Statement of Administration Policy: H.R. 5268 - Rural Development, Agriculture, and Related Agencies Appropriations Bill, FY 1991

(House)
(Sponsor: Whitten (D), Mississippi)

The Administration continues to oppose House action on appropriations bills in advance of a budget summit agreement.

Such action could unnecessarily and perhaps harmfully complicate implementation of a final budget resolution that reflects the agreement. However, inasmuch as the House is apparently going to take action, the Administration will express its views on these bills as they come before the House. The purpose of this Statement of Administration Policy is to express views on the Rural Development, Agriculture, and Related Agencies Appropriations Bill, FY 1991, as reported by the House Appropriations Committee.

The Administration strongly objects to the total level of funding provided by the House Committee. The bill provides $4.2 billion more than requested by the President in discretionary budget authority and $2.3 billion more in discretionary outlays. Direct loan limitations exceed the President's request by $3.9 billion and guaranteed loan limitations by $0.5 billion. Although the Administration supports the adoption of a loan guarantee program for rural housing, the House Committee has failed to adopt readily available broader loan program reforms and other proposals made by the President. These reforms and proposals could make available more of our limited resources for higher priority purposes throughout the Government. Instead, at a time when budget summit participants are meeting to try to reduce the deficit, the House Committee bill proposes such items as continuing high levels of heavily subsidized loans to financially healthy rural electric and rural telephone cooperatives.

The Administration strongly supports the House Committee's proposal to terminate the heavily subsidized and largely ineffective Federal crop insurance program, as suggested in the President's budget.

The Administration's concerns are discussed more fully in the attachment.

Attachment

(House)

H.R. 5268 - RURAL DEVELOPMENT, AGRICULTURE, AND RELATED AGENCIES APPROPRIATIONS BILL, FY 1991

I. MAJOR PROVISIONS SUPPORTED BY THE ADMINISTRATION

Federal Crop Insurance Corporation (FCIC): The Administration commends the House Committee for proposing to terminate the FCIC program in FY 1991. As representatives of the Administration have stated often, the Government cannot afford both crop insurance and annual, ad hoc disaster assistance. The Committee's action is a move in the right direction.

Rural Housing Insurance Fund (RHIF): The Administration commends the Committee for including a provision for rural housing guaranteed loans. This "pilot" will demonstrate that rural banks are ready and willing to use these guarantees, and that they are a viable alternative to direct loans. However, providing guarantee subsidies through revolving fund balances rather than through a specific appropriation violates proper budgetary treatment of this discretionary spending because the Farmers Home Administration (FmHA) would need to use its permanent borrowing authority to finance these subsidies.

Animal and Plant Health Inspection Service (APHIS): The Committee has: accepted the Administration's proposed restructuring of the APHIS account. This will increase tne amount of flexibility APHIS will have in addressing current and emergent animal and plant pest problems that could jeopardize American agriculture.

II. MAJOR PROVISIONS OPPOSED BY THE ADMINISTRATION

A. Funding Levels

Rural Electrification Administration fREAi and Rural Telephone Bank (RTB): The Committee has recommended direct loan levels that are identical to those' of recent years, perpetuating unwarranted subsidies to financially well-off borrowers. Furthermore, the Committee has ignored the request for privately- originated REA guaranteed loans, which would provide borrowers access to reasonably-priced financing without requiring significant changes in subscriber rates.

Appropriations for RTB stock purchase and reimbursement to REA were not reouested and are unnecessary.

Farmers Home Administration (FmHA) Loan Funds Appropriations for Past Losses: The Committee has under-funded these mandatory appropriations for losses by almost $1.1 billion. The committee knows that such under-funding merely increases the borrowing required by the revolving funds, thereby increasing fund interest outlays, and that the Administration's request next year for reimbursements will increase by a like amount. Since the Committee gets no discretionary savings credit for under-funding past losses, the only possible reason for this action is to report a Committee bill that appears to require less budget authority than the President's request. The Administration encourages the House to utilize genuine reductions in program levels, rather than gimmickry, to reduce budget authority.

Agriculture Credit Insurance Fund (ACIF): The Committee recommends over $1 billion in direct loans more than the President's request. Furthermore, the Committee has not included the proposal for subsidized guarantees. This proposal is an equally effective alternative for direct farm loans as it is for housing loans.

Rural Housing Insurance Fund (RHIF): The Committee's recommendation for direct loans exceeds the President's request by nearly $900 million. The Committee has made no provision for the housing vouchers contained in the President's budget. Therefore, the Committee has not provided housing assistance for rural low-income individuals who do not qualify for direct loans and for whom FmHA rental projects are not available.

Rural Development Insurance Fund (RDIF): The Committee recommends significantly higher direct loan levels for the RDIF, while decreasing the amount of guarantees. Direct waste and waste disposal loans are set at $500 million, a full $200 million higher than the President's Budget. The President's Budget also requested a shift from big business and industry (B&I) guaranteed loans to smaller-scale loans made by the Rural Development Loan Fund (RDLF). The House Committee ignored the proposed termination of the B&I program, providing $100 million, and went on to accept most of the proposed increase for the RDLF.

P.L. 480: The Committee's increase of $113 million over the President's request is unwarranted and unnecessary. Because of falling commodity prices and increasing receipts, the President's request would allow one-half million tons more in commodities to be exported in 1991 compared to 1990.

Cooperative State Research Service (CSRS): The Committee accepts the funding level included in the President's National Research Initiative but earmarks one-half of the increase from competitive grants for "special grants". The Committee cuts the President's request of $100 million for competitive grants by $27 million, to a level of $73 million. On the other hand, the Committee recommends $57 million for special grants, S31 million over the President's budget.

CSRS Buildings and Facilities: The Committee provides, and earmarks, $45 million for construction projects. The President requested no such funding. This account has been continually earmarked with special projects that serve political interests, not scientific ones.

Agricultural Research Service (ARS): The Committee has increased funding for the ARS buildings and facilities account, as requested, but has earmarked most of the money for work not included in the President's request. Generally, projects included in the President's $32 million request are funded at one-half of the requested level in the Committee bill. The rest of the proposed $26 million appropriation is divided among Congressionally-itemized projects. This appropriation practice continues to delay modernization of the Beltsville facility and promotes decentralized and duplicative facilities.

FmHA Grants: The Committee provides $300 million for FmHA Water and Waste Disposal Grants, $92 million over 1990 levels, and $200 million over the President's Budget. These grants are used to lower the cost of infrastructure improvements for rural communities and are often provided in combination with FmHA loans. The Committee also recommends continued or slightly increased funding for Mutual and Self Help Housing grants; Fire Protection Grants; Compensation for Construction Defects; Self Help Land Development loans; and Rural Development Grants, all of which are recommended for termination in the President's Budget.

Food and Nutrition Service (FNS): The Administration is concerned that in addition to necessary mandatory funding increases, the Committee has provided some $160 million more than the budget request for discretionary activities. Some of these increases are in higher priority programs, but, in the aggregate, these discretionary increases are not acceptable.

Child Nutrition Program: The Administration is concerned that the Committee bill includes only $3.7 million for the independent verification of school food service claims, rather than the $5.7 million requested in the budget. The Federal Review System was started after a series of audits and reviews indicated problems in school meal counting. The additional $2 million included in the budget would improve accountability, ensuring that Federal funds are used properly.

The Administration objects to the discretionary increase of $2.5 million for nutrition education and training (net), in addition to the earmark of $500,000 for the Food Service Management Institute at the University of Mississippi. The increase in net funding and the Food Service Management initiative earmark are unwarranted and would neither improve nutritional intake nor improve program accountability.

Special Supplemental Feeding Program for Women, Infants, and Children (WIC): The Administration opposes the $2 million earmark for the farmer's market coupon demonstration project. FNS plans to submit an evaluation of the project next year, based on a study of the first two years of the project. Four million dollars has already been made available for this project, and additional funding is not necessary.

Food Stamp Program: The Administration is pleased that the Committee has included a contingency reserve for the Food Stamp Program but is concerned that the appropriations language does not include "such sums as may be necessary" as requested in the Budget. Funding needs for the program have become increasingly uncertain, as the once certain relationship between unemployment and food stamp participation has broken down. "Such sums" language would ensure the continued availability of food stamp benefits to millions of participants. The Administration opposes the $962 million funding level for Puerto Rico. The Budget requested $825 million in a new program in the Department of Health and Human Services, recognizing Puerto Rico's improved economic conditions and increasing the Commonwealth's flexibility in using such funds. The Administration is concerned that the Committee did not adopt the Budget proposal constraining rapidly growing costs in the Employment and Training program.

Food and Drug Administration (FDA): The Committee has rejected the Administration proposal to include $157 million in user fees, which would benefit industi^ and consumers alike. Instead, the Committee has added $157 million in budget authority to the $528 million requested, but failed to make the funds available. The Administration urges the House to include FDA user fees and reduce the FDA's dependence on direct appropriations. User fees would reduce the FDA's vulnerability to fluctuations in appropriations and thereby improve the agency's ability to make safe and effective drugs available to the public as quickly as possible.

Commodity Futures Trading Commission (CFTC): The Committee has decreased the CFTC budget by $5.3 million based on the possible change in jurisdiction over stock index futures. However, such a change in jurisdiction would likely lead to only a $0.5 million to $1.5 million reduction in resource requirements for the CFTC.

B. Language Provisions

Micro-management of Farmers Home Administration (FmHA) Loan Programs: The Committee has included numerous general provisions that represent micro-management of FmHA's loan programs. These provisions include a prohibition on the use of private debt collectors for delinquent FmHA loans (Section 631). Such provisions reduce the efficiency of FmHA operations and, ultimately, increase costs to the taxpayers. Also included in the bill is the requirement that FmHA sell at least .65 percent of their new loans to the Federal Financing Bank (FFB), in the form of Certificates of Beneficial Ownership (CBO's) (Section 615). This provision is intended to ensure "a more accurate reflection of outlays"; however, agency "sales" to the FFB have not been scored as affecting Government outlays since the enactment of Gramm-Rudman-Hollings in 1985. Sales of CBO's to the FFB are now scored as borrowing and not as a "sale" of loan assets that would be scored as affecting outlays.

FTE Floors: The Administration objects to the continuation of arbitrary personnel floors for the Food and Drug Administration, the Farmers Home Administration, the Agricultural Stabilization and Conservation Service, the Rural Electrification Administration, and the Soil Conservation Service. Personnel floors are an unwarranted intrusion into Executive Branch management prerogatives and can only result in the inefficient allocation of scarce Federal resources. For example, the FDA personnel floor would slow the drug-approval process and reduce the . flexibility needed to respond to emergencies by tying up funds in maintaining unneeded personnel. Further, FDA would not have the flexibility to contract fof non- Federal expertise or invest in developing the agency's capability to meet future challenges.

New Projects: The Administration objects to the Section 622 requirement that not less than 20 new construction projects be initiated under the Watershed Protection and Flood Prevention Act (P.L. 566), and not less than five new projects be initiated under the Flood Control Act (P.L. 534). Such requirements would necessitate that funding be applied to the more expensive construction projects and reduce funding for environmentally sensitive land treatment activities.