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Hearing Of The Agriculture, Rural Development, Food And Drug Administration, And Related Agencies Subcommittee Of The Senate Appropriations Committee - Fiscal Year 2010 Appropriations For The U.S. Department Of Agriculture

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SEN. KOHL: Good afternoon to everybody. We'd like to welcome Secretary Vilsack back to this subcommittee at this time to present the administration's fiscal year 2010 budget request for USDA. Mr. Secretary is accompanied by Dr. Kathleen Merrigan, deputy secretary, Dr. Scott Steele, the USDA budget officer, and Dr. Joseph Glauber, the USDA's economist. We thank you all for being here with us today.

The fiscal year 2010 budget for discretionary programs at USDA is $21.25 billion. This is an increase of 1.9 billion (dollars) from last year, or nearly 10 percent. At first glance, this appears to be a very robust budget and in many important ways it indeed is. The WIC program for many of us -- which many of us consider essential, has been underfunded in recent executive budgets. By contrast, this budget includes an increase of 917 million (dollars) so that we can deal with increased food costs and maintain participation.

The rental assistance program would see an increase of 189 million (dollars) to prevent a large number of poor rural residents, many of them elderly, from losing their homes. And funding for humanitarian food aid is increased by $564 million. These three changes alone make up nearly 90 percent of USDA's total budget increase. Just to repeat that, these three items alone make up nearly 90 percent of the total increase in the budget.

The rest of the money goes quickly. Information technology at the department would see an increase of 117 million (dollars). These funds are necessary to improve USDA data security and make sure computer systems do not fail. Without them, we run a significant risk of delayed farm payments and deferred farm bill implementation.

USDA energy programs, which we hope will help lead our nation toward a renewable energy future, receive an $80 million increase. The Food Safety and Inspection Service budget includes an increase of 47 million (dollars) to provide more inspections and improve information systems.

There are obviously more increases, but I will leave those for the secretary to discuss. I would like to point out, however, that a portion of these increases are made possible only by reducing mandatory farm bill spending to the tune of 678 million (dollars). This is nearly 200 million (dollars) more in cuts than we took last year. While I appreciate the department's mandate to find offsets to fund the president's initiatives, I'm certain you understand the precarious situation these farm bill cuts create in Congress.

Mr. Secretary, our nation has significant challenges ahead and this budget lays out a plan to begin addressing them. But I have feared for some time that many don't fully appreciate the breadth of USDA's mission or why these investments are important.

All of us enjoy greater food safety because of the USDA. Nearly one in five Americans participate in USDA nutrition programs. USDA research is developing better crops and energy systems whose benefits are widely spread across our society. Rural development programs bring safe drinking water, affordable housing, and essential community facilities to regions that would otherwise almost certainly be overlooked. These are all important tasks that demand thoughtful deliberative treatment in the appropriations process.

So Secretary Vilsack, I, and I'm sure everybody else, is very pleased that you're here. We all believe that you will do an outstanding job and we look forward to working with you in the coming years. After other opening statements from senators, Mr. Secretary, the floor will be yours. Senator Brownback?

SEN. SAM BROWNBACK (R-KS): Thank you very much, Mr. Chairman. Welcome, Secretary. Good to have you here and good to have a good fellow Midwesterner in that position at secretary of agriculture. I also think it's all very, very, very helpful to the Midwest that Iowa is the first caucus. It drives a lot of senators to travel through Iowa and get to know our issues throughout the Midwest. So I think that's a very good thing.

They formed a caucus in the U.S. Senate of members of the U.S. Senate who would never, ever, ever run for President, and there's like two people in it. So it means 98 got some passing interest of going through your state and you're -- and I'm delighted you're (hearing about that ?).

Glad you're at USDA. USDA touches each American's lives multiple times a day -- food, housing programs, research, and assistance. My state of Kansas is a great beneficiary of USDA programs. Got this first land grant university in the country at Kansas State University. We got valuable USDA research. We provide valuable USDA research. State -- and my state produces a lot of food and agricultural products and we are dependent upon that research. We want to see it continue.

I want to highlight two quick areas and I really want to hear from you today about your targets that you want to hit as secretary of agriculture. You have a great position and a period of time in which you get to drive the ship and I want to hear where you want to take it. A couple that I'm very concerned about, food insecurity around the world, and I think this is a big problem for us. It's a big opportunity for us in both providing food for people and then, I think, getting back on agricultural development programs globally.

I've been doing a fair amount of research and meeting with experts on this and in the mid-'80s we pulled out of agricultural development work in a lot of places around the world, and I think it's been quite harmful to us. I think there was a trend at that point in time -- it's not really working, we don't need to do this so let's pull out of it and let's just go to emergency food assistance programs, and I think we've suffered consequences because of it. I'm going to go through that some more in questioning.

But particularly what Senator Bond has pushed in Afghanistan on some of the ag development work to help us stabilize Afghanistan, I think, is good in a fighting region but there's also chronic places like Malawi and others that their agricultural developments continue to decline. And I think we need to figure out ways we can use our food assistance again to get us back in the agricultural development game. I think it's important to do it.

Another one is in bioenergy. I don't think there's an area that the rural states are more excited about than bioenergy. Certainly, grain-based ethanol is having some difficulty now and some consolidation taking place in that business but it's providing a key portion of our energy equation. Our efforts in cellulosic ethanol are very intriguing and I hope will be quite successful.

Biomass -- I just came from an energy meeting mark-up and we're looking more and more at biomass for meeting renewable standards and needs.

Wind energy, although not in your purview, is one that's generated a lot of interest and support across many areas of the Midwest. I can't think of probably a better area for rural development than in the bioenergy field, and I want to hear what you want to try to do more in that particular area.

Final point is on rural development programs. I've been around this for a long time. There are 90 different grant, loan, or stand- alone programs in the rural development area, and you got to really question whether we need all 90 of those or if you'd be better off with three big well-funded ones or five maybe, but it just has made it so complicated that people can't access it or they get a little piece here and they find another piece there -- you've got to hire somebody to find the program, and I would think it would really be one you could break into.

So delighted to have you at that position. Welcome here. I want to welcome Susan Collins, new to the committee as well, Chairman. She's going to do a great job and educate us about Maine agriculture and potatoes and all sorts of other things I'm sure. Lobster -- great -- a great Iowa dish. So thank you very much for the hearing. Welcome, Susan.

SEN. KOHL: Thank you very much, Senator Brownback. Other statements from senators? Senator Pryor, Senator Cochran, Senator Bond, Senator Johnson, and Senator Collins.

SEN. MARK PRYOR (D-AR): Thank you, Mr. Chairman. But I don't have a statement. I'll just put mine in the record. Thank you.

SEN. KOHL: All right. Senator Cochran?

SEN. THAD COCHRAN (R-MS): Mr. Chairman, I ask unanimous consent that my statement be printed in the record.

SEN. KOHL: Thank you so much.

SEN. TIM JOHNSON (D-SD): Mr. Chairman, I ask unanimous consent that my full statement be entered into the record. I have a couple other things to comment about. I'm pleased that the -- with the targeting of (program ?) payments with the $250,000 payment -- (inaudible). I'm pleased that Secretary Vilsack has worked so hard at implementing country of origin labeling.

I am also concerned for some parts of the budget, including a $500,000 annual sales limit for direct payments, which does not reflect (ag ?) school farm income, and I look forward to working with you on issues important to our ag communities and to fund priorities important to South Dakota. Thank you.

SEN. KOHL: Thank you, Senator Johnson. Senator Bond?

SEN. CHRISTOPHER BOND (R-MO): Thank you, Mr. Chairman. I'll pass up the opportunity to be as brief as some of my colleagues. I do want to -- I do want to mention one area that I think is of overall concern. The Food Conservation Energy Act of 2008 established the new National Institute of Food and Agriculture, or NIFA, to provide enhanced support for research, extension, and higher education programs dealing with all the challenges not only that we face but the world faces, and research under this would encourage better land use management, provide efficient nutrition and nutrient and pesticide application, increase domestic energy production, increase nutrition awareness -- many, many things.

And I'm disheartened that the administration in this initial budget proposal places little emphasis on ag research and instead of increasing our capabilities would cut 237 million (dollars) from the research, education, and economics portion of the USDA budget. I think that's a cause for concern. (I asked a ?) question on it but I think -- I hope, Mr. Chairman and Senator Brownback, that we will be able to have a discussion on that.

SEN. KOHL: Good. Senator Collins?

SEN. SUSAN COLLINS (R-ME): Thank you very much, Mr. Chairman. Let me just say that I'm delighted to be a new member of this subcommittee. I just want to express some concerns also about the president's budget in the area of the zeroing out of the Rural Empowerment Zone and Enterprise Communities program. There's no funding for resource conservation and development programs. As my colleague has mentioned, agricultural research has taken a hit, particularly the USDA ARS building and facilities account. It's zeroed out. These -- the Healthy Forest programs. There's a lot of concerns that I have about the priorities set in this budget.

I'm very pleased to be a new member of this subcommittee and to work with you, Mr. Chairman, and the ranking member, Senator Brownback. Thank you.

SEN. KOHL: Thank you, Senator Collins. It's great to have you with us.

SEN. COLLINS: Thank you.

SEN. KOHL: Mr. Secretary, we'd love to hear from you.

SEC. VILSACK: Thank you, Senator, and Mr. Chairman. Thank you very much for the opportunity and appreciate the comments.

I'm going to depart from what traditionally would take place, which is to read a statement that is a part of what we would submit for the record and just simply talk very briefly about the priorities of USDA. And let me first and foremost say that the budget that we're going to discuss today was fashioned in a fairly rapid time period at a time when USDA was obviously not fully staffed and manned because we were in the process of transitioning to a new administration. So it's important, I think, for the committee to know precisely what our priorities are and how they might be reflected in this budget.

Let me first and foremost say that we believe the USDA is an every day, every way department. As Senator Brownback indicated, this is a department that intersects American lives every single day in multiple ways. In order for us to reflect that role and that responsibility, we have a set of agenda items and priorities that really cover the wide range of USDA's portfolio.

We are very concerned about rural development and economic development in rural communities and we believe that a time has come for a wealth creation approach to rural development that focuses on regional and coordinated investment, not only coordinating investments within USDA but also coordinating those investments with other federal investments as well as what state and local government is investing in economic development.

We think there are synergies and opportunities for coordination. We think there are opportunities to create wealth and repopulate rural America. We believe that will require us to target our resources, to focus on building the infrastructure for high-paying jobs, starting with an expansion of broadband to unserved areas.

This committee, this Congress, through the American Recovery and Reinvestment Act, saw fit to provide additional resources and I'll assure the committee during the course of questions that we are intending on putting those resources to work very quickly to expand that very important technology to unserved areas in rural America.

We want to aggressively implement the energy title provisions of the 2008 farm bill. We want to focus on expanding local and regional food systems for local wealth creation. We obviously want to continue a focus on value-added local commodity agriculture and we want to make community facility investments that result in rural areas being great places to live, work, and raise families.

We also want to make sure that we continue to promote nutrition and food safety. It is the goal of the president's, it is the goal of USDA, and I suspect it's the goal of this committee to significantly reduce childhood obesity and hunger in this country. At the same time, we will work with our partners at Health and Human Services to develop a modern and coordinated food safety system.

Our forests are extraordinarily important, not in and of themselves but also for the significant role they play in preserving the quantity and quality of water, particularly in western United States.

We want to develop an ecologically sustainable forest and private working land system with a focus on conservate (ph) and conserving water resources and improving water quality while at the same time restoring our national forests and linking that work with our conservation work on private working lands.

We want USDA to be a modern workplace and a modern workforce. That will require working with this committee to modernize, stabilize, and securitize our technology so that we may be able to provide services more quickly and more conveniently to people in rural communities. We will focus on expanded trade promotion, particularly through a coordinated strategy for exporting biotechnology crops. We will work very hard to advance the notion of food security worldwide based on the principles of expanding the availability of food, the accessibility of food, and the utilization properly of food.

Our focus initially will be on Afghanistan and Pakistan and sub- Saharan Africa. We also want to maintain an appropriate farm safety net. You know, we'll obviously have conversations about the proposal relative direct payments but our commitment is to work with this Congress to maintain a strong and adequate and appropriate farm safety net.

We think there are opportunities for reform in crop insurance and we do believe it's appropriate to focus on a $250,000 hard cap, but we will be glad to work with this committee on other ideas and other thoughts.

Finally, we want to be a committee -- or excuse me, a department that makes a true commitment to civil rights -- a commitment that reflects the culture and diversity of this country that is also reflected in rural communities. We are committed to a fair resolution of outstanding and long-standing civil rights cases against the department as well as a reduction and resolution of equal employment opportunity complaints that are currently within the department.

Mr. Chairman, this is an aggressive agenda. We believe that this budget as presented to you is a start but by no means will it finish the job. We look forward to working with this committee and responding to questions that you might have. Thank you.

SEN. KOHL: Thank you, Mr. Secretary. We'll start our round of questionings with five-minute events. Mr. Secretary, the economic recovery act included substantial resources for USDA including 11 billion (dollars) for housing loans, 3 billion (dollars) for business loans and grants, 3.75 billion (dollars) for water and wastewater loans and grants, as well as other funds. We know this placed a huge burden on the department to quickly identify and fund the good projects.

Do you foresee impediments to effectively utilizing all of the recovery act funds in a timely manner and does this effort complicate the effective use of your annual appropriations?

SEC. VILSACK: Mr. Chairman, we appreciate the opportunity that the American Recovery and Reinvestment Act has given us to invest in appropriate investments across the wide spectrum that you've identified with your question. Let me simply report to you and to the committee that we have been very aggressive in our efforts to implement the Recovery and Reinvestment Act.

To date, USDA has provided 37,057 home loans -- single-family housing loans -- which has allowed us to reduce a significant backlog. To date, with the recovery and reinvestment resources we have provided 2,636 direct operating loans to farmers and ranchers in need. At the same time, we have begun the implementation of the expanded Supplemental Nutrition Assistance Program benefits, which has on average provided additional $80 a month for a family of four. For the benefit of the committee, these resources are expended by those families, 97 percent of them, within 30 days, and the reality is that for every $5 we invest in that specific program we get $9.20 of economic activity. It is indeed a direct stimulus.

We have provided over $615 million for safe drinking water and (improve ?) wastewater treatment facilities in rural communities in 34 states. We have announced $357 million in funding for Forest Service projects. We have fully obligated the $100 million that you all provided for the National School Lunch Program. We have also obligated $100 million for the Emergency Food Assistance Program.

I was recently in Kentucky at a food bank. I can't tell you how appreciative the food banks of this country are for the commitment that you have made. In that one facility alone, an additional 172,000 meals will be served as a result of the commitments and resources they received, and I'm pleased to say that many of those meals will be high-protein meals with pork and poultry being two particular commodities that they were able to purchase.

We have awarded $85 million -- I think we have committed $145 million for available watershed operations projects. We have awarded $45 million for watershed rehabilitation programs to rehabilitate dams and critical public health and water quality issues, and we have provided over $60 million in funding for community facilities in 39 states, including a number of fire, police, and medical vehicles.

So we have rapidly implemented as best we can a substantial portion of the recovery and reinvestment proceeds. To your question as -- in terms of its impact, this has obviously placed some stress on our staff, but I would suggest it's probably placed a greater stress on the staff of OMB, which sometimes makes it difficult for us working with those hardworking folks at OMB to get all of the rules and regulations out for the many programs that the USDA has responsibility for. I'm sure we'll touch on a few of those by the time the questions are finished today.

SEN. KOHL: Very good. Senator Brownback?

SEN. BROWNBACK: Thank you, Chairman. A couple questions in some broad areas. One, I want to start off with, though, narrowly. The NBAF facility was recently announced in Manhattan, Kansas -- National Bio and Agro-Defense Facility. The physical plant owned by Homeland Security -- it's operated by USDA. Do you know USDA's plans to transition it from Plum Island (for as far as ?) when the actual personnel will be moved to expand this expanded mission at NBAF?

SEC. VILSACK: Senator, I'm not sure that we have a specific timetable for transition. We are aware of the fact that this is an important step for us to take in terms of our homeland security and vital security. This new facility will provide us expanded space. It will also provide us BSL-4 capabilities, which we currently do not have.

We are working with the Department of Homeland Security, and we have identified with Department of Homeland Security a variety of research opportunities at that facility once it gets in place. We are concerned, obviously, as I'm sure you are, about foot and mouth disease, classical swine fever, American -- African swine fever, Rift Valley Fever, and a variety of other diseases. We will be working very closely with Homeland Security to get this transition done as quickly as we can because it's an important facility.

SEN. BROWNBACK: Good. I want to show you a quick chart we had done up on food aid and the big area that (I've got concerned of ?) in food aid. I've worked in this region for some period of time, worked with a number of experts on it. Very important program that we have. Critical -- I think it's a critical diplomatic program.

I think it's a critical humanitarian program. I think it's critical for us in making our new efforts on HIV/AIDS in Africa and malaria work because if we're going to treat people and they've got a poor diet they don't do very well. They need a good diet to go along with it.

The troubling aspect of this chart is that we've increased funding substantially over the past eight years and our tonnage has gone down dramatically in that same period of time, and we're at a point now where roughly 65 percent of our food aid dollars go for two areas -- administration and transportation. And I'm hopeful we start looking at ways that we can -- that we can get people well fed and trying to get that piece of it in a more controlled fashion, if possible.

And I don't know if you're aware of this. These are GAO studies. This one in particular, this chart is from the GAO. They're very engaged on this. I know the chairman cares deeply about food aid. It's got to be done right. But a 65 percent number just seems way high to me on those two areas. Do you have any comments?

SEC. VILSACK: Several.

First and foremost, we recognize the important role that food aid plays in terms of America's role internationally, which is one of the reasons why we've suggested and proposed, as you know, an increase in the McGovern-Dole program. That has been a very successful program.

SEN. BROWNBACK: Has broad bipartisan support.

SEC. VILSACK: Broad bipartisan support.

SEN. BROWNBACK: People like that one. That's good.

SEC. VILSACK: And for good reason. We can assist over 4 million children in 19 countries. In fact, it's been so successful that some countries have actually taken that model and adopted it for themselves and have actually moved away from a reliance on our program.

As you well know, there are certain restrictions and limitations in terms of how resources that we do provide in food aid are transported to countries, and I would say that we are focused on a couple --

SEN. BROWNBACK: Could I get right at that because my time has run up. I am not going at that. That's an old fight around these places and I don't think we ought to engage that -- that fight. I just think we've got to somehow get our pencil sharper on the amount that we're going at administration and transportation number. But to go at that fight -- I've been around this one too long. That won't get us anywhere.

SEC. VILSACK: Well, I'm not disagreeing with you. I'm just pointing out that that is one of the explanations for the chart that you've placed up there.

SEN. BROWNBACK: I agree, but --

SEC. VILSACK: And let me -- let me suggest a different way, Senator, if I might.


SEC. VILSACK: Let me suggest that one way that we could perhaps move this process forward is to focus on how we might be able to use the -- not just the food resources of this country but the knowledge and the technical assistance that this country can provide. I think that there is enormous opportunity, as I mentioned earlier in my opening statement, in Afghanistan and Pakistan to model an effort on the part of America to empower people to -- to be more self- sufficient.

One of the problems is that most of the world farms on relatively small farms, and most of what we -- what we do in this country and most of the research that we do is focused on larger farms. I believe that we can provide technical assistance. I believe that we can focus our efforts on one- to two-hectare-sized farms and create an even more effective international effort to supplement what we are currently providing in the way of emergency food.

In order for there to be food security, not only do folks have to be able to grow the food, not only do they have to be able to trade and have an economy that will allow them to trade, but there's obviously a role for emergency food assistance. So it's all three of those aspects. And if you focus simply on one or two of the three, then you're not going to make the food available.

Even if it's available, you also have to focus on creating the infrastructure, the roads, the transportation systems that allow it to get to people, and even if it's accessible to people you also have to make sure that there is adequate information about how to properly utilize food.

So all three of these components have to be part of what USDA does and what part of the United States does relative to food security. It's not, in my view, not just one. I think you have to do all three and I think you have to focus on all -- all aspects of this.

SEN. BROWNBACK: Thank you, sir. (Inaudible.)

SEN. KOHL: Thank you very much, Senator Brownback. Senator Pryor?

SEN. PRYOR: Thank you, Mr. Chairman. Let me start, if I may, with another issue as Senator Brownback alluded to on his issue. You know, we fight this fight sometimes around here and -- but I do want to get your thoughts on it and that is the administration's proposal to phase out direct payments to farms that, I guess, have sales revenues of above $500,000. Could you talk a little bit about that, please?

SEC. VILSACK: Senator, I think, first of all, I want to make it very clear that the administration, the president, myself, USDA understands and appreciates the important role that safety net provides in rural America, and that is the reason why we are -- and moved rapidly with the preceding administration and our administration to implement the farm bill rules as it relates to direct payments and counter-cyclical payments, why we have proposed the rules relating to ACRE and extended the sign-up for the ACRE program and why we are currently working very hard, and hopefully in the next 30 days, to be able to put some of the livestock disaster payment rules out and to be in a position to have SURE, the disaster program, available in the fall. It's also one of the reasons why we do support reform but understand the important role that crop insurance plays in creating that safety net.

So there is a commitment to the safety net. The proposal relates to relatively a small percent of the farmers -- 3 percent of the farmers -- who essentially receive 30 percent of the benefits. There may be and there probably are better ways to do this, Senator, and we're happy to work with you.

We were challenged to focus on the priorities of increasing funding for child nutrition so we could end childhood hunger in this country and address the obesity issue at the same time. We were compelled, and I think appropriately so, to also take a look at the bottom line. And we tried to respond to the priorities, made a proposal, but are certainly willing to work with you. If there is a better way to do this we're certainly open to it.

SEN. PRYOR: Well, I look forward to that, and I think one of the things we should look at is the cost involved in producing the product and getting it out to the market because that varies widely from -- depending on the product you're growing and also what region of the country you happen to be farming in. So I look forward to working with you on that. If -- you know, if we can do that fairly soon that'd be great.

My second question deals with trade, specifically trade with China and even more specifically, with poultry. And there was an amendment that was attached to the farm bill last year, Section 727. Are you familiar with that?

SEC. VILSACK: Yes, sir.

SEN. PRYOR: What is your opinion on Section 727? And, I guess more specifically, it seems to me that -- well, anyway, I'd like to hear your opinion on that.

SEC. VILSACK: Well, I think it's fair to say that the opinion of USDA is that we are obviously very interested in a science-based and rule-based trading system. It's one of the reasons why we've expressed concern recently on the H1N1 circumstance and some of the decisions that countries have made to ban pork products.

Having said that, we understand and appreciate the importance of concerns that are expressed in Congress and throughout the country about food safety relative to imported food, and so what we are doing now is we are working with members of Congress and a number of other folks to try to figure out precisely what the concerns are and (see ?) ways in which USDA can specifically respond to those concerns as quickly as possible so that whatever barriers exist can be removed and we can open up as much trade in all products as quickly as we possibly can.

The commitment to you and to this Congress and to this committee is to -- is to work as quickly as we can to figure out precisely what we can do better than we're currently doing, and I think, hopefully, we'll within the next several months have a better, clearer understanding of precisely what we can do better and if -- once we know that, we're committed to making that happen.

SEN. PRYOR: Great.

(I think that ?) that's music to my ears and I'd love to be a part of those discussions with you and try to figure out how we can proceed from here. My impression is of Section 727 is it ends up hurting American agriculture, specifically the poultry part of that. But we can talk about that more offline and have more discussions.

Last question I have for you is about the traditional land grant colleges and the research that's being done there. I believe it was Senator Brownback -- I'm sorry, Senator Bond -- one of those two referred to that. Could you tell us about the funding there and the -- you know, there's a core element of that research and there are a lot of other things that get done -- could you tell us about your vision for how we should prioritize those research dollars?

SEC. VILSACK: Thank you for that question and I certainly appreciated Senator Bond's comments and I understand his concerns. Let me simply say that -- alluding to the fact that we had a relatively short period of time to put this budget together but I did not feel comfortable knowing fully and completely all aspects of the department's activities.

And so what I have -- what I decided to do was in hiring the under secretary for research, education, and economics to challenge and to charge Dr. Shaw, recently confirmed by the Senate, to take a look at all of our research activities to make sure that we properly prioritize, we properly fund, we properly understand the intersection of those research opportunities at USDA and at the land grant universities and in private -- in the private sector so that we can make sure that we're spending and investing our resources as wisely as possible.

Only then would I feel comfortable in terms of committing to a budget of additional resources or different -- resources directed in a different way. I understand the importance of research. I clearly understand the importance of land grant universities. I worked at one before I came here. I worked on the Seed Center (sic) at the Iowa State University and I understand precisely the work that it does and that land grant universities throughout the country do.

I will tell you that in discussions with the Afghan and Pakistani minister the one topic that came up repeatedly was the extension service -- the important role that the extension plays. They'd like to be able to replicate that in their countries. So I do understand it. I'd just like to have the opportunity to better understand the details and the specifics and to be able to prioritize it appropriately so that I could then be able to justify precisely what we're doing and why we're doing it.

SEN. PRYOR: Thank you. Thank you, Mr. Chairman.

SEN. KOHL: Thank you very much, Senator Pryor. Senator Cochran?

SEN. COCHRAN: Mr. Chairman, thank you. I find myself in agreement with the distinguished senator from Arkansas about the possible implications of changes in the farm bill or administration actions with respect to implementing the farm bill that might make it more and more difficult for southern agriculture producers along the Mississippi River where traditionally the crops have been cotton and rice and to some extent soybeans and others. They will likely suffer more than any other segment of agriculture if this administration's proposals are actually codified by the Congress.

So I just mention that and you know it already but it's a serious concern. It could likely lead to support for cap-and-trade legislation. I never have understood exactly why we got that language to describe that legislation. But it's going to reduce prices paid to farmers. It's likely to increase input costs as well. I don't know who benefits from that except those who want major changes made in the farm bill.

We spent a year in hearings and working to try to develop a consensus for writing a new farm bill and now to have this administration come in and immediately start attacking major provisions that were the objects of a lot of debate and a lot of difficulties in getting included in the bill set aside.

So I'm concerned about that. I hope that we will support the administration's efforts in developing more aggressive trade policies. We think that's a very important step in the right direction and we encourage you to use the tools that Congress has placed in farm bills in the past that have worked, and we hope you can be successful in increasing our share of world markets with the use of those provisions. Let me ask you if you could give us an update on the department's farm bill implementation activities with respect to payment limitations.

SEC. VILSACK: Senator, the direct payment and counter-cyclical rules are out. The ACRE rules are out. The time period for sign-up is extended to August 14th to give folks the capacity to determine what's in their best interest. So those rules are out and we are waiting for farmers across the country to make decisions which are important to their operations, and once those decisions are made we will certainly honor them.

We are also in the process of this month working diligently with OMB to try to complete work on a number of the disaster provisions particularly as it relates to livestock. We know that circumstances, particularly in the upper Midwest specifically, and other parts of the country with reference to livestock and storms and the impact of floods. So we are working very hard to get those rules out so people understand how they can sign up.

We also appreciate the SURE program, which was part of the 2008 farm bill -- a new disaster program. It is a complex program to develop, made more so by the changes that were made to it or as a result of the American Recovery and Reinvestment Act. It is also highly tied to the technology challenges that we have within the USDA. Operating with very antiquated technology and software it sometimes becomes very cumbersome and time consuming to write the software to implement these programs.

But we believe we're on track to have SURE rules out at least in some form in the fall and then we'll have to collect data concerning losses, and hopefully we'll be in a position to respond with payments in the following year.

SEN. COCHRAN: Thank you very much.

SEN. KOHL: Thank you, Senator Cochran. Senator Johnson?

SEN. JOHNSON: Thank you, Secretary Vilsack, for conducting an animal ID listening session in South Dakota. Are there -- are any parts of the current plan you are absolutely committed to moving forward?

SEC. VILSACK: Senator, this is, among many issues, a very contentious and difficult one. It not only creates different attitudes in different parts of the country -- it creates different attitudes within the livestock family generally, poultry and pork having different views about it than cattle, and within the cattle industry different views depending upon whether you graze on public lands or private lands or a combination.

We have not completed the listening sessions and so the candid answer to your question is I have not made any specific decisions relative to the program and improvements to the program because I want to give everyone an opportunity to have input.

I will say that the reason why we are doing these listening sessions is because there has been concern expressed by some members of Congress about whether or not the investment that is being made today by the federal government, now in excess of $130 million, is money well spent. That concerns me from a market standpoint.

A recent study suggested that one incident could (cause ?) the livestock industry as much as $13 billion in losses. We know one -- a head of cattle coming across the border of Canada caused us significant problems with our cattle industry which we still have yet to recover from in terms of our trading partners, and we also know that our trading partners are looking very closely at the safety and security systems that we have.

There have been a number of concerns that have been raised, which I am sensitive to. One is the cost; two is the technology -- whether or not the government is going to address specific technology or a multitude or range of technologies that could be used; three, obviously, whether it's voluntary or mandatory; four, who bears the cost. There is a significant difference between cattle, pork, and poultry in terms of the overall cost to the industry. And there are deep concerns about who gets the information, who uses it, how is it accessed, and whether the public, through the media, would have the capacity to -- through Freedom of Information access information.

All of those issues -- and I suspect a whole lot more have been identified as we look for improvements we're going to have to think creatively and innovatively about.

SEN. JOHNSON: Could you provide me with a timeline on all this to --


SEN. JOHNSON: -- take place and when your decisions will be made?

SEC. VILSACK: Well, we expect and anticipate that it will take another month to two to complete the listening sessions and then hopefully not very long after that we would be in a position to make some recommendations and suggestions to see what reaction we get.

The one thing I don't want to have happen is I don't want this Congress to lose confidence in the system, not provide funding, and then send, I think, what would be a very poor message to our trading partners and would, I think, negatively potentially affect our trading opportunities.

SEN. JOHNSON: Given your excellent dedication to the COOL program, how have you been working with the USTR to ensure COOL is implemented properly?

SEC. VILSACK: We've had very good conversations with Ambassador Kirk and his staff. We've had two face-to-face meetings between USDA staff and trade representative staff. I appreciate the working relationship that we've developed. Ambassador Kirk and I were friends before we had this opportunity in the administration and we've built on that friendship.

We continue to provide information and resources concerning COOL to the trade representatives so that there is a clear understanding and appreciation that we are -- we are committed to COOL. We are committed to following the intent of Congress as you all have outlined it. We do not think that what we have proposed or suggested or that what you all have passed is necessarily trade distorting. We think it's within the guidelines provided by the WTO. We know that our trading partners may have disagreements about that.

Just one observation -- a recent report suggested that livestock activities in Canada have been a bit more robust than they have in this country, which would suggest that perhaps COOL isn't having the impact or effect that some might believe. We will continue to work with USTR, continue to work with our Canadian and Mexican friends to make sure that they fully understand what this is, and more importantly, what it isn't.

SEN. JOHNSON: I have been an enthusiastic supporter of a cap on $250,000 for payment -- (inaudible) -- cap. But I'm concerned about the $500,000 gross sales on the -- (inaudible) -- for direct payments also included in this budget. I want to point out that I am in favor of the $250,000 cap, unlike some of my colleagues, but I am opposed to the sales revenue cap because it's a gross number and not net.

SEC. VILSACK: Well, Senator, in one respect, I guess, the USDA can be congratulated for developing such a strong bipartisan reaction to this idea. When I was governor of Iowa, I often said that I would propose but the legislature would perfect, and I suspect that that strategy is in play here.

SEN. JOHNSON: Yeah. Now, what do you propose to have an offset for the change (if me make it ?)?

SEC. VILSACK: Well, Senator, we are pledged to working with you, with this committee, and with our counter -- your counterpart in the House to make sure that this budget squares itself. We're committed to working with you. We're sure that -- we were sure of one thing when we proposed this budget -- that you all wouldn't just say, "Well, this is great. All in favor say, 'Aye'," -- that you would have a lot to say about this budget. We're committed to working with you.

I think it is important for me to reemphasize the priorities that the president has and that I share. We think it is important for a multitude of reasons that we address aggressively child nutrition. We think it is important for a variety of reasons, not to mention national security and economic security, that we continue to invest in bioenergy and rural development, and we do believe that there are ways in which we can have a strong, adequate safety net as perhaps you have suggested with the cap that don't necessarily make it more difficult for people to survive, and we're committed to that set of priorities.

SEN. KOHL: Thank you very much, Senator Johnson. Senator Bond?

SEN. BOND: Thank you, Mr. Chairman. And Mr. Secretary, being a fellow former governor we've had a lot of experience on the legislative branch disposing of what we proposed. I appreciate your answers to my colleague from Arkansas on research. We want to work with you on that. When you were speaking about Afghanistan, the agriculture there, we talked about the National Guard ag development teams and we wanted to work it to the point where USDA is participating in security advances on that area because there is a tremendous opportunity.

But I want to move into another area, and one of the answers to one of the questions you mentioned a priority on dealing with obesity, and you also testified initially about serving very nutritious food. As you know, the SNAP program is getting a $7.3 billion increase to over $61 billion, and we're all aware that this extra investment in taxpayer money can legally be used to buy sugar-sweetened drinks and empty-calorie food.

Now, I am concerned. Are we doing well by taxpayers, but most important, by the recipients of assistance and their families when we subsidize poor and unhealthy diets? It seems to me that there is an opportunity with the electronic benefits card and point of sale displays or information to push -- to make sure that more of the assistance that's received are used in the healthy pyramid food type purchases. What are your views on that?

SEC. VILSACK: Well, Senator, first of all, I want to acknowledge that you -- that you feel very strongly about this and I appreciate the passion that you have about this. We've talked about it in your office and I know that you're committed to it.

Let me first and foremost say that food is a -- is an extraordinarily complicated set of issues. Until I got this job, I didn't realize that there were over 300,000 food products sold in grocery stores around this country and that over 12,000 new products were introduced in the last 10 or 15 years.

We have made a concerted effort to, one, work diligently to try to improve the food pyramid so that it reflects modern science; two, that we do a much better job of promoting through educational tools the need for more nutritious food. We've begun a process of working, particularly focusing on young children and young families, to ensure that moms and dads are aware of the important responsibility they have in making choices for their children. We are committed to working with our schools to make sure that not only are the school lunches and school breakfasts more nutritious but what's in our vending machines at schools reflects that same attitude. So we think we are aggressively pursuing an education effort and we think that over time it will make a difference.

SEN. BOND: But you're not willing to go down the road with me and cause a little bit of firestorm? Look, I understand that. Let me -- let me raise in the time I have remaining -- we've had an opportunity to discuss agro-forestry, which is done -- I'm sorry my colleague from Arkansas has left, but the University of Missouri School of Agro-Forestry works with the Booneville Agro-Forestry. It's a regional approach to assisting agriculture and particularly small farmers in using plants and trees for environmental benefits, providing better income. We're developing new crops like -- I might just mention chestnuts, for example, as a second source of income.

And I was -- I was -- had a minimum amount of happiness when I understand that the money for Booneville had been proposed for rescission. I hope that you all will consider that, but most importantly, I hope that we will have an opportunity to work with you and your staff and the people who are interested here in Washington about the opportunities we have to do so many of the things you're talking about through agro-forestry research.

SEC. VILSACK: Senator, we're excited about the opportunities that forests present.

As I explained earlier in my opening statement, we see a new opportunity for us to link our forests with our private working lands with our urban centers so that there's a full appreciation across the country of what -- of what trees and forests mean. And I know that there are concerns about specific proposals relative to things that you all designate and specify. Again, I think it's a reflection of the budget process. We will certainly work with folks.

But don't -- please don't take from whatever we propose the belief that we don't understand and appreciate the importance of forests because we do. We are very excited about what we see as a new day for the U.S. Forest Service and RCS and linking those two important components of USDA to all of America.

SEN. BOND: Well, I thank you for that. We look forward to working with you and I also appreciate your work and the discussions we have had on biotechnology -- a complicated area. We'll discuss that later. Thank you, Mr. Chairman, and Mr. Secretary, thank you. We've got a lot of exciting and interesting things to work on.

SEN. KOHL: Thank you very much, Senator Bond. Senator Nelson?

SEN. NELSON: Thank you very much, Mr. Chairman. Thank you for holding this hearing. And Mr. Secretary, welcome. Let me first say as both former governors from rural states, neighboring states, we learned about the importance of communication extending out to the rural areas and to farmsteads and to small schools as well as to the major metropolitan areas.

As we set forth in the stimulus package for broadband deployment, it's my understanding that there may have been some slowdown, not necessarily intentionally but as a result of trying to establish rules to move forward with the distribution of money to expand that broadband deployment, and knowing that the construction season is a little bit earlier for our states than it may be for some of the other states that don't enjoy the cold weather is there anything that can be done to move the development of some of those rules along maybe a little bit more quickly?

SEC. VILSACK: Senator, we have been working very closely with Secretary Locke and his team at the Commerce. We are confident that by the end of this month we will have an outline of rules and regulations relative to how folks might be able to qualify for the grants and loans under the broadband program that you all have put into the recovery and reinvestment act and that we anticipate that the first set of resources will go out in probably one of three different deliveries in the fall of this year. So we are aggressively working to get that done. We appreciate the importance of distance learning, of telemedicine.

But I would also suggest to you that it is an extremely important strategy for rural development in terms of economic development. Small businesses currently that have a unique service or product are able to perhaps sell locally but with broadband they may be able to expand their market globally, and this is part of the wealth creation strategy that we're trying to implement at USDA.

So we are very cognizant, we are moving forward, and I would say we're also moving in a streamlined way. We won't have separate applications. We'll have the single application, a single process. We'll make it as easy as possible for communities and for folks to apply for these resources.

SEN. NELSON: Well, that's very encouraging because I was concerned where you have a couple of agencies trying to work together that there might be some bifurcation as opposed to unification of the process. So that's extremely encouraging. The discussion earlier from my colleague from Arkansas, Senator Pryor, regarding the payment limitations issue, I'm concerned that what's been proposed by the administration on two occasions -- the $500,000 input limitation or the $500,000 direct payment limitation -- is not appropriate.

I look forward to being able to work with you to design something more in line with what Senator Johnson and Senator Grassley and others have done in the past to try to limit the direct payments to large farm and ranching operations that just simply don't require the same kind of assistance from time to time or the same kind of a safety net that you would expect for smaller farms to be able to protect and keep agriculture from becoming all mega farms. So I hope that we can look forward to working together on that.

SEC. VILSACK: You have my commitment to do that, Senator.

SEN. NELSON: The final question I have deals with water. The University of Nebraska in Lincoln has been established as the base for watching water management but also in predicting drought, and the National Drought Mitigation Center provides a lot of background and data on drought including what's now referred to as -- cited as the drought monitor. And one of the reasons that we've focused on that and perhaps one of the reasons why it's housed in Nebraska is that now, according to the Ag Census of 2007 (sic) by your agency, Nebraska is the number one irrigating state based on acreage.

What we've -- what we've determined is that you cannot obviously prevent drought. You can't necessarily always predict drought. But the more data that you have on drought the better you are able to predict and prevent against some of the most adverse consequences of drought -- in other words, changing the mix of crops that are used or changing the approach to agriculture during a period of dryness. I hope that the USDA sees this as a valuable tool for agriculture in those areas that are most directly affected by continuing dry periods.

The old saying is actual -- I think it's true. When you're in a middle of a drought and it rains the question is whether that's the end of the drought or at the beginning of the next drought. And so I'm hopeful that there will be a lot of support for the efforts in the National Drought Mitigation Center.

SEC. VILSACK: Well, Senator, thank you for those comments and we are acutely aware of the growing concern about water generally and see that there are a number of different strategies that we need to focus on in addition to those that you've identified.

Just yesterday I had the opportunity to visit with the CEO of a seed company. They are obviously working very diligently on seed technology that might result in drought-resistant crops. That would certainly be helpful. Interestingly enough, I would expect that we'll learn even more than we already know about these issues in terms of our work overseas. In meeting with the Afghan and Pakistani ag ministers, one of the big concern they have is water and proper irrigation techniques. So I think there are a wide variety of ways in which we need to address this holistically and comprehensively.

SEN. NELSON: Thank you. Thank you, Mr. Chairman.

SEN. KOHL: Thank you so much, Senator Nelson. Senator Bennett?

SEN. ROBERT BENNETT (R-UT): Thank you, Mr. Chairman. And Mr. Secretary, welcome.

SEC. VILSACK: Thank you.

SEN. BENNETT: And thank you for your service, your willingness to put up with all of this after having been in charge for a while. Now you're discovering that nobody is in charge.

SEC. VILSACK: (Laughter.) I thought you were, Senator.

SEN. BENNETT: Sometimes we think we are. (Laughter.) Senator Nelson has covered most of the items that I wanted to cover with respect to broadband, and I am delighted that you're as committed as you are to pushing this forward. Let's just drill a little deeper into your methodology of trying to get the money out to the rural areas.

I understand that you're hiring 40 new people with respect to the expanded RUS program, and is this to replace a contractor? Is this in addition to the contractor? Will this help get money out faster? Just share with us the particulars of how that's all going to work.

SEC. VILSACK: Senator, as you know, USDA has been criticized in the past for the way in which it has handled some of these resources in rural communities and we are sensitive to those criticisms and want to respond to those criticisms and want to make sure that when you all invest in us one more opportunity to promote broadband access in unserved rural areas that we actually deliver.

So this is a decision on our part to try to make sure that we have sufficient outreach and sufficient information and sufficient evaluation to actually get the job done properly. I would also say that you have given us parameters, suggesting that at least 75 percent of what we have available from the recovery and reinvestment act needs to be focused on these unserved rural areas.


SEC. VILSACK: And that is the intent. I come from a state when I was governor where we made a really concerted effort to advance this technology without identifying which specific technology you would use. There are many options and it depends on what part of the country you're in. It depends on what's already been done. It depends on whether or not you are talking about funding the last mile, the middle mile, precisely what you're going to do, and I think what you'll see from us is a comprehensive approach.

In some parts of the country, a middle mile is more important for us to finance than the last mile. In some parts of the country, it may be that that last mile is most important. It may be that we work with private contractors. It may be that we work with cities and communities. It may be that we're working with an individual locality or a group of localities. So it is not -- there's no one size fits all and so you really have to have a lot of people working diligently to make sure that you're making the right set of decisions.

We are going to work very hard to make that happen. We do not want to be subject to the same criticisms (appropriately ?) so that we have been in the past.

SEN. BENNETT: Okay. Thank you. Let me switch to another issue that was raised by Senator Johnson and that's COOL. I don't know of any one issue that's been more contentious in this subcommittee over the years than COOL. All right. You're moving forward. You're complying, et cetera. Do you have any ideas or any data -- a better way of putting it -- as to whether or not the consumer is paying any attention? Is it really making any difference in the supermarket?

SEC. VILSACK: Senator, I don't know that we have specific data that I would be comfortable suggesting a specific response to your question. I do know that we are monitoring. We are monitoring -- we'll probably likely monitor during the fiscal year approximately 5,000 locations to make a determination of compliance. I do think (if on ?) a general proposition -- this is not data driven but from a general proposition -- I think there is a growing appreciation in this country for wanting to know your farmer, wanting to know where your food is coming from, wanting to know more about your food.

And I think you're going to continue to see more of that especially as we focus on nutrition, especially as there is a health care debate in this country and prevention and wellness become critical components of that. I think you're going to see a rising awareness.

SEN. BENNETT: I agree, but I don't think personally that location is going to make any difference to a customer as to what he or she will buy in the supermarket.

SEC. VILSACK: Well, my only -- my only caveat to what would normally, I think, be an accurate observation on your part I think price is obviously pretty significant.


SEC. VILSACK: His -- we had a program called Taste of Iowa when I was governor and, you know, people kind of like the idea of purchasing food that was produced in Iowa. And I will tell you I found it interesting that Lay's Potato Chips has decided to specifically identify the state in which the potato is coming from so that you can actually buy Georgia Lay's Potato Chips if you are of a mind to buy Georgia Lay's Potato Chips, or Idaho.


SEC. VILSACK: So they are giving consumer choice. They must be doing it because there's marketing advice suggesting --

SEN. BENNETT: I -- that I agree with. I've always been in favor of a voluntary COOL. It's the required federal label that I've always doubted, and if I can just share this with you -- the one experience we've had before in this country has been the drive by the United Auto Workers to make sure that North American content would be listed on every car, and there was a great fight about that in the Congress for a long time and finally the union won.

And then a few years later, people went back and started asking customers if they paid any attention to it, and the vast majority of the customers said, "No. We didn't notice." But there was a small group who said, "Yes. We read the label very carefully and if there is a high Japanese or German content we're more likely to buy the car." So that did not necessarily work in the way that the sponsors of the legislation had in mind. Thank you, Mr. Chairman.

SEN. KOHL: Thank you, Senator Bennett. Senator Reed?

SEN. JACK REED (D-RI): Thank you very much, Mr. Chairman. Mr. Secretary, thank you and not only for being here but this week you approved a commitment (on the ?) recovery act for four floodplain projects in Rhode Island. We really appreciated it. It will not only get people to work but it's critical to the homes that live along the Pocasset River, part of this watershed. And at this moment, the Natural Resources Conservation Service is completing their overall watershed plan and it should be before you very quickly, and I ask for your expeditious, and in the same spirit that you use this week, approval of the plan. Thank you very much -- (inaudible).

SEC. VILSACK: Yes, Senator.

SEN. REED: No, that's just more of a thank you than a -- than anything else. Just wanted -- (inaudible).

SEC. VILSACK: (Inaudible) -- made a note of that so --

SEN. REED: Well -- (inaudible) -- if it's the first one today then I -- (inaudible).

SEC. VILSACK: Well, I'm sure it's not. It better not be.

SEN. REED: It better not be. There's one program that has been very useful to my state. It's the Wildlife Habitat Incentive Program -- the WHIP program -- and it's been significantly reduced in the budget. It's about a 50 percent cut. And I recognize you have to make very difficult decisions. But the other aspect of this is that through changes in the last agricultural bill and through limited funding it's posed real practical problems to using (it in a reliable way ?).

We have been very successful in removing old dams that are part of our industrial history. The whole Industrial Revolution began up in Rhode Island with the Slater Mill but the -- taking those dams out allows the fish to begin to propagate again. We've done it generally through partnerships with state and not for profits, and also it's been made possible because the NCR -- NRCS has been able to put up front cost in place.

And the changes in the legislation -- the cap on annual contract payments that will limit their ability to put money up front and also restricting sort of who can participate with them -- has -- is a problem. I understand it's an issue that's both authorization and appropriations issue. But I wondered if you could give some thought to ways in which other programs might be available, other methods might be used to continue to help us in Rhode Island to restore these river ways and restore fish to the river ways.

SEC. VILSACK: Senator, that's a challenge that we will -- we will take up. If I might, I think it is necessary for me to respond to where we're headed in terms of conservation. The overall budget relative to conservation, at least from our perspective, will result in a total of $4.7 billion being committed in a variety of programs, both in technical and financial assistance.

This is a $374 million increase over 2009 level and a $744 million increase over 2008.

What we attempted to do -- and we'd ask, I guess, some understanding on the part of this committee and the Congress -- what we attempted to do was to try to match up as best we could the resources in individual programs with what we see as the historical need and desire for those programs together with the fact that with the new programs -- the Conservation Stewardship Program -- we have -- we have some things to learn about how best to implement, how complicated or easy it will become.

So we made our best-guessed estimate on a relatively short time frame about how best to do this but there is no question there is a commitment to private working lands. There is no question there's a commitment to try and figure out how to help landowners, property owners protect their land. There's no question that we understand the significant role that these programs can play in providing that protection and we are committed to it. And as I said earlier, what we hope to be able to do is to integrate it with what we're doing with the Forest Service in other parts of the country to preserve water -- both quality and quantity of water.

So we are -- we are committed. Let me also say that I have not had an opportunity yet to institute this but we've just begun starting a process of taking a look at how we make decisions and whether or not there are ways in which we can streamline, reduce the steps necessary to making decisions without reducing the appropriateness or the right -- the correctness of the decision we make. I can't tell you that that's going to be done tomorrow but I can tell you that it will be done and hopefully some of these programs will be easier to administer and easier to understand than they have been.

SEN. REED: Well, thank you, Mr. Secretary. Just a quick point is you have a national mandate and some of these programs are particularly useful in some parts of the country. We found this with the WHIP program, because we are trying to really reverse hundreds of years of industrial use along our rivers and that's not the same challenge in many parts of the country. So any help you could give along these lines we'd appreciate. Thank you, Mr. Secretary. Thank you, Mr. Chairman.

SEN. KOHL: Thank you, Senator Reed. Senator Harkin?

SEN. TOM HARKIN (D-IA): Mr. Chairman, thank you very much, and Ranking Member Brownback, thank you for your stewardship -- your great stewardship of this committee and also having this hearing today. I'm sorry I'm late, Mr. Secretary, but I was chairing a hearing on the Authorizing Committee on derivatives and we had Mr. Gensler, the head of the -- new head of the Commodity Futures Trading Commission and it went on for a long time. So I apologize for being a little bit -- little bit late.

I hope, Mr. Chairman, that you and other members of the committee are now getting to know the Tom Vilsack that those of us in Iowa have known for a long time. A very dynamic leader, smart, progressive, not afraid of change, but in fact I would submit has the requisite managerial expertise to guide and direct that change for very positive ends. We've known that for a long time as governor of the state of Iowa and before that even as a state senator.

And one -- (inaudible) -- the three things that I'd note that you've been such a great leader on just since you've taken over down there, Mr. Secretary, is your great leadership, of course, on energy -- renewable energy -- which (trails ?) what you did as governor of Iowa; your leadership, of course, on nutrition and looking ahead on that and, of course, we have to reauthorize our child nutrition bill this year and we can look for you and Dr. Merrigan's help and input on getting that through.

I do want to commend you and the president for putting that extra billion dollars a year in there for our child nutrition programs -- vitally important -- vitally important, that we want to get better food for our kids in schools. Better fresh fruits, better fresh vegetables, fresh meat instead of processed meat -- things like that. Well, those cost a little bit more money and -- but if we really want our kids to eat well we're just going to have to do that. So I'm really glad that you put in your budget that extra -- that extra billion dollars a year.

Your leadership also in conservation and, I might also add, civil rights. You've sort of taken the bull by the horn, if I can use a well-worn phrase, on civil rights, and I congratulate you for that and don't let up on it, please. Continue to pursue that and let's get this thing cleared up. Maybe the others had talked about that before. I don't know. I don't mean to get into that.

But just, again, want to thank you and Dr. Merrigan both for your great leadership there down at the department. Again, I don't really have a set of questions. I'd ask that, Mr. Chairman, my statement be made a part of the record. I won't get into that --

SEN. KOHL: We'll do that.

SEN. HARKIN: -- and I might submit some questions in writing. But just the one thing, Mr. Secretary, that I would like to ask about is, you know, we fought very hard in the last farm bill. I mean, this was a long, drawn-out affair, both on this side and then in Congress, and we reached compromises. As I've often said, it wasn't exactly the bill that I would have written and I think everybody on our committee would have said that in the House side. So everybody had to make compromises.

But the one thing that we did pursue and I think that we kept very strong was our conservation title in that farm bill. And I'm glad to see that you're kind of -- you kept that up. But I'm a little concerned, I must add for the record, ask you about this is the -- is the cutbacks in the WRP program and the EQIP program.

As far as I've been able to discern that there's been no reduction in the -- in the request for monies under WRP or EQIP, and again, if we're going to be moving more towards renewable energy and using land for that purpose, it might entail more intensive cropping practices. And if that happens, then we're going to really need more conservation practices out there.

Now, again, I'm glad to see that you've kept the other programs -- the CRP, CSP, and other things going. But I'm just a little concerned about the WRP and can you just give me some idea of why that was cut back a little bit?

SEC. VILSACK: Senator, first of all, I'm keenly aware of your personal commitment to conservation and the work that you did not just on the 2008 farm bill but also the 2002 farm bill to really introduce this topic of conservation in a meaningful way in creating private working lands, conservation concepts in the farm bill, and we are certainly supportive.

This may not be an acceptable response to your question but it is the response that I must give, and that is that we have overall increased the spending levels of what we spent last year and the year before in conservation generally.

SEN. HARKIN: That's true.

SEC. VILSACK: And we have tried in many of the programs to match the amount of money that we're asking for with the amount of work that we in fact have been able to do. In other words, even though you may have authorized a substantially greater amount, the capacity of USDA in some of these programs is limited by the number of people we have that are processing these applications, making sure that they're processed accurately.

I haven't in -- in response to Senator Reed's question, I have not had an opportunity yet to really focus in on how we -- the process that we're using to determine whether or not it can be streamlined and maybe, as a result, we can actually process more with the same number of people and maybe do a better job in the future of meeting those authorized limits as opposed to what we are currently proposing.

But the reason we're proposing what we're proposing is we think it's a realistic, in many cases -- in some cases it's actually an increase over what we spent last year. We think it's a realistic target in terms of our capacity to actually process the work.

SEN. HARKIN: Okay. That's fair enough.

SEC. VILSACK: And, you know, I would be -- I don't know this. I know that folks are working hard over there at NRCS and all the other agencies of USDA but my guess is that there's probably some things we could probably do from a streamlined process. I know Senator Brownback suggested in rural development the need to integrate programs and I think he may have a good point. There may be process integration that could take place as well. I just haven't had a chance to get to that yet.

SEN. HARKIN: I appreciate that. I think (that there are ?) probably a lot of streamlining could be done (the past ?) over there. The only other thing I would just bring up -- I don't know if my time -- is my time expired?

SEN. KOHL: Go ahead. Go ahead.

SEN. HARKIN: Okay. Thank you, Mr. Chairman. Is on the -- on the recovery act money -- the stimulus money -- and the business and industry loans, and maybe that's already been covered. If it is, don't cover it again. I just want to know how that's coming along and how you are getting the money out because that has to be obligated by next -- not this September but by September of next year.

SEC. VILSACK: Senator, I think we have done a reasonably good job of getting a significant amount of the recovery and reinvestment act money out. We were fortunate because in most cases you were funding existing programs and we could work through the existing structure.

SEN. HARKIN: Uh-huh.

SEC. VILSACK: There's a funnel that is created, as you well know, between the vast number of people at USDA that are working on proposals that ultimately have to be approved by OMB and that funnels into a relatively small hardworking outfit over at OMB.

We have put a priority on some of these -- on some of these programs because we think would create the biggest bang for the buck and the quickest bang for the buck. The B and I piece of this we are working on. We have proposals at OMB, I believe, that will allow us to proceed forward with those programs in the very near future. But the vast majority of the rest of the money has actually been obligated or is out the door or is in the process very quickly of being obligated.

I'm pleased with what we've done in terms of 37,000 home loans. I'm pleased what we've done in terms of all of the direct operating loan money has been obligated. I'm pleased that most of the watershed rehabilitation money has been allocated and the easement -- the watershed easements have been allocated. I'm pleased that we were able to get the SNAP money out and the administrative money to the states and the emergency funding and the school lunch monies out to the states.

So we have been working pretty hard. B and I comes next and I'm anticipating that that will be very, very soon.

SEN. HARKIN: Very good. Thank you very much, Mr. -- (inaudible).

SEN. KOHL: Thanks a lot, Senator Harkin. Senator Specter?

SEN. ARLEN SPECTER (D-PA): Thank you, Mr. Chairman. Mr. Secretary, I join my colleagues in welcoming you here and thank you for taking on this tough job. Couple of subjects I'd like to discuss with you in the short time allotted here -- milk prices, and I begin with the Philadelphia school lunch program, which I see you nodding in the affirmative on familiarity because there has been a very strong push by many members of both the House and Senate side on this very important program which feeds children at 204 schools, and in a big city like Philadelphia that's a very difficult situation.

A lot of single parent families -- a lot of working mothers -- in the economic crunch we are in at the present time, very little income to buy the necessities of life. And where we have seen so many situations where children go to school hungry, no breakfast and no lunch, the educational opportunities are very limited, and that kind of a district has been the recipient of a lot of attention over the years -- attention on a program called Gear Up, especially attuned to at-risk young people. Extensive job training programs -- a very, very, difficult situation -- mentoring, where you find a tremendous movement from truancy to juvenile delinquency to crime. Extraordinarily difficult.

And this lunch program is really an indispensable building block on what I have seen as a city official and as a senator, and there is concern about at least waiting until the nutrition authorization bill comes up -- a consideration on adding an amendment to the agriculture appropriations bill. But isn't there some way to extend this program to relieve a lot of angst that is gripping now parents of -- and children in this very large, very difficult city population?

SEC. VILSACK: Well, Senator, first of all, I certainly appreciate your advocacy for this program. It has been steadfast and it has been passionate and I know that it's an important -- very important program to the city of Philadelphia. As you know, the Bush administration made the decision before I came into office -- before President Obama came into office too.

SEN. SPECTER: Well, we corrected all that.


SEN. SPECTER: We thought we did, or somebody did if not I personally.

SEC. VILSACK: In December --

SEN. SPECTER: In fact, now that I think about it, I think I had something to do with -- (inaudible).

SEC. VILSACK: Well, in December --

SEN. SPECTER: (Inaudible.)

SEC. VILSACK: This program has been extended a couple of times. But in December of 2008, the school district was notified that -- of the intention to discontinue the program. We recognized that a -- an abrupt discontinuation of the program was not an appropriate way for us to respond to the challenge -- the moral challenge that you've outlined -- to these families, and we have been searching for a way in which we can not only continue to do what needs to be done in Philadelphia but make sure that at every inner city -- every major city -- the children of every working family or poor family that has the same kind of circumstances gets an opportunity to be well fed. I want to assure you that that is an absolute commitment of this USDA, of this president. He wants to end childhood hunger by 2015. He is committed to it. We are committed to it. I know you are.

We are -- we are anxious to work with you to figure out ways in which that program can be a model, a pathway to a national effort that enables all of the children similarly situated to have the benefit of decent meals. And so whether it's in the reauthorization act or after the reauthorization act, we're happy to work with you on that and we make that commitment today to work with you.

SEN. SPECTER: Well, are you saying in effect that there is some real optimism about our ability to have this program continue?

SEC. VILSACK: I think what I'd like to be able to say, Senator, is I'd like to see it rolled into a program that essentially extends those kinds of opportunities all over the country including Philadelphia -- not necessarily only Philadelphia but including Philadelphia. And we think that we've learned a lot from this program, and the question is can we -- can we figure out how to take what we've learned in Philadelphia and make sure that it's available to cities all across the country.

SEN. SPECTER: Well, if you're talking about rolling the Philadelphia program into a broader program, that's terrific. I think there ought to be a broader program, and my focus obviously, necessarily is on Philadelphia. But if it can be -- if you think it can be rolled into a broader program that would be satisfactory.

SEC. VILSACK: That -- that's what we hope. I mean, I'm from Pittsburgh, Senator, and so we, you know, want to make sure the rest of --

SEN. SPECTER: I'm equally concerned about this one -- (laughter) -- and also, Secretary Governor, about Iowa -- (inaudible) --

SEC. VILSACK: Very good.

SEN. SPECTER: -- and about children all across the country.

SEC. VILSACK: As I am as well, Senator.

SEN. SPECTER: My time is expired and I will not ask another question to take more time of the subcommittee but will submit in writing the concerns I have about the reduction in milk prices, some 36 percent lower from January to April of this year compared to last year, and will ask you about what might be done under the MILC program or under the Dairy Export Incentive Program because the farmers of my state and I think the farmers across the country are in very bad shape.

SEC. VILSACK: If the Chairman would allow me 30 seconds to respond to --

SEN. SPECTER: You're not restricted on time. It's only senators who are restricted on time. The red light doesn't go on for you. (Inaudible) -- question.

SEC. VILSACK: Well, I just simply want to reassure you that we are very concerned about the dairy situation, which is why we have got the milk payments out. We anticipate that by the time it's all said and done -- I want to make sure I get this number right -- almost $900 million will be paid, we suspect, through the MILC program.

We have also given instructions to our farm service agencies to work with our dairy producers to enable them to restructure, refinance, reexamine their lending so that they are not put in a difficult situation because of these low milk prices and we know that they are looking very carefully and closely at how they can help. And we also recently utilized the DEIP program, making sure that it was WTO compliant but that we exercised support for exports as well.

So we have taken a number of steps in the last couple of months, Senator, to respond because of your advocacy and Senator Casey's advocacy and Senator Kohl, your advocacy in particular, and those from California. We have been listening and we've been trying to respond as best we can.

SEN. SPECTER: Well, that's very encouraging. Thank you very much, Mr. Secretary. Thank you, Mr. Chairman.

SEN. KOHL: Thank you very much, Senator Specter. Mr. Secretary, as you know, global food security is one of the most important issues in this subcommittee, and we discussed a number of ways to improve agricultural systems in developing countries in order to improve stability and to also fight world hunger. How is USDA involved in this effort and what more can you do to improve food security around the world?

SEC. VILSACK: Senator, I would say a couple of things. First of all, we think this is an opportunity for us to expand the McGovern- Dole program. As I said earlier, this is a program that has been enormously successful. We have suggested an increase to $200 million that will allow us to expand the program to four African nations, helping about 400,000 additional children.

We're pleased with the fact as -- again, as I said, a number of countries have been so impressed with the appropriateness of helping feed children and the connection that that has had with youngsters' ability to be educated, that they themselves have taken up that responsibility. We also believe that we need to integrate our efforts with the State Department, with USAID, and to develop a over arching philosophy that's focused on the three principles of food security, which is availability; providing technical assistance and help so that the countries can raise what they can raise and do it in the most productive way possible; assisting those countries in utilizing trade to supplement what they cannot raise; and providing appropriate food assistance -- emergency food assistance when that becomes necessary. That's one component.

The second component is accessibility -- the ability to get food from where it -- where it's being grown to where it's needed. That involves infrastructure and we are specifically, as it relates to Afghanistan and Pakistan, hopeful that we can work with those two countries to substantially increase the infrastructure, to substantially increase productivity, to deal with water issues, to create assistance with regulatory structures and frameworks so that they can enhance their trade opportunities as a model.

And then, finally, utilization -- the capacity to properly refrigerate, properly handle, properly utilize the food that is available and is accessible. All of those components have to be part of our overall program. USDA is prepared from technical assistance, from the research component, from APHIS, from the regulatory assistance we can provide, and from the fellowships that are funded through USDA -- the Borlaug Fellowships, the Cochran Fellowships, and the land grant university exchanges that take place.

All of that is part of an over arching program that we are instituting with Afghanistan, Pakistan and we hope to be able to extend that to the sub-Sahara Africa. We think if we can do this and we have the resources to do it, we can, I think, profoundly impact this food insecurity issue that challenges the world.

And then finally, we talked -- we discussed earlier today water. That is a very critical issue and I think we can help provide resources in terms of technical assistance in how to utilize water. The research that's being done today for the most part is focused in this country on large farms. But the reality is that the vast majority of farms worldwide are very small farms and so it may not take a lot of technical assistance. It may be fairly rudimentary to provide irrigation systems -- drip irrigation systems that might be very inexpensive.

We just need to figure out strategies to help these farmers be more productive, to help them be able to access trade opportunities, and help them be able to be self-sufficient. And when and if it becomes necessary, we need to be prepared to provide emergency assistance and maybe in a more efficient and more effective way as was outlined earlier today.

SEN. KOHL: Very good. You've held several rural community forums across the country. I understand you may be holding more. What kinds of things have you been discovering? What kind of information have you been gathering?

SEC. VILSACK: Well, it somewhat depends on the area of the country, but I think that there is a real strong desire on the part of rural America to participate in helping reduce our dependence and our addiction to foreign oil. I think there is a belief that whether it's biomass or whether it's corn-based ethanol or whether it's new feed stocks -- alternative feed stocks -- there's a real desire for America to be producing its own energy.

And there is concern, as you well know, and Senator Brownback, I'm sure you know as well, there is concern about the existing infrastructure for the ethanol industry and the biofuel industry and so we are working with our credit friends, Farm Credit and others, to try to figure out strategies and ways in which we can make resources available or restructure the resources we have so that we maintain that infrastructure.

And then the president has provided a directive to us to accelerate the implementation of the energy provisions of the farm bill. We intend to meet the deadline he has set for us. So very, very shortly you will see proposals relative to second- and third- generation feed stocks, resources for new biorefineries, resources to convert existing biorefineries to use these new feed stocks, and assistance for producers to produce these new feed stocks. That is one thing that we're hearing.

And then there is, you know, the -- (inaudible) -- issue we've discussed is a serious issue and we've tried to outline the fact that we have taken steps. The pork producers are feeling stress. Part of our challenge is that we have tools to respond to situations like this, but to a certain extent because of decisions that are made to direct Commodity Credit Corporation resources sometimes our capacity to respond in as large a way as necessary is a bit compromised.

So we're trying to figure out ways in which we can encourage, for example, institutional buyers to focus on purchasing pork to take some of the pressure off that industry and we're obviously working hard on trying to reduce trade barriers.

And I think there's a genuine concern in rural communities. They're anxious to know that the recovery and reinvestment act relates to them, and when they hear a water treatment facility being funded in their town or they hear a health care facility being expanded or equipped because of resources or they hear that the river that's flooded every year isn't going to flood or that they're going to receive some relief from that because of what USDA has done, they are appreciative.

And then we've made an effort to make sure that they not only know the resources that are provided from USDA but they have a sense of all the other resources that are being provided from other departments of government, and I think that's a reassuring message.

SEN. KOHL: Very good. Senator Brownback?

SEN. BROWNBACK: Thank you very much. Mr. Secretary, a couple of things. You started off talking about wealth creation on a regional approach, which perked my ears up that we need to do that in rural areas and we certainly do. We're losing a lot of population in rural areas.

May I suggest you or your staff take a look at a bill several of us put together and have for a series of years called the New Homestead Act? Senator Dorgan, previously Senator -- well, several from the Midwest, myself have put this forward as a way to try to get more investment -- excuse me -- more investment and growth taking place in rural areas. And we worked at it a long time and I think it's one -- we modeled it after what was done in this country in the '70s to get the urban areas to go again.

And we put in a series of tax incentives in particular that just applied to rural areas in counties that had lost population over the last 20 years. So you're trying to target just those areas that have lost population. I think Iowa had half of its state as half of mine qualifies in that, and you got a whole swath.

And we took places and things that have worked previously in the urban areas to get regeneration taking place (that we think they'd work ?) in the rural ones and I'd hope you'd take a look at that, and we put a fair amount of time in it.

So I want to show you a bag, if I could. This is -- we didn't fill it. But I'm sure if you haven't seen one of these you're going to see a bunch of these.

SEC. VILSACK: I have one in my office.

SEN. BROWNBACK: Good. All right. So you're well aware of this. I love these. I see them around the world. I love the American flag on it. You know, I love the partnership on it. So, I mean, that piece of it I like. The point I wanted to make is it's a corn-soy blend. Great. All for corn and soy. But this formulation hasn't been changed in 30 years. We've been shipping -- that was the last -- that was when we developed the corn soy-blend for food aid was 30 years ago and we haven't changed what we're shipping in 30 years.

Now, the reason I make that point is is that they polled a series of Nobel laureates and said, "If you were going to put money anywhere in the world to improve the status of humanity, what would you do?" And the top one and third thing were both micronutrients that they said. Cheap, effective -- if you took that corn soy-blend and you added proper levels of iodine, zinc, vitamin A, and iron into it for children feeding at the right age, you have dramatic impact. That's not heavy to do that but it does require some reformulation of it to do.

Tufts University is doing a study right now -- maybe you know about this anyway -- that -- on its reformulation, and I'm looking at this and going, this is really -- this is cheap for us to be able to do. We dramatically improve lives and we use that in adjacent to what we're doing on AIDS and malaria in Africa particularly, and our outcomes get dramatically better, and it's simple and it's cheap.

So I would -- I would hope you could look at this Tufts study on this area just of micronutrients. We're look -- now you got to fund it all. That's the trick for everybody. One of the things we're looking at is to say, okay, if we're spending 65 percent right now on administration and transportation for our food aid, what if we could put a hard level -- that we can't spend any more than 45 percent for administration and transportation. That's pretty generous right there -- that you're going to spend nearly half your budget just to administer and get it there -- and then use your (delta ?) difference to get the micronutrients in this and to target.

So you don't have new funds in -- having to go into it but you dramatically improve your outcomes with it. We're researching that. Love to work with you on it. I just ask -- you have far more resources to do this than we would. I think the resources are there if we -- if we sharpen our pencil on those two areas and then look at what we can do in this -- in this field.

Wish you -- wish you Godspeed there at Ag (sic), Secretary. That's a great spot and I'm sure you'll do a great job at it.

SEN. KOHL: Thank you, Senator Brownback. Mr. Secretary, would you talk about WIC? Do you think we're adequately funded for this year? Are you worried about having to come back for more? What do you see for WIC?

SEC. VILSACK: Senator, we've made our best estimate in terms of what we have proposed and I believe we also have some contingency language in the WIC program. We believe 9.8 million participants is a very good, healthy estimate of what the program will be and I believe we've provided resources and funding for that level.

This is obviously a very important program and one that we are fully supportive and one that's consistent with the president's desire to assist in ending childhood hunger. So we are committed to it as we are with the SNAP program and as we are the child nutrition reauthorization efforts that we'll be undertaking this year.

SEN. KOHL: Very good. Would you amplify a little bit your vision of USDA's role in terms of the administration's renewable energy program in years to come?

SEC. VILSACK: I'd be happy to and it really dovetails a little bit with what Senator Brownback was talking about earlier in terms of rural development and regional development. The administration first and foremost is committed to an expansion of the biofuels industry. The president established a working group recently directing myself, Secretary Chu, and Administrator Jackson to figure out strategies for expanded marketing of biofuels.

We are in the process of having staff meet to try to figure out ways in which that can be done. As I said earlier, first and foremost we have to maintain the infrastructure that we have. That's a challenge with the current credit circumstances of some of those entities.

Secondly, I think we have to continue and we will continue invest in research that allows us to be more efficient with the ethanol and soy diesel and biodiesel and biofuels that we're currently producing, both in terms of the energy that's used and in terms of the natural resources that are required, specifically water.

There's a lot of interesting, exciting research and activity being done to reduce the amount of energy and to reduce the natural resources in producing those fuels.

The third thing is to continue to promote, and we will as I indicated earlier with the energy title of the farm bill, all aspects of the energy title to the farm bill, identifying second- and third- generation feed stocks. There's interesting efforts and demonstration projects underway using corn stover, the corn cob, the husk of corn. There's interesting opportunities potentially with grasses.

There clearly is an effort in woody biomass and we are trying to link that effort up with opportunities with the Department of Interior and Agriculture as we try to maintain our forests in an appropriate way and reduce the hazardous fuel that currently exists in our forests to reduce the intensity of fires. All of that can create an opportunity for us and there is some resources you well know to create demonstration projects in that area.

We will aggressively pursue that. We are working hard to -- once the rules are out, to put resources to work creating new biorefineries. We've already at least announced one grant -- a joint grant between ourselves and the Department of Energy to accelerate research, but we're also providing resources to build new biorefineries. We're trying to identify biorefineries that want to convert their production process.

We are able because of the money that you all put in the Farm Bill to be able to assist them in making that conversion. We're looking for farmers who are obviously interested in helping us produce the feed stocks of the future and provide resources and assistance for them to do so. We're also working with communities, so trying to identify communities that will be able to -- who will want to convert to using woody biomass to produce some of their power.

That is part of the strategy that wraps around the whole notion of renewable fuel and energy, which we think is a growth opportunity for rural America. Whether it's wind or solar, hydro, geothermal, we think that there are enormous opportunities in rural communities if we're strategic and if we are smart about the transmission challenges that renewable energy presents.

We are currently thinking about and working on how you would distribute biofuels, whether it's through the current system or through a pipeline system. I know that there are some members of Congress who are interested in looking at the possibility of a pipeline that would make it easier to transport biofuels that are produced from, say, the Midwest to other parts of the country or from other parts of the country to the Midwest.

We're working on strategies to make sure that once we produce the biofuel that it can be adequately marketed. So many stations today don't have adequate pumping or tank infrastructure so there are opportunities, I think, for us to respond. We're looking at ways in which we can use our rural development resources to enhance gas stations, convenience stores to be better equipped to handle ethanol.

We're also continuing to, obviously, articulate the desire and hope that we look at the blend rate that is currently at E10. We were hopeful that it will be expanded from E10 to somewhere between E10 and E15. That obviously will expand opportunity and send a clear strong message, particularly to the market and to lenders, that we're in this for the long haul. So it's a wide variety of those things and we're obviously expecting our car industry to respond by producing cars that are more amenable to flexible fuels.

SEN. KOHL: Very good.

SEN. : Anything further here, Chairman?

SEN. KOHL: Well, we thank you for being with us, Secretary Vilsack. I'm most encouraged with you as a person in terms of your knowledge, your enterprise, your energy, your ambition, and I'm convinced you're -- you are and will be a great secretary of agriculture. Thank you for being with us today and we'll hold the record open for a week for any additional questions.

SEC. VILSACK: Mr. Chairman, thank you for your courtesies and, Senator Brownback, be reassured. We'll find out about that Tufts program because the deputy secretary comes from Tufts. I'm hopeful she knows all about that and if she doesn't she's going to find out about it. (Laughter.)

SEN. : She better.

SEC. VILSACK: Thank you.

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