Segment 1 Of 2     Next Hearing Segment(2)


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Thursday, February 12, 1998.







Opening Remarks

    Mr. SKEEN [presiding]. We're in session and on the record.

    Well, good morning, and it's again an honor for the subcommittee to have the distinguished Secretary of Agriculture, the Honorable Dan Glickman, who's a good friend and former colleague, appearing before us. The purpose of this hearing is to discuss the fiscal year 1999 budget request for the Department of Agriculture.
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    The Secretary should be well prepared, as he appeared before the Senate just 2 days ago for the same purpose. And I know, Dan, that as a former member of the House, that you consider that to be a mere rehearsal for what you're going to go through today. But we're here for the really big show.

    I think the record shows a great deal of cooperation from our committee, both Republicans and Democrats, to get you the money that you've needed for critical programs. We never have enough money to go around, but I believe that we agree with you and almost all your priorities. We have no allocation yet, but I'm going to do my very best and everything possible this year to help you out, and I appreciate the cooperation that you and Rich Rominger, and the rest of your colleagues provide to us. And I particularly want to mention to Rich, we appreciate the help we had with the 3 foot of snow we had in New Mexico, around Christmas. We still got the snow on the ground, however we've got it piled a little bit.

    And now for the bad news. I thought we had a budget agreement last year, but for the fiscal year 1999 the Administration is asking Congress to authorize about $800 million in user fees to pay for activities funded by this subcommittee; and this is simply because you want to spend more money than was in the caps provided by the Budget Agreement, and in order to avoid the caps you created a new Federal revenue, all user fees, and I believe this violates the Budget Agreement. Those user fees require passage of about a dozen separate pieces of legislation, and if you can't get the legislation passed to sign into law, we have to come up with the money for those activities that don't get funded.

    By far, the worst case here is user fees for meat and poultry inspection, $573 million of fees that need to be authorized in the face of opposition, not only from the authorizing committees themselves, but from the industry and the consumer groups as well. And if that authorization doesn't happen this year, we have to come up with several hundred million, or Federal inspection will not take place.
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    And where are we going to get the money? WIC, food stamps, low income housing. You couldn't make that choice, and that's why you proposed user fees. But user fees legislation won't pass, and we'll be left with making that choice that you have avoided.

    Now, I want to make it clear that this is not about whether or not user fees are a good idea, and I think that we understand that; we've had that understanding for many months. This is about the Office of Management and Budget—OMB, risking one of the most important programs in the entire Federal budget with a phony accounting scheme, and OMB ought to know better.

    Now, Mr. Secretary, one of the burdens of high office like yours, and one of the reasons that you make the really big money is——[Laughter.]

    They're laughing about it. While OMB lies low, you have to come up here and make the case for them; and we're sorry to have to lean on you like this, but OMB ought to get its act together down there. They know better than this. They're good number crunchers, but they don't understand the process.

    Now, they're lying low and you have to come up here to make this case for them, and I want to tell you that when the Food and Drug Administation—FDA—is here in 2 weeks I think we should ask them to investigate OMB as a menace to public health.

    Anyhow, we have a lot of other important issues to talk about today, the consolidation of various USDA activities, exports to Asia, civil rights, nutrition programs, and if you're lucky, maybe someone will ask you a question about milk marketing orders. I'm sure that you're all primed for that.
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    Your distinguished colleagues at the table are all well known and respected here, but I'll let you introduce them. But before we get to that and your opening statement, I'll ask our distinguished ranking members, who are here, we'll start with Jay Dickey.

    Just say howdy.

    Mr. DICKEY. Howdy.

    Mr. SKEEN. Go ahead.

    Mr. DICKEY. Good morning, Mr. Secretary. Welcome. Thank you for your good work on the Conservation Reserve Program—CRP—and the Pacific Northwest; I'll have some questions soon. Thanks to all of you for being here.

    Mr. SKEEN. Mr. Nethercutt.

    Mr. NETHERCUTT. Howdy. Thank you.

    Mr. SKEEN. Mr. Secretary, there's no love lost between us. We know what the problems are, and you know what you have to do, and we know what we have to do, and we'll get it done.

Statement of the Secretary

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    Secretary GLICKMAN. Thank you.

    Mr. SKEEN. Welcome.

    Secretary GLICKMAN. Howdy.

    Mr. SKEEN. Howdy.

    Secretary GLICKMAN. First of all, thank you very much for your courtesy, for you, Mr. Chairman, members of the committee, Tim Sanders, we appreciate the good working relationship. Most of you know—of course, you've mentioned Deputy Secretary Rominger, who worked diligently on the disaster problem that you had in your State.

    Mr. SKEEN. He certainly did, and we appreciate that.

    Secretary GLICKMAN. And you of course know our esteemed budget officer, Mr. Dewhurst, who we think is the best in government.

    Mr. SKEEN. Not only the best; we don't operate unless he's here.

    Secretary GLICKMAN. And Mr. Keith Collins, our chief economist, who we also believe is the best in government.

    Mr. SKEEN. And he's very famous for this as well.
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    Secretary GLICKMAN. We have an awful lot of talented people who are sitting behind me, who are ready to help answer the questions when I'm not able to do it.

    Mr. SKEEN. I'm glad that you brought them along.

    Secretary GLICKMAN. Thank you.

    Let me just make a couple of quick comments. One is that, I'm going to try to keep these remarks to less than 10 minutes——

    Mr. SKEEN. That's fine.

    Secretary GLICKMAN. I have as full statement for the record. I think that there are a couple of good things happening that I need to mention. The fact of the matter is, that because of the strength of the national economy, we have the lowest interest rates in a very long period of time, and that has been a tremendous help to agriculture all over the country; agriculture being the most interest-sensitive part of the U.S. economy. Those lower interest rates have helped farmers expand and finance their operations. It has also allowed us to have more room in the budget for some of the rural development lending programs.

    The President's commitment to a balanced budget and submission of a balanced budget I think reflects the strength of the economy; it also reflects the decisions that have been made in the past few years by both Congress and the President. If you look at the charts you will see that our outlays are down by a projected 14 percent from $63 billion in 1993 to $54 billion in 1999, and our numbers of employees are down about 20,000.
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    The outlays are down for many reasons. One of them of course has to do with the Agricultural Marketing Transition Act—AMTA—payments, provided for in the 1996 Farm Bill. Those numbers will continue to come down as the farm program payments continue to come down. Outlays are also down to a large extent because of the welfare entitlement programs and food stamps. The numbers of people on the programs are down considerably and the dollars are down as well.


    So saying that, I want to talk to you a little more about some of the basic issues that we think need to be in the budget. The first item I'll talk about is enhanced economic and trade opportunity. Because of the program, the Freedom to Farm program, managing risks for agriculture is more important than ever when we're in a market economy that's more volatile than it has been before. We believe that maintenance of a strong set of risk management tools is necessary, and that's why our budget provides for full funding of the Crop Insurance Program. We will propose legislation to shift funding of certain crop insurance, delivery expenses to mandatory funding to ensure maintenance of this vital program.


    Now, I will admit to you, crop insurance works better in some parts of the country than it works in others. Where you have repeated disasters, crop insurance has become a problem for utilization, and I think it is appropriate for us to, again, re-examine the substantive nature of the Crop Insurance Program to make sure that it actually operates nationwide effectively as a good risk management program.
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    Farmers and ranchers also need access to credit to succeed. The 1999 budget provides more funding for farm loans. We are proposing doubling direct farm ownership loans to $85 million and increasing guaranteed loans. Under our budget almost 3,500 beginning and small farmers will be able to acquire or save their farms. The budget keeps direct and guaranteed farm operating loans at $2.4 billion, to serve some 28,000 limited resource farmers. This budget proposes full funding for our Small Farmer Outreach and Technical Assistance Program to help limited resource farmers boost their bottom line. We had a National Commission of Small Farms that emphasized credit and related activities, and some of these proposals relate to that Commission's report.

    In addition, I want to present one item to you, which is a legislative item, but I think it's important that we talk about it. The 1996 Farm Bill has a categorical ban on loans to farmers who've ever had a government debt forgiveness in the past. We will soon be sending Congress emergency legislation to address this problem. I believe the Farm Bill goes too far, potentially denying good, solid, family farmers the credit they need to stay on the land, hurting small farmers and minority farmers especially hard.

    The result is that we disenfranchise people who've ever had a debt write down, notwithstanding that for the last 10 years they may have been in good operating condition. This is much worse than any banks would do in the private sector. We really need to deal with that problem, and still protect the taxpayers in the process, and you can do that. I would ask that we work together on that particular problem.
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    Exports are critical to the American economy; not only opening new markets. Concerning the Asia situation, we just met with Secretary Rubin and Alan Greenspan over in the Agriculture Committee. We talked about the need to deal with the International Monetary Fund—IMF issue. We also need to fight unfair trade barriers, unnecessary, sanitary, and phyto-sanitary restrictions. These are things that are basically the highlight of our efforts to provide a safety net.


    For Fiscal Year 1999 we have proposed spending nearly $6.4 billion for trade-related activities, including a projected $4.6 billion for export credit guarantees to protect sales to Asia. I would point out, however, that if we believe we need more credits than that we will move in that direction. There is no cap on the amount of credits, GSM credits, we can provide. To the best of my knowledge, we're only limited by the budget exposure, which would be there in case there is a default. So obviously it is an internal situation to determine if more money is needed, we've got to come up with some of those monies within the budget. But there is no cap on that, and we will do our best to protect against the lost of market share, and in fact try to expand U.S. market access in Asia and other parts of the world.

    It's the most important priority we have now. I just might mention we've provided an additional $2 billion worth of GSM credits so far. We have been told our credits to Korea have had a marked impact, particularly in the livestock area, and we continue to work on other areas as well. The budget also proposes a flexible multi-year authorization for the export enhancement program, to allow us to carry over, rather than losing unused funds, to the next fiscal year. The fact is we haven't used the program in the last couple of years. Congress has reduced the appropriation for it, but we may need to use it in the future, and the ''use it or lose it'' history of this we don't think is very suitable, given the changing nature of the subsidy arrangements in other parts of the world.
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    Our rural development programs are significant to us. Our rural development budget will support about $9.8 billion in loans, loan guarantees, grants, and technical assistance; $300 million more than 1998, and $1.8 billion more than 1997, to a large extent because of lower interest rates. The budget supports our Water 2000 initiative, home ownership initiatives, infrastructure for electric, telecommunications, and empowerment zone funding.


    Research is critical to the future growth of agriculture. Driven by publicly-funded research, agriculture productivity has grown at an annual average rate of 1.8 percent over the past 45 years; and there is no question, in addition to exports, research is the other part of the safety net. The budget increases—the work we are supporting to identify and develop a better understanding of genes that are important to agriculture production and crop file diversity. We also intend to increase our competitiveness in the global market production efficiency, and other areas as well.

    I must tell you from a parenthetical perspective, I wish our research budget were much more than it is right now. If you look at the history of our research budget, in real terms there has not been any growth, in real terms in the last several years. There's a budget problem. It is something that we need to identify ourselves and communicate much better than we have done in the past, as to what the impact of ag research is on people's lives. And, if we do that, I think that we will be in a position to augment our research budget in future years.
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    The budget request that we have also increases funding for pest detection, disease prevention, border inspections, the projects that I talked about before, and I think these are very important.


    In the area of a healthy, safe, affordable food supply, the budget includes $46 million, which is roughly one half of a government-wide increase of $101 million for the President's food safety initiative. That initiative will focus on the safety of imported and domestic fruits and vegetables, food safety education, modernizing our meat and poultry inspection systems, and related tools.

    As you know, we are in the process of modernizing our 90-year-old meat and poultry inspection system. Just last month 300 of the largest slaughter and processing establishments, producing 92 percent of meat and poultry went into the new HACCP system approach. Firms are now using the latest science to identify and correct food safety hazards.

    For 1999, we propose boosting food safety spending by $34 million to a program level of $710 million. The additional resources will allow us to maintain a frontline inspection workforce, and provide rigorous science-based inspection. To support this work, as the chairman indicated in the beginning, we will be proposing legislation to recover the costs of providing inspection services.

    Now, we can argue this point, and this is an issue that's been brought before this committee almost every year for the last 10, 12 years, in different perspectives. My only point is that, as our budget continues to be flat we can for about 1 cent a pound, provide the consumers the confidence their meat and poultry is safe; otherwise, we have to take these funds out of other priority issues, such as research, conservation, and other kinds of things.
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    I recognize the meat and poultry industry by and large—I don't want to speak for everybody—has an ideological aversion to fees, inspection fees. We have fees in our government in a lot of different areas; banks, securities, and a lot of other areas, we have fees in our government to protect the public interest. The industry has opposed fees for a very long period of time.

    I understand that. I'm just saying that the other side of the coin is, safe food sells. The public will buy food if they believe it's safe. We have the safest food in the world; I want to keep it that way. And based upon the budget constraints that we're under, we will have to take large chunks of money out of other parts of this budget. We will of course work with you if there are other options there.


    In addition, I would like to talk for a moment about our food assistance program. The budget requests full funding for the food stamp, child nutrition, and WIC programs. In addition to that, our budget includes a new $20 million food recovery initiative to provide community-based grants to help neighborhoods recover edible food. I call this our Gleaning and Food Rescue Initiative. This has kind of been a pet project of mine. Twenty-five percent of the food that's prepared every day in America is thrown away; 25 percent; hotels, hospitals, restaurants, institutional servings of food; and schools. So this is a kind of a cheap way to save food from being thrown away. Because Congress passed the Bill Emerson Good Samaritan Act last year, this donation can take place without fear of liability; it's one of the few areas that that can take place. So we're trying to encourage food recovery, food rescue efforts all over the country through the private sector food banks; that kind of thing.
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    In the area of our natural resources, we're asking for $825 million for the NRCS. That will support their base duties and responsibilities, contribute to the administration's clean water initiative, and we will improve and strengthen the leadership capacity of local conservation districts through competitive partnership grants to help meet our program.

    We're making considerable progress in our land conservation and cost-year programs funded through the Commodity Credit Corporation (CCC). Last year was a pivotal one for the CRP, the Conservation Reserve Program that Congressman Nethercutt mentioned, when we held our first sign-ups under the new rules. We have just completed another sign-up. We made some mistakes on the first sign-up; by and large it did well, but we made some mistakes that we, I think, have remedied in the second sign-up. I am pleased to report that in one year we have doubled the environmental benefits of CRP, while at the same time saving taxpayers hundreds of millions of dollars.

    In conjunction with the CRP, the Wetlands Reserve Program will continue to restore and protect America's wetlands, and we're proposing an additional 164,000 acres in 1999 in that program.

    Another popular program established by the 1996 Farm Bill and funded through the CCC is the EQIP program, the Environmental Quality Incentives Program. The budget includes a $300 million number for EQIP, which is a one-third increase of $100 million over the 1998 funding level. We think that is very important. Our budget also requests $10 million for an interagency climate change technology initiative for research to minimize the adverse effects of agriculture production practices on climate change.
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    On customer service, I place high priority on improving customer service and program delivery, streamlining, continuing the downsizing. We now have about 2,775 field offices now, going down to 2,554, which is our goal. In addition to that, we are consolidating the administrative functions that support the county-based agencies. In the old days when you would go into a county office, and you'd have a Xerox machine for NRCS, and a Xerox machine for FSA, and a Xerox machine for rural development, and neither twain shall meet. And that perhaps is a hyperbolic way of saying that there can be a coordination of administrative functions in each State, and we're moving in that direction. We think that will enhance customer service.

    We have contracted with an independent consultant to examine what further steps, if any, we can take to improve coordination and efficiency of our farm and rural program delivery system.


    The budget also requests an additional $22 million to support a presidential initiative for our inspector general to crack down on abuse in our nutrition, rural development, and other programs. We have an excellent IG. He's done a great job of dealing with reducing fraud, waste, and abuse, and we think these dollars are very effective.

    And let me just finally say—you mentioned the area of civil rights. It is a high priority to deal with civil rights issues, particularly to make sure that limited resource farmers are eligible for our programs, whether they are programs in the Farm Service Agency or other agencies of the department. We have requested funds to try to deal with this.
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    So, I think that what you will find is a budget which reflects the priorities of the Department at a time of change in agriculture, particularly at a time when we're in the midst of the AMTA payment situation. We have a commission on 21st Century Agriculture, Mr. Chairman; its goal is to look at what happens after this farm bill is over. And obviously, those are issues that we're going to be looking at very carefully, as well. But in the meantime, we thank you for your cooperation, and look forward to working with you on these issues.

    [CLERK'S NOTE.—The Secretary's written statement appears on pages 187 through 228. Biographical sketches appear on pages 183 through 186. The Office of the Secretary's budget justification appears on pages 254 through 263.]

    Mr. SKEEN. Ms. Kaptur, your welcoming remarks.


    Ms. KAPTUR. Mr. Chairman, I just wanted to welcome the Secretary, and to say how much we look forward to receiving the full weight of your testimony, being able to ask you questions this morning, and to say that we deeply appreciate the enthusiasm and the effort that you put into your work, on behalf of the people of our country. I think I've been very impressed with your international travel, as well as your domestic travel. You basically just don't sit in that building; you're on the move all the time. And I'm very anxious to be able to ask questions, but we look forward to working with you and to doing the best we can to meet several of your budget requests. We know the Department of Agriculture has done more to reduce staff levels and to meet the budget requirements of this particular decade, than almost any other department, with perhaps the exception of the Department of Defense. I know that that hasn't been easy; with all the consolidations at the State levels, the local levels.
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    You have been a part of that, and I think we still have a department, that is functioning well, and has focused missions. That's a real credit to you and to the administration. And frankly, to this Congress and this committee.

    So, we thank you very much for that, and it has been certainly my pleasure to work with you.

    Secretary GLICKMAN. Thank you.

    Ms. KAPTUR. Thanks, Mr. Chairman.


    Mr. SKEEN. Thank you, Ms. Kaptur.

    Speaking of disaster, you know the big problems we had in the southwest during Christmas, and also the big freeze in the Northeast. Thousands of cattle, sheep, and livestock, perished in both of these weather systems.

    Will you submit a supplemental to help the farmers and ranchers over those losses?

    Secretary GLICKMAN. We're assessing the needs now. It may require a supplemental—if it does, we will ask for additional money.
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    Mr. SKEEN. Thank you.

    One question on user fees, can you guarantee the committee today that the legislation will be sent up on a date certain, and that the administration will push for its passage, or are we going to have to come up with several hundred million dollars in conference to make sure that the meat and poultry inspection is adequately funded?

    Secretary GLICKMAN. Well, we're going to send up legislation?

    Mr. SKEEN. Are you?

    Secretary GLICKMAN. Yes. Now, can I promise you it's going to pass? No, I can't promise that. But we're going to send it up, and we intend to fight for it.

    Mr. SKEEN. Well, I hope so. Because we were going to have it sent up last year, and it didn't show up. We'd appreciate having it.

    Secretary GLICKMAN. I can't speak for previous times——

    Mr. SKEEN. I understand.

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    Secretary GLICKMAN [continuing]. We need to send it up.

    Mr. SKEEN. I just want to be sure that we're dedicated to getting this thing done. I appreciate that.

    Ms. Kaptur.

    Ms. KAPTUR. Yes, Mr. Chairman.


    I wanted to ask the Secretary, in your budget you are requesting $1 billion, I think, additional for the child nutrition programs, if I'm reading your testimony correctly.

    Secretary GLICKMAN. Yes, I think that's correct.

    Ms. KAPTUR. It's there somewhere.

    Secretary GLICKMAN. Yes.

    Ms. KAPTUR. My basic question would be, is that because of increase in food costs or is that because of increasing levels of enrollment?

    Secretary GLICKMAN. Part of that is to have full enrollment in WIC. But, Steve, do you have the numbers for this?
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    Mr. DEWHURST. Sure, it's a little bit of both.

    What is happening in the child nutrition programs, is that more and more children are coming in and applying for the free lunch and free breakfast portions of the program, for which the government pays the full cost. So for instance, in 1997 we have 13 million children on the free lunch program; but in 1999 the estimate is 13.6 million. In other words, an additional 600,000 children will qualify for free lunches.

    The same is true with free breakfast. We have 5.5 million children in this country on the free breakfast program. In 1999 the estimate is about 6.3 million children. But we have more kids from lower income families showing up, and asking to be on those programs, and that's essentially what's driving the cost.

    They also get a cost-of-living increase, so that the price—for instance, we pay for a free lunch, which this year is $2.05. It goes up to about $2.09 in fiscal 1999, so there's a little bit of cost growth in there too. But it's mostly the additional kids on the free meals.


    Ms. KAPTUR. Mr. Secretary, we want to make sure every child in America is well fed, and that they have nutritious food. I'm very pleased to see in your budget proposal this time your gleaning initiative. Because one of the concerns that has been growing on my part—and I spend a lot of time in the schools on occasion during breakfast and lunch time, and I am appalled at what is thrown away.
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    Now, the first time I saw it, I gasped. Then when I saw it more than once, I realized it was a pattern. And you know, when you talk to people, they give you excuses. Why does this happen? Well, it happens because maybe the food and nutrition staff don't pick the right foods. The kids only like to eat chicken nuggets, and you know, on this particular day they served peaches, and they don't each peaches, so they throw it out.

    But there is a serious problem in the waste across school districts in this country, and I think to be developing a value in a child at an early age that you throw it away, is a very bad value. And it's happening coast to coast. I'm not talking about any particular income level of district. I'm not sure where the answer lies. I don't think the answer lies in cutting back the cost per meal, but I do think that there's a problem in the selection of items at the local school district level. I guess if you fed kids pizza every day, they'd be happy; but that wouldn't necessarily be a balanced diet. There's definitely a problem in menu planning.

    One of the staff mentioned to me, well, another problem is that in too many local school districts they say, well, kids only have 10 minutes to eat, and so therefore a lot of food is thrown away because the kids don't have enough time to eat it. That's not a problem you can solve. But as you get into this gleaning initiative, I hope that part of that will involve an assessment, on a statistical basis, of what is going on across this country; and to get some of these local administrators and the governors, and their administrators at the State level, more conscious, I mean, of the volumes that are merely going from the kitchen into the waste basket.

    And when you sit on this committee, and you vote for these programs, and then you go back, and you see what happens at home, you get really upset, and you want to go in there and manage it yourself, because you're so mad at what you see happening. But I know the men here don't cook, so you probably don't worry about going in the kitchen, right? Oh, I'll get a real reaction there; just waiting for it. But it is just really troubling. [Laughter.]
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    Secretary GLICKMAN. Actually, if I just may say, I agree with you, and the subject of food waste is a monumental problem. We need to analyze in depth the amount of food waste in the school lunch program now. The school lunch people say there's less food waste there than there is in other areas. It may be true just because of the way that they're operating; and most of them of course operate under State law, and State authority. But I have heard the anecdotal cases myself, and the fact that they're public programs means that they have an extra special responsibility to manage those resources well. I think your point is a good point.

    Ms. KAPTUR. A lot of people say, you know, USDA only lets us purchase these items. But somebody needs to look at this, starting at the receiving end, not the giving end. They ought to be at the grassroots, looking at what's happening, a cross section of school districts.

    Related to that, some of the money that is needed in that program for expansion, coverage, obviously, when we met with the inspector general, we were given a real insight on some of the abuse attendant to feeding programs relating to daycare. And I suggested also that he look very seriously at the Headstart programs across this country, and to make sure that those nutrition programs, and the way that they are applied for and administered, are being done properly. I think you will be amazed at what you will find there.

    And also, because of welfare reform at the local level in places like Ohio, some of our public feeding kitchens, run by nongovernmental groups, are receiving almost over 40 percent increases over this winter in the demand for food. So when I see food being thrown away in one place, and I see a need somewhere else, I think you have really hit on something here, and I desire to help you in any way that I can.
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    To move on to another subject. There was a commission on small farms that reported back in January, and my question to you is—I think you know my concerns. In many markets, whether it's beef, or pork, or even grain, the delivery mechanisms in this country are extremely concentrated, and the average farmers has more limited opportunities every year to have market access. So there's a gatekeeper system that is really developing in this country. Some people can make it to market; other people can't make it to market.

    What, in your judgment—what can USDA do in your budget, to implement some of the recommendations of that small farmer commission?

    Secretary GLICKMAN. Well, in the first place, we have put together a team under the leadership of the Deputy Secretary to manage this effort, so not to let that report die. There was an initial report done by Secretary Bergland in 1980, and this is a follow-up report. There is a myriad of recommendations in this report, all the way from fully funding the Grain Inspection, Packers and Stockyards Administration, to making sure they can enforce anticompetitive practices in the law. Some of that is reflected in our budget here; to a more extensive use of cooperatives, farmers' markets, organic agriculture, etc.

    I mean, there are a whole litany of suggestions to facilitate small farm agriculture in America. We really intend to make a conscientious effort to implement those across the board. But, we do have to enforce our own laws, which is basically the Packers and Stockyards Act. Because, quite honestly, we're about the only agency in government that enforces those particular provisions as it relates to the livestock industry.
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    Ms. KAPTUR. Why have you not been able to do that? Do you not have sufficient staff there? What's the problem inside the program?

    Secretary GLICKMAN. Well, we have enforced the law. In fact, we filed suit 2 years ago against the largest meat packing company in the world for preferential pricing practices, in terms of feed lots—I mean packing houses and preferred feed lots. They have—my notes tell me—completed one comprehensive investigation of major steer and heifer slaughter plants in Kansas, and are currently conducting similar investigations in Texas. There's a southern Minnesota hog procurement investigation; it's ongoing right now.

    Our budget reflects $4.7 million to correct unfair deceptive and discriminatory practices. How does that relate to last year's budget?

    Mr. DEWHURST. It repropose last year's request which wasn't funded by Congress.

    Ms. KAPTUR. Are these attorneys? That $4.7 million in——

    Secretary GLICKMAN. Some are, but a lot of them are investigators.

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    Mr. DEWHURST. They are investigators and economists.

    Secretary GLICKMAN. Yes. Economists too. Some of these are complex economic issues as well.

    Ms. KAPTUR. Is this housed in one place in the Department, or is it in different places?

    Secretary GLICKMAN. Generally, it's housed in the Grain Inspection, Packers, and Stockyards Administration in one administrative entity.

    They have some field offices, as well, around the country that they operate out of. And, you know, they get the help from our Chief Economists and other people as well. But they are a separate enforcement agency.

    That law, the Packers and Stockyards Act, is kind of the USDA's version of the Robinson-Patman Act—Federal antitrust laws. And, you know, I don't think there's any question that we've got to have adequate resources, however, to go out and actually investigate these cases. It takes a lot of time and effort.

    Ms. KAPTUR. That's what I'm concerned with; you have sufficient resources in order to do that.

    Secretary GLICKMAN. It's a 25 percent increase we've asked for in packers and stockyards enforcement.
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    Ms. KAPTUR. All right. Thank you very much.


    On pork prices, I wanted to ask, in view of the fact that many farmers are concerned about low pork prices, is there anything the Department is intending to do to encourage exports, or to purchase for meals programs, lunch programs, et cetera?

    Secretary GLICKMAN. Yes, all of the above. In terms of exports our credit package has focused on livestock exports largely to Korea, and then we also are doing purchases of pork under Section 32 for our commodity programs.

    Mr. Collins, do you have any other comments on that?

    Mr. COLLINS. We've recently done some Section 32 purchases for the child nutrition and food assistance programs. We have another large potential package for pork purchases under review right now that the Secretary will decide on shortly.

    Secretary GLICKMAN. The pork producers nationally have written me, asking me to take all steps I can in this area. The biggest part of this, I will have to tell you, is the export side in Asia, which has a great potential in terms of livestock purchases, but pork particularly has been somewhat threatened by the currency crisis. But that's why we've tried to use our export credits as aggressively as we can; to sell more of that product over there.

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    Ms. KAPTUR. Mr. Secretary, I want to just ask one more question, then I'll save additional ones for the second round. But could you, or one of the other representatives of the Department, in more detail talk about how much you are asking for this year for a cooperative development, as opposed to last year? I think it's level funding. And what your focus is in this area; how important it is to the Department?

    Secretary GLICKMAN. It is very important. The numbers on our rural business cooperative service—what are those numbers compared to last year, do we know?

    Mr. DEWHURST. We have about $1.7 million in base funding for the cooperative services within the Department. We have a $2 million increase above that to increase the research we do with cooperatives to help folks establish new cooperatives, or branch out existing cooperatives into new lines of business. We have a substantial percentage of our business and industry financing program dedicated to cooperatives, about $200 million of that billion dollar program is in effect, targeted to cooperatives.

    So essentially, there's a lot of money in the Department for cooperatives. I wouldn't want to mislead you. It's not a substantial increase over this year, but the $2 million research program is a new proposal, and a new program. The credit dedication under the B and I program is increasing a little bit each year.

    Ms. KAPTUR. Thank you.

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    Mr. SKEEN. Thank you. Mr. Walsh.


    Mr. WALSH. Thank you, Mr. Chairman. Mr. Secretary, thank you. I'm sorry I missed your testimony; I had a legislative hearing that I hurried out of as quickly as I could, because what is being discussed here is very important.

    I'd also like to thank you for coming up to Central New York last year to visit one of our dairy farms, and meet with farmers. I think it gave you a pretty good idea of the level of concern and frustration within the industry, but it was great that you were there. It was meaningful to—certainly to myself, and Congressman Boehlert, and to the farmers. And the farmer whose home we visited is delighted, and I'm sure he'll remember that, and his kids will remember that the rest of their lives.

    We've since had, as you know, an ice storm that, fortunately for my constituents, didn't affect our district, but it did severely affect Congressman McHugh's and Solomon's, and on into Vermont and Maine also, and I would like to associate myself with the comments of the chairman, regarding disaster relief, and hope that we would be able to reach out, and help those farmers out who suffered that terrible damage.

    Just to give you an idea of the scale of the storm; there were 30,000 telephones and telephone poles down in that part of the country, 30,000. I'll suspect it'll help the southern yellow pine industry though.

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    Mr. DICKEY. So what's wrong with that?

    Mr. WALSH. That's okay.


    Just to hone in, if I may, on this dairy issue, because it is of such importance, and it is very timely. As you know, there are a number of court cases going on right now. I'd like to first of all thank you for the effort that you and your staff have put into this, consolidating the market orders, and trying to hone in on this issue of differentials, and just ask you if I might—you've made it pretty clear that you favor Option 1B. That's the preferred option as opposed to Option 1A.

    Secretary GLICKMAN. There are two options in the proposal, 1A and 1B, but you're correct.

    Mr. WALSH. You made fairly clear that that's the case.

    Can you describe your rationale for designating Option 1B as the preferred option?

    Secretary GLICKMAN. Well, let me kind of give you a little bit of background, because this is an awfully complicated issue.

    This issue's been around the Department for a long period of time, and we've had milk marketing orders for a long period of time. For milk, the differential is generally based on distance from Eau Claire, Wisconsin, based upon historical needs to ensure an adequate production of fluid milk all over this country. That's been the kind of the principle for about 40 or 50 years, I've asked the folks to look at it, to see if that principle is still as applicable as it was before, and whether modern transportation, and other kinds of techniques require us to take a more modern look at that particular issue.
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    So, we looked at this whole issue, and it struck us that there were two primary ways that you could go on this. Well, there are three primary ways. One, you could just get rid of the whole thing, which we thought that wouldn't make any sense, given the fact that we think there are reasons to have some differentials, and certainly to have marketing orders.

    The second way is status quo; no change in the area. Things would be exactly as they were in the 1940s and 1950s. The way we transport and move milk, and other products, would be unchanged, and you could still price basically from one basing point. We said, all right, that's a possibility, and quite honestly, an awful lot of people want that approach.

    And the third way is to look at the system, and determine basically from an economic model, what does the modern world need to ensure an adequate supply of fluid milk in each region, taking into account modern transportation and other factors. That's basically what we did in Option 1B.

    Now, let me tell you this, I haven't done this without knowing that the dairy industry is one of the hardest hit of any in agriculture. But I would have to tell you, the number of dairy farmers has been reduced 50 percent each decade since 1950.

    The current system hasn't probably helped some people stay in business. You can't argue that it's been the salvation for dairy farmers all over the country.

    So what we decided to do, is to follow what Congress ordered us to do—modernize the systems, and reduce the number of orders. We changed the way we computed the basic formula price, and that will stabilize the price of milk a little bit.
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    Mr. WALSH. It averages it out.

    Secretary GLICKMAN. It averages it out over a longer period of time. If we're going to move to a slightly more market-oriented system, we have to provide some transition as we did for wheat, corn, cotton, and rice. Dairy has had no transition assistance compared to the other commodities.

    So we have provided options. If we went to Option 1B, then there could be a bump-up in the price over two or three years so that people in the short-term would not suffer any harm, regardless of where they're located.


    Mr. WALSH. And you can do that administratively?

    Secretary GLICKMAN. We can do that administratively.

    In addition to that, I propose on a separate track, flooring the BFP until such time as we finish this milk-marketing order reform to give people some additional stability.

    Mr. WALSH. You can do that also administratively?

    Secretary GLICKMAN. I can. It requires rulemaking, but I can do that administratively. And that's on a separate kind of track.
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    Now, I'll have to tell you that this thing is a regional problem, as you can well imagine.

    Mr. WALSH. I'm aware of that.

    Secretary GLICKMAN. I doubt that you and Mr. Obey have exactly the same views on these particular issues. And he's not a 100 percent thrilled with what we did either; I can tell you that. But I've had to try to do my best.

    But what I've had to try to do, is to come up with a rational system that can meet the tests of modern agriculture, and also meet the tests of people who will challenge it, both from the courts as well as the political system. Now we have the debate that's out in the open. I hope to have a genuine debate on these issues from the public; a national debate. We'll have plenty of time. We'll extend the comment period if we need to do it, in order to get people talking about this kind of thing. That's about the best that I an can tell you right now.

    Mr. WALSH. And so the idea was to make it more market-oriented, so you consolidate the market orders, and then you get down to this issue of differentials, and prices.

    Is it your feeling that both Option 1A and 1B are market-oriented options?

    Secretary GLICKMAN. Well, I guess my feeling is Option 1B is more of a market-oriented option than Option 1A.
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    Mr. WALSH. Could you explain why you feel that way?

    Secretary GLICKMAN. Because the differentials will be set based upon a kind of quantifiable national economic factors. I might ask Mr. Collins to talk a bit about this.

    Mr. COLLINS. Yes. I think under Option 1A essentially what happens is the mandated minimum price, the regulatory minimum price, is going to be up much closer to the current market price, whereas under 1B it's going to be a little bit below that. So, therefore, under 1B there's a little more scope for the forces of supply and demand to operate, and determine the price, rather than have it being determined by the regulatory administered price of the order system.

    Secretary GLICKMAN. I've seen some numbers which indicate that in certain parts of the country milk is going to come down in price, but because of a blended price, you may actually see some increases in other parts of the country.

    Mr. WALSH. Well, you mentioned that it is going to affect the nation regionally, and there are some studies available that would point out that's exactly right, and that all areas under Option 1B—all areas of the country, except for one, which is the upper Midwest, lose. In fact, $365 million gone from the farmer's paycheck nationwide.

    Secretary GLICKMAN. That's the Agrimark Study.

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    Mr. WALSH. That's correct.

    Secretary GLICKMAN. Yes, we're taking a look at it now. I have to tell you, I don't want to characterize it as absolutely wrong; I think that its an advocacy study, but we are meeting with the Agrimark people. We think that study's just wrong. I hope it is.

    Mr. COLLINS. Well, I won't say that it's wrong—economists can differ on these things—but I would say that that study ignores a few important factors. First of all, it ignores the fact that what we're proposing is phased in over 5 years; it just looks at the year 2003 after full phase-in. It doesn't take account of any changes in manufacturing milk prices, which we think will increase under this proposal. It doesn't take account of any of the effects of the formulas for the Class 3 price and Class 4 price, which we think over time will raise milk prices as well.

    So we think it's an incomplete study, and our estimate for the effect on gross revenues for farmers over the entire phase-in period is a decline of $83 million.

    Mr. WALSH. Over 5 years?

    Mr. COLLINS. That's $83 million per year, on average over 5 years, as opposed to Agrimark's analysis which shows $365 million; that's quite different.

    Mr. WALSH. Well, the result is that there will be less on farm income in the dairy industry, pretty clearly.
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    Mr. COLLINS. Well, somewhat less——


    Mr. WALSH. Regardless of the region. If you take the whole country, there's going to be less on farm income in dairy.

    And let me just refer you to a study, the National Commission on Small Farms, I believe Congresswoman Kaptur mentioned, the Department recently released this report, and the report states that, ''Having gone through the process of developing this report, we are now even more convinced of the necessity to recognize the small farmer's a cornerstone of agricultural and rural county. The Secretary should fully support passive of legislation that will make the viability and competitiveness of small and medium-size dairy operations a priority issue.''

    It's clearly a contradiction in this study on small farms and your recommendation on this policy.

    Secretary GLICKMAN. Let me just make a couple comments. The Small Farms Report is one of reasons why we need to get the public input on the issue.

    But look, Congress in 1996 said we had to move towards a more market-oriented farm policy. We may not like it—you may not like it in your area, but I think that most economists will agree that 1B is more market-oriented than 1A. Now 1A preserves and protects the price. In certain parts of the country it does that; I understand that. But I got the clear impression from reading the 1996 Farm Bill that we were to move generally to more market-oriented farm policy. But at the same time, dairy has never had the kind of transition assistance that the other farm commodities have had.
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    It may be that this creates such regional conflict, that you all decide legislatively that there's another avenue to go here, but we were ordered to modernize the milk-marketing order system, and we did the best that we could. And I would also point out that we still had two options there, even though one is preferred. I could have gone with one option only, and I didn't do that.

    Mr. WALSH. Well, my colleagues all have important questions. I don't want to monopolize the time, but I'd just like to end with this. And that is that, in the review—in your review of the Federal milk-marketing order system both the recommendations of independent analysis that your Department asked for from Cornell and from Texas A&M, their dairy economists, as well as the career experts within the dairy division of USDA, recommended Option 1A. However, when these recommendations moved up the chain of command to top levels of USDA, the objective recommendations were overruled by your higher level political deputies.

    What does this say about the validity of the decisionmaking process and the analysis of objective outside observing?

    Secretary GLICKMAN. Well, I never knew that you or anybody else put full faith in career bureaucrats to make final decisions for the United States of America. The fact is, I was given the choice of trying to decide what was best for the country as a whole. I could have gone the status quo, Jim. You know, I could have said, no change; we're just going to keep it as it is. But I had to do my best under the circumstances to create a national debate. And I'm going to make this point——

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    Mr. WALSH. You've done that.

    Secretary GLICKMAN [continuing]. Let me tell you, that is critical for these issues. Because the only people that ever seem to talk about dairy issues are basically people in the dairy industry only, and they usually prefer exactly what they have, except it hasn't been working very well.

    I have visited dairy farms out there. I'm thinking to myself a lot of these people are just struggling; how do they hang on? And you have small dairy farmers in Mr. Obey's State. Then you have a regional change in dairy production.

    Listen, we used to produce the most milk in this country in the upper Midwest and northeast. Now California's the biggest dairy-producing State, and they've got massive, mega dairies; 5, 6, 7,000 cows producing milk. And that's true in other parts of the country as well.

    I'm looking, and I'm wondering, does our current dairy pricing system encourage people to build mega dairies around the country, and hurt the little guy as well. That went into my thinking, in terms of getting this subject out for general debate.

    But look, if I were you, I'd be arguing the same thing, because I know that people obviously want to keep the price higher, and move it as high as they possibly can. And that's why we proposed transition assistance, which actually over the next few years gives people higher dairy prices, in every part of the country than they have right now.

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    Mr. WALSH. I appreciate that very much. And also the fact that you've offered to extend this comment period for as long as we might need to get a decision. This is very difficult. We've never been able to get a national dairy policy, maybe we never will. But I appreciate the effort; I just disagree with your conclusion.

    Mr. SKEEN. Mr. Serrano.

    Mr. SERRANO. Thank you, Mr. Chairman. Thank you, Mr. Secretary for joining us today.

    Mr. SKEEN. We're gonna try and limit this to about 5 minutes each, then we'll go around again if we have to.

    Mr. SERRANO. Starting with me? [Laughter.]

    You know, I was going to ask a question about civil rights.

    Mr. SKEEN. We'll let you be the last of the Little Mohicans.

    Mr. SERRANO. Thank you very much. I'll abide by the time, of course.

    Let me just for the record, Mr. Chairman—and the only disagreement I've ever had with Ms. Kaptur—say that pizza is a balanced meal, but only if it comes from New York. I've tasted some in this country where you can't tell the difference between the pizza and the cardboard box it came in. [Laughter.]
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    Wait until we get to the chicken industry.


    There is a concern that I have on a comment that Ms. Kaptur spoke about, and that is that, there is, not only in the schools in this nation, but in society in general, such a waste of food. And we know that, we've discussed this forever. And I'm sure there are people in the audience, like I do, who remember times in our lives when the availability of foods was not that easy for ourselves as a family.

    We've had success in this country at alerting people to the dangers of certain things, encouraging them to do something early about the detection of breast cancer, and HIV, and tobacco, and other things.

    Why can't we have a national plan—why, your Department for instance, to alert people to the fact that we are a wasteful society when it comes to food, and that we should be thankful for what we've got, and try to protect it in many ways, and one of them is not to waste.

    Now, of course my question—my being naive—is that bad for business, to suggest that we should not waste food in this country, and can we start that at the national level, and spread it?

    Secretary GLICKMAN. Absolutely. In fact, Mr. Serrano, we had a national conference on food rescue and gleaning last fall to deal with this issue. There are private groups all over the country, led by Second Harvest, which is one of the largest charities in the United States. They basically are the umbrella organization for all the food banks in America, and they, and us, and others are working on this problem right now.
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    The National Restaurant Association. They've got 700,000 restaurants, just published a book for their members on how to save food, and keep it from being thrown away, and how to donate that food.

    Major American corporations, 7-Eleven, Pizza Hut, Marriott, other hotel chains, are now engaged in this effort to try to deal with not dumping food in the garbage, but donating it to those who need it.

    The liability law change made a big difference, because people no longer have to be worried about being sued unless they're grossly negligent or engage in willful misconduct. So we do have a major effort going to try to educate people as to what they can do legitimately.

    The biggest waste is in prepared food. Canned and boxed foods are easier to donate. The biggest problem is how to recover food after it's been prepared, and that requires logistics, transportation, refrigeration, working with health departments; you still got to make sure the food is safe.

    Mr. SERRANO. Mr. Secretary, that is good, but you're speaking also on the larger volume level. Are we stepping over a line if we begin a national campaign to suggest to Mr. and Mrs. Smith or Rivera, that you can not ignore everything that you put in the fridge over the last 4 days. We do waste a lot at home.

    We're always talking about values for our children. One of the things we're teaching children in this country is that you can waste food. You know, I had recently to meet with about six individuals from six Latin American countries, including Cuba, and I asked them, tell me what impresses you the most about our country. And of course, we expected them all to talk about our election system. They said the abundance of food in your country. One of them said, you're the only country we know who hires people in stores to keep fruits and vegetables back on the bins, because you have so much it falls on the floor, and there people who go around picking it up and putting it back on the bins. That's a luxury and a blessing you have no understanding of.
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    So I would hope that we could really do something at the personal level also.


    Mr. Secretary, an article in the March 1, 1997 edition of ''The Washington Post'' discussed the claims of minority farmers across the country. The USDA officials unfairly discouraged, delayed, or rejected applications for Federal loans and subjected them to stifling standards when loans were approved.

    In this article—column—written by you, you state clearly there's a problem. I've heard stories, I've read reports, I've seen the numbers. Since much of the rural development budget requests relate to appropriations for loans and grants, what measures have been considered to ensure that civil rights violations to not occur in program delivery? Specifically, does the direct loan origination and servicing system address civil rights concerns, and if so, how is this problem being addressed?

    Secretary GLICKMAN. Okay. Several things. Number one, I created a civil rights action team last year, largely because of the concerns of a lot of minority farmers. Grievances were filed. Nobody ever called them back to find out what was going on with them. To be perfectly honest with you, there are parts of this Department that I'm not particularly proud of, in terms of how we've treated our customers and our employees over the years.

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    So we created this effort to try to deal with these problems, and I appointed a long-term career civil servant to lead the effort, and he prepared an implementation report that does a lot of things.

    Now, let me first tell you about all these old grievances filed by minority farmers. In the mid-1980s our independent investigative unit was disbanded, so these cases just sat there. We have reestablished that unit; we're in the process of trying to settle as many of these cases that we can responsibly settle, and try to deal with the existing complaints. I mean, that's justice delayed, it's justice denied. We've got to work on these cases as best as we possibly can. It's not an easy matter. There are legal problems with some of the cases, but we're doing our best to make sure that people know that their claims will be heard.

    In terms of the operation of the Department, we've changed our personnel evaluation systems to ensure that civil rights performance is as important in how people are evaluated as is program performance. And that is a total change of culture and circumstances for the Department of Agriculture, which I think is important.

    In terms of our loans, in terms of our technical assistance, we have about $250 million total in program funding in the budget that is geared towards small, limited resource farmers and other civil rights issues. But I did mention a problem to you that we've got. The 1996 Farm Bill says, if you've ever gotten a write-down, ever gotten a write-down from the government, you're no longer eligible; absolutely disbarred from ever getting government financing again. That's a standard that no bank in America has. And we're sending up legislation to try to correct that problem, and still do it in a way that's taxpayer friendly, because quite frankly, there were some people that abused the system, and those aren't the people that we're talking about helping.
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    We have Employee Training and New Outreach programs. We have a Commission on Small Farms, that is dealing with a lot of these particular issues. But I think most people who look at USDA honestly believe that a revolution is taking place, and that we are focused for the first time on trying to improve the way we deal with our employees, as well as our customers.

    Mr. SERRANO. Just very briefly. Those claims amounted to how many, do you know?

    Secretary GLICKMAN. Since January 1997, about 13 months, we have settled or closed 203 of the 1,088 program discrimination complaints in the backlog. Some of these cases date back to the mid-1980s. We are in the process—now that we have a full investigative unit—of trying to accelerate these particular cases. I would have to tell you the Department is a defendant in a class action case filed in Federal district court here in D.C. on these particular issues, so some of the matters are getting resolved through the courts, and some are getting resolved administratively. But we are doing our best in trying to get rid of this old backlog.


    Mr. SERRANO. And I know that you are in constant touch with activists of both the Black Congressional Caucus, and other folks that you're dealing with on a regular basis on these issues.

    Secretary GLICKMAN. That's correct. The big focus in addition to settling the cases, however, is to try to ensure that there's appropriate access to credit, that our USDA system of county offices is run fairly. As you know, the employees in our county offices are not Federal employees, even though they're paid for by the Federal Government. This is an anomaly in the law. Over the years there has been some concern that the accountability of these employees is not as direct as it would be if they were Federal employees. We believe all those employees should be made Federal employees, because they get their paychecks from Uncle Sam. We're working on that legislation as well. But even though it hasn't been passed yet, we are seeing very significant improvements in those operations.
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    We have appointed more minorities to our State committees that run our farm programs—African Americans, Hispanics, and women, Native Americans, and so this is a total effort to try to make sure that USDA is what Lincoln called the People's Department.

    Mr. SERRANO. Thank you. Thank you, Mr. Chairman.

    Mr. SKEEN. Mr. Dickey.

    Mr. DICKEY. Mr. Secretary, you and I have had our differences over the years, and one in particular is your insistence on calling your State Kansas, when it should be ''Can Saw.'' The other is that you talk so much that our 5 minutes is taken up.

    Now, I'd like to—if we could get an agreement, that you'll just keep your answers to yes or no, if you possibly can. Can you do that?

    Secretary GLICKMAN. I'll try.


    Mr. DICKEY. I'm not through with the question.

    We have in our little State of Arkansas, a problem in our aqua culture with the bird called the Cormarant. The Cormarant—it is a fish-eating bird, and it comes in, and just takes over our catfish farms, and eats the smaller fish, and actually injures the heavier fish, but they can't swallow those.
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    So, we're having a problem—is that we don't know what to do with it. It's protected by some kind of Japanese Treaty, we've been told. We go from one department to the next. Is there any way that you could assume jurisdiction? Just answer yes or no. [Laughter].

    Secretary GLICKMAN. Yes, of course.

    Mr. DICKEY. Can you assume jurisdiction over this issue?

    Secretary GLICKMAN. I don't know very much about the issue, but we'll see what we can do. Do you know who else has been working on it?

    Mr. DICKEY. Well, we're trying to get Don Young.

    Take your 5 minutes.

    Mr. WALSH. I'd just be real brief. I believe Fish and Wildlife enforces the Endangered Species Act regarding this species, and it is a huge problem in New York State too, and I don't think they're endangered anymore.

    Mr. DICKEY. It's a problem—it really has to do with the catfish production, and I wish you would look into it.


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    I've got a problem with the WIC budget. Last year we had, I think, $92 million in surplus from the previous year, and you all ask for $76 million in addition to that. And we ask—and I may be wrong on this, Mr. Secretary, but we asked for documentation as to why we were looking at an increase in the WIC usage, or actually the beneficiaries.

    Can you explain that to me, why with a $92 million surplus, you asked and got $76 million, I believe, in additional appropriations?

    Secretary GLICKMAN. Well, I'd ask Steve to answer after me, but 7.5 million participants is our full participation funding target, and we're not there yet. So the budget presumes 7.5 million, and that adds up to most of what we're talking about.

    There were 11.1 million women and infant children who were income eligible for WIC, and that is higher than what is currently served. Most of the WIC program growth is occurring among children 1 through 4, which is a group not accorded top priority until we reach full funding levels. So, the best I can tell you is that that participation level is what motivated the increase. Is that correct?

    Mr. DEWHURST. Yes, sir, that is correct.

    The program, as you know, is run by the States, and we allocate money to the States; we give each State an amount of money for the WIC program. We know historically that States do not ultimately use all that money, because they don't want to overspend their budgets. So they're pretty cautious about that. And, when all is said and done, out of a $4 billion program, we usually end up the year with about $100 million in carryover, simply because that's the sort of the shock absorber the States establish to prevent any overobligation of the money.
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    So, when we try to estimate what new money we need for these programs, we always have to operate in the knowledge that the States are going to be a little short of the spending targets we have given them just by the way they carry out the program now. And so last year we did have a carryover, roughly $100 million, and we will probably have that carryover in the future. It's just sort of inherent in the way they run the program.

    Mr. DICKEY. Well, can you justify that when we're looking at a budget problem, and you all are cutting staff years off, and we can't give minority farmers the benefits we want, and so forth?

    Mr. DEWHURST. Well, we have carryover balances in many of our programs. You tend to get them any time you take a budget—say you have $100 budget for a given program, and you allocate it to 40 or 50 people to run. And, if each one of them spends $99 of the $100 you've given them, you end up with a carryover. We see that in the Natural Resources Conservation Service, we see that in some of the farm programs, and we certainly see it in WIC.

    You know, to the extent the money is not spent, it carries over into the following year.

    Mr. DICKEY. Okay, let me ask you another way. Excuse me.

    If you have money left over, then how can you ask for an increase the next year? Would you give me that answer?

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    Mr. DEWHURST. Because we know that we will also have the same carryover at the end of the coming year, so we have $100 million we're carrying over from 1998 into 1999, and we know at the end of 1999 we will also have $100 million because the same people are running the program.

    Mr. DICKEY. But last year you asked for $76 million more. Now just centered on that increase, why would you ask for an increase, if in fact the year before—of $76 million, and you couldn't support it, and you're now anticipating—well, maybe you could, excuse me. But at any rate, you're now anticipating that that $76 million was to provide and allow for a $100 million surplus in that year.

    Now what I'm asking is how can you ask for increases in that environment?

    Mr. DEWHURST. I understand your question; I don't know that I'm doing a very good job of answering it.

    Secretary GLICKMAN. I think the answer is because we're focusing on getting additional people into the program, and that's where the increase comes from. I understand your point quite well.

    Mr. DICKEY. I have no further questions.

    Mr. SKEEN. Thanks. Mr. Obey.

    Mr. OBEY. Thank you, Mr. Chairman. I'm going to ask the indulgence of the Chair, because I need to ask several questions, and I'm not going to be here for the second round, because I have to get to some other subcommittees yet.
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    Let me just, Mr. Secretary, get back to the dairy issue. And I hadn't intended to do this, but with Mr. Walsh's defending his section of the country, I need to explain the problems in my section.

    We've been operating under these milk-marketing orders since 1938. I have not voted for a farm bill in the last 15 years, because I think they have all discriminated rampantly against my part of the country. And let me explain why I think the Secretary needed to go in fact further than you've gone in adjusting these milk-marketing orders.

    The way the milk-marketing order system works is that you start with Eau Claire, which is Ron Kind's district, and I represent one ward of Eau Claire. And then you set prices, based on how far from Eau Claire you are across the nation. That may have made sense in 1938, when we didn't have any decent transportation; we didn't have refrigeration. In our judgment it certainly doesn't make any sense today.

    What people—I think if the consumers understood that the law requires farmers in some sections of the country to be paid amounts which are very much higher for the same amount of milk than they're paid in other sections of the country, I think they'd go bananas; they'd think that's no market system at all. They'd think that's a political fix. And let me explain it.

    Right now the law says, if you're a farmer living in Florida, the law requires that farmer be paid almost $3 more per 100 pounds of milk than if you're a farmer in Wisconsin. If you're in New York, the law requires that the farmer be paid $2 more per 100 weight than he's paid if that farmer produces the same quality milk in Wisconsin.
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    I find it ironic that at a time we were promoting free trade, and level playing fields internationally, we have got this jury-rigged system of prosperity barriers within our own country.

    Now what your plan did is to make some very small changes in that imbalance in my view, at least your Option 1B. If you take your multiple component pricing plan, and you combine it with what you're doing on the changes in milk-marketing orders, what you do, for instance, is to suggest that Texas farmers will still be able to retain about two-thirds of the additional price that they get for their milk. In Florida you've reduced the differential by about 2 percent in some counties, and actually expanded in other counties. And in Georgia, Georgia still keeps on average about 85 percent of the additional amount that they get for the same 100 pounds of milk, the same quality of milk. And North Carolina, they still get to keep 70 percent of the additional price.

    I hardly think that you've been radical in changing this outmoded, mossbacked, 60-year-old milk-marketing order system. In fact, the way we see it in our region of the country, we didn't expect that you'd be able to hit a home run, given all the other pressures on you. We were hoping for a double; we think we got a bunt.

    Secretary GLICKMAN. Better than a foul ball.


    Mr. OBEY. We appreciate the fact that you've tried to make some adjustment, recognizing your national responsibilities to be fair to all regions, but I think we need to understand when people think that only the Midwest benefits by what you've done, they have to understand that we're getting absolutely hammered by the existing law, because the law requires that our farmers be paid $2 and $3 for 100 pounds of milk weight less than farmers are paid in other regions. And what your suggestion does is to simply reduce that existing injustice by a small percentage. Now that's what you've done, and we thank you for small favors on the 1B option. I wish it were the only option.
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    But then you mitigate what you've done by doing the temporary increase in the base price, and what happens there is that the mitigation means that farmers in my section of the country get about 15 or 20 cents temporary increase, but the farmers in Florida get a very large increase; farmers in northeast get a very large increase. In some cases, for the first 2 or 3 years that means the difference of what my farmers are paid and their farmers are paid actually broadens.

    So I don't think that you have been able to do any huge favors for the upper Midwest at the expense of the rest of the country, and I think it needs to be put in perspective. In fact, I want to just ask you a question, based on an assessment I got this morning.

    With respect to the temporary proposal that you're talking about, the transition proposal, the Upper Midwest Dairy Coalition has put out a statement, essentially being opposed to that portion of your recommendation.

    Secretary GLICKMAN. We're talking about the transition proposal in the marketing order reform, not the BFP flooring. Are you talking about the BFP flooring?

    Mr. OBEY. No, I'm talking about the BFP flooring?

    Secretary GLICKMAN. BFP flooring, okay.

    Mr. OBEY. Because, let me simply read what they say.
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    ''Whereas the proposed price floor will greatly insulate producers and high Class——'' and let me back up to explain this further.

    In Wisconsin, first of all, your adjustments apply only to Class 1 and Class 2; that's milk that goes into fluid. In Wisconsin only 15 percent of our milk goes into fluid; 85 percent of our milk goes into Class 3 and others, which means that they don't even get the benefit of those changes for the bulk of the milk they produce.

    Now what, reading from this memo, it says, ''Whereas the proposed price floor will greatly insulate producers and high Class 1 and utilization markets from the pain of falling milk prices. Producers in low Class 1 and 2 utilization markets, such as the upper Midwest, will directly suffer from the negative impacts of price declines.''

    And then they go on to say that the price floor, which is being examined—they go on to say about that, ''It is currently estimated that placing a price floor of $13.50 under Class 1 and 2 milk will result in an increase of about a $1 to $1.20 per 100 weight in the wholesale price of Class 1 and 2 milk. This increased price will stimulate milk production, particularly in high Class 1 and 2 utilization markets.'' And they see that creating more product, which in turn will depress the prices which we get for 85 percent of the milk we produce.

    Secretary GLICKMAN. Can I just make a comment on that?

    Mr. OBEY. Yes, after I've gotten one other sentence off my chest.
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    In my view that means that there is really very little that is being done to mitigate the economic crunch on our farmers; and I think that other regions of the country who are suggesting that you have driven them to the wall, are in fact crying crocodile tears, because they're already two or three steps up the economic ladder than our farmers are because of the built-in wackiness of the existing system. And I would urge you, not only to stick to what you've done in the 1B option, but to go even further. And I would point out that your agency is not considering pooling, which they say they can't under the law. I think there ought to at least be pooling if we're going to have any kind of arrangements like this.

    But now go ahead, please. Feel free to respond.


    Secretary GLICKMAN. Okay. I'll ask Mr. Collins to respond on the pooling issue. But let me just tell you, on this flooring issue, just so that you know, that is a formal rulemaking. There is a hearing next week, February 17th, so you need just to make sure your comments are in. The $13.50 number is the proposal by one group, but we didn't say that that's what we were looking at. So that matter is open, and I'm conscious of not wanting to interfere excessively in the marketplace. The other thing is, that's a temporary measure as well.

    On the pooling issue—do you want to comment on it?

    Mr. COLLINS. You characterized it correctly. The law requires us to have at least 10 orders, and our General Counsel has advised us that we can only pool within orders, which means we have to have at least 10 pools, not one national pool.
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    Mr. OBEY. Well, that's why we'd hope that you would at least expand the geographical region of the upper Midwest, so that broader pooling would result.

    Mr. Secretary, let me just—because of the time, I don't want you to take your time now responding, but I just want to ask you these questions, and you can respond for the record.

    First of all, I understand that USDA is working on a dairy options pilot program, which is intended to allow farmers using fluid markets to give them greater risk management strategies.

    I understand that you've proposed to have pilot programs in six States and in six counties within those States. I would strongly urge you to consider Marathon County as one of those test sites. That is the largest dairy county in Wisconsin, and there's considerable interest in that county in participating, even though I have my doubts about how useful in the end that's going to be.

    Secondly, I would ask that your agency take a look at the devil of a time pork producers and ginseng producers are experiencing in overcoming trademark barriers in countries like Korea, Taiwan, and the Philippines. They're not practicing what they preach on trade.

    And I would just like to ask, what has been—organic meat producers in Wisconsin feel that Food Safety and Inspection Service is dragging its feet, with respect to allowing the labeling of organic meat, and that it's costing them a lot of money in sales. I'd like to know why the case of the slow is on that?
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    Secretary GLICKMAN. I would mention to you on organic certification—there's two issues here. One is the actual inspection issue; the other is that we have proposed these new organic rules that have created an avalanche, as well as a firestorm, of a response. We've extended the public comment period for 45 days. But I'll check the issue on the inspection side as well.

    Mr. OBEY. Thank you, Mr. Chairman.

    Mr. SKEEN. Mr. Nethercutt.

    Mr. NETHERCUTT. Thank you, Chairman. Welcome, Secretary, gentlemen.


    Mr. Secretary, I'm impressed. I've been on this subcommittee 3 years, and every time I've heard you come before us, I've been impressed that you have emphasized research, and the importance of it, that USDA does and can do in funds for the benefit of agriculture. And as you said today, it's critical to the future growth of agriculture. Every statement that I've seen in testimony and otherwise has stole the virtues of research, and I agree with you.

    You've also testified here before about your support for export and export enhancement, as well as, I think a year ago, regulatory relief.

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    I agree with you on your priority setting for the Department, and I agreed with you the last year, and we had testimony from you about the logic of eliminating the Prosser Research Station in my State, not in my district, but in my State. And also the North Dakota station, which I think were the only two that were eliminated a year ago. This committee put them back in. I would argue, not for partisan purposes at all, but for the substance of research that is done in those stations. And Earl Palmeroy's a Democrat, and speaks as passionately about his, as I do about the one in our State.

    As you may know, the Prosser Station does research, primarily potatoes, peas, and lentils, and other commodities—up to 100 commodities actually, and it's a very valuable station. In fact the public/private partnership exists in that station, and the Potato Commission in our State spent $400,000 on the basis that there would be a station. They put in private money to improve it.

    I was frustrated to see this year that it has now come out again. I don't know if that's a function of OMB or your Department, but I would appreciate having some explanation.

    Secretary GLICKMAN. The administration has proposed four labs and work sites in the country to be closed. One is the Mandan, North Dakota site, which was on the list last year; one is the Prosser Washington site, and those projects would be largely transferred to Pullman, Washington, part of Washington State University or facilities there. There's a site in Royal Lake, California, an irrigation research station, and there's a site in Maine, a Northeast Plant, Soil, and Water Laboratory.

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    The administrations propose those. I'm well aware of what you did last year—and all I can tell you is that the budget based upon the full review of all of the different research facilities.

    Now, we do have a commission. In fact, we're meeting today.

    Is called the Strategic Planning Task Force on Facilities, headed by a fellow named Bruce Andrews, who's with Purdue University. One of their jobs is to look—it's not a base closure kind of thing, but it is to look at all these different facilities we have to make sure that within the limited budget that we have, that there's some sense to all of this. So, I'm sure that this will be a part of that particular effort. But George, that's about the best I can tell you right now.


    Mr. NETHERCUTT. I understand. And I noticed in your testimony that the administration's position is to take out these four stations. I won't put you on the spot and ask you if the Department is in agreement. I have had some sense that maybe the Department sees the value of these stations, at least the two that I'm speaking of from last year, and I haven't researched the other two.

    But I would just argue to you, researchers are difficult to buy. You can't just go buy one off the shelf and say, we need a researcher this year. It's a four, and five, and six—it's a longer term project that needs good people, good scientists to come into these stations. And I think there's a great morale reducer when there's this ''in one year, out the next''. Congress puts it in; now it's back out again. And again, it has a chilling effect I think on the private sector, and their commitment to put in private money.
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    The wheat research facility in Pullman, Washington, which is in my district, was a collaboration of Federal, State, and local money; $2 million from the Wheat Commission, and I think $3 million or $4 million from our State, and $3 million or $4 million from our Federal. That's a good combination, good partnership.

    So, I'll just to say to you, I'm going to fight for this one, and I respect the work you do, but I think you're wrong on this one; you, meaning the administration. And I'll say it's the other guys, and not you folks. Because I think it's really worthy of looking at very carefully, especially given this recent influx of private money, and an investment that ostensibly is going to be gone.

    Two other things I want to mention to you. I'm an advocate of diabetes research and a cure for diabetes. I've had consultation with Indian tribes across the country. I think the Department ought to look carefully at the food programs that exist, as they relate to Native Americans, and the potential consequences to Native Americans on the health side, by virtue of the food and the kinds of foods that are distributed to Native Americans.

    Obesity is a significant problem for Native American populations. It then leads to diabetes, which then leads to terrible health costs, and consequences to that segment of our population. I don't know if the Department has thought that much about the content of food that may be going to Native Americans, but I'd say it advisedly, I think it's worth looking very carefully at, because it has a terrible detrimental effect downstream.

    Secretary GLICKMAN. I think it's an excellent point. I think our Food and Nutrition Service is looking at the WIC package, and how it effects Native Americans.
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    I would have to tell you—and I don't know if you ever visit these labs—the primary work that's done in human nutrition research is done by USDA—we have six major laboratories. One is at Tufts University, one's at Baylor Medical School in Houston, part of the Texas Medical Center, which is the largest medical complex in the world, I think. One's in—San Francisco, and one in Grand Forks, North Dakota. While NIH gets all the discussion of health research, virtually all of the research on eating and content of food, we do.

    I think the point that you raise is an interesting point. There is some very exciting work being done at these other laboratories. For example, how to get mineral absorption faster in food for children. Diabetes actually causes heart disease, as you know. So I think it's a very good suggestion.

    Mr. NETHERCUTT. I just think there should be good coordination.

    One final point, because I know Henry's waiting.


    The National Food Gleaning Initiative, $20 million. With all due respect, I was impressed with your comments about all the private, and volunteer, and private sector efforts there are to save wasted food.

    Secretary GLICKMAN. Right.

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    Mr. NETHERCUTT. It's—my judgment is—and again, it reflects my philosophy a little bit—is that if we can encourage the private sector, and the private sector is encouraged to do its work to solve that problem, is it really necessary, perhaps at the expense of the Prosser Station—which does good research that provides an ability to grow better food and so on, and others—is it advisable to start an initiative like this for $20 million where it's being done very effectively in the private sector? Again, with all respect to the government effort, I just think it—in tight budget times where we're squeezing research—and you'd like to spend more—I just think that it is unadvisable. I think that it ought to be very carefully thought out.

    Secretary GLICKMAN. Well, I would like to respectfully disagree. You go to the food banks around the country, and you ask them—and they are all privately run—you ask them what are their needs. And they say, ''Mr. Glickman, we don't have refrigerated trucks——''

    Mr. NETHERCUTT. Right.

    Secretary GLICKMAN [continuing]. ''And we don't have the systems available to make sure that the food is properly cooled, heated, or chilled.'' Those are largely what we're talking about. It's to facilitate them—it's not to run their programs. In bigger cities you might get a big company to do this. But in smaller towns, you don't have those kind of resources available. So, the main thing is to help them, facilitate their effort.

    I would also point out that we have an awful lot of hungry people who are not served through our traditional programs, and there's a giant gap there, and this is a fairly inexpensive way—when you consider that 25 percent of the food is being thrown away in the garbage every single day, it is a pretty small drop in the bucket. Hopefully it doesn't come out of the Prosser Washington Center. I understand the tie that you are talking about there. But this encourages these volunteer organizations in America that have the resources to be able to do the job better.
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    Mr. NETHERCUTT. I've been in those food banks. I've been in one in Spokane. I've been in a little one in Walla Walla. They are anxious for a better refrigerated system. They're going to move fairly soon.

    My point is, is the $20 million for grants? Is it administrative?

    Secretary GLICKMAN. No, it's grants——

    Mr. NETHERCUTT. How much administrative money is there in it, would you say?

    Secretary GLICKMAN. It's grants. It's all grants.

    Mr. NETHERCUTT. All grants?

    Secretary GLICKMAN. Yes. And we'll make sure that it is administered within the operations of the budget. The idea is grants.

    Mr. NETHERCUTT. Alright. Well, that makes a difference. I just get worried about new initiatives when we're struggling to meet the Department's obligations as they exist today.

    So, thanks for your work.

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    Thank you, Mr. Chairman.

    Mr. SKEEN. Mr. Bonilla?

    Mr. BONILLA. Thank you, Chairman.

    Secretary, gentlemen, welcome. It is always good to see you and work with you. I'm still learning a lot on this subcommittee. It's my second year on the job here, and you all have helped me tremendously in learning the details of the programs you oversee. I also want to say, for whatever it's worth, Secretary, that there's a great feeling among producers in my State that you have their best interests at heart. You are a good man, and you are doing a good job, and we appreciate what you are doing in Texas for all of the producers.


    I have a question to start out that relates directly to the FSA operation in Reeves County. We talked about this last year. I brought it up with the Inspector General when he was here just a few days ago. Last year, if you will recall, I brought up this issue, and because a lot of the farmers were waiting for the—payment and to find out what was going to happen with the office. There's a lot of uncertainty. Payments were finally made last year, in September, but there still continues to be a lot of uneasiness and uncertainty among my 122 farmers in that county because the IG investigation continues, and although Mr. Viadero came here a few days ago and said that—he is committed about a two-to-three-week time period to complete the work in Reeves county, we want to make sure that everything is done right. I'm not suggesting at all that we move faster than what we need to to complete the investigation. But I'm just asking if you can provide me with a timeline or a schedule as well for the FSA to complete its work and to make final decisions on the future of this Reeves county office to settle some of the uneasiness that I hear from my producers there.
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    Secretary GLICKMAN. Congressman, the latest news that I have is that representatives from Roger Viadero's office, the IG's office, and FSA will be meeting later this month to further review any evidence of fraud. To date, it is my understanding that no instances of fraudulent activity have been found. But anyway, I will advise you when a final decision is reached. They are meeting later this month, however.

    Mr. BONILLA. I appreciate that. As you can identify with a Member of Congress when you go back to your district they have a lot of concerns, so they ask me questions about this all the time, and I would like to bring them some good news before too long.


    I'd like to move now to the American Heritage Rivers Initiative. As you probably know, at least in our part of the country, farmers and ranchers are overwhelmingly opposed to this initiative because of concerns that this may spill over into more restrictions on private-property rights.

    Related to that, I was very disturbed to see that USDA, NRCS spent $94,000 in Fiscal Year 1997, and $225,000 in Fiscal Year 1998 on this initiative and used staff time on a program that does not even have congressional approval. And while it may not seem like a lot of money, it is still taxpayer money, and it should always be spent in the most responsible manner.

    How do you justify, Mr. Secretary, taking money away from other congressionally-approved initiatives and programs to spend money on the American Heritage Rivers Initiative no matter how small or great the amount? Many questions remained unanswered and the true benefits of this program are still in question.
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    I have gone to countless meetings in my congressional district, Mr. Secretary, where farmers and ranchers have come from miles around because of their great concern of what this program can mean to them, and they are very troubled to hear that USDA is involved in this program, I know that this is a small amount of money, but—one of the things I talk about in my speeches—back home, is how spending has gone down in agriculture—and in the military as—yet we seem to find money to work on a project that a lot of farmers and ranchers are adamantly opposed to.

    Secretary GLICKMAN. Well, first of all, let me tell you, my judgement, in going around the country, is that as a general proposition, this is a very popular project in the country. I'm not saying that there aren't some farmers and ranchers that don't like it. But my judgement, as I travel, is that it is quite popular, and I think that there is a lot of rhetoric out there which indicates that it is the end of private-property rights which just isn't true, because we wouldn't be participating in it if that were true.

    Now, this is a high priority of the President. And I do not know the specific numbers of what you are talking about, but my assumption is that there's probably been some staff time at NRCS associated with looking at proposals and working with the other agencies of the government. Steve, is that right?

    Mr. DEWHURST. I would assume so. We have people in our watershed programs who would actually be involved in a river-based initiatives.

    Secretary GLICKMAN. Yes, I would guess there's probably been some technical assistance from watershed-related people into the project as part of their general work in dealing with watershed development. But I'm not too familiar with specifically where the dollars that you came up with are from.
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    Mr. BONILLA. Maybe you could research that, Mr. Secretary, and get back to me on that because it is a hot issue—not just in my congressional district but throughout the State of Texas.

    [CLERK'S NOTE.—Secretary Glickman provided additional information via seperate letter. A copy of this letter appears on pages 33–35.]

    I've also received materials that CEQ has published that suggest ways that the American Heritage Rivers Initiative can help communities. In their literature, it specifically addresses targeting the Environmental Quality-Incentives Program to areas of designated rivers. The program is designed to allow State technical committees to set priority areas for each State. This is to allow for the most local input possible, and to get the money into areas where it is needed the most. Does this mean that we can expect Federal input into State-priority areas or changes in the way the program is administered at the Federal level? I also have to wonder how you will target EQIP money when it is a cost-share program; the producer has to be interested in participation in the program in the first place.

    Secretary GLICKMAN. I think that I need to get back with you on that specific question. I can't answer it.

    [CLERK'S NOTE.—Secretary Glickman provided additional information via seperate letter. A copy of this letter appears on pages 33–35.]

    Mr. BONILLA. I appreciate that, Secretary.
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    Let me close with one more question here on another issue. I understand that you have the opportunity to fund 25 new RC&D's this year with the $5 million increase that this subcommittee provided for Fiscal Year 1998. In Texas, there are nine RC&D's that have not been funded, and five are in my congressional district. I've been informed that some of the proposals for my district are excellent. I'd like to know what standards and priorities are used by USDA when you select any of these proposals for funding.

    Secretary GLICKMAN. Yes, the process is basically peer reviewed, there is a ranking system. I don't personally, as a general rule, get involved in picking those projects. They are generally picked—they appear on a list with points given. Does either Steve or the deputy know anymore about it?

    Mr. ROMINGER. That's correct. There are a number that are on a waiting list to be funded, and they are ranked by the program folks each year, and we are able to fund a few more each year. The goal is to fund them all eventually.

    Secretary GLICKMAN. We'll check on your Texas projects to make sure they are being considered.

    [CLERK'S NOTE.—Secretary Glickman provided responses on three separate issues to Congressman Bonilla via letter. A copy of that letter follows.]
    "The Official Committee record contains additional material here."
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    Mr. BONILLA. My excellent proposals, you'll check on those?

    Secretary GLICKMAN. Yes.

    Mr. BONILLA. I appreciate it very much, gentlemen, thank you.

    Thank you, Chairman.

    Mr. SKEEN. Mr. Secretary, we have a vote on, as you well recognize, but what I think we're going to do is help agriculture and give us about a 30-minute break and we'll take it up again at about a quarter to one. If anybody would like to catch a bite to eat, why——

    Secretary GLICKMAN. Okay, we'll go downstairs, then.

    Mr. SKEEN. That will work all right?

    Secretary GLICKMAN. Yes.

    Mr. SKEEN. Then we'll come back, and we'll start again in about 15 minutes or so.

    Secretary GLICKMAN. Alright.

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    Mr. SKEEN. Thank you.


    Mr. SKEEN. Okay, we're back on record.

    Mr. Latham?

    Mr. LATHAM. Thank you very much, and Dan, thank you for being here. It is always a pleasure, to have you with us.


    I just have to say—I think you have been visiting a little bit about dairy policy. And last July, apparently you sent a letter to the leaders of the Agriculture Committee discussing dairy policy. And in that letter, you said, and I quote, ''I believe that establishing a price floor under the Federal milk-marketing orders would be inconsistent with congressional intent.'' And I see now that you have called an emergency hearing next week to discuss flooring. What's changed your mind?

    Secretary GLICKMAN. That was then, and this is now. [Laughter.]

    No, that's not a very good answer.

    I think that what happened was that there was a lot of interest in us establishing a permanent price floor, and I did not think that I could do that. But in the context of milk-marketing order reform, a price floor is a temporary measure to expire upon the final date of the milk-marketing order system. We basically view it as legal, and we can do it.
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    So, I think that the honest answer is that I view this as transition and not any kind of a permanent role.

    Mr. LATHAM. You don't think that it is now inconsistent with congressional intent?

    Secretary GLICKMAN. No. But I recognize that it is—I understand that with the letter we said it. And, my impression back then was that we were under great pressure to establish to a permanent-price floor, and I didn't think that we could do that.

    But we have to have a hearing, I haven't established this. It can't be done without evidence, so I haven't established the floor itself. One of the dairy groups had asked for a floor at $13.50, so we're taking evidence on that.

    Mr. LATHAM. Okay.


    To a different subject that has become near and dear to my heart on the information technology. I'll probably sound like a broken record, but discuss a little bit the budget, and what have you done to rectify the problems of the past?

    Secretary GLICKMAN. Well, let me tell you a little bit about budget, and then I would ask both the Deputy Secretary and Steve to talk about it.
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    As I understand it, our budget for technology is approximately $1.25 billion in this budget across the various mission areas. And to give you a breakdown, that includes $253 million for equipment, $74 million for software, $343 million for services and supplies, and $280 million for personnel. And then—as I'm reading from material given to me by my staff—$447 million is budgeted for intra-government payments which include funds provided to the States for the technical infrastructure that support the food-stamp program.

    We have a Chief Information Officer, and she basically establishes the budgets overall. Her name is Ann Reed. We also have a departmental executive information technology review board which has to approve all of those expenditures. Because of the year 2000 problem—which, by the way, Mr. Raines at OMB is probably more focused on than almost anything else. We have to comply in dealing with that. The chief information officer has to approve all information technology expenditures over $25,000. The Deputy actually put that policy in effect in order to ensure that we weren't inconsistent with the year 2000 focus.

    Mr. LATHAM. Are you familiar with the fact—it is my understanding that the Chief Financial Officer just bought a computer system that was not 2000 compatible.

    Secretary GLICKMAN. I'm aware of that. I became aware of that allegation yesterday, and we are looking into it. We actually have a new Chief Financial Officer. Just so you know, the Chief Financial Officer has been a vacant position. That's been an acting role until last night. The Senate confirmed the new CFO for the Department.

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    But I am not aware of anything more specific than that. I heard it. I don't know if it is true or not. If it is true, it is irritating. But we're going to check it out, and we will get back with you.

    For example, there was a rumor that the Rural Utility Service had purchased computer equipment that is not year 2000 compliant, and I understand that that is not true.

    Mr. LATHAM. You don't know about the chief financial officer?

    Secretary GLICKMAN. I don't know about the CFO purchase. I heard that yesterday.


    Mr. LATHAM. What's the new initiative, the common computing environment. Does Ann Reed have authority to do anything over there?

    Secretary GLICKMAN. I have so many papers on this.

    Mr. LATHAM. Twenty-nine smokestacks.

    Secretary GLICKMAN. Let's start and ask either the Deputy or Steven to talk about that. But the answer to your question is, yes, she has the authority, and in subcabinet meetings, I have emphasized that to the other mission areas. She is in charge of the computer acquisition and monitoring and oversight over computer purchases.
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    Mr. LATHAM. You are saying that if this was true about the chief financial officer that she would have been aware of this.

    Secretary GLICKMAN. She should have been, but I don't know whether she was—it happened before she was appointed? So, you know about the purchase then? [Laughter.]

    What do we know about this in order to get the right answer?

    When did the purchase take place that would have triggered this? Is this a recent purchase?

    Mr. KAPLAN. It was purchased in 1994.

    Mr. DEWHURST. It was a commitment that was made sometime ago. Some of the equipment and software is just arriving, so they have been running tests to see what works, and they have recently discovered that some of it is not 2000-compliant. I am not aware of the exact magnitude of the problem, but if we fix it, I'm told that the Chief Financial Officer and Ann Reed are involved in looking at this to see what exactly the problem is.

    Secretary GLICKMAN. I think that we need to get the facts to you as quickly as possible. I just—I don't know enough to tell you anymore about it.

    [The information follows:]
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    "The Official Committee record contains additional material here."

    Mr. LATHAM. Outside of this, you think that you do have a handle on the 2000 problem?

    Secretary GLICKMAN. Let me put it to you like this——

    Mr. LATHAM. This does not instill confidence, shall we say?

    Secretary GLICKMAN. Well, okay, except that I was just made aware of this yesterday. But the implications in your question is that they had just gone out and bought equipment that was not compliant. I don't think that's accurate. That's why there was some hesitancy here.

    Frank Raines has told us that of everything that we do in our respective departments, year 2000 compliance is the number one management task that we have, each of us. As far as I'm concerned if our agencies and offices don't do this one well, then that is a chief judge of their performance—as well as for the CIO. I get reports weekly on compliance under the year 2000 work, and what they are doing, how much they are spending in order to make sure that our systems are compliant.

    Mr. ROMINGER. The latest report from the Chief Information Officer was that 40 percent of our systems are compliant now, and that we're on track to have all of them compliant in time for the year 2000.

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    Mr. LATHAM. Okay. I don't know how we are on time here, Mr. Chairman.


    In the Inspector General audit, the CRP program found that there was a 47 percent error rate in calculating the environmental-benefit index. Are you comfortable with that accuracy rate?

    Secretary GLICKMAN. Well, there was some difference in opinions within the mission areas as to the specifics of the error rate as you would extrapolate Nation wide. There were error-rate problems, and, as a matter of fact, there have been management and personnel actions taken in at least one State where errors occurred as a result of the computation of the EBI. So, that report did cause us to both take a personnel action as well as to ensure that it did not happen again.

    Mr. LATHAM. And I'll just tell you—I mean it was very, very frustrating last year with the sign up, and I know that I made it clear to you personally, I think—and other people in the Department—but you really have to question what motivation there was as far as some of the judgements that were made. In a State like Iowa where my district represents one-third, geographically, of the State, of the 15 sign up, I got 3 percent of the acres in the State of Iowa. Another member of the other party got 74 percent of the acres with a smaller district by far. Obviously—you know I probably would not want to change the level of the quality of farmland, but obviously we were penalized greatly because we have very environmentally-sensitive ground that should be in CRP which happens to be, say, in the same county or close to higher-valued land. And, obviously, when you have the environmental-benefit index wrong. You could flip a coin and do as well, obviously, at 47 percent—it has real concern, as far as I'm concerned, as to the equity in the program and who is making those type of judgements and on what basis.
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    Secretary GLICKMAN. Well, first of all, let me say that in terms of the IG report, the Farm Service Agency has taken a position that is contrary to the IG report. They have filed their comments. And, while I think that the IG made some good suggestions, I wouldn't want to say that all of their findings were accepted by a lot of folks on the ground as being entirely accurate.

    But, second of all, I will tell you that the 15th sign up for a new CRP was a first attempt for us to change the CRP after it had operated in exactly the same way for a long period of time. I think the 16th sign up is probably more to your liking because it reflected, again, a re-review of how we did these decisions. And we'll have future sign-ups and hopefully with each one we'll learn from those mistakes.

    Mr. LATHAM. But, in knowing that, according to the Inspector General who is unbiased and it is not their office that did the indexing—has there been any effort by you to go back and look to see if there were inequities in the 15th sign up to try and correct that inequity?

    Secretary GLICKMAN. Well, there were appeals made at each sign up, and there was additional acreage offered, a rather substantial amount.


    Mr. LATHAM. But it had to come from the producer? It did not happen by the Department who made 47 percent errors.
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    Secretary GLICKMAN. Well, first of all, I don't accept that there's been 47 percent error rate.

    Mr. LATHAM. Well, the Inspector General doesn't have a dog in this fight.

    Secretary GLICKMAN. No, I understand that—and, by the way, we have one of the best Inspector Generals in the entire government, but a lot of technical people in the Department disagreed with his findings on this matter. The Inspector General files hundreds, if not thousands, of reports every year, and then he gives the opportunity for the agency to give their comments and response. It doesn't mean that he is absolutely accurate on every single report. I would have to say that he is right most of the time. Mr. Collins, do you have a comment?

    Mr. COLLINS. I might say——

    Mr. LATHAM. Before you start, what is your Department? What do you say, then, was the error rate?

    Secretary GLICKMAN. I don't have a number, a specific number on that particular error rate right now.

    Mr. COLLINS. We don't have a number, it is a question of what you call an error. There can be an error where you just simply add up all the components wrong and that is an error. In other cases there were judgements that were made about the quality of the bid based on records in the office, and later on it turned out that farm—the producer had changed the cover crop on the land, for example, which was not recorded in the office, and therefore, the score that was awarded for that piece of land was, in fact, inaccurate because the farmer had made some changes in the way he protects his lands, and the office didn't know about it. That's an error. Those are the kinds of things that we corrected through the appeals process.
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    We originally accepted 16.2 million acres, I believe in the 15th sign up. Then, we adjudicated all the appeals. And after we offered contracts to individual producers, some of those producers chose not to follow through on the contract. When those two sets of factors, both the appeals and those producers chose not to follow through on the contract—when all was said and done, we accepted 16.8 million acres.

    Secretary GLICKMAN. So an additional 600,000 acres? And a lot of those changes would have been due to a variety of things that could have been called errors. Look, I acknowledge that in Washington State where Mr. Nethercutt was involved, there were problems that his people would call errors, but the fact is that we went back in and said, ''You know what, we have to re-evaluate how we compute this EBI because there are other factors that we needed to take into account,'' and we did that. But that wasn't classically an ''error.''

    I'm not sure that's what the Inspector General was talking about, either. I think that the Inspector General was talking about, let's say, the species that weren't there that the government said were there. Those kinds of things.

    And we attempted to go back in each State and look at that particular issue, and that's one of the reasons why we added an additional 600,000 acres.

    But it wasn't perfect, I'll admit that to you.

    Mr. LATHAM. I agree. [Laughter.]

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    We agree, Dan.

    Secretary GLICKMAN. Okay.

    Mr. LATHAM. If I can have another chance later, I'll——

    Mr. SKEEN. Go ahead.

    Mr. LATHAM. You are really kind today, Mr. Chairman. As always.

    Mr. SKEEN. Well, you know that when a field is fertilized it will keep growing.

    Mr. LATHAM. Okay. [Laughter.]


    The Department put together a plan to move the cost of administration reimbursements for crop insurance from discretionary to mandatory. When will the Department be submitting the legislative language to the authorizing committee?

    Mr. DEWHURST. I don't know a date. The legislation is largely drafted. We have some clearances to go through within the executive branch, but I would expect the legislation to come up here pretty quick.
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    Mr. LATHAM. You don't have a date—why?

    Mr. DEWHURST. I can't do that because I can't control the other folks who review the proposal.

    Mr. LATHAM. Okay. I think I'm through now, Mr. Chairman. Thank you.

    Mr. SKEEN. Mr. Fazio.

    Mr. FAZIO. Thank you, Mr. Chairman.

    Mr. Secretary, nice to see you and all of your associated staff, including my friend and constituent, Rich Rominger.

    I apologize that I haven't been here earlier, and I hope that I don't double back over anything that we've talked about.


    The one thing I did want to ask about, Danny, is the research initiative, the NRI, which I know you are quite proud of, and I think it is a significant issue and certainly something that we would hope that we could support. But I'm concerned about the erosion of other aspects of research within USDA's budget. The formula funds seem to be in trouble. The Hatch Act funds severely decrease some 15 million, McIntyre Stennis, the forestry program is decreased, Smith Lever extension activities cut by $10 million, payments to the historically black agriculture schools are only held steady.
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    So, it seems that we are reducing research in general by taking another approach which seems to highlight an increase at the same time we're making a series of reductions.

    Do you want to comment on where you think we're going and what the rationale behind that approach was?

    Secretary GLICKMAN. Well, it is number-driven to some extent. Now, there are some increases, including the President's food safety initiative and the national food genome strategy that are considered high priorities. And there are some other enhancements, for example agricultural management decision practices under some of the conservation areas.

    But, as I've said before—the agriculture-research budget in real terms is coming down, not going up. I've been thinking a lot about this. The problem with the agriculture-research budget is that it is so decentralized, it's agriculture experiment station driven, land grant driven. It is often driven based upon who is in which building located where. And then a project takes on a life of its own. I know that. I had that in my own district.

    That strategy I don't think is very productive for the big picture of getting increases. You know, we have all these massive problems in agriculture. For example, pest resistance, insect resistance. We have erosion, sustainability. We have feeding the hungry. We have human nutrition. And what we don't seem to do is put these categories in a way that are easily understood by the public. When you look at the big increases in research in this budget—I'm talking about the general budget—a lot of them are important, and I obviously will support them—cancer research, health research, the NIH budget, the National Cancer Institute budget. Those are easily identifiable by the public.
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    What we have got to figure out is how to articulate the mission of agriculture research so that it becomes something that is positive and accepted nationally as important to the country beyond just our own discussion in agriculture circles so that we can start getting some augmentations where we need them.

    Now, saying that, I think that we will be able to basically take care of our needs within this budget even with the changes that you talk about. But it can't go on forever like this.

    Mr. FAZIO. Well, I know the debate rages on between competitive grants and formula grants, and I'm certainly not going to weigh in just on the formula side because I tend to agree that competition is healthy in research, and certainly I'm not worried that the institution I represent is doing well under that approach. But I know that many of our land-grant institutions really look to the formula side to underwrite some of the costs of doing business, the overhead, in a sense. And if we're not careful, we're going to have this inflationary erosion and make it harder and harder for these very valuable institutions to make their overall contributions.


    Mr. ROMINGER. Yes, I would just add that we agree that we would like to have more money in our budget, but when we have the numbers that we had to work with, we made some choices, and we said that we do want to put more money in the NRI, and we also put more money into integrated PEST management. Most of the funds in both of those programs go through the land-grant universities and the only way to increase those was to take a little bit out of the formula funds.
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    Mr. FAZIO. I know—I had a chance to chat earlier and the OMB pass back—almost caused the Department to pass out. It was difficult for the Department, I know, to absorb this year. I think we're all running into that in a lot of different departmental budgets.


    Initiatives are very important. We need them, but we've paid the price for them in other parts of all our budgets.

    I'd like to ask about HACCP and the implementation so far. Can you tell us what we've encountered? Anything evident to us that we didn't anticipate with the implementation of our new food-safety approach?

    Secretary GLICKMAN. By and large, I think it's been pretty successful. The implementation started with respect to 300 of the largest plants last month. That is about 92 percent of the meat and poultry in the country. I don't think that we have found any major catastrophes out there. I think industry, by and large, is working through this very successfully. There have been a few problems, a few plants that haven't set up critical control points to determine contamination as much as we would like, but we're working with them. We began testing—you know we're doing salmonella testing, the industry is doing generic e-coli testing.

    So, I would say from the food-safety folks, they think it's going fine.
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    Mr. FAZIO. As you know, I've introduced the Safe Food Act which is designed to create an independent food safety agency. It was our experience recently when we asked for a briefing on the food-safety initiative, we had 24 officials from FSIS, ARS, CSREES, ERS, AMS, APHIS, FDA, EPA, CDC. The transportation costs alone in getting that group to come over and brief us is one of our underlying problems in eroding the administrative budget.

    What do you think? Is there a chance the administration might try to make more rational the way we deal with this ever-growing public concern about food safety?

    Secretary GLICKMAN. Well let me—first of all say that the National Academy of Sciences is currently doing a study on this——

    Mr. FAZIO. This committee——

    Secretary GLICKMAN. You asked for that.

    Mr. FAZIO [continuing]. Generated that, yes.

    Secretary GLICKMAN. And so, I think that it is useful. And I'm not going to pre-judge it, nor am I going to tell you that I think it is inherently a bad idea.

    I would tell you that if you did it now, you would create absolute chaos. You have 7,500 inspectors out there who are currently in the process of going through the most major change in meat and poultry inspection since the 1920's. If we were to overlay this right now with creating a single food agency, I'm convinced that you would probably have a revolution out there, and it would be a very bad thing and nobody's food would be made safer in that process.
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    So, I think that we've got to let this HACCP system go forward.

    And by the way, we do work very well with FDA. The cooperation with FDA and CDC is probably better now than it has been in a very long time.

    But, you know, if you were starting this from ground zero would the system look like this that we've got now? Probably not. And so, I don't want to pre-judge at some point in time that we may want to make improvements in the system, but I would say now is not the time to do it.

    Mr. FAZIO. Well, I appreciate your concern about jumpstarting something. If we were to agree to do this, obviously we would have to do it over time. We would have to make the whole system more rational, but we would have to do it effectively and gradually would probably be the means to do that.

    But, we have a kind of crazy quilt of approaches where we put a lot more emphasis on meat products, for example, than we do for a lot of other things that the public consumes, and I don't think they are quite aware to the degree which we do make more or less effort in a wide variety of areas.

    Secretary GLICKMAN. Well, the President's Food Safety Initiative does make an effort to begin the process of seriously augmenting the Federal inspection role on fresh produce, fresh fruits and vegetables. It is true, we hardly inspect anything that comes in across the border in fresh fruits and vegetables. I think that people are somewhat comfortable that the meat and poultry is inspected, but I think they are quite shocked to know that there is virtually no inspection—and that is one of the things—on fresh fruits and vegetables—and that's one of the things—or even seafood which is somewhere in between——
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    Mr. FAZIO. Sure.

    Secretary GLICKMAN. The Food Safety Initiative is attempting to deal with that issue.

    Mr. FAZIO. Let me ask you, in this regard. FDA is seeking authority to expand its surveillance of food growing and manufacturing practices to include visits to producers in foreign countries. Do you think that the Department would expect that those visits to foreign producers would require a reciprocity? That is, foreign governments sending their inspectors here to our producers who intend to export our products overseas?

    Secretary GLICKMAN. Well, you know, I can only tell you right now we have our own USDA inspectors in foreign meat and poultry plants to ensure that they meet equivalent standards. By the way, they have the right to look at our plants as well. I don't know how many of them actually have people in our plant. But I do not believe that our farmers and ranchers, certainly, would like to have regulators from Europe come to their farms and look at their practices.

    Mr. FAZIO. Probably somewhere deep in the recess of my mind that's why I asked that question.

    Secretary GLICKMAN. Yes, I think that would not be very well tolerated and shouldn't be.

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    Mr. FAZIO. Well, I mean, I think we have to think twice about advocating certain things that bring about concomminant, reciprocal arrangements, and because we don't really import that much meat product—I think probably more lamb than anything else, to the chagrin of the chairman—we probably haven't begun to estimate what the impact would be on our produce industry because we export a tremendous amount of orchard and nut-crop products, and I just thought I would be interested in the Department's response on that.

    I don't want to take any more time, Mr. Chairman.


    Mr. SKEEN. For reciprocity on pork and chicken and things of that kind, we'll leave their little wheat pocket in Southeast Asia alone. That was why, I think, that question was in there about whether or not we're really getting reciprocity as far as the inspections were concerned for our shipments out of the country.

    Secretary GLICKMAN. Well, for example, in Australia, they have been irritated because we haven't given them reciprocity on meat. We're working with them on that, but—I don't want to give them any market, even their little market in the Far East. I don't think that we should just accept the fact that certain parts of the world are their markets. I mean, right now we're using GSM credits overseas, especially focused on Korea and Indonesia, and the Undersecretary, Gus Shumacher, just came back from a trip where he was called an ''avaricious looter'' by the members of the Australian government for our attempt to come in and use our credits which are perfectly legal under the GATT agreement. These are not subsidizes, they are commercial bank credits, and I think that we ought to continue to use them.
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    Mr. SKEEN. But it caused a little tremor that runs up and down his spinal cord—I thank the gentleman for yielding.

    Mr. FAZIO. I just want to say, in passing, I really appreciate the Market Access Program being fully funded in the budget this year. That's very important to a lot of people that I represent.


    I had a question about the commodity-purchase program. We've historically had a small-business preference there. I understand that USDA has recently required 100 percent set aside for specific school-lunch program purchases. The effect it has, however, is on co-ops which are, you know, kind of an amalgam of a lot of small businesses. They might be excluded from being able to participate in the bidding on those commodity purchases. I wonder if the Department has thought that through?

    Mr. ROMINGER. It is a concern, and I think that we want to review that because we did make some changes in the program, and we've made similar changes in other programs, but in those cases we did include co-operatives along with small businesses. So, I think in this program we do need to review that.

    Mr. FAZIO. Is that an administrative decision that could be adjusted? Or is that something that you need to hear from us on?

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    Mr. ROMINGER. I think that is an administrative decision, and we need to review it.

    [The information follows:]

    Federal Acquisition Regulations developed by the Federal Acquisition Regulations Council require the use of small business in certain circumstances and in other circumstances they provide agencies the discretion to utilize small businesses. Our review of USDA commodity purchases indicates that USDA has a policy to use small businesses whenever possible, consistent with FAR. However, in making those commodity purchases, USDA is required to utilize definitions for small business developed by the Small Business Administration (SBA). SBA does not distinguish agriculture cooperatives from other forms of business in their definitions of small business. Should an agricultural cooperative meet the SBA definition for small business they may compete on contracts set aside for small business.

    Mr. FAZIO. Well, I would just as soon urge you to be consistent and allow co-operatives to participate as small businesses.


    On organic standards, as you know, that is a particularly important issue for my State. We have 1,200 producers, and 50,000 acres in production. It is an $85 million industry in California, which is small in the larger context of, what, a $16 billion industry. But it is a significant and growing one.

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    It seems that our rules are a good deal more stringent now than those that have been adopted at the Federal level, and our concern is that we still work towards national standardization.

    I know that there were some issues that were sort of left out there for further resolution. I wonder if you could comment on the proposed rule and some of the factors that have been involved in thinking through some of the more contentious issues that weren't really resolved fully. And I know that we were pressuring you to get the regs out, so you did the best you could.

    Secretary GLICKMAN. Well, first of all, we've extended the comment period for an 45 additional days. We've received thousands of comments on the Internet and in other ways as well.

    There are three unresolved issues. There are others that are differences of opinion, but the three major unresolved issues are: Should we allow genetically-engineered crops to be certified as organic or not? Should we allow irradiation to be used on crops and call that organic? There is also the use of sludge, which is a kind of treated sewage in the fertilizer context which is in some places conventional and allowed to be called organic.

    We didn't deal with that in the rule because the comments were coming in so significantly that we decided that we would leave that part of the record open.

    The organic community, frankly, took our decision not to comment to mean we were going to include that in the rule. And I've made it clear that is not, in fact, the case. We haven't made that judgement yet.
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    So, right now this is nationwide about a $3.5 billion industry. It is growing by leaps and bounds.

    Mr. FAZIO. Right.

    Secretary GLICKMAN. World-wide this is one of the biggest possible markets because the Europeans and the Japanese, among others, love organic food. It offers a nice niche to small and medium-sized farmers as well. Now you can see some of the big companies are getting involved with it.

    Mr. FAZIO. Sure. I see Fresh Fields full every time I go by.

    Secretary GLICKMAN. That's right.

    The organic community wants this as a selling tool, a marketing tool. When you label something organic, people will know what it is. It is not a food-safety issue at all. Organic doesn't necessarily mean safer, period. It is just a marketing tool.

    And they are upset because we haven't resolved all of the issues, and we're just going to keep that record open for a longer period.

    Mr. FAZIO. But they are going to be resolved in some timeframe?

    Secretary GLICKMAN. They will be resolved.
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    I don't think—without pre-judging the issue, I doubt that we're going to come down with a rule that the organic community detests. You know, they are the ones that asked for it.

    Mr. FAZIO. On the other hand, they are a group that does tend to differ even among themselves.

    Secretary GLICKMAN. Well, and the other thing is they are not the only people who should have an impact on this rule.

    Mr. FAZIO. Exactly.

    Secretary GLICKMAN. I mean, I've got to look at the world as a whole as well.

    Mr. FAZIO. And you do allow the States to be more stringent if they wish to, although there may be, with the national standards, some desire on those States to conform, otherwise they may be disadvantaging their own grower community.

    Mr. ROMINGER. What the Secretary also said in that announcement where the comment period will close now, April 30, was that we'll review all those comments and then put out a proposed rule. But they will have another chance to comment when we re-propose the rule.

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    Mr. FAZIO. Well, I can see this is not an issue that will be resolved easily or quickly, but I do congratulate you on stepping up to it. It needed to be dealt with even though it wasn't going to be simple.

    Secretary GLICKMAN. It had been seven years, and it could have been seven more years.

    Mr. FAZIO. I understand. That's why I raised it a year ago, and I'm taking all the credit for having moved you to——

    Secretary GLICKMAN. It's not substantively what we said——


    Mr. FAZIO. I want to thank you, Mr. Chairman, for giving me the time. I will put the rest of my questions in the record, and I simply want to say how pleased I am with the way my good friend and colleague Mr. Glickman with his staff has been running the Department. I think he's—particularly on food safety—been a real breath of fresh air and deserves a lot of credit.

    Mr. SKEEN. Thank you.

    Mr. Nethercutt?

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    Mr. NETHERCUTT. Thank you, Mr. Chairman. Thank you, sir.


    Mr. Secretary, I agree with Vic's comments about the Market-Access Program and export enhancements and so on, and your's certainly. What is your sense of the impact that the Asian financial-problem crisis will have on American agriculture? Have you all quantified that yet? What are your projections?

    Secretary GLICKMAN. Yes, this morning, Secretary Rubin and Mr. Greenspan, and I gave a briefing to the House Agriculture Committee. As a part of that, we prepared a fact sheet, a USDA-fact sheet which I'm going to give you because it is one of the best things that can give you a summary of this.

    But let me just quickly tell you a couple of things. Asia is 40 percent of our exports and about half of our export growth in the last decade. So, this is a big market, and our initial estimates are for our exports to fall at least by $500 million this year, but it could be more. We'll have a forecast on the 23rd of February. Probably somewhere between 3 and 6 percent reduction could occur for each of the next two years from what otherwise would have been—so that could be about $2 billion in Fiscal Year 1998.

    It was interesting today. Mr. Greenspan, in arguing for the IMF funding said the following, ''the currency crisis, in addition to reducing the purchases of our products, has another affect. It's had the effect of weakening the Canadian and Australian currencies which makes their products cheaper than ours and they are picking up some market share over us as result of this crisis as well and that is, of course, having a bearish affect on our markets for grains and livestock products.''
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    So, you know, Korea and Indonesia have been the big hits, but we have put out about $2 billion in credits. It's had impact in Korea, no question about it. We have kept markets because of the quick use of those GSM credits.

    And the other thing is, these markets have been somewhat restricted to us. However, Indonesia now has reduced their tariffs on our products from 20 percent to 5 percent, and part of that is because of the international-IMF requirements there.

    So, all I can say is that it is going to have some impact. At this stage it is impossible to determine the magnitude. The crisis seems to have moderated a bit, stabilized a bit, but you don't know where things are going. And, quite frankly, I will make a pitch for this. I think that the IMF issue is totally different than other trade-related issues. We are such an export-dependent country in agriculture that—if, in fact, the crisis worsened, it would have a monumentally bearish affect on American agriculture.


    Mr. NETHERCUTT. If you, in your discussion today—or Secretary Rubin or Mr. Greenspan—have you looked at the different commodities that are affected either proportionally or disproportionately? Has that analysis been done? If it has, great, I'd like to see it. If it hasn't, maybe that is something to look at too.

    Mr. COLLINS. What I might say is, we forecast U.S. agricultural exports four times a year. As the Secretary mentioned, the last official forecast was in December in which we foresaw a $500 million drop due to Asia. Since then we have created an Asian-currency crisis team to look at this and track it on a daily basis.
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    In mid-January, our snapshot was that we foresaw a 3 to 6 percent decline in exports—that's the $2 billion decline—due to Asia alone. When we produce our next quarterly forecast, that will be an export estimate due to all factors. We are actually increasing exports of some commodities such as soybeans and soybean products.

    There has been a serious drought in Malaysia, Indonesia. World palm-oil production is going down. Soybean-oil prices are going up. There are tremendous export opportunities for soybean oil. So, there are a lot of factors going back and forth here.

    But to get to the answer to your question, the largest impacts will be for meat and poultry products. Generally we are talking about a 5 to 6 percent decline in U.S. exports of those products. The next largest impacts would be horticultural products, roughly a 4 percent decline. The least affected would be grain because they are used as an input. The consumer doesn't face those prices directly. They are a smaller proportion of the consumer price.

    So there are those commodity-type effects.

    Mr. NETHERCUTT. That's very helpful, and I thank you. And I really support the GSM credit emphasis. I think that it is great that you are emphasizing GSM credits and are thinking of it very carefully as well as export enhancement.

    How much money did we use last year? None, zero?

    Secretary GLICKMAN. None.
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    Mr. NETHERCUTT. Okay. Alright, at least you are aware that that is a tool.

    Secretary GLICKMAN. We used the dairy export-incentive program——

    Mr. NETHERCUTT. Yes, right.


    I just—a couple of quick questions. I noticed in your testimony, Mr. Secretary, the goal of the IPM, the Integrated Pest Management program, is—I think it is 75 percent coverage by 2002. Do you know how many acres are currently using or have taken advantage of IPM? Has that been decided yet?

    Secretary GLICKMAN. Do you know?

    Mr. ROMINGER. No, we have not taken a look at it lately.

    Mr. NETHERCUTT. Will you be doing that in the normal course of your activity this year so that you know whether you are going to reach your goal or not?

    Mr. ROMINGER. That's right.

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    Mr. NETHERCUTT. Okay.


    One final question—and I've written you about this, Mr. Secretary, with regard to the PL–480 program and the terms that the Department specifies Tenders. I guess really the shipper has to bear the risk of the commodity getting from producer to the port. And if the railroad, for example, doesn't get commodities to port on time and the opportunity is missed, the loss is borne by the producer rather than the railroad. And I know—I have some sense of how the PL–480 program works. And I've written you a letter on it.

    I'm just wondering to what extent you have had a chance to even focus on it? And if not so much, when you might?

    Secretary GLICKMAN. I'll get you a response sometime next week.

    [The information follows:]
    "The Official Committee record contains additional material here."

    Mr. NETHERCUTT. That's great.

    I'm—the purpose of my letter was not to complain, but—other than to raise the problem and complain about the circumstances that affect the farmer, but also to look at whether the Department might want to work with us or other Members of Congress as to how there can be some solution that doesn't seemingly so disproportionately affect the farmer as opposed to the transporter, the railroad. The ownership doesn't change hands until it gets to port, and if it gets to port late, then the producer is stuck with—bears the loss as opposed to—a disruption in the railroad industry, for example, that may cause that delay in getting it to port and off to PL–480 recipients.
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    Thank you.

    Mr. SKEEN. Mr. Kingston.

    Mr. KINGSTON. Thank you, Mr. Chairman. Since this hearing started, I went to another hearing, I met with my staff, I went to lunch and I also gave a speech. Mr. Secretary, I hope they let you go to the bathroom.

    Secretary GLICKMAN. Twice, and also to lunch for 15 minutes.

    Mr. KINGSTON. Well, that's good.

    Secretary GLICKMAN. Twenty or 30 minutes, I'm sorry, 30 minutes.


    Mr. KINGSTON. Mr. Secretary, on this proposed tobacco settlement is the U.S.D.A. at the table?

    Secretary GLICKMAN. Yes.

    Mr. KINGSTON. In a big way? Are you an afterthought or——
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    Secretary GLICKMAN. No, we're at the table in the context that we have a team that is actively engaged on the legislative side of the picture as it relates to what the tobacco farmers' involvement would be in any settlement process.

    I don't have any language for you right now. I do know that the White House has repeatedly called upon our team. It's Charlie Rawls, who was the Executive Assistant to the Deputy Secretary, who is now our acting General Counsel; Deputy Undersecretary Dallas Smith, from North Carolina, who knows more about the tobacco program than anybody else around.

    The President has committed that dealing with the farmer will be a linchpin of any settlement. We're not going to sign off on any legislation without that. There is obviously some difference of opinion within tobacco country as to what this ought to look like. But we are at the table.

    Mr. KINGSTON. Will that definitely mean a buyout? Are we moving in the direction of a buyout? Are we moving in the direction of maybe a special—and I hate to use the word subsidy, but a special kind of investment subsidy for the farmers to get involved with alternative crops.

    Secretary GLICKMAN. Well, it's hard to say where we are, except that my guess is that both of those concepts are being seriously considered. But, you know, I've talked to the President about this and other people in the Domestic Policy Council. I think there's the clear belief that Capitol Hill is going to have a great impact into what this proposal looks like.
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    Mr. KINGSTON. Switching gears, on the inspection of meat and poultry, and other agri-type businesses where you have an inspection component to it, many of the producers in our area have become increasingly concerned about the power of a U.S.D.A. inspector to close down a food processing plant for the day. Five hours down time is just a huge problem.

    And they're concerned that it might not have been accurately closed down. For violating the law, fine, close it down. But if you have an inspector who's made a mistake, to quote one processor, he told me, he said, can you imagine, you have a business with $100 million in receipts, you have 600 employees, you have deadlines to get the food out to grocery stores and so forth, and one U.S.D.A. guy can make a mistake and close you down for 10 hours and you could potentially even be out of business for that.

    Just tell me where the balance is.

    Secretary GLICKMAN. Okay, but first of all, let me say that we are doing a lot of training right now. Most of our inspectors don't want to close down a plant. I mean, it puts people out of work. It's just not a power you'd like to use willy-nilly.

    We are doing an extensive amount of training, particularly with all the new HACCP rules. An inspector alone can't close down a plant. There's a process that they have to go through and there's a district manager and the issue works its way up through a process.

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    I don't personally get involved in decisions that like—you know, these are professional decisions that are made to close down a plant. But there is a process in the Food Safety and Inspection Service, so you just can't have one inspector come in and say, ''You're closed.'' That would be pretty problematic if that happened.

    One other thing I would tell you. I have asked for additional authorities here. The industry doesn't like it. But I don't like the idea that the only authority I have is to shut down a plant. That's what I call the atomic bomb authority. Nobody wants to put 700 people out of work.

    If you have serious food safety problems, fecal material, or other terrible things that are happening and the product is going out, maybe there's no other option.

    I'd like to have civil fine authority, which is what the FAA has, which is what the bank examiners have so that there is some intermediary authority other than shutting a plant down. We'll see if Congress decides to give us that kind of authority.

    The other thing is the new HACCP rules. The old way we used to do business is that if you had a problem—let's say you saw something on a piece of meat that shouldn't have been there—the inspector would say, ''Aha, deficiency.'' There was never really a process to look at the plant systematically to see if it was operating in a clean way.

    And so what we never really did was to ensure the plant and U.S.D.A. were working together to develop systems to make sure the plant itself is clean. Now you've got testing and you've got a science-based system with trained inspectors. I think we're going to have a lot better operation, and a plant will know earlier on if they have a problem.
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    And that's the whole idea. Most people don't want to serve dirty food or dirty meat. But the other system really didn't encourage you to deal with the problems early on. And I think this new system will do that.


    Mr. KINGSTON. One thing that we may need to think about is how can a food processor disclose their concern without being worried about revenge of the individual inspector. I think inspectors are far more open and less vengeful than a food processor would believe, but at the same hand, it seems like the food processor is very, very much afraid to come forward and say, look, I have a problem right here on this floor, I'm not sure what to do, and can you help me, give me some technical assistance.

    But instead, they don't want to do that, because they're afraid that the inspector will say, okay, that's it, everybody out of the pool, the gig's up for the day and we're going to get this problem fixed.

    We need to think of a way that a food processor can—instead of coming to me as a member of Congress and saying, hey, we have this problem and I trust you and I'm telling you about it; but I would never come forward and tell U.S.D.A. about it because they'll shut me down for revenge.

    It seems like there ought to be some way that we could encourage maybe a little more open dialogue.
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    Secretary GLICKMAN. Well, the new HACCP system is basically geared towards each plant setting up its systems and then they have critical control points where you're likely to have the problem on the cutting room floor or wherever else it is.

    The whole idea is for the inspectors and the plants to work together on a systems-based approach to make sure that those systems are clean and working. They'll also be testing there and that kind of thing. So it is really geared towards collaboration.

    The old system was based on a deficiency slap you with a deficiency notice, and you know, you can't keep your plant open unless you fix that. They would fix it and they would move on.

    I don't know how many inspectors are viewed that way by food processors. But our goal is to make sure that they are talking to each other.

    The other thing I would have to tell you, though, is that the new system means there's a lot more responsibility on the company, the plants, to set up systems and do it the right way. And, it means the top management of these plants have to be engaged. I suspect that has not been universally true in a lot of plants in the country.

    Mr. KINGSTON. Thank you, Mr. Secretary. Mr. Chairman.

    Mr. SKEEN. Thank you. Mr. Latham, last shot before we wind her up.
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    Mr. LATHAM. A couple of things, very briefly. You've got in the budget, I think, $10 million each of user fees for the FSA and the NRCS. What are you going to be charging farmers for? They basically only deal directly with farmers.

    Mr. DEWHURST. The intention is not to charge farmers. Both of those agencies gather information in the course of their business. A lot of times they gather information from the farmer. Soil survey information in the case of the NRCS, or acreage information in the case of the Farm Service Agency.

    There are folks who have access to that information and use that information. Insurance companies, to some extent; private developers who use soil survey kinds of information. The intention is simply where you have someone who's in business for profit making, you ought to be able to charge a fair charge for that sort of information, and not have taxpayers continue to pay for it.

    But the point is not to levy some kind of new charges on the producers who are providing the information in the first place, but only on those up the line who are, in fact, making use of that information for their own purposes.

    Mr. LATHAM. And you've someway come about the amount of $10 million in each agency that that's what people are going to pay from the outside for these reports. Is there any basis? I'm curious. I mean, you've obviously just plugged numbers in here.
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    Mr. DEWHURST. I think I'd have to say that we don't really know how much money we'd be able to recover. The Department feels in principle we ought to be able to do some of this, but we don't really have a solid number. So the number in the budget is essentially a placeholder.


    Mr. LATHAM. Well, that's very nice of you to say. I just want to make you aware, of a situation and compliment you, because you're not the real problem. In my district, we have agriculture drainage wells, which were punched into the bedrock back 40, 50, 60, 70 years ago for drainage.

    And if you remember back in 1995, we tried to pass the Clean Water Act, which would have given U.S.D.A. authority over agricultural wetlands and not with EPA and Fish and Wildlife and the Army Corps, that you would have been able to solve this problem.

    What we have is a situation of concentration of primarily hog feeding facilities, and the concern is, obviously, that we're going to have the manure go down into the aquifer directly. What we have is a typical bureaucratic Washington infighting going on where, when you recognize agricultural wetlands, Fish and Wildlife does not, and then the Army Corps comes in, and then the EPA comes in and they all have a different set of requirements.

    And what we're facing is an environmental and ecological disaster, because this is the aquifer that my kids drink water out of, Thousands of people in my district drink out of it. I would welcome anything that you could do to resolve this problem.
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    The state of Iowa has put millions of dollars into it. There is EQIP money that's usable for this situation. But what we have is just the bureaucratic infighting here in Washington and everyone is ready to go, but we can't get the bureaucrats to agree.

    And we're going to have a disaster which is going to pollute the aquifer, the Ogallala aquifer, if we don't get something done. Any kind of cooperation to stave off this pending disaster, would be very helpful.

    Secretary GLICKMAN. I'm not going to say you're preaching to the choir, but——

    Mr. LATHAM. Fine. I know.

    Secretary GLICKMAN. We are also very cognizant of this problem.

    Mr. LATHAM. Right. Well, and it's very frustrating to me, because, you know, we tried to address this when I was on Transportation in the last Congress. We tried to resolve this as far as agricultural wetlands, so that you folks or some one agency would have jurisdiction that we could get an answer. And now we still have four agencies fighting each other. In the meantime, we're going to pollute the aquifer. And it's nothing more than bureaucratic infighting.

    Thank you, Mr. Chairman, on that high note. Thank you, Mr. Secretary. I very much appreciate your help.
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    Mr. SKEEN. Thank all of you. Ms. Kaptur.


    Ms. KAPTUR. Yes, Mr. Chairman. Before Mr. Latham leaves, I wanted to follow up on his questioning regarding crop insurance, and to ask the Secretary in your budget, you indicate that your proposal is fully offset under pay-go.

    And can you tell us the source of those offsets, because, as we read the submission, the budget justifications only note a partial pay-go offset resulting from program changes that don't take effect until Fiscal Year 2000.

    And there appear to be shifting of funds occurring here and maybe someone could, if you cannot do it now, provide it to us.

    Secretary GLICKMAN. Steve, do you want to comment?

    Mr. DEWHURST. Sure. We can provide you with the detail. But essentially what's happening here is that you're going to receive a proposed piece of legislation and it is going to have some items in it that increase costs on the mandatory side of the budget. The crop insurance item we've discussed is one of them.

    There is also a proposal to increase the size of the environmental quality incentives program. There is a proposal to fund some additional enterprise zones in rural areas. And there is a proposal to provide some additional funds to state and local governments out of the Forest Service.
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    All of those items will be in one legislative proposal, and then there will be a series of offsets in order to meet pay-go requirements. Those offsets will include some tightening up of the crop insurance program, particularly with respect to profits that companies are permitted to make from that program.

    There'll be some reductions. There is a cotton step two proposal that saves some government money. There are some changes in the EEP program that saves some money. So in order to produce a total package that meets the total budget requirement, you have to put all these things together in one vehicle and send them up to the Congress at one time. And we'll be doing that in the very near future.

    Ms. KAPTUR. All right. We'll look forward to receiving that. We would appreciate clarification there.

    [The information follows:]
    "The Official Committee record contains additional material here."

    Mr. Secretary, as you know, the Farmland Protection Program expires at the end of this year. Do you expect to send up legislation for its reauthorization?

    Mr. DEWHURST. We are working on this in the same piece of legislation that I just discussed. We are trying to work into that legislation an increase for that program.

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    Frankly, we're not sure we're going to be able to do it at this point, because we're not sure all the numbers balance. But it looks like we'll be able to do it. So we want to extend that program and we're trying to find a way to get it done within the budget.

    Ms. KAPTUR. There's quite a bit of support up here on the Hill for that, so we would—I wish you good luck in trying to incorporate that in the proposals that ultimately arrive here.

    Mr. DEWHURST. We agree that's a good program.


    Ms. KAPTUR. On contract growing, let me ask Mr. Secretary the Department's position on strengthening the ability of ordinary farmers, who may not have the capital of a ConAgra or a Hormel, to ban together to be represented in a negotiating posture vis a vis the processing company that may be located near those farmers.

    Which commodity areas might you be looking at? One indication——

    Secretary GLICKMAN. Poultry.

    Ms. KAPTUR. Only. What about beef?

    Secretary GLICKMAN. Yes, poultry is the primary one.

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    Ms. KAPTUR. What about eggs? What about fruits and vegetables? What about the other areas where farmers are—hogs—farmers facing tremendous market pressure out there now, economic pressure there, buckling. They're having to get themselves into relationships that truly are at odds with what the Commission on Small Farms recommended.

    And also, in relation to which areas you're looking at, what about enforcement authority? Is the Department going to actually help these farmers assume a negotiating posture around a table?

    Secretary GLICKMAN. I know you're interested in this issue. I think we have sent up legislation on co-ops, giving co-ops additional authority in the bargaining area.

    Ms. KAPTUR. But there's no enforcement, Mr. Secretary.

    Secretary GLICKMAN. But this is one of the issues the Small Farms Commission talked about, I've particularly heard from poultry growers, let's say, in Arkansas and in Oklahoma, some of these areas.

    You know, Mike Dunn, who's the Assistant Secretary for Marketing and Regulatory Programs, talked about this. His shop is working on the issue now. I know this is a great interest of yours. Keith, Do you know something——

    Mr. COLLINS. I want to say as part of our response to the 1996 Secretary's Committee on Agricultural Concentration, we did make a series of legislative proposals. Among those there was one that would increase the Secretary's enforcement authority under the Agricultural Fair Practices Act, which does involve bargaining. Unfortunately, I can't remember the details of that proposal, but we can certainly get it to you.
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    Ms. KAPTUR. Yes. And I think—you know, you should look at the—the Department should really look at the economic relationship that is being forced upon, forced upon many of these farm families. And who's assuming the risk vis a vis how much capital is being invested?

    And I think, you know, whether you're talking Iowa or Ohio or wherever you're located, you'd be surprised at what's happening to these farmers out there. You've got to have run into them as you've traveled across the country. So this is an area of extreme importance to Ohio, and I know many other states.

    So I'm glad to hear you're looking into it. We would love to work with you on it, to provide you with names around the country of people who've even come to our offices on this.

    Secretary GLICKMAN. We'll get you a copy of the bill that—this market concentration that he talked about.

    [The information follows:]
    "The Official Committee record contains additional material here."

    Ms. KAPTUR. All right, thank you. Let me ask, Mr. Secretary, you talked about the stellar export performance in agriculture for our country, $56 billion. Congratulations. We are very aware that no trade deficit accrues because of agriculture.

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    What is the level of imports from this past fiscal year that has come into the country? Because one of the relationships I look at is the imports versus exports and the rate of growth.

    Secretary GLICKMAN. I think it's about $20 billion to $30 billion.

    Mr. COLLINS. For Fiscal Year 1997, it was $35.8 billion.

    Ms. KAPTUR. All right. One thing I would appreciate, if the Department would provide me with a chart going back maybe 15 years, because I am looking at Freedom to Farm and a lot of other things that are happening here.

    Show me the rate of growth of both exports and imports over a period of time, because I don't sense that the lines will look like this. I think they're going to look like this over a period of time.

    Mr. COLLINS. Well, I think what happened was—actually, you are referring to the net trade balance, whether—agriculture has always had a surplus. That surplus actually grew and reached a peak of $27 billion in 1996.

    Ms. KAPTUR. Two years ago. I know that.

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    Mr. COLLINS. Two years ago, and now it has come back down. The import growth over the last couple of years has exceeded the export growth.

    Ms. KAPTUR. I know that that's true, but I'm interested in the rate over a period of time.

    Secretary GLICKMAN. We'll get you the figures.

    [The information follows:]
    "The Official Committee record contains additional material here."

    Ms. KAPTUR. Thank you. Mr. Secretary, I also wanted to ask you how you feel about the fact that when that strawberry outbreak occurred in Michigan and other places, that we could never trace back to a source where those strawberries actually came from, as I understand it.

    Do you think that we need a better kind of trace authority on food labeling in this country?


    Secretary GLICKMAN. Well, we've really never been able to trace the source of contamination. That is, the strawberries came in and then were distributed around the country and there was only an outbreak basically in one place, or maybe in two places. We knew where the strawberries came from, but we do not know the source of the outbreak.
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    So one of the things that was so disturbing about this is that we don't know if the outbreak was a result of handling in Michigan or was because of contaminated strawberries coming into the country in the first place.

    We know that since the outbreak only occurred in one place in the United States, it makes you kind of think it was the former rather than the latter, but we don't know for sure on that. We do know that the people who bought the strawberries for our school lunch program had gone through a variety of law enforcement procedures because they violated the law in purchasing nondomestically grown strawberries.

    I do think that the President's food safety initiative is geared, Marcy, towards increasing inspection of fruits and vegetables, both at the border, as well as domestically. This is an area where, as a general proposition, we do not do a very good job.


    Ms. KAPTUR. I appreciate your sensitivity on that one. I know we had talked earlier about the importance of labeling—that happens to be a very major concern of my own—including the origin of meat and poultry, especially in this new blended hamburger stuff that we're getting on the shelves now, or in the coolers in many of our meat markets around the country, certainly in Ohio.

    I think we have a right to know where that meat comes from. And my father used to own a meat business. He was very proud to put our family name on what he manufactured. Why are we moving into an age of anonymity in labeling? I find it a very troubling development as a society.
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    Finally, Mr. Secretary, my last question. I hope this is a pleasurable question for you. I know that you've had a chance to travel a lot in your work and you've traveled to the former Soviet Union, you've gone through several republics.


    Would you reflect a little bit on what you have observed in terms of the agricultural future for those nations and any conclusion, or just observations, you want to make.

    Secretary GLICKMAN. Well, in the first place, we have people who are more expert than I in the Department who I should have brief you on that. By and large, though, it has not been a tremendously bullish—because of a lot of long-time historic practices and lack of credit.

    And as you know, I believe in Russia, you cannot transfer fee title to land. And because of that, you cannot borrow. And if you can't borrow in agriculture, you're dead. Of course you're dead if you do borrow, too.

    So that's where we've been trying to promote the use of cooperatives where possible, because that's a good transition for them in light of what their history has been, and involving American private voluntary organizations.

    We have an emerging democracy fund where we have provided some of this technical assistance, and I don't think it's working as well as it should overall. But we have had some successes. We've had some joint ventures, for example, in some agribusiness poultry processing where there's been some success.
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    But in the raw ownership of land and production agriculture, we probably need to augment those efforts.

    Ms. KAPTUR. Well, you know, I think that the—I am concerned in some of those nations, their ability to produce food sometimes has gone down by as much as 85 percent. And their traditional export markets have dried up.

    I am very concerned about political instability in that part of the world, and I think initially it certainly will go back to food and the ability of people to feed themselves, especially when their incomes are so low.

    And I would very much like to work with the Department, particularly on suggestions you might have, in order to try to help them feed themselves as they transition to this new system, whatever it might be. And, of course, each one of those nations is different.

    But I find the agricultural instability and the ability of people to feed themselves very troubling, and the caloric intake diminishing, as opposed to increasing in many of those countries. It isn't talked about much. It isn't even in the newspapers here very much.

    And I know we're focused on Asia right now, an area of the world not known to have any democratic leanings at all, or much of a history there. But I would be very interested in meeting with people who have spent some time there, any of their observations.

    Secretary GLICKMAN. I will tell you that the Vice President has a commission, Gore-Chernomyrdin Commission with Prime Minister Chernomyrdin. That commission is meeting in this country in March, and their ag minister usually comes in at that time period. Can't tell you when, but that's a good opportunity to further explore this.
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    Ms. KAPTUR. All right. I thank you very much. Thank you, Mr. Chairman.

    Mr. SKEEN. Thank you, Ms. Kaptur. Mr. Secretary, thank you so much for your patience.

    Secretary GLICKMAN. Thank you.


    Mr. SKEEN. Let me wind up by saying only two percent of our entire population is involved in agricultural production, and I think Marcy is talking about what world peace—what it depends on, what is most important, being able to feed oneself.

    We're one of the few countries in the world that can feed ourselves and probably could feed all the rest of the world, except for the fact that we're going to have an extended elevation of population here within the next 10 to 15 years.

    What bothers me is research. You've got some of the finest research elements going on in agriculture, than anyplace else I've ever crossed in my entire life. And since I've been Chairman of this committee, we've traveled extensively and looked into your research facilities. Now, the President's budget is seeking to cut off $60 million in current research.

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    And I think that ought to be looked at with an awful lot of care, because I haven't found a bummer in the bunch yet, and I've been to a lot of your research facilities. You've got some of the finest people with the finest objectives and they're not replicating each other. They're not poaching on one another's fields.

    You've got some of the most knowledgeable people working in the Department today in the research sector. And I certainly don't want to see us cutting back our emphasis on research in agriculture, particularly, because I think it's vital for us as a world leader, and it's going to keep us in that lead.

    I don't mean to preach at you, but $60 million is a big hole out of that budget, and I know you may have your reasons for doing it. I'm not going to press you for all that, because a lot of it maybe felt like it was unnecessary or a duplicate or whatever, but I think I'd be very careful with making that judgment.

    Thank you all for being the kind of people that really make us proud that we've got a good agricultural division.

    Secretary GLICKMAN. Thank you.

    Mr. SKEEN. Thank you, Dan.

    [CLERK'S NOTE.—The following questions were submitted to be answered for the record:]

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Water 2000

    Mr. SKEEN. The 1980 Census estimated that about 2.1 million Americans lacked a source of clean, running water in their homes. The 1990 Census placed this number at about 1.1 million. What impact have Water 2000 projects had in eliminating the remaining population of residents lacking clean, running drinking water?

    RESPONDENT. We estimate that the Water 2000 projects funded since inception through FY 1997 will serve just under 2 million people including 280,000 that will receive water from public sources for the first time.

FSIS User Fees

    Mr. SKEEN. The authorizing committee has opposed user fees consistently. User fees are widely opposed by both industry and consumer groups. How do you expect to get this legislation passed by October 1?

    RESPONDENT. The Administration will be submitting a legislative proposal for consideration by Congress in the near future. At that time, we will work with appropriate committees in Congress to brief them on fee structures, the impact of the fees on consumers and producers, and present a regulatory strategy that shows how the fees can be assessed by October 1, 1998.

User Fees

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    Mr. SKEEN. Let's assume that authorizing legislation gets passed and signed into law. How much time would the Department need to write and put into effect the necessary regulations?

    RESPONDENT. We would need a number of months to issue regulations, afford the public an opportunity to comment, and put the administration systems in place to collect the fees. The timing of passage would determine the appropriate course of action to ensure an October 1, 1998, implementation date.

Milk Prices

    Mr. SKEEN. I have had numerous conversations concerning the Milk Marketing Order Reform proposal and considerable input on the Options 1A and Option 1B. To put it simply, producers in my district, the Southwest and many other regions of the country are strongly opposed to Option 1B. In fact, I have seen a study which shows that Option 1B would cost dairy farmers $365 million per year. One region increases its income under Option 1B and its location surprises almost no one, the Upper Midwest. Considering that a referendum to ratify Option 1B would require a two-thirds approval and it is apparent that a large number of the new regions are either strongly opposed or neutral at best, wouldn't you agree that Option 1B is essentially dead on arrival?

    RESPONDENT. No, I do not believe that Option 1B is dead on arrival. Option 1B is the Department's preferred alternative because it establishes more market-oriented pricing, in line with the general trend in agricultural policy. As with all major Federal order amendments, the newly consolidated Federal milk orders will require approval by two-thirds of the dairy producers or by producers representing two-thirds of the volume of milk associated with the newly consolidated market to become effective. The producers will be voting on the order as a whole unit and not on the individual provisions contained within an order. We would like to hear from producers in your district and elsewhere as to their concerns with the proposed rule.
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    Mr. SKEEN. In the interest of saving time I will submit the remainder of my questions on this issue. However, I must reassert that I have serious questions as to the survivability of Option 1B and its potentially drastic effects on the dairy industry, in my district and elsewhere. In the past, the USDA has stated the use of the competitive B series in the basic formula captured the elements of the availability and cost of feeds. Now that the reform proposal has no competitive price in the formula, how is the cost of feeds being considered in the proposed minimum prices?

    RESPONDENT. The costs of feeds and the various other factors stated in the supply and demand criteria of the 1937 Act are reflected through the commodity prices used in the proposed basic formula price proposal. These commodity prices are based on a competitive marketplace and reflect the supply and demand for those products, Class III and IV, that utilize approximately 50 percent of the Grade A milk supply.

    Mr. SKEEN. When basic formula prices have climbed in the past, higher consumer prices for Class I followed. With the proposed enhancement of Option 1B, (1) do you expect the consumer prices to climb correspondingly, (2) will Government purchases for milk increase, and (3) will the initially high prices reduce demand for milk?

    RESPONDENT. The potential impacts of the options are analyzed in the Preliminary Regulatory Impact Analysis. With respect to retail prices and the impact on consumers the estimated impact is less certain than the impacts on other sectors of the dairy industry. However, retail prices are estimated to decrease in the long-term under Option 1B. The analysis assumed that the Government purchases for milk would not be affected by the proposal. It is further projected that for the period of 1999–2004, consumption of fluid milk products actually will increase under either of the Option 1B transitional phase-in programs.
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    Mr. SKEEN. The Department has scheduled a hearing next week to discuss increasing the floor price for Class I and Class I fluid milk. Would that increase raise the price of milk for consumers and government feeding programs?

    RESPONDENT. The preliminary cost-benefit analysis states that in addition to increasing volume to dairy producers, adoption of a BFP floor would also result in increased prices of fluid milk products to consumers. The purpose of the hearing is to obtain evidence supporting or opposing such findings. Once the hearing record evidence is analyzed, a final cost-benefit analysis will be completed that will provide a further indication of the projected effects of flooring the basic formula price on consumers and government feeding programs.

    Mr. WALSH. Option 1B, your preferred Class I pricing option, has been estimated by economists to lower farm milk prices in ever region of the country with the exception of the Upper Midwest. The direct loss in dairy farmer income is estimated to be $1 million per day or $365 million per year.

    Given the volatile nature of milk prices recently, the very low prices that dairy farmer have received in the past year, and the financial distress already being felt by farmers across the country—why do you want to reduce dairy farmer income even further?

    RESPONDENT. Option 1B is a more market-oriented approach to pricing, and one that allows producers and cooperatives to take a more active role in bargaining for milk prices. The Department proposes two methods of transition to the Option 1B differentials. One would replace the lost revenue while the other would enhance revenue over the 4-year period by $498.8 million. Specific regional impacts are set forth in the Preliminary Regulatory Impact Analysis. The volatile nature of milk prices is a concern of many in the industry and is addressed by the proposed rule suggestion to utilize a 6-month declining average of surplus milk prices to establish minimum Class I prices under the orders. We invite comments on the use of such a Class I price mover, and all other aspects of the proposed rule.
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    Mr. WALSH. Having made the decision that you prefer Option 1B over Option 1A, do you feel that you fully understand the potential economic and social impacts of Option 1B on the dairy industry and dairy farmers in various regions of the country as well as the rural economies of these regions overall?

    RESPONDENT. Although USDA provides an estimate of the economic consequences of the alternatives on producers, processors and consumers through the Preliminary Regulatory Impact Analysis, the industry and the public have specifically been invited to address the consequences of the alternatives as well as the economic analysis presented.

    Mr. WALSH. Would you describe for the Committee what you believe those potential impacts to be?

    RESPONDENT. Aside from the immediate estimated impacts outlined in the RIA, the longer run impact of Option 1B is to move the dairy sector to more market-oriented pricing, in tune with the current trend in agricultural policy. As such, an impact of Option 1B is that producers will have a more active role in pricing, and the Government will reduce its presence in milk pricing.

    Mr. WALSH. In particular, would you provide what you believe to be the probable impact of Option 1B on the Northeast and Southeast regions of the country?

    RESPONDENT. The estimated impact on cash receipts of Option 1–B in the northeast and southeast are contained in the Preliminary Regulatory Impact Analysis. For the period 1999 through 2004, the estimated average yearly impact on cash receipts for the northeast and southeast markets relative to cash receipts expected under the Department's baseline is as follows:

Table 1

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    Mr. WALSH. Please include the estimated amount of the dairy farm income lost annually, the approximate number of dairy farms that would go out of business, and any plans the Department has to deal with the economic disruption that will result?

    RESPONDENT. Estimated impacts contained in the Preliminary Regulatory Impact Analysis are based on estimated supplies of milk that would be marketed. There are no estimates of the approximate changes in farm numbers that may occur with any option or provision of the proposed rule. The final rule, once it is developed with the assistance of comments from the public and the industry, and if approved by producers, must adhere to the requirements of the 1937 Act to ''establish and maintain orderly marketing conditions.'' To the extent that marketing conditions change in the future, further amendment proceedings can be initiated as the need arises.

    The Department recently released the National Commission on Small Farms Report. ''A Time to Act.'' In this report, it states that ''Having gone through the process of developing this report, we are now even more convinced of the necessity to recognize the small farm as the cornerstone of our agricultural and rural economy.'' The report goes on to say that ''The Secretary should fully support passage of legislation that will make the viability and competitiveness of small and medium size dairy operations a priority mission.''

    At the same time, however, you state in the proposed rule that ''By lowering the differentials in most of the United States, marketing practices would have a greater impact on class I values.'' The proposed rule goes on to say that ''Less efficient small business could be disadvantaged because of the lack of resources and knowledge necessary to effectively negotiate and maintain necessary price levels.'' The proposed rule also states that the level of Class I differentials under Option 1B are such that ''small businesses, particularly producers would experience significant economic impacts.'' It also states that ''all producers'' with the exception of the Upper Midwest would face ''reduced income'' due to lower Class I prices and that producers in the Northeast and Southeast would experience the greatest decrease.
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    Mr. WALSH. Mr. Secretary, would you please explain this clear contradiction in the Department's policies and priorities?

    RESPONDENT. The Department does not believe there is a contradiction in its policies and priorities. It is important to emphasize that milk orders as required by the 1937 Act, are intended to establish and maintain orderly marketing conditions and establish minimum prices based on supply and demand conditions that will bring forth an adequate supply of milk and dairy products. The 1937 Act does not specify by whom or where such milk should be produced. Nevertheless, we have attempted to articulate the probable regulatory impacts of the proposed rule on small businesses and have requested public input on these impacts. These comments will assist the Department in developing a final rule to carry out the requirements of the 1996 Farm Bill.

    Mr. Secretary, In the Introduction to the Department's National Commission on Small Farms Report ''A Time to Act'' you state that: ''Conclusions and policies which focus on the large and super-large farms as an inevitable result of economic progress may be ignoring the small farm as the most vital component of all food production.'' The Introduction goes on to state that: ''The 'get big or get out' policy drives of the past fail to recognize the real cost of this kind of 'economic progress' This perspective does not consider the loss of market competition when production is concentrated in a monopoly market. It does not consider the cost of potential environmental consequences of concentrating a large number of animals in limited areas. It does not consider the risk to the security of our milk supply should disease or natural disaster strike these few megafarms. It does not consider the cost of increased use of fossil fuels to ship milk across the country. It does not consider the increase in bacteria when water is extracted. Contrary to popular belief, large farms do not produce agricultural products more efficiently than small farms, especially when real costs are taken into account.''
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    Mr. WALSH. Mr. Secretary, were the National Small Farms Commission's concerns identified above part of the analysis and decisionmaking process which led you to arrive at your decision that your preferred option is Option 1B—an option which would appear to favor large farms over small farms, which would put many farmers out of business, and which would most likely result in more concentrated areas of milk production and increased shipping of milk across the country?

    RESPONDENT. Theproposed rule recognizes the potential impacts on small farmers and small businesses, and asks for comments on all aspects of the proposed consolidated orders including the price structure alternatives. Phase-in alternatives for Option 1B have been suggested to provide farmers the opportunity to become more efficient and effective in operating in a more market-oriented environment. The Small Farms Commission concerns were published too late to be accommodated explicitly in the proposed rule.

    Mr. WALSH. If so, would you explain the Department's analysis of Option 1B as it regards the concerns of the National Small Farms Commission and the Department's conclusions in this regard? If not, why weren't these issues considered in making the decision that you prefer Option 1B?

    RESPONDENT. The report issued by the National Small Farms Commission was published too late to be explicitly incorporated into the proposed rule. As a result, the specific findings addressed in that report were not included in the development of the proposed rule. However, as part of the Small Business Regulatory Enforcement Fairness Act of 1996, the impact of the proposed rule on all small businesses, both producers and processors, has been evaluated and is included in the Regulatory Flexibility Analysis contained in the proposed rule.
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    Mr. Secretary, in the proposed rule, you state that your preferred Class pricing option is Option 1B and that this option is ''more market-oriented.'' It is my understanding that Option 1B does not take into consideration important regional and local market factors in determining Class I milk prices for a given location while Option 1A does take into consideration these important factors.

    Mr. WALSH. Would you please explain why you believe Option 1B to be ''more market-oriented'' than Option 1A?

    RESPONDENT. Option 1B would move the dairy industry into a more market-oriented system by establishing differentials on the basis of optimal milk movements based on the most recent estimated costs of transporting milk, allowing market conditions to play a greater role in determining class prices. Option 1B places more emphasis on negotiations by dairy farmers and processors to determine actual class prices.

    Mr. WALSH. Would you also provide the Committee with a precise definition of the term ''more market-oriented'' as you understand it in this context?

    RESPONDENT. More market-oriented means less dependence on governmental regulation and more reliance on supply/demand conditions to determine a greater portion of Class I differentials. More market orientation is consistent with the policy course set by the Congress in the 1996 Farm Bill.

    Mr. WALSH. Mr. Secretary, since the proposed rule recommends both Option 1A and Option 1B, should we not assume that you believe both of these options are consistent with legislation and meet all of the requirements of the 1937 Act and the 1996 Farm Bill?
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    RESPONDENT. Yes, it is correct to assume that the Department regards both Option 1A and Option 1B to be consistent with legislation and meet all of the requirements of the 1937 Act and the 1996 Farm Bill.

    Mr. WALSH. That being the case, would you please define for the Committee precisely what evaluative criteria were used by you and the Department in determining that Option 1B is preferred over Option 1A and how these criteria were determined?

    RESPONDENT. Nine evaluation criteria were used to evaluate every pricing option considered in the proposed rule. These pricing criteria reflect both regulatory objectives and limitations of the 1937 Act. These criteria established an initial framework for analysis of the class/pricing options. Other factors such as the overall intent of the 1996 Farm Bill and movement toward less Government involvement in agricultural markets were also considered.

    Mr. WALSH. Mr. Secretary, would you please explain to the Committee what you believe to be the primary objective of the 1937 Act and the Federal Milk Marketing Order system?

    RESPONDENT. The primary objective of the 1937 Act and the Federal Milk Marketing Order system is to establish and maintain orderly marketing conditions and establish minimum prices based on supply and demand conditions that will bring forth an adequate supply of milk and dairy products.

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    Mr. WALSH. Mr. Secretary, would you please explain why the Federal Milk Marketing Order system is not and should not be considered or treated as a price support program?

    RESPONDENT. The Federal Milk Marketing Order program is a voluntary program that requires the approval of producers in a given area to maintain orderly marketing conditions and establish minimum prices. A Federal order is designed, as required in the 1937 Act, to allow supply and demand conditions within a given marketing area to impact the actual price that producers receive. Because supply and demand conditions determine the actual price producers receive, the prices to producers vary throughout the United States. Moreover, the Federal order program establishes minimum prices that dairy farmers receive for milk used in fluid consumption. Fluid milk utilization represents less than half of all milk produced nationally, with the larger proportion of milk being used in storable, manufactured products. Milk available for manufacturing purposes serves as both a residual supply for fluid needs and as the residual use for milk not needed for fluid purposes. As such, the only practical way to provide price support to the daily industry is through support of prices received by dairy farmers for milk used in manufactured products.

    Mr. WALSH. Mr. Secretary, would you agree that, if the ''market'' does not allow individuals dairy farmers to effectively represent themselves and achieve fair and reasonable prices for fluid milk for both the producer and the consumer, it is the role of the Government to step in and regulate the ''market'' to ensure that farmers are treated fairly in the ''market'' and that the Nation has as adequate supply of fresh fluid milk available to all regions of the country at a reasonable price?

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    RESPONDENTS. I would agree that there can be a role for the Government to step in and regulate the market to ensure that farmers are treated fairly in the market and that the Nation has an adequate supply of fresh fluid milk available to the extent provided for in the 1937 Act, as amended, and the 1996 Farm Bill.

    Mr. WALSH. Mr Secretary, I would like to give you an example of what Option 1B could mean to a small (65 cow) family farm operation. Under Option 1B, an operation of this size would lose about $5,000 in income at a time when most of these operators already work 10–12 hours a day 7 days a week. Do you believe the Department should select Option 1B knowing that this option will further reduce the income of these farmers and probably put them out of business?

    RESPONDENT. The Department recognizes that Option 1B involves changes in both the level of Class I differentials and the method for establishing them. Because of these changes, Option 1B is proposed to be implemented utilizing one of three possible transitional programs, a 20 percent phase-in per year, a phase-in with offsetting assistance, a phase-in with additional assistance. The use of a phase-in program would provide daily farmers and processors the opportunity to adjust marketing practices to adapt to more market-determined Class I prices. The proposed rule specifically asks questions of all interested parties to obtain input regarding the implementation and ramifications of Options 1A and 1B.

Agricultural Research Service (ARS)

    The mission of ARS research is to develop new knowledge and technology which will ensure an abundance of high quality agricultural commodities and products at reasonable prices to meet the increasing needs of an expanding economy and to provide for the continued improvement in the standard of living of all Americans.
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    ARS is an Excellent program which provides for necessary research funds.

    Unfortunately, this year we have seen some reductions in the base funding for programs. Levels of funding that were established in the FY 99 appropriations bill have been decreased, and this is of great concern to me.

    Using AR research facilities as an example, the people at home rely on consistent funding trends from ARS in order to best equip their facilities. In particular are areas of staffing.

    For example, in FY 98, ARS provided several hundred thousand dollars to fill research staff positions for a facility in AR. However, your proposal for FY 99 eliminates that funding and proposes FY 99 funding at FY 97 levels.

    In essence, the federal government gave the authority for the research facility to hire new staff, but then pulled the rug from under their feet after only one year. This takes away from the ability of the research facilities to hire ''around'' federally funded positions so as not to duplicate positions and greatly diminishes the trust relationship that the states have developed with ARS over the years.

    Mr. DICKEY. Can you explain the reasoning behind your method in this case?

    RESPONDENT. The FY 1999 Federal budget submitted by the President recommends a number of new initiatives to address changing priorities facing agriculture and the American consumer. The research budget proposed for ARS reflects an increase of $32 million over the current year. However the Department is focusing on many priority agriculture issues that must be addressed now by our research scientists. This requires that ARS terminate some ongoing projects and reallocate these resources to the new or expanded initiatives as recommended by the President.
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    Mr. DICKEY. How does this make ARS a more effective program or the USDA a more efficient agency?

    RESPONDENT. While proposals to discontinue ongoing work can be stressful to those who are directly affected, in the long-run change is required to ensure that research resources are employed to address the most pressing national issues. The broad consensus within the Congress and the executive branch on the necessity for constraints on discretionary spending, which we fully share because of the enormous benefits for a balanced budget for the agriculture sector—leads us to propose selective reductions in ongoing work to accommodate proposals for national initiatives. For example with Congressional support for the budget as proposed there would be reductions in aquaculture and rice genetics, but there would also be larger increases in human nutrition.

Research Extension Formula Funding and The Hatch Act

    You have proposed a decrease in the Smith-Lever Formula of $10,740,000 for extension-related base funding for FY 99.

    As a justification, your propose that states have maximum flexibility to fund specific programs through formula funds, thus the proposed decrease should have the least impact in those areas States identify as high priority. This flexibility will be enhanced if the Administration's recommendation that the States be given discretionary authority to use up to 10% of their formula funds for either research or extension activities is enacted in the reauthorization of the research title.
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    However, even if the States have the 10% flexibility, there is still a net loss for research and extension activities.

    Likewise, you have proposed roughly a 9% decrease in the Hatch Act.

    With the proposed decrease in these areas, I have seen what appears to be a corresponding increase in the National Research Initiative Competitive Grants Program (NRI). This is a concern to me based on some information that was recently brought to my attention.

    While I am a supporter of the competitive bidding process, I am particularly concerned with the USDA's ability to scientifically and fairly evaluate grant applications.

    On one particular situation, two almost identical grants were submitted to the NRI program. The two grant applications were submitted by two institutions in an effort to receive a grant in cooperation. Unfortunately their lines of communication broke down and submitted similar applications at separate times.

    After the peer review was conducted for both institutions, they received contradicting responses.

    Mr. DICKEY. How could two applications that were almost identical receive such dramatically different peer reviews under your system? Could this be a common occurrence under your system of competitive bid peer review?
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    RESPONDENT. Without knowing the specifics of the situation, it is difficult to comment on any particular grant application. However, it may help to clarify NRI policies.

    Applicants are barred from submitting duplicate or substantially overlapping proposals to the NRI. Thus, an applicant may not submit a proposal to one NRI program area and subsequently submit it to another program at a later date. However, on rare occasion, applicants from more than one institution who are collaborating on a proposal, submit an identical proposal from each institution. These are called ''companion'' proposals. In most cases, the applicants are trying to reduce the overhead that would normally be charged on a single proposal that has a subcontract to a second institution. In the case of a single proposal with a subcontract, the originating institution charges 14% indirect costs on the entire grant, then the subcontracted institution charges an additional 14% on their portion. In order to avoid this practice of double overhead, collaborating applicants submit identical proposals, each from their own institution. These proposals only differ in the cover page and the budget. The budget includes a 14% indirect cost rate on only that portion that is going to the submitting institution.

    Companion proposals are considered as one proposal throughout the review process. They are sent together to reviewers, and are discussed as a single proposal in panel. When panels recommend proposals for funding, it often happens that certain proposal objectives are viewed as highly meritorious while other objectives are viewed less so. If recommended for funding, with a budget cut, budgets are cut accordingly to reduce the scope of the project (because of the large number of highly meritorious proposals, most applicants do not receive the amount of funds they originally request, and most budgets are cut to enable more applicants to be funded). When a budget is cut, the applicant is asked to reduce the scope of the proposal by eliminating some of the objectives. In the case of recommended companion proposals, if the objectives which are designated to be eliminated all are within the responsibility of one investigator who is at a different institution, then it is possible that the recommendation be to not support the companion institution. It is then the responsibility of the investigators involved to work out the logistics of the final funding recommendation and to submit the revised objectives.
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    It should be noted that the NRI no longer accepts companion proposals because of the administrative complications that may arise. When they were accepted, no more than 3–8 of these type of proposals were submitted out of the over 3000 proposals received in any given year.

    The NRI peer review policies are designed to give applicants an equitable and high quality review of scientific research. The practices of the NRI have their basis in practices established 20 years ago. However policies and practices have constantly evolved to improve the overall quality of the review so that the NRI in now viewed as one of the most equitable peer review systems in the Federal Government. It has also served as a model for other agencies who are establishing or trying to improve their peer review processes.

Decreasing Funding Formulas And Increasing Competitive Bids

    Both the Hatch and Smith Lever formulas are vital in empowering States to determine what are critical areas of funding and it is my opinion that the States are better in determining what is important to their industries that is the federal government.

    Each State has its own wants and needs and it is imperative that they have the ability to address them.

    Mr. DICKEY. Why would the USDA propose to go in the exact opposite direction by decreasing some formulas and increasing competitive grants that are determined here in Washington? In order words, is Washington better at determining the needs of AR than the State of Arkansas?
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    RESPONDENT. The Administration supports a broad range of funding mechanisms in support of university-based agricultural research, education, and extension. These mechanisms, including formula programs, competitive grants, special grants and projects, and other programs (such as Smith Lever 3(d)), are interdependent and jointly contribute to the success of our knowledge-based system of agriculture.

    Mr. DICKEY. Do you think that this policy will diminish the existing relationship between States and the federal government?

    RESPONDENT. The priorities which define Federal support for programs in agricultural science and education are developed through a collaborative, States/Federal process of consultation with stakeholders, mutual planning, and in almost all cases, joint investment.

    Mr. DICKEY. Is it your opinion that the NRI program is a more adequate system of determining what should and should not be funded than State agencies?

    RESPONDENT. The Administration's budget does not suggest that the Federal partner in this cooperative system is better able to determine what should be done than are States. In fact, within the mandates of laws authorizing Federal formula programs and in keeping with the Government Performance and Accountability Act, States determine how to utilize Hatch, Smith-Lever, and other allocations to address critical issues facing agriculture in their States, region, and the Nation. Further, competitive grant programs support research initiated through, and peer reviewed by, university, industry and agency scientists from every state.
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    Mr. DICKEY. In other words, is Washington better at determining the needs of AR than the State of Arkansas?

    RESPONDENT. Arkansas receives Federal funds through a number of agricultural research and education programs administered by CSREES. In fiscal year 1997 Arkansas received $10.8 million, of which $3.1 million supported agricultural research under Hatch Act formula funds and $1.9 million supported research and higher education activities under competitive research and education grants.

Food Quality Protection Act Implementation

    Mr. BONILLA. Commodity groups and general farm organizations are becoming increasingly concerned that USDA is not fully fulfilling its responsibility under the Food Quality Protection Act (FQPA). There has been a widely held belief that the Department has not been engaged with EPA as EPA develops policies and proposed action plans to implement FQPA.

    How has USDA been involved with EPA as FQPA policy issues are being considered by the Agency? How may USDA employees are dedicated to working on FQPA issues? What analysis has USDA performed regarding the potential impacts to agriculture from the policies and approaches being considered by EPA, particularly as applied to the first group of tolerances to be released by August 1999? Has USDA considered the impacts on the potential sourcing of agricultural commodities with EPA's implementation of FQPA?

    RESPONDENT. USDA has been collaborating with EPA on a number of issues related to implementing FQPA policies. USDA's newly established Office of Pest Management and Policy (OPMP) leads the Department's effort of FQPA implementation and coordination with EPA. There is also a cross-cutting team representing various agencies, including CSREES, ARS, AMS, and ERS that lend support at the program level.
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    A total of eight employee contribute a significant part of their effort to issues related to the FQPA implementation. Staffing plans call for a total of 10 full time positions OPMP.

    Until EPA resolves a number of scientific, policy, and resource issues, it is not possible to analyze the impacts of FQPA. Certainly, there is the potential for major economic dislocation. We hope to minimize serious disruption in agriculture by working with EPA to develop ''transition strategies''. Such strategies would allow continual crop production while alternative pest management tools are developed.

    Mr. BONILLA. How will USDA insure resources are fully directed to FQPA implementation?

    RESPONDENT. OPMP will serve as a focal point for pesticide regulatory issues, and improve coordination between the Department and EPA and farmer organizations. USDA and EPA have signed a Memorandum of Understanding that commits the two agencies to work together when regulatory action by EPA would reduce farmer competitiveness, limit producers ability to adopt practices such IPM, and ensure consumers a safe, abundant, high quality of food and other agricultural products.

    The 1999 budget includes $26 million for NASS pesticide use date; ARS dietary intake surveys; and AMS pesticide residue testing. IPM is an essential tool in mitigating the existing risks associated with excessive pesticide exposure. The budget includes $34 million for IPM research and extension activities to support a number of areawide demonstration projects, research and extension IPM implementation projects, and to enhance the efforts of PMAP in finding alternative to higher risk pesticides currently under regulatory review. The budget also provides $23 million for programs that directly support IPM implementation, including minor-use pesticide registration, analysis of the economic benefits and consequences of pesticide use, and training conducted to limit the level of pesticide exposure.
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FQPA Implementation

    These programs represent a comprehensive response to the needs resulting from implementation of FQPA that includes determining what tactics will remain and how efficacious they are, what alternative tactics are in the developmental pipeline or in the registration process, identifying pest management systems that are vulnerable to FQPA implementation, and conducting research and extension programs to develop solutions to pest management problems and assist growers in implementing them.

    CSREES and its land-grant university partners have been directing resources from several programs to begin providing science-based solutions to the challenges presented by FQPA. IR–4 is also collecting data needed for petitions submitted to EPA in support of minor or specialty uses of pest management tactics (chemical and biological), and is advancing its research and registration efforts for biological and reduced risk pesticides which are important to IPM and resistance management programs.

    Specific CSREES efforts are as follows: NAPIAP is providing data and analysis on pesticide use patterns and the benefits of pesticide use, and is conducting analyses of the economic impacts of FQPA on American agriculture. The Pest Management Information Decision Support System is linking informational databases to provide decision-makers with ready access to pest management information so that critical needs can be identified and prioritized. The Pesticide Applicator Training Program is conducting educational programs that help mitigate pesticide risks through education and training. PMAP is developing alternative pest management tactics to replace those lost through EPA cancellation or voluntary withdrawal as a result of FQPA implementation. IPM is developing holistic pest management approaches to help growers deal with critical pest problems resulting from FQPA.
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    The Department is aware of the potential problem resulting from the withdrawal of pesticides for minor-use crops and will make every effort to maintain domestic production of minor-use crops.

Dairy Options Pilot Program

    Mr. LATHAM. USDA's Risk Management Agency has announced its intention to implement a pilot options program for dairy under the authority in section 191 of the 1996 farm bill that requires that trades under the pilot program ''shall be carried out on commodity futures and options markets designed as contract markets under the Commodity Exchange Act.''

    There is at least one futures exchange that is advocating that dairy producers' choices of a trading venue under the pilot program should be limited to a single futures exchange, in effect creating a government-dictated monopoly in trading.

    It seems to me that dairy producers would benefit most from this program if they are free to choose the options products and the futures exchange that best fits their marketing and risk management plans. I would also expect that it is more likely that producers will receive better service at lower costs in markets governed by competition, not monopoly.

    Do you agree with this analysis, or do you see some overriding benefit to limiting producers' freedom in this regard?

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    RESPONDENT. We agree that dairy producers should be in position to choose the options products and the futures exchange that best fits their needs. However, RMA has received comments suggesting that the availability of multiple contracts on the BFP will create unnecessary confusion in the minds of novice traders such as the DOPP participants. The decision should be forthcoming within the next month.

Water 2000

    Mr. SERRANO. Through the Water 2000 initiative, the Department of Agriculture targets resources to the estimated 2.5 million rural Americans which have some of the Nation's most serious drinking water availability and quality problems. According to the 1990 Census, over 400,000 rural households lack complete plumbing.

    What answers will the Department's Water 2000 program provide for the shocking public health concerns? Please provide this panel with specific examples of approaches to solving these problems.

    RESPONDENT. The Department over the past three years has invested $1.3 billion to construct Water 2000 projects that will serve just under 2 million rural residents, including 280,000 of the 1.1 million identified by the Census as not having clean running water in their homes. The objective of Water 2000 is to attempt to provide all rural residents with running water in their homes by the year 2000. Some of these residents live in some of the most remote, geographically challenging areas of the nation and a large percentage of them have incomes below the poverty level, making the attempts to achieve the objective very difficult.

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Urban Resources Partnership

    Mr. SERRANO. I have had the pleasure of visiting Urban Resources Partnership (URP) sites many times in my District. I am always impressed by what a small amount of URP funding is able to accomplish when it brings together the expertise of Federal agencies with locally based groups. The environmental restoration and river clean up work that you have participated in at the Phipps Beacon School next to the Bronx River has made a significant improvement in my District, and I know that this is just one example of the positive changes in urban communities that result from URP sponsored initiatives. Can you explain to the Committee what role USDA and specifically, the Natural Resources Conservation Service, has played in URP?

    RESPONDENT. Early in 1994, USDA spearheaded the Urban Resources Partnership which is a cooperative effort among six federal, natural resource-related agencies, including NRCS. URP provides technical, financial and educational assistance to urban communities in 13 major cities and metropolitan areas. The approach relies on local community leaders and representatives to identify natural resource concerns and to design projects to deal with them with an emphasis on improving natural resource conditions in low income and minority urban neighborhoods. Projects range from working with youth to restore natural habitat on a forest preserve to enhancing urban wildlife habitats. NRCS provides natural resource-related information and technical assistance to support the overall urban planning process that this program relies on.

Civil Rights

    MR. SERRANO. During the hearing the Secretary did a great job of detailing ongoing problems and initiatives associated with discrimination and civil rights in the Department of Agriculture.
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    However, since much of the Rural Development budget requests relate to appropriations for loans and grants, what measures have been considered to ensure that civil rights violations do not occur in program delivery?

    Specifically, does that Direct Loan Origination and Servicing (DLOS) system address civil rights concerns, if so, how is the problem being addressed?

    RESPONDENT. I have communicated to all USDA employees that violations of civil rights statutes, regulations or policies will not be tolerated. The Under Secretary for Rural Development has also communicated the same message to all Rural Development employees. In addition, Rural Development has provided extensive customer service training. If all of our customers are treated as they should be, then we should eliminate civil rights program complaints. Rural Development, like the rest of the Mission Areas, is also scheduling extensive training in civil rights and equal opportunity policies.

    Regarding DLOS addressing civil rights concerns, civil rights is not one of the primary purposes of DLOS but it does have an effect in that the servicing of housing loans is now consistent throughout the country rather than subject to individual interpretation throughout the country. All borrowers are treated equally and I think this is a positive step and one that should eliminate some civil rights problems.

Supplemental Nutrition Program for Women, Infants, and Children (WIC)

    Ms. DELAURO. Secretary Glickman, the WIC program currently serves approximately 7.5 million people. In your testimony, you focus on efforts to improve management of the program and to reduce the overall costs of WIC food packages. In streamlining management and reducing costs, how is the quality of the program guaranteed?
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    RESPONDENT. Our efforts to improve WIC management and to reduce food package costs are expected to help improve the overall quality of WIC. Many States have achieved notable successes in efficient and effective management, and as their practices are adopted and adapted by other States, program quality will improve along with cost efficiencies. WIC is a mature program and simply needs some fine tuning. If we can keep food costs low we can serve more participants with the same money. That is our strategic goal.

Food Safety

    Ms. DELAURO. Secretary Glickman, in your testimony, you mention food-related illnesses due to the pathogen Cambylobacter. In recent years, we have heard about the many people who have experienced illnesses due to the E. coli bacteria. Could you explain how the new Food Safety Initiatives will address these threats to the safety of our food supply?

    RESPONDENT. Campylobacter and E. coli 0157:H7 pose a significant health threat to consumers. The implementation of the Pathogen Reduction/Hazard Analysis and Critical Control Point Systems rule and the President's Food Safety Initiative are expected to contribute to the reduction of foodborne illness in the United States. The HACCP rule provides for microbial testing and targets pathogens for reduction. The President's Interagency Food Safety Initiative addresses food safety hazards from farm-to-table. Key components include expansion of the Federal food safety surveillance system, improved coordination between Federal, State, and local health authorities, improved risk assessment capabilities, increased inspection, expanded research, consumer education, and strategic planning. Expansion of the FoodNet surveillance system will provide more accurate information on the number of foodborne illnesses due to Campylobacter, E. coli 0157:H7, and Salmonella, and other contaminants. Funding for Campylobacter-related activities would increase from $2.6 million in 1998 to $4.7 million in 1999.
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    Ms. DELAURO. What are the carrots that will encourage voluntary compliance with the Food Safety Initiatives?

    RESPONDENT. The President's Food Safety Initiative contains a number of activities for improving the safety of the United States food supply. One facet of this initiative is the implementation of the President's directive to ensure the safety of imported and domestic fruits and vegetables. Representatives from USDA and the Department of Health and Human Services have held numerous meetings across the country to discuss ways to implement the plan. We are currently working on identifying what measures that can be taken to facilitate the adoption of practices that will lead to a safer food supply and maintain consumer confidence in the safety of the food supply. In addition, we will be working closely with animal producers to develop voluntary measures that producers can use to address food safety hazards on the farm.

    Ms. DELAURO. What are the mandatory measures that States and individuals must comply with?

    RESPONDENT. USDA and the Department of Health and Human Services are developing guidance materials that the producers could utilize to ensure the safety of fruits and vegetables. Nothing in the proposal would require the adoption of mandatory measures to accomplish the goal of a safer food supply. Activities planned for meat and poultry producers will be for educational purposes. In order to ensure that hazards are addressed from farm-to-table, we must work closely with producers to provide them the information necessary for them to voluntarily address the food safety hazards they may encounter.

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    Ms. DELAURO. Last week, the Australian government announced that the United States agreed to accept meat from Australia that was inspected using private plant employees, not Government inspectors. Would your clarify the USDA's decision to rely on private plant inspectors?

    RESPONDENT. Unfortunately, recent media releases inaccurately indicated that USDA has accepted the Australian meat inspection plan that would have utilized private plant employees to inspect meat. USDA has not agreed to accept meat from Australia under this plan. We are continuing to work with Australia to ensure that any future plans meets U.S. requirements for inspected meat.

    Ms. DELAURO. The Jack-in-the Box company has been using an intensive microbial testing system to check for hazardous bacteria in all hamburger intended for sale in its restaurants. The percentage of hazardous bacteria has declined dramatically in the 4 years that the program has been in operation. Is the USDA considering instituting a similar program for all ground beef processors?

    RESPONDENT. Microbial testing is a critical component of the Pathogen Reduction/Hazard Analysis and Critical Control Point (HACCP) Systems rule. One year ago, on January 27, 1997, the HACCP systems rule required all slaughter establishments to begin testing products for E. coli to ensure process control for the prevention and removal of fecal contamination. Just recently, on January 27, 1998, 300 of the largest meat and poultry slaughter and processing establishments, producing 92 percent of Federally inspected products, implemented HACCP plans for identifying and controlling food safety hazards in their establishments. The remaining establishments will phase in the use of HACCP over the next 2 years. As establishments phase in the use of HACCP plans, the Food Safety and Inspection Service is testing and monitoring carcasses and raw ground product for Salmonella. At that time, establishments are required to achieve performance standards for Salmonella contamination.
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    Mr. FAZIO. I want to check on the status of funding for the Fund For Rural America grants. We've got an important wheat research grant at UC-Davis that the department had appeared to give the go-ahead to only to be told that a decision was still pending. As you know, some of the FRA money was rescinded last year for the emergency supplemental, but the reason, in part, was that the department decided to perform a separate RFP for it. My understanding is that FY 1997 funds still are not out the door.

    What is the status of both the Fund for Rural America research component and the particular grant application from UC-Davis concerning wheat?

    RESPONDENT. the first round of awards under the Fund for Rural America was made in September, 1997 for Planning Grants totaling $880,000. In February 1998, we will began making the standard awards that will commit the remainder of the funds that became available January 1, 1997. The nature of competitive research grants is such that long lead times are involved in announcing a program, soliciting proposals, preparing applications, evaluating proposals, and making final awards. This is particularly true in the first year of a new program. Pending receipt of all requested administrative information, the UC-Davis grant will be awarded by the end of March.

    Mr. FAZIO. Do you intend to continue performing a separate RFP for FRA research grants or have you given consideration to using current NRI evaluation methods to streamline this process?
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    RESPONDENT. The decision to announce a separate Request For Proposals was made initially based on the unique nature of the work that we hoped to support with the competitive grant component of the Fund. I would contend that this rationale is still valid. The Fund emphasizes short to intermediate problem-solving via the direct linking of applied research, education, and extension activities. The Fund is also to afford the highest priority to initiatives that address problems cutting across agriculture, the environment, and rural development. Priority is also to be given to initiatives that build partnerships across the physical, biological, and social sciences and between grantees and the clients and stakeholders to be served by their activities. These special emphases required a separate RFP.

    However, after our first year's experience, we have identified several modifications that will speed up the process. For example, we plan to evaluate all grant applications in a particular subject area at one time rather than evaluating planning grants, standard grants, and center grants in individual panels.

    NRI evaluation techniques are used to evaluate Fund proposals to the extent that technical/scientific merit and relevance are critical criteria. The NRI model of peer panel review is also used. However, the Fund's special emphases identified above make it critical that we review scientific and technical merit in the context of factors including short to intermediate term impact, partnerships, and impact across subject areas.

    Mr. FAZIO. What is the official method of notification by USDA that an entity has received a grant and the money has been obligated?

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    RESPONDENT. While procedures vary somewhat from program to program, the typical process within the Cooperative State Research, Education and Extension Service is as follows. After review is done and final selections are made by program staff, administrative staff review and finalize awards. The program and administrative review often involve contacting grant applicants for added information needed before a grant can be finalized. Institutions and investigators who have experience in grant programs recognize that such contact is an indication that the probability of award is high, but not certain. When an award has been documented, reviewed, and signed by the agency, funds are obligated. The appropriate Congressional office is notified and announcement of the award follows.

    The confusion you alluded to in the UC-Davis case related to an inquiry by program staff prior to recommending an award for administrative review and processing. This inquiry was interpreted by the university as a formal award. We have modified our procedures to insure that this confusion will not happen again, particularly in programs such as the Fund where a broader range of institutions, some without past grant experience, are likely to be involved.

    For other grant programs within the Fund which are not administered by the Cooperative State Research, Education and Extension Service, notification procedures are similar. For the Outreach for Socially Disadvantaged Farmers program and the Rural Development grants, recipients are notified by letter that a grant has been awarded and funds have been obligated.

Conservation Reserve Program

    Mr. FAZIO. I have expressed my concern to you about opportunities to increase California's participation in the Conservation Reserve Program (CRP). California officials are now in the process of developing the State's initial Conservation Reserve Enhancement program (CREP) proposal. Last year, Jim Walsh and I encouraged you to allocate about 8 million acres under the CRP for buffer strip enrollments and CREP proposals. You indicated support for such an allocation.
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    What is the current status of overall CRP enrollments, and do you believe the remaining acreage is sufficient for the purposes we support?

    RESPONDENT. As of December 1997, 28.8 million acres were enrolled in the CRP. Given the 5.9 million acres we recently accepted under signup 16 less the 4.8 million acres under contracts that will expire on September 30, 1998, there will be 29.9 million acres under contracts on October 1, 1998.

    We will reserve at least 5.5 million acres for practices covered by the continuous CRP sign-up process, the Conservation Reserve Enhancement Program (Federal/State enhancement agreements), the Conservation farm Option program, and other initiatives. These CRP components are key to the success of the USDA conservation buffer initiative. This figure is based upon USDA analysis of the acreage authority needed to ensure successful operation of these initiatives in the future. We will continue to monitor enrollment levels and producer interest and adjust this reserve if necessary.

    Mr. FAZIO. On rental rates, we need to ensure flexibility particularly for California and the Northeastern States. In California's case it is important to reflect the value of irrigated land.

    RESPONDENT. CRP rental rates are established for each cropped soil type at the local level to reflect the dryland agricultural-value cash or cash equivalent rent adjusted for relative productivity. We recognize that the value of predominantly irrigated lands generally exceeds dryland values. Although there are concerns regarding paying irrigated values and water saved from CRP acreage would likely be reprogrammed for other uses, we intend to work closely with representatives of irrigated States and others to fully explore this issue. Our review should be completed before the next general CRP signup.
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    Mr. FAZIO. Do you believe you have the required flexibility on rental rates, and do you believe rental rate flexibility will be sufficient with regard to California's CREP?

    RESPONDENT. Consistent with the Manager's Report to the Federal Agriculture Improvement and Reform Act of 1996, CRP rental rates are based on the local cash or cash equivalent value. We have not adjusted any rental rates from the dryland agricultural value although we intend to further study the development of CRP rental rates based on irrigated values. Under CREP, rental rates cannot be arbitrarily adjusted; however, we may make additional incentive payments (as an adjustment to the rental rate) to achieve desired program goals.


Hearings Where Chief Economist Testified

    Mr. SKEEN. Please provide a list of the Congressional hearings where the Chief Economist testified in fiscal year 1997.

    RESPONDENT. The Chief Economist testified during fiscal year 1997 at the following hearings:

    Principal USDA witness, February 25, 1997, Farm Tax Issues, Before Senate Committee on Agriculture, Nutrition, and Forestry;

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    Panel witness supporting Secretary Glickman, February 26, 1997, Before House Committee on Appropriations, Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies;

    Panel witness supporting Secretary Glickman, February 27, 1997, Before Senate Committee on Appropriations, Subcommittee on Agriculture, Rural Development and Related Agencies;

    Panel witness supporting Secretary Glickman, March 13, 1997, NCE Prices in Administrative Federal Milk Marketing Order Program, Before Senate Committee on Appropriations, Subcommittee on Agriculture, Rural Development and Related Agencies;

    Panel witness supporting Secretary Glickman, March 18, 1997, Outlook for Agricultural Trade into the 21st Century, Before the House Committee on Agriculture;

    Panel witness supporting Lon Hatamiya, Administrator, AMS, May 15, 1997, Marketing Orders & Dairy/Cheese Industry, Before House Subcommittee on Livestock, Dairy, and Poultry; and

    Principal USDA witness, July 29, 1997, Volatility in Agriculture Markets, Before Senate Committee on Agriculture, Nutrition, and Forestry.

Sustainable Development Policy

    Mr. SKEEN. The responsibility for developing and coordinating USDA sustainable development policy and programs resides with the Director of Sustainable Development who is located in the Office of the Chief Economist. Please provide the committee with a status report on USDA activities associated with sustainable agriculture.
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    RESPONDENT. Sustainable Development is defined by the President's Council on Sustainable Development as development that allows people to meet the needs of the present without compromising the ability of future generations to meet their own needs. The 1990 Farm Bill defines sustainable agricultural systems as integrated systems that: (1) Satisfy human food and fiber needs; (2) enhance environmental quality and the natural resource base upon which the agricultural economy depends; (3) make the most of nonrenewable resources and on-farm resources, and integrate, when appropriate, natural biological cycles and controls; (4) sustain the economic viability of farm operations; and (5) enhance the quality of life for farmers and society as a whole.

    In general, the Director of Sustainable Development leads and coordinates sustainable development activities in USDA and works to integrate and institutionalize the concepts of sustainable development within USDA policy and programs.

    The USDA Council on Sustainable Development, chaired by the Director, has established several working groups, two of which focus on sustainable agriculture activities; a sustainable agriculture learning initiative to help remove or remedy credit and crop insurance obstacles that are unnecessarily hindering the expansion of sustainable agricultural enterprises and practices, including helping to educate bankers in sustainable agriculture; and a research working group to identify specific research needs for USDA agencies in sustainable development, including sustainable agriculture.

    The Director of Sustainable Development also acts as liaison to the President's Council on Sustainable Development—PCSD—and maintains liaison and communication with other Government agencies and outside groups. The City of Tulsa, Oklahoma and the Kerr Center for Sustainable Agriculture sponsored the September 1997 PCSD meeting. A regional foods banquet and a farm tour and discussion on sustainable agriculture practices and their link to water quality for the Tulsa watershed is one of the top issues for the Mayor of Tulsa. In addition, activities of the Metropolitan and Rural Strategies Task Force of the PCSD, will include follow-up actions on sustainable agriculture issues. The rural working group of this task force is chaired by USDA.
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    During 1997, the Director of Sustainable Development also served as chair for the Civil Rights Implementation Team. The Team was charged with establishing a National Commission on Small Farms and worked with the Office of the Secretary to establish the Commission as a formal advisory committee. The Team also choose membership for the Commission, taking into account regional, ethnic, gender and agricultural perspective diversity. In addition, the Director has helped to make sustainable agriculture a key part of the development of the domestic and international discussion papers that will serve as the basis for the U.S. Action Plan on Food Security in response to the World Food Summit.

    The Director of Sustainable Development represents USDA on the United States delegations to the United Nations—U.N.—Commission on Sustainable Development—UNCSD—and other related international fora, negotiations and discussions, including, for example, the Summit of the Americas. In 1997, these sessions included the U.N. General Assembly Special Session on Sustainable Development; U.S. participation included President Clinton. As part of participation in UNCSD, USDA holds, when needed, informal briefings and consultations for agricultural non-Governmental organizations interested in sustainable agriculture. Working in an open and participatory manner with other Federal, international, and non-Governmental organizations, USDA has started to prepare for the year 2000 meetings of the UNCSD. The focus will be on integrated land resources, including sustainable agriculture, and developing an agenda for action for sustainable agriculture.

Budget Support

    Mr. SKEEN. What budget support did other USDA agencies provide to the Office of the Chief Economist in fiscal year 1997?
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    RESPONDENT. The Office of the Chief Financial Officer provided direct budget formulation and execution support for the program activities in the Office of the Chief Economist. The Office of Budget and Program Analysis provided general budget guidance and oversight, as is provided to all USDA agencies. Departmental Administration provided general support on human resources and space issues.

Risk Assessment Rule Making

    Mr. SKEEN. Please provide the Committee with examples of how risk assessment has improved rule making at USDA?

    RESPONDENT. The risk assessments for the Conservation Reserve Program and the Environmental Quality Incentives Program were performed to accompany regulatory impact analyses of these major rules. The Office of Risk Assessment and Cost-Benefit Analysis—ORACBA—provided the technical guidance, review, and other assistance to the agencies performing the analyses. The urgency and statutory guidance for publishing the proposed rules for these programs resulted in many program decisions being made prior to the completion of the risk assessments. However, the Environmental Quality Incentive Program—EQIP—risk assessment proved to be very useful in identifying those agricultural areas in the United States subject to the cumulative effects of hazards identified in the risk assessment. Information about cumulative hazards can aid in the identification of conservation priority areas and the allocation of program resources. It should be noted that the risk assessments for the Conservation Reserve Program Analysis—CRP—and EQIP programs were the first national level ecological risk assessments which examined the effects of multiple hazards on multiple endpoints over a broad range of ecosystems, and were unique and complex. The EQIP and CRP risk assessments were found to be extremely useful sources of information for subsequent agency analyses and decisions concerning these programs. In addition, the agencies promulgating these rules have made substantial progress in incorporating risk analysis methods into ongoing agency program analysis activities. From ORACBA's perspective, substantial progress has been made by these agencies in using risk assessment information for regulatory development. ORACBA also initiated an interagency team for developing guidance on ecological risk analysis and plans to work with relevant USDA agencies in evaluating the implementation of EQIP and CRP.
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    ORACBA participated in the interagency reviews of a number of significant regulatory proposals and reports. ORACBA provided technical guidance and support in EPA's National Ambient Air Standards for Ozone and Particulate Matter, EPA's Mercury Report to Congress, the President's National Interagency Food Safety Initiative—NFSI—and the FDA Fruits and Vegetables Initiative. In regard to NSFI, ORACBA helped formulate the role of risk assessment in the interagency strategy to prevent food borne disease. ORACBA continues to advise the newly created Joint Institute for Food Safety and Applied Nutrition, established under NSFI, on risk assessment issues through its work with the Risk Assessment Consortium. ORACBA's participation on the interagency review of the EPA Mercury Report resulted in the removal of language raising undue concerns about fish as a food, due the lack of scientific evidence, and resulted in the development of a risk communication effort to better inform consumers about the benefits of fish consumption versus the limited risk of mercury exposure for most people.

    ORACBA was a member of the interagency team responsible for the development of a plan to manage broilers and other animals that may have dioxin contamination resulting from a clay anti-caking agent in soybean meal as used in animal feedstuffs. ORACBA provided technical support and guidance for the assessment of dioxin in animal feed, leading to USDA guidance for testing exposed animals before they or their products are marketed and sound information indicating no immediate health hazard to consumers. The information brought by ORACBA resulted in studies which indicate that no anthropogenic origin of dioxins can explain the mix of dioxins and distribution in the clay in situ. Therefore, a natural but unknown source is presumed.

    ORACBA worked with the Animal and Plant Health Inspection Service—APHIS—of USDA to develop a policy for the animal health Regionalization Regulation which provides greater flexibility for other countries to export their products to the U.S., but with safeguards for U.S. livestock by relying on science-based risk assessments. APHIS has requested that ORACBA review all risk assessments for all imports brought into the country using the Regionalization Regulation. ORACBA's participation helps assure the safety of such products to U.S. consumers and ecosystems.
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    ORACBA reviewed the risk assessment for the importation of Haas avocados from Mexico into the U.S., a position supported by the risk assessment. Consequently, an industry group funded a conference at Harvard University to evaluate the risk assessment. The findings at this conference supported those of ORACBA. The first avocados were imported to the U.S. from Mexico November 1997 and ended February 28, 1998.

    In response to an increasing number of human illnesses attributed to egg consumption, an interagency effort was established to develop a plan of action. ORACBA assisted in the conceptualization of a plan for a comprehensive risk assessment that examined the farm to table risk of food borne illness due to Salmonella in eggs. The risk assessment has identified target areas for risk reduction, compared to public health benefits of alternative strategies, and is guiding future research. The risk assessment, now in draft, along with a cost-benefit analysis will lead to an integrated risk reduction strategy in a series of regulatory initiatives for eggs and egg products.

    ORACBA provided technical guidance in the interdepartmental Animal Feeding Operation Strategy Working Group, part of the Vice President's Clean Water Action Plan Initiative in the areas of cooperation in regulatory development, monitoring and evaluation, and initiatives for the action plan.

    ORACBA served on the President's Initiative on Fruit and Vegetable Safety by identifying how risk assessment can provide information identifying the most significant risks and effective guidance for mitigating those risks. It is expected that the risk assessment efforts promoted by ORACBA will lead to a systematic evaluation which identifies the hazards, the sources of food safety risk, and the most effective and efficient means of prevention. ORACBA continues to work toward the development of a plan assuring the safety of fruits and vegetables from both domestic and international sources.
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    ORACBA reviewed the Agricultural Marketing Services regulation on labeling organic foods. Though ORACBA had no statutory requirement to review this labeling regulation, some problems were recognized in the original regulation. ORACBA contacted the Agricultural Research Service and the Centers for Disease Control to assure review by competent infections disease microbiologists and the subsequent draft of the regulation was modified to show concerns about these issues.

    ORACBA has been working closely with USDA's Food Safety and Inspection Service and Animal and Plant Health Inspection Service to develop a risk assessment based strategy for safeguarding U.S. consumers and livestock industry from bovine spongiform encephalopathies—BSE—and transmissible spongiform encephalopathies—TSE. ORACBA was called upon to develop a USDA-based plan concerning BSE/TSE in the U.S. which is based on a risk assessment of the adequacy of current safeguards. ORACBA also coordinated a risk communication training course on BSE/TSE issues for USDA personnel. ORACBA was also involved in the planning of the International Workshop on TSE conducted by the Joint Institute on Food Safety and Applied Nutrition—JIFSAN, created by the President's Food Safety Initiative.

    In order to ensure that there are scientifically trained staff in USDA to perform needed risk assessments to support implementation of regulations, ORACBA began two courses, a beginning and an advanced, in 1996 to hep train personnel. After the Food and Drug Administation—FDA—requested places in these courses, USDA and FDA joined with USDA Graduate School to offer these two courses and develop others which would also support good risk assessment development. Financial resources from JIFSAN are sponsoring the development of 6–8 more courses which would be taught as part of a summer institute for JIFSAN, at the University of Maryland as regular semester courses, and through the USDA Graduate School on an as-needed basis. Tuskegee University will be participating in the development of these courses and will use them to form the core of their Master's Degree Minor in Risk Analysis. The USDA Graduate School will be giving a Risk Analysis Certificate to students who successfully complete a minimum of 6 courses in this series.
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    ORACBA has encouraged land-grant and 1890's universities to engage in risk analysis activities by providing seminars, teaching sessions, and faculty consultations for universities who request such service—University of Illinois, Iowa State University, Michigan State University, University of California Davis, Tuskegee University, University of Arkansas Pine Bluff. In addition, ORACBA has worked with the Cooperative State Research, Education, and Extension Service to develop language and appropriate reviewing of multi-disciplinary research proposals in risk analysis.

Risk Assessment Staff Time

    Mr. SKEEN. How much staff time has been devoted to risk assessment by your office and by the agencies that performed the risk assessment?

    RESPONDENT. The Office of Risk Assessment and Cost Benefit Analysis provided the training, technical support, coordination and review of the risk assessments mentioned above. About three full-time equivalents from ORACBA staff were devoted to these activities in fiscal year 1997. We are unable to estimate the staff time devoted risk assessment activities by other USDA agencies to risk assessment.

Risk and Benefit-Cost Analyses Differences

    Mr. SKEEN. In addition to risk analyses for rule making, agencies are required to perform cost-benefit analyses. Please describe for the Committee how risk and cost-benefit analyses differ and how each contributes to rule making.
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    RESPONDENT. The primary purpose of a risk assessment is to identify the hazards to human health, human safety, or the environment, the likelihood of their occurrence, and the magnitude of the consequences. Within the context of regulatory analysis, a risk assessment provides a basis for examining the effects of alternative programs on ecological or human health relationships and consequently their performance in reducing human health or environmental hazards. Stated differently, a risk assessment identifies the potential human health or environmental benefits of a proposed regulatory action.

    A cost-benefit analysis evaluates the economic impacts of alternative program actions to achieve regulatory objectives. Cost-benefit analyses attempt, within the limits of reasonably available economic information and the capacity of economic models, to identify, quantify, and estimate the monetary value for all costs and benefits of rule making. These benefits include the human health and environmental risk reduction effects identified in an ecological risk assessment—e.g., degree of compliance with water quality criteria—are translated into economic terms in the cost-benefit analysis—e.g., days of recreational fishing, reduced water treatment costs. Risk assessment and cost-benefit analysis provide agency program managers, policy officials, and the public with valuable information with which to evaluate regulatory actions and guide the rule making process toward effective, balanced actions.

Commission on 21st Century Production Agriculture

    Mr. SKEEN. Has the President made any appointments to the Commission on 21st Century Production Agriculture?

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    RESPONDENT. The President has named three persons to serve on the Commission. They are Mr. Jim DuPree, a producer from Newport, Arkansas; Mr. Ralph Paige, executive director of the Federation of Southern Cooperatives, East Point, Georgia; and Mr. Leland Swenen, president of the National Farmers Union, Aurora, Colorado.

Support for Commission on 21st Century Production Agriculture

    Mr. SKEEN. How much staff time will be required from USDA agencies to support the Commission?

    RESPONDENT. Up to now and for the foreseeable future, the USDA staff time to assist the Commission is expected to be minimal. The Office of the Chief Economist—OCE—is serving as the Secretary's liaison to the Commission and will be represented at Commission meetings, which have been infrequent. OCE is also providing budget oversight and administrative support, which mainly involves assisting the Commission with the payment of their bills. The Commission has not requested assistance from USDA in preparing their mandated reports. However, we expect the Commission will use USDA analyses and research that has been done since 1996 and future work that would be done regardless of the existence of the Commission.

Funds To Support Commission

    Mr. SKEEN. What lower priority activities would be curtailed if USDA redirects funds to support the Commission?

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    RESPONDENT. USDA has not redirected funds from agencies to support the Commission and does not expect to. The Secretary has provided that the Commodity Credit Corporation—CCC—could make available up to $50,000 for fiscal year 1998 to support the Commission's activities. This funding will not affect the operation of the programs supported by the CCC. The Secretary has directed that the $50,000 will be counted as part of the $1 million limit on spending of appropriated funds for advisory committees, task forces, etc. Therefore, the funding of the Commission curtails in a very limited way the activities of the other advisory committees subject to the $1 million limitation.

Object Class Table for Commission

    Mr. SKEEN. Please provide a separate object class table for the Commission.

    [The information follows:]

Table 2

Salary Costs for Commission and Staff

    Mr. SKEEN. Please provide a breakdown of the total salary costs for Commissioners and staff.

    RESPONDENT. The total salary cost for Commissioners and staff is $137,000, consisting of expenses for a staff director and secretarial support.

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Impacts of Welfare Reform on Farm Labor

    Mr. SKEEN. Has OCE studied the impacts of welfare reform on the availability of farm labor?

    RESPONDENT. OCE has not conducted formal studies of the impact of welfare reform on the availability of farm labor. However, we have closely followed reports and anecdotal information as it has become available. OCE staff has worked closely with a consortium of welfare agencies, community based organizations, and farmers in several rural counties of California who are establishing a ''Welfare-To-Farm-Work'' program intended to provide jobs for welfare recipients and workers to meet agricultural labor needs. At this point, it is too early to determine the level of success of the program.

Implementation of EQIP

    Mr. SKEEN. What was the result of the analysis by the Office of Risk Assessment and Cost Benefit Analysis of risk management options for implementing EQIP?

    RESPONDENT. As stated in the final rule for the EQIP program, one year after the promulgation of the final rule the Natural Resources Conservation Service—NRCS—is responsible for conducting an economic analysis based on a risk management assessment of EQIP. Upon consultation with ORACBA, NRCS has stated that such a study is not practicable at this time because of the complexity of the ecological relationships affected by the program, the length of time between the introduction of an EQIP conservation plan and environmental result, and other factors. However, NRCS is currently cooperating with ORACBA in developing case studies to better understand manure management alternatives available through EQIP. The case study consists of conducting a risk assessment, a cost-benefit analysis of manure management alternatives, and establishing a plan for monitoring the performance of the program as implemented. Such a study would demonstrate the agency's adaptation of risk assessment and cost-benefit analysis into program and regulatory development. Such analyses, of which the mature management study is the first example, is consistent with and accomplishes the intent of the risk management assessment called for in the final rule.
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Conservation Reserve Program

    Mr. SKEEN. What was the result of the analysis by the Office of Risk Assessment and Cost Benefit Analysis of the Conservation Reserve Program?

    RESPONDENT. As is also stated in the Conservation Reserve Program final rule, one year after the promulgated of the final rule the Farm Service Agency—FSA—is responsible for conducting an economic analysis based on risk management assessment of the CRP. Such as assessment is currently underway. The report will be delayed somewhat as the agency will incorporate the results of the most recent—16th—sigh-up for the program. The FSA is also conducting a case study similar to that identified for NRCS and is a reflection of the progress of FSA in using risk assessment, cost-benefit analysis, and monitoring in program and regulatory development.

Relationship of Price Discovery to Weather and Climate Data

    Mr. SKEEN. What is the relationship of price discovery, as mentioned on page 8–8 of the budget justifications, to weather and climatic data?

    RESPONDENTS. Facilitating efficient price discovery in agricultural markets refers to the delivery of relevant and timely information and data and affect the price of agricultural products and livestock. Prices react to the delivery of market information, including information about weather and climate. The fuller and more complete the information the better market price represents supply and demand fundamentals. Weather and climate affects virtually all phases of crop cycles and all phases of commodity storage and transportation. As such, weather and climate are primary inputs used by USDA to generate the World Agricultural Supply and Demand Estimates report. This information is provided to policy officials and the public. Some reactions are immediate, such as a freeze event during a crucial blooming stage of fruit trees. Others, such as a developing drought episode, affect the market more gradually and over a longer period of time.
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Two New Staff Persons

    Mr. SKEEN. What will the proposed two new staff persons do in regard to the activities mentioned in section ii on page 8–8?

    RESPONDENT. The staff will be tasked with managing the operation of the newly installed hardware and software, maintaining the integrity of the data network, and utilizing a sophisticated Geographic Information System—GIS—package to ensure near real time availability of the data to all operational sites, including the data collection site at Stoneville, Mississippi. More comprehensive access to weather and climate information in rural areas, away from the warming influence of urban weather stations, will provide more accurate information that relates to agriculture. During periods of unfavorable weather, GIS tools will be used to delineate more precisely the most vulnerable agricultural areas. Further, the incumbents will focus on transferring technologies innovations and data to the research community and the private sector.

Program Increases in Weather and Climate Data

    Mr. SKEEN. Please provide some specific examples of how your proposed program increases in weather and climate data would provide information to agricultural areas in the United States that are not provided through the private sector or other government agencies?

    RESPONDENT. There is a significant lag in availability of critical data from rural areas through the Cooperative Observer network—COOP. In addition, many data networks presently in place are fragmented and/or not readily accessible by prospective users, including ''value-added'' vendors in the private sector. Others, while available locally, are not available at the national level. USDA's program will identify key COOP stations through agricultural areas and establish a protocol for timely access to those reports throughout USDA for USDA use in making assessments and for delivery of the data to the private sector. USDA will then establish new weather and climate observing stations in important farming and rural areas that do not currently have stations. The goal is to extent coverage in citrus and field crop areas. USDA will use also GIS technology to identify river drainage systems and the most suitable COOP stations for operational assessments.
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    Mr. SKEEN. What reallocations (section 3, page 8–9) have affected the World Agricultural Outlook Board?

    RESPONDENT. One example is the recent announcement by the Economic Research Service that it is reducing by half its commodity situation and outlook reports and is reallocating resources from monitoring short-run conditions to the conduct of research on market fundamentals. While this shift should increase the Department's potential to understand longer term developments, it is expected to reduce information on short-and medium-term events. In addition, other agencies have found it increasingly difficult to meet program analysis needs with limited budgets with supporting short-end medium-term analysis. The World Agricultural Outlook Board has the primary responsibility for advising the Secretary on the causes and consequences of near-term market developments. In order to respond to increasing demands in a more globally and market-oriented world and to plug short-term information gaps, the Board is seeking additional resources. To maintain the analytic underpinnings needed for Department-wide forecasts, and to be able to better answer questions concerning short-to medium-term developments in the farm sector.

Explanation of Acronyms

    Mr. SKEEN. Pages 8–8 and 8–9 of the budget justifications use more acronyms per page than any other U.S. Government publication. Please provide a brief explanation of the following: AWIPS, NOAAPORT, UCAN, NAWON, COOP, SNOTEL, SNOpack TELemetry, and FS RAWS.
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    RESPONDENT. Acronyms include:

    AWIPS, the Advanced Weather Interactive Processing System is part of the National Weather Service modernization effort. AWIPS will serve as the nerve center of operations for all modernized forecast offices. It will be capable of receiving, processing, and analyzing huge amounts of data including, satellite, radar, and other land based systems. AWIPS is primarily a data-crunching server—computer—and working stations, connected to a communication network. The communications linkage will include a high-speed data network for point-to-point networking and a one-way point-to-multi-point broadcast service called NOAAPORT.

    NOAAPORT is the technical name for the National Weather Service method for delivering a continuous stream of weather and climate information to multiple sites via satellite uplink and distributed downlinks.

    UCAN, the Unified Climate Access Network, is a network on the Internet which provides public access to weather and climate data sets collected by many Federal, State, and county agencies. UCAN is a collaborative effort between the NOAA Regional Climate Centers, USDA's Natural Resources Conservation Service, and the National Climatic Data Center.

    NAWON, National Agricultural Weather Observing Network, is the name of USDA's proposal to collect weather and climate data from rural areas, either by accessing data and information from sites already established by other Federal agencies or State and local agencies that are not now being routinely made available to USDA or by establishing weather and climate observing sites in agricultural areas where weather and climate data would be useful to Federal and private meteorologists.
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    COOP, the Cooperative Observer Network, is a National Weather Service—NWS—network of volunteer observers located in many urban and rural areas of the United States. The NWS provides instruments to volunteer observers who make and report weather and climate readings each day.

    SNOpack TELemetry—SNOTEL—is USDA's Natural Resources Conservation Service snow reporting network. It is an automated snow telemetry system for hydrologic stream flow estimations.

    RAWS, the Remote Automated Weather System, is the Forest Service's network of automated weather and climate stations located in forested areas throughout the West.

Improved Risk Assessment Methods for Foodborne Pathogens

    Mr. SKEEN. How would the Office of the Chief Economist help develop improved risk assessment methods for foodborne pathogens? Isn't that the business of FDA, FSIS, and CDC?

    RESPONDENT. Comprehensive, ''farm to fork'' risk assessments for foodborne pathogens require the expertise of people from several agencies with diverse experiences. Knowledge ranging from on-farm environments to home preparation practices is necessary. Due to its diverse experiences in risk assessment and lack of affiliation with a particular rule-making agency, ORACBA is in a unique position to bring these people together to participate in risk assessment model development for food safety. ORACBA continues to coordinate the Interagency Food Safety Risk Assessment Group to share data and develop models for risk assessments. The group actively engages in projects. Current members include representatives from the Agricultural Research Service, Economic Research Service, Food Safety and Inspection Service, Animal and Plant Health Inspection Service, Cooperative, State, Research, Education, and Extension Service, Food and Drug Administration Center for Food Safety and Applied Nutrition, Food and Drug Administration Center for Veterinary Medicine, and Environmental Protection Agency. As a result of these ORACBA-sponsored interagency activities, food safety risk assessments will be more complete and food safety issues will permeate other areas of analyses, such as environmental analyses and manure management.
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Analysis of Tobacco Settlement

    Mr. SKEEN. Please provide a copy of the OCE analysis of the tobacco settlement.

    [The information follows:]
    "The Official Committee record contains additional material here."

Analysis of El Nino on World Grain Production

    Mr. SKEEN. Please summarize OCE's most recent analysis of the effects of EL Nino on world grain production.

    RESPONDENT. The effects of the current El Nino event on world grain production has been mixed and perhaps more unpredictable than expected based on historical comparisons. In spite of reduced planted acreage in anticipation of drought, Australian wheat output is expected to be the fifth highest on record, despite historical correlations of extreme drought in that country's wheat areas. Late arriving rains in Indonesia allowed uncontrolled fires, but the arrival of timely rains is boosting rice output above last year and possibly the highest on record. Past El Nino's have brought drought to northwest India, but near-normal rains during the current season have resulted in record rice production. In South Africa, El Ninos typically diminish corn production. While planted area there had been reduced in anticipation of drought, crop yields are estimated at near trend levels because of timely and favorable rains in late December and January. Grain yields are expected to be below average in Central America, but abundant rains have boosted corn output in Argentina.
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Breakout of Resources for OBPA'S Responsibility

    Mr. SKEEN. Please update the table that appears on page 186 and 187 of last year's hearing record showing a breakout of resources for the areas of OBPA responsibility to include fiscal year 1997 actuals and fiscal years 1998 and 1999 estimates.

    [The information follows]:

Table 3


    Mr. SKEEN. Provide a tree chart that shows the organization of the office.

    [The information follows:]
    "The Official Committee record contains additional material here."

Object Class 25.2, OTHER SERVICES

    Mr. SKEEN. Please provide a sub-object class breakout for object class 25,2, other services, for fiscal years 1997, 1998, and 1999.

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    [The information follows:]

Table 4

Legislative Proposals

    Mr. SKEEN. How many legislative proposals were sent to Congress in fiscal years 1996 and 1997? How many were enacted into law?

    RESPONDENT. USDA has sent to Congress a total of 5 legislative proposals in fiscal years 1996 and 16 legislative proposals in fiscal year 1997. Our records indicate two proposals were enacted into law in fiscal year 1996, PL 104–307, Wildfire Suppression Aircraft Transfer Act of 1996 and PL 104–127, Federal Agriculture Improvement and Reform Act of 1996. In fiscal year 1997, PL 105–113, Census of Agriculture was enacted into law.

Code of Federal Regulations

    Mr. SKEEN. Do you still expect to complete your work on the Code of Federal Regulations in 1999?

    RESPONDENT. USDA is fully committed to this initiative and we are 72 percent complete.

1998 Buyouts

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    Mr. SKEEN. What is the status of buyouts at the Department for fiscal year 1998?

    RESPONDENT. As of January 1998, the Department used a total of 1,958 buyouts, which is approximately 69 percent of the number of buyouts proposed in the Department's Buyout Plan. Details of the Department's buyouts follow:

Farm Service Agency


Rural Development


Forest Service


Natural Resources Conservation Service


Food Safety and Inspection Service

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Economic Research Service


Grain Inspection, Packers and Stockyards Administration


Office of Communications

Total, USDA


Staff Year Reductions and the 1996 Farm Bill

    Mr. SKEEN. Please provide your analysis of the reductions in force needed due to the farm program changes made by the 1996 farm bill. Briefly summarize the results of this analysis and provide the Committee with a more detailed copy for the record.

    RESPONDENT. The plating flexibility provisions and multi-year contract provisions of the farm bill have substantially reduced workload requirements of the Farm Service Agency—FSA—at the field office level. For example, the fiscal year 1997 budget estimates prepared in January 1996 before enactment of the farm bill included non-Federal county workload staffing needs of 13,224 full time equivalent—FTE—employment for fiscal year 1996. Following passage of the farm bill in April 1996, FSA performed an internal workload analysis that showed lower staffing needs for fiscal year 1996, down to an estimated 12,835 county office FTE's. The analysis showed further reductions for fiscal year 1997, down to 11,946 county office FTE's. The actual levels of county office FTE's supported by appropriations action for fiscal years
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1996 and 1997 were respectively 12,738 and 11,399. These lower staffing levels have been achieved through a combination of buyouts, reductions-in-force, and attrition. The 1999 budget estimates of additional reductions in non-Federal county office of FTE's, to 10,835 in fiscal year 1998 and 9,980 in fiscal year 1999, reflect further efforts by the Administration to increase efficiency and reduce costs. Federal county staff years will also be reduced as showm in the table that follows.

    [The information follows:]

Table 5

The USDA Budget Summary

    Mr. SKEEN. What is the cost to print and distribute the USDA budget summary document? How much of these costs are recovered through fees?

    RESPONDENT. The cost to print the USDA 1999 Budget Summary was approximately $8,200. None of the costs are recovered through fees.

Travel, Supplies, and Materials and Equipment

    Mr. SKEEN. Your proposed fiscal year 1999 budget shows significant percentage reductions in travel, supplies and materials and equipment from the two previous years. Are these expenses being charged to other agencies?

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    RESPONDENT. None of these costs are charged to other agencies.

Legislative Proposals

    Mr. SKEEN. Please list all the legislative proposals to be submitted in support of the fiscal year 1999 budget. Please indicate the cost of each and whether that cost is derived from mandatory or discretionary funding or from user fees.

    [The information follows:]
    "The Official Committee record contains additional material here."

Professional and Clerical Staff

    Mr. SKEEN. Please update the table that begins on page 76 of last year's hearing record, showing the number of professional and clerical staff from each agency assigned to the public affairs activities and the cost by agency, to include 1999 data.

    RESPONDENT. Yes, I will provide that information for the record.

    [The information follows:]
    "The Official Committee record contains additional material here."

Congressional Relations

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    Mr. SKEEN. Please update the table that begins on page 80 of last year's hearing record showing a breakout of congressional relations activities to include fiscal year 1999.

    RESPONDENT. Yes, I will provide that information for the record.

    [The information follows:]
    "The Official Committee record contains additional material here."

Farm Loan Programs

    Mr. SKEEN. Former Secretary Espy created a Loan Resolution Task Force whose purpose was to resolve delinquent loan accounts with an indebtedness of $1 million or more. Please provide the status of both the Task Force and the number of delinquent loans and update the information provided on pages 99 and 100 of last year's hearing record?

    RESPONDENT. The Loan Resolution Task Force was dissolved on September 30, 1996. The responsibility for collection and resolution of delinquent million-dollar accounts now lies with the Deputy Administrator for Farm Loan Programs and State Executive Directors.

    The number of outstanding delinquent million-dollar accounts dropped from 502 on September 30, 1996, to 431 on September 30, 1997, a net decline of 71. From September 30, 1997, through December 31, 1997, we experienced a net decline of 17 additional accounts, resulting in a remaining portfolio of 414 delinquent million-dollar accounts.
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    Of the 414 accounts, 306 or 74 percent are in some form of litigation involving foreclosure, bankruptcy, or some means of settlement. The remaining accounts are being serviced under the requirements of the 1987, 1990 and 1996 Acts.

    The 414 remaining delinquent million-dollar accounts represent only 2 percent of Farm Loan Program delinquent accounts but are responsible for about 32 percent of all delinquent dollars outstanding ($649,058,930 for delinquent million dollar accounts while the entire delinquent portfolio is $2,008,442,181). Therefore, collection and resolution of delinquent million dollar accounts will remain an FSA priority.

    Most delinquent million-dollar accounts are being resolved by liquidation. Where other income or assets are available, offsets and deficiency judgements are being pursued. Collection efforts are terminated on delinquent million-dollar accounts only when no reasonable possibility of collection exists and only when ordered by judicial decree or approved by the FSA National Office or the Civil Division of the Department of Justice.

    The status of the 414 remaining delinquent million-dollar accounts follows:
    "The Official Committee record contains additional material here."

    Mr. SKEEN. What is the current error rate in processing loan applications?

    RESPONDENT. For FY 1997, according to a national internal review, of the 1,266 cases reviewed, 87 percent of all servicing actions were in compliance with the Agency's statutory, regulatory and servicing quality requirements, resulting in a 13 percent error rate.
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Tobacco Table

    Mr. SKEEN. Please provide a copy of the most recent updated tobacco table that shows the related administrative expenses for carrying out the tobacco program.

    RESPONDENT. Yes, I will provide a copy of the most recent updated table on the administrative expenses associated with carrying out the tobacco program.

    [The information follows:]
    "The Official Committee record contains additional material here."

USDA AmeriCorps Activities

    Mr. SKEEN. Please update the table that appears on page 110 of last year's hearing record on USDA AmeriCorps activities.

    RESPONDENT. USDA's participation in the AmeriCorps program ended after FY 1996. No funding for the program was provided in FY 1997, and none will be provided in FY 1998 or FY 1999.

OSEC Staff in Current Offices

    Mr. SKEEN. Provided tables similar to the ones on pages 112 through 117 of last year's hearing record that list current staff on board in each of the OSEC offices, the position title, the grade level, the pay costs associated with each position, the identify of the appointment, and how they are funded for fiscal years 1997 and 1998. Also, please list by name each staff and those that are used by OSEC and costs that are paid by agencies.
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    RESPONDENT. Yes, I will provide updated tables concerning OSEC staffing and associated costs.

    [The information follows:]
    "The Official Committee record contains additional material here."

EBT Food Stamp Benefits

    Mr. SKEEN. What percentage of food stamp benefits are currently being delivered by EBT?

    RESPONDENT. Currently, about 35 percent of food stamp benefits are delivered by EBT.

Supplemental Nutrition Program for Women, Infants, and Children (WIC)

    Mr. SKEEN. Please submit a copy of the Department's most recent estimate of WIC eligibles for the record.

    RESPONDENT. Yes, I will provide this for the record.

    [The information follows:]
    Offset folios 258 to 260 Insert here

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    Mr. SKEEN. Update the table that appears on page 123 of last year's hearing record showing the monthly participation levels of the WIC program to include fiscal year 1997, and to date in fiscal year 1998.

    RESPONDENT. The information follows.
    "The Official Committee record contains additional material here."

Advisory Committees, Panels, Task Forces and Commissions

    Mr. SKEEN. The fiscal year 1997 appropriations bill included language that not more than $1.0 million may be expended on advisory committees, panels, task forces, and commissions. For the record, please provide a list of all activities that were funded. Indicate those that are mandated by law and those that are discretionary as well as the funding level of each. Also list each advisory committee, panel, task force and commission that you propose to operate in FY 1998 and the proposed budget for each.

    RESPONDENT. I will provide for the record a listing of those advisory committees, panels, commissions and task forces that are subject to the $1 million limitation. Final decisions have not been made with regard to funding for each advisory committee in FY 1998. I will provide the total allocation for each mission area at this time and we will submit further cost estimates by committee when they become final.

    [The information follows:]
    "The Official Committee record contains additional material here."

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Outside Private Counsels Hired

    Mr. SKEEN. Were any outside private counsels hired by the Department in fiscal year 1997? Does the Department plan to hire any private outside counsel in fiscal year 1998? If so, please provide the name and firm of the counsel with a brief description of the nature of the work that they are performing for the Department and the amount spent for this service.

    RESPONDENT. Private outside counsel were under contract to various agencies of the Department in fiscal year 1997 and agencies of the Department have continued with this practice into fiscal year 1998. This practice has provided substantial value to agencies of the Department in more expeditious service and lower costs.

Table 6

Conservation Reserve Program

    Mr. SKEEN. Update the table that appears on page 127 of last year's hearing record showing the total cost of the CRP program since its inception to include fiscal year 1997 actuals and fiscal year 1998 estimates.

    RESPONDENT. A summary of costs by fiscal year since the inception of the program, including both cash outlays and the value of CCC commodity certificates issued for rental payments, follows.

Table 7

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Karnal Bunt

    Mr. SKEEN. What is the status of the Karnal Bunt issue?

    RESPONDENT. Through our Karnal Bunt (KB) Emergency Program, we have prevented the presence of KB in the United States from crippling the $5.9 billion wheat export market. Exports were not significantly affected because the disease did not reach the major wheat-producing areas of the United States.

    Our intensive National KB Survey of 1996–97 have provided ample evidence that KB is not present at detectable levels in unregulated U.S. wheat production regions and is not a production or quality problem in our system.

    On January 27, 1998, APHIS proposed a rule to allow commercial seed to move from KB-restricted areas. We expect this rule to take effect this spring. Also, we recently finalized a rule to compensate growers and seed companies for the loss in value of wheat seed and straw in the 1995–1996 crop season. Currently, APHIS is finalizing a proposal to compensate growers and seed companies for the loss in value of wheat seed and straw in the 1996–1997 crop season. These compensation payments are necessary to reduce the economic impact of the KB regulations on affected wheat growers and other individuals. The proposed rule for the 1996–1997 crop season should be completed sometime this spring.

    In June 1998, the Food and Agriculture Organization in Rome will be convening an expert panel, including an APHIS representative, to pursue international consensus on how minor diseases like KB should be regulated. We hope that the panel will conclude that KB does not need to be regulated as a quarantine pest, but only as a quality issue. Ideally, this panel will be able to reach agreement on an international framework for dealing with minor diseases—including but limited to KB—before significant regulatory problems arise.
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    Mr. SKEEN. How much has been spent to date on Karnal Bunt compensation?

    RESPONDENT. Since the program's inception in March 1996, APHIS has obligated approximately $21.2 million to pay compensation claims for the 1995/1996 crop season (mostly to millers, farmers, and grain handlers).

    Mr. SKEEN. What are your projections for the future?

    RESPONDENT. In FY 1998, we have $10.8 million available to compensate certain growers and seed companies for the loss in value of wheat seed and straw in the 1995–1996 crop season. At this point, we cannot precisely predict the amount we will actually spend. In addition to this amount, we anticipate spending approximately $400,000 for owners of KB-positive grain in restricted areas during the 1996/1997 crop season.

Fund for Rural America

    Mr. SKEEN. Please provide a table showing the levels of funding, both program level and budget authority, for the activities of the Fund for Rural America to date.

    RESPONDENT. I will be pleased to provide that information for the record.

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    [The information follows:]

Table 8

FSIS User Fees

    Mr. SKEEN. Did you consult with industry and consumer groups before developing the plan for user fees in the FSIS budget?

    RESPONDENT. Last year we held meetings with interested parties to gain input on the user fees for meat, poultry, and egg products inspection proposed in the 1998 budget. We have not held any meetings since then.

    Mr. SKEEN. Implementation of the FSIS user fees requested by the Administration will require authorization. What is the Administration's plan for securing authorization and what will be your role in that plan?

    RESPONDENT. We will be submitting a legislative proposal for user fees to Congress shortly. I will ensure that the fees are designed to be fair and equitable, promote accountability and efficiency, and minimize the impact on the competitive balance among affected industries.

Codex Alimentarius Activities

    Mr. SKEEN. What is the total Department budget for activities of the Codex Alimentarius?
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    RESPONDENT. We expect to spend a total of $0.6 million on Codex Alimentarius activities in FY 1998.

Staff Year Reductions

    Mr. SKEEN. Please update the table on page 134 of last year's hearing record that shows, by fiscal year and agency, the staff year reductions that have occurred, including how much has been spent through the use of early outs and buyouts.

    RESPONDENT. The estimated amount that has been spent for fiscal years 1997 and 1998 on buyouts that were authorized by Section 727 of P.L. 104–180 for the Department is $44.2 million. This represents one-time costs for Voluntary Separation Incentive Payments and additional contributions to the retirement system. Even with these costs, use of the buyouts resulted in first year savings of over $11 million in 1997. The updated table that appeared on page 134 of last year's hearing is provided for the record.

    [The information follows:]
    "The Official Committee record contains additional material here."

Funding for Beginning and Socially Disadvantaged Farmers

    Mr. SKEEN. What is the level of direct farm credit loans that will be targeted to beginning and socially disadvantaged farmers and ranchers under the proposed FY '99 budget?
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    RESPONDENT. In FY 1999, the percentage of funds which will be targeted for beginning farmers by loan program is as follows:



Direct Operating


Guaranteed Operating


Direct Farm Ownership


Guaranteed Farm Ownership


    The percentage of funds which will be targeted for minority and women farmers by loan program is as follows:
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Direct Operating


Guaranteed Operating


Direct Farm Ownership


Guaranteed Farm Ownership



    Mr. SKEEN. There is a plan for consolidating management at the Department called administrative convergence. Could you describe briefly the scope and schedule of that program?
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    RESPONDENT. Administrative convergence is the consolidation of administrative functions at headquarters and in the field of the three county based organizations; Farm Service Agency, Natural Resources and Conservation Service, and Rural Development. The impetus for this effort came from the realization that future budget trends, particularly on salaries and expense accounts, mandate that we make every effort to reduce the impact on program staffs or our ability to deliver the programs would be jeopardized. Further, with our efforts to collocate the three agencies it made little sense to maintain three separate administrative support units. Consolidations of these functions will provide the flexibility needed to continue to support the program staffs and ensure effective program delivery. I plan to have a single administrative support unit in place in headquarters and the state offices by October 1, 1998.

Rural Housing

    Mr. SKEEN. The rural housing budget has a small increase this year, mainly in guarantees, by comparison, the HUD budget has a $1.8 billion increase. Did the Department request significant increases in rural housing programs for FY '99?

    RESPONDENT. The Department's 1999 budget requests for the rural housing programs were developed in accordance with a very tight ceiling on discretionary spending and therefore did not include significant increases over the levels appropriated by Congress in prior years.


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    Mr. SKEEN. Last year the Department testified that it hoped to send up a legislative package for civil rights in the first session of Congress. I don't believe that package was ever sent. Can we expect to see any legislation this year?

    RESPONDENT. Yes, you can expect to see legislation this year. It will complement the issues that were addressed in H.R. 2185 by Congresswoman Eva Clayton of North Carolina.

    Mr. SKEEN. Does the Department have specific goals or targets dates to resolve the backlog of discrimination complaints both from employees as well as applicants for loans and other assistance programs?

    RESPONDENT. Our plan is to address the backlog of program complaints by July 1, 1998, and we believe we can achieve this goal barring unforeseen problems. We also plan to resolve any new cases within 180 days of filing. There is a similar time line and goal to resolve employee complaints through mediation that includes contractor investigations and through improved inhouse investigations.

    Mr. SKEEN. When USDA settles cases of discrimination with a cash payment, does this money come from USDA funds?

    RESPONDENT. USDA funds are used to settle cases that are settled under the USDA administrative process. Otherwise, the case settlements may be funded from the Department of Justice's Judgement Fund.

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Dairy Options Pilot Program

    Mr. SKEEN. How much does the Department expect to spend in administration, subsidies and other costs on the Dairy Options Pilot Program in its first year of operation?

    RESPONDENT. Funding for the Dairy Options Pilot Program (DOPP) funding is expected to be approximately $10 million annually for fiscal years 1998 through 2000. This estimate may increase or decrease slightly depending upon the level of participation, the likelihood of variations in options premiums, and the number of producers who choose to purchase fewer that the maximum number of options available under the program. The program will be funded from the Commodity Credit Corporation, in accordance with Section 191 of the Federal Agriculture Improvement and Reform Act of 1996.

Dairy Options

    Mr. SKEEN. The Committee understand that there is a debate about whether to limit trading under the Dairy Options Pilot Program to a single futures exchange. What are the Department's views on this issue and when do you expect to make a decision and begin the program?

    RESPONDENT. RMA published an advance notice of availability for the Dairy Options Pilot Program last month and is still in the process of reviewing public comments on the matter. The decision should be forthcoming within the next month.

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