SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOC
REVIEW OF USDA'S IMPLEMENTATION OF DISASTER ASSISTANCE AND THE OPERATION OF OTHER PROGRAMS
THURSDAY, MARCH 18, 1999
House of Representatives,
Committee on Agriculture,
Washington, DC.
The committee met, pursuant to call, at 8:30 a.m., in room 1300, Longworth House Office Building, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Barrett, Boehner, Ewing, Pombo, Canady, Smith, Everett, Lucas of Oklahoma, Chenoweth, Chambliss, LaHood, Moran, Thune, Cooksey, Calvert, Gutknecht, Riley, Walden, Simpson, Ose, Hayes, Fletcher, Stenholm, Peterson, Dooley, Clayton, Minge, Pomeroy, Bishop, Baldacci, Berry, Goode, McIntyre, Stabenow, Etheridge, John, Boswell, Phelps, Lucas of Kentucky, Thompson, and Hill.
Staff present: Bill O'Conner, staff director, Tom Sell, Lynn Gallagher, Pete Thomson, David Ebersole, Russell Laird, Alan Mackey, Callista Bisek, Wanda Worsham, clerk; Anne Simmons, Russell Middleton, Andy Johnson, and Chip Conley.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. The committee will come to order.
Mr. Secretary, I appreciate your coming up and again being willing to change and adjust your schedule. I am pleased to see that you have used this forum that this committee has provided to stay the number of new initiatives.
Maybe we should have had this hearing several weeks ago. In your submitted testimony, you mentioned the CRCPLUS as an emergency legislation that you had just sent to Congress. As of last night, it was not here. Unless you have it in your pocket, it still is not here. However, in discussions with the Department, we have already been at work to meet the pressing need. We have drafted a bill to try to deal with this on our own initiative and intend to have it on the suspension calendar next Tuesday.
Page 2 PREV PAGE TOP OF DOC
As to the other areas that you outlined in your statement about the needs that the Department has, I will assure you that we will rapidly respond when you send us legislation to accomplish what you want. You expressed concern about the disaster program that Congress enacted. Since we did the disaster program without any specific suggestions from the administration, I will look forward to your specific request that would accommodate your needs now.
You asked for quick action on the supplemental appropriation request for temporary personnel. I would remind you that last year the President proposed a reduction of 1,100 in the field. We rejected that proposal.
This year he requested another reduction of 752. Mr. Secretary, I would ask does the administration stand by this reduction request as submitted in the budget, or is the administration now changing that request, or does it stay in place?
On crop insurance the President mentioned his desire to see an improved Crop Insurance Program, but provided not one dime for this reform. The President has threatened veto of the appropriations bill that you have asked us for because he does not like the offsets.
So, my question would be what are your off-set proposals to fund your crop insurance ideas. And 148 days ago, the President signed into law H.R. 4328, an Omnibus Appropriations bill providing $5.9 billion in additional disaster spending; including $2.5 billion in disaster assistance.
Then 103 days after it became law, signup began for multi- and single-year crop loss assistance. Though this signup was slated to continue for 6 weeks, the Secretary announced a 4-week extension.
As of now, signup will be completed 170 days after the bill was signed, and just shy of 6 months. On March 8, I received a letter from you, Mr. Secretary, indicating that disaster payments will not be made until June.
Page 3 PREV PAGE TOP OF DOC
This will be 222 days or 8 months after the President signed the bill into law. More importantly, it will be one year after wheat farmers begin suffering crop losses.
There is absolutely no excuse for the delays that continue to plague the implementation of this program. Last fall, Congress rejected and resisted micro-managing the disaster assistance.
We provided a very broad authority and tremendous flexibility. It was a Cabinet Secretary's dream. Why did we give the Department an absolutely free hand in putting together this program? The answer is simple. We wanted nothing to delay critical help to farmers and ranchers.
This is not rocket science. This is not splitting the atom. This is something the Department has done before in implementing Disaster relief programs in 1986, 1988, 1990, 1991, 1992, and 1993. Never before have farmers and ranchers had to wait so long for disaster assistance.
I suppose we are going to hear about the difficulties of writing regulations, getting OMB clearance, inter-agency approval, and so forth and so on. When I listen to the public and private statements by various individuals from the Department, all I hear are excuses.
If the Department is not willing to admit that there is a problem, then I have questions as to whether or not they are willing to fix it. The Department cannot plead a lack of resources.
Before Congress put together the disaster package last year, 1,100 field office staff had been slashed, as a result of the Department's own 1999 budget.
Knowing that rapid programs delivery was critical to farmers, Congress provided $40 million in the disaster package to replace these field office personnel. Unbelievably, the President's subsequent budget submission calls for an additional 752 reduction in county office personnel.
Page 4 PREV PAGE TOP OF DOC
Mr. Secretary, farmers are hurting now. Springtime planting decisions are being made now. Without disaster payments, many producers will be unable to secure necessary operating loans.
Last year we had a natural disaster in farm country. This year the disaster has been entirely man-made and it happened right down the street at the U.S. Department of Agriculture.
On October 21, Congress wrote the Nation's farmers and ranchers a check. Mr. Secretary, we would like for you to be able to cash that. In your statement this morning, Mr. Secretary, you have made 18 new legislative proposals.
How many of these proposals have been submitted to the committee with the language? And six or more would have significant costs.
How many of them are in the President's fiscal year 2000 budget proposal? Where does the administration expect to find budget offsets necessary to fund these proposals?
I thank you for coming, Mr. Secretary.
I recognize Mr. Stenholm.
Mr. STENHOLM. Mr. Chairman, I have a statement for the record to be submitted at this time. I yield back the balance of my time.
[The prepared statement of Mr. Stenholm follows:]
PREPARED STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
We are here today to conduct oversight over USDA's implementation of the disaster bill that was included in last year's omnibus appropriations legislation. I am disheartened by the delay in the delivery of this disaster assistance, and would like to take this opportunity to touch on some of the reasons for the delay as I see them. But let me be clear in this; in terms of delay, there is plenty of blame to go around.
Page 5 PREV PAGE TOP OF DOC
In some ways, we set ourselves up for this delay by punting the hard decisions down to USDA to be made. As a point of reference, the 1988 disaster bill contained 39 pages of legislative language and included a 50 page report. The 1998 disaster legislation should have been written in this committee where the expertise resides, instead of being tucked inside an appropriations bill with little or no guidance. The fact that it wasn't written in this committee is symptomatic of the breakdown of the committee structure that occurred in the previous Congresses when the leadership legislated out of their hip pocket. Even so, it is inexcusable that USDA has taken such a long to provide the assistance to our struggling farmers. USDA was given great discretion to provide this assistance as quickly as possible and should have made decisions which would have resulted in payments being made in a more expeditious fashion.
I am concerned that there is little we can do at this time that will expedite the delivery of assistance to producers. The administration has requested $43 million in the supplemental appropriations request to provide salaries for personnel to deliver the program. This comes at a time when we expect to provide livestock producers with less than 30 percent of their assistance. I have often suggested that the time would come when we would have to choose between the delivery structure at USDA and assistance for our producers. Well, it appears we are now there. Let me make perfectly clear that this is not the fault of individuals in the local offices. These folks are doing their best to deliver a program which was poorly defined and supported. As for the efficiency of USDA's operations, this reflects a lack of leadership in Washington at both ends of Independence Avenue.
In 1994, we passed a USDA reorganization bill and since then Congress has invested very little time and effort in oversight activities. I understand that part of the delay in USDA's implementation of the disaster program is due to the incompatible computer systems/programs of FSA and RMA. In the 1996 farm bill, we took RMA out of FSA and made them a stand-alone agency. If your goal is to have a common computing environment at USDA for the farmer programs they deliver, this is not the policy we should have enacted. If coordination between USDA's agencies is desired, we are going to have to address the various fiefdoms which are currently in place at USDA.
Page 6 PREV PAGE TOP OF DOC
At this time, I am not interested in determining ''who shot John'' or where the blame lies—unless USDA can take this information and use it to make necessary changes. I am more interested in positive actions that will enable the personnel in the field to deliver disaster assistance to our farmers as quickly as possible. Until then, the real losers in this situation are the producers who are waiting on the assistance we promised them with much fanfare, press releases and stump speeches nearly 6 months ago. It is time to make good on those promises.
The CHAIRMAN. Mr. Secretary, please proceed.
STATEMENT OF HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF AGRICULTURE
Secretary GLICKMAN. Thank you, Mr. Chairman, Mr. Stenholm, and members of the committee. Thank you for having me here. I would like to introduce with me Virginia Haynes. Virginia is a program technician from Holt County, NE; Mr. Barrett's district.
I have asked her to come because I wanted somebody from the field here who could talk a little bit about what it is like getting all of these programs out. She consented to be here to give you some idea operationally what people have to go through everyday to deal with the work load that is out there.
I have an oral statement, and I would ask that my entire statement be in the record, Mr. Chairman.
Let me just mention a couple of things. One is you did mention the CRCPLUS emergency legislation in terms of extending the time lines. We do not have the administrative authority to extend the Federal insurance sales date. That legislation will be up this morning. So, you should have that. We will work with you on that.
I would like to add as a positive note, unrelated to the disaster thing. I am pleased to announce that purchases of corn, soybeans, soybean meal, and rice under the Public Law 480, title I, Food Assistance Program for Russia will begin within the next several days. The purchases will include 500,000 tons of corn; 200,000 tons of soybeans; 300,000 tons of soybean meal; and 100,000 tons of rice.
Page 7 PREV PAGE TOP OF DOC
So, those purchases under the agreement that we had to provide assistance to the Russians are beginning. We anticipate that they will continue throughout the rest of this fiscal year.
The commitment that the President made on the Russian Aid Commitment will in fact begin. Let me just talk a little bit about the issues that you asked us here today.
At the same time while the Dow hit 10,000, and while unemployment hit record lows; interest rate record lows; home ownership record highs; and of course the budgets that you are more familiar with than I, we do have this problem in the farm economy.
I think it is worthwhile talking about why we have it and then what we can do about it. I would say there are three primary reasons why the problem is there. One is that our customers, many of them are broke right now.
Because of economic conditions, they cannot buy our products. That has had something to do with the relative spread between the currencies that are out there. That has further hurt exports. The actual volume of exports is now down significantly, the dollar value is because of those factors. I personally believe that some of those markets are beginning to turn around. I do not look for anything immediate in that area.
There is some evidence that there is some brightening; particularly in Asia. Second, each of the last 3 years set successive records in world grain production; each of the last 3 years; America, Argentina, Canada, Australia, Europe.
So, you had 3 record years of world grain production. Third, last year natural disasters ripped across the Farm Belt. I think those three things together have had certainly a dramatic affect on all of this stuff.
We all have got to work together to try to do what we can. Before I begin the discussion of the actual disaster bill, I would like to announce today that we are proposing regulatory changes and an emergency rule that will improve the terms of shared appreciation agreements for farmers.
Page 8 PREV PAGE TOP OF DOC
Basically these agreements require farmers who have received debt forgiveness to pay a portion of the appreciation of the value of the property under certain circumstances.
Unfortunately, the real affect of these agreements is that farmers are unable to recover from financial setbacks due to factors beyond their control, such as natural disaster or market problems.
The proposed rule changes will cut in half the terms of these agreements and allow for the deductions of capital improvement, such as barns and silos. For agreements coming due in 1999, I am issuing an emergency rule that will allow for a deferral of up to 3 years on a farmer's ability to pay the recapture payment due.
So, this is an example of how we are working to try to deal with this problem. The increasing pressure on farmers is putting added pressure on folks at the grassroots level. We will continue to look at things.
Mr. Chairman, I do not think it is bad that you hold these hearings. I think that they do in fact spur us to do what we need to do. The shared appreciation things, we do a lot of it ourselves, but I think you help to push us along too.
The Shared Appreciation Agreement is one that Mr. Pomeroy, Mr. Minge, and others have been bringing to our attention. So, let me go on to the disaster bill. Last fall, you put together a $6 billion disaster bill with the administration.
I am proud to say that despite the fact that this year's program is far more complex than past disaster relief efforts, it is being delivered at about the same time, when you look at the total bill. Despite the added work load on our folks out in the field, we have been getting assistance to farmers.
[Chart]
If you will look at this chart here, it talks about this is not one disaster bill. This was seven parts of the disaster bill. However, we have run into some serious problems in credit and manpower.
Page 9 PREV PAGE TOP OF DOC
On Monday, the President restated the importance of acting on his request for $152 million in supplemental funds that will allow us to provide the $1.1 billion in additional loans and loan guarantees, and additional staff in the Farm Service Agency to deliver program payments to farmers.
I will address the work load thing in a moment. I do want to reiterate the President's point that the supplemental assistance is critical to make it available to farmers. While we are doing that, I do recognize the stress on farmers and ranchers.
Many people are asking us how much longer it is going to take to get the rest of the relief. I hear it all the time when I am out as well. I have got to tell you, I would like it all out this afternoon.
I want to get this relief out. I sat in your shoes for 18 years. I know what it is like. It is complex. The funds have to be distributed fairly. Reasonable efforts must be made to prevent fraud and abuse. The programs that have caused more fraud and abuse, and have resulted in probably more reports by our Inspector General and the GAO over the last 20 years has been the way that we have operated disaster programs.
So, we have to be careful to make sure it is done in a sensible way. Also, seven new programs were created by the Omnibus Appropriations Act. I will discuss some of the ways we have been dealing with it.
First of all, let me tell you in the context of all of this. The demand for our Commodity Loan Program is up 25 percent over 1998; $6.5 billion. To date, we have paid $2.3 billion in Marketing Loan Gains and Loan Deficiency Payments for 98 crops, including corn silage.
We expect to pay out $3.2 billion in those LDPs by the end of this season. That is a 20-fold increase over 1997, in part due to low prices. The bill provides that. In October, we paid out $1.3 billion in CRP payments.
Page 10 PREV PAGE TOP OF DOC
On March 4, we completed the most recent signup and took another 5 million acres into the program. We have paid out $1.6 billion in crop insurance indemnity and $10 million in NAP Benefits, Non-insured Crop Disaster Assistance Program.
We have made $4 billion in 1999 AMPTA payments and have another $1.6 billion to go. Loan demand. Our borrowing demand is up 65 percent over the same time last year. We have made another $1.1 billion in loans so far this year.
We will make another billion as soon as we work out the supplemental problem. We have made $4 billion in export credit available; 40 percent more than last year.
To meet the crisis hog farmers have faced, and are still enduring, we have purchased $150 million in pork for our feeding programs, accelerated the Pseudo-Rabies Eradication Program, spending about $80 million.
Finally this week, we are making payments under the $50 million Hog Assistance Program. On top of that, we need to address the disaster bill. I mentioned those things because that is what is going on normally.
In the disaster bill, seven new programs were created. The most complex to administer is the crop loss disaster. First, let me go through the disaster bill and what we have done. Within 10 days after the enactment of the 1999 act in November, we began making income loss assistance payments.
By November 21, 1998, we paid 1.4 million farmers more than $2.8 billion; almost half of the money Congress appropriated in farmers' hands were paid by Thanksgiving. On November 12, 1998, we started the Livestock Assistance Program and started signup on November 23, 1998.
On March 4, we started accepting applications for hunting and mohair loans, which we had not been doing for some period of time. On March 8, I announced the Dairy Assistance Program.
Page 11 PREV PAGE TOP OF DOC
Farmers can begin signing up for the $200 million on April 12. On March 15, we completed the $400 million program we set aside for the crop insurance premium buy-down; our down payment on crop insurance reform.
I accept your point about workload and workload-related things. I will have to tell you that the volume and demand for work in the last 6 months has increased astronomically. A lot of that was unanticipated.
So, we have the existing programs. You have the implementation of new programs coming on top of each other. It has placed unprecedented burdens on our delivery system in the field offices
Our folks out in the field who understand how important their work is to the livelihood of so many have given 110 percent. I want to express to you how proud I am of them and I know you are the same for what they are doing.
I would like to ask Virginia Haynes if she would perhaps give a brief ground eye view on what our folks are dealing with out there. Then I will finish with a discussion of the Crop Loss Program.
[The prepared statement of Secretary Glickman appears at the conclusion of the hearing.]
STATEMENT OF VIRGINIA HAYNES, PROGRAM TECHNICIAN, FARM SERVICE AGENCY, U.S. DEPARTMENT OF AGRICULTURE; HOLT COUNTY, NE
Ms. HAYNES. Thank you, Mr. Secretary.
Mr. Chairman and members of the committee, I, too, am pleased to appear before you today to comment on the disaster program. I work in a county office. I am here to give you that perspective.
I not only work with producers on a daily basis, but I also was involved with the implementation of this new program. I have had the privilege to work with Kansas City and Washington, DC employees.
Page 12 PREV PAGE TOP OF DOC
Last fall when the Department requested that I be on the task force for my input from the county from the field, I did not have any idea what was involved to launch a new program. We were asked to discuss issues and then make recommendations to the Secretary.
Our main objective was to try to keep programs simple, but at the same time to keep it fair. RMA also had employees that participated on the task force. They informed us that they had data on insured producers that would reduce the workload in the county office.
Some of the main issues that were of concern to this task force were the part that the producers who did not buy insurance were not to be given an advantage; crops that were intended for one use, but actually harvested for another. Quality losses. Proof of production evidence when evidence of the disaster no longer exist. Multiyear losses for producers that their entities had changed in the last 5 years. Also, the sharing of the data between agencies.
The team's main concern was implementing this new program in county offices that had undergone reduction in forces and are less staffed than they have been in the past. We knew what we had to do was to take the workload off of those county offices and away from the producers.
We felt that if the development of Y2K software and RMA data would let us do that, even though it would require more time, then that is what we needed to do. Multiyear applications take a minimal amount of time.
When a producer comes in, we have the data from RMA. He reviews it. If he agrees with it, then he signs the application, the insurance agreement, and he is on his way. Those are the easy ones.
Then we have the more complex. Although the 5-year multiyear I cannot imagine how much time that would have taken if we had not had the RMA data in our system.
If you can imagine every producer bringing in records for 5 years from every county that he is in, and having the county office try to calculate those multiyear benefits. Single year applications require a bit more time.
Page 13 PREV PAGE TOP OF DOC
If they are insured and they claimed a loss on every unit, then all of the information that we need is in the system. The applications that are the most time consuming are the single year, uninsured, and non-insured producers.
Additional information is also needed if the producer is not already in any FSA Programs. This includes adding that producer's ID to our name and address file, taking the payment limitation form, having him certify to compliance of highly erodible and wetlands, and also reporting his crop acreage.
All of this has to be done before we even start to get into the disaster application. The producer might actually spend an hour in our Office before he has even filed for the disaster benefits with all of the other forms.
If software were not available, I am estimating it could take at least a half a day per producer, per application. Determining production evidence is also very time consuming, as we have all found out with the LDP and prior year disaster programs.
I think there are a lot of differences between this disaster program and prior ones. A multiyear benefit was not available in the past. With the exception of one disaster program, funding was unlimited.
Basically, if the producer qualified, then we paid him. Also in the past, producer certifications were already on file. It was always a hectic 6 to 8 weeks when crop certifications were mandatory, but producers made appointments and it went rather smoothly.
When we were not allowed to send out those certification reminders, due to budget, our producers did not come in and certify. Then the prices fell on grain, and they came in to get an LDP or a loan and realized they had to late-certify.
Now, here we are again taking certification for disaster. Sometimes I wonder how much time or money we really save by quitting doing something that supposedly saves us time and money.
Page 14 PREV PAGE TOP OF DOC
And also the producer, because had we been able to encourage him to certify when he came in the summer, now he would not have had to pay the late charge and the time would have been less consuming for us on the LDPs.
Thank you for giving me this opportunity to speak to you today.
Secretary GLICKMAN. Thank you, Virginia. I thought it was useful and you may have specific questions on things that she thinks could be helpful to her.
She did not speak to the workload request. I would say that in addition to the supplemental request of $43 million, which we are asking for in an emergency FSA, we are considering a range of options, including simplifying the programs while preserving their integrity, and reallocating staff between USDA agencies. We are undergoing significant downsizing. So, while our folks had to administer seven new complex programs, we were caught in the middle of modernizing our work force and in streamlining.
In fact, quite frankly, we have a lot of offices in which we have one supervisor and two employees; a lot of county offices. I have committed that we are not going to go through any more office closings without coming and talking to you.
There are an awful lot of places out there where our fixed costs in these buildings are far in excess of what is justified in terms of running a single office. A lot of these people could be better utilized keeping all of the people, but moving them to places where the workload might be greater.
So, we have got some work to do to manage our own affairs better as well. I am just telling you that this enormous workload hit at the time of downsizing. It was pretty significant stuff.
Let me just turn quickly to the Crop Loss Assistance Program. I agree with you, Mr. Chairman, you gave us full discretion to administer this bill.
So, we had to basically develop the bill using some of the things we had done before. I like the discretion. At the same time, I would have to tell you that without the definitions of statute, we have had to come up with our own program and do it on the basis of what is both fair and expeditious.
Page 15 PREV PAGE TOP OF DOC
Sometimes those two things are inconsistent with each other. We also had payment limits. Only in one other case in the past were these programs not unlimited. So, you get in. You qualify. You got your check because there was no cap on the check.
So, we had a limit, a cap, and then you had two programs; a multiyear program and a single year program. We determined that we were going to put that farmer into the program that gets him the most money. That means complexity.
I would have to tell you that it would have been easier and faster to administer a bill that prescribed exact program parameters and set-up specific eligibility standards. I appreciate the fact that you gave us the full discretion.
With that discretion came the responsibility of working out a compromise that would ensure disaster assistance would be provided to all producers throughout the Nation in a fair and equitable manner.
As I said, we will make these payments from a fixed amount of money. If we had unlimited monies, then the program payments could be made as soon as the farmer applied for benefits. Therefore, in fact, no one can actually receive a payment until the last eligible farmer has applied.
You have got to know how much request there is in there. Now, we can do a few things. We can estimate payments that producers are likely to receive, pro rate this to a figure we consider conservative, and let the farmer know that for the purpose of credit and going to his bank.
We are doing that; both with respect to our own loans and with respect to the farmers getting this information to go out to their bankers. We cannot make any payments until the whole kit-and-caboodle is finished, and we know which pot of money the farmer is getting.
Signup is currently in full swing for the Crop Loss Program. We were careful to develop a program that maintain the integrity of the Crop Insurance Program. In fact, we reserved up to $400 million to be used as a down payment on crop insurance for the year 2000.
Page 16 PREV PAGE TOP OF DOC
I have instructed our officials to make the payments as quickly as possible. I do not want this thing to delay anymore either. I also have my OIG looking down on me, the GAO, this committee, and the committee on the other side to make sure that we do not have significant amount of fraud and abuse in the program, as we have had in previous disaster programs.
So, we also have to be careful how we are doing this. I will do my best to move this as fast as we can. The county offices are working fully as fast as they can.
We will work with you on the workload and the staffing requirements. I am not going to talk completely. My statement refers to some legislative initiatives which we will be sending down to you in the next few weeks. This is not a formal request for legislation.
We are trying to figure out what things we can do to provide farmers some help from the standpoint of modifications to current farm law that do not in any way radicalize farm legislation, but provides some additional improvements.
Some of these will cost money. Some of these will not cost money. For example, we have talked about having a shorter term Conservation Reserve Program. I support that. I would like to work with the Congress. It will cost some money, but I think it is an important point to work on.
I would like the authority for USDA to finance construction of on-farm storage facilities, which we no longer have the authority to. I think that will help farmers to market their programs better.
We have significant legislation on crop insurance. I am pleased to see that you have worked with the House Budget Committee to perhaps provide some additional money. We will work with you on those crop insurance reforms.
Ken Ackerman, I think, testified before one of your subcommittees before. There are other legislative programs that have talked about some modifications to haying and grazing to make it more usable.
Page 17 PREV PAGE TOP OF DOC
Ways to make sure that farmers and ranchers are not disadvantaged by concentration by strengthening the Packers and Stockyards Act, the Agriculture Fair Practices Act, and asking for mandatory price reporting, which we think will level the playing field for all livestock producers.
I would say to you that we have a tremendous amount of work to do; both in terms of implementing the 1996 farm bill, implementing this disaster bill, and working on legislative changes that we think can make life a lot better for farmers and ranchers in this country.
I thank you very much, Mr. Chairman.
The CHAIRMAN. Mr. Secretary, thank you very much.
All members may, without objection, submit statements for the record. That would include one from the gentleman from New York, Mr. Gilman, who was here earlier and has a very strong interest in crop insurance.
[The prepared statements of Members follow:]
STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Mr. Chairman, thank you for holding this very important hearing on
USDA's delivery of disaster payments approved last October—a subject that is so important to our Nation's farmers. I would also like to thank Secretary Glickman for appearing before the committee this morning.
Mr. Chairman, our farmers and ranchers are experiencing low prices along with adverse weather conditions. Many of our producers have experienced multiyear losses due to drought, while others are simply experiencing very low market prices. The agriculture crisis has, in turn, created many stressful situations for the entire industry.
I am very concerned with the agriculture credit situation that our farmers are currently facing. The low market prices have placed producers into situations which make their individual cash-flow more important than ever. As farmers visit lending institutions, bankers are much more hesitant to lend money during this time of low prices. Many producers have been approved, while many others have been declined.
Page 18 PREV PAGE TOP OF DOC
Last October, Congress passed an appropriations bill that contained $5.9 billion in various agriculture relief. Many farmers have visited with their bankers and made use of their expected disaster payments to provide cash-flow. These same loans are now being declined because the USDA has not delivered the disaster payment. Many farmers are now in search of a lender that will provide a loan for the next crop production year.
The USDA has now delayed the delivery date until June. I hope you and the President realize what effect this decision will have on a number of farmers who need this money immediately. In addition, the President's budget once again cuts FSA staffing levels.
Mr. Chairman, I would expect Secretary Glickman to make use of all his resources to deliver this money to our producers as quickly as possible.
Two weeks ago, the subcommittee which I chair—the General Farm Commodities, Resource Conservation, and Credit—held a hearing on the slow processing of loan deficiency payments to our producers. It is well known that the processing of these payments has lagged far behind. At a time when we have producers in rural areas that are struggling from low market prices and adverse weather conditions, it is critical that these checks—as well as the disaster payment checks—get to our producers.
I would like to again thank the chairman for focusing on the challenges that are facing our Nation's producers—and focusing on USDA's inability to quickly process the paperwork so that our producers can get the much needed financial help from the Government that is rightfully theirs.
PREPARED STATEMENT OF HON. HELEN CHENOWETH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
Mr. Chairman, thank you for holding this hearing to review the U.S. Department of Agriculture's implementation of disaster assistance and the operation of other programs. This is a very, very important issue, and I look forward to bringing a lot of information to the attention of the committee.
Page 19 PREV PAGE TOP OF DOC
Today, farmers and ranchers are experiencing economic hardships and President Clinton and his administration has shown a complete lack of leadership in helping them. I'm very disturbed to learn that the Clinton Administration's promise to responsibly deliver disaster aid payments (under Public Law 105–277) to farmers and ranchers has not been acted on.
Mr. Chairman, over $2.5 billion in disaster funds continue to sit at the USDA, and there is no sign that the disaster relief payments may be made soon. Of that $2.5 billion, Idaho's expected share is $6.7 million—none of which has been paid. This concerns me.
Congress appropriated these funds to respond to the current farm crisis. To that end, the administration must take immediate action and begin to compensate farmers and ranchers for their crop loss. I do not intend to allow producers' needs to go unanswered because of bureaucratic failure from Washington.
In addition to the disaster aid payment delays, President Clinton promised farmers and ranchers that his administration would responsibly secure the Non-Insured Assistance Program (NAP) for seed crop loss when he signed the Freedom to Farm Act into law on April 4, 1996. The Freedom to Farm Act properly reintroduced and incorporated seed crops into NAP.
Unfortunately, the President is ignoring repeated calls from Idahoans to compensate onion seed growers for crop loss due to adverse weather. The Idaho State Farm Service Agency reports that the Federal disaster payment for onion seeds amounts to over $518,000—none of which has been paid.
Mr. Chairman, I repeat, no payments have been made to my Idaho onion seed producers. This in spite of changes we made under the Freedom to Farm Act. This news is disturbing, and we must get to the bottom of this issue. I am not happy.
To further complicate the issue, the Clinton administration informed me that a change in the NAP regulations was necessary before it could justify any payment to Idaho onion seed growers. Today, USDA is writing Federal regulations to make the 1996 onion seed losses in Idaho eligible for NAP coverage. Unfortunately, the regulation is caught up in the Clinton administration's regulatory quagmire while the loss of promised money for repayment has placed many Idahoans in a difficult position.
Page 20 PREV PAGE TOP OF DOC
As the author of the NAP section of Freedom to Farm Act, I assure you that the purpose behind these provisions was to include seed crops as an eligible crop under the program. NAP was designed to help seed farmers receive just payment for losses to their seed crops. It's apparent that there's a pattern of inaction by the Clinton administration to responsibly enforce NAP for onion seed crop loss.
Mr. Chairman, the time has come to understand the problems associated with the payment processes for the disaster aid program and NAP. I look forward to hearing from USDA to explain these payment delays.
PREPARED STATEMENT OF HON. DEBBIE STABENOW, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
I appreciate the opportunity to comment on the implementation of disaster assistance payments by the U.S. Department of Agriculture. This past decade has been marked by repeated disasters and devastating weather conditions beyond precedent. The agricultural community has suffered droughts, outbreaks of diseases such as wheat scab, hurricanes, as well as all of the conditions caused by El Nino. 1998 was no exception and Congress reacted by including important disaster assistance payments in last year's Omnibus Appropriation bill.
Over the last few weeks, I have been hearing from Michigan farmers about the disaster program. Many of my folks did not qualify this year. Those who are eligible have told me that they appreciate the assistance however, they are experiencing difficulty getting help, information, and payments from their local Farm Service Agency offices. I understand that signup for the program exceeded initial estimates across the Nation and, in response, USDA has extended the deadline to allow all eligible farmers sufficient time to apply. However, there are numerous other delays in the program that resulted from less than adequate implementation from the United States Department of Agriculture. The purpose of today's hearing is to address the difficulties USDA has faced in implementing the disaster assistance programs and to seek solutions that will improve future implementation.
Page 21 PREV PAGE TOP OF DOC
I am here today to ask Secretary Glickman to explain in detail what went wrong with the implementation of the disaster programs. After a full discussion of the difficulties, I am prepared to discuss how Congress can help to improve implementation. The bottom line is Congress agreed last year that there is a crisis out in farm country and that our producers need assistance. We need to do everything in our power today to make that happen.
STATEMENT OF HON. BENJAMIN A. GILMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK
I want to thank Chairman Combest for holding this important hearing.
Crop insurance is at the forefront of the many issues that facing our farmers. It is apparent to all producers who have had to rely on their crop insurance policy in times of trouble that the current policy is a failure and provide no adequate remedy to the problems that they face.
Many vegetable growers in my district have communicated their distress, as well as the frustrations they have met in dealing with the maze of bureaucracy that they have encountered at USDA and its agencies.
The plight of the farmers in my District has been an ongoing one, to which USDA has failed to respond, particularly with regard to our onion farmers in Orange County, New York who lost their crops following a severe hailstorm on May 31, 1998 that passed through the upstate New York region. Following the storm, I toured the disaster area and witnessed the devastation firsthand. I contacted Secretary Glickman numerous times, imploring
him to assist our farmers who have found themselves bound by a low market price for yellow onions and a failed crop insurance policy. To date, USDA has not acted to address any of the complaint of our farmers.
Pawelski Farms in Florida New York is one of the many family farms in my district that have been in operation for generations. They are on the verge of bankruptcy as a result of multiple year losses due to
Page 22 PREV PAGE TOP OF DOC
inclement weather. Like many producers around the country, they found no relief in the crop insurance program.
In my conversations with owner/operator Chris Pawelski, he has informed me that his farm will be out of money by next month if emergency funds are not allocated soon to alleviate their plight.
Another farm in my district in jeopardy is Gratz & Utter, Inc. Gratz & Utter have also been in operation for generations. In 1990, Harold Utter found himself barred from participation in any USDA programs due to a failure to pay his premium which was a result of his contention that the then current market price for yellow onions was set a four dollars/cwt—far below the NASS average. Time proved his contentions correct, and while USDA raised the market price, they have failed to reinstate his eligibility to participate in any programs. Gratz & Utter also face bankruptcy if immediate assistance is not made available.
These are just two examples of the many complaints I have heard from farmers in my District and around the country regarding the failure of the Federal crop insurance program and the inaction of the Department of Agriculture to enact the necessary reforms. Back in October, Congress approved the Omnibus Appropriations Act which allocated $5.9 billion in disaster assistance for farmers suffering from crop losses due to disaster. Since the bills enactment, not one of the farmers in my District have seen any of the money. Instead, the Secretary initiated a signup period for the disaster assistance that was to run from February 1 to March 12.
Last week, Secretary Glickman extended the period to April 9. This is totally unacceptable. In my communications to the Secretary, both personally and in writing I have made my opposition to this program clear as it simply delays the disbursement of these much-needed funds.
Just yesterday I received a copy of the Office of Inspector General's report to the Secretary which details the failures of the Risk Management Agency to properly implement and oversee the crop insurance program, particularly with regard to the Catastrophic Risk Protection (CAT) Program. OGI's report states that RMA policies with regard to risk-sharing between RMA and the insurance companies has resulted in large premiums with the majority of the funds going to the insurance companies, rather than the producers. In citing the CAT program as an example, the report states that the CAT program has resulted in about $2 in administrative payments to reinsured companies for every $1 paid to insured producers in the form of insurance indemnities; this is not a safety net.
Page 23 PREV PAGE TOP OF DOC
I call on the Secretary Glickman to make good on the promises he has made both to myself and to producers nationwide and to release the emergency funds that will keep our farmers in business, rather than force them out of business and to implement the revisions that are needed in the crop insurance program now and to make them effective for this year. Through these simple steps, we can insure the future of our Nations farmers. I have attached comments from Mr. Pawelski that I request it be made part of the record.
PREPARED STATEMENT OF HON. HENRY BONILLA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. Chairman, thank you for the opportunity to comment today on USDA's failure to issue disaster payments to farmers and ranchers in a timely manner.
Last October, Congress approved approximately $2 billion in disaster relief for farmers along with a $200 million Livestock Assistance Program. To date not one farmer or rancher has seen one penny of this money. I understand that farmers can expect to receive payments by June. June will be too late to help Texas producers with the 1999 crop year. USDA has left our farmers and ranchers hanging.
Last week I raised this issue with Gus Schumacher, Under Secretary for Farm and Foreign Agricultural Services. He said the payments have not been made because it was ''too much work''. This is unacceptable. I cannot tell farmers and ranchers who have faced drought, floods, low commodity prices, and now lack of promised assistance, that those who are supposed to help you don't have the time.
Last week a rancher told me he had all but given up on the money. Besides he said ''that was last year, we have to move on, we can't wait on USDA we have to start worrying about this year. USDA is basically a year behind us.''
Congress even approved an additional $40 million for USDA salaries and expenses to ensure this money would be distributed promptly. Now USDA has come to my Committee and requested another $42 million to handle the workload. Apparently USDA had no problems spending this $40 million, but it is a different matter when it comes to serving producers.
Page 24 PREV PAGE TOP OF DOC
I am deeply concerned about the future for farmers and ranchers not only in my congressional district, but across the country who have been depending on this money. Many were depending on this money to assist with spring planting or to pay feed bills. Now in Texas we are facing a second year of drought. As much as I hate to say this, I am afraid that USDA has really failed our producers.
The CHAIRMAN. Mr. Secretary, if it helps to have these hearings to get things moving along, schedule every Wednesday, every week and we will have a hearing if you would like. Whatever you want.
Secretary GLICKMAN. Perhaps we could do this by telephone.
Mr. CHAIRMAN. Great. That would be fine too; whatever it takes. If hearings help, we will do some more.
On your legislative initiatives, Mr. Secretary, obviously I cannot guarantee what this committee will pass out in agreement. I cannot guarantee what the entire House would pass.
I will assure you that when you send those to us, the areas in which you think you need legislative change in order to help you help the American farmers, we will work very expeditiously to consider those in this committee.
I look forward to the submission of those. I will, again, make my commitment to you that we will proceed on those in a very rapid fashion.
Very quickly, let me just ask you how quickly is the money that we passed in H.R. 882 last week under suspension that allowed the transfer of $470 million, I believe, into immediately? Now that has been signed, it would seem to me that is something that hopefully could be ready very soon.
Secretary GLICKMAN. I will ask Carolyn Cooksie to respond to that.
Page 25 PREV PAGE TOP OF DOC
Ms. COOKSIE. Good morning. The money went out to the field on Monday. So, they do have access to it.
The CHAIRMAN. Great.
Ms. COOKSIE. To date, we have spent about $100 million of it. I suspect that by the end of next week, certainly by the end of March it will be gone.
The CHAIRMAN. My compliments to you for the expeditious way then that has been handled. By the end of March, that gives us the opportunity to have gone ahead and had that money out there. We are certainly hopeful for rapid consideration of the supplemental.
Ms. Haynes, are you a CED?
Ms. HAYNES. No, I am not. I am a program technician.
The CHAIRMAN. In the Accounting Office?
Ms. HAYNES. Yes.
The CHAIRMAN. Having worked for the ASCS years ago before it became something else, let me congratulate you and thank you for what it is that you and your counterparts do.
I have been there on that side of the counter. I recognize that you do not set policy. You just go out there everyday and work, and work, and work trying to get the job done. You are the ones who catch that immediate reaction from that farmer on the other side of the counter.
I commend you. I thank you. I appreciate your being here today. Let me ask you, are you open for some questions about how, from the county level, that this might work smoothly and feel comfortable in answering those?
Ms. HAYNES. Yes.
Mr. CHAIRMAN. Thank you very much.
Page 26 PREV PAGE TOP OF DOC
On the payments, Mr. Secretary, that went out, and I think you reinforced what was the Congressional intent. The money that has gone out that went out very immediately after the signing was the additional AMPTA payment which was made.
That was the reason that was done because there was a lot of discussion up here on both sides of the Congress about how we can best come up with a mechanism to most rapidly deliver that money.
Would you say, and you Ms. Haynes, from the standpoint of getting that money out that, that might be ways—I have said and I believe it strongly. There is going to be another disaster program this year.
I do not see how we can get around it. Would you suggest that, that may be a way that we want to try to continue to look for a way to deliver that in a very expeditious manner?
I would think since those addresses are already in the computer that is a fairly easy way for the Department to do that.
Secretary GLICKMAN. I think the answer is yes. Then you ask the question, is it the fairest way? That is, are you serving the right people by doing that? For example, that money went out lickety-split, largely because it was an easy way of getting money out.
Then you ask the question, are the producers who are getting that money the ones entirely who need the money? Are there other producers who may need the money?
The CHAIRMAN. Which sets up the need to have some of the other programs.
Secretary GLICKMAN. Right.
The CHAIRMAN. The multiyear programs. That was in the administration request as well.
Page 27 PREV PAGE TOP OF DOC
Secretary GLICKMAN. That is correct.
The CHAIRMAN. That they be multiyear programs to handle some of those problems in the past. So, that is why they were established.
I do not want to pin you down or hold you to this. Again, if we are looking at a mechanism by which we might be able to deliver, you would not discourage us from looking at that.
Secretary GLICKMAN. That is a mechanism that gets money out quickly. There is no question, using existing systems.
The CHAIRMAN. Did not the Department make the decision? Ms. Haynes mentioned about the fact if there had been certification when farmers came in. Did not the Department make the decision not to require certification?
Secretary GLICKMAN. I think so, but I wonder if somebody might respond to that. Parks Shackelford.
Mr. SHACKELFORD. Because of the changes in the 1996 farm bill, we did not require certification for certain programs.
However, for eligibility, for the Marketing Assistance Loan Program, and Loan Deficiency Payment Program, the farm bill requires that those crops, or at least the program crops other than oil seeds, be produced on a contract farm.
In that case, we do require it. However, there have been a number of people emerge that we do not require any acreage reports because of the changes in the farm bill.
The CHAIRMAN. Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman.
Welcome, Mr. Secretary. In my written statement that I put in the record, I offered my share of criticism as we have in the past. I associate myself with most of the chairman's criticism of your end of Pennsylvania Avenue.
Page 28 PREV PAGE TOP OF DOC
I think it is awfully important that each of us on this committee assume our share of the responsibility. There is enough blame to go around.
Blame does not help our farmers. I, too, commend our county office, Ms. Haynes you being here representing all of those diligent workers out there trying to do what is almost an impossible task.
Mr. Chairman, a moment ago you said they do not set policy. They do not. We do. We have been very derelict in setting policy.
Last August and September, I asked of the majority, and Mr. Chairman you were not there at the time, I asked of this committee that we hold hearings on this disaster bill. That we consider marking up a bill and assuming our share of the responsibility, but was denied that opportunity.
The majority on this committee said no. We do not wish to do that because it gets too controversial. There is an election going on. We all joined. I am saying this is self-criticism. We all joined in saying let us get the money out and worry about the details later.
Now hear Mr. Secretary, when you get the discretion, it is important that you make decisions. You have been very reluctant to make decisions that step on members of Congress' toes.
There has been tremendous amounts of pressure being brought upon you and the administration to do X, Y, and Z; particularly from the other body. As we have listened to that, it has compounded our problems tremendously.
Lest we get overly critical, this committee shirked our duty in setting the policy that we are now heaping abundance of criticism on those who have been charged with doing what we did not do.
The 1995–96 farm bill, according to policy said, we do not want to keep anymore records in FSA Offices. Remember the basic philosophy behind Freedom to Farm. That was to get Government out of agriculture and let the market take over.
Page 29 PREV PAGE TOP OF DOC
We said we do not want anymore acreage reports. We do not want any of this. Now, all of a sudden, we are saying yes. We are criticizing you, Mr. Secretary, because we told you what to do.
Now, we are criticizing our employees because they do not have the information that they should have had. That was a foolish decision that we made. I voted for it, not that I was for it, but I voted for it. I take the responsibility 100 percent.
Now, let us talk about where we are today. I agree. If we are going to have a disaster this year and, Mr. Chairman, we are going to have a disaster this year. I am going to join with you in doing what you have already said this committee is going to do.
Let us start the policy decisions of whatever it is going to look like this year. Let us do it in this committee. The first step starts with what happened in the Budget Committee yesterday.
My colleagues on this committee, both sides of the aisle, this budget debate that we are going through and the budget that we are going to vote on next week, please do not come and say we are going to expect the Secretary to bring all of these requests in for additional money when we are not willing to put the money in the budget to take care of it.
There is no way on this Earth that in the year 2000 that we can protect Social Security, do what is going to be necessary for Medicare, stay within the caps on spending on everything but Defense, cut taxes $15 billion, and increase spending to the degree that was going to be necessary if we have another disaster like this.
So, before we join in the rhetoric on this, everybody take a little bit of time and look at the budget. We are setting ourselves up to a trap that is going to be extremely difficult.
Mr. Chairman, there is enough blame to go around. I assume my share of the blame. Certainly, Mr. Secretary, my frustrations with you, as a friend, in not being able to make the tough decisions that we count on you to make, you have got to make some more of them, Dan. You have just got to make some tough decisions.
Page 30 PREV PAGE TOP OF DOC
Do it, even it is wrong. If you get criticism from every one of us, you have got to make those decisions. When we give you the discretion, you have got to make it. When we give you that discretion, withhold the criticisms of the Secretary when we have not done our job in setting the policy.
Now, that was last year. From this point forward, I am interested, as everybody on this committee is interested. Let us get the job done now. Let us make sure that our employees do not get the blame for it.
Let us do some of the other things that we need to do getting ready for what I agree with the chairman that we are looking at another tough year this year. Let us begin to get ready for that.
The CHAIRMAN. Mr. Barrett.
Mr. BARRETT. Thank you, Mr. Secretary for being with us again. Thank you for bringing in a program technician from an FSA Office in my district. I think Virginia will be an addition, and already has been to this hearing. It is nice to know that I believe she is one or two technicians brought in from field offices around the country.
That is certainly saying something about her credibility. I want to again compliment you on your response to H.R. 882, which we passed recently. That is getting the money to our producers immediately. That was good news.
There is a lot of hurt out there. There is a lot of responsibility that hangs on a lot of heads. I think USDA has certainly added to that hurt. This is very disappointing. On the 4th of February, Chairman Combest, Ranking Member Stenholm, and I wrote a letter to you.
We were concerned that delays in getting disaster assistance out to our producers would compound the problems that they are facing when they are looking toward financing for this year because of their cash-flow deficits.
Page 31 PREV PAGE TOP OF DOC
When we wrote the letter, we thought that payments would be available no later than April. Today, we know that we will be lucky to get those payments out perhaps in June. This is unacceptable.
So, perhaps a rhetorical question, Dan. How can the Congress expect USDA to make loans to help our producers get through the year, when we cannot get out the disaster payments?
Secretary GLICKMAN. Mr. Barrett, let me say again that I would have liked to have gotten the money out in January. It does not serve me very well to come up here and face the concerns that you are legitimately raising.
I would have to say this. We created a program from scratch. It is a combination of a multiyear and single-year program that is capped. We also have to make sure that we provide a basis for paying the benefits.
This means that records have to be provided and proof of loss has to be met. These are Inspector General reports that report the operation of disaster programs over the last 15 to 20 years. So, they are watching us pretty closely.
We are also making this program as producer friendly so that we provide the benefits to the producer and help him or her through this process up front. That is putting them in the right side of this program.
I am not telling you that we are doing it perfectly. I am just telling you, honest to God, we are doing the best we can under this circumstance and moving it as fast as we can.
Let me tell you this. Mr. Combest raised this with me before. He said, can you give producers any indication of the amounts they will get so they can go to their banker or their creditor? What we are doing is we can estimate the payment the producers are likely to receive.
Page 32 PREV PAGE TOP OF DOC
Then we can pro rate this at a conservative number. Let us say at 50 percent, which is a conservative figure, so that the farmer/rancher can then use this estimate for completion of his or her cash-flow projections for the borrowing season.
This means that when farmers signup for the program, they receive a printout. It is called a CCC–540(e) Entitlement Report. This report calculates their multiyear and single-year benefit prior to pro rate.
FSA is using 50 percent of this benefit report for cash-flow analysis for our own lending programs. Farmers can use these forms to provide their banks, seed, or fertilizer suppliers as a guide for cash-flow projection purposes.
We are not giving our permission to assume that any amount absolutely will be paid. This is no guarantee at all. It at least does reflect that effort to let these people know that there is money going to be coming in.
Then can do their best to try to bank that under normal circumstances. We are doing the best we can, Mr. Barrett. We will get it done as fast as we can.
Mr. BARRETT. Well, in that regard then, Mr. Secretary, would you advise the President not to veto the supplemental?
Secretary GLICKMAN. The supplemental has a lot of factors beyond just my Department. So, the President has included the supplemental request of money for FSA offices and farm loans.
That is a part of the program that he feels very strongly about. I cannot answer some of the larger questions about how the offsets are coming from.
Those are factors being considered at other levels as well. The President strongly believes we need the money for the FSA offices and the farm loans.
Mr. BARRETT. Mr. Secretary, would you be willing to write the President a letter requesting him to sign the supplemental?
Page 33 PREV PAGE TOP OF DOC
Secretary GLICKMAN. Well, as you know, any administration involves team work and collegiality. Obviously he put the money in there because we asked him to. So, he knows this is important. But there are other parts of this bill that is important.
This is going to be give and take between the Congress and the administration on the whole issue of offsets. There are other things in this bill besides this. I would like to see this bill passed with these funds in it.
Mr. BARRETT. Thank you Mr. Secretary.
Thank you, Mr. Chairman. My time has expired.
The CHAIRMAN. Mr. Minge.
Mr. MINGE. Thank you, Mr. Chairman.
Secretary GLICKMAN. If I just may add one other thing too. The fact is we believe this is a disaster request, emergency request. So, the hang-up is whether it needs to be off-set at all.
The President does not believe it needs to be off-set because it is an emergency request. There is obviously a difference of opinion on that up here.
The CHAIRMAN. Do not take out on Mr. Minge's time.
Secretary GLICKMAN. OK.
Mr. MINGE. Well, I will strike that off my list of questions. I would like to, again, thank you for coming up, Mr. Secretary, and the staff that has accompanied you.
I certainly do feel that you have come up here and as you well-know, it is very convenient for us to overlook our problems and cast them all on the south end of the Hill, and assume that you are somehow going to work these things out when we cannot do it.
I would like to just urge my colleagues to talk to our friends on the Appropriations Committee, if this is a disaster situation, we do not need offsets.
Page 34 PREV PAGE TOP OF DOC
To say that the President is holding up a program that we are holding up, does violence to what is actually occurring in this political process. I think it is duplicitous.
I think that we should refrain from those comments that undermine our efforts on the Agriculture Committee to get these programs completed. I spent an agonizing day yesterday with the Budget Committee.
Last night after the committee ended its work and this morning, I have tried to put my hands on information that would enable me to ask you what the proposed budget that was passed by the Budget Committee would do to your ability to deliver the programs that we are talking about now?
As best I can determine, the Budget Committee came up with a 10 percent cut in funding for discretionary programs of the Department of Agriculture. It is Function 350. This is a 10 percent cut from the President's budget proposal, which of course has not been well-received by this committee.
Can you explain to us how in the discretionary function of the Department a 10 percent cut from what the White House put the screws to you on and forced you to accept would enable you to deliver the disaster programs that we are talking about?
Secretary GLICKMAN. Assuming that the 10 percent cut were applied to, let us say, the agency involved here as well as other agencies, we would probably be talking about at least another 1,000, 1,500, or 2,000 employees; about 1,500 employees.
Mr. MINGE. That would be doubled the number of employees that came up here.
Secretary GLICKMAN. Additional reduction.
Mr. MINGE. In addition, OK. So, there is 751 employees that we told you we thought it was crazy to try to cut out of FSA. Now, you are telling us that if this is an across-the-board 10 percent cut, it would be another 1,500 employees.
Page 35 PREV PAGE TOP OF DOC
Secretary GLICKMAN. That is correct; assuming that it was allocated to this agency as well as the other agencies.
Mr. MINGE. Well, I would like to urge all of my colleagues on this committee to oppose the budget resolution which is headed to the floor next week or to insist that between its time of leaving that committee and reaching the floor, these figures for the Department of Agriculture's discretionary functions are changed.
I find that unacceptable. I think that if we hold a hearing like this today and we do not take that stand, then we are acting in a hypocritical way.
Now, I am also very pleased that the Budget Committee leadership has assured us that there is one that is in the budget or will be in the budget, if it is not in there now, for adequate levels of crop insurance. I would like to just briefly ask you about the problems we are experiencing in the delivery of the Crop Insurance Program because the impression that I have from individuals that are attempting to purchase crop insurance, that rates for crop revenue coverage, and even the design of some of the new products that, that information has not been available until early March.
That in many cases, the agents do not even understand the information. They say that the rates are going to change. I am wondering, how can we expect farmers to be held to a March 15 deadline for signing up in the Northern Plains in the Midwest when this information is not yet available?
Secretary GLICKMAN. I would ask Mr. Ackerman, if possible, to respond.
Mr. ACKERMAN. Mr. Minge, the situation you are referring to is the one that the Secretary referred to which has prompted us to propose the emergency legislation. It involves a particular product called CRCPLUS.
It is a private non-reinsured product. It is sold in conjunction with the re-insured products; CRC and MPCI. The company that sells that product did make a number of announcements after the sales period had ended.
Page 36 PREV PAGE TOP OF DOC
They announced on March 1 that they were changing their CRCPLUS rate on rice. They announced on March 10, that they were withdrawing sales of CRCPLUS on all of the other crops. They will announce in the future on March 25 whether those rates were changed.
Because farmers do make decisions on their risk management products as a package, We felt that created confusion. That created an unstable situation. As a matter of fairness, that purchasers of CRCPLUS should have the opportunity to readjust their crop insurance decisions.
The emergency legislation, that we have discussed with the committee, will be forwarding the formal language this morning and would create a special 2 to 4 week period for farmers to make that correction.
The CHAIRMAN. Thank you. Mr. Everett.
Mr. EVERETT. Thank you, Mr. Chairman.
I think I would like to take issue with the last statement about 1,500 people being cut. Let me yield to Mr. Chambliss, who is on the Budget Committee also, to explain how that works so that some of our members can understand it.
Mr. CHAMBLISS. Well, I was not here when you made the statement, Dave. I understand about the fact that the budget is going to require that some 1,500 personnel be cut from FSA.
Mr. MINGE. Would you yield for a moment and I can explain the statement? The point I made is that there is a 10 percent cut in the discretionary function for agriculture in the budget that was adopted yesterday by the Budget Committee.
I asked them if there is a 10 percent cut in discretionary, what impact that has on their ability to delivery programs? They stated if it is an across-the-board 10 percent, that would require laying off 1,500 additional people at FSA.
Mr. EVERETT. Well, that is not the area that the budget directed the cuts to take place in. There is no requirement, from a budgetary standpoint, that 1,500 folks be eliminated from FSA.
Page 37 PREV PAGE TOP OF DOC
I think, Dan, you understand that. Maybe you ought to eliminate them in Washington. Then we could get a lot more done at the local level. It is absolutely up to the authorizing committee to decide where those cuts are going to take place. Then for Dan to decide at USDA, specifically, where the cuts take place.
Mr. Secretary, I have a USDA Press Release in my hand dated January 27, 1999, entitled ''Crop Loss Disaster Assistance Program signup Begins February 1, Glickman Reminds Farmers.''
I am going to read a couple of excerpts from your press release quoting you. ''This money is solely needed by farmers who suffer losses due to natural disasters,'' said Glickman. ''We are going to do our best to get it out to the people who need it so they can make plans for planning in the spring.''
The release also says, ''Payments to farmers will be prorated after all application are received in order to stay within the program's requirement and budget.
Now, you made two good points in that release. No. 1 being that farmers needed the money to plan in the spring. No. 2, the more producers who apply, the less money would be delivered to each farm.
So, why extend the deadline for farmers who are late in applying when doing so will lessen the amount of money that farmers will receive and delay payments to those who need it most and have gotten their applications in?
Secretary GLICKMAN. I think it is a good question.
I would ask both Mr. Shackelford as well as Ms. Haynes to respond to that. One thing you have to realize is that there was a California disaster. That added to this thing.
There was a citrus freeze. That occurred in December; $800 million. We felt under the law were compelled to include that California disaster. Those applications did not start coming in.
Page 38 PREV PAGE TOP OF DOC
Frankly, almost everybody in the California delegation contacted us and said we ought to be a part of this particular program. Under the law, we believe they were entitled to be included. That was one of the reasons. I would ask Mr. Shackelford to further respond.
Mr. SHACKELFORD. We would be in a situation of being very unfair if we said there was just a certain amount of time because our county office people can only process a certain amount of producers, even with the improved process that we have.
So, if we said, only those producers who we could serve up to this certain point, get assistance because we could not serve you. You are now out.
Mr. EVERETT. You are saying disasters occur after their applications are final.
Mr. SHACKELFORD. No, sir. We have to get the producers in. Where we have the records, it goes very smoothly. When we do not have the records, it takes a long time.
We go through with each producer, get them enrolled, and signed up. We take the time it takes to get the producers in. We need to offer that option to every producer, not just the ones we can serve in a set period of time.
Secretary GLICKMAN. Perhaps Ms. Haynes might want to respond.
Ms. HAYNES. Sir, I guess I would just like to comment that if we had cut it off on that date without allowing all of the producers that are eligible to come in, that would be similar to saying at 2:00 p.m. on a good day for LDPs, sorry, you missed the deadline.
We stay until those producers are in there. On one particular Friday when the LDP price was great, that meant 6:00 p.m. for me. There is just no way that we could have gotten all of those producers in that amount of time with all of the other workload also in the office.
Page 39 PREV PAGE TOP OF DOC
Mr. EVERETT. Thank you. Thank you, Mr. Secretary.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Boswell.
Mr. BOSWELL. I agree with the chairman. I agree with Mr. Stenholm. It is critical that we have a hearing. There are folks out there that are towing the line; people like Ms. Haynes and the people she works with.
I have a full appreciation of what was going on there. I think the next disaster bill, or the effort, we have got to bring the folks in and spend a long time with them that are out there; the hands-on working with.
You, Ms. Haynes, and people like you, and also the producers themselves. We have got to have that kind of input to make us hold the line and do what we can. So, I just cannot sit here and not, Mr. Chairman, appreciate the fact that when you stop and look at the rural production that has gone on in the last 3 years, that you have just reminded us of—what did we think was going to happen? I support the Freedom to Farm Act. I was not here.
I have said publicly that I would have supported that. I meant that. What did we think was going to happen. We said, the market farmer, go produce. What did we think was going to happen? Going to go produce. That is what I would do; what I have done, and so have many of you here.
Let us pull together and see if we cannot work this thing out and help those producers out there. I do not need to tell you folks, my colleagues who are on this committee, and you in the Department.
Last weekend, when I got home late Saturday night, I felt like I was carrying the world on my shoulders because I was talking to farmers all day long. A lot of them, I had not planned on talking to.
I can tell you that young farmer out there that has got some debt on some land, which is OK to do. We have all done that. Got some debt on some machinery, is out there trying to size the operation to make it economically work and paying cash rent.
Page 40 PREV PAGE TOP OF DOC
They are not going to make it. They are just not going to make it. Do we want to save those people? I think we do? Some people might disagree with me. But I think we need to save them.
When I see people have paid for their land, at that point in their life, they want a little bit of security. They are eating up their equity these last many, many months. All of a sudden, they are going back and putting mortgages back on the land. Something is wrong.
I see the light is on. Mr. Chairman, thank you for letting me air a little bit of my feelings. We have to go from here and do the best we can. I submit that is what I feel as I talk to the rest of you folks on this committee.
That is what I feel as I look Dan Glickman in the eye and his team. That is what they want to do. So, do your best to get it done.
Thank you.
The CHAIRMAN. Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman.
Mr. Secretary, thank you for being here today. Thank you for always being very accessible to members of this committee. I appreciate that. I know it is not easy times at USDA.
Probably we could do things better and I know you try very hard. I appreciate that. I was interested in your comment about 3 years of record productions. Do you have those figures, and I know you do have them, but whether you have them right with you—how much American production went up in those 3 years?
Secretary GLICKMAN. Mr. Schumacher, do you have the information?
Mr. SCHUMACHER. As you know, we had some pretty spectacular soybean crops the last 3 years. It looks fairly promising for this year. Corn has been very, very good. Wheat has been very, very solid as well.
Page 41 PREV PAGE TOP OF DOC
So, I can give you the exact figures, but we have had some pretty good crops here; record crops in soybeans; second largest crop in corn.
Mr. EWING. Thank you Mr. Schumacher, but the point I am getting at is it would be interesting to figure out just how much our production has contributed to the glut.
It was not a lot. You know, that production was going to be out there whether we had the old program or the new program; from Brazil and Argentina. I know our production has been up. I do not believe the glut in the world market comes from increased U.S. production.
Mr. SCHUMACHER. I would say that is true on wheat. We are still the largest soybean producer in the world. We may be a more major factor there and corn is somewhere in between. I think world wheat production, we are not the major factor anymore.
Mr. EWING. I believe, Mr. Secretary that, that is important information as we decide what we are going to do with foreign policy. We cannot control the farm production in Brazil and in other places in the world. We maybe cannot control it or should not here, but the point is where is the problem coming from as far as the glut on the market?
I want to go on to another question dealing with USDA employees out in the Farm Service Agency Offices. Ms. Haynes, thank you for being here. I am a producer and I go in to the local office in a couple of counties in central Illinois.
I always say to those people, you are doing a great job. They are always very pleasant. I know they are hurried. I worry sometimes that we are going to have a workmen's comp claim when the pile of paperwork falls over on one of those employees because there is so much of that.
What is the thought at USDA that we continue to cut employees out there? We are fortunate in central Illinois that we are not really getting the disaster money. So, that is not causing that workload.
Page 42 PREV PAGE TOP OF DOC
They cannot keep up with getting the AMPTA payments out and the LDP payments out. They are weeks behind. I mean, we will have the corn and soybeans up in the fields before they get those payments out.
Secretary GLICKMAN. First of all, let me say this. I was on this committee in 1994 when we passed the Departmental reorganization bill.
There is no question that over the last several years there has been a clear assumption that this Department was going to be down-sized. We are down 28 percent in the county offices and 34 percent in the Washington Offices in the Farm Service Agency in the last 5 years.
Those numbers are somewhat parallel Department-wide, not so much in food safety, let us say, but they are everywhere. There has been a deliberate Congressional and executive branch agreement about the downsizing of the Department of Agriculture.
Now, the fact of the matter is that our estimates for our work force needs, I think, were overtaken by the present crisis. The President's budget was not prepared before the Department's latest baseline projections were published.
It was not clear how long the crisis would become or how long it would last. The fact of the matter is, we all need to reevaluate numbers of personnel and workload in the FSA Offices, as well as the whole FSA System.
What we have seen is that your projections never work out the way you think you are going to work out. There are all of these factors outside your control. I think we also were lead to believe that the 1996 farm bill would dramatically reduce workload.
The Government would no longer be involved, for example, in basis and acres determination, and all involved with the reporting system we had before. Then we had something called the LDP. Who had ever heard of this before?
We estimated 20,000 LDPs in 1997, 1.5 million; this last year we are expecting 2 million this year. Can you imagine that, 2 million visits to the county offices. So, it is obvious we are way under-staffed right now.
Page 43 PREV PAGE TOP OF DOC
Mr. EWING. Mr. Secretary, the light is on. I have to quit. When we cut 652 out of the offices that are dealing with the farmers, and only 100 here in Washington, I guess I do not think we are setting our priorities right in the reduction.
The personnel in the offices in my district, many of them are temporary. They will be gone at the end of this month. They are weeks behind now. I think it takes some real new management to get those offices up and going.
Secretary GLICKMAN. Let me just say again, that the reduction in Washington has been 34 percent. So, the percentage reduction has been higher. The temporaries can provide some necessary help in terms of some of the clerical help.
Some of the State Directors are reallocating their people between various parts of the State. We have asked Rural Development and NRCS to be involved in this as well. Look, there is no question. We have a workload problem there.
The CHAIRMAN. Mr. Lucas of Oklahoma.
Mr. LUCAS. Thank you, Mr. Chairman.
I would like to turn my focus on the Livestock Assistance Program. First off, for the Secretary, an observation and then a question.
The Livestock Assistance Program legislation which was signed into law on the 21st of October with a signup which began on the 23rd of November 1998. The signup now has been extended twice; most recently for another 45 days.
I must congratulate you, Mr. Secretary, and your colleagues here in DC in that both my producers and my FSA employees back home in Oklahoma tell me that this program is friendlier and simpler than any livestock program in recent memories.
While I know my colleagues I think on this committee would agree with me that it is important to make sure that everyone has an opportunity to signup to participate in the program as qualified, I find it personally very frustrating that this last 48-day signup, I have been lead to believe really had nothing to do with producers signing up for the program.
Page 44 PREV PAGE TOP OF DOC
So, I guess my question, Mr. Secretary, is should producers have to wait an extra 2 months for the payment? It would appear that management could not get the livestock regulations approved, either internally at USDA here or perhaps externally within the rest of the administration. Should they have to wait?
Secretary GLICKMAN. Let me ask Mr. Shackelford to respond to your question.
Mr. SHACKELFORD. That is actually not correct. You are correct in saying that we could not have closed the signup until we got the regulation published. However, with the volume of work we have had, we still had requests coming in from other areas.
Even if we had the regulation published, we could not have ended signup because we would not have served all producers. We have the previous example as something we could compare it to.
Mr. LUCAS. The initial set of rules that we began the signup with on the 23rd of November were clean, simple, and straightforward.
If it was a matter of getting it approved internally within your legal department here or perhaps within the administration, why could we not have done that and how do I explain to my constituents back home who were lead to believe that money would be up promptly.
It was not because of the legal ease, or the administrative policy, or politics within the administration.
Mr. SHACKELFORD. That was not the case.
We developed the program. I appreciate your compliments because I think it was a very good program. We worked with a lot of people in the field. If you can imagine if you are standing in a line, in a grocery check-out line, or somewhere else.
You have been standing there patiently waiting, as other producers have, and suddenly they put up a sign and says we are closed, and everybody who has been standing in line gets nothing.
Page 45 PREV PAGE TOP OF DOC
Mr. LUCAS. That would be if we ended it before——
Mr. SHACKELFORD. This, once again, was a program that had a fixed amount of money. So, until the last producer signs up, we could not pay any producer. If we had a fixed program that gave us a cost share rate and we could spend, then we pay the first person as soon as we got that dollar.
Mr. LUCAS. Mr. Secretary, but three signups? Now I understand that the rules have changed somewhat in the last 2 weeks.
I guess my question to you in this regard is, when you consider the number of extended signups and changing the terms the percent the producers were told they would be eligible for from as much as 100 percent down to 50 percent, does it bother you, Mr. Secretary, that the credibility of the Department is undermined out there by the folks who depend on your services and our efforts when we accept, when you accept, applications over an extended period for a program and then the rules change as they go along? It drives those folks out on the ranches crazy.
Secretary GLICKMAN. I can understand that. Mr. Lucas, I cannot agree with the premise of your question. The rules have not changed.
Mr. SHACKELFORD. The rules have not changed at all. We had a fixed amount of money. Rather than create a set, we knew we could spend $200 million. We tried to do a simple program to ensure we spent the entire $200 million.
Now, we could have set a factor in the past in livestock programs. We have paid between 25 and 50 percent, depending upon the program over the years.
They change each year. Rather than set a factor this time, for example, and say the payment rates are going to be 50 percent, then come in and have to create another pro rate of the 50 percent, so we have two different factors, we said let us take the applications.
Let us find out how far the money will go. We will set that payment rate based on the amount of money.
Page 46 PREV PAGE TOP OF DOC
Mr. LUCAS. Let us cut to the chase then. So, you created a program based on an amount of money which was substantially more than you asked for that we insisted that you take. You knew apparently that the program could not be financed.
Why did you not just come to us, Mr. Secretary, and ask for more money? Simply say that the $200 million was not enough. Granted it was more than you asked for, but it was not enough, and ask us to come up with more resources.
Secretary GLICKMAN. It is enough to pay at the basic level that we have paid in years past; the $200 million. That is what I have been told. It will not pay 100 percent. It will pay between 25 and 50 percent.
It may be at the low end of that. I will have to tell you. I want to go back to the situation. That is the demand for the program has been exceptional.
We did not want to close the door on some of these people. The applications kept coming in. We could have closed the door. You are right.
Mr. LUCAS. So, you are saying, Mr. Secretary, that there was no internal problems in getting the rules and regs approved by the legal staff in your Department? There were no hamstrings from OMB or anyone else in the administration? It was simply a decision by your folks to extend the program?
Secretary GLICKMAN. No, sir. I will tell you that the rule was not the smoothest thing we have ever done. However, regardless of some of the difficulties we had getting the rule out, and the rule is out or will be published.
The signup will stop on the 25th. We will make payments on the week of April 12. However, had we even not had this difficulty with the rule, we still could not have had the producer signed up. We still would have had to continue to pay those producers.
Mr. EWING. If the Chair will indulge me for 20 seconds. I can only say that when we paid those funds out, the folks who stated signed up on the 23rd of November who believed that 100 percent of their losses were to be eligible, who believed that potentially they could receive up to $50,000.
Page 47 PREV PAGE TOP OF DOC
When they do determination and see what has really happened, there will be fire storms out there. I appreciate the Secretary's comments and his assistant's.
Thank you Mr. Chairman. I yield back the balance of my time.
The CHAIRMAN. Mr. Secretary, did you finish your thought?
Secretary GLICKMAN. No; except I want to try to—Mr. Shackelford, were there every any representations made about 100 payment or anything like that?
Mr. SHACKELFORD. We never lead people to believe we would pay 100 percent. This is total loss on no disaster programs at least since 1984 have we ever paid on 100 percent of loss. We have always paid on a smaller amount.
The livestock feed programs, we have always cost shared on between 25 and 50 percent. We have lead no one to believe that there would be anything different than that in this program.
The CHAIRMAN. I appreciate your comments on the record. Time will tell. Mr. Chambliss.
Mr. CHAMBLISS. Thank you, Mr. Chairman.
Mr. Glickman, I was intending to come here and express my frustration to you in the same manner that I have been receiving words of frustration, both from my farmers as well as my FSA folks over this disaster situation.
I kind of agree with what Mr. Stenholm said to start with. It does not do any good to come in and put blame on anybody. What I have heard is both frustration on both ends there.
I have 30 counties in my district, all of which are basically agricultural counties in one form or another. I have visited every single one of those FSA Offices here in the last several months, either me or my staff individually, just to talk to them about the administration of this program.
Page 48 PREV PAGE TOP OF DOC
The level of frustration from folks like Ms. Haynes is just unbelievable. I have talked to you about that. I have written to you about it. You were very generous in responding.
Your 18 years of experience there has taught you well how to run the mine fields. You will answer me honestly and correctly I know. We still have a tremendous level of frustration out there.
I have not seen any instance where I think it is the lack of staffing at the local level that has created the problem that we have right now of getting money in the farmer's hands.
What I am hearing from my folks is, and what has been verified to me is the fact that the job is not getting done in Washington to get the information in the hands at the local level to get the job done.
I have sat here and I have listened to you and to Mr. Shackelford and other folks about what you are doing, and how you are doing it. All of that is fine, but I hope that you have taken 1998 and 1999 as a classic example of how not to administer a disaster program.
That you are going to be looking towards this fall and learn from the lessons that have occurred over the last several months so that we make sure that we do not run into these problems again, number one.
Also, I think it is a good example. I note in your letter to me you talked about using 1988 as an example for subsequent disaster programs, but you could not use 1988 for any number of reasons; because of the complexity of this program. That is fine.
You know, there is a lot of technology that has come about between 1988 and 1999. A good example of the utilization of that technology is what you did with the AMPTA payments. You got the AMPTA payments in the hands of the farmers within 30 days because you had the information. You had the technology. You had the delivery mechanism.
Page 49 PREV PAGE TOP OF DOC
Obviously, we have not geared up your office from a technological standpoint to be able to handle the other complexities of this type program. I do not know that you have ever come to us and asked for anything that we did not give you.
Sure, we complain all of the time about reducing the size of staff and you have done that. From a technological standpoint, we obviously need to help you gear up so that we do not run into this kind of problem again.
I wonder, No. 1, if we really are ready for 1999 if something occurs again which, as Mr. Combest said, we may be looking at that, or is there anything that you know of that we need to provide for you in the way of technology to, not just deliver this money, but be ready for the next disaster that comes along whether it is 1999 or 2000, whatever? We know it is coming.
Secretary GLICKMAN. I think those are all excellent questions. Let me first start by saying, when I was here in this committee in 1994, we passed crop insurance, reorganization. We said we would never have another disaster program again. That was understood by everybody; not again. Crop insurance was going to be the answer.
As we know crop insurance works for some and not for others. I am looking right at Mr. Pomeroy. In 1996, we created a farm bill that made some changes in the programs and reduced the kind of acreage reporting that we would be doing.
In effect, it got the Government out of managing basis and acres The set aside type of requirements to supply management was gone. So, we did not do that work anymore. I think it has had an impact.
Let us look at this disaster bill that Mr. Stenholm talked about. We all accept some responsibilities for these things. This thing grew rapidly last summer; very rapidly. It grew from a $500 million to a $6 billion package in an extremely rapid period of time.
The fact of the matter is that we were basically working on the rules of the disaster part of it for another 6 weeks as Members of Congress came to us and there are other constituency groups.
Page 50 PREV PAGE TOP OF DOC
They said you need to take care of this part of the country. You have got to take care of this part of the country. You have to do a certain portion for this particular problem.
The fact of the matter is that we all could have done a better job; not just this Congress, but the administration as well, in working on the specifics of the natural disaster part of the situation. This is not a way to do business. I agree with you in the future. We are going to do the best we can.
We are going to get the money out. We are going to do—jail. Our IG is going to not come down on us for paying payments to people who do not deserve the payments. We do need, by the way, probably more resources in our common computing environment
The fact of the matter is that Congress has limited the computer purchases, but so has OMB as well. It is not just Congress, OMB, because they want to make sure that what we are purchasing is correct for what we need for a modern period of time.
Let me mention one final thing so you understand this. Beyond all of that stuff, you know the Congress capped the program. Because of the capping of it, we have to pro rate payments.
That is the essence of the time problem. We cannot get the money out until we know the input side of the picture. That is different from all but one recent program where we did not do it the other way.
So, I think if we are going to do a disaster program in the future, we have got to sit down and figure out, if we are not going to cap the payments, that is one thing. If we are going to cap them, then we have to have a procedural way of dealing with the claims in a more fair and expeditious way.
Mr. CHAMBLISS. My time is up. I know we are under time constraints. That is my point, Dan. If you had the technology available to you and you had it plugged in, then you would not have that problem.
Page 51 PREV PAGE TOP OF DOC
I hope you will really concentrate on that. There is obviously some communication problems going on at the top levels because we had some hearings that Mr. Ackerman was kind enough to come down for in February.
The week before those hearings, Mr. Schumacher was up here testifying. We talked about the issuance of the regulations getting down to the local level. I was given the assurance on February 12 by Mr. Schumacher that those reservations had gone down.
That was not the case. That was not Gus' fault. All he was telling me was what somebody told him. Regulations did not get to the FSA Office until March 5. That type of thing is what is causing the problems.
You just are not getting the information out. A part of that may be due to technology. I hope we can help you in that regard.
Secretary GLICKMAN. One thing I would just say in conclusion is you know the ability to invest in computers has been capped by the Congress. Now, there is a cap on CCC funding; a limit on CCC funding in the 1996 farm bill.
Now, I am not telling you that we have the premium on all virtue in terms of how we run and buy our own computers. There is some reason for why Congress did that as well. At the same time, we have got to work together on ways to deal with this computer situation.
Thank you.
The CHAIRMAN. Mr. Stenholm suggested that the Chair reiterate the recognition policy as was outlined on the first day.
The Chair had indicated on that day that the Chair would alternate recognizing members who were here at the sound of the gavel, and then would recognize members as they arrived after that point.
Mr. Chambliss just completed the last of the members who were here at the sound of the gavel. The Chair is ready now to start on those members recognizing as they arrived.
Page 52 PREV PAGE TOP OF DOC
The gentleman from Kansas, Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you.
Mr. Secretary, thank you for being here. Fortunately, in Kansas, with some exceptions, disaster relief has not been the problem. We have the general problem of commodity prices.
So, my questions are perhaps more general than disaster relief. Although I would encourage the Department to do everything possible to make certain that the focus is on staff reductions someplace besides the county offices.
I met with farmers, Mr. Secretary, in my neighborhood on Monday of this week. Every one of them complained about the inability, not their concerns about the staffing, not the employees themselves, but the level of staffing, the paperwork, the time delay, the inability to get things done.
They continued to complain about the configuration of the office and the giving up of 200 square feet of space. It is interesting to me that in times of low commodity prices, farmers still are focused on the inability of the local office to provide quick, speedy, and efficient service.
So, please continue your efforts in trying to maintain as high a level of staffing possible in the county offices. I appreciate what you had to say about shared depreciation this morning. That is an important issue to many farmers.
I think at least what you announced here hit upon the issues that I think were important. It seems to me that you are taking a good approach and crossing the right t's and dotting the i's.
I will be in contact with you in regard to several of my farmers whose shared depreciation agreements have already expired. They are now in the appeal process. How you word your emergency order will determine whether or not they are eligible for the kind of relief that you announced today.
Page 53 PREV PAGE TOP OF DOC
I just have a couple of general questions. I read this week of the administration's interest with trade with Iran. If you have anything to comment, I would appreciate hearing about that.
I wonder what the administration is going to do in regard to its policy towards sanctions. Is there any administration effort, hopefully lead by the Department of Agriculture, to reduce and eliminate sanctions and other trade barriers?
I would also tell you that CRP in the last signup had a number of counties, again, where the difference between what was accepted in one county versus the adjoining county was dramatically different; suggesting perhaps that the rules are being implemented and interpreted differently county-to-county.
Finally, perhaps this is Mr. Schumacher's question because he and I talk about it every time we visit. Is there any chance that the administration is going to recommend the use of a flour EEP?
Secretary GLICKMAN. Let me take a couple and then I will turn to Gus. One is the request for approval of a license for sales of grain to Iran is still pending. The administration is giving the request serious consideration.
It is a broad-based policy decision. We have had input into that decision. As you are well-aware, there are other foreign policy considerations involved in that. I do not have anything more to say about that at this time.
I am obviously keenly aware of this. I would have to say that, at present, we have unilateral sanctions on food to five countries. I keep hearing these numbers; 120 countries; 170 countries; 5 countries: North Korea, Iran, Libya, Sudan, and Cuba.
All of the embargoes, which they are, unfortunately that is the name of them or sanctions, whatever you call them, permit the non-commercial export of foods and medicines for humanitarian purposes.
Page 54 PREV PAGE TOP OF DOC
The only other country under multilateral sanctions were the U.S. sanctions agricultural exports is Iraq. And where sales of food are permitted under the U.N. Oil for Food Program. Saying that, it amounts to about 1 percent of our exports.
It is an important number. Any amount right now is important. So, obviously these are issues we are working on. With the Congressional help, the President pulled back on Pakistan and India.
We intend to look at all of these and the policy is continuing to evolve on the issue of sanctions. I would ask Gus to talk about your other point about flour EEP and on the CRP issue, this question about county-by-county difference of interpretation.
Mr. SHACKELFORD. I am not aware of a problem. In fact, this is the first comment positive, negative, or anything. On the 18th signup we have had, we will work with your staff and try to find out. We are not aware of a problem, but we will look and see why there might be differences. There are often legitimate reasons that they are.
Mr. MORAN. It seems to be related to water quality initiatives.
Secretary GLICKMAN. County-by-county apparently treated that differently or did not understand the importance of the county's participation, which I do not understand because that issue has been around at least for year.
Mr. SCHUMACHER. We did actually correct some problems we had had previously on the water quality areas and required a real basis for the designation. The State committee had to designate up to one-third of the area to qualify for those points.
That may have been the reason and there may be a legitimate basis for it.
Mr. SHACKELFORD. Mr. Moran, thank you for commenting on the EEP flour. As you know, we have been pushing that hard within the administration. We will continue to be doing that.
Page 55 PREV PAGE TOP OF DOC
What we have not done is to work on the President's initiative last summer where were ramping up, say, the food aid donations for flower; particularly in some of those areas like Yemen. We signed an agreement for 1 million tons since Yemen is one of the biggest flour importers.
We are working that 416 authority very, very hard. We will continue to press forward and see if we, at some point, get done on the EEP flour as well.
Mr. MORAN. Thank you Mr. Secretary. I assume, although my time is expired, that we will hear more about——
The CHAIRMAN. The gentleman is correct.
Mr. MORAN. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Pomeroy.
Mr. POMEROY. Thank you, Mr. Chairman.
I thank the chairman. My State FSA described some of the difficulties in getting the program administered is essentially as follows.
In previous ad hoc programs, as soon as an indemnity amount was calculated. USDA could issue a check. Now, every last application needs to approved, loaded into a computer so it can then be transferred to central computers for a complicated factoring system, weighing competing payment methods to determine final payment factors.
Only then can USDA field offices begin to make payments accordingly. Is that a reasonable description of what you are dealing with in light of the capped amount available for this disaster program?
Secretary GLICKMAN. Yes. I would say that is fairly reasonable. We also want to determine which of the 2 programs, the multiyear or the single-year the producer is better served by as well.
We are all frustrated by the delays. I sense that you are. We are very frustrated by the delays in the program. On the other hand, I want to state for the record that I have found you staff to be quite receptive to a number of concerns we have had from the Northern Plains in terms of how this program is put together. We have been able to work the problems through, for the most part, as we have encountered them.
Page 56 PREV PAGE TOP OF DOC
Mr. POMEROY. So, a part of this hearing is about venting frustration. I must say, I think, a part of it is about trying to assign blame for problems on the farm. I have some comments relative to that dimension of this hearing.
This hearing occurs in the immediate aftermath of House budget action that cut discretionary spending for agriculture; 10 percent. It took $2 billion out of the funding of agriculture at a time when everyone knows agriculture is in the tank across the country.
Then we come in this morning and want to beat up the administration. By the way, we are talking about a disaster bill. It ended up being $1.7 billion more in funding because the administration under your leadership, Mr. Secretary, vetoed the agriculture appropriations bill last fall.
They would not sign it until the disaster amount got put up at an adequate level. We have this hearing. In the setting of a stalled supplemental request, which would make available right now, $1.1 billion in critically needed loan funding.
Hung up with an additional $43 million for some of the staff to get these programs out the door. This reminds me of the Grand Forks flood. Do you remember that one? We had the flood relief. We needed the flood relief desperately. They wanted to play games.
The majority of that time wanted to play games with trying to hook on something about the 2000 census; something that was not first in the minds of the people in Grand Forks with wrecked homes and destroyed net worth in light of that flood.
We are doing the same thing to our farmers in this disaster; playing games with assistance that is so desperately needed.
Finally, I think really the No. 1 disaster facing agriculture is price. There is not a price for our commodities. When the chairman and others talk about the need for a disaster bill this fall, we are talking about it in March.
We do not know what kind of growing conditions are going to be. They must mean they need a disaster payment this fall because we know there will not be the price for our commodities.
Page 57 PREV PAGE TOP OF DOC
We used to have a farm program from 1948 right through 1995 that provided price support for farmers when commodity prices collapsed. This majority, the majority back in the 104th Congress, which coincidentally is the same partisan majority that is running this Congress, eliminated price protection for farmers. I think the great bulk of damage to farm country has flowed from that critical era no longer providing price protection for farmers, leaving farmers utterly exposed to radically swinging market prices on the world market.
We will try and cobble things together. We will try and cobble relief together and do it in an ad hoc way. It simply does not have the capacity to provide the kind of assistance to farmers and farmers' needs when prices collapse, that some kind of safety net undergirding price previously provided.
I hope we will be able to move past these kinds of parting line differences we have had on foreign policy and rebuild a safety net for Agriculture, starting with crop insurance, but moving into some price protection as well.
I must say, when we are reducing the discretionary account for agriculture by 10 percent in this budget, and we are not passing the supplemental that our farmers need, and we are having this hearing to beat up on the Department of Agriculture for not getting this disaster payment out of the door when Congressional complicity is all over the place in the complexity of this thing.
It does not look well for a very good start, in a bipartisan way to fix the farm program.
Mr. CHAIRMAN. Mr. LaHood
Mr. LAHOOD. Thank you Secretary Glickman for being here. Let me just comment, Earl, on a couple of things you said.
No. 1, the President had some great lines about crop insurance in the State of the Union, and then he did not put one dollar in his budget for it.
Page 58 PREV PAGE TOP OF DOC
There is plenty of blame to go around, Earl. I know it is easy for you to try and make it look like all of us were responsible for Freedom to Farm. We eliminated the price supports.
But let us face it. The point is that we ought to be working together to try and solve the problem, rather than playing the blame game here. The point is that one of the reasons that we do not have very good markets right now is the President goes to Central America and goes to South America and talks a great game about fast track.
Then he will not come back here and lift one finger to help us get the votes that we need to pass fast track last year. So, we end up with about 140 votes. He loves to talk about fast track when he goes to Asia, when he goes to Central America, when he goes to South America.
If we had the markets that fast track would give us in Central America, Chile, and Brazil, that would help commodity farmers in central Illinois.
The reason we have the lowest prices in over 20 years is because we do not have the markets. So, there is plenty of blame to go around. I would love for the President to get engaged in fast track. I really would.
I think if he did, it would be like NAFTA. We would pass it because he would get a lot of the people on your side to vote for it. The point is if you want to politicize things, so be it.
I have five questions here that there is no way that I can get answered, so I am going to submit them. If you could give us a response back at some point, I would appreciate it, Dan.
Let me just say this. Over the President's Day recess, I traveled around my district; particularly talking to a lot of farmers. One of the things that we are really facing in central Illinois and other parts of Illinois and other parts of the country is small hog producers are about ready to go out of business.
Page 59 PREV PAGE TOP OF DOC
I know the administration came up with a program. You came up with $50 million. On the night of the State of the Union, I said to you we appreciate that. That really is not getting down to the hog producers in central Illinois that need it.
I just met with a family that has produced hogs for 25 years. This guy said he just met with his banker and they are about ready to close up shop after 25 years of producing hogs. I wonder if there are some things you have been thinking about with respect to small hog producers which your program simply does not help in central Illinois?
The last quarter of last year, hogs were at 9 cents a pound. Today, they are up to about 26 or 27 cents. It cost about 40 cents a pound to really make a difference. So, that is one of the things that I have really tried to focus on.
A lot of these hog producers are going down the tubes. I just wonder if you had been thinking about that at all?
Secretary GLICKMAN. Yes, a lot. I would like for Gus to respond a little bit on the export market side of the picture. You are right. We had a fund within what is called section 32 authority.
It was established during the Depression. It gave me the authority to send out direct payments to producers basically in an unlimited capacity. It is the same fund that I use to buy for the School Lunch Program or to buy for our Commodity Program.
So, the fund generally has a limit of about $100 million, but you have to replenish it all of the time. So, I took $50 million out. That was that I could do frankly without getting Congressional authority on them.
Those payments go out this week are really to almost, well, I do not want to call it the smallest hog producers, but I think you could have no more than marketing 1,000 hogs during the previous 6 months period. So, a lot of your producers are not eligible for that because of the size.
Page 60 PREV PAGE TOP OF DOC
The Pork Producers have called for a similar program about 10 times the size of that; $500 million which Congress is going to have to decide whether it can come up with those kinds of monies.
Let me just mention three things quickly. One is we are the pseudo-rabies, the purchases for our programs; those are accelerated. The export side I would like for Gus to talk about as well.
Underlying all of this has to do with a changing relationship between producer and packer. In changing a structural relationship in the industry. I think it has created a situation where there is much more price volatility than there used to be.
The opening by which the hogs that are out there go through is much smaller than it used to be because there is much lower packing capacity. We are looking at the Packers and Stockyards.
The Justice Department is looking at whether there are anti-trust violations here. Ultimately, the problem with hogs is a structural problem that deals with ownership, size, and that kind of thing. We will continue to do everything we can on the other side of the picture.
Gus, do you have any thought on that?
Mr. SCHUMACHER. We seem to be actually doing rather well on the volume side. We are certainly doing well in Taiwan. Japan is up and Mexico continues to be your solid market for our hogs.
So, the Meat Export Federation and others have done a superb job of moving the volumes overseas. We are gaining market share. We will certainly have competitors in Denmark. They were in to see me yesterday.
We have been complaining about this. We have been very, very aggressive on the export side. Volumes are up in major markets.
Page 61 PREV PAGE TOP OF DOC
Mr. LAHOOD. Demand is up. That is the irony. Is this the one area where demand up worldwide and domestically. People are eating more pore. Buying more pork. That is the irony of this massive volatility.
Secretary GLICKMAN. I think our focus has to be working together.
Mr. LAHOOD. Do you think the President will ever get engaged in fast track?
Secretary GLICKMAN. I think he has been and I think we are.
Mr. LAHOOD. Mr. Secretary, will the President ever get engaged to the extent that he will help us line up the votes to pass fast track this year.
Secretary GLICKMAN. Let me say this, Mr. LaHood, I will pass your message along.
Mr. LAHOOD. Thank you. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Smith.
Mr. SMITH. Mr. Chairman, thank you.
I would hope that Mr. Minge's suggestion that we vote against the budget would be debated in term so fits benefit for agriculture. No. 1, in the discretionary spending in 350, the President requested in his budget a reduction in that discretionary spending.
Likewise coming out of the Budget Committee is a reduction. The President's suggestion in discretionary spending for the year 2000 was $4.140 billion. That is a reduction from this year approximately $200 million.
The difference in this budget that we put out, No. 1, we are going to live under the caps that we passed in 1997. We are going to set aside all of the Social Security surplus in what some people like to call a lock box. It is going to be used to pay down the public debt or used for seniors.
Page 62 PREV PAGE TOP OF DOC
What we did put in and the President did not put in was $6 billion that can be used over the next 5 years or the insurance program can, or we are going to expand that. I think we will probably make modifications in that so that the language will be income support programs for farmers.
Maybe with that mandatory additional spending, we can develop some flexibility in there that would help compensate for the administrative costs. I do not know how we might do that. Maybe Mr. Ackerman, we could put a little more load on the ins companies with that mandatory spending; take some relief off of county officers where we could fill the gap with our traditional disaster program and other programs that I am overwhelmed with right now.
I just would like to make the point that agriculture did very well by getting this Budget Committee to add $6 billion to programs in the mandatory part of Function 350. That can be used for agriculture over the next 5 years.
So, I suggest that we have won a great deal of that debate, even though the argument, and maybe a part of the fault—maybe we should have argued longer. But the President did have a reduction in the discretionary part of 350 and likewise out of the Budget Committee. We did not Win that argument, but we did win the $6 billion argument.
Secretary GLICKMAN. One thing Mr. Smith, I think it is worthwhile noting is that this fiscal year we will make $15.9 billion in direct payments to farmers and ranchers, which is the highest in history; $15.9 billion in one fiscal year; direct payments to farmers. It is the highest in history.
The CCC expenditures are the second highest in history. There is an accounting reason for that taking place. I guess my point is that notwithstanding the discretionary issues which I think are important policy debates, the fact of the matter is the amount of dollars in this crop here that is actually going out as the second highest since 1987–88, which is basically over two fiscal year periods of time.
Page 63 PREV PAGE TOP OF DOC
We are near record dollar times in terms of monies that are going out. I think that is something we should both—I do not know if you take pride in spending all of this money. The fact is we, together have worked to try to make sure that we do our best, given the authorities that we have.
Mr. SMITH. Mr. Secretary and Under Secretary Schumacher, I suggested that we try to broaden this language on mandatory spending. So, it is not unnecessarily directed just towards crop insurance.
Do you suggest that there are other alternatives? Would it be your advice that we make that language more flexible so that it possibly could be used for other areas of mandatory spending, other than crop insurance as we explore what is going to best help farmers during these tough times?
Secretary GLICKMAN. I think so. I would say yes. I will tell you why; because I think the one defect of the 1996 farm bill, and it is not all bad. I want to make it clear that there are parts of that bill that I think people like.
The one defect is that it has lost its counter-cyclical nature. One of the things I would like to have working with you is to try to figure out how to increase payments when times are bad and lower payments when times are good.
I do not know how you do it.
Mr. SMITH. We are still working on that language. Any suggestions—Mr. Minge, Mr. Chambliss, Mr. Nussle from Iowa are working on that language. So, any suggestions you have, we would appreciate it.
Thank you, Mr. Chairman.
Mr. CHAIRMAN. Mr. Boehner.
Mr. BOEHNER. Thank you, Mr. Chairman.
Mr. Secretary, welcome.
Page 64 PREV PAGE TOP OF DOC
Secretary GLICKMAN. Thank you.
Mr. BOEHNER. It is nice to see you back in the committee. Before I turn to you, some of my colleagues on the other side I want to remind them that the election is next year and not this year. I think the gentleman from Illinois, Mr. LaHood urged all of us to put some of our differences aside.
Make sure that we are all here working on behalf of American farmers. When we go back to what happened last fall, the gentleman from Texas, as he pointed out earlier, there were no officials meetings of the committee.
I do think it is pretty clear, as I attempt to correct the record, that the gentleman from Texas along with the gentleman from Oregon, this time, the chairman, Mr. Combest, and the Department were all involved in terms of putting together the disaster program last fall.
I will just note that we do not need to point fingers in a lot of directions. The price in the market dropped rather precipitously. I think everybody did their best to come up with a plan that was workable.
The budget debate, we can have next week We do not need to have it this week. Mr. Secretary, moving to the problems that we have had in delivering this disaster aid, in last October Congress added $40 million to keep USDA staff on the job in the FSA offices.
On February 1, the President submitted his budget. In the budget, the President called to cut 752 staff positions; 652 from the local FSA offices; and 100 out of the Washington side.
Then 3 weeks later on February 26, the USDA comes up to us and asked for $42.7 million to hire temporary staff from local offices that would expire on September 30 before the harvest.
Now, I am a little confused as to why there is not some consistency to what is happening in terms of the need in the countryside.
Page 65 PREV PAGE TOP OF DOC
Secretary GLICKMAN. First of all, let me just stay that that extra $42 million, I am going to ask Mr. Schumacher to respond specifically on this. The extra $42 million was to basically provide the resources to help get these disaster payments out.
They were temporary employees. We said we were going to get them out in June. So, it really is to get us through the next 3 or 4 months.
It does not deal with the more structural questions you talked about. That is the primary reason for that. I will ask Mr. Schumacher to respond to the issue.
Mr. SCHUMACHER. I think, Mr. Boehner, as you know the trips to Ohio, and of course we were out there last year with some of your farmers. I know Tim Galvin was out recently. We keep very close in touch with Steve Morrow, our distinguished State Executive Director.
Mr. BOEHNER. And things are not good on the farm.
Secretary GLICKMAN. These estimates were done, as the Secretary said earlier, before our baseline was done. It had been overtaken by events. The volatility you have certainly seen in dairy; $6 per 100 weight in a very short period of time.
Mr. LaHood, on the pork issue, a plunge in prices. These volatilities have overtaken our estimates which were done some months ago.
So, I think we have to work together as the Secretary said, and we will get through this. Those earlier estimates have been swiftly overtaken by events in the last 3 months.
Mr. BOEHNER. My point is that we added the extra $40 million last October at your request. Then we get some 3 or 4 months later and the President's budget calls for reductions of 752 people. Then 3 weeks later you want emergency money to hire temporary people.
Secretary GLICKMAN. Look, I am not telling you that I do not understand what you are asking me here, all right. The $40 million back last year was of course to prevent us from actually terminating staff, which we did not want to do.
Page 66 PREV PAGE TOP OF DOC
Let us talk about this generically. We basically, actually 4 years ago, started the program to dramatically down-size the Department of Agriculture; and particularly our farm program delivery services. Let us be honest about it.
You and I, together, did that. The 1996 farm bill basically said we are going to provide more reason to downsize further because we are going to get away from the micromanagement of daily agriculture.
So, we based our program decisions on that as well. The markets have not cooperated. It has placed an enormous amount of work on us. That work has come up in the last 8, 9, 10 months.
So, maybe we were not as far ahead of the game as we should have been on staffing requests. The fact of the matter is that we have to deal with the here and now. The here and now is that we have ourselves in.
Mr. BOEHNER. Beyond the problems we have in the disaster, I think what all of us recognize is what we need most is we need better appraisers. When we looked at the President's budget, the administration called for cuts in Foreign Agricultural Programs by $1.5 billion from the current levels.
It is $772 million less for the Food for Peace Program; $56 million less for the EEP; $15 million less for the DEIP; and $616 million less for foreign food donations.
How are we going to be able to work together if in fact the tools that are available to you are not being used to the extent that many of us thing they could be used. In addition to that, the administration I calling for cuts in the very programs that we need that will help lose the price.
Secretary GLICKMAN. First of all, let us remember that we used our GSM Credit Program 40 percent more last year than the year before. I have the authority to use what I need. That is considered a mandatory account and I will do that.
Page 67 PREV PAGE TOP OF DOC
Those amounts will continue to be used aggressively. We had 10 million tons of food aid this year, compared to 3 million tons the year before. A part of the Public Law 480 budget request reflected the ups and then the fact that we did not think we would need quite the amount of Public Law 480 donations.
We will reevaluate that in the event that there are additional food aid assistance needs. Mr. Schumacher, do you have any other comments on this?
Mr. SCHUMACHER. Again, as I mentioned to Mr. Moran, we are finding that other authorities that we have been aggressive in, the Food Aid, the Wheat Donation Program, the work we have done in Russia. Those have been ramped up, as I said earlier, to very substantial levels. We are finding the surplus disposal authority and then moving that overseas has given a 3 times increase in targeted food moving overseas, especially wheat.
Mr. BOEHNER. All I can add is that in the President's budget, the money will not be there to do it.
The CHAIRMAN. The gentleman's time has expired.
Mr. Hayes.
Mr. HAYES. Thank you, Mr. Chairman.
This has been very instructive. Mr. Secretary and other members of your staff, I have heard some interesting things this morning. If you all have been beat up on, you look pretty good.
You have taken it in good humor and enthusiasm. As I have traveled through my district, and you all have been very cooperative in giving us personnel to meet with farmers. I have not heard any cry from my farmers for a return to price support.
None of them have been talking about the State of the Union message either. They are concerned about the state of agriculture. There have been several allusions to the FSA reduction in employees.
Page 68 PREV PAGE TOP OF DOC
If you could help me, Mr. Secretary or anyone, look forward as to your own opinion based on present and past experience. What position are you going to take in terms of do we need to turn around and go the other way with the FSA employees? Are we going to ask the administration to go in another direction?
Secretary GLICKMAN. I want to tell you that from a personal perspective, I have been talking a lot with OMB officials about this issue. I intend to do more of that. I think if the workload continues at current levels, we cannot continue to go down in numbers. I would have to tell you that one of the situations we have is that we still have an awful lot of county offices out there.
Some of those offices have one manager and one employee; not a very efficient way to operate, especially when you are paying rent on a building, utilities, insurance, and everything else that you would ordinarily do.
We do not need fewer employees. We may need to reallocate some of those employees to places where they can be used much more efficiently. We would not have that fixed building cost associated with all of that.
I am not going to do any of that without coming back here to you. The fact of the matter is that we have to look at how we deliver our services as well. There has been some significant down-size that has been taken on.
At the current level I would not think if we have these kinds of workload problems, then it would be hard for us to go down anymore. That is clear.
Mr. HAYES. Speculate for me, if you will. I have heard some history which I have not been a part of. You have been on both side of the microphone. The chairman has been on both sides of the counter.
Given the fact that these cycles seem to repeat themselves, our emphasis on crop insurance this time, are we creating problems that we have created before? What is your advice to us as a committee in terms of where we should be looking.
Page 69 PREV PAGE TOP OF DOC
Secretary GLICKMAN. I think we can improve the Crop Insurance Program significantly and make it more attractive for more people in more parts of the country. I think working with Chairman Combest, Mr. Stenholm, and Mr. Ackerman believe that we can come up with, I think, some substantive changes that will make crop insurance a much more acceptable all risk program.
I do not believe it will be the only part, domestic part of the safety new. I think there will always be some people who will not fit within that insurance niche perfectly. So, that is why we have to look at other domestic programs as well. I do think crop insurance can do a lot better job than it has done in the past.
Mr. HAYES. I thought that is what I heard you saying. In followup on that, a lot our farmers are saying that that is something. If we can improve that where the price comes up and the price comes down, hopefully that will take some of the pressure off of the disaster area.
I see you moving in that direction. I appreciate that. Mr. Shackelford, I was listening to what you are talking about in terms of getting these payments out for the disasters.
In 1998, you all did apparently a spectacular job on the livestock/hog situation. It just seems to me, and maybe this is to simple a solution, but when you have a situation where you have to keep the date open for people to apply, is it not possible to have different stages for the date?
In other words, a third of your money is applied up to a certain date, and then stage it going forward so that everybody does not have to wait because the cycle keeps progressing. Is that possible?
Mr. SHACKELFORD. The problem with a fixed amount of money is everyone's losses are different. So, if people with minor losses came first, they might get paid a much higher rate per pound than the next group.
Page 70 PREV PAGE TOP OF DOC
They have got real severe losses and they get a lower rate per pound, it would be very difficult. In the past, we have had programs that we would pay on 65 percent of the price for losses greater then 35 percent.
In that case, we can producer right away. Where we have that fixed part, if we want to make sure everybody gets the same rate, at least on their losses, then we have to have everybody's losses.
Mr. HAYES. I have asked this same question. I have aid why we cannot just pay a certain amount in advance maybe now and pay the rest later or something like that.
Mr. SCHUMACHER. We have done some advance payments in the past, but that greatly complicates all of this calculation. In this program, where we have not one pot but two pots, and producers we are going to make the decision for them rather than make them say I want multiyear or I want single-year.
We are going to figure out what works best for them. As those payments are pro rated, we are going to have to a process where that switch is back and forth. As one producer moves out, he gets more assistance from the other program. That is going to then change the pro rate for everybody else.
You can do it forever. We are not going to do that, but we are going to do some basic things to try to ensue producers get the payment.
Mr. HAYES. Bring back the K.I.S.S. method.
Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Baldacci.
Mr. BALDACCI. Good morning, Mr. Chairman.
Thank you for holding these hearings. I think they are helpful. They are informative. They give us an opportunity to share with the Secretary and his staff some of the concerns that farmers have about the way some of these programs are or are not working.
Page 71 PREV PAGE TOP OF DOC
I wish my friend, Mr. LaHood, were here, because the way these hearings have taken place, I would think that courtesy is no longer a retreat, but it has become a surrender. I think it sort of reinforces the principle about those that go to church on Sunday, but sin the rest of the week.
I think that if we are going to really talk about bipartisanship, and going to have these kinds of opportunities, then I think we have got to set a different stage than the one we have talked about.
Mr. Secretary, I am going to talk about 85 farmers in Aroostook County in northern Maine, which is up by the Canadian border. The 85 farmers I am talking about were not informed by the local about the change that had taken place.
We have gone through your Office of General Counsel and they have tried to say we pushed the envelope as far as we could push it. It has really left these 85 farmers that are involved with barley and oats really out in a lurch.
As you know, and Gus, has known from his visits there. We do appreciate your outreach, involvement, and assistance there. These farmers are really out in a lurch. We would really appreciate the opportunity for you to maybe reconsider that General Counsel's decision to review these 85 farmers because of the change in that program.
Secretary GLICKMAN. This is on LDPs I presume.
Mr. BALDACCI. Yes.
Secretary GLICKMAN. We will take a look at it because there are a few other States where we have somewhat similar problems. I can at least say it got an extensive review before that decision was made. It was not one that was made lightly.
Mr. BALDACCI. Mr. Secretary, just sitting here listening coming in feeling that the Department could have done more in getting out the payments and the programs.
Page 72 PREV PAGE TOP OF DOC
But listening to your responses and the officials that are with you, I have a renewed sense of confidence in the leadership at the U.S. Department of Agriculture. I recognize that in this environment where everybody is pointing fingers at everybody else, I would hate to see you taking risks and taking gambles because I think unfortunately in this environment, we are going to spend more time trying to figure out who did what, when, and to whom? We are never going to get that needle in the haystack, instead of trying to focus on where do we go from here.
I was here during Freedom to Farm. I watched that thing go through here. I understand all of the principles that went with it. They are great principles to understand. We always understood at that point that after that, there was no safety net.
There was no disaster program. They were out on their own. They were going to get fixed payments. Now, all of a sudden we recognize that maybe that is not we want and the price fell through the floor.
Now, we are trying to look at crop insurance. So, it is an unsure science. I think that the best that we can do is try to pull together. This committee and this industry has been overlooked and under looked for too many years.
It is the strength of our country because this is made up of small family farmers and small business that are glued to communities. I am here to try to make sure, along with you and your staff, and others to make sure that we promote agriculture more.
We get involved in more trade. We get involved in more value added and other people. I think the secret of success and continued success in our country is here in agriculture. So, I would yield back the balance of my time. I would like to again say thank you for holding these hearings.
The CHAIRMAN. Thank you very much. Mr. Canady
Mr. CANADY. Thank you, Mr. Chairman.
Page 73 PREV PAGE TOP OF DOC
I also want to thank you for holding this hearing and giving us this opportunity. Mr. Secretary, thank you for being here. I have a couple of points that I want to raise.
I want to thank you and Mr. Ackerman for working with us on crop insurance problems we had in Florida. We have had some bumps along the way. I appreciate the accessibility of Mr. Ackerman and the people at the Department in trying to help us work through this process.
There will probably be other problems that we confront. We will look forward to working with you to resolve issues that arise for the industry in Florida. Second, I want to thank you, Mr. Secretary, and thank the administration for the decision to allocate $25 million for emergency citrus canker eradication in Florida.
That is absolutely a critical issue for the Florida citrus industry. I appreciate the Department's understanding of just how significant a problem this is for us. If we do not get canker under control, in control for the fresh fruit industry in Florida, it promises to be absolute devastation.
We export a large portion of that crop. Those export markets will be gone, if we do not get this problem under control. It is something that has to be a top level priority and I appreciate that. I have one question. Do you expect that the funds will actually be released; the $25 million from the Commodity Credit Corporation?
Secretary GLICKMAN. I think about 80 percent of that actually goes to the State of Florida. I think about $2.5 million goes to Florida and the rest stays with APHIS. I signed the emergency order. So, it should be very soon. I think we still have some details on an agreement with the State, but is should be soon.
Mr. CANADY. Very good. I appreciate that. Just to emphasize that time is of the essence. This is a problem that is spreading. It has really moved faster than we anticipated. We need the money just as soon as we can possibly get it.
Page 74 PREV PAGE TOP OF DOC
I also want to point out that these funds are really just a down payment on addressing this issue. We need a multiyear program to complete the task of eradicating canker in Florida.
I know that all of the members of the Florida delegation are committed to working with the Department and the administration in trying to come up with the funds to accomplish that.
Again, as you know the Federal Government is just a partner in an effort where the state has made significant contributions and plans to continue making significant contributions. This is a problem that has a very important Federal element. This came from outside the United States. It was a failure of the Federal Government that resulted in this problem.
That points me toward another point that I would like to make. That is that we have to do a better job in our interdiction efforts. I want you to know that I am committed to doing everything I can to assist the Department in the work that has to be done to keep invasive pests, not just canker, but all invasive pests and diseases out of the United States.
I think we have to redouble our efforts in that regard. Canker, for instance, I am convinced that we will spend the money that is necessary that is necessary to eradicate a citrus canker.
All of that investment will be naught if we allow citrus canker to be reintroduced. So, we have got to focus resources on the interdiction effort. I also will point out that I believe that we have got to pay attention to the research needs with respect to invasive pests and try to get a little ahead of the curve in terms of the research that will help us combat invasive pests.
This is a problem that affects, not just the citrus industry in Florida, but all aspects of agriculture in Florida and in many other places in the country.
Page 75 PREV PAGE TOP OF DOC
So, I want to primarily thank you and pledge my support. I believe I can speak for, if not all, than most of the members of the Florida delegation in saying we want to work with you to solve this problem over the longterm.
Thank you very much.
The CHAIRMAN. Thank you. Mrs. Clayton
Mrs. CLAYTON. Thank you, Mr. Chairman.
Thank you for having the hearing. Thank you Mr. Secretary and those of you who have come from the Department. I gather this hearing has a lofty purpose. Some of us cannot resist the opportunity it gives us to say I told you so, or your President did this or that.
I am also struck about when things become political. I am sorry my colleague and my friend, Mr. LaHood is not here. Mr. Boehner is not here. As they carefully described the scenario they had confusion with, that was not political.
I am glad you were able to understand the question and took it in a generic way, rather than in a political way. The administration failed, or we failed, we are really in a problem. So, it is not who was right and who was wrong.
The money needs to get out to those people. We need to find a better way to implement the policies that Congress passed. When all is said and done, it is on the administration, Mr. Secretary, or the Department to get those resources out to those individual farmers.
To the extent that that is the goal of the hearing, we want to find out what the barriers are and how we can assist you and obviously the emergency funds that are available will be a part of the barrier.
I was also pleased to see in your testimony where you had shared appreciation. I was just reminded that you have deferred it. I guess you are announcing to defer it for 3 years. Will the interest run with the 3 years? I want to make sure, are the farmers going to be as bad off as they were?
Page 76 PREV PAGE TOP OF DOC
Secretary GLICKMAN. They are Treasury interest rates. I cannot do anything about the interest. There would be a scoring on that. So, I did not have the authority to deal anything with the interest rates right now. We may take a look at that later on. The whole thing is deferred for at least 3 years.
Mrs. CLAYTON. In other words, you can do all of this by administrative. You do not need any legislation.
Secretary GLICKMAN. Well——
Mrs. CLAYTON. That is good.
Secretary GLICKMAN. Perhaps Ms. Cooksie would like to make sure that I do not make any mistakes.
Ms. COOKSIE. I am not sure I am going to do that. I wanted to explain a little bit. As you well know what we can do administratively is only a short-term fix, Mrs. Clayton. The longterm fix has to be legislative in which I have talked to your office about. We have talked about it before. I still think that needs to be talked about and we need to do this.
At best, what we are doing is a short-term fix. What we plan to do is establish the debt at the end of the 10-year period by doing the appraisal. If he self-certifies that he cannot pay, then we are going to not ask for cash-flow or anything.
We are going to defer it for up to a year. At the end of that year, he has got to come in. We have got to figure out whether he can cash-flow or not. If he cannot cash-flow, we may be able to defer it for an additional 2 years.
That money that he does not pay though has to run at a cost. We did not want to do it at a non-program cost, which is 9 or 10 percent. That is too high.
The attorneys agreed to let us do it at something called the Treasury interest rate, which is about around 5 percent or something like that at this point. So, they were building interest costs to it.
Page 77 PREV PAGE TOP OF DOC
If we did not do that, the budget costs would be high. When we scored this, we would have less spending authority. As you know, we do not have money now. We could not afford the spending authority that is attached to this.
So, we had to do something to kind of appease OMB that we are getting some return on this in order to defer it. At best, it is a short-term fix. This is not a longterm fix. We are deferring the payment and the problem. So, legislatively we still do need a fix.
Mrs. CLAYTON. How many farmers would you say are affected under this?
Ms. COOKSIE. This year alone, 99. We have between 2,500 and 2,600 becoming due.
Mrs. CLAYTON. So, it is fairly significant.
Ms. COOKSIE. Fairly significant.
Mrs. CLAYTON. Let me move to another quickly. I think one of the things we find in this hearing is trying to implement a policy and the policy—well we are implementing disaster payments based on a policy.
Now, the 1996 farm bill has indeed some very important principles. If we cannot understand that what we are in the midst is fixing a fix, then we will always be in there until we have the underlying principle there that there has to be some safety net. You call it a cyclical relationship. If we think we can embrace this market system globally and not have our farmers vulnerable, we do not understand the magnitude of the economy goal. We are playing games with ourselves. If we think that fast track or NAFTA is the sole answer to this, we are playing games with ourselves.
Now, obviously we cannot have a protective Government all of the time. We have got to find a system where we recognize policy-wise that global economy forces are so mass and so vulnerable, that if we are talking about making our farming stronger, we have to even make the election that bigger is better.
Page 78 PREV PAGE TOP OF DOC
Therefore, whatever happens out in the world does not make any difference. If you are talking about protecting smaller farmers, there is no way, as they say back home, in a tinkers dam you are going to be able to have these small farmers be able to wade that.
So, hopefully, Mr. Secretary, we are going to be able to have you come back to us to say, not only disaster and crop insurance, and credit, but how do we begin to respect the vulnerability of agriculture?
Agriculture needs the world market; no doubt about that. We are over producing for our own domestic consumption. So, I am amazed that we have not come to grips that we are dealing with crisis because we failed to deal with a longterm policy. Stevie Coba who has the seven—says if you continue to deal with the fire, you will never build a solid house.
Agriculture is going to always be vulnerable unless we build a solid house. Thank you, Mr. Chairman.
The CHAIRMAN. I thank the gentle woman. Mr. Thune.
Mr. THUNE. Thank you, Mr. Chairman.
Mr. Secretary, in listening to all of this discussion, I have been watching various farm bills for a lot of years. I do not think I have seen one that does not have its shortcomings.
In fact, I think probably most of the farm policies we have had in the past have emphasized the production side of it. We do have to work harder at the marketing side of it in opening additional markets or we are not going to be able to compete.
The demand side of the equation is something I think that we have not given appropriate attention to in the past. I think that this farm bill and concept tried to recognize that. We have got some serious problems with respect to our export markets.
In the interim until we get out of that cycle, we are going to have to do some things, I think in terms of policy that will help our producers. I just have one question and I think maybe you have answered it already.
Page 79 PREV PAGE TOP OF DOC
Forgive me for belaboring the point. You have about $2 billion to work with. You are trying to determine what the universe is of eligible applicants. I guess to me it seems like you could take at least a portion of those dollars and get them out there, knowing that the signup is going to be coming to a conclusion here we hope soon. The livestock signup started last fall.
We have had an ample amount of time. You are not going to be able to get every producer. If they are not aware of it by now and are not taking the steps to apply, then perhaps at some point, we just have to draw that line.
I guess my only point would be in terms of distributing the dollars, we got folks waiting out there for assistance, we have with some degree of certainty know, I would think, it would be safe to put out a certain amount of those funds.
I am questioning again your comments as to why we cannot in some way pro rate some of those payments?
Secretary GLICKMAN. I have asked that question myself. Mr. Shackelford will answer it. Let me just say that what we have to do is come up with a little bit of a middle ground here which is estimate the payments. Be conservative about it.
Give these producers some idea of what they are going to be so they can go bank them, either through our loans, or to their banker, or to their other creditors. We are not guaranteeing anything by that.
The producers, if they wish, can get a number that is based on a conservative pro rata estimate that they can then go out and show that to his creditor or banker. I have asked why can we not just send two checks out instead of one check or three checks out instead of two checks.
Parks, you may want to respond to that.
Mr. SHACKELFORD. I will try to explain it to the extent I understand it. We can get a very detailed automation program person to explain it to you sometime to the point that none of us could understand it.
Page 80 PREV PAGE TOP OF DOC
If we do an advanced payment in a situation where we are going to have pro ration, first of all we would have to set the advance very low because while we have a pretty good idea on the multiyear side, what those expenditures are going to be, on the single-year side we really do not.
Our estimates are always very bad because we have producers of so many different types of crops that do not participate in our programs, that are covered under this bill, that have had losses in specific areas, that any estimates we ever get that I have seen from even our best economists, usually turn out to be very different.
If we go with that pro ration, it greatly complicates all of the calculations and the things we have to go through to get those payments out. So, we are better served to go ahead and determination the amount of the payment and get it out to the producer.
Our staff virtually all have come from county offices in the past. We look at that, but it is exponentially more complicated if we try to do it that way.
Mr. THUNE. I can appreciate from a bookkeeping standpoint. I guess it is hard to fathom when you have got $2 billion to work with that we could not figure out some way when people are going to the bank and trying to get credit that have some certainty of what that income stream is going to be.
Mr. SHACKELFORD. We give them an estimate for that, yes. That we are able to provide an estimate. When the producer comes in, we provide what is called an Entitlement Report, which shows the total amount that that producer will be eligible for.
We have suggested and we are using for our loan programs a 50 percent pro ration of that amount. That option is available to producers.
Mr. THUNE. That producer can take that piece of paper to his bank. Again, it is not an absolute guarantee, but it meets half way what you are talking about.
Thank you, Mr. Chairman.
Page 81 PREV PAGE TOP OF DOC
The CHAIRMAN. Mr. Bishop.
Mr. BISHOP. Thank you very much. Let me thank you, Mr. Chairman and Mr. Ranking Member for convening this hearing. It is, of course, very, very timely. Let me thank the Secretary, Mr. Ackerman, and Mr. Schumacher for your accessibility to south Georgia farmers and the sensitivity that you have shown.
Let me just say that aside from the general frustration that is expressed by farmers with regard to the lateness of the delivery, there have been several specific instances where it appears as if the intent of Congress is not being followed about the Department and the Process.
Case in point is a situation a Ronald Barksdale, a farmer from Sylvester, GA. He farms cotton and pecans among other crops. He has had disaster in 4 out of the past 5 years.
USDA requires 3 years of losses out of the last 5, in order to qualify for the multiyear peril formula. USDA rules do not allow Mr. Barksdale to combine the 2 years for which he received NAP payments, and the 2 years for which he received the Multi-Peril Crop Insurance Policy Indemnity.
In other words, he has had 4 years of losses, but he will not qualify under the multi year portion of the package. His losses in 1998 were insignificant so he will not recover under the single-year disaster formula either. That is very frustrating.
I would ask why it is that in the Department's press release of March 8, it seems to be in conflict with the way that the handbook is published in instructing the county offices to implement the multiyear peril year portion of the disaster package.
I do not think it was the committee's nor the Congress' intent to exclude someone like Mr. Barksdale in these circumstances. These are in fact the kinds of situations that we were trying hard to address. Can you give us a clarification?
Page 82 PREV PAGE TOP OF DOC
Secretary GLICKMAN. Mr. Ackerman, do you want to address that?
Mr. ACKERMAN. I thank you for raising the question. This is a very good example of some of the very difficult decisions we had to make as far as where there was a trade off between possibly fairness versus complexity.
We have kept the NAP system separate from the insurance system for calculating these payments. Because they are two separate programs, the situation goes back to the way Ms. Haynes described how the multiyear program works at the county office level.
The crop insurance data is automated. It is on a system for the county office person. They can take the RMA download and see what the farmer is entitled to very quickly. If you mix NAP and insurance, then the process has to become a manual one because the data is not mixed.
Mr. BISHOP. You need to answer directly though. Why do we disqualify those years? That is the basic question.
Mr. SHACKELFORD. A loss is a loss.
Mr. ACKERMAN. If a farmer has 3 years of NAP losses, they would qualify. If they have 3 years of insurance losses they would qualify. If you tried to mix them, then again, you are mixing two data systems, two programs and it cannot be done in an automated way.
Mr. BISHOP. I really do not care whether it is automated or whether it is manual as long as the farmer can get some relief.
Mr. SHACKELFORD. There were for other reasons as well. This multiyear portion of the program was developed over a period of time with a number of senior members of both bodies and it made certain assumptions.
It was originally only an insurance program. We tried to include the noninsurance program to ensure we provided a fair assistance to as many people as we could. Now, there is a very significant policy reason as well.
Page 83 PREV PAGE TOP OF DOC
If we switch to the two systems at any time you had a loss in any of these crops, the amount of assistance that is available would be so diluted that those people that this provision was intended most to address, which for the most part this was sponsored by members from the Northern Plains, it would so dilute that amount of money that it would greatly reduce a meaningful level of assistance to producers nationwide.
It was trying to help primarily those producers who had the most severe losses, whose insurance had begun to be impacted by that, and were not receiving that assistance.
Mr. BISHOP. Obviously, the situation has changed since it was implemented. Now, we have people who have suffered these losses who are being apparently promised, even in the Department's release.
I think the release of March 8 says that in any three or more crop years between 1994 and 1998 where crop insurance indemnity or assistance under the Non-Insured Crop Disaster Assistance Program was received.
Mr. SHACKELFORD. Throughout all of our policies, everything we have tried to go through, everything we have clarified we have always said it would be 3 years of crop insurance or 3 out of 5 of NAP.
Mr. BISHOP. Can you understand? Can you appreciate the frustration? When our farmers read this and they are bleeding and they take this in-hand and come to the office and say, hey, you know, I need help. They go through and they fill out all of the paperwork and they sit there and they wait. Then they come back and they are told, oh, you know, this is not for you. I mean, is there any way that you can accommodate a situation like this?
Mr. SHACKELFORD. From our standpoint, if we could have the funding to provide a meaningful level of assistance to all of the producers who have had losses over the whole mixture of this, we would all very much like to do that. We hear from farmers all over the Nation.
Page 84 PREV PAGE TOP OF DOC
However, if we made this decision, the impact it would have on the amount of assistance that those people that had these very severe losses in the other crops had, we would then change the amount of assistance they would receive. People more important than me make those kinds of decisions.
Mr. BISHOP. Who is that?
Secretary GLICKMAN. All I can tell you is that we have made the decision to try to make sure there are adequate benefits in the whole country.
There are probably some inequities in it. We will go back and talk about it. I cannot promise anything. Otherwise, it will be next year before we get any payments out.
Mr. BISHOP. It looks like, regardless of what it is, he is not going to get anything.
The CHAIRMAN. The gentleman from Texas, Mr. Stenholm, pointed out something that I think I need to clarify.
In earlier comments in regards to a disaster program, it needs to be made excruciatingly clear that that statement was made to show an indication of the fact we still have a major problem ongoing.
What I want to make for certain does not happen is that farmers out there assume that is going to be the case. Obviously, we have no way to know for certain. We will be looking at that as Mr. Stenholm indicated earlier on.
That is something this committee should be doing in looking at the state of the economy. I would not want farmers to think that is a certainty. That it is in fact going to happen.
I certainly would not want them to think that and encourage people not to take crop insurance that might otherwise take crop insurance. It has always been something that this committee has been very interested in.
Page 85 PREV PAGE TOP OF DOC
That in those years as was mentioned in my opening statement, that we have had disaster programs. We have always tried to make for certain that people who were willing to take crop insurance were not penalized for doing that, but that would still be eligible, if there were programs. I would not want any individual to think that is a certainty.
I would not want any individual to use that as a potential of not taking crop insurance. I would encourage them to as has been stated many times, and as we have been working with and have a number of conversations with the Secretary and the Department.
I think there is a lot of improvement we can make in crop insurance. We intend to do that. We do not even know when that essentially will be implemented. So, I would not want anyone to misconstrue that statement.
I appreciate Mr. Stenholm pointing that out to me because I do think we have to be very careful that in expressing our concerns about the state of the agricultural economy, we do not make statements that would cause people to make decisions that would be unwise.
I would call on Mr. Stenholm for any other questions.
Mr. STENHOLM. Mr. Secretary, it is my understanding that the workload analysis for the Farm Service Agency and maybe there is more than one. The one that we have heard the most about does not take into account loan deficiency payment activity or disaster program workload.
Since you knew last fall that the Loan Deficiency Program activity was already stressing the system, as you pointed out this morning, and that disaster assistance was in the works, why did not the Department request more than $40 million in Farm Service Agency salaries and expenses to be included in the omnibus appropriations bill of last year?
Secretary GLICKMAN. I will respond after Keith. Keith Kelly, Administrator, Farm Service Agency.
Mr. KELLY. Congressman Stenholm, with regard to the $40 million that was put in, which we certainly thank you for last year, the $40 million really prevented the layoff of the 1,100 and something employees who were still on staff.
Page 86 PREV PAGE TOP OF DOC
It was not even at that time, and I have checked back with regard to payouts of when the LDP money started going out. It started very slowly. Then it exploded in the fourth quarter. That was when the first explosion happened, and in the first quarter of 1999 is when the payments hit.
It just built a head of steam so quickly that of the $40 million, and quite frankly we were trying just to hold onto the resources there. We were just starting into the LDPs and did not know or could anticipate the severity would be.
We are in a market-driven economy right now that will tell us what our work is. The initial workload stage, as you indicated, never did include the LDP numbers in there at the time.
Mr. STENHOLM. You have requested almost $43 million in supplemental salaries and expense funds. What particularly staffing needs do you plan to address with these funds? Will you be able to, again, authorize over-time in the States and counties where it is needed?
Mr. KELLY. To the last part of your question, that decision of authorization of overtime or temporary help is to be best determined by the State Executive Directors. That is their discretion to utilize what best works in those cases for them.
This money or this temporary help is to try and get caught up on the blizzard of paperwork that has hit our offices really starting last August, September, October. It really built a head of steam when the corn harvest and the soybean harvest got underway.
So, it is trying to get caught up prior to the beginning of this harvest. Right now, the prices—if we are not, we are going to be right back into it as soon as the wheat harvest starts to get here in probably May or June in the South.
It is really trying to get caught up. I should add one more part on the overtime. There is a specific category in the overtime in there is to try and get some more help on the agriculture credit side of it.
Page 87 PREV PAGE TOP OF DOC
We have vastly expanded the complexity of the portfolio because of the economic crisis that is happening out there. So, the two things that are driving that, in my view, is that the marketplace is determining what our workload is right now because LDPs were not even a factor 2 years ago.
That, in turn, is feeding into our economic prices which is creating the same types of problems on the Credit Program.
Mr. STENHOLM. Now, it is my understanding that Washington has to allow the States to pay overtime. You have got to allow it. My question is, in this $43 million, have you looked at this enough and anticipated enough now, since you are rightfully anticipating wheat crop this year, additional activity?
Have you looked at this enough to sort of suggest, to give a little guidelines to this committee and to the States that overtime may be the best application of those funds, rather than trying to hire temporary people, et cetera?
Then as we have been through, and I do not want to get into repeating the complete dislocation between what we have been saying and doing in the budget that the President has been submitting and the reality out there.
Now, is it overtime the best expenditure for those monies or is it something else?
Mr. KELLY. Congressman, we have had a conference call with all of the State Executive Directors out there on the line. In different parts of the country, the needs for the resources will change.
I will give an example. If you are in an area that you are buried in LDPs, you need just more bodies at the counter to help get the paperwork processed through and some of that temporary help.
If you are in an area, in a disaster area, where you really need some other level of expertise, then the overtime is going to be a better one; specifically in the credit side. We do not have, I do not think, our own analysis to be able to go out there and pick-up some temporary part-time help to go into some of this very complex agriculture credit reworking. It is not going to work.
Page 88 PREV PAGE TOP OF DOC
So, in our conversations with the State Executive Directors we have said, what best suits you, whether you are behind in the loan deficiency payment side of it, whether you are marred down in the disaster programs that are out there with all of the work that is due there.
So, that judgment best out to be left to those people on the front line. That is how we have communicated that.
Mr. STENHOLM. Of all of the programs or functions that FSA carries out, which three have the most staff years devoted to them?
Mr. KELLY. I will get that answer back up to you. I do not have it here right now.
Mr. STENHOLM. No. I have a list now of 11 FSA farm bill authorized programs. We have got 14 FSA disaster programs that we have authorized since the farm bill passed. I mean, it is a tremendous workload that there is a disconnect.
I do not want to repeat my earlier statements on that. It is my understanding that the NRCS will no longer be able to provide technical assistance to land owners who are in rolling acreage in the Conservation Reserve Program as of May 15. What is the Department planning on doing to address this situation?
Secretary GLICKMAN. Parks, can you address this?
Mr. SHACKELFORD. Yes, sir. That is correct. We have been funding the technical assistance for NRCS out of the remaining funds for CRP when it was an appropriated account. That money is going to run out about May 15 as the Chief has testified.
We are looking at what other alternatives we can use. One thing we have assured people is we will get the conservation plans in place. We will have the contracts in place so that they can become effective on October 1.
We have put out, I do not know if you would call them official bids, but we have talked to the contracting to determination if in some areas we can contract with private entities.
Page 89 PREV PAGE TOP OF DOC
The section 11 cap on CCC spending does not allow us to contract with other State or Federal or any local government entities, but we can work with private groups. We will use whatever resources we can to be sure we can get the job done.
Secretary GLICKMAN. I might say on the section 11 cap, we are working both with the Appropriations Committee here, as well as OMB to see if there is some way to raise that cap as well.
Mr. SHACKELFORD. We do need a longterm answer, but for the short-term we are going to work with band aids to make sure we get it done.
Mr. STENHOLM. Well, we certainly look forward to working with you on the longterm answer to this.
Mr. Chairman, permit me just about another minute of some Monday morning quarterbacking. I said this to Mr. Boehner before he left. Therefore, I am not going to say anything of his comments.
You know, the majority has to lead. I know my comments irritated some folks on the majority a moment ago and what I said the early part of it. There is blame on both ends of Pennsylvania Avenue.
I believe it is an accepted fact. I believe Mr. Boehner agreed with me that we, the minority, did make request after request after request last August and September to hold hearings and to provide more guidance from this committee, but we were denied.
That is a decision that the majority made. That is history and that is the way it is. Also, this NRCS problem, to the NRCS leadership that has absolutely fought becoming a part of Team USDA and our county offices, I mean, this is the price we pay.
When we get down to budget problems like we have in which we have got to make tough decisions, we are now having to decide whether to put in additional funds X, Y, and Z. This has been our message since 1992, which again, I have stated as clearly as I can.
Page 90 PREV PAGE TOP OF DOC
Those down at USDA who have fought us every step of the way, we are now paying the price for it. I am no more satisfied I think than you are today, but could have predicted some of this.
As you have pointed out this morning, Mr. Secretary, we have got people scattered all over the country. They are just not in the places in which they ought to be. If we had just been able to do that, and you had been able to withstand this committee when you tried to do it in your first year here of closing, consolidating, and making these decisions.
But this committee would not let you do it individually. You should have done it anyway, Mr. Secretary, even if it had made me mad. You should have done it. I hope you will do it now.
Secretary GLICKMAN. Thank you for sharing that, Mr. Stenholm.
Mr. STENHOLM. Also, on crop insurance, you know, in the 1995–96 farm bill, we took risk management out of FSA and I stated then, and I state again, that was a mistake. We are now paying for it.
Mr. Ackerman, it is a real problem now when your numbers do not add up to FSA numbers, and these FSA employees that are having to deal with this, we have created a problem for them. That is your fault. But it is also our fault for doing what we did.
That is something that as we look at the future of crop insurance, we had better answer that question in a better way from this committee's standpoint and give you the direction that you need.
I hope you will share with us the experiences that you have had of how we can in fact make the partnership between Government and private enterprise work better, because we got holes all over the place on this one. The computer question—I remember that goes back to Secretary Madigan. It probably goes back to when he was the ranking member of this committee; the frustration we have had.
Page 91 PREV PAGE TOP OF DOC
That goes back to the inability, Mr. Secretary, of you to make decisions regarding how we are going to structure and have Team USDA work so that our computers can talk to each other.
That is Monday morning quarterbacking. I do not want to get into that today, except to just repeat and say that as we look at the longterm, these are the kinds of questions that we had better answer.
We had better have your input into the committee. The chairman is going to schedule the hearings. We are going to talk this thing to death, both publicly and privately. Then we are going to make some decisions. This time around, I do believe under this chairman's leadership we are going to have ample opportunity for us to give you the direction.
We also have to get the expertise. One of the weaknesses of the farm bill was that at no time when we wrote the 1995–96 farm bill were you ever asked to come in to the discussions. That bugs me.
We have never written a farm bill like that and I have been through four of them. We have never had it to where we required your experts at the table to not be in there and to share at the time the conference was going on.
We are paying for that too dearly today. I thank you for being here. As we continue to work here, my message is going to continue to be Ms. Haynes for you and those you represent today, for all of our farmers, do not take it out on the county offices.
I mean, we have got the most demoralized staff that we have ever seen out there as the result of all of what has happened. We now have a bipartisan effort on this committee to work with you to solve the problems from this day forward.
We cannot undo what has been done. We have just got to reach out. I know there is a lot of press here. If there is one headline that would come out of here is do not take it out on the county employees.
Page 92 PREV PAGE TOP OF DOC
Let us be patient and let us continue to do everything we can, as you are doing within those frames that you are working, Mr. Secretary, to take this lemon we got and make lemonade out of it.
Secretary GLICKMAN. I just might say, Mr. Stenholm, we appreciate your constructive pressure to try to deal with issues like administrative conversions. We have moved ahead on that one and set-up a support services bureau.
Quite frankly, there is a lot of heat inside the various agencies for the fact that we jumped a little further than they thought we were going to jump. There is not a lot of the disconnect among the various parts of USDA.
I would not be telling you the truth if I did not say that some of the problems we deal with are based upon the competitive nature of the specific agencies that we administer as we administer common programs.
I think we need to work with you a lot more aggressively to deal with some of these structural problems. Just the ones you heard today in terms of data between two separate parts of the Department of Agriculture doing the same things, compatibility of data.
There is a practical implication of a structural problem there. We probably will do a better job than we have done. We are going to get this worked out. These payments are going out.
There will be other days, other payments, other problems.
Mr. STENHOLM. Mr. Secretary, I have great confidence that you are going to straighten out the difficulties between those folks that work for you. I have great confidence you are going to do that in the days ahead.
Just like having been in the majority when we started down this and all of the arrows that I took from the folks that we are now talking about, I am going to be very, very strongly behind the chairman as he now takes the direction and causes these decisions to be made.
Page 93 PREV PAGE TOP OF DOC
We will let him take the first arrows, but I will be right behind him on every one of the other decisions that the chairman is going to be taking to get this done working with you.
Secretary GLICKMAN. Thank you.
The CHAIRMAN. Thanks a lot.
Mr. Moran, did you have any other questions?
Mr. MORAN. No questions.
The CHAIRMAN. Mr. Thune.
Mr. THUNE. Mr. Secretary, thank you for giving us a lot more of your time than probably you had expected to. Let me just sort of summarize kind of where I think we are.
Obviously, as I think you are aware, we are extremely concerned about this issue and concerned in how that is going to affect farmers that are waiting until June to get money when most crops are going to be planted or have needed to be planted.
There is a lot money that they need down there for their cash-flows and for their operations. We would like to just encourage that whatever is possible to expedite this be done because I think you have made good points about why there are some real concerns and why it is taking some time.
We all see real people's lives, faces, emotions, hardships, pains, and problems that they are going through when we are all talking to the people that are out there on the receiving end.
We had a farmer who had been listening in on our Internet site. In talking about February 1 when disaster signup started, the county employees in his county had not even been trained and did not have any instructions, tools, or whatever to do to begin to sign up.
That is really not a problem with them. It is just a problem that they had not gotten down the message. So, I think it is critical that if we are asking them to come into a hopefully more efficient operation, that when they do come in, then we can help deliver. I guess if nothing else, hopefully there have been a lot of lessons learned on both sides of this about how if we are confronted with these problems in the future, maybe there are ways that we can do it better as Mr. Stenholm said.
Page 94 PREV PAGE TOP OF DOC
Maybe you may not appreciate the invitation that Mr. Stenholm said about being up here a great deal of the time working through this problem, but we will certainly extend that invitation.
Secretary GLICKMAN. Thank you, sir.
The CHAIRMAN. We appreciate your being here, Mr. Secretary.
This hearing is adjourned.
[Whereupon, at 11:20 a.m., the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Statement of Hon. Dan Glickman, Secretary of Agriculture
Mr. Chairman and members of the committee, I am pleased to appear before you today to discuss the Department of Agriculture's implementation of the disaster bill enacted last fall.
CRCPLUS
Before proceeding I want to call your attention to emergency legislation I have just sent to Congress. It deals with Crop Revenue Coverage Plus, a private supplemental policy for rice and other crops sold and serviced by American Agrisurance, Inc. (AmAg). Let me emphasize that CRCPLUS is a private policy. It is not a policy USDA reinsures.
The policy was marketed in conjunction with insurance we do reinsure, and farmers in many cases bought both private and USDA-backed insurance together as a package. We feel we have the obligation to give those farmers the opportunity to reassess their 1999 crop insurance plans.
Because AmAg made changes in their policies after the insurance sales deadline for rice and potentially other crops, many farmers find themselves unable to adjust their coverage. In some cases they risk being caught with no insurance beyond base level catastrophic protection through no fault of their own.
Page 95 PREV PAGE TOP OF DOC
USDA does not have the administrative authority to extend the Federal insurance sales period without Congressional action. We seek your help in providing a solution for these farmers to get the coverage they need for the upcoming planting season. This bill provides a special period of between 2 and 4 weeks after enactment for farmers who had purchased CRCPLUS policies to cancel their current insurance arrangement and obtain which ever federally backed coverage level or plan that they choose from any company they choose. I am taking this opportunity to ask that you give this matter immediate attention. Thank you.
DISASTER RELIEF PROGRAM
Despite a booming national economy, it's been a difficult period for many of our Nation's farmers. You know too well how the current farm financial crisis is wreaking havoc on many parts of rural America. A quick look at this year's prices tells all. Wheat prices have fallen to the lowest level in 8 years, and corn and soybean prices have fallen to the lowest levels in more than a decade. In December, hog prices fell to the lowest level since the Depression. The Basic Formula Price for milk fell 37 percent from January to February. With weak farm exports and continued low prices anticipated for the rest of this year, we expect the financial stress on many farmers and ranchers to continue.
I'm proud to say that the response of this administration has been quick and decisive. Even though I don't have the authority I had before the 1996 farm bill was enacted, we were not going to sit by idly and watch the distress continue unabated. We offered all assistance allowable under the law. For example, we made corn harvested as silage eligible for loans and Loan Deficiency Payments (LDPs) which resulted in hundreds of millions of dollars paid to farmers. We provided $50 million in direct payments to hog producers, purchased $146 million in pork for donation to Federal food programs and provided $80 million to accelerate our pseudorabies erradication program. We increased humanitarian aid overseas which will help feed hungry people in need, and also provide some relief to farmers and ranchers. This year we will ship 10 million metric tons of food, a 7 million ton increase over last year. We increased export credit guarantees by roughly 40 percent to help overseas customers continue buying from us. And, we are being more flexible in our credit programs.
Page 96 PREV PAGE TOP OF DOC
SHARED APPRECIATION
Today I'm announcing proposed regulatory changes and an emergency rule that will improve the terms of Shared Appreciation Agreements for farmers. Basically these agreements require farmers who've received debt forgiveness to pay a portion of the appreciation of the value of he property under certain circumstances. Unfortunately, the effect of these agreements is that many farmers are unable to recover from financial setbacks due to factors beyond their control such as natural disaster or damaging market conditions.
These proposed rule changes will cut in half the term of these agreements and allow for the deduction of capital improvements such as on barns and silos. For agreements coming due in 1999, I am issuing an emergency rule that would allow for a deferal of up to 3 years based on farmers' ability to pay the recapture payment due. This is an example of how we are working with farmers to meet their needs during these very difficult times. But the increasing stress on farmers is putting added pressure on our folks at the grass roots level.
Last fall, Congress and the administration put together a $6 billion emergency relief bill. Even before the bill was finally passed, our folks were developing plans to get the aid to farmers and ranchers as quickly as possible.
I'm proud to say that, despite the fact that this year's program is far more complex than past disaster relief efforts, it is being delivered in about the same time frame. Despite the added workload on our folks out in the field, we have steadily been getting assistance out to farmers. The chart behind me illustrates how funds have flowed steadily to producers since October.
However, we've run into some serious problems in credit and manpower. On Monday, the President restated the importance of acting on his request of $152 million in supplemental funds that will allow us to provide $1.1 billion in additional loans and loan guarantees. This money will also provide funding for additional staff to help meet the demands for delivering program payments to farmers. I will address the work-load issue in detail a little later. I do want to reiterate the President's point that this supplemental assistance will do the most good the sooner we can make it available to farmers.
Page 97 PREV PAGE TOP OF DOC
With all that we've done and are doing, I recognize that because of the continued stress on farmers and ranchers, many are asking how much longer will it take to get the rest of the relief into farmers hands. I assure you we will get the payments out as soon as possible. But, this is a complex process. The funds must be distributed fairly, and reasonable efforts must be made to prevent fraud and abuse. Seven new programs created by the Omnibus Appropriations Act. A satisfactory answer needs to weigh the complexities of the legislation and the additional requirements it puts on the department, and the relationship of these new programs to those already in place.
ACCOMPLISHMENTS
To give you a clear picture of where we are in the process, I will first discuss what the department has done in the past 6 months since passage of the relief bill.
USDA has witnessed an extraordinary explosion in demand for Marketing Assistance Loans, Loan Deficiency Payments (LDP's), and Marketing Loan Gains (MLG's), putting enormous burdens on USDA's field offices. By way of comparison, for 1997 crops, USDA paid about $160 million to farmers and ranchers for LDPs and MLGs. For 1998, LDPs and MLGs are currently at $2.3 billion and we expect the total to climb to $3.2 billion before the season ends. That's a 2,000 percent increase in the value of payments made to farmers. Loan placements are valued at about $6.5-billion, about a 25 percent increase over 1997.
Conservation Reserve Program payments of $1.3 billion were issued last October. On March 4, USDA announced the results of the latest sign up in which 5 million acres were accepted.
FCIC paid out $1.6 billion in crop insurance indemnities to insured producers.
In addition, we paid $10-million in Non-insured Crop Disaster Assistance Program (NAP) payments.
Page 98 PREV PAGE TOP OF DOC
Since October 1, 1998, farm loan activity has increased dramatically over the comparable period last year. Emergency loans are up 400 percent, guaranteed operating loans up 59 percent and direct operating loans up 44 percent. We have already made 1.1 billion in farm loans and the administration has asked for $1.1 billion in additional program authority in its request for supplemental appropriations that I referred to earlier.
Over two-thirds of 1999 Production Flexibility Contract Payments totaling nearly $4 billion have been issued to date; another $1.5 billion will be paid out by the end of the fiscal year.
In December 1998, hog prices dropped to their lowest level in over 5 decades. USDA responded by designing and administering a special program to make $50 million available to keep family-sized hog operations in business as well as $80 million to accelerate our pseudorabies eradication program. We conducted a sign up from February 1 through February 12. Payments began going out to farmers this week.
When the additional work-load became apparent, the Farm Service Agency (FSA) sought additional funding to meet this demand. Congress helpfully responded by including $40 million in the 1999 Act. However, more needs to be done. The President's supplemental appropriations request includes $43 million for additional FSA temporary staffing needs in fiscal year 1999. In addition, USDA is considering a range of options, including simplifying the programs while preserving their integrity and reallocating staff between USDA agencies. This crisis hit during a time of downsizing. So while our folks had to administer seven new complex programs, we were caught in the middle of modernizing our work force. Frankly, there is more streamlining to be done, such as in offices where we have one supervisor and two employees. So I'm saying that additional funds are part of the answer, but so is managing our affairs better such as through our proposed support service bureau.
Page 99 PREV PAGE TOP OF DOC
TRADE
While the focus thus far has been on delivery of FSA programs and emergency relief, I want to emphasize that we have been aggressively using the range of discretionary program tools available to us to provide additional financial and market support to American farmers. For example, as world economic growth has slowed and world agricultural demand weakened, we stepped up efforts to expand trade. During 1998, we made available over $4 billion in export credit guarantees, an increase of 40 percent over the previous year. As of today, we have already announced a greater level of available export credit guarantees than at this time last year, and we have yet to conclude an agreement with South Korea. We have also greatly expanded international food aid. The President's Food Aid Initiative, combined with Public Law 480 exports and the assistance program will triple the usual level of food aid shipped. We are also using the Dairy Export Incentive Program to the fullest extent consistent with our international trade obligations.
DOMESTIC MARKETS
We have also increased our efforts in domestic markets for farm products. We used section 32 funds for the first time in four decades to make direct payments to producers, which was done under the small hog operator program. We also used section 32 funds to make bonus purchases of beef and pork for the food assistance programs. In addition, we accelerated the pseudorabies eradication program to remove up to 1.7 million hogs from the market.
THE 1999 ACT
Now I will address what we're doing in relation to income and crop loss programs included in the relief bill. Seven new programs were created and the most complex to administer is the crop loss disaster assistance program.
Within 10 working days of the enactment of the 1999 act, USDA began making income loss assistance payments. By November 21, 1998, USDA had paid 1.4 million farmers more than $2.8 billion, almost half of the money Congress appropriated in farmers' hands by Thanksgiving.
Page 100 PREV PAGE TOP OF DOC
On November 12, 1998, USDA announced the Livestock Assistance Program (LAP) and began taking applications on November 23, 1998. To accommodate the extremely high demand for LAP, USDA extended the sign up for this program and now plans to close enrollment on March 25, 1999. USDA will issue payments shortly thereafter. We estimate that the $200 million Congress appropriated for livestock assistance will be heavily over-subscribed and USDA, consequentially, will be able to pay only a portion of the total request.
On March 15, 1999, the sales closing date for the 1999 crop insurance program, USDA had obligated nearly all of the $400 million dedicated to lowering crop insurance premiums—the administration's down payment on its commitment to strengthening the farm safety net by reforming and improving crop insurance.
USDA began accepting applications for honey and mohair loans on March 4.
Last week, I announced USDA's plans for the $200 million dairy assistance program. We delayed this program while dairy prices were high, but responded quickly as prices began to drop. USDA will pay family-sized dairy operations up to $4900 on their first 26,000 hundredweight of milk produced in 1998 or 1997, whichever was higher. Sign up will begin April 12 and run through May 21. Payments will be issued in June.
We are working on a $42 million program for producers with flooded land. We expect to begin sign up shortly after the conclusion of the crop loss disaster assistance program sign up.
It is clear just from the volume of activity over the last 6 months that the combination of sharp increases in workload for the existing programs coupled with implementation of new programs, coming virtually one on top of another, has placed unprecedented burdens on our delivery system in the field offices. Our folks out in the field, who understand how important their work is to the livelihoods of so many, have given 110 percent and I want to express to you how proud of them I am for all that they are doing.
Page 101 PREV PAGE TOP OF DOC
CROP LOSS DISASTER ASSISTANCE PROGRAM
Now let me turn my attention to the $2.375 billion in the Crop Loss Disaster Assistance Program. Unlike previous disaster legislation, in this case Congress did not provide specific details of how the funds should be distributed, such as payment levels and loss thresholds. Instead, two different funding sources were provided, with a limited restriction that producers could not receive assistance from both.
The 1999 act sought to address two very different situations, the severe heat and drought throughout the southern part of the country in 1998, and years of repeated disasters in the Northern Plains. Other areas also suffered disasters during this time period, but these two factors were the major impetus behind the bill.
In enacting this legislation, Congress wrestled with questions such as how to deliver the crop loss aid? How to protect the integrity of the crop insurance program? Should aid go only to insured producers? What do uninsured producers deserve? How to treat producers with multiyear losses? How to ensure these payments do not interfere with producers' willingness to purchase crop insurance in the future? How to distribute payments in a fair and equitable manner? Who should deliver these payments? There were no easy answers and given the time constraints that Congress was under, the burden to respond shifted to the Department.
It would have been easier and faster to administer a bill that prescribed exact program parameters and set up specific eligibility standards. As the legislation was being considered, our folks could have transformed its provisions into procedure, written software, and issued the checks. That's exactly what happened for the income loss assistance payments Congress authorized. We started writing those checks within 10 working days of enactment.
But, while I appreciate the authority, discretion, and flexibility that the 1999 act provided me, with that discretion came the responsibility of working out a compromise that would ensure that disaster assistance would be provided to all producers throughout the Nation in a manner fair and equitable to all. This was no small task. I received dozens of letters providing suggestions on disaster program implementation from members of both the House and Senate. While I welcome the input and the insight many of those letters provided, it will come as no surprise to you that in many cases these suggestions were in direct conflict with one another. I believe the program we developed represents a reasonable compromise that builds on the strengths of many of your ideas and will provide a meaningful level of assistance to all producers who suffered losses in 1998 or in multiple prior years.
Page 102 PREV PAGE TOP OF DOC
The flexibility and discretionary authority provided to implement this program worked well in a situation where the total scope of the disasters was not identified at the time of enactment. A good example is the unfortunate December freeze in California where we had the flexibility to adjust the program so that it covers these losses.
Immediately following enactment of this legislation, our folks had to resolve a very difficult question: How to combine a crop insurance program and a disaster program with different objectives and different delivery mechanisms into one seamless program.
Our people dove in and by the end of November a framework was developed. Several State Executive Directors, other State office personnel, and county office employees were brought to Washington, DC during the second week of December for their input. On December 12, the White House announced the program.
During the next 6 weeks, our Washington and Kansas City staff moved into high gear. Software was developed from scratch. Records of 300,000 State prices and county yields were compiled by headquarters and sent to our State offices for review. We conducted national training the last week in January. State training was conducted in the following weeks. In early February, forms, applications, and worksheets were made available to our county offices and to the public on the internet. Our Risk Management Agency sent out 100,000 letters to farmers notifying them that they may be eligible for multiyear losses. Handbooks, with detailed instructions and procedures, were sent to county offices in the second week of February. Over 3.4 million crop insurance records were transferred to the Farm Service Agency with details of acreage and losses for every producer that purchased crop insurance in 1998 or had multiyear losses in prior years. A complete software package was sent to county offices in the first week of March that minimizes the time a producer must spend at the counter.
Our task was made more difficult in that the disaster bill was passed after the crops were harvested. We learned from previous disaster bills that when this occurs the potential for fraud and abuse could be quite large. We have taken steps to protect the integrity of this program.
Page 103 PREV PAGE TOP OF DOC
In order to reduce the time a farmer spends at the counters of our Service Centers, we are trying something different that I feel will result in much greater efficiency. We started from scratch developing software to implement the program and do so in as farmer-friendly a manner as possible. As a result of this, in this instance and unlike previous programs, USDA has undertaken most of the paperwork burden, not the farmer.
This process has been created not only to assist producers, but also to ensure that the disaster program is implemented in a manner that strengthens, rather than undermines, our existing Federal crop insurance programs. Many of you have contacted me to urge that this program be implemented with these goals.
Let me describe this process in some detail. Crop insurance records were electronically delivered to FSA with details of acreage and losses for every producer that purchased crop insurance in 1998 or had multiyear losses in prior years. This means that in many cases a farmer will come into the office and find a completed application, all done by automation. A farmer will verify the information and sign on the dotted line—it's that simple. We have shifted the burden of documentation from the producer onto our own personnel. Now, this won't work in all cases and won't work if a producer did not purchase crop insurance. In previous disaster programs, a farmer would provide crop loss information to his or her crop insurance agent, and then provide the same information to the FSA county office. Our new process avoids that unnecessary duplication.
A key factor contributing to the complexity of administering the program and consequently the timing of making the payments is that, unlike most earlier disaster programs, USDA will make these payments from a fixed amount of money. In previous programs, the funding was open-ended, and if a farmer met the eligibility criteria, USDA could make the payment as soon as the farmer applied for the benefit. Under this program, however, USDA must first determine each farmer's eligibility, total all eligible claims, determine whether each producer would fare better under multiyear or single year assistance, and pro-rate the final payments if the total exceeds the appropriation, which will almost certainly be the case. Therefore, no one can receive a payment until the last eligible farmer has applied. Also, since CLDAP is actually two major programs—the single year and the multiple year losses—USDA must go through one additional step of determining which will pay the applicant more before issuing final payments and adjust each ''pot'' or money accordingly.
Page 104 PREV PAGE TOP OF DOC
SUMMARY
signup is currently in full swing for the crop loss program. We were careful to develop a program that maintained the integrity of the crop insurance program. In fact, we reserved up to $400 million to be used as a down payment on crop insurance reform in 2000. The money is being used to reduce the cost of a producer's crop insurance buy-up premium by up to 30 percent.
USDA is working hard to make payments in a fair and expeditious manner. As you know, haphazard disaster payments in the past have led to internal and external reviews by various regulatory and law enforcement entities, including USDA's Inspector General as well as the General Accounting Office. While I have instructed USDA officials to make the payments as quickly as possible, I also want to maintain the integrity of the programs. I want to ensure payments are made in an efficient yet thoughtful manner to ensure the appropriate use of taxpayer dollars.
We plan to end signup April 9. An extension is possible if it means ensuring that all farmers have had an opportunity to apply for assistance. After the conclusion of the sign up we must allow several weeks for farmers to provide any additional paperwork, and another week or two to transmit the data to our Kansas City office. We will total up all the producers' claims, compare the total claims to the appropriations and compute a factor, if necessary, to reduce the claims so we do not overspend the appropriations Congress has authorized. This process must be repeated several times to reconcile the shifts between multiyear and single year funding. Payments will then be made in June.
I want to reiterate that our plate is very full, but our county employees are working hard to make sure our farmers receive their checks as fast as possible for production flexibility contract payments, crop loans and loan deficiency payments, farm loans, CRP payments, market loss assistance payments, hog payments, dairy payments, wool and honey loans, and livestock assistance payments, and now the crop loss assistance program. It's been a tremendous burden on our delivery system with some assistance going to almost every segment of production agriculture. Both Congress and the administration have worked together to provide assistance to America's farmers and ranchers during a very difficult period. I'm proud of what we have accomplished so far but I believe there is still much to do.
Page 105 PREV PAGE TOP OF DOC
I want to re-emphasize how important it is that Congress act on the supplemental bill immediately to ensure that our services and credit programs continue unabated.
LONG TERM
What I have outlined here today is Congress and the administration working together to help farmers and ranchers in a time of need. But we cannot stop here. We all know this is a short-term measure. I believe it is incumbent on all of us, to take a long-term view so we can avoid costly relief efforts in the future that in many instances can and should be avoided.
Together, in a bipartisan manner, we need to address a comprehensive farm safety net. I've called 1999 the Year of the Safety Net, because I believe we've had enough time under the 1996 farm bill to determine what is and what is not working. Now is the time for all of us with an interest in agriculture to respond.
It is more urgent than ever that we give farmers the tools they need to protect themselves. We laid out our principles for crop insurance reform that are designed to fill the most glaring crop insurance voids. Our proposal will make crop insurance more affordable and more worth buying. It will bring new products to market and provide better information and service to growers.
Other crop insurance reform plans have been put before Congress. While those plans may differ from mine in the details, there is a consensus on the need to strengthen the program and make it more accessible. The President and I are committed to working with Congress immediately, to do whatever we have to do to find the resources to fix this problem.
But there is no single tool that comprises the safety net. As important as crop insurance is, it is not the silver bullet. There are many other things Congress can and should do to help farmers protect their risk.
IMPROVING THE FARM BILL
Simply stated, we need to improve the farm bill. I'm not talking about a wholesale rewriting or interfering with the bill's measures that permit farmers the freedom to make their own planting decisions. I'm talking about building flexibility into the safety net—after all a safety net has a lot of give and elasticity to it—but right now what we have is more like a floor—rigid and inflexible.
Page 106 PREV PAGE TOP OF DOC
We are looking for ways to provide farmers with more choices which in turn gives them more freedom and more tools to manage their risk. I want to avoid situations where the administration and Congress have to react after the fact with costly disaster bills. That is an expensive, inefficient way to go and I believe that working together, this administration and Congress can develop a reliable safety net.
We are currently reviewing a number of initiatives, but some of the ideas I would like to see included in the farm safety net act are:
Expanding planting flexibility so that producers can elect to plant fruits and vegetables if they choose to do so;
Improving marketing flexibility for farmers to go along with the planting flexibility they gained in 1996 by:
Renewing my authority to extend commodity marketing loans when it is prudent to do so;
I would like the authority for USDA to assist farmers with on-farm storage facilities; and
I would also like to review the potential for a short-term, 3–5 year conservation reserve program that will make it financially feasible for farmers to temporarily remove land from production and plant soil-building crops to increase productivity in future years;
Improving farmers access to affordable credit:
Additional funding is needed for critical programs, especially low-interest loan programs;
Page 107 PREV PAGE TOP OF DOC
Congress eased the 1-strike rule, but while it is a step in the right direction, it didn't go far enough;
We need more flexibility in moving targeted funds from State to State;
Improving USDA's disaster assistance programs:
Legislative changes are needed to allow us to get NAP assistance and emergency loans to farmers more quickly;
I believe CRP needs to be modified to predictably allow limited haying and grazing in exchange for reduced CRP rental payments;
Allowing producers to better-manage their CRP land through occasional, well-managed haying and grazing can improve wildlife habitat and conservation.
I would like Congress to review assistance for livestock feed.
I would like to close the gab in eligibility between USDA and SBA's emergency loans so that all ag-related business can qualify for one or the other in time of need.
Strengthening our export programs and making them more flexible:
I would like authority to redirect unused EEP funds for food aid and other programs;
Making sure that farmers and ranchers are not disadvantaged by concentration and other structural changes:
We need a fair practices act that assures that farmers who join Coops are not discriminated against in the marketplace;
Page 108 PREV PAGE TOP OF DOC
I want to expand the Packers and Stockyards Act to include poultry;
I want mandatory price reporting which will level the playing field for all livestock producers;
Again I am proposing legislation that establishes a livestock dealer trust. Such a trust would require livestock inventories and account receivable from the sale of livestock to be held in trust for unpaid cash sellers when a dealer fails to pay for livestock.
As you can see, these ideas are designed to give farmers more flexibility and more freedom and more tools to manage risk. I am open to suggestions from anyone with an interest in agriculture on how we can improve profitability for farmers and ranchers. These are some of the ideas I have in mind—I am sure others have good ideas too and these should be considered.
What's at stake here—with both our short-term and our long-term challenges—is nothing less than the future profitability of family farming. I believe we are all on the same page when I say that we are committed to preserve the traditions, values and prosperity for agriculture that helped make this country what it is today.
Letter of Susan Combs, Commissioner, Texas Department of Agriculture
I am writing to express my sincere concern regarding the manner in which the administration has handled the Federal disaster assistance program. My office receives phone calls and letters daily from farmers and ranchers who are unable to plan for the 1999 production season, as a result of severe delays and deadline extensions on their Farm Service Agency loans and disaster assistance payments.
Texas farmers and ranchers genuinely appreciate the relief efforts provided by Congress last October. However, emergency situations require prompt and the United States Department of Agriculture does not seem to the urgency that is required under our current circumstances.
Page 109 PREV PAGE TOP OF DOC
Some producers are not going to be able to honor existing debt responsibilities and are finding it nearly impossible to secure operating funds for the current production year. Lenders around the State indicated that approximately 40 percent of commercial farm ranch and borrowers ended 1998 with some carryover debt. Many Texas farmers are now faced with rapidly approaching spring planting dates which do not conform to the FSA timeline.
It seems contradictory for USDA to encourage producers to establish improved risk management activities through increased business planning when the Federal delivery system imp airs their ability to adequately prepare for the immediate future.
Texas producers were devastated by natural disasters in 1998, and now they are faced with a bureaucratic disaster in 1999. I hope that you and your colleagues will continue to address this matter. This Nation's agricultural producers must receive the help that Congress intended as soon as possible.