Appropriations for FY2005: U.S. Department of Agriculture and Related Agencies
Released: 2004-12-09T00:00:00

Most Recent Developments

On December 8, 2004, the President signed into law the FY2005 Consolidated AppropriationsAct ( P.L. 108-447 , H.R. 4818 ), which combines nine annual appropriations bills intoone measure. Division A of P.L. 108-447 contains $85.3 billion in FY2005 funding for the U.S.Department of Agriculture and Related Agencies, including $16.9 billion in discretionary spending.The total appropriation does not reflect the effect of a provision that requires a 0.8% across-the-boardrescission in all discretionary spending in the measure.

USDA Spending at a Glance

The U.S. Department of Agriculture (USDA) carries out its widely varied responsibilitiesthrough approximately 30 separate internal agencies and offices staffed by some 100,000 employees. USDA is responsible for many activities outside of the agriculture budget function. Hence, spendingfor USDA is not synonymous with spending for farm programs.

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

Total USDA spending in FY2003 also included $7.0 billion (9%) for an array of natural resource and environment programs, approximately three-fourths of which was for the activities ofthe Forest Service, and the balance for a number of discretionary conservation programs for farmproducers. (USDA's Forest Service is funded through the Interior appropriations bill; it is the onlyUSDA agency not funded through the annual agriculture appropriations bill.) USDA programs forrural development ($2.9 billion in gross outlays for FY2003); research and education ($2.4 billion);marketing and regulatory activities ($2.3 billion); meat and poultry inspection ($735 million); anddepartmental administrative offices and other activities ($576 million) accounted for the balance ofUSDA spending.

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 control of annual appropriations.Currently accounting for the vast majority of USDA mandatory spending are: the farm commodityprice and income support programs (including ongoing programs authorized by the 2002 farm billand emergency programs authorized by various appropriations acts); the food stamp program andmost child 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 nutritionprograms are funded by an annual appropriation based on projected spending needs. Supplementalappropriations generally are made if and when these estimates fall short of required spending. Anannual appropriation also is made to reimburse the Commodity Credit Corporation for losses itincurs in financing the commodity support programs and the various other programs it finances.

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

Table 1. USDA and Related Agencies Appropriations, FY1997 to FY2005 (budget authority in billions of dollars)

Source: House Appropriations Committee.

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. The FY2004 levelreflects the 0.59% across-the-board rescission to all non-defense, discretionary accounts, withoutexception. The FY2005 level does not yet reflect the 0.8% across-the-board rescission to alldiscretionary accounts required in the FY2005 omnibus measure ( P.L. 108-447 ).

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.

FY2005 Agriculture Appropriations Action

As the first step in the FY2005 budget and appropriations process, the BushAdministration released its budget request on February 2, 2004 for all federaldepartment, agencies, and programs. The Administration's budget contained anFY2005 appropriations request of $82.9 billion for the U.S. Department ofAgriculture and Related Agencies (which includes all of USDA except the ForestService, and also includes the Food and Drug Administration and CommodityFutures Trading Commission). The FY2005 requested total was down $3.65 billionfrom the enacted FY2004 level of $86.6 billion, primarily because of an anticipated reduced need in FY2005 to reimburse the Commodity Credit Corporation for itsrealized losses. (1) An estimated $66.3 billion, ornearly 80%, of this requestedspending is for mandatory programs administered by USDA (primarily the CCC,crop insurance, and most food and nutrition programs). Actual spending for theseprograms is highly variable and is driven by program participation rates andprevailing economic and weather conditions. The balance of the FY2005 spendingrequest ($16.6 billion) was for discretionary programs, compared with an enactedFY2004 appropriated level of $16.8 billion. It is this category of spending for whichappropriators have direct control over annual spending levels.

Table 2. Congressional Action on FY2005 Appropriations for the U.S. Department of Agriculture and RelatedAgencies

* On Nov. 20, 2004, the final version of the FY2005 agriculture appropriations bill was incorporatedinto the conference agreement on the consolidated appropriations bill (H.R. 4818) forFY2005.

** Pending

The agriculture subcommittee of the House Appropriations Committee completed markup of the FY2005 agriculture appropriations bill on June 14, 2004,and a markup by the full House Appropriations Committee followed on June 23. Thecommittee officially reported the bill ( H.R. 4766 , H.Rept. 108-584 ) onJuly 7, 2004. The full House approved the measure on July 13, 2004, after adoptingfourteen amendments.

Senate subcommittee action on its version of the FY2005 bill was completed on September 8, 2004, and the full committee reported the bill ( S. 2803 )on September 14. The only amendment adopted in the Senate subcommittee was ageneral provision that would relax restrictions on travel to Cuba to promote and sellU.S. agricultural products. This provision was subsequently deleted by conferees. In full committee markup, an offered amendment to require mandatory country oforigin labeling for fresh meats and produce to begin on January 1, 2005, wasdefeated. No floor action was taken on S. 2803.

A conference agreement was reached on the differences between the House-passed bill ( H.R. 4818 ) and the Senate-reported measure( S. 2803 ). On November 20, 2004, the conference agreement wasfolded into an FY2005 consolidated appropriations bill (H.R. 4818, H.Rept. 108-792 ), along with eight other annual appropriations bills. The Presidentsigned the omnibus bill into law ( P.L. 108-447 ) on December 8, 2004.

The following sections of this report review the major provisions in the FY2005 conference agreement for USDA and related agencies as finally enacted, and comparethe FY2005 funding levels with the House-passed and Senate-reported measures, theAdministration's FY2005 request, and the enacted FY2004 levels ( P.L. 108-199 ).Also, see the table at the end of the report for a tabular summary comparison.

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 were provided in response to lowfarm 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 CCC will receive an indefinite appropriation ("such sums as necessary") for FY2005. The Administration estimates the required FY2005appropriation at $16.452 billion, compared with a revised estimate of $22.937 billionfor FY2004. The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) concurs with this request. The estimated appropriation forFY2005 is not a reflection of expected outlays for FY2005, but is instead an estimateof the required reimbursement to the CCC for its losses incurred primarily inFY2003. Although the estimated FY2005 appropriation is nearly $6.5 billion belowthe estimated FY2004 appropriation, the reduction is not because CCC spending isbeing cut by Congress. Instead, it is primarily attributable to improved farmcommodity prices in recent years, which have contributed to a reduction in requiredspending for farm commodity support under the 2002 farm bill.

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 traditionally makes two separate appropriations for thefederal crop insurance program. It provides discretionary funding for the salaries andexpenses of the RMA. It also provides "such sums as are necessary" for the FederalCrop Insurance Fund, which funds all other expenses of the program, includingpremium subsidies, 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.

In its FY2005 budget request, the Administration requested such sums as are necessary for the mandatory-funded Federal Crop Insurance Fund, and estimated thisappropriation at $4.095 billion, up from the revised FY2004 appropriation of $3.765billion. The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) concurs with this request. Legislative enhancements ( P.L.106-224 ) made to the crop insurance program in 2000 have greatly increased thefederal subsidy of farmer premiums. The increased subsidy coupled with programlosses associated with disasters in various parts of the country have contributed toincreased program costs in recent years.

For the discretionary component of the crop insurance program, P.L. 108-447 provides $72.0 million for RMA salaries and expenses, up slightly from the enactedFY2004 appropriation of $71.0 million, but well below the Administration's FY2005request for $91.6 million. Approximately three-fourths (or $15.5 million) of therequested increase would have funded various information technology (IT)initiatives. The Administration had requested an $8.3 million increase in total RMAfunding for FY2004, mostly to cover proposed IT initiatives. However, the enactedFY2004 level was just $800,000 above the enacted FY2003 level.

Over the past few years, the Administration's budget contained legislative proposals to limit the amount of federal subsidy that accrues to the private insurancecompanies participating in the program. None of these proposals were adopted, andthe FY2005 request did not contain any legislative initiatives pertaining to the cropinsurance program. Instead, USDA earlier this year completed negotiations on a newstandard reinsurance agreement (SRA), which became effective on July 1, 2004. TheSRA contains the terms and conditions under which USDA provides subsidies andreinsurance on eligible crop insurance contracts sold or reinsured by the privatecompanies. The newly adopted SRA is expected to reduce program costs by $22million in 2005 and $36 million in 2006 and subsequent years, through lowersubsidies to private insurance companies and increased private risk-sharing. Formore information on the new SRA, see the CRS Electronic Briefing Book onAgriculture, "Federal Crop Insurance: Standard Reinsurance Agreement," at http://www.congress.gov/brbk/html/ebagr83.html .

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. The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) provides $1.305 billion for all FSA salaries and expenses.(This includes $1.007 billion appropriated directly to FSA and another $298 milliontransferred to FSA primarily to administer its farm loan programs.) The appropriatedamount is higher than the FY2004 appropriation of $1.266 billion, about equal to theSenate-reported level ( S. 2803 ), but below the $1.352 billion in theHouse-passed bill ( H.R. 4766 ) and the Administration request for$1.317 billion. The House-passed bill was higher because an adopted House flooramendment transferred nearly $53 million to FSA salaries and expenses fromUSDA's Common Computing Environment account, which was not agreed to in thefinal appropriations law.

Several years ago, FSA funding levels were bolstered by carryover funding from supplemental acts that allowed FSA to increase staffing to administer farm billcommodity support programs. The Administration notes that these carryover fundsare now dwindling and need to be compensated for with an increase in regularappropriations to maintain county office staff levels. Report language accompanyingthe FY2004 House appropriations bill instructed USDA not to shut down orconsolidate any local FSA offices unless rigorous analysis proves such action to becost-effective. The FY2005 House committee report ( H.Rept. 108-584 ) reinforcesthis policy.

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 amount of loans that can be made, the loanauthority, is several times larger.

P.L. 108-447 provides an appropriation of $157.8 million to subsidize the cost of making $3.747 billion in direct and guaranteed FSA loans. An additional $301.8million is appropriated for salaries and administrative expenses to carry out the loanprogram, most of which is included by transfer in the total FSA salaries andexpenses.

The enacted FY2004 loan subsidy was $195.5 million to support FSA loans totaling $3.246 billion. Thus, P.L. 108-447 provides a loan subsidy that is 19%below the FY2004 level, but loan authority is increased in FY2005 by 15%. Theability to increase loan authority while decreasing the appropriation is possible dueto two factors: USDA adjustments in historical loan costs and loan repayment ratios,and relatively bigger increases in the lower-cost unsubsidized guaranteed loanprograms. The Administration had requested an FY2005 loan subsidy of $161million to cover $3.8 billion in loans.

P.L. 108-447 follows both the House and Senate bills in not funding the Administration's request for $3.2 million to cover $25 million in emergency loanauthority. In recent years, the emergency loan program has operated from carryoverfunds, but USDA expected to consume the remaining carryover in FY2004. Also, P.L. 108-447 maintains boll weevil eradication loan authority at its FY2004 level($100 million, up $40 million from the Administration request, with no additionalloan subsidy), and adds language that pink bollworm qualify for the boll weevileradication loan program.

Most of the $500 million increase in overall loan authority in the final law is a 50% increase in farm ownership loans. The authority for direct farm ownership loansincreases by 63% (to $210 million in FY2005) and the authority for guaranteed farmownership loans increases by 48% (to $1.4 billion). Guaranteed loans with nointerest subsidy require a smaller appropriation than interest-subsidized or directloans. Thus, with the loan repayment ratio adjustments mentioned above, the $456million increase in guaranteed farm ownership loans costs only $2.3 million inadditional loan subsidy.

Nearly all of the $37.7 million decrease in loan subsidy in P.L. 108-447 is in the direct lending programs (farm ownership and operating loans). Because of theperformance ratio adjustments, the loan subsidy for direct farm ownership loansdecreases by 60% ($17 million) despite the 63% increase in loan authorization. Theloan subsidy for direct operating loans decreases by 25% ($23 million) despite amore modest 6% increase in loan authorization.

P.L. 108-447 effectively transfers funds from the unsubsidized guaranteed operating loan program to the subsidized guaranteed operating loan program. Although both types of operating loans are guaranteed, buying down the interest ratecosts USDA more. Loan authority for the unsubsidized program decreases by $93million while authority for the subsidized interest program increases by $20 million. In recent years, the subsidized guaranteed operating loan program has been the mostoversubscribed program among the FSA loans.

For more information about agricultural credit in general, see CRS Report RS21977 , Agricultural Credit: Institutions and Issues.

Conservation

Agricultural conservation spending includes both discretionary and mandatory programs, which are administered for the most part by USDA's Natural ResourcesConservation Service. (The major exception is the Conservation Reserve Program,administered by USDA's Farm Service Agency). Discretionary conservationspending has totaled over $1 billion annually in recent years. Mandatoryconservation spending, funded by the Commodity Credit Corporation, is estimatedto total over $3 billion in FY2004. This section does not discuss USDA ForestService spending. For information on Forest Service funding, please see CRS Report RL32306 , Appropriations for FY2005: Interior and Related Agencies .

Discretionary NRCS Programs. Discretionary programs are those which are funded through annual appropriationsbills. The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) provides $999.9 million in NRCS discretionary funding (ascompared to the FY2004 level of $1.027 billion.) Appropriations for majorconservation programs are discussed below.

Conservation Operations (CO). This account funds assistance to the public and local governments for conservation. P.L. 108-447 provides $837 million, about $10 million less than the FY2004 enacted level and lessthan either the House-passed ( H.R. 4766 ) level of $854 million or theSenate-reported ( S. 2803 ) level of $846 million. The conference reportto P.L. 108-447 states that member-requested projects funded in FY2004 are notcontinued in FY2005, unless the final measure specifically mentions those projects.

Technical Assistance. P.L. 108-447 rejects the Administration's request for a new FY2005 discretionary account that would fundtechnical assistance (TA) for two mandatory programs -- the Conservation ReserveProgram (CRP) and the Wetlands Reserve Program (WRP). TA funding formandatory conservation programs, which is derived from the Commodity CreditCorporation (CCC), was capped in the 1996 farm bill. Costs have since exceeded thecap. To cover the CRP and WRP TA costs that exceed the cap, USDA is borrowingfunds from other so-called "donor" programs, upsetting constituents of thoseprograms. P.L. 108-447 includes identical language in each discretionary accountprohibiting use of funds in that account for any mandatory farm bill conservationprogram TA (including CRP and WRP). Although the House adopted a flooramendment to H.R. 4766 that would have fixed the problem, theamendment was dropped in conference. On December 7, 2004, Congress completedaction on S. 2856 , which limits the transfer of funds betweenconservation programs for TA and requires each program to pay for its own TA. Ifthe President signs the measure, it will restrict CCC funding for TA to the specificprogram for which that funding was made available, effectively prohibitingborrowing TA funding from "donor" programs. The bill would also lift the 1996 TAfunding cap, so all CRP and WRP TA would come from the CCC rather than otherconservation programs. CRP is expected to have high TA costs when 22 millionCRP acres expire beginning in 2007. For a discussion on technical assistancefunding, see CRS Issue Brief IB96030, Soil and Water ConservationIssues .

Other Accounts. P.L. 108-447 provides $75.6 million for watershed and flood prevention operations, compared with the FY2004 enacted levelof $86.5 million. It also provides $27.5 million for the watershed rehabilitationaccount (the FY2004 enacted level was $29.6 million.) For the watershed surveysand planning account, H.R. 4818 provides $7 million (the FY2004enacted level was $10.5 million.) For the resource conservation and developmentaccount, H.R. 4818 provides $51.6 million, the same as the FY2004enacted level.

Selected Mandatory Conservation Programs. In theory, mandatory conservation programs are notgoverned by the annual appropriations process because their funding is mandated byother laws. (For example, the 2002 farm bill ( P.L. 107-171 ) authorizes funding from2002 through 2007 for mandatory conservation programs.) In practice, appropriatorsoften place limits on mandatory spending in annual appropriations bills. Reductionsin mandatory spending are scored as savings, which may be used to offset otherspending.

Compared with the FY2005 authorized funding levels, cuts to mandatory conservation programs totaled $545 million in P.L. 108-447 . The table below listssome mandatory conservation programs limited by conferees. These include theEnvironmental Quality Incentives Program (EQIP), which provides cost-sharing toinstall structural and land management practices; the Conservation Security Program(CSP), which pays farmers to conserve natural resources over part or all of a farm;the Wildlife Habitat Incentives Program (WHIP), which provides financial assistanceto develop wildlife habitats; the Wetlands Reserve Program (WRP), which is fundedin terms of enrolled acres rather than by dollars, and assists producers to protectwetlands; the Farmland Protection Program (FPP), which assists with purchasingconservation easements for agricultural land; the Ground and Surface WaterConservation Program (GSWC), which helps fund irrigation efficiencies, particularlyin the Great Plains states; and the Small Watershed Rehabilitation Program, whichprovides financial assistance to rehabilitate aging small dams originally built byNRCS.

P.L. 108-447 did not address some mandatory programs. Hence, these programs are considered fully funded at their authorized levels. These include the $2 billionConservation Reserve Program, which pays farmers to retire land from production;the Klamath Basin program, a subprogram of EQIP that funds water conservation inwestern states; the Grasslands Reserve Program, which assists landowners to restoregrasslands while maintaining the land's suitability for grazing; and the AgriculturalManagement Assistance program, which provides assistance to certain states forvarious conservation activities. P.L. 108-447 also contains general provisionsmaking funding available through NRCS's Emergency Watershed ProtectionProgram for damage from fires initiated by the federal government.

For more information on USDA conservation programs, see CRS Issue Brief IB96030, Soil and Water Conservation Issues .

Agricultural Trade and Food Aid

For USDA's international activities that require an appropriation (discretionary programs), the FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) provides $1.533 billion, $29.8 million more than enacted inFY2004. Much of the increase is accounted for by an increased appropriation for theMcGovern-Dole International Food for Education Program (see below). The finaltotal for USDA's international activities is $12.3 million more than requested by thePresident. In addition to such discretionary programs as P.L. 480 foreign food aid,USDA's international activities also include mandatory programs (e.g., export marketpromotion), with the latter funded through the borrowing authority of the CommodityCredit Corporation (CCC). The Administration has estimated that the combined totalof discretionary and mandatory programs for FY2005 would be $6.6 billion, up $183million from the FY2004 Administration estimate.

Discretionary Programs. Discretionary international programs include commodity sales and humanitariandonations under P.L. 480 (or Food for Peace) and the McGovern-Dole InternationalFood for Education Program (FFE), authorized in the 2002 farm bill ( P.L. 107-171 ). Historically, P.L. 480 has been the main vehicle for providing U.S. agriculturalcommodities as food aid overseas. FFE makes available commodity donations andassociated financial and technical assistance to carry out school and child nutritionprograms in developing countries.

For P.L. 480, the final appropriations act contains an FY2005 appropriation of $1.303 billion, almost $15 million less than enacted in FY2004 and just over $5million more than requested by the President. The lower FY2005 appropriation forP.L. 480 is explained almost entirely by a reduction in P.L. 480 Title I loan subsidiesand ocean freight differential grants. (Title I provides direct loans to low-income ortransitional countries for the purchase of U.S. farm commodities). The totalappropriation to P.L. 480 includes $1.182 billion, or $2.5 million less than enactedin FY2004, for humanitarian commodity donations under P.L. 480 Title II. In reportlanguage, the conference committee makes clear that it expects "the Administrationto abide by the statutory set-aside for non-emergency food aid programs." The 2002farm bill ( P.L. 107-171 ) increased this statutory set-aside, the volume of P.L. 480Title II commodities earmarked for non-emergency assistance, to 1,875,000 metrictons. The committee reminds USDA that if additional emergency assistance abovethe appropriated level is needed, the Bill Emerson Humanitarian Emerson Trust (seebelow) is available for that purpose.

For the McGovern-Dole International Food for Education and child nutrition program (FFE), P.L. 108-447 provides $87.5 million, $37.8 million more thanenacted in FY2004. Both the House-passed ( H.R. 4766 ) andSenate-reported ( S. 2803 ) appropriations measures had recommendedsubstantially increased funding for FFE: H.R. 4766 by $25 million and S.2803 by $50 million. The increased funding level for FFE is partiallyoffset by reductions in the Title I loan account. Conferees also rescinded $191.1million in P.L. 480 funds carried forward to FY2005 from previous years, whichappropriators scored as savings in the measure.

USDA's other major discretionary account is the Foreign Agricultural Service (FAS), for which the conferees appropriated $137.8 million, $6.4 million more thanenacted in FY2004. FAS administers all of USDA's international activities with theexception of P.L. 480 Title II, which is administered by the U.S. Agency forInternational Development (USAID). P.L. 108-447 provides $4 million to coverexpenses for administering CCC export credit guarantees (which are mandatoryactivities). The President's budget and House and Senate appropriations reportsestimate that in FY2005, these administrative costs will support programs thatfinance $4.5 billion of U.S. agricultural exports.

In a general provision, P.L. 108-447 appropriates $2.5 million for Bill Emerson and Mickey Leland Hunger Fellowships. These fellowships, which finance trainingfor hunger-related activities both domestically (Emerson) and abroad (Leland), areprovided through the Congressional Hunger Center.

Mandatory Programs. Other food aid programs are mandatory (for which an annual appropriation is not required),including Food for Progress (FFP), the Bill Emerson Humanitarian Trust, andSection 416(b) commodity donations. The President's budget envisions $149 millionof CCC funding for FFP. That program level (plus some funding from P.L. 480 TitleI) is expected to provide the minimum 400,000 tons of commodities in FFPestablished in the 2002 farm bill. No commodities were released from the EmersonTrust in FY2004, but in FY2003, $212 million of commodities and related serviceswere provided through the Trust, which is primarily a commodity reserve, used tomeet unanticipated food aid needs or to meet food aid commitments if domesticsupplies are unavailable. The President's budget makes no estimate of releases fromthe Trust in FY2005, but notes that 500,000 tons are available for emergency foodassistance. About 1.6 million metric tons of wheat and $109 million in cash arecurrently in the Trust. For Section 416(b) commodity donations, the President'sbudget projects a program level of $147 million ($15 million for ocean freight andoverseas distribution costs and $132 million in commodity value). P.L. 108-447 contains a general provision stipulating that, to the extent practicable, $25 million ofSection 416(b) commodities be made available to foreign countries to assist inmitigating the effects of HIV/AIDS. The House bill (and the President's budgetrequest) had omitted this provision, which had been included in the FY2004 andprevious appropriations measures. USDA indicates that only nonfat dry milk will beavailable for distribution under Section 416 in FY2005.

A number of USDA's export-related programs (including CCC export credit guarantees, mentioned above) are also mandatory and thus do not require anappropriation. Under the Export Enhancement Program (EEP) and the Dairy ExportIncentive Program (DEIP), USDA makes cash bonus payments to exporters of U.S.agricultural commodities to enable them to be price competitive when U.S. prices areabove world market prices. EEP has been little used in recent years, and no EEPbonuses were provided in FY2004. Reflecting this program experience, thePresident's budget assumes a program level of $28 million in FY2005, comparedwith $478 million authorized by the 2002 farm bill. Consequently, USDA retainssome flexibility to increase the level of EEP subsidies because of the mandatoryauthorization. For DEIP, the Administration expects a program level of $53 millionfor FY2005, compared with a current estimate of $22 million for FY2004. Forexport market development, the budget proposes $125 million for the Market AccessProgram (MAP) and $34 million for the Foreign Market Development Program. Both of these estimates are identical to amounts proposed in the FY2004 budget forUSDA. The MAP request, however, is $15 million less than authorized in the 2002farm bill. Previous efforts to reduce MAP spending have proved unsuccessful, butneither the final FY2005 appropriations act nor reports accompanying H.R. 4766 and S. 2803 address this issue. A Chabotamendment to H.R. 4766 that would have prohibited any MAP spendingin FY2005, but was defeated by a vote of 72-347 on the House floor.

For more information, see CRS Issue Brief IB98006, Agricultural Export and Food Aid Programs .

Cuba Travel Amendment. P.L. 108-447 did not adopt language included in the Senate-passed version of the FY2005agriculture appropriations bill that would have relaxed the licensing requirement forU.S. exporters seeking to travel to Cuba to explore opportunities and finalize salesof agricultural and medical products. Amendment supporters argued that theAdministration has used the rules to delay or refuse to issue travel licenses to thoseseeking to make farm product sales to Cuba. Just before conferees completed work,Administration officials signaled that including in the bill any provision to weakenexisting sanctions against Cuba (such as restrictions on commercial exports ofagricultural and medical goods) would result in a presidential veto. Identicallanguage was included in the Senate-reported version of the FY2004 agricultureappropriations bill, which was also deleted in conference. For more information, seeCRS Issue Brief IB10061, Exempting Food and Agriculture Products from U.S.Economic Sanctions: Status and Implementation .

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).

The USDA research, education, and extension budget, when adjusted for inflation, has remained flat for almost 30 years (supplemental funds appropriatedsince September 11, 2001, specifically have supported anti-terrorism activities, notbasic programs). Furthermore, current financial difficulties at the state level arecausing some states to reduce the amounts they appropriate to match the USDAformula funds (block grants) for research, extension, and education (100% matchingis required, but most states have regularly appropriated two to three times thatamount). A combination of cuts at the state and federal levels can result in programcuts felt as far down as the county level.

In 1998 and 2002 legislation authorizing agricultural research programs, the House and Senate Agriculture Committees tapped sources of available funds fromthe mandatory side of USDA's budget and elsewhere (e.g., the U.S. Treasury) to findnew money to boost the availability of competitive grants in the REE mission area. In FY1999, and FY2001 through FY2005, annual agriculture appropriations actshave prohibited the use of those mandatory funds for the purposes the AgricultureCommittees intended; however, from FY1999 through FY2002, and in FY2004 andFY2005, final agriculture appropriations acts have allocated more funding forongoing REE programs than were contained in either the House- or Senate-reportedversions of the bills. Nonetheless, once adjusted for inflation, these increases do nottranslate into significant growth in spending for agricultural research. Agriculturalscientists, stakeholders, and partners express concern for funding over the long termin light of high budget deficit levels and lower tax revenues.

Agricultural Research Service. The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) provides $1.299 billion in total for ARS activities (up $153 million fromFY2004). This amount is $40 million higher than the House-passed bill, $36 millionhigher than S. 2803 , and $133 million higher than the Administration'srequest.

Within the total, the conferees compromised on the House and Senate differences concerning the split between research funding and laboratory constructionfunding. They allocated $187.8 million for construction, an amount $14 millionbelow the House-passed bill ( H.R. 4766 ) and $15 million more than theSenate-reported measure ( S. 2803 ). This leaves $1.1 billion availablefor research projects, which is $53.9 million more than the House provision and$20.6 million more than in the Senate bill.

P.L. 108-447 reflects the Senate provision on ARS construction funding: $122 million goes toward completing the modernization of the National Centers forAnimal Health in Ames, Iowa (originally expected in October 2007). Another $65.8million is distributed among 22 additional locations. As requested by theAdministration, the House bill would have directed all of its requested allocation forARS facility construction ($178 million) to go to the Ames project. Improvement ofthe facility is part of the Administration's multi-agency Food and AgricultureDefense Initiative, which is intended to prepare these sectors against, and providequick response in the event of, a terrorist attack on production agriculture or the fooddistribution system. ARS operates the lab jointly with the Animal and Plant HealthInspection Service, whose National Animal Disease Diagnostic Lab is located at thesite. Language in the conference report urges ARS to develop a prioritized masterplan for all of its aging infrastructure to help appropriators allocate funds; until sucha plan exists, appropriators will demand to see an annual prospectus for each request.

The conference report accompanying P.L. 108-447 mandates the continuation of individual earmarked ARS research projects that Members have added to annualappropriations acts in past years. The Administration maintains in its annual budgetrequest that a number of these should be terminated and the savings redirected to theAdministration's high priority research initiatives, but Congress in general does nothonor these proposals.

In separate report language under the heading of the Office of the Secretary, the conferees take USDA to task for failing to address longstanding problems with theU.S. National Arboretum, which was put under ARS's jurisdiction in the 1994USDA reorganization. The conferees require the Secretary to report, within onemonth of passage of the appropriations bill, on the budgeting for research, security,and public access (among other things), and on the status of discussions with theArboretum's nonprofit association concerning fundraising initiatives.

Cooperative State Research, Education, and Extension Service. P.L. 108-447 provides $1.171 billion in total forCSREES. This represents a $30 million increase over the House-passed bill, a $36million increase over S. 2803 , a $58 million increase from FY2004, anda $165.6 million increase over the Administration's FY2005 budget request.

Of the total provided for CSREES in P.L. 108-447 , $660.8 million supports state agricultural research and academic programs. This represents about a $32million increase over both the House and the Senate measures, and a $43 millionincrease from FY2004. (This includes the formula-allocated payments to each stateand U.S. insular areas, as well as competitive and special grant programs, andeducation grant programs.) Spending levels for some specific items within theresearch and academic program area are as follows (numbers within parentheses areFY2004 levels): $180.1 million for Hatch Act formula funds (same as FY2004);$22.4 million for cooperative forestry research ($21.8 million); $37 million forpayments to 1890 (historically black) land grant colleges of agriculture ($36 million);$181 million for the NRI competitive grant program ($165 million); and $136.6million for special (earmarked) research grants ($111.3 million).

The conferees allocated $449.2 million in total to support state extension education programs. This amount is $10 million more than FY2004, and $9 millionand $6 million above the House and Senate measures, respectively. Spending levelsfor specific items within this program area are as follows (figures within parenthesesare FY2004 levels): $277.7 million for Smith-Lever formula funds ($279.4 million);$87.4 million for competitively awarded extension grants (Smith-Lever 3(d)programs), of which $58.9 million is for the Expanded Food and Nutrition EducationProgram ($83.4 million in FY2004; $52.4 million for EFNEP); $33.1 million forextension programs at the 1890 colleges (same as FY2004); $17 million for 1890facilities grants ($15 million); and $22 million for earmarked extension grants ($22.3million).

P.L. 108-447 provides $55.1 million for integrated activities (which have both research and extension components). This is $5 million more than FY2004, but $11million less than the House bill and $2.1 million less than the Senate provision. Theoutreach program for disadvantaged farmers is to receive level funding ($5.9million).

P.L. 108-447 makes available $3 million in interest income from the Native American Endowment Fund to distribute to the 34 tribally controlled colleges inFY2005, to support the development of their agricultural curricula. The reportcontains $3.4 million for extension programs at tribal schools ($2.9 million inFY2004), and $1.1 million for research ($1.7 million in FY2004).

CSREES administers two competitive grant programs that are authorized to be funded by mandatory transfers of unobligated government funds. The largest of theseprograms is the Initiative for Future Agriculture and Food Systems (IFAFS), whichis authorized to receive $160 million in FY2005. However, as in recent years, appropriators have prohibited CSREES from operating the IFAFS program. ForFY2005, as in FY2004, report language instead allows the Secretary to award up to20% of the appropriation for the National Research Initiative (NRI) competitivegrants program using IFAFS program criteria (approximately $35 million in FY2005;$30 million in FY2004). (5)

The second CSREES grant program authorized to use mandatory funds supports research and extension programs on organic agriculture. The 2002 farm bill ( P.L.107-171 ) authorizes $3 million annually through FY2007 for this program. Theconference report contains no language blocking the expenditure of those funds.

Economic Research Service (ERS) and National Agricultural Statistics Service (NASS). P.L. 108-447 contains$74.8 million for ERS in FY2005. This is a $3.8 million increase over FY2004, buta slight decrease from both the House and Senate bills ($76.6 million and $75.3million, respectively). Report language designates $3.5 million of the increase tosupport the Administration's request for developing a Consumer Data andInformation System, but specifically blocks House report language to fund afeasibility study of retail stores that stock and sell food only to participants in theWomen, Infants, and Children (WIC) feeding program.

P.L. 108-447 contains $129.5 million for NASS. This is a $1.3 million increase over FY2004 and less than $1 million different from the House and Senate measures. The conferees direct NASS to spend up to $22.4 million for ongoing work on themost recent Census of Agriculture, as requested by the Administration, and alsoprovide a $2.7 million increase for continued modernization of the NASS agriculturalestimates program, which surveys farm operators to develop estimates of variousagricultural statistics.

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 FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) sets a level of $823.8 million for FSIS in FY2005, close tothe Senate-reported ( S. 2803 ) level and a $43.9 million increase fromthe FY2004 enacted level. The House-passed bill ( H.R. 4766 )recommended $824.7 million. The Administration requested an FY2005appropriation of $838.7 million for FSIS.

Congress did not accept an Administration proposal to impose new inspection user fees of $124 million (which would require legislation to be implemented). Theproposed fees would have been collected from meat and poultry processors forinspection services provided beyond one 8-hour shift per day. FSIS has beenauthorized since 1919 to charge user fees for holiday and overtime inspections. Income from existing user fees (plus trust funds) adds approximately $111 millionto the FSIS program level annually. The Administration has included the expandeduser fee proposal in the past two years' budget requests, and previous administrationshave proposed that greater parts of and/or the entire inspection program be fundedthrough user fees. Congress has not agreed with these proposals, responding thatassuring the safety of the food supply is an appropriate function of the federalgovernment.

P.L. 108-447 includes language, generally as proposed by the Senate, which directs that no less than 63 full-time equivalent positions (above the FY2002 level)be devoted to enforcement of the Humane Methods of Slaughter Act, and that $3million (rather than the $4 million in the Senate bill) be provided to incorporate theagency's Humane Animal Tracking system into its field computer systems. Also in P.L. 108-447 , and also part of the overall total, are $17.3 million for frontlineinspectors and humane slaughter enforcement; $20.7 million for regulatory andscientific training; $3 million for overseeing BSE-related FSIS rules; $7.2 million forinspector training; and increases for food defense activities, including $2.1 millionfor biosurveillance, $2 million for the Food Emergency Response Network, and $1.5million for the network's data systems support. Conferees also included $2.7 millionfor Codex Alimentarius activities.

Conference report language commends FSIS for beginning to include, in its meat and poultry recall notices, photographs of recalled products and websiteaddresses of their manufacturers. Conferees urge the agency to continue this practiceand also to ask manufacturers to voluntarily provide information on retail locationsof recalled products, for inclusion in the releases. For background on FSIS, see CRS Issue Brief IB10082, Meat and Poultry Inspection Issues .

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.

The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4766 ) provides a total APHIS appropriation of $819.6 million, up $98.3 million(14%) from FY2004, but is $13.8 million below the Administration's request. TheSenate-reported agriculture appropriations bill ( S. 2803 ) did not increasethe appropriation as much as the Administration requested, while the House-passedagriculture appropriations bill (H.R. 4766) provided more than theAdministration requested. The final level includes significant new funding for avianflu and BSE activities, as discussed in separate sections below. Nearly all of theseamounts and increases are for salaries and expenses; funding for buildings andfacilities continues at the $5 million (FY2004) level.

P.L. 108-447 does not include the Administration's legislative proposal to apply $10.9 million of user fees for animal welfare inspection directly to APHIS accounts(rather than to Treasury). The Administration requested similar legislation forFY2004 and FY2003, but the House and Senate did not act on the request.

For pest and disease exclusion, P.L. 108-447 provides $152.3 million, nearly level from FY2004 and $21 million below the Administration's request. For plantand animal health monitoring, the final law provides $196.6 million, up 42% overFY2004 but $27 million below the Administration's request. For scientific andtechnical services, conferees provided $80.6 million, up 15% from FY2004 andnearly at the Administration's request. The animal care function is funded at therequested $17.1 million, an increase of 2% over FY2004.

Pest and Disease Management. Another APHIS program area, pest and disease management, receives the largestappropriation and significant congressional attention. P.L. 108-447 provides $363.9million, an increase of 10% ($33 million) over FY2004. The Administration hadrequested a 5% reduction to $315 million.

For avian influenza, conferees followed the House-passed bill (which nearly doubles amounts in the Administration's request and in the Senate-reported bill) andprovides $23 million, up from $1 million in FY2004 (see section below). For bollweevil, the Administration had requested a 66% cut, but the conference committeecut the amount by only 6%, to $47.5 million. For Johne's disease, the Administrationrequested an 83% cut, but the conference committee maintained the level at $18.7million. Brucellosis and noxious weeds receive small increases rather than therequested cuts. Chronic wasting disease (CWD), scrapie, and tuberculosis receivesmaller increases than requested.

For emerging plant pests (EPP) within the pest and disease management function, P.L. 108-447 provides $101.6 million, up 9% from FY2004. The EPPaccount is used to address relatively new outbreaks. Conferees increased fundingover FY2004 levels for citrus canker, Pierce's disease, emerald ash borer, and suddenoak death. Funding for Asian longhorned beetle is maintained at nearly constantlevels, instead of the Administration's proposed 69% cut. (For citrus canker, P.L.108-447 also directs the Secretary to transfer $30 million from the Commodity CreditCorporation for grower compensation programs. This amount is in addition to theAPHIS appropriation through EPP.)

The final law reiterates language in the House-passed and Senate-reported bills that the Secretary of Agriculture has the authority to transfer funds from theCommodity Credit Corporation (CCC) to combat plant and animal healthemergencies. The conference report also cites the Office of Management and Budget(OMB) for denying a CCC transfer for Pierce's disease, which the committee stateswas an intrusion on the Secretary's discretion. For more background, see CRS Report RL32504(pdf) , Funding Plant and Animal Health Emergencies: Transfers fromthe Commodity Credit Corporation .

Homeland Security Funding. Overall, USDA requested $511 million for its homeland security activities in FY2005, up166% from FY2004. Within that amount, USDA has highlighted several programsfor its newly termed "Food and Agriculture Defense Initiative" ($381 million of the$511 million, shared among four agencies). APHIS requested $94.4 million underthe initiative for FY2005, an increase of $49.3 million, to improve surveillance,laboratory capacity, networking, state cooperative agreements, and vaccine banks. For more information about recent agroterrorism appropriations, see CRS Report RL32521 , Agroterrorism: Threats and Preparedness.

Only certain agroterrorism-related items are specifically mentioned in the Senate, House, and conference reports. P.L. 108-447 provides $2.0 million for theAdministration's new bio-surveillance program ($5 million requested). Vaccinebanks are funded at $3 million ($6 million requested). Funding for emergencycoordinators rises to 4.0 million ($4.6 million requested). State cooperativeagreements increase by $3.6 million, select agents by $2.5 million, the nationalanimal laboratory network by $2.9 million. Requested funding of $7.1 million forphysical security enhancements throughout APHIS was not included in the final law.

The conferees expressed concern over agricultural border inspections and research at Plum Island following the transfer of these activities in 2003 from USDAto the Department of Homeland Security (DHS). The conference committee requestsa report from the Government Accountability Office (GAO) by March 1, 2005, oncoordination between USDA and DHS to protect U.S. agriculture.

Avian Flu Activities. APHIS is thelead USDA agency responsible for controlling avian influenza. P.L. 108-447 provides $23 million for avian flu activities, $10.2 million more than theAdministration's request of $12.7 million, and well above the $1 millionappropriation for FY2004. In February 2004, cases of low pathogenic avian flu werediscovered in Delaware, Maryland, Pennsylvania, and New Jersey, and a highlypathogenic case was found in Texas. These outbreaks, now contained and eradicated,have garnered high visibility since an unrelated and highly pathogenic strain of avianflu began spreading throughout Asia in late 2003. In FY2004, the APHIS avian fluprogram focuses primarily on controlling the spread of low pathogenic avian flu inlive bird markets. In May 2004, USDA released $13.7 million of Commodity CreditCorporation (CCC) funds to begin a larger national avian flu program ($10.8 million)and assist Texas with its highly pathogenic outbreak ($2.9 million), effectivelyaccelerating action on the Administration's request.

The expanded funding for FY2005 enables APHIS to establish new elements in its low pathogenic avian influenza program. About half of the funding would beused for indemnities to farmers when the government destroys flocks to control thedisease. Other program initiatives include cooperative agreements with states,increased monitoring, a bird identification system, laboratory support, and vaccinedevelopment.

For more information on avian flu, see CRS Report RS21747, Avian Influenza: Multiple Strains Cause Different Effects Worldwide .

BSE (Mad Cow Disease) Activities. APHIS is the lead USDA agency in conducting surveillance for and addressing bovine spongiform encephalopathy (BSE, or mad cow disease). TheAdministration's original budget proposal called for APHIS to receive $50 millionout of a total request for $60 million for BSE-related activities in FY2005, a responseto the discovery of the first case of BSE in the United States in December 2003. Thenew request compares with BSE spending by USDA of about $24 million in FY2004and $13 million in FY2003. Of the $60 million total, $33 million was to go toAPHIS to accelerate development of a national system to identify and trace animalsfrom birth to slaughter, considered by many to be an important tool for more quicklylocating and containing BSE or other animal disease outbreaks. Also part of the $60million was a $17 million request for collecting samples from 40,000 cattle on farmsand at rendering plants in order to test them for BSE.

Both the House committee and conference reports note that the Administration already has transferred $69.9 million (in March 2004) from the Commodity CreditCorporation (CCC) to fund an expanded BSE surveillance program under which itintends to test approximately 268,000 animals within a 12 to 18 month periodstarting June 1, 2004. The CCC-transferred amount will cover all BSE testing duringthat timeframe, the reports state.

The House and conference committee reports note, among other things, that the appropriation provides the full remaining amount of increase requested for APHISBSE activities, which it states is $8.6 million over the FY2004 level; theSenate-reported version included this same increase. Other BSE-related funding inthe House, Senate, and final versions includes the $33.2 million requested fordevelopment of the national animal ID system (as the conferees noted, USDAtransferred $18.8 million from the CCC in April 2004 to get the ID programunderway). P.L. 108-447 provides not less than $2 million to fund a livestock IDcooperative agreement with Wisconsin, and $600,000 for the Farm Animal ID andRecords (FAIR) program, in addition to other ID funds for which they might qualify.

The House committee report requests that the Secretary of Agriculture provide quarterly reports on its BSE surveillance program, implementation of national animalID, and each component of its BSE response plan. The House committee expressesconcern that USDA "improperly allowed the importation of millions of pounds ofground and processed beef from Canada [which reported its own BSE case in May2003] for many months...."

The House committee report directs USDA's Office of Inspector General to provide reports on its investigation into a controversy over how the U.S. BSE cowfrom Washington state was chosen for BSE testing in the first place, and on itsseparate investigation into USDA's later failure to perform such a test on asuspicious Texas cow. Elsewhere in its report, the House committee expressesconcern that the Food and Drug Administration had not yet published its own rulesto tighten BSE safeguards, five months after they were first announced. Thecommittee also asked the Commodity Futures Trading Commission to report on itsinvestigation into whether news of the December 2003 U.S. BSE announcement wasleaked in advance to certain commodity traders.

During House floor consideration of the agriculture appropriations bill, Representative Tiahrt unsuccessfully offered an amendment that would haveprohibited the use of USDA travel funds until the Department implements a programto permit beef slaughtering establishments to test carcasses for BSE. Theamendment, which was rejected on a procedural point of order, relates to an effortby several smaller firms (notably Creekstone Farms Premium Beef) aiming to meetprimarily Japanese market demands for 100% testing. USDA, which claims approvalauthority under the Virus-Serum-Toxin Act, (6) hasdenied the Creekstone request, onthe grounds that such testing is not scientifically based and misleadingly would implythat tested meat is safer than untested meat.

On the Senate side, the committee report expresses concern over USDA's BSE testing program, urging the Department to adopt recommendations by the InspectorGeneral and by outside experts that it include the testing of a "statistically significantsample" of over 30-month-old cattle, which may have eaten materials at higher riskfor transmitting BSE-related disease prior to a ban on such feed types in 1997. "Testing older cattle helps calculate BSE prevalence directly from the science-basedsurveillance data rather than rely on complex and potentially faulty mathematicalcalculations," the Senate report states.

Other agencies receiving BSE-related funding in the bill include FSIS ($3 million) and the Food and Drug Administration (nearly $30 million). (See CRS Issue Brief IB10127, Mad Cow Disease: Agricultural Issues for Congress .)

Agricultural Marketing Service. AMS is responsible for promoting the marketing and distribution of U.S. agriculturalproducts in domestic and international markets. P.L. 108-447 provides $95.3 millionin FY2005 budget authority for AMS compared with $93 million in theHouse-passed bill, $97.8 million in the Senate-reported version, and theAdministration's FY2005 proposal of $103.1 million. The enacted FY2004 levelwas $93.7 million.

Within the above total, conferees provide $3.8 million for payments for state marketing activities, compared with an Administration request of $1.3 million. The$2.5 million difference is for a Senate-proposed specialty markets grant to theWisconsin Department of Agriculture.

The Administration requested a $10 million increase in appropriated funds for improved information technology systems to be used in USDA commoditypurchasing, which it conducts to stabilize agricultural markets and to meet thecommodity needs of domestic food programs; the conferees direct the Secretary totake no less than $10 million from the Section 32 account (see below) to cover theprogram's cost.

The overall AMS budget authority level includes annual appropriations for marketing services and for payments to states and territories. Nearly $16 million ofthe AMS appropriation represents funds transferred from the permanent Section 32account. Further, AMS uses additional Section 32 monies (not reflected in the abovetotals) to pay for government purchases of surplus farm commodities that are notsupported by ongoing farm price support programs, and for other purposes (forexample,<108> conferees assume that the $10 million for improved computersystems will come from this account; see above). For an explanation of this account,see CRS Report RS20235, Farm and Food Support Under USDA's Section 32Program . Also not included in the above AMS budget authority levels areapproximately $195 million in various user fees that fund numerous agencyactivities.

The Senate committee report states that USDA is expected to use Section 32 to purchase surplus salmon for domestic feeding programs, and also reminds theDepartment that the 2002 farm bill ( P.L. 107-171 ) requires it to use a minimum of$200 million each year for purchasing fruits, vegetables, and other specialty crops. The conference report also urges the Department to use Section 32 to purchasesurplus domestic salmon to stabilize the domestic industry.

P.L. 108-447 provides $2 million to AMS for activities related to organic standards. The report urges AMS to finalize the hiring of a director for the NationalOrganic Standards Board, to create a Peer Review Panel to oversee USDAaccreditation for organic certifiers, and to improve scientific technical support for theStandards Board. In separate earlier action relating to AMS, a House flooramendment by Representative Kaptur, to transfer $6 million from USDA's ChiefInformation Officer to the Farmers Market Promotion Program, was defeated by avote of 213 to 206.

Country of Origin Labeling. The 2002 farm bill had mandated that retailers begin country-of-origin labeling (COOL) forfresh meats, produce, peanuts, and seafood on September 30, 2004, but a provisionin the FY2004 Consolidated Appropriations Act ( P.L. 108-199 ) delayed mandatoryCOOL from being implemented by AMS for two years, to September 30, 2006(except for seafood). During its September 2004 markup of the FY2005 agricultureappropriation bill, the Senate Appropriations Committee defeated, on a tie vote of 14to 14, an amendment that would have required mandatory COOL to begin on January1, 2005. Conferees did not include language in the final omnibus appropriationwhich would have replaced mandatory COOL with a voluntary effort, despitespeculation that they might do so. The House Agriculture Committee had approveda voluntary COOL bill ( H.R. 4576 ) in July 2004 (for details see CRS Report 97-508, Country-of-Origin Labeling for Foods ).

Grain Inspection, Packers, and StockyardsAdministration. GIPSA establishes the official U.S. standards,inspection and grading for grain and other commodities. It also 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, (such as contractualrelationships between producers and processors), have raised concerns among someproducers about the impacts of these developments on farm prices. The HouseAppropriations Committee report ( H.Rept. 108-584 ) accompanying the FY2005agriculture appropriations bill ( H.R. 4766 ) notes that funds wereprovided in FY2003 to study "issues surrounding a ban on packer ownership." Thereport states that the committee expects a "comprehensive update" on the study byJanuary 1, 2005.

Conferees provide a FY2005 appropriation of $37.3 million for GIPSA as proposed by the Senate, but below the Administration's request of $44.2 million. The House-passed version provided $37.5 million for GIPSA. The Administrationwas seeking the following GIPSA increases: $5 million to upgrade significantly itsinformation technology; $1.2 million to monitor the technologies that livestock andmeat industries use to evaluate carcass characteristics (which determine value toproducers); $1 million for "rapid response teams" to monitor livestock markets toensure producers are not unfairly treated in the wake of last year's U.S. BSE finding;and $500,000 to help resolve international grain trade problems. The Senatecommittee and conference reports said the new budget authority includes $1 millionfor budget increases including IT security and BSE-related activities.

In FY2004, Congress appropriated $35.7 million for GIPSA salaries and expenses, with another $42 million in already authorized user fees anticipated for anoverall agency program level of nearly $78 million. The Administration's proposedincreases would have raised the FY2005 program level to $86 million. To help coverthis increase, the Administration had proposed new user fees of $29.4 million (whichwould require legislation to be adopted). However, neither the House nor the Senateassumed adoption of the new fees, which also had been proposed but not acceptedfor FY2004.

Rural Development

Three agencies are responsible for USDA's rural development mission area: the Rural Housing Service (RHS), the Rural Business-Cooperative Service (RBS), andthe Rural Utilities Service (RUS). An Office of Community Development providescommunity development support through Rural Development's field offices. Themission area also administers the rural portion of the Empowerment Zones andEnterprise Communities Initiative and the National Rural Development Partnership.

The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) provides a total appropriation of $2.43 billion for USDA rural development,which in part supports a $10.39 billion loan authorization level for rural economicand community development programs. The FY2005 appropriation is $14.7 millionless than enacted for FY2004. The Senate-reported ( S. 2803 ) andHouse-passed ( H.R. 4766 ) agriculture appropriations measures hadrecommended $7.8 million more and $34.7 million less, respectively, in budgetauthority than the amount provided in the final FY2005 act. The conferees alsoprovide $443.1 million less in loan authorization than the Senate measure and $119.8million less than the House bill. Total rural development funding in P.L. 108-447 includes $642.5 million for salaries and expenses (including transfers), $23.4 millionless than the House recommendation and budget request and $5 million more thanthe Senate recommendation.

As was the case with both the House and Senate bills, P.L. 108-447 eliminates or limits FY2005 funding to carry out several mandatory rural development programsauthorized in the 2002 farm bill ( P.L.107-171 ). For several programs, the confereesprovide discretionary funding instead for these programs, although at levels lowerthan the authorized amounts. The following table summarizes the authorized fundingand the required restrictions on these mandatory programs by the House and Senatebills, and how any differences were resolved in P.L. 108-447 .

* Figures in the FY2005 authorized column represent how much would be available under currentlaw, including the carryover of unobligated balances from prior years, had no restrictions beenplaced on spending.

Rural Community Advancement Program (RCAP). RCAP, as authorized by the 1996 farm bill ( P.L.104-127 ),consolidates funding for 12 rural development loan and grant programs into threeaccounts. P.L. 108-447 provides an FY2005 appropriation of $716.0 million, $57.6million more than recommended by the House-passed bill and $17.4 million less thanrecommended by the Senate. FY2005 funding is $38 million less than enacted forFY2004 and $174.1 more than requested. Of the total provided by the conferees,$89.2 million is for the community facilities account; $552.7 million for the ruralutilities account; and $74.2 million for the business development account.

Consistent with both the House and Senate bills, the conferees earmark funding from the three RCAP accounts for various programs. The level of these earmarks isnot significantly different from similar recommendations enacted for FY2004. Thefinal FY2005 bill provides the following earmarks: Native American Tribes ($25million) and tribal colleges ($4.5 million); native villages of Alaska ($26 million);water and waste water treatment for colonias ($25 million); a circuit rider programfor water technical assistance ($13.5 million); technical assistance grants for ruralwater and waste water systems ($18.3 million); the Delta Regional Authority($1million); and $6.4 million for the rural community development initiative. Theconferees also accepted the Senate bill provision of $21.0 million foreconomic impact initiative grants and $28.0 million for communities with highenergy costs. They also accepted the House bill recommendation of $22.2 millionof RCAP funding for the Empowerment Zone/Enterprise Community and RuralEconomic Area Partnership (REAP) programs.

Rural Business-Cooperative Service. For FY2005, P.L. 108-447 provides $84.4 million for RBSloan subsidies and grants, including $15.9 million in rural development loansubsidies and $24.0 million in rural cooperative development grants. These amountsare approximately the same as recommended by the House and Senate bills andenacted for FY2004. P.L. 108-447 provides an estimated loan authorization level of$34.2 million for the rural development loan fund and $25 million for the ruraleconomic development loan program account. Conferees also provide funding toseveral regional development authorities: $3.4 million for Mississippi Deltacounties, $1.5 million of which is earmarked for the Delta Regional Authority; $1.5for the Northern Great Plains Regional Authority; and $1.5 million for the DenaliCommission for solid waste management grants.

As noted above, general provisions in P.L. 108-447 prohibit funds from being used to carry out four mandatory rural development programs under the jurisdictionof RBS, all of which were authorized and funded by the 2002 farm bill. P.L. 108-447 cancels $80 million of the mandatory funds already available for the Value-AddedAgricultural Product Market Development grants ($40 million authorized forFY2005 and another $40 million carried over from the previous year). The confereesreplace the mandatory funds with $15.5 million in discretionary funding,approximately the same as recommended by the House and Senate bills andrequested by the Administration. The conferees also prohibit the expenditure of$23.0 million in authorized mandatory funds for the Renewable Energy Systemsprogram, but provide $23.0 million in discretionary funds instead, the same asrecommended by the House bill. Unlike the House measure, which recommendedno funding, or the Senate measure, which recommended a maximum of $34.0million, P.L. 108-447 provides a $10 million maximum on the use of funds to carryout the provisions of the Rural Business Investment Fund. The Administration hadrequested cancelling a portion of mandatory grant funding for this program andreducing the cost of guaranteeing debentures from the authorized level of $280million, down to $60 million. The conferees also prohibit any funds to carry out theprovisions of the Rural Strategic Investment Fund, which has an authorized level of$100 million.

P.L. 108-447 also provides $12.5 million for the Empowerment Zone/Enterprise Community and REAP Programs, as recommended by the Senate measure, ratherthan the $11.4 recommended by the House bill. The Administration had requestedno funding for the program. Of the amount provided, $1 million is earmarked forthird-round empowerment zones.

Rural Utilities Service. P.L. 108-447 provides FY2005 budget authority of $103 million for RUS, $3.6 millionbelow the level recommended by te Senate measure and $11.7 million more than theHouse bill. This appropriation supports, in part, a loan authorization level of $5.61billion, $959.0 million less than authorized for FY2004. The House and Senate billshad recommended a loan authorization level of $5.53 billion and $5.73 billionrespectively.

P.L. 108-447 , as in both the House and the Senate measures, also prohibits expenditure of $40 million of the mandatory funds available ($20 million authorizedfor FY2005 and $20 million in previous year's unexpended funds) for theEnhancement of Rural Access to Broadband Service authorized in the 2002 farm bill. For other broadband telecommunication loans, the conferees provide loan subsidiesof $11.7 million and a loan authorization level of $550 million, $50 million less thanrecommended by the Senate measure and $86 million less than the Houserecommendation. P.L. 108-447 also provides $9 million in broadband grants, thesame as recommended in both the House and Senate bills. There was noAdministration request for broadband grants.

For the distance learning and telemedicine program, P.L. 108-447 provides $35 million in grants, $10 million more than the House bill and about $3million less than the Senate measure and the amount enacted for FY2004. Fordistance learning and telemedicine loans, the conferees accepted the House billrecommendation for $50 million in loan authorization, a $250 millionreduction from FY2004. The conferees also rescind $88 million in the localtelevision loan guarantee program.

P.L. 108-447 provides a loan authorization of $4.32 billion in direct and guaranteed electric loans as recommended by the House bill. This loan level is $669million less than enacted for FY2004. The conferees also provide $520 million loanauthorization level for telecommunication loans, the same as recommended by theHouse and Senate bills.

Rural Housing Service. In part to support $4.72 billion in rural housing loans, P.L. 108-447 provides $1.38 billionin budget authority for the Rural Housing Service. Section 502 single family directand unsubsidized guaranteed loans are the largest programs in the Rural HousingInsurance Fund Program account. For these programs, the conferees provide$4.46 billion in loan authorization and $166.8 million in loan subsidies. The House bill recommended about $50 million more in loan authorization while theSenate measure recommended $534 million less. Conferees also rescind $3 millionof the rural housing insurance fund and $1 million in the rural housing assistancegrants.

The final law provides $586.1 million for the Section 521 rental assistance payments program, as recommended by the House measure, up from $574.7 millionin FY2004. For Section 515 rental housing loans, P.L. 108-447 contains $100million in loan authorization, approximately $6 million and $10 million less than theHouse and Senate bills, respectively. For Section 515 loan subsidies for rentalhousing repair and rehabilitation, the final act makes available $47.1million, about $5.0 million more than the Senate measure and $7.5 million less thanrecommended by the House bill. For Section 504 housing repair grants, confereesconcurred with the House and Senate recommended levels of $10.2 million, whichis nearly the same amount as enacted for FY2004. For Section 538 multi-familyhousing guarantees, P.L. 108-447 provides funding to support $100 million in loanauthorization, the amount recommended by the House measure and approximately$15 million more than recommended by the Senate bill. The conferees provide $3.5million in subsidies for this program, approximately the same as recommended bythe House and Senate bills. P.L. 108-447 also provides $34.1 million in grant andloan subsidies for the farm labor housing program. This is slightly less than theamount enacted for FY2004. Consistent with the Administration's request and theHouse and Senate bills, conferees prohibited a total of $30 million in availablemandatory funding for rural firefighters and emergency personnel as authorized bythe 2002 farm bill ($10 million authorized in FY2005 and $20 million carried overfrom FY2003 and FY2004, when mandatory funds were also prohibited byappropriators).

For more information on USDA rural development programs, see CRS Report RL31387(pdf) , An Overview of USDA Rural Development Programs .

Food and Nutrition Programs

The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) includes a total of $52.53 billion for food and nutrition programs administeredby USDA. These include the food stamp and related programs, child nutritionprograms, the special supplemental nutrition program for women, infants andchildren (WIC), and commodity donation programs for the needy and elderly. Theappropriated amount is $5.27 billion more than the amount appropriated for theseprograms in FY2004, and is projected to maintain full services for the food andnutrition programs.

The FY2005 Administration budget requested budget authority totaling $50.42 billion for all USDA domestic food and nutrition programs. The amount includedthe revised Administration request submitted July 13, 2004, that added $300 millionto nutrition program funding to reflect higher than originally anticipated food costsand participation in the WIC program. (7)

The House version of the FY2005 agriculture appropriations bill ( H.R. 4766 ), passed the same day the Administration submitted itsrevised request. It recommended a total of $50.24 billion for food and nutritionprograms for FY2005, slightly less than the Administration revised request for theseprograms. The Senate-reported appropriations bill ( S. 2803 ) would havefunded these programs at a total of $50.51 billion in FY2005, roughly $90 millionmore than the Administration and $276 million more than the House-passed bill. Allthree proposals provided for an increase in funding above that estimated for theseprograms in FY2004 ($47.26 billion), and were based on then current projections offood costs and program participation, with no major policy changes.

The final amounts for all discretionary programs in the bill are to be reduced by 0.8%. However, most food and nutrition program funding is mandatory (e.g. foodstamps and school feeding programs), and thus is not affected by the reduction. However, the largest of the discretionary programs, the WIC program, will have itsFY2005 funding reduced by the 0.8% rescission.

Also provided in the general provisions of P.L. 108-447 is $2.5 million for the Congressional Hunger Center to use for Bill Emerson and Mickey Leland Hungerfellowships. This funding is not drawn from the Food and Nutrition Service account.

Food Stamps. P.L. 108-447 includes a total of $35.15 billion for food stamp programs, or approximately $1.5billion more than the amount recommended by the Administration and House andSenate. The Administration proposal and House and Senate bills would have fundedfood stamp and related programs at a total of $33.6 billion in FY2005 -- $2.7 billionmore than projected FY2004 spending for these programs. Nearly all of the increase($1.4 billion) is for food stamp expenses. All of the proposals and the finallyapproved law provide a $3 billion food stamp contingency reserve fund, and $140million to buy commodities for the Emergency Food Assistance Program (EFAP). P.L. 108-447 provides slightly more for Nutrition Assistance for Puerto Rico andSamoa ($1.52 billion) than was recommended by the House and Senate ($1.45billion).

Food stamp expenses also would fund, at an estimated cost of $77.5 million, the Food Distribution Program on Indian Reservations (FDPIR), an alternative to foodstamps for those living on or near Indian reservations. It also provides $4 million fora bison meat purchase for the FDPIR, which was not in the Administration request,but was in both the House and Senate bills. P.L. 108-447 also funds the new costs($3 million) of excluding combat pay from household income used to determineeligibility and benefits for food stamps, as was proposed by the Administration andthe House and Senate.

Child Nutrition. Child nutrition programs receive a total of $11.78 billion in FY2005 in P.L. 108-447 . TheAdministration budget and House-passed and Senate-reported appropriationsmeasures would have provided $11.38 billion for these programs, which include theschool lunch, breakfast, child and adult care, summer food, and special milkprograms, and related support. The enacted level is expected to finance programoperations at full service levels. The lower amounts recommended by theAdministration and two chambers were based on projections that $263 million inunexpended FY2004 school lunch funding would be available for use in FY2005.The higher funding provided by P.L. 108-447 goes primarily to the school lunch,school breakfast and commodity programs.

No spending is proposed for the Child Nutrition Integrity Project (which received just under $5 million in FY2004) or for the School Breakfast Pilot program,common roots program, and child nutrition archive center, none of which werefunded in FY2004. A new performance measurement and program assessmentwould have been funded at $4 million under the Administration proposal andSenate-reported bill. The House does not refer to this in its bill or committee report( H.Rept. 108-584 ), but the report notes that child nutrition reauthorization legislation(which contained performance integrity provisions as well as other program changes)had not yet passed at the time of committee action. (8) There is no indication of fundingfor this in the final law.

WIC Program. P.L. 108-447 provides $5.28 billion for the WIC program for FY2005. This is approximately $190million above the Administration amended budget request of $5.087 billion. TheWIC program offers monthly food supplements to low-income pregnant andpostpartum women and children under age 5 who are determined to be at nutritionalrisk. For FY2004, $4.612 billion was appropriated for the program. TheAdministration estimated that its WIC funding proposal would serve an averagemonthly caseload of 7.86 million, up from a projected 7.8 million in FY2004.

The revised Administration request was $180 million more than the amount contained in the House-passed appropriations bill ($4.907 billion), which passed thesame day that the Administration revised request was issued. The Senate committeeprovided a regular FY2005 appropriation of $5.050 billion plus an emergencyappropriation of $125 million that was contingent upon an Administration request forthese as "emergency" funds. The final version contains the $125 million contingencyreserve (without the need for an emergency designation). It also redirected $37.25million from various initiatives to meet current and anticipated increases inparticipation.

Under the Administration proposal, WIC grants to states for food would have totaled an estimated $3.7 billion in FY2005, up from $3.3 billion in FY2004. TheHouse Appropriations Committee did not specify the amount for food grants, butconcurred with the Administration proposal to use $14 million of the appropriatedfunds for infrastructure grants and management information systems, and thisprovision is included in the final law.

Funding for breastfeeding counselors would have risen from $15 million to $20 million under the Administration proposal, but remained at $15 million in the Houseand Senate bills and final law. Conferees did not fund the childhood obesityprevention projects, which received $4 million in FY2004; the Administration andSenate recommended $5 million for FY2005. They also deleted the $20 millionset-aside for state management information systems. Neither the House nor Senatesupported the Administration proposal to strike language prohibiting the use of WICfunds for studies and evaluations, and this restriction remained in P.L. 108-447 . Aprovision in FY2004 appropriations law that allowed the Secretary to restrict fundingfor other activities if needed to maintain caseload was also deleted.

The House and Senate appropriators agreed, after several years of Administration proposals, to remove funding for the farmers' market nutritionprogram (FMNP) -- $22.9 million in FY2004 -- from the WIC account and provide$20 million for this program in FY2005 under the Commodity Assistance Program(CAP) account. (9) (See below for more on CAPfunding.) Authorized under Section17 of the Child Nutrition Act, the FMNP provides vouchers to WIC recipients andWIC eligibles that can be used to buy fresh foods from farmers' markets. Intendedto free up more WIC funds for food program and related expenses, the proposal totransfer FMNP funding to another account has been opposed by some who fear thatits separation from WIC might lessen support for farmers' markets and reduce accessto fresh farm goods by needy pregnant, women, infants and children.

Commodity Assistance Program (CAP). P.L. 108-447 provides the $178.8 million proposed by theHouse for the Commodity Assistance Program (CAP) for FY2005, instead of the$172.1 million proposed by the Senate and $169.4 million proposed by theAdministration. This is $5.9 million more than the $172.9 million appropriated forthe same programs in FY2004. (10) Programsincluded in this budget category are:

The commodity supplemental food program (CSFP ), which provides monthly food packages to low income mothers, young children, and elderlyin projects in 33 states and two Indian reservations. The largest of the CAPs, thisprogram is funded at the House-proposed level of $107.7 million in the final law. The Administration would have funded it at $98.3 million (the same as in FY2004);the Senate would have funded it at $101 million. According to the House report, theincreased funding, together with $6.5 million in available commodity inventory forFY2005 is expected to prevent elderly caseload slots from beingcut.

The emergency food assistance program (EFAP) , which provides administrative grants to states to help with the costs of distributing federallydonated commodities to the needy and homeless. P.L. 108-447 concurs with theAdministration and House and Senate bills' recommendation to fund this grantprogram at $50 million in FY2005, slightly above the $49.7 million provided for thisactivity for FY2004. The conferees also permitted the Secretary to transfer up to $10million from EFAP commodity purchases (funded from food stamp appropriations)to administration.

The farmers' market nutrition program (FMNP) , which currently provides vouchers to WIC participants and eligibles for the purchase offresh foods at farmers' markets. The Administration proposed, and the House andSenate concurred, that this funding be removed from the WIC funding category, andinstead be funded at $20 million under the CAP account, down from the $22.9million it received in FY2004.

The food donations program , which funds disaster assistance and food assistance to the Nuclear Affected Islands. (11) It will be at $1.08 million inFY2005, as under the Administration request and House and Senate proposals, upslightly from $1.075 million in FY2004.

Senior Farmers' Market Program. Both the Administration's budget and the House and Senate committee reports notethe transfer of $15 million in mandatory funding from the Commodity CreditCorporation (CCC) for the continued operation of the Senior Farmers' MarketProgram, which was created and funded under Section 4402 of the 2002 farm bill( P.L. 107-171 ). This program uses federal funds to provide coupons for low-incomesenior citizens to buy fresh, unprepared foods at farmers' markets, roadside stands,and community supported agriculture programs.

For more information on USDA food and nutrition programs, see CRS Report RL31577, Child Nutrition and WIC Programs: Background and Funding .

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 revenuesassessed primarily for the pre-market review of drug and medical device applications. The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) provides an appropriation of $1.462 billion, slightly below the House-passed( H.R. 4766 ) and Senate-reported ( S. 2803 ) levelsrecommended for FY2005. This appropriation is a 5.5% increase over the FY2004enacted appropriation of $1.386 billion, but 2.2% below the Administration'sFY2005 budget request of $1.495 billion.

In addition to appropriated funds, the total amount of user fees to be collected each year is set in FDA's annual appropriations act. The conferees recommend thatFDA be authorized to collect a total of $326.7 million in user fees during FY2005,slightly more than the President requested, and 14% higher than the $286.5 millionin authorized user fee collections for FY2004. P.L. 108-447 provides a total FY2005program level (appropriations and user fees combined) of $1.788 billion, a 7.4%increase from the $1.665 billion available in FY2004, but a 1.8% decrease from the$1.821 billion in the President's request.

For the first time, the President's FY2005 budget request did not contain an amount for the maintenance of buildings and facilities. Both the House and Senateand consequently the conferees concurred with this decision and no funding wasprovided for this category. Without funding, FDA will absorb the costs ofmaintaining its facilities with its program funds. In FY2004, Congress provided $7million for buildings and facilities.

Counterterrorism. The FY2005 conference report contains a total of $215 million for FDA counterterrorism funding. This is 12% less than the President's request of $245 million, but a 22% increaseover the $177.2 million appropriated in FY2004. (See Table 3 below.) This fundingis part of each program center's request and is included in the total appropriationapproved for FDA.

Most of the increase in counterterrorism funding is for food defense. This $151 million is 16% below the requested amount of $181 million, but $34 million or 30%more than the FY2004 appropriation of $116 million. These additional funds willbe used for the Food Emergency Response Network (FERN), a nationwideFDA-FSIS network of federal and state laboratories capable of testing thousands offood samples within days for certain biological, radiological, and chemical threatagents. The increase will also fund research on food testing methods and relatedareas, about 97,000 food import field inspections (up 60% from the number forFY2004), and will increase crisis management capability by boosting FDA's rapidand coordinated response to food threats and food-associated crises. (For moreinformation, see CRS Report RL31853 , Food Safety Issues in the 108th Congress .)

A $5 million increase in funding for medical countermeasures will be spread over the various categories in Table 3. Some of these medical countermeasureactivities will also be funded under Project BioShield, a program designed to helpensure that medical products for use in the event of war or catastrophic events arereviewed and approved quickly for safety and effectiveness. The funding also willbe used to assist companies in developing new countermeasures. It also will allowFDA to implement regulations to provide for "emergency use authorization" whenthe countermeasure is still in a developmental stage. (For more information, see CRS Report RS21507 , Project Bioshield .)

Table 3. FDA Counterterrorism Funding, FY2004-FY2005 ($ thousand)

Source: FDA's Office of Budget and Budget Formulation. December 1, 2004.

* Does not reflect the 0.8% rescission.

Food. The conferees recommend that the foods program of the Center for Food Safety and Applied Nutrition and thecenter's field activities have a budget of $439 million for FY2005, the same amountrecommended by the Senate, a 1.7% reduction from the House recommendation, buta 6.8% increase over the FY2004 appropriated level of $411 million. In addition, theconference report provides an increase of $8.3 million (or a total of $29.8 million)for programs related to bovine spongiform encephalopathy (BSE) or "mad cow"disease. In report language, the conferees direct FDA to expedite the publication offinal regulations to tighten BSE safeguards for food, animal feed and cosmetics. They also want the agency to establish an alternative mechanism to its priornotification and import facility registration requirements for imports of food productsthat are not intended for human consumption so they can continue to be imported forresearch and analytical testing. The conference report includes $5.36 million for thefood center's Adverse Events Reporting System (CAERS) of which $1.5 million isto be used for reports on dietary supplements.

The conferees accepted a House amendment affecting the recall of food products, requiring FDA to announce the Internet address of the food manufacturerthat markets the recalled product and to print a photograph of the food item on theFDA website. The agency also would be permitted to ask for a list of retailers thatcarry the recalled product.

The conference report also expects FDA to finalize both the pre-market notification rule and related guidance documents for the labeling of geneticallymodified foods by giving them a high priority, and directs FDA to educate foreigngovernments on U.S. products made with biotechnology. The conferees included $3million for the National Center for Food Safety and Technology (NCFST) in Illinoisfor an ongoing cooperative agreement to improve the safety of the nation's foodsupply. The conferees also state that this $3 million "shall be exclusive of anyadditional initiative funds that FDA may award to NCFST." The conferees alsodirect the FDA to support the development of tests for fruits and vegetablecontamination at New Mexico State University's laboratory and continue support forthe Waste Management Education and Research Consortium verifying food safetytechnology. The conference report wants the agency to continue funding at $250,000the research and educational activities on shellfish safety and Vibrio vulnificus beingconducted by the Interstate Shellfish Sanitation Commission (ISSC) and to spend$200,000 on getting states to work through the ISSC program on this safety. Theconferees recommend that FDA, with state testing programs, test farm-raised shrimpimports and inventories for the banned antibiotic chloramphenicol and other illegalantibiotic residues and, if tests are positive, destroy or export the shrimp.

The conferees expressed concern with mercury found in seafood and instructed FDA to establish an educational program for physicians. In addition, it urged betterenforcement of standards on artificially dyed farmed salmon. Better inspections arealso mentioned in the conference report when it urges the agency to continue Alaskancontracts for inspections on seafood and urges the agency's HACCP inspections ofseafood to be culturally sensitive in Hawaii. Moreover, conferees let stand the Senatedirection for two reports from FDA: one on the collaborative relationship betweenFDA, USDA, and the Centers for Disease Control and Prevention (CDC) in theirsupport of the National Antimicrobial Resistance Monitoring Service (NARMS); andthe other on survey findings of perchlorate (used in rocket fuel) in food and bottledwater.

In addition, the conference report wants to ensure that standards of identity are enforced on milk protein concentrate imports, and are revised to include a drainedweight requirement for canned tuna. It also encourages FDA to request additionalfunding in its FY2006 budget request for the agency's Office of Nutritional Products,Labeling, and Dietary Supplements whose responsibilities have increased in the lastfew years, but whose appropriations have remained level.

Prescription Drugs and Biologics. Conferees set FDA's human drug program level at $498.6 million, slightly less thanthe President's request of $499.5 million, but 4.7% over the FY2004 level of $476.2million. The FY2005 drug program would come from $293.8 million in budgetauthority and $204.8 million in user fees. User fees, collected under the PrescriptionDrug User Fee Act (PDUFA), would provide 41% of the total drug program'sfunding. With this money, FDA will add staff for the review of human drugs and payfor cost-of-living increases.

Import monitoring and inspections have taken on a more prominent role as steadily increasing amounts of drug products are being imported under FDA's"personal use" import policy. The conference report leaves in both the House andSenate report language which contains a provision that prohibits FDA from usingfunds to enforce the current statute that bans importation of prescription drugs byparties other than drug companies. (For more on this issue, see CRS Report RL32511 , Importing Prescription Drugs: Objectives, Options, and Outlook. ) Concerned about drug counterfeiting, the conference report directs FDA to work withthe drug industry to use technologies like color-shifting inks on labels and packagesof drugs and report its progress to the committee by February 1, 2005. The confereeschastise the agency for not producing a required report last year regarding thefeasibility and cost of a monograph system for prescription drugs (i.e., guidelinescovering acceptable ingredients, doses, formulations, labeling, and testing). Productsconforming to a monograph may be marketed without FDA pre-approval while anyothers must go through the New Drug Application (NDA) process. The conferencereport leaves standing the Senate language claiming that FDA's policy toward olderdrugs (which could go through a new monograph system and not need to go throughthe formal NDA process) may have raised prices to consumers and have become asubstantial cost on small businesses. The report directs the agency to report, no laterthan 60 days after enactment, on viable alternative methods on how it will maintainaccess to affordable medicines and foster a cooperative regulatory regime for smallbusinesses.

The conferees direct that $14.4 million be available for grants and contracts under the Orphan Drug Act to accelerate the development and approval of orphandrugs. The point is to encourage development of diagnostic tests for rare diseasesand explore potential surrogate endpoints and to make drugs available for serious andlife-threatening orphan diseases through the fast-track approval process.

The conferees did not accept Senate language about standards for compounded drugs. Rather, they directed the FDA to assist involved organizations to form aprivate partnership with the United States Pharmacopeia (USP) organization todevelop national standards for compounded drugs during FY2005 and asks that FDArequest funding in FY2006 to support this effort. The agency is to report on theprogress towards these objectives on a regular basis.

The conference report included a general provision that would allow over-the-counter sales of the contraceptive "Plan B." In May, FDA had decided notto allow "Plan B" to be sold without a prescription. The conference report bars FDAfrom using its FY2005 funding "to restrict to prescription use a contraceptive that isdetermined to be safe and effective for use without the supervision of a practitionerlicensed by law to administer prescription drugs."

The conferees noted the public interest in the withdrawal of a widely prescribed painkiller (Vioxx) and changes ordered in anti-depressant drug labels (SSRIs). Noting FDA's commissioning of an Institute of Medicine (IOM) National Academyof Sciences' study into post-marketing safety issues, the conferees direct the agencyto advise regularly the committees about any changes that FDA anticipates regardingdrug safety and to give them progress reports on the IOM study.

The conferees fund the biologics program in FY2005 with $124.1 million in appropriations and authorize the collection of $40.4 million in PDUFA user fees and$8.2 million in Animal Drug User Fees for a total program level of $172.7 million. The total includes $300,000 for additional activity relating to flu vaccines.

The conference report also included a general provision that bars FDA from using its FY2005 funding "to close or relocate, or to plan to close or relocate, FDA'sDivision of Pharmaceutical Analysis in St. Louis, Missouri, outside the city or countylimits of St. Louis, Missouri."

Medical Devices. The conference report provides an appropriation of $235.1 million, which includes $25.6 million forthe review of medical devices. This amount meets one of the conditions of theMedical Device User Fee and Modernization Act (MDUFMA) of 2002( P.L.107-250 ) which requires that FDA's appropriation for the medical deviceprogram meet a statutory minimum in order to implement the program. This increasedoes that and will provide the resources needed to significantly reduce review timesfor medical devices by allowing FDA to hire about 400 new reviewers. In addition,the conferees did not change the Senate report language that talks about long-termsafety studies of implanted medical devices and suggests FDA create programs forpost-market surveillance, long-term Phase 4 clinical trials, and registries of devices.

Women's Health. The conferees provided the Office of Women's Health in the Office of the Commissioner a total of$4 million, which includes a $325,000 increase over the Administration's request,because they support the collection of data to study differences between diagnoses,treatment, and outcomes for given diseases for men and women. The report furtherdirects the use of that increase with $250,000 for study of cardiovascular disease inwomen and $75,000 to continue and expand the hormone therapy education 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.

The FY2005 Consolidated Appropriations Act ( P.L. 108-447 , H.R. 4818 ) provides $94.3 million for the CFTC, which is $1 million above theHouse-passed ( H.R. 4766 ) level and $3.4 million above the enactedFY2004 level, but $1 million below the Senate-reported ( S. 2803 ) andAdministration-requested levels. CFTC has been investigating whether certaincommodity traders may have had advance knowledge of the discovery of bovinespongiform encephalopathy (BSE, or mad-cow disease). Report language ( H.Rept.108-584 ) accompanying the House-passed bill directs CFTC to submit a report of itsfindings to the committee as soon as the investigation is concluded.

Table 4. USDA and Related AgenciesAppropriations, FY2005 Congressional Action and Administration Request vs.FY2004 Enacted (budget authority, in millions of $)

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 thesubsidy level is included in the total appropriation.

(1) FY2004 enacted levels include amounts appropriated for USDA and related agencies in the Consolidated Appropriations Act, 2004 ( P.L. 108-199 ) adjusted for the 0.59%across-the-board rescission to all non-defense, discretionary programs, as calculated byCRS. The FY2005 enacted level does not include the effect of a mandated 0.8%rescission to all discretionary accounts funded by the FY2005 ConsolidatedAppropriations Act ( P.L. 108-447 ).

(2) Under current law, the Commodity Credit Corporation and the Federal Crop Insurance Fund each receive annually an indefinite appropriation ("such sums, as may benecessary"). The amounts shown are USDA estimates of the necessary appropriations,which are subject to change.

(3) The FY2005 Administration request reflects a revised Administration request submitted July 13, 2004, which added $300 million to the original WIC request tocompensate for higher than originally anticipated food costs and participation in the WICprogram. The FY2005 Senate-reported level includes a $125 million emergencyappropriation for WIC that is contingent on an emergency request for that amount fromthe Administration.

(4) Scorekeeping adjustments reflect the savings or cost of provisions that affect mandatory programs (as estimated by the Congressional Budget Office), plus thepermanent annual appropriation made to USDA's Section 32 program. For the FY2005Administration request, scorekeeping adjustments are unofficial estimates based onAdministration budget documents, and do not reflect an official CBO score, which ispending.

(5) Division H of the FY2004 Consolidated Appropriations Act ( P.L.108-199 ) contained $225 million in supplemental funding for various USDA assistance programs (including$50 million for USDA's Forest Service, which is funded under the Interior appropriationsbill). Spending for this assistance was offset in the conference agreement by a mandatedrescission of $225 million from the Federal Emergency Management Agency (FEMA). The FY2005 Senate-reported appropriations bill contains a $125 million emergencyappropriation for WIC that is contingent on an emergency request for that amount fromthe Administration.