The U.S. Department of Agriculture: Appropriations for FY1997

Ralph Chite, Coordinator
Specialist in Agricultural Policy Environment and Natural Resources Policy Division

November 12, 1996

96-903 ENR

SUMMARY

The FY1997 agriculture appropriations act (P.L. 104-180) was signed into law on August 6, 1996. P.L. 104-180 provides $52.84 billion in FY1997 budget authority for the U.S. Department of Agriculture and related agencies, an amount which is $5.60 billion below the Administration's FY1997 request and $10.25 billion below the FY1996 enacted level. Much of the reduction in funding from FY1996 levels is attributable to an $8.9 billion reduction in the reimbursement for net realized losses of the Commodity Credit Corporation, which is the funding mechanism for USDA's commodity programs. The act also requires recipients of the new farm bill-authorized market transition payments to use eligible land for farm production, or place it in a conserving use.

The amount provided for conservation programs in FY1997 is approximately $2 billion less than FY1996 and the Administration request, not because of actual funding reductions for the most part, but because provisions in the enacted 1996 farm bill converted certain conservation programs to entitlements that are no longer subject to annual appropriations. The measure also limits funding for certain new conservation programs authorized by the farm bill.

P.L. 104-180 also provides $1.6 billion to support roughly $6.9 billion of foreign food aid and export programs. The act reduces overall funding for the P.L. 480 Food for Peace Program and limits spending on the Export Enhancement Program. Increased funding is made available for the Foreign Agricultural Service, and P.L. 480 commodity donations.

FY1997 funding of $2.0 billion for USDA rural development programs in P.L. 104-180 is $123 million below FY1996 and $250 million below the Administration request. The Administration requested funding for several new rural initiatives, none of which is funded by the FY1997 act. The measure does potentially make more programs eligible for Fund for Rural America money.

P.L. 104-180 provides $40.5 billion for USDA food and nutrition programs, $652 million more than FY1996, but $2.6 billion below the Administration request. This level does not reflect lower spending expected to result from changes to food programs made by the 1996 welfare reform law. Most of the difference from the request is related to the contingency reserve for the food stamp program.

The $1.84 billion appropriated for agricultural research in P.L. 104-180 is $66 million more than FY1996 and $39 million above the Administration request. Included is a $45 million increase over FY1996 for USDA's in-house scientific research agency, and a $19 million increase for USDA to assume responsibility of the census of agriculture from the Commerce Department.

P.L. 104-180 provides $574 million for USDA meat and poultry inspection as requested by the Administration. It also contains compromise language to avert a dispute over poultry labeling regulations.

CONTENTS

The USDA FY1997 Budget Request
Mandatory vs. Discretionary Spending
FY1997 Agriculture Appropriations Act (P.L. 104-180)
Farm Assistance Programs
Farm Commodity Programs
Planting Requirement
Deleted Farm Commodity Program Amendments
Crop Insurance
Farm Credit
Conservation
Agricultural Trade and Food Aid
Foreign Agricultural Service
P.L. 480
Export Credit Guarantees
Export Enhancement Program (EEP) and Market Access Program (MAP
Rural Development
Fund for Rural America
Distance Learning and Medical Link Loans
Community Facility Grants
Rural Performance Partnership Program
Empowerment Zones and Enterprise Communities
Food and Nutrition Programs
Food Stamps
Child Nutrition and WIC
Commodity Assistance
Agricultural Research, Education, and Economics
ARS
CSREES
ERS and NASS
Food Safety
Marketing and Regulatory Programs

CONTRIBUTORS

Ralph M. Chite
USDA Budget and Farm Spending

Jeffrey A. Zinn
Conservation

Charles E. Hanrahan
Trade and Food Aid

Jean Yavis Jones
Domestic Food Assistance

Sandra S. Osbourn
Rural Development

Jean M. Rawson
Research and Education

Geoffrey S. Becker
Food Safety and Marketing

The USDA FY1997 Budget Request

The Clinton Administration's FY1997 budget estimate for all USDA programs was for $56.0 billion in outlays, a $1.0 billion increase over the current estimate for FY1996 outlays. USDA carries out its widely varied responsibilities through approximately 30 separate internal agencies staffed by some 105,000 employees. USDA is responsible for many activities outside of the agriculture budget function. Hence, spending for USDA is not synonymous with spending for farmers.

By far the largest outlay within the Department, an estimated $40.7 billion or 72 percent of total outlays, is for its food and nutrition programs, primarily the food stamp program (the costliest of all USDA programs), various child nutrition programs, and the Women, Infants and Children (WIC) program. Another $6.2 billion (11 percent) is estimated for an array of USDA conservation and environment programs, nearly one-half of which funds the Forest Service (which is funded through the Interior appropriations bill, not the agriculture bill), and the other half a number of conservation programs for farm producers. The estimate also includes $3.9 billion (6.5 percent) for commodity support payments, crop insurance and farm loans. USDA programs for agricultural trade and food aid ($2.0 billion), research and education ($1.8 billion), rural development ($1.0 billion), marketing and regulatory activities ($635 million), and meat and poultry inspection ($465 million) account for the balance of the budget estimate.

The President's budget estimate for FY1997 was submitted prior to, and hence did not reflect, the enactment of the Federal Agricultural Improvement and Reform Act of 1996 (P.L. 104-127, the 1996 farm bill), which the President signed into law on April 4, 1996. Among its many provisions, the 1996 farm bill made significant changes to the long-standing commodity price and income support programs that will require higher spending on farm support programs in FY1997. The welfare reform bill enacted on August 22, 1996 (P.L. 104-193) will also affect FY1997 outlays for the food and nutrition programs.

Mandatory vs. Discretionary Spending

Approximately three-fourths of the total USDA budget is classified as mandatory, which by definition occurs outside the control of annual appropriations. Currently accounting for the vast majority of USDA mandatory spending are the food stamp program and certain other nutrition programs; the farm commodity price and income support programs; the federal crop insurance program; and the conservation reserve program (CRP). Eligibility for mandatory programs is written into law, and any individual or entity that meets the eligibility requirements is entitled to a payment as authorized by the law.

Although they have mandatory status, the food and nutrition programs are funded by an annual appropriation based on projected spending needs. (Conservation provisions in the 1996 farm bill eliminate the need for future annual appropriations to fund existing and new contracts in the CRP.) Supplemental appropriations generally are made if and when these estimates fall short of required spending. An annual appropriation is also made to reimburse the Commodity Credit Corporation for losses it incurs in financing the commodity support programs. Since farm commodity price and income support programs have been a significant portion of the USDA budget, and spending levels among these programs are erratic and unpredictable, total USDA spending has historically been highly variable. This is expected to change in future years as a result of the enactment of the 1996 farm bill, which caps spending on direct payments to crop producers.

The other 25 percent of the USDA budget is for discretionary programs, which receive their funding in annual appropriations legislation. Among the major discretionary programs within USDA that are funded by the annual agriculture appropriations bill are its rural development programs, research and education programs, agricultural credit, the Women, Infants, and Children (WIC) program, and the Public Law (P.L.) 480 international food aid program.

FY1997 Agriculture Appropriations Act (P.L. 104-180)

The conference agreement on the FY1997 agriculture appropriations bill (H.R. 3603/P.L. 104-180) was approved by Congress on August 1, 1996, and was signed into law by the President on August 6. P.L. 104-180 provides $52.84 billion in FY1997 budget authority for USDA and related agencies, an amount which is $5.60 billion below the Administration's FY1997 request and $10.25 billion below the FY1996 enacted level.

Table 1. U.S. Department of Agriculture and Related Agencies Appropriations,
FY1992 to FY1997
(budget authority in billions of dollars)

Sources: Congressional Budget Office and House Appropriations Committee.

Much of the reduction in funding from FY1996 levels is attributable to an $8.9 billion reduction in the reimbursement for net realized losses of the Commodity Credit Corporation, which is the funding mechanism for USDA's commodity programs. Strong market prices for supported commodities over the last 2 years have contributed to the lower funding requirements for the CCC. Also contributing to the reduction in appropriations are recent legislative changes made to the method of funding several USDA farm conservation programs. The recently enacted Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104-127, the 1996 farm bill) converted the Conservation Reserve Program and Wetlands Reserve Program (with combined funding of $1.85 billion in FY1996) to entitlement programs that no longer require an annual appropriation beginning in FY1997.

The following is a summary of the major provisions of P.L. 104-180: Farm Assistance Programs

The FY1997 agriculture appropriations act includes $3.22 billion in budget authority to fund the three major areas that support farmers in the production of their commodities: the Commodity Credit Corporation (CCC), the federal crop insurance program, and farm credit programs.

Farm Commodity Programs. Outlays for the farm commodity programs and certain farm export programs are funded through USDA's Commodity Credit Corporation (CCC). In past years, outlays of the CCC have been highly variable, and tended to fluctuate based on crop market conditions. The Federal Agriculture Improvement and Reform Act of 1996 (P.L. 104-127, the 1996 farm bill) was enacted on April 4, 1996, and made significant changes to commodity programs. The 1996 farm bill replaces the program of making direct payments to participating producers when market prices fall below a target level, with pre-determined and declining market transition payments to eligible producers over a 7-year period. Recently, market prices have been strong for many of the commodities that receive direct payments.

As requested by the Administration, P.L. 104-180 provides $1.5 billion for reimbursement for the net realized losses of the Commodity Credit Corporation (CCC), $8.9 billion below the FY1996 appropriated level. The CCC is a revolving financing mechanism within USDA, through which it supports more than a dozen specified commodities, including grains, cotton, milk, sugar, peanuts, wool, and tobacco. The formulas that determine payments under these programs were made by long-term legislation, and benefits had to be provided to any participating producer. The CCC serves as a funding mechanism for several USDA export subsidy programs as well.

Because the farm commodity programs are mandatory spending programs, they do not require appropriations to the CCC for annual program outlays. The CCC borrows funds from the Treasury to fund its operations. However, because CCC outstanding borrowing cannot exceed $30 billion, the annual appropriations bill usually contains funding for a "reimbursement of CCC net realized losses" so that the CCC can repay its debt to the Treasury and not exhaust its borrowing authority. Therefore, the $1.5 billion requested for FY1997, and provided in P.L. 104-180, is not driven by what CCC spending is expected to be in FY1997, but rather by what actual spending was in FY1995.

Planting Requirement. P.L. 104-180 requires recipients of market transition payments to use eligible farmland for agricultural production, unless the land is placed in a soil conserving use, or if the land is affected by a natural disaster. Proponents of this measure hope to prevent a recipient from collecting payments while using the land for nonagricultural purposes. Opponents contend that this provision, as first approved by the House, would create confusion with a similar provision in the enacted 1996 farm bill, and might lead to additional regulations from USDA as well as additional paperwork requirements for farmers. In response to these concerns, P.L. 104-180 states that it is not meant to be interpreted in a way that would require additional regulations or reporting procedures.

Deleted Farm Commodity Program Amendments. Several amendments to the FY1997 agriculture appropriations bill were adopted in either the House- or Senate-passed version of the bill that would have affected the farm commodity programs. All of these provisions were deleted in the conference agreement on the measure.

A Senate provision would have increased contract payments to barley producers by $20 million in FY1997, and offset this amount by reducing outyear barley payments by a like amount. Supporters contended that the barley share of available contract payments was unfairly low in relation to other contract commodities. The conferees struck the provision and instead encourage the House and Senate Agriculture Committees to instruct USDA to find ways to address the perceived inequity.

Two other floor amendments that were adopted by the Senate but deleted by conferees would have affected the planting flexibility of farmers. One would have prohibited the planting of wild rice on contract acres, constraining farmers' planting flexibility but protecting wild rice producers from the potential price-depressing effects of a shift in production to wild rice on contract acres. In contrast, a separate Senate provision would have allowed any farmer to plant fruits and vegetables on contract acres subsequent to a production failure of contract commodities. This latter provision was intended to continue a policy long maintained under previous farm bills. These issues might be addressed in separate legislation.

The House-passed bill contained a provision that would have effectively capped the price of raw sugar at 21.15 cents per lb., which would have been a 1.5-cent reduction from May 1996 average market prices. The provision was supported by sugarcane refiners and food and beverage companies that use sugar in their products, and was opposed by the sugar production sector. The conference agreement deletes this provision and instead requires USDA to report to the Appropriations Committees on market conditions within the sugar sector twice during FY1997.

Crop Insurance: P.L. 104-180 concurs with the Administration request for full funding of the federal crop insurance program for FY1997, which it estimates at $1.8 billion in total outlays, compared with an estimated $2.0 billion in FY1996. Because crop losses caused by natural disasters are impossible to predict, outlays of the crop insurance program are difficult to budget. Hence, the Administration requests that Congress appropriate "such sums as are necessary" for the mandatory spending component of the program. Although much of the cost of the program is mandatory spending, most of its administrative and operating expenses are subject to annual appropriations. The enacted 1996 farm bill eliminates the statutory requirement that a producer purchase the minimum level of crop insurance as a prerequisite for receiving direct commodity payments. USDA anticipates that this provision will reduce its outlays since fewer producers will likely participate without the farm program linkage. However, some of this savings will be offset by a 1996 farm bill requirement that USDA begin offering insurance coverage for seed crops, nursery crops, and aquaculture. In accordance with a provision in the enacted 1996 farm bill which creates an Office of Risk Management within USDA, P.L. 104-180 makes available $64 million in salaries and expenses to this new office. For more information on crop insurance, see CRS Report 96-477 ENR, Crop Insurance and Risk Management: Provisions in the Enacted 1996 Farm Bill.

Farm Credit: USDA serves as a lender of last resort for family farmers unable to obtain credit from a commercial lender, formerly through its Farmers Home Administration, but now through its Farm Service Agency. USDA provides direct farm loans and also guarantees qualified loans from commercial lenders, which are used to finance the purchase of farm real estate and help producers meet their operating expenses, and to financially recover from natural disasters. P.L. 104-180 continues the recent trend of focusing most of USDA's farm loan resources toward loan guarantees rather than direct loans. Under budget rules adopted in 1990, federal agencies are required to estimate the cost of making a direct or guaranteed loan and record that cost as the budget outlay for the loan. The cost of making a loan is directly related to any interest rate subsidy provided by the government, as well as a projection of anticipated loan losses caused by farmer non-repayment of the loans.

P.L. 104-180 provides an appropriation of $134.3 million to support new direct and guaranteed FY1997 farm loans of $3.0 billion, compared with $177.8 million to support $3.16 billion in the FY1996 act. The Administration had requested $139 million to support a total loan level of $3.20 billion in FY1997. The Administration had requested the elimination of the emergency disaster (EM) loan program, which received an FY1996 appropriation of $100 million for direct loans to farmers affected by a natural disaster. P.L. 104-180 reduces EM funding from the current $100 million to $25 million in FY1997. However, the conferees agreed to provide an emergency supplemental appropriation of $25 million for FY1996 to make an additional $85.2 million of EM loans to victims of the Southwest drought, Hurricane Bertha and others. The only other reductions in loan authority among the other USDA farm loan programs is a $105 million cut in direct farm operating loans to $445 million in FY1997, and a $10 million reduction in direct farm ownership loan authority to $50 million. For information on farm bill changes to credit programs, see CRS Report 96-431 ENR, Credit Provisions of the Enacted 1996 Farm Bill.

Conservation

Title II of the FY1997 agriculture appropriations act provides budget authority for resource conservation funding, which includes programs administered by the Natural Resources Conservation Service (NRCS) and the Farm Service Agency (FSA). P.L. 104-180 provides $769 million for FY1997, which is closer to the House-passed version ($767 million) then to the Senate-passed version ($790 million). All funding is provided to the NRCS.

Total conservation funding appears to decrease about $2 billion from FY1996. However, provisions in the 1996 farm bill made several major conservation programs entitlements, to be funded through the borrowing authority of USDA's Commodity Credit Corporation rather than through annual appropriations. The largest conservation programs converted to entitlements by the farm bill were the Conservation Reserve Program (CRP) and the Wetlands Reserve Program (WRP), which pay producers to retire environmentally sensitive lands. Budget authority for both programs combined was $1.859 billion in FY1996. Actual FY1997 reductions for conservation are limited.

Congressional action on conservation funding contrasts with Administration proposals, which had to be submitted to Congress before the 1996 farm bill was enacted. The Administration proposed FY1997 budget authority for conservation programs totalling $2.948 billion, a $121 million increase over the FY1996 appropriation. The request included $143 million more for the CRP, $111 million more for WRP, and $33 million more for the core NRCS conservation program, Conservation Operations (CO), which provides technical assistance to producers. Proposed reductions included eliminating more than $110 million in emergency supplemental funding for FY1996 and eliminating funding for four cost-sharing programs that were subsequently terminated by the farm bill.

Congress has repeatedly rejected Administration proposals for large funding increases for additional enrollments for the CRP and WRP on budgetary grounds. P.L. 104-180 provides no budget authority for new CRP enrollments and limits authority for new WRP enrollments to 130,000 acres, an increase of 30,000 acres. (P.L. 104-180 permits enrollments above this threshold if they are funded through non-Federal funds available to the Secretary.) The 1996 farm bill required that the initial 75,000 acres in FY1997 be enrolled in the WRP in temporary agreements before more expensive permanent easements could again be used; P.L. 104-180 reduces that figure to 31,667 acres. Also, the Department is prohibited from automatically extending expiring CRP contracts, thereby making interested farmers reapply for the program using full-term contracts under revised rules.

For CO, P.L. 104-180 adopts almost all of the House-passed reduction of $10.2 million from FY1996. The Senate had proposed increasing it by $9.0 million over the FY1996 appropriated level. Both appropriations committees stated in their reports that technical assistance activities supporting implementation of all CCC-funded conservation programs should also be funded through the CCC. The House Appropriations Committee noted that CO funding would actually be an increase from FY1996, when the mandatory funding for EQIP (see below) is considered.

The 1996 farm bill authorized several new conservation programs. It terminated four cost-share programs that received a total appropriation of $77 million for FY1996, and replaced them with a new cost-sharing program, called the Environmental Quality Incentive Program (EQIP), an entitlement authorized at $200 million per year. (EQIP is receiving $130 million in FY1996.) While EQIP funding is not affected by the FY1997 appropriations, two other new mandatory programs, the farmland protection program and the Conservation Farm Options Program, are restricted in P.L. 104-180 to $2 million each, a fraction of the maximum authorized. In addition, no funds are earmarked for the new National Natural Resources Conservation Foundation, although the Senate had earmarked $250,000 for it.

For more information on conservation issues, see CRS Issue Brief 96030, Soil and Water Conservation: Implementing the Farm Bill and Other Issues.

Agricultural Trade and Food Aid

The FY1997 agriculture appropriations act contains budget authority of $1.593 billion for USDA's foreign food aid, export credit guarantees, certain market promotion programs, and the salaries and expenses of its Foreign Agricultural Service. The conference agreement on the bill was close to the amount provided in the House bill and requested by the Administration, 1 percent above the Senate level, and 2 percent below the FY1996 appropriation. Of the $1.593 billion in P.L. 104-180, $610 million is provided to support nearly $6.0 billion in guaranteed and direct loans. A general provision in the FY1997 act places a funding limitation on the Export Enhancement Program (EEP), and a restriction on participation in the Market Access Program, formerly called the Market Promotion Program. Both of these are mandatory programs that do not require an annual appropriation.

Foreign Agricultural Service: In addition to administering the export and food aid programs, FAS maintains a worldwide agricultural information and reporting service and carries out USDA's programs of international development and technical cooperation in food and agriculture. P.L. 104-180 provides a direct appropriation of $131.3 million plus transfers of $4.2 million, for a total program level of $135.6 million in FY1997, an increase of $10.8 million above the amount available in FY1996 and $1.6 million below the Administration request. The appropriations act includes a $5.5 million increase for the Foreign Market Development Cooperator Program.

P.L. 480: The P.L. 480 or Food for Peace Program, provides for long-term concessional sales of food (Title I), humanitarian commodity donations (Title II), and grant food aid to least developed countries (Title III). Title I of P.L. 480 provides for financing sales of agricultural commodities to developing countries and private entities for dollars on credit terms or for local currencies (including for local currencies on credit terms). Under Title II of P.L. 480, commodities are donated through foreign governments to combat malnutrition and meet famine and other emergency-induced food requirements and made available public and private agencies for nonemergency development projects. Under Title III, commodities go to governments of least developed countries for direct feeding, development of emergency food reserves, or may be sold with the proceeds used for specific economic development purposes.

P.L. 104-180 provides for a total P.L. 480 program level of $1.1 billion in FY1997, as requested by the Administration and in the Senate bill, which is $77 million less than the FY1996 enacted level. Lower FY1997 funding is due primarily to significant reductions in concessional sales (Title I) and grant food aid (Title III). Funding for Title II humanitarian commodity donations increases by $15.9 million in FY1997. An earlier amendment to eliminate Title III funding for FY1997 was defeated on the House floor.

Export Credit Guarantees: Under this program, the CCC guarantees the repayment of commercial credit extended to finance sales of U.S. agricultural products. The GSM-102 program covers credit with repayment terms of up to 3 years. The GSM-103 program provides intermediate-term credit with repayment in 3 to 10 years. The Agricultural Trade Act of 1978 as amended by the 1996 farm bill requires that not less than $5.5 billion be made available as export credit guarantees. P.L. 104-180 provides $390 million in loan subsidies to support the $5.5 billion of credit guarantees requested by the Administration, and $3.8 million in salaries and expenses to administer the program.

Export Enhancement Program (EEP) and Market Access Program (MAP): Funding levels, for EEP, a direct export subsidy program, are authorized in the 1996 farm bill, but EEP is not subject to annual appropriations; its costs are covered in appropriations to cover the net realized losses of the CCC. For FY1997, the 1996 farm bill authorized not more than $250 million in EEP subsidies. P.L. 104-180 effectively limits EEP funding in FY1997 to $100 million by prohibiting the use of FY1997 appropriations to pay salaries and expenses of personnel charged with implementing the program if EEP subsidies exceed $100 million. High prices for commodities that usually benefit from EEP could keep FY1997 EEP expenditures below $100 million.

MAP, which supports private initiatives to promote agricultural exports is, like EEP, not funded by annual appropriations. Although P.L. 104-180 does not limit MAP FY1997 funding, it does effectively prohibit MAP spending in support of promotion of exports of mink pelts or garments, a provision that was adopted in the FY1996 agriculture appropriations bill. Before initial passage of the FY1997 appropriations bill by the House and Senate, amendments were considered to eliminate or restrict MAP funding, but both were defeated. The House amendment would have eliminated all MAP funding for FY1997, and the Senate amendment would have reduced MAP funding from the authorized level of $90 million to $70 million in FY1997.

For more information, see CRS Issue Brief 95088, Farm Bill Issues: Agricultural Exports and Food Aid, and CRS Report 96-538 ENR, Food Aid and Trade Provisions in the Federal Agriculture Improvement and Reform Act of 1996.

Rural Development

The FY1997 agriculture appropriations act provides $2.004 billion for USDA rural development programs. This represents a decrease of $123 million from FY1996 funding levels, and is $250 million below the Administration's FY1997 budget request. Some of this funding would support rural and economic community development loan programs at a level of $4.942 billion, $215 million less than the FY1996 level and $564 million less than the Administration request.

Fund for Rural America: P.L. 104-180 prohibits the Secretary from using funds appropriated by the bill to carry out two provisions of the Fund for Rural America, a mandatory spending program authorized by the 1996 farm bill which will make $100 million available for competitive research and rural development beginning on January 1, 1997. One provision prohibits USDA from enforcing Section 793(d) of the 1996 farm bill. Section 793(d) stipulates that in order for a rural development program to receive funds through the Fund for Rural America in any fiscal year, it must have received an appropriation of no less than 90 percent of the amount appropriated in FY1996. The appropriations committees noted that a number of factors might leave eligible rural development programs funded at a level lower than FY1996, and the programs would then be doubly jeopardized if they are also not eligible for monies distributed through the Fund.

A second prohibition originated in conference on the FY1997 act. It provides that no funds appropriated by this act can be used to implement Section 793(c)(1)(C) of the farm bill, which limits the amount of Fund for Rural America money available for housing programs to 20 percent of the total.

Distance Learning and Medical Link Loans: The distance learning and medical link program is designed to provide incentives to improve the quality of phone services and to provide rural access to advanced telecommunications services and computer networks. The Administration requested $125 million in new loan funds to supplement the existing grant program, for which an increase from $7.5 million to $20.2 million was requested. P.L. 104-180 appropriates $9 billion, which can be used for grants or loans.

Community Facility Grants: P.L. 104-180 makes funding available for one new program authorized by the 1996 farm bill, a $10 million community facilities grant program. The Administration requested funding for this in an amendment to its FY1997 budget request. P.L. 104-180 provides the full $10 million and incorporates the program into the new Housing Assistance Program.

Rural Performance Partnership Program: In its FY1996 budget, the Administration requested the establishment of a new Rural Performance Partnership Program, which would consolidate fourteen existing programs into three funding streams: rural utilities, rural community facility infrastructure, and rural business. The FY1966 appropriations act adopted this approach for one funding stream, creating the Rural Utilities Assistance Program, which combined funding for water and waste disposal loans and grants, solid waste management grants, and associated administrative expenses.

The 1996 farm bill authorized the establishment of a new Rural Community Advancement Program (RCAP) that would consolidate twelve existing programs (two of which were newly authorized by the Act) into three funding streams and grant some authority to transfer funds from one stream to another.

P.L. 104-180 adopts the concept of consolidating rural development program funds into three funding streams: a Housing Assistance Program, a Utilities Assistance Program (funded in FY1996), and a Business-Cooperative Assistance Program. Like the Administration's proposal, it includes some housing programs in this restructuring (the 1996 farm bill did not). For the three rural performance partnership programs combined, P.L. 104-180 provides $749 million, which is $103 million less than the $852 million requested by the Administration.

Empowerment Zones and Enterprise Communities: The Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) authorized the designation of 3 Rural Empowerment Zones and 30 Rural Enterprise Communities. The Administration proposed a second round of competition, which would designate 35 new rural areas. Designated areas receive some combination of federal tax benefits, social service grants, and earmarked funds from appropriations. P.L. 104-180 earmarks $23.4 million for Empowerment Zones and Enterprise Communities from four accounts: Rural Housing Assistance Program, Rural Development Loan Fund, Business and Industry Loans, and Rural Utilities Assistance Program.

Food and Nutrition Programs

The FY1997 agriculture appropriations act provides a total of $40.415 billion in new budget authority for food and nutrition programs, which is $652 million above the FY1996 enacted level, but $2.6 billion below the FY1997 Administration request. Accounting for most of the difference is that the Administration requested a food stamp contingency reserve of nearly $2.5 billion, while P.L. 104-180 provides $100 million. FY1997 budget authority for the food and nutrition programs will be affected by the welfare reform bill that was enacted on August 22, 1996 (P.L. 104-193). According to CBO estimates, this law will lower FY1997 spending for food programs by some $2.2 billion.

The Administration requested $43.0 billion in new budget authority domestic food and nutrition programs. This is $3.3 billion more than the FY1996 appropriation. The total includes separate food stamp and WIC contingency reserves. It did not reflect CBO estimated reductions of $2.3 billion in food program spending for FY1997 under changes contained in the Administration's welfare reform proposal.

Food Stamps: P.L. 104-180 provides a total of $27.6 billion for food stamps and related activities, $100 million of which is for the contingency reserve, and $1.2 billion is for Puerto Rico. The total is $20.2 million above FY1996 and $2.37 billion below the FY1997 Administration request. There is no specific reference in the act to the increased funding needed for American Samoa Nutrition Assistance and the new community food program. However, the 1996 farm law mandates that spending for these activities be taken from food stamp program funds. The Administration requested total food stamp funding of $30.0 billion: $26.35 billion for food stamps, $2.5 billion for a contingency reserve fund, and $1.2 billion for Puerto Rico. A provision limits to $3 million the amount of food stamp funds that can be used for studies and evaluations. A separate general provision in the FY1997 act freezes the standard deduction for food stamp eligibility at the FY1995 level, which allows the committees to recognize $345 million in savings. The 1996 welfare law made changes to the food stamp that are expected to reduce FY1997 spending by $2.1 billion, according to CBO estimates.

Child Nutrition and WIC: The FY1997 agriculture appropriations act provides a total of $12.383 billion in budget authority for the child nutrition programs, which include the school lunch, breakfast, child and adult care food, summer food service, special milk programs, and for the WIC program. This includes $8.65 billion for the child nutrition programs, ($107 million more than FY1996 and $15 million below the Administration request), and $3.73 billion for WIC (the same level as FY1996 and $151 million below the Administration request.) The amount provided for child nutrition meal service programs (e.g., school lunch and breakfast programs) is expected to maintain full service for the mandatory programs. Conferees did not concur with the Administration-proposed $50 million increase and $100 million reserve fund for WIC. Noting continued Committee support for WIC, the House Appropriations Committee report indicated that $245 million in WIC funds are expected to remain unspent at the end of FY1996. The Committee projected that use of these funds (less any amount above $100 million in unspent WIC amounts that are transferred to other USDA programs) will maintain and possibly allow for an increase in WIC participation.

The FY1997 appropriation does not provide funding under the child nutrition account to pay for the nutrition education and training (NET) program, which authorizes funds for grants to states for training teachers and school food service workers and for teaching children about nutrition. Funding for this program was struck, largely because it was a mandatory program and appropriators did not want to use limited discretionary funds to pay for what should have to come from mandatory spending. However, the subsequent welfare reform law contained a provision restoring the NET to its pre-1995 "discretionary" spending status. This meant that there no longer was a "mandate" that USDA spend funds for the NET, and there was no specific discretionary spending appropriated to it. An attempt was made in the last days of the 104th Congress to pass legislation to address the unexpected problem. However, agreement could not be reached on how much funding should be provided and where it should come from in the existing appropriated funds. The USDA has indicated that it will find funds from other sources to help pay for continued NET activities.

Commodity Assistance: The Administration proposed to continue the combined funding provided for the commodity assistance programs -- the Emergency Food Assistance Program (TEFAP), Commodity Supplemental Food Program (CSFP), and the Soup Kitchen food bank program -- at a total of $172 million for FY1997. This would have been an increase of $6 million over the FY1996 level. P.L. 104-180 provides $166 million for these programs, matching the FY1996 appropriation. This does not reflect $100 million of food stamp funding mandated by the 1996 welfare reform to be used to buy commodities for the TEFAP-soup kitchen food bank program.

The FY1997 act discontinues separate funding for the Food Donation Program for Indian Reservations (FDPIR), a commodity program that operates as an alternative to the food stamp program. Continued funding for this program is expected to come from food stamp appropriations.

The Administration had also proposed to transfer funding for the USDA portion of the elderly nutrition program ($150 million in FY1996) to the Department of Health and Human Services (DHSS) to better coordinate with that agency's larger meal program for the elderly. P.L. 104-180 assumes maintaining the elderly commodity program in the USDA and funds it at $140 million.

For more information, see CRS Report 96-299 ENR, FY1997 Budget: Food and Nutrition Programs.

Agricultural Research, Education, and Economics

The FY1997 agriculture appropriations act provides $1.848 billion in budget authority for the Department's research, education and economics (REE) function. This level is about $79 million, or 4.5 percent. more than the House-passed version, which provided $1.769 billion in budget authority for this function; it is $8.4 million, or about 0.5 percent higher than the Senate-passed version, which provided $1.840 billion. The President's FY1997 budget request for the REE function had been $1.809 billion. The appropriation for research, education and extension in FY1996 is $1.782 billion.

Four agencies carry out USDA's REE function. The Department's in-house research agency is the Agricultural Research Service (ARS), which provides scientific support to USDA's action and regulatory agencies and conducts long term, high risk, basic and applied research on subjects of national and regional importance. The Cooperative State Research, Education, and Extension Service (CSREES) is USDA's liaison with state-level research, education and extension programs. ARS, CSREES, the Economic Research Service (ERS), and the National Agricultural Statistics Service (NASS), are under the Under Secretary for Research, Education, and Economics (REE).

ARS: P.L. 104-180 provides a total of $786 million in budget authority for ARS, of which $717 million is for the agency's research activities and $69 million is for the construction and renovation of ARS buildings and facilities. The conferees decreased the portion for ARS research by $6 million from the earlier Senate version ($723 million), but the agreement represents a significant increase over the House allowance, which was $703 million. The $69 million in budget authority for buildings and facilities represents a 16 percent and 17 percent increase respectively over the House- and Senate-approved levels. The final budget authority for ARS for FY1997 is $45.7 million (6.2 percent) higher than FY1996 ($740.2 million).

CSREES: The FY1997 act raises the total budget authority for CSREES to $908.6 million, which represents an increase above both House- and Senate- approved levels ($852 million and $906.2 million, respectively). Congressionally designated construction projects for research facilities at land-grant colleges of agriculture primarily account for the increase in CSREES budget authority. However, P.L. 104-180 reaffirms FY1996 appropriations report language that calls for federal funding for this purpose to end after FY1997, and states that the higher funding level for FY1997 is to complete current projects before federal funding ends.

P.L. 104-180 maintains formula funding (under the Hatch Act) for research at the state agricultural experiment stations at $168.7 million, same as the FY1996 level. The budget authority for congressionally designated research grants (special research grants) rises from $47.8 million to $49.8 million, while the amount for competitive research grants decreases by 2.6 percent, from $96.7 million to $94.2 million.

The conferees reached agreement on a budget authority level for state cooperative extension programs that roughly splits the difference between the House and Senate recommendations by providing $425.5 million. Of the total, federal support for basic extension programs in the states comprises 63 percent, or $268.5 million, while support for discretionary and congressionally designated extension programming comprises the balance. The FY1996 appropriations for cooperative extension is $427.8 million. P.L. 104-180 maintains funding for the Native American Institutions Endowment Fund at the FY1996 level of $4.6 million, and provides an additional $1.5 million in direct payments to enhance agricultural education at the Native American land-grant colleges (1994 institutions). It also provides $2 million for extension services at the 1994 institutions; the Senate had proposed $2.5 million for this purpose and the House had no similar provision.

ERS and NASS: The conferees adopted the Senate proposal to give ERS $53.1 million in budget authority, which is virtually the same as the FY1996 level but $1.1 million below the House level. P.L. 104-180 adopts the House proposal to provide $100.2 million for NASS, a level $2 million above the Senate recommendation and $19 million higher than the $81 million FY1996 funding for NASS. The increase is intended to support the transfer of the Census of Agriculture from the Department of Commerce to USDA in 1997. The Commerce Department had proposed reducing the level of detail in the census as a cost-saving measure. USDA officials and several Members of Congress proposed the interagency transfer because of a concern that a decrease in the availability of comprehensive statistical data on the U.S. agricultural sector could hamper policymaking.

For more information, see CRS Issue Brief 95101, Research, Education, and Extension Issues in the 104th Congress.

Food Safety

USDA's Food Safety and Inspection Service (FSIS) is responsible for the mandatory inspection of most meat and poultry to ensure its safety, wholesomeness, and proper labeling. The FY1997 agriculture appropriations act provides FY1997 budget authority of $574 million for FSIS, the same amount requested by the Administration and in the House-passed version of the bill, and $29 million over FY1996 budget authority. The Senate version provided $558 million. Both the House and Senate reports expect that funds will be used to support implementation of the mandatory HACCP (Hazard Analysis and Critical Control Point) program, a new system that emphasizes the prevention of safety problems before they occur, which was recently unveiled by FSIS. The act does not anticipate approval of an Administration proposal to collect $109 million in new user fees to offset a portion of the cost of regular plant inspections. (For details see CRS Issue Brief 95062, Meat and Poultry Inspection Issues.)

The conferees on the FY1997 act concurred with Senate bill language intended to avert a dispute over poultry labeling regulations. Last year's USDA appropriations bill barred USDA from implementing regulations aimed at prohibiting processors from labeling poultry products chilled anywhere below 26 degrees Fahrenheit (when they begin to get hard) as "fresh." Southern producers argued that such a rule effectively would have blocked their attempts to compete in the more distant California market; consumers and California producers contended that labeling frozen poultry as "fresh" was misleading. Under the compromise language in P.L. 104-180, USDA rules would still have to limit the "fresh" label only to products where the internal core temperature has not fallen below 26 degrees. However, the rules also must allow for variances, such as temporary temperature decreases of up to 2 degrees below the limit during shipping, and exemptions from temperature testing for wings, organs and other special products. P.L. 104-180 also requires USDA to issue a revised final rule on the labeling of raw poultry products within 90 days after enactment of the FY1997 agriculture appropriations bill.

Marketing and Regulatory Programs

The mission of marketing and regulatory programs -- administered by three agencies, the Agricultural Marketing Service (AMS), the Animal and Plant Health Inspection Service (APHIS), and the Grain Inspection, Packers, and Stockyards Administration (GIPSA) -- are intended to "facilitate the domestic and international marketing of U.S. agricultural products and to ensure the health and care of animals and plants while improving market competitiveness and the economy for the overall benefit of both consumers and American agriculture," according to USDA.

The FY1997 agriculture appropriations act provides $511.5 million in budget authority for the three agencies (about 85 percent of the totals is for APHIS alone). This level is below both the FY1996 appropriation of $522 million and the Administration's request for about $527 million. Conferees on the measure concurred with the Senate provision to discontinue funding of the $11.4 million AMS pesticide data program, which since 1991 has sampled and tested fruits and vegetables for pesticide levels.

Table 2. U.S. Department of Agriculture and Related Agencies Appropriations, Budget Authority
(in millions of dollars)

Note: An item with an asterisk represents the total amount of direct and guaranteed loans that can be made given the requested or appropriated loan subsidy level. E.G., the $152.8 million in subsidy for farm loans in FY1995 supported $3.184 billion in total new loans. Only the subsidy level is included in the budget authority totals.

(1) The 1996 farm bill made several USDA conservation programs (including the conservation reserve program and the wetlands reserve program) entitlement programs, which no longer require annual appropriation beginning in FY1997.

Source: House Appropriations Committee.

Chronology of FY1997 Appropriations Legislation: Agriculture, Rural Development, and Related Agencies, P.L. 104-180 / H.R. 3603