of the Nation’s meat, poultry, and 

egg products. We participate fully in the agency’s work to enhance the effectiveness 

of the Hazard Analysis and Critical Control Points (HACCP)/Pathogen Reduction 

regulations, to support effectively the agency’s compliance and enforcement program, and to defend FSIS in legal challenges to the implementation of its statutory 

authorities and regulations. 

OGC attorneys continue to work with DOJ attorneys in defending civil actions 

that have been initiated in Federal court against the Department involving FSIS’ 

food safety programs. One such case involves a Bivens complaint filed by Nebraska 

Beef in the District Court for the District of Nebraska alleging that FSIS employees 

improperly suspended inspection services. Nebraska Beef has also filed a related 

lawsuit in Federal court challenging FSIS enforcement actions. A second case involves a Bivens complaint filed by Montana Quality Foods in the District Court for 

the District of Columbia alleging that FSIS employees took retaliatory action in enforcing FSIS’ policy regarding E. coli O157:H7 contamination. 

OGC also provides assistance to FSIS in connection with its rule making activities. Our attorneys work with FSIS staff from the early stages of the agency’s policy 

development activities, and participate in an array of agency working groups and 

regulation development teams. OGC has assisted FSIS in connection with ongoing 

rule making to strengthen protections against exposure to the bovine spongiform 

encephalopathy (BSE) agent. The interim rules require the removal of certain ani-
50 

mals and specified risk materials from the human food chain, mandate additional 

process controls for establishments that use advanced meat recovery systems, require establishments to hold meat from cattle that have been tested for BSE until 

the test has been confirmed negative, and prohibit the air-injection stunning of cattle. We are working with the agency in developing a final rule that will encompass 

a careful evaluation of the comments submitted in response to the interim rule. 

OGC also assisted FSIS on an array of rules, notices and directives aimed at improving the Department’s food safety program. The issues involved included safe 

food handling practices, food security plans, and emergency preparedness, and revisions to the agency’s recall procedures to improve the dissemination of recall information. We also worked with FSIS and the Food and Drug Administration (FDA) 

to amend food standards and regulatory requirements to provide a more coherent 

approach to food safety. 

OGC devotes substantial resources to FSIS field operations activities and its critical compliance and enforcement programs. Our attorneys work on a daily basis 

with the agency’s compliance and enforcement staff officials, with the Office of Inspector General (OIG), and with DOJ to achieve successful prosecution of criminal, 

civil and administrative cases involving violations of the meat, poultry, and egg 

products inspection laws, and to prevent the distribution of adulterated, misbranded, or uninspected products. 

In the past year, OGC handled numerous criminal, civil, and administrative cases 

in this area. The criminal cases involve not only violations of the Federal Meat Inspection Act (FMIA) and Poultry Products Inspection Act (PPIA), but also violations 

of provisions of U.S. criminal laws relating to false statements, bribery, conspiracy, 

and mail and wire fraud. The civil cases involved injunctions, seizure actions, bankruptcy and claims collections actions and the defense of civil lawsuits brought 

against the Department and its officials. Typically, OGC prepares proposed indictments, information and complaints, and provide whatever assistance is necessary 

for the successful prosecution or defense of the cases. 

OGC attorneys are responsible for prosecuting administrative actions initiated by 

FSIS to withdraw, suspend or deny Federal meat and poultry inspection or custom 

exemption services under the FMIA and PPIA based on criminal convictions, as well 

as on serious HACCP and Standard Sanitation Operating Procedures (SSOP) regulation violations. 

The Department’s programs for safeguarding the animal and plant health of the 

United States is a matter of utmost importance to American agriculture and to the 

public as a whole. OGC works very closely with the Animal and Plant Health Inspection Service (APHIS) in carrying out that agency’s program responsibilities. 

APHIS’s program and regulatory activities continue to increase substantially. The 

focus of our work with APHIS remains the development and implementation of legally supportable measures to prevent the introduction and dissemination of animal 

diseases and plant pests, to ensure the safe entry of people and goods into the 

United States, and the facilitation of agricultural trade in compliance with our 

international obligations. The demands on OGC staff for timely and effective legal 

support continue to increase proportionately. 

During the past year, APHIS regulatory activities involving BSE have placed extraordinary demands on our attorney resources. Among the many challenging issues 

requiring extensive assistance was the agency’s regulatory response to BSE in North 

America, particularly the litigation that followed on the publication of the rule to 

establish BSE minimal-risk regions. In addition, we assisted APHIS in its work on 

Asian longhorned beetle, emerald ashborer, grasshopper control, sudden oak death 

syndrome (SOD), control programs for low-pathogenic avian influenza, bovine tuberculosis, chronic wasting disease, and exotic Newcastle disease. 

In addition, requests for OGC’s assistance in connection with APHIS’ regulation 

of biotechnology has continued to increase, and we have devoted substantial resources to the biotechnology regulatory programs and the implementation and enforcement of agency regulations. This includes defending litigation challenging the 

agency’s regulation of genetically modified turf grasses. 

OGC also handles a very substantial caseload of administrative cases on behalf 

of APHIS to enforce the agency’s regulations. OGC attorneys have also continued 

our strong support for APHIS’ Wildlife Services activities and programs and have 

defended these programs in a variety of litigation settings in the Federal courts. 

In the past year, OGC attorneys reviewed over 150 dockets, as well as many other 

documents relating to marketing orders, and provided daily legal advice to client 

agencies in connection with a wide variety of matters arising under both the fruit 

and vegetable and the milk marketing order programs. Substantial legal services 

were devoted to both formal and informal rulemakings. Formal rulemaking proceedings presented complex and substantial amendments and revision to a number 
51 

of marketing order programs. Significant legal services were provided in connection 

with enforcement and defense of these programs. There is one administrative challenge to the legality of the California Raisin marketing order which is pending. In 

addition, OGC has filed numerous administrative complaints to enforce the terms 

of marketing orders which require regulated entities to pay their assessments and 

to comply with the requirements in the order. Significant legal services were provided in connection with an administrative challenge to classification determinations concerning Class I and Class II milk. There are also a number of complaints 

pending in the Federal courts filed by DOJ in order to obtain payments from milk 

handlers into the producer-settlement fund. 

An extensive amount of legal services was provided in the drafting of regulatory 

language in various rulemaking proceedings. OGC continued to provide legal assistance to the Agricultural Marketing Service (AMS) Dairy Programs on several rulemaking proceedings in the Mideast, Upper Midwest and Central Orders which provided for changes to the milk pooling standards and related issues. OGC continued 

work on the ongoing rulemaking proceeding involving potential changes in the producer-handler definition in the Pacific Northwest and Arizona-Las Vegas Orders including review of the recommended decision. OGC completed work on the amendment of the Appalachian, Florida, and Southeast Florida Orders to implement a 

temporary supplemental charge on Class I milk to be paid to handlers who incurred 

extraordinary transportation charges for moving milk to supply those markets because of the hurricanes in August and September 2005. OGC also completed work 

on changes to all the orders to reclassify milk used to produce evaporated milk and 

sweetened condensed milk in consumer-type packages from Class III to Class IV. 

OGC provided legal services on a rulemaking proceeding to amend the Class I fluid 

milk product definition in all milk marketing orders. 

OGC continued to provide legal assistance to DOJ and the client agencies in numerous administrative and Federal court cases involving challenges to the constitutionality of generic advertising funded by mandatory assessments in research and 

promotion programs. Since the United States Supreme Court May 2005 ruling upholding the constitutionality of the Beef Promotion and Research Act, in Veneman 

v. Livestock Marketing Association, USDA is advancing those same arguments in 

defense of the other challenged research and promotion programs. All research and 

promotion programs continue to receive legal services in the intervening period. For 

example, OGC expended substantial resources litigating more than 100 administrative and Federal court First Amendment cases arising under research and promotion programs. These cases involve some of the most important, complex, and 

controversial legal and public policy issues in constitutional and agricultural law. 

Research and promotion programs cumulatively collect and spend over $700 million 

a year on commodity promotions. OGC also provided extensive legal analysis for a 

proposed implementation of a new research and promotion program for mangos. 

OGC expended substantial resources in connection with the Animal Welfare Act 

and Horse Protection Act Programs. OGC attorneys serve as agency counsel in administrative enforcement actions brought under these two statutes, and in fiscal 

year 2005, OGC initiated 46 enforcement cases, and 49 decisions were issued in ongoing cases. In addition, OGC reviewed and provided drafting assistance to APHIS 

in a number of rulemaking actions for publication in the Federal Register. 

OGC reviewed a variety of rulemaking and other documents in connection with 

this program. OGC continued to work with and advise the agency concerning program changes to better serve the grain industry in a more cost effective and efficient 

manner. OGC attorneys provided substantial advice and guidance in connection 

with a number of issues, including reauthorization of the program, use of contracting authority to provide inspection and weighing services and exemption of speciality grain from inspection and weighing requirements. 

In the Trade Practices area, we provide legal services under the Packers and 

Stockyards Act (P&S Act), the Perishable Agricultural Commodities Act (PACA), 

and the Capper-Volstead Act and provide the liaison for the Department under the 

Memorandum of Understanding between the Department, the Federal Trade Commission and the DOJ on competition issues. Under the P&S Act, the attorneys of 

the Trade Practices Division file administrative complaints to enforce the provisions 

of the statute, requiring prompt payment for livestock and poultry and ensuring 

that livestock auction markets and dealers are solvent, provide accurate weights 

and measures, and account accurately to sellers and producers of livestock. 

In 2005, OIG conducted an audit of the competition investigations and cases conducted by the Packers and Stockyards Program (P&SP). After several months, OIG 

issued a report finding that P&SP had difficulties defining and tracking investigations, planning and conducting competition and complex investigations, and making 

agency policy decisions. As a result, the report found that P&SP’s tracking system 
52 

was not reliable, competition and complex investigations were not being performed, 

and timely action was not being taken on issues that impact day-to-day activities. 

The report also found that P&SP should increase its communication and cooperation 

with OGC. As a result of the report’s findings, GIPSA has requested OGC’s assistance in streamlining procedures and in training its staff, and P&SP is seeking oral 

opinions and legal guidance on a more frequent basis. 

OGC has provided extensive legal services in support of the GIPSA program in 

a case against Valley Pride Pack, Inc., (‘‘Valley Pride’’), a beef slaughter and meat 

processing company with its corporate headquarters and principal place of business 

in Norwalk, Wisconsin. Valley Pride shut down, leaving cattle sellers unpaid for 

roughly $3.5 million worth of livestock purchases from late July and early August 

2001. Following Valley Pride’s financial collapse, OGC assisted in preparing an 

analysis of unpaid livestock sellers’ claims pursuant to the P&S Act trust, which requires meat packers to hold inventories, receivables and proceeds from the sale of 

meat or livestock derived products in trust for the benefit of livestock sellers. The 

analysis found $3.4 million in apparently valid, timely claims by cattle sellers. 

These claims were subsequently paid by Valley Pride’s primary pre-petition lender, 

GE Capital, which held a security interest in Valley Pride’s inventory and receivables. Cattle sellers received additional funds from Valley Pride’s packer bond. Following the trust and bond payouts, approximately sixty-five cattle sellers remained 

unpaid for roughly $50,000 worth of cattle purchased by Valley Pride. On behalf of 

GIPSA, OGC filed an administrative, disciplinary complaint against Valley Pride alleging failures to make timely payment for cattle purchases, and naming the company’s sole owner and chief executive officer, as a respondent, alleging that the violations of the P&S Act occurred while the company was under his direction, management and control. After GE Capital made allegations of fraud, OGC amended the 

complaint against Valley Pride and the company’s sole owner, alleging that the respondents had engaged in unfair and deceptive practices by creating false records, 

including invoices and payment receipts, evidencing cattle and/or meat sales by Valley Pride to third parties for which no sales actually occurred. Millions of dollars 

in fictitious assets had been used to offset real liabilities in Valley Pride’s financial 

reports, thereby disguising the company’s insolvency. At the end of the fiscal year, 

the parties were seeking resolution of the complaint through an agreement that 

would result in the full payment to all livestock sellers. On January 30, 2006, just 

prior to the scheduled hearing for GIPSA’s administrative complaint against Valley 

Pride and the company’s owner, the case was resolved by a negotiated consent decision. Respondents, Valley Pride and the company’s owner, agreed to cease and desist from further violations of the Packers and Stockyards Act’s prompt payment 

provisions and agreed to keep records that fully and correctly disclosed all transactions in their business. Valley Pride and the company’s owner were also jointly 

and severally assessed a civil penalty of $80,000. By agreement between the parties, 

GIPSA agreed to hold $55,000 of the civil penalty in abeyance to facilitate payments 

by respondents to cattle sellers who still remained unpaid for cattle purchases by 

Valley Pride. 

OGC has also provided legal services to GIPSA in the review of the plan and data 

request for the Livestock and Meat Marketing Study (LMMS), a study requested by 

Congress to review the impact of long term contracting and use of captive supply 

by slaughtering packers. Captive supply is defined by P&S Programs as livestock 

that are committed to a packer more than 14 days prior to slaughter. The study 

was to review the question of whether such longer term commitment impacts the 

‘‘spot’’ or cash market for livestock. OGC assisted P&S in the preparation of the information collection request for Departmental and OMB clearance, meeting with 

OMB officials on a number of occasions to address OMB’s concerns regarding the 

agency’s plans for the study and the treatment of confidential data. 

Trade Practices attorneys prepared and filed administrative enforcement actions 

under the PACA. Of particular significance, the Trade Practices Division has continued to litigate administrative disciplinary cases arising out of the criminal convictions of eight USDA inspectors and 12 individuals who were owners and/or employees of PACA licensed produce firms located on the market. Fruit and Vegetable Programs of AMS filed eight disciplinary complaints against nine produce companies 

located on the Hunts Point market: (1) Post & Taback, Inc., (2) M. Trombetta & 

Sons, Inc., (3) Cooseman’s Specialties, Inc., (4) KOAM Produce, Inc., (5) King Sol 

Produce, (6) BT Produce Co., Inc., (7) Kleiman & Hochberg, Inc., (8) G&T Terminal 

Packaging Co., Inc. and (9) Tray Wrap, Inc. The complaints alleged that the companies, which by statute are held to an identity of action with their employees or 

agents, had violated section 2(4) of the PACA by making illegal payments to Federal 

produce inspectors. Seven of the complaints sought a sanction of revocation of the 

company’s PACA license. One complaint sought a sanction of a finding of the com-
53 

mission of flagrant or repeated violations of section 2(4) of the PACA, rather than 

a revocation, because the company no longer had a PACA license. The sanctions 

sought also include employment sanctions against the principals of the nine produce 

firms. 

One of the eight cases, King Sol Produce, was decided by default. The remaining 

seven cases went to hearing before the Department’s Administrative Law Judges 

(ALJ’s), who have issued decisions in all seven cases (though the Respondent in BT 

Produce Co., Inc., has asked the Chief ALJ for reconsideration). Six of the ALJ decisions were appealed to the Department’s Judicial Officer (JO), who has decided four 

of them (Post & Taback, Inc.; G&T Terminal Packaging Co. Inc.; Tray Wrap, Inc.; 

and M. Trombetta & Sons, Inc.), finding that the companies committed the alleged 

violations and issuing the sanctions requested by Fruit and Vegetable Programs. 

G&T Terminal Packaging Co., Inc., and Tray Wrap, Inc., has been appealed to the 

2nd Circuit Court of Appeals. One case, Post & Taback, Inc., was appealed to the 

U.S. Court of Appeals for the D.C. Circuit, which upheld the JO’s decision (Post & 

Taback, Inc. v. Department of Agric., 123 Fed Appx. 406 (D.C. Cir. 2005). 

Also in support of the PACA Program, OGC and DOJ continued to defend against 

a challenge to an amendment of a PACA regulation that added coating or battering 

to the list of operations that do not alter the character of a fresh fruit or fresh vegetable so that it is no longer a ‘‘perishable agricultural commodity’’. The lawsuit, filed 

by a bankrupt wholesale grocer and retailer, argues that the regulatory amendment 

conflicts with the language and purpose of the PACA, and that the rulemaking process was inadequate. On June 7, 2004, a judge in the U.S. District Court for the 

Eastern District of Texas granted USDA’s Motion for Summary Judgment. The 

judge found that the ‘‘PACA ambiguously states that fresh fruits and vegetables of 

every kind and character’ are perishable agricultural commodities’’ and that, where 

legislative language is ambiguous, the Secretary is granted the authority to issue 

regulations to determine what may be classified as fresh fruits and vegetables for 

the purposes of the PACA. The judge also found that USDA followed the appropriate 

procedural requirements in amending the regulation. Therefore, the court found 

that the amendment to the regulation is valid. The grocer/retailer appealed the decision to the 5th Circuit Court of Appeals. Oral argument was held in New Orleans, 

Louisiana, on April 5, 2005. On February 1, 2006, the 5th Circuit Court of Appeals 

issued an unpublished decision affirming the decision of the U.S. District Court for 

the Eastern District of Texas upholding the validity of the amendment to the regulation. In its brief decision, the 5th Circuit affirmed, finding the regulation to be 

valid ‘‘for the reasons articulated by the district court in its comprehensive opinion’’. 

RURAL DEVELOPMENT

OGC also provides legal services to USDA agencies which manage some of America’s largest loan portfolios. OGC continues to be heavily involved in debt collection, 

foreclosure, and bankruptcy matters for FSA, Farm Loan Programs and the Rural 

Development (RD) mission area. OGC is assisting these agencies’ implementation of 

provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 

2005 that became effective on October 17, 2005, and greatly affected USDA as a 

creditor. OGC also has provided significant assistance in identifying and utilizing 

existing and new emergency authorities, responding to claims, and coordinating benefits in response to the many disasters that have recently impacted the southern 

United States including Hurricanes Katrina and Rita. OGC also has supported the 

agencies’ efforts to implement eGovernment initiatives and move towards web-based 

credit application, servicing, and notification procedures. 

OGC continues to defend approximately 300 existing and newly filed lawsuits involving approximately 800 RD multi-family housing projects whose owners want to 

prepay their loans and, thereby, remove a significant number of low-income housing 

units from rural America. OGC has devoted significant time and resources to working closely with DOJ to support litigation efforts, particularly in providing information and analysis in the context of settlement negotiations. 

OGC is working extensively with the Rural Housing Service (RHS) on implementing several new programs. The Multi-Family Housing Preservation and Revitalization Restructuring Demonstration Program (Revitalization Program) will revitalize selected Rural Rental Housing (RRH) properties throughout the Nation. The 

Revitalization Program allows for loan servicing tools previously unavailable to RHS 

such as grants and subordinates section 515 loans with all principal and interest 

deferred as a balloon payment at the end of the loan term.. OGC is currently working with RHS on drafting the Notice of Funding Availability and the legal documents necessary for restructuring the owners’ loans. The Multi-Family Housing 

Voucher Demonstration Program (Voucher Program) will provide continued rental 
54 

assistance to low-income households in prepaid RRH projects. RHS is providing continued rental assistance in the form of 1-year portable vouchers. OGC is working 

with the Department of Housing and Urban Development and RHS in drafting a 

Notice of Funding Availability and Interagency Agreement for the Voucher Program. 

OGC also assisted RHS in developing its Preservation Revolving Loan Fund program which was authorized as a demonstration program under the Agriculture, 

Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2005. 

OGC also has assisted the Rural Business-Cooperative Service (RBS) on various 

new and continuing initiatives. OGC reviewed RBS’ final rules implementing the 

new Energy Systems and Energy Efficiency Improvements Program and the Biomass Research and Development Program under the Farm Security and Rural Investment Act of 2002. OGC also provided RBS legal assistance in revising its Business and Industry loan regulations. RBS has needed increased support on secondary 

market issues and its Rural Business Investment Program that funds rural area 

venture capital investment activities. In addition, OGC is providing significant support on several major defaults on guaranteed Business and Industry loans and negligent servicing by guaranteed lenders. OGC continues to experience a significant 

increase in requests for advice regarding various grant and cooperative agreement 

issues, and is assisting RBS’ and RHS’ implementation of the President’s FaithBased and Community Initiative to ensure that faith-based and community organizations have equal access to USDA programs. 

The need for legal services supporting the programs of the Rural Utilities Service 

(RUS) continued to grow significantly in fiscal year 2005 as a result of sustained 

increased funding for RUS programs, increased responsibilities for RUS resulting 

from the passage of the Farm Security and Rural Investment Act of 2002, and the 

impact of continuing changes in the electric and telecommunications program structures and policies. 

The RUS Electric Program is the largest of these programs. Several of these loans 

involved large-scale generation and transmission projects. OGC furnishes the legal 

services necessary for RUS to document and secure these obligations, thereby enabling these programs to be delivered. OGC is providing a full range of legal services 

to RUS to enable successful administration of these programs, including the servicing of a direct and guaranteed loan portfolio. 

The 2002 Farm Bill amended the Rural Electrification Act of 1936 by adding a 

new Title VI which established a Broadband Direct and Guarantee Loan Program 

(Broadband Program) in RUS. The RUS Broadband Program plays a critical role in 

implementing the President’s initiative to make access to broadband technology 

available to every American by 2007. OGC furnishes all legal services necessary to 

establish and maintain this program. Since the beginning of this program in February 2003, OGC has furnished all legal assistance needed by RUS in approval of 

all loans. During fiscal year 2005, OGC improved the legal documentation packages 

necessary to protect the government’s financial interests in these transactions. During fiscal year 2005, OGC began assisting RUS and DOJ in collecting obligations 

from telecommunications borrowers aggregating approximately $50 million. The 

bulk of these obligations to the Broadband and Internet Services Programs were established as pilot programs in 2001. The volume of pilot projects in legal collection 

is expected to continue growing in fiscal year 2006 and carry over into fiscal year 

2007 as an increasing number of pilot projects default. 

The 2002 Farm Bill also established a new guarantee program under Section 

313A of the Rural Electrification Act which provides for RUS to issue guarantees 

of bonds and notes issued by lenders to electric cooperatives. OGC assisted RUS in 

developing the regulations to implement this new program. OGC provided substantial legal assistance to RUS in developing the legal documentation that enabled 

RUS to deliver its first guarantee. OGC efforts to provide legal support to RUS for 

administering these guarantee agreements will continue into fiscal year 2007. 

In addition to the new Broadband Program, OGC is providing legal services to 

support several other new RUS initiatives. OGC also supports the RUS mission by 

providing legal services to RUS that enable the agency’s participation in the Rural 

Telephone Bank (RTB). During fiscal year 2005, RTB’s demand for OGC legal services to support the process of dissolving the public/private RTB rose dramatically. 

As proposed in the 2007 President’s budget, RTB is expected to be dissolved by fiscal year 2007. However, the complex process of winding up the affairs of RTB is 

expected to continue to place significant demands on OGC legal resources beyond 

the dissolution and distribution of RTB stock proceeds to the shareholders that is 

scheduled to occur during fiscal year 2006. 

Congress recently amended the Rural Electrification Act of 1936 to add new authority for RUS, in collaboration with the Department of the Treasury, to extend 
55 

the maturities for outstanding loans associated with power plants and transmission 

lines which have been determined to have longer useful lives, e.g. in the case of a 

nuclear plant whose license has been extended by the Nuclear Regulatory Commission (NRC) for an additional 20-year term. The documentation and procedures for 

implementing this new authority, which also involves assessing a fee for this service, will need to be developed. OGC anticipates this program will be used extensively during fiscal year 2007. 

OGC continues to provide significant assistance in the area of Federal crop insurance. OGC supports DOJ in defending several multi-million dollar lawsuits brought 

by insured farmers and companies reinsured by the Federal Crop Insurance Corporation (FCIC). These suits involve a wide variety of issues government committed 

an error or omission as to its 2000 sugar beet policy. OGC also is providing a great 

deal of support to the Risk Management Agency (RMA) with regard to the financial 

collapse and liquidation of one of its largest insurance providers, implementation of 

new risk management programs developed by the private industry, and responding 

to new and emerging diseases and the spread of existing diseases. OGC also is assisting RMA’s development of a new combo policy that incorporates the provisions 

of the actual production history and various revenue plans of insurance into a single 

policy, and updates of numerous other crop insurance policies. 

Implementation of the Agriculture Risk Protection Act of 2000 continues to increase the responsibilities of RMA and OGC. Compliance efforts have included the 

development of administrative disqualification, suspension, and debarment actions 

against producers, agents, loss adjusters, reinsured companies and the update of associated regulations. OGC also is assisting RMA’s development of conflict of interest 

requirements for reinsured companies, agents and loss adjusters and reviewing administrative actions to alleviate fraud, waste and abuse in the program. 

OGC continues to work with Department officials to reduce regulatory burdens 

and eliminate obsolete and unnecessary regulatory requirements, particularly in the 

areas of rural development, farm, and utility lending. Increased OGC assistance has 

been required in the defense of several significant civil rights actions against FSA 

and RHS and the continued implementation of the Pigford consent decree. We are 

assisting RHS and FSA in streamlining and rewriting loan-making and servicing 

regulations for the Guaranteed Single Family Housing Loan Programs, the Community Facilities Loan and Grant Programs, and the Farm Loan Programs. Our efforts 

on these long-range projects will continue into fiscal year 2007. 

NATURAL RESOURCES

OGC continues to provide substantial legal assistance related to Forest Service 

(FS) land management planning and program area compliance with environmental 

and administrative laws and regulations. Litigation involving agency compliance 

with the National Environmental Policy Act (NEPA), the National Forest Management Act (NFMA) and the Endangered Species Act (ESA) continues apace, with approximately 170 cases pending at the end of fiscal year 2005, the same level as the 

previous year. OGC anticipates this level of litigation to continue or increase. Examples of litigation regarding program matters and regulatory actions include litigation related to the National Fire Plan, the State Petition Rule regarding roadless 

areas, the Planning Rule, the Northwest Forest Plan, the Sierra Nevada Framework 

and the Healthy Forest Restoration Act. Project level litigation involves among other 

things, timber sales, grazing permits, and special use authorizations. 

OGC has provided extensive assistance regarding the preparation and defense of 

the FS’s 125 Land and Resource Management Plans. Significant legal services were 

provided in association with development of interim direction and other guidance respecting the agency’s revised NFMA planning regulation. The implementation of the 

revised NFMA planning regulations is underway in forest plan revisions, requiring 

a heavy investment of OGC legal services. OGC continues to devote substantial time 

and resources to assisting the FS with large-scale planning initiatives and project 

preparation. 

USDA and FS efforts regarding the President’s Healthy Forests Initiative and the 

Healthy Forests Restoration Act have also required significant assistance from 

OGC. This initiative will continue to require a substantial investment of OGC time 

and effort in defending agency reforms associated with this initiative. Numerous 

lawsuits are ongoing that challenge these reforms. 

OGC continues to provide legal advice to ensure FS and Natural Resources Conservation Service (NRCS) compliance with Federal administrative laws, such as the 

Administrative Procedure Act, the Data Quality Act, the Federal Advisory Committee Act, the Freedom of Information Act, the Paperwork Reduction Act, the Pri-
56 

vacy Act, Executive Orders, and other authorities governing Federal decisionmaking, which can and do arise in a variety of legal and factual settings. 

In the recreation area, OGC drafted several FS directives implementing a new 

regulation governing management of off-highway vehicle use on National Forest 

System (NFS) lands. OGC provided significant legal advice regarding a final rule 

providing for cost recovery for processing special use applications and monitoring 

compliance with special use authorizations. OGC drafted a memorandum of understanding (MOU) among 5 Federal agencies and 31 shooting sports organizations regarding shooting sports activities on Federal lands. OGC created and updated 

standard special use authorization forms. Additionally, OGC developed FS accessibility guidelines for outdoor developed recreation areas and trails on NFS lands. 

OGC drafted a directive that extended the maximum term for FS outfitting and 

guiding permits from 5 to 10 years. OGC assisted with implementation of interagency recreation fee legislation that supplants the recreation fee authority in the 

Land and Water Conservation Fund Act and the Recreational Fee Demonstration 

Program statute. OGC defended a legal challenge to the FS’s national trail classification system. OGC also provided assistance to the FS in requiring States and 

other non-Federal governmental entities that hold FS special use permits to insure 

and indemnify the United States under those permits. 

In the forest management program area, OGC continued to provide litigation support to DOJ in collecting millions of dollars in damages owed the government by 

defaulting timber sale purchasers. OGC continued to provide assistance to DOJ in 

on-going settlement negotiations of several consolidated cases, at one time numbering twenty, concerning the collection of tens of millions of dollars in principal 

damages plus interest owed the government pursuant to orders issued in two of the 

representative consolidated cases. To date, the government has collected more than 

$16 million in damages from the consolidated cases. 

OGC provided legal assistance on the defense of approximately 25 lawsuits challenging timber sale suspensions, modifications and cancellations, and alleging 

breach of contract for unlawful suspensions, modifications and cancellations seeking 

tens of millions of dollars. Additionally, OGC provided legal assistance in drafting 

contract provisions to limit liability for contractual damages and to clarify the obligations of the parties to the timber sale contract. OGC continued to revise and 

present, twice annually, a 3-day course on Contract Law to train FS contracting officers on various aspects of contract law as it relates to their daily program activities. 

OGC continues to provide legal advice and assistance to FS regarding implementation of stewardship contracts and other forms of agreement which allow the agency to achieve forest resource management objectives in exchange for forest products. 

Under these stewardship contracts, timber is harvested while contractors perform 

services, such as road and trail maintenance, watershed restoration and restoration 

of wildlife habitat. OGC has reviewed and provided advice on the standard contract 

form and is working with the agency to adapt other instruments for use in a stewardship setting. 

As the FS continues to implement OMB circular A–76 on competitive outsourcing, 

OGC has continued to serve as its legal advisor in this effort. OGC anticipates committing significant time and resources to the provision of advice and assistance in 

this area. 

In congressional matters, the Natural Resources Division (NRD) provided extensive assistance in drafting various legislative proposals, including the FS’s partnership initiative and reauthorization of the Secure Rural Schools and Community SelfDetermination Act of 2000, and various FS appropriations provisions. NRD continued to provide assistance in addressing legal issues concerning implementation of 

the administration’s Healthy Forest Initiative and related matters. NRD assisted 

the FS Legislative Affairs staff in preparation for numerous Congressional hearings. 

The Conservation and Environment Division provided similar assistance to the 

NRCS on legislative proposals affecting the agency’s programs and activities. 

OGC has continued to work closely with the FS and the NRCS on real property 

matters. For example, OGC provided legal services to both agencies for the acquisition of lands and conservation easements under various programs, almost 500 easements under the Farm and Ranch Lands Protection Program for NRCS alone in fiscal year 2005. Numerous land transactions requiring the preparation of contracts, 

environmental compliance documents, land titles, and closing documents have occurred during the last year. OGC also provides legal services regarding access and 

rights of way to public lands, title claims and disputes, treaty rights, land appraisals and surveys, and other issues incident to the ownership and management of real 

property assets of the government. The agency’s real estate practice is divided 

among its Washington DC office, which primarily handles legislative, regulatory, 
57 

and policy matters, and the regional and field offices which conduct most of the 

transactional work. 

OGC has provided legal services on a number of significant issues concerning tribal relations. OGC assisted DOJ in the successful defense of suits alleging violations 

of the Religious Freedom Restoration Act and the Establishment Clause regarding 

land management activities in Arizona and Nevada. OGC provided substantial legal 

assistance regarding Federal laws, such as those concerning American Indian treaty 

rights and religious freedom, and historic and archaeological resource protection. 

OGC drafted legislation that would enhance FS tribal relations in areas involving 

access, use of forest products, and reburials of Indian remains. OGC assisted the 

FS in drafting regulations and guidelines to implement the Tribal Forest Protection 

Act of 2004. OGC also participated on FS sacred sites team, which is developing policy to protect tribal sacred sites on NFS land, as required under Executive Order 

13007. OGC conducted trainings for FS employees in the field and Washington D.C. 

office regarding Indian law and tribal issues. OGC has provided legal services on 

a number of significant issues concerning tribal relations. 

OGC counseled FS on a number of wilderness and wild and scenic river management issues, including representation in litigation and issuance of opinions involving commercial outfitter operations, placement of structures and installations, and 

management plan and protection requirements. OGC provided analysis of revisions 

to an agreement between the FS and a fish and wildlife organization representing 

States, addressing jurisdictional issues and agency decision-making authorities. 

OGC assisted with drafting and review of revisions to Forest Service Handbook 

(FSH) provisions pertaining to wilderness management and wild and scenic river 

evaluation procedures. OGC assisted with drafting and implementation of an appeal 

decision involving fishing and boating user conflicts on a designated river in South 

Carolina. 

OGC has provided the FS extensive assistance regarding its cooperative authorities. In support of the FS’s new Partnership Office, OGC drafted sections of the FS 

Partnership guide on ethics and conflict of interest. OGC also assisted the FS in 

drafting revisions to its FSH direction regarding the payment of overhead costs by 

FS cooperators. In addition, OGC advised the FS on drafting of numerous MOUs 

and cooperative agreements. 

In the minerals area, OGC provided extensive assistance to the FS in promulgating a final rule clarifying when authorization is required before a person can 

commence mining on NFS lands under the United States mining laws. OGC has experienced an increase in demand for legal services as the FS undertakes program 

reviews and issues instructions due to the passage of the Energy Policy Act of 2005. 

OGC also provided significant assistance to the FS and DOJ in defending precedential litigation challenging minerals projects on NFS lands. OGC helped the FS by 

analyzing the implication of numerous legislative proposals on the disposal of minerals on NFS lands. 

OGC provided extensive assistance to FS regarding hydroelectric licensing 

projects on NFS lands, including counseling FS regarding conditions on licenses, 

cost accounting requirements, and compliance with Federal Energy Regulatory Commission’s (FERC) licensing procedures. OGC worked with counsel from the Departments of the Interior and Commerce to draft regulations in 90 days providing for 

expedited hearings involving challenges to conditions placed on hydropower licenses, 

as required under the Energy Policy Act of 2005. OGC provided guidance to the FS 

regarding the implications of the Energy legislation on the FS’s conditioning authority, the information required to support filing of such conditions, and the hearing 

process that will occur before the Department of Agriculture’s administrative law 

judges. 

The Conservation and Environment Division (CED) provided legal advice and 

services to the NRCS regarding its programs for natural resource conservation on 

private or other non-Federal farm, range, pasture and nonindustrial forest lands, including programs authorized by the Food Security Act of 1985 and other statutory 

authorities. The 1985 Act, as amended in 2004, authorizes approximately $17 billion 

in conservation funding for the 2002–2014 period. In total, NRCS received more 

than $2.8 3.2 billion for natural resource conservation programs in fiscal year 

20054, leading to an increase in requests for program related legal services. OGC 

provided legal counsel to the agency in developing new or revised regulations, standard form documents, and internal guidance needed to administer several conservation program authorities, such as the Conservation Security Program and the Farm 

and Ranch Lands Protection Conservation Program Technical Service Provider initiative. In addition, the administration of the Healthy Forest Reserve Program was 

transferred to NRCS from the FS in fiscal year 2005. OGC provided assistance in 

reviewing and drafting the regulation implementing that program. The following are 
58 

examples of natural resource conservation program areas where legal advice and 

services were provided by OGC to NRCS and the Department in fiscal year 20054: 

(1) publishing revised regulations for the Conservation Security Program which is 

authorized at $6 billion in program funding through 2015; (2) negotiating and reviewing of cooperative agreements, conservation easements, and restoration agreements and/or providing title review across the easement programs and the purchase 

of several hundred conservation easements under the Grassland Reserve Program, 

the Emergency Watershed Protection Program, the Farm and Ranch Lands Protection Program, and the Wetland Reserve Program (WRP). As an example of the scope 

of thisis work, OGC has assisted NRCS in enrolling 146,111 1,633,3 acres into the 

Wetland Reserve Program through 907 easements or agreements. OGC provides 

title review for easement acquisitions as well as reviewing restoration contracts. It 

is anticipated that this program will continue to grow at an additional acreage increase of 150,000—200,000 acres per year; (3) assisting with enrolling 384,794 acres 

through 1,219 agreements in the Grassland Reserve Program, and 86,209 acres 

through 507 easement in the Farm and Ranch Lands Protection Program; and (4) 

providing training sessions for NRCS employees related to easement program implementation at two national meetings. 

OGC also assisted the Department in reviewing and commenting on regulations 

promulgated by the Environmental Protection Agency (EPA) under the Clean Water 

Act for oil spill prevention and for point source pollution control as they relate to 

farms, and regulations under the Clean Air Act for the particulate matter. In addition, OGC assisted the Department in reviewing the Air Quality Compliance Agreement developed by EPA for animal feeding operations. 

The CED Pollution Control Team (PCT) provided legal services and advice for all 

USDA agency matters related to the Resource Conservation and Recovery Act 

(RCRA) and Comprehensive Environmental Response, Compensation, and Liability 

Act (CERCLA). During the most recent fiscal year, the PCT negotiated with responsible parties to obtain substantial contributions to cleanup costs or cleanup work 

performed by responsible parties of more than $24 million. OGC also provided advice on compliance with pollution control standards concerning USDA programs and 

facilities, and provided advice on hazardous materials liability in real property 

transactions. Specific PCT efforts on behalf of USDA on pollution control matters 

include the following: (1) OGC is continuing to provide legal support to the FS as 

the lead agency for the cleanup of 9 phosphate mine sites contaminated with selenium in Southeastern Idaho where total response costs to address selenium contamination are projected to run as high as $225–450 million. This support includes 

negotiating Administrative Settlement Agreements and Orders on Consent and Consent Decrees with potentially responsible parties that conducted the phosphate mining under the Mineral Leasing Act; and (2) OGC continues to defend against claims 

concerning potential groundwater contamination by carbon tetrachloride used to fumigate grain at multiple former CCC grain storage facilities. OGC will continue to 

represent CCC in negotiating cleanup action at these affected sites. Such settlements will ensure appropriate response actions are taken to remediate aquifer contamination. 

With the passage of the Forest Service Facilities Realignment and Enhancement 

Act of 2005 (FSFREA), OGC anticipates a significant increase in requests for advice 

from the FS on the disposal of surplus facilities as the FS reduces its operations 

and maintenance costs on surplus facilities by selling them. This new authority, 

which provides that an unlimited number of administrative sites may be conveyed, 

will require greater OGC allocation of effort to ensure that the facilities are transferred from Federal ownership in accordance with the necessary CERCLA Section 

120(h) requirements. 

GENERAL LAW DIVISION

The General Law Division (GLD) provides legal services to all agencies of the Department concerning those areas of law that apply generally to all agencies of the 

Federal Government. These services include, but are not limited to, the determination of claims filed under the Federal Tort Claims Act, personnel and labor matters, 

procurement, grants, fiscal law issues, and reviewing annually hundreds of Freedom 

of Information Act (FOIA) and Privacy Act appeals, each involving hundreds of 

pages of documents, in order to insure that the various agencies of the Department 

do not release or withhold documents inconsistent with applicable law. In addition, 

GLD attorneys assist DOJ with any litigation that arises in these and other areas, 

and represent the Department before the USDA Board of Contract Appeals and the 

Merit Systems Protection Board. 
59 

GLD also serves as legal counsel on program matters to specific client agencies 

in the Research, Education, and Economics (REE) mission area as well as Departmental Administration and staff offices such as the Office of the Chief Financial Officer (OCFO), Office of the Chief Information Officer (OCIO), the Office of the Chief 

Economist (OCE), and the National Appeals Division. As program counsel to the 

REE mission area, GLD commits significant resources to the interpretation of REE 

program authorities, review of proposed agreements, and counsel regarding the special relationship of the Department with land-grant colleges and universities. As an 

example of work for staff offices, GLD has worked closely with in drafting item designation and labeling rules for the Federal Biobased Products Preferred Procurement Program that will be published in 2006. 

During the past fiscal year, GLD worked closely with employees and officials of 

APHIS and other Departmental officials regarding the confidentiality and releasability issues posed by the creation of a National Animal Identification System 

(NAIS). Since the Secretary announced that the NAIS should be maintained as a 

private system that can be accessed by State and Federal officials, we continue to 

be involved in advising APHIS regarding the potential applicability of FOIA to 

records in a privately maintained system. In connection with the BSE surveillance 

program, GLD also provided APHIS with extensive support with respect to interpretation of agreements and procurement contracts for equipment and sample collection, including defense in protest litigation. 

Also during the past fiscal year, GLD attorneys provided significant legal resources advising policy officials on election reform for FSA County Committees pursuant to section 10708 of the Farm Security and Rural Investment Act of 2002. GLD 

continues to advise FSA regarding various issues related to the county committee 

election process, as well as proposed regulations implementing the process. 

GLD provided extensive advice to OCFO in the past year with respect employment matters related to the reduction in Thrift Savings Plan work and with respect 

to the evacuation of the National Finance Center from New Orleans due to Hurricane Katrina. GLD also worked closely with the Office of Procurement and Property 

Management and other agencies in providing support for procurement and other response and recovery actions taken in response to Hurricanes Katrina. 

GLD continues to provide legal advice, and contract protest litigation defense, for 

the consolidation of Federal agency recreational reservation systems into the USDA 

FS and United States Army Corps of Engineers National Recreation Reservation 

Service as part of the Recreation One Stop Initiative. GLD also defended multiple 

protests against the FS award of 5-year national contracts for catering services for 

firefighters. 

LITIGATION DIVISION

Litigation Division attorneys, in cooperation with attorneys from DOJ and other 

divisions in OGC, presented USDA’s position in appellate courts. These efforts included providing assistance to the Office of the Solicitor General and DOJ counsel, 

who represented USDA before the Supreme Court in Veneman v. Livestock Marketing Association, arguing that Congressionally-mandated assessments for generic 

advertising for beef research and promotion programs do not violate the First 

Amendment speech rights of cattle producers who disagree with the content of the 

advertisements. The Supreme Court issued an opinion which agreed with the position taken by the Department. In addition, our attorneys assisted DOJ attorneys in 

presenting, in the Courts of Appeals and the Supreme Court, arguments in cases 

addressing similar programs for pork and dairy products, which also have now been 

successfully resolved. 

The Litigation Division assisted DOJ attorneys in winning a reversal by the Sixth 

Circuit of an adverse district court decision invalidating the Attorney General’s decision pursuant to the Westfall Act, 28 U.S.C. 2679(d)(1), to certify that a FS employee was acting within the scope of his employment when the employee denied 

that the allegations of the plaintiff’s claim were true; and also assisted DOJ in representing the Secretary before the District of Columbia Circuit in a case addressing 

whether a party can receive attorneys’ fees and costs under the Equal Access to Justice Act when the party has won a preliminary injunction against the United States, 

but not a final decision on the merits of the lawsuit. Litigation Division attorneys 

also assisted DOJ in representing the Secretary before the Federal Circuit in a case 

addressing the basis for a contract default termination and the subsequent award 

of damages to the contractor; and assisted DOJ in defending before the First Circuit 

the Secretary’s National Organic Final Rule, 7 C.F.R. Part 205, promulgated pursuant to the Organic Foods Production Act of 1990, 7 U.S.C. §§ 6501–6523. In addition, actions on other cases handled by Litigation Division attorneys include: (a) the 
60 

District of Columbia Circuit upheld the authority of the Department to interpret 

legislation and set interest rates for sugar loans; (b) the District of Columbia Circuit 

upheld the Secretary’s adverse administrative action against a company licensed 

under the PACA after an employee of the company was convicted of criminal 

charges related to inspections of the company’s produce; and (c) the Sixth Circuit 

upheld the Secretary’s administrative action against a horse trainer found to have 

violated the Horse Protection Act, 15 U.S.C. §§ 1821–1831. 

LEGISLATION DIVISION

During fiscal year 2005, OGC reviewed approximately 260 legislative reports on 

bills introduced in Congress or proposed by the Administration, and cleared for legal 

sufficiency written testimony of approximately 380 witnesses testifying on behalf of 

the administration before Congressional committees. The Division provided extensive assistance to USDA policy officials in drafting and analyzing legislative proposals and amendments, and coordinated the legal review for USDA in the clearance of legislation and ancillary legislative materials. The Division drafted or provided technical assistance in the preparation of bills and amendments for the Secretary, members of Congress, Congressional committees, Senate and House Offices 

of Legislative Counsel, and agencies within USDA, including the: (1) Agriculture, 

Rural Development, Food and Drug Administration and Related Agencies Appropriations Act for fiscal year 2006, Public Law 109–97; (2) Emergency Supplemental 

Appropriations to Address Hurricanes in the Gulf of Mexico and Pandemic Influenza, 2006, Division B, Department of Defense Appropriations Act for fiscal year 

2006, H.R. 2863; (3) Deficit Reduction Act of 2005, S.1932, H.R. 4241; and (4) legislation to protect the confidentiality of information collected in the developing Livestock Identification System. 

CIVIL RIGHTS

For over 8 years, USDA has engaged in massive efforts to reform its civil rights 

performance. Critical to the achievement of these goals was the creation, in 1998, 

of the Civil Rights Division (CRD) within OGC. Recently, the Civil Rights Division 

reorganized into two distinct divisions; the Civil Rights Litigation Division (CRLD) 

and the Civil Rights Policy, Compliance and Counsel Division (CRPCCD). Staffed 

with attorneys with specialized expertise in civil rights and Equal Employment Opportunity (EEO) law, CRLD and CRPCCD maintain an extraordinarily diverse 

workload servicing the civil rights needs of the Secretary and USDA’s agencies and 

staff offices. 

CRLD’s litigation duties include 5 active program class actions in Federal District 

Court and 8 active employment class actions, most of which are pending before the 

Equal Employment Opportunity Commission (EEOC). The requested damages in 

these class actions total over $45 billion. In addition, CRLD anticipates adding at 

least 1 new employment class action in the coming year to its litigation workload. 

USDA continues to implement the April 14, 1999, consent decree in Pigford v. 

Johanns, orginally, Pigford v. Glickman (Pigford). The Pigford complaint was filed 

in 1997 on behalf of African American farmers alleging racial discrimination in farm 

lending and benefit programs. The consent decree provided a framework which assigned tasks and time frames to specific parties to resolve the claims. Under the 

Consent Decree framework, claimants determined by the Facilitator to be members 

of the class could choose one of two ‘‘tracks’’ for processing their claims. 

Most claimants have chosen the more streamlined Track A which allows the 

claimant to submit a claim form upon which the Adjudicator issues a decision. A 

successful Track A claimant may receive a blanket payment of $50,000, plus loan 

forgiveness. Under Track B, those who believe they have evidence of extreme wrongdoing go before an Arbitrator to seek larger damages. 

As of January 31, 2006, 64 percent of the 22,244 Track A claims submitted to the 

Adjudicator were decided in favor of claimants. The government has paid approximately $685 million to 14,297 prevailing Track A claimants. In addition, USDA has 

provided approximately $22 million in debt relief to over 1,341 prevailing claimants. 

CRLD has taken the lead in ensuring that USDA meets its commitments under 

the consent decree, by coordinating the production of relevant documents, providing 

necessary legal analyses, and ensuring USDA’s compliance with Adjudicator and Arbitrator decisions. CRLD is working with FSA and the DOJ to develop timely and 

appropriate government responses to claims filed by eligible farmers. CRLD also 

plays a major role in the appeals process, which allows petitions to a Monitor to 

reevaluate claims. 

Key to settlement of the Pigford action was the 1998 enactment of the waiver of 

the Equal Credit Opportunity Act’s statute of limitations that allows farmers with 
61 

long-standing discrimination complaints to have their claims finally heard. CRLD 

and OGC field offices have represented USDA in over 130 cases in which a hearing 

was requested; the vast majority were dismissed on motions filed by OGC. With respect to farmer discrimination claims not covered by the Pigford settlement, CRLD 

works with the USDA Office of Civil Rights (CR) to ensure that all claims receive 

expeditious and fair consideration, within the bounds set by applicable law. 

CRLD also coordinates USDA’s defense in 4 other program class actions in Federal District Court. These cases include 3 class actions, Keepseagle v. Johanns, Garcia v. Johanns, and Love v. Johanns, all originally filed by the same attorneys that 

initiated the Pigford litigation. To date, the Keepseagle case is furthest along in litigation and may be the best predictor for the outcome of the other cases. Despite 

a vigorous defense, District Judge Emmet G. Sullivan certified the Keepseagle class 

to include all Native American farmers or ranchers, who (1) farmed or ranched between January 1, 1981 and November 24, 1999; (2) applied to the USDA for participation in a Federal program during that time period; and (3) filed a discrimination 

complaint with the USDA individually or through a representative during the time 

period. The Keepseagle case is proceeding through lengthy and comprehensive discovery on the merits which has, to date, resulted in the production of nearly 400,000 

pages of documents to the Plaintiffs. 

The Garcia and Love class actions were brought on behalf of Hispanic farmers 

and female farmers respectively, alleging discrimination in the administration of 

farm credit and disaster benefit programs. In September 2004, the D.C. District 

Court denied class certification in both cases. However, in December 2004, the U.S. 

Court of Appeals, D.C. Circuit, granted Plaintiffs’ petitions to file appeals. In July 

2005, the Circuit Court issued a consolidated briefing schedule for both cases that 

concluded in November 2005. Oral argument was held on February 6, 2006. On 

March 3, 2006, the Court of Appeals for the D.C. Circuit affirmed the District 

Court’s denial of class certification in Love. 

The remaining program class action is Chiang v. Johanns, filed on behalf of all 

black citizens or qualified aliens who reside in the U.S. Virgin Islands alleging discrimination in the access to and participation in RD programs for credit, assistance, 

training, educational opportunities, housing, or home ownership. The Chiang class 

was certified by the District Court in the Virgin Islands and is proceeding on the 

merits. In response to the government’s appeal of class certification, the Third Circuit limited the class definition to Virgin Islanders. In September 2005, the parties 

participated in mandatory mediation but were unable to resolve the litigation. The 

parties are now proceeding through discovery on the merits. 

CRLD provides primary litigation defense services in all employment class actions 

pending before EEOC. Since August of 2000, as a result of CRLD’s vigorous defense, 

EEOC has dismissed over 20 class action employment complaints for failing to meet 

the legal standards for class certification. 

Currently, CRLD is involved in 8 active employment class actions. To date, CRLD 

is actively litigating 4 of these complaints. CRLD seeks to resolve those matters 

that, upon careful review, indicate a need to address apparent underrepresentation 

or policies that may have an adverse impact on a particular group of employees. For 

example, CRLD has assisted DOJ in negotiating settlements in 2 major class actions 

filed by employees of the FS Region 5, Donnelly and Regional Hispanic Working 

Group (RHWG)/Brionez. The Donnelly consent decree expired in January 2006. 

There was a contempt hearing in RHWG/Brionez on February 10, 2006. The Court 

issued a brief order the next day, to be followed by a comprehensive opinion, which 

extended the Settlement Agreement for one year. 

CRLD also carries a full docket of over 50 complex and politically sensitive individual Equal Employment Opportunity (EEO) cases involving either issues of first 

impression or disputes over positions at the highest levels within USDA. CRLD litigates these cases on behalf of USDA without the assistance of DOJ. Moreover, recent years have seen a dramatic increase in the demand for CRLD’s litigation services in a number of formal individual EEO complaints previously defended by nonattorney agency personnel staff. CRLD’s litigation responsibilities also have expanded as a result of several changes in the law, including a 1999 Supreme Court 

decision holding that EEOC possesses the legal authority to require Federal agencies to pay compensatory damages in EEO cases. 

In addition to its primary litigation responsibilities, CRLD currently assists DOJ 

in the litigation of over 50 additional individual civil rights cases in both the employment and program areas pending in Federal district court. Although the Assistant U.S. Attorneys (AUSAs) and/or DOJ attorneys serve as lead counsel, CRLD is 

receiving an increasing number of requests for comprehensive litigation support, including drafting answers, dispositive motions, discovery responses; deposition participation; and witness preparation. 
62 

The newly created CRPCCD provides advice and counsel to agency components 

on civil rights issues, including: (1) completing an impressive number of legal sufficiency reviews and legal opinions each year; (2) providing daily, informal legal advice to the client agencies; and (3) providing periodic training on civil rights issues. 

CRPCCD is also responsible for providing advice and assisting in the early resolution of informal EEO matters. 

In an average month, CRPCCD staff write at least 25 formal and informal opinions in response to, or in anticipation of, inquiries on a wide variety of civil rights 

topics. This advice is an essential element in CRPCCD’s proactive relationship with 

its client agencies. CRPCCD anticipates that the demand for these services will only 

intensify. For example, CRPCCD continues to receive an increasing number of requests for advice on reasonable accommodation for employees with disabilities and 

program accessibility for customers with disabilities. In addition, CRPCCD receives 

numerous inquiries regarding the proper interpretation and application of Executive 

Order 13166 requiring agencies to ensure that customers with limited English proficiency have access to USDA programs. CRPCCD’s formal policy responsibilities are 

on the rise as well. CRPCCD has been working with the Assistant Secretary for 

Civil Rights to develop a Departmental Regulation on alternative dispute resolution 

(ADR). In addition, CRPCCD reviews civil rights impact analyses of all major reorganizations throughout the Department. 

In recent months, CRPCCD has also received an increasing number of requests 

for training presentations. CRPCCD has provided training to numerous agencies on 

issues such as reprisal, ADR, and reasonable accommodations. 

FISCAL YEAR 2007 BUDGET REQUEST

For fiscal year 2007, the budget proposes a total of $40,647,000 for OGC salaries and expenses. This is an increase of $1,690,000 over the adjusted base for fiscal year 

2006. This amount includes $515,000 to maintain staffing levels and $791,000 for 

pay costs. This critically important increase is needed to support and maintain current staffing levels to meet the current and projected increased demand in delivering predecisional legal advice, training, and litigation legal services to agencies. 

Approximately 92 percent of OGC’s budget is in support of personnel compensation, 

which leaves no flexibility for absorbing promotions, within-grade and pay cost increases. An increase of $384,000 and 5 staff years is requested to support significant workload increases in several areas of the office. Attorney staff years are needed to assist 

APHIS in addressing major animal health and food safety issues of the Department. 

There is a strong demand to add an additional attorney to support the farm loan 

and crop insurance programs, as well as an additional attorney to face the challenges in the areas of contracts, procurement, and outsourcing of Federal functions. 

Additional legal resources are also needed in OGC’s Kansas City office in the areas 

of farm and loan programs, bankruptcy, risk management and contract law and also 

in OGC’s San Francisco office to handle class action EEO complaints arising out of 

the activities of the FS Region 5 headquartered in Vallejo, California. 

CLOSING

That concludes my statement. We very much appreciate the support the Subcommittee has given us in the past. Thank you. 

Senator BENNETT. Thank you very much, Mr. Secretary. 

We have been joined by Senator Burns, who has another commitment that is going to take him out of here in about 3 minutes. So 

if there is no objection, I would yield my time to Senator Burns before we turn to Senator Kohl. Then we will go to Senator Craig, 

and I will come in at the end, rather than the beginning. 

Senator BURNS. Did you ask Senator Kohl about that? 

Senator BENNETT. Well, I said if there is no objection, and I 

didn’t hear a grunt from him. 

Senator BURNS. I am not going to upstage my Ranking Member, 

I will tell you that. I know where I am on the pecking order. 

So I have just got a couple of comments. And Mr. Secretary, 

thank you very much and all the work that you have done. And 

I think you know out of this $97 billion, or whatever it is number 

that we got, I was interested in how much of that money goes out 
63 

in direct payments to farmers in subsidies, and only around $25 

billion. 

We do a lot of things that they said, well, you spend $97 billion 

on farmers. Well, we don’t spend $97 billion on farmers. There are 

a lot of programs that are very, very important, and conservation 

being one of those and a lot of things. And some of those dollars 

do make it down to agriculture that is not counted directly to the 

commodity support. 

Mr. Secretary, we are still concerned about the Japanese beef 

thing. I know you continue to work on that, and any good news 

that you give us would be welcome. If you have got bad news, well, 

we will just let that slide. But I would want some comment on that. 

And then the second question, we are having difficulties with 

high energy prices, and we can’t get our arm around our production 

costs. Energy being one of those, both in our fuels, in our fertilizer 

with natural gas being high and being the feed stock, the fertilizer. 

We see another increase coming in fertilizer. We hear our producers are cutting back about a third of the fertilizer that is going 

on the ground this year because they just can’t afford it, and that 

concerns me. 

And your move to be a producer kind of advocate, the EPA again 

over there—I wish you would have somebody to take a look—because by changing definitions of what is happening that the EPA 

changes has a huge impact on our producers, especially in confined 

feeding and the way we handle chemicals and the way we do 

things. 

A change of definitions has a huge impact on the costs we are 

having on the farm and ranch. And that appears to be happening 

over there, and we have got to take note of that and to work very 

closely with those groups that the impact on agriculture and our 

ability to produce food and fiber of this country is very, very important. You might want to comment on that. 

And then the third one is that with the new technologies, I think 

we are going to put agriculture in the energy business. That was 

the drive in 2002. It was the drive in 2005, when we passed the 

energy bill because of renewables and alternative fuels, and it 

seems to be working. And I think we are going to have to have a 

strong title in the 2007, especially with the advances we have made 

in technology, in plant residue, in the biomass area. 

We know that the production of ethanol and biodiesel is going to 

be very important. So agriculture is going to be in the energy business. And it needs to be because we need to increase our independence away from foreign oil, and if we can get our capacity of those 

alternative fuels up, we can deal with that along. 

And the other night, we were on a television show on RFD–TV 

with Secretary Dorr. We continue in the rural communities, the 

cornerstone to their growth is still broadband deployment and telecommunications because we cannot compete in the national economy or the international economy unless we can move massive 

amounts of information from our smaller towns and rural villages. 

So you might want to comment on that, and the Japanese situation, and then also the situation of working with the EPA to make 

sure that these definitions don’t have a high impact on us. 
64 

BEEF EXPORTS TO JAPAN

Secretary JOHANNS. In reference to Japan, I can assure you I 

don’t have any bad news. So I can start there. 

Let me also say, Senator, how much we appreciate your tenacity 

relative to this issue. We can explain that to the Japanese, but it 

speaks volumes when House Members and Senators publicly explain how important this market is and the need to have it reopened. So we appreciate that. 

The report, regarding the ineligible shipment of veal to Japan is 

done. We did a very thorough investigation. We even went the 

extra step and invited the inspector general to take a look at the 

findings in the report. There were actually two investigation reports submitted to Japan. We have been receiving questions from 

Japan. About half of those questions are answered already. We are 

not taking any extra time. We are getting those questions answered and back on their desk. 

This weekend, I will have an opportunity to meet with Minister 

Nakagawa, who is my equivalent in Japan. I am very anxious to 

sit down with him. Our report has 475 pages. There was a lot of 

work put into it and I can assure you what we found out was that 

there was no attempt to hide anything here. There was just simply 

confusion on both sides. 

We had an e-mail trail that showed that the person making the 

order from Japan was confused about what was authorized. It is 

listed right there in the e-mail. And the plant was confused also. 

Now I don’t offer that as an excuse, but we have a rather complicated agreement with Japan. So I am optimistic. They are probably going to have some additional inspection requirements. That 

is not a big issue for us. We will facilitate their requirements and 

get them in plants. My goal is to get this beef market reopened 

again just as quickly as we can. 

I don’t really see any reason for extensive delay. We have got the 

investigation done. We can answer their questions. We will meet 

their requirements, and I think it is time to get beef moving back 

to Japan again. 

RENEWABLE ENERGY

In terms of renewable energy, I agree with your assessment. I do 

believe that as we think about farm policy for the future, a strong 

energy component for agriculture is critical. The news is very good. 

We estimate 22 percent of corn crops will be processed into ethanol by 2010. It is currently 14 percent. So we just continue to see 

dramatic increases there. 

Biodiesel, soybeans to biodiesel. Again, we just continue to see 

very dramatic growth in that area. There are also other biomass 

products that aren’t as far along. And then there are still other 

areas, like wind energy to be developed. 

In terms of your comments about working with the EPA, we have 

got a good working relationship with them. I will pass on to them 

whatever issues you have on your mind, and I would be happy to 

facilitate a meeting, too, where we can sit down with you or other 

members of this subcommittee and deal with those issues. 
65 

ENERGY COSTS

Energy costs are a big issue among farmers and ranchers. We 

heard about it in our Farm Bill forums. We do have some really 

promising things going on out there. We designed an energy strategy, and we have had a good response to it. It is an online system 

in part, so producers can figure out how they might save some energy costs, some nitrogen application costs, and then I directed the 

USDA to do everything we can to move money that we have available into this area of energy assistance and provide grants and 

loans to try to help with projects related to energy. 

I wish I could tell you that I could bring the price of a barrel of 

oil down to $35, but I probably can’t. But everything we can do at 

the USDA we have been doing to provide energy assistance. 

Senator BURNS. If we could get a bushel of wheat to $6, you 

could offset it on that end, too. 

Secretary JOHANNS. That solves the problem, too, doesn’t it? 

Senator BURNS. You know, there are a lot of ways to offset this. 

I thank the Chairman for his courtesy, and thank you, Senator 

Kohl. I appreciate that very much. 

Senator BENNETT. Senator Kohl? No, you go ahead. I will take 

Senator Burns spot. 

Senator KOHL. All right. Thank you, Mr. Chairman. 

DAIRY POLICY

Mr. Secretary, dairy annually generates over half of Wisconsin’s 

cash farm receipts, and last year about $20.5 billion of economic activity in our State. So anything that disproportionately affects 

dairy and cheese disproportionately affects our entire State. 

I am sure you can appreciate then my profound disappointment 

that the President’s budget seems to have it in for dairy. First, it 

seeks a 5 percent across the board reduction of all commodity payments to farmers. Second, it re-proposes a statutory mechanism for 

adjusting the butter/powder tilt in the dairy support program, the 

practical effect of which will reduce value to producers. And third, 

it recommends a 3 cent per hundredweight farmer assessment on 

all milk, which would have totaled about $7 million for Wisconsin 

producers last year. 

Earlier this week, a bipartisan group of senators joined me in a 

letter to the Senate Budget Committee urging rejection of this attack on dairy farmers. 

Now I know you do not put together the entire budget, but does 

it make sense, Mr. Johanns, to you in a budget that includes billions of dollars in tax cuts for investors that you are being asked 

to fight for a tax increase on dairy farmers? And is that really the 

policy that you are asking us to support? 

Secretary JOHANNS. I support the President’s budget, as you 

might expect, Senator. And that probably comes as no surprise to 

anybody in this room. 

But let me, if I may, just try to identify some of the things that 

have stood out for me as I have worked on what is really my first 

opportunity to be involved in the budget process from start to finish. 
66 

I hear your comments about the tax decreases, and what I would 

offer is that if you look at the revenue situation, revenues actually 

increased for the United States. What you are seeing is that those 

tax decreases, which really did apply across the board, improve the 

economy. 

I have worked around government budgets long enough to know 

that there are number of factors that you consider in trying to put 

a budget together and trying to decide what level of taxation you 

should place upon your citizens. If the level of taxation placed upon 

citizens is too high, you are going to depress the economy, whether 

that is a State economy or a national economy. What we saw is 

revenues actually increased, and our budget people can give you 

specific numbers on that. 

[The information follows:] 

As a direct result of this strong economic growth, receipts to the Treasury have 

returned to healthy growth in the past 2 years, with increases of 5.5 percent in 2004 

and an extraordinary 14.5 percent in 2005, more than 5 percentage points above the 

projection in last year’s Budget. Growth in corporate receipts in 2005 was an astounding 47 percent. Total receipts reached 17.5 percent of GDP, up from a low of 

16.3 percent of GDP in 2004. The administration projects that receipts will increase 

6.1 percent in 2006 and an average of 5.9 percent annually through 2011. This cautious forecast is far slower than the 14.5 percent growth experienced in 2005, but 

still faster than the projected rate of economic growth. 

REDUCING THE FEDERAL DEFICIT

Secretary JOHANNS. Now in reference to the situation relative to 

dairy, what we were trying to do is figure out a way to make these 

adjustments, whether it is a commodity program or the dairy program, recognizing that we have to deal with the Federal deficit, not 

in a way that picked on dairy, but in a way that we thought was 

fair to commodity programs whether you are a dairy farmer or a 

corn farmer or a soybean farmer. 

That is how we came up with this approach and this formula basically implies that in every area, we are going to make some adjustments to deal with the situation of having to reduce the deficit. 

So that is the philosophy behind it, Senator, and we may disagree on the approach. I hope we share the same goal of recognizing that somehow, some way we have got to deal with the Federal deficit. 

Senator KOHL. One other question, and then I will defer to our 

Chairman. 

COMMODITY SUPPLEMENTAL FOOD PROGRAM

Mr. Secretary, in Wisconsin alone, nearly 700 senior citizens are 

being turned away from the Commodity Supplemental Food Program this year, and well over 5,000 people are going to lose these 

food packages if we eliminate the program, which is what the budget proposes. Nationwide, the budget proposes to stop the CSFP food 

packages that are being delivered to 470,000 people, most of whom 

are seniors. 

Many seniors, estimates go as high as 25 percent participating 

in CSFP, also participate in the Food Stamp Program because their 

Food Stamp benefit is too low to live on. I keep hearing about $10 

a month. So, Mr. Secretary, do you have some advice for these people? 
67 

Secretary JOHANNS. I have some thoughts on the CSFP program. 

It is an interesting program to study, Senator, from this standpoint. This is not a national program. It is a program that exists 

only in 32 States. Two Native American tribes, I believe, have the 

program also. But, it is not even national in terms of the tribes, 

and I believe we also have the program in the District of Columbia. 

The other interesting thing about the program is that even in the 

32 States, it is not a statewide program. It is literally identified for 

certain areas, with certain States left out and certain parts of 

States that are left out. We have included in our budget request 

$2 million for the transition from CSFP to the Food Stamp Program. 

It is our belief that the people that receive the benefits of this 

food box will qualify for some other part of our nutrition programs—Food Stamps, maybe even WIC. We know who these people 

are. Our goal is to reach out and identify them and get them signed 

up for another nutrition program that we have. 

But again, as you study this program, it is a very interesting program. I am not arguing that people who receive these benefits don’t 

enjoy them, but it is a program that never even got implemented 

statewide in the 32 States where it currently operates. We believe 

that with the $2 million transition money, that we can serve these 

people with nutrition programs that we actually have in existence 

across the entire country. 

Senator KOHL. As you can imagine, I am not satisfied with your 

answer, but—— 

Secretary JOHANNS. I understand. 

Senator KOHL [continuing]. I appreciate that very much. And Mr. 

Chairman, it is up to you. 

Senator BENNETT. Thank you very much. 

Senator Craig. Then I will take Senator Burns slot. 

Senator CRAIG. Okay. Thank you. Thank you for that courtesy. 

I have several questions here. I will ask some, Mr. Chairman, 

and submit others for the record. 

MILK INCOME LOSS CONTRACT

Senator Kohl, Mr. Secretary, expressed concern about dairy. As 

you know, Congress recently passed the $1 billion 2-year extension 

of the Milk Income Loss Contract, or milk program, in the budget 

deficit reduction act. 

The administration backed the extension of this subsidy program 

during the budget reconciliation debate this past year. Your 2007 

budget seeks an assessment of 3 cents per hundredweight on milk 

produced by our dairymen in order to save $578 million over 10. 

Additionally, the 2007 budget seeks to reduce milk subsidy payments to dairy producers by 5 percent and to better manage the 

Dairy Price Support Program. 

So the administration backed a billion dollar extension of a discriminatory milk subsidy program. That is how my producers in 

Idaho see it. By law was intended to sunset in 2005. But you know, 

once you create these things, dependency hangs in there, and we 

now believe it is causing overproduction. 
68 

The milk program encourages overproduction. It certainly doesn’t 

encourage movement with the market. So what doesn’t add up 

here? 

Secretary JOHANNS. Well, in the last few months, we have started to pay out again under the MILC program. That is a reflection 

of production up, prices down. I mean, that is, in effect, what kicks 

in with the MILC program when you hit a certain price level. 

We have supported the MILC program. The thought I would 

offer, in terms of that extension, is that the extension tied the program to the life of the Farm Bill and, in effect, joined it with other 

commodity programs that were out there. 

Next year, it is my hope that we will have a debate on farm policy and what farm policy should look like because 2007 is the year 

that we reauthorize the Farm Bill. And I believe it is an opportunity for us to look at all of our programs and make a decision 

about how best to approach them. 

As I explained or offered to Senator Kohl, we have made adjustments to the MILC program. As we looked at the need to deal with 

the deficit, we did not feel that we could leave any program out. 

And so, this was a way of making adjustments in that program 

that we hoped, at least, would reflect the changes that we are making in other commodity programs. 

The wheat growers in the Western part of the United States, for 

example, are going to get 5 percent less if the President’s budget 

is approved. So we basically looked at the MILC program and said 

how do we make an adjustment there that at least reflects what 

we are doing in the other commodity programs? 

But just to summarize, Senator, the thought about the MILC 

program extension was along the lines of if you extend it for the 

life of the Farm Bill, you join it with the other commodity programs in the Farm Bill, and it is in the Farm Bill, where you decide what you want to do with the whole commodity title and farm 

programs in general. 

Senator CRAIG. Mr. Chairman, one last question. And thank you 

for that answer, Mr. Secretary. 

RENEWABLE ENERGY

Section 9006 of the 2002 Farm Bill provides for loans, loan guarantees, and grants to farmers and small businesses for projects 

that use renewable resources to create energy. This provision has 

gotten a lot of attention in Idaho. Some of those loans and guarantees have been provided, and it is working. 

And I think we are all quite impressed with the challenges farmers are stepping up to dealing with animal waste and crop refuse. 

You heard the senator from Montana talk about a variety of aspects of it. You have talked about biodiesel. Cellulose ethanol is 

something that is being looked at now. The President has spoken 

to it in his State of the Union. 

Even though this program is a win-win for agriculture, the environment, and the production of energy at a time when energy production is not adequate—and we all really do believe that a decade 

from now or two or three, American agriculture is going to be a sizable producer of energy for our country—why did you cut that 

budget? It was small to begin with. You cut it from $23 million to 
69 

$10 million. It just doesn’t seem to fit the arguments you have 

placed before this committee. 

Secretary JOHANNS. Senator, let me, if I could, quickly walk you 

through what we have for renewable energy in the budget. The 

2007 budget provides funding to support about $35 million for 

guaranteed renewable energy loans. The estimate for 2006 is $177 

million in loans. However, it is unlikely that that amount will be 

made. 

The 2007 budget provides nearly $8 million to award grants for 

use on renewable energy. This funding is about $3 million less, and 

we acknowledge that. However, the 2007 budget provides about a 

billion dollars in guaranteed loans under the Rural Business-Cooperative Service’s business and industry program. This program can 

be used for financing renewable energy projects. 

So when you pull together the constellation of authority we have 

to assist through loans, guaranteed loans, and grants, it is a substantial, renewable energy package that we submitted to Congress. 

Also, when I was governor of Nebraska, I was the vice chair of 

the Governor’s Ethanol Coalition, and I was the chairman of the 

Governor’s Ethanol Coalition following Governor Tom Vilsack from 

Iowa. One of the things that I talked about during that period of 

time was that the standard of success in renewable energy is when 

it becomes economically self-sufficient, and we should celebrate 

that day. 

Now there is probably a debate about whether we are far enough 

along here. But I will tell you that in the ethanol industry, corn 

to ethanol, it has been a remarkable 12 to 24 months. I mean truly 

remarkable. 

As a governor, I worked on financing for a number of ethanol 

plants, and we just never would have predicted the return on investment that I think you are seeing in some of these areas. Every 

plant is different. Every area is different. But the goal should be 

that we work toward energy production or we work toward economic independence in these projects. In some areas, like I said, it 

has been a remarkable few years. 

When you put all of that together, and you identify and pull together the constellation of what we have available, we think we 

can do some very, very exciting things in the renewable energy 

area, and we look forward to working with your staff and with you, 

sir, to make that happen. 

Senator CRAIG. Well, thank you very much. I think you recognize 

as well as I because you have obviously worked in that field at a 

time when it was almost considered an experimental start-up industry. 

One of the great difficulties we have in agriculture today—or 

anywhere, but especially agriculture—is when a new technology 

comes along, trying to put some capital behind it, to get it out on 

the ground and working so that from there grows changes and evolutions that make it increasingly more efficient. 

Frankly, if Government hadn’t come along and subsidized ethanol when it did, we would not be where we are. And as a result 

of that, while I am not too excited about subsidies, it appears that 

is one that is probably going to work. It is on its own now, and you 
70 

are right. It is all but standing alone, and it gets increasingly efficient and more productive and, therefore, profitable. 

Thank you. 

Secretary JOHANNS. The energy policies of Congress worked. Let 

me just be very clear about that. Sometimes I think we wonder, is 

this going to make a difference? This made a huge difference. 

What you are now seeing across the country is that Wall Street 

has discovered rural America. 

Senator CRAIG. Yes. 

Secretary JOHANNS. There is big debate about that. But quite 

honestly, Wall Street is beginning to realize this is a sound investment. But I will submit that through the efforts of the President 

and Congress, that is what led the way. 

Senator CRAIG. Thank you. 

Thank you, Mr. Chairman. 

Senator BENNETT. Thank you. 

AVIAN INFLUENZA

Mr. Secretary, in your opening statement, you talked about avian 

flu. I would like to focus on that just a little more because I think 

that is one of the things that people who are watching are concerned about. 

In your opinion, how prepared is the United States agriculture 

for an avian flu outbreak? 

Secretary JOHANNS. My opinion, I believe we are well prepared. 

I say that for a number of reasons. One is that the funding, which 

Congress approved, which the President sought, is there, and that 

is helping us do a lot of really good things. 

But the other thing that I will share with you from our standpoint at the USDA, first of all, it is important to remind everyone 

that low path avian influenza is nothing new to the United States. 

It has been here 100 years. Birds have a flu season much like humans do. They pass through it every year. Typically, you don’t even 

notice it. 

High path avian influenza, we have dealt with that, in fact, on 

three occasions. The most recent occasion was in 2004. 

We have a plan in place. We have surveillance in place. We have 

testing in place. As we have worked to expand testing capabilities, 

I can now tell you that we have those capabilities in 32 States, 

with 39 labs approved for AI testing. So we can identify where AI 

is domestically. 

But we feel ready. The other thing I will mention to you, is that 

we are not taking anything for granted. The President has led a 

Government-wide effort in AI. And more specifically at USDA, just 

within the last week, we have tabletopped our response to identify 

any areas where we see weaknesses. We are preparing like avian 

influenza is going to be here. 

Senator BENNETT. Have you used the $91 million in the supplemental? 

Secretary JOHANNS. Yes, we are using those funds in a number 

of ways. One is we are assisting overseas. When foreign governments ask for technical assistance, part of that money helps us do 

that. We send people out to offer technical assistance. We work 

with our international partners. 
71 

As you might expect, some countries are better prepared than 

others. It is just simply a case where some countries don’t have the 

infrastructure or the resources to be very well prepared. That is 

not true in other countries. So it is a little bit of a mixed bag. 

We are also using that money for additional surveillance and research to enhance our capability to respond to avian influenza. We 

can give you a very detailed summary of how the money is being 

allocated. 

[The information follows:] 

PLANNED USE OF PANDEMIC INFLUENZA FUNDS

With $71.5 million appropriated to it and an additional $8.8 million from the Office of the Secretary, APHIS plans to devote funds to both international and domestic efforts. These include: 

—$17.8 million for overseas in-country technical training and veterinary capacity 

building; —$16.4 million for domestic wildlife surveillance in migratory flyways and wildfowl; —$26.8 million for domestic surveillance and diagnostics (e.g., State cooperative 

agreements for surveillance in live bird markets, upland game and waterfowl, 

commercial poultry operations; laboratory support; anti-smuggling efforts; training; outreach; other activities); —$19.3 million for domestic emergency preparedness (e.g., supplies and animal 

vaccines for the National Veterinary Stockpile (NVS); development of scenario 

models to direct efficient NVS acquisitions; preparedness training for State Incident Management Teams and the Veterinary Reserve Corps; related efforts). With $7 million appropriated to it, ARS plans to conduct research as follows: 

—$3 million for improved vaccines and mass immunization in domestic and wild 

birds; —$1 million for environmental surveillance methodology of avian influenza (AI) 

in commercial and wild birds; —$2 million for complete genome sequencing of outbreak AI viruses; and, 

—$1 million for biosecurity against virus transmission between and within farms. 

With $1.5 million appropriated to it, CSREES plans to conduct expanded AI surveillance in the Pacific flyway and associated activities. 

The following funds from the Office of the Secretary will be used for other needs: 

—$1.8 million for FAS to support the FAO, provide complementary overseas foreign surveillance, diagnostic, and other support; —$0.5 million for the Office of Communications to develop a variety of brochures, 

posters, videos, and for other initiatives to effectively communicate with the 

public; —$0.2 million for FSIS to develop a highly pathogenic AI module for its Non-routine Incident Management System to enable the agency to respond to an AI detection effectively and in a timely manner; and, —$0.1 million for Departmental Administration to revise its Continuity of Operations Plan to help ensure the Department maintains essential functions and 

services in the event of significant and sustained absenteeism. 

Secretary JOHANNS. So we have identified the key areas, and we 

have allocated those funds in a way that will boost our response 

in those areas. 

Senator BENNETT. Very good. This is a nitpick, but it is the kind 

of thing that people pick up. I will use the inflammatory language, 

and then let you get to the more specifics. But this is the kind of 

thing that makes for headlines. 

CENTRAL ADMINISTRATION FUNDING

You have cut discretionary funding for rural development by 13 

percent. You have cut conservation by 20 percent. You cut research 

by 14 percent. But the spending for central administration has 

gone up by 12 percent. Now when I look at the chart with all of 

that on it, I realize that that is the smallest base. So adding $63 
72 

million to central administration is, percentage wise, a pretty big 

jump. 

But I hope you can explain to the committee why you need to go 

up in central administration and how the taxpayer is going to get 

a return for that over the long term in view of the other cuts that 

you have recommended? 

Secretary JOHANNS. Mr. Chairman, that is a really excellent 

question, and I must admit I did not analyze the individual areas 

that way in terms of central administration. 

Senator BENNETT. Neither did I, but I have a very eagle-eyed 

staff. 

Secretary JOHANNS. And I have got a very eagle-eyed budget director, and I am going to let him offer a few thoughts on why you 

are seeing that impact. 

Mr. STEELE. Thank you, Mr. Secretary. 

Mr. Chairman, we have included in our budget pay costs for all 

of our agencies, according to what the President is going to request. 

I think it is a 2.2 percent increase in pay costs across the board 

for all agencies. 

The other area in administrative costs that we are dealing with 

is IT expenditures. Throughout the Department of Agriculture, we 

have a number of systems in the Department that need enhanced 

funding. We really appreciate the funding that the Committee has 

provided us in the past to help modernize these systems. But there 

is still a large number of systems that we are asking for increased 

funding to get them up to standard. 

One of these areas is in the Farm Service Agency. The Common 

Computing Environment (CCE) has received substantial funding, 

but there are a lot of legacy systems that we have out in the field 

that utilize old software systems. We need to update those and migrate them onto this new Common Computing Environment so we 

can all use them efficiently. 

Throughout the department, we can give other examples of those 

kinds of issues. We also have some issues in the financial area. We 

have to start looking at our foundation financial systems that we 

have. Some of those are outdated, and we have some money requested in the budget to start looking at ways of upgrading these 

financial systems and other operating systems. 

Some of these IT systems were put in place in the 1980s and 

1990s, and you have to refresh them every so often to get them up 

to standard. And there are a number of requests for those types of 

systems throughout the budget as well. 

Senator BENNETT. Give me an example of a financial system. 

Mr. STEELE. Well, we have a central accounting system called 

the Foundation Financial Information System (FFIS). 

Senator BENNETT. Are we talking about Food Stamps, WIC? 

Mr. STEELE. I wouldn’t say that. It is more of a Department-wide 

accounting system, that we use through the National Finance Center in New Orleans. This is where our agencies do procurement and 

other kinds of financial transactions and where accounting records 

are maintained. 

Some of those systems were put in place in the 1990s, and now 

we have new Government-wide standards that the OMB has put in 

place to achieve certain accountability in those accounting systems. 
73 

Our Chief Financial Officer now is investigating ways of upgrading 

our financial systems so that they are up to the Government-wide 

standard. 

Now we are making progress, but we need to augment our fund- ing. There is a request in the budget—I think $14 million or $15 

million—to look into developing a better financial system at the 

Department. 

Senator BENNETT. All right. Senator Dorgan. 

Senator DORGAN. Mr. Chairman, thank you very much. 

Mr. Secretary, welcome. 

Secretary JOHANNS. Thank you. 

WEATHER-RELATED DISASTER ASSISTANCE

Senator DORGAN. Mr. Secretary, last November or December, 

when we finished the emergency supplemental, I was one of the 

conferees. And I offered to the Senate conferees a $1.2 billion disaster aid package, which the Senate conferees accepted. The House 

conferees rejected it, and so we did not accomplish a disaster aid 

package. You, in your statement, said that USDA has made available $2.8 billion to assist those impacted by the hurricanes of which $1.2 billion will be made available to agricultural producers through various programs and so on. I fully support all of that, and a hurricane is devastating to the agricultural producers of that region. 

One community received one-third of its annual rainfall in 24 

hours in the northern part of North Dakota last year, and we had 

a million acres that couldn’t be planted. I was up there recently, 

and the question they asked is why could there not be some sort 

of disaster program for the weather-related disaster that occurred 

there? Illinois has its third-driest year last year since 1895. 

So the question is, we came close to getting it in the conference. 

We did not get it because I was told that the House conferees, at 

the request of the Speaker, rejected it because the administration 

did not support it. 

What is the administration’s position—because we will attempt 

to do this again on the next supplemental, emergency supplemental. What is the administration’s position on a disaster package 

for farmers and ranchers outside of the Gulf Coast who suffered a 

weather-related disaster? 

Secretary JOHANNS. I would offer a couple of thoughts, if I could, 

on that issue. This first thing we would have to see is what is being 

proposed in the bill. But historically, as you know, pre-dating me, 

when disaster bills have come forward, the administration has 

taken a position of providing offsets. 

And as I understand the policy behind that, when the Farm Bill 

was created in 2002 and debate was occurring on what was going 

to be the allocation of funding into that Farm Bill, I think there 

was a look to the history of direct payments made to farmers. And 

the allocation was based upon not only emergency disaster payments that had been made, but in addition, some other ad hoc supplemental assistance payments. 

That is what has led to the issue of offsets. If there is going to 

be a disaster program, it has to be found within the budget of the 

Farm Bill. 
74 

A couple of other things I would offer. In 2000, there was a very 

major reform of crop insurance. Interestingly enough, as we conducted our Farm Bill forums, we did hear from farmers that they 

thought as we went to work on another Farm Bill, there should be 

some effort put into crop insurance and how that process is working. 

And then the other thing I would mention, and again, interestingly enough—and Keith Collins can probably offer some thoughts 

on this—FCIC has actually paid out more in the Northern Plains 

for prevented planting than we have paid out for hurricane assistance. So those are some thoughts. 

When there is a bill that asks for disaster assistance, of course, 

we will look at it. But I can tell you historically at least that has 

been the position of the administration that offsets in the Farm Bill 

would have to be sought to support disaster assistance payments. 

Senator DORGAN. And Mr. Secretary, you would understand producers in one part of the country that suffer a weather-related disaster, lose their entire crop, they would probably look at this and 

say, well, I don’t understand the difference in we provide disaster 

aid in one part without an offset, but you say in order to provide 

disaster aid in another part, even to consider whether you would 

support it, you have to have an offset. 

I am sure you understand how producers would look at that and 

say that really probably isn’t fair. But at any rate, we will grapple 

with that because we don’t have a disaster piece in the Farm Bill 

that we now have. We have got to do that year by year, and the 

Congress has actually, in most cases, stepped up. Last year, it did 

not. 

FSA STAFFING LEVELS

I would like to ask also about the staffing at the Farm Services 

Agency. The other thing I keep hearing in North Dakota from 

farmers and producers is that our county FSA offices we are losing 

a fourth of the people or 10 percent or 30 percent of the people in 

certain offices and they are not replaced. And it is interesting. 

Farmers are the ones that are coming, complaining, saying you 

need to have adequate staffing in these offices. 

What is the recommendation from the USDA on staffing for the 

Farm Service offices, the FSA offices? 

Secretary JOHANNS. We have a specific recommendation. The 

2007 budget provides resources to maintain permanent, non-Federal county staff levels at about 8,775 staff-years, which is about 

the same as the estimated 2006 level. The temporary, non-Federal 

county staff-years will remain at the 2006 level of 650 staff-years. 

These levels reflect reductions made in early 2006 in response to 

the tobacco program budget. So there has been some shifting there. 

Scott, do you have anything more specific to offer on that? 

Mr. STEELE. Well, there have been some changes in staffing in 

the Farm Service Agency due to changes in temporary employment. 

Every time you institute a new Farm Bill, you bring in a lot of temporary employees to implement the Farm Bill. And then as the 

workload tapers off, when you get the systems in place and get the 

payment structure set up, you find that you may not need as many 

temporary employees. 
75 

We still are maintaining temporary employees but at a reduced 

level. We are also trying to maintain permanent, full-time staff at 

a modestly reduced level. There is no dramatic reduction here 

across the country in FSA staffing, but there could be some local 

areas where there could be some staffing shortages. 

There are a lot of small offices in FSA. I don’t know the exact 

number, but there are a number of offices that have three or fewer 

people. We have situations where there are some offices where people retire, and they haven’t been replaced. There has been some 

discussion that maybe there should be some consolidation of these 

small offices. 

Now we are working with the Congress dealing with how to go 

about consolidating offices, and there is report language in last 

year’s appropriations bill as to how USDA should go about determining what the staffing should be and how offices should be handled in these various localities. We are working through these 

issues now with Committee staff and staff in your offices. 

Senator DORGAN. I am going to send you some questions about 

that. 

BEEF EXPORTS TO JAPAN

Mr. Chairman, if I might make one additional comment? A few 

moments ago, about an hour ago, the administration released the 

last month’s trade deficit numbers. It was the highest in history, 

$68.5 billion for the most recent month, which, of course, is a complete disaster for our country. And both the President and the Congress have had their head in the sand on trade for a long while. 

On the issue of trade with Japan, because one Canadian cow 

found in the United States with BSE occurred, Japan has shut off, 

then started, then shut off again beef shipments to Japan. 

Obviously, you are working to try to open that market, and my 

own feeling is that if Japan doesn’t open their market, they should 

ship all their goods to Kenya and see how quick they get rid of 

their exports. But I just want to say that when that market is 

open—let us say it is fully open tomorrow—not many know it, but 

15 or 17 years after the beef agreement with Japan, every pound 

of beef that we do get into Japan will have a 50 percent tariff attached to it. 

At the end of the beef agreement, you would have thought both 

sides won the Olympics back in the late 1980s because they celebrated and thought it was wonderful, what a great agreement this 

is. Almost 17 years after the agreement, there would remain a 50 

percent tariff because they have tariff reductions with a snapback 

on increased quantity. 

It is unbelievable to me that even if you get that back open—and 

it should be open tomorrow, the beef market in Japan for U.S. 

beef—even if it is reopened, there will remain a 50 percent tariff 

on every pound of beef going to Japan. That is a colossal failure. 

And I simply wanted to mention one more demonstration that in 

the area of trade, all kinds of trade, our country lacks backbone 

and will to say to other countries, we insist on reciprocal treatment 

and fair treatment. It is not fair 17 years after a beef agreement 

that they would continue to impose a 50 percent tariff. 
76 

Now that is not the most important thing. The most important 

thing at the moment is prying open that market. I know you are 

working on that. I know the administration is working on it. I 

think it is unbelievable the trade deficit we have with Japan. Last 

year, I believe close to $70 billion or over $70 billion. 

And because one Canadian cow was found in the State of Washington with BSE, Japan has shut its market to U.S. producers. It 

is unbelievable to me. So keep working, and you can’t be tough 

enough for my tastes. Whatever you do, the tougher you get, the 

more I will support it. 

Secretary JOHANNS. Thank you. I appreciate that. Thank you. 

Senator BENNETT. Senator Bond. 

Senator BOND. Thank you very much, Mr. Chairman. And welcome, Mr. Secretary. 

Following up on the comments by colleague from the Dakotas, 

foreign trade is extremely important. And in agriculture, our surplus has been as high as $30 billion that our exporters can generate from exporting farm goods. 

And your budget officer talked about the need for 21st century 

IT for the central administration of USDA, and that sounds good. 

But farmers in the Midwest are telling me they need 21st century 

transportation if they are to get their goods to the world market. 

MISSISSIPPI RIVER TRANSPORTATION INFRASTRUCTURE

And on the issue of having a competitive Mississippi River transportation and the Illinois system that serves the 21st century, as 

our 75-year-old system has served the previous century, I understand from news reports that you have reconfirmed that the administration does not oppose modernizing our aging locks on the Mississippi and Illinois Rivers. Is that correct? 

Secretary JOHANNS. Correct. 

Senator BOND. Thank you. 

Deputy Secretary Conner, I was very much encouraged by the 

comments you made in response to questions from my colleague 

Jim Talent in your confirmation hearing when you said Mississippi 

River commerce is absolutely essential and that we would be absolutely dead in the water without it and that you would be an advocate within the administration in helping that reality become understood. 

Does that remain your point of view? 

Mr. CONNER. Absolutely, Senator. 

Senator BOND. Haven’t lost any of your enthusiasm for it? 

Mr. CONNER. No. No, those were not statements made as a result 

of my confirmation. We continue to believe strongly in those, Senator Bond. 

I don’t think you need to look any further than the impact that 

Hurricane Katrina had on grain prices in the Midwest during that 

short period of time when the ports were closed to know just how 

essential this river transportation is to our farmers in the Midwest. 

Senator BOND. I was pleased that I even saw some mention in 

the national media that there was something coming down the 

river going through the port of New Orleans called grain. And this 

may have been the first recognition by the national media that we 
77 

do export grain, and that it is very important for our rural economies and as well as our balance of trade. 

GRAIN EXPORTS FORECASTING

Dr. Collins, it is good to see you again. I remember very well, I 

believe it was 2 years ago, you told this subcommittee when asked 

about the requirement that the Corps come up with a 50-year projection, you said that you could make a 10-year projection that our 

exports in corn are projected to rise about 45 percent with about 

70 percent of that expected to go out through the Gulf. And by extension, that means significantly down the Mississippi and Illinois 

Rivers. 

When I asked you why you didn’t try to make a 50-year, 5–0, 

forecast as some people had charged the Corps of Engineers for 

doing, I believe you said that doing it for 10 is heroic enough. Is 

that a fair representation, and would you like to explain that? 

Mr. COLLINS. Senator Bond, I would still stand by that last comment. I think that 50-year projections are highly speculative. Our 

own 10-year projections, which we do every year to support the estimates in the President’s budget, are also speculative. 

Nevertheless, those projections do show that, over time, we 

would expect to increase our grain exports, particularly our corn 

exports. However, the increase is not quite as high in our current 

set of forecasts, as you just mentioned. Nevertheless, it is still a 

substantial increase over the next decade. 

One of the reasons we lowered it was because of the increase in 

corn use for ethanol, which might compete a little bit in the export 

market. But even so, we show a strong increase in corn exports expected over the next decade. And we expect that roughly three 

quarters of those exports would move down the Mississippi River. 

Senator BOND. And they are trying to go beyond that with all of 

the variables, not only uses, but exchange rates. Perhaps even 

transportation. That becomes beyond the realm of the realistic? 

Mr. COLLINS. It is beyond what we normally try to forecast. Nevertheless, you can look out over the next 20, 30, 40, 50 years, and 

you can look at the economic growth that is occurring in the world. 

The increase in incomes in developing countries, higher income developing countries, and we know they are going to change their 

diets. We know they are going to move more toward meat, and they 

are going to be demanding feed grains and oil seeds to grow livestock and poultry products. 

So we do think there is a good long-term market for grains and 

oil seeds in the world, and we think that the United States can 

compete successfully in that market. And I think having efficient 

infrastructure will help make that possible. 

Senator BOND. Thank you, Doctor. That is very important, and 

I certainly appreciate it. 

And I would ask Secretary Johanns’ picture of some of the 

jammed up barges, on maybe even bringing some grain across from 

Nebraska to try to go into the world market. Do you agree that the 

system built 75 years ago with a 50-year projected life span that 

moves 80 million tons of commerce annually and two thirds of our 

exported grain has proved to be an important and wise investment? 

Secretary JOHANNS. Yes. 
78 

Senator BOND. It is interesting that sometimes people are naysayers, and I would like to introduce you to a person, unfortunately, a dedicated man, well intentioned, bright, honorable. This 

is Major Charles L. Hall, the Rock Island engineer from 1927 to 

1930. 

He advised President Hoover at the time that the proposed system that currently exists, that we have now, was not economically 

feasible. He argued that limited barge traffic did not indicate that 

a viable barge industry would develop. 

Fortunately, President Hoover and the Congress ignored the advice, and President Hoover said modernization would put the Nation’s rivers back as great arteries of commerce after half a century 

of paralysis. 

Now I suspect that Major Hall may have some grandchildren or 

great-grandchildren working dutifully over at OMB. 

Senator BOND. But I ask that you let not just a positive vision 

of the future, but this history help inform you, the internal discussion on whether we should be trying to predict the future or shape 

the future, whether we want to compete or surrender. 

And I was very much encouraged by Dr. Collins’s comments, and 

I think that shows that if we are willing to build the future, if we 

are willing to provide the infrastructure, we can and will see it 

grow. If we say, hey, the 75-year-old system is good enough, it is 

going to break down, and so are our exports. 

And I know that you are reluctant, Mr. Secretary, to comment 

in public about other agencies’ budgets. But I think we all understand that there is absolutely no voice, nobody speaking up for agriculture at DOD, at CEQ, or at the Office of Management and 

Budget. 

At DOD, wonderful folks to work with, but they are afraid that 

they are going to get beaten down if they try to step out of line. 

If you and your colleagues, well-informed at the United States Department of Agriculture, don’t fight for agriculture, agriculture will 

be without a voice. 

And I join with my colleagues in saying that voice not only needs 

to be for efficient, effective transportation, it needs to be for new 

technology, and we need to continue to develop the biotechnology 

and the other things that are significant. 

And we need to continue to fight to make sure that agriculture 

has a seat and a prominent place in lowering tariff barriers so that 

we can realize the potential of American agriculture in feeding the 

hungry of the world and assuring not only solid rural communities, 

but good incomes for farmers. 

Secretary JOHANNS. Thank you. 

Senator BOND. Thank you very much. Thank you, Mr. Chairman, 

Mr. Secretary. 

ADDITIONAL COMMITTEE QUESTIONS

Senator BENNETT. Thank you very much, Senator Bond. 

With the eye on the clock and the recognition that the full committee is meeting, we will submit additional questions to you, Mr. 

Secretary, in writing. And as I said in the opening statement, I 

hope that all Senators have those questions to the subcommittee 

staff by Friday, March 17. 
79 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 

QUESTIONS SUBMITTED BY SENATOR ROBERT F. BENNETT

USDA SHARE OF BUDGET CUTS

Question. Congressional Quarterly analyzed the administration’s budget request 

by appropriations subcommittee. The analysis shows that overall discretionary funding for this subcommittee, as proposed by the administration, is down 7 percent. 

Since the budget for the Food and Drug Administration is up 5 percent, we know 

all of the cuts come from the budget of USDA. No other department has taken such 

a large decrease. 

Why has USDA taken such a disproportionate share of the cuts to the non-defense, non-homeland security, portion of the discretionary budget? 

Answer. The President’s budget for 2007 continues to support the priorities of the 

United States Department of Agriculture (USDA). USDA is committed to the President’s plans to reduce the deficit which will strengthen the economy and create jobs. 

The reduction in USDA discretionary funding is largely the result of the following 

changes. First, the budget does not propose continuation of the one-time supplemental funding provided in 2006. Second, funding for selected programs, including 

earmarked research grants and watershed projects, is reduced or eliminated in the 

budget. Further, certain one-time funding, such as construction projects, is not continued in the budget. These reductions allow us to propose increases in high priority 

areas, including food and agriculture defense, avian influenza and food safety. 

LEGISLATIVE PROPOSALS IN THE BUDGET

Question. Historically, the Congress has not enacted new user fees for the Food 

Safety and Inspection Service. The 2007 budget request includes a legislative proposal that would generate an additional $105 million. 

If the Congress does not agree to new user fee proposals, how do you propose we 

make up the difference? 

Answer. In 2007, the President’s budget includes and requests the full amount of 

budget authority needed to operate FSIS’ inspection services. We are requesting authority to charge user fees, deposit the fees into special receipt accounts, and use 

the fees subject to appropriations. We fully support the fee proposal as presented 

in the budget, which will shift the responsibility for funding these programs to those 

who most directly benefit. 

Question. Will you submit a budget amendment? 

Answer. No, the President’s current budget includes and requests the full amount 

of budget authority needed to operate FSIS’ inspection services. 

Question. Have you submitted the text of your legislative proposals? 

Answer. The proposal is currently being finalized and will be sent to Congress 

shortly. 

WIC LEGISLATIVE PROPOSAL

Question. In addition, the budget proposes another legislative proposal to limit nutrition services and administration grants in the Women, Infants, and Children 

(WIC) program, which reduces the program by $152 million. 

If the Congress does not agree to this proposal, how do you propose we make up 

the difference? Will you submit a budget amendment? 

Answer. The WIC Program will continue to serve as many eligible persons as pos- sible with the funding level provided by the Congress, including use of the $125 million contingency fund as needed. We do not plan to submit a budget amendment. 

ANIMAL IDENTIFICATION

Question. Mr. Secretary, the Congress has provided over $66 million for the implementation of an animal identification system. This level of funding does not include 

an additional $18.7 million that was transferred from the Commodity Credit Corporation. With that in mind, the budget request for fiscal year 2007 proposes another $33 million to continue this animal identification exercise. 

Please provide us with an update on the status of animal identification and when 

you expect a national program to be fully implemented. 

Answer. Premises registration has been implemented in all 50 States and 2 Territories. Several Tribes are also registering their premises. The animal identification 

phase, in which APHIS will begin allocating animal identification numbers, is being 
80 

implemented in March 2006. We anticipate the remaining systems elements will be 

operational in early 2007, but private entities will need to supply information to fill 

the private databases. 

Question. To be more specific, infrastructure items such as ear tags, scanners, and 

private databases must be available for such a program to operate. Who will fund 

this infrastructure, the private sector or USDA? 

Answer. USDA will continue to provide funding to the States to carry out their 

responsibilities at the local level. In addition, USDA will continue to support the 

premises registration and animal identification numbering systems, the data system 

necessary to support and integrate multiple data systems held by private industry 

and State sectors, and public outreach and education efforts. The private sector will 

be assuming costs associated with scanners, private databases, and animal identification devices. 

OFFICE OF THE UNDER SECRETARY FOR MARKETING AND REGULATORY PROGRAMS

Question. Mr. Secretary, the Under Secretary position for Marketing and Regulatory programs is currently vacant. This position is one that is very significant 

based on current issues that the Department of Agriculture continues to monitor. 

For instance, this office provides oversight and management of Department actions 

related to avian influenza, pest eradication programs, marketing and grading of 

commodities, and animal disease surveillance. Please provide us with an update on 

this Under Secretary position. Also, how long do you expect this position to be vacant? 

Answer. I appointed Dr. Charles ‘‘Chuck’’ Lambert as the Acting Under Secretary 

for Marketing and Regulatory Programs on November 14, 2005. Dr. Lambert served 

as Deputy Under Secretary for Marketing and Regulatory Programs since December 

2, 2002. I anticipate that the President will nominate someone for this position in 

the very near future. 

FARM SERVICE AGENCY (FSA)—COUNTY OFFICE REALIGNMENT

Question. Mr. Secretary, the Farm Service Agency continues to review the current 

county office structure to determine how to better manage the agency’s day-to-day 

operations. Any action taken by the agency will most likely include a number of office closures and relocation of current employees. 

Please provide us with an update of the current review process. Also, please take 

a moment to explain how altering the current office structure will impact productivity and customer service. 

Answer. Consistent with Congressional guidance provided in the 2006 Appropriations Act, I have asked FSA’s State Executive Directors (SED) to conduct independent reviews of the efficiency and effectiveness of FSA offices in their States. 

The SED and State committees will form review committees to identify what the 

optimum network of FSA facilities, staffing, training, and technology should be in 

each State within existing budgetary resources and staffing ceilings. Consistent with 

guidelines set out by Congress, the agency will notify Congressional delegations and 

conduct public hearings on proposals for closure or consolidation. There are no targets for office consolidations specified at the national level, but as you well know 

there is an urgent need to optimize the network of offices given the current number 

of inefficient offices. 

We are encouraging the SED to explore joint opportunities with the Natural Resources Conservation Service (NRCS) and other agencies utilizing the State Food 

and Agriculture Councils. The agencies are being asked to work cooperatively in this 

effort. 

We are committed to a continued dialogue with State and Congressional leaders 

to discuss how best to modernize the FSA county office system and the necessary 

steps required to improve its information technology (IT) infrastructure. As you 

know this budget contains a request for funding to develop a modern, web-based, 

program delivery IT infrastructure called MIDAS. The ultimate goal of the modernization/office consolidation process is to increase the effectiveness of FSA’s local 

offices by upgrading equipment, investing in technology and providing personnel 

with critical training. IT modernization along with office consolidation is absolutely 

essential to ensure that America’s farmers and ranchers continue to receive excellent service long into the future. 

CLASSICAL CHINESE GARDEN

Question. Mr. Secretary, your budget requests approximately $8.4 million for the 

construction of a Classical Chinese Garden at the National Arboretum. I understand 

this is a joint project between China and the United States. In previous years, the 
81 

Congress was unable to fully fund the administration’s request in a number of priority research programs such as the National Research Initiative (NRI), food safety, 

nutrition, obesity, and emerging plant and animal diseases. It is almost certain that 

we will not be able to fund all of your priorities again this year. What is the Classical Chinese Garden’s priority with respect to these other research objectives? Answer. Although the construction of the Classical Chinese Garden is a joint project 

between China and the United States, it is essentially a gift from China to the 

United States. The Chinese will provide all the structures, rockeries, plants, furniture and art objects which are valued at over $50 million. The $8.4 million requested in the fiscal year 2007 budget is for infrastructure preparation including, 

excavation of the lakes, and building a story palace for the Garden. The Department 

has ranked this project as the highest priority facility project for ARS in the fiscal 

year 2007 budget. 

NATIONAL FINANCE CENTER—STATUS

Question. USDA’s National Finance Center (NFC), located in New Orleans, operates a centralized payroll, personnel, administrative payment, and central accounting system that serves more than 40 departments, independent agencies, and congressional entities. NFC employs more than 1,400 staff in New Orleans to carry out 

this mission. Because of the devastation Hurricane Katrina wrought on the New Orleans area, NFC was forced to evacuate and initiate its Continuity of Operations 

Plan. NFC was not able to return to its New Orleans office for several months. 

The Hurricane supplemental that was passed in December provided $35 million 

to support temporary space for NFC employees, equipment, and refurbishment of 

the New Orleans office. The most recent supplemental request seeks an additional 

$25 million for continued support of recovery efforts at the National Finance Center. 

Can you provide us with an update on the status of the National Finance Center 

and explain how these funds are being used? 

Answer. With the help of the $35 million appropriated to the Department, the National Finance Center is returning to normal operating conditions utilizing its New 

Orleans facility. Service levels to client agencies are continuing to improve. The staff 

remains committed to the continued uninterrupted delivery of services for financial 

reporting and human resource and payroll clients. The National Finance Center 

pays approximately 565,000 civilian Federal employees in over 140 Federal agencies, provides human resource services for several USDA, DHS, and other agencies, 

and host the financial management system for USDA. 

The National Finance Center and activities collocated with the Center incurred 

expenses for redeployment of personnel, for equipment and related technology to resume business operations as quickly as possible, for rental payments and contract 

costs associated with administering the emergency facility and for housing for personnel, and for emergency overtime for personnel working toward establishing operations. We are continuing to utilize and operate an interim computing facility in 

Philadelphia with a small on-site staff; all other employees are now operating out 

of the New Orleans facility. 

The additional $25,000,000 in supplemental funds represents funding to support 

recovery and continuity of operations efforts during the ‘‘deployment’’ and to continue supporting the operation of the interim computing facility in Philadelphia. 

Specifically, supplemental funds are to be applied in the following areas: 

—Extraordinary Personnel and Related Expenses.—Covers overtime and employee 

travel between New Orleans and the various alternate worksites. Additionally, 

provides continuing coverage of overtime and employee travel for staffing of the 

interim computing facility. 

—Rental Charges.—Covers the residential rental expenditures incurred for deployed employees. 

—Contracts.—Covers various contracts in support of the operation of the interim 

computing facility, backup facilities and the alternate worksites. Also includes 

space rental of the various alternate worksites. 

—Temporary Labor.—Covers the additional costs incurred to temporarily replace 

expertise lost due to the dislocation and/or loss of employees. 

—Other Services.—Covers essential support costs incurred and future costs needed to replace, refurbish, or rehabilitate facilities at the New Orleans site and 

the interim/backup computing facilities. This includes hardware leases and software licenses for the interim computing facility, replacement of destroyed furniture, office equipment, telecommunications infrastructure and support, and 

supplies. 

—Temporary Facilities.—NFC expects to be done with temporary buildings by 

early summer. 
82 

NATIONAL FINANCE CENTER—DATA CENTER OPERATIONS

Question. I understand that under the Continuity of Operations Plan the NFC’s 

data center, meaning the main computer servers and equipment, was moved to a 

temporary site in Philadelphia. Six months after Hurricane Katrina, NFC’s data 

center is still located in this temporary space. 

Can you provide us with an update on USDA’s efforts to find a permanent site 

for NFC’s data center? 

Answer. On February 8, 2006, the USDA sent out a facility requirements package 

to Department of Defense organizations and the General Service Administration requesting information on existing Federal facilities that could satisfy NFC’s requirements. This package included a copy of NFC’s current facility requirements (i.e. 

floor space, power, pricing, security, etc.). As of March 21, 2006, information on 17 

available facilities has been received. NFC is currently evaluating those responses 

to determine the best alternatives. Once the best alternatives are determined, NFC 

will conduct visits to those sites to complete the assessment process. NFC is working to complete the assessment and site selection process as quickly as possible. 

This effort should be completed this spring. 

Question. Can the NFC use USDA’s National Information Technology Center in 

Kansas City as a permanent site? 

Answer. NFC explored the possible use of USDA’s National Information Technology Center (NITC) in Kansas City as a permanent site. However, it was determined that the pressing program needs of the Department at the Kansas City site 

would have resulted in implementation and operational costs that were incompatible 

with the current rate structure employed with NFC customers. On February 8, 

2006, the USDA sent out a facility requirements package to Department of Defense 

organizations and the General Service Administration requesting information on 

other existing Federal facilities that could satisfy NFC’s requirements. Once responses are received and assessment and comparison of all acceptable alternatives 

are completed, a decision of where to locate NFC’s permanent site will be made. 

515 HOUSING PROGRAM

Question. Mr. Secretary, the fiscal year 2007 budget request eliminates funding 

for the 515 Rural Rental Housing Program. The 515 housing program provides funding for construction and revitalization of affordable rental housing for rural families 

who have very low to moderate incomes. 

If the Congress does not provide funding for the 515 housing program, will low 

income citizens have any other option when it comes to affordable housing? 

Answer. We stress that the Section 538 program, like the 515 program, provides 

housing for very low income citizens. The 2007 budget includes almost $200 million 

for Section 538 guaranteed loans for rural rental housing—double the amount available for 2006. These guaranteed loans may be used for either new construction or 

repairs and rehabilitation. In most cases, they are used in conjunction with other 

sources of financial assistance. These guaranteed loans help increase the supply of 

rental housing in rural areas. 

As for the Section 515 program, the administration proposes to focus on the critical needs of the existing multi-family projects that have been financed under this 

program, primarily in the 1980’s. Almost half a million rural people reside in these 

projects. A study completed in 2004 demonstrated that most of the projects are still 

viable for low-income housing; however, a substantial portion of these projects are 

in need of revitalization. Moreover, there is a risk that some projects will be prepaid 

and leave the program. This would put the tenants of those projects at risk of substantial rent increases and possible loss of their housing. The 2007 budget includes 

$74 million for housing vouchers to assist these tenants. The administration has 

also submitted a legislative proposal to Congress that authorizes debt restructuring 

and other incentives to encourage revitalization coupled with a long-term commitment from project sponsors to remain in the program. Further, the 2007 budget reflects the administration’s commitment to fully funding the renewal of all expiring 

rental assistance contracts, which is vital to keeping the projects affordable to low 

income people. 

Also, opportunities need to be provided for low-income people to own their own 

homes. The 2007 budget supports about $1.2 billion in direct loans and $3.5 billion 

in guaranteed loans for single-family housing—about the same as available for 2006, 

except for emergency funding for the Gulf Coast hurricanes. This level of funding 

is expected to provide over 40,000 homeownership opportunities. All of the direct 

loans and about a third of the guaranteed loans are expected to go to low-income 

families with incomes below 80 percent of median income. 
83 

NATIONAL VETERINARY MEDICAL SERVICES ACT

Question. In fiscal year 2006, Senator Kohl and I provided funding to implement 

the National Veterinary Medical Services Act (NVMSA), to help get more vets into 

underserved areas. No funds are requested by USDA to continue this program in 

fiscal year 2007. A March 2005 Government Accountability Office report about 

agroterrorism states that : ‘‘USDA officials told us they intend to increase the number of veterinarians entering public service by making new efforts to increase veterinary students’ awareness of potential careers in public service.’’ This appears to be 

inconsistent. 

Why the inconsistency? 

Answer. The $500,000 appropriated in fiscal year 2006 has not been obligated. 

Therefore, there was no need to request funds in the fiscal year 2007 budget. As 

no-year funds, they will be obligated when the program is developed and incur costs. 

CSREES is currently working with other agencies in the Department and informally 

discussing implementation options with program constituents to determine how best 

to design and deliver a full loan subsidy program. A critical initial task will be to 

determine criteria for demonstrating, measuring, and monitoring need for veterinarians across fields of service, geographic locations, and national service needs. Once 

these criteria and program guidance have been developed and made available for 

public comment, specific needs for the program can be estimated. 

Question. These vets will be extremely important as first responders in the case 

of an outbreak of a foreign animal disease. 

What is USDA doing to make sure that there will be enough vets familiar with 

foreign animal diseases to help protect U.S. agriculture? 

Answer. Veterinary Services, part of the U.S. Department of Agriculture’s Animal 

and Plant Health Inspection Service (APHIS), administers the National Veterinary 

Accreditation Program. This voluntary program certifies private veterinary practitioners to work cooperatively with Federal veterinarians and State animal health 

officials. Accredited veterinarians are instrumental in increasing our capability to 

perform competent health certifications, maintain extensive disease surveillance and 

monitoring, and provide valuable veterinary service during national emergencies. 

Producers that export animals interstate and internationally rely on the expertise 

of accredited veterinarians to help ensure that exported animals will not introduce 

diseases into another State or country. The accreditation program has served the 

animal industry well for many years and remains integral to their future growth. 

There are currently over 60,000 active accredited veterinarians in the national database. 

The President’s budget requests $2.4 million to enhance the National Veterinary 

Accreditation Program to develop web-based certification and training modules for 

veterinarians. This will provide a method for veterinarians to expand their knowledge of, and vigilance for foreign animal diseases. 

MANDATORY COMMODITY PROGRAMS

Question. Mr. Secretary, the administration’s fiscal year 2007 budget includes a 

legislative proposal to reduce farm program spending by approximately $1 billion in 

fiscal year 2007. This proposal would include a number of changes to the current 

farm law that would decrease commodity support. 

Please take a moment to describe this legislative proposal and the cost savings 

that will be achieved should it become law. 

Answer. The fiscal year 2007 Budget again proposes some changes in farm programs designed to save about $1.1 billion in fiscal year 2007 and about $5 billion 

over a 5 year period. Key changes proposed include: a 5 percent reduction in all 

farm program payments; a reduction in the payment limit from $360,000 to 

$250,000 per natural person; a 1.2 percent assessment on all sugar marketed; a 

three cent per hundredweight assessed on milk marketed; cost minimizing adjustments for the dairy price support program, and some moderate changes in the crop 

insurance program, including modest reductions in premium subsidies and in administrative expenses paid to crop insurance companies. 

FOREST SERVICE FUNDING

Question. Please give us details on any funding provided by this subcommittee 

that benefits the United States Forest Service. Include agencies and amounts. 

Answer. The Forest Service receives a small amount of funding provided by the 

Agriculture Subcommittee to the Hazardous Materials Management (HMM) account. Funds are used to address environmental contaminations on Federal land. 

More details are provided for the record. 
84 

[The information follows:] 

The appropriation language for the HMM account provides for the necessary expenses of the Department of Agriculture to comply with the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and the Resource 

Conservation and Recovery Act (RCRA). The funds remain available until expended 

and may be transferred to any agency of the Department for its use in meeting requirements pursuant to CERCLA and RCRA on Federal and non-Federal lands. 

Agencies compete for HMM funding by submitting proposals explaining the RCRA 

or CERCLA work that is needed, the strategic impact of that work, and the public 

benefits that will be realized. Funding priorities reflect those planned impacts and 

benefits. The following table shows actual amounts for fiscal year 2005, estimated 

fiscal year 2006, and requested fiscal year 2007 HMM budgets for USDA agencies: 

USDA HMM BUDGETS FOR FISCAL YEARS 2005, 2006, AND 2007 

[In thousands of dollars] 

Agency 

Fiscal year 

2005 actual 2006 estimate 2007 request 

Agricultural Research Service .................................................................... 2,259 3,770 2,027 

Food Safety and Inspection Service .......................................................... 17 ........................ ........................

Forest Service ............................................................................................. 5,645 4,900 6,593 

Departmental Administration 1 .................................................................. 2,580 1,533 1,700 

Office of the General Counsel ................................................................... 1,484 1,677 1,700 

Total .............................................................................................. 11,985 11,880 12,020 

1 Actual reflects amounts under DA’s Office of Procurement and Property Management, as well as for agencies not in the FFIS system, CCC, 

FSA, and Rural Development. 

The HMM funding the Forest Service receives in this process supplements the 

$10–15 million of annual Forest Service funding in support of USDA’s Hazardous 

Materials Management Program. The Forest Service is not required to reimburse 

the account, except when cleanup costs are recovered from other responsible parties. 

It is estimated that HMM funding helped to leverage the estimated $22 million of 

environmental cleanup work responsible parties performed in lieu of cash payments 

in fiscal year 2005. 

FINANCIAL MANAGEMENT SYSTEM

Question. The budget request includes an increase of $13.9 million to begin planning for the implementation of a new financial system. I understand that these 

funds will be used for hardware and software procurement. 

What, specifically, does USDA plan to purchase with this funding? 

Answer. USDA is pursuing modernization of its core financial management system and associated business practices. It is critical that this modernization be advanced now to ensure a sound financial management system to support the Department’s large and diverse portfolio of programs. The new, web-based system will replace outdated technology that is costly to maintain and not fully compliant with 

current financial management standards. Further, the new system will allow full integration of existing and new eGovernment initiatives and provide efficiency 

through shared services. Funds requested for 2007 are needed to begin the process 

of designing and implementing the new system. Specifically, the funds will support 

a contract to begin acquiring hardware and software. Implementation is expected 

to continue for approximately 5 years beginning with a 1-year planning and startup phased during 2007. 

Question. What is the status of the planning and implementation effort for the 

new financial system? 

Answer. The new financial management system, called the Financial Management 

Modernization Initiative (FMMI), is in the early stages of procurement. A Request 

for Information was released in August, 2005. The information USDA received was 

used to further refine USDA’s plans. A Request for Proposals was issued in late December, 2005 to solicit contractors to provide planning and integration services for 

the financial management system. USDA prefers to contract with one entity for both 

the hardware and software. It is expected that a contract will be awarded in the 

fourth quarter of fiscal year 2006 so that integration planning and implementation 

can begin and continue during fiscal year 2007. 
85 

Question. Does USDA have an estimate for how much it will cost to fully implement the financial system? 

Answer. Until USDA receives and evaluates proposals, we will not know the total 

cost or schedule for implementing FMMI. 

Question. How does USDA plan to pay for this system? Will all of the funding 

come through the CFO account or will each USDA agency be asked to provide funding for the system? 

Answer. USDA will determine the funding approach after we receive and evaluate 

proposals for FMMI. The funding requested for fiscal year 2007 is critical to permit 

the project to continue to move forward. 

PROVINCIAL RECONSTRUCTION TEAM

Question. Please provide detailed information on USDA’s past participation in the 

Provincial Reconstruction Teams, including total funding obligated. Please give specific examples of the results achieved and the number of individuals who served as 

advisors and their employing agency. 

Answer. USDA agricultural advisors on Provincial Reconstruction Teams (PRTs) 

in Afghanistan provide technical guidance to PRT commanders, local and international non-governmental organizations, and individual farmers and herders. Advisors also provide training and information for local offices and staff of Afghanistan’s 

Ministry of Agriculture, Animal Husbandry and Food, and the Ministry of 

Reconstruction and Rural Development. Additional information is provided for the 

record below. 

[The information follows:] 

Total funding obligated for these activities, including State Department International Cooperative Administrative Support Services (ICASS) costs, is shown below 

by fiscal year: 

Fiscal year Amount 

2004 ..................................................................................................................................................................... $940,000 

2005 ..................................................................................................................................................................... 2,628,000 

2006 (projected) 1 ................................................................................................................................................ 3,909,000 

2007 (projected) ................................................................................................................................................... 5,012,000 

1Includes $1 million transferred to USDA from the U.S. Agency for International Development to help defray an unanticipated increase in 

security and other support costs. 

From 2003 through 2006, 39 USDA staff served on PRTs in Afghanistan. Currently, USDA has six advisors in Afghanistan, including an area agronomist for the 

Natural Resources Conservation Service from Brice, Utah, who serves on the Farah 

PRT. 

USDA agencies and the number of their staff participating over the years are as 

follows: 

—Natural Resources Conservation Service—17 

—Food Safety and Inspection Service—6 Farm Service Agency—4 

—Rural Business Cooperative Service—3 

—Animal and Plant Health Inspection Service—3 

—Cooperative State Research, Education, and Extension Service—2 

—Foreign Agricultural Service—2 

—Agricultural Marketing Service—1 

—Forest Service—1 

Below are some specific examples of results achieved: 

—USDA advisors guided their Afghan counterparts in organizing the protection 

of the endangered Koli-Kashman watershed. More than 2,500 trees were planted to stabilize the watershed; other conservation plant materials were incorporated; and erosion control and other protective structures were established. 

More than 2,570 paid labor days were generated to benefit Afghan participants. 

Disarmed and demobilized combatants were trained and employed for this activity, as well as unemployed youth, women, the elderly, and disabled. The program is being replicated in 28 other provinces. 

—USDA advisors serving on PRTs in the Kandahar area designed, secured funding, and worked with their military counterparts to install 15 windmills to 

pump water for irrigation and livestock. The advisors established a distribution 

network and water user associations to operate and maintain the systems. Alternative sources of energy are extremely important in this country which has 

negligible reserves of fossil fuels. 

—A USDA veterinarian designed, secured funding, constructed, and trained Afghans to staff two veterinary clinics in Parwan and Kapisa Provinces. These 
86 

clinics provide access to professional animal health care and herd improvement 

information for Afghanistan’s livestock producers. Approximately 85 percent of 

Afghanistan’s families own livestock; therefore, this is a critically important 

service. 

—A USDA advisor serving on the Kondoz PRT trained local non-governmental organizations to provide credit programs to farmers and rural businesses. Credit 

cooperatives were established throughout northeast Afghanistan, and they have 

remained functional and financially solvent for nearly 3 years. These credit programs have provided the first access to credit in decades for farmers in this region of Afghanistan, and have resulted in increased agricultural production and 

incomes. 

—USDA advisors provided training to faculty at the agricultural colleges in 

Jalalabad, Herat, Kandahar, and Kabul. Curricula were developed for new 

courses and new training materials were developed and shared with other agricultural training institutions. Training was provided in veterinary sciences, natural resources management, horticultural production, and farm management. 

This training provided these faculties with their first exposure in decades to 

modern course materials and technical information on current agricultural practices. 

—The USDA advisor serving on the Kandahar PRT established a province-wide 

poultry project that provided eggs to more than 400 families, for consumption 

and sales. This project provided direct benefits to women and children through 

increased family incomes and improved nutrition. 

Question. How will the $5,000,000 requested in the budget to continue USDA’s 

participation in the PRT be used, (e.g. salaries, training, equipment, logistical support)? How much will go to the Department of State or any other department? 

Answer. Approximately $3,400,000 is for salaries, benefits, and allowances and 

$830,000 is for travel, equipment, program costs, and other support. Approximately 

$782,000 is budgeted to go to the Department of State for projected ICASS and security costs. 

FOREIGN SERVICE PERFORMANCE PAY

Question. The budget requests $990,000 for foreign service performance pay. Why 

is this funding needed? How was this figure arrived at? What criteria will be used 

to award such funding? Why was this requested in the Office of the Secretary? 

Answer. The requested funding supports the first step of transition to a performance-based pay system and global rate of pay for Foreign Service personnel grade 

FS–01 and below. The forthcoming Foreign Service Modernization legislative proposal linked to this funding would amend Section 406 of the Foreign Service Act 

(22 USC 3966) to eliminate longevity-based pay increases and institute a strictly 

pay-for-performance system similar to that instituted for the Senior Foreign Service 

in Public Law 108–447. 

The proposal would also establish a global rate of pay for the Foreign Service to 

attract and retain a labor market for worldwide-available personnel, based on the 

needs of the Service, consistent with other pay systems with similar worldwide 

availability requirements. This global rate also addresses the increasing pay disincentive to overseas service, due to the frequent rotation of assignments, influenced 

by 5 USC 5304. 

The Modernization proposal would equalize the Foreign Service global rate at the 

Washington, DC, rate, including locality pay, over 2 years. The requested funding 

supports the first step of this transition. Additional funding will be required in fiscal 

year 2008 and fiscal year 2009 to fully close the gap, in order to begin a new payfor-performance system effective April 2008, under a uniform global rate pay system. Funds are requested in the Office of the Secretary so that further allocations 

can be made to the agencies within USDA that have Foreign Service personnel. 

CROSS CUTTING TRADE NEGOTIATIONS AND BIOTECHNOLOGY RESOURCES

Question. How has the fiscal year 2006 funding for this been used (please be specific and give examples of the results achieved)? What agencies are involved in the 

utilization of this funding? What will the proposed increase of $366,000 achieve? 

Answer. Funding in the Office of the Secretary to support cross-cutting trade negotiation and biotechnology issues allows critical coordination of efforts that span 

several agencies within USDA. In addition to supporting the Senior Advisor to the 

Secretary, the agencies involved in the biotechnology funding are: the Animal and 

Plant Health Inspection Service; the Cooperative State Research, Education, and 

Extension Service; and the Foreign Agricultural Service. Their use of the money is 

described below. 
87 

The proposed increase of $366,000 would enable the Department to more effectively address: 

—Quantitative analyses and studies needed to support increasingly complex compliance activities; 

—Expansion of a project to develop a regulatory and trade strategy for specialty 

crops; 

—Increased activity in the area of transgenic animals—domestically, in international markets, and in international standard setting organizations; and 

—Increasing need for communication materials for both domestic and international markets. 

[The information follows:] 

APHIS has used the fiscal year 2006 funding for a number of small to medium 

size projects that together will strengthen and improve the biotechnology regulatory 

process: 

—Extended an existing agreement with the National Plant Board to continue the 

collection of information from the States and stakeholders on key aspects of the 

agency’s regulatory system and items that APHIS should consider during State 

evaluations. These efforts will help APHIS to improve the biotechnology regulatory process. 

—Extended our current agreement with the National Association of State Departments of Agriculture (NASDA) to coordinate and conduct the pilot program for 

State personnel to perform notification inspections. Once the pilot project is 

complete, a task group consisting of NASDA and APHIS personnel will conduct 

a full joint review of the program. 

—Continued work with Iowa State University to prepare additional chapters for 

the APHIS–Biotechnology Regulatory Services equipment inspection manual to 

be used to train third-party inspectors (State and other APHIS employees) on 

proper techniques and procedures for cleaning and inspecting equipment for 

contaminated materials. 

—Supported the agency’s efforts to procure a geographical information system to 

assist in managing and analyzing program data. Examples include the production of large and small maps of regulated States, counties and sites to improve 

compliance, risk analysis, and program management functions; the ability to 

‘‘geo-identify’’ sites that may have been affected by weather events such as hurricanes or tornados in order to respond appropriately to these events to evaluate 

the potential spread of regulated genetic materials; and the ability to layer a 

number of data sets on a single map to provide the APHIS biotechnology regulatory program with an enhanced data analysis capability. 

The fiscal year 2006 funding for Cooperative State Research, Education, and Extension Service has been used to begin the development of an 

implementation/business plan by a contractor to deal with biotechnology regulatory issues associated with specialty crops. To date, a Scope of Work was prepared, 

and proposals were received by the Specialty Crops Regulatory Initiative (SCRI) 

Steering Committee. The Steering Committee is composed of representatives of technology developers, including USDA, 1890 and 1862 land-grant universities, other 

universities, a spectrum of private sector companies, and commodity groups.It is anticipated that a consultant will be hired in May 2006, through an award to Arkansas State University. A draft business plan is anticipated by the end of the year, 

to include proposals for the structure and function of the SCRI, and implementation 

plans including mechanisms to fund the finalization of the operation of the SCRI. 

The Foreign Agricultural Service has applied the fiscal year 2006 funds to address 

global market access issues, capacity building, and technical assistance needs associated with agricultural biotechnology. In collaboration with other Federal agencies, 

funds have been targeted to sustain and expand a number of ongoing bilateral and 

multilateral activities aimed at advancing the development of science and rule-based 

regulatory systems for the products of agricultural biotechnology and adherence to 

World Trade Organization principles. This in turn has helped foster global market 

access for U.S. agricultural products that, increasingly, are produced using modern 

biotechnology. 

Specifically, policy and technical engagement with Japan, China, Canada, and 

Mexico, as well as within the Asia Pacific Economic Cooperation (APEC) and other 

international fora, has helped maintain open access to these key markets for U.S. 

agricultural products, including those produced through modern biotechnology. A 

notable success of the engagement has been the continued market access for U.S. 

corn exports to Japan after an unapproved biotechnology corn product was found in 

the United States. Bilateral and multilateral efforts have been undertaken with 

countries in the Western Hemisphere, as well as China and Japan, which have 

helped guide implementation of the Cartagena Protocol on Biosafety in a practical 
88 

and predictable manner that will maintain access to global markets for U.S. agricultural products. Numerous technical assistance and educational activities have been 

undertaken aimed at promoting adoption and acceptance of biotechnology. These 

have included outreach to farmers in Africa and efforts to promote farmer adoption 

of plum pox resistant plum production in Europe. Targeted technical assistance and 

policy dialogues on biotechnology have also been undertaken with numerous countries with which the United States is engaged in FTA negotiations. 

OFFICE OF CIVIL RIGHTS

Question. Please generally describe the Civil Rights Enterprise System and provide the following information: How much funding has been provided for this system 

through fiscal year 2006? What is the total anticipated cost of the system? How has 

this system helped improve the processing and resolution of discrimination complaints? 

Answer. The Civil Rights Enterprise System (CRES) is a web-based USDA enterprise-wide complaint tracking system used for tracking, processing and reporting 

employment and program complaints. The system is being implemented in two 

phases: Phase 1—Employment Complaints Tracking System in fiscal year 2004 and 

2005, and Phase 2—Program Complaints Tracking System in fiscal year 2006 and 

fiscal year 2007. 

The CRES project is on schedule and within budget. Phase 1, the Employment 

Complaints Tracking System component, has been fully implemented and is currently operational. The employment complaint legacy systems have been shut down. 

Phase 2, the Program Complaints Tracking System is under development with testing scheduled for the summer. 

One of USDA’s most significant achievements is the implementation of a webbased, Department-wide discrimination complaint tracking system in fiscal year 

2004 to track, process and report on employment and program complaint activity. 

The Civil Rights Enterprise System is being implemented in two phases: 

—Phase 1—Employment complaint tracking system was implemented on time 

and within budget during fiscal year 2005. 

—Phase 2—Program complaint tracking system will be implemented in fiscal 

years 2006 and 2007. 

Additional information is provided for the record. 

[The information follows:] 

CRES planned budgeted cost is as follows: 

Fiscal year 2003 ................................................. System Planning ................................................ $0.1 million, completed 

Fiscal year 2004 ................................................. System Acquisition & Implementation Costs .... 1.6 million, completed 

Fiscal year 2005 ................................................. System Acquisition & Implementation Costs .... 1.5 million, completed 

Fiscal year 2006 ................................................. System Acquisition & Implementation Costs .... 1.8 million, planned 

Fiscal year 2007 ................................................. System Acquisition & Implementation Costs .... 1.987 million, planned 

TOTAL .................................................... ............................................................................. 6.987 million, planned 

The Civil Rights Enterprise System has improved efficiency through: 

—Standardization and elimination of duplicative systems. 

—Real time access to EEO complaint data. 

—Support of a paperless environment. 

—Ability to track, process and report informal and formal employment complaint 

activity. 

—Implementation of accurate performance based reports. 

In fiscal year 2006, USDA is enhancing the Civil Rights Enterprise System, including ‘‘eFiling’’ and an online docketing system that will allow complainants and 

agency representatives to access real time complaint status information. These initiatives are currently in the development and testing phase. 

This includes the ability to respond to mandatory reporting requirements, including: 

—Annual Federal Equal Employment Opportunity Statistical Report of 

Discrimination Complaints (EEOC Form 462). 

—Notification and Federal Employee Antidiscrimination and Retaliation Act of 

2002 (the No FEAR Act). 

—EEOC Management Directive 715. 

Question. What are the specific activities and their associated funding in the fiscal 

year 2007 budget that are targeted to the prevention of equal employment opportunity and program complaints? 
89 

Answer. As Secretary of Agriculture, I am firmly committed to ensuring the civil 

rights of all USDA’s customers and employees. The Office of the Assistant Secretary 

for Civil Rights was reorganized in July 2005 to facilitate the fair and equitable 

treatment of USDA customers and employees while ensuring the delivery and enforcement of civil rights programs and activities. This includes processing complaints in a time and cost effective manner and implementing initiatives to prevent 

EEO and program complaints. Additional information on prevention activities is 

provided for the record. 

[The information follows:] 

OFFICE OF CIVIL RIGHTS PROGRAM FUNDING

Conflict Prevention Resolution 

The Conflict Prevention and Resolution Center (CPRC) was established to lead 

and coordinate conflict management and ADR efforts throughout USDA. ADR programs exist in all USDA agencies and mission areas, and vary in both scope and 

level of activity. ADR itself is applicable, in a variety of forms, to workplace disputes, EEO complaints, USDA program disputes, including civil rights complaints, 

and group interventions. Reorganization and subsequent inclusion of CPRC in Civil 

Rights maintains the USDA-wide focus on conflict resolution, with additional emphasis in support of the Assistant Secretary for Civil Rights. 

Outreach 

The USDA Office of Outreach strengthens USDA outreach efforts to limited-resource farmers and ranchers and under-represented customers, coordinates program 

delivery outreach throughout USDA, and assists underserved customer groups in 

collaboration with the Agency Outreach Coordinators and State Outreach Councils. 

Outreach develops policy, thereby enhancing the building of partnerships with universities/colleges, community/faith-based organizations and other groups, associations and organizations. Outreach provides leadership through policy guidance, 

high-level strategic planning and goal setting, performance measurement and feedback to USDA national, State and local outreach coordinators and councils. Outreach monitors, analyzes, and evaluates trends related to USDA programs and activities through mission area outreach plans, outreach coordinators, and State outreach councils. Outreach develops and provides training and education in outreach 

function models, best practices, policies, environmental justice, strategic plans and 

goals to USDA employees and stakeholders to provide an effective educational resource and linkage to internal and external customers regarding USDA-wide programs. 

Program Fiscal year 2005 

funding actual 

Fiscal year 

2005 FTEs 

Fiscal year 2006 

funding estimate 

Fiscal year 

2006 FTEs 

Fiscal year 2007 

funding estimate 

Fiscal year 

2007 FTEs 

Outreach ......................... $1,338,387 8 $981,000 8 $1,001,000 8 

Conflict Prevention & 

Resolution Center ....... 706,700 6 736,000 6 751,000 6 

Totals ................ 2,045,087 14 1,717,000 14 1,752,000 14 

QUESTIONS SUBMITTED BY SENATOR ARLEN SPECTER

DAIRY ASSISTANCE

Question. Agriculture is the largest industry in Pennsylvania, producing over $45 

billion annually and providing approximately 1 in 6 jobs in agriculture and related 

businesses. Of this industry, dairy is the number one sector in the State and ranks 

number 4 in overall milk production in the entire Nation. Milk prices for dairy farmers have been on a down trend since January and economists project that the price 

of milk will continue to fall. The proposed 3 cent per cwt. assessment in the fiscal 

year 2007 Budget on all milk production will only compound the severity of this situation. Although the Milk Income Loss Contract (MILC) program, that I worked 

very hard on to be extended to October 2007, will provide the safety-net needed for 

our dairy farmers, the falling prices of milk and the continued high costs of fuel will 

make it more difficult for dairy farmers across America to survive. 

What does the Department plan on doing to help our Nation’s dairy farmers when 

they need you the most? 

Answer. We share your concern about the rising cost-price pressures faced by 

dairy farmers and for that matter most farmers. In addition to the credit and other 
90 

programs the Department has available to help producers when financial stress 

rises, our dairy programs are by design geared to provide support when prices decline. The dairy price support program puts a floor under milk prices to provide 

some protection in that way. And as you mentioned, the Milk Income Loss Contract 

(MILC) program will provide some counter-cycle protection by providing payments 

to eligible dairy producers when prices decline. As you will recall the President had 

proposed that this program be extended through the end of the 2002 Farm Bill and 

Congress did enact that extension in the recent Deficit Reduction Act. The Department is now implementing the newly extended program. 

COMMODITY SUPPLEMENTAL FOOD PROGRAM

Question. The Commodity Supplemental Food Program (CSFP) provides 6.4 million food packages to over 400,000 mothers, infants, children, and primarily low-income seniors—in fiscal year 2005, 15,575 households in PA received CSFP packages. 

CSFP food packages are delivered monthly, and provide $50 worth of food including 

cheese, milk, and canned fruits and vegetables. The President eliminated this program in his fiscal year 2007 budget, stating Food Stamps and the WIC program 

could meet the needs of CSFP recipients. However, seniors, who represent 90 percent of CSFP recipients, are not eligible for the WIC program, and many of these 

seniors are also not eligible for food stamps, or are eligible to receive only $10 per 

month in food stamp benefits. An additional benefit of the CSFP program to seniors 

with disabilities is that they do not have to leave their home to receive the CSFP 

food package. 

How does the Department plan to meet the needs of many of these seniors who 

depend on the CSFP program and who will not be eligible to receive any benefits, 

or will receive reduced benefits, from the Food Stamp program? 

Answer. Elderly participants who are leaving the CSFP upon the termination of 

its funding and who are not already receiving Food Stamp Program (FSP) benefits 

will be eligible to receive a transitional benefit worth $20 per month ending in the 

first month following enrollment in the FSP under normal program rules, or 6 

months, whichever occurs first. We estimate that most elderly CSFP participants 

will be eligible to participate in the regular Food Stamp Program. 

Based on the information we have about the characteristics of all elderly food 

stamp participants, the average monthly food stamp benefit for an elderly person 

living alone was $65 per month in 2004. The percentage of food stamp households 

with elderly that received the maximum benefit (14 percent) was nearly as large as 

the percentage that received the minimum benefit of $10 (17 percent). Thus, most 

elderly food stamp participants receive more than the $10. We expect that this pattern would extend to new FSP participants leaving the CSFP as well. 

LIVESTOCK PROTECTION PROGRAM

Question. The Livestock Protection Program (LPP), implemented by the Pennsylvania Department of Agriculture, in conjunction with the U.S. Department of Agriculture’s (USDA) Animal and Plant Health Inspection Service (APHIS) Wildlife 

Service (WS), the Pennsylvania Game Commission, and the Pennsylvania State University is a crucial pilot program that provides technical and operational assistance 

to help Pennsylvanian agriculture producers control wildlife damage to their crops 

and property. Started in 2005, this program is fully implemented in eight counties, 

while on a limited basis across the rest of the Commonwealth of Pennsylvania. The 

goal of the LPP is to expand fully to other counties in order to protect dairy farmers 

from feed loss due to starlings, protect sheep farmers from coyotes, and protect property from geese damage. On an annual basis, dairy farmers lose about $2,000 from 

feed loss due to starlings. I, along with U.S. Senators Bennett and Santorum, and 

U.S. Representatives Sherwood, Holden, Shuster, English, Platts, Kanjorksi, Murphy, and Murtha sent you a letter on January 24th requesting that you direct any 

additional fiscal year 2006 Agricultural Appropriations funding for APHIS Wildlife 

Services to the LPP in order to keep this important program in existence. 

What is the status of this request? Does the Department plan on redirecting extra 

funds to the Livestock Protection Program? 

Answer. The Department recognizes the vital role of agriculture and the LPP to 

Pennsylvania’s economy. APHIS allocated $70,000 in fiscal year 2006 to support this 

program. 
91 

QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

NATIONAL AGRO-FORESTRY CENTER

Question. When USDA National Agro-forestry Center, a partnership between the 

Forest Service and NRCS, in Lincoln, NE, was affected by the NRCS re-organization, the USDA provided assurances that the center would be supported by NRCS 

at a funding level of $655,000. 

What was the actual NRCS funding for the above mentioned partnership in Lincoln, NE in 2006? How much is the NRCS funding for the above mentioned partnership in Lincoln, NE for 2007? 

Answer. NRCS continues a close collaboration with the National Agroforestry 

Center. A NRCS Lead Agroforester position was reestablished and filled at the beginning of fiscal year 2006 and additional direct support totals $140,000. This position serves as a liaison with the Center. Further support is provided from the three 

foresters at NRCS new National Technology Support Centers. Salaries and support 

total an estimated $360,000. The total support cost in fiscal year 2006 is $500,000. 

Specifics for the fiscal year 2007 Budget have not been developed. 

NATIONAL INSTITUTE FOR FOOD AND AGRICULTURE

Question. The President announced a major initiative as part of the State of the 

Union address to enhance America’s competitive standing in the global marketplace. 

The American Competitiveness Initiative proposes to significantly boost the Federal 

Government’s investment in basic research for the physical sciences acknowledging 

the vital importance of basic research to future discovery and eventual economic 

growth. 

How much basic research does USDA perform? Over the last two decades has that 

amount grown? Would the establishment of a National Institute for Food and Agriculture—-similar to other National scientific institutes like the NIH or NSF enhance 

the future competitiveness of our farm and food sectors? If so, will you endorse its 

creation? 

Answer. While the distinction between basic and applied research is not clear cut, 

it is estimated that slightly less than half of the USDA research budget supports 

basic research. 

The National Institute for Food and Agriculture is one of several initiatives that 

have been proposed to strengthen the Nation’s agricultural research system, with 

the ultimate goal of strengthening the competitive position of the U.S. farm and food 

sector. NIFA, among other proposals, has generated useful discussion among the diverse stakeholders of the food and agriculture research community that enrich future consideration of options for strengthening the research component of the farm 

and food sector. 

Question. The National Institutes of Health spends nearly $15 on research for 

every dollar spent by the USDA. In competitive, merit based, peer-reviewed 

grants—long considered the best way to achieve advances in fundamental science— 

the NIH outspends the USDA by more than 100 to 1. 

What is the cause for this funding imbalance? Do you believe the competitive interests of our farmers are being met with such a funding disparity? 

Answer. The administration continues to show strong support for the National Research Initiative (NRI), the competitive, merit-based, peer-reviewed grant program 

within USDA. Funding for the NRI has increased in recent years, and the administration has requested an increase of $66.3 million in fiscal year 2007. The NRI is 

a critical component of a balanced research portfolio of intramural and extramural 

research that is effectively serving the competitive interests of farmers. 

Question. In USDA’s budget proposal for fiscal year 2007, your administration 

lists six strategic goals that describe the Department’s major objectives which include enhancing international competitiveness, enhancing the competitiveness and 

sustainability of rural economies, enhancing food safety, improving the Nation’s nutrition and health, protecting our natural environment, establishing energy independence and improving the quality of life in Rural America. Similar objectives were 

listed by the 2002 USDA Research, Education and Economics Task Force which 

called for the creation of a National Institute for Food and Agriculture to achieve 

these goals. 

Has the Department taken any steps to meet the objectives outlined in this task 

force report? My thought would be that if NIFA were in place for the last 15 years 

we probably would be producing at least 20 percent of our energy needs from cellulose sources and other renewable fuels. Would you agree with that? 

Answer. The Department’s fiscal year 2007 strategic goals are similar to those 

identified by the 2002 USDA task force report. This suggests that the Department’s 
92 

research agencies and programs are focused on achieving the same goals and objectives as those outlined in the task force report. 

Question. Mr. Secretary, since this administration financially supports joint research with major overseas competitors like India to improve farming technology as 

part of an Agricultural Knowledge Initiative, will this administration support an agricultural knowledge initiative here at home known as the National Institute for 

Food and Agriculture? It seems to me, Mr. Secretary that we ought to reinvest in 

our research infrastructure here at home before going overseas. I think my farmers 

would support a major U.S. Agricultural Initiative before they would support a U.S.- 

India Agriculture Initiative. Let’s fix our own research problems before fixing those 

of our competitors. 

Answer. The Department has a strong agricultural research program that is generating new knowledge and technology that will enhance American farmers’ ability 

to be competitive in global markets. In particular, the administration continues to 

support the National Research Initiative, USDA’s flagship competitive research program. In the fiscal year 2007 Budget the President once again recommends increasing the investment in the NRI to help address the critical issues facing our Nation’s 

farmers. 

EPA REGULATIONS

Question. Specific provisions of concern to Ag retailers and distributors regards 

the proposed EPA rules relating to secondary containment requirements covered 

under ‘‘Scope and Applicability’’—Section 165.141 (This defines facilities covered by 

these sections of the rule) through ‘‘Administrative Standards’’—Section 165.157. 

Included in these sections are new Federal requirements that relate to bulk pesticide containment only. For example, ‘‘General Requirements for Containment 

Structures’’—Sec. 165.146(a)(1)(2) and ‘‘Specific Requirements for Liquid Bulk Containment Structures’’—Section 165.148(a) discuss types of containment structure Ag 

retailers would need to comply with. 

Will the above mentioned specific provisions be applied in a fair and even manner 

for the entire Ag sector? If not, then will these provisions be dropped from any final 

EPA rule and continue to allow the States to regulate this area as they have been 

doing for the past several decades without EPA oversight? 

Answer. EPA administers pesticide regulations under the Federal Insecticide, 

Fungicide and Rodenticide Act (FIFRA), and is responsible for their implementation 

and interpretation. USDA and EPA actively work together to ensure unnecessary 

regulatory burdens are not imposed on the agricultural sector. We will work with 

EPA to encourage them to adopt provisions in the rulemaking that can be applied 

in a fair and even manner for the entire Ag sector. 

QUESTIONS SUBMITTED BY SENATOR CONRAD BURNS

RESUMING BEEF EXPORTS TO JAPAN

Question. Mr. Secretary, many of my producers in Montana are frustrated that 

you don’t appear to be taking a more firm stance with Japan regarding beef exports. 

Can you tell me what USDA is doing to get the borders back open? 

Answer. On January 20, when we announced that a U.S. exporter sent a shipment of veal to Japan that did not comply with the terms of the Export Verification 

Program, we made very clear that we take this matter very seriously. We immediately set about to implement follow-up actions that would prevent such an incident from occurring again and would help get exports to Japan resumed as soon 

as possible. To help in this effort, we made clear in a series of meetings with senior 

Japanese officials that this is a top priority and that our investigation of the incident would be thorough. 

On February 17, the results of the Department’s investigation into the ineligible 

shipment of veal were announced. In conjunction with that announcement, a comprehensive USDA report was released that details the findings of the investigation 

and actions taken by USDA. At that time, it was announced that additional actions 

beyond those announced January 20 would be taken in response to findings in the 

report. These actions go beyond the circumstances of the incident to incorporate further efficiencies and protections into the U.S. export system. 

This information was submitted to Japanese authorities for their review. The document contained two distinct reports: an investigation by the Food Safety and Inspection Service and an audit by the Office of the Inspector General. Japanese authorities reviewed the two reports and transmitted questions to USDA about the report. USDA has responded to all of Japan’s official questions and delivered them 
93 

to the Ministry of Agriculture. In addition, a technical team will be traveling to 

Japan in late March for meetings to provide any necessary clarifications as well as 

respond to any remaining questions. Department of Agriculture officials, as well as 

those from other Executive Branch agencies, have pressed upon Japan the importance of resolving this matter and the need to provide a timeline for reestablishing 

trade. We have stated on a number of occasions that time is of the essence and that 

we need to have assurances that this process will not be drawn out. We have also 

made clear that Japan may be inviting a complication in our bilateral trade relationship if this matter is not resolved quickly. 

PESTICIDES

Question. Mr. Secretary, you and I have often talked about the need for USDA 

to serve as an advocate for agriculture at EPA. I am concerned that rules relating 

to Superfund and pesticide containment are treating agriculture unfairly, and I believe that you need to step up on behalf of America’s farmers and ranchers. 

Can you share with the Committee your thoughts on the relationship between 

EPA and USDA? 

Answer. The Department normally reviews proposed rules that EPA promulgates 

to evaluate their impact on USDA activities, and on production agriculture. We 

work cooperatively with EPA, and often provide comments, both informally and formally, in order to attain key environmental objectives without unduly penalizing 

farmers and ranchers. 

Representatives of USDA regularly meet with EPA personnel in a series of bimonthly meetings to share progress on conservation programs, and look for opportunities to assist producers in proactively meeting regulatory constraints. These meetings also inform EPA staff so that they can tailor regulatory programs to achieve 

protection of the environment while allowing producers to have flexibility in achieving the desired results. 

For example, USDA has been working with EPA during their efforts to promulgate regulations on the containment of pesticides at storage facilities to achieve a 

final regulation that will not be unfairly burdensome to agricultural producers. The 

draft final rule would establish standards for removal of pesticides from containers 

and for rinsing containers; facilitate the safe use, refill, reuse, and disposal of pesticide containers by establishing standards for container design, labeling and refilling; and establish requirements for containment of large, stationary pesticide containers and for containment of pesticide dispensing areas. These regulations do not 

directly impact farm containers. Since this effort is not yet finalized, I am not at 

liberty to discuss any further details of the pending regulatory language, but we 

continue to evaluate proposed changes and will provide EPA with comments on 

their draft final rule. 

RENEWABLE FUELS

Question. Renewable fuel development holds tremendous potential for rural States 

like Montana, particularly the development of cellulose ethanol and biodiesel. I understand this is a top priority for USDA. 

Can you update the Committee on USDA’s activities in implementing the Energy 

title of the Farm Bill and in making producers aware of the resources that USDA 

has available? 

Answer. Renewable fuel and bioenergy development remains a top priority for 

USDA. The Energy Title of the Farm Security and Rural Investment Act of 2002 

(Farm Bill) authorized various renewable fuels programs. Section 9010 of the Farm 

Bill continued support for the bioenergy program to support increased production 

of bioenergy. Since fiscal year 2002, USDA has awarded over $450 million in payments to bioenergy producers through this program. Section 9004 established the 

Biodiesel Fuel Education Program through which USDA awards grants to educate 

governmental and private entities and the public about the benefits of biodiesel. 

USDA also continues to team with the Department of Energy on the Biomass Research and Development Initiative with authorized funding from section 9008. This 

initiative supports the development of new bioenergy technologies and biobased 

products. 

USDA conducts outreach to producers in many ways. Service Center Agencies provide information at their individual locations. USDA participates in many conferences each year that are designed to reach producers and potential producers. 
94 

BEGINNING FARMERS AND RANCHERS

Question. I believe one of the most important things we can be debating, especially in light of Farm Bill reauthorization, is role the Federal Government can play 

in encouraging young farmers and ranchers to get into production agriculture. 

Is USDA considering incentives and/or elimination of barriers for young farmers 

and ranchers, and how will that play into Farm Bill proposals? 

Answer. I recently completed a series of Farm Bill listening sessions around the 

country. A recurring theme at these sessions was the need to help young farmers 

and ranchers to get into production agriculture. A number of comments and suggestions were received which warrant consideration during the upcoming Farm Bill debate. Further, the USDA Beginning Farmer and Rancher Advisory Committee will 

be meeting later this year. In the past, this committee has provided valuable guidance in framing Farm Bill debate pertaining to assistance to beginning farmers and 

ranchers. 

NATIONAL ANIMAL IDENTIFICATION SYSTEM

Question. Producers in Montana continue to be concerned about the development 

of a national animal ID system. I hear concerns relating to cost, confidentiality, and 

liability. 

Can you please share what is being done to address these concerns? 

Answer. The size and scope of the National Animal Identification System (NAIS) 

demand that it be a cooperative program, with industry and government sharing the 

cost of the necessary elements. By the end of fiscal year 2006, USDA will have invested $84.8 million into developing NAIS in terms of premises registration, information technology development, education and outreach, and staffing. The animal 

identification component is USDA’s next implementation priority, along with the information-technology architecture to support multiple tracking databases. The animal tracking databases themselves will be developed and maintained by industry 

and States, and the cost of capturing animal movement data will be their responsibility. 

USDA recognizes that some producers have concerns about misuse of the data 

that will be collected and how the information will be maintained. We are working 

with industry to establish an information technology solution for animal movement 

data to be maintained in animal tracking databases managed by the industry and 

States. As proposed, USDA will only be able to access the information through a 

querying mechanism initiated when a disease of concern has been reported. As industry develops data collection systems and this process moves forward, USDA will 

continue to keep producers informed. The NAIS will not expose producers to any 

unwarranted or additional liability. 

QUESTIONS SUBMITTED BY SENATOR SAM BROWNBACK

NEW USES EXPO FOR BIOBASED PRODUCTS

Question. I recently sent a letter to you concerning the biobased products component of the Department of Agriculture’s Research, Education and Economics ‘‘Strategic Vision of 2005–2008’’. I offered Kansas City as a site for the USDA to host 

a New Uses Expo to highlight new, non-food, non-feed uses for agricultural products. Your office was kind to reply to my letter by saying that the USDA ‘‘hopes 

to sponsor, as resources allow, a National Biobased Products Conference to highlight 

new biobased products’’ in 2007. 

Mr. Secretary, what resources does your department need in order to make this 

New Uses Expo happen? 

Answer. At this time, the Department has not committed to holding a Biobased 

Products Conference in 2007. If we decide to hold a conference, we will coordinate 

with other Federal agencies. 

HORSE SLAUGHTER

Question. Last year the Senate passed an amendment that sought to de-fund 

USDA inspections of horse packing plants. I believe this policy to be extremely 

short-sighted. Now horse packing plants are required to pay ‘‘user fees’’ for inspectors to certify the quality of the meat. This is essentially an extra tax on packing 

plants that will lead to a loss of jobs here in America. Plus, if we outlaw the slaughter of horses, I believe this will lead to less humane treatment of unwanted horses. 

Experts estimate 70–80,000 horses each year are disposed of because they are no 

longer viable, are old, infirm, unmanageable or unwanted. These same experts esti-
95 

mate this number will approach 100,000 unwanted animals a year very shortly and 

could double within a few years. While most horses are sold, an unknown number 

are abandoned. When sold, approximately 55,000 animals will move to USDA-regulated and inspected processing plants, transported under USDA regulations, promulgated under the Commercial Transport of Equine for Slaughter provisions of the 

1996 Farm Bill. Once they reach the processing plant, these animals are euthanized 

humanely under the Federal Humane Slaughter Act, and the meat is inspected and 

certified by USDA’s Food Safety & Inspection Service (FSIS). While some meat is 

sold in the United States to satisfy cultural markets, the majority is exported. Some 

argue these unwanted animals can be easily moved to existing ‘‘adoption’’ facilities. 

The capacities of such facilities range from 5 horses to, in rare instances, a maximum of 1,000 horses. The average capacity of one of these facilities, however, is 

30 animals. In the first year of a Federal ban on horse processing, nearly 2,700 additional facilities would be needed, according the American Association of Equine 

Practitioners (AAEP), the professional organization of equine veterinarians. This is 

PETA’s first salvo in the war against meat. What’s next, the outlawing of slaughtering cattle? I intend to undo this mistake we made last year. 

What is the administration’s position on the ‘‘Horse Slaughter’’ amendment as 

passed last year? 

Answer. USDA has abided by the prohibition of federally-funded USDA inspections of horses presented for slaughter at official establishments. The fiscal year 

2006 Agriculture, Rural Development, Food and Drug Administration and Related 

Agencies Appropriations Act included a section prohibiting the use of appropriated 

funds to pay the salaries or expenses of personnel to inspect horses (ante-mortem 

inspection) after March 10. Conference report language for the act recognized FSIS’ 

obligation under existing statutes to ‘‘provide for the inspection of meat intended for 

human consumption (domestic and exported).’’ 

While the appropriations bill prohibited appropriated funds from being used to 

pay for ante-mortem inspection, it does not eliminate FSIS’ responsibility under the 

FMIA to carry out post-mortem inspection of carcasses and meat at official establishments that slaughter horses. In response to a petition, FSIS established a feefor-service program under which establishments can apply and pay for ante-mortem 

inspection of horses. The interim final rule became effective March 10, 2006. 

LAND GRANT UNIVERSITY FUNDING

Question. As a Senator from a State with a first class land-grant university and 

a graduate of that same university, I am very proud of the legacy the land grant 

university system has in our country. As you know the land grant university system 

makes up the infrastructure which is the basis of our country’s agriculture research, 

teaching, and extension programs. These are programs that support our farmers, 

ranchers, youth, families, and rural residents. Without the base funds that our Land 

Grants schools receive for Hatch Act, McIntire-Stennis Cooperative Forestry, and 

the Animal Health programs many schools would be in dire straits to continue to 

offer programs that support our constituents. The President’s budget proposes to cut 

55 percent of Hatch Act funds, 50 percent of the McIntire-Stennis funds, that our 

Land Grant Universities currently get and make them available only to multi-state 

projects and eliminate the Animal Health funding. Some Universities would very 

likely have to terminate many of their Agriculture programs. Some may have to go 

as far as not offering agriculture as part of a curriculum. A University like Kansas 

State might suffer a loss of $1.6 million. Kansas State is an institution that would 

compete very well for those funds if in a multi-state pool. However, there would be 

major disruption in current programs while we had to go through the motions of 

competing. They would have to lay off faculty, stop on-going research projects, and 

undertake other disruptive measures. And then there would be no guarantee that 

my institution would get back to even. Without these funds the Land Grants system 

would be in disarray. 

In making this proposal, did you consider the financial and programmatic impacts 

there would be on each Land Grant institution and the other stakeholders who depend on these programs? 

If ‘‘YES’’—can you please provide the Committee with a copy of your analysis of 

these impacts? 

If ‘‘No’’—How can you expect us to embrace such a major change in program administration without a detailed analysis of how these changes will affect the Land 

Grant institutions in our State? 

Answer. Yes, we did consider the impact on eligible institutions. The analysis is 

provided for the record. 

[The information follows:] 
96 

REVIEW OF STAKEHOLDER RESPONSE TO THE FISCAL YEAR 2006 BUDGET AS BACK- GROUND FOR COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE

(CSREES) FISCAL YEAR 2007 BUDGET PROPOSAL

Key Elements of the President’s Fiscal Year 2006 Budget for CSREES 

The fiscal year 2006 budget expanded the NRI to $250 million; established a new, SAES Competitive Grants Program at $75 million; cut the Hatch and McIntire-Stennis research formulas by 50 percent in 2006, and 100 percent in 2007; cut the Animal Health (Section 1433) research formula by 100 percent, starting in 2006; and 

moved six competitive grants programs currently funded under Section 406, Integrated Competitive Grants programs, to the integrated programs area of the NRI 

initially provided through Congressional appropriations actions beginning in 2004. 

The proposal also called for full indirect cost recovery on all competitively award 

grants, up from the current level of 20 percent of direct costs, and an increase in 

integrated grants authority from 20 to 30 percent. 

Congressional Response 

In questions to the Agency during the hearing, and more intensively in post hearing, written questions, the House sought accomplishment information for formula 

based programs and asked the agency about stakeholder input and the administration’s analyses leading to the recommendations to redirect formula funded research 

programs to competitive grants. 

The Senate committee is very unlikely to adopt the administration’s proposal to 

redirect formula funds to competitive programs, and may be reticent to consolidate 

the 406 programs with the NRI, particularly if this action limits the integrated programs in the NRI which began in 2004. 

University Response 

Agricultural Research and Extension Administrators, Land-Grant Universities 

(LGUs): The collective response of these administrators has been extraordinarily 

negative to the formula-competitive conversion. Initial analysis of the university director’s response to the initial proposals in the President’s fiscal year 2006 budget 

indicate that the primary concerns are: (1) lack of consultation with affected universities and stakeholders; (2) loss of matching funds; (3) program continuity and 

length of awards; (4) sustaining breadth of capacity in agricultural science and education nationwide; (5) providing responsiveness to State and local issues; and (6) 

leveraging and sustaining partnerships across institutions. 

—Directors particularly have cited consequences for employment (estimating as 

many as 2000 scientists and equal numbers of technicians and graduate students will lose their jobs; see CRIS tables on employment by Hatch projects for 

actual numbers.); concerns about program infrastructure; loss of matching 

funds; and continuity of efforts. In addition, agricultural research directors have 

expressed concern about a net decline in total research effort, if funds are diverted from direct scientific effort to covering indirect administrative expenses. 

They also are concerned by the speed with which these changes would be implemented especially given that they argue there was no consultation on the proposal. In 2005, LGU agriculture deans and directors have declined the offer of 

CSREES to participate in a joint planning team to examine alternate strategies 

to implement fiscal year 2006 proposed, competitive research programs. 

—Central Administrators at LGU’s: Chancellors, Presidents and Vice President’s 

for Research, particularly, though not exclusively, those at larger institutions, 

have expressed support for the proposals in the administration’s fiscal year 

2006 budget proposal. Their support appears predicated not only on the need 

for agricultural research grants to carry indirect cost recovery to the degree consistent with other Federal grants, but also to help bring agricultural science 

into the broader fold—and stature—of peer reviewed research on campus. 

Scientific Societies 

Individual organizations and consortia of scientific societies have supported 

growth in competitive research programs, and have been either fully supportive of 

the fiscal year 2006 administration budget, or supportive of the growth the NRI and 

other competitive programs while silent on the formula-related provisions. For example, the American Phytopathology Society has focused its lobbying efforts on 

seeking to expand competitive grants, as included in the fiscal year 2006 proposal. 

Co-Farm, the Coalition for Funding Agricultural Research Missions, is seeking overall growth in funding for agricultural science, thus emphasizes programs with higher numbers than previous appropriations. Episodic reports from individual scientists 

have varied from concern about loss of start-up funds and preliminary studies needed to test approaches prior to developing proposals for grant funding provided by 
97 

some institutions through formula programs to supporting increases in available 

funds for competitive grants especially to increase the average size and duration of 

awards. 

Public Citizens and Associations of Producers, Processors, Consumers and other Interests 

Few citizens or public stakeholder groups have expressed views to the Agency regarding funding mechanisms employed by CSREES. CARET, the Council for Agricultural Research, Extension and Teaching, collectively has called for the restoration 

of formula funds, although individual members have expressed an interest in developing alternative funding approaches. Major commodity groups have not expressed 

views on this issue. 

HATCH ACT

Recipients of Hatch Act funds have the flexibility to distribute funds among research projects, infrastructure, and personnel as they wish to meet the needs of 

their university. The distribution of these dollars varies from State to State. The 

latest data on personnel supported with Hatch funds as reported into the Current 

Research Information System (CRIS) by recipients of Hatch Act Funds is for fiscal 

year 2004. The recipient institutions do not assemble the data until the close of the 

fiscal year and then the reporting process requires approximately 6 months. The fiscal year 2005 data is being collected now but not all institutions have made their 

reports available yet. Therefore, we do not have complete data for fiscal year 2005 

at this point. The recipient institutions do not report estimates to CSREES so estimates for fiscal year 2006 and 2007 are not available. 

The information is submitted for the record. 
98 

SUMMARY OF PERSONNEL SUPPORTED WITH HATCH ACT FUNDS IN FISCAL YEAR 2004

MCINTIRE-STENNIS FORESTRY GRANTS

Recipients of McIntire-Stennis funds have the flexibility to distribute funds among 

research projects, infrastructure, and personnel as they wish to meet the needs of 

their university. The distribution of these dollars varies from State to State. The 

latest data on personnel supported with McIntire-Stennis funds as reported into the 

Current Research Information System (CRIS) by recipients of McIntire-Stennis 

Funds is for fiscal year 2004. The recipient institutions do not assemble the data 

until the close of the fiscal year and then the reporting process requires approximately 6 months. The fiscal year 2005 data is being collected now but not all institutions have made their reports available yet. Therefore, we do not have complete 
99 

data for fiscal year 2005 at this point. The recipient institutions do not report estimates to CSREES so estimates for fiscal years 2006 and 2007 are not available. 

The information is submitted for the record. 

[The information follows:] 

SUMMARY OF PERSONNEL SUPPORTED WITH MCINTIRE-STENNIS FUNDS

ANIMAL HEALTH AND DISEASE RESEARCH

Recipients of Animal Health and Disease Research funds have the flexibility to 

distribute funds among research projects, infrastructure, and personnel as they wish 
100 

to meet the needs of their university. The distribution of these dollars varies from 

State to State. The latest data on personnel supported with Animal Health and Disease funds as reported into the Current Research Information System (CRIS) by recipients of Animal Health and Disease Funds is for fiscal year 2004. The recipient 

institutions do not assemble the data until the close of the fiscal year and then reporting process requires approximately 6 months. The fiscal year 2005 data is being 

collected now but not all institutions have made their reports available yet. Therefore, we do not have complete data for fiscal year 2005 at this point. The recipient 

institutions do not report estimates to CSREES so estimates for fiscal years 2006 

and 2007 are not available. 

The information is submitted for the record. 

[The information follows:] 
101 

SUMMARY OF PERSONNEL SUPPORTED WITH ANIMAL HEALTH AND DISEASE RESEARCH

PROGRAM FUNDS IN FISCAL YEAR 2004

The Land Grant University System is supported through a broad portfolio of funding mechanisms at the Federal, State, and in the case of Cooperative Extension, the 

local level. The proposal in the fiscal year 2007 President’s budget for CSREES 

seeks to expand the proportion of Federal funding flowing to agricultural research 

through credible, competitive processes, while building on the strengths of land 

grant universities to work together to solve research-based problems. University and 

USDA staff members currently are working together to design a multi-state pro-
102 

gram implementation plan such that universities could address issues of great importance locally, which collectively achieve regional or national goals in agriculture. 

The plan recognizes the value of expanding the capacity at smaller institutions 

through joint and collaborative work, addressing issues on local and State agendas 

to assure matching funds for the programs, and recognizing the geographically diverse nature of agriculture and natural resources. 

Issues which could be addressed through expanded multi-state and institutional 

collaboration include animal and plant disease, including current issues such as citrus greening and Asian soybean rust; water availability and management; best 

practices for small-sized agricultural producers. In addition, the multi-institutional 

research program has been used to expand access to subject matter colleagues 

across State lines, rapidly respond to emerging issues, and sustain national research 

support efforts, such as pesticide clearance. 

By sustaining funding through the Hatch and McIntire-Stennis programs, the 

President’s budget proposal responds to concerns expressed by universities in previous years about retaining matching requirements, allowing planning and management of programs to remain in the context of the Agricultural Experiment Stations 

(AES) and Cooperative Forest Research programs, and proving continuity and planning through a full, 5 year award cycle to AES directors and Administrative Technical Representatives (McIntire-Stennis managers) for each multi-state project in 

which a State participates. 

Question. The Land Grant University System is currently undertaking a comprehensive review of all of these programs and how they might be changed in the 

context of the 2007 Farm Bill to meet the 21st century challenges facing agriculture, 

rural communities, and our entire food and fiber system through research, extension 

and teaching. Do you agree that such changes can best be considered through a collaborative process with an eye toward the 2007 Farm Bill as opposed to the implementation of drastic changes imposed unilaterally by USDA? 

Answer. Although revising the Farm Bill to restructure the research agencies at 

the U.S. Department of Agriculture could address some of the issues regarding sustainability of funding for science, other concerns such as competitiveness, quality 

and coordination of programs and projects, and linkage to other Federal Science programs also can be addressed through budget allocations and mechanisms. 

Question. Rather than imposing these drastic changes now, would you be willing 

to continue engage the Land Grant System in their efforts to review and build consensus for changes in our collaborative research, extension and teaching efforts? 

Answer. Currently, University and USDA staff members are working together to 

design a multi-state program implementation plan such that universities could address issues of great importance locally, which collectively achieve regional or national goals in agriculture. 

FARM PROGRAM FUNDING

Question. I applaud President Bush’s proposal to reduce the payment limit from 

its current $360,000 level to $250,000. I’ve voted for lowering this limit in the past 

and I continuing to believe the payment limit should be lowered from its current 

level. Obviously, this could help play a role in reining in government spending. I 

also believe tougher enforcement on those who circumvent the payment limits could 

help us spend less money in commodity payments. 

What commitment level does this administration give to lowering payment limits, 

strengthening enforcement when loopholes are found and developing a measurable 

standard to determine who should and should not be receiving farm subsidies? 

Answer. The President’s Budget for fiscal year 2007 includes a package of proposed farm program changes for the purpose of reducing spending in these programs 

as part of the effort to reduce the budget deficit. One of these proposals would reduce payment limits and significantly reform current payment limitation law. 

Among other things the proposal would reduce the overall payment limit from 

$360,000 to $250,000 per natural person. It would establish a form of direct attribution and strengthen provisions for enforcement against loopholes. These proposals 

would apply to the remainder of the 2002 Farm Bill. 

NATIONAL ANIMAL IDENTIFICATION SYSTEM (NAIS)

Question. If States and private industry were to contribute the same amount of 

funding as the Federal Government for the implementation of the NAIS—$33 million per year in this budget request and in the previous 2 years—would it be possible to maintain the implementation timeline outlined in the Department’s May 

2005 Draft Strategic Plan (i.e., full program implementation by January 2009)? If 

not, what percentage of the total funding would have to come from outside the Fed-
103 

eral Government in order to have an animal ID system fully operational by January 

2009—would States and private industry be responsible for two-thirds of the funding, or three-fourths, or more? 

Answer. NAIS will be a fully operational system in early 2007 and consist of three 

main components: premises registration, animal identification, and animal tracking. 

Premises registration has been implemented in all 50 States and 2 Territories. Several Tribes are also registering their premises. In March, APHIS will begin distributing animal identification numbers. We anticipate the remaining systems elements 

will be operational in early 2007, but private entities will need to supply information to fill the private databases. 

Question. Does USDA have the authority under the Animal Health Protection Act, 

or any other statute, to require a mandatory animal identification program? Does 

the transfer of the animal-tracking database to the private sector affect the Department’s ability to mandate participation as originally envisioned in the May 2005 

Draft Strategic Plan? 

Answer. The Animal Health Protection Act provides authority to issue regulations 

establishing a mandatory National Animal Identification System. The inclusion of 

State or private animal movement tracking systems within the NAIS would not 

alter the Department’s authority to mandate participation. 

SERICEA LESPEDEZA

Question. Sericea lespedeza is an important Federal field crop in the southeastern 

United States, but it is an invasive species in the central plains States, including 

my home State of Kansas, as it destroys the ecological balance of tallgrass prairie 

lands. Currently, conservation efforts in Kansas’ tallgrass prairie cannot sequester 

USDA’s assistance to find ecologically/economically compatible controls for Sericea 

lespedeza because of its status as a Federal field crop through APHIS. However, we 

need to address this critically important issue affecting our prairie before it’s too 

late. 

How can we find a way to ascertain USDA’s help in controlling this destructive 

invasive species in Kansas while ensuring that these methods of control do not compromise Sericea’s production in the southeastern United States? Would APHIS be 

open to providing varying regional statuses for Sericea lespedeza? 

Answer. There is no formal definition of a ‘‘Federal field crop.’’ APHIS’ focus is 

on quarantine pests. The offending pest must be new to the United States, or 

present but not known to be widely distributed in the United States and currently 

under an active control program. S. lespedeza has been in the country for more than 

a century and is in at least 60 percent of the States. Consequently, it does not meet 

the requirements of a quarantine pest. 

However, regional effort is an option that could be pursued using State statutes. 

Currently, Kansas is the only State that regulates S. lespedeza as a State noxious 

weed. 

QUESTIONS SUBMITTED BY SENATOR HERB KOHL

HORSE SLAUGHTER/USER FEES

Question. Meat inspection user fees have been proposed many times, but have ultimately been rejected by Congress because the general assumption was that statutory authorization was required before the Department could collect fees. However, 

based on your recently announced rule for fee inspection, and the subsequent court 

ruling, USDA apparently CAN collect user fees without explicit statutory language. 

Now that USDA lawyers assert that these fees can be collected, it seems this dramatically changes the dynamic. 

Can Congress assume that USDA still believes it has legal authority to collect 

these fees? 

Answer. User fees have been proposed for inspection under the Federal Meat Inspection Act (FMIA), the Poultry Products Inspection Act (PPIA), and the Egg Products Inspection Act (EPIA), because these statutes only authorize user fees for overtime and holidays. The Agricultural Marketing Act of 1946 provides USDA the legislative authority to collect user fees for ante-mortem inspection of horses. This authority also authorizes the collection of fees for other types of voluntary meat and 

poultry inspection activities, including inspection of species not covered by the 

FMIA. 

Question. Since USDA prevailed in court on the question of fees for horse inspection, does that same legal theory apply to other meat and poultry inspections, including those activities for which user fees are proposed in the budget? 
104 

Answer. Under the Agricultural Marketing Act of 1946 (AMA), USDA is directed 

and authorized to provide, when requested, inspection of eligible species on a feefor-service basis. Such fee-for-service inspections have long been provided by FSIS 

inspection program personnel for other species not eligible for inspection or not eligible to receive certain types of services under the FMIA. The AMA does not provide 

the authority necessary to recover the costs of providing inspection services under 

the FMIA, PPIA, or the EPIA. 

Question. Is USDA still in favor of user fees as a way to pay for meat and poultry 

overtime inspections? 

Answer. Yes. USDA will continue to recover the costs of providing overtime and 

holiday inspection through user fees. In addition, legislation will be submitted to 

Congress to authorize fees to recover the costs of providing inspection beyond a single approved primary shift. 

Question. Since the President’s budget simply asks us to provide $757 million for 

FSIS, can Congress assume that you will be able to support all FSIS activities 

through the new user fees you propose whether or not the authorization committee 

takes action? If not, what is your contingency plan—what’s going to get cut? Answer. The President’s 2007 budget requests $863 million, the full amount of 

budget authority needed to operate FSIS’ inspection services. We are requesting authority to charge user fees, deposit the fees into special receipt accounts, and use 

the fees subject to appropriations. 

FOOD SAFETY BUDGET TRENDS

Question. According to an OMB document published on January 23rd, fiscal year 

2008 budget for FSIS decreases by $27 million from the fiscal year 2007 proposed 

level, and that trend continues. 

Should we be prepared for a trend in requesting fewer dollars for food safety activities? If these decreases on this OMB document actually occur over the next 5 

years—one analysis maintains that it will equal a 17 percent cut—what activities 

are going to suffer? 

Answer. The fiscal year 2007 budget documents include estimates for fiscal year 

2008 and beyond that reflect the President’s commitment to reduce the Federal deficit in half by fiscal year 2009. These out-year estimates are computer generated 

using set formulae that do not reflect policy decisions. No conclusion on the administration’s priorities for food safety or other USDA activities should be drawn from 

these numbers. 

COMMODITY SUPPLEMENTAL FOOD PROGRAM

Question. How much carryover did CSFP have at the end of fiscal year 2005? 

Answer. At the end of fiscal year 2005, the Commodity Assistance Food Program 

(CSFP) had a carryover amount of $118,000. 

Question. How much will be used to help fund the fiscal year 2006 Shortfall? If 

this will not occur, please explain the reasoning, especially since the budget proposes to eliminate the program next year, making carryover into 2007 unnecessary. 

Answer. All of the fiscal year 2005 carryover funds will be used in 2006. We plan 

to use all of the fiscal year 2005 funds in 2006. 

Question. What is the status of the $4 million additional funding provided for 

CSFP in the last supplemental? Could this be used to help the fiscal year 2006 

shortfall? If not, why? 

Answer. The supplemental assistance will be offered to the three Gulf-area CSFP 

States that were directly affected by the hurricanes (Louisiana, Mississippi and 

Texas). These three CSFP States have the vast majority (over 93 percent) of all disaster assistance applicants. The assistance will be provided in the form of caseload, 

administrative funds, and commodities. 

The supplemental funding cannot be used to make up the fiscal year 2006 shortfall. The legislation that provided the supplemental funding to CSFP requires that 

the supplemental funding be used ‘‘for necessary expenses related to the consequences of Hurricane Katrina... .’’ Therefore, these funds cannot be used to restore caseload to all CSFP States. 

Question. Has there ever been a full evaluation of the CSFP, other than the administration’s PART review, which stated that CSFP was a good alternative to the 

Food Stamp Program for senior citizens? If not, why wasn’t one planned or carried 

out before this elimination? 

Answer. There is very limited information on the impact of the CSFP on participants’ nutrition and health status, and no evaluation of which we are aware that 

characterized the program as a good alternative to the Food Stamp Program. A 1982 

evaluation examined administrative and medical records data from 3 CSFP sites 
105 

and found positive impacts for pregnant women and suggestive evidence of positive 

impacts for children. However, the program has changed substantially since this 

study was done. In particular, it did not include the elderly, who now account for 

about three-fourths of program participants. 

In 2005, the Economic Research Service began a study to examine participation 

and administrative issues related to the CSFP, including how CSFP fits into States’ 

overall designs to address food insecurity among target populations, why some 

States choose not to participate, and who among those eligible tends to participate. 

The study will be published in early 2007. 

Though questions have been raised about the effectiveness of CSFP, other important factors influenced the administration’s decision to eliminate program funding. 

The key consideration influencing this decision is that the program is not available 

nationally and is substantially redundant of other nutrition assistance programs 

that are available nationally. 

In the administration’s view, ensuring adequate funding for programs that have 

the scope and reach necessary to provide access to eligible people wherever they 

may reside is a better and more equitable use of scarce resources than to allocate 

them to programs that cannot provide access to many areas of the country. For this 

reason, the administration has placed a priority on funding the Food Stamp, WIC, 

and other nationally-available programs that provide benefits to eligible people 

wherever they may live. 

Question. How many senior citizens do you estimate will be ineligible for the Food 

Stamp Program, or may choose not to participate for other reasons? 

Answer. Based on the best-available national information on the circumstances of 

all low-income elderly, we estimate that about 101,000 elderly CSFP participants 

will not be eligible for food stamps, largely because they hold countable assets that 

put them over the Food Stamp Program’s resource limit. Our budget request assumes that 88,000 CSFP participants will make the transition to food stamps and 

that about 118,000 will choose not to even though they are eligible. We are prepared, however, to use the requested food stamp benefit reserve if necessary to support participation by all who are eligible. We have also requested $2 million for outreach to encourage elderly CSFP participants to participate in Food Stamps. 

Question. What is the average market value of the food boxes received in the 

CSFP program by seniors, and how does that compare to the $20 in temporary assistance you are offering to provide? 

Answer. We estimate that a CSFP food package for elderly participants would 

have a retail value of approximately $42.35, on average, if purchased at retail prices 

in 2005. However, this cost could vary greatly depending on type, brand, etc. of 

foods in the package. In comparison, the average food stamp benefit for a senior living alone was $65 per month in 2004. 

GIPSA OIG AUDIT

Question. I know that USDA is taking specific actions to try to fix all of the problems identified in a recent OIG audit of GIPSA. However, in 1997 and in 2000 

GIPSA was reviewed and changes were suggested, but problems weren’t fixed. 

Why will this time be different? How will you regain the confidence of the markets GIPSA is supposed to protect? 

Answer. GIPSA intends to restore confidence by implementing all recommendations in the OIG report. GIPSA has already issued policy directives in response to 

several of the recommendations and is initiating a review process to ensure that the 

directives are being followed and implemented properly. 

However, GIPSA has gone further than just the OIG recommendations. For example, the agency has requested a full scale organizational review to provide recommendations on how to improve the agency’s operational effectiveness. Also, the 

new GIPSA Administrator recently ordered an Office of Personnel Management-administered Organizational Assessment Survey. The survey gives employees an anonymous opportunity to let the Administrator know what they think about the organization on a range of topics. Results will be used to make decisions about work environment improvements in the program and enhance its organizational effectiveness. 

The Administrator is also working to develop an organizational culture to ensure 

at all levels a recommitment to OIG and GAO recommendations and to redirect resources to achieve mission-critical activities. 

Question. On January 24th, I sent a letter to the Justice Department’s Special 

Counsel for Agriculture, with a copy to USDA, encouraging them to work with you 

to prevent anti-competitive market conditions—especially while GIPSA is still working to improve its efforts. Have you, or anyone from USDA, been in touch with the 

Justice Department? Do you plan to work with them? 
106 

Answer. USDA has undertaken a number of initiatives related to working with 

the Department of Justice (DOJ). First, an economist from GIPSA’s Industry Analysis Division, has been detailed to work at DOJ for 4 months on a case. GIPSA is 

also currently working in collaboration with DOJ on an anti-competitive investigation. Finally, GIPSA has a memorandum of understanding between the Office of 

General Counsel (OGC) at USDA and DOJ in place. Already DOJ and OGC are coordinating on relevant issues where warranted. 

Question. Since this report came out after the budget was written, do you now 

think you need additional resources in order to implement all of OIG’s recommendations? 

Answer. GIPSA is conducting an evaluation of program resources. If changes to 

resources are needed, they will be taken into consideration for the 2008 budget request. 

SMALL FARM/DIRECT MARKETING

Question. Can you point to any actions USDA has taken recently to help small 

producers work through regulatory problems that might stifle their ingenuity? Last 

year we provided funds for a new program to help promote farmers markets and 

other outlets for small producers, but they are not included in your budget. 

Answer. USDA has many programs that enhance the reliability and economic 

livelihood of small farmers and ranchers across America. Through these programs 

we actively encourage the growth and continuation of small, limited-resource, and 

minority farmers and ranchers, as well as local communities. Through outreach, research, market development, financial support, and technical assistance we are 

helping them compete. 

In January 2006, USDA issued its third progress and achievement report entitled 

‘‘Making a Difference for America’s Small Farmers and Ranchers in the 21st Century.’’ This report highlights USDA’s continuing efforts to assist the Nation’s small 

farmers, ranchers, and farm workers. It identifies the major achievements and continuing actions taken by USDA in response to the 8-policy goals and 146 recommendations included in the USDA National Commission on Small Farms’ report, 

A Time to Act. 

The Farmers Market Promotion Program is included in USDA’s fiscal year 2007 

budget. Following Congressional approval of funds for the administration of the 

Farmers Market Promotion Program for fiscal year 2006, USDA has been rapidly 

implementing this grants program through the Agricultural Marketing Service. The 

program is designed to facilitate and promote farmers markets and other direct-toconsumer marketing channels for farm products. By the end of fiscal year 2006, 

AMS will administer approximately $1 million in grants, with a statutory maximum 

of $75,000 per grant, to eligible entities. A Notice of Funds Availability for the 

Farmers Market Promotion Program was published in the Federal Register on 

March 15, 2006. The Notice invites eligible entities to submit project proposals to 

AMS by May 1, 2006. Eligible entities include agricultural cooperatives, local governments, non-profit corporations, public benefit corporations, economic development 

corporations, regional farmers’ market authorities, and Tribal governments. Grants 

will be awarded on a competitive basis following a comprehensive internal review. 

Question. What initiatives have you proposed to assist small farmers, to encourage their creativity, and to help American farmers remain independent? 

Answer. USDA’s budget for fiscal year 2007 proposes to continue the Farmers 

Market Promotion Program, which is designed to facilitate and promote farmers 

markets and other direct-to-consumer marketing channels for farm products. In addition, AMS offers technical assistance useful to small farmers through its ongoing 

Wholesale, Farmers, and Alternative Markets and Transportation Services programs. Examples of recent initiatives include the creation of a Farmers Market Consortium in November 2005, bringing together Federal agencies and private foundations that support development of farmers markets which has already produced and 

released a Farmers Market Resource Guide in March 2006. Also, the Federal-State 

Marketing Improvement Program offers grants that encourage creative solutions to 

local and regional agricultural marketing challenges. 

BSE—JAPANESE EXPORTS

Question. One of the things USDA is doing in response to the recent shipment 

of banned material to Japan is re-training the FSIS inspectors to make sure this 

never happens again. 

What is the status of that training, and what, exactly does it entail? 

Answer. On January 23, 2006, USDA’s Food Safety and Inspection Service (FSIS) 

conducted interactive web-based training for its inspection program personnel at Ex-
107 

port Verification (EV)-approved establishments. All FSIS inspection program personnel currently assigned to an establishment with an approved EV program completed the on-line training course by March 21, 2006. 

FSIS inspection personnel are provided computer-based follow-up and supplemental training. Inspectors who rotate into any establishment that produces product 

that is subject to EV requirements will also undergo training. All new employees 

hired after March 2006 will receive training. 

FSIS’ EV training reviews policies pertaining to Export Certification, Re-Inspection of Product intended for Export, and Certifying Beef Products under the EV Programs and all pertinent Export Directives. 

To be certain that FSIS inspection program personnel are fully aware of specific 

products approved for export to countries participating in EV programs, the Agricultural Marketing Service (AMS) will maintain a list of specific products approved for 

export to each country on an internal Web site accessible to FSIS-trained inspection 

program personnel. AMS will also notify FSIS each time establishments are audited, listed or delisted for EV programs. 

NON-AMBULATORY DISABLED CATTLE

Question. A recent OIG report on BSE surveillance notes that there has been 

some confusion regarding what constitutes a ‘‘downer’’ animal. I understand that 

the number of times this happened is extremely low—less than 50, I believe, out 

of all of the animals processed during the time of enhanced surveillance. However, 

I also understand the effect that even one case of BSE can have on our markets. 

What steps is the Department taking in order to provide a more clear description 

of what animals are to be considered ‘‘downers’’? 

Answer. On January 12, 2004, USDA issued an interim final rule which includes 

requirements for the disposition of non-ambulatory disabled cattle. The preamble to 

the rule States, ‘‘FSIS is requiring that all non-ambulatory disabled cattle presented 

for slaughter be condemned’’ (Docket No. 03–025IF, Federal Register, January 12, 

2004). The rule has not changed. However, in those extremely rare instances when 

a cow suffers an acute injury after passing ante mortem inspection and becomes 

non-ambulatory, the cow is not automatically condemned. 

Under an FSIS notice issued January 18, 2006, the animal is tagged as ‘‘U.S. Suspect’’ (FSIS Notice 05–06). The ‘‘U.S. Suspect’’ designation was not created for this 

rare situation, but is a long-standing practice. Inspection program personnel conduct 

careful ante mortem reinspection of animals so designated. Pursuant to the notice, 

Public Health Veterinarians (PHVs) perform an examination on these animals to ensure that the injury is acute and not the result of a chronic condition. If there is 

any evidence of a chronic condition, or if the PHV cannot be sure the injury was 

not caused by a chronic condition, the notice provides that the animal is to be condemned. 

A previous notice, issued on January 12, 2004, addressed this rare situation but 

did not provide for tagging. The application of a ‘‘U.S. Suspect’’ tag will help the 

Agency to better track occurrences in which acute injuries occur after ante mortem 

inspection at the slaughter plant. 

All cattle tagged ‘‘U.S. Suspect’’ are eligible to go to slaughter. The ‘‘U.S. Suspect’’ 

designation indicates that the animal needs closer postmortem examination, and 

consequently the PHV makes the final postmortem disposition of every ‘‘U.S. Suspect’’ animal. All cattle designated as ‘‘U.S. Condemned’’ are banned from entering 

the slaughter establishment. 

Question. Is additional training or information being provided to your inspectors 

in this regard? 

Answer. Public Health Veterinarians (PHVs) have the requisite veterinary medical education to distinguish between chronic conditions and acute injuries. A significant part of PHV training is dedicated to determining acute versus chronic conditions. A chronic disposition often leads to condemnation because the condition is 

ongoing, whereas an acute condition would likely lead to condemnation of part of 

the animal. 

BSE—JAPANESE EXPORTS

Question. I understand that as part of the ‘‘verification’’ program set up to ship 

beef to Japan, two signatures are required to ensure that the shipment does indeed 

meet Japanese requirements. 

Are both of these signatures from FSIS employees? 

Answer. As the result of the January 20, 2006, discovery of three boxes of veal 

with vertebral column shipped from the United States, in violation of the terms of 

our Export Verification (EV) agreement with Japan, I announced 15 Action Steps, 
108 

including the requirement of an additional signature during the EV process. Both 

the Agricultural Marketing Service (AMS) and the Food Safety and Inspection Service (FSIS) share the responsibility to confirm shipments for the EV program and 

employees from both agencies sign the documentation. 

Question. Do both verification form signatories physically check to make sure the 

shipment meets the proper standards? 

Answer. FSIS and AMS both have specific responsibilities for confirming that 

shipments meet the appropriate EV standards. These responsibilities do not require 

the signatories to physically check the shipment. 

AMS confirms that both the establishment and products are approved for export 

to the importing country. 

FSIS certifies and signs that all food safety requirements have been met. When 

signing an export certificate, an FSIS certifying official should receive the following 

from an establishment: (1) the original FSIS Form 9060–5, Meat and Poultry Export 

Certificate of Wholesomeness; (2) any other certificates required by the importing 

country; and (3) a copy of the letter from AMS that confirms that AMS conducted 

a review and that AMS has determined the items listed are approved for export to 

the country listed on the certificate and from the facilities listed. 

If all documents are acceptable, the FSIS certifying official will sign all certifications and maintain a copy of the AMS letter in the government file along with 

the certifications. 

Question. What steps is USDA taking to try to make the regulatory market more 

streamlined, as opposed to wide variety of requirements for each country to which 

we export? 

Answer. Most market openings (with the exception of Japan, where the terms of 

the market opening were negotiated in October 2004) have been for boneless beef 

from cattle under 30 months of age. The terms of these market openings were guided largely by international guidelines as maintained by the World Organization for 

Animal Health (OIE) and by precedents set by major importers, including the terms 

that the United States applies to imports from other countries that have experienced BSE. While these openings have resulted in a number of different import requirements by country, these requirements were negotiated with the full cooperation and knowledge of the U.S. industry with the intention of getting back into the 

market as quickly as possible with at least some product and the understanding 

that greater access would be negotiated at a later date. In our current negotiations 

USDA is pushing for broader access for U.S. beef overseas, arguing that OIE guidelines permit more favorable access than boneless/under 30 months. 

Question. I also understand that in this recent case of banned veal being sent to 

Japan, the inspector was an online inspector who was, according to FSIS regulations, not authorized to do the final inspection on this beef. Is this accurate? 

Answer. No, this is not accurate, because the inspector was authorized to do the 

final inspection of this beef. The problem arose from USDA inspection program personnel and the Japanese importer lacked familiarity with USDA’s bovine export 

verification (EV) requirements for Japan. 

Question. What steps are you taking to prevent this from happening again, and 

to ensure that there are a sufficient number of offline inspectors to prevent online 

inspectors from having to perform duties they are not officially authorized to do? 

Answer. The problems have been identified and appropriate actions have been 

taken. The problem was not related to an online inspector conducting activities that 

person was not authorized to perform. Rather, the problem was related to USDA 

inspection program personnel and the Japanese importer lacking familiarity with 

USDA’s bovine EV requirements for Japan. In response to this incident, the establishments involved were immediately removed from the approved list, and extensive 

training has been conducted with all involved FSIS inspection program personnel. 

AMS and FSIS also have strengthened coordination between their personnel. Eligibility of both the establishment and the products for export must be confirmed by 

AMS prior to FSIS certifying export documents. 

ALTERNATIVE FUELS

Question. Mr. Secretary, I believe you agree that American Agriculture has a 

strong role to play in energy development, so please explain why USDA’s investments in this area are going down instead of up. 

Answer. The fiscal year 2007 Budget supports an estimated $345 million in loans, 

grants, research and other support for energy projects. These funds will support investments to encourage additional biofuels production, develop improved feedstocks 

and efficient conversion technologies and increase energy efficiency. The bioenergy 

incentives program, funded at $60 million in 2006, expires at the end of 2006. 
109 

Question. What is the status of new technology and knowledge about feed stocks 

that U.S. farmers and rural business people can use to provide new, cleaner, and 

less costly, sources of energy for this country? 

Answer. Progress is being made on the development of technologies for converting 

cellulosic biomass to useable energy. Commercial pilot facilities for fermenting agricultural residues such as wheat straw and corn stover to ethanol are either operational (Iogen—Ontario, CA) or under construction (Abengoa—York, Nebraska). 

Companies are also scaling up new technologies for gasifying biomass and producing methane. For instance, Frontline Bioenergy (Ames, Iowa) and Chippewa Valley Ethanol Corporation (CVEC—Benson, Minnesota) announced that construction 

will begin this year on a facility to gasify distillers dried grains, and eventually corn 

stover. Their gasification unit will eventually displace over 90 percent of the natural 

gas now used at CVEC’s Benson site. And Viresco Energy (Riverside, California) 

plans to build a pilot plant to gasify a mixture of coal and wood. Technology also 

exists to convert the product gas from biomass gasification to methanol or diesel 

fuel. 

Technology is also being developed to pyrolyze biomass at or near the farm and 

produce an energy-dense bio-oil. The bio-oil could then be transported to a central 

refinery for conversion into hydrogen, diesel fuel or even gasoline. 

In spite of this progress, however, significant technology development is needed 

before a sizable industry for producing energy from agricultural and/or woody biomass can be realized. 

Question. What are USDA research and development programs doing to assist 

that effort? 

Answer. The Agricultural Research Service (ARS) has a number of programs to 

develop technologies that will enable the growth of a sizable industry for producing 

energy from agricultural and/or woody biomass. 

—ARS-Peoria, IL has a number of projects for improving the efficiency of fermenting cellulosic biomass to ethanol. 

—ARS-Lincoln, NE and a number of other ARS facilities are involved in a critical 

project to understand the long-term impact of harvesting crop residues, such as 

corn stover, on farm soils. 

—ARS-Albany, CA is working to sequence the genome of switchgrass, and to develop genetic tools for breeding new varieties of switchgrass with superior traits 

as an energy feedstock. 

—ARS-Corvallis, OR and ARS-Wyndmoor, PA have partnered with the Western 

Research Institute to develop a portable gasifier for converting wheat and grassseed straw into methane, rather than burning these residues in the field as is 

currently practiced. 

—ARS-Wyndmoor, PA and ARS-University Park, PA are field-testing a portable 

gasifier for switchgrass. 

—ARS-Florence, NC is developing a proposed program to gasify manure wastes 

into methane, thereby eliminating effluent lagoons and, at the same time, generating useful fuel. 

—ARS-Albany, CA is developing a proposed program to investigate the fundamental, biological mechanisms involved in the production of cell walls, the component of plants that is the basis of all ligno-cellulosic biomass. This research 

is necessary to enable the breeding of new plants that will significantly lower 

the cost of biomass-derived energy. 

Additionally, CSREES, through the National Research Initiative’s Biobased Products and Bioenergy Production Research Program, supports activities which expand 

science-based knowledge and technologies that support the efficient, economical and 

environmentally friendly conversion of agricultural residuals into value-added industrial products and biofuels. 

QUESTIONS SUBMITTED BY SENATOR TOM HARKIN

USDA SERVICE CENTERS

Question. Since 1993, the county-based agencies have been implementing streamlining plans to cut red tape and co-locate offices in the same county, with the goal 

of providing one-stop service for USDA customers. However, we have also witnessed 

the erosion of this customer service objective, first with the replacement of local 

USDA Rural Development offices with area offices that serve multiple counties and 

more recently with the Farm Service Agency directive to State offices to identify offices that can be closed and consolidated. 
110 

If it is necessary to consider consolidating local offices, isn’t it appropriate to consider the convenience of keeping together all agency services related to customer 

needs in any specific Service Center? 

Answer. USDA utilizes the State Food and Agriculture Councils (SFACs) to provide a cross-agency, decision-making and communication forum for administering 

programs at the local level. We are encouraging FSA, NRCS, RD and all other agencies to work together in a spirit of cooperation to work with the SFACs to achieve 

the optimum network of local offices, staffing, training and technology. 

USDA is committed to delivering farm program services through the Service Center model and is exploring all ‘‘shared space’’ opportunities where multiple USDA 

agencies can share space, supplies, mailroom, printing, conference room, common 

computer facilities, and basic office equipment. 

USDA is committed to a continued dialogue with State and congressional leaders 

to discuss how best to modernize the FSA county office system and the necessary 

steps required to improve its information technology (IT) infrastructure. The ultimate goal of this process is to increase the effectiveness of FSA’s local offices by upgrading equipment, investing in technology and providing personnel with critical 

training. We are committed to working with our partners to ensure that America’s 

farmers and ranchers continue to receive excellent service long into the future. 

Question. Why hasn’t USDA approached this as a Service Center issue rather 

than a decision by just one of USDA’s agencies? 

Answer. Each USDA agency is faced with individual resource concerns as well as 

infrastructure problems. Although many p our customers are the same, each agency 

also has distinctly different clientele. As you note, the Service Center Agencies already maintain different office structures. For example, in your State of Iowa, Rural 

Development maintains a network of 10 area offices while FSA maintains a presence in all 99 counties of the State. 

However, USDA is committed to delivering farm program services through the 

Service Center model and is exploring all ‘‘shared space’’ opportunities where multiple USDA agencies can share space, supplies, mailroom, printing, conference room, 

common computer facilities, and basic office equipment. 

Question. How is the Department coordinating the multiple mission areas of local 

Service Centers? 

Answer. State Food and Agriculture Councils (SFACs) are the primary vehicles 

for administering programs at the local level. SFACs provide a policy-level, crossagency, decision-making and communication forum to achieve USDA’s goals and objectives. 

Furthermore, the Farm Service Agency (FSA) State Executive Directors (SEDs) 

are currently conducting local-level reviews of the efficiency and effectiveness of 

FSA offices in each State. The SEDs and State committees are forming review committees to better identify what the optimum network of FSA facilities, staffing, 

training and technology should be for each State within existing budgetary resources and staffing ceilings. Each SED is also exploring potential joint-effort opportunities with the Natural Resources Conservation Service and other USDA agencies. 

COMMON COMPUTING ENVIRONMENT

Question. The objective of the Service Center Modernization Initiative is to create 

an environment of one-stop quality service for customers of the Farm Service Agency, the Natural Resources Conservation Service, and the Rural Development agencies. The Common Computing Environment (CCE) is intended to enable the 3 agencies to share information technology to improve customer service. Since fiscal year 

1996, USDA has been planning and deploying an integrated information system to 

replace several old systems in Service Center Agencies that could not share data. 

In March 2000, the Office of Chief Information Officer was given direct management 

responsibility for the CCE. 

Given that this effort has been underway for 10 years, has USDA made sufficient 

progress in reaching the objective number of shared information technology and 

ability to share and transfer data? 

Answer. USDA has made significant progress in reaching the shared information 

technology objectives. The shared technology platform, the Common Computing Environment (CCE), is in place. The platform allows USDA to maintain one standardized environment for use by the Service Center Agencies (SCAs). The platform is 

the foundation for on-going efforts to modernize individual SCA systems and business processes. Despite the fact that full modernization has yet to be achieved, the 

platform has provided several administrative and technological benefits. Examples 

of the benefits have been provided. 

[The information follows:] 
111 

Common Administrative Functions 

Common computer technology on each of 50,000 agency and contributing partner 

desks, including shared software; 

Shared networks, making higher speed connectivity affordable for the SCAs; and 

Common IT security with the capability to manage from a single operation nationwide. 

Centralized Computing Technology 

Shared Storage Area Network (SAN) technology (5 locations) for tabular and 

geospatial data and backup/disaster recovery (full redundancy); 

Common eAuthentication portal for user validation in the SCAs; and 

Web Farm Technology (consolidated IT locations) developed and deployed to support Web access for employees and customers. 

Telecommunications Architecture and Operations 

Maintenance for phones and network routers and upgrades to data network and 

technology to meet future demands; and 

Transition to the Departments Universal Telecommunications Network (UTN)— 

component of the USDA Enterprise Architecture in fiscal year 2006. 

USDA Data Center 

Data acquisition for Geographic Information Systems (GIS)—examples: Common 

Land Use (CLU) data for FSA, Soils data for NRCS; and 

Data acquisition for aerial/high altitude imagery for mapping and compliance review—example: NAIP photography. 

Question. How has the cost of the common computing environment been allocated 

among program areas? 

Answer. The cost of the Common Computing Environment (CCE) is allocated 

across the three Service Center Agencies. A formula based on the number of computers an agency has connected to the CCE network was derived for the allocation 

of $19,538,000 for base infrastructure. For fiscal year 2006, FSA has 40 percent of 

the computers, NRCS has 39 percent, and RD has 21 percent. Agency-specific and 

interagency funds account for the remainder of the CCE costs. These funds are: 

$73,260,000 (FSA-specific), $11,025,000 (NRCS-specific), $3,960,000 (RD-specific), 

and $1,188,000 (Interagency eGoverment). 

Question. Is there any evidence that producers have begun to embrace the webbased system of program delivery? 

Answer. The Service Center Agencies (SCAs) have begun to see increased producer interest in Web-based program delivery. Examples of this interest have been 

provided. 

[The information follows:] 

As of March 1, 2006, over 32,000 producers have obtained an eAuthentication 

Level 2 ID. This credential is required to access, sign, and electronically submit loan 

applications and to review the combined customer statement that uses data from 

each of the SCAs. 

For the 2005 crop year, Service Centers used the Web-based Electronic Loan Deficiency Payment (eLDP) system to process about 87 percent of the LDPs. As of 

March 23, 2006, over 1.287 million applications have been processed, resulting in 

the payment of over $4.258 billion. Of these, 16,630 eLDP applications were submitted directly from producers resulting in the payment of $75.9 million. 

Nearly 5,800 producers self-enrolled for the Electronic Direct and Counter Cyclical 

Payment Program (eDCP) for the 2005 crop year. As of March 21, 2006, FSA has 

enrolled over 1.35 million contracts for the 2006 crop year with nearly 10,000 producers enrolling electronically. 

Over 1,700 FSA customers regularly conduct business via the eForms Web portal. 

Electronic forms submission has grown from 54 in fiscal year 2002 to 2,965 in fiscal 

year 2005. 

The NRCS Soil Data Mart is averaging 12,000 downloaded soil surveys and 

17,800 online reports viewed per month. In addition, about 1,400 users per day are 

using the Web Soil Survey, saving staff time at the Service Centers. 

CROP INSURANCE

Question. The Group Risk Insurance Plan (GRIP) has grown by leaps and bounds 

over the past 2 years because of the perception held by farmers that they have a 

better chance of collecting an indemnity with a GRIP policy than a standard yield 

or revenue product. Many critics of GRIP claim that the product, in its present form, 

does not work like insurance but like a lottery. They allege that, under this pro-
112 

gram, a farmer could experience a significant loss but not be due an indemnity payment. The exact opposite scenario could also be true—the policy could pay farmers 

an indemnity even though they have a bumper crop. I am told that these situations 

have already occurred. 

Has RMA looked into the question of how common these overpayments or underpayments relative to actual crop losses on a specific farm actually are, and if so, 

what has the Agency found? 

Answer. The Group Risk Income Protection (GRIP) plan of insurance, as with 

Revenue Assurance (RA) and Crop Revenue Coverage (CRC), is designed to protect 

growers against an unexpected decline in revenue, not merely against a yield shortfall. GRIP indemnities are triggered by the declining value of the harvest not the 

quantity harvested. This is important because indemnities can be triggered by large 

price declines even as the producer harvests a bumper crop. Likewise, a producer 

could have significantly reduced yields but not receive an indemnity if a large price 

increase moderates the loss of revenue. 

RMA has not specifically studied the performance of the GRIP plan of insurance; 

however, the agency contracted for an outside study of a related product, the Group 

Risk Protection (GRP) program. This review addressed the question about GRP’s effectiveness in reducing a grower’s risk. The results are relevant for GRIP because 

it uses the same yield data for determining guarantees and indemnities. The external review found that: 

—GRP, on average, provides substantial risk reduction to growers. 

—GRP tends to be more effective where individual yields are more homogenous 

across the county. 

—GRP tends to be more effective in the major production regions. 

Question. Could the problem be addressed by re-rating the policies or acquiring 

more accurate information about county-level yields? 

Answer. The potential for a grower to receive an indemnity when he or she did 

not suffer a loss, or vice-versa, is inherent to a group based policy. This cannot be 

changed by re-rating. However, accurate information about county level yields is important to the performance of GRP and GRIP. Consequently, GRP and GRIP is limited to those counties with at least 30 years of NASS yield history and a minimum 

threshold for number of growers. NASS county yield estimates are likely to be the 

most accurate in these counties. 

To ensure that the GRIP program is functioning as intended, an outside review 

will be conducted during this year. 

Question. Should USDA or Congress consider revoking the authority to offer this 

type of insurance coverage? 

Answer. No, the authority to offer group products should not be revoked. Groupbased coverage offers a reasonable alternative to the individual-based policies. In 

some cases, such as for pasture and rangeland, group coverage is the only viable 

method for offering meaningful crop insurance. Many growers find that group-based 

products provide effective risk management protection at a significant cost savings 

relative to individual plans of insurance. 

Question. In both 2005 and 2006, the President’s budget proposed to cut funds for 

the Federal crop insurance program to the tune of $130 million annually, cutting 

both to the premium subsidies provided to farmers who buy crop insurance and payments to the private companies that deliver crop insurance to farmers. 

Has USDA or any other government agency ever conducted an analysis of the effect on the crop insurance program were those cuts to be implemented? 

Answer. Yes, the administration’s 2007 budget proposal would link the purchase 

of crop insurance to the participation in farm programs, such as the direct and 

counter-cyclical payment programs. This proposal would require farm program participants to purchase crop insurance protection for 50 percent, or higher, of their expected market value or lose their farm program benefits. Currently participation in 

crop insurance is voluntary; however, producers are encouraged to participate 

through premium subsidies, which currently average about 59 percent of the total 

premium. By linking crop insurance to other farm programs, we anticipate that an 

estimated 20 million additional acres would be brought into the crop insurance program. We also anticipate that insurance companies would benefit from this feature 

via increased business and potential underwriting gains. I will provide additional 

details. 

[The information follows:] 

To offset the increased costs stemming from the increased crop insurance program 

participation, several proposals are made for garnering savings. One proposal is to 

reduce premium subsidies by 5 percentage points for coverage levels of 70 percent 

or below and 2 percentage points for coverage levels of 75 percent or higher. The 
113 

primary impact of this feature falls on producers who would be required to pay a 

larger share of the premium. It is expected that a small number of producers would 

move to a lower level of coverage to offset the higher costs. Another change being 

proposed is to reduce the delivery expense reimbursement rate by 2 percentage 

points for all policies above the CAT level of coverage. The proposal would also adjust the administrative fees required to obtain CAT coverage to make the fee more 

equitable between small and large producers. Lastly, the proposal would increase 

net book quota share to 22 percent (from the current 5 percent). This proposal would 

require the participating companies to ‘‘reinsure’’ 22 percent of their retained premium with the Federal Government rather than with commercial reinsurers. As an 

offset, the companies would receive a 2 percent ceding commission. In recent years, 

the companies have been retaining about 80 percent of the premium, for which they 

received almost $3.6 billion in aggregate underwriting gains between 1996 and 

2005. Over this period, the companies have sustained an underwriting loss in only 

1 year (2002), and that underwriting loss was less than $45 million. In 2005 alone, 

the companies are expected to receive an underwriting gain of approximately $900 

million. Conversely, the Federal Government has experienced underwriting losses of 

about $1.6 billion over this period on the remaining 20 percent of business the companies have ceded back to USDA. 

Question. Has any outside consultant been hired to conduct such an analysis? 

Answer. RMA has not contracted with any outside consultants for a study of the 

potential impacts of the proposed program changes. 

Question. If there is such an analysis, I would like to be provided a copy of it. 

If no such analysis has been conducted, how does USDA know that these cuts would 

not be deleterious to the crop insurance program? 

Answer. The proposed reductions in premium subsidies to producers and payments to companies are relatively small. The anticipated cost savings are shared equitably among producers and companies and are necessary to offset the additional 

costs of increased participation in an era of ever-tightening budgets. For purposes 

of the proposal, the linkage requirement was assumed to increase total acreage in 

the Federal crop insurance program by an estimated 20 million acres, for a participation rate of about 84 percent. This is essentially the same level of participation 

achieved in 1995. However, the structure of the current farm program is substantially different from that which existed in 1995, in particular because of the availability of direct payments. It is likely that the availability of direct payments could 

result in participation that is somewhat greater than that assumed and experienced 

with the previous linkage effort. 

If enacted, the administration’s proposal should result in a substantial increase 

in total premium volume due to (1) CAT policyholders moving to a buy-up level of 

coverage, and (2) the addition of an estimated 20 million currently uninsured acres 

to the program. With this increase in premium volume, companies should experience greater economies of scale, thereby lowering their per-policy costs of delivering 

the program. At the same time, delivery expense reimbursements on the larger premium volume will offset much of the impact of the reduction in the reimbursement 

rate. Similarly, larger overall underwriting gains (on the higher premium volume) 

will offset much of the increase in the net book quota share. Further, if more than 

20 million acres are added to the program, it is possible that total payments to companies could in fact increase under this proposal. 

TRADE

Question. Last year, the U.S. agricultural trade surplus (exports minus imports) 

was only $3.5 billion, the lowest figure since 1959. However, the President’s fiscal 

2007 budget proposes to cut the main USDA trade promotion program, the Market 

Access Program (MAP), by 50 percent from its Farm Bill level. 

In light of the disappearing trade surplus, how can you justify such a cut? 

Answer. The proposal to limit funding for the Market Access Program in 2007 reflects the administration’s efforts to reduce the Federal deficit. Reducing the deficit 

is a key component of the President’s economic plan and will help to strengthen the 

economy and create more jobs. Farmers, ranchers, and other residents of rural 

America understand the importance of a healthy economy, which raises incomes and 

increases demand for their products. This and other deficit reduction measures will 

contribute to a more prosperous future for our citizens. 

It should be noted that, even if the program is limited to $100 million in 2007, 

that level is still higher than the $90 million program level that was authorized for 

MAP prior to the last Farm Bill. Also, limiting the program will result in better targeting of the assistance to those products and organizations that have the greatest 

need for it and can use it most effectively. 
114 

With regard to the balance of trade, U.S. agricultural exports are expected to 

reach a record high of $64.5 billion in 2006 and have grown 22 percent since 2001. 

During the same period, agricultural imports have also grown. However, import 

growth over the past decade has been in processed foods and beverages, not farm 

products. As such, a lower agricultural trade surplus does not signal reduced export 

competitiveness of the farm sector, but rather American consumer preference for a 

wide variety of foods and vegetables, including those from foreign suppliers. 

Question. If that proposed cut to MAP were to be adopted by Congress, how would 

USDA plan to implement it by cutting equally from all U.S. cooperators in MAP, 

or by dropping some participants from the program? 

Answer. USDA would not be required to implement any changes to the current 

funding allocation process if the proposed limitation on MAP funds were adopted by 

Congress. MAP funds are allocated to program applicants using a competitive process involving quantitative, performance-based criteria that are published in the Federal Register each year. Changes in program participation would reflect the results 

of that competitive process and cannot be predicted accurately in advance. 

FOOD AID

Question. If the President’s proposal to zero out funding for the Public Law 480 

Title I concessional loan program were to be enacted, that would mean that a portion of those funds are no longer available to transfer to the Food for Progress program. 

For each of the past 5 years, how much money has been transferred from Title 

I to the Food for Progress program? 

Answer. We will submit for the record a table that provides the amount of annual 

Public Law 480 Title I funding that was allocated to Food for Progress programming 

during each of the past 5 years. 

[The information follows:] 

Fiscal year Millions of dol- lars 

2001 ..................................................................................................................................................................... 77.7 

2002 ..................................................................................................................................................................... ........................

2003 ..................................................................................................................................................................... 88.6 

2004 ..................................................................................................................................................................... 86.3 

2005 ..................................................................................................................................................................... 67.9 

Question. What would the loss of those funds mean in terms of lost or cut-back 

programs on the ground in developing countries, particularly in terms of numbers 

of targeted recipients? 

Answer. The impact of the reduction in Title I funding for Food for Progress programming would be mixed. USDA would need to reduce the number of Food for 

Progress programs by 5–10 projects. Up to 50,000 beneficiaries could lose the benefits of the agricultural development projects. However, the increase in funding proposed for Public Law 480 Title II would offset that reduction. The additional funding 

for Title II would increase the number of beneficiaries under that program, who suffer from critical food aid needs. The additional recipients under the Title II program 

would likely exceed 50,000 in number and thereby fully offset the reduced number 

under Title I-funded Food for Progress. 

AVIAN INFLUENZA

Question. The Department of Agriculture (USDA) has requested a total of $82 million to prepare for and prevent outbreaks of avian influenza in the United States. 

These resources include various domestic activities, such as wildlife surveillance, 

diagnostics, and emergency preparedness. I am concerned about providing adequate 

support and resources to State and local entities, such as State departments of agriculture and animal health care workers, to be used to prepare for a potential large 

scale avian influenza outbreak. 

What is the total amount of funds from USDA that will go to States to plan and 

prepare for an avian influenza outbreak? 

Answer. Currently, APHIS is working with other Federal agencies, States, and industry to prevent and control H5 and H7 avian influenza (AI) in U.S. commercial 

broilers, layers and turkeys, their respective breeders, and the live bird marketing 

system. Of the amount requested in the low-pathogenicity avian influenza line item 

in the APHIS fiscal year 2007 budget, approximately $8.1 million has been set aside 

for cooperative agreements with the States to support H5 and H7 AI surveillance 
115 

activities. Of the amount requested in the high-pathogenicity avian influenza line 

item in fiscal year 2007, APHIS has set aside approximately $9.2 million for cooperative agreements with the States to further enhance our AI surveillance activities. 

Question. Will some of the funding for avian flu be available for interstate coordination during an avian flu outbreak which would include State officials and poultry 

producers? 

Answer. The high-pathogenicity avian influenza (HPAI) line item request does not 

include funding for an avian influenza outbreak. The HPAI program is for avian influenza preparedness. In the event of an outbreak, we would work closely with State 

officials. 

FOOD SAFETY

Question. The Food Safety and Inspection Service (FSIS) recently announced an 

initiative to reduce Salmonella levels in poultry. However, USDA currently does not 

have the authority to enforce Salmonella performance standards nor does it have 

authority to require recalls of contaminated meat and poultry. 

Will USDA implement deterrents or incentives for industry to make lowering Salmonella levels in poultry a priority? If not, how will USDA require industry to decrease Salmonella levels decrease? 

Answer. USDA’s Salmonella initiative does provide incentives to industry to improve Salmonella controls. 

Under the initiative, FSIS will provide the results of its Salmonella performance 

standard testing to establishments on a sample-by-sample basis as soon as they become available. The more rapid disclosure of testing results under the initiative will 

allow establishments to identify promptly any need for improved process controls in 

slaughter or dressing operations and respond effectively. 

In addition, FSIS will post quarterly nationwide data for Salmonella on its Web 

site, as compared to the current practice of posting annually; conduct follow-up sampling sets as needed; and provide new compliance guidelines for the poultry industry. If a facility does not meet the performance standards on two consecutive sets, 

a food safety assessment will be conducted. Categorization of establishments based 

on Salmonella positive samples will allow the Agency to pursue a comprehensive 

strategy for combating the pathogen and provide the industry incentives to control 

the prevalence of Salmonella. 

After that year of review, FSIS will reassess its policy. FSIS will consider whether 

there are further actions that should be taken to ensure that establishments improve their control of Salmonella and further enhance public health protection. For 

example, FSIS would consider actions that would provide an incentive to industry 

to improve controls for Salmonella, such as posting on the Agency Web site the completed Salmonella sample sets for each establishment. FSIS would consider allowing 

establishments producing product classes with superior performance to conduct pilot 

studies testing whether line speeds could be increased above the current regulatory 

limits. 

RESOURCE, CONSERVATION, AND DEVELOPMENT PROGRAM

Question. The President’s budget would cut the Resource Conservation and Development Program budget in half to $26 million. This cut is done by eliminating over 

225 coordinator positions and requiring the remaining 150 coordinators to serve 

multiple RC&D areas. In Iowa, this program has had widespread benefits in achieving such important activities as reducing erosion in the Loess Hills, installing dry 

hydrants for rural firefighters, and providing companies with seed money to start 

up rural companies that create jobs for rural communities. 

Why did the President’s budget target this program which involves local leaders 

at the grassroots to solve critical needs for rural communities and which has leveraged large additional investments beyond the modest investment from the Federal 

Government? 

Answer. The administration recognizes that the RC&D coordinators and councils 

play an important role in protecting the environment in a way that improves the 

local economy and living standards. However, the Department of Agriculture, like 

every Federal agency, must share in the government-wide effort to control Federal 

spending. The RC&D program received a ‘‘Results Not Demonstrated’’ evaluation in 

the Administration’s Program Assessment Rating Tool results last year and as a result, the administration is proposing program streamlining and cost-cutting measures. The President’s fiscal year 2007 budget proposal will save $25 million by reducing the number of coordinator positions while maintaining the current number 

of authorized RC&D Areas nationwide. 
116 

QUESTIONS SUBMITTED BY SENATOR BYRON L. DORGAN

RESEARCH BUDGET

Question. In your testimony this morning, you said ‘‘reducing the deficit is a critical part of the President’s economic plan-Farmers, ranchers, and rural citizens 

know the deficit and burden of debt have a profound impact on the economy and 

the ability of future generations to participate in agriculture.’’ 

I agree with you. That’s why I’m deeply disappointed that the administration has 

chosen to support tax cuts for the wealthiest of Americans over agricultural research and programs that benefit America’s family farmers. The administration proposes to cut USDA discretionary spending by 6.5 percent over last year’s funding 

levels. And last year’s funding levels were themselves $500 million lower than the 

year before. 

In the past few weeks, I have met with dozens of farmers, ranchers, researchers, 

and community leaders who depend on USDA’s research and programs and who believe agricultural research is an investment in the future of our farm economy. They 

ask me: ‘‘How does the President expect us to get by without this research?’’ 

So I would ask you that same question: how does USDA expect America’s farm 

economy to remain competitive in the face of these deep cuts in vitally important 

agricultural research? 

Answer. Research is necessary for the farm economy to remain competitive and 

a vital part of the American economy. The USDA recognizes that a strong economy 

based on sound Federal investments and reduced public debt is also vital to the 

American farm economy. In this light, the USDA has presented budget requests 

that focus on the highest priority issues and greatest opportunities. We are proposing new research to protect crops and livestock so that the United States will 

be a reliable trading partner and a competitive producer of food. We have proposed 

new animal protection research on the vexing problem of bovine spongiform 

encephalopathies and other transmissible spongiform encephalopathies. We are supporting new research to greatly enhance the production of bioenergy from cellulosic 

materials by modifying cell walls of plants. We propose to address the national crisis 

of obesity through new research. In these financially challenging times, we plan to 

pay for these initiatives by having focused and efficient research programs that address high priority needs. 

DISASTER ASSISTANCE

Question. In your testimony today, you said that ‘‘USDA has made available $2.8 

billion to assist those impacted by the hurricanes, of which $1.2 billion will be made 

available to agricultural producers through various programs... Total USDA aid 

to hurricane disaster victims comes to more than $4.5 billion.’’ 

I support emergency relief for those in the Gulf States who were hit by Hurricanes Katrina and Rita. When people fall on tough times, we have an obligation to 

help them. But what I do not support picking and choosing which producers who 

suffered a weather-related disaster will get help, and which will not. 

North Dakota had over 1 million prevented plant acres last year, due to excessive 

moisture. Parts of Bottineau County along the Canadian border received one-third 

their annual rainfall in just 1 day. Every county in North Dakota has been named 

a Primary or Contiguous Disaster Area. But there has been no support from this 

administration for a disaster assistance package that would help those producers. 

USDA’s own prediction is that net farm income will drop nearly 25 percent this 

year because of record high energy costs. I think that is optimistic. North Dakota 

State University estimates that average farm income in my State will fall 88 percent in 2006. 

Outside North Dakota, farmers and ranchers in the Midwest experienced one of 

their worst droughts in decades in 2005. Last year, Illinois experienced its thirddriest year since records first started being kept in 1895. Parts of Missouri, Iowa, 

Wisconsin, Indiana, and Arkansas were nearly as bad. USDA’s own estimate last 

summer was that agriculture losses from Hurricane Katrina would be $900 million, 

but that losses from drought will be over $2 billion. 

My office gets phone calls every day from producers who are barely hanging on. 

They are meeting with their banker to see if they can squeeze out another year on 

the farm, or if they will have to abandon the farming lifestyle and the farm they 

grew up with. These farmers who call me do not understand why Congress has not 

acted to help them. I don’t understand, either. 

My question to you is, do you support an agricultural disaster package for farmers 

and ranchers outside of the Gulf Coast? If not, why not? 
117 

Answer. This administration has been, and continues to be, a strong supporter of 

the Federal crop insurance program. Crop insurance should be our first line of defense against the financial impact of natural disasters. Farmers and rancher should 

be encouraged to protect themselves through the purchase of crop insurance rather 

than expecting ad hoc disaster assistance from the Federal Government. 

Nation-wide, 2005 crop losses were not as severe as originally expected. The loss 

ratio for crop insurance currently stands at about 0.54, meaning that producers 

have received 54 cents in indemnities for each dollar of premium. This is a historically low level which reflects stronger than expected yields and prices. 

Furthermore, we would note that the hurricane damage in the Gulf Coast differs 

markedly from the modest production losses sustained nation-wide. Gulf Coast producers lost productive capacity through the destruction of poultry houses, nurseries, 

and green houses and environmental degradation of farm lands. The disaster assistance provided to the Gulf States reflects this and is largely intended to restore the 

productive capacity of this region. 

VALUE-ADDED PRODUCER GRANTS

Question. The 2002 Farm Bill authorized the Value-Added Producer Grant Program to receive $40 million in mandatory spending annually for the life of the farm 

bill. In fiscal year 2004 and 2005, the program request and the final appropriations 

was $15 million, a cut of roughly 60 percent each year. The USDA request for fiscal 

year 2006 was again $15 million, but in the final appropriations bill we were able 

to increase that amount to $20 million, still just half of the mandated farm bill 

amount, but moving in the right direction. 

What is USDA doing to ensure that this program is administered in a manner 

consistent with Congressional intent expressed in the manager’s report language in 

the Farm Bill, which states that the program should: fund a broad diversity of 

projects, projects likely to increase the profitability and viability of small and medium-sized farms and ranches, project’s likely to create self-employment opportunities in farming and ranching, and project likely to contribute to conserving and enhancing the quality of land, water and other natural resources? 

Answer. USDA published regulations for the Value-Added Producer Grant program in 2004 and publishes an annual notice soliciting applications. These documents provide detailed information on how the program is administered, including 

how applications are processed and scored. Lists of grant recipients and brief descriptions of their projects are available on-line at the USDA Rural Development 

website. The descriptions demonstrate that the program has funded projects with 

a wide variety of agricultural commodities combined with innovative ways to add 

value. In 2004, USDA Rural Development put program performance measures into 

place, and preliminary data on these measures is now being reported and collected. 

This data indicates that many grant recipients have experienced increased revenue 

and an expanded customer base for their value-added products, which is consistent 

with the Congressional intent that is expressed in the Conference Report on the 

2002 Farm Bill. 

Question. Over the life of the existence of the VAPG program, how many total 

project proposals has USDA received? 

Answer. The Value-Added Producer Grant program was initially authorized by 

the Agriculture Risk Protection Act of 2000. Since this authorization, there have 

been 2,919 applications between 2001 and 2005. 

Question. What was the total value of requested funds? Of these, how many proposals were funded, and what were the actual funding amounts? 

Answer. The total value of funds requested in the 2,919 applications is 

$363,439,756. A total of 756 applications received $116,272,496 in funding. 

NATIONAL VETERINARY MEDICAL SERVICES ACT

Question. Many rural areas of this country face a severe shortage of veterinarians. 

I understand that there are one-half as many veterinarians available to respond in 

the event of an animal disease outbreak as there were 20 years ago. The National 

Veterinary Medical Service Act would help solve this shortage by providing loan repayments to veterinarians who agree to practice in areas with a serious veterinary 

shortage. Why is the National Veterinary Medical Services Act not a functioning 

program within your department despite the appropriation it received for fiscal year 

2006? 

What steps are necessary to begin this program? 

Answer. USDA is exploring potential financial management strategies both within 

the Department and in collaboration with other Federal agencies in order to effectively run a loan repayment program. To evaluate these and other programmatic 
118 

issues presented by the National Veterinary Medical Services Act, CSREES has constituted the National Veterinary Medical Services Act working group to develop potential program management strategies. The working group has met on four occasions and is exploring alternative strategies for managing National Veterinary Medical Services Act. We are working to ensure a well thought out program plan which 

includes collaborations with veterinary schools and other stakeholders to develop 

consensus regarding the candidate eligibility requirements, and metrics to support 

prioritized and weighted needs within the veterinary need areas identified within 

the Act. A draft program management proposal is presently being reviewed. 

Question. How long do you anticipate it will take to begin this program? 

Answer. CSREES anticipates that the processes required to begin this program 

will be completed in approximately 18 months. 

APHIS BLACKBIRD CONTROL

Question. Various species of blackbirds cause an estimated $200 million in direct 

agricultural damage to a host of crops, including sunflower in my State of ND. 

Many urban areas and airports have serious problems as well. 

Please describe efforts in the Department to deal with this increasingly serious 

problem of what appears to be an accelerating population. 

Answer. We are undertaking a variety of actions to deal with blackbird damages. 

Scientists at APHIS’ National Wildlife Research Center (NWRC) are studying ways 

to refine damage abatement methods and develop new methods to reduce blackbird 

damage to sunflower crops in the northern Great Plains. Of note, NWRC discovered 

two promising chemical compounds that might discourage blackbirds from feeding 

on sunflower. APHIS also conducts an annual cattail management program in North 

Dakota and South Dakota to disperse large concentrations of blackbirds from sunflower production areas. In addition, APHIS helps farmers, homeowners, and municipalities nationwide with blackbird-related problems. The agency develops sitespecific management plans for airports to address several wildlife hazard issues, including those associated with blackbirds. 

Question. Damage to ripening sunflower in the Dakotas and Minnesota is as high 

as $20 million annually. Through this Subcommittee, I have been successful in adding funding to enhance blackbird control efforts in North Dakota. Yet APHIS has 

confirmed to my office that the agency is spending less than 50 percent of what it 

did just 2 years ago on this problem despite my efforts to provide direct funding for 

this purpose. 

What is the rationalization for diverting funds away from this important purpose? 

Answer. In 2003, Congress earmarked $368,000 for blackbird control plus 

$240,000 to conduct an environmental impact study (EIS) and $100,000 for cattail 

management activities. In 2005, Congress earmarked $368,000 for blackbird control 

efforts. In addition, APHIS provided $77,000 net in 2005 to ensure the highest level 

of service to sunflower producers with blackbird problems. APHIS has not diverted 

earmarked funds from this program and will continue to work with the National 

Sunflower Association to address all concerns. Earmarked funding for the continuation of these efforts in 2006 is $377,000. 

2007 FARM BILL

Question. A number of farm and commodity organizations have endorsed proposals to extend the 2002 Farm Bill until after the completion of the latest round 

of WTO trade negotiations. 

Do you support extending the 2002 Farm Bill? If not, why not? 

Answer. I believe the appropriate approach under current circumstances is to proceed to develop a new 2007 farm bill which addresses the best interests of our producers and taxpayers. An extension of the 2002 Farm Bill until after WTO negotiations are complete would put us in a more reactionary rather than proactive stance. 

Question. I understand you have participated in a number of Farm Bill listening 

sessions all over the United States. When will you issue a final report on those listening sessions? 

Answer. A series of issue papers that summarize information and comments received in the Farm Bill forums around the country have been completed and were 

made available on March 29, 2006. We did obtain a great deal of input and a diverse range of ideas and comments which will merit further study as we attempt 

to focus on what are the most critical concerns to address in fashioning a new Farm 

Bill. As part of that process, I have asked Dr. Keith Collins, our Chief Economist, 

to develop a number of documents based on various themes that will provide a 

straight forward, unbiased analysis. We will post these documents on the USDA 

website and share them with all stakeholders. 
119 

STATE MEAT INSPECTION PROGRAM

Question. The 2002 Farm Bill directed USDA to conduct a comprehensive review 

of State meat and poultry inspection programs and to report to Congress on these 

activities by the Food Safety and Inspection Service. 

What is the status of this report? 

Answer. USDA provided written interim updates on the Agency’s review of State 

meat and poultry inspection programs to the House and Senate Agriculture Committees in September 2004, and again in July 2005. 

On-site reviews of State Meat and Poultry Inspection programs have been completed for 20 of the 28 States. Fourteen of those States have been determined ‘‘at 

least equal to’’ the Federal inspection program, with Wyoming and Utah currently 

on deferred status. On February 7, 2006, FSIS completed on-site reviews of New 

Mexico, North Carolina, Oklahoma, and South Carolina, but final reports for these 

four States have not yet been completed. The 8 remaining on-site reviews will take 

place in 2006. In April, on-site reviews are scheduled for Indiana, Louisiana, Maine, 

and West Virginia. 

Question. I understand that all 28 State programs have had annual record reviews and that the majority of them have had on-site reviews. Is there a preliminary assessment on, and recommendations for, Congress on State meat and poultry 

inspection programs? 

Answer. At this time, we have not conducted on-site reviews in 8 States. USDA 

will not make recommendations to Congress on State meat and poultry inspection 

programs until all on-site reviews have been completed and evaluated. 

BEEF IMPORTS AND BSE

Question. I have heard from cattle producers in North Dakota who are concerned 

about USDA’s approval of beef imports from Japan. As you know, the prevalence 

of BSE in Japan is many times greater than that in the United States. 

Many U.S. consumers believe that, because Japan requires testing for BSE of all 

meat intended for domestic consumption, meat exported from Japan to the United 

States will be also tested for BSE. However, the final rule adopted by USDA does 

not require such testing. 

How much, if any, Japanese beef coming into the United States is being tested 

for BSE, either by Japan or by the United States? 

Answer. The final rule, published in the Federal Register on December 14, 2005, 

established the conditions under which certain types of beef may be imported from 

Japan. The regulations do not require that the boneless beef be derived from animals that were tested for BSE. It is important to note that the available tests for 

BSE are not appropriate as food safety indicators. 

Question. Based on USDA’s actions relative to importing beef from Canada, there 

is a presumption by the American public that meat coming from a country with a 

BSE-infected herd will be from younger cattle. However, USDA’s final rule governing the importation of Japanese beef appears to put no such age limits on the 

beef imported from Japan, despite the fact that Japan restricted U.S. beef imports 

to cattle 20 months of age and younger. This suggests that we should have more 

stringent rules regarding Japanese beef coming into the United States than we currently have. 

Does USDA consider it necessary to impose an age restriction on imports of Japanese beef similar to the restrictions previously placed on American beef exports to 

Japan? 

Answer. USDA did not include an age restriction in the import requirements for 

whole cuts of boneless beef from Japan. APHIS established the requirements for allowing the import of whole cuts of boneless beef from Japan based on a thorough 

risk analysis. BSE studies in cattle have not detected infectivity in boneless beef, 

which is what is eligible for import, regardless of the age of the animal. For these 

reasons, we consider whole cuts of boneless beef to be inherently low-risk for BSE 

and determined that they can be safely traded provided that measures are taken 

to prevent cross-contamination during processing. 

Question. What is USDA’s position on allowing private testing of beef for BSE by 

U.S. producers and processors? 

Answer. Given the consequences and governmental actions that can result from 

BSE testing of animals, USDA believes that such testing is an inherently governmental function that must be conducted by Federal and State laboratories. We 

would also like to clarify that BSE tests are not conducted on cuts of beef. Rather, 

the tests are performed on brain tissue taken from dead or slaughtered cattle to diagnose the presence of BSE in that animal. 
120 

Question. Why are the BSE importation rules not being changed to better reflect 

the current status of nations the U.S. imports beef from? 

Answer. The APHIS regulations concerning BSE-related restrictions have been 

changed over the past year to reflect both the status of certain countries regarding 

BSE and the currently accepted scientific guidelines for appropriate risk mitigations 

on various products. Further, APHIS regulations are consistent with international 

guidelines on BSE. 

GIPSA

Question. There have been very disturbing reports about the failure of USDA’s 

Grain Inspection, Packers, and Stockyards Administration to properly investigate 

claims of wrongdoing. 

Please tell me the steps you are taking to restore rural America’s confidence in 

GIPSA and how you intend to make sure this agency fulfills its proper oversight 

role. 

Answer. GIPSA intends to implement all recommendations in the OIG report. 

GIPSA has already issued policy directives in response to several of the recommendations and is initiating a review process to ensure that the directives are 

being followed and implemented properly. 

However, GIPSA has gone further than just the OIG recommendations. For example, the agency has requested a full scale organizational review to provide recommendations on how to improve the agency’s operational effectiveness. Also, the 

new GIPSA Administrator recently ordered an Office of Personnel Management-administered Organizational Assessment Survey. The survey gives employees an anonymous opportunity to let the Administrator know what they think about the organization on a range of topics. Results will be used to make decisions about work environment improvements in the program and enhance its organizational effectiveness. 

The Administrator is also working to develop an organizational culture to ensure 

at all levels a recommitment to OIG and GAO recommendations and to redirect resources to achieve mission-critical activities. 

QUESTIONS SUBMITTED BY SENATOR RICHARD J. DURBIN

DISASTER ASSISTANCE

Question. My first question pertains to the budget’s assumption that there will be 

no ad hoc disaster relief spending for farmers this year. On January 26, 2006, your 

office announced that it would distribute $1.2 billion to producers that sustained 

losses due to Hurricane Katrina. This spending will go to producers in Mississippi, 

Florida, Louisiana, and other Gulf Coast States. However, as you know, there were 

natural disasters in many parts of the country that hurt producers significantly. In 

my home State of Illinois and many other parts of the Corn Belt, producers experienced one of the worst droughts since modern records have been kept. Almost every 

county in Illinois was declared a primary disaster area. According to crop indemnity 

statistics, Illinois yields were down significantly and indemnities rose. 

I would like an answer as to why emergency funds have not been directed to producers in my State, and I would like the relevant branch of the USDA to provide 

an estimate of the amount of losses sustained State-by-State due to natural disasters this past year. 

Answer. Yields in Illinois were down in 2005 when compared to the record production of 2004. However, when compared to historical averages, crop losses in Illinois 

were not as severe as expected. Current crop insurance data indicates that the loss 

ratio for Illinois is about 0.50. By contrast, the loss ratio in Florida stands at nearly 

3.0, the highest in the Nation. The difference in losses becomes even more apparent 

when you consider that nearly 85 percent of Illinois crops are insured at a 70 percent or higher coverage level meaning that the majority of producers needed a loss 

of just 10 to 30 percent to qualify for an indemnity. By contrast, less than 18 percent of Florida crops are insured at such high coverage levels. In fact, over 63 percent of Florida crops are insured at the catastrophic level meaning they needed to 

sustain losses in excess of 50 percent to qualify for an indemnity. 

At the present time we do not have a break-down of losses sustained State-byState due to natural disasters. However, the Risk Management Agency does have 

a break-down of losses sustained State-by-State due to all causes of loss; which may 

include losses stemming from price declines. 

[The information follows:] 
121 

FEDERAL CROP INSURANCE CORPORATION CROP YEAR STATISTICS FOR 2005 AS OF 3/20/2006 

[Nationwide Summary—By State] 

State Policies Sold Policies Earning Premium Policies Indem- nified Net Acres In- sured Liabilities Total Premium Premium Subsidy Indemnity Loss Ratio 

ALABAMA ...................................................................... 13,358 6,175 1,275 1,037,905 266,638,428 30,294,966 18,286,761 14,719,917 .49 ALASKA ......................................................................... 37 22 ........................ 5,864 419,584 53,432 45,525 ........................ ................ARIZONA ....................................................................... 2,109 973 72 381,969 150,917,945 8,497,319 5,256,239 1,877,860 .22 ARKANSAS .................................................................... 33,456 17,706 3,730 4,564,203 489,344,042 45,621,410 33,525,853 27,975,089 .61 CALIFORNIA .................................................................. 32,945 24,939 3,140 3,817,389 3,322,510,070 169,072,162 120,901,931 79,763,804 .47 COLORADO .................................................................... 36,022 17,140 10,117 3,928,423 579,414,985 84,784,549 48,770,711 96,305,825 1.14 CONNECTICUT ............................................................... 411 296 40 22,152 70,382,422 3,517,559 2,376,180 622,699 .18 DELAWARE .................................................................... 1,629 1,170 426 263,145 45,150,127 4,576,175 2,967,234 2,695,938 .59 FLORIDA ........................................................................ 17,886 14,491 3,612 1,373,469 2,978,645,459 106,546,097 77,499,714 310,683,797 2.92 GEORGIA ....................................................................... 34,796 14,321 3,467 2,449,745 727,871,287 78,312,292 48,135,009 56,789,355 .73 HAWAII .......................................................................... 140 138 5 26,506 77,903,217 913,243 625,013 387,341 .42 IDAHO ........................................................................... 11,150 6,321 1,426 1,849,657 536,046,499 42,134,361 24,522,855 23,595,390 .56 ILLINOIS ........................................................................ 135,200 110,759 23,902 15,916,643 3,939,276,514 277,222,446 149,641,601 137,614,012 .50 INDIANA ........................................................................ 51,866 41,996 6,900 7,703,368 2,002,619,812 163,300,587 87,078,250 25,001,170 .15 IOWA ............................................................................. 151,329 127,408 12,734 19,909,552 4,513,906,738 310,561,169 166,880,925 67,947,493 .22 KANSAS ......................................................................... 237,020 123,906 33,215 16,403,797 1,894,187,392 261,253,464 150,721,768 117,836,089 .45 KENTUCKY .................................................................... 21,908 12,410 2,242 1,848,103 399,460,535 34,702,791 20,523,436 16,478,773 .47 LOUISIANA .................................................................... 24,268 9,471 1,739 2,645,190 386,339,172 33,641,733 23,162,354 16,250,621 .48 MAINE ........................................................................... 670 518 160 100,357 60,150,179 5,087,398 3,530,434 5,573,387 1.10 MARYLAND .................................................................... 5,563 4,179 804 750,124 175,680,023 15,024,802 9,883,561 4,266,926 .28 MASSACHUSETTS .......................................................... 800 604 104 26,829 47,248,511 2,454,178 1,715,709 2,239,041 .91 MICHIGAN ..................................................................... 28,560 20,759 2,815 3,571,061 923,476,088 74,022,000 44,997,976 15,860,243 .21 MINNESOTA ................................................................... 123,856 82,367 14,838 16,248,086 3,137,522,415 284,883,602 159,009,913 131,820,332 .46 MISSISSIPPI .................................................................. 16,405 7,265 1,194 3,200,937 423,650,399 37,416,582 24,606,293 16,611,379 .44 MISSOURI ..................................................................... 76,164 46,459 13,414 7,039,822 970,677,140 111,472,976 69,187,614 74,237,351 .67 MONTANA ...................................................................... 39,785 22,567 3,326 33,915,723 672,585,090 96,239,181 56,274,382 24,573,063 .26 NEBRASKA .................................................................... 159,011 95,153 21,766 14,121,474 2,726,193,994 253,899,361 141,880,921 79,564,839 .31 NEVADA ........................................................................ 152 115 32 38,102 13,967,262 1,023,211 595,975 763,228 .75 NEW HAMPSHIRE .......................................................... 118 98 17 8,121 9,515,182 381,105 275,311 490,792 1.29 NEW JERSEY ................................................................. 1,521 1,067 129 156,939 87,457,732 3,486,846 2,854,527 1,413,404 .41 NEW MEXICO ................................................................ 3,615 1,763 229 551,108 80,983,767 10,635,155 6,990,003 2,430,038 .23 NEW YORK .................................................................... 6,329 4,340 658 714,682 233,205,271 17,854,230 12,421,731 12,031,267 .67 NORTH CAROLINA ......................................................... 35,045 19,037 4,783 3,101,172 906,615,258 77,458,243 46,861,372 63,726,912 .82 NORTH DAKOTA ............................................................ 170,987 74,758 26,596 20,393,248 2,032,938,321 308,384,516 178,545,676 222,427,856 .72 
122 

FEDERAL CROP INSURANCE CORPORATION CROP YEAR STATISTICS FOR 2005 AS OF 3/20/2006—Continued 

[Nationwide Summary—By State] 

State Policies Sold Policies Earning Premium Policies Indem- nified Net Acres In- sured Liabilities Total Premium Premium Subsidy Indemnity Loss Ratio 

OHIO ............................................................................. 51,177 40,288 11,083 5,742,109 1,336,152,625 109,260,601 59,310,152 44,364,624 .41 OKLAHOMA .................................................................... 36,002 19,698 6,453 4,668,500 408,355,429 60,183,880 36,530,873 26,770,647 .44 OREGON ........................................................................ 6,082 3,506 1,080 878,217 544,055,132 18,199,764 11,366,471 25,330,774 1.39 PENNSYLVANIA ............................................................. 15,281 11,410 2,383 1,117,322 249,867,340 29,841,007 19,260,202 14,811,482 .50 RHODE ISLAND ............................................................. 57 36 6 1,529 840,333 60,232 45,452 55,859 .93 SOUTH CAROLINA ......................................................... 10,142 5,404 1,312 1,057,078 273,512,449 28,391,120 17,924,781 18,181,566 .64 SOUTH DAKOTA ............................................................. 112,973 62,641 19,023 13,583,329 1,618,226,090 230,818,186 134,592,001 116,288,325 .50 TENNESSEE ................................................................... 16,646 9,217 1,179 1,865,720 651,254,289 32,535,870 22,291,662 12,693,138 .39 TEXAS ........................................................................... 172,730 74,337 16,955 13,604,810 1,988,774,231 315,743,910 198,748,630 146,587,572 .46 UTAH ............................................................................. 1,172 847 173 173,209 21,421,230 2,625,837 1,650,607 2,846,260 1.08 VERMONT ...................................................................... 596 509 43 72,085 16,753,118 1,201,826 837,124 329,444 .27 VIRGINIA ....................................................................... 12,238 6,745 2,008 970,105 271,737,055 23,357,692 14,259,115 14,251,573 .61 WASHINGTON ................................................................ 16,260 11,823 2,072 2,403,707 1,050,845,453 48,835,523 31,421,700 21,611,628 .44 WEST VIRGINIA ............................................................. 942 494 84 45,381 11,247,813 1,285,520 870,190 641,063 .50 WISCONSIN ................................................................... 37,485 28,708 5,471 4,053,136 857,353,335 80,504,835 47,060,824 35,885,299 .45 WYOMING ...................................................................... 6,371 3,968 869 7,490,239 93,006,210 10,534,970 6,466,884 6,034,049 .57 

Grand Total ..................................................... 1,970,265 1,190,322 269,101 245,811,341 44,276,302,992 3,948,109,914 2,343,189,425 2,141,258,534 .54 
123 

The issue of rural development is of serious concern to me. I just don’t see how 

this budget demonstrates a commitment to the needs of rural America. Here’s one 

item that jumps out at me: consolidation of Farm Service Agency (FSA) offices. I 

continue to be concerned that there are signals going out to State FSA directors that 

they will be able to shutter FSA offices. 

Consolidating these offices would mean that farmers have to spend more time 

driving around to access the essential services provided by FSA offices, and would 

result in a direct decrease in these services. 

FSA OFFICE CLOSURES

Question. The issue of rural development is of serious concern to me. I just don’t 

see how this budget demonstrates a commitment to the needs of rural America. 

Here’s one item that jumps out at me: consolidation of Farm Service Agency (FSA) 

offices. I continue to be concerned that there are signals going out to State FSA directors that they will be able to shutter FSA offices. 

Consolidating these offices would mean that farmers have to spend more time 

driving around to access the essential services provided by FSA offices, and would 

result in a direct decrease in these services. 

First, I would like to know what mechanism the Secretary proposes for State authorities to be given discretion to close FSA offices. Also, I would like the Secretary 

to respond in unequivocal terms that should State or Federal authorities choose to 

consolidate FSA offices, that Members of Congress be consulted. I would like to 

know what plans the Secretary has for keeping Members in the loop fully through 

the process. 

Answer. The Department and the Farm Service Agency (FSA) is committed to 

meeting the needs of farmers and ranchers in the 21st Century, and wisely investing in our employees, technology and equipment will only improve customer service 

delivery. We are also committed to coordinating with Congress, stakeholders, local 

groups and customers to ensure the Agency offers the best service possible. 

FSA is working with the State Executive Directors (SEDS) for each State. FSA 

is asking each SED to conduct an independent local-level review of the efficiency 

and effectiveness of FSA offices in their State. SEDs and State Committees will 

form a review committee to identify what the optimum network of FSA facilities, 

staffing, training and technology should be for your State within existing budgetary 

and staffing resources. Further, SEDs will explore potential joint-effort opportunities with the Natural Resources Conservation Service and other USDA agencies. 

There is no comprehensive national plan or formula for identifying the optimum 

network of FSA offices. Each State will review its own county office system before 

submitting recommendations for technology upgrades, staffing, training and facilities. 

As recommendations are received from each State, FSA will hold public hearings 

and coordinate communications efforts with area farmers, ranchers, and stakeholders. If the office closure or consolidation moves forward, FSA will notify the appropriate members of Congress, including those on the Appropriations Subcommittees. 

The Department is committed to a continued dialogue with State and congressional leaders to discuss how best to modernize the FSA county office system and 

the necessary steps required to improve its information technology (IT) infrastructure. The ultimate goal of this process is to increase the effectiveness of FSA’s local 

offices by upgrading equipment, investing in technology and providing personnel 

with critical training. Optimizing the county office structure consistent with IT modernization is absolutely essential if the Agency’s tradition of excellent customer service is to be maintained. 

QUESTIONS SUBMITTED BY SENATOR TIM JOHNSON

IMPORTS OF JAPANESE BEEF

Question. When Japan opened its market to U.S. exports of beef from animals 

under 20 months of age, the U.S. simultaneously opened up its market to a broad 

range of beef from Japan, including beef from animals over 30 months of age. Japan 

implemented its ruminant-to-ruminant feed ban in 2001, and has had more than 20 

cases of Bovine Spongiform Encephalopathy (BSE). 

Can you explain how the U.S. import standard for beef from Japan meets the 

standards of the World Organization for Animal Health (OIE) for mitigating the risk 

of spread of BSE? 
124 

Answer. The OIE guidelines provide for three possible BSE classifications for an 

exporting country: negligible risk, controlled risk, and undetermined risk, with export conditions increasingly stringent as the status of a region moves from negligible 

risk through controlled risk to undetermined risk. The import conditions for whole 

cuts of boneless beef from Japan, including the requirements for specified risk material removal and restrictions on stunning and pithing, are consistent with OIE’s criteria for meat exported from controlled-risk regions. 

Question. How does this import standard take into account the fact that science 

is still evolving regarding the question of whether or not the prions responsible for 

BSE infection may be found in sciatic nerve tissue and muscle cuts of meat? 

Answer. APHIS recognizes that ongoing research with increasingly sensitive detection measures may find the presence of abnormal prions in different tissues. This 

does not negate the previous research studies nor the years of epidemiological evidence that demonstrate the lack of infectivity in muscle meat. The incidence of BSE 

worldwide continues to decrease, providing evidence that the established control 

measures are working. These control measures are based on previous research and 

epidemiological evidence, and demonstrate that this research has identified those 

tissues that contain essentially all of the relevant infectivity in cattle tissues. 

Question. Does this opening to beef from a country with a feed ban since 2001 

comply with USDA’s earlier position that risk mitigation required the existence of 

a feed ban for a minimum of 7 years? 

Answer. A feed ban in relation to the definition of a BSE-minimal risk region— 

which is not relevant to the import of boneless beef from Japan—requires that a 

minimal-risk region should maintain risk mitigation measures adequate to prevent 

widespread exposure and/or establishment of disease, including the fact that a ruminant-to-ruminant feed ban is in place and is effectively enforced. There is no time 

frame specified. 

Question. Why did the United States agree to impose less stringent import standards for meat from a country with BSE problems than that country agreed to impose on our exports? 

Answer. Japan requested that the USDA consider allowing the resumption of beef 

imports from Japan based on the safeguards they had implemented to prevent and 

control BSE. APHIS conducted a thorough risk analysis to evaluate this request, 

and determined that the importation of whole cuts of boneless beef could be allowed 

while continuing to protect the United States against the introduction of BSE. 

IMPORTS FROM CANADA

Question. In January of this year, Canada confirmed the detection of another animal infected with BSE in Alberta. The animal in question was born 3 years after 

Canada imposed its ruminant-to-ruminant feed ban. In addition, in December of last 

year, USDA’s Inspector General confirmed that Canadian beef inspection officials 

were still not enforcing certain measures required of them in order to qualify for 

equivalence to the U.S. inspection system, despite the fact that USDA originally 

identified these problems in the Canadian system as early as 2003. Yet FSIS is only 

now developing and implementing protocols to evaluate deficiencies in the Canadian 

system. 

In light of these developments, is USDA considering re-evaluating its Canadian 

import policy? 

Answer. USDA remains confident in the animal and public health measures that 

Canada has in place to prevent BSE, combined with existing U.S. domestic safeguards and additional safeguards outlined in the final rule recognizing Canada as 

a minimal-risk region for BSE. 

Question. Do you feel there are any additional safeguards that may be needed in 

our import regulations to account for the discovery of an infected animal Canadian 

born after the feed ban, and the continued deficiencies in Canada’s meat inspection 

system? 

Answer. USDA feels that the safeguards currently in place are sufficient to protect public health against BSE. USDA requires that all foreign countries that export 

meat and poultry to the United States must have an inspection system equivalent 

to the one in this country. This means that all of our trading partners must meet 

our domestic regulatory standards, including the ban on specified risk materials 

(SRMs) and the prohibition of non-ambulatory disabled cattle from the human food 

supply. 

Canada has SRM removal requirements that are virtually identical to the current 

U.S. regulations. The only difference is that Canada does not consider tonsils to be 

SRMs in cattle less than 30 months of age. However, all meat exported from Canada 

to the United States must have the tonsils removed, pursuant to U.S. regulations. 
125 

Question. If you don’t believe any modifications in our import regulations are 

needed, why not? 

Answer. USDA remains confident in the animal and public health measures in 

place in both Canada and the United States. With respect to BSE, risk mitigation 

is not tied to the success or failure of one individual measure. It relies on an interlocking sequence of risk mitigation measures that provide an overall measure of risk 

protection. The Canadian BSE risk assessment evaluated the total effect of all of 

these measures, and was not based on one individual measure. 

COUNTRY OF ORIGIN LABELING

Question. American cattle producers often argue that one of the most important 

steps that could boost their competitiveness at home and abroad would be to differentiate their product to consumers as meat exclusively from animals born and 

raised in the United States. In fact, customers in some of our most important export 

markets are also demanding source verification of U.S. meat exports. Yet country 

of origin labeling is still not mandatory for U.S. meat products, and there is no way 

for consumers to distinguish whether meat packed in the United States is from U.S. 

animals or foreign animals. 

Does USDA see mandatory country of origin labeling for meat, including information on animal origin, as a competitive advantage for U.S. producers? 

Answer. Evidence from the marketplace suggests that the willingness of consumers to pay for information about the origin of their food is not high. If market 

premiums for country of origin information were available, there would be strong 

incentives for the industry supply chain to provide that information voluntarily to 

consumers. Since the level of voluntary labeling for country of origin of U.S. foods 

is minimal, the willingness of consumers to pay for the information appears to be 

small. That being the case, there most likely would be minimal competitive advantage for U.S. producers under a mandatory program. 

Question. If export customers are demanding such information, shouldn’t U.S. consumers have access to the same information about the food they eat? 

Answer. Many groups, including consumers and industry associations, have expressed an interest in country of origin labeling. In general, providing more information to consumers to make informed purchase decisions is better than less or no information. If the costs of providing the additional information exceed the benefits, 

however, then there is no economic rationale for providing it. 

Question. What can USDA do to help ensure that U.S. producers can differentiate 

their product in the market? 

Answer. There are existing user-fee programs administered by USDA that address this issue, such as the Process Verified Program. Under this program, individuals can request that USDA verify live animal or product attributes, including the 

source of their animals. USDA’s voluntary marketing programs are currently assisting U.S. producers in differentiating their products in domestic and international 

marketplaces. 

RESOURCE, CONSERVATION, AND DEVELOPMENT PROGRAM

Question. I am concerned for the President’s budget request for the Resource, Conservation, & Development program. RC&D leverages $8 in my community for every 

$1 the Federal Government invests. What other programs in your agency budget 

bring this type of return on investment to rural areas? 

Answer. USDA delivers a variety of rural economic development, farm support, 

research, conservation, and forestry programs that collaborate closely with local 

communities and landowners to address their locally identified priorities. Many of 

these programs cost share the financial and technical assistance costs with State 

and local governments, and the private sector, to more cost effectively deliver benefits for local communities. 

Question. It is my understanding that while we level funded RC&D that the following States lost funds in your new resource based allocations. Can you tell us 

what factors you used to determine the resource allocations? I note that States 

served by Members of this Subcommittee like Missouri, Kentucky, Kansas, California, Iowa, Illinois, and North Dakota lost funding under this process. 

Answer. State RC&D allocations are now based on 19 resource concern factors 

which reflect the four program statute purposes of Land Conservation, Land Management, Water Management, and Community Development; and State specific factors which reflect the cost of doing business within the State. In fiscal year 2006 

the resource concern factors reflected 90 percent of the allocation and State specific 

factors reflected 10 percent. The new approach was designed so that no State received a reduction in allocation greater than 5 percent. Additional information, in-
126 

cluding a list of fiscal year 2006 allocation factors and weights used is provided for 

the record. 

[The information follows:] 

This new targeted allocation approach addresses Program Assessment Rating Tool 

(PART) concerns about the need for targeting resources to address the highest priority needs. It uses weighted state and local-level data elements collected through 

the Natural Resources Inventory (NRI), National Agricultural Statistics Service 

(NASS), U.S. Census Bureau, Economic Research Service and other reliable and statistically sound sources to highlight the resource needs in the States. The targeted 

allocations reflect national NRCS priorities and tie to long-term program goals. 

Question. Can you give us an update on management issues within the RC&D 

program including long term program goals and the status of the new POINTS 

database? 

Answer. There are a number of improvements underway for the program that address operating deficiencies highlighted through the PART results and through the 

national evaluation conducted in conjunction with RC&D councils in fiscal year 

2004–2005. 
127 

By the end of April, NRCS will have a new RC&D program performance reporting 

system, POINTS, in place that will enable more effective management of program 

performance and more closely link performance with budget requests. In addition, 

NRCS has recently developed new national long-term, outcome-oriented program 

performance measures and goals that meaningfully reflect the program’s purpose. 

The new long-term performance measures, reflecting the core of activities undertaken by RC&D Councils, were developed using information provided by the National Association of RC&D Councils (NARC&DC). 

NRCS is working with RC&D Councils to develop Area Plans and annual plans 

of work that tie more closely to the new targeted approach to addressing the highest 

priority needs and be more accountable for showing program performance. 

NRCS is also taking steps with the National Association of RC&D Councils 

(NARC&DC) to increase program participation with Indian Tribes, an item of concern reported in the national program evaluation. Hands-on training is being provided to RC&D councils and coordinators on working more effectively with Tribes. 

In addition, a useful handbook has been developed to aid local councils in their daily 

interaction and outreach activities with Tribes. 

Question. RC&D was originally intended to be administered by NRCS yet bring 

to bear the resources of all USDA programs in a community. We hear from constituents that conservation and implementation of Farm Bill programs are the priority 

for NRCS employees associated with the program. 

What are you doing to maintain the integrity of the RC&D area planning process 

and ensure that in areas where rural development is a priority that council can still 

receive assistance from the Federal coordinator? 

Answer. All program improvements being implemented for the RC&D program 

are designed to maintain the integrity and authorities of the program. Under longstanding NRCS policy, the RC&D Area Plan developed by each council must address 

all four statutory components of the program: land conservation, water management, community development and land management. Rural development activities 

fall within these components. The technical assistance provided through RC&D coordinators and other NRCS employees address the high priority concerns outlined 

in the RC&D area plans to the extent that RC&D appropriations are available. 

Question. We hear that States no longer have full time coordinators and that part 

time program assistant positions have been eliminated in most States. 

The program was level funded. How has this happened? 

Answer. Despite continued increased costs relating to salaries, rent, equipment, 

supplies, fuel, etc., program efficiencies and more effective leveraging of Federal 

funds allow the program to deliver the high level of service in 2006 as in prior 

years. 

Question. Can you detail the level of support provided to each State? 

Answer. In fiscal year 2006 the following funds were provided to each State: 

State Total fiscal year 

2006 allocation 

Alabama ............................................................................................................................................................... $1,095,450 

Alaska ................................................................................................................................................................... 984,616 

Arizona .................................................................................................................................................................. 801,550 

Arkansas ............................................................................................................................................................... 856,767 

California .............................................................................................................................................................. 1,465,350 

Colorado ............................................................................................................................................................... 973,733 

Connecticut .......................................................................................................................................................... 274,083 

Delaware ............................................................................................................................................................... 134,417 

Florida .................................................................................................................................................................. 940,917 

Georgia ................................................................................................................................................................. 1,343,633 

Hawaii .................................................................................................................................................................. 549,694 

Idaho .................................................................................................................................................................... 1,075,333 

Illinois ................................................................................................................................................................... 1,221,917 

Indiana ................................................................................................................................................................. 1,095,450 

Iowa ...................................................................................................................................................................... 1,947,467 

Kansas .................................................................................................................................................................. 1,096,716 

Kentucky ............................................................................................................................................................... 1,704,033 

Louisiana .............................................................................................................................................................. 940,917 

Maine .................................................................................................................................................................... 672,083 

Maryland ............................................................................................................................................................... 403,250 

Massachusetts ..................................................................................................................................................... 403,250 

Michigan ............................................................................................................................................................... 940,917 

Minnesota ............................................................................................................................................................. 1,075,333 
128 

State Total fiscal year 

2006 allocation 

Mississippi ........................................................................................................................................................... 940,917 

Missouri ................................................................................................................................................................ 1,009,897 

Montana ............................................................................................................................................................... 1,075,333 

Nebraska .............................................................................................................................................................. 1,460,600 

Nevada ................................................................................................................................................................. 403,250 

New Hampshire .................................................................................................................................................... 268,833 

New Jersey ............................................................................................................................................................ 268,833 

New Mexico ........................................................................................................................................................... 979,469 

New York .............................................................................................................................................................. 1,023,728 

North Carolina ...................................................................................................................................................... 1,217,167 

North Dakota ........................................................................................................................................................ 998,832 

Ohio ...................................................................................................................................................................... 1,095,450 

Oklahoma ............................................................................................................................................................. 1,095,450 

Oregon .................................................................................................................................................................. 672,083 

Pennsylvania ........................................................................................................................................................ 1,095,450 

Rhode Island ........................................................................................................................................................ 134,417 

South Carolina ..................................................................................................................................................... 940,917 

South Dakota ........................................................................................................................................................ 940,917 

Tennessee ............................................................................................................................................................. 1,217,167 

Texas .................................................................................................................................................................... 2,677,767 

Utah ...................................................................................................................................................................... 940,917 

Vermont ................................................................................................................................................................ 268,833 

Virginia ................................................................................................................................................................. 940,917 

Washington ........................................................................................................................................................... 940,917 

West Virginia ........................................................................................................................................................ 735,050 

Wisconsin ............................................................................................................................................................. 940,917 

Wyoming ............................................................................................................................................................... 672,083 

Pacific Basin ........................................................................................................................................................ 280,863 

Puerto Rico ........................................................................................................................................................... 403,250 

Total Allocated to States ........................................................................................................................ 47,637,100 

Question. RC&D coordinators are being pulled from their program responsibilities 

to implement Farm bill programs. What is the average amount of time a coordinator 

spends on RC&D program activities nationally? 

Answer. RC&D coordinators are spending at least 75 percent of their time on 

RC&D program activities. 

Question. Is this time charged to the TA portion of Farm bill programs? 

Answer. NRCS time charges are directly connected to the benefiting program. If 

an RC&D Coordinator works on a Farm Bill related program their time is charged 

directly to those programs on a case-by-case basis. Only RC&D work is charged to 

the RC&D program. 

Question. Anecdotal evidence indicates that RC&D councils are taking on more 

and more of NRCS overhead and administrative costs. 

Can you provide a comparison by State of the administrative costs assessed to 

RC&D in proportion to other Federal programs in your agencies jurisdiction? 

Answer. The comparison by State for fiscal year 2006 is provided for the record. 

[The information follows:] 
129 

Question. The House bill included report language that the Committee expects the 

NRCS to promptly fill RC&D coordinator vacancies. The Committee expects support 

provided under this act to be allocated equitably among the 375 existing councils 

and that priority be given to providing every council a full-time coordinator. 

What States returned funds to headquarters at the end of the fiscal year? 

Answer. Eight States, Alaska, Arizona, Florida, Illinois, Nevada, North Carolina, 

Utah, and Washington had unused funds at the end of fiscal year 2005 in amounts 

ranging from $10,000 to $101,000. There were 20 other States that had unused 

funds of less than $10,000; they were Alabama, Arkansas, Georgia, Hawaii, Indiana, 

Maine, Massachusetts, Michigan, Mississippi, Montana, New Jersey, New York, 

North Dakota, Oregon, Rhode Island, Tennessee, Texas, Virginia, Wisconsin, and 

Wyoming. The Funds were then redistributed using the allocation formula. 

Question. Please provide a chart of coordinator vacancies that took place in fiscal 

year 2006 and the length of time it took to fill the position with a permanent employee? 

Answer. Since the beginning of fiscal year 2006 there are 10 vacancies. 
130 

State Number of 

vancancies Vacant since est. Length vacant 

Florida ........................................................................................................ 1 10/05 6 months

Georgia ....................................................................................................... 1 2/06 2 months 

Kentucky ..................................................................................................... 1 1/06 3 months 

Louisiana .................................................................................................... 1 2/06 2 months 

Massachusetts ........................................................................................... 1 1/06 3 months 

Michigan .................................................................................................... 1 1/06 3 months 

North Carolina ............................................................................................ 1 1/06 3 months 

Ohio ............................................................................................................ 1 1/06 3 months

Oklahoma ................................................................................................... 1 1/06 3 months 

South Dakota ............................................................................................. 1 3/06 1 month 

Question. Include an explanation of how appropriated funds were used while there 

were extended vacancies. Will vacancies that occur in fiscal year 2006 be promptly 

filled? 

Answer. Funds are allocated to the States to support RC&D activities within the 

State. In most cases when there is a vacancy, appropriated funds are used for another NRCS employee to serve in an acting capacity for the Coordinator. If that is 

not possible, the funds are not used until the position is filled. When the positions 

are filled, the funds are used to cover salary and relocation costs incurred in filling 

the position. In some cases relocation costs can exceed $100,000. In situations where 

funds are limited, filling vacancies is deferred until the employee relocation costs 

and salary can be absorbed. Vacancies that occur in fiscal year 2006 are being filled 

as funding permits. 

Question. Why has no input been asked for or taken from local RC&D councils 

in regard to the fiscal year 2006 Goaled Performance Measures in accordance with 

Public Law 107–171 and NRCS’s own Programs Manual part 513 on RC&D program 

(May, 2002) section a, b, and c? 

Answer. In fiscal year 2005, NRCS established goaled performance measures for 

all programs covering a two-year period, fiscal year 2005 and fiscal year 2006. However, information provided by the NARC&DC, representing the 375 councils nationwide, was used in the development of the new annual, long-term and efficiency 

measures for the program being implemented for fiscal year 2006 and 2007. The 

NARC&DC, through a cooperative agreement with NRCS, provided eight long term 

program performance measures, and four program priorities based on their research 

of local RC&D council area plans. 

Question. Why should local RC&D Council Members who are volunteers continue 

to spend their time on RC&D goals which are decided at the Washington DC level, 

rather than at the local, grassroots community level which was the intent of the 

RC&D legislation? 

Answer. Performance goals established for the RC&D program are required by the 

Government Performance and Results Act of 1993. The goaled performance measures established for the RC&D program relate to the statutory elements outlined 

in the authorizing legislation and reflect program benefits that RC&D councils have 

been reporting for many years. Participation in the RC&D program is voluntary and 

not limited to goaled performance measures. However, the goaled performance 

measures are tied to program budget requests and the types of activities for the 

Federal coordinator. 

Question. How can the Office of Management and Budget ignore the statutory 

mission established for the RC&D program? 

Answer. The Office of Management and Budget does not ignore the statutory mission established for the RC&D program. Performance goals relate to the four statutory elements in the authorizing legislation of the program. 

Question. Are there any other programs that have the ability to bring together 

grassroots community vision and mission based on local needs and leverage the dollars to local communities at 6:1–10:1? 

Answer. USDA delivers a variety of rural economic development, farm support, 

research, conservation, and forestry programs that provide technical and financial 

assistance to address local needs. 

Question. Why has the NRCS abandoned grassroots priority-setting for the RC&D 

program in response to the PART review conducted by OMB? 

Answer. NRCS has not abandoned grassroots priority setting for the RC&D program. RC&D Councils can set their priorities as they relate to the four statutory 

elements in the authorizing legislation. 
131 

COMMODITY SUPPLEMENTAL FOOD PROGRAM

Question. In relation to the Commodity Supplemental Food Program, why would you eliminate a Federal program that provides a $50 retail value of food each 

month, at a cost of just $16 a month to the tax payers, with $20 worth of food 

stamps? This would equate to a loss of $30 in benefits to our Nation’s elderly at 

a time of rising medical and utility costs. Isn’t this an example of a judicious use 

of the tax payer’s dollars being discarded? 

Answer. The CSFP is a relatively small program that operates in limited areas 

of 32 States, two Indian reservations, and the District of Columbia. Its benefits are 

to a great extent redundant of those available through other nutrition assistance 

programs. In an era of fiscal constraint, we must ensure that limited resources are 

targeted to those programs that are available to needy individuals and families, regardless of the communities in which they reside. The populations served by CSFP 

are eligible to receive similar benefits through other Federal nutrition assistance 

programs that offer them flexibility to meet their individual nutritional needs and 

preferences. The administration has proposed this change to better target limited 

resources to those major programs that are available nationwide, promoting equity 

and effectiveness. If Congress adopts the budget request, we will work closely with 

CSFP State agencies to ensure that any negative effects on program participants 

are minimized and that they are transitioned as rapidly as possible to other nutrition assistance programs for which they are eligible. 

Elderly participants who are leaving the CSFP upon the termination of its funding and who are not already receiving FSP benefits will be eligible to receive a transitional benefit worth $20 per month ending in the first month following enrollment 

in the FSP under normal program rules, or 6 months, whichever occurs first. The 

average food stamp benefit for an elderly person living alone was $65 per month 

in 2004. The percentage of food stamp households with elderly that received the 

maximum benefit (14 percent) was nearly as large as the percentage that received 

the minimum benefit of $10 (17 percent). Thus, most elderly food stamp participants 

receive more than $10 per month, and we expect that this pattern would extend to 

new FSP participants leaving CSFP as well. 

Question. Why would you consider eliminating the CSFP, unlike any other, that 

receives donations of goods, services and volunteer hours with a value nearly equal 

to the administrative reimbursement by USDA? Besides providing a critical food 

supplement to our low income seniors, CSFP also provides a $1 donation for every 

$1 of administrative costs. 

Answer. We greatly appreciate our CSFP partners at the State and local level who 

have worked on behalf of this program and hope that their efforts can be directed 

toward volunteer opportunities in other USDA commodity programs, including the 

Emergency Food Assistance Program (TEFAP). Under TEFAP, local nonprofit organizations that are staffed mainly by volunteers, including many faith-based and 

community organizations, provide USDA commodities to the needy, either as prepared meals in soup kitchens, or through food pantries as commodities to be used 

by households. In addition, many TEFAP local organizations actively seek donations 

of commodities from other sources, including local grocery stores. 

Question. What will you do for the 25 percent of the CSFP participants who are 

already enrolled in the food stamp program and would be losing a critical benefit? 

Answer. CSFP recipients who are already enrolled in the FSP will continue to receive monthly food assistance benefits and have access to nutrition education services. 

Question. Isn’t it true that the FSP and CSFP are supplemental programs that 

are meant to work with each other to ease the burden upon our low income seniors? 

Answer. The Food Stamp Program is the cornerstone of the national nutrition 

safety net, and the largest elderly nutrition assistance program, serving nearly 2 

million seniors in an average month. Because the CSFP operates in limited areas, 

some low-income elderly have access to nutrition assistance through commodities 

and/or Food Stamps, while most others must rely exclusively on Food Stamps for 

such help. In the administration’s view, ensuring adequate funding for programs 

that have the scope and reach necessary to provide access to eligible people wherever they may reside is a better and more equitable use of scarce resources than 

to allocate them to programs that cannot provide access to many areas of the country. For this reason, the administration has placed a priority on funding Food 

Stamps, WIC, and other nationally-available programs that provide benefits to eligible people wherever they may live, including communities currently served by 

CSFP. Many elderly CSFP participants are expected to be eligible for, and to make 

use of the FSP, from which they may receive benefits that can be more flexibly used 

to avoid conflicts with their individual dietary needs and preferences. 
132 

Question. Why would you consider eliminating a program that has grown by 15 

States since 2000, has 5 States on a waiting list and has current participating 

States asking for thousands of additional caseload slots? 

Answer. We face difficult challenges and decisions with regard to discretionary 

budget resources and have chosen to not request funding for this program for several reasons. Resources are not available to permit CSFP to operate nationwide. In 

an era of fiscal constraint, we must ensure that limited resources are targeted to 

those programs that are available to needy individuals and families, regardless of 

the communities in which they reside. The priority of the administration is to ensure the continued integrity of the national nutrition assistance safety net, including the Food Stamp Program and WIC. 

Question. Some seniors have spoken that they prefer commodities to food stamps 

as was shown during your pilot program, of commodities in lieu of food stamps, in 

Connecticut and North Carolina. What do you say to those seniors? 

Answer. We recognize that some seniors prefer commodity packages to food 

stamps. However, the Food Stamp Program is the Nation’s primary domestic nutrition assistance program for low-income households. Because the CSFP operates in 

limited areas, some low-income elderly have access to nutrition assistance through 

commodities and/or FSP, while most others must rely exclusively on Food Stamps 

for such help. 

In the administration’s view, ensuring adequate funding for programs that have 

the scope and reach necessary to provide access to eligible people wherever they 

may reside is a better and more equitable use of scarce resources than to allocate 

them to programs that cannot provide access to many areas of the country. For this 

reason, the administration has placed a priority on funding the Food Stamp, WIC, 

and other nationally-available programs that provide benefits to eligible people 

wherever they may live and offer flexibility in benefits to meet their individual nutritional needs and preferences. 

SUBCOMMITTEE RECESS

Senator BENNETT. We thank you for your testimony, sir, and for 

the expertise that you bring here. The next hearing of the subcommittee will be with the Food and Drug Administration on Tuesday, March 14 at 10 a.m., and the subcommittee is recessed. 

[Whereupon, at 9:54 a.m., Thursday, March 9, the subcommittee 

was recessed, to reconvene at 10 a.m., Tuesday, March 14.] 
(133) 

AGRICULTURE, RURAL DEVELOPMENT, AND 

RELATED AGENCIES APPROPRIATIONS FOR 

FISCAL YEAR 2007 

TUESDAY, MARCH 14, 2006 

U.S. SENATE, 

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

The subcommittee met at 10:05 a.m., in room SD–192, Dirksen 

Senate Office Building, Hon. Robert F. Bennett (chairman) presiding. 

Present: Senators Bennett, Craig, Kohl, and Harkin. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

FOOD AND DRUG ADMINISTRATION

STATEMENT OF HON. ANDREW C. VON ESCHENBACH, ACTING COMMISSIONER 

ACCOMPANIED BY: 

KATHLEEN HEUER, CHIEF FINANCIAL OFFICER AND ASSOCIATE 

COMMISSIONER FOR MANAGEMENT 

RICHARD TURMAN, DEPUTY ASSISTANT SECRETARY FOR BUDGET, 

TECHNOLOGY, AND FINANCE, DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

STEVE SUNDLOF, DIRECTOR, CENTER FOR VETERINARY MEDICINE 

OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

Senator BENNETT. The subcommittee will come to order. 

And this morning, we are happy to welcome Dr. Andrew von 

Eschenbach, who is the acting Commissioner of the Food and Drug 

Administration. And we also welcome Ms. Heuer and Mr. Turman. 

We appreciate very much your being here. 

This is the second subcommittee hearing we have convened since 

receiving the President’s fiscal 2007 budget request, and it is the 

first time that Dr. von Eschenbach has appeared before the subcommittee. 

The FDA did pretty well under the President’s budget process. 

The budget request, not including user fees and fiscal 2006 supplemental funding, represents an overall increase of $70 million from 

the level of funding in fiscal 2006. Not all portions of this subcommittee’s budget did as well in terms of the President’s recommendations. 
134 

The FDA budget includes increases for pandemic influenza preparedness, food defense, drug safety, tissue safety, animal drug and 

medical device review, and a new initiative, called the Critical Path 

Initiative, to speed development of medical products. 

But it does include more than $50 million in base funding reductions. We have been given very little information about the impact 

of these reductions, and I expect that we will discuss those in some 

greater detail in the hearing this morning. 

Now given the fact that we are competing with other subcommittees, had to fight your way down the hall to get around the corner 

to come in here, and we are in the midst of the budget discussions 

on the floor, we are going to keep members to 5-minute rounds. 

We will use the ‘‘early bird’’ rule. That is, Senators will be recognized in the order of their arrival, and members will be allowed to 

submit questions for the record. We want all of the questions to the 

subcommittee to be here by the close of business on the 24th of 

March. 

Senator Kohl and I will be the only two to give opening statements. And when we have finished with our opening statements, 

then we will go directly to Dr. von Eschenbach for his presentation 

and then begin the questioning rounds. 

So with that statement of the ground rules, Senator Kohl. 

Senator KOHL. I thank you, Mr. Chairman. 

Dr. von Eschenbach, it is good to see here you here today, and 

we also want to welcome Ms. Heuer and Mr. Turman as well as 

the rest of your staffs. 

There has been, as you know, lots of interest in your budget, 

which appears to receive the most robust increase in the entire agricultural appropriations bill. I am pleased to see additional funding for drug and tissue safety as well as avian flu and food defense. 

Also in the budget, though, there is a redirection of $52 million 

and funding for some important activities and staffing levels actually decreases. These decreased activities, according to your budget, 

include generic drug contracts, analysis of food import samples, 

compliance and recall functions, certain safety activities in the biologics program, dietary supplement activities, and inspections of 

veterinary food and human drugs manufacturers. 

This is not at all a complete list. This is obviously a concern, and 

we are interested to know how the priorities in this budget were 

determined. 

We are hopeful that you will provide detailed information on this 

redeployment as well as your budgeted increases here today. And 

so, we look forward to your statement and the opportunity to ask 

questions. 

Thank you, Mr. Chairman. 

Senator BENNETT. Thank you. 

Dr. von Eschenbach, your prepared statement has been received 

and will be included in the record at this point in its entirety. But 

we would appreciate it now if you would give us a summary and 

whatever introductory comments you may wish to make. 

STATEMENT OF DR. ANDREW C. VON ESCHENBACH

Dr. VON ESCHENBACH. Thank you, Mr. Chairman. 
135 

Good morning, Senator Kohl. And good morning, Senator Craig, 

and other members of the staff. 

I am very honored to be here as the acting Commissioner of the 

Food and Drug Administration to present this 2007 fiscal year 

budget. But most of all, to also have the opportunity to thank you 

for the continued support and commitment that you have made to 

the FDA in helping to assure that it continues to be the gold standard around the world for the safety and effectiveness of the interventions that we provide to people. Our 2007 budget request proposes a total budget of $1.95 billion, of which $1.54 billion is in discretionary budget authority and $402 

million will be in user fees from the firms that we regulate. These 

funds are precious, and they are, in fact, essential to FDA’s continuing effort to assure that Americans can go to bed each night 

confident that the food they ate is safe, the medical devices they 

use are reliable, and the drugs that they gave to their children and 

grandchildren were safe and effective. 

As we developed this 2007 proposal, the first thing we focused on 

was FDA’s most precious asset, its people. The funds we are requesting are essential for us to continue to recruit, retain, and nurture a critical and diversified staff of highly skilled professionals 

and scientists who make it possible for the FDA to achieve the gold 

standard in regulating foods, drugs, and medical products. Our request includes $20 million for cost of living increases that 

are essential to meet payroll obligations and needed funds for the 

infrastructure to support our workforce and consolidate FDA operations in modern facilities at White Oak. 

In addition to the workforce-related issues, we have also focused 

on emerging urgent public health challenges and opportunities. 

The increase of $30.5 million over fiscal year 2006 for pandemic 

preparedness is for a comprehensive program that is designed to 

safeguard Americans from the danger of avian flu by enhancing 

and integrating our programs across vaccine development, 

antivirals, enhancement of devices for detection as well as for 

human protection, and also include issues with regard to animal 

welfare and human health. 

The $20 million for food defense is to protect the Nation’s food 

supply both from intentional terrorist attacks as well as to enhance 

our ability to safeguard the food supply from unintentional contamination. 

$4 million for human drug safety, plus an additional $700,000 in 

user fees, we believe will strengthen our capacity to recognize and 

act upon emerging drug safety concerns. And the $2.5 million for 

human tissue safety is in response to the dramatic growth that we 

are experiencing in the use of tissues for transplantation and the 

anticipation of the emerging challenges that will come from tissues 

obtained through bioengineering. 

With regard to the request for $6 million for the Critical Path to 

Personalized Medicine, this initiative is an essential investment, an 

investment in FDA’s ability to respond to the explosion in molecular medicine that is responsible for and resulting in progress toward new treatments, diagnostics, and preventive interventions. 

By using the science and technology of the 21st century, Critical 

Path will help ensure that FDA can guide these new discoveries 
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through the development process so that they are able to be delivered to patients in a rapid, safe, and effective manner. 

A modern, robust Critical Path will lead to solutions that will deliver on the promise of making our future health care personalized, 

predictive, preemptive, and, in fact, more cost effective. 

As you have indicated, to partially offset the cost of these initiatives and, most importantly, as good stewards of the resources that 

you have already provided, FDA has undergone a process to identify and an activities for opportunities for efficiencies and proposes 

to strategically redeploy $52 million in base funds. 

We have done this, first and foremost, with the principle to not 

undermine or impair our commitment to public health. But we believe by looking at opportunities within the portfolio to determine 

where there are programs that could be effectively carried out by 

alternative or other strategies, where there are opportunities to 

eliminate waste and maximize the impact of our investment, we believe that we can modernize and transform our business operations, as well as our programmatic operations, to address the 

emerging needs of the 21st century. 

We will accomplish this strategic redeployment while assuring 

you that we will maintain our century-old commitment to assuring 

the health and welfare of the American public. 

There are two new user fees that are being proposed. One covers 

the cost of re-inspecting facilities that fail to meet standards, and 

the second would cover the cost of issuing food and animal feed export certificates. 

As you have pointed out, the investment in the FDA in this 

budget is investment in the future of our country and our commitment to continue to ensure the health and safety of the American 

public. We propose to use these resources wisely and carefully as 

good stewards and, in doing so, assure a healthier America for generations to come. 

PREPARED STATEMENT

We really are grateful and appreciate your commitment and your 

interest to working together with us, as we will with you, to be 

sure that we fulfill that goal. 

[The statement follows:] 

PREPARED STATEMENT OF DR. ANDREW C. VON ESCHENBACH

Introduction 

Good morning Chairman Bennett, Senator Kohl, and distinguished members of 

the Subcommittee. I am very honored to have been appointed by President Bush 6 

months ago as Acting Commissioner of the FDA, and I consider it a privilege to 

present our fiscal year 2007 budget request on behalf of this extraordinary agency. 

I am joined today by Ms. Kathy Heuer, FDA’s Chief Financial Officer and Associate 

Commissioner for Management, and Mr. Richard Turman, Deputy Assistant Secretary for Budget, Technology, and Finance of the Department of Health and 

Human Services (DHHS). I also have members of FDA’s senior leadership with me 

at today’s hearing. 

Last September, President Bush selected me to lead an agency to which I appreciate, we, as Americans owe a great debt of gratitude. Millions of Americans go to 

sleep each night, secure in the knowledge that the food they ate and the medicines 

they gave their child were safe and effective. They do so, thanks to the thousands 

of dedicated professionals at FDA who work to assure the safety, efficacy, and security of drugs, vaccines and biological products, medical devices, our Nation’s food 

supply, and other consumer products. 
137 

This year, the Food and Drug Administration will celebrate its 100th birthday, 

marking a century as America’s gold standard for safety and consumer protection. 

We began in 1906, when Congress passed and President Theodore Roosevelt signed 

the Food and Drugs Act. This statute entrusted the Bureau of Chemistry, an office 

in the U.S. Department of Agriculture, to implement the sweeping new law. The Bureau eventually became the FDA, an agency of the Department of Health and 

Human Services. As the first consumer protection agency in the United States, FDA 

has a distinguished record, established during its 100 years of service to the American public. 

Today, the products we regulate represent almost 25 percent of U.S. consumer 

spending and include 80 percent of our food supply and all human drugs, vaccines, 

medical devices, tissues for transplantation, equipment that emits radiation, cosmetics, and animal drugs and feed. FDA takes great pride in its heritage and accomplishments, promoting and protecting the health and well-being of all Americans. I assure you that the precious resources you provide this agency in fiscal year 

2007 will be used wisely and judiciously to ensure that we maintain this record of 

excellence, as well as work to respond to the growing challenges to advance the Nation’s public health in a new era of rapidly developing science and individualized 

medicine. 

I want to thank the Subcommittee members for providing FDA with several key 

increases in the fiscal year 2006 appropriation. The Subcommittee demonstrated its 

commitment to FDA’s mission by providing increases for drug safety, the Critical 

Path Initiative, review of direct-to-consumer advertising, Food Defense, medical device review, and the FDA consolidation project at White Oak, Maryland. In addition 

to the amounts in the annual appropriations bill, I also want to express my thanks 

to Congress for the supplemental appropriation of $20 million to contribute to our 

Nation’s preparedness for the threat of pandemic flu. FDA enters this appropriation 

cycle mindful of our responsibility and stewardship, and that all Federal agencies 

must operate in an environment where our dollars must go to the greatest need. 

FDA’s 2007 President’s Budget Request 

In our fiscal year 2007 budget, the Administration proposes a total program level 

for the FDA budget of $1.95 billion, an increase of 3.8 percent above the fiscal year 

2006 amount. This includes $1.54 billion in discretionary budget authority and $402 

million in current law user fees. Our budget also includes $25.5 million for two new 

user fees. Our budget request maintains critically important core functions and 

demonstrates that our programs meet a firm test of accountability. At the same 

time, we are heeding the President’s call to assure continued progress by fostering 

innovation and focusing on emerging priorities. In fiscal year 2007, FDA will employ 

resources to advance its mission to protect the public health by assuring the quality 

of food and medical supplies and by implementing advanced technologies to monitor 

and speed innovations to market that will make foods safer and medical products 

more effective, safer, and more affordable. We will also implement advanced tools 

to ensure that the medical community can use molecular biology to improve outcomes for patients. We must accomplish these goals in a way that provides the public with the accurate, science-based information they need to use food and medicine 

to improve their health. 

The President’s budget focuses on six emerging, and urgent challenges and opportunities. To address these challenges, the budget proposal increases funding in these 

targeted activities above the amount provided in fiscal year 2006: $30.5 million for 

Pandemic Preparedness, $19.9 million for Food Defense, $5.9 million for the Critical 

Path to Personalized Medicine, $4.0 million for Human Drug Safety (plus an additional $0.7 million in user fees), $2.5 million for Human Tissue Safety, and $7.4 million to meet the statutory triggers of the Animal Drug and Medical Device user fee 

programs. In addition to these high priority initiatives, the budget requests $20.3 

million for inflationary cost-of-living increases that will enable the agency to recruit, 

nurture, and retain a critical mass of highly skilled professionals and scientists. 

This dedicated staff is necessary to respond to greater challenges in the regulatory 

process, including increased complexity of the sciences and technology and the need 

for a more rapid pace. 

FDA also seeks $1.2 million for the Unified Financial Management System, and 

an investment of $14.3 million for the agency’s infrastructure needs. To partially offset the cost of these initiatives, the President’s budget proposes to strategically redeploy $52.3 million in base funds. Even in an era of declining budgets, FDA recognizes the need to modernize and transform operations to address the emerging 

needs of the 21st century. Therefore, we engaged in an ongoing process to strategically redeploy resources to address high-risk public health challenges while main-
138 

taining our century-old commitment to principles that have made us the world’s 

‘‘gold standard’’ for regulating food and medical products. In doing so, the proposed 

budget will permit FDA to meet its ongoing statutory and regulatory responsibilities, while allowing us to initiate new and expanded efforts in critical areas of our 

mission. Now I would like to provide you with greater detail on our proposed budget 

increases. 

Pandemic Preparedness (∂$30.5 million) 

To safeguard Americans from the danger of pandemic influenza, FDA requests a 

total base program of $55.3 million in fiscal year 2007. This amount is $30.5 million 

more than the fiscal year 2006 enacted level, which includes the $20 million in supplemental appropriations provided by Public Law 109–148. The supplemental will 

allow FDA to rebuild and enhance its infrastructure; provide personnel and expertise in the essential clinical, product and manufacturing areas necessary to support 

new vaccine development for pandemic influenza. With the fiscal year 2007 funds, 

we will conduct a more comprehensive program to prepare for and respond to the 

risks of a pandemic flu outbreak. The resources will build upon the program this 

Congress launched in the supplemental, and will allow FDA to: 

—Engage in public-private partnerships to select, prepare, and test pandemic seed 

strains of variants of the H5N1 virus. 

—Develop reagents (used to assess vaccine potency) that are essential for successful large-scale manufacturing. 

—Evaluate and license flu vaccines that rely on current egg-based technology as 

well as encouraging the development of new approaches such as cell culturebased vaccines, recombinant vaccines, and vaccines that contain adjuvants— 

substances added to vaccines to stimulate an immune response. 

—Provide essential technical support to vaccine manufacturers throughout the 

vaccine development process, including support throughout the manufacturing 

phase. 

—Develop analytical methods to detect, identify, and quantify antiviral residues 

in poultry, so that these drugs do not promote drug resistance in humans. 

—Develop and validate methods to detect avian influenza in foods and advise 

American consumers about how to safely handle and cook these foods. 

We make this request because public health experts tell us that the risks of being 

unprepared for a pandemic could mean the death of up to 200,000 Americans (based 

on a medium-level pandemic scenario) and economic losses of up to $160 billion. In 

the near term, our pandemic initiative will stimulate broader interest among vaccine manufacturers, as they recognize that FDA will provide consistent technical 

support to overcome vaccine development hurdles. We have already seen results in 

this area. In the longer term, our fiscal year 2007 investment will yield essential 

seed strains and reagents, and allow us to transfer this technology to manufacturers, while we also perform our regulatory responsibilities of evaluating and licensing 

pandemic influenza vaccine products. Over the next 2–4 years, we will also fulfill 

our public health responsibilities related to foods and veterinary products, by delivering methods to detect antiviral residues and by educating Americans about safe 

food practices. 

Food Defense (∂$20 million) 

FDA seeks an investment of an additional $20 million in fiscal year 2007 to protect the Nation’s food supply from terrorist attack, by developing and deploying improved methods to screen food and feed imports and expanding the Food Emergency 

Response Network (FERN). 

FERN is a network of Federal and State laboratories designed to ensure that we 

have the analytic surge capacity to respond to an attack on the food system. By the 

end of fiscal year 2006, we plan to have an operational FERN system of 10 Federal 

and 10 State labs. The fiscal year 2007 funds ($13 million) will allow FDA to expand 

the current network by six additional labs, located at existing State facilities, and 

we will work to bring these on-line before the end of the fiscal year. We will fully 

equip these new labs, and provide operational funding and technical assistance so 

that they can conduct food defense activities. Our technical assistance will include 

proficiency testing on the new equipment and training to validate their ability to 

conduct food testing in response to an emergency. The result of this investment will 

be a more robust and more geographically diverse capability to provide the essential 

surge capacity to test contaminated food samples and allow us to warn the public 

about threats to the food supply. By working cooperatively with State facilities, we 

can stretch our Federal dollars and strengthen food defense at the Federal and 

State level. 

Within the $20 million increase, we will also: 
139 

—Conduct food defense research ($1 million) to fill in gap areas that we identified 

in the vulnerability assessments we conducted on 23 major food products such 

as baby food, infant formula, dairy products, soft drinks, and bottled water. 

—Strengthen the Electronic Laboratory Exchange Network (eLEXNET), an Internet based data exchange system used by Federal, State, and local government 

food safety laboratories. Using fiscal year 2007 funds, we will use eLEXNET to 

provide food sector-specific information to sister agencies and build a secure 

interface so that we can exchange data with DHS. Finally, we will purchase essential reagents and test kits to conduct biomonitoring surveillance. In fiscal 

year 2007, we will spend $2 million of the Food Defense increase for these activities. 

—Improve our Emergency Operations Network ($1 million) to allow FDA to conduct more sophisticated incident tracking for food-related emergencies. —Continue Field support of food defense operations ($3 million), including the targeting of potentially high-risk imported foods through Prior Notice Import Security Reviews based on intelligence, FDA inspection reports, discrepancies in 

prior notice reporting and sample collection and analysis. 

Critical Path to Personalized Medicine (∂$5.9 million) 

FDA requests an increase of $5.9 million in fiscal year 2007 for the Critical Path 

to Personalized Medicine initiative. This will allow us to increase the predictability 

and efficiency of developing new medical products, and deliver greater benefits to 

patients as we accelerate the field of personalized, predictive, preemptive, and 

participatory medicine. Our goal is to stimulate a new generation of scientific tools 

that will enable product sponsors to evaluate and predict the safety and effectiveness of drugs. This will permit physicians to tailor therapies to individual patients 

and avoid potentially dangerous adverse events. The Critical Path to Personalized 

Medicine Initiative also fulfills the Congress’ expectation under the Food and Drug 

Administration Modernization Act, when it charged FDA to work collaboratively 

with partners in government, academia, and industry to advance medical product 

development. A modern, robust Critical Path will lead to solutions that will deliver 

on the promise to make our future health care, personalized, predictive, preemptive, 

and more cost effective. 

The fiscal year 2007 investment will support: 

—Imaging Initiative.—Our Critical Path investment will support efforts to accelerate an understanding of the use of positron emission tomography (PET) and 

other advanced imaging technologies as surrogate endpoints for developing new 

cancer drugs. A surrogate endpoint helps to predict the benefit that a patient 

may experience from therapy. In fiscal year 2007, we will participate in developing technical standards for PET imaging—the tools that will enable drug developers to evaluate and improve the effectiveness of new products. 

—Improving Stent Design.—Cardiovascular disease is a significant cause of morbidity and mortality in the United States, and drug eluting stents have become 

a standard therapy to address cardiac disease in many patients. Today, most 

vascular stents eventually fail and alternative designs are difficult to test in humans. Our objective is to improve stent performance and safety by predicting 

and avoiding product failures. In fiscal year 2007, we will develop the preliminary components of a simulation model of drug eluting stent behavior in adults 

and children. Also in fiscal year 2007, we will work to develop open source imaging software to assess stent performance and begin to develop guidance for 

industry on using the simulation model to predict stent performance. 

—ECG Warehouse.—We will invest funds to develop the tools to permit searches 

of electrocardiogram (ECG) data submitted with drug applications so that we 

can identify cardiovascular risk patterns associated with unsafe drugs. We will 

also partner with academia and the public sector in fiscal year 2007 to conduct 

additional ECG analyses. This will improve our ability to identify cardiac safety 

concerns before we approve a drug for marketing and also detect post market 

safety signals. Through these activities, we will help ensure that therapies are 

safe and effective, and we will improve outcomes for patients who are using 

products that are already on the market. 

The need for new medical treatments and the investment of billions of dollars in 

basic biomedical research led many in the medical community to anticipate a new 

wave of medical products capable of dramatically saving and extending lives. Yet 

the recent slowdown in the rate of new medical treatments actually reaching patients is a significant concern at FDA. Products fail before they reach the market 

because clinical trials fail to demonstrate safety or efficacy, or they cannot be manufactured at a consistently high quality. Despite recent innovations, many serious 

and life-threatening diseases still lack effective treatments. 
140 

At FDA, we witness the full spectrum of drug, device, and biologic product development. From this unique perspective, it is clear that the development of evaluative 

scientific tools to utilize in medical product development has not kept pace with the 

rapid advances in basic sciences. The path from cutting-edge medical discovery to 

the delivery of safe and effective treatments is long, arduous, and uncertain—and 

it does not yield extensive information on product performance. To correct this imbalance, FDA initiated the Critical Path to Personalized Medicine, a program designed to modernize medical product development to ensure more efficient and more 

informative product development and clinical use. FDA considers the Critical Path 

Initiative to be its top scientific policy initiative for at least the next 5 years. 

FDA’s Critical Path Initiative will stimulate research community efforts to identify the essential biomarkers and improved clinical trial designs that will accelerate 

product development. Biomarkers are measurable characteristics that reflect physiological or disease processes. Medicine can use biomarkers to predict or monitor response to therapy. The initiative will generate essential information to identify patients likely to benefit from a treatment and patients more likely to respond adversely to a product. Without clinically proven biomarkers and innovative trial designs, we cannot modernize medical product development and realize the potential 

of personalized medicine. The subcommittee recognized this need when it appropriated funds for FDA in fiscal year 2006 to study cardiovascular biomarkers predictive of safety and clinical outcomes, and the funds that we request in fiscal year 

2007 will support broader efforts to achieve personalized medicine. 

Drug Safety (∂$4.7 million in budget authority and user fees) 

FDA will build on recent improvements to its drug safety activities with an fiscal 

year 2007 increase of $4.7 million (a $3.96 million increase in budget authority and 

$0.74 million in PDUFA user fees). The proposed fiscal year 2007 budget will provide a significant increase to our base resources for drug safety and will allow FDA 

to continue to strengthen our capacity to recognize and act on emerging drug safety 

concerns. 

As we plan for fiscal year 2007, we must continue to focus on the needs of the 

patient. We must constantly ask ourselves—how can we achieve the proper risk/benefit balance while speeding patient access to safe and effective products? U.S. pharmacies fill approximately 3.7 billion prescriptions per year and consumers make 

more than 5 billion over-the-counter drug purchases annually. The effect of these 

medicines on the full spectrum of our population causes unforeseen problems to surface that may not have appeared during the sometimes-lengthy drug review process. 

Our fiscal year 2007 drug safety request will permit us to launch a web-based system that provides agency analysts faster access to adverse event reports. Known as 

AERS II, this system will allow FDA to more easily evaluate potential safety issues, 

and improve our ability to take follow-up actions to protect patients. Fiscal year 

2007 funding will also allow us to analyze valuable drug safety information housed 

in CMS and other population-based databases and to conduct studies of high priority safety issues in the Medicare population. Studies conducted on these types of 

databases will provide more supporting evidence about drug use under a broader 

range of conditions, and more detailed evidence about drug safety in subgroups of 

patients, such as the elderly, and in patients with multiple medical conditions. This 

will provide FDA with many of the tools necessary to formulate and communicate 

safety information to health care practitioners, consumers, and the research community in a more timely and user-friendly way. 

We have made important drug safety enhancements during the past year, and I 

would like to highlight these activities for your now. The members of this Subcommittee provided an increase of $9.9 million in FDA’s fiscal year 2006 budget. We 

will bolster premarket and postmarket drug safety functions by using these funds 

to: 

—Increase the professional staff in FDA’s Center for Drug Evaluation and Research (CDER) who perform high priority drug safety reviews. 

—Increase the number of staff with expertise in critical areas, such as risk management, risk communication, and epidemiology. 

—Expand our information technology infrastructure for monitoring post-marketing data by increasing access to a wide range of clinical, pharmacy, and administrative databases. 

—Hire additional experts to enhance use of multidisciplinary, multi-office teams 

to interpret drug safety data. 

—Access external population-based ‘‘linked’’ databases to identify drug safety signals. 

Other important drug safety accomplishments during the past year include: 
141 

—Establishing a Drug Safety Oversight Board to provide independent oversight 

and advice on drug safety and disseminating safety information. The Board conducted 5 meetings in 2005 to discuss 17 drug products with potential risks. 

—Appointing a new director of CDER’s Office of Drug Safety. 

—Conducting a public meeting of experts to assess risk communication about 

drugs and to plan future communication efforts. 

—Unveiling a major revision to the format of prescription drug information, commonly called the package insert, to give healthcare professionals clear and concise prescribing information. 

These efforts emphasize our commitment to providing the American public with 

safe and effective medical products. 

Tissue Safety (∂$2.5 million) 

FDA requests an increase of $2.5 million to provide the essential resources to support a human tissue safety, including our role in monitoring the expanding field of 

tissue transplantation and the emerging challenges of bioengineering. These funds 

will allow the agency to: 

—Commence a comprehensive risk-based approach to assure the safety and quality of human cells, tissues and cellular and tissue-based products used for transplantation. Examples include corneas, heart valves, ligaments, joints, skin, or 

other tissues. 

—Promptly monitor and investigate adverse events and tissue product problems. 

—Take early action to improve tissue practices and prevent tissue-related injuries 

and deaths. 

—Educate industry, the medical community, and the public about human tissue 

safety. 

—Support promising new technologies that use cells and tissues, including therapies for diseases such as cancer, AIDS, Parkinson’s disease, hemophilia, diabetes, and other serious conditions. 

This program will provide guidance and predictability to more than 2,000 registered establishments that process and distribute tissue products used in medical 

procedures that save or enhance the lives of recipients. FDA has seen its workload 

in the area of human tissue transplants rise dramatically as transplants have increased from approximately 350,000 in 1990, to more than 1,000,000 annually. The 

number of transplants will continue to rise in the years ahead. 

With these resources, FDA will conduct 75 additional tissue inspections in fiscal 

year 2007 and thereby increase our annual inspection coverage to 325 facilities. 

Through inspection and monitoring activities, we can ensure that establishments 

demonstrate safety and efficacy of their products. These funds will also permit FDA 

to rapidly review, track, and analyze tissue deviation reports. Finally, we will issue 

guidance for industry on emerging issues relating to the eligibility of donors and 

good tissue practices. The goal of these efforts is to ensure safe outcomes for patients when they receive tissue transplants. 

FDA’s announcement in early February that we ordered a New Jersey company 

to cease operations is evidence that we will take action to protect the public health 

against tissue manufacturers that fail to follow safety requirements. This is an example of the targeted enforcement action we will conduct to protect the public 

health when we have evidence unsafe tissue practices. 

Budget Authority in Support of User Fee Programs—MDUFMA and ADUFA (∂$7.4 

million) 

To achieve more timely and cost-effective review of new medical devices and animal drugs, we continue to implement Medical Device User Fee and Modernization 

Act (MDUFMA) and the Animal Drug User Fee Act (ADUFA). Congress enacted 

these statutes to allow the agency to collect user fees from companies that submit 

medical device and animal drug applications. 

In fiscal year 2007, we are requesting a total increase of $7.4 million in new budget authority ($4.9 million for medical devices and $2.5 million for animal drugs) to 

ensure that we meet statutory requirements, known as triggers, and fulfill the fiscal 

year 2007 performance commitments under these programs. If we do not receive sufficient budget authority to meet the statutory triggers, FDA will lose the right to 

collect $55.3 million in user fees. The flow of potentially life saving medical devices 

will decline and the use of unapproved drugs in food-producing animals will likely 

rise. 

Under both these user fee programs, we pursue a complex and comprehensive set 

of product review goals. Each year brings additional goals, and the goals become 

more aggressive. FDA provides a complete report on its performance on under these 

programs at the end of each year. 
142 

The proposed increase will permit FDA to maintain its highly skilled scientific 

and professional review staff and conduct speedier review and approval of safe and 

effective medical devices. Under MDUFMA, FDA is meeting, or is on track to meet, 

nearly all of the performance goals for fiscal year 2003, fiscal year 2004, and fiscal 

year 2005. We will continue to make program improvements to ensure we meet the 

goals for fiscal year 2006 and fiscal year 2007. Under ADUFA, FDA expects to meet 

or exceed all performance goals. 

Cost of Living—Paying our People (∂$20.3 million) 

Soon after the President appointed me Acting Commissioner, I told my FDA colleagues that the well-being of our agency’s employees was one of my top priorities. 

The talented and dedicated FDA employees are the agency’s most precious asset and 

are the primary reason for our success. The proposed increase of $20.3 million to meet inflationary pay costs is essential 

to FDA’s ability to accomplish its public health mission. Payroll costs account for 

more than 60-percent of the FDA budget, and the Agency is not able to absorb inflationary increases on such a significant portion of its resources. These funds will 

allow FDA to maintain its world-class workforce and achieve the promise of a 

healthier America. 

FDA’s diverse portfolio of pubic health responsibilities demands that we maintain 

a large cadre of scientists and professionals with the training and experience to respond to complex and escalating public health challenges. This workforce is directly 

engaged in both developing the science of regulation as well as administering regulatory functions. 

FDA professionals are increasingly challenged by evolving food defense responsibilities as well as growing responsibilities in regulation of vaccine, drug, and device, development. Within the past year, they have addressed threats such as BSE 

(Mad Cow Disease), Salmonella, West Nile Virus, and pandemic flu. The FDA workforce reviews, approves, and continues to ensure the safety and effectiveness of 

products to manage cancer, diabetes, and heart disease, as well as oversee products 

intended to preserve health. FDA principally expends its budget for payroll that allows us to recruit and retain a skilled workforce dedicated to safeguarding the public using advanced tools to preempt public health threats. 

Unified Financial Management System (UFMS) (∂$1.2 million) 

In fiscal year 2007, FDA seeks an increase of $1.2 million to fully utilize the Unified Financial Management System (UFMS) for all of our financial transactions. 

These funds will allow FDA to achieve a major program milestone in the implementation of a new centralized financial management system under the Department of 

Health and Human Services (HHS). These additional funds would bring the fiscal 

year funding level to $14.1 million. 

UFMS is changing the way HHS agencies do business at it improves efficiencies 

in business processes and technology It will replace five redundant and outdated accounting systems in use at the National Institutes of Health, the FDA, the CDC, 

the Centers for Medicare and Medicaid Services, and the DHHS Program Support 

Center. The requested increase and the base funds in our budget will support dual 

functions. First, as a component of the Department-wide system, FDA resources will 

support testing and integration of the UFMS system, as well as regular operation 

and maintenance of UFMS. Second, fiscal year 2007 funding will support FDA-specific functions such as the purchase of reporting tools and software licenses, essential system upgrades and new software releases, and training to support FDA users 

of this new system. This will ensure that we satisfy financial requirements and provide timely financial information to executives and managers to support better decision making. As FDA fully integrates UFMS into our systems and way of doing 

business throughout fiscal year 2007, we expect to witness the projected efficiencies 

for this vital enterprise and be able to use UFMS’ full financial management capability. 

Infrastructure (∂$11.3 million) 

In fiscal year 2007, FDA submits a modest request to fund three fundamental 

components of our physical infrastructure: —An increase of $10.5 million for rent payments to the General Services Administration (GSA). 

—An increase of $3.8 million in budget authority to maintain progress on the 

White Oak Consolidation project. 

—A reduction of nearly $3 million below the fiscal year 2006 appropriated level 

for our Buildings and Facilities account. 

In total, these proposals would result in a net increase of $11.3 million for fiscal 

year 2007. 
143 

We also plan to commit $8.2 million in PDUFA carryover funds to the White Oak project and $1.9 million for GSA rental payments. FDA continues to seek support 

for the White Oak project with the goal of eventually housing over 7,700 staff in 

2.3 million square feet of space. As of the end of calendar year 2005, we have approximately 1,850 staff on site at White Oak, in three buildings with almost 700,000 

square feet. The new buildings will eventually replace all 40 existing, fragmented 

facilities in 16 locations that support the Office of the Commissioner, and all of our 

Centers and the Field headquarters, other than the Center for Food Safety and Applied Nutrition and the National Center for Toxicological Research. 

Proposed User Fees: Reinspection and Food/Animal Drug Export Certificates ($25.5 

million) 

In addition to those user fees authorized by statute, the FDA is proposing two new user fees. The first, estimated at $22.0 million, would pay the full cost of reinspection and other FDA follow-up work if a manufacturer fails to meet important 

FDA requirements such as Good Manufacturing Practices, which help ensure high 

quality and safety of FDA regulated products. When a firm fails an inspection, FDA 

must conduct a reinspection and perform associated laboratory analysis to verify the 

firm’s corrective measures. 

The reinspection user fee will ensure that facilities that fail to comply with established health and safety standards bear the cost of FDA follow-up inspection. We 

are asking Congress to assess the cost of follow-up inspections on those who fail to 

comply, rather than on the American taxpayer, who bears the cost today. The natural consequence of this change will be that manufacturers will work to ensure that 

they meet established standards. 

The second proposed new user fee will cover the cost of issuing an approximately 

37,000 food and animal feed export certificates. We have estimated the cost of this 

user fee program at $3.5 million. Although the agency’s effort to issue these certificates benefits industry exports, FDA must support this function at the cost of other 

vital public health activities. FDA’s proposal for user fees would establish a source 

of dedicated funding for this activity and allow the agency to better perform this 

function. The domestic food and animal feed industry would benefit from the agency’s enhanced ability to facilitate the exportation of their products. 

The Federal Food, Drug, and Cosmetic Act (the Act) authorizes FDA to collect 

user fees for export certificates for human drugs, animal drugs, and devices. However, this authority does not extend to collecting user fees for export certificates for 

foods and animal feed. FDA expends significant resources annually to issue these 

certificates, and the agency needs to focus its resources on activities that are central 

to its public health mission. The Administration has asked that Congress fund these 

two user fee programs with mandatory budget authority. 

Current Law User Fees (∂$20.2 million) 

We are also requesting an increase of $20.2 million for user fees that support prescription drug review, medical device review, animal drug review, mammography inspections, export certification, and color certification fees, for a total fiscal year 2007 

user fee level of $402 million. These fees enable FDA to review medical products 

in a timely manner and reimburse FDA for two services (color certification and export certification for human drugs, animal drugs, and devices) that we provide to 

industry. All of these requested fee increases are authorized under current law. In 

fiscal year 2007, FDA will work with Congress on the reauthorization of the 

PDUFA, MDUFA, and ADUFA user fee programs. 

Closing 

Mr. Chairman, I look forward to working with you, members of the Subcommittee, 

and your staffs to maximize FDA’s resources in the best interest of the American 

people and our country as we move into fiscal year 2007. The agency’s program level 

request of $1.95 billion is necessary to perform our mission—established by Congress a Century ago—to protect and promote the health and safety of the American 

public. At the Food and Drug Administration, we work tirelessly to fulfill these public health responsibilities. Our goal is to maximize the benefits and minimize the 

risks from the products we regulate. 

Among my highest priorities as Acting Commissioner—for as long I am privileged 

to serve at the helm of FDA—will be to foster the development of the FDA of the 

21st Century. Building on the success of the past, we will maintain our ‘‘covenant 

of trust’’ with patients and the public. We will assure they have safe, effective, modern, and cost efficient solutions for the challenges to their health and well-being, 

and the health and well-being of their children and grandchildren. A well managed 

and adequately funded FDA will mean a healthier America for many generations 

to come. 
144 

STRATEGIC REDEPLOYMENT

Senator BENNETT. Thank you very much. 

You talk about reprogramming and redirecting the $52 million. 

Would you please provide for the record more specific information 

on each program that you plan to either reduce or eliminate and 

the impact this will have? 

Dr. VON ESCHENBACH. Yes, sir. We will be very pleased to provide that for the record in significant detail. 

[The information follows:] 
145 
146 
147 
148 
149 
150 
151 
152 
153 
154 

Senator VON ESCHENBACH. We have gone through the entire 

portfolio across the various centers and offices with the FDA, 

worked extensively with the staff within those offices to look for 

those opportunities and those efficiencies where we could leverage, 

synergize, and partner, and we will provide the detail for each of 

those particular parts of the portfolio for you. 

PANDEMIC INFLUENZA

Senator BENNETT. All right. Thank you. 

Last night, as I was watching television, which I don’t often do— 

the news programs on television strike me as being more fictional 

than the sitcoms in many cases—running across the bottom of one 

of them was constant reference to Secretary Leavitt’s warning with 

respect to pandemics. 

And you discussed pandemic influenza preparedness at some length in your testimony, and we provided $20 million for pandemic preparedness in fiscal 2006. Now you are asking for an additional $30 million. 

For those who do watch television and the streamer that runs 

across the bottom, could you discuss FDA’s overall role in preparing for a pandemic and kind of tell us what you see in that 

whole area coming ahead for us? 

Dr. VON ESCHENBACH. Thank you, Mr. Chairman. 

I believe your question points out a very essential and critical 

element in our overall plan for a pandemic, and that particular element is the essential role that the FDA must play across a large 

portfolio of opportunity. 

The role being to make certain that we are proactively helping 

to develop and to approve vaccines, antivirals and, devices that 

could be used for diagnostic purposes as well as devices that may 

have to be used ultimately with regard to human protection and 

support. And the important area that needs to be included in the 

portfolio, and that is the attention that needs to be paid to food 

animal. 

In each of these areas, FDA plays and must continue to play a 

critically important role in that process. We are engaged, for example, in working proactively with companies in the industry to help 

stimulate the development of vaccines, to help them improve current vaccine production capabilities, including the utilization of 

cell-based techniques in addition to the traditional egg-based techniques that have been used. 

Senator BENNETT. Let me interrupt you there quickly because I 

have been contacted by an American company that works on the 

issue of cell-based techniques as opposed to egg-based. And I want 

to call your attention to the fact that there are American companies that are in this field, and there has been concern raised about 

contracts being given overseas that are primarily to egg-based 

fixes, while there are American companies that complain that they 

are being overlooked. 

And I would ask you to pay personal attention to that as we go 

forward because it has to do with volume. 

Dr. VON ESCHENBACH. I certainly will continue to look into that, 

as will the rest of the agency, and pay very close attention to that. 

Because our commitment is to broaden the portfolio as widely as 
155 

possible to make as many opportunities and options available with 

regard to the development of new vaccines, specifically directed to 

H5N1. 

With regard to antivirals, just as an example of the FDA’s commitment, we are actively looking at opportunities to enhance shelf 

life of antivirals such as Tamiflu, which would significantly increase and enhance our abilities with regard to stockpile. 

In devices, we work collaboratively with the CDC and recently 

approved in a very rapid period of time a diagnostic device, which 

can be used in processes of screening and looking for the first and 

earliest signs of H5N1. 

And one of the areas I have pointed out which we needed to include into the FDA’s commitment, and where a significant amount 

of the new funds are being directed, has to do with issues with regard to animal welfare, including the ability to regulate how animals will be used and making sure that we check and look for residue or traces of antivirals because we are concerned about the development of resistance in animals and humans. 

But also should there be an outbreak or pandemic of avian flu 

within our bird population, the destruction of those food animals 

places the FDA in a critically important role with regard to regulating the processes of destruction and assuring that there is no 

contamination and risk for human health. 

So it is a very broad portfolio, and we initiated after I arrived 

at FDA an integrated task force within FDA so that all these parts 

and pieces are now being coordinated and integrated into a cohesive effort so that FDA contributes appropriately to the larger initiative being carried out at the Department of Health and Human 

Services and in other agencies. 

Senator BENNETT. Thank you very much. I would note that the 

company that contacted me is not located in Utah. 

Senator Kohl. 

Senator KOHL. Thank you, Mr. Chairman. 

GENERIC DRUGS

Dr. von Eschenbach, the FDA plans to spend over $400 million 

to approve approximately 88 new brand-name drugs and just $65 

million to approve over 400 new generic drugs in fiscal year 2007. 

There are currently over 800 generic drugs waiting to be reviewed 

at FDA, and the generics waiting list is expected to grow, as you 

know. 

Now I understand the importance of reviewing and approving 

new drugs. They are often breakthroughs in the treatment of disease. However, according to the Congressional Budget Office, generic drugs on the market now save consumers an estimated $8 billion to $10 billion a year at retail pharmacies, and this doesn’t include the money saved when they are used in hospitals. 

As you know, they bring a big bang for the buck. And while the 

backlog continues to grow, your budget doesn’t seem to make any 

effort to reduce that backlog. It seems that a relatively small increase, especially in relation to the money you spend to approve 

brand-name drugs, could make a big dent with respect to generics. 

How do you answer that? 
156 

Dr. VON ESCHENBACH. Thank you very much, Senator Kohl, for 

addressing what we believe is a very important and critical issue. 

As you point out, we do want to continue to be sure that we are 

nurturing and supporting the innovative opportunities to continue 

to bring new solutions to patients, especially based on the progress 

that is being made in biomedical research and molecular medicine. 

At the same time, however, we are equally committed to being certain that we can provide access to patients to a wide portfolio of 

these drugs, including the availability of generics. 

Over a period of time, we have a commitment to the generic program using all of the dollars that have been authorized for that 

purpose and have seen a continuous increase in the number of 

generics being approved each year. It is also true that the number 

of applications have also continued to increase. 

We are attempting to address this problem in a variety of ways. 

First, we are giving priority to the first generic available. That is 

enabling us to assure that at least across the entire portfolio, 

Americans have access to one alternative to the innovator drug. 

In fact, we believe that program has been successful, to the extent that we are approving first generics almost simultaneously 

with patent issues having been resolved. We have narrowed any 

gap between the legal barriers and the regulatory barriers making 

those drugs available to patients. 

With regard to volume, we are at a point now where we are approving more than one generic drug on the average every day. Having said that, we also recognize the need for continuous improvement in the process, to continue to expand our ability to grow the 

portfolio to alleviate the backlog. 

We are directing more people to the effort of the approval process. We are working with manufacturers to enhance the quality of 

their submissions in order to reduce cycle time to approval. 

Most importantly, we are improving our own internal processes, 

especially by moving from paper-based regulatory approval processes to electronic based. And we believe this electronic infrastructure will be a significant step forward in enhancing the rapidity of 

our ability to process these applications and eliminate the backlog. 

GENERIC DRUG BACKLOG

Senator KOHL. In spite of all of that, there are 800 generic drugs 

waiting to be reviewed and approved at the FDA, and that waiting 

list is expected to grow. So why don’t we find a way, understanding 

how important these generic drugs are in helping people save 

money, why don’t we find a way to more quickly address this backlog? 

Do you see that as a high priority that you want to get at, or 

is it business as usual? 

Dr. VON ESCHENBACH. No, sir. 

Senator BENNETT. If I could just do the math? If they have 800, 

and they are doing one a day, and they don’t work Saturdays and 

Sundays, that is about 3 years of backlog. 

Senator KOHL. Thank you. 

Dr. VON ESCHENBACH. Senator, let me approach the question in 

the following way. We are committed, as you are, to being able to 

expand the portfolio of access to various solutions for the American 
157 

people. And to do that, I believe really requires a process improvement. It is a way of looking at this entire continuum and looking 

for places in which we can improve cycle time, where we can improve the ability to move larger volumes of these applications more 

effectively through the system. 

And as I indicated, the strategies that we are embarking upon 

are more people, more effective means of processing applications, 

including electronic submissions and electronic review, and working more collaboratively and proactively with the manufacturers of 

these generics in order for them to be able to enhance their applications and improve the application process. 

We believe that by a multi-pronged effort, we will find incremental benefits along the entire process improvement continuum. 

The end result being more generic drugs coming, being made available to the American people. 

Senator KOHL. Of course, you understand the American people 

want every generic drug that can be approved to be approved because it is an immediate tremendous saving in their pocket, right? 

And that is why we are here. That is a basic reason why we are 

here. 

I just make that comment, and I turn it back to you, Mr. Chairman. 

Senator BENNETT. Yes. I mean, a 3-year backlog, and you add in 

holidays, you get to 3.5. 

Senator KOHL. Thank you again. 

Dr. VON ESCHENBACH. Well, I think—— 

Senator BENNETT. That is more significant than I had realized. 

Dr. VON ESCHENBACH. Well, I think one of the important things 

I would like to also emphasize—and apologize if I didn’t make it 

as clear as I should have—is that in looking at the large volume 

of generics and what is available to the American people, we are 

looking at this in a hierarchical fashion. 

First and foremost, we want to be sure that across the continuum of drugs that there is at least one generic available for any 

one of those particular drugs or solutions. Then there are followon generics after that or additional generics that are complementary or perhaps identical to that same generic. 

Now the entire portfolio will always continue to grow, but there 

is a point where we believe that at least being sure that there are 

available drugs, generic drugs for every condition and in every situation and circumstance will be our first priority. 

Senator BENNETT. So you are saying you are prioritizing them so 

that the generic that would benefit the greatest number of people 

will get moved up in the—— 

Dr. VON ESCHENBACH. Exactly, sir. In order to put the backlog 

into perspective, it would be one thing if we had a backlog in which 

there was an innovator drug for which there was no alternative generic. That would be a backlog that would have a critical impact 

on the health and welfare of the American people. 

But if the backlog is one in which we already have three or four 

generics available for that particular drug, and there is a backlog 

of three or four other applications, that is going to get less priority 

in the hierarchical system. 
158 

Senator BENNETT. Well, I encourage you to continue to do that, 

and that is prudent management. But it would be helpful if the 

total number could come down and the total backlog could shrink 

a little. 

CRITICAL PATH TO PERSONALIZED MEDICINE

Let me focus for a minute on your new initiative called the Critical Path to Personalized Medicine. That is an intriguing title, and 

this is obviously a long-term investment on your part. 

Tell us what the ultimate goals are and how long you think it 

will take to achieve those goals. Or is this something that the goals 

will always be coming up, so this is a long-term program that will 

continue? 

Dr. VON ESCHENBACH. Well, Mr. Chairman, I have benefitted 

greatly from my previous experience in being able to witness firsthand the tremendous progress that is being made in biomedical research and the literal explosion in our ability to understand diseases and even human health and nutrition from a genetic and molecular perspective. 

And that discovery is really opening up for us the opportunity to 

develop new solutions, new products that are very different and unlike the products and solutions that we have seen in the past. We 

need a new bridge between that discovery to the delivery of those 

new solutions to patients, and that bridge of development is the 

bridge that the FDA is responsible for and is nurturing. 

And it is the critical path from that discovery to that delivery 

that we are committed to by bringing to the regulatory process the 

science that has been involved in the discovery and the development of these new interventions and the science and technology 

that will be necessary in order to regulate and approve these new 

solutions and new products with regard to their safety and their 

efficacy. 

So, in that context, with regard to that vision of what we are trying to accomplish, it will be an ongoing iterative process. We will 

continue to develop it as the science and technology continues to 

develop it. 

But our goal is to make certain that these new solutions that we 

are experiencing by virtue of our investment in biomedical research 

at the NIH and in other areas will, in fact, translate into solutions 

that can and will be delivered rapidly, effectively, and safely to the 

American people. 

Senator BENNETT. Well, one of the frustrations that I have had 

since I have been in the Senate is that almost none of the discussion about health care has anything to do with health. It is always 

focused on acute care or after the fact kind of care. 

And if I hear correctly what you are saying, FDA is making a 

commitment for keeping people healthy prior to the time when they 

would need acute care and taking advantage of the science that is 

being developed at NIH and elsewhere. 

And if we are successful and keep people healthy at the front 

end, we presumably save money at the back end. Is this a fair summary of what it is you are aiming for? 

Dr. VON ESCHENBACH. It is an absolutely insightful summary, 

and I appreciate you framing it in that way. We believe that the 
159 

opportunities that are now available to us, the opportunities that 

the FDA can make possible for the American people, and for the 

rest of the world, by virtue of this critical path from discovery to 

delivery is the fact that medicine will be more preemptive or preventive. 

We will have the tools to be able to understand the earliest 

stages in the development of many diseases and be able to then 

have products that will be able to be delivered to preempt that 

process. Being able to develop and regulate approval of those products will require a new FDA, the FDA of the 21st century. 

And so, we will see cost benefits to that by moving out of a model 

that is predominantly focused on the treatment of established disease to a model in which we will have the solutions and tools to 

detect diseases much earlier in their development and then to be 

able to intervene and preempt them. 

It will also be personalized. We are seeing increasingly opportunities to be able to define the right intervention for the right patient based on our understanding of these fundamental molecular 

mechanisms. And we are seeing new targeted drugs becoming 

available and coming to the FDA for regulatory approval. 

If we get the right drug to the right patient, we eliminate the 

waste that occurs in the old system, the empiric system, where we 

are giving patients an intervention based on a statistical probability of success, but not knowing whether it will work in that patient or another patient. Just the fact that we can eliminate waste 

will have significant implications for our total expenditures in 

health care. 

Senator BENNETT. I would like to pursue that with you in some 

detail because I think, ultimately, that is the only solution to our 

spiraling increase in Medicare and private health care costs. 

Dr. VON ESCHENBACH. I would look forward to that, Senator. 

Senator BENNETT. Yes. Senator Kohl. 

GENERIC DRUGS

Senator KOHL. Thank you very much. 

Just to add a final word on generics, you stated that you 

prioritized to be sure that we have at least a generic, if not two, 

available for every brand-name drug. I would like to ask my staff 

to work with your staff to satisfy me that, in fact, we are doing a 

good enough job in meeting at least that minimum kind of a condition which, as you point out, is very important, and I would agree. 

Dr. VON ESCHENBACH. We would welcome that, Senator. 

Senator KOHL. Thank you. 

Dr. VON ESCHENBACH. And look forward to working with your 

staff. 

AVIAN INFLUENZA

Senator KOHL. Dr. von Eschenbach, I was recently looking at 

some news reports on avian flu, and these two reports seemed to 

summarize, I think, what many people are feeling. 

The first report quoted Dr. Gerberding of the CDC as saying that 

our current situation is not a good one. Secretary Johanns, on the 

other hand, was quoted that same day as stating that bird flu is 

coming to America, but he said that we are ready and ‘‘know how 
160 

to deal with it, and we will deal with it.’’ And just last week, he 

testified to us that, ‘‘We are well prepared for bird flu.’’ 

It is understandable why many people are confused and uncertain and concerned about how to react. So from your perspective, 

are we prepared for a bird flu outbreak? How much vaccine do we 

have on hand now? And please talk about our ability to obtain or 

make more vaccine. 

Dr. VON ESCHENBACH. Well, Senator—— 

Senator KOHL. Do you think we are well prepared? 

Dr. VON ESCHENBACH. Pardon me, sir? 

Senator KOHL. How would you summarize our situation with respect to the possibility of a bird flu outbreak? 

Dr. VON ESCHENBACH. One of the things that I have appreciated 

is the fact that, as Secretary Leavitt has indicated, we are in a 

race. We are in a race with regard to our ability to mobilize and 

prepare all of the particular interventions and solutions that will 

be necessary to deal with an avian flu outbreak in humans. 

And that race to prepare is in contrast to the race that the virus 

is engaged in with regard to its mutations. We don’t know and 

can’t predict exactly how long it may take for the virus to undergo 

the mutations that might be necessary for human-to-human transmission. We certainly have seen enough with regard to the virus 

to be alarmed and concerned that that ultimately might occur. 

Having witnessed the mobilization that is occurring with regard 

to not only our own infrastructure within the United States, but 

around the world, I believe that we are engaged now in a very positive and very constructive and productive effort to bring all of the 

components to bear. As I indicated, the FDA is taking its role in 

a very integrated and comprehensive way to look across this continuum, to accelerate the ability to develop vaccines. 

We cannot develop a vaccine for the human-to-human virus until 

that virus occurs, but we are developing vaccines for the H5N1 that 

has already occured. And we are also developing seed strains so 

that we have in place variations of the virus so that we would be 

already prepared to move to the next step to mass production of 

vaccines once we got the right match. 

So I use that as an example to point out that it is a problem that 

requires a comprehensive, integrated, collaborative solution. It is 

one in which we will look across the wide portfolio of interventions, 

and it will go beyond just vaccines to also include, as I have indicated before, antivirals, and diagnostic devices. 

Senator KOHL. But just last week, the United Nations stated 

that bird flu could arrive in the United States between 6 and 12 

months from now, which is imminent. So if these predictions are 

correct, the virus could arrive in the United States before we have 

the capability to make mass quantities of vaccines. 

What advice do you have for people all across our country who 

are concerned about this imminence, this possibility within 6 to 12 

months? 

Dr. VON ESCHENBACH. Well, I think, as Secretary Leavitt has indicated, we need to be aware of the threat. We need to not panic, 

but we need to prepare in the sense of anticipating and being 

aware of the fact that this is a threat that could strike us. 
161 

It has not happened at this point in the sense of having the 

avian form of the disease in the United States, but that is expected 

to occur. It has not happened with regard to a strain that has 

human-to-human transmission capabilities. 

But I think as far as the public is concerned, the continued support of the efforts that are being made across the public health continuum—not only in the Department of Health and Human Services, but throughout the rest of the academic world and in conjunctions with WHO—as you pointed out, I think it is a commitment 

to prepare and to prepare as rapidly as possible is the most important contribution we could make at this point. 

Senator KOHL. Thank you, Mr. Chairman. 

Senator BENNETT. Senator Harkin. 

BOVINE SPONGIFORM ENCEPHALOPATHY

Senator HARKIN. Thank you very much, Mr. Chairman. And I 

apologize for being late. We had an authorizing committee hearing 

prior to this, not the appropriations. 

But I thank you, Mr. Chairman, and welcome our witnesses here, 

especially Dr. von Eschenbach, whom I have worked with a great 

deal at NIH over the years. 

I will get right to the point. Maybe this has been asked before, 

but I don’t know if anything has been brought up about the recent 

case of BSE that was just discovered in Alabama. 

Senator BENNETT. It hasn’t been asked. So go ahead. 

Senator HARKIN. Thanks, Mr. Chairman. 

Well, as you know, it is in the press now that it was confirmed 

that we have another animal, a 10-year-old cow in Alabama tested 

positive for BSE, and now they are looking at the herd and the feed 

and everything else to try to figure out if there were other animals 

contaminated or where this contamination may have come from. 

Now FDA recently proposed several changes to the feed ban rule 

that it first adopted in 1997. The main adjustment proposed is that 

brain and spinal cord from cattle would be banned from all animal 

feed, not just from cattle feed, okay? So far, so good. 

However, the loophole that currently exists of allowing poultry 

litter—yes, you heard me right—poultry litter to be fed to cattle 

would continue. 

So we have a situation where you can take some of the SRMs, 

specified risk material, from cattle, a ruminant animal, feed it to 

chicken. Some of that gets into the litter. The litter is then fed to 

a ruminant animal. The prions exist, and they may exist in the 

SRMs from the slaughtered, go into chicken feed, fall into the litter, and be fed back to a ruminant animal. 

Canada is in the process of strengthening its feed ban rule to 

prohibit all, all specified risk materials from all animal feed, including pet food. That is, Canada is going beyond just the brain 

and spinal column. Canada has already banned poultry litter and 

plate waste from cattle feed. 

Now FDA clearly acknowledges that the main cause of BSE in 

cattle is from contaminated feed. In fact, the feed rules are routinely cited by USDA and FDA officials as our first line of defense 

against BSE. But in this case, FDA, with these new proposed rules, 
162 

appears to be preparing to come out with a weaker feed rule than 

Canada, weaker than has been called for by experts on BSE. 

In other words, it would still be permissible to feed cattle byproducts with a high risk of BSE back to cattle through poultry litter. 

Now, again, I don’t know what the reasons for allowing that are, 

but I am just wondering with this proposed rule, FDA proposed 

rule, FDA will only prohibit a partial list of SRMs from all animal 

feed, a partial list. 

In addition, FDA is not closing the loophole that currently exists 

by allowing poultry litter to be fed to cattle. This leaves a clear circle of transmission wide open, where the SRMs that are not prohibited by the proposed rule could be fed to poultry, and then the poultry litter fed back to cattle. How does the FDA justify not closing 

the poultry litter loophole? 

Dr. VON ESCHENBACH. Senator, let me first begin by saying I appreciate the question and thank you for it because it is addressing 

an issue that, as you pointed out, with the recent awareness in the 

press of another cow being detected with BSE, it has raised concerns. And it is important that we address them. 

The feed ban that was put in place in 1997 was done in a way 

to be able to ban high-risk materials and to be able to over a period 

of time, continue to monitor and inspect and be sure that processes 

were being appropriately applied. So FDA has been working closely 

with USDA. As it has been responsible for the issues with regard 

to cattle, FDA has been approaching the issues with regard to animal feed. 

Throughout that period of time, and as you have pointed out, the 

processes that we put in place have, as we have gone through 

looked for compliance with regard to the processes, we have found 

in all the inspections over 99 percent compliance with the rules. 

And during that period of time, over 800,000—or at least at this 

point with regard to 650,000 high-risk animals that the FDA has 

identified, there have only been 2 cases of BSE, and those 2 cases 

have been in animals that were born before the feed ban was put 

in place. 

Now I emphasize that because I think it is important to point out 

that the processes that have been in place since 1997 have had a 

high degree of compliance, and in fact, the risk of BSE in the cattle 

population at this point in time has only involved 2 animals, and 

both those animals were born before this ban was put in place. 

Having said that, as you have pointed out, the FDA recently 

went a step further to further strengthen the feed ban rule and put 

in additional bans, as you have indicated. 

Now with regard to the specifics of the transmission of BSE in 

prions in the droppings from poultry, if I could permit—with your 

permission—to have Steve Sundlof, the head of our Center for Veterinary Medicine, who is responsible for this area, he may be able 

to give you a much more precise scientific answer with regard to 

the risk of that particular aspect of possible transmission of BSE. 

POULTRY LITTER AND BSE TRANSMISSION

Senator HARKIN. It is up to the Chairman. 

Senator BENNETT. We could follow up. 

Senator HARKIN. It is up to the Chairman. Yes, that is fine. 
163 

Senator BENNETT. Do you want to follow up quickly? 

Senator HARKIN. If that would be okay with you, Mr. Chairman? 

Senator BENNETT. Sure. Go ahead. 

Mr. SUNDLOF. Thank you, Senator Harkin. 

I am Steve Sundlof, the Director of the FDA Center for Veterinary Medicine, and it is my center that regulates the safety of all 

animal feeds, including pet foods. 

To get to your precise question regarding poultry litter, first of 

all, we have evaluated the potential risk of poultry litter to spread 

BSE among cattle, and we find that to be very low for a number 

of reasons. First of all, the amount of animal protein in that poultry litter is very small. Secondly, it comprises a small part of the 

cattle diet. Thirdly, when we put it through some of our risk assessment models, it appears that that risk presently, as the rule 

is written, represents an extremely low risk. 

By proposing that all brains and spinal cords from cattle over the 

age of 30 months be eliminated from all animal feeds, you have 

taken 90 percent of whatever remaining infectivity there exists out 

there, and you have taken that out of any poultry diet. So now with 

the new proposed rule, you have actually reduced any potential 

risk from poultry litter by another 90 percent. 

And again, that is 90 percent of a very, very small risk to begin 

with. And so, the proposal really addresses a lot of the issues that 

remain around poultry litter. 

Senator HARKIN. Is it possible, Mr. Sundlof, is it possible for the 

prions to come from a ruminant animal that actually might be fed 

to poultry or drop in the litter, and that litter could then possibly 

be fed back to a ruminant animal? 

Mr. SUNDLOF. It is possible, but the amount that would be—first 

of all, if you take the brain and spinal cord out, you have eliminated 90 percent of whatever infectivity could go into that. 

Senator HARKIN. I understand. I understand that. 

Mr. SUNDLOF. But the amount of animal protein that is in the 

litter is very, very small. Now, you know, we don’t say, we never 

can say that the risk is absolutely zero. And so, to answer your 

question, yes, it is possible. But the probability of that occurring is 

very, very remote. 

Senator HARKIN. Well, now, Canada has already banned poultry 

litter, right, from being fed? 

Mr. SUNDLOF. That is true. 

Senator HARKIN. That is true in Europe, too? 

Mr. SUNDLOF. Yes. 

Senator HARKIN. It is true around the rest of the world as far 

as I know. And my question, I guess you just raised this question 

in my mind, if poultry litter is so low in protein, why are they feeding it? 

Senator BENNETT. Yes, that was the question I have. If it is so 

small, what does poultry litter bring to the table? 

Mr. SUNDLOF. Well, a little cattle physiology here. Cattle are able 

to convert non-protein materials like cellulose, in terms of grass, 

actually into protein. So a large part of cattle diet is made up of 

material that is very low in protein, but in the rumen of the cattle, 

the microorganisms actually make protein, which then the cattle 

digest. 
164 

So in terms of why Canada and Europe and other countries don’t 

feed poultry litter has to do more with the demographics. In the 

South, especially in the southeastern United States, cattle are 

raised on open land. They are raised in areas where there is a lot 

of poultry production in addition to cattle production. 

Poultry litter becomes an issue. The poultry industry has to get 

rid of this product somehow. They can either spread it onto the 

land and use it for fertilizer. But in general, there is more than can 

be disposed of by that method. It does have a fairly high nutritional value for cattle. It is something that, strangely enough, cattle seem to like to eat. And those conditions really don’t occur in 

other parts of this country and especially in Canada and Europe. 

Senator HARKIN. Well, again, since everyone else has banned it, 

it seems like we are always looking for ways to somehow get 

around banning the elements, all SRMs, not just the high risk, but 

all SRMS from getting back into ruminant feed. There are ways we 

can do that. Other countries have done it. 

BSE RULE AND HARMONIZATION WITH CANADA

Now I am told, Mr. Chairman, I am told that some FDA people 

told my staff they were working with Canada to make its rules 

similar to the United States. In other words, FDA is working, hoping to see that Canada weakens it rule to match that of the United 

States. Is that so? Are we working to try to get Canada to weaken 

its rule? 

Dr. VON ESCHENBACH. We are exploring harmonization efforts 

with Canada. 

Senator HARKIN. Now what does that mean? 

Dr. VON ESCHENBACH. Well, that means that we are exploring 

whether or not, you know, this is a proposal—— 

Senator HARKIN. Are we exploring to get to their level or get 

them to our level? 

Dr. VON ESCHENBACH. Well, we are holding discussions where we 

are looking at their assumptions behind their risk models compared to our risk models. And if we find that their risk models are 

a better reflection than what we have developed, then we would be 

willing to adjust our rule. 

But also we are just in the discussion phases now, where we are 

sitting down and examining the assumptions that went into each 

of our rules to determine whether or not those are valid in our particular countries, and there may be. And in the case with Canada, 

there may be some valid reasons why they should be different. 

Senator HARKIN. Mr. Chairman, you have given me more than 

enough time. I do have some follow-up questions on the next round. 

Senator BENNETT. Surely. We will have another round. 

Dr. von Eschenbach—and thank you, sir, for your expertise. You 

told me more about chicken litter than I probably wanted to know. 

MEDICAL DEVICE USER FEES

One of the things that I have been interested in since I have had 

this assignment in the Senate has been user fees and particularly 

medical device user fees. I found that FDA was delighted to have 

the extra money from the user fees, which were being paid some-
165 

what reluctantly on the part of the users, but paid in an effort to 

increase the performance and lower the backlog of approvals. 

And there was a period when FDA simply took the money and 

then took the appropriated money that would have gone into improving performance and spent it someplace else. And I have been 

a bit of a nag on that issue and got an agreement out of OMB that 

that sort of thing would stop, that the user fees would, in fact, be 

matched with appropriated funds, and the two would be coupled 

rather than one becoming the replacement for the other. It is only 

fair that that be the case. 

Could you bring us up to date on where we are with performance 

out of MDUFMA? Now I have a copy of the answer that was given 

in the House with respect to this, and that is part of the transcript 

now of the House hearing. And I find that useful, but give you the 

opportunity to comment in general terms as to where we are with 

respect to greater performance in the medical device area and other 

areas where user fees are being paid in an effort to make sure that 

things move more rapidly. 

Dr. VON ESCHENBACH. Well, Senator, as I have come to understand it and appreciate it, with regard to MDUFMA, or the medical 

devices user fees, that particular program has not had as long a 

history of experience and process improvement as has PDUFA with 

regard to the experience at FDA. And obviously, with medical devices, that introduces its own set of complexities with regard to the 

review process. 

Having said that, as MDUFMA has been implemented at the 

FDA, in most cases, there has been a full compliance with regard 

to the targets or the milestones that were put in place. But at the 

same time, it is also true that it has not been the case uniformly 

across the entire board and, in fact, in looking at even where we 

have met those milestones, the incremental improvement in terms 

of really being able to significantly reduce cycle time and streamline and accelerate the time to market is not to the degree that 

even we would be happy with and comfortable with. 

So we are looking at this from the point of view of process improvement. We are looking at it and working collaboratively and 

cooperatively with the industry in order to be able to continue to 

find ways to accelerate the process and make it more effective. 

We think there are opportunities to work with the industry, for 

example, with the preparation of their applications in a way that 

will help us proactively and prospectively be able to do that by 

greater consultations. We have noticed with regard to PDUFA that 

that opportunity for consultations before the application process 

has proven to be something highly attractive and very positive with 

regard to their experience. 

So we are looking at this. As you have pointed out, these dollars 

will be focused and targeted for a specific purpose, and that will 

remain so. And we will look to continue to improve the process. 

Senator BENNETT. Thank you. I don’t want user fees to become 

general taxes that just go into the general fund and then may or 

may not be producing the result for which people are paying extra. 

Senator Kohl. 
166 

FIELD INSPECTORS

Senator KOHL. Thank you, Mr. Chairman. 

Dr. von Eschenbach, looking at your budget, it states that your 

field force of inspectors is going to decrease by some 48 to 60 people. It also says in your budget in the very same section that the 

number of FDA-regulated imported products requiring inspection is 

increasing exponentially. 

Some of the other examples of activities that won’t be performed 

as often by these inspectors, as I said, the analysis of imported and 

also domestic samples of food, inspections of veterinary feed manufacturers, inspections of human drug manufacturers, compliance 

and recall functions, including food, drugs, and animal drugs and 

feeds. 

How do you justify cutting field inspectors right now when the 

requirement for them seems to be going up and not down? Do you 

really believe that this is the best place for you to be trying to save 

money? 

Dr. VON ESCHENBACH. What we are attempting to do, Senator, is 

to look at this again—as I have indicated in an answer to a previous question—as a process improvement issue. In looking at the 

total portfolio of activities and asking questions, where can we 

streamline? Where can we make this more efficient so that we are 

getting more outputs vis-a-vis the resources that we have to utilize 

to do that, including the human resources and the number of people that are involved? 

We think that there are opportunities to continue to improve the 

process. By, for example, focusing on preapproval inspections, 

working with manufacturers, working with regard to good manufacturing practice requirements, we can improve some of the processes and opportunities with regard to a proactive approach. 

We are targeting inspections to areas of high risk so that we are 

utilizing the workforce in a more efficient, more targeted way so 

that we are focusing on the areas where we see the highest concerns or the highest risks as opposed to simply disseminating those 

resources with less impact. 

So it is a process improvement problem. Looking at modern technologies that will enable us to enhance the ability to utilize the inspection process is another way we think we can continuously get 

more outputs, meet our responsibilities, but do that in a way that 

is efficient in the use of the human resources that we have so that 

we are deploying those where we see areas of higher public health 

need. 

DRUG SAFETY OVERSIGHT BOARD

Senator KOHL. All right. Dr. von Eschenbach, your budget talks 

about the creation last year of an independent Drug Safety Oversight Board to oversee the management of important drug safety 

issues. 

A quote from Secretary Leavitt regarding this board says, ‘‘The 

public has spoken. They want more oversight and more openness. 

We will address their concerns by cultivating openness and enhanced independence.’’ That is his quote. 
167 

And yet the FDA has received criticism because the board now 

has no public representatives, meets in private, and publishes only 

vague summaries regarding what is discussed in these meetings. 

So how do you respond to these criticisms? 

The board may be independent, but is it really transparent when 

the only members are from the FDA and other Government agencies and reports are so vague? 

Dr. VON ESCHENBACH. Senator, this is an important area, obviously, with regard to our commitment to drug safety. And the Drug 

Safety Oversight Board, as you point out, does go beyond FDA, and 

it does include other Federal employees from the National Institutes of Health and from the Veterans Administration. 

That provides us a couple of opportunities. One, it does broaden 

the input. It does enhance the expertise that is involved in this 

oversight review, and it does take it outside the walls of the FDA 

so that it is subject to a larger and more, if you will, independent 

analysis and review by individuals who are not part of the agency 

and not part of the FDA internal process. 

The very fact that they are Government employees, however, provides a great deal of efficiency in the terms of which this board is 

able to function. First of all, it enables us to avoid some of the potential problems and barriers in timeliness that would come from 

having to have to resolve conflict of interest issues or problems 

should this be outside of the Government. 

It allows us to deal with confidential proprietary information 

within the confines and constraints of the committee so that we are 

looking at data and information that is much more sensitive and, 

therefore, has the potential to be much more important and insightful with regard to the safety issues. 

So we believe that it is a balance and a balance between a process that is framed within the rules and regulations of FOIA, the 

rules and regulations with regard to conflict of interest, while at 

the same time, it is broadening the input beyond the FDA and assuring that we have the right expertise of individuals who will be 

able to improve the oversight of these drug safety issues. 

OPENNESS OF DRUG SAFETY OVERSIGHT BOARD

Senator KOHL. Well, Secretary Leavitt said that he wants to see 

more openness, more independence, and that he would take steps 

to improve that. Now if you meet in private, if the members are 

not public representatives, and if the reports that emanate from 

your meetings are not specific, what kind of openness is that? 

Dr. VON ESCHENBACH. Well, I think there can be a great deal of 

attention paid to the openness and transparency of the process and 

the rules and regulations that frame how an oversight is being conducted. But the issues with regard to what is occurring in the internal discussions dealing with proprietary information, that in 

itself needs to continue to be protected or we won’t be able to get 

the right information that we need to analyze and assess. 

So I think it is a balance, and it is an interplay between a process that is well defined, open, and, if you will, perhaps more precisely is transparent in terms of how it is being conducted with the 

rules that govern and frame how things are being done. 
168 

But then the discussions occur within the context of the confidentiality that is required in order to protect proprietary interests and 

information that is not appropriate to disclose in a public venue. 

And the committee has been vigilant and active in its effort. There 

have been five meetings in 2005 looking at 17 different products. 

So it is active. It is engaged. It is an ongoing effort, and I think 

it is a process of balance between making sure that there is an additional layer of oversight, but one that is still being conducted 

within the constraints and confines of what the law and the regulatory process makes possible. 

Senator KOHL. Thank you, Mr. Chairman. 

Senator BENNETT. Senator Harkin. 

BOVINE SPONGIFORM ENCEPHALOPATHY

Senator HARKIN. Thank you, Mr. Chairman. Just one last followup on the BSE. 

I understand that FDA is going with the weaker rule because 

they are concerned about the costs of a stronger rule. Well, we can’t 

ignore cost, but consider the cost that our country is bearing in lost 

export markets already because of that. Or consider the potential 

cost if consumers lose confidence in eating beef. 

I mean, you can argue about science and risk, but some things 

just make common sense. I mean, how many people know that cattle are fed chicken litter? Now that is not just the straw and the 

bedding, that is fecal matter. They are eating chicken feces, okay? 

And they are eating a lot of stuff that could fall into that litter that 

could be parts from SRMs that are fed a lot to poultry, a lot. 

And since other countries have banned it, I don’t know why we 

are so reluctant to do that. Ask anybody even in this audience, how 

many, if you had a choice between hamburger from a cow that 

never ate fecal matter or one that did, what do you think you 

would get? It makes common sense. 

And my big concern is that with this recent case of BSE, obviously, I have an interest in this because I represent a lot of cattle 

feeders. I represent cattle people, and they are concerned about the 

loss of confidence that may happen if more of these problems start 

popping up. 

You may hear from the other side or some other side about this. 

But it seems to me that a big part of the problem that we have 

right now is that both FDA and USDA are telling the public that 

the feed rules are a firewall, a true safeguard. But now what I am 

hearing is you are saying that the feed rules are based on probabilities, 90 percent here, 90 percent there. You know, probabilities. 

Well, so what we are hearing, the rhetoric and the facts don’t 

match. And I am just, again, concerned that we don’t move ahead 

more aggressively to prohibit all SRMs, not just the high risk, all 

SRMs from all animal feed, including poultry, and to eliminate, finally get over that hurdle of plate waste. 

I can’t believe we still permit plate waste in this country going 

into ruminant animals. Most other countries don’t, but we still permit it. So, again, that is all I have to say on that. 
169 

FOOD AND NUTRITION FTE

A couple of other things, Dr. von Eschenbach. Is it true that in 

this budget that there are somewhere between 50 and 80 FTEs 

that will be taken away or transferred out of the food safety and 

nutrition area? Am I wrong in that? 

Are there any at all in this budget, are there FTEs being cut in 

food and nutrition? 

Dr. VON ESCHENBACH. With regard to the area of food and nutrition, Senator, we are looking at redeploying activities within that 

area and synergizing and partnering in order to be able to meet the 

necessary commitments that we have within the budget. But do 

that in a way that is more efficient and more effective. 

We are looking at opportunities, for example, where mechanisms 

with regard to our management of personnel and opportunities for 

early buyout will enable us to reduce the cost of our workforce 

without necessarily reducing the number of FTEs. I would have 

to—— 

Senator HARKIN. Okay. Are there any in the budget? That is all 

I want to know. In this budget before us, is there a reduction in 

full-time equivalents in food and nutrition? 

Dr. VON ESCHENBACH. I will have to give you for the record the 

specific—— 

Senator HARKIN. Okay. If you don’t know, then if you could get 

back to us, I would sure appreciate it. 

Dr. VON ESCHENBACH [continuing]. FTE reductions. But as I indicated to a prior question, I want to reassure the committee that 

whatever reductions and whatever redeployments are made in resources, we are doing that in a way that it has not compromised 

the commitment to public health and to safety. 

Senator HARKIN. I appreciate that. 

[The information follows:] 

FOOD AND NUTRITION FTE 

The strategic redeployment will be offsetting the requested increases in fiscal year 

2007 for critical, high priority initiatives such as Pandemic Preparedness and Food 

Defense. This would be a change in FTE levels of ¥64 for Center for Food Safety 

and Applied Nutrition and ¥22 in Food related Field activities. 

The redeployment of the FTE in Center for Food Safety and Applied Nutrition 

will be made from programs such as food additives and food contact substances, research, cosmetics, dietary supplements, outreach and regulatory activities. The redeployment of the Food related Field FTE will be made in areas such as the collection 

and analysis of domestic and import food samples and in the management, supervision, and coordination of personnel at multiple locations. 

DIETARY HEALTH SUPPLEMENTS EDUCATION ACT

Good manufacturing practices. Senator Hatch, the other Senator 

from Utah, and I 12 years ago joined forces. We got a bill passed 

called DSHEA, the Dietary Supplement Health and Education Act. 

At that time, we put a provision in the law that mandates that 

FDA is supposed to come with good manufacturing practices, GMPs 

we called them. About every 2 years since that, we have been told 

that FDA is going to come up with good manufacturing practices, 

going to come up with the regulations. This persisted in the 1990s. 

It has persisted since then. 
170 

Twelve years later, we still don’t have good manufacturing practices regulations. The industry is crying out for this. The public 

needs it. It will tend to get some of the bad actors and those that 

might be out there out of the business. It will set up good standards. And here I am told again, ‘‘very soon.’’ 

Can you give us your personal assurance that you will work with 

OMB to get the GMPs published, and can you give us any definitive date? 

Dr. VON ESCHENBACH. Thank you, Senator. And we are, along 

with you, committed to continuing to the full implementation of 

DSHEA and meeting the requirements that have been involved in 

that important law. 

With regard to the dietary supplement GMP, as you have indicated, it is at OMB. The staff of CFSAN have been working directly 

with them with regard to addressing any particular issues with regard to that GMP being finally issued. 

I will continue to commit to you and ensure you that FDA will 

do everything that is needed and required to work with OMB to 

bring that about as rapidly as possible. I understand that it is—— 

Senator HARKIN. It is frustrating. 

Dr. VON ESCHENBACH [continuing]. Imminent. But—— 

Senator HARKIN. It is frustrating. Dr. Crawford, when he was before the help committee last year, said—he assured us that the 

GMPs for dietary supplements will be published in the Federal 

Register within months. Still hasn’t happened. 

Senator BENNETT. Depends on your definition of ‘‘months.’’ 

Senator HARKIN. Okay. Well, I suppose if you meant a lot of 

months, yes. 

Dr. VON ESCHENBACH. I have looked into this, Senator, and I can 

tell you that it is in process and in progress. I am led to believe 

and understand that the issues are being and have been addressed. 

Senator HARKIN. Can you give us any idea, can we see something 

happening here in the next 30, 60, 90 days? Anything at all that 

we can hold you accountable for? 

Dr. VON ESCHENBACH. Please hold me accountable for working 

with the OMB in an effort to make this come forward as you have 

requested. 

Senator HARKIN. I won’t press the issue further. 

I just have one last question. I will wait until my next round. 

Thank you. 

Senator BENNETT. Thank you. 

The experience of working with OMB is one that I have had, and 

it was an administration 30 years ago or longer, I guess. But I 

don’t think OMB has changed that much, and it is very difficult 

many times. 

And I have been in the position of being a witness where I know 

what I want to say, but OMB has told me what I can say. So I 

think Dr. von Eschenbach’s commitment is probably the only one 

he can make under these circumstances. 

UNIFIED FINANCIAL MANAGEMENT SYSTEM

Unified Financial Management System. This is a project initiated 

in 2001 to integrate several financial management systems across 

the department. I am assuming we are talking IT here, all right? 
171 

Dr. VON ESCHENBACH. Financial management, yes, sir. 

Senator BENNETT. Everyone has experience with IT programs 

that start out with great hope and anticipation and then end up 

being over budget and behind time. Originally, FDA’s share of the 

total project through fiscal 2007 was estimated at $36.5 million. 

This subcommittee has provided more than $50 million over the 

last 5 years, and your budget requests an additional $1.2 million. 

These are not large sums, but it is my understanding that annual costs for the system were supposed to level off and go down 

after fiscal 2005. This has not been the case. Since 2004, annual 

costs have gone up roughly 37 percent. 

Can you give us any kind of light at the end of this tunnel as 

to where we are going and what kind of progress we have been 

making? 

Dr. VON ESCHENBACH. I would be happy to, Senator, and I also, 

with your permission, will call Kathy Heuer, who is the head of our 

Office of Finance and Management, to provide additional details. 

As I have understood and appreciated the process, FDA is contributing its appropriate share to the larger HHS effort with regard 

to the UFMS initiative, and it has, in fact, undergone an activation 

period of time with activation costs for contractor support, training, 

vendor support for new tools and licenses, and a need to continue 

to stabilize the process with regard to its utilization. 

We are anticipating and expecting that those activation costs will 

come to an end through the year 2007 and into early 2008, which 

will bring us then into a level of cost reductions and cost savings, 

in fact, with regard to once we have implemented the system fully. 

So that is my expectation and anticipation of the process and 

how it will unfold. Kathy, if you would add to that? 

Ms. HEUER. Thank you, Senator. 

UFMS will be the largest financial management system on the 

civilian side of the Federal Government when fully implemented. 

It is a way to consolidate financial management across Health and 

Human Services, allowing for better integration of information, 

comparability of information, and sounder management decisions 

based on easier access to data. 

The cost increase you reflected in terms of 2005, 2005 is the year 

that we implemented UFMS. We went live in April 2005. The original budget projections did not include operations and maintenance 

projections. Those are about $3 million per year. 

We have a consolidated operations and maintenance structure 

with the department. So that is something that we have to pay in 

addition. Those were not part of the original estimates in terms of 

the budget. 

The original estimate in terms of the budget was just the project 

development, and that is why there is that increase, as you mentioned, the 37 percent going up because that was not included. 

Originally, it was just development. But now the operations and 

maintenance is on top of that. 

As Dr. von Eschenbach said, when UFMS is fully developed into 

2008, then the development costs will be eliminated, and our ongoing costs will just be the operations and maintenance costs. 

Senator BENNETT. Thank you. I wish you well. 

Ms. HEUER. Thank you. 
172 

Senator BENNETT. Senator Kohl. 

Senator KOHL. Thank you, Mr. Chairman. I have finished my 

questioning. I will defer to Senator Harkin. 

Senator BENNETT. Senator Harkin. 

STRATEGIC REDEPLOYMENT

Senator HARKIN. Mr. Chairman, just one last thing. And again, 

Dr. von Eschenbach, you are going to get back to us on these 

FTEs? 

Dr. VON ESCHENBACH. Yes, sir. 

Senator HARKIN. The question I asked, I had information that in 

the budget there is a cut in FTEs in food and nutrition? 

Dr. VON ESCHENBACH. Senator, I am looking forward to presenting to the entire committee for the record a detailed explanation—— 

Senator HARKIN. Okay. 

Dr. VON ESCHENBACH [contining]. Of the redeployment strategy 

across all of the centers and offices within FDA. So that it will define what the programmatic shifts are in those programs, along 

with what the FTE changes will be. And we will give that to you 

not only with regard to CFSAN, but with regard to the entire portfolio so that you will have that with regard to answering your question. 

GELATIN CAPSULES FOR DIETARY SUPPLEMENTS

Senator HARKIN. Okay. My last question has to do with U.S. 

companies that want to export dietary supplements with gelatin 

capsules to Europe are first required to obtain a health certificate 

from the Food and Drug Administration, required to do so by the 

European Union. 

Now I wrote you a letter about this on February 28. I don’t expect you to have replied. That is a short time ago. But I wrote you 

a letter about this on February 28. 

Now as I understand it, the EU requires U.S. companies to get 

a health certificate from FDA’s Center for Food Safety and Nutrition. But according to the exporters that have talked to me, the EU 

does not require these certificates for pharmaceutical companies 

that are using the same gelatin capsules to export pharmaceuticals. 

But if you have a dietary supplement, same gelatin capsule, they 

require the FDA to give a health certificate. 

Well, I am told that the FDA does not issue such certificates. I 

don’t know if that is so or not, but do you have any—I don’t want 

to catch you flat-footed on this, but I am told that FDA does not 

issue them. So they are kind of caught. 

The EU says they have got to have a health certificate, and yet 

FDA says they don’t issue those. So—— 

Dr. VON ESCHENBACH. Senator, I cannot give you the specific details in answer to that question. I would be happy to do that for 

the record or have one of the FDA staff that would be responsible 

for that respond. 

Senator HARKIN. Well, please have your staff, and you personally, take a look at the letter I wrote you on February 28. My staff 

will give you a copy here. I understand how those things go. But 

take a look at that because it is a big issue. 
173 

Because it is the same gelatin capsule that pharmaceutical companies use. They order them from the same place, but the EU has 

rules that say you can’t without a health certificate. 

So, they are sort of caught in a bind here. I need to find out 

about that and what we can do to help them overcome this trade 

barrier. 

Dr. VON ESCHENBACH. I will look into that for you, Senator. 

Senator HARKIN. I appreciate that very much. 

Thank you, Mr. Chairman. 

[The information follows:] 

HEALTH CERTIFICATES FOR GELATIN CAPSULES

FDA issues a certificate, sometimes called a health certificate, for bulk gelatin for 

human consumption exported to the European Union, also known as EU. In the certificate, FDA certifies compliance with relevant U.S. standards, which have been 

recognized for this purpose as equivalent to EU requirements for foods including dietary supplements. The EU requires the certificate include affirmations from the 

manufacturer and periodic state inspections confirming the gelatin is produced in 

accordance with U.S. standards, the gelatin meets certain criteria, and that raw materials are appropriately sourced. 

The EU legislation separates requirements for foods and requirements for pharmaceuticals. However, to date it is only the United Kingdom, in its implementation 

of EU legislation, has stopped shipment of gelatin capsules containing dietary supplements. It is our understanding that our EU counterparts are trying to resolve 

the situation since the gelatin used in human food is, in most cases, identical to the 

gelatin used for pharmaceuticals. 

ADDITIONAL COMMITTEE QUESTIONS

Senator BENNETT. Thank you. 

Dr. von Eschenbach, we appreciate your attention to all of these 

questions and you and your staff’s response to what our concerns 

are. 

Dr. VON ESCHENBACH. Thank you, Mr. Chairman. And may I express to you and to the committee our gratitude, as I indicated at 

the very beginning, for your support. 

I would also like to express personally, for however long I have 

the privilege to serve in this role, that both myself and the staff 

of the leadership of the FDA would look forward to an ongoing conversation and relationship about many of the important issues that 

you raise. Not simply at a time, for example, when we are requesting a budget appropriation, but in an ongoing basis. 

We intend to be responsive and timely to requests that are provided to us by mail, but I look forward to that opportunity in person as well. And I know that that is reflected by the talented and 

wonderful people who are sitting behind me, who are the content 

experts that are at your disposal. 

Thank you, sir. 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 

QUESTIONS SUBMITTED BY SENATOR ROBERT F. BENNETT

MEDICAL DEVICE USER FEE AND MODERNIZATION ACT (MDUFMA)

Question. Please provide, for the record, specific information regarding FDA performance in each of the medical device user fee goal areas. 

Answer. Secretary Thompson’s November 2002 letter to Congress, also known as 

the FDA commitment letter, defines the performance objectives FDA is pursuing 
174 

under the Medical Device User Fee Act, or MDUFMA. The commitment letter defines a comprehensive set of challenging goals and a schedule for meeting the goals. 

To allow FDA time to build its capacity to meet the ultimate goals set by 

MDUFMA for fiscal year 2007, the commitment letter provides for a phased implementation of goals, with the addition of more goals and higher performance expectations each year. In fiscal year 2005, 18 additional goals went into effect, with two 

exclusively for the Center for Biologics, Evaluation and Research, also known as 

CBER. Six additional goals go into effect in fiscal year 2006. In fiscal year 2007, 

FDA will be responsible for a total of 77 quantitative goals covering five receipt cohorts. FDA is expected to pursue eight additional nonquantifiable commitments, 

such as developing an appropriate bundling policy, continuing our efforts to develop 

mechanisms for the electronic receipt and review of applications, and improving the 

scheduling and timeliness of preapproval inspections. 

Although we do not expect to meet every goal specified by MDUFMA, the trends 

are promising. Since some goals involve so few applications that missing the review 

time frame for a single application by a single day can result in ‘‘failure’’ to meet 

a MDUFMA goal. We are, in general, showing better performance as we implement 

new policies and procedures designed to improve the timeliness of our review processes. Although it is too soon to know what our final performance statistics will 

show, since many goals still have applications that remain open, our performance 

on applications within more recent receipt cohorts is better than our performance 

within older cohorts. If you had taken a snapshot of performance for the fiscal year 

2003, fiscal year 2004, and fiscal year 2005 receipt cohorts on December 31, 2005, 

you would see that FDA is meeting or exceeding 19 of the 24 goals in effect, and 

is not meeting only two goals. No applications have qualified for the remaining 

three goals. 

We are confident that MDUFMA is producing positive results for FDA, for industry, and—of critical and highest importance—for patients and health care professionals. 

I would be happy to provide FDA’s performance report for fiscal year 2004 for the 

record. We will forward our fiscal year 2005 report when it is complete. 

[The information follows:] 
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MEDICAL DEVICE USER FEES

Question. During operation of the medical device user fee program, has the agency 

been able to determine specific direct and indirect costs of performing the various 

types of PMA and 510(k) device approvals? Will FDA be able to determine incremental direct and indirect costs that will be associated with improving review times 

under more aggressive performance goals in the future? 

Answer. FDA is engaging with industry and stakeholders as we work on the 

MDUFMA reauthorization. If the MDUFMA reauthorization results in changes to 

the performance goals, we will be able to estimate direct and indirect costs. During 

fiscal year 2005, FDA contracted with Dr. Dale R. Geiger, a recognized expert in 

the field of government cost accounting, to prepare a report of the costs of FDA medical device review processes. The statement of work for this report did not require 

Dr. Geiger to make findings and conclusions. Rather, Dr. Geiger prepared analysis 

for FDA to consider during the MDUFMA reauthorization. Dr. Geiger examined 

FDA medical device reviews conducted during fiscal year 2003 and fiscal year 2004, 

including investigational device exemption applications, investigational new drug 

applications, premarket approval applications, or PMAs, PMA supplements, biologics licensing applications, or BLAs, BLA supplements, and 510(k) premarket notifications. 

The methodology employed by Dr. Geiger follows generally accepted accounting 

principles for U.S. Government reporting entities, and parallels the methodology applied by an earlier Arthur Anderson study that measured PDUFA costs for 1992 and 

1993. Dr. Geiger examined both direct and indirect costs, at CBER, CDRH, the Office of Regulatory Affairs, or field, and FDA general and administrative costs. This 

work will assist FDA with cost analysis in regards to the performance goals resulting from the MDUFMA reauthorization. 

Question. What criteria does the agency use to determine the allocation and priority for distribution of staff increases across FDA components, including offices, divisions, branches, regions, and districts resulting from medical device user fees and 

related Congressional appropriations? 

Answer. In the absence of a Congressional directive, FDA allocates medical device 

user fees and other medical device appropriations to best achieve FDA’s public 

health objectives, the performance goals, and other expectations established under 

the Medical Device User Fee and Modernization Act of 2002 and its amendments. 

Resources have been allocated to reflect the workload balance between the Center 

for Devices and Radiological Health, or CDRH, and the Center for Biologics Evaluation and Research, or CBER. Soon after MDUFMA was enacted, FDA estimated 

that 83 percent of the device review work was performed in CDRH and 17 percent 

was performed in CBER. The Field resources associated with each Center are included in these percentages. FDA’s fiscal year 2003 to fiscal year 2005 allocations 

were based on these percentages. FDA is presently reexamining this allocation and 

expects this examination will result in a higher percentage of MDUFMA being allocated to CDRH. 

Field resources are allocated among districts by the Office of Regulatory Affairs, 

or ORA, according to each district’s projected medical device workload. To illustrate 

the use of workload to determine distribution of resources, CDRH’s MDUFMA hiring priorities were established by product group experts who made recommendations about the type and order of new hires that would best contribute to improving 

the device review process. For example, the CDRH cardiovascular group, which included experts on those types of devices from across the Center, concluded that their 

highest priority for improving and speeding the review of cardiovascular devices 

were additional statisticians. Other product review teams—for example, those for in 

vitro diagnostic devices, ophthalmic and ENT devices, ob-gyn, gastro-renal, and 

urological devices—identified the priority needs they believed were essential to improving the quality and timeliness of the review process. 

POSTMARKET SAFETY ISSUES

Question. At the industry-agency workshop on ongoing efforts to improve postmarket safety activities in February of this year, several issues came up that are 

of potential concern. 

With regard to the notion of requiring ‘‘unique product identifiers,’’ how would 

this requirement differ from and improve on the existing device tracking requirements for high risk devices? What technical and labeling issues arise with regard 

to such a requirement for all devices? 

Answer. The device tracking requirement applies to manufacturers of a small set 

of mostly implantable devices, and intends to ensure that manufacturers can quickly 

locate defective devices and notify patients. Conversely, the idea underlying unique 
221 

device identification, or UDI, is to require manufacturers to apply a unique code to 

the label of a variety of medical devices, in both human and machine readable formats, like barcodes. When combined with other health information technology efforts, UDI has the potential to provide a number of benefits to improve patient safety. Important potential benefits include the reduction of device-related medical errors through the recognition of compatibility and interoperability issues; facilitating 

the population of device information in patients’ electronic health records; and improving the accuracy of information about marketed devices through the standardized identification of specific devices in adverse event reports. Additionally, an effective system of device identification should allow more efficient recall of defective devices and also assist in fighting counterfeit devices. 

The type of information included in the UDI will determine what technical and 

labeling issues arise. FDA is currently considering the appropriate scope of such information and intends to address these issues in a rulemaking. 

Question. With regard to the draft guidance document on requirements for additional information to be to be included in annual reports, does FDA already have 

this information in various formats and disparate offices throughout the device center? Would it make more sense for the agency to break down its internal barriers 

that prevent effective utilization of information already collected by the Center for 

Devices and Radiological Health? 

Answer. The Center for Devices and Radiological Health, also known as CDRH, 

believes that data and information gathered in the postmarket setting is critical to 

our continued confidence in the safety and effectiveness of marketed devices. Premarket Approval, or PMA, annual reports are one of the important tools that FDA 

relies upon to gather information about the device once it is marketed. For this reason, CDRH is assessing the information provided in annual reports to ensure that 

these submissions provide meaningful information for the agency and industry to 

assure postmarket safety. At this time, CDRH has not made a final decision as to 

the type of information that should be included in a PMA annual report. Once the 

decision is made, CDRH will take the necessary steps to ensure that the information 

required in the annual report is not duplicative of other regulatory reporting requirements. 

CDRH is also reviewing our internal processes and systems for communicating 

post-market information across the center. As part of its on-going effort to improve 

all aspects of post-market safety, CDRH initiated the Postmarket Transformation 

Leadership Team that consists of CDRH managers and external experts to guide the 

Center in this effort. 

CRITICAL PATH INITIATIVE

Question. FDA is requesting an increase of $5.9 million for the Critical Path Initiative. This funding is specified for the Center for Drug Evaluation and Research. 

However, I understand that the Critical Path Initiative is intended to speed the development of all medical products regulated by FDA. 

Will the requested funding be made available to other FDA Centers? If so, how 

much will be made available to each FDA center? 

Answer. All FDA centers will participate in Critical Path activities in order to 

achieve the public health benefits envisioned by FDA in its Critical Path report of 

March 16, 2004, and the Critical Path Opportunities List announced on March 16, 

2006. In fact, several of the projects described in our budget request are cross-center 

projects, such as work to create a library of digital electrocardiograms, also known 

as ECGs, that involves both the Center for Drug Evaluation Research and the Center for Devices and Radiological Health. 

The Agency is still working with our partners in government, academia, and industry to determine which Critical Path activities, in addition to those identified in 

our fiscal year 2007 budget request, are the most appropriate activities to fund in 

fiscal year 2007. 

I would be happy to provide for the record the Critical Path Opportunities List 

that was announced on March 16, 2006. 

[The information follows:] 
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REUSE OF SINGLE-USE DEVICES

Question. Last summer, Congress passed the Medical Device User Fee Stabilization Act to continue the medical device user fee program, adjust user fees, and tighten up branding provisions related to reprocessed devices. 

How soon will FDA issue the final guidance related to reprocessed devices? 

Answer. We hope to issue the final guidance shortly. 

Question. Will the final guidance differ significantly from the current draft? 

Answer. Because the guidance has not yet been finalized and cleared, we cannot 

say whether or not it will differ significantly from the current draft. 

Question. Will the final guidance assure that reprocessed single-use devices are 

adequately marketed so reports of malfunctions and serious injuries are reported 

correctly during the entire time a particular device is being reprocessed or reused? 
244 

Answer. Yes. FDA believes that the final guidance will be adequate to ensure that 

reprocessed single-use devices are adequately marked to ensure that reports of malfunctions and serious injuries are reported correctly during the time a reprocessed 

device is used. 

Question. Will the FDA ensure that the labels that meet the branding requirements actually make it in to the patient chart when used by a hospital? 

Answer. FDA’s primary task will be to ensure and monitor that reprocessed single 

use devices include the appropriate identification and labeling. The hospitals and 

other facilities that use these devices will have responsibility for ensuring that 

health care personnel attach labels to patient charts as appropriate. FDA intends 

to work with manufacturers, hospitals, and the Joint Commission for the Accreditation of Health Organizations to do outreach and encourage health care facilities to 

establish procedures to ensure that these labels are properly attached to patient 

charts. 

Question. Recent media attention to the reprocessing of single use devices has 

raised many concerns about the practice. The original Medical Device User Fee and 

Modernization Act required the FDA to review the most commonly reprocessed devices. The FDA reviewed a small subset of reprocessed single use devices and nearly 

50 percent of the reviewed devices were either withdrawn or were declared not-substantially-equivalent. 

What is FDA doing to ensure patient safety is not compromised by the use of reprocessed single use devices? Can FDA do more to ensure patient safety is not compromised by the use of these reprocessed single use devices? 

Answer. FDA implemented the new premarket requirements put into place by the 

Medical Device User Fee Act, or MDUFMA, for reprocessed single-use devices, also 

known as SUDs. Manufacturers who intend to reprocess certain types of SUDs must 

now submit premarket 510(k) notifications for these devices which contain validation data on cleaning, sterilization and functionality. The additional premarket requirements apply to reprocessed SUDs determined to be high risk for transmission 

of infection or inadequate function following reprocessing, involving those reprocessed SUDs intended to come into contact with tissue at high risk of being infected 

with the causative agents of brain-wasting Creutzfeldt-Jakob disease. The reprocessed SUDs that are subject to the additional premarket requirements noted include 

21 device types that were previously exempt from premarket notification requirements, and 52 device types that were already subject to 510(k) premarket notification requirements, but were not previously required to submit validation data. 

FDA’s postmarket oversight of reprocessors of SUDs includes inspections of manufacturing operations and review of adverse event reports. Since August 2000, FDA 

has inspected 29 reprocessing companies and over 200 hospitals to ensure that the 

third party reprocessors are following quality system regulations and that any hospitals engaged in reprocessing are also in compliance with these manufacturing requirements. During that time period, FDA issued eight warning letters to third 

party reprocessors and obtained two injunctions against firms. FDA issued regulatory correspondence outlining violations to four hospitals but has found that most 

hospitals are no longer reprocessing SUDs. In fiscal year 2005, FDA inspected seven 

reprocessing companies and found all of them in substantial compliance with applicable regulations. 

FDA continues to review adverse events submitted by manufactures, user facilities and the general public for problems associated with reprocessing of single use 

medical devices. FDA changed its MedWatch reporting forms to make it easier for 

device users to inform the agency when a reprocessed SUD is associated with an 

adverse event. In addition, FDA recently issued draft guidance to implement the 

provision of the Medical Device User Fee Stabilization Act, or MDUFSA, that requires reprocessors to ensure that each SUD clearly identifies the reprocessor. The 

new provision, which will go into effect in August 2006, is intended to facilitate accurate reporting of adverse events involving reprocessed SUDs. 

FDA believes the measures Congress put into place for reprocessed single use devices under MDUFMA establish appropriate controls to provide reasonable assurance of safety and effectiveness for these devices. The controls, which include additional data requirements, premarket review, and labeling provisions, have supplemented the inspection and enforcement authorities FDA already had in place. 

FDA DETAILEES

Question. Please provide information on the FDA detailees sent to work in the 

Congress over the past 10 years, including the office they work in at FDA, the office 

they were or are detailed to in the Congress, the length of service, and FDA’s policy 

on providing detailees to the Congress. 
245 

Answer. I would be happy to provide that and the HHS Instruction 300–3, Detail 

of Employees for the record. 

[The information follows:] 

FDA DETAILEES 

Name FDA offices Detail location Length of detail 

David Dorsey, J.D ..................... Office of the Commissioner; 

Office of the Chief Counsel.

Senate Health, Education, 

Labor, and Pensions Committee.

Jan. 2001-Present 

Dr. Brian Harvey ...................... Center for Drug Evaluation 

and Research Office of New 

Drugs.

White House, American Political Science Association 

Congressional Fellowship.

Oct. 2000–Oct. 2001 

Stacy M. McBride ..................... Office of the Commissioner; 

Office of Management.

Senate Appropriations Subcommittee.April 2005–Nov. 2005 

Dr. Kevin Mulry ........................ Center for Devices and Radiological Health; Office of Device Evaluation.

Office of Senator Richard Durbin Office of Legislative Affairs.

Jan. 1998–Aug. 1998 

Thomas B. O’Brien ................... Office of the Commissioner; 

Office of Management; Office of Financial Management.

House Appropriations Committee.Feb. 2004–Nov. 2004 

Jan. 2005–Feb. 2006 

Dr. Donna-Bea Tillman ............ Center for Devices and Radiological Health; Office of Device Evaluation.

Congresswoman Louise 

Slaughter-New York.

Jan. 2000–July 2000 

Lisa Siegel ............................... Office of the Commissioner; 

Division of Budget Formulation and Presentation.

House Agriculture Appropriations Subcommittee.Feb. 1999–Oct. 1999 

Maureen Holohan ..................... Office of the Commissioner; 

Office of Planning.

House Agriculture Appropriations Subcommittee.Feb. 2000–Oct. 2000 

Margaret Carlson ..................... Center for Food Safety and Applied Nutrition.Senate Health, Education, 

Labor, and Pensions Committee.

Mar. 2002–Jan. 2004 

Dennis Strickland ..................... Center for Biologics Evaluation 

and Research; Office of 

Communication, Training 

and Manufacturers Assistance.

Office of Senator William Frist 

(Brookings Legislative Fellows Program).

Jan. 1996–Dec. 1996 

Tracy Summers ........................ Center for Food Safety and Applied Nutrition; Office of the 

Director.

Office of Senator Edward Kennedy FDA Desk.Aug. 1999–Nov. 1999 

Diane Prince ............................. Office of the Commissioner; 

Office of Legislative Affairs.

House Energy and Commerce 

Subcommittee.

May 1998–Jul. 1998 

Jeff Shuren ............................... Office of the Commissioner; 

Office of Policy.

Senate HELP Committee Office 

of Senator Edward Kennedy’s Office.

Nov. 1999–Nov. 2000 

Theresa Mullin ......................... Office of the Commissioner; 

Office of Planning.

Office of Senator Byron Dorgan Mar. 2000–Aug. 2000 

Dave Doleski ............................ Center for Biologics Evaluation 

and Research; Manufacturers Branch II.

Office of Senator Paul 

Wellstone (Brookings Legislative Fellows Program).

Jun. 1999–Dec. 1999 

Serina Vandegrift ..................... Office of the Commissioner; 

Office of Policy.

Senate Agriculture Committee 

(Chairman Cochran).

Jan. 2004–Jan. 2005 

Tim Lynagh .............................. Office of the Commissioner; 

Office of Legislation.

Office of Congressman Chris 

Smith.

2003 

Mike Skonieczny ....................... Office of the Commissioner; 

Office of Legislation.

Office of Congresswoman Rosa 

DeLauro.

2001 

HHS TRANSMITTAL 96.2

PERSONNEL MANUAL

Issue Date: 2/22/96 

Material Transmitted.—HHS Instruction 300–3, Detail of Employees (pages 1–3) 

Material Superseded.—HHS Instruction 300–3 (all). 
246 

Background.—This Instruction has been substantially streamlined in accordance 

with National Performance Review recommendations, and in support of HHS administrative initiatives calling for more streamlined rules and greater delegations 

of authority. 

Any reference to ‘‘OPDIV’’ in this Instruction now includes the PHS agencies, the 

Office of the Secretary, the Program Support Center, HCFA, ACF, and AOA. 

This issuance is effective immediately. Implementation under this issuance must 

be carried out in accordance with applicable laws, regulations, and bargaining 

agreements. 

Filing Instructions.—Remove superseded material and file new material. Post receipt of this transmittal to the HHS Check List of Transmittals and file this transmittal in sequential order after the check list. 

JOHN J. CALLAHAN, 

Assistant Secretary for Management and Budget. 

INSTRUCTION 300–3

DISTRIBUTION: MS (PERS): HRFC–001

HHS PERSONNEL INSTRUCTION 300–3

DELEGATION OF AUTHORITY TO DETAIL EMPLOYEES

A. Authority Delegated 

1. Heads of Operating Divisions (including PHS agencies and the Program Support Center), the Assistant Secretary for Management and Budget for the Office of 

the Secretary (OS), and the Inspector General (for OIG) are delegated the authority 

to: 

a. detail and extend details of civil service personnel within the Department in 

increments not to exceed 120 days, pursuant to 5 U.S.C. 3341; and 

b. detail and extend details of civil service personnel to or from other Federal 

organizations on either a reimbursable or a non-reimbursable basis pursuant to 

31 U.S.C. 1535. 

2. These authorities may be redelegate with further redelegation authorized. 

B. Restrictions 

1. The term ‘‘Federal organizations’’ in paragraph A.1.b. above does not include 

the Executive Office of the President and the Legislative and Judicial Branches of 

Government. 

2. The Assistant Secretary for Management and Budget retains the authority to 

approve all details to or from the Executive Office of the President and to or from 

the Legislative and Judicial Branches of Government (including the General Accounting Office, the Library of Congress, and the Government Printing Office). 

C. Exclusions 

1. This delegation does not cover: 

a. Assignments of excepted employees other than those with Schedule A and B 

or VRA appointments to competitive service position (5 CFR 6.5); 

b. Details of Administrative Law Judges (5 U.S.C. 3344); 

c. Details to certain Executive positions (5 U.S.C. 3344–3349) ; 

d. Details of members of the Senior Executive Service (5 CFR 317.903) ; 

e. Details of PHS Commissioned Officers (42 U.S.C. 215): 

f. Details between HHS and a non-Federal organization under Section 214 of 

the PHS Act, as amended; 

g. Details under the Intergovernmental Personnel Act of 1970 (5 U.S.C. 3372– 

3374; and 5 CFR Part 334); and 

h. Details to an International organization (5 U.S.C. 3343; and 5 CFR 352.304). 

D. Information and Guidance 

1. The authorities delegated in paragraphs A.1.a and b. above must be exercised 

in accordance with the requirements and/or provisions in the following references: 

a. U.S.C. 112 (Details to the Executive Office of the President) 

b. U.S.C. 3341 (Details within Executive or Military Departments) 

c. Civil Service Rule 5 CFR 6.5 (Assignment of Excepted Employees) 

d. 31 U.S.C. 1301 (Appropriation Restrictions on Assignment of Employees) 

e. 31 U.S.C. 1535 (Assignment of Employees Between Executive Branch Departments and Agencies and Written Agreements Between Agencies Detailing Employees) 

f. 4 CG 848–849, April 13, 1925 (Appropriations and Transfer) 

g. 21 CG 954, April 27, 1942 (Details to the Legislative Branch) 
247 

h. 21 CG 1055, May 26, 1942 (Details to the Legislative Branch) 

i. 64 CG 370, B–211373, March 20, 1985 (Nonreimbursable Details) 

E. Prior Delegations 

This delegation supersedes the February 19, 1991, Delegation of Authority to Detail Personnel, as amended September 29, 1993, from the Assistant Secretary for 

Personnel Administration to the Heads of Operating Divisions and Regional Directors. To the extent that previous redelegations of the authority to detail personnel 

made to other officials within HHS are consistent with the provisions of this delegation, they may remain in effect until new redelegations are made under the authority of this delegation. 

F. Effective Date 

This delegation is effective on the date of this transmittal. 

BSE—FEED BAN

Question. Yesterday afternoon, USDA announced that the third cow in United 

States history tested positive for BSE, commonly known as mad cow disease. 

The FDA feed-ban rule, issued in 1997, is the first line of defense in preventing 

BSE infection in U.S. cattle. 

What is FDA doing to ensure that it is inspecting all entities that are subject to 

the feed ban? 

Answer. FDA inspects a wide variety of firms in the animal feed industry to confirm compliance with the ruminant feed ban regulation. Every firm that manufactures, processes, blends, transports, or distributes animal feed or feed ingredients 

for any animal species is subject to inspection under the FDA ruminant feed ban 

compliance program. Firms are subject to inspection under the FDA ruminant feed 

ban regardless of whether prohibited material is used or the relative risk the firms 

practices may pose to the U.S. BSE feed control program. In addition to feed manufacturers and distributors, over one million farm operations feeding ruminants such 

as dairy and beef cattle are subject to the rule. 

The BSE Ruminant Feed Inspection Compliance Program guidance document constitutes the FDA risk-based inspection priority approach used by FDA and state investigators. FDA gives highest priority to inspecting firms that manufacture or process animal feeds or feed ingredients that contain prohibited material. This industry 

segment of renderers, protein blenders, and feed mills are inspected annually to ensure that ruminant feeds do not contain prohibited materials. 

FDA also conducts inspections on firms considered to have a reduced risk producing or causing contamination of ruminant feed. The agency conducts inspections 

of these lower risk firms to detect overall compliance trends. If FDA detects compliance trends, agency staff implements more targeted inspectional initiatives to increase our presence in some of these lower risk industry segments. 

PANDEMIC INFLUENZA

Question. How is FDA using the $20 million for pandemic influenza provided in 

the fiscal year 2006 supplemental? 

Answer. The $20 million supplemental was received at the end of the first quarter 

and the funds were available on January 26, 2006. I would be happy to provide the 

spending plan for the record. 

[The information follows:] 
248 
249 

Question. How does FDA plan to use the $30.5 million requested in fiscal year 

2007? 

Answer. I would be happy to provide that information for the record. 

[The information follows:] 
250 
251 

IMPORT INSPECTION

Question. FDA plays a significant role in import inspection at ports. For example, 

FDA inspects food, human drugs, animal feeds, and medical devices at ports of 

entry across the country. 

For FDA-regulated food products, FDA estimates that by 2007 the amount that 

comes across the border will have nearly quadrupled since 1999. In a typical year, 

FDA physically examines less than 1 percent of these food imports. How does FDA 

keep up with the ever increasing amount of imported products? 

Answer. FDA attempts to keep up with the increasing volume of imported products by using a risk based approach when selecting shipments to inspect and sample. All products are screened electronically by FDA’s Operational and Administrative System for Import Support, also known as OASIS, against a set of criteria established as a result of previous laboratory findings, foreign inspections, information 

received from other regulatory agencies, and the relative risks posed by the products 

in question. 

The Public Health Security and Bioterrorism Preparedness and Response Act of 

2002 requires anyone intending to import or offer for import a food product must 

provide prior notice to the FDA before the shipment arrives at the border. Every 

Prior Notice submission is screened electronically. If specific criteria are met, FDA’s 

Prior Notice Center will review those submissions using various intelligence targeting parameters to protect the Nation’s food supply against terrorist acts and 

other public health emergencies. For example, currently, working with information 

submitted through Customs and Border Protection’s electronic systems used for import entries or through FDA’s internet-based Prior Notice System Interface, FDA 

screens shipments electronically before they arrive in the United States to determine if the shipments meets identified criteria for physical examination or sampling 

and analysis or warrants other review by FDA personnel. This electronic screening 

allows FDA to better determine how to deploy our limited physical inspection resources at the border on what appear to be higher-risk food shipments while allowing lower-risk shipments to be processed in accordance with traditional import procedures after the electronic screening. 

Question. Does FDA have adequate resources to properly inspect imports? 

Answer. The rapid growth of imports combined with ever present security concerns has increased the need to assess the status of imported products. FDA estimates it will review more than 19 million import lines for admissibility into domestic commerce in fiscal year 2007. To help ensure the safety of imported products entering the United States, FDA electronically screens imports through the Operational and Administrative System for Import Support, also known as OASIS. 

OASIS is an automated system for processing and making admissibility determinations for FDA regulated products that are offered for import. FDA also performs laboratory analysis on products offered for import into the United States; conducts foreign inspections to evaluate manufacturing conditions of products before they are 

offered for import; and performs periodic filer evaluations to ensure that the import 

data being provided to FDA is accurate. 

The Prior Notice Center, also known as PNC, is another important part of FDA’s 

import strategy. The mission of FDA’s PNC is to identify imported food and feed 

products that may be intentionally contaminated with biological, chemical or radiological agents, or which may pose significant health risks to the American public, 

and intercept them before they enter the United States. FDA will continue to focus 

resources on Intensive Prior Notice Import Security Reviews of products that pose 

the highest potential bioterrorism risks. The PNC uses a combination of adaptable 

targeting strategies and weighted risk indicators in the threat assessment process 

including contemporary intelligence involving terrorist activities, a history of prior 

notice violations, and compliance with admissibility standards as indicated by the 

results of import field exams, filer evaluations, firm inspections, repeated prior notice violations, and feedback from Field Investigators. By using a risk based approach, the PNC can intercept potentially hazardous products before they enter the 

United States. 

The benefit of these reviews comes from the quality and targeting of review activities; not from the volume of imports inspected. Thus the quality of import screening 

is a better measure of FDA’s import strategy rather than simply focusing on the 

items physically examined. 

DRUG SAFETY

Question. Drug safety is a topic that has been very much in the news over the 

past year, and in your written testimony, you discuss the challenges the agency 
252 

faces in balancing the need for proper risk analysis while trying to speed the review 

process. 

This subcommittee has closely followed FDA’s drug safety activities. Last year, we provided an increase of $10 million for drug safety. This amount was $5 million 

more than the budget request. In fiscal year 2007, FDA is requesting an additional 

$3.9 million for drug safety. How is FDA using the $10 million increase we provided last year? 

Answer. In its fiscal year 2006 budget submission to Congress, FDA requested a base increase of $5 million to bolster the drug safety functions performed within the 

Center for Drug Evaluation and Research’s Office of Drug Safety, also known as 

ODS. These included three important increases. First, ODS will increase the professional staff in ODS who manage and lead safety reviews. Second, ODS will increase 

the number of staff with expertise in critical areas, such as risk management, risk 

communication, and epidemiology. Third, ODS will expand our information technology infrastructure for monitoring post-marketing data by increasing access to a 

wide range of clinical, pharmacy, and administrative databases. Valuable information regarding the safety of drug products is available in these types of databases 

for use by our scientists in ODS. 

The approval by Congress of the Administration’s fiscal year 2006 request for a $5 million increase significantly strengthens the ability to conduct drug safety activities within ODS. 

Congress increased our $5 million request to $10 million, adding to our original request an additional $5 million for general drug safety program activities. The Center for Drug Evaluation and Research will use these funds to increase its emphasis 

on effective risk communication. The additional funds will further enable FDA to 

modernize its drug safety program and expand the understanding of, involvement 

in, and access to, external population-based and ‘‘linked’’ databases, such as the 

CMS Medicare and Medicaid databases. Accessing these databases represent the future of more thorough and continued monitoring of drug products after they are 

marketed. Information obtained from these databases, combined with voluntarily reported adverse event information, will substantially increase the agency’s ability to 

efficiently and effectively identify, investigate, and notify consumers of possible drug 

safety concerns and take appropriate regulatory actions. FDA will also continue its 

efforts to improve the Adverse Event Reporting System, also knows as AERS, so the 

agency can more efficiently review medication error reports and more quickly take 

appropriate action to avert further medication errors. 

These funds will also allow FDA to hire additional expert staff across the Center 

to enhance the ability to use multidisciplinary, multi-office teams to analyze and interpret drug safety data before and after product approval. FDA plans to hire additional scientists to address its highest priority safety needs, such as responding to 

emerging drug safety issues, supporting FDA’s Drug Safety Oversight Board, and 

increasing resources devoted to risk assessment and communication activities. 

These funds will also assist Center efforts to ensure that drug safety information 

is available to healthcare professionals, patients, and other consumers. 

Question. What will the additional $3.9 million allow FDA to accomplish in fiscal 

year 2007? 

Answer. FDA requested additional funds in fiscal year 2007 to continue to modernize its AERS system and create ‘‘AERS II’’—a replacement web-accessible computer system that will enable FDA to maintain the current level of AERS 

functionality, while providing enhancements in several areas. With more than 5 

years of experience with the database, we have identified areas of critical new 

functionality, including generating web-accessible adverse event information. The 

current AERS system is FDA’s principal post-marketing monitoring tool. It allows 

FDA to identify events that were not observed or recognized before approval. It allows FDA to identify adverse events that might be happening because patients and 

prescribers are not using the drug as anticipated. 

Beyond the modernization of the AERS system, however, we requested these 

funds because the AERS system alone is not adequate for a successful, state-of-theart drug safety program. To appropriately monitor drug safety after marketing, it 

is essential that FDA have access to a wide range of clinical, pharmacy, and administrative databases. These include databases maintained by organizations such as 

the Center for Medicare and Medicaid Services, the Department of Veterans Affairs, 

the Department of Defense, and the Indian Health Service. We will also access clinical and hospital and pharmacy networks and insurers, such as health maintenance 

organizations, preferred provider organizations, and pharmacy benefit management 

organizations. 

FDA is actively evaluating the utility and feasibility of conducting specific studies 

of high priority safety issues using such linked databases. Studies conducted on 
253 

these types of databases will provide more evidence about drug use in a broader 

range of conditions, including more detailed evidence about drug safety in subgroups 

of patients. The planned modernizations for AERS are expected to optimize internal 

access and review of adverse event. 

HUMAN TISSUE SAFETY

Question. In February of this year, FDA ordered a New Jersey human tissue recovery firm to cease operation because it found that the company had seriously violated FDA regulations governing donor screening and record keeping practices. FDA 

inspection and action followed a news article that uncovered the fact that this company was regularly and illegally harvesting human tissues from funeral homes. 

These tissues were subsequently transplanted into dozens of patients. 

What is FDA doing to make sure situations like this do not happen again? 

Answer. FDA wishes to clarify information regarding this matter. As part of an 

audit consistent with FDA regulations, a tissue processor in Florida noticed discrepancies in records supplied to it by the New Jersey tissue recovery firm. The Florida 

firm then took the following steps: initiated a recall of tissue it had processed and 

distributed, quarantined tissue it still had in its possession, and notified FDA. FDA 

began an inspection of the New Jersey firm in October, 2005, and found that the 

firm had failed to comply with regulations designed to prevent the spread of communicable diseases. Tissues harvested by the New Jersey firm had been sold to several 

processors and subsequently transplanted. 

FDA is committed to establishing and maintaining high standards for tissue safety and to detecting, investigating and taking enforcement action against violations 

of its regulatory requirements. FDA continues to evaluate its tissue regulations and 

policies on an ongoing basis. 

Question. Is there a certification or licensing procedure that tissue processing 

firms must go through before they can begin operating? 

Answer. FDA regulations require that tissue processing establishments register 

with FDA and list their products within 5 days after beginning operations. FDA’s 

District Offices use these registrations to schedule inspections to assure compliance 

with the regulations designed to promote patient safety and to prevent the spread 

of communicable diseases. 

Question. Does FDA regularly inspect human tissue firms? 

Answer. FDA performed 270 inspections of human tissue establishments in fiscal 

year 2005. The Agency anticipates it will perform 250 inspections in fiscal year 2006 

and 325 inspections in fiscal year 2007. FDA is in the process of implementing its 

new risk-based approach to assure the safety of human cells, tissues, and cellular 

and tissue-based products, or HCT/Ps. The Agency is using a comprehensive approach for regulating existing and new cell and tissue products. FDA is in the process of addressing issues related to safety and effectiveness of a rapidly growing industry. 

A rule expanding the types of tissue facilities required to register with the FDA 

and list their HCT/Ps became effective January 21, 2004. The donor eligibility rule 

became effective May 25, 2005, and focuses on donor screening and testing measures to prevent the transmission of communicable diseases from the donor through 

HCT/Ps. The current good tissue practice rule also became effective May 25, 2005. 

This rule requires manufacturers to recover, process, store, label, package and distribute HCT/Ps in a way that prevents the introduction, transmission, or spread of 

communicable diseases. These rules are critical new tools that give FDA the ability 

to monitor human tissue adverse reactions to target more effectively the products 

with the highest risks. 

PROPOSED USER FEES

Question. FDA is proposing two new user fees in the budget request. One will require manufacturers to pay for the full cost of follow-up inspections when FDA must 

revisit facilities because of initial bad inspection reports. The second fee would reimburse FDA for the cost of issuing export certificates for food and animal feeds. 

Can you explain why you believe these fees are necessary? 

Answer. Although FDA issues export certifications for all products it regulates, 

the agency only has authority to charge a fee to issue export certifications for 

human and animal drugs, and medical devices. Timely issuance of food and feed export certificates funded through user fees would improve the ability of food and animal feed producers to export their products and would eliminate the current preferential treatment of the food and feed industry differences in authority to collect 

fees for the food and feed industries. 
254 

FDA conducts post-market inspections of food, human drug, biologic, animal drug 

and feed, and medical device manufacturers—both domestic and foreign—to assess 

their compliance with Current Good Manufacturing Practice, or CGMP, and other 

FDA requirements. In 2004, approximately 1,500 out of 21,000 firms inspected were 

found non-compliant with CGMPs and other important FDA requirements. Under 

current law, FDA does not have the authority to assess fees for any follow-up inspections conducted by FDA to ensure that manufacturers have addressed violations 

that were found during the previous inspection. A fee for repeat inspections will 

serve as an incentive to industry to conform to CGMPs and other FDA requirements 

and will ensure that the financial burden of re-inspections is more equitably shared 

between industry and the public. 

Both fees are designed to improve the overall management of these activities. 

Question. Has FDA sought input from impacted organizations? 

Answer. Discussions with industry have not yet been held. 

Question. Have you submitted the text of your legislative proposal to the authorizing committee? 

Answer. The legislative proposals are in the final stages of review. We expect the 

proposals will be submitted to the Congress within the next several weeks. 

Question. Please explain the services FDA will be reimbursed for by the re-inspection user fee. 

Answer. If a firm undertakes corrective action to achieve compliance, FDA will 

verify the appropriateness and completeness of the corrective action. For the firm 

to satisfy FDA’s concerns and, if regulatory action was taken, to resume its full ability to market products, the firm must be reinspected by FDA and found in compliance. 

These user fees will provide funding to FDA to act in a timely manner to ensure 

that noncompliant firms have taken appropriate corrective action and to facilitate 

the return of compliant firms to full marketing of violative products. Some of the 

activities that FDA performs in conducting reinspections include the scheduling and 

preparatory reinspection work by the FDA investigator, the reinspection itself, sample analyses, report writing, compliance officer review and analysis, conferring with 

experts, and travel and administrative time. 

Question. Please explain the services FDA will be reimbursed for by the food and 

animal feed certification fee. 

Answer. The services FDA will be reimbursed for by the food and animal feed certification fee include: reviewing applications and attestations; checking of field and 

headquarters administrative records, and with personnel for the compliance status 

of the firm; review of the product label for compliance with the law; preparing, processing, and issuing of the certifications, including notarization; maintenance of applications and copies for tracking of services rendered and for provision of certificate 

copies when requested; all other clerical procedures necessary to issue the certifications within 20 days including processing of billing and receipts, and other costs 

attributable to the issuance of certifications. Currently certifications are processed 

on an ‘‘as resources permits’’ basis. 

FOOD DEFENSE

Question. Over the past 5 years, this subcommittee has provided more than $600 

million for food defense activities at FDA. The fiscal year 2007 budget requests an 

increase of $19.8 million for food defense activities. This is a significant investment. 

How has FDA used the funding we have provided to make the food supply safer? 

Answer. FDA uses the food defense funding to build upon the Nation’s core food 

safety and public health systems and to strengthen our capabilities to address terrorist threats. FDA’s efforts to protect the food supply focus primarily on six major 

crosscutting initiatives under Homeland Security Presidential Directive-9, also 

known as HSPD–9, for food defense. 

One example of FDA’s HSPD–9 activities is the establishment of the Food Emergency Response Network, a national network also known as FERN, to increase analytic surge capacity in the event of terrorist attack by developing adequate laboratory testing capacity for biological, chemical and radiological agents in food. The 

Agency continues to develop FERN by providing laboratory infrastructure, training, 

and proficiency testing to member laboratories. FDA is conducting targeted food defense research efforts, including prevention technologies, methods development, determination of infectious dose for certain agents when ingested with food, and agent 

characteristics within specified foods. Also, FDA is performing more effective targeted risk-based inspections using data from FDA’s Prior-Notice system and Prior 

Notice Import Security Reviews based on intelligence, FDA inspection reports, discrepancies in prior notice reporting, and sample collection and analysis. As part of 
255 

the government-wide Biosurveillance Initiative, FDA is improving coordination and 

integration of existing food surveillance capabilities with the Department of Homeland Security’s integration and analysis function. FDA is upgrading and expanding 

its Emergency Operations Network Incident Management System to assist in the 

management and coordination of the Agency’s response to incidents affecting the 

U.S. food supply. Along with the U.S. Department of Agriculture, the Federal Bureau of Investigation, and Department of Homeland Security, FDA began a new collaborative effort with States and private industry to protect the Nation’s food supply 

from terrorist threats through the Strategic Partnership Program Agroterrorism Initiative. FDA has spearheaded this effort to identify sector-wide vulnerabilities, mitigation strategies, and research needs to protect our Nation’s food supply. 

Question. Does FDA have an overall plan for food defense, including out-year 

costs? Can you provide this information for the record? 

Answer. FDA’s overall plan for food defense aligns with the activities outlined in 

Homeland Security Presidential Directive-9 also known as HSPD–9, which establishes a national policy to defend the food and agriculture system. The directive lays 

out a framework for augmenting the Nation’s food safety protections by identifying 

and prioritizing sector-critical infrastructure and key resources for establishing protection requirements, developing awareness and early warning capabilities to recognize threats, mitigating vulnerabilities at critical production and processing nodes, 

enhancing screening procedures for domestic and imported products, and enhancing 

response and recovery procedures. 

With regard to future activities, the fiscal year 2007 requested funds will be used 

expand the Food Emergency Response Network, also known as FERN, to include 16 

State laboratories, provide grants and technical support to these laboratories, and 

build analytic surge capacity to respond to a terrorist attack. We will also use these 

funds to manage, through the National Program Office, the network and to provide 

training and proficiency testing for FERN laboratories. We will continue Field support for food defense operations, including targeting potentially high-risk imported 

foods through Prior Notice Import Security Reviews based on intelligence, FDA inspection reports, discrepancies in prior notice reporting, and sample collection and 

analysis. 

FDA also will continue laboratory preparedness efforts and valuable short-term 

food defense research projects. Many of the projects undertaken are derived from 

direct interaction with industry following vulnerability assessments. The results of 

these projects can be communicated directly to industry. These efforts will result in 

a better understanding of which interventions work, and which do not, for certain 

agents in specific foods. 

In addition, the fiscal year 2007 requested funds will further joint food defense 

and food safety assignments that will enhance and facilitate the integration of food 

defense with food safety. In these assignments, samples obtained as part of routine 

food safety programs will also be tested in a variety of laboratories for a range of 

select agents that are of most concern. The foods chosen for these assignments are 

generally foods that we have most concern about based on vulnerability assessments. 

Out-year activities will further strengthen our food defense system and advance 

the objectives identified in HSPD–9. 

DRUG EFFICACY STUDY IMPLEMENTATION (DESI) MONOGRAPH SYSTEM

Question. In response to Senate Committee Report language accompanying the 

fiscal year 2005 agriculture appropriations bill, FDA prepared a report on the feasibility of developing a drug monograph system for older prescription drugs that have 

been marketed for a material extent and material amount of time without documented safety problems. In this report, FDA stated that a monograph system would 

be scientifically infeasible and cost prohibitive. However, FDA did not propose an 

alternate solution to this monograph system. 

The Senate Committee Report to accompany the fiscal year 2006 Agriculture appropriations bill requested a second report asking FDA to propose an alternate approach that provides for the uniform and transparent regulation of these products. 

What is the status of this report? 

Answer. FDA is working on this report and hopes to submit it to Congress this 

summer. 

Question. Has FDA developed an alternate method as requested in the report language? 

Answer. The agency is working on its approach to the regulation of these products 

and plans to discuss alternatives in our report to the subcommittee. 
256 

MEDICAL IMAGING DRUGS

Question. Since FDA terminated the Medical Imaging Drugs Advisory Committee 

in 2002, FDA has tried to fill the gap in medical imaging expertise by retaining experts as special government employees and appointing them on an ad hoc basis to 

meetings of a standing advisory committee when a medical imaging product or issue 

needs advisory committee review. I understand that at the last advisory committee 

meeting to consider a medical imaging product, which was held in March 2005, FDA 

appointed three medical imaging drug experts to a standing panel of 17 experts. In 

light of the increasingly important role of medical imaging drugs and medical imaging biomarkers under FDA’s Critical Path initiative, I am interested in FDA’s ability to get the necessary medical imaging expertise on these panels. How many medical imaging experts has FDA retained as special government employees? 

Answer. Currently, FDA has a list of 89 special government employees, or SGEs, 

with medical imaging expertise who may be requested to participate in regulatory 

activities, including FDA drug advisory committee and device panel discussions. The 

89 SGEs includes 72 members of various Medical Devices Advisory Committees and 

consultants. These SGEs are also accessible for drug review consultation. 

Question. What is FDA doing to improve the recruitment of medical imaging experts as special government employees? Are there any barriers to such recruitment? 

Answer. The ability of a special governmental employee, or SGE, to assist in FDA 

activities varies considerably, based predominantly upon competing SGE commitments and timelines. Hence, FDA is actively recruiting additional SGEs via interactions with professional societies and visiting professor lecture activities. Barriers 

to SGE recruitment relate to conflict of interest considerations and the limited reimbursements to SGEs. 

Question. How many medical imaging expert special government employees does 

FDA intend to hire in the future? 

Answer. FDA is currently processing materials for 12 medical imaging experts as 

potential special government employees. When vacancies are imminent on Medical 

Devices Advisory Committees, FDA requests professional society assistance in obtaining voluntary applicants. 

COLOR CERTIFICATION

Question. The fiscal year 2007 budget request includes an increase in current law user fees of $180,000 for the Color Certification Program. Please explain this increase. Answer. As in previous years, FDA estimates that an increase of 3 percent in 

poundage will be submitted for color certification in fiscal year 2007 over fiscal year 

2006. This will generate an estimated $180,000 in additional color certification revenue and is not related to any rate increase for the Color Certification Program. 

Question. In April 2005, FDA increased the color certification fee through an interim final rule, with no opportunity for comment from industry. FDA has stated 

this was necessary in order to ensure that the fund was not depleted. At the same 

time, FDA stressed the need to keep adequate reserves in order to ensure adequate 

levels of funding. Given that FDA has worked to ensure an adequate reserve fund, 

would it be possible for FDA to seek public comment in advance of any future color 

certification fee increase? 

Answer. Historically, solicitation of public comment has not been deemed a prerequisite for increasing color certification fees. As required under the Federal Food, 

Drug, and Cosmetic Act, also known as the FD&C Act, Section 721(e), the fees assessed for color certification reflect those costs necessary to provide, maintain, and 

equip an adequate service for such purposes. Section 721(e) does not provide for notice-and-comment rulemaking for assessing or increasing fees. Since passage of the 

1938 FD&C Act, FDA increased the color certification fees several times, most recently in 1963, 1982, 1994 and 2005. FDA stated, in the March 29, 2005 interim 

final rule, that the fee modification is necessary because of a general increase in 

all costs of operating the certification program. In the interim final rule, FDA found 

under 5 U.S.C. 553(b)(B) and 21 CFR 10.40(e) that providing for public comment 

before establishing the fees, and for revising the basis for calculating the fees, is 

contrary to the public interest. Despite this finding, the agency stated in the interim 

final rule that it invited and would consider public comments on the requirements 

in the rule. The interim final rule became effective on April 28, 2005, and FDA requested comments by May 31, 2005. Comments, as well as a request for a stay of 

the effective date and a citizen petition, were submitted to the docket and are under 

consideration. 

Question. Has FDA taken any steps to make the color certification fees and program expenses more transparent? 
257 

Answer. FDA’s Office of Financial Management, also known as OFM, occasionally 

submits certification fund updates to industry representatives; this information is 

always provided to industry representatives upon request. OFM maintains detailed 

accounting records of color certification expenditures and other related non-proprietary information. These statements include expenditure reports, status of funds reports, and projected yearly estimates for the various allowances within the Color 

Certification program. 

Question. Please provide a list of anticipated equipment needs, including estimated costs, necessary to maintain adequate service for certification of batches of 

color additives. 

Answer. I would be happy to provide that information for the record. 

[The information follows:] 

COLOR CERTIFICATION PROGRAM—ANTICIPATED EQUIPMENT NEEDS AND RELATED COSTS— 

FISCAL YEAR 2007-FISCAL YEAR 2009 

Item Description Estimated Cost 

(per three years) 

Maintenance contract for computer database.Certification operating system and web-based industry interface.$300,000 

Maintenance contracts for large equipment.High-performance liquid chromatographs (approximately 21 

systems).

250,000 

Liquid chromatograph/mass selective detector ......................... 25,000 

X-ray fluorescence spectrometer ................................................ 60,000 

Atomic absorption spectrometer ................................................. 30,000 

Ion chromatograph ...................................................................... 16,500 

Microwave digestion and ashing systems ................................. 15,000 

Replacement parts for equipment ............ X-ray fluorescence spectrometer (x-ray tubes, sample changer 

parts, helium/vacuum switch).

75,000 

Atomic absorption spectrometer (furnace tubes, lamps) .......... 30,000 

Microwave digestion and ashing systems (parts, crucibles) .... 7,500 

Shatterbox (grinding tools) ......................................................... 5,000 

Pellet press (press tools) ............................................................ 2,500 

Anticipated new large equipment ............. High-performance liquid chromatographs (expect to purchase 

two annually).

460,000 

X-ray fluorescence spectrometer ................................................ 350,000 

Liquid chromatograph/mass selective detector ......................... 120,000 

Ion chromatograph ...................................................................... 10,000 

Preparative high-performance liquid chromatograph ................ 45,000 

Flash preparative chromatograph .............................................. 25,000 

Automatic titrator ....................................................................... 17,000 

Microwave ashing system ........................................................... 20,000 

Fusion machine and platinum ware .......................................... 50,000 

Freeze drier ................................................................................. 15,000 

Microwave synthesizer ................................................................ 20,000 

Uninterruptible power supply ...................................................... 30,000 

Reaction system .......................................................................... 20,000 

Anticipated new small equipment ............ Analytical balances (5), top-loading balances, lab computers, 

spectrophotometers, fluorescence detector, moisture analyzer, centrifuge rotor, digital camera.

250,000 

Hazardous waste disposal ........................ Disposal of chemical waste ....................................................... 300,000 

Stockroom contract .................................... Reagents, glassware, misc. lab supplies .................................. 330,000 

Misc. purchases ........................................ Computer software, reagents, misc. lab supplies ..................... 400,000 

Total ............................................. ..................................................................................................... 3,278,500 

Question. What is the anticipated timeframe for these equipment needs? 

Answer. Certification requirements are assessed in 3 year cycles. FDA’s anticipated timeframe for these equipment needs is 3 years. 

FOOD CONTACT SUBSTANCES

Question. Since its implementation 6 years ago, the Food Contact Notification program has been successful. I understand that the Food Contact Notification program 

requires less FDA resources than the previously used Food Additive Petition process 

because the FCN program does not require the Agency to follow Notice and Comment Procedures and promulgate a new regulation. In addition, the clearance of a 
258 

new material under the Food Additive Petition program typically took 2 to 4 years, 

but the Notification program only takes 4 months. The success of the program has 

led to the clearance of over 500 new types of packaging materials. 

If the FCN program is more efficient, why would FDA seek to eliminate the program and return to promulgating regulations, and how does FDA plan to accomplish 

its statutory mandate under the food additive petition process when it does not seek 

to add additional resources to handle these submissions? 

Answer. The Food Contact Notification, also known as FCN, program has been 

very successful. Under the FCN program, if FDA does not object within the 120- 

day review period, a company can legally market its product. To date, FDA has always met the 120-day deadline. In contrast, under the Food Additive Petition, also 

known as FAP, program, the petitioned food contact substance cannot lawfully be 

marketed until a regulation is published by FDA. Reverting to the FAP process for 

food contact substances will not have an adverse impact on the public health because these substances cannot be marketed until FDA completes a full safety review 

of each substance. Prior to the implementation of the FCN program, FDA had implemented many changes to the FAP process and had made significant progress in 

streamlining the review of food additive petitions. Although FDA does not expect to 

be able to meet its statutory mandate of publishing a decision on a petition within 

180 days of filing, we will continue our efforts to streamline the petition review 

process and to reach decisions in a timely manner. 

Question. What is FDA’s assessment of the impact that the elimination of the 

FCN program will have on packaging innovation and on public health? 

Answer. Elimination of the FCN program will not have a significant adverse impact on the public health because pre-market approval of food contact substances 

will still be required and food contact substances will still have to meet the same 

safety standard so that unsafe food contact substances do not reach the market. As 

in the past, petitions in which the subject additive is intended to have an impact 

on the public health, for example reducing pathogens on food, will be prioritized and 

expedited through the review and administrative process. Thus any impact on public health will be minimal. 

NEW DRUG APPLICATIONS

Question. On February 13, 2006, the Justice Department, on behalf of FDA, represented to the U.S. District Court for the District of Columbia that the Omnitrope 

New Drug Application, which was submitted in fiscal year 2003, is still undergoing 

active review by the Agency. However, in the FDA’s fiscal year 2007 budget submission the Agency reported that, for NDA submissions during fiscal year 2003, which 

would include this application, FDA reviewed and acted on ‘‘100 percent of 82’’ fiscal 

year 2003 NDA submissions by the end of fiscal year 2004. Please explain this apparent discrepancy. Was action completed on all NDAs or are there submissions 

from fiscal year 2003 still under review? 

Answer. As FDA described in an August 2004 letter to the sponsor of the 

Omnitrope NDA, the reviewing division had completed its review of the information 

in the NDA. However, because the agency was considering related scientific and 

legal issues in its review of pending citizen petitions, and scientific considerations 

related to the approval of products like Omnitrope were to be the subject of a series 

of public meetings, FDA was not ready to make an approval decision on the application. The agency deferred a decision on the Omnitrope NDA until the agency knew 

whether the data in the NDA was sufficient for approval and, if not, what additional 

substantive information and data might be necessary to support approval. The letter 

identified what additional steps had to be completed before the agency could inform 

the sponsor of the actions necessary to place the Omnitrope NDA in condition for 

approval. Therefore, it was considered an action in accordance with the PDUFA performance goals. All fiscal year 2003 NDA submissions have been completed and 

final performance has been reported. 

SUNSCREEN MONOGRAPHS

Question. The statement of managers accompanying the fiscal year 2006 conference report directed FDA to issue a comprehensive final monograph for labeling 

over-the-counter sunscreen products, including UVA and UVB labeling requirements, by May 10, 2006. Please describe the status of FDA’s efforts or plans to finalize the sunscreen labeling guidelines by this deadline. 

Answer. We are currently working on a rulemaking for OTC sunscreen drug products to address both UVA and UVB labeling requirements. We are currently working to publish the document for this rulemaking in the Federal Register. 
259 

QUESTIONS SUBMITTED BY SENATOR MITCH MCCONNELL

NATIONAL INSTITUTE FOR PHARMACEUTICAL TECHNOLOGY AND EDUCATION

Question. In June 2005 the Center for Drug Evaluation and Research’s Office of 

Pharmaceutical Science within the Food and Drug Administration (FDA) signed a 

Memorandum of Agreement with the National Institute for Pharmaceutical Technology and Education (NIPTE). The University of Kentucky (UK) is a member of 

NIPTE. 

As the FDA considers funding priorities for fiscal year 2007, I am interested in 

answers to the following questions raised by NIPTE and UK. 

The Memorandum of Agreement expresses the FDA’s desire to collaborate with 

NIPTE on issues related to pharmaceutical development, manufacturing practices 

and technologies. 

To date, what interaction has the FDA had with NIPTE? 

Answer. FDA has had some preliminary discussions with NIPTE about issues of 

mutual interest. NIPTE has expressed concerns about the level of products failing 

during development. 

Question. NIPTE has concerns that product failure during development is often 

related to the transition from a laboratory prototype to final product. They have expressed concerns that the limited amount of research into these failures causes production technology to lag behind efforts to discover new compounds. 

Do you anticipate that the relationship between FDA and NIPTE will promote a 

more efficient therapy development and production process and if so, how? 

Answer. It is not possible to determine, at this time, the outcome of any interactions with NIPTE. FDA works with many academic institutions and other interested parties on pharmaceutical development and manufacturing research to support FDA policy relating to Process Analytical Technologies product applications. 

Question. The FDA’s stated goal of the Critical Path to New Medical Products initiative is to modernize the scientific process through which drugs and other treatments are transformed from ‘‘proof of concept’’ into medical products. 

How can the FDA take advantage of the infrastructure and resources of NIPTE’s 

member institutions to promote the goals of the Critical Path initiative? 

Answer. We expect the new manufacturing science created through CDER’s contract with NIPTE to promote manufacturing process improvements as part of the 

Critical Path Initiative. It is not possible to determine, at this time, whether FDA 

can take further advantage of infrastructure and resources at NIPTE. FDA believes 

that the best way to advance the goals of Critical Path is to stimulate broad-based 

efforts that advance the goals of this initiative. 

QUESTIONS SUBMITTED BY SENATOR SAM BROWNBACK

CLINICAL TRIALS

Question. I understand the FDA has regulatory authority to utilize a number of 

various controls to determine efficacy in the clinical trials process, which include the 

use of historical controls and placebo controls. 

Is the FDA considering increasing the frequency of approval for study designs involving historical controls or even Bayesian statistics? 

Answer. FDA is actively considering, under its critical path initiative, a variety 

of study designs, methods of analysis, and uses of data from other studies to improve decision making and the rate of success of studies. Although FDA does not 

approve study designs, we do discuss with sponsors whether we are likely to consider a particular design as representing an adequate and well-controlled study that 

could support approval under the Federal Food, Drug, and Cosmetic Act. The appropriate use and applicability of historical controls in which treatment of a group of 

patients is compared to well-documented experience from other studies is considered 

in detail in the ICH guidance E–10 known as the Choice of Control Group and Related Issues in Clinical Trials. FDA’s regulations at 21 CFR 314.126, state that historical controls can be an acceptable kind of ‘‘adequate and well-controlled study,’’ 

but only in special circumstances, such as studies of diseases with high and predictable mortality. Such controls are regularly used now, for example, in accelerated approvals of anti-cancer drugs based on tumor response rates. See 21 CFR 314.500. 

It is possible, and is worth studying, particularly for rare diseases, that better documentation of the natural history of diseases will provide a basis for wider use of 

historically controlled trials. With regard to medical devices, FDA’s regulations at 

21 CFR 860.7, allow for a wide variety of valid scientific evidence for premarket approval applications, including historical controls, where appropriate. 
260 

FDA has viewed Bayesian approaches as an alternative method in the design and 

evaluation of clinical studies. The frequency of use of such an approach is related 

to the medical product itself, the sponsor, the target population, and many other factors. Although FDA would consider the use of Bayesian statistics, few drug sponsors 

propose such designs. In May 2004, in an effort to emphasize our willingness to examine such designs, FDA and Johns Hopkins University jointly sponsored a very 

well-attended workshop for industry, academia, and government entitled, ‘‘Can 

Bayesian Approaches to Studying New Treatments Improve Regulatory DecisionMaking?’’ The Center for Devices and Radiological Health has accepted designs involving Bayesian statistics since 1998, and there has been an increase in the frequency of investigational device exemptions that use Bayesian design and plan appropriate analyses. 

Question. Please list the number of cancer drugs for which the FDA approved a 

study design that included a placebo-controlled trial, over the past 4 year period. 

Answer. FDA does not ‘‘approve’’ study designs or protocols. Companies generally 

develop an overall drug development strategy, including specific protocols, to seek 

registration or approval in multiple countries such as the European Union, Japan, 

Switzerland, Canada, and Australia. FDA reviews, but does not approve these protocols. 

In cancer settings, the term placebo-controlled is a misnomer. It is very rare for 

a cancer patient to only receive a placebo. Whenever possible, FDA encourages use 

of another available therapy as an active-control rather than a placebo. In situations 

where an active-control study cannot be conducted, FDA seeks to ensure that all patients receive best supportive care in addition to the test-article or placebo to which 

they are randomized. 

Question. Please describe the process by which a cancer patient who has exhausted all other treatment options can gain access to a drug that has shown efficacy in an earlier stage of the clinical trials process. 

Answer. The FDA has a long-standing commitment to desperately ill patients, including patients with cancer, to facilitate the availability of promising new drugs 

during the drug development process, when promising drugs are being studied, but 

are not yet approved for marketing. FDA’s statute and regulations enable a patient 

suffering from a serious or immediately life threatening disease for whom no comparable or satisfactory alternative drug or other therapy is available to get access 

to a promising investigational drug. FDA is developing regulations to further clarify 

and publicize the expanded access mechanisms for such treatment use of investigational new drugs, in the belief that such new regulations will increase the awareness of and participation in expanded access programs. However, it should be noted 

that FDA does not have authority to compel a sponsor to make an investigational 

new drug available for treatment use. 

In December 2003, FDA submitted to Congress its report on Patient Access to 

New Therapeutic Agents for Pediatric Cancer. This report includes how patients can 

access investigational drugs under current rules. I would be happy to provide for 

the record, the section of the report that describes our current system. 

[The information follows:] 

EXISTING PROGRAMS

Access Outside of Clinical Trials 

It is not always possible for all patients who want access to investigational drugs 

to enroll in clinical trials. Patients may not meet eligibility criteria or may be geographically isolated from a study site. It may be difficult to find an ongoing trial 

for a particular type and stage of cancer. In these situations, FDA and NCI believe 

that it is appropriate to help make certain promising, but as yet unproven, products 

available outside of a clinical trial (non-protocol) to patients with cancer as well as 

other serious and life-threatening illnesses. Non-protocol investigational therapy 

should be offered in a way that does not pose an unreasonable risk to the patient 

or an unreasonable risk of losing valuable information about the effect of the drug. 

For these reasons, although treatment is focused on the individual patient, a study 

plan (protocol) may be written to ensure that the treatment is administered appropriately and that patients are monitored for toxicity. The programs available 

through both agencies are discussed below. It is important to note that a pharmaceutical manufacturer must first agree to provide the requested product for a nonprotocol investigational therapy to begin. NCI and FDA cannot mandate that the 

requested products be supplied to these programs; the agencies can only review and 

approve proposals to use them. 
261 

FDA Programs for Non-protocol Access 

FDA programs that permit non-protocol access to investigational agents for patients with serious or life-threatening disease include the single patient IND, the 

emergency IND, and the Treatment IND (sometimes informally referred to as an expanded access protocol). The lay public frequently refers to these programs as compassionate use, although the term compassionate use does not appear in FDA regulations. Single patient or emergency INDs refer to a treatment program for a single 

individual. Treatment IND refers to a single study plan used to treat multiple patients. 

Single Patient IND Submissions 

Single-patient IND submissions can represent entirely new uses for a drug or exceptions to an ongoing clinical trial protocol for a patient who does not meet protocol 

entry criteria. Single patient IND requests can be submitted as amendments to an 

existing IND or as an entirely new IND. They can be submitted by a drug manufacturer (usually amending an existing IND) or by an individual physician, following 

usual procedures for IND filing, including IRB review and informed consent. If the 

need for treatment is urgent and does not allow time for submission of an IND, an 

emergency IND can be obtained allowing FDA to authorize shipment of a drug for 

the specified use before the IND is submitted (21 CFR 312.36). The IND should then 

be submitted as soon as possible after receiving authorization. As with all INDs, 

both mechanisms require adverse event reporting and an annual summary to be 

submitted to FDA. 

Treatment IND 

Treatment IND study plans ‘‘facilitate the availability of promising new drugs to 

desperately ill patients as early in the drug development process as possible, before 

general marketing begins, and obtain additional data on the drug’s safety and effectiveness’’ (21 CFR 312.34). Certain criteria must be met for a drug to be considered 

for approval in a Treatment IND,1 including: 

—The patients’ disease must be serious or life-threatening. 

—No comparable or satisfactory treatment is available to the target population of 

patients. 

—The drug is in clinical trials (generally Phase 3 and not ordinarily prior to 

Phase 2). 

—The sponsor of the clinical trials is actively pursuing marketing of the drug. 

FDA may refuse the request if: 

—For a serious disease, sufficient evidence of safety and potential efficacy is not 

provided to support use of the drug to treat it. 

—For a life-threatening disease, available scientific evidence does not provide a 

reasonable basis for concluding that the drug may be effective and would not 

expose patients to serious additional risk of illness or injury. 

The same safeguards and reporting requirements that apply to any IND study 

apply to a Treatment IND, including IRB approval. The study plan must contain 

a rationale for the use of the investigational drug, as well as a list of what available 

regimens should be tried prior to its use, or an explanation of why the use of the 

investigational drug is preferable to the use of available marketed treatments. 

NCI Programs for Non-protocol Access 

At NCI, Special Exception and Group C protocols provide access to investigational 

agents for those patients unable to participate in a clinical trial. 

Special Exception 

The Special Exception is comparable to the single patient IND, but investigators 

may obtain investigational agents directly from NCI using NCI’s Special Exception 

mechanism instead of filing a new IND with FDA. NCI does not grant these requests for drugs in Phase 1 development, because NCI requires some demonstration 

of efficacy before permitting individual treatment. The written policy for this program requires objective evidence that the investigational agent is active in the disease for which the request is being made. 

Anecdotal reports or reports that show low response rates or responses of brief 

duration are not sufficient to justify approval of the request. Patients must be ineligible for ongoing research protocols and must have received standard therapies. 

Group C 

Group C designation is an expanded access program similar to a Treatment IND 

that allows broadened access to investigational agents with reproducible activity in 

one or more specific tumor types. An agent must alter or be likely to alter the pattern of treatment of the disease, and properly trained physicians without specialized 
262 

supportive care facilities must be able to administer the agent safely. For an agent 

that meets this definition, CTEP may submit a formal application to FDA to authorize distribution of the agent (Group C distribution) by NCI for the specific indication 

described in the application. This application is not a marketing application, and 

FDA approval of a Group C protocol does not replace an FDA conclusion that the 

drug is safe and effective. The study plan must contain the indication, dosage, precautions, warnings, known adverse events of the product, and an informed consent 

form. Approval of the Group C protocol carries the obligation of the usual safety reporting requirements. This mechanism is used only with agents for which activity 

is sufficiently established and for which a New Drug Application (NDA) or Biological 

Licensing Application (BLA) approval is considered likely in the relatively near future. 

QUESTIONS SUBMITTED BY SENATOR HERB KOHL

FIELD STAFF

Question. We discussed earlier the decrease in FDA field force, and I was told that 

this was a result of the streamlining of the FDA inspection process, and would not 

result in fewer, or less effective, inspections. 

Please provide specific numbers of inspections that are scheduled to take place by 

all FDA field staff members in fiscal year 2007. Please organize these into the types 

of inspections FDA performs—for example, inspections of feed manufacturers, ports, 

food manufacturers, drug companies, overseas companies, etc. How do each of these 

numbers compare to fiscal year 2006 and 2005 levels? 

Answer. I will be happy to provide a table that lists activities, by type of inspections, for fiscal years 2005, 2006, and 2007 for the record. Traditionally, that information is captured in a table entitled, ‘‘Combined Field Activities—ORA Program 

Activity Data’’ that appears in the published fiscal year 2007 FDA Congressional 

Justification, pages 272–277. 

[That information follows:] 

COMBINED FIELD ACTIVITIES—ORA PROGRAM ACTIVITY DATA 

Fiscal year 2005 actual Fiscal year 2006 estimate Fiscal year 2007 estimate 

FOODS FIELD 

Program Outputs—Domestic Inspections: 

Domestic Food Safety Program Inspections ..................................... 4,573 3,400 3,400 

Imported and Domestic Cheese Program Inspections ..................... 477 400 400 

Domestic Low Acid Canned Foods/Acidified Foods Inspections ....... 481 400 400 

Domestic Fish & Fishery Products (HACCP) Inspections ................. 2,467 2,480 2,480 

Import (Seafood Program Including HACCP) Inspections ................ 500 500 500 

Juice HACCP Inspection Program (HACCP) ....................................... 490 375 375 

Interstate Travel Sanitation (ITS) Inspections .................................. 1,510 1,700 1,700 

State Contract Food Safety (Non HACCP) Inspections ..................... 6,992 8,130 8,130 

State Contract Domestic Seafood HACCP Inspections ..................... 953 1,135 1,135 

State Contract Juice HAACP ............................................................. 35 35 

State Partnership Inspections .......................................................... 1,284 1,300 1,300 

Total Above FDA and State Contract Inspections ........................ 19,774 19,855 19,855 

Total Domestic Reinspections (Non-add) ..................................... 523 523 523 

State Contract and Grant Foods Funding ........................................ $6,825,000 $7,100,000 $6,940,000 

Number of FERN State Laboratories ................................................. 8 10 16 

Annual FERN State Cooperative Agreements/Operations ................. $12,270,000 $7,037,000 $12,236,000 

Total State & Annual FERN Funding ........................................... $19,095,000 $14,137,000 $19,176,000 

Domestic Field Exams/Tests ............................................................. 3,528 5,000 5,000 

Domestic Laboratory Samples Analyzed ........................................... 15,390 11,425 9,425 

All Foreign Inspections ..................................................................... 129 200 100 

Total Foreign Reinspections (Non-add) ........................................ 15 15 15 
263 

COMBINED FIELD ACTIVITIES—ORA PROGRAM ACTIVITY DATA—Continued 

Fiscal year 2005 

actual 

Fiscal year 2006 

estimate 

Fiscal year 2007 

estimate 

Import Field Exams/Tests ................................................................. 84,997 75,000 71,000 

Import Laboratory Samples Analyzed ............................................... 25,549 31,600 29,600 

Import Physical Exam Subtotal ........................................................ 110,546 106,600 100,600 

Import Line Decisions ....................................................................... 8,672,168 10,059,715 11,669,269 

Percent of Import Lines Physically Examined .................................. 1.27 1.06 0.86 

Prior Notice Security Import Reviews (Bioterrorism Act mandate) .. 86,187 45,000 60,000 

COSMETICS FIELD 

Program Outputs—Domestic Inspections: 

All Inspections .................................................................................. 138 100 100 

Total Domestic Reinspections (Non-add) ..................................... 7 7 7 

Program Outputs—Import/Foreign Inspections: 

Import Field Exams/Tests ................................................................. 1,983 2,000 2,000 

Import Laboratory Samples Analyzed ............................................... 241 200 200 

Import Physical Exam Subtotal .................................................... 2,224 2,200 2,200 

Import Line Decisions ....................................................................... 1,146,049 1,398,180 1,705,779 

Percent of Import Lines Physically Examined .............................. 0.19 0.16 0.13 

DRUGS FIELD 

Program Outputs—Domestic Inspections: 

Pre-Approval Inspections (NDA) ........................................................ 149 130 130 

Pre-Approval Inspections (ANDA) ...................................................... 81 135 135 

Bioresearch Monitoring Program Inspections ................................... 562 520 520 

Drug Processing (GMP) Program Inspections ................................... 1,365 1,500 1,440 

Compressed Medical Gas Manufacturers Inspections ..................... 125 155 150 

Adverse Drug Events Project Inspections ......................................... 106 135 135 

OTC Monograph Project Inspections and Health Fraud Project Inspections 1 .................................................................................... 53 11 45 

State Partnership Inspections: Compressed Medical Gas Manufacturers Inspections ......................................................................... 85 110 110 

State Partnership Inspections: GMP Inspections ............................. 57 50 50 

Total Above FDA and State Partnership Inspections ................... 2,594 2,780 2,715 

Total Domestic Reinspections (Non-add) ..................................... 220 220 220 

Domestic Laboratory Samples Analyzed ........................................... 1,446 1,735 1,600 

Programs Outputs—Import/Foreign Inspections: 

Foreign Pre-Approval Inspections (NDA) ........................................... 163 180 180 

Foreign Pre-Approval Inspections (ANDA) ......................................... 77 60 60 

Foreign Bioresearch Monitoring Program Inspections ...................... 85 65 65 

Foreign Drug Processing (GMP) Program Inspections ...................... 217 195 195 

Foreign Adverse Drug Events Project Inspections ............................ 10 25 25 

Total Above Foreign FDA Inspections ........................................... 52 525 525 

Total Foreign Reinspections (Non-add) ........................................ 17 17 17 

Import Field Exams/Tests ................................................................. 4,288 4,400 4,400 

Import Laboratory Samples Analyzed ............................................... 1,045 355 300 

Import Physical Exam Subtotal ........................................................ 5,333 4,755 4,700 

Import Line Decisions ....................................................................... 264,559 317,471 380,965 

Percent of Import Lines Physically Examined .................................. 2.01 1.50 1.23 
264 

COMBINED FIELD ACTIVITIES—ORA PROGRAM ACTIVITY DATA—Continued 

Fiscal year 2005 

actual 

Fiscal year 2006 

estimate 

Fiscal year 2007 

estimate 

BIOLOGICS FIELD 

Program Outputs—Domestic Inspections: 

Bioresearch Monitoring Program Inspections ................................... 121 156 156 

Blood Bank Inspections .................................................................... 1,439 1,130 1,070 

Source Plasma Inspections ............................................................... 188 165 160 

Pre-License, Pre-Approval (Pre-Market) Inspections ........................ 3 10 10 

GMP Inspections ............................................................................... 42 36 36 

GMP (Device) Inspections ................................................................. 14 35 35 

Human Tissue Inspections ................................................................ 270 250 325 

Total Above Domestic Inspections ............................................... 2,077 1,782 1,792 

Total Domestic Reinspections (Non-add) ..................................... 50 50 50 

Program Outputs—Import/Foreign Inspections: 

Blood Bank Inspections .................................................................... 16 24 24 

Pre-License Inspections .................................................................... 6 ........................ ........................

GMP Inspections ............................................................................... 15 24 17 

Total Above Foreign FDA Inspections ........................................... 37 48 41 

Total Foreign Reinspections (Non-add) ........................................ 4 4 4 

Import Field Exams/Tests 1 .............................................................. 143 100 100 

Import Line Decisions ....................................................................... 39,979 44,377 49,258 

Percent of Import Lines Physically Examined .................................. 0.36 0.23 0.20 

ANIMAL DRUGS & FEEDS FIELD 

Program Outputs—Domestic Inspections 

Pre-Approval/BIMO Inspections ......................................................... 72 140 110 

Drug Process and New ADF Program Inspections ............................ 230 210 210 

BSE Inspections ................................................................................ 3,025 3,760 3,760 

Feed Contaminant Inspections ......................................................... 3 15 15 

Illegal Tissue Residue Program Inspections .................................... 203 245 245 

Feed Manufacturing Program Inspections ........................................ 369 240 40 

State Contract Inspections: BSE ...................................................... 3,309 4,562 4,562 

State Contract Inspections: Feed Manufacturers ............................. 457 347 347 

State Contract Inspections: Illegal Tissue Residue ......................... 370 750 600 

State Partnership Inspections: BSE and Other ................................ 988 900 900 

Total Above FDA and State Contract Inspections ........................ 9,036 11,169 10,789 

Total Domestic Reinspections (Non-add) ..................................... 173 173 173 

State Animal Drugs/Feeds Funding .................................................. $1,300,000 $1,700,600 $1,800,000 

BSE Grant Increase ........................................................................... $3,000,000 $3,000,000 $3,000,000 

State Contract for Tissue Residue ................................................... $220,000 $220,000 $210,000 

Total State Funding ...................................................................... $4,520,000 $4,920,600 $5,010,000 

Domestic Laboratory Samples Analyzed ........................................... 1,841 1,770 1,730 

Programs Outputs—Import/Foreign Inspections: 

Foreign Pre-Approval/Bioresearch Monitoring Program Inspec 

tions .............................................................................................. 26 45 45 

Foreign Drug Processing and New ADF Program Inspections .......... 12 10 10 

Total Above Foreign FDA Inspections ........................................... 38 55 55 

Total Foreign Reinspections (Non-add) ........................................ 3 3 3 

Import Field Exams/Tests ................................................................. 4,298 4,500 4,500 
265 

COMBINED FIELD ACTIVITIES—ORA PROGRAM ACTIVITY DATA—Continued 

Fiscal year 2005 actual Fiscal year 2006 estimate Fiscal year 2007 estimate 

Import Laboratory Samples Analyzed ............................................... 753 1,120 900 

Import Physical Exam Subtotal ........................................................ 5,051 5,620 5,400 

Import Line Decisions ....................................................................... 212,254 235,602 261,518 

Percent of Import Lines Physically Examined .................................. 2.38 2.39 2.06 

DEVICES FIELD 

Programs Outputs—Domestic Inspections: 

Bioresearch Monitoring Program Inspections ................................... 329 300 300 

Pre-Approval Inspections .................................................................. 64 130 130 

Post-Market Audit Inspections .......................................................... 63 65 65 

GMP Inspections (Levels I, II, III and Accredited Persons) .............. 1,430 1,530 1,530 

Total Above Domestic Inspections: Non MQSA ............................ 1,886 2,025 2,025 

Inspections (MQSA) FDA Domestic (non-VHA) .................................. 366 335 371 

Inspections (MQSA) FDA Domestic (VHA) ......................................... 32 32 32 

Inspections (MQSA) by State Contract ............................................. 8,340 7,924 7,700 

Inspections (MQSA) by State non-Contract ...................................... 545 530 530 

Total Above Domestic Inspections: MQSA .................................... 9,283 8,821 8,633 

Total Domestic Reinspections (Non-add) ..................................... 237 237 237 

State Contract Devices Funding ....................................................... $1,350,000 $250,000 $275,000 

State Contract Mammography Funding ............................................ $9,800,000 $9,200,000 $9,940,000 

Total State Funding ...................................................................... $11,150,000 $9,450,000 $10,215,000 

Domestic Radiological Health Inspections ....................................... 107 130 130 

Domestic Field Exams/Tests ............................................................. 944 1,215 1,215 

Domestic Laboratory Samples Analyzed ........................................... 200 217 217 

Programs Outputs—Import/Foreign Inspections: 

Foreign Bioresearch Monitoring Inspections ..................................... 6 10 10 

Foreign Pre-Approval Inspections ..................................................... 17 34 34 

Foreign Post-Market Audit Inspections ............................................. 26 27 27 

Foreign GMP Inspections .................................................................. 225 207 189 

Foreign MQSA Inspections ................................................................ 16 15 15 

Foreign Radiological Health Inspections .......................................... 9 19 19 

Total Above Foreign FDA Inspections ........................................... 299 312 294 

Total Foreign Reinspections (Non-add) ........................................ 24 24 24 

Import Field Exams/Tests ................................................................. 6,901 5,000 5,000 

Import Laboratory Samples Analyzed ............................................... 1,333 1,440 1,440 

Import Physical Exam Subtotal ........................................................ 8,234 6,440 6,440 

Import Line Decisions ....................................................................... 3,484,393 4,460,023 5,708,829 

Percent of Import Lines Physically Examined .................................. 0.24 0.14 0.11 

1 The OTC Monograph and Health Fraud Inspections will no longer be planned separately in fiscal year 2006. 

AVIAN FLU

Question. Is there any vaccine currently available that would protect humans 

from the H5N1 flu virus? How much? Please include experimental and approved, 

and explain the difference, and how the distribution would occur. 
266 

Answer. There is currently no FDA-approved vaccine available to protect humans 

from the H5N1 influenza virus that currently is circulating in Asia and parts of Europe. However, candidate H5N1 vaccines are in development. 

In 2004, the National Institute of Allergy and Infectious Diseases, or NIAID, 

awarded two contracts for the production and clinical testing of H5N1 vaccines 

based on an H5N1 reference strain produced through reverse genetics. These vaccines are currently under evaluation in clinical trials, under protocols developed 

with FDA input. We have stated that, if provided adequate data, we would be able 

to approve a pandemic influenza strain that is used in an existing licensed vaccine 

process, in an expedited manner and without requiring a new license. Therefore, as 

the results of these studies are submitted to us by licensed manufacturers, we will 

be able to consider them rapidly for approval as supplements to existing vaccine licenses. Currently, unlicensed vaccines made with new technologies or with the addition of adjuvants to stimulate the immune response would require more extensive 

evaluation by FDA as new products. However, we are providing accelerated development and evaluation pathways to help assure the safety and immunogencity of new 

influenza vaccines as efficiently and rapidly as possible. 

To help manufacturers develop pandemic and seasonal influenza vaccines, we recently issued two draft guidances. These guidances provide recommendations on developing the information needed to show safety and effectiveness for new vaccines 

and outline expedited pathways to licensure. Among the issues discussed in the 

guidances are the use of new technologies, such as cell culture, recombinant technologies, and the use of adjuvants, in vaccine development and production. 

To facilitate the availability of pandemic influenza vaccines prior to their licensure, if needed in an emergency, FDA could evaluate the benefit/risk ratio of pandemic influenza vaccines and, where appropriate, make such vaccines available 

under other regulatory mechanisms, including investigational new drug or Emergency Use Authorizations. With regard to vaccine distribution, the Department of 

Health and Human Services, or HHS, has announced procurement for the Strategic 

National Stockpile, also known as SNS, which includes vaccines that could be distributed for use in the event of a potential influenza pandemic. HHS provides oversight of the SNS, including responsibility for procurement and maintenance of vaccines and other medical products to be used in the event of an influenza pandemic 

or other public health emergency. FDA’s role is to provide technical assistance and 

support for HHS efforts regarding the development, procurement, maintenance, and 

deployment of pandemic influenza countermeasures and other medical products held 

in the SNS. 

After consultation with HHS, FDA offers the following information on the status 

of HHS efforts to support the stockpiling and distribution of candidate pandemic 

vaccines. Based on the latest scientific research, which indicates that two 90 

microgram doses of the pre-pandemic H5N1 vaccine will be effective as a course of 

vaccination, HHS has ordered approximately 4 million courses of the vaccine. Of the 

4 million courses, approximately 3.75 million courses have been manufactured, with 

the remaining courses on order. These courses are not being held in the Strategic 

National Stockpile; rather, they are being stored in bulk at cGMP-compliant storage 

facilities of the vaccine manufacturers awaiting instructions for formulation and fill 

finish into final containers. HHS will review clinical results from studies this summer which may indicate that adding adjuvant to the H5N1 vaccine may boost immune response to those who receive the vaccination. Once these results have been 

obtained and all doses are formulated and filled accordingly, they may be distributed to critical workforce groups as needed. Currently plans are for the H5N1 vaccine to reside with the vendor or vaccine manufacturer until deployment. 

Question. Please summarize the FDA’s ability, and timeframe necessary, in order 

to mass-produce vaccines for a human strain of H5N1? 

Answer. FDA is actively engaged in facilitating the efforts of DHHS, manufacturers and other partners to develop and make available influenza vaccines, including 

those for the currently circulating H5N1 strain. While FDA can rapidly evaluate 

and approve the use of a new vaccine strain by a licensed manufacturer, and a new 

vaccine could start to become available within 4 months of its identification, current 

U.S. influenza vaccine manufacturing and the available technologies that support it 

are not adequate to quickly produce enough pandemic vaccine for the U.S. population. Therefore, we are aggressively supporting multiple efforts to increase manufacturing capacity using both new and existing technologies, including antigen sparing vaccines using both aluminum and novel adjuvants, which is a nonspecific simulators of immune response, as well as live attenuated vaccines, and cell-culture 

based and recombinant vaccines, which involves combining DNA from two or more 

sources. FDA scientists work with manufacturers throughout the year to collect information on the capability of new influenza viruses to be used for large-scale pro-
267 

duction of influenza virus vaccines and to provide needed reagents and technical assistance. FDA has initiated annual inspections of licensed influenza vaccine manufacturers to help ensure that manufacturers are in compliance with good manufacturing practices, and to identify and, where possible, prevent problems ahead of 

time, and thus are able to manufacture safe and effective pandemic influenza vaccines in emergent circumstances. 

Increasing the Agency’s capacity to facilitate rapid evaluation, product testing, licensure, and production of vaccines is critical to expanding product availability, assuring timely and expert evaluation of product quality, supporting national preparedness and response capacities for pandemic influenza, and achieving public confidence in vaccine products. The funds requested for fiscal year 2007 are critical to 

achieving our goal of supporting a process whereby manufacturers can produce pandemic influenza vaccine in the shortest possible time to protect the greatest number 

of people, using a vaccine that is safe, effective, and easy to deliver. 

With regard to vaccine production issues, we will use fiscal year 2007 requested 

funds to facilitate HHS and manufacturers’ efforts to increase domestic manufacturing capacity to meet HHS goals, including a stockpile with enough vaccine to vaccinate 20 million people. FDA is supporting the longer term goals of HHS, manufacturers, and other partners to achieve pandemic surge production capacity that 

would make it possible to provide licensed vaccine for the entire U.S. population 

within 6 months of a strain being isolated, using a combination of current egg-based 

and, potentially, new high-volume, rapid response cell-based production. How quickly these goals can be met will in part be dependent on the results of current industry vaccine development programs, mostly assisted by HHS, including ongoing studies of adjuvanted and cell culture vaccines. In 2005, we were able to very rapidly 

facilitate the evaluation and U.S. licensure of an additional annual influenza vaccine, using our accelerated approval process, helping avoid major shortages. We will 

continue to do everything possible to facilitate both the process of vaccine development and the enhancement of manufacturing capacity, and Congress’ support is critical in assuring FDA’s capacity to both prepare for and respond to a pandemic. 

Question. The budget proposes over $55 million for pandemic flu preparedness. 

The very earliest this funding would be available is October 1, but we are hearing 

reports that the virus could arrive here in the United States, at least in birds, and 

potentially in humans, prior to that. 

Do you believe we can afford to wait until the fiscal year 2007 bill to make this 

money available to FDA? If so, why? Would you support adding the additional funding to the pending supplemental in order to make it available more quickly? 

Answer. Thank you for the opportunity to discuss the funding of FDA’s Pandemic 

Preparedness activities. We appreciate your interest in supporting the FDA efforts 

in this initiative. The President’s budget requests in fiscal year 2006 and fiscal year 

2007 were carefully considered with respect to identifying the immediate needs and 

the urgent nature of the overall initiative. The most immediate needs are identified 

in the fiscal year 2006 supplemental request and the fiscal year 2007 request builds 

upon the activities identified in fiscal year 2006. In fiscal year 2006, total enacted 

funding for Pandemic activities is approximately $24.8 million. Included in this 

number is the fiscal year 2006 $20 million supplemental increase and approximately 

$4.8 million in base spending. The $20 million supplemental was received at the end 

of the first quarter of fiscal year 2006 and the funds were available on January 26, 

2006. 

The fiscal year 2007 total funding request for Pandemic Preparedness request is 

approximately $55.3 million and includes the $24.8 million from the fiscal year 2006 

that includes the emergency supplemental appropriation and a requested increase 

of $30.5 million over the fiscal year 2006 enacted level for pandemic influenza. We 

would be happy to provide the activities covered under the fiscal year 2006 supplemental request. 

[The information follows:] 
268 
269 

GENERIC DRUGS USER FEES/CITIZEN PETITIONS

Question. I understand that FDA believes it is time to implement a user fee program for generics. The generic drug industry has several criticisms of this idea. One 

is that they will still face many regulatory issues after their drug is approved. Another is that their budget has been chronically under funded—especially in relation 

to dollars spent approving new drugs, even without including user fee money. 

How would you respond to these criticisms? 

Answer. First, FDA has made significant investments to improve the generic drug 

review process with the funds appropriated by Congress. These investments have 

helped lower the median review time by 2 months. FDA has not made any decisions 

concerning a user fee program for generics. Given the existence of user fee programs 

for other product reviews, there have been suggestions that the idea may need to 

be explored, but these suggestions are general comments. There is no commitment 

to propose generic user fees and no formal Administration proposal for a generic 

user fee program. If a proposal is considered, we will certainly consider the concerns 

and criticisms about the proposal from the generic industry. We continue to work 

with the generic industry to address their current concerns with the Office of Generic Drugs. 

Question. Have you begun working on legislation? 

Answer. FDA has not made any decisions concerning a user fee program for 

generics, nor has the Agency begun work on legislation to enact such a program. 

Given the existence of user fee programs for other product reviews, there have been 

suggestions that the idea may need to be explored, but these suggestions are general comments. There is no commitment to propose generic user fees and no formal 

Administration proposal for a generic user fee program. If a proposal is considered, 

we will certainly consider the concerns and criticisms about the proposal from the 

generic industry. We continue to work with the generic industry to address their 

current concerns with the Office of Generic Drugs. 

Question. It has been reported that one cause of unnecessary delays in getting generic drugs on the market are certain citizen petitions. I am aware that FDA is 

working on a study to figure out what the actual effects of these citizen petitions 

are. In last year’s Senate report, we asked for an update on this study—including 

any changes FDA plans to make in the process. I understand that this report is still 

in your clearance process, but can you give us a preview of what we might be provided? 

Answer. The Senate report is currently undergoing final clearance, but I would 

be happy to provide you with an overview of how FDA is addressing potential improvements to the citizen petition process. In response to the significant increase in 

the number of citizen petitions submitted to FDA’s Center for Drug Evaluation and 

Research, CDER, and an increasing backlog of pending petitions, the Center’s Office 

of Regulatory Programs or ORP, initiated an extensive review of CDER’s processes 

for responding to citizen petitions. 

The Office of Generic Drugs has made organizational changes designed to improve 

the citizen petition response process. The office has dedicated a specific group of scientists who will be responsible for addressing citizen petition responses. This organizational change is expected to increase the consistency, quality, and speed of the 

Office of Generic Drug’s input on citizen petition responses. 

ORP is currently undertaking an initial review of its citizen petition process improvement efforts. Although FDA has been implementing changes to its process for 

less than a year, the agency is trying to gather some early data to evaluate whether 

these new processes have been helpful and to examine whether additional improvements might be beneficial. The review and response to citizen petitions, however, 

requires careful and painstaking research, precise writing and editing, and thorough 

legal review to produce a document that is a clear representation of FDA’s scientific 

and legal opinion of what are often very complex issues. This process requires input 

from many agency components. 

In addition, ORP, the Office of Generic Drugs, and the Office of Chief Counsel 

plan to review blocking petitions that have been denied to consider such factors as 

the timing of the petition and the nature and age of the data upon which the petition was based. In some cases, individuals submitted petitions that were very close 

to the date of patent or exclusivity expiration were based on information that was 

readily available well before the petitions were submitted. Where we believe that 

further investigations may be warranted, the agency is considering the option to 

refer the cases to the Federal Trade Commission. 

I would be happy to provide for the record a timeline for our recent activities related to improvements to the citizen petition process. 

[The information follows:] 
270 

Timeline for Improvements to Citizen Petition Process 

Fall of 2004.—ORP convened a process improvement team comprising representatives from ORP, the Office of New Drugs, and the Office of Generic Drugs and consulted with other offices involved in the petition process, such as the Office of Chief 

Counsel, to discuss improvements to the petition process. 

October 2004 to May 2005.—The process improvement group generally met on a 

biweekly basis; sometimes more frequently. The group began by describing the existing process in detail and then looked for areas where FDA could make improvements and achieve efficiency. 

June 2005.—ORP finalized new procedures to improve the citizen petition process 

and began full implementation of process improvements. ORP instituted some of 

these improvements while the meetings to identify improvements were ongoing. 

May and June 2005.—ORP presented process improvement efforts to senior management within CDER and various groups involved in working on citizen petition 

responses. 

Currently.—ORP is documenting its new procedures in a Manual of Policies and 

Procedures, also known as MAPP. 

GENERIC DRUG APPROVAL

Question. I appreciate your response to my letter of February 6th, regarding generic drugs and the FDA strategic redeployment. However, there were some questions that were not answered. 

What additional staffing and funding would be required to decrease the backlog 

of generic drug applications by 1/3 over the next fiscal year? 

Answer. FDA understands that Congress and the public are concerned about the 

high cost of prescription drug products. Generic drugs play an important role in 

granting access to products that will benefit the health of consumers and the government. Prompt approval of generic drug product applications, also known as abbreviated new drug applications, or ANDAs, is imperative to making generic products available to American consumers at the earliest possible date. This has been 

a high priority for FDA. 

FDA believes that making improvements in the process for the review of generic 

drug applications offers the best promise for reducing ANDA review time. Total 

spending on the Generic Drug Program is $64.6 million, which is more than a 66 

percent increase from the comparable fiscal year 2001 amount, and has helped lower 

the median review time. In addition, FDA believes that making improvements in 

the process for the review of generic drug applications offers the best promise for 

reducing ANDA review time. With this goal in mind, in fiscal year 2005, FDA’s Office of Generic Drugs, or OGD, focused on streamlining efforts to improve the efficiency of the ANDA review process. OGD added chemistry and bioequivalence review teams and has taken steps to decrease the likelihood that applications will face 

multiple review cycles. OGD also instituted revisions to the review process such as 

early review of the drug master file as innovator patent and exclusivity periods 

come to an end, cluster reviews of multiple applications, and the early review of 

drug dissolution data. 

In fiscal year 2006, we will build on these process improvements. We have begun 

a major initiative to implement Question-based Review for assessment of chemistry, 

manufacturing, and controls data in ANDAs. This improvement builds on the Quality-by design and risk-based review initiatives of FDA’s Center for Drug Evaluation 

and Research. This mechanism of assessment is consistent with the International 

Conference on Harmonization Common Technical Document and will enhance the 

quality of evaluation, accelerate the approval of generic drug applications, and reduce the need for supplemental applications for manufacturing changes. 

FDA’s OGD will continue institute efficiencies in the review process to accelerate 

the review and approval of ANDAs. FDA will also continue to work very closely with 

the generic manufacturers and the generic drug trade association to educate the industry on how to submit applications that can be reviewed more efficiently and that 

take advantage of electronic efficiencies that speed application review. We will also 

work with new foreign firms entering the generic drug industry. The agency recognizes that it will take time for these new firms to understand the requirements for 

generic drug products. In the long term, however, these efforts should shorten overall approval time and increase the number of ANDAs approved during the first cycle 

of review. In fiscal year 2006, FDA plans to spend $62.8 million relating to generic 

drugs and, specifically, $28.3 million in OGD. In fiscal year 2007, FDA plans to 

spend $64.6 million relating to generic drugs and $29 million in OGD. 

Question. What additional staffing and funding is required to decrease the length 

of time it takes to approve a generic drug application by 25 percent? 
271 

Answer. FDA recognizes that generic drugs play an important role in granting access to products that will benefit the health of consumers and the government. The 

total spending on the Generic Drugs Program is $64.6 million, which is more than 

a 66 percent increase from the comparable fiscal year 2001 amount. This has helped 

lower median drug review time by 2 months. FDA believes that making improvements in the process for the review of generic drug applications offers the best 

promise for reducing Abbreviated New Drug Application, also known as ANDA, review time. With this goal in mind, in fiscal year 2005, FDA’s Office of Generic 

Drugs, or OGD, focused on streamlining efforts to improve the efficiency of the 

ANDA review process. In fiscal year 2006, we will build on these process improvements, including efforts to implement Question-based Review. FDA’s OGD will continue institute efficiencies in the review process to accelerate the review and approval of ANDAs. FDA will also continue to work to educate the industry on how 

to submit applications that can be reviewed more efficiently. We will also work with 

new foreign firms entering the generic drug industry. The agency recognizes that 

it will take time for these new firms to understand the requirements for generic 

drug products. In the long term, however, these efforts should shorten overall approval time and increase the number of ANDAs approved during the first cycle of 

review. 

Question. Please provide the number of new drug applications that have been submitted and approved in each of the last 5 years, including the average timeframe 

for approval. How does this number compare with the number of generic drugs that 

have been submitted and approved? 

Answer. I would be happy to provide that information for the record. 

[The information follows:] 

The following two tables provide a 5-year summary of approval statistics for new 

drugs. Please note: The submissions approved in a particular fiscal year are not necessarily filed in that fiscal year. 
272 

APPROVAL TIMES FOR PRIORITY AND STANDARD NEW DRUG AND BIOLOGIC APPROVALS, NDAS/BLAS FISCAL YEARS 2001 TO 2005—APPROVAL TIMES IN MONTHS 

Fiscal year 

Priority Standard 

Submissions 

Filed Number Approved Mean Approval Time Median Approval Time Submissions Filed Number Approved Mean Approval Time Median Approval Time 

2001 ........................................................................................................ 10 10 7.9 6.0 86 61 17.8 15.0 2002 ........................................................................................................ 12 10 14.3 13.0 84 54 19.4 14.8 2003 ........................................................................................................ 19 14 18.2 6.0 82 72 21.9 13.3 2004 1 ...................................................................................................... 28 19 13.8 9.0 94 74 19.7 12.7 2005 1 ...................................................................................................... 32 27 10.1 6.0 71 82 20.6 12.9 

1 Beginning in fiscal year 2004, CDER figures include BLAs for therapeutic biologic products which were transferred from CBER to CDER. 

APPROVAL TIMES FOR PRIORITY AND STANDARD NEW MOLECULAR ENTITIES, NMES AND NEW BIOLOGICS FISCAL YEARS 2001 TO 2005—APPROVAL TIMES IN MONTHS 

Fiscal Year 

Priority NMEs/New Biologics 1 Standard NMEs/New Biologics 1

Number Filed Number Approved Mean Approval Time Median Approval Time Number Filed Number Approved Mean Approval Time Median Approval Time 

2001 ........................................................................................................ 8 5 8.5 6.0 24 10 24.7 21.9 2002 ........................................................................................................ 8 8 13.7 13.0 14 14 16.4 12.5 2003 ........................................................................................................ 12 8 9.0 6.0 17 13 21.6 22.8 1 2004 ...................................................................................................... 18 13 12.7 6.0 15 14 22.8 19.3 1 2005 ...................................................................................................... 18 17 12.4 6.0 14 10 25.5 23.9 

1 Beginning in fiscal year 2004, CDER figures include BLAs for therapeutic biologic products which were transferred from CBER to CDER. 
273 

The following table provides information regarding generic drug approvals 

APPROVAL TIMES FOR GENERIC DRUG FISCAL YEARS 2001 TO 2005—APPROVAL TIMES IN 

MONTHS 

Fiscal Year Receipts of 

Original ANDAs 

Number of Approvals Mean Approval 

Time 

Median Approval 

Time 

2001 .............................................................................. 307 241 20.9 18.4 

2002 .............................................................................. 361 296 21.4 18.3 

2003 .............................................................................. 449 284 20.7 17.3 

2004 .............................................................................. 563 320 20.5 16.3 

2005 .............................................................................. 766 361 19.5 16.3 

Question. What total funding has been spent annually on approval of new drugs 

for the past 5 years? Please list appropriated funding and user fees separately. 

Answer. I would be happy to provide the amount spent annually on the approval 

of new drugs in the past 5 years for the record. 

[The information follows:] 

FUNDING TOTALS FOR NEW DRUGS 

Amount 

Fiscal year 2001: 

Appropriated Funding .................................................................................................................................. $76,000,000 

User Fees ..................................................................................................................................................... 47,500,000 

Total ........................................................................................................................................................ 123,500,000 

Fiscal year 2002: 

Appropriated Funding .................................................................................................................................. 70,000,000 

User Fees ..................................................................................................................................................... 49,300,000 

Total ........................................................................................................................................................ 119,300,000 

Fiscal year 2003: 

Appropriated Funding .................................................................................................................................. 75,000,000 

User Fees ..................................................................................................................................................... 56,500,000 

Total ........................................................................................................................................................ 131,500,000 

Fiscal year 2004: 

Appropriated Funding .................................................................................................................................. 72,000,000 

User Fees ..................................................................................................................................................... 76,900,000 

Total ........................................................................................................................................................ 148,900,000 

Fiscal year 2005: 

Appropriated Funding .................................................................................................................................. 75,200,000 

User Fees ..................................................................................................................................................... 83,400,000 

Total ........................................................................................................................................................ 158,600,000 

DRUG ADVERTISING

Question. I understand that FDA issued approximately 15 warning letters to drug 

companies regarding advertisements in 2005, an increase from the past several 

years. As we all know, though, the number of drugs ads has also increased. I am 

pleased that drug companies have published guidelines for their ads, and appear to 

be working with the FDA to try to ensure that ads are more responsible and presented fairly. I believe FDA is working on guidance to be published this year to assist drug companies in that effort. 

Can you give us an update on FDA’s activities relating to drug ads? Is it still 

FDA’s position that companies should not be required to submit ads to FDA prior 

to their publication? 

Answer. On November 1 and 2, 2005, the FDA held a two-day public hearing to 

provide an opportunity for broad public participation and comment on direct-to-con-
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sumer, also known as DTC, promotion of regulated medical products, including prescription drugs for humans and animals, vaccines, blood products, and medical devices. FDA is in the process of developing additional guidance for industry. Our 

major effort is a draft guidance to address the presentation of risk information in 

prescription drug and medical device promotion. Another effort is to finalize the 

draft guidance on the brief summary of risk information for the page adjacent to 

direct-to-consumer print advertisements for prescription drugs. FDA will conduct a 

series of three studies to examine the format and content of brief summaries in direct-to-consumer print advertisements to assist the agency in finalizing this draft 

guidance. FDA is also working to finalize the draft guidance on criteria FDA uses 

to distinguish between disease awareness communications and promotional materials, to encourage manufacturers to disseminate educational messages to the public, and the guidance on the manner in which restricted device firms can comply 

with the rules for disclosure of risk information in consumer-directed broadcast advertising for their products. FDA has created a Promotion Steering Committee to 

leverage policy development for prescription drug promotion, including DTC promotion. The committee consists of representatives from the Office of the Commissioner, Office of Chief Counsel, and each center responsible for medical products. 

The committee meets to determine how to best allocate our limited resources for policy development. 

Under current law and regulations, FDA cannot require companies to submit promotion materials prior to use. In addition, there are tens of thousands of promotional pieces per year, prior review, even if authorized, would be a major challenge. 

Question. If legislation were enacted calling for prior approval of prescription drug 

ads before airing, would your agency have adequate personnel and resources to meet 

this mandate? Could you provide us more information on this? 

Answer. The Administration has not established a position on the legislative proposal you describe. The Center for Drug Evaluation and Research receives over 

54,000 pieces per year, of which 9,000 are direct-to-consumer, or DTC. Of the 9,000 

pieces of DTC final materials, only 467 are sent in as proposals. Providing timely 

review of these promotional material would represent a tremendous increase in 

workload and FDA could not conduct timely reviews of these promotional material 

with the resources available. 

FDA feels that it is highly valuable to the public for us to review and provide advice to manufacturers about broadcast advertisements while they are being produced. Therefore, we have made that one of our highest priorities. This helps ensure 

DTC compliance and reduces the number of advertisements that might otherwise 

violate the Food, Drug & Cosmetic Act from appearing in public. 

FOOD DEFENSE

Question. Dr. Von Eschenbach, the past several years have seen huge increases 

for ‘‘food defense’’: $20.5 million in fiscal year 2004, $35.5 million in fiscal year 2005, 

$10 million in fiscal year 2006, and the budget this year proposes an increase of 

nearly $20 million. 

In your written statement, you spend just under two pages discussing what this 

money will buy. FERN Labs, eLexnet systems, and Emergency Operations Networks 

all sound, and I’m sure in fact are, very important, but this is a lot of money, and 

I think we should spend a little more time focusing on it—especially if these increases are coming at the expense of other activities. 

Can you walk us through a scenario that illustrates how this money will be used, 

in a practical way, to prevent or contain an outbreak involving contaminated food 

of drugs? How are we safer now that all of this money has been spent? 

Answer. In one such scenario, a truck driver for a food manufacturing plant introduces a biological, chemical, or radiological agent into truck loads of a byproduct en 

route between the food manufacturing plant and one of several plants that converts 

the byproduct into a usable food ingredient. The food ingredient is distributed nationwide as well as overseas. The ingredient is used in the manufacture of a variety 

of seemingly unrelated food items. Many of these food items are themselves used 

as ingredients in other foods. Consequently, contaminated ingredients from several 

plants would end up in a large number of foods, under a variety of brand names, 

with national distribution. 

Food Emergency Response Network, or FERN, laboratory testing in the scenario 

listed above would likely include finished product testing of foods implicated in 

human illness; and, food of the same lots as those implicated in human illness at 

various points in the production and distribution systems totaling approximately 

100,000 samples for analysis. To fully recover from this scenario or from a terrorist 
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attack or national emergency, FDA would need to conduct recalls, seizures, and/or 

disposal of contaminated food which would then restore confidence in the Nations 

food supply. 

Food Defense funding supports FDA’s five key areas of awareness, prevention, 

preparedness, response, and recovery. FDA strives to increase awareness of the role 

of food as a vehicle for terrorism, various illnesses, and symptoms that are caused 

by foodborne threat agents; and, by educating and coordinating the dissemination 

of information to State and local partners, relevant associations, and industry. With 

Food Defense funding, FDA is able to conduct surveillance, inspectional and sampling programs to monitor manufacturers and their products for the presence of 

threat agents where such an intentional tampering may be found prior to full 

human consumption. FDA studies food prevention technologies to improve the safety 

of food and establish guidelines and or performance standards for industry which 

might prevent the contamination altogether. FDA has worked on method validation 

and matrix extension to strengthen the Nation’s food testing laboratory capability 

in order to be prepared to quickly detect threat agents in the food supply. In addition, the FERN provide response capabilities by rapidly testing large numbers of 

samples of food. The Emergency Operations Network, or EON, is an enhanced communication system that provides seamless information access to all FDA offices, enabling them to respond quickly to the full range of FDA emergencies. 

Question. With regard to the technology we are buying and labs we are outfitting– 

are they flexible? Can they be used for other activities when there are no emergencies? How do they complement or duplicate similar USDA labs? 

Answer. Many of the agents we are concerned about in food defense are also of 

food safety concern. Therefore, the equipment is useful for our routine food safety 

surveillance programs as well as food defense activities. The state Food Emergency 

Response Network, or FERN, Chemistry laboratories that were awarded FDA FERN 

chemistry Cooperative Agreements in fiscal year 2005 are utilizing the equipment 

and resources provided by FDA to increase capability of FERN analytical methods 

and for surveillance of the food supply. Currently, these laboratories are actively engaged in increasing the number of analytes and food commodities that the current 

FERN Chemistry methods can detect. This method validation work not only increases the capabilities of the Cooperative Agreement laboratories but also increases 

the capabilities of the entire FERN Network when the expanded methods are 

shared with all FERN Chemistry laboratories. 

In addition, the Cooperative Agreement laboratories are involved in the surveillance of the food supply through ad hoc analysis of food commodities for Food Defense analytes. These surveillance analyses are based on vulnerability and risk assessments. This surveillance sampling provides a wider food shield and an opportunity to demonstrate and assess the capabilities, capacity, and communication 

within the FERN. Cooperative Agreement laboratories also analyze proficiency test 

samples throughout the year to demonstrate their continuing capability to analyze 

particular food commodities for identified analytes. These proficiency test samples 

build confidence in each laboratory’s ability to find threat agents in a variety of food 

commodities, were there to be terrorist attack or a national emergency. 

To avoid duplication, FDA has taken the lead in funding both Chemistry and Radiological FERN laboratories to build capability and capacity for these disciplines 

across the Nation, whereas United States Department of Agriculture, or USDA, is 

responsible for funding the Microbiological laboratories. Therefore, our coordinated 

efforts are complementary to FDA’s overall FERN program. 

Question. Do you anticipate a time we won’t have to provide huge increases every 

year for these activities—when will we simply be able to maintain our safeguards? 

Answer. Thank you for the opportunity to address FDA’s efforts to safeguard the 

food supply from attack. FDA regulates $240 billion worth of domestic food and $15 

billion of imported food. The American food industry contributes approximately 20 

percent of the U.S. Gross National Product, employs about 14 million individuals, 

and provides an additional 4 million jobs in related industries. FDA’s capacity to 

defend the food supply from attack and to maintain consumer confidence in our ability to do so has significant impacts on the public health and the Nation’s economy. 

Our plan for food defense aligns with the mandate of Homeland Security Presidential Directive-9, which establishes a national policy to defend the food and agriculture system. Among the key food defense projects funded to date is the Food 

Emergency Response Network, or FERN. FERN establishes and expands a national 

laboratory network to increase analytic surge capacity for biological, chemical and 

radiological agents in food. Other key food defense projects include targeted food defense research; targeted, risk-based inspections; Biosurveillance, to improve coordination and integration of existing food surveillance capabilities under the government-wide Biosurveillance Initiative; and emergency Operations Network Incident 
276 

Management System, to upgrade and expand FDA’s management and coordination 

capabilities for responding to incidents affecting the U.S. food supply. 

FDA conducts these activities in the context of an ever-increasing volume of imported foods and the growing complexity of the food industry and of the technologies 

used in food production and packaging. This transformation will continue to present 

fresh challenges for FDA and for the plans and strategies we use to defend the food 

supply from attack. We will direct any food defense funding provided in fiscal year 

2007 to address these new challenges, to build upon past successes, and to strengthen our capabilities to address terrorist threats to the food supply. 

Although the Administration has not formulated a budget for fiscal year 2008 and 

later years, the long-term recommendation for the FERN program is for FDA to 

achieve a total of 50 state laboratories. With the funding in our fiscal year 2007 

budget, we estimate that we will increase the number of operational facilities to 16 

laboratories. You are correct in pointing out that we will not need budget increases 

to expand the number of FERN laboratories once we establish all of these labs. 

However, there may still be an annual need for resources to maintain and support 

FERN labs. 

UNIFORM FOOD SAFETY

Question. Does FDA support the National Uniformity for Food Act as passed recently in the House of Representatives? Please explain why or why not. 

Answer. The Administration has not taken a position on this legislation. 

POST-MARKETING STUDIES

Question. What activities, if any, is FDA undertaking in order to decrease the 

number of post-marketing studies that have been pledged to FDA but not yet undertaken? Does FDA see this as a problem? Why or why not? 

Answer. Postmarketing Study Commitments, also known as PMCs, for approved 

drug products, including biological drugs, are studies that a product sponsor either 

is required or agrees to conduct after FDA approves a product for marketing to further define the safety, efficacy, or optimal use of a product. FDA closely monitors 

the status of PMCs to ensure that product sponsors initiate and complete the studies in a timely manner. In some cases, the studies can take years to complete, even 

if everything is on schedule. In other cases, there are considerable obstacles, such 

as difficulty in recruiting patients and investigators to participate in a clinical trial 

when an approved therapy is available. Sponsors must resolve these issues before 

they can complete the studies. When obstacles arise, FDA works closely with sponsors to address these obstacles. Approximately 38 percent of the currently pending 

PMCs for new drug applications were established in applications approved between 

October 1, 2003 and September 30, 2005. Depending on the complexity of the study, 

FDA would expect that many of these studies would not have been initiated yet. 

As of the Senate Hearing date, FDA had planned to undertake a review of the 

decision-making process behind requests for PMCs but had not formally issued a 

contract. On April 5, 2006, FDA awarded a contract to an outside organization to 

conduct a thorough evaluation of the postmarketing study commitment process for 

collecting medical information. The contractor will examine in-depth the agency’s internal processes regarding PMCs and make recommendations regarding ways to improve FDA’s PMC processes and practices. The outside contractor will evaluate how 

review divisions decide whether to request PMCs, how divisions make decisions surrounding what kinds of PMCs to request, and how divisions establish reasonable 

timeframes for completing PMCs. The study will serve to assist FDA in determining 

whether industry needs better guidance regarding PMCs and to ensure there is a 

standardization of the procedures. In addition, the Centers within FDA also have 

undertaken activities to improve the response on postmarketing and post-approval 

studies. 

FDA takes its statutory obligations under the Food and Drug Administration 

Modernization Act of 1997 to track and monitor the progress of PMCs very seriously. FDA recently published a final guidance for industry to describe in greater 

detail the content, format, and timing of PMC annual status reports submitted by 

the drug industry. Furthermore, FDA reports annually in the Federal Register on 

the performance of applicants in conducting their PMCs and maintains a public Web 

site that contains the basic information that FDA committed to make available to 

the public. These initiatives, along with other FDA internal procedures, are all intended to ensure that industry undertakes their commitments and completes them 

in a timely manner. 

On January 1, 2005, the Center for Devices and Radiological Health, also known 

as CDRH, initiated the use of the new Condition of Approval Tracking System. As 
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of that date, all postapproval studies are entered into the system, along with the 

due dates of any agreed upon report deliverables. CDRH monitors the system daily 

to see that sponsors are honoring their commitments. Procedures are in place to notify the sponsor immediately if deadlines are not met, and also to acknowledge the 

receipt of reports that are on time and are reviewed. Under the new system, all reports have been delivered on time. 

CDRH is also developing the Postapproval Study Web site that will be available 

to the public. This Web site will list the postapproval studies being done, briefly describe the study, and document the status of studies, as reported by industry. 

FDA believes that changes to the Condition of Approval study program will improve communication with industry about these studies and increase collaboration 

in designing high quality studies with targeted end points. The results of these 

studies will be important to FDA, industry and the health care community. Acknowledgement of receipt of study reports and follow-up on overdue reports will encourage compliance. Finally, we believe the public Web site will prompt industry to 

conduct the studies and report to FDA on time. 

MICROBIOLOGICAL DATA PROGRAM

Question. The USDA is proposing to eliminate that Microbiological Data Program, 

currently carried out by the Agricultural Marketing Service. One reason offered for 

this proposal is that FDA currently undertakes, or will continue, the work of this 

program. Reports of increased food illnesses from fruits and vegetables appear to 

highlight the importance of the Microbiological Data Program. 

Has FDA worked with AMS in order to ensure that none of the sampling currently carried out through the Microbiological Data Program will be eliminated? 

Answer. As a science-based agency, FDA collects data that can be used to direct 

policy decisions, risk assessments, regulatory actions, and other actions. In comparison, the Microbiological Data Program, or MDP, program of the USDA Agricultural 

Marketing Service, also called AMS, is a non-regulatory sampling survey. Because 

the MDP program is not bound by the same regulatory requirements as FDA, it provides an opportunity for collection of a much larger data set. However, the MDP is 

not designed to provide the same source information, traceback, or support for regulatory follow-up that are built into the FDA sampling assignments. If a positive 

sample is found in an FDA produce sampling assignment, follow-up action can be 

taken, while the design of the MDP program does not allow for follow-up. Therefore, 

if AMS does eliminate the MDP program, it would not produce a surveillance gap 

as FDA defines this term. 

Question. Is FDA already working on similar activities? 

Answer. Since 1999, FDA has routinely issued sampling assignments for selected 

commodities produced both domestically and abroad. The purpose of FDA’s produce 

sampling assignments is to gather information on both the incidence of contamination and the practices and conditions associated with contaminated produce and to 

take regulatory action, as appropriate, when contaminated produce is found. The 

FDA sampling assignments differ from the Agricultural Marketing Service’s Microbiological Data Program, also known as MDP, in important ways. FDA samples are 

routinely collected at the farm gate or packinghouse for domestic produce or at the 

border for imported produce. With domestic samples, if contamination is present, it 

must have occurred at the farm or packing facility. MDP samples are routinely collected at a later stage of the supply chain, such as a distribution center, making 

it more difficult to narrow down where contamination might have occurred. The 

MDP program is a blind study. It does not collect information about the samples 

that would allow traceback to the source; therefore, it does not provide an opportunity to visit farms or packinghouses associated with positive sample to gather information about practices or conditions at those firms that may have led to contamination. FDA samples are tested in FDA laboratories, while MDP samples are tested 

at state laboratories. FDA data have a relatively well known performance standard 

across the United States. 

QUESTIONS SUBMITTED BY SENATOR TOM HARKIN

AFLATOXIN

Question. Late last year, a pet food company based in South Carolina initiated 

a recall of dog food that had been made with corn contaminated with aflatoxin, produced by mold that sometimes develops in crops under drought or other weather 

stress conditions. The death of dozens of dogs has been attributed to consumption 

of this product both before and after the recall was announced. 
278 

What steps has FDA taken to address this situation to ensure the recall is fully 

and effective and completed? 

Answer. FDA determined that this situation represented a serious life-threatening 

health hazard to pet dogs and pet cats and classified this recall as Class I. In a 

Class I Recall, FDA requests that the firm conduct 100 percent effectiveness checks 

of their consignees to confirm that they received notification about the recall and 

have taken appropriate action. Additionally, our Atlanta district office issued audit 

check assignments in coordination with the Center for Veterinary Medicine to determine the effectiveness of the company’s recall. The vast majority of FDA audit 

checks are completed and show the recall of dog food to be effective. FDA will monitor the disposal of all recovered products. FDA will terminate this recall when disposition of the recalled products is finalized. 

Question. How can we assure the pet owners of this country that this kind of 

event won’t happen again? 

Answer. As part of the investigation, FDA evaluated the company’s descriptions 

of the actions it has implemented at all of its plants to ensure that an aflatoxin 

event does not happen again and found the corrective actions acceptable. This situation generated much attention and has served as a reminder to the pet food industry of the importance of using appropriate manufacturing and quality control procedures. 

BIOTERRORISM

Question. In December of 2004, the outgoing Secretary of Health and Human 

Services Tommy Thompson stated ‘‘I, for the life of me, cannot understand why the 

terrorists have not attacked our food supply, because it is so easy to do.’’ The President’s 2007 budget increases funding for food defense to continue lab preparedness 

efforts and expand State laboratories. However, it cuts funding for food import inspections at ports of entry which a terrorist might use to smuggle contaminated food 

products into the country. Since 1994, food imports have grown five-fold to 6 million 

food import shipments annually, but the FDA inspects less than 2 percent of these 

shipments. 

Won’t these proposed budget cuts for import inspection and testing actually weaken FDA’s ability to prevent an attack on the food supply and make more likely the 

event that Secretary Thompson predicted? 

Answer. For fiscal year 2007, FDA is requesting an increase of $19.9 million in 

food defense to a total request of $178.2 million. This is a 21,500 percent increase 

in funds from fiscal year 2001. The funds requested would continue to improve laboratory preparedness and food defense field operation, food defense research, surveillance, and incident management capabilities. FDA uses a risk-based approach to 

allocate resources. By focusing on risk through the cooperative work of Customs and 

Border Protection, or CBP, FDA’s Prior Notice Center, and FDA field examinations, 

we will work smarter to target higher risk products, manufacturers, and importers 

to ensure the safety of the public health, protect the Nation’s food supply and prevent an attack on the Nation’s food supply. 

For example, currently, working with information submitted through CBP’s electronic systems used for import entries or through FDA’s internet-based Prior Notice 

System Interface, FDA screens shipments electronically before they arrive in the 

United States to determine if the shipments meets identified criteria for physical 

examination or sampling and analysis or warrants other review by FDA personnel. 

This electronic screening allows FDA to better determine how to deploy our limited 

physical inspection resources at the border on what appear to be higher-risk food 

shipments while allowing lower-risk shipments to be processed in accordance with 

traditional import procedures after the electronic screening. 

Question. Instead of cutting border inspection, shouldn’t the Bush administration 

apply more resources to food import inspections to bolster our defenses against bioterrorism? 

Answer. Through smart allocation of FDA resources, fine tuning FDA’s risk based 

approach, and smarter screening criteria, the FDA will be able to continue ensuring 

a safe food supply and protecting the pubic health despite cuts in border inspections, 

which will allow funding to other higher risk food defense and lab preparedness 

areas. 

SUNSCREEN

Question. Skin cancer is on the rise in the United States. A significant contributor 

is exposure to UVA rays. FDA has been developing a monograph for sunscreens 

since 1978 to address the critical issue of UVA rays but has not, thus far, issued 

it. As part of the Fiscal year 2006 Agriculture Appropriations Act, FDA was asked 
279 

to issue a ‘‘comprehensive final monograph for over-the-counter sunscreen products, 

including UVA and UVB labeling requirements within 6 months of enactment.’’ 

What is the status of the monograph? 

Answer. We are currently working on a rulemaking for OTC sunscreen drug products to address both UVA and UVB labeling requirements. 

Question. Will the monograph be issued by May 10th, the date the fiscal year 

2006 Act requires? 

Answer. We are working to publish the document for this rulemaking in the Federal Register. 

GENERIC DRUGS

Question. Generic drugs help to make health care more affordable. Currently, 

FDA has a backlog of 850 applications for generic drugs—there are expected to be 

more over the next several years. Yet, the President’s budget flat funds the Office 

of Generic Drugs. In your testimony before the Committee, you stated that generics 

were reviewed in priority order, meaning that new generics for branded drugs without a generic counterpart would be bumped to the front of the line. However, more 

price competition between generics is also a valuable way to decrease the price consumers pay for drugs. Therefore, I believe prioritization is not, in and of itself, a 

sufficient solution to the problem. In addition, approval delays effectively extend the 

patent life of branded drugs despite Congress’ clear intention otherwise. FDA has 

increased its generic drugs Full Time Evaluators (FTEs) from 134 in 2001 to 201 

in 206. Despite the increase, I am concerned FDA is not devoting enough personal 

and resources to generic drugs given the current workload and the future increase. 

How many FTEs would be required to eliminate the current backlog within the 

next year? 

Answer. FDA understands that Congress and the public are concerned about the 

high cost of prescription drug products. Generic drugs play an important role in 

granting access to products that will benefit the health of consumers and the government. Prompt approval of generic drug product applications, also known as abbreviated new drug applications, or ANDAs, is imperative to making generic products available to American consumers at the earliest possible date. This is a key 

priority for FDA. Since 2001, FDA has increased spending on the Generic Drugs 

Program to $64.6 million for fiscal year 2007, which is more than a 66 percent increase from the comparable fiscal year 2001 amount. This has allowed FDA to reduce median review time by 2 months. 

FDA believes that making improvements in the process for the review of generic 

drug applications offers the best promise for reducing ANDA review time. With this 

goal in mind, in fiscal year 2005, FDA’s Office of Generic Drugs, or OGD, focused 

on streamlining efforts to improve the efficiency of the ANDA review process. OGD 

added chemistry and bioequivalence review teams and has taken steps to decrease 

the likelihood that applications will face multiple review cycles. OGD also instituted 

revisions to the review process such as early review of the drug master file as innovator patent and exclusivity periods come to an end, cluster reviews of multiple applications, and the early review of drug dissolution data. 

In fiscal year 2006, we will build on these process improvements. We have begun 

a major initiative to implement Question-based Review for assessment of chemistry, 

manufacturing, and controls data in ANDAs. This improvement builds on the Quality-by design and risk-based review initiatives of FDA’s Center for Drug Evaluation 

and Research. This mechanism of assessment is consistent with the International 

Conference on Harmonization Common Technical Document and will enhance the 

quality of evaluation, accelerate the approval of generic drug applications, and reduce the need for supplemental applications for manufacturing changes. FDA believes that these process improvements will work to make more generic drugs available to the public. 

FDA’s OGD will continue institute efficiencies in the review process to accelerate 

the review and approval of ANDAs. FDA will also continue to work very closely with 

the generic manufacturers and the generic drug trade association to educate the industry on how to submit applications that can be reviewed more efficiently and that 

take advantage of electronic efficiencies that speed application review. We will also 

work with new foreign firms entering the generic drug industry. The agency recognizes that it will take time for these new firms to understand the requirements for 

generic drug products. In the long term, however, these efforts should shorten overall approval time and increase the number of ANDAs approved during the first cycle 

of review. In fiscal year 2006, FDA plans to spend $62.8 million relating to generic 

drugs and, specifically, $28.3 million in OGD. In fiscal year 2007, FDA plans to 

spend $64.6 million relating to generic drugs and $29 million in OGD. 
280 

Question. How much would that cost? 

Answer. FDA recognizes that generic drugs play an important role in granting access to products that will benefit the health of consumers and the government. FDA 

believes that making improvements in the process for the review of generic drug applications offers the best promise for reducing ANDA review time. With this goal 

in mind, in fiscal year 2005, FDA’s Office of Generic Drugs, or OGD, focused on 

streamlining efforts to improve the efficiency of the ANDA review process. In fiscal 

year 2006, we will build on these process improvements, including efforts to implement Question-based Review. FDA’s OGD will continue institute efficiencies in the 

review process to accelerate the review and approval of ANDAs. FDA will also continue to work to educate the industry on how to submit applications that can be 

reviewed more efficiently. We will also work with new foreign firms entering the generic drug industry. The agency recognizes that it will take time for these new firms 

to understand the requirements for generic drug products. In the long term, however, these efforts should shorten overall approval time and increase the number of 

ANDAs approved during the first cycle of review. 

Question. Does FDA estimate the number of future Abbreviated New Drug Applications when making decisions to allocate resources to hiring and training FTEs? 

Answer. FDA attempts to project application numbers by ongoing tracking of receipts and by looking at the products that will be going off patent as well as other 

industry forecasts of trends. FDA also ensures that it can meet the specified budget 

earmark for the generic drug review program. 

EARLY FOOD SAFETY EVALUATION

Question. I understand your agency is nearing publication of its final Early Food 

Safety Evaluation, (EFSE) guidelines. I’m happy to hear that as it is an important 

issue for American agriculture and I look forward to its release. 

Can you offer us more specifics on when we can expect to see final publication? 

Answer. We are moving to complete the last steps necessary to finalize the guidance. For example, we are currently nearing completion of the requirements of the 

Paperwork Reduction Act of 1995. The comment period for the Notice for the agency 

information collection activities recently closed on March 13, 2006. We expect publication soon after completion of these final steps. 

FOOD IMPORTS

Question. More than 80 percent of the seafood and an estimated 20 percent of 

fresh produce that Americans consume is imported. Increasingly, imported foods are 

the source of food-borne illness. For example, in 2003, a hepatitis A outbreak associated with green onions imported from Mexico sickened over 550 people, killing at 

least 3. There are many other examples of contaminated food that caused large scale 

outbreaks and fatalities in the last 10 years. 

How do you intend to improve FDA’s oversight of imported food? 

Answer. FDA will continue to implement the Public Health Security and Bioterrorism Preparedness and Response Act of 2002, which provides FDA with authorities aimed at enhancing the security of imported foods. For example, the requirement for domestic and foreign facilities to register with FDA will help FDA quickly 

identify, locate, and notify the facilities that may be affected in the event of a potential or actual terrorist incident or outbreak of foodborne illness. The advance information about imported food shipments, provided under the prior notice requirement, 

enables FDA, working closely with Customs and Border Protection, or CBP, to more 

effectively target inspections of food at the border at the time of arrival to ensure 

the safety and security of imported food. This advance notice not only allows FDA’s 

and CBP’s electronic screening systems to review and screen the shipments for potential serious threats to health, intentional or otherwise, before food arrives in the 

United States, but it also allows FDA staff to review prior notice submissions for 

those products flagged by the systems as presenting the most significant risk and 

determine whether the shipment should be held for further investigation. 

For fiscal year 2007, FDA is requesting an increase of $19.9 million in food defense to a total of $178.2 million. This is a 21,500 percent increase in funds from 

fiscal year 2001. The funds requested would continue to improve laboratory preparedness and food defense field operation, food defense research, surveillance, and 

incident management capabilities. 

FDA has worked to develop an automated risk-based import entry examination 

system. This system is designed to assess risk in individual import shipments. The 

system will combine expert knowledge, open source intelligence and advanced selflearning algorithms to dynamically assess entry-line level risk. In 2005, the first of 

a series of research and analysis papers on this system provided timely and relevant 
281 

information to serve as the basis for exogenous-source rules development for riskbased import examination. The goal in the project is to provide early identification 

and assessment of events, conditions, and situations in the world that could have 

an impact on the safety or security of FDA-regulated imports. The project is currently focused on imported seafood. 

Question. How much would it cost to increase food import inspections from 2 percent to 5 percent or 10 percent? 

Answer. During fiscal year 2005, the Field conducted approximately 85,000 Import Food Field Exams/Tests; analyzed approximately 25,550 food import lab samples; and, made 8,672,168 Import Line Decisions. Over 1.27 percent of food import 

lines were physically examined during fiscal year 2005. In addition, critical steps 

in our counter terrorism efforts are the Prior Notice Security Import Reviews. During fiscal year 2005, the Field conducted 86,187 Prior Notice Security Import Reviews in the foods area. 

The mission of FDA’s Prior Notice Center, or PNC, is to identify imported food 

and feed products that may be intentionally contaminated with biological, chemical 

or radiological agents, or which may pose significant health risks to the American 

public, and intercept them before they enter the United States. FDA will continue 

to focus resources on Prior Notice Import Security Reviews of products that pose the 

highest potential bioterrorism risks. The PNC uses a combination of adaptable targeting strategies and weighted risk indicators in the threat assessment process including contemporary intelligence involving terrorist activities, a history of prior notice violations, and compliance with admissibility standards as indicated by the results of import field exams, filer evaluations, firm inspections, repeated prior notice 

violations, and feedback from Field Investigators. By using a risk based approach, 

the Prior Notice Center can intercept potentially hazardous products before they 

enter the United States. 

The benefit of these reviews comes from the quality and targeting of review activities; not from the volume of imports inspected. Thus, the quality of import screening 

is a better measure of FDA’s import strategy rather than simply focusing on the 

items physically examined. 

Question. Could FDA improve its oversight of imports if it had inspectors checking 

farms and factories in the country where our food originates? 

Answer. FDA continues to enhance our risk based approach to target higher risk 

products, manufacturers, and importers with available resources. FDA-conducted 

foreign inspections are an important aspect of this multifold approach. It is important to understand, however, that this is only one component of our approach. We 

also use previous examination and laboratory sampling results, compliance information received from other domestic and foreign regulatory agencies, examination at 

the ports of entry, and general risk factors posed by the products in question to provide controls of the safety of import food commodities. FDA also focuses on risk by 

working cooperatively with Customs and Border Protection and through the FDA’s 

24/7 Prior Notice Center in counter- and bioterrorism targeting and evaluation of 

supply chain integrity. 

Although foreign inspections and border operations provide some assurance that 

imported foods are safe, the agency continues to work to foster international agreements and harmonize regulatory systems. For example, we actively participate in 

the Canada/United States/Mexico Compliance Information Group, which shares information on regulatory systems and the regulatory compliance status of international firms to protect and promote human health. In addition, FDA is heavily 

involved in the Codex Alimentarius Commission Committees, which develop Codes 

of Practice and standards to harmonize international food safety practices. 

FOOD RECALL

Question. The Food and Drug Administration (FDA) does not have mandatory authority to recall contaminated food products and instead relies on voluntary cooperation by food companies to get contaminated food out of supermarkets, restaurants, 

and consumers’ homes. In a recent GAO study, FDA identified over 3,000 recalls of 

non-meat and poultry foods from 1986 to 1999 and GAO identified nine instances 

during that time where companies delayed or refused compliance with an FDA recall request. 

Should FDA have mandatory recall authority in order to protect American consumers from contaminated food? Why or Why not? 

Answer. The vast majority of food recalls are initiated voluntarily by firms when 

a problem is discovered, often after the product has entered the marketplace. It is 

the responsibility of the recalling firm to account for product remaining under its 

direct control, to quickly notify direct consignees of the identity of the product and 
282 

any potential hazard that it presents, and to request subrecalls where indicated. 

FDA monitors recalls and either discusses follow-up actions with the firm if it appears that the recall is not effective, or if necessary, takes direct action to complement actions taken by the firm. FDA encourages firms to conduct recalls that are 

effective and may take enforcement action to remove products from the market if 

a firm is unable or unwilling to do so. 

When the hazard is significant, FDA expects that firms will initiate a public notification process to make the public aware of the problem and to recommend steps 

to be taken in order to prevent injury or illness. Recall notifications provide the corrective action necessary and a means for returning and/or reporting the status of 

the recalled product. 

In the event that public notice is not provided or is not sufficient, FDA has and 

will continue to notify the public of the hazard. 

Question. If a terrorist attack against the food supply occurred, how would FDA 

ensure the food was removed from the distribution chain, supermarket shelves, and 

people’s homes? 

Answer. The Public Health Security and Bioterrorism Preparedness and Response 

Act of 2002 includes a number of provisions that give new authority to FDA to take 

action to protect the food supply against the threat of intentional or accidental contamination of the food supply. If a terrorist attack on the food supply occurs, FDA 

would work with State and local food safety officials to remove products from store 

shelves and distribution channels. FDA would also work with the press to alert the 

trade industry and consumers about the potential hazard and would provide consumers with information on how and where to dispose of contaminated foods. We 

would include information to consumers on what they should do if they had been 

exposed to the contaminated food. 

To ensure efficiency if an emergency occurred, FDA continues to take additional 

measures to improve the success of recalls. On November 3, 2003, FDA posted guidance to the industry on our website intended to assist industry in handling all aspects of a product recall, including all corrections and removals. We also continue 

to develop the Recall Enterprise System, which, when completed, will post recalls 

on our website in real time. 

METHYLMERCURY

Question. FDA and EPA have issued a joint advisory warning pregnant women 

and women planning a pregnancy to avoid swordfish, shark, some types of tuna and 

king mackerel, since those fish accumulate large quantities of methylmercury which 

can harm their unborn children. Eating seafood is the leading cause of exposure to 

methylmercury, a toxin that can cause neurological damage to the developing fetus 

and young children. 

Although the advisory is useful, some groups have complained that it is complicated and hard-to-remember. The Center for Science in the Public Interest recently recommended that all grocery stores and fish retailers should post the warning at the counter where consumers actually purchase the seafood. 

Why doesn’t FDA enforce the limit for methylmercury in seafood, e.g. test and remove seafood from the market that exceeds the limit of 1 ppm? 

Answer. Risk from methylmercury is generally understood to derive from substantial exposure over time of many meals that include fish. That is why we issued a 

consumer advisory on methylmercury directed toward women of childbearing age 

and young children. We are conducting surveys to determine how the public, including pregnant women and health care providers, are reacting to the consumer advisory on methylmercury and to other information they may be receiving from all 

sources about seafood risks and benefits. 

It is useful to note that data from the National Health and Nutrition Examination 

Survey, operated by the Centers for Disease Control and Prevention, that measures 

levels of methylmercury in U.S. women of childbearing age and young children 

through 5 years of age reveal that the overwhelming majority of both women of 

childbearing age and young children are exposed to methylmercury at very low levels. The next phase of our risk management process for methylmercury involves a 

risk analysis that is examining the likelihood of adverse effects through the range 

of exposures being experienced by U.S. consumers. This project is also examining 

the likelihood of health and nutritional benefits from eating fish at various levels 

of consumption. 

Question. To make the advisory truly effective, why doesn’t FDA require pointof-purchase notices giving consumers detailed information on which types of fish 

contain high levels of methylmercury at the fish counter? 
283 

Answer. FDA, in conjunction with the Environmental Protection Agency, or EPA, 

has implemented a cost-effective public education campaign. This campaign is designed to inform high-risk consumers about reducing their exposure to high levels 

of mercury, while emphasizing the health benefits of consuming fish and shellfish. 

This has resulted in raising awareness about methylmercury in seafood. We believe 

the steps that have been taken are more appropriate and more effective than using 

point-of-purchase signage to convey a complex consumer message. The program uses 

health professionals and the media to inform high-risk populations, including 

women who may become pregnant, pregnant women, nursing mothers and the parents of young children, about mercury in seafood. The goal is to inform these highrisk consumers that they should avoid or restrict their consumption of certain kinds 

of fish, while emphasizing the importance of fish and shellfish as part of a healthy 

diet. 

The public education campaign includes an extensive outreach effort to over 9,000 

print and electronic media outlets. FDA and EPA have also distributed over four 

million brochures about the advisory on methylmercury in fish and shellfish to 

members of over 50 organizations of healthcare providers to women and children. 

The brochures have also been given to all practicing pediatricians, obstetricians, 

gynecologists, nurse practitioners, and nurse midwives throughout the country for 

office distribution. And, finally, we distribute it through exhibits at medical and 

public health professional organization meetings. This information is also available 

on our Web site for use by States, food facilities, health care professionals, and consumer groups. 

In August 2005, FDA launched an educational program entitled ‘‘Food Safety 

Moms-To-Be’’ that builds upon several food safety messages and includes information for use by health educators about the advisory on methylmercury in fish and 

shellfish. More than 45,000 Educator Toolkits, including an Educators Resource 

Guide, video, and DVD were sent to health professionals who have direct contact 

with pregnant women via pregnancy planning, prenatal and post-natal care, and 

childbirth education classes. 

FDA also established a Web site for pregnant women to obtain information about 

foodborne safety. The Web site received more than 35,000 visitors in its first full 

month of September 2005, is available in both English and Spanish, and has an 

‘‘email a friend’’ feature that allows users to share this information with others. 

FOODNET

Question. The Foodborne Diseases Active Surveillance Network (FoodNet) is the 

principle foodborne disease component of CDC’s Emerging Infections Program (EIP). 

It is a collaborative project of the CDC, FDA, and USDA. Unlike the direct funding 

that comes from USDA which has remained consistent, the funds from CDC and 

FDA are derived from the larger Food Safety Initiative and are thus subject to being 

reallocated. Over the last 5 years the program has experienced a 10 percent decrease in funding. Cuts to the FoodNet Program will have a direct effect on our Nation’s ability to identify and track foodborne illness. 

How have these cuts impacted our ability to identify and track foodborne illness? 

Answer. FDA has provided a consistent level of funding in support of FoodNet 

over the years and has experienced no change in the availability of information we 

need to direct and evaluate the effectiveness of our regulatory programs. FDA will 

work with the Committee if specific funding information is needed from CDC. 

Question. Do you support giving direct line item funding to the FoodNet Program? 

Answer. While FDA believes that FoodNet is a valuable tool for identifying and 

tracking foodborne illness, which allows the agency to evaluate the effectiveness of 

its regulatory programs, FDA does not support giving direct line item funding to the 

FoodNet program in the FDA appropriation. 

QUESTIONS SUBMITTED BY SENATOR BYRON L. DORGAN

IMPORTED PRESCRIPTION DRUGS

Question. Given the substantial price differences between products sold in the 

United States and abroad, it should come as no surprise that millions of Americans 

already import prescription drugs. 

How much did the FDA spend in fiscal year 2005 to prevent Americans from importing prescription drugs from Canada and other countries? 

Answer. FDA prevents unauthorized importation of drugs from other countries 

through post-market import inspections and post-market import laboratory analyses. In fiscal year 2005, the Office of Regulatory Affairs spent $6.4 million on post- 
284 

market import inspections and $1.7 million on post-market import laboratory analyses of human drug imports from all countries. Post-market import inspections are 

defined as physical inspections, product information, line entry & label review. They 

include all the activities relating to the decision to permit or refuse entry to regulated products. Examples include: import field exams, import sample collections, 

Operational and Administrative System for Import Support on-screen reviews, review of physical documents, detention without physical examination, private laboratory report review and audit activities, filer evaluation, and follow up to refusals. 

Post-market import laboratory analyses are defined as sample analysis, product 

testing, methods development for testing purposes, specific regulatory problems that 

FDA develops solutions for. They exclude applied research and premarket review 

analyses and include fingerprinting. 

Question. Much of the apparatus for assuring safe consumer access to imported 

drugs is already in place. Under current law, drug companies are free to manufacture prescription drugs in other countries and import them for sale in the United 

States. More than $40 billion of the prescription drugs consumed by Americans in 

2002—one quarter of all drugs—was made in other countries and imported to the 

United States for sale by pharmaceutical manufacturers. 

If importation can be deemed safe for manufacturers, why can’t it be made safe 

for consumers? Wouldn’t a regulated system be safer than what is occurring today? 

Answer. 21 USC 381(d)(1) was included in the Federal Food, Drug, and Cosmetic 

Act with the understanding that the manufacturer of a drug product is in the best 

position to know if a drug product destined for import into the United States is their 

genuine product, and not a counterfeit, and whether it has been stored or handled 

in such a way as to affect the integrity of the product. Because counterfeiters are 

so sophisticated in their methods of copying drug products and packaging, consumers, distributors, and retailers, are not in a position to easily distinguish genuine from counterfeit drug product. Oftentimes, the manufacturer must perform 

costly and complicated analysis to determine if a product is genuine or not. 

The HHS Drug Importation Task Force Report issued in December 2004 outlined 

the measures that would be needed to implement an importation program that provides adequate safeguards and resources to ensure that the imported drugs are safe 

and effective. A program that does not take these measures into consideration, regulated or not, would perpetuate the buyer beware situation that is currently occurring and consumers would continue to put themselves at risk for harm by importing 

unapproved drugs into the United States for personal use. 

Specifically, the Task Force made a number of significant finding about an importation program. The Task Force determined that first, integrity of the distribution 

system must be ensured by, among other measures, requiring drug pedigrees with 

adequate documentation, limiting ports of entry and distribution channels, and allowing commercial importation only from licensed foreign wholesalers to authorized 

sellers in the United States. The program must exclude personal shipments via the 

mail and courier services. Indeed, regulating personal importation could be extraordinarily costly, on the order of $3 billion a year based on estimates of the current 

volume. 

Second, any program must limit importation to those prescription drugs most likely to yield savings—namely high-volume products for which a United States—approved generic is not available—and allow importation only from countries for which 

we have a high degree of confidence in the comparability of their drug regulatory 

systems. In the Administration’s view, Canada is the only country from which importation should be considered at this point. Congress should also exclude drugs or 

classes of drugs that pose increased safety risks in the context of importation, such 

as controlled substances and drugs that require refrigeration during shipping. 

Third, any program must require that imported prescription drugs be dispensed 

pursuant to a valid U.S. prescription pursuant to advice from a trusted medical professional. 

Fourth, measures must be included to ensure that any purchasers of imported 

drugs are given full and adequate information regarding, among other things, the 

source of the drugs, and that packaging and labels on imported drugs meet all FDA 

requirements. 

Fifth, any importation program must ensure effective oversight and adequate government resources to protect American consumers. 

Sixth, any program must include the ability to use streamlined inspection procedures, and ensure appropriate remedial steps can be taken in the event of adverse 

events from imported drugs. 

Seventh, any program must avoid anti-competitive provisions such as so-called 

‘‘forced sale’’ provisions, and other types of price controls. 

The Task Force found that such a system would have minimal cost savings. 
285 

Question. Congress has twice enacted legislation to allow for the importation of 

prescription drugs. Both times provisions were included that required the Secretary 

of Health and Human Services to certify that imported drugs would be safe and 

would result in significant savings for the American consumer. The Congressional 

Budget Office has already determined that legalizing importation will reduce prescription drug expenditures by $50 billion. CBO estimates Federal savings of $1.6 

billion over the 2006–2010 period and $6.1 billion over the 2006–2015 period. That 

takes care of the savings argument. 

In terms of safety, how do you guarantee the safety of drugs that are sold in the 

United States? How did the FDA guarantee the safety of Vioxx? Why is the bar set 

higher for imported drugs? 

Answer. At FDA, the Center for Drug Evaluation and Research, or CDER, is responsible for ensuring that America’s drug product supply is safe, effective, adequately available, and of the highest quality. CDER’s responsibility for ensuring 

drug safety is two fold, consisting of premarket safety review and postmarket safety 

surveillance. We evaluate the safety of a drug before it can be marketed in the 

United States in a pre-market safety review. FDA grants approval to drugs after 

a sponsor demonstrates that they are safe and effective for their intended use. Since 

the full magnitude of some potential risks do not always emerge during the mandatory clinical trials conducted before approval to evaluate these products for safety 

and effectiveness, if CDER approves a drug, we continue to monitor the safety of 

that drug after it is on the market by collecting data about its use and watching 

for signs of troubling or dangerous side effects. We call this post-market safety surveillance. 

No drug product is ‘‘perfectly’’ safe. Moreover, FDA approval of a drug is not a 

‘‘guarantee’’ that the drug is ‘‘perfectly’’ safe. All approved drugs pose some level of 

risk since every drug that affects the body will have some side effects. FDA considers both the benefits and risks of all medications before approval and unless a 

new drug’s demonstrated benefit outweighs its known risk for an intended population, FDA will not approve the drug. Medications needed to treat very severe or 

life-threatening illnesses such as cancer treatments may be approved with more serious side effects than other types of medications. FDA makes sure the label or 

package insert accurately describes the benefits and risks discovered in the clinical 

trials and after marketing. With the help of a health-care provider, a patient should 

decide if the benefits for the drug outweigh the risks. 

The pre-market process for approving drug products begins with the drug companies who must first test their products. CDER monitors their clinical research to 

ensure that people who volunteer for studies are protected and that the quality and 

integrity of scientific data are maintained. CDER assembles a team of physicians, 

statisticians, chemists, pharmacologists, and other scientists to review the company’s data and their proposed use for the drug. If the drug is effective and we are 

convinced that it is safe for its intended use— meaning that its health benefits outweigh its risks, we approve it for marketing in the United States CDER does not 

actually test the drug when we review the company’s data. By setting clear standards for the evidence FDA needs to approve a drug, including evidence for demonstrating the safety of the drug for its intended use, the Agency helps medical researchers bring new drugs to American consumers more rapidly. 

Once a drug is approved for sale in the United States, FDA monitors the use of 

marketed drugs for unexpected health risks, either through post-marketing clinical 

trials or through spontaneous voluntary reporting of adverse events from patients, 

doctors, and nurses through MedWatch system that are entered into the Adverse 

Event Reporting System, or AERS. Our safety reviewers monitor the data in AERS 

looking for indications of potential serious, unrecognized drug-associated reactions. 

If new, unanticipated risks are detected after approval, we take steps to inform the 

public and change how a drug is used or even remove a drug from the market. 

Following the process and fundamental principles just described, FDA originally 

approved Vioxx in May 1999 for the reduction of signs and symptoms of osteoarthritis, as well as for acute pain in adults and for the treatment of primary 

dysmenorrhea. The original safety database included approximately 5,000 patients 

on Vioxx and did not show an increased risk of heart attack or stroke. A later study, 

VIGOR, which stands for VIOXX GI Outcomes Research, was primarily designed to 

look at the effects of Vioxx on GI effects such as stomach ulcers and bleeding and 

was submitted to the FDA in June 2000. The study showed that patients taking 

Vioxx had fewer stomach ulcers and bleeding than patients taking naproxen, another NSAID, however, the study also showed a greater number of heart attacks in 

patients taking Vioxx. The VIGOR study was discussed at a February 2001 Arthritis 

Advisory Committee and the new safety information regarding all that was known 

at the time about the potential risk of cardiovascular effects with Vioxx from this 
286 

study was added to the labeling for Vioxx in April 2002. Merck then began to conduct longer-term trials to obtain more data on other potential indications of this 

product. All trials for chronic use were designed to monitor carefully for cardiovascular safety. The serious side effect risks for which Vioxx was ultimately withdrawn from the market voluntarily by Merck were identified when Merck collected 

new data from a trial called the APPROVe, which stands for Adenomatous Polyp 

Prevention on VIOXX trial where Vioxx was compared to placebo. The purpose of 

this new trial was to see if Vioxx 25 mg was effective for a new indication—for preventing the recurrence of colon polyps. This trial was stopped early because there 

was an increased risk for serious cardiovascular events, such as heart attacks and 

strokes, first observed after 18 months of continuous treatment with Vioxx compared with placebo. 

The bar is not set higher for imported drugs. In fact, the bar is identical to that 

for FDA-approved drugs. The problem with illegally imported prescription drugs is 

that we often have no assurance that they have been manufactured, processed and 

held according to the same requirements and standards as FDA-approved drugs. 

FDA drug approvals are manufacturer- and product-specific and include many requirements relating to the product, such as manufacturing location, formulation, 

source and specifications of active ingredients, processing methods, manufacturing 

controls, packaging location, container/closure system, and appearance (21 CFR 

314.50). Frequently, drugs sold outside of the United States are not manufactured 

or packaged by a firm that has FDA approval for that drug. Moreover, even if the 

manufacturer has FDA approval for a drug, the version produced for foreign markets may not meet all of the specific requirements of the United States approval, 

and thus would be considered to be unapproved (section 505 of the Act (21 U.S.C. 

355)). 

In December 2004, the HHS Drug Importation Task Force Report on Prescription 

Drug Importation concluded that any safe system of importation would likely 

produce only modest savings on the national level. The small quantity of available 

drugs to import would result in little aggregate cost savings. The Task Force included a report with the results from a Department of Commerce study. That study 

concluded the reduction of research and development of competitive markers for generic medicines, thereby denying consumers in those markets benefits, including 

lower prices that Americans obtain as result of competition between generic and 

brand-name drugs. In fact, U.S. consumers would pay, on average, 50 percent more 

for their generic medications if they bought them abroad. 

Question. Mark McClellan has said, ‘‘If you’re certain you’re buying approved Canadian drugs from an approved Canadian pharmacy,’’ he says, ‘‘you can have a high 

level of confidence that that’s a good product.’’ 

If we could figure out a system that makes importing drugs just like walking into 

a brick and mortar Canadian pharmacy, wouldn’t it be safer than what is occurring 

today? 

Answer. The HHS Drug Importation Task Force Report on Prescription Drug Importation issued in December 2004 outlined measures that would be needed to implement an importation program that provides adequate safeguards and resources 

to ensure that the imported drugs are safe and effective within the meaning of the 

Federal Food, Drug, and Cosmetic Act. An importation program that does not take 

these measures into consideration would frustrate our ability to ensure that the prescription drugs imported for personal use were safe and effective for their labeled 

uses. 

Specifically, the Task Force made a number of significant finding about an importation program. The Task Force determined that first, integrity of the distribution 

system must be ensured by, among other measures, requiring drug pedigrees with 

adequate documentation, limiting ports of entry and distribution channels, and allowing commercial importation only from licensed foreign wholesalers to authorized 

sellers in the United States. The program must exclude personal shipments via the 

mail and courier services. Indeed, regulating personal importation could be extraordinarily costly, on the order of $3 billion a year based on estimates of the current 

volume. 

Second, any program must limit importation to those prescription drugs most likely to yield savings—namely high-volume products for which a United States—approved generic is not available—and allow importation only from countries for which 

we have a high degree of confidence in the comparability of their drug regulatory 

systems. In the Administration’s view, Canada is the only country from which importation should be considered at this point. Congress should also exclude drugs or 

classes of drugs that pose increased safety risks in the context of importation, such 

as controlled substances and drugs that require refrigeration during shipping. 
287 

Third, any program must require that imported prescription drugs be dispensed 

pursuant to a valid U.S. prescription pursuant to advice from a trusted medical professional. 

Fourth, measures must be included to ensure that any purchasers of imported 

drugs are given full and adequate information regarding, among other things, the 

source of the drugs, and that packaging and labels on imported drugs meet all FDA 

requirements. 

Fifth, any importation program must ensure effective oversight and adequate government resources to protect American consumers. 

Sixth, any program must include the ability to use streamlined inspection procedures, and ensure appropriate remedial steps can be taken in the event of adverse 

events from imported drugs. 

Seventh, any program must avoid anti-competitive provisions such as so-called 

‘‘forced sale’’ provisions, and other types of price controls. 

The Task Force found that such a system would have minimal cost savings. 

Question. The FDA claims that more than 10 percent of drugs worldwide are 

counterfeit. 

What is this based on? What is the percentage in the European Union? Canada? 

Are drugs made in Canada that enter the United States considered counterfeit? 

Answer. FDA has not stated that 10 percent of the drugs worldwide are counterfeit. Many sources have attributed FDA with this figure; however, it did not come 

from FDA. In fact, FDA does not know what the prevalence of counterfeit drugs is 

globally, in the European Union, EU, or in Canada. Drugs that are made in Canada 

are not considered counterfeit unless they meet the definition of ‘‘counterfeit drug’’ 

under 21 U.S.C. 321(g)(2). Rather, virtually all prescription drugs imported into the 

United States from Canada for personal use violate the Federal Food, Drug, and 

Cosmetic Act, the Act, because they are unapproved new drugs (section 505 of the 

Act (21 U.S.C. 355)), labeled incorrectly (sections 502 and 503 of the Act (21 U.S.C. 

352 and 353)), dispensed without a valid prescription (section 503(b)(1) of the Act 

(21 U.S.C. 353(b)), or imported in violation of the Act’s ‘‘American goods returned’’ 

provision (21 U.S.C. § 381(d)(1)). Under the American Goods Returned provision of 

801(d)(1), it is illegal for anyone other than the original manufacturer of the drug 

to import into the United States a prescription drug that was originally manufactured in the United States and sent abroad. Because a consumer is not the manufacturer, they are not permitted to reimport prescription drugs into the United 

States, even if the drugs were made in the United States. Importing a drug into 

the United States that does not comply with the labeling and dispensing requirements in the Act and/or is an unapproved new drug is prohibited under section 

301(a) and/or (d) of the Act (21 U.S.C. 331(a) and/or (d)). 

Question. There have been several recent reports that your agency, along with the 

Customs and Border Patrol, has increased enforcement efforts to stop prescription 

drugs from coming into the United States. Did the FDA change its policy? 

Answer. FDA’s guidance on the personal importation of prescription medicine has 

not changed. However, we have accommodated CBP’s new role in the initial screening of packages containing pharmaceuticals by adjusting the application of our procedures for handling pharmaceutical products shipped through international mail 

facilities. We anticipate that efficiencies gained as a result of the revised CBP procedures will allow CBP and FDA to screen and process a larger number of packages 

than in the past. 

QUESTIONS SUBMITTED BY SENATOR RICHARD J. DURBIN

DIETARY SUPPLEMENTS

Question. Most dietary supplements provide great health benefits for many Americans. As you know, I have worked for years to ensure that dietary supplements are 

safe for the public—I hope that the dietary supplement adverse reporting system 

is enacted in the near future. Clearly, such a system would increase the workload 

of the FDA, and Congress would need to do its part and provide extra funding for 

your agency. 

In the meantime, please advise the Subcommittee on the timeline to publish the 

final rule on Good Manufacturing Practices for dietary supplements, which were 

mandated by Congress 12 years ago and still have yet to be finalized. 

Answer. The proposed rule was published March 13, 2003, and included responses 

to numerous comments received after publication of the advanced notice of proposed 

rulemaking in 1997. The comment period for the proposed rule was extended until 

August 2003. We held public stakeholder meetings on April 29, 2003, in College 
288 

Park, MD, and on May 6, 2003, in Oakland, CA. We also held a public meeting, 

via satellite downlink, on May 9, 2003, with viewing sites at our district and regional offices throughout the country. After the comment period closed, we began 

the process of analyzing the comments submitted to the proposed rule. The issues 

raised by the comments are complex, legally and substantively, and in some cases, 

novel. We have expended significant internal resources on reviewing and preparing 

responses to the comments received. In addition, we have worked to ensure that the 

goals of Dietary Supplement Health and Education Act are carried out with careful 

consideration of the impact on the dietary supplement industry. We are working to 

complete the rulemaking. 

WOMEN’S HEALTH

Question. In late August, Dr. Susan Wood, the Assistant FDA Commissioner for 

Women’s Health and Director for the Office of Women’s Health, resigned over the 

Administration’s refusal to issue a final decision on the emergency-contraception 

(Plan B) application. She said, ‘‘I can no longer serve as staff when scientific and 

clinic evidence, fully evaluated and recommended for approval by professional staff 

here, has been overruled.’’ This decision was contrary to the recommendations of the 

FDA’s advisory commission and its review staff. I requested a GAO study, released 

in November, which found that the decision process to deny the application ‘‘was 

unusual.’’ It is my understanding that the FDA is currently considering a revised 

request to make emergency contraception available over the counter to women, but 

require a prescription for younger girls. 

What is the status of this request, and what is the FDA doing to further all aspects of women’s health? 

Answer. On May 6, 2004, the FDA issued a ‘‘Not Approvable’’ letter to Barr Laboratories, sponsor of a supplemental New Drug Application proposing to make the 

currently approved Plan B emergency contraception prescription product available 

as an over-the-counter, or OTC product. After reviewing the supplemental application, FDA concluded that the application could not be approved at that time because 

adequate data were not provided to support the conclusion that young adolescent 

women can safely use Plan B for emergency contraception without the professional 

supervision of a licensed practitioner and a proposal from the sponsor to change the 

requested indication to allow for marketing of Plan B as a prescription-only product 

for women under 16 years of age and a nonprescription product for women 16 years 

and older was incomplete and inadequate for a full review. 

The applicant chose to revise its application, and in a July 2004 resubmission, the 

applicant requested to market Plan B as prescription-only for women under the age 

of 16 and OTC for women 16 years of age and older. In addition, they proposed an 

educational program for healthcare providers, pharmacists, and patients. 

On August 26, 2005, FDA issued a letter to Duramed Research, the successor to 

the Barr Laboratories application, in response to their July resubmission. The response concluded that the available scientific data are sufficient to support the safe 

and effective use of Plan B as an OTC product for women who are 17 years of age 

and older. However, the Agency stated that it was unable to reach a decision on 

the approvability of the application because of unresolved issues that relate to 

whether a drug may be both prescription and OTC, depending on the age of the patient, how an age based distinction could be enforced, and whether Rx and OTC 

versions of the same active ingredient may be marketed in a single package. 

On the same date that FDA issued this letter to Duramed Research, FDA issued 

an advance notice of proposed rulemaking. This rulemaking requested comment on 

whether to initiate a rulemaking to codify its interpretation of section 503(b) of the 

Food, Drug, and Cosmetic Act regarding when an active ingredient may be simultaneously marketed as both a prescription and OTC drug product. The comment period on this notice closed on November 1, 2005, and FDA is currently evaluating 

those comments. 

With regard to your question on what FDA is doing to further women’s health, 

FDA’s Office of Women’s Health also known as OWH continues to expand patient 

protection and empower consumers for better health by providing consumer information and funding research. OWH continues its Take Time to Care Campaign, a 

multi-faceted campaign that focuses on the dissemination of health education materials for consumers through activities and collaborative partnerships. OWH continues its Menopause and Hormones Education Campaign providing clear and useful information to women about the use of hormones during menopause. OWH continues to develop and distribute numerous consumer information fact-sheets about 

FDA-regulated products for women and their families. OWH consumer information 

and publications are available in approximately 20 different languages. 
289 

OWH funds research projects related to FDA products and relevant to women’s 

health and sex differences. The office funds research projects at FDA and academic 

institutions that are of regulatory significance to FDA. OWH partners with other 

HHS organizations to identify gaps in women’s health research and to leverage limited funding. The office participates in national medical, scientific, and health care 

conferences sharing information with consumers about FDA regulated products and 

participating in scientific discussions and presentations advancing the science related to sex and gender differences. 

OWH enhances patient protection and consumer health by maintaining an extensive and current electronic ‘‘contact database’’ used to inform patient advocacy 

groups, health professionals, national organizations, and large insurance carriers of 

innovative products approved by FDA and important safety information related to 

FDA regulated products. 

OWH is working to transform systems and infrastructure to support critical agency operations regarding electronic knowledge/information management for an integrative IT environment across FDA Centers. The office is developing a ‘‘SMART’’ 

document approach for FDA reviewers to enhance review quality and consistency. 

OWH has been working on a business case plan to better allow for electronically 

tracking the inclusion of women and sex-specific analyses in studies submitted to 

FDA. 

ADVISORY COMMITTEES

Question. As you know, Congress required FDA to publish a quarterly report on 

your efforts to find unconflicted scientists for FDA panels. Your first report, published January 2006, gave some raw numbers (over 200 resumes review for a limited number of slots) but did nothing to document any specific efforts to find 

unconflicted scientists. 

What specific steps other than cursory resume reviews have you taken to find scientists to serve on advisory committees this year that don’t have conflicts of interest? 

Answer. FDA has instituted a number of additional steps this year to find experts 

with limited or no conflicts of interest to serve on FDA advisory committees and 

panels. FDA scientific and technical staff and their managers generally identify and 

contact experts, inviting them to fill vacancies on advisory committees or panels. In 

the past year, FDA’s Advisory Committee and Management Staff in the Commissioner’s Office and committee management staff at the Center levels have briefed 

FDA scientific and technical staff and their managers on the importance of identifying potential committee nominees with limited or no conflicts of interest. In an 

effort to help identify potential conflicts at the earliest possible stage, staff and management were also advised to consider, to the extent possible, the types of products 

likely to be discussed at upcoming committee and panel meetings when interviewing 

candidates about financial holdings and industry relations. 

Panel and committee members themselves also identify possible candidates to 

serve on advisory committees and panels. Current committee and panel members 

are therefore advised to consider possible conflicts of interest when recommending 

candidates for participation. 

We anticipate that the efforts described above will result in the need for fewer 

waivers in the future. Because committee and panel vacancies are often filled well 

ahead of meetings, it can be difficult to identify the relevant sponsors or competing 

companies, and therefore potential conflicts of interest, during the nomination stage. 

Importantly, one of the most critical mechanisms for preventing and addressing conflict of interest issues continues to be the rigorous analysis FDA conducts to identify 

conflicts of interest once we know the context of a committee or panel meeting, as 

well as the process, guided by both Federal statutes and regulations, for determining whether conflict of interest waivers are appropriate. As we pursue FDA’s 

mission to protect the public health, we strive to fill committee and panel vacancies 

with qualified experts who satisfy the committee composition requirements set forth 

by Federal law. Finding experts who have no or limited conflict of interest remains 

one of multiple considerations in identifying who will fill a committee or panel vacancy. 

Question. On January 23, a joint meeting of the FDA’s Nonprescription Drug Advisory Committee and the Endocrinologic and Metabolic Drugs Committee met to 

discuss GlaxoSmithKline’s weight loss drug, Orlistat, going over-the-counter. It was 

eventually approved 11–3. Seven scientists were granted waivers for that meeting, 

including two who had direct ties to Glaxo. 

Do you think that public’s faith in this committee’s decision is undermined by the 

fact that so many scientist required waivers of conflicts of interest? Does your staff 
290 

have enough resources to conduct adequate background research on potential advisory committee members to find people without such conflicts? 

Answer. We believe that several factors should serve to bolster the public’s faith 

in the advisory committee recommendation described above. 

First, the conflict of interest waivers were granted in accordance with Federal 

law. The waivers approved for the meeting described above were granted in compliance with 18 U.S.C. 208(b)(3), 21 U.S.C. 355(n)(4), and the applicable Office of Government Ethics regulations. 

Second, information regarding these waivers and the underlying conflicts of interest was made publicly available before the advisory committee meeting, as required 

by law. Waiver documents and information regarding the nature and magnitude of 

the underlying conflicts of interest were posted on FDA’s Internet page prior to the 

meeting. 

Third, the voting results of this meeting do not suggest a bias resulting from conflicts of interest. Five of the seven waivers were granted for members with minimal 

interests in competing companies. If financial bias was present, one might expect 

that the final vote would have been directed against the product under discussion. 

Instead, a significant majority of the members voted in support of the product. 

Moreover, as stated in the waiver documents posted online, the two additional waivers were granted to scientists receiving minimal compensation that arguably did not 

constitute ‘‘financial interests’’ under 18 U.S.C. 208(a). FDA proceeded with waivers 

for these individuals, however, out of an abundance of caution. 

To identify potential conflicts at the earliest possible stage, staff and management 

are advised to consider, to the extent possible, the types of products likely to be discussed at upcoming committee and panel meetings when interviewing candidates 

about financial holdings and industry relations. Panel and committee members 

themselves also identify possible candidates to serve on advisory committees and 

panels. Current committee and panel members are therefore advised to consider 

possible conflicts of interest when recommending candidates for participation. We 

believe these steps are sufficient and adequately resourced. 

METHYLMERCURY

Question. It is well known that mercury occurs naturally in the environment and 

can also be released into the air through pollution. It is well established that exposure to elevated levels of mercury during fetal development can have adverse effects 

on the developing brain and nervous system that can lead to delayed speech and 

motor development. For these public health reasons, what else can be done to reduce the amount of mercury in seafood? 

Answer. There is no technical process that can remove methylmercury from fish. 

Therefore, FDA and the Environmental Protection Agency (EPA) have implemented 

a comprehensive public education campaign through health professionals and the 

media to inform high-risk populations, including women who may become pregnant, 

pregnant women, nursing mothers and the parents of young children, about mercury in seafood. The purpose of this campaign is to inform these high-risk consumers that they should avoid or restrict their consumption of certain kinds of fish, 

while emphasizing the importance of fish and shellfish as part of a healthy diet. 

The public education campaign includes an extensive outreach effort to over 9,000 

print and electronic media outlets, including magazines about pregnancy and young 

children. Information has also been sent to members of over 50 organizations of 

healthcare providers to women and children, such as the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, and the American College of Nurse Midwives, directors of the Women, Infants, and Children programs, as well as all local health departments. 

In addition, brochures about the methylmercury advisory have been sent to all 

practicing pediatricians, obstetricians, gynecologists, nurse practitioners, and nurse 

midwives throughout the country for distribution in their offices. The brochures are 

accompanied by a letter to the health professional that emphasizes the health benefits of fish. The advisory is also being distributed through exhibits at medical and 

public health professional organization meetings. 

To date, FDA and EPA have distributed over four million brochures. The brochures are currently available in English and Spanish, and will soon be available 

in Korean, Cambodian, Chinese, Vietnamese, Hmong, and Portuguese. This information is also available on our Web site for use by States, food facilities, health care 

professionals, and consumer groups. 

FDA and EPA will continue to review these recommendations and make adjustments, as needed, so that consumers have access to clear, sound dietary informa-
291 

tion. We recognize that the marketplace often has multiple, and at times confusing 

or contradictory, messages. FDA will continue to provide a clear channel for public 

health information concerning methylmercury and other foodborne contaminants. 

To reiterate FDA’s position, consumers should continue to eat a diet that follows 

the advice given in the 2005 Dietary Guidelines, including eating a variety of seafood. It is useful to note that data from the National Health and Nutrition Examination Survey, operated by the Centers for Disease Control and Prevention, that measures levels of methylmercury in U.S. women of childbearing age and young children 

through 5 years of age reveal that the overwhelming majority of both women of 

childbearing age and young children are exposed to methylmercury at very low levels. 

The next phase of our risk management process for methylmercury involves a risk 

analysis that is examining the likelihood of adverse effects through the range of exposures being experienced by U.S. consumers. This project is also examining the 

likelihood of health and nutritional benefits from eating fish at various levels of consumption. 

Question. You recently met with Dr. David Acheson, Director of Food Safety, regarding the adequacy of the FDA’s mercury advisory. Dr. Acheson said that the advisory is geared toward childbearing women and young children and the information 

is disseminated through healthcare providers. At present levels of mercury in 

canned light tuna, a child would exceed the recommended maximum level of mercury consumption by eating as few as two sandwiches a week that contain tuna. 

What steps can the FDA take to better educate consumers about avoiding excessive mercury intake? 

Answer. FDA and the Environmental Protection Agency, also know as the EPA, 

have implemented a comprehensive public education campaign through health professionals and the media. The campaign is intended to inform high-risk populations. 

These include women who may become pregnant, pregnant women, nursing mothers 

and the parents of young children, about mercury in seafood. The purpose of this 

campaign is to inform these high-risk consumers that they should avoid or restrict 

their consumption of certain kinds of fish, while emphasizing the importance of fish 

and shellfish as part of a healthy diet. 

The public education campaign includes an extensive outreach effort to over 9,000 

print and electronic media outlets, including magazines about pregnancy and young 

children. Information has also been sent to members of over 50 organizations of 

healthcare providers to women and children, such as the American Academy of Pediatrics, the American Academy of Family Physicians, the American College of Obstetricians and Gynecologists, and the American College of Nurse Midwives, directors of the Women, Infants, and Children programs, as well as all local health departments. 

In addition, brochures about the methylmercury advisory have been sent to all 

practicing pediatricians, obstetricians, gynecologists, nurse practitioners, and nurse 

midwives throughout the country for distribution in their offices. The brochures are 

accompanied by a letter to the health professional that emphasizes the health benefits of fish. The advisory is also being distributed through exhibits at medical and 

public health professional organization meetings. 

To date, FDA and EPA have distributed over four million brochures. The brochures are currently available in English and Spanish, and will soon be available 

in Korean, Cambodian, Chinese, Vietnamese, Hmong, and Portuguese. This information is also available on our Web site for use by States, food facilities, health care 

professionals, and consumer groups. 

FDA and EPA will continue to review these recommendations and make necessary 

adjustments to ensure consumers have access to clear, sound dietary information. 

We recognize that the marketplace often has multiple, and at times confusing or 

contradictory, messages. FDA will continue to provide a clear channel for public 

health information concerning methylmercury and other foodborne contaminants. 

To reiterate FDA’s position, consumers should continue to eat a diet that follows 

the advice given in the 2005 Dietary Guidelines, including eating a variety of seafood. It is useful to note that data from the National Health and Nutrition Examination Survey, operated by the Centers for Disease Control and Prevention, that measures levels of methylmercury in U.S. women of childbearing age and young children 

through 5 years of age reveal that the overwhelming majority of both women of 

childbearing age and young children are exposed to methylmercury at very low levels. 
292 

DRUG LABELING

Question. The FDA recently issued a final rule on warning label requirements for 

prescription drugs. In the proposed rule, which was issued in December of 2000, the 

FDA stated that the rule would NOT preempt state law. Then, in the final rule, 

the agency asserts that the rule should be interpreted to preempt state law and 

state tort liability. 

Given that the FDA provided no notice of its intention to preempt state law, how 

did the FDA comply with the notification and consultation requirements mandated 

by both the Administrative Procedures Act and an existing Executive Order? 

Answer. The Administrative Procedure Act requires the Agency to address the 

comments it receives in response to proposed rules. The discussion you reference in 

the preamble to the final rule regarding Federal preemption was written in response 

to the comments received and merely restates the Agency’s longstanding position as 

articulated in amicus briefs filed in court by the Department of Justice, or DOJ, in 

cases regarding Federal preemption and drug labeling. These product liability cases 

involved state law challenges to FDA approved labeling. DOJ argued on behalf of 

FDA that such law suits are preempted by the Federal Food, Drug, and Cosmetic 

Act when State requirements cause drug products to be misbranded under Federal 

law. 

Next, you correctly reference the preamble to the proposed rule’s statement that 

it was not intended to preempt state actions. Because the rule itself is about the 

labeling of prescription drugs and is not a rule regarding preemption, and because 

the codified language did not expressly propose to preempt state law, FDA included 

the statement you reference in the proposed rule. However, FDA received comments 

about the product liability implications of the proposed rule and in responding to 

those comments, FDA mentioned its view of preemption law as it relates to the Physician Labeling Rule. In fact, the rule itself does not create new preemption law in 

any way; FDA was simply stating in the preamble what it believes the law already 

is with regard to implied conflict preemption. In addition, implied conflict preemption works to preempt state law when ever conflict with Federal law arises. The 

agency need not state in a proposed rule that implied preemption might arise for 

it to actually do so. 

With regard to the Executive Order relating to Federalism, although the preamble 

to the final rule merely stated the agency’s view of current implied conflict preemption law and is not part of the codified portion of the rule, FDA consulted with a 

variety of State officials and representative organizations that represent State officials and governments on its proposed course of action before the final rule was published. FDA considered their input before proceeding. 

Question. The FDA had a long-standing policy of allowing States to implement additional safety requirements that would compliment FDA’s rules and regulations. 

Why did the FDA recently stray from the long-standing policy and assert that any 

differing state law or requirement should be extinguished in favor of the Federal 

standards, especially in light of new evidence showing some FDA-approved drugs 

and medical devices are dangerous? 

Answer. All drug products have risks and their FDA-approved labeling is designed 

to reflect the known risks at any given time. Companies are put in the impossible 

situation of complying with conflicting Federal and state law when Federal law demands they use approved drug labeling and state law requires different warnings. 

The preamble language represents FDA’s view of preemption law and does not abrogate the State’s ability to implement safety requirements. States can do so as long 

as they do not attempt to impose requirements that conflict with Federal law nor 

frustrate the purposes of Federal law. In addition, the preamble language reflects 

FDA’s long standing views about Federal preemption law and does not reflect a 

change in FDA policy. 

Question. Unelected Federal agencies like the FDA cannot decide, on their own, 

to extinguish an entire area of state law without congressional authority. Given that 

Congress never gave the FDA the authority to wipe out numerous state safety laws 

and requirements, how does the agency find the authority to assert this position? 

Answer. FDA did not decide to extinguish an entire area of state law without congressional authority. The six examples in the preamble describe the types of instances where FDA believes that under the Supremacy Clause of the U.S. Constitution and relevant case law, Federal law trumps state law. For instance, state law 

can not require a warning that would misbrand the product under the Federal Food, 

Drug, and Cosmetic Act. Similarly, FDA is the expert agency charged by Congress 

in evaluating the safety and efficacy of drug products, and implied conflict preemption would arise if a State allowed a product liability suit for failing to warn about 

a specific risk that FDA excluded from the approved label. Companies could be held 
293 

liable under state law where state requirements neither conflict with Federal requirements nor frustrate Federal purposes. 

Question. The final rule makes clear the agency’s position that even if a drug company failed to warn doctors about a drug’s known potential dangers—but the warning label was approved by the FDA—the company would be immune from liability 

no matter how many patients are injured or killed. In those situations, why 

shouldn’t States be allowed to protect their own citizens and allow consumers to 

hold these drug companies accountable? 

Answer. All drug products carry risk. With regard to safety, FDA attempts to approve drugs that have favorable risk benefit balances, and to approve labeling that 

accurately reflects the known risks about the product. It is unfortunate that people 

are injured and killed by drug products, but FDA believes that Federal law mandates what warnings are appropriate in the form of approved drug labeling, and 

that state law requiring different warnings is trumped by Federal law under the 

doctrine of implied conflict preemption. 

ADDITIONAL SUBMITTED STATEMENT

Senator BENNETT. The subcommittee has received a statement 

from the Advanced Medical Technology Association which will be 

inserted in the record at this point. 

[The statement follows:] 

PREPARED STATEMENT OF THE ADVANCED MEDICAL TECHNOLOGY ASSOCIATION

AdvaMed is pleased to provide this testimony on behalf of our member companies 

and the patients and health care systems we serve around the world. AdvaMed is 

the largest medical technology trade association in the world, representing more 

than 1,300 medical device, diagnostic products and health information systems manufacturers of all sizes. AdvaMed’s members manufacture nearly 90 percent of the 

$86 billion of health care technology products purchased annually in the United 

States, and more than 50 percent of the $220 billion purchased annually around the 

world. AdvaMed members range from the largest to the smallest medical technology 

innovators and companies and directly employ about 350,000 workers in the United 

States. More than 70 percent of our members have less than $30 million in domestic 

sales annually. 

AdvaMed supports the President’s fiscal year 2007 budget request of $229,334,000 

for the Food and Drug Administration’s (FDA’s) Center for Devices and Radiological 

Health (CDRH). This inflationary increase amount satisfies the fiscal year 2007 requirements of the Medical Device User Fee and Modernization Act (MDUFMA— 

Public Law 107–250) and the Medical Device User Fee and Stabilization Act 

(MDUFSA—Public Law 109–43) and is crucial to ensure patients have timely access 

to lifesaving and life-enhancing products. 

Medical Device User Fees 

The increasing number and complexity of medical device submissions have overwhelmed CDRH over the last decade. When MDUFMA was crafted, review times 

for breakthrough products often exceeded over 400 days, despite a statutory ceiling 

of 180 days. To address these chronic delays, Congress passed MDUFMA in October 

of 2002 to supplement FDA’s resources and expertise and reduce review times for 

medical technologies. MDUFMA creates a predictable and adequate funding base for 

CDRH through a combination of industry-paid user fees and an increase in Congressional funding for the agency. Congress also passed MDUFSA last year to ensure 

the continuance of this critical program. 

Medical technology companies have already paid over $80 million in user fees and 

will add more than $150 million to CDRH resources during the first 5 years of the 

historic MDUFMA agreement. Although the additional appropriations did not materialize in the first 2 budget years of the MDUFMA agreement, Congress provided 

the nearly $26 million requested by the President for fiscal year 2005 and the President’s inflationary requested amount for fiscal year 2006. This, along with the fiscal 

year 2007 request for an inflationary increase, maintains the MUDFMA program. 

CDRH must be funded adequately to ensure the goals of MDUFMA are met, 

maintain the United States’ position in the rapidly advancing field of medical technology, and ensure patients’ timely access to needed medical breakthroughs. 

AdvaMed requests that the fiscal year 2006 Agriculture Appropriations bill fully 

fund CDRH at $229,334,000 to accomplish these important goals. 
294 

Additional Fees and Issues 

AdvaMed notes with interest that the President’s budget calls for collecting some $22 million for re-inspection fees. We are interested to learn more about the nature 

of these fees and to which services currently provided by the FDA they will apply. 

As was discussed last year during crafting of MDUFSA, we are still working with 

the FDA to learn how the current device user fees are used and generally have concerns about additional fees being applied without better understanding of their use 

and reflection of costs for providing the intended services. AdvaMed believes any additional fees must be additive to the baseline and must be associated with clearly 

identified increased performance to benefit the fee payer above and beyond current 

performance. 

Additionally, AdvaMed is concerned that, as in years past, attempts will be made 

in the fiscal year 2007 appropriations process to alter FDA policy and procedures 

related to the regulation of new and existing devices. AdvaMed generally opposes 

such attempts to alter fundamental FDA regulatory policy for medical devices on appropriations bills. We stand ready to offer our expertise on such matters should the 

need arise in the coming months. 

Background on the Medical Device User Fee Program 

America is on the cusp of an unprecedented revolution in medical technology driven by major private and public investments in scientific research and computer 

technology. Congress has also made a multi-billion dollar commitment to double 

medical research at NIH and unravel the human genome. Medical technology companies also doubled research and development spending in the decade of the 90’s. 

The vibrant medical technology sector has driven employment gains and a strong 

balance of trade much to the benefit of the American patient and economy over the 

last several years. At the same time, the growing number and complexity of new 

medical devices throughout the last decade, coupled with a drop in the absolute 

number of reviewers at CDRH has resulted in severe budget strain and increasing 

delays in approval of new medical technologies for patients. 

Prior to passage of MDUFMA, CDRH faced increasing challenges as a result of 

dwindling resources and accelerating innovation. Staff levels had dropped by 8 percent between 1995 and 2001. By 2001, the average total review time for premarket 

approval applications had risen to 411 days, more than twice the statutory review 

time. An FDA science panel warned at the time that increasingly rapid advances 

in technology ‘‘threaten to overwhelm’’ CDRH’s limited resources. 

On October 26, 2002, President Bush signed MDUFMA, which was unanimously 

passed by Congress, into law to give CDRH additional resources and expertise to 

help provide timely patient access to new medical technologies. It established an industry-funded user fee program to provide up to $35 million each year to help the 

agency meet rigorous new performance goals. 

Key regulatory reforms in MDUFMA are designed to: 

—Eliminate bureaucratic delays in review of combination products by establishing 

a new office to oversee these technologies 

—Authorize FDA to accredit third-party inspectors to audit medical technology 

companies with a good track record of compliance; 

—Encourage timely, thorough premarket reviews by codifying the PMA ‘‘modular 

review’’ program and extending the third-party review program for 510(k)s; 

—Permit paperless device labeling and electronic facility registration. 

—Strengthen FDA regulation of reprocessed disposable devices. 

From bioengineered organs and implantable artificial hearts to gene-based diagnostic tests and molecular imaging systems, America’s medical technology companies are developing thousands of promising new tests and treatments. AdvaMed believes full implementation of MDUFMA will help ensure these advances reach the 

millions of patients who need them. 

The user fee provisions in the law set fees for premarket approval applications, 

supplements and 510(k) submissions. Under the original law, these fees, combined 

with funds from increased appropriations, will provide FDA’s device program with 

more than $225 million in additional resources over the 5 years of the program. A 

letter agreement accompanying the bill sets review performance goals for the agency. 

To assure that these user fees would have an additive effect on the CDRH budget, 

MDUFMA requires CDRH receive a $15 million appropriations increase in each of 

the first 3 years of the program (fiscal year 2003, fiscal year 2004 and fiscal year 

2005) for a total of $45 million by the end of fiscal year 2005, or the user-fee program terminates in fiscal year 2006. These funds are designed to allow CDRH to 

upgrade information technology and other infrastructure necessary to carry-out a 

user-fee program and to meet the performance goals. 
295 

MDUFMA passed both houses of Congress on the last day of the regular session 

in October 2002. Owing to the extremely late timing of MDUFMA passage and a 

very tight budget climate, MDUFMA funding targets were not met in either of the 

first 2 years of the MDUFMA agreement. MDUFSA was passed last year to allow 

the program to continue despite the funding shortages in the early years of the program. MDUFSA also addressed the significant rate of increases in fees paid by industry. As Congress has struggled to provide its funding, industry paid user fees 

(per submission) that far exceed what was expected by MDUFMA. Increases of 35 

percent, 15.7 percent and a projected 20 percent for fiscal year 2006 for individual 

PMA submissions were troubling to industry, and we appreciate the steps Congress 

took to limit the rates of increase until the program can be reauthorized in 2007. 

To maintain the MDUFMA program and protect investments made by the Agency, 

American consumers and a leading source of job growth in our economy, we ask 

Congress to again meet the President’s fiscal year 2007 budget request for CDRH. 

Conclusion 

AdvaMed appreciates the Subcommittee’s efforts last year and urges them to continue on this path to fully fund MDUFMA and ready FDA for the coming era of 

biomedical innovation and patients that await timely access to the coming dramatic 

breakthroughs in medicine. AdvaMed requests that the fiscal year 2007 Agriculture 

Appropriations, Rural Development, Food and Drug Administration and Related 

Agencies bill fully fund CDRH at $229,334,000 to accomplish these important goals. 

We have concerns about the inclusion of new fees for the FDA to carry out core mission activities and urge the committee to refrain from altering FDA policy and procedures related to the regulation of new and existing devices in the fiscal year 2007 

appropriations process. 

AdvaMed thanks the committee for this opportunity to present our views and we 

look forward to working with you to help prepare FDA for the coming revolution 

in medical technology. 

SUBCOMMITTEE RECESS

Senator BENNETT. Thank you very much. 

The subcommittee is recessed. 

[Whereupon, at 11:25 a.m., Tuesday, March 14, the subcommittee was recessed, to reconvene subject to the call of the Chair.] 

(297) 

AGRICULTURE, RURAL DEVELOPMENT, AND 

RELATED AGENCIES APPROPRIATIONS FOR 

FISCAL YEAR 2007 

THURSDAY, MARCH 30, 2006 

U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, DC. 

The subcommittee met at 10 a.m., in room SD–192, Dirksen Senate Office Building, Hon. Robert F. Bennett (chairman) presiding. 

Present: Senators Bennett and Kohl. 

DEPARTMENT OF AGRICULTURE 

STATEMENTS OF: 

KEITH COLLINS, CHIEF ECONOMIST 

J.B. PENN, UNDER SECRETARY, FARM AND FOREIGN AGRICULTURAL SERVICES 

MARK REY, UNDER SECRETARY, NATURAL RESOURCES AND ENVIRONMENT 

ERIC M. BOST, UNDER SECRETARY, FOOD, NUTRITION, AND CONSUMER SERVICES 

RICHARD RAYMOND, M.D., UNDER SECRETARY, FOOD SAFETY 

CHARLES LAMBERT, ACTING UNDER SECRETARY, MARKETING 

AND REGULATORY PROGRAMS 

OPENING STATEMENT OF SENATOR ROBERT F. BENNETT

Senator BENNETT. The subcommittee will come to order. 

This is the subcommittee’s third and final hearing on the administration’s budget request for fiscal 2007 for the Department of Agriculture. 

And today, we have the following witnesses: Dr. Keith Collins, 

who is the Chief Economist at USDA; Dr. J.B. Penn, the Under 

Secretary for Farm and Foreign Agricultural Services; Mr. Mark 

Rey, the Under Secretary for Natural Resources and Environment; 

Mr. Eric Bost, the Under Secretary for Food, Nutrition, and Consumer Services; Dr. Richard Raymond, Under Secretary for Food 

Safety; and Dr. Charles Lambert, Acting Under Secretary for Marketing and Regulatory Programs. 

And if Dr. Lambert nods off during the hearing, we will understand and forgive him. He has just gotten off an airplane from 

Japan. We want to ask you, Dr. Lambert, about what you found 

when you got over there with the activities. 

They are accompanied by Mr. Dennis Kaplan, of the Office of 

Budget and Program Analysis. And we thank you all for being here 

this morning. 
298 

We are going to focus on the budget for the mission areas that 

each of you is responsible for, but not limited to those areas, if you 

have additional information to share with us. This is production, 

agriculture, trade, conservation, nutrition, food safety, animal and 

plant health, and marketing—a wide portfolio represented by this 

group of half dozen under secretaries at the table. 

Unfortunately, the Under Secretaries for Rural Development and 

Research, Education, and Economics could not join us this morning. But we will receive information from them later. The mission 

areas of the under secretaries before us demonstrate the breadth 

of the programs offered by USDA. 

Now the combined fiscal year 2007 discretionary budget request 

for the agencies under the jurisdiction of this group of under secretaries is $11.1 billion. And to compare where we are, discretionary 

funding provided in fiscal 2006 for these mission areas was approximately $11.3 billion. So there has been a cut. A real cut, not 

a Washington cut. 

A Washington cut is where you spend more than you did last 

year, but less than somebody thought you should. A real cut is 

where you spend less than you did last year, and there is a real 

cut of $200 million. And that represents a 2 percent decrease from 

fiscal 2006 levels. 

Now you drill down below that top number, and the fiscal 2007 

budget request for Under Secretary Rey is 21 percent below fiscal 

2006. For Secretary Raymond, it is 9 percent below fiscal 2006. For 

Secretary Bost, it is 2 percent on the overall number below 2006. 

Secretary Penn, 2 percent above 2006. And Acting Secretary Lambert is 11 percent above fiscal 2006. 

So while the 2 percent number is enough to get our attention as 

a whole, you get into the specifics, and you get even closer attention that has to be paid. And I am sure we will discuss that. 

Now some will say that the message from this is that it is better 

to be an acting under secretary than an under secretary. 

But I think that is coincidence. 

Now, before I turn to Senator Kohl for his remarks, I would like 

to specifically mention the efforts of the Farm Service Agency, Natural Resources Conservation Service, and the Food and Nutrition 

Service in the wake of Hurricane Katrina. 

The employees of these agencies rescued and fed people in the 

immediate aftermath, and they are currently helping the region recover from this terrible disaster. And we would be remiss if we did 

not formally acknowledge their work and the leadership that you 

gentlemen provided to them in that time of great national distress. 

Now, members who are not here are free to submit questions for 

the record. Senator Kohl and I may have some questions for the 

record, in addition to the round of questioning. 

But again, gentlemen, we welcome you here and thank you for 

your service. 

Senator Kohl. 

Senator KOHL. I join Chairman Bennett this morning in welcoming members of this panel who represent nearly all of the agencies within USDA. Your presence shows the diverse missions of the 

USDA, and this panel is an excellent representative of the many 

priorities that we must balance—farm support, nutrition, mar-
299 

keting, foreign aid, food safety, conservation. All of those mission 

areas are represented here today. 

American farmers are no strangers to adversity, harsh weather, 

or unpredictable markets. And the past year or so has led them to 

again face hard times. Storms have hammered the Gulf State 

coast. Drought has gripped much of the Nation. Wildfires have 

raged across prairie lands. Energy costs have cut profit margins, 

and foreign markets for certain products have been closed. 

Around the world, drought continues to devastate Africa. Millions of Americans were displaced because of the hurricanes and 

are still trying to find their way. Another case of mad cow disease 

and the impending arrival of avian flu remind us just how at risk 

we really are. 

It is not fortunate, therefore, that the President’s budget calls for 

cuts in nearly all of these areas. It proposes significant cuts to support programs for dairy and other producers. It imposes new fees 

for farmers and rural families seeking credit. It eliminates many 

ongoing conservation and research projects. It eliminates a small, 

but important elderly feeding program. It proposes food safety user 

fees that have been rejected time and again. 

On the other side of the coin, technology and market conditions 

are giving U.S. producers an important role in helping this Nation 

move closer to energy independence. However, our central challenge is to help guide these changes so that they benefit everyone 

and not just a few. 

Mr. Chairman, I look forward to working with you to develop an 

appropriations bill to help support all of USDA’s constituencies in 

what we all know is going to be a challenging year. 

Thank you. 

Senator BENNETT. Thank you very much. 

Let us go in the order in which I introduced the witnesses, which 

means, Dr. Collins, that we start with you. 

STATEMENT OF KEITH COLLINS

Mr. COLLINS. Thank you very much, Mr. Chairman, Mr. Kohl. 

Thanks for the opportunity to begin this hearing with some brief 

comments on the general economic environment for U.S. agriculture, which I hope will provide a backdrop for your deliberations 

on the USDA’s budget. 

Over the past 2 years, U.S. agriculture has experienced solid 

growth in both domestic and export demand. We have had recordhigh cattle, broiler, and milk prices; record-high net farm income 

in 2004; near record-high again in 2005; and record-high net 

wealth. 

Such accomplishments in agriculture occur only periodically. And 

when they occur, they provide the opportunity for savings and 

wealth creation that enables many farmers to maintain their operations during less prosperous times. 

Large harvests last fall, adverse weather, higher energy prices, 

the continued loss of Asian beef markets, the global spread of avian 

influenza are some of the challenges the farm economy must surmount in 2006. And facing these and other challenges, I would like 

to highlight several key developments. 
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First, global and U.S. farm product demand generally remains 

favorable. The United States and world economies show strong 

growth, despite this morning’s reduced GDP estimate for the fourth 

quarter, we are looking for an improvement in 2006. U.S. agricultural exports are forecast to be a record-high $64.5 billion, and U.S. 

food and industrial product demand is expanding. 

Second, most world commodity markets are moving toward better supply and demand balance. The record-high crops of 2004 

raised global stock levels and reduced market prices. But this year, 

we have generally lower world production, higher consumption, and 

as a result, stocks of major commodities are likely to decline, but 

they will still remain above the levels of 2 years ago. 

A notable exception is soybeans, where with very large South 

American harvests in prospect we once again will add to our already large supplies. 

The U.S. market is showing more of an imbalance than the world 

market as we face a second consecutive year of higher corn, soybeans, and cotton stocks. Last fall’s large harvests are more than 

offsetting increased corn demand for ethanol and strong soybean 

and cotton exports to China. 

Wheat and rice look a little more robust as poor weather is reducing the 2006 global wheat production prospects, and rice has 

the tightest global market in over 3 decades. All of this for this 

year means a mixed picture for U.S. crop prices compared to the 

across-the-board declines we saw last year. 

A third observation is that U.S. livestock and poultry production 

is now rising fairly rapidly. Meat and poultry production is expected to be up 3 percent this year, led by a 5 percent increase in 

beef production. As U.S. cattle numbers are increasing, we expect 

more live cattle imports from Canada. 

The large increase in meat supplies is reducing cattle, hog, and 

broiler prices. With progress in opening foreign beef markets, we 

expect higher beef exports in 2006, although they will remain well 

below the pre-BSE levels. Pork continues to benefit with another 

record-high export year in prospect. 

And for poultry, as a result of avian influenza, we have been reducing our export forecast. But at this point, we still expect exports 

to be slightly above a year ago. Leg quarters, in fact, have become 

quite a bargain. Prices ranged from 40 to 50 cents a pound late last 

fall. Last week, they were selling for under 20 cents a pound, which 

should attract foreign buyer interest. 

Milk production is expected to increase a hefty 3 percent for the 

second year in a row this year, and that will lead to lower prices, 

Milk Income Loss Contract payments, and a modest increase in 

price support purchases for nonfat dry milk. 

This year’s return to trend in many markets means somewhat 

lower farm cash receipts. Also, Government payments are expected 

to be down by $4.5 billion because of lower disaster, tobacco, and 

marketing loan payments. 

Higher interest rates and energy costs are expected to increase 

farm production expenditures again in 2006. Thus, we have lower 

revenues and higher costs, that suggests the U.S. farm income in 

2006 will drop from the unusually high levels of the last few years 

to the long-term average level. 
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PREPARED STATEMENT

Meanwhile, farm land values are expected to keep rising, net 

worth for farmers is expected to set another record high, and the 

farm debt-to-asset ratio is expected to drop to the lowest level in 

over 4 decades. 

While the coming year will present more of a financial challenge 

for many producers, a strong balance sheet, average cash flows, 

and the resiliency in managerial capacities of America’s farmers 

should help them meet this year’s challenges. 

Thank you, Mr. Chairman. 

[The statement follows:] 

PREPARED STATEMENT OF KEITH COLLINS

Mr. Chairman and Members of the Subcommittee thank you for the opportunity 

to discuss the general economic situation in U.S. agriculture as background for the 

Subcommittee’s review of the Department of Agriculture’s (USDA) fiscal year 2007 

budget submission. I will review the major factors affecting agricultural markets in 

the coming year and their implications for financial conditions in U.S. agriculture. 

U.S. agriculture experienced an extremely strong recovery following the economic 

slowdown at the start of this decade. With solid growth in domestic and export demand, large crop harvests, and record-high cattle, broiler and milk prices, net farm 

income reached a record high in 2004. In 2005, net farm income reached the second 

highest level on record despite a large increase in crop stocks which reduced crop 

prices; multiple hurricanes that shut down the central marketing infrastructure of 

the country; sharply higher energy prices that raised production, marketing and 

processing costs; continued loss of Asian beef markets; and the emergence of global 

Avian Influenza (AI) concerns. Adverse factors were partially offset by continued 

strong global demand for food, the ability of the agricultural system to rebound from 

shocks, a substantial increase in government support spending and continued strong 

livestock and livestock product markets. 

In the year ahead, global economic growth and food demand is expected to remain 

strong, but markets for major crops will face lower prices from higher stock levels 

built up from the large production levels the past 2 years. In addition, expansion 

of livestock and livestock product production following several years of profitable returns will likely reduce market prices somewhat. Higher interest rates and energy 

costs and continued disruption of markets due to animal diseases and weather are 

also likely to be factors affecting economic performance. Together, these factors suggest that net cash farm income will drop in 2006. Even with the contraction and 

more financial stress for some farming operations, the overall farm economy is expected to perform at long-term average levels with farm household income remaining strong and farm net worth continuing to increase. 

Global Economic Growth and Farm Product Demand 

The U.S. economy grew at 3.5 percent in 2005, down from 2004’s 4.2 percent but 

well above 2003’s 2.7 percent. For 2006, U.S. Gross Domestic Product (GDP) growth 

is expected to be slightly less than last year. The decline in the rate of growth in 

2006 from last year is expected to be due to slower growth in consumption, housing, 

and tight energy markets. Increased tightness in labor markets is likely also to be 

a factor. As the unemployment rate continues to decline, the lack of unemployed 

labor resources tends to slow real productivity and output growth. 

Foreign economic growth retreated in 2005 from 2004’s strong growth rate of 4.0 

percent, with most areas slowing, particularly Western Europe. This year, Western 

Europe is expected to have the strongest growth since 2000, and growth prospects 

appear good in Canada, Japan, East Asia and Mexico—all important markets for 

U.S. agriculture. Foreign economic growth is expected to rise to 3.4 percent in 2006, 

up from 2005’s 3.2 percent, which would be the second strongest rate of foreign economic growth since 2000. 

With the U.S. economy expected to have another year of steady growth, consumption expenditures on food remain positive, although the rate of growth is likely to 

decline to near 3.5 percent from the unusually high 5 percent levels in 2004 and 

2005. Average growth was less than 2.5 percent during the slowdown in 2001 and 

2002. This year, slower growth in consumer spending on food is likely, as consumers 

face heavier debt loads, higher energy costs, and are less likely to use household 

assets to finance consumption. Consumer spending, which accounts for two-thirds 
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of GDP, increased only 1.4 percent in the last quarter of 2005, sharply below the 

third-quarter, but a rebound is expected in the first quarter of 2006. 

U.S. Agricultural Trade 

Turning to foreign demand for U.S. agricultural products, our latest quarterly 

forecast for farm exports in fiscal year 2006, released in February, is a record-high 

$64.5 billion, up $2 billion from 2005’s record and unchanged from our last quarterly forecast. Stronger horticultural product, cotton, and beef exports are expected 

to show the greatest gains, while oilseeds and their products, the largest decline 

compared with fiscal year 2005. The increase in forecast beef exports assumes that 

the current suspension in Japanese imports is a temporary divergence from the earlier Japanese policy decision to resume imports. We have no information as to when 

imports will resume, but for the purposes of making a forecast, we simply assume 

Japan resumes imports of U.S. beef during the second quarter of 2006. 

U.S. agricultural imports are forecast at $63.5 billion, up $2 billion from our last 

forecast, and $5.8 billion more than in fiscal year 2005. Much of the increase from 

last year and from our last forecast is due to increased imports of coffee, cocoa, 

sugar, wine, beer, and fruits. The agricultural trade surplus for fiscal year 2006 is 

forecast at $1 billion, down from $3 billion in our last forecast and $4.7 billion in 

fiscal year 2005. 

While the agricultural export-weighted value of the dollar appreciated in the second half of 2005, at the start of 2006, it was still over 10 percent below the start 

of the 2003 level. The current period of strong foreign economic growth and continued effects of the decline in the value of the dollar from several years ago should 

show up in higher U.S. agricultural exports in the future and a modestly improving 

trade balance. However, the strong consumption growth in the United States and 

the consumer desire for horticultural products suggest the trade balance in the future will be much smaller than in the past. USDA’s long-run projections issued in 

February forecast U.S. agricultural exports rising to nearly $73 billion by fiscal year 

2010 and imports of $70.5 billion, leaving a trade surplus of a little over $2 billion. 

By 2015, projected exports equal projected imports. 

Crops: Supply, Demand, and Price 

The 2004/2005 marketing year began with relatively tight crop supplies, but global production of grains, oilseeds and cotton reached record-highs. As a result, stock 

levels increased, market prices declined, and farm program costs rose. In 2005/2006, 

global production was near-record high for most major crops, except for oilseeds production which set another record-high. Global total use this year is expected to be 

about the same as last year for rice and higher than last year for wheat, coarse 

grains, oilseeds, and cotton. With generally lower production and rising consumption, global stocks of most major commodities will decline this year but remain 

above the level of 2 years ago. In the United States, supplies for feed grains, cotton, 

rice and soybeans are at record highs this year, although not for wheat. Unlike the 

world market where major crop stocks are expected to decline, the large 2005-crop 

U.S. production levels are expected to cause an increase in corn, soybean, and cotton 

stocks this year, while wheat remains about the same and rice declines. 

World grain (wheat and coarse grain) consumption this year is expected to exceed 

last year’s record high and slightly exceed reduced world production. This will lead 

to a drawdown in world grain stocks, with world stocks as a percent of total use 

not excessive. The picture for oilseeds is quite different. Global oilseed production 

is forecast to be record high for the 10 consecutive year. And, in the coming year, 

this increase in production is expected to exceed the increase in consumption, resulting in higher global stocks. For soybeans, global stocks as a percent of use is forecast to exceed the high set in 1986. 

For the United States, the 2003/2004 grain and oilseed markets, which featured 

strong demand and tight supplies, was a major contributor to the record high farm 

income of the past 2 calendar years. The current market prospects have changed 

as a result of 2 consecutive years of large production and increasing stock levels. 

The U.S. soybean situation reflects the world situation, with U.S. stocks expected 

to be excessive, rising nearly 400 percent above the level of 2 years ago. This jump 

reflects our bumper harvest this past fall and strong competition from Brazil. For 

example, Brazil had record high soybean exports during the October-December 2005 

quarter, and a rebound in Brazilian production from last year’s drought is expected 

to boost Brazil’s soybean production this spring to 58.5 million tons, up from 53 million last year. Still, U.S. soybean prices this winter have been strong in the face 

of this prospective stock buildup, reflecting perhaps a risk premium, purchases by 

index funds, or other factors. For the year as a whole, the average price received 

for soybeans is expected to average $5.50 per bushel compared with $5.74 last mar-
303 

keting year. If the Southern Hemisphere crop and the increase in U.S. stocks materialize as expected, soybean prices will likely drop in the second half of the year and 

into 2006/2007. 

For 2006/2007, last year’s record-high soybean yields, pressure to rotate to more 

soybeans from corn, and high energy costs may cause some shifting of corn to soybeans. We expect an increase in soybean planted area of nearly 2 million acres to 

74 million. The increase in planted area, combined with trend yields, would result 

in production levels near expected demand; consequently, carryover levels would remain about the same. With continued heavy stocks and large expected supplies in 

South America, weaker prices are expected for soybeans. 

The U.S. corn market in 2005/2006 is expected to see another year of increasing 

carryover with ending stocks 150 percent above 2 years ago. Corn prices have rebounded from the extraordinary lows following the hurricanes when the transportation network was impaired and are expected to average $1.90 per bushel this 

year, down from $2.06 last year. As of the end of February, the average corn loan 

deficiency payment rate made so far on 9.75 billion bushels of corn (88 percent of 

the 2005 crop), was $0.44 per bushel, up sharply from $0.27 averaged on the 2004 

crop. In addition, producers received marketing loan gains averaging $0.42 per 

bushel on 569 million bushels of corn. 

Another important influence on this year’s and future corn and other crop markets is biofuels. While biodiesel production has increased from less than a half million gallons in 1999 to over 70 million in 2005, it remains relatively small, equivalent to 3 percent of soybean oil production. That is about where ethanol production 

was relative to corn production in 1983. Ethanol production this marketing year is 

expected to account for 14 percent of U.S. corn production. The USDA baseline, released on February 10, 2006, projects ethanol production will account for 22 percent 

of corn use by 2010 and drive corn prices to $2.60 per bushel. 

In 2004, ethanol accounted for about 2 percent of motor gasoline use in the United 

States on a btu basis. Under the Department of Energy’s baseline projections for 

motor gasoline and ethanol use to 2010, gasoline use is expected to grow 1.2 percent 

per year, and ethanol use at over 15 percent per year. Consequently, ethanol is expected to account for over one-quarter of the increase in motor gasoline use through 

2010. 

For 2006/2007, with soybean area expected to expand, high corn stocks, and high 

energy prices, corn planted area is forecast to decline 1.3 million acres to 80.5 million. Less acreage and stronger ethanol use is expected to reduce carryover and 

raise corn prices $0.25 per bushel, or 13 percent, over the 2005/2006 expected average farm price. 

The 2005/2006 wheat market is in good overall balance, with carryover stocks 

forecast to be nearly the same as last year and the year before. Farm prices are 

forecast to average $3.40 per bushel, the same as in each of the past 2 marketing 

years. After much of the 2005-crop had been marketed, wheat prices started to rise 

reflecting reduced 2006-crop prospects due to deteriorating weather conditions in 

the United States and abroad and a currently tight situation for hard red winter 

wheat. The last week of February saw the nearby Kansas City wheat futures price 

reach a 40-month high. 

For 2006/2007, wheat acreage, which has been trending down and is now 30 million acres less than 25 years ago, is expected to increase by less than 1 million acres 

to 58 million due to more winter wheat planted last fall. Fall seedings were up reflecting the better price prospects than other crops and good planting weather in 

the Corn Belt. Yield prospects for the 2006 crop are clouded by the intense drought 

in the South in areas west of the Mississippi River. Winter wheat in Texas was 

rated 89 percent poor or very poor as the end of February and the quality of the 

wheat crop is also reported to be down sharply in Oklahoma. Wheat yield problems 

are also expected in the Former Soviet Union, an important grain producer, where 

planted acreage of winter grains are down and a very harsh winter is likely to result 

in above average winterkill. These poor starting conditions suggest global wheat 

production will be down again in 2006/2007. If at this point we use trend yields, 

U.S. wheat production would be near expected demand and wheat 2006/2007 carryover levels and average farm price would remain about the same as this year. 

U.S. cotton production reached an all-time high in 2005/2006, and stocks are expected to rise for the second year in a row to 7 million bales, double the level 2 

years ago. The increase is expected despite a forecast of record-high exports of 16.4 

million bales, up 2 million from last season. About half of U.S. cotton exports are 

expected to go to China where domestic use is rising rapidly and production is down 

from last season. U.S. cotton mill use continues to trend down as textile mill activity 

continues to move offshore. Mill use this year is forecast at 5.9 million bales, compared with 6.7 million last season. Even with stocks increasing, farm prices of cot-
304 

ton have been running above year-ago levels as the world stock situation is tightening. 

For 2006/2007, lower production is expected to support prices as a third consecutive record-high crop is unlikely. With the prospect of continued strong exports, ending stocks will likely decline to more average levels in 2006/2007. 

Despite a near-record crop, a sharp increase in exports is moving the U.S. rice 

market into balance with only a slight rise in stocks expected this year compared 

with 2 years ago. Rice ending stocks are forecast at 26.5 million cwt., down from 

carry-in stocks of 37.7 million cwt. Medium grain stocks at 5.25 million cwt are the 

tightest on record (since 1982/1983–first year of supply and use statistics for rice 

by class). The global rice market is the major factor contributing to strong exports 

and steady U.S. farm prices, as global ending stocks are expected to be the lowest 

since 1982/1983, with the stocks-to-use ratio the lowest since 1974/1975. U.S. average farm-level rice prices are forecast at $7.80 per cwt. this season compared with 

$7.33 last season. 

For 2006/2007, a rebound from last fall’s reduced yields would raise rice production, but with production costs rising, producers are expected to reduce plantings 

causing production to decline for the second year in a row. As in 2005/06, total use 

is expected to outpace production leading to another decline in carryover stocks and 

higher rice farm prices in 2006/2007. 

Under the 2002 Farm Bill, lower prices for major crops trigger increases in 

counter-cyclical payments and marketing assistance loan benefits, thus increasing 

farm program costs. Based on current market price projections, counter-cyclical payments could reach $5.2 billion for the 2005/2006 crops, up from about $4.3 billion 

for the 2004/2005 crops and $0.5 billion for the 2003/2004 crops. Marketing assistance loan benefits (loan deficiency payments, marketing loan gains and certificate 

exchange gains) are projected to increase from less than $1 billion for the 2003/2004 

crops to $5.5 billion for the 2004/05 crops to about $6.1 billion for the 2005/2006 

crops. In addition, program crop producers receive nearly $5.3 billion annually in 

direct payments. 

The 2005/2006 sugar market has been very different from other crops this year 

as hurricane-reduced production has driven prices up substantially. Since this market is heavily regulated by USDA, the Department has substantially increased import quotas to meet this year’s demand and help relieve market tightness. In the 

current marketing year, sugar imports are forecast to reach 3.1 million tons, up 

from 2.1 million tons last year and 1.8 million tons 2 years ago. 

Fruits, vegetables, nursery and greenhouse products continue to provide good 

news for U.S. agriculture. They are expected to generate $49 billion in sales in 2006, 

similar to 2005, and account for 21 percent of farm cash receipts. Sales of these 

products are now about equal to the value of sales of program crops. U.S. horticultural exports are forecast at $16.3 billion and imports at $28.2 billion, indicating 

a continuing widening of the sector’s traditional trade deficit. 

Livestock & Livestock Products: Production, Demand and Price 

Turning to livestock and poultry markets, U.S. meat exports continue to be heavily influenced by animal diseases. Although we expect rising beef exports in 2006 

as trade with Japan eventually resumes, beef exports are still expected to be only 

about 40 percent of the level of 2003. Our current forecast assumes shipments to 

Japan resume in the second quarter and does not include any exports to South 

Korea. We expect the Korean market to open soon and at that time we will incorporate exports to South Korea into our forecasts. With continuing limitations on 

beef exports, pork exports are forecast to be 4 percent higher than 2005’s record 

high. Lower broiler prices this year would normally help increase exports. However, 

in January, the forecast of the rate of growth in poultry exports was lowered to a 

4 percent increase, half the rate of our prior estimate and down from last year’s 9 

percent increase, due to reduced consumption in some countries due to AI concerns. 

In recent weeks, AI has been found in Europe and other areas, suggesting USDA’s 

poultry export forecast could go lower in the months ahead. 

While animal disease issues are surrounding meat and poultry export prospects, 

U.S. production of meat and poultry is expected to be record-high in 2006, leading 

to record-high U.S. per capita meat and poultry consumption. With a 3 percent increase in U.S. meat and poultry production in 2006, a mixed export picture, and 

some slowing in the growth of overall consumer expenditures, lower live animal, 

meat and poultry prices are expected in 2006. 

Even though several countries continued to block imports of U.S. beef, U.S. livestock markets were very strong in 2005. The index of prices received for meat animals was an all-time high, 4 percent above 2004 and 17 percent above 2003. Although U.S. cattle numbers increased for the first time in 9 years in 2005, cattle 
305 

slaughter continued to drop. For 2006, the situation will change. First, the U.S. cattle inventory on January 1, 2006 was up 2 percent over last year, indicating that 

producers are now moving well into the expansion phase of the cattle cycle. Second, 

live cattle imports from Canada will be up in 2005. Third, higher carcass weights 

are expected. And lastly, drought conditions in Texas and Oklahoma are causing 

some producers to market additional animals and to place cattle in feedlots sooner. 

Consequently, cattle slaughter and beef production are expected to increase a strong 

5 percent in 2006. Despite the increase in output, choice fed cattle prices are expected to decline only about 2 percent to about $85 per cwt., and retail beef prices 

are expected to be down about 3–4 percent. 

Despite sustained profitability in hog production, hog producers have been cautious about expanding the past few years. Still, with back-to-back years of good returns, we expect hog slaughter and pork production to be up about 3 percent in 2006 

following a modest increase of 0.8 percent in 2005. Hog prices are expected be average $44 per cwt. in 2005, down about 13 percent from last year, but still stronger 

than during the 1998 to 2003 period. 

Broiler production is expected to again be record high in 2006. A nearly 4 percent 

increase in production in 2005 was driven by record-high broiler prices in 2004 and 

low feed prices. Although broiler prices fell about 5 percent in 2005, they remained 

fairly strong and with favorable feed costs, broiler production is expected to be about 

2 percent higher in 2006. Wholesale broiler prices are expected to average 67 cents 

per pound, down from 70.8 cents last year. However, this forecast was made prior 

to the finding of AI in Europe and the current acceleration in its spread. As AI has 

become more widespread, world poultry trade has slowed, which is now adversely 

affecting U.S. poultry exports and broiler prices. In late February, prices of leg quarters, the principal U.S. broiler export product, had fallen to the low 20-cents-perpound range, after reaching the high 40-cents-per-pound range in late fall. 

Milk, like meat and poultry, is coming off 2 years of strong prices. Widespread 

forage problems and reduced rBST are largely behind producers now, and following 

record and near record milk prices in 2004 and 2005, milk production is accelerating. U.S. milk production in January 2006 was up an extremely strong 5 percent 

over January 2005. In 2004, milk production was flat; in 2005, it rose 3.3 percent; 

and in 2006, it is forecast to be up nearly 3 percent despite declining prices. Increased milk production this year is expected to exceed the trend growth in dairy 

product demand, consequently, the all-milk price is forecast to average $13.45 per 

cwt. in 2006, down 10 percent from 2005. Payments were triggered under the newly 

reauthorized Milk Income Loss Contract Program beginning in December 2005, following essentially no payments from the second quarter of 2004 through the third 

quarter of 2005. The payment rate for March will be $0.41 per cwt. the highest rate 

since March 2004. Cheese prices have recently declined to near support levels and 

price support purchases of nonfat dry milk and cheese are likely during 2006. There 

were no purchases of dairy products under the milk price support program in 2005. 

Farm Income and Government Payments 

In 2004, net farm cash income reached nearly $86 billion, up from the previous 

record of $72 billion in 2003. Declining crop prices and increasing production expenses caused net cash farm income to decline to $83 billion in 2005. In 2006, the 

farm economy is pulling back from the strong crop prices and production levels in 

2003 and 2004 and the record livestock and milk prices of 2004 and 2005. With 

higher crop stocks, reduced crop prices, and a modest decline in livestock sector receipts, the value of 2006 farm marketings is expected to decline about $7 billion 

from the last year’s near record $239 billion, with two-thirds of the decline in crops. 

With further increases in production expenses and lower government payments, net 

cash farm income is forecast to fall to $65 billion in 2006, or about equal to the previous 10-year average. 

In 2005, government payments to producers were a record high $23 billion, up 

from $13 billion in 2004. In 2005, increased marketing loan costs aggravated by the 

marketing system disruption caused by the hurricanes, increased counter-cyclical 

payments, ad hoc disaster assistance, and tobacco program buyout payments all contributed to higher government payments. Payments to farmers are expected to decline by $4.5 billion in 2006 due to lower ad hoc disaster payments, marketing assistance loan outlays, and tobacco buyout payments. 

Cash production expenses are expected to rise 4 percent in 2006 following increases of 6 percent in 2005 and 5 percent in 2004. Energy-related input (fertilizer, 

lime, fuels, oils, and electricity) and interest expenses increased by $6.5 billion in 

2005 and are expected to rise by over $4 billion or 10 percent in 2006. For 2006, 

the Department of Energy projects that diesel and natural gas will cost another 5 

percent more on top of the increases of around 35 percent that these fuels saw in 
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2005. Corn, a heavy user of energy for fertilizer, irrigation and grain drying, can 

be used to illustrate the impact of higher energy costs on crop returns. For 2006, 

energy is expected to add about 5 cents to national average corn operating costs 

compared with a year ago and 23 cents more than 2 years ago. These rising costs 

will reduce farm income and have some effect on crop acreage and production in 

2006. This forecast increase in energy expenses assumes producers will not alter 

their production methods to reduce energy use and lower costs, and of course, many 

will do so. 

Net farm income is expected to decline for all major types of crop and livestock 

farms and in all production regions. Farm household income is also expected to decline for the first time in 7 years, but at over $80,300, would still be 20 percent 

higher than in 2003 and well above the average of all U.S. households. 

Despite the drop in income and the increase in interest rates, we project that farm 

real estate values will rise 6.5 percent in 2006, down slightly from the 7 percent 

gain in 2005. Another land value increase would continue the recent strong improvement in the farm sector balance sheet. The ratio of real estate value to net 

cash farm income, a concept similar to a price-to-earnings ratio, is forecast to spike 

up in 2006 to the highest level since the early 1980s. If that ratio were to stay high 

over the next few years, it would suggest the increase in farmland values may not 

be sustainable. For the last 3 years in a row, farm net worth has gone up by an 

average of nearly $95 billion per year, which is more than the increase in farm income each year and much more than the $6 billion annual increase in farm debt. 

That is expected to be true again in 2006. Farm net worth, or equity is now a record 

high at $1.4 trillion and the debt-to-asset ratio at the end of 2006 is forecast at 13.1 

percent, the lowest in 45 years. 

A return to average national farm income, lower enterprise and regional farm income, lower cash margins, and an increase in farm debt do not indicate an impending financial crisis in U.S. agriculture. Yet, they do suggest there is likely to be 

greater financial stress for an increasing number of producers. That stress is likely 

to show up in tighter credit standards, delayed loan repayments and loan extensions, and more demand for USDA credit guarantees. The coming year will present 

more of a financial challenge for U.S. agriculture than in recent years. In addition, 

agriculture will have to contend with questions over the effect of rising interest 

rates on the durability of the U.S. economic recovery, the value of the dollar, issues 

raised by the Federal budget deficit, trade negotiations, bird flu, BSE, oil prices, and 

terrorism. Producers will likely need to draw more on their resiliency and managerial capabilities in 2006 than during in the past couple of years of abnormally high 

farm income. 

That completes my comments and thank you. 
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Senator BENNETT. Thank you very much. 

Dr. Penn. 
313 

STATEMENT OF J.B. PENN

Mr. PENN. Thank you, Mr. Chairman. 

I am pleased to be here with you and Senator Kohl again this 

year and to present the budget and program proposals for the 

Farm and Foreign Agricultural Services mission area. As you will 

recall, this mission area is comprised of the Farm Service Agency, 

the Risk Management Agency, and the Foreign Agricultural Service. 

The budgets we are discussing today provide the resources needed to ensure our continued ability to implement our programs effectively. Although the budget is constrained by the need to reduce 

the Federal deficit, it meets our priorities and ensures our continued efforts on behalf of America’s farmers and ranchers. 

I would like to discuss the three agencies and their budgets individually, beginning first with the Farm Service Agency (FSA). FSA 

is the lead agency, as you know, for delivering farm assistance, and 

the budget places a priority on maintaining and enhancing our 

ability to provide efficient, responsive services to all producers. 

Recently, FSA has faced a series of program implementation 

challenges that have required the full commitment of agency resources. Last year and this year, several new disaster programs 

have been implemented. We have had the tobacco buyout program 

while continuing administration of the 2002 Farm Bill programs. 

The 2007 budget is designed to ensure the agency’s continued delivery of its services. The budget provides a total program level for 

FSA salaries and expenses of nearly $1.4 billion, a net increase of 

$86 million above 2006. Now this requested level will support a 

ceiling of about 5,250 Federal staff-years and 9,400 non-Federal 

staff-years, and temporary staffing will remain at the 2006 levels. 

FSA also provides a variety of direct loans and loan guarantees 

to farm families who would otherwise be unable to obtain the credit 

they need to continue their operations. And by statute, a substantial portion of the direct loan funds are reserved each year for assistance to beginning, limited resource, and socially disadvantaged 

farmers and ranchers. 

The 2007 budget includes funding for about $930 million in direct loans and $2.5 billion in loan guarantees. This level of funding 

is consistent with the actual program use in 2005, and we believe 

these proposed loan levels will be sufficient to meet the demand in 

2007. 

Turning to the Risk Management Agency (RMA), the Federal 

Crop Insurance Program is another part of the strong safety net 

that is available to our Nation’s agricultural producers. Last year 

the crop insurance program provided about $45 billion in protection 

on over 246 million acres out of the total crop land base of about 

325 million acres. 

We project that for last year, the total indemnity payments will 

be about $3.3 billion. And despite all of the droughts and freezes 

and floods and hurricanes, that is about the same level of indemnities that we had in 2004. Our current projection shows that for 

the coming year, we will insure about $49 billion worth of product. For salaries and expenses of RMA, the budget provides $81 mil- lion in discretionary spending. That is an increase of $4.5 million 
314 

from the 2006 level, and this net increase includes additional funding for information technology (IT) and increased staff-years to improve our monitoring of the financial health of the insurance companies. 

The budget also includes a proposal to implement a participation 

fee to fund IT modernization and maintenance costs. The fee would 

be assessed on the insurance companies that participate in the program and that benefit from the subsidies paid by the Federal Government. 

Finally, let me turn to the Foreign Agricultural Service (FAS) 

and our international activities. I am pleased to report that we 

have made considerable progress in trade expansion activities this 

past year, but challenges remain. 

FAS has been very actively involved in supporting all of the 

trade negotiations, including the comprehensive World Trade Organization (WTO) negotiations, but also the several bilateral and regional free trade negotiations. It has been very actively involved in 

reopening the markets closed because of bovine spongiform 

encephalopathy (BSE) and other animal and plant diseases. And 

the agency continues to work to expand foreign sales and, at the 

same time, provide foreign food aid. 

The proposed budget provides a program level of $162 million for 

2007. That is an increase of $11 million above 2006. This funding 

is proposed to meet higher overseas operating costs in the agency’s 

overseas posts, including increased payments to the Department of 

State for administrative services that are provided in the embassies in which our personnel are posted. 

Funding is also included for FAS’s contribution to the Capital Security Cost Sharing Program operated by the State Department. 

The budget also includes a small increase for trade capacity building. This initiative assists developing countries in adopting policies 

that meet WTO standards and to adopt regulatory systems that are 

transparent and science based and modeled after ours. 

The budget also includes a projected program level of $1.3 billion 

for the Public Law 480 program, and the budget proposes that all 

of the Public Law 480 funding will be through Title II donations. 

This reflects our recent experience in which an increasing share of 

the foreign food assistance has been directed to emergency situations, where such aid is critical to preventing famine and saving 

lives. 

For the McGovern-Dole Food for Education Program, the budget 

continues funding at the 2006 level. 

So, in conclusion, Mr. Chairman, our 2007 budget and program 

proposals provide the resources we need to continue the important 

work that these agencies do on behalf of America’s farmers and 

ranchers. 

PREPARED STATEMENTS

We certainly appreciate the support for our mission area that we 

have received from this committee in past years, and we look forward to working with you in the future. 

Thank you. 

[The statements follow:] 
315 

PREPARED STATEMENT OF J.B. PENN

Mr. Chairman and Members of the Committee, I am pleased to appear before you 

this morning to present the 2007 budget and program proposals for the Farm and 

Foreign Agriculture Services (FFAS) mission area of the Department of Agriculture 

(USDA). The FFAS mission area is comprised of three agencies: the Farm Service 

Agency, Risk Management Agency, and Foreign Agricultural Service. 

Statements by the Administrators of the FFAS agencies, which provide details on 

their budget and program proposals for 2007, have already been submitted to the 

Committee. My statement will summarize those proposals, after which I will be 

pleased to respond to any questions you may have. 

Mr. Chairman, the FFAS mission area and the programs it carries out are critical 

for meeting three of the Department’s strategic objectives: enhancing the international competitiveness of American agriculture in order to increase export opportunities; enhancing the competitiveness and sustainability of the rural and farm 

economies; and protecting and enhancing the Nation’s natural resource base and environment. By providing the diverse array of programs offered by our agencies— 

price and income support, farm credit assistance, conservation and environment incentives, risk management tools, and trade expansion and export promotion programs—we are in the forefront of efforts to accomplish the Department’s mission of 

service to American agriculture. 

The 2007 President’s budget provides the resources needed to ensure continuation 

of these diverse activities. Although the budget does include proposals for savings 

in both discretionary and mandatory programs, as part of government-wide efforts 

to reduce the deficit, it meets our priorities and ensures our continued efforts on 

behalf of America’s agricultural producers. 

FARM SERVICE AGENCY

The Farm Service Agency (FSA) is the lead agency for delivering farm assistance. 

It is the agency that the majority of farmers and ranchers interact with most frequently. Producers rely on FSA to access farm programs such as direct and countercyclical payments, commodity marketing assistance loans, loan deficiency payments, 

farm ownership and operating loans, disaster assistance, and certain conservation 

programs, such as the Conservation Reserve Program (CRP). Because FSA is the 

prime delivery agency for most of the major farm assistance programs, the budget 

places a priority on maintaining and enhancing FSA’s ability to provide efficient, responsive services to our producers. 

Farm Program Delivery 

FSA has faced a series of program implementation challenges that have required 

the full commitment of agency resources. Last year, FSA implemented the Emergency Hurricane Supplemental Appropriations Act of 2005, which included more 

than a dozen programs and $2.9 billion for farmers and ranchers who were affected 

by drought and other weather-related problems in 2003 and 2004. FSA also implemented an emergency relief program, supported with $600 million of section 32 

funds, for Florida’s citrus, nursery, and vegetable growers who were affected by 

three hurricanes in 2004. 

In addition, FSA was required to implement the tobacco buy-out program during 

2005, with very little lead time to prepare. Under the program, transition payments 

of about $950 million per year are being made to tobacco quota holders and producers, ending all elements of the Federal tobacco price support program effective 

with the 2005 crop. 

Although the emergency supplemental provided some funds to cover administrative costs of delivering disaster assistance, they were not sufficient to meet those 

costs fully. As a result, FSA had to cut expenses aggressively in all but the most 

essential areas and was forced to divert IT resources away from planned modernization to provide the resources needed to implement these new programs. In 2006, 

FSA is again meeting the challenge of delivering disaster assistance to producers 

affected by hurricanes in the Gulf Coast states. 

In the fall of 2005, FSA reduced permanent staffing through the use of buy-out 

authority to adjust staffing due to workload changes resulting from elimination of 

the tobacco program and other changes. Although the demands on FSA’s resources 

have tightened and workload and staffing needs have shifted, the FSA office structure has remained stable for several years. FSA now has hundreds of county offices 

with three or fewer employees that are increasingly expensive to maintain and are 

hard pressed to provide effective customer service. As you know, the agency terminated its ‘‘FSA Tomorrow’’ plan to close and consolidate county offices, but the need 

to streamline operations and office structure continues. FSA has asked its State Ex-
316 

ecutive Directors to conduct independent, local-level reviews of the offices and operations in their states. This ongoing effort will follow the guidelines established in 

the 2006 Agriculture Appropriations Act with respect to public meetings, Congressional notification, and communications with affected producers. This will ensure 

the most appropriate adjustments are made, consistent with local needs and within 

the constraints of available resources. 

The 2007 budget is designed to ensure the agency’s diverse efforts can move for- ward. It provides a total program level for FSA salaries and expenses of nearly $1.4 

billion, a net increase of $86 million above 2006. The requested level will support 

a ceiling of about 5,250 Federal staff years and 9,425 non-Federal staff years. Staff 

levels have been reallocated among FSA’s program activities to reflect the decreased 

workload associated with the tobacco program and other areas. Permanent Federal 

staff years will be reduced by 65 and permanent full time non-Federal county staff 

years will be reduced by 24, while temporary staff years will remain at 2006 levels. 

FSA is taking other actions designed to improve their services on behalf of America’s producers. Among the most important of these are information technology (IT) 

improvements, including the adoption of web-based applications that allow farmers 

to sign up for programs, as well as receive payments, on line. This reduces the paperwork burden significantly and provides for more timely receipt of payments. 

Critical to the success of this endeavor is the need to replace farm program delivery software now running on FSA’s remaining legacy computer system which is obsolete and incapable of meeting future needs. In order to complete the transition to 

the modern web-based technology system, the budget proposes $14 million for a 

multi-year investment in streamlining farm program delivery processes and software to allow retirement of the legacy system. 

Commodity Credit Corporation 

Domestic farm commodity price and income support programs are financed 

through the Commodity Credit Corporation (CCC), a Government corporation for 

which FSA provides operating personnel. CCC also provides funding for conservation programs, including the CRP and certain programs administered by the Natural Resources Conservation Service. In addition, CCC funds most of the export programs administered by the Foreign Agricultural Service. 

In 2005, CCC outlays were relatively high at $20.2 billion due to recent large 

crops that have contributed to growing supplies and weakened prices. CCC outlays 

are now projected to reach $21.3 billion in 2006 and $20.2 billion in 2007 under current law, which reflects the recent enactment of the Agricultural Reconciliation Act 

of 2005. 

In light of the continuing high levels of CCC outlays and the continuing budget 

deficit, the President’s budget again includes a number of proposals to reduce the 

level of farm spending consistent with the government-wide goal of reducing the 

Federal deficit. These proposals are designed to work within the existing structure 

of the 2002 Farm Bill and achieve savings over the next 10 years. The proposals, 

which are spread across the entire agricultural sector, include reducing commodity 

payments across the board by 5 percent; tightening payment limits; lowering dairy 

program costs; and reinstituting a 1.2 percent marketing assessment on sugar processors as well as a 3 cent per hundredweight assessment on milk marketings. 

These proposals are expected to save $1.1 billion in 2007 and $7.7 billion over 10 

years. The majority of the savings is achieved through the across-the-board reduction in program payments. 

Conservation Programs 

The 2002 Farm Bill provided for significant growth in the Department’s conservation programs. The CRP, which is funded by CCC and administered by FSA, is the 

Department’s largest conservation/environmental program. The Farm Bill extended 

CRP enrollment authority through 2007 and increased the enrollment cap by 2.8 

million acres to a total of 39.2 million acres. 

As of January, CRP enrollment totaled 35.9 million acres. The 2007 budget assumes general signups will be held this year and next to enroll about 2.5 million 

and 4.9 million acres, respectively. In addition, a major effort is underway beginning 

this year to re-enroll or extend a large number of CRP contracts that will begin expiring over the 2007–2010 period. 

Our current baseline assumptions are that CRP acreage will increase gradually 

to 39.2 million acres by 2008 and remain at that level through 2016. 

FARM LOAN PROGRAMS

FSA plays a critical role for our Nation’s agricultural producers by providing a 

variety of direct loans and loan guarantees to farm families who would otherwise 
317 

be unable to obtain the credit they need to continue their farming operations. By 

law, a substantial portion of the direct loan funds are reserved each year for assistance to beginning, limited resource, and socially disadvantaged farmers and ranchers. For 2007, 70 percent of direct farm ownership loans are reserved for beginning 

farmers and 20 percent are reserved for socially disadvantaged borrowers, who may 

also be beginning farmers. The 2007 budget includes funding for about $930 million in direct loans and $2.5 

billion in guarantees. This level of funding is consistent with actual program use 

in 2005, and we believe these proposed loan levels will be sufficient to meet demand 

in 2007. 

The 2007 budget provides funding of $4 million for the Indian Land Acquisition 

program, double the amount provided in 2006. For the Boll Weevil Eradication loan 

program, the budget requests $59 million, a reduction of $41 million from 2006. This 

reduction is due to the successful completion of eradication efforts in several areas. 

The amount requested is expected to fully fund those eradication programs operating in 2007. 

For emergency disaster loans, no additional funding is requested. As of January, about $175 million is available for use in 2006, and sufficient funding is expected 

to carry forward into 2007 to assist producers whose farming operations have been 

damaged by natural disasters. 

RISK MANAGEMENT AGENCY

The Federal crop insurance program represents one of the strongest safety net 

programs available to our Nation(s agricultural producers. It provides risk management tools that are compatible with international trade commitments, creates products and services that are market driven, harnesses the strengths of both the public 

and private sectors, and reflects the diversity of the agricultural sector. In 2005, the crop insurance program provided about $45 billion in protection on 

over 246 million acres. Our current projection is that indemnity payments to producers on their 2005 crops will be about $3.3 billion, which is about the same level 

as in 2004. Our current projection for 2007 shows a moderate increase in the value 

of protection to more than $49 billion. This projection is based on the Department(s 

latest estimates of planted acreage and expected changes in market prices for the 

major agricultural crops, and assumes that producer participation remains essentially the same as it was in 2005. 

The 2007 budget requests an appropriation of ‘‘such sums as are necessary’’ as 

mandatory spending for all costs associated with the program, except for Federal 

salaries and expenses. This level of funding will provide the necessary resources to 

meet program expenses at whatever level of coverage producers choose to purchase. 

The Risk Management Agency (RMA) is making significant progress in preempting fraud, waste, and abuse through the expanded use of data mining. RMA 

has preempted million of dollars’ worth of improper payments and continues to identify ways to reduce program abuse. RMA continues to use data mining to identify 

anomalous producer, adjuster, and agent program results and, with the assistance 

of FSA offices, conducts growing season spot checks to ensure that new claims for 

losses are legitimate. These spot checks based on data mining have resulted in a 

significant reduction in anomalous claims for certain situations. 

Despite the successes of the crop insurance program, more can be done to improve 

its effectiveness. One of the overarching goals of the crop insurance program has 

been the reduction or elimination of ad hoc disaster assistance. However, in recent 

years Congress has passed four disaster bills covering 6 crop years and costing the 

government about $10 billion. Therefore, the budget includes a proposal to link the 

purchase of crop insurance to participation in farm programs, such as the direct and 

counter-cyclical payment programs. This proposal would require farm program participants to purchase crop insurance protection for 50 percent, or higher, of their expected market value or lose their farm program benefits. This level of coverage is 

nearly double the amount of protection currently provided at the catastrophic level. 

Additionally, participants in the Federal crop insurance program would contribute 

to the President’s deficit reduction program. The budget includes several proposals 

that would reduce subsidies paid to producers and approved insurance providers. In 

total, these changes are expected to save about $140 million annually beginning in 

2008. 

Salaries and Expenses 

For salaries and expenses of RMA, $81 million in discretionary spending is proposed, an increase of $4.5 million from the 2006 level of about $77 million. This net 

increase includes additional funding for IT, increased staff years to improve monitoring of the insurance companies, and pay costs. 
318 

The budget also includes a proposal to implement a participation fee to fund IT 

modernization and maintenance costs. The fee, of about one-half cent per dollar of 

premium, would be assessed on the insurance companies that participate in the program and benefit from the subsidies paid by the Federal Government. The fee will 

be collected beginning in 2008 and will initially supplement the annual appropriation to provide for modernization of the IT system. After modernization is completed, the fee would be shifted to maintenance and would at that point reduce the 

discretionary appropriation required by RMA. 

RMA has an aging IT system; the last major overhaul occurred about 12 years 

ago. At that time, the crop insurance program offered seven plans of insurance covering roughly 50 crops and providing about $14 billion in protection. In 2005, protection was offered through more than 20 plans of insurance covering 370 crops, plus 

livestock and aquaculture, and providing over $44 billion in protection. 

Several major changes also have occurred over the years in the way producers 

protect their operations from losses. In 1994, there were no plans of insurance that 

offered protection against changes in market prices. Today, over 50 percent of the 

covered acreage has revenue protection and nearly 62 percent of the premium collected is for revenue based protection. In addition, the Agricultural Risk Protection 

Act (ARPA) of 2000 authorized the development of insurance products to protect 

livestock. RMA has implemented several new livestock price protection products. Because livestock production occurs year-round, these products must be priced and 

sold in a different manner than traditional crop insurance. The advent of new types 

of insurance, not contemplated when the IT system was designed, has placed tremendous strain on an aging system. 

ARPA also instituted new data reconciliation, data mining, and other anti-fraud, 

waste, and abuse activities that require the data to be used in a variety of new 

ways. The current IT system was not designed to handle these types of data operations. Consequently, the data must be stored in multiple databases which increases 

data storage costs and processing times, and increases the risk of data errors. 

Finally, I would note that the budget for RMA includes a request for 15 additional 

staff years. This increase will provide RMA with the additional resources necessary 

to improve oversight and internal controls of the insurance providers. In 2002, 

American Growers’, the Nation’s largest crop insurance company, failed. RMA, in 

concert with the Nebraska Department of Insurance, did a tremendous job of ensuring that both the producers’ and the Government’s interests were protected, indemnities paid, and policies transferred to other insurance providers. The additional 

staffing will help to ensure that a similar failure does not occur in the future. 

FOREIGN AGRICULTURAL SERVICE

I would now like to turn to the international programs and activities of the FFAS 

mission area. One of the goals that Secretary Johanns has established for the Department is to enhance the international competitiveness of American agriculture 

in order to provide increased export opportunities for our farmers and ranchers. The 

FFAS mission area is a primary contributor to that goal through activities that expand and maintain opportunities for U.S. agricultural exports; enhance the global 

sanitary and phytosanitary system to facilitate agricultural trade; and support 

international economic development and trade capacity building. 

We made noteworthy progress in our export expansion activities during the past 

year. During fiscal year 2005, the value of U.S. agricultural exports was once again 

at a record level, and we are presently on course to set another record—$64.5 billion—during fiscal year 2006. 

One of our highest priorities this past year was working to achieve an agreement 

on reform of agricultural trading practices in the Doha Round of multilateral trade 

negotiations. Last fall, the United States tabled an ambitious proposal to advance 

the negotiations that we believe provides the basis for their successful conclusion. 

Although the ambition of our proposal has not been matched by others, Members 

of the World Trade Organization (WTO) have agreed to reach agreement on the modalities (i.e., reduction formulas and methodologies) for a final agreement by the end 

of April, and we are working diligently to achieve that goal. We have a tremendous 

opportunity to achieve significant reforms in this Round, and we are committed to 

achieving a successful outcome that will provide new and meaningful opportunities 

for export growth in future years. 

Regional and bilateral trade agreements are another, very important avenue for 

opening new markets. Just last month, the President announced that South Korea 

and the United States intend to negotiate a bilateral free trade agreement that will 

offer significant opportunities for increased sales of U.S. food and agricultural products in what is already our sixth largest overseas market. In addition, we have re-
319 

cently completed free trade negotiations with Peru, Colombia, and Oman and are 

continuing negotiations with an array of other countries that are expected to provide 

new opportunities for U.S. agricultural sales. 

One of our other very important priorities during the past year has been our efforts to recover access to overseas markets for U.S. beef that were closed following 

the discovery of bovine spongiform encephalopathy (BSE) in the United States in 

2003. Despite our recent setback with Japan in this regard, we have made significant progress. To date, we have regained at least partial access to 28 markets (not 

including Japan). Restarting shipments to Japan is now of paramount importance. 

We are confident the steps Secretary Johanns has directed be implemented in response to recent developments in Japan lay the groundwork for resumption of sales 

there. The Department has provided a full report on this matter to Japan, and we 

will continue to engage our Japanese counterparts to achieve our objective of resuming sales in near future. 

Salaries and Expenses 

The Foreign Agricultural Service (FAS) is the lead agency for the Department’s 

international activities and is in the forefront of our efforts to expand and preserve 

overseas markets. Through its network of 77 overseas offices and its headquarters 

staff here in Washington, FAS carries out a wide variety of activities that contribute 

to the objective of providing increased export opportunities for our agricultural products. 

During the past year, FAS has continued to review its activities and operations 

in order to ensure that it is structured appropriately to address priority issues that 

will characterize global agriculture in the 21st century. As a result of the agency’s 

review, FAS has increased its focus on inherently governmental functions such as 

trade negotiations, enforcement of trade agreements, and strategic management of 

country relationships. In response to the increased importance of sanitary and 

phytosanitary issues for trade, FAS has stepped up its monitoring and enforcement 

activities and increased its efforts through international standard-setting bodies to 

support the development of science-based regulatory systems. It also has increased 

its emphasis on trade capacity building activities that facilitate achievement of the 

U.S. trade agenda. 

With trade of such critical importance to the future health and vitality of American agriculture, it is imperative that FAS have the resources needed to continue 

to represent and advocate for American agriculture on a global basis and to open 

new markets overseas. The budget provides a program level of $162 million for FAS 

in 2007, an increase of $11 million above 2006. This includes funding to meet higher 

overseas operating costs at the agency’s overseas posts, including increased payments to the Department of State for administrative services provided at overseas 

posts. 

Funding is also included for FAS’ contribution to the Capital Security Cost Sharing Program. Under that program, agencies with an overseas presence in U.S. diplomatic facilities are contributing a proportionate share of the construction of new, 

safe U.S. diplomatic facilities over a 14-year period. 

The budget also includes funding to support a new Trade Capacity Building initiative that supports U.S. trade policy objectives. By assisting developing countries to 

adopt policies that meet WTO standards and regulatory systems that are transparent and science-based, we will improve access for U.S. products to their markets. 

At the same time, by enhancing their ability to benefit from trade, we encourage 

them to become more forthcoming and supportive in market access negotiations. As 

their ability to participate in and benefit from global trade is improved, they will 

become better markets for U.S. agricultural exports. 

International Food Assistance 

The United States continues to provide leadership in global efforts to provide humanitarian relief and promote economic development through foreign food assistance. Emergency needs for food assistance remain at high levels, particularly in subSaharan Africa. To help meet those needs, the supplemental appropriations package 

submitted by the President on February 16th includes a request for $350 million 

to support additional Public Law 480 Title II food donations. This funding will be 

used to respond to humanitarian food aid needs in the Darfur region of Sudan, including for refugees in neighboring Chad; other regions of Sudan; and other areas 

facing critical food situations, including those in East and Central Africa. 

For 2007, the budget continues our support for these efforts by providing an overall program level of nearly $1.6 billion for U.S. foreign food assistance activities. 

For the Public Law 480 program, the budget includes a projected program level 

of $1.3 billion. This includes $1.2 billion of appropriated funding requested in the 
320 

budget, plus projected reimbursements from the Maritime Administration for prior 

year cargo preference related expenses. The budget proposes that all funding for 

Public Law 480 will be provided through Title II donations in 2007 and, therefore, 

includes no new funding for additional Title I concessional credit or grant programs. 

This proposal reflects the experience of recent years in which an increasing share 

of U.S. foreign food assistance has been directed to emergency situations in which 

food aid is critical to preventing famine and saving lives. At the same time, demand 

for food assistance provided through concessional credit has declined significantly. 

This year, only two government-to-government agreements are expected to be 

signed. 

The budget also proposes that the Administrator of the Agency for International 

Development have the authority in emergency situations to use up to 25 percent of 

Title II funding to purchase commodities in locations closer to where they are needed. This authority is intended to expedite the response to emergencies overseas by 

allowing food aid commodities to be purchased more quickly and closer to their final 

destination, while increasing the total amount of commodities that can be procured 

to meet those emergencies. It is important to emphasize that U.S. commodities will 

continue to play the primary role in U.S. foreign food aid purchases and will be the 

first choice for meeting global needs. Furthermore, with this authority commodities 

would be purchased from developing countries that are eligible for official development assistance and not from developed countries, such as the European Union. 

For the McGovern-Dole International Food for Education and Child Nutrition Program, the budget continues funding at the 2006 level. With the conclusion of 2005 

programming, this program and its predecessor, the Global Food for Education Initiative, will have provided assistance to more than 10 million children, mothers, and 

infants throughout the world. Particularly noteworthy, this assistance has helped 

establish sustainable programs in four countries—Kyrgystan, Lebanon, Moldova, 

and Vietnam—where parents and local governments have assumed responsibility for 

continuing the feeding programs, allowing United States support to be ended. 

The budget also includes an estimated program level of $161 million for the CCCfunded Food for Progress program, which supports the adoption of free enterprise 

reforms in the agricultural economies of developing countries. 

Export Promotion and Market Development Programs 

FAS administers the Department’s export promotion and market development 

programs that play an important role in our efforts to enhance the international 

competitiveness of American agriculture. 

The CCC export credit guarantee programs provide payment guarantees for the 

commercial financing of U.S. agricultural exports. The guarantees facilitate exports 

to buyers in countries where credit is necessary to maintain or increase U.S. sales. 

For 2007, the budget projects a program level of nearly $3.2 billion for CCC export 

credit guarantees. 

For the Department’s market development programs, including the Market Access 

Program and Foreign Market Development Program, the budget includes funding of 

$148 million. This level reflects a proposal to limit the Market Access Program to 

$100 million in 2007, which is intended to achieve savings in mandatory spending 

and contribute to government-wide deficit reduction efforts. 

The budget also includes $35 million for the Dairy Export Incentive Program and 

$28 million for the Export Enhancement Program. 

Trade Adjustment Assistance 

For the Trade Adjustment Assistance (TAA) for Farmers Program, the budget includes $90 million, as authorized by the Trade Act of 2002. The program provides 

assistance to producers of raw agricultural commodities, who have suffered lower 

prices due to import competition, and to fishermen who compete with imported 

aquaculture products. In order to qualify for assistance, the price received by producers of a specified commodity during the most recent marketing year must be less 

than 80 percent of the national average price during the previous 5 marketing 

years. In addition, a determination must be made that increases in imports of like 

or competitive products ‘‘contributed importantly’’ to the decline in prices. 

During 2005, 14 petitions for TAA were approved, including 9 that were recertified for a second year of assistance. Commodities that were approved for assistance 

included Pacific salmon, shrimp, lychees, California black olives, Idaho potatoes, and 

Concord juice grapes. Total program costs for 2005 were approximately $21 million. 

The deadline for submission of petitions for 2006 TAA closed on January 31. To 

date, TAA petitions have been certified for producers of Florida avocados and Indiana snapdragons. Additional petitions are under review, and decisions on their eligibility should be announced in the near future. 
321 

That concludes my statement, Mr. Chairman. I would be pleased to answer any 

questions that you and other Members of the Committee may have. 

PREPARED STATEMENT OF TERESA C. LASSETER, ADMINISTRATOR, FARM SERVICE

AGENCY

Mr. Chairman and Members of the Subcommittee, I appreciate the opportunity 

to appear before you for the first time as Administrator of the Farm Service Agency 

(FSA). I have taken the helm at a challenging moment for FSA—a moment when 

the agency is at a crossroads. As things currently stand, we are faced with a choice 

between delivering programs to the best of our ability using current methods, or 

modernizing the agency in terms of structure and technology to respond more quickly to new legislation, provide better access to our programs and data for our customers and business partners, and more efficiently implement a 2007 Farm Bill. 

Our fiscal year 2007 budget request provides a fiscally responsible approach which 

addresses these agency priorities while also doing our part to restrain discretionary 

spending to help reduce the deficit. Before I begin discussing the details of the budget, I would like to comment on how we arrived at our current position, provide a 

status of some of our current initiatives and challenges, and solicit your support and 

partnership for approval of this budget request. 

Office Structure 

As competition and accountability for limited resources continue to increase, we 

want to ensure we are still providing our customers with the efficient, accurate and 

timely service they deserve. Quite frankly, FSA as presently structured must change 

in order to best serve our customers. There have been numerous program changes 

over the past few years as well as improvements in technology that have shifted 

our workload. Also, reductions in the number of employees in the past 3 years require that we adjust our present structure. As you know, we set aside our FSA tomorrow plan and stopped all actions on county office restructuring and office closures under that plan. Many of our State Executive Directors, however, are experiencing extreme difficulty in providing services due to the increased number of offices 

that have two or fewer employees in them, and the increasing number of managers 

who are responsible for more than one county and must divide their time between 

two or more offices. 

At present we have 36 offices that have no permanent employees in them, 144 

offices with only one employee, 372 offices with 2 employees, and 266 offices that 

share a manager. Providing a full range of services to our customers full-time is impossible in these offices. We must reorganize, modernize and streamline this agency 

from the bottom up. We must reinvent FSA on a technological platform that feels 

more like 2006 than 1980. Having set aside the national FSA Tomorrow plan, and 

in accordance with your guidance, we have asked our State offices for a full review 

of their technology, training, staffing and facilities. We know that we need widespread technology upgrades. We know that we need to provide our people with better training. We know that absent our ability to hire more employees, temporaries 

and contractors, we need technology to streamline our operations to increase productivity. 

FSA’s State Executive Directors (SEDs) will conduct independent, local-level reviews of the efficiency and effectiveness of the FSA office structure in each State. 

SEDs and State committees will form review committees to identify what the optimum network of FSA facilities, staffing, training, and technology should be in each 

State within existing budgetary resources and staffing ceilings. Furthermore, SEDs 

will also explore potential joint-effort opportunities with the Natural Resources Conservation Service and other Department of Agriculture agencies. 

As recommendations are received from each State, FSA’s Deputy Administrator 

for Field Operations will review and validate the proposed changes. After the recommendations are shared with the affected Congressional delegations, the agency 

will hold public hearings and coordinate communications efforts with area farmers, 

ranchers, and stakeholders. 

We will faithfully follow your instructions as outlined in Public Law 109–97. If 

State offices recommend that any of our offices be closed or consolidated, we will 

hold public hearings within 30 days and notify Congress of all impending changes 

within 120 days. 

Administrative Budget Trends 

Congress has provided an increase in the appropriations for our Salaries and Expenses (S&E) account each year, and we appreciate the support of the Committee 

reflected in those numbers. At the same time, however, operational costs such as 
322 

pay costs, information technology infrastructure and legacy systems, rents, and utilities have been increasing at a faster pace. The President’s Budgets have taken this 

reality into account in the requested levels. However, for the past 3 years the enacted appropriations for S&E together with the FSA component of the Common 

Computing Environment account have averaged about 3.8 percent below the budget 

request. In addition, during fiscal year 2005, FSA implemented the newly enacted 

Tobacco Buyout Program under the American Jobs Creation Act of 2004 and disaster programs for 2003, 2004, and 2005 crop losses as directed by the Military Construction Appropriation and Emergency Hurricane Supplemental Appropriations 

Act, 2005. It is estimated that these programs cost the Agency a minimum of $26 

million to administer. 

These effective reductions in the agency resource level have been addressed 

through aggressive cost-cutting measures. For example, FSA reduced discretionary 

non-information technology (IT) expenses such as travel, equipment and supplies by 

39.5 percent from fiscal year 2003 levels. FSA also deferred and realigned investment funding intended for modernization of IT systems in order to fund uncontrollable increases in non-discretionary IT and non-IT expenses. FSA successfully carried out its new programs at the expense of its modernization progress. In addition, 

Federal and non-Federal permanent staffing ceilings were reduced by 5 percent and 

3 percent from fiscal year 2003 to fiscal year 2005. 

Mr. Chairman, we in FSA have always considered ourselves a ‘‘can-do’’ agency. 

That is why in recent years we have told an optimistic story even while facing resource challenges. And that is why it is difficult to come before you sounding a less 

optimistic note today. The time has passed, however, when we can promise to do 

more with less. The time has come when we must make some difficult choices. This 

brings me back to the crossroads I mentioned earlier: do we direct our resources to 

maintaining the status quo as nearly as possible to focus on near-term program delivery? Or do we make the investments needed for future program delivery, which 

would divert resources from current activities? Even with your support for the President’s budget, we must work with our stakeholders on an acceptable office consolidation plan to ensure we are providing our customers with the quality service they 

are entitled to. 

Our restructuring plan is not limited to our county offices but will involve a comprehensive review of the organization and operations at all levels of the agency, including State and national offices. We need to wisely invest in our employees, technology and equipment. With the 2007 requested level for both our Salaries and Expenses and the Common Computing Environment accounts, we can achieve this by 

providing critical training to our employees, upgrading computer systems, networks 

and software, and modernizing local office equipment. With over 45 percent of FSA 

offices staffed with three or fewer people, IT modernization has become significantly 

more important. 

Employee Buyout Program 

During first quarter of fiscal year 2006, we conducted two employee buyout programs, commonly known as the Voluntary Separation Incentive Program (VSIP) or 

‘‘buyouts’’ and the Voluntary Early Retirement Authority (VERA) or ‘‘early outs’’. A 

total of 424 Federal and non-Federal employees were separated from FSA with 

buyout payments of up to $25,000. Several factors influenced our decision to request 

VSIP and VERA authority, including legislative changes ending the tobacco program, a transfer of the bulk of the administrative activity FSA previously performed 

for the Natural Resources Conservation Service (NRCS) on the Environmental Quality Incentives Program back to NRCS in fiscal year 2005, and shifts in program participation in certain States causing workload decreases in those States and a resulting staffing imbalance. As a result, reductions to staffing levels could be absorbed 

at the affected locations, without severely impacting their ability to deliver ongoing 

programs. The buyouts resulted in a 3-percent reduction in FSA permanent staffing 

levels. Through the use of buyout/early out authority we were able to more efficiently align ourselves within existing resources and begin to right-size in an employee friendly manner without the need for a reduction-in-force. In partnership 

with stakeholders, implementation of a comprehensive agency-wide restructuring 

plan will enable us to address our remaining workforce right-sizing challenges. 

Disaster Assistance 

The past 2 years have presented producers with tremendous challenges from 

Mother Nature, with record rainfall in parts of the country, a pervasive drought in 

the West, and the worst hurricane season in decades. The Emergency Supplemental 

Appropriations to Address Hurricanes in the Gulf of Mexico and Pandemic Influenza 

Act, 2006 (Public Law 109–148) included $404 million for the Emergency Forestry 
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Conservation Reserve Program, which will provide assistance for farmers and 

ranchers who have suffered forestry damage directly related to hurricanes Katrina, 

Ophelia, Rita, Dennis and Wilma. FSA anticipates publishing the rule and issuing 

software by late winter, and holding a 2006 signup in the spring. In addition, $199.8 

million was designated for the Emergency Conservation Program (ECP). The language of the Supplemental Appropriations Bill provides for assistance with restoration of activities such as oyster operations not normally covered by ECP. Therefore, 

new regulations are required to make certain that new practices are developed that 

achieve the goals of the program while ensuring program integrity. We expect ECP 

regulations to be published soon, with signups anticipated in early spring. 

In addition, Secretary Johanns authorized $250 million for crop disaster, livestock, dairy, tree and aquaculture assistance. These funds are authorized under Section 32 of the Agricultural Act of August 24, 1935, which allows the Secretary to 

restore producers’ purchasing power. These funds will be distributed by way of five 

new programs: the Tree Indemnity Program (TIP), the Livestock Indemnity Program (LIP), the Feed Indemnity Program (FIP), the Hurricane Indemnity Program 

(HIP), and an Aquaculture Block Grant program. The Secretary announced these 

programs on January 26, 2006. For TIP, LIP, FIP, and HIP, interim final regulations are in final clearance, and signups will begin in late June. For the Aquaculture Program, memorandums of understanding will be sent to the States in early 

March. 

Prior to the President’s signing of the Emergency Supplemental Appropriations 

Bill, FSA made more than $30 million in Emergency Conservation Program assistance available to agricultural producers suffering damage from Hurricane Katrina. 

In addition, USDA’s Commodity Credit Corporation implemented immediate 

changes to its Marketing Assistance Loan Program to allow producers to obtain 

loans for on-farm grain storage on the ground in addition to grain bins and other 

normally approved structures. 

Tobacco Transition Program 

FSA has expeditiously implemented the provisions of the ‘‘The Fair and Equitable 

Tobacco Reform Act,’’ otherwise know as the ‘‘tobacco buyout’’ program which was 

part of the American Jobs Creation Act of 2004, signed by the President on October 

22, 2004. The Act terminated the tobacco quota and price support program of more 

than 65 years, which had restricted production and kept domestically produced tobacco prices high. The program allows producers and quota owners to sign up for 

10 years of transition payments to ease the economic adjustment process. 

As of December 20, 2005, the Commodity Credit Corporation (CCC) had approved 

382,972 quota holder contracts valued at $6.6 billion, and 181,696 producer contracts valued at $2.9 billion. CCC disbursed fiscal year 2005 payments to 563,770 

contracts holders, valued at $945.9 million. 

On October 17, 2005, CCC implemented the successor-in-interest provision of the 

Tobacco Transition Payment Program or TTPP. The successor-in-interest program 

allows contract holders to transfer their remaining contract rights in full to a third 

party in return for a lump-sum payment. As of December 2, 2005, 89,885 quota 

holder and producer contracts valued at $1.5 billion were sold to lump-sum providers. There are over 60 financial institutions participating in the successor-in-interest program. 

As of February 28, 2006, approximately $934.6 million had been disbursed for fiscal year 2006 TTPP payments. County offices will continue to disburse payments 

through March. Contracts requiring a correction for over- or under-payments have 

been delayed. The correction software is complex and deployment is targeted for late 

April. 

BUDGET REQUESTS

Turning now to the specifics of the 2007 Budget, I would like to highlight our proposals for the commodity and conservation programs funded by the Commodity 

Credit Corporation (CCC); the farm loan programs of the Agricultural Credit Insurance Fund; our other appropriated programs; and administrative support. 

COMMODITY CREDIT CORPORATION

Domestic farm commodity price and income support programs are administered 

by FSA and financed through the CCC, a government corporation for which FSA 

provides operating personnel. Commodity support operations for corn, barley, oats, 

grain sorghum, wheat and wheat products, soybeans, minor oilseed crops, upland 

cotton and extra long staple cotton, rice, milk and milk products, honey, peanuts, 
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pulse crops, sugar, wool and mohair are facilitated primarily through loans, payment programs, and purchase programs. 

The 2002 Farm Bill authorizes CCC to transfer funds to various agencies for authorized programs in fiscal years 2002 through 2007. It is anticipated that in fiscal 

year 2006, $1.797 billion will be transferred to other agencies. 

The CCC is also the source of funding for the Conservation Reserve Program administered by FSA, as well as many of the conservation programs administered by 

the Natural Resources Conservation Service. In addition, CCC funds many of the 

export programs administered by the Foreign Agricultural Service. 

Program Outlays 

The fiscal year 2007 budget estimates largely reflect supply and demand assumptions for the 2006 crop, based on November 2005 data. CCC net expenditures for 

fiscal year 2007 under current law are estimated at $20.2 billion, down about $1.1 

billion from $21.3 billion in fiscal year 2006. If the President’s proposals for farm 

program savings are enacted, CCC outlays would decline by an additional $1.1 billion in fiscal year 2007. 

This net decrease in projected expenditures is attributable to decreases for crop, 

tree and livestock disaster payments, tobacco payments, loan deficiency payments, 

and the Noninsured Assistance Program, partially offset by an increase in countercyclical payments. 

Reimbursement for Realized Losses 

CCC is authorized to replenish its borrowing authority, as needed, through annual appropriations up to the amount of realized losses recorded in CCC’s financial 

statements at the end of the preceding fiscal year. For fiscal year 2005 losses, CCC 

was reimbursed $25.4 billion in fiscal year 2006. 

Conservation Reserve Program 

The Conservation Reserve Program (CRP), administered by FSA, is currently 

USDA’s largest conservation/environmental program. For 20 years it has cost-effectively assisted farm owners and operators in conserving and improving soil, water, 

air, and wildlife resources by converting highly erodible and other environmentally 

sensitive acreage, normally devoted to the production of agricultural commodities, 

to a long-term resource-conserving cover. CRP participants enroll acreage for 10 to 

15 years in exchange for annual rental payments as well as cost-share assistance 

and technical assistance to install approved conservation practices. 

The 2002 Farm Bill increased authorized enrollment under this program from 

36.4 million acres to 39.2 million acres. Under the fiscal year 2005 continuous and 

Farmable Wetlands Program (FWP) signups, a combined total of 387,000 acres was 

enrolled. We issued incentive payments totaling approximately $76 million in fiscal 

year 2005 under continuous signup, Conservation Reserve Enhancement Program 

(CREP), and FWP under the incentives program that began in May 2000 to boost 

continuous signup participation. As of January 2006, total CRP enrollment is 35.9 

million acres, nearly 92 percent of the 39.2 million acres authorized under the Farm 

Bill. 

The CREP is also a major initiative under CRP that seeks to address recognized 

environmental issues of States, Tribes, and the Nation. CREP is a voluntary program implemented through Memoranda of Agreement with partners, such as States, 

Federal agencies, and private groups. FSA currently has 34 CREP agreements with 

27 States with over 2 million acres reserved for enrollment. The program is very 

popular with environmental and wildlife groups, in addition to States and private 

landowners. More than 772,000 acres are currently enrolled in CREP nationwide. 

Most recently, in July 2005, FSA launched a new CREP project in Indiana. 

No general signup was held in fiscal year 2005. However, the fiscal year 2007 

budget assumes general signups in fiscal years 2006 and 2007 to enroll approximately 2.5 million acres and 4.9 million acres, respectively. In fiscal years 2006 and 

2007, we anticipate enrolling 410,000 acres and 774,000 acres under continuous 

signup and the CREP. About 40,000 acres are estimated to be enrolled in the FWP 

in fiscal year 2006 and 40,000 acres in fiscal year 2007. Additionally, the fiscal year 

2007 budget assumes early re-enrollments and extensions of fiscal year 2007–2010 

expiring contracts. Overall, CRP enrollment is assumed to gradually increase from 

35 million acres at the end of fiscal year 2005 to 39.2 million acres by fiscal year 

2008, and to remain at 39.2 million acres through fiscal year 2016, maintaining a 

reserve sufficient to provide for continuous signup and CREP. 
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FARM LOAN PROGRAMS

The loan programs funded through the Agricultural Credit Insurance Fund provide a variety of loans and loan guarantees to farm families who would otherwise 

be unable to obtain the credit they need to continue their farming operations. The fiscal year 2007 Budget proposes a total program level of about $3.5 billion. Of this total, approximately $1 billion is requested for direct loans and nearly $2.5 

billion for guaranteed loans offered in cooperation with private lenders. These levels 

should be sufficient to provide adequate funding throughout the year. While the 

total request is below the amounts provided by Congress in fiscal year 2005 and 

2006, it is nearly $500 million above the amount actually obligated in fiscal year 

2005. 

For direct farm ownership loans we are requesting a loan level of $223 million. 

The proposed program level would enable FSA to extend credit to about 1,921 small 

and beginning farmers to purchase or maintain a family farm. In accordance with 

legislative authorities, FSA has established annual county-by-county participation 

targets for members of socially disadvantaged groups based on demographic data. 

Also, 70 percent of direct farm ownership loans are reserved for beginning farmers, 

and historically about 35 percent are made at reduced interest rates to limited resource borrowers, who may also be beginning farmers. Recently, however, the reduced-rate provisions have not been utilized since regular interest rates are lower 

than the reduced rates provided by law. For direct farm operating loans we are requesting a program level of $644 million to provide approximately 14,525 loans to 

family farmers. 

For guaranteed farm ownership loans in fiscal year 2007, we are requesting a loan level of $1.2 billion. This program level will provide about 4,600 farmers the 

opportunity to acquire their own farm or to preserve an existing one. One critical 

use of guaranteed farm ownership loans is to allow real estate equity to be used 

to restructure short-term debt into more favorable long-term rates. For guaranteed 

farm operating loans we propose a fiscal year 2007 program level of approximately 

$1.3 billion to assist nearly 7,800 producers in financing their farming operations. 

This program enables private lenders to extend credit to farm customers who otherwise would not qualify for commercial loans and ultimately be forced to seek direct 

loans from FSA. 

In addition, our budget proposes program levels of $4 million for Indian tribe land acquisition loans and $60 million for boll weevil eradication loans. For emergency 

disaster loans, our budget does not request any new appropriation; anticipated carryover funding will support a program level of approximately $70 million, which 

should provide sufficient credit to producers whose farming operations are damaged 

by natural disasters. 

The 2007 budget request reflects the Administration’s proposed increase in the 

fees producers pay to secure guaranteed farm ownership or guaranteed unsubsidized 

farm operating loans. This change will bring the fees for these loans more in line 

with the fees charged to secure other types of guaranteed loans. This proposal will 

be implemented through the rulemaking process and is expected to save about $30 

million annually. 

OTHER APPROPRIATED PROGRAMS

State Mediation Grants 

State Mediation Grants assist States in developing programs to deal with disputes 

involving a variety of agricultural issues including distressed farm loans, wetland 

determinations, conservation compliance, program payment eligibility, and others. 

Operated primarily by State universities or departments of agriculture, the program 

provides neutral mediators to assist producers—primarily small farmers—in resolving disputes before they culminate in litigation or bankruptcy. States with mediation programs certified by FSA may request grants of up to 70 percent of the cost 

of operating their programs. 

For fiscal year 2006, grants have been issued to 32 States. Two additional States 

are expected to become certified during the fiscal year. For fiscal year 2007, we anticipate that the requested $4.2 million will provide grants to 34 States and seed 

funding for 2 new States. 

Emergency Conservation Program 

Since it is impossible to predict natural disasters, it is difficult to forecast an appropriate funding level for the Emergency Conservation Program, and in recent 

years the program has been funded through supplemental appropriations. During 

fiscal year 2005 Congress provided $150 million for the program to assist producers 

in repairing damage caused by natural disasters. For fiscal year 2006, as I men-
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tioned earlier, the program received supplemental funding of $199.8 million specifically for hurricane damage to the Gulf States. On March 3, $63 million of the $199.8 

million was allocated. The eligible States have requested a total of $374 million. Nationwide, as of March 3, $20.6 million is pending allocation to 28 States, and $4.8 

million has already been allocated, for recovery from various disasters utilizing 

funds carried forward from fiscal year 2005 together with recoveries of unused prior 

allocations. As of March 3, $5.1 million is available for allocation nationwide. The 

fiscal year 2007 Budget proposal does not include funding for this program. 

Dairy Indemnity Program 

The Dairy Indemnity Program (DIP) compensates dairy farmers and manufacturers who, through no fault of their own, suffer income losses on milk or milk products 

removed from commercial markets due to residues of certain chemicals or other 

toxic substances. Payees are required to reimburse the Government if they recover 

their losses through other sources, such as litigation. As of March 1 we have paid 

fiscal year 2006 DIP claims totaling $44,000 in 3 States. The fiscal year 2007 appropriation request of $100,000, together with unobligated 

carryover funds expected to be available at the end of fiscal year 2006, would cover 

a higher than normal, but not catastrophic, level of claims. Extended through 2007 

by the 2002 Farm Bill, DIP is a potentially important element in the financial safety 

net for dairy producers in the event of a serious contamination incident. 

Grassroots Source Water Protection Program 

The Grassroots Source Water Protection Program (GSWPP) is a joint project by 

the Farm Service Agency and the nonprofit National Rural Water Association 

(NRWA) designed to help prevent surface and ground water pollution through voluntary practices installed by producers at the local level. With the fiscal year 2006 

appropriations of $3.7 million, the NRWA is hiring a rural source water technician 

in each of the 36 participating States to work with FSA State and county directors 

as well as State conservation specialists to develop water protection plans within 

priority watersheds. 

Legislative authority for the GSWPP will expire September 30, 2007. The budget 

requests no funding for this program. 

ADMINISTRATIVE SUPPORT

The costs of administering all FSA activities are funded by a consolidated Salaries 

and Expenses account. The account comprises direct appropriations, transfers from 

loan programs under credit reform procedures, user fees, and advances and reimbursements from various sources. 

The fiscal year 2007 Budget requests $1.41 billion from appropriated sources including credit reform transfers, for a net increase of about $86 million over the fiscal 

year 2006 level. The request reflects increases in pay-related costs to sustain essential program delivery and increases in information technology investments. The request would fund IT operational expenses, technical analysis and design documentation of the Modernize and Innovate the Delivery of Agricultural Systems (MIDAS) 

program, and development and enhancements necessary to support legacy IT systems and maintain current IT operations during the transition to Web-based systems. It would also shift to the S&E account certain costs previously included in 

the Common Computing Environment (CCE) account, such as the Universal Telecommunications Network and enterprise licensing. These increases are offset by decreases in both Federal and non-Federal county office staff years and operating expenses. 

As I have already noted, FSA has taken aggressive action over the past 3 years 

to reduce discretionary administrative expenditures and live within available funding. In conjunction with this effort, the employee buyout/early out program I mentioned earlier yielded a reduction of 143 Federal and 281 non-Federal staff-years for 

fiscal year 2006. The fiscal year 2007 request reflects a total of 5,253 Federal staffyears and 9,425 non-Federal staff-years, representing decreases of 65 and 24 staffyears, respectively, from the fiscal year 2006 levels. Temporary non-Federal county 

staff-years will remain at the fiscal year 2006 level of 650. 

I would like to emphasize the importance of the support of FSA’s modernization 

effort that is provided through the Department’s CCE account. Funding made available to FSA under this account will provide needed telecommunications improvements and permit us to continue implementation of GIS, which is so crucial to rapid 

and accurate program delivery. If this source of funding were not available, the additional costs would have to be covered by FSA’s S&E account. 

Mr. Chairman, this concludes my statement. I will be happy to answer your questions and those of the other Subcommittee Members. 
327 

PREPARED STATEMENT OF A. ELLEN TERPSTRA, ADMINISTRATOR, FOREIGN

AGRICULTURAL SERVICE

Mr. Chairman, Members of the Subcommittee, I appreciate the opportunity to review the work of the Foreign Agricultural Service (FAS) and to present the President’s budget request for FAS programs for fiscal year 2007. 

INTRODUCTION

FAS is a small agency with a big mission: working to expand and maintain international export opportunities for U.S. agricultural, fish and forestry products; supporting international economic development through trade capacity building and 

sustainable development practices; and supporting the adoption and application of 

science-based Sanitary and Phytosanitary (SPS) regulations to facilitate agricultural 

trade. In addition to our Washington-based staff, the Agency maintains a network 

of overseas offices that provide critical market and policy intelligence to support our 

strategic goals, respond quickly in cases of market disruption, and represent U.S. 

agriculture in consultations with foreign governments. 

To meet new international challenges, FAS has refined the three functions essential to our mission—market access, intelligence, and analysis; trade development; 

and agricultural development for national security. While the first two functions 

represent the historic activities of the Agency, the third reflects new tasks that we 

have identified as essential to support U.S. agriculture and broader U.S. Government policy goals. 

In addition, we have developed a new strategic focus for the Agency. We are placing a greater priority on inherently governmental functions such as trade negotiations, enforcement of trade agreements, and strategic management of country relationships. We have increased our emphasis on SPS issues by stepping up our monitoring and enforcement activities and increasing efforts to work through international standard-setting bodies to support the development of science-based regulatory systems. We are placing greater emphasis on trade capacity building activities that are in line with the President’s trade agenda, and we are shifting from 

implementing individual development activities to coordinating USDA international 

activities. 

Market Access, Intelligence, and Analysis 

Our core objective continues to be the expansion and maintenance of overseas 

market opportunities for U.S. agriculture. If we are to help U.S. food and agricultural exporters build on three consecutive years of record export sales, expanding 

market opportunities will be vital for America’s food and agricultural sector. We all 

recognize the United States is a mature market, while around the world we see 

emerging markets with rapidly growing middle classes. 

Our primary tool to expand access is the negotiation of new bilateral, regional, 

and multilateral trade agreements that lower tariffs and reduce trade impediments. 

FAS provides the critical analysis and policy advice to ensure U.S. agriculture 

achieves substantial benefits in these negotiations. 

Over the past several years, maintaining existing market access has grown in importance. We monitor foreign compliance with trade agreements, analyze trade 

issues, and coordinate with other trade and regulatory agencies to develop effective 

strategies to avoid or reverse trade-disruptive actions. We also use the extensive expertise within USDA to pursue solutions to difficult technical issues that restrict 

trade, such as those related to bovine spongiform encephalopathy (BSE) and biotechnology or those that create barriers to trade, such as sanitary and phytosanitary 

or food safety regulations. We have increased our efforts to ensure that more trading partners use science-based regulatory systems and follow international guidelines in order to reduce the number of technical problems and non-science based 

policies that hinder trade. We also work with the Office of the U.S. Trade Representative to ensure trade agreements are enforced through formal dispute mechanisms, when necessary. 

Trade Development 

Our trade development function includes price/credit risk mitigation and market 

development programs that support U.S. firms and industries in their efforts to 

build and maintain overseas markets for U.S. agricultural products. The price/credit 

risk mitigation programs include the GSM–102 Export Credit Guarantee Program, 

the Supplier Credit Guarantee Program and the Facility Guarantee Program. 

FAS administers two major market development programs—the Foreign Market 

Development (Cooperator) and Market Access Programs. These are carried out chiefly in cooperation with non-profit agricultural trade associations and private firms. 
328 

Several smaller programs—Technical Assistance for Specialty Crops (TASC) and the 

Quality Samples Program (QSP)—also provide financial and technical support to 

U.S. exporters. 

Agricultural Development for National Security 

President Bush’s National Security Strategy recognizes international economic development, along with defense and diplomacy, as one of the three pillars of U.S. foreign and national security policy. The Strategy recognizes that the lack of economic 

development, particularly in fragile and strategic countries and regions, results in 

economic and political instability, which can pose a national security threat to the 

United States. For most developing countries, a productive and sustainable agricultural sector and open markets are the key elements for economic growth. 

FAS deploys USDA’s unique resources and expertise in agricultural development 

activities to promote market- and science-based policies and institutions, and sustainable agricultural systems. One way that USDA helps developing countries increase trade and integrate their agricultural sectors in the global economy is to improve regulatory frameworks. Promoting productivity-enhancing technologies that 

will help increase food security is also a priority. In addition, we support agricultural reconstruction in post-conflict or post-disaster countries or regions such as in 

Afghanistan. 

MAJOR ACTIVITIES AND GOALS

In 2005, FAS was a key contributor to the bold U.S. agriculture proposal that has 

been credited with providing new impetus to the Doha Development Agenda of the 

World Trade Organization (WTO) negotiations. While much work needs to be done 

to bring the negotiations to a successful conclusion, we believe that the Hong Kong 

Ministerial Declaration laid a solid foundation for the final phase of the negotiations. Later this week, Secretary Johanns will participate in a Ministerial meeting 

in London. Ministers will be working to narrow differences in order to meet the 

April target for defining modalities. 

In preparation for and follow-up to the Hong Kong Ministerial, FAS actively 

worked to convince developing countries, particularly cotton-producing African countries, of the benefits of trade to their economic growth. In addition, FAS conducted 

several technical assistance programs to help improve those countries’ ability to 

trade. These efforts played a key role in helping move the Doha trade talks forward. 

Last year saw Congressional ratification of the Central America-Dominican Republic-United States Free Trade Agreement. FAS worked in tandem with the Office 

of the United States Trade Representative (USTR) on the development, analysis and 

negotiation needed to bring the agreement to completion. When implemented, it will 

provide U.S. exporters improved access to 40 million consumers with growing incomes. In 2005, we worked to recover trade lost as a result of the finding of BSE in the 

United States when 51 markets closed their borders to our products. I am pleased 

to report that we have regained at least partial access to 26 (not including Japan) 

of these markets for beef and beef products, representing 45 percent of our 2003 export value. Momentum in reopening export markets for U.S. beef gained considerably since Japan announced on December 12, 2005, that it was resuming imports 

of U.S. beef. Hong Kong, Korea, Taiwan, and Singapore all agreed to open to 

boneless beef. In addition, Mexico announced the lifting of its import ban on U.S. 

bone-in beef. These openings represented market access gains of 82 percent of our 

2003 export value for beef and beef products (includes Japan). Unfortunately, as you 

know, Japan ($1.4 billion market) has since closed its market due to the finding of 

vertebral column in a few boxes of a U.S. veal shipment, reducing our regained market access to $2.5 billion. We continue to work on regaining Japanese confidence in 

U.S. beef and our ability to meet Japan’s import requirements. 

We successfully defended U.S. export market access in a number of countries. In 

the European Union (EU), our intervention delayed the implementation of debarking requirements for wood packaging materials. This ensured continued smooth 

trade in U.S. exports packed in or on wood packaging materials. That trade is valued at nearly $80 billion annually. With the help of our industry partners, we were 

able to preserve $300 million in corn gluten feed exports to the EU. 

Through our monitoring and enforcement of the WTO Sanitary and Phytosanitary 

Agreement, we reviewed over 600 foreign SPS regulations and took direct action 

against 40 that were inconsistent with U.S. regulations or did not comply with the 

WTO Agreement. Our successes with India and China are particularly noteworthy. 

As a result of our efforts, India relaxed import requirements that could have blocked 

U.S. shipments of almonds, pulses, and horticultural products. Almond shipments, 

the top U.S. agricultural export to India, increased from $95 million to $118 million, 
329 

and U.S. sales of pulses grew from $500,000 to over $3 million in 1 year. Our actions caused China to change its import regulations on meat, wine, spirits and fresh 

fruit. U.S. exports of these products grew from $142 million to $252 million. 

FAS has worked aggressively to recover, maintain and expand markets for U.S. 

farm products that have been produced with agricultural biotechnology. A high priority is assisting other countries in their efforts to develop, safely regulate, and 

begin using this important tool to reduce hunger and alleviate poverty. For example, 

for the past 2 years, the United States has aggressively pursued a WTO case 

against the EU’s moratorium on agricultural biotechnology, which has cost U.S. producers of corn and related products, hundreds of millions of dollars each year. In 

addition, FAS leads U.S. efforts to work with like-minded countries to assure that 

international rules and regulations for agricultural biotechnology are science-based 

and implemented in transparent and predictable ways. 

As in the case of the EU’s biotechnology moratorium, when we are unable to resolve problems bilaterally, we have used the WTO dispute settlement mechanism 

to advance our trade objectives. In 2005, we were successful in cases with Japan 

on fire blight in apples and with Mexico on rice and high-fructose corn syrup. 

Just as we look to the WTO to enforce our complaints against trading partners, 

we must also live up to WTO decisions that raise questions about U.S. programs. 

After the WTO decision in the Brazil cotton case, we were able to revise our export 

credit guarantee programs to comply with the deadline imposed by the WTO. Officials of several developing countries have complimented the United States on our 

efforts to bring our export credit guarantee programs in line with the WTO decision. 

Of course, we also recognize the important role that the Congress has played in 

working with the Administration to address these critical issues. We appreciate that 

Congress recently approved legislation including repeal of the Continued Dumping 

and Subsidy Offset Act—the Byrd Amendment—and the Step 2 cotton program. 

Both programs were ruled inconsistent with our WTO obligations. This action demonstrates that the United States intends to live up to our WTO commitments. 

In the area of trade development, we launched several e-gov initiatives to improve 

electronic access to key programs to meet requirements of the President’s Management Agenda. We launched a new electronic registration system for the export credit guarantee programs that allows U.S. exporters to quickly register sales via the 

Internet. We are implementing a streamlined, integrated process to manage grant 

applications. 

Our projects to promote agricultural development took us to many countries. We 

participated in post-conflict reconstruction efforts in Afghanistan by sending 26 

USDA advisors to nine provinces to assist with livestock management, irrigation 

methods, and rudimentary food safety procedures. We expanded trade capacity 

building and technical assistance efforts in Armenia, Algeria, Malawi and Yemen. 

We worked with African countries to help them develop the institutional capacity 

to expand their exports and to regulate imports according to principles of sound 

science. We placed pest risk assessment advisors in the trade hubs sponsored by the 

U.S. Agency for International Development, and we are training 200 people from 35 

countries on a wide variety of sanitary and phytosanitary issues. We hosted an 

Avian Influenza Conference last summer for the Asian Pacific Economic Cooperation 

(APEC) forum that was attended by more than 100 officials from the 21 APEC 

economies. 

Under the Cochran Fellowship Program, we provided short-term training for nearly 500 participants from 81 countries. Cochran participants meet with U.S. agribusiness, attend policy and food safety seminars, and receive technical training related to market development and trade capacity building. Under the Borlaug Fellows program, launched in 2004, 120 researchers, policymakers and university staff 

received short-term scientific training and research opportunities at U.S. colleges 

and universities. 

Our food aid programs have helped millions of hungry people around the world. 

For example, under the McGovern-Dole International Food for Education and Child 

Nutrition Program, a record 3.4 million children and mothers benefited from our 

2005 programming efforts. 

In 2006, our goals include bringing the multilateral trade talks to a successful 

conclusion, working to complete the outstanding bilateral free trade agreements 

with the United Arab Emirates, Peru, Panama and Thailand, launching new negotiations with Korea, and monitoring existing agreements. We also will continue our 

efforts to ensure that more trade partners use science-based regulatory systems and 

follow international guidelines, particularly regarding BSE and products from agricultural biotechnology. Our trade capacity activities will be used to support all these 

efforts. We will continue the process to realign our overseas staff to meet the changing world trading environment, focusing on Asia. 
330 

BUDGET REQUEST

Mr. Chairman, our fiscal year 2007 budget proposes a funding level of $162.5 mil- lion for FAS and 974 staff years, an increase of $11.0 million above the fiscal year 

2006 level. The budget has been developed to ensure the agency’s continued ability 

to conduct its full array of activities and provide services to U.S. agriculture. The budget proposes an increase of $7.4 million to meet higher operating costs 

at FAS overseas offices. The FAS network of 77 overseas offices covering over 130 

countries is vulnerable to macro-economic events and developments that are beyond 

the agency’s control but which must be met if FAS’ overseas presence is to be maintained. Specifically, these increases include: —$3.4 million for wage and price increases to meet higher operating costs at overseas offices. Declines in the value of the U.S. dollar, coupled with overseas inflation and rising wage rates, have led to sharply higher operating costs that must 

be accommodated in order to maintain our current overseas presence. —$1.1 million for increased payments to Department of State (DOS) for International Cooperative Administrative Support Services (ICASS). The DOS provides overseas administrative support for foreign affairs agencies through the 

ICASS system. FAS has no administrative staff overseas, and thus relies entirely on DOS/ICASS for this support. —$2.9 million for the Capital Security Cost Share program assessment. In fiscal 

year 2005, DOS implemented a program through which all agencies with an 

overseas presence in U.S. diplomatic facilities pay a proportionate share for accelerated construction of new secure, safe, and functional diplomatic facilities. 

These costs are allocated annually based on the number of authorized personnel 

positions. This plan is designed to generate a total of $17.5 billion to fund 150 

new facilities over a 14-year period. The FAS assessment will increase annually 

in roughly $3 million increments until fiscal year 2009 to total annual assessed 

level of $12 million. This level is assumed to remain constant at that point for 

the ensuing 9 years. 

The budget also requests $1.5 million in support of the President’s trade policy 

agenda for Trade Capacity Building. One of the challenges we face is obtaining the 

dedicated funding that can be used throughout the Department in support of this 

initiative. Through technical assistance, training, and related activities, this initiative will support U.S. trade policy objectives on a proactive basis by assisting developing countries to adopt scientifically sound health and safety standards that will 

enable U.S. exporters to take advantage of negotiated market access. It will also 

strengthen their ability to participate in, and benefit from, the global trading arena 

and, thereby, enhance opportunities for U.S. agricultural exports. Successful Free 

Trade Agreement (FTA) implementation requires that market access issues based 

on SPS problems be resolved, otherwise the benefits of the FTA are not realized by 

either side. In this regard, FAS works closely with USDA agencies, such as APHIS 

and FSIS, and the Food and Drug Administration. Obtaining a dedicated source of 

funding will lay the foundation for more effective resolution of ongoing and emergent SPS market access issues without recourse to time-consuming and costly dispute resolution procedures. 

Finally, the budget includes an increase of $2.1 million to cover higher personnel 

compensation costs associated with the anticipated fiscal year 2007 pay raise. Without sufficient funding, absorption of these costs in fiscal year 2007 would primarily 

come from reductions in agency personnel levels that will significantly affect FAS 

efforts to address market access for U.S. food and agricultural exports. 

EXPORT PROGRAMS

Mr. Chairman, the fiscal year 2007 budget proposes approximately $4 billion for 

programs administered by FAS designed to promote U.S. agricultural exports, develop long-term markets overseas, and foster economic growth in developing countries. 

Export Credit Guarantee Programs 

The budget includes a projected overall program level of $3.2 billion for export 

credit guarantees in fiscal year 2007. Under these programs, the Commodity Credit 

Corporation (CCC) provides payment guarantees for the commercial financing of 

U.S. agricultural exports. Last year, we announced changes to these programs to 

comply with the WTO cotton decision in a dispute with Brazil. We implemented a 

risk-based fee structure for the GSM–102 and Supplier Credit Guarantee Programs. 

Fee rates are now based on the country risk that CCC is undertaking, as well as 

the repayment term and repayment frequency under the guarantee. We also suspended operation of the GSM–103 program, effective July 1, 2005, in response to 
331 

a WTO dispute panel decision. In addition, USDA proposed legislative changes to 

the cotton and export credit programs. Congress passed legislation to repeal the 

Step 2 Program and the repeal will take effect on August 1, 2006. 

As in previous years, the budget estimates reflect actual levels of sales expected 

to be registered under the programs and include: —$2.5 billion for the GSM–102 program; 

—$602 million for Supplier Credit guarantees; and 

—$30 million for Facility Financing guarantees. 

The fiscal year 2005, the GSM–102 program provided credit guarantees which fa- cilitated sales of approximately $2.2 billion of U.S. agricultural exports to 8 countries and 6 regions. In fiscal year 2005, the Supplier Credit Guarantee Program 

(SCGP) registered approximately $455 million in credit guarantees which facilitated 

sales of over $700 million to 9 countries and 8 regions. USDA has also undertaken 

a top-to-bottom review of the Supplier Credit Guarantee Program. Most recently, 

USDA announced an Advanced Notice of Proposed Rulemaking on the SCGP and 

invited suggestions on changes that would improve program operations and efficiency. Several factors are behind the effort to improve program operations. As the 

SCGP has grown, defaults have also increased. Although CCC has improved its 

claims recovery process, further changes may be necessary. The comment period 

closed in late February and USDA is reviewing the comments. 

Market Development Programs 

Funded by CCC, FAS administers a number of programs to promote the development, maintenance, and expansion of commercial export markets for U.S. agricultural commodities and products. For fiscal year 2007, the CCC estimates include a 

total of $148 million for the market development programs, $100 million below the 

fiscal year 2006 level and includes: —$100 million for the Market Access Program; 

—$34.5 million for the Foreign Market Development (Cooperator) Program; 

—$10 million for the Emerging Markets Program; 

—$2.5 million for the Quality Samples Program; and 

—$2 million for the Technical Assistance for Specialty Crops Program. 

The lower program level for these activities reflects a proposal to limit funding for the Market Access Program to $100 million in fiscal year 2007, which is intended to achieve savings in mandatory spending and contribute to governmentwide deficit reduction efforts. 

International Food Assistance 

The United States continues to play a leading role in providing international food 

aid. In this regard, the fiscal year 2007 budget includes an overall program level 

for U.S. foreign food assistance of $1.6 billion consisting of: —$1.3 billion for Public Law 480 which is expected to provide approximately 2.2 

million metric tons of commodity assistance. The budget proposes that all Public 

Law 480 food assistance be provided through the Title II donations program in 

fiscal year 2007, which is administered by the U.S. Agency for International Development. In recent years, there has been significant decline in demand for 

food assistance provided through concessional credit financing, accordingly, no 

funding is requested for Title I credit sales and grants. The budget includes an 

appropriation request of $1.2 billion for Public Law 480 Title II, an increase of 

$80 million over the 2006 enacted level, and proposes a new provision that will 

allow up to 25 percent of the funding to be used to purchase commodities locally 

in emergency situations thereby saving more lives. —$161 million for the CCC-funded Food for Progress Program. Funding at that 

level is expected to support 300,000 metric tons of commodity assistance. —$103 million for the McGovern-Dole International Food for Education and Child 

Nutrition Program. This comprises $99 million in appropriations and an estimated $4 million in reimbursements from the Maritime Administration. Funding at this program level will assist an estimated 2.5 million women and children through the donation of nearly 80,000 metric tons of commodities. 

Export Subsidy Programs 

FAS administers two export subsidy programs through which payments are made 

to exporters of U.S. agricultural commodities to enable them to be price competitive 

in overseas markets where competitor countries are subsidizing sales. These include: 

—$28 million for the Export Enhancement Program (EEP). World supply and demand conditions have limited EEP programming in recent years and therefore, 

the budget assumes a limited program level for 2007. However, the 2002 Farm 

Bill does include a maximum annual EEP program level of $478 million which 
332 

could be utilized should market conditions warrant reactivation of the awarding 

of bonuses. 

—$35 million for the Dairy Export Incentive Program (DEIP), $33 million above 

the fiscal year 2006 estimate of $2 million. This estimate reflects the level of 

subsidy expected to be required to facilitate export sales consistent with projected United States and world market conditions. The actual level of bonuses 

awarded may change during the programming year as market conditions warrant. 

Trade Adjustment Assistance for Farmers 

Authorized by the Trade Act of 2002, the Trade Adjustment Assistance Program 

for Farmers authorizes USDA to make payments of up to $90 million annually to 

members of eligible producer groups when the current year’s price of an eligible agricultural commodity is less than 80 percent of the national average price for the 

5 marketing years preceding the most recent marketing year, and the Secretary determines that imports have contributed importantly to the decline in price. 

This concludes my statement, Mr. Chairman. I will be pleased to answer any 

questions. 

PREPARED STATEMENT OF ELDON GOULD, ADMINISTRATOR, RISK MANAGEMENT

AGENCY

Mr. Chairman and members of the Subcommittee, I am pleased to present the fiscal year 2007 budget for the Risk Management Agency (RMA). Although this budget 

was developed by my predecessor, I have been fully briefed on the funding issues 

facing RMA and I support the funding level requested in this budget submission. 

One of my principle goals is to make the crop insurance program more efficient 

so farmers can be less reliant on ad hoc disaster payments. When I accepted this 

position, Secretary Johanns charged me with administering the crop insurance program in a timely and farmer-friendly manner. I take this charge very seriously; cooperation and unity between the Government and our reinsured partners are necessary to meet our common goals of providing effective insurance products, processing timely and accurate claims when losses occur and identifying and eliminating 

waste, fraud and abuse in the program to the greatest extinct possible. In addition, 

effective outreach to our stakeholders and customers is necessary to identify attributes of the program that are working well and the aspects that need to be 

changed to improve efficiency and effectiveness. Administration of the crop insurance program requires all interested parties working together to identify viable insurance products and solutions that meet farmer/rancher needs of the agricultural 

community. Moreover, if the program is to continue to be successful, the checks and 

balances necessary to guard against the risks of fraud, waste and abuse need 

strengthening. 

The Federal Crop Insurance Corporation continues to improve the economic stability of agriculture through a sound system of crop insurance, in paying out approximately $3.3 billion in losses in fiscal year 2005. Overall, the program provided 

farmers with more than $44 billion in protection on about 246 million acres with 

a participation rate of about 80 percent (principal crops). In order to maintain and 

go beyond our current participation rate, while at the same time reducing the expectation of ad hoc disaster payments when bad weather or natural disasters strike, 

a strategy that compels the purchase of crop insurance must be implemented. 

The 2007 budget supports more than $49 billion in protection on approximately 

286 million acres through about 1.2 million policies. The appropriations required for 

this level of risk protection is $4.2 billion, which includes program administration, 

product evaluation and program oversight, as well as premium subsidies, administrative expenses reimbursements, and payments for excess losses estimated above 

the mandated loss ratio of 1.075. The funding level proposed for the Federal Crop 

Insurance Corporation (FCIC) Fund is $4.1 billion and for the Administrative and 

Operating Expenses, $80.8 million. 

FCIC FUND

The fiscal year 2007 budget proposes that ‘‘such sums as may be necessary’’ be 

appropriated to the FCIC Fund. This ensures the program is fully funded to meet 

the contractual obligation to pay claims, to reimburse for expenses incurred in delivering insurance to farmers and ranchers, and to provide premium subsidies to make 

crop insurance affordable. Of the total funding requested for the FCIC budget, 66 

percent is for premium subsidies. This level of subsidy is necessary to maintain par-
333 

ticipation in the program and to encourage producers to purchase higher levels of 

coverage. 

To make the crop insurance program more efficient and to reduce the reliance on 

ad hoc disaster payments, the 2007 budget includes a proposal to encourage producers to purchase more adequate crop insurance coverage by linking direct payments or any other Federal payment for crops to the purchase of crop insurance. 

This change will ensure farmer’s revenue loss would not be greater than 50 percent. 

Other changes include making catastrophic coverage more equitable in its treatment 

of both large and small farms, restructuring premium rates to better reflect historical losses, and reductions in delivery costs. Essentially, the majority of producers 

will have crop insurance and the minimum coverage level will be sufficient to support the producers when losses occur. The estimated savings to the program is $140 

million beginning in 2008. This proposal will be submitted along with the other 

mandatory proposals for farm programs that support the President’s Budget. The FCIC budget estimates are $2.7 billion for premium subsidy, $940.3 million for delivery expenses, $379.8 million for estimated excess losses, and $74.5 million 

for Agricultural Risk Protection Act of 2000 (ARPA) initiatives. With the exception 

of ARPA initiatives, these estimates are based on program indicators derived from 

USDA’s latest projections of planted acreage and expected market prices. 

ADMINISTRATIVE AND OPERATING EXPENSES (A&O)

RMA’s fiscal year 2007 request of $80.8 million for Administrative and Operating 

Expenses represents a base of $76.3 million, which includes $3.6 million for data 

mining, and an increase of about $4.5 million from fiscal year 2006. The increase 

includes funding for an increase in Compliance staffing, $1.3 million; improving 

monitoring of the insurance companies, $1.0 million; pay costs, $1.2 million; and information technology costs of $1.0 million. 

The 2007 budget requests $1.3 million to support an increase of 15 staff years. 

This will raise RMA’s employment ceiling from 553 to 568. The 15 staff years will 

support the increased workload for the Compliance function to provide the staffing 

to address outstanding OIG and GAO recommendations to improve oversight and 

internal controls over insurance providers. In response to several OIG audit reports, 

RMA needs to improve the process of auditing insurance providers to detect and correct vulnerabilities to proactively prevent improper payment of indemnities. The additional staffing will provide the necessary oversight to ensure taxpayers’ funds are 

expended as intended. 

Also included in the 2007 budget is $1.0 million to expand the monitoring and 

evaluation of reinsured companies. RMA is requesting funds to establish a process 

of monitoring, evaluating, and auditing, on an annual basis, the performance of the 

product delivery system. These funds will be used to support insurance company expense audits, performance management audits and reinsurance portfolio evaluations 

to ensure effective internal and management controls are in place and operating for 

each reinsured company’s business operations. 

An increase of $1.2 million is requested for pay costs. These funds are necessary 

to maintain required staffing to carry out RMA’s mission and mandated requirements. 

Lastly, an increase of $1.0 million is requested for immediate IT requirements 

that will support patch-work enhancements to the existing IT system. If RMA is to 

continue to pay out billions of dollars in indemnity payments, it is prudent and necessary to have a current and reliable operating system to deliver the crop insurance 

program. To effectively manage a $4 billion crop insurance program, a modernized 

IT system is necessary to replace RMA’s core IT operating system that is over 12 

years old. 

In light of that, an additional legislative proposal in the 2007 budget is being offered to require the reinsured companies to share in the cost to develop and maintain a new IT system. The companies would be assessed a fee based on one-half cent 

per dollar of premium sold. The fee is estimated to generate an amount not to exceed $15 million annually. After the IT system has been developed, the assessment 

would be shifted to maintenance and would be expected to reduce the annual appropriation of the salaries and expenses account of the agency. 

PROGRAM MANAGEMENT

The following is an update on accomplishments and events in 2005 regarding key 

initiatives, activities and products: 

—FCIC Board Activities 

—Reinsurance 

—Hurricane Crop Losses 
334 

—Pilot Programs 

—Product Development 

—Education and Outreach Program 

—Agricultural Management Assistance 

—Program Integrity 

The FCIC Board of Directors consists of 10 members. The Board receives, reviews, 

and approves policies and plans of insurance and other related materials for reinsurance, risk subsidy, and administrative and operating subsidy. During 2005, the 

Board considered 62 action items during eight board meetings. The actions included 

6 expert reviews, 23 program revisions and modifications, 10 new program submissions, and 23 corporate administrative items. 

Reinsurance 

Currently, there are 16 approved insurance providers. Recent entrants into the 

crop insurance program include: Austin Mutual Insurance Company and its managing general agent (MGA), Crop USA; Westfield Insurance Company and its MGA, 

John Deere Risk Protection, Inc., and Stonington Insurance Company and its MGA, 

Agro National, LLC. The new Standard Reinsurance Agreement has been put in 

place, effective beginning the 2005 crop year. 

During 2005, RMA published a proposed rule for premium reduction plans (PRP). 

The PRP authorizes a company to pass confirmable cost savings to insured in the 

form of premium reductions. After a 60-day comment period, an interim final rule 

was published. Currently, nine insurance providers are eligible to offer a premium 

reduction plan for the 2006 reinsurance year. However, due to a provision in the 

2006 appropriations act, the PRP will not be available for the 2007 reinsurance year 

which begins July 1, 2006. 

Hurricane Crop Losses 

Like other Federal agencies, RMA had a role in responding to victims of last 

years’ hurricanes. When Wilma, Katrina and Rita hit the southeast and Gulf Coast 

areas, RMA’s delivery system was available to respond to the crop losses ensuring 

the timely disbursement of payments. In addition, the Agency put in place emergency loss procedures to help producers who were subject to cancellation or termination dates for indebtedness or unpaid premium. This change allowed producers 

who might have become ineligible for the 2006 crop year to have additional time 

to either make payment of the premium due or execute a payment agreement with 

the approved insurance provider. This primarily impacted about 1,500 crop insurance policies that earned premium mostly on nursery, wheat, sugarcane, and oat 

crops. An estimated 500–600 insured producers were impacted. The following are 

the current 2005 loss estimates of the hurricanes: 

Hurricane States Impacted Liability Estimated Losses 

Wilma .................................................. Florida ....................................................... $1,196,400,000 $194,000,000 

Katrina ................................................ Alabama, Florida, Mississippi, Louisiana 525,710,000 129,709,000 

Rita ..................................................... Arkansas, Louisiana, Texas ...................... 130,183,00 15,447,000 

Total ...................................... ................................................................... 1,852,293,000 339,156,000 

Pilot Programs 

RMA has 26 active pilot programs in various phases of development. The pilot 

programs for crop year 2005 are Adjusted Gross Revenue (AGR) and AGR-Lite, 

apple pilot quality option, avocado actual production history, avocado revenue, avocado/mango trees, cabbage, cherries, citrus (dollar), coverage enhancement option, 

cultivated clams, cultivated wild rice, Florida fruit trees, forage seed, fresh market 

beans, the Income Protection plan of insurance, mint, mustard, onion, pilot stage 

removal option, processing chile peppers, processing cucumbers, rangeland, raspberry/blackberry, strawberries, sweet potatoes, and winter squash/pumpkins. After 

about three to five years of experience, pilot program evaluations are performed to 

determine whether the plans of insurance should be converted to permanent programs and offered in counties where the crop is routinely grown. During 2005, RMA 

completed evaluations on eight pilot programs including: cherries, chile peppers, 

California citrus, processing cucumbers, strawberries, winter squash, AGR and avocado revenue. After consideration by the FCIC Board, winter squash and processed 

cucumbers were terminated; cherries, chile peppers, and California citrus were continued as pilots until the 2006 crop year; and strawberries extended through the 

2008 crop year. Consideration of the evaluations of AGR and avocado revenue pilots 

will come before the Board in the 2006 fiscal year. 
335 

Product Development 

In January 2006, the FCIC Board approved two new pilots, pasture range and forage programs set to begin for the 2007 crop year. These are group-risk programs, 

one using a temperature adjusted normalized difference vegetative index and the 

other a rainfall index program. The programs will be piloted in different States and 

areas with sales beginning this fall. In addition, RMA plans to seek expert review 

of a third proposal this spring in an attempt to create viable products for commodities representing over 550 million acres. 

Education and Outreach Program 

A total of $4.4 million was distributed for education and outreach projects with 

State departments of agriculture, universities and non-profit organizations. As a result, crop insurance education was provided to producers in Connecticut, Delaware, 

Maine, Pennsylvania, Rhode Island, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, Utah, Vermont, West Virginia and Wyoming. These 

educational projects will promote risk management education opportunities by informing agribusiness leaders about new trends in risk management and by delivering risk management training to producers with an added emphasis on reaching 

small farmers. 

Similar to last year, RMA awarded 40 commodity partnership agreements at a 

cost of $5.5 million. These agreements will provide outreach to specialty crop producers to broaden their risk management education. In addition, RMA also directs 

education and outreach efforts toward women, small, and limited resource farmers, 

and ranchers. In 2005, 63 outreach projects were funded at a cost of $7 million. 

RMA continues to partner with community-based organizations such as 1862, 1890, 

and 1994 land grant colleges, universities, as well as, with Hispanic serving institutions to provide technical assistance and risk management education on managing 

farming risks. 

Agricultural Management Assistance 

In 2005, RMA provided $4.1 million in financial assistance to producers purchasing spring buy-up crop insurance policies in 15 targeted States. The primary 

goal of the program is to encourage producers to purchase higher levels of coverage, 

and to provide an incentive for new producers to enter the program. In 2005, RMA 

paid up to 15 percent of producers’ out-of-pocket premium costs to encourage increased participation. 

Program Integrity 

RMA, the Farm Service Agency (FSA), and the reinsured companies continue to 

improve program compliance and integrity through: (l) data reconciliation and 

matching of disaster program payments; (2) evaluating and amending procedures for 

referring potential crop insurance errors or abuse between FSA and RMA; and (3) 

creating anti-fraud distance learning training packages as required by Agricultural 

Risk Protection Act of 2000. Compliance managers have increased efforts to integrate new data mining projects to improve program results and are exploring ways 

to expedite processing of sanctions requests. 

The efforts of FSA and the results from the data mining and analysis tools have 

greatly improved the referral activity to and from RMA. As a result, from the period 

of January to December, 2004, an estimated $71 million reduction in program costs 

has been identified by preventing or deferring unsubstantiated claims. 

Currently, to manage the referral activity and the responsibilities of data reconciliation RMA has dealt with the added workload by increasing emphasis on data 

management and computer based resources. But the workload continues to create 

a challenge for Compliance to accomplish current activities along with new requirements mandated by ARPA without the benefit of additional resources. Therefore, 

the fiscal year 2007 budget includes 15 additional staff years for Compliance to 

strengthen the front-end reviews of approved insurance providers and to address 

outstanding recommendations to improve oversight and internal controls over insurance providers. 

CONCLUSION

RMA is faced with many challenges to make the crop insurance program more 

efficient and effective. But along with these challenges come opportunities to provide 

more meaningful insurance products and tools, ensure a first-rate delivery system 

and the opportunity to verify and validate that the program is solvent and administered with integrity. I look forward to working with our stakeholders to make this 

program even better than it is today. However, the improvements require the re-
336 

sources requested in the 2007 budget along with passage of the proposed legislations. 

Mr. Chairman, this concludes my statement. I will be pleased to answer any questions. 

Senator BENNETT. Thank you, sir. 

Mr. Rey. 

STATEMENT OF MARK REY

Mr. REY. Thank you, Mr. Chairman and Senator Kohl. 

I am pleased to appear before you today to present the fiscal year 

2007 budget and program proposals for the Natural Resources Conservation Service (NRCS). 

Overall, for fiscal year 2007, the President’s budget recommends 

a record $4 billion in mandatory funding to expand participation in 

Farm Bill conservation programs throughout the department. Proposals in the 2007 budget will produce savings in both the mandatory and discretionary accounts. These savings will enable the administration to target funding based on resource needs and program results. 

The 2007 budget request for the Natural Resources Conservation 

Service provides $2.8 billion in total funding, with $788.6 million 

in discretionary funding and $2 billion in mandatory funding, including $1 billion for the Environmental Quality Incentives Program. 

Also, on the mandatory side, the budget request includes an increase of $153 million for the Wetlands Reserve Program to enroll 

an additional 250,000 acres in fiscal year 2007. This represents a 

total investment of $402 million for the Wetlands Reserve Program 

and will bring the total acreage enrolled in the program to more 

than 2.2 million acres. 

The Wetlands Reserve Program is the principal supporting program for the President’s Wetlands Initiative to restore, protect, and 

enhance 3 million acres of wetlands over a 5-year period that began 

in June 2004. The Wetlands Reserve Program contributes roughly 

one third of all of the acres included in the President’s initiative. 

The appropriations request includes $634.3 million for the Conservation Technical Assistance Program, the base conservation program that enables NRCS to successfully implement Farm Bill conservation programs. In past testimony, the department has discussed the excellent score NRCS received in the measure of customer satisfaction for conservation assistance. 

Today, I am pleased to announce that we are releasing a new report from the American Customer Satisfaction Index, conducted by 

the University of Michigan, that gives NRCS an overall score of 76 

out of 100 for administering the Conservation Security Program 

(CSP). This score for CSP is considerably higher than the 2005 national average of 71 for other Federal Government programs. 

We are very proud of the results of this survey, as it highlights 

our commitment to quality customer service. In addition, we have 

continued to make strides in streamlining our operations as well. 

We are striving to keep the administration of conservation programs as efficient and as lean as possible. 

This year alone, we have streamlined program forms to make 

them more consistent among like programs, such as the easement 
337 

programs. We have consolidated program manuals where possible. 

We have established a process for rapid watershed assessments to 

provide initial estimates of where conservation investments can 

best address resource concerns, and we have instituted programmatic reforms, such as a pilot sign-up process for conservation 

planning and technical assistance. 

We are also preparing for the future with a new strategic plan 

that charts the agency’s future over the next 10 to 20 years. The 

plan introduced a new mission statement—‘‘helping people help the 

land.’’ 

This mission and the accompanying vision statement affirm the 

agency’s commitment to assist private land owners and solidify the 

essential connection between working agricultural lands and sustaining a healthy environment. 

PREPARED STATEMENTS

In summary, I believe that the administration’s fiscal year 2007 

budget request reflects sound policy and provides solid support for 

the vital mission of voluntary conservation on private lands. 

Thank you very much. 

[The statements follow:] 

PREPARED STATEMENT OF MARK REY

Mr. Chairman and members of the Subcommittee, I am pleased to appear before 

you today to present the fiscal year 2007 budget and program proposals for the Natural Resources Conservation Service (NRCS) of the Department of Agriculture 

(USDA). I am grateful to the Chairman and members of this Subcommittee for the 

ongoing support of private lands voluntary conservation and the protection of soil, 

water, and other natural resources. 

Farmers, ranchers, and other private landowners across America play a vital role 

in conserving our Nation’s soil, water, air, and wildlife resources, while producing 

abundant food and fiber. More than 70 years of ‘‘helping people help the land’’ gives 

NRCS a firm foundation to meet the challenge of balancing production agriculture 

with resource conservation. For fiscal year 2007, the President’s Budget meets that 

challenge by recommending a record $4 billion in mandatory funding to expand participation in Farm Bill conservation programs. 

PRESIDENT’S FISCAL YEAR 2007 BUDGET

The President’s fiscal year 2007 budget request for NRCS provides resources for 

the ongoing mission of NRCS, while ensuring that new challenges faced by landowners can be addressed. 

Because of the overriding need to reduce the deficit, NRCS, like every Federal 

agency, will share in the responsibility of controlling Federal spending. There are 

proposals in the fiscal year 2007 Budget that will produce savings in both the mandatory and discretionary accounts. These savings will enable the Administration to 

target funding based on need and program results. 

With that said, the President’s fiscal year 2007 budget request for NRCS recognizes the vital role that natural resource conservation plays in securing America’s 

national security. Without productive soil, clean water and air, and farmers and 

ranchers who can make a living off the land, the United States would not be the 

strong Nation it is today. 

The fiscal year 2007 budget request for NRCS provides $2.8 billion in total funding, with $788.6 million in discretionary funding, and $2 billion in mandatory funding, including $1 billion for the Environmental Quality Incentives Program. 

Also on the mandatory side, the Budget request includes an increase of $153 million for the Wetlands Reserve Program (WRP) to enroll and additional 250,000 

acres. This represents an investment of $402 million for WRP, and will bring the 

total acreage enrolled in the program to more than 2.2 million acres. 

WRP is the principal supporter of the President’s Wetlands Initiative to restore, 

protect, and enhance 3 million acres of wetlands over a 5 year period that will begin 
338 

in June 2004. WRP also contributes roughly one-third of all the acres toward the 

goals of the President’s Wetlands Initiative. 

The appropriation request includes $634.3 million for the Conservation Technical 

Assistance (CTA) Program, which is the base program that supports the Department’s conservation efforts with State and local entities, and the basic conservation 

planning and decision support needed to successfully implement Farm Bill conservation programs. 

BUILDING STRONG ACCOUNTABILITY MEASURES

In the current budget environment, it is more important than ever to continue 

working diligently on accountability and results measurement for the funds provided by Congress. Mr. Chairman, I am proud of the great strides NRCS has made 

in the past year on this effort as well as on making NRCS information more accessible to farmers, ranchers, and the general public. NRCS has taken bold steps to 

address all the challenges identified as a result of the Office of Management and 

Budget’s Program Assessment Rating Tool (PART) scores for various conservation 

programs. PART reviews have been completed for 12 NRCS programs. The Agency 

has used these assessments to develop long-term outcome based performance measures and to become even more results oriented. 

Meeting the President’s Management Agenda is critical to all of us at USDA. 

Linking program requirements and program allocations to performance and accountability measures helps both the Administration and Congress make the most informed budget decisions. 

CONSERVATION SECURITY PROGRAM (CSP) CUSTOMER SERVICE RESULTS SURVEY

Mr. Chairman, in past testimony before this Subcommittee, I have discussed the 

excellent score NRCS received in a measure of customer satisfaction for conservation assistance. I am proud to report that according to the American Customer Satisfaction Index (ACSI) conducted by the University of Michigan, NRCS received an 

overall score of 76 out of 100 for administering CSP. This voluntary program supports ongoing stewardship of private agricultural land by providing payments for 

maintaining and enhancing natural resources. 

NRCS’ score for CSP is considerably higher than the 2005 national average of 71 

for the Federal Government and right on track with earlier scores for the Environmental Quality Incentives Program (75) and the Wildlife Habitat Incentives Program (77) from surveys conducted in 2004. 

The four drivers of satisfaction that were measured for CSP include its Self-Assessment Workbook, the one-on-one personal interview with NRCS, the contract review and award process, and NRCS staff. This is the first customer satisfaction survey for this new program. 

STREAMLINING FOR CONSERVATION GAINS

NRCS continues to make strides in streamlining operations. In this process, the 

Agency is striving to keep the administration of conservation programs as lean as 

possible. We are doing that by: 

—Streamlining the payment process; 

—Building our eGovernment infrastructure, including eForms, and the programs 

Web site; 

—Reducing required paperwork for customers through a common computer database in USDA Service Centers; 

—Streamlining program forms that are used, trying to be more consistent between like programs such as the easement programs, and consolidating program manuals when possible; 

—Costing and revising program allocation formulas to distribute funds to States 

on resource-based methodology; 

—Working on an automated application ranking tool; 

—Establishing a process for rapid watershed assessments to provide initial estimates of where conservation investments can best address resource concerns; 

—Continuing to place programmatic and technical information available on the 

Agency’s Web site to give our employees and customers access to the latest, 

high-quality information; and 

—Instituting programmatic reforms such as a pilot sign-up process for conservation planning technical assistance. 
339 

ACCELERATING CONSERVATION IMPLEMENTATION

Accelerating conservation implementation is essential. Wise management of resources is critical. We need to get the 5 to 10-year contracts the Agency has signed 

with farmers completed, get the conservation on ground, and at the same time, 

aware of the realities of farm economics. Conservation is a wise investment in the 

future of our country’s healthy soil, clean water, and abundant wildlife; but practicing good conservation also makes good economic sense. 

STRATEGIC PLANNING FOR THE FUTURE

I am proud of the accomplishments NRCS achieved in 2005. An effort that particularly stands out is one undertaken to chart the future by completing a new strategic plan. The strategic planning process incorporated internal and external assessments of natural resources, human capital, civil rights, and other issues. The information collected through this assessment served as the foundation to formulate the 

new strategic plan. This plan will be a comprehensive roadmap to guide the Agency 

over the next 10 to 20 years. 

The plan introduced a new mission statement, ‘‘helping people help the land.’’ 

This mission, and an accompanying vision statement, articulates the Agency’s role 

to assist private landowners and solidify the essential connection between retaining 

a viable agricultural presence on the landscape and sustaining a healthy environment. 

CONCLUSION

Mr. Chairman, in summary, we are planning for the future under an atmosphere 

of increasingly austere budgets and economic uncertainties along with a multitude 

of other unknowns on the domestic and international fronts. I believe that the Administration’s fiscal year 2007 Budget request reflects sound policy, and will provide 

stability to the vital mission of voluntary conservation on private lands. The Budget 

request reflects sound business management practices and the best way to work for 

the future and utilize valuable conservation dollars efficiently and wisely. 

I thank members of the Subcommittee for the opportunity to appear, and would 

be happy to respond to any questions that Members might have. 

PREPARED STATEMENT OF BRUCE I. KNIGHT, CHIEF, NATURAL RESOURCES

CONSERVATION SERVICE

Thank you for the opportunity to appear before you today to discuss our fiscal 

year 2007 budget request for the Natural Resources Conservation Service (NRCS). 

As we look ahead to fiscal year 2007, and the contents of the Administration’s 

budget request, I want to take a moment to reflect upon the successes that NRCS 

has faced in the past year and what we are doing to move the Agency forward. It 

has been a productive year for NRCS, our partners, and landowners across America. 

We have assisted landowners to treat over 42 million acres of conservation and develop over 4,400 Comprehensive Nutrient Management Plans (CNMP). This brings 

the total CNMPs applied with NRCS support since 2002 to more than 14,000. In 

addition, last year NRCS and our partners: 

—Served nearly 3.8 million customers around the country; 

—Completed or updated soil survey mapping on 31.2 million acres, of which, 1.8 

million acres were on Native American or Native Alaskan lands; 

—Conducted a comprehensive study of technical assistance, reaffirming the intrinsic value of scientifically based tools and activities including developing conservation plans and encouraging a knowledge-based approach to conservation; 

—Committed to over 49,000 Environmental Quality Incentives Program (EQIP) 

contracts for multi-year conservation obligations; 

—Enrolled over 3,300 Wildlife Habitat Incentives Program (WHIP) contracts; 

—Expanded the Conservation Security Program nationwide to recognize outstanding land stewards and enable them to do more; 

—Helped land managers create, restore, or enhance more than 284,000 acres of 

wetlands primarily through WRP; 

—Facilitated nearly 1 million hours of Earth Team volunteer service; and 

—Registered over 2,500 Technical Service Providers to assist in conservation planning and implementation efforts, obligating $52.7 million in fiscal year 2005. 

This provided the equivalent of 520 staff years to attain additional conservation 

achievements. 

As we look ahead to this year and beyond, we will direct our efforts toward ensuring that all of the potential conservation gains are fully realized. What I mean by 
340 

that is NRCS will be focusing on fine-tuning our business tools and solidifying the 

progress we have made in working with farmers and ranchers across America to implement conservation programs. We want to make sure everything works smoothly—for our employees and our customers. We want our decisions and processes to 

be transparent. We want to be even more efficient, effective and focused on meeting 

our customers’ needs. 

HELPING PEOPLE HELP THE LAND

For over 70 years, NRCS has been committed to locally led, voluntary cooperative 

conservation. Last year, one of our district conservationists from Iowa suggested 

that we describe our mission as ‘‘helping people help the land.’’ The phrase is succinct and it effectively describes what we do, so our Agency has adopted ‘‘helping 

people help the land’’ as our new mission statement. 

NEW STRATEGIC PLAN

In fiscal year 2005, NRCS initiated an aggressive strategic planning process to develop a roadmap to guide the Agency over the next 10 to 20 years. This new NRCS 

Strategic Plan refines and builds on the goals and successes of past plans; and directly supports the new U.S. Department of Agriculture (USDA) Strategic Plan. The 

NRCS plan was developed around three foundations: 

—Agency customers; 

—Agency business lines and associated products and services; and 

—Priority and newly emerging natural resource conservation issues. 

The new plan emphasizes three overarching strategies—cooperative conservation, 

the watershed approach, and market-based approaches to conservation. These complementary strategies will be used effectively to assist private landowners manage 

their lands and resources to achieve national natural resource goals and objectives. 

The plan includes six mission goals oriented toward existing and emerging natural resource challenges. Three are Foundation Goals which reflect long-standing 

conservation priorities and include: high quality, productive soils; clean and abundant water; and healthy plant and animal communities. Also, new in this plan are 

three Venture Goals that reflect emerging areas of natural resource interest, posing 

challenges for niche definition and capacity building. The Venture Goals include: 

clean air, an adequate energy supply, and working farm and ranch land preservation. 

Even though the agency’s new strategic plan has not yet been implemented, there 

are things that we are doing already to make this plan operational. We have integrated the concepts of business lines and new Agency goals in our fiscal year 2006 

business planning process. Our Strategic Human Capital Plan has adopted the strategic plan as a framework, ensuring that succession planning aligns with the Agency’s long-term goals and objectives. We are emphasizing cooperative conservation 

and market-based and watershed approaches in our programs, such as in the Cooperative Conservation Partnership Initiative and Conservation Innovation Grants 

that offer competitive grants to a broad and diverse array of potential customers. 

HUMAN CAPITAL STRATEGIC PLAN

NRCS is in the process of developing a Human Capital Strategic Plan to help us 

focus on the future workforce of our Agency. Over the next 5 years, more than half 

of Federal employees are eligible to retire. This pool of potential retirees includes 

highly skilled key personnel such as our engineers, hydrologists, soil scientists, and 

agronomists, just to name a few. Because of the importance of these disciplines to 

our organization, it is vital that we have a strategy in place to fill-in behind these 

employees and provide the high level of expertise that our customers have come to 

expect. We will develop this plan to address the potential loss of so many employees 

and to compete for talent in a shrinking pool of candidates; primarily due to 

generational changes in employment trends, and shifts in academia from agriculture 

related disciplines to more ecology and ecological related degrees. We need a strategy that will continue to make NRCS the ‘‘employer of choice’’ for highly skilled individuals interested in serving in voluntary conservation. 

EMPHASIS ON ENERGY

One of the issues facing many farmers today is the high cost of fuel, fertilizer and 

other energy-related inputs. In early December 2005, Secretary Johanns announced 

the USDA Energy Strategy, which is a concerted effort to look at both reducing demand for oil and natural gas and increasing supply through bio-fuels. 
341 

To assist in this effort, NRCS has developed the three-click Energy Estimator 

Tool, which helps farmers and ranchers determine how much they could save by 

switching from conventional tillage to no-till or another reduced tillage system. 

I am pleased to announce that we recently released a Nitrogen Estimator Tool. 

Farmers can use this tool to better estimate how much nitrogen they are applying 

on the ground in order to better manage and minimize the amount of fertilizer applied. A large part of fertilizer costs relate to energy; this tool can help result in 

a net savings for farmers and ranchers that apply the technology. 

Beyond these two tools, the Agency is also working on an Irrigation Estimator 

Tool to help show water savings garnered by switching to less intensive water conservation practices. 

The Agency is working on an enhancement that would help farmers figure out 

how much they could save through improved irrigation systems. A second enhancement will enable producers to predict their savings by switching from fossil fuel fertilizer to animal manure. 

WEB BASED SOIL SURVEY

One of the fundamental building blocks of conservation is knowledge. We know 

that farmers, ranchers, contractors, and homeowners need sound data about the 

land where they live. In continued efforts to make conservation data as transparent 

and available as possible, we launched a Web Soil Survey to make soils data available upon demand through the internet. Soil survey maps and related information 

are available online for more than 95 percent of the Nation’s counties. 

As we move forward in fiscal year 2006, there is some innovative technology that 

can help farmers and ranchers realize even bigger gains in their conservation efforts. We look forward to building upon the technology foundation achieved this year 

to implement even more voluntary conservation on America’s private lands. 

DISCRETIONARY FUNDING

The President’s fiscal year 2007 budget request for NRCS reflects our ever-changing environment by providing resources for the ongoing mission of NRCS and ensuring that new opportunities are realized. 

CONSERVATION OPERATIONS

The President’s fiscal year 2007 budget request for Conservation Operations (CO) 

proposes a funding level of $745 million, which includes $634.3 million for Conservation Technical Assistance (CTA), $89.3 million for Soil Surveys, $10.6 million for 

Snow Surveys, and $10.7 million for the 26 Plant Materials Centers. As in past requests, the Budget does not fund continuation of fiscal year 2006 congressional earmarks. 

Mr. Chairman, while for years we have stated that CO is the heart of everything 

our Agency does, we need to do a better job describing the program’s scope and effect. The Office of Management and Budget’s Program Assessment Rating Tool 

(PART) process has been an important step in developing meaningful, quantifiable 

long-term performance measures. This review has helped the Agency streamline the 

program and focus on national priorities in fiscal year 2005 including, development 

of CNMPs that will help landowners meet regulatory challenges; reduction of nonpoint source pollution (nutrient, sediments, pesticides, or excess salinity); reduction 

of emissions, such as particulate matter, that contribute to air quality impairment; 

reduction of soil erosion from agricultural lands; and promotion of at-risk species 

habitat conservation. 

Mr. Chairman, I am pleased to report that in fiscal year 2005, NRCS developed 

and implemented the first comprehensive CTA Program policy that improves transparency and clarifies the program’s mission in an era of increased accountability. 

This year, NRCS revised the allocation process for the CTA Program to ensure that 

dollars go where the needs are greatest. This new methodology will provide a more 

transparent allocation that addresses resource issues. The new allocation formula 

also aligns with the new CTA policy and national priorities, and integrates program 

performance measures that were developed in the PART process. 

In addition, this year we had 9 States participate in NRCS’ first conservation 

planning sign-up. This is a pilot initiative that emphasizes the importance of conservation planning to help producers be better prepared to apply for conservation 

programs and to comply with Federal, State, tribal and local governmental regulations. The sign-up enabled landowners to plan more realistically to implement practices and apply for conservation programs in a more comprehensive approach. 
342 

All of these improvements will ensure that the most pressing conservation needs 

on America’s private lands are addressed and will help NRCS meet its strategic 

planning objectives and improve accountability. 

WATERSHED AND FLOOD PREVENTION OPERATIONS

Through the Watershed Protection and Flood Prevention Operations program that 

NRCS administers, our employees work in partnership with local leaders to improve 

the overall function and health of the Nation’s watersheds. Each project developed 

under this program has a specific purpose and benefit; most address a primary purpose of flood control, while other project benefits include upland conservation practices that address a variety of natural resources needs such as water quality improvement, soil erosion control, animal waste management, irrigation, water management, water supply development, and recreation enhancement. However, the Administration proposes to terminate funding for WFPO in fiscal year 2007 for several 

reasons. 

First, the decrease in funding in the WFPO will enable the Administration to 

focus limited resources to other higher priority conservation programs. It is expected 

that those high-priority watershed projects not yet completed will continue to receive strong local support from project sponsors, and that progress on them will continue to be made. 

In 2004, the Administration compared the benefits and costs of three Federal 

flood damage reduction programs operated by NRCS, the Corps of Engineers, and 

the Federal Emergency Management Agency. The analysis found that of the three 

programs, the WFPO program provided the least net flood damage reduction benefits. 

Mr. Chairman, I would also note that the amount of funding earmarked by Congress for this program nearly equaled the amount appropriated. This seriously hampers the Department’s ability to effectively manage the program, and does not permit the Agency to prioritize projects based upon merit and local need. 

WATERSHED SURVEYS AND PLANNING

The Watershed Surveys and Planning authorities are directed toward assessment 

of natural resource issues and development of watershed plans to conserve and utilize natural resources, solve local natural resource and related economic problems, 

avoid and mitigate hazards related to flooding, and provide for advanced planning 

for local resource development. This includes Floodplain Management Studies, Cooperative River Basin Studies, Flood Insurance Studies, Watershed Inventory and 

Analysis, and other types of studies, as well as Public Law 566 Watershed Plans. 

With the elimination of Watershed and Flood Prevention Operations (WFPO), continuation of this planning component is no longer necessary. The fiscal year 2007 

budget proposes to redirect this program’s resources to other higher priority programs. It is expected that local sponsoring organizations, as well as State and local 

governments, will assume a more active role in identifying water resource problems 

and their solutions. 

WATERSHED REHABILITATION

The Watershed Rehabilitation program addresses the problem of aging dams, especially those with a high risk for loss of life and property. Fifty-six dams have rehabilitation plans authorized and implementation of the plans is underway. 

NRCS currently has 107 dams that have rehabilitation plans authorized, and the 

projects are completed or implementation of the plans is underway. This number 

adds to the 728 rehabilitation assessment reports already completed. 

The Administration requests $15.3 million to address critical dams with the greatest potential for damage to life and property. 

RESOURCE CONSERVATION AND DEVELOPMENT PROGRAM

The purpose of the Resource Conservation and Development (RC&D) Program is 

to encourage and improve the capabilities of State, local units of government, and 

local nonprofit organizations in rural areas to plan, develop, and carry out programs 

for resource conservation and economic development. The program provides technical assistance to local communities to develop strategic plans that address their 

locally identified natural resource and economic development concerns. The budget 

proposes to reduce funding by $25 million and consolidate the number of RC&D coordinators from 375 to about 150. The current number of authorized RC&D Areas 

nationwide will be maintained at the current 375. The responsibilities and duties 
343 

of the RC&D Coordinator position would be modified to provide more coordination 

and oversight duties instead of hands-on, day-to-day activities. 

The reduction in funding for the RC&D Program will require that it be more focused on multi-county/parish planning, intergovernmental relations, serving as the 

Federal Government Representative on any Federal contracts with the RC&D Councils, and coordinating USDA assistance available toward implementation of RC&D 

Area Plans. The overall proposed budget for RC&D in fiscal year 2007 is $25.9 million. 

FARM BILL AUTHORIZED PROGRAMS

WETLANDS RESERVE PROGRAM

The Wetlands Reserve Program (WRP) is a voluntary program in which landowners are paid to retire cropland from agricultural production if those lands are 

restored to wetlands and protected, in most cases, with a long-term or permanent 

easement. Landowners receive fair market value for the land and are provided with 

cost-share assistance to cover the restoration expenses. The 2002 Farm Bill increased the program enrollment cap to 2,275,000 acres. WRP also is the principle 

USDA program to help meet the President’s Wetland Initiative goal to create, restore and enhance 3 million acres of wetlands by 2009. The President’s 2007 budget proposes $402 million for the WRP, an increase of $153 million over the 2006 level. This will allow an annual enrollment of 250,000 

acres; an increase of 100,000 acres, and will bring total cumulative enrollment to 

2,225,700 acres. 

ENVIRONMENTAL QUALITY INCENTIVES PROGRAM

The purpose of the Environmental Quality Incentives Program (EQIP) is to provide flexible technical and financial assistance to landowners that face serious natural resource challenges that impact soil, water, and related natural resources, including grazing lands, wetlands, and wildlife habitat management. In fiscal year 2005, EQIP funding was almost $1 billion. Over 49,000 contracts 

were written to assist landowners in treating an estimated 18.1 million acres. 

Mr. Chairman, in addition, NRCS assumed all contracting and administration responsibilities for EQIP (including payments to participants) were previously made 

through the Farm Service Agency. All functions were carried out through a Webbased contracting software program called ‘‘ProTracts.’’ This streamlining of procedures eliminated duplication of effort and resulted in real-time data. 

Technical Service Providers (TSPs) were used to a greater extent last year and have more than doubled since fiscal year 2003. NRCS obligated over $52 million in 

EQIP for TSPs to complement the conservation planning activities carried out under 

this program. NRCS offered approximately $20 million in Conservation Innovation Grants (CIG) 

to stimulate the development and adoption of new innovative conservation approaches while leveraging Federal investment. This program was authorized under 

EQIP in the 2002 Farm Bill and allows competitive grants to be awarded to eligible 

entities, including State and local agencies, non-governmental organizations, tribes 

or individuals to accelerate technology transfer and to develop promising new technologies to address some of our Nation’s most pressing natural resource concerns. The President’s budget proposes a level of $1 billion for EQIP, about the same 

level as in 2006. 

GRASSLAND RESERVE PROGRAM

The 2002 Farm Bill authorized the Grassland Reserve Program (GRP) to assist 

landowners in restoring and protecting grassland by enrolling up to 2 million acres 

under easement or long-term rental agreements. The 2002 Farm Bill authorized 

$254 million for implementation of this program during fiscal year 2003 through fiscal year 2007. No additional funding was requested in the President’s budget for 

GRP in fiscal year 2007 as the program reached its statutory funding limit in fiscal 

year 2005. 

CONSERVATION SECURITY PROGRAM

The Conservation Security Program (CSP), as authorized by the 2002 Farm Bill, 

is a voluntary program that provides financial and technical assistance for the conservation, protection, and improvement of natural resources on tribal and private 

working lands. The program provides payments for producers who practice good 

stewardship on their agricultural lands and incentives for those who want to do 

more. 
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In 2005, CSP was implemented in 220 watersheds nationwide, including Puerto 

Rico, and resulted in about 12,000 eligible applications covering more than 9 million 

acres of privately owned land. In fiscal year 2004, NRCS initiated the program in 

18 watersheds within 22 States. In the 2-year period since, NRCS has rewarded 

nearly 14,800 stewards on 10.9 million acres of working agricultural land. 

Through the CSP enhancement provisions and the application of intensive management measures, producers are achieving even greater environmental performance and additional benefits for society. Several new conservation activities will 

allow producers to further enhance their operation and the natural resources. For 

example, the energy component of CSP is rewarding farmers and ranchers for converting to renewable energy fuels such as soy bio-diesel and ethanol. Because CSP 

enhancements go beyond the minimum requirements, innovative producers are 

pushing conservation technology to produce even greater conservation benefits. 

Recently, the Secretary announced the fiscal year 2006 sign-up for CSP which 

runs through March 31, 2006, in 60 watersheds across all 50 States, the Caribbean, 

and Guam. The fiscal year 2006 announcement marks the third CSP sign-up. The President’s fiscal year 2007 budget requests $342.2 million in program fund- ing an increase of $83 million to continue expanding the program and rewarding 

excellent conservation stewards. 

WILDLIFE HABITAT INCENTIVES PROGRAM

The Wildlife Habitat Incentives Program (WHIP) is a voluntary program that provides cost-sharing for landowners to apply an array of wildlife practices to develop 

habitats that will support upland wildlife, wetland wildlife, threatened and endangered species, fisheries, and other types of wildlife. The budget proposes a funding 

level for WHIP of $55 million, with the additional $10 million supporting the improvement and restoration of streams and rivers for migratory fish species. NRCS 

will prioritize WHIP resources to deliver community-driven, small dam and river 

barrier removal projects in coastal States to enhance populations of key migratory 

fish species. 

FARM AND RANCH LANDS PROTECTION PROGRAM

Through the Farm and Ranch Lands Protection Program (FRPP), the Federal 

Government establishes partnerships with State, local or tribal government entities 

or nonprofit organizations to share the costs of acquiring conservation easements or 

other interests to limit conversion of agricultural lands to non-agricultural uses. 

FRPP acquires perpetual conservation easements on a voluntary basis on lands with 

prime, unique, or other productive soil that presents the most social, economic, and 

environmental benefits. FRPP provides matching funds of no more than 50 percent 

of the purchase price for the acquired easements. The budget proposes a level of $50 

million for FRPP in fiscal year 2007. 

EMERGENCY RESPONSE TO HURRICANE KATRINA

In addition Mr. Chairman, the NRCS helped communities across the Gulf Coast 

region recover from the devastation caused by the 2005 hurricanes through the 

Emergency Watershed Protection (EWP) Program. The purpose of the EWP program 

is to undertake emergency measures, including the purchase of floodplain easements, for runoff retardation and soil erosion prevention to safeguard lives and 

property from natural disasters. The typical process for delivery of this program 

starts with the local sponsor requesting assistance for a disaster recovery effort. 

NRCS then conducts a damage assessment to identify if the project is eligible and 

develops an estimated cost. Typical work under this program consists of debris removal from clogged streams caused by flooding; installing conservation measures, 

like reseeding native grasses to prevent soil erosion on hillsides after a fire; or replanting and reshaping streambanks due to erosion caused by flooding. At the request of communities across the Gulf Coast region recovering from Hurricanes 

Katrina and Rita, NRCS completed nearly $23 million in recovery work under the 

EWP Program immediately following the damage. In addition, the fiscal year 2006 

Supplemental Appropriations provided $300 million for EWP hurricane recovery efforts. 

As part of USDA’s hurricane relief efforts, NRCS assisted hurricane-impacted 

States by providing maps used by first responders to assess ground conditions during the search and rescue of survivors. Current satellite and airborne imagery is 

used to locate possible dangers, such as fires, and the safest route to rescue survivors. Soil survey data layers are used to locate the best areas for animal debris 

disposal and burial that will not endanger water sources. NRCS continues to work 

with other USDA agencies, the Federal Emergency Management Agency (FEMA), 
345 

and State emergency agencies to assist with post-disaster cleanup and restoration 

projects in Louisiana, Florida, Mississippi, Texas, and Alabama. The President recently made a request for $10 million of additional funding under 

WFPO for the EWP Program for the purchase of easements on floodplain lands in 

disaster areas affected by Hurricane Katrina and other hurricanes of the 2005 season. Under the EWP Floodplain Easement Program, a landowner voluntarily sells 

a permanent conservation easement to NRCS and, in return for a payment for the 

agricultural value of the parcel, foregoes future cropping and development on the 

land. NRCS restores the natural features and characteristics of the floodplain to 

generate public benefits, such as increased flood protection and reduced need for future public disaster assistance. 

CONCLUSION

As we look ahead, it is clear that the challenges before us will require the dedication of all available resources—the skills and expertise of the NRCS staff, the contributions of volunteers, and continued collaboration with partners and TSPs. 

I am proud of the work and the conservation ethic our people exhibit day in and 

day out as they go about the job of getting conservation on the ground. Through 

Cooperative Conservation, we have achieved a great deal of success. We are sharply 

focusing our efforts and will work together with our partners to consolidate our 

gains this coming year. I look forward to working with you, as we move ahead in 

this endeavor. 

This concludes my statement. I will be glad to answer any questions that Members of the Subcommittee might have. 

Senator BENNETT. 

Thank you. 

Mr. Bost. 

STATEMENT OF ERIC M. BOST

Mr. BOST. Mr. Chairman and Senator Kohl, I thank you for the 

opportunity to present the administration’s fiscal year 2007 budget 

for Food, Nutrition, and Consumer Services. 

However, before I do that, there are a couple of accomplishments 

I would like to note that I think are very important. We continue 

to ensure programmatic success to all of those that are eligible and 

in need of benefits. Most recently, 26 million people are participating in our Food Stamp Program, 29 million children are participating in our National School Lunch Program every day, and we 

are serving approximately 8 million children, women, and infants 

in our WIC Program. 

In addition to that, last year we released ‘‘My Pyramid,’’ and we 

are up to 1.5 billion hits to that site. In addition, we released ‘‘Pyramid For Children,’’ and we are over 500 million hits. 

The Chairman made reference to this, but I also want to note the 

outstanding work done by the FNS staff and our partners; APHSA, 

America’s Second Harvest, and FRAC in terms of addressing the 

needs of those persons in our Gulf that were affected by the hurricanes. 

As a result of FNS’s efforts, we provided over $900 million in 

food stamp benefits to over 1.9 million affected households. We also 

provided over 22 million pounds of baby food, formula, meats, and 

pasta products to persons in need. We were on the ground and operating 1 day after the hurricane hit, and it is something that we 

are very proud of. 

In terms of the fiscal year budget for 2007, we are requesting 

funds in the amount of $57 billion. This will allow us to meet the 

needs of approximately 25.9 million persons in our Food Stamp 

Program, monthly participation in our WIC Program in the amount 
346 

of 8.22 million persons, serve 30.9 million children in our National 

School Lunch Program, and serve 10.3 million students in our 

School Breakfast Program. 

If our estimates in terms of program participation or costs are too low, we continue to request $3 billion in contingency funds for 

the Food Stamp Program, and for the first time, are requesting 

$300 million for our Child Nutrition Programs. 

When you put together a budget, you are not able to do all of the 

things you might want to do. As a result, we had to make some 

tough choices and decisions. That is why we are requesting the 

ability to phase out the Commodity Supplemental Food Program 

(CSFP) program for a couple of reasons. 

First and foremost, CSFP is only operating in limited areas in 32 

States, 2 Indian reservations, and the District of Columbia. We believe that we can serve these affected persons in other nutrition assistance programs. 

The other thing that I would say that we also believe is very important is the fact that the error rate in the Food Stamp Program 

is at 5.88, which is the lowest that it has ever been in the history 

of the Food Stamp Program. It is something we are also very, very 

proud of. 

With that in mind, we are requesting additional resources to be 

able to maintain that level of efficiency in our program. This budget also requests $675 million to continue in our efforts 

to move Americans toward a healthier lifestyle. Approximately 62 

percent of all Americans in this country are overweight. Thirty percent of us are obese. Twenty-two percent of all adolescents are 

overweight. We have seen a doubling in the rate of Type 2 diabetes 

among children. 

PREPARED STATEMENTS

According to the numbers at the Centers for Disease Control and Prevention (CDC), we spend approximately $123 billion in healthrelated costs because we eat too much and exercise too little. 

I am really pleased to be able to present this budget request and 

am more than happy to answer any questions that you may have. 

[The statements follow:] 

PREPARED STATEMENT OF ERIC M. BOST

Thank you, Mr. Chairman, and members of the subcommittee for this opportunity 

to present the Administration’s fiscal year 2007 budget request for USDA’s Food, 

Nutrition, and Consumer Services (FNCS). 

I am here today to discuss with you the President’s budget request which demonstrates the Administration’s steadfast commitment to our Nation’s nutrition assistance programs. These programs ensure a nutrition safety net for the Nation’s 

children, elderly and low-income households and, in conjunction with the Center for 

Nutrition Policy and Promotion, inform all Americans about the importance of good 

nutrition and physical activity. I am proud of our accomplishments and honored to 

work for a President who provides clear and continued support for these programs 

that protect our children and low-income households from hunger, and help to prevent the health risks associated with poor nutrition and physical inactivity for all 

our citizens. 

Our Federal nutrition assistance programs are there to meet the needs of Americans, not just in their everyday life, but also in times of disaster. I am so proud 

of my staff’s efforts in the aftermath of the recent hurricanes. When the victims of 

Hurricanes Katrina, Rita and Wilma needed our programs, we responded immediately. Cutting through red tape, simplifying requirements, trucking and airlifting 

food, expediting services, working around the clock, our staff worked side by side 
347 

with State and local staff and volunteers to help the evacuees get the food they 

needed. We even negotiated with other States to borrow eligibility workers to help 

meet high program demand within disaster States. Over $900 million in Food 

Stamp benefits were provided to over 1.9 million affected households. For situations 

where food stamps could not meet the needs, we worked in cooperation with the Agricultural Marketing Service, made commodity purchases; sped up planned deliveries already in the pipeline; and diverted product from other parts of the country 

to move commodities where they were most needed. In total, we provided over 22 

million pounds of baby food, formula, meats, pasta products, fruits and vegetables 

for congregate feeding and also for distribution to households for home consumption. 

I am proud to report to you today that the Federal nutrition assistance programs 

staff, at every level, succeeded in providing a timely and robust nutrition response 

to these devastating storms. This response underscores the value and high level of 

performance of these programs and the people at the Federal, State and local level 

who make them work across the country, every day. These programs truly operated 

as a safety net in the days and months immediately following these disasters. The 

President’s budget is committed to keep these vital programs strong. 

Mr. Chairman, this budget, more than any other I have presented to you, reflects 

the fundamental challenge of this Administration: ensuring that the needs of all eligible persons seeking to participate in our programs are met while at the same time 

protecting the interests of current and future generations who must accept the consequence, both economic and social, of the unsustainable levels of deficit spending 

and Federal debt. Not all of our existing programs are funded in this request, but 

we have been very careful to make certain to provide access to nutrition assistance 

programs for all eligible populations we serve. 

We have made tough choices and developed a budget request that makes every 

dollar produce maximum benefit for the vulnerable populations served by our programs and for the Nation as a whole. This is the first budget request I have presented to you that includes an overall decrease in resources requested. That decrease, however, in no way represents a wavering in the Administration’s demonstrated, consistent support for the Nation’s nutrition safety net. Funds requested 

within the budget fully support our best estimates of demand for program services 

and cost for the major nutrition assistance programs in fiscal year 2007. 

—This includes a monthly average participation of 25.9 million persons in the 

Food Stamp Program. This represents a decrease of approximately 1 million 

from fiscal year 2006, the first projected decrease in participation in 5 years. 

This reduction results, in large part, from sustained strong economic performance and the transition of Gulf Coast disaster participants to self-sufficiency. 

—Participation in the WIC program is expected to rise slightly in fiscal year 2007 

from 8.17 million participants a month to 8.22 million. 

—In the School Meals Programs, daily meal service to our youth will reach 30.9 

million students in the National School Lunch Program and 10.3 million students in the School Breakfast Program. 

Three principle objectives guide our administration of these programs, (1) to ensure that low-income people have access to food by ensuring sufficient funding for 

the major nutrition assistance programs; (2) to promote healthful diets and active 

lifestyles by making nutrition education an integral part of the nutrition assistance 

programs; and (3) to manage prudently and efficiently so that every dollar invested 

has maximum benefit for those truly in need. The President’s budget request for fiscal year 2007, like all prior requests submitted by this Administration, reflects these 

prime objectives. 

ENSURING LOW INCOME PERSONS HAVE ACCESS TO FOOD

At its most basic level, ensuring program access must begin with making certain 

that sufficient resources are available so all who are eligible and in need can have 

ready access to benefits. The President’s fiscal year 2007 budget requests funds to 

support anticipated participation in the Food Stamp Program, the Child Nutrition 

Programs and the WIC Program. The Administration’s strong commitment to adequately fund these critical programs acknowledges the inherent difficulties in anticipating future demand for program services, and provides for contingency funding 

should program costs exceed our estimates. 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 and myself, through properly funded contingency reserves. In the Food Stamp Program we have continued the funding 

for the contingency reserve of $3 billion. These funds are especially important as 

the program transitions out of a period of growth and begins to reflect the benefits 

of strong economic performance the Nation has been enjoying. In the WIC Program, 
348 

approximately $125 million remains available to ensure that the essential food, nutrition education, and health care referral services remain available to all who need 

them. 

For the first time, the President has proposed a contingency reserve for the Child 

Nutrition Programs. The reserve, proposed at $300 million, will ensure that sufficient resources are available to fully fund the mandatory entitlement payments to 

our State and local partners who make certain that nutritious, appealing meals are 

available to all our children in schools and many childcare settings. 

PROMOTING HEALTHFUL DIETS AND ACTIVE LIFESTYLES

Our programs provide nutrition assistance, including both access to healthy food 

and nutrition education and promotion to support and encourage a healthy lifestyle. 

With this nutrition mission in mind, and the Center for Nutrition Policy and Promotion’s (CNPP) focus on the broader population, we play a critical role in the integrated Federal response to the growing public health threat posed by overweight 

and obesity which affects well over half of adult Americans. 

The Federal nutrition assistance programs play a critical role in combating this 

epidemic by providing not just access to healthful food, but also promoting better 

health through nutrition education and promotion of physical activity. These FNS 

program services, along with the work of the CNPP to improve the diets of all 

Americans, are a key component of the President’s HealthierUS Initiative. I believe 

the American public is served well by USDA’s contributions to addressing the critical nutrition- and health-related issues facing us today. This budget request provides approximately $675 million in resources tied specifically to improving the 

diets, nutrition knowledge and behavior and promoting the importance of physical 

activity among the people we serve. 

The CNPP continues to have an integral role in the development and promotion 

of updated dietary guidance and nutrition education. The Dietary Guidelines for 

Americans (Guidelines), published jointly every 5 years by the USDA and the U.S. 

Department of Human Services (HHS), is the cornerstone of Federal nutrition policy, allowing the Federal Government to speak with one voice. This request features 

an increase of $2 million to support the efforts of the CNPP to maintain and enhance the extremely well-received food guidance system, MyPyramid.gov, which is 

one of the most frequently visited of all Federal websites for the public. In addition, 

base funding will allow CNPP to begin preparations for the 2010 update to the Dietary Guidelines for Americans for which USDA is the lead Federal agency. 

MANAGING PRUDENTLY AND EFFICIENTLY

With this budget request, we are asking the Nation to entrust us with over $57 

billion of public resources. We are keenly aware of the immense responsibility this 

represents. To maintain the high level of public trust that we have earned as good 

stewards of the resources we manage, we will continue our ongoing commitment to 

program integrity as an essential part of our mission to help the vulnerable people 

these programs are intended to serve. 

This is not a new commitment. As I noted earlier, in fiscal year 2004, the most 

recent year for which data is available, the Food Stamp Program achieved a record 

high payment accuracy rate of 94.1 percent, up 0.7 percent points from the fiscal 

year 2003 level of 93.4 percent. Our budget request included an increase of $4 million in the Nutrition Program Administration account focused on sustaining the momentum we have achieved to improve the Food Stamp payment accuracy and overall program integrity. 

We have proposed elimination of restrictive language that prohibits the use of 

funds appropriated in the program accounts for the purpose of studies and evaluations. This proviso has limited our capacity to support and assess program innovations, many of which are initiated by our State and local partners. Lifting this restriction will help us to document results more effectively, and contribute to better 

program management. 

We also continue to develop strategies to improve the accuracy of eligibility determinations in our school meals programs—an issue of mutual concern to all those 

that care about these programs. The Federal administrative resources provided for 

in this budget will allow us to advance our close work with our State and local program partners on both of these essential integrity initiatives—continuing both our 

successes in the Food Stamp Program and our intensified efforts in school meals. 

In the remainder of my remarks, I’d like to discuss in greater detail a few of the 

key proposals contained in the President’s fiscal year 2007 request. 
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FOOD STAMP PROGRAM

The Food Stamp Program is fully funded in the President’s budget at $37.9 billion. This will support an anticipated average monthly participation of 25.9 million 

persons, about 1 million persons lower than expected in fiscal year 2006. This displays a key strength of the Food Stamp Program: its ability to respond dynamically 

to the changing levels of need within American society. We responded to the hurricanes in the Gulf Coast this past fall, providing benefits to 1.9 million affected 

households. Elsewhere, the program is now responding to the strength of the economy, and is no longer growing as it did in recent years. 

Should our estimate of fiscal year 2007 program participation or cost prove to be 

too low, the program continues to be protected by a contingency reserve, proposed 

at $3 billion in new budget authority for fiscal year 2007. As an alternative to the 

contingency reserve, the President’s request offers a proposal of indefinite authority. 

This form of appropriation would eliminate the need for an annual contingency reserve appropriation, while at the same time guaranteeing that sufficient funds will 

be available to meet the entitlement components of the program. 

We continue to aggressively promote the message that Food Stamps Make America Stronger, in the sense that the program puts healthy food on the tables of lowincome families and has a positive effect on local economies. The President’s budget 

features proposals targeted at ensuring those in need can access benefits without 

sacrificing their retirement savings, making certain that all persons in need face the 

same program eligibility requirements regardless of where they live, and improving 

the ease and accuracy of the certification process so each household receives the 

proper benefit level. Given tough budget constraints, the food stamp proposals focus 

on those who are most needy. 

The President’s budget proposes to expand and make mandatory the exclusion, 

first made a State option for 401(k) and Keogh accounts in the 2002 Farm Bill, of 

the value of tax-preferred retirement accounts from the asset test. This exclusion 

strengthens retirement security policy and enables low-income people to get nutrition assistance without depleting their retirement savings. It also simplifies food 

stamp resource policy and makes it more equitable because under current law some 

retirement accounts are excluded and some are included. This proposal supports the 

President’s Ownership Society Initiative, by increasing the ability of low-income people to save for retirement. It is expected, when fully implemented, to add approximately 100,000 persons to the program and to increase benefits by $592 million over 

5 years. The majority of the new participants will be workers and their families, 

most with children. On average, each new household will get $122 in benefits each 

month. 

While we seek to encourage all who are eligible and in need to participate in the 

program, we feel strongly we must also ensure that access to the program is administered in an equitable manner across all States. For this reason we have once again 

included a proposal to eliminate categorical food stamp eligibility for Temporary Assistance for Needy Families (TANF) participants who receive only services and not 

cash benefits. The people affected by this proposal have income or assets that exceed 

the program’s regular limits. When fully implemented in fiscal year 2008, this 

change is estimated to affect approximately 300,000 individuals and save $658 million over 5 years. The President’s proposal restores equity among participants and 

ensures that food stamp benefits go to individuals with the most need while retaining categorical eligibility for the much larger number of recipients who receive cash 

assistance through TANF, Supplemental Security Income and General Assistance. 

Also included in the budget request is a proposal to add the Food Stamp Program 

to the list of programs for which States may access the National Directory of New 

Hires. Access to this national repository of employment and unemployment insurance data will enhance States’ ability to quickly and accurately make eligibility and 

benefit level determinations, improving program integrity. This proposal is expected 

to produce a net savings of $1 million annually beginning in fiscal year 2008. 

Finally, the budget request reflects our continued commitment in two important 

areas. First the President’s request includes a proposal to exclude special military 

pay received by members of the armed forces deployed in combat zones when determining Food Stamp Program eligibility and benefit amounts for their families back 

home. This proposal has been provided for in appropriations law in previous years, 

where it is requested again. Second, the Administration remains committed to working with Congress on a name change for the program. The President’s request continues the process that began in 2006 to gather information related to a proposed 

name change for Congressional consideration. 
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CHILD NUTRITION PROGRAMS

A base increase of $685 million is requested to fully fund the Child Nutrition Programs including our three largest programs serving children, the National School 

Lunch Program, the School Breakfast Program, and Child and Adult Care Food Program. This increase will support the continuing growth in meal service in these programs with more than 9 billion appealing, nutritious meals provided to all of our 

children in schools and many childcare settings. Since fiscal year 2000, average 

daily participation in the National School Lunch Program has climbed from 27.2 

million to an estimated 30.9 million in fiscal year 2007. In the School Breakfast Program, 10.3 million children will be served each day in fiscal year 2007, up from 7.8 

million in fiscal year 2000. 

Should this increase not prove sufficient to fully cover program costs, the budget request proposes an additional increase of $300 million to, for the first time, fund 

a contingency reserve for the Child Nutrition Programs. This reserve will serve to 

ensure access to these important services to all children and make certain that 

funds are available to meet our mandatory obligations to our State and local partners in the administration of the Child Nutrition Programs. 

Improving both the nutrition of children and their awareness of the role that 

healthy food choices and physical activity play in promoting overall well being are 

core goals of these programs. The Food and Nutrition Service is reviewing the new 

Dietary Guidelines, as well as the Dietary Reference Intakes, and working to incorporate their recommendations into our nutrient standards and meal patterns. Additional resources requested under the Nutrition Program Administration for CrossProgram Nutrition Education will help us to incorporate family-based approaches to 

nutrition education into the Child Nutrition Programs and to leverage those messages and materials to improve nutrition education and promote smart food choices 

and physical activity across all of the nutrition assistance programs. We also are 

continuing efforts to promote healthy behaviors through support for implementation 

of local school-based wellness programs required by the Child Nutrition and WIC 

Reauthorization Act of 2004. 

WIC

In fiscal year 2007, the President’s budget request of $5.2 billion anticipates supporting critical services to a monthly average participation of 8.2 million women, infants and children through the Special Supplemental Nutrition Program for Women, 

Infants and Children (WIC). While this request is a small decrease from the enacted 

fiscal year 2006 level, in combination with available prior-year resources it will support a slight increase from anticipated fiscal year 2006 participation levels. The 

$125 million contingency reserve appropriated in fiscal year 2003 and replenished 

in fiscal year 2005, remains available to the program should participation or food 

costs exceed our projections. We currently do not anticipate the need to access the 

contingency reserve in either fiscal year 2006 or fiscal year 2007. 

In all of the Federal nutrition assistance programs, the Administration is committed to ensuring that benefits are targeted to those most in need. WIC applicants 

can currently receive adjunctive or automatic eligibility for benefits based on their 

participation in other means-tested programs such as the Food Stamp Program and 

Medicaid. However, in some States, individuals with incomes higher than those established for participation for WIC are eligible for Medicaid. Included in the budget 

request is a proposal to limit adjunctive eligibility based on participation in Medicaid to those individuals whose incomes are below 250 percent of Federal poverty 

guidelines. 

The budget also reflects the Administration’s dual commitment to both support 

the WIC Program and to control discretionary spending growth. We are committed 

to working with our State partners to manage program costs to ensure future access 

to this critical program for all who are eligible and seek its services. The President’s 

budget contains a two-part proposal that will allow us to reduce Federal expenditures on Nutrition Services and Administration (NSA) with the participation of the 

States. WIC is currently one of the few Federal programs that do not require matching funds for administration funds. The President’s budget proposes a 20 percent 

State matching on NSA funds that would take effect in fiscal year 2008. The 1-year 

delay in implementation is essential so that the States can incorporate this new requirement into their fiscal plans. As a transitional step, we are renewing our proposal to cap the level of NSA funding at 25 percent of the total level grants to States 

in fiscal year 2007. We will also continue our long successful partnership with the 

States in containing food package cost growth through sharing of best practices and 

providing technical assistance in the implementation of food cost containment strategies. 
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COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

The President’s fiscal year 2007 budget request does not fund CSFP. We face difficult challenges and decisions with regard to discretionary budget resources and 

have chosen to not request funding for this program for several reasons. First, CSFP 

is not available in all States. It currently operates in limited areas of 32 States, two 

Indian reservations, and the District of Columbia. Second, its benefits, to a great 

extent, overlap those available through other nutrition assistance programs. Finally, 

we believe our limited resources are best focused on those programs that are universally available to serve these needy populations. The priority of the Administration 

is to ensure the continued integrity of the national nutrition assistance safety net, 

including the Food Stamp Program and WIC. However, we want to acknowledge our 

CSFP partners at the State and local level who have worked on behalf of this program. 

USDA will work closely with CSFP State agencies to ensure that any negative 

effects on program participants are minimized, and that they are transitioned as 

rapidly as possible to other nutrition assistance programs for which they are eligible. The budget request includes funds to support the transition of CSFP participants to nationally available FNS nutrition assistance programs such as WIC and 

FSP. The budget requests $2 million to provide outreach and to assist individuals 

to enroll in the Food Stamp Program. Elderly participants who are not already receiving food stamp benefits will be eligible to receive a transitional benefit worth 

$20 per month ending in the first month following enrollment in the Food Stamp 

Program under normal program rules, or 6 months, whichever occurs first. CSFP 

women, infants, and children participants who are eligible for WIC benefits will be 

referred to that program. Commodities obtained under agriculture support programs 

will be redistributed for use in other nutrition assistance programs, such as TEFAP. 

THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

TEFAP plays a critical supporting role for the Nation’s food banks. This support 

takes the form of both commodities for distribution and administrative funding for 

States’ commodity storage and distribution costs. Much of this funding flows from 

the States to faith-based organizations, a cornerstone of the food bank community. 

The President’s budget requests the fully authorized level of $140 million to support 

the purchase of commodities for TEFAP. Additional food resources become available 

through the donation of surplus commodities from USDA’s market support activities. State and local administrative costs, which support the food bank community, 

are funded at $49.5 million in the President’s request. 

NUTRITION PROGRAMS ADMINISTRATION

We are requesting $160.4 million in our Nutrition Programs Administration account, which reflects an increase of $18.6 million in our Federal administrative 

funding. This account supports Federal management and oversight of a portfolio of 

program resources totaling $57 billion, almost 60 percent of the USDA budget. 

A key component of this year’s request is a $4 million increase to support additional program integrity and accountability efforts in the Food Stamp Program. 

These resources would support up to 40 additional staff dedicated to continuing our 

strong record of results in improving payment accuracy and improving our ability 

to provide oversight and technical assistance to our State partners. While I am very 

proud of our accomplishments in program integrity, maintaining those gains and 

achieving further improvement in payment accuracy is a daunting challenge. This 

request represents a small investment that will pay big dividends in our continuing 

efforts to make certain we get the right benefits to the right people. 

The budget also requests an increase of $2 million to support the efforts of the 

Center for Nutrition Policy and Promotion. These resources will continue the Center’s work on MyPyramid and will support up to an additional 4 staff years dedicated to this initiative. 

Also included in the President’s request is $6 million to support important program assessment and evaluation activities examining program integrity issues and 

ways to improve the delivery of benefits and services with the Food Stamp Program. 

Other increases contained in the budget request include the $3 million for CrossProgram Nutrition Education efforts, $3.5 million to support FNCS’ participation in 

the OMB’s government-wide initiative to modernize and better integrate financial 

management systems, and $2.8 million to support base pay cost increases. 

The increases requested within this budget are essential to ensuring that FNCS 

can continue to successfully execute its basic program administration, oversight and 

fiscal stewardship duties. We understand the difficult budgetary circumstances the 
352 

Federal Government now faces and support and have participated in the tough 

choices that must be made. However, it is essential that FNCS address the serious 

challenge posed by both the accumulated effect of over a decade of staffing reductions and the loss of critical skills and experience inherent in the impending retirement of close to 30 percent of its workforce over the next 5 years. 

I have begun that process by improving the management of human capital planning processes, strengthening services provided to employees, and implementing 

programs designed to improve the efficiency, diversity, and competency of the work 

force. With just nominal increases for basic program administration in most years, 

FNCS has reduced its Federal staffing levels significantly over time. We have compensated for these changes by working smarter—re-examining our processes, building strong partnerships with the State and local entities which administer our programs, and taking advantage of technological innovations. We are extremely proud 

of what we have accomplished and continue to seek new ways to meet the challenges before us. However our ability to continue to reliably meet these challenges 

will be in question if staffing levels continue to decline. 

Mr. Chairman, I appreciate the opportunity to present to you this budget and 

what it means for the millions of Americans that count on us for nutrition assistance. I would be happy to answer any questions you may have. 

PREPARED STATEMENT OF ERIC J. HENTGES, EXECUTIVE DIRECTOR, CENTER FOR

NUTRITION POLICY AND PROMOTION

Thank you, Mr. Chairman, and members of the Subcommittee, for allowing me 

this opportunity to present testimony in support of the Administration’s budget for 

fiscal year 2007. 

With the Nation facing significant public health issues related to the quality of 

the American diet, I believe that the outcome-based efforts of the Center for Nutrition Policy and Promotion are key to promoting more healthful eating behaviors and 

lifestyles across the Nation. Working from its mission to improve the health of 

Americans by developing and promoting dietary guidance that links scientific research to the nutrition needs of consumers, the Center for Nutrition Policy and Promotion has a critical role in how USDA meets its strategic goal to improve the Nation’s nutrition and health. 

TRENDS CONTINUE TO SHOW NEED FOR REVISED NUTRITION GUIDANCE AND

EDUCATIONAL TOOLS

Recent studies of America’s dietary and physical activity behaviors reveal disturbing trends. First, a combination of poor diet and sedentary lifestyle not only undermines quality of life and productivity, but it also contributes to the preventable 

causes of deaths each year in the United States. 

Second, specific diseases and conditions, such as cardiovascular disease, hypertension, overweight and obesity, and osteoporosis, are clearly linked to a poor diet. 

Recent statistics are staggering: 65 percent of adults (ages 20 to 74) are overweight, 

with 31 percent among this group classified as obese. Children and adolescents have 

not escaped this unhealthy outcome: among 6- to 19-year-olds, 16 percent (over 9 

million) are overweight—triple what the proportion was in 1980. Another 15 percent 

are at risk of becoming overweight. With statistics showing an increase in overweight and obesity and estimates indicating that obesity-attributable medical expenditures in the United States reached $75 billion in 2003, the health of Americans 

is a serious concern that must be addressed. 

Third, the lack of physical activity has been associated with a number of conditions, including diabetes, overweight and obesity, cardiovascular disease, and certain cancers. Supporting evidence indicates less than half (46 percent) of the U.S. 

population meets the recommended level of physical activity. USDA’s involvement 

is critical in helping to stem and eventually reverse some of these disturbing trends. 

DIETARY GUIDELINES FOR AMERICANS ESTABLISH FEDERAL NUTRITION POLICY

In conjunction with the Department of Health and Human Services, USDA released the sixth edition of the Dietary Guidelines for Americans on January 12, 

2005. This science-based blueprint for promoting good nutrition and health encourages Americans to ‘‘(1) Make smart choices from every food group, (2) Find your balance between food and physical activity, and (3) Get the most nutrition out of your 

calories.’’ 

The Guidelines, the basis for Federal nutrition policy, provide advice for healthy 

Americans, ages 2 years and older, about food choices that promote health and pre-
353 

vent disease. These Guidelines not only form Federal nutrition policy, but they also 

set standards for the nutrition assistance programs, guide nutrition research and 

education efforts, and are the basis for USDA nutrition promotion activities. 

As the lead Federal agency in administration of the 2010 Guidelines, USDA’s 

Center for Nutrition Policy and Promotion has already begun laying the foundations—planning the management strategies that USDA will use to lead in interagency coordination and putting into place an evidence-based system. An evidencebased system will provide a framework or protocol for comprehensive analysis and 

synthesis of scientific literature, ranking its strengths according to established criteria. In developing nutrition guidance, this system will enable government decision 

makers to make the best policy supported by the strongest scientific evidence available, giving both the Executive and Legislative branches of government along with 

the scientific community and the general public a continued confidence in nutrition 

policies, guidelines and recommendations that are being developed and promoted. 

MYPYRAMID SERVES AS PREMIER TEACHING TOOL

MyPyramid, based on the 2005 Dietary Guidelines for Americans, supports two 

pillars of the President’s HealthierUS Initiative: to ‘‘Eat a Nutritious Diet’’ and to 

‘‘Be Physically Active Every Day.’’ MyPyramid is an individualized, interactive tool 

to help Americans build the Guidelines into their daily lives. Included in the 

MyPyramid webpage are the MyPyramid Plan and MyPyramid Tracker. MyPyramid 

Plan helps consumers find the types and amounts of food they should eat to meet 

nutrient requirements. MyPyramid Tracker, which has nearly 1 million registered 

users to date, is for consumers who want a detailed assessment and analysis of their 

current eating and physical activity behaviors; and it provides guidance on how to 

improve those behaviors. Since its launch in April 2005, MyPyramid.gov has received over 1.5 billion hits. 

USDA also launched MyPyramid for Kids, a child-friendly version of MyPyramid 

targeted to schoolchildren. This tool is designed to encourage children to make 

smart food choices each day. An interactive learning computer game; lesson plans 

for educators; colorful posters and flyers; and other resources are available to help 

children make those choices. To reach an even broader audience, Spanish language 

versions of MyPyramid (MiPira ́mide) and MyPyramid for Kids (MiPira ́mide para 

Ninos) have been developed. These materials have been distributed to tens of thousands of schools across America and are also available online. 

The President’s budget requests an increase of $1.98 million for CNPP. These 

funds will support maintenance and enhancements to MyPyramid, improvements in 

customer support and outreach capabilities. This budget will help USDA determine 

whether the use of the Dietary Guidelines and MyPyramid by the American public, 

teachers, students, and health professionals ultimately improves the American diet. 

Planned activities directly related to MyPyramid include the procurement of ongoing web hosting and maintenance of MyPyramid.gov and MyPyramid Tracker, 

which assist the public in monitoring and developing individualized healthy eating 

plans. In addition, this funding will provide for the maintenance and upgrading of 

related hardware and software; increased operational costs realized from spikes in 

the usage of the website; developmental costs associated with improvements to 

MyPyramid Tracker; and acquisition of new food and nutrient composition data 

bases and integration of the Healthy Eating Index into MyPyramid Tracker. 

With this budget, CNPP will procure the development and implementation of a 

continual evaluation plan for MyPyramid to ascertain its usefulness by the American consumer. Additionally, CNPP plans to enhance the MyPyramid.gov website 

with interactive capabilities to encourage behavior change that promotes healthful 

diets across a broad spectrum of American society. This would include a meal planning feature which is currently missing, a recipe file feature, and a shopping list 

feature all of which have been requested by the public and the professional nutrition 

community. 

With thousands of emails, written correspondence, telephone inquiries and hotline 

calls that have resulted from the overwhelming success of the Dietary Guidelines 

for Americans and MyPyramid.gov, CNPP also intends to use appropriated resources toward four additional staff years devoted exclusively to assisting the public 

in the areas of information dissemination and improvement of the CNPP, Dietary 

Guidelines and MyPyramid websites. These additional staff years would allow 

CNPP to provide customer support in timely manner; enhance the outreach and promotion of MyPyramid.gov; and support USDA’s Nutrition.gov website and USDA’s 

on-line ‘‘Ask the Expert.’’ 

With your support, we look forward to continuing to build, enhance, and better 

promote personalized and individualized nutrition guidance tools—such as 
354 

MyPyramid.gov—reaching millions of Americans daily. Your support will also help 

us improve customer support and outreach as well as set the foundation for future 

development of scientific nutrition policy, which is vital to addressing the growing 

problems of overweight and obesity and the related health challenges in America. 

I thank the Committee for the opportunity to present this written testimony. 

PREPARED STATEMENT OF ROBERTO SALAZAR, ADMINISTRATOR, FOOD AND NUTRITION

SERVICE

Thank you, Mr. Chairman, and members of the Subcommittee for allowing me 

this opportunity to present testimony in support of the fiscal year 2007 budget request for the Food and Nutrition Service (FNS). 

FNS is the agency charged with administering the fifteen Federal nutrition assistance programs which create the Nation’s nutrition safety net and providing Federal 

leadership in America’s ongoing struggle against hunger and poor nutrition. Our 

stated mission is to increase food security, reduce hunger and improve health outcomes in partnership with cooperating organizations by providing children and lowincome people access to nutritious food and nutrition education in a manner that 

inspires public confidence and supports American agriculture. The budget request 

clearly demonstrates the President’s continuing commitment to this mission and our 

programs as well as strengthens the Federal nutrition assistance safety net in a 

time of competing priorities and limited resources. Balancing program access, good 

nutrition, and program integrity, this budget makes tough choices to meet our key 

commitments: 

—To ensure that low-income people have access to food by ensuring sufficient 

funding for the major nutrition assistance programs. 

—To promote healthful diets and active lifestyles by making nutrition education 

an integral part of nutrition assistance programs. 

—To manage prudently and efficiently so that every dollar invested has the maximum positive benefit for those truly in need. 

A request of $57 billion in new budget authority is contained within the fiscal 

year 2007 budget to fulfill this mission through the FNS nutrition assistance programs. These critical programs touch the lives of more than 1 in 5 Americans over 

the course of a year. Programs funded within this budget request include the National School Lunch Program (NSLP), which will provide nutritious school lunches 

to 30.9 million children each school day, the WIC Program, which will assist with 

the nutrition and health care needs of 8.2 million at risk pregnant and postpartum 

women, infants and children each month, and the Food Stamp Program (FSP), 

which will ensure access to a nutritious diet each month for an estimated 25.9 million people. The remaining programs include the School Breakfast Program (SBP), 

the Summer Food Service Program (SFSP), the Child and Adult Care Food Program 

(CACFP), The Emergency Food Assistance Program (TEFAP), the Food Distribution 

Program on Indian Reservations (FDPIR) and the Farmers’ Market Programs. 

We are proposing, with this budget request, the elimination of the Commodity 

Supplemental Food Program (CSFP). The priority of the Administration, as reflected 

in the President’s budget request, is to ensure the continued integrity of the national nutrition assistance safety net. CSFP is only available in limited areas. It operates in parts of 32 States, two Indian Tribal Organizations, and the District of 

Columbia. Its benefits and target populations to a great extent, overlap with two 

of the largest nationwide Federal nutrition assistance programs—Food Stamps and 

WIC. FNS seeks to serve the children and low-income households of this Nation. We 

believe the President’s budget request, allows us to focus scarce resources on addressing the diverse ways which hunger and nutrition-related problems present 

themselves through the core programs of the nutrition safety net. 

The resources we are here to discuss represent an investment in the health, selfsufficiency, and productivity of Americans who, at times, find themselves in need 

of nutrition assistance. Under Secretary Bost, in his testimony, has outlined the 

three critical challenges which the Food, Nutrition and Consumer Services team has 

focused on under his leadership: promoting access and awareness of the Federal nutrition assistance programs; addressing the growing epidemic of obesity; and, improving the integrity with which our programs are administered. In addition to 

these fundamental priorities specific to our mission, the President’s Management 

Agenda provides an ambitious agenda for management improvement across the Federal Government as a whole. I would like to report on our efforts to address three 

specific items under this agenda: reducing improper payments and enhancing the 

efficiency of program delivery, building partnerships with faith and community- 
355 

based organizations, and systematically planning for the human capital challenges 

facing all of the Federal service. 

THE CHALLENGE OF IMPROPER PAYMENTS

Good financial management is at the center of the President’s Management Agenda. As with any Federal program, the nutrition assistance programs require sustained attention to program integrity. We cannot sustain these programs over the 

long term without continued public trust in our ability to manage them effectively. 

Program integrity is as fundamental to our mission as program access or healthy 

eating. Our efforts to minimize improper program payments focus on (1) working 

closely with States to improve food stamp payment accuracy; (2) implementing policy changes and new oversight efforts to improve school meals certification; and (3) 

improving management of CACFP providers and vendors in WIC. We have identified these 4 programs as ones susceptible to improper payments and will continue 

to enhance the efficiency and accuracy with which these programs are delivered. 

I am happy to report that in fiscal year 2004, the most recent year for which data 

is available, we have achieved a record level of food stamp payment accuracy with 

a combined payment accuracy rate of 94.12 percent. This is the sixth consecutive 

year of improvement, making it the lowest rate in the history of the program. With 

this budget request, we will continue our efforts with our State partners toward continued improvement in the payment accuracy rate. We will continue efforts to address the issue of proper certification in the school meals programs in a way that 

improves the accuracy of this process without limiting access of eligible children. 

Analytical work has begun to better assess the accuracy of eligibility determinations 

in the CACFP. 

FAITH-BASED AND COMMUNITY ORGANIZATIONS OUTREACH

Faith-based and community organizations have long played an important role in 

raising community awareness about program services, assisting individuals who 

apply for benefits, and delivering benefits. President Bush has made working with 

these organizations an Administration priority, and we intend to continue our outreach efforts in fiscal year 2007. The partnership of faith-based and community organizations and FNS programs, including TEFAP, WIC, CACFP and NSLP is longestablished. Significant numbers of faith-based schools participate in the NSLP and 

many child care providers and sponsors are faith-based and community organizations. In addition, the majority of food pantries and soup kitchens that actually deliver TEFAP benefits are faith-based and community organizations. Across the country, faith-based organizations have found over the years that they can participate 

in these programs without compromising their mission or values. They are valued 

partners in an effort to combat hunger in America. I am happy to report we have 

provided eight grant awards of approximately $2 million to community and faithbased organizations to test innovative food stamp outreach strategies to reach underserved, eligible individuals and families. 

HUMAN CAPITAL MANAGEMENT

We currently estimate that up to 80 percent of our senior leaders are eligible to 

retire within five years, as is nearly 30 percent of our total workforce. FNS must 

address this serious challenge by improving the management of the agency’s human 

capital, strengthening services provided to employees, and implementing programs 

designed to improve the efficiency, diversity, and competency of the work force. With 

just nominal increases for basic program administration in most years, the FNS has 

reduced its Federal staffing levels significantly over time. 

We have now reached a critical point within our agency staffing levels; we simply 

must have the ability to develop the resources necessary to continue to assure appropriate access to the agency programs while maintaining stellar integrity outcomes. While we have compensated in the past by building strong partnerships with 

the State and local entities which administer our programs and taking advantage 

of technological innovations, the President’s budget proposes the addition of 40 staff 

years to perform fundamental program integrity activities for the Food Stamp Program. 

It is also important that we have the ability to conduct research on our programs 

and we ask that we not be prohibited from doing so. We are extremely proud of 

what we have accomplished. In order to continue to achieve improvements in program integrity and program access; I believe full funding of the Nutrition Program 

Administration (NPA) request in this budget is vital. 

Now, I would like to review some of the components of our request under each 

program area. 
356 

FOOD STAMP PROGRAM

The President’s budget requests $37.9 billion for the Food Stamp account including the Food Stamp Program and its associated nutrition assistance programs. 

These resources will serve an estimated 25.9 million people each month participating in the Food Stamp Program alone. Included in this request is the continuation of the $3 billion contingency reserve provided for the program in fiscal year 

2006. While we anticipate improvement in the general economy, the turning point 

of participation continues to be challenging to predict. 

To better meet this challenge, we have proposed, as an alternative to the traditional contingency reserve, indefinite funding authority for program benefits and 

payments to States and other non-Federal entities. These contingency resources are 

important to not only ensuring the availability of basic program benefits, but also 

to ensuring that adequate funds are available in the event of disasters. The Food 

Stamp Program is designed to respond, not only to the economy but also to disasterrelated food assistance needs. Our recent experience with the Gulf Coast disasters 

made this very clear when over $900 million in food stamp benefits have been 

issued to date to over 1.9 million households affected by Hurricanes Katrina, Rita 

and Wilma in the fall of 2005. In addition, we have made a concerted effort to encourage working families, senior citizens and legal immigrants to apply for benefits. 

The President’s budget request contains three legislative proposals for the Food 

Stamp Program. These proposals work together to strengthen the national framework of the Food Stamp Program by setting national standards that better target 

benefits to low-income persons. They support the priorities of access and nutrition 

assistance for those in need while ensuring integrity in the program. 

The budget proposes to exclude the value of tax-preferred retirement accounts 

from the Food Stamp certification asset test. This exclusion strengthens retirement 

security policy and enables low-income people to get nutrition assistance without depleting their retirement savings. It also simplifies food stamp resource policy and 

makes it more equitable because under current law, some retirement accounts are 

excluded while others are not. This proposal is consistent with the President’s Ownership Society Initiative, by increasing the ability of low-income people to save for 

retirement. 

Our budget once again proposes to eliminate categorical Food Stamp eligibility for 

Temporary Assistance for Needy Families (TANF) participants who receive only 

non-cash TANF services. Fully implemented in fiscal year 2008, this change is estimated to affect approximately 300,000 individuals and save $658 million over five 

years. We believe this proposal ensures that food stamp benefits will go to the individuals with the most need and retains categorical eligibility for the large number 

of recipients who receive cash assistance through TANF, Supplemental Security Income and General Assistance. 

Also included in the budget is a proposal to add the Food Stamp Program to the 

list of programs for which States may access the National Directory of New Hires. 

Access to this national repository of employment and unemployment insurance data 

will enhance States’ ability to quickly and accurately make eligibility and benefit 

level determinations, supporting continued program integrity. The budget also requests a continuation of a policy included in last year’s appropriations act to exclude 

special military pay received by members of the armed forces serving in combat 

zones when determining food stamp benefits for their families back home. 

Finally, the Administration remains committed to proposing a name change for 

the program to Congress. We will continue the process that began in 2006 to gather 

information related to a proposed name change for Congressional consideration. 

CHILD NUTRITION PROGRAMS

The budget requests $13.6 billion for the Child Nutrition Programs, which provide 

millions of nutritious meals to children in schools and in childcare settings every 

day. This level of funding will support an increase in daily NSLP participation from 

the current 30.2 million children to approximately 30.9 million children. Requested 

increases in these programs reflect rising school enrollment, increases in payment 

rates to cover inflation, and proportionately higher levels of meal service among 

children in the free and reduced price categories. To ensure that Child Nutrition 

Programs respond to unforeseen increases in participation, the request provides 

$300 million in contingency funding. This contingency reserve would make supplemental funding requests unnecessary at times of budgetary shortfalls. Similar to the 

Food Stamp Program, such a shortfall could result from larger than anticipated program participation growth, responses to natural disasters or other national emergencies. 
357 

We are continuing to implement program changes and new activities resulting 

from the 2004 reauthorization of these programs including the Fruit and Vegetable 

Program. We are also continuing our efforts to promote healthy behaviors by supporting the implementation of local wellness policies. We created the HealthierUS 

Schools Challenge to encourage communities to improve the foods offered at school 

and other aspects of a healthy school nutrition environment and to recognize schools 

that made improvements. 

FNS is continuing to integrate the 2005 Dietary Guidelines for Americans recommendations into the school meal programs. By law, school meals are required to 

be consistent with the Guidelines. Meals in the NSLP must provide one third of the 

Recommended Dietary Allowances (RDAs), while meals in the School Breakfast Program must provide one fourth of the RDAs. An FNS workgroup is reviewing the 

new Guidelines as well as the Dietary Reference Intakes (DRIs) nutrient standards 

to identify potential changes in the meal patterns within the existing meal reimbursement structure. 

The workgroup will make recommendations based on its review. USDA will publish a proposed rule with changes to the meal patterns and actively seek public comment. Federal, State and local staff will work together to implement the new requirements, plan improved recipes and menus, modify contracts to obtain the needed ingredients or modified products, and train staff who prepare and serve the food. 

SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN

(WIC)

The President’s budget request includes $5.2 billion for the WIC Program. This 

request will provide food, nutrition education, and a link to health care to a monthly 

average of 8.2 million needy women, infants and children during fiscal year 2007, 

including former CSFP participants. 

The budget contains a two-part proposal that reflects our commitment to both 

support core activities of the WIC Program and reduce Federal discretionary spending. We are proposing to cap the level of Nutrition Services and Administration 

(NSA) funding to no more than 25 percent of the total WIC State grant amount for 

fiscal year 2007. We continue to believe the reduction in NSA funding will not have 

a significant impact on the delivery of core WIC services. States will be encouraged 

to work with Federal program staff to seek efficiencies in the delivery of the program to ensure that the reduction in NSA funding does not impact core services. 

Looking forward to fiscal year 2008, the budget proposes to replace this NSA cap 

with a 20 percent State match requirement. WIC is currently one of the few Federal 

programs that do not require State matching funds for administrative purposes. The 

proposal is not effective until fiscal year 2008 so that States are provided adequate 

notification to allow their legislatures to appropriate funds. 

The President’s budget request contains a proposal which limits automatic (adjunctive) eligibility based on participation in Medicaid to those individuals whose incomes are below 250 percent of Federal poverty guidelines. In the WIC Program, 

applicants can currently receive automatic (adjunctive) eligibility for benefits based 

on their participation in other means-tested programs such as the FSP and Medicaid. However, in some States, Medicaid permits participation of individuals with 

incomes higher than those established for eligibility for WIC (185 percent of the 

Federal poverty level). This proposal will better target WIC benefits to those most 

in need and, if enacted, the proposal will affect six States (Missouri, Maryland, Minnesota, Vermont, New Hampshire and Rhode Island). 

The $125 million contingency fund provided in the fiscal year 2003 appropriation 

and replenished in fiscal year 2005, continues to be available to the program. We 

currently do not anticipate using the reserve in either fiscal year 2006 or 2007, as 

available resources in fiscal year 2006 and the President’s budget request will fully 

meet our projected program need for those 2 years. 

FNS is continuing its efforts to review and consider revisions to the WIC food 

package. In September 2003, FNS contracted with the National Academies of 

Sciences’ Institute of Medicine (IOM) to independently review the WIC food packages. The IOM recommendations on the WIC Food Packages were published in a 

final report in April, 2005. FNS has used these recommendations along with comments received on the public notice soliciting comments on food package changes to 

develop a proposed rule to update the WIC food packages. This proposed rule is in 

clearance and is expected to be published in the Summer of 2006. 

The President’s budget also requests the continuation of the moratorium on the 

authorization of new WIC-only stores. The current moratorium was put in place 

through the fiscal year 2006 appropriations bill and will expire at the end of this 

year. We believe it is important to continue this moratorium due to the uncertainty 
358 

that States encountered concerning the status of our regulations implementing new 

management controls on WIC vendor authorizations. This uncertainty arose as a 

consequence of a law suit filed by the National Women, Infants, and Children Grocers Association and the subsequent Temporary Restraining Order (TRO) issued by 

the Federal District Court. Although the law suit was resolved in favor of the government, States, particularly those covered by the TRO, were delayed several 

months in moving ahead with the implementation of new requirements. Therefore, 

to give States reasonable opportunity to put into place approved plans effecting 

these new cost control requirements, we believe continuation of the moratorium is 

prudent. 

COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

CSFP serves elderly persons and at risk low-income pregnant and post-partum 

and breastfeeding women, infants and children up to age six. The budget does not 

request funding for this program which is not available nationwide and duplicates 

two of the Nations’ largest Federal nutrition assistance programs—Food Stamps and 

WIC. This program operates in selected areas in just 32 States, the District of Columbia, and two Indian Tribal Organizations. The populations served by CSFP are 

eligible to receive similar benefits through other Federal nutrition assistance programs that offer them flexibility to meet their individual needs. The Administration 

has proposed this change to better target limited resources to those major programs 

that are available nationwide, promoting equity and effectiveness. 

The President’s budget does include a request for funds to support the transition 

of CSFP participants to nationally available FNS nutrition assistance programs 

such as WIC and FSP. USDA will work closely with CSFP State agencies to ensure 

that any negative effects on program participants are minimized. We plan to implement a transition strategy to encourage those women, infants and children that are 

eligible for WIC to apply for that program, and to encourage elderly CSFP recipients 

to apply for the Food Stamp Program. 

The budget request includes $2 million to provide outreach and to assist individuals enrolling in the FSP. Elderly participants who are leaving the CSFP upon the 

termination of its funding and who are not already receiving FSP benefits will be 

eligible to receive a transitional benefit of $20 per month. This transition benefit 

will end in the first month following enrollment in the FSP under normal program 

rules, or in 6 months, whichever occurs first. CSFP women, infants, and children 

participants who are eligible for WIC benefits will be referred to that program. Commodities obtained under agriculture support programs that would be used to support CSFP will be donated for use in other nutrition assistance programs, such as 

TEFAP. 

THE EMERGENCY FOOD ASSISTANCE PROGRAM (TEFAP)

As provided for in the Farm Bill, the budget requests $140 million for commodities in this important program. Our request for States’ storage and distribution 

costs, critical support for the Nation’s food banks, is $50 million. The Food and Nutrition Service is committed to ensuring the continuing flow of resources to the food 

bank community including directly purchased commodities, administrative funding, 

and surplus commodities from USDA market support activities. Much of this funding is provided, at the local level, to faith-based organizations. Surplus commodity 

donations significantly increase the amount of commodities available to the food 

bank community from Federal sources. 

SENIORS’ FARMERS MARKET NUTRITION PROGRAM (SFMNP)

The President’s budget request includes two provisions that improve the value of 

the SFMNP benefits. The first provision prohibits farmers selling eligible foods 

under the SFMNP from charging sales tax on fresh fruits and vegetables that are 

purchased using SFMNP checks or coupons, or that are provided to eligible recipients through community supported agriculture. The second provision ensures that 

the value of benefits provided to eligible recipients is not considered as income in 

the process of determining eligibility for any other Federal or State programs, such 

as food stamps, TANF, energy assistance, and housing assistance. It would also ensure that the value of the SFMNP benefit would not be considered as income in calculating the recipients’ Federal or State tax obligations. These proposals are consistent with the way benefits are treated in all other Federal nutrition assistance 

programs. 
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NUTRITION PROGRAMS ADMINISTRATION (NPA)

We are requesting $160.4 million in this account, an increase of $18.6 million over 

our fiscal year 2006 level. This increase will partially offset personnel-related costs 

of the FNS workforce in fiscal year 2007. Our request for Federal administrative 

resources is needed to sustain the program management and support activities of 

our employees nationwide. The NPA account supports both FNS’ administration of 

the nutrition assistance programs and CNPP’s nutrition policy development and 

promotion activities targeted at the general population. Specific requests for this account include $2 million to support continuing work on MyPyramid; $4 million to 

support initiatives to improve program integrity within the Food Stamp Program 

and $3 million to improve the coordination of nutrition education efforts across all 

of the our programs. 

Our request for $6 million to fund critical research and evaluation activities examining program integrity issues and ways to improve the delivery of program services is essential to the management of our programs, as is the $3.5 million request 

to fund FNS’ participation in Office of Management and Budget’s initiative to modernize and better integrate financial management system across the government. I 

firmly believe we need this increase in NPA funding in order to maintain accountability for our $57 billion portfolio and to assist States to effectively manage the programs and provide access to all eligible people. 

Thank you for the opportunity to present this written testimony. 

Senator BENNETT. Thank you very much. 

In spite of how much we eat, we still have surpluses that Dr. 

Collins talks about. That is why we need to export. 

Yes, sir. Dr. Raymond. 

STATEMENT OF RICHARD RAYMOND

Dr. RAYMOND. Thank you, Mr. Chairman and Senator Kohl. 

I am pleased to appear before you today to discuss the status of 

the Food Safety and Inspection Service (FSIS) programs and the 

fiscal year 2007 budget request for food safety within the U.S. Department of Agriculture. 

As we begin another new year at USDA, I would like to point out 

that this one marks the 100th anniversary of the passage of the 

Federal Meat Inspection Act. We can look back over the past century with pride and certainly gain a greater appreciation for what 

USDA has done to protect our food supply and further public 

health protection. 

Today, I will share with you some recent accomplishments, as 

well as our priorities to further protect the food supply, and will 

conclude with some highlights of our fiscal year 2007 budget request. 

FSIS is accountable for ensuring safe meat, poultry, and egg 

products for 295 million people in this country and millions more 

around the world. In addition, we are accountable for ensuring 

compliance with the Humane Methods of Slaughter Act, so that all 

livestock used for human food are humanely handled and slaughtered. 

There are indications that our risk-based Hazard Analysis and 

Critical Control Point, known as HACCP, system is working. We 

have seen dramatic declines in the prevalence of pathogens in the 

products that we regulate and the numbers of food-borne illnesses 

stemming from these pathogens. 

Our regulatory sampling for E. coli O157:H7 and Listeria 

monocytogenes shows evidence of our successes. We have gone from 

a 0.86 prevalence rate for positive E. coli O157:H7 samples in cal-
360 

endar year 2000 to only 0.17 percent prevalence rate for positives 

in the calendar year 2004. That is a four-fold drop. 

During the same period, the prevalence rate for Listeria 

monocytogenes samples testing positive dropped from 1.45 percent 

in calendar year 2000 to only 0.55 percent in calendar year 2004, 

a three-fold drop. 

Another success has been the break in the annual cycle of multimillion pound recalls and a dramatic decline in the number of recalls each year. We reached an all-time high of 113 recalls, totaling 

nearly 61 million pounds of product in 2002, and in 2004, we were 

down to only 48 recalls, totaling approximately 3 million pounds of 

product. 

We have also seen the effect that the declining number of positive E. coli: O157:H7 and Listeria monocytogenes samples is having 

on food-borne illnesses caused by these two pathogens over an 8- 

year period of time. Illnesses caused by E. coli O157:H7 have decreased by 42 percent. That is less than 1 person per 100,000 population. And those illnesses caused by listeria have dropped by 40 

percent. 

I might add, these numbers do come from the CDC. These are 

not our numbers. I do feel that a picture is worth more than 1,000 

words, and I have included graphs with our submitted written testimony with those numbers. 

These successes would indicate that our risk-based approach is 

working and that we are protecting public health through a safer 

food supply. If we make the assumption, from the E. coli and Listeria data, that using product sampling trends can also be indicators for human illness trends, then we do have a glaring problem. 

That would be Salmonella. 

According to our sampling data, the number of product samples 

positive for Salmonella has been on the rise in several poultry categories over the past 3 years, specifically in young chicken or broiler carcasses. The overall incidence of Salmonella infections also remains far greater than for other food-borne pathogens. 

In 2004, according to data, again from the CDC, there were 14.7 

cases of culture-proven Salmonella infections per 100,000 population in this country. This means 115 people are infected by Salmonella every day, or 42,000 every year. The CDC also says this 

is an underestimate by a factor of 38, which means that nearly 1.3 

million people actually had Salmonella infections last year. In my 

view, that is way too high. 

Salmonella infection rates are not declining like they are for the 

E. coli, Listeria, and Campylobacter bugs. In fact, they are rising 

for certain Salmonella serotypes. Last month, we announced an initiative to reduce Salmonella in meat and poultry products. This initiative will help FSIS be more proactive and will prevent illnesses. 

It incorporates 11 steps, including increased product sampling 

and food safety assessments in plants where they are most needed, 

and our quarterly publication of nation-wide Salmonella data by 

class. 

A $602,000 increase that we are requesting for our risk-based 

Salmonella approach in fiscal year 2007 would, among other 

things, allow us to do serotyping more quickly and to initiate more 
361 

food safety assessments at high-risk establishments before an outbreak occurs. 

Our next priority for the year is the cornerstone strategy to further improve food safety, implementing a more robust risk-based 

inspection system. Our 100-year-old inspection system was based 

on visual examination for visible signs of disease. The future demands that we also be able to identify things that the human eye 

cannot see, things the nose cannot smell, and things the fingers 

cannot feel. 

We need to be able to better anticipate and more quickly respond 

to food safety challenges before they negatively affect the public’s 

health. The $2.6 million increase that we are seeking in the 2007 

budget for risk-based inspection services will help FSIS reallocate 

its resources to focus more closely on food safety systems and prevent public health problems before they occur. 

Finally, to further improve our food defense capabilities, we are 

asking for an increase of $15.8 million for food and agriculture defense. A major component of this request will be allocated for the 

enhancement of the Food Emergency Response Network, known as 

FERN, which is a joint laboratory partners project between FSIS, 

Department of Health and Human Services, FDA, and selected 

State public health laboratories. 

We saw what happened to laboratory capacity and the U.S. Postal Service efficiency when just a few letters were sent containing 

anthrax to just a few persons. That same thing can happen again 

with one phone call to the Washington Post indicating that the 

meat supply has been contaminated intentionally. 

That is why our $13 million request for FERN will provide 23 selected existing State or local laboratories with the necessary training, equipment, and supplies that they need so that surge capacity 

can be handled more quickly and closer to home. 

From a public health standpoint, an investment in FERN is absolutely essential if we want to prevent or mitigate the loss of life 

and economic hardship if an intentional or an unintentional incident affecting the food supply or even a hoax were to happen. 

We must also be prepared for the distinct possibility that one or 

all of our three FSIS laboratories could be intentionally incapacitated in an attack on our food supply. 

Overall, in fiscal year 2007, FSIS is requesting an appropriation 

under current law of $862.9 million, a net increase of about $33.5 

million from the enacted level for fiscal year 2006. This request 

supports the agency’s basic mission, providing continuous or daily 

inspection in each U.S. meat, poultry, and egg products plant. The 

agency’s permanent statutory obligation to provide continuous inspection is a labor-intensive mandate, therefore making its salary 

costs relatively inflexible. 

An increase of $16 million for the FSIS inspection program is requested to provide for a 2.2 percent pay raise for FSIS employees 

as well as $1 million for salary increases in cooperating State inspection programs in fiscal year 2007 to assure that the agency is 

provided sufficient funds to maintain its programs. 
362 

PREPARED STATEMENT

Mr. Chairman, thank you again for providing me the opportunity 

to speak with the subcommittee and submit testimony regarding 

the steps that we are taking to continue our public health leadership role. Implementation of these budget initiatives is imperative 

so that we can continue to ensure the safety of the products that 

we regulate. 

I look forward to working with you and the subcommittee to further improve our food safety program, and I would welcome any 

questions from the committee that you might have. 

[The statement follows:] 

PREPARED STATEMENT OF RICHARD RAYMOND

Mr. Chairman and Members of the Subcommittee, I am pleased to appear before 

you today to discuss the status of the Food Safety and Inspection Service’s (FSIS) 

programs and the fiscal year 2007 budget request for food safety within the U.S. 

Department of Agriculture (USDA). I am Dr. Richard Raymond, Under Secretary for 

Food Safety. With me today is Dr. Barbara Masters, Administrator of FSIS. 

USDA Secretary Mike Johanns and I share a passion for public health. I accepted 

this position last year because of the Secretary’s commitment. I knew he would support and allow us to move forward to further enhance public health protection. The 

long history this Agency has of protecting public health was another aspect that 

drew me to this opportunity. 

In fact, this year marks the 100th anniversary of the passage of the Federal Meat 

Inspection Act (FMIA), which ushered in a new era of food safety on a national 

level. Even prior to the passage of the FMIA, FSIS’ predecessor agency, the Bureau 

of Animal Industry (BAI), carried out many important responsibilities to protect 

public health here and abroad. With an appropriation of $150,000 in 1884—the first 

year of its existence—the BAI focused on preventing diseased animals from being 

used as food. Then in 1891, the initial Meat Inspection Act of 1890 was amended 

to cover the inspection and certification of all live cattle and beef for export. 

As you see, the USDA has a long and proud history in protecting public health 

through food safety. To give you an idea of how far we have come in protecting public health, let me share these two facts with you. 

One hundred years ago in the United States, the life expectancy was 45 years. 

Now it is approximately 75 years. And 100 years ago in the United States, one in 

five coffins contained a child under 5 years old. Today that number in the United 

States is only one in 100 coffins. 

These are amazing accomplishments that have had a profound effect on our society and everyone here. Clean water, proper sewage treatment, vaccines and antibiotics have all played an important role, but a safer food supply has also played 

a vital role in this amazing improvement. 

This is truly a good story, but the journey is far from over. There is much more 

we need to do. Both Secretary Johanns and I want to push the envelope to improve 

food safety and public health. We all must strive to do better because of constantly 

evolving threats and challenges to food safety and our public health system. Having 

been in the medical profession for 27 years as a doctor in both rural and urban 

parts of Nebraska, and having spent the last 6 years prior to USDA in public 

health, I know that the public health environment constantly evolves and it is not 

always a nine-to-five job. Product recalls during off hours and the Agency’s response 

in the aftermath of Hurricane Katrina are just a couple of examples of the many 

instances when FSIS personnel worked many hours beyond their regular tours of 

duty. 

This is why I am truly proud and impressed by the dedicated professionals at 

FSIS, who often put in long hours when needed to ensure that our meat, poultry 

and egg products supply is the safest in the world. Their support and the Agency’s 

successes in protecting the health and well being of millions of consumers worldwide 

would not have been possible without the resources you have so generously given 

to us. I will cover FSIS’ successes in more detail, our priorities in the coming year, 

and conclude with a discussion of the fiscal year 2007 budget request. 

Accomplishments 

We are accountable for protecting the lives and well-being of 295 million people 

in this country and millions more around the world. There are indications that our 
363 

risk-based system to protect these consumers is working. We have seen dramatic declines in the prevalence of pathogens in the products we regulate and the numbers 

of foodborne illnesses stemming from these pathogens due to many actions by the 

Agency including the use of risk assessments, working with our partners along the 

farm-to-table continuum, and basing our policies on sound science. 

Regulatory Sampling 

One such success is apparent in our regulatory sampling for E. coli O157:H7 and 

Listeria monocytogenes. 

Let’s take a look at results from our microbiological surveillance testing program 

for E. coli O157:H7. We have gone from 59 positives in 7,010 samples for E. coli 

O157:H7 in CY 2001 to only 14 positives in 8,010 samples in CY 2004. Each year’s 

prevalence rate is listed below. 

—In CY 2001, our testing program yielded 59 positive results out of 7,010 samples 

for a rate of .84 percent; 

—In CY 2002, there were 55 positive results from 7,025 samples for a rate of .78 

percent; 

—In CY 2003, there were 20 positives out of 6,584 samples for a rate of .3 percent; and 

—In CY 2004, there were 14 positives out of 8,010 samples for a rate of .17 percent. 

Our testing for Listeria monocytogenes (Lm) in all ready-to-eat (RTE) products 

shows similar progress. Compared to a decade ago before HACCP was implemented, 

we have made substantial progress in Lm control, as these statistics from our RTE 

sampling program indicate: 

—In 1995, 3.02 percent tested positive; 

—In 1996, 2.91 percent tested positive; 

—In 1997, 2.25 percent tested positive; 

—In 1998, 2.54 percent tested positive; 

—In 1999, 1.91 percent tested positive; 

—In 2000, 1.45 percent tested positive; 

—In 2001, 1.32 percent tested positive; 

—In 2002, 1.03 percent tested positive; 

—In 2003, .76 percent tested positive; and 

—In 2004, .55 percent tested positive. 

Recalls 

Another success has been the break in the annual cycle of multi-million pound 

recalls and a dramatic decline in the number of recalls each year. The number of 

recalls had been increasing since the mid 1990s, with at least one multi-million 

pound recall being conducted every year until 2002. 

For example: 

—In 1997, there were 27 recalls for a total of nearly 28 million pounds; 

—Followed by 44 recalls of just over 44 million pounds in 1998; 

—58 recalls in 1999 for 40 million pounds of product; 

—76 recalls of almost 23 million pounds in 2000; 

—87 recalls in 2001 for 33 million pounds; and 

—Reaching an all-time high of 113 recalls in 2002, totaling nearly 61 million 

pounds. 

After we implemented science-based policies for E. coli O157:H7, Listeria 

monocytogenes, and Salmonella, we saw a dramatic decline in recalls, culminating 

in a reduction of nearly 18 percent in the number of pathogen-related recalls, from 

28 in 2003, to 23 in 2004. 

Foodborne Illnesses 

Another significant measure of how our science-based policies are making a major 

impact on public health is from the annual FoodNet preliminary report published 

by the Department of Health and Human Services’ (DHHS) Centers for Disease 

Control and Prevention (CDC) every spring [the annual report is published later 

each year]. I will discuss FoodNet later, but according to the CDC, there have been 

significant declines from 1996 to 2004 in illnesses caused by E. coli O157:H7, Listeria monocytogenes, Campylobacter, and Yersinia. Compared to the 1996–98 baseline, illnesses caused by E. coli O157:H7 decreased by 42 percent; Listeria 

monocytogenes dropped by 40 percent; Campylobacter fell 31 percent; and Yersinia 

decreased by 45 percent. 

This is just raw data. To put these figures into real human terms, in 2004, we 

saved at least an additional 21,815 people from suffering the debilitating effects of 

a foodborne illness. That is nearly the number of people who work inside the Pentagon on a daily basis. 
364 

Stated another way, in 2004, compared to the 1996–98 baseline, an additional 

1,939 people did not miss work because of E. coli O157:H7. Five hundred thirty-five 

more people did not suffer from a high fever caused by Listeria monocytogenes. 

Nearly 17,250 consumers did not have severe abdominal cramps caused by 

Campylobacter. And approximately 2,100 people did not have to think, ‘‘What did 

I eat?’’ thanks to an illness caused by Yersinia. 

Taken together, these human health results, declines in recalls, and decreasing 

numbers of pathogens in our sampling program indicate that our risk-based approach is working, and that we are protecting public health through a safer food 

supply. While this is good news, we still have areas of concern. 

Salmonella 

A specific concern is Salmonella. When FSIS reported its 2003 data, the Agency 

acknowledged concern that the percentage of positive Salmonella tests had increased slightly in all three poultry categories. While the 2004 data showed more 

mixed results, there was a continued increase for young chicken (or broiler) carcasses and that number rose again in 2005. 

It is clear that the overall incidence of Salmonella infections remains far greater 

than our objective. In 2004 FoodNet data, there were 14.7 cases of culture-proven 

Salmonella infections per 100,000 people. This means 115 people are infected by 

Salmonella every day, or 42,000 every year. In my view, as someone with a medical 

background, that is way too high. 

The CDC’s 1999 estimate of Salmonella infections is even higher. They estimate 

about 1.4 million cases of infection each year, with about 16,000 hospitalizations, 

580 deaths and $3.1 billion in health care costs. 

The CDC’s 2005 FoodNet report (of 2004 data) did not look any better. While it 

did report that Salmonella infections dropped 8 percent, only one of the five most 

common strains, which accounted for 56 percent of the reported Salmonella infections in 2004, declined significantly. That strain was Salmonella Typhimurium 

which declined 38 percent. 

Salmonella Enteritidis and Salmonella Heidelberg neither increased nor decreased 

significantly. However, incidences of Salmonella Newport increased by an alarming 

41 percent. 

It is clear that we must do better if we are going to meet DHHS’ Healthy People 

2010 objective for Salmonella, which is 6.8 infections per 100,000 people. We have 

already met the DHHS’ Healthy People 2010 objective of 1.0 cases of E. coli 

O157:H7 per 100,000 people. In 2004, the CDC reported 0.9 cases of E. coli O157:H7 

infections per 100,000 people. 

However, I do believe there is a way this year to combat Salmonella as I will explain later. I believe that we can leverage new technologies and cutting edge research, not only to reach the Healthy People 2010 objective, but to drive the numbers even lower. 

Cooperation and Collaboration with Other Agencies and Food Safety Partners 

Another significant accomplishment from 2005 has been unprecedented cooperation and collaboration with other Federal, State and local agencies and food safety 

partners. 

For starters, Avian Influenza has received a significant amount of press recently. 

FSIS takes this animal health issue very seriously. We will require a multi-agency 

effort to address this issue, and we have embarked on such an approach. FSIS has 

a Memorandum of Understanding with the Animal and Plant Health Inspection 

Service (APHIS), in which FSIS agrees to promptly notify APHIS if FSIS inspection 

program personnel detect signs of foreign animal disease. FSIS is also participating 

in several interagency groups that include DHHS, as well as State and local government agencies. 

In food defense, FSIS has been working very closely with DHHS’ Food and Drug 

Administration (FDA), the Department of Homeland Security and the National Association of State Departments of Agriculture in developing guidelines and procedures for State and local first responders and Federal food regulatory agencies. This 

interagency response plan will facilitate cooperation with State and local emergency 

efforts when responding to incidents involving the food supply. We have already 

started testing these guidelines. We conducted an exercise through our district office 

in California with the California Department of Agriculture, the California Department of Health, Environmental Protection Agency, FDA, Federal Bureau of Investigation, CDC, and local and county health officials. We intend to hold more of these 

exercises with each FSIS district office and our partners so that we can make continuous improvements to the guidelines. 
365 

We also have been working closely with industry to help them develop voluntary 

comprehensive food defense activities for every establishment. We feel it is essential 

that all slaughter, processing, import and export establishments take steps to ensure the security of their operations. Earlier in 2005, we made available on FSIS’ 

Web site an ‘‘Industry Self-Assessment Checklist for Food Defense’’ and model food 

defense activities that they can use to guide their actions to defend the safety of 

their product. In addition, we have our inspectors ready and trained to assist industry as they enhance the protections they already have in place. As of this date, FSIS 

inspection program personnel have conducted over 1.3 million evaluations of establishment food defense activities and have found less than 1,500 areas that needed 

to be addressed. 

The model food defense activities were developed as a result of the vulnerability 

assessments that FSIS conducted for selected domestic and imported food products. 

These assessments allowed us to rank food products and potential contaminating 

agents in order of highest concern. Using this risk-based ranking, during periods of 

heightened awareness, FSIS’ laboratories examine samples for threat agents posing 

the greatest risk as identified in FSIS’ vulnerability assessments. 

Although the findings from these vulnerability assessments are classified, FSIS 

has been training industry representatives in how to conduct the assessments. As 

a result, many companies are now conducting their own assessments and taking appropriate measures to defend their processing lines and distribution chains from intentional contamination. 

Another example of collaboration is the Food Emergency Response Network 

(FERN). This joint FSIS–FDA effort of national, State, and local laboratories provides ongoing surveillance and monitoring of food and will promptly respond to an 

intentional contamination that targets the Nation’s food supply. I will discuss FERN 

in more detail later when I go over our priorities for fiscal year 2007. 

We are also working closely with the CDC and FDA to improve our ability to link 

foodborne illness estimates with different food vehicles. Data on foodborne illnesses 

due to specific pathogens also needs to be connected with data on the prevalence 

of different pathogens in specific foods. 

The Foodborne Diseases Active Surveillance Network, or FoodNet which I mentioned before, is part of CDC’s Emerging Infections Program, and it allows FSIS and 

our Federal, State, and local food safety partners to integrate foodborne illness data 

to determine the burden of foodborne disease, monitor foodborne disease trends, and 

determine the extent of foodborne diseases attributable to specific foods. Since 1995, 

FSIS has worked closely with the CDC, FDA, and State and local epidemiologists 

and public health laboratories in making FoodNet an essential public health tool. 

FoodNet includes active surveillance of foodborne diseases, case-control studies to 

identify risk factors for acquiring foodborne illness, and surveys to assess medical 

and laboratory practices related to foodborne illness diagnosis. It provides estimates 

of foodborne illness and sources of specific diseases that are usually found in the 

United States and interprets these trends over time. Data are used to help analyze 

the effectiveness of our HACCP rule and other risk-based regulatory actions, as well 

as to develop public education initiatives. 

Consumer Safety Education 

Speaking of education, last year FSIS reached nearly 120 million citizens by developing and distributing brochures, technical papers, and booklets through the 

media, educators, the Agency’s Web site, the Meat and Poultry Hotline, FSIS’ virtual representative ‘‘Ask Karen,’’ and the USDA Food Safety Mobile. As a medical 

doctor, I truly value the importance of effective and continuous food safety outreach 

to consumers. It is the key to any multi-pronged strategy to prevent people from 

getting sick and possibly dying. 

In fiscal year 2005, our Meat and Poultry Hotline handled nearly 88,000 consumer calls on the safe storage, preparation, and handling of meat, poultry and egg 

products and over 130 media and information multiplier calls that included requests 

from newspapers, magazines and book authors along with live interviews with radio 

and television stations. From a public health standpoint, we still want to serve consumers even if an unexpected event affects the Washington, DC metropolitan area. 

No one should have to suffer through a foodborne illness after they have tried to 

contact our Hotline and have found it is down due to some unforeseen incident in 

the capital area. That is why in fiscal year 2006, we are expanding and upgrading 

the Hotline communication equipment to ensure uninterrupted service to the public 

in the case of an unexpected event. 

Research has shown FSIS that the at-risk, under-served, and Spanish-speaking 

populations require education and messages geared to their needs. In fiscal year 

2005, FSIS continued to develop education programs for elderly, immune-com-
366 

promised, and other at-risk individuals, and assisted with revisions to the American 

Medical Association/CDC/FDA/FSIS Diagnosis and Management of Foodborne Illness: A Primer for Physicians. We also developed a brochure titled, What Transplant Recipients Should Know About Food Safety. This is just one in a series of publications that will be developed targeting other at-risk audiences. 

In an unprecedented effort to reach those underserved, yet at-risk for foodborne 

illness, FSIS is cosponsoring a food safety conference entitled, ‘‘Reaching At-Risk 

Audiences and Today’s Other Food Safety Challenges,’’ with the FDA, CDC, and private sector organizations. The goals of this conference include sharing current surveillance and epidemiological data on foodborne illness; presenting strategies leading to enhanced food safety knowledge, skills, and abilities in the general population 

and among at-risk populations; and to communicate the latest science-based safe 

food handling principles and practices. 

Also, FSIS produced a public service announcement (PSA) ‘‘Fight BAC!®’’ in 

Spanish and distributed more than 50,000 copies to a national network of physicians’ offices. In addition to being able to view the PSA, patients had access to flyers 

describing listeriosis, a foodborne illness more common in the Hispanic population. 

The USDA Food Safety Mobile that I mentioned earlier tours nationwide to support food safety education efforts and reach consumers where they live. In fiscal 

year 2005, the Mobile appeared at State and county fairs, food events, media events, 

schools, libraries, grocery stores, community events, parades, festivals, health and 

safety expos, trade shows, conventions, FSIS District Offices, and at FSIS events in 

conjunction with visits and presentations by USDA officials. Hundreds of thousands 

of educational items have been distributed and millions of consumers have been 

reached through media coverage of the Mobile. Since its launch in March 2003, the 

Food Safety Mobile has traveled more than 66,000 miles, appearing in 247 events 

in approximately 185 cities, in 48 States and the District of Columbia. 

Hurricane Katrina Response 

The Mobile was a vital component of our Hurricane Katrina response strategy. 

We deployed it in September 2005 to areas affected by Hurricane Katrina to provide 

firsthand food safety education and assistance to prevent any outbreaks of foodborne 

illness. I realized that food safety would not be one of the top priorities with many 

of the affected populace, given that they were displaced, grieving the loss of loved 

ones, or looking for missing family and friends. However, we were gravely concerned 

about the public health consequences of the hurricane’s aftermath. With power outages and flooding of contaminated water, the potential for people consuming contaminated food was alarmingly high, which was why I ordered the Mobile to immediately abandon its previously scheduled course in the Northeast and head down to 

the Gulf Coast. I also directed FSIS to lease a second Food Safety Mobile to go to 

the affected areas. 

During its two-and-one-half month tour of the Gulf States, the Food Safety Mobile 

reached nearly 41,000 total consumers and distributed food safety brochures, bleach, 

hand wipes and thermal bags. The second Mobile appeared at 18 events, reaching 

an additional 15,000 consumers. 

In addition to our swift and aggressive consumer outreach, FSIS worked as rapidly as possible with industry to resume operations at meat, poultry and egg product 

establishments in the affected areas of the Gulf States. By September 5, 2005, FSIS 

had deployed approximately 30 additional inspection program personnel and compliance staff personnel to this area so these plants could quickly resume operations. 

These personnel also oversaw the appropriate disposal and decontamination procedures at the plants. 

On September 20, 2005, FSIS began increased Salmonella testing of raw meat 

and poultry products in the affected areas of the Gulf Coast to provide microbial 

data to compare with nationwide data. FSIS also trained additional non-field staff 

to assist in conducting intensified verification tests in ready-to-eat establishments 

for Listeria monocytogenes, including collecting food-contact surface and environmental samples, to supplement product sampling and food safety assessments. 

These provided an additional layer of microbial testing and verification to ensure 

the safety of the ready-to-eat meat products. 

Building the Foundation of a More Robust Risk-Based Inspection System 

The successes from 2005 are varied and significant, ranging from reductions in 

pathogen prevalence to a quick and concerted response in the aftermath of Hurricane Katrina. The examples I just covered indicate that our food safety system 

works and is strong. However, I do not want to serve as just a caretaker of a good 

system. 
367 

Even though FSIS has accomplished a lot, people still get sick and die each year 

from consuming contaminated food. As a medical doctor, that simply does not set 

well with me. I did not accept this job last year to recall hamburger, ham, sausage 

or any other product on a routine basis. I want to focus our time and valuable resources on prevention, rather than on response. It is a common sense, cost-effective 

public health strategy that best serves the American consumer. 

However, in order to move forward with this approach, we are going to need the 

help of everyone along the farm-to-fork continuum and Congress. I know with your 

support, we can further improve upon the food safety successes that we have already seen. 

The cornerstone of our strategy is to move forward on implementing a more robust risk-based inspection system. Our current system, while strong, is not suited 

to the future realities of food safety and public health, and we will need the new 

capabilities offered by an enhanced risk-based system. 

Our 100-year old inspection system was based on visual examination for visible 

signs of disease. The future demands that we be able to focus more on things that 

the human eye cannot see, things the nose cannot smell, and things the fingers cannot feel. 

We will also need the ability to anticipate and quickly respond to food safety challenges before they negatively affect public health. This is vital, as is a system that 

will allow us to use our finite resources more effectively and efficiently to further 

improve food safety. As a public health agency, we must have the capability and 

capacity to be smarter and act more efficiently, quickly and flexibly. 

This means a move away from a regulatory agency that protects public health by 

recalling dangerous product or withdrawing marks of inspection toward one that is 

focused on actively preventing foodborne illnesses from ever occurring. However, it 

is important to note that FSIS already uses a risk-based approach to food safety. 

Our goal is to further enhance and strengthen that system so that we are prepared 

for the food safety challenges in the next century. This is why we are requesting 

in the fiscal year 2007 budget an increase of $2.6 million to help us move toward 

our goal of a more robust risk-based inspection system. 

To continue our progress toward a more robust risk-based inspection system, we 

need to be sure that we communicate openly and often with all of our food safety 

stakeholders. We will use a transparent and inclusive process to seek input on a 

wide range of issues related to creating a more robust risk-based inspection system. 

We will proceed through a public process, gaining input from all of our stakeholders. At the last meeting of the National Advisory Committee on Meat and Poultry Inspection (NACMPI) in November, the Committee recommended a third-party 

approach to assist us in reaching out to, and gaining input from, our stakeholders. 

For this purpose, we are now in the process of selecting a third party. We have already established a NACMPI subcommittee to provide regular, ongoing guidance. It 

is important that we ensure everyone participates in this process. 

In fiscal year 2007, we plan to advance risk-based inspection in processing establishments through team inspection. This approach will utilize Agency-developed 

measures, which gauge an establishment’s inherent hazard; monitor how well establishments are controlling hazards and complying with regulatory requirements; and 

provide for risk-based verification testing for Listeria monocytogenes in ready-to-eat 

products and the environment, and for Salmonella and E. coli O157:H7 in raw products. 

Effective implementation of team inspection in processing and risk-based 

verification testing will require not only workforce training for risk-based inspection, 

but also implementation support activities to ensure consistency of application after 

training. 

As part of a comprehensive risk-based inspection system, we will develop riskbased verification strategies for meat and poultry in commerce that can be used by 

FSIS personnel. Such activities would complement inspection activities performed 

in-plant. This initiative in fiscal year 2007 covers the cost of testing the policies, 

methods, and information technology (IT) applications to determine which mix provides the best consumer protections within FSIS’ regulatory authority. 

Data obtained through surveys enable the Agency to base policies and regulations 

for inspection on a comprehensive understanding of the measures taken by establishments to reduce foodborne risks and the efficacy of such measures as processing 

technologies and pathogen reduction interventions. These surveys will be used to 

measure the potential impact of proposed regulatory changes, identify which segments of the industry may be achieving a regulatory standard, and identify improvements other establishments will need to make to achieve the standard. 
368 

Risk-Based Salmonella Control 

Part of the $2.6 million request for risk-based inspection is for risk-based Salmonella control, which amounts to $602,000. Given the challenge we face with Salmonella that I mentioned earlier and the fact that there has been an increasing concern about outbreaks attributed to emerging and multi-drug resistant strains of Salmonella, it is imperative that we take a risk-based approach to investigating and 

controlling the incidence of Salmonella in meat, poultry and egg products. 

Since the prevalence rate in broiler chickens seems to be a trouble spot, we are 

looking into revising the performance measure for Salmonella on this particular 

product. Since 1998, FSIS has used the prevalence of Salmonella on broiler chickens, which is a regulatory performance standard for the production of raw poultry 

carcasses (broilers), to measure the Agency’s performance in achieving its goal of reducing foodborne illness. 

However, FSIS has identified three weaknesses with the current measure. The 

first one is that the measure is scientifically unsound. The FSIS regulatory testing 

program that is the source of the data used in the current performance measure 

does not provide a true measure of prevalence of the pathogen. 

The second weakness is that the current measure overlooks an important public 

health issue. The current measure is for generic Salmonella, including those that 

are not attributed to foodborne illness. Not all serotypes of Salmonella are equally 

dangerous for humans. There are many known serotypes of Salmonella found in 

broilers, some of which cause human illness with varying severity. In fact, the most 

common serotype is not a significant factor in human foodborne illness. 

The third weakness is that the current testing program is not consistent with 

FSIS’ goal of transitioning to a more risk-based inspection system. Plant process 

controls for Salmonella vary widely. Since 2003, aggregate percent positives in sample sets have increased each year from 11.5 percent in 2002, to 16.3 percent in 2005 

while still remaining within regulatory performance standards. In order to improve 

program performance, FSIS is working to strengthen its verification testing program 

by making it more risk-based. 

Recognizing these weaknesses, FSIS will develop a new performance measure that 

more accurately measures: 

—Agency performance in achieving its goal of reducing foodborne illness; and 

—Plant performance, including identification of those plants that are most likely 

to have Salmonella serotypes that cause human illness. 

FSIS has analyzed data from approximately 7 years of regulatory testing for Salmonella in broilers. The Agency found strong evidence that plants that have consistently achieved a percent positive rate in sample sets at or below half the current 

regulatory performance standard are less likely to produce raw product that have 

the serotypes of Salmonella that are causes of human illness. Since these plants 

have been successful in controlling overall Salmonella to low levels, they would also 

have low levels of serotypes that are causes of human illness. 

As a result, achievement of performance goals established under the new measure 

would provide a better indication of process control and relate more directly to the 

improved safety of broilers. Consequently, we are developing a new measure to replace the existing Salmonella performance measure that would demonstrate the potential for reduction in exposure of humans to the serotypes of Salmonella most 

commonly associated with human illness. 

As we move forward on Salmonella, much can be learned from the success from 

our risk-based model dealing with E. coli O157:H7. In 2002, FSIS issued a Federal 

Register notice to manufacturers of raw ground beef to conduct reassessments of 

their HACCP plans. Our scientifically trained personnel conducted food safety assessments through the first-ever, comprehensive reviews of all-beef products. The 

reassessments and enhanced process control by plants, with assessments by FSIS 

and testing, led to reductions in E. coli O157:H7 percent positives in FSIS’ 

verification testing program. 

Using this model, we are planning to re-evaluate the broiler industry’s process 

controls for serotypes of Salmonella that cause human illness. We will use food safety assessments as tools to reassess higher risk plants, which have the greatest potential to operate above the existing Salmonella performance standard. A food safety 

assessment is a systematic evaluation of a plant’s scientific basis, design, validation 

and execution of its HACCP plan. In an example of how effective food safety assessments are, one broiler plant had a 30 percent positive Salmonella rate. After our 

enforcement, investigation, and analysis officers conducted the assessment, the 

plant has a two percent positive Salmonella rate and is holding steady. This is the 

kind of result we anticipate for Salmonella. 
369 

Outreach to Small and Very Small Plants 

In order to move forward with a more robust risk-based inspection system, we 

need to have the support of industry. All plants need to fully embrace HACCP, and 

a critical sector of the industry we regulate are small and very small plants, which 

comprise the majority of the plants we oversee each day. 

We realize that small and very small plants have unique needs when it comes 

to full-scale HACCP implementation and that they might not have as many resources as large plants do. Therefore, I made an absolute priority of increasing the 

communication between FSIS and the small and very small plants so that we can 

identify and respond to their needs faster and more efficiently with regard to fullscale implementation of their HACCP plans. 

Since September 2005, we have held listening sessions for small and very small 

plant owners and operators in Montana, California and Pennsylvania. These sessions gave us a better understanding of what was causing gaps between a plant’s 

performance and our expectations for them to operate under HACCP. As a result, 

we have taken several actions to remedy any misunderstanding and deliver what 

small and very small plants need to embrace HACCP effectively. 

I do believe that education facilitates a greater understanding and helps close any 

performance gaps in implementation of HACCP plans. It also keeps FSIS from having to take enforcement action on establishments. I would be much happier with a 

solution that calls for increased education rather than for increased regulation; however, I have made the point to industry that we will do whatever it takes to ensure 

that a robust HACCP system is implemented and maintained in each and every 

plant, large or small. Public health is our responsibility and we will take regulatory 

action as necessary. 

This is absolutely necessary to move forward because when a child eats a hamburger, that burger should be as safe as it possibly can be, regardless of the size 

of plant it comes from. If that child gets E. coli O157:H7 or Salmonella, then that 

child, the child’s parents and the child’s doctor do not care what size that plant was, 

or how much ground beef it produced. 

Workforce Training 

In addition to industry’s complete embracing of HACCP, training FSIS’ workforce 

is a key component to ensure a robust risk-based inspection system. I understand 

that it requires a large investment in FSIS employees to ensure they have the training and skills they need to be successful in a risk-based environment. However, it 

is an investment that I know will continue to provide food safety dividends well into 

the future. If they succeed, then the American consumer is better off as well. 

Training enables inspection program personnel a wider range of opportunities to 

make a real difference in public health, and it also opens new avenues of career advancement to our employees. I also believe training improves job satisfaction, which 

leads to increased employee retention and recruitment. 

One of the Agency’s top priorities in recent years has been to aggressively address 

the training and education of its workforce. We truly appreciate the support you 

have provided for us to pursue this goal. The increased workforce capabilities made 

possible by the changes and improvements in FSIS training have led to measurable 

improvements in public health, as I mentioned before using the data from the CDC. 

The declines in pathogen contamination further demonstrate that your support for 

our investment in training is a critical component of our public health infrastructure. 

Public Health Communications Infrastructure 

Another critical building block for the foundation of a robust risk-based inspection 

system is to have a public health communications infrastructure that has the ability 

to collect, assess and respond to data in real-time. This is why we are requesting 

$1.9 million in fiscal year 2007 to enhance our communications infrastructure. 

It is vital for our in-plant personnel to have this data in real-time in order to do 

their jobs properly and effectively. If they can do their jobs effectively, then FSIS 

will be able to react more rapidly in a crisis to better protect public health and ultimately save lives. 

Enhancing effective field communication capabilities has been a major goal of 

FSIS. Yet, while these efforts are continuing, approximately 40 percent of FSIS’ 

field inspection workforce remains without timely communication capabilities. Part 

of the $1.9 million request for the communications infrastructure would be $615 

thousand dedicated specifically toward inspector communication enhancement. With 

a need for increases in food safety assessments, enforcement actions and increased 

readiness, timely communication is vital to more effectively protect consumers. 
370 

We need to continue the progress we have been making in replacing dial-up connections with high speed telecommunication lines for our field force. High-speed access enables us to receive real-time data and thus react more quickly to protect the 

public health. It is also an essential time-saving and cost-saving mechanism that 

makes management of the Agency’s operations more efficient in the long run. We 

provided high speed telecommunication lines first to slaughter establishments with 

inspection personnel having bovine spongiform encephalopathy regulatory enforcement responsibilities. In fiscal year 2006, we are continuing this strategy of bringing 

broadband service to over 2,300 base plant locations. 

In addition, the rapid pace of technological change in operating systems, application software and hardware, as well as the failure/repair rates for equipment, necessitates the replacement of computers every 3 years. The $1.3 million requested for 

computer replacements will enable FSIS to meet the demands of major operating 

system changes and eliminate the need for warranties extended beyond 3 years and 

expenditures not covered by the warranties. We need to ensure our compliance officers, supervisory and inspection program personnel, as well as State inspection personnel receive replacement computers. At present, this accounts for about 4,000 

microcomputers in the field, and our goal is to replace 1,300 to 1,400 computers annually. 

Food Emergency Response Network 

To continue the advancements in food defense that I mentioned earlier, we are 

asking for an increase of $15.8 million for food and agriculture defense. A major 

component of this request would be allocated for the Food Emergency Response Network (FERN), which I also mentioned earlier. 

Consumer safety and public health protection will be enhanced through FERN. 

This will be possible through achieving FERN’s four primary objectives. The first 

objective is to help us and partnering agencies prevent, or at least mitigate the 

brunt of, any attacks on the food supply through surveillance testing. The second 

objective is to prepare for emergencies by strengthening laboratory capabilities 

through the development and validation of analytical methods, analyst training and 

proficiency testing. The third objective is to respond to threats, attacks and emergencies in the food supply by providing a communications network and the necessary laboratory surge capacity. And the final objective is to provide laboratory 

support for investigations of, and recovery from, terrorism-related events. 

Being able to respond rapidly to a sudden surge in demand for testing is imperative, if we are going to restore consumer confidence in the safety of the Nation’s food 

supply and to maintain U.S. economic stability in spite of the event. We only need 

to look back at the anthrax attacks in the autumn of 2001 to learn a valuable lesson. Only a few envelopes containing traces of anthrax were opened and only a few 

people died. 

But what happened in this bioterrorism event was that all Americans became 

fearful of exposure to anthrax when they came in contact with any white, powdery 

substance. Demand for laboratory testing of these substances was nationwide, and 

most laboratories did not have the necessary resources to handle this surge, causing 

prolonged delay before people knew if they had been exposed or not, putting a great 

burden on the Nation’s psyche. 

When I worked in Nebraska’s Department of Public Health, we had set up and 

maintained an effective laboratory testing system that could handle surge capacity 

within that State, whether it was for events stemming from intentional acts or 

Mother Nature. If we had not built such capacity, then only a few State laboratory 

technicians would have been inundated with West Nile virus testing when the virus 

hit Nebraska. We had an integrated system, so that when West Nile did become 

a public concern, we were able to call upon laboratory technicians from hospitals 

and universities to start testing for the virus. Having several hundred laboratory 

technicians test for West Nile as opposed to having only several do the job was certainly a much more sensible and effective public health strategy. 

If something were to happen in the food and agriculture sector that would cause 

public alarm, then our current system simply would be inundated. FSIS has three 

regulatory sampling laboratories and they work great under normal conditions. 

However, we need the surge capacity to help us handle at least three potential likely scenarios. The first one would be a hoax—let’s say someone or some organization 

claims they have contaminated the food supply, but have not. The second would be 

an actual attack on the food supply by an individual or group. The third would be 

an outbreak stemming from an act of Mother Nature. In all three cases, there would 

be mass public concern and significant economic consequences. In the last two cases, 

there could potentially be hundreds, perhaps thousands, of people getting sick and 

dying. The sad reality is that we do not at this time have a laboratory system effec-
371 

tive enough to handle the surge capacity if one of these three scenarios were to happen today or tomorrow. This is why FSIS’ $13 million request for FERN will help provide participating 

laboratories with the necessary training, laboratory equipment and supplies so that 

we can handle surge capacity and achieve the other three objectives I mentioned 

earlier. From a public health standpoint, an investment in FERN is an absolute essential priority if we want to prevent, or mitigate, the loss of life and economic hardship if an intentional or unintentional incident affecting the food supply were to 

happen. 

FISCAL YEAR 2007 BUDGET REQUEST

I appreciate having the opportunity to discuss a number of FSIS’ accomplishments 

and priorities with you. Now, I would like to present an overview of the fiscal year 

2007 budget request for FSIS. 

Implementation of these budget initiatives is imperative to helping us attain 

FSIS’ public health mission. In fiscal year 2007, FSIS is requesting an appropriation 

under current law of $862.9 million. 

Supporting FSIS’ Basic Mission 

The FSIS budget request for fiscal year 2007 supports the Agency’s basic mission 

of providing continuous food safety and inspection in each meat, poultry, and egg 

products establishment in the United States. 

The Agency’s permanent statutory obligation is to provide continuous inspection 

of meat, poultry, and egg products is a labor intensive mandate, thereby making its 

salary cost relatively inflexible. An increase of $16 million for the FSIS inspection 

program is requested to provide for the 2.2 percent pay raise for FSIS employees 

in fiscal year 2007 to assure that the Agency is provided sufficient funds to maintain programs. Failure to provide the full amount for pay and benefit costs jeopardizes the effectiveness of FSIS programs and weakens food safety. We also seek an increase of $1.9 million for Agency efforts to support the President’s Management Agenda in the area of IT. As I pointed out earlier, the Agency 

is seeking ways to have electronically stored information from all FSIS personnel 

integrated and available in real-time. This would allow inspectors ready access to 

information necessary to protect the public health. 

As I mentioned several times, as someone with a medical background, I view the 

bottom line of preventing foodborne illness and saving lives very stringently. My 

focus is on prevention, and I believe the request for increases of $2.6 million for 

risk-based inspection and $15.8 million for food and agriculture defense will move 

us where we need to be to further enhance public health protection. 

In order to facilitate cross-agency coordination of information, FSIS seeks an in- crease of $600,000 for International Food Safety in order to link to the International 

Trade Data System managed by the Department of Homeland Security’s Customs 

and Border Protection. 

User Fees 

Inspection services for the cost of Federal meat, poultry and egg products during 

all approved shifts are now paid with Federal funds. Legislation will be re-submitted to Congress, which would provide USDA with the authority to collect fees 

for inspection services beyond one eight-hour shift per day, saving significant Federal costs by transferring these costs to the industries that directly benefit from 

services performed. New industry costs would be a small fraction of one cent per 

pound of production, but would allow FSIS to ensure a safe food supply. Of the 

$862.9 million requested in the fiscal year 2007 budget, $105 million is proposed to 

be derived from these user fees. 

CLOSING

We will continue to engage the scientific community, public health experts, and 

all interested parties in an effort to identify science-based solutions to public health 

issues to ensure positive public health outcomes. It is our intention to pursue such 

a course of action this year in as transparent and inclusive a manner as is possible. 

The strategies I discussed today will help FSIS continue to pursue its goals and 

achieve its mission of reducing foodborne illness by protecting public health through 

food safety and security. 

Mr. Chairman, thank you again for providing me with the opportunity to address 

with the Subcommittee and submit testimony regarding the steps that FSIS is taking to remain a world leader in public health. I look forward to working with you 

to improve our food safety system, ensuring that we continue to have the safest food 

supply in the world. 
372 
373 

PREPARED STATEMENT OF DR. BARBARA J. MASTERS, ADMINISTRATOR, FOOD SAFETY

AND INSPECTION SERVICE

Mr. Chairman and members of the Subcommittee, I am pleased to be here today 

as we discuss public health and the U.S. Department of Agriculture’s (USDA) fiscal 

year 2007 budget request for the Food Safety and Inspection Service (FSIS). 

This year marks the 100th anniversary of the passage of the Federal Meat Inspection Act (FMIA), which ushered in a new era of food safety on the national level. 

Although FSIS was established under its current name by the Secretary of Agriculture on June 17, 1981, our history dates back prior to 1906. Our mission is to 

ensure that meat, poultry, and egg products distributed in commerce for use as 

human food are safe, secure, wholesome, and accurately labeled. FSIS is charged not 

only with administering and enforcing the FMIA, but also the Poultry Products Inspection Act (PPIA), the Egg Products Inspection Act (EPIA), portions of the Agricultural Marketing Act, and the regulations that implement these laws. 

At FSIS, we are committed to the idea that an effective food safety and food defense system must be rooted in science. To meet its goal of protecting public health, 

FSIS will continue to review policies and regulations in light of what the science 

demands. We will also work with interested parties to modernize and enhance our 

inspection and food safety and defense verification efforts. All of this is necessary 

if we are to fulfill our public health mandate and stay ahead of the evolving threats 

to America’s food safety. 

I am pleased to report that progress is being made in measurable and significant 

ways. An effective gauge of how our scientific policies are working is looking at how 

public health is positively impacted. Our efforts are clearly on the right track, as 

evidenced by the decline in foodborne illness over a recent 6-year span. For instance, 

the Centers for Disease Control and Prevention (CDC) last spring reported continued reductions in foodborne illnesses from 1996–1998 through 2004 stemming from 

E. coli O157:H7, Listeria monocytogenes, Campylobacter, and Yersinia. The report 

indicates that reductions in foodborne illness reported in 2003 were not an isolated 

event and that sustained progress is being made toward reducing illness from very 

dangerous foodborne pathogens. 

While these reported declines in foodborne illness are dramatic, we believe more 

can—and will—be done. We will realize further progress in the food safety dynamic 

by implementing a more robust, risk-based inspection system. 

The foundation of this system will be the ability to anticipate and quickly respond 

to food safety challenges before they have a negative impact on public health. While 

FSIS incorporates risk assessments in our approach to food safety, our goal is to 

further strengthen the system so that inspection program personnel may more effectively anticipate problems before they happen. A more robust, risk-based inspection 

system will ensure that our Agency’s resources are used in the most effective and 

efficient way possible. We need a more robust system to help us meet future food 

safety challenges, some of which are either evolving or unknown today. An optimal 

risk-based inspection system is what FSIS is striving to achieve, and it will continue 

to guide our activities in fiscal year 2007. 

Ensuring the safety of America’s meat, poultry, and egg products requires a 

strong infrastructure. To accomplish this task, FSIS has dedicated public health 

servants stationed throughout the country and in laboratories, plants, and import 

houses everyday. In fiscal year 2005, the Agency had approximately 7,600 full-time 

personnel protecting the public health in 5,870 Federally-inspected establishments 

nationwide. FSIS inspection program personnel performed ante-mortem and postmortem inspection procedures at 1,700 slaughter establishments to ensure public 

health requirements were met in the processing of 140 million head of livestock, 9.4 

billion poultry carcasses, and about 4.3 billion pounds of liquid egg products. In fiscal year 2005, FSIS inspection program personnel also conducted over 8 million procedures to verify that establishments met food safety and wholesomeness requirements. In addition, during fiscal year 2005, approximately 4.3 billion pounds of 

meat and poultry and about 8.4 million pounds of egg products were presented for 

import inspection at U.S. ports and borders. 

In an Agency the size of FSIS, with employees stationed all around the country, 

it quickly became apparent to me that effective communication was central to our 

mission. I have made improved communication a major priority, and we have greatly enhanced our communications tools including a redesigned, consumer-friendly 

Website; the debut of an Intranet for employees where they can access important 

and vital information; the launch of ‘‘all-employee’’ meetings via Web-cast; and more 

regular communications from the Administrator’s office to the field. We continue to 

work on communications enhancements in order to ensure our entire workforce remains fully knowledgeable about the Agency’s mission and goals. 
374 

Fulfilling our public health mandate to ensure a safe and wholesome food supply 

is a demanding responsibility and an exciting challenge. I would like to thank you 

for providing FSIS with the resources to protect meat, poultry, and egg products. 

For fiscal year 2006, FSIS received $837.7 million ($829.4 million after rescission), 

and these funds are helping to move the public health agenda forward. For instance, 

for fiscal year 2006, Congress approved $2.2 million in additional funds for frontline 

inspection. This funding is enabling us to hire additional supervisory consumer safety inspection personnel, thus freeing up time for Public Health Veterinarians to 

focus on more complex and demanding food safety projects such as conducting food 

safety assessments and focusing on the design of food safety systems. Further, the 

additional funding you have provided us in the area of food defense has helped the 

Agency in further developing our response to contamination of the food supply, 

whether intentional or accidental. I will provide additional information on both 

these subjects later in this document. 

Today, I would like to share with you how we will further implement a more robust, risk-based inspection system, as well as some of our leading pathogen control 

efforts; our enhanced outreach to small and very small plants; our workforce training initiatives; our food defense activities; and our public health communications 

programs. 

FSIS’ Six Priorities 

First, I want to reiterate that the Agency operates under six operational priorities, 

which I first shared with you 2 years ago. FSIS continues to hold itself accountable 

for improving public health. When we established these priorities, we outlined a series of actions to enable us to better understand, predict, and prevent contamination 

of meat and poultry products to improve health outcomes for American families. 

Since then, we have been building upon these priorities, all equally important, and 

continue to improve the Agency’s infrastructure with a greater attention to risk so 

that we can continue improving our performance under the public health model. I 

should note that even though our priorities remain the same, we are constantly raising the bar so we can move forward to enhance public health protection. These priorities are building the infrastructure for further implementation of a more robust, 

risk-based inspection system. 

Continuing Evolution of Inspection and Enforcement: The Three Pillars 

The first major initiative I want to discuss today is the continuing evolution of 

inspection and enforcement. The evolution of inspection and enforcement is most 

closely aligned to our building a more robust, risk-based inspection system. (See Attachment.) 

This process can best be described by an illustration we have often used at FSIS. 

Namely, a more robust, risk-based system is a major structure built on a strong 

foundation with three pillars providing support. The pillars, taken together, maintain the system’s integrity. The three pillars are: industry, FSIS personnel, and consumers. 

The Hazard Analysis and Critical Control Point (HACCP) system is the core of 

the industry pillar, and FSIS has a vital role in educating, as well as regulating 

industry’s ability to achieve a positive outcome. Industry, for its part, is responsible 

for designing and implementing an effective food safety system. In this regard, we 

have been enhancing our outreach efforts, especially to small and very small plants, 

which I will describe later in this document. 

The FSIS personnel pillar is necessary so that we can collect, assess, and respond 

to public health data. Our verification must be uniform and consistent, especially 

in areas of greatest risk. Under a more robust, risk-based inspection system, we 

must use science as our guiding principal. In other words, we follow the core functions of the public health model—assessment, policy development, and assurance. 

Thus, the type and intensity of inspection at each plant would be determined by an 

analytical process which allows our inspectors to foresee problems so they can focus 

their efforts at plants and in processes that pose a public health risk. But in order 

to reach this point, we must develop a new system that will allow us to collect, assess, and respond to public health data. This need is emphasized in our budget request. 

The third pillar is one which represents consumers. Consumers—including all of 

us here today regardless of title—need to have confidence in a safe and well-defended food supply. 

As we move towards a more robust, risk-based inspection system, our goal is to 

ensure that we receive input from all stakeholders (industry, employees, and consumers) along every step of the process. We need to ensure that all food safety part-
375 

ners are aware of the expectations and goals and have had the opportunity to provide input in moving towards a more robust, risk-based inspection system. 

Risk-Based Pathogen Controls 

FSIS’ Listeria monocytogenes verification sampling is a good example of how we 

have taken a more risk-based approach in processing plants. Under this initiative, 

FSIS tailors its verification activities to the interventions that plants choose to 

adopt and to the potential for Listeria monocytogenes growth in their products. In 

other words, FSIS conducts less sampling in those plants that have the best Listeria 

monocytogenes control programs and more sampling in plants that adopt less vigorous programs. Thus, plants have an incentive to do more to control Listeria 

monocytogenes. 

Considering all the progress that has been made in reducing Listeria 

monocytogenes, E. coli O157:H7, Campylobacter, and other pathogens, FSIS believes 

that it is time to enhance the risk-based approach to investigating and controlling 

the incidence of Salmonella in meat, poultry, and egg products. Salmonella is the 

most frequently reported foodborne illness in the United States, causing culture 

proven cases of foodborne illness at a rate of 14.7 per 100,000 population. The Department of Health and Human Services’ (DHHS) Healthy People 2010 calls for a 

rate of Salmonella infections of 6.8 per 100,000 population. We have a long way to 

go. 

Salmonella includes over 2,300 serotypes, all of which are considered pathogenic 

in humans. Although most of the reported cases in the United States are associated 

with a relatively small number of serotypes—some of which are commonly found in 

raw meat and poultry products—there has been increasing concern about outbreaks 

attributed to relatively rare strains of Salmonella resistant to multiple antibiotics. 

While the Agency responds quickly to positive findings of Salmonella linked to 

human illness at any establishment, our risk-based Salmonella approach for raw 

product would help us be proactive before human illness is associated with our regulated products rather than reactive. It is essential that FSIS proceeds with its new 

Salmonella performance measure because it more accurately reflects Agency performance in reducing foodborne illness and plant performance in reducing the 

pathogen in its processes. Our risk-based Salmonella approach would also provide 

us with an early warning capability for the high-risk Salmonella serotypes from 

meat, poultry, and egg products in particular geographic areas. 

Our budget request would allow us to fully characterize isolates; initiate a Food 

Safety Assessment at a high-risk establishment before an outbreak occurs rather 

than as part of the investigation of why an outbreak has occurred; conduct more 

testing in areas where a cluster of serotypes is identified to determine if an unusual 

prevalence is occurring; and continually feed to CDC and State public health officials any data concerning patterns. We are requesting $602,000 for this risk-based 

Salmonella approach. 

In many ways, our foundational work has already started. We held public meetings to work with our stakeholders to find ways to reduce food safety hazards. In 

August 2005, for example, we held a public meeting on Advances in Pre-Harvest Reduction of Salmonella in Poultry in Athens, Georgia. The meeting, with over 208 

participants, focused on research and practical experiences aimed at reducing Salmonella at the poultry production level, or before poultry reaches Federally-inspected plants. Based on input from the meeting and other information available 

to us, we are developing compliance guideline materials for producers that address 

pre-harvest food safety and Salmonella control. We held a second public meeting on 

February 23 and 24, 2006, in Atlanta, Georgia, which outlined new approaches to 

in-plant controls for Salmonella. Approximately 150 attended the meeting, with 

close to 100 joining the meeting by phone or netcast; the netcast was available both 

days. This meeting discussed new FSIS actions for encouraging industry to control 

Salmonella. Both of these meetings served as important steps in our foundational 

work. 

Funding Progress 

As a more robust, risk-based inspection system is the Agency’s number one priority, we are requesting $2.6 million for this risk-based effort in fiscal year 2007. 

I will go over in more detail the specific funding needs for these efforts later when 

I review our budget request. However, it is worth highlighting here the following 

ways in which the Agency will prepare for the further evolution of the risk-based 

system through the improvement of Agency support: 

—$602,000 Salmonella risk-based inspection system approach described above. 
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—Advance risk-based inspection in processing establishments through reprogramming databases to better assess plant data to determine where to sample based 

on risks to public health. 

—Development of risk-based verification strategies for meat, poultry, and egg 

products in commerce that can be used by FSIS personnel. We will collaborate 

with State, local, and public health officials at the retail level to determine 

strategies for enhanced consumer protections within our regulatory framework. 

These activities would complement inspection activities performed in-plant. 

—Use of data to base policies and regulations for inspection on information obtained that defines measures taken by establishments to reduce foodborne risks 

and the efficacy of measures implemented to reduce risk, e.g., pathogen reduction interventions. 

—Use of new technologies to increase the effectiveness of the risk-based inspections that inspectors perform including such things as rapid tests for residues 

and microbes. 

Training, Education, and Outreach 

The next priority I want to discuss is training, education, and outreach. Training 

is the foundation of our public health successes and a key element in our strategy 

to meet the Healthy People 2010 goals. All employees need to be equipped with the 

knowledge and technical expertise to operate within a public health framework, and 

the Agency has made great strides in achieving a well-trained workforce that is not 

only able to identify threats to the public health, but also to anticipate possible 

threats. We continue to have a need for training and are moving beyond the entry 

level and basic HACCP training provided to our workforce. As new employees join 

the Agency, they still require the basic training. With ongoing changes in policy, 

and as we move to a more robust, risk-based inspection system, new training and 

refresher training will be needed by all employees. Additionally, we are beginning 

to explore intermediate and advanced training opportunities for our employees. 

Based on new, innovative ways of reaching our employees, the Agency is using its 

existing budget to conduct this training. 

It has been easier to reach our employees and provide them training with the implementation of our regional training system to deliver vital training courses closer 

to employees’ worksites. This innovative program ensures that our workforce receives critical scientific training in a timely manner. Providing this training efficiently and effectively has been a key element in the on-going reductions of 

foodborne pathogens. 

Due to improvements FSIS has made to its training program, 100 percent of those 

hired as entry-level employees, as well as those who are promoted into inspection 

and enforcement occupations, now receive mission-critical training within 1 year of 

entering Agency duty. Many of these employees will receive the training within the 

first 6 months of being hired, or sooner. 

FSIS’ Food Safety Regulatory Essentials (FSRE) training program has equipped 

inspection program personnel in verifying an establishment’s HACCP system. Customized HACCP training is then provided, based on the types of products being produced at the establishments where inspectors are assigned. Approximately 1,400 

FSIS employees received FSRE training in fiscal year 2005, and an additional 1,200 

are slated to complete this customized job-training program this fiscal year. We continue to provide specialized training to our Public Health Veterinarians (PHVs), and 

this year, for the first time, this training will be required as a condition of employment, meaning that employees must successfully complete the curriculum in order 

to remain in our workforce. Since being launched in fiscal year 2004, over 230 PHVs 

have received the 9-week classes. We plan to hold eight PHV training classes this 

year, reaching nearly 200 people. 

We are also partnering with other Federal agencies to leverage resources for 

training. FSIS PHVs are trained to identify signs and symptoms during antemortem and post-mortem inspection that could potentially signify the presence of 

a foreign animal disease or suspicious condition, and they learn the appropriate response and reporting procedures. Working closely with our sister agency, the Animal and Plant Health Inspection Service, we are developing a training module on 

this issue that is available anytime, anywhere through the Department’s AgLearn 

system. The course is also currently available through CD–ROM. 

In addition, we recognize that we employ individuals who must maintain their 

professional licenses. That is why we became a certified continuing education units 

outlet so that many of our courses can be utilized by the PHVs to obtain continuing 

education credit. 

FSIS is also in the midst of a comprehensive, multi-year training and education 

effort designed to ensure that every FSIS employee fully understands their role in 
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preventing, or responding to, an attack on the food supply. Efforts began in fiscal 

year 2002 with food defense awareness training for supervisors. Since then, we have 

expanded with contracted anti-terrorism training that was provided to more than 

5,000 field and headquarters employees. Food defense awareness training is also 

being conducted with local partners, such as State and local inspectors, in a cooperative effort with other Federal agencies (Food and Drug Administration, USDA/Food 

and Nutrition Service, and USDA/Agricultural Marketing Service). 

With a regional approach to training, we have been able to deliver training faster 

and more efficiently to employees entering mission-critical occupations. Through elearning techniques, we have been able to distribute training materials more rapidly 

to the workforce on vital issues such as bovine spongiform encephalopathy (BSE) 

policy. Through a policy of training as a condition of employment, we have also been 

able to ensure that all employees have the competencies to perform successfully. 

The regional approach also allows us to better leverage our resources so that our 

trainers can also provide outreach and education to small and very small plants, as 

well as in the course of interacting with their FSIS colleagues. 

FSIS is exploring a wide range of methods to reach its geographically dispersed 

workforce with on-going training updates. The newest vehicle FSIS has used is 

netcast. Most recently, Export Verification training was provided to inspection program personnel via netcast at establishments that produce beef products for export 

under Export Verifications programs. 

We know that for a more robust, risk-based inspection system to be successful 

then all plants must have well-designed, food-safety systems. To that end, we have 

been enhancing our outreach efforts, especially to small and very small plants, to 

ensure everyone is meeting the same requirements. We are significantly changing 

the dynamic of our workforce in order to improve our outreach efforts in this area. 

It is clear to us from our existing communication efforts that effective outreach can 

lead to important changes in food safety designs by industry. Small and very small 

plants are also part of the industry pillar that supports a more robust, risk-based 

inspection system, and any performance gaps that exist between them and the larger plants needs to be closed. 

One method we know is succeeding in this area is our actions following Food Safety Assessments (FSA), which have remained consistent over the past 3 years. For 

example, out of 1,501 FSAs conducted in 2005, 912 of the establishments were found 

in compliance. We believe we have a vital role in educating and regulating industry 

to achieve this outcome, so we are assessing all aspects of our industry outreach. 

In 2005, we held outreach and listening sessions with small and very small plants 

in Montana and California. Early this year, we held two more in Pennsylvania. 

From these sessions, we are gathering critical feedback to ensure plants do not fall 

behind in HACCP implementation. 

FSIS recognized, based on responses and comments from the outreach/listening 

sessions, the need to update its outreach strategy from one focused on initial development of a HACCP plan, to one that is geared towards the scientific basis of the 

HACCP plan. In other words, we need to shift from ‘‘execution’’ of HACCP plans 

to ‘‘design’’ of those plans. FSIS especially wants to continue to work with small and 

very small plant owners and operators so they can continue to enhance the design 

of their food safety systems. 

Ultimately, making certain that the Nation’s food supply is safe makes good business sense, as well as good public health. We realize plant owners and operators 

must have the necessary tools for success, so education through outreach is an important focus for us. Likewise, plant owners and operators must seek this education 

and these tools and follow them. If educational or training opportunities are repeatedly ignored then we have made it clear that public health is our responsibility and 

we will take regulatory action as necessary. 

Most recently, the International HACCP Alliance hosted a strategy session attended by senior-level FSIS employees to discuss and discover the needs business 

owners, especially those of small and very small plants, have in relation to fully implementing HACCP. Both Dr. Raymond, Under Secretary for Food Safety, and I attended the meeting to show how important and valuable we view these sessions. 

The recommendations from this session are being included as part of an implementation plan by a group of senior-level FSIS employees. While the implementation 

plan is not yet finished, I can tell you that a uniform, consistent, and effective message regarding food safety regulations is a critical deliverable on the part of the 

Agency. 

Consumer Education Initiatives 

In the area of consumer education this year, the Food Safety Mobile played perhaps our most prominent role when it visited the Hurricane-ravaged Gulf Coast re-
378 

gion. This eye-catching ‘‘food safety educator-on-wheels’’ brings important public 

health information to consumers and builds on our partnerships in grassroots communities across the country. Through the Food Safety Mobile, FSIS is sharing its 

food safety message with the public, especially culturally diverse and underserved 

populations and those with the highest risk from foodborne illnesses. In addition to 

dispensing important food safety tips in areas hit with power outages and water 

damage, the Food Safety Mobile distributed food safety brochures, bleach, hand 

wipes, and thermal bags. During its two-and-one half month tour of the Gulf States, 

the Food Safety Mobile reached nearly 41,000 total consumers face-to-face. In fact, 

the Food Safety Mobile was so successful that a second mobile was launched in October 2005, appearing at 18 events in 11 additional cities in Texas and Louisiana 

following Hurricane Rita. Food Safety Mobile II reached an additional 15,000 consumers affected by the hurricanes. 

In another inter-agency collaborative effort to educate about the importance of 

food safety, FSIS is cosponsoring with the DHHS’ Food and Drug Administration 

(FDA), CDC, and private sector organizations an international food safety education 

conference this September, focusing on reaching at-risk audiences. An unprecedented effort, the goals of the conference include sharing current surveillance and 

epidemiological data on foodborne illness; presenting strategies leading to enhanced 

food safety knowledge, skills, and abilities in the general population and among atrisk populations; and to communicate the latest science-based safe food handling 

principles and practices. 

Food Defense 

The third priority is our substantial effort to continue to improve our food defense 

capabilities. The Agency has accomplished much in the area of food defense, making 

a strong system even stronger. The name of the office which handles this important 

area was changed from the Office of Food Security and Emergency Preparedness to 

the Office of Food Defense and Emergency Response. This reflects the fact that we 

have restructured the office to focus on developing strategies to protect and defend 

the food supply from intentional contamination and to respond to both intentional 

acts of adulteration, as well as large scale food emergencies. 

Last year, FSIS developed four model food defense plans, which are available on 

our website. These models are designed to assist Federal- and State-inspected meat, 

poultry, and egg products establishments, as well as import facilities, to develop 

their own defense measures to deter the threat of intentional contamination or similar attacks on the food supply. During 2005, the Agency held workshops on these 

plans in Dallas, TX; Oakland, CA; Chicago, IL; and Philadelphia, PA. In addition 

to webcasting the Oakland and Philadelphia workshops, FSIS also conducted four 

additional web casts to ensure that as many people as possible had the opportunity 

to participate. Two of these webcasts were targeted specifically to State officials, and 

the Agency also partnered with the University of Puerto Rico in holding an entire 

webcast in Spanish, which also drew participants from Latin America. In all, it is 

estimated that these workshops reached over 1,200 people. 

The model food defense plans have been issued in the form of guidance documents 

and are voluntary. However, FSIS believes that every establishment should have a 

written plan that describes and documents controls to ensure that the premises are 

defended from potential threats. 

FSIS continues to assess vulnerabilities in the food supply. The Strategic Partnership Program on Bioterrorism, a program including the Federal Bureau of Investigation, FDA, and Department of Homeland Security (DHS), along with FSIS and other 

USDA agencies, carries out joint vulnerability assessments on the food supply with 

industry and States, and we have been working in conjunction with the CDC, the 

FDA, epidemiologists, and public health laboratories in several States through the 

FoodNet and PulseNet programs. FSIS is also conducting an assessment of 

vulnerabilities of the food supply from illegally imported products. 

The majority of the $15.8 million increase in our fiscal year 2007 food and agriculture defense budget request focuses on the Food Emergency Response Network 

(FERN). FERN is a joint FSIS–FDA effort of national, State, and local laboratories 

to provide ongoing surveillance and monitoring of food and to promptly respond to 

an intentional contamination that targets the Nation’s food supply, or a foodborne 

illness outbreak brought about by Mother Nature. To date, $4 million in funding allocated in fiscal year 2005 and fiscal year 2006 has been used to build on the expertise of the Federal, State, and local laboratories that are now part of FERN, and 

these laboratories are currently conducting method development for testing and performing proficiency testing. FERN has also established five Regional Coordination 

Centers that serve as the primary points of contact for laboratories across the country. 
379 

This effort enables FSIS to utilize State and local laboratories in handling the numerous samples required to be tested in the event of an attack on the food supply, 

a natural outbreak, or even a hoax, involving a meat, poultry, or egg product. It is 

vital for the Agency to respond rapidly to such emergencies to not only protect the 

public’s health, but also to ensure public confidence in the safety of the food supply 

and to prevent an economic collapse in the meat or poultry industries. The first line 

of this rapid response is the laboratories, which must be provided with training, 

methodology, and state-of-the-art laboratory equipment. Ultimately, our goal is to 

have 100 State and local laboratories actively testing the food supply for FERN, like 

the 18 FSIS-affiliated biological and eight FDA-affiliated chemical laboratories with 

which FERN now has cooperative agreements. 

Another important example of inter-agency cooperation, and one that is designed 

to allow the FERN labs to test methods and proficiency, is a joint project between 

USDA’s Food and Nutrition Service, Agricultural Marketing Service (AMS), and 

FSIS. Product samples will be taken from facilities in four States that provide 

ground beef to the National School Lunch Program. FSIS labs will test those samples for threat agents, in addition to the regular pathogen testing that is performed 

by AMS. Then, once that product has been sent to warehouses, it will then be retested for the same threat agents by non-FSIS labs in the FERN network that have 

a cooperative agreement with the FERN network. The project will be held later this 

year and is the first one to focus on FSIS-regulated products. Earlier projects held 

in November and December of 2004 tested FDA-regulated products. 

Risk Analysis 

Fourth, is our risk analysis priority—which includes risk assessment, risk management, and risk communication. This is an extremely important process, one that 

provides FSIS with a way to focus resources on hazards that pose the greatest risk 

to public health. 

A good risk assessment needs good data in order to be effective. Therefore, we are 

conducting a series of nationwide baseline studies that will help determine the levels of various pathogenic microorganisms in raw meat and poultry. These baseline 

studies are designed to provide FSIS and the regulated industry with data concerning the prevalence and quantitative levels of selected foodborne pathogens and 

microorganisms that serve as indicators of process control. 

The first baseline study, which began in August and will continue to December 

2006, is for E. coli O157:H7 and indicator organisms in beef trim and subprimals. 

Data from this study will guide Agency decisions on performance standards and allocation of inspection resources. In September of last year, a contract was awarded 

to a third-party laboratory to perform the microbial analyses for future baseline 

studies on: young chicken carcasses, ground chicken, and swine carcasses. From 

this, a new baseline study for young chicken carcasses will be initiated within the 

next few months. The young chicken baseline will include prevalence and quantified 

levels for both Salmonella and Campylobacter. This scientific information will allow 

FSIS to make the decisions necessary to move to a more robust, risk-based inspection system. 

Regarding BSE, USDA has contracted with Harvard University to update its risk 

assessment to ensure previous measures implemented through the interim final 

rules were appropriate. USDA is drafting a final rule based on the comments received on the interim final rule, the results of the updated Harvard Risk Assessment and results of the USDA enhanced surveillance program. 

During the past year, FSIS assumed the Chair of the USDA Food Safety Risk Assessment Committee (FSRAC), whose purpose is to enhance communication and coordination among USDA agencies, to promote sound risk assessments in support of 

food safety policy, and regulatory decisions. FSIS also became the co-lead for the 

Interagency Risk Assessment Consortium to share information and coordinate food 

safety risk assessment approaches among 18 Federal agencies, including DHHS, the 

Department of Defense, and the Environmental Protection Agency. 

Management Controls and Efficiency 

Our fifth priority is management controls and efficiency, which is a priority we 

added as a mechanism to best achieve our operational goals and objectives within 

each program area. Every task undertaken by the Agency has an effect on public 

health. Because of this, we are requiring each program area to illustrate through 

documentation that they are meeting their established goals. 

In order to ensure that proper management controls are implemented, FSIS’ Office of Program Evaluation, Enforcement, and Review (OPEER) branch will audit 

all Agency program areas to measure the outcomes. In fiscal year 2005, the Agency 

began development of a two-phase management control audit protocol and agenda 
380 

to systematically verify and evaluate management controls. Phase 1 will verify the 

implementation of the management controls for each program area; Phase 2 will 

verify that each program is achieving its objectives, and that their controls are adequate and are achieving the program’s desired results. 

During fiscal year 2005, we developed and implemented management controls 

that established operational performance standards for verification of HACCP requirements, ante-mortem/post-mortem requirements, Food Safety Assessments, administrative enforcement actions, food defense verification, and recall procedures. 

FSIS launched the AssuranceNet project team in fiscal year 2006. This team is 

developing a state-of-the-art management control reporting system that will tie into 

key Agency databases. The AssuranceNet team collects information on Agency management controls and the items the Agency needs in the way of a reporting tool. 

The team is working with Agency technical staff and outside contractors to develop 

the system according to industry standards and best practices. The AssuranceNet 

system will undergo extensive real world testing before it becomes fully available 

for use in June 2006. 

An area of management efficiency which we at FSIS emphasize is human resources (HR) modernization and reform. In 2004, FSIS launched an initiative to reshape the HR system to better support our human capital and strategic plans and 

to facilitate every-day mission performance. The resulting internal work group has 

developed innovative HR practices that can be implemented under current law, as 

well as identifying innovations that require Federal legislation or regulatory 

changes. We stand committed to the belief that the Agency requires an alternative 

HR system that emphasizes pay-for-performance. 

Public Health Communications Infrastructure 

Our sixth priority is the public health communications infrastructure with the 

ability to collect, assess, and respond to data in real-time. Because this is also a 

foundation of a more robust, risk-based inspection system, we are constantly looking 

for ways to improve communication within the Agency, between the Agency and its 

stakeholders, as well as cross-Agency communications. FSIS is examining its data 

needs to make our field operations more effective. Having the same data from the 

border, the districts, and field and laboratory personnel at the same time is essential so that everyone can connect the dots and proactively respond to this wealth 

of information rather than just react after a problem surfaces. Proactively interpreting our data will better protect public health from the prospect of non-intentional or intentional contamination. By collecting, assessing, and responding to data 

in real time, lives can be saved. 

A key part of this process is through the effective management of information 

technology (IT). Through an Enterprise Architecture Working Group, we have been 

working closely with the Office of Management and Budget (OMB) and others involved in the Federal-government wide e-Government efforts to develop IT systems 

that facilitate cross-Agency analysis and identification of duplicative investments, 

gaps and opportunities for collaboration within and across agencies. 

Another way we are working to enhance cross-Agency communication in fiscal 

year 2007 is to create electronic linkages with the Department of Homeland Security’s Customs and Border Protection’s International Trade Data System in order to 

provide FSIS with a stronger ability to screen and verify the security of products 

imported into the United States in an efficient way. FSIS is also working with its 

Federal partners through the Federal Health Architecture initiative to build a system that all Federal agencies can communicate through to better protect imported 

products. 

On the Agency level, FSIS is working to have electronically stored information 

from all FSIS personnel integrated and available in real-time, allowing managers 

and administrators to make management decisions more efficiently as events are 

unfolding and with greater access to information. This is necessary for our inspection program personnel to do their jobs properly and effectively and to react more 

rapidly in a crisis to better protect public health and save lives. An example of this 

was shown in a recent test of an updated version of our Consumer Complaint Monitoring System (CCMS). When implemented later this year, this new version of 

CCMS will include improved scientific tools to enable us to act more quickly to prevent further foodborne illness. In one scenario, as we were testing this new version 

of CCMS, we were able to find an E. coli O157:H7 outbreak 3 weeks faster than 

with our present technology. FSIS is partnering with States to integrate this system 

so that this real-time data could be accessed and shared by all to help prevent outbreaks and/or limit their scope. Other aspects would also include procuring PDAtype hardware and related software integrating into existing Agency computer and 
381 

communications equipment for inspection program personnel. It also includes keeping up with rapid changes in microcomputer technology. 

We believe these efforts to improve upon the Agency’s IT systems will greatly enhance the Agency’s efforts to support the President’s Management Agenda, and 

move us towards more efficient e-Government solutions to the challenges we face. 

InsideFSIS Debuts 

Other ways that we have improved our communications includes InsideFSIS, the 

Agency’s employee intranet which was launched in June. With InsideFSIS, employees are able to gain instant access to important Agency information and may participate in netcasts, as was the case with a State of the Agency meeting held in September last year. We also have an extensive food handlers’ education program that 

encompasses everything from bilingual pamphlets on using thermometers to our 

Food Safety Mobile. 

I have already mentioned the prominent role the Food Safety Mobile played on 

the hurricane-ravaged Gulf Coast, but the Food Safety Mobile was not the only way 

the Agency played an important role in our strategy to respond to the hurricanes. 

Prior to both hurricanes’ landfalls, FSIS issued videotaped consumer alerts with 

food safety tips following a power outage or flood that were satellite broadcast to 

media outlets in Alabama, Louisiana, Georgia, and Florida. In addition, the Agency’s Meat and Poultry Hotline began 24-hour service to handle any food safety questions from consumers. Our outreach to American consumers continued into September, when FSIS recorded and distributed public service announcements offering 

food safety tips. 

Fiscal Year 2007 Budget Request 

I appreciate the opportunity to discuss FSIS’ priorities with you. Now, I would 

like to present an overview of the fiscal year 2007 budget requests for FSIS. These 

budget initiatives are vital to helping us attain FSIS’ public health mission, as outlined by our priorities. In fiscal year 2007, FSIS is requesting an appropriation of 

$862.9 million. 

Risk-Based System 

FSIS is seeking a total increase of $2.6 million for the improvement of Agency 

support for risk-based inspection and risk-based Salmonella control. We are requesting $1.9 million for Agency support of risk-based inspection. Finally, for our riskbased Salmonella approach, we are requesting $602,000. 

Food and Agriculture Defense Initiative 

The fiscal year 2007 budget also requests a total increase of $15.8 million for FSIS 

to support the Food and Agriculture Defense Initiative in partnership with other 

USDA agencies, the DHHS, and the Department of Homeland Security. Because 

food contamination and animal and plant diseases could have catastrophic effects 

on human health and the economy, the three Federal departments involved are 

working together on a comprehensive food and agriculture policy that will enrich the 

Government’s ability to respond to the dangers of disease, pests, and poisons, 

whether natural or intentionally introduced. The total is broken down as follows: 

Central to FSIS’ food defense efforts is FERN, for which we are seeking an increase of $13 million. These funds are critical to help FSIS provide participating laboratories with the necessary training, laboratory equipment and supplies so that we 

can handle surge capacity, whether from events stemming from a hoax, intentional 

acts or mother nature. From a public health standpoint, an investment in FERN 

is an absolute essential priority if we want to prevent, or mitigate, the loss of life 

and economic hardship if an intentional or unintentional incident affecting the food 

supply were to happen. 

We are also requesting $2.5 million for two data systems to support FERN—the 

electronic laboratory exchange network (eLEXNET), and a repository of analytical 

methods. The eLEXNET is a national, web-based, electronic data reporting system 

that allows analytical laboratories to rapidly report and exchange standardized 

data. This system is currently operational in nearly 100 food-testing, public health, 

and veterinary diagnostic laboratories across the country. The fiscal year 2007 budget request would make eLEXNET available to additional FERN and other analytical, food-testing laboratories. This will require eLEXNET system management, 

travel, on-site computer programming, and training. 

Access to current, properly validated methods used for screening, confirmation, 

and forensic analysis is critical to all laboratories. For this reason, FSIS is working 

with FDA to develop a Web-based repository of analytical methods compatible to 

eLEXNET. Access to these methods will greatly enhance the ability of FERN and 

other laboratories to respond to emergencies, to use new methodologies and tech-
382 

nologies, to enhance efficiency, and to trouble-shoot problems. The requested funding will be used to enhance the repository and to populate the repository with numerous methods that will be obtained from analytical laboratories. 

Communication 

In order to facilitate cross-Agency coordination of information, FSIS seeks an increase of $600,000 for International Food Safety in order to link to the Import Trade 

Data System managed by the Department of Homeland Security’s Customs and Border Protection. Currently, FSIS relies on the importer of record to present shipments for reinspection, and the lack of network linkages among import data systems 

maintained by different agencies contributes to a prolonged, sometimes incomplete 

rendering of product dispositions and document certification for imported meat and 

poultry products at U.S. ports of entry. 

We are also requesting funds for Agency efforts to support the President’s Management Agenda in the area of IT. As I pointed out earlier, the Agency is seeking 

ways to have electronically stored information from all FSIS personnel integrated 

and available in real-time. This would allow inspectors ready access to information 

necessary to protect the public health. For inspector communication enhancements, 

such as the PDA-type hardware for inspectors mentioned earlier, we are seeking 

$615,000. 

Our experience has shown that the originally postulated life cycle of 5 years for 

microcomputers delivered to the field inspection workforce is not practical, given the 

rapid pace of technological changes. To replace a 5-year lifecycle for computer hardware with a 3-year lifecycle, the Agency seeks $1,271,000. This accounts for the approximately 4,000 microcomputers in the field. Our goal is to replace 1,300 to 1,400 

computers annually. 

Personnel Pay Increase 

An increase of $16 million for the FSIS inspection program is requested to provide 

for the 2.2 percent pay raise for FSIS employees in fiscal year 2007 to assure that 

the Agency is provided sufficient funds to maintain programs. Failure to provide the 

full amount for pay and benefit costs jeopardizes the effectiveness of FSIS programs 

and weakens food safety. 

User Fee Proposal 

Once again this year, our budget reproposes the implementation of a new user 

fee. As you know, inspection services for the cost of Federal meat, poultry, and egg 

products during all approved shifts are currently paid for with Federal funds, provided that the species or product is covered under our legislative authority. However, most plants run beyond one 8-hour shift per day. A fee for services beyond 

that would save significant Federal costs by transferring these costs to the industries that directly benefit from them. The proposed fiscal year 2007 savings are projected at $105.4 million to reflect collections of receipts for three quarters of the 

year. 

Closing 

As we mark the 100th anniversary of the passage of the FMIA, FSIS will continue 

to engage the scientific community, public health experts, and all interested parties 

in an effort to identify science-based solutions to public health issues to ensure positive public health outcomes. It is our intention to pursue such a course of action 

this year, as we have in the past, in as transparent and inclusive a manner as possible. The strategies I discussed today will help FSIS continue to pursue its goals 

and achieve its mission of reducing foodborne illness, and protecting public health 

through food safety and defense. 

Mr. Chairman, thank you again for providing me with the opportunity to speak 

with the Subcommittee and submit testimony regarding the steps that FSIS is taking to remain a world leader in public health. I look forward to working with you 

to improve our food safety system and ensuring that we continue to have the safest 

food in the world. 
383 

Senator BENNETT. Thank you. Dr. Lambert. 

STATEMENT OF CHARLES LAMBERT

Mr. LAMBERT. Thank you, Chairman Bennett, Senator Kohl. 

I am pleased to appear before you to discuss the activities of the 

Marketing and Regulatory Programs and to present our 2007 budget proposals. 

With me today are Dr. Ron DeHaven, who is the Administrator 

of the Animal and Plant Health Inspection Service (APHIS); Mr. 

Lloyd Day, Administrator of the Agricultural Marketing Service 

(AMS); and Mr. James Link, who is the Administrator of the Grain 

Inspection, Packers and Stockyards Administration (GIPSA). And 

those are the three agencies that make up Marketing and Regulatory Programs (MRP). 

In addition, Mr. Dennis Kaplan from the department’s Budget 

Office is here with us. 

MRP has addressed several broad goals and objectives to increase marketing opportunities and to protect American agriculture 

from damages caused by pests and diseases, both intentional and 

unintentional. The key to private sector financial success is relatively simple. First, offer high-quality products. Second, produce 

them at a competitive cost. And third, earn a fair price in the marketplace. 

In relation to this, MRP has identified three areas for special attention to make American agriculture more competitive. They include protecting plant and animal health; ensuring quality; and 

continuing to work with the Department of Homeland Security to 

exclude agricultural health threats and with farmers and ranchers 

to control endemic pests and diseases once they are here. 
384 

Through MRP’s commodity grading and inspection programs, we 

support producers in the marketing of high-quality crops and livestock. 

Second is through enhancing market access by reducing technical 

barriers to trade. And third is harmonizing international standards 

by redoubling our efforts in a variety of international standard-setting organizations and working closely with our sister agencies to 

ensure that technical standards do not become technical barriers. 

MRP activities are funded both by the taxpayers and beneficiaries of program services. The budget proposes that the MRP 

agencies carry out programs of close to $2 billion, with $412 million 

funded by fees charged to direct beneficiaries and $450 million 

from customs receipts. 

On the appropriation side, the President’s budget requests about $959 million for APHIS, $85 million for AMS, and $42 million for 

GIPSA. 

The budget proposes user fees that, if enacted, would generate about $42 million in savings to the U.S. taxpayer. The budget also 

includes a proposal to terminate the AMS Microbiological Data Program, given its limited use to determine the source of food-borne 

illnesses and other reasons. 

PREPARED STATEMENTS

Mr. Chairman, the increases that you referred to are generally 

in the exclusion of foreign animal and plant diseases and pests and 

for enhanced monitoring and surveillance primarily related to 

avian influenza. 

I look forward to working with the committee on the 2007 budget 

for marketing and regulatory programs. We believe the proposed 

funding amounts and sources of funding are vital to improving 

plant and animal health and ensuring quality and enhancing market access and achieving harmonization of international standards. 

It also works to reduce the deficit and protects American agriculture from terrorists. 

We are happy to answer any questions. Thank you. 

[The statements follow:] 

PREPARED STATEMENT OF CHARLES LAMBERT

Mr. Chairman and members of the Committee, I am pleased to appear before you 

to discuss the activities of the Marketing and Regulatory Programs (MRP) of the 

U.S. Department of Agriculture and to present our fiscal year 2007 budget proposals 

for the Animal and Plant Health Inspection Service (APHIS), the Agricultural Marketing Service (AMS), and the Grain Inspection, Packers and Stockyards Administration (GIPSA). 

With me today are Mr. Jeremy Stump, Acting Deputy Under Secretary for MRP; 

Dr. Ron DeHaven, Administrator of APHIS; Mr. Lloyd Day, Administrator of AMS; 

and Mr. James Link, Administrator of GIPSA. They have statements for the record 

and will answer questions regarding specific budget proposals. 

MRP has addressed several broad goals and objectives to increase marketing opportunities and to protect American agriculture from damages caused by pests and 

diseases, both intentional and unintentional. The key to private sector financial success is relatively simple. First, offer the highest quality products. Second, produce 

them at the lowest possible cost. And, third, earn a fair price in the marketplace. 

MRP helps American farmers and ranchers in several ways. AMS and GIPSA certify the quality of agricultural commodities and provide industry with a competitive 

edge earned by the USDA seal of approval for grading and inspection. APHIS protects the health of plants and animals, thereby keeping costs low. APHIS also provides plant and animal sanitary and phytosanitary (SPS) expertise during inter-
385 

national negotiations to maintain and open markets around the world, and GIPSA 

works to ensure that livestock producers have a level playing field upon which to 

compete. A healthy and marketable product provides the foundation of competitive 

success. 

MRP INITIATIVES

MRP has identified three areas for special attention to make American agriculture 

more competitive. They include: 

Protect Plant and Animal Health and Ensure Quality.—MRP will continue to 

work closely with the Department of Homeland Security (DHS) to prevent the entry 

of foreign plant and animal pests and diseases through the Agricultural Quarantine 

Inspection Program (AQI). We will continue to work with farmers and ranchers to 

control endemic pests and diseases at minimal levels. Through MRP’s commodity 

grading and inspection programs, we will support our producers in the marketing 

of their high quality crops and livestock. 

Enhance Market Access.—Market access can be impaired through technical barriers and SPS measures. MRP will continue to work closely with international counterparts to educate them about our systems; to learn more about the foreign country 

requirements; and to certify that U.S. products meet their standards. 

Harmonize International Standards.—MRP will continue to provide expertise in 

an effort to harmonize sanitary and phytosanitary measures. Since risk is inherent 

and fair trade relies upon the same standards being applied to all parties, MRP will 

increase its efforts with the World Organization for Animal Health and the International Plant Protection Convention to develop standards and processes for twoway trade to exist, with restrictions and mitigations based on science to reduce risk. 

Moving away from an ‘‘all or nothing’’ approach makes trade therefore less risky, 

as a localized or contained outbreak has fewer effects on exports and thus on the 

economy. In a similar vein, a level playing field in world markets depends on technical standards that describe the quality and other characteristics of agricultural 

products in a manner that does not discriminate against U.S. producers and shippers. MRP will redouble its efforts in a variety of international standard setting organizations and work closely with our sister agencies to ensure that technical standards do not become technical barriers. 

FUNDING SOURCES

The MRP activities are funded by both the taxpayers and beneficiaries of program 

services. The budget proposes that the MRP agencies carry out programs of close 

to $2 billion, with $412 million funded by fees charged to the direct beneficiaries 

of MRP services and $450 million from Customs receipts. 

On the appropriation side, the Animal and Plant Health Inspection Service is requesting about $953 million for salaries and expenses and $6 million for repair and 

maintenance of buildings and facilities; the Agricultural Marketing Service is requesting $85 million; and the Grain Inspection, Packers and Stockyards Administration is requesting $42 million. 

The budget proposes user fees that, if enacted, would generate about $42 million 

in savings to the U.S. taxpayer. Legislation will be proposed to provide USDA the 

authority to recover the cost of administering the Packers and Stockyards Act, developing grain and other commodity standards that are used to support fee-based 

grading programs and for other purposes, providing Federal oversight of marketing 

agreements and orders, and inspecting entities regulated under the Animal Welfare 

Act. I will use the remainder of my time to highlight the major activities and our 

budget requests for the Marketing and Regulatory Programs. 

ANIMAL AND PLANT HEALTH INSPECTION SERVICE

The fundamental mission of APHIS is to anticipate and respond to issues involving animal and plant health, conflicts with wildlife, environmental stewardship, and 

animal well-being. Together with their customers and stakeholders, APHIS promotes the health of animal and plant resources to enhance market access in the 

global marketplace and to ensure abundant agricultural products and services for 

U.S. customers. I would like to highlight some key aspects of the APHIS programs: 

Improve Plant and Animal Health.—While APHIS continues to work closely with 

the Department of Homeland Security (DHS) to exclude agricultural health threats, 

it retains responsibility for promulgating regulations related to entry of passengers 

and commodities into the United States. APHIS’ efforts have helped keep agricultural health threats away from U.S. borders through increased offshore threat-assessment and risk-reduction activities. APHIS has also increased an already vigilant 
386 

animal and plant health monitoring and surveillance system to promptly detect outbreaks of foreign and endemic plant and animal pests and diseases. 

Since June, 2004, when we launched the one-time, significantly enhanced surveillance program for BSE, we have tested about 660,000 high-risk animals as of March 

20, 2006, and an additional 21,000 clinically-normal animals. Only two samples 

have tested positive. APHIS is in the process of evaluating the enhanced program, 

though it certainly would not be premature to say that by any measure the incidence of BSE in the United States is extremely low. 

In addition, we are moving ahead with the National Animal Identification System 

(NAIS). All 50 States, five Tribes, and two U.S. Territories are registering premises 

with an estimated total of about 213,000 premises registered as of March 7, 2006. 

APHIS and its State and Tribal cooperators are registering hundreds of premises 

each week, and we are also in the preparation stage to begin allocation of individual 

animal identification numbers. 

We have been closely monitoring the very alarming spread of highly pathogenic 

avian influenza overseas. USDA is a full partner in the government-wide effort to 

prepare the country for a potential pandemic and the worldwide effort to stop the 

spread of H5N1 virus at its source overseas. We appreciate funding provided 

through the December, 2005, pandemic influenza emergency supplemental. We are 

using those funds for international efforts, domestic surveillance of poultry and migratory birds, diagnostics, and emergency preparedness and response. 

Because efforts to exclude foreign pests and diseases are not 100 percent successful, APHIS also assists stakeholders in managing new and existing agricultural 

health threats, ranging from threats to aquaculture, crops, tree resources, livestock 

and poultry. In addition, APHIS assists stakeholders on issues related to conflicts 

with wildlife and animal welfare. 

Enhance Market Access.—The Trade Issues Resolution and Management efforts 

are key to ensuring fair trade of all agricultural products. APHIS’ staff negotiates 

SPS standards, resolves issues, and provides clarity on regulating imports and certifying exports which improves the infrastructure for a smoothly functioning market 

in international trade. Ensuring that the rules of trade are based on science helps 

open markets that have been closed by unsubstantiated SPS concerns. 

In fiscal year 2005, reopening markets for United States products posed one of 

the greatest challenges. In regard to beef markets that were closed to U.S. exports 

because of BSE, APHIS has contributed to regaining at least partial access to 26 

markets. Altogether, APHIS resolved 79 SPS issues in fiscal year 2005, allowing approximately $1.4 billion worth of trade to occur. 

Recent developments in biotechnology underscore the need for effective regulation 

to ensure protection of the environment and food supply, reduce market uncertainties, and encourage development of a technology that holds great promise. APHIS’ 

Biotechnology Regulatory Services unit coordinates our services and activities in 

this area and focuses on both plant-based biotechnology and transgenic arthropods. 

We also are examining issues related to transgenic animals. 

APHIS’ 2007 BUDGET REQUEST

In a year of many pressing high-priority items for taxpayer dollars, the budget 

request proposes about $953 million for salaries and expenses. There are substantial 

increases to support the Administration’s Food and Agriculture Defense Initiative, 

enhance avian influenza efforts, address SPS trade barriers, and deal with specific 

threats to the agriculture sector. In addition, existing user fees of about $139 million 

will support Agricultural Quarantine Inspection and related activities. A brief description of key efforts supported by the 2007 budget request follows. 

A Total of About $182 Million for Foreign Pest and Disease Exclusion.—Efforts 

will focus on enhancing our ability to exclude Mediterranean fruit fly, foreign animal diseases, and screwworm. In addition, we also request funds to open offices in 

Thailand, India, Italy, and West Africa to facilitate U.S. exports. 

A Total of About $304 Million for Plant and Animal Health Monitoring and Surveillance.—Due to the critical role of APHIS in protecting the Nation from both deliberate and unintentional introductions of an agricultural health threat, the budget 

requests an increase of about $62 million as part of the Food and Agriculture Defense Initiative. This request would provide: enhanced international information 

gathering about potential threats abroad; greater plant pest detection and safeguarding; increased national wildlife and animal health surveillance; improved ability to respond to plant or animal disease outbreaks; and vaccines and supplies for 

the National Veterinary Stockpile. We will also continue efforts to build the National Animal Identification System to limit the spread of a potential animal disease 

outbreak. 
387 

A new request is intended to stop, slow, or otherwise limit the spread of highly 

pathogenic avian influenza to the United States and to limit the domestic spread 

of a pandemic. The budget includes an additional $57 million for international capacity building (e.g., providing in-country veterinary expertise overseas); domestic 

surveillance and diagnostics (including wildlife surveillance); and emergency preparedness and response. This would continue efforts that were started with funds 

from the December, 2005, pandemic influenza emergency supplemental. 

A Total of $344 Million for Pest and Disease Management Programs.—Once a pest 

or disease is detected, prompt eradication will reduce long-term damages. In cases 

where eradication is not feasible (e.g., European gypsy moth), attempts are made 

to slow the advance, and damages, of the pest or disease. APHIS provides technical 

and financial support to help control or eradicate a variety of agricultural threats. 

The budget proposes a number of increases, including those for citrus canker, emerald ash borer, and sudden oak death. Other programs are reduced. For example, 

successes in boll weevil eradication efforts allow a reduction in that program. Included is an increase of $10 million for competitive grants to fund the application 

of innovative private-sector solutions to real-world pest and disease problems. 

A Total of $20 Million for the Animal Care Programs.—Additional funding will 

help APHIS maintain its animal welfare and horse protection programs despite the 

rapid growth in the number of new licensees and registrants. The budget includes 

a proposal to collect $8 million in fees from regulated entities to help cover costs 

associated with inspections under the Animal Welfare Act. 

A Total of $94 Million for Scientific and Technical Services.—Within USDA, 

APHIS has chief regulatory oversight of genetically modified organisms. To help 

meet the needs of this rapidly evolving sector, the budget includes a request to, in 

part, enhance our regulatory role towards transgenic animals and disease agents. 

Also, APHIS develops methods and provides diagnostic support to prevent, detect, 

control, and eradicate agricultural health threats, and to reduce wildlife damages 

(e.g., coyote predation). It also works to prevent ineffective or harmful animal biologics from being marketed. 

A Total of $10 Million for Improving Security and IT Operations.—A portion of 

the increase would be used to upgrade key computer resources for eGov requirements and other efforts. It also includes providing the State Department funds to 

help cover higher security costs for APHIS personnel abroad. 

AGRICULTURAL MARKETING SERVICE

The mission of the AMS is focused on facilitating the marketing of agricultural 

products in the domestic and international marketplace, ensuring fair trading practices, and promoting a competitive and efficient marketplace to the benefit of producers, traders, and consumers of U.S. food and fiber products. The Agency accomplishes this mission through a wide variety of publicly and user funded activities 

that help its customers improve the marketing of their food and fiber products and 

ensure such products remain available and affordable to consumers. Consequently, 

most AMS programs enhance access to current trading information, including availabilities of supply, location and size of demand, underutilized market facilities, and 

availability of means of transportation. In addition, the Standardization program 

contributes to the harmonization of international quality standards. 

Market News.—Market news reports improve market efficiency for all parties by 

offering equal and ready access to current, unbiased market information so that agricultural producers and traders can determine the best place, price, and time to 

buy or sell. AMS Market News provides this information by reporting current 

prices, volume, quality, condition, and other market data on farm products in more 

than 1,300 production areas and specific domestic and international markets. In October 2005, AMS launched a new Market News Web Portal, making Fruit and Vegetable and Livestock and Grain reports immediately available for users, with other 

AMS commodities to be added in coming months. 

The Livestock Mandatory Price Reporting Program continues to provide more 

than 100 daily, weekly, or monthly reports on fed cattle, swine, lamb, beef, and 

lamb meat market transactions. However, since legislative authority for the Program lapsed on September 30, 2005, the program operates on a voluntary basis. The 

Government Accountability Office recently reviewed the program and we are making improvements in response to their recommendations. 

Commodity Standards.—AMS works with the agricultural industry to establish 

and improve commonly recognized quality descriptions for agricultural commodities 

that support access to domestic and international markets. The Standardization program supports exports of U.S. agricultural products by helping to represent the interests of U.S. producers in a variety of international standards development meet-
388 

ings. AMS experts continue to participate in developing international dairy, meat, 

poultry, fruit, and vegetable standards. 

Country of Origin Labeling.—AMS is implementing a Country of Origin Labeling 

surveillance and enforcement program for fish and shellfish. Labeling requirements 

for these products became mandatory on April 4, 2005, and AMS has educated the 

industry on the documentation and records required to substantiate country of origin and method of production claims. 

National Organic Program.—The National Organic Standards program supports 

market access for organic producers by setting national standards for organic products sold in the United States, which provides assurance for consumers that the organic products labeled ‘‘organic’’ uniformly meet those requirements. The U.S. organic food industry has increased to an $18 billion annual sales level and is still 

growing. 

Pesticide Data and Microbiological Data Programs.—AMS also provides consumer 

assurance by collecting pesticide residue data and microbiological baseline data. In 

2005, the Pesticide Data program performed over 120,000 analyses on more than 

13,000 samples. The data gathered and reported by AMS on pesticide residues supports science-based risk assessments performed by a number of entities, including 

regulatory agencies. 

Transportation Services.—The Transportation Services program supports market 

access by facilitating the movement of U.S. agriculture products from farm to market. This program helps maintain farm income, expand exports, and sustain the 

flow of food to consumers by providing ‘‘how to’’ technical expertise, research, and 

data on domestic and international transportation to growers, producers, and others 

in the marketing chain, and for government policy decisions. The Transportation 

Services program also produces periodic publications that improve market access by 

providing information for agricultural producers and shippers on trends, availability, and rates for various modes of transportation, including grain and refrigerated transport, agricultural containers, and ocean shipping. In fiscal year 2005, 

the program greatly expanded its reporting to keep the Secretary and Administration officials well-apprised on the impacts of Hurricanes Katrina and Rita on agricultural transportation. 

Wholesale, Farmers, and Alternative Markets.—AMS program experts, in cooperation with local and city agencies, improve market access to market facilities by assisting local efforts to develop or improve wholesale and farmers markets, and to 

discover other direct marketing opportunities. This program also supports research 

projects to help agricultural producers discover new or alternative marketing channels and new technology. For 2006, AMS was appropriated funds to implement the 

Farmers Market Promotion program. The program will make grants of up to 

$75,000 to eligible entities, such as agricultural cooperatives, local governments, and 

others, to establish, expand, and promote farmers’ markets and other direct-to-consumer marketing channels. 

Federal/State Marketing Improvement Program (FSMIP).—AMS helps to resolve 

local and regional agricultural market access problems by awarding Federal matching grants for projects proposed by State agencies. In 2005, the FSMIP program allocated grant funds to 21 States and Puerto Rico for 27 projects such as studies on 

linking producers with new buyer groups and innovative uses for locally important 

agricultural products. 

Commodity Purchases.—USDA nutrition programs provide growers and producers 

with access to an alternative outlet for their commodities. AMS food purchases stabilize markets and support nutrition programs, such as the National School Lunch 

Program, the Emergency Food Assistance Program, the Commodity Supplemental 

Food Program, and the Food Distribution Program on Indian Reservations. AMS 

works in close cooperation with both the Food and Nutrition Service (FNS) and the 

Farm Services Agency (FSA) to administer USDA commodity purchases and to 

maximize the efficiency of food purchase and distribution operations. In fiscal year 

2006, we will begin the development of a Web-based Supply Chain Management 

System, which will enhance our ability to track bids, orders, purchases, payments, 

inventories, and deliveries of approximately $2.5 billion of commodities used in all 

food assistance programs every year in addition to those price-support commodity 

products maintained in inventory. 

AMS’ 2007 BUDGET REQUEST

For 2007, the AMS budget proposes a program level of $730 million, of which 

$195 million (nearly 27 percent) will be funded by existing user fees, $450 million 

(approximately 62 percent) by Section 32 funds and $85 million (about 12 percent) 
389 

by appropriations, which includes $14.5 million to be derived from proposed new 

user fees. More specifically, the budget includes the following: 

An Increase of About $1 Million for the National Organic Program.—This request 

is to ensure that the National Organic Program can meet the needs of the rapidly 

growing organic industry. The increase will support: rulemaking needed to address 

a court order that found three elements of the national organic standards regulations inconsistent with statutory authority; renewal of substances on the National 

List of Approved and Prohibited Substances that are set to expire on October 21, 

2007; and increased compliance actions, including training sessions for certifying 

agents. 

An Increase of About $400,000 for the Federal Seed Act Program.—AMS would assume seed testing in those States that have withdrawn from the program and work 

with seed producers and States to improve the accuracy of seed sampling and testing programs. 

An Increase of About $2.8 Million for a Food Protection Program.—AMS would 

promote the protection of commodities provided to the National School Lunch Program (NSLP) and other Federal nutrition assistance programs by incorporating food 

security attributes into purchase specifications, conducting vulnerability assessments needed to develop industry guidance on how to protect products purchased 

for distribution through NSLP, and development of model food security plans for 

products of importance to NSLP. 

Funding of More than $1 Million for Payments to States.—Under the FederalState Marketing Improvement Program, AMS awards Federal matching grant funds 

to State agencies to address local and regional agricultural marketing problems. 

Funding of Nearly $10 Million Within Marketing Services for the Web-based Supply Chain Management System.—As mentioned earlier, this system, the successor 

to the Processed Commodities Inventory Management System, will improve information technology systems used to manage and control commodity orders, purchases, 

and delivery. Discretionary appropriated funding is requested in fiscal year 2007 to 

continue developing the system. 

As Secretary Johanns testified before this committee last month, the 2007 budget 

funds our most important priorities while exercising fiscal discipline that is necessary to reduce the Federal deficit. The AMS budget has proposals that moves us 

in the right direction while continuing to meet key priorities. 

A Decrease of About $6.3 Million for the Termination of the Microbiological Data 

Program (MDP).—The fiscal year 2007 budget does not request funding to continue 

the MDP because it is difficult to determine to what extent the data is used to support risk assessments. Sample origin data is not collected which limits the use of 

the data in epidemiological investigations aimed at determining the source of outbreaks of foodborne illness. In response to these findings and the need to limit Federal spending, the program is proposed for termination in 2007. 

User Fees.—The budget proposes to collect about $2 million through user fees for 

the development of domestic commodity grade standards that are associated with 

a grading program. Users of grading services are direct beneficiaries of commodity 

standards and, therefore, should be charged for the development of commodity 

grades associated with the grading and inspection program. In order to implement 

this proposal, legislation will be submitted to Congress to authorize these fees. Likewise, approximately $12 million in user fees would be collected for Federal administration of marketing agreements and orders, which is currently funded through Section 32. The local market administrator or committee will be billed for their portion 

of Federal administrative costs. 

GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION

GIPSA’s mission is to enhance market access for livestock, meat, poultry, cereals, 

oilseeds, and related agricultural products and to promote fair and competitive trade 

for the benefit of consumers and American agriculture. GIPSA fulfills this through 

both service and regulatory functions in two programs: the Packers and Stockyards 

Programs (P&SP) and the Federal Grain Inspection Service (FGIS). 

Before proceeding, I want to note that we are taking very seriously the recent 

audit by the Office of Inspector General (OIG) of the P&SP and we have established 

an aggressive schedule to improve enforcement of the Packers and Stockyards Act. 

The audit identified areas where program management was not up to the high 

standard that this Administration expects and our stakeholders deserve. The OIG 

provided ten recommendations for strengthening the P&SP. GIPSA concurs with all 

recommendations and is taking aggressive action to implement them. 

Packers and Stockyards Programs.—Recognizing what needs to be improved, the 

strategic goal for P&SP is to promote a fair, open and competitive marketing envi-
390 

ronment for the livestock, meat, and poultry industries. Currently, with 152 employees, P&SP monitors the livestock, meatpacking, and poultry industries, estimated 

by the Department of Commerce to have an annual wholesale value of about $120 

billion. Legal specialists and economic, financial, marketing, and weighing experts 

work together to monitor emerging technology, evolving industry and market structural changes, and other issues affecting the livestock, meatpacking, and poultry industries that the Agency regulates. 

The Swine Contract Library began operation on December 3, 2003, and continues, 

though since October, 2005, it has been on a voluntary basis since the legislative 

authority in the Livestock Mandatory Price Reporting Act lapsed. Producers can see 

contract terms, including, but not limited to, the base price determination formula 

and the schedules of premiums or discounts, and packers’ expected annual contract 

purchases by region. 

Progress continues to be made on the Livestock and Meat Marketing Study, which 

examines broad issues surrounding packer ownership of livestock. The contractor for 

the study, the Research Triangle Institute (RTI), released an interim report in August, 2005. The final report is scheduled for release in early 2007. We recognize that 

this is later than expected, but given the complexity of issues, more time is needed 

to adequately analyze them. 

Federal Grain Inspection Service.—FGIS facilitates the marketing of U.S. grain 

and related commodities under the authority of the U.S. Grain Standards Act and 

the Agricultural Marketing Act of 1946. As an impartial, third-party in the market, 

we advance the orderly and efficient marketing and effective distribution of U.S. 

grain and other assigned commodities from the Nation’s farms to domestic and 

international buyers. We are part of the infrastructure that undergirds the agricultural sector. 

GIPSA works with government and scientific organizations to establish internationally recognized methods and performance criteria and standards to reduce the 

uncertainty associated with testing for the presence of biotechnology traits in grains 

and oil seeds. It also provides technical assistance to exporters, importers and end 

users of U.S. grains and oilseeds, as well as other USDA agencies, industry organizations, and other governments. These efforts help facilitate the sale of U.S. products in international markets. 

Our efforts to improve and streamline our programs and services are paying off 

for our customers, both in terms of their bottom lines and in greater customer satisfaction. In fiscal year 2005, GIPSA employees issued nearly 3 million certificates 

representing approximately 245 million tons of grain. One indicator of the success 

of our outreach and educational initiatives is the number of foreign complaints 

lodged with FGIS regarding the quality or quantity of U.S. grain exports. In fiscal 

year 2005, FGIS received only ten complaints regarding poor quality and one complaint regarding inadequate weights from importers on grains inspected under the 

U.S. Grain Standards Act. These involved 456,069 metric tons, or about 0.4 percent 

by weight, of the total amount of grain exported during the year. 

I would like to acknowledge the efforts of GIPSA employees in the aftermath of 

Hurricanes Katrina and Rita. We are proud to report that no service requests were 

denied as a result of the hurricanes. GIPSA personnel were on duty and ready to 

provide service as soon as the industry resumed operations. Our local personnel 

showed fortitude and determination in addressing both the personal and work-related challenges created by the storms. 

GIPSA’S 2007 BUDGET REQUEST

For 2007, the budget proposes a program level for salaries and expenses of about 

$84 million, of which more than $42 million is from existing inspection and weighing user fees. Of the appropriations request of almost $42 million, approximately 

$20 million is devoted to the grain inspection activities including standardization, 

compliance, and methods development activities and about $21 million to the P&SP. 

The 2007 budget includes the following program increases: 

About $2.9 Million for IT Initiatives.—This would continue the agency’s multi-year 

IT modernization efforts, of which $1.4 million is one-time funding. The agency’s 

eGov initiatives would facilitate the electronic transfer of information to and from 

stakeholders, and allow more efficient utilization by GIPSA of information such as 

program reviews and evaluations, agricultural product standards, inspection data, 

field test equipment reporting. 

About $400,000 to facilitate U.S. grain exports to Asia. GIPSA would establish an 

ongoing presence in Asia to expand upon our successful international services and 

trade activities currently provided on a temporary basis. 
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User fees. Two user fees are included in the budget. One would be charged to recover the costs of developing, reviewing, and maintaining official U.S. grain standards used by the grain industry. This fee proposal would enable GIPSA to recover 

almost $4 million in fiscal year 2007. Also, a further $16 million in license fees 

would be collected for the Packers and Stockyards program. 

CONCLUSION

This concludes my statement. I am looking forward to working with the Committee on the 2007 budget for the Marketing and Regulatory Programs. We believe 

the proposed funding amounts and sources of funding are vital to improving plant 

and animal health and ensuring quality, enhancing market access, and achieving 

harmonization of international standards. It also reduces the deficit and protects 

American agriculture from terrorists. We are happy to answer any questions. 

PREPARED STATEMENT OF LLOYD C. DAY, ADMINISTRATOR, AGRICULTURAL

MARKETING SERVICE

Mr. Chairman and Members of the Committee, I am pleased to have this opportunity to represent the Agricultural Marketing Service (AMS) in presenting our fiscal year 2007 budget proposal. Although I have worked with AMS only since early 

August, I understand the importance of efficient and effective marketing systems for 

U.S. agricultural producers and consumers. My previous Government experience 

was focused on international trade issues at the Foreign Agricultural Service and 

the California Trade and Commerce Agency; in private industry, I have managed 

business development and marketing activities. 

To provide a starting point for discussion of our budget proposals, I would like 

to begin by reviewing our agency’s mission in the context of USDA’s strategic objectives. I will also discuss a few of the programs through which we carry out that mission, and mention a few recent accomplishments and issues of interest to AMS clientele. 

MISSION

AMS is a key component in USDA’s strategic objective to increase the efficiency 

of domestic agricultural production and marketing systems. This objective recognizes that the long-term viability of agricultural producers depends on their ability 

to manage an efficient and profitable operation. Once produced, agricultural goods 

need efficient and equitable market outlets. AMS plays an integral role in the U.S. 

marketing system by ensuring that buyers and sellers in the food production and 

distribution chain have equal access to market information and technical services. 

Although our focus is generally on domestic marketing, some of our programs also 

support USDA’s efforts to assist U.S. agricultural producers in international marketing. 

The mission of AMS is to facilitate the marketing of agricultural products in the 

domestic and international marketplace, ensure fair trading practices, and promote 

a competitive and efficient marketplace to the benefit of producers, traders, and consumers of U.S. food and fiber products. We accomplish our mission through a wide 

variety of appropriated activities and through our user-funded grading, certification, 

and Perishable Agricultural Commodities Act programs. Although our user-funded 

and reimbursed programs are important to agricultural marketing, most of my discussion today will focus on our appropriated programs. 

AMS PROGRAMS

AMS programs work together, in cooperation and coordination with other Federal 

agencies within USDA and outside the Department, and with State partners to provide services that support our mission. Our ‘‘clients’’ span the marketing chain from 

the producer to the consumer. For example, we collect and disseminate current market information on agricultural prices, quality, supply, demand, and other data useful for production, sales, and purchase decisions. We also publish current rates and 

availability information on agricultural product transportation modes. We provide 

technical advice and support on market facilities, methods, and technology, plus 

matching grants for regional projects that support agricultural marketing. We offer 

independent, official verification services to provide assurance for sellers and buyers 

that commodities meet contract specifications, quality and marketing claims, labeling, and Federal requirements, and to ensure fair trading of agricultural production 

in the United States. Consumers benefit directly from organic labeling, graded 

foods, farmers markets, and pesticide residue information. Our programs assist com-
392 

modity producer groups by providing technical and regulatory support for federallyauthorized self-help programs, and we purchase food commodities that are in shortterm oversupply for use in USDA nutrition assistance programs. 

MARKETING SERVICES

Our Marketing Services programs provide services that benefit all agricultural 

producers, traders, and consumers of dairy products, fruits, vegetables, specialty 

crops, livestock and meat, poultry, cotton, and tobacco. These programs facilitate 

marketing by providing information, technical expertise, and buyer assurance. They 

are funded through annual appropriations and include our Market News, Standardization, Shell Egg Surveillance, Federal Seed, National Organic, Pesticide Recordkeeping, Country of Origin Labeling, Pesticide Data, Transportation Services, and 

Wholesale, Farmers, and Alternative Market Development programs. 

MARKET NEWS

AMS’ Market News service reports market data on farm products in more than 

1,300 production areas and many domestic and international markets. Market News 

reports for over 700 commodities are disseminated within hours of collection via the 

Internet and other electronic means and through the news media. In October 2005, 

we made available a new Market News Web Portal to the public, making Fruit and 

Vegetable and Livestock and Grain reports immediately available for users, with 

other AMS commodities to be added in coming months. The portal allows the agricultural industry and other interested users to customize the data they receive, 

build their own reports, and query the database back to 1998. We have already received an enthusiastic response to the expanded availability of data through the portal. 

Market news data is provided by buyers and sellers for most commodities on a 

voluntary basis. However, Congress established Livestock Mandatory Price Reporting (LMPR) in 2000 to ensure that information on meat and livestock trades would 

continue to be available for producers in a consolidating industry, including formula 

and contract market information. LMPR generates more than 100 daily, weekly, or 

monthly reports on fed cattle, swine, lamb, beef, and lamb meat market transactions. Legislative authority for LMPR lapsed on September 30, 2005, following a 

1-year extension. As both Houses of Congress were considering bills to continue the 

program, AMS sent letters to all packers previously required to report, requesting 

voluntary cooperation in continuing to submit information required under the mandatory program. Consequently, most of the reports continue to be published—only 

the imported boxed lamb cuts and slaughter cow reports have been discontinued. 

The Government Accountability Office recently reviewed the program and recommended some improvements. To improve reporting transparency, AMS will inform Market News readers about the general guidelines followed by AMS reporters 

in making reporting decisions through periodic public reports on the volume of submitted transactions that are excluded by reporters and the effect that such exclusions had on net price distributions on all reported commodities. We also have established a toll-free telephone information line for questions about reporting which 

gives producers an opportunity to obtain information on how the data for the livestock they sold is used in reporting. 

To help verify the overall accuracy of the transaction data supplied by packers 

and to identify recurring significant problems, AMS will implement additional or 

modified auditing methods to increase the overall effectiveness of compliance activities. The program is reviewing sample selection, the need for more audits at plants 

that demonstrate a higher frequency of non-compliances, and additional analyses to 

identify any widespread reporting problems. To ensure timely and consistent followup to audit findings, AMS has developed new procedures that greatly improve the 

audit process, including timeframes for corrective action and a hierarchy for categorizing the severity of non-compliances. AMS also has modified its audit process to 

more closely review transactions reported at the low-price end of the market. All of 

these improvements will be completed by the end of this fiscal year. 

Livestock and meat information is used as a basis for developing contracts between producers and packers, as well as packers and retailers. We believe that the 

program has resulted in the availability of comprehensive information that has improved the transparency of the marketplace. Therefore, we request continued funding and support reauthorization of Livestock Mandatory Price Reporting. 

COUNTRY OF ORIGIN LABELING

This year, we are implementing a Country of Origin Labeling (COOL) surveillance 

and enforcement program for fish and shellfish. Labeling requirements for these 
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products became mandatory on April 4, 2005, and we have used the intervening 

months to educate the industry—suppliers and retailers—on the documentation and 

records required to substantiate country of origin and method of production claims. 

Mandatory labeling requirements for all other covered commodities were delayed 

until September 30, 2008. The delay will allow us to develop an operational infrastructure before mandatory labeling for all other commodities covered by the Act— 

beef, lamb, pork, perishable agricultural products, and peanuts—becomes effective. 

TRANSPORTATION

Our Transportation Services program facilitates the movement of U.S. agricultural products to market. As part of that effort, the program produces periodic publications that provide information for agricultural producers and shippers on various 

modes of transportation, including grain transportation, refrigerated transport, 

ocean rates and transportation trends, and agricultural containers. In 2005, the program greatly expanded its reporting to keep the Secretary and Administration officials well-apprised of the impacts of Hurricanes Katrina and Rita on agricultural 

transportation; issuing 22 daily and 5 weekly briefing reports from August 29, 2005 

to October 26, 2005. In early November, the program switched to issuing a Weekly 

Transportation Update, which continued to provide information on the recovery status of the transportation systems. During the aftermath of the hurricanes AMS participated with the Army Corps of Engineers in briefing staff from both houses of 

Congress and supported Departmental testimony on the recovery. 

MARKET DEVELOPMENT

Our Wholesale, Farmers, and Alternative Market Development program experts, 

in cooperation with local and city agencies, assist local efforts to develop or improve 

wholesale and farmers market facilities, and to discover other direct marketing opportunities. This program also supports research projects on marketing channels 

and market technology improvements, as well as numerous marketing conferences 

and workshops across the country. For 2006, AMS was appropriated funding to implement the Farmers Market Promotion program. The program will make grants of 

up to $75,000 to eligible entities to establish, expand, and promote farmers’ markets 

and other direct-to-consumer marketing channels. These eligible entities include agricultural cooperatives, local governments, regional farmers’ market authorities, and 

nonprofit, public benefit, and economic development corporations. 

SECTION 32

AMS also receives appropriated funding for activities authorized under Section 32 

of the Act of August 24, 1935. AMS’ Commodity Purchase program buys perishable 

non-price supported agricultural commodities—meat, poultry, fruits, vegetables, and 

fish to encourage domestic consumption. Commodity purchases support the market 

for these agricultural commodities by reducing supplies in temporary surplus, by 

providing foods used by domestic nutrition assistance programs, and by purchasing 

commodities for use in disaster relief efforts. The purchased foods are donated to 

the National School Lunch Program and other domestic nutrition programs. In fiscal 

year 2005, AMS purchased 1.46 billion pounds of commodities that were distributed 

by the Food and Nutrition Service through its nutrition assistance programs. As directed by the Secretary, this program may also make emergency diversion and relief 

payments to producers in temporary distress. In addition to commodity purchasing 

activities, Section 32 funds the Federal administration of Marketing Agreements 

and Orders, which help producers in the marketing of their milk, fruit, vegetables, 

and specialty crops. 

PARTNERSHIPS

Discussion of AMS’ programs is not complete without a brief mention of the extensive partnerships with other Federal agencies, State agencies, and industry that 

characterize our program delivery. 

The Agricultural Marketing Act of 1946, the authority on which we rely for a 

great number of our programs, encourages Federal-State cooperation in carrying out 

market facilitating activities. AMS depends on strong partnerships with cooperating 

State and Federal agencies to operate many of our programs. AMS provides guidance and coordination to State agency partners who collect data, provide inspection, 

monitoring, and laboratory services, and otherwise maximize the value of both State 

and Federal resources through sharing and coordination. For instance, AMS’ Market 

News program maintains cooperative agreements with 38 States to coordinate their 

local market coverage with the regional and national coverage needed for AMS’ mar-
394 

ket reporting. State employees, who inspect shipments of seed within a State, provide information to AMS’ Federal Seed program on potential violations in interstate 

shipments. Our transportation and direct marketing programs work with Federal, 

State, city and local policy makers to maintain an efficient national transportation 

system and expand and improve market outlets for U.S. agricultural products. 

Under Section 32, USDA’s food purchase programs have developed partnerships 

that maximize the unique expertise that each agency brings to the process. AMS 

works in close cooperation with the Food and Nutrition Service (FNS) and the Farm 

Service Agency (FSA) to support USDA’s nutrition assistance and administer surplus commodity programs. 

FISCAL YEAR 2007 BUDGET REQUEST

This leads us into our budget requests for fiscal year 2007. In Marketing Services, 

we propose to strengthen the operations of the National Organic and Federal Seed 

Act programs, implement a new Food Protection program for purchased commodities, and continue work on the Web-based Commodity Supply Chain Management 

System. The budget also includes a proposal to terminate the Microbiological Data 

program and institute new user fees for the development of grade standards and 

the Federal administration of Marketing Agreements and Orders. 

NATIONAL ORGANIC PROGRAM

The U.S. organic food industry has grown approximately 20 percent a year to an $18 billion annual sales level and provides an important marketing opportunity for 

many producers. We are requesting additional funding of $1.1 million for fiscal year 

2007 so that we can more effectively manage the statutory and operational requirements of the National Organic Program (NOP) to ensure that it meets producers’ 

needs and consumers’ expectations. 

The National Organic program (NOP) provides assurance for consumers that organic products uniformly meet established requirements nationwide. Program personnel work in partnership with the National Organic Standards Board, which is 

appointed by the Secretary to represent industry and consumer interests. In January, six new members were appointed to the Board. Based on earlier Board recommendations, AMS has hired an Executive Director and developed a plan to establish a peer review panel. The panel will assist in evaluating applications of certifying agents seeking accreditation and ensure that the accreditation process is consistent with the intent of the law. 

The budget request will provide the funds needed for independent peer audits 

that evaluate all aspects of the NOP accreditation program and for program staffing 

to implement the results of those audits and otherwise assist in the delivery of this 

program. The audits, which will be conducted every 2 years, are necessary to maintain the program’s credibility with the organic industry and for continuous improvement of the program’s management systems. 

The program also needs additional resources to avoid interruption of organic production. As provided in statute, the approvals for some 174 materials originally 

placed on the National List of approved and prohibited substances for organic production will sunset in October 2007. AMS program staff works with the National 

Organic Standards Board to update and maintain the National List and each of the 

expiring materials must be re-evaluated. To ensure that the Board and all interested parties have sufficient time to evaluate such a large number of materials, 

AMS published an Advance Notice of Proposed Rulemaking in June 2005 that began 

the public comment process on whether the specific exemptions or prohibitions 

should be continued. Due to heightened interest, technological obsolescence, or available alternatives, we expect that almost one-third of those materials will have to 

undergo independent scientific reviews before their use can be reauthorized. Our fiscal year 2007 budget request includes funding for the program to work with the 

Board to complete the re-evaluation of the National List. 

The requested funding also will provide the resources needed to resolve other 

issues facing the program: (1) strengthening compliance and enforcement activities 

to maintain trade and consumer confidence; (2) developing organic standards for additional products, which will require extensive public input; and (3) dealing with 

current issues such as recent amendments to the Organic Foods Production Act and 

questions on access to pasture for organically produced ruminants. Although Congressional action amending the Organic Foods Production Act of 1990 (OFPA) restored the program to its status before the decision by the U.S. District Court for 

the District of Maine in the case of Harvey v. Johanns, certain procedural issues 

remain to be resolved. The court found, on June 9, 2005, that USDA had in two 

instances exceeded its statutory authority in developing program regulations. To re-
395 

duce the impact of the court’s ruling on the organic industry, Congress amended the 

OFPA on November 10, 2005, to permit the use of synthetic ingredients and the 

transitioning of dairy farms. 

FEDERAL SEED ACT PROGRAM

Our fiscal year 2007 budget request includes an increase of $432,000 for our Federal Seed Act program. The Federal Seed Act protects anyone who purchases seed 

by prohibiting false labeling and advertising on seed shipped interstate. The program prevents financial losses to farmers by detecting mislabeled, low quality seed 

before it is planted and creates a level playing field for seed companies that market 

truthfully labeled seed. In States where seed monitoring programs exist, AMS works 

with State partners who refer interstate violations to us. However, in States that 

do not have their own monitoring programs, we estimate that the percentage of mislabeled seed doubles. To better enforce the Act to protect growers, we propose to assume seed testing in 8 States—Maine, Vermont, New Hampshire, Connecticut, 

Rhode Island, New York, Michigan, and Wisconsin—that receive most of their seed 

from other States but do not have their own monitoring programs. 

FOOD PROTECTION PROGRAM

For fiscal year 2007, we are requesting a $2.75 million increase in Marketing 

Services to establish a new Food Protection program that will better protect the recipients of commodities that are purchased by USDA and distributed through the 

National School Lunch Program (NSLP) and other Federal nutrition assistance programs. 

The Food Safety and Inspection Service (FSIS) and the Food and Drug Administration (FDA) are doing significant work with the food industry to promote food defense. AMS is pleased to be participating in several FSIS and FDA initiatives. Additional funding is necessary to ensure that all possible actions are taken in assessing 

and eliminating vulnerabilities in the production and distribution of foods for NSLP 

and other Federal nutrition assistance programs that serve vulnerable population 

segments. The resources we are requesting will enable us to work effectively with 

our vendors in their protection of their production facilities and with distributors 

in the transport of food products to State warehouses. AMS will ensure that our 

vendors are aware of FSIS’ and FDA’s food defense guidance and that they are early 

and effective adopters of that guidance. 

In full partnership with FSIS and FDA, AMS will work with the vendor community to conduct vulnerability assessments, develop guidance on protecting products 

purchased for distribution through Federal programs, fund studies on improving security through safer packaging and transportation, and incorporate food protection 

attributes into our purchase specifications. AMS has begun developing specialized 

training materials to ensure that agency staff involved in contract acceptance are 

properly trained and supervised. With additional resources, we plan to offer food 

protection training for about 6,000 employees of State partner agencies, along with 

workshops and training sessions for vendor employees. With the funds being requested we can protect Federal commodity purchases and help advance the food defense efforts of FSIS and FDA by ensuring that AMS’ vendors are implementing effective food defense plans in their facilities. 

FEDERAL-STATE MARKETING IMPROVEMENT PROGRAM

The Federal-State Marketing Improvement Program (FSMIP) helps to resolve 

local and regional agricultural marketing problems by awarding Federal matching 

grant funds for projects proposed by State agencies. Our fiscal year 2007 budget request includes $1.3 million for FSMIP. These matching grant funds are made available to State departments of agriculture and other State agencies for 25 to 35 

projects each year, with the State agencies contributing at least half of the project 

cost. In 2005, the program allocated grant funds to 21 States and Puerto Rico for 

a total of 27 projects, including studies on linking producers with new buyer groups 

and innovative uses for locally important agricultural products. The program encourages projects that use a collaborative approach between the States, academia, 

and the farm sector, that have regional or national significance, and that address 

challenges or opportunities posed by the global economy, changing consumer preferences, agricultural diversity, technical innovation, transportation, and distribution. 
396 

WEB-BASED SUPPLY CHAIN MANAGEMENT SYSTEM (WBSCM)

For fiscal year 2007, we are proposing to continue development of the Web-based Supply Chain Management System at a reduced level of $9.9 million, and we are 

requesting funding from Marketing Services so that this project is funded from discretionary resources. As $20 million was provided from Section 32 in fiscal year 

2006, our budget request for Commodity Purchases Administrative funds in fiscal 

year 2007 has been reduced by that amount. The WBSCM system will support $2.5 billion worth of USDA food purchases distributed through the National School Lunch Program and other domestic and international food assistance programs. WBSCM will replace USDA’s existing Processed 

Commodity Inventory Management System (PCIMS) that links the procurement and 

distribution functions of AMS, FNS, and FSA. PCIMS is over 15 years old and is 

inflexible, resource intensive, and costly to maintain. AMS initiated and coordinated 

the budget request for this initiative on behalf of all three agencies. 

The implementation of WBSCM will save USDA’s nutrition programs several million dollars annually, in operational and maintenance costs, increased productivity, 

and reduced purchase and shipping costs. WBSCM will create a single point of access for customers, allowing the agencies to share information with customers more 

quickly and conveniently. The new system will improve efficiency by greatly reducing the time required for processing purchases; shortening delivery times; improving 

USDA’s ability to collaborate with other Departments; improving reporting capabilities; reducing transportation, inventory, and warehousing costs; and enabling future 

systems updates as needed. Successful completion of this initiative will support 

clean financial audits for the Department, the agencies’ ability to effectively and efficiently work with recipients and vendors, and USDA’s ability to respond to natural 

disasters. 

MICROBIOLOGICAL DATA PROGRAM TERMINATION

The fiscal year 2007 budget does not request funding to continue the Microbiological Data Program (MDP) which was established in 2001 to establish a national database on foodborne pathogens on domestic and imported produce. It is difficult to determine to what extent the data obtained through this program are used 

to support risk assessments by other Federal agencies such as the Food and Drug 

Administration. Furthermore, the use of these data by agencies, such as the Centers 

for Disease Control and Prevention, involved in epidemiological investigations aimed 

at determining the source of outbreaks of foodborne illness is limited because data 

on sample origin is not collected, as directed by Congress. In response to these concerns and the need to limit Federal spending, the program is proposed for termination in 2007. 

NEW USER FEES

Our Marketing Services request for fiscal year 2007 includes $2.2 million to be 

recovered through new user fees, based on a proposed legislative change that would 

convert most of our domestic standards activities to user-fee funding. USDA will 

submit legislation that will amend the Agricultural Marketing Act of 1946 and authorize the agency to implement, collect, and retain user fees for domestic standards 

that are associated with AMS’ grading and certification services. Also, $12.3 million 

is proposed to be recovered for the Federal administration of Marketing Agreements 

and Orders through increased assessments on program beneficiaries, which is currently funded through Section 32. 

STANDARDS USER FEES

This budget again proposes to recover the costs for developing and updating domestic standards through user fees paid by those requesting AMS’ grading and certification services. This proposal was recommended by the Program Assessment Rating Tool (PART) review conducted for the fiscal year 2006 budget. On average, we 

expect the cost for Standards development will be about 2 percent of the cost of 

grading services. The Department has proposed a legislative amendment authorizing standards user fees. 

AMS’ Standardization program works closely with interested parties in agriculture and the food marketing system to ensure that quality descriptions are 

aligned with current U.S. marketing practices because efficient markets need widely-recognized agricultural product descriptions in commercial sales and purchases. 

The agriculture industry uses these descriptions to convey commodity quality in 

purchase specifications and sales contracts. AMS currently maintains about 600 

U.S. agricultural quality standards for domestic and international trading of cotton, 
397 

tobacco, dairy products, fruits and vegetables, livestock, meat, poultry, eggs, and 

rabbits. 

The Standardization program also supports exports of U.S. agricultural products 

by representing the interests of U.S. producers in a variety of international standards development organizations. We are proposing to retain appropriations to fund 

these activities. 

MARKETING AGREEMENTS AND ORDERS USER FEES

Marketing Agreements and Orders are requested by producers and handlers to 

help establish orderly marketing conditions for milk, fruits, vegetables, and tree 

nuts. AMS evaluates and conducts hearings on proposed Marketing Orders, which 

are subject to approval by producers of the regulated community. Section 32 funds 

have been appropriated for Federal costs in administering the order at the national 

level, including public hearings, referenda on new programs and proposed revisions, 

and enforcement. The Milk Marketing Order Administrators and Fruit and Vegetable Marketing Order Committees, who oversee local administration of Marketing 

Orders, operate on assessments paid by their industries. Our fiscal year 2007 budget proposes to charge user fees to recover the cost of Federal oversight. The assessments already charged to beneficiaries for local program administration would be 

increased to cover Federal costs. USDA is preparing a legislative amendment to authorize recovery of these costs. 

BUDGET REQUEST SUMMARY

Our budget request includes $81.5 million in appropriated funds and $2.2 million in new user fees for a total budget of $83.7 million in Marketing Services; we also 

request $1.3 million for FSMIP grants funding. For administration of Section 32 activities, we request $11.6 million to support commodity purchasing and a total of 

$16.4 million for the Marketing Agreements and Orders program—$4.1 million in 

appropriations and $12.3 million from user fees. Our Marketing Services and Section 32 administrative funding requests include an increase for pay costs. 

Thank you for this opportunity to present our budget proposal. 

PREPARED STATEMENT OF DR. W. RON DEHAVEN, ADMINISTRATOR, ANIMAL AND

PLANT HEALTH INSPECTION SERVICE

Mr. Chairman and members of the Subcommittee, it is a pleasure for me to represent the Animal and Plant Health Inspection Service (APHIS) before you today. 

APHIS is an action-oriented agency that works with other Federal agencies, Congress, States, agricultural interests, and the general public to carry out its mission 

to protect the health and value of American agriculture and natural resources. This 

mission is vital not only to protect the livelihoods of agricultural producers and the 

industries related to them, but also to United States homeland security and food 

and agriculture defense. The past year has brought many challenging agricultural 

issues our way, such as the threat of a pandemic Highly Pathogenic Avian Influenza 

(HPAI) outbreak and Bovine Spongiform Encephalopathy (BSE); outbreaks of Medfly, Sudden Oak Death, and Emerald Ash Borer; as well as the spread of citrus canker in Florida due to the heavy hurricane season last year. APHIS remains committed to preventing the spread of animal and plant pests and diseases in the 

United States and our Agency has continued its vigilant effort to prevent foreign 

agricultural pests and diseases from entering the country. We also remain committed to keeping American agricultural products moving overseas. APHIS’ mission 

of protecting the health and value of United States agricultural and natural resources encompasses a wide variety of activities. I would like to report on our fiscal 

year 2005 highlights, and our fiscal year 2007 budget request. 

FISCAL YEAR 2005 HIGHLIGHTS

Pest and Disease Exclusion Activities 

APHIS’ efforts begin with offshore threat assessment and risk reduction activities 

at the sources of exotic agricultural pests and diseases. Through our pest and disease exclusion programs, we follow animal and plant health throughout the world 

and use this information to set effective agricultural import policy, and facilitate 

international trade by clarifying and amending import requirements, as necessary. 

Our off-shore risk reduction activities also include conducting pest and disease 

eradication programs in foreign countries and pre-clearance inspection of certain 

commodities in off-shore locations; performing intense monitoring and surveillance 

for exotic fruit flies and cattle fever ticks in high-risk, border areas of the United 
398 

States; and cooperating with the Department of Homeland Security’s Bureau of Customs and Border Protection (CBP) to inspect arriving international passengers, 

cargo, baggage, mail, and other means of conveyance. 

Officials with our Agricultural Quarantine Inspection, Trade Issues Resolution 

Management, Foreign Animal Disease/Foot and Mouth Disease (FAD/FMD), and Import/Export programs track plant and animal health issues around the world and 

use the information to set import policies to ensure that agricultural diseases are 

not introduced through imports. This information also helps determine what pests 

and diseases might have pathways into the United States and informs our monitoring and surveillance efforts here at home. APHIS is establishing a formal international information gathering program under the FAD/FMD and Pest Detection 

line items to build on these efforts. Through its off-shore pest information system, 

APHIS has identified more than 600 plant pests that pose risks to U.S. agriculture. 

APHIS uses this information to provide guidance to CBP on inspection protocols and 

to target cargo from certain areas for increased inspection. 

To ensure our import regulations are enforced and adequately protect United 

States agricultural and natural resources, we work closely with CBP to monitor and 

intercept prohibited items that arrive at United States ports of entry. In fiscal year 

2005, agricultural inspectors checked the baggage of nearly 66 million arriving passengers and cleared 49,394 ships and 2,239,813 cargo shipments. In total, agricultural inspectors intercepted 49,665 reportable pests at land borders, maritime ports, 

airports, and post offices. These include exotic fruit flies, various moth species, scale 

insects, and rust diseases. 

In fiscal year 2005, APHIS and CBP also began enforcing new entry requirements 

for solid wood packaging materials, which can harbor serious forest pests. The introduction of pests such as the Asian longhorned beetle and emerald ash borer has 

been linked to solid wood packaging materials used as crates and boxes for shipping 

all kinds of commodities. The new regulations are based on an international standard that will be used by more than 150 countries to address this world-wide problem. 

APHIS continued to support the FMD barrier between Central America and Columbia and began plans to move it further away from the United States to reduce 

the risk of an FMD introduction. We reported 29 FMD-positive cases in countries 

bordering Columbia: 21 in Ecuador and eight in Venezuela. Agency officials in these 

two countries maintained relationships with local governments and strengthened cooperative agreements for FMD eradication. In particular, we supported 15 new cattle movement control posts along the Columbian-Ecuador border that will begin operating in November 2007 to establish a buffer zone to prevent the introduction of 

FMD in Columbia. 

APHIS is actively engaged in ensuring that U.S. agricultural producers benefit 

from the global trade system established under the World Trade Organization 

(WTO), particularly the WTO Sanitary/Phytosanitary (SPS) Agreement. APHIS’ scientific and technical expertise is key to enforcing our rights under the SPS Agreement involving animal and plant health measures. As a direct result of our efforts, 

79 SPS trade issues were resolved in fiscal year 2005, allowing trade of U.S. agriculture exports worth close to $1.4 billion to occur. These accomplishments involved 

retaining or expanding existing markets as well as opening new markets for U.S. 

products. The products involved range from poultry exports to China, apples to 

Japan, stonefruit to Mexico, almonds to India, and feeder cattle to Canada. 

Our efforts to remove unjustified trade barriers related to BSE and AI are prime 

examples of APHIS work in this area. In fiscal year 2005, we successfully addressed 

barriers for U.S. poultry and poultry products in 25 export markets worth a combined $254 million. We resolved BSE-related trade issues involving 19 foreign markets for U.S. bovine genetics, beef and beef products, allowing exports worth $58 

million in fiscal year 2005. Furthermore, APHIS leadership in international standard setting resulted in important science-based changes to the international standards for BSE and AI that we believe will encourage greater reliance on sound 

science in the trade of beef and poultry products. 

Animal and Plant Monitoring and Surveillance 

To minimize agricultural production losses and export market disruptions, APHIS 

quickly detects and responds to new invasive agricultural pests and diseases, or 

other emerging agricultural health threats, through our plant and animal health 

monitoring programs. The Agency creates and updates endemic pest and disease information systems, and monitors and conducts surveys in cooperation with States 

and industry. APHIS also conducts surveys for exotic plant pests and investigates 

reports of suspicious animal pests and diseases to reduce their spread, which elimi-
399 

nates significant losses and helps maintain pest-free status for export certification 

of agricultural commodities. 

The Animal Health Monitoring and Surveillance (AHMS) and Pest Detection programs coordinate national detection efforts for animal and plant pests and diseases. 

Both work closely with State and university cooperators to ensure that any introduction of exotic or foreign pests and diseases is quickly detected. These programs 

are also working closely with USDA’s Cooperative State Research, Education, and 

Extension Service (CSREES) to coordinate the National Animal Health Laboratory 

Network and the National Plant Diagnostic Network to increase testing capacity in 

the United States for economically and environmentally significant animal and 

plant diseases. 

To quick detect and contain foreign animal disease incursions from spreading, 

APHIS thoroughly investigates all suspicious situations. In fiscal year 2005, the 

AHMS program conducted 1,027 foreign animal disease investigations, up from 870 

in fiscal year 2004. The most common investigation was for vesicular conditions. 

Most suspected cases were investigated and subsequently diagnosed as not being an 

FAD. The program also continued to implement an enhanced surveillance program 

in response to the December 2003 detection of BSE in Washington State. With additional funding from the Commodity Credit Corporation, as of March 20, 2006, 

APHIS has sampled more than 660,000 animals for BSE since the inception of the 

enhanced surveillance program. To date, two samples have tested positive. Most 

samples were from high-risk categories (such as those animals exhibiting signs of 

central nervous system disorders); however, we also tested more than 21,000 samples from clinically normal adult animals. APHIS is in the process of analyzing data 

from the enhanced surveillance effort to determine what appropriate conclusions to 

draw about BSE prevalence, though it certainly would not be premature to say that 

the incidence of BSE in the United States is extremely low. At the conclusion of the 

enhanced BSE surveillance effort, we will continue our BSE monitoring program by 

conducting a minimum of 40,000 tests annually, which would still allow us to find 

BSE in one million cattle, with a confidence level of 95 percent. 

To facilitate response efforts in the event of a future foreign animal disease outbreak, APHIS and its State and industry cooperators continue to implement the National Animal Identification System (NAIS) designed to identify, within 48 hours of 

discovery, any agricultural premise exposed to a disease so that potential outbreaks 

can be contained and eradicated as quickly as possible. The NAIS is a networked 

computerized system that will allow us to identify livestock and poultry and record 

their movements over their life-spans. All 50 States, five Tribes, and two U.S. Territories are currently registering premises with an estimated total of 213,000 premises registered. APHIS and its State and Tribal cooperators are registering hundreds of premises each week, and we are also in the preparation stage to begin allocation of individual animal identification numbers. 

Through the Pest Detection program, APHIS targets pests based on their risk of 

entry and potential to cause significant economic or environmental damage. In fiscal 

year 2005, our national Cooperative Agricultural Pest Survey network resulted in 

the detection of several significant pests and diseases, including citrus greening in 

Florida and swede midge and sirex beetle in New York. While the responses to these 

pests will differ based on many factors, the early detections made by the Pest Detection program are allowing APHIS or the affected State to take action to address the 

outbreaks and mitigate their effects. 

In addition to conducting traditional surveys, the Pest Detection program and its 

cooperators are implementing ongoing monitoring activities at high-risk sites such 

as nurseries and warehouses that receive international cargo. In June 2005, California personnel detected an Asian longhorned beetle (ALB) introduction at a Sacramento warehouse as part of these efforts. ALB is present in urban locations in 

New York, New Jersey, and Chicago, Illinois. To control the beetle in these places, 

APHIS and cooperators have removed more than 10,000 trees at a significant cost 

to U.S. taxpayers. Because the Sacramento introduction was detected and addressed 

at its source, APHIS and State officials believe they have eliminated the threat of 

an ALB infestation in California by fumigating the warehouse and quickly tracking 

other products from the same shipment. Surveys will continue through 2008 to 

make certain that the beetle is not present. 

In fiscal year 2004, Asian soybean rust (SBR) was detected for the first time in 

the United States. Because SBR cannot be eradicated, soybean producers must adjust to its presence and the costs associated with it, namely the application of fungicides to protect crops. Early detection of SBR in each new area is critical for effective disease management because the application of fungicides is most effective if 

applied as a preventive measure, before a field is infected. However, fungicide application is cost prohibitive (an average of $25 per acre) if a particular area is not at 
400 

risk for infection. Accordingly, USDA (including APHIS and CSREES) implemented 

a short-term monitoring and surveillance network for the disease in fiscal year 

2005. The survey data collected by the program in 36 States provided soybean producers with accurate information to use in determining whether or not to treat their 

fields and prevented the unnecessary application of fungicides. 

Under the Animal and Plant Health Regulatory Enforcement program, our Investigative and Enforcement Services unit continues to provide support to all APHIS 

programs by conducting investigations of alleged violations of Federal laws and regulations under APHIS’ jurisdiction and taking appropriate civil or criminal enforcement actions. Regulatory enforcement activities prevent the spread of animal and 

plant pests and diseases in interstate trade. In fiscal year 2005, APHIS conducted 

842 investigations involving animal health programs, resulting in 440 warnings, 104 

civil penalty stipulations, three Administrative Law Judge Decisions, and $345,044 

collected in fines. APHIS also conducted 1,773 investigations involving plant quarantine violations resulting in 456 warnings, 744 civil penalty stipulations, 157 Administrative Law Judge decisions, and approximately $2 million collected in fines. 

The Agency maintains a cadre of trained professionals prepared to respond immediately to potential animal and plant health emergencies. APHIS’ Emergency Management System (EMS) is a joint Federal-State-industry effort to improve the ability 

of the United States to successfully manage animal health emergencies, ranging 

from natural disasters to introductions of foreign animal diseases. The EMS program identifies national infrastructure needs for anticipating, preventing, mitigating, responding to, and recovering from such emergencies. The Preparedness and 

Incident Command group of the EMS continued its ongoing efforts to complete, review, and update response plans for foreign animal diseases, such as BSE, Avian 

Influenza, and Classical Swine Fever. 

Pest and Disease Management 

APHIS also works closely with State, industry, and academic partners to maintain 

national detection networks and emergency response teams for plant and animal 

pest and disease outbreaks that may occur here in the United States. We work with 

these same partners to manage or eradicate economically significant endemic pests 

and diseases, and manage wildlife damage to agricultural and natural resources. 

APHIS continues the cooperative effort with States and cotton producers to eradicate the Boll Weevil, and, by the end of fiscal year 2005, the program had eliminated the boll weevil from approximately 85 percent of the 15 million acres of cotton 

grown in the United States, up from 80 percent the previous year. We are on track 

to achieve full eradication by the end of fiscal year 2009. 

At the end fiscal year 2005, 47 States were in full compliance with the Johne’s 

national program standards with the goal being 45 States enrolled. Only 3 States, 

Massachusetts, Montana, and Wyoming, have not adopted the Voluntary Bovine 

Johne’s Disease Control Program (VBJDCP). By the end of the year, 7,860 herds 

were enrolled in the VBJDCP. Since the initial goal was to enroll 4,000 herds, we 

exceeded the target by 96 percent. 

APHIS continues to address the last stubborn pockets of endemic animal diseases 

such as pseudorabies, brucellosis, and bovine tuberculosis (TB). At the end of fiscal 

year 2005, all 50 States and 3 territories were in Stage V (free) status for 

pseudorabies. A full declaration of National Pseudorabies eradication will be possible after all 50 States and 3 territories have maintained free status for 2 consecutive years. Throughout fiscal year 2005, 48 States and three Territories remained 

classified at Brucellosis Class Free status, and two States, Texas and Wyoming, continued their Brucellosis Class A status classification for bovine brucellosis. In addition, at the end of fiscal year 2005, the TB program designated 49 States and Territories and portions of two others as accredited TB-free, thus exceeding the target 

of 47 States and territories considered class free. 

Through our Wildlife Services Operations program, the Agency’s cadre of wildlife 

disease biologists provided technical assistance, conducted surveillance, and maintained control of more than 18 wildlife diseases including Chronic Wasting Disease, 

West Nile Virus, bovine and swine brucellosis, pseudorabies, classical swine fever 

and plague. In addition, APHIS reinforced oral rabies vaccination zones along the 

Appalachian Ridge through the distribution of 5.52 million baits on 31,000 square 

miles from the Ohio-Pennsylvania border through northern Alabama. 

APHIS wildlife biologists provided wildlife hazard management assistance to over 

580 airports nationwide for the protection of human safety and property in fiscal 

year 2005, more than 12 times the amount in 1990 with only 42 airports. Wildlife 

strikes cost U.S. civil aviation nearly $500 million in 2004. 

APHIS has been challenged with numerous emergencies over the last several 

years. As such, we took quick and aggressive action to address plant and animal 
401 

health situations with BSE, Mediterranean fruit fly, citrus canker, sudden oak 

death, and emerald ash borer. The Secretary approved approximately $177 million 

in Commodity Credit Corporation funding releases for APHIS programs in fiscal 

year 2005, of which $8 million was funded through unused balances and $169 million from new funds. 

Animal Care 

APHIS ensures the humane care and treatment of animals covered under the Animal Welfare Act (AWA) and the Horse Protection Act. Under this legislation, first 

enacted in 1966 and amended several times thereafter, APHIS carries out activities 

designed to ensure the humane care and handling of animals used in research, exhibition, the wholesale pet trade, or transported in commerce. APHIS places primary 

emphasis on inspection of facilities, records, investigation of complaints, inspection 

of problem facilities, and training of inspectors. Regulations supporting the AWA 

provide minimum standards for the handling, housing, feeding, transportation, sanitation, ventilation, shelter from inclement weather, and veterinary care of regulated 

animals. APHIS continues to focus on conducting quality inspections at USDA licensed and registered facilities. The program’s risk-based inspection system concentrates activities on facilities where animal welfare concerns are the greatest. 

During fiscal year 2005, the program conducted 16,474 inspections of licensees, registrants, and prospective applicants. This represents a 9 percent increase over fiscal 

year 2004. 

APHIS conducted 575 animal care investigations in fiscal year 2005, resulting in 

391 formal cases submitted for civil administrative action. We also issued 219 letters of warning for animal care. During fiscal year 2005, we resolved 87 cases with 

civil penalty stipulations resulting in $160,184 in fines. Administrative Law Judge 

decisions resolved another 82 cases resulting in $946,184 in fines. High-priority and 

significant cases included several involving the sale of dogs and exotic animals by 

unlicensed dealers as well as numerous handling violations involving exhibition animals attacking and/or injuring the public. 

Scientific and Technical Services 

The programs within this component ensure the effectiveness of the technology 

and protocols used in APHIS programs. The Agency conducts these programs to develop new or improved methods for managing wildlife damage and detecting and 

eradicating animal and plant pests and diseases. The Agency also conducts laboratory testing programs to support disease and pest control and/or eradication programs. Additionally, those programs provide advice and assistance to APHIS on environmental compliance requirements with respect to pesticide registration and drug 

approvals for products used in implementing these programs. 

APHIS has successfully regulated the biotechnology industry for almost 20 years. 

During that time, the Agency has overseen approximately 10,000 field trials without 

any adverse impacts on human health or significant environmental harm, and has 

evaluated more than 90 petitions for deregulation to ensure these plants posed no 

threat to other plants or the environment. As of September 30, 2005, APHIS has 

granted 68 petitions for deregulation for varieties of the following crops: tomatoes, 

squash, cotton, soybeans, rapeseed, potatoes, papayas, beets, rice, flax, tobacco, and 

corn. 

To carry out its goal of safeguarding U.S. agricultural resources from foreign pest 

and disease introductions, APHIS needs the appropriate technological tools. The 

Plant Methods program develops new or improved existing tools to enhance APHIS’ 

safeguarding capabilities. The program met its fiscal year 2005 performance target 

of developing five new quarantine treatments or detection methods or improving existing ones for commodities of trade. 

In our Veterinary Biologics program, APHIS issued 97 product licenses in fiscal 

year 2005. Veterinarians and animal owners now have 16 new products for the diagnosis, prevention, or treatment of animal diseases. Of the 16, four new product licenses were issued for biotechnology-based products. 

APHIS exceeded its long-term performance measure target in fiscal year 2005 to 

have 39 States involved with the National Animal Health Laboratory Network 

(NAHLN). At the end of fiscal year 2005, the NAHLN consisted of 49 State and university laboratories in 41 States that are available to assist our National Veterinary 

Services Laboratory in animal disease testing. The laboratory network forms the nation’s strongest weapon against bioterrorism: an effective network of laboratories capable of integrated and coordinated response to emergencies that could otherwise 

devastate the U.S. economy and food supply. This key resource of APHIS has increased testing capacity significantly. APHIS and its NAHLN partners are currently 

testing up to 10,000 samples per week for BSE, 4,800 samples per week for chronic 
402 

wasting disease, and 4,800 samples per week for scrapie. Additionally, in a period 

of extraordinary demands caused by an adverse animal disease event, the network 

could test up to 18,000 samples per day for AI/Exotic Newcastle Disease or 15,000 

samples per day for classical swine fever or FMD. 

Growing populations of Canada geese, a Federally-protected species, continue to 

pose problems for homeowners across the country. In September 2005, APHIS’ National Wildlife Research Center (NWRC) received a Notable Technology Development Award from the Federal Laboratories Consortium Mid-Continent Region for its 

role in the development and registration of OvoControl-G Canada goose bait. Which 

is the first EPA approved oral contraceptive of its kind. The NWRC also continued 

work to support the Environmental Protection Agency’s approval of a new chemical 

treatment to reduce the hatchability of eggs laid by treated Canada geese. 

FISCAL YEAR 2007 BUDGET REQUEST

The fiscal year 2007 Budget Request for Salaries and Expenses totals just over $953 million, an increase of $146 million over the fiscal year 2006 Agriculture Appropriations Act and an increase of $75 million when the fiscal year 2006 supplemental for avian influenza is included. About $9.2 million of the increase is for pay 

raises. Of the total request, approximately $453 million is identified in the President’s Homeland Security initiative, including $314 million in discretionary funding. 

Of the $453 million, $188 million is also identified in the President’s Food and Agriculture Defense Initiative, which serves to protect the agriculture and food system 

in the United States from intentional, unintentional, or naturally occurring threats. 

The increase, approximately 15 percent above the fiscal year 2006 appropriation, 

is for initiatives designed to address the increasing domestic and international 

threats to the health of United States agriculture. In the international arena, 

APHIS plans to use additional funding to establish a formal international information collection program that will help us set agricultural import policy and inform 

others of our monitoring and surveillance efforts here in the United States, and protect and expand the $53 billion annual agricultural export market, among other 

things. We are also addressing HPAI threats in other countries by requesting additional funding to provide technical assistance to develop knowledge and experience 

in surveillance and control techniques, which will help prevent the spread of HPAI 

to the United States. On the domestic side, our efforts include enhancements to both 

animal and plant health surveillance systems and diagnostic capabilities; the ability 

to track animal and plant pathogens and toxins identified as Select Agents; the 

build up of our animal disease vaccine bank; the ability to address wildlife disease 

threats to livestock health; an investment to substantially reduce emergency fund 

transfers for a variety of plant pest and disease programs; and continuing enhancements to our Biotechnology Regulatory Services program. Our goal is to reduce economic damage that pests and diseases can cause to American agriculture. As such, 

APHIS is in the process of developing a new performance measure that will allow 

us to assess the value of the pest and disease damage that our programs are preventing or mitigating, and we will utilize this information to help determine future 

funding requests. We will begin applying this measure to all of our programs. 

The following paragraphs detail some of the funding increases and associated accomplishments expected under the fiscal year 2007 budget request: 

Pest and Disease Exclusion 

An increase of $6.4 million for the Foreign Animal Disease/Foot-and-Mouth Disease program and $4.7 million under Pest Detection to expand the program’s formal 

collection of international health information, which will allow APHIS to conduct 

risk assessments and regulate imports more effectively as well as provide an overall 

picture of global animal health trends. 

An increase of $13.85 million for the Fruit Fly Exclusion and Detection program 

to strengthen the Moscamed (Mediterranean fruit fly) program along the MexicoGuatemala border to prevent the northward spread of the Medfly into Central Mexico thereby reducing the threat to the United States. 

An increase of $4.68 million for the Trade Issues Resolution and Management program to increase work on Free Trade Agreements, and expand and retain markets 

to provide new market access and facilitate trade worth $2.4 billion in fiscal year 

2007. 

Animal and Plant Monitoring and Surveillance 

An increase of $8.5 million for the Animal Health Monitoring and Surveillance 

program to enhance the current disease monitoring and surveillance system by increasing and integrating its infrastructure to better protect the nation’s animals 

from emerging and foreign animal disease. The fiscal year 2007 request also in-
403 

cludes continued funding for the maintenance of monitoring and surveillance of BSE 

(approximately $17 million for 40,000 samples) and continued implementation of the 

National Animal Identification System (approximately $33 million). An increase of $1.2 million for the Animal and Plant Health Regulatory Enforcement to provide additional support to APHIS programs by conducting investigations 

of alleged violations of Federal laws and regulations under the Agency’s jurisdiction. An increase of $9.1 million for Emergency Management Systems to improve readiness at the Federal, State, Tribal, and local levels to respond to disease incursions 

or acts of bioterrorism, and respond effectively and efficiently to all hazardous animal health incidents. We will also stockpile sufficient levels of supplies, vaccines, 

materials, and equipment needed to respond to an outbreak of 50 percent of the 

most damaging disease agents, or four of the eight most damaging and highly contagious foreign animal diseases. $57 million for the new HPAI program (initially funded via fiscal year 2006 supplemental appropriation) to continue the development of the Agency’s new HPAI 

surveillance and preparedness program through efforts with international capacity 

building ($5.01 million) and domestic surveillance and preparedness ($51.72 million). 

An increase of $15.4 million for Pest Detection activities to enhance early detection efforts through an increase in the number and intensity of surveys conducted 

throughout the United States for high-risk plant pests; enhance emergency response 

capabilities; and develop molecular diagnostic tools for high-risk pests. An increase of $1.8 million for the Select Agents program to register facilities desiring to handle select agents, and enhance current physical security requirements 

to expand the barcode inventory tracking system. Approximately $2 million for the new Wildlife Disease Monitoring and Surveillance program to establish methods for surveillance data collection in wildlife populations and investigate the prevalence of specific diseases that may move from wildlife to domestic livestock or poultry populations. 

Pest and Disease Management 

A $16 million shift in funding from Boll Weevil and Pink Bollworm programs to 

establish a new program, Cotton Pests, to improve technical efficiency by formally 

merging resources to simplify administration of both programs and help move toward the goal of eradication of both pests. An increase of approximately $27 million for Emerging Plant Pests to enhance survey and tree removal to control emerald ash borer ($21 million); continue conducting surveys for various citrus pests and diseases in Florida ($2 million); conduct 

additional inspections in nurseries to determine extent of P. remora (Sudden Oak 

Death) in California, Oregon, and Washington State ($3.45 million); and continue 

containment activities for Karnal bunt ($1.25 million). 

An increase of approximately $10 million for Invasive Species to establish a new 

competitive grant program to the private sector to apply innovative and cost-effective methods for responding to and controlling invasive species. An increase of approximately $3 million for the Low Pathogenic Avian Influenza 

(LPAI) program to continue addressing LPAI on a national level in live bird markets 

and commercial industries, and develop and oversee production of AI test reagents 

to be distributed to State and industry laboratories approved to participate in the 

LPAI program. An increase of $3 million for the Wildlife Services Operations Airport Safety program to enhance human safety by reducing wildlife strikes to aircraft. An increase of $1.75 million for rabies control under the Wildlife Services Operations program to maintain the oral rabies vaccination barrier to prevent the spread 

of this disease. 

An increase of $5 million for Homeland Security and Food and Agriculture Defense to enhance wildlife disease surveillance. 

Animal Care 

An increase of almost $1.5 million for the Animal Welfare program to enhance 

current program operations through the application of the new regulation to inspect 

facilities that contain mice, rats, and birds not involved in research. We will continue to use a risk-based inspection system to concentrate activities on facilities 

where animal welfare concerns are greatest, while also developing strategies for effective outreach and education programs to develop expertise and promote voluntary 

compliance. 

Scientific and Technical Services 

An increase of $3.3 million for the Biotechnology Regulatory Services program to 

enhance our infrastructure for a transgenic program by conducting additional risk 
404 

assessments; preparing environmental assessments; advising on policies related to 

animal and disease agent biotechnology; developing and implementing regulations 

and guidelines regarding transgenic animals and disease agents; and providing leadership to advance the Agency’s use of biotechnology oversight to protect and enhance American agriculture. We will also strengthen regulatory validation activities 

by developing scientific personnel exchange programs with academia and industry; 

conducting peer reviews for significant scientific components of biotechnology policies and regulations; and conducting quantitative analyses and studies to support 

regulatory decisions. An increase of $1 million for Plant Methods Development Laboratories to establish a new National Crop Biosecurity Center to coordinate technical and scientific 

needs for detecting and responding to high-consequence plant pests and diseases. 

We also will assess current and emerging threats and develop a laboratory accreditation program to certify State and university laboratories to conduct tests for highrisk diseases that have the potential to generate large volumes of samples and overburden the current testing capacity. An increase of $3.5 million for Veterinary Biologics to reduce the time it takes 

to review and test new veterinary biologics products entering the market. We also 

will address containment requirements to meet the required standards for the use 

of select agents and toxins maintained by the Center for Veterinary Biologics. In 

addition, we plan to expand activities in pharmacovigilance (the post-marketing 

monitoring of adverse events associated with the use of licensed veterinary biological products) with the implementation of a standard data system for sharing resources, data collection methods, and review processes for adverse events reporting 

with the Food and Drug Administration. An increase of approximately $5.5 million for Veterinary Diagnostics to expand 

diagnostics capability to include additional foreign animal diseases; expand the National Animal Health Laboratory Network to address significant biological and 

chemical threats to animal agriculture and our national food supply; address security requirements and meet standards related to Select Agents; and achieve NVSL 

lab accreditation. 

A $3.2 million shift in funding within Wildlife Disease Methods Development to 

dedicate funding to conduct avian influenza methods development research to improve environmental sample diagnostics, and characterize and evaluate the risk 

that feral swine pose in the generation and maintenance of avian influenza subtypes 

of domestic animal and human health concern. 

Decreases 

To support our high priority programs while continuing to meet the goal of reducing the Federal deficit, we propose several offsetting decreases. Within our Pest and 

Disease Exclusion activities, we propose a reduction of $2 million for the Hawaii 

Interline program within the appropriated Agricultural Inspection Quarantine line 

item, which we expect to conduct in the future via a reimbursable agreement with 

the State of Hawaii; a reduction in Cattle Fever Tick activities to the fiscal year 

2005 level because we do not anticipate outbreaks occurring outside of the quarantine zone nor an increase in incursions into the quarantine zone; and, a reduction 

of $1.2 million in the Import/Export program to dedicate resources to higher priority 

activities. 

Within our Animal and Plant Monitoring and Surveillance activities, we propose a $2.3 million shift in funding within the Animal Health Monitoring and Surveillance program and an $830,000 shift in funding within the Pest Detection program 

to dedicate resources to higher priority activities. 

Within our Pest and Disease Management activities, we propose a reduction of 

$25.9 million for Boll Weevil program activities due to the program’s success in 

eradicating boll weevil, and other reductions ($1.5 million for Brucellosis; $3.3 million for Chronic Wasting disease; $1.14 million for Grasshopper; $9.9 million for 

Johne’s; $1.92 million for Pink Bollworm; and $763,000 for Noxious Weeds) to dedicate resources to higher priority activities. 

Also, in fiscal year 2007, we are re-proposing new user fees for the Animal Welfare program, which would generate $8.22 million. 

Finally, within our Scientific and Technical Services activities, we propose a shift 

of $371,000 in our Veterinary Diagnostics program and a $3.2 million shift in our 

Wildlife Disease Methods Development program to dedicate resources to higher priority activities. 

CONCLUSION

APHIS’ mission of safeguarding United States agriculture is becoming ever more 

critical. Although the processes by which we protect America’s healthy and diverse 
405 

food supply are being increasingly challenged by increased trade and tourism, 

APHIS is committed to taking the lead in building and maintaining a world-class 

system of pest and disease exclusion, surveillance, detection, diagnosis, and response. Healthy plants and livestock increase our market potential internationally, 

and thus contribute to a healthy U.S. economy. The APHIS budget consists of interdependent components that, when combined, truly protect the health and value of 

American agriculture and natural resources. 

On behalf of APHIS, I appreciate all of your past support and look forward to continued, positive working relationships in the future. We are prepared to answer any 

questions you may have. 

PREPARED STATEMENT OF JAMES E. LINK, ADMINISTRATOR, GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION

INTRODUCTION

Mr. Chairman and Members of the Committee, I am pleased to highlight the accomplishments of the Grain Inspection, Packers and Stockyards Administration 

(GIPSA), and to discuss the agency’s fiscal year 2007 budget proposal. 

GIPSA’s activities are an integral part of USDA-wide efforts to support a competitive global marketplace for U.S. agricultural products. Our mission is to facilitate 

the marketing of livestock, poultry, meat, cereals, oilseeds, and related agricultural 

products, and to promote fair and competitive trading practices for the overall benefit of consumers and American agriculture. 

We fulfill our service and regulatory roles through our Packers and Stockyards 

Program, which promotes a fair, open, and competitive marketing environment for 

the livestock, meat, and poultry industries and our Federal Grain Inspection Service, which provides the U.S. grain market with Federal quality standards and a uniform system for applying these standards to promote equitable and efficient marketing. 

ORGANIZATION

We carry out our mission with a dedicated staff of 680 employees working in partnership with a variety of State and private entities. Our Packers and Stockyards 

Program relies on three regional offices which specialize in poultry, hogs, or cattle/ 

lamb. Our grain inspection services are delivered by the national inspection system, 

a network of Federal, State, and private inspection personnel. The system includes 

9 GIPSA field offices, 1 Federal/State office, and 56 State and private agencies authorized by GIPSA to provide official services. 

PACKERS AND STOCKYARDS PROGRAM

Our Packers and Stockyards Program (P&SP) administers the Packers and Stockyards Act (P&S Act) to promote fair and competitive marketing in livestock, meat 

and poultry for the benefit of consumers and American agriculture. The P&S Act 

is intended to protect producers, other market actors, and consumers against unfair, 

discriminatory, or deceptive practices that might be carried out by those subject to 

the Act. 

To meet this objective, GIPSA seeks to educate, regulate and investigate individuals and firms subject to the P&S Act; to respond to anti-competitive behavior, unfair, deceptive, or unjustly discriminatory trade practices; and to ensure livestock 

producers and poultry growers are paid for their products. GIPSA takes corrective 

action when there is evidence that firms or individuals have violated the P&S Act. 

In April 2005, the USDA’s Office of Inspector General (OIG) initiated an audit in 

response to Congressional concerns with the Agency’s management and oversight of 

P&SP. The audit identified four primary areas where program management was not 

up to the high standard that this Administration expects and our stakeholders deserve. 

The OIG provided ten recommendations for strengthening P&SP. GIPSA concurs 

with all recommendations and is taking immediate actions to implement them. We 

have already taken steps to improve the management of investigations, to correct 

how we categorize and track investigations and to implement additional recommendations from prior OIG and Government Accountability Office reviews. The 

Administration takes the Inspector General’s findings very seriously and we have 

established an aggressive schedule to improve the enforcement of the P&S Act. 

While improvements are needed, P&SP has delivered valuable services to the livestock, meatpacking, and poultry industries. With only 136 employees, we continued 

to regulate these industries, estimated by the Department of Commerce in fiscal 
406 

year 2002 to have an annual wholesale value of $120 billion. At the close of fiscal 

year 2005, 5,569 market agencies and dealers and 1,858 packer buyers were registered. In addition, there were 1,443 facilities that provided stockyard services, an 

estimated 6,000 slaughtering and processing packers, meat distributors, brokers and 

dealers, and 202 live poultry dealers operating subject to the P&S Act. 

Our regulatory responsibilities are the heart of our mission to administer the P&S 

Act. To this end, GIPSA closely monitors practices that may violate the P&S Act. 

Last fiscal year, we conducted 1,936 activities related to compliance with the P&SP 

Act. These activities included 1,491 regulatory activities such as financial audits 

and scale check weighs and 445 investigations of P&S Act violations. As a result 

of these investigations, P&SP helped recover over $14.1 million for producers and 

enforced the restoration of nearly $350 million to custodial accounts and business 

balance sheets to protect producers from financial harm. 

We continue to work with violating firms to achieve voluntary compliance, and 

continue to initiate appropriate corrective action when we uncover evidence that the 

P&S Act has been violated. In fiscal year 2005, with assistance from the Office of 

the General Counsel, we filed 18 administrative or justice complaints alleging violations of the P&S Act. These formal disciplinary complaints resulted in 21 decisions 

ordering the payment of $116,300 in civil penalties and suspending 7 registrants 

from operating for periods ranging from 21 days to 6 years. In one specific case, 

GIPSA worked through informal resolution channels to obtain voluntary compliance 

when a market agency and dealer operation in the Midwest discovered one of its 

employees had defrauded the company in excess of $1 million. Through GIPSA’s 

timely intervention, the firm secured sufficient financial protection so that none of 

the company’s livestock sellers suffered losses. 

We regularly assist the FBI, State and local law enforcement agencies with their 

investigations. Some of our investigations involve overlapping jurisdiction, and 

sometimes these agencies call on GIPSA for its expertise. In addition, we communicate with our sister agencies within USDA, the Department of Justice, the Commodity Futures Trading Commission, and local and State governmental organizations to discuss common issues and when appropriate, coordinate plans. 

GIPSA maintains a toll-free hotline (800–998–3447) as an avenue for receiving 

complaints and other communications from livestock producers, poultry growers and 

other members of the industry or general public. Use of the hotline allows callers 

to voice their concerns or file a complaint anonymously without fear of retaliation. 

In fiscal year 2005, GIPSA’s Packers and Stockyards Program received 39 hotline 

calls. Those calls that related to livestock or poultry issues resulted in investigations. To encourage voluntary compliance, we regularly attend industry meetings 

and conduct orientation sessions (28 in 2005) for new auction market owners and 

feed mills to educate them about their fiduciary and other responsibilities under the 

P&S Act. 

In fiscal year 2005, we continued working with stakeholders and other interested 

parties to develop and publish two additional voluntary industry standards for technologies used to assess quality and determine payment for livestock, meat, or poultry. The tentative code was published by the American Society for Testing and Materials in the 2006 National Institute of Standards and Technology—Handbook 44 

‘‘Specifications, Tolerances and Other Technical Requirements for Weighing and 

Measuring Devices’’, which was released in October 2005. The new standards will 

help producers receive full value for the quality of livestock they produce as well 

as help packers pay only for the product they want to purchase. We will continue 

to work with stakeholders to develop additional standards, as needed, to enhance 

transparency in the marketplace. 

GIPSA continues to operate the Swine Contract Library (SCL) which includes information pertaining to price, premiums, discounts, grids, formulas, and other important contract terms extracted from offered and available contracts used to purchase hogs. The data is available on GIPSA’s website on a real time basis. In October 2005, the reporting requirements under the Livestock Mandatory Reporting Act 

of 1999 became voluntary due to the sunset of the law. 

GIPSA continues to administer a livestock and meat marketing study that examines the broad issues surrounding packer ownership of livestock. Research Triangle 

Institute (RTI), the firm with whom GIPSA has contracted to complete the study, 

released an interim report in August 2005. RTI began contacting survey respondents in November 2005 and collecting transaction data in February 2006. The final 

report is scheduled for release in early 2007. 
407 

FEDERAL GRAIN INSPECTION SERVICE

Our Federal Grain Inspection Service (FGIS) facilitates the marketing of U.S. 

grain and related agricultural products through the establishment of standards for 

quality assessments, regulation of grain handling practices, and management of a 

network of Federal, State, and private laboratories that provide impartial, user-fee 

funded official inspection and weighing services under the authority of the U.S. 

Grain Standards Act and the Agricultural Marketing Act of 1946. 

FGIS establishes terms and methods for quality assessments that the grain indus- try uses to buy and sell about $50 billion of commodities annually. These standards 

for quality assessments provide the U.S. grain marketing system with the means 

to align post-harvested crop quality with the diverse end-use needs of today’s food 

and feed industry. GIPSA currently maintains 131 unique standards and quality assessment factors to characterize the quality of grain and grain-related products. 

We continue work with producers, technology providers, and food and feed manufacturers to consensually identify the essential quality attributes that require standard measurement to effectively differentiate quality and add value to U.S. agriculture. In fiscal year 2005, GIPSA implemented artificial neural network (ANN) 

technology to streamline and improve the accuracy of the wheat protein testing program, and to offer, for the first time, a barley protein testing service. The new official ANN protein testing services facilitate the marketing of these grains by providing a fair, accurate, and transparent third-party determination, backed by a national quality control process, and standardized instrumentation, reference samples, 

calibration, and procedures. 

GIPSA also conducted activities related to soybeans in fiscal year 2005. GIPSA 

verified and adopted an American Oil Chemists’ Society (AOCS) gas 

chromatographic method as a reference method to measure levels of various fatty 

acids in soybeans, including linolenic acid. Soybeans with lower linolenic acid levels 

were introduced during 2004. ‘‘Low-lin’’ soybeans produce oil that has half the linolenic acid level of commodity soybean oil, making it more stable and reducing or precluding the need for hydrogenation—the process that creates unhealthy trans fats 

in foods. This standard quality assessment method will help the market capture the 

full value of this emerging product. GIPSA continues to explore rapid tests for fatty 

acid contents of soybeans and other grains. 

We are also working with the wheat industry in an effort to regain the U.S. wheat 

market share which has declined from 33 percent of the international market in 

1995 to an estimated 25 percent in 2005. 

Our goal is to develop rapid measurement methods to differentiate wheat quality 

at the first point of sale and allow the U.S. wheat industry to better meet the needs 

of foreign buyers. To date, working with the wheat industry, we have identified several key quality attributes, such as gluten strength, that require rapid measures, 

as well as the need to validate international reference methods relating to the attributes. 

In fiscal year 2005, GIPSA validated and adopted three widely used, internationally recognized reference methods that assess various aspects of protein quality in 

wheat: the Farinograph reference method to measure water absorption and dough 

strength; the Glutomatic reference method for wet gluten quantity; and the 

Alveograph reference method to measure dough strength. 

Gaining consensus on the salient wheat attributes and reference methods will 

allow GIPSA to pursue the development of rapid analytical methods for use at the 

first point of sale. 

As we develop measures of new attributes entering the market, we are ensuring 

the current measurement methods are accurate and cost-effective. For example, we 

are working to transform the measurement of grain moisture. Maintaining current 

calibrations for moisture measurement is time consuming and resource intensive. 

Advances in the basic means to measure moisture, led by GIPSA, have the potential 

to greatly reduce maintenance costs and improve the accuracy of moisture measurements over a much wider range. These advances will benefit the entire grain industry, from producer to food manufacturer. 

We are also working with stakeholders to ensure grading standards further facilitate trade. GIPSA is developing national feed pea standards to meet surging production and use of peas for feed. As the global competition in soybean markets intensifies, we are collaborating with the soybean industry to determine whether changes 

in analytical methods and grading standards would improve the U.S. competitive 

position. One grading factor under review is test weight per bushel, a factor used 

to market soybeans in the United States for over a half century, but not used by 

our major international competitors. We are also working closely with the wheat industry to ensure the wheat standards facilitate the expansion of the new and evolv-
408 

ing market for Hard White Wheat. In 2005, we amended the U.S. Standards for 

Wheat to change the definition of contrasting classes in Hard Red Winter wheat and 

Hard Red Spring wheat. The new standard and policy will ensure the purity of both 

the Hard White and the Hard Red classes, which is essential to promote market 

growth and meet the needs of those making high-quality wheat products for consumers around the world. All of these activities improve the American agriculture’s 

ability to deliver the specific quality of grain desired by food manufactures and consumers, and strengthen its competitive position in the global market. 

In the biotechnology arena, we are improving the reliability and accuracy of testing for the presence of modern biotechnology-derived grains to help U.S. agriculture 

avoid market disruption as trading partners around the world implement new import requirements. Our Test Kit Evaluation Program validates the performance of 

commercially available rapid tests for biotechnology-derived grains. Our Proficiency 

Program improves the performance and reliability of government and private laboratories that test for biotechnology-derived grains in the United States and worldwide. More than 115 organizations participated in the program in fiscal year 2005, 

compared to 22 in 2002. 

In response to the results of the proficiency program, we are working to harmonize international reference materials and biotechnology measurement methods 

used in commerce to measure the level of biotechnology-derived events in raw agricultural products. The current focus of many laboratories is to assay for the presence or absence of a particular transgenic event, whereas the regulatory requirements evolving for agricultural products usually require reliable methods to measure the quantity of a biotechnology derived event. 

Our international outreach goes beyond work in the area of biotechnology. We 

work cooperatively with other government agencies to support market development 

and remove obstacles to U.S. grain reaching world markets. 

In recent years, we have focused on providing technical support to the Mexican 

and Asian markets. Last year, GIPSA worked with Mexico’s private and public 

grain sectors to harmonize sampling and analytical methods with the goal of minimizing trade disruptions due to differences between GIPSA-certified quality and an 

importer’s own quality assessment. We conducted seminars at three major grain importing locations in Mexico for personnel from Mexican commercial firms and government agencies to educate buyers on grain contracting, U.S. grain standards, 

sampling, and inspection procedures. We also spearheaded the establishment of a 

government-to-government grain industry consultative group as a technical-level 

forum to address cross-border grain quality issues. Finally, GIPSA led a USDA team 

that visited key Mexican border inspection offices to facilitate cross-border trade by 

addressing Mexico’s inspection and clearance process for U.S. grain shipments to 

Mexico. 

Since fiscal year 2002, GIPSA has placed a temporary duty officer in Asia to address immediate and long-term issues in the region, to promote a better understanding and adoption of U.S. sampling and inspection methods to minimize differences in inspection results and to develop face-to-face relationships with customers, USDA cooperators and government officials. During fiscal year 2005, a 

GIPSA officer served on a 7-month assignment in the region. In fiscal year 2005, 

this program allowed GIPSA to respond face-to-face to importers in Japan who 

raised concerns regarding dockage levels in U.S. wheat; to Taiwanese importers 

about differences in grain weight; and to representatives of Malaysia and Singapore 

regarding U.S. soybean quality. We also were able to share samples with Japan to 

allow them to monitor pesticide residue levels in U.S. wheat, rice, and barley, before 

they implement new domestic residue limits. Finally, GIPSA’s representative participated in several marketing seminars sponsored by USDA cooperator organizations to inform importers and their governments about the role and responsibilities 

of GIPSA and the national inspection system. 

We also provide technical consultative services for international customers. During fiscal year 2005, GIPSA facilitated the reopening of Iraqi grain markets to the 

United States for the first time since 1999, leading to wheat sales of $107 million 

in 2005. We provided technical monitoring and on-site inspection expertise for U.S. 

wheat shipments from their departure point in the United States to their arrival 

in Syria and final destination in Baghdad. 

Also during the fiscal year, GIPSA installed and check tested laboratory equipment to inspect and grade wheat in Yemen; conducted wheat grading and inspection 

seminars in El Salvador and Tunisia; worked with Algerian grain buyers to address 

Karnal bunt concerns; met with Peruvian officials to discuss the effects of their new 

rice import regulations; developed sample collection procedures for Japan’s Ministry 

of Agriculture, Forestry and Fisheries; participated in several international meetings on implementing the Biosafety Protocol; continued to work with Chinese offi-
409 

cials to discuss biotechnology, the Biosafety Protocol, and their impact on trade; 

helped the USDA/Foreign Agricultural Service and Animal and Plant Health Inspection Service resolve various grain quality issues in other countries that would otherwise have restricted U.S. grain exports; and briefed visiting trade and governmental 

teams representing 44 countries around the world. 

In addition to facilitating the marketing of U.S. grain by developing grain quality 

assessment methods and carrying out international outreach efforts, GIPSA administers a national inspection system comprising Federal, State, and private laboratories. These laboratories provide valuable service to all sectors of the grain industry 

on a user fee basis, 24 hours a day, 7 days a week. The world recognizes the certificates issued by these laboratories as the gold standard for grain quality certification. Buyers and sellers around the world have confidence in and rely on the 

GIPSA certificate to trade grain. 

This confidence was earned. The dedicated Federal, State, and private employees 

of the national grain inspection system work tirelessly to ensure the integrity and 

reliability of the national inspection system. The dedication and professionalism of 

GIPSA employees was proven last year in the aftermath of Hurricanes Katrina and 

Rita. Four GIPSA offices (New Orleans and Lake Charles, Louisiana, and League 

City, and Beaumont, Texas) were in the paths of these storms. Through the superlative efforts of employees in New Orleans, Louisiana, and League City, Texas, all 

agency employees were located and inspection personnel were working with industry with 48 hours after the hurricanes passed to get U.S. export port operations in 

the Gulf online. Within a week, employees in the affected area had set up an alternate field office and were responding to industry service requests. Local GIPSA employees, many of whose homes were lost or destroyed, were on duty. Within 3 weeks, 

the New Orleans field office was fully operational. 

GIPSA’s Beaumont, Texas, and Crowley/Lake Charles, Louisiana, offices took direct hits from Hurricane Rita. The Crowley/Lake Charles office suffered moderate 

damage and was fully functional within a week. The Beaumont suboffice was severely damaged by Rita and closed for a month but is now fully operational. 

We are proud to report that no service requests were denied as a result of the 

hurricanes. GIPSA personnel were on duty and ready to provide service as soon as 

the industry resumed operations. Our local personnel showed fortitude and determination in addressing both the personal and work-related challenges engendered 

by the storms. All told, GIPSA employees issued nearly 3 million certificates representing approximately 245 million tons of grain during fiscal year 2005. 

GIPSA continuously works to improve service delivery by this network of laboratories and meet the needs of a changing market. In fiscal year 2005, we revised the 

regulations on short-voyage fumigations to facilitate the movement of waterborne 

grain shipments of 5 days or less duration. 

EGOVERNMENT SOLUTIONS

Our most ambitious undertaking to improve program operations and service to 

the public is a sweeping, multi-year project to upgrade information management 

systems and modernize our business functions. Our current information management system consists of several independent systems that have served specific purposes over the years well, but are not integrated. This has limited our ability to 

meet the growing demand for electronic, or web-based, delivery of our services. It 

also impedes our efforts to improve the cost effectiveness and efficiency of our internal business practices. The enterprise-wide system currently under development will 

modernize nearly every aspect of GIPSA operations and provide a great opportunity 

to improve current business practices and service delivery. The new system includes 

twenty-seven applications to be built over 5 years. 

New funding provided in fiscal year 2005 and fiscal year 2006 along with the redirection of existing funds has enabled GIPSA to begin development on ten of the 

twenty-seven GIPSA Application Modernization modules. Currently funded components of the new system will be deployed incrementally in 2006 and 2007 with the 

first seven applications scheduled for deployment in the spring of 2006. This long 

term initiative is scheduled to continue through fiscal year 2009. We have requested 

additional funding in fiscal year 2007 to support this important initiative. 

When completed, customers will have online access to the information and applications they need to file complaints with GIPSA via the Internet; receive status reports on a complaint; place claims against bonds required under the P&S Act; register as a grain exporter or livestock dealer; submit required annual reports; request 

grain inspection services; receive reports on service status; see the status of their 

user-fee account; and receive final certified results online which will, in turn, allow 

customers to integrate official inspection data into their own information and docu-
410 

ment management systems. Private and State inspection agencies interested in 

being authorized to provide official inspection services will also be able to apply for 

GIPSA designation and re-designation on-line. Once officially designated, these 

agencies will have direct access through the web to GIPSA’s extensive quality assurance program to ensure their inspection results align with the official standards 

maintained by GIPSA. 

This modernization effort will create synergy across GIPSA programs and data 

sources, allowing GIPSA to improve internal program efficiencies and effectiveness. 

This large multi-year initiative will deliver improved performance and reduce costs 

years into the future. 

PROTECTING THE HOMELAND

In addition, GIPSA has dedicated resources to homeland security efforts. We continue to work closely with the USDA Office of Crisis Planning and Management 

(OCPM) to refine the Department’s and the Agency’s Continuity of Operations Plan 

(COOP) and to support and staff the Department’s Crisis Action Team (CAT). In fiscal year 2005, GIPSA’s COOP and CAT representatives participated in critical disaster-related exercises and training sessions, including a major government-wide exercise. 

We provided technical assistance related to homeland security issues to a number 

of industry and governmental groups, including the USDA Homeland Security 

Working Group; worked with the National Food Laboratory Steering Committee to 

coordinate and integrate resources to support key components of the Food Emergency Response Network (FERN); and participated on an Federal Bureau of Investigation-led team that conducted a threat assessment of a major export grain elevator. 

2007 BUDGET REQUEST

To fund important initiatives and address the Agency’s responsibilities, GIPSA’s budget request for fiscal year 2007 is $41.5 million under current law for salaries 

and expenses and $42.5 million for our Inspection and Weighing Services. These 

budgets include additional requests of $673,000 for employee compensation; 

$2,870,000 to continue the modernization of our information management systems 

and business functions; and $405,000 for international services; and a decrease of 

$500,000 for the corn growers initiative. In addition our request includes a proposal 

to recover $19.7 million through user fees to cover the costs of grain standardization 

activities and Packers and Stockyards program activities. An increase of $673,000 for employee compensation will enable GIPSA to meet its 

objectives consistent with the priorities established by the Secretary of Agriculture. 

This critically important increase is needed to support and maintain current staffing 

levels to meet projected increased demand. We are requesting an additional $2,870,000 for our IT modernization initiative. 

This multi-year project will upgrade information management systems and modernize our business functions. This request includes $1.4 million to continue the development of eGov solutions and $1.5 million for recurring costs associated with the 

maintenance of these applications. We are also requesting an additional $405,000 to establish an ongoing presence 

in Asia allowing GIPSA to continue and expand upon our successful international 

services and trade activities currently provided on a temporary basis. GIPSA’s 

hands-on approach of assigning a temporary duty officer in Asia to facilitate trade 

of U.S. grain has provided a positive impact on existing and potential buyers. These 

buyers say their concerns related to grain quality are addressed effectively. Continuing and expanding this program is crucial not only to increasing U.S. grain exports and reducing market disruptions due to technical differences in analytical 

methods and standards, but to increase satisfaction and loyalty among our current 

customers in an extremely competitive marketplace. The U.S. trade dollars saved 

upon the resolution of just one grain shipment complaint can far outweigh the costs 

associated with maintaining a GIPSA presence in Asia. 

Part of our appropriation request will be derived from proposed new user fees. The budget proposes collecting $3.7 million from grain standardization user fees and 

$16.0 million from Packers and Stockyards Program licensing fees after a 3 month 

start-up period. 

CONCLUSION

Mr. Chairman, Members of the Committee, thank you for the opportunity to share 

some of the accomplishments made by our dedicated staff and highlight our future 

plans to facilitate the marketing of U.S. agricultural products and to promote fair 
411 

and competitive trading practices for the overall benefit of consumers and American 

agriculture. 

I would be pleased to address any issues or answer any questions that you may 

have. 

Thank you. 

Senator BENNETT. Thank you very much. Appreciate the testimony of all of you. 

USER FEES

Dr. Collins, let us talk about user fees. FSIS proposes a user fee. 

If this were authorized, what would be the impact on domestic 

slaughter capacity and facilities? Would this increase the price of 

meat at the supermarket counter? Would it be absorbed? How 

would that happen? 

Mr. COLLINS. Mr. Chairman, a user fee is an increase in processing costs, and the way economics looks at that is that if slaughter is a competitive industry, that is, it is buying its inputs from 

a competitive industry and selling its outputs in a competitive industry that, over time, the increase in processing costs will be 

passed on. It will not be borne by the processor. It will be passed 

back in some form to the supplier of the live animal to the slaughterhouse. It will also be passed forward to consumers. 

Generally, because consumer demand for meat is so unresponsive 

to price, most of the processing costs over time would be passed on 

to consumers. The user fee that I believe has been proposed, which 

is for inspection beyond the regular 8-hour shift, would generate 

about $105 million in revenue. 

That would be small in the context of our meat production; we 

produce or we expect to produce in 2006 about 90 billion pounds 

of meat in the United States. That would be red meat, plus poultry. 

So if you divide that production into $105 million, it turns out to 

be about one-tenth of one cent effect on the price of meat if that 

user fee is passed fully forward 100 percent to the consumers. 

So I find it hard to suggest that the fee would have much effect 

at all on the meat packing industry, which, incidentally, is getting 

a little bit better margins right now compared to a year ago. 

Senator BENNETT. Okay. Thank you. 

AVIAN INFLUENZA

Let us talk about avian flu. If a widespread depopulation should 

occur, what do you think the effect of that would be on the industry 

as a whole? I am not predicting that it would occur—— 

Mr. COLLINS. No, you are hypothesizing a widespread incident in 

the United States? 

Senator BENNETT. Right. 

Mr. COLLINS. We have already seen it, of course, in many countries around the world, which has had some impact on our exports. 

If we had such an outbreak in the United States, there are a lot 

of scenarios that could play out. But clearly, the effect is going to 

be focused in two areas—the exports of poultry products, including 

broilers, turkeys, and eggs, and in the domestic demand for those 

products with secondary effects on feed markets. 

I think the impact is going to depend very much on the size of 

the outbreak, where the outbreak occurs, whether it is in major or 
412 

minor producing States. It is also going to depend on the effectiveness of APHIS in eradicating the outbreak. So the economic effects 

will depend on those factors. 

But, of course, we would immediately lose some exports. It would 

be incumbent upon Dr. Lambert and Dr. Penn to work with other 

countries to ensure that any suspension of imports by those countries would be quickly regionalized just to those States where the 

outbreak occurs. If that is the case, then we might be able to reduce, fairly quickly, the effect on our exports. 

Regarding domestic demand, the United States has been incredibly resilient in the face of any kind of animal disease for many, 

many years. You can go back to the 1983–1984 high pathogenic 

avian influenza (HPAI) outbreak in Pennsylvania and the eastern 

States, and poultry consumption actually went up that year. We 

have had other high-path incidents, such as Texas in 2004 with no 

effect on poultry consumption. 

There could possibly be some small effect because of the frontpage news that Avian influenza (AI) has had for so long. But I 

think, again, effective eradication and depopulation would limit 

any domestic consumer effect. 

You know, we use as a rule of thumb, if we were to lose 10 percent of our exports, we say that would probably reduce poultry 

prices by about 3 percent, which on a $23 billion industry for broilers would be about $700 million. 

So there are any number of scenarios that you can play out here, 

but I think that on the domestic side, it ought to be manageable. 

And I think with good work by APHIS and our trade experts, we 

can limit the damage on the export side. 

Senator BENNETT. Thank you. That kind of analysis is helpful in 

a world that is filled with hype about all of these various issues. 

BOVINE SPONGIFORM ENCEPHALOPATHY

Dr. Lambert, let me swing back to you now, as long as we are 

talking about these kinds of problems, and have you tell us what 

happened in Japan when you were over there. And they have shut 

their market down again because of a single cow with BSE. 

And you have just returned. You are quoted extensively, I hope 

accurately. But having been in public life now, I know that is not 

always the case. So tell us, briefly, what you found and what you 

see with respect to our possibility of reopening the export market 

for beef in Japan. 

Mr. LAMBERT. Thanks, Mr. Chairman. 

The technical team that went to Japan consisted of representatives from APHIS and AMS and MRP, but also the Food Safety and 

Inspection Service and the Foreign Agricultural Service. And we 

were there after the finding of this one cow that was not consistent 

with Japanese criteria in January. The Japanese government did 

shut off all imports or suspended all imports of U.S. product. 

The Secretary promised a thorough and extensive investigation 

into that incident. We have completed that investigation and submitted a 475-page report. After that, there were follow-up questions to which we responded. Then, in spite of those efforts, there 

were continued gaps in the understanding of officials in Japan 

about how this incident occurred and the measures that we were 
413 

going to put into place to assure that we can at least minimize, to 

the extent humanly possible and hopefully prevent another incident like this from happening. 

So the team was there primarily to address these gaps in understanding. I feel that we were successful in doing that. We have 

both identified the next steps that our governments will take. 

From the USDA side, we will provide a checklist of all the new 

measures that the Secretary indicated and that were indicated in 

the report and that we agreed to during our discussions these last 

couple of days. We will provide a checklist of that to the Japanese 

government and get concurrence that these are the changes that 

processing plants need to make in order to resume trade. 

Once that happens, FSIS and AMS will re-audit the plants that 

are eligible to export to Japan with an eye toward getting Japan’s 

technical people into the plants to do follow-up verification audits 

and verify, in fact, that we have made the changes we said we 

would, and re-establish trade. 

Senator BENNETT. Do you have any kind of guess as to the timetable? 

Mr. LAMBERT. These timelines are always a crap shoot. We have 

committed that we will respond just as fast as we can with the 

checklist. Once that takes place, we will have people in the plants 

and perform the verification audits just as fast as we can. That 

probably will take in the neighborhood of 10 days to 2 weeks. The 

next challenge will be to get the audit teams from Japan onsite to 

conduct the verification visit. 

We are optimistic, but in these types of situations, unanswered 

questions continue to arise. I should mention, too, that while we 

are doing the audits, the Japanese government will begin communication and outreach with their consumers to explain the changes 

that have taken place and to help reassure Japanese consumers of 

the safety and wholesomeness of the product as we move forward 

to reopening trade. 

Senator BENNETT. Good. Thank you very much. 

PUBLIC LAW 480 TITLES I AND II

Dr. Penn, the fiscal 2007 request provides no funding for Public 

Law 480, Title I. But it does provide an increase of $80 million for 

Title II. Do you want to talk about that? 

Mr. PENN. Yes, Mr. Chairman, thank you for the question. 

We have, for the first time ever, not asked for funding for Title 

I because, as I indicated in my statement, it has been our experience that the use of that program has dwindled away. In the last 

fiscal year, we only had two government-to-government 

concessional programs operating. And so, various countries are 

using that program less and less. 

Senator BENNETT. Just for information, which two countries? 

Mr. PENN. One in Latin America and one elsewhere, but I can’t 

tell you off the top of my head. 

Senator BENNETT. Okay. Fine. All right. 

Mr. PENN. But we did, as you noted, propose an increase of $80 

million for Title II. So all of the Public Law 480 funding will be 

made available through Title II. 
414 

More and more of that is used for emergency purposes. We are 

seeing a greater need all around the world, and especially on the 

African continent, for emergency funding. And so, more and more 

of the resources will be devoted to that. 

Senator BENNETT. Okay. Fine. 

Senator Kohl, I will come back later on. But let us hear from 

you. Thank you. 

SPECIALTY MARKETS

Senator KOHL. Dr. Lambert, at one of our hearings last year, I 

asked about opportunities for small farmers who are seeking niche 

or specialty markets. The response I got, talked about credit programs that are available and a number of grant programs to help 

with the value-added product development. 

Both things help, but I think there are a lot of opportunities out 

there for men and women who are creative, willing to work hard 

as independent business owners, and don’t want to have their livelihoods controlled by some large mega grain or livestock company. 

This past November, USDA proposed a rule change to allow 

China to export processed poultry products back into the United 

States. It seems to me that if the department could find a way to 

help Chinese poultry make their way back into the United States, 

they should push as hard or harder to help our own farmers develop niche or specialty markets. 

So can you point to any USDA actions taken recently to help 

small producers? 

Mr. LAMBERT. Well, we have a number of programs within MRP 

that work with small producers. Among these are the process 

verified and organic programs. There are ways that producers can 

verify that they have a unique or specialty product to market in 

niche or specialty markets. 

The organics program is rapidly growing. One of the budget requests we have this year is for an additional $1 million for the 

organics program based solely on the expanding demand for organic products. So there are a number of programs where we work 

with small and mid-sized farmers. 

We also have the farmers markets that allow individual producers to market their produce and goods directly to consumers, 

and that has been a growing and very successful program. 

With respect to the processed poultry from China, basically, that 

is for only United States or Canadian product, or product that is 

eligible for export to the United States to be processed or valueadded in China and then re-exported to the United States. But, as 

I say, we do have a number of programs that support specialty 

crops, including block grant programs for specialty crop producers 

that facilitate niche marketing both by small and mid-sized producers. 

Senator KOHL. On these farmers markets, last year we provided 

funds for the program to promote farmers markets. But they are 

not included in your budget this year. Have I missed something? 

Mr. LAMBERT. The 2007 budget includes $1 million that provides 

for block grants of up to $75,000 per farmers market to do outreach 

and promote those activities. That is included in the 2007 budget. 
415 

ALTERNATIVE FUELS

Senator KOHL. Thank you. 

Dr. Collins, over the past several years, there has been a lot of 

talk about alternative fuels. The President’s State of the Union address increased interest in this subject. 

As an economist, do you believe that the development of alternative fuels is good for our country and, in particular, is it good for 

rural America? Can you describe how the market’s regulations and 

technology have changed over the recent years and have made alternative fuels more or less attractive? 

Mr. COLLINS. Certainly, Senator Kohl. 

Yes, I think we are in the midst right now of quite a transformation in thinking about alternative fuels. I can remember 

when I first started working at the department, we actually had 

our energy office being an opponent of ethanol. We were worried 

about creating a subsidy-dependent commodity with an uncertain 

value. 

But I think as we have gone through the 1990s, and particularly 

in this decade, there has been a substantial change. This substantial change relates to, of course, what happened on 9/11, the concern about energy security, the concern about diversification of energy supplies. 

We have an exploding trade deficit. One third of our trade deficit 

is oil imports. We have also had energy prices soar to unprecedented levels. That has changed the backdrop in which alternative 

fuels now are looked. 

In addition to that, we have the environmental side of alternative fuels. Today, people are valuing alternative fuels not just for 

their BTU content in the gasoline tank, but for their environmental 

value, for their rural development, employment creation opportunities, for their trade deficit reduction, for their energy security. 

I would say that many people are valuing it that way. The Wall 

Street Journal aside, of course—if you saw their editorial this 

week—which seems to miss most of those points. 

I would say also a point that you made is the development of 

new technologies. You could probably go back into the 1980s and 

find ethanol being produced at a cost of over $2 a gallon. It fell by 

the early 2000s to about 95 cents a gallon as its cost of production. 

It is now probably about $1.10 a gallon, mainly because of the 

higher price of energy, as a lot of natural gas is used in ethanol 

production. 

But I think this combination of new technologies and, of course, 

the President talked about down the road by 2012, hopefully, the 

commercialization of cellulosic conversion to ethanol, this advent of 

all of these new technologies, combined with the environment in 

which we find ourselves with high fuel costs, have really changed 

the thinking about ethanol. 

And of course, you are seeing that in the explosion of production 

across rural America. And yes, I do believe that this is an enormously important opportunity for rural economic development. 

If you look at the value of our oil imports, they exceed the total 

net cash income of agriculture. So even capturing a small portion 
416 

of that for agriculture could be very important to farm income and 

rural economic growth. 

COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)

Senator KOHL. Thank you. 

Mr. Bost, when Secretary Johanns was here, we briefly discussed 

elimination of the Commodity Supplemental Food Program, CSFP, 

which, as you know, provides food boxes to low-income elderly individuals and also some women, infants, and children. 

He stated several reasons why USDA believes this program is no 

longer necessary, including the fact that seniors can move to food 

stamps, there simply isn’t enough money, and that the program 

only operates in a limited number of States. 

Is CSFP the only nutrition program that operates in a limited 

number of States? 

Mr. BOST. Senator Kohl, in this particular program, it is not only 

in a limited number of States, in those States, it is not even State 

wide. Right now, it is in 32 States, 2 Indian reservations, and the 

District of Columbia. 

As I said in my opening statement, when you put together a 

budget, you are not able to do everything that you would like to 

do. We feel strongly that many of the people currently served in 

this specific program would be better served in other nutrition assistance programs that essentially are in existence across the Nation—for example, the WIC Program and, for the elderly participants, the Food Stamp Program. 

Senator KOHL. Well, a little bit of the math on that. The CSFP 

program was last year funded at $109 million, and it served over 

420,000 people, nearly 90 percent of whom were seniors. The increase in food stamps in the budget to take care of these people the 

USDA says it plans to switch from CSFP is only $50 million, with 

an additional $18 million in transition benefits. 

So it seems to me that the funding levels show a discrepancy, 

and how would you explain that people are not going to lose benefits under this plan? 

Mr. BOST. Senator Kohl, as we are transitioning the elderly eligible participants in this program, we are providing them with $20 

a month until they do participate in the Food Stamp Program. 

However, it is true given the income levels of some of the CSFP 

participants, they probably would not be eligible to participate in 

the Food Stamp Program. 

One final point, the average amount of money that we believe 

many of the elderly would be eligible to receive in the Food Stamp 

Program would be approximately $63. So, they would actually get 

more. Some of them—not all of them—would actually get a higher 

benefit under the Food Stamp Program as opposed to the value of 

their benefit as a participant in CSFP. 

Of course not all of the elderly are eligible for the average Food 

Stamp benefit, which currently is about $63. The food box that they 

get in CSFP is delivered. They do not have to go get it. There is 

some belief that many of these seniors will not participate in the 

Food Stamp Program for this reason. 
417 

But we believe that, working with our partners, building in transition, we will be able to pick up and offer these services to a significant number of persons. 

The other point that I want to make, finally, is for those that are 

not eligible for either the Food Stamp or WIC Program, there is another nutrition program we have available in which they will probably be able to participate, which is our TEFAP program. 

Senator KOHL. So you are saying that in many States, like my 

own State, those people who are receiving the benefits of this program won’t be disadvantaged? 

Mr. BOST. Some of them may be, but not all of them. That is why 

it is a very difficult budget decision for us to make because some 

may be adversely affected. 

But we are going to do our best to ensure that those who are eligible to participate in our nutrition assistance programs, are picked 

up. And for those that are not eligible they will be provide with 

other resources like the TEFAP program. 

MEAT AND POULTRY IMPORT REQUIREMENTS

Senator KOHL. One question for Dr. Raymond. We have recently 

heard reports that FSIS is working to set up a trial program during which some Canadian plants will be able to export beef into the 

United States without requiring daily inspections, which is something that we require in this country. 

I know that most recently this trial has been put off until at 

least July, but apparently, it is not off the table. One of our most 

important safety requirements for bringing food into this country 

is that the exporting country has to have the equivalent food safety 

requirements as we do, and this project appears to throw that out 

the window. 

Are you considering lessening the requirements on our food 

plants at home for less than daily inspections? Do you think this 

would be wise, especially when certain countries already have 

questions about our food safety program? Would you talk about 

this trial program that you have on the table? 

Dr. RAYMOND. Certainly, Senator Kohl. 

First of all, to clarify, the trial program has not been established 

as exactly what it will look like. One of the possibilities is that the 

Canadian government would do daily inspection for 3 months in 50 

plants that export to the United States and do intensified laboratory testing for food-borne pathogens. Then they would do 3 

months of less than daily inspection and continue with the enhanced laboratory testing so they could compare food product contamination rates for daily inspection and for less than daily inspection. 

When that product is tested, that product would not be shipped 

across the border to the United States until it tested negative for 

food-borne pathogens. That is just one proposal. That is not necessarily the proposal that will take place. 

First of all, they may not do any project. They may not do any 

test for equivalency of less than daily. That is their choice. 

But the point right now is that they cannot export product to 

America unless they have daily inspection in those plants, which 
418 

they are now doing. All of the facilities that export to the United 

States have daily inspection. 

If they want to try to show us that less than daily inspection is 

equivalent in safety, they have to devise a project that would satisfy our requirements to evaluate that. We are still in negotiations 

with them on that issue. 

I hope that clarifies that issue. They have been doing daily inspection since August 22, 2005. 

Senator KOHL. Okay. Well, I understand there is a trial program 

under consideration in Australia to export beef to America from 

plants that pay for their own inspectors, something that we don’t 

allow in this country. As you know, we pay for meat inspectors, believing Government employment is the best way to make sure that 

our meat stays safe. 

Are we thinking about a program with Australia that would 

allow them to export beef from companies that employ their own 

inspectors? 

Dr. RAYMOND. At this time, Senator Kohl, there are no Australian establishments certified to export to the United States that 

are using their meat safety enhancement program. 

Senator KOHL. So there is really nothing to that consideration of 

a trial program to allow them to export meat? 

Dr. RAYMOND. They have had one plant that has expressed interest, and at this point, that plant has not been certified for export 

to the United States. 

Senator KOHL. Thank you. 

Mr. Chairman. 

Senator BENNETT. Thank you very much. 

GRAZING LAND CONSERVATION INITIATIVE

Mr. Rey, let us talk about invasive species. They affect forage 

quality and range land health and wildlife and watershed function 

and all of those things. 

And in fiscal 2006, we provided $4.1 million to control and manage invasive species through the Grazing Land Conservation Initiative. And these funds were leveraged with private matching, and 

the administration eliminated funding for Grazing Land Conservation Initiative. 

I have a series of questions on this, but just talk about that generally and let us see what your thinking is with respect to this 

problem. 

Mr. REY. Our thinking generally is that we are trying to consolidate and better organize a variety of the conservation programs. 

The Grazing Land Conservation Initiative is one that fulfills functions that are already being fulfilled under Conservation Technical 

Assistance and under the Environmental Quality Incentive Program (EQIP). 

Much of the work that would have been done was being done 

under the Grazing Land Conservation Initiative. In our 2007 budget that work will be done under the other two programs, and will 

include work on invasive species. 

We are also investing $2 million in our 2007 budget request in 

the cooperative conservation partnership initiatives to deal specifi-
419 

cally with invasive species, and that issue, invasives, will be one 

of the top priorities in that area and in the EQIP area as well. 

Senator BENNETT. Have you had any response or comment from 

the various stakeholders with the elimination of the funding for 

GLCI? 

Mr. REY. Not so far. I expect as the budget process unfolds and 

as we talk about that, we will hear from them. Particularly where 

GLCI earmarks were directed toward specific States and locales, 

we are going to have to lift a burden of proof to demonstrate that 

the work will still be done if those earmarks are eliminated. 

AIR AND WATER QUALITY ISSUES

Senator BENNETT. Okay. Let us see, Mr. Rey, Conservation Technical Assistance. Senator Kohl and I made this a priority last year. 

We provided $12 million, a major increase in light of the budget 

that we faced last year. There is no similar request for the 2007 

budget. Why did the budget request not ask for funding to continue 

the progress that we started last year? 

Mr. REY. Well, the funding request for Conservation Technical Assistance is a total of $634.3 million, which is a fairly significant 

budget line item. 

Senator BENNETT. No. I am sorry. I am talking about specific 

money to meet water quality and air quality requirements. I apologize. I didn’t pose the question properly. 

Mr. REY. Sorry. We have established as a priority for the EQIP 

program and for the General Conservation Title programs at large 

to work on air and water quality issues, and we are making substantial progress in those areas. So I think what you are going to 

see in the mix of program priorities from both EQIP and Conservation Technical Assistance is a substantial amount of work directed 

toward water quality and air quality, particularly in addressing the 

air and water quality in packs of confined animal feeding operations. 

Senator BENNETT. So you are saying that the amount we very 

specifically focused on this will be taken care of in the overall, and 

we don’t need to worry about it? 

Mr. REY. Correct. In 2006, we spent the amount that you earmarked for air and water quality, but we also spent a substantially 

greater amount of that as part of the overall EQIP and Conservation Technical Assistance budgets to deal with air and water quality issues. 

Senator BENNETT. So you are telling us the emphasis is still 

there? 

Mr. REY. Correct. 

Senator BENNETT. All right. I am sure we will watch that and 

appreciate that. 

I have some additional questions, but I think we will submit 

those for the record. 

Okay. Senator Kohl. 

FARM SUBSIDIES

Senator KOHL. Thank you, Mr. Chairman. 

I would like to address this to Dr. Penn and Dr. Collins. There 

was an article in the Wall Street Journal recently about the future 
420 

of farm subsidies. The article discussed how subsidies can promote 

overproduction and lead to other problems, including issues with 

the World Trade Organization. 

It also noted that American citizens, both rural and urban, are 

becoming concerned about the way traditional farm programs affect 

farmers in poor African countries and elsewhere, as well as the effect they have on our environment here. 

These issues, as you know better than I, are very complex. There 

are several different ways to estimate this, but I understand that 

in the past 3 years, farm payments averaged approximately 25 percent of net farm income, which is more generous than some countries and less generous than others. 

This is an issue that could consume an entire hearing all by 

itself, but while we have you here, I am interested in your views. 

Can you talk about this shift in public opinion? Can you talk about 

the WTO? 

Can you talk about traditional farm programs, if they were to decrease or to be eliminated? What thoughts do you have on the best 

way to protect not only our farmers, but our rural America? 

For after all, all this money that the farmers get is spent in rural 

America in ways that keep rural America alive. So where do you 

see this whole issue going in terms of its impact on our rural economy? 

WTO

Mr. PENN. Senator Kohl, let me begin by discussing the WTO aspects of the question. As you indicated, it is a very broad question 

and one that we could spend a lot of time discussing. 

But let me say before I turn to Dr. Collins that in recent times, 

there has been a much greater consideration given to the impact 

of our domestic farm programs on our trading partners. And I 

think that this has been around since the Uruguay round agricultural agreement was concluded in the mid 1990s. 

This was the first multilateral or international agreement to include food and agriculture in a very substantive way. So we have 

been much more cognizant of this connection between the trade impacts and the domestic farm program impacts since that time. 

Now this really came to a head quite recently when some of our 

programs were challenged in the WTO. Brazil and some other 

countries launched the so-called ‘‘cotton case’’ in which they singled 

out cotton and other various programs and challenged those for the 

very reasons that you indicate. They said that the programs were 

stimulating additional production here at home. We then exported 

that production into the world market. That extra production had 

a price-depressing effect. 

Now we certainly think that that effect is greatly overstated, but 

nonetheless, Brazil prevailed in that WTO challenge, and they prevailed on the appeal. So that has now caused us to take into account the effects of our programs on others, or the extent of the 

trade distortions that our programs may have. 

So as we approach the 2007 Farm Bill, as we approach what we 

hope to be the successful conclusion of the Doha trade negotiations, 

we are now much more mindful of the form in which we provide 

support to our producers than perhaps we have been in the past. 
421 

The WTO has established various color boxes. The amber box, 

which is the most trade distorting form of domestic support; the 

blue box, which is less trade distorting; and the green box, which 

is non- or minimally trade distorting. 

So we are having to give more and more thought about switching 

our support for our farmers from amber box to blue box to green 

box, so that we can continue to provide support for domestic agriculture, but do it in a way that doesn’t negatively or adversely affect our trading partners around the world. 

That is sort of the trade aspects. But as you know, Dr. Collins 

has spent most of his career studying all of the other aspects of 

your question. So I will turn to him. 

Mr. COLLINS. That is very kind of a senior author of a multiple 

edition agricultural policy book to hand that off to me. 

PUBLIC OPINION ON AGRICULTURAL POLICY

Mr. COLLINS. Mr. Kohl, your question deserves a comprehensive 

and thoughtful answer, and Dr. Penn mentioned the trade implications of our programs and how that can affect future agricultural 

policy. 

One of the things you asked about was how public opinion has 

shifted, which is part of what the Wall Street Journal article was 

about. I guess my feeling is that the great majority of Americans 

really don’t know much about agricultural policy, and I think they 

are very positive about agriculture and about farmers. So I don’t 

sense a great shift among most people, urban residents, for example. 

However, within agriculture in rural areas, I think there is a 

shift, and I think part of it reflects a broader and deeper understanding about farm programs. Some of that has come because of 

the international scrutiny of our programs—WTO challenges, the 

loss of the cotton case, for example, the understanding that programs are ‘‘amber box’’ in many cases and have resource allocation 

effects. 

Also there has been a lot of discussion about the effects of farm 

programs on land values, the equity of the payments across commodities, across regions, and across size of producers. Much data 

has been presented in recent years about those things. And so, I 

think there is a bigger and deeper understanding about some of the 

consequences of our current structure of programs than perhaps we 

have had in the past, and that is starting to show in the public discourse. 

As you probably saw yesterday, the department released 41 short 

papers, which are the summaries of what the department heard at 

the 52 Farm Bill forums that were held by the Secretary and people at this table. If you look through some of the comments, you 

will find that people are questioning. 

Well, you mentioned 25 percent of net farm income or net cash 

income coming from Government payments. You know, this year, 

it is going to be about 30 percent in 2006. That is roughly $20 billion the last couple of years. 

People are saying, well, $20 billion a year is a lot of money and 

are there other ways that that money can be used to continue to 

promote rural well-being, address some of the problems with the 
422 

current programs, and also deal with some of the new emerging 

issues that people want dealt with. 

You already talked about promoting niche opportunities for small 

producers in rural America. Maybe more could be done there. People want to do more in energy. We had an energy title in the last 

Farm Bill. Very little money went into that energy title. Maybe 

money is not the answer for energy, but that is something to think 

about. 

There is the question of specialty crops. I have been struck by 

the fact that 20 years ago, the cash receipts that farmers earned 

from specialty crops was half of what was earned from program 

crops. And this year, it is going to be equal to what is earned from 

program crops. So we have had this incredible growth in specialty 

crops in the United States, and specialty crops are not really party 

to that $20 billion. 

So I think there is a discussion going on within agriculture in 

rural areas about farm programs and about what is the best way 

to deal with the problems that farmers face, which certainly are 

there, but also deal with the needs of rural areas. 

And of course, you asked, how we thought that might come out, 

and I guess my answer to that would be, well, we will wait and 

see how that comes out in the 2007 Farm Bill. But that is the landscape behind the debate that is emerging, and I do think that there 

has been some shifting of opinion within rural areas and agriculture. 

You even see that in some of the reports that some of the farm 

groups are putting out. The National Corn Growers and the American Farm Bureau Federation have put out some very thoughtful 

pieces about where we should go in the long run with our agricultural policy and it is a little bit different than you might have 

heard 10 or 15 years ago. 

Senator KOHL. Do you anticipate that there will be some very detailed discussion of this whole issue surrounding the Farm Bill in 

2007 and maybe some significant changes? 

Mr. COLLINS. I guarantee you there will be detailed discussion. 

As to the significant changes, my forecasting ability there has 

failed me in the past. So I am not sure. But there is always that 

potential. 

Senator KOHL. But isn’t it true in the sense that if we spend the 

money in different ways, the direct payments to farmers, as they 

go down, will have a direct impact on farming? I mean, if we are 

spending $20 billion a year—— 

Mr. COLLINS. Right. Right. 

Senator KOHL. And we take that money and spend a portion of 

it or a large amount of it in other ways to impact in a positive way 

rural America, but the money doesn’t go through the farmer, what 

will happen to the farmer? 

Mr. COLLINS. Well, it may or may not. Look at the situation now. 

The $20 billion, most of that goes to a small set of farmers. 

Senator KOHL. That is true. 

Mr. COLLINS. Most of that goes to wheat, corn, cotton, rice, soybeans, and so on. It is not going to another big part of agriculture. 

So you could already argue that there is some relative disadvantage in place right now with the current structure. 
423 

So if you start to reapportion things, change things around, it is 

true that some farmers would stand to lose. Other farmers would 

stand to gain. 

And there also may be alternative ways that those producers 

who would lose their direct payments or their counter-cyclical payments or their marketing loan benefits could pick up those benefits 

through other programs—other programs that exist now, such as 

expanded conservation programs, or other programs yet to be designed in the 2007 Farm Bill. 

So I don’t think you can conclude that automatically every producer is going to lose. They are not. There is going to be a distribution of losers and of gainers, and always part of the dilemma in 

changing farm policy is how to deal with anybody that is perceived 

as a loser. 

We have figured out how to do that in some cases. We had a peanut buyout program. We had a tobacco buyout program. Who 

knows? Maybe there will be new ways that we can think about how 

we can transition from one structure to another structure and minimize the losers. 

Senator KOHL. Thank you very much, gentlemen. 

Mr. Chairman. 

ADDITIONAL SUBMITTED STATEMENTS

Senator BENNETT. The subcommittee has received statements 

from Rural Development and Research, Education and Economics 

which will be placed in the record. 

[The statements follow:] 

PREPARED STATEMENT OF THOMAS C. DORR, UNDER SECRETARY, RURAL

DEVELOPMENT

Mr. Chairman, members of the Subcommittee, I appreciate this opportunity to appear before you today to present the President’s fiscal year 2007 Budget request for 

USDA Rural Development. 

With me today are Jim Andrew, Administrator of our Rural Utilities Programs; 

Russell Davis, Administrator of our Rural Housing and Community Facilities Programs, and Jack Gleason, Acting Administrator of our Rural Business and Cooperative Programs. 

On behalf of all of us, let me say that it is indeed a privilege for us to be here 

today representing over 6,800 dedicated men and women of USDA Rural Development. They are spread across every State and are your neighbors. They do an outstanding job. 

And if I may, I would like to take just a moment to pay a special tribute to the 

extraordinary contributions so many of them made this past year under very difficult circumstances in the wake of the 2005 hurricanes. This is not the place for 

an extended discussion, but I do want to say that amidst all the controversies, a 

great deal of good work by good people has gone unremarked. 

I have visited the Gulf Coast repeatedly since the hurricanes, and I have been 

inspired by the resiliency, commitment, and energy of hundreds of USDA Rural Development people in the affected areas. Some of them, in fact, had lost their own 

homes—but in those first days after landfall, all of them were working around the 

clock helping to provide emergency shelter, financial support, and transitional housing to evacuees. And they are hard at work now helping with the rebuilding of 

homes and businesses across the region. 

We are a relatively small agency and, in the context of the hurricanes, a relatively 

small part of a much larger story. But this was truly a case where we punched 

above our weight. I am tremendously proud of the work our people did, and not just 

those in Louisiana, Mississippi, Alabama, and Texas, but also their colleagues 

around the country. 
424 

VISION

Mr. Chairman, I am both honored and humbled by the opportunity President 

Bush has given me to serve as Under Secretary for Rural Development. I am committed to the future of rural America. My home is outside Marcus, Iowa, a metropolis of about 1,100. I am a farmer. I treasure the rural way of life and understand 

the pressures faced by rural communities in our rapidly urbanizing society. But I 

also believe that the traditions and values of rural America remain a vital part of 

our national heritage. 

I believe also that the future of rural America is bright. Certainly there are challenges; there always are. But rural communities enjoy many assets as well: the 

quality of life, a clean environment, peace and quiet, livable small towns, a lower 

cost of living, strong communities, and traditional values. These are communities 

worth preserving, and they have a future well worth building. 

The mission of USDA Rural Development is to provide leadership, infrastructure, 

venture capital, and technical support to enable rural communities to prosper in a 

dynamic new environment defined by globalization, the Internet revolution, and the 

rise of new technologies, products, and markets. 

In this effort, we begin with the recognition that rural America is extraordinarily 

diverse. It includes some of the fastest growing communities in the Nation, areas 

that are suffering from long-term economic and population decline, and everything 

in between. One size does not fit all. 

We understand as well that sustainable development must be market driven, not 

program dependent. And finally, we recognize that our role is to encourage and support local initiatives, both public and private. We know that our success depends 

on our ability to attract both private and other public partners; our success, indeed, 

is measured primarily by their success. 

I believe in this mission. And I believe firmly that rural America today is more 

competitive... more attractive as a place to live, work, and do business . . . and 

better positioned for self-sustaining growth... than has been the case for many 

years. 

FISCAL YEAR 2007 BUDGET REQUEST

The President’s fiscal year 2007 Budget proposes $2.1 billion in budget authority 

and a program level of $13.7 billion for rural housing, community facilities, infrastructure, and economic development. Under the USDA Rural Development programs, each Federal dollar supports 6.5 dollars of investments in rural America. We 

are also able to leverage our funds with those of the private sector, as well as create 

partnerships with State, local, and tribal governments, community development organizations, and for-profit and not-for-profit companies. 

In a challenging budget environment, this is an important means of maximizing 

the return on scarce budget dollars. It should be emphasized, however, that this emphasis on leveraging is a sound policy choice quite independent of current budget 

constraints. Indeed, the evolution of program emphasis within USDA Rural Development has for some years been away from grants and direct loans and toward a 

greater reliance on loan guarantees. This has allowed us to serve more individuals, 

businesses, and communities for any given level of budget authority. It also reinforces our strategic objective of fostering sustainable development based, on market 

orientation and private investment. 

I would like to touch briefly on some highlights of our fiscal year 2007 request. 

RURAL UTILITIES PROGRAMS

USDA Rural Development provides financing for electric, telecommunications, and 

water and wastewater services that enhance the quality of life and provide the foundation for economic development in rural areas. For fiscal year 2007, the President’s 

Budget proposes $553 million in budget authority to support a program level of $6.3 

billion for rural utilities programs. 

Of this total, $3.8 billion is for the rural electric program. With the support of 

the President and Congress over the last several years, we have eliminated the 

backlog in electric program applications and believe that the funds proposed for fiscal year 2007 will be sufficient to meet the demand. 

In addition, the President’s budget proposes $1.414 billion in loans and grants for 

rural water and wastewater projects. To enhance the ability of low-income communities to finance vital water and wastewater improvements, we propose to change 

the calculation of the ‘‘poverty’’ interest rate for this program from the current fixed 

4.5 percent to an adjustable rate set at 60 percent of the market rate. This change 

is reflected in the higher subsidy rate projected in fiscal year 2007 for Water and 
425 

Wastewater Program Direct Loans. We also continue to believe that in the current 

low interest rate environment, rural communities can afford to finance a higher 

share of project costs, and we therefore propose to shift the loan-grant ratio to an 

approximate 75–25 percent ratio. 

The President’s budget proposes $690 million in telecommunications loans and the 

investment of $356 million in loans to accelerate the deployment of broadband to 

rural communities. Broadband is fast becoming an essential tool for businesses, both 

large and small, and we are acutely aware that broadband deployment continues 

to lag in rural areas. Ensuring broadband access is essential to achieving a dynamic 

rural economy. The budget request is expected to be sufficient to meet the demand 

for the next year. This represents a reduction from the nominal fiscal year 2006 program level of $495 million, but as this Subcommittee knows, we have to date been 

unable to obligate all the broadband loan funds that Congress has made available 

to us. The volume of viable applications that either we or the Congress anticipated 

has simply not materialized. 

It is clear, therefore, that the rural broadband deployment model must be improved. This has been a top priority since my confirmation last summer. We are now 

engaged in a thorough review to identify obstacles to borrower participation. In the 

meantime, we look forward to working with the Congress, the telecommunications 

industry, and rural stakeholders to accelerate deployment of this vital technology. 

In addition, the President’s budget includes $24.8 million for the Distance Learning and Telemedicine (DLT) Grant Program, which enables rural communities to enhance their educational options and access the resources of big city medical centers 

via the Internet. This request maintains the fiscal year 2006 program level for DLT 

Grant Program. 

RURAL HOUSING AND COMMUNITY FACILITIES PROGRAMS

Safe, modern, affordable housing is essential to healthy communities. USDA 

Rural Development works to extend the benefits of homeownership to low- and moderate-income Americans and to historically disadvantaged communities. We finance 

affordable rental housing and essential repairs for low- and very-low income homeowners. We also assist rural communities in providing quality health care, police 

and fire services, day care, educational and recreational facilities, and other essential community services. 

The fiscal year 2007 budget request for rural housing and community facilities exceeds $6.27 billion. This includes an increase in funding for both direct and guaranteed homeownership loans, to $1.2 billion and $3.56 billion, respectively. We anticipate that this level of funding will provide homeownership opportunities for over 

40,000 rural families. In order to meet this goal, we propose raising the guarantee 

fee from 2 percent to 3 percent. This nominal increase will provide an additional 

$2.86 billion in single family guaranteed loans. 

For multi-family housing, the budget proposes shifting funding from direct to 

guaranteed lending in order to increase our leveraging and serve more residents at 

a lower cost. A total of $198 million—double the fiscal year 2006 program level for 

guaranteed lending—is requested for this purpose. 

We also propose $486 million for rental assistance, a figure which reflects a shift 

from 4 to 2 year contracts. We believe it is unnecessary to renew contracts for 4 

years especially while revitalization is underway, and the Administration remains 

committed to renewing contracts as needed. However, 2 years is the minimum contract term the program should have to operate efficiently from year to year. 

In addition, the budget proposes $74 million to fund our multi-family housing revitalization initiative. As this Subcommittee knows, the multi-family housing portfolio faces longstanding issues of deferred maintenance. This is compounded by the 

threat of prepayment by the owners of some complexes who may wish to exit the 

program, leading to the displacement of significant numbers of elderly and low-income tenants. The $74 million will fund the voucher program to help displaced tenants from USDA financed multifamily housing properties where the owner has chosen to pre-pay the Rural Development loan and withdraw the property from the program. The $74 million is proposed in the Budget solely for funding the anticipated 

need for the voucher program. Funding debt restructuring without the proper legislative authorizations in place would be premature. However, in order to allow for 

balancing of needs in anticipation of the new authorization passing, the appropriations language does allow for the funds to be used for this purpose if debt restructuring authorization language is enacted. While modest in budgetary terms, this is 

a very significant investment in the long-term stabilization and revitalization of the 

rural rental housing portfolio. 
426 

Finally, the budget proposes to increase the program levels for the Farm Labor 

and Self Help Housing Programs to $55 million and $38 million, respectively. It continues Community Facilities Loans and Grants at their fiscal year 2006 levels. 

RURAL BUSINESS AND COOPERATIVE PROGRAMS

The third leg of the Rural Development stool is business development and job creation. The future of rural communities depends on their ability to attract and regain 

young families. A diversified, growing rural business sector is essential to offering 

opportunity to young adults and a future to growing families. 

To support these goals, the President’s budget for fiscal year 2007 requests $103 

million in budget authority to support a program level of $1.138 billion for our Rural 

Business and Cooperative Programs. 

Our request for fiscal year 2007 is—as it was last year—consistent with the 

Strengthening American Communities Initiative, which called for a consolidation of 

several economic development programs within the Department of Commerce. We 

are confident of our ability to partner with the Department of Commerce to ensure 

that rural America participates fully in this broader funding pool. 

Of the programs remaining in USDA Rural Development, the Business and Industry Guaranteed Loan Program (B&I) accounts for approximately 42 percent of proposed budget authority and 87 percent of total program level for fiscal year 2007. 

We will also continue to provide technical assistance, development, and research 

support for rural cooperatives, targeted investment in alternative energy and energy 

conservation, and support for intermediary lending institutions through a variety of 

smaller programs. We estimate that total business program investment in fiscal 

year 2007 will create or save over 56,000 jobs. 

CLOSING

In closing, Mr. Chairman, I want to emphasize that the bottom line for USDA 

Rural Development is not budget numbers; it is water lines laid, families able to 

afford a new home, new businesses and jobs created or saved, and rural communities strengthened by what we do. It is a privilege to work with the members of 

this Subcommittee to advance these objectives despite the stringent budget environment we face today. This concludes my formal statement and I will be glad to answer any questions you may have. 

PREPARED STATEMENT OF JACKIE J. GLEASON, ACTING ADMINISTRATOR, RURAL

BUSINESS-COOPERATIVE SERVICE

Mr. Chairman and members of the Subcommittee, I am pleased to present the Administration’s fiscal year 2007 Budget for the Rural Development’s rural business 

and cooperative programs. 

Mr. Chairman, the programs and services of Rural Development, in partnership 

with other public and private sector businesses, continue to improve the economic 

climate of rural areas through the creation or preservation of sustainable business 

opportunities and jobs. Rural Development continues to invest in rural America, especially in the under-served rural areas and populations. Rural Development programs help close the gap in opportunity for these under-served rural areas and populations, moving them toward improved economic growth by providing capital, technology and technical assistance. The $103 million requested in budget authority for 

Rural Business-Cooperative Service programs will support $1.138 billion in direct 

and guaranteed loans and grants and will assist in creating or saving over 56,000 

jobs and providing financial assistance to more than 1,200 small businesses. 

The cooperative form of organizational governance continues to be a cornerstone 

of business development in our rural communities, whether in the traditional form 

that brings day care services to a rural community or today’s new generation ethanol cooperatives that lessen our dependence on foreign oil. From the large agricultural marketing cooperative that brings additional value to its members products, 

to the small rural telephone cooperative that brings broadband technology to its 

community’s businesses and residents, to the elder care cooperative that brings desperately needed services to our ‘‘greatest generation,’’ cooperative organizations provide our rural residents with new and exciting job opportunities, enhanced educational and health care opportunities, and products and services that enable viable 

rural communities to compete with their urban and suburban counterparts. 

Rural Development’s mission is ‘‘to increase economic opportunity and improve 

the quality of life for all Rural Americans.’’ Rural Development’s business and cooperative programs successfully carry out this mission by providing an array of edu-
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cational, technical assistance, research, and loan and grant programs to rural Americans. 

BUSINESS AND INDUSTRY GUARANTEED LOAN PROGRAM

For the Business and Industry (B&I) Program, the fiscal year 2007 budget includes 

$43.16 million in budget authority to support $990 million in guaranteed loans. 

We estimate that the funding requested for fiscal year 2007 will create or save over 

23,667 jobs and provide financial assistance to approximately 554 businesses. The 

B&I program allows lenders to better meet the needs of rural businesses. Through 

the lender’s reduced exposure on guaranteed loans, they are able to meet the needs 

of more businesses at rates and terms the businesses can afford. B&I guaranteed 

loans may also be used by individual farmers to purchase cooperative stock in a 

start-up or existing cooperative established for value-added processing. 

I would like to illustrate how this program partners with a lender. Desert View 

Regional Medical Center Holdings, LLC was approved for a Business and Industry 

Guaranteed Loan in the amount of $17.5 million. The funds will be used to construct a 25 bed acute-care surgical hospital in Pahrump, NV, which currently does 

not have hospital services. The facility will include 22 medical beds, 3 birthing 

suites, and emergency rooms with 8 treatment bays and trauma unit. The surgery 

department will have 2 operating rooms; the imaging department will include radiology, fluoroscopy, mammography, ultra sound, C/T, and mobile MRI; and there will 

be a clinical laboratory, cardiopulmonary, physical, and occupational therapies. At 

present, residents of the Pahrump area must travel approximately 60 miles to Las 

Vegas for acute primary hospital care. Approximately $12 million in equity and 

other funds will be contributed to the project. In addition to benefiting the community with a critical access hospital, the new hospital will bring 140 new jobs to the 

area, which includes 40 doctors and nurses. 

I would also like to share with you another example of how this program 

partnering with a lender, Comerica Bank, has supported alternative energy development in rural America. The Snowflake White Mountain Power, LLC, was approved 

for a B&I guaranteed loan of $6 million in addition to a Section 9006, Renewable 

Energy System Guaranteed Loan of $10 million to build a 20 megawatt biomass 

electrical generating plant 17 miles southwest of Snowflake, Arizona. The raw materials for generation are burnt trees from the Abitibi Paper Mill which is located adjacent to the proposed plant. About six jobs will be created directly and 40 jobs from 

subcontractors. This is a good example of how two programs within Rural Development were jointly utilized to purchase the guaranteed loan assistance needed for the 

project to be realized. 

VALUE-ADDED PRODUCER GRANT PROGRAM

For fiscal year 2007, the budget requests $20.295 million for the value-added producer grant program, the same as in the previous year. The Value-Added Producer 

Grant (VAPG) program encourages independent agricultural commodity producers 

to further refine or enhance their products, thereby increasing their value to end 

users and increasing the returns to producers. Grants may be used for planning 

purposes such as conducting feasibility analyses or developing business plans, or for 

working capital accounts to pay salaries, utilities and other operating costs. Program revisions were made in fiscal year 2006 that will increase the number of eligible applicants competing for this critically important funding, and in support of the 

President’s e-Gov initiative, administrative processes were refined to enable producers to complete an electronic application template and submit their completed 

applications through Grants.gov. 

The successes of the Value-Added program are evident throughout the country. 

Alternative crops are two vital words for the survival of agriculture in today’s world. 

For example, Paulk Vineyards of Wray, Georgia, is a family-based grower of southern grapes, commonly known as muscadines. While this alternative crop is used in 

wines, jellies, jams, and juice, studies have shown that the product and its by-products have tremendous health benefits. Paulk Vineyards received a $126,350 VAPG 

to develop processes that would turn muscadine seeds into anti-oxidant powders and 

a healthy, good-tasting juice. Muscadine seeds are higher in reseratol antioxidant, 

ellagic acid, and total antioxidants than any other fruit analyzed according to several researchers, including the University of Georgia. When dried, crushed, and encapsulated, this value-added product can be sold on the market to biomedical companies, health food stores, natural food stores, and the public. As a result of being 

able to develop these new processes with the value-added grant, the Paulk family 
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is building a new processing facility for its extract and powder lines which will substantially increase employment in this rural area. 

Since the passage of the 2002 Farm Bill, funding for the Agricultural Marketing 

Resource Center (AgMRC) has been set at 5 percent of the funding made available 

to the other value-added programs. Therefore, approximately $1.015 million of the 

$20.295 million budget request will fund the AgMRC’s activities. AgMRC is an electronically based information center that creates processes, analyzes, and presents 

information on value-added agriculture. The center is housed at Iowa State University; however, it has partners at Kansas State University and the University of California–Davis. The center provides producers, processors, and other interested parties with critical information necessary to build successful value-added businesses. 

RURAL COOPERATIVE DEVELOPMENT GRANT PROGRAM

For fiscal year 2007, the budget requests $4.95 million for the Rural Cooperative 

Development Grant Program. The Rural Cooperative Development Grant program 

provides funds to establish and operate centers for developing new cooperatives and 

improving the operations of existing cooperatives with the primary goal of improving 

the economic conditions of rural areas. This program complements our national and 

State office technical assistance efforts by increasing outreach and developing feasibility studies and business plans for new cooperatives, and assisting existing cooperatives in meeting the demands of today’s ever-changing global economy. 

For example, when Cooperative Development Services, Inc. (CDS) started fielding 

inquiries to start new food cooperatives, they found this to be very unique. Not since 

the 1970s had a major number of new food cooperatives been developed in the 

United States. While CDS’ consultants work with over 100 food cooperatives in rural 

Wisconsin, Minnesota, and Iowa, assisting with all phases of leadership development; store growth, and expansion; and operations improvement, it needed additional financing for the technical assistance necessary to meet the growing demands 

of start-up cooperatives. With a Rural Cooperative Development Grant from USDA’s 

Rural Development, CDS was able to advise and assist two steering committees as 

they moved through the steps of cooperative development, including market research, feasibility analysis, business planning, equity formation, and, in one case, 

the hiring of the cooperative’s manager. The results have been an overwhelming 

success. Harvest Market Co-op, located in the Village of Barneveld, opened a grocery 

store cooperative that has 348 members. The store is thriving with projections calling for the store to reach breakeven profitability this year. A second cooperative, 

Just Foods Co-op, has already grown in membership to over 1,100. These start-ups 

served as the catalyst for CDS to create a national model to guide the development 

of food cooperatives across the country. Implemented in June 2005, the model has 

been adopted by other cooperative associations and is expected to grow the number 

of food cooperatives throughout the country in the next 10 years from 300 to 500. 

GRANTS TO ASSIST MINORITY PRODUCERS

For fiscal year 2007, the budget requests $1.485 million for funding for cooperatives or associations of cooperatives whose primary focus is to provide assistance to 

small, minority producers whose governing board and/or membership comprise at 

least 75 percent minority members. Grants may be used for developing business 

plans, conducting feasibility studies, or developing marketing plans for farmers, 

ranchers, loggers, agricultural harvesters and fishermen whose gross annual sales 

do not exceed $250,000. 

COOPERATIVE RESEARCH AGREEMENTS

For fiscal year 2007, the budget requests $495,000 for cooperative research agreements to encourage the study of those issues essential to the development and sustainability of cooperatives. Because so much of rural America’s business endeavors 

are cooperatively formed, their continued success is critical for the continued sustainability of the Nation’s rural communities. Through cooperative research agreements, Rural Development can continue to develop and maintain the information 

base vital for innovative, creative, and prudent decision making. 

INTERMEDIARY RELENDING PROGRAM

The fiscal year 2007 budget also includes $14.951 million in budget authority to 

support $33.925 million in loans under the Intermediary Relending Program (IRP). 

We estimate that the proposed level of funding will create or save approximately 

25,952 jobs over the 30-year period of this year’s loans. Participation by other private credit funding sources is encouraged in the IRP program, since this program 
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requires the intermediary to provide, at a minimum, 25 percent in matching funds. 

To illustrate the benefits IRP provides to rural America, I would like to share with 

you a success story from rural Iowa. 

A $625,000 IRP loan was made to the Corn Belt Power Cooperative in Humboldt, 

Iowa, for the purpose of expanding their existing Revolving Loan Fund. Together 

with private sector matching funds, the loan fund was increased to approximately 

$2,250,000. Based on historical performance, Corn Belt Power estimates that approximately 95 jobs will be created in rural areas with this new injection of funding. 

RURAL BUSINESS ENTERPRISE GRANT PROGRAM/RURAL BUSINESS OPPORTUNITY GRANT

PROGRAM

The Rural Business Enterprise Grant (RBEG) and the Rural Business Opportunity Grant (RBOG) programs are being proposed to be consolidated into the Federal Economic and Community Development programs as part of the President’s initiatives to help strengthen America’s transitioning and most needy communities. 

These grant programs, along with others will be transformed into a new, two-part 

program: (1) the Strengthening America’s Communities Grant Program, a unified 

economic and community development grant program, and (2) the Economic Development Challenge Fund, a bonus program for communities. 

RURAL ECONOMIC DEVELOPMENT LOAN AND GRANT PROGRAMS

The fiscal year 2007 budget includes $7.568 million in budget authority to support 

$34.652 million in Rural Economic Development Loans (REDL) and $10 million in 

Rural Economic Development Grants (REDG). This program represents a unique 

partnership, since it directly involves the Rural Development electric and telecommunications borrowers in community and economic development projects. It provides zero-interest loans and grants to intermediaries, who invest the funds locally. 

The return on our equity from rural America is strong. 

The following is an example of how one REDL will benefit two States by allowing 

a Wisconsin firm to expand its capacity. A loan of $740,000 was provided to the 

Northwest Telephone Cooperative Association on behalf of the Laurens Industrial 

Foundation for Link Snacks, Inc. Laurens, Iowa has a population under 1,500. The 

loan will be used to assist with the purchase of a warehouse facility and equipment 

to accommodate Link Snacks, Inc., of Minong, Wisconsin. Link Snacks, Inc. will use 

the facility as freezer storage and international distribution center for a snack and 

meat production company. In addition, some meat products will be processed at this 

site. As a result, the loan will increase opportunities, help fill vacant space, and create up to 150 new jobs in an area suffering from population decline. 

RENEWABLE ENERGY GRANTS/LOAN GUARANTEE PROGRAM

The Renewable Energy Systems and Energy Efficiency Improvements Program 

were authorized by the Farm Security and Rural Investment Act of 2002. The program authorizes loans, loan guarantees, and grants to farmers, ranchers, and rural 

small businesses to (1) purchase renewable energy systems, and (2) make energy efficiency improvements. The fiscal year 2007 budget proposes a $7.92 million grant 

program and a budget authority of $2.243 million to support $34.560 million guaranteed loan program. The program supports the President’s energy policy goals by 

helping to develop renewable energy supplies that are environmentally friendly. In 

addition, the program contributes to local rural economies through the creation of 

jobs and provides new income sources to rural small businesses, farmers, and ranchers. Finally, the program helps to reduce the costs of doing business for farmers, 

ranchers, and rural small businesses by encouraging the use of energy efficient 

physical plant systems. We anticipate 37,440 households will be served, 388 millionkilowatt hours of energy generated while reducing greenhouse gasses by 0.1 million 

metric tons. These loans and grants will reduce oil imports by 73 million barrels 

in the year funded. 

Reducing the costs of operating a business is significant in terms of job retention. 

In June, 2005, an energy efficiency improvement grant of $98,873 was awarded to 

the New Holland Brewing Company, a Limited Liability Corporation in Holland, 

Michigan. Using the grant, as well as leveraged funds of almost $400,000, the company installed a low pressure boiling storage system and a new lighting fixture with 

motion sensors. Thus, the lights are only on when a person is present to use them. 

It is estimated that the energy efficiency improvements are saving the business between 40 percent and 50 percent of their normal energy costs. 
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BIOMASS RESEARCH AND DEVELOPMENT GRANTS

The Biomass Research and Development Grant program, authorized under section 

9008 of the 2002 Farm Bill, is jointly administered by USDA and the Department 

of Energy. During fiscal year 2006, Rural Development will assume USDA’s part of 

the administration of this program from the Natural Resources Conservation Service. The fiscal year 2007 budget includes funding to provide up to $12 million in 

grants to organizations involved in researching biomass energy alternatives and developing bio-based energy products. 

Mr. Chairman, and members of the Subcommittee, this concludes my testimony 

for the Rural Development fiscal year 2007 budget for rural business-cooperative 

programs. I look forward to working with you and other Committee members to administer our programs. I will be happy to answer any questions the Committee 

might have. 

PREPARED STATEMENT OF RUSSELL T. DAVIS, ADMINISTRATOR, RURAL HOUSING

SERVICE

Mr. Chairman and members of the Subcommittee, thank you for the opportunity 

to present the fiscal year 2007 President’s Budget for the USDA Rural Development 

rural housing and community facilities programs. 

As an integral part of Rural Development, the rural housing programs assist rural 

communities with a wide array of single and multi-family housing options to residents of rural communities. We also help to fund medical facilities, fire and police 

stations, childcare centers, and other essential community facilities. 

The proposed budget for rural housing and community facilities programs in fiscal year 2007 supports a program level of approximately $6.27 billion in loans, loan 

guarantees, grants, and technical assistance. It also maintains the Administration’s 

strong commitment to economic growth, opportunity, and homeownership for rural 

Americans. We believe that our efforts, combined with the best of both the non-profit and private sectors, will ensure that this budget makes a tremendous difference 

in rural communities. The fiscal year 2007 Budget also includes a major initiative 

to revitalize the rural rental housing programs. 

Let me share with you how we plan to continue improving the lives of rural residents under the President’s fiscal year 2007 Budget proposal for our rural housing 

programs. 

PROGRAM HIGHLIGHTS

I am pleased to provide you with an update on several highlights from our major 

programs, as well as key initiatives being undertaken. 

In fiscal year 2005, we were instrumental in the Federal response efforts to hurricanes Katrina and Rita. Immediately following the hurricanes we had our people 

who were already living in the gulf States coordinating relief efforts and assisting 

evacuees with their housing needs. Our Multi-Family Housing program was able to 

place about 10,000 individuals or nearly 4,000 hurricane evacuee families nationwide and was able to offer approximately $17 million in emergency Rental Assistance. In our Single Family Housing program, we provided immediate housing payment moratoriums for over 18,000 of our affected borrowers, suspended foreclosure 

actions, and opened up our single family housing inventory properties nationwide 

in order to place some evacuees. We are continuing to provide relief and assistance 

through aggressive loan servicing, and new loans and grants in the affected areas. 

In December 2005, the Department of Defense Appropriations Act for 2006 provided some relief for areas affected by the hurricanes of 2005. The legislation provides approximately $175.593 million in program level for section 502 direct single 

family loans, $1.293 billion in program level for section 502 guaranteed single family loans, $34.188 million in program level for section 504 home repair loans, and 

$20 million for section 504 home repair grants. In addition to funding, Congress 

gave Rural Development flexibility within their current statutes and regulations to 

meet the needs of those affected by the hurricanes. 

We will soon be announcing details for the rural housing voucher demonstration 

program and expanded revitalization demonstration program that were authorized 

in the 2006 Appropriations Act. We expect to have these programs fully underway 

within the next few months. 

MULTI-FAMILY HOUSING PROGRAMS

The Multi-Family Housing (MFH) budget preserves Rural Development’s commitment to maintaining the affordable housing for the many rural Americans who rent 
431 

their homes. Our existing portfolio provides decent, safe, sanitary, and affordable 

residences for about 470,000 tenant households. 

The total program level request is $825.4 million. Four hundred and $86 million 

will be used for rental assistance (RA) for contract renewals, farm labor housing, 

and preservation. These funds will renew more than 46,000 2-year RA contracts. The fiscal year 2007 budget also requests funds for a program level of $41.6 mil- lion in loans and $13.9 million in grants for the Section 514/516 Farm Labor Housing program, and program level of $1.5 million in loans for credit sales, and $9.9 

million for housing preservation grants. 

Multi-Family Housing Revitalization 

The fiscal year 2007 budget extends the Administration’s proposal to revitalize USDA’s multi-family housing projects by providing $74.2 million for rural housing 

vouchers for tenants of projects that have withdrawn from the program. Upon enactment of legislation the Administration has already submitted to Congress, these 

funds could also be used to provide incentives for project sponsors to stay in the program and make essential repairs and rehabilitations. 

We anticipate our revitalization efforts will span the next several years and have 

initiated a demonstration program using existing authority during fiscal year 2005 

to test the viability of the revitalization concepts. The demonstration validated some 

of the basic revitalization concepts and helped us identify an efficient process for 

implementing the fiscal year 2006 demonstration program and preparing for the full 

scale implementation of the revitalization initiative. The 2005 demonstration effort 

will revitalize 22 rental properties through 12 transactions in the States of Missouri, 

Wisconsin, Louisiana, Arkansas, and Georgia. Through these efforts, 559 tenant 

families will continue to live in affordable rental housing. Eight of the transactions 

have closed and we will complete the remaining shortly. 

Section 538 Guaranteed Rural Rental Housing Program 

The fiscal year 2007 budget request will fund $198 million in section 538 guaranteed loans, funds that may be used for new construction and repairing 515 properties. The section 538 guaranteed program continues to experience ever-increasing 

demand and brisk growth, and is rapidly becoming recognized within the multi-family housing finance, development, and construction industry as a viable conduit to 

facilitate the financing of housing projects. 

In fiscal year 2005, we distributed more than $97 million in guarantees to fund 

housing projects that attracted over $338 million in other sources of funds. The risk 

exposure to the government continues to be very low, as loan guarantees to total 

development costs are well under 30 percent. We also have a delinquency rate of 

zero. Over 90 percent of the applications were awarded Low-Income Housing Tax 

Credits from the various State governments where the projects were located. This 

type of leveraging helps ensure that properties are affordable for low-income families. 

Since inception of the program, the section 538 guaranteed program has closed 

approximately 100 guarantees totaling over $185 million. These closed guarantees 

will provide over 4,500 rural rental units at an average rent per unit of approximately $500 per month. In addition, the program has more than 100 applications 

in the works. 

The rural housing program recently published a final rule on January 19, 2005, 

to address program concerns from our secondary market partners and to make the 

program easier to use and understand. The fiscal year 2007 proposed budget of $198 

million will enable Rural Development to fund a significant number of additional 

guaranteed loan requests. 

SINGLE FAMILY HOUSING PROGRAMS

The Single Family Housing (SFH) programs provide several opportunities for 

rural Americans with very low- to moderate-incomes to purchase homes. Of the 

$4.80 billion in program level requested for the SFH programs in fiscal year 2007, 

$3.56 billion will be available as loan guarantees of private sector loans, including 

about $99 million for refinancing more affordable loans for rural families. Also, with 

$1.237 billion available for direct loans, an increase of 10 percent over the 2006 enacted level, our commitment to serving those most in need in rural areas remains 

strong. This level of funding will provide homeownership opportunities for approximately 40,760 rural families. 

Effective outreach and a quality guarantee product, coupled with low interest 

rates, have increased demand for the section 502 guaranteed program. Currently, 

approximately 2,000 lenders participate in the guaranteed SFH program. The competitive low-interest rate environment has enabled the rural housing program to 
432 

serve low-income families, who would typically receive a section 502 direct loan, 

with a guaranteed loan instead. To help decrease the Federal cost of this program, 

we are requesting the authority to charge up to a 3 percent guarantee fee for purchase loans. Without the proposed fee change the budget authority requested will 

support only $601 million in loans compared to $3.56 billion available if the 3 percent fee were in place. In addition, we are ensuring that this program is not redundant with other Federal guarantee housing loan programs by requiring that the 

lender certify that the borrower does not qualify for another guarantee that the 

lender offers and that they would not issue the loan without the guarantee. 

Section 523 Mutual and Self-Help Housing 

The President’s fiscal year 2007 Budget requests $37.6 million for the mutual and 

self-help housing technical assistance program, an increase of 12 percent over fiscal 

year 2006 levels. 

The fiscal year 2005 ended with over $42 million awarded for contracts and 2- 

year grants. There were 39 ‘‘pre-development’’ grants awarded in fiscal year 2005, 

including many first-time sponsors, several faith-based groups, and groups in States 

with no self-help housing programs. Pre-development funds may be used for market 

analysis, determining feasibility of potential sites and applicants, and as seed 

money to develop a full-fledged application. Groups in the pre-development phase 

typically need 6 to 12 months before they are ready to apply for full funding. 

The fiscal year 2007 proposed budget also includes approximately $36.4 million 

in program level for home repair loan funds and $29.7 million for grants to assist 

elderly homeowners. It also includes approximately $5 million in loan level for each 

of two site loan programs, $10 million in loan level for sales of acquired properties, 

and approximately $990 thousand for supervisory and technical assistance grants. 

COMMUNITY PROGRAMS

The Community Facilities budget request will provide essential community facilities, such as educational facilities, fire, rescue, and public safety facilities, health 

care facilities, and child care centers in rural areas. The total requested program 

level of $521.7 million includes $297 million for direct loans, $207.9 million for loan 

guarantees, and $16.8 million for grants. 

In partnership with local governments, State governments, and Federally-recognized Indian Tribes, the fiscal year 2007 budget will support more than 300 new 

or improved public safety facilities, 125 new and improved health care facilities, and 

approximately 90 new and improved educational facilities to serve rural Americans. 

In fiscal year 2005, we invested over $163 million in 155 educational and cultural 

facilities serving a population totaling over 1.8 million rural residents, over $136 

million in 523 public safety facilities serving a population totaling over 2.4 million 

rural residents, and over $426 million in 166 health care facilities serving a population totaling over 2 million rural residents. Funding for these types of facilities 

totaled $725 million. The remaining balance was used for other essential community 

facilities such as: food banks, community centers, early storm warning systems, 

child care centers, and homeless shelters. 

CONCLUSION

Through our budget, and the continued commitment of President Bush, rural 

Americans will have the tools and opportunities they can put to work to improve 

both their lives and their communities. We recognize that we cannot do this alone 

and will continue to identify and work with partners to improve the lives of rural 

residents. 

I would like to thank each of you for your support of the rural housing and community facility programs’ efforts. I look forward to working with you in moving the 

fiscal year 2007 Budget forward, and welcome your guidance as we continue our 

work together. 

PREPARED STATEMENT OF JAMES M. ANDREW, ADMINISTRATOR, RURAL UTILITIES

SERVICE

Mr. Chairman, members of the Subcommittee, thank you for the opportunity to 

present the President’s fiscal year 2007 budget for USDA Rural Development utilities programs. This is my first appearance before you and I appreciate the opportunity. We value the work and support you and other members of this subcommittee 

have provided us so that together we can provide a strong, dependable infrastructure in the rural United States. 
433 

A strong rural America is important for a strong Nation. We consider the rural 

utilities programs an important part of the USDA Rural Development mission. Safe, 

affordable, modern utility infrastructure is an investment in economic competitiveness and serves as a fundamental building block of economic development. Changes 

in the landscape of rural America, along with developments in technology and 

changes in market structure, combined with an ageing utility infrastructure, are impacting the electric, telecommunications and water sectors. Without the help of 

USDA Rural Development’s utilities programs, rural citizens face monumental challenges in participating in today’s economy, as well as maintaining and improving 

their quality of life. 

The $43.5 billion rural utilities loan portfolio includes investments in 8,000 small 

community and rural water and waste disposal systems, as well as approximately 

2,000 electric and telecommunications systems serving rural America. This local/ 

Federal partnership is an ongoing success story. Eighty percent of the Nation’s 

landmass continues to be rural, encompassing 25 percent of the population. For an 

economy to prosper, we need infrastructure investment to spur economic growth, 

create jobs and improve the quality of life in rural America. 

ELECTRIC PROGRAM

The Electric Program budget proposes a program level of $3.8 billion supported 

by $2.7 million in budget authority. This includes a hardship program level of $99 

million and a $39.6 million program level for municipal rate loans. The Direct 

Treasury rate loan program level is proposed to be $700 million. There is also $3 

billion for the guarantee of Federal Financing Bank (FFB) direct loans. The FFB 

loans are made at the cost of money to the Federal Government plus an one-eight 

of a percent. Both the President and Congress have provided very generous loan levels over the past four years and we have been able to eliminate the backlog in loan 

applications. I believe the President’s budget request will meet the demand during 

the 2007 fiscal year. 

To meet the demands of economic growth across our Nation, the need for transmission lines to deliver electric power where it is needed is placing new demands 

on cooperatives providing transmission service. Last year we predicted that because 

in the last twenty years no new base load capacity had been built, there would be 

an increasing demand for power generation and transmission. We are now seeing 

the first of many applications for those base load requirements. However, past history has shown that base load is riskier than other projects. We intend to develop 

a separate subsidy rate that reflects the increased risk and incorporates a fee to offset the cost. Legislation will be necessary to allow for a fee. Within the $700 million 

requested for direct loans, we plan to make $200 million available for renewable energy projects. 

TELECOMMUNICATIONS PROGRAM

The area of rural telecommunications is the most rapidly changing aspect of rural 

utilities infrastructure. Job growth, economic development, and the quality of life in 

rural America are directly tied to access to today’s high speed telecommunications. 

We administer the Broadband Loan Program, the traditional Telecommunications 

Infrastructure Loan Program, as well as Distance Learning and Telemedicine Loan 

and Grant Programs. 

The fiscal year 2007 Broadband Loan Program budget proposes a program level 

of $356.4 million driven by $10.8 million in budget authority. This replaces the mandatory funding provided by the Farm Bill for the 2007 fiscal year. Moreover, as a 

result of decreased subsidies, the President’s budget will deliver nearly the same 

program level as was anticipated by the Farm Bill. When the 2002 Farm Bill was 

enacted, the mandatory funding anticipated a program level of approximately $400 

million a year. The proposed budget is reflective of the intent of the Farm Bill and 

as it has turned out, more in concert with the demand in qualified loan applications. 

Included in the broadband loans budget proposal is $29.7 million in direct 4 percent loans requiring $3 million in budget authority; $297 million in direct Treasury 

Rate loans is requiring $6.4 million in budget authority, and $29.7 million in guaranteed loans requiring $1.4 million in budget authority. 

We are reviewing every aspect of the program with a view toward making needed 

improvements. We must continue to balance fiduciary responsibility with mission 

delivery. Making bad loans helps no one; making successful loans helps everyone. 

In the regular Telecommunications Program, the 2007 budget proposes a program 

level of $689 million. Included is $143.5 million in direct 5 percent loans, $246.7 million in direct Treasury Rate loans, and $299 million in Federal Financing Bank 
434 

(FFB) direct loans guaranteed by USDA Rural Development. All of this is driven 

by $605,000 in budget authority. 

I am happy to report that the dissolution of the Rural Telephone Bank is progressing on schedule. No funds are requested for that program. 

Distance learning and telemedicine technologies are having a profound impact on 

the lives of rural residents. This program helps rural schools and learning centers 

to take advantage of the information age and enables rural hospitals and health 

care centers to have access to quality medical services only found in large hospitals. 

The Distance Learning and Telemedicine (DLT) program pulls together the best of 

Federal assistance and local leadership. The DLT grants are budgeted at $24.75 

million. The President’s proposal does not request loan program funding simply because the demand for loans to schools and hospitals has never developed and funding is available from previous years to support new loans in fiscal year 2007. 

WATER AND ENVIRONMENTAL PROGRAMS

The Water and Environmental Programs provide the most basic of infrastructure 

needs for rural citizens: clean, safe, affordable drinking water and ecologically sound 

wastewater disposal. No element is more vital to human life and dignity as clean, 

safe water. Rural communities are challenged to provide this vital service while facing increasing regulatory requirements and persistent drought conditions across a 

large area of the country. 

The budget request seeks a program level of $1.4 billion in loans and grants, costing $514 million in budget authority. The total is divided with $990 million in direct 

loans and $75 million in loan guarantees for the Water and Waste Disposal programs. The direct loan program requires $164.7 million in budget authority. The 

budget request also includes $345.9 million in Water and Waste Disposal Grants 

and $3.4 million in Solid Waste Management Grants. 

SUMMARY

Rural Utilities infrastructure programs are interwoven in the fabric of USDA 

Rural Development programs. To provide safe, clean, water; modern communications; and reliable, affordable electric power means businesses can develop, homes 

can have light and heat, and markets can be opened to the rest of the world. We 

will play our part in building communities from the ground up. 

Thank you for the opportunity to present the President’s fiscal year 2007 Budget 

for USDA Rural Development utilities programs. 

PREPARED STATEMENT OF DR. JOSEPH J. JEN, UNDER SECRETARY, RESEARCH, 

EDUCATION, AND ECONOMICS

Mr. Chairman, members of the Committee, it is my pleasure to appear before you 

to discuss the fiscal year 2007 budgets for the Research, Education, and Economics 

(REE) mission area agencies of the USDA. I am accompanied by Dr. Merle Pierson, 

Deputy Under Secretary of REE and the Administrators of the four agencies: Dr. 

Edward Knipling, Administrator of the Agricultural Research Service (ARS); Dr. 

Colien Hefferan, Administrator of the Cooperative State Research, Education, and 

Extension Service (CSREES); Dr. Susan Offutt, Administrator of the Economic Research Service (ERS); and Mr. Ronald Bosecker, Administrator of the National Agricultural Statistics Service (NASS). Also present is Dr. Scott Steele, Director of the 

Office of Budget and Program Analysis of the Department. Each Administrator has 

submitted written testimony for the record. 

The President is committed to reducing the budget deficit by half, and USDA as 

well as many departments across the Federal Government have been called on to 

help make this a reality. The President’s fiscal year 2007 budget proposes $2.283 

billion for the four REE agencies to conduct research, education, economics and statistical programs. This represents a slight decrease of $39 million from the level in 

the President’s fiscal year 2006 budget and a $401 million decrease from the total 

REE appropriation in fiscal year 2006. Within this decrease, the agency budgets 

have critical increases in high priority areas such as food and agricultural defense, 

nutrition and obesity, genomics, and animal and plant diseases. 

Agricultural research is truly the lynchpin of the American food and agricultural 

system. A great deal of the system’s success over many decades is attributable to 

the new scientific understandings and technology generated by our national food 

and agricultural research system, of which USDA’s research agencies are key components. Numerous studies have found that the return on investment in agriculture 

research is high. Whether measured in productivity, competitive strength in global 
435 

markets, environmentally sustainable production practices, or new science-based 

food safety technology, research and development underpins essentially all advances 

in the food and agriculture sector. It provides a necessary condition for success. Natural events, market conditions and resistance to adoption of new technologies can 

be formidable barriers to success. At the same time, absent cutting-edge research, 

the food and agriculture sector runs the risk of losing its edge in increasingly competitive global markets. In that context, I look forward to your consideration of the 

many important requests for the four REE agencies proposed in the President’s 

budget. 

The budget we are discussing today includes what I consider to be an innovative 

and excellent proposal for restructuring the Hatch and McIntire-Stennis formula 

programs. The Administration has been on record for some years as believing that 

competitive programs provide the most effective mechanism for allocating research 

funds to solve pressing national problems. Consistent with that proposition, the fiscal year 2007 President’s budget proposes an innovative approach to introducing 

competition into the Hatch and McIntire-Stennis formula programs. Under the proposal, the current Hatch multi-state research program will be expanded from 25 

percent to approximately 56 percent of the total Hatch funding in 5 years. As current multi-state projects are completed, an increasing portion of these multi-state 

funds will be competed. A similar proposal is made for the McIntire-Stennis formula 

program, with the introduction of a new nationally-competed multi-state program in 

fiscal year 2007. 

This design of the proposal for the two formula programs is responsive to the concerns raised by many stakeholders to last year’s budget proposal. Among other 

things, the new proposal sustains matching funds and sustains the land grant institutions’ Federal funds for leveraging non-Federal resources. In addition, it does not 

reduce appropriated funding from the fiscal year 2006 enacted level. The Department looks forward to working with the State Experiment Stations and forestry colleges in developing an implementation plan for this expanded multi-state program. 

Before turning to the individual agency budgets, I would like to describe increases 

in three particularly high priority areas for the Department: food and agricultural 

defense, nutrition and obesity, and genomics. 

Food and Agricultural Defense Initiative.—Now in its 5 year, the Food and Agriculture Defense Initiative is designed to strengthen the Federal Government’s capacity to defend the Nation’s food and agricultural systems against terrorist attacks, 

major disasters and other emergencies. The fiscal year 2007 budget provides increased program funding of $42.3 million for ARS and $7.1 million for CSREES to 

expand their participation in this initiative. 

Under the Food Defense component of the initiative, ARS increases will allow the 

agency to expand its food safety research, particularly focused on developing technology that rapidly identifies suspected food pathogens and toxins. The budget also 

proposes an increase of $4.2 million for ARS’ National Plant Disease Recovery System which is designed to ensure that disease resistant seed varieties are continually 

developed and made available to producers in the event of a natural or intentional 

catastrophic disease or pest outbreak. An increase of $24.6 million will support 

strengthening ARS’ ongoing research on rapid response systems to bioterror agents, 

improved vaccines, and identification of genes affecting disease resistance. 

The budget provides CSREES $12 million, an increase of $2.1 million from fiscal 

year 2006, to maintain and enhance the Regional Diagnostic Network of public agricultural institutions that serves as a component of APHIS diagnostic laboratories 

for both animals and plants. The initiative also includes $5 million for a competitive 

Higher Education Agrosecurity Program that promotes the training of food system 

defense professionals critically needed in securing our Nation’s agriculture and food 

supply. 

Nutrition and Obesity.—Concern continues regarding the epidemic of obesity in 

the Nation. Particularly distressing is the incidence of obesity in children, estimated 

to be approximately 16 percent for children and adolescents ages 6 to 19. Recent 

studies show that Type 2 diabetes, previously considered an adult disease associated 

with obesity, is increasingly found in children. Future projections of the incidence 

of diabetes, particularly for Hispanic and African-American children, are alarming. 

The causes of obesity are many and complex. Levels of physical activity, reliance 

on convenience food, large food portions, and genetic make-up all play a role. Whatever the set of causes and their interplay, collectively they portend greater problems 

for individuals, families, communities and the country, with the potential for significant productivity losses to the economy and increases in health-related expenses. 

Funding for research now could significantly contribute to the reduction of these 

negative impacts in the future. 
436 

As the Federal Government department most closely associated with food policy 

and programs, USDA has an important role in addressing the obesity challenge and 

more broadly promoting healthy nutrition and weight. Its food assistance, nutrition 

education, and nutrition research programs are all addressing this major national 

public health problem. 

Under the President’s HealthierUS Initiative, the fiscal year 2007 budget proposes increases and program redirections for ARS, CSREES, and ERS that will 

strengthen the Department’s capacity to address obesity and associated issues. The 

increases focus on gaining a better understanding of food consumption patterns and 

the factors influencing them, and on developing effective interventions to promote 

healthy dietary choices. ARS increases and redirection of funds total $11.3 million, of which $4.7 million 

will support a longitudinal study to assess the long-term benefits and approaches 

to controlling weight. We know that it is easy for people to control weight for a short 

period, but very difficult to do so for extended periods of time. This initiative will 

be the only one of its type to address the efficacy of the healthful eating and physical activity patterns set forth in the Dietary Guidelines in preventing obesity in the 

U.S. population, with particular attention focused on children. One aspect of the 

obesity conundrum is that the factors affecting dietary choices and the effects of 

those choices are not only complex, but vary with subpopulations. Redirected funds 

in ARS will be used to gain a better understanding of dietary patterns that contribute to obesity in low socioeconomic and minority populations. Other redirected 

funds will support research to develop effective, and likely distinct, dietary strategies for children, middle-aged adults and Native Americans. An ERS increase of $1.6 million under the agency’s new consumer data and information system will be used to obtain food-away-from-home data that is important 

in supporting the development and targeting of USDA policies and programs to help 

improve the diets and nutrition of all consumers, particularly low-income consumers. Genomics.—The future of agriculture rests in genomics and associated molecular 

biology. Moreover, in many ways that future is here. Genomics and molecular biology are now effectively being used in many types of food and agricultural research 

focused on a wide range of research objectives. Over the last several years, ARS and 

CSREES have increased their investment in genomics and molecular biology, helping to lay the foundation for their use today in applied research. Past increases have 

supported sequencing the genome of important agricultural plants and animals and 

learning about the functions of different genes and how they can be turned on and 

off. ARS and CSREES supported researchers are now aggressively using the technology associated with genetic and molecular biology toward such goals as developing rapid detection tests, isolating disease resistant plant varieties, and enriching 

the nutrients in food. 

Both the ARS and CSREES budgets continue a trend of requested increases in 

genomics. The President’s fiscal year 2007 budget provides a total of almost $17.7 

million for the two agencies. The ARS budget provides an additional $8.7 million 

to identify genes that influence animal and plant growth and quality, disease resistance, and other economically important traits. The proposed increases in the National Research Initiative (NRI) of CSREES would support new or more research in 

domestic animal genomics ($5 million), genomics to improve production of biofuels 

and biobased products ($1 million) and molecular biology to improve the water useefficiency of plants ($3 million). 

An important part of the ARS and CSREES genomics programs is active 

partnering with other science institutions and governments. For example, research 

on plant genomics, in particular sequencing the soybean genome, is being supported 

through a CSREES partnership with the U.S. Department of Energy. ARS and 

CSREES are both coordinating their genomics research with NIH’s National Human 

Genome Research Institute, and the National Science Foundation. 

Classical Chinese Garden.—Under the ARS Building and Facilities program, the 

President’s budget proposes $8.4 million towards a Classical Chinese Garden at the 

U.S. National Arboretum. The Garden is a gift from the Chinese government and 

people to the U.S. Government and people. Once completed, the Garden will be the 

finest example of a Classical Chinese Garden outside of China. The Garden will also 

enrich the Arboretum’s research program, through increasing the availability of vast 

numbers of plants from China that can be used to develop new and improved ornamental and floral plants in the United States. The proposed $8.4 million will be 

used for design validation, infrastructure, and site preparation only. An estimated 

equivalent of over $50 million will be contributed by the China’s State Forestry Administration towards the Garden. The Chinese government is providing the garden 

structures, rockeries, furniture, art objects, and unique plants and is reassembling 
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all the structures and placing them on the infrastructure foundation provided by the 

United States. 

REE FISCAL YEAR 2007 INITIATIVES

I would now like to turn briefly to the budgets of the four REE agencies. 

Agricultural Research Service.—The Agricultural Research Service fiscal year 

2007 budget requests slightly over $1 billion in ongoing research and information 

programs and facilities. Within the total, the budget proposes increases of $57.7 million dedicated to high priority programs addressing issues of national and regional 

importance, several of which were previously described. The budget also proposes 

$49.1 million in program redirections of ongoing base resources to enhance priority 

research objectives. To offset the increases, terminations of approximately $195.7 

million in current programs are proposed. As the principal intramural biological and 

physical science research agency in the Department, ARS continues to play a critical 

role for the Department and the larger agricultural community in conducting both 

basic and mission-oriented research. Results from ARS’ basic research provide the 

foundation for applied research carried out by ARS, academic institutions and private industry. ARS’ applied research and technology development address the research needs of other USDA agencies, as well as of those engaged in the food and 

agriculture sector. 

In addition to the increases previously described, the ARS budget proposes increases to strengthen its research program addressing several diseases, pests, and 

pathogens threatening crop and animal production and marketing and in some 

cases, human health. Bovine Spongiform Encephalopathy (BSE) continues to be a 

challenge for the livestock sector, particularly as it relates to foreign markets. An 

increase of $9.8 million will support ARS scientists in the development of countermeasures to detect, control, and eradicate future BSE and Chronic Wasting Disease. 

Rust diseases, such as Asian soybean rust, pose severe problems throughout the 

United States. A $3.9 million increase will focus on controlling or minimizing the 

spread of rust diseases of grains and soybeans. Throughout the country, different 

varieties of invasive weeds, insects, and pathogens cause tens of billions of dollars 

of agricultural losses each year. Research on these wide-ranging threats such as the 

Asian Longhorned Beetle and Salt Cedar will be enhanced with a proposed $5.4 million increase. 

Development of biobased fuels continues to be a high Administration priority. Research is critical to both improve the agricultural biomass feedstock for the production of energy and to develop the technologies to produce biofuels from the feedstock. 

An increase of $3.6 million will enhance ARS on both these research objectives, as 

well as development of other biobased products. Other priority programs to be 

strengthened through funding increases or redirections include climate change and 

associated carbon sequestration, water quality and technologies to minimize vulnerability to drought, and air quality in the context of animal feeding. 

The Abraham Lincoln National Agricultural Library (NAL), one of four national 

libraries, serves as a valuable national resource for information on food and agricultural sciences. Full integration of many kinds of digital information and fast, seamless navigation among them are essential for NAL to meet the increasingly complex 

customer demands. Proposed funding of $4 million will be used to sustain the national collection of agricultural information warranted by a national library. The 

funds will also be used to continue developing information technology to manage 

and deliver information efficiently. 

Cooperative State Research, Education, and Extension Service—The President’s 

fiscal year 2007 budget provides the Cooperative State Research, Education, and Extension Service just over $1 billion, which is approximately the same as the President’s fiscal year 2006 budget and $161.3 million less than fiscal year 2006. In providing critical funding for the research, education, and extension programs of the 

Land Grant system and other universities and organizations across the country, 

CSREES continues to play a central role in the generation of new knowledge and 

technology, and the transfer of that knowledge and technology to stakeholders. 

The restructuring of the Hatch and McIntire-Stennis formula programs at the 

same overall funding levels as fiscal year 2006 is a critical part of CSREES’ budget 

proposal. The budget also includes important increases to strengthen high priority 

programs. 

The NRI, the agency’s flagship competitive research program, continues to be a 

very effective avenue for supporting cutting-edge research conducted by the finest 

scientists across the country. The fiscal year 2007 budget proposes a $66.3 million 

increase in the NRI. In addition to the increases in genomic research previously described, the budget provides for increases in animal production, emerging issues in 
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food and agricultural biosecurity, and invasive species. A $42.3 million increase in 

the NRI on-going programs is being shifted from the Integrated Activities account 

to the NRI to achieve greater efficiency in program administration. The focus of the 

programs, including water quality and food safety, will stay the same. The proposed CSREES budget also includes an increase of about $1 million to a total of $6.9 million to fund outreach and technical assistance for socially disadvantaged farmers and ranchers. 

Economic Research Service.—The Economic Research Service is provided $82.5 

million in the President’s fiscal year 2007 budget. As the Department’s principal intramural economics and social science research agency, ERS conducts research and 

analysis on the efficiency, efficacy, and equity aspects of issues related to agriculture, food safety, human nutrition, the environment, and rural development. In 

addition to the increases described above related to obesity and nutrition, the budget includes $5 million to fund a new Agricultural and Rural Development Information System, a comprehensive data collection and research program to monitor the 

economic health and well-being of farm and non-farm households in rural areas. The 

increase will support collection of multiple-year, longitudinal information on rural 

household in areas with specific challenges, such as persistent poverty and population loss, and adds a longitudinal component to USDA’s Agricultural Resource 

Management Survey (ARMS) to collect information on farms in the same areas. In 

particular, the information generated will support programs administered by the 

Department’s Rural Development mission area. 

National Agricultural Statistics Service.—The National Agricultural Statistics Service budget requests $152.5 million, an increase of $13.3 million over the fiscal 

year 2006 Act. NASS’ comprehensive, reliable, and timely data are critical for informing policy decisions to keep agricultural markets stable, and to ensure a level 

playing field for all users of agricultural statistics. The President’s budget provides 

increases in the agency’s agricultural estimates program and the Census of Agriculture. 

An increase of $3.9 million is directed at the continuing restoration and modernization of the agency’s core survey and estimation program begun in fiscal year 

2004. Producers rely on the NASS surveys as being comprehensive and accurate in 

making their decisions. Funding received in the fiscal year 2004 through fiscal year 

2006 appropriations has been used to successfully improve the precision level for 

commodity surveys conducted by NASS for State, regional, and national estimates 

through sample size increases and better survey response. Funding requested in fiscal year 2007 will promote data quality by encouraging voluntary response through 

increased respondent awareness of market and policy reliance upon USDA–NASS 

statistical measures and by improving the data collection capabilities of local interviewers throughout the Nation. The budget also provides an increase of $7.3 million 

for the Census of Agriculture based on its 5 year cycle. The increase supports the 

normal increase in the level of activity as the next Census year, 2007, approaches. 

The 2007 data will be collected in 2008. For the first time, respondents will be able 

to complete the survey over the Internet. 

SUMMARY

In summary, the REE agencies’ budgets we are discussing today present a balanced research, education, and economics portfolio, with investments in such high 

priority issues as animal disease, nutrition and obesity, food safety and farm household well-being. Such a budget is particularly notable at a time of severe budget 

constraints. 

Reflecting back on the importance of research to the long-term success and competitiveness U.S. agriculture, it is critical that a strong, dynamic, and focused food 

and agricultural research portfolio be sustained. The proposals for REE in the President’s budget will do just that. This concludes my statement. Thank you for your 

attention. I look forward to answering your questions. 

PREPARED STATEMENT OF DR. EDWARD B. KNIPLINGS, ADMINISTRATOR, 

AGRICULTURAL RESEARCH SERVICE

Mr. Chairman, and members of the Subcommittee, I appreciate this opportunity 

to present the Agricultural Research Service’s (ARS) budget recommendations for 

fiscal year 2007. The President’s fiscal year 2007 budget request for ARS’ research 

programs is a little over $1 billion, a net decrease of $123 million or about 11 percent from the fiscal year 2006 funding level. There are several components to ARS’ 

fiscal year 2007 budget request: (1) $106.8 million for new and expanded priority 

research initiatives ($57.7 million represents a net increase in budget authority and 
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$49.1 million is from reprogramming); (2) $15.4 million for pay costs; (3) $3.1 million 

for reprogramming recommendations to transfer resources from existing locations in 

support of priority research needs; and (4) $195.7 million for proposed program and 

project terminations. 

Of the proposed new and enhanced research increases, $48.2 million is in support 

of the Federal Government’s initiative to strengthen the Nation’s homeland security. 

Homeland security research is in the areas of food safety, emerging and exotic diseases of animals and crops, and for the National Plant Disease Recovery System. 

ARS is also proposing new and expanded initiatives for research on Bovine 

Spongiform Encephalopathy (BSE), invasive species of animals and plants, nutrition 

and obesity, genetics and genomics, biobased products and bioenergy, air and water 

quality, and climate change. Increases for the National Agricultural Library and information technology are also requested. 

The budget proposes the termination of a number of research laboratories and 

projects and associated resources appropriated in recent years totaling $195.7 million. The savings to be achieved through the proposed terminations will finance the 

higher priority research initiatives proposed in ARS’ budget, as well as help reduce 

overall Federal spending. 

The ARS budget also includes $8.4 million under its Buildings and Facilities account for the construction of infrastructure for a Classical Chinese Garden at the 

U.S. National Arboretum in Washington, DC. 

PROPOSED PROGRAM INCREASES AND REDIRECTIONS

These high priority increases respond to urgent, nationwide issues in critical 

areas, such as homeland security, emerging diseases, food safety, obesity, climate 

change, invasive species, and genomics and genetics, that affect the entire country. 

—Food Safety—$13.8 Million.—Ensuring the safety of the Nation’s food supply is 

essential and vitally important to the Nation’s homeland security. Bioterrorism 

against our food supply would affect the health and safety of consumers and 

their confidence in the safety of the foods they consume. It would also have farreaching impacts on the country’s economy, since U.S. agriculture employs nearly one-quarter of the Nation’s workforce and annually contributes over one trillion dollars to the gross domestic product. ARS research will focus on assessing 

the vulnerabilities of the food supply, strengthening and expanding laboratory 

preparedness, and developing technologies which rapidly identify suspected food 

pathogens and toxins. ARS will work in these areas of prevention, detection, 

and response with the Food Safety and Inspection Service and other USDA 

agencies, through programs, such as the Collaboration for Animal Health and 

Food Safety Epidemiology. 

—Human Nutrition/Obesity Prevention Research—$11.3 Million.—Two of every 

three American adults and an increasing number of children are overweight or 

obese, making obesity one of this country’s fastest growing public health problems. It contributes to heart disease, cancer, diabetes, and other illnesses resulting in hundreds of billions of dollars in health care costs each year. Understanding food consumption trends and the factors that influence dietary choices 

is critical for developing strategies for preventing and mitigating obesity. ARS 

will use the proposed increase to conduct nutrition surveys and research to prevent childhood and adult obesity, and to develop strategies which encourage 

healthy food choices. 

—Avian Influenza (AI) and Foot-and-Mouth Disease (FMD)—$6.1 Million.—Animal health officials define a foreign animal disease as a transmissible livestock 

or poultry disease that has a potentially significant health or economic impact. 

AI and FMD are two of the most serious foreign animal diseases which presently threaten the United States. ARS will use the proposed increase to: develop 

diagnostic detection tools that can be more widely used in field situations, increase our understanding of disease epidemiology (i.e., spread of virus, routes 

of transmission, persistence of infection), and deploy countermeasures in the 

form of vaccines and antivirals. 

—Bovine Spongiform Encephalopathy (BSE) and Chronic Wasting Disease 

(CWD)—$9.8 Million.—BSE is a progressive, degenerative, fatal disease affecting the central nervous system of adult cattle. It is believed that eating contaminated beef products from BSE-affected cattle causes a variant form of 

Creutzfeldt-Jacob Disease in humans. The first case of BSE was identified in 

the United States on December 23, 2003. CWD is a disease which affects deer 

and elk. Unlike BSE, CWD does not appear to be transmissible to humans, but 

it is worrisome because it could jump species barriers and become more virulent 
440 

or infectious. The proposed increase will enable ARS scientists to develop countermeasures to detect, control, and eradicate future BSE and CWD outbreaks. —Soybean and Wheat Stem Rust—$3.9 Million.—Rust diseases pose severe problems in crops throughout the United States. Since 2000, Stripe Rust has caused 

hundreds of millions of dollars in losses to wheat growers. Asian Soybean Rust 

(SBR) is reported to cause up to 80 percent yield losses in numerous countries 

around the world. The first incidence of SBR, in nine soybean producing States 

in the United States, was confirmed by the Animal and Plant Health Inspection 

Service (APHIS) in 2004. The proposed increase will be used to control or minimize the spread of SBR, Stripe Rust, and other rust diseases of grains and soybeans. —Emerging and Exotic Diseases of Animals and Plants—$15.3 Million.—The 

United States is increasingly vulnerable to emerging animal and plant diseases 

which could threaten the Nation’s homeland security. The threat of new diseases—whether they are a result of bioterrorism or of naturally occurring 

epidemics—is an urgent and growing challenge to livestock producers. Bovine 

Viral Diarrhea in cattle, Porcine Reproductive Respiratory Syndrome in swine, 

and Marek’s disease virus in chickens are examples of these exotic diseases. 

Harmful animal diseases introduced to the United States in recent years from 

foreign countries include Exotic Newcastle Disease and Monkeypox. Brucellosis, 

Leptospiroris, and West Nile Virus are still other examples of zoonotic diseases 

that pose a threat not only to animals but to humans as well. Similarly, exotic 

and emerging plant diseases—wheat and barley rusts, citrus canker, and corn 

viruses—present a potential threat to the Nation’s agriculture industry. With 

the proposed increase, ARS will develop vaccines, intervention strategies, and 

diagnostics for the detection, identification, control, and eradication of these animal and plant disease threats. —Emergency Research Needs and Research to Assist APHIS—$7.4 Million.— APHIS has requested help from ARS in controlling various animal diseases, 

such as FMD, Rift Valley Fever, and Classical Swine Fever, and plant diseases, 

such as Citrus Canker and Citrus Leprosis Virus. There is also a need for ARS 

to be able to respond to unanticipated special research needs and emergencies. 

Often, funds are not readily available for these situations. The proposed increase will provide ARS with the flexibility to respond quickly to special needs 

and emergencies as well as support APHIS’ efforts to control and eradicate 

pests and diseases. —National Plant Disease Recovery System—$4.2 Million.—The emergence or 

spread of certain plant diseases, such as soybean rust, citrus variegated chlorosis, or bacterial wilt, could seriously harm America’s agriculture. Recovery 

from a significant disease outbreak requires a national system to manage host/ 

pathogen interactions using cultural, biological, and chemical control strategies 

and deploy resistant plant resources. Homeland Security Presidential Directive 

(HSPD–9) has charged ARS with the responsibility for leading this effort with 

the Cooperative State Research, Education and Extension Service (CSREES), 

APHIS, and others. ARS will use the proposed increase to minimize the impacts 

of devastating crop diseases by documenting and characterizing plant diseases, 

developing germplasm and plant varieties with improved disease resistant characteristics, implementing integrated pest management approaches, and transferring genetic resources (i.e., disease resistant plant varieties) to its customers. 

—Invasive Species—$5.4 Million.—Invasive weeds, insects, pathogens, and other 

pest species cost the United States tens of billions of dollars each year in agricultural losses, negatively impacting the environment and biodiversity as well. 

Sudden Oak Death has had negative effects on California’s plant nurseries. Salt 

Cedar and Yellow Starthistle (invasive weeds) have caused agricultural and environmental damage in several western States. Lobate Lac Scale, Asian 

Longhorned Beetle, and Emerald Ash Borer (invasive insects) have caused damage to a wide range of plant species. Animals are also at risk. Imported Fire 

Ants, which inhabit over 350 million acres in 12 southern States, from Texas 

to Virginia, damage crops and are a threat to livestock, wildlife, and humans. 

ARS will use the proposed increase to target its research on controlling invasive 

species including Imported Fire Ants, Sudden Oak Death, Salt Cedar, Yellow 

Starthistle, Lobate Lac Scale, Asian Longhorned Beetle, and Emerald Ash 

Borer. 

—Applied Genomics—$8.7 Million.—Genomics holds the key to maintaining 

America’s agricultural competitiveness in global markets. Advances in genomics 

research can improve the production and quality of food products, prevent animal and plant diseases, and produce foods which are richer in nutrients. To capture the potential of genomics, ARS needs to continue its work on character-
441 

izing, identifying, and manipulating the useful properties of genes and genomes. 

In this regard, ARS will use the proposed increase to identify genes that influence animal and plant growth and quality, disease resistance, and other economically important traits. ARS will continue to coordinate its genomics research with National Institutes of Health’s National Human Genome Research 

Institute, CSREES, and the National Science Foundation. —Genetic Resources—$2.6 Million.—The rate of extinction of lines and strains of 

food animals and plants is accelerating. The Nation needs a more comprehensive program to maintain threatened germplasm to prevent the loss of genetic 

diversity. An adequate supply of useful genes is essential in the event of bioterrorism or other crises (e.g., FMD, Exotic Newcastle Disease, etc.). With the proposed increase, ARS will enhance its ability to collect, identify, characterize, and 

incorporate plant germplasm into centralized gene banks. The additional funding will help sustain ARS’ National Plant Germplasm System repositories; it 

will also enable further development of cryopreservation technologies for longterm storage of important animal germplasm (i.e., of poultry, aquaculture, cattle 

and swine). —Biobased Products/Bioenergy Research—$3.6 Million.—The Biomass Research 

and Development Act of 2000 and the Food Security and Rural Investment Act 

of 2002 encourages the development and use of biobased products. There is also 

a need to expand the development of bioenergy. ARS will focus its research on: 

(1) improving the quality and quantity of agricultural biomass feedstocks for the 

production of energy and biobased products, (2) developing technologies to 

produce biofuels from agricultural commodities and byproducts, and (3) developing technologies leading to new value-added products from food animal byproducts. Increased development of bioenergy and biobased products will expand market opportunities for U.S. agriculture, reduce the Nation’s dependence 

on petroleum imports from unstable regions, and improve environmental quality 

by reducing air pollution and greenhouse gas emissions. —Air/Water Quality and Drought Mitigation—$3.5 Million.—Millions of Americans are exposed to air pollution levels that exceed the Environmental Protection Agency’s air quality standards. Agriculture activities, such as animal production operations, which produce ammonia, particulate matter, and volatile organic compounds, can adversely affect air quality. Another concern is the quantity and quality of water available in the United States. Drought and its impacts annually cost the Nation $6 to $8 billion. ARS will use the proposed increase to develop new technologies that reduce gaseous and particulate matter 

emissions from animal feeding operations. It will also provide technologies that 

help ensure adequate water for agriculture and improve the health of the Nation’s streams, rivers, and lakes. —Global Climate Change—$3.2 Million.—Climate change encompasses global and 

regional changes in the earth’s atmospheric, hydrological, and biological systems. Agriculture is vulnerable to these environmental changes. The objective 

of ARS’ global change research is to develop the information and tools necessary 

for agriculture to mitigate climate change. ARS has research programs on carbon cycle/storage, trace gases (i.e., methane and nitrous oxide), agricultural ecosystem impacts, and weather/water cycle changes. ARS will use the proposed 

increase to develop climate change mitigation technologies and practices for the 

agricultural sector. Specifically, ARS will: (1) conduct interdisciplinary research 

leading to technologies and practices for sustaining or enhancing food and fiber 

production and carbon sequestration by agricultural systems exposed to multiple environmental and management conditions, (2) expand the existing network of ARS sites conducting measurements of greenhouse gas fluxes between 

the atmosphere and the land, and (3) identify ways to decrease methane emissions associated with livestock. 

—National Digital Library for Agriculture and Improved Agricultural Information 

Services—$4.0 Million.—In 2001, both a ‘‘Blue Ribbon Panel’’ and an advisory 

board concluded that the National Agricultural Library (NAL) needed increased 

resources to meet its potential, taking advantage of technological innovations 

for timely information access and retrieval. Full integration of many kinds of 

digital information and fast, seamless navigation among them are essential for 

NAL to satisfy the increasingly complex interdisciplinary information needs of 

its customers. The proposed funding will support the revitalization of NAL, enabling it to better deliver relevant information products, satisfy increasingly complex customer demands, and provide leadership as the premier agricultural information resource of the United States. 

—Information Technology—$4.1 Million.—ARS information technology (IT) systems and networks are exposed to an unprecedented level of risk. Of particular 
442 

importance is safeguarding the Agency’s pathogenic, genomic, and other sensitive research information from being acquired or destroyed by unauthorized 

intruders through unprotected or undetected cyber links. Agencywide centralized security measures are needed to counter security threats. ARS must also 

ensure that its IT infrastructure (i.e., computers, network hardware, etc.) is upto-date and reliable. ARS will use the proposed increase to replace, upgrade, 

and secure its IT equipment and systems. 

PROPOSED OPERATING INCREASES

In addition to the proposed research initiatives, ARS’ fiscal year 2007 budget pro- vides funding to cover costs associated with pay raises. An increase of $15.4 million 

is essential to finance these costs and to avoid erosion of the Agency’s base resources. 

PROPOSED PROGRAM DECREASES

ARS is proposing the reduction/termination of selected research programs and projects, totaling $195.7 million, to finance higher priority research and support the 

Administration’s efforts to reduce spending and the Federal deficit. As the country 

faces new challenges in the areas of homeland security, food safety, and obesity, 

ARS needs to reprioritize and reallocate resources. Many of the projects being reduced or terminated pertain to research carried out by other ARS locations or other 

research institutions. 

PROPOSED REPROGRAMMINGS

The proposed budget includes $3.1 million to reprogram programs and resources 

currently operating at Baton Rouge, Louisiana and Lane, Oklahoma. Funding for 

Soil and Water research at Baton Rouge, Louisiana is proposed to be reprogrammed 

to higher priority initiatives and obesity research at the Pennington Biomedical Research Center at Baton Rouge. Similarly, funding for crop genetics research at Lane, 

Oklahoma is proposed to be reprogrammed to higher priority forage-livestock research at ARS’ El Reno and Woodward, Oklahoma locations. 

PROPOSED INCREASE FOR BUILDINGS AND FACILITIES

The fiscal year 2007 budget recommends $8.4 million for ARS’ Buildings and Facilities account. The Agency is recommending these funds be used to assist in the 

construction of a Classical Chinese Garden (CCG) at the U.S. National Arboretum 

(USNA) in Washington, DC, most of which will be built and paid for by the People’s 

Republic of China. The Garden will serve as a symbol of friendship between the Chinese and American people and help promote better relations between the two nations. The proposed new garden will also serve as a major research facility. The 

project will enable the introduction of unique Chinese flowers and plants into the 

United States for horticultural research purposes. 

CCG is a priority project for the USDA and the People’s Republic of China (PRC). 

The design was developed by a joint team from the PRC and the United States and 

has been approved by the National Capital Planning Commission and the District 

of Columbia Commission on Fine Arts. 

The structure, landscaping, and interior furnishings of the CCG will be provided 

by the Chinese State Forestry Administration. The land at USNA has been made 

available by USDA. As part of this venture, USDA is responsible for providing the 

infrastructure and site work, including grading and foundations. The proposed $8.4 

million is to cover these activities. USDA will subsequently be responsible for the 

security and maintenance of the garden. 

Mr. Chairman, this concludes my presentation of ARS’ budget recommendations 

for fiscal year 2007. I will be happy to respond to any questions the Committee may 

have. 

PREPARED STATEMENT OF DR. COLIEN HEFFERAN, ADMINISTRATOR, COOPERATIVE

STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE

Mr. Chairman and Members of the Committee, I appreciate the opportunity to 

present the President’s fiscal year 2007 budget for the Cooperative State Research, 

Education, and Extension Service (CSREES), one of the four agencies in the Research, Education, and Economics (REE) mission area of the United States Department of Agriculture (USDA). 

The CSREES fiscal year 2007 budget proposal is just over $1 billion. CSREES, 

in concert with the Secretary of Agriculture and the intent of Congress, works in 
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partnership with the land-grant university system, other colleges and universities, 

and public and private research and education organizations to initiate and develop 

agricultural research, extension, higher education, and related international activities to advance knowledge for agriculture, the environment, human health and wellbeing, and communities. In addition, CSREES implements grants for organizations 

to better reach and assist disadvantaged farmers and ranchers in accessing programs of USDA. These partnerships result in a breadth of expertise that is ready 

to deliver solutions to problems facing U.S. agriculture today. 

The fiscal year 2007 CSREES budget request aligns funding and performance 

with the USDA strategic goals. CSREES manages its many budget elements in support of research, education, extension, and outreach programs as part of a cohesive 

whole supporting all six of the Department’s strategic goals. The Agency defines distinct performance criteria, including strategic objectives and key outcomes with 

identified annual targets. As part of an integrated budget and performance process, 

CSREES conducts periodic portfolio reviews by external experts to monitor overall 

program progress, suggest alternative approaches, and propose management improvements. 

In support of the Administration’s commitment to ensure that Federal funds are 

used to support the highest quality research, the fiscal year 2006 Budget proposed 

to increase overall funding for competitive peer reviewed research and reduce funding for formula grant programs that do not allocate funds based on a competitive 

process. Extensive analysis of the stakeholder response to the proposal indicated 

that primary concerns included the lack of consultation with affected universities 

and stakeholders, loss of matching funds, program continuity and length of awards, 

sustaining breadth of capacity in agricultural science and education nationwide, providing responsiveness to State and local issues, and leveraging and sustaining partnerships across institutions. 

In response to the concerns, CSREES proposes a new initiative that supports the 

Administration’s belief that the most effective and flexible way to fund research 

projects is through peer reviewed competitive awards that address national issues, 

while at the same time, responds to stakeholder concerns and still retains overall 

funding at enacted levels. CSREES recognizes that multi-state programs have been 

an effective part of the portfolio of work funded through the Hatch formula, assuring focused, non-duplicative, collaborative, problem-solving science. This program 

lends itself to national peer review. To achieve the goals of expanding competitiveness and peer review, we propose an approach that would expand and continuously 

recompete the multi-state awards of the Hatch Act program; and establish a similar, 

though separately authorized, program for McIntire-Stennis Cooperative Forestry 

(McIntire-Stennis) funds. 

In fiscal year 2007, CSREES is proposing to distribute a portion of the Hatch Act 

and the McIntire-Stennis formula programs to nationally, competitively awarded 

multi-state/multi-institutional projects based on high priority national topics decided 

by CSREES in consultation with our land grant partners. This new plan for multistate programming sustains the matching requirement and the leveraging of Federal funds. It also allows institutions to focus on program strengths they identify 

and sustain through linking local issues to broad national goals. The Agency is 

eager to work with the agricultural experiment station and university forestry research communities to develop an implementation plan for the expanded multistate/multi-institutional effort. 

CSREES also will continue to distribute a portion of the Hatch Act and McIntireStennis funds on the basis of the formula. The requested $177 million of Hatch Act 

funds will support research at the SAES related to producing, marketing, distributing, and utilizing crops and resources; enhancing nutrition; and improving rural 

living conditions. Funds will support research topics such as water and other natural resources, crop and animal resources, people and communities, competition and 

trade, and human nutrition. In addition, $22 million of the funding requested for 

the McIntire-Stennis program will continue to support research related to timber 

production, forest land management, wood utilization, and the associated development of new products and distribution systems. Both the Hatch Act and McIntireStennis programs allow 5 year projects supporting the goal of continuity. 

CSREES proposes to eliminate funding for the Animal Health and Disease Program. Alternative funding from the National Research Initiative (NRI) program 

could be used to support aspects of this program. Recent, large Coordinated Agricultural Project (CAP) grants have supported animal disease issues, such as Johnes 

Disease and Avian Influenza. 

CSREES continues to provide new opportunities for discoveries and advances in 

knowledge through the NRI program. The fiscal year 2007 budget request of $247.5 
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million for the NRI is a strong statement of the importance that the Administration 

places on competitively awarded grants to advance knowledge for agriculture. 

The NRI will continue to support current high priority programs with an emphasis on critical issues. For example, under the NRI CAP, multi-million dollar awards 

support multi-year large-scale projects to promote collaboration, open communication, and coordinated activities among individuals, institutions, States, and regions 

to address priority issues of national importance. Under the NRI Animal Biosecurity 

Program, CSREES is investing funds to support three animal disease CAPs. CAP 

awards for Avian Influenza ($5 million/3 years with 18 States involved), Porcine Reproductive and Respiratory Syndrome ($4.4 million/3 years with 16 States involved), 

and Johne’s Disease ($4.4 million/3 years with 21 States involved) are working to 

accelerate research discoveries and the translation of basic and applied research 

into significant outcomes that diminish the impact and threat from these diseases. 

These projects provide a strategic framework of objectives that integrate research, 

education, and extension specialists representing academia, producers, veterinarians, pharmaceutical and other biologics companies, Federal agencies, State partners, and international institutions. 

Under the Applied Plant Genomics Program in the NRI, CSREES supports two CAPs—rice ($5 million/4 years representing 12 States) and wheat ($5 million/4 

years representing 17 States.) Activities under these CAPs are working to bridge the 

gap between cereal grain genomics and traditional breeding practices. The Project 

Directors for the CAPs recently met to discuss facilitating synergistic activities 

across the CAPs that will provide lasting benefits to U.S. agriculture through improved varieties. Also discussed was how the U.S. public breeding programs can capitalize on advances in genomics. The Agency also continues support for a CAP focused on food safety at North Carolina State University. 

Expanded partnerships with other Federal agencies on research topics of mutual 

interest will be possible with the increase in the NRI funding. For example, research 

on plant genomics, in particular sequencing of the soybean genome, will be supported through a partnership with the U.S. Department of Energy. The research collaboration will substantially contribute to advances in soybean breeding, with great 

potential to improve the environmental and nutritional quality of the plant, leading 

to improved efficiency of production, reduced environmental impact, and healthier 

foods. 

The NRI also will support research on animal genomics. Substantial public investment in the Human Genome Project has led to technologies, practices, and knowledge which enable cost-effective research in animal genomics. The considerable similarities of the genomes of livestock species, fish, and birds to that of human will reduce the need for whole genome sequencing. An increase of $5 million in the NRI 

to support domestic animal genomics including bioinformatics is requested. CSREES proposes that $42.3 million from the Integrated Activities account for 

programs that focus on water quality, food safety, methyl bromide, organic transition, and pest-related programs be administered through the NRI. This transfer is 

proposed as a means to streamline the CSREES budget portfolio. Funding for these 

programs will be sustained at the fiscal year 2006 levels. 

Under the NRI, an increase of $1 million is requested for genomics and biomass/ 

biofuels that focus on the functional genomics and bioinformatics of microorganisms 

to increase the efficiency of biological conversion of pulp and paper products to 

bioenery and biobased products and the development of new products including biologically-based fuels. These efforts will tap into the power of genomics to provide insights into new approaches for converting low value, agricultural feedstocks to high 

value fuels and products. 

An increase of $12 million is proposed to address emerging issues in food and agriculture biosecurity under the NRI. The requested funding will support research, 

education, and extension activities on emerging pathogens and antibiotic production 

for animal protection and biosecurity, and on microbial forensics of food safety 

pathogens. 

In fiscal year 2007 an increase of $3 million is proposed under the NRI for ecology 

and economics of biological invasions. The requested funds will support projects that 

couple the economic predictions of costs of prevention and control with ecological 

processes that govern the entry, spread, and damage by invasive species. 

Under the NRI, an increase of $3 million is proposed in fiscal year 2007 for plant 

biotechnology and water security. The funds will support research on methods of 

modern molecular biology to improve the water use-efficiency of crops, managed forests, and horticulture plants. 

In continuing and expanding our efforts for agricultural security and in support 

of the President’s Food and Agriculture Defense Initiative, CSREES, through cooperative efforts with the Animal and Plant Health Inspection Service, has established 
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a unified Federal-State network of public agricultural institutions to identify and respond to high risk biological pathogens in the food and agricultural system. The network is comprised of 13 State animal diagnostic laboratories and 6 plant diagnostic 

laboratories, strategically located around the country. These 19 key laboratories are 

developing a two-way, secure communications network with other university and 

State Department of Agriculture diagnostic laboratories throughout their respective 

regions. The diagnostic laboratories are responsible for identifying, containing, and 

minimizing the impact of exotic and domestic pests and pathogens that are of concern to the security of our food and agricultural production systems. For example, 

the National Animal Health Laboratory Network (NAHLN) with its 12 founding laboratories in New York, Louisiana, Georgia, Texas, Wisconsin, Iowa, Colorado, Washington, California, Arizona, North Carolina and Florida continued efforts to enhance 

national preparedness against foreign animal disease appearing in the United 

States by conducting activities related to Avian Influenza (AI). AI is one of the new 

high-consequence animal pathogens covered by the NAHLN protocols. In its efforts 

to increase the ability to respond to outbreaks, NAHLN increased the number of 

laboratories that can run the real time polymerase chain reaction for AI using a 

standardized assay and protocol. Annual proficiency testing is required of individuals conducting testing to ensure quality results. The budget proposal requests an 

increase of $2.1 million for a total of $12 million to maintain the current level of 

diagnostic capabilities across the Nation. CSREES proposes $5 million for the Agrosecurity Education Program to support 

educational and professional development for personnel so strengthen our national 

capacity to secure the Nation’s agricultural and food supply. The program will develop and promote curricula for undergraduate and graduate level higher education 

programs that support the protection of animals, plants, and public health. The program is designed to support cross-disciplinary degree programs that combine training in food sciences, agricultural sciences, medicine, veterinary medicine, epidemiology, microbiology, chemistry, engineering, and mathematics (statistical modeling) 

to prepare food system defense professionals. Also proposed is $2.3 million for the 

Asian Soybean Rust Program. The funds will provide stakeholders with effective decision support for managing diseases of legume crops, particularly soybean rust, to 

continue surveillance of sentinel plots. 

CSREES continues to expand diversity and opportunity with activities under 1890 

base and educational programs, and 1994, insular areas, and Hispanic-Serving Institutions educational programs. In fiscal year 2007, the budget requests an increase 

of approximately $1.2 million for both the research and extension 1890 base programs. Funding for our 1890 base programs provides a stable level of support for 

the implementation of research and extension programming that is responsive to 

emerging agricultural issues. Funding for the 1994 Institutions strengthens the capacity of the Tribal Colleges to more firmly establish themselves as partners in the 

food and agricultural science and education system through expanding their linkages with 1862 and 1890 Institutions. Proposed funding for the Resident Instruction 

Grants for Insular Areas Program will be used to enhance teaching programs at 

higher education institutions located in U.S. insular areas that focus on agriculture, 

natural resources, forestry, veterinary medicine, home economics, and disciplines 

closely allied to food and agriculture production and delivery systems. Continued 

funding for the Hispanic-Serving Institutions promotes the ability of the institutions 

to carry out educational training programs in the food and agricultural sciences. 

This proven path of research, extension, and educational program development rapidly delivers new technologies into the hands of all citizens, helping them solve 

problems important to their lives. 

CSREES also will continue to effectively reach underserved communities through 

increased support for the Outreach and Assistance for Socially Disadvantaged 

Farmers and Ranchers (OASDFR) Program. CSREES will fund competitive multiyear projects to support outreach to disadvantaged farmers and ranchers by providing grants to educational institutions and community-based organizations to support these groups. Funds for the OASDFR program will encourage and assist socially disadvantaged farmers and ranchers in their efforts to become or remain owners and operators by providing technical assistance, outreach, and education to promote fuller participation in all USDA programs. CSREES requests an increase of 

about $1 million for the OASDFR program. 

The CSREES higher education programs contribute to the development of human 

capacity and respond to the need for a highly trained cadre of quality scientists, engineers, managers, and technical specialists in the food and fiber system. The fiscal 

year 2007 budget provides a $.8 million increase in the Food and Agricultural 

Sciences National Needs Graduate Fellowship program. This program prepares 

graduates to deal with emerging challenges in such areas as agricultural biosecurity 
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to ensure the safety and security of our agriculture and food supply, natural resources and forestry, and human health and nutrition, including problems related 

to obesity such as diabetes and cardiovascular health. Other higher education programs will provide important and unique support to Tribal Colleges, the 1890 LandGrant Colleges and Universities, and the 1862 Land-Grant Universities as they pilot 

important new approaches to expand their programs. 

CSREES is requesting funds to accelerate and innovate the New Technologies for 

Agricultural Extension (NTAE) to establish an eXtension network which will offer 

Americans unparalleled access to scientifically-derived and unbiased information, 

education, and guidance. The fiscal year 2007 budget proposal includes a $1.5 million increase for the NTAE Program to allow the Cooperative Extension System to 

make available research-based education offered through eXtension to a technology 

conscious Nation. 

To ensure the highest quality research which addresses national needs within 

available funding, the fiscal year 2007 budget proposes to eliminate earmarked 

projects. Peer-reviewed competitive programs that meet national needs are a much 

more effective use of taxpayer dollars than earmarks that are provided to a specific 

recipient for needs that may not be national. Based upon its broad scope, including 

the expanded integrated authority, and proposed funding increase, alternative funding from the NRI could be used to provide a peer-reviewed forum for seeking and 

assessing much of the work funded through earmarks. For example in the past four 

years, CSREES supported research in animal identification and/or animal tracking 

under earmarked projects which fit within the scope of the NRI. In addition, earmarked projects for human nutrition and food safety also could fit within the program areas of the NRI. 

The fiscal year 2007 budget proposes changes in the general provisions including 

increasing the amount provided for the NRI that may be used for competitive integrated activities from up to 22 percent to up to 30 percent. Also proposed is the 

elimination of the cap on indirect costs for competitively awarded grants. In the past 

indirect cost rate caps have resulted in recipients’ inability to recover legitimate indirect costs, thus penalizing recipients who choose to do business with CSREES. 

This elimination allows full indirect cost recovery under competitive awards and 

places CSREES competitive programs on an equal footing with other Federal assistance programs, so that top scientists will be more likely to apply for CSREES grant 

programs. 

CSREES consulted widely in the development of program goals and budget priorities for fiscal year 2007. In discussions with the land-grant university system, forestry researchers, and others, stakeholders expressed their concerns over the approach to expand competitive research grant programs. The President’s fiscal year 

2007 budget proposal addresses their concerns, and is consistent with the view that 

the most effective use of taxpayer dollars is through competitively awarded grants 

that meet National goals. CSREES, in collaboration with university and other partners nationwide, continues to enhance its responsiveness and flexibility in addressing critical agricultural issues. This proposal provides support for research, extension, higher education, and outreach and assistance activities in the food, agricultural, and human sciences that can make a difference in solving problems facing the 

Nation. 

Mr. Chairman, this concludes my statement. I will be glad to answer any questions the Committee may have. 

PREPARED STATEMENT OF SUSAN E. OFFUTT, ADMINISTRATOR, ECONOMIC RESEARCH

SERVICE

Mr. Chairman and members of the Committee, I am pleased to have the opportunity to present the proposed fiscal year 2007 budget for the Economic Research 

Service (ERS). 

MISSION

The Economic Research Service informs and enhances public and private decision 

making on economic and policy issues related to agriculture, food, the environment, 

and rural development. 

BUDGET

The agency’s request for 2007 is $82.5 million, which includes increases for two 

initiatives and pay costs. The agency is requesting an increase of $5 million to develop an agricultural and rural development information system that will monitor 
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the changing economic health and well-being of farm and non-farm households in 

rural areas; and an increase of $1.6 million to continue the development of an integrated and comprehensive data and analysis framework of the food system beyond 

the farm-gate that will provide a basis for understanding, monitoring, tracking, and 

identifying changes in the food supply and in consumption patterns. 

AGRICULTURAL AND RURAL DEVELOPMENT INFORMATION SYSTEM

In fiscal year 2007, ERS is requesting an increase of $5.0 million to fund the Agricultural and Rural Development Information System, to implement a comprehensive 

data collection and research program that will monitor the changing economic wellbeing of farm and non-farm households in rural areas. This initiative supports collection of survey data from farm and non-farm households over time to analyze the 

effects of policy adjustments in rural areas facing specific development issues, such 

as persistent poverty or substantial out migration. Data and analysis from this Agricultural and Rural Development Information System will be critical to identifying 

the most successful economic development strategies for different types of rural 

areas, the adjustments that farm households and rural communities make in response to agricultural policy changes, and the importance of the linkages between 

farm and non-farm economies in assessing farm and rural policy effects. The initiative also supplies the better and more useful information on the status of farm, market, and rural economics that USDA partners and customers seek. 

The $5.0 million total amount requested would be allocated to four specific sets 

of activities. The first, collecting longitudinal data from rural households, will involve developing and supporting an integrated set of surveys, which include core 

components to track critical indicators over time as well as modules on specific topics related to emerging policy issues. The second, collecting longitudinal data from 

farm households, will build on USDA’s Agricultural Resource Management Survey 

(ARMS). The third will be to expand public internet access to ERS agricultural and 

rural data. A portion of the initiative funds would be devoted to providing State and 

local governments, trade and commodity associations, other interest groups, and the 

public, easy, interactive access to a new Agricultural and Rural Development System. The fourth is to assure research capacity to analyze, interpret and apply new 

agricultural and rural development information. 

Data are not currently available to allow analysts to distinguish the effects of 

rural development, farm, and agricultural resource programs from one another, and 

from the myriad of other forces affecting the economic well-being of farm and rural 

households. The Census Bureau’s Census of the Population provides information on 

rural households within the context of their local area, but it does not include a longitudinal component that allows assessment of individual household response to 

changing policies and programs over time. The American Community Survey will, 

in time, provide social and economic data at the census tract level, but it does not 

use a longitudinal framework to understand individual household change. Other 

data sources, such as the Survey of Income and Program Participation, have a longitudinal component but do not have sufficient detail or statistical reliability to allow 

analyses of local rural area household response for specific areas facing specific development challenges. 

CONSUMER DATA AND INFORMATION SYSTEM

In fiscal year 2007, ERS is requesting an increase of $1.6 million to augment the 

Consumer Data and Information System that was provided funds in fiscal year 

2006. New funding will be used to obtain data on consumption of food away from 

home to improve the understanding of how individuals make food choices. A major 

change in U.S. food consumption patterns in the last several decades has been the 

increasing popularity of foods consumed away from home. The importance of data 

on food-away-home consumption for understanding food choices and nutritional outcomes is growing, as Americans now spend about 50 percent of their total food budget on food-away-from-home in 2004, up from 27 percent in 1962. 

The additional funding requested this year supports ERS long-term goals and objectives for research on food choices, including: 

—Identifying differences in consumption of food away from home by region and 

customer/household demographics (such as income, education level, age, and 

presence of children in the household); 

—Measuring the effect of prices of food away from home on food choices, by region 

and customer/household demographics; 

—Assessing how low-income households differ in the away-from-home food choices 

they make and the prices that they pay; 
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—Assessing how households’ away-from-home food choices change through consumers’ life cycle. For example, households with young children tend to favor 

fast food restaurants over sit-down restaurants. Older Americans are known to 

eat out less frequently than young adults; and 

—Examining the extent by which convenience of eating away from home is impact 

American’s food choices. 

USDA officials require timely information on food prices, product movements, and 

potential consumer reactions to events to effectively make commodity support decisions, provide nutrition education, and ensure the safety of food. The components 

of the Consumer Data and Information System already implemented with prior 

years’ funding will provide USDA with current food prices, sales volumes, food purchases, a database on consumer characteristics and purchasing behavior, and the 

ability to quickly survey consumer reactions, knowledge, attitudes, and awareness 

on a host of issues. For example, we will be able to determine how consumers respond to USDA’s nutrition information efforts, such as the Food Guide Pyramid and 

recommendations to increase consumption of whole grains. 

The Consumer Data and Information System has three major components providing intelligence across and within the food and agricultural complex. The Food 

Market Surveillance Report will provide policy officials with the most up-to-date information on food prices, purchases, and sales data publicly or privately available. 

This information will improve USDA decision-making and provide data for understanding consumer purchasing behaviors. 

The Rapid Consumer Response Module will provide real-time information on consumer reactions to unforeseen events and disruptions, current market events, and 

government policies. The module question will be asked of members of several proprietary consumer data panels currently maintained by private vendors. The Rapid 

Consumer Response Survey is awaiting OMB approval. 

Using fiscal year 2005 and fiscal year 2006 funding, ERS has continued development of the third major component of the Consumer Data and Information System, 

the Flexible Consumer Behavior Survey (FCBS). This survey will complement data 

from the National Health and Nutrition Examination Survey (NHANES) by providing information needed to assess linkages among individuals’ knowledge and attitudes about food safety and dietary guidance, their economic circumstances, their 

food-choice decisions, and their nutrient intakes. Combining the NHANES with this 

new survey allows analysis of how individual behavior, information, and economic 

factors affect food choices, dietary status, and health outcomes. The FCBS is scheduled to appear on the 2007–2008 NHANES with research data available in 2009. 

ERS CONTRIBUTIONS TO MISSION AREA GOALS

ERS supports the six USDA strategic goals to: (1) enhance international competitiveness of American agriculture; (2) enhance the competitiveness and sustainability 

of rural and farm economies; (3) support increased economic opportunities and improved quality of life in rural America; (4) enhance protection and safety of the Nation’s agriculture and food supply; (5) improve the Nation’s nutrition and health; 

and (6) protect and enhance the Nation’s natural resource base and environment. 

Goal 1: Enhanced International Competitiveness of American Agriculture 

ERS helps the U.S. food and agriculture sector adapt to changing market structures in rapidly globalizing, consumer-driven markets by analyzing the linkages between domestic and global food and commodity markets, as well as the implications 

of alternative domestic and international policies on competitiveness. ERS economists analyze factors that drive change in the structure and performance of domestic and global food and agriculture markets; provide economic assessment of structural change and competition in the agricultural sector; analyze the price impacts 

of evolving structural changes in food retailing; analyze how international trade 

agreements and foreign trade restrictions affect U.S. agricultural production, exports, imports, and income; and provide economic analyses that determine how fundamental commodity market relationships are adjusting to changing trade, domestic 

policy, and structural conditions. ERS will continue to work closely with the World 

Agricultural Outlook Board (WAOB) and USDA agencies to provide short- and longterm projections of United States and world agricultural production, consumption, 

and trade. 

In 2006, several initiatives are increasing the timeliness and availability of data 

and information, while simultaneously saving staff time. We are increasing the 

transparency of our commodity projections processes, and automating calculations 

where possible, and embedding them within databases. Our goals are to: (1) make 

the work transparent, inviting critique from both internal and external users; (2) 

transition to fewer outlook analysts as retirements near, and (3) increase timeliness 
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in the release of data. Our redesigned feedgrains database provides a wider range 

of data with automatic updates from our ongoing commodity analysis reports. A new 

database on base acres allows users to download and map county-level farm program and planted acreage data for nine major program crops. 

Large developing countries—such as China, India and Brazil—are becoming more 

important to U.S. agriculture. China is one of the top 10 markets for U.S. agricultural exports and is the world’s largest producer and consumer of a range of commodities. ERS research continues to examine key factors that will shape the size 

and pattern of China’s agricultural trade: water scarcity, implementation of WTO 

commitments, changes in Chinese consumers’ demand for food, and new directions 

in agricultural policy and investment in agriculture and rural areas. ERS’ China 

briefing room on our website provides access to a new queriable Agricultural and 

Economic database containing information on agricultural production, food consumption, price indices, macroeconomic information and industrial output. India’s 

strong economic growth and rising middle class are creating new markets for agricultural products. ERS research examines the policy environment and prospects for 

growth in key commodity markets, such as cotton, oilseeds, poultry and apples. 

Food price determination is increasingly important for understanding domestic 

and international markets and opportunities to promote U.S. agriculture. ERS food 

markets research focuses on enhancing knowledge and understanding of food prices, 

both their objective measurement and how they are set by firms at different stages 

of the food system. ERS has begun to use micro-level household and store scanner 

data to measure the impact of changing store formats on food prices in order to 

focus on the changing economic environment and how these changes could affect 

customers’ retail food purchasing habits. 

ERS will continue to work closely with the Foreign Agricultural Service (FAS) and 

the Office of the U.S. Trade Representative to ensure that ongoing negotiations on 

the Doha Development Agenda under the auspices of the World Trade Organization 

(WTO) and regional trade agreements are successful and advantageous for U.S. agriculture. The demands of developing countries for sharp cuts in domestic agricultural policies, along with exemptions that would limit the opening of their markets, 

serve as stumbling blocks to reaching an agreement in current WTO negotiations. 

ERS has developed new analytic tools, including its PEATSIM (Partial Equlibrium 

Trade Simulation) modeling framework, to provide more detailed analysis of the 

global benefits of trade liberalization. It has also completed studies of important 

issues affecting developing countries, including preferential trade agreements and 

forces shaping global cotton markets after the end of the Multifiber arrangement. 

Goal 2: Enhanced Competitiveness and Sustainability of Rural and Farm Economies 

ERS provides assessment of the effects of farm policy on commodity markets and 

the food and agricultural sector. For example, the 2005 USDA report, The 20th Century Transformation of U.S. Agriculture and Farm Policy provides perspective on 

the long-term forces that have helped shape agricultural and rural life and considers 

the extent to which farm policy design has or has not kept pace with the continuing 

transformation of American agriculture. ERS is also preparing a series of nine commodity background studies to augment information available to policy decision makers. 

Changes in U.S. farm structure can have wide-ranging impacts on agricultural 

productivity, opportunities for farm operators, and the distribution of benefits from 

government programs. ERS research focuses on two elements of change: the widespread shift of production to larger farms, and the growing use of formal contracts 

between farmers and buyers, used to guide farm production and marketing decisions. An updated Family Farm report will be released in 2006, as well as an Economic Brief detailing the impact of structural change on the distribution of Federal 

commodity payments. 

ERS recently released a report, using 2003 data, on the growing use of agricultural contracts (Agricultural Contracting Update: Contracts in 2003). For producers, 

contracting can reduce income risks of price and production variability, ensure market access, and provide higher returns for differentiated farm products. For processors and other buyers, vertical coordination through contracting is a way to ensure the flow of products, obtain differentiated products, ensure traceability for 

health concerns, and guarantee certain methods of production. But widespread contract use can also limit the efficiency of cash markets, and under certain circumstances contracts can allow buyers to extend market power. A September, 2005 

ERS report (Did the Mandatory Requirement Aid the Market? Impact of the Livestock Mandatory Reporting Act) examined the effects of expanded price reporting requirements on contract and cash markets for cattle. 
450 

Current research is examining the effects of contract use in hog, dairy, and poultry sectors. For example, ERS research has found that marketing contracts between 

packers and producers can facilitate industry efforts to address pork quality needs 

by reducing measuring costs, controlling quality attributes that are difficult to 

measure, facilitating adaptations to changing quality standards, and reducing transaction costs associated with relationship-specific investments in branding programs. 

Organic farming continues to be one of the fastest growing segments of U.S. agriculture and can potentially enhance environmental protection, as well as economic 

opportunities for producers. Appropriations received in fiscal year 2005 and fiscal 

year 2006 will enable ERS to continue to explore in greater depth the market for 

organic products and the performance of organic farm sectors. In 2005, ERS hosted 

an interagency USDA workshop on organic agriculture which assessed producer options and obstacles in adopting organic farming systems, and evaluated new developments in organic marketing and technology. Also in 2005, ERS began adding a 

targeted sample of organic producers to the USDA Agricultural Resources Management Survey (ARMS). The first of these enhanced ARMS surveys, targeting organic 

dairy producers, will be administered in 2006, and will be followed by an over sample of organic soybean producers in the subsequent ARMS survey. Survey data for 

both organic and conventional operations will enable, for the first time, a side-byside comparison of the profitability, productivity, energy efficiency, and other economic characteristics of these farms. 

The Agricultural Resource Management Survey (ARMS) helps support important 

estimates, analyses, and research produced by ERS. Two key uses of ARMS are to 

underpin estimates of income and value-added that are provided to the Department 

of Commerce for use in preparing the U.S. national accounts, and to produce estimates of income for different types of commercial-size farm businesses, such as 

those that produce program crop commodities, that were required by the Congress 

in the 2002 Farm Bill. Data from ARMS are used in a collaborative effort between 

ERS and the National Agricultural Statistics Service to measure annual production 

expenses in U.S. agriculture. 

A special emphasis of ARMS in 2006 is to measure use of purchase practices and 

strategies by farm managers in acquiring production inputs, including energy-based 

inputs such as fertilizers, chemicals, and fuels. These data will be used to help provide a broader understanding of how changes in inputs costs affect different types 

of farms and areas of the country. Additional funding provided for ARMS in fiscal 

year 2003 was used to increase the number of farm businesses included in the 

ARMS sample and to more effectively disseminate annual survey results to data 

users. In the 2005 calendar year survey, now in the field to be enumerated, about 

34,000 farmers will be interviewed nationwide. The larger sample for ARMS gives 

us greater confidence in income and financial measures produced for the and geographic areas, and for types and sizes of farms engaged in U.S. agriculture. ERS 

continues to focus on improving the dissemination of ARMS data so that annual survey results are more readily available and easily accessible to data users, while assuring that sensitive data are not disclosed. The web-based, secure ARMS data retrieval and summarization tool, implement in late 2004, has now been through a 

successful update with release of the latest annual data in November, 2005. About 

700 unique data users access ARMS results through this web-based outlet each 

month. 

Goal 3: Support Increased Economic Opportunities and Improved Quality of Life in 

Rural America 

ERS assesses rural needs by examining the changing demographic, employment, 

education, income, and housing patterns of rural areas. Data from the 2000 Census 

and other Federal information sources provide the most up-to-date information on 

the current conditions and trends affecting rural areas, and provide the factual base 

for rural development program initiatives. In 2006, the agency is continuing its series of publications that report current indicators of social and economic conditions 

in rural areas for use in developing policies and programs to assist rural people and 

their communities. Rural America at a Glance: 2006 and Rural Employment at a 

Glance, designed for a policy audience, will summarize the most current information 

on these topics. 

ERS research focuses on the determinants and consequences of critical themes in 

contemporary rural America, including changing population composition and industrial restructuring. One emerging rural population trend is baby boomer migration 

as they retire. The oldest members of the baby boom cohort are now 60 years old, 

just entering the stage in their lives when they tend to migrate for retirement. The 

growth of baby boomer populations in rural and small town America depends on demographic, natural amenity, housing market, urban proximity, and economic factors 
451 

affecting their migration flows. ERS will publish a report in 2006 analyzing the impact of these factors during the 1990s, which will help policymakers and planners 

better anticipate the likely increase in migration of baby boomers into rural areas 

over the next 20 years. 

ERS is examining the effects of industrial change on the geography of low-skill 

employment. Today many rural labor market areas find themselves in the midst of 

industrial transformation as regional, national, and global forces reshape the geography of economic activity. ERS research is addressing how the transformation of 

rural America from an economy based on manufacturing and extraction to one based 

on services and amenities has changed the prospects for workers with limited skills 

and education. A recent ERS study analyzed trends in rural low-skill employment 

in the 1990s and identified the industrial and occupational components of this 

change. The findings suggest that investment in education and training, rather than 

industrial targeting, is a more effective approach to raising skill levels in the rural 

economy. In 2006, ERS will publish a second report looking at the regional variation 

in the rural shift toward a service economy, and in the effects of this shift on lowskill labor demand. The expected result is a better understanding of how global economic forces, including broader trade liberalization and rapid technological change, 

can affect rural communities and how Federal and local responses can assist in the 

resulting restructuring. 

Goal 4: Enhance Protection and Safety of the Nation’s Agriculture and Food Supply 

In response to increased risks to the Nation’s agriculture and food supply due to 

bio-terrorism, ERS embarked on an ambitious project known as Geo-Spatial Economic Analysis (GSEA). The GSEA system merges an extensive Geographic Information System with the analytical expertise of ERS’s economists. The Security 

Analysis System for U.S. Agriculture (SAS–USA), which is being updated and enhanced in 2006 under a cooperative agreement with the Massachusetts Institute of 

Technology, systematically ties all food supply processes from farm production, food 

manufacturing, distribution of food products, to food consumption in every region of 

the country and other non-agricultural sectors, such as energy and services. The 

GSEA system is designed to serve as a platform for collaborative analysis across 

agencies in USDA and with appropriate groups in FDA and the Department of 

Homeland Security (DHS). These capabilities mean that emergencies can be managed efficiently and expeditiously by assessing vulnerabilities and predicting outcomes. The first simulation system prototype will completed this year as part of a 

joint project with the Army Corps of Engineers, the Tennessee Valley Authority, and 

Oak Ridge National Lab to improve our ability to measure the economic consequences in the food and agricultural industries caused by transportation disruptions. In support of broad USDA initiatives such as the National Plant Disease Recovery System, the GSEA system will serve as a tool to improve economic assessments of crop and animal disease outbreaks using alternative control strategies. 

As part of several national homeland security activities, ERS continues to develop 

and expand the capacity to assess the impact of accidental and intentional disruptions to our food and agricultural system. This year ERS will provide access to the 

GIS platform for selected staff in USDA and other government agencies. The GIS 

platform allows analysts to quickly manage the county-level crop, livestock, demographic and economic data needed to provide scope and context in the event of an 

emergency. ERS staff are prepared to conduct the complex economic analysis needed 

to assess the cost of securing our food supply, which includes protecting production, 

processing, distribution, and consumption of food and agricultural products. ERS is 

working with the Homeland Security Office (HSO), Office of Risk Assessment and 

Cost Benefit Analysis (ORACBA), Animal and Plant Health Inspection Service 

(APHIS), and the Food and Drug Administration (FDA) to improve tools for the 

analysis of disruption and disease mitigation strategies that require both sound biological and economic analysis. 

ERS has become well-known for its pioneering estimates of the societal costs associated with foodborne illnesses due to E. coli and other known pathogens. ERS and 

researchers from Harvard and the University of Wyoming are collaborating to develop new methodologies for more accurately eliciting and measuring the value of 

reductions in health risk associated with foodborne pathogens. This project applies 

state-of-the-art valuation methodologies to measure the benefits of improving food 

safety. A survey conducted in 2004 presented respondents with information on duration and severity of foodborne illness and asked respondents how much they would 

be willing to pay for a food with lower risk of foodborne illness. Another survey conducted in 2005 provided respondents with information about the likelihood of 

foodborne illnesses and asked them about their food consumption and food safety 
452 

practices. Analysts will explore the linkage between food choices and food safety information using the information obtained by this survey. 

In the event that unsafe food enters the marketplace, public health officials and 

food safety regulators ultimately rely on records maintained by private industry and 

retailers to track the manufacture and distribution of that food. Privately maintained traceability bookkeeping records provide investigators with information on 

the extent and distribution of a contaminated product—and on how to remove such 

a product from distribution channels efficiently. The strength of private traceability 

systems and the readiness of the food industry to track and recall a contaminated 

product is important for safeguarding the Nation’s food supply. In 2006, ERS will 

continue work with agricultural economists from the University of Arkansas to investigate how various food companies in different industries handle product recalls, 

the operation of designated recall teams, and the frequency and results of mock recalls. The research will examine the type and scope of information collected from 

auditing and certification activities, characteristics of firms with recall practices, 

and the proportion of firms in given sectors participating in auditing and certification activities. 

Goal 5: Improve the Nation’s Nutrition and Health 

ERS research has a major focus on the economic dimensions of obesity, including 

understanding the societal costs of obesity, explaining obesity trends among different demographic and income groups, and assessing the benefits and costs of alternative options for influencing Americans’ food choices and dietary behaviors, including roles for nutrition education and Federal food and nutrition assistance programs. ERS investigated consumers’ likely response to a tax on snack foods a public 

health issues generated by rising U.S. obesity rates. Findings suggest that the impacts on dietary quality from the tax are small and negligible at the lower tax rates. 

If taxes were earmarked for funding information programs, as several proponents 

suggest, taxes would generate a revenue stream the public health community could 

use for nutrition education. 

In 2006, ERS is investigating the factors that influence consumers’ food choices 

when eating away from home using the NHANES data. This research will focus on 

discovering consumer preferences, such as convenience and entertainment that compete with healthy eating. Information about these factors help social marketers design effective campaigns to influence consumers’ away from home eating behavior. 

Whether the poor pay more for food than other income groups matters to their nutrition and health; therefore, the operating costs of the stores at which they shop 

matter. An ERS study found overall operating costs of stores with high food stamp 

redemption rates are not significantly different from those of stores with moderate 

redemption rates. If the poor do pay more, factors other than operating costs are 

likely to be the reason. 

ERS is currently conducting a study of the economic factors affecting the cost of 

infant formula and rebates issued to the Special Supplemental Nutrition Program 

for Women, Infants, and Children Program (WIC). Over half of all infant formula 

sold in the United States is purchased through USDA’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). In fiscal year 2004, WIC 

State agencies obtained $1.6 billion in rebates from infant formula manufacturers 

for formula purchased through WIC. In recent years, some States awarding new infant formula contracts have seen a marked decrease in the size of the rebate. As 

a result, concern has been raised that the cost to the States of providing infant formula to WIC participants is increasing, a result that if sustained, could have farreaching negative implications for the WIC program A final report will be released 

in 2006. 

ERS continues to monitor U.S. households’ food security—their access to enough 

food for active, healthy living—and the extent and severity of food insecurity. ERS 

funds a national food security survey, conducted by the Census Bureau, and reports 

annually on the food security of the Nation’s households. The Committee on National Statistics (CNSTAT) of the National Academy of Sciences will complete its review, funded by ERS and USDA’s Food and Nutrition Service, of the methods and 

procedures that underlie the current measures of food security. ERS will lead 

USDA’s work to enhance and strengthen these methods for monitoring, evaluation, 

and related research purposes pursuant to CNSTAT findings and recommendations. 

As part of our effort to improve the timeliness and quality of the Department’s 

food consumption data, in 2003 ERS launched an interagency effort to develop a 

proposal for an external review of USDA’s food consumption data needs and gaps. 

Enhancements to the food consumption data infrastructure are critical to understanding and addressing many market and policy issues in the Department. The 

interagency effort led to the funding of a review by the National Research Council’s 
453 

Committee on National Statistics. The Committee issued its final report in 2005, 

which included several recommendations. An interagency working group has been 

established to take responsibility for the systematic development and use of diet and 

food consumption data to address policy and research questions of the Federal Government, as recommended by the Committee. ERS is participating in this working 

group, which will consider priorities and methods for obtaining additional food and 

nutrition-related data in the National Health and Nutrition Examination Survey. As 

recommended by the committee, ERS is also evaluating the use of data on food purchases, prices, and consumption from proprietary retail scanner systems, household 

scanner panels, and household consumption surveys. This evaluation will examine 

the quality of the data, consider ways to reduce the cost of access to the data, and 

determine the highest priority applications for the information. 

Goal 6: Protect and Enhance the Nation’s Natural Resource Base and Environment 

ERS continues to provide comprehensive information to public and private users 

on programs in the Conservation Title of the Farm Security and Rural Investment 

Act of 2002. The ERS report, Flexible Conservation Measures on Working Land: 

What Challenges Lie Ahead? released in 2005, deals with the complexities associated with the design of working-land payment programs. Program design and implementation will largely determine the extent to which environmental goals are 

achieved, and whether they are achieved cost-effectively. Empirical analysis also 

shows how the environment, commodity prices, and farm incomes could be affected 

by alternative designs. 

In the course of the production of food and fiber, agriculture also produces many 

by-products (positive externalities) such as open space, recreational amenities, scenic views, groundwater recharge, and wildlife habitat. Historically, the standard policy practice has been to address each externality through a separate policy instrument. However, when the transaction costs of administering policies (e.g., information gathering, contract formulation, enforcement) are positive, using one instrument to address each externality or objective may not be optimal. Using an empirical analysis focusing on the CRP, the ERS report The Multiple Objectives of AgriEnvironmental Policy, to be released in 2006, explores the extent to which environmental attributes may be jointly produced, e.g., efforts to reduce soil erosion may 

also reduce nutrient runoff and increase soil carbon, with implications for simultaneously targeting multiple environmental and cost objectives. 

Furthermore, applying environmental policies in an uncoordinated fashion fails to 

account for interactions among environmental mediums (i.e., air, land, water). This 

can result in conflicting policies, in that addressing one environmental problem can 

make another worse. The ERS report, Manure Management for Multimedia Environmental Improvement: A Comparison of Single Media versus Multi-Media Policy 

Optimization, released in 2005, provides a concrete example of the tradeoffs of alternately and simultaneously meeting air and water quality objectives, in terms of 

farmers’ costs, production decisions, and environmental indicators, by focusing on 

livestock and poultry production. Among the results in the report is that, if enacted, 

restrictions on ammonia emissions from concentrated animal feeding operations 

could increase the cost of meeting Clean Water Act regulations for spreading manure. 

In 2006, ERS will release an update of its popular Agricultural Resources and Environmental Indicators report, which describes trends in resources used in and affected by agricultural production, as well as the economic conditions and policies 

that influence agricultural resource use and its environmental impacts. Each chapter provides a concise overview of a specific topic with links to sources of additional 

information. 

In fiscal year 2005, ERS continued the Program of Research on the Economics of 

Invasive Species Management (PREISM) that was initiated in fiscal year 2003. 

PREISM supports economic research and the development of decision support tools 

that have direct implications for USDA policies and programs for protection from, 

control/management of, regulation concerning, or trade policy relating to invasive 

species. Program priorities have been selected through extensive consultation with 

APHIS, the Office of Budget and Program Analysis (OBPA) and other agencies with 

responsibility for program management. In 2004 and 2005, APHIS used an ERSsupplied pest ranking decision tool to determine which pests would be on its Federal-State Cooperative Agricultural Pest Survey list, making transparent the basis 

for selecting the pests for which State cooperators could receive targeted pest surveillance and detections funds. The recent and rapid spread of the pathogen, soybean rust (SBR), in South America prompted ERS, in April 2004, to publish a study 

of the potential economic impacts and policy impacts of its windborne entry into the 

United States, Economic and Policy Implications of Wind-Borne Entry of Asian Soy-
454 

bean Rust into the United States. USDA used this study to refine rapid response 

strategies to SBR entry, which was confirmed by APHIS in November 2004. ERS 

built on this work to examine the value to producers of USDA’s coordinated framework to detect and report the presence of Asian soybean rust in different producing 

areas in The Value of Plant Disease Early-Warning Information: USDA’s Soybean 

Rust Coordinated Framework, to be published in 2006. 

In addition to ERS-led analyses of invasive species issues, PREISM has allocated 

about $3.6 million in extramural research cooperative agreements since fiscal year 

2003 through a peer-reviewed competitive process. These agreements and their accomplishments through 2005 are documented in a new report, Program of Research 

on the Economics of Invasive Species Management: Fiscal 2003–2005 Activities. 

PREISM-funded projects are developing analytical tools to address Federal and 

State decision issues such as trade regulation, design and choice of exclusion policies, and the selection of options or strategies to manage plants pests and animal 

diseases. For example, researchers from Virginia Polytechnic Institute developed a 

framework and assisted APHIS in analyzing the impacts of a trade regulation to 

allow imports of avocados from approved orchards and packers in the state of 

Michoacan, Mexico. The economic model, analysis, and responses to public comments were published along with the new avocado regulation in the Federal Register (Nov. 30, 2004). To share and review progress made by cooperators who received PREISM funding, and to provide a forum for dialogue on economic issues associated with agricultural invasive species, ERS organized workshops in 2004 and 

2005, each with about 100 attendees from academia and Federal agencies. Among 

the projects funded in fiscal year 2005 were studies of the value of animal 

traceability systems is managing contagious animal diseases, the economic effects 

of phytosanitary barriers to U.S. seed exports, and the benefits and costs of policy 

options to manage risks associated with commercial imports of non-native nursery 

stock. 

CUSTOMERS, PARTNERS, AND STAKEHOLDERS

ERS shapes its program and products principally to serve key decision-makers 

who routinely make or influence public policy and program decisions. This clientele 

includes White House and USDA policy officials and program administrators/managers; the U.S. Congress; other Federal agencies, and State and local government 

officials; and domestic and international environmental, consumer, and other public 

organizations, including farm and industry groups interested in public policy issues. 

ERS depends heavily on working relationships with other organizations and individuals to accomplish its mission. Key partners include: NASS for primary data collection; universities for research collaboration; the media as disseminators of ERS 

analyses; and other government agencies and departments for data information and 

services. Examples of successful partnerships with other agencies include conservation policy design (NRCS), creating a component to the National Health and Nutrition Examination Survey (FNS, Center for Policy and Promotion, along with the Department of Health and Human Services), and the economics of invasive species 

management (APHIS). ERS augments its research capacity with 93 cooperative 

agreements, 14 research grants, and 26 Memorandums of Understanding (MOUs). 

CLOSING REMARKS

I appreciate the support that this Committee has given ERS in the past and look 

forward to continue working with you and your staff to ensure that ERS makes the 

most effective and appropriate use of public resources. Thank you. 

ADDITIONAL COMMITTEE QUESTIONS

Senator BENNETT. Thank you. Thank you all for your testimony. 

We will have some written questions for you, but we appreciate 

your service and appreciate your appearing here today. 

[The following questions were not asked at the hearing, but were 

submitted to the Department for response subsequent to the hearing:] 
455 

QUESTIONS SUBMITTED BY SENATOR ROBERT F. BENNETT

CAPITAL SECURITY COST SHARING PROGRAM

Question. The Department of State requires all agencies with an overseas presence in U.S. diplomatic facilities to pay a share of costs through the Capital Security 

Cost Sharing Program. The fiscal year 2007 budget request for the Foreign Agricultural Service (FAS) includes $2.9 million for this program. What assurances have 

you received from the State Department that FAS is paying for space that they actually occupy? Is the agency currently paying for space in facilities where they do 

not have a presence? 

Answer. The State Department has not provided any specific assurances that FAS 

will actually occupy the space for which we are billed; however, they are working 

very closely with the affected agencies. Currently, the State Department depends on 

several databases and a data call issued to Posts to collect personnel data. Once the 

data is collected, FAS reviews the results and verifies each position. If the State Department numbers differ from ours, we will file an appeal. 

The fiscal year 2007 Capital Security Cost Sharing Program is estimated to re- quire an additional $2.9 million over the fiscal year 2006 costs for a total of $6 million. 

RISK MANAGEMENT AGENCY—CROP INSURANCE

Question. The fiscal year 2007 budget request includes two new legislative proposals for the crop insurance program. One proposal would tie farm payments to the 

purchase of crop insurance protection at 50 percent or higher of their expected market value. The other proposal would allow for a new participation fee that would 

generate funding for information technology improvements. Please explain both legislative proposals. 

Answer. The first legislative proposal would provide savings to reduce the Federal 

deficit while increasing participation in the Federal crop insurance program. The 

proposal contains several key features that, in combination, are expected to save 

about $140 million on an annual basis. The proposal is identical to last year’s deficit 

reduction proposal which was not enacted by Congress. The proposal’s specifics are 

summarized below. 

—The proposal would require any farmer that receives a Federal commodity payment for his/her crop to buy crop insurance at a minimum coverage level of 50/ 

100. This is intended to ensure farmers have adequate protection in the event 

of a natural disaster without resorting to ad hoc disaster assistance. 

—The proposal reduces premium subsidies by stated percentages points for buyup coverage levels. 

—The proposal modifies the administrative fee on CAT to equal the greater of 

$100 or 25 percent of the imputed CAT premium, subject to a maximum fee of 

$5,000. This change would make the administrative fee more equitable between 

small and large producers. 

—The proposal would also lower the imputed CAT premium rate by 25 percent. 

—Finally, the proposal reduces the A&O reimbursement on all buy-up coverage 

by 2 percentage points and increases the net book quota share to 22 percent, 

but provides a ceding commission to the companies of 2 percent. 

The second proposal is to provide the authorization for a participation fee. The 

participation fee would be used to help fund the modernization and maintenance of 

the Risk Management Agency’s computer systems. The proposed fee would initially 

be used, beginning in 2008, to fund modernization of the existing information technology (IT) systems and would supplement the annual appropriation provided by 

Congress. Subsequently, the fee would be shifted to maintenance and would be expected to reduce the annual appropriation. The participation fee would be charged 

to insurance companies participating in the Federal crop insurance program; based 

on a rate of about one-half cent per dollar of premium sold. Because it is the companies that will most benefit from better, more advanced computer systems, it is reasonable that they contribute to the modernization and maintenance of these systems. The fee is expected to generate an amount not to exceed $15 million annually. 

Question. Will the implementation of the proposal to tie payments to higher levels 

of crop insurance eliminate the need for ad hoc disaster assistance to farmers? 

Answer. Much of the demand for ad hoc disaster assistance is believed to be driven by producers who do not purchase crop insurance, or who purchase catastrophic 

(CAT) coverage. CAT coverage provides a maximum indemnity of only 27.5 percent 

in the event of a total loss. The low coverage level for CAT has produced significant 

pressure for additional relief. Linking eligibility for farm program payments to the 

purchase of buy-up levels of crop insurance should mitigate some of the demand for 
456 

ad hoc disaster assistance as a much larger percentage of the losses experienced by 

producers will be covered by the Federal crop insurance program. 

Question. Also, in regard to the one half cent per dollar on premiums, when was 

the last time this type service fee was increased or has the cost of participating in 

the program been set for a number of years? 

Answer. The fiscal year 2007 budget proposes a ‘‘new’’ participation fee designed 

to help pay for the modernization and maintenance of the Risk Management Agency’s computer systems. The participation fee to be paid by insurance companies, will 

generate funds estimated to be consistent with similar past Agency budget requests. 

The participation fee will initially supplement the existing appropriation to support 

improved IT systems for the many new programs and program enhancements occurring within the Federal crop insurance program. Modernization is expected to take 

about 2 years to complete, after which the participation fee will be available to reduce the need for appropriated funding. The Federal crop insurance program has 

seen substantial growth over the past several years, yet the Agency’s IT budget has 

remained constant. Modernization of the RMA IT system is critical in light of the 

existing systems reaching the end of their expected useful life. The modernization 

system will provide substantial benefits to the participation insurance companies 

and will improve RMA’s ability to comply with Congressional mandates regarding 

data mining and data reconciliation/data sharing with the Farm Service Agency. 

CODEX AND TRADE CAPACITY BUILDING

Question. USDA has publicly stated that the vitality and science based independence of the United Nations standard setting organizations under FAO, specifically 

Codex Alimentarius and the International Plant Protection Convention (IPPC) are 

critical to advance U.S. agricultural trade objectives. A strong American policy presence within these organizations is important to effectively represent U.S. agriculture 

interests. Yet, concern has been raised by the U.S. industry that the EU policy personnel, and consequently the EU influence, in those organizations is far greater 

than the United States. For example, I understand that of the 100 Associate Professional Officers (APOs) at FAO, only one is from the United States. Can you speak 

to this issue within the context of your $1.5 million budget request for trade capacity building and explain how the requested budget is intended to address this stated 

imbalance. 

Answer. It is critical to place Americans in key positions within international bodies like the CODEX and IPPC where they can influence policies in crucial areas 

such as standard-setting. These bodies are essential for implementing the Doha Development commitments. The APO program is a useful tool for placing more Americans in international organizations. Currently, the Netherlands funds about 30 

APOs, Germany 11, Italy 9, and Spain 8. The advancement of science-based, decision-making practices in agricultural trade is a well known U.S. priority. The APO 

program, operating within organizations like FAO, not only helps to increase U.S. 

influence in these bodies, but it also assists developing member countries to build 

capacity to better participate in standard-setting bodies, comply with international 

trade agreements, and engage as full partners in global trade. 

Part of the $1.5 million requested would be used to expand the APO program and 

place at least one APO in the IPPC or CODEX secretariats, where the United States 

currently has no representation. This would not only allow the United States to 

quickly place competent Americans in these increasingly important secretariats, but 

past experience has shown that the APO program can also leverage additional resources from the international organizations themselves as well as from other member countries. For example, USDA provided $500,000 in funding for two APO’s to 

develop a pilot International Food Safety, Animal and Plant Health portal at FAO. 

This initial funding has leveraged additional funding from FAO, the Netherlands, 

Norway, and the Standards and Trade Development Facility. The portal was 

launched at the 2nd Global Forum of Food Safety Regulators in Bangkok in 2004. 

It provides a single electronic access point for official information which increases 

transparency in SPS measures and improves national laws and regulations across 

the sectors of food and animal and plant health. 

Another way USDA influences CODEX is through leadership on the CODEX Commission as well as chairing and hosting various Committee meetings. Ms. Karen 

Hulebak of USDA’s Food Safety Inspection Service (FSIS) was elected this year to 

serve as a Codex Commission vice-Chair. Also, the U.S. Codex Office hosts meetings 

for three Codex Committees—the committee on Food Hygiene, which FSIS also 

chairs; Committee on Residues of Veterinary Drugs and Food; and the Committee 

on Processed Fruits and Vegetables. In addition, FSIS provided an employee on a 

temporary duty assignment for a year and a half to the Codex Secretariat, who pro-
457 

vided secretarial support to the group of consultants making recommendations on 

Codex committee structure and mandates, monitored contracts to translate standards into Chinese and developed and edited FAO/Codex publications (e.g. ‘‘Understanding Codex’’). 

RESOURCE CONSERVATION AND DEVELOPMENT PROGRAM

Question. The fiscal year 2007 budget proposes to fund the Resource Conservation 

and Development program at $25,933,000. This is a reduction of $25,971,000 and 

230 staff years. How was this level of funding and staff years determined? What 

is your plan to allocate RC&D coordinators? Will you evaluate the needs of each 

council before allocating RC&D coordinators? Since many of the sponsors of these 

councils are local governments, how will this budget affect USDA’s relationship with 

rural county commissioners and mayors? 

Answer. The fiscal year 2007 President’s Budget recognizes the important role 

RC&D coordinators and councils play in protecting the environment in a way that 

improves the local economy and living standards. USDA’s goal is to improve Federal 

efficiency and reduce spending. The rationale for the RC&D proposal reflects the belief that many councils will have the capacity to be more autonomous by fiscal year 

2007. An assessment leading up to the proposal included a review of current RC&D 

Coordinator duties and responsibilities to find ways to increase efficiency and reduce 

costs without reducing effectiveness. Geographic considerations for remoteness and 

very large distances were included in the overall proposal. The Budget assumes, on 

average, that RC&D coordinators will serve multiple RC&D areas. Large geographic 

distances and complexity in service area will be taken into consideration. 

NRCS is updating its analysis on the staffing impacts associated with the President’s Budget proposal. At the time the Budget proposal was initially developed, the 

Agency estimated that up to 225 current RC&D coordinators would need to be reassigned, without counting potential retirements. 

The plan to provide assistance through a federally funded RC&D coordinator to 

each RC&D Council takes into consideration three different factors. First, NRCS 

will conduct a business analysis that takes into consideration current geographic 

considerations for remoteness and very large distances to see if there could be some 

effectiveness gained through this analysis. In addition, it is expected that some 

RC&D coordinator positions would become vacant due to attrition. Over the next 5- 

years, more than half the Federal workforce is eligible to retire. This will create opportunities to once again assess effectiveness and service needs. And lastly, there 

will be many opportunities for promotions within the agency for existing RC&D coordinators. RC&D employees possess a variety of highly skilled, highly desirable, 

multi-disciplinary backgrounds and would have many opportunities for promotion to 

other positions within the Agency. This again would provide the Agency the opportunity to consider service and effectiveness criteria on a case-by-case basis. 

NRCS Regional Assistant Chiefs will work closely with State Conservationists 

throughout their regions. Parameters for the number of positions per State and Region will include an understanding of the geographic attributes and needs associated with serving multi-jurisdictions within the region, including the needs of each 

council. 

USDA will continue to have a strong working relationship with rural county commissioners and mayors. For several years, USDA has been working with the National Association of RC&D Councils (NARC&DC) to increase council capacity by 

providing resources, training and expertise. By fiscal year 2007, many councils will 

be ready to take a more active and autonomous role in addressing local concerns 

identified in their area plans. 

Examples of council capacity building tools used and/or available include: 

Publication of a manual for RC&D Council members entitled: ‘‘Guidebook For 

RC&D Directors.’’ This manual is designed to help Council members carry out their 

personal and corporate responsibilities in governing the RC&D area. This publication is available in hard copy and can be downloaded from the NARC&DC website: 

www.rcdnet.org. 

Training courses with accompanying information that include: 

—RC&D (A Primer) 

—What, Why & How (Basic Roles and Responsibilities) 

—Organizational Capacity Building 

—Nonprofit Financial Management 

—Strategies for Stronger Associations 

—Hiring 101 

Development, publication, and dissemination of guidelines for rural communities 

to use to recognize and respond to drought conditions. 
458 

National and regional workshops for RC&D Councils to increase diversity from 

underrepresented individuals and groups in area plan development and implementation. 

National workshop or ‘‘Forum on Entrepreneurial Development’’ with an emphasis 

on meaningful community economic development and disseminate the information 

to RC&D Councils. 

National conference on the utilization of alternative energy and disseminate information to RC&D Councils. 

WATERSHED PROJECT BACKLOG

Question. Please provide the status of the watershed project backlog assessment 

that Bruce Knight mentioned in testimony in December 2005 before the House Committee on Agriculture. How long will it take to complete this assessment? How much 

will this assessment cost? Which account will fund this assessment? 

Answer. The current watershed project unfunded list totals $1.8 billion. The funding provided for fiscal year 2006 will fund projects where sponsors have acquired 

the necessary land rights and permits to proceed with construction. In addition, 

there are some projects on this list categorized as active that have been on the 

records for 40 years or longer. Clearly it is time to work with local sponsors to assess the viability of each individual project. 

NRCS is committed to working with local project sponsors to determine more accurately the viability of the potential watershed project unfunded list. NRCS will 

assess the viability of unfunded projects in two steps. First, we will use internal 

databases along with employee and partner knowledge to determine which projects 

are clearly active and viable. NRCS identified watershed projects that have not had 

requests for implementation funding for the last 2 years or where the NRCS state 

water resource long range plans do not indicate planned implementation activity 

over the next 3 to 5 years. Second, for projects that are not clearly active or viable, 

the sponsors will be contacted to establish their continued interest in project implementation. The sponsor’s role in completing this effort will be critical. Upon mutual 

agreement with the project sponsor, adjustments to NRCS’s watersheds database 

will be completed by each State to reflect changes agreed upon with regard to 

project viability. This effort is currently underway and will be completed by June 

2, 2006. 

The staff time associated with this effort will be minimal. To date most of the assessment work has been completed through existing program manager knowledge, 

phone calls and record checks. Depending on the sponsor, additional individual case 

investigations for the assessment could be completed with Watershed Surveys and 

Planning, and/or Conservation Technical Assistance funds. 

RAPID WATERSHED ASSESSMENTS

Question. How many watersheds have undergone the rapid watershed assessment? In which states? In total how many watersheds will go through these assessments? How much has been spent on these assessments? From which account(s)? 

How have these assessments improved conservation? Please give examples. How 

much will be spent in fiscal year 2007 on these assessments? 

Answer. Thirteen watersheds have been completed using the rapid watershed assessment (RWA) approach in California, Oregon, and Idaho. Georgia and Ohio have 

developed assessments similar to RWAs. Approximately $390,000 has been spent on 

these assessments. 

Individual states and local stakeholders decide if they will conduct RWAs. NRCS 

currently anticipates the average cost of completing a single RWA on an 8-digit hydrologic unit to be in the range of $25,000 to $50,000. NRCS plans to mainly use 

Conservation Technical Assistance Program funding to complete RWAs. 

NRCS has been active with a variety of local, State and Federal agencies as well 

as non-government organizations in developing RWAs in the Klamath Basin. 

Through the use of rapid watershed assessments, NRCS and stakeholders have 

more efficiently targeted specific conservation measures to specific watersheds, ensuring the best use of available program funds for securing permanent solutions to 

the issues related to the quality and quantity of water. 

The Upper Klamath Basin includes 271,700 acres of irrigated agriculture. Based 

on a series of rapid watershed assessments, NRCS determined that approximately 

260,500 acres of these irrigated lands need some level of conservation treatment including improvements to existing irrigation systems. Also identified in the RWAs, 

the Lower Klamath Basin has approximately 41,000 irrigated acres needing treatment to improve irrigation water management. Through the RWA process, local 
459 

landowners were able to effectively address these conservation issues and identify 

potential funding sources for implementing irrigation improvements. 

NRCS’s Upper Klamath Rapid Watershed Assessment concluded improving water 

quality and riparian habitat in Upper Klamath Lake and its tributary streams 

would provide the greatest benefits to the Endangered Species Act listed Shortnose 

and Lost River suckers. As a result of the RWA, irrigation improvement practices 

were identified that would have an impact in reducing the amount of warm, nutrient rich irrigation tailwater that return to area streams. It identified additional wetland and riparian habitat that needed restoring around the lake or along its tributary streams, resulting in clean, cool water as well as spawning and rearing habitat 

for endangered suckers. 

Funding decisions have not been made for fiscal year 2007 regarding the completion of additional RWAs. 

COMMODITY SUPPLEMENTAL FOOD PROGRAM (CSFP)—PROGRAM ELIMINATION

Question. The budget request eliminates the Commodity Supplemental Food Program, which serves 32 States, 2 Indian reservations, and the District of Columbia. 

The elimination of this program results in a $108 million reduction from the fiscal 

year 2006 appropriation. Please explain why you chose to eliminate this program. 

What will the participants in CSFP do if the program is eliminated? 

Answer. The President’s fiscal year 2007 budget request proposes to discontinue 

CSFP operations and transition eligible CSFP participants to other nutrition assistance programs such as the Food Stamp Program (FSP) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC Program). The 

CSFP is a relatively small program which operates in limited areas of 32 States, 

two Indian reservations, and the District of Columbia. In an era of fiscal constraint, 

we face a difficult challenge with regard to discretionary budget resources, and must 

ensure that those limited resources are targeted to those programs that are available to needy individuals and families, wherever they live. 

If Congress adopts the budget request, we will work closely with CSFP State 

agencies to ensure that any negative effects on program participants are minimized 

and that they are transitioned as rapidly as possible to other nutrition assistance 

programs for which they are eligible. We are requesting $2 million to provide outreach and to assist individuals to enroll in the FSP. We also propose that elderly participants who leave the CSFP upon 

the termination of its funding and who are not already receiving FSP benefits will 

be eligible to receive a transitional benefit worth $20 per month ending in the first 

month following enrollment in the FSP under normal program rules, or 6 months, 

whichever occurs first. CSFP women, infants, and children participants who are eligible for WIC Program benefits will be referred to that program as appropriate. 

FOOD STAMP PROGRAM—PARTICIPATION

Question. The budget request anticipates declining participation in the Food 

Stamp Program. Specifically, overall participation is expected to decrease by 1.1 million in fiscal year 2007. Can you take a moment to explain why participation is declining and do you expect these reductions to continue? 

Answer. One of the key strengths of the Food Stamp Program is its ability to adjust automatically to changing economic conditions. The number of participants generally rises as the economy weakens and unemployment and poverty increase, and 

falls as the economy grows. Between January 2004 and January 2006, the unemployment rate fell from 5.7 percent to 4.7 percent, and the number of people working 

increased. In 2005, program participation began to flatten before the Gulf Coast 

hurricanes of the fall. As a result, we expect the number of food stamp participants 

to decline between 2006 and 2007. We currently project additional reductions 

through 2009, after which food stamp participation is projected to be fairly flat. 

SPECIAL SUPPLEMENTAL PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC)— 

LEGISLATIVE PROPOSAL

Question. The fiscal year 2007 budget request includes a legislative proposal to 

cap State nutrition services and administration (NSA) grants at 25 percent. A savings of $152 million is assumed in the budget for this proposal. Please explain this 

proposal. What is the current NSA cap, and how will enacting this proposal further 

the goals of the WIC program? If the legislative proposal is not enacted, does the 

budget request fully fund the WIC program? 

Answer. The cap on WIC NSA funding will be applied at the national level. In 

other words, the funds available from the WIC appropriation for grants to State 

agencies will be divided into two components: 75 percent of the available funds will 
460 

be released to WIC State agencies as food funds and 25 percent of the available 

funds will be for NSA. The requested funding level for fiscal year 2007 would equally reduce each State agency’s NSA grant from the prior year’s NSA grant level as 

needed to ensure that the national total of funds allocated for NSA stays within the 

25 percent cap. 

Currently, funds available from the WIC appropriation for grants to States are 

divided between food and NSA funds to provide a nationally guaranteed administrative grant per participant. During fiscal year 2006, 26.5 percent of available funds 

were provided for NSA. 

SPECIAL SUPPLEMENTAL PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC)—FOOD

PACKAGE

Question. In April 2005, the National Academy of Sciences Institute of Medicine 

released a report that recommended revisions to the food package offered to WIC 

participants. The report recommends that revisions to the food package encourage 

consumption of fruits and vegetables, emphasize whole grains, lower saturated fat, 

and appeal to diverse populations. In accordance with these recommendations, I understand that a final rule updating the WIC food package will be released at the 

end of 2006. Will the final rule be released at the end of this year as required? I 

understand that the final rule will be cost neutral, meaning that the total cost of 

the food package will not change. Will keeping changes to the package cost neutral 

have an affect on the overall make up of the food package? 

Answer. Absent further delays, we fully anticipate that a proposed rule can be 

published this summer. However, affording opportunity for a full 90-day public comment period for this important rule may preclude issuing an interim final rule within the 18-month statutory deadline of November 2006. 

Adding new items to the food package requires adjustments to current items in 

the package. As such, the overall make up of the food package would change. 

MINORITY OUTREACH

Question. The Food and Nutrition Service provides outreach and information on 

the programs it operates and dietary guidelines. What is FNS doing to make sure 

these important messages are appropriately targeted to minority populations, including the rapidly growing Hispanic population in the United States? How much 

does FNS spend annually on these information campaigns and specifically on minority outreach? 

Answer. For all of the major nutrition assistance programs, program outreach and 

information materials are targeted to reach low-income populations, including minority populations and those who speak Spanish and other languages beyond 

English. This includes making program application easier for non-English speakers 

by expanding the number and types of products available in Spanish and other languages. 

In food stamps, USDA’s largest nutrition assistance program, FNS identified 

three target populations for food stamp outreach activities—seniors, the working 

poor, and immigrants. Each of these groups contain large subsets of minority populations, including Hispanics. These target populations were selected because they 

represent populations that are hard to reach and have historically low food stamp 

participation rates. FNS makes special efforts to reflect cultural diversity in all outreach materials, tools, and resources (including photos and cultural sensitivities) 

and to provide outreach materials in multiple languages, whenever possible. Numerous outreach materials are available in Spanish as well as English. In addition, 

about six informational publications are available in more than 30 other languages. 

Food stamp outreach activities include: 

—Posters, flyers, and brochures available in English and Spanish featuring diverse families and individuals. 

—Informational materials available in 35 languages. 

—Collection of ‘‘10 FSP Myths and Facts’’ handouts for various populations in 

English and Spanish. 

—Television PSA available in English and Spanish. 

—Toll free number offering information and service in English and Spanish. 

—Paid radio advertisements for the past 3 years in English and Spanish. 

—Award of small outreach grants awarded to community organizations that serve 

immigrants and minority populations (every year since 2001 with the exception 

of 2003). 

—Photo gallery featuring images of outreach and nutrition education for use by 

State and local outreach providers and featuring diverse families and individuals. 
461 

—Food stamp pre-screening tool in English and Spanish. 

In WIC, USDA developed the Fathers Supporting Breastfeeding Project, which focuses on educating fathers about the benefit of breastfeeding so that they may have 

a positive impact on a mother’s decision to choose to breastfeed. The primary target 

audience for this project is African American males because African American females have the lowest breastfeeding rates compared to other racial/ethnic groups. 

USDA also recently launched the WIC Hispanic Breastfeeding Promotion and Education Project to develop educational resources that specifically address the barriers 

to breastfeeding for Hispanic WIC participants. 

USDA conducts a wide range of nutrition education and promotion activities to 

motivate participants to improve their eating and physical activity behaviors. Food 

and Nutrition Service (FNS) nutrition education efforts are targeted primarily to 

participants or potential participants in the nutrition assistance programs, rather 

than to the general public. The Center for Nutrition Policy and Promotion (CNPP) 

provides nutrition information for the general public. USDA makes the development 

of materials that promote healthy food choices to the Spanish-speaking community, 

in ways that are understandable and culturally relevant, a critical priority. Key efforts include: 

—Development of a comprehensive nutrition education initiative targeting low-literacy and Spanish-language populations, to help Food Stamp Program recipients and other groups served by USDA to overcome their barriers to healthy 

eating and physical activity behaviors, based on the Dietary Guidelines for 

Americans. The materials are planned for release in 2007. 

—Eat Smart. Play Hard. Materials in Spanish promote healthy eating and physical activity, including activity sheets, bookmarks, posters, and brochures. Over 

2.4 million of these Spanish-language materials have been ordered by program 

cooperators to date. 

—Development of Eat Smart, Live Strong, a behavior-focused nutrition and physical activity intervention for able-bodied, low-income seniors, 60–74 years old. 

The intervention focuses on two key behaviors: increasing fruit and vegetable 

consumption and physical activity. 

—The Food Stamp Nutrition Connection (FSNC), an online resource system designed to facilitate communication and resource sharing among Food Stamp Nutrition Education providers. There are 70 nutrition education materials written 

in Spanish on the FSNC Web site, http://www.nal.usda.gov/foodstamp. 

One of the main tenets and philosophies of CNPP’s new MyPyramid Food Guidance System was to personalize and individualize dietary guidance. Upon the release of MyPyramid in April 2005, children and Spanish speakers were the first two 

sub-groups of the U.S. population to receive personalized attention. Within the year, 

USDA released MyPyramid for Kids and MiPira ́mide, the Spanish-language version. 

MyPyramid for Kids features Tips for Families in both English and Spanish, an 

interactive computer game, posters, worksheets, and classroom materials to help 

children learn about the benefits of healthful diets and physically active lifestyles. 

With the funds requested for 2007, the CNPP will seek expanded translation of 

MyPyramid materials. We will also look for greater message dissemination supported by culturally appropriate consumer research and seek greater outreach 

through public/private partnerships. 

Major FNS/CNPP nutrition education and information expenditures are listed 

below: 

FNS NUTRITION EDUCATION AND INFORMATION ESTIMATED EXPENDITURES 

[In thousands of dollars] 

Program Fiscal year 2006 Fiscal year 2007 

Food Stamp Program .............................................................................................................. 262,900 263,004 

Team Nutrition (for Child Nutrition Programs) ...................................................................... 15,039 15,034 

WIC Program (general nutrition education and information) ................................................ 305,599 290,510 

WIC Program (breastfeeding promotion and education) ........................................................ 91,091 91,241 

Food Distribution Program ...................................................................................................... 200 1,200 

Other Nutrition Education ....................................................................................................... 7,504 8,634 

TOTAL, FNS ................................................................................................................. 682,423 669,624 

CNPP Nutrition Education and Information Expenditures ...................................................... 2,865 4,898 

Total, FNCS ................................................................................................................ 685,288 674,522 
462 

Each fiscal year, FNS spends $8 million on national outreach activities to promote 

the nutrition benefits of food stamps. As described above, most all of our food stamp 

outreach activities touch minority populations in some way. Thus, while it is not 

possible to break out how much is spent on minority outreach specifically, we believe that almost all of it is spent on program information activities that impact minority populations. 

FOOD DEFENSE—FOOD EMERGENCY RESPONSE NETWORK

Question. The fiscal year 2007 budget requests an increase of $15.8 million to expand the Food Emergency Response Network (also known as FERN) and upgrade 

FSIS’ laboratory capabilities for evaluating a broader range of threat agents for 

food. A part of the President’s food and agricultural defense initiative, the Food 

Emergency Response Network will be a national network of 100 laboratories for 

testing of food samples for contaminants. The Food Emergency Response Network 

has been an ongoing partnership with FSIS, FDA, and State laboratories since fiscal 

year 2005. How many labs currently participate in FERN? Where are they? 

Answer. Currently, there are 26 laboratories actively participating in FERN. Of 

these 26 laboratories, FSIS has cooperative agreements with 18 State laboratories 

to begin to build what is, at this time, a very limited capacity to test for biological 

threat agents in food, while the Department of Health and Human Services’ Food 

and Drug Administration has agreements with 8 State laboratories to develop capacity to respond to chemical attacks on the food supply. Over 100 more laboratories 

have completed a checklist and volunteered to share data with FERN. 

FSIS has cooperative agreements with the following 18 State laboratories to build 

a still very limited capacity to test for biological threat agents in food: 

State Division 

Virginia ...................................................................................... Virginia Division of Consolidated Laboratory Services 

Arkansas ................................................................................... Arkansas Department of Health 

Delaware ................................................................................... Delaware Health and Social Services 

Florida ....................................................................................... Florida Department of Agriculture and Consumer Affairs 

Hawaii ....................................................................................... Hawaii State Laboratories Division, Department of Health 

Indiana ...................................................................................... Indiana State Department of Health

Massachusetts .......................................................................... Massachusetts Department of Public Health, State Lab Institute 

Michigan ................................................................................... Michigan Department of Agriculture & Michigan Department 

of Health 

Minnesota .................................................................................. Minnesota Department of Agriculture 

Montana .................................................................................... Montana Department of Public Health & Human Services 

Nebraska ................................................................................... Nebraska Department of Agriculture 

New Hampshire ......................................................................... New Hampshire Public Health Laboratories 

New Jersey ................................................................................. New Jersey Department of Health and Senior Services 

New York ................................................................................... New York State Department of Agriculture 

Ohio ........................................................................................... Ohio Department of Agriculture, Consumer Analytical Lab 

Rhode Island ............................................................................. Rhode Island Department of Agriculture

South Carolina .......................................................................... South Carolina Department of Health & Environmental Control 

South Dakota ............................................................................ South Dakota Animal Disease Residue & Diagnostic Lab, 

South Dakota State University 

The Department of Health and Human Services’ Food and Drug Administration 

has agreements with the following 8 State laboratories to develop capacity to respond to chemical attacks on the food supply: 

State Division 

Iowa ........................................................................................... University of Iowa 

California .................................................................................. Regents of the University of California 

Arizona ...................................................................................... Arizona Department of Health Service 

Connecticut ............................................................................... Connecticut Agriculture Experimental Station 

Virginia ...................................................................................... Virginia Division of Consolidated Labs 

Minnesota .................................................................................. Minnesota Department of Agriculture 

New Hampshire ......................................................................... New Hampshire Department of Public Health

Florida ....................................................................................... Florida Department of Agriculture

Question. How many labs do you hope to add with the increased funding? 
463 

Answer. Using fiscal year 2005 funds, FSIS spread $1.2 million between 18 laboratories with which the agency has cooperative agreements. As a result, more funding is needed to make these labs operational within FERN. An operational FERN 

lab is defined as a laboratory that has developed the capability and demonstrated 

proficiency to test meat, poultry, and egg products for 2–3 threat agents, either as 

a screening test or a confirmatory test. It is important to note that not all labs will 

test for the same threat agent or agents. The request was for $15.8 million, $13 million of which will go to build laboratory capacity and $2.8 million for electronic communication in real-time between the laboratories for more rapid, timely information 

sharing and response. With the $13 million FERN request for fiscal year 2007, FSIS 

will be able to ensure that those original 18 laboratories plus five additional laboratories are operational FERN labs. Thus, by the end of fiscal year 2007 with the 

funding requested, 23 State labs would be capable of operating in FERN in the 

event of an intentional attack, an act of nature, or a hoax and help USDA ensure 

product safety and consumer confidence in the food supply. 

FSIS also requests $2.5 million for two data systems to support FERN: the electronic laboratory exchange network (eLEXNET), and a repository of analytical 

methods. The eLEXNET is a nationwide, Web-based electronic data reporting system that allows analytical laboratories to rapidly report and exchange standardized 

data. This system is currently operational in nearly 100 food-testing, public health, 

and veterinary diagnostic laboratories across the country. The funding will be used 

to make eLEXNET available to additional FERN and other analytical, food-testing 

laboratories. 

FSIS is working with FDA to develop a Web-based repository of analytical methods compatible with eLEXNET. Access to these methods will greatly enhance the 

ability of FERN and other laboratories to respond to emergencies, to use new methodologies and technologies, and to enhance efficiency. The requested funding will be 

used to enhance the repository and to populate the repository with numerous methods that will be obtained from analytical laboratories. 

Question. What does USDA provide for the State labs with this funding—staff, 

equipment, training? 

Answer. FERN establishes the network of communication between levels of government and ensures that all laboratories participating have the necessary capacities and capabilities needed to respond to an attack, act of nature, or hoax affecting 

the food supply. FERN enhances the abilities of existing laboratories to perform procedures and tests through training, proficiency testing, food defense exercises, acquisition of new equipment, and the repository of validated methods. FERN is able to 

offer these, and other, resources to the State and local labs primarily through funding from cooperative agreements. No staff years are provided with these funds. 

Question. How, exactly, do the labs assist USDA in protecting the food supply 

from a potential terrorist attack? 

Answer. FERN enables FSIS to leverage State and local laboratories for surge capacity in handling the numerous samples that would be required in the event of an 

attack, act of nature, or hoax that affects the food supply and to maintain product 

safety and consumer confidence in the U.S. food supply. The request was for $15.8 

million, $13 million of which will go to build laboratory capacity and $2.8 million 

for electronic communication in real-time between the laboratories for more rapid, 

timely information sharing and response. The $13 million budget request for FERN 

will enable the agency to manage, maintain, and expand the capacities and capabilities of the existing FERN labs and bring new labs into the network. The $2.5 million requested for eLEXNET and the repository of analytical methods, will enhance 

the data systems supporting FERN. 

There are estimated to be over 50,000 food types and literally thousands of biological, chemical, and radiological agents that can be added to food that pose a 

threat to humans. Many different laboratory analytical methods are needed to detect these agents. For a large number of agent/food combinations, there are no proven or validated methods. Part of the FERN effort will be to develop and validate 

these methods and to provide the necessary equipment and training to the member 

laboratories. Because there are such a large number of agent/food combinations that 

may require testing, no single laboratory will be able to respond to every threat. The 

mission of FERN is to develop the capability and capacity of existing labs to respond 

to any type of threat to food. Some analyses can be done at a rate of over 1,000 

per day while others are much slower, perhaps only 10 per day. The laboratory capacity is dependent on the specific scenarios and the specific threat agent involved. 

The goal of 100 State labs to be fully functional under FERN is an estimate of the 

capacity necessary to address many of the common foodborne threats agents in the 

vast array of food matrices. 
464 

BUDGET REQUEST—CONSTRUCTION AUTHORITY

Question. The budget request includes $565,000, from current resources, for construction of a laboratory receiving facility at an Agricultural Research Service lab 

in Athens, GA. FSIS currently does not have authority to construct facilities, and 

this is the first time FSIS has requested such authority through the budget process. 

Why is this sample receiving facility necessary and how will it benefit FSIS operations and performance? 

Answer. In the event of a food safety emergency, a sample receiving facility that 

is separate and distinct from the laboratory in Athens, Georgia, would be essential. 

For instance, if a hazardous material arrived at the present sample receiving area, 

FSIS may have to shutdown and decontaminate the entire laboratory. As a result, 

all incoming test samples would be delayed while shipped to one of only two other 

FSIS laboratories and in a food safety emergency, such delays could have a serious 

impact on public health. The Agricultural Research Service laboratories in the same 

building could also be shut down and need to be decontaminated. Decontamination 

can be a long, tedious process. For example, the Hart Senate Office Building was 

closed for a lengthy period of time for decontamination. FSIS cannot afford to have 

its only BSL–3 laboratory and a major ARS research laboratory closed for any 

length of time. Thus, a separate sample receiving facility would enable the laboratory to continue with its work, even if the receiving facility was forced to shut down. 

Question. If funding for the facility comes from current resources, what current 

activities will be negatively impacted by this reduction? 

Answer. No current essential public health activities would be negatively impacted by the construction of a laboratory receiving facility in Athens, Georgia. Only 

after the essential public health needs are met will the agency consider using other 

available resources to build the facility. 

CODEX

Question. The work of the U.S. Government through Codex has been critical in 

advancing trade in U.S. food and agriculture. So important, in fact, that several 

years ago dedicated funding was identified to support the U.S. Codex office. In fiscal 

year 2006, funding for Codex through this appropriations bill is slightly more than 

$3 million. This funding is intended, in part, for international outreach efforts with 

other countries to advance U.S. policy positions. The U.S. food industry has expressed concern that these dedicated resources are not available for Codex outreach 

as intended but are being directed to general FSIS program activities. Does your 

office provide an accounting of how the Codex money is spent? 

Answer. The U.S. Codex Office is part of the Office of the Administrator for the 

Food Safety and Inspection Service (FSIS), which provides funding and tracks expenditures for U.S. Codex Office operations, outreach and representational events. 

The Manager of the U.S. Codex Office reports directly to the Under Secretary for 

Food Safety and keeps the Under Secretary informed about the status of the U.S. 

Codex Office budget and expenditures. 

Question. Are other organizations or initiatives, outside of direct Codex work, 

being funded by this specific amount? 

Answer. No, the funding provided will be used for activities associated with the 

work of the Codex Alimentarius Commission and its committees, task forces, and 

working groups. 

Question. Please identify the international outreach programs for fiscal year 2007. 

Answer. The U.S. Codex Office manages a vigorous program of outreach to developing countries, which involves co-hosting committee meetings, organizing multi-day 

technical seminars on a variety of issues, and inviting delegates from developing 

countries to meet U.S. delegates at special, issue-specific workshops. These meetings 

provide opportunities for Codex officials from developing countries to exchange 

views with experts from the United States for the purpose of developing working 

relationships and building confidence in the U.S. positions on issues under negotiation. 

One of the United States’ on-going objectives is to broaden participation in Codex, 

especially participation by developing countries. Many of the least developed countries have varied levels of food safety infrastructure, and participation in Codex by 

representatives of these countries is largely disconnected from the national experience. While the United States believes that capacity-building activities should be 

funded and managed by other organizations, the outreach program of the U.S. 

Codex Office can help developing countries to set priorities for their participation 

in Codex and identify specific objectives for building their capacity to participate effectively in Codex negotiations. 
465 

Africa has become a priority for developing new working relationships. On April 

19–21, 2006, the U.S. Codex Office hosted a technical seminar in Maputo, Mozambique for Codex contact points from African countries. In 2007, the U.S. Codex Office will follow up on the outcomes of this technical seminar. 

The Latin American and Caribbean communities will continue to be top priorities, 

and the U.S. Codex Office will build on the working relationships existing with 

these countries to organize additional outreach events, just as the U.S. Codex Office 

has organized events with Latin America and the Caribbean in the previous 3 years. 

Currently, the U.S, Codex Office is working with Argentina, Mexico, and Brazil to 

organize a technical seminar with the member countries of the Codex Committee 

for Latin America and the Caribbean (CCLAC), except Cuba. Argentina holds the 

rotating presidency of CCLAC, Mexico is the representative for Latin America and 

the Caribbean on the Codex Executive Committee, and we propose to host this seminar with the Brazilians in Rio de Janeiro, June 1–3, 2006. This seminar has two 

main purposes: (1) to enhance the capacity of officials in Latin America and the Caribbean countries to participate more effectively in meetings of the Codex 

Alimentarius Commission and its Committees; and (2) to strategize about potential 

new work and new directions for the Codex Alimentarius Commission to respond 

to emerging food safety and trade issues in which the United States and the CCLAC 

members have common interests. The agenda features presentations and panel discussions with U.S., Latin American and Caribbean experts, and experts will also be 

invited from inter-American institutions (such as the Pan American Health Organization (PAHO), the Inter-American Institute for Cooperation on Agriculture (IICA)) 

and from the Food and Agriculture Organization (FAO) and the World Health Organization (WHO) which are the sponsoring organizations of the Codex Alimentarius 

Commission. 

In addition, FSIS’ Food Safety Institute of the Americas (FSIA), established in October 2004 to improve food safety and public health training throughout the Western Hemisphere, is promoting more effective participation in the Codex 

Alimentarius Commission. The Western Hemisphere has many shared interests in 

food safety, many of which are raised in Codex. FSIA wants to assist these countries 

in becoming more aware of these shared hemisphere interest, and encourage joint 

scientific and unified responses in Codex by the hemisphere. FSIA will do this by 

working with governments throughout the hemisphere to establish permanent food 

safety and public health training programs in each country at all educational levels—high school, university, and graduate levels. FSIA has its own budget. No 

Codex funds are used for FSIA activities. 

Through FSIA, FSIS hopes to encourage countries to adopt the food safety standards developed by Codex as minimum food safety standards within their countries. 

By building relationships throughout the hemisphere on a non-regulatory basis, 

FSIA can improve trade and public health in the hemisphere. With new trade agreements being implemented, FSIA has an opportunity to work closely with these countries to provide a forum for discussions about the food safety and public health 

needs of the hemisphere. Scientifically based education and training need improvement throughout the hemisphere, and by sharing information and finding common 

solutions, we will all benefit. 

FSIA provides training and education materials to educational institutions 

throughout the hemisphere. Many excellent but underutilized educational programs 

have been developed by international and hemispheric organizations such as the 

PAHO, the IICA, the FAO, and the WHO. FSIA promotes these types of existing 

programs. 

HUMANE SLAUGHTER

Question. There are allegations that USDA does not adequately inspect the transport and slaughter of horses. Please comment on the adequacy of USDA’s effort for 

both of these critical functions. 

Answer. Under USDA’s Slaughter Horse Transport Program (SHTP), administered through the Animal and Plant Health Inspection Service (APHIS) and described in the 1996 Farm Bill, only horses that are fit to travel may be shipped in 

accordance with APHIS regulations. Upon arrival at a U.S. slaughter plant, APHIS 

Veterinary Services personnel (1) examine each shipment of horses; (2) accept and 

review the owner/shipper certificate; (3) question the shipper to verify compliance; 

(4) examine each horse after off-loading; (5) inspect the animal cargo area of the 

conveyance; (6) document any violations; and (7) ensure the plant provides food and 

water after off-loading. 

At U.S. borders, port veterinarians review and compare the health certificate and 

the owner/shipper certificate for each shipment. If discrepancies are noted, port vet-
466 

erinarians visually examine the horses to determine if the crossing should be permitted or refused. 

The SHTP helps ensure that horses are transported humanely to slaughter by 

preventing injuries and ensuring adequate food and water so that the horses do not 

endure unnecessary suffering prior to slaughter. Examination of the horses prior to 

and after shipment is critical to ensuring that owners and shippers transport horses 

humanely to slaughter. 

USDA has abided by the prohibition of federally-funded USDA inspections of 

horses presented for slaughter at official establishments. The fiscal year 2006 Agriculture, Rural Development, Food and Drug Administration and Related Agencies 

Appropriations Act included a section prohibiting the use of appropriated funds to 

pay the salaries or expenses of personnel to inspect horses (ante-mortem inspection) 

after March 10, 2006. Conference report language for the Act recognized the Food 

Safety and Inspection Service’s (FSIS) obligation under existing statutes to ‘‘provide 

for the inspection of meat intended for human consumption (domestic and exported).’’ 

While the appropriations bill prohibited appropriated funds from being used to 

pay for ante-mortem inspection, it does not eliminate FSIS’ responsibility under the 

Federal Meat Inspection Act (FMIA) to carry out post-mortem inspection of carcasses and meat at official establishments that slaughter horses. In response to a 

petition, FSIS established a fee-for-service program under which establishments can 

apply and pay for ante-mortem inspection of horses. The interim final rule became 

effective March 10, 2006. 

The fee-for-service program meets all of the Federal inspection requirements for 

slaughter. Under the fee-for-service program, all requirements in the regulations authorized by the FMIA that pertain to official establishments that slaughter horses 

continue to apply. Inspection program personnel are to continue to conduct all inspection activities, including ante-mortem inspection, in accordance with the requirements of the FMIA and applicable Federal meat inspection regulations, including regulations pertaining to humane handling. 

Question. Will the recently implemented fee-for-service regulations regarding 

ante-mortem inspection of horses at slaughter diminish USDA’s ability to carry out 

its duty under the humane slaughter act? 

Answer. No, USDA considers humane handling and slaughter high priorities and 

is committed to ensuring compliance with the Humane Methods of Slaughter Act 

(HMSA). USDA strictly enforces the provisions of the HMSA, which, like other Federal meat inspection regulations, continues to apply under the fee-for-service program. 

FSIS employs a veterinarian and slaughter line inspectors at every federally inspected slaughter establishment. FSIS compliance officers also make further inquiries and prepare reports of instances in which there are alleged violations of regulations, including violations of the humane handling and slaughter regulations. All 

FSIS livestock inspection personnel are trained in humane handling and understand 

that they are obligated to take immediate enforcement action when a humane 

slaughter violation is observed. 

Question. Will the recently enacted language in the Agriculture Appropriations 

Bill allow the USDA to adequately inspect the transport of horses for humane treatment? 

Answer. With the language included in the fiscal year 2006 Agriculture Appropriations Bill, USDA will be able to continue to adequately inspect the transport of 

horses for humane treatment by supporting this activity through user fees. 

Question. Do you believe that the USDA is able to insure the humane transport 

and slaughter at these plants in the United States? 

Answer. As long as APHIS is authorized to carry out the SHTP activities through 

either Federal funding or user fees, program personnel will be able to help ensure 

the humane transport of horses to slaughter. SHTP personnel help prevent injuries 

and ensure that the horses have adequate food and water so that they do not endure 

unnecessary suffering prior to slaughter. Examination of the horses is critical to ensuring that owners and shippers transport horses humanely to slaughter. 

All requirements in the regulations authorized by FMIA that pertain to official 

establishments that slaughter horses continue to apply. Inspection program personnel are to continue to conduct all inspection activities, including ante-mortem inspection, in accordance with the requirements of the FMIA and applicable Federal 

meat inspection regulations, including regulations pertaining to humane handling. 

FSIS can deny or withdraw ante-mortem inspection services at horse slaughter establishments for any applicable reason under Federal regulations. 
467 

ANIMAL IDENTIFICATION

Question. The Congress has provided over $66 million for the implementation of 

an animal identification system. This level of funding does not include an additional 

$18.7 million that was transferred from the Commodity Credit Corporation. With 

that in mind, the budget request for fiscal year 2007 proposes another $33 million 

to continue this animal identification exercise. Please provide us with an update on 

the status of animal identification and when you expect a national program to be 

fully implemented. 

Answer. USDA anticipates that the National Animal Identification System (NAIS) 

will be a fully operational system in early 2007, and it will consist of three main 

components: premises registration, animal identification, and animal tracking. The 

standardized premises registration system provided by USDA is operational in 40 

States. The remaining States are using one of several compliant premises registration systems, for which they are financially responsible. Premises registration continues to be USDA’s priority, which the Agency supports by providing cooperative 

agreement funding to States and Tribes. The States and Tribes themselves administer the premises registration process. APHIS has established benchmarks and 

timelines to achieve full participation in this aspect of the NAIS by fiscal year 2009. 

The component of NAIS that enables individual animal identification became 

operational in March 2006 and is funded by USDA. Animal identification devices 

will be purchased by producers. The NAIS implementation plan calls for increased 

levels of animals to be identified with the Animal Identification Number starting 

in 2006, and for all newborn animals born throughout 2008 to be identified when 

moved from their birth premises. 

The final component of NAIS—the animal tracking databases—will be managed 

and owned by the industry and States. The cost of the animal tracking databases 

will be covered by the industry and States. An interim/development phase for these 

tracking systems will be launched in April 2006, and fully operational systems will 

be in place by February 2007. USDA is developing the metadata system that supports the integration of multiple animal tracking databases. 

Question. How do you plan to address the infrastructure needs (i.e.; eartags, scanners, and private databases) to implement this program? For instance, if all the cattle in the United States are ear tagged, without a network of scanners in place, the 

program will be unable to operate. 

Answer. In developing NAIS, USDA is establishing data standards and the design 

of the data system. Once the identification system is designed, stakeholders will determine which technologies are the most appropriate to meet the needs of the system and which methods are most cost-efficient and effective. Producers are in the 

best position to determine which animal identification and data collection technologies are used, and they will have responsibility for purchasing them. 

Although the marketplace will determine which technologies are used to support 

the NAIS, USDA has established minimum standards and requirements for certain 

species. For example, a visual eartag with the Animal Identification Number (AIN) 

imprinted on the tag has been established as the de facto standard for cattle. Other 

forms of identification that may be used with the AIN tag are referred to as ‘‘supplemental identification.’’ The use of such supplemental identification is a decision to 

be made by the producer. This ensures that the additional cost of advanced technology is optional at the producer level. Some producers may elect not to use such 

technologies within their herd management program, and USDA does not want to 

limit their participation in the NAIS. 

It is true that automated data collection devices will help the industry effectively 

obtain information on their animals. The integration of the NAIS data standards 

into management systems and processes will result in the most successful and costeffective systems. The selection of such technology is best determined by the industry sector to ensure their preferences are met in incorporating the data standards 

with their management practices and information systems. However, as long as animals are identified according to uniform standards established through the NAIS, 

State and Federal animal health officials will have a much better chance of carrying 

out a successful epidemiologic investigation than they would otherwise. The technology for identifying animals is rapidly evolving. USDA acknowledges the need to 

have compatibility of systems throughout the pre-harvest production chain, but believes producers and the marketplace are in the best position to determine which 

technologies are used. 

Question. Please provide a legal opinion explaining the authority of the Secretary 

to create a mandatory national animal identification system. 

Answer. The Animal Health Protection Act (AHPA), 7 USC § 8301–8317, authorizes the Secretary of Agriculture to carry out operations and measures to detect, 
468 

control, or eradicate livestock pests or disease. It also provides ample authority to 

establish and implement either a mandatory or voluntary system of animal identification. Further, the AHPA enables the Secretary to enter into agreements with 

States or other stakeholder organizations to implement either a mandatory or voluntary animal identification program. 

PREMISE IDENTIFICATION

Question. Please provide information by State on the total number of premises, 

the total number of premises identified, and the percentage of premises identified. 

Please keep the subcommittee updated on these figures quarterly. 

[The information follows:] 

Please note: The estimated number of premises for each State was obtained from 

USDA’s National Agricultural Statistics Service 2002 Census of Agriculture. Based 

on NASS’ definition of a farm, the estimated number of premises may not accurately 

reflect the total number of premises in each State for purposes of the NAIS. (Number of premises identified as of March 2006) 

State Total estimated 

premises 

Number of premises identified 

Percentage of 

premises Identified 

Alabama ..................................................................................................... 48,036 1,766 3.68 

Arkansas .................................................................................................... 52,878 5,542 10.48 

Arizona ....................................................................................................... 9,443 234 2.48 

California ................................................................................................... 52,234 2,343 4.49 

Colorado ..................................................................................................... 36,747 1,667 4.54 

Delaware & Maryland ................................................................................ 13,406 2,108 15.72 

Florida ........................................................................................................ 41,458 2,215 5.34 

Georgia ....................................................................................................... 46,836 1,385 2.96

Iowa ............................................................................................................ 64,327 3,134 4.87 

Idaho .......................................................................................................... 29,502 15,073 51.09 

Illinois ........................................................................................................ 40,810 3,745 9.18 

Indiana ....................................................................................................... 49,500 5,105 10.31 

Kansas ....................................................................................................... 54,030 3,057 5.66 

Kentucky ..................................................................................................... 80,823 5,026 6.22 

Louisiana .................................................................................................... 27,650 517 1.87 

Maine ......................................................................................................... 7,525 326 4.33 

Michigan .................................................................................................... 45,706 10,221 22.36

Minnesota ................................................................................................... 61,625 10,606 17.21

Missouri ...................................................................................................... 109,082 7,771 7.12 

Mississippi ................................................................................................. 41,272 543 1.32 

Montana ..................................................................................................... 32,370 312 0.96 

North Carolina ............................................................................................ 51,309 2,699 5.26 

North Dakota .............................................................................................. 19,716 7,182 36.43 

Nebraska .................................................................................................... 43,236 5,734 13.26 

New Jersey .................................................................................................. 9,169 70 0.76 

New Mexico ................................................................................................ 19,338 467 2.41 

Nevada ....................................................................................................... 4,764 934 19.61 

New York .................................................................................................... 40,134 13,176 32.83

Ohio ............................................................................................................ 72,543 1,417 1.95 

Oklahoma ................................................................................................... 105,158 2,904 2.76 

Oregon ........................................................................................................ 48,188 1,930 4.01

Pennsylvania .............................................................................................. 68,699 27,987 40.74 

South Carolina ........................................................................................... 23,115 1,361 5.89 

South Dakota ............................................................................................. 32,216 3,842 11.93 

Tennessee ................................................................................................... 93,529 9,008 9.63 

Texas .......................................................................................................... 277,493 9,711 3.50 

Utah ........................................................................................................... 20,981 6,807 32.44 

Virginia ....................................................................................................... 51,097 2,686 5.26 

Vermont ...................................................................................................... 7,341 78 1.06 

Washington ................................................................................................ 34,541 947 2.74 

Wisconsin ................................................................................................... 74,511 47,171 63.31

West Virginia .............................................................................................. 26,582 7,452 28.03 

Wyoming ..................................................................................................... 14,615 227 1.55 

Total .............................................................................................. 2,083,535 236,486I77 ........................
469 

OFFICE OF THE UNDER SECRETARY FOR MARKETING AND REGULATORY PROGRAMS

Question. The Under Secretary position for Marketing and Regulatory programs 

is currently vacant. This position is one that is very significant based on current 

issues that the Department of Agriculture continues to monitor. For instance, this 

office provides oversight and management of Department actions related to avian 

influenza, pest eradication programs, marketing and grading of commodities, and 

animal disease surveillance. 

Please provide us with an update on this Under Secretary position. Also, how long 

do you expect this position to be vacant? 

Answer. The Secretary appointed Dr. Charles ‘‘Chuck’’ Lambert as the Acting 

Under Secretary for Marketing and Regulatory Programs on November 14, 2005. 

Dr. Lambert served as Deputy Under Secretary for Marketing and Regulatory Programs since December 2, 2002. The Department anticipates that the President will 

nominate someone for this position in the very near future. 

AVIAN INFLUENZA

Question. Please give us a status of avian influenza worldwide. 

Answer. Avian influenza (AI) is a disease found among poultry. AI viruses can infect chickens, turkeys, pheasants, quail, ducks, geese, and guinea fowl, as well as 

a wide variety of other birds, including migratory waterfowl. Each year, there is a 

flu season for birds just as there is for humans and, as with people, some forms 

of the flu are worse than others. 

AI viruses can be classified into low pathogenicity and highly pathogenic forms, 

based on the severity of the illness they cause in poultry, and within each of these 

forms are numerous subtypes. Most AI strains are classified as low pathogenicity 

avian influenza (LPAI) and cause few clinical signs in infected birds. Incidents of 

LPAI are commonly detected in domestic poultry flocks, and LPAI does not pose a 

serious threat to human health. However, two subtypes of LPAI can potentially mutate into a more dangerous form, and USDA is initiating programs to monitor those 

subtypes. 

In contrast, high pathogenicity avian influenza (HPAI) causes a severe and extremely contagious illness and death among infected birds. The HPAI subtype that 

is considered to be the most serious is H5N1. Of the few avian influenza viruses 

that have crossed the species barrier to infect humans, H5N1 has caused the largest 

number of detected cases of severe disease and death in humans. 

The World Organization for Animal Health reports that H5N1 HPAI has been detected in over 40 countries in 2005 and 2006. Nine countries have reported laboratory-confirmed cases of H5N1 influenza in humans, according to the World Health 

Organization. 

There is no evidence that HPAI currently exists in the United States. Historically, 

there have been three HPAI outbreaks in poultry in this country—in 1924, 1983 and 

2004. No significant human illness resulted from these outbreaks. 

Question. Also, please provide an update on actions taken by your agency and how 

you are preparing for avian influenza. 

Answer. Our safeguarding system against avian influenza (AI) encompasses, 

among other things, (1) cooperation with States in targeted and passive surveillance; (2) cooperative efforts and information sharing with States and industry; (3) 

outreach to producers regarding the need for effective on-farm biosecurity practices; 

(4) trade restrictions on poultry and poultry products from overseas; and (5) antismuggling programs. 

Surveillance.—National surveillance for AI is accomplished through several 

means: (1) the National Poultry Improvement Plan (NPIP), a cooperative IndustryState-Federal program, which has a program for breeder flocks that has been in 

place since 1998; (2) State and university laboratories, which test suspect cases; (3) 

industry, which works with States to conduct export testing at slaughter; and (4) 

States, which conduct surveillance in areas where AI has historically been a concern 

(e.g., the live bird marketing system). 

Low Pathogen Avian Influenza (LPAI) Surveillance and Control.—APHIS has developed a Federally-coordinated and State-assisted domestic LPAI program that provides surveillance for H5/H7 AI in two areas: (1) the live bird marketing system, 

and (2) the U.S. commercial broiler, layer, and turkey industries. By doing so, 

USDA and its partners will prevent the possible mutations and reassortments of the 

low-pathogenicity virus to its highly pathogenic form; reduce the likelihood of the 

virus becoming a zoonotic agent, thereby protecting the public (human health); and 

preserve international trade in poultry and poultry products. 

Live Bird Market System.—In October 2004, APHIS established the live bird market segment of the National Control Program by publishing uniform standards to 
470 

prevent and control the H5 and H7 LPAI subtypes in live bird markets. These 

standards are now being implemented. APHIS enters into cooperative agreements 

with States that have live bird market activities, as well as Official State Agencies 

and NPIP authorized laboratories participating in the NPIP LPAI program. States 

will use funds to implement uniform guidelines for all participants in the live bird 

market system in the areas of State licensing, AI testing, recordkeeping, sanitation, 

biosecurity education and outreach, surveillance, inspections, and response to positive facilities. Funds also provide for equipment, supplies, and personnel to inspect 

and collect samples within the live bird market system; perform trace backs and 

trace forwards; and support additional field and laboratory activities essential to the 

program. By the end of fiscal year 2005, cooperative agreements for the live bird 

market system LPAI program were initiated with 21 States (California, Delaware, 

Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Minnesota, Missouri, North Carolina, New Jersey, New York, Ohio, Pennsylvania, South 

Carolina, Texas, Vermont, and Virginia). 

Commercial Poultry.—The NPIP is developing the commercial poultry segment of 

the LPAI surveillance. The surveillance program will provide for H5 and H7 AI 

monitoring of participating broiler, table egg, and turkey production flocks and their 

respective breeding flocks. The adopted program is currently proceeding through the 

regulatory process that will fully establish this voluntary program as part of the 

NPIP. Official State Agencies use funds to work with NPIP LPAI participants to 

conduct active and passive surveillance and to develop State containment and response plans to enhance their ability to detect and respond to LPAI. This also facilitates trade through the documentation of disease-free status. Funds also provide for 

supplies and labor for conducting tests, laboratory cost for conducting LPAI clinical 

diagnostic surveillance, laboratory equipment to conduct the official tests of the 

NPIP LPAI program, site visits, sample collection, transportation, and submission 

to authorized laboratories and NVSL. APHIS has memoranda of understanding in 

place with 48 official State agencies to carry out commercial flock surveillance 

through the NPIP. The rule to establish the surveillance program is in the final 

stages of clearance. 

Domestic Surveillance of Migratory Birds.—On March 20, 2006, USDA announced 

an enhanced national framework for early detection of HPAI in wild migratory birds 

in the United States. This readiness plan and system builds on, significantly expands, and unifies ongoing efforts among Federal, State, regional and local wildlife 

agencies. Because Alaska is at the crossroads of bird migration flyways, scientists 

believe the strain of highly pathogenic H5N1 currently affecting Southeast Asia 

would most likely arrive there first if it spreads to North America via migratory 

birds. Thus, the plan recommends a prioritized sampling system with emphasis in 

Alaska, elsewhere in the Pacific flyway, and the Pacific islands, followed by the Central, Mississippi, and Atlantic flyways. 

The ability to effectively prevent the spread of highly pathogenic H5N1 to domestic poultry operations is greatly enhanced by being able to rapidly detect the pathogen if it is introduced into wild migratory birds in the United States. The interagency plan outlines five specific strategies for early detection of the virus in wild 

migratory birds, including (1) investigation of disease outbreak events in wild birds; 

(2) expanded monitoring of live wild birds; (3) monitoring of hunter-killed birds; (4) 

use of sentinel animals, such as backyard poultry flocks; and (5) environmental sampling of water and bird feces. 

In spring 2006, under the interagency plan, the USDA and its cooperators plan 

to collect between 75,000 and 100,000 samples from live and dead wild birds in all 

States and 50,000 samples of water or feces from high-risk waterfowl habitats 

across the United States. The U.S. Geological Survey will initially screen 11,000 of 

the live bird samples at its National Wildlife Health Center in Madison, Wisconsin. 

The remaining samples will be initially tested at labs certified by USDA in the National Animal Health Laboratory Network. Suspected findings of HPAI will be further tested and diagnosed by the National Veterinary Services Laboratory. Since the 

summer of 2005, the Department of Interior (DOI) has been working with Alaska 

to strategically sample migratory birds in the Pacific flyway. DOI has already tested 

more than 1,700 samples from more than 1,100 migratory birds. No highly pathogenic isolates have been detected. Since 1998, USDA has tested over 12,000 migratory birds in the Alaska flyway; since 2000, almost 4,000 migratory birds in the Atlantic flyway have been tested. All birds in these flyways have tested negative for 

the highly pathogenic H5N1 virus of concern. 

Education and Outreach.—The USDA’s Biosecurity for the Birds Campaign is an 

outreach initiative designed to educate noncommercial poultry owners about the 

signs of AI and other poultry diseases; promote the importance of practicing biosecurity; and encourage rapid reporting of clinical signs of disease and/or unexpected 
471 

deaths. The advertising campaign began in July 2004 and has reached a circulation 

of over 125 million. 

Trade Restrictions and Anti-Smuggling Program.—USDA maintains import restrictions on poultry and poultry products from countries affected by H5N1. Furthermore, all imported live birds (and returning U.S.-origin pet birds) must be quarantined for 30 days and tested for the AI virus before entering the country. USDA 

works closely with the Department of Homeland Security’s Customs and Border Protection to enforce import restrictions. To ensure compliance with restrictions, APHIS 

concentrates on identifying smuggled poultry products and live birds from H5N1- 

affected countries. APHIS also conducts routine surveys, special operations, and 

marketing activities focusing on H5N1 products in commerce and at ports of entry. 

All suspected violations are forwarded to APHIS’ Investigative and Enforcement 

Services staff for further investigation. Civil and/or criminal penalties may be issued 

for violations. 

APHIS has also increased its monitoring of domestic commercial markets for illegally smuggled poultry and poultry products. USDA works with trading partners 

and the World Organization for Animal Health (OIE) to maintain safe trade. 

Responding to an Outbreak.—In the event of an HPAI outbreak, APHIS has the 

Foreign Animal Disease management infrastructure to conduct an emergency response that would occur at the local level, in accordance with the National Animal 

Health Emergency Management System’s guidelines for highly contagious diseases. 

Should the disease be detected in commercial flocks or in back yard flocks, affected 

flocks would be quickly quarantined to prevent spread. Sick and exposed birds 

would be euthanized and the premises cleaned and disinfected to stamp out the disease. USDA would conduct epidemiology investigations to determine the source of 

the virus, and to track the movement of birds to contain spread. 

To ensure immediate deployment of supplies necessary to contain, control, and 

eradicate an HPAI outbreak, APHIS is building a stockpile of needed vaccines, 

antiviral, and therapeutic products including reagents, disinfectants, and equipment. We are also conducting simulated exercises specific to avian influenza to ensure an effective response to an outbreak of the disease. Further, APHIS is developing models of the potential impacts of avian influenza outbreak in the United 

States and alternative control strategies. 

If the scope of the HPAI outbreak is beyond APHIS’ and the affected State’s immediate resource capabilities, additional resources can be obtained through the following mechanisms: the National Response Plan’s Emergency Support Function #11 

ensuring that animal-health emergencies are supported in coordination with the 

emergency support function that covers public health and medical services; and the 

National Animal Health Emergency Response Corps and various State response 

corps can be activated. These private veterinarians and animal health technicians 

are ready to assist on short notice. 

HURRICANE ASSISTANCE

Question. The Congress recently provided emergency funding through the hurricane supplemental for a number of programs that are within the rural development 

mission area. To be more specific, we provided supplemental funding for the Rural 

Community Advancement Program and Rural Housing. 

Please provide us with an update on the Department’s use of the funds. What additional needs are you aware of in rural areas that were affected by Hurricane 

Katrina? 

Answer. On March 13, 2006, Rural Development published a Notice of Funding 

Availability (NOFA) in the Federal Register implementing the hurricane supplemental provisions of Public Law 109–148. 

The supplemental provided $35 million in budget authority for our direct and 

guaranteed homeownership programs, $10 million for direct homeownership repair 

loans, and $20 million in direct homeownership repair grants. These funds have 

been allocated to the gulf region. We expect that all direct loan and grant funds will 

be obligated in fiscal year 2006. Of the $15 million of budget authority for guaranteed homeownership loans ($1.3 billion in deliverable program level), we expect the 

majority of these funds will be carried over into fiscal year 2007. We are also planning to use a portion of this budget authority to implement a mortgage recovery program for our guaranteed homeownership customers. Under this program, Rural Development will advance to a lender up to 1 year’s worth of payments to bring the 

customer to a current status. To be eligible for the program, the customer had to 

be in good standing with the lender prior to the hurricanes and have a reasonable 

prospect for success. The debt would be secured by a non-interest bearing soft-sec-
472 

ond lien on the property payable upon sale or transfer of title. Rural Development 

will be publishing a NOFA on this initiative in the near future. 

The Water and Environmental Programs received $45 million in budget authority. 

We continue to monitor the situation with regard to telecommunications and electric 

demands, but to date, we have not received any applications. The first request for 

2005 hurricane funds was received on April 10, 2006, and is in the process of being 

reviewed for funding qualifications. 

Additional demand for our programs is still difficult to estimate. Rebuilding of the 

housing stock in the gulf region is very dependent on ensuring that adequate infrastructure exists, on-going negotiations between existing homeowners seeking Federal Emergency Management Agency (FEMA) and insurance benefits, lack of builders, and high building costs. Our local field offices continue to work with our customers and within these rural communities to help with recovery efforts. 

515 HOUSING PROGRAM

Question. The fiscal year 2007 budget request eliminates funding for the 515 

Rural Rental Housing Program. The 515 housing program provides funding for construction and revitalization of affordable rental housing for rural families who have 

very low to moderate incomes. 

If the Congress does not provide funding for the 515 housing program, will low 

income citizens have any other option when it comes to affordable housing? 

Answer. Yes. Rural Development’s section 538 Guaranteed Rural Rental Housing 

Program (GRRHP) provides affordable housing to very-low and low income families. 

The section 538 program works in partnership with other financing entities to create affordable housing. The lender provides the financing to construct or renovate 

affordable housing, Rural Development guarantees the loan. Guaranteed loans generate 10 times more loan funds for the same budget authority than do direct loans, 

and attract 2.5 times more private sector leveraged money. More than 90 percent 

of the closed loans in the portfolio have 9 percent tax credit dollars. Tax credits require owners to achieve affordability targets, resulting in high percentages of low 

and very low income tenants. Many tenants in section 538 properties have section 

8 vouchers which assist the tenants in paying rent. The program also offers interest 

credit subsidies that assist in lowering the interest rate throughout the term of the 

loan. The subsidized interest rate keeps rents low for tenants. The section 538 program requires that rents not be more than 30 percent of 115 percent of the area 

median income, and average rents for all units at the property cannot be more than 

30 percent of 100 percent of area median income. 

For example, last year the following was provided for new construction: 

[The information follows:] 

COMPARING RENTAL UNITS PRODUCED IN FISCAL YEAR 2005 WITH SECTION 515 AND 538 

BUDGET AUTHORITY 

Direct loans Guaranteed loans 

Budget Authority ..................................................................................................................... $13,200,000 $3,462,000 

Funding Authority .................................................................................................................... $28,013,000 $99,200,000 

Units Produced ........................................................................................................................ 783 3,313 

Tenants < 60 percent of Area Median Income (Est.) ............................................................ 720 1,000 

While the average incomes may appear different ($10,036/year adjusted income in 

Section 515 vs. $18,400/year gross income in Section 538), the aggregate number of 

families served in the very low income category is greater in Section 538. 

RURAL HOUSING VOUCHER PROGRAM

Question. In fiscal year 2006, Congress included $16 million for a new rural housing voucher program. This funding is available to assist tenants who are unable to 

reside in the current rental arrangement due to a property owner exiting the program. The fiscal year 2007 budget request increases the funding level for housing 

vouchers to $74 million. 

Please take a moment to explain the current status of the $16 million that was 

provided for fiscal year 2006. Also, do you expect the funding that has been provided 

for the current fiscal year to meet the demand? 

At this point, it seems difficult to determine how many owners will choose to prepay and exit the program. Please explain how the Department determined this level 

of funding for fiscal year 2007. 
473 

Answer. On March 20, 2006, Rural Development published a NOFA announcing 

the availability of a voucher demonstration program and has started to utilize the 

$16 million that was provided for fiscal year 2006. The first Rural Development 

Vouchers were issued in early April. We anticipate that demonstration funding will 

be sufficient to provide 2,700 vouchers to protect tenants in projects that prepay 

during fiscal year 2006. 

The Comprehensive Property Assessment (CPA) found that 10 percent of the 

properties (approximately 1,700) could be economically viable to prepay, if permitted. This is estimated to be about 46,000 units, with approximately one-third of 

the prepayments occurring in each of the first 3 years. The $74 million proposed 

fiscal year 2007 funding level allows USDA to fund approximately 15,000 units at 

a per voucher funding level of slightly over $400 per month. This will include the 

renewal of up to 2,700 vouchers funded during fiscal year 2006. However, the specific dollar amount and number of tenants is dependent on the number of properties 

that pre-pay, their location, and the market conditions at the time. 

WATER AND WASTEWATER

Question. The budget request proposes to change the calculation of the interest 

rate for water and wastewater grants from the fixed rate of 4.5 percent to a floating 

rate set at 60 percent of the market rate. 

Please take a moment to explain the reason why this proposal has been included 

and how it will affect the current program. 

Answer. The reason the President’s budget proposed a change in the method it 

uses to determine its loan interest rates is to enable communities to better use 

available loan funds and make the lowest rate more reflective of changing market 

rates. Under our current method of establishing a three-tier interest rate, the market rate is indexed quarterly to the Bond Buyer 11 GO Bond Index. The poverty 

rate is fixed at 4.5 percent and the intermediate rate is halfway between the market 

and poverty rates. 

In the last 12 quarters the market rate has been at or below 4.5 percent 7 times, 

effectively reducing our three-tier to a one-tier interest rate schedule. To avoid this, 

we are proposing to index all three interest rate tiers to the 11 GO Bond Index. The 

market rate will remain at the 11 GO Bond Index, the intermediate rate will be 

80 percent of the 11 GO Bond Index and the poverty rate will be 60 percent of the 

11 GO Bond Index. The final rate will be 3.2 percent for fiscal year 2007. 

Question. Most importantly, would this be an administrative change or will it require legislative language? 

Answer. The change in rate calculation is administrative. 

ORGANIC RESEARCH

Question. Please provide information on all current research on organic agriculture performed by ERS and ARS or funded through CSREES. 

Answer. A search of the Current Research Information System indicates that 

there are 187 active organic agriculture research projects supported by CSREES. 

These projects are being conducted in 42 States with 57 different cooperating landgrant university or other institutional partners. In total, these projects support an 

equivalent of 46 scientist years, and the funds are fairly evenly distributed across 

the four CSREES regions. The $10.2 million invested in these 187 projects is further 

leveraged by the State partners to increase funding support to $20.5 million for organic research. 

An assessment of all Agricultural Research Service research activities supporting 

organic agriculture has been completed. Of $18.4 million spent by ARS that directly 

benefits organic agriculture, $4.7 million is spent for research conducted in the field 

under conditions that are the same or similar to certified organic. Other ARS research that indirectly benefits organic agriculture totals $44.1 million. ARS now has 

a national program leader for Integrated Agricultural Systems who oversees ARS 

organic agriculture research. Based on the customer input from the 2005 ARS organic agriculture workshop, ARS scientists are encouraged to incorporate organic 

agriculture objectives into research plans as part of the next national program cycle. 

New organic field research sites are being planned at Ames, Iowa, Mandan, North 

Dakota, and Fort Pierce, Florida, in addition to field research already conducted at 

Salinas, California, Lane, Oklahoma, Beltsville, Maryland, Dawson, Georgia, Morris, 

Minnesota, Weslaco, Texas, and Orono, Maine. ARS is developing a national strategy to identify the greatest barriers to organic agriculture production in different 

regions of the country. ARS will use organic agriculture customer input to develop 

specific research problems for the 2007 Integrated Agricultural Systems National 

Program Action Plan. 
474 

The Economic Research Service has been tracking organic acreage and livestock, 

by commodity since 1997, and partnered with NASS in increasing the availability 

of production data and statistics. More recently, ERS has gotten involved in organic 

marketing and social science research, including work comparing United States to 

European organic policy, issues and trends in retailers and handlers and consumer 

data analysis. The most recent addition to their research projects is data tracking 

wholesale organic produce prices. In terms of leading the research agenda, ERS has 

sponsored two workshops in the past 5 years to frame the consumer, production and 

environmental issues that warrant more research. 

The National Agricultural Library, through its Alternative Farming Systems Information Center, general reference and referral services, document delivery services and collection development provides access to and/or can obtain access to published research on organics conducted outside the United States. Some of the information is made available through the AFSIC Web site, the NAL Agricola database 

and through other databases to which NAL has access. NAL helps organic farmers 

to locate information on organic research that is conducted nationally and internationally. 

Question. Please provide information on all statistics on organic agriculture published through NASS. 

Answer. Only one directed question on organic sales was included in the 2002 Ag 

Census, and NASS reported statistics for the value of certified organically produced 

sales by total sales and number of farms. The 2007 Census of Agriculture was modified to address the increasing data needs of the organic sector and will ask a number of new questions of producers in Section 22. Respondents will be asked whether 

the operation is a certified organic operation, how many acres were used for organic 

production, the total value of sales for crops and livestock produced and sold, and 

how many acres were being converted to organic production in the past year. 

NASS also conducts the Agricultural Resource Management Survey (ARMS) that 

asks very specific questions about production practices, including organic, which together with other detailed data could provide rich analyses of the financial performance, sociodemographic and marketing choices and trends of organic producers. This 

cooperative arrangement with the Economic Research Service is likely to increase 

the level of data and research available. For example, the ARMS for dairy, added 

an oversample of 700 organic dairy farmers to this survey. An expanded section on 

pasture, organic certification, and other questions to capture aspects of organic production that can be contrasted with conventional dairy production systems were also 

added. A similar project is underway to explore the costs and production practices 

of organic soybean producers through the ARMS survey program. 

Question. How would the amount of research and statistical information available 

for organic agriculture compare to that for other sectors of agriculture? 

Answer. According to the World Trade Organization’s International Trade Centre, 

certified organic products make up between 2 and 2.5 percent of total retail food 

sales in the United States. ARS research in direct support of organic agriculture is 

$18.4 million, or 1.4 percent of its total budget in fiscal year 2005. CSREES research in direct support of organic agriculture is $10.2 million or 0.8 percent of its 

total budget in fiscal year 2005. 

The data on organic production has been relatively scarce, a situation that is 

being remedied with the ERS/NASS ARMS, and will also improve with the addition 

of questions to the 2007 Ag Census. With the increasing inclusion of questions on 

organic sales, acres and production practices relevant to organic producers, comparable data will be available on organic producers. 

On the marketing side, data and statistics on organic agriculture are less available than for conventional products. Again, ERS has taken lead in increasing the 

amount of information available for some products and geographic markets, but 

until the Agricultural Marketing Service (AMS) adapts their price reporting to include more delineations for organic product lines, and explores how prices are discovered differently, for example through direct markets, little useful price information will be available to organic producers and marketing channel partners. AMS 

is currently making changes that will result in greater availability of marketing information on organic products. 

Question. What are the organic agriculture’s greatest areas of need for research 

and statistical information? 

Answer. The research topics identified at the ARS Organic Agriculture Customer 

Workshop in January 2005 suggest where more research is needed in core areas of 

production, processing, resource management and economics. These topics include 

how organic production contributes to different aspects of food quality, safety and 

security, developing production systems to increase profitability, ways to manage 

and measure the health of soils, the environmental benefits from organic production 
475 

systems, ways to achieve the greatest productivity in organic production, the contributions of organic production to overall sustainability, genetic materials specific 

to organic production systems, and biologically-based strategies to manage diseases, 

weeds and insect pests. 

A recent white paper on organic agriculture developed by CSREES identified a 

number of research priorities that will facilitate organic production. The research 

priorities include developing an improved understanding and management of soil 

fertility, pest management, livestock production and health; the development and 

evaluation of adapted cultivars and breeds, assessment of the long term impacts of 

whole-farm systems; the evaluation of the economic, business and social aspects of 

various organic production systems to improve grower returns, reduce market barriers, marketing strategies to increase consumer demand; the development of 

science-based information on which to base organic regulations, thereby assuring rational regulation, providing options to overcome current constraints, and assisting 

in overcoming the increasing number of complex, technical barriers to foreign trade; 

assessment of the production and processing practices for impact on consumer valuation of various attributes such as identifying: varieties with enhanced flavor and 

nutrition, improved practices to add value and enhance shelf life and quality, effects 

of production systems on product nutrition and quality, and mechanisms to minimize GMO contamination of organic products; and the identification of the marketing and policy constraints on the expansion of organic agriculture, especially 

among conventional growers who would otherwise transition to organic. 

The high interest in, and widespread use of, data collected by the ERS on organic 

production scale and growth would suggest that any new data that can be collected 

on certified acres, including the detailed information collected in the Agricultural 

Resource Management Survey, would be a good investment. But, after consultation 

with the Economic Research Organic Work team, the true need is information on 

prices, marketing margins, marketing practices, trade data and other information 

that would allow for better research on competitiveness, profitability, emerging marketing trends and how the organic food market performs under its evolving growth 

and change in structure. 

AVIAN FLU

Question. Please provide information on all current USDA research on highly 

pathogenic avian influenza. Please provide a brief description of the research topic, 

where it is being performed, and the funding history by fiscal year. 

Answer. Avian influenza (AI) presents a major disease threat to the U.S. poultry 

industry. The recent highly publicized outbreak of H5N1 avian influenza (AI) in 

chickens and people in Hong Kong illustrates the potential public health concerns 

that may surface as a result of AI infections. In 1997, a deadly form of AI (H5N1) 

infected poultry farms and live poultry markets in Hong Kong and was associated 

with 18 hospitalized human cases, of which six died. More recently, a similar virus 

has been seen spreading in poultry throughout Asia and Europe and is occasionally 

infecting humans (approximately 200 cases and 100 deaths). Less pathogenic strains 

of avian influenza have caused problems in many U.S. turkey flocks and live poultry 

markets since the 1960’s, although few commercial chicken flocks were involved. Because of research on AI viruses in recent years we now know that some viruses can 

rapidly change from causing only mild disease to ones that cause a deadly disease 

in chickens. It is likely that the longer a virus infects commercial poultry, the more 

likely it is to cause the severe form of the disease. This research seeks to understand the changes that are required for this shift in ability to cause disease. The 

research also seeks to control the presence of AI viruses in poultry by development 

of new and more effective vaccines and to develop tests to more rapidly diagnose 

infection in chickens. 

It is crucial that we both seek ways to eradicate or control these AI viruses and 

to understand their potential for a virulence shift. The research takes several approaches to these goals including: identifying and evaluating the best vaccination 

approaches to control the disease; identifying the source(s) and family relationships 

of the viruses; characterizing the events leading to increase in virulence; characterizing the chicken’s response to infection with AI viruses; and characterizing the factors that allow AI viruses to cross infect other species of animals. To aid in the detection and control of the virus, ARS developed and APHIS validated a rapid detection assay for Avian Influenza Virus (AIV), which is now widely deployed into the 

National Animal Health Laboratory Network. 

For the control of low pathogenic AI outbreaks, vaccination is being more commonly considered, because it can potentially help control an outbreak at a lower cost 

than depopulation programs. At ARS, the use of currently available and new vac-
476 

cination strategies are being investigated for the control of AI. Currently only two 

types of vaccines are available for use for AI, killed adjuvanted vaccines and 

fowlpox-vectored vaccines. Our research has shown that to get optimal protection 

from these vaccines, it is important to match the vaccine to the challenge strain. 

A better match of vaccines allows less virus to be shed from vaccinated but infected 

birds. Additional research has shown that when vaccination is used on a widespread 

basis antigenic drift, similar to what is seen with human influenza viruses, can be 

a problem for decreased effectiveness for the vaccine. Additional research has been 

focused on using viral-vectored or recombinant vaccines for AI including fowlpox 

vectored vaccines, replication incompetent alphavirus vectors, and Newcastle disease virus vectored vaccines. All three of these vaccines types have shown to provide 

protection from influenza challenge, and can provide the advantage of use as a 

DIVA (differentiate infected from vaccinated animals) vaccine. These vaccines are 

still being evaluated to determine if they have significant advantages over commercially available vaccines and can be produced in a cost-effective manner. Additional 

vaccine technologies, including the reverse genetics approach to create AI viruses 

that can also be used with the DIVA approach have also been shown to be effective. 

To aid in the understanding of AI epidemiology, AI viruses received recently from 

U.S.A. (low pathogenic), Hong Kong, Italy, El Salvador, Chile, Netherlands, Indonesia, Viet Nam, and South Korea are being classified for disease causing potential. 

Research studies include molecular characterization related to the lethality of the 

viruses, the search for genetic markers for this lethality, and investigating the epidemiology and spread of the viruses. Pathogenic potential of the viruses is being assessed in disease free chickens held in biocontainment facilities. ARS is developing 

and evaluating techniques to predict which mild forms of viruses will change to 

more deadly forms of the AI virus. Furthermore, ARS is assisting the Centers for 

Disease Control and Prevention with evaluating recombinant vaccines to assure 

human vaccines will not cause disease in poultry. 

With the supplemental funding received in fiscal year 2006, ARS plans to conduct 

the following: 

—research on developing and validating existing and new vaccines to ensure that 

they can be distributed to domestic poultry or wild waterfowl before, during, or 

after an outbreak to help them build immunity and resistance to AI infection. 

In addition, ARS will provide direct support to the appropriate in-country counterparts in Asia for testing and evaluating different vaccine formulations via 

challenge studies; in addition to virus sequencing, cross hemagglutination inhibition titers, and neutralization titers. 

—ARS with partners will develop rapid, State laboratory based or site-deployable 

tools and other assays that will allow rapid detection and classification of AI 

viruses. The tests will be accurate for detecting AI virus in various samples including birds (domestic and wild) and environmental specimens. The other assays will include: (1) development, bench validation and limited field validation 

of a real-time RT–PCR (RRT–PCR) for screening of wild birds for AI viruses; 

(2) microarray test development for AI virus classification; (3) more sensitive 

penside tests for avian influenza. 

—genome sequencing of poultry outbreak and wild bird AI viruses in SEPRL archive and those obtained by on going surveillance, and characterize them biologically. ARS will sequence genomes and then mine the sequence data for viral 

evolution, relationships, and determinants of virulence as well as identify diagnostic sequences and potential vaccine antigens. Viruses will be studied to determine genomic changes that define host adaptation and specificity and 

changes necessary for AI viruses to cross to new avian and mammalian hosts. 

—ARS with partners will conduct epidemiological studies to identify the risk factors for transmission of virus between farms and biosecurity mitigation steps 

to reduce transmission. In addition, targeted surveillance of wild birds and poultry at high risk for avian influenza will be conducted to assess risk of introduction to farms. 

ARS supports APHIS and poultry industry action programs with epidemiology, 

molecular virology, pathogenesis research, and technical assistance on AI. ARS is 

directly assisting APHIS in trade negotiations of poultry products by determining 

the risk for low and high pathogenicity AI in poultry meat and the ability of pasteurization to inactivate AI in egg products. 

The funding for Avian Influenza Disease research for fiscal years 2005, 2006 and 

2007 are provided below for the record. 
477 

Fiscal year 2005 Fiscal year 2006 Fiscal year 2007 

Athens, GA ................................................................................................. $2,171,200 1 $2,344,400 $5,418,400 

1 Does not include the fiscal year 2006 supplemental funding of $7 million. 

RENEWABLE ENERGY RESEARCH

Question. Please provide information on all current USDA research on renewable 

energy. Please provide a brief description on the research topic, where it is being 

performed, and the funding history by fiscal year. 

Answer. Both the Agricultural Research Service (ARS) and the Cooperative State 

Research, Education, and Extension Service (CSREES) support renewable energy 

research. ARS, as the Department of Agriculture’s in-house research agency, has a 

nationwide network of facilities and research scientists who conduct basic and applied research for the purpose of solving problems associated with regional and national high priority issues, including renewable fuels, affecting producers and consumers of U.S. agricultural products ARS cooperates closely with the Cooperative 

State Research, Education, and Extension Service (CSREES) and the university system. 

ARS conducts a national Bioenergy and Energy Alternatives Research Program 

(http://www.ars.usda.gov/research/programs/programs.htm?NPlCODE=307), with 

the vision of meeting America’s energy needs with renewable resources. The mission 

of this research addresses national goals of improving energy security, environmental quality, and the economy, with an emphasis on the rural economy. Major 

program goals include: 

—Sustainable energy from agriculture that is energy efficient and economic. 

—Understanding the recalcitrance of biomass. 

—Exploiting the potential of molecular biology to improve quantity and quality of 

agricultural biomass feedstocks and to improve the effectiveness of conversion 

organisms. 

—Matching the characteristics of biomass feedstocks with the requirements of 

conversion organisms. 

—Devising value-added biofuel coproducts. 

—Meeting on-farm and rural community energy needs for liquid fuel, electricity, 

and heat. 

—Reduce energy cost for agricultural operations. 

To achieve these goals, research is conducted from feedstock, including crops, crop 

residues, byproducts, and wastes, to fuel, including ethanol, biodiesel, biogas, and 

hydrogen. Examples include: 

—Genetic modification of plants to improve the quality characteristics and increase the quantity of feedstock produced. 

—Technology to sustainably produce and harvest the biomass, to efficiently handle, add value, store, and deliver the feedstock, and to quickly measure its quality at any point in the process. 

—Technology for biological or thermochemical conversion of feedstock to fuel and 

coproducts. This includes processes, organisms, and product separation for energy efficient and economical application for use on-farm, in local community 

size plants, and in large biorefineries. 

—Technology to improve quality, performance, and ease of using the biofuels produced. 

Successful completion of the proposed work will promote the enhanced use of agricultural commodities by providing additional markets for farmers and for fuel producers. The public will benefit from reduced environmental pollution and enhanced 

energy security associated with using a domestic resource that reduces dependence 

on imported petroleum and improves the balance of trade. Outcomes and impact include: 

—Successful and sustainable systems of bioenergy production 

—Energy crops with greater yield and more desirable properties 

—Energy efficient conversion of herbaceous crops and crop residue to ethanol 

—Biodiesel with reduced emissions and better performance 

—Less costly biofuels 

—Distributed rural energy production for farm, rural community, and national 

needs 

—Enhanced rural economy 

With its nationwide capabilities in natural resources and sustainable agricultural 

systems, in quality and utilization of agricultural products, in crop production and 

management, and in animal production and management, ARS has the research capacity and is well positioned to lead and to partner with other Federal agencies, 
478 

States and private interests to develop energy efficient, economical, sustainable, and 

socially acceptable technologies to make agriculture energy independent and for agriculture to be a major supplier of energy for the Nation. 

Components of ARS Bioenergy and Energy Alternatives Research are conducted 

at the following locations: 

—Energy Crop research: 

—Western Regional Research Center, Albany, California: 

—Genetic manipulation to develop crops more easily converted to ethanol. 

—Lincoln, Nebraska: 

—Grasses with improved biomass yield and quality and sustainable grass production management practices. 

—St. Paul, Minnesota: 

—Legumes with improved biomass yield and quality and sustainable legume 

production management practices. 

—Corvallis, Oregon; El Reno, Oklahoma; Mandan, North Dakota; Tifton, Georgia; 

and University Park, Pennsylvania: 

—Germplasm, physiology, and management technology for herbaceous energy 

crop production on agricultural lands managed for conservation. 

—Madison, Wisconsin: 

—Harvesting, handling, storage, and characterizing quality of energy crops and 

plant residues. 

—Ethanol research: 

—Eastern Regional Research Center, Wyndmoor, Pennsylvania: 

—Process technologies and systems that reduce cost of ethanol production. 

—Environmentally sustainable processes to maximize ethanol yield from starch. 

—Processes for generating high value products from parts of corn not converted 

to ethanol. 

—Processes to integrate production of ethanol from stover and from grain. 

—National Center for Agricultural Utilization Research, Peoria, Illinois: 

—Development of superior microbes and enzymes for conversion of agricultural 

commodities to ethanol. 

—Processes for conversion of cellulosic agricultural materials to ethanol. 

—Technologies to recover valuable coproducts during ethanol production. 

—Western Regional Research Center, Albany, California: 

—Integration of plant molecular biology, genomics, bioinformatics, and plant 

transformation to produce ethanol from cereal crops. 

—Enzymes, which work at lower temperatures, to improve energy efficiency. 

—Biomaterial membranes that improve separation of water and ethanol. 

—Richard B. Russell Research Center, Athens, Georgia: 

—Characterization of herbaceous plant parts suitable for conversion to ethanol. 

—Methods to evaluate plant material composition. 

—Enzymatic processes to extract carbohydrates from corn stover. 

—Brookings, South Dakota: 

—Processes and products to enhance value of distillers dried grains. 

—Converting cellulosic ethanol by-products into value-added coproducts. 

—Processes that add value to cellulosic feedstocks on the farm. 

—Biodiesel research: 

—Eastern Regional Research Center, Wyndmoor, Pennsylvania: 

—Enzymatic processes to convert animal fats, vegetable oils and restaurant 

greases into biodiesel. 

—Burning of fats and oils as heating fuel. 

—National Center for Agricultural Utilization Research, Peoria, Illinois: 

—Quality and performance, including storage stability, cold flow, and emissions 

reduction, of diesel fuels and additives produced from vegetable oils. 

—Use of biodiesel as aviation fuel. 

—Bushland, Texas: 

—Performance and emissions of biodiesel as affected by feedstock. 

—On-farm biofuel production. 

—Other renewable energy research: 

—Beltsville, Maryland: 

—Production of electricity from animal manure via anaerobic digestion and use 

of the methane produced to generate electricity. 

—Wyndmoor, Pennsylvania: 

—Thermo-chemical conversion of plant biomass to hydrogen. 

—Peoria, Illinois: 

—Biological production of hydrogen. 

—Bushland, Texas: 
479 

—Systems to provide renewable energy for on-farm and remote agricultural 

needs. 

CSREES RENEWABLE ENERGY RESEARCH

CSREES with Hatch Act, McIntire-Stennis, Evans-Allen, National Research Initiative, Special Research Grants, and Federal Administration funding supports research projects focused on renewable energy. CSREES is the lead agency for the 

USDA Small Business Innovation Research Program. Funding for this program 

comes from CSREES and other USDA agencies and also supports projects on renewable energy. The majority of projects address technical obstacles to the cost-effective 

conversion biomass to energy. The majority of conversion technologies are biological 

or thermo/chemical conversion of vegetable oils, starches and lignocellulosic materials into biofuels. The information that is requested is listed below according to the 

funding authority. 

I. Competitive awards through the National Research Initiative 

(1) NOVEL BIOMASS PROCESSING CHEMISTRY 

START: 01 September 2003. 

COMPLETION DATE: 31 August 2006. 

TOTAL BUDGET: $175,000. 

PROJECT LOCATION: Institute of Paper Science And Technology, Atlanta, Georgia. 

OBJECTIVES: The objective of this program is directed at using ionic liquidbased systems to develop novel oxidative/reductive chemistry that will fragment and 

convert lignin into high-value, low molecular weight chemicals that could be employed as a feedstock for the plastic and chemical industries. This research program 

will take advantage of recent advances in ionic liquids to develop new chemical reactions that will convert waste biomass lignin into high-value chemical components including phenol derivatives for adhesive/polymer industry, polycarboxylate derivatives that will be employed by the detergent and metal chelant industry and/or 

lignin fragments for polymer synthesis. 

(2) PROCESS FOR XANTHOPHYLLS FROM CORN 

START: November 2003. 

COMPLETION DATE: 14 November 2006. 

TOTAL BUDGET: $142,000. 

PROJECT LOCATION: University of Illinois, Urbana, Illinois. 

OBJECTIVES: The overall objective is to develop a process for the production of 

xanthophylls from corn using a combination of solvent extraction, membrane technology and chromatography. There are two specific objectives in this proposed research: (1) Screen membranes for their separation characteristics and stability in organic solvents, and optimize performance parameters of selected membranes for the 

concentration of xanthophylls extracted from corn. (2) Develop a method for producing high-purity xanthophylls by chromatography. This project benefits human 

health by creating a low-cost source of lutein and zeaxanthin. It also benefits the 

dry-grind ethanol industry by creating a high-value coproduct that can offset the 

need for tax waivers and subsidies. Xanthophylls can generate an income of $1–2 

per bushel of corn which is 25–33 percent increase in net revenue with no additional 

materials coming in to the plant. 

(3) GENETIC ENGINEERING OF YEAST FOR CO-FERMENTING ALL FIVE 

CELLULOSIC SUGARS TO ETHANOL 

START: 01 September 2003. 

COMPLETION DATE: 31 August 2005. 

TOTAL BUDGET: $227,003. 

PROJECT LOCATION: Purdue University, West Lafayette, Indiana. 

OBJECTIVES: Researchers have developed recombinant Saccharomyces yeast 

that can effectively ferment xylose, a major sugar molecule in cellulosic biomass, to 

ethanol. The objective of this project is to make the yeast also able to effectively 

ferment other sugars in cellulosic biomass so that the engineered yeast can be more 

effective in using this ideal feedstock to produce fuel ethanol. 

(4) SORGHUM AS A VIABLE RENEWABLE RESOURCE FOR BIOFUELS AND 

BIOBASED PRODUCTS—SHORT TITLE: SORGHUM BIOCONVERSION RESEARCH (SBR) 

START: 01 September 2004. 

COMPLETION DATE: 31 August 2007. 

TOTAL BUDGET: $450,000. 

PROJECT LOCATION: Kansas State University, Manhattan, Kansas. 
480 

OBJECTIVES: Identify hybrids, and elite germplasm, with genetic variation for 

a range of selected compositional characteristics (starch, starch type, hardness, protein, grain phenotype, etc). Develop a coordinated understanding of the relationship 

among composition, chemical structure, physical features, and the availability of fermentable/usable-stored glucose (starch). Expand a demonstrated micro-fermentation 

system to allow higher-throughout screening of test samples, and test conditions, for 

the production of ethanol and lactic acid. Integrate the results from the above experiments to determine the impact of compositional, structural, and physical factors 

on the efficiency of bioprocessing, and to identify the key interactions impacting fermentation yield from sorghum grain. Create an Energy Life Cycle Analysis Model 

to quantify and prioritize the savings potential from factors identified in the above 

research, based on both energy and economics. 

(5) PROTEOMIC ANALYSIS OF ETHANOL SENSITIVITY AND TOLERANCE IN 

THERMOPHILIC AND ANAEROBIC BACTERIA 

START: 01 September 2004. 

COMPLETION DATE: 31 August 2006. 

TOTAL BUDGET: $330,000. 

PROJECT LOCATION: University Of Kentucky, Lexington, Kentucky. 

OBJECTIVES: The specific objectives are to: Characterize alterations in the 

proteomic profile of C. thermocellum and T. ethanolicus in response to ethanol challenge. Determine the proteomic profile of ethanol resistant strains. Examine if 

proteomic changes elicited by ethanol are similar to those caused by environmental 

stresses including temperature, pH, and organic solvents. Evaluate alternative approaches to identify and quantify changes in proteomes of thermophilic bacteria. 

(6) AN INTEGRATED APPROACH TO REDUCED RISK OF PHOSPHORUS POLLUTION OF SURFACE WATERS IN CROP-LIVESTOCK BASED MANAGED 

ECOSYSTEMS OF THE MIDWEST 

START: 15 August 2005. 

COMPLETION DATE: 14 August 2009. 

TOTAL BUDGET: $490,000. 

PROJECT LOCATION: Nebraska Corn Development, Utilization and Marketing 

Board Lincoln, Nebraska 

OBJECTIVES: Develop methods for removing phosphorus (P) from corn milling 

by-products, or improving P availability through while minimizing the loss of feed 

value for ruminants and for enzymatic degradation of phytate to P to produce value 

added products such as inositol, inositol phosphates and struvites. Develop a decision tool on the cost effectiveness of composting livestock manure to improve the economics of transporting manure greater distances to more land for agronomically 

and environmental sound application rates. Determine the effects of manure applied 

several years previously, of deep incorporation of surface soil with excessively high 

soil P, and the effects of setback alternatives on the potential for P delivery to surface waters. Validate and calibrate a watershed characterization model and two Pindexes for assessment of the potential for P delivery to surface waters. Provide education to various stake-holders on P related issues. 

(7) LIGNIN BLOCKERS FOR LOWER COST ENZYMATIC HYDROLYSIS OF 

PRETREATED CELLULOSE 

START: 01 September 2004. 

COMPLETION DATE: 31 August 2007. 

TOTAL BUDGET: $401,000. 

PROJECT LOCATION: Thayer School of Engineering, Hanover, New Hampshire. 

OBJECTIVES: The primary goal is to more fully develop lignin blocker technology 

for biological conversion of pretreated cellulosic biomass to glucose that can be converted to ethanol and a range of other products either biologically or chemically. In 

particular, to understand and apply lignin blockers to reduce enzyme loadings and 

costs for enzymatic digestion of pretreated cellulose to glucose. The first objective 

of the research is to screen different soluble proteins and other promising compounds not yet considered with pretreated biomass to define a library of promising 

lignin blockers that could reduce cellulase loadings and costs. The second objective 

is to measure cellulase and blocker adsorption and desorption when applied with 

different lignin blockers and cellulase addition strategies and pretreatment conditions. The third objective is to define the impact of the most promising lignin 

blockers on enzymatic hydrolysis of pretreated cellulose to determine how performance of the system is influenced by amounts of lignin blocker, cellulase, cellulose, 

and lignin; temperature; pH; glucose accumulation; beta-glucosidase supplementation; and ingredient addition strategies. The fourth objective is to investigate the 

performance of the most promising lignin blockers when used with pretreated cel-
481 

lulose in simultaneous saccharification and fermentation (SSF) to define the impact 

on performance versus cellulase use because SSF eliminates equipment and speeds 

rates, yields, and concentrations of ethanol production while inhibiting invasion by 

unwanted organisms. The final objective is to develop models to relate enzymatic 

hydrolysis rates and yields to concentrations of lignin blockers and cellulase; the cellulose, lignin, and other component content of pretreated biomass; process conditions; and the use of other ingredients (e.g., supplemental beta-glucosidase). This research element will focus on improving the understanding of how adsorption and 

desorption of lignin blockers and cellulase are influenced by processing conditions 

and how they in turn affect the performance of hydrolysis systems and use that information to project pathways to further improve performance 

(8) NOVEL MEMBRANE TECHNOLOGY FOR VOLATILE BIOPRODUCT RECOVERY FROM FERMENTATION BROTHS 

START: 01 September 2003. 

COMPLETION DATE: 31 August 2006. 

TOTAL BUDGET: $168,700. 

PROJECT LOCATION: New Jersey Institute of Technology, Newark, New Jersey. 

OBJECTIVES: Develop a novel composite membrane system from surface modified porous hydrophobic polypropylene (PP) hollow fibers and an appropriate liquid 

membrane in the macropores of the PP hollow fibers and determine their separation 

performances from model solutions of individual bioproducts, such as butanol, ethanol, acetic acid, propionic acid and butyric acid under the influence of permeate 

side vacuum. Study a batch fermentation system externally coupled with the novel 

membrane device and total broth recycle for the production and recovery of acetone, 

butanol and ethanol (ABE) from Clostridium acetobutylicum. Study batch fermentation also with total broth recycle for the production and recovery of propionic acid. 

(9) BEYOND THE BARRIER: ETHANOL FROM LIGNOCELLULOSIC BIOMASS 

USING METABOLIC ENGINEERING 

START: 01 SEP 2004. 

COMPLETION DATE: 31 AUG 2007. 

TOTAL BUDGET: $451,000. 

PROJECT LOCATION: North Carolina State University, Raleigh, North Carolina. 

OBJECTIVES: The main objective is to use genetically engineered lignocellulosics 

as the feedstock for fuel ethanol production. Produce desirable transgenic trees for 

ethanol conversion. Establish systems for high throughput, micro-scale component 

analysis of treatment streams. Determine the chemical and enzymatic digestibility 

of the transgenic materials and their ability to ferment ethanol, with the emphasis 

of using Novozyme’s efficient, low cost cellulase cocktail. Perform cost versus performance studies of sugar/ethanol production from transgenics with diminished recalcitrance. 

(10) ECONOMIC IMPACTS FROM INCREASED COMPETING DEMANDS FOR 

AGRICULTURAL FEEDSTOCKS TO PRODUCE BIOENERGY & BIOPRODUCTS 

START: 15 August 2003. 

COMPLETION DATE: 31 August 2006. 

TOTAL BUDGET: $136,000. 

PROJECT LOCATION: University of Tennessee, Knoxville, Tennessee. 

OBJECTIVES: The overall objective of this proposed project is to develop a national bioenergy and bioproduct expansion curve. As bioenergy and bioproduct production increases, demand for, and price of agricultural products will increase. This 

analysis will quantify these expected increases considering various demand quantities of bioenergy and bioproducts. 

(11) REGULATION OF N-ACYLETHANOLAMINE METABOLISM IN SEEDS 

START: 01 September 2002. 

COMPLETION DATE: 30 September 2006. 

TOTAL BUDGET: $145,000. 

PROJECT LOCATION: University of North Texas, Denton, Texas. 

OBJECTIVES: We propose to continue our efforts to examine the catabolism of 

N-acylphosphatidylethanolamine (NAPE) and N-acylethanolamine (NAE) in plants. 

Our approach is targeted toward the functional characterization of candidate NAE 

amidohydrolase(s) from several plant sources (Arabidopsis thaliana, Medicago 

truncatula and cotton) as well as a detailed characterization of several putative 

NAPE-phospholipase D(s) identified in germinated cottonseeds. The overall goal will 

be to place this new biochemical and molecular information into the physiological 

context of seed development, germination and seedling growth, stages determined 

previously to be active in NAPE/NAE metabolism, in an effort to improve our under-
482 

standing of the role(s) of this pathway in plants. Specifically, to (1) functionally 

identify and biochemically characterize plant NAE amidohydrolase(s) (or fatty acid 

amide hydrolase, FAAH), (2) functionally identify and biochemically characterize 

seed-derived NAPE-phospholipase D(s), and (3) evaluate NAE amidohydrolase and 

NAPE-phospholipase D expression during seed development, desiccation, imbibition, 

germination, and seedling growth. 

(12) VAPOR PHASE BIOREACTORS TO TREAT AIR POLLUTANTS EMITTED 

FROM CORN-BASED ETHANOL PRODUCTION FACILITIES 

START: 01 September 2003. 

COMPLETION DATE: 31 August 2006. 

TOTAL BUDGET: $178,500. 

PROJECT LOCATION: University of Texas, Austin, Texas. 

OBJECTIVES: The primary objective of the project is to develop a vapor phase 

bioreactor system specifically optimized to treat the hazardous air pollutants (HAPs) 

and volatile organic compounds (VOCs) emitted from corn-derived ethanol production facilities. Specific objectives include: (1) Assess the biodegradability of VOC/ 

HAP mixtures representative of those emitted from ethanol production facilities; (2) 

Evaluate the effect of key operating parameters on pollutant removal in vapor phase 

bioreactors treating ethanol plant emissions; (3) Evaluate the feasibility of using a 

hybrid biofilter/biotrickling filter system to treat plant emissions. 

(13) QUANTITATIVE ASSESSMENT OF CARBOHYDRATE, LIGNIN AND EXTRACTIVE DEGRADATION PRODUCTS IN PRETREATED 

LIGNOCELLULOSE 

START: 01 September 2003. 

COMPLETION DATE: 31 August 2006. 

TOTAL BUDGET: $175,000. 

PROJECT LOCATION: Baylor University, Waco, Texas. 

OBJECTIVES: The overall project goal is to improve fundamental quantitative 

understanding of the effect of pretreatment conditions on the production of a wide 

range of hydrolysate degradation products. Objectives to achieve this goal are to: (1) 

Develop a Liquid Chromatography-Mass Spectrometry method that will quantify diverse biomass degradation products and (2) Correlate product concentrations with 

pretreatment conditions of temperature, reaction time, pH, severity, and combined 

severity. 

(14) CELLULASES FOR BIOMASS CONVERSION FROM TRANSPLATOMIC 

PLANTS 

START: 01 September 2005. 

COMPLETION DATE: 31 August 2008. 

TOTAL BUDGET: $399,963. 

PROJECT LOCATION: University of Wisconsin, Madison, Wisconsin. 

OBJECTIVES: Enhance translation efficiency leading to higher expression levels 

through N-terminal extension addition to three different cellobiohydrolases. Compare the efficiency of expression of the three enzymes at the trnI/A locus and trnG/ 

fM locus. Combine chloroplast-derived cellobiohydrolase expression with existing nuclear-derived E1cd endoglucanase expression through breeding. 

(15) PHOTOSYSTEM I NANOSCALE PHOTODIODES FOR CREATING 

PHOTOELECTROCHEMICAL DEVICES 

START: 01 December 2004. 

COMPLETION DATE: 30 November 2006. 

TOTAL BUDGET: $165,000. 

PROJECT LOCATION: Vanderbilt University, Nashville, Tennessee. 

OBJECTIVES: This project will utilize nanoscale components from green plants 

for solar energy conversion, exemplifying the use of natural resources to promote responsible environmental stewardship by providing alternative, biobased energy resources for our society. The overall objective of this project is to create an environmentally clean and biologically inspired photoelectrochemical device that incorporates one of nature’s optimized nanoscale photodiodes, the Photosystem I (PSI) reaction center. 

II. Competitive awards through the Small Business Innovative Research Program 

Processing of Poultry Manure for Fuel Gas Production.—Advanced Fuel Research, 

Inc., East Hartford, CT, $79,849/6 months. The objective of this phase I research 

is to convert poultry manure into a usable syngas fuel. Project completed, received 

phase II in 2005. 

Modified Soybean Oil as a Deposit Control Fuel Additive.—Mountain View Systems, LLC, Canfield, OH, $80,000/6 months. This phase I project seeks to produce 
483 

a fuel additive from soybean oil that will enhance the performance of biofuels by 

reducing deleterious deposits formed by biofuel combustion in engines. Project is ongoing with an extension. 

Improved Quality Soy-oil Based Biodiesel Fuel.—BioPlastic Polymers and Composites, LLC, Midland, MI, $40,000/6 months. The goal of this phase I project is to improve the process for converting soybean oil into biodiesel fuel. Project completed, 

received Phase II in 2005. 

Cellulases for Biomass Conversion from the Transgenic Maize System.—Prodigene, 

Inc., College Station, TX, $296,000/24 months. The enzymatic conversion of biomass 

is limited by the availability and expense of enzymatic catalysts. This phase II 

project seeks to develop an economically feasible method for producing cellulases in 

industrial scale quantities with reduced cost. Project is ongoing. 

Fiscal year 2005 projects: 

Biosolids for Biodiesel.—Emerald Ranches, Sunnyside, WA, $295,606/24 months. 

The goal of this Phase II project is to set up a facility that is capable of extracting 

oil from canola seed and transforming the oil into biodiesel fuel through a base catalyzed esterification reaction. Project is ongoing. 

A New Process for Biodiesel Production Based on Waste Cooking Oils and Heterogeneous Catalysts.—United Environment & Energy, LLC, Orchard Park, NY, 

$80,000/8 months. The overall objective of this Phase I project is to study the feasibility of a proposed new process for cost-effective production of high value biodiesel 

from waste cooking oils. Project completed, applied for Phase II in 2006, pending. 

Improved Quality Soy-Oil Based Biodiesel Fuel.—Bioplastic Polymers & Composites, LLC, Midland, MI, $296,000/24 months. The overall objective of this Phase II 

project is to produce biodiesel from fats and vegetable oils that has better low temperatures flow properties, such as lower viscosity, is more volatile, and is more resistant to thermal breakdown than current biodiesels. Project is ongoing. 

Lignin-based Polymeric Materials from Byproduct of Biomass Conversion.— 

NaSource Company, Newbury Park, CA, $80,000/8 months. The conversion of agricultural biomass to biofuels produces a waste stream of materials that require further conversion to create value-added products and improve the economics of fuel 

production. The objective of this Phase I project is to chemically modify certain 

waste stream components to produce lignin-based plastics. Project is ongoing with 

an extension. 

Processing of Poultry Manure for Fuel Gas Production.—Advanced Fuel Research, 

Inc., East Hartford, CT, $296,000/24 months. The objective of this Phase II project 

is to develop the technology for converting poultry manure into combustible gases 

that can be integrated with various electrical power generation devices and have 

widespread agricultural use for poultry manure removal, resource recovery, and 

power generation. Project is ongoing. 

Improved Anaerobic Digestion of Dairy Manure for Energy and High-value Coproducts.—Andgar Corporation Ferndale, WA, $80,000/8 months. This Phase I 

project seeks to develop the anaerobic digestion technology to convert manure produced by dairy cows into biogas and high-quality, value-added fiber. Project is ongoing with an extension. 

Camelina Sativa.—A Multiuse Oil Crop for Biofuel, Omega-3 Cooking Oil, and 

Protein/oil Source for Animal Feed: Great Northern Growers Cooperative, Sunburst, 

MT, $80,000/8 months. The objective of this Phase I project is to evaluate a new 

crop for the Northern Plains States that is suitable for economic conversion into biodiesel, biolubricants, and an omega-3 fatty acid-rich cooking oil for human consumption. Project is completed, applied for Phase II in 2006, and is pending. 

—High Yield, High Efficiency Bio-refining.—Advanced Materials and Processes, 

San Marcos, TX, $79,966/8 months. The objective of this Phase I project is to 

develop technology to improve yields in vegetable oil processing by extracting 

fatty acids from vegetable oils and biodiesel without creating emulsions. Project 

is completed, applied for Phase II in 2006, and is pending. 

—Ultra-Clean Mobile Incinerator for Chicken Litter/Waste Disposal.—Mel 

McLaughlin Company, Upper Marlboro, MD, $80,000/8 months, The objective of 

this phase I is to validate the feasibility of the ultra-clean mobile incinerator 

for chicken litter/waste disposal. Project is completed, applied for Phase II in 

2006, and is pending. 

—Cost Effective and Reliable Anaerobic Digestion for Agricultural Byproducts.— 

Hansen Energy and Environmental, East Garland, UT, $80,000/8 months. The 

objective of this phase I project is to study an anaerobic induced blanket reactor 

(IBR) system and verify performance for treating manure and food waste economically. Project is completed, applied for Phase II in 2006, and is pending. 
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III. Special Research Grants and Federal Administration Research grants 

(1) IOWA BIOTECHNOLOGY CONSORTIUM 

The primary goal of this project is to conduct fundamental and applied research 

aimed at enhancing the recovery and utilization of by-product materials from new 

and emerging biotechnology industries, with emphasis on agribusiness. Grants have 

been awarded from funds appropriated as follows: fiscal year 1989, $1,225,000; fiscal 

year 1990, $1,593,000; fiscal year 1991, $1,756,000; fiscal year 1992, $1,953,000; fiscal year 1993, $2,000,000; fiscal year 1994, $1,880,000; fiscal years 1995–1996, 

$1,792,000 each year; fiscal year 1997, $1,738,000; fiscal years 1998–2000, 

$1,564,000 each year; fiscal year 2001, $1,560,559; fiscal year 2002, $1,530,000; fiscal year 2003, $1,753,528; fiscal year 2004, $1,789,380; fiscal year 2005, $1,774,688; 

and fiscal year 2006, $1,757,250. A total of $30,586,405 has been appropriated. Research is being conducted at Iowa State University, the University of Iowa, and various sites throughout Iowa. 

(2) FEEDSTOCK CONVERSION 

The original goal of this research was to develop the mission of the Sun Grant 

Initiative, to identify five leading universities as regional centers, to plan individual 

and collaborative activities at each center, and to establish a working relationship 

between these universities and Federal agencies. The work supported by this grant 

began in fiscal year 2002, and the appropriation was $560,000 in fiscal year 2002; 

$556,360 in fiscal year 2003; $671,017 in fiscal year 2004; $667,616 in fiscal years 

2005; and $668,250 in fiscal year 2006. A total of $3,123,243 has been appropriated. 

Research is conducted at South Dakota State University at Brookings, Cornell University at Ithaca, University of Tennessee at Knoxville, Oklahoma State University 

at Stillwater, and Oregon State University at Corvallis. The anticipated completion 

date for fiscal year 2005 funds is September 30, 2006. 

(3) BIODESIGN AND PROCESSING RESEARCH CENTER 

The Center will address economic viability of farmers, and will include conversion 

of agricultural wastes to value-added products. The Center will also provide educational and outreach programming for students, farmers, woodland owners and 

processors in the region. During the first year of this project, research will focus on 

converting animal waste to energy, as a strategy for animal waste management. The 

appropriation for fiscal year 2006 is $940,500. The Center is located at Virginia 

Polytechnic Institute and State University, Blacksburg, Virginia. This project will 

be completed in fiscal year 2009. 

(4) BIOMASS-BASED ENERGY RESEARCH 

This research addresses conversion of biomass to ethanol, and chemicals. Through 

an Oklahoma State University, University of Oklahoma, and Mississippi State University Consortium, the three universities are developing an ethanol gasificationbioconversion process that utilizes all of the plant biomass, including the lignin. 

While making the process more cost efficient than other methods of ethanol production, this process utilizes all portions of a variety of biomass and feedstock material 

that includes grasses, crop residues, and processing plant byproducts. The primary 

goal is to develop a cost-effective biomass conversion-to-ethanol production system 

utilizing a unique gasification-fermentation process. The work supported by this 

grant began in fiscal year 2001, and the appropriation for fiscal year 2001 was 

$900,016; for fiscal year 2002, $960,000; for fiscal year 2003, $1,142,525; for fiscal 

year 2004, $1,022,929; for fiscal year 2005, $1,014,816; for fiscal year 2006, 

$1,188,000. The total amount appropriated is $6,228,286. This work is carried out 

at Oklahoma State University, University of Oklahoma, and Mississippi State University. This project is expected to be completed in 3 years. 

(5) INSTITUTE FOR BIOBASED PRODUCTS AND FOOD SCIENCE 

The Biobased Institute funds research projects that increase profitability of agriculture, enhance human health through improved nutrition, and reduce reliance on 

non-renewable energy by production of biofuels, ethanol and biolubricants. Research 

activities include producing ethanol from biomass, and reducing the cost of producing biodiesel. Technology transfer collaborations have been set up to ensure efficient transfer to the marketplace for all products under development at the Institute. The funding for this project began in fiscal year 2003, and $596,100 was appropriated for fiscal year 2003; $532,838 for fiscal year 2004; $562,464 for fiscal year 

2005; $557,370 for fiscal year 2006. A total of $2,248,772 has been appropriated. 

Currently this work is being carried out at Montana State University. 
485 

(6) ALTERNATIVE FUELS CHARACTERIZATION LABORATORY 

Through a national collaboration, the National Alternative Fuels Laboratory 

matches about half of its Federal funding with non-Federal money to work on industry fuel relevant research. The National Alternative Fuels Laboratory has developed 

a Federal Aviation Administration-certified lead-free ethanol- and biodiesel-containing alternative to leaded aviation gasoline. The fuel is now commercially available in South Dakota and will be introduced at airports throughout the United 

States in response to increasing demand. They have resolved ethanol-in-gasoline 

performance and environmental issues to accelerate the use of ethanol, and they 

have initiated new biomass fuel developments, including processes, to produce Environmental Protection Agency-approved, high-octane, emission-clean gasoline additives from agricultural resources. In addition, they have initiated and coordinated 

a 27-member Red River Valley Clean Cities Coalition to increase the number of alternative fuel vehicles in regional public and private fleets and have built refueling 

sites for disbursing fuels containing 85 percent of ethanol in North Dakota. The primary goal was to develop a database of at-the-pump-sampled conventional, reformulated, and alternative transportation fuels sold in the upper Midwest and throughout the United States to enable comparison of current and historical fuels on the 

basis of chemical and physical properties. This fuel database has been expanded to 

include how gasoline chemistry affects air quality and fuel performance. The goal 

of developing nonfuel products derivable from bio-oils generated via fast pyrolysis 

of lignocellulosic biomass was achieved during fiscal year 2005. Another original 

goal was to provide information on conversion of crop residues, agriculture processing wastes, high-cellulose-content municipal wastes, and other biomass materials 

to alternative fuels. The National Alternative Fuels Laboratory program supported 

the Red River Valley Clean Cities Coalition, conducted chassis dynamometer tests 

comparing three major brand E10 gasoline and one E8 fuel, and collaborated with 

the American Lung Association of Minnesota to assess the greenhouse gas reduction 

potential of E85 fuel. 

The National Alternative Fuels Laboratory began in fiscal year 1991 and was, in 

part, sponsored by this grant. Federal appropriations in fiscal year 1991 through fiscal year 1993 were $250,000 per year. Later awards were $235,000 in fiscal year 

1994; $204,000 in fiscal year 1995; $218,000 per year in fiscal years 1996 through 

2000; $258,430 in fiscal year 2001; $294,000 in fiscal year 2002; $300,037 in fiscal 

year 2003; $268,407 for fiscal year 2004; $281,728 in fiscal year 2005; and $279,180 

in fiscal year 2006. A total of $3,960,782 has been appropriated. The work is performed at the University of North Dakota Energy and Environmental Research Center in Grand Forks. 

(7) AGRICULTURE WASTE UTILIZATION 

The original goal was to determine the applicability of anaerobic digestion to convert organic waste materials to energy in the form of biogas, thereby reducing the 

amount of organic matter for disposal. The goal has gone beyond the testing of 

waste materials in the digester and proceeded with a program to determine pathogen reduction by anaerobic digestion and to economically use the digested sludge. 

The subsequent goal is to manage the remaining solids from anaerobic digestion in 

an environmentally-sound manner. This research indicates that for at least 

cryptosporidium parvum, the thermophilic temperature and the anaerobic digestion 

process are critical in the inactivation of the organism. Field trials of using digester 

solids for potatoes and broccoli showed significant increases in growth over the control experiment. The work supported by this grant began in fiscal year 1998, and 

the appropriation for fiscal year 1998 was $360,000; for fiscal year 1999, $250,000; 

for fiscal year 2000, $425,000; for fiscal year 2001, $494,909; for fiscal year 2002, 

$600,000; for fiscal year 2003, $685,515; for fiscal year 2004, $617,336; for fiscal 

year 2005, $648,768; and for fiscal year 2006, $683,100. A total of $4,764,628 has 

been appropriated. Research is conducted at West Virginia State College, Institute. 

The principal researchers anticipate the work for this project will be completed in 

2006. 

(8) MICHIGAN BIOTECHNOLGY INSTITUTE 

The goal of this research is to select and develop market-viable technologies for 

the production of industrial products from agricultural raw materials, and to accelerate development of product and related technologies that are critical to the sustainability of the agricultural and rural economy. Accomplishments for 2005 include 

optimization of Ammonia Fiber Explosion treatment for conversion of crop residues 

for maximum recovery of glucose and xylose sugars, improved extraction of protein 

from distillers grains and switchgrass using an aqueous ammonia process; and identification and cloning of two genes for enhancing succinic acid production from glyc-
486 

erol-containing waste streams. Demonstrations of technology occur throughout the 

United States. The work supported by this grant began in fiscal year 1989, and the 

following amounts have been appropriated: in fiscal year 1989, $1,750,000; in fiscal 

year 1990, $2,160,000; in fiscal year 1991, $2,246,000; in fiscal years 1992–1993, 

$2,358,000 per year; in fiscal year 1994, $2,217,000; in fiscal year 1995, $1,995,000; 

in fiscal years 1996 and 1997, $750,000 per year; in fiscal years 1998–2000, 

$675,000 per year; in fiscal year 2001, $723,405; in fiscal year 2002, $481,000, in 

fiscal year 2003, $623,918; in fiscal year 2004, $558,684; in fiscal year 2005, 

$554,528; and in fiscal year 2006, $549,450. A total of $22,099,985 has been appropriated. The research is being conducted on the campus of Michigan State University and at the Michigan Biotechnology Institute. Current objectives are expected to 

be completed in fiscal year 2007. 

IV. Hatch Act, McIntire-Stennis, and Evans-Allen Projects, the formula funded 

projects include about 40 projects with a renewable energy component for a total 

amount of approximately $1.3 million for fiscal year 2005. However, the fifteen 

projects described below were selected for their innovative and cutting edge technologies that complement the portfolio of projects supported through competitive 

grant programs. 

A. FUEL CELLS, HYDROGEN 

(1) SYSTEMS FOR BIOLOGICAL PRODUCTION OF HYDROGEN GAS, fiscal 

years 2004–2008, Oregon State University, Corvallis, Oregon: 

The purpose of this project is to develop bacterial strains to produce hydrogen efficiently and sustainably at high rates. Mutant strains of Clostridium acetobutylicum 

and a hydrogen detection method have been developed. Using microorganisms to 

produce hydrogen from water, using sunlight as an energy source, or from renewable carbonaceous materials, can contribute to meeting 

(2) HYDROGEN FUEL PATHWAYS FOR TRANSPORTATION IN CALIFORNIA, 

fiscal years 2003–2008, University of California, Davis, California: 

Decisions on how to proceed with the use of hydrogen as the fuel of the future, 

will have profound implications for the economy and for society. This project addresses decision-making based on sound knowledge from a wide variety of disciplines. The primary focus is the manufacture, storage and distribution of hydrogen 

for use in fuel cell vehicles. On-going research includes developing lifecycle environmental analysis models, innovative approaches to measure potential demand for hydrogen vehicles and designs for hydrogen energy stations. The outcome will be a set 

of tools and a body of knowledge to inform public sector debates and private sector 

investments. 

(3) BIOENERGY BASED ELECTRICAL SYSTEMS AND THEIR SAFE, EFFICIENT APPLICATIONS, fiscal years 2003–2008, Michigan State University, 

East Lansing, Michigan: 

The purpose of this study is to develop specifications for installation and economic 

analysis of alternative systems to convert biogas to electrical energy. A coalition of 

organizations has been formed to address the conversion of livestock biomass to energy in stationary fuel cells. Proposals have been submitted to the National Electrical Code to address inadequate rules for the installation of the direct current portion of renewable energy production systems. If proposals are accepted, the result 

will be practical and safe rules. 

(4) FEASIBILITY STUDY TO ANALYZE THE ECONOMIC VALUE 

PROPOSAITON AND RELATED MARKETING STRATEGY FOR A MODULAR, PRESSURIZED ANAEROBIC DIGESTION, fiscal years 2004–2005, Cornell University, Ithaca, New York: 

Biogas, i.e. methane, from traditional anaerobic digestion technology is typically 

produced at atmospheric pressure, with little attempt made to harness this energy 

source for compressed natural gas or for application to fuel cells for stationary 

power generation. A novel design for producing biogas has been developed that delivers pure and compressed biogas that is promising for these applications. The current focus is on evaluating the commercial potential of this new technology for New 

York State dairy farms, and for farming economics and public policy. This technology offers a sustainable strategy to problems associated with animal manure 

management. 
487 

B. AGRICULTURAL RESIDUES, WASTES 

(1) BIOFUELS PRODUCTION FROM COTTON GIN WASTE AND RECYCLED 

PAPER SLUDGE, fiscal years 2005–2010, Virginia Polytechnic Institute, 

Blacksburg, VA: 

Cotton gin waste can potentially be used ethanol production. Unlike other 

lignocellulosic feedstocks, this material is concentrated at the processing sites and 

therefore harvesting and transportation costs are considerably less than those for 

other agricultural and forestry residues. This project is developing an in situ detoxification process for the bioconversion of cotton gin waste and recycled paper sludge 

mixture into ethanol at high yields. Processing of agricultural residues is a valueadded activity and will assist in implementing new ethanol production capacity in 

the southern United States. 

(2) BIOLOGICAL CONVERSION OF CROP RESIDUES TO FUELS AND CHEMICALS, fiscal years 2005–2008, North Carolina A&T State University, Greensboro, North Carolina: 

This project addresses the biological conversion of crop residues to ethanol, hydrogen and succinic acid. Pretreatment steps include physical and chemical treatment 

followed by enzymatic hydrolysis and anaerobic fermentation. Economic and environmental evaluations will be conducted to validate commercialization potential. 

(3) ANEROBIC DIGESTION OF AGRICULTURAL AND FOOD WASTE BIOMASS 

FOR THE EFFICIENT PRODUCTION OF HIGH QUALITY BIOGAS, fiscal 

years 2004–2008, Ohio State University, Wooster, Ohio: 

This research is developing a laboratory scale anaerobic digestion system to determine the metabolic and nutritional requirement of digesters for efficient conversion 

of diverse biomass feedstocks to biogas energy. Feedstocks used include dairy cattle 

manure, corn and potato based snack foods and corn silage. Biogas production must 

be clean and reliable for process heat, combustion or turbine engines, or solid-oxide 

fuel cells. A closed anaerobic digestion system of agricultural wastes offer the opportunity to produce a clean form of fuel, methane and/or hydrogen, with minimal environmental emissions of ammonia, methane and fossil fuel based carbon dioxide. 

(4) PROCESSING OF NON-TRADITIONAL AGRICULTURAL MATERIALS FOR 

VALUE-ADDED UTILIZATION, fiscal years 2004–2009, Auburn University, 

Auburn Alabama: 

The purpose of this project is to develop procedure and methodology for the 

pelleting of poultry litter and energy crops, and to quantify the storage and handling of the manufactured pellets. This project is also testing the pelleted materials 

as a biofuel in a pellet furnace. Results to date indicate that energy saving up to 

30 percent can be obtained with the use of a biofuel furnace in a greenhouse. The 

ash obtained from pellet combustion has value as s substrate component. Pelleted 

biofuels provide obvious environmental benefits such as use of wastes from agroprocessing, reduced greenhouse gas emissions and potential on-site generation of 

fuel. 

(5) MICROBIAL CONVERSION OF AGRICULTURAL WASTES TO ELECTRICITY, fiscal years 2003–2004, University of Massachusetts, Amherst, Massachusetts: 

The purpose of this study is to determine whether a microbe-electrode system 

could be used to degrade compounds that are an odor or environmental concern in 

animal wastes and at the same time provide electrical power that could be applied 

to farm operations. Fuel cells inoculated with swine waste have been shown to 

produce less methane and to eliminate butyrate faster than controls. Ongoing research will define under what conditions organic loads are lessened by the presence 

of electrodes in both fuel cell and potentiostat mode. In addition, analysis of the microbial community associated with the graphite electrodes will provide further insight into the mechanism of swine waste treatment. 

C. NEW ENERGY CROPS 

(1) CARBON AND NITROGEN CYCLING AND MANAGEMENT IN ALTERNATIVE CROPPING SYSTEMS, fiscal years 2004–2007, Washington State 

University, Pullman, Washington: 

Agricultural activities impact nitrate contamination of groundwater and particulate emissions. Alternative cropping systems can lessen negative impacts and expand environmental benefits. This project includes determining the biomass production and partitioning of Giant Reed, Arundo donax, at rain-fed and irrigated locations in Washington State. Results to date show biomass production potential great-
488 

er than 20 dry tons per acre in the second year, with hemicellulose and cellulose 

contents similar to other grasses. Variations in wheat cultivars and exotic species 

are being evaluated to identify economically and environmentally sound cropping 

options for supplying bioenergy feedstocks. 

(2) AGRICULTURAL AND ENVIRONMENTAL BENEFITS FROM ENERGY, 

FIBER AND FORAGE CROPS IN ALABAMA, fiscal years 2003–2008, Auburn 

University, Auburn, Alabama: 

This project addresses biomass crops and cropping-livestock production systems to 

realize agricultural and environmental benefits for the southeastern United States. 

Small plot experiments are underway and include switchgrass, mimosa, giant reed, 

fescue, ryegrass, and a comparison of productivity of goats and stocker cattle. This 

research will lead to commercialization of bioenergy in Alabama, especially co-firing 

biomass with coal to produce electricity. 

(3) SUGARCANE IMPROVEMENT FOR ARID, ALKALINE ENVIRONMENTS, fiscal years 2000–2006, Texas A&M University, College Station, Texas: 

This project is developing sugarcane as an energy crop through a conventional 

breeding and genetic engineering program. Sugarcane has been crossed with 

Miscanthus, a perennial grass that is promising as an energy crop, and has cold resistance and good fiber quality. New sugarcane varieties will allow the grower to 

increase production, reduce costs, and expand into the renewable energy market. 

D. COMMODITY ENERGY CROPS 

(1) VALUE-ADDED PRODUCTS FORM AGRICULTURAL COMMODITIES, fiscal 

years 2004–2009, Purdue University, West Lafayette, Indiana: 

This research is addressing the use of mixtures of soybean methyl esters, i.e. biodiesel, with jet fuel, quantifying the physical properties and measuring turbine jet 

engine combustion performance and emissions. Aviation jet fuels are a unique energy fuel market due to the critical nature of fuel weight/energy density required 

for jet flight. A key performance limitation of soy methyl esters is the very low freezing point required for jet fuel. This project has developed a fractionation technology 

that removes the saturated components to produce workable fuel blends with existing jet fuels. The byproduct of biodiesel production is glycerin. This project is also 

evaluating the use of glycerin for aviation deicers to replace ethylene/propylene glycol deicers. The fractionation process and glycerin deicer product are being patented 

and Purdue is working with industrial partners to commercialize the technologies. 

E. ECONOMICS 

(1) ECONOMIC ASSESSMENT OF CHANGES IN TRADE ARRANGEMENTS, 

BIOTERRORISM THREATS AND RENEWBLE FUELS RQUIREMENT IN 

THE U.S. GRAIN AND OILSEED SECTOR, fiscal years 2004–2009, Iowa State 

University, Ames, Iowa: 

This project includes analyzing the effect of U.S. renewable energy programs as 

one of several factors that affect international trade and markets for corn, soybeans, 

and wheat. The impacts of energy policy changes on grain and byproduct markets 

that include gluten feed and distillers’ grain are being addressed, along with the effects of the expanding bioenergy industry on the organization and performance of 

local and international grains markets. Specific studies include pricing in local and 

international grain markets, and international competitiveness of the ethanol industry compared to Brazil and the appropriate scale and organization of value-added 

processing. Improved private investment and public policy decisions will result from 

better information about the bioenergy industry. 

(2) RURAL COMMUNITIIES, RURAL LABOR MARKETS AND PUBLIC POLICY, 

fiscal years 2002–2007, Virginia Polytechnic Institute, Blacksburg, Virginia: 

Rural America is experiencing substantial demographic and economic change and 

its future depends on solid policy analysis. This project examines how rural markets 

adjust to economic change and how policy can be formulated assist in these adjustments. Findings indicate that several sources of renewable fuels could be viable in 

Virginia. Biomass, particularly electricity generation through switchgrass and wood 

chips has more widespread viability than wind or solar technologies. Biofuels could 

provide additional incomes to land owners in depressed areas, but overall economic 

impacts are likely to be modest. Further research is needed to overcome persisting 

technical problems with switchgrass transport and processing leading to higher 

costs and lower competitiveness. It is estimated that a single 600 megawatt coalfired power plant that co-fires with 5 percent switchgrass could improve the finan-
489 

cial viability of 140 families and have total economic impacts of more than $2 million per year. 

QUESTIONS SUBMITTED BY SENATOR ARLEN SPECTER

Question. With the dairy industry responsible for cash receipts of $27,367,857,000 

(2004) representing 11.3 percent of total agriculture cash receipts for the Nation, 

why is the Agricultural Research Service terminating the Dairy processing and 

products Research Unit located at Wyndmoor, Pennsylvania, when this is the only 

USDA laboratory conducting research on dairy processing and products? In addition, 

it is my understanding that the scientists assigned to this laboratory have the capability of addressing the issue of bio-security research to help prevent the intentional 

contamination of the milk supply and support the dairy industry with research on 

prevention and removal of threat agents from the milk supply. How will this crucial 

research be accomplished if this program is eliminated? 

Answer. The consideration to close the lab was based on the fact that the unit 

has largely met its objectives and the return on investment was lower than for other 

high priority areas of research. As mentioned, the need for the research is reduced 

due to improvements in milk processing, much of which has been developed by the 

lab. If additional work in the area of dairy processing does arise, such work could 

and has been done in the past at the ARS Beltsville Agricultural Research Center 

(Beltsville, Maryland) or the National Animal Disease Center (Ames, Iowa). 

PEST MANAGEMENT ALTERNATIVES

Question. This question is directed to Under Secretary Jen regarding a letter that 

Sen. Rick Santorum and I sent to you on February 17, 2006. Pennsylvania is the 

Nation’s number one producer of mushrooms, producing 59 percent of all pounds 

grown and valued at more than $420 million. Trichoderma green mold remains the 

most serious disease faced by mushroom growers, as crop losses can quickly reach 

epidemic levels. Both Sen. Santorum and I urge you to strongly support the research proposal, ‘‘Resistance Management Program for Trichoderma Green Mold on 

Mushrooms,’’ submitted by Drs. Peter Romaine and Daniel Royse, at The Pennsylvania State University, under the Special Grants Program—Pest Management Alternatives. This was all detailed in our February 17 letter. 

Are you taking this research proposal under serious consideration and when can 

we expect a response to our letter? 

Answer. In his response dated April 3rd, 2006, former Under Secretary Jen indicated that funds appropriated for the Pest Management Alternatives Program, 

which is administered by the Cooperative State Research, Education, and Extension 

Service, are distributed through a peer review competitive grants process. Priorities 

for the program are developed in consultation with stakeholders and land-grant university partners through the Regional Integrated Pest Management Centers. A 

major emphasis of this program is cropping systems where the loss of pest management alternatives has led to a loss of pest control or the development of pest resistance to the alternatives. The proposal from the Pennsylvania State University received full and fair consideration by the peer review panel. Applicants will be notified in the coming weeks of final funding decisions under the fiscal year 2006 Pest 

Management Alternatives Program. 

COUNTY OFFICE RESTRUCTURING

Question. The Farm Service Agency (FSA) had intended to implement ‘‘FSA Tomorrow’’ last Fall. This plan intended to reduce the number of FSA county offices 

throughout the entire Nation through consolidation. Across the United States, 713 

county offices were planned to be consolidated, in Pennsylvania alone 14 offices 

were planned to be consolidated bringing the number of offices to 32. While I understand the importance of efficiency, farmers work hard all day and to require them 

to drive long distances to see their FSA office puts further strain on their work. 

Under Secretary Penn, the FSA fiscal year 2007 Budget request is $33,891,000, 

down from the fiscal year 2006 budget estimate of $36,797,000; a decrease of about 

8 percent. 

Does the Department of Agriculture intend to implement a consolidation plan in 

light of the reductions in the President’s fiscal year 2007 Budget request? 

Answer. FSA has asked our State Executive Directors (SEDs) to conduct an independent, local-level review of the efficiency and effectiveness of FSA offices in their 

State. Each State’s SED and State Committee will form a review team to identify 
490 

the State’s optimum network of FSA facilities, staffing, training, and technology 

within existing budgetary resources and staffing ceilings. 

There is no comprehensive national plan or formula for the ideal field structure. 

Each State will review its own county office system and submit a plan for the best 

distribution of resources. 

Each SED is exploring potential joint-effort opportunities with the Natural Resources Conservation Service (NRCS) and other Department of Agriculture (USDA) 

agencies. State Food and Agriculture Councils (SFACs) are the primary vehicles for 

coordinating programs at the local level. SFACs provide a policy-level, cross-agency, 

decision-making and communication forum to achieve USDA’s goals and objectives. 

In accordance with the SFAC mission, FSA, NRCS, and other agencies will work 

together to develop the plan for the most effective mix of local offices, staffing, training and technology. 

If FSA county office closures create a disadvantage for some producers in accessing services, those producers may request a new administrative county office if there 

is one that will be more convenient. The flexibility of producer choice is an important part of consolidation efforts. FSA is committed to delivering farm program services through the Service Center model. 

Question. If so, does the Department plan on bringing this to the attention of Congress before any implementation takes place? 

Answer. After recommendations are received from a State and validated by FSA’s 

Deputy Administrator for Field Operations, any consolidation recommendations will 

be shared with the potentially affected Congressional delegation. The Agency will 

hold public hearings and coordinate communications efforts with area farmers, 

ranchers, and other stakeholders. Where a decision is made to consolidate offices, 

Congress will be notified 120 days before a closure takes place. FSA is committed 

to a continued dialogue with congressional delegations and State leaders as to how 

best to modernize the FSA county office system. 

MUSHROOM SPAWN

Question. I have been contacted by mushroom spawn manufacturers in my state 

regarding their difficulties in exporting mushroom spawn to certain countries which 

require phytosanitary certificates, for which mushrooms spawn is apparently ineligible. It is my understanding that many countries require U.S.-exported spawn to 

be accompanied by APHIS-issued phytosanitary certificates; however APHIS cannot 

issue certificates for this product. This situation is especially problematic since governments of foreign competitors are willing to issue such certificates. Therefore, 

American spawn manufactures are unable to obtain the necessary phytosanitary 

certificates, whereas foreign competitors can obtain them. As a result, our Nation’s 

mushroom spawn exporters are in danger of losing access to some of their most valuable export markets, valued at more than $8.7 million. Maintaining access to export markets is vital to the spawn industry in Pennsylvania and across the country. 

How do you intend to resolve this problem and when can constituents in my home 

State expect a solution? 

Answer. As you indicate, several countries require phytosanitary certificates for 

mushroom spawn. However, the countries in question (including China, Oman, and 

several others) have not provided information on what pests are associated with 

mushroom spawn that are of concern to them or of quarantine significance. 

Phytosanitary certificates are generally used to provide assurance that a shipment 

or product is free of specified pests, usually a list of quarantine pests provided by 

the importing country. Accordingly, APHIS is not able to issue phytosanitary certificates for this product since it is essentially grain inoculated with a fungus and there 

are no known quarantine pests associated with it. Our officials sent letters to the 

countries explaining that we cannot issue phytosanitary certificates without knowing what to certify the product for. We also explained APHIS policy regarding the 

import of mushroom spawn into the United States (the genus and species must be 

identified on the commercial invoice and the shipment must be free of soil) and officially requested that they adopt equivalent policies. In late March 2006, officials 

from APHIS and USDA’s Foreign Agricultural Service met with the American 

Mushroom Institute to discuss this situation. We believe that the importing countries are more concerned with product quality than with plant health risk. In addition to working with our counterparts in the importing countries regarding their requirements, we are also working with USDA’s Agricultural Marketing Service to 

find an alternative to phytosanitary certificates for mushroom spawn exports. 
491 

QUESTIONS SUBMITTED BY SENATOR HERB KOHL

SIMPLIFIED SUMMER FOOD PROGRAM

Question. Mr. Bost, as you know, the Simplified Summer Food Program is currently available in half of the States, including my home State of Wisconsin. Have 

States that participated in this program attracted more program sponsors, operated 

more program sites and served more low-income children than those States not participating in the program? Would USDA consider this program a success? Would 

USDA be supportive of expanding this program to additional States? 

Answer. States participating in the Simplified Summer Food Program have shown 

an increase in participation as measured by sponsors, sites, and meals served to eligible children during the summer months. During the same time, those States not 

participating in the program have experienced a decrease in each of the corresponding categories. However, since the inception of the Simplified Summer Food 

Program, many States have also had the opportunity to operate a seamless summer 

feeding program through the National School Lunch Program (NSLP). Because 

these two initiatives have operated concurrently in these States, we are not able to 

identify the extent to which changes in sponsors, sites, and children result from the 

Simplified Summer Food Program, from the NSLP seamless summer feeding program, or from a combination of both. 

Although modest, there are costs associated with expanding the program to additional States. Assuming appropriate offsets could be found, USDA would support expansion of the program because it reduces paperwork burden on sponsors and aligns 

the program’s meal reimbursement procedures with our school-based and day carebased Child Nutrition Programs. 

NSA GRANTS

Question. Mr. Bost, one of the hallmarks of the WIC program is that it goes beyond providing healthy foods to provide participants with nutrition education, 

breastfeeding support, and health care referrals. These services are a critical complement to the WIC food package and they are all funded with NSA grants. The 

WIC program has also achieved extremely effective cost-containment, particularly 

with regard to infant formula costs. The administrative costs associated with these 

accomplishments are funded with NSA grants. 

In a 2001 report, the GAO found that since the late 1980s important new nutrition services and administrative demands have been placed on State and local WIC 

agencies without accompanying increases in NSA funds. Isn’t it the case that under 

WIC’s authorizing statute NSA grants per-participant have remained at the same 

inflation-adjusted level for the past 19 years? If this proposal is not adopted, will 

your request level for WIC still be adequate? What effect do you believe this administrative proposal will have on cost-containment? 

Answer. In 1990 the guaranteed per participant nutrition services and adminis- tration (NSA) grant was $9.32. Adjusting the grant for inflation resulted in a guaranteed NSA grant of $14.12 in fiscal year 2006. 

If this proposal is not adopted, the funds requested in the budget for food will be approximately $152 million less than the estimated amount needed to provide food 

benefits to a monthly average of 8.2 million WIC participants in fiscal year 2007. 

We believe this proposal will encourage State agencies to seek cost saving practices and efficiencies in program management and in providing participant services 

funded with NSA grants. 

SPECIAL SUPPLEMENTAL PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC)— LEGISLATIVE PROPOSAL

Question. Mr. Bost, another legislative proposal included in the WIC account will 

prevent any State from allowing participation in the WIC program to anyone whose 

family income is more than 250 percent of poverty. How many States will this affect? Will it save any money? Is it true that the affected States, because their WIC 

participants are automatically deemed eligible, will have to re-check the eligibility 

of all of their participants? How many individuals would lose eligibility for WIC if 

the Administration’s proposal to limit Medicaid adjunct eligibility were adopted? Do 

you intend to provide additional administrative funding for these States to conduct 

these eligibility exercises, or is the intent that they perform this function under the 

proposed new administrative limitations as well? 

Answer. The President’s fiscal year 2007 budget prohibits the use of funds to provide WIC benefits to individuals who receive Medicaid or who are members of a 

family in which a pregnant woman or infant receives such assistance unless the 

family income is below 250 percent of the poverty guidelines. Six States (Maryland, 
492 

Minnesota, Missouri, New Hampshire, Rhode Island and Vermont) have income eligibility cut-offs for Medicaid that are 250 percent or above for some or all categories 

of potential WIC participants. Based on the estimated per-person cost in fiscal year 2007 ($52.67), it is estimated that this proposal will result in a savings of $2.9 million. The States affected by this 

proposal and the estimated savings per State are shown in the table below. 

State Number of Persons Affected 

Estimated Savings (in thousands) 

Maryland .................................................................................................................................. 859 $543 

Minnesota ................................................................................................................................ 2,434 1,538 

Missouri ................................................................................................................................... 573 362 

New Hampshire ....................................................................................................................... 143 90 

Rhode Island ........................................................................................................................... 286 181 

Vermont ................................................................................................................................... 286 181 

Total ........................................................................................................................... 4,581 2,895 

The President’s budget proposal would continue to provide automatic (adjunctive) 

income eligibility based on participation in Medicaid to the vast majority of WIC 

participants certified in this manner. Any mother, infant, or child who can currently 

be certified as income eligible for WIC through Medicaid, will still be income eligible 

for WIC if their household income is below 250 percent of poverty. For those State 

agencies affected by the proposal, they will have to modify their procedures to determine the income eligibility of individuals who would have otherwise been automatically income eligible to participate in the WIC Program based on their participation 

in Medicaid. Based on data from the 2004 Report on WIC Participant and Program 

Characteristics, we estimate that approximately 4,600 individuals will be affected 

by the proposal to limit automatic eligibility based on participation in Medicaid to 

those individuals with an income level that is below 250 percent of Federal poverty 

guidelines. 

Affected States may incur a modest increase in the needed administrative resources associated with eligibility determinations and will have to re-allocate their 

nutrition services and administration (NSA) funds accordingly. The proposal will not 

increase Federal expenditures on NSA. 

WIC MANAGEMENT INFORMATION SYSTEM

Question. Last year, we provided $20 million for a new WIC Management Information System, which we have heard for several years is desperately needed. We 

made the money contingent on WIC caseload being met, and it seems as though 

that requirement will be met this year. Has USDA yet, or do you plan to, release 

this money this year? Answer. The fiscal year 2006 appropriation provided $19.8 million (after the 1 

percent rescission) for management information systems (MIS) if it was determined 

that adequate funds were available to meet caseload requirements without the use 

of contingency funds. Based on current projections of both food package costs and 

participation for the remainder of fiscal year 2006, we do not anticipate the need 

to use contingency funds to support WIC caseload. Therefore, we fully intend to allocate the $19.8 million in MIS funding during fiscal years 2006 and 2007 to WIC 

State agencies for critical MIS projects. 

CSFP

Question. Mr. Bost, as you know, the CSFP program is slated for elimination 

under the President’s budget. Reasons USDA believes this is appropriate, as explained by Secretary Johanns, include the fact that seniors can move to Food 

Stamps, there simply isn’t enough money, and the program operates only in a limited number of States. Is CSFP the only nutrition program that operates in a limited number of States? How many States currently have CSFP programs? How 

many, and which States have approved plans and would join if there was funding 

available? Is it fair to say that this program has limited participation by States because of funding, and not because States don’t want it? 

Answer. The CSFP is not the only nutrition assistance program that operates in 

a limited number of States. The Fresh Fruit and Vegetable Program (FFVP) and 

the WIC Farmers’ Market Nutrition Program (FMNP) also operate in a limited 

number of States. The FFVP is currently authorized to operate in a limited number 

of schools in limited number of States and Indian Tribal Organizations (ITOs); cur-
493 

rently 14 States and 3 ITOs. Funding is commensurate with the number of participating States and ITOs. The FMNP operates in 45 locations (37 States, D.C., Puerto 

Rico, Guam and 5 ITOs). While new State agencies may apply to participate, appropriations have been commensurate with the number of currently participating 

States which precludes the expansion of the program to new States. 

CSFP currently operates in limited areas of 32 States, two Indian reservations, 

and the District of Columbia. Five States have approved plans for CSFP but are not 

yet participating: Delaware, Arkansas, Oklahoma, New Jersey, and Utah. CSFP’s 

participation by States is currently limited because of funding. 

Question. Mr. Bost, I understand that under the Commodity Supplemental Food 

Program, States are required to order their food several months in advance. Do you 

plan to allow States to go ahead and place orders for food for next year? What does 

USDA plan to do if there is a continuing resolution? If the entitlement purchases 

from farmers that currently go to the CSFP program end, is it safe to assume that 

farmers will lose money? 

Answer. While the President’s fiscal year 2007 budget request does not include 

funding for the CSFP, the program will continue to be administered in a manner 

that ensures program continuity until such time that Congress decides not to fund 

the program. Should Congress choose to adopt the President’s fiscal year 2007 budget request, commodities remaining in CSFP inventories next fiscal year will be redonated for use in other programs, including the Emergency Food Assistance Program. 

We anticipate no impact on the agriculture sector from the elimination of CSFP. 

Food purchases that result from agricultural support activities will be maintained, 

but distributed through other channels. 

WIC MORATORIUM

Question. Mr. Bost, last year’s reauthorization legislation included measures to 

contain costs in these and other high-priced stores. We knew, however, it would take 

time for those provisions to be implemented. To contain costs in the meantime we 

included in last year’s appropriation law a moratorium on the approval of any new 

WIC-only stores. We considered such a measure critical; in its absence, this committee would have faced even greater pressure on our limited resources. Can you 

please tell us whether this moratorium has helped contain WIC food costs and 

whether extending the moratorium will help to contain food costs next year? Why 

do you believe it is necessary to maintain the moratorium again this year, since the 

cost containment regulations have been in place for several months? 

Answer. We proposed a moratorium to provide States with adequate time to implement the newly enacted cost containment provisions of the Child Nutrition Act. 

It is difficult to know for certain how the moratorium has affected food costs due 

to limitations on the data we have available and the multiple factors that influence 

State agency food expenditures in any given year. Although the reasons for changes 

in average food package costs are complex, it is likely that the moratorium contributed to holding food costs down in fiscal year 2005. We know that the 6 State agencies with the largest number of WIC-only stores experienced food package cost increases ranging from 3.5 percent to 14.2 percent between fiscal year 2003 and fiscal 

year 2004. Between fiscal year 2004 and fiscal year 2005, 3 of these State agencies 

experienced a decrease in the average food package cost, and three had a lower rate 

of increase than in the previous year. 

At present we are optimistic that all State agencies that require certification will 

submit requests before September 30, 2006, and that all or most will receive certification by this date. Progress toward this goal was delayed for several months following the publication of the WIC Vendor Cost Containment Interim Rule on November 29, 2005. This rule implements the vendor cost containment certification requirement found in section 17(h)(11) of the Child Nutrition Act. From December 28, 

2005 through February 23, 2006, FNS was under a temporary restraining order 

(TRO) due to a lawsuit filed by the National Women, Infants and Children Grocers’ 

Association and other plaintiffs to prevent implementation of the Interim Rule. The 

TRO interrupted State agency submission of requests for certification and FNS decisions on certification. Since the dismissal of the lawsuit on February 23, 2006, FNS 

has moved expeditiously to certify the State agencies that meet the certification requirements, and to provide technical assistance to others that are still in the planning process. In addition to the requests for certification that are currently being 

reviewed, FNS expects to receive nearly a dozen more between mid-April and the 

end of September 2006 (including California’s, the State with the largest number 

of WIC-only stores). We are making every effort to certify State agencies before the 

end of the fiscal year. Extension of the current moratorium prohibiting the approval 
494 

of new ‘‘WIC-only’’ stores until a State agency receives certification would ensure 

that the number of such vendors does not increase before State agencies implement 

improved cost containment methods. 

WIC REAUTHORIZATION LEGISLATIVE PROPOSAL

Question. The 2004 reauthorization legislation added section 9(b)(8) to the Richard 

B. Russell National School Lunch Act, which specifies that all communications with 

households regarding certification or verification for free or reduced price meals 

must be in an understandable and uniform format and, to the maximum extent 

practicable, in a language that parents can understand. FNS has already provided 

model application and verification materials that reflect the changes to the certification and verification processes made by reauthorization in English and Spanish. 

In which additional languages will translations be provided and when will they be 

available? 

Answer. The household application is already published in English and has been 

translated into Spanish. Both are available on our Web site found at http:// 

www.fns.usda.gov/cnd/FRP/frp.process.htm. The next round of translations will include: Russian, Vietnamese, Chinese (Mandarin), Japanese, Serbo-Croatian, Arabic, 

Korean, Somali, Cambodian/Khmer, French, Hmong, Haitian Creole, Laotian, Polish, Portuguese, Sudanese, Thai, Urdu, Hindi, Kurdish, Farsi, Greek, Samoan, and 

Tagalog. All 25 translations of the English version of the application are expected 

to be finished in time for use in the 2006–2007 school year. 

Question. We are aware that FNS has issued general guidance alerting States and 

school districts to this new provision. We are also aware that many households 

never respond to the request for eligibility verification and we want to be sure that 

families get the information they need to comply with the verification process. 

Please describe any manuals or other technical assistance materials that FNS has 

provided to local school districts clarifying the kinds of steps they are expected to 

take during the certification and verification processes to comply with section 

9(b)(8). Has FNS reviewed materials in use by States and school districts to assess 

whether they comply with this provision and provide them with the assistance they 

need to come into compliance? 

Answer. FNS has issued 14 guidance memos to the State agencies concerning the 

National School Lunch Program (NSLP) free and reduced price applications, certification and verification, eight of which specifically deal with verification. The goal 

of each of these memos is to ensure that school food authorities are fully aware of 

the new provision, understand completely the requirement to follow-up when a request for verification goes unanswered, and that schools and families have the necessary information in order to comply with verification requests. 

FNS has updated its Guidance for Coordinated Management Evaluations of State 

Agency Operations to include the new provisions in the Reauthorization Act, including the new verification procedures as required by the Child Nutrition and WIC Reauthorization Act of 2004. As part of the management evaluation process, FNS reviews State agencies and the materials they use in their review of school food authorities to ensure that they comply with the new verification requirements. 

FARMERS’ MARKET NUTRITION PROGRAM

Question. It is my understanding that States grants for the Farmers Market Nutrition Program have decreased this year. Is this accurate, and if so, why, considering the appropriated amount did not decrease? How much will the carryover be 

for the Farmer’s Market Nutrition Program this year? How does this compare to the 

past 3 years? 

Answer. It is important to include the effect of prior year unspent funds when 

analyzing funding for the WIC FMNP. We anticipate approximately $3–4 million in 

unspent fiscal year 2005 funds will become available after closeout is completed 

which can supplement the appropriated funds, thus bringing State agencies close to 

their actual expenditure levels in fiscal year 2005. 

In fiscal year 2005, in addition to appropriated funds, we had available unspent 

prior year funds that were allocated to State agencies at the beginning of the fiscal 

year. Subsequently in fiscal year 2005, additional unspent prior year funds became 

available that were allocated to State agencies. For FMNP base grants for fiscal 

year 2006, only available appropriated funds have been made available. Additional 

funds recovered from 2005 should be made available by early summer, 2006. 

In fiscal year 2005, $8.4 million in unspent funds were available to supplement 

the appropriation of $19.8 million. In fiscal year 2004, $5 million in unspent funds 

were available to supplement the $22.8 million appropriation. 
495 

FRUIT AND VEGETABLE PILOT PROGRAM

Question. As you know, last year we provided funding for an additional 6 States 

to join the Fruit and Vegetable Pilot Program. How much money would be required 

to extend the participation by these States through the next school year? 

Answer. No funding will be needed to extend the program to these States through 

school year 2006–2007 because the extension will be covered by existing funds appropriated on November 10, 2005, for the period January 30, 2006 through June 30, 

2007. After June 30, 2007, however, funds will be needed should Congress wish to 

continue the program in these 6 States. 

WILDLIFE SERVICES

Question. What is APHIS Wildlife Services currently doing to reduce the effects 

the double-crested cormorant has on the Great Lakes fishery and how can we get 

them to expand their work to other highly impacted areas in the State? 

Answer. APHIS is currently conducting double-crested cormorant damage management activities in the Great Lake States of Michigan, Minnesota, New York, and 

Ohio. We are also conducting an environmental analysis in Wisconsin to determine 

the potential impacts of expanding our activities to that State. In addition, we are 

cooperating with several State, Federal, tribal, and Canadian agencies to survey 

Great Lakes breeding populations. The breeding population of Double-crested Cormorants on the Great Lakes has increased dramatically—from 89 in 1970 to approximately 115,000 pairs in 2005. Also, APHIS continues to cooperate in satellite 

telemetry to monitor and assess regional movements in conjunction with diet and 

foraging studies. 

Question. Would increasing control in the Great Lakes, a prime breeding ground 

for the double-crested cormorant, help reduce the number of cormorants currently 

decimating aquaculture facilities in the southern United States? 

Answer. Yes, increasing control in the Great Lakes would help reduce the number 

of cormorants currently decimating aquaculture facilities in the southern United 

States. We have assessed the migratory path of double-crested cormorants. Using 

satellite telemetry and band recovery data, we observed the winter movement of 

these birds from the Great Lake Region to aquaculture facilities in Alabama, Arkansas, Louisiana, and Mississippi. We do expect that increased control activities in the 

Great Lakes would reduce the wintering population in the South and lessen the impact to the aquaculture industry and the environment. 

Question. Does APHIS Wildlife Services have enough resources to successfully 

control the Great Lakes breeding population of double-crested cormorants? 

Answer. Our current resources allow us to respond to the immediate short-term 

needs of States and industry—such as removing birds from a site. 

STANDARDIZATION

Question. On January 26, I wrote to Secretary Johanns encouraging the UDSA 

to act expeditiously to establish a grass-fed label standard for red meat. This proposal has been in the works for some time. 

When can we expect the Department to act on this proposal? 

What steps can the Department take to make sure that the program is affordable 

for producers? 

Answer. Developing a label standard for the grass-fed marketing claim is a priority of the Agricultural Marketing Service (AMS) and we have been working closely 

with the industry to develop a workable and usable standard that would serve the 

grass-fed market. AMS has obtained input from a number of individual experts 

within government, industry, and academia while drafting the revised proposed 

standard and its corresponding threshold. We have finalized the development of the 

revised standard, and it is expected to be published in the Federal Register this 

spring. 

Every effort will be made to administer this voluntary program cost-effectively. 

To validate the marketing claim associated with this production activity, AMS will 

conduct verification activities in accordance with procedures that are contained in 

Part 36 of Title 7 of the Code of Federal Regulations for Processed Verified Programs. This approach to verification of marketing claims makes for the best utilization of government resources on a cost recovery basis while providing for integrity 

of the program. 

NATIONAL VETERINARY MEDICAL SERVICES ACT

Question. The National Veterinary Medical Services Act (Public Law 108–161) 

was funded in the fiscal year 2006 Agriculture Appropriations bill. What steps have 
496 

been taken to implement this program? When can we expect those steps to be completed? 

Answer. USDA is exploring potential financial management strategies both within 

the Department and in collaboration with other Federal agencies in order to effectively run a loan repayment program. To evaluate these and other programmatic 

issues presented by the National Veterinary Medical Services Act—NVMSA, 

CSREES has constituted the NVMSA working group to develop potential program 

management strategies. The working group has met on four occasions and is exploring alternative strategies for managing the NVMSA. A draft program management 

proposal is presently being reviewed. We are working to ensure a well thought-out 

program plan which includes collaborations with veterinary schools and other stakeholders to develop research-based consensus regarding the candidate eligibility requirements, and metrics to support prioritized and weighted needs within the veterinary need areas identified within the Act. 

AVIAN INFLUENZA

Question. Late last year, you were provided more than $90 million in supplemental funds to prepare against avian flu, a small part of the total avian flu supplemental. 

It is apparent this is both a public health and an agricultural issue. Do you think 

USDA should have more of a leading role in protecting against this disease? 

Answer. USDA has taken an important role in preparing for and protecting 

against an incursion of high pathogenicity avian influenza (HPAI). We initiated the 

National Domestic H5/H7 Low Pathogenicity Avian Influenza (LPAI) Prevention 

and Control program in 2004 to conduct surveillance on the subtypes of LPAI that 

can mutate to dangerous forms. We have effective trade restrictions to prevent the 

introduction of HPAI through imported poultry and poultry products. Our preparation for a possible outbreak includes development of USDA responses as well as coordination with other Government agencies to protect both human and animal 

health. Internationally, we support capacity building, which allows APHIS to go into 

countries where the disease exists and assist in control efforts by providing technical training and advice. 

Question. In what ways are you working with U.S. producers, large and small, to 

make sure they have all the tools possible to protect against this disease? What are 

producers asking you to do? 

Answer. USDA has several cooperative programs to work with producers. The National Poultry Improvement Plan is a cooperative Industry-State-Federal program 

through which new technology can be effectively applied to the improvement of poultry and poultry products throughout the country. The program’s provisions were developed jointly by industry members and State and Federal officials to establish 

standards for poultry breeding stock and hatchery products with respect to freedom 

from certain diseases and thereby provide certification of poultry and poultry products for interstate and international shipment. 

As the avian influenza surveillance program widens, producers are often concerned about indemnification for flocks that test positive. Both the NPIP General 

Conference Committee, which represents poultry industry stakeholders, and the 

States have recommended 100 percent indemnity for participants of the NPIP H5/ 

H7 avian influenza monitoring program. 

In addition to publishing rules and uniform standards, USDA has focused on outreach and education through its Biosecurity for the Birds advertising campaign, professional development training, and other media. The advertising campaign, which 

provides basic information to promote avian health through biosecurity, began in 

July 2004 and has reached a circulation of over 125 million. Various training 

courses have been provided to State and Federal animal health technicians, veterinary medical officers, and other stakeholders working with the H5/H7 LPAI live 

bird marketing system program. These training sessions have included comprehensive information about poultry diseases, laboratory testing, biosecurity, personal 

protective equipment, State regulations, and risk assessments, among other things. 

USDA is also expanding outreach to the commercial poultry industry, especially 

those involved in the NPIP program, by updating an interactive CD to provide new 

information about poultry biosecurity for feed mills, hatcheries, slaughter plants, 

vaccine crews, live haulers, and service personnel. 

Question. I understand that you plan to use $3 million from last year’s supplemental for avian flu vaccines and immunizations. However, there are some concerns 

that vaccinations will make it difficult to determine if flocks are actually infected 

with the virus after they are vaccinated. Do you favor a vaccination program for 

U.S. poultry? 
497 

Answer. Vaccination does have the potential to negatively impact our trade of 

poultry and poultry products, but the vaccination of domestic poultry for H5 Avian 

Influenza (AI) strains can be valuable as part of an official control and eradication 

program. If appropriate, USDA is prepared to vaccinate domestic poultry, and maintains a vaccine bank. Approximately 40 million doses of vaccine were manufactured 

in 2004 (H5N2, H5N9, H7N2, and H7N3) and are stored as frozen bulk viral fluid 

antigens. In 2005, the bank was expanded by approximately 30 million doses. The 

stockpiled H5 vaccines are effective against the current Asian strain of AI. 

APHIS’s Center for Veterinary Biologics (CVB) regulates the sale and distribution 

of veterinary vaccines. CVB controls the distribution of AI vaccines through a license restriction that places constraints on when, and under what conditions, manufacturers can sell AI vaccines domestically. 

Question. Although the President’s 2007 request includes a significant increase for 

avian flu, this bill won’t be passed until October at the very earliest, and this disease is spreading more quickly than many have anticipated. Do you think the funding request in the 2007 budget is adequate to deal with avian flu or do you think 

you will need additional funds this year? 

Answer. Currently, APHIS has sufficient funding to carry out its national domestic surveillance H5/H7 Low Pathogenicity Avian Influenza program and initiate additional surveillance and preparedness activities against an incursion of High Pathogenicity Avian Influenza. If we were to receive the entire amount requested in the 

fiscal year 2007 President’s Budget and the disease situation did not change from 

its current status, we would not need additional funds to carry out our stated objectives. However, if there were a widespread outbreak or another domestic emergency 

related to avian influenza, we would need to reassess our available resources and 

consider adjustments to our spending plans at that time. 

Question. While there has been much attention to transmission by migratory 

birds, there is also evidence that a bigger threat may be through the shipment of 

poultry-related products and that the disease might even be carried by containers 

in which infected birds had been kept. 

Just how much do we really know about the transmission of this disease? For example, do we know that if all U.S. poultry flocks were kept inside buildings that 

they will be safe? Do you think we have enough information to control this threat? 

Answer. Poultry scientists have studied how avian influenza (AI) and other virulent poultry diseases are transmitted. From this research, they have developed effective procedures to help prevent transmission from occurring. USDA has been publicizing these biosecurity measures, and we believe that by implementing them, producers themselves are helping us reduce the threat of widespread disease transmission. 

AI is primarily spread by direct contact between healthy birds and infected birds, 

and through indirect contact with contaminated equipment and materials. The virus 

is excreted through the feces of infected birds and through secretions from the nose, 

mouth and eyes. Contact with infected fecal material is the most common method 

of bird-to-bird transmission. 

Wild ducks often introduce low pathogenicity virus into domestic flocks raised on 

range or in open flight pens through fecal contamination. Because game birds and 

migratory waterfowl can introduce disease into domestic flocks, USDA and the poultry industries recommend preventing these avian populations from coming into contact with each other. 

Within a poultry house, transfer of the highly pathogenic avian influenza (HPAI) 

virus between birds can occur via airborne secretions. The spread of avian influenza 

between poultry premises almost always follows the movement of contaminated people and equipment. AI also can be found on the outer surfaces of egg shells. Transfer of eggs, therefore, is a potential means of AI transmission. Airborne transmission 

of virus from farm to farm is highly unlikely under usual circumstances. 

It is important to remember that a detection of H5N1 HPAI in wild birds would 

not mean that commercial poultry would be affected. The U.S. poultry industry is 

well equipped to prevent AI. First, chickens, turkeys, and eggs produced for human 

consumption are generally raised in very controlled environments. Secondly, biosecurity practices have been a part of the business of raising poultry in the United 

States for decades. The vast majority of our commercial poultry producers raise 

their chickens and turkeys in covered structures with controlled access. 

In addition to carrying out surveillance and preparedness activities, USDA maintains trade restrictions on the importation of poultry and poultry products from 

countries currently affected by H5N1 HPAI. We would emphasize that there is no 

evidence that HPAI currently exists in the United States. 
498 

Question. If we ever have an outbreak of avian flu in this country, what kind of 

contingency plan do you have in place? Do you have cost estimates, including who 

will pay for it and where will the money come from? 

Answer. If there were an outbreak of avian influenza (AI) in this country, our response would depend on the nature and extent of the outbreak and may require coordinated action with other Federal, State, and local agencies, as well as other segments of society. ‘‘The National Strategy for Pandemic Influenza’’ guides the national preparedness and response to an influenza pandemic, with the intent of (1) 

stopping, slowing or otherwise limiting the spread of a pandemic to the United 

States; (2) limiting the domestic spread of a pandemic, and mitigating disease, suffering and death; and (3) sustaining infrastructure and mitigating impact to the 

economy and the functioning of society. The Strategy provides a framework for future U.S. Government planning efforts that is consistent with the National Security 

Strategy and the National Strategy for Homeland Security. It recognizes that preparing for and responding to a pandemic cannot be viewed as a purely Federal responsibility, and that the Nation must have a system of plans at all levels of government and in all sectors outside of government that can be integrated to address the 

pandemic threat. APHIS has developed a response plan for AI. This plan provides 

greater detail on how APHIS will respond to an outbreak of AI and define activities 

that will be required to address the control, containment, and eradication of the disease. Additionally, APHIS has developed a playbook that acts as a direct link to the 

National Strategy for Pandemic Influenza, such that if the scope of an outbreak in 

animals surpasses APHIS and its partner’s capacity, other resources can be activated in a standardized manner. 

In the event of an HPAI outbreak that is within the scope of APHIS’ response 

capabilities, APHIS has the Foreign Animal Disease management infrastructure to 

conduct an emergency response that would occur at the local level, in accordance 

with the National Animal Health Emergency Management System’s guidelines for 

HPAI. Should the disease be detected in commercial flocks or in back yard flocks, 

affected flocks would be quickly quarantined to prevent spread. Sick and exposed 

birds would be euthanized and the premises cleaned and disinfected to stamp out 

the disease. USDA would conduct epidemiology investigations to determine the 

source of the virus, and to track the movement of birds to contain spread. 

To ensure immediate deployment of supplies necessary to contain, control, and 

eradicate an HPAI outbreak, APHIS is building a stockpile of needed vaccines; diagnostic products including reagents; disinfectants; and equipment that would be required to support operations until normal supply lines can be established for protracted operations. APHIS is developing models of the potential impacts of AI outbreak in the United States and alternative control strategies. These models will enable APHIS to test preparedness and response capabilities through conducting simulated exercises specific to AI. The information gathered through the simulations 

and the exercises will enable APHIS to assess resource requirements in many different outbreak scenarios. 

If the scope of the HPAI outbreak is beyond APHIS’ and the affected State’s immediate resource capabilities, additional resources can be obtained through the following mechanisms: the National Response Plan’s Emergency Support Function #11 

ensuring that animal-health emergencies are supported in coordination with the 

emergency support function that covers public health and medical services; and the 

National Animal Health Emergency Response Corps and various State response 

corps can be activated. These private veterinarians and animal health technicians 

are ready to assist on short notice. 

Currently, APHIS has sufficient funding to carry out its national domestic surveillance H5/H7 LPAI program and initiate additional surveillance and preparedness 

activities against an incursion of HPAI. If we were to receive the entire amount requested in the fiscal year 2007 President’s Budget and the disease situation did not 

change from its current status, we would not need additional funds to carry out our 

stated objectives. However, if there were a widespread outbreak or other emergency 

related to AI, we would need to reassess our available resources and consider adjustments to our spending plans based on the nature and extent of the outbreak. 

USDA’s current LPAI funding supports cooperative agreements with States; diagnostic work at the National Veterinary Services Laboratories; program personnel 

and their associated support costs; vaccine stockpiling; outreach and education; 

training; information technology/database architecture; and investigative and enforcement services efforts, among other things. A certain level of indemnity funding 

is available from fiscal year 2005 carry-over funding to allow rapid response to occasional LPAI introductions into domestic poultry flocks. 

USDA’s current HPAI funding supports the expansion of AI surveillance in the 

commercial industry and live bird market system to all appropriate States. In addi-
499 

tion, the HPAI program will allow for surveillance in upland game premises, commercial/backyard flocks, and other high-risk populations that have not been covered 

under the national domestic program. The HPAI program will support preparedness 

activities such as data modeling, simulated exercises specific to AI, and planning for 

the immediate deployment of the supplies necessary to contain, control, and eradicate an AI outbreak. The program will also expand the ‘‘Biosecurity for the Birds’’ 

outreach campaign, as well as anti-smuggling and risk management activities. 

Internationally, the HPAI program will support capacity building, which allows 

APHIS to go into countries where the disease exists and assist in control efforts by 

providing technical training and advice. This will create a more comprehensive approach to AI by looking at it internationally, monitoring the multiple ways that AI 

might get into the country, and preparing for the possibility of a H5N1 outbreak. 

FOOD SAFETY INSPECTORS

Question. Dr. Raymond, how many food safety inspectors will FSIS employ this 

year? Do you have a breakdown of ‘‘off-line’’ and ‘‘online’’ inspectors? How does this 

compare to last year? Are inspectors who quit or retire being replaced? 

Answer. There are approximately 7,600 in-plant food safety inspection program 

personnel, including field import inspectors and compliance officers. The in-plant 

personnel includes 7,190 food safety inspectors. Of the total food safety inspectors 

3,171 are ‘‘on-line’’ and 4,019 are ‘‘off-line.’’ This represents a slight decline in the 

number of in-plant food safety inspection program personnel due to difficulty finding 

qualified personnel to fill the positions. In-plant employees make up the overwhelming majority of the field inspection force and are the only ones designated as 

‘‘on-line’’ and ‘‘off-line.’’ Other ‘‘front-line’’ inspection employees are not identified by 

these terms. Open positions are filled as quickly as possible with qualified people. 

Each year, FSIS hires on average approximately 300 entry-level Food Inspectors 

and approximately 75 Public Health Veterinarians. 

Question. I understand that the number of plants has decreased, but what about 

the number of animals processed? How do you do a good job with fewer inspectors 

doing more work? 

Answer. As required by the Poultry Products Inspection Act and the Federal Meat 

Inspection Act, respectively, each poultry carcass and 100 percent of livestock carcasses presented for slaughter are inspected by FSIS. Over the last decade, the 

number of poultry carcasses inspected per fiscal year has significantly decreased; 

however, the number of livestock inspected per fiscal year has increased. 

The current number of FSIS inspection program personnel allows the agency to 

perform its public health functions. FSIS inspection program personnel provide inspection services for all establishments under its jurisdiction by employing alternative staffing strategies and fully utilizing available field inspection employees to 

address the demands of each particular area. 

HUMANE ACTIVITIES TRACKING (HAT) SYSTEM

Question. How much funding will be required to complete connection of the HAT 

system to the FAIM architecture within FSIS? Please provide detailed information. 

Answer. The total amount of $7 million available from fiscal year 2005 and fiscal 

year 2006 will be sufficient to complete connection of the Humane Activities Tracking (HAT) system to the Field Automation and Information Management (FAIM) architecture within FSIS. In order to ensure that the field work force is able to instantly transmit public health and humane handling data to headquarters, $5.5 million of the $7 million is being used to install new high-speed connections in approximately 1,500 of 2,300 ‘‘base plants,’’ which are establishments from which inspection 

program personnel, including patrol inspectors, operate on a daily basis. Reflected 

in these costs are equipment, initiating services, and monthly charges for 1 year 

after the service is initiated. The agency hopes to have high-speed connections completed on these 1,500 base plants by February 2007, and is evaluating alternatives 

for the remaining 800 sites for which DSL/Cable Broadband is currently unavailable 

or have other connectivity issues. By replacing dial-up connections with high-speed 

access at all base plants, FSIS will be equipped with a fully-integrated, real-time 

communications infrastructure that gives the agency the ability to instantly detect 

and respond to abnormalities or weaknesses in the system to best monitor humane 

handling and slaughter enforcement, safeguard public health, and ensure food safety and food defense. 

The agency will also continue its development of a reporting tool which will link 

the HAT system to other agency databases through a web-based system, for which 

the remaining $1.5 million is earmarked. As part of the agency’s communications 

infrastructure, this reporting tool will allow inspection program personnel in the 
500 

District Offices and headquarters to access HAT data along with other food safety 

verification data, thereby providing the agency with a powerful management control 

tool for improved and consistent enforcement of the Humane Methods of Slaughter 

Act (HMSA). 

Question. How much funding is required to maintain this technology? 

Answer. Ongoing charges for the 1,500 broadband locations are expected to be $3 

million of base funding annually. USDA is currently evaluating connectivity alternatives for the remaining 800 base plant sites, so funding estimates are unavailable 

at this time. 

COOPERATIVE SERVICES

Question. You commissioned an outside review of the programs and services provided by Cooperative Services at the Rural Business-Cooperative Services agency. 

Can you discuss the results of the review? 

In addition, what steps will USDA take to ensure the unique structural and economic advantages of member-owned and controlled cooperatives will continue to be 

supported by USDA and its programs? 

To support cooperatives, what steps have you taken to fill positions in the field 

at Co-op Services that are for cooperative development? 

Answer. The Administration contracted for an outside program review of Cooperative Programs. The review was conducted by a committee comprised of industry 

leaders and members of academia and was charged with identifying improvements 

or changes that would assist today’s rural cooperatives and promote opportunities 

for leveraging the current Cooperative Programs’ programs and capacity to support 

a broader range of cooperative strategies and approaches to building economic vitality in rural areas. 

The committee’s recommendations focused on three primary areas—the expansion 

of the Cooperative Program’s mission, the need for an infusion of new intellectual 

capital, and the adoption of a regional approach for providing cooperative services 

in rural communities. The committee recommended that Cooperative Program’s mission be expanded to include alternative cooperative models and organizations, as 

well as non-agricultural cooperatives. The traditional cooperative model was seen as 

too restrictive, and the recommendation was made to include new generation cooperatives, LLCs, and other innovative ‘‘self-help’’ business models. The committee 

also found that cooperatives and other ‘‘self-help’’ organizations that focus on housing, consumer services, health care, consumer goods, employer-ownership, small 

business purchasing, and other areas could be useful and important tools for rural 

economic development and improving the quality of life in rural areas. Finally, the 

committee recommended a partnership between regional Rural Development offices 

and rural cooperative development centers to provide information, education, and 

legal and development assistance. Rural Development is taking these recommendations under review. 

Rural Development’s cooperative programs (CP) include the Value-Added Producer Grant (VAPG), the Rural Cooperative Development Grant (RCDG), and the 

Agricultural Marketing Resource Center (AgMRC) programs that devote major parts 

of their programs supporting and developing member-owned cooperatives. The 

RCDG program is budgeted at $4.95 million for fiscal year 2007. Rural Cooperative 

Development Centers are awarded funds for the purpose of providing assistance to 

groups wishing to form cooperatives, as well as for providing assistance to existing 

cooperatives in rural areas. Member-owned cooperatives are encouraged and made 

specifically eligible for the VAPG program. However, the VAPG program is a competitive program that does not set aside specific support for cooperatives or any 

other type of applicant. In addition, CP provides support to member-owned and controlled cooperatives through the Rural Development Salaries and Expenses account 

by researching cooperative issues, by providing cooperative development technical 

assistance, by providing cooperative education and other technical advisory services, 

and by reporting on the financial health of the agricultural cooperative sector. Rural 

Development is taking these recommendations under review. 

Question. Mr. Dorr, you have recently stated that Persian Gulf countries are 

showing an interest in investing in U.S. ethanol plants and you have said, ‘‘If you 

don’t own [these plants] as agricultural producers, someone else will and you’re 

going to be working for them’’. 

Do you think that agricultural producers and rural cooperatives have a roll in producing renewable fuels or have they already lost out to the large corporate interests? Have your dire warnings come too late? 

Answer. Renewable energy is, and will continue to be a big part of America’s energy solution. From 2001 through 2005 ethanol production more than doubled from 
501 

under 2 billion gallons per year to about 4 billion gallons per year. Government investment, especially in recent years, has helped agricultural producers and rural cooperatives play a major roll in production of renewable fuels and will continue to 

assist in the growth of the renewable fuels sector. For example, from fiscal years 

2001 through 2005, USDA Rural Development invested nearly $84 million in 89 

guaranteed loans and grants to assist with development of ethanol facilities 

throughout rural America. Many of these facilities are owned and operated by agricultural producers and by cooperatively organized entities. 

We sincerely hope that agricultural producers, rural cooperatives, and rural residents will continue to be major sources of investment in renewable fuels. We want 

the people and businesses in rural communities to share in the returns to investment and the local development that is stimulated by local business ownership. As 

we look at the projects being started across the country we see that local money 

is still flowing in. What we are seeing as well, however, is that the big institutional 

investor, domestic and foreign, is seeing those high returns too. We would like to 

see that institutional interest in renewables serve as a tremendous way to leverage 

local investment. 

Question. Mr. Dorr, your mission is to support Rural America and rural interests 

and, I think you agree, not large multi-national or foreign corporations. 

Do you think that the budget proposal will provide adequate capital to small producers or cooperatives to move into the renewable fuels industry? 

Answer. USDA Rural Development has several funding tools and opportunities, 

including direct and guaranteed loans and grants, to support investment by small 

agricultural producers and rural cooperatives and help move these entities into the 

renewable fuels industry. Most of these programs are relatively small in terms of 

budget authority. Collectively, however, they provide a highly flexible portfolio of 

management strategies and funding options with which to address the unique circumstances of agricultural producers and cooperatives we serve. The Renewable Energy/Energy Efficiency Loan and Grant Program (Section 9006) provides financial 

assistance specifically targeted to the industry. In order to ensure adequate capital 

for small producers under this program, the Section 9006 final rule, published in 

July of 2005, calls for the provision of priority selection points for small agricultural 

producers. 

Question. Do you think the mix of grants-to-loans that you propose will be enough 

to make sure these groups can get a fair shake in this growing industry? 

Answer. Rural Development will continue to extend support to agricultural producers and cooperatives for the development of renewable fuels from the full range 

of our business lending and investment programs. These funding programs, coupled 

with private sector leverage, will continue to assist rural small businesses and small 

agricultural producers in increasing their access to the growing renewable energy 

industry. In addition, continued simplification of application processes for small entities will encourage increased participation from that sector. Finally, as mentioned 

above, we have placed increased emphasis on supporting small agricultural producers through the priority selection process. 

Question. How do you justify the reductions you propose when the opportunities, 

and the stakes, are so great? 

Answer. One of USDA Rural Development’s primary roles in nurturing the renewable fuels industry will be to encourage private sector investment to maximize the 

benefit of Federal funding. By leveraging Federal dollars with private investments, 

we can spread resources. By fostering partnerships with State, local, and tribal governments, community development organizations, and for-profit and not-for-profit 

companies, Rural Development can help to grow State and local renewable energy 

policies that will support further investment. To ensure that small projects are not 

overlooked, we will continue to emphasize the use of grants when they are needed 

and to increase utilization of loan guarantees when possible. This will continue to 

allow us to serve the neediest entities while increasing loan-based financial assistance to the target market. In fiscal year 2007, we will be looking for ways to better 

target all available program resources to meet the growing demand in the renewable 

fuels industry. 

Question. Please provide us a breakdown, by program, for all the funds under 

your mission area for fiscal year 2007 that can be used to support renewable fuels 

development by farm organizations and rural cooperatives. 

Answer. 

[The information follows:] 
502 

FISCAL YEAR 2007 PROPOSED FUNDING TO SUPPORT RENEWABLE FUELS DEVELOPMENT 

Loan/grant description 

Fiscal year 2007 

projected funding 

levels 

Fiscal year 2007 

Projected Funding Activities for 

Renewable Energy 

Business and Industry Guaranteed Loan (B&I) ..................................................................... $990,000,000 $16,000,000 

Rural Economic Development Loan ........................................................................................ 34,600,000 400,000 

Rural Economic Development Grant ....................................................................................... 10,000,000 400,000 

Value Added Producer Grants ................................................................................................. 19,280,000 2,500,000 

Section 9006 Renewable Energy Grants and Guaranteed Loans .......................................... 7,920,000 7,920,000 

Section 9006 Renewable Energy Guaranteed Loan ................................................................ 34,600,000 34,600,000 

Section 9008 Biomass R&D Grants ....................................................................................... 12,000,000 12,000,000 

Electric Program Loans ........................................................................................................... 700,000,000 200,000,000 

TOTAL ......................................................................................................................... 1,732,420,000 273,820,000 

Question. Mr. Dorr, USDA has a long history of running a well-managed guaranteed rural homeownership program through a private-public partnership with over 

2,000 lenders. In fact, in fiscal year 2005, over $100 million in housing loans were 

provided in the rural areas of my home State. Of that amount, 32 percent benefited 

low and very-low income families. 

I now see you are raising the origination fee for these loans from 2 percent to 3 

percent, while interest rates are rising, and I must admit I am puzzled. An origination fee of 3 percent is extraordinarily high for this targeted market and almost unheard of in the housing industry. For fiscal year 2003, you stated you were lowering 

this fee from 2 percent to 1.5 percent to lower the so called ‘‘barriers’’ to achieve 

the President’s Initiative of increasing minority homeownership. 

Why was it considered a ‘‘barrier’’ then and not now, and how do you justify increasing what you personally identified as a ‘‘barrier’’ to an unprecedented level? 

How will your increased fee with rising interest rates help you meet or exceed 

the President’s goal of providing increased homeownership rates to low and very 

low-income families, especially minorities? 

Answer. Homeownership, particularly minority homeownership, is still a key Administration objective. In fiscal year 2003, fees presented a barrier to homeownership for some prospective minority borrowers because they had to pay the fees at 

closing. We helped eliminate that barrier by allowing the entire fee to be financed 

into the loan by increasing the amount we can lend up to 103 percent of the appraised value of the home. 

Additionally, we have no requirements for down payment or mortgage insurance, 

so even with the fees, monthly payments remain reasonable. The higher fee would 

only result in a $6 increase in the average monthly payment for most customers. 

We closely monitor the other fees charged by participating lenders in our SFH guarantee program to ensure that fees charged are reasonable. 

Raising the guarantee fee saves approximately $35 million in Budget Authority 

for fiscal year 2007. This is a significant savings. Realizing savings like this while 

at the same time maintaining effective programs like 502 guaranteed loans is the 

balance USDA Rural Development is trying to achieve. 

THE USDA LOAN PROGRAM

Question. Also as part of your request, you are asking lenders to certify they 

would not make a loan to a borrower using any other Federal housing program, including FHA, before making a USDA loan. The USDA program serves a rural based, 

lower-income population and is limited to a primary home, unlike FHA. 

What data do you have that shows these programs overlap? 

Wouldn’t this requirement add another layer or layers of bureaucracy and most 

likely confuse participating lenders and drive up the originator’s costs that will be 

passed on the borrower? 

What have you heard from the lending community on both of these proposals, because, to be honest, we have heard a great deal from lenders, underwriters and national lending associations from around the country all of which were very critical 

of these efforts? 

Answer. The Office of Management and Budget’s (OMB’s) Program Assessment 

Rating Tool (PART) indicates that the 502 guaranteed program may overlap other 

Federal housing programs, and may at times serve customers that could have received loans through the Federal Housing Authority or Veterans Administration. 
503 

This general provision has been proposed to preclude the potential overlap of Federal programs. 

Currently, a lender must certify that they would not provide the proposed loan 

without a Rural Development guarantee. The proposed provision would require a 

lender certify that a borrower was not eligible for another Federal insured or guaranteed housing program. If the lending institution normally does not offer another 

Federal program, they would not be bound by this proposal. 

The reaction from the lending community on the fee increase and the new certification proposal has not been positive. Higher fees and additional paperwork are not 

popular concepts. However, given the cost savings that would be realized from the 

fee increase and the elimination of potential Federal program overlaps, it is felt that 

benefits from these proposals are significant, can be successfully implemented, and 

make good program management sense. 

STRENGTHENING AMERICA’S COMMUNITIES INITIATIVE

Question. In its fiscal year 2007 Budget, the Administration again proposes to 

eliminate four programs within the Department of Agriculture and consolidate those 

activities in the Department of Commerce with thirteen other programs from four 

other departments under the ‘‘Strengthening America’s Communities Initiative.’’ 

The four USDA programs are Rural Business Enterprise Grants, Rural Business 

Opportunity Grants, Economic Impact Grants, and Rural Empowerment Zones/Enterprise Communities, which annually have provided over $72 million to Rural 

America’s most underserved communities for several years. 

What assurances can you provide that rural communities will continue to receive 

the same level of support for these specific programs under this consolidation? 

Answer. The President’s Strengthening America’s Communities Initiative will include eligibility criteria that will ensure funds are directed to those communities 

most in need of development assistance. We feel confident that rural communities 

will fare well when these criteria are used. USDA Rural Development has offered 

our expertise, assistance, and experience in program delivery in rural areas through 

our 800 local offices and 6,800 employees. We will continue to work with the Department of Commerce and the Department of Housing and Urban Development on the 

technical details of program delivery, particularly as it affects rural areas. 

Question. What studies indicate that this initiative will more effectively deliver 

these specific programs? 

Answer. The initiative is designed to streamline a number of programs that provide regional economic assistance to communities, and will include eligibility criteria 

that will ensure funds are directed to those communities most in need of development assistance. While Rural Development has not conducted any studies of the initiative, we are confident that rural communities will fare well when these criteria 

are used. USDA Rural Development has offered our expertise, assistance, and experience in program delivery in rural areas. 

Question. If any of these four programs will experience any funding reduction 

under this consolidation, please indicate the amount of the reduction and provide 

detailed justification for each reduction. 

Answer. A total of $327 million is proposed for the economic development component of the restructured Initiative. Further distributions of funding by program area 

have yet to be determined. Again, we believe rural America will be well served as 

the eligibility criteria will direct resources to those rural communities most in need 

of assistance, and USDA Rural Development expects to be heavily engaged in program development, implementation, and delivery. 

SECTION 515

Question. The budget eliminates the section 515 rural rental housing program. 

Since 1963, the Agriculture Department has made loans for affordable rental housing in rural areas. The section 515 program is the only Federal program providing 

direct, subsidized loans (1 percent) to finance rural rental housing. According to a 

recent USDA report, there is a substantial need to repair and renovate section 515 

housing. The portfolio contains 450,000 rented apartments in section 515 developments. The average 515 tenant income is little more than $9,000, which is equal 

to only 30 percent of the Nation’s rural median household income. Sixty percent of 

the tenants are elderly or disabled and one-quarter are minority. The existing Section 515 portfolio is aging. Of the 17,000 developments across the country, close to 

10,000 are more than 20 years old. To maintain this stock, it will take a commitment of Federal funds for restoration. It’s hard to argue that rural America does 

have a housing crisis. According to the 2000 Census, there are 106 million housing 

units in the United States. Of that, 23 million, or 23 percent, are located in non- 
504 

metro areas. Many non-metro households lack the income for affordable housing. 

The 2000 Census reveals that 7.8 million of the non-metro population is poor, 5.5 

million, or one-quarter of the non-metro population, face cost overburden, and 1.6 

million of non-metro housing units are either moderately or severely substandard. 

Why has the Administration proposed to end a program that for over 40 years 

has financed over 500,000 units of affordable housing with very few delinquencies 

or defaults and why is RHS giving up on providing affordable rental housing for 

over seniors and families? 

Answer. Rural Development has not given up on providing affordable rental hous- ing. The President’s fiscal year 2007 budget proposes $74 million to continue the 

new vision for Multi-Family Housing programs. 

The Administration proposes to create a new source of funding to rehabilitate 515 

properties. The Comprehensive Property Assessment (CPA) found that 90 percent 

of the properties lacked sufficient cash and reserves to prevent economic obsolescence. Already, over 100 properties are lost from the program each year. This number 

will rise quickly in coming years as deferred maintenance overtakes the 17,000 remaining properties in the portfolio. This is a much bigger threat to the portfolio 

than prepayment. Furthermore, in a few years loans will begin maturing; unless 

515 property owners have equity in their property, many may be lost to the private 

market. 

The Administration’s multi-family housing proposal allows property owners to restructure their loans. With this restructuring USDA will exchange debt service payments on the loan to provide cash for rehabilitation, and the property owner will 

sign up for another 20 years providing affordable housing. 

The new restructuring tools that are key components in our proposed revitalization legislation will allow us to assure that resources are available to revitalize the 

vast majority of properties in our portfolio where the owner elects to stay in the program. These restructuring tools, primarily the use of debt deferral, will create the 

opportunity to add additional debt to take care of immediate rehabilitation needs. 

One way to look at this restructuring process is to view it as a ‘‘fix-up vs. build’’ decision: it costs $85,000 on average to build a new affordable housing unit, but only 

$20,000 per unit to rehabilitate what we currently have. The vision, then, is to secure the valuable national asset of a large affordable rural rental housing portfolio, 

for the longest period, at the lowest cost to the government, at the greatest benefit 

to tenants, owners, and communities. 

The Administration’s fiscal year 2007 Budget proposes more new construction for 

multi-family housing. It does this by doubling funds for Section 538 guaranteed 

loans, thereby increasing dramatically the loan amounts available. The section 538 

program works in partnership with other financing entities to create affordable 

housing. More than 80 percent of the closed loans in the portfolio have 9 percent 

tax credit dollars. Many tenants in section 538 properties have section 8 vouchers 

which assist the tenants in keeping section 538 housing affordable. The program 

also offers interest credit subsidies that assist in lowering the interest rate throughout the term of the loan. The subsidized interest rate keeps rents low for tenants. 

Question. According to the Department’s Comprehensive Property Assessment, repair and renovation of the section 515 portfolio is a far greater problem—in terms 

of number of units—than prepayment. The Comprehensive Property Assessment indicated the need for some 50,000 vouchers for families unlikely to be displaced by 

sale of certain section 515 development and estimated over $2 billion was needed 

to repair and restore the existing portfolio. Rural Housing Service (RHS) has used 

section 515 to finance this sort of repair and renovation activity. In fiscal year 2006, 

RHS will commit at least $50 million to repair and restore the existing portfolio. 

How many 515 projects have been repaired using the 538 program and how many 

projects would you predict would be rehabilitated with the 538 program at the 

President’s budget request? 

What statutory barriers exist for the 538 program to refinance and/or repair a 515 

project with HUD or USDA rental assistance attached to it? 

Answer. This is the first year of using 538 financing to renovate existing 515 

properties. Currently, we estimate that in fiscal year 2006, 10 properties in the 515 

portfolio will receive lender provided funds with a 538 guarantee. At the fiscal year 

2007 President’s budget request amount of $198 million, we expect to finance approximately 20 to 30 existing 515 properties. 

There are no statutory barriers which would preclude section 538 financing on an 

existing 515 project. However, section 515 owners do not have to refinance their 

loans in order to finance repairs or to restore their developments. If a section 515 

owner wants to finance repairs with a 538 loan guarantee, the section 538 program 

provides an interest credit down to the applicable Federal rate at the time the loan 
505 

closes (currently approximately 4.6 percent). The interest rate difference is only part 

of the story. The cost of making section 538 funds available is significantly less to 

the Federal Government than through the Section 515 program. We would also consider the section 538 guaranteed funds to be only one of many sources of funding 

for rehabilitation purposes that can be made available to existing 515 projects. 

VOUCHERS

Question. The fiscal year 2007 budget proposes $74 million for vouchers and indicated that some of this money will be used for portfolio restructuring. 

What is the planned breakout between expenditures for restructuring and vouchers—in both dollars and units? 

Answer. The 2007 Budget addresses the displaced tenant issue with the funding 

of vouchers and hopes to be able to address the dilapidation issue if the restructuring authorization is passed. The 2007 Budget includes $74 million to continue 

the multi-family housing revitalization proposal that was initially proposed in the 

2006 Budget. This funding will be used primarily for housing vouchers, good for 12 

months, for residents of projects whose sponsors prepay their outstanding indebtedness on USDA loans and leave the program. The specific dollar amount and number 

of tenants is dependent on the number of properties that pre-pay, their location, and 

the market conditions at the time. In addition, the Administration is proposing that 

2007 appropriation language provide the flexibility to use the $74 million for debt 

restructuring and other revitalization incentives that we expect to be authorized before or during 2007. 

Question. The fiscal year 2006 budget requested $214 billion for vouchers alone. 

The fiscal year 2007 budget requests much less for vouchers—$74 million—and proposes to use some of that for restructuring. 

What has changed in the last year so that the administration can request only 

about one-third of the fiscal year 2006 budget for vouchers? 

Answer. The Comprehensive Property Assessment (CPA) found that 10 percent of 

the properties (approximately 1,700) could be economically viable to prepay if permitted. This is estimated to be about 46,000 units, with approximately one-third of 

the prepayments occurring in each of the first three years. The fiscal year 2006 

budget reflected vouchers needed in the first year funded under the assumption they 

would last 3 to 4 years and provided administrative funds to establish the Office 

of Portfolio Revitalization. The fiscal year 2007 budget reflects vouchers needed in 

the first year funded at a 1-year level. 

RENTAL ASSISTANCE

Question. The budget proposes to reduce the term on rural rental assistance contracts from 4 years to 2 years. 

If this is not approved, what is the total needed to continue all expiring contracts? 

If this is approved, what is the projected total needed for contract renewals for fiscal 

year 2008? 

Answer. 

[The information follows:] 

RENTAL ASSISTANCE PROJECTIONS 

YEAR 

4 YR RENEWALS 

Number Dollars in Thousands 

2006 ........................................................................................................................................ 66,799 $639,126 

2007 ........................................................................................................................................ 85,756 987,000 

2008 ........................................................................................................................................ 78,567 1,284,564 

2009 ........................................................................................................................................ 60,524 1,204,900 

2010 ........................................................................................................................................ 73,531 950,000 

RENTAL ASSISTANCE PROJECTIONS 

YEAR 

2 YR RENEWALS 

Number Dollars in Thou- sands 

2007 ........................................................................................................................................ 66,799 $477,000 

2008 ........................................................................................................................................ 85,756 628,000 
506 

RENTAL ASSISTANCE PROJECTIONS—Continued 

YEAR 

2 YR RENEWALS 

Number Dollars in Thousands 

2009 ........................................................................................................................................ 145,366 1,089,000 

2010 ........................................................................................................................................ 146,280 1,121,000 

2011 ........................................................................................................................................ 152,098 1,194,000 

Question. The Administration proposes to continue new construction for farm 

labor housing. These units need rental assistance in order to be affordable to eligible 

farmworkers housing households. 

Is there rental assistance for farmworker housing included in the budget request? 

Answer. Yes, Rural Development’s rental assistance request includes units for 

farm labor housing. 

WATER AND SEWER GRANTS

Question. The budget includes a reduction in the interest rate charged to poverty 

level communities, which is offset by a reduction in water/sewer grants. For most 

rural communities, grant funds are the key to financing new systems and system 

improvements. These communities have the most significant problems with their 

water-sewer systems and lack the capacity in terms of income and population to 

spread the costs for improvements. It is likely that a reduction in the amount of 

available grant assistance will limit the ability of the communities with the greatest 

need to afford RUS assistance. The RUS system allows for up to 75 percent grant 

financing for water or sewer systems, yet typically communities only get 35–40 percent grant. 

What assurance can you give the Committee that this proposal will not result in 

small poor communities being left out of the program or increasing the debt servicing that will have a negative impact on increased average user water and sewer 

bills? 

Did you conduct analysis on small low-income rural communities and can you 

share this information with the Committee? 

Answer. An applicant’s debt repayment capacity is evaluated independently of the 

loan interest rate and based on maintaining reasonable user fees. The applicant’s 

loan capacity is then determined based on its repayment capacity and the interest 

rates and terms available at the time the project is approved. With the proposed 

reduction in interest rates, it expects to increase most applicants’ loan capacity. 

Grant funds will continue to be used to assist borrowers in maintaining reasonable 

user rates where their borrowing capacity is less than the project cost. Priority for 

funding will continue to be based on small communities with low income levels that 

must make system improvement to meet health standards. 

The chart below describes our analysis of the revised interest rate structure in 

funding a loan and grant project with the same level of budget authority. Using 

data available at the time the President’s budget was being developed, the chart 

shows the market rate range where the revised interest rate structure will result 

in lower annual loan payments. Since the historic market rate falls within that 

range, we concluded our revised interest rate structure would better serve our borrowers in maintaining reasonable user fees. Rural Development has determined 

that because this assists all communities, it will help the small low-income rural 

communities as much or more than those between 5,000 to 10,000 populations. 

[The information follows:] 
507 

ORGANIC RESEARCH

Question. The 2002 Farm Bill established the Organic Research and Extension 

Initiative to fund organic agricultural research at the level of $3 million for each 

of the subsequent 5 years. When combined with the Organic Transitions Program, 

this joint Integrated Organic Program has been disbursing about $4.5 million to 

fund organic research annually. 

How does the competitiveness of this program compare to other of the integrated 

grant programs (e.g. section 406 grants)? 

Answer. In 2005, the Integrated Organic Program received 82 proposals requesting $39 million and the competitive review panel deemed 42 of the proposals requesting $23 million as high quality and fundable. To stay within the approximately 

$4.7 million available to the program, 8 proposals were recommended for funding, 

which represents 10 percent of all submitted and 19 percent of those that were determined to be fundable. 

In 2005, the Crops at Risk Program received 22 proposals requesting $7.4 million 

and the competitive review panel deemed 9 of the proposals requesting $3.4 million 

as high quality and fundable. To stay within the $1.3 million available to the program, 5 proposals were recommended for funding, which represents 23 percent of 

those that were determined to be fundable. 

In 2005, the FQPA Risk Avoidance & Mitigation Program received 18 proposals 

requesting $25.6 million and the competitive review panel deemed 12 of the proposals requesting $17.6 million as high quality and fundable. To stay within the 

$4.2 million available to the program, 4 proposals were recommended for funding, 

which represents 22 percent of those that were determined to be fundable. 

In 2005, the Methyl Bromide Transitions Program received 19 proposals requesting $6 million and the competitive review panel deemed 11 of the proposals requesting $3.9 million as high quality and fundable. To stay within the $2.9 million available to the program, 9 proposals were recommended for funding, which represents 

47 percent of those that were determined to be fundable. 

Question. Please describe any plans CSREES has to increase its level of support 

for organic agricultural research. 

Answer. The quality of proposals being funded through the Integrated Organic 

Program and low percentage of high quality proposals funded suggest that increased 

funding for the Integrated Organic Program would be effectively used. In the 2007 

President’s budget, the program is funded under the NRI. The agency is assessing 
508 

how organic research is currently supported through allied programs and how this 

support could be increased, if appropriate. For example, a number of National Research Initiative programs support basic and applied research directly and indirectly 

related to organic production, marketing and environmental interdependencies. It 

may be possible to increase support for organic agricultural research by increasing 

staff awareness of organic research needs and by adapting Requests for Applications 

to reflect the increasing interest of the USDA in organic production and marketing 

systems, as well as potential implications to the environment, rural communities 

and long term competitiveness in the United States products. 

ORGANIC AGRICULTURE

Question. The 2002 agricultural census contained only 2 questions on organic operations, providing little information about the scope of the industry. What is 

NASS’s plan to gather more information to document demographic and economic 

trends in the organic sector? 

Answer. NASS has expanded the Organic Section for the 2007 Census of Agriculture. NASS staff consulted with other USDA agencies and organic grower organizations to develop a more comprehensive Organic Section that will better address 

the needs of the data user community. This data will allow NASS to publish the 

organic data in conjunction with the economic and demographic data already collected on the census. The result will be a more complete picture of the organic sector 

of American agriculture. 

Question. We understand that NASS has suggested they could better address data 

on the organic industry by doing a follow up survey to the 2007 census sent only 

to certified organic operations. Is it possible to include this organic survey as an addendum (included with) the main agricultural census? 

Answer. The 2007 Census of Agriculture will collect information on certified, transitional, and non-certified organic agriculture. In combination with other data collected in the census of agriculture, NASS will be able to produce cross tabulations 

providing the most comprehensive data set available on the organic sector. 

The main barrier to inserting an addendum into the 2007 Census of Agriculture 

is the inability to easily pre-identify the producers in all sectors of organic agriculture. Industry experts have indicated information is needed on certified, transitional, and non-certified organic producers. While it may be possible to pre-identify 

certified producers, it would be virtually impossible to pre-identify the others. 

Question. Of 15 project areas in the NRI competitive grants program, I have been 

informed that only 2 of them have funded projects that contain an organic agriculture element within them. These are Managed Ecosystems and Agricultural Prosperity for Small and Medium-Sized Farms. However, I have also been informed that 

since 2003, there have been no grants made that specifically fund organic production research, though five projects that had some aspect pertaining to organic marketing were funded through the Agricultural Prosperity program in 2005. How could 

organic be better represented through more program areas of the NRI? 

Answer. Organic research, extension, and educational issues are applicable to the 

majority of the NRI competitive grants programs. In the past, the majority of 

projects funded have been through the Managed Ecosystem program and its predecessor, the Agricultural Systems program. Between the fiscal years 2003 and 2006, 

six projects have been funded through the Managed Ecosystem program for an 

award amount of $1,976,127. Three of these projects are related to increasing production in cropping systems through more efficient cycling of nutrients and better 

understanding of soil biological processes. Two projects compared apple production 

systems between organic, conventional, and integrated systems. Results from the 

apple projects were published in an article in Science. 

As you mentioned, the new Agricultural Prosperity for Small & Medium-Sized 

Farms program funded two projects on organic agriculture during its first year. One 

project was from a social perspective looking at the role of women farmers in sustaining small farms and rural communities. The second project was on production 

systems transitioning to conservation tillage practices. The 2006 fiscal year projects 

have not been announced, but we anticipate additional projects related to organic 

agriculture will be funded. 

In addition to the Managed Ecosystem and the Small Farms program, six other 

programs have been involved in funding organic agriculture projects between fiscal 

years 2001 and 2006. These programs illustrate the diversity of topics that can support organic research interests through NRI programs. Programs that have funded 

projects directly related to organic agriculture are the Biology of Plant-Microbe Associations, Soil Processes, Biologically Based Pest Management, Biology of Plant-Microbe Associations, Agricultural Markets and Trade, and Rural Development. Re-
509 

search questions being addressed under these programs range from ‘‘Population Migrations of Phytophthora Infestans in Organic and Conventional Agricultural Production Systems’’ related to potato blight in the Biology of Plant-Microbe Associations program, ‘‘Microbial Community Structure in Relation to Organic and Conventionally Farmed Desert Soils’’ related to soil health in the Soil Processes program, 

‘‘Dispersal of Phytophthora capsici in Soils from Conventional and Organic 

Agroecosytems’’ looking at how organic practices can control disease in the Biologically Based Pest Management program, ‘‘Population Migrations of Phytophthora 

Infestans in Organic and Conventional Agricultural Production Systems’’ in the Biology of Plant-Microbe Associations program. Social and economic issues can be addressed through the Agricultural Markets and Trade and Rural Development programs. Examples of funded topic are ‘‘Experimental Investigation of Interactions in 

Willingness to Pay for Certified Organic and Non-Genetically Modified Foods’’, ‘‘The 

Demand for Alternative Foods: Perceptions and Characteristics of U.S. Shoppers’’, 

and ‘‘Generational Transfer of Alternative Farms as Rural Development in the 

Northern Great Plains Region’’. 

Projects can impact or inform organic producers, but may not be directly identified 

as an organic research project. These projects provide examples of the breath of 

issues that are facing the organic producer, which can be addressed through NRI 

programs. There were 16 NRI programs that funded projects that are potentially 

relevant to organic research in fiscal years 2004 and 2005. The areas of research 

vary from use and management of manures, growth and health of animals, weed 

dynamics, soil biological processes and nutrient cycles, air quality from animal systems, bio-control of insects, biodiversity of systems, to health aspects encouraging 

vegetable consumption. NRI funding for these projects was at a level of $16,691,097. 

An emerging area of interest for the organic producer is in being able to use generally accepted practices of conservation, enhancing biodiversity, soil enrichment, 

and recycling on inputs to increase the economic value of organic production practices. Several programs in the NRI are expanding our focus on ecosystem services 

and market valuation of these practices. For example the Markets and Trade and 

Managed Ecosystem programs have funded 10 projects that will lead to adoptions 

of conservation practices or evaluate market potentials for ecosystem services. This 

is a new opportunity for research, extension, and educational activities in support 

of organic agriculture. 

QUESTIONS SUBMITTED BY SENATOR TOM HARKIN

RISK MANAGEMENT AGENCY

Question. In your written testimony, you referred to the President’s request to 

fund 15 additional staff years for the Risk Management Agency to provide better 

oversight of the crop insurance program so as to avoid problems such as those that 

resulted in the failure of the American-Agrisurance insurance company in 2002. 

Please describe in greater detail what functions those additional staff would perform 

that would have such an impact? 

Answer. RMA has requested the additional staff for the Compliance offices to provide more effective program oversight, strengthen the front-end reviews of approved 

insurance providers, and to address outstanding OIG recommendations to improve 

company oversight and internal controls. 

Increased staffing will assist Compliance with ongoing efforts pertaining to quality control and assurance requirements and the increased workload associated with 

increases in program size and complexity. These efforts will clearly improve RMA’s 

ability to deter waste, fraud, and abuse through better internal controls and monitoring. The ability of the Compliance staff to maximize automation and other efficiencies to offset limited personnel resources has reached a peak, and it is necessary 

to increase actual numbers of people at this time or alternately reduce some activities. Reducing any of our ongoing activity would be a hard choice since every activity Compliance engages in is based on statutory or approved program requirements. 

Compliance uses various methodologies to limit the number of policies selected for 

review (dollar thresholds, etc.) and refers complaints and other related issues back 

to the Approved Insurance Providers for their review and response. However, accomplishing more of this work with RMA Compliance staff would provide greater assurance and control over the results. 

The addition of two staff to each of the six Regional Compliance Offices is intended to assist with the additional workloads associated with performing random 

policy reviews associated with determining a program error rate under the Improper 

Payments and Information Act of 2002 (IPIA). During the last decade, Compliance 
510 

greatly reduced the numbers of random policy reviews it performed. Requirements 

in the previous Standard Reinsurance Agreement for the companies to randomly review policies annually, provided mixed and/or wholly unusable results that RMA 

deemed unsatisfactory, especially for establishing the required Program Error Rate. 

Presently, Compliance has taken resources away from other review activities to supplement the required IPIA random reviews. The additional staff will permit each 

office to recover some of the effort in these other areas. 

Question. For fiscal 2007, the President is seeking $109 million to fund computer 

upgrades at various agencies in the Department of Agriculture, a recurring request 

for the last several years. Why is Risk Management Agency the only entity within 

USDA for which the President is proposing to assess private sector partners the cost 

of upgrading the Agency’s computers, by imposing a half cent fee on every policy 

sold by crop insurance companies? 

Answer. The Federal-Private sector partnership that makes up the Federal crop 

insurance program is unique among USDA programs. The delivery of the Federal 

crop insurance program is provided through a network of private sector insurance 

companies who are reimbursed by the Federal Government for their delivery costs. 

The companies are also able to earn underwriting gains in years of favorable loss 

experience. For the 2005 crop year, the total compensation paid to participating insurance companies is expected to approach $1.8 billion and more than $10 billion 

over the last decade. 

While private sector companies deliver the crop insurance program, the USDA 

Risk Management Agency (RMA) information technology (IT) system is critical to 

its ongoing operation. The RMA IT system is used to maintain a wide array of vital 

program information including acreage and production information on about 1.2 million policies, and provides critical internal controls for mitigating program 

vulnerabilities. The RMA IT system also maintains actuarial data for over 368 crops 

in over 3,000 counties Nation-wide. The private sector insurance companies need to 

access the RMA IT system and data on a daily basis in order to conduct business. 

The existing RMA IT system has been in place for over a decade and is reaching 

the end of its life expectancy. The system is becoming increasingly difficult and expensive to maintain and recent years have seen increases in computer downtime 

which threaten the operation and security of the Federal crop insurance program. 

The Administration’s proposal recognizes the urgency of RMA IT funding needs 

in light of previous budget requests that have gone unfunded. The Administration 

believes the private insurance companies are a primary beneficiary of efficient, effective and more advanced computer systems, and thus it is not unreasonable to have 

the companies contribute to the modernization and maintenance of the IT systems 

which they rely upon to accrue considerable financial benefits. In addition, the new 

IT systems will likely contribute to improved and more efficient compliance with 

Congressional mandates pertaining to data mining and data reconciliation/data 

sharing, which has a direct impact and associated cost to the insurance companies. 

MARKET ACCESS PROGRAM

Question. Why does the President’s budget propose to reduce funding for the Market Access Program (MAP) by 50 percent? 

Answer. The proposal to limit funding for MAP in 2007 reflects the Administration’s efforts to reduce the Federal deficit. It should be noted that even if the program is limited to $100 million in 2007, that level is still higher than the $90 million program level that was authorized for MAP prior to the 2002 Farm Bill. Reducing the deficit is a key component of the President’s economic plan and will help 

to strengthen the economy and create more jobs. Farmers, ranchers, and other residents of rural America understand the importance of a healthy economy, which 

raises incomes and increases demand for their products. This and other deficit reduction measures will contribute to a more prosperous future for our citizens. 

Question. Has some problem been detected with the program, or has it been determined that it is no longer necessary to assist U.S. agricultural exporters? 

Answer. Expanding overseas markets for agricultural products is critical to the 

long-term health and prosperity of the U.S. farm community. This Administration 

is convinced that, given our advantages in agricultural productivity and low cost of 

production vis-a-vis the rest of the world, the future of our farmers and ranchers 

lies in the export market. FAS’ international activities, including MAP, play a critical role in helping open new markets, pursuing the emerging growth markets of 

tomorrow, and maximizing the opportunities offered by trade liberalization and 

growth in global food demand. FAS’ market development programs were reviewed 

in accordance with the Office of Management and Budget’s Program Assessment 

Rating Tool in 2005 and received a score of 75 with a ‘‘Moderately Effective’’ rating. 
511 

The current budget situation requires hard choices and the setting of priorities. We believe that $100 million is an appropriate level for the program in light of the 

fiscal discipline that is absolutely necessary in times of deficit spending. It is also 

important to understand that, while funding for MAP is reduced, funding for all 

other USDA market development activities, including the Foreign Market Development Program, remains unchanged from this year’s level. 

WORLD TRADE ORGANIZATION

Question. In the Doha Round negotiations, the European Union has pushed hard 

to require that all international food aid be provided only on a cash basis, rather 

than through commodity donations as is done in U.S. programs. I find the EU proposal on food aid to be unacceptable, as do most other members of the Senate. 

Where do the negotiations stand on this issue? 

Answer. Recently, the Agriculture Negotiations Chair, Crawford Falconer, issued 

a Food Aid Reference Paper, which essentially summarized the state of play on various food aid issues. The purpose of the paper is to help focus discussions on key 

issues in upcoming meetings. We are encouraged by the Chair’s paper as it allows 

for in-kind, or commodity, food aid. Earlier this year, the African and Least Developed Countries (LDC) groups, which are the recipients of food aid, issued a joint 

submission on food aid. This paper, too, suggested that food aid disciplines should 

leave the door open for in-kind donations. These are encouraging developments in 

the food aid negotiations. 

AGRICULTURAL TRADE

Question. Many of the bilateral disputes that have emerged in recent years in agricultural trade are highly technical in nature, typically having to do with unscientific sanitary or phytosanitary (SPS) rules or cumbersome customs or distribution 

requirements. What steps is USDA taking to make sure that potentially problematic 

rules of this kind are identified early and addressed before they hinder access for 

U.S. agricultural exports? 

Answer. On a weekly basis FAS and U.S. food safety agencies meet to review new 

or revised foreign SPS regulations and assess their potential impact on U.S. exports. 

In 2005, USDA’s World Trade Organization (WTO) Enquiry Point led a U.S. interagency process that reviewed over 600 foreign SPS regulations notified to the WTO. 

Based on an interagency analysis, the Enquiry Point drafted and submitted official 

comments on 62 foreign measures to reduce their impact on U.S. exports. In addition to the numbers above, FAS and U.S. food safety agencies also collaborated to 

prepare an additional dozen formal comments addressing barriers to market access 

for measures that were not notified to the WTO, including a number of measures 

implemented by China and India. FAS’ overseas staff also actively monitor local 

government’s SPS-related regulations and notify the U.S. industry and the Enquiry 

Point of potentially problematic regulations for further action. 

FAS uses the rules of the WTO SPS Agreement to exert pressure on countries 

such as India and China to increase the transparency of their import regulations, 

thereby, allowing the United States and other countries to expose and then resolve 

unfair SPS import barriers. In 2005, these actions caused China to change import 

regulations on meat, wines, spirits, and fresh fruits. U.S. exports to China of these 

products grew from $142 million in fiscal year 2004 to $252 million in fiscal year 

2005. Similarly, India relaxed import requirements that could have blocked U.S. exports of almonds, pulses (chick peas, lentils, and peas), and other horticultural exports. Almond shipments, the top U.S. agricultural export to India, increased from 

$95 million in fiscal year 2004 to $118 million in fiscal year 2005. U.S. exports of 

pulses to India increased from $500,000 in fiscal year 2004 to over $3 million in fiscal year 2005. 

FARM LOAN PROGRAMS

Question. I have heard from constituents that the emergency loan program is unnecessarily complex and, for many farmers, too restrictive to meet their legitimate 

needs. I note that FSA is continuing its project to streamline all farm loan program 

regulations, handbooks, and information collections. I believe that it is essential to 

complete this project and reduce the paperwork burden for all loan applicants and 

FSA employees as quickly as possible. How soon can borrowers expect improved 

loan processing procedures? 

Answer. FSA has re-engineered and streamlined the guaranteed and emergency 

(EM) loan processes, and is in the process of streamlining the remaining direct loan 

making regulations and processes. These streamlined regulations will reduce the paperwork required for a loan and shorten the time it takes to process a loan. The 
512 

final rule implementing these regulations is currently in the clearance process, and 

we expect the regulations to be implemented in the field in early 2007. In the case 

of EM loans, the submission requirements have been reduced and flexibility added 

to the process. However, the Agency still must determine an applicant’s eligibility 

for an EM loan, make decisions regarding loan feasibility and adequacy of collateral 

for the proposed loan, and comply with Federal environmental and credit policy requirements. We have endeavored to make this as easy as possible for the applicant, 

but these determinations require information that some applicants may find burdensome to provide. 

FSA also utilizes technology to ease the application process. Applicants can access 

all forms necessary to apply for a loan via the internet. They may also complete and 

submit loan applications on-line. The Agency recently implemented a state-of-theart business planning system that has improved loan processing response times. 

Question. What more can FSA do to make emergency loans available to those who 

have suffered crop, livestock or property damage as a result of natural disasters? 

Answer. FSA re-engineered the EM loan regulations and procedures in 2002. The 

changes made it easier for producers, particularly livestock producers, to apply for 

and receive EM loans. Any livestock loss, whether it is reduced production or loss 

of animals, is now considered a qualifying loss for EM loans. If a producer meets 

the statutory eligibility requirements and has suffered any property damage, they 

now may qualify. Additional changes were made to the method used for calculating 

a qualifying loss for crop producers. These changes have streamlined the application 

process and made EM loans more accessible to crop producers. FSA also uses available crop insurance data to expedite and reduce the burden on applicants. The new 

regulations allow FSA to provide EM assistance to more producers in an efficient 

and expeditious manner and comply with statutory requirements. 

Question. I am going to read from the USDA Budget Summary: ‘‘The farm credit 

programs provide an important safety net for America’s farmers by providing a 

source of credit when they are temporarily unable to obtain credit from commercial 

sources.’’ 

I fully agree with this statement, but would expand it to include the guaranteed 

loan programs which facilitate loans from private lenders, so I am particularly concerned that the Administration intends to shift $30 million of the cost of the guaranteed credit to the very farmers who are least able to afford the additional cost. 

The Administration proposal refers to a modest increase in the fee required to obtain guaranteed loans. In fact, upfront fees for all guaranteed loans will be increased 50 percent. In addition, a proposed annual fee for multi-year farm operating 

loans will significantly increase the cost of credit for those farmers who obtain guaranteed unsubsidized credit lines. For some farmers the annual fee may make the 

difference between the ability to cash flow and the decision to quit farming. What 

makes this proposal even more distressing is that interest rates are rising, so farmers will face higher credit costs even before the fees are imposed. 

What legal authority are you relying on to impose these fees? 

Answer. The Consolidated Farm and Rural Development Act, § 307(b) [7 U.S.C. 

1927], authorizes fees on farm ownership loans. The fees are not statutorily limited 

but are ‘‘as the Secretary may require.’’ In the case of operating loans, Title V of 

the Independent Offices Appropriations Act of 1952 [31 U.S.C. 9701] authorizes fees 

for services or things of value provided by the Government. The statute requires 

that the fees or charges be based upon what is fair and on the costs to the Government. 

Question. The budget assumes a decrease of $186,000,000 for guaranteed farm 

ownership loans and a decrease of $112,890,000 for guaranteed farm operating unsubsidized loans. The justification for these significant decreases is a decline in demand for the program. 

To what extent do the proposed user fees contribute to the decline in program demand? 

Answer. We do not anticipate that imposition of fees will have a material impact 

on the program demand. Historically, program demand has reacted to trends in the 

agricultural and general economies. Guaranteed operating loan demand has actually 

increased to date in fiscal year 2006 as higher energy prices, which were unforeseen 

during the development of the budget, have increased production costs. The demand 

for guaranteed farm ownership loans has declined slightly, as refinancing activity 

has slowed with rising interest rates. 

Question. How many borrowers are expected to forgo guaranteed loans because of 

the additional and new fees? 

Answer. We anticipate that very few borrowers will be forced to forgo guaranteed 

loans because of the additional and new fees. The amount of the fees is relatively 

minor as compared to the total expenses and overall borrowing of a typical bor-
513 

rower; therefore, very few borrowers are likely to be unable to cash flow because 

of the increased fees. 

Question. Has FSA conducted an economic assessment of the proposed fees on borrowers and rural lenders? If so, what are the key findings of the assessment? 

Answer. FSA did not conduct a formal economic assessment of the proposed fees. 

However, FSA reviewed the impacts of fee increases in the Small Business Administration and USDA Rural Development programs. Fee increases on guaranteed loans 

from those agencies have not materially impacted the use of the programs. 

Question. Are there adequate funds available to offer subsidized guaranteed loans 

or direct loans to borrowers who will be unable to cash flow guaranteed loans because of the additional fees? 

Answer. We anticipate that there will be adequate funds to meet the needs of the 

few borrowers likely to be in that situation. Because the amount of the fees is small 

compared to the total expenses and overall borrowing of most guaranteed loan applicants, we anticipate that few will need to move to subsidized or direct loans as a 

result of the fees. 

SECTION 9006 OF THE 2002 FARM BILL

Question. As you know, section 9006 of the farm bill’s energy title, which I authored, provides grants and loans to farmers and rural small businesses for renewable energy projects and to make energy efficiency improvements. The program is 

very popular, and already well oversubscribed. Of course, I strongly disagree with 

the Administration’s budget proposal to cut this program’s funding by more than 

half. In 2004 less than 3 percent of applications for small wind and solar projects 

were approved and funded. What I have heard is that the scoring system USDA and 

DOE have established puts smaller scale distributed generation projected at a significant disadvantage to larger projects. 

Why are so few small-scale renewable energy projects and such a negligible percentage of such applications for grants receiving funds? 

Are you looking into ways to alter the program to give small-scale renewable energy projects a greater opportunity to participate? 

Would you supply data as to how much projects have been funded the past several 

years, by energy category, and by the size or scale of those projects? 

Answer. The Section 9006 regulation published on July 18, 2006, included a simplified and streamlined application process for small projects of $200,000 or less. To 

increase accessibility for smaller projects and applicants, we expanded priority 

points for small agricultural producers and small rural businesses. We are in the 

process of developing application worksheets to help guide smaller applicants 

through the process and provide them with tools to help improve the quality of applications. In fiscal year 2007, we are looking for ways to better target the resources 

to give small scale projects a greater opportunity to participate. 

SECTION 9006 AWARDS, FISCAL YEAR 2003–2005 

Small Projects 1 Large Projects 2

Award ($) Number Award ($) Number 

Grants: 

Anaerobic Digester ............................................... ........................ ........................ 21,973,493 82 

Bioenergy ............................................................. 233,521 10 7,547,719 27 

Energy Efficiency ................................................. 2,068,455 132 2,861,488 33 

Geothermal ........................................................... 130,848 3 249,435 1 

Hybrid ................................................................... 26,457 2 2,413,375 7 

Hydrogen .............................................................. ........................ ........................ ........................ ........................

Solar ..................................................................... 229,883 12 1,212,360 5 

Wind ..................................................................... 434,712 24 27,374,804 97 

Grant Totals .................................................... 3,123,876 183 63,632,674 252 

Guaranteed Loans: 

Bioenergy ............................................................. 100,000 1 10,000,000 1 

Loan Totals ...................................................... 100,000 1 10,000,000 1 

Total Number ................................................................ 437 
514 

SECTION 9006 AWARDS, FISCAL YEAR 2003–2005—Continued 

Small Projects 1 Large Projects 2

Award ($) Number Award ($) Number 

Total Awards ($) ........................................................... 76,856,550 

1 Small Projects=projects with total eligible project cost of $200K or less. 

2 Large Projects=projects with total eligible project cost greater than $200K. 

Value-added Producer Grant (VAPG) applications, especially those seeking funds 

for planning purposes, do not necessarily indicate size or scale of the proposed 

project. Therefore, an accurate measure of the number applicants proposing smallscale energy projects is not available. 

Beginning in 2006, VAPG evaluation criteria provide for priority points to be 

awarded to farm-based renewable energy project applications. 

Following is a breakdown of VAPG-funded energy projects by number of projects, 

amount funded, and category for 2001–2005. 
515 

VAPG-FUNDED ENERGY PROJECTS 

Project 

Fiscal year 2001 Fiscal year 2002 Fiscal year 2003 Fiscal year 2004 Fiscal year 2005 

No. Amount No. Amount No. Amount No. Amount No. Amount 

Ethanol .................................................................................................................................. 9 $3,461,704 22 $4,824,323 11 $1,849,620 6 $988,986 14 $1,519,500 Biodiesel ............................................................................................................................... 2 1,000,000 4 1,246,000 9 1,783,225 4 621,099 9 789,377 Solid fuel .............................................................................................................................. 1 470,000 4 272,567 1 50,000 ........ .................... 1 110,000 Anaerobic .............................................................................................................................. ........ .................... 1 65,429 ........ .................... 2 135,000 3 188,975 Wind ...................................................................................................................................... ........ .................... 2 298,000 2 14,812 1 128,000 .................... ....................Solar ...................................................................................................................................... ........ .................... ........ .................... ........ .................... 1 73,332 Other ..................................................................................................................................... ........ .................... 1 250,000 1 101,920 ........ 3 358,435 ....................

Total ........................................................................................................................ 12 4,931,704 34 6,956,319 24 3,799,577 14 1,946,417 30 2,966,287 
516 

SECTION 9002 BIOBASED PRODUCTS

Question. As you know I talked with the Secretary about the biobased products 

rule coming out a few weeks ago. We had a good conversation. I want to thank you 

as I did the Secretary for getting to this point. Specifically how many items do you 

expect to designate for preferred procurement by the end of this calendar year? 

Answer. We currently have six items designated by final rule for preferred procurement. These six items account for at least 120 specific products from 58 different manufacturers. We expect to have four additional proposed rules, with ten 

items each, in the clearance process or published in the Federal Register by the end 

of calendar 2006. When finalized, the first five rules will account for over 1,000 specific products from more than 300 manufacturers within the 46 items. USDA will 

continue to designate additional items as further market research and test data is 

obtained. 

RURAL DEVELOPMENT GRANTS

Question. Please provide a list of Rural Development grants (including the amount 

granted) made in fiscal year 2004 and fiscal year 2005 to communities on the list 

published in the Federal Register on January 4, 2001 (66 Fed. Reg. 751) for the purpose of building rural businesses infrastructures to utilize and market products from 

forest hazardous fuel reduction projects. 

Answer. Our research indicates that no Rural Development grants were made to 

organizations in the communities listed for the purpose of building rural business 

infrastructure to utilize and market products from forest hazardous fuel reduction 

projects. 

IMPLEMENTATION OF TEXAS INTEGRATED ELIGIBILITY CONTRACT

Question. Under Secretary Bost, as you know, I have had some concerns about 

turning over core Food Stamp Program functions to private contractors, specifically 

the recent decision by the State of Texas to turn over large areas of program administration to private entities. 

As you know, at the end of January, Texas began to roll out the first stage of 

its integrated eligibility contract in two counties surrounding the Austin area on a 

pilot basis. I have had a chance to review several of the site and implementation 

reports from this contract phase and based upon my review, I have several reasons 

for considerable concern. 

The Weekly Post transition Status Report from the Texas Access alliance for the 

reporting period of 3/6/06 through 3/12/06 shows that individuals seeking assistance 

over the telephone are encountering major problems. This report indicates call abandonment rates of almost 55 percent and average waiting time of over 21 minutes. 

Given that these are average waiting times, it is obvious that many individuals are 

waiting longer to speak with customer service representatives. 

Under Secretary Bost, what is being done to ameliorate these problems and, more 

importantly, please indicate what levels of telephone service you believe are acceptable. You have assured me several times, and I take you at your word, that FNS 

will not approve the rollout of additional project phases unless you are satisfied with 

the contractor performance in the previous contract phase. Under what conditions 

would you not approve the next contract phase? Is a 20 minute waiting time with 

more than half of callers giving up acceptable? What are the criteria and standards 

that you will use to make a decision regarding approval of the next phase of the 

contract? 

Answer. Implementation of Texas’ new system is intended to allow the State to 

realize the customer service improvements and potential savings that its new business model offers. USDA/FNS stewardship responsibilities require assurance that 

basic program standards are maintained. Our overriding issues for continuing 

project expansion are sustaining program access and integrity to ensure that applicants and recipients get fair, timely, and accurate service. 

We recognize that any new system is likely to encounter problems during implementation, many of which can be addressed as rollout continues. Our concern is that 

the project not expand in the face of major problems which jeopardize access or integrity, or which warrant immediate correction. We intend to continue funding and 

working with the State to resolve problems and will only halt funding in the face 

of serious deficiencies. 

Texas’ recent call center performance has not been acceptable, but it has been improving. The data from the weekly status report for the week ending April 9, 2006, 

indicates that the call abandonment rate is 3.86 percent and the call wait time is 

66 seconds. The data from the week ending March 12, 2006—approximately 1 
517 

month earlier—had a call abandonment rate of 54.5 percent and the call wait time 

was 1,276 seconds. Therefore, based on our monitoring of this project, we know that 

steps are being taken which have already resulted in improved call center operations. 

USDA/FNS has developed a list of performance elements which we consider critical and appropriate for use in considering the success of initial rollouts of the Texas 

project. While we will be monitoring many aspects of project implementation, we 

will focus on these components which include: System Functionality, Customer Service, and Application Timeliness. Findings from our recent reviews found: long call 

wait times, high call abandonment rates, and call operators providing misinformation; as well as backlogs in data entry, and a high percentage of cases returned to 

the vendor due to missing or inaccurate information. We also learned that there is 

insufficient system testing and risk assessment. While these items may not in and 

of themselves be critical, taken together their cumulative effect caused us to question the readiness of the system to expand. 

The decisions on the pace of rollout are complex and dynamic and must include 

assessment of the risks of identified problems and the availability of remedies to 

these problems. These must be weighed against the cost and risks of delayed implementation. Accordingly, we are not setting specific numerical standards but are reviewing and monitoring the overall functionality and capacity of the system. Based 

on its own assessment of readiness, the State announced a delay in its rollout to 

resolve fundamental operating concerns. We agree with the State’s decision and continue to work closely with the State to monitor project implementation. 

Note: Under Secretary Bost and Deputy Under Secretary Kate Coler traveled to 

Texas on May 16, 2006 to state clearly the FNS expectation that further rollout 

should be delayed until identified issues have been addressed. Texas stated they 

will not rollout the system to additional areas in the State until issues of access and 

integrity have been resolved. No date for future rollout has been established at this 

time. 

IMPACT OF TEXAS ELIGIBILITY SYSTEM ON VULNERABLE GROUPS

Question. As you know from our prior correspondence on this matter, I have been 

particularly concerned about the disparate impact of the new eligibility systems for 

persons with low levels of literacy, persons with limited English proficiency, the elderly, and persons with disabilities. 

In my previous correspondence with you, I have raised these issues several times. 

In a recent letter to me you responded that, ‘‘we are working to monitor the project’s 

impact on such persons and ensure the State’s continued compliance with applicable 

civil rights laws.’’ Are you tracking the extent to which the new eligibility process 

and systems impact these vulnerable groups compared to other individuals? Please 

tell me specifically how you are monitoring these things. Can you provide me with 

any data about differential impacts of the new system on these vulnerable groups? 

Are you collecting any data on this at all? 

Answer. Access to program benefits for all eligible persons is a priority of USDA/ 

FNS, however vulnerable populations such as the elderly, disabled, and others with 

barriers to participation are of specific concern. For this reason, USDA/FNS is carefully watching for negative impacts on especially vulnerable populations. In addition, the USDA/FNS Program Access Review process includes contacting advocacy 

organizations, which represent the interests of a variety of vulnerable populations, 

to obtain their feedback on the service they have received during the food stamp 

application process. 

USDA/FNS is conducting on-site monitoring of local offices and call centers, participating in project meetings and conference calls, and performing an ongoing review of performance reports and contractor deliverables. 

USDA/FNS is monitoring Texas’ project implementation in affected counties on a 

monthly basis. However, given the normal State reporting mechanisms, which include time needed for review of the data, the number of cases processed at the State 

level during the first month of project implementation in January 2006 will not be 

available until June 2006. County level data is normally reported only for the 

months of January and July; thus county data for January will be available in June/ 

July. 

FNS does not impose higher standards on Texas than exist for other States administering the Food Stamp Program, such as reporting or collecting data not normally collected as a part of routine program operations. However, we are monitoring 

these issues closely, in lieu of actual additional data collection. Thus far, it could 

be concluded that Texas’ new business model actually has the potential to improve 
518 

access for special populations. We will continue to watch this aspect carefully, as 

Texas proceeds with its project. 

NATIONAL ANIMAL IDENTIFICATION SYSTEM

Question. USDA expedited its plans to implement a national animal identification 

system after BSE was discovered in a cow in Washington State. A system such as 

this is extremely important to trace back the origin of animals in the event of a disease outbreak, but also to determine its exact age. In a recent BSE case in Alabama, 

the age of the cow has been a key issue in order to determine the effectiveness of 

FDA’s ruminant-to-ruminant feed ban and for restoring beef trade. South Korea 

made it clear that it wanted certainty that the cow that tested positive for BSE in 

Alabama was in fact born before FDA’s ruminant-to-ruminant feed ban. 

Recent press accounts indicate that the national animal identification system will 

only track animal movements and not the age of animals. Is this correct? 

Answer. Implementation of NAIS will support State and Federal animal disease 

monitoring and surveillance through the rapid tracing of infected and exposed animals during animal disease outbreaks. The ultimate long-term goal of NAIS is to 

provide animal health officials with the capability to identify all animals and premises that have had direct contact with a disease of concern within 48 hours after 

discovery. While age is not required to track an animal to its origin, its value in 

an epidemiologic investigation can be significant and producers are encouraged to 

report such information to the private and State databases. However, it is important 

that the ‘‘required’’ data elements be restricted to the most basic information needed 

to trace an animal back to its premises of origin. 

What is USDA’s justification for only tracking animal movements and not incorporating animal age into the system? 

Answer. Producers are very much aware of the value of having records to document the age of their animals and may elect to input such data in private tracking 

data systems. While age is not required to track an animal to its origin, its value 

in an epidemiologic investigation can be significant and producers are encouraged 

to report such information to the private and State databases. However, it is important that the ‘‘required’’ data elements be restricted to the most basic information 

needed to trace an animal back to its premises of origin. USDA wants this system 

to be as easy as possible to allow for producer participation. Increasing the amount 

of information producers must submit could discourage the number of participants. 

Why does USDA not want to know the age of animals for tracking purposes when 

it would provide critical information for restoring or maintaining beef trade? 

Answer. The ultimate long-term goal of NAIS is to provide animal health officials 

with the capability to identify all animals and premises that have had direct contact 

with a disease of concern within 48 hours after discovery. While age is not required 

to track an animal to its origin, its value in an epidemiologic investigation can be 

significant and producers are encouraged to report such information to the private 

and State databases. However, it is important that the ‘‘required’’ data elements be 

restricted to the most basic information needed to trace an animal back to its premises of origin. USDA wants this system to be as easy as possible to allow for producer participation. Increasing the amount of information producers must submit 

could discourage the number of participants. Again, market demands will drive the 

reporting of additional information and will be better accepted by the affected producers. 

Question. On January 10, of this year, a non-profit U.S. Animal Identification Organization (USAIO) was formed, at the behest of USDA, to implement and operate 

the animal movement database. USAIO submitted a Memorandum of Understand 

(MOU) to USDA to develop a strategic partnership. 

Has USDA approved the MOU? 

Answer. USDA has received a proposed memorandum of understanding from 

USAIO. USDA since published the document detailing our plan for the integration 

of private animal tracking databases with the National Animal Identification System (NAIS). This plan includes a draft cooperative agreement that, when finalized, 

will be used to establish the arrangement of all participating organizations. USDA 

plans to have all agreements signed in June 2006. 

Will USDA exercise authority to approve or disapprove decisions made by the 

USAIO regarding the management and operation of the national animal tracking 

database. 

Answer. Animal tracking databases will be managed and owned by the industry 

and States. As envisioned and outlined in our strategic documents, the NAIS will 

integrate with more than one of these private animal tracking databases. On April 

6, 2006, USDA released the general technical standards that animal tracking data-
519 

bases will need to comply with to enable their integration with the NAIS. Private 

database owners or those involved with the development of private databases, such 

as USAIO, have been invited to submit applications for system evaluation to USDA 

and offer feedback as the final technical requirements are established. 

Should USDA find that the defined data elements are compliant with the NAIS 

standards, the technology architecture meets the technical requirements, and the 

proposed databases submitted for review meet all the other criteria, we would initiate a formal agreement with each entity responsible for compliant databases. The 

agreement would also detail access rights, as well as safeguards for preserving historic data if the organization discontinues operation of the database or ceases business. If and when the agreement is finalized, those databases would be noted as an 

authorized or compliant animal tracking system in the NAIS. The application for 

system evaluation and a draft cooperative agreement are available on the NAIS 

Web site at www.usda.gov/nais. 

By early 2007, USDA expects to have the technology in place, called the ‘‘Animal 

Trace Processing System’’ or commonly known as the ‘‘metadata system,’’ that will 

allow State and Federal animal health officials to query the NAIS and private databases during a disease investigation. The animal tracking databases will record and 

store animal movement tracking information for livestock that State and Federal 

animal health officials will query for animals of interest in a disease investigation. 

If there is a disease outbreak, and there is an inability of USAIO to provide the 

necessary tracking information to USDA due to poor management decisions or technology flaws, who will be held accountable? 

Answer. USDA has released the general technical standards that animal tracking 

databases will need to comply with to enable their integration with the NAIS. Private database owners or those involved with the development of private databases, 

such as USAIO, have been invited to submit applications for system evaluation to 

USDA and offer feedback as the final technical requirements are established. 

Should USDA find that the defined data elements are compliant with the NAIS 

standards, the technology architecture meets the technical requirements, and the 

proposed databases submitted for review meet all the other criteria, we would initiate a formal agreement with each entity responsible for compliant databases. The 

agreement would also detail access rights, performance measures such as availability of the system, and requirements for redundancy and back-ups to ensure data 

is available on an as-needed basis. Also, safeguards for preserving historic data if 

the organization discontinues operation of the database or ceases business will be 

part of the agreement. If and when the agreement is finalized, those databases 

would be noted as an authorized or compliant animal tracking system in the NAIS. 

If USDA is unable to access necessary data from a compliant entity during a disease 

investigation, USDA may either revoke their status as a compliant entity (therefore 

affecting the system’s marketability to producers) or take some other corrective action. 

Question. In June 2004, I wrote Secretary Veneman expressing concern that the 

implementation and infrastructure of the planned national animal identification system appeared to be geared towards cattle to the exclusion of other animal species. 

Currently, the USDAIO is made up of only cattle or bison representatives and the 

database appears to not be suited for poultry or hogs. 

What is USDA doing to remedy this problem to ensure that the database is least 

burdensome to producers and tailored to the daily functioning for operations of all 

animal species? 

Answer. Throughout the establishment and implementation of the NAIS, USDA 

has engaged in extensive dialogue with producers and industry organizations across 

the country to gauge their views on animal identification. In April 2005, USDA published a draft strategic plan and draft program standards for the NAIS and invited 

public comments on those documents. Industry-specific working groups have also 

been studying the issue of animal identification and will be making recommendations to USDA through an established advisory committee on how best to tailor the 

program to meet their industry-specific needs. NAIS working groups have been established for both the poultry and swine industries, and they have been providing 

input throughout the developmental process. 

On April 6, 2006, USDA released the general technical standards for animal 

tracking databases that will enable integration of private systems with the NAIS. 

Those involved in the development of private databases, such as the U.S. Animal 

Identification Organization (USAIO), were invited to submit applications for system 

evaluation to USDA and offer feedback as the final technical requirements are established. USDA plans to enter into cooperative agreements with organizations responsible for the databases that meet the standards. The application for system 

evaluation and a draft cooperative agreement are available on the NAIS website. 
520 

More than one private animal tracking database can be integrated into the overall 

NAIS, including those that might be species-specific. 

By early 2007, USDA expects to have the technology in place, called the ‘‘Animal 

Trace Processing System’’ or commonly known as the ‘‘metadata system,’’ that will 

allow State and Federal animal health officials to query the NAIS and private databases during a disease investigation. The animal tracking databases will record and 

store animal movement tracking information for livestock that State and Federal 

animal health officials will query for animals of interest in a disease investigation. 

Once the entire system is designed and implemented, the market will determine 

which technologies are the most appropriate to meet the needs of the system. Sale 

barns, feedlots, and others will help determine which methods are most cost-efficient and effective. In developing the system, USDA has been accepting input from 

both species-specific working groups and a markets and processors working group. 

Will USDA, in partnership with USAIO, be incorporating the principles and practices of existing USDA disease eradication programs into the structure and operation of the national animal identification system? 

Answer. The primary objective of the NAIS is to develop and implement a comprehensive information system that will support ongoing animal disease programs 

and enable State and Federal animal health officials to respond rapidly and effectively to animal health emergencies such as foreign animal disease outbreaks or 

emerging domestic diseases. The faster animal health officials can respond to, contain, and eradicate disease concerns, the sooner affected producers can resume business as usual. USDA has been developing data standards to align with this overall 

concept. 

GRAIN INSPECTION, PACKERS AND STOCKYARDS ADMINISTRATION (GIPSA)

Question. On March 9, during a hearing of the Committee on Agriculture, Nutrition, and Forestry to review GIPSA’s enforcement of the Packers and Stockyards 

Act, I asked GIPSA Administrator James Link why there had been no governmental 

oversight or corrective action given the high rate of staff turnover, management preventing employees from doing their jobs and management demanding that staff inflate the number of investigations listed in annual reports at GIPSA. These problems continued over the course of 5 years. James Link stated he did not know why 

USDA failed to take corrective action because he was not employed by USDA during 

that time. You have served as USDA’s Deputy Under Secretary for Marketing and 

Regulatory programs since December 2002. You have also served as acting Under 

Secretary since last year. How is it possible that GIPSA was in complete disarray 

for so many years, yet you did not take corrective action? 

Answer. Prior to my appointment with USDA, I served as the Chief Economist 

for the National Cattlemen’s Beef Association. Due to my past connection with the 

cattle industry, I was recused from issues that had a direct connection to my previous employer for a period of 1 year. After this recusal period ended, I continued 

to distance myself from Packers and Stockyard Program issues due to a perceived 

conflict of interest. However, upon Under Secretary Hawks retirement and assuming the role of Acting Under Secretary, followed shortly by Jim Link’s appointment 

as GIPSA Administrator, I worked with USDA ethics experts to assure that by inserting myself into GIPSA management that I was not crossing ethical boundaries. 

At such time corrective actions were taken to begin addressing the matters that 

have been outlined in the OIG’s report. 

Question. During your time as Deputy Under Secretary, what was your role in 

and responsibility for communicating with the Under Secretary and Secretary concerning GIPSA’s mission and daily operations relating to enforcement of the PSA 

against anti-competition practices? 

Answer. Prior to my appointment with USDA, I served as the Chief Economist 

for the National Cattlemen’s Beef Association. Due to my past connection with the 

cattle industry, I was recused from issues that had a direct connection to my previous employer for a period of 1 year. After this recusal period ended, I continued 

to distance myself from Packers and Stockyard Program issues due to a perceived 

conflict of interest. However, upon Under Secretary Hawks retirement and assuming the role of Acting Under Secretary, followed shortly by Jim Link’s appointment 

as GIPSA Administrator, I 

worked with USDA ethics experts to assure that by inserting myself into GIPSA 

management that I was not crossing ethical boundaries. At such time corrective actions were taken to begin addressing the matters that have been outlined in the 

OIG’s report. 

Question. What will you do to make sure that the Secretary or the new Under 

Secretary knows what GIPSA is doing in regard to anti-competitive practices? 
521 

Answer. Both the Secretary and I have an open door policy with GIPSA. I meet 

weekly with the Administrator to discuss issues ongoing within the agency. These 

discussions involve all types of Packer and Stockyards cases, including financial, 

trade practice, and competition issues. Also, weekly activity reports are submitted 

by GIPSA and reviewed by the Secretary’s and Under Secretary’s office. This report 

includes all important issues ongoing within GIPSA. As needed, GIPSA’s Administrator briefs my office, as well as the Secretary on investigations that may have a 

large economic impact. I am committed to maintaining open lines of communications 

between GIPSA and the Under Secretary’s office for Marketing and Regulatory Programs. 

QUESTIONS SUBMITTED BY SENATOR RICHARD J. DURBIN

SIMPLIFIED SUMMER FOOD PROGRAM

Question. The Simplified Summer Food Program, started as the Lugar pilot program, was expanded to now include 25 states. In Illinois, we know there are many 

children who are eligible for free or reduced price lunch during the school year who 

are not participating in a summer food program. I’m told sponsors are hard to come 

by because the paperwork and accounting requirements are onerous. The nutrition 

and anti-hunger community in Illinois expects to see a dramatic increase in summer 

food programs when Illinois is able to participate in the Simplified Summer Food 

Program. Have States participating in the Simplified Summer Food Program seen 

increases of this type? Have States that participated in this program attracted more 

program sponsors, operated more program sites and served more low-income children than those States not participating in the program? 

Answer. States participating in the Simplified Summer Food Program have shown 

an increase in participation as measured by sponsors, sites, and meals served to eligible children during the summer months. During the same time, those States not 

participating in the program have experienced a decrease in each of the corresponding categories. However, since the inception of the Simplified Summer Food 

Program, many States have also had the opportunity to operate a seamless summer 

feeding program through the National School Lunch Program (NSLP). Because 

these two initiatives have operated concurrently in these States, we are not able to 

identify the extent to which changes in sponsors, sites, and children result from the 

Simplified Summer Food Program, from the NSLP seamless summer feeding program, or from a combination of both. 

WIC FOOD PACKAGE

Question. Last year, the Institutes of Medicine released recommendations for improving the nutritional profile of the WIC food package, including adding whole 

grain foods, fresh produce and incentives for breast feeding. Given the growing rates 

of overweight and obese children, these recommendations for an updated food package also could help start children on the right path to nutritious and lower fat dietary habits makes. What are the USDA’s plans for incorporating IOM recommended 

changes to the WIC food package? 

Answer. USDA is proceeding with a rule making process that will afford opportunity for public comment on all of the proposed changes to the WIC food packages 

before the rule is finalized. The proposed revisions to the WIC food packages largely 

reflect the recommendations of the Institute of Medicine (IOM) in its 2005 Report 

WIC Food Packages: Time for a Change. The proposed rule was sent to the Office 

of Management and Budget this spring. We are hopeful that a proposed rule can 

be published by summer 2006. However, affording opportunity for a full 90-day public comment period for this important rule may preclude issuing an interim final 

rule within the 18-month statutory deadline. 

CSFP CASELOAD

Question. Low-income Illinois seniors rely heavily on the Commodity Supplemental Food Program to supplement what they are able to purchase at the grocery 

store or obtain through a food bank. I recognize the program is under stress as commodity prices have grown faster than program funding. What plans does the agency 

have to ensure that current caseload demand can be met? 

Answer. All available resources are being utilized to support the program, but 

total estimated resources are insufficient to support 2006 nationwide caseload at the 

2005 level. 

In addition to cash resources, CSFP commodity inventory maintained at Federal, 

State, and local levels and those commodities obtained under agriculture support 
522 

programs (surplus commodities) that are appropriate for inclusion in the CSFP food 

package are being used to support the program. The types and amounts of surplus 

commodities depend on agricultural market conditions. 

On December 29, 2005, we assigned tentative caseload and administrative grants 

for 2006 based on the level of resources expected to be available to support the program. While all available resources were included in our calculations, total estimated resources available were sufficient to support about 477,000 tentative caseload slots, representing a reduction of approximately 11 percent from the 2005 caseload level. Final caseload and administrative grants were allocated on March 27, 

2006. The final caseload level increased to over 492,000 slots due to an expected increase in the level of surplus commodities available for use in the CSFP food package and lower caseload use by Louisiana early in the year due to the disruption 

caused by the recent hurricanes. Both of these factors served to free available cash 

resources to support more caseload slots nationwide without negatively impacting 

Louisiana. However, CSFP States were subject to at least a 6 percent reduction in 

final caseload from 2005 levels, and consistent with the regulations, States that did 

not fully utilize caseload in the previous year were subject to further reductions. 

FINANCIAL ASSISTANCE PROGRAMS ALLOCATION FORMULAS

Question. NRCS administers a host of conservation programs—the Environmental 

Quality Incentives Program (EQIP), Conservation Security Program (CSP), and others. In my view, the State of Illinois is well-equipped to take advantage of these 

environmental programs—producers in the State have a long-standing tradition of 

being at the forefront of conservation, the State is one of the leading producers of 

agricultural products, and there is a lot of land used for farming—28 million acres 

or 80 percent of the State’s total land. Unfortunately, when compared to States with 

similar populations or farm sectors or agricultural production statistics, Illinois receives lower conservation technical assistance allotments. These are the multiplier 

funds that help farmers build expertise and leverage other funding sources. One of 

my concerns is that there are more than two dozen measures that can be weighted 

differently to determine State technical assistance allocations. My other concern is 

that the formulae and criteria that are used to make State allocations are not available on the NRCS website. I would like to know why the State of Illinois received 

this allocation and I would like to know what NRCS is doing to make these allocation decisions more transparent. Will NRCS publish theses criteria on its website? 

Answer. EQIP allocations to States include financial assistance (FA) and technical 

assistance (TA) dollars. FA is allocated to the States and territories based on 31 

base and natural resource factors which are relevant to addressing the EQIP national priorities. The source of the data is generally the Natural Resources Inventory (NRI) data, although some data is based on Environmental Protection Agency 

(EPA), Ag Census, Bureau of Indian Affairs (BIA), National Oceanographic and Atmospheric Agency (NOAA) and the American Plant Food Control Officials reports. 

Program Management Performance Incentives, initiated in EQIP in fiscal year 2003, 

include FA and TA and are part of a State’s allocation only if a high level of performance was achieved in administering the prior years funding. 

TA funding is used to deliver program-specific services. Technical assistance allocations are based on the NRCS cost-of-programs data and linked directly to a State’s 

FA allocation. There are no weights in TA allocations. For fiscal year 2006, NRCS 

took into consideration the amount of TA that would be required to service EQIP 

contracts written in prior years. Nationally, with the prior year workload pulled into 

the equation, the total workload—represented by FA dollars equaled $1,947,931,838 

(prior year $1,094,395,709 plus fiscal year 2006 $662,601,964). EQIP TA was set at 

$190,934,165 and equals about 9.8 percent of the FA workload. Therefore, each 

State, including Illinois, received a TA allocation equal to 9.8 percent of the total 

FA workload—as represented by the prior year and current year FA dollars. 

In fiscal year 2005, Illinois received an additional $313,958 EQIP TA allocation 

to accelerate the writing of Comprehensive Nutrient Management Plans through the 

use of Technical Service Providers. That same year, the State returned $1.4 million 

in EQIP FA without the commensurate amount of TA. Fortunately, other States 

were able to use the FA. 

The FA and Performance Incentive formulas are as follows: 
523 

FA FORMULA 

Weight (percent) 

The base factors (49.3 percent): 

Acres of non-irrigated cropland (1997 NRI) ............................................................................................... 3.2 

Acres of irrigated cropland (1997 NRI) ...................................................................................................... 4.3 

Acres of Federal grazing lands (1992 NRI) ................................................................................................ 0.5 

Acres of non-Federal grazing lands (1997 NRI) ........................................................................................ 4.2 

Acres of forestlands (1997 NRI) ................................................................................................................. 1.1 

Acres of specialty crops (1997 NRI) ........................................................................................................... 3.2 

Acres of wetlands and at-risk species habitat (1997 NRI) ....................................................................... 4.5 

Acres of water bodies (1997 NRI) .............................................................................................................. 3.2 

Livestock animal units (1992 NRI) ............................................................................................................. 5.7 

Animal waster generation (1992 NRI) ........................................................................................................ 5.7 

Waste management capital cost (1992 NRI) ............................................................................................. 3.4 

Acres American Indian Tribal Lands (most current BIA acres) ................................................................. 3.3

Number of Limited Resource Producers (1997 Ag Census) ....................................................................... 4.9

Grazing land lost to conversion (1997 NRI) ............................................................................................... 0.8 

Revised Air Quality non-attainment areas (EPA) ....................................................................................... 1.3 

The resource factors (49.3 percent): 

Acres of pastureland needing treatment (1992 NRI) ................................................................................. 5.4 

Acres of cropland eroding above T (1992 NRI) .......................................................................................... 6.1 

Acres of Fair and Poor Rangeland (1992 NRI) .......................................................................................... 6.1 

Acres of Forestlands, eroding above T (1992 NRI) .................................................................................... 1.4 

Acres of cropland and pastureland soils affected by saline and/or sodic conditions (1997 NRI) .......... 2.6 

Miles of impaired rivers and streams (EPA) .............................................................................................. 3.5 

Potential for pesticide and nitrogen leaching (1997 NRCS Report) .......................................................... 1.3 

Potential for pesticide and nitrogen runoff (1997 NRCS Report) .............................................................. 1.7

Ratio of livestock animal units to cropland (1997 NRCS Report & NRI) ................................................. 1.7 

Number of CAFO/AFO (1997 Ag Census) .................................................................................................... 2.7 

Ratio of commercial fertilizers to cropland (1995 American Plant Food Control Officials Report) .......... 0.8 

Wind erosion above T (1997 NRI) ............................................................................................................... 4.2 

Phosphorous runoff potential (1997 NRCS Report) .................................................................................... 3.9 

Riparian areas (1997 NRCS Report) .......................................................................................................... 0.8 

Carbon sequestration (1992 & 1997 NRCS Reports) ................................................................................. 3.5 

Coastal zone (1992 NOAA Report) .............................................................................................................. 3.6 

Note: Financial Assistance allocations to entities (Alaska, Hawaii, Pacific Basin, and Puerto Rico) without reliable base and resource factors account for 1.4 percent of total FA. 

Total of FA factors (100 percent). 

Program Management Performance Incentives: 

For fiscal year 2006, $38.4 million Program Management Performance Incentives 

are part of the allocation if a State performed above the cut-off. The following factors were used to compare State performance: 

Performance Factors Weight (percent) 

Cost share obligations versus payments for fiscal year 2004 and fiscal year 2005 ........................................ 15 

FA to TA ratio ....................................................................................................................................................... 25 

TSP obligations and disbursements .................................................................................................................... 15 

Weighted cost-share percentage ......................................................................................................................... 10 

Limited Resource Farmers ................................................................................................................................... 10 

Livestock-related contracts (CNMP) ..................................................................................................................... 15 

Program National Priorities .................................................................................................................................. 10 

Total of Performance factors .................................................................................................................. 100 

In fiscal year 2006, NRCS will release a request for proposals to evaluate all of 

the allocation formulas in their entirety. This project will be a comprehensive evaluation of each program allocation formula, to include analysis and findings on each 

formula’s consistency with the new NRCS Strategic Plan; consistency with program 

statutory authorities and regulatory requirements, and program goals and objectives; technical and analytical defensibility of the formula (parameter and variable 

selection, formula functional form) and data sources; the efficiency and effectiveness 

of allocation outcomes as a result of formula. The deliverable will be used to provide 

guidance for improvement in allocation formulas, as evidence to support NRCS’s allocation formulas to interested external parties, to provide a template for which to 

evaluate future allocation formulas, and finally as a means to assess how allocation 
524 

formulas relate to programmatic efficiency and annual/long-term performance measures. 

When the evaluation is complete, NRCS will post this information on the website. 

NRCS is committed to making our processes transparent through our public 

website. 

MARKET ACCESS PROGRAM

Question. The Administration’s fiscal year 2007 budget cuts the Market Access 

Program (MAP) program in half from $200 million to $100 million. Overseas markets are critical for our agricultural producers, and this program was an important 

part of making our products competitive overseas. The State of Illinois alone exports 

$4 billion annually in agricultural products. 

I would like a report on the markets that MAP has helped open up, the commodities the program has assisted since the MAP received funding, and the rate of return on the Map’s activities. I would also like to know what alternative programs 

the Administration hopes will fill the place of MAP as our producers compete 

against foreign producers supported by export subsidies. 

Answer. We are providing a table which identifies more than 40 markets where 

MAP funds were used to help open the market for some 35 U.S. agricultural, fish, 

and forestry products. We are also providing a listing of all the current participants 

in the MAP. 

With regard to the rate of return on MAP activities, the Foreign Agricultural 

Service (FAS) has hired an independent evaluator to assess the effectiveness of two 

primary market development programs administered by FAS—the MAP and the 

Foreign Market Development (Cooperator) Program. This work is ongoing, and FAS 

hopes to receive the results in late summer of 2006. This evaluation will also be 

used to satisfy the Office of Management and Budget’s requirement outlined in the 

Program Assessment Rating Tool to conduct independent evaluations of government 

programs. 

As for supporting U.S. producers in the export market, the U.S. Government is 

actively pursuing reform of international trade rules in the World Trade Organization (WTO) so that U.S. exporters will not have to compete with foreign producers 

who receive export subsidies. In fact, agreement was reached at the Hong Kong 

Ministerial meeting in December 2005 that all forms of export subsidies should be 

eliminated by 2013. FAS currently administers four other foreign market development programs that augment the MAP: the Foreign Market Development (Cooperator) Program funded at $34.5 million in fiscal year 2006, the Emerging Markets 

Program at $10 million, the Technical Assistance for Specialty Crops Program at $2 

million, and the Quality Samples Program at $2.5 million. 

Question. In its January 2006 report, the Office of the Inspector General stated 

that because of the voluntary nature of the enhanced surveillance program and 

based on USDA published data that estimated the ‘‘distribution of the cattle population, as well as those that died or became nonabulatory,’’ it could not determine 

whether USDA achieved the desired representation. How does USDA know that it 

is testing a representative sample and that it is testing animals that are at highest 

risk such as older, clinically normal cattle? Why hasn’t USDA released detailed results of the surveillance program, such as age distribution, geographic locations of 

the sample, and whether the cows were down, neurologic or clinically normal? 

Answer. Experience in Europe (where there has been significant Bovine 

Spongiform Encephalopathy (BSE) exposure and circulating infectivity in contrast 

to the United States, where we can assume very limited, if any exposure) has shown 

that testing a targeted population of cattle—those animals exhibiting some type of 

clinical abnormality—is the method most likely to identify BSE in the national herd. 

As an example, from 2001 to 2004, a total of 4,798,764 targeted animals were sampled, with a total of 5,486—or approximately 0.11 percent—of the targeted animals 

testing positive for BSE. In contrast, during that same time frame, a total of 

34,207,597 clinically normal animals were sampled, with a total of 982—or approximately 0.003 percent of the clinically normal animals testing positive. These differences clearly demonstrate the efficiencies of sampling subpopulations where the 

disease is most likely to be detected if it is present. Therefore, since our surveillance 

efforts began, USDA has consistently focused on sampling these targeted cattle subpopulations. The targeted population includes cattle that have classic clinical signs 

of BSE, are nonambulatory, exhibit signs of a central nervous system disorder, or 

cattle that die for unexplained reasons. 

With regard to the geographic distribution of the sample obtained in our enhanced 

surveillance effort, we are still analyzing this information and will present this to 

the public when our analysis is complete. USDA’s surveillance plan looks at this 
525 

issue on a national level. It is most important that our sample is obtained from 

among the animals in our target populations. European reports have shown clearly 

that this disease is most likely to be found in downed, dying, dead, and diseased 

animals, so we go to the facilities where these animals are found, regardless of 

where the animals originate. We have largely worked with animal disposal facilities. 

In regions where those don’t exist, we have made efforts to conduct other types of 

collection and are confident that we have obtained a sufficient sample that represents the target populations—those animals where we are most likely to detect 

the disease—within the United States. 

CONCLUSION OF HEARINGS

Senator BENNETT. The subcommittee is recessed. 

[Whereupon, at 11:20 a.m., Thursday, March 30, the hearings 

were concluded, and the subcommittee was recessed, to reconvene 

subject to the call of the Chair.] 

(527) 

AGRICULTURE, RURAL DEVELOPMENT, AND 

RELATED AGENCIES APPROPRIATIONS FOR 

FISCAL YEAR 2007 

U.S. SENATE, 

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, 

Washington, DC. 

NONDEPARTMENTAL WITNESSES 

[The following testimonies were received by the Subcommittee on 

Agriculture, Rural Development, and Related Agencies for inclusion 

in the record. The submitted materials relate to the fiscal year 

2007 budget request for programs within the subcommittee’s jurisdiction.] 

PREPARED STATEMENT OF THE AMERICAN FARM BUREAU FEDERATION

The Farm Security and Rural Investment Act of 2002 (FSRIA) was enacted 4 

years ago following 2 years of exhaustive debate in the House and Senate. The new 

farm law represents a delicate balance by effectively addressing the stability of our 

agricultural production base, protecting our important natural resources and enhancing nutrition and food assistance programs in our Nation. 

The mandatory programs administered by the Department of Agriculture such as 

commodity, conservation, crop insurance, export promotion programs, nutrition and 

forestry are of enormous importance to farmers, ranchers, rural businesses, low-income Americans and our Nation’s children. Therefore, we respectfully ask the Appropriations Committee to avoid making any changes to mandatory programs within 

the USDA budget. 

Contract-based working lands conservation programs such as the Environmental 

Quality Incentives Program (EQIP), Conservation Security Program (CSP), Wildlife 

Habitat Incentives Program (WHIP) and Forest Land Enhancement Program 

(FLEP) are a priority within the agricultural and landowner community, as shown 

by current levels of oversubscription. Farm Bureau is concerned that many of these 

programs have not been funded at optimum levels, especially the Conservation Security Program. This has led to a level of confusion among farmers and ranchers 

of when and how the program will be implemented within their particular watershed, and whether or not the financial incentives will be adequate to encourage participation. As we move forward in this budget process, Farm Bureau encourages 

Congress to find an appropriate balance of funding for targeted land idling programs, such as the General and Continuous Conservation Reserve Programs, with 

our current working lands conservation programs. 

Farm Bureau supports the farm bill’s energy title that includes provisions for Federal procurement of bio-based products, bio-refinery development grants, a biodiesel 

fuel education program, renewable energy development program, renewable energy 

systems, a bioenergy program, biomass research and development and value-added 

agricultural product development and marketing. These programs play a critical 

role in assisting in rural economic development as well as in increasing our Nation’s 

energy independence and should be fully funded at authorized levels. 

Farm Bureau has identified three areas as priorities for discretionary funding in 

fiscal year 2006. They are funding for animal identification implementation, programs that maintain the use of agriculture inputs and programs that increase agriculture exports. 
528 

PROGRAMS NECESSARY FOR IMPLEMENTATION OF ANIMAL IDENTIFICATION

The threat of bioterrorism and the discovery of bovine spongiform encephalopathy 

(BSE) in the United States has prompted increased action by USDA and others to 

step up animal disease surveillance and funding for critical programs such as animal identification. Farm Bureau places great priority on efforts to safeguard our 

livestock and food supply and requests increased resources be appropriated to the 

National Animal Identification System (NAIS) for these activities. 

We have serious concerns about the adequacy of the administration’s proposal for 

$33 million for the Animal and Plant Health Inspection Service (APHIS) to continue 

implementation of the NAIS. Industry estimates of the U.S. Animal Identification 

Plan (USAIP), upon which the NAIS is based, forecast an ongoing cost of about $100 

million per year to effectively implement such a system. USDA has expended just 

$84 million total in the first 2 years of development of the NAIS. When added to 

this year’s budget request, the total Federal fund commitment amounts to approximately $117 million. This is significantly short of the department’s own cost estimate of $550 million for the first 5 years of NAIS operation. 

If the government were to fund $33 million each year (the same as their budget 

requests during the first 3 years of operation), two-thirds of the cost of the NAIS 

would have to be funded by producers and affected industries in order for the NAIS 

to proceed on the timeline originally proposed by both USDA and the livestock industry. Farmers and ranchers cannot afford to bear the brunt of the cost of this program, which is essentially a public good. Although participating in the NAIS does 

provide some insurance to producers in the event of an animal health incident, this 

program also assists Federal animal health officials and is an important tool against 

the effects of accidental or intentional introduction of zoonotic disease. Given the 

benefits of the NAIS to the general public and our overall national biosecurity, a 

larger portion of the cost must be borne by the government. 

If the industry bears the cost of identification devices and application of those devices, and the Federal Government were to fund the majority of the cost of database 

maintenance, program administration, and retro-fitting for data collection at large 

co-mingling sites (i.e., markets and processing facilities), the end result would be an 

almost equal funding distribution between industry and government. However, the 

current budget request will not support this funding split under the timeline proposed in USDA’s NAIS Draft Strategic Plan. Under the fiscal year 2007 budget proposal, States and industry would have to bear a greater share of the cost burden 

in order to maintain the timeline through full implementation in 2009, although 

States and industry cannot afford to pay for the majority of the system, the United 

States cannot afford to delay implementation of the system. A delay could be economically devastating in the case of an animal disease outbreak such as foot-andmouth disease (FMD), both in terms of the impact on the domestic herd and the 

implications from the loss of trading partners. 

We appreciate the inclusion of NAIS funding in the fiscal year 2005 and fiscal 

year 2006 agriculture funding bills, and strongly encourage the committee to significantly increase that amount in this year’s version of the agriculture appropriations 

bill. Progress has been seen in making premises registration available in all 50 

States and multiple tribes. Nationally, just over 10 percent of all livestock premises 

are now identified, but much work remains to bring the remaining 90 percent into 

the system. Outreach and education are key to inform producers about the purpose 

of the NAIS; it is critical to immediately correct the many misconceptions that have 

circulated and may discourage producers from participating. In addition to continuing funding for APHIS’s premises registration activities in cooperation with 

State animal health officials, we believe it is important to proceed with the next 

phases of the NAIS—the individual identification of animals or groups of animals, 

and the tracking of animal movements. The department has turned to the private 

sector to provide the data repository necessary for animal tracking; therefore, we encourage the committee to consider a cost-share funding allocation for privately managed, non-profit animal ID databases maintained by agricultural organizations. 

Such databases should be capable of providing multi-species data repository services 

and access to that data by State and Federal veterinary officials in the event of an 

animal health issue in order to meet public needs and justify a Federal funding appropriation. 

While there are still some major issues to be resolved, primarily data confidentiality, AFBF strongly supports the NAIS. Timely implementation of this critical 

program will not only add to our ability to trace a diseased animal back to the 

source but will also reassure the public and our trading partners of a safe food supply system. 
529 

PROGRAMS TO INCREASE AGRICULTURAL EXPORTS

Creating new and expanding existing overseas markets for U.S. agricultural and 

food products is essential for a healthy agricultural economy anytime, but especially 

in 2006/07 when the USDA is forecasting a reduction in net U.S. farm income of 

$15 billion. We recommend full funding of all export development and expansion 

programs consistent with our WTO commitments. 

Export Development and Expansion Programs.—The Market Access Program, the 

Foreign Market Development Program, the Emerging Markets Program and the 

Technical Assistance for Specialty Crops program are all very effective export development and expansion programs that have demonstrated substantial increases in 

demand for U.S. agriculture and food products abroad. These programs are also important because they attract larger amounts of private sector funding into development and expansion activities for U.S. agriculture and food exports. We recommend 

full funding of these programs 

Farm Bureau also supports General Sales Manager credit guarantee programs. 

These programs are important because they make available commercial financing 

to buyers of U.S. food and agricultural exports that might otherwise not be available. They should be funded at fully authorized levels. 

Direct assistance for U.S. agricultural exports is also authorized by the Export 

Enhancement Program, a program to counter unfair trading practices of foreign 

countries. Farm Bureau supports the funding and use of this program in all countries and for all commodities where the United States faces unfair competition. The 

Dairy Export Incentive Program is another similar program that allows U.S. dairy 

producers to compete with foreign nations that subsidize their diary exports. We 

recommend full funding of this program as well. 

Food Aid Programs.—We urge full funding of Public Law 480 that serves as the 

primary means by which the United States provides needed foreign food assistance 

through the purchase of U.S. commodities. In addition to providing short-term humanitarian assistance, the program helps to develop long-term commercial export 

markets. We oppose any efforts to reduce funding of Public Law 480, especially efforts to transfer funding to other food aid and development programs outside the 

jurisdiction of USDA. Further, the International Food for Education Program will 

be an effective platform for delivering severely needed food aid and educational assistance and we urge its full support. 

Plant and Animal Health Monitoring, Pest Detection and Control.—USDA services 

and programs that facilitate U.S. exports by certifying plant and animal health to 

foreign customers, that protect U.S. agricultural production from foreign pests and 

diseases, and fight against unsound non-tariff trade barriers by foreign governments 

should be funding priorities. Plant and animal health monitoring, surveillance and 

inspection are crucial. We support funding increases for improved plant pest detection and eradication, management of animal health emergencies and to increase the 

availability of animal vaccines. Expansion of Plant Protection and Quarantine personnel and facilities is necessary to protect U.S. agriculture from new, oftentimes 

virulent and costly pest problems that enter the United States from foreign lands. 

APHIS Trade Issues Resolution and Management.—Full funding is needed for 

APHIS trade issues resolution and management. As Federal negotiators and U.S. 

industry try to open foreign markets to U.S. exports, they consistently find that 

other countries are raising pest and disease concerns (i.e., sanitary and 

phytosanitary measures), real or contrived, to resist or prohibit the entry of American products into their markets. Only APHIS has the technical capability to respond effectively to this resistance. It requires however, placing more APHIS officers 

at U.S. ports and in overseas locations where they can monitor pest and disease conditions, negotiate trading protocols with other countries and intervene when foreign 

officials wrongfully prevent the entry of American imports. It is essential that 

APHIS be positioned to swiftly and forcefully respond to such issues when and 

where they arise. 

APHIS Biotech Regulatory Service (BRS).—Agricultural biotechnology is an extremely promising technology and all reasonable efforts must be made to allow continued availability and marketability of biotech tools for farmers. BRS plays an important role in overseeing the permit process for products of biotechnology. Funding 

for BRS personnel and activities are essential for ensuring public confidence and 

international acceptance of biotechnology products. AFBF supports an increase in 

spending to $11.417 million ($8.584 in 2006) for BRS because it will enable the 

USDA to increase inspections of genetically-modified crop field test sites and enhance its capacity to regulate transgenic animals, arthropods, and disease agents. 

Foreign Agricultural Service (FAS).—The USDA’s Foreign Agricultural Service 

will require sufficient funding to expand services to cover all existing and potential 
530 

market posts. We support continuance of funding at the 2006 appropriations level 

for the office of the secretary for cross-cutting trade negotiations and biotechnology 

resources. 

PROGRAMS THAT MAINTAIN THE USE OF AGRICULTURE INPUTS

USDA must continue to work with EPA, agricultural producers, food processors 

and registrants to provide farm data required to ensure that agricultural interests 

are properly considered and fully represented in all pesticide registration, tolerance 

reassessment re-registration, and registration review processes. In order to participate effectively in the process of ensuring that crop protection tools are safe and remain available to agriculture, USDA must have all the resources necessary to provide economic benefit, scientific analysis and usage information to EPA. To this end, 

funding should be maintained or increased, and in some cases restored, to the following offices and programs: 

Office of Pest Management Policy (OPMP).—OPMP has the primary responsibility 

for coordination of USDA’s Food Quality Protection Act (FQPA) and crop protection 

obligations and interaction with EPA. Proper funding is vital for the review of tolerance reassessments, particularly dietary and worker exposure information; to identify critical uses, benefits and alternatives information; and to work with grower organizations to develop strategic pest management plans. The funding to OPMP 

should be designated under the secretary of agriculture’s office, rather than as an 

add-on to the Agricultural Research Service budget. 

Agriculture Research Service (ARS).—Integrated Pest Management (IPM) research, minor use tolerance research (IR–4) must have funding maintained, and research on alternatives to methyl bromide must have funding restored and receive 

future funding to satisfactorily address the unique concerns of these programs. Research is also needed to identify new biological pest control measures and to control 

pesticide migration. 

Cooperative State Research, Education and Extension Service (CSREES).—Funding must be maintained, in some cases restored, and full future funding provided 

for Integrated Pest Management research grants, IPM application work, pest management alternatives program, expert IPM decision support system, minor crop pest 

management project (IR–4), crops at risk from FQPA implementation, FQPA risk 

avoidance and mitigation program for major food crop systems, methyl bromide 

transition program, regional crop information and policy centers and the pesticide 

applicator training program. 

Economic Research Service (ERS).—USDA and EPA rely on ERS programs to provide unique data information and they should be properly funded including IPM research, pesticide use analysis program and the National Agriculture Pesticide Impact Assessment Program. 

Food Quality and Crop Protection Regulation.—Additional funding for proper regulation of pesticides is needed in the following programs: National Agriculture Statistics Service pesticide use surveys; Food Safety Inspection Service increased residue sampling and analysis; Agricultural Marketing Service; and the Pesticide Data 

Program. 

PREPARED STATEMENT OF THE AMERICAN INDIAN HIGHER EDUCATION CONSORTIUM

Mr. Chairman and Members of the Subcommittee, on behalf of the American Indian Higher Education Consortium (AIHEC) and the 33 Tribal Colleges and Universities that comprise the list of 1994 Land Grant Institutions, thank you for this opportunity to share our funding requests for fiscal year 2007 (fiscal year 2007). 

This statement is presented in three parts: (a) a summary of our fiscal year 2007 

funding recommendation, (b) a brief background on Tribal Colleges and Universities, 

and (c) an outline of the 1994 Tribal College Land Grant Institutions’ plan for using 

our land grant programs to fulfill the agricultural potential of American Indian communities, and to ensure that American Indians have the skills and support needed 

to maximize the economic development potential of their resources. 

Summary of Requests 

We respectfully request the following funding levels for fiscal year 2007 for our 

land grant programs established within the USDA Cooperative State Research, 

Education, and Extension Service (CSREES) and Rural Development mission areas. 

In CSREES, we specifically request: $12 million payment into the Native American 

endowment fund; $3.3 million for the higher education equity grants; $5 million for 

the 1994 institutions’ competitive extension grants program; $3 million for the 1994 

Institutions’ competitive research grants program; and in Rural Development— 
531 

Rural Community Advancement Program (RCAP), that $5 million be provided for 

each of the next 5 fiscal years for the tribal college community facilities grants program. RCAP grants help to address the critical facilities and infrastructure needs 

at the colleges that impede our ability to participate fully as land grant partners. 

Background on Tribal Colleges and Universities 

The first Morrill Act was enacted in 1862 specifically to bring education to the 

people and to serve their fundamental needs. Today, over 140 years after enactment 

of the first land grant legislation, the 1994 Land Grant Institutions, as much as any 

other higher education institutions, exemplify the original intent of the land grant 

legislation, as they are truly community-based institutions. 

The Tribal College Movement was launched in 1968 with the establishment of 

Navajo Community College, now Dine College, serving the Navajo Nation. Rapid 

growth of tribal colleges soon followed, primarily in the Northern Plains region. In 

1972, the first six tribally controlled colleges established the American Indian Higher Education Consortium to provide a support network for member institutions. 

Today, AIHEC represents 34 Tribal Colleges and Universities 3 of which comprise 

the list of 1994 Land Grant Institutions located in 12 States—created specifically 

to serve the higher education needs of American Indian students. Annually, they 

serve approximately 30,000 full- and part-time students from over 250 Federally 

recognized tribes. 

All of the 1994 Land Grant Institutions are accredited by independent, regional 

accreditation agencies and like all institutions of higher education, must undergo 

stringent performance reviews to retain their accreditation status. Tribal colleges 

serve as community centers by providing libraries, tribal archives, career centers, 

economic development and business centers, public meeting places, and child care 

centers. Despite their many obligations, functions, and notable achievements, tribal 

colleges remain the most poorly funded institutions of higher education in this country. Most of the 1994 Land Grant Institutions are located on Federal trust territory. 

Therefore, States have no obligation and in most cases, provide no funding to tribal 

colleges. In fact, most States do not even fund our institutions for the non-Indian 

State residents attending our colleges, leaving the tribal colleges to absorb the per 

student operational costs for non-Indian students enrolled in our institutions, accounting for approximately 20 percent of our student population. Under these inequitable financing conditions and unlike our State land grant partners, our institutions do not benefit from economies of scale—where the cost per student to operate 

an institution is diminished by the increased size of the student body. 

As a result of 200 years of Federal Indian policy—including policies of termination, assimilation and relocation—many reservation residents live in abject poverty comparable to that found in Third World nations. Through the efforts of Tribal 

Colleges and Universities, American Indian communities are receiving services they 

need to reestablish themselves as responsible, productive, and self-reliant citizens. 

It would be regrettable not to expand the very modest investment in, and capitalize 

on, the human resources that will help open new avenues to economic development, 

specifically through enhancing the 1994 Institutions’ land grant programs, and securing adequate access to information technology. 

1994 Land Grant Programs—Ambitious Efforts to Reach Economic Development Potential 

Tragically, due to lack of expertise and training, millions of acres on our reservations lie fallow, under used, or have been developed through methods that render 

the resources nonrenewable. The Equity in Educational Land Grant Status Act of 

1994 is starting to rectify this situation and is our hope for future advancement. 

Our current land grant programs are small, yet very important to us. It is essential that American Indians explore and adopt new and evolving technologies for 

managing our lands. We have the potential of becoming significant contributors to 

the agricultural base of the Nation and the world. 

Native American Endowment Fund.—Endowment installments that are paid into 

the 1994 Institutions’ account remain with the U.S. Treasury. Only the annual interest, less the USDA’s administrative fee, is distributed to the colleges. The latest 

gross annual interest yield (fiscal year 2005) is $2,577,357 after the USDA’s administrative fee of $103,094 is deducted; $2,474,263 is the amount available to be distributed among all of the eligible 1994 Land Grant Institutions by statutory formula. While we have not yet been provided the latest breakdown of funds distributed to each of the 1994 institutions, last year USDA’s administrative fee amounted 

to more than the payment amounts to 75 percent of the 1994 Land Grant Institutions. After the distribution amounts are determined for this year’s disbursement, 

we fully expect similar results. We respectfully ask that the Subcommittee review 
532 

the Department’s administrative fee and consider reducing it for this program, so 

that more of these already limited funds can be utilized to conduct vital 1994 Land 

Grant community based programs. 

Just as other land grant institutions historically received large grants of land or 

endowments in lieu of land, this endowment assists 1994 Land Grant Institutions 

in establishing and strengthening our academic programs in such areas as curricula 

development, faculty preparation, instruction delivery, and to help address critical 

facilities and infrastructure issues. Many of the colleges have used the endowment 

funds in conjunction with the Education Equity Grant funds to develop and implement their academic programs. As earlier stated, tribal colleges often serve as primary community centers and although conditions at some have improved substantially, many of the colleges still operate under less than satisfactory conditions. In 

fact most of the tribal colleges cite improved facilities as one of their highest priorities. Several of the colleges have indicated the need for immediate and substantial 

renovations to replace buildings that have long exceeded their effective life spans 

and to upgrade existing facilities to address accessibility and safety concerns. 

Endowment payments increase the size of the corpus held by the U.S. Treasury 

and thereby increase the annual interest yield disbursed to the 1994 land grant institutions. This additional funding would be very helpful in our efforts to continue 

to support faculty and staff positions and program needs within Agriculture and 

Natural Resources departments, as well as to continue to help address the critical 

and very expensive facilities needs at our institutions. Currently, the amount that 

each college receives from this endowment is not adequate to address curricula development and instruction delivery, as well as make even a dent in the necessary 

facilities projects at the colleges. In order for the 1994 Institutions to become full 

partners in this Nation’s great land grant system, we need and frankly, under treaty obligations, warrant the facilities and infrastructure necessary to fully engage in 

education and research programs vital to the future health and well being of our 

reservation communities. We respectfully request the subcommittee fund the fiscal 

year 2007 endowment payment at $12 million, $120,000 above fiscal year 2006 and 

the in the President’s Budget recommendation—restoring the across-the-board cut 

imposed on fiscal year 2006 appropriated levels. 1994 Institutions’ Educational Equity Grant Program: Closely linked with the endowment fund, this program is designed to assist 1994 land grant institutions with academic programs. Through the 

modest appropriations made available since fiscal year 2001, the tribal colleges have 

been able to begin to support courses and plan activities specifically targeting the 

unique needs of their respective communities. 

The 1994 Institutions have developed and implemented courses and programs in 

natural resource management; environmental sciences; horticulture; forestry; bison 

production and management; and especially food science and nutrition to address 

epidemic rates of diabetes and cardiovascular disease on reservations. If more funds 

were available through the Educational Equity Grant Program, tribal colleges could 

channel more of their endowment yield to supplement other facilities funds to address their critical infrastructure issues. Authorized at $100,000 per eligible 1994 

Institutions, in fiscal year 2006, approximately $68,000 or two-thirds of the authorized level was available to the 1994 institutions, after across-the-board cuts and Department fees were applied to the initial appropriated level of $2,250,000. We respectfully request full funding of $3.3 million to allow the tribal colleges to build 

upon the courses and successful activities that have been launched. 

Extension Programs.—The 1994 Institutions’ extension programs strengthen communities through outreach programs designed to bolster economic development; 

community resources; family and youth development; natural resources development; agriculture; as well as health and nutrition awareness. 

In fiscal year 2006, $3,273,000 was appropriated for the 1994 Institutions’ competitive extension grants, a slight increase over fiscal year 2005. Without adequate 

funding, 1994 Institutions’ ability to maintain existing programs and to respond to 

emerging issues such as food safety and homeland security, especially on border reservations, is severely limited. Increases in funding are needed to support these vital 

programs designed to address the inadequate extension services provided to Indian 

reservations by their respective State programs. It is important to note that the 

1994 extension program is designed to complement the Indian Reservation Extension Agent program and does not duplicate extension activities. 1994 Land Grant 

programs are funded at very modest levels. The tribal college land grants have applied their ingenuity for making the most of every dollar they have at their disposal 

by leveraging funds to maximize their programs whenever possible. For example, 

College of Menominee Nation (CMN) in Keshena, Wisconsin, has a multiyear program that leverages funding from several activities to expand its extension program, 

which focuses on strengthening the economic capacity of the local community. 
533 

Partnering with U.S. Department of Health and Human Services, CMN is designing 

curriculum that involves tribal elders, relevant service providers, local schools, the 

Commission on Aging, and health clinics designed to encourage minority youth to 

enter Allied Health fields. With a grant from the Wisconsin Department of Transportation, the college’s extension and outreach offers the Transportation Alliance for 

New Solutions (TrANS) program. This is a 120 hour program designed to train 

women and minorities in roads construction. In addition, the Federal Highway Administration and the Wisconsin Department of Transportation have provided grant 

funds to CMN extension and outreach to conduct a Summer Transportation Institute focusing on middle school students. Students spend 4 weeks exploring various 

careers within the transportation industry. CMN is just one example of the innovative programs being conducted at 1994 Institutions. To continue and expand these 

successful programs, we request the Subcommittee support this competitive program by appropriating $5 million to sustain the growth and further success of these 

essential community based programs. 

1994 Research Program.—As the 1994 Land Grant Institutions have begun to 

enter into partnerships with 1862/1890 land grant institutions through collaborative 

research projects, impressive efforts to address economic development through land 

use have come to light. Our research program illustrates an ideal combination of 

Federal resources and tribal college-state institutional expertise, with the overall 

impact being far greater than the sum of its parts. We recognize the budget constraints under which Congress is functioning. However, $1,039,000, the fiscal year 

2006 appropriated level, is a 4.4 percent decrease in funding that was already grossly inadequate. This research program is vital to ensuring that tribal colleges may 

finally become full partners in the Nation’s land grant system. Many of our institutions are currently conducting agriculture based applied research, yet finding the resources to conduct this research to meet their communities’ needs is a constant challenge. This research authority opens the door to new funding opportunities to maintain and expand the research projects begun at the 1994 Institutions, but only if 

adequate funds are appropriated. $1,039,000 for 33 institutions to compete for is 

clearly inadequate. Project areas being studied include soil and water quality, amphibian propagation, pesticide and wildlife research, range cattle species enhancement, and native plant preservation for medicinal and economic purposes. We 

strongly urge the Subcommittee to fund this program at a minimum of $3 million 

to enable our institutions to develop and strengthen their research potential. 

Rural Community Advancement Program (RCAP).—In fiscal year 2006, 

$4,464,000 of the RCAP funds appropriated for loans and grants to benefit Federally 

recognized American Indian tribes were targeted for community facility grants for 

improvements at Tribal Colleges and Universities. This amounts to an increase of 

$464,000 over the level that had been allocated to the program each year since it 

began in fiscal year 2001. This program requires a minimum 25 percent non-Federal 

match. Tribal colleges are chartered by their respective tribes, which enjoy a government-to-government relationship with the Federal Government. Due to this relationship, tribal colleges have very limited access to non-Federal dollars making non-Federal matching requirements a significant barrier to our colleges’ ability to compete 

for much needed funds. The 2002 Farm Security and Rural Investment Act, (Public 

Law 107–171) included language limiting the non-Federal match requirement for 

the Rural Cooperative Development Grants to no more than 5 percent in the case 

of a 1994 institution. We would like to have this same language applied to the 

RCAP community facilities grants for tribal colleges to open the door to more 1994 

Institutions to compete for these dollars. 

We urge the Subcommittee to designate $5 million for each of the next 5 fiscal 

years to afford the 1994 institutions the means to aggressively address critical facilities needs, thereby allowing them to better serve their students and respective communities. Additionally, we request that Congress include language directing the 

agency to limit the non-Federal matching requirement to not more than 5 percent, 

the same level as applied to the Rural Cooperative Development Grants program, 

to help the 1994 land grant institutions to effectively address critical facilities and 

construction issues at their institutions. 

Conclusion 

The 1994 Land Grant Institutions have proven to be efficient and effective vehicles for bringing educational opportunities to American Indians and hope for selfsufficiency to some of this Nation’s poorest regions. The modest Federal investment 

in the 1994 Land Grant Institutions has already paid great dividends in terms of 

increased employment, education, and economic development. Continuation of this 

investment makes sound moral and fiscal sense. American Indian reservation communities are second to none in their potential for benefiting from effective land 
534 

grant programs and as earlier stated no institutions better exemplify the original 

intent of the land grant concept than the 1994 Land Grant Institutions. 

We appreciate your support of the Tribal Colleges and Universities and we ask 

you to renew your commitment to help move our communities toward self-sufficiency. We look forward to continuing our partnership with you, the U.S. Department of Agriculture, and the other members of the Nation’s land grant system—a 

partnership that will bring equitable educational, agricultural, and economic opportunities to Indian Country. 

Thank you for this opportunity to present our funding proposals to this Subcommittee. We respectfully request your continued support an 

PREPARED STATEMENT OF THE AMERICAN PUBLIC POWER ASSOCIATION

The American Public Power Association (APPA) is the national service organization representing the interests of over 2,000 municipal and other state and locally 

owned utilities throughout the United States (all but Hawaii). Collectively, public 

power utilities deliver electricity to one of every seven electricity consumers (approximately 43 million people), serving some of the nation’s largest cities. However, 

the vast majority of APPA’s members serve communities with populations of 10,000 

people or less. 

We appreciate the opportunity to submit this statement outlining our fiscal year 

2007 funding priorities within the jurisdiction of the Agriculture, Rural Development, and Related Agencies Subcommittee. 

Department of Agriculture: Rural Utility Service Rural Broadband Loan Program 

APPA urges the Subcommittee to fully fund the Rural Utility Service’s (RUS) Rural Broadband Loan Program at $10 million, as authorized in the 2002 Farm Bill. 

A funding level of $10 million would produce approximately $356 million in RUS 

loans for fiscal year 2007. 

APPA believes it is important to provide incentives for the deployment of 

broadband to rural communities, many of which lack broadband service. Increasingly, access to advanced communications services is considered vital to a community’s economic and educational development. In addition, the availability of 

broadband service enables rural communities to provide advanced health care 

through telemedicine and to promote regional competitiveness and other benefits 

that contribute to a high quality of life. Approximately one-fourth of APPA’s members are currently providing broadband service in their communities. Several APPA 

members are planning to apply for RUS broadband loans to help them finance their 

broadband projects. 

PREPARED STATEMENT OF THE AMERICAN SOCIETY OF AGRONOMY, CROP SCIENCE

SOCIETY OF AMERICA, AND SOIL SCIENCE SOCIETY OF AMERICA

Dear Chairman Bennett, Ranking Member Kohl and Members of the Subcommittee: On behalf of the American Society of Agronomy, Crop Science Society 

of America, Soil Science Society of America (ASA/CSSA/SSSA), we are pleased to 

submit comments in strong support of enhanced public investment in food and agricultural research, extension and education as a critical component of federal appropriations for fiscal year 2007 and beyond. With nearly 18,000 members, ASA/CSSA/ 

SSSA are the largest life science professional societies in the United States dedicated to the agronomic, crop and soil sciences. ASA/CSSA/SSSA play a major role 

in promoting progress in these sciences through the publication of quality journals 

and books, convening meetings and workshops, developing educational, training, 

and public information programs, providing scientific advice to inform public policy, 

and promoting ethical conduct among practitioners of agronomy and crop and soil 

sciences. The programs and activities of ASA/CSSA/SSSA are tailored not only to 

our members’ interests and scientific advancement, but also serve the public interest. ASA/CSSA/SSSA publish six peer-reviewed journals in which over 1100 scientific articles are published yearly. The peer-review procedures for manuscripts 

published in ASA/CSSA/SSSA journals as well as our activities and procedures for 

publishing ensure the highest quality and integrity in our scientific literature. 

ASA/CSSA/SSSA understand the challenges the Senate Agriculture Appropriations Subcommittee faces with the tight agriculture budget for fiscal year 2007. We 

also recognize that the Agriculture Appropriations bill has many valuable and necessary components, and we applaud the efforts of the Subcommittee to fund mission-critical research through the USDA-Cooperative State, Research, Education 

and Extension Service as well as its intramural research portfolio funded through 
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the Agricultural Research Service. We are particularly grateful to the Subcommittee 

for funding the NRI at $181 million in fiscal year 2006. Below we have highlighted 

recommendations for the fiscal year 2007 appropriations cycle. 

Agricultural Research Service 

ASA/CSSA/SSSA understand the agency’s need to reprogram approximately $49.1 

million in funding to higher priority areas such as homeland security, emerging diseases, food safety, obesity, climate change, invasive species, and genomics and genetics. ASA/CSSA/SSSA applaud ARS’s ability to respond quickly and flexibly to 

rapidly changing national needs. The proposed increase of $57.7 in new monies for 

these high priority areas is also commended. However, ASA/CSSA/SSSA are concerned that the proposed overall cut in total funding for ARS of $123, or 11 percent, 

from fiscal year 2006 enacted, could result in decreased research capacity and/or the 

elimination of important research programs currently underway. ASA/CSSA/SSSA 

urge the Subcommittee to act judiciously and not implement such drastic funding 

cuts for this critical research agency. 

Cooperative State Research, Education, and Extension Service 

National Research Initiative.—ASA/CSSA/SSSA strongly endorse the President’s 

proposed fiscal year 2007 budget increase of $66.3 million for the National Research 

Initiative Competitive Grants Program (NRI) which would bring total funding for 

this important research program to $247.5 million. However, we do not support the 

President’s proposal to transfer the $42.3 million Sec 406 (Integrated Research, 

Education, and Extension program) program into the NRI. This transfer may result 

in the loss of critical programs such as the Organic Transitions Program. 

NRI Integrated Research.—ASA/CSSA/SSSA request that any new monies appropriated for the NRI, as requested by the administration, allow the Secretary the discretion to apply up to 30 percent towards carrying out the NRI integrated research, 

extension and education competitive grants program. 

Sustainable Agriculture Research and Education Programs.—ASA/CSSA/SSSA oppose the administration’s request to cut funding for SARE by more than $3 million. 

At a minimum, the Subcommittee should fund SARE at the fiscal year 2006 enacted 

(pre-rescission) level of $12.4 million. 

Indirect Costs.—ASA/CSSA/SSSA applaud the administration’s proposal to eliminate the indirect cost cap on the NRI, set at 20 percent for fiscal year 2006, which 

will broaden its appeal by putting the NRI on equal footing with other federal competitive grants programs such as those of NSF and NIH. However, we are concerned 

that new funding was not provided to cover this change. 

Research Formula Funding.—ASA/CSSA/SSSA oppose the administration’s proposal to change the methodology for distributing Hatch Funds and McIntire-Stennis 

Funds through a multistate, competitively awarded proposal program. Such drastic 

changes would be detrimental to the entire USDA research portfolio. Because of 

their timing and potential regional and intra-state impacts, much of the infrastructure needed to conduct competitively funded research could be compromised if formula funds were to be redirected as proposed, and could irreparably damage programs housed at each land-grant university. This would mean a huge and potentially damaging loss of national infrastructure to conduct agricultural research. The 

private sector depends heavily on the agricultural technology and training provided 

by the U.S. land grant system, and the impact of such a drastic transfer of formula 

funds to a competitive grants program would affect not only the viability of U.S. industry but also the health and survival of millions of people across the globe. Moreover, as noted below, investments in formula funded research show an excellent annual rate of return. 

Agrosecurity.—ASA/CSSA/SSSA support the request of the administration that 

$12 million be provided for the Animal and Plant Diagnostic Labs and EDEN to facilitate protecting America’s agricultural production systems. ASA/CSSA/SSSA also 

endorse the administration’s request ($5.0 million) for the Agrosecurity Curricula 

Development, which we consider to be a critical new initiative. Recent security 

threats facing America require new and expanded agricultural research to protect 

our nation’s natural resources, food processing and distribution network, and rural 

communities that will secure America’s food and fiber system. 

Higher Education.—ASA/CSSA/SSSA urge the Subcommittee to fund the Institution Challenge Grants at $6 million which will restore some of the funding lost due 

to the 2006 rescission. We applaud the Administration’s budget request of $4.445 

million for the Graduate Fellowships Grants. 

Extension Formula Funding.—Extension forms a critical part of the research, education and extension program integration, the hallmark of CSREES which in not 

seen in other agencies. Unfortunately, the Smith Lever 3(b) and 3(c) account has 
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been flat-funded (in constant dollars, this account has seen a gradual erosion in 

funding), in recent years. Moreover, the current trend of annual rescissions has resulted in an even lower funding level for this and other vital extension programs. 

ASA/CSSA/SSSA proposes, at a minimum, that the Subcommittee restore funding 

for Smith Lever 3(b) and 3(c) to the fiscal year 2006 pre-rescission enacted level of 

$275.73 million. 

A balance of funding mechanisms, including intramural, competitive and formula 

funding, is essential to maintain the capacity of the United States to conduct both 

basic and applied agricultural research, improve crop and livestock quality, and deliver safe and nutritious food products, while protecting and enhancing the Nation’s 

environment and natural resources. In order to address these challenges and maintain our position in an increasingly competitive world, we must continue to support 

research programs funded through ARS and CSREES. Congress must enhance funding for agricultural research to assure Americans of a safe and nutritious food supply and to provide for the next generation of research scientists. According to the 

USDA’s Economic Research Service (Agricultural Economic Report Number 735), 

publicly funded agricultural research has earned an annual rate of return of 35 percent. This rate of return suggests that additional allocation of funds to support research in the food and agricultural sciences would be beneficial to the U.S. economy. 

We must also continue support for CSREES-funded education programs which will 

help ensure that a new generation of educators and researchers is produced. Finally, 

we need to ensure support for extension at CSREES to guarantee that these important new tools and technologies reach and are utilized by producers and other stakeholders. 

As you lead the Congress in deliberation on funding levels for agricultural research, please consider American Society of Agronomy, Crop Science Society of 

America, Soil Science Society of America as supportive resources. We hope you will 

call on our membership and scientific expertise whenever the need arises. 

PREPARED STATEMENT OF THE AMERICAN SOCIETY OF CIVIL ENGINEERS

The American Society of Civil Engineers (ASCE) is pleased to offer this testimony 

on the President’s proposed budget for the Natural Resources Conservation Service 

(NRCS) for fiscal year 2007. 

ASCE was founded in 1852 and is the country’s oldest national civil engineering 

organization. It represents more than 139,000 civil engineers in private practice, 

government, industry and academia who are dedicated to the advancement of the 

science and profession of civil engineering. ASCE is a 501(c)(3) non-profit educational and professional society. 

The Administration’s proposed fiscal year 2007 budget includes only $15.3 million 

in discretionary appropriations to fund rehabilitation of unsafe and seriously deficient dams that were originally constructed under USDA Watershed Programs. This 

is more than a 50 percent reduction from the fiscal year 2006 when $31.5 million 

was appropriated by Congress. 

ASCE respectfully requests that this Subcommittee increase the Administration’s 

proposed appropriation to $75 million. This amount is $60 million less than the total 

$135 million authorized in the 2002 Farm Bill which includes discretionary funds 

and Commodity Credit Corporation (CCC) mandatory funding. 

Of the 78,000 dams in the United States, 95 percent are regulated by the states. 

Approximately 10,400 of these dams are small watershed structures built under the 

United States Department of Agriculture programs authorized by Congress beginning in the 1940s (primarily the Flood Control Act of 1944, Public Law 78–534 and 

the Watershed Protection and Flood Control Act of 1953, Public Law 83–566). By 

the year 2020, more than 85 percent of all dams in the United States will be more 

than 50 years old, the typical useful life span. 

THE URGENT NEED FOR FEDERAL ACTION

The benefits from the 11,000 improved watershed dams are enormous. The dams 

provide downstream flood protection, water quality, irrigation, local water supplies 

and needed recreation. Yet these benefits to lives and property are threatened. The 

small watershed dams are approaching the end of their useful lives as critical components deteriorate. The reservoirs become completely filled with sediment, downstream development increases the potential hazards and significantly changes the 

design standards, and many dams do not meet State dam safety standards. 

Although these dams were constructed with technical and financial assistance 

from the Department of Agriculture, local sponsors were then responsible for operation and maintenance of the structures. Now these dams are approaching the end 
537 

of their useful lives, yet the resource need is still great. The flood control benefits, 

the irrigation needs, the water supply, the recreation and the conservation demands 

do not end. In fact, they are more necessary than ever as downstream development 

has dramatically increased the number of people, properties and infrastructure that 

are protected by the flood control functions of these dams. The Federal Government 

has a critical leadership role in assuring that these dams continue to provide critical 

safety and resource needs. 

The NRCS in the Department of Agriculture has estimated the cost of rehabili- tating the small watershed dams at $542 million. While the average rehabilitation 

cost per dam is approximately $242,000, the local sponsors typically do not have sufficient financial resources to complete these necessary repairs to assure the safety 

and critical functions of these dams. The Federal Government must recognize the 

urgent need to provide assistance to maintain these dams. Congress should reinforce 

its earlier commitment to the goals of the Flood Control Acts of 1944 and 1953. 

Since the program began, there have been 136 watershed rehabilitation projects 

initiated in 21 States, which include 47 completed rehabilitation projects and 89 

projects either in the planning, design or construction phase. It is clear from these 

136 projects as well as the 76 projects, which requested assistance but were unable 

to be funded in fiscal year 2006, just how much demand exists; and how successful 

this USDA program is. 

EXTENT OF THE PROBLEM

ASCE views the funding of dam safety repairs as a critical need for the nation. 

In ASCE’s 2005 Report Card for America’s Infrastructure dams received a grade of 

D. Nearly 3,500 unsafe dams have been identified in this country and many of the 

owners do not have sufficient funding sources. 

More that 900 watershed dams across the nation will need rehabilitation in just 

the next five years at a cost of over $570 million. These numbers will increase as 

dams get older and thousands of people and millions of dollars of property could be 

at risk if these dams should fail. That is why Congress authorized $600 million for 

rehabilitation for 2003–2007 in the last Farm Bill. Local watershed project sponsors 

provide 35 percent of the cost of the rehabilitation projects and many have local 

cost-share funds ready for projects that could be lost if the Federal money isn’t made 

available. 

Many of these urgent repairs and modifications are needed because of the following: downstream development within the dam failure flood zone, replacement of 

critical dam components, inadequate spillway capacity due to significant watershed 

development and increased design criteria due to downstream development. 

Many of the small watershed dams do not meet minimum State dam safety standards and many that are being counted on for flood protection can no longer provide 

flood protection due to excessive sedimentation and significant increases in runoff 

from development within the watershed. The dams suffer from cracked concrete 

spillways, failing spillways, inoperable lake drains and other problems that require 

major repairs that are beyond the capability of the local sponsors. 

THE COST OF NO ACTION

These small watershed dams have been a silent and beneficial part of the landscape. Failure to make the necessary upgrades, repairs and modifications will increase the likelihood of dam failures. Continued neglect of these structures may easily result in reduced flood control capacity causing increased downstream flooding. 

Failure of a dam providing water supply would result in a lack of drinking water 

or important irrigation water. 

The recent dam failures in Hawaii and Missouri, and the near failure in Massachusetts last year have brought into tragic focus for the public the impact aging and 

under-funded dams can have on a community. The floods in Georgia in 1993 and 

in the Midwest in 1994 are recent reminders of natural events that can cause enormous disasters, including dam failures. The failure to act quickly will clearly result 

in continued deterioration and a greater number of unsafe dams until a dam failure 

disaster occurs. The failure of a 38-foot tall dam in New Hampshire in 1996, which 

caused $5.5 million in damage and one death, should be a constant reminder that 

dam failures happen and can have tragic consequences. 

Completion of the needed repairs will result in safer dams, as well as continued 

benefits. Failure to establish a mechanism to reinvest in these structures will greatly increase the chances of dam failures and loss of benefits, both having significant 

economic and human consequences. Costs resulting from flood damage and dam failure damage are high and unnecessarily tap the Federal Government through disaster relief funds or the National Flood Insurance Program. 
538 

RECOMMENDATION

ASCE asks that the Subcommittee view funding the Rehabilitation of Watershed 

Dams as a significant re-investment in the benefits of the program and an investment in the safety of these dams. Therefore, ASCE respectfully requests that this 

Subcommittee provide additional appropriations beyond the Administration’s request to $75 million for fiscal year 2006. 

The condition of our Nation’s dams, and the need for watershed structure rehabilitation, should be a national priority before we have to clean up after dam failures 

that we know are likely to happen if nothing is done. 

PREPARED STATEMENT OF THE AMERICAN SOCIETY FOR MICROBIOLOGY

The American Society for Microbiology (ASM) appreciates the opportunity to submit testimony on the fiscal year 2007 appropriation for the United States Department of Agriculture (USDA). The ASM is the largest single life science organization 

in the world, with more than 42,000 members who work in academic, industrial, 

medical, and governmental institutions. The ASM’s mission is to enhance the 

science of microbiology, to gain a better understanding of life processes, and to promote the application of this knowledge for improved plant, animal and human 

health, and for economic and environmental well-being. 

The USDA sponsors research and education programs, which meet the USDA’s 

strategic goals of enhancing competitiveness and sustainability of U.S. agriculture; 

increasing economic opportunities and improving quality of life in rural America; enhancing protection and safety of the Nation’s agriculture and food supply; improving 

the Nation’s nutrition and health; and protecting and enhancing the Nation’s natural resource base and environment. U.S. agriculture faces new challenges, including threats from emerging infectious diseases in plants and animals such as avian 

influenza, as well as threats from climate change, and public concern about food 

safety and security. It is critical to increase the visibility and investment in agriculture research to respond to these challenges. The ASM urges Congress to provide 

increased funding for research programs within the USDA in fiscal year 2007. 

Microbiological research in agriculture is vital to understanding and finding solutions to foodborne diseases, endemic diseases of long standing, new and emerging 

plant and animal diseases, development of new agriculture products and processes 

and addressing existing and emerging environmental challenges. Unfortunately, 

Federal investment in agricultural research has not kept pace with the need for additional agricultural research to solve emerging problems. The USDA funds more 

than 90 percent of all Federal support for the agricultural sciences. According to the 

USDA Economic Research Service (ERS) report, Agricultural Research and Development: Public and Private Investments Under Alternative Markets and Institutions, 

the rate of return on public investment in basic agricultural research is estimated 

to be between 60 and 90 percent. 

USDA National Research Initiative Competitive Grants Program 

The National Research Initiative Competitive Grants Program (NRI) was established in 1991 in response to recommendations outlined in Investing in Research: 

A Proposal to Strengthen the Agricultural, Food and Environmental System, a 1989 

report by the National Research Council’s (NRC) Board on Agriculture. This publication called for increased funding of high priority research that is supported by the 

USDA through a competitive peer-review process directed at: 

—Increasing the competitiveness of U.S. agriculture. 

—Improving human health and well-being through an abundant, safe, and highquality food supply. 

—Sustaining the quality and productivity of the natural resources and the environment upon which agriculture depends. 

Continued interest in and support of the NRI is reflected in two subsequent NRC 

reports, Investing in the National Research Initiative: An Update of the Competitive 

Grants Program of the U.S. Department of Agriculture, published in 1994, and National Research Initiative: A Vital Competitive Grants Program in Food, Fiber, and 

Natural Resources Research, published in 2000. 

Today, the NRI, housed within the USDA Cooperative State Research, Education, 

and Extension Service (CSREES), supports research on key problems of national 

and regional importance in biological, environmental, physical, and social sciences 

relevant to agriculture, food, and the environment on a peer-reviewed, competitive 

basis. Additionally, the NRI enables the USDA to develop new partnerships with 

other Federal agencies that advance agricultural science. Examples of such collaborations include the USDA’s involvement in the Microbial Genome Sequencing Pro-
539 

gram, the Maize Genome Program, the Microbial Observatories program, the Plant 

Feedstock Genomics for Bioenergy program, the Metabolic Engineering program, 

and the Climate Change Science Plan. 

The ASM urges Congress to support the Administration’s requested increase for 

the NRI in fiscal year 2007. NRI’s proposed increase comes from shifting the 

CSREES Integrated Activities, such as food safety, pest management, and water 

quality, making up $42.7 million of the proposed increase, providing a net increase 

of $24 million for the NRI including the additional responsibility of the Integrated 

Programs. The ASM supports the Administration’s effort to increase competitively 

awarded funding mechanisms and believes that competitive grants ensure the best 

science. 

Additional funding for the NRI is needed to expand research in microbial 

genomics and to provide more funding for merit reviewed basic research with longterm potential for new discoveries and products. It is critical to increase the visibility and investment in agriculture research to respond to these challenges and we 

appreciate Congress’s efforts to fund the NRI at $181 million in fiscal year 2006 and 

urge Congress to support the Administration’s fiscal year 2007 request of $247.5 

million for this program. 

Agricultural Research Service 

The Agricultural Research Service (ARS) is the USDA’s chief scientific research 

agency, which conducts research to develop new scientific knowledge, transfers technology to the private sector to solve critical agricultural problems of broad scope and 

high national priority, and provides access to scientific data. The ARS supports approximately 1,200 individual research projects conducted by scientists from the 

USDA at over 100 Federal facilities. The Administration requests approximately 

$1.03 billion for the ARS in fiscal year 2007, a 20 percent decrease from fiscal year 

2006. The ASM urges Congress to strongly support the ARS in fiscal year 2007. 

USDA Food and Agriculture Defense Initiative 

The Food and Agriculture Defense Initiative is an interagency initiative to improve the Federal Government’s capability to rapidly identify and characterize a bioterrorist attack, by improving the national surveillance capabilities in human 

health, food, agriculture, and environmental monitoring. The ASM supports the Administration’s request for this initiative of $322 million for fiscal year 2007, an increase of $127 million over fiscal year 2006. This does not include funding for construction of the Ames, Iowa facility for animal research and diagnostics, which was 

fully funded in fiscal year 2006. Of the total amount, an increase of approximately 

$30 million for Food Defense would enhance the Food Safety and Inspection Service’s (FSIS) ability to detect and respond to food emergencies and for the USDA’s 

research agencies to conduct related research. For Agriculture Defense, the budget 

includes a $97 million increase to improve the Animal and Plant Health Inspection 

Service’s (APHIS) monitoring and surveillance of plant and animal health, including 

wildlife; response capabilities, including provisions for the National Veterinary 

Stockpile; and further research on emerging and exotic diseases. 

The ASM supports this greater emphasis on research in the Food and Agriculture 

Defense Initiative and recommends an increase in funding, both extramural and intramural, for research on pathogenic microorganisms as part of the Food and Agriculture Defense Initiative. 

Food Safety 

The Centers for Disease Control (CDC) estimates that each year 76 million people 

get sick, more than 300,000 are hospitalized, and 5,000 die because of foodborne illnesses. Primarily the very young, the elderly, and the immunocompromised are affected. Recent changes in human demographics and food preferences, changes in 

food production and distribution systems, microbial adaptation, and lack of support 

for public health resources and infrastructure have led to the emergence of novel 

as well as traditional foodborne diseases. With increasing travel and trade opportunities, it is not surprising that now there is a greater risk of contracting and spreading a foodborne illness locally, regionally, and even globally. (MMWR 2004;53[No. 

RR–04]). The USDA’s Economic Research Service (ERS) estimates that the medical 

costs, productivity losses, and costs of premature deaths for diseases caused by just 

five types of foodborne pathogens exceeds $6.9 billion per year in the United States. 

The USDA plays a vital role in the government’s effort to reduce the incidence of 

foodborne illness. Continued and sustained research is important to safeguarding 

the Nation’s food supply and focusing on methods and technologies to prevent microbial foodborne disease and emerging pathogens. The ASM supports the requested 

increases for the Food and Agriculture Defense Initiative and the Food Safety and 

Inspection Service. Without sustained significant increases in the level of food safety 
540 

research funding, meeting the National Health Objectives for 2010 in all likelihood 

will not become reality. The ASM recommends a substantial increase in food safety 

research, which is essential to ensure the protection of the Nation’s health. 

Genomics Initiative 

The NRI and the ARS fund the USDA collaborative efforts in the field of 

genomics. There are opportunities to leverage the USDA’s investments with those 

of the National Institutes of Health (NIH), the Department of Energy (DOE), and 

the National Science Foundation (NSF) in projects to map and sequence the 

genomes of agriculturally important species of plants, animals, and microbes. Determining the function of the sequenced genomes (functional genomics) and analyses 

of the data (bioinformatics) now need investment for new management techniques 

and tools. The USDA plays an important role in coordinating and participating in 

interagency workgroups on domestic animal, microbial, and plant genomics. Access 

to genomic information and the new tools to utilize it have implications for virtually 

all aspects of agriculture. The ASM urges Congress to provide strong support for 

the USDA genomics initiative. 

Emerging Infectious Diseases in Plants and Animals 

The food production and distribution system in the United States is vulnerable 

to the introduction of pathogens and toxins through natural processes, global commerce, and intentional means. The ASM supports increases in the USDA research 

budget for emerging diseases and invasive species. Nearly 200 zoonotic diseases can 

be naturally transmitted from animals to man and opportunistic plant pathogens 

and soil-inhabiting microorganisms can be causal agents of infection and disease in 

humans. For emerging diseases to be effectively detected and controlled the biology, 

ecology, and mechanisms for pathogenicity of the causal pathogens must be understood and weaknesses exploited to limit their impact. This research will help address the risk to humans from emerging diseases and opportunistic pathogens, and 

will ensure the safety of plant and animal products. Additionally, expanded research 

is needed to accelerate the development of information and technologies for the protection of United States agricultural commodities, wildlife and human health 

against emerging diseases. 

Antimicrobial Resistance Research 

The USDA plays a key role in addressing the national and global increase in antimicrobial resistance and the complex issues surrounding this public health threat. 

The ARS Strategic Plan for 2003–2007 states the need to ‘‘determine how antimicrobial resistance is acquired, transmitted, maintained, in food-producing animals, and develop technologies or altered management strategies to control its occurrence.’’ In 1996, the Department of Health and Human Services (HHS) and the 

USDA established the National Antimicrobial Resistance Monitoring System 

(NARMS) to monitor trends in antimicrobial resistance in foodborne pathogens; the 

USDA has expanded monitoring to include the Collaboration on Animal Health Food 

Safety Epidemiology (CAHFSE) program. The USDA support for these projects 

should continue and the ASM urges Congress to increase support for antimicrobial 

resistance surveillance, research, prevention, and control programs. 

Conclusion 

The USDA’s mission and goals of leadership on food, agriculture, and natural resources, based on sound public policy, the best available science, and efficient management should be strongly supported. With a significant investment in research, 

the USDA will be better able to meet its goals. The ASM urges Congress to increase 

funding for agricultural research programs to enable the USDA to help ensure a 

safe, nutritious and plentiful food supply for America. This includes providing 

$247.5 million for the NRI in fiscal year 2007. 

The ASM appreciates the opportunity to provide written testimony and would be 

pleased to assist the Subcommittee as the Department of Agriculture bill is considered throughout the appropriations process. 

PREPARED STATEMENT OF THE AMERICAN SOCIETY FOR MICROBIOLOGY

The American Society for Microbiology (ASM) is submitting the following statement in support of increased funding for the fiscal year 2007 budget of the Food 

and Drug Administration (FDA). The ASM is the largest single life science society 

in the world with over 42,000 members who are involved in basic and applied research and testing in university, industry, government and clinical laboratories. 
541 

The Administration’s fiscal year 2007 budget request of $1.95 billion for the FDA includes $1.55 billion in budget authority and $402 million in industry user fees, 

a total increase of $70.8 million or 3.8 percent over the fiscal year 2006 budget. Despite the proposed increase, the FDA’s budget continues to be constrained, especially 

in view of the increasing demands on the FDA related to food safety, pandemic influenza, new and emerging infectious diseases, such as West Nile and Mad Cow Disease, drug safety, and initiatives to advance innovation in medical product development. The ASM recommends that Congress provide additional funding for the FDA 

to increase its fiscal year 2007 proposed budget. Increased support for the FDA will 

enable the Agency to enhance programs that protect against unsafe healthcare products, unhealthy foods, and health challenges from bioterrorism or natural disasters. 

The FDA regulates products that account for almost 25 percent of U.S. consumer 

spending, including 80 percent of our national food supply and all human drugs, 

vaccines, medical devices, tissues for transplantation, equipment that emits radiation, cosmetics, and animal drugs and feed. Together these products are worth 

nearly $1.5 trillion annually and affect the daily lives of people. 

Protecting America’s Health—Pandemic Preparedness 

The specter of a potential influenza pandemic requires increased resources for 

preparedness. Recent research has found that viruses responsible for the three influenza pandemics in the past century carried genes from avian influenza viruses. In 

the current H5N1 outbreak, the World Health Organization has confirmed about 

186 human cases although thus far the virus does not spread readily from human 

to human. If viral mutations make human-to-human transmission a tragic reality, 

however, a deadly pandemic could cause millions of human deaths and billions in 

economic costs. The FDA request for fiscal year 2007 asks for $55.3 million for pandemic preparedness, an amount $30.5 million more than the fiscal year 2006 level. 

The FDA provides unique support to the recently launched National Strategy for 

Pandemic Influenza, a broad, multi-agency effort to better prepare the United 

States for any pandemic influenza. This Federal response targets three primary 

goals: detect and contain outbreaks wherever they occur; ensure that Federal, State, 

and local communities are prepared; and stockpile vaccines and antiviral drugs 

through accelerated development of new vaccine technologies and greatly increased 

U.S. production capacity. Last December, when the Department of Health and 

Human Services (DHHS) announced its Pandemic Influenza Plan as part of the Federal strategy, the ASM endorsed its priority of increased vaccine manufacturing capacity (enough vaccine for all Americans within 6 months of a domestic outbreak). 

At present, there are not nearly enough vaccines and antiviral drugs to meet Federal goals. The ASM is concerned that adequate funding be given to the FDA, which 

will be a central figure in vaccine and antiviral development and manufacturing. 

Heightened output using new technologies will further burden the FDA’s product 

evaluation process, already stretched by research responses to emerging infectious 

pathogens like SARS and West Nile virus. 

Scientists at the FDA’s Center for Biologics Evaluation and Research (CBER) and 

Center for Drug Evaluation and Research (CDER) will shoulder much of the Agency’s growing vaccine and antiviral contribution towards pandemic preparedness. Researchers from the FDA and their private-industry partners will tackle the critical 

issues of expanding U.S. capacity for traditional egg-based vaccine production, the 

technological transition to cell-culture-based vaccine production, and development of 

innovative vaccines and therapeutic drugs. Through the FDA’s Critical Path Initiative to get products to market more quickly, accelerated approval can help expedite 

the Federal stockpile of vaccines and antivirals needed to counter pandemic influenza. 

The FDA not only assures the safety and efficacy of new products, but agency personnel also provide technical support to manufacturers from laboratory to market. 

In early March, the FDA issued two sets of draft recommendations to aid manufacturers in developing vaccines, one for seasonal, one for pandemic influenza. Seasonal 

influenza is an ever present threat to American health and with pneumonia, it remains the leading infectious cause of U.S. deaths. The two guidances also address 

some promising higher-output technologies for vaccine production, such as cell culture and recombinant manufacturing. The scientific advances from the FDA’s influenza activities will undoubtedly heighten protection against infectious diseases in 

general, as well as production of antiviral vaccines and drugs in particular. Efforts 

by the influenza preparedness programs also will improve the safety of our national 

food supply. Scientists from the FDA are developing new methods to detect antiviral 

drug residues in food, while FDA communications personnel are creating public 

guidelines on food preparation in the event that avian influenza reaches poultry 

flocks in the United States. 
542 

Protecting America’s Health—Food Security and Safety 

The FDA oversees about 80 percent of the nation’s entire food supply, with only 

the exception of meat, poultry, and some egg products regulated by the Department 

of Agriculture (USDA). Within the FDA, the Center for Food Safety and Applied Nutrition (CFSAN) and the Office of Regulatory Affairs are responsible each year for 

goods worth $417 billion in domestically produced foods and $49 billion in imported 

foods. In fiscal year 2007, the agency’s Prior Notice Center is expecting to process 

daily up to 20,000 notifications of food import shipments. The FDA’s food safety efforts involve reams of regulations, constant laboratory testing with the latest methods, and field inspections of producers and handlers from among the 420,000 FDAregistered food establishments here and abroad. The Administration’s proposed fiscal year 2007 budget requests about $450 million for the FDA foods program, an 

increase of $11 million over last fiscal year. Within this total, $178 million is earmarked for protecting our food against deliberate attacks, a $20 million increase 

over fiscal year 2006. 

The CFSAN conducts research typically not conducted by industry or other research agencies, which provides the basis for regulating the food-producing and 

processing industries to ensure a safe and nutritious food supply from farm to table. 

It provides the scientific basis for nutrition labeling regulations and guidance, identification of foodborne pathogens, the development of mitigation and prevention 

strategies, as well as identifying and recommending the adoption of innovative technologies that reduce public health concerns related to foodborne pathogens. The 

ASM is concerned with the proposed $5.2 million reduction for the CFSAN in fiscal 

year 2007, and the redirection of resources from base programs that includes cuts 

to the CFSAN’s research program and the loss of 64 full-time employees (FTE). 

With the current increasing trends in importation of produce, the FDA needs to 

strengthen its role in this area, including better sampling and real-time microbiological testing procedures, and more inspectors to provide a greater assurance of 

public health protection. 

Protecting the nation’s food supply from bioterrorism is one of the FDA’s priority 

initiatives for fiscal year 2007, specifically through improved prevention strategies 

and plans, advanced screening methods to detect microbial food contamination, and 

outreach to industry, State, and local stakeholders. The FDA’s Food Defense Initiative is part of an interagency strategy involving the Department of Homeland Security, the USDA, and other government entities. Because of countless possibilities for 

intentional and accidental food contamination, the ASM supports the aggressive 

measures taken by the FDA to inspect, detect, and prevent unsafe foods. For example, in fiscal year 2005, the FDA conducted more than 86,000 import security reviews to identify any imported food and feed products that might be intentionally 

contaminated. Much of the fiscal year 2007 budget increase would expand the FDA’s 

Food Emergency Response Network (FERN) and the Internet-based data exchange 

system used by health labs at all levels, the Electronic Laboratory Exchange Network (eLEXNET). FERN is a network of Federal and State laboratories designed 

to guarantee the analytic surge capacity to respond to any attack on the U.S. food 

system. By the end of fiscal year 2006, the network will incorporate 10 Federal and 

10 State labs; the additional fiscal year 2007 funds will expand the network into 

6 more State labs. Funds also support related basic food defense research and other 

surveillance linkages among Federal, State, and local responders. 

Although impressive in its quantity, quality and diversity, the food supply system 

in the United States nonetheless remains vulnerable to accidental cases of foodborne 

infectious diseases. Health officials report that each year these diseases are responsible for an estimated 76 million illnesses, more than 300,000 hospitalizations, and 

5,000 deaths. The USDA has estimated that each year the most common foodborne 

pathogens cost the U.S. economy as much as $6 billion through direct medical costs 

(acute and chronic cases) and lost productivity. The ASM commends the FDA regulatory and research programs that address health risks related to foods, cosmetics, 

and animal feed and drugs, many of which involve microbial pathogens. 

Globalization of our food sources has diversified American diets, but it also greatly 

increases the possibilities for contamination as we eat more fresh produce, once-unfamiliar foods, and products from less-regulated import sources. Oversight of the 

new genetically engineered foods and recent dramatic growth in the diet supplement 

industry also stretches limited FDA food safety resources. 

An estimated 118,000 illnesses occur each year in the United States due to eggs 

contaminated with Salmonella bacteria (Salmonella caused infections alone account 

for $1 billion yearly in direct and indirect costs). In 2006, the FDA expects to publish its final rule to the States and the egg industry to prevent Salmonella contamination during production, with the intent of reducing the annual human cases by 

at least 33,500. The agency uses on-going surveillance of U.S. foodborne disease out-
543 

breaks to detect any incidents with products regulated by the FDA. It also has several emergency response plans to address sudden threats to food safety, for example, 

post-Katrina deployment to assess stored-food sources in the Gulf Coast, and the 

BSE Emergency Response Plan to quickly evaluate with the USDA any report of 

bovine spongiform encephalopathy in US cattle. For fiscal year 2007, BSE research/ 

detection will be one of the two highest-priority programs at the FDA’s Center for 

Veterinary Medicine, along with reduction of antimicrobial resistance in humans 

now linked to antibiotics fed to food animals. 

Protecting America’s Health—Biomedical Frontiers 

The new Critical Path to Personalized Medicine will be the FDA’s top scientific 

policy initiative for at least the next 5 years, created ‘‘to accelerate the field of personalized, predictive, and preemptive medicine.’’ Economic experts predict that by 

2015 the United States will pay out about 20 percent of its gross domestic product 

on health spending. The FDA is seeking to more efficiently evaluate pre-market biomedical products. The critical path initiative is the Agency’s response to recent stagnation in new product development due to problematic clinical trials or manufacturing procedures that disallow approval FDA from the FDA. By using cutting-edge 

molecular biology technologies, the FDA expects to modernize the medical product 

development process with cooperation from private industry. These technologies also 

will enable scientists from the FDA to evaluate and encourage superior therapies 

personalized or tailored to individual groups of patients, reducing the time-consuming need to approve products for broad use and paving the way to less-expensive 

clinical trials and more effective drugs. The new molecular-based technologies also 

are expected to help predict which patients would benefit from a particular therapy 

and which might suffer ill effects. The ASM agrees with the FDA intent to stimulate 

private industry use of new generations of scientific tools, in order to expedite technology transfer and to help maintain U.S. science-based competitiveness in an expanding global healthcare market. 

Conclusion 

The ASM strongly recommends an increased budget for the FDA, which would 

benefit its important programs and provided need resources for priority initiatives. 

PREPARED STATEMENT OF THE AMERICAN SOCIETY OF PLANT BIOLOGISTS (ASPB) 

The American Society of Plant Biologists (ASPB), a non-profit society representing 

nearly 6,000 plant scientists, urges the Subcommittee to support the President’s fiscal year 2007 budget request of $247.5 million for the Department of Agriculture 

National Research Initiative Competitive Grants Program (NRI). We urge a significant increase for the Cooperative State Research Education, and Extension Service 

(CSREES) and Agricultural Research Service (ARS) over the fiscal year 2006 appropriation. 

Basic plant research supported by USDA–ARS and CSREES, including the NRI, 

provides new knowledge that leads to improved and value-added crops. This enhances economic opportunities for America’s farmers. This in turn benefits rural 

economies and the quality of life in rural communities. 

As ASPB Committee on Public Affairs Chair Roger Innes, Professor, Indiana University, noted, NRI-funded research performed by ASPB members has led to major 

advances in enhancing and protecting the safety of the Nation’s agriculture and food 

supply. ASPB members are also studying how plants accumulate nutrients in order 

to develop crop plants with higher nutrient content and are learning how plants utilize water and soil nutrients (e.g. nitrogen and phosphorous) in an effort to develop 

crops that require less fertilizer, which would have major environmental, economic 

and health benefits. 

Advances in science made possible through the NRI will enable farmers to reduce 

their dependency on pesticides and antibiotics and to protect the water supply, soils 

and fragile ecosystems, noted ASPB Committee on Public Affairs Chair Pamela Ronald, Professor, University of California, Davis. 

Research sponsored by the NRI contributes to higher yields and safer foods. The 

NRI contributes to the talent pool of agricultural scientists in the states and Nation 

to better serve the needs of producers and consumers. Without grant support from 

the NRI, the agricultural research community in our Nation would be severely 

weakened, commented ASPB President Michael Thomashow, Professor, Michigan 

State University. 

Research leading to improved energy crops could boost economies in rural and 

urban areas of America while reducing dependence on foreign oil. USDA and DOE 

reported in April how more than 33 percent of our Nation’s transportation fuels 
544 

could be supplied by homegrown biofuels compared to the current two percent. This 

would help cut the Nation’s trade deficit, while also reducing carbon emissions. We 

applaud the Department of Agriculture for its own and collaborative efforts with the 

Department of Energy and National Science Foundation to increase basic understanding of plants for enhanced production of biofuels. Advances in plant research 

that have helped farmers give Americans the world’s lowest cost for food (as the 

share of personal income) could also lower fuel costs and stabilize energy supplies. 

The majority of ASPB members perform research that addresses fundamental 

questions in plant biology. It is this basic research that leads to unexpected breakthroughs and new approaches to improving crop production. For example, the discovery of RNA interference arose from basic research on the control of gene expression and on virus resistance in plants, but is now revolutionizing research and applications in both plant and human biology. ASPB urges the Subcommittee to continue supporting USDA-sponsored world leading basic plant biology research. New 

enhanced crops result from research directly on crops and on simpler model plants 

with shared traits, such as Arabidopsis. 

Tremendous advancements in our understanding of plant genomes have been 

made in the last 5 years. These advancements have greatly accelerated our ability 

to identify genes controlling important agricultural traits such as disease resistance, 

flowering time, and drought tolerance. These genomic resources have also greatly 

enhanced our abilities to use molecular breeding tools to develop superior crop varieties, Innes commented. 

We have recommended in the past that the NRI increase funding awarded for individual research grants for both direct and indirect costs, but not decrease the total 

number of grants awarded. This requires substantial additional funding for the NRI 

program. Due to overall budget constraints, the NRI budget for existing programs 

has not increased at a rate to keep pace with the higher grant award levels, that 

are more comparable now to award levels from other research agencies. As a result, 

to accomplish an increase in award sizes, the NRI has had to fund fewer grants. 

This has caused funding rates to plummet. 

If such low funding rates are maintained, it will cause many research labs to close 

and make it difficult for universities to justify maintaining faculty in these areas. 

It will also make it very difficult to attract new students and faculty into plant biology, just at a time when the opportunities for rapid advancement are unprecedented. A substantial increase as requested by the President for the NRI would lead 

to a higher number of awards in plant biology and other areas. This will result in 

more benefits in crop yields, human health and nutrition, environmental quality, 

clean energy production and farming practices. 

Continued support for a balanced research portfolio in the Department including 

extramural and intramural research is needed to address the many and sometimes 

devastating problems farmers face in growing crops. CSREES and ARS continue to 

address very effectively many important research questions for American agriculture. 

We deeply appreciate the Subcommittee’s support for research sponsored by the 

Department of Agriculture. The Subcommittee’s support has been essential to producing and securing the Nation’s food supply. 

Disclosure statement on Federal grant support 

The American Society of Plant Biologists (ASPB) received Federal grants from 

USDA–CSREES in the amount of $7,000 in each of fiscal years 2005 and 2006 to 

help coordinate the USDA–CSREES Plant and Pest Biology Stakeholders’ Workshop 

and print the subsequent workshop report. Many associations representing growers 

of commodity crops; science societies representing the research community; and officials administering Federal research programs participated. 

PREPARED STATEMENT OF THE CALIFORNIA INDUSTRY AND GOVERNMENT CENTRAL

CALIFORNIA OZONE STUDY COALITION

Mr. Chairman and Members of the Subcommittee: On behalf of the California Industry and Government Central California Ozone Study (CCOS) Coalition, we are 

pleased to submit this statement for the record in support of our fiscal year 2007 

funding request of $400,000 from the Department of Agriculture for CCOS. These 

funds are necessary for the State of California to address the very significant challenges it faces to comply with new national ambient air quality standards for ozone 

and fine particulate matter. The study design incorporates recent technical recommendations from the National Academy of Sciences (NAS) on how to most effectively comply with Federal Clean Air Act requirements. 
545 

First, we want to thank you for your past assistance in obtaining Federal funding 

for the Central California Ozone Study (CCOS) and California Regional PM10/PM2.5

Air Quality Study (CRPAQS). Your support of these studies has been instrumental 

in improving the scientific understanding of the nature and cause of ozone and particulate matter air pollution in Central California and the Nation. Information 

gained from these two studies is forming the basis for the 8-hour ozone, PM2.5, and 

regional haze State Implementation Plans (SIPs) that are due in 2007 (ozone) and 

2008 (particulate matter/haze). As with California’s previous SIPs, the 2007–2008 

SIPs will need to be updated and refined due to the scientific complexity of our air 

pollution problem. Our request this year would fund the completion of CCOS to address important questions that won’t be answered with results from previously funded research projects. 

To date, our understanding of air pollution and the technical basis for SIPs has 

largely been founded on pollutant-specific studies, like CCOS. These studies are conducted over a single season or single year and have relied on modeling and analysis 

of selected days with high concentrations. Future SIPs will be more complex than 

they were in the past. The National Academy of Sciences (NAS) is now recommending a weight-of-evidence approach that will involve utilizing more broad-based, 

integrated methods, such as data analysis in combination with seasonal and annual 

photochemical modeling, to assess compliance with Federal Clean Air Act requirements. This will involve the analysis of a larger number of days and possibly an 

entire season. In addition, because ozone and particulate matter are formed from 

some of the same emissions precursors, there is a need to address both pollutants 

in combination, which CCOS will do. 

Consistent with the new NAS recommendations, the CCOS study includes corroborative analyses with the extensive data provided by past studies, advances the 

state-of-science in air quality modeling, and addresses the integration of ozone and 

particulate pollution studies. In addition, the study will incorporate further refinements to emission inventories, address the development of observation-based analyses with sound theoretical bases, and includes the following four general components: 

Performing SIP modeling analyses ...................................................................................................................... 2005–2011 

Conducting weight-of-evidence data analyses ................................................................................................... 2006–2008 

Making emission inventory improvements ........................................................................................................... 2006–2010 

Performing seasonal and annual modeling ........................................................................................................ 2008–2011 

CCOS is directed by Policy and Technical Committees consisting of representatives from Federal, State, and local governments, as well as private industry. These 

committees, which managed the San Joaquin Valley Ozone Study and are currently 

managing the California Regional Particulate Air Quality Study, are landmark examples of collaborative environmental management. The proven methods and established teamwork provide a solid foundation for CCOS. 

For fiscal year 2007, our Coalition is seeking funding of $400,000 from the Department of Agriculture/CSREES in support of CCOS. Domestic agriculture is facing 

increasing international competition. Costs of production and processing are becoming increasingly more critical. With the current SJV PM10 SIP and the upcoming 

ozone and PM2.5 SIPs, the agricultural industry within the study area is facing 

many new requirements to manage and reduce their air quality impacts. The identification of scientifically validated, cost-effective options for reducing the environmental impacts of on-field and livestock related air emissions will contribute significantly to the long-term health and economic stability of local agriculture. Funding 

will support livestock and crop-related research that will help maintain a vital agricultural industry within the state. Research will be focused to measure baseline 

emissions, and to study the most economical and effective approaches for reducing 

the impacts of agriculture on air quality. These studies also have nationwide benefits. 

The funding request is for: (1) Study of agricultural VOC emissions from pesticide 

application that will help answer questions relevant to farmers and regulators 

throughout the Nation, (2) Evaluation of baseline livestock emissions (VOCs, PM10, 

ammonia) and effective methods to reduce these emissions, (3) Development of livestock facility emissions models as recommended by the National Academy of 

Sciences and (4) Improvement of emissions estimates for agricultural related diesel 

engines, both on-road and off-road. This includes emission factors, activity data, 

fleet characteristics, seasonality of emissions, and benefits of incentive programs to 

accelerate the introduction of cleaner engines. 

Thank you very much for your consideration of our request. 
546 

PREPARED STATEMENT OF THE COALITION ON FUNDING AGRICULTURAL RESEARCH

MISSIONS (COFARM) 

The Coalition on Funding Agricultural Research Missions (CoFARM) appreciates 

the opportunity to submit testimony on the fiscal year 2007 appropriation for the 

United States Department of Agriculture (USDA). CoFARM is a coalition of 23 professional scientific organizations with 130,000 members dedicated to advancing and 

sustaining a balanced investment in our Nation’s research portfolio. 

The USDA sponsors research and education programs which contribute to solving 

agricultural problems of high national priority and ensuring food availability, nutrition, quality and safety, as well as a competitive agricultural economy. U.S. agriculture faces new challenges, including threats from emerging infectious diseases in 

plants and animals, climate change, and public concern about food safety and security. It is critical to increase the visibility and investment in agriculture research 

to respond to these challenges and we appreciate the Subcommittee’s efforts to fund 

the National Research Initiative at $181 million in fiscal year 2006 and urge the 

Subcommittee to support the Administration’s fiscal year 2007 request of $247.5 

million for this program. 

USDA National Research Initiative Competitive Grants Program 

The National Research Initiative Competitive Grants Program (NRI) was established in 1991 in response to recommendations outlined in Investing in Research: 

A Proposal to Strengthen the Agricultural, Food and Environmental System, a 1989 

report by the National Research Council’s (NRC) Board on Agriculture. This publication called for increased funding of high priority research that is supported by 

USDA through a competitive peer-review process directed at: 

—Increasing the competitiveness of U.S. agriculture. 

—Improving human health and well-being through an abundant, safe, and highquality food supply. 

—Sustaining the quality and productivity of the natural resources and the environment upon which agriculture depends. 

Continued interest in and support of the NRI is reflected in two subsequent NRC 

reports, Investing in the National Research Initiative: An Update of the Competitive 

Grants Program of the U.S. Department of Agriculture, published in 1994, and National Research Initiative: A Vital Competitive Grants Program in Food, Fiber, and 

Natural Resources Research, published in 2000. 

Today, the NRI, housed within USDA’s Cooperative State Research, Education, 

and Extension Service (CSREES), supports research on key problems of national 

and regional importance in biological, environmental, physical, and social sciences 

relevant to agriculture, food, and the environment on a peer-reviewed, competitive 

basis. Additionally, NRI enables USDA to develop new partnerships with other Federal agencies that advance agricultural science. Examples of such collaborations include USDA’s involvement in the Microbial Genome Sequencing Program, the Maize 

Genome Program, the Microbial Observatories program, the Plant Feedstock 

Genomics for Bioenergy program, the Metabolic Engineering program, and the Climate Change Science Plan. 

CoFARM Urges Congress To Support the Administration’s Requested Increase or 

NRI in Fiscal Year 2007.—NRI’s proposed increase comes from the shifting of 

CSREES Integrated Activities, such as food safety, pest management, and water 

quality, making up $42.7 million of the proposed increase, providing a net increase 

of $24 million for NRI including the additional responsibility of the Integrated Programs. CoFARM supports the Administration’s effort to increase competitively 

awarded funding mechanisms and believes that competitive grants ensure the best 

science. 

Past investments in agricultural research have yielded many breakthroughs in 

American agricultural productivity, including these few Hatch and NRI funded research success stories: 

—Pennsylvania researchers are developing rapid diagnostic tests to curb avian influenza, a disease that could cripple the state’s $700 million poultry industry. 

—University of Maryland researchers have created an advanced machine vision 

technology to detect bone fragments and foreign objects in meat. 

—Researchers in Florida have tested a common fern’s ability to soak up arsenic, 

a cancer-causing heavy metal, from contaminated soils. The market for plantbased remediation of wastes is estimated to be $370 million in 2005. 

—Entomologists and Nematologists developed a vaccine for the protection of cattle 

from the horn fly, a major insect pest in many parts of the world costing the 

North American cattle industry alone more than $1 billion annually. 
547 

—As a result of NRI funding, a group of economists found that the competitive 

environment of supermarket retailers encourages patterns of adoption of food 

products using technologies that are new to the market. 

—Through NRI funded research, scientists developed a new assay that allows for 

rapid identification of Clostridium perfringens, which is associated with common food-borne illness, in hospital outbreaks and has resulted in improved diagnostic procedures. 

—Florida family and youth researchers have shed light on crime and violence 

trends in schools and evaluated prevention programs. The result has been a decline in disruptive behavior in classrooms by 40 percent over 2 years. The work 

is a national model for improving school safety. 

Congress must enhance funding for agricultural research to assure Americans of 

a safe and nutritious food supply and to provide for the next generation of research 

scientists. 

CoFARM appreciates the opportunity to provide written testimony and would be 

pleased to assist the Subcommittee as the Department of Agriculture bill is considered throughout the appropriations process. 

PREPARED STATEMENT OF THE COALITION TO PROMOTE U.S. AGRICULTURAL EXPORTS

As members of the Coalition to Promote U.S. Agricultural Exports, we commend 

the Chairman and members of the Subcommittee for their interest and support of 

U.S. agriculture and express our appreciation for this opportunity to share our 

views. 

The Coalition to Promote U.S. Agricultural Exports is an ad hoc coalition of over 

100 organizations, representing farmers and ranchers, fishermen and forest product 

producers, cooperatives, small businesses, regional trade organizations, and the 

State Departments of Agriculture (see attached). We believe the United States must 

continue to have in place policies and programs that help maintain the ability of 

American agriculture to compete effectively in a global marketplace still characterized by highly subsidized foreign competition. 

With the 2002 Farm Bill, Congress sought to bolster U.S. trade expansion efforts 

by approving an increase in funding for the Market Access Program (MAP) and the 

Foreign Market Development (FMD) Program. This commitment began to reverse 

the decline in funding for these important export programs that occurred over the 

previous decade. For fiscal year 2007, the Farm Bill authorizes funding for MAP at 

$200 million, and FMD is authorized at $34.5 million. The Coalition strongly urges 

that both programs be funded at the full authorized levels in order to carry out important market development activities. These are the same levels of funding included in the fiscal year 2006 Agriculture Appropriations bill that was signed into 

law last November. 

Farm income and agriculture’s economic well-being depend heavily on exports, 

which account for over 25 percent of U.S. producers’ cash receipts, provide jobs for 

nearly one million Americans, and make a positive contribution to our nation’s overall trade balance. In fiscal year 2006, U.S. agriculture exports are projected to reach 

$64.5 billion which, if realized, would make it the highest export sales year ever. 

However, exports could be significantly higher if it were not for a combination of 

factors, including continued high levels of subsidized foreign competition and related 

steep artificial trade barriers. Agricultural imports are also forecast to be a record 

$63.5 billion, continuing a 35-year upward trend that has increased at a faster pace 

recently. If these projections hold, then agriculture’s trade surplus is only expected 

to be about $1 billion, a huge decline from the roughly $27 billion surplus of fiscal 

year 1996. In fiscal year 1999, the U.S. recorded its first agricultural trade deficit 

with the EU of $1 billion. In fiscal year 2006, USDA forecasts that the trade deficit 

with the EU will grow to $6.8 billion, the largest agriculture deficit the United 

States runs with any market. 

America’s agricultural industry is willing to continue doing its best to offset the 

alarming trade deficit confronting our country. However, the support provided by 

MAP and FMD (both green box programs) is essential to this effort. 

According to USDA, the European Union (EU) spent more than $3.25 billion on 

agricultural export subsidies in 2003, compared to approximately $30 million by the 

United States. In other words, the United States is being outspent by more than 

100 to 1 by the EU alone with regard to the use of export subsidies. 

In recent years, the EU, the Cairns group, and other foreign competitors also devoted approximately $1.2 billion on various market development activities to promote their exports of agricultural, forestry, and fishery products. A significant portion of this is carried out in the United States. Market promotion is permitted under 
548 

World Trade Organization (WTO) rules, with no limit on public or producer funding, 

and is not expected to be subject to any disciplines in the Doha Round negotiations. 

As a result, it is increasingly seen as a centerpiece of a winning strategy in the future trade battleground. Many competitor countries have announced ambitious 

trade goals and are shaping export strategies to target promising growth markets 

and bring new companies into the export arena. European countries are expanding 

their promotional activities in Asia, Latin America, and Eastern Europe. Canada, 

Australia, New Zealand, and Brazil have also budgeted significant investments in 

export promotion expenditures worldwide in recent years. As the EU and our other 

foreign competitors have made clear, they intend to continue to be aggressive in 

their export efforts. 

Both MAP and FMD are administered on a cost-share basis with farmers and 

other participants required to contribute up to 50 percent of their own resources. 

These programs are among the few tools specifically allowed in unlimited amounts 

under WTO rules to help American agriculture and American workers remain competitive in a global marketplace still characterized by highly subsidized foreign competition. The over 70 U.S. agricultural groups that share in the costs of the MAP 

and FMD programs fully recognize the export benefits of market development activities. Since 1992, MAP participants have increased their contributions from 30 percent (30 cents for every dollar contributed by USDA) to 166 percent ($1.66 in industry funds for every USDA dollar). For FMD, the contribution rate has risen from 

76 percent to the current level of 139 percent. By any measure, such programs have 

been tremendously successful and extremely cost-effective in helping maintain and 

expand U.S. agricultural exports, protect American jobs, and strengthen farm income. 

Competing in the agricultural export market carries new challenges and opportunities for U.S. agriculture. Not only is the competition becoming more intense with 

increased funding being brought to bear, but we also face a world where new trade 

agreements are being developed almost daily. The United States is also negotiating 

trade agreements with the goal of opening new market opportunities for U.S. agriculture. In addition, the opening of the Iraq market and the markets of other previously sanctioned countries will offer further opportunities and challenges. 

For all these reasons, we want to emphasize again the need to strengthen the 

ability of U.S. agriculture to compete effectively in the global marketplace. American 

agriculture is among the most competitive industries in the world, but it cannot and 

should not be expected to compete alone in export markets against the treasuries 

of foreign governments. As a Nation, we can work to export our products, or we can 

export our jobs. Eliminating or reducing funding for MAP and FMD in the face of 

continued subsidized foreign competition, and during ongoing Doha Round trade negotiations, would put American farmers and workers at a substantial competitive 

disadvantage and would be nothing short of unilateral disarmament. USDA’s export 

programs, such as MAP and FMD, are a key part of an overall trade strategy that 

is pro-growth, pro-trade and pro-job. 

Again, as members of the Coalition to Promote U.S. Agricultural Exports, we appreciate very much this opportunity to share our views and we ask that this statement be included in the official hearing record. 

PREPARED STATEMENT OF THE COLORADO RIVER BASIN SALINITY CONTROL FORUM

The Congress concluded that the Colorado River Basin Salinity Control Program 

(Program) should be implemented in the most cost-effective way. Realizing that agricultural on-farm strategies were some of the most cost-effective strategies, the 

Congress authorized a program for the United States Department of Agriculture 

(USDA) through amendment of the Colorado River Basin Salinity Control Act in 

1984. With the enactment of the Federal Agriculture Improvement and Reform Act 

of 1996 (FAIRA), the Congress directed that the Program should continue to be implemented as one of the components of the Environmental Quality Incentives Program (EQIP). Since the enactment of the Farm Security and Rural Investment Act 

(FSRIA) in 2002, there have been, for the first time in a number of years, opportunities to adequately fund the Program within the EQIP. 

The Program, as set forth in the Colorado River Basin Salinity Control Act, is to 

benefit Lower Basin water users hundreds of miles downstream from salt sources 

in the Upper Basin as the salinity of Colorado River water increases as the water 

flows downstream. There are very significant economic damages caused by high salt 

levels in this water source. Agriculturalists in the Upper Basin where the salt must 

be controlled, however, don’t first look to downstream water quality standards but 

look for local benefits. These local benefits are in the form of enhanced beneficial 
549 

use and improved crop yields. They submit cost-effective proposals to the State Conservationists in Utah, Wyoming and Colorado and offer to cost share in the acquisition of new irrigation equipment. The Colorado River Basin Salinity Control Act 

provides that the seven Colorado River Basin States will also cost share with the 

Federal funds for this effort. This has brought together a remarkable partnership. 

After longstanding urgings from the States and directives from the Congress, the 

USDA has concluded that this program is different than small watershed enhancement efforts common to the EQIP. In this case, the watershed to be considered 

stretches more than 1,200 miles from the river’s headwater in the Rocky Mountains 

to the river’s terminus in the Gulf of California in Mexico and receives water from 

numerous tributaries. The USDA has determined that this effort should receive a 

special funding designation and has appointed a coordinator for this multi-state effort. 

In recent fiscal years, the Natural Resources Conservation Service (NRCS) has directed that over $19 million be used for the Program. The Forum appreciates the 

efforts of the NRCS leadership and the support of this subcommittee. The plan for 

water quality control of the Colorado River was prepared by the Colorado River 

Basin Salinity Control Forum (Forum), adopted by the States, and approved by the 

United States Environmental Protection Agency (EPA). The Colorado River Basin 

Salinity Control Advisory Council has taken the position that the funding for the 

salinity control program should not be below $20 million per year. Over the last 3 

fiscal years, for the first time, funding almost reached the needed level. State and 

local cost-sharing is triggered by the Federal appropriation. In fiscal year 2006, it 

is anticipated that the States will cost share with about $8.3 million and local agriculture producers will add another $7.5 million. Hence, it is anticipated that in fiscal year 2005 the State and local contributions will be 45 percent of the total program cost. 

Over the past few years, the NRCS has designated that about 2.5 percent of the 

EQIP funds be allocated to the Colorado River salinity control program. The Forum 

believes this is the appropriate future level of funding as long as the total EQIP 

funding nationwide is around $1 billion. Funding above this level assists in offsetting pre-fiscal year 2003 funding below this level. The Basin States have cost sharing dollars available to participate in funding on-farm salinity control efforts. The 

agricultural producers in the Upper Basin are waiting for their applications to be 

considered so that they might improve their irrigation equipment and also cost 

share in the Program. 

OVERVIEW

The Program was authorized by the Congress in 1974. The Title I portion of the 

Colorado River Basin Salinity Control Act responded to commitments that the 

United States made, through a Minute of the International Boundary and Water 

Commission, to Mexico specific to the quality of water being delivered to Mexico 

below Imperial Dam. Title II of the Act established a program to respond to salinity 

control needs of Colorado River water users in the United States and to comply with 

the mandates of the then newly-enacted Clean Water Act. This testimony is in support of funding for the Title II program. 

After a decade of investigative and implementation efforts, the Basin States concluded that the Salinity Control Act needed to be amended. The Congress agreed 

and revised the Act in 1984. That revision, while keeping the Department of the 

Interior as lead coordinator for Colorado River Basin salinity control efforts, also 

gave new salinity control responsibilities to the USDA. The Congress has charged 

the Administration with implementing the most cost-effective program practicable 

(measured in dollars per ton of salt controlled). It has been determined that the agricultural efforts are some of the most cost-effective opportunities. 

Since Congressional mandates of nearly 3 decades ago, much has been learned 

about the impact of salts in the Colorado River system. The Bureau of Reclamation 

(Reclamation) has conducted studies on the economic impact of these salts. Reclamation recognizes that the damages to United States’ water users alone are hundreds 

of millions of dollars per year. 

The Forum is composed of gubernatorial appointees from Arizona, California, Colorado, Nevada, New Mexico, Utah and Wyoming. The Forum has become the sevenstate coordinating body for interfacing with Federal agencies and the Congress in 

support of the implementation of the Salinity Control Program. In close cooperation 

with the EPA and pursuant to requirements of the Clean Water Act, every 3 years 

the Forum prepares a formal report evaluating the salinity of the Colorado River, 

its anticipated future salinity, and the program elements necessary to keep the salinity concentrations (measured in Total Dissolved Solids—TDS) at or below the lev-
550 

els measured in the river system in 1972 at Imperial Dam, and below Parker and 

Hoover Dams. 

In setting water quality standards for the Colorado River system, the salinity concentrations at these three locations in 1972 have been identified as the numeric criteria. The plan necessary for controlling salinity and reducing downstream damages 

has been captioned the ‘‘Plan of Implementation.’’ The 2005 Review of water quality 

standards includes an updated Plan of Implementation. In order to eliminate the 

shortfall in salinity control resulting from inadequate Federal funding for a number 

of years from the USDA, the Forum has determined that implementation of the Program needs to be accelerated. The level of appropriation requested in this testimony 

is in keeping with the agreed upon plan. If adequate funds are not appropriated, 

significant damages from the higher salt concentrations in the water will be more 

widespread in the United States and Mexico. 

Concentrations of salts in the river cause $330 million in quantified damages and 

significantly more in unquantified damages in the United States and result in poorer quality water being delivered by the United States to Mexico. Damages occur 

from: 

—a reduction in the yield of salt sensitive crops and increased water use for leaching in the agricultural sector, 

—a reduction in the useful life of galvanized water pipe systems, water heaters, 

faucets, garbage disposals, clothes washers, and dishwashers, and increased use 

of bottled water and water softeners in the household sector, 

—an increase in the use of water for cooling, and the cost of water softening, and 

a decrease in equipment service life in the commercial sector, 

—an increase in the use of water and the cost of water treatment, and an increase 

in sewer fees in the industrial sector, 

—a decrease in the life of treatment facilities and pipelines in the utility sector, 

—difficulty in meeting wastewater discharge requirements to comply with National Pollutant Discharge Elimination System permit terms and conditions, 

and an increase in desalination and brine disposal costs due to accumulation 

of salts in groundwater basins, and 

—increased use of imported water for leaching and cost of desalination and brine 

disposal for recycled water. 

For every 30 mg/L increase in salinity concentrations, there is $75 million in additional damages in the United States. The Forum, therefore, believes implementation 

of the USDA program needs to be funded at 2.5 percent of the total EQIP funding. 

Although the Program thus far has been able to implement salinity control measures that comply with the approved plan, recent drought years have caused salinity 

levels to rise in the river. Predictions are that this will be the trend for the next 

several years. This places an added urgency for acceleration of the implementation 

of the Program. 

STATE COST-SHARING AND TECHNICAL ASSISTANCE

The authorized cost sharing by the Basin States, as provided by FAIRA, was at 

first difficult to implement as attorneys for the USDA concluded that the Basin 

States were authorized to cost share in the effort, but the Congress had not given 

the USDA authority to receive the Basin States’ funds. After almost a year of exploring every possible solution as to how the cost sharing was to occur, the States, 

in agreement with Reclamation, State officials in Utah, Colorado and Wyoming and 

with NRCS State Conservationists in Utah, Colorado and Wyoming, agreed upon a 

program parallel to the salinity control activities provided by the EQIP wherein the 

States’ cost sharing funds are being contributed and used. We are now several years 

into that program and, at this moment in time, this solution to how cost sharing 

can be implemented appears to be satisfactory. 

With respect to the States’ cost sharing funds, the Basin States felt that it was 

most essential that a portion of the Program be associated with technical assistance 

and education activities in the field. Without this necessary support, there is no advanced planning, proposals are not well prepared, assertions in the proposals cannot 

be verified, implementation of contracts cannot be observed, and valuable 

partnering and education efforts cannot occur. Recognizing these values, the ‘‘parallel’’ State cost sharing program expends 40 percent of the funds available on these 

needed support activities made possible by contracts with the NRCS. Initially, it 

was acknowledged that the Federal portion of the Program funded through EQIP 

was starved with respect to needed technical assistance and education support. The 

Forum is encouraged with a recent Administration acknowledgment that technical 

assistance must be better funded. 
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PREPARED STATEMENT OF THE COUNCIL ON FOOD, AGRICULTURAL, & RESOURCE ECO- NOMICS (C–FARE) AND THE CONSORTIUM OF SOCIAL SCIENCE ASSOCIATIONS

(COSSA) 

Dear Chairman Bennett, Ranking Member Kohl and Members of the Subcommittee: The Council on Food, Agricultural, and Resource Economics (C–FARE) 

and the Consortium of Social Science Associations (COSSA) appreciate the opportunity to submit testimony on the fiscal year 2007 appropriation for the United 

States Department of Agriculture. C–FARE is a non-profit, non-partisan organization dedicated to strengthening the presence of the agricultural, natural resources, 

and applied economics profession to matters of science policy and Federal budget determination, and we represent approximately 3,500 economists nationwide. COSSA 

is an advocacy organization for the social and behavioral sciences supported by more 

than 100 professional associations, scientific societies, universities, and research institutes. 

Our organizations understand the challenges the Senate Agriculture Appropriations Subcommittee faces given the tight fiscal year 2007 agriculture budget. We 

also recognize that the Agriculture Appropriations bill has many valuable and necessary components, and we applaud the efforts of the Subcommittee to fund mission-critical research. Below are listed recommendations for the fiscal year 2007 appropriations cycle. 

USDA COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE (CSREES)

National Research Initiative 

C–FARE and COSSA endorse funding for the National Research Initiative Com- petitive Grants Program (NRI) at the President’s proposed level of $247.5 million. 

The NRI encourages high quality research that is conducted through a peer reviewed format. In particular, the research issues addressed by Markets and Trade 

and Rural Development are diverse and multi-faceted. Social Science research also 

enhances ideas and technologies from other fields of science and research which 

adds value to their role in the NRI. 

C–FARE and COSSA requests that any new monies appropriated for the NRI, as 

requested by the administration, allow the Secretary the discretion to apply up to 

30 percent towards carrying out the NRI integrated research, extension and education competitive grants program. 

Our organizations applaud the administration’s proposal to eliminate the indirect 

cost cap on the NRI, set at 20 percent for fiscal year 2005, which will broaden its 

appeal by putting the NRI on equal footing with other Federal competitive grants 

programs. 

Social Science research is highly valued by USDA and much of what our scientists 

offer can help meet the strategic goals of CSREES. For example, social science research meets CSREES strategic goal number 1, ‘‘Enhance Economic Opportunities 

for Agricultural Producers’’ by providing science-based information, knowledge, and 

education to help farmers and ranchers understand risk management, and the longterm impacts of trade barriers. Research by our members also meets CSREES goal 

number 2, ‘‘Support Increased Economic Opportunities and Improved Quality of Life 

in Rural America,’’ by providing information to help inform decisions affecting the 

quality of life in rural America. Therefore, we request that the Committee encourage 

CSREES to fund the social science research components of the NRI at a level sufficient to allowing scientists to address these unmet research needs. Within the last 

year, USDA changed funding for these core congressionally-mandated programs to 

every other year, rather than on a yearly basis. 

Formula Funding.—Cuts to and proposed elimination of CSREES’ formula-funded 

research programs can be detrimental to the entire USDA research portfolio. Formula Funds support the continuing costs of research activities while providing for 

long-term commitments to research that is often essential. Because of their timing 

and potential regional and intra-state impacts, much of the infrastructure needed 

to conduct competitively award research would be compromised if formula funds 

were cut. This would mean a huge and potentially damaging loss of research data 

nationwide. A balance of funding mechanisms, including competitive awards and 

formula funding, is essential if the capacity of the United States to conduct agricultural research, both basic and applied, is to be maintained and the country is to 

continue to excel in areas such as agricultural production and expanding the quality 

of rural life. 

USDA Economic Research Service (ERS) 

C–FARE and COSSA support the President’s proposed fiscal year 2007 funding 

level for the Economic Research Service (ERS) initiatives. The President’s budget in-
552 

cludes $5.0 million towards the Agricultural and Rural Development Information 

System (ARDIS) to help ERS establish and maintain data collection on the demographic, economic, government program participation, and other household wellbeing information from samples of non-farm rural households and rural-based farm 

households, over time. The scientists our organizations represent need exactly such 

new and valuable data for a variety of purposes, including estimating impacts of 

farm policy changes. Simultaneously collecting the same data and information from 

panels of farm and non-farm households in the same rural area makes it possible 

to determine just how farm and non-farm rural households are different from or 

similar to one another, and provides a far more definitive than currently available 

basis for judging whether and to what extent farm policy changes spill over into the 

rural economy. We urge full funding of this initiative to assure that agricultural and 

rural economic analysts can reap the minimum necessary value added that will, in 

turn, enhance their contributions to a sound farm policy and robust rural economies 

throughout the Nation. We also support the President’s proposal of $1.6 million for 

the ERS Consumer Data and Information System at ERS. The funding will include 

a comprehensive food data system that will be used to obtain food away from home 

information. C–FARE and COSSA believe funding this program is an important contribution to the government wide effort to fight obesity. 

USDA National Agricultural Statistics Service (NASS) 

C–FARE and COSSA recommend supporting the President’s priority activities for 

NASS. These include a net increase of $14 million for funding for agricultural estimates, Census of Agriculture, and pay costs. Of the proposed increase, it is necessary to support $3.9 million for Agricultural Estimates Restoration and Modernization. This initiative will continue NASS’ efforts to restore quality and modernization of the basic USDA agricultural estimates program that supports the U.S. 

agricultural market system. The increase will also include $7.3 million for the 2007 

Census of Agriculture. The census data are relied upon to measure trends and new 

developments in the agricultural sector. 

USDA Agriculture Marketing Service (AMS) 

C–FARE and COSSA encourage Congress to continue supporting USDA’s AMS at 

a level that will allow them to continue offering the high value programs they provide. As economists and social scientists we appreciate that the AMS programs promote a competitive and efficient marketplace. AMS services such as standardization, 

grading, market news, commodity procurement, and other market-facilitating activities benefit both consumers and producers. For the research community specifically, 

AMS market news services provide in-depth data regarding a wide range of commodities and modes of transportation; such basic information is invaluable for analysis. AMS also supports research on marketing and transportation issues through 

cooperative agreements and through the Federal-State Marketing Improvement Program. 

USDA Grain Inspection, Packers, and Stockyards Administration (GIPSA) 

C–FARE and COSSA also value the vital work of GIPSA to help USDA enhance 

economic opportunities for agricultural producers by promoting fair and competitive 

trade practices and financial integrity in the grain, livestock, meat and poultry industries. GIPSA reports provide information that aid in the development of industry 

standards and policy decision-making. Several of these reports are used in the research conducted by social scientists. In particular, the Packers and Stockyards Statistical Report provides researchers with data on industry concentration, plant size, 

and other industry economic information. The data helps social science researchers 

study important social and economic issues, including concentration in the meat 

packing industry. We encourage Congress to continue providing appropriate support 

for GIPSA and their important programs. 

USDA Natural Resources Conservation Service (NRCS) 

Our organizations also support sustained investment in our Nation’s natural resources and environment. We applaud USDA NRCS for promoting conservation and 

sustainable use of natural resources on the Nation’s private lands. NRCS helps provide science-based knowledge to improve the management of forests, rangelands, 

soil, air and water resources. Social science researchers use this vital information 

to develop policy recommendations that impact the future of our agricultural sector, 

as well as life in rural America. 

Conclusion 

Recent security threats facing America require new and expanded agricultural research to protect our Nation’s forests, water supplies, food processing and distribu-
553 

tion network, and rural communities and insure the future security, safety and sustainability of America’s food and fiber system. In order to address these challenges 

and maintain our position in an increasingly competitive world, we must continue 

to support research programs such as the NRI and formula funding, and information systems such as those provided by ERS. 

Thank you for the opportunity to present our recommendations. As you know, 

past investments in agricultural research have yielded many breakthroughs in 

American agricultural productivity. If you have any questions or concerns regarding 

our priorities please do not hesitate to contact us. 

C–FARE DISCLOSURE OF GOVERNMENT CONTRACTS AND GRANTS 2004–2006 

Agency Year Background 

USDA CSREES ............................................... 2005 $10,000 to help support C–FARE’s Educational Outreach Activities by funding a 2004 conference on ‘‘Partnering for Agricultural Research.’’ The conference invited in scientists from 

universities, government and private sector to discuss ways to 

partner for enhanced research. 

USDA ERS ...................................................... 2004 $25,000 to help support C–FARE’s Educational Outreach Activities by funding a 2004 conference on ‘‘Partnering for Agricultural Research.’’ The conference invited in scientists from 

universities, government and private sector to discuss ways to 

partner for enhanced research. Other portions of the funding 

were dedicated to other education activities with academic 

scientists. 

USDA ERS ...................................................... 2005 $25,000 to help support C–FARE’s Educational Outreach Activities by helping provide funding for C–FARE’s intern briefings, 

and other educational seminars. 

USDA NASS .................................................... 2004 $7,500 to help support C–FARE’s Educational Outreach Activities 

by funding a 2004 conference on ‘‘Partnering for Agricultural 

Research.’’ The conference invited in scientists from universities, government and private sector to discuss ways to partner for enhanced research. 

USDA NASS .................................................... 2005 $7,500 in funding helped provide educational seminars to college students about careers in Washington, DC and other 

educational seminars 

EPA ................................................................ 2004 $5,000 to help support a 2003 conference on how to use various 

database systems. 

PREPARED STATEMENT OF DEFENDERS OF WILDLIFE

On behalf of our members and supporters, Defenders of Wildlife appreciates the 

opportunity to comment upon the fiscal year 2007 budget for the U.S. Department 

of Agriculture. Defenders of Wildlife is a national nonprofit conservation organization committed to preserving the integrity and diversity of natural ecosystems, preventing the decline of native species, and restoration of threatened habitats and 

wildlife populations. 

Defenders of Wildlife has concerns about the administration’s fiscal year 2007 

budget and we strongly oppose a number of changes the Bush Administration’s proposed fiscal year 2007 budget would make to Farm Bill conservation programs. 

While we applaud the administration’s recommendations to fully fund the Wetlands 

Reserve Program, the Bush Administration’s proposal continues to attempt to rewrite the Farm Bill to the great detriment of the suite of USDA voluntary conservation programs. We make recommendations in the following priority areas. 2002 

Farm Bill Conservation Title Programs 

Resource conservation programs within the Farm Security and Rural Investment 

Act of 2002 (Public Law 107–171) (Farm Bill) provide an integrated approach, 

through incentives and technical assistance, to both production and stewardship of 

farm and ranch lands and the environment. Further, these programs have been particularly valuable in providing resources for addressing threatened and endangered 

species conservation issues. The 2002 Farm Bill tried to achieve a balance between 

farm commodity provisions and critical conservation, nutrition, research and rural 

development programs that reach far more Americans than the traditional commodity programs. But, in every year since the passage of the Farm Bill, conservation programs continue to be funded well under authorized levels. This comes at the 
554 

expense of meaningful benefits to both sustainable farmers and ranchers and the 

environment. The conservation title specifically has bourn the brunt of the cuts. 

Since the passage of the 2002 farm bill, congressional and administrative actions 

have shortchanged promised conservation title funding for programs administered 

by the National Resource Conservation Service (NRCS) by $1.444 billion over fiscal 

year 2003 through fiscal year 2006. The President’s proposed budget for 2007 unfortunately continues this trend. We are pleased that the President’s budget this year 

again contains a promising proposal to limit environmentally harmful agricultural 

commodity subsidies by capping payments at $250,000 per farmer, and for the first 

time since he came to office, a request to fully fund the Wetlands Reserve Program. 

Unfortunately, his request still cuts critical conservation programs not just from the 

mandated Farm Bill funding, but actually below even the fiscal year 2006 level. 

Thus, Defenders of Wildlife urges Congress to restore balance to the Farm Bill 

and to not shortchange progressive voluntary conservation programs. National Farm 

Bill legislation has a profound impact on native species and wildlife habitat conservation choices of individual private landowners who practice crop, livestock, and 

forestry activities. Almost 60 percent of at risk species (as defined by The Nature 

Conservancy) are on private or state lands. Nearly 40 percent of plant and animal 

species listed as threatened or endangered are found only on private or state lands. 

Seventy percent of the land in the United States is held in private ownership in 

the form of range, forestry, or agricultural use. As of 1995, nearly 84 percent of the 

plants and animals listed as endangered or threatened were listed in part due to 

agricultural activities. Specifically, we urge Congress to restore balance by protecting funding allocations for the following programs 

The Conservation Security Program 

The Bush Administration’s proposed fiscal year 2007 budget continues to cripple 

the landmark Conservation Security Program (CSP). CSP is an innovative and important initiative that is meant to support farmers and ranchers who implement 

and maintain effective stewardship practices on their working farm and ranch 

lands. However, every year since passage it has been a target for cuts thus limiting 

its ability to be implemented as intended. Furthermore, the baseline for CSP was 

dramatically slashed by $1 billion in the fiscal year 2006 budget reconciliation. Yet, 

the administration’s fiscal year 2007 budget cuts CSP by a further 8 percent. As 

originally enacted, CSP should have received $846 million in 2007, compared to the 

$342 million requested in the President’s 2007 budget. 

The President’s fiscal year 2007 budget reduces the CSP substantially below the 

original and intended level authorized in the Farm Bill, but with the reduced baseline it amounts to an 8 percent decrease. Moreover, because a significant portion 

of fiscal year 2006 funding will go to fund the continuation of contracts signed in 

2004 and 2005, the proposed funding level will severely curtail the number of watersheds where the program can be offered to well below the intent of the 2002 Farm 

Bill. Current funding levels have permitted enrollment of only about 10 percent of 

the Nation’s watersheds in the first 2 years of program implementation. In the 

spring of 2006 the CSP sign-up was cut in half because there was not enough 

money. Many farmers who had been told that their watershed would be funded 

under CSP were suddenly told there was no money. This inconsistency turns away 

many good stewards of the land. 

The Conservation Security Program offers long term benefits for continued management of lands to promote environmental health. CSP is structured to reward 

farmers who have already invested in environmental stewardship, and to encourage 

them to go even farther to implement stewardship practices on their working lands 

through the enhancement payment structure. CSP is an essential part of the USDA 

portfolio of conservation programs to protect our water, soil, and wildlife resources. 

In order to achieve its promise of continuous income support to all of the country’s 

best stewards, the program must be available to all producers nationwide, and must 

be implemented on a schedule that permits farmers to re-enroll when their contracts 

are up. Thus Defenders urges Congress to consider the benefits that these programs 

can provide to sustainable farmers in all types of agriculture and in all regions of 

the country, and appropriate at authorized levels. At this point, perpetual cuts have 

the effect of rewriting the Farm Bill and changing CSP from the first-ever working 

lands conservation entitlement program envisioned by Congress, to a program with 

limited enrollment, preferential bidding, and waiting lists. 

The Wildlife Habitat Incentives Program 

In the President’s fiscal year 2007 budget the Wildlife Habitat Incentives Program 

(WHIP) gets slashed by 35 percent—$30 million less then fiscal year 2007 authorized level mandated in the 2002 Farm Bill and $5 million less then the administra-
555 

tion requested last year. WHIP provides cost sharing and technical assistance for 

the development of wildlife habitat on private lands. Though small in size, the program provides significant benefits for wildlife and wildlife habitat and provides 

proactive solutions to dealing with endangered habitat and species issues before 

they become critical. More than 8,400 projects affecting some 1.4 million acres have 

been approved under WHIP through fiscal year 2004 (source: http:// 

www.nrcs.usda.gov/programs/farmbill/2002/pdf/WHIPFct.pdf, fiscal year 2005 data 

still unavailable) There is demand for more as backlog statistics from NRCS show 

us: nationwide, according to figures through fiscal year 2004 (fiscal year 2005 data 

unavailable), over 3,000 qualified applicants were turned away. The value of the 

backlogged applications that could be going to these stewards totals $10 million. 

Defenders urges Congress to restore full funding to this program and protect the 

allocation of this program to continue to provide meaningful benefits to sustainable 

farmers and ranchers and to wildlife. 

Other Important Conservation Programs in the Farm Bill 

Several other critical programs, that are part of the forward thinking conservation 

initiatives in the Farm Bill, will also be significantly cut, which in turn will undermine progressive efforts by farmers and ranchers to steward land, conserve soil and 

water, and provide habitat for wildlife. The Environmental Quality Incentives Program (EQIP), which provides technical assistance, cost-share/incentive funding to 

assist crop and livestock producers with environmental and conservation improvements on their farms and ranches, is cut by 21 percent—and is $17 million below 

2006 funding levels. And the Farm and Ranch Land Protection Program (FRPP), 

which keeps working farms and ranches in production and puts cash in the pockets 

of farmers and ranchers, is slashed by a whopping 48 percent—$23.5 million below 

the fiscal year 2006 level. Defenders again urges Congress to protect the restore 

funding and protect the allocation for these programs, as well as the Conservation 

Reserve program. Farm Bill conservation programs should be appropriated at authorized levels as intended by the 2002 Farm Bill. Overall, the President’s request 

cuts 21 percent of the Farm Bill’s mandatory fiscal year 2007 funding for NRCS programs. 

This pattern has real consequences both for environmental quality and for the 

farmers and ranchers who need assistance. In 2004 alone, nearly 152,000 qualified 

applications for farm conservation programs had to be turned away—an astonishing 

unmet conservation need of almost $4.5 billion! Defenders again urges Congress to 

protect the restore funding and protect the allocation for these programs. 

Farm Bill Energy Title Programs 

Inclusion of an Energy Title in the 2002 Farm Bill was a huge bipartisan victory 

for renewable energy and for rural America. However, the program was allocated 

$23 million per year in mandatory funding for fiscal years 2003–2007. The President’s fiscal year 20067 budget request provides only $10 million in discretionary 

funding. This title provides programs to spur the growth of renewable energy within 

the agriculture sector, an immense potential energy source. Sec. 9006 is the only 

provision specific to renewable energy project development within the Farm Bill. It 

provides grants, and eventually loans and loan guarantees, to farmers, ranchers, 

and rural small businesses for the development of renewable energy projects and 

energy efficiency improvements. The program is designed to help farmers develop 

much needed new income streams from renewable energy generation, including 

wind, biomass, geothermal, hydrogen and solar energy, as well as helping to meet 

the Nation’s critical energy needs in an environmentally sustainable way, and generate economic development in every region of the country. Defenders urges Congress to restore full funding to the Renewable energy program as mandated by the 

Farm Bill. 

USDA Invasive Species Prevention and Rapid Response 

Defenders of Wildlife is pleased that the President’s budget for fiscal year 2007 includes a $28 million increase over 2006 for the Animal and Plant Health and Inspection Service’s Pest and Disease exclusion program (page 83). Many of the pests, 

weeds, and diseases that threaten livestock, crops and rangelands area are also 

problematic for wildlife and wildlife habitats, and exclusion of these pests is the 

safest and most cost-effective way to prevent these impacts. Unfortunately, this foresightedness does not appear to extend to other areas of the Agriculture budget. For 

instance: while the Agriculture Research Service budget text promises ‘‘increased 

emphasis’’ on diseases, crop pests and invasive species, many of the line items related to these functions have been substantially decreased from 2006 levels: Food 

safety by $9 million, Livestock Protection by $7 million, Crop Protection by $32 million, and Environmental Stewardship by $51 million (page 74–75). We note that the 
556 

Homeland Security line item receives a $45 million increase; however, the vast majority of damaging organisms that have entered the United States have arrived accidentally, or were deliberately imported for perceived benefit, not through malicious 

intent. The Forest Service’s Research and Development program also promises ‘‘increased funding’’ for ‘‘invasive species research vital to a rapid management response’’ but overall funding for Forest and Rangeland Research is decreased by $56 

million (pages 181–182). Furthermore, State and Private Forestry programs, which 

provide technical and financial assistance to states for invasive species issues that 

impact forest health, is also cut by $39 million from 2006 levels (page 182). 

Given the serious economic and ecological problems associated with invasive species, which are particularly prevalent in agriculture, rangelands and forests, we 

urge Congress to fund all of these programs at their 2006 levels or higher. 

Animal and Plant Health and Inspection Service and Wildlife Services 

Livestock Protection 

The Wildlife Services (WS) program, housed under the Animal and Plant Health 

and Inspection Service (APHIS), continues to spend a disproportionate amount of its 

annual allocation for livestock protection activities, which translates generally into 

the killing of predators primarily on behalf of sheep and cattle producers. But according to a recent study by the Wildlife Conservation Society (WCS), decades of 

U.S. government-subsidized predator control has failed to prevent a long-term decline in the sheep industry. The study says that more than 80 years of federally subsidized predator control with a total investment of more than $1.6 billion have not 

been able to stave off an 85 percent decline in the sheep industry since its peak of 

56.2 million animals in 1942. 

According to the study, predation by coyotes is often cited as the primary cause 

of the decline. However, 80 years of historical data reveal that a variety of market 

trends ranging from fluctuating hay prices and rising wages for livestock workers, 

to the drop in wholesale prices of lamb and wool, are the real culprits behind the 

industry’s drop-off. According to the study’s author, ‘‘If predation losses are responsible for the decline in the U.S. sheep industry and Federal predator control has 

been effective at reducing these losses, then we’d expect to see a strong, positive relationship between efforts to control predators and trends in sheep numbers and 

that is just not the case.’’ While predation is not the industry’s primary threat, it 

is one of the few factors over which ranchers feel they have some degree of control. 

In fiscal year 2004 alone, Federal agents killed more than 80,000 mammalian carnivores, including 75,674 coyotes, 359 mountain lions and 397 black bears. The study 

suggests that Federal funding for predator control in the sheep industry should be 

re-evaluated given the program’s failure to prevent the industry’s decline. We support such a reevaluation and urge the Committee to direct Wildlife Services to modernize its livestock protection program to focus on assisting ranchers by providing 

them with a range of more effective means of reducing predation, many of which 

have been developed by the program’s research facility, the National Wildlife Research Center, rather than concentrating on killing predators. Specifically, Defenders is concerned with the consistent lack of attention paid to repeated Congressional 

directives to the Wildlife Services program that deal with modernizing the field activities of its staff. Defenders recommends that Congress ask for a report on Wildlife 

Services’ documenting its compliance with the directives dealing with the increased 

use of non-lethal methods. Defenders of Wildlife requests also that the Committee’s 

report include the following language: ‘‘The Committee expects that Wildlife Services will make use of the non-lethal methods developed by the National Wildlife Research Center and will make non-lethal controls as the method of choice and resort 

to lethal means only as a last resort.’’ 

Defenders of Wildlife appreciates this opportunity to provide testimony on the fiscal year 2007 USDA budget. Thank you for your consideration of these comments. 

PREPARED STATEMENT OF THE DUCHESNE COUNTY WATER CONSERVANCY DISTRICT

The Duchesne County Water Conservancy District is requesting your support for 

continued funding for the Colorado River Salinity Control Title II Program. This 

program has greatly assisted in removal of many tons of salt from the Colorado 

River, but there is still a great deal of work to be completed that will require an 

adequate level of funding. The seven Colorado River Basin States, as well as Mexico, 

have greatly benefitted from this important program. For many years high concentrations of salt in the Colorado River had severely damaged agricultural production in the West as well as resulting in poor quality water being delivered to Mexico. 
557 

Great strides have been made in improving water quality in the Colorado River 

since the inception of this program but we strongly feel that there is still a great 

deal to be done. We understand that the Colorado River Basin Salinity Control 

Forum is requesting $17,500,000 in funds be appropriated for this program for fiscal 

year 2007 and we would like to add our full support to that funding level request. 

We would also like to express support for the continued funding of the Natural Resource Conservation Service program, the Environmental Quality Incentive Program 

(EQIP) which works closely with the Salinity Program. It is very important that 

adequate funding levels be maintained for it also. 

We request the Subcommittee’s assistance to ensure that the Colorado River Salinity Control Title II program and EQIP program are provided with continued adequate funding. 

PREPARED STATEMENT OF FLORIDA STATE UNIVERSITY

Mr. Chairman, I would like to thank you and the Members of the Subcommittee 

for this opportunity to present testimony before this Committee. I would like to take 

a moment to briefly acquaint you with Florida State University. 

Located in Tallahassee, Florida’s capitol, FSU is a comprehensive Research I university with a rapidly growing research base. The University serves as a center for 

advanced graduate and professional studies, exemplary research, and top-quality 

undergraduate programs. Faculty members at FSU maintain a strong commitment 

to quality in teaching, to performance of research and creative activities, and have 

a strong commitment to public service. Among the current or former faculty are numerous recipients of national and international honors including Nobel laureates, 

Pulitzer Prize winners, and several members of the National Academy of Sciences. 

Our scientists and engineers do excellent research, have strong interdisciplinary interests, and often work closely with industrial partners in the commercialization of 

the results of their research. Florida State University had over $182 million this 

past year in research awards. 

Florida State University attracts students from every state in the nation and 

more than 100 foreign countries. The University is committed to high admission 

standards that ensure quality in its student body, which currently includes National 

Merit and National Achievement Scholars, as well as students with superior creative talent. We consistently rank in the top 25 among U.S. colleges and universities 

in attracting National Merit Scholars to our campus. 

At Florida State University, we are very proud of our successes as well as our 

emerging reputation as one of the nation’s top public research universities. 

Mr. Chairman, let me summarize our primary interests today. The Southeast Climate Consortium (SECC), which consists of Florida State University, the University 

of Florida, the University of Miami, the University of Georgia, Auburn University, 

and University of Alabama at Huntsville, has been at the forefront of research and 

extension for the applications of climate predictions to risk reduction for agriculture. 

With support from NOAA and USDA, the SECC has developed new methods to predict the consequences of climate variability for agricultural crops, forests, and water 

resources in the southeast United States. In recent real-life tests, these methods 

have been applied to the problems that farmers raising specialty crops face arising 

from variable rainfall, temperature, and wild fires. By the use of these methods, 

these initial challenges have been successfully met. 

In the SECC, Florida State University will provide the climate forecasts and risk 

reduction methodology. The University of Florida and University of Georgia will 

translate this climate information into risks associated environmental impacts on 

agriculture and, with Auburn University, will work with Extension Services to provide information to the agricultural community. The University of Miami will provide economic modeling of agricultural systems. Together UM, UF, and the University of Alabama-Huntsville are developing new tools to help minimize climate risks 

to water quality and quantity, especially for agriculture. FSU, on behalf of the 

SECC, seeks $4,500,000 in fiscal year 2007 for this activity. Utilization of these 

tools and their application to agricultural problems in this project has the strong 

support of extension managers. 

The new tasks for fiscal year 2007 are to develop flood forecasting methods to help 

farmers and producers plan for reducing risks of economic losses and environmental 

damage; to develop partnerships and methods for incorporating climate forecasts 

and other climate information into agricultural and water policy decisions, and to 

begin development of a prototype decision support system for the application of climate forecasts to water resource management, especially for agricultural water use. 
558 

1See http://www.fsis.usda.gov/Help/glossary-C/index.asp. 

2See http://www.usda.gov/oig/webdocs/2451-01-FM.pdf. 

3See http://gao.gov/new.items/d0259.pddf. 

Mr. Chairman, we believe this research is vitally important to our country and 

would appreciate your support. 

PREPARED STATEMENT OF FOOD & WATER WATCH

My name is Wenonah Hauter. I am the Executive Director of Food & Water 

Watch, a non-profit consumer organization. We welcome this opportunity to present 

our views on the fiscal year 2007 Agriculture, Rural Development, Food and Drug 

Administration and Related Agencies Appropriations Bill. 

USDA—FOOD SAFETY AND INSPECTION SERVICE (FSIS)

The Food Safety and Inspection Service (FSIS) is proposing a shift to a risk-based 

inspection system. We have the following concerns about this proposal: 

The Agency lacks the statutory authority to execute a risk-based inspection 

scheme that would require less than daily inspection. According to both the Federal 

Meat Inspection Act (21 U.S.C. 603) and the Poultry Inspection Act (21 U.S.C. 455), 

the United States Department of Agriculture is required to provide continuous inspection in all establishments that produce meat and poultry products that enter 

the food supply. 

Furthermore, the FSIS’ own glossary defines continuous inspection as: 

Continuous Inspection.—USDA’s meat and poultry inspection system is often 

called ‘‘continuous’’ because no animal destined for human food may be slaughtered 

or dressed unless an inspector is present to examine it before slaughter (antemortem inspection), and its carcass and parts after slaughter (postmortem inspection). In processing plants, as opposed to slaughter plants, inspectors need not be 

present at all times, but they do visit at least once daily. Processing inspection is 

also considered continuous.1

Risk-based inspection needs to have a reliable database upon which to make judgments about which meat and poultry plants meet or exceed performance standards. 

At the present time, there are problems with the data collection within the Food 

Safety and Inspection Service. The USDA Inspector General, in a November 2004 

audit report, stated the following about the Performance Based Inspection System 

(PBIS) database: 

Due to the lack of controls noted during our audit, FSIS cannot be assured that 

PBIS data is complete, accurate, and reliable. As a result, FSIS management may 

not have the information it needs to effectively manage its inspection activities. 

Without effective controls over data integrity, the PBIS system may be an unreliable 

repository that gives FSIS management a false sense that inspection activities are 

adequately carried out and sanitation of plant operations is accurately reported.2

The Hazard Analysis Critical Control Points (HACCP) inspection system still has 

problems. The authority of inspectors to prevent adulterated products from entering 

the food supply has been severely hampered. Company HACCP plans do not require 

pre-approval from FSIS before they are implemented. Under HACCP, inspectors 

have been relegated to verifying whether company-written HACCP plans are being 

followed. Even when FSIS issues directives to companies to reassess their HACCP 

plans to take into account new food safety policies (e.g., the 2002 directive requiring 

companies to deal with E. coli 0157:H7 as an adulterant likely to occur in beef processing), companies often take long periods of time to implement the new policy. 

The HACCP-Based Inspection Models Project (HIMP) in poultry slaughter still 

has fewer than two dozen plants participating in the program. The Government Accountability Office issued the last comprehensive analysis of this project in December 2001 and pointed out a number of serious problems.3 Inspectors assigned to 

these plants report that they are not able to perform food safety functions because 

they are assigned to stationary positions on the slaughter lines (e.g., they are not 

able to look inside the cavity of poultry carcasses where there may be contamination). Furthermore, defects that are considered to be ‘‘other consumer protection,’’ 

such as blemishes, scabs, tumors, feathers, and bruises, and would not pass muster 

in processing plants using conventional inspection techniques are being permitted 

to enter commerce under the HIMP system. We do not believe that they Agency is 

prepared to extend this inspection model to the entire poultry industry at this time. 

There should be a thorough examination of the HIMP project before it is expanded. 

Because there has not been a full evaluation of HIMP recently, we filed a Freedom of Information Act request on December 14, 2005 requesting certain documents 
559 

so that we could conduct our own study. FSIS responded that they wanted us to 

pay more than $10,000 for the information. We have since scaled back the request, 

and yet they are still requesting the exorbitant sum of $2,858 for the records. We 

are a non-profit consumer group and we do have access to such large sums of 

money. Furthermore, we believe that this information should be available at no cost 

to requesters since the agency is proposing to expand this pilot project that will 

radically change our inspection system in slaughter establishments. We believe that 

Congress should request full disclosure of this information. 

In January 2006, the USDA Inspector General released an audit report entitled, 

‘‘Food Safety and Inspection Service Assessment of the Equivalence of the Canadian 

Inspection System’’ (Report No. 24601–05–Hy). The report indicates that Canada 

was continually exporting meat and poultry products to the United States that had 

been subject to less than daily inspection—in violation of U.S. standards. While 

those responsible for enforcing our equivalency agreements at FSIS recommended 

taking disciplinary action against Canada for their repeated violations, they were 

overruled by the Secretary in 2004. We find this most troubling. FSIS has repeatedly testified before Congress that countries that wish to export their meat and 

poultry products to the United States must maintain inspection standards that are 

identical to those for domestic producers. Yet, in this instance, USDA has chosen 

to look the other way. 

While Canada has agreed to institute daily inspection in those establishments 

that export to the United States, we have learned that FSIS has been in discussions 

with the Canadian Food Inspection Agency (CFIA) to establish a pilot project with 

a subset of Canadian plants that would be able to export products that have been 

subject to less than daily inspection. This pilot program is being created without the 

benefit of congressional input or discussion through rulemaking. We believe that instituting such a pilot project would be a violation of the Federal Meat Inspection 

Act (FMIA) and the Federal Poultry Products Inspection Act (FPPIA) and it should 

be stopped before it is implemented. 

We have also learned that Australia is in the process of considering a ‘‘trial’’ of 

its controversial Meat Safety Enhancement Program (MSEP) for a beef processor 

that would like to export its products to the United States. MSEP is a privatized 

inspection system for beef for which there is no comparable system here in the 

United States. MSEP trials were last conducted in 1999, but were stopped since the 

inspection system raised consumer concerns both here in the United States and in 

Europe. We can only surmise that someone at USDA has signaled to Australia that 

we would accept beef products produced under a privatized inspection system. 

We view both the Canadian pilot project and the Australian MSEP trial as vehicles by the current USDA policymakers to institute backdoor changes to our inspection system through our international trading partners. Congress has already had 

to step in to warn USDA on changing the programs authorized under the 2002 

Farm Security and Rural Development Act through the Doha round of WTO negotiations; it may be time for Congress to send another shot across the bow to prevent 

the undermining of the FMIA and FPPIA through international discussions that 

have not had the benefit of congressional or public scrutiny. 

For all of these reasons, we do not believe that the Agency is prepared to make 

radical changes to the current inspection system, no matter what terms they use 

to describe it. The concept of ‘‘continuous’’ government inspection has been the core 

of our meat inspection system for 100 years, and the Agency should not be permitted to abandon this principle. 

PREPARED STATEMENT OF THE HUMANE SOCIETY

As the largest animal protection organization in the country, we appreciate the 

opportunity to provide testimony to the Agriculture, Rural Development, Food and 

Drug Administration, and Related Agencies Subcommittee on fiscal year 2007 funding items of great importance to The Humane Society of the United States (HSUS) 

and its more than 9.5 million supporters nationwide. 

ENFORCEMENT OF ANIMAL WELFARE LAWS

We thank you for your outstanding support during recent years for improved enforcement by the U.S. Department of Agriculture (USDA) of key animal welfare 

laws and we urge you to sustain this effort in fiscal year 2007. Your leadership is 

making a great difference in helping to protect the welfare of millions of animals 

across the country. As you know, better enforcement will also benefit people by helping to prevent: (1) orchestrated dogfights and cockfights that often involve illegal 

gambling, drug trafficking, and human violence, and can contribute to the spread 
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of costly illnesses such as Exotic Newcastle Disease and bird flu; (2) injuries to 

slaughterhouse workers from animals that are still conscious; (3) the sale of 

unhealthy pets by commercial breeders, commonly referred to as ‘‘puppy mills’’; (4) 

laboratory conditions that may impair the scientific integrity of animal based research; (5) risks of disease transmission from, and dangerous encounters with, wild 

animals in or during public exhibition; and (6) injuries and deaths of pets on commercial airline flights due to mishandling and exposure to adverse environmental 

conditions. In order to continue the important work made possible by the fiscal year 

2006 budget, we request the following for fiscal year 2007: 

APHIS/ANIMAL WELFARE ACT (AWA) ENFORCEMENT

We request that you support the President’s request of $19,142,640 for AWA enforcement under APHIS. We commend the Committee for responding in recent years 

to the urgent need for increased funding for the Animal Care division to improve 

its inspections of more than 13,000 sites, including commercial breeding facilities, 

laboratories, zoos, circuses, and airlines, to ensure compliance with AWA standards. 

Animal Care now has 100 inspectors (with four vacancies that the agency is in the 

process of filling), compared to 64 inspectors at the end of the 1990s. We are pleased 

that the President’s budget recommends an increase of $1,481,420 (plus allowance 

for pay costs) to cover hiring 15 new staff to further improve AWA enforcement in 

fiscal year 2007. This increase will enable the agency to handle additional responsibilities as the number of licensed/registered facilities has grown by 12 percent 

from fiscal year 2004 to fiscal year 2005. 

APHIS/INVESTIGATIVE AND ENFORCEMENT SERVICES

We request that you support the President’s request of $11,738,430 for APHIS Investigative and Enforcement Services. We appreciate the Committee’s consistent 

support for this division, which handles many important responsibilities including 

animal welfare. The President’s budget recommends an increase of $1,235,000 (plus 

allowance for pay costs) and 12 staff years for IES in fiscal year 2007. A portion 

of this increase will be used to improve enforcement of federal animal welfare laws. 

The volume of animal welfare cases is rising significantly as new facilities become 

licensed and registered. In fiscal year 2005, IES conducted 575 animal care investigations, with 169 cases resolved through either civil penalty stipulations or Administrative Law Judge decisions and a total of $1.1 million assessed in fines (compared 

to 288 investigations and 97 cases resolved through stipulations or ALJ decisions 

and $548,614 in fines during fiscal year 2004). 

OFFICE OF INSPECTOR GENERAL/ANIMAL FIGHTING ENFORCEMENT

We request sustained funding of $800,000 for the Office of Inspector General to 

focus on enforcement of animal fighting laws (this amount is incorporated in the 

President’s request for OIG base funding). We appreciate the inclusion of $800,000 

in each of the past three fiscal years for USDA’s Office of Inspector General to focus 

on animal fighting cases. Congress first prohibited most interstate and foreign commerce of animals for fighting in 1976 and tightened loopholes in the law in 2002. 

Since then, USDA has begun to take seriously its responsibility to enforce this law, 

working with state and local agencies to complement their efforts. Dogfighting and 

cockfighting are barbaric (but still surprisingly widespread) practices in which animals are drugged to heighten their aggression and forced to keep fighting even after 

they’ve suffered grievous injuries. Animal fighting is almost always associated with 

illegal gambling, and also often involves illegal drug trafficking and violence toward 

people. Dogs bred and trained to fight endanger public safety, and some dogfighters 

steal pets to use as bait for training their dogs. Cockfighting was linked to an outbreak of Exotic Newcastle Disease in 2002–2003 that cost taxpayers more than $200 

million to contain. It’s also been linked to the death of at least eight people in Asia 

reportedly exposed through cockfighting activity to bird flu. Given the potential for 

further costly disease transmission, as well as the animal cruelty involved, we believe it would be a sound investment for the federal government to increase its efforts to combat illegal animal fighting activity. 

FOOD SAFETY AND INSPECTION SERVICE/HUMANE METHODS OF SLAUGHTER ACT (HMSA)

ENFORCEMENT

We request sustained funding of no less than $5,000,000 and no fewer than 63 

staff years for HMSA enforcement (this amount is incorporated in the President’s 

request for FSIS base funding) and continued funding of $4,000,000 as provided in 

fiscal year 2006 for further implementation of the new tracking system. We are 
561 

grateful that Congress provided $5 million in fiscal year 2006 to sustain at least 

63 full time equivalent positions dedicated solely to inspections and enforcement related to the Humane Methods of Slaughter Act, plus $4 million to incorporate a new 

tracking system to ensure compliance with this law. The HMSA is designed to ensure that livestock are treated humanely and rendered unconscious before they are 

killed. The effort to target funds for this purpose was undertaken following reports 

of lax enforcement of the HMSA and animals being skinned, dismembered, and 

scalded while still alive and conscious. Implementation of the Humane Animal 

Tracking System is ongoing; continued funding of $4 million will be used to equip 

remaining facilities. 

COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE/VETERINARY

STUDENT LOAN FORGIVENESS

We request $1,000,000 to continue a pilot program for the National Veterinary Medical Service Act, authorized in 2003, that received initial funding of $500,000 

in fiscal year 2006. We appreciate that Congress has begun to address the critical 

shortage of veterinarians practicing in rural and inner-city areas, as well as in government positions such as at FSIS and APHIS. Having adequate veterinary care is 

a core animal welfare concern. There are only 70 veterinarians engaged in poultry 

practice to address the needs of approximately nine billion chickens raised each year 

in the United States, and only 75 veterinarians addressing the needs of 30 million 

beef cattle and 102 million pigs, respectively. Veterinarians support our Nation’s defense against bioterrorism (the Centers for Disease Control estimate that 80 percent 

of potential bioterrorism agents are zoonotic—transmitted from animals to human). 

They are also on the front lines addressing public health problems associated with 

pet overpopulation, parasites, rabies, chronic wasting disease, bovine spongiform 

encephalopathy (‘‘mad cow’’ disease), and a host of other concerns. Veterinary school 

graduates face a crushing debt burden of $80,000 on average, and the lowest pay 

of any of the medical professions, with an average starting salary of $43,000. For 

those who choose employment in underserved rural or inner-city areas or public 

health practice, the National Veterinary Medical Service Act authorizes the Secretary of Agriculture to forgive student debt. It also authorizes financial assistance 

for those who provide services during Federal emergency situations such as disease 

outbreaks or disasters. We hope you will build on the initial funding provided last 

year to expand this needed program under CSREES or such other account as the 

Committee deems appropriate. 

APHIS/HORSE PROTECTION ACT ENFORCEMENT

We hope you will provide the $492,030 requested by the President for fiscal year 

2007, and we urge the Committee to oppose any effort to restrict USDA from enforcing this law to the maximum extent possible. Congress enacted the Horse Protection 

Act in 1970 to end the obvious cruelty of physically soring the feet and legs of show 

horses. In an effort to exaggerate the high-stepping gate of Tennessee Walking 

Horses, unscrupulous trainers use a variety of methods to inflict pain on sensitive 

areas of the feet and legs for the effect of the leg-jerk reaction that is popular among 

many in the show-horse industry. This cruel practice continues unabated by the 

well-intentioned but seriously understaffed APHIS inspection program. We appreciate the Committee’s help providing modest increases to bring this program close 

to its authorized annual funding ceiling of $500,000. 

DOWNED ANIMALS AND BSE

We are pleased that the Bush Administration proposed an interim final rule in 

January 2004 to ban the use of downed cattle for human food, in the wake of the 

discovery of a cow in Washington State that was infected with Bovine Spongiform 

Encephalopathy (BSE). We hope the Committee will codify this ban—and extend it 

to other livestock besides cattle—with language barring the Food Safety and Inspection Service from spending funds to certify meat from downed livestock for human 

consumption. While the science to date on BSE has only indicated transmission 

from infected cows to people, downer pigs and other downer livestock are at a significantly higher risk of transmitting other serious and sometimes fatal illnesses 

through their meat, such as E. coli and Salmonella, and these animals, too, suffer 

when they are moved en route to slaughter. 

As the Committee is aware, some segments of industry and members of Congress 

have recommended weakening the USDA downed cattle ban. They claim that animals unable to walk because of injury pose no health risk. But injury and illness 

are often interrelated—an animal may stumble and break a leg because of disease 

that causes weakness and disorientation. And USDA inspectors would have a dif-
562 

ficult—if not impossible—task trying to sort out the reason an animal became nonambulatory. Major consumer groups including Consumers Union and Consumer 

Federation of America, support groups for victims of food-borne illness such as Safe 

Tables Our Priority (S.T.O.P.), Creutzfeldt-Jakob Disease Foundation, and CJD 

Voice, food safety organizations, companies such as McDonald’s and Wendy’s, and 

many others have all pointed out how reckless such a system would be. Of the BSE 

cases identified in Canada and the United States to date, 7 out of 8 have involved 

downers, and at least 3 of these were identified as downed due to injuries, including 

the Washington State case (‘‘calving injuries’’) and a January 2005 case in Canada 

(‘‘slipped on ice/broken leg’’). 

From an animal welfare perspective, a comprehensive ban is needed because a 

downer cow with a broken leg would suffer just as much as a sick one if it’s dragged 

through a slaughterplant—maybe even more. A ban on use of all downers for 

human food also provides an incentive for producers to treat animals humanely and 

prevent livestock from going down. Even before the administrative ban, USDA estimated that only 0.4 percent to 0.8 percent of all cows processed annually were nonambulatory. The downer ban encourages producers and transporters to engage in 

responsible husbandry and handling practices, so that this percentage may be reduced to levels approaching zero. Temple Grandin—advisor to the American Meat 

Institute and others in the meat industry—has noted that as many as ninety percent of all downers are preventable. Cases that involve broken bones and other injuries are perhaps the most preventable with improved husbandry. 

Most Americans had no idea that animals too sick or injured to walk were being 

dragged with chains or hauled by bulldozer en route to the food supply. When that 

fact came to light in December 2003, USDA’s prompt decision to ban all downer cattle from human food calmed consumers. Unraveling the ban would undermine consumer confidence. More than 99 percent of the 22,000∂ public comments USDA received on its downer ban called on the agency to maintain and strengthen its downer ban, with most asking that other species be included. For a report on the comments received by the agency, please go to: http://files.hsus.org/web-files/PDF/ 

2004l06l16lreptlUSDAlcomments.pdf. 

USDA testimony before various congressional committees has made clear that the 

agency need not rely on slaughterplant testing of downers for BSE surveillance purposes. Surveillance of downers can and should be conducted at rendering plants and 

on farms. 

In addition to the downer issue, we urge the Committee to provide adequate funding to ensure meaningful enforcement by the Food and Drug Administration of its 

‘‘feed ban,’’ designed to prevent BSE-contaminated animal products from being fed 

to other animals. We are concerned that inspectors visit facilities infrequently and 

rely on self-reporting by those facilities and paperwork checking rather than firsthand evaluation of feed content and dedicated production lines. We are also concerned that FDA relies a great deal on state agencies to conduct this oversight, 

when most states face severe budget constraints that may compromise their ability 

to handle this job. Preventing the spread of BSE is vital to the Nation as a whole, 

for public health, the agricultural industry, and animal welfare. Vigorous enforcement of the feed ban is an essential component of this effort. We hope adequate Federal funds will be provided in fiscal year 2007 to meet this challenge. 

Again, we appreciate the opportunity to share our views and priorities for the Agriculture, Rural Development, and Related Agencies Appropriation Act of fiscal year 

2007. We appreciate the Committee’s past support, and hope you will be able to accommodate these modest requests to address some very pressing problems affecting 

millions of animals in the United States. Thank you for your consideration. 

PREPARED STATEMENT OF INTERREGIONAL RESEARCH PROJECT NO. 4 

The Interregional Research Project No. 4 (IR–4 Project) was organized 43 years 

ago by the Directors of the State Agricultural Experiment Stations (SAES) to obtain 

regulatory clearances for crop protection chemicals on specialty or minor food crops 

when the economic incentives for the registrants precluded private sector investment. IR–4 has been administered by the United States Department of Agriculture’s 

(USDA’s) Cooperative State Research, Education, and Extension Service (CSREES) 

since its inception in 1963. The Agricultural Research Service (ARS) component of 

the USDA established a companion minor use program in 1976 to provide further 

program support. The objectives of the IR–4 Project were expanded in 1977 to include registration of pest control products for the protection of nursery, floral, 

Christmas tree, and turf crops and again in 1982 when the objective of clearance 

of biological control agents or biopesticides was added. 
563 

The IR–4 Project works as a model government program that fosters cooperative 

partnerships between the USDA (CSREES and ARS), the IR–4 Headquarters and 

Regional staff, the land grant university system, the crop protection industry, commodity and grower groups, the Environmental Protection Agency (EPA), and the 

California Department of Pesticide Regulation (CDPR) to bring crop protection solutions to specialty crop growers. 

The Food Use Program is the primary focus of the IR–4 Project. To streamline 

the project request process, growers, commodity groups, university researchers and 

extension personnel, USDA researchers and other interested parties can submit online requests directly from our website at: http://www.ir4.rutgers.edu/ 

FOODRequestForm.htm. The requests are recorded and reviewed by IR–4 Headquarters staff. At the annual Food Use Workshop, growers, commodity groups, university and USDA researchers, extension personnel, and EPA staff discuss and 

prioritize the projects by consensus. The high priority projects are finalized the following month at the annual National Research Planning Meeting where field residue and analytical laboratory assignments are made based on the best use of available USDA–ARS and land grant university personnel within the funding provided 

by Congress. For more information concerning the food use program and the status 

of on-going projects or studies, access the IR–4 website at: http:// 

www.ir4.rutgers.edu/foodcrops.html. All IR–4 food use residue research is carried 

out by EPA approved Good Laboratory Practices (GLP’s) with coordination and implementation by the Quality Assurance Unit (QAU). Annual training of the Field 

Research Directors, laboratory personnel and support staff involved in the conduct 

of work is essential to the success of the IR–4 Project. GLP compliance audits of 

facilities and of ongoing field and laboratory procedures, provides assurance that 

IR–4 food safety data will be accepted by the crop protection industry, growers and 

the EPA. 

The 991 food use clearances obtained in 2005 boosted the 43 year total to over 

9,300 clearances. It is interesting to note that 53 percent (4,949) of all clearances 

in the program’s history have been obtained in the last 8 years. In pursuit of this 

remarkable accomplishment, IR–4 continues its commitment to producing high quality, compliant scientific data in order to meet EPA’s GLP requirements and strive 

to further enhance our effectiveness and efficiency by providing continuing GLP 

education and/or QA training sessions for IR–4 personnel and cooperators, audit 

data and reports, as well as, review and revise Standard Operating Procedures 

(SOP’s). 

The research program for year 2006 consists of approximately 110 studies supported by 701 field trials. One hundred and six (106) of these studies will require 

the collection of residue samples and 4 studies will be for collecting efficacy and/ 

or crop safety data to support specific data needs. The smaller efficacy program this 

year is a result of the reduced budget in 2006 thereby eliminating the pilot efficacy 

program. Five hundred and twenty-eight (528) of the field trials will be conducted 

by regional State agricultural research stations, while USDA–ARS will be conducting 115 field trials and Canada has agreed to cooperate on 58 trials. 

The Section 18 Economic Benefits/Loss Avoidance Project to document potential 

economic impact (loss) data from state submitted Section 18’s approved by the EPA 

and supported by IR–4 residue data was initiated in 1998. Since this initiative 

began, a total of 205 Section 18’s have been converted to full Section 3 labels as 

a result of IR–4 petitions. This is the result of IR–4’s commitment to minimize the 

number of years that Section 18’s are needed on new crop protection products before 

Section 3 labels are approved by the EPA. The total over the eight year period from 

1998 to 2005 (where the data are available) bring the total economic impact/loss 

avoidance to $12.589 billion from 1,229 Section 18’s covering 47 States. 

The ornamental industry is an extremely important component of specialty crop 

agriculture with over $15 billion in annual sales which comprise over 35 percent of 

all specialty crop sales. The research to develop efficacy and crop safety data to support registration of both traditional chemicals and biopesticides as pest control tools 

on ornamentals continues to be an important component of our overall program. The 

industry presents a formidable challenge since it involves a diverse array of crops 

in various markets such as floral, bulbs, forestry seedlings, Christmas trees, nursery, turf, commercial and interior landscapes, greenhouses, etc. 

Like the Food Use Program, requests are received, recorded and reviewed by IR– 

4 Headquarters. At the annual Ornamental Horticulture Workshop, growers, commodity groups, university and USDA researchers, extension personnel and EPA 

staff discuss and prioritize the projects by consensus. The efficacy and crop safety 

trials are planned in discussions between the IR–4 Headquarters Ornamental Horticulture Manager, regional field coordinators and ARS leadership. In 2006, the Ornamental Horticulture research program will focus on the high priority projects estab-
564 

lished at the annual workshop: Phytophthora Efficacy, Pythium Efficacy, Thrips Efficacy, Coleopteran Efficacy, and Broadleaf Weed and Sedge Management Tools 

Crop Safety. The research program also enables each regional field coordinator to 

focus some discretionary funds on trials of specific regional interest. The Northeast 

and Southern regions are coordinating their funding on herbicide fern safety, while 

the Western region enhanced the testing program for the high priority herbicide 

project. 

The Biopesticide Research Program continued its 8 year of competitive grant 

funding of projects for $400,000 and amounting to over $3,325,000 since its inception. In addition to funding projects that have focused in recent years on the biopesticides considered Advanced Stage (near commercialization or commercialized but 

expanding uses to specialty crops), IR–4 has continued to help biopesticide registrants with regulatory support needs. 

For the 2006 Biopesticide Research Program, IR–4 received a total of 113 proposals requesting approximately $1.2 million. Of the 113 proposals, 21 were Early 

Stage, 64 were Advanced Stage and 28 were Demonstration Stage of which 70 involved disease management, 24 were for insect/mite management, 5 were for weed 

control, 11 were for nematode control, 2 were plant growth regulators and 1 involved bird management. The 2006 program will fund 42 of the project proposals. 

Without the existence of the IR–4 Project, fewer safe and effective crop protection 

chemicals and biological alternatives would be available for use on specialty crops 

today. The crop protection industry has continued to be an excellent partner in 

working with IR–4 to provide their latest technologies, both chemical and biological, 

for specialty crop uses. However, the Project must continue to evolve in order to stay 

relevant. To this end, the importance of the continued special research grant funding and strategic plan implementation will be critical to the future of IR–4. 

Three hot topics’ for the fiscal year 2007 Congressional Appropriations hearings 

were recently posed to the Cooperative State Research, Education and Extension 

Service concerning the IR–4 Project. The questions asked and answers provided are 

as follows: 

Question. What has the Inter-regional Project #4 (IR–4) done to provide safe and 

effective pest management solutions for growers of specialty crops in the United 

States? 

Answer. By cooperating with researchers, producers, the agrichemical industry 

and Federal agencies, IR–4 has achieved over 9,300 food crop and 10,000 ornamental crop registrations for pest management products since the project began in 

1963. In 2004 and 2005 alone, there were over 2,000 clearances for these specialty 

crops which are collectively valued at $43 Billion. Priorities for future research and 

future registrations are established at IR–4’s annual Food Use and Ornamental 

Horticulture Workshops and a record attendance of over 325 stakeholders participated in defining IR–4’s workplan for 2006. 

Question. Since horticultural/specialty crops are an important part of U.S. agriculture, what is being done to improve export opportunities for the producers of 

these crops? 

Answer. Over the past decade, the agrichemical industry has developed a range 

of new, safer products and IR–4 has been very successful in expanding the registrations of these products facilitating their use on specialty crops. This has significantly benefited growers producing food for domestic markets. However, some of 

their new lower risk products are not approved by some of the U.S. trading partners 

resulting in U.S. growers not being able to use some of these products if their 

produce is going to be shipped to countries that do not have Maximum Residue Limits (MRLs) established for these new products. Therefore, it has become critically 

important for a product to be available globally in order to level the playing field 

for United States specialty crop growers who wish to export their crops. IR–4 is in 

a unique position to facilitate the Global Specialty Crop Initiative where existing 

data in the IR–4 Library can be used to solve some of the trade issues. This initiative would enhance global registrations and reduce trade barriers, while at the same 

time further promote the use of new, safer pest management products both domestically and world wide. 

Question. What is the economic impact of the IR–4 Project on United States specialty crop growers? 

Answer. Using economic loss avoidance data submitted to the EPA by 47 states 

covering over 1225 Section 18 requests supported by IR–4 specialty crop residue 

data, the economic loss avoidance between 1998 and 2005 has been $12.6 billion. 
565 

PREPARED STATEMENT OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN

CALIFORNIA

The Metropolitan Water District of Southern California is writing in support of 

the following Federal program under the Department of Agriculture’s (USDA) budget that we believe is deserving of your Subcommittee’s support during the fiscal year 

2007 budget process: 

Natural Resources and Environment Mission Area—Agency: Natural Resources 

Conservation Service (NRCS)—Farm Bill Programs (Funded by the Commodity 

Credit Corporation)—Environmental Quality Incentives Program: 

—$1 billion requested by the President nationwide with $25 million designated 

by the NRCS for the Colorado River Basin Salinity Control Program. 

The Metropolitan Water District of Southern California is a public agency that 

was created in 1928 to meet the supplemental water demands of people living in 

what is now portions of a six-county region of southern California. Today, the region 

served by Metropolitan includes approximately 18 million people living on the coastal plain between Ventura and the international boundary with Mexico. 

Included in our region are more than 300 cities and unincorporated areas in the 

counties of Los Angeles, Orange, San Diego, Riverside, San Bernardino, and Ventura. We provide over half of the water used in our 5,200-square-mile service area 

and help our members to develop local supplies through increased water conservation, recycling, storage and other resource-management programs. Metropolitan’s 

imported water supplies come from the Colorado River via our Colorado River Aqueduct and from northern California via the State Water Project’s California Aqueduct. 

MWD continues to support USDA implementation of conservation programs. 

MWD firmly believes that interagency coordination, along with incentive-based cooperative conservation programs that facilitate the development of partnerships, are 

critical to addressing natural resources concerns, such as water quality degradation, 

wetlands loss and wildlife habitat destruction. It is vital that the Congress provides 

USDA with the funding necessary to successfully carry out its commitment to natural resources conservation. 

Environmental Quality Incentives Program (EQIP) 

An important program for MWD has been the Colorado River Basin Salinity Control Program, which is funded by USDA at the Federal level through the Environmental Quality Incentives Program. MWD recommends that EQIP be funded at $1 

billion in fiscal year 2007, as proposed in the President’ Budget, with the Colorado 

River Basin Salinity Control Program funded at $25 million, 2.5 percent of the 

EQIP budget, as requested by the seven Colorado River Basin states through the 

Colorado River Basin Salinity Control Forum. 

EQIP provides assistance to farmers and ranchers who face threats to soil, water, 

air and related natural resources on their land. EQIP provides assistance in a manner that will promote agricultural production and environmental quality as compatible goals. NRCS offers the program throughout the Nation. 

In Public Law 104–127, Congress amended the Colorado River Basin Salinity 

Control Act to direct the Secretary of Agriculture to carry out salinity control measures in the Colorado River Basin as part of EQIP. Beginning with the first full year 

of EQIP funding in 1997 through 2001, USDA’s participation in the Colorado River 

Basin Salinity Control Program (Salinity Control Program) had significantly diminished as compared to the 1996 level of funding for salinity control. After requests 

had been made by the Colorado River Basin Salinity Control Forum (Forum), the 

interstate organization responsible for coordinating the seven Basin states’ salinity 

control efforts, and others, as well as directives from the Congress, USDA concluded 

that the Salinity Control Program warranted a multi-state river basin approach. 

The Forum is composed of Gubernatorial appointees from Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming. Clearly, Colorado River Basin salinity control has benefits that are not merely local or intrastate in nature, but continue downstream. EQIP is also important because it provides funding for agricultural source water protection measures that protect and improve the quality of 

Metropolitan’s imported supplies from Northern California. 

The Colorado River is a large component of Southern California’s regional water 

supply and its relatively high salinity causes significant economic impacts on water 

customers in MWD’s service area, as well as throughout the Lower Colorado River 

Basin (Lower Basin). MWD and the Bureau of Reclamation (Reclamation) completed 

a Salinity Management Study for Southern California in June 1999. The study concluded that the high salinity from the Colorado River continues to cause significant 

impacts to residential, industrial and agricultural water users. Furthermore, high 
566 

salinity adversely affects the region’s progressive water recycling programs, diminishes the effectiveness of water conservation efforts, and is contributing to an adverse salt buildup through infiltration into Southern California’s irreplaceable 

groundwater basins. 

In April 1999, MWD’s Board of Directors authorized implementation of a comprehensive Action Plan to carry out MWD’s policy for management of salinity. The 

Action Plan focuses on reducing salinity concentrations in Southern California’s 

water supplies through collaborative actions with pertinent agencies, recognizing 

that an effective solution requires a regional commitment. MWD, the Association of 

Groundwater Agencies, the Southern California Association of Publicly Owned 

Treatment Works, and the WateReuse Association of California have formed a Salinity Management Coalition. 

During 2002, the Coalition was expanded to include major water and wastewater 

agencies throughout Southern California. Presently, the ten members of the coalition are working to implement a Strategic Action Plan that focuses primarily on 

local contributions to southern California’s high-salinity problem. 

In addition, Southern California leaders are working with urban areas in Arizona, 

Nevada, New Mexico, and Texas to find solutions to mutual problems with salinity 

in imported supplies, such as from the Colorado River, and other sources. These 

agencies participate in the annual National Salinity Summit to examine and coordinate salinity management activities. 

Concentrations of salts in the Colorado River cause hundreds of millions of dollars 

in damage in the United States according to the U.S. Department of the Interior. 

Implementation of salinity control measures: 

—increases the yield of salt sensitive crops and decreases water use for leaching 

in the agricultural sector, 

—increases the useful life of galvanized water pipe systems, water heaters, faucets, garbage disposals, clothes washers, and dishwashers, and decreases the 

use of bottled water and water softeners in the household sector, 

—decreases the use of water for cooling, and the cost of water softening, and increases equipment service life in the commercial sector, 

—decreases the use of water and the cost of water treatment, and decreases sewer 

fees in the industrial sector, 

—increases the life of treatment facilities and pipelines in the utility sector, 

—eases the meeting of wastewater discharge requirements to comply with National Pollutant Discharge Elimination System permit terms and conditions, 

and decreases desalination and brine disposal costs due to less accumulation of 

salts in groundwater basins, and 

—decreases use of imported water for leaching and the cost of desalination and 

brine disposal for recycled water. 

Absent the Salinity Control Program, impacts would progressively increase with 

continued agricultural and urban development upstream of California’s points of 

Colorado River diversion. Droughts will cause spikes in salinity levels in the future 

that will be highly disruptive to Southern California water management and commerce. The Salinity Control Program has proven to be a very cost-effective approach 

to help mitigate the impacts of higher salinity. Adequate Federal funding of the Salinity Control Program is essential. 

The Forum issued its 2005 Review, Water Quality Standards for Salinity, Colorado River System (2005 Review) in October 2005. The 2005 Review found over 

900,000 tons of salinity needs to be controlled annually to maintain 2004 salinity 

levels through 2025. From 1994 through 2003, funding for USDA’s salinity control 

program did not equal the Forum-identified funding need for the portion of the program the Federal Government is responsible to implement. While NRCS has designated Colorado River Basin salinity control as an area of special interest, appointed a multi-state coordinator, and allocated about $19.5 million in fiscal years 

2005 and 2006, it is essential that implementation of salinity control efforts through 

EQIP continue to be accelerated to reduce economic impacts. The Basin states and 

farmers continue to stand ready to pay their share of the implementation costs of 

EQIP. 

The Forum has determined that allocation of 2.5 percent of the EQIP funds, that 

is $25 million, is needed in fiscal year 2007 for on-farm measures to control Colorado River Basin salinity. Funding at this level will permit the state adopted and 

U.S. Environmental Protection Agency approved water quality standards to be met. 

With 2.5 percent of the EQIP cost share financial assistance, monitoring, and technical assistance funding requested by the President allocated to the Salinity Control 

Program, an additional $21 million in states and local cost sharing could be committed. 
567 

MWD urges the Subcommittee to support funding of $1 billion for EQIP, the 

amount requested in the President’s Budget, and advise USDA that $25 million, or 

2.5 percent of the EQIP funds, be designated for the Salinity Control Program. 

Thank you for your consideration of our testimony. USDA’s conservation programs 

are critical for achieving Colorado River Basin salinity control objectives, as well as 

broader source water quality protection objectives in the Colorado River Basin and 

California. 

We look forward to working with you and your Subcommittee. Please contact me 

at (213) 217–6211, if I can answer any questions or provide additional information. 

PREPARED STATEMENT OF THE MIDWEST ADVANCED FOOD MANUFACTURING

ALLIANCE (MAFMA) 

The Midwest Advanced Food Manufacturing Alliance (MAFMA) is a research consortium involving 13 leading Midwestern universities (University of Illinois, Indiana 

University, Iowa State University, Kansas State University, Michigan State University, University of Minnesota, University of Missouri, University of Nebraska, North 

Dakota State University, Ohio State University, Purdue University, South Dakota 

State University, University of Wisconsin). MAFMA expedites the development of 

new manufacturing and processing technologies for food and related products derived from U.S. produced crops and livestock and thus contributes to the economic 

development of the U.S. food industry, one of this country’s premier industry sectors. The research of MAFMA is conducted by scientists in food science and technology, food engineering, nutrition, microbiology, and other relevant disciplines from 

universities participating in the MAFMA consortium. MAFMA sponsors an annual 

peer-reviewed research competition where superior research proposals are selected 

from among the submissions of scientists from these 13 universities. Specific research proposals are funded on a competitive basis to university scientists who must 

also demonstrate matching funds from non-Federal sources (primarily the food industry) for research involving processing, packaging, storage, and transportation of 

food products. The close cooperation between university and corporate researchers 

assures that the latest scientific advances are applied to the most relevant problems 

and that any solutions will be efficiently transferred and used by the private sector. 

MAFMA research proposals are peer-reviewed by scientists from academia and industry who are not affiliated with the 13 institutions or any of the companies providing matching funds which assures that the proposed research is sound and likely 

to contribute valuable scientific information. The MAFMA project has been funded 

for 12 years and this proposal will fund the 13th year of competition. During the 

past 12 years, the MAFMA consortium has funded 136 projects for a total of 

$4,327,570 of USDA funds and an impressive total of $6,369,623 in matching funds 

from non-Federal (primarily food industry) sources involving 193 companies and 

other entities. 

PREPARED STATEMENT OF THE NATIONAL ASSOCIATION OF STATE FORESTERS

INTRODUCTION

The National Association of State Foresters (NASF) is pleased to provide testimony on the U.S. Department of Agriculture (USDA) budget request for fiscal year 

2007. Representing the directors of State forestry agencies from all 50 States, eight 

U.S. territories, and the District of Columbia, our testimony centers around those 

program areas most relevant to the long-term forestry operations of our constituents: Research, Education, and Economics, as well as Natural Resources and Environment. We believe the USDA budget for fiscal year 2007, which offers opportunities for advancing the sustainable management of private forestland nationwide, can 

be strengthened through our recommendations. 

USDA COOPERATIVE STATE RESEARCH, EDUCATION, AND EXTENSION SERVICE (CSREES)

PROGRAMS

Cooperative Forestry Research (Mcintire-Stennis) Program.—The Cooperative Forestry Research (McIntire-Stennis) Program (CFRP) is a crucial part of the foundation that underlies academic and scientific understanding of the Nation’s forest resources. McIntire-Stennis CFRP was originally enacted in order to provide universities with formula funds for the explicit purpose of research in the field of forestry, 

which was not provided for in similar research funding programs. For more than 

40 years, CFRP has equipped both private and land-grant universities with the abil-
568 

1 As part of its mission, National C–FAR seeks to increase awareness about the value of food 

and agricultural research, extension and education. For example, National C–FAR is hosting an 

educational series of ‘‘Lunch-N-Learn’’ seminars on the hill, featuring leading-edge researchers 

on timely topics to help demonstrate the value of public investment in food and agricultural research, extension and education. More information about National C–FAR and its programs is 

available at http://www.ncfar.org. 

ity to produce invaluable research concerning forest productivity, environmental 

quality, and technologies for monitoring and extending the natural resource base. 

The program also provides rigorous scientific education and training for university 

students—the future managers of the Nation’s forest resources. 

Universities, supported by base funds from the Federal Government, have consistently supplied science-based forestry research not affiliated with any particular resource use or interest group. Without sufficient base funds from the Federal Government, society will lose the benefits wrought by this productive partnership. NASF recommends $24.5 million for the Cooperative Forestry Research (McIntireStennis) Program. The proposed increase in CFRP will help the program continue 

to serve as the cornerstone of forest research in universities, providing knowledge 

central to sound management from environmental, economic, and social perspectives. In addition, we strongly urge the Subcommittee to reject the President’s proposal to shift 59 percent of the program to competitive funding. 

The Renewable Resources Extension Act (Rrea).—The Renewable Resources Extension Act (RREA) facilitates the transfer of needed forestry information and technology to non-industrial private forest landowners, as well as loggers and small 

businesses involved with forest resource management. 

Extension’s education programs aid private landowners in understanding their 

management options and responsibilities, and encourage them to take advantage of 

other technical and financial assistance programs. NASF recommends funding RREA at $4.1 million for fiscal year 2007, in order 

to sustain the program’s ability to address critical extension and stewardship needs. 

FARM BILL CONSERVATION PROGRAMS

NASF believes that the conservation programs enacted in the 2002 Farm Bill are 

integral for protecting water quality, erodible soils, wildlife habitat, and wetlands 

associated with agricultural and forestry operations. Trees and forestry practices are 

often the best solution to many of the conservation challenges arising from these 

operations. 

NASF recommends funding for the Environmental Quality Incentives Program (EQIP) at the fiscal year 2006 level of $1.2 billion, full funding for the Conservation 

Reserve Program (CRP), and $85 million for the Wildlife Habitat Improvement Program (WHIP). NASF supports the President’s fiscal year 2007 funding proposal of 

$342 million for the Conservation Security Program (CSP). NASF recommends that 

the Subcommittee encourage the Secretary of Agriculture and the NRCS to expand 

the emphasis on forestry practices in EQIP and the other Farm Bill Conservation 

Programs. 

These programs are important for landowners with both forest and agricultural 

land, as well as farmers who wish to plant trees for conservation purposes on their 

agricultural lands. Nearly two thirds of the land in the United States is forested, 

the majority of which is privately owned. Investing Federal funds in conservation 

practices on private forest lands produces benefits for all, not simply landowners. 

These benefits include abundant clean water for drinking and recreation, improved 

wildlife habitat, open space, viable rural economies, and many other tangible and 

intangible public benefits. 

CONCLUSION

The National Association of State Foresters seeks the Subcommittee’s support for 

a USDA fiscal year 2007 budget that will make sure the public’s conservation 

needs—provided by private landowners—are met. Thank you for the opportunity to 

provide our testimony. 

PREPARED STATEMENT OF THE NATIONAL COALITION FOR FOOD AND AGRICULTURAL

RESEARCH

Dear Mr. Chairman, Ranking Member Kohl and Members of the Subcommittee: 

On behalf of the National Coalition for Food and Agricultural Research 1 (National 

C–FAR), we are pleased to submit comments in strong support of enhanced public 

investment in food and agricultural research, extension and education as a critical 
569 

component of Federal appropriations for fiscal year 2007 and beyond. National C– 

FAR serves as a forum and a unified voice in support of sustaining and increasing 

public investment at the national level in food and agricultural research, extension 

and education. National C–FAR is a nonprofit, nonpartisan, consensus-based and 

customer-led coalition established in 2001 that brings food, agriculture, nutrition, 

conservation and natural resource organizations together with the food and agriculture research and extension community. 

Support for Fiscal Year 2007 Funding for Food & Agricultural Research, Extension 

& Education 

CSREES—National C–FAR urges the Subcommittee and Committee to support 

the Administration’s fiscal year 2007 request for USDA’s Cooperative State Research, Education, and Extension Service (CSREES) of $1.038 billion, and to augment funding to the extent practicable since it represents a represents a significant 

decrease from fiscal year 2006 funding levels. In particular, National C–FAR supports the Administration’s $247.5 million request for the National Research Initiative (NRI). This represents a significant increase over fiscal year 2006 levels. While 

a portion of the proposed increase occurs through the shifting of Section 406 Integrated Activities funding and responsibilities (such as food safety, pest management, 

and water quality) to NRI, funding for NRI would still realize a net increase of $24 

million. Significantly, the Administration’s proposal increases the cap for Integrated 

Activities funding, providing more funding for projects that include both research 

and extension components. 

The NRI supports research on key problems of national and regional importance 

in biological, environmental, physical, and social sciences relevant to agriculture, 

food, and the environment on a peer-reviewed, competitive basis. Additionally, the 

NRI enables USDA to leverage a portion of its funds for food and agricultural research, extension and education by fostering the development of new partnerships 

with other Federal agencies that advance agricultural science. Examples of successful collaborations include USDA’s involvement in the Microbial Genome Sequencing 

Program, the Maize Genome Program, the Microbial Observatories program, the 

Plant Feedstock Genomics for Bioenergy program, the Metabolic Engineering program, and the Climate Change Science Plan. 

ARS.—National C–FAR is concerned about the Administration’s proposed $123 

million cut in funding for the USDA Agricultural Research Service (ARS), as compared with fiscal year 2006 funding levels. Indeed ARS funding has been cut each 

of the past several years. Research conducted by ARS helps to ensure high-quality, 

safe food, and other agricultural products, assess the nutritional needs of Americans, sustain a competitive agricultural economy and enhance the natural resource 

base and the environment. The steady erosion in ARS funding could jeopardize the 

ability of the agency to carry out its important mission. 

ERS.—National C–FAR urges the Subcommittee and Committee to support the 

Administration’s fiscal year 2007 request of $83 million for the USDA, Economic Research Service (ERS), which represents a modest increase over the fiscal year 2006 

level. Many of the research outcomes generated through ERS efforts provide value 

in both policy and business application terms far in excess of what the modest size 

of the ERS budget might suggest. An important part of the Administration’s budget 

includes $5 million for the ERS to establish and maintain data collection on the demographic, economic, government program participation, and other information 

from samples of non-farm rural households and rural-based farm households, over 

time. National C–FAR believes such new and valuable data is necessary for a variety of purposes, including estimating impacts of farm policy changes. National C– 

FAR urges full funding of this initiative to assure that agricultural and rural economic analysts can reap the minimum necessary value added that will, in turn, enhance contributions to a sound farm policy and more robust rural economies 

throughout the Nation. 

National C–FAR urges that funding for food and agricultural research, extension 

and education be augmented to the maximum extent practicable, as an important 

next step toward building the funding levels needed to meet identified food and agricultural research, extension and education needs. 

As a coalition representing stakeholders in both the research, extension and education community and the customers’ who need and depend upon their outcomes, 

National C–FAR urges expanded public participation in the Administration’s research priority setting and funding decision process and stands ready to work with 

the Administration and other interested stakeholders toward that end. 
570 

DEMONSTRATED VALUE OF PUBLIC INVESTMENTS IN FOOD AND AGRICULTURAL

RESEARCH, EXTENSION AND EDUCATION

Public and private investments in U.S. agricultural research and practical application of results have paid huge dividends to the United States and the world, especially in the latter part of the 20th century. However, these dividends are the result 

of past investments in agricultural research. 

If similar research dividends are to be realized in the future, then the Nation 

must commit to a continuing investment that reflects the long-term benefits of food 

and agricultural research. 

Food and agricultural research, extension and education to date have helped provide the United States with an agricultural system that consistently produces high 

quality, affordable food and natural fiber, while at the same time: —Creating Jobs And Income.—The food and agricultural sector and related industries provide over 20 million jobs, about 17 percent of U.S. jobs, and account 

for nearly $1 trillion or 13 percent of GDP. —Helping Reduce The Trade Deficit.—Agricultural exports average more than $50 billion annually compared to $38 billion of imports, contributing some $12 billion to reducing the $350 billion trade deficit in the nonagricultural sector. —Providing Many Valuable Aesthetic And Environmental Amenities To The Public.—The proximity to open space enhances the value of nearby residential property. Farmland is a natural wastewater treatment system. Unpaved land allows 

the recharge of the ground water that urban residents need. Farms are stopovers for migratory birds. Farmers are stewards for 65 percent of non-Federal 

lands and provide habitat for 75 percent of wildlife. —Sustaining Important Strategic Resources.—This Nation’s abundant food supply 

bolsters national security and eases world tension and turmoil. Science-based 

improvements in agriculture have saved over a billion people from starvation 

and countless millions more from the ravages of disease and malnutrition. 

Publicly financed research, extension and education are necessary complements to 

private sector research, focusing in areas where the private sector does not have an 

incentive to invest, when (1) the pay-off is over a long term, (2) the potential market 

is more speculative, (3) the effort is during the pre-technology stage; and (4) where 

the benefits are widely diffused. Public research, extension and education help provide oversight and measure long-term progress. Public research, extension and education also act as a means to detect and resolve problems in an early stage, thus 

saving American taxpayer dollars in remedial and corrective actions. 

By any standard, the contributions of publicly supported agricultural research, extension and education to advances in food production and productivity and the resulting public benefits are well documented. For example, an analysis by the International Food Policy Research Institute of 292 studies of the impacts of agricultural 

research and extension published since 1953 (Julian M. Austin, et al, A Meta-Analysis of Rates of Return to Agricultural Research, 2000) showed an average annual 

rate of return on public investments in agricultural research and extension of 81 

percent! 

NATIONAL C–FAR URGES ENHANCED FEDERAL FUNDING FOR FOOD AND AGRICULTURAL

RESEARCH, EXTENSION AND EDUCATION

National C–FAR appreciates the longstanding support this Subcommittee and the 

full Committee have demonstrated through funding food and agricultural research, 

extension and education programs over the years that have helped the U.S. food and 

agricultural sector be a world leader and provide unprecedented value to U.S. citizens, and indeed the world community. 

National C–FAR is deeply concerned that shortfalls in funding in recent years for 

food and agricultural research, extension and education jeopardize the food and agricultural community’s continued ability to maintain its leadership role and more 

importantly respond to the multiple, demanding challenges that lie ahead. Federal 

funding for food and agricultural research, extension and education has been flat 

for over 20 years, while support for other Federal research has increased substantially. Public funding of agricultural research in the rest of the world during the 

same time period has reportedly increased at a nearly 30 percent faster pace. 

Reduced public investment in food and agricultural research, extension and education may well be a result of a view that the U.S. food and agricultural system 

is an unprecedented success story. However, societal demands and expectations 

placed upon the food and agricultural system are ever-changing and growing. Simply stated, Federal funding has not kept pace with identified priority needs. 

National C–FAR believes it is imperative to lay the groundwork now to respond 

to the many challenges and promising opportunities ahead through Federal policies 
571 

and programs needed to promote the long-term health and vitality of food and agriculture for the benefit of both consumers and producers. Stronger public investment 

in food and agricultural research, extension and education is essential in producing 

research outcomes needed to help bring about beneficial and timely solutions to 

multiple challenges. Multiple examples, such as those listed below, serve to illustrate current and future needs that arguably merit enhanced public investment in 

research, extension and education so that the food and agricultural system can respond to these challenges on a sustainable basis: 

—Strengthened bio-security is a pressing national priority. There is a compelling 

need for improved bio-security and bio-safety tools and policies to protect 

against bio-terrorism and dreaded problems such as foot-and-mouth and ‘‘mad 

cow’’ diseases and other exotic plant and animal pests, and protection of range 

lands from invasive species. 

—Energy costs are escalating, dependence on petroleum imports is growing and 

concerns about greenhouse gases are rising. Research, extension and education 

can enhance agriculture’s ability to provide renewable sources of energy and 

cleaner burning fuels, sequester carbon, and provide other environmental benefits to help address these challenges, and indeed generate value-added income 

for producers and stimulate rural economic development. 

—Food-linked health costs are high. Some $100 billion of annual U.S. health costs 

are linked to poor diets, obesity, food borne pathogens and allergens. Opportunities exist to create healthier diets through fortification and enrichment. 

—Research, extension and education are key to providing to solutions to environmental issues related to global warming, limited water resources, enhanced 

wildlife habitat, and competing demands for land and other agricultural resources. 

—There was considerable debate during the last farm bill reauthorization about 

how expanded food and agricultural research, extension and education could enhance farm income and rural revitalization by improving competitiveness and 

value-added opportunities. 

—Population and income growth are expanding the world demand for food and 

natural fiber and improved diets. World food demand is projected to double in 

25 years. Most of this growth will occur in the developing nations where yields 

are low, land is scarce, and diets are inadequate. Without a vigorous response, 

demand will only be met at a great global ecological cost. 

—Regardless of one’s views about biotechnology and genetic resources, an effective 

publicly funded research role is needed for oversight and to ensure public benefits. 

Translational education (extension) is a vital link connecting the research community to those who need and use research outcomes. The extension and education system helps translate basic and applied research outcomes into practical applications 

and more timely implementation by the end user community, thus helping to realize 

positive economic, environmental, health, food security and a host of other benefits 

in the food and agricultural system, and for the consuming public. The extension 

community is evolving its mission in a positive direction, seeking to engage constituents in a way that not only fulfills the traditional extension role but also actively 

solicits feedback concerning research and extension needs as identified by the customers’ who need research outcomes. This is consistent with National C–FAR’s mission of increasing stakeholder involvement in decision making about research priorities and funding. The USDA NRI has made significant progress in recognizing the 

extension role, through funding of projects that undertake an integrated research 

and extension approach. National C–FAR strongly supports funding for extension 

and education. 

Finally, there is a continuing need to build the human capacity of expertise to do 

quality food and agricultural research, extension and education, and to implement 

research outcomes in the field and laboratory. The food and agricultural sciences 

face a daunting task of supplying the Nation with the next generation of scientists 

and educators. If these basic human resource needs are not met, then the Nation 

will face a shortage of trained and qualified individuals. 

Public investment in food and agricultural research, extension and education 

today and in the future must simultaneously satisfy needs for food quality and 

quantity, resource preservation, producer profitability and social acceptability. National C–FAR supports the public funding needed to help assure that these interdependent needs are met. 

A Sense of the Congress resolution endorsed by National C–FAR to double funding in food and agricultural research, extension and education within five years was 

incorporated into the 2002 Farm Bill that was enacted into law. However, the major 
572 

commitment to expanded research has not yet materialized. At the four-year mark, 

the larger reality is the threat of funding cuts. 

CONCLUSION

In conclusion, National C–FAR respectfully submits that— 

—The food and agricultural sector merits Federal attention and support; 

—Food and agricultural research, extension and education have paid huge dividends in the past, not only to farmers, but to the entire Nation and the world; 

—There is an appropriate and recognized role for Federal support of research, extension and education; 

—Recent funding levels for food and agricultural research, extension and education have been inadequate to meet pressing needs; 

—Federal investments in food and agricultural research, extension and education 

should be enhanced in fiscal year 2007 and beyond; and 

—The Administration should provide for expanded public participation, including 

during review of programs being considered for possible reforms or cuts. 

National C–FAR appreciates the opportunity to share its views and stands ready 

to work with the Chair and members of this Subcommittee and Committee in support of these important funding objectives. 

PREPARED STATEMENT OF THE NATIONAL COOPERATIVE BUSINESS ASSOCIATION

The National Cooperative Business Association appreciates the opportunity to 

submit testimony on the importance of the Rural Cooperative Development Grant 

program and the need for increased funding. NCBA is the Nation’s only national 

organization representing cooperatives across all economic sectors—including agriculture, childcare, electricity, finance, food retailing and distribution, healthcare, 

housing, insurance, purchasing and shared services, telecommunications and many 

others. 

The Rural Cooperative Development Grant program, which NCBA helped to establish, is the only dedicated source of Federal funding supporting the network of 

more than 20 cooperative development centers serving more than 40 States. This 

funding leverages much more from State and local as well as private sources. The 

program also includes money for economic research on the impact of cooperatives, 

research needed to inform policymakers and cooperatives about how best co-ops can 

address issues facing this Nation such as senior services and rural housing. 

Congress recognized the importance of the work of cooperative development centers when it enacted the program in 1996 and authorized $50 million annually to 

help create businesses and jobs in rural America. In 2002, Congress reauthorized 

the program at the same level. Unfortunately, chronic underfunding has limited the 

ability of centers to capitalize on opportunities to revitalize rural areas. A first step 

to address this problem is for this Subcommittee to appropriate $8.5 million in this 

year’s appropriations bill and maintain the President’s funding for research on the 

economic impact of cooperatives. 

Rural Cooperative Development Grants—Revitalizing Rural Economies 

Cooperatives are businesses owned and controlled by the people who buy their 

products or use their services. Tens of thousands of cooperatives in this country 

range in size from small storefronts to Fortune 500 companies. Credit unions, electric cooperatives, telephone co-ops, agricultural cooperatives, purchasing cooperatives, and worker cooperatives all serve the needs of millions of members. 

Cooperatives represent a flexible business model that can be developed by the 

community to address its economic needs. Co-ops provide an opportunity for entrepreneurial ideas to become reality. Since members own the cooperative, they participate in the earnings of the cooperative. Rather than leaving the community, patronage refunds—money paid to members based on their use in the cooperative—remains, refueling the economy as members use their refunds to purchase goods locally. 

The Rural Cooperative Development Grants program funds the establishment and 

operation of centers for rural cooperative development to improve economic conditions in rural areas. Grants are competitive, require a 25 percent non-Federal match 

in most cases, and can be provided to nonprofits or institutions of higher education. 

For the past few years, USDA has funded only half of all applications received due 

to budget constraints. The program is authorized at $50 million. 

Cooperative development centers are on the front lines of efforts to revitalize 

struggling rural economies. They use Rural Cooperative Development Grants to conduct feasibility studies, develop business plans, launch new businesses, and provide 
573 

education and training to help ensure the success of these businesses. Through 

CooperationWorks!, a national organization of more than 20 centers, centers share 

their knowledge and experience. This network allows centers to maximize resources, 

avoid duplication and bring the greatest benefit to their communities. 

The work of the centers translates into jobs and money in these rural communities. Since the 1990s, the centers have helped start or expand almost 400 cooperative businesses with more than 47,000 members, creating more than 5,800 new 

rural jobs in virtually every sector of the economy, including energy, housing, agriculture, forestry, food, senior and childcare services, and health care. Investment in 

these cooperatives exceeds $900 million. 

The Need for Cooperative Development 

Cooperative development centers address a growing need. Rural areas in this 

country, especially in the Midwest, have not benefited from the recent economic expansion. This has worsened an outmigration problem that has ravaged the center 

of our country over the last few years. 

For example, despite 3 years of economic expansion, 1.5 million people were added 

to the poverty rolls in the Midwest between 2001 and 2004. In all non-metropolitan 

areas, the poverty rate has remained stuck at 14.2 percent despite the economic recovery. 

With the help of RCDG grants, cooperative development centers are working with 

communities to create economic sustainability. For example, the Georgia Cooperative Development Center helped 27 local farmers create a co-op to get access to 

wholesale buyers who had previously denied them business. The Farmers Fresh 

Food Network now markets to agriculture members, local restaurants and farmers 

markets and soon plans to provide local schools with fresh produce. 

The Missouri Farmers Union Family Farm Opportunity Center helped families 

turn seemingly profitless land into a sustainable business by forming a co-op to mill 

their trees into high quality boards. Not only are they practicing sustainable development with the project but the estimated return to the community could jump from 

$35 million to $3.4 billion. 

The centers also respond to communities in crises, such as those devastated by 

Katrina. The Federation of Southern Cooperatives and the Mississippi Association 

of Cooperatives have been working with farmers to stabilize farms and homes destroyed by the storm, to provide shelter, basic supplies and financial assistance. 

They are also working long term to train people at their facilities and create cooperatives that address basic economic needs of these hard-hit communities, such 

as housing. 

The common thread through these stories is economic sustainability and revitalization. Substantial amounts of money generated by these cooperatives are being 

put back into the local economy by members. 

Cooperative Research—Filling a Gap 

The number of jobs and other data collected by the cooperative development centers and the success stories indicate that cooperatives have great potential to address many of the problems facing rural America. There is a serious gap, however, 

in the information about cooperatives. Though economic data was collected on cooperatives many years ago, there has been no comprehensive data collection effort 

to find out the impact of all types of cooperatives on the United States and regional 

economies. 

The President’s budget this year includes $495,000 for research on the economic 

impact of cooperatives. The funding is for a cooperative research agreement between 

USDA and a qualified academic institution to direct research on the national economic impact of cooperatives. The research can assess how cooperatives can address 

emerging economic development needs in all sectors of the economy. The research 

funded for fiscal year 2007 will build on the research currently underway on the 

economic impact of all types of cooperatives. In addition, this research is essential 

to assess the impact and cost effectiveness of the Federal program on efforts to revitalize rural economies. 

The limited studies available indicate the potential is significant for cooperatives 

to address economic needs. According to the National Co-op Month Planning Committee’s ‘‘2005 Snapshot,’’ a quick survey of co-ops, annual revenues for cooperatives 

are in excess of $211.9 billion. In Wisconsin, a study funded by USDA found cooperatives supported close to 30,000 full time jobs. The South Dakota Rural Electric 

Association found that the electric co-ops there generated 800 new jobs and $11 million in economic development over a 5 year period. The Alabama Credit Union 

League found that their State’s credit unions generated 8,777 jobs, $288 million in 

household income and $24.1 million in tax receipts. 
574 

These types of studies need to be replicated on a nationwide basis for all types 

of cooperatives. This country needs data such as: 

—The number of jobs created by cooperatives both directly and indirectly. 

—The level of economic activity created by cooperatives. 

—The tax revenue generated by the level of economic activity. 

—A definitive census on the number of cooperatives and the types of good and 

services that are being offered. 

—The amount of patronage dividends that are returned to the members from 

their cooperatives. 

—The extent of the economic and social benefit where cooperatives can meet the 

needs of communities that are not adequately met by other types of businesses. 

As Liz Bailey, Executive Director of the Cooperative Development Fund noted: 

We all know that there is a basic lack of understanding about cooperatives in all 

levels of government, in the business community, in the academic world, in the philanthropic world and among the general public. Too few understand how cooperatives function and the role they play in the Nation’s economy. We all use anecdotal 

stories to tell of successful cooperative enterprises, but we don’t have access to the 

kind of aggregated economic data that is routinely used by economic and business 

analysts to map U.S. economic activity and interpret the data for those who make 

or influence public policy. Government, through its support of university research, 

has traditionally been the source of this kind of basic research... It’s also important to have data that is continually updated. It can’t be a one time 

snapshot... it’s data that needs to be tracked and reported on a regular basis. 

(emphasis added) Testimony of Liz Bailey, USDA Public Meeting on Cooperative Research Agenda, September 27, 2005 

Chronic Underfunding Limits Opportunities 

The need for rural economic development and cooperative development is clear. 

Congress recognized the need when it developed the program: 

The Managers intend to target the limited funds available for the Rural Cooperative Development Grant program on cooperative development centers that operate 

on a regional or statewide basis. By focusing this grant program on regional centers 

rather than on small local projects, the Committee hopes to link cooperatives from 

different communities and different sectors of the economy to strengthen the cooperative movement as a whole. (emphasis added) Federal Agriculture Improvement and 

Reform Act of 1996, Conf.Rep., p. 432 

One of the ways Congress tried ‘‘to strengthen the cooperative movement as a 

whole’’ with the program was to ‘‘emphasiz[e] job creation in rural areas through 

the development of rural cooperatives, value added processing, and rural businesses.’’ (Conf.Rep., p. 431) The centers provide a cost effective and efficient way to 

deliver technical assistance that creates businesses, jobs and opportunities. But the 

program’s funding has not kept up with the demand, which limits both the ability 

of current centers to provide assistance to create jobs and the development of new 

centers to ensure national coverage. 

Last year, for example, many projects that could have created jobs and economic 

opportunities were denied funding. Centers with proven track records, with business 

development expertise, were turned down. Though the program serves more than 

40 States, the program was intended to cover the entire country. More funding is 

needed to ensure that all States are served by a center that can address the economic and entrepreneurial needs of the area. 

Private dollars also go into cooperative development. But these funds struggle to 

meet the need as well. The Cooperative Development Fund’s Mutual Service Cooperative Fund, which makes grants for feasibility studies, educational programming 

and technical assistance projects, knows how great the demand for dollars is. In 

2004, with $90,000 in available funds for grants, CDF received 44 applications requesting a total of $980,000. In 2005 the trustees narrowed the focus of the Fund 

and still received over $300,000 in proposals, 3 times the funds available. 

Cooperative development centers also would benefit from multi-year funding. 

Many times efforts to develop a business are halted due to a lack of commitment 

for funds in the future. Since businesses typically take at least 3 years from concept 

to operation, there is great need to have funds available during that period. 

The program’s recent funding history shows little to no increase in the program 

over the past 5 years despite the continued growing demand. 

—Fiscal year 2006—$6.5 million (includes $500,000 for research agreement) 

—Fiscal year 2005—$6 million 

—Fiscal year 2004—$6.5 million 

—Fiscal year 2003—$6.5 million 
575 

—Fiscal year 2002—$5.25 million 

This funding also is only a small portion of the program’s authorized level of $50 

million. The program’s sponsors intended there to be enough funds to address the 

rural economic needs of the whole country. 

Request for Increased Appropriation for RCDG 

The President’s fiscal year 2007 budget includes $7 million for the RCDG program, including $495,000 for research on the economic impact of cooperatives. We 

seek an increase in funding to at least $8.5 million, which would help provide funding for four to six additional centers and help fulfill the goal of serving all States. 

The $8.5 million would also ensure that sufficient funds are available to help build 

the research capacity to provide policymakers with information to assess the value 

of RCDG and how cooperatives can address economic issues facing the country. This 

would be a first step toward achieving the goals Congress intended for the program. 

Thank you for the opportunity to submit testimony on this important topic. 

PREPARED STATEMENT OF THE NATIONAL COMMODITY SUPPLEMENTAL FOOD

PROGRAM ASSOCIATION

Mr. Chairman and Subcommittee members, I am Tim Robertson, President of the 

National Commodity Supplemental Food Program Association (NCSFPA). Thank 

you for this opportunity to present information regarding the Commodity Supplemental Food Program (CSFP). 

CSFP was our Nation’s first food assistance effort with monthly food packages designed to provide protein, calcium, iron, and vitamins A and C. CSFP began in 1969 

for low-income mothers and children, preceding the Special Supplemental Nutrition 

Program for Women, Infants, and Children known as WIC. CSFP pilot programs in 

1983 added low-income seniors to the list of eligible participants and they now comprise nearly 90 percent of all participants. 

CSFP is a unique Federal/State and public/private effort. The USDA purchases 

specific nutrient-rich foods at wholesale prices for distribution. State agencies such 

as the department of health, agriculture or education provide administration and 

oversight. These agency’s contract with community and faith based organizations to 

warehouse and distribute food, certify eligibility and educate participants. The local 

organizations build broad collaboration among non-profits, health units, and area 

agencies on aging so that seniors and others can quickly qualify for and receive 

their monthly supplemental food package along with nutrition education to improve 

their health and quality of life. This unique public/private partnership reaches even 

homebound seniors with vital nutrition. 

The foods provided through CSFP includes canned fruits and vegetables, juices, 

meats, fish, peanut butter, cereals and grain products, cheese, and other dairy products. The availability of these goods increases healthy food consumption among 

these low-income populations. 

The CSFP is also an important ‘‘market’’ for commodities supported under various 

farm programs, as well as an increasingly important instrument in meeting the nutritional and dietary needs of special low-income populations. 

In fiscal year 2006, the CSFP provided services through 150 non-profit community 

and faith-based organizations at over 1,800 sites located in 32 States, the District 

of Columbia, and two Indian reservations (Red Lake, Minnesota and Oglala Sioux, 

South Dakota). On behalf of those organizations the NCSFPA would like to express 

our concern and disappointment regarding the reduction of available CSFP resources for fiscal year 2006. 

—Congress in the fiscal year 2006 Agricultural Appropriations bill strongly encouraged USDA to make every effort to maintain the fiscal year 2005 caseload 

by making full use of CSFP inventory and carryover from preceding years and 

to access all available resources from bonus commodity holdings and CCC 

stocks. 

—It is not clear from the ‘‘CSFP 2006 Final Caseload Assignments’’ memorandum 

whether USDA has made full use of all available resources, especially since 

States were instructed to cut program participation by 6.26 percent (32,902 seniors nationally). 

—The prospect of seniors not receiving needed CSFP food in a year when USDA 

has forecast in excess of $35.4 million in carryover inventory at the end of the 

fiscal year 2006 is disturbing. Clearly these inventories could and should be 

used to serve the full fiscal year 2006 caseload. 

—Other resources such as $4 million included for CSFP Gulf Coast operators in 

the defense bill, and full use of Commodity Credit Corporation (CCC) inventory 
576 

appears not to have been factored into the CSFP 2006 final caseload assignments. 

—At a time when many Americans must choose between food or their medicine, 

utilities, and other basic expenses, the Federal Government should not be reducing benefits for our most vulnerable citizens. We respectfully request your 

review of USDA’s adherence to your directive in the Agriculture Appropriation 

Bill. 

CSFP’s 36 years of service stands as testimony to the power of partnerships 

among community and faith-based organizations, farmers, private industry and government agencies. The CSFP offers a unique combination of unparalleled advantages. 

—The CSFP specifically targets our Nation’s most nutritionally vulnerable populations: seniors and young children. 

—The CSFP provides a monthly selection of food packages tailored to the nutritional needs of the population served. Eligible participants are guaranteed [by 

law] a certain level of nutritional assistance every month in addition to nutrition education regarding how to prepare and incorporate these foods into their 

diets. 

—The CSFP purchases foods at wholesale prices, which directly supports the 

farming community. The cost of the average food package for fiscal year 2006 

is $15.04, but the retail value is approximately $50.00. 

—The CSFP involves the entire community in confronting the problem of hunger. 

There are thousands of volunteers as well as many private companies who donate money, equipment, and most importantly time and effort to deliver food 

to needy and homebound seniors. These volunteers not only bring food but companionship and other assistance to seniors who might have no other source of 

support. (See Attachment 1) 

The White House proposed budget for fiscal year 2007, released on Monday, February 6, 2006, would eliminate the CSFP completely, and would eliminate all of this 

effort and support of those 36 years. This proposal has shocked the entire CSFP 

community as well as legislators, anti-hunger and senior service organizations and 

concerned citizens. America’s Second Harvest, AARP, FRAC, and others have all 

voiced their opposition to the elimination of CSFP. It is unconscionable to eliminate 

benefits for some of our most vulnerable citizens and to eliminate hope of those 

waiting for participation in the program. It is the cruelest cut for the greatest generation. 

In a recent CSFP survey, more than half of seniors living alone reported an income of less than $750 per month. Of those respondents from two-person households, more than half reported an income of less than $1,000 per month. Fewer than 

25 percent reported being enrolled in the Food Stamp Program. Over 50 percent 

said they ran out of food during the month. Also, close to 70 percent senior respondents say they use money for medical bills not food. 

The Senate Agriculture Appropriations Subcommittee has consistently supported 

CSFP, acknowledging it as a cost-effective way of providing nutritious supplemental 

foods. This year, your support is needed urgently to provide adequate resources for 

the 536,196 mothers, children and seniors currently receiving benefits, 20,500 lowincome participants currently waiting in five new States and 154,259 seniors waiting in current States for this vital nutrition program. 

There is no discernible plan to address the long-term needs of those affected by 

the elimination of CSFP. The proposed transition plan provides that seniors being 

removed from CSFP will be provided a Food Stamp Program (FSP) benefit of $20 

per month for up to 6 months, or until the participant actually enrolls in the FSP, 

whichever comes first. As referenced earlier, CSFP provides a food package that 

costs USDA about $15 per month. It has a retail value of approximately $50. How 

does someone use $20 to purchase approximately $50 worth of nutritious foods? 

What happens at the end of 6 months? Simply transferring seniors to the FSP is 

an inadequate solution. It is essential for seniors to have access to services which 

they 

feel is offered with dignity and respect. Many will outright reject the idea of applying for FSP benefits. According to the ERS Evaluation of the USDA Elderly Nutrition Demonstrations: Volume I: 

‘‘The Commodity alternative benefit demonstration in North Carolina was popular 

both among new applicants and among existing FSP participants. Clients eligible 

for low FSP benefits were more likely to get the commodity packages, which had 

a retail value substantially greater than their FSP benefits’’. In particular, seniors 

described the anxiety of using FSP benefits in stores, where they felt shoppers and 

store clerks looked down on them. The demonstrations attracted a particularly large 
577 

share of clients eligible for the $10 benefit because the retail value of the commodity 

packages was worth $60–$70’’. 

Depending on their non-cash assets, seniors may not qualify for a FSP benefit 

level equivalent to the CSFP food package. Seniors receiving the minimum benefit 

would not be eligible for the $20/month transitional benefit. The 25 percent of current CSFP participants who already enrolled in the FSP will lose the benefits of 

CSFP and those benefits will not be replaced at a time when they are struggling 

to make ends meet. CSFP and FSP are supplemental programs. They work together 

to make up the shortfall that many of our seniors are facing each month. Both programs need to be available as part of the ‘‘safety net’’ for our low-income participants. 

USDA reports that the average FSP benefit paid to senior citizens is about $65 

per month, but in reality, many senior citizens receive only the minimum monthly 

benefit of $10, which has not been updated since 1975. USDA figures also report 

households rather than individual participants and include households with disabled family members. 

The proposed transition plan for women, infants and children enrolled in the 

CSFP is to transfer them to WIC. However, due to increasing coordination between 

WIC and CSFP at the State and community levels, the number of WIC-eligible 

mothers and children enrolled in the CSFP is steadily declining. In some States, 

this figure is less than 2 percent of all enrolled women and children, eradicating 

supplemental food and nutrition benefits for that population as well. Further, the 

majority of women and children receiving CSFP food are 6 month postpartum 

women and 5 year old children who are not eligible for the WIC Program. 

The National Commodity Supplemental Food Program Association requests the 

Senate Agriculture Appropriations Subcommittee take the appropriate actions to 

fund CSFP for fiscal year 2007 at $160 million as illustrated below: 

[Dollars in millions] 

Description People (caseload) Funding 

Maintain fiscal year 2005 Caseload Requirements in Existing 

States.

536,196 ................................................. $128.0 

Five New States (AK, DE, OK, NJ, UT) ............................................ 20,500 ................................................... 3.7 

Current States Senior Needs .......................................................... 154,259 ................................................. 27.6 

USDA Costs for Procuring Commodities ......................................... ................................................................ .7 

Total CSFP Request for fiscal year 2007 ......................... 710,955 ................................................. 160.0 

With the aging of America, CSFP must be an integral part of USDA Senior Nutrition Policy as well as comprehensive plans to support the productivity, health, independence, and quality of life for America’s seniors. 

Measures to show the positive outcomes of nutrition assistance to seniors must 

be strengthened. A 1997 report by the National Policy and Resource Center on Nutrition and Aging at Florida International University, Miami—Elder Insecurities: 

Poverty, Hunger, and Malnutrition indicated that malnourished elderly patients experience 2 to 20 times more medical complications, have up to 100 percent longer 

hospital stays, and incurs hospital costs $2,000 to $10,000 higher per stay. Proper 

nutrition promotes health, treats chronic disease, decreases hospital length of stay 

and saves health care dollars. 

Rather than eliminating the program, the NCSFPA recommends the following initiatives to strengthen CSFP: 

—Develop a formal evaluation process to demonstrate individual and program 

outcomes of CSFP with Federal, State, and local CSFP managers included in 

the study design. 

—Restore financial guidelines for seniors to the original level of 185 percent of 

poverty. 

—Set ‘‘greatest need within a project area’’ as the priority for service or let each 

State set its priority for service under a plan approved by the Secretary of Agriculture. 

—Support and expand the program in those States that have demonstrated an interest in the CSFP, including the 5 States that already have USDA-approved 

plans to operate CSFP (Arkansas, Delaware, New Jersey, Oklahoma, and Utah) 

or that have demonstrated a willingness to continue and expand current CSFP 

services. 

This program continues with committed grassroots operators and dedicated volunteers. CSFP’s mission is to provide quality nutrition assistance economically, effi-
578 

ciently, and responsibly always keeping the needs and dignity of our participants 

first. We commend the Food and Nutrition Service of the Department of Agriculture 

and particularly the Food Distribution Division for their continued innovations to 

strengthen the quality of the food package and streamline administration. We also 

remain committed to providing quality services in collaboration with the community 

organizations and volunteers that contribute more than 50 percent of the resources 

used in providing these services. 
579 

ATTACHMENT 1.—NATIONAL CSFP ASSOCIATION ADMINISTRATIVE EXPENSE/VALUE SURVEY FOR FISCAL YEAR 2005 

Programs USDA Reim- bursed Cash Not Reimbursed by USDA Cash CSFP Expendi- tures Cash Goods & Services donated to agen- cy Value Volunteer Labor Hours Value Annual Total Pro- gram Value Percent Paid by USDA Extra Goods do- nated to CSFP participants 

New Hampshire ....................................................................................... $425,689 $16,902 $442,591 ........................ $117,370 $559,961 76 $1,668 New York ................................................................................................. 1,896,086 85,500 1,981,586 $20,000 9,126 2,010,712 94 10,425 Vermont ................................................................................................... 257,950 318,327 576,277 1,200 96,578 674,055 38 ........................Washington DC ........................................................................................ 449,139 1,500,000 1,949,139 1,600,000 12,513 3,561,652 13 ........................Pennsylvania ........................................................................................... 834,444 147,234 981,678 332,604 234,310 1,548,592 54 278,303 Kentucky .................................................................................................. 912,417 35,538 947,955 5,000 376,799 1,329,754 69 ........................Mississippi .............................................................................................. 402,779 ........................ 402,779 ........................ 189,540 592,319 68 ........................North Carolina ......................................................................................... 79,849 40,000 119,849 ........................ 3,438 123,287 65 20,000 South Carolina ........................................................................................ 215,880 113,827 329,707 66,000 98,456 494,163 44 14,500 Tennessee ................................................................................................ 827,805 ........................ 827,805 ........................ ........................ 827,805 100 ........................Illinois ...................................................................................................... 903,174 3,000 906,174 ........................ 341,172 1,247,346 72 ........................Indiana .................................................................................................... 264,831 32,020 296,851 19,440 369,603 685,894 39 100 Michigan .................................................................................................. 4,535,044 2,237,705 6,772,749 296,000 3,696,683 10,765,433 42 577,199 Minnesota ................................................................................................ 806,379 277,890 1,084,269 28,000 798,525 1,910,794 42 497,700 Red Lake, MN .......................................................................................... 5,937 5,937 11,874 ........................ ........................ 11,874 50 ........................Ohio ......................................................................................................... 713,807 250,997 964,804 54,800 442,629 1,462,233 49 166,590 Wisconsin ................................................................................................ 287,026 15,000 302,026 ........................ 305,370 607,396 47 79,797 Louisiana ................................................................................................. 4,672,088 ........................ 4,672,088 377,479 1,483,387 6,532,955 72 2,500 New Mexico .............................................................................................. 1,120,106 195,000 1,315,106 78,719 231,800 1,625,625 69 1,208,353 Texas ....................................................................................................... 706,534 85,000 791,534 1,500 115,830 908,864 78 12,000 Colorado .................................................................................................. 1,196,217 425,963 1,622,180 13,375 174,254 1,809,809 66 650,425 Iowa ......................................................................................................... 228,563 286,543 515,106 ........................ 67,247 582,353 39 108,510 Kansas ..................................................................................................... 342,332 69,019 411,351 329,960 255,881 997,192 34 81,424 Missouri ................................................................................................... 539,700 109,072 648,772 2,000 398,455 1,049,227 51 ........................Montana .................................................................................................. 81,528 29,649 411,177 115,929 515,022 1,042,128 37 37,800 Nebraska ................................................................................................. 761,247 116,207 877,454 46,449 276,044 1,199,947 63 74,960 North Dakota ........................................................................................... 161,155 43,208 204,363 ........................ 192,594 396,957 41 1,695 South Dakota ........................................................................................... 161,911 5,005 166,916 36,875 87,785 291,576 56 12,480 Oglala Sioux, SD ..................................................................................... 37,779 ........................ 37,779 ........................ ........................ 37,779 100 ........................Alaska ...................................................................................................... 138,798 ........................ 138,798 ........................ 35,100 173,898 80 Arizona ..................................................................................................... 968,788 640,636 1,609,424 442,950 1,030,066 3,082,440 31 655,000 California ................................................................................................. 3,095,354 1,036,699 4,132,053 242,424 3,532,078 7,906,555 39 588,868 Nevada .................................................................................................... 401,133 16,000 417,133 2,000 1,123 420,256 95 4,000 Oregon ..................................................................................................... 72,603 ........................ 72,603 ........................ ........................ 72,603 100 ........................
580 

ATTACHMENT 1.—NATIONAL CSFP ASSOCIATION ADMINISTRATIVE EXPENSE/VALUE SURVEY FOR FISCAL YEAR 2005—Continued 

Programs USDA Reim- bursed Cash Not Reimbursed by USDA Cash CSFP Expendi- tures Cash Goods & Services donated to agen- cy Value Volunteer Labor Hours Value Annual Total Pro- gram Value Percent Paid by USDA Extra Goods do- nated to CSFP participants 

Washington .............................................................................................. 134,426 31,000 165,426 12,600 6,318 184,344 73 ........................

Grand Total ................................................................................ 28,938,498 8,168,878 37,107,376 4,125,304 15,495,096 56,727,776 51 5,084,297 
581 

PREPARED STATEMENT OF THE NATIONAL TURFGRASS EVALUATION PROGRAM

Mr. Chairman and Members of the Subcommittee: On behalf of the National 

Turfgrass Evaluation Program (NTEP), I appreciate the opportunity to present to 

you the turfgrass industry’s need and justification for continuation of the $490,000 

appropriated in the fiscal year 2006 budget for turfgrass research within the Agricultural Research Service (ARS) at Beltsville, MD. Secondly, we ask that the committee support and accept the $1,880,000 for Drought Mitigation in the President’s 

budget request. This funding will be used by ARS to conduct turfgrass water conservation and salinity research at Phoenix, AZ and Riverside, CA. Thirdly, to implement the most critical needs within the National Turfgrass Research Initiative, we 

are asking for five individual research positions of $450,000 each. This amount is 

being requested by senators in the states where the positions are located. We appreciate the support of research funding at Beaver, WV ($330,000) provided by the committee in fiscal year 2006 and request that funding be restored in fiscal year 2007. 

All funding provided by the Committee is requested to go directly to ARS/Beltsville, 

not the industry per se. 

Restoration of funding for the existing ARS Scientist Position and related support activities at Beltsville, MD ($490,000) 

NTEP and the turfgrass industry are requesting the Subcommittee’s support for $490,000 to continue funding for the full-time scientist staff position within the 

USDA, ARS at Beltsville, MD, focusing on turfgrass research, that was provided by 

the Committee in the fiscal year 2006 budget, and in the four previous budget cycles. We consider this funding our Congressional ‘‘baseline’’, i.e. that funding which 

is central to and critical for the mission of the National Turfgrass Research Initiative. We are very grateful for this support and hope the Committee will continue 

this funding. 

Turfgrass provides multiple benefits to society including child safety on athletic 

fields, environmental protection of groundwater, reduction of silt and other contaminants in runoff, and green space in home lawns, parks and golf courses. Therefore, 

by cooperating with NTEP, USDA has a unique opportunity to take positive action 

in support of the turfgrass industry. While the vast majority of the USDA’s funds 

have been and will continue to be directed toward traditional ‘‘food and fiber’’ segments of U.S. agriculture, it is important to note that turfgrasses (e.g., sod production) are defined as agriculture in the Farm Bill and by many other departments 

and agencies. It should also be noted that the turfgrass industry is the fastest growing segment of U.S. agriculture, while it receives essentially no federal support. 

There are no subsidy programs for turfgrass, nor are any desired. 

For the past 70 years, the USDA’s support for the turfgrass industry has been 

modest at best. The turfgrass industry’s rapid growth, importance to our urban environments, and impact on our daily lives warrant more commitment and support 

from USDA. 

A new turfgrass research scientist position within USDA/ARS was created by 

Congress in the fiscal year 2001 budget. Additional funding was added in fiscal year 

2002 with the total at $490,000. A research scientist was hired, and is now working 

at the ARS, Beltsville, MD center. A research plan was developed and approved by 

ARS. This scientist has used the funding for a full-time technician, equipment and 

supplies to initiate the research plan and for collaborative research with universities. We have an excellent scientist in place, and he is making good progress in 

establishing a solid program. At this point, losing the funding for the position would 

be devastating to the turf industry, as significant research has begun. 

Support the President’s budget request for Drought Mitigation research as proposed 

by ARS (See ARS Explanatory Notes, pages 10–82, 10–83) ($1,880,000) 

The turfgrass industry is excited that for the first time, the President’s budget 

contains funding for turfgrass research within ARS. This funding will be used to 

hire scientists in two very important locations, Riverside, CA and Phoenix, AZ, focusing on water conservation, wastewater reuse and salinity research. These issues 

are the most critical research needs for the survival of the turf industry. Following 

is a brief description of the research that ARS will conduct with this funding: 

ARS will: 

Develop Technology and Management Systems to Use Non-Potable Water to Reduce 

Agriculture’s Vulnerability to Drought ($1,880,000 Total).—In the process, ARS will 

develop systems to safely reuse wastewater and low-quality water as a means of irrigating agricultural, horticultural and turf-based enterprises in an environmentally 

and economically sustainable manner 

As noted in USDA’s Explanatory Notes accompanying this budget request, this 

funding will be directed to the following two critical locations: 
582 

Phoenix, AZ, ($940,000) 

The U.S. Water Conservation Lab in Phoenix will determine the on-site impacts 

and movement in the air, soil, plant, and ground water of biological and chemical 

substances contained in treated and untreated waste water used for irrigation of 

turfgrass. They will also develop irrigation technologies and management systems 

to mitigate the impact of elevated levels of these compounds and nutrients when 

wastewater is used in the production of turf and specialty crops. 

Riverside, CA, ($940,000) 

This research will be conducted at the world-renowned U.S. Salinity Lab. The Riverside lab will focus on the development of new irrigation technologies and systems 

to either mitigate or manage the effect of saline irrigation on the production of turf 

and specialty crops. 

Request funding of Congressional earmarks for five ARS scientist positions at four ARS installations @ $450,000 each (Total: $2,250,000) 

The turfgrass industry also requests that the Subcommittee appropriate an addi- tional $2,250,000 for the National Turfgrass Research Initiative. This Initiative has 

been developed by USDA/ARS in partnership with the turfgrass industry. We are 

asking for five priority research positions at four locations across the United States. 

These five positions address the most pressing research needs, namely water use/ 

efficiency and environmental issues. $450,000 is being requested for each location. 

The USDA needs to initiate and maintain ongoing research on turfgrass development and improvement for the following reasons: 

The value of the turfgrass industry in the United States is $40 billion annually. 

There are an estimated 50,000,000 acres of turfgrass in the United States. Turfgrass 

is the number one or two agricultural crop in value and acreage in many States 

(e.g., MD, PA, FL, NJ, NC). 

As our society becomes more urbanized, the acreage of turfgrass will increase significantly. In addition, State and local municipalities are requiring the reduction of 

water, pesticides and fertilizers on turfgrass. However, demand on recreational facilities will increase while these facilities will still be required to provide safe 

turfgrass surfaces. 

Currently, the industry itself spends about $10 million annually on applied and 

proprietary turfgrass research. However, private and university research programs 

do not have the time nor the resources to conduct basic research and to identify 

completely new sources of beneficial genes for stress tolerance. ARS turfgrass scientists will enhance the ongoing research currently underway in the public and private sectors. Because of its mission to conduct the Nation’s research for agricultural 

commodities, ARS is the proper delivery system for this research. 

Water management is a key component of healthy turf and has direct impact on 

nutrient and pesticide losses into the environment. Increasing demands and competition for potable water make it necessary to use water more efficiently. Also, 

drought situations in many regions have limited the water available and, therefore, 

have severely impacted the turf industry as well as homeowners and young athletes. 

Therefore, new and improved technologies are needed to monitor turf stresses and 

to schedule irrigation to achieve the desired quality. Technologies are also needed 

to more efficiently and uniformly irrigate turfgrasses. Drought tolerant grasses need 

to be developed. In addition, to increase water available for irrigation, waste water 

(treated and untreated) must be utilized. Some of these waste waters contain contaminants such as pathogens, heavy metals, and organic compounds. The movement 

and accumulation of these contaminants in the environment must be determined. 

USDA conducted significant turfgrass research from 1920–1988. However, since 

1988, no full-time scientist has been employed by USDA, Agricultural Research 

Service (ARS) to conduct turfgrass research specifically, until the recently appropriated funds became available. 

ARS and the turfgrass industry enjoy a special, collaborative relationship, and 

have even entered into a cooperative Memorandum of Understanding (MOU). The 

turfgrass industry has met on numerous occasions with USDA/ARS officials to discuss the new turfgrass scientist positions, necessary facilities, and future research 

opportunities. In January 2002, ARS held a customer workshop to gain valuable 

input from turfgrass researchers, golf course superintendents, sod producers, lawn 

care operators, athletic field managers and others on the research needs of the 

turfgrass industry. As a result of the workshop, ARS and the turfgrass industry 

have developed the National Turfgrass Research Initiative. The highlights of this 

strategy are as follows: 

ARS, as the lead agency at USDA for this initiative, has graciously devoted a significant amount of time to the effort. Like the industry, ARS is in this research en-
583 

deavor for the long-term. To ARS’ credit, the agency has committed staff, planning 

and technical resources to this effort. This year is the first time ARS has been able 

to include some funding in the President’s budget for the Turfgrass Research Initiative. However, there are so many issues and needs, that the industry is desperate 

for answers. Thus, to address the critical research needs, the industry is left with 

no alternative but to come directly to Congress for assistance through the appropriations process. 

The role and leadership of the Federal Government and USDA in this research 

are justifiable and grounded in solid public policy rationale. ARS is poised and prepared to work with the turfgrass industry in this major research initiative. However, ARS needs additional resources to undertake this mission. 

The turfgrass industry is very excited about this new proposal and wholeheartedly 

supports the efforts of ARS. Since the customers at the workshop identified 

turfgrass genetics/germplasm and water quality/use as their top priority areas for 

ARS research, for fiscal year 2007, the turfgrass industry requests that the following positions be established within USDA/ARS: 

Position 1: Component II: Germplasm: Molecular Biologist: Southwest—Lubbock, TX $450,000 

Position 2: Component I: Water: Agricultural Engineer—Irrigation: Transition Zone—Florence, SC 450,000 

Position 3: Component IV: Environment: Agricultural Engineer—Fate & Transport: Northeast—University 

Park, PA 450,000 

Position 4: Component III: Pest Management: Weed Scientist: Northeast—University Park, PA 450,000 

Position 5: Component II: Germplasm: Geneticist—Biodiversity: Upper West—Logan, UT 50,000 

Total ........................................................................................................................................................ 2,250,000 

For this research we propose an ARS-University partnership, with funding allocated to ARS for in-house research as well as in cooperation with university partners. For each of the individual scientist positions, we are requesting $300,000 for 

each ARS scientist position with an additional $150,000 attached to each position 

to be distributed to university partners, for a total of $450,000 per position. We are 

also asking that the funding be directed to ARS and then distributed by ARS to 

those university partners selected by ARS and industry representatives. 

Request restoration of funding for the ARS lab in Beaver, WV that was appropriated 

in fiscal year 2006 ($330,000) 

In the last 2 fiscal years, the Subcommittee has generously provided funding for 

turfgrass research at the Appalachian Farming Systems Research Center in Beaver, 

WV. The Subcommittee allocated $150,000 in fiscal year 2005 and an additional 

$180,000 in fiscal year 2006, bringing the total to $330,000. As the Beaver lab has 

expertise in soils research, the turf industry has embraced this funding and the research possibilities. The turf industry is now working with the lab to construct a 

research program on soil issues that affect turfgrass production. This research fits 

very nicely within the framework of the National Turfgrass Research Initiative. 

Therefore, we appreciate the support of the Subcommittee for this new funding in 

the last 2 fiscal years and ask for your continued support of that funding in fiscal 

year 2007. 

In addition, the Committee should be receiving Member requests for funding of 

each of the five positions described above. We appreciate your strong consideration 

of each individual member request for the turfgrass research position in his or her 

respective state. 

In conclusion, on behalf of the National Turfgrass Evaluation Program and the 

turfgrass industry across America, I respectfully request that the Subcommittee continue the funding appropriated in fiscal year 2006 for Beltsville, MD, ($490,000) and 

Beaver, WV ($330,000) within the Agricultural Research Service. I also request that 

the committee support the President’s budget request of $1,880,000 for Drought 

Mitigation. Finally, I request that the Subcommittee appropriate an additional 

$2,250,000 for five new turfgrass scientist positions around the country, with 

$450,000 provided for each location. 

Thank you very much for your assistance and support. 

PREPARED STATEMENT OF THE NATIONAL FISH AND WILDLIFE FOUNDATION

Mr. Chairman and Members of the Subcommittee: I appreciate the opportunity 

to submit testimony regarding the fiscal year 2007 funding request for the National 

Fish and Wildlife Foundation (Foundation). Included in this testimony is a summary 
584 

of our history and fiscal year 2005 accomplishments, as well as the new and innovative programs we hope to accomplish with the funding provided by this Committee. 

Congress established the Foundation 22 years ago, and since that time the Foundation’s vision for more healthy and abundant populations of fish, wildlife and 

plants has flourished through the creation of numerous valuable partnerships. The 

breadth of our partnerships is highlighted through our active agreements with 14 

Federal agencies, as well as various corporations, foundations and individual grantees. Through these unique arrangements, we are able to leverage Federal funds, 

bring agencies and industry together and produce tangible, measurable results. Our 

history of collaboration has given way to programs and initiatives such as the North 

American Waterfowl Management Plan, the Neotropical Migratory Bird Conservation Program, the Chesapeake Bay Small Watershed Grants Program and the Pulling Together Initiative. With the support of the Committee in fiscal year 2007, we 

can continue to uphold our mission of enriching fish, wildlife and the habitat on 

which they depend. 

Federal dollars appropriated by this Committee allow the Foundation to be highly 

successful in assisting the Natural Resources Conservation Service (NRCS) in accomplishing its mission to help people conserve, maintain and improve our natural 

resources and environment. Whether it involves farm, range or grassland conservation, species management or conservation education, the Foundation strategically 

invests the Federal funds entrusted to us in sound projects. The Foundation respectfully requests that this Subcommittee fund the Foundation at $4 million through 

the U.S. Natural Resources Conservation Service Appropriation. 

This request would allow the Foundation to expand its highly successful grant 

program to better assist NRCS in maximizing private land conservation. 

Since the grants partnership began in 2000, the Foundation has received $18 million in NRCS Federal funds ($3 million per fiscal year), which it has dedicated to 

a matching grant program focused on private land conservation. The Foundation 

has supported over 400 projects in 49 states by leveraging the $18 million in NRCS 

funds into more than $75 million in on-the-ground conservation. These projects have 

led to the direct restoration of more than 200,000 acres of farmland and rangeland 

and 775 miles of streams and rivers. In fiscal year 2005, the Foundation received 

$3 million in NRCS Federal funds, which it leveraged into more than $12 million 

in on-the-ground conservation. With the funds provided by the Committee in fiscal 

year 2006, we are on track to successfully continue leveraging NRCS funds to increase on-the-ground conservation benefits. 

The Foundation’s achievements are based on a competitive grant process where 

Federal funds are matched by the grantee with non-Federal funds and in-kind services. Grantees include Resource Conservation and Development Areas, conservation 

districts, universities and non-profit organizations who partner with farmers and 

ranchers to support conservation efforts on private land. The Foundation also works 

to further maximize Federal funds by providing private funds through the generosity of our growing number of corporate and foundation partners. These funds 

are in addition to the non-Federal funds that are provided by the Foundation’s 

grantees. In the Foundation’s partnership with NRCS, Federal funds have been supplemented with funding from Shell Oil Company, FMC Corporation, AnheuserBusch Companies, Inc., Southern Company, Summer T. McKnight Foundation, 

Charles Stewart Mott Foundation, William Penn Foundation and the David and Lucile Packard Foundation. The Foundation is also pleased to report that the Kellogg 

Foundation has agreed to a multi-year partnership beginning in fiscal year 2006 to 

further the Foundation’s agriculture conservation work. 

Working Landscapes.—Through our partnership, the Foundation works with 

NRCS to identify and fund projects that have strong support in affected agricultural 

and rural communities. We place our highest priority on projects integrating conservation practices on ongoing agricultural, ranching and forestry operations with 

the goal of improving the ecological health of working lands. We fund partners and 

provide expertise by engaging watershed experts, ranchers, foresters, farmers, local 

governments and non-profits to undertake on-the-ground private land activities with 

willing landowners. Through these efforts, the Foundation has helped to reduce agricultural runoff, remove invasive species and restore native ecosystems. 

Conserving Fish, Wildlife and Plants.—With our NRCS dollars, the Foundation 

funds projects that directly benefit diverse fish and wildlife species, including salmon in the West, migratory birds in the Midwest and grassland birds in the South. 

Habitat for native fish has been restored on private lands throughout the United 

States through vegetative planting, streambank stabilization, livestock fencing and 

nutrient reduction efforts. In addition to improving water quality, efforts have been 

undertaken by our grantees to reduce water loss caused by invasive species or from 
585 

outdated irrigation systems. By reducing the water taken from rivers, there is less 

chance that drought will negatively impact aquatic life. 

We also measure our success, in part, by preventing the listing of species under 

the Endangered Species Act and by stabilizing and hopefully moving others off the 

list. Some species that have received support through our NRCS grant program include salmonids, golden-cheeked warblers, black-capped vireos, Southwestern willow 

flycatchers, whooping cranes, sage grouse, lesser prairie chickens, aplomado falcons, 

black-tailed prairie dogs, Louisiana black bears, bog turtles, tiger salamanders and 

Karner blue butterflies. We invest in common sense and innovative cooperative approaches to endangered species, building bridges between the government and the 

private sector. 

Expanding Conservation Education Opportunities.—Our grantees also use our 

NRCS dollars to expand conservation education opportunities. Of our fiscal year 

2005 NRCS partnership grants, over one-fourth contained an environmental education or outreach component. Some of the conservation education projects supported through our NRCS grant program seek to educate farmers and ranchers on 

conservation practices, while demonstrating how best management practices and 

wildlife incentives provide both environmental and economic benefits. Other projects 

have provided training to secondary school teachers on the ecological, economic and 

cultural benefits of rangeland and farmland conservation. 

Special Grant Programs.—In fiscal year 2005, NRCS joined the Foundation’s Pulling Together Initiative, a grant program that supports the creation of local cooperative Weed Management Area partnerships. These partnerships bring together local 

landowners, citizens groups and weed experts to develop and implement strategies 

for managing weed infestations on public lands, natural areas and private working 

lands. Through this collaborative program, NRCS staff is able to join invasive species experts from the U.S. Fish and Wildlife Service, USDA-Forest Service, Bureau 

of Land Management, Animal and Plant Health Inspection Service and the Department of Defense to review and jointly select the most innovative weed management 

projects. This collaborative model has proven so successful that in late fiscal year 

2005, the Foundation launched a new strategically focused grant program targeting 

the Great Lakes Watershed. The partners in this program include the Environmental Protection Agency, U.S. Fish and Wildlife Service, National Oceanic and Atmospheric Administration and the USDA-Forest Service. The Foundation is currently in discussions with NRCS regarding their formal participation in the program 

for the next grant cycle. 

The Foundation is currently developing two additional Special Grant Programs 

that will be launched later this year. The purpose of the first grant program is to 

implement the National Fish Habitat Initiative Action Plan. The National Fish 

Habitat Initiative is a multi-agency, multi-partner initiative to improve our Nation’s 

aquatic resources. The Foundation’s grant program will bring together Federal and 

non-Federal funds to strategically invest in priority fish habitat grants. The Foundation’s second grant program will focus on the Upper Mississippi River Watershed. 

The program is being launched at the direction of the USDA-Forest Service with the 

goal of restoring private land streambanks with native trees and grasses. The Foundation is hoping to expand this program into a multi-partnered effort in fiscal year 

2007. 

Evaluation.—The Foundation has become a leader in evaluation and adaptive 

management among its peers. The Foundation’s goal is to build the capacity of both 

itself and its partners to undertake more effective evaluation, to assist in both 

measuring performance and adapting methods and funding strategies for more effective conservation. To address these goals, the Foundation is implementing several 

evaluation strategies simultaneously. First, the Foundation has instituted new protocols within its application process to provide the measurable indicators needed to 

evaluate the impacts of our programs. Second, the Foundation has convened discussions among our agencies partners to identify and coordinate potential opportunities 

for collaboration within evaluation. One of the initial results of these meetings has 

been an interest in piloting new evaluation indicators, to better articulate the Federal investment for GPRA and PART requirements. 

Third, the Foundation has commissioned several third-party evaluations targeting 

standard methods like culvert removal to full program evaluations to learn where 

we have been successful and where past methods have not provided the desired impact. As an example, in fiscal year 2006, the Foundation’s Chesapeake Bay Small 

Watershed Grants Program will be evaluated for the first 5 years of grant-making. 

The evaluation will include 355 projects associated with about $10.6 million in Federal funds. The Federal legislation accompanying this program included 10-year 

goals, and this evaluation presents an opportunity to assess the mid-way mark in 

helping the Foundation and its partners better focus their resources over the next 
586 

5 years. To capture the evaluations and lessons learned, the Foundation is taking 

a fourth key step by developing a new searchable project website where users will 

be able to query information and learn more about funded projects, including how 

to adapt projects for higher rates of success. 

Continued Need.—The Foundation is uniquely positioned to continue assisting 

NRCS in implementing beneficial conservation practices on our Nation’s farms and 

ranches by leveraging NRCS’s scarce Federal resources to maximize on-the-ground 

conservation benefits. The Foundation’s matching grant program has the flexibility 

to address many agricultural conservation needs. These include, but are not limited 

to, increasing instream flow for rivers while continuing to support agricultural irrigation, promoting the recovery of specific threatened or endangered animals on private lands, implementing critical conservation practices on private lands that do not 

qualify for funding under a Farm Bill program, working with non-traditional partners such as the Amish and Mennonites and by forging broad community-based 

partnerships. Additional resources are needed in fiscal year 2007 to continue meeting the growing demand for private land conservation, while expanding the participation of NRCS into new multi-partner programs. 

Accountability and Grantsmanship.—The Foundation constantly strives to improve the grant making process while maintaining a healthy level of oversight. To 

improve ease of use for potential applicants, Foundation applications are now completed and reviewed electronically. In early 2006, to further improve efficiency, the 

Foundation released a revised application, grant contract template and reporting 

form. Even with these efficiencies, the Foundation still requires strict financial reporting by grantees and has once again received an unqualified audit in fiscal year 

2005. 

In addition to the evaluation requirements described earlier, all potential grants 

are subject to a peer review process. This involves five external reviews representing 

state agencies, Federal agencies, affected industry, environmental non-profits and 

academics. Before being recommended to the Foundation’s Board of Directors, 

grants are also reviewed internally by staff, including our conservation scientists. 

The internal review process examines the project’s conservation need, technical 

merit, the support of the local community, the variety of partners and the amount 

of proposed non-Federal cost share. The Foundation also provides a 30-day notification to the Members of Congress for the congressional district and state in which 

a grant will be funded, prior to making a funding decision. 

Basic Facts About the Foundation.—The Foundation is governed by a 25-member 

Board of Directors, appointed by the Secretary of the Interior and in consultation 

with the Secretary of Commerce. At the direction of Congress, the Board operates 

on a nonpartisan basis. Directors do not receive any financial compensation for service on the Board; in fact, all of our directors make financial contributions to the 

Foundation. It is a diverse Board, representing the corporate, philanthropic and conservation communities; all with a tenacious commitment to fish and wildlife conservation. I took over the chairmanship in January, after serving on the Board for 

10 years. It is an honor to lead such a prestigious board. 

The National Fish and Wildlife Foundation continues to be one of, if not the most, 

cost-effective conservation programs funded in part by the Federal government. 

Since our inception in 1984 through fiscal year 2005, the Foundation has supported 

over 8,190 grants and leveraged $339 million in Federal funds into more than $1 

billion in on-the-ground conservation. None of our Federally appropriated funds are 

used for lobbying, litigation or the Foundation’s administrative expenses. By implementing real-world solutions with the private sector while avoiding regulatory or advocacy activity, our approach is more consistent with this Congress’ philosophy than 

ever before. We are confident that the money you appropriate to the Foundation will 

continue to make a difference. 

PREPARED STATEMENT OF THE NATIONAL ORGANIC COALITION

Chairman Bennett, Ranking Member Kohl, and Members of the Subcommittee: 

My name is Steven Etka. I am submitting this testimony on behalf of the National 

Organic Coalition (NOC) to detail our requests for fiscal year 2007 funding for several USDA marketing, research, and conservation programs of importance to organic agriculture. 

The National Organic Coalition (NOC) is a national alliance of organizations 

working to provide a voice for farmers, ranchers, environmentalists, consumers and 

others involved in organic agriculture. The current members of NOC are the Center 

for Food Safety, Rural Advancement Foundation International-USA, National Coop-
587 

erative Grocers Association, and the Northeast Organic Farming Association-Interstate Council. 

We urge the Subcommittee’s strong consideration of the following funding requests for various USDA programs of importance to organic farmers, marketers and 

consumers: 

USDA/Agricultural Marketing Service (AMS) 

National Organic Certification Cost-Share Program Request: $1.5 million 

In recognition of the costs to farmers and handlers associated with the process 

of organic certification, the National Organic Certification Cost Share program was 

authorized by Section 10606 of the Food Security and Rural Investment Act of 2002. 

In fiscal year 2002 initial funding of $5 million was provided for this program 

through the Commodity Credit Corporation (CCC) to AMS. The assistance provided 

by this program has been particularly critical to small-to-medium scale farmers and 

handlers struggling with the costs of mandatory organic certification and required 

annual updates. Unfortunately, the initial CCC funding for this program has been 

fully expended. Therefore, we are seeking stop-gap funding of $1.5 million from the 

CCC to keep the program running until the program can be reauthorized. 

Organic Standards Request: 3.13 million 

In fiscal year 2006, Congress specified funding of $2.026 million for the AMS category of ‘‘Organic Standards.’’ In the President’s fiscal year 2007 budget submittal, 

a request was made for $3.13 million for AMS ‘‘Organic Standards.’’ We support the 

President’s budget, in order to provide the National Organic Program with greater 

resources for certifier training, National Organic Standards Board support, enforcement, and public outreach and education on upcoming rulemaking processes. 

For several years, report language has been included in the Senate report strongly 

urging the National Organic Program to take action on several unfulfilled statutory 

requirements. Specifically, the Senate report language in fiscal years 2004, 2005, 

and 2006 called on the NOP to hire an Executive Director for the National Organic 

Standards Board and to establish an on-going Peer Review Panel, as called for in 

OFPA, to provide oversight and advice to the NOP regarding the accreditation process for organic certifiers. 

While progress has been slow in complying with these statutory requirements, the 

members of the National Organic Coalition are very pleased that an Executive Director for the National Organic Standards Board has been hired by USDA. This position is critical in helping the NOSB fulfill its statutory role, especially at time of 

such heavy workload for the Board. We congratulate the NOP for taking this action. 

In contrast, the requirements of Section 2117 of OFPA to establish a Peer Review 

Panel and the further requirement of Section 205.509 of the Organic rule to establish an annual Peer Review Panel have not been met by the NOP. However, we are 

pleased that the NOP contracted with the American National Standards Institute 

(ANSI) to perform an outside audit of the NOP, the results of which were presented 

in late 2004. The ANSI audit noted numerous technical and procedural deficiencies 

in the NOP’s operations and suggested corrective actions in several areas. In addition, USDA’s own Inspector General’s office released an audit report regarding the 

National Organic Program in July of 2005, which was very critical of the National 

Organic Program’s operations, and also suggested several corrective actions that 

could be taken by the Agency to resolve the problems. The Members of the National 

Organic Coalition concur with the recommendations of the ANSI and Office of Inspector General (OIG) audits, and believe that if the NOP were to implement these 

recommendations, it would be a significant step to resolving many of the concerns 

that have been raised by the organic community regard the NOP’s operations. 

Recently, a new National Organic Program Director was hired with significant expertise in the area of quality systems management and ISO compliance. We are 

very encouraged that the new Director’s expertise will be helpful in guiding the 

NOP in implementing the ANSI and OIG audit recommendations. However, we also 

believe that the House and Senate Agriculture Appropriations Subcommittees 

should be kept informed by NOP with regular reports on their progress in complying 

with these recommendations. Therefore, in addition to supporting the Administration’s budget request of $3.13 million for AMS/organic standards, we are requesting 

that the following report language be included: 

The Committee is encouraged that the Agency has hired an Executive Director 

for the National Organic Standards Board (NOSB), as well as a new Director for 

the National Organic Program. The Committee also notes that the audits performed 

by the American National Standards Institute (ANSI) in 2004 and by the USDA Office of Inspector General (OIG) in 2005 made strong recommendations about 

changes needed in the administration of the National Organic Program. The Com-
588 

mittee expects the Agency to take the necessary actions to comply with these recommendations, and to provide a written report to the Committee by December of 

2006 regarding the progress in implementing these recommendations. In addition, 

the Committee expects a report regarding the complaints that the NOP has received 

about violations of the organic standards, and the progress of the Agency in investigating and responding to those complaints. Finally, the Committee expects the 

NOP to work closely with the NOSB to implement the Peer Review Panel requirements of OPFA and USDA’s organic regulations. 

USDA 

Organic Data Initiatives 

Authorized by Section 7407 of the 2002 Farm Bill, the Organic Production and 

Marketing Data Initiative States that the ‘‘Secretary shall ensure that segregated 

data on the production and marketing of organic agricultural products is included 

in the ongoing baseline of data collection regarding agricultural production and marketing.’’ As the organic industry matures and grows at a rapid rate, the lack of national data for the production, pricing, and marketing of organic products has been 

an impediment to further development of the industry and to the effective functioning of many organic programs within USDA. Because of the multi-agency nature 

of data collection within USDA, the effort to improve organic data collection and 

analysis must also be undertaken by several different agencies within the Department: 

Economic Research Service (ERS) 

Collection and Analysis of Organic Economic Data Request: $750,000 

In fiscal year 2006, Congress appropriated $500,000 to USDA’s Economic Research Service to continue the collection of valuable acreage and production data, 

as required by Section 7407 of the 2002 farm bill. Because increased ability to conduct economic analysis for the organic farming sector is greatly needed, we request 

$750,000 to be appropriated to the USDA ERS to implement the ‘‘Organic Production and Market Data Initiative’’ included in Section 7407 of the 2002 farm bill. 

Agricultural Marketing Service (AMS) 

Organic Price Collection Request: $1 million 

Accurate, public reporting of agricultural price ranges and trends helps to level 

the playing field for producers. Wholesale and retail price information on a regional 

basis is critical to farmers and ranchers, but organic producers have fewer sources 

of price information available to them than conventional producers. Additionally, the 

lack of appropriate actuarial data has made it difficult for organic farmers to apply 

for and receive equitable Federal crop insurance. AMS Market News is involved in 

tracking product prices for conventional agricultural products, and with funding, 

could broaden their efforts to include organic price data as well. We request $1 million to be appropriated to the USDA Agricultural Marketing Service for collection 

of organic price information. 

National Agriculture Statistics Service (NASS) 

Census Follow-up/Organic Grower Survey Request: $1 million 

The mission of USDA’s National Agricultural Statistics Service (NASS) is to provide timely, accurate, and useful statistics in service to U.S. agriculture. NASS is 

making an effort to expand the quantity of organic questions in the 2007 census. 

However, they will need to conduct a follow-up survey to collect more in-depth information on acreage, yield/production, inventory, production practices, sales and expenses, marketing channels, and demographics. Therefore, we are requesting $1 

million for USDA NASS. 

USDA/CSREES 

Organic Transitions Program Request: $5 million 

The Organic Transition Program, funded through the CSREES budget, is a research grant program that helps farmers surmount some of the challenges of organic production and marketing. As the organic industry grows, the demand for research on topics related to organic agriculture is experiencing significant growth as 

well. The benefits of this research are far-reaching, with broad applications to all 

sectors of U.S. agriculture, even beyond the organic sector. Yet funding for organic 

research is minuscule in relation to the relative economic importance of organic agriculture and marketing in this nation. The CSREES Organic Transition Program was funded at $2.1 million in fiscal 

year 2003, $1.9 million in fiscal year 2004, and $1.88 million for both fiscal years 
589 

2005 and 2006. Given the rapid increase in demand for organic foods and other 

products, and the growing importance of organic agriculture, the research needs of 

the organic community are expanding commensurately. Therefore, we are requesting that the program be funded at $5 million in fiscal year 2007. In addition, we 

are requesting that the Organic Transition Program remain a separate program, 

and not be subsumed within the National Research Initiative, as proposed in the 

President’s budget. 

USDA/CSREES 

National Research Initiative (NRI) Request: Language directing CSREES to 

add a new NRI program area to foster classical plant and animal breeding 

In recent decades, public resources for classical plant and animal breeding have 

dwindled, while resources have shifted toward genomics and biotechnology, with a 

focus on a limited set of major crops and breeds. Unfortunately, this shift has significantly curtailed the public access to plant and animal germplasm, and limited 

the diversity of seed variety and animal breed development. This problem has been 

particularly acute for organic and sustainable farmers, who seek access to 

germplasm well suited to their unique cropping systems and their local environment. Without renewed funding in this arena, the public capacity for plant and animal breeding will disappear. 

In both of fiscal years 2005 and 2006, the Senate Agriculture Appropriations Subcommittee included report language raising concerns about this problem, and urging 

CSREES to give greater consideration to research needs related to classical plant 

and animal breeding, when setting priorities within the National Research Initiative. Despite this report language, research proposals for classical plant and animal 

breeding that have sought NRI funding in the past couple of years have been consistently declined. Further, the shift in NRI toward work on genomics and biotechnology continues, to the exclusion of classical plant and animal breeding. 

As the nation’s preeminent agricultural competitive grants program, the National 

Research Initiative should be funding classical plant and animal breeding activities. 

The NRI currently has over 30 program areas of focus. We are requesting that an 

additional program area be created within the NRI to foster this important research, and that this new program area be entitled, ‘‘Classical Plant and Animal 

Breeding to Foster More Diverse, Energy Efficient and Environmentally Sustainable 

Agricultural Systems.’’ 

USDA/CSREES 

Sustainable Agriculture Research Request: $15 million (Chapter 1) and Education (SARE) and $5 million (Chapter 3) 

The SARE program has been very successful in funding on-farm research on environmentally sound and profitable practices and systems, including organic production. The reliable information developed and distributed through SARE grants have 

been invaluable to organic farmers. We are requesting $15 million for Chapter 1 and 

$5 million for Chapter 3 for fiscal year 2007. 

USDA/Rural Business Cooperative Service Appropriate Technology Transfer for 

Rural Areas (ATTRA) Request: $3.1 million 

ATTRA is a national sustainable agriculture information service, which provides 

practical information and technical assistance to farmers, ranchers, Extension 

agents, educators and others interested in sustainable agriculture. ATTRA interacts 

with the public, not only through its call-in service and website, but also provides 

numerous publications written to help address some of the most frequently asked 

questions of farmers and educators. Much of the real-world assistance provided by 

ATTRA is extremely helpful to the organic community. As a result, the growth in 

demand for ATTRA services has increased significantly, both through the websitebased information services and through the growing requests for workshops. We are 

requesting $3.1 million for ATTRA for fiscal year 2007, representing a $600,000 increase over fiscal year 2005 and fiscal year 2006 levels. These funds would be used 

to initiate a Farm Energy Initiative, to respond to the high demand for information 

and technical assistance from farmers about ways to increase their energy efficiency 

in response to high energy costs. 
590 

USDA/ARS 

Strategic Regional Programming for Organic Agricultural Research Request: 

$10 million, divided between regions 

In 2005, USDA–ARS spent about $3.5 million on organic-specific projects, or about 

0.35 percent of the overall ARS budget for fiscal year 2005. Given its growing importance in the overall agricultural economy, the commitment by ARS to organic research must be greatly enhanced. 

Distributed among the 7 Regional Areas and the ARS National Program Office, 

this funding would provide needed flexibility to better address the broad needs and 

opportunities of the organic production and processing sector. Funding will be allocated by the Area Directors to: (1) maintain and enhance existing CRIS projects, scientists and technicians whose objectives are specific to organic production and processing; and (2) provide support to integrate organic agriculture objectives into other 

projects, when such capacity exists. 

USDA/NRCS 

Conservation Security Program Request: No Funding Limitation 

USDA/Rural Business Cooperative Service 

Value-Added Producer Grants Request: No Funding Limitation 

The Conservation Security Program (authorized by Section 2001 of the 2002 farm 

bill) and the Value-Added Producer Grant (authorized by Section 6401 of the 2002 

farm bill) have great potential to benefit organic producers in their efforts to conserve natural resources and to explore new, value-added enterprises as part of their 

operations. Unfortunately, while these programs were authorized to operate with 

mandatory funding, their usefulness has been limited by funding restrictions imposed through the annual appropriations process. We are urging that the Conservation Security Program and the Value-Added Producer Grant Program be permitted 

to operate with unrestricted mandatory funding, as authorized. 

Thank you for this opportunity to testify and for your consideration on these critical funding requests. 

PREPARED STATEMENT OF NATIONAL POTATO COUNCIL

My name is Ed Schneider. I am a potato farmer from Pasco, Washington and current Vice President, Legislative/Government Affairs for the National Potato Council 

(NPC). On behalf of the NPC, we thank you for your attention to the needs of our 

potato growers. 

The NPC is the only trade association representing commercial growers in 50 

States. Our growers produce both seed potatoes and potatoes for consumption in a 

variety of forms. Annual production is estimated at 437,888,000 cwt. with a farm 

value of $3.2 billion. Total value is substantially increased through processing. The 

potato crop clearly has a positive impact on the U.S. economy. 

The potato is the most popular of all vegetables grown and consumed in the 

United States and one of the most popular in the world. Annual per capita consumption was 136.5 pounds in 2003, up from 104 pounds in 1962 and is increasing 

due to the advent of new products and heightened public awareness of the potato’s 

excellent nutritional value. Potatoes are considered a nutritious consumer commodity and an integral, delicious component of the American diet. 

The NPC’s fiscal year 2007 appropriations priorities are as follows: 

Potato Research 

Cooperative State Research Education and Extension Service (CSREES) 

The NPC urges the Congress not to support the President’s fiscal year 2007 budget request to eliminate the CSREES Special Grant Programs and the formula funds 

under the Hatch Act. Both of these programs support important university research 

work that helps our growers remain competitive in today’s domestic and world marketplace. 

The NPC supports an appropriation of $1.8 million for the Special Potato Grant 

program for fiscal year 2007. The Congress appropriated $1.417 million in fiscal 

year 2004, a decrease from the fiscal year 2003 level of $1.584 million and $1.509 

million in fiscal year 2005. This has been a highly successful program and the number of funding requests from various potato-producing regions is increasing. 

The NPC also urges that the Congress include Committee report language as follows: 
591 

‘‘Potato research.—The Committee expects the Department to ensure that funds 

provided to CSREES for potato research are utilized for varietal development testing. Further, these funds are to be awarded after review by the Potato Industry 

Working Group.’’ 

Agricultural Research Service (ARS) 

The NPC urges that the Congress not support the Administration’s fiscal year 

2007 budget request to rescind all fiscal year 2005 Congressional increases for research projects. 

The Congress provided funds for a number of important ARS projects and, due 

to previous direction by the Congress, the ARS continues to work with the NPC on 

how overall research funds can best be utilized for grower priorities. 

Foreign Market Development: Market Access Program (MAP) 

The NPC also urges that the Congress maintain the spending level for the Market 

Access Program (MAP) at its authorized level of $200 million for fiscal year 2007 

and not support the Administration’s budget request to cap this valuable export program at the $125 million level. 

Foreign Agriculture Service (FAS) 

The NPC supports the President’s fiscal year 2007 budget request of $152.4 million for the USDA Foreign Agriculture Service (FAS). This level is the minimum 

necessary for the agency given the multitude of trade negotiations and discussions 

currently underway. 

Food Aid Programs 

Mcgovern-Dole 

The NPC supports the Administration’s fiscal year 2007 budget request of $100 

million for the McGovern-Dole International Food Aid Program. PVO’s have been including potato products in their applications for this program. 

Public Law 480 

The President’s fiscal year 2007 budget requests $1.2 billion for USAID programs, 

including $964 million for USAID Public Law 480 Title II programs. The President’s 

budget also transfers $300 million from USAID Title II activities funded under the 

Agriculture Budget to the Foreign Operations Budget. The NPC urges that the $300 

million be reinstated in the regular USAID Public Law 480 Title II budget to avoid 

a significant loss of applications for dehydrated potatoes in Title II programs and 

procurement of U.S. food commodities for food aid. 

Pest and Disease Management 

Animal and Plant Health Inspection Service (APHIS) 

Golden Nematode Quarantine.—The NPC supports an appropriation of $1,266,000 

for this quarantine which is what is believed to be necessary for USDA and the 

State of New York to assure official control of this pest. Failure to do so could adversely impact potato exports. 

Given the transfer of Agriculture Quarantine Inspection (AQI) personnel at U.S. 

ports to the Department of Homeland Security, it is important that certain 

USDAAPHIS programs be adequately funded to ensure progress on export petitions 

and protection of the U.S. potato growers from invasive and harmful pests and diseases. 

Pest Detection.—The NPC supports $45 million in fiscal year 2007, which is the 

Administration’s budget request. Now that the Agriculture Quarantine Inspection 

(AQI) program is within the new Homeland Security Agency, this increase is essential for the Plant Protection and Quarantine Service’s (PPQ) efforts against potato 

pests and diseases such as Ralstonia. 

Emerging Plant Pests.—$101 million was appropriated in fiscal year 2005. The 

President requests $127 million in fiscal year 2007 which the NPC supports. 

The NPC supports having the Congress once again include language to prohibit 

the issuance of a final rule that shifts the costs of pest and disease eradication and 

control to the States and cooperators. 

Trade Issues Resolution Management.—$12,578,000 was appropriated in fiscal 

year 2005 and the President requests $18 million in fiscal year 2007. The NPC supports this increase only if it is specifically earmarked for plant protection and quarantine activities. These activities are of increased importance yet none of these 

funds are used directly for plant protection activities. As new trade agreements are 

negotiated, the agency must have the necessary staff and technology to work on 
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plant related import/export issues. The NPC also relies heavily on APHIS–PPQ resources to resolve phytosanitary trade barriers in a timely manner. 

Agricultural Statistics 

National Agricultural Statistics Service (NASS) 

The NPC supports sufficient funds and guiding language to assure that the potato 

objective yield and grade and size surveys are continued. 

Rural Development Grants 

Since potato growers do not receive direct payments, the 2002 Farm Bill provided 

for, among other things, grants to allow our growers to expand their business opportunities. One program that has been used by our growers is the value-added grant 

program. The NPC would urge that the Farm Bill funding level for this program 

be maintained. In addition, maintaining adequate farm labor is also important to 

our growers. The NPC urges that farm labor housing grants be maintained and not 

reduced as proposed by the Administration’s budget request. 

PREPARED STATEMENT OF THE NATIONAL RURAL TELECOM ASSOCIATION

Project Involved.—Telecommunications lending programs administered by the 

Rural Utilities Service of the U.S. Department of Agriculture 

Actions Proposed.—Supporting loan levels for fiscal year 2007 in the amounts requested in the President’s budget for 5 percent direct ($144 million) and cost ofmoney ($247 million) and the associated subsidy, as required, to fund those programs at the requested levels. 

—Supporting Sec. 306 guaranteed loans in the amount ($299 million) requested 

in the budget. 

—Opposing the budget request that would cut direct loans for broadband facilities 

and internet service access by almost 30 percent from the fiscal year 2006 enacted level of $500 million to $356 million. Supporting the request to fund the 

program through discretionary funding and the budget proposal to provide $30 

million of the authorized level in broadband loans at an interest rate of 4 percent. 

—Supporting the completion of the dissolution of the Rural Telephone Bank in fiscal year 2006 in accordance with the administration’s budget assumption. 

—Supporting continued funding, as requested in the President’s budget, in the 

amount of $25 million in grant authority designated for distance learning and 

medical link purposes. 

Mr. Chairman, Members of the Committee: My name is John F. O’Neal. I am 

General Counsel of the National Rural Telecom Association. NRTA is comprised of 

commercial telephone companies that borrow their capital needs from the Rural 

Utilities Service of the U.S. Department of Agriculture (RUS) to furnish and improve telephone service in rural areas. Approximately 1000, or 71 percent of the Nation’s local telephone systems borrow from RUS. About three-fourths of these are 

commercial telephone companies. RUS borrowers serve almost 6 million subscribers 

in 46 states and employ over 22,000 people. In accepting loan funds, borrowers assume an obligation under the act to serve the widest practical number of rural users 

within their service area. 

Program Background 

Rural telephone systems have an ongoing need for long-term, fixed rate capital 

at affordable interest rates. Since 1949, that capital has been provided through telecommunications lending programs administered by the Rural Utilities Service and 

its predecessor, the Rural Electrification Agency (REA). 

RUS loans are made exclusively for capital improvements and loan funds are segregated from borrower operating revenues. Loans are not made to fund operating 

revenues or profits of the borrower system. There is a proscription in the Act 

against loans duplicating existing facilities that provide adequate service and state 

authority to regulate telephone service is expressly preserved under the Rural Electrification Act. 

Rural telephone systems operate at a severe geographical handicap when compared with other telephone companies. While almost 6 million rural telephone subscribers receive telephone service from RUS borrower systems, they account for only 

4 percent of total U.S. subscribers. On the other hand, borrower service territories 

total 37 percent of the land area—nearly 12 million squares miles. RUS borrowers 

average about six subscribers per mile of telephone line and have an average of 

more than 1,000 route miles of lines in their systems. 
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Because of low-density and the inherent high cost of serving these areas, Congress 

made long-term, fixed rate loans available at reasonable rates of interest to assure 

that rural telephone subscribers, the ultimate beneficiaries of these programs, have 

comparable telephone service with their urban counterparts at affordable subscriber 

rates. This principle is especially valid today as this administration endeavors to deploy broadband technology and as customers and regulators constantly demand improved and enhanced services. At the same time, the underlying statutory authority 

governing the current program has undergone significant change. In 1993, telecommunications lending was refocused toward facilities modernization. Much of the 

subsidy cost has been eliminated from the program. In fact, most telecommunications lending programs now generate revenue for the government. The subsidy 

that remains has been targeted to the highest cost, lowest density systems in accordance with this administration’s stated objectives. 

We are proud to state once again for the record that there has never been a loan 

default by a rural telephone system! All of their loans have been repaid in accordance with their terms: $13 billion in principal and interest at the end of the last 

fiscal year. 

Need for RUS Telecommunications Lending Continues 

The need for rural telecommunications lending is great today, possibly even greater than in the past. Technological advances make it imperative that rural telephone 

companies upgrade their systems to keep pace with improvements and provide the 

latest available technology to their subscribers. And 5 years ago, Congress established a national policy initiative mandating access to broadband for rural areas. 

But rapid technological changes and the inherently higher costs to serve rural areas 

have not abated, and targeted support remains essential. 

Competition among telephone systems and other technological platforms have increased pressures to shift more costs onto rural ratepayers. These led to increases 

in both interstate subscriber line charges and universal service surcharges on end 

users to recover the costs of interstate providers’ assessments to fund the Federal 

mechanisms. Pressures to recover more of the higher costs of rural service from 

rural customers to compete in urban markets continue to burden rural consumers. 

There is a growing funding crisis for the statutory safeguards adopted in 1996 to 

ensure that rates, services and network development in rural America will be reasonably comparable to urban telecommunications opportunities. 

Ongoing Congressional Mandates for Rural Telecommunications 

Considerable loan demand is being generated because of the mandates for enhanced rural telecommunications standards contained in the authorizing legislation. 

We are, therefore, recommending the following loan levels for fiscal year 2007 and 

the appropriation of the associated subsidy costs, as required, to support these levels: 

5 percent Direct Loans ........................................................................................................................................ $144,000,000 

Cost-of-Money Loans ............................................................................................................................................ 247,000,000 

Guaranteed Loans ................................................................................................................................................ 299,000,000 

Broadband Loans ................................................................................................................................................. 500,000,000 

Total ........................................................................................................................................................ 1,190,000,000 

These are the same levels for 5 percent direct, cost-of-money loans and guaranteed loans, as requested in the President’s budget for fiscal year 2007 and the enacted amount for broadband loans in the fiscal year 2006 appropriations act. The 

authorized levels of loans in each of these programs were substantially obligated in 

fiscal year 2005 and current estimates are that authorized program levels will be 

met in fiscal year 2006. We believe that the needs of this program balanced with 

the minimal cost to the taxpayer make the case for its continuation at the stated 

levels. 

Rural Telephone Bank Dissolution Initiative 

Congress established the Rural Telephone Bank in 1971 to provide supplemental 

financing for rural telephone systems with the objective that the bank ultimately 

would be owned and operated by its private shareholders. However, changed circumstances in the rural telephone industry and difficulties associated with accelerating privatization of the Rural Telephone Bank have made this transition to private ownership and control problematic raising difficult questions about the viability 

of a privatized bank and its future support among rural telephone systems. 
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In recognition of these factors, the administration, subject to congressional approval, determined to dissolve the bank in fiscal year 2006 pursuant to Sec. 411 of 

the RTB enabling act. We continue to support this action as well as the budget recommendation to transfer the historic lending authority of the RTB ($175 million) 

to the guaranteed loan program so that rural telephone systems will continue to 

have adequate loan resources available for rural telecommunications infrastructure 

development at the levels intended by the Congress. We share the assumption in 

the fiscal year 2007 budget that the bank’s dissolution will be completed during the 

current fiscal year. 

The Broadband Loan Program 

The broadband loan program was funded last year for the current fiscal year at 

$500 million. Very little subsidy cost is associated with this program since most of 

the loans are made at the government’s cost-of-money. Despite that, the President’s 

budget recommends reducing the loan levels for fiscal year 2007 by almost 30 percent to $356 million. We are opposed to that and recommend to the committee that 

the fiscal year 2007 appropriations bill continue to fund the program at enacted levels. The demand for this program is still quite strong and if the President’s stated 

objective of deploying this technology to all rural areas of this country is to be met, 

the $500 million funding level must be maintained. 

At the same time, this year’s budget recognizes that given the high costs involved 

in the more sparsely populated areas requires subsidy assistance and recommends 

that $30 million of the authorized level of these loans be made at a 4 percent interest rate. We support that initiative as well as the budget request to fund the program through discretionary rather than mandatory funding. 

Grants for Medical Link and Distance Learning Purposes 

We support the continuation in fiscal year 2007 of the $25 million in grant authority provided in the President’s budget for medical link and distance learning 

purposes and the decision to not request additional loan funds for these programs. 

The purpose of these grants is to accelerate deployment of medical link and distance 

learning technologies in rural areas through the use of telecommunications, computer networks, and related advanced technologies by students, teachers, medical 

professionals, and rural residents. We agree with the conclusion in the budget that 

these projects are more feasible when provided through grants to eligible recipients 

rather than loans. 

Conclusion 

Thank you for the opportunity to present the association’s views concerning this 

vital program. The telecommunications lending programs of RUS continue to work 

effectively and accomplish the objectives established by Congress at a minimal cost 

to the taxpayer. They serve to assure that America’s rural inhabitants will never 

become second-class citizens in this modern information age of telecommunications 

technology. 

PREPARED STATEMENT OF THE NATIONAL WIC ASSOCIATION

Dear Chairman Bennett and Ranking Member Kohl: We write on behalf of the 

National WIC Association, NWA, to present comments on the President’s proposal 

to fund the Special Supplemental Nutrition Program for Women, Infants and Children, known as WIC, for the fiscal year 2007. 

We write on behalf of the thousands of nationally recognized WIC health professionals, nutritionists and dietitians who are committed to addressing the nutrition 

and healthcare needs of WIC families. Our members serve over 8.0 million low and 

moderate-income women and children with, or at risk of developing, nutrition-related health problems through 2,100 WIC agencies in 10,000 WIC clinics each 

month. WIC serves almost one-half of all infants born in this country and roughly 

1 in 4 of all children between 1 and 5 years of age. Our members are the front lines 

battling to improve the quality of life for our most vulnerable populations. 

At the outset, we would like to compliment both of you and members of the Subcommittee for your long-term commitment to WIC. The future of our Nation’s lowincome women, infants and children depend upon your support. NWA is proud of 

the strong bi-partisan commitment WIC has engendered since its inception. 

As well, we compliment the President, Secretary Mike Johanns, Under Secretary 

for Food, Nutrition, and Consumer Services Eric Bost and their teams for their past 

support of WIC. 
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We applaud the President for proposing to provide $15 million for breastfeeding initiatives, $14 million for infrastructure funds, $125 million to restore the contingency fund, and to maintain the moratorium on new WIC-Only vendors. In contrast to the President’s budget proposal of $5.2 billion, NWA strongly rec- ommends that WIC be funded at $5.388 billion. NWA’s recommended funding level 

is $188 million above the President’s request and redresses the damages from the 

proposed cap on NSA funding ($152 million), the proposal to cap Medicaid adjunctive eligibility ($3 million), a failure to provide funding for essential MIS needs ($30 

million) and important health outcomes research ($3 million). 

We are dismayed that the President has again offered his proposal to cap nutrition services funding (NSA) at 25 percent of the total amount provided—that Congress wisely defeated in the 1st Session of the 109th Congress. This proposal will 

reduce services for all mothers and children and because States are highly unlikely 

to be able to further reduce per participant costs, 850,000 mothers and children 

could potentially lose essential nutrition services benefits. 

Nutrition services include nutrition assessment, counseling and education, obesity 

prevention efforts, breastfeeding support and promotion efforts, on-going interventions of nutrition related complications of pregnancy, complex feeding and growth 

issues of infants and children, follow-up of special metabolic formulas, pre-natal and 

pediatric healthcare referrals and follow-up, spousal and child abuse referral, drug 

and alcohol counseling referral, immunization screening assessment and referral 

and a host of other client benefits. Simply put, the President’s proposal to cap nutrition services funding, NSA, represents a significant benefit cut to WIC mothers and 

children. 

The Government Accountability Office, GAO, in its mandated report to Congress 

entitled ‘‘Food Assistance: WIC Faces Challenges in Providing Nutrition Services,’’ 

published in December 2001, writes that: ‘‘WIC has been faced with the challenge 

of meeting additional program requirements with available resources. Since the late 

1980’s, a number of requirements have been placed on the program aimed at, among 

other things, containing the cost of food benefits, promoting breastfeeding, encouraging immunizations, and controlling program abuse. While these requirements 

have placed additional service delivery and administrative demands on WIC staff, 

they have not been accompanied by more funding per participant; the NSA grant 

per participant was established in 1989 and since then has only been adjusted for 

inflation. There is also evidence that nonfederal support for NSA may have decreased since fiscal year 1992. Nor have the additional demands been offset by reductions in other responsibilities. As a result, WIC agencies have had to cut costs 

and make changes in service delivery that potentially will have a negative impact 

on the quality of WIC services (GAO–02–142, p. 31).’’ 

Balancing increased program demands and available resources has forced WIC 

Programs across the nation to cut costs despite increasing needs. 

Indeed, local agencies have been forced to consolidate or close clinics and in some 

cases dramatically increase participant to staff ratios to unacceptable levels of 

1,000:1 or 1,200:1 from 300:1. The GAO quotes 1998 and 2001 USDA studies that 

found that ‘‘22 percent of local agencies serving almost 25 percent of all WIC participants reported having inadequate office space. Additionally, 30 percent of local 

agencies serving about 41 percent of all WIC participants reported having insufficient numbers of professional staff. Finally, 56 percent of State WIC agency automated management information systems were not capable of performing, or efficiently performing, 1 or more of 19 essential program tasks (GAO–02–142, p. 37).’’ 

Evidence suggests that this situation has only gotten worse. 

It is important to note that State cost containment efforts have significantly contributed to reducing WIC food package costs. Indeed, savings from infant formula 

cost containment efforts allow WIC to cover the food benefits provided to roughly 

20 percent of WIC mothers and children and saved the Subcommittee and Federal 

tax payers over $23 billion since 1989. ‘‘If rebate savings are considered, NSA has 

remained roughly 20 percent of total program costs from 1988 through 1999 (GAO– 

02–142, p. 34).’’ In essence, cost containment has effectively capped NSA at unreasonably low levels. A legislated cap has the potential to further diminish the success 

and savings the Program has achieved. 

It takes NSA resources to prescribe and distribute WIC food packages and maintain program integrity. The President’s proposed cap on WIC NSA funding will result in unspent WIC food resources and unmet participant needs, increasing the vulnerability of all ready food insecure mothers and children. We cannot imagine that 

the President intends this result when in previous years he was so committed to 

ensuring that WIC received additional overall Program funding. 

WIC’s population, like the general population, has experienced dramatic increases 

in the prevalence of overweight and obesity and related health issues. A study re-
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leased by the Department of Health and Human Services’ Centers for Disease Control and Prevention shows that deaths due to poor diet and physical inactivity rose 

by 33 percent over the past decade and may soon overtake tobacco use as the leading preventable cause of death. WIC Programs across the Nation have been actively 

engaged in obesity prevention efforts since the turn of the millennium and WIC is 

recognized for its role in addressing the Nation’s obesity health crisis. 

WIC uses multiple key nutrition services strategies in the Program’s nearly 

10,000 clinics to combat the growing national obesity epidemic. These include: 

—Individualized nutrition assessments provided to mothers and children to identify overweight or obesity among other nutrition risks; 

—Individualized nutrition counseling provided for at-risk mothers and children; 

—Prescribed, tailored, reduced fat and low-sugar WIC food packages provided to 

all WIC mothers and children that include reduced or non-fat milk, reduced-fat 

cheese, and cereals with 6 grams of sugar or less; 

—Counseling to promote increased physical activity; 

—Counseling for eating and life-style behaviors that may contribute to overweight 

and obesity; 

—Instruction on how to select and prepare healthy foods; 

—Active promotion and support of breastfeeding as the best form of infant feeding—acknowledged to aid in preventing childhood overweight and obesity. 

Inadequate nutrition services and administration funding will stifle WIC’s efforts 

to achieve positive nutrition outcomes. 

The net result of the President’s proposal to cap nutrition services funding, NSA, 

would be to harm the Program and to erode benefits and services for mothers and 

children. 

We urge the Subcommittee to once again exempt WIC from the proposed cap on 

Nutrition Services funding to protect critical WIC participant benefits. 

NWA urges the Subcommittee not to override WIC’s authorizing statute and to provide $30 million annually outside of the regular NSA grant to implement MIS 

core functions, upgrade and maintain WIC technology systems, achieve program efficiencies and economies, and render systems EBT ready. This will fulfill the President’s own WIC technology initiative, embodied in the Child Nutrition and WIC Reauthorization Act of 2004. 

The President, in his WIC reauthorization agenda, recognized that technology provides a critical foundation for quality WIC services and Program Integrity. He recognized that funding WIC technology from existing resources compromises WIC’s ability to deliver services and develop responsive MIS systems. Current limits on funding prevent more than half—56 percent—of WIC State agencies from meeting USDA 

core functions. Among these core functions are those that are critical for States to 

effectively manage grant funds and food cost containment efforts. 

To develop and maintain MIS and electronic service delivery systems, and to link 

with other health data systems the President urged Congress during reauthorization to earmark and provide a funding level of $30 million annually outside the regular NSA grant to implement MIS core functions, upgrade WIC technology systems, 

maintain MIS and electronic services and expedite the joint NWA/USDA 5 year plan 

for State MIS systems. This funding level is a mere down payment for the actual 

costs of improving outdated and outmoded MIS systems—USDA reported in 2001 

that ‘‘the cost of bringing WIC’s essential program tasks up to standard in all States 

over the next 6 years is between $147 million and $267 million (GAO–02–142, p. 

22).’’ 

The President’s fiscal year 2007 proposal provides no monies for MIS, seriously 

jeopardizing mandated vendor cost containment requirements and impending 

changes to the WIC food packages essential to combating obesity. We urge the Subcommittee to act to fund MIS and electronic service delivery systems at $30 million 

in its appropriations bill. 

NWA urges that Congress continue to save Medicaid funds by ensuring that all 

Medicaid recipients remain automatically income eligible for WIC. The President 

has again proposed a cap on Medicaid adjunctive eligibility, freezing that eligibility 

level at 250 percent. This proposal, wisely rejected by Congress last year, most directly affects MD, MO, MN, NH, RI and VT. 

This proposal flies in the face of the Administration’s purported efforts to reduce 

NSA costs by driving up the expense of doing WIC business for the six States directly affected. Though it eliminates eligibility for only a small number of individuals, it would require the affected States to accomplish duplicative income documentation for all Medicaid recipients applying for WIC. It would have the unintended consequence of potentially discouraging otherwise WIC eligible mothers and 

children from applying if they feel that they may not be eligible, undermining the 

preventative impact of WIC and adding unnecessary administrative burden. 
597 

Although this proposal is not included in the fiscal year 2007 budget request for 

WIC, the President has signaled his intention in the Administration’s fiscal year 

2007 budget request to recommend in fiscal year 2008 a required State match of 

20 percent for nutrition services (NSA) funds. NWA urges Subcommittee members 

to oppose this recommendation. Based on USDA data, adjusted for inflation, in fiscal year 2008, should States fail to provide a match, more than 1.5 million mothers 

and children would be at risk of losing critical nutrition services benefits! 

It is inconceivable that State legislatures and governors would be willing to provide matching funds. This proposal would be disastrous for the future of WIC, leading to a significant deterioration in services and State and local agencies closing 

down clinics, even entire programs. WIC food benefits cannot be prescribed or provided, nor can program integrity be maintained without adequate NSA resources. 

A matching grant would undermine or even eliminate current effective collaborative relationships due to reduced resources. Collaboration is already jeopardized 

with some programs that have limited resources as a result of Federal and State 

funding cuts. 

A national priority for 32 years, WIC ensures healthy pregnancies, babies and 

children. To make WIC anything less than a national priority runs the risk of increased infant mortality and increased numbers of low birth weight infants. WIC 

must remain a national priority. 

Finally, NWA has sought changes in the WIC Food Packages since 2000, attempting to bring them in line with current dietary science. The Association has encouraged USDA/FNS to publish a proposed rule transforming the WIC food packages by 

adding fresh, frozen and canned fruits and vegetables, among other changes proposed by the National Academy of Sciences Institutes of Medicine. NWA urges the 

Subcommittee to continue to press USDA/FNS for immediate publication of a proposed rule, reflecting the IOM’s recommendations, with a minimum 90-day public 

comment period. The time for change in the WIC food packages is now if we are 

to continue to meet the challenges of ensuring healthy children and preventing obesity in low-income populations. 

NWA urges the Subcommittee to fully fund WIC for the fiscal year 2007 at $5.388 

billion, oppose the NSA and Medicaid caps, fund MIS at $30 million, fund 

breastfeeding initiatives at $15 million, fund infrastructure needs at $14 million, 

fully restore the WIC contingency fund to $125 million, continue the moratorium on 

new WIC-Only stores until State agencies are in full compliance with the Interim 

Final Rule on Vendor Cost Containment, and fund WIC health outcomes research 

at $3 million. 

WIC is a short-term intervention program designed to influence lifetime nutrition 

behaviors and lifelong health outcomes in a targeted, high-risk population. It has 

an extraordinary, nearly 31-year record of preventing children’s health problems 

and improving their health, growth and development. WIC children enter school 

ready to learn. They show better cognitive performance. It would be tragic to undo 

32 years of success and reverse the President’s own multi-year commitment to the 

families WIC serves. 

PREPARED STATEMENT OF THE NATURE CONSERVANCY

Mr. Chairman and members of the Subcommittee, I appreciate this opportunity 

to present The Nature Conservancy’s recommendations for fiscal year 2007 appropriations for Agriculture, Rural Development, Food and Drug Administration and 

Related Agencies. My name is Jimmie Powell and I am the Director of Government 

Relations at the Conservancy. 

The Nature Conservancy is an international, nonprofit organization dedicated to 

the conservation of biological diversity. Our mission is to preserve the plants, animals and natural communities that represent the diversity of life on Earth by protecting the lands and waters they need to survive. Our on-the-ground conservation 

work is carried out in all 50 states and in 27 foreign countries and is supported by 

approximately one million individual members. We have helped conserve nearly 15 

million acres of land in the United States and Canada and more than 102 million 

acres with local partner organizations globally. 

Much of my testimony today will concern the pests, pathogens and other invasive 

species that threaten natural landscapes and working lands all across our Nation. 

These threats are urgent and it is most important that the federal government provide leadership now in addressing this growing threat to our economy and to the 

wildlife and plants of our continent. 

Asian Longhorned Beetle.—The Asian Longhorned Beetle kills a wide variety of 

hardwood trees, particularly sugar maple. ALB threatens to devastate forests reach-
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ing from New England to the Great Lakes. Currently the beetle is found primarily 

in New York City and New Jersey. APHIS, working with state, and local officials, 

is succeeding in a 10-year program to eradicate ALB. The President has proposed 

funding of $19.927 million in fiscal year 2007 as compared to the $19.859 million 

appropriated (after recision) in fiscal year 2006. We urge the Subcommittee to fund 

ALB at $30 million in fiscal year 2007, so that the ongoing efforts to eradicate this 

pest will succeed. Failure to eradicate the ALB exposes both urban and rural areas 

of northern states to substantial risk. If not stopped, ALB could kill 30 percent of 

the Nation’s urban trees at a compensatory value of $669 billion. If it is unchecked, 

the New England maple syrup industry is threatened as well as autumn foliage 

tourism which generates $1 billion in revenue in New England every year. 

Cactus Moth.—The cactus moth kills prickly pear cacti. First found in Florida, the 

moth is rapidly moving along the Gulf Coast (currently it has traveled as far as Alabama). APHIS has bred a sterile cactus moth that may help control the spread of 

this pest. Control of the cactus moth before it disperses around the Gulf Coast 

would protect the vast diversity of prickly pear cacti in the southwestern United 

States and Mexico. There are 31 likely host prickly pear species (opuntia) for the 

moth across the United States (9 found nowhere else in the world), including the 

federally endangered Opuntia treleasei, and 56 in Mexico (38 found nowhere else 

in the world). Control would also protect agricultural interests. Horticultural production of prickly pears occurs in Arizona, California, Nevada, New Mexico, and 

Texas. Annual revenues for Arizona alone are estimated at $14 million. In drought 

years, ranchers in Texas have burned the spines off opuntias and fed them to cattle. 

Thus, the cactus moth presents both a critical ecological and agricultural threat. We 

urge you to fund eradication efforts at $1.5 million in fiscal year 2007 for a full sterile release program. 

Emerald Ash Borer.—The Emerald Ash Borer (EAB), an Asian native, was detected in 2002. Control programs began in 2003. The quarantine area now covers 

nearly 20,000 square miles in Michigan’s Lower Peninsula and nearby areas in Indiana, Ohio, with additional areas in Ontario. At present, spread of the emerald ash 

borer to the Upper Peninsula, Illinois, and Wisconsin is partially prevented by the 

Great Lakes. However, if eradication efforts are not sufficiently aggressive, EAB will 

spread further south into Ohio and Indiana, and be carried to other vulnerable 

areas in the East and Midwest. Seven billion ash trees are at risk across the Nation, 

at an estimated cost of $282 billion. We urge the Subcommittee to provide APHIS 

with $55 million to contain the Emerald Ash Borer in fiscal year 2007. In fiscal year 

2006, APHIS is spending only $9.93 million in appropriated funds. We support the 

efforts of Governors and other partners to obtain urgently needed emergency funds 

drawn from the Commodity Credit Corporation (CCC) to contain this beetle. Since 

funding must continue at this higher level for the program to succeed, it is important that the Congress appropriate $55 million in fiscal year 2007 and beyond. 

Sudden Oak Death.—Since 2000, APHIS has worked with California, Oregon, and 

other states to prevent the spread of Sudden Oak Death (SOD). This disease infects 

at least 40 native tree, shrub and herb species. The disease kills a variety of western and eastern oak trees. SOD has already killed one hundred thousand tanoaks, 

live oaks and black oaks in California. If SOD spreads into Oregon and Washington, 

it could severely disrupt production and movement of Douglas-fir seedlings used in 

replanting. If SOD spreads to the East, it is likely to kill large numbers of red oaks. 

Collectively the red and white oaks comprise 38 percent of the Nation’s total hardwood saw-timber volume. 

Containing Sudden Oak Death has become more challenging as the number of 

host plants has grown. The situation became a crisis in 2004 when officials discovered that infected nursery plants had been shipped to more than 200 nurseries 

across the country. APHIS adopted highly restrictive regulations to prevent a recurrence of the 2004 crisis that are proving effective: in 2005, inspectors detected infected plants in 56 nurseries, only 8 of which were not on the West Coast. In fiscal 

year 2007, at least $9 million is needed to ensure the continued efficacy of these 

regulations and curb the spread of this disease. 

Sirex Woodwasp.—This wood-boring insect native to Europe, Asia, and North Africa has been introduced into pine plantations in several countries in the Southern 

Hemisphere where it caused serious damage before the release of a biological control 

agent reduced the problem. The wasp has now become established in New York and 

Ontario. According to the USDA Forest Service, if the Sirex woodwasp is allowed 

to spread, within 55 years it could cause damage ranging from $3 billion to $17 billion to U.S. pine timber and pulp production, primarily in the South. To forestall 

these damages, APHIS must implement regulations to prevent movement of infested 

material while expediting the safety review required before any release in North 
599 

America of the biological control agent. We anticipate that APHIS will need several 

million dollars for this new activity. 

USDA Agriculture Research Service.—The Conservancy urges the Subcommittee 

to provide funding for the Agricultural Research Service (ARS) to study possible biological control agents targeting two insects that threaten the unique cycad forests 

of Guam. The Asian cycad scale and cycad blue butterfly—both individually and together—are on track to destroy these forests. ARS staff at the Ft. Pierce, Florida 

laboratory should receive funds to identify and test possible biological control agents 

targeting these two harmful insects. Additional funds are needed for staff on Guam. 

Noxious Weed Control and Eradication Act.—We respectfully request $15 million 

to fully implement the Noxious Weed Control and Eradication Act of 2004, enacted 

by the 108th Congress. As control and management of invasive species are important for agriculture, natural areas, forestry, and rangeland, this effort has strong 

bipartisan support. This issue is vital to the health of the Nation’s economy and ecosystems. Funding for this program now will save money in the long-term. 

Pest and Disease Management Programs.—APHIS provides technical and financial 

support to help control or eradicate a variety of threats to our agricultural and natural systems. In an attempt to further combat pest and disease outbreaks and problems the Administration has proposed a $10 million pilot competitive-bid program 

to award grants to private groups who can respond to invasive species with innovative methodologies. It has been noted that a major obstacle to APHIS’ ability to rapidly respond to infestations is that there is no national system that addresses all 

types of invasive species infestations—those affecting aquatic areas, rangelands, and 

forests as well as crops and livestock. With this pilot program the agency may be 

able to increase its effectiveness with invasive species by including the early involvement of on the ground groups who recognize the urgent need for rapid response, active involvement, and can bring with them pioneering and resourceful tactics. 

Wetlands Reserve Program.—America’s wetlands are the habitat for thousands of 

species of wildlife, and up to half of all North American bird species nest or feed 

in wetlands and about half of all threatened and endangered species use wetlands. 

In addition, our wetlands help to trap pollution, reduce the impact of floods, stabilize shore areas, and provide recreational opportunities. President Bush has committed to increasing the number of wetland acres in the United States and has requested full funding for the Wetlands Reserve Program (WRP) in his fiscal year 

2007 budget request. Full funding of WRP would allow for enrollment of 250,000 

acres in 2007, the full yearly authorized amount in the 2002 Farm Bill. WRP is the 

key component in meeting the president’s promise to create, improve and protect at 

least 3 million wetland acres over a 5-year period that ends in 2009. 

Another very effective program administered under WRP, is the Wetlands Reserve 

Enhancement Program (WREP), which uses existing authority to enhance the delivery of WRP. Specifically, WREP provides an avenue for NRCS to form special partnerships with States, local governments, and non-profit organizations to improve 

and expand the delivery of WRP through easement acquisition and activities associated with wetland restoration, creation, or enhancement. We are pleased to see 

NRCS using this tool to direct funding to locally initiated and led projects that 

achieve maximum environmental benefits while remaining cost-effective and 

leveraging non-Federal funds. We fully support the expanded use of this program 

and propose that with an increased funding level for WRP, NRCS be encouraged to 

expand its financial assistance available for WREP. 

Wildlife Habitat Incentive Program.—The Wildlife Habitat Incentive Program 

(WHIP) is a highly-effective and widely-accepted program across the country. WHIP 

is able to target wildlife habitat projects on all lands and aquatic areas, and provides assistance to conservation-minded landowners to develop and improve wildlife 

habitat on their lands. We recommend that the committee support the President’s 

program request for an increase of $12 million over the 2006 level. The Conservancy 

supports the NRCS proposal to target $10 million to improve migratory fish habitats 

by removing obstructions from rivers, such as small private dams and water diversions. This focus will help to create incentives to protect streamside areas, repair 

instream habitat, improve water flows and water quality, or initiate watershed 

management and planning in areas where streams are in a degraded condition due 

to past practices. 

Conservation Reserve Program.—The Conservancy has been a strong supporter of 

USDA’s Conservation Reserve Program (CRP) and supports the full authorized enrollment of 39 million acres. Roughly 35 million acres across the country are under 

short term CRP rental agreements, and beginning in 2007, contracts representing 

over 22 million acres will expire, over 62 percent of those acres. USDA’s Farm Serv-
600 

ice Agency (FSA) is currently deciding how to handle this large number of expiring 

contracts and additional acres, as well. 

Few environmental programs have matched the scope and achievement of CRP. 

Since its inception in 1986, the program has been responsible for reducing soil erosion by nearly 40 percent and restoring the grassland and wetland communities of 

the Great Plains. However, there is still so much more that the program could accomplish. We urge the committee to direct USDA to increase CRP’s environmental 

benefits by: (1) better targeting CRP enrollments; (2) enhancing the management of 

CRP lands; and (3) assuring that inappropriate cover plantings are not encouraged 

by the program. In order to achieve these higher environmental benefits, FSA will 

need to update and improve the Environmental Benefits Index (EBI). Proper management of CRP lands and improved targeting of CRP contracts to attain the highest conservation goals will require increased funding for the agency as it prepares 

for huge reenrollment that it now faces. 

PREPARED STATEMENT OF THE NEW MEXICO INTERSTATE STREAM COMMISSION

SUMMARY

This Statement is submitted in support of appropriations for the U.S. Department 

of Agriculture’s Environmental Quality Incentives Program (EQIP) and the Colorado 

River Basin Salinity Control Program. Prior to the enactment of the Farm Security 

and Rural Investment Act (FSRIA) in 2002, the salinity control program had not 

been funded at the level necessary to control salinity with respect to water quality 

standards since the enactment of the Federal Agriculture Improvement and Reform 

Act (FAIRA) of 1996. Inadequate funding of the salinity control program also negatively impacts the quality of water delivered to Mexico pursuant to Minute 242 of 

the International Boundary and Water Commission. Adequate funding for EQIP, 

from which the U.S. Department of Agriculture (USDA) funds the salinity program, 

is needed to implement salinity control measures. The President’s budget for fiscal 

year 2007 requests an appropriation of $1 billion for EQIP. I urge the Subcommittee 

to support an appropriation of at least $1 billion to be appropriated for EQIP. I request that the Subcommittee designate 2.5 percent, but no less than $20 million, 

of the EQIP appropriation for the Colorado River Basin salinity control program. I 

request that adequate funds be appropriated for technical assistance and education 

activities directed to salinity control program participants. 

STATEMENT

The seven Colorado River Basin States, in response to the salinity issues addressed by Clean Water Act of 1972, formed the Colorado River Basin Salinity Control Forum (Forum). Comprised of gubernatorial appointees from the seven Basin 

States, the Forum was created to provide for interstate cooperation in response to 

the Clean Water Act, and to provide the States with information to comply with Sections 303(a) and (b) of the Act. The Forum has become the primary means for the 

seven Basin States to coordinate with Federal agencies and Congress to support the 

implementation of the Salinity control program. 

Congress authorized the Colorado River Basin salinity control program in the Colorado River Basin Salinity Control Act of 1974. Congress amended the Act in 1984 

to give new responsibilities to the USDA. While retaining the Department of the Interior as the lead coordinator for the salinity control program, the amended Act recognized the importance of the USDA operating under its authorities to meet the objectives of the salinity control program. Many of the most cost-effective projects undertaken by the salinity control program to date have occurred since implementation of the USDA’s authorization for the program. 

Bureau of Reclamation studies show that damages from the Colorado River to 

United States water users are about $330,000,000 per year. Damages are estimated 

at $75,000,000 per year for every additional increase of 30 milligrams per liter in 

salinity of the Colorado River. It is essential to the cost-effectiveness of the salinity 

control program that USDA salinity control projects be funded for timely implementation to protect the quality of Colorado River Basin water delivered to the Lower 

Basin States and Mexico. 

Congress concluded, with the enactment FAIRA in 1996, that the salinity control 

program could be most effectively implemented as a component of EQIP. However, 

until 2004, the salinity control program since the enactment of FAIRA was not funded at an adequate level to protect the Basin State-adopted and Environmental Protection Agency approved water quality standards for salinity in the Colorado River. 

Appropriations for EQIP prior to 2004 were insufficient to adequately control salin-
601 

ity impacts from water delivered to the downstream States, and hampered the required quality of water delivered to Mexico pursuant to Minute No. 242 of the International Boundary and Water Commission, United States and Mexico. 

EQIP subsumed the salinity control program without giving adequate recognition 

to the responsibilities of the USDA to implement salinity control measures per Section 202(c) of the Colorado River Basin Salinity Control Act. The EQIP evaluation 

and project ranking criteria target small watershed improvements which do not recognize that water users hundreds of miles downstream are significant beneficiaries 

of the salinity control program. Proposals for EQIP funding are ranked in the States 

of Utah, Wyoming and Colorado under the direction of the respective State Conservationists without consideration of those downstream, particularly out-of-state, 

benefits. 

Following recommendations of the Basin States to address the funding problem, 

the USDA’s Natural Resources Conservation Service (NRCS) designated the Colorado River Basin an ‘‘area of special interest’’ including earmarked funds for the salinity control program. The NRCS concluded that the salinity control program is different from the small watershed approach of EQIP. The watershed for the salinity 

control program stretches almost 1,200 miles from the headwaters of the river 

through the salt-laden soils of the Upper Basin to the river’s termination at the Gulf 

of California in Mexico. NRCS is to be commended for its efforts to comply with the 

USDA’s responsibilities under the Colorado River Basin Salinity Control Act, as 

amended. Irrigated agriculture in the Upper Basin realizes significant local benefits 

of improved irrigation practices, and agricultural producers have succeeded in submitting cost-effective proposals to NRCS. 

Years of inadequate Federal funding for EQIP since the 1996 enactment of FAIRA 

and prior to 2004 resulted in the Forum finding that the salinity control program 

needs acceleration to maintain the water quality criteria of the Colorado River 

Water Quality Standards for Salinity. Since the enactment of FSRIA in 2002, an 

opportunity to adequately fund the salinity control program now exists. The President’s budget request of $1 billion accomplishes the needed acceleration of the 

NRCS salinity control program if the USDA continues its practice of designating 2.5 

percent of the EQIP funds appropriated. The requested funding of 2.5 percent, but 

no less than $20 million, of the EQIP funding will continue to be needed each year 

for at least the next few fiscal years. 

State and local cost-sharing is triggered by and indexed to the Federal appropriation. Federal funding for the NRCS salinity control program of about $19.5 million 

for fiscal year 2006 has generated about $15.8 million in cost-sharing from the Colorado River Basin States and agricultural producers, or more than an 80 percent 

match of the Federal funds appropriated for the fiscal year. 

USDA salinity control projects have proven to be a most cost-effective component 

of the salinity control program. USDA has indicated that a more adequately funded 

EQIP program would result in more funds being allocated to the salinity program. 

The Basin States have cost-sharing dollars available to participate in on-farm salinity control efforts. The agricultural producers in the Upper Basin are willing to costshare their portion and are awaiting funding for their applications to be considered. 

The Basin States expend 40 percent of the state funds allocated for the program 

for essential NRCS technical assistance and education activities. Previously, the 

Federal part of the salinity control program funded through EQIP failed to adequately fund NRCS for these activities, which has been shown to be a severe impediment to accomplishing successful implementation of the salinity control program. Recent acknowledgement by the Administration that technical assistance and 

education activities must be better funded has encouraged the Basin States and 

local producers that cost-share with the EQIP funding for implementation of the essential salinity control work. I request that adequate funds be appropriated to 

NRCS technical assistance and education activities directed to the salinity control 

program participants (producers). 

I urge the Congress to appropriate at least $1 billion in fiscal year 2007 for EQIP. 

Also, I request that Congress designate 2.5 percent, but no less than $20 million, 

of the EQIP appropriation for the Colorado River Basin salinity control program. 

PREPARED STATEMENT OF THE US MARINE SHRIMP FARMING CONSORTIUM

Mr. Chairman, we greatly appreciate the opportunity to provide testimony to you 

and the Subcommittee, to thank you for your past support, and to discuss the 

achievements and opportunities of the US Marine Shrimp Farming Consortium(USMSFC), funded under the Federal initiative, Shrimp Aquaculture. 
602 

We bring to your attention the success of the US Marine Shrimp Farming Consortium and its value to the Nation. The Consortium consists of institutions from 7 

States: the University of Southern Mississippi/Gulf Coast Marine Laboratory, Mississippi; the Oceanic Institute, Hawaii; Tufts University, Massachusetts; Texas Agricultural Experiment Station, Texas A&M University, Texas; Waddell Mariculture 

Center, South Carolina; the University of Arizona, Arizona; and Nicholls State University, Louisiana. These institutions, which oversee the USMSFC, have made 

major advances in technology development and services to support the U.S. shrimp 

farming industry. The USDA in its 2004 program review recognized the program’s 

excellent scientific performance, output, and multi-state collaborative efforts. The 

Consortium is at the crossroads of contributing to major growth of the U.S. shrimp 

farming industry, consolidating its competitive advantages, and satisfying consumer’s demands for safe and wholesome seafood products. Shrimp is the number 

one consumed seafood product in the United States, yet contributes to a $3.6 billion 

trade deficit, second only to the import of oil for the deficit contributed by natural 

resource products. 

Accomplishments 

The Consortium, in cooperation with private industry, industry associations, and 

government agencies has generated new technologies for producing safe and premium quality marine shrimp at competitive prices. To date, the program has: (1) 

established the world’s first and currently most advanced breeding and genetic selection program for marine shrimp; (2) completed pioneering research and development of advanced diagnostic tools for disease screening and control; (3) described 

the etiology of shrimp diseases associated with viral pathogens; (4) fostered shrimp 

production at near-shore, inland/rural farm and even desert sites; (5) served a lead 

role in the Joint Subcommittee on Aquaculture’s efforts to assess the threat of globally transported shrimp pathogens; (6) served on the Office of International 

Epizootics, recommending country-of-origin labeling of imported shrimp products to 

combat the spread of exotic disease pathogens, subsequently adopted by the USDA 

in its 2002 Farm Bill; (7) supplied the United States industry with selectively bred 

and disease-resistant shrimp stocks; (8) developed advanced technology for biosecure 

shrimp production systems to protect both cultured and native wild stocks from disease; and (9) developed new feed formulations to minimize waste generation and enhance the use of domestic grains and oilseed products. These substantial accomplishments advance the continued growth of the domestic industry place an important emphasis on environmental sustainability, address concerns for the safety and 

quality of our seafood supply, and increase market competitiveness. 

Judging from the State of the industry today, USMSFC efforts continue to have 

measurable positive effect. Coastal farming continues to lead in the production of 

cultured shrimp in the United States, inland farming has added new dimensions 

and growth to the industry, and super-intensive production approaches are gaining 

momentum. Improvements in farm management practices coupled with the widespread use of disease-resistant stocks have resulted in bumper crops for the industry over the last several years. 

With reliable production in place, we have also seen a commensurate geographic 

expansion of the industry within the United States from three to seven States in 

the last 10 years. A broader industry base, while increasing production through the 

addition of new farms, also provides additional protection to the industry by geographically isolating different regional sectors in the event of disease outbreaks or 

natural disaster. Significant amounts of shrimp are now being produced in Texas, 

South Carolina, Florida, Hawaii, Arizona, Alabama, and Arkansas. Several other 

States are now beginning to explore production with the newer, super-intensive 

technologies being developed. 

In addition, the recent and growing worldwide switch to use of specific pathogen 

free (SPF) L. vannamei has created tremendous opportunity for U.S. shrimp 

broodstock suppliers. This switch has been caused by diseases overseas which have 

affected wild broodstock animals, lowering overall yield and profitability. The SPF 

concept for shrimp, pioneered by the USMSFC, has now been accepted worldwide 

and U.S. broodstock suppliers are being overwhelmed by orders for their stocks. For 

instance, in 2004, the State of Hawaii gave its exporter of the year award to a local 

company specializing in shrimp broodstock. Estimates are the world market for SPF 

stocks can reach near $90 million yearly. 

Industry Vulnerability 

While exceptional progress has been made, this emerging industry is continually 

confronted with new challenges. The industry depends on the USMSFC for leadership and innovative technology development. As a result of development of high- 
603 

health and improved stocks, disease diagnosis, new feeds, and new production technologies and farming approaches, the domestic industry has maintained relative stability, while other countries have had major losses in their production due to diseases and environmental problems. Disease losses due to exotic viruses in Asia and 

Latin America during the past 6 years have approached $6 billion USD. 

Diseases present in imported commodity shrimp products threaten not only the 

emerging domestic shrimp farming industry, but also the Nation’s native shrimp 

stocks. During 2004, limited disease outbreaks did occur in Texas and Hawaii that 

were caused by a breakdown in biosecurity protocols against imported shrimp products. A quick response of the USMSFP, working in concert with the USDA’s Animal 

and Plant Health Inspection Services and other agencies in the State of Texas, 

helped identify and isolate these outbreaks, limit the spread, and minimize the loss 

in production nationwide. There were no reoccurrences or outbreaks of other disease 

in 2005. 

While significant progress has been made in risk assessment and risk management with visible success, the industry and the USMSFC must remain constantly 

vigilant and proactive to further improve global competitiveness. In addition to providing significant input on the development of national and international regulatory 

standards for shrimp farmers, important service work for governmental agencies 

and NGOs keeps us continuously apprised of new developments pertaining to 

emerging regulations so that USMSFC research plans can be kept proactively responsive to dynamic shifts in industry needs. 

The overwhelming threat facing the U.S. marine shrimp farming industry today 

is the significant decline in market prices for domestic shrimp due to a surge of foreign imports over the last 3 years. The decline has also seriously threatened the domestic shrimp harvest industry. Average U.S. farm gate prices have fallen 40 percent since then, constraining profitability and plans for industry expansion. Antidumping tariffs imposed in February 2005 have not nor are forecasted to stem the 

tide of rising imports, or improve domestic shrimp prices as intended. Affected buyers and distributors have largely absorbed those costs or producers have switched 

to product forms not covered by the tariffs. Moreover, other countries not named on 

the order have filled any voids with increased imports into the United States. 

Concerns also have been heightened over food safety issues associated with unregulated use of antibiotics and fecal-borne contaminants due to questionable production practices in certain countries. Further, due to disease outbreaks worldwide, 

several foreign countries have switched production to the dominant species in the 

United States, eroding a previous competitive advantage. While it is important that 

a level playing field be created through reexamination of trade and food safety 

issues, more technologically advanced and innovative approaches are now critically 

needed to leverage U.S. industry gains, create competitive advantage, and improve 

profitability. Innovative ways need to be sought to offset low prices and to distinguish and add value to the domestic product to provide a competitive edge in the 

marketplace and to ensure the safety of the domestic seafood supply. 

Industry Independence 

In fact, despite recent price and profitability trends, investor confidence is rising 

as a result of the work of the Consortium. New farms are emerging utilizing new 

and improved technologies, while others are working in cooperation with the Consortium on more advanced approaches that are nearing fruition. In addition to supporting today’s industry, our advanced, high-density biosecure shrimp production 

systems are now developed to the point for further expansion of shrimp farming into 

near-shore, inland/rural and desert sites away from the environmentally sensitive 

coastal zone. We now have in place the economic models that will appropriately direct research to ensure economic viability, taking in consideration all associated biological, regional, and economic risk factors. Importantly, these new production technologies produce the highest quality and safest shrimp, utilize U.S. grain and oilseed products for feed production, and do not pose any threat to the environment. 

These important traits of an evolving domestic industry can be exploited to gain 

competitive edge, offset declining prices, and ensure the quality and safety of shrimp 

for the consumer. Clearly, the U.S. shrimp farming industry has emerged solid from 

near collapse in the early 1990s, and appears well poised for a new phase of growth, 

provided the technologies and innovations are in place to support a larger, more diverse, and more competitive domestic industry for the new millennium. 

To support existing efforts and technology transfer and plans for new dimensions 

to the research to address recent profitability issues, an increase in the current 

funding level from $4.158 million to $6 million is requested. The increase will be 

used to: strengthen the Consortium’s biotechnology and molecular capabilities and 

activities to support rapid and more advanced disease monitoring and genetic selec-
604 

tion efforts; accelerate the development of new genetic lines for market advantage; 

advance high-density production prototypes to commercial-scale testing; determine 

the mechanisms of disease immunity in shrimp for protection of both farmed and 

wild shrimp stocks; and address niche market technologies for competitive advantage. In addition to these needed technological innovations, increased funding will 

support new efforts to promote institutional innovations that will enable expansion 

and vertical integration of the domestic industry, including examination of regulatory impediments to shrimp aquaculture; the effect of farm insurance; development of cooperatives; and the socioeconomics of existing and advanced, high-density 

production systems. 

Mr. Chairman, the U.S. shrimp farming industry and our Consortium deeply appreciate the support of the Committee and respectfully ask for a favorable consideration of this request. 

PREPARED STATEMENT OF THE ORGANIC FARMING RESEARCH FOUNDATION (OFRF) 

The Organic Farming Research Foundation (OFRF) has received support from the 

following federal grants and contracts during the period October 1, 2002 to present. 

ENVIRONMENTAL PROTECTION AGENCY (EPA) STRATEGIC AGRICULTURE INITIATIVE (SAI)

GRANTS UNDER THE FOOD QUALITY PROTECTION ACT (FQPA)

REGION 9 

Grant Agreement: X–97901601–0 

Project Title: Organic Farming Research for Alternative Weed and Pest Management 

Project Period: 10/01/2001—12/31/2003 amended to 6/30/2005 

This assistance agreement provided full Environmental Protection Agency (EPA) funding in the amount of $84,000. The project supported limited research in EPA 

Regions 8, 9 and 10 that investigated pest and weed management in organic farming systems to develop alternative approaches for managing pests and weeds without relying on agricultural chemicals. 

Grant Agreement: X–97935601–0 

Project Title: Pest and Weed Management 

Project Period: 11/01/2001—12/31/2004 

This assistance agreement provided full Environmental Protection Agency (EPA) funding in the amount of $10,430. The project supported investigation and development of pest and weed management methods in organic farming systems for a variety of crops in EPA Region 9 to develop alternatives to synthetic agricultural chemicals. 

REGION 5 

Grant Agreement: X8–96562001–0 

Project Title: Organic Farming Research Foundation 

Project Period: 10/01/2004—9/30/2006 

Environmental Protection Agency (EPA) funds in the amount of $30,000 would be 

distributed through a competitive grants program for projects that investigate organic pest control alternatives to chemicals being reviewed under the Food Quality 

Protection Act. The Organic Farming Research Foundation proposed to use EPA 

funding to support research on organic farming practices for weed and insect pest 

management in IL, IN, MI, MN, OH, and WI and tribal Nations. 

Grant Agreement: X8–96562001–1 

Project Title: Organic Farming Research Foundation 

Project Period: 10/01/2004—9/30/2006 

Environmental Protection Agency (EPA) funds in the amount of $30,000 would be 

distributed through a competitive grants program for projects that investigate organic pest control alternatives to chemicals being reviewed under the Food Quality 

Protection Act. The Organic Farming Research Foundation proposed to use EPA 

funding to support research on organic farming practices for weed and insect pest 

management in IL, IN, MI, MN, OH, and WI and tribal Nations. 

REGION 8 

Grant Agreement: X8–97815401–0 

Project Title: Surveys, Studies, Investigations 

Project Period: 10/01/2004—9/30/2006 

Environmental Protection Agency (EPA) funds in the amount of $40,000 support 

research on organic farming practices for weed and insect pest management in CO, 
605 

MT, ND, SD, UT, WY, and 27 Tribal Nations. Funds are channeled through OFRF’s 

competitive grants program for projects that investigate organic pest control alternatives to chemicals being reviewed under the Food Quality Protection Act. 

UNITED STATES DEPARTMENT OF AGRICULTURE (USDA)/INITIATIVE FOR FUTURE

AGRICULTURE AND FOOD SYSTEMS (IFAFS)

Subcontract RF740050 under the USDA/IFAFS Award Number: 00–52101–9691 

Project Title: Revitalizing Small and Mid-Sized Farms: Organic Research, Education, and Extension 

Project Period: 9/15/2000—9/30/2004 amended to 9/30/2005 

USDA/IFAFS funding in the amount of $221,038 to establish a consortium of universities, non-profit and grassroots farmers organizations that will revitalize small 

and mid-sized family farms by integrating multidisciplinary research, education, 

and extension of organic agriculture. The goal is to catalyze new opportunities for 

farmers including niche marketing of high-value horticultural and agronomic crops 

by expanding existing organic agriculture programs at three land grant institutions. 

I, Brise Tencer, am submitting this testimony on behalf of the Board of Directors 

of the Organic Farming Research Foundation (OFRF) to detail our recommendations 

and requests for funding of several USDA marketing, research, and conservation 

programs of importance to organic agriculture. 

The Organic Farming Research Foundation is a non-profit whose mission is to 

sponsor research related to organic farming practices, to disseminate research results to organic farmers and to growers interested in adopting organic production 

systems, and to educate the public and decision-makers about organic farming 

issues. 

As you prepare your appropriations priorities for the fiscal year 2007 Agriculture, 

Rural Development and Related Agencies Appropriations bill, we request your support for the following organic programs. Development of organic production effectively serves USDA strategic objectives for environmental quality, human health 

and nutrition, and agricultural trade. Organic agriculture has experienced extraordinary growth over the last decade; the International Trade Center (UNCTAD/WTO) 

estimates that organic products represent 2–2.5 percent of total U.S. retail food 

sales. Because organic production improves profitability and market access, it is a 

desirable alternative for many producers and represents an important opportunity 

for growth in U.S. agriculture. The organic sector is extremely diverse in scale, technology, and market chains. Both ends of the scale spectrum are experiencing vibrant 

growth. The modest funding levels requested below will help these trends continue 

while providing a cost effective way to create positive returns for the environment 

and our economy. 

USDA AGRICULTURAL RESEARCH SERVICE

$10 Million for Strategic Regional Programming for Organic Agricultural Research 

In 2005, USDA–ARS spent about $3.5 million on organic-specific projects, or about 

.35 percent of $1 billion fiscal year 2005 ARS expenditures. Under a 2 percent ‘‘fair 

share’’ framework, the ARS would have generated about $20 million for organic research in its budget. The 2004 and 2005 appropriations omnibus bills contained language urging ARS to direct an increased amount of resources to organic. This report 

language was not a mandate and no significant increases in organic expenditures 

have been seen over the last several years. 

For fiscal year 2007, OFRF recommends $10 million for Strategic Regional Programming for Organic Agricultural Research. This funding would be part of an overall package of $10 million total that would be distributed among the 8 Regional 

Areas (and the National Agricultural Library). Regional distribution of funds would 

provide flexibility to address the needs and opportunities of the organic production 

and processing sector. This approach would make progress towards the ‘‘fair share’’ 

goal and provide a bridge to the evolution of a national program for organic research. Funding will be allocated by the Area Directors (with stakeholder input) to 

(1) Maintain and enhance existing CRIS projects, scientists and technicians whose 

objectives are specific to organic production and processing; and (2) Provide support 

to integrate organic agriculture objectives into other projects and partnerships, 

where such capacity exists and when the objectives meet priority needs (e.g., as 

identified by the ARS National Organic Workshop held January, 2005 in Austin, 

Texas). The attached addendum to this request provides additional information 

about regional needs. 
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USDA COOPERATIVE STATE RESEARCH EDUCATION AND EXTENSION SERVICE

Organic Transitions Program: $5 million 

Over the last few years the Organic Transition research program has become one 

of the most competitive of the USDA CSREES integrated grant programs. Because 

of the high level of interest in this program, only about 10 percent of qualified applicants have been able to receive funding (compared to 19–29 percent of qualified applicants that receive funding in comparable grants programs at the USDA 

CSREES). We expect interest in this program to continue to grow. Expansion of this 

program should focus on a higher number of smaller grants. Also, it is important 

that this program keeps its own identity and not be incorporated into the National 

Research Initiative (NRI). We ask the committee to increase funding for Organic 

Transition program to $5 million in 2007 and for it to remain as part of the Integrated Organic Program, distinct from the National Research Initiative. 

National Research Institute (NRI): 30 percent directed to goals of the Initiative for 

Future Food and Agricultural Systems (IFAFS) 

The IFAFS program has provided an important source of research funds for 

projects relevant to organic growers. The appropriation bills between fiscal year 

2003 to fiscal year 2006 each prohibit USDA from spending money for IFAFS, but 

directed the Department to spend a 20 percent subset of the National Research Initiative competitive grants program ‘‘under the same terms and conditions’’ as 

IFAFS. For fiscal year 2007 we support the President’s request that 30 percent of 

NRI be directed to IFAFS goals. Additionally, we request the Committee include report language directing the USDA CSREES to direct a significant portion of these 

funds to organic research (including trade and economic policy topics) within the following program areas: Managed Ecosystems and Small and Mid sized Farm Viability and Rural Entrepreneurship through inclusion of language soliciting applications 

on organic research topics in the NRI requests for applications. 

Sustainable Agriculture Research and Education (SARE): Chapter 1: $15 million, Chapter 3: $5 million 

SARE funds farmer-driven research and outreach on profitable, environmentally 

sound farming practices, including organic production. SARE’s solid track record, regional structure, and close links between research and outreach mean that farmers 

nationwide get reliable information they need on how to stay in business while 

being environmentally responsible. In 2005 the SARE program was funded at Chap 

1: $9.2 million, Chap 3: $3.8 million. For 2007 we seek $15 million, $5 million for 

Chapters 1 and 3, respectively. 

USDA ECONOMIC RESEARCH SERVICE

Organic Production and Marketing Data Collection: $750,000 

Because increased ability to conduct economic analysis for the organic farming sector is greatly needed, we request $750,000 be appropriated to the USDA Economic Research Service to implement the ‘‘Organic Production and Market Data Initiative’’ included in Section 7407 of the 2002 farm bill. 

USDA NATIONAL AGRICULTURE STATISTICS SERVICE (NASS)

Census follow up—Organic Grower Survey: $1 million 

Unlike other sectors of agriculture, the organic industry has suffered from a lack 

of data collection and analysis, which has limited producers’ ability to respond to 

market trends. The USDA NASS is currently in the process of developing the 2007 

agricultural census. Although they are making an effort to expand the quantity of 

organic questions in the census, they will need to conduct a follow up survey in 

order to collect more in-depth information on acreage, yield/production, inventory, 

production practices, sales and expenses, marketing channels, and demographics. 

We request $1 million be appropriated to the USDA National Agriculture Statistics 

Service for collection of organic price information, authorized by the ‘‘Organic Production and Market Data Initiative’’ included in Section 7407 of the 2002 farm bill. 

USDA AGRICULTURAL MARKETING SERVICE

Organic Price Collection: $1 million 

Wholesale and retail price information is critical to farmers and ranchers, but organic producers have fewer resources for price information than conventional producers. Organic price information is particularly important for insuring that organic 

producers receive appropriate payment from Federal crop insurance when they 

incur a loss. We request $1 million be appropriated to the USDA Agricultural Mar-
607 

keting Service for collection of organic price information, authorized by the ‘‘Organic 

Production and Market Data Initiative’’ included in Section 7407 of the 2002 farm 

bill. 

Organic Certification Cost Sharer: $1.5 million 

For small to medium scale producers and handlers, the cost of organic certification can be a significant impediment to entry into the USDA Organic Program. 

The cost of the program are not confined to initial certification, in fact many small 

and medium sized producers often cite the ongoing annual cost burden of maintaining organic certification as an obstacle to staying in the USDA National Organic 

Program. The Organic Certification Cost Share Program was created to ease the 

cost burden of certification by providing up to 75 percent (to a maximum of $500) 

of certification costs, but the $5 million provided in the 2002 Farm Bill has now 

been expended at the Federal level (although a few states have some residual funding which they are still in the process of dispersing to producers or handlers). We 

urge the committee to direct $1.5 million in funds of the Commodity Credit Corporation as a stopgap measure to continue the National Organic Certification Cost Share 

Program authorized in Section 10606 of the 2002 Farm Bill. 

Organic Standards: $3.13 million 

The national organic standards, which have been in effect since October 31, 2002, 

provide a uniform national standard for the term ‘‘organic’’ that ensures consumer 

confidence in American organic products. The rules, however, will have little effect 

unless it is properly enforced thereby protecting both consumers and producers of 

organic products. Additional funding is needed to investigate complaints, on-site auditing of certifiers (for accreditation purposes), and certifier training programs. In 

fiscal year 2005, Congress appropriated $2 million to AMS for Organic Standards. 

For 2007, we support the President’s request of $3.13 million to expand enforcement 

and compliance of the National organic standards. Additionally, we request the following report language be included: ‘‘The Committee is encouraged that the Agency 

has hired an Executive Director for the National Organic Standards Board (NOSB), 

as well as a new Director for the National Organic Program. The Committee also 

notes that the audits performed by the American National Standards Institute 

(ANSI) in 2004 and by the USDA Office of Inspector General (OIG) in 2005 made 

strong recommendations about changes needed in the administration of the National Organic Program. The Committee expects the Agency to take the necessary 

actions to comply with these recommendations, and to provide a written report to 

the Committee by December of 2006 regarding the progress in implementing these 

recommendations. In addition, the Committee expects to be kept abreast of the complaints that the NOP has received about violations of the organic standards, and 

the progress of the Agency in investigating and responding to those complaints. Finally, the Committee expects the NOP to work closely with the NOSB to implement 

the Peer Review Panel requirements of OPFA and USDA’s organic regulations.’’ 

USDA NATURAL RESOURCES CONSERVATION SERVICE

Conservation Security Program (Csp): Full Funding 

The Conservation Security Program is a comprehensive stewardship incentives 

program that provides financial and technical assistance to farmers and ranchers 

nationwide to reward them for creating public benefits such as clean water, clean 

air, wildlife habitat, and long-term carbon storage. Such assistance is of particular 

importance to the organic producers, many of whom already implement practices 

outlined in this program. We seek full funding for the CSP as a nationwide conservation entitlement program. 

Environmental Quality Incentives Program (Equip): Language supporting incentive 

payments for transitioning to organic production 

The Environmental Quality Incentives Program (EQIP) is a voluntary conservation program for farmers and ranchers that promotes agricultural production and 

environmental quality as compatible national goals. EQIP offers financial and technical help to assist eligible participants install or implement structural and management practices on eligible agricultural land. 

Incentive payments may be provided for up to three years to encourage producers 

to carry out management practices they may not otherwise use without the incentive. Some states, including Massachusetts, Montana, and Minnesota have used incentive payments to support producers transitioning to organic production. These 

transition incentives payment programs assist farmers who choose to convert new 

acreage to organic production. To qualify, farmers must apply at their local NRCS 

offices, file organic system plans, and be inspected by a USDA-accredited certifying 
608 

agent. We urge the Committee to encourage more states to make such programs 

available by adding language that says: ‘‘funds may be used for incentive payments 

for transition to organic production’’. 

USDA RURAL BUSINESS-COOPERATIVE SERVICE

Appropriate Technology Transfer for Rural Areas (ATTRA): $3.9 million 

ATTRA, is a national sustainable agriculture information service managed by the 

National Center for Appropriate Technology. It provides information and other technical assistance to farmers, ranchers, Extension agents, educators, and others involved in sustainable agriculture in the United States. The ATTRA website receives 

hundreds of thousands of visitors annually. Often written in response to questions 

from organic farmers, the ATTRA publications cover specific issues about the most 

widely produced organic crops. With the continued rapid growth of the organic industry, we anticipate an increase in demand for ATTRA services in the coming year. 

Because ATTRA specifically provides accurate and up-to-date technical information 

relating to organic agricultural practices we request that it be funded at $3.9 million. 

Thank you for your consideration of these requests. Supporting organic agriculture, by appropriating adequate funding for these programs provides critical, 

cost-effective benefits for U.S. producers and consumers. 

PREPARED STATEMENT OF THE ORGANIZATION FOR THE PROMOTION AND

ADVANCEMENT OF SMALL TELECOMMUNICATIONS COMPANIES

SUMMARY OF REQUEST

The Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO) seeks the Subcommittee’s support for fiscal year 

2007 loan levels for the telecommunications loans program administered by the 

Rural Utilities Service (RUS) in the following amounts: 

[Millions of dollars] 

5 percent hardship loans .................................................................................................................................... 145 

Treasury rate loans .............................................................................................................................................. 250 

Guaranteed loans ................................................................................................................................................. 1 300 

1 Note: The $300 million requested for guaranteed loans includes $175 million in funding that was previously available through the Rural 

Telephone Bank (RTB). The dissolution of the RTB necessitates additional funds for RUS telecommunications loans in order to maintain the 

level of funds available to rural telecommunications borrowers. 

In addition, OPASTCO requests that the distance learning, telemedicine, and 

broadband program be funded at sufficient levels. 

OPASTCO is a national trade association of approximately 550 small telecommunications carriers serving primarily rural areas of the United States. Its 

members, which include both commercial companies and cooperatives, together 

serve over 3.5 million customers in 47 States. 

Perhaps at no time since the inception of the RUS (formerly the REA) has the 

telecommunications loans program been so vital to the future of rural America. The 

telecommunications industry is at a crossroads, both in terms of technology and 

public policy. Rapid advances in telecommunications technology in recent years have 

begun to deliver on the promise of a new ‘‘information age.’’ Both federal and state 

policymakers have made deployment of advanced communications services a top priority. However, without continued support of RUS’s telecommunications loans program, rural telephone companies will be hard pressed to continue building the infrastructure necessary to bring their communities into this new age and achieve policymakers’ objectives. 

Contrary to the belief of some critics, RUS’s job is not finished. Actually, in a 

sense, it has just begun. We have entered a time when advanced services and technology—such as fiber-to-the-home, high-speed packet and digital switching equipment, and digital subscriber line technology—are expected by customers in all areas 

of the country, both urban and rural. Moreover, the ability of consumers to use increasingly popular Voice over Internet Protocol (VoIP) services requires that they 

first have a broadband connection from a facilities-based carrier. Unfortunately, the 

inherently higher costs of upgrading the rural wireline network, both for voice and 

data communications, has not abated. 

Rural telecommunications continues to be more capital intensive and involves 

fewer paying customers than its urban counterpart. In the FCC’s September 2004 

report on the deployment of advanced telecommunications capability, the Commis-
609 

sion correctly noted that ‘‘[r]ural areas are typically characterized by sparse and disperse populations, great distances between the customer and the service provider, 

and difficult terrain. These factors present a unique set of difficulties for providers 

attempting to deploy broadband services.’’ Thus, in order for rural telephone companies to continue modernizing their networks and providing consumers with advanced services at reasonable rates, they must have access to reliable low-cost financing. 

The relative isolation of rural areas increases the value of telecommunications for 

these citizens. Telecommunications enables applications such as high-speed Internet 

connectivity, distance learning, and telemedicine that can alleviate or eliminate 

some rural disadvantages. A modern telecommunications infrastructure can also 

make rural areas attractive for some businesses and result in revitalization of the 

rural economy. For example, businesses such as telemarketing and tourism can 

thrive in rural areas, and telecommuting can become a realistic employment option. 

Certainly, telecommunications plays a major role in any rural community’s economic 

development strategy, with the existence of modern and advanced telecommunications infrastructure being a major enabling factor in the development of small 

business and manufacturing enterprises in rural areas. 

While it has been said many times before, it bears repeating that RUS’s telecommunications loans program is not a grant program. The funds loaned by RUS 

are used to leverage substantial private capital, creating public/private partnerships. For a very small cost, the government is encouraging tremendous amounts 

of private investment in rural telecommunications infrastructure. Most importantly, 

the program is tremendously successful. Borrowers actually build the infrastructure 

and the government is reimbursed with interest. 

In addition to RUS’s telecommunications loans program, OPASTCO supports adequate funding of the distance learning, telemedicine, and broadband program. 

Through distance learning, rural students gain access to advanced classes which 

will help them prepare for college and jobs of the future. Telemedicine provides 

rural residents with access to quality health care services without traveling great 

distances to urban hospitals. Furthermore, funding that is targeted to finance the 

installation of broadband transmission capacity will allow more rural communities 

to gain high-speed access to the Internet and receive other advanced services. In 

light of the Telecommunications Act’s purpose of encouraging deployment of advanced technologies and services to all Americans—including schools and health 

care providers—sufficient targeted funding for these purposes is essential in fiscal 

year 2007. 

CONCLUSION

The development of the nationwide telecommunications network into an information superhighway, as envisioned by policymakers, will help rural America survive 

and prosper in any market—whether local, regional, national, or global. However, 

without the availability of low-cost RUS funds, building the information superhighway in communities that are isolated and thinly populated will be untenable. 

By supporting the RUS telecommunications programs at the requested levels, the 

Subcommittee will be making a significant contribution to the future of rural America. 

PREPARED STATEMENT OF THE PICKLE PACKERS INTERNATIONAL, INC. 

The pickled vegetable industry strongly supports and encourages your committee 

in its work of maintaining and guiding the Agricultural Research Service. To accomplish the goal of improved health and quality of life for the American people, the 

health action agencies of this country continue to encourage increased consumption 

of fruits and vegetables in our diets. Accumulating evidence from the epidemiology 

and biochemistry of heart disease, cancer and diabetes supports this policy. Vitamins (particularly A, C, and folic acid) and a variety of antioxidant phytochemicals 

in plant foods are thought to be the basis for correlation’s between high fruit and 

vegetable consumption and reduced incidence of these debilitating and deadly diseases. The problem is that many Americans choose not to consume the variety and 

quantities of fruits and vegetables that are needed for better health. 

As an association representing processors that produce over 85 percent of the tonnage of pickled vegetables in North America, it is our goal to produce new products 

that increase the competitiveness of U.S. agriculture as well as meet the demands 

of an increasingly diverse U.S. population. The profit margins of growers continue 

to be narrowed by foreign competition. Likewise, the people of this country represent an ever-broadening array of expectations, tastes and preferences derived from 
610 

many cultural backgrounds. Everyone, however, faces the common dilemma that 

food costs should remain stable and preparation time continues to be squeezed by 

the other demands of life. This industry can grow by meeting these expectations and 

demands with reasonably priced products of good texture and flavor that are high 

in nutritional value, low in negative environmental impacts, and produced with assured safety from pathogenic microorganisms and from those who would use food 

as a vehicle for terror. With strong research to back us up, we believe our industry 

can make a greater contribution toward reducing product costs and improving 

human diets and health. 

Many small to medium sized growers and processing operations are involved in 

the pickled vegetable industry. We grow and process a group of vegetable crops, including cucumbers, peppers, carrots, onions, garlic, cauliflower, cabbage (Sauerkraut) and Brussels sprouts, which are referred to as minor’ crops. None of these 

crops is in any ‘‘commodity program’’ and as such, do not rely upon taxpayer subsidies. However, current farm value for just cucumbers, onions and garlic is $2.3 billion with an estimated processed value of $5.8 billion. These crops represent important sources of income to farmers, and the processing operations are important employers in rural communities around the United States. Growers, processing plant 

employees and employees of suppliers to this industry reside in all 50 States. To 

realize its potential in the rapidly changing American economy, this industry will 

rely upon a growing stream of appropriately directed basic and applied research 

from four important research programs within the Agricultural Research Service. 

VEGETABLE CROPS RESEARCH LABORATORY, MADISON, WISCONSIN

The USDA/ARS Vegetable Crops Research Lab at the University of Wisconsin is 

the only USDA research unit dedicated to the genetic improvement of cucumbers, 

carrots, onions and garlic. Three scientists in this unit account for approximately 

half of the total U.S. public breeding and genetics research on these crops. Their 

past efforts have yielded cucumber, carrot and onion cultivars and breeding stocks 

that are widely used by the U.S. vegetable industry (i.e., growers, processors, and 

seed companies). These varieties account for over half of the farm yield produced 

by these crops today. All U.S. seed companies rely upon this program for developing 

new varieties, because ARS programs seek to introduce economically important 

traits (e.g., virus and nematode resistance) not available in commercial varieties 

using long-term high risk research efforts. The U.S. vegetable seed industry develops new varieties of cucumbers, carrots, onions, and garlic and over twenty other 

vegetables used by thousands of vegetable growers. The U.S. vegetable seed, grower, 

and processing industry, relies upon the USDA/ARS Vegetable Crops Research Lab 

for unique genetic stocks to improve varieties in the same way the U.S. health care 

and pharmaceutical industries depend on fundamental research from the National 

Institutes of Health. Their innovations meet long-term needs and bring innovations 

in these crops for the United States and export markets, for which the United 

States has successfully competed. Past accomplishments by this USDA group have 

been cornerstones for the U.S. vegetable industry that have resulted in increased 

profitability, and improved product nutrition and quality. 

Both consumers and the vegetable production and processing industry would like 

to see fewer pesticides applied to food and into the environment in a cost-effective 

manner. Scientists in this unit have developed a genetic resistance for many major 

vegetable diseases that are perhaps the most important threat to sustained production of a marketable crop for all vegetables. Genetic resistance assures sustainable 

crop production for growers and reduces pesticide residues in our food and environment. Value of this genetic resistance developed by the vegetable crops unit is estimated at $670 million per year in increased crop production, not to mention environmental benefits due to reduction in pesticide use. New research progress initiated in the 1990s and continuing today in Madison has resulted in cucumbers with 

improved disease resistance, pickling quality and suitability for machine harvesting. 

New sources of genetic resistance to viral and fungal diseases, environmental stress 

resistance like heat and cold, and higher yield have recently been mapped on cucumber chromosomes to provide a ready tool for our seed industry to significantly 

accelerate the development of resistant cultivars for U.S. growers. Nematodes in the 

soil deform carrot roots to reduce yield from 10 percent to over 70 percent in major 

production areas. A new genetic resistance to nematode attack was recently discovered and found to almost completely protect the carrot crop from one major nematode. This group improved both consumer quality and processing quality of vegetables with a resulting increase in production efficiency and consumer appeal. This 

product was founded on carrot germplasm developed in Madison, Wisconsin. Carrots 

provide approximately 30 percent of the U.S. dietary vitamin A. With new carrots 
611 

that have been developed, nutritional value of this crop has tripled, including the 

development of nutrient-rich cucumbers with increased levels of provitamin A. 

Using new biotechnological methods, a system for rapidly and simply identifying 

seed production ability in onions has been developed that reduces the breeding process up to 6 years! A genetic map of onion flavor and nutrition will be used to develop onions that are more appealing and healthy for consumers. Garlic is a crop 

familiar to all consumers, but it has not been possible to breed new garlic varieties 

until a new technique for garlic seed production was recently developed and is now 

being bred like other crops. 

There are still serious vegetable production problems which need attention. For 

example, losses of cucumbers, onions, and carrots in the field due to attack by 

pathogens and pests remains high, nutritional quality needs to be significantly improved and U.S. production value and export markets could certainly be enhanced. 

Genetic improvement of all the attributes of these valuable crops are at hand 

through the unique USDA lines and populations (i.e., germplasm) that are available 

and the new biotechnological methodologies that are being developed by the group. 

The achievement of these goals will involve the utilization of a wide range of biological diversity available in the germplasm collections for these crops. Classical plant 

breeding methods combined with bio-technological tools such as DNA marker-assisted selection and genome maps of cucumber, carrot and onion will be the methods 

to implement these genetic improvements. With this, new high-value vegetable 

products based upon genetic improvements developed by our USDA laboratories can 

offer vegetable processors and growers expanded economic opportunities for United 

States and export markets. 

U.S. FOOD FERMENTATION LABORATORY, RALEIGH, NORTH CAROLINA

The USDA/ARS Food Fermentation Laboratory in Raleigh, NC is the major public 

laboratory that this industry looks to as a source for new scientific information on 

the safety of our products and development of new processing technologies related 

to fermented and acidified vegetables. Over the years this laboratory has been a 

source for innovations, which have helped industry remain competitive in the current global trade environment. We expect the research done in this laboratory to 

lead to new processing and product ideas that will increase the economic value of 

this industry and provide consumers with safe, high quality, healthful vegetable 

products. 

To maintain the current level of research we request that Congress restore the 

funding increases provided in the fiscal year 2004 ($270,000) and fiscal year 2005 

($100,000) budgets. It is very important that Congress restore the full $370,000 in 

the fiscal year 2007 budget, since the funds were not included in the budget sent 

to the Congress. 

We seek additional funding to support two new research directions for this laboratory that have substantial economic potential for our industry and health benefits 

for the American public. These are: (1) Preservation of a variety of high nutrient/ 

high antioxidant vegetables using fermentation or acidification techniques so as to 

maintain the natural levels of beneficial phyotochemicals in convenient to use valueadded products; (2) development of techniques to deliver living pro-biotic microorganisms to consumers in fermented or acidified vegetable products. 

Certain vitamins and beneficial phytochemicals in vegetables are stabilized by the 

low pH in acidified and fermented foods. In addition, low pH makes it possible to 

preserve vegetables with low heat or, ideally, no heat. While many high nutrient/ 

high antioxidant vegetables are pickled to a very limited extent, traditional processes typically include steps that lose many of the health-promoting components 

that diet authorities emphasize when they urge people to increase their consumption of fruits and vegetables. The objective will be develop new acid preservation 

techniques for broccoli, Brussel sprouts, sweet potato, cauliflower, and peppers that 

will provide high levels of vitamin C, folic acid, carotenoids, glucosinolates, and phenolic compounds to maximize the health benefits of these vegetables in products 

that are convenient and attractive to consumers. 

Most of what we hear about bacteria in foods concerns the pathogens that cause 

disease. However, lactic acid bacteria are intentionally grown in fermented foods because they are needed to give foods like sauerkraut, yoghurt, cheeses, and fermented salami the characteristic flavors and textures that we desire. There is a 

growing body of research to indicate that certain living lactic acid bacteria are probiotic’ and can improve human health by remaining in the intestinal tract after they 

are consumed. Fermented or acidified vegetables may be a good way to deliver such 

pro-biotic bacteria to consumers. The objective will be to identify pro-biotic lactic 

acid bacteria that can survive in high numbers in selected vegetable products and 
612 

investigate the potential for using vegetables as healthful delivery vehicles for probiotic organisms. 

SUGAR BEET AND BEAN RESEARCH UNIT, EAST LANSING, MICHIGAN

The USDA/ARS cucumber post harvest engineering research at East Lansing, 

Michigan, is the only federally funded program that is devoted to developing new 

and/or improved engineering methods and technology for assessing, retaining, and 

assuring post harvest quality, marketability, and wholesomeness of pickling cucumbers and other vegetable products. The cucumber post harvest engineering research 

is one component of the post harvest engineering research program within the 

Sugar Beet and Bean Research Unit in East Lansing, Michigan. The post harvest 

engineering research program currently has a full-time research agricultural engineer whose primary research is to develop methods and technology for assessing and 

assuring post harvest quality of tree fruits. Because of severe under-funding, the location’s cucumber post harvest engineering research has not been carried out at the 

full scope it would have been expected. A postdoctoral research associate has been 

hired to conduct research on developing nondestructive technology for assessing and 

grading pickling cucumbers and other vegetables. The ARS East Lansing location 

has been internationally recognized for developing innovative, practical engineering 

methods and techniques to improve harvest and post harvest handling systems for 

vegetables and tree fruits. The location recently developed a new laser-based multispectral imaging technology for grading and sorting fruit for texture and soluble solids content. The technology has the potential for inspecting a variety of vegetable 

crops including cucumbers. The location also developed an advanced hyper-spectral 

imaging system for automated detection of defects and quality attributes of fruit, 

which could be used for pickling cucumber inspection. 

Today, consumers have increasing choices of foods and they are demanding for 

better, consistent safe products. Defective and inferior cucumbers/vegetables will 

lead to poor quality, inconsistent pickled products and can cause significant economic losses to growers and processors. An effective quality control and assurance 

system throughout the handling steps between harvest and retail is required for the 

pickling industry to provide consistent, superior products to the marketplace. Methods currently available for measuring and grading quality of cucumbers and other 

vegetables are either ineffective or time consuming. New and/or improved technologies are needed to assess, inspect and grade fresh cucumbers rapidly and accurately for various internal and external quality characteristics so that raw products 

can be directed to, or removed from, appropriate processing or marketing avenues. 

This will minimize post harvest losses of food that has already been produced and 

ensure high quality, consistent final product and end-user satisfaction. Current research at East Lansing is focused on developing rapid inspection techniques for detecting and segregating defective cucumbers to assure the keeping and processing 

quality of pickling cucumbers. The research will lead to new inspection and grading 

technology that will help the pickling industry in delivering high-quality safe products to the marketplace. To enhance research on the development of engineering 

methods and technology for assuring post harvest quality and marketability of pickled and vegetable products, a full-time research scientist (engineering) will be needed for the ARS East Lansing research program. 

U.S. VEGETABLE LABORATORY, CHARLESTON, SOUTH CAROLINA

The research program at the USDA/ARS Vegetable Laboratory in Charleston, 

South Carolina, addresses national problems in vegetable crop production and protection with emphasis on the southeastern United States. This research program is 

internationally recognized for its accomplishments, which have resulted in development of over 150 new vegetable varieties and lines along with the development of 

many new and improved disease and pest management practices. This laboratory’s 

program currently addresses 14 vegetable crops including those in the cabbage, cucumber, and pepper families, which are of major importance to the pickling industry. The mission of the laboratory is to (a) develop disease and pest resistant vegetable crops and (b) develop new, reliable, environmentally sound disease and pest 

management programs that do not rely on conventional pesticides. 

Continued expansion of the Charleston program is crucial. Vegetable growers depend heavily on synthetic pesticides to control diseases and pests. Cancellation and/ 

or restrictions on the use of many effective pesticide compounds are having a considerable influence on the future of vegetable crop production. Without the use of certain pesticides, growers will experience crop failures unless other effective, non-pesticide control methods are found quickly. The research on improved, more efficient 

and environmentally compatible vegetable production practices and genetically re-
613 

sistant varieties at the U.S. Vegetable Laboratory continues to be absolutely essential. This gives U.S. growers the competitive edge they must have to sustain and 

keep this important industry and allow it to expand in the face of increasing foreign 

competition. 

FUNDING NEEDS FOR THE FUTURE

It remains critical that funding continues the forward momentum in pickled vegetable research that the United States now enjoys and to increase funding levels as 

warranted by planned expansion of research projects to maintain U.S. competitiveness. We also understand that discretionary funds are now used to meet the rising 

fixed costs associated with each location. Additional funding is needed at the Wisconsin and South Carolina programs for genetic improvement of crops essential to 

the pickled vegetable industry, and at North Carolina and Michigan for development 

of environmentally-sensitive technologies for improved safety and value to the consumer of our products. The fermented and acidified vegetable industry is receptive 

to capital investment in order to remain competitive, but only if that investment is 

economically justified. The research needed to justify such capital investment involves both short term (6–24 months) and long term (2–10 years or longer) commitments. The diverse array of companies making up our industry assumes responsibility for short-term research, but the expense and risk are too great for individual 

companies to commit to the long-term research needed to insure future competitiveness. The pickled vegetable industry currently supports research efforts at Wisconsin and North Carolina and anticipates funding work at South Carolina and 

Michigan as scientists are put in place. Donations of supplies and processing equipment from processors and affiliated industries have continued for many years. 

U.S. Vegetable Laboratory, Charleston, South Carolina 

The newly constructed laboratory-office building at the U.S. Vegetable Laboratory 

was occupied in April 2003. Design of the accompanying greenhouse and head house 

using the funds appropriated for this purpose in fiscal year 2003 was completed in 

July 2004. In fiscal year 2004, construction of the head house component of this 

project was funded. The head house component of the project is now under construction with an expected completion in late spring 2006. In fiscal year 2005, $2.976 

million was appropriated for construction of greenhouses. In fiscal year 2006, an additional $1.980 million was appropriated for construction of greenhouses, but $7.169 

million is still needed for the planned $12.125 million greenhouse complex. This new 

facility replaces and consolidates outmoded laboratory areas that were housed in 

1930s-era buildings and trailers. Completion of the total research complex will provide for the effective continuation and expansion of the excellent vegetable crops research program that has been conducted by the Agricultural Research Service at 

Charleston for over 60 years. It is most critical to the mission of the U.S. Vegetable 

Laboratory that the fiscal year 2002, fiscal year 2003, and fiscal year 2004 appropriated funds for expansion of the Charleston research staff is maintained in fiscal 

year 2007. In addition, new funds are still needed to hire additional scientists to 

expand the research program. An Entomologist is needed to facilitate development 

of host resistance and new management approaches to a wider range of established 

insect pests of vegetable crops; a Molecular Biologist is needed to develop and utilize 

molecular techniques for pathogen and pest population studies necessary to development of new management approaches and resistant genetic stocks. Both of these 

new scientific positions will greatly contribute to the accomplishment of research 

that will provide for the effective protection of vegetable crops from disease and 

pests without the use of conventional pesticides. Each of these positions requires a 

funding level of $400,000 for their establishment. 

Appropriations to restore Fiscal year Gross funds impacted 

Minor Use Pesticides (IR–4) ................................................................................................... ........................ $5,335 

U.S. Vegetable Laboratory ....................................................................................................... 2003 484,969 

U.S. Vegetable Laboratory ....................................................................................................... 2004 263,597 

Total funds to restore ............................................................................................... ........................ 753,901 

New Scientific Staff Needed Current Status New Funds Needed 

Entomologist .................................................................................... Needed .................................................. $400,000 
614 

New Scientific Staff Needed Current Status New Funds Needed 

Molecular Biologist .......................................................................... Needed .................................................. 400,000 

New funds needed ............................................................. ............................................................... 800,000 

Food Fermentation Laboratory, Raleigh, North Carolina 

The current funding for the laboratory is $1,274,000. This includes the new funds 

provided in fiscal year 2004 ($270,000) and in fiscal year 2005 ($100,000) that are 

not in the fiscal year 2007 budget proposal that was sent to the Congress. We request that the additional funding provided by the Congress in fiscal year 2004 and 

fiscal year 2005 be restored in the fiscal year 2007 budget. 

To initiate and then increase the research initiatives to preserve high nutrient/ 

high antioxidant vegetables to maximize healthful components and to determine 

how to deliver living pro-biotic lactic acid bacteria in acidified and fermented vegetable products, we request additional support for the Food Fermentation Laboratory 

of $100,000 in fiscal year 2007 with the expectation that an additional $100,000 be 

added each year from fiscal year 2008 through fiscal year 2011. This will provide 

an ability to have an orderly growth of research effort in these areas by supporting 

Post-Doctoral or Pre-Doctoral research associates initially and then hiring a permanent scientist in the third or fourth year to provide a long term research capability 

in the most productive research areas. 

Scientific staff Current status Funds needed 

Microbiologist ................................................................................................. Active ...................................... $318,500 

Chemist .......................................................................................................... Active ...................................... 318,500 

Food technologist/biochemist ........................................................................ Active ...................................... 318,500 

Microbial Physiologist .................................................................................... Active ...................................... 318,500 

Fiscal year 2007 post-doctoral or predoctoral research associates ............. Needed .................................... 100,000

Total funding required ..................................................................... ................................................. 1,374,000 

Presidential Budget (fiscal year 2007) ......................................................... ................................................. 912,195 

Appropriations to restore ............................................................................... ................................................. 361,805 

New funds needed ......................................................................................... ................................................. 100,000 

Vegetable Crops Research Laboratory Unit, Madison, Wisconsin 

Current base funding for three scientists is $835,900, of which $200,000 was 

added in fiscal year 2002. An additional $64,100 is needed to fully fund the scientists and support staff, including graduate students and post-doctorates. 

Scientific staff in place Current status Funds needed 

Geneticist ....................................................................................................... Active ...................................... $300,000 

Horticulturist .................................................................................................. Active ...................................... 300,000 

Geneticist ....................................................................................................... Active ...................................... 300,000 

Total funding required ..................................................................... ................................................. 900,000 

Presidential Budget (fiscal year 2007) ......................................................... ................................................. 641,911 

Appropriations to restore ............................................................................... ................................................. 193,989 

New funds needed ......................................................................................... ................................................. 64,100 

A temporary addition of $200,000 was provided to enhance the research effort of 

this program in fiscal year 2002, and we greatly appreciate that additional support, 

but that addition is being proposed for reduction in fiscal year 2007. Thus, the restoration of the funds proposed for reduction, is urgently requested. We request a 

$258,089 permanent addition this year to sustain the long-term research of this 

group. 

Sugar Beet and Bean Research Unit, East Lansing, Michigan 

The location urgently needs to hire a full-time research engineer to develop a comprehensive research program on nondestructive inspection, sorting and grading of 

pickling cucumbers and other vegetable crops to assure the processing and keeping 

quality of pickled products. The current base funding for the cucumber engineering 
615 

research is $200,000. An increase of $100,000 in the current base funding level 

would be needed to fund the research engineer position. 

Scientific staff in place Current status Funds needed 

Postdoctoral Research Associate ................................................................... Active ...................................... $200,000 

Research Engineer ......................................................................................... Needed .................................... 100,000 

Total funding required ..................................................................... ................................................. 300,000 

Current Funding ............................................................................................. ................................................. 200,000 

New funds needed ......................................................................................... ................................................. 100,000 

Thank you for your consideration and expression of support for the USDA/ARS. 

PREPARED STATEMENT OF THE RED RIVER VALLEY ASSOCIATION

Mr. Chairman and members of the Committee, I am Wayne Dowd, and I am 

pleased to represent the Red River Valley Association as its President. Our organization was founded in 1925 with the express purpose of uniting the citizens of Arkansas, Louisiana, Oklahoma and Texas to develop the land and water resources 

of the Red River Basin. (Enclosure 1) 

The Resolutions contained herein were adopted by the Association during its 81st 

Annual Meeting in Bossier City, Louisiana on February 24, 2006, and represent the 

combined concerns of the citizens of the Red River Basin Area as they pertain to 

the goals of the Association. (Enclosure 2) 

As an organization that knows the value of our precious water resources we support the most beneficial water and land conservation programs administered 

through the Natural Resources Conservation Service (NRCS). We understand that 

attention and resources must be given to our national security and the war in Iraq; 

however, we cannot sacrifice what has been accomplished on our Nation’s lands. 

NRCS programs are a model of how conservation programs should be administered 

and our testimony will address the needs of the Nation as well as our region. 

The President’s fiscal year 2007 budget for NRCS indicates a decrease of $216.4 

million (21.5 percent decrease) from what Congress appropriated in fiscal year 2006. 

In addition, the Administration eliminated two crucial watershed programs: Watershed & Flood Prevention Operations and Watershed Survey & Planning. Along with 

drastic reductions in the other programs, NRCS manpower for fiscal year 2007 

would have to decrease by over 1,500 staff years, if the President’s budget is implemented. This is unacceptable. 

This means that NRCS assistance to landowners will not be adequately funded, 

to the detriment of the Nation and our natural resources. We would like to address 

several of the programs administered by NRCS. Failure to adequately fund these 

initiatives would reduce assistance to those who want it and the resources that need 

protection. 

Conservation Operations.—This account has been in steady decline, in real dollars, 

over the past several years. The President’s budget included $745 million, which is 

a decrease of $94.5 million from what you appropriated in fiscal year 2006. Mandated increases in pay and benefits, continuing increases in the cost of doing business’ and budget reductions greatly reduces the effective work that can be accomplished in this account. Allocations should be increased not decreased. 

We request a total of $930 million be appropriated for Conservation Operations 

for NRCS to meet the demands it faces today. 

Conservation Technical Assistance is the foundation of technical support and a 

sound, scientific delivery system for voluntary conservation to the private users and 

owners of lands in the United States. It is imperative that we provide assistance 

to all working lands’ not just those fortunate few who are able to enroll in a Federal 

program. Working lands are not just crops and pasture (commodity staples) but includes forests, wildlife habitat and coastal marshes. The problem is that NRCS personnel funded from mandatory programs’ can only provide technical assistance to 

those enrolled in these programs, leaving the majority of the agricultural community without technical assistance. We recommend that adequate funding be placed 

in ’Conservation Technical Assistance’, and allow NRCS to provide assistance to all 

who are in need of assistance. 

It is our understanding that the Technical Service Providers (TSP) program has 

not lived up to its expectations. Experience indicates landowners are hesitant to use 

the program. This program funds projects at a level estimated if NRCS conducted 
616 

the work. Usually the TSP cost exceeds this estimate and the landowner is responsible for the difference, effectively making the landowner cost share. We believe that 

TSPs should be used only after NRCS staffing is brought up to levels commensurate 

with the increase in workload caused by the Farm Bill, not to replace NRCS staffing. 

Watershed and Flood Prevention Operations (Public Law 566 & 534).—We are 

greatly disappointed that the President’s Budget provided no funding for watershed 

operations. There is no doubt that this is a Federal responsibility, in conjunction 

with a local sponsor. This program addresses all watershed needs to include: flood 

protection, water quality, water supply and the ecosystem. There is no Corps of Engineer, Bureau of Reclamation or FEMA program to address small watershed needs, 

before disaster strikes. We recommend that Congress continue to hold oversight 

hearings to understand the importance and hear how popular this program is to our 

communities. 

These projects have developed a $15 billion infrastructure that is providing $1.5 

billion in annual benefits to over 48 million people. It is not a Federal program, but 

a Federally assisted program. This partnership between local communities, State 

agencies and NRCS has been successful for over 50 years. It would take $1.6 billion 

to fund the existing Federal commitment to local project sponsors. This cost only 

increases every year if adequate funding is not provided. 

If you allow this program to end, all ongoing contracts will be terminated. This 

will ultimately lead to lawsuits and tort claims filed by both sponsors and contractors, due to the Federal government not fulfilling its contractual obligation. We are very appreciative for the funding level of $75 million enacted in fiscal year 

2006. It is reassuring to know that both the House and Senate realize the importance of this program to the agricultural community. For every $1 spent, the Nation 

realizes $2 in benefits. 

There are many new projects, which are awaiting funds for construction under this program. We strongly recommend that a funding level of $190 million be appropriated for Watershed Operations Programs, Public Law 534 ($20 million) and Public Law 566 ($170 million). 

The Red River has proven, through studies and existing irrigation, to be a great 

water source for supplemental’ irrigation. The two projects mentioned below, will 

use existing, natural bayous to deliver water for landowners to draw from. The majority of expense will be for the pump system to take water from the Red River to 

the bayous. These projects will provide the ability to move from ground water dependency to surface water, an effort encouraged throughout the Nation. Both will 

enhance the environmental quality and economic vitality of the small communities 

adjacent to the projects. —Walnut Bayou Irrigation Project, AR.—Plans and specifications have been completed and it is ready to proceed into the construction phase. An irrigation district has been formed and they are prepared to take on the responsibility to 

generate the income for the O&M required to support this project. We request 

that $4,000,000 be appropriated for these projects in fiscal year 2007. 

—Red Bayou Irrigation Project, LA.—The plans and specifications have been completed, making this project ready for construction in fiscal year 2007. An irrigation district has been formed and is prepared to collect funds to support the 

O&M for this proposed system. We request that $2,500,000 be specifically appropriated to begin construction in fiscal year 2007. 

Watershed Rehabilitation.—More than 10,400 individual watershed structures 

have been installed nationally, with approximately one-third in the Red River Valley. They have contributed greatly to conservation, environmental protection and enhancement, economic development and the social well being of our communities. 

More than half of these structures are over 30 years old and several hundred are 

approaching their 50-year life expectancy. Today you hear a lot about the watershed 

approach to resource management. They protect more people and communities from 

flooding now than when they were first constructed. The benefit to cost ratio for this 

program has been evaluated to be 2.2:1. What other Federal program can claim such 

success? 

In the next 5 years over 900 watershed structures will require over $570 million 

for rehabilitation. Each year this number increases as more dams reach their 50- 

year life. There is no questioning the value of this program. The cost of losing this 

infrastructure exceeds the cost to reinvest in our existing watersheds. Without repairing and upgrading the safety of existing structures, we miss the opportunity to 

keep our communities alive and prosperous. It would be irresponsible to dismantle 

a program that has demonstrated such great return and is supported by our citizens. We cannot wait for a catastrophe to occur, where life is lost, to decide to take 

on this important work. 
617 

The President’s budget neglects the safety and well being of our community needs by allocating only $15 million for this program. This is drastically lower than the 

levels authorized in the 2002 Farm Bill, which authorized $600 million for rehabilitation for 2003–2007. 

We request that $65 million be appropriated to provide financial and technical assistance to those watershed projects where sponsors are prepared (35 percent cost 

share) to commence rehabilitation. 

Watershed Survey and Planning.—In fiscal year 2006, $6.1 million was appropriated to support this extremely important community program. NRCS has become 

a facilitator for the different community interest groups, State and Federal agencies. 

In our States such studies are helping identify resource needs and solutions where 

populations are encroaching into rural areas. The Administration decided to eliminate this program. We disagree with this and ask Congress to fund this program 

at the appropriate level. 

Proper planning and cooperative efforts can prevent problems and insure that 

water resource issues are addressed. Zeroing out the planning process assumes the 

economy will not grow and there is no need for future projects. We do not believe 

anyone supports or believes this. Another serious outcome is that NRCS will lose 

its planning expertise, which is invaluable. We request this program be funded at a level of $35 million. 

We request that the following two studies be specifically identified and funded in 

the fiscal year 2007 appropriation bill. —Maniece Bayou Irrigation Project, AR.—This is a project in its initial stage of 

planning. An irrigation district is being formed to be the local sponsor. This 

project transfers water from the Red River into Maniece Bayou where landowners would draw water for supplemental irrigation. We request that $200,000 

be appropriated to initiate the plans and specifications. —Lower Cane River Irrigation Project, LA.—The transfer of water from the Red 

River to the Lower Cane River will provide opportunities for irrigation and economic development. Funds are needed to initiate a Cooperative River Basin 

Study. We request that $250,000 be appropriated for this study. 

Resource Conservation and Development (RC&D).—This has traditionally been a 

well-received program by the Administration, not this year. Their budget proposal 

only had $27 million, far short of national needs. This program leverages its resources at 4 to 1, with communities, local sponsors and non-government organizations. The benefits are realized at over 14 to 1, average per project. What other Federal program can claim such a return on investment? We request that $51 million be appropriated for this program, at the same level 

as in fiscal year 2006. 

Mandatory Accounts (CCC) Technical Assistance (TA).—Request for assistance 

through the CCC programs has been overwhelming. Requests far exceed the available funds and place an additional workload on NRCS’s delivery system. Adequate 

funding for TA must be provided at the full cost for program delivery. This includes 

program administration, conservation planning and contracting with each applicant. 

Congress, in the 2002 Farm Bill, wisely increased conservation programs each year. 

This increased investment, with the multi-year CCC programs, will increase the 

NRCS workload. It is imperative that NRCS receive the TA funding levels required 

to administer these programs. If they do not receive full funding these programs will 

not realize their full capability. 

It has been mandated that a set percent of TA, from the CCC Program, must be 

used for TSPs, approximately $40 million. This is equivalent to losing 600 staff 

years from NRCS manpower. This is another unacceptable policy, which will reduce 

the effectiveness of NRCS. This mandate must be eliminated. 

Over 70 percent of our land is privately owned. This is important in order to understand the need for NRCS programs and technical assistance. Their presence is 

vital to ensuring sound technical standards are met in conservation. These programs not only address agricultural production, but sound natural resource management. Without these programs and NRCS properly staffed to implement them, many 

private landowners will not be served adequately to apply conservation measures 

needed to sustain our natural resources for future generations. Technical Assistance 

cannot be contracted out to private companies. 

We are all aware of the issue with TMDL levels in our waterways. If our Nation 

is to seriously address this we must look at the impacts from our farmlands. Assistance for land treatment plans and plan implementation is exactly what the NRCS 

Watershed programs are intended to address. Watershed programs should be receiving an increase in funds, not zeroed out! 

With these new clean water initiatives why do we ignore the agency that has a 

proven record for implementing watershed conservation programs? Congress must 
618 

decide; will NRCS continue to provide the leadership within our communities to 

build upon the partnerships already established? It is up to Congress to insure 

NRCS is properly funded and staffed to provide the needed assistance to our taxpayers for conservation programs. 

These NRCS studies and watershed projects are an example of true ‘‘cooperative 

conservation’’ initiatives. There is an interface with communities and local sponsors 

at each step of the process and local sponsors do cost share at the levels expected 

of them. 

All these programs apply to the citizens in the Red River Valley and their future 

is our concern. The RRVA is dedicated to work toward the programs that will benefit our citizens and provide for high quality of life standards. We therefore request 

that you appropriate the requested funding within these individual programs, to insure our Nation’s conservation needs are met. 

I thank you for the opportunity to present this testimony on behalf of the members of the Red River Valley Association and we pledge our support to assist you 

in the appropriation process. 

ENCLOSURE 1.—RED RIVER VALLEY ASSOCIATION

The Red River Valley Association is a voluntary group of citizens bonded together 

to advance the economic development and future well being of the citizens of the 

four State Red River Basin area in Arkansas, Louisiana, Oklahoma and Texas. 

For the past 80 years, the Association has done notable work in the support and 

advancement of programs to develop the land and water resources of the Valley to 

the beneficial use of all the people. To this end, the Red River Valley Association 

offers its full support and assistance to the various Port Authorities, Chambers of 

Commerce, Economic Development Districts, Municipalities and other local governmental entities in developing the area along the Red River. 

The Resolutions contained herein were adopted by the Association during its 80th 

Annual Meeting in Bossier City, Louisiana on February 24, 2005, and represent the 

combined concerns of the citizens of the Red River Basin area as they pertain to 

the goals of the Association, specifically: 

—Economic and Community Development 

—Environmental Restoration 

—Flood Control 

—Irrigation 

—Bank Stabilization 

—A Clean Water Supply for Municipal, Industrial and Agricultural Uses 

—Hydroelectric Power Generation 

—Recreation 

—Navigation 

The Red River Valley Association is aware of the constraints on the Federal budget, and has kept those constraints in mind as these Resolutions were adopted. 

Therefore, and because of the far-reaching regional and national benefits addressed 

by the various projects covered in the Resolutions, we urge the members of Congress 

to review the materials contained herein and give serious consideration to funding 

the projects at the levels requested. 

ENCLOSURE 2.—RED RIVER VALLEY ASSOCIATION FISCAL YEAR 2007 APPROPRIATIONS— 

NATURAL RESOURCES CONSERVATION SERVICE (NRCS) 

[Thousands of dollars] 

Discretionary accounts Fiscal year 2006 

approp. 

Fiscal year 2007 

request 

Pres. 2007 budget 

Conservation Operations ............................................................................ 839,519 930,000 745,000 

Watershed & Flood Prevention Operations ................................................ 75,000 190,000 ........................

Walnut Bayou Irrigation Project, AR ................................................. ........................ 4,000 ........................

Red Bayou Irrigation Project, LA ...................................................... ........................ 1,600 ........................

Watershed Rehabilitation ........................................................................... 31,516 65,000 15,000 

Watershed Survey & Planning ................................................................... 6,083 35,000 ........................

Maniece Bayou Irrigation Project, AR ............................................... ........................ 200 ........................

North Wallace Lake Watershed, LA ................................................... ........................ 250 ........................

Resource Conservation & Development (RC&D) ........................................ 51,300 51,000 27,000 

Healthy Forest Reserve Program ................................................................ 2,475 5,000 2,475 
619 

PREPARED STATEMENT OF THE SOCIETY FOR ANIMAL PROTECTION LEGISLATION

$1.5 Million for the Animal Welfare Information Center (AWIC) at the National Agricultural Library 

The Animal Welfare Information Center was established by the Improved Standards for Laboratory Animals Act (the 1985 amendment to the Animal Welfare Act) 

to serve as a clearinghouse, training center and educational resource for institutions 

using animals in research, testing and teaching. A primary purpose of the Center 

is to help research laboratories comply with the requirements of the Federal law. 

The Center provides data on alleviating or reducing pain and distress in experimental animals (including anesthetic and analgesic procedures), reducing the number of animals who must be used for research where possible, and identifying alternatives to the use of animals for specific research projects. The AWIC was also 

charged with providing information to prevent the unintended duplication of animal 

experiments. 

We greatly appreciate the past support Congress has provided to the AWIC to carry out its programs: $750,000 and an add-on of $400,000. It is essential to maintain the existing level of support therefore a minimum base of $1.15 million is needed on an annual basis. We are respectfully requesting an additional $350,000 for 

desperately needed expansion in fiscal year 2007 including increased educational 

workshops and exhibits presented throughout the United States, increased production and printing of educational material and increased staffing to meet the demand 

for services. 

There is general consensus between the biomedical research industry and the animal welfare community about the need for increased funding. In fact, myriad individuals representing these disparate interests have agreed on the need for $1.5 million in funding for the Animal Welfare Information Center (see attached letter). The 

AWIC is able to help improve the conduct of research, including the care provided 

to the animals who are used, thereby ensuring a reduction in variables which might 

skew the research. Better science is the end result. 

The $1,500,000 would be used as follows: staff salary and benefits ($1,073,000), exhibitions conducted at major scientific conferences ($53,600), preparation and conduct of educational workshops across the country ($16,800), educational workshops 

conducted at the Center ($4,100), printing and reproduction of paper and electronic 

material ($29,200), training for the NAL staff ($13,900), acquisition of, including 

electronic access to, data ($38,000), internet services ($20,400), office supplies including hardware and software ($26,000) and the overhead that must be provided 

to the Agricultural Research Service and the National Agricultural Library (at least 

$225,000). 

The Center’s mandate necessitates the collection and dissemination of material on 

humane housing and husbandry, the functions and responsibilities of Institutional 

Animal Care and Use Committees (IACUCs), animal behavior, improved methodologies, psychological well-being of primates and exercise for dogs. The AWIC has expanded to include the broader industry regulated under the Animal Welfare Act: 

animal dealers, carriers and handlers, zoos and other exhibitors. Other topics covered by the Center include animal diseases, animal models, animal training and environmental enrichment for all species. USDA Animal Care’s veterinary medical officers and animal care inspectors are able to utilize the full range of services provided 

by the AWIC to better fulfill their responsibilities. 

The AWIC is the single most important resource for helping research facility personnel meet their responsibilities under the Animal Welfare Act. There are more 

than 1,200 research facilities nationwide, and the services of the AWIC are available 

to all individuals at these institutions including the cage washers, animal technicians, research investigators, attending veterinarians, IACUC representatives including the nonaffiliated member, and the Institutional Official. The Office of Inspector General (OIG) audit titled ‘‘APHIS Animal Care Program Inspection and Enforcement Activities’’ cited an increase in apparent violations of the AWA by research facilities over the past few years. There appears to be a significant problem 

with the oversight provided IACUCs and training for IACUC members is encouraged. In response to this need, we are requesting funds to allow—for the first time— 

AWIC to conduct workshops at locations around the country rather than being limited to conducting them only from the Center’s base in Maryland. 

The AWIC website (http:www.nal.usda.gov/awic) received more than 27 million 

hits in fiscal year 2005 (one of the most accessed sites at the NAL). 300,000 documents were distributed via the web and more than 12,000 hard copies were distributed as well. Exhibitions and/or presentations were provided at the following 

venues: American Association for Laboratory Animal Science (AALAS) annual meeting, National Capital Area Branch AALAS, Tribranch AALAS, Society of Neuro-
620 

science, New Jersey Association for Biomedical Research, American Veterinary Medical Association, Combined Animal Science meeting, International Conference on 

Environmental Enrichment, American Association for the Advancement of Science 

and the 5th World Congress on the Use of Animals in the Life Sciences, Scientists 

Center for Animal Welfare meetings and the Public Responsibility in Medicine and 

Research annual meeting. 

The AWIC works closely with both APHIS Animal Care and with Emergency Veterinary Services on emerging crises such as the highly pathogenic Avian Influenza. 

The Center is focused on transmissible spongiform encephalopathy, exotic Avian 

Newcastle disease, tuberculosis, West Nile Virus and micro-bacterial diseases too. 

A proposal was made to create a ‘‘Center for Excellence’’ within Animal Care, but 

we oppose this effort as an enormous misuse of funds. There is no need to pay for 

a site and hire new staff because much of the work proposed for such a Center for 

Excellence is already covered effectively and efficiently by the AWIC. We would, 

however, support further expansion of the AWIC at its current location within the 

National Agricultural Library. The AWIC has a record spanning nearly two decades 

that demonstrates its abilities to serve. 

$19.143 Million for APHIS/Animal Care’s Enforcement of the Animal Welfare Act 

The Animal Welfare Act (AWA) is the chief Federal law for the protection of animals. The USDA seeks compliance with its minimum standards for the care and 

treatment of animals during transportation and at the nearly 13,000 sites of dealers, research, testing and teaching facilities, zoos, aquariums, circuses, carriers (airlines, motor freight lines and other shipping businesses) and handlers (ground 

freight handlers). There are a mere 101 Veterinary Medical Officers (VMOs) and 

Animal Care Inspectors (ACIs) conducting searches, pre-licensing inspections and 

enforcement inspections across the country. 

In fiscal year 2005, 575 cases were brought regarding violations of the AWA and 

more than $1.1 million dollars was received in fines and stipulations. These enforcement actions help ensure the protection of both animals and people as evidenced 

by the OIG Audit released this fall. 

We support the President’s request for $19.143 million for enforcement of the 

AWA. We hope the additional funds will permit USDA to hire 15 additional inspectors and to conduct a national meeting (with all inspectors in attendance). There 

were insufficient funds for USDA to conduct a workshop this fiscal year, and a national meeting must be held next year; it is vital as it provides proper training of 

inspectors and ensures a high and equal standard of enforcement is being implemented by the field inspectors nationwide. The cost for a national meeting is expected to be $150,000. 

In 1966 the Laboratory Animal Welfare Act (later renamed the Animal Welfare 

Act) was adopted in an effort to prevent the sale of lost or stolen pets into research. 

Nevertheless, this has continued to be a serious problem. Sound enforcement by 

USDA has reduced the number of random source dealers in live dogs and cats to 

10. More than half of these are currently under investigation by USDA for their failure to comply with the law. A recent Home Box Office documentary film, Dealing 

Dogs, highlighted the problems that plague this cottage industry. The committee 

could save Animal Care significant resources and aggravation if it brought an end 

to this illicit trade by including report language prohibiting the sale of dogs and cats 

to research by random source dealers. Animals needed for research purposes can be 

obtained from other sources including licensed breeders. This would ensure integrity 

in the supply of dogs and cats for research purposes. 

$750,000 for APHIS/Animal Care’s Enforcement of the Horse Protection Act 

More than thirty years have passed since the Horse Protection Act was adopted 

by Congress, yet soring of Tennessee Walking Horses continues to be a widespread 

problem. Soring is defined by APHIS as ‘‘the application of any chemical or mechanical agent used on any limb of a horse or any practice inflicted upon the horse that 

can be expected to cause it physical pain or distress when moving.’’ Horses are sored 

to produce an exaggerated gait. 

The most effective method of reducing the showing of horses who have been sored 

is to have Animal Care (AC) inspectors present at the shows. Oftentimes, as soon 

as an AC inspector arrives at a show, there is a rush to put horses back into trailers 

and haul them away. If the likelihood that an AC inspector will show up increases 

significantly, this will have a huge deterrent effect on those who routinely sore their 

horses. 

AC was only able to attend 32 events in fiscal year 2004 out of a total of approximately 865 shows. $750,000 ($500,000 plus a $250,000 add-on) must be provided to 

enable AC to attend even a modest number of events. 
621 

Unfortunately, the amount of penalties assessed for violations of the law have 

dropped to a negligible amount. In addition to increasing the presence of inspectors, 

USDA must increase the penalties which are assessed or the industry will continue 

to defy the law with impunity. 

Lack of financial support has made it necessary for Animal Care to rely heavily 

on the industry to assume responsibility for enforcement of the law. This is the 

same industry that has turned a blind eye to compliance with the law since 1970! 

‘‘Designated Qualified Persons’’ (DQPs) are the ‘‘inspectors’’ from industry who are 

supposed to assist AC in identifying sore horses and pursuing action against the individuals who are responsible. The history of the DQPs reveals their failure to 

achieve the level of enforcement of the unbiased, well-trained, professional inspectors who work for AC. Following is data for horses shown with pads on their front 

feet to accentuate their gait: in calendar year 2001 (the most recent year for which 

such information is available from USDA); the average rate at which DQPs identified violations for soring was 3.4 per 1,000 horses inspected. The rate of violations 

reported when government inspectors were present to oversee the activities of the 

DQPs was more than 5 times higher—19 per 1,000 horses inspected. 

We have few current figures on enforcement, however, we recently learned from 

USDA that in 2005 of the samples taken by a gas chromatography machine (used 

to test for use of illegal substances to sore horses) at the Kentucky Celebration 

horse show, 100 percent indicated the presence of diesel fuel or another similar fuel 

plus numbing agents. Clearly the law is not being taken seriously by the industry. 

An appropriation of at least $750,000 is essential to permit AC to maintain a 

modest level of compliance with the Horse Protection Act by trained AC professionals. 

Strengthened Enforcement of Humane Slaughter Act by FSIS 

When President Eisenhower signed the Humane Slaughter Act (HSA) into law he 

noted that if he went by his mail he would think Americans were interested in no 

other issue. The concern about HSA enforcement continues today and is as broad 

now as it was then. Over the past few years the Congress has generously provided 

additional appropriations to the Food Safety and Inspection Service (FSIS) to improve enforcement of the Humane Slaughter Act, however, problems persist. A big 

part of the problem is that the vast majority of animals currently slaughtered at 

the approximately 900 federally inspected plants are not observed by FSIS until 

after they are already dead. 

In addition, FSIS inspectors are discouraged from enforcing the law. Inspectors 

are supposed to be able to stop the slaughter line if violations are seen. However, 

stopping the line will markedly reduce the plant’s financial profits, thus there is intense pressure for the inspector not to take action. The situation at plants appears 

to be cozy for people, meanwhile the animals are suffering. For example, the Office 

of the Inspector General conducted an investigation of a large plant in Iowa, issuing 

a report on April 25, 2005, which concluded that: ‘‘employees of AGRI had engaged 

in acts of inhumane slaughter. It was also determined that FSIS employees observed the acts of inhumane slaughter and did nothing to stop the practice. Additionally, the investigation revealed that FSIS inspectors accepted meat products 

from AGRI employees and that FSIS employees engaged in other acts of misconduct.’’ 

FSIS has attempted a variety of machinations in an effort to dupe Congress into 

believing that enforcement efforts have increased dramatically. This is mere window 

dressing, and inspectors who are in the plants have confirmed that little has 

changed—and abuses are rife. The situation at Agriprocessors, described above is 

but one example (http://awionline.org/pubs/Quarterly/05l54l1/541p7a.htm). Because of this, we vehemently oppose increased resources for FSIS. The agency hasn’t 

demonstrated its resolve to strongly enforce the law. 

Bill language should direct FSIS to hire no fewer than 50 individual inspectors 

(as opposed to FTE’s) to serve as permanent fixtures in each of the largest slaughter 

plants to observe the handling, stunning and slaughter of animals for compliance 

with the law. When inspectors are not present, line speeds are increased and the 

operations are conducted in a completely different (and horrific) manner. A full-time 

presence is the only way to ensure compliance. FSIS should report the results of 

this effort to the Committee and evaluate the effectiveness of having full-time (not 

full time equivalent) enforcement of the humane slaughter requirements following 

a year of diligence. All inspectors who engage in HSA enforcement must receive adequate training about the law and, more importantly, must receive a strict mandate 

from the Secretary of Agriculture to take strong, immediate action against any violators of the HSA. This would be a modest step toward protecting the millions of 

animals who are killed for food from unnecessary suffering. 
622 

Congress Needs to Provide Increased Oversight of Wildlife Services Operations and 

Research 

Wildlife Services (WS) needs to utilize a variety of tools for management of wildlife under its purview. However, it is essential that these tools are effective and publicly acceptable. As improved tools are developed through research, operations must 

make use of this data and shift methods accordingly. 

WS needs to phase out of use of steel jaw leghold traps. WS’ own research demonstrates the archaic nature of certain leghold traps; these should be prohibited immediately. Leghold traps slam shut with bone-crushing force on the limbs of their 

victims, tearing ligaments and tendons, severing toes and causing excruciating pain. 

These traps, opposed by the vast majority of Americans, have been condemned as 

‘‘inhumane’’ by the American Veterinary Medical Association, the American Animal 

Hospital Association, the World Veterinary Association and the National Animal 

Control Association. 

The European Union (E.U.) banned use of the barbaric steel jaw leghold trap so 

that 88 countries now prohibit their use. Nobly, the EU went a step further; the 

EU law also prohibits import of furs from countries that use steel jaw traps. On December 11, 1997, in response to this European law, the U.S. Trade Representative 

reached an ‘‘Understanding’’ with the E.U. in which the United States agreed to end 

use of ‘‘all jaw-type leghold restraining traps’’ by 2002 on muskrat and nutria and 

to phase out use of ‘‘conventional steel-jawed leghold restraining traps’’ by 2004. WS 

has the responsibility of complying with this United States obligation by ending its 

use of these barbaric devices. 

WS should pursue no further testing of leghold traps as this would be an extremely wasteful and cruel use of taxpayer money. Previously, funds designated for 

trap research were merely passed on to a nongovernmental organization to utilize 

as it saw fit, without involvement from WS. If funds are allocated for trap testing, 

WS should conduct the research since the agency has the appropriate technical expertise. 

Further, WS should adopt a policy of checking all restraining traps within a 24- 

hour period. A wealth of scientific studies documents the fact that the longer an animal is in a restraining trap, the greater the injury. For this reason, the majority 

of States have a daily trap check requirement. Animals should not be subjected to 

long-drawn out pain because of a failure to assume the responsibility of carefully 

checking traps every day. This policy will help reduce the trauma experienced by 

non-target animals, too, ensuring that more of these animals will be able to be released alive. 

Thank you very much for the opportunity to submit testimony. We would be 

happy to provide any additional information that might be of interest. 

PREPARED STATEMENT OF THE SOCIETY FOR WOMEN’S HEALTH RESEARCH AND

WOMEN’S HEALTH RESEARCH COALITION

On the behalf of the Society for Women’s Health Research and the Women’s 

Health Research Coalition, we are pleased to submit testimony in support of increased funding for biomedical research, and more specifically women’s health research. 

The Society is the only national non-profit women’s health organization whose 

mission is to improve the health of women through research, education, and advocacy. Founded in 1990, the Society brought to national attention the need for the 

appropriate inclusion of women in major medical research studies and the need for 

more information about conditions affecting women disproportionately, predominately, or differently than men. 

The Coalition was created by the Society in 1999 to give a voice to scientists and 

researchers from across the country who are concerned and committed to improving 

women’s health research. The Coalition now has more than 620 members, including 

leaders within the scientific community and medical researchers from many of the 

country’s leading universities and medical centers, directors from various Centers 

of Excellence on Women’s Health. 

The Society and the Coalition are committed to advancing the health status of 

women through the discovery of new and useful scientific knowledge. We believe 

that sustained funding for the women’s health research programs that are conducted and supported across the Federal research agencies is necessary if we are 

to accommodate the health needs of the population and advance the Nation’s research capability. Therefore, we urge your support for the Food and Drug Administration’s (FDA) Office of Women’s Health and request funding of $5 million in order 

that it may meet its program goals. 
623 

FOOD AND DRUG ADMINISTRATION OFFICE OF WOMEN’S HEALTH

The Office of Women’s Health (OWH) role at FDA is critical to women’s health, 

both within and outside the agency and to research into sex and gender-differences, 

areas in which the Society long has been a proponent. The office aims to provide 

scientific and policy expertise on gender sensitive regulatory and oversight issues; 

to correct gender disparities in the areas for which the FDA is responsible—drugs, 

devices, and biologics and to monitor women’s health priorities, providing leadership 

and an integrated approach across the agency. The OHW accomplishes its admirable 

work, despite inadequate budgets that prevent it from fully accomplishing its mission. 

Since its inception, OWH has funded high quality scientific research to serve as 

the foundation for agency activities that improve women’s health. To date, OWH has 

distributed $12 million in funding for over 100 research projects. OWH has recently 

funded research to fully understand heart disease in women. Despite being the 

number one killer, women with heart disease face misdiagnosis, delayed diagnosis, 

under-treatment, and mistreatment due to the under-representation in heart-related 

research studies. Extramural research funded by OWH is looking into the use of coronary stents in women and problems with breast interference in interpreting heart 

catherization studies. 

We would encourage OWH to expand its research focus to further address the discrepancies in heart disease treatment for women. The Society in conjunction with 

WomenHeart: the National Coalition for Women with Heart Disease compiled a list 

of ten questions that must be answered if women are to receive optimal cardiovascular care and treatment. The ten unanswered research questions are: 

—Why do women receive significantly fewer referrals for advanced diagnostic testing and treatments for heart disease than men, and how can the referral rate 

for women be increased? 

—What are the best tools and methods for assessing women’s risk of heart disease? 

—What are the best strategies for preventing heart disease in women? 

—What treatments for heart disease work best for women? 

—What are the most effective methods and treatments for diastolic heart failure, 

which is the most common form of congestive heart failure in women? 

—How can the heart disease diagnosis and care disparities between white women 

and women of color be eliminated? 

—What are the biological differences between men and women in the location, 

type, and heart disease risk level associated with fat deposits, and what determines these differences? 

—How do sex differences in the regulation of heart rhythm affect risk of heart 

disease and response to treatment? 

—What is the role of inflammation in heart disease in women? 

—Why are women ages 50 and younger more likely to die following a heart attack 

than men of the same age? 

As part of its educational outreach efforts to consumers, OWH worked closely with 

women’s advocacy and health professional organizations to address some of the confusing issues related to the findings of the Women’s Health Initiative Study. As a 

result of this OWH initiative, an informational fact sheet about menopause and hormones and a purse-size questionnaire for women to review with their doctor were 

distributed to national and local print, radio, and Internet advertisements. The FDA 

website received over 3 million hits to download campaign materials. 

In 2001, the Society submitted testimony on behalf of the OWH and in support 

of a centralized database at the FDA to coordinate clinical trial oversight, monitor 

the inclusion of women in clinical trials, oversee the parameters of informed consent, and identify training needs for all scientific agency staff who analyze human 

clinical trials. Due to Society efforts and this Committee’s commitment, in 2002 

Congress provided the OWH at the FDA with funds to develop an agency-wide database focused on women’s health activities to include demographic data on clinical 

trials. The FDA has been developing this database now known as the ‘‘Demographic 

Information and Data Repository’’ to review clinical studies, enhance product labeling, identify knowledge gaps, and coordinate data collection. 

While progress has been made, the database is far from up and running. Currently, the FDA receives large volumes of information in applications from drug 

manufacturers for review and evaluation. The FDA reviewers must comb through 

the submitted drug trial reports and digital data in as many as twelve formats in 

order to evaluate a new drug’s safety and effectiveness. With no uniform system or 

database, reviewers must handpick gender, age, and ethnicity information from 

stacks of reports and craft their own data comparisons. This is time consuming, 
624 

makes the review process less efficient, and delays access to important information. 

Scientific and medical advances are occurring rapidly and the public needs and deserves access to the most recent and accurate information regarding their health. 

Therefore, in order to fully capitalize on the potential of the data warehouse and 

the resulting wealth of information, we urge Congress to commit $1 million for the 

Demographic Information and Data Repository. 

Scientists have long known of the anatomical differences between men and 

women, but only within the past decade have they begun to uncover significant biological and physiological differences. Sex differences have been found everywhere 

from the composition of bone matter and the experience of pain to the metabolism 

of certain drugs and the rate of neurotransmitter synthesis in the brain. Sex-based 

biology, the study of biological and physiological differences between men and 

women, has revolutionized the way that the scientific community views the sexes, 

with even more information forthcoming as a result of the recent sequencing of the 

human X chromosome. The evidence is overwhelming, and as researchers continue 

to find more and complex biological differences, they are gaining a greater understanding of the biological and physiological composition of both sexes. 

The Society has long recognized that the inclusion of women in study populations 

by itself was insufficient to address the inequities in our knowledge of human biology and medicine, and that only by the careful study of sex differences at all levels, 

from genes to behavior, would science achieve the goal of optimal health care for 

both men and women. 

The differences between men and women are important in disease susceptibility, 

prevalence, time of onset and severity and are evident in cancer, obesity, coronary 

heart disease, autoimmune, mental health disorders, and other illnesses. Physiological and hormonal fluctuations may also play a role in the rate of drug metabolism and effectiveness of response in females and males. This research must be both 

encouraged and supported. 

In addition, the Society encourages the establishment of drug-labeling requirements that ensure labels include language about differences experienced by women 

and men. Furthermore, we advocate for research on the comparative effectiveness 

of drugs with specific emphasis on data analysis by sex. When available, this information should also be specified on drug labels. 

Our country’s drug development process has succeeded in providing new and improved medications to ensure the health of both women and men. However, there 

is no mandated requirement that the data acquired during research of a new drug’s 

safety and efficacy be analyzed as a function of sex, to evaluate potentially important differences in females versus males. Similarly, there are no requirements that 

information regarding the action of drugs in various populations (e.g., women requiring a lower dosage because of different rates of absorption or chemical breakdown) be included in prescription drug labeling or other patient educational and instructional materials. In order for patients to be an informed participant in their 

own care, they should have access to all available pertinent information. 

Proper drug labeling may not always provide the complete solution. If the drug 

is not one newly approved or if sex-specific information is detected only in post-marketing studies, the drug label will not convey the sex-specific information discovered 

to the prescribing physician, and it may be difficult to get such new information incorporated into physicians’ prescribing habits. 

The Society believes the opportunity is now before us to communicate the sex differences data discovered from clinical trials to the medical community and to consumers through drug labeling and packaging inserts, and other forms of alerts. As 

part of advancing the analysis and reporting of sex-based effects, the Society encourages the FDA to continue addressing the need for accurate drug labeling to identify 

important sex and gender differences, as well as to ensure that appropriate data 

analysis of post-market surveillance reporting for these differences is placed in the 

hands of physicians and ultimately the patient. 

To ensure adequate analysis and recording of sex and gender disparities in drugs, 

devices and biologics, and to provide for appropriate regulatory policy and accurate 

drug labeling, we believe that the OWH at the FDA should be funded at a total of 

$5 million so that this Office can create, implement, and coordinate gender sensitive 

programs vital to women and men throughout the Nation. 

In conclusion, Mr. Chairman, we thank you and this Committee for its strong 

record of support for women’s health. We look forward to continuing to work with 

you to build a healthier future for all Americans. 
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PREPARED STATEMENT OF THE SOCIETY OF AMERICAN FORESTERS, NATIONAL ASSOCIATION OF STATE FORESTERS, THE NATURE CONSERVANCY, AND NATIONAL ASSOCIATION OF STATE DEPARTMENTS OF AGRICULTURE

Dear Mr. Chairman/Ranking Member: The Society of American Foresters, National Association of State Foresters, The Nature Conservancy, and the National Association of State Departments of Agriculture urge the Subcommittee on Agriculture, Rural Development, and Related Agencies to increase funding substantially 

for the USDA Animal and Plant Health Inspection Service (APHIS) Emerging Plant 

Pests program. A sharp increase in funding is necessary in order to ensure adequate 

funding for eradication and control efforts targeting the emerald ash borer, Asian 

longhorned beetle, and sudden oak death. All three introduced organisms threaten 

forest and amenity trees and related economic activities worth hundreds of billions 

of dollars. 

This statement of common goals supplements individual letters to the Subcommittee submitted by several of these organizations. These individual letters address additional issues which we do not include here. 

We seek an appropriation of $55 million for fiscal year 2007 to contain the emerald ash borer. The emerald ash borer threatens twelve species of ash across the continent, especially in the upper Midwest and Southeast. At risk are the $25 billion 

ash timber industry in the Northeast and street trees across the Nation valued at 

$20 to $60 billion. The emerald ash borer outbreak is large, but the core of the infestation remains in the lower peninsula of Michigan—where it is largely contained by 

the Great Lakes. It is absolutely essential that APHIS receive adequate funding in 

fiscal year 2007 to enable affected states to eradicate the limited and isolated outbreaks found in Ohio, Indiana, and Michigan’s Upper Peninsula. It is also crucial 

that APHIS and its partners carry forward detection surveys and regulatory and 

educational programs aimed at preventing movement of infested firewood, nursery 

stock, and other materials that spread the insect. Once the outlying outbreaks are 

eradicated, officials can begin efforts to quash the core outbreak in Michigan. 

We seek an appropriation of $30 million for fiscal year 2007 to carry forward 

eradication of the sole remaining populations of the Asian longhorned beetle. The 

Asian longhorned beetle poses an alarming threat to hardwood forests reaching from 

New England into Minnesota and in the West, and to the hardwood timber, maple 

syrup, and autumn foliage tourism industries dependent on these forests. Also at 

risk are street trees across the Nation valued at $600 billion. Eradication has been 

successful in Chicago, proving the efficacy of this approach. Beetle populations in 

New Jersey are well on track for eradication. Only the populations in New York persist—and that is because funding for the New York effort has been reduced in past 

years to focus the inadequate overall resources on Illinois and New Jersey. It is essential to provide sufficient funding now and in coming years to complete eradication in New York. 

We seek $9 million in appropriations for fiscal year 2007 to contain a third damaging forest pest, sudden oak death (also called the phytophthora leaf and stem 

blight). If sudden oak death does escape confinement, it threatens oaks in forests 

in Oregon and Washington as well as throughout the Appalachians, Ozarks, and 

even into southern New England. This disease is also a major threat to the Nation’s 

nursery industry as it readily attacks species such as rhododendron and other species used in the garden nursery business. Spread of sudden oak death is thus of 

enormous consequence to both native forests and the garden nursery business. In 

its impact on the oak species, it has the potential to devastate critical forage for 

many wildlife species as well. 

Additional forest pests introduced into the United States and recently identified 

are currently being reviewed by scientific experts convened by APHIS and the 

USDA Forest Service. The most prominent example is the Sirex wood wasp, now 

present in New York, which threatens valuable pine timber resources, including 

those of the Southeast and eastern United States. The scientists’ conclusions regarding the wood wasp and other species might result in additional funding needs. 

The Society of American Foresters, National Association of State Foresters, The 

Nature Conservancy, and the National Association of State Departments of Agriculture strongly support the Congress’ numerous statements urging the Administration to release emergency funds from the Commodity Credit Corporation sufficient 

to enable full implementation of management plans for the exotic threats to our forest resources. 

Action now at the funding level requested would help ensure that these forest 

pests do not reach populations so large as to threaten forest, amenity trees, garden 

nursery stock, and related economic activities worth hundreds of billions of dollars. 
626 

PREPARED STATEMENT THE WYOMING STATE ENGINEER’S OFFICE

Dear Chairman Bennett and Ranking Member Kohl: This letter is sent in support 

of the designation of 2.5 percent of the fiscal year 2007 Environmental Quality Incentive Program (EQIP) funding for the Department of Agriculture’s Colorado River 

Salinity Control (CRSC) Program. Pursuant to Public Law 104–127, the USDA’s 

CRSC Program is a component program within EQIP. Wyoming views the inclusion 

of the CRSC Program in EQIP as a direct recognition on the part of Congress of 

the Federal commitment to maintenance of the water quality standards for salinity 

in the Colorado River—and that the Secretary of Agriculture has a vital role in 

meeting that commitment. 

The State of Wyoming is a member State of the seven-State Colorado River Basin 

Salinity Control Forum. Established in 1973 to coordinate with the Federal Government on the maintenance of the basin-wide Water Quality Standards for Salinity 

in the Colorado River System, the Forum is composed of gubernatorial representatives and serves as a liaison between the seven States and the Secretaries of the 

Interior and Agriculture and the Administrator of the Environmental Protection 

Agency. The Forum advises the Federal agencies on the progress of efforts to control 

the salinity of the Colorado River and annually makes funding recommendations, 

including the amount believed necessary to be expended by the USDA for its onfarm CRSC Program. Overall, the combined efforts of the Basin States, the Bureau 

of Reclamation and the Department of Agriculture have resulted in one of the nation’s most successful non-point source control programs. 

The Colorado River provides municipal and industrial water for 27 million people 

and irrigation water to nearly 4 million acres of land in the United States. The 

River is also the water source for some 2.3 million people and 500,000 acres in Mexico. Limitations on users’ abilities to make the greatest use of that water supply due 

to the River’s high concentration of total dissolved solids (hereafter referred to as 

the salinity of the water) are a major concern in both the United States and Mexico. 

Salinity in the water source especially affects agricultural, municipal, and industrial 

water users. While economic detriments and damages in Mexico are unquantified, 

the Bureau of Reclamation presently estimates salinity-related damages in the 

United States to amount to $330 million per year. The River’s high salt content is 

in almost equal part due to naturally occurring geologic features that include subsurface salt formations and discharging saline springs; and the resultant concentrating effects of our users man’s storage, use and reuse of the waters of the River 

system. Over-application of irrigation water by agriculture is a large contributor of 

salt to the Colorado River as irrigation water moves below the crop root zone, seeps 

through saline soils and then returns to the river system. 

In close cooperation with the EPA and pursuant to requirements of the Clean 

Water Act, every three years the Forum prepares a formal report analyzing the salinity of the Colorado River, anticipated future salinity, and the program elements 

necessary to keep the salinity concentrations (measured at Total Dissolved Solids— 

TDS) at or below the levels measured in the river system in 1972 at Imperial Dam, 

and below Parker and Hoover Dams. In setting water quality standards for the Colorado River system, the salinity concentrations at these three locations have been 

identified as the numeric criteria. The plan necessary for controlling salinity and reducing downstream damages has been captioned the ‘‘Plan of Implementation.’’ The 

2005 Review of water quality standards includes an updated Plan of Implementation. In order to eliminate the shortfall in salinity control resulting from inadequate 

Federal funding for the last several years from the USDA, the Forum has determined that implementation of the Program needs to be accelerated. The level of appropriation requested in this testimony is in keeping with the agreed upon plan. 

The Department of Agriculture’s CRSC Program is an important proven and costeffective tool in improving irrigation water application and thus reducing salt loading into the Colorado River system. For the past 22 years, the seven-State Colorado 

River Basin Salinity Control Forum has actively assisted the U.S. Department of 

Agriculture in implementing its unique, collaborative and important program. With 

the enactment of the Federal Agriculture Improvement and Reform Act of 1996 

(FAIRA), the Congress directed that the Program should be implemented as one of 

the components of the Environmental Quality Incentives Program (EQIP). Since the 

enactment of the Farm Security and Rural Investment Act (FSRIA) in 2002, there 

is, for the first time, an opportunity to adequately fund the Program within the 

EQIP. At its recent October 2006 meeting, the Forum recommended that the USDA 

CRSC Program should expend 2.5 percent of the Environmental Quality Incentive 

Program funding. In the Forum’s judgment, this amount of funding is necessary to 

implement the needed program. ‘‘Catch-up’’ funding in the future will require expending greater sums of money, increase the likelihood that the numeric salinity 
627 

criteria are exceeded, and create undue burdens and difficulties for one of the most 

successful Federal/State cooperative non-point source pollution control programs in 

the United States. The Colorado River Basin Salinity Control Advisory Council has 

taken the position that the funding for the salinity control program should not be 

below $20 million per year. Over the last 3 fiscal years, for the first time, funding 

almost reached the needed level. The amount of State and local cost-sharing that 

can be applied in each given fiscal year is driven by the amount of Federal appropriations and the EQIP allocation. In fiscal year 2006, the participating basin States 

will cost share with about $8.3 million and local agriculture producers will add another $7.5 million. Hence, it is anticipated that in fiscal year 2006 the State and 

local contributions will be 45 percent of the total program. 

The State of Wyoming greatly appreciates the Subcommittee’s support of the Colorado River Salinity Control Program in past years. We continue to believe this important basin-wide water quality improvement program merits support by your Subcommittee. We request that your Subcommittee direct the allocation of 2.5 percent 

of the Environmental Quality Incentives Program funding for the USDA’s CRSC 

Program during fiscal year 2007. Thank you in advance for your consideration of 

this statement and its inclusion in the formal record for fiscal year 2007 appropriations. 

PREPARED STATEMENT OF THE U.S. APPLE ASSOCIATION

The U.S. Apple Association (USApple) appreciates the opportunity to provide this 

testimony on behalf of our nation’s apple industry. 

Our testimony will focus on the following areas: the Market Access Program 

(MAP); funding for the Specialty Crop Competitiveness Act, Cooperative State Research, Extension and Education Service (CSREES) and Agricultural Research Service (ARS) funding, nutrition education and expansion of the fruit and vegetable 

snack program. 

USApple is the national trade association representing all segments of the apple 

industry. Members include 36 State and regional apple associations representing 

the 7,500 apple growers throughout the country as well as more than 300 individual 

firms involved in the apple business. Our mission is to provide the means for all 

segments of the U.S. apple industry to join in appropriate collective efforts to profitably produce and market apples and apple products. 

Market Access Program (MAP) 

USApple encourages Congress to appropriate $200 million in MAP funds, the 

level authorized in the farm bill for fiscal 2007. 

The apple industry receives over $3 million annually in export development funds 

from the U.S. Department of Agriculture’s (USDA) Market Access Program (MAP). 

These funds are matched by grower dollars to promote apples in more than 20 countries throughout the world. One-quarter of U.S. fresh apple production is exported, 

with an annual value of approximately $370 million. 

Strong MAP funding is critical to the U.S. apple industry’s efforts to maintain and 

expand exports, and to increase grower profitability. Congress recognized the importance of MAP by authorizing increased funding in the 2002 farm bill. Over the past 

three years, congressional appropriations have kept pace with the farm bill’s authorized level. 

Food Quality Protection Act (FQPA) Implementation 

USApple urges full funding for the following U.S. Department of Agriculture 

(USDA) administered programs to mitigate the negative impact of FQPA implementation on apple growers. —$16 million for the Pesticide Data Program, administered by the Agricultural 

Marketing Service (AMS); 

—$8.0 million for the National Agricultural Statistics Service (NASS) pesticideusage surveys; 

—$2.0 million for the Office of Pest Management Policy administered by the Agricultural Research Service (ARS); 

—$3.7 million for minor-use registration of crop protection tools (IR–4) administered by ARS; 

—$7.2 million for area-wide IPM research administered by ARS; 

—$13.5 million for the Integrated Pest Management Research Grant Program administered by the Cooperative State Research, Extension and Education Service 

(CSREES); 

—$10.8 million for minor-use registration of crop protection tools (IR–4) administered by CSREES; and 
628 

—$12.5 million for the Pest Management Alternatives Program, Regional Pest 

Management Centers, Crops at Risk and Risk Avoidance and Mitigation Program also administered by CSREES. 

National Tree Fruit Technology Roadmap 

USApple urges the Committee to support the apple industry’s efforts to improve 

its competitiveness by providing increased Federal funding for the development and 

application of new technologies as outlined below. 

Codling Moth and Other Lepidoptera Insect Research: 

—$800,000 Agricultural Research Service—Yakima, Washington 

—$800,000 Agricultural Research Service—Kearneysville, West Virginia 

Colonial immigrants introduced the codling moth into the United States from Europe, and its presence in apple orchards has plagued apple growers for the past 200 

years. If uncontrolled, codling moth larvae damage apples by burrowing into fruits. 

This pest causes significant production losses and ruins demand. Codling moth is 

presently controlled by pesticide applications or techniques that interfere with reproduction. However, these options are insufficient to fully meet industry standards 

for codling moth control. Shortcomings in current controls have even led to the closure of the apple industry’s third largest export market. Other lepidoptera insects 

such as oriental fruit moth and leaf rollers are also significant pests of concern that 

decrease grower profitability. 

The apple industry needs better decision-making techniques, improved understanding of secondary pests and the biology of pest predators, improved mating disruption techniques, rapid and efficient pest detection and instrumentation methods. 

Geographic differences in codling moth control capabilities requires a regional approach to research funding. 

Rootstock Breeding and Soil Replant Disease Research: 

—$400,000 Agricultural Research Service—Geneva, New York 

—$400,000 Agricultural Research Service—Wenatchee, Washington 

Rootstocks are important to apple growers because of their prominence in determining tree size, tree architecture and disease vulnerability. There is a growing interest and demand for hearty rootstocks that lend disease resistance and improved 

tree structures that are more efficient and profitable to manage. 

Soil replant disease is a poorly understood phenomenon that reduces tree vigor 

and stunts tree growth in new orchards, which are planted on the site of a previously existing orchard. A combination of organisms such as bacteria, fungi, nematodes and viruses are suspected to play a role in attacking the roots of new apple 

trees, limiting their growth potential. This problem has surfaced as a high priority 

problem because of the scarcity of new orchard sites, the need to replant existing 

orchards, the high per acre cost of planting new orchards and shortage of good options to control replant disease. Soil replant disease is a problem for all tree fruits 

including apples, pears, peaches and cherries. Genetics and genomics approaches 

are expected to yield significant progress in addressing rootstock related research. 

Research is needed to better understand site-specific drivers causing the disease 

and how the disease causes damage. Research is necessary to develop sustainable 

controls. 

Fruit Quality Research: 

—$750,000 Agricultural Research Service—Albany, California 

—$750,000 Agricultural Research Service—Wenatchee, Washington 

The future of the U.S. apple industry will depend on the ability of apple growers 

to consistently grow and market apples with superior quality. Improved fruit quality 

will not only ensure greater international competitiveness, but it will increase consumer demand for apples. 

Research is needed on the physical, chemical and genetic composition of apples 

so apple growers can produce apples with superior consumer traits, such as texture, 

aroma, and nutrition and apples with superior production traits such as uniform 

ripening and better storage characteristics and systems to deliver better fruit quality to consumers through improved defect and quality sorting. 

Automation, Sensors, and Precision Agriculture Research: 

—$4,000,000 Agricultural Research Service—Kearneysville, West Virginia 

—$2,000,000 Agricultural Research Service—East Lansing, Michigan 

—$2,000,000 Agricultural Research Service—Prosser, Washington 

Improving labor productivity is a critically important goal for the apple industry 

as it strives to remain competitive with low-wage international competitors. Tree 

fruit industries must identify and incorporate new technologies that will minimize 

low skill tasks, enhance worker productivity and safety, reduce production and handling costs, decrease seasonality of labor, and maximize fruit quality delivered to 

consumers. 
629 

Additional research is needed for fruit postharvest technology research in a packing line environment to better evaluate internal fruit quality characteristics, such 

as internal defects, sugar content and fruit firmness. Improved sensor technology 

used on packing lines will be beneficial in detecting internal defects, lessen that 

amount of labor needed to detect and sort fruit and ensure that all packed fruit 

meets consumer demand for high quality fruit. 

Successful technological innovations must be coupled with novel plant genetics, 

integrated orchard designs, biorational pest and predator management systems, and 

prescriptive plant bioregulators. A systems approach will also require the simultaneous development and deployment of remote and ground sensing capabilities for 

real-time assessment of micro-environmental variables; tree vigor and orchard canopies; pest, pathogen, and predator pressure; water stress, and fruit quality. This 

research would also be applicable to a host of tree fruits including cherries, peaches, 

almonds and apples and pears. 

The need for investment in these new technologies has never been greater, but 

current Federal research to address this need is insufficient. Therefore, the tree 

fruit industry is requesting an increase in research funding to meet this great need. 

Specialty Crops Competitiveness Act 

USApple urges Congress to fund the block grants authorized under the Specialty Crop Competitiveness Act at the full $44.5 million authorized under the Act. 

The Specialty Crop Competitiveness Act (SCCA) was introduced in the 108th Congress by Reps. Cal Dooley (D-CA) and Doug Ose (R-CA) and in the Senate by Senators Craig (R-ID) and Stabenow (D-MI). The bill was designed to strengthen demand, reduce production costs, and enhance production and marketing efficiencies. 

The majority of the funds authorized funds would go toward block grants, with each State department of agriculture being guaranteed a minimum of $100,000. In 

fiscal year 2006 Congress appropriated $7 million for the block grants. USDA’s Agriculture Marketing Service is now in the process of drafting regulations to implement 

the program. There is a strong need to build on the $7 million authorized for fiscal 

year 2006 and continue this important program. 

USApple urges Congress to increase funding for the Technical Assistance for Spe- cialty Crops (TASC) program to $4 million as authorized under the Specialty Crop 

Competitiveness Act. 

This program has been critical over the last 4 years in helping the apple industry 

address specific sanitary and phytosanitary (SPS) non-tariff trade barriers. 

Fresh Fruit and Vegetable Snack Program 

USApple urges Congress to include $36 million in the USDA budget to expand 

the fruit and vegetable snack program to 25 schools in each of the 36 remaining 

States. 

The 2002 farm bill established the Fruit and Vegetable Pilot Program to promote 

consumption of fruits and vegetables among school children by providing free 

produce to schools in 25 schools in each of four States (Iowa, Indiana, Michigan, 

Ohio and one Indian Tribal Organization in New Mexico). The Child Nutrition and 

WIC Reauthorization Act of 2004 made the pilot permanent and expanded it to 25 

schools in Mississippi, three additional States (North Carolina, Pennsylvania and 

Washington were chosen by USDA) and two additional Indian Reservations. In fiscal year 2006, Congress expanded the program to an additional 6 States (Utah, Wisconsin, Texas, Idaho, New Mexico, and Connecticut). If Congress is unable to expand 

the program to the entire country, USApple urges that the program be expanded 

to include New York. 

Reports from the original pilot showed that students were increasing their consumption of fruits and vegetables, choosing more fruits and vegetables for lunch, 

and asking their parents for fruits and vegetables at home. The fruit and vegetable 

snack program works to educate children about the healthy eating habits that will 

last a lifetime. The fruit and vegetable snack program should be expanded to 25 

schools in every State. 

REINSTATEMENT OF RECESSIONS

Temperate Fruit Fly Research Position—Yakima, Wash. 

USApple requests continued funding of $300,000 to conduct critical research at 

the USDA ARS laboratory in Yakima, Wash. on temperate fruit flies, a major pest 

of apples. 

The Yakima, Wash., USDA ARS facility is conducting research critical to the crop 

protection needs of the apple industry. FQPA implementation has reduced the number of pesticides currently available to growers for the control of pests, such as cherry fruit fly and apple maggot. Left unchecked, these temperate fruit flies can be dev-
630 

astating. Thus, research is needed to develop alternative crop protection methods as 

growers struggle to cope with the loss of existing tools. While Congress appropriated 

$300,000 last fiscal year for this critical research, the administration’s proposed 

budget for fiscal 2007 rescinds this funding. 

Post Harvest Quality Research Position—East Lansing, Mich. 

USApple urges Congress to maintain funding of $309,600 in the USDA ARS fiscal 

year 2007 budget for the postharvest quality research position in East Lansing, 

Mich. 

The East Lansing, Mich., USDA ARS facility is conducting research critical to the 

future survival of the apple industry. Using a series of new sensing technologies, 

researchers at this facility are developing techniques that would allow apple packers 

to measure the sugar content and firmness of each apple before it is offered to consumers. Research indicates consumer purchases will increase when products consistently meet their expectations, suggesting consumers will eat more apples once this 

technology is fully developed and employed by our industry. While Congress appropriated $309,600 last fiscal year for this critical research, the administration’s proposed budget for fiscal 2007 rescinds this funding. 

Genomics, Disease Resistance and Insect Behavior—Kearneysville, W.V. 

USApple urges Congress to maintain funding of $588,900 in the USDA ARS 2007 

budget for genomics, disease resistance and insect behavior research in 

Kearneysville, W.V. 

This research provides critical information that assists with the development of 

new apple varieties, identification of disease pathways and strategies to control devastating insect pests. This research is important in developing solutions to problems 

that reduce fruit quality and increase production costs. Apple growers depend on 

this research for economic sustainability and increased international competitiveness. 

Genetics of Fruit Quality Research—Wenatchee, Wash. 

The Wenatchee, Wash., USDA Agricultural Research (ARS) lab is building a genetics and genomics research program that will develop a greater understanding of 

fruit quality attributes that are important to consumers, such as flavor, texture, 

storability and nutrition. This research will also provide a clearer understanding of 

where important genes are located within the apple genome and the role those 

genes play in the expression of desirable fruit quality attributes. This understanding 

will provide new tools that can be understood as a multiplier effect to propel existing research programs that will be able to utilize the genetics and genomics tools 

related to fruit quality and physiological issues. 

USApple urges Congress to maintain baseline funding of $450,000 in the USDA 

Agricultural Research Service’s fiscal year 2007 budget for the genetics of fruit quality research position in Wenatchee, Wash. Laboratory. 

PREPARED STATEMENT OF THE USA RICE FEDERATION

Dear Mr. Chairmen: This is to convey the rice industry’s request for fiscal year 

2007 funding for selected programs under the jurisdiction of your respective subcommittees. The USA Rice Federation appreciates your assistance in making this 

letter a part of the hearing record. 

The USA Rice Federation is the national advocate for all segments of the rice industry, conducting activities to influence government programs, developing and initiating programs to increase worldwide demand for U.S. rice, and providing other 

services to increase profitability for all industry segments. USA Rice members are 

active in all major rice-producing States: Arkansas, California, Florida, Louisiana, 

Mississippi, Missouri, and Texas. The USA Rice Producers’ Group, the USA Rice 

Council, the USA Rice Millers’ Association, and the USA Rice Merchants’ Association are members of the USA Rice Federation. 

USA Rice understands the budget constraints the committee faces when developing the fiscal year 2007 appropriations bill. We appreciate your past support for 

initiatives that are critical to the rice industry and look forward to working with 

you to meet the continued needs of research, food aid and market development in 

the future. 

A healthy U.S. rice industry is also dependent on the program benefits offered by 

the Farm Security and Rural Investment Act of 2002. Therefore, we oppose any attempts to modify the support levels provided by this vital legislation through more 

restrictive payment limitations or other means and encourage the committee to resist such efforts during the appropriations process. 
631 

A list of the programs the USA Rice Federation supports for appropriations in fiscal year 2007 are as follows: 

Funding Priorities 

Research and APHIS 

The Dale Bumpers National Rice Research Center should receive continued funding at the fiscal year 2006 approved level. This center conducts research to help 

keep the U.S. rice industry competitive in the global marketplace by assuring high 

yields, superior grain quality, pest resistance, and stress tolerance. The fiscal year 

2007 budget proposal from the U.S. Department of Agriculture proposes to rescind 

$270,000 in funding for this key research center, which would severely hamper the 

vital research activities being conducted at this national center. We urge you to provide full funding to the Dale Bumpers National Rice Research Center. 

In addition, we have attached information outlining the top priority research request from the USA Rice Federation; funding for aromatic rice variety research at 

the Dale Bumpers Center. The request is for $250,000 for fiscal year 2007 for research to develop domestic, high-yielding, high-quality aromatic rice varieties for the 

U.S. rice industry. Further details and specifics of this request are attached. 

Furthermore, we urge the subcommittee to continue to provide full funding for the 

USDA-ARS Rice Research Unit in Beaumont, Texas. The fiscal year 2007 budget 

proposal calls for cuts of $1.4 million, which would likely result in the closure of 

this important rice research facility. We ask for your consideration in maintaining 

funds to keep this center in operation for the benefit of the U.S. rice industry. 

The Western Regional Research Center, located in California, should receive continued full funding for operating funds. This center provides important research activities in support of the California rice industry, particularly post-harvest research. 

This facility has undergone recent modernization and upgrades and it is important 

to continue to provide the funds necessary to allow the center to continue full operations. 

For APHIS-Wildlife Services, we encourage the committee to fund the Louisiana 

blackbird control project at $333,000. This program annually saves rice farmers in 

Southwest Louisiana over $4,000 per farm, or $2.9 million total. No increases have 

been provided to the program since 1994 and inflation is reducing the overall impact. An increase from the $150,000 baseline is justified. 

Market Access 

Exports are critical to the U.S. rice industry. Historically, 40–50 percent of annual 

U.S. rice production has been shipped overseas. Thus, building healthy export demand for U.S. rice is a high priority. 

The Foreign Market Development Program (FMD) allows USA Rice to focus on 

importer, foodservice, and other non-retail promotion activities around the world. 

For fiscal year 2007, FMD should be fully funded at $34.5 million, consistent with 

the President’s Budget request. 

The Market Access Program (MAP) allows USA Rice to concentrate on consumer 

promotion and other activities for market expansion around the world. For fiscal 

year 2007, MAP should be funded at $200 million as authorized by the Farm Security and Rural Investment Act of 2002, which restores MAP funding to its authorized level. This is $100 million above the President’s budget request. 

In addition, the Foreign Agricultural Service should be funded to the fullest degree possible to ensure adequate support for trade policy initiatives and oversight 

of export programs. These programs are critical for the economic health of the U.S. 

rice industry. 

Food Aid 

We encourage the committee to fund Public Law 480 Title I at a minimum level 

of $100 million, an increase from fiscal year 2006 levels. This program is our top 

food-aid priority and we support continued funding in order to meet international 

demand. Food-aid sales historically account for a significant portion of U.S. rice exports. 

For Public Law 480 Title II we support funding for fiscal year 2007 at $1.335 billion, equal to the fiscal year 2006 level. We encourage the committee to fund Title 

II at a level to ensure consistent tonnage amounts for the rice industry. We oppose 

any shifting of funds, as all Title II funds have traditionally been contained within 

USDA’s budget. We believe all food-aid funds should continue to be used for foodaid purchases of rice and other commodities from only U.S. origin. 

USA Rice supports continued funding at fiscal year 2006 levels for Food for 

Progress. Funding for this program is important to improve food security for food 

deficit nations. 
632 

The Global Food for Education Initiative is a proven success and it is important 

to provide steady, reliable funding for multi-year programming. USA Rice supports 

the $103 million request in the President’s fiscal year 2007 budget for this education 

initiative because it efficiently delivers food to its targeted group, children, while 

also encouraging education, a primary stepping-stone for populations to improve economic conditions. 

Other 

Farm Service Agency.—We encourage the Committee to provide adequate funding 

so the agency can deliver essential programs and services. The Agency has been 

hard hit by staff reductions and our members fear a reduction in service if sufficient 

funds are not allocated. 

Please feel free to contact us if you would like further information about the programs we have listed. Additional background information is available for all of the 

programs we have referenced, however, we understand the volume of requests the 

committee receives and have restricted our comments accordingly. 

Thank you for your consideration of our recommendations. 

Attachment: 

FISCAL YEAR 2007 FUNDING REQUEST FORM

Agency.—U.S. Department of Agriculture 

Account.—USDA/ARS: The Dale Bumpers National Rice Research Center, Stuttgart, AR 

Project Name.—Research to develop domestic, high yield, high quality aromatic 

rice varieties at the USDA/ARS Dale Bumpers National Rice Research Center 

Priority.—High. 

New Project.—Yes. 

Project Description.—Aromatic rice imports have grown dramatically in the 

United States in the past 15 years and now total about 450,000 MT per year or 15 

percent of total consumption. The United States does not have an aromatic rice variety that has the yield, milling quality, and flavor to compete with the imported 

products. The research will enable the U.S. rice industry to compete effectively in 

a timely manner in the U.S. market with imported aromatic rice. 

The Dale Bumpers National Rice Research Center conducts research in rice genetics, quality, and pests’ resistance to help keep the U.S. rice industry competitive in 

the global marketplace. The Center directly serves the needs of the U.S. industry 

in Arkansas, California, Mississippi, Louisiana, Missouri, and Texas. One of its 

major emphases is the genetic improvement of rice through the use of cutting-edge 

genomic tools and a multidisciplinary research approach. 

Aromatic rice has a flavor and aroma similar to roasted nuts or popcorn. This is 

a natural compound that is found in several plants like corn and rice but is present 

in much higher concentrations as a result of breeding and development of aromatic 

rice varieties. 

What is the anticipated benefit and/or impact of the project? 

Developing high-yielding domestic aromatic rice varieties with the grain quality 

traits needed is essential for the U.S. rice industry to compete in this market and 

meet domestic consumer demand. In addition, developing a new understanding of 

the various chemical compounds that result in aromatic flavors and smells, along 

with developing genetic markers that can be used by breeders to improve grain 

chemistry and grain appearance traits, will help the U.S. rice industry to have a 

competitive edge in this value-added market. 

Previous Funding: Fiscal Year 2002–06 And Amount.—Zero. 

Fiscal Year 2007 Request.—$250,000; one full-time staff position for 1 year. 

Fiscal Year 2007 Share.—Fiscal year 2007 funding is for 1 year of research, with 

development of a multi-year project pending the findings of the 2007 research. 

Local Share.—Availability of matching funds is being explored at this time. 

Request Description 

ARS Account: Dale Bumpers National Rice Research Center, Stuttgart, AR 

Dale Bumpers National Rice Research Center, Stuttgart, AR 

Domestic Aromatic Rice Varieties Research 

The Committee provides $250,000 toward development of domestic aromatic rice 

varieties to enable the U.S. rice industry to compete effectively in a timely manner 

in the U.S. market. 
633 

PREPARED STATEMENT OF THE UNIVERSITY OF SOUTHERN MISSISSIPPI AND THE

MISSISSIPPI POLYMER INSTITUTE

Mr. Chairman, distinguished Members of the Subcommittee, I thank you for this 

opportunity to provide testimony describing ongoing research and commercializing 

efforts of The University of Southern Mississippi (USM) and the Mississippi Polymer Institute. I am very grateful to the Subcommittee for its leadership and the 

continued support of the Institute and its work. This testimony will include a summary of the Institute’s research progress since my testimony of approximately 1 

year ago. 

Research efforts over the last year have focused on developing agricultural-based, 

environmentally responsible derivatives for use in coatings and composites to replace petroleum derivatives. Novel monomers for emulsion polymerization have 

eliminated the previously required complicated synthesis procedures while allowing 

higher levels of vegetable oil macromonomer (VOMM) incorporation. The resulting 

latex polymers facilitate the formulation of architectural coatings with gloss levels 

rivaling solvent-based coatings and zero volatile organic compound (VOC) content. 

Performance and storage stability optimization continues across a wide range of 

novel VOMMs. We are excited about the continued progress as we believe the agriculturally-derived monomers have the potential to improve performance while reducing environmental hazards. 

Last year, we reported the successful production of lab-scale soy-based adhesive, 

formaldehyde-free particleboards that exceeded all commercial specifications. We 

have confirmed that the adhesive can be scaled up to 30 L batches that produce superior boards compared to the conventional formaldehyde-based boards. Moreover, 

the soy-based particleboards degrade faster than commercial particleboards as evidenced in soil burial tests. To the best of our knowledge, this is the only soy proteinbased adhesive that can be formulated into particleboards without the use of formaldehyde-releasing resins that meets and exceeds commercial particleboard performance. Pilot plant testing confirmed laboratory performance. It defined the limits of 

conventional production and suggested areas requiring further research to prepare 

it for commercial manufacturing. 

Through our continued research, the U.S. farmer is better positioned to grow and 

supply the sustainable raw materials required to produce environmentally responsible products and reduce our dependency on imported petroleum products. Coupled 

with the reduction in air pollution, a carbon neutral technology, and the absence of 

formaldehyde, our research is a valuable strategic component to America’s long-term 

success and aid in maintaining a higher standard of living. To date, our technology 

has resulted in a total of 25 patents and patent applications, both United States and 

foreign. Additional patent applications will be submitted during the upcoming 

months. With adequate funding, facilities, and commitment, ag-based research will 

continue to the betterment of our society. We are most appreciative of your support 

and will continue to push for full commercialization of technological advances utilizing agricultural intermediates while training scientists for careers in the next 

generation of agriculturally-oriented polymer science. 

The design and synthesis of novel vegetable oil macromonomers (VOMMs) using 

soy oil, linseed oil, and tung oil are being investigated. Continued research has increased the utility for new monomers at higher levels of incorporation. Tailored synthesis methods with the new monomers have increased the VOMM content in 

latexes to 80 percent of the monomers by weight, a 30 percent increase over last 

year (based on solids). The monomers that permit the polymer chain to form a 

smooth film also provide a mechanism for crosslinking through auto-oxidation. Successful incorporation of a variety of VOMM levels allows our research to advance 

to the optimization of unsaturation, comonomer ratios, and coating performance. 

Long-term storage stability and coatings performance continue to be investigated. 

Surfmers or VOMMs that act as the stabilizing surfactant and a participating 

monomer in emulsions continue to be investigated. Neutralized soybean acrylated 

monomer (nSAM) functions well as a surfmer and performs similar to commercial 

surfactants with good polymerizability. Last year, we synthesized stable styrene 

emulsion copolymers containing 44 weight percent VOMM-based surfmers. This 

year, we have successfully synthesized 100 percent VOMM-based latexes that yielded high gloss films without added plasticizers or solvents, forming films at 0°C. 

Solvent-free nail polishes and waterborne industrial coatings based on VOMMs 

were studied in comparison with commercial products. VOMM-based nail polishes 

provided high gloss levels and improved adhesion on plastic (ABS) and human nails. 

Research will continue to improve the water resistance. Industrial coatings formulated with VOMM-based latexes performed similar or superior to the control coatings when crosslinked with melamine or aziridine crosslinkers, respectively. VOMM- 
634 

based latexes formulated into paper coatings have exhibited performance properties 

similar to those of styrene-acrylic commercial controls. VOMM coating properties 

continue to be evaluated and optimized using various comonomer compositions. 

Particleboard composites based solely upon soy protein adhesives were scaled 

from the 1–4 L range to 30 L and proved that board performance and storage stability are achievable. Additionally, the 30 L batch of adhesive produced quality composites after long-term storage. Our research produced particleboards that have met 

or exceeded each of the industry performance requirements as defined by ANSI 

standards for M1, M2, M3, and M–S grade boards. The two primary barriers to market entry/commercialization are solids content/viscosity and cost. This year, the 

practical adhesive solids content was increased from 20 weight percent to 29 weight 

percent. Commercial formaldehyde-based resins are supplied at 65 percent or greater in solids content. The low solids content of our adhesive necessitates removal of 

large quantities of water during the commercial manufacturing process which is influenced by various factors such as temperature, time, and platen type and size. 

Current research efforts are focused on improving the solids content/viscosity balance through understanding the protein interactions in water that generate a viscous solution. Soy protein isolate (SPI) is a high purity protein (90 percent) and 

therefore is more expensive than other forms of soy protein such as defatted soy 

flour (DSF) at 53 percent protein content. Particleboards manufactured with DSF 

as the sole replacement for SPI exceeded MS and M1 specifications, but did not 

meet M2 and M3 performance requirements. Since SPI-based particleboards exceed 

the commercial performance requirements of formaldehyde-based particleboards in 

that it delivers superior moisture resistance and improved structural integrity even 

after 24 hours of water immersion, we believe the environmentally responsible and 

sustainable goals warrant further research. In addition to the performance attributes, SPI-based particleboards degrade more rapidly than commercial 

particleboards during soil burial tests. 

The Mississippi Polymer Institute is charged with promoting and supporting Mississippi’s polymer industry by providing workforce development, technical service, 

product development, and assistance with economic development activities. In the 

area of workforce development, the Institute provides industry training in injection 

molding, extrusion, blow molding, and lean manufacturing. In 2004–2005, MPI 

trained 192 employees and in 2005–2006 MPI provided training for an additional 

152 employees. The Institute has implemented polymer technology programs in high 

schools throughout the State of Mississippi. Currently, MPI supports four high 

school polymer technology programs in Petal, Moss Point, Columbia, and Corinth. 

There are 74 students enrolled in these programs. Implementing similar programs 

throughout the State will build a skilled workforce in polymer science for Mississippi. 

The faculty, the University, and the State of Mississippi are strongly supportive 

of the Mississippi Polymer Institute and its close ties with industry. Most faculty 

maintain at least one industrial contract as an important part of extramural research efforts. Polymers which include fibers, plastics, composites, coatings, adhesives, inks, and elastomers play a key role in the materials industry. They are ubiquitous in industrialized societies and across all industries including textiles, aerospace, transportation, energy, packaging, architecture and construction, medicine, 

sports and sporting goods, composites, and defense related materials. Critical for 

many of the technologies is a combination of controlled performance, weight reduction, and high strength performance. Unfortunately, our strategic position resembles 

the natural rubber supply situation during WWII which was controlled by potentially unreliable sources affecting our Nation’s security. 

Our agriculturally focused research continues to create innovative natural product 

derivatives across several technology platforms targeting commercialization in coatings, adhesives, composites, and polymers in general. America is presently at a critical point in history as our standard of living is tied directly to technological advancements and innovation demanding high energy usage and the need for scientists and engineers. Since petroleum reserves are being depleted at an accelerating rate and other countries are competing on price and innovation, timing is 

critical. Our youth are no longer choosing careers in science and engineering which 

will cause us to lose our competitive edge, and in turn, affect the standard of living 

within the next decade. Our greatest achievements can be accomplished through the 

development of high performance materials based upon carbon neutral sustainable 

raw material resources. Almost every technological development over the past decade was dependent upon polymeric materials. Since the polymer industry is the 

largest single consumer of petroleum chemical intermediates in the world, our reality is clear in that we must develop agriculture as the industry of the future. Fortunately, many scientists are beginning to harness agricultural feedstocks and nat-
635 

ural products. For example, a scientific literature search using the term biomimetic 

(defined as copying nature’s methods or designs) revealed only 125 peer reviewed 

publications and patents in 1990, whereas over 1,100 publications and patents in 

2005, followed nature’s lead for energy-related products, coatings protection, composites, adhesives, environmentally friendly antibacterial/antimicrobial agents, and 

improved medicines. A similar search using the word polymer provides over 70,000 

publications and patents for 2005. Our research and commercialization efforts encompass many important facets including training scientists that will continue to 

innovate and develop technology that is critical for the maintenance of our quality 

of life and national stability. We, as a Nation, can improve our environment, reduce 

our dependence on imported petroleum, keep America’s farmlands in production, 

and continue to be the World’s technology leader. Your support is necessary to continue our research efforts to accomplish the goals set forth. 

As a polymer scientist, I am intrigued by the vast opportunities offered by American agriculture. As a professor, however, I continue to be disappointed that few of 

our science and business students receive training in the polymer-agricultural discipline despite its enormous potential. The School of Polymers and High Performance Materials and the Mississippi Polymer Institute at USM are attempting to 

make a difference by showing others what can be accomplished if appropriate time, 

energy, and resources are devoted to the understanding of ag-based products. I became involved in the polymer field more than 40 years ago, and have watched its 

evolution where almost each new product offered the opportunity for many more. 

Although polymer science as a discipline has experienced expansion and a degree 

of public acceptance, alternative agricultural materials in the polymer industry continue to be an underutilized national treasure. Today, society displays less acceptance of petroleum-derived materials than ever before, and consequently, the timing 

is ideal for agricultural materials to make significant inroads as environmentally responsible, biodegradable, and renewable feedstocks. Agricultural materials have always been available for our use, and the scientific community often grasps the real 

potential for renewable materials, unfortunately, society continues to ignore their 

potential. 

U.S. agriculture has made the transition from the fields to the kitchen tables, but 

America’s industrial community continues to be frightfully slow in adopting agbased industrial materials. The prior sentence was included in several of my previous testimonies and rings true again. We are making progress and must continue 

to aggressively pursue these opportunities and in doing so: 

—Intensify U.S. efforts to commercialize alternative crops and dramatically reduce atmospheric VOC emissions and odor. The result will be much cleaner and 

less noxious air for all Americans. 

— Reduce U.S. reliance on imported petroleum. 

— Maintain a healthy and prosperous farm economy with unlimited sustainability. 

— Foster new cooperative opportunities between American farmers and American 

industry. 

—Create advanced polymer technology-based manufacturing jobs that can not be 

easily exported to other countries. 

Mr. Chairman, your leadership and support are deeply appreciated by the entire 

USM community. While I can greatly appreciate the financial restraints facing your 

Subcommittee, I feel confident that further support of the Mississippi Polymer Institute will continue to pay dividends of increasing commercialization opportunities of 

agricultural materials in the American industry and training scientists required for 

America’s continued prosperity. Advances in polymer research are crucial to food, 

energy, transportation, housing, medical, and defense industries. Our work has 

clearly established the value of ag-products as industrial raw materials, and we 

must move it from the laboratories to the industrial manufacturing sector. Only 

then can the United States enjoy the cleaner and safer environment that these technologies offer, as well as new jobs, and expanded opportunities for the U.S. farmer 

and scientists. We are most grateful for the support you have provided in the past. 

The funding you have provided has supported fundamental research as well as pilot 

commercial manufacturing and testing. However, additional funds are needed to further advance these technologies. 

Since our testimony last year, we have continued to research, understand, and develop, agricultural-based materials for commercialization. We are in need of additional and consistent resources to advance these infant technologies to the market 

place, and to continue our research and development of other exciting technologies. 

We therefore respectfully request $2 million in federal funding to more fully exploit 

the potential of commercializing the technologies described herein. We have shown 

that we can be successful, yet we need additional resources in order to ultimately 
636 

utilize the potential of this technology. Next year’s research and commercialization 

plan is aggressive, knowing that our Nation requires technology to survive and that 

our efforts will be recognized as instrumental in developing a ‘‘process’’ for the commercialization of new ag-based products. The development of this process, and to 

show it is successful, is extremely important to all entrepreneurs who believe in and 

support ag-based products. Thank you, Mr. Chairman and Members of the Subcommittee, for your support and consideration. 

PREPARED STATEMENT OF THE UPPER MISSISSIPPI RIVER BASIN ASSOCIATION

The Upper Mississippi River Basin Association (UMRBA) is the organization created in 1981 by the Governors of Illinois, Iowa, Minnesota, Missouri, and Wisconsin 

to serve as a forum for coordinating the five States’ river-related programs and policies and for collaborating with Federal agencies on regional water resource issues. 

As such, the UMRBA has an interest in the budget for the U.S. Department of Agriculture’s conservation programs and technical assistance. 

Of particular importance to the UMRBA is funding for the Conservation Reserve 

Program (CRP), Wetlands Reserve Program (WRP), Environmental Quality Incentives Program (EQIP), and Conservation Security Program (CSP). Taken together, 

these four Commodity Credit Corporation-funded programs provide an invaluable 

means for the USDA to work with landowners, local conservation districts, and the 

states to maintain agricultural productivity while protecting the Nation’s soil and 

water resources. Moreover, they do this in a voluntary, non-regulatory fashion. CRP, 

WRP, EQIP, and CSP will be key non-regulatory elements in the States’ efforts to 

address agricultural sources of water quality impairment through the Total Maximum Daily Load program. Successful application of conservation programs to this 

region’s water quality problems will also help address the growing national concern 

with hypoxia in the Gulf of Mexico, which has been linked to nutrient loads from 

agriculture and other sources. As stewards of some of the Nation’s most productive 

agricultural lands and important water resources, the five States of the Upper Mississippi River Basin believe these programs are vital. 

Conservation Reserve Program 

The UMRBA supports President Bush’s fiscal year 2007 budget request of $2.09 

billion for the Conservation Reserve Program, a 5 percent increase over fiscal year 

2006. This increase is testament to the strong landowner interest and high environmental benefits resulting from enrollment of fragile cropland acres in CRP. Through 

CRP, farmers and ranchers can voluntarily establish long term conservation practices, such as filter strips and riparian buffers, on highly erodible and environmentally sensitive cropland. 

In the UMRBA States (Illinois, Iowa, Minnesota, Missouri, and Wisconsin), total 

CRP enrollment is currently 7.0 million acres, or approximately 19 percent of the 

national CRP acreage. Yet the five States’ CRP enrollment represents 41 percent 

of the total number of CRP contracts, 40 percent of the total number of farms enrolled nationwide in the CRP, and 32 percent of the total annual CRP rental payments. 

In 2007, nearly 39,000 CRP contracts in the five UMRBA States will expire, representing 29 percent of the CRP acres currently enrolled in these States. To determine which expiring contracts will be eligible for re-enrollment, USDA used an Environmental Benefits Index. As a result, 99.7 percent of the contracts expiring in 

2007 in the five States will be offered re-enrollment. 

All five UMRBA States also have active Conservation Reserve Enhancement Programs tailored to meet their priority conservation needs. Current CREP enrollment 

in the five States is nearly 243,000 acres, or 31 percent of the national total. These 

rates of participation clearly demonstrate the importance of the CRP and CREP in 

the Nation’s agricultural heartland and reflect the compatibility of these programs 

with agricultural productivity. 

Wetlands Reserve Program 

The President’s fiscal year 2007 budget proposes $403 million for the Wetlands 

Reserve Program, an increase of 60 percent over fiscal year 2006 funding. UMRBA 

applauds this substantial increase and urges Congress to provide sufficient funding 

to meet WRP’s 2007 enrollment goal of 250,000 acres, which is 100,000 acres more 

than the 2006 estimate. 

Since the WRP was established in 1996, its easements have proven to be important tools for restoring and protecting wetlands in agricultural areas. This is clearly 

evident from the overwhelming landowner response and the resulting improvements 

to water quality and habitat. Through fiscal year 2004, WRP enrollment in Illinois, 
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Iowa, Minnesota, Missouri, and Wisconsin totaled more than 309,000 acres, or 19 

percent of the national total. In fiscal year 2005, landowners in the five States enrolled an additional 28,000 acres in the WRP. However, there were 1,217 eligible, 

but unfunded, applications to enroll another 134,000 acres from the five States in 

fiscal year 2005. This represents 38 percent of the total national backlog of applications for that year. 

Environmental Quality Incentives Program 

In contrast to conservation programs that protect land and water resources by 

curtailing production on sensitive lands, the Environmental Quality Incentives Program supports conservation on working lands. Promoting agricultural production 

and environmental quality as compatible goals is particularly important in the Midwest agricultural heartland. The 2002 Farm Bill provides $1.3 billion of budget authority for the EQIP in fiscal year 2007. However, the President is proposing to fund EQIP at only $1.0 billion. 

The UMRBA urges Congress to fund EQIP at its full authorized level. Like many 

other conservation programs, EQIP funding has not kept pace with demand. Even 

at full funding, there will likely be significant numbers of unfunded EQIP applications. In fiscal year 2006, the EQIP allocation to the States of Illinois, Iowa, Minnesota, Missouri, and Wisconsin totals $118 million, only slightly more than the 

$114 million provided in fiscal year 2004, a year when there was an additional $180 

million in unmet requests for EQIP assistance. 

Conservation Security Program 

The President’s fiscal year 2007 budget request of $342 million for the Conservation Security Program reflects a 32 percent increase over fiscal year 2006 for this 

popular voluntary program, which provides financial and technical assistance to agricultural producers who implement conservation measures on working lands. 

In fiscal year 2005, CSP contracts were offered to farmers and ranchers in 220 

watersheds across the country. Twenty-two of those watersheds were in the five 

States of the Upper Mississippi River Basin. In those 22 watersheds, NRCS approved payments totaling $37.6 million, which was 26 percent of the total CSP contract payments that year. 

In fiscal year 2006, CSP will be offered in 60 different watersheds nationwide, including one or two in each UMRBA State. It is too early to judge the demand for 

CSP in fiscal year 2006. The fiscal year 2006 sign-up opened February 13, 2006 and 

is scheduled to close March 31, 2006. It remains to be seen what the ultimate level 

of landowner interest will be in the CSP, as eligible watersheds change each year. 

But the UMRBA is encouraged that CSP is continuing to expand and funding levels 

are increasing. 

Conservation Technical Assistance 

Through the Conservation Technical Assistance program, NRCS provides the 

technical capability that helps people plan and apply conservation on the land. 

NRCS works through and in partnership with conservation districts to assist individuals and groups in assessing conservation needs and planning, designing, and installing conservation practices. In addition, the CTA program assists in preparing 

landowners to participate in USDA conservation financial assistance and easement 

programs, provides emergency disaster technical assistance, and enables NRCS to 

coordinate with other programs such as U.S. EPA’s nonpoint source management 

program and U.S. Fish and Wildlife Service’s Partners for Wildlife. Approximately 

$92.8 million in CTA funding will be allocated to the five UMRBA States (Illinois, 

Iowa, Minnesota, Missouri, and Wisconsin) in fiscal year 2006. Yet that is an 8.6 

percent decrease from funding levels just 2 years ago. 

Given that CTA is the foundation for much of the Nation’s private lands conservation assistance, it is disappointing that the President’s fiscal year 2007 budget proposes a $62 million, or 9 percent, decrease in the CTA account. The UMRBA urges 

that, at a minimum, funding for CTA be maintained at the fiscal year 2006 level. 

Watershed Programs 

The UMRBA is concerned that the President is proposing deep cuts to NRCS’s 

watershed programs, including total elimination of the Watershed and Flood Prevention Operations program, which funds Public Law 566 and Public Law 534 

projects. Funding for Watershed Operations has declined substantially over the past 

20 years, from an historical high of $199 million in fiscal year 1994 to only $74 million in fiscal year 2006. And yet this program provides significant local, regional, 

and national benefits, by addressing watershed protection, flood prevention, erosion 

and sediment control, water supply, water quality, water conservation, agricultural 

drought problems, rural development, municipal and industrial water needs, up-
638 

stream flood damages, fish and wildlife habitat enhancement, and wetland creation 

and restoration. In May 2005 there were $1.89 billion of unfunded Federal commitments to Public Law 566 and Public Law 534 projects nationwide, with nearly $243 

million of that in the States of Illinois, Iowa, Minnesota, and Missouri. Despite the 

fact that Public Law 566 and Public Law 534 projects in the five States were allocated nearly 27 percent of the total national funding in fiscal year 2005, that 

amount ($19.1 million) was far less than the $243 million backlog. In fiscal year 

2006, although there is only $74 million available for watershed protection and flood 

prevention operations nationwide, there are funding requests totaling over $174 million, $44 million of which are in the five UMRBA States. Rather than eliminating 

this important program, UMRBA urges that it be funded at least equal to the fiscal 

year 2006 level of $74 million. 

In addition to continuing to invest in watershed and flood prevention projects, the 

rehabilitation of aging flood control dams must also be addressed. Of the 11,000 

Public Law 534 and Public Law 566 dams nationwide, more than 3,000 will reach 

the end of their design life by 2013. Recognizing this fact, Congress authorized the 

Watershed Rehabilitation Program in 2000 and authorized significant new funding 

for the program in the 2002 Farm Bill. In particular, $60 million is authorized for 

the Watershed Rehabilitation Program in fiscal year 2007. Yet the President’s fiscal 

year 2007 budget request is only $15 million, a 52 percent decrease over the fiscal 

year 2006 funding level. In fiscal year 2005, when $27.3 million was appropriated 

for the Watershed Rehabilitation Program, only 60 percent of the $46 million in 

project requests was met for the year. Rehabilitation of aging dams, which could become a threat to public health and safety, is extremely important and UMRBA thus 

urges Congress to fund the Watershed Rehabilitation Program at least equal to its 

fiscal year 2006 level. 

PREPARED STATEMENT OF WEST VIRGINIA UNIVERSITY

Chairman Bennett and Members of the Subcommittee: Thank you for the opportunity to offer testimony to the Subcommittee on Agriculture, Rural Development, 

and Related Agencies. We request funding in the amount of $1,000,000 in the USDA 

budget for fiscal year 2007 to initiate a program called SCIPS, the Small Community Infrastructure Protection and Sustainability program. Discussion regarding our 

request is offered below. 

Introduction 

My name is Richard Bajura, and I serve as Director of the National Research 

Center for Coal and Energy at West Virginia University in Morgantown, West Virginia. We have a long history of working with small and rural communities on 

projects in drinking water, wastewater, solid waste management, security for small 

community water systems, and emergency preparedness. We offer a resource of information and specialized technical assistance and training services to small communities and to those professionals that serve small communities and rural areas. 

Currently in the United States, there are no comprehensive regional or national 

centers dedicated to helping a small community to prepare for, respond to, and recover from natural or man-made emergencies or terrorist acts which affect a community’s water infrastructure. This testimony outlines a model concept called Small 

Community Infrastructure Protection and Sustainability (SCIPS) which addresses 

this national need. Benefits to be gained by small communities include improved 

emergency preparedness and reduced costs for restoring infrastructure and services. 

Need 

In the last 5 years, the Federal Emergency Management Administration (FEMA) 

has responded to more than 300 declared disasters including natural events such 

as earthquakes, hurricanes, tornadoes, and floods and man-made perils such as 

major fires, dispersal of hazardous materials, and acts of terrorism. Floods are the 

most common and widespread of all natural disasters except fires. The devastation 

caused by hurricanes such as Katrina or Rita is widely publicized and impinges on 

our consciousness. During major disasters, much of the Nation’s attention is focused 

on large population centers, but nearly one-third of all Americans live in small, 

rural communities. Early reports on Hurricane Katrina’s aftermath indicated that 

nearly 1,000 drinking water and sewer systems were damaged and non-functional. 

Most of the impacted systems were in sparsely populated rural communities, lacking 

in emergency communications, and typically last in line for assistance as responders 

bypassed them on the way to the bigger cities. 

Advance preparation before an emergency is essential since federal protocols require that communities should be able to manage with their own resources for at 
639 

least 24 to 72 hours before national programs provide assistance. But many small 

communities lack the expertise, information, and resources to install and operate 

appropriate water and wastewater systems, prepare the mandated emergency response plans, respond to emergencies when they occur, and recover afterwards. 

Small, and even medium-sized communities, are the least able to afford security and 

emergency preparedness enhancements to their water infrastructure or to obtain 

such expertise. These communities require assistance in all phases of preparing for 

and responding to emergencies. 

SCIPS Model 

States and their respective small communities would benefit from access to a national resource dedicated to providing comprehensive water and wastewater assistance in all phases of emergency management. The SCIPS model program can assist 

small communities nationwide to maintain, protect, and replace water infrastructure resources damaged during emergency events. A service organization, or center, 

based on the SCIPS model draws upon experts in technology, public health, public 

administration, law, and policy to make the best environmentally and economically 

sound options available to small communities. SCIPS can serve as a comprehensive, 

one-stop resource for regulatory and public officials, assistance providers, utility operators/managers, and homeowners who want unbiased and timely information on 

water and wastewater infrastructure selection, maintenance, and replacement. 

Community Preparation.—During non-emergency periods, the SCIPS center focuses on community preparedness. Preparedness includes development and dissemination of short- and long-term strategies addressing threats to, and fostering the 

sustainability of, small community water and wastewater infrastructure. SCIPS personnel will provide customized training and education, technical assistance, and 

R&D throughout the Nation. These services will promote and facilitate asset management practices and emergency protocols as an integral part of infrastructure protection and sustainability. The SCIPS center increases the knowledge base of community officials, policy makers, scientists, engineers, and others through a research, 

education, and awareness campaign. 

Disaster Response.—During a disaster, the SCIPS center is a specialized resource 

that can be drawn upon at the request of national and local officials for timely assistance. The SCIPS center has core capabilities as an information center and technical assistance provider through its extensive knowledge of the network of public 

and private service providers across the Nation. SCIPS personnel are available to 

answer questions via hotline phone and internet facilities, serve as a communications resource among responders, and provide specialized assistance by arranging 

for technology experts to visit the affected communities. The SCIPS center assists 

communities in quickly restoring services as effectively as possible based on the extent of the disaster. 

Recovery.—During the post-emergency recovery phase, the SCIPS center assists 

communities in assessing damage, evaluating options for infrastructure replacement, and providing technical services for the replacement, installation and/or repair of infrastructure damaged during the emergency. The SCIPS center provides 

communities access to local, regional, and national experts. The Center offers a comprehensive spectrum of assistance to small communities for recovery of services, 

which enables a return of economic productivity to the community in addition to restoring essential services and ensuring public health. 

Benefits 

The benefits to small and rural communities and to the Nation from establishing 

the SCIPS program include: 

—Implementation of viable security improvements for water and wastewater infrastructure, systems ‘‘hardened’’ to withstand disaster and prevent damage 

from terrorism acts, and quicker recovery of essential systems and services after 

catastrophic events; 

—Small communities that are better informed about preparing and implementing 

water and wastewater emergency procedures; 

—Communications plans for small community water and wastewater treatment 

systems in coordination with other community organizations; 

—Improved rural community public health and a protected environment; and, 

—Cost savings at the Federal, State and local levels realized by implementing infrastructure sustainability measures which reduce economic losses during catastrophic events. 

West Virginia University 

West Virginia University is uniquely qualified to undertake implementation of the 

SCIPS model. As a comprehensive land grant, research extensive university, West 
640 

Virginia University has the necessary faculty expertise to address the spectrum of 

legal, health, policy, research, and service requirements of the SCIPS model. Its National Environmental Services Center has more than 26 years of service to the Nation’s small communities in the areas of drinking water, waste water, homeland security, and educational and training programs. The Center also has working relationships with relevant Federal agencies, State offices, and technology experts 

through out the country who would participate in response teams addressing emergencies in their respective regions. 

Recommendation 

The lessons learned from the effects of Hurricane Katrina demonstrate the need 

for assistance to small communities in the protecting drinking water and wastewater infrastructure. We recommend establishing a national center to provide the 

services outlined under the SCIPS model. 

The following language is suggested for the Subcommittee Report: ‘‘The Managers 

provide $1 million for the Small Community Infrastructure Protection and Sustainability program.’’ We have not received funding for this program previously. 

PREPARED STATEMENT OF THE NATIONAL DRINKING WATER CLEARINGHOUSE

Chairman Bennett and Members of the Subcommittee: Thank you for the opportunity to offer testimony to the Subcommittee on Agriculture, Rural Development 

and Related Agencies. We request an appropriation of $2 million for fiscal year 2007 

to continue the programs of the National Drinking Water Clearinghouse [NDWC] 

under the Rural Community Advancement Program [RCAP] in the USDA budget. 

Introduction 

My name is Richard Bajura, and I represent the National Drinking Water Clearinghouse, which is located at West Virginia University in Morgantown, West Virginia. My unit is home to a specialized suite of programs that address the environmental needs of small and rural communities. Our staff members have expertise in 

drinking water, wastewater, solid waste management, security systems for small 

community infrastructure, and emergency preparedness. We offer a resource of information and specialized technical assistance and training services to small communities and to those professionals that serve small communities and rural areas. 

This testimony focuses on our programs in drinking water infrastructure that are 

funded under RCAP. 

Need for Federal Programs 

Clean, safe drinking water and the effective treatment of wastewater are critical 

to public and environmental health. For most of us, it’s easy to take water for granted. However, not that long ago, most people didn’t have indoor plumbing. According 

to U.S. Census Bureau data, half of American homes in 1940 lacked complete 

plumbing facilities (defined as hot and cold piped water, a bathtub or shower, and 

a flush toilet). By 2002, EPA found that the number of homes having complete 

plumbing facilities increased to 91 percent. Much of this improvement can be attributed to Federal infrastructure investment. The U.S. Department of Agriculture’s 

Rural Utilities Service [RUS] has provided more than $20 billion for water and 

wastewater projects since 1947. In spite of these improvements, however, 670,000 

households (with nearly 2 million people) lack access to water, sanitation, or both. 

Safe, affordable water infrastructure is an investment in the economic viability and 

public health of rural America. 

Water Infrastructure Challenges 

Over 50,000 water treatment systems serve the U.S. population, with 86 percent 

of these systems being classified as ‘‘small’’ systems (serving fewer than 3,300 customers) and ‘‘very small’’ systems (serving fewer than 500 customers). Because 

smaller systems have lower revenues and fewer resources, they are more likely to 

have difficulty meeting an increasing number of environmental regulations. Very 

small systems are 50 percent more likely to incur violations than all other system 

sizes. When the Safe Drinking Water Act was passed in 1974, 18 contaminants were 

regulated. By 2004, that number had grown to 86. Another eight will be added by 

2008. 

While significant progress has been made, a number of challenges confront communities as they try to safeguard public health. The very nature of rural/small town 

America works against easy solutions to providing essential water service. The cost 

of providing basic water service (and other infrastructure) is often prohibitive because of geographic isolation, low population density, social and cultural diversity, 
641 

and a lack of proper information. Twenty-five percent of our Nation’s drinking water 

utilities have insufficient revenues to fund the full cost of providing service to customers. An equal percentage of utilities have deferred maintenance due to insufficient funding. Estimates show that during 2000–2019, the operation and maintenance funding gap for our Nation’s drinking water utilities could be as high as $495 

billion, and the capital funding gap could be as high as $267 billion. 

In many communities, water distribution systems and wastewater collection systems are 40 to 50 years old, with many dating back more than a century. According 

to the American Society of Civil Engineers (ASCE), U.S. drinking water systems are 

responsible for maintaining an estimated 800,000 miles of water delivery pipelines. 

In the 2002 report titled Clean Water and Drinking Water Infrastructure Gap Analysis, EPA estimated that we need to invest $265 billion for drinking water systems 

infrastructure through 2022. In the 2003 update to ASCE’s Report Card for America’s Infrastructure, both drinking water and wastewater were given a grade of ‘‘D.’’ 

The report suggests that, without new investment, the progress made over the last 

30 years is threatened. 

As a partial solution to addressing these challenges, the Technical Assistance and 

Training [TAT] grants program under the USDA Rural Community Advancement 

Program make it possible for small communities to maximize their investments in 

water infrastructure through the use of appropriate technology and sound management practices. The next sections of this testimony focus on programs of the National Drinking Water Clearinghouse which provide needed assistance to these communities. 

Information and Technical Assistance Services of the NDWC 

For 15 years, the National Drinking Water Clearinghouse has helped small and 

rural communities with their water infrastructure management and utility security 

issues. The NDWC’s services enable small communities to provide clean water to 

their citizens and prevent pollution. In this way the NDWC helps small and rural 

communities to protect their public health, increase economic opportunity, and improve their quality of life through providing adequate, safe, and economical drinking 

water to their citizens. 

The NDWC accomplishes its mission through a three-pronged approach. First, the 

NDWC provides targeted assistance and quality information for meeting regulatory 

compliance requirements and for optimizing community water services. Second, the 

NDWC provides assistance and strategic information to small communities to enable them to develop sustainable water services that facilitate economic development. Third, the National Drinking Water Clearinghouse provides information for 

public awareness and increased stewardship of water resources to educate community officials (who usually are part-time administrators) and the general public. 

The NDWC performs a range of assistance activities for small communities. Telephone callers can obtain toll-free technical assistance from our staff of certified operators, engineers, and scientists. Our quarterly publication ‘‘On Tap,’’ a magazine 

about drinking water treatment, financing, and management options helps communities and small water systems to operate, manage and maintain their facilities 

while keeping them financially viable. A comprehensive Web site and databases 

with thousands of entries provide around the clock access to contemporary information on small water systems. Training sessions customized for small and rural 

areas, teleconferences, and more than 400 free and low-cost educational products 

provide people the instruction and tools they need to address their most pressing 

drinking water issues. 

These services are well received by small community officials and service providers and should be continued. Unless the services of the National Drinking Water 

Clearinghouse are available to provide assistance to these communities regarding 

alternative technologies, preparing grant proposals, and training the community officials and service providers, the health of these communities will be jeopardized 

and opportunities for economic development will be severely hampered. 

We plan to use $1.5 million of our request to continue NDWC’s Information and 

Technical Assistance Services in fiscal year 2007. This program receives funding 

from proposals submitted to the Technical Assistance and Training [TAT] Grants 

Program in the RCAP budget line. 

Special Services to Small Communities 

In addition to the National Drinking Water Clearinghouse’s knowledge base and 

technical support, the NDWC is expanding its assistance to small ‘‘underserved’’ 

communities through technical field support. ‘‘Underserved’’ is a term that is used 

to characterize those small and rural communities that, due to size and economic 

constraints, have great difficulty assessing their environmental problems and com-
642 

peting for funding. Examples would be communities such as we have in West Virginia, Alaska, the sprawling Colonias bordering Mexico, Indian reservations, and 

small communities in California, New York, and the New England States. 

The NDWC’s funding under the Technical Assistance and Training Grants program currently does not provide for direct ‘‘on the ground’’ services to underserved 

communities. A portion of our funding will be used to develop a pilot program to 

honor requests for site-specific technical support from underserved communities. 

This support gives small and very small communities assistance through site assessments and feasibility studies that they might not otherwise be able to access for 

planning needed infrastructure improvements, their financing, and management. 

Communities often ask for help in assessing their water and wastewater needs 

and options prior to contacting and retaining the services of a private consulting 

firm. Through the pilot program, the NDWC will be able to conduct site assessments 

and offer information and education on technology options. In addition, NDWC staff 

will attend and make presentations at community meetings concerning best technology and management practices. Pre-engineering assessments conducted by 

NDWC will enable communities to have a thorough knowledge of their water and 

wastewater treatment needs and options, prior to retaining engineering services. In 

this way they will be positioned to select technologies that they can afford, and will 

be able to manage and maintain. 

Funding for the special services to small communities programs will enable assistance to be provided on location in communities throughout the United States. We 

will use $500,000 of our appropriation for special services to small communities. 

For the past several years, the Managers of this Subcommittee have inserted language in the committee report for Agriculture Appropriations budget bill that recommended increases in our annual funding to provide special services to underserved communities. However, no specific amount of funding was earmarked 

through this language, and, consequently, the National Drinking Water Clearinghouse has not received funding from USDA to initiate the special services program. 

Request 

In the Conference Report for the USDA appropriations for fiscal year 2006 [H.R. 

109–255], the Conference Managers directed spending in the amount of $18,250,000 

for the Technical Assistance and Training [TAT] Grants Program in the RCAP 

budget line. For fiscal year 2007, we request that the TAT program receive sufficient funding to maintain the NDWC program and that of the total amount provided 

for fiscal year 2007, $2 million should be specifically earmarked for the programs 

of the NDWC. 

The following language is suggested for the USDA Subcommittee Report: ‘‘The 

Mangers provide $2 million to the National Drinking Water Clearinghouse for information, technical assistance and special services to small communities.’’ 

A summary of our recent awards history is provided for reference. 

FUNDING AWARDED TO THE NATIONAL DRINKING WATER CLEARINGHOUSE FOR TECHNICAL ASSISTANCE AND TRAINING (TAT) PROJECTS UNDER THE RURAL COMMUNITY ADVANCEMENT PROGRAM 

(RCAP) OF THE USDA BUDGET 

USDA funded grants Federal fiscal 

year appropriated Award amount 

National Drinking Water Clearinghouse ................................................................................. 2006 ( 1 ) 

National Drinking Water Clearinghouse ................................................................................. 2005 $1,200,000 

National Drinking Water Clearinghouse ................................................................................. 2004 1,157,000 

National Drinking Water Clearinghouse ................................................................................. 2003 1,336,000 

Technical Assistance for Rural Wastewater Management Entities (Project II) ..................... 2003 510,000 

National Drinking Water Clearinghouse ................................................................................. 2002 1,336,000 

Technical Assistance for Rural Wastewater Management Entities (Project II) ..................... 2002 500,000 

........................ 6,039,000 

1 Amount pending. 

Fiscal year 2007 Request: $2 million ($1.5 million for Information and Technical Assistance Services and $0.5 million for Special Services 

to Small Communities). 

PREPARED STATEMENT OF THE WILDLIFE SOCIETY

The Wildlife Society appreciates the opportunity to submit testimony concerning 

the fiscal year 2007 budgets for the Natural Resources Conservation Service 

(NRCS), Animal Plant Health Inspection Service (APHIS), and Cooperative State 
643 

Research, Education and Extension Services (CSREES). The Wildlife Society is the 

association of almost 8,000 professional wildlife biologists and managers dedicated 

to sound wildlife stewardship through science and education. The Wildlife Society 

is committed to strengthening all Federal programs that benefit wildlife and their 

habitats on agricultural and other private land. 

Natural Resources Conservation Service 

Wildlife Habitat Incentives Program (WHIP).—WHIP is a voluntary program that 

provides technical and financial support to farmers and ranchers to create high 

quality wildlife habitat. The Wildlife Society recommends funding WHIP at $85 million in fiscal year 2007, the full amount authorized by the 2002 Farm Bill. 

Wetland Reserve Program (WRP).—WRP is a valuable program designed to assist 

farmers and ranchers in protecting and restoring wetland habitat. The Wildlife Society appreciates the continued targeting of 200,000 acres annually for enrollment in 

WRP. However, we recognize that if the authorized level of 250,000 acres is not enrolled every year, then enrollment must increase in future years to reach the authorized level of 2,275,000 acres. Full WRP enrollment is needed if the Administration intends to achieve the President’s goal of no-net-loss of wetlands. The Wildlife 

Society supports an enrollment target of 250,000 acres in fiscal year 2007. 

Animal and Plant Heath Inspection Service 

Wildlife Services.—Wildlife Services (WS), a unit of APHIS, is responsible for controlling wildlife damage to agriculture, aquaculture, forest, range, and other natural 

resources, for controlling wildlife-borne diseases, and for controlling wildlife at airports. Its activities are based on the principles of wildlife management and integrated damage management, and are carried out cooperatively with State fish and 

wildlife agencies. 

The Wildlife Society is concerned by the Administration’s proposal to decrease 

funding in key activity areas for WS. The President’s fiscal year 2007 proposed 

budget directs an increase of $9,750,000 to the WS Operations line item, while requesting $12,539,000 in deceases to offset the proposed increases, for a net decrease 

of $2,789,000. In essence, $9,750,000 is being redirected from existing activities to 

support airport safety and assistance ($3,000,000), the oral rabies vaccination program ($1,750,000), and wildlife disease monitoring and surveillance ($5,000,000). 

While we are pleased that these activities have gained presidential support, these 

new mandates, along with the net decrease to the WS operational budget, will effect 

a $12,539,000 overall reduction to key activity areas. The Wildlife Society strongly 

recommends that Congress restore, as an add-on, the proposed decrease of 

$2,789,000 and provide increased funding of $9,750,000 for WS to continue local program operations, as well as to support the airport safety, rabies, and wildlife disease 

activities without redirecting funds from other needed activities. 

We understand the importance of safeguarding our Nation against highly pathogenic avian influenza and applaud the added fiscal resources to address this critical 

issue. The President’s fiscal year 2007 budget proposal redirects $3.2 million for 

avian influenza research as it relates to migratory birds. The Wildlife Society recommends that Congress provide additional money to adequately fund this and other 

important and associated research. Redirection of funds for this program would have 

serious and, in many cases, terminal effects on existing projects. 

This program is also short $2.2 million because of previously directed unfunded 

earmarks. These directed programs leave important programs under-funded, like 

the Jack Berryman Institute for Wildlife Damage Management at Utah and Mississippi State Universities; the Logan, Utah Predator Research Station; the newlyestablished Texas A&M University-Kingsville Research Field Station; important reproduction inhibition research; and the National Trap Standards Development and 

Testing Project. 

Veterinary Services.—The Wildlife Society is deeply troubled by the proposed cuts 

in several line-item budgets of USDA–APHIS-Veterinary Services (VS). The protection of wildlife, livestock, and humans from the threat of intentional and/or accidental introduction of disease pathogens is very real and increases daily. The occurrence of Highly Pathogenic Avian Influenza H5N1 in Asia, Europe, Africa, and the 

Middle East, the introduction of Monkey Pox in 2003, the Exotic Newcastle Disease 

event in California and other States in 2003–2004, and the national spread of West 

Nile Virus starting in 1999 all indicate that the introduction of diseases is rapidly 

increasing with no signs of abating. In time of concern about national security and 

the need to protect the citizens of the United States. from the introduction of exotic 

diseases, it is imperative that funding for the agencies responsible for detecting and 

prohibiting disease introductions be adequately funded. The reemergence of several 

diseases, such as bovine TB, Brucellosis, and others indicate that the efforts to con-
644 

trol and eradicate these diseases are not complete and APHIS must continue to address the threats they pose to livestock, wildlife, and humans. Additionally, VS continues to identify some diseases, such as pseudorabies in feral pigs, as important 

economic drains on the economy while sister agencies in USDA–APHIS propose to 

cut research into feral hog control programs. The Wildlife Society strongly recommends that all branches of USDA–APHIS coordinate budgets and activities for 

livestock and wildlife disease surveillance, research, and control. 

The Wildlife Society is very concerned about the proposed $1.405 million reduction 

in the Brucellosis Program budget. This appears ill-advised given the fact that three 

States—Texas, Wyoming, and Idaho—currently are without their brucellosis classfree status because of recent outbreaks in domestic cattle herds. Because of its presence in wild elk and bison, brucellosis in the Greater Yellowstone Area will be especially difficult to eliminate and will require more, not less, fiscal resources to accomplish. We recommend Congress restore brucellosis funding to $11 million in fiscal 

year 2007, and that USDA–APHIS-Veterinary Services continue to utilize the authorities and expertise of the Greater Yellowstone Interagency Brucellosis Committee to address domestic livestock interactions with wild elk and bison in the region. 

The Wildlife Society commends APHIS-Veterinary Services for providing funding 

to state wildlife management agencies for Chronic Wasting Disease (CWD) surveillance and management in free-ranging deer and elk. Additionally, The Wildlife Society strongly supports APHIS’ efforts to eliminate CWD from captive cervids in order 

to eliminate the risk of spread of the disease from these animals to free-ranging 

deer and elk. The surveillance and monitoring efforts conducted by all 50 States 

during 2004 and 2005 would not have been possible without this cooperative funding. Additionally, knowledge of the presence and prevalence of CWD has been enhanced by this program. Without continued funding, States will be unable to maintain the level of CWD surveillance necessary to track the disease. The National 

CWD Plan calls for additional management efforts to prevent the spread of CWD 

in the United States. The finding of CWD in three additional States in 2005 (New 

York, West Virginia, and Kansas) emphasizes the need for continued surveillance 

and monitoring. Without the State cooperative agreement funding from Veterinary 

Services, this surveillance and monitoring would not be possible. With additional 

States finding CWD or bordering States with CWD, the amount of funding available 

will be spread thinner, while the need for this activity increases. The Wildlife Society strongly recommends Congress increase CWD funding to a total of $30 million 

in fiscal year 2007, with $20 million designated for cooperative agreements with the 

States for surveillance and management of CWD in free-ranging cervids. 

The Wildlife Society is encouraged by the additional funding proposed in fiscal 

year 2007 for both low pathogenic and high pathogenic avian influenza work. The 

potential for this disease to spread to the North American continent and severely 

impact wildlife, domestic poultry, and humans highlights the importance of continued surveillance and monitoring of all zoonotic diseases. The fiscal year 2006 supplemental appropriation provided funding needed to begin to address the avian influenza issue, both in the United States and elsewhere. This effort must continue 

to ensure that America’s citizens and resources are protected. The Wildlife Society 

strongly supports the proposed funding for low pathogenic avian influenza at $3.05 

million and for high pathogenic avian influenza at $51.7 million. 

Cooperative State Research, Education, and Extension Service 

Renewable Resources Extension Act.—RREA provides an expanded, comprehensive 

extension program for forest and rangeland renewable resources. The RREA funds, 

which are apportioned to State Extension Services, effectively leverage cooperative 

partnerships at an average of four to one, with a focus on private landowners. The 

need for RREA educational programs is greater today than ever because of continuing fragmentation of ownership, urbanization, the diversity of landowners needing assistance and increasing societal concerns about land use and the impact on 

natural resources including soil, water, air, wildlife and other environmental factors. 

The Wildlife Society recommends that the Renewable Resources Extension Act be 

funded at $30 million as authorized in the 2002 Farm Bill. 

McIntire-Stennis.—The proposed budget for fiscal year 2007 reflects a stable funding level for the McIntire-Stennis Cooperative Forestry program. An alternative approach to the research formula base programs would redirect 45 percent of both the 

Hatch Act and the McIntire-Stennis Cooperative Forestry program funds to nationally competitively awarded multi-state/multi-institutional projects. This represents 

a significant departure from prior years. These funds are essential to the future of 

resource management on non-industrial private forestlands, as forest products are 

produced while conserving natural resources, including fish and wildlife. As demand 
645 

for forest products grow, private-land forests will increasingly be needed to supplement supplies, but trees suitable for harvest take decades to produce (versus the 

single year in which crops such as corn and soybeans can be harvested). In the absence of long-term and on-going research, such as provided through McIntire-Stennis, the Nation could easily become ill-suited to meet future forest-product needs. 

Replacement of McIntire-Stennis funding with competitive grants will leave longterm and stable forest research to chance. The Wildlife Society strongly believes 

that the reasons for continuing the McIntire-Stennis Cooperative Forestry program 

into the future are compelling and urges Congress to increase the fiscal year 2007 

budget to $25 million, an amount more consistent with historic levels. 

National Research Initiative.—National Research Initiative Competitive Grants 

(NRI) are open to academic institutions, Federal agencies, and private organizations 

to fund research on improving agricultural practices, particularly production systems that are sustainable both environmentally and economically, and to develop 

methods for protecting natural resources and wildlife. Innovative grant programs 

such as NRI help broaden approaches to land management, such as integrating timber and wildlife management on private lands. The Wildlife Society supports the administration request of $247 million for National Research Initiative Competitive 

Grants. 

Thank you for considering the views of wildlife professionals. We look forward to 

working with you and your staff to ensure adequate funding for wildlife conservation. 

(i) 

LIST OF WITNESSES, COMMUNICATIONS, AND 

PREPARED STATEMENTS 

Page 

Advanced Medical Technology Association, Prepared Statement of ................... 293 

American: 

Farm Bureau Federation, Prepared Statement of ......................................... 527 

Indian Higher Education Consortium, Prepared Statement of .................... 530 

Public Power Association, Prepared Statement of ......................................... 534 

Society: 

For Microbiology, Prepared Statements of.......................................... 538, 540 

Of: 

Agronomy, Crop Science Society of America, and Soil Science 

Society of America, Prepared Statement of .................................. 534 

Civil Engineers, Prepared Statement of ........................................... 536 

Plant Biologists (ASPB), Prepared Statement of ............................. 543 

Andrew, James M., Administrator, Rural Utilities Service, Department of 

Agriculture, Prepared Statement of ................................................................... 432 

Bennett, Senator Robert F., U.S. Senator From Utah: 

Opening Statements of ........................................................................... 1, 133, 297 

Questions Submitted by........................................................................ 79, 173, 455 

Bond, Senator Christopher S., U.S. Senator From Missouri, Questions Submitted by ............................................................................................................... 91 

Bosecker, R. Ronald, Administrator, National Agricultural Statistics Service, 

Department of Agriculture, Prepared Statement of .......................................... 33 

Bost, Eric M., Under Secretary, Food, Nutrition, and Consumer Services, 

Department of Agriculture .................................................................................. 297 

Prepared Statement of ..................................................................................... 346 

Statement of ...................................................................................................... 345 

Brownback, Senator Sam, U.S. Senator From Kansas, Questions Submitted 

by......................................................................................................................... 94, 259 

Burns, Senator Conrad, U.S. Senator From Montana, Questions Submitted 

by ........................................................................................................................... 92 

California Industry and Government Central California Ozone Study Coalition, Prepared Statement of ................................................................................ 544 

Christopherson, Charles, Chief Financial Officer, Office of the Financial Officer, Department of Agriculture, Prepared Statement of ................................... 36 

Coalition: 

On Funding Agricultural Research Missions (CoFARM), Prepared Statement of ........................................................................................................... 546 

To Promote U.S. Agricultural Exports, Prepared Statement of ................... 547 

Cochran, Senator Thad, U.S. Senator From Mississippi, Prepared Statement 

of ............................................................................................................................ 4 

Collins, Keith, Chief Economist, Office of the Secretary, Department of Agriculture................................................................................................................... 1, 297

Prepared Statement of ..................................................................................... 301 

Statement of ...................................................................................................... 299 

Colorado River Basin Salinity Control Forum, Prepared Statement of .............. 548 

Combs, David M., Chief Information Officer, Office of the Chief Information 

Center, Department of Agriculture, Prepared Statement of ............................ 42 

Conner, Charles, Deputy Secretary, Office of the Secretary, Department of 

Agriculture ............................................................................................................ 1 

Consortium of Social Science Associations (COSSA), Prepared Statement of .... 551 
Page

ii 

Council on Food, Agricultural, & Resource Economics (C–FARE), Prepared 

Statement of ......................................................................................................... 551 

Davis, Russell T., Administrator, Rural Housing Service, Department of Agriculture, Prepared Statement of ........................................................................... 430 

Day, Lloyd C., Administrator, Agricultural Marketing Service, Department 

of Agriculture, Prepared Statement of ............................................................... 391 

Defenders of Wildlife, Prepared Statement of ....................................................... 553 

DeHaven, Dr. W. Ron, Administrator, Animal and Plant Health Inspection 

Service, Department of Agriculture, Prepared Statement of ........................... 397 

Dorgan, Senator Byron L., U.S. Senator From North Dakota, Questions Submitted by .......................................................................................................... 116, 283 

Dorr, Thomas C., Under Secretary, Rural Development, Department of Agriculture, Prepared Statement of ........................................................................... 423 

Duchesne County Water Conservancy District, Prepared Statement of ............. 556 

Durbin, Senator Richard J., U.S. Senator From Illinois: 

Prepared Statement of ..................................................................................... 5 

Questions Submitted by...................................................................... 120, 287, 521 

Florida State University, Prepared Statement of ................................................. 557 

Food & Water Watch, Prepared Statement of ....................................................... 558 

Gleason, Jackie J., Acting Administrator, Rural Business-Cooperative Service, 

Department of Agriculture, Prepared Statement of .......................................... 426 

Gould, Eldon, Administrator, Risk Management Agency, Department of Agriculture, Prepared Statement of ........................................................................... 332 

Harkin, Senator Tom, U.S. Senator From Iowa, Questions Submitted 

by.............................................................................................................. 109, 277, 509 

Hefferan, Dr. Colien, Administrator, Cooperative State Research, Education, 

and Extension Service, Department of Agriculture, Prepared Statement 

of ............................................................................................................................ 442 

Hentges, Eric J., Executive Director, Center for Nutrition Policy and Promotion, Department of Agriculture, Prepared Statement of ............................ 352 

Heuer, Kathleen, Chief Financial Officer and Associate Commissioner for 

Management, Food and Drug Administration, Department of Health and 

Human Services ................................................................................................... 133 

Interregional Research Project No. 4, Prepared Statement of ............................. 562 

Jen, Dr. Joseph J., Under Secretary, Research, Education, and Economics, 

Department of Agriculture, Prepared Statement of .......................................... 434 

Johanns, Hon. Mike, Secretary, Office of the Secretary, Department of Agriculture ................................................................................................................... 1 

Prepared Statement of ..................................................................................... 11 

Statement of ...................................................................................................... 6 

Johnson, Senator Tim, U.S. Senator From South Dakota, Questions Submitted by ............................................................................................................... 123 

Kelly, James Michael, Deputy General Counsel, Office of the General Counsel, Department of Agriculture, Prepared Statement of ................................... 47 

Klurfeld, Roger J., National Appeals Division, Department of Agriculture, 

Prepared Statement of ......................................................................................... 33 

Knight, Bruce I., Chief, Natural Resources Conservation Service, Department 

of Agriculture, Prepared Statement of ............................................................... 339 

Kniplings, Dr. Edward B., Administrator, Agricultural Research Service, Department of Agriculture, Prepared Statement of .............................................. 438 

Kohl, Senator Herb, U.S. Senator From Wisconsin, Questions Submitted 

by....................................................................................................................... 103, 262 

Lambert, Charles, Acting Under Secretary, Marketing and Regulatory Programs, Department of Agriculture ...................................................................... 297 

Prepared Statement of ..................................................................................... 384 

Statement of ...................................................................................................... 383 

Lasseter, Teresa C., Administrator, Farm Service Agency, Department of 

Agriculture, Prepared Statement of ................................................................... 321 

Link, James E., Administrator, Grain Inspection, Packers and Stockyards 

Administration, Department of Agriculture, Prepared Statement of .............. 405 
Page

iii 

Masters, Dr. Barbara J., Administrator, Food Safety and Inspection Service, 

Department of Agriculture, Prepared Statement of .......................................... 373 

McConnell, Senator Mitch, U.S. Senator From Kentucky, Questions Submitted by ............................................................................................................... 259 

Metropolitan Water District of Southern California, Prepared Statement of .... 565 

Midwest Advanced Food Manufacturing Alliance (MAFMA), Prepared Statement of .................................................................................................................. 567 

Moore, Terri Teuber, Director of Communications, Office of Communications, 

Department of Agriculture, Prepared Statement of .......................................... 40 

National: 

Association of State Foresters, Prepared Statements of........................... 567, 625 

Coalition for Food and Agricultural Research, Prepared Statement of ....... 546 

Commodity Supplemental Food Program Association, Prepared Statement 

of ..................................................................................................................... 575 

Cooperative Business Association, Prepared Statement of ........................... 572 

Fish and Wildlife Foundation, Prepared Statement of ................................. 583 

Organic Coalition, Prepared Statement of ..................................................... 586 

Potato Council, Prepared Statement of .......................................................... 590 

Rural Telecom Association, Prepared Statement of ...................................... 592 

Turfgrass Evaluation Program, Prepared Statement of ............................... 581 

WIC Association, Prepared Statement of ....................................................... 594 

New Mexico Interstate Stream Commission, Prepared Statement of ................. 600 

Offutt, Susan E., Administrator, Economic Research Service, Department of 

Agriculture, Prepared Statement of ................................................................... 446 

Organic Farming Research Foundation (OFRF), Prepared Statement of ........... 604 

Organization for the Promotion and Advancement of Small Telecommunications Companies, Prepared Statement of ....................................................... 608 

Pellett, Nancy C., Chairman and Chief Executive Officer, Farm Credit Administration, Department of Agriculture, Prepared Statement of ......................... 26 

Penn, J.B., Under Secretary, Farm and Foreign Agricultural Services, Department of Agriculture .............................................................................................. 297 

Prepared Statement of ..................................................................................... 315 

Statement of ...................................................................................................... 313 

Pickle Packers International, Inc., Prepared Statement of .................................. 609 

Raymond, Richard, M.D., Under Secretary, Food Safety, Department of Agriculture ................................................................................................................... 297 

Prepared Statement of ..................................................................................... 362 

Statement of ...................................................................................................... 359 

Red River Valley Association, Prepared Statement of .......................................... 615 

Rey, Mark, Under Secretary, Natural Resources and Environment, Department of Agriculture .............................................................................................. 297 

Prepared Statement of ..................................................................................... 337 

Statement of ...................................................................................................... 336 

Romero, Annabelle, Deputy Assistant Secretary for Civil Rights, Office of 

Assistant Secretary for Civil Rights, Department of Agriculture, Prepared 

Statement of ......................................................................................................... 19 

Salazar, Roberto, Administrator, Food and Nutrition Service, Department 

of Agriculture, Prepared Statement of ............................................................... 354 

Society: 

For: 

Animal Protection Legislation, Prepared Statement of ......................... 619 

Women’s Health Research and Women’s Health Research Coalition, 

Prepared Statement of .......................................................................... 622 

Of American Foresters, Prepared Statement of ............................................. 625 

Specter, Senator Arlen, U.S. Senator From Pennsylvania, Questions Submitted by ............................................................................................................ 89, 489 

Steele, W. Scott, Budget Officer, Office of the Secretary, Department of Agriculture ................................................................................................................... 1 

Sundlof, Steve, Director, Center for Veterinary Medicine, Food and Drug 

Administration, Department of Health and Human Services .......................... 133 

Terpstra, A. Ellen, Administrator, Foreign Agricultural Service, Department 

of Agriculture, Prepared Statement of ............................................................... 327 

The Humane Society, Prepared Statement of ....................................................... 559 
Page

iv 

The National Drinking Water Clearinghouse, Prepared Statement of ............... 640 

The Nature Conservancy, Prepared Statements of .......................................... 597, 625 

The Wildlife Society, Prepared Statement of ........................................................ 642 

Thomas, Peter J., Deputy Assistant Secretary, Department of Administration, 

Department of Agriculture, Prepared Statement of .......................................... 20 

Turman, Richard, Deputy Assistant Secretary for Budget, Technology, and 

Finance, Food and Drug Administration, Department of Health and Human 

Services ................................................................................................................. 133 

U.S. Apple Association, Prepared Statement of .................................................... 627 

University of Southern Mississippi and the Mississippi Polymer Institute, 

Prepared Statement of ......................................................................................... 633 

Upper Mississippi River Basin Association, Prepared Statement of ................... 636 

US Marine Shrimp Farming Consortium, Prepared Statement of ...................... 601 

USA Rice Federation, Prepared Statement of ....................................................... 630 

von Eschenbach, Hon. Andrew C., Acting Commissioner, Food and Drug 

Administration, Department of Health and Human Services .......................... 133 

Prepared Statement of ..................................................................................... 136 

Statement of ...................................................................................................... 134 

West Virginia University, Prepared Statement of ................................................ 638 

Wyoming State Engineer’s Office, Prepared Statement of ................................... 626 
(v) 

SUBJECT INDEX 

DEPARTMENT OF AGRICULTURE 

Page 

Accelerating Conservation Implementation .......................................................... 339 

Additional Committee Questions ............................................................................ 78 

Administrative Support ........................................................................................... 326 

Agricultural 

And Rural Development Information System ................................................ 447 

Estimates .......................................................................................................... 33 

Marketing Service ............................................................................................ 387 

Trade ................................................................................................................. 511 

Agriculture Buildings and Facilities ...................................................................... 21 

Air and Water Quality Issues ................................................................................. 419 

Alternative Fuels................................................................................................. 108, 415 

AMS: 

Programs ........................................................................................................... 391 

2007 Budget Request ....................................................................................... 388 

Animal and Plant Health Inspection Service ........................................................ 385 

Blackbird Control ............................................................................................. 118 

2007 Budget Request ....................................................................................... 386 

Animal: 

Health and Disease Research .......................................................................... 99 

Identification .................................................................................................. 79, 467 

Avian: 

Flu ...................................................................................................................... 475 

Influenza .............................................................................. 70, 114, 411, 469, 496 

Beef: 

Exports to Japan .............................................................................................. 64, 75 

Imports and BSE .............................................................................................. 119 

Beginning Farmers and Ranchers .......................................................................... 94 

Biomass Research and Development Grants ......................................................... 430 

Bovine Spongiform Encephalopathy ....................................................................... 412 

BSE—Japanese Exports ..................................................................................... 106, 107 

Budget ....................................................................................................................... 446 

Construction Authority .................................................................................... 464 

Request ......................................................................................................... 323, 330 

Summary .................................................................................................... 397 

Building Strong Accountability Measures ............................................................. 338 

Business and Industry Guaranteed Loan Program .............................................. 427 

Capital Security Cost Sharing Program ................................................................ 455 

Census of Agriculture .............................................................................................. 34 

Central Administration Funding ............................................................................ 71 

Child Nutrition Programs................................................................................... 350, 356 

Civil Rights .............................................................................................................. 60 

Classical Chinese Garden ....................................................................................... 80 

Codex ........................................................................................................................ 464 

And Trade Capacity Building .......................................................................... 456 

Commodity: 

Credit Corporation ............................................................................................ 323 

Program Elimination ........................................................................................ 459 

Supplemental Food Program.............................. 66, 90, 104, 131, 351, 358, 416 

Common Computing Environment ......................................................................... 110 

Community Programs ............................................................................................. 432 

Condition of the Farm Credit System .................................................................... 31 

Conservation ............................................................................................................ 16 
Page

vi 

Conservation—Continued 

Operations ......................................................................................................... 341 

Security Program .............................................................................................. 343 

Customer Service Results Survey ............................................................ 338 

Consumer Data and Information System .............................................................. 447 

Continuity of Operations Planning ........................................................................ 22 

Cooperative: 

Research Agreements ....................................................................................... 428 

Services .............................................................................................................. 500 

Corporate Activities ................................................................................................. 30 

Country of Origin Labeling ................................................................................ 125, 392 

County Office Restructuring ................................................................................... 489 

Crop Insurance ...................................................................................................... 14, 111 

Cross Cutting Trade Negotiations and Biotechnology Resources ........................ 86 

CSFP ......................................................................................................................... 492 

Caseload ............................................................................................................ 521 

CSREES Renewable Energy Research ................................................................... 479 

Current Activities and Issues ................................................................................. 47 

Customers, Partners, and Stakeholders ................................................................ 454 

Dairy: 

Assistance .......................................................................................................... 89 

Policy ................................................................................................................. 65 

Department Management ....................................................................................... 18 

Departmental Administration Direct Appropriation ............................................ 21 

Dietary Guidelines for Americans Establish Federal Nutrition Policy ............... 352 

Disaster Assistance ............................................................................................. 116, 120 

Discretionary Funding ............................................................................................. 341 

eGovernment Solutions ........................................................................................... 409 

Electric Program ...................................................................................................... 433 

Electronic Government ............................................................................................ 44 

Emergency Response to Hurricane Katrina .......................................................... 344 

Emphasis on Energy ................................................................................................ 340 

Energy ...................................................................................................................... 13

Costs .................................................................................................................. 65 

Ensuring Low Income Persons Have Access to Food ............................................ 347 

Enterprise: 

Architecture ...................................................................................................... 46 

Human Resources System ............................................................................... 23 

Environmental Quality Incentives Program ......................................................... 343 

EPA Regulations ...................................................................................................... 92 

ERS Contributions to Mission Area Goals ............................................................ 448 

Examination Programs for FCS Banks and Associations .................................... 27 

Excess Personal Property Program ........................................................................ 25 

Export Programs ...................................................................................................... 330 

Faith-based and Community Organizations Outreach ......................................... 355 

Farm and Ranch Lands Protection Program ......................................................... 344 

Farm: 

Bill Authorized Programs ................................................................................ 343 

Commodity Program Spending ........................................................................ 13 

Loan Programs .................................................................................... 316, 325, 511 

Program: 

Delivery ...................................................................................................... 14 

Funding ...................................................................................................... 102 

Service Agency .................................................................................................. 315 

Office Realignment .................................................................................... 80 

Subsidies ........................................................................................................... 419 

Farmers’ Market Nutrition Program ..................................................................... 494 

Federal: 

Agricultural Mortgage Corporation ................................................................. 32 

Biobased Products Procurement Preference Program ................................... 24 

Grain Inspection Service .................................................................................. 407 

Seed Act Program ............................................................................................. 395 

State Marketing Improvement Program ........................................................ 395 

Financial: 

Assistance Programs Allocation Formulas ..................................................... 522 

Management System ........................................................................................ 84 

Fiscal Year: ..............................................................................................................

2005 Accomplishments ..................................................................................... 27 
Page

vii 

Fiscal Year—Continued 

2005 Highlights ................................................................................................ 397 

2007: 

Budget ........................................................................................................ 33 

Key Outcomes ............................................................................................ 19 

Objectives ................................................................................................... 19 

515 Housing Program ........................................................................................... 82, 472 

Request ........................................................... 20, 32, 41, 62, 371, 394, 402, 424 

Food: 

Aid ...................................................................................................................... 114 

And: 

Agriculture Defense Initiative .................................................................. 12 

Nutrition Division ..................................................................................... 48 

Defense—Food Emergency Response Network .............................................. 462 

Protection Program .......................................................................................... 395 

Safety .............................................................................................................. 15, 115 

Budget Trends ........................................................................................... 104 

Inspectors ................................................................................................... 499 

Stamp Program ............................................................................................ 349, 356 

Participation ..................................................................................................... 459 

Foreign: 

Agricultural Service ......................................................................................... 318 

Office Closures ........................................................................................... 123 

Staffing Levels ........................................................................................... 74 

Service Performance Pay ................................................................................. 86 

Forest Service Funding ........................................................................................... 83 

Fruit and Vegetable Pilot Program ........................................................................ 495 

Funding Sources ...................................................................................................... 385 

General Law Division .............................................................................................. 58 

Government Ethics Program .................................................................................. 23 

Grain: 

Exports Forecasting .......................................................................................... 77 

Inspection, Packers and Stockyards Administration ....................... 120, 389, 520 

OIG Audit .......................................................................................................... 105 

2007 Budget Request ....................................................................................... 390 

Grants to Assist Minority Producers ..................................................................... 428 

Grassland Reserve Program ................................................................................... 343 

Grazing Land Conservation Initiative ................................................................... 418 

Hatch Act .................................................................................................................. 97 

Hazardous Materials Management ........................................................................ 26 

Helping People Help the Land ............................................................................... 340 

Horse Slaughter ....................................................................................................... 94 

User Fees .......................................................................................................... 103 

Human Capital Management............................................................................... 23, 355 

Strategic Plan ................................................................................................... 340 

Humane: 

Activities Tracking System .............................................................................. 499 

Slaughter ........................................................................................................... 465 

Hurricane Assistance .............................................................................................. 471 

Impact of Texas Eligibility System on Vulnerable Groups .................................. 517 

Implementation of Texas Integrated Eligibility Contract .................................... 516 

Imports: 

From Canada .................................................................................................... 124 

Of Japanese Beef .............................................................................................. 123 

Information Security ............................................................................................... 44 

Intermediary Relending Program ........................................................................... 428 

International Affairs and Commodity Programs Division .................................... 47 

IT Management ........................................................................................................ 46 

Land Grant University Funding ............................................................................ 95 

Legislation Division ................................................................................................. 60 

Legislative Proposals in the Budget ....................................................................... 79 

Litigation Division ................................................................................................... 59 

Livestock Protection Program ................................................................................. 90 

Major Activities: 

And Goals .......................................................................................................... 328 

Of the National Agricultural Statistics Service (NASS) ............................... 34 

Managing Prudently and Efficiently ...................................................................... 348 

Mandatory Commodity Programs .......................................................................... 83 
Page

viii 

Market: 

Access Program ............................................................................................ 510, 524 

Development ..................................................................................................... 393 

News .................................................................................................................. 392 

Marketing: 

Agreements and Orders User Fees ................................................................. 397 

Regulatory and Food Safety Programs ........................................................... 49 

Services .............................................................................................................. 392 

McIntire-Stennis Forestry Grants .......................................................................... 98 

Meat and Poultry Import Requirements ................................................................ 417 

Microbiological Data Program Termination .......................................................... 396 

Milk Income Loss Contract ..................................................................................... 67 

Minority Outreach ................................................................................................... 460 

Mission................................................................................................... 33, 391, 446 

Of the Farm Credit Administration ................................................................ 27 

Mississippi River Transportation Infrastructure .................................................. 76 

MRP Initiatives ........................................................................................................ 385 

Multi-Family Housing Programs ............................................................................ 430 

Mushroom Spawn .................................................................................................... 490 

MyPyramid Serves as Premier Teaching Tool ...................................................... 353 

National: 

Agro-Forestry Center ....................................................................................... 91 

Animal Identification System............................................................... 94, 102, 518 

Finance Center: 

Data Center Operations ............................................................................ 82 

Status ......................................................................................................... 81 

Institute for Food and Agriculture .................................................................. 91 

Organic Program .............................................................................................. 394 

Veterinary Medical Services Act.......................................................... 83, 117, 495 

Natural Resources ................................................................................................... 55 

New: 

Strategic Plan ................................................................................................... 340 

User Fees .......................................................................................................... 396 

Uses Expo for Biobased Products .................................................................... 94 

Non-Ambulatory Disabled Cattle ........................................................................... 107 

NSA Grants .............................................................................................................. 491 

Nutrition: 

Assistance .......................................................................................................... 18 

Programs Administration ............................................................................ 351, 359 

Office of: 

Civil Rights ....................................................................................................... 88 

Program Funding ............................................................................................. 89 

The Under Secretary for Marketing and Regulatory Programs................. 80, 469 

Organic: 

Agriculture ........................................................................................................ 508 

Research........................................................................................................ 473, 507 

Organization ............................................................................................................. 405 

Other Appropriated Programs ................................................................................ 325 

Packers and Stockyards Program ........................................................................... 405 

Partnerships ............................................................................................................. 393 

Pathogenic Avian Influenza (AI) ............................................................................ 12 

Personnel and Information Security ...................................................................... 22 

Pest Management Alternatives .............................................................................. 489 

Pesticides .................................................................................................................. 93

Physical Security ..................................................................................................... 21 

Planned use of Pandemic Influenza Funds ........................................................... 71 

Premise Identification ............................................................................................. 468 

President’s Fiscal Year 2007 Budget ..................................................................... 337 

Procurement Policy .................................................................................................. 24 

Program Highlights ................................................................................................. 430 

Promoting Healthful Diets and Active Lifestyles ................................................. 348 

Proposed: 

Increase for Buildings and Facilities .............................................................. 442 

Operating Increases ......................................................................................... 442 

Program: 

Decreases ................................................................................................... 442 

Increases and Redirections ....................................................................... 439 

Reprogrammings ............................................................................................... 442 
Page

ix 

Protecting the Homeland ........................................................................................ 410 

Provincial Reconstruction Team ............................................................................. 85 

Public: 

Law 480 Titles I and II .................................................................................... 413 

Opinion on Agricultural Policy ........................................................................ 421 

Rapid Watershed Assessments ............................................................................... 458 

Real Property Asset Management .......................................................................... 25 

Reducing the Federal Deficit ........................................................................... 66 

REE Fiscal Year 2007 Initiatives ........................................................................... 437 

Regulatory Activity .................................................................................................. 29 

Renewable Energy................................................................................................... 64, 68 

Fuels .................................................................................................................. 93 

Loan Guarantee Program ................................................................................ 429 

Research ............................................................................................................ 477 

Rental Assistance .................................................................................................... 505 

Research ................................................................................................................... 17 

Budget ............................................................................................................... 116 

Resource Conservation and Development Program........................ 115, 125, 342, 457 

Results Achieved Recently ...................................................................................... 37 

Resuming Beef Exports to Japan ........................................................................... 92 

Review of Stakeholder Response to the Fiscal Year 2006 Budget as Background for Cooperative State Research, Education, and Extension Service 

(CSREES) Fiscal Year 2007 Budget Proposal ................................................... 96 

Risk Management Agency .................................................................................. 317, 509 

Crop Insurance ................................................................................................. 455 

Rural: 

Business: 

And Cooperative Programs ....................................................................... 426 

Enterprise Grant Program/Rural Business Opportunity Grant Program ........................................................................................................ 429 

Cooperative Development Grant Program ..................................................... 428 

Development ..................................................................................................... 16, 53 

Grants ........................................................................................................ 516 

Economic Development Loan and Grant Programs ....................................... 429 

Housing and Community Facilities Programs ............................................... 425 

Utilities Programs ............................................................................................ 424 

Voucher Program .............................................................................................. 472 

Section: 

32 ....................................................................................................................... 393 

515 ..................................................................................................................... 503 

9002 Biobased Products ................................................................................... 516 

9006 of the 2002 Farm Bill .............................................................................. 513 

Seniors’ Farmers Market Nutrition Program (SFMNP) ....................................... 358 

Sericea Lespedeza .................................................................................................... 103 

Service Center Modernization Initiative—(SCMI) ................................................ 43 

Simplified Summer Food Program..................................................................... 491, 521 

Single Family Housing Programs ........................................................................... 431 

Small: 

And Disadvantaged Business Utilization ....................................................... 25 

Farm/Direct Marketing .................................................................................... 106 

Special Supplemental: 

Nutrition Program for Women, Infants and Children (WIC) ........................ 357 

Program for Women, Infants, and Children (WIC)—Food Package ............. 460 

Legislative Proposal.............................................................................. 459, 491 

Specialty Markets .................................................................................................... 414 

Standardization ........................................................................................................ 495 

Standards User Fees ............................................................................................... 396 

State Meat Inspection Program .............................................................................. 119 

Strategic Planning: 

And Performance Plans .................................................................................... 30 

For the Future .................................................................................................. 339 

Streamlining for Conservation Gains .................................................................... 338 

Strengthening America’s Communities Initiative ................................................. 503 

Summary of Personnel Supported With: 

Animal Health and Disease Research Program Funds in Fiscal Year 

2004 ................................................................................................................ 101 

Hatch Act Funds in Fiscal Year 2004 ............................................................. 98 

McIntire-Stennis Funds ................................................................................... 99 
Page

x 

Telecommunications Program ................................................................................. 433 

The Challenge of Improper Payments ................................................................... 355 

The Emergency Food Assistance Program (TEFAP) ........................................ 351, 358 

The USDA Loan Program ....................................................................................... 502 

Trade ...................................................................................................................... 14, 113 

Transportation ......................................................................................................... 393 

Trends Continue to Show Need for Revised Nutrition Guidance and Educational Tools ........................................................................................................ 352 

2007: 

Budget ............................................................................................................... 12 

Farm Bill ........................................................................................................... 118 

Request .............................................................................................................. 410 

USDA: 

Fiscal year 2007 Information Technology Budget Summary ........................ 42 

Service Centers ................................................................................................. 109 

Share of Budget Cuts ....................................................................................... 79 

Use of Biofuels ......................................................................................................... 24 

User Fees .................................................................................................................. 411

Value-Added Producer Grants ................................................................................ 117 

Program ............................................................................................................. 427 

Vision ........................................................................................................................ 424 

Vouchers ................................................................................................................... 505

Water and: 

Environmental Programs ................................................................................. 434 

Sewer Grants .................................................................................................... 506 

Wastewater ....................................................................................................... 473 

Watershed: 

And Flood Prevention Operations ................................................................... 342 

Project Backlog ................................................................................................. 458 

Rehabilitation ................................................................................................... 342 

Surveys and Planning ...................................................................................... 342 

Weather-related Disaster Assistance ..................................................................... 73 

Web Based: 

Soil Survey ........................................................................................................ 341 

Supply Chain Management System (WBSCM) .............................................. 396 

Wetlands Reserve Program ..................................................................................... 343 

WIC ........................................................................................................................... 350 

Food Package .................................................................................................... 521 

Legislative Proposal ......................................................................................... 79 

Management Information System ................................................................... 492 

Moratorium ....................................................................................................... 493 

Reauthorization Legislative Proposal ............................................................. 494 

Wildlife: 

Habitat Incentives Program ............................................................................ 344 

Services .............................................................................................................. 495 

World Trade Organization.................................................................................. 420, 511 

DEPARTMENT OF HEALTH AND HUMAN SERVICES 

FOOD AND DRUG ADMINISTRATION

Additional Committee Questions ............................................................................ 173 

Advisory Committees ............................................................................................... 289 

Avian: 

Flu ...................................................................................................................... 265 

Influenza ........................................................................................................... 159 

Bioterrorism ............................................................................................................. 278 

Bovine Spongiform Encephalopathy .................................................................. 161, 168 

Feed Ban ........................................................................................................... 247 

Rule and Harmonization With Canada .......................................................... 164 

Clinical Trials .......................................................................................................... 259 

Color Certification ................................................................................................... 256 

Critical Path: 

Initiative ............................................................................................................ 221 

To Personalized Medicine ................................................................................ 158 

Dietary: 

Health Supplements Education Act ................................................................ 169 

Supplements ...................................................................................................... 287 
Page

xi 

Drug: 

Advertising ........................................................................................................ 273 

Efficacy Study Implementation (DESI) Monograph System ......................... 255 

Labeling ............................................................................................................. 292 

Safety ................................................................................................................. 251 

Oversight Board ........................................................................................ 166 

Early Food Safety Evaluation ................................................................................. 280 

Existing Programs ................................................................................................... 260 

FDA Detailees .......................................................................................................... 244 

Field: 

Inspectors .......................................................................................................... 166 

Staff ................................................................................................................... 262 

Food: 

And Nutrition FTE....................................................................................... 169, 169 

Contact Substances .......................................................................................... 257 

Defense.......................................................................................................... 254, 274 

Imports .............................................................................................................. 280 

Recall ................................................................................................................. 281 

FoodNet .................................................................................................................... 283

Gelatin Capsules for Dietary Supplements ........................................................... 172 

Generic Drug: 

Approval ............................................................................................................ 270 

Backlog .............................................................................................................. 156 

Drugs.................................................................................................... 155, 159, 279 

User Fees/Citizen Petitions ............................................................................. 269 

Health Certificates for Gelatin Capsules ............................................................... 173 

Human Tissue Safety .............................................................................................. 253 

Import Inspection .................................................................................................... 251 

Imported Prescription Drugs .................................................................................. 283 

Medical Device User: 

Fee and Modernization Act (MDUFMA) ......................................................... 173 

Fees ............................................................................................................... 164, 220 

Medical Imaging Drugs ........................................................................................... 256 

Methylmercury .................................................................................................... 282, 290 

Microbiological Data Program ................................................................................ 277 

National Institute for Pharmaceutical Technology and Education ..................... 259 

New Drug Applications ........................................................................................... 258 

Openness of Drug Safety Oversight Board ............................................................ 167 

Pandemic Influenza............................................................................................. 154, 247 

Personnel Manual .................................................................................................... 245 

Post-Marketing Studies ........................................................................................... 276 

Postmarket Safety Issues ........................................................................................ 220 

Poultry Litter and BSE Transmission ................................................................... 162 

Proposed User Fees ................................................................................................. 253 

Reuse of Single-Use Devices ................................................................................... 243 

Strategic Redeployment ...................................................................................... 144, 172 

Sunscreen ................................................................................................................. 278 

Monographs ....................................................................................................... 258 

Unified Financial Management System ................................................................. 170 

Uniform Food Safety ............................................................................................... 276 

Women’s Health ....................................................................................................... 288 

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