Appropriations for FY1999: U.S. Department of Agriculture and Related Agencies IV

CONTENTS FOR THIS SECTION

Rural Development

Rural Community Advancement Program
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Fund for Rural America

Food and Nutrition Programs

Food Stamps
Child Nutrition Programs
WIC
Commodity Donation Programs

Food and Drug Administration
Commodity Futures Trading Commission

List of Tables

3. U.S. Department of Agriculture and Related Agencies Appropriations, Budget Authority

.

Rural Development

USDA rural development programs are intended to improve the quality of rural life through the development of decent and affordable housing; the creation and retention of jobs; expanded and improved access to electric and telecommunications services, and modern and affordable water and waste disposal services. Funds are awarded and technical assistance provided by one of three USDA rural development services charged with carrying out the department's rural development strategy: Rural Housing Service (housing and community facilities), Rural Business-Cooperative Service, and Rural Utilities Service (telecommunications, electricity, water quality, and solid and wastewater disposal). Funds are awarded to states and local governments, rural businesses and cooperatives, and nonprofit organizations and individuals.

In the aggregate, the amount appropriated by P.L. 105-277 for rural development activities totals $2.175 billion for assistance to the three rural development service agencies and for the Rural Community Advancement Program (RCAP). A portion of total rural development funding is targeted to direct subsidy support of $6.169 billion in loan authority. P.L. 105-277 includes a total of $657 million in grants, and $1.5 billion in loan subsidies, salaries, and expenses. The President's FY1999 budget proposal included a request for an appropriation of $2.220 billion for rural development programs, much of which would have supported $5.797 billion in loan authority for rural development initiatives.

Rural Community Advancement Program. In addition to grants, loans, and loan guarantees awarded under one of the three service divisions of the Rural Development Administration, rural development assistance may also be available through the Rural Community Advancement Program (RCAP), which was authorized by the Federal Agriculture Improvement and Reform Act of 1996. RCAP consolidated twelve programs into three distinct funding streams dedicated to rural community facilities, rural utilities, and rural business and cooperative development. State development officers may transfer up to 25% of the program's total budget authority among the three accounts, provided that no more than 10% of the funds are transferred from any one of the three accounts nationally. A state may control up to 10% of its RCAP funds through the creation of a state administered block grant.

The FY1999 omnibus appropriations act includes $722.7 million in budget authority to support RCAP loan and grant activities. This is $22.5 million less than recommended by the House, $20.1 million more than approved by the Senate, $7.5 million more than requested by the Administration, and $70.5 million more than appropriated for FY1998. A major portion ($68 million) of the $70.5 million increase in appropriations will be allocated to support water and waste disposal grants and loans. The increase in grants and loans for water and waste disposal projects is consistent with the President's Water 2000 Initiative to provide all rural households with clean running water by the year 2000.

P.L. 105-277 includes a provision originally included in the Senate bill that would permit the USDA to transfer up to $26 million in discretionary funds not otherwise appropriated for a specific purpose or location for activities in the Lower Mississippi Delta Region. It also includes a proviso that would count any funds made available from ongoing programs of the Department for use in the Lower Mississippi Delta as part of the $26 million targeted to the region.

P.L. 105-277 directs the Undersecretary for Rural Development to give particular consideration to specific projects or activities in various locations, but the report stops short of earmarking RCAP funds for these projects. Instead, report language states that the Department is "to apply established review procedures when considering applications." Such language contrasts with the recent practice of allocating funds for the Department of Housing and Urban Development's Economic Development Initiative (EDI), where funds are routinely earmarked for specific projects identified in reports accompanying bills appropriating funds for HUD programs. (For additional discussion of the increasing use of set-asides under the EDI program, see CRS Issue Brief 98026, Community Development Block Grants: Funding and Other Issues in the 105^th Congress.)

P.L. 105-277 includes provisions found in the original House- or Senate-passed versions of the bill, including earmarks of:

• $16.2 million in technical assistance for water and sewer funding;
• $5.3 million for the circuit rider program;
• $33.9 million for assistance to empowerment zones and enterprise communities (EZ/EC);
• $500,000 in transportation related technical assistance; and .
• $24 million in water and waste disposal assistance.

Rural Housing Service. P.L. 105-277 provides a total appropriation of $1.14 billion, of which $197.3 million supports $4.25 billion in total housing loans ($1.15 billion in direct loans and $3.0 billion in loan guarantees). Included in this amount is $116.8 million appropriated to support $3 billion in guaranteed loans and $965 million in direct loans for single family housing in support of the Administration's National Housing Initiative. Loan authority provided for single family housing is $35 million more than approved by the House and $35 million less than what was approved by the Senate, requested by the Administration, and appropriated in FY1998. On a number of other RHS funding items, the Senate conferees receded in favor of the recommendations of the House. These included funding for the: Section 504 housing repair program ($25 million in loan level supported by $8.8 million in subsidies); Section 514 farm labor housing program ($20 million loan level supported by $10.4 million subsidy); multifamily credit sales program ($2.3 million in subsidy in support of a $5 million loan level); and credit sales of acquired property program ($3.5 million in loan subsidy in support of $16.9 million in loan authority.)

Provisions of P.L. 105-277 reflect House and Senate compromises on assistance for Section 515 rental housing loans and Section 538 multifamily housing guarantees. The Act provides a loan subsidy of $55.2 million to support $114.3 million of Section 515 activities. It also provides $100 million for Section 538 multifamily housing loan guarantees, a significant increase from the $20 million program level in FY1998. In addition, P.L. 105-277 includes a Senate provision that earmarks $10.4 million in RHS assistance to existing empowerment zones and enterprise communities (EZ/EC) authorized under P.L. 103-66. The Administration had sought to provide $100 million in grants, over 5 years, for five newly designated empowerment zones. P.L. 105-277 also includes a general provision, which was in neither the House nor the Senate bill, which appropriates an additional $15 million in assistance to previously designated empowerment zones ($10 million) and 20 additional rural enterprise communities ($5 million).

The FY1999 appropriations act also includes a Senate provision that earmarks $1 million in mutual and self help housing grants for use in EZ/EC communities with the proviso that such assistance must be obligated by June 30, 1999. It includes a provision that appropriates $41 million for the Rural Housing Assistance Grant Program. This is $4.7 million less than appropriated in FY1998. It includes language that reauthorizes a number of rural housing programs through the year 2000. A Senate provision would have reauthorized these programs through FY1999, but was deleted in conference. A provision reauthorizing such programs was included in separate legislation.

Rural Business-Cooperative Service. Total funding of $56.4 million for RB-CS programs in FY1999 includes $3.3 million in grants, $25.7 million in salaries and expenses and $23.9 million in loan subsidies. P.L. 105-277 provides an appropriation of $56.4 million to fund salaries and expenses of RB-CS and to support a loan level of $48 million. Total funding for FY1999 is $5.7 million below FY1998, $10.6 million below the Administration request, $5 million below the Senate level, but $2.5 million above the proposed House level. Within these amounts are:

• $16.6 million in Rural Development Loan Fund subsidies in support of a loan level of $33 million, which is consistent with the amount proposed by the Senate;
• $3.8 million in Rural Economic Development loan subsidies in support of a $15 million loan level as proposed by the House; and
• $3.3 million in Rural Cooperative Development Grants, with $1.3 million earmarked for technology transfer to rural areas program as proposed by the House, and $250,000 earmarked for a cooperative development program as proposed by the Senate.

P.L. 105-277 also includes language that directs the Secretary to give special consideration to several projects requesting Rural Cooperative Development Grant assistance. These projects are located in Missouri, Pennsylvania, and Iowa. Further, the FY1999 act appropriates $3.5 million for the Alternative Agricultural Research and Commercialization Revolving Loan Fund. This is $3.5 million less than approved by the Senate or appropriated in FY1998, and $6.5 million less than requested by the Administration. The House version of the bill provided no funding for the program.

Rural Utilities Service. P.L. 105-277 provides a total appropriation of $126.2 million to the Rural Utilities Service to support $1.87 billion in FY1999 lending authority. It includes $300 million in authority for Treasury-rate telecommunications loans and $158 million for the Rural Telephone Bank Program. The Act allocates $12.7 million in distance learning and telemedicine grants, and $180,000 in loan subsidies in support of a $150 million loan level for distance learning and telemedicine loans

Fund for Rural America. The Act prohibits any funds from being used to administer the Fund for Rural America for FY1999. The Fund, which was created in 1996, provides grants assistance in support of rural economic development projects. An annual appropriation is not required for the Fund since it receives its funding directly from the U.S. Treasury. The Act in effect prohibits the spending of the $60 million that is authorized for the program in FY1999.

Food and Nutrition Programs

Food and nutrition programs are administered by the U.S. Department of Agriculture (USDA). They include the food stamp program, child nutrition programs, the special supplemental nutrition program for women, infants, and children (WIC), and several commodity donation programs serving low-income mothers and children, Indians, the elderly, and needy families and individuals. Total spending approved for these programs for FY1999 is $36.07 billion, or about two-thirds of total spending for the USDA. The Administration requested a total of $38.4 billion (+$1.2 billion from the FY1998 enacted level) in spending for food and nutrition programs in FY1999.

The final omnibus FY1999 appropriations act (P.L. 105-277) contains identical provisions for food and nutrition programs to those in the earlier vetoed conference agreement on H.R. 4101. As finally enacted, P.L. 105-277 provides a total of: (1) $22.6 billion for the food stamp program; (2) $3.924 billion for the WIC program, the same as FY1998 funding; (3) $5.38 billion for the school lunch program; (4) $1.6 billion for the child and adult care food program, and (5) just under $1.4 billion for the school breakfast program. Funding and responsibility for nutrition program studies and evaluations is maintained within the Economic Research Service (ERS), instead of the Food and Nutrition Service (FNS) as proposed by the Administration.

Food Stamps. P.L. 105-277 essentially adopted the House-proposed spending levels for food stamps -- $22.58 billion in total funding, and $90 million for EFAP commodities. The Administration food stamp request for FY1999 was $24.7 billion, a decrease of $439 million from FY1998 projected spending. The request included funding for Nutrition Assistance to Puerto Rico and for the food distribution program on Indian Reservations; $100 million to buy commodities for food banks and soup kitchens participating in the emergency food assistance program (EFAP); and a $1 billion contingency reserve fund.

Senate appropriations provided a total of $23.8 billion for food stamp and related programs for FY1999, or $920 million less than the Administration request. This allowed for a contingency reserve of $100 million (instead of the $1 billion requested by the Administration), and called for a reduction of $20 million from the $100 million in food stamp funds required to be used to buy commodities for the EFAP. As passed by the House, H.R. 4101 recommended $22.6 billion for food stamps in FY1999. The difference is due largely to the fact that the House used more recent estimates of food stamp spending needs than either the Administration or Senate. These showed lower than previously projected participation and benefit costs, and thus, the need for less spending. The finally enacted measure cut the Administration's $1 billion contingency fund request down to $100 million, the same as last year. It also provided $10 million less to buy commodities for the EFAP than the $100 million of food stamp funds that are supposed to be used to buy commodities for this program. The Administration requested the full $100 million; the Senate proposed $80 million.

Child Nutrition Programs. These programs include school lunch and breakfast, summer food, child and adult care and special milk programs, and related support activities. P.L. 105-277 provides a total of $9.177 billion, which is less than both the House and Senate-passed measures. This is because of acceptance of a Senate provision that will lessen mandatory FY1999 spending by about $40 million for commodity procurement for the school lunch program. This provision, originally added as a floor amendment to provide room for an increase for the WIC program (see below), requires that the USDA use bonus commodities to help meet the requirement that not less than 12% of federal support for the school lunch program be in the form of commodity assistance.⁽²⁾ The Administration proposed total funding of $9.2186 billion for child nutrition programs in FY1999. The Senate appropriation for FY1999 would have funded these programs at a total of $9.2199 billion, slightly less ($13 million) than the Administration request. The House bill recommended $9.2186 billion for child nutrition programs.

The final law provided $10 million for the School Meals Initiative, the amount proposed by the Senate, and $2 million more than the House proposal. Committee report language in both chambers' initially-approved bills recommended that $4 million of the funds appropriated for the School Meals Initiative be used to fund food service training grants to states, with the remainder used for technical assistance materials ($1.6 million), print and electronic resource systems ($400,000), and other unspecified activities ($3.2 million). No funding for the Nutrition Education and Training (NET) program, as proposed by the Senate, was contained in the final law. This program was funded at $3.75 million in FY1998, the level requested by the House for FY1999. The Administration requested $10 million for the NET.

WIC. The final amount provided in P.L. 105-277 for WIC is the same as the House-recommended level ($3. 924 billion). P.L. 105-277 did not approve funding for a WIC contingency reserve proposed by the Administration ($20 million). It did approve the $15 million recommended by the Administration and Senate for the WIC farmers' market nutrition program but did not accept the Administration proposal that this be funded with Commodity Assistance Program (CAP) funds, instead of WIC funds. Of the $15 million in WIC appropriations for the farmers' market program, the conferees directed that USDA obligate $10 million within 45 days of enactment, and allow an additional $5 million from any funds not needed to maintain the WIC caseload level. The Administration budget proposed WIC program funding of $4.16 billion in FY1999, $157 million more than FY1998 appropriations. This reflected a $20 million contingency reserve and the assumption that no WIC funds will be used to fund the WIC Farmers Market Coupon (FMC) program, which would be funded elsewhere (see section on Commodity Donation Programs). According to Administration estimates, its FY1999 WIC funding proposal was necessary to maintain the FY1998 monthly average participation level of 7.5 million persons. Legislators agreed to maintain FY1999 WIC funding at the FY1998 level because of lower projected participation than that assumed by the Administration, and the assumption of program efficiencies growing out of child nutrition reauthorization legislation (H.R. 3874) passed at the end of the session. The Senate-passed bill recommended $3.948 billion for WIC in FY1999, or $24 million more than FY1998 funding. The additional $24 million was added by a floor amendment that also reduced federal funding for commodity procurement for the school lunch program to pay for the WIC increase.

Commodity Donation Programs. The final amount in P.L. 105-277 provides $272.1 million in FY1999 for commodity donation programs -- the emergency food assistance program (EFAP), the commodity supplemental food program (CSFP), the elderly nutrition (commodities) program, and the Needy Family program. Of this total, $45 million is for grants to states to help with the cost of distributing commodities for the EFAP⁽³⁾; $86 million is for the CSFP, $140 million is for elderly commodities, and $1.1 million is for commodities for the needy family program. The $86 million provided for the CSFP is $10 million less than the amount provided last year. Unspent carryover funds from FY1998 are expected to be available to the program in FY1999 to maintain the caseload for this program, which provides monthly food packages to low-income mothers, young children and elderly.

The Administration budget proposed a total of $317.1 million for all of these programs. Of this amount, $96 million was for the commodity supplemental food program (CSFP) and $45 million for EFAP state administrative grants, for a total of $141 million. The Administration also proposed $15 million for the WIC farmers market coupon (FMC) program (normally funded with WIC appropriations), and $20 million for a new gleaning/food recovery initiative under this category of programs. Food donation programs were to receive $141.1 million.

(For more information, see CRS Report 98-582, Food and Nutrition Programs: FY1999 Budget and Appropriations.)

Food and Drug Administration

The Food and Drug Administration (FDA) is funded through both congressional appropriations and user fees whose total level of collections is set each year by the appropriations committees. The most contentious provisions are in the funding levels for salaries and expenses (S&E) and in one user fee program. The omnibus FY1999 appropriations act (P.L. 105-277) increases FDA's S&E program level to $970.9 million, a 13% increase over FY1998, and allows $132.3 million for Prescription Drug User Fee Act (PDUFA) collections, also a 13% increase over FY1998. The total program level (S&E plus user fees) for FY1999 is $1.117 billion.

Included for the first time in the S&E account is $83 million for rental payments to be paid to the General Services Administration (GSA). The act includes a provision that will allow $5.428 million of PDUFA funds to be transferred and merged in the S&E account and used for payment of GSA rentals. Thus, a total of $88 million will be made available for rental payments in the S&E account. Separately, P.L. 105-277 provides $11.35 million for FDA buildings and facilities.

P.L. 105-277 maintains the FY1998 appropriation level of $34 million to fund tobacco outreach and enforcement activities, and also continues support for the President's Food Safety Initiative (FSI). The President had requested an additional $50 million in direct appropriations for FDA for FSI activities. The act appropriates a $25 million increase. The conferees expect FDA to use $24.5 million of this total amount for increased food inspections, and $500,000 for research by the National Center for Toxicological Research.

The FY1999 appropriations act also includes $250,000 for the Office of Seafood Inspection. Within this amount, $200,000 is to be used to continue the grant to the Interstate Shellfish Sanitation Committee. It also directs FDA to use $500,000 to develop the system and regulations necessary to implement a new food packaging materials notification program by May 1999. The conferees strongly urge FDA to finalize a rule within one year after receiving a citizen's petition on the use of "and/or" in the labeling of types of fish contained in surimi. Conferees increased the appropriation by $2.5 million for the cosmetic and color regulatory program.

Conferees also expect FDA to publish by June 1, 1999, a proposed rule concerning the use of foreign marketing data in the review of new sun-screen active ingredients in the over-the-counter drug monograph on sun-screen products. Also included in the bill is $3 million in construction funds for the third phase of construction of FDA Arkansas Regional Laboratory (ARL) in Jefferson, Arkansas. The project will need approximately $13.3 million to be completed.

P.L. 105-277 prohibits FDA from closing or relocating its Division of Drug Analysis in St Louis, MO, appropriates $1 million for the Office of Generic Drugs, and appropriates $700,000 for competitive grants under the clinical pharmacology program.

P.L. 105-277 urges FDA to issue new regulations and guidance for the generic drug industry manufacturers who file an Abbreviated New Drug Application (ANDA) which relies on the FDA's previous determination that the drug is safe and effective, thus avoiding submitting new safety and effectiveness studies. The act also refines the definition of antibacterial ingredients to exempt a certain class in animal drugs.

Not included in P.L. 105-277 is Senate bill language on metered-dose inhalers (MDIs), which are used to treat asthma and other chronic lung diseases. Under the Montreal Protocol, the FDA is required to phase out the use of chlorofluorocarbons (CFCs) in MDIs and approve new devices that use a less environmentally damaging propellent compound. The Senate directed FDA to gather information on safe and effective non-CFC MDIs, which meet patients needs, before phasing out CFC devices.

Another Senate provision that was not included in the final act is a requirement for country of origin labeling for fresh produce. Instead, the bill directs the General Accounting Office (GAO) to study the potential effects of mandatory country of origin labeling of fresh produce and submit a report to Congress no later than 6 months after enactment of this Act.

Commodity Futures Trading Commission

Regulatory jurisdiction over derivative financial contracts -- contracts whose value depends on changes in the price of some underlying commodity or financial instrument -- has been a contentious issue for several years. The Commodity Futures Trading Commission (CFTC) has jurisdiction over derivative contracts (futures contracts and some options) traded on the futures exchanges. However, several other forms of derivatives (e.g., certain contracts based on foreign currencies or U.S. Treasury securities) are exempted by law from CFTC regulation. Currently, attention focuses on swap contracts, which are the basis of a booming international market in off-exchange, or over-the-counter, derivatives. Swaps resemble futures in their economic function, but the major dealers -- banks and affiliates of securities firms -- are not institutions that have traditionally been regulated by the CFTC. No agency has overall regulatory jurisdiction, and there is some concern that the present fragmented regulatory structure might have difficulty responding to a crisis in the swaps market, which might have wide repercussions throughout the international financial system.

In May 1998, the CFTC published a "concept release" announcing its intention to evaluate current regulation of swaps and to consider whether they should be subject to some or all of the requirements of the Commodity Exchange Act, which governs exchange-traded futures. The Securities and Exchange Commission and the banking regulators objected to this CFTC initiative, stating that 1) existing regulation of over-the-counter derivatives was adequate, and 2) that if new regulation was necessary, it should be formulated by the various financial regulators as a group, rather than by unilateral action of a single agency. The swaps industry argued that even raising the possibility of CFTC regulation might cast doubt over the legal enforceability of swaps contracts and drive the business offshore.

In response to these concerns, the FY1999 omnibus appropriations act (P.L. 105-277) imposes a "restraint period" on the CFTC, directing it not to issue or propose any new rule or regulation affecting swaps or "hybrid" financial instruments before March 30, 1999.

3. U.S. Department of Agriculture and Related Agencies Appropriations, Budget Authority
($ in millions)

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. Only the subsidy level is included in the totals.

(1) FY1998 enacted levels include supplemental spending and rescissions provided by the FY1998 emergency supplemental appropriations act (P.L. 105-174).

(2) The Senate amendment which would provide $66 million to fund the President's food safety initiative is distributed among the recipient agencies in this table: USDA Chief Economist=$98,000; ERS=$906,000; ARS= $8.92 million; CSREES=$11.2 million; FSIS=$8.347 million; FDA= $37 million.

(3) Federal reimbursement to crop insurance agents for their administrative expenses was converted by statute to a mandatory expense beginning in FY1999, and thus no longer requires an appropriation.

(4)The Senate and conferees did not include the mandatory spending for export credit loan guarantees.

(5) Scorekeeping adjustments reflect the savings or costs of provisions that affect mandatory programs.

Source: House and Senate Appropriations Committees

Footnotes

2. ^(back) The National School Lunch Act mandates a legislatively specified level of commodity assistance (currently valued at 14.75 cents) for every lunch served under the school lunch, child and adult care, and summer food programs. Section 6g of this law also requires that not less than 12% of the federal assistance provided to the school lunch program be in the form of commodities. In recent years, the per lunch rate of commodity assistance has not provided sufficient values of commodities to meet the 12% school lunch commodity requirement, and appropriations have been needed to meet the 12% minimum. The Senate amendment lessens the amount of funds that must be appropriated for this purpose by requiring the Secretary to use "bonus" commodities to meet the FY1999 shortfall. "Bonus" commodities are those acquired for farm support or surplus removal reasons rather than for domestic food programs, and commonly are donated to domestic food programs.

3. ^(back)This does not reflect the $90 million in food stamp funds appropriated to buy commodities for the EFAP.

.........