Statement of Administration Policy: H.R. 5487 - Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Bill, FY 1993

(Senate Floor)
(Sponsors: Byrd (D), West Virginia; Burdick (D), North Dakota)

The purpose of this Statement of Administration Policy is to express the Administration's views on H.R. 5487, the FY 1993 Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Bill, as reported by the Senate Appropriations Committee. The Administration has serious concerns about several provisions of this bill as discussed below.

The Administration regrets that the Committee has provided unwarranted increases in the loan levels for the Farmers Home Administration and the Rural Electrification Administration. These increases have been provided at the expense of several high priority environmental, food safety, and research programs, for which the Committee has provided funding below the President's request. In addition, the Committee has rejected the Administration's proposals for new user fees for the Food and Drug Administration and several agricultural marketing services that would reduce net spending for these programs by over $215 million.

The Committee bill fails to support the nation's farmers adequately in their efforts to protect and conserve vulnerable farmland. The President has proposed funding of $161 million for the Wetlands reserve program to protect up to 200,000 acres of wetlands in FY 1993. No funding for this program is included in the Committee bill, and section 728 would prohibit the enrollment of additional acres in the reserve during FY 1993. This action is taken in spite of overwhelming evidence of the value farmers place on the program. During the FY 1992 sign-up period, producers in nine States sought to enroll nearly 500,000 acres, of which only 50,000 acres have been funded in FY 1992.

The President also has proposed enrolling 381,000 acres in FY 1993 in the Conservation reserve program to remove highly erodible cropland from production. Section 729 of the Committee bill would forbid any additional cropland enrollment in FY 1993. The Administration urges the Senate to permit the enrollment of additional acreage in these important environmental protection programs.

The Committee bill would prevent needed improvements in ensuring food safety for the country's consumers. Analyses from the National Academy of Sciences and other sources have highlighted the need to go beyond the current labor intensive, visual inspection system. The Committee bill does not include funding for the microbiological baseline study, which is a key component of the President's Food Safety Initiative. This study would provide needed data to measure the effectiveness of current inspection programs. In addition, the bill would prohibit the continuation of the pilot Streamlined Inspection System for cattle, which was initiated as a way to modernize meat inspection. The Administration urges the Senate to fund these vital steps toward improving the inspection system.

The Committee bill would fund the National Research Initiative (NRI) at $97.5 million, the same level as FY 1992 and $52.5 million below the President's request. Instead of providing funding at the requested level for this important program, the Committee has provided an additional $40.9 million for special research grants, $8 million for earmarked grants in Federal administration, and $52.1 million for unrequested, earmarked grants for buildings and facilities.

These grants most often address local research problems and parochial interests. The NRI, in contrast, is a competitively- awarded grant program that targets top priority national research needs. Eliminating earmarks and funding NRI at the requested level represents the most appropriate use of scarce research dollars.

The President's budget proposes new user fees for the Food and Drug Administration (FDA) and several agricultural marketing services in the Department of Agriculture. The Committee bill would prohibit the FDA from developing and implementing these fees and does not include the agricultural marketing fee proposals. The Administration urges the Senate to allow the FDA to collect fees to recoup a fraction of the private benefit derived by industry through FDA drug approvals, which enhance domestic and foreign sales. The Administration also urges the Senate to require beneficiaries, rather than the taxpayers, to pay for agricultural services currently provided free of charge. These fees would reduce net spending for these programs by over $215 million.

The Administration urges the Senate to restore the President's full $69.5 million request for P.L. 480 debt restructuring under the Enterprise for the Americas Initiative (EAI). The EAI is a key U.S. foreign policy priority. P.L. 480 debt reduction can provide substantial benefits for economic growth and environmental protection in Latin America and the Caribbean, particularly in the smaller economies of the region. Stronger growth will increase U.S. exports to the region (currently our fastest growing export market) and export-related jobs in the United States.

The Administration strongly objects to the addition of a new loan program, the alcohol Credit Guarantee Program. Past experience with similar loans guaranteed by the Farmers Home Administration through the Business and Industry loan program shows a staggering 80-percent default rate. In addition, the amount of losses paid on those guaranteed loans that have defaulted has been nearly 100 percent of the guarantee. This proposed program has not been the subject of any oversight hearing or Congressional review, is not authorized by any statute, and has not been requested. The Administration urges the Senate to delete funding for this program.

The Senate Agriculture Committee has questioned the size of and need for the current Agriculture field structure and has requested a significant downsizing. Yet, the Committee bill would tie the hands and efforts of the Agriculture Department to make changes and to determine its most efficient structure.

The Committee bill provides $62.8 million, a reduction of $4.8 million from the request, for the Inspector General. Reductions of this magnitude cannot be absorbed without serious impacts on productivity. The reduction would seriously affect the performance of legislatively mandated audits of financial statements as well as audits or investigations of "high risk" areas and other priority areas requiring audits or investigations. Areas of possible impact include the entitlement programs of the Food and Nutrition Service (the Food Stamp program has $100 million at risk); the loan and housing programs of the Farmers Home Administration (with up to $14 billion in delinquent loans at risk); and the meat inspection program, which is critical to public health and safety. The Administration urges the Senate to restore this reduction.

A provision added by the Committee would severely limit the ability of the Rural Electrification Administration (REA) to exercise its mortgage right to require the Basin Electric Power Co-op to raise electric rates to cover losses by its coal gasification subsidiary. The provision could allow subsidiary losses to threaten Basin Electric's ability to repay REA loans. This would set a dangerous precedent, particularly in view of the very high loan default rate experienced by REA. The Administration strongly opposes this provision.

On the basis of OMB's preliminary scoring, the Committee bill is within the Senate 602(b) allocations for both domestic and international discretionary budget authority and outlays. The Senate 602(b) allocations are consistent with the statutory spending limits enacted in the Budget Enforcement Act.

Additional Administration concerns regarding the Committee bill are contained in the attachment. Also attached is a table that provides OMB's preliminary scoring of the Committee bill.

Attachments

Attachments
(Senate Floor)

ADDITIONAL CONCERNS
H.R. 5487 — AGRICULTURE, RURAL DEVELOPMENT, FOOD AND, DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS BILL, FY 1993

MAJOR PROVISIONS OPPOSED BY THE ADMINISTRATION

A. Funding Levels

Rural Housing Insurance Fund. Farmers Home Administration (FmHA). The Committee has constrained the options available for financing low-income housing by failing to fund FmHA's subsidized guaranteed home loan program and the voucher program for rural rental assistance.

For FY 1993, the Administration has requested a $400 million increase over FY 1992 for subsidized loan guarantees. Although the Committee has chosen to fund both unsubsidized direct and guaranteed loans, it has not funded subsidized guarantees. With the rural housing market in need of credit, the subsidized guaranteed loans fill a gap for low-income home borrowers who need modest Federal assistance to qualify for commercial loans. The Administration urges the Senate to fund these subsidized guarantees.

The Administration urges the Senate to restore the President's $140 million request for housing vouchers. Vouchers are a proven, cost-effective alternative to providing housing assistance to rural Americans, especially those who cannot afford FmHA home purchase loans at even one-percent interest. The successful rural voucher demonstration program in FY 1988 underscored the demand for and the effectiveness of vouchers in rural areas.

The Administration objects to the funding of rental assistance for new construction projects as a separate grant from the section 515 construction loan. New construction rental assistance is obligated as part of the construction loan process and is considered by the Administration to be part of the loan subsidy cost. The Committee understates the true cost of the loan program by appropriating separately for these costs. Moreover, the Committee overstates the cost of new construction rental assistance by providing it in the grant account on a cash basis rather than on a present value basis in the loan account.

Farm and Rural Loans. The Committee bill would undermine farm and rural loan program reforms enacted in the Omnibus Budget Reconciliation Act of 1990 (OBRA). These reforms represent an agreement between the Congress and the Administration, not only on funding priorities in agriculture, but also on the form of financial assistance to farm and utility borrowers.

The Committee bill does not adopt the reductions in five-percent loans and the shift to private guarantees for the Rural Electrification Administration (REA) electric and telephone borrowers, as contained in section 1201 of OBRA. The vast majority of these borrowers are fully able to afford private financing, especially if assisted by OBRA's 90-percent guarantees, without significant changes in subscriber rates.

Many current REA telephone borrowers are subsidiaries of major telephone corporations or have excessive amounts of cash on hand -- some in excess of twice the value of their physical assets. The Administration strongly believes these borrowers should be directed to private financing, with or without Federal guarantee assistance, and that the level of five-percent loans should be reduced.

Farm operating and ownership direct loans of the Farmers Home Administration (FmHA) are funded in the Committee bill at $525 million in excess of OBRA's prescribed levels for FY 1993. OBRA directed that authority for these direct loans be shifted to subsidized guarantees, wherein the Federal government buys down the interest rate on private guarantees to the point that borrowers can afford them; Subsidized guarantees provide borrowers the necessary assistance that direct loans provide, but at a reduced Federal cost and through a process that enables borrowers to establish needed relationships with local banks.

General Accounting Office studies have shown that FmHA direct farm loans have become a subsidy that many farmers depend upon, rather than being the temporary credit source they were designed to be. The Administration urges the Senate to adopt farm and rural loan assistance at OBRA levels.

Departmental Administration. The Committee bill reduces Departmental Administration, which includes the Office of Finance and Management, by $3.9 million. This reduction would impede the activities associated with improving financial management throughout the Department, including the efforts to improve the Department's accounting systems. The Administration urges the Senate to restore this reduction.

Commodity Futures Trading Commission (CFTC). The Committee bill has frozen the CFTC's budget authority for FY 1993 at the FY 1992 level. This freeze would come at a time when the futures industry is rapidly expanding, as are enforcement demands. The Administration urges the Senate to fund the CFTC at the President's requested level of $52.8 million.

In addition, the Administration supports a futures transaction fee to offset the CFTC's budget authority and outlays. Such a fee is not included in the Committee bill.

B. Language Provisions

Agricultural Marketing Service: Purchase of Sunflower and Cottonseed Oil. The Administration objects to language in the Committee bill that directs the Secretary of Agriculture to spend Section 32 funds to purchase sunflower and cottonseed oil. This provision is not, as required by the authorizing legislation, for "emergency surplus removal." It would create a $50 million subsidy for sunflower and cottonseed growers. This subsidy to a small group of agri-businesses is unauthorized and unwarranted. The Administration urges the Senate to remove this provision from the bill.

Section 722. Section 722 of the Committee bill would prohibit the use of private debt collection agencies to collect delinquent payments from FmHA borrowers. At the end of FY 1991, FmHA had over $56 billion in outstanding loans. Of this, almost $14 billion represented expected losses, net of recoveries and fees.

The use of debt collection agencies for seriously delinquent debt is a proven debt collection tool. Federal agencies received authority to use this tool in the Debt Collection Act of 1982. Several Federal agencies have successfully used these collection services for housing, student, and business loans. In the Administration's view, there is no reason to exempt FmHA borrowers from the effective debt collection authority available under the Act. The Administration urges the Senate to delete this provision.

Micro-management. The Committee bill includes a number of micro-management provisions that would prohibit the ability of agencies to respond to changing circumstances. These include extensive directives on the pest and disease eradication programs of the Animal and Plant Health Administration; a prohibition in section 713 on phasing out the Resource Conservation and Development Program; full-time equivalent staffing floors in section 718; and a prohibition on the establishment of new offices in section 724.

Farmers Home Administration State Office in Nevada. The Administration strongly objects to language in the Committee bill that would require the Farmers Home Administration (FmHA) to open a State office in Nevada. Under present circumstances, FmHA programs are being administered effectively through the sub-State office located in Carson City, Nevada. A State office would require an additional 10-12 staff years, siphoning away staff from other Nevada county offices to the detriment of service at the local level.

The attached data tables can be downloaded in PDF format by clicking this link