Statement of Administration Policy: S. 1800 - Agriculture, Rural Development, Related Agencies Appropriations Bill, 1988

(Senate Floor)
(Sponsors: Whitten (D} Mississippi; Smith (D) Nebraska, Stennis (D) Mississippi, Burdick (D) North Dakota)

The bill is unacceptable to the Administration as reported by the Appropriations Committee because of excessive funding, numerous objectionable language provisions, and the total disregard of the President's credit and cost-saving proposals. If the bill were presented to the President in its present form, the Secretary of Agriculture and the Office of Management and Budget would recommend that he veto it.

In considering the acceptability of Congressional action on appropriations bills, the Administration uses as its benchmark the budgetary resources (i.e., budget authority, obligation limitations, and loan limitations) requested by the President for discretionary programs. The Rural Development/Agriculture bill substantially exceeds that benchmark. For discretionary programs, the Committee provides $2.1 billion more than the President's budget authority request. The Committee also increases the President's request by $4.9 billion in direct and guaranteed loans. As a result, the bill exceeds the Administration's benchmark by $7.0 billion.

There are several other areas of particular concern. First, the Committee's treatment of direct and guaranteed loan programs is totally unacceptable.

— The Committee completely ignores all Administration initiatives concerning REA loan programs, continuing highly-subsidized REA lending at $2.0 billion. The Administration's initiative of converting direct REA loans to 70 percent REA guarantees of private loans and charging a user fee for administrative costs would achieve deficit reductions of $4.5 billion from FY 1988 to FY 1992, while having an insignificant impact on a typical borrower's interest costs over the next four years. In addition, the Committee includes $328 million for reimbursements of losses to the Rural Electrification and Telephone Revolving fund, a fund that is already heavily subsidized by a $7.9 billion interest-free Treasury loan.

— The Committee continues the costly and inefficient rural housing direct loan program, which the President proposed to terminate, at '..9 billion rather than adopting the cost-effective housing voucher program.

— Rural development direct and guaranteed loan programs are continued at the FY 1987 level of $522 million, thus effectively removing the incentive for municipalities to seek financing through the private market. The President proposed these programs be terminated.

Second, the Committee rejects the President's proposals to terminate programs whose conservation goals could largely be achieved through the conservation activities mandated in the Food Security Act of 1985 or programs that should no longer be funded by the Federal government. For example, increases for the Soil Conservation Service ($181 million) and the Agricultural Stabilization and Conservation Service ($268 million) are provided. These increases are in addition to $1,388 million the Committee provides for the new Conservation Reserve Program, the Administration's preferred mechanism for achieving conservation objectives.

Third, the Committee rejects the Administration's attempts to implement user fees in USDA and FDA programs. Under the President's proposal, beneficiaries of specialized services would be required to pay for these services. The rejection of these user fees requires the taxpayer to pay over $586 million more per year rather than the recipients of these services.

The enclosed material details these and other provisions that are objectionable to the Administration.

The Administration commends the Committee for not including numerous objectionable provisions that the House Appropriations Committee includes in H.R. 3520, the foremost being language that prohibits any efforts to alter the method of computing normalized prices for agricultural commodities in effect January 1, 1987. This type of provision undermines recently-implemented efforts to reform the way Federal agencies justify agricultural development water projects. The previous practice of double-counting benefits has resulted in construction of unneeded water projects that, in turn, increase the production of surplus crops and cause additional downward pressure on farm prices.

Enclosure

November 10, 1987
(Senate Floor)

AGRICULTURE/RURAL DEVELOPMENT APPROPRIATIONS BILL, 1988
OBJECTIONABLE PROVISIONS

I. FUNDING LEVELS

Rural Electrification Administration (REA). The Committee's FY 1988 REA loans levels are far in excess of the President's request. The Committee provides: (1) insured 5 percent loans of $872.4 million as compared to the President's request of $290 million; (2) Rural Telephone Bank (RTB) loans of $177 million versus the President's request of $93 million; and (3) REA-guaranteed Federal Financing Bank (FFB) direct loans of $933.1 million versus the President's request of no 100 percent REA-guaranteed lending. In place of reduced insured 5 percent REA loans and RTB loans, the President proposed a program of $840 million in 70 percent REA guarantees of privately-originated loans.

Further, the bill includes $328 million to reimburse the REA revolving fund for losses, and specifies that the Rural Telephone Bank (RTB) sell $28.7 million in Class A Stock to the Treasury in FY 1988. The President's requests no appropriation for reimbursements to the Fund in FY 1988 because it is unnecessary and the Fund is already heavily subsidized with a $7.9 billion interest-free Treasury loan. The President's requests no purchase of Class A stock because it is unnecessary given a replacement of RTB loans with 70 percent guarantees of private loans. Class A stock purchases provide a costly and unwarranted subsidy to financially prosperous telephone borrowers since the stock only pays a 2 percent annual dividend to Treasury.

Rural Housing Insurance Fund (RHIF). The Committee rejects all of the President's proposals to terminate funding for the housing programs in the RHIF and replace them with housing vouchers. The bill funds these programs at $2 billion over the President's request for new loans. Thus, the bill continues to fully fund all the inefficient new housing construction programs- the President has actively sought to terminate for years.

Rural Development Insurance Fund. The Committee completely rejects the president's proposals to discontinue the direct and guaranteed loan programs. The continuation of these programs at the FY 1987 level of $522 million is objectionable and inappropriate. By rejecting the President's request, the Committee effectively removes the incentive for creditworthy borrowers to seek adequate credit resources through the more appropriate private markets.

Rejection of User Fee Initiative. The President’s user fee proposals for the fol1owing programs we. rejected by the Committee:

— REA ($27 million)
— Food and Drug Administration ($34 million)
— Food Safety and Inspection Service ($395 million)
— Animal and Plant Health Inspection Service ($86 million)
— Federal Grain Inspection Service ($7 million)
— Marketing Services ($33 million)
— Agricultural Cooperative Service ($4 million).

This action, which results in the loss of $584 million in offsetting collections, in concert with additional funding increases to these programs, is unnecessary and burdens the Federal government with costs it should not bear.

Soil Conservation Service. The Administration proposal to provide only funding for close-out activities for the following programs is rejected by the Committee:

— River Basin Surveys and Investigations
— Watershed Planning
— Watershed and Flood Prevention Operations
— Great Plains Conservation Program
— Resource Conservation and Development.

In addition, the Committee provides $654 million, $181 million more than requested by the President, for all SCS programs. Continued funding of the§"5 programs at the expense of higher-priority programs is inconsistent with good fiscal policy. Moreover, any continued funding of many of these programs should be assumed by local entities.

Agriculture Stabilization and Conservation Service (ASCS). The Committee rejects the President's proposal To terminate ASCS programs whose objectives are essentially available through the conservation activities mandated in the Food Security Act of 1985. The Conservation Reserve Program (CRP) is clearly the preferred mechanism to achieve this Nation's conservation objectives in the most cost-effective manner.

Extension Service. The Committee provides $361 million for this program, $99 million in excess of the President's request. The bill funds section 3(d) grants under the Smith-Lever Act, and includes such low-priority activities as urban gardening and pesticide impact assessment, for which no funds were requested. Also, the bill provides $3.3 million in unrequested grants for counseling programs activity. These programs can be financed by resources other than those provided by Federal taxpayers.

P.L. 480. The Committee provides $95 million more in Title II food aid programs than requested by the President. The increase is unnecessary given current program requirements. The Administration already has the authority to use surplus stocks under section 416 of the Agricultural Act of 1949 to meet additional food aid needs if they arise.

Foreign Agriculture Service. A $100 million appropriation for this program, $14.5 million above the President's request, is unjustified and contradicts the Administration's goal of scaling back this program. The funds requested by the President are adequate to meet the increased workload associated with the provisions of the 1985 Farm Bill.

Sunflower Indemnity Program. The bill proposes to establish a new price support program for sunflowers. The Committee establishes payment rates for the 1988 crop and provides an $18 million appropriation. The Administration opposes the establishment of this program and is concerned that appropriations bills are used to authorize programs that have not been completely and carefully studied.

Agricultural Research Service. The Administration objects to the Committee's $64 million 1ncrease to the President's request for this program, including an additional $49 million for buildings and facilities. The Committee funds many low-priority specialized programs, including a $5.5 million increase above the President's request for human nutrition research. The Administration has a research program based on nationwide priorities. The use of Federal funds is carefully evaluated in terms of these priorities. If a State has a particular interest in certain type of research, the State should fund that research.

Cooperative State Research Service. The Committee provides $329 million, a $89 million increase to the President's request. The Committee increases funding for special research grants. States with specialized interests should fund those interests.

Animal and Plant Health Inspection Service. The Committee provides $352 million for this program, a $140 million increase to the President's request. The largest increases, discounting the rejected user fee proposals, are: $18 million for bollweevil eradication, and $12 million for animal damage control. A large portion of ADC benefits accrue directly to local beneficiaries who should bear the major responsibility for funding these activities.

WIC. The Committee provides $1,804 million, an increase of $116 million to the President's request, and $80 million above current services. Despite tight budgetary constraints on all domestic programs, WIC funding has more than doubled since FY 1980. With more than 3 million low-income women, infants, and children currently participating, further program improvements should come through more efficient use of existing resources and better targeting to the neediest, rather than through such unfocused funding increases. In Tennessee, for example, current estimates indicate that State WIC participation may increase by 8 - 12 percent due to a recent food cost savings initiative.

Nutrition Assistance for Puerto Rico. The Committee provides more funds than necessary for the Nutrition Assistance for Puerto Rico block grant. For FY 1988, the Administration requests $825 million; the Committee provides $880 million. Puerto Rico has complete flexibility to set benefit levels and eligibility criteria. Puerto Rico can maintain benefits for high-priority recipients and, if necessary, reduce benefits to the less needy to stay within its appropriation.

Agricultural Credit Insurance Fund (ACIF). The Committee continues funding for various ACIF loan programs proposed for termination by the President. These funds should be used for higher-priority programs that require appropriate Federal funding.

FmHA, Grant Programs. The Committee funds all of the grant programs at a total cost of $165 million over the President's request. The President proposed termination of all of these programs.

Temporary Emergency Food Assistance Program (TEFAP). The Committee funds the Temporary Emergency Food Assistance Program for which no funds were requested by the President. The bill provides $50 million in grants to States for the distribution of surplus commodities donated to the needy. The government already provides surplus commodities to the needy. In addition, the government also pays the cost of processing and transporting these commodities to the States. Any additional costs should be provided by the States as their fair share.

Commodity Supplemental Food Program (CSFP). The Committee increases CSFP by $13.1 million above the President's request, and $5.2 million--or 12 percent-above current services. Needy women, infants, and children eligible for CSFP are much better targeted by WIC, which serves the same population, and has expanded dramatically in recent years to serve over 3.3 million women, infants, and children in all but 200 counties nation-wide. Unlike WIC, CSFP does not target participants who show medical/nutritional need and is open to low-income elderly.

Food and Drug Administration (FDA). The Administration objects to the unnecessary $1 million addition to FDA's contingency fund. The $1.2 million remaining in the fund from prior years is sufficient to meet any emergency that might arise in FY 1988.

II. LANGUAGE PROVISIONS

Food and Drug Administration. In rejecting the President's proposal Tor FITK user fees, the Committee retains restrictive language prohibiting the use of funds to develop, establish, or implement user fees. This language represents an intrusion into effective management of FDA drug and device approvals and would seriously hamper FDA's effort to improve the processing of new drug and device applications.

Commodity Supplemental Food Program. First, the Administration opposes language that forbids CSFP from reimbursing CCC for commodities donated to the program. The reimbursement of CCC for commodities is a valid program expense, and failure to pay for donated CCC items understates the resources needed to maintain CSFP food packages. This restriction results in subsidies to CSFP by CCC.

Second, the Committee directs USDA to limit participation at existing sites to FY 1987 levels, and use remaining resources to fund new sites. The Administration believes that it would be disruptive to participants and fiscally imprudent for the Food and Nutrition Service to certify a new site that it would not be able to fund on a sustained basis in the current fiscal environment. The nutritional needs of women, infants, and children in areas not served by CSFP are met by other programs, such as WIC.

Minimum Staffing Levels. Section 626 mandates minimum staffing levels For three bureaus of USDA — Farmers Home Administration, Agricultural Stabilization and Conservation Service, and Soil Conservation Service. This infringes on the Executive Branch's ability to implement programs efficiently and effectively.

Credit to Poland. The Administration continues to object to Section 570 restricting the President's ability to conduct foreign policy by modifying terms of existing U.S. commitments to U.S. banks under credit guaranteed to the Polish People's Republic.

WIC. The bill directs USDA to study Medicaid savings for infants due to the mother's participation in WIC. Since the Administration already believes that the participation of pregnant women and infants in WIC is a priority, there is no policy usefulness in conducting further research in this area. The study would cost about $1 million, and would either limit research in areas like breastfeeding promotion and vendor fraud, or reduce program participation.

FmHA Debt Collection. Section 631, which denies the Administration the opportunity to use private debt collection agencies, is objectionable. Sound debt management requires the ability to seek effective and cost-efficient collection alternatives and not to preclude the use of these alternatives.

Mandating New Construction Projects. Section 622 directs the Secretary of Agriculture to initiate construction on not less than twenty new projects under the Watershed Protection and Flood Prevention Act and not less than five new projects under the Flood Control Act. The types of decisions should be reserved for the Federal managers tasked with executing these programs.

Intrusions in Executive Branch Matters. The Administration objects to Section 617 that disallows the phasing out of the Resource Conservation and Development Program and language that precludes any action to consolidate the Soil Conservation Services' national technical centers. These provisions are inappropriate intrusions in Executive Branch matters.

Release of Proprietary Information. The Administration objects To section bill because laws to enforce and control the release of proprietary information already exist. Given the protections already established by these laws, this provision will only serve to hamper the effective administration of the program.