Appropriations for FY2004: U.S. Department of Agriculture and Related Agencies
Released: 2004-02-05T00:00:00

Most Recent Developments

On January 22, 2004, the Senate adopted a cloture motion and approved theconference agreement on the FY2004 consolidated appropriations bill ( H. Rept.108-401 , H.R. 2673). The measure combined six annual appropriations measureswith the spending bill for the U.S. Department of Agriculture (USDA) and RelatedAgencies. The President signed the measure into law ( P.L. 108-199 ) on January 23,2004. Division A of P.L. 108-199 contains $80.6 billion in FY2004 funding forUSDA and related agencies, of which $16.9 billion is for discretionary programs and$63.7 billion is for mandatory programs.

USDA Spending at a Glance

The U.S. Department of Agriculture (USDA) carries out its widely variedresponsibilities through approximately 30 separate internal agencies and officesstaffed by some 100,000 employees. USDA is responsible for many activitiesoutside of the agriculture budget function. Hence, spending for USDA is notsynonymous with spending for farm programs.

USDA gross outlays for FY2003 were $81.53 billion, including regular and supplemental spending. The mission area with the largest gross outlays ($41.3billion or 50% of spending) was for food and nutrition programs -- primarily thefood stamp program (the costliest single USDA program), various child nutritionprograms, and the Supplemental Nutrition Program for Women, Infants and Children(WIC). The second largest mission area in terms of total spending is for farm andforeign agricultural services, which totaled $24.3 billion, or 30% of all USDAspending in FY2003. Within this area are the programs funded through theCommodity Credit Corporation (e.g., the farm commodity price and income supportprograms and certain mandatory conservation and trade programs), crop insurance,farm loans, and foreign food aid programs.

Mandatory vs. Discretionary Spending

Approximately three-fourths of total spending within the U.S. Department of Agriculture is classified as mandatory, which by definition occurs outside the controlof annual appropriations. Currently accounting for the vast majority of USDAmandatory spending are: the farm commodity price and income support programs(including ongoing programs authorized by the 2002 farm bill and emergencyprograms authorized by various appropriations acts); the food stamp program andchild nutrition programs; the federal crop insurance program; and various agriculturalconservation and trade programs.

Although these programs have mandatory status, many of these accounts ultimately receive funds in the annual agriculture appropriations act. For example,the food stamp and child nutrition programs are funded by an annual appropriationbased on projected spending needs. Supplemental appropriations generally are madeif and when these estimates fall short of required spending. An annual appropriationalso is made to reimburse the Commodity Credit Corporation for losses it incurs infinancing the commodity support programs and the various other programs itfinances.

The other 25% of the USDA budget is for discretionary programs, which are determined by funding in annual appropriations acts. Among the major discretionaryprograms within USDA are Forest Service programs; certain conservation programs;most of its rural development programs, and research and education programs;agricultural credit programs; the supplemental nutrition program for women, infants,and children (WIC); the Public Law (P.L.) 480 international food aid program; meatand poultry inspection; and food marketing and regulatory programs. Funding for allUSDA discretionary programs (except for the Forest Service) is provided by theannual agriculture appropriations act. Funding for Forest Service programs isincluded in the annual Interior appropriations act.

Table 1. USDA and Related Agencies Appropriations, FY1995 to FY2003 (budget authority in billions of dollars)

Note: Includes regular annual appropriations for all of USDA (except the Forest Service), the Foodand Drug Administration, and the Commodity Futures Trading Commission. Excludes all mandatoryemergency supplemental appropriations. The FY2003 level reflects the 0.65% across-the-boardrescission applied to all discretionary programs funded in the FY2003 Consolidated AppropriationsAct ( P.L. 108-7 ), except for the WIC program which was specifically exempted.

Source: House Appropriations Committee.

A key distinction between mandatory and discretionary spending involves how these two categories of spending are treated in the budget process. Congressgenerally controls spending on mandatory programs by setting rules for eligibility,benefit formulas, and other parameters rather than approving specific dollar amountsfor these programs each year. Eligibility for mandatory programs is usually writteninto authorizing law, and any individual or entity that meets the eligibilityrequirements is entitled to the benefits authorized by the law. Spending fordiscretionary programs is controlled by annual appropriations acts. The 13subcommittees of the House and Senate Appropriations Committees originate billseach year which decide how much funding to devote to continuing current activitiesas well as any new discretionary programs.

Congressional Action

The agriculture subcommittee of the House Appropriations Committee and thefull House Appropriations Committee completed markup of the FY2004appropriations bill for USDA and related agencies on June 17, 2003 and June 25,2003, respectively. The FY2004 House measure ( H.R. 2673 , H.Rept.108-193 ) was officially reported on July 9, 2003, and approved by the full House onJuly 14, 2003. Following the House action, the agriculture subcommittee of theSenate Appropriations Committee completed markup of its version of the FY2004agricultural appropriations bill on July 15 and July 17, 2003, respectively, andreported the measure ( S. 1427 , S.Rept. 108-107 ) on July 17. Senatefloor action was completed on November 6, 2003, following the adoption ofapproximately 49 amendments. The Senate substituted the text of H.R.2673 with the text of S. 1427 as amended, and then passedH.R. 2673 as amended.

On November 25, 2003, H.R. 2673 became a consolidated appropriations measure when the conference agreement ( H. Rept. 108-401 ) on H.R. 2673 was filed, incorporating six other FY2004 appropriations measures with USDAfunding. The full House approved the conference agreement on December 8, 2003. Senate action was completed on January 22, 2004, when a cloture motion wasadopted followed by Senate passage. The President signed the measure into law( P.L. 108-199 ) on January 23, 2004.

Because final action on the FY2004 USDA spending bill (as well as several other annual appropriations measures) was not completed in time for the beginningof the fiscal year (October 1, 2003), spending for USDA and related agencies was governed by several continuing resolutions (most recently P.L. 108-135 , which wasin effect until enactment of the consolidated appropriations measure on January 23,2004.) P.L. 108-135 allowed all departments and agencies for which FY2004spending bills had not been completed to be funded at the FY2003 level until theearlier of: enactment of a final spending measure or January 31, 2004.

The enacted consolidated appropriations measure contains $80.63 billion for USDA and related agencies for FY2004 (excluding the effects of a 0.59%across-the-board rescission in all discretionary, non-defense accounts, as required inthe final law). As originally reported by their respective committees, H.R. 2673 and S. 1427 contained nearly identicalappropriations of $77.49 billion. However, the Senate added $2.2 billion to themandatory food stamp account to reflect more recent projections of programparticipation, and conferees added $1 billion to the food stamp reserve account. Justover three-fourths ($63.7 billion) of the spending in the agriculture portion (DivisionA) of P.L. 108-199 is classified as mandatory spending, including food stamps, childnutrition programs, crop insurance, and the various farm support programs fundedthrough USDA's Commodity Credit Corporation.

The balance of spending ($16.9 billion) in Division A is for discretionaryprograms, which is $198 million below the Administration's request and $61 millionbelow both the House- and Senate-passed levels. Discretionary spending in DivisionA of the measure is $963 million below the FY2003 enacted level includingsupplementals. Agriculture appropriators were allocated nearly $1 billion less forFY2004 discretionary accounts than the FY2003 level including supplementals. Tohelp achieve this goal, the conference agreement includes an FY2004 appropriationfor foreign food aid that is $572 million below the FY2003 level (which wasbolstered by supplemental spending). Also, the conference agreement containsprovisions that limit or prohibit spending on certain mandatory conservation, ruraldevelopment, and research programs, which in total reduced spending in theseaccounts by approximately $650 million from authorized levels.

The measure did not include a Senate provision that would have relaxed the licensing requirement for travel to Cuba for the sale of agricultural and medicalproducts. Conferees also rejected a House provision that would have blocked FDAfrom preventing individuals from importing cheaper FDA-approved prescriptiondrugs from foreign suppliers.

Table 2. Congressional Action on FY2004 Appropriations for the U.S. Department of Agriculture and RelatedAgencies

** = Pending

(1) Before Senate floor action on the FY2004 appropriations measure, the Senatesubstituted the text of S. 1427 for the text of the House-passed bill( H.R. 2673 ), and then after considering further amendments, adopted H.R. 2673 , as amended.

(2) Six other appropriations bills were included in H.Rept. 108-401 as part of anFY2004 consolidated appropriations bill.

FY2004 Agriculture Appropriations: Spending Levels and Current Issues

The following sections compare the agriculture provisions of the FY2004consolidated appropriations act ( P.L. 108-199 , H.Rept. 108-401 ) with theHouse-passed version of the FY2004 agriculture appropriations bill( H.R. 2673 ), the Senate-passed version of the measure (originallyreported as S. 1427 , but subsequently amended and substituted as thetext for H.R. 2673 ), the FY2004 Administration request, and the enactedconference agreement on the FY2003 omnibus appropriations bill ( P.L. 108-7 ) forvarious mission areas and agencies within USDA, and for the Food and DrugAdministration and the Commodity Futures Trading Commission. Also see the tableat the end of the report for a tabular summary.

Commodity Credit Corporation

Most spending for USDA's mandatory agriculture and conservation programs was authorized by the 2002 farm bill ( P.L. 107-171 ), and is funded through USDA'sCommodity Credit Corporation (CCC). The CCC is a wholly owned governmentcorporation. It has the legal authority to borrow up to $30 billion at any one timefrom the U.S. Treasury. These borrowed funds are used to finance spending forongoing programs such as farm commodity price and income support activities andvarious conservation, trade, and rural development programs. The CCC has also beenthe funding source for a large portion of emergency supplemental spending over theyears, particularly for ad-hoc farm disaster payments, and direct market losspayments to growers of various commodities which have been provided in responseto low farm commodity prices.

The CCC must eventually repay the funds it borrows from the Treasury. Because the CCC never earns more than it spends, its losses must be replenishedperiodically through a congressional appropriation so that its $30 billion borrowingauthority (debt limit) is not depleted, which would render the corporation unable tofunction. Congress generally provides this infusion through the regular annualUSDA appropriation law. Because of the degree of difficulty in estimating itsfunding needs, which is complicated by crop and weather conditions and otheruncontrollable variables, the CCC in recent years has received a "current indefiniteappropriation," which in effect allows the CCC to receive "such sums as arenecessary" during the fiscal year for previous years' losses and current year's losses.

As in past years, the Administration requested an indefinite appropriation for the CCC for FY2004, which the Administration estimated at $17.275 billion, comparedwith an estimated indefinite appropriation of $16.285 billion provided in FY2003. The final FY2004 consolidated appropriations act ( P.L. 108-199 ) and the originalHouse- and Senate-passed FY2004 agriculture appropriations bills ( H.R. 2673 ) all concur with this request.

Dairy Price Support Provision. A general provision in the final consolidated appropriations act requires the Secretaryof Agriculture to more diligently support the farm price of milk at the farmbill-mandated support price of $9.90 per hundredweight (cwt.). Under the dairy pricesupport program, USDA indirectly supports the farm price of milk by standing readyto purchase surplus cheese, butter, and nonfat dry milk from processors at a price thatshould allow the processors to pay at least the support price to farmers for the milkused in the manufacturing of those products. Supporters of this provision argued thatthe government purchase prices for surplus dairy products are set too low by USDAto support the farm price of milk at $9.90 per cwt. Late in 2002 and in early in 2003the market price of farm milk used for cheese fell below the $9.90 support price foreight consecutive months. USDA officials say they are evaluating the situation andpoint out that the authorizing statute for the dairy price support program ( P.L.107-171 , the 2002 farm bill) requires USDA to set dairy purchase prices so that theannual farm milk price on average is supported at $9.90, not the monthly price. Formore information on the dairy price support program, see CRS Issue Brief IB97011, Dairy Policy Issues .

Crop Insurance

The federal crop insurance program is administered by USDA's Risk Management Agency (RMA). It offers basically free catastrophic insurance toproducers who grow an insurable crop. Producers who opt for this coverage havethe opportunity to purchase additional insurance coverage at a subsidized rate. Mostpolicies are sold and completely serviced through approved private insurancecompanies that have their program losses reinsured by USDA. The annualagriculture appropriations bill makes two separate appropriations for the federal cropinsurance program. It provides discretionary funding for the salaries and expensesof the RMA. It also provides "such sums as are necessary" for the Federal CropInsurance Fund, which funds all other expenses of the program, including premiumsubsidies, indemnity payments, and reimbursements to the private insurancecompanies. Annual spending on the crop insurance program is difficult to predict inadvance and is dependent on weather and crop growing conditions and farmerparticipation rates.

The Administration had estimated that the mandatory-funded Federal Crop Insurance Fund would require an FY2004 appropriation of $3.368 billion, comparedwith an estimated FY2003 appropriation of $2.886 billion. As is customary, the final consolidated appropriations act ( P.L. 108-199 ) concurs with the Administration'sestimate and provides "such sums as may be necessary" for the fund. Legislativeenhancements ( P.L. 106-224 ) made to the crop insurance program in 2000 greatlyincreased the federal subsidy of insurance premiums. The increased subsidy coupledwith large program losses associated with the extended drought in various parts ofthe country have contributed to increased program costs in recent years.

For the discretionary component of the crop insurance program, P.L. 108-199 provides $71.42 million, as proposed by the Senate, for the salaries and expenses ofUSDA's Risk Management Agency (RMA). The final FY2004 level is just $87,000below the original House-passed level, $6.98 million below the Administration'srequest, but up $1.26 million from the FY2003 enacted level of $70.25 million. TheAdministration had requested a nearly 12% increase for FY2004, mainly to coverproposed information technology initiatives within RMA.

The Administration request also had contained a legislative proposal to limit the amount of subsidy that accrues to the private insurance companies participating inthe program. The House- and Senate-passed versions of the bill, as well as the finalact, do not concur with the Administration proposal. The Administration maintainsthat the increased farmer participation in the program following the 2000 legislativeenhancements has resulted in windfall profits for the private insurance companies.Hence, the FY2004 budget request contained a proposal to cap the reimbursementthat the private companies receive from the federal government for their deliveryexpenses at 20% of premium for FY2004 and subsequent years, instead of the currentcap of 24.5%. According to Congressional Budget Office estimates, enactment ofthis proposal would have saved $81 million in FY2004. In report language, theSenate Appropriations Committee stated that the proposed reimbursement limitationwould force some private companies out of business, and that the reimbursement rateshould be negotiated in the standard reinsurance agreement between the privatecompanies and the federal government, rather than through a legislative mandate.

Separately, the Agricultural Risk Protection Act of 2000 ( P.L. 106-224 ), as amended by the 2002 farm bill, authorized $20 million in each year (FY2003-2007) for an Agricultural Management Assistance program, which assists crop growers instates that are viewed as underserved by the crop insurance program (13 Northeaststates, Utah, and Wyoming.) The final consolidated appropriations act ( P.L. 108-199 )concurs with a Senate-passed provision that requires that $15 million of the funds beused for sharing in the cost of producers' conservation practices, as prescribed in thelaw, and $2 million for certification of organic growers in the states. In FY2003, theSecretary used virtually all of the $20 million to further subsidize crop insurancepremiums of farmers in these states. Current law allows the funding to be used foreither conservation or risk management practices, but leaves the mix of spending tothe discretion of the Secretary of Agriculture.

Separately, report language in the final conference agreement urges the Secretary to expand the number of states eligible for a pilot livestock insuranceprogram from the current 10 states to the maximum number possible, includingMissouri, North Dakota, Ohio, South Dakota, West Virginia, and Wisconsin.

Farm Service Agency

While the Commodity Credit Corporation serves as the funding mechanism for the farm income support and disaster assistance programs, the administration of theseand other farmer programs is charged to USDA's Farm Service Agency (FSA). Inaddition to the commodity support programs and most of the emergency assistanceprovided in recent supplemental spending bills, FSA also administers USDA's directand guaranteed farm loan programs, certain conservation programs and domestic andinternational food assistance and international export credit programs.

FSA Salaries and Expenses. This account funds the expenses for program administration and other functions assignedto the FSA. These funds consist of appropriations and transfers from CCC exportcredit guarantees, from P.L. 480 loans, and from the various direct and guaranteedfarm loan programs. All administrative funds used by FSA are consolidated into oneaccount. For FY2004, the final consolidated appropriations act ( P.L. 108-199 )provides a total appropriation of $988 million for FSA salaries and expenses, as inthe Senate-passed bill and requested by the Administration. The final FY2004 levelis below the House-passed level of $1.02 billion, but above the regular annualappropriation of $970.4 million for FY2003. The final FY2004 level also is belowthe total FY2003 level that included supplemental authority for FSA to tap the CCCfor $70 million to cover the administrative costs associated with implementing adhoc disaster assistance authorized in the emergency provisions of P.L. 108-7 .

Report language accompanying the House bill instructed USDA not to shut down or consolidate any local FSA offices unless rigorous analysis proves suchaction to be cost-effective. The Senate committee also expressed concern about FSAdownsizing and directed the Secretary to consider the impact further reductions willhave on farm services before considering closing additional offices.

FSA Farm Loan Programs. Through FSA farm loan programs, USDA serves as a lender of last resort for familyfarmers unable to obtain credit from a commercial lender. USDA provides directfarm loans and also guarantees the timely repayment of principal and interest onqualified loans to farmers from commercial lenders. FSA farm loans are used tofinance the purchase of farm real estate, help producers meet their operatingexpenses, and help farmers financially recover from natural disasters. Some of theloans are made at a subsidized interest rate. An appropriation is made to FSA eachyear to cover the federal cost of making direct and guaranteed loans, referred to asa loan subsidy. Loan subsidy is directly related to any interest rate subsidy providedby the government, as well as a projection of anticipated loan losses caused byfarmer non-repayment of the loans.

The Administration requested an appropriation of $210.7 million for FY2004 to subsidize the cost of making $3.52 billion in direct and guaranteed FSA loans. The enacted FY2003 loan subsidy was $226.8 million to support FSA loans totaling$3.94 billion. Most of the proposed $420 million decline in requested loan authoritywas accounted for in a proposed $300 million reduction in unsubsidized guaranteedfarm operating loans (from $1.7 billion authorized in FY2003 to an estimated $1.4billion in FY2004). The Administration contends that the proposed reduction infunding for this program, which finances farmers' purchases of feed, seed, fertilizer,livestock and machinery, is consistent with historical demand.

The FY2004 consolidated appropriations act ( P.L. 108-199 ) provide cuts in FSA farm loans beyond those requested by the Administration. Conferees provided anappropriation of $196.7 million to subsidize the cost of making $3.26 billion in directand guaranteed FSA loans in FY2004. The appropriation level is above the $194.3million provided in the Senate-passed version, but below the House-passed versionof $200.2 million. As in the Administration request, most of the reduction in loanauthority in the final appropriations act is within the unsubsidized guaranteedoperating loan program account.

Natural Resources and Environment

The natural resources and environment mission area within USDA is implemented through the programs of the Natural Resources Conservation Service(NRCS), the Farm Service Agency (FSA), and the Forest Service. (Funding for theForest Service is provided in the annual Interior appropriations bill.) Conservationspending combines discretionary spending, which has totaled more then $1 billionannually in recent years, and mandatory funding, which is funded through theCommodity Credit Corporation and is estimated to total just under $3 billion inbudget authority in FY2004, according to the March 2003 Congressional BudgetOffice baseline. The NRCS administers all the discretionary conservation programs.

Discretionary Programs. The final FY2004 consolidated appropriations act ( P.L.108-199 ) provides a total of $1.033billion for the five discretionary conservation line items for FY2004, an increase of$12 million from the FY2003 enacted level of $1.021 billion. The earlierHouse-passed version of the agriculture appropriations bill (H.R. 2673) provided$1.045 billion, while the Senate-passed version of H.R. 2673 provided $973.2million. The House version was an increase of $23.5 million from the FY2003enacted level, while the Senate bill was a decrease of $48.1 million from that amount. The Administration had requested $1.241 billion. The Administration total isdifficult to compare directly with congressional amounts because the requestincluded the creation of a new discretionary line item of $432 million to pay fortechnical assistance in support of the mandatory conservation programs, which wouldhave been funded in part, by taking money from other accounts. The conferencecommittee and both chambers rejected this request. For more information on thisissue, see "Technical Assistance Funding," below.

The enacted FY2004 level differs from the House and Senate bills, the Administration request, and the FY2003 funding levels in almost all cases for the fivediscretionary programs. P.L. 108-199 provides $853.0 million for ConservationOperations, $3.0 million more than the House-passed bill and $23.4 million morethan the Senate-passed bill. (The FY2003 appropriation was $819.6 million, and theAdministration requested $703.6 million for FY2004). P.L. 108-199 provides $10.6million for Watershed Surveys and Planning, $0.5 million less than the House billand $0.6 million more than the Senate bill. (The FY2003 appropriation was $11.1million and the Administration requested $5.0 million for FY2004.) For Watershedand Flood Prevention Operations, P.L. 108-199 provides $87.0 million, $3.0 millionless than the House and $32 million more than the Senate. (The FY2003appropriation was $109.3 million and the Administration requested $40 million forFY2004.) For Watershed Rehabilitation, P.L. 108-199 provides $29.8 million, $10.2million less than the House bill and the same as the Senate bill. (The FY2003appropriation was also $29.8 million and the Administration requested $10.0 millionfor FY2004.) For the Resource Conservation and Development Program, the P.L.108-199 provides $51.9 million, $1.0 million less than the House bill and $0.9million more than the Senate bill. (The FY2003 appropriation was $50.7 million andthe Administration request was $49.9 million.)

The use of earmarks within two discretionary conservation program accounts, Conservation Operations and Watershed and Flood Prevention Operations, continuesto be substantial. The conference committee report identifies 135 earmarks forConservation Operations, and retains all other earmarks that were in the reports thataccompanied both the House and Senate bills. The final consolidated appropriationsact includes very few earmarks for Watershed Programs, with some identified inreport language and others in the general provisions of the measure. For comparison,the FY2003 appropriation included 214 congressional earmarks with a total value ofmore than $200 million, according to a compilation prepared by the NRCS budgetoffice. Both the number and total value of earmarks have been growing in recentyears, and for both of these accounts, the growth in earmarks has exceeded thegrowth in overall program funding some years. Some conservation supporters haveexpressed concern that the increased use of earmarks means that less money isavailable for those pressing conservation priorities that do not coincide with theearmarked projects and activities. The conference report specifies that theseearmarks are to be in addition to state funding allocations, and requires NRCS toreport to both appropriations committees on how Conservation Operations funds arebeing allocated among states within 45 days of enactment.

Mandatory Programs. Annual or total funding levels for each of the mandatory conservation programs is contained inthe omnibus 2002 farm bill ( P.L. 107-171 ). (For two of the programs, theConservation Reserve and the Wetlands Reserve, limits are set in enrolled acresrather than dollars, so savings are made by limiting the number of acres that can beenrolled.) The Conservation Reserve Program (CRP) remains the largestconservation program in FY2004, according to the Congressional Budget Office'sAugust 2003 estimates. Outlays for all mandatory conservation programs areestimated to rise from a total of $2.86 billion in FY2003 to $2.99 billion in FY2004.

However, P.L. 108-199 limits (and in one case completely prohibits) funding for seven of the mandatory programs, for total estimated savings of $240.6 million. These mandatory program adjustments include:

limiting enrollment in the Wetland Reserve Program to 189,177 acres instead of 250,000 acres, for an estimated savings of $69.0million;

limiting spending under the Environmental Quality IncentivesProgram (EQIP) by $25.0 million, to $975 million;

limiting spending under the Conservation Security Program to $41.4 million, which is $11.6 million below the Congressional Budget Officeestimate;

eliminating mandatory spending on the Dam Rehabilitation Program, with a savings of $95.0 million;

limiting the Ground and Surface Water Conservation Program by $9.0 million, to $51.0 million;

limiting the Wildlife Habitat Incentives Program by $18 million, to $42.0 million; and

limiting the Farmland Protection Program (FPP) (also called the Farm and Ranch Lands Protection Program) by $13.0 million, to $112million.

The total reduction in mandatory programs under the final appropriations act was greater than under the bills that passed either chamber. The House-passed billlimited funding for four programs to a total of $229 million below authorized levels,while the Senate-passed bill limited funding for five programs for an estimatedreduction of $204 million. P.L. 108-199 also amends another mandatory program,the Agricultural Management Assistance Program, modifying an amendment that hadbeen adopted in the Senate bill. The final act provides $14 million to conservationprograms in 15 specified states, $1 million to organic certification assistance, and $5million to financial management activities to reduce risk each year from FY2004through FY2007. This provision responds to an action taken by USDA in FY2003to channel almost all of the authorized total of $20 million to further subsidize cropinsurance premiums.

The Administration's budget submission had proposed to limit total funding for mandatory conservation programs to $285 million below the authorized levels byreducing funding in five programs. In the Administration request, the reductionwould have offset part of the cost of establishing a proposed new line item to fundtechnical assistance in support of mandatory programs, a proposal both chambersrejected (see discussions above and below). P.L. 108-199 concurs with theAdministration proposals for the Dam Rehabilitation Program, the Ground andSurface Water Conservation Program, the Wildlife Habitat Incentives Program, andthe Farmland Protection Program (now called the Farm and Ranch Lands Programby USDA).

Technical Assistance Funding. The rapid expansion in funding for conservation programs and activities hasincreased requests for technical assistance. Technical assistance had been funded inpart through the Commodity Credit Corporation (CCC), in part by reprogrammingcarry-over funds, and in part by using funds from Conservation Operations, adiscretionary program, to pay for this assistance. A statutory cap on the use of CCCfunds to provide such assistance for mandatory conservation programs, combinedwith limits from the other sources and rapid growth in these programs, has createda funding shortfall. Congress attempted to address these funding concerns in the2002 farm bill ( P.L. 107-171 ). However, in late 2002, the Office of Management andBudget, supported by a Department of Justice opinion, ruled that the farm bill didnot remove the CCC cap and the Administration would have to continue to limitmandatory technical assistance funding through the CCC.

The Administration initially sought to address this problem by proposing to create a new farm bill technical assistance line item in FY2003, funded at $333million. This would have provided the technical assistance for all of the mandatoryconservation programs (authorized at a total of $1.2 billion), plus the ConservationReserve Program, a mandatory program authorized in acres rather than dollars. Congress rejected this proposal, and specifically prohibited the use of discretionaryfunds (funds from the Conservation Operations account) to implement any mandatoryconservation programs. This prohibition, combined with a retention of the cap onCCC funds, meant that some of the mandatory programs were significant "donorprograms" by funding technical assistance for other programs, thereby leaving lessmoney available to implement their activities. USDA estimated that four programswere donor programs, with the largest donations being made from the EQIP ($107.9million) and the Farmland Protection Program ($27.6 million).

The Administration again proposed a new discretionary technical assistance line item for FY2004 and Congress again rejected it. P.L. 108-199 includes a provisionwithin each of the five discretionary accounts that prohibits using these funds to payfor technical assistance in support of the mandatory conservation programs. TheHouse bill, as reported, contained a provision prohibiting the spending of funds in theConservation Operations account for this purpose. This provision was removed ina floor amendment. The Senate bill contained provisions prohibiting funding fortechnical assistance for mandatory programs from all the discretionary programsexcept the Resource Conservation and Development Program. The conferencecommittee does not otherwise address the issue. Earlier, during floor debate on theagriculture appropriations bill, the Senate defeated an amendment that would haveprohibited technical assistance funding for the Conservation Reserve Programcoming from four programs (EQIP, Farmland Protection, Grassland Reserve, andWildlife Habitat Incentives), so there will again be donor programs among themandatory programs unless Congress enacts freestanding legislation, such as H.R. 1907 , that would prohibit funds in three of the mandatory programs(EQIP, the Grasslands Reserve Program, and Farmland Protection) from being usedfor technical assistance for any of the other mandatory programs.

Other Provisions. Also in P.L. 108-199 are general provisions that (1) waive cost sharing requirements for theEmergency Watershed Protection Program to repair or prevent damage to non-federallands in watersheds that have been affected by fires initiated by the federalgovernment; (2) prohibit making land enrolled in the CRP and planted to hardwoodtrees ineligible for re-enrollment; and (3) prohibit NRCS from reorganizing regionalconservationists and regional offices without approval by the appropriationscommittees. Additionally, report language for the Office of the Secretary encouragesimplementation of a new program to establish a conservation corridor along theDelmarva peninsula; encourages a study of cropping techniques in the UpperMidwest; and requires consultation with the agriculture committees beforeproceeding with possible mergers involving the NRCS and FSA.

Division H of P.L.108-199 also includes conservation provisions that are not part of the regular annual funding for conservation programs. One provisionauthorizes the Conservation Security Program (CSP) through FY2007 rather thanFY2013, and removes a lifetime cap of $3.77 billion on total program spending thatwas placed on the CSP by the FY2003 consolidated appropriations act ( P.L. 108-7 )so that the remainder of the estimated spending could be used to offset the cost ofdisaster assistance. Other separate provisions in the FY2004 consolidatedappropriations act make disaster assistance funds available to deal with the resourceproblems stemming from the wildfires in California during the fall of 2003, including$150 million to the Emergency Watershed Protection Program, $12.5 million to theTree Assistance Program, and $12 million to the Emergency Conservation Program.The cost of these wildfire assistance provisions is offset by a mandated rescission of$225 million from the Federal Emergency Management Agency (FEMA). TheCalifornia wildfires are also addressed in the general provisions of the agriculturetitle, where a provision waives the cost-sharing requirements for funding andassistance under the Emergency Watershed Protection Program.

Agricultural Trade and Food Aid

USDA's international activities include both discretionary and mandatory programs with the former funded by appropriations and the latter funded withborrowing from USDA's Commodity Credit Corporation. Both the discretionary andthe mandatory international programs are authorized in the 2002 farm bill ( P.L.107-171 ). The FY2004 consolidated appropriations act ( P.L. 108-199 ) provides$1.512 billion for discretionary USDA trade programs, namely P.L. 480 food aid, thenew McGovern-Dole international food for education program (IFEP), salaries andexpenses of USDA's Foreign Agricultural Service, and administrative expenses forCCC export programs. The original House-passed agriculture appropriations bill( H.R. 2673 ) provided an appropriation of $1.523 billion for theseactivities, while the Senate-passed version provided an appropriation of $1.487billion. Most of the difference between the two bills was accounted for by a Senaterecommendation of $25 million for IFEP, in contrast to a House-recommendedappropriation of $56.9 million. The conference report resolved this difference byappropriating $50 million for IFEP.

For the mandatory programs, which include both agricultural export and other food aid programs, the Administration's FY2004 budget proposal estimates aprogram level of around $4.7 billion. The final FY2004 appropriations measureplaces no new funding limits on the mandatory agricultural trade and food aidprograms; it does, however, make permanent a prohibition, first incorporated inappropriations measures in FY1993, on the use of USDA funds to promote the saleor export of tobacco or tobacco products.

Foreign Agricultural Service. For FAS, which administers USDA's international programs, P.L. 108-199 appropriates$132.1 million, considerably less than the $140.8 million requested by theAdministration. House and Senate measures had recommended $133.9 million and$131.6 million respectively. Neither measure included the Administration's requestfor a $5 million USDA contribution to the Montreal Protocol Fund. The MontrealProtocol is an international agreement on limiting substances that deplete the ozonelayer. Additionally, P.L. 108-199 allots to FAS the sum of $500,000 for cross-cuttingtrade negotiations and biotechnology activities. This allocation is part of anappropriation of $3.3 million for such activities. Other USDA agencies that receivetrade-biotechnology allotments in the conference report include the Office of theSecretary ($1.165 million), APHIS ($1.0 million), and GIPSA ($150,000).

Food Aid. For P.L. 480 commodity sales and donations, P.L. 108-199 provides an appropriation of $1.326billion, an amount identical with the Senate-passed amount and only $2 million lessthan recommended in the House-passed measure. Of that amount, $1.192 billion isfor commodity donations for emergency and non-emergency activities under P.L. 480Title II. USDA administers P.L. 480 commodity sales and IFEP, while the U.S.Agency for International Development (USAID) administers humanitarian donationsunder P.L. 480 Title II. The conferees direct the Administration not to place arbitrarylimits on monetization (i.e., sales of donated commodities for local currencies) underTitle II, but rather to base approvals of food aid proposals on the merits of programplans to promote food security and improve people's lives, not on the level ofmonetization. The FY2004 bill authorizes the transfer to Title II of any balances,recoverables, or reimbursements that remain available to P.L. 480 Title III (afood-for-development program, first established in 1990, that has not received anappropriation in recent years).

The new food aid program, IFEP, authorized in the 2002 farm bill ( P.L. 107-171 ), receives an FY2004 appropriation of $50 million. IFEP will providecommodity donations and associated finance and technical assistance to carry outschool and child feeding programs in foreign countries. The 2002 farm billauthorized $100 million of CCC funding for IFEP in FY2003 but stipulated that,beginning in FY2004, IFEP must be funded by appropriations. The bill suggests,however, that the Secretary investigate the use of other resources, such as Section416(b) food aid (see below), to carry out activities consistent with the goals of IFEP.

The appropriation for food aid in P.L. 108-199 is $377.6 million less than the amount appropriated for FY2003. The regular FY2003 appropriation for food aidwas augmented by $369 million for P.L. 480 Title II programs in the EmergencySupplemental Wartime Appropriations Act of 2003 ( P.L. 108-11 ). P.L. 108-11 included $69 million toward partial replenishment of releases of commodities from the Emerson Trust used to meet urgent food needs in Africa, Afghanistan, and Iraq;$150 million to finance previously approved but unfunded FY2003 P.L. 480 Title IIprojects, and $150 million in additional food aid for Africa, Iraq, and Afghanistan.

The President's budget provides no estimate of the value or volume of commodities that could be released from the Emerson Trust (primarily a commodityreserve), which was used extensively in FY2003 to respond to food emergencies inAfrica and Iraq. In FY2003, the Secretary of Agriculture announced availability from the Emerson Trust of 200,000 tons of wheat for emergency relief in the Hornof Africa (Ethiopia and Eritrea) and 600,000 tons of wheat for emergency relief inIraq. Of the total amount made available, only about half was used (400,000 metrictons). USDA estimates that about 1.6 million metric tons of wheat now remain inthe trust, which is authorized to hold up to 4 million metric tons of wheat, corn,sorghum, and rice. The appropriations measure provides no additional funding forreplenishment of the Emerson Trust. Instead, it limits to $20 million the amount ofFY2004 P.L. 480 funds that could be used to reimburse the trust for the release ofcommodities to meet emergency food aid needs.

Other food aid programs include Food for Progress (FFP) which provides commodities to countries that are introducing and expanding free enterprise in theiragricultural economies and Section 416(b) commodity donations. The President'sbudget envisions $151 million of CCC funding for FFP; some funding for FFP alsowill come from appropriations for P.L. 480 Title I, which P.L. 108-199 set at $132million. USDA estimates that about $119 million of surplus nonfat dry milk will bemade available as commodity donations under Section 416(b) in FY2004. Theconference report accompanying P.L. 108-199 directs the Secretary of Agriculture,to the extent practicable, to make available $25 million in Section 416(b)commodities to mitigate the effects of HIV/AIDS.

Export Programs. Mandatory (CCC-funded) programs to promote exports include the Export EnhancementProgram (EEP), the Dairy Export Incentive Program (DEIP), CCC Export CreditGuarantee Programs, the Market Access Program (MAP), and the Foreign MarketDevelopment Program (FMDP). None of these mandatory programs require anannual appropriation. In the EEP and DEIP programs, USDA makes cash bonuspayments to exporters of U.S. agricultural commodities to enable them to be pricecompetitive when U.S. prices are above world market prices. EEP has been littleused in recent years. No EEP bonuses were provided in FY2002 or FY2003. Reflecting this program experience, the President's budget assumes a program levelof $28 million in FY2004, compared with $478 million authorized for EEP in the2002 farm bill. Consequently, USDA would retain some flexibility to increase thelevel of EEP subsidies. For DEIP, the Administration expects a program level of $57million for FY2004.

The President's budget projects an overall program level of $4.2 billion in FY2004 for CCC export credit guarantee programs, which provide paymentguarantees for the commercial financing of U.S. agricultural exports. While thisprojection is virtually the same as for FY2003, the actual level of guarantees willdepend on demand for credit, market conditions, and other factors. Of the amountof guarantees expected to be issued in FY2004, $4 billion would be made availablefor GSM (General Sales Manager)-102 short-term guarantees of up to 3 years, whileGSM-103 intermediate-term guarantees (3 to 10 years) would be allocated $18million.

For export market development, the budget proposes $125 million for the Market Access Program and $34.5 million for the Foreign Market DevelopmentProgram, as required by the 2002 farm bill. Both programs support the developmentand maintenance of export markets for U.S. agricultural products. However, MAPmainly promotes high value products, including brand-name products, while FMDPpromotes generic commodities.

Funding for U.S. agricultural export and food aid programs could be affected by ongoing WTO agricultural trade negotiations. The United States has proposedthat agricultural export subsidies be eliminated, while the European Union, whichopposes complete elimination of such subsidies, has conditioned its willingness tonegotiate reductions in export subsidies on the inclusion of export credit programs(such as CCC export credit guarantees) and food aid based on surpluses (such assection 416(b)) on the WTO agriculture negotiating agenda. The EU and othertrading partners charge that the U.S. credit program has a subsidy element (althoughit is much less than the subsidy represented by the EU's own export subsidy program)and gives the United States an unfair competitive advantage in exporting certainagricultural commodities.

The EU and other U.S. trading partners, such as Australia, Brazil, and a number of agricultural exporting developing countries, also have raised the issue of largeU.S. food aid shipments in ongoing WTO agriculture negotiations. They havesuggested that the United States is using food aid to get around its export subsidyreduction commitments made in the 1994 Uruguay Round Agriculture Agreement. The United States has countered that its food aid shipments, though large, are madein conformity with WTO rules, and are being made available to countries with foodneeds or used for development programs.

In ongoing WTO agriculture negotiations, the United States has agreed to the principle of establishing new rules and disciplines for export credit guarantees andfor food aid. However, those negotiations have not yielded agreements on detailedproposals for modifying either program. For more information on the status ofnegotiations on export credits and food aid, see CRS Report RL32053 , Agriculturein WTO Negotiations .

Other International Provisions. P.L. 108-199 includes an FY2004 appropriation of $3 million to finance BillEmerson and Mickey Leland Hunger Fellowships as authorized in P.L. 108-58 . These fellowships, administered by the Congressional Hunger Center, honorEmerson and Leland, now deceased, who were, respectively, ranking member andchairman of the House Select Committee on Hunger, which was eliminated alongwith other House Select Committees in 1995.

Cuba Trade. P.L. 108-199 did notadopt language included in the Senate-passed version of the FY2004 agricultureappropriations bill that would have relaxed the licensing requirement for travelingto Cuba to pursue opportunities to sell agricultural and medical products. The Senatelanguage was reportedly in response to a Treasury Department decision in June 2003to deny the license application of a firm seeking to organize a food and agribusinessexhibition in Havana in January 2004. The Bush Administration continues to opposeany efforts to relax existing restrictions on eligible agricultural exports to Cuba.

Current U.S. policy is to exempt commercial sales of agricultural and medical products from U.S. unilateral sanctions imposed on foreign countries, subject tospecified conditions and prohibitions. Debate continues, though, among policymakerson the scope of the statutory restrictions that should apply on agricultural sales toCuba. Members of Congress opposed to the Cuba-specific prohibitions haveintroduced bills in the 108th Congress proposing to effectively repeal them. Formore information on this issue, see the CRS Electronic Briefing Book, Trade , pageon Economic Sanctions and AgriculturalExports .

Agricultural Research, Extension, and Economics

Four agencies carry out USDA's research, education, and economics (REE) function. The Department's intramural science agency is the Agricultural ResearchService (ARS), which performs research in support of USDA's action and regulatoryagencies, and conducts long term, high risk, basic and applied research on subjectsof national and regional importance. The Cooperative State Research, Education,and Extension Service (CSREES) is the agency through which USDA sends federalfunds to land grant Colleges of Agriculture for state-level research, education andextension programs. The Economic Research Service (ERS) provides economicanalysis of agriculture issues using its databases as well as data collected by theNational Agricultural Statistics Service (NASS).

With the exception of recent years in which USDA research agencies have received supplemental funds for antiterrorism activities, the agricultural researchbudget, when adjusted for inflation, has remained flat for almost 30 years. Furthermore, current financial difficulties at the state level are causing some statesto reduce the amounts they appropriate to match the USDA formula funds (blockgrants) for research, extension, and education (100% matching is required, but moststates have regularly appropriated two to three times that amount). A combinationof cuts at the state and federal levels can result in program cuts as far down as thecounty level. In 1998 and 2002 legislation authorizing agricultural researchprograms, the House and Senate Agriculture Committees tapped sources of availablefunds from the mandatory side of USDA's budget and elsewhere ( e.g. , the U.S.Treasury) to find new money to boost the availability of competitive grants in theREE mission area. From FY1999 through FY2003, the Appropriations Committeesprohibited the use of those mandatory funds for the purposes the AgricultureCommittees intended; however, from FY1999 through FY2002, and now again forFY2004, the appropriations conference committees have allocated more funding forongoing REE programs than were contained in either the House or Senateappropriations bills. Nonetheless, agricultural scientists, stakeholders, and otherscurrently are concerned that higher military spending and lower tax revenues mayreturn the REE mission area to a period of static or shrinking appropriations.

Agricultural Research Service. The FY2004 consolidated appropriations Act ( P.L. 108-199 ) provides $1.15 billionfor ARS, an amount higher than both the House- ($1.05 billion) and Senate-passed($1.09 billion) appropriations bills. This represents essentially level funding with theregular appropriation for ARS in FY2003, excluding the $110 million one-timesupplemental appropriation that ARS received in P.L. 108-11 for construction at theNational Animal Disease Laboratory in Ames, Iowa.

P.L. 108-199 allocates $1.1 billion of the total FY2004 ARS appropriation to support the agency's research programs, and $63.8 million to support themodernization and construction of ARS facilities. This will provide nearly $54million in additional funds for research over FY2003, but represents nearly a $55million decrease in spending for facilities ($118.7 million in FY2003, excluding thesupplemental). The research allocation in P.L. 108-199 is $75 million more than thatcontained in the House bill and $43.4 million more than in the Senate bill.

Of the $63.8 million appropriated in FY2004 for facility construction and modernization, $10.5 million is allocated for laboratory security upgrades (theAdministration had requested $22 million for ARS construction, nearly all forsecurity upgrades), and the balance is designated for construction projects at eighteendifferent ARS locations. The House bill would have provided $36 million forbuilding projects, and the Senate measure $46 million. The Senate bill provision toprovide $2 million for renovations at the National Agricultural Library in Beltsville,Maryland, was not adopted. FY2004 conferees included report language requiringARS to submit prospectuses on construction projects and to assist the committees insetting priorities to guide future appropriations.

As in past years, the Administration's budget request for ARS assumed thediscontinuation of several dozen congressionally earmarked research projects anddirected the savings to other research areas that the agency considers to have higherpriority. Again as in the past, the FY2004 act reflects the appropriators' rejection ofthat proposal, and provides continued funding for all the projects at FY2003 levels. (The House appropriations committee report for FY2004 also contains languagestating that in future years the Administration will be expected to defend and explainwhy each research program should be terminated.) However, the conferees didinclude in the Act the Administration's proposal to reprogram roughly $12 millionfrom lower-priority research areas into special initiatives on emerging diseases,global climate change, biosecurity, and genomic sequencing. Every 5 years, ARSevaluates its programs and revises its research plan. Reprogramming is the outcomeof this process.

Cooperative State Research, Education, and Extension Service. P.L. 108-199 provides total FY2004 funding of$1.120 billion for CSREES, an amount $2.4 million higher than the FY2003appropriation. This amount is $11 million higher than the House bill and $1.8million more than the Senate bill provisions.

Within the agency's budget, P.L. 108-199 allocates $621.4 million for research and education funding for the states, which is $4.65 million above FY2003, $24million above the House bill allocation, $3.9 million above the Senate provision, and$107.2 million above the FY2004 budget request. Block grants to the states tosupport agricultural experiment station research (under the Hatch Act of 1887) at the1862 land grant universities are funded at $180 million, level with FY2003. Grantsfor research at the 1890 (historically black) land grant institutions are funded at $36million, essentially level with the FY2003 appropriation of $35.6 million. Conferees appropriated $1.1 million to supplement money distributed from the endowment fundto support research at the 1994 (tribally controlled) land grant institutions ($1.7 inFY2003).

For state extension programs, P.L. 108-199 designates $441.7 million, which represents an $8.8 million decrease from FY2003. The House bill contained $439.7million for extension, and the Senate bill $442 million. Block grants to the states tosupport extension programs (under the Smith-Lever Act of 1914) at the 1862 landgrant universities are funded at $279.4 million, a decrease from $281.2 million inFY2003. Grants for extension programs at the 1890 institutions are funded at $31.9million, essentially level with the $32.1 million appropriated in FY2003. P.L.108-199 provides $2.9 million to support extension programs at the 1994 institutions($3.4 million in FY2003).

For the fairly new category of multi-state research projects that have both research and extension components (authorized in1998), the FY2004 consolidatedappropriations act provides $50.5 million, which is a $4.1 million increase overFY2003, and a $4 million increase over the Senate bill provision, but a $12.4 milliondecrease from both the budget request and the House bill.

The act contains increased funding for an outreach program for socially disadvantaged farmers, from $3.5 million in FY2003 to $6 million in FY2004, anamount that is higher than both the budget request ($4 million) and the fundingcontained in the Senate bill (which provided level funding), but lower than the Housebill provision ($8.5 million).

As in past years, the Administration proposed to eliminate all but about $3 million in earmarked research and extension grants to specified land grant schools(special research grants). Congress traditionally has never adopted such proposals. P.L. 108-199 contains $111.3 million, essentially level funding with FY2003 ($112million); the House and Senate bills would have provided about $100 million forspecial research grants. For USDA major competitive, peer-reviewed grant program,the National Research Initiative (NRI), P.L. 108-199 appropriates $165 million,essentially level funding with the FY2003 appropriation of $167 million, which wasthe highest in the program's 13-year history (authorized at $500 million annuallysince 1994). The NRI would have received $149 million and $180 million,respectively, in the House and Senate bills. The FY2004 budget request was for$200 million.

P.L. 108-199 includes (as did the House and Senate bills) the Administration's request to continue to deny funding to carry out the Initiative for Future Agricultureand Food Systems competitive grants program. This program (which is not subjectto annual appropriations) was established in 1998, was reauthorized in the 2002 farmbill ( P.L. 107-171 ), and is authorized to receive $120 million annually in governmentmandatory funds. Grants were awarded under the initiative in FY2000 and FY2001,but appropriators prohibited the funds to be used for that purpose in FY2002 andFY2003. Language in P.L. 108-199 concurs with a Senate bill provision giving theSecretary discretionary authority to make 20% of NRI funds available for competitivegrants under the terms and conditions of the initiative. This means thatapproximately $30 million of the $165 million NRI appropriation could be awardedas initiative grants in FY2004. Both grant programs support fundamental researchon subjects of national, regional, or multistate importance to agriculture, naturalresources, human nutrition, and food safety, among other things.

Economic Research Service (ERS) and National Agricultural Statistics Service (NASS). P.L. 108-199 includes theHouse bill provision to appropriate $71.4 million for ERS. This represents a $2.7million increase over FY2003, a $1.5 million increase over the Senate bill, but $5.3million decrease from the amount requested by the Administration. For NASS, theact contains FY2004 funding of $128.9 million, as proposed in the Senate bill, whichis about $1 million less than the House provision, $7.3 million less than the budgetrequest, and $9.5 million less than the FY2003 level.

Food Safety

USDA's Food Safety and Inspection Service (FSIS) conducts mandatory inspection of meat, poultry, and processed egg products to insure their safety andproper labeling. The FY2004 consolidated appropriations act ( P.L. 108-199 ) provides $784.5 million for FSIS, roughly the amount contained in both the Houseand Senate bills. It represents a $29.7 million increase over FY2003, but it is $12.6million below the Administration's request.

The FY2004 conference report contains language from the House bill directing the agency to use the increase to hire additional inspectors, provide more scientifictraining, and conduct more sampling for pathogens that cause human illness, amongother things. P.L. 108-199 also includes the Administration's request for $1.65million to be used solely to pay for microbiological testing of meat and poultrysamples at commercial laboratories, in order to support the goal of establishing avalid and reliable baseline against which to measure risks and performance. Reportlanguage also expresses concern over the validity of FSIS determinations of the"equivalency" of foreign meat and poultry inspection systems that are authorized toexport to the United States. FSIS is required to present a report to Congress byMarch 1, 2004, documenting the process for determining equivalency, and explainingrecent changes in the agency's system for reinspecting meat imports at U.S. ports ofentry. A provision in the Senate bill to prohibit USDA from spending any funds toinspect downed (non-ambulatory) animals was not included in the conferenceagreement (meaning that they could not receive federal inspection for use as humanfood). However, because the first case of bovine spongiform encephalopathy (BSE,or mad cow disease) was identified in a downer cow in the state of Washington inDecember 2003, FSIS has since instituted new regulations banning downed animalsfrom entering slaughtering plants.

In addition to annual appropriations, FSIS traditionally has had access to user fees collected from industry for laboratory accreditation and for overtime and holidayinspection. Approximately $101 million is made available annually from thisaccount to support the inspection program. The President's budget request containeda proposal to change the definition of "overtime" to mean any hours that a firm mightbe operating beyond one 8-hour daytime shift. This would significantly raise theamount of fees collected from industry and diminish the proportion of inspection paidfor by tax dollars. Congress has never agreed to similar proposals in the past, sayingthat assuring the safety of the food supply is an appropriate function of the federalgovernment. In keeping with the House and Senate bills, which disregarded theAdministration's proposal, the FY2004 appropriations act does not address it.

Marketing and Regulatory Programs

Animal and Plant Health Inspection Service (APHIS). The largest appropriation for USDA marketing andregulatory programs goes to the Animal and Plant Health Inspection Service. APHISis responsible for protecting U.S. agriculture from foreign pests and diseases,responding to domestic animal and plant health problems, and facilitating agriculturaltrade through science-based standards. Under the FY2004 consolidatedappropriations act ( P.L. 108-199 ), APHIS receives $725.6 million. This is $32.9million more than FY2003 (see next paragraph), $25.7 million more than theAdministration's request, $13.5 million more than the Senate-passed bill, and $4.9million less than the House-passed bill. Of the $725.6 million in P.L. 108-199 ,$720.6 million is for salaries and expenses, and $5 million is for buildings andfacilities, the latter of which matches the Administration's request and both theHouse and Senate versions.

The FY2003 amount that is comparable to the FY2004 appropriation is $692.7 million. This equals the FY2003 appropriation of $730.7 million, after rescission,minus $38 million transferred to the new Department of Homeland Security (DHS). On March 1, 2003, approximately 2,680 APHIS border inspectors and the PlumIsland Animal Disease Center became part of DHS under P.L. 107-296 . SeparateFY2004 appropriations for USDA and DHS reflect this new division ofresponsibilities. DHS now conducts agricultural inspections at the border, butAPHIS continues to set agricultural inspection policies, conduct preclearance,supervise training, and inspect passengers and cargo entering the mainland fromHawaii and Puerto Rico. USDA continues to collect the user fees that fund muchof the agriculture border inspection program and will reimburse DHS for inspectionsperformed. In FY2004, USDA expects to collect $285 million in such fees andtransfer $178 million to DHS.

APHIS activities are divided into five program functions, plus a contingency fund. P.L. 108-199 funds the pest and disease exclusion function at $152.5 million,an increase of $6 million from FY2003, but $3.4 million less than theAdministration's request ($5.9 million less than the House and $4.5 million morethan the Senate). Plant and animal health monitoring is funded at $139.3 million, anincrease of $6.3 million from FY2003, but $3 million less than the Administration'srequest ($430,000 less than the House, and $2.4 million more than the Senate). Pestand disease management rises prominently to $333 million, an increase of $15.8million over FY2003, and $35.5 million over the Administration's request ($4.2million above the House and $920,000 above the Senate). The increase for scientificand technical services is $13.8 million over FY2003 and $6.1 million above theAdministration's request ($2.3 million below the House and $10 million above theSenate). The contingency fund and animal care function adopt the Senate-passedlevels, and are very similar to FY2003, the Administration's request, and the House.

Within the pest and disease management function, P.L. 108-199 provides an increase of $18.3 million for emerging plant pests (totaling $93.7 million), $5.2million more than the Senate, but $2.5 million less than the House. This increase isallocated with $8 million for citrus canker, $4 million for Asian long-horned beetle,$4.8 million for glassy-winged sharpshooter, and $1.5 million for Emerald AshBorer. The conferees request reports from USDA on controlling Emerald Ash Borer(by March 1, 2004) and Asian long-horned beetle (by January 1, 2004). Theagreement also increases funding for chronic wasting disease by $3.6 million(totaling $18.6 million), $1.8 million more than the House but $1.4 million less thanthe Senate. Appropriations also rise for control of grasshoppers, Mormon crickets,cormorants, and other pests and diseases.

As in past years, Congress encourages the Secretary to transfer funds from other Departmental accounts (generally the Commodity Credit Corporation (CCC)) foremergency eradication and indemnification programs. The agency transferred over$390 million in CCC funds for such purposes in FY2003. (Separately, theconference report notes that $10 million of CCC funds should be used for treereplacement and indemnification for losses due to citrus canker in Florida.)

In the plant and health monitoring function, the conferees increase emergency management systems by $640,000, partially to increase the number of available dosesof foot and mouth disease (FMD) vaccine. P.L. 108-199 funds a $2 millionbiosecurity program, in addition to other funds related to agroterrorism preparedness,such as database development and veterinary diagnostics. The conferees instruct theSecretaries of Agriculture and Homeland Security to coordinate efforts to assist stateswith agroterrorism preparedness. They also direct that diagnostic work at PlumIsland should remain focused on agriculture.

Regarding cost sharing, P.L. 108-199 incorporates a Senate provision prohibiting funds from being used to issue a final rule that would have required statesto match certain federal funds. Conferees also adopted another Senate amendmentallowing citrus canker assistance funds (in the Agricultural Assistance Act of 2003)to be used for tree replacement.

P.L. 108-199 reflects language from a Sense of the Senate amendment that USDA should not allow imports of live cattle from any country known to have BSE(bovine spongiform encephalopathy, also known as "mad cow disease") unless thecountry complies with guidelines of the World Organization for Animal Health.

Agricultural Marketing Service. AMS is responsible for promoting the marketing and distribution of U.S. agriculturalproducts in domestic and international markets. The FY2004 consolidatedappropriations act ( P.L. 108-199 ) provides budget authority of $94.2 million forAMS in FY2004, compared with the House-passed level of $92.7 million and theSenate-passed level of nearly $94 million. The Administration request was $91.8million; $91.5 million was provided in FY2003. The AMS levels include annualappropriations for marketing services and for payments to states and territories. Conferees approved the Senate's additional $2 million in FY2004 budget authorityfor payments to states and territories (funded last year at $1.3 million), andearmarked the $2 million increase specifically for the Wisconsin Department ofAgriculture, Trade, and Consumer Protection for the creation of specialty markets.

More than $15 million of the AMS appropriation represent funds transferred from the permanent Section 32 account. Further, AMS uses additional Section 32monies (not reflected in the above totals) to pay for government purchases of surplusfarm commodities that are not supported by ongoing farm price support programs. (For an explanation of this account, see CRS Report RS20235, Farm and FoodSupport Under USDA's Section 32 Program .) Also not included in the above AMSbudget authority levels are approximately $195 million in various user fees that fundnumerous agency activities.

The Senate appropriations committee report encourages USDA to use all existing Section 32 authorities to continue the $6 million Fruit and Vegetable PilotProgram (providing free fresh fruits and vegetables to students in 25 schools),authorized under Section 4305 of the 2002 farm bill ( P.L. 107-171 ). On a separatebut related matter, the report also notes that Section 10603 of the farm bill requiresUSDA to purchase at least $200 million annually of fruits, vegetables, and otherspecialty crops, and reminds the Department that farm bill report language expectedthat the purchases were to be in addition to any existing purchases. So far, USDAhas interpreted the farm bill language by counting existing purchases toward the $200million minimum. In another area, the Senate report notes that it was including, inthe committee's recommended increase for AMS, an additional $477,000 (for a totalof $1.5 million) for the National Organic Program, which, the report stated, shouldbe used to hire an executive director for the National Organic Standards Board, createa peer review panel to oversee USDA's accreditation process for organic certifiers,and pay expenses for volunteer technical advisers to the program.

Country-of-Origin Labeling. The 2002 farm bill ( P.L. 107-171 ) contained a requirement that many retailers providecountry-of-origin labeling (COOL) for fresh fruits and vegetables, ground and freshcuts of red meats, wild and farmed fish, and peanuts, starting on September 30, 2004. P.L. 108-199 delays most implementation for 2 years. The new implementation dateis September 30, 2006, for all covered commodities except wild and farmed fish,which are still subject to the original deadline. The House-passed bill had includeda provision, added in committee, to prohibit the use of FY2004 funds to implementCOOL for meats only. A House floor amendment to strike this committee provisionwas defeated, 208-193. The Senate version had not included a delay in COOLimplementation. Rather, the full Senate had approved a resolution insisting thatconferees not agree to the House position. (For background, see CRS Report 97-508ENR, Country-of-Origin Labeling for Foods .)

Grain Inspection, Packers, and Stockyards Administration. GIPSA establishes the official U.S. standards,inspection and grading for grain and other commodities, and ensures fair-tradingpractices, including in livestock and meat products. GIPSA has been working toimprove its understanding and oversight of livestock markets, where increasingconcentration and other changes in business relationships have raised concernsamong some producers about the impacts of competition on farm prices. Theconsolidated FY2004 appropriations act ( P.L. 108-199 ) provides an appropriation of$35.9 million for GIPSA salaries and expenses. As approved by the House, H.R. 2673 would have provided $39.7 million, the same level as inFY2003 and $2 million below the Administration request. The Senate-passedversion would have set the GIPSA appropriation at $35.6 million in FY2004,approximately $4 million below FY2003 and $6 million below the Administrationrequest.

In addition to the annual appropriation, another $42.5 million is expected to be collected through existing GIPSA user fees. Neither the House- nor Senate-passedbill assumed adoption of the Administration's proposal for new user fees in FY2004to replace $28.8 million in appropriations. Approximately $5 million of the proposednew fees would have come from charges for the costs of developing, reviewing, andmaintaining official U.S. grain standards; the other $24 million would have comefrom new license fees imposed on packers, live poultry dealers, poultry processors,stockyard owners, market agencies, dealers and swine contractors covered by thePackers and Stockyards Act (PSA). In their report, conferees expressed concernabout the Secretary's transfer in July 2003 of $2 million from the salaries andexpenses account to the user fee account for grain export inspection and weighingservices. Conferees directed the Administration to "take all necessary steps to adoptand implement a fee structure that fully funds the services provided."

Report language accompanying the original House committee-reported appropriations bill notes that no resources are provided for packer audits. TheAdministration requested $1 million in FY2004 GIPSA funds to implement a newpilot program to audit the four largest beef packers, intended for "better financialprotection to the regulated industries through heightened financial scrutiny of the TopFour." Also, $500,000 was proposed to conduct a comprehensive, industry-widereview of the PSA and its regulations. The Act has not undergone a comprehensivereview since its enactment in 1921 despite "dramatic structural changes" in theindustry since then, USDA observed. After receiving industry participant input,"GIPSA will clarify its views on competition in the industries it regulates. Theseactivities may result in future increases in the number and complexity ofinvestigations conducted by GIPSA and the monies recovered or returned to theregulated industries," the Department added in its proposal.

The House Appropriations Committee stated in its report that it "continues to be concerned about the economic impacts of packer control, feeding, or ownership[of livestock] on local communities." Observing that it had provided FY2003funding "for a comprehensive, objective study of the issues surrounding a ban onpacker ownership," the committee states that it expects the Department to provideregular updates on its progress.

The Administration's FY2004 budget summary also noted that some of the new funds proposed for the Secretary's office for "crosscutting" trade and biotechnologyactivities may be provided to GIPSA for its expanded biotechnology activities. P.L.108-199 earmarks $150,000 to GIPSA for these purposes, out of a total of $3.3million provided by conferees to all of USDA for this request.

Rural Development

USDA's stated rural development mission is to enhance rural communities by targeting financial and technical resources in areas of greatest need. Three agenciesestablished by the Agricultural Reorganization Act of 1994 ( P.L.103-354 ) areresponsible for this mission area: the Rural Housing Service (RHS), the RuralBusiness-Cooperative Service (RBS), and the Rural Utilities Service (RUS). AnOffice of Community Development provides community development supportthrough Rural Development's field offices. The mission area also administers therural portion of the Empowerment Zones and Enterprise Communities Initiative, theRural Economic Partnership Zones, and the National Rural Development Partnership.

The FY2004 consolidated appropriations act ( P.L. 108-199 ) provides a total appropriation of $2.462 billion for USDA rural development programs, which in partsupports an $11.098 billion loan authorization level for rural economic andcommunity development programs. The Senate and House measures recommendedapproximately $131 million and $65 million more, respectively, in budget authorityand $36 million and $1.386 billion more, respectively, in loan authorization levelthan the conference agreement provides. P.L. 108-199 also provides $170 millionmore in budget authority and $3.203 billion more in loan authorization than theAdministration's requested appropriation.

Reductions in Mandatory Spending and General Provisions. In general provisions, P.L. 108-199 prohibits theexpenditure of any funds to carry out several mandatory rural development programsauthorized by the 2002 farm bill ( P.L.107-171 ). Each of these programs is fundedthrough the borrowing authority of USDA's Commodity Credit Corporation, anddoes not require an annual appropriation. The provisions prohibit the use ofappropriated funds for the salaries and expenses associated with these programs,which effectively blocks funding for these programs. In total, P.L. 108-199 prohibits$293 million in mandatory rural development spending for the following programs: The Rural Strategic Investment Program (Congressional Budget Office-estimatedsavings of $100 million); the Rural Firefighters and Emergency Personnel Program($10 million); Enhancement of Rural Access to Broadband Services ($20 million);the Renewable Energy Systems and Energy Efficiency Improvements Program ($23million); the Rural Business Investment Program ($100 million); and theValue-Added Agricultural Product Market Development Grants program ($40million). (1) While the original House-passed billrecommended prohibitingexpenditures to carry out the Value-Added grants program, the Senate bill did notcontain this prohibition. The Senate bill recommended that no funds be spent tocarry out provisions of the Rural Business Investment Program ($100 million). TheHouse bill did not contain this provision.

While prohibiting the mandatory funding for the Renewable Energy Systems and Energy Efficiency Improvements Program, P.L. 108-199 does provide $23million in funding for the program, bringing budget authority to the level authorizedin the 2002 farm bill, but doing so through a discretionary appropriation. Both theHouse- and Senate-passed bills contained this recommendation. P.L. 108-199 alsoincludes bill language to provide guaranteed loans for this program, and also provides$15 million in discretionary funding for the Value-Added grants program.

In other general provisions, P.L. 108-199 provides $1.5 million for the Northern Great Plains Regional Authority, half of the amount recommended by the Senate bill. The Authority was created in the 2002 farm bill and authorized at $30 million eachfiscal year, FY2002-FY2007. This is the first year that funding has been providedfor the program. P.L. 108-199 also provides $1 million to the Denali Commissionfor improving solid waste disposal sites that currently threaten rural drinking watersupplies in Alaska. This was also half the amount recommended by the Senatemeasure. The House bill did not make recommendations for these programs.

Rural Community Advancement Program (RCAP). The RCAP, authorized by the 1996 farm bill( P.L.104-127 ), consolidates funding for 13 rural development loan and grantprograms into three accounts: Community Facilities, Rural Utilities, andBusiness-Cooperative Development. RCAP was designed to provide greaterflexibility in targeting financial assistance to local needs and permits a portion of thevarious accounts' funds to be shifted from one funding stream to another. P.L.108-199 provides $757.4 million in budget authority for the three RCAP accounts,approximately $10 million less than the Senate-passed measure, $56 million morethan the House-passed bill, and $280 million more than requested by theAdministration.

Within the three streams of RCAP funding, P.L. 108-199 provides funding of $76 million for the Community Facilities account. Through earmarking, theconference agreement provides $30 million for the Rural Utility Service's HighEnergy Cost Grants account (by transfer) and $22 million for Economic ImpactInitiative Grants for facilities in communities with high unemployment/economicdepression. These amounts are $2 million and $1 million less respectively than theSenate-passed bill had recommended. The House-passed bill made norecommendation for these programs. P.L. 108-199 also adopts the Senate and Housebill recommendations directing $6 million of the funding for rural communityprograms for a Rural Community Development Initiative targeting low-income ruralareas and Native American Tribes. The Senate bill noted that demand for the directcommunity facilities loan program far exceeds available funding, and, in reportlanguage, encouraged the Department to consider establishing a program level of$500,000,000 to meet these demands. The conference agreement does not includethis language.

For the Rural Utilities account within RCAP, P.L. 108-199 provides $605 million. The account supports water and waste-water loans and grants and solidwaste grants and is, by far, the largest of the three RCAP accounts. As with theHouse and Senate bills, language is included in the conference agreement that furtherearmarks RCAP water/waste-water funding for Native American Tribes ($24million), Alaska Native villages ($28 million), and the Colonias ($25 million) alongthe U.S.-Mexican border. The Senate bill had recommended $30 million for Alaskavillages, while the House measure made no such earmark P.L. 108-199 also provides$13 million for the circuit rider program and earmarks two additional circuit ridercontracts for Alaska. The circuit rider program provides technical assistance to smallrural water and waste-water systems. P.L. 108-199 further earmarks approximately$12.6 million of the RCAP account for water and waste-water development inEmpowerment Zones/Enterprise Communities and Rural Economic AreaPartnerships, about $10 million more than the Senate had recommended and the sameas recommended by the House measure. P.L. 108-199 also earmarks $2 million forgrants to statewide private non-profit television stations, $3 million less than theSenate recommendation. P.L. 108-199 also provides $1 million for improvements toindividually owned water wells, half of the amount recommended by the Senate. TheHouse made no recommendation for the program.

Finally, P.L. 108-199 provides $76.5 million for the Rural Business Services account within RCAP, which is $5 million and $3.5 million more than the House andSenate recommendations, respectively. P.L. 108-199 also earmarks $8.5 million forbusiness development in Empowerment Zones/Enterprise Communities and RuralEconomic Area Partnerships.

Rural Housing Service. For the RHS, P.L. 108-199 provides a $1.376 billion appropriation for FY2004, which inpart supports a total rural housing loan authorization of $4.362 billion. P.L. 108-199 provides $129.5 million and $147.7 million less in total budget authority thanrecommended by the Senate and House measures respectively, and is $170 millionless than requested. This reduced budget authority, however, supports a loanauthorization level that is only slightly less than the House recommendation andabout $9 million more than the Senate recommendation. P.L. 108-199 provides aloan authorization level of $4.092 billion for Section 502 single family guaranteedloans, the largest account of the Rural Housing Insurance Fund portfolio. TheSenate-recommended loan authorization level and Administration request for thisaccount are slightly less than this amount and are the same as recommended by theHouse bill.

P.L. 108-199 provides $232 million in housing loan subsidies, with Section 502 single family loans accounting for half of the direct subsidies ($165.9 million). Thisis $667,000 more than the Senate recommendation and $79,000 less than the Houserecommendation, but $19.6 million more in total subsidies than requested. P.L.108-199 provides approximately $50 million for Section 515 rental housingsubsidies, the same as recommended by the House bill and only slightly less than theSenate recommendation.

For the Rural Rental Assistance program, P.L. 108-199 provides $584 million. This is $137 million and $147 million less, respectively, than the Senate and Houserecommendations and $156 million less than the budget request. Conferees includedreport language expressing concern that past Section 521 rental assistance budgetrequests have been overstated, resulting in substantial unliquidated balances in thataccount. In particular, the conferees note that appropriations for 5-year rentalassistance contracts have been sufficient for an average period of 6.5 years. Accordingly, P.L. 108-199 changes the contract term from 5 years to 4 years. Theconferees also provide the Secretary with the authority to carry over unexpendedfunds at the completion of the 4-year contract period.

P.L. 108-199 also provides $46.2 million for the rural housing assistance grants, the same as recommended by the Senate and $4 million more than recommended bythe House bill. For the farm labor account, P.L. 108-199 provides $36.3 million, thesame as recommended by the House and $3.3 more than recommended by the Senate. P.L. 108-199 also provides $34 million for the mutual and self-help housing grants,the same as recommended by the Senate and only slightly less than the House billrecommendation.

P.L. 108-199 does not include the Senate recommendation to provide $2 million for the Historic Barn Preservation Program authorized by the 2002 farm bill.

Rural Utilities Service. P.L. 108-199 provides a total appropriation of $102.3 million for rural utility programs,which supports, in part, a loan authorization level of $6.681 billion. This is $18.7million more in budget authority than recommended by the House-passed bill and $4million less than in the Senate-passed bill. It is also $1.390 billion more in loanauthorization than recommended by the House bill, $45 million less than the Senaterecommendation, and $3.160 billion more than the Administration requested. Budgetauthority for the Rural Electrification and Telecommunications Loan account isapproximately the same as recommended by both the House and Senate bills. P.L.108-199 adopts the loan authorization level recommended by the Senate bill. Thislevel is $950 million more than the House bill and $2.47 billion more than requested. As recommended by both the House and Senate bills, and as requested by theAdministration, P.L. 108-199 effectively terminates electric and telecommunicationloan subsidies.

For the Rural Telephone Bank (RTB), P.L. 108-199 provides $173.5 million in FY2004 loan authorization, but no loan subsidies. This is the same as proposed bythe Senate bill. The House bill recommended neither loan authorization nor directloan subsidies for RTB, the same as requested by the Administration. In furtheranceof the privatization of the RTB, the conferees also include a provision limiting theretirement of Class A stock in the RTB.

In other RUS programs, P.L. 108-199 provides an FY2004 loan authorization level of $300 million for the Distance Learning and Telemedicine program, $250million more than requested, but the same as recommended by both House andSenate bills. P.L. 108-199 also provides $39 million in grants for this program, $14million more than the House recommendation and $1 million less than the Senaterecommendation. P.L. 108-199 also provides a loan authorization level of $602million for rural broadband telecommunications, $266 million more thanrecommended by the House and requested by the Administration, and $45 millionless than recommended by the Senate bill. For broadband direct loan subsidies andgrants, P.L. 108-199 provides $13.1 million and $9 million respectively. This is $19million more than recommended by the House bill and $4 million less thanrecommended by the Senate measure. No funding was provided for broadband directloan subsidies in FY2003. For purposes of loans and grants under these programs, P.L. 108-199 also adopts the Senate definition of a rural area as one outside anincorporated city or town and with a population of 20,000 residents or less.

Rural Business-Cooperative Service. P.L. 108-199 provides an FY2004 appropriation of $84million for the RBS accounts to support rural business development and expansion. This is $12 to $13 million more than the levels recommended by the House andSenate bills and $46 million more than requested. P.L. 108-199 adopts the loansubsidy and authorization levels for the Rural Development Loan Fund asrecommended by the House and Senate bills and as requested by the Administration. P.L. 108-199 also adopts the Senate recommendation to provide $15 million in loanauthorization for the Rural Economic Development Loan account, approximately $1million less than the House measure and the same as requested. For RuralCooperative Development grants, P.L. 108-199 provides $24 million. This is $11and $15 million more respectively than the House and Senate measures.

Within the RBS appropriation, P.L. 108-199 provides an FY2004 appropriation of $12.7 million for the Empowerment Zone/Enterprise Community Initiative(EZ/EC), approximately $1.7 million more than the House measure and $1.7 lessthan the Senate recommendation. The Administration made no funding request forthe program. The conference report also provides $1 million for the two rural EZs(Aroostook County, Maine and Middle Rio Grande FUTURO communities) chosenin Round III of the Empowerment Zone competition.

Food and Nutrition Programs

The FY2004 consolidated appropriations act ( P.L. 108-199 ) provides total funding of $47.3 billion for USDA nutrition programs, an increase of $5.4 billionover FY2003 spending for these programs. The final amount is higher than the $44.2billion recommended by the Administration, the $46.3 billion proposed by theSenate, and the $44.1 billion proposed by the House because of higher than originallyprojected unemployment resulting in greater participation in income-tested programs.Food and Nutrition programs include the food stamp program, child nutritionprograms (e.g., school lunch, breakfast, summer food, child care, special milk, etc.),the special supplemental nutrition program for women, infants and children (WIC),and various commodity donation programs.

The food stamp program, the largest of the federal nutrition programs, is expected to serve over 21 million people in FY2004, according to Administrationestimates. For FY2004, Congress agreed to total funding of $30.9 billion for foodstamp and related programs. This is $4.6 billion more than FY2003 spending; $3.2billion more than the Administration request and House proposal, and $1 billionmore than the Senate proposal. The final amount funds food stamp expenses (foodbenefits, administration, and the Food Distribution Program on Indian Reservations)at $26.4 billion, the food stamp contingency reserve at $3 billion, $1.4 billion forPuerto Rico and American Samoa, and $140 million for the emergency foodassistance program (EFAP). Food stamp expenses are funded at the Senate proposedlevel ($2.2 billion more than the Administration request and House proposal) becausemore recent projections indicate higher than originally expected unemployment. Another difference between the finally enacted amount and the Administration,House, and Senate proposals is in the reserve fund, which was raised from $2 billionto $3 billion. Other food stamp related programs (Puerto Rico and American Samoaand EFAP) are funded at the same levels as were proposed by the House and Senatebills but slightly more ($5 million) than the Administration request. The final lawalso contains language amending the Food Stamp Act to ensure that food stampbenefits in FY2004 for Alaska and Hawaii are not lower than those in FY2003.

Child Nutrition programs receive a total of $11.417 billion (2) under the finallyenacted law. This is $837 million more than FY2003 spending for these programs,and $1 million less than was proposed by the Administration and the House- andSenate-passed bills. The difference reflects a reduction from $6 million to $5 millionfor a certification study by the FNS. Child nutrition funding is used to assist with thecosts of meal service programs in schools, child and adult care, and summer andafter-school programs, milk programs, and related nutrition and administrativesupport. The largest program, the school lunch program, served subsidized meals tosome 28.7 million children in FY2003. For FY2004 it would receive an estimated$6.7 billion and serve 29.1 million children, according to USDA estimates.Conference report language encourages the Secretary of Agriculture to take actionto prevent purchases for the school lunch program of chicken treated withfluoroquinolones (an antibiotic treatment).

Several child nutrition programs and provisions due to expire at the end of of FY2003 were temporarily extended through March 31, 2004 in separate legislation ( P.L.108-134 ) after the Congress was unable to agree on a comprehensive childnutrition reauthorization bill. These programs include: (1) the summer food serviceprogram and summer food service pilot projects; (2) authority for the use ofagricultural funds to buy commodities for food programs; (3) provisions relating toeligibility for private non-profit child and adult care food providers, and (4) aprovision extending a provision permitting the exclusion of military housingallowances for free and reduced price meal eligibility.

WIC program funding authority, which expired at the end of FY2003, was not among the expiring programs temporarily reauthorized by P.L.108-134 . Nevertheless, the program was funded in the FY2004 consolidated appropriations actat $4.64 billion. This program provides monthly food packages to low-incomepregnant and postpartum mothers and children under age 5 who are at nutritionalrisk. The amount provided by P.L. 108-199 is the same as that recommended by theSenate; $51 million less than the House proposal; $130 million less than theAdministration request; and $56.8 million less than the FY2003 appropriation. TheSenate committee report ( S. Rept.108-107 ) justified the agreed-upon FY2004reduction in appropriated funds from FY2003 on the basis of lower than originallyprojected FY2003 participation rates and a slight decrease in WIC food packagecosts. Moreover, according to the Administration, there will be $125 million inunexpended reserve funds from FY2003 that can be used in FY2004. The reportprojected that the final funding level of $4.64 billion would be adequate to maintainparticipation at the FY2003 level of approximately 7.8 million.

An Administration proposal to remove funding for the Farmers' Market Nutrition Program (FMNP) (3) from the WIC budget,and instead, fund this activityunder the Commodity Assistance Program (CAP, see below) was not adopted in thefinal law. The House-passed bill concurred with this change; the Senate bill did not. The final law sets $23 million ($2 million less than the Senate bill) as the amount ofWIC funds to be spent on the FMNP. It also allows not less than $15 million ofWIC funds for a breastfeeding support initiative, and up to $25 million formanagement information systems. Up to $4 million of WIC funds are permitted tobe used for pilot projects to combat childhood obesity, $1 million less than the Senatebill recommendation.

The Commodity Assistance Program (CAP) is a category created by appropriators to combine funding for a variety of commodity donation programsauthorized by several agriculture laws. Programs include the commoditysupplemental food program (CSFP); emergency food assistance program (EFAP)administrative grants; and funding for Food Donations and Pacific Island Assistance.The finally enacted law provides a total of $150 million for these programs, insteadof the $166 million proposed by the Administration and the House and the $145million proposed by the Senate. This is $13.4 million less than the amount spent forthese programs in FY2003. Of the amount appropriated, the CSFP is funded at$98.92 million. The CFSP provides monthly food packages made up of commoditiesto low-income pregnant and postpartum women, children under 6 and elderlypersons. The final law provides $3.93 million more than the Administration request,and the House and Senate recommended levels. Conference report languageindicates the conferees' intent that the funding maintain the same caseload in FY2004as that existing at the end of FY2003. The final CAP funding also provides $50million to support the administrative costs of distributing commodities through theEFAP, and $1.081 million for food donations for disasters and Pacific Islandassistance, and contains language authorizing assistance to nuclear-affected islands.

Food and Drug Administration (FDA)

The Food and Drug Administration (FDA), an agency of the Department ofHealth and Human Services (DHHS), is responsible for regulating the safety offoods, drugs, biologics (e.g., vaccines), and medical devices. The agency is fundedby a combination of congressional appropriations and various user fee revenues,assessed primarily for the pre-market review of drug and medical device applications. The total amount of user fees to be collected each year is set in FDA's annualappropriations act. The FY2004 consolidated appropriations act ( P.L. 108-199 ) provides a total program level of $1.704 billion. Of this amount, $1.387 billion isappropriated for FDA salaries and expenses, an increase of $6 million over the$1.381 billion appropriated for FY2003, but $19 million less than the Administrationrequest of $1.406 billion. P.L. 108-199 also appropriated $7 million to pay forconstruction and maintenance of FDA's buildings and facilities. In addition, P.L.108-199 allows FDA to collect a total of $309.7 million in user fees during FY2004,an amount 14.5% higher than the $270.5 million in user fees for FY2003.

User Fees

Total user fee revenues, which have risen steadily over the past 10 years, account for nearly 18% of FDA's total program level this year. The PrescriptionDrug User Fee Act (PDUFA), reauthorized as part of the 2002 Public Health Securityand Bioterrorism Preparedness and Response Act ( P.L. 107-188 ), allows FDA tocollect user fees for the review of drug and biologic applications. P.L. 108-199 setsthese fees at $249.8 million, as the President requested, an increase of $26.9 millionover the $222.9 million for FY2003. In addition, the new Medical Device User Feeand Modernization Act (MDUFMA) of 2002 ( P.L. 107-250 ) authorizes the agencyto charge user fees for medical device applications as well. P.L. 108-199 calls for$31.7 million in medical device user fee assessments, an increase over the $25.1million for FY2003. Moreover, the President signed the new Animal Drug User FeeAct of 2003 ( P.L. 108-130 ) on November 18, 2003, and the conference committeerecommended that $5 million be derived from these fees. The FDA also receives$23.2 million in user fee revenues from mammography clinics, color certificationreceipts, and export certificates.

Counterterrorism Activities

The conference report provides $20.5 million for FDA's counterterrorism activities in FY2004, the same as the budget request. These funds are consolidatedunder the category of food safety as part of the DHHS's overall strategy to protect thenation's food supply, and include $5 million in grants to states, $5 million forlaboratory protection, and another $10.5 million to support FDA's new food facilityregistration system. This initiative, mandated under the Bioterriorism Act of 2002,requires all food facilities, both domestic and foreign, to register with the FDA.

Unified Financial Management System

FDA's Unified Financial Management System (UFMS), which integrates the Department's financial management structure, provides HHS leaders with a moretimely and coordinated view of critical financial management information. Conference report language includes a total of $9.445 million for the UFMS, anincrease of $1.145 million. The conferees directed that, from this total amount, noless than $4.5 million is to be invested in improvements to FDA's legacy systems,and cannot be used for UFMS contracts or global UFMS costs.

Food

Conference report language continues to support $1.9 million for research at the New Mexico University Laboratory to develop rapid test methods for microbiologicalpathogens found in fruits and vegetables and to develop models and data analysis tofacilitate implementation of FDA's rules on food safety, homeland security,bioterrorism, and other initiatives.

In three other issues related to food, conferees (1) agreed to an appropriation of $21.607 million for Bovine Spongiform Encephalopathy (BSE) prevention activities;(2) allocated $692,000 for the food center's adverse event reporting system; and (3)set aside a total of $10.9 million for the regulation of dietary supplements, a$500,000 increase over FY2003. The conference report concurs with a Senateprovision that directs the agency to spend no less than $250,000 to process commentson its March 5, 2003 proposed rule to require warning labels on dietary supplementscontaining ephedrine alkaloids.

Seafood

In report language, the conferees said they expect FDA to devote no less than$250,000 to continuing work with the Interstate Shellfish Sanitation Commission(ISSC) and at least $250,000 to promoting educational and research activities relatedto shellfish safety in general and Vibrio vulnificus in particular. On other seafoodsafety issues, the conference committee let stand a House requirement that FDAproduce a report describing its current efforts for controlling temperaturerequirements for imported seafood; the Senate urged FDA to promote newcost-effective technologies to control temperatures. The House required the FDA toreport on the sampling frequency and violation rates for chloramphenicolcontamination in farm-raised imported shrimp, while the Senate encouraged theagency to increase its frequency of inspections.

Drug Issues

The conferees directed FDA to spend no less than $53.8 million for its generic drugs program, confirming that the timely approval of generic drug products playsan important role in addressing the high cost of prescription drugs. An $8 millionincrease over the FY2003 level, the amount is $5 million less than the $13 millionincrease called for in the budget request. Nevertheless, both the House and Senatecommittees said this funding level -- coupled with the pay increases for the program -- will allow the agency to hire 28 more reviewers and examiners and review at least85 percent of generic drug applications within 6 months of submission. In separatebut related legislation, the President signed into law on December 8, 2003, theMedicare Prescription Drug, Improvement, and Modernization Act of 2003 (H.R. 1),which contains a provision to close existing loopholes in the Hatch-Waxman patentlaw and, in so doing, speed up the availability of less costly generic drugs forconsumers.

Conferees rejected a House-passed provision that would have blocked FDA from preventing individuals, wholesalers, and pharmacists from importing cheaperFDA-approved prescription drugs from foreign suppliers. The recently enactedMedicare reform legislation also includes a provision to let pharmacists and drugwholesalers import prescription drugs from Canada, but only if the DHHS Secretaryfirst certifies to Congress that the drugs will be safe and provide substantial costsavings for American consumers.

To address other drug-related issues, conference report language provides $8 million to reduce review times and increase the number of generic drugs on themarket; $4 million to improve pediatric labeling under the Best Pharmaceuticals forChildren Act; $3 million for activities related to patient safety; and $650,000 tosupport FDA's over-the-counter (OTC) drug program. Acknowledging the importantrole OTC drugs play in the nation's healthcare system, Congress directed that theOTC funds be used to hire and train additional employees to improve the OTC drugreview process and work towards finalizing the OTC drug monograph system. Inaddition, the conferees provided $13.3 million to support grants and contracts underthe Orphan Products Grants Program.

Commodity Futures Trading Commission (CFTC)

The Commodity Futures Trading Commission (CFTC) is the independentregulatory agency charged with oversight of derivatives markets. The CFTC'sfunctions include oversight of trading on the futures exchanges, registration andsupervision of futures industry personnel, prevention of fraud and price manipulation,and investor protection. Although most futures trading is now related to financialvariables (interest rates, currency prices, and stock indexes), Congressional oversightis vested in the Agricultural Committees because of the market's historical originsas an adjunct to agricultural trade. For FY2004, the consolidated appropriations act( P.L. 108-199 ) provides $90.4 million , which is $2 million more than the House-and Senate-passed measures and the Administration request, and $5 million abovethe FY2003 appropriation. The Senate-reported version of the bill had originallyprovided $90.4 million. However, an adopted floor amendment in the Senatereduced CFTC funding by $2 million to offset the added cost of a rural developmentamendment. The final enacted level in effect is the same as the Senate-reported level.

In earlier Senate floor action on the appropriations measure, the Senate rejected by a vote of 41-56 an amendment offered by Senator Feinstein that would have giventhe Commodity Futures Trading Commission (CFTC) and Federal Energy RegulatoryCommission (FERC) new powers to regulate energy trading and marketing. Theamendment would have required currently unregulated dealers in over-the-counterderivatives contracts based on energy products to report certain data to the CFTC,and would have increased the anti-fraud authority available to both regulators. Proponents of such legislation have argued that the collapse of Enron and theCalifornia electricity crisis were signs of a dangerous regulatory gap. Opponentsbelieve that regulators have adequate authority to pursue fraud and manipulationunder current law, and point to ongoing enforcement actions against Enron and otherenergy traders as evidence of this.

Table 3. USDA and Related AgenciesAppropriations, FY2004 Budget Request, House Bill, Senate Bill and Enacted, vs. FY2003 Enacted (budget authority, in millions of $)

Source: Based on spreadsheets provided by the House Appropriations Committee.

An item with a single asterisk (*) represents the total amount of direct and guaranteed loans that can be made given the requested or appropriated loan subsidy level. Only the subsidy levelis included in the total appropriation.

(1) FY2003 enacted levels include amounts appropriated for USDA and related agencies in the Consolidated Appropriations Act, 2003 ( P.L. 108-7 ) adjusted for the 0.65% across-the-boardrescission in all discretionary programs (with the exception of the WIC program which wasspecifically exempted from the rescission), and the $479 million in supplemental FY2003agriculture appropriations provided by the Wartime Supplemental Appropriations Act, 2003.

(2) The FY2004 omnibus conference agreement ( H.R. 2673 ) contains a 0.59% across-the-board rescission in all non-defense discretionary accounts. Figures in this table areas reported by the conferees and do not include the effect of the rescission.

(3) Under current law, the Commodity Credit Corporation and the Federal Crop Insurance Fund each receive annually an indefinite appropriation ("such sums, as may be necessary"). Theamounts shown for both FY2003 and FY2004 are USDA estimates of the necessaryappropriations.

(4) Scorekeeping adjustments reflect the savings or cost of provisions that affect mandatory programs, plus the permanent annual appropriation made to USDA's Section 32 program.

(5) P.L. 108-7 includes $3.1 billion in farm disaster assistance for 2000 and 2001 crop livestock losses. The cost of this assistance in the final law was offset by a limitation placed onmandatory spending for the Conservation Security Program over a ten-year period (FY2004-FY2013). This additional spending does not appear in the grand total listed above.

(6) Division H of P.L.108-199 contains $225 million in supplemental funding for various USDA assistance programs (including $50 million for USDA's Forest Service, which is fundedunder the Interior appropriations bill). Spending for this assistance was offset in the conferenceagreement by a mandated rescission of $225 million from the Federal Emergency ManagementAgency (FEMA).