Order Code RL31801
Report for Congress
Received through the CRS Web
Appropriations for FY2004:
U.S. Department of Agriculture
and Related Agencies
May 21, 2003
Ralph M. Chite
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Congressional Research Service Ëœ The Library of Congress

Appropriations are one part of a complex federal budget process that includes budget
resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions, and
budget reconciliation bills. The process begins with the Presidentâ€™s budget request and is
bounded by the rules of the House and Senate, the Congressional Budget and Impoundment
Control Act of 1974 (as amended), the Budget Enforcement Act of 1990, and current
program authorizations.
This report is a guide to one of the 13 regular appropriations bills that Congress passes each
year. It is designed to supplement the information provided by the House and Senate
Appropriations Subcommittees on Agriculture. It summarizes the current legislative status
of the bill, its scope, major issues, funding levels, and related legislative activity. The report
lists the key CRS staff relevant to the issues covered and related CRS products.
NOTE: A Web version of this document with active links is
available to congressional staff at:
[http://www.crs.gov/products/appropriations/apppage.shtml].

Appropriations for FY2004: U.S. Department of
Agriculture and Related Agencies
Summary
As the first step in the FY2004 budget and appropriations process, the
Administration released its budget request on February 4, 2003. Included in the
budget submission was a requested FY2004 appropriation of $77.63 billion for the
U.S. Department of Agriculture (USDA) and related agencies (Food and Drug
Administration and the Commodity Futures Trading Commission).
The $77.63 billion requested is $3.0 billion above the $74.58 billion provided
in total for FY2003 in both regular (P.L. 108-7) and supplemental (P.L. 108-11)
appropriations. Much of the increase in requested spending for FY2004 is within
USDA mandatory programs, particularly the food and nutrition programs, which
would receive $2.3 billion more in FY2004 than the current year appropriation.
For the discretionary portion of the request, the Administration requests an
appropriation of $17.14 billion for USDA and related agencies, which is $736
million below the FY2003 enacted appropriation of $17.88 billion, including the
supplemental. Among the requested reductions in USDA spending are: $424 million
less for rural general assistance programs (although the lower level of spending
would support a program level close to the FY2003 level); $333 million less for
international food aid from the FY2003 level that was bolstered by supplementals;
and a $150 million reduction for agricultural research activities.
The FY2004 request presents several funding and policy issues that may be
addressed in appropriations or authorizing legislation, including proposals to: restrict
or eliminate mandatory funding for certain rural development, conservation and
research programs; resolve a funding dispute for technical assistance for certain
conservation programs; provide food aid resources in response to global food crises;
eliminate congressionally earmarked research projects; increase funding for meat and
poultry inspection; and limit the reimbursement rate to private insurance companies
participating in the federal crop insurance program.
The House and Senate Appropriations Committees have held hearings on the
FY2004 Administration request for USDA and related agencies. House
subcommittee markup on the FY2004 agriculture appropriations bill is expected to
be held shortly after the subcommittee receives its discretionary spending allocation
from the full committee.

Key Policy Staff
CRS
Area of Expertise
Name
Division
Telephone
USDA Budget/Farm Spending and Coordinator Ralph M. Chite
RSI
7-7296
Conservation
Jeffrey A. Zinn
RSI
7-7257
Agricultural Trade and Food Aid
Charles E. Hanrahan
RSI
7-7235
Rural Development
Tadlock Cowan
RSI
7-7600
Domestic Food Assistance
Jean Yavis Jones
RSI
7-7331
Joe Richardson
DSP
7-7325
Agricultural Research and Food Safety
Jean M. Rawson
RSI
7-7283
USDA Marketing and Regulatory Programs
Geoffrey S. Becker
RSI
7-7287
Food and Drug Administration
Donna U. Vogt
DSP
7-7285
B. Randall
DSP
7-7046
Commodity Futures Trading Commission
Mark Jickling
G&F
7-7784
Division abbreviations: RSI = Resources, Science and Industry; DSP= Domestic Social Policy.
G&F=Government and Finance

Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
USDA Spending at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mandatory vs. Discretionary Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The Administrationâ€™s FY2004 Budget Request . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Farm Commodity Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Crop Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Farm Service Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FSA Salaries and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
FSA Farm Loan Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Natural Resources and Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Discretionary Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Mandatory Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Technical Assistance Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Agricultural Trade and Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Foreign Agricultural Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Food Aid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Export Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Agricultural Research, Extension, and Economics . . . . . . . . . . . . . . . . . . . 12
Agricultural Research Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Cooperative State Research, Education, and Extension Service . . . . . 13
Economic Research Service (ERS) and National Agricultural Statistics
Service (NASS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Food Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Marketing and Regulatory Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Animal and Plant Health Inspection Service (APHIS) . . . . . . . . . . . . 14
Agricultural Marketing Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Grain Inspection, Packers, and Stockyards Administration . . . . . . . . . 15
Rural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Rural Community Advancement Program (RCAP) . . . . . . . . . . . . . . . 16
Rural Business-Cooperative Service (RBS) . . . . . . . . . . . . . . . . . . . . 17
Rural Housing Service (RHS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Rural Utilities Service (RUS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Food and Nutrition Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Food and Drug Administration (FDA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Commodity Futures Trading Commission (CFTC) . . . . . . . . . . . . . . . . . . . . . . . 20
List of Figures
Figure 1 U.S. Department of Agriculture Actual Gross Outlays, FY2002 . . . . . . 2
List of Tables
Table 1. USDA and Related Agencies Appropriations, FY1995 to FY2003 . . . . 3
Table 2. USDA and Related Agencies Appropriations,
FY2004 Budget Request vs. FY2003 Enacted . . . . . . . . . . . . . . . . . . . . . 22

Appropriations for FY2004: U.S. Department
of Agriculture and Related Agencies
Most Recent Developments
On February 3, 2003, the Bush Administration released its FY2004 budget
estimates, containing a requested appropriation of $77.63 billion for the U.S.
Department of Agriculture and Related Agencies. Of the requested amount, $60.5
billion is for mandatory programs and $17.1 billion for discretionary programs. The
agriculture subcommittees of the House and Senate Appropriations Committees have
conducted hearings on the request. Subcommittee markups are pending, and are
expected to be held this spring shortly after the subcommittees receive their
discretionary allocations from the full committees.
USDA Spending at a Glance
The U.S. Department of Agriculture (USDA) carries out its widely varied
responsibilities through approximately 30 separate internal agencies and offices
staffed by some 100,000 employees. USDA is responsible for many activities
outside of the agriculture budget function. Hence, spending for USDA is not
synonymous with spending for farm programs.
USDA gross outlays for FY2002 (the most recently completed fiscal year) were
$79.95 billion, including regular spending and supplemental spending for homeland
security following the September 11, 2001 terrorist attacks. The mission area with
the largest gross outlays ($37.5 billion or 50% of spending) was for food and
nutrition programs â€“ primarily the food stamp program (the costliest single USDA
program), various child nutrition programs, and the Women, Infants and Children
(WIC) program. The second largest mission area in terms of total spending is for
farm and foreign agricultural services, which totaled $22.9 billion, or 31% of all
USDA spending in FY2002. Within this area are the programs funded through the
Commodity Credit Corporation (e.g., the farm commodity price and income support
programs and certain mandatory conservation and trade programs), crop insurance,
farm loans, and foreign food aid programs.

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Total USDA spending in FY2002 also included $7.0 billion (9%) for an array
of natural resource and environment programs, approximately three-fourths of which
was for the activities of the Forest Service, and the balance for a number of
discretionary conservation programs for farm producers. (USDAâ€™s Forest Service is
funded through the Interior appropriations bill; it is the only USDA agency not
Figure 1
U.S. Department of Agriculture Actual Gross Outlays, FY2002
funded through the annual agriculture appropriations bill.) USDA programs for rural
development ($2.72 billion in gross outlays for FY2002); research and education
($2.2 billion); marketing and regulatory activities ($1.5 billion); meat and poultry
inspection ($717 million); and departmental administrative offices and other
activities ($454 million) account for the balance of USDA spending.
Mandatory vs. Discretionary Spending
Approximately three-fourths of total spending within the U.S. Department of
Agriculture is classified as mandatory, which by definition occurs outside the control
of annual appropriations. Currently accounting for the vast majority of USDA
mandatory spending are: the farm commodity price and income support programs
(including ongoing programs authorized by the 2002 farm bill and emergency
programs authorized by various appropriations acts); the food stamp program and
child nutrition programs; the federal crop insurance program; and various agricultural
conservation and trade programs.
Although these programs have mandatory status, many of these accounts
ultimately receive funds in the annual agriculture appropriations act. For example,

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the food stamp and child nutrition programs are funded by an annual appropriation
based on projected spending needs. Supplemental appropriations generally are made
if and when these estimates fall short of required spending. An annual appropriation
also is made to reimburse the Commodity Credit Corporation for losses it incurs in
financing the commodity support programs and the various other programs it
finances.
The other 25% of the USDA budget is for discretionary programs, which are
determined by funding in annual appropriations acts. Among the major discretionary
programs within USDA are Forest Service programs; certain conservation programs;
most of its rural development programs, and research and education programs;
agricultural credit programs; the supplemental nutrition program for women, infants,
and children (WIC); the Public Law (P.L.) 480 international food aid program; meat
and poultry inspection; and food marketing and regulatory programs. Funding for all
USDA discretionary programs (except for the Forest Service) is provided by the
annual agriculture appropriations act. Funding for Forest Service programs is
included in the annual Interior appropriations act.
Table 1. USDA and Related Agencies Appropriations, FY1995 to FY2003
(budget authority in billions of dollars)
FY95
FY96
FY97
FY98
FY99
FY00
FY01
FY02
FY03
Discretionary $13.29
$13.31
$13.05
$13.75
$13.69
$13.95
$15.07
$16.02
$17.46
Mandatory
$54.61
$49.78
$40.08
$35.80
$42.25
$61.95
$58.34
$56.91
$56.70
Total Budget
$67.90
$63.09
$53.12
$49.55
$55.94
$75.90
$73.41
$72.93
$74.16
Authority
Note: Includes regular annual appropriations for all of USDA (except the Forest Service), the Food and Drug Administration, and the Commodity
Futures Trading Commission. Excludes all mandatory emergency supplemental appropriations. The FY2003 level reflects the 0.65% across-the-board
rescission applied to all discretionary programs funded in the FY2003 Consolidated Appropriations Act (P.L. 108-7), except for the WIC program
which was specifically exempted.
Source: House Appropriations Committee.
A key distinction between mandatory and discretionary spending involves how
these two categories of spending are treated in the budget process. Congress
generally controls spending on mandatory programs by setting rules for eligibility,
benefit formulas, and other parameters rather than approving specific dollar amounts
for these programs each year. Eligibility for mandatory programs is usually written
into authorizing law, and any individual or entity that meets the eligibility
requirements is entitled to the benefits authorized by the law. Spending for
discretionary programs is controlled by annual appropriations acts. The 13
subcommittees of the House and Senate Appropriations Committees originate bills
each year which decide how much funding to devote to continuing current activities
as well as any new discretionary programs.

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The Administrationâ€™s FY2004 Budget Request
On February 3, 2003, the Administration released its budget request for
FY2004, including an estimated appropriation of $77.63 billion for the U.S.
Department of Agriculture (USDA) and related agencies (Food and Drug
Administration and the Commodity Futures Trading Commission). The total
requested appropriation for FY2004 is $3.0 billion above the $74.58 billion provided
in total for FY2003 in the regular annual appropriation (P.L. 108-7) and a subsequent
supplemental measure (P.L. 108-11).1 Almost all of the increased requested spending
for FY2004 is accounted for within USDA mandatory programs, particularly for food
and nutrition programs (up $2.3 billion) and the reimbursement to the Commodity
Credit Corporation (CCC) for the net realized losses associated with its farm price
and income support spending (up $990 million). Total estimated mandatory USDA
spending under the request (for food stamps, child nutrition, CCC spending, and crop
insurance) is $60.49 billion, up $3.8 billion from the enacted FY2003 level of $56.70
billion. For mandatory rural development spending, however, the Administration is
requesting that it either be canceled or converted to discretionary funding.
For discretionary spending on programs within USDA and related agencies, the
Administration requests an appropriation of $17.14 billion, an amount that is $736
million below the FY2003 enacted appropriation of $17.88 billion, including the
supplemental. Among the requested reductions in USDA spending are: $424 million
less for rural general assistance programs (although the lower level of spending
would support a program level close to FY2003); $333 million less for international
food aid from the FY2003 level that was bolstered by supplementals; and a $150
million reduction for agricultural research activities.
The FY2004 request presents several funding and policy issues that may be
addressed in appropriations or authorizing legislation, including proposals to: restrict
or eliminate mandatory funding for certain rural development, conservation and
research programs; resolve a funding dispute for technical assistance for certain
conservation programs; provide food aid resources in response to global food crises;
provide additional international food aid resources if food crises continue or reoccur;
redirect or eliminate congressionally earmarked research projects; increase funding
for meat and poultry inspection; and limit the reimbursement rate to private insurance
companies participating in the federal crop insurance program.
The House and Senate Appropriations Committees have held hearings on the
FY2004 Administration request for USDA and related agencies. House
subcommittee markup on the FY2004 agriculture appropriations is expected to be
held shortly after the subcommittee receives its discretionary spending allocation
from the full committee.
1All enacted FY2003 appropriation figures cited in this report are adjusted for a 0.65%
across-the-board rescission on all discretionary accounts (except for the WIC program,
which was specifically exempted), as required by a provision in the FY2003 Consolidated
Appropriations Act (P.L. 108-7) to offset the total cost of the omnibus measure.

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The following sections of this report discuss the FY2004 Administration request
(including policy proposals) for USDA and related agencies, by major program and
mission area, and compare the FY2004 request with the FY2003 enacted level.
Farm Commodity Support
Most spending for USDAâ€™s mandatory agriculture and conservation programs
was authorized by the 2002 farm bill (P.L. 107-171), and is funded through USDAâ€™s
Commodity Credit Corporation (CCC). The CCC is a wholly owned government
corporation. It has the legal authority to borrow up to $30 billion at any one time
from the U.S. Treasury. These borrowed funds are used to finance spending for
ongoing programs such as farm commodity price and income support activities and
various conservation, trade, and rural development programs. The CCC has also been
the funding source for a large portion of emergency supplemental spending over the
years, particularly for ad-hoc farm disaster payments, and direct market loss
payments to growers of various commodities which have been provided in response
to low farm commodity prices.
The CCC must eventually repay the funds it borrows from the Treasury.
Because the CCC never earns more than it spends, its losses must be replenished
periodically through a congressional appropriation so that its $30 billion borrowing
authority (debt limit) is not depleted, which would render the corporation unable to
function. Congress generally provides this infusion through the regular annual
USDA appropriation law. Because of the degree of difficulty in estimating its
funding needs, which is complicated by crop and weather conditions and other
uncontrollable variables, the CCC in recent years has received a â€œcurrent indefinite
appropriation,â€ which in effect allows the CCC to receive â€œsuch sums as are
necessaryâ€ during the fiscal year for previous yearsâ€™ losses and current yearâ€™s losses.
As in past years, the Administration requested an indefinite appropriation for the
CCC for FY2004, which the Administration estimates at $17.275 billion, compared
with an estimated indefinite appropriation of $16.285 billion provided in FY2003.
Not included in the FY2003 amount is a separate appropriation of $3.1 billion in P.L.
108-7 (Division N, Emergency Relief) for farm disaster assistance, which is being
funded through the borrowing authority of the CCC.
Crop Insurance
The federal crop insurance program is administered by USDAâ€™s Risk
Management Agency (RMA). It offers basically free catastrophic insurance to
producers who grow an insurable crop. Producers who opt for this coverage have
the opportunity to purchase additional insurance coverage at a subsidized rate. Most
policies are sold and completely serviced through approved private insurance
companies that have their program losses reinsured by USDA. The annual
agriculture appropriations bill makes two separate appropriations for the federal crop
insurance program. It provides discretionary funding for the salaries and expenses
of the RMA. It also provides â€œsuch sums as are necessaryâ€ for the Federal Crop
Insurance Fund, which funds all other expenses of the program, including premium
subsidies, indemnity payments, and reimbursements to the private insurance

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companies. Annual spending on the crop insurance program is difficult to predict in
advance and is dependent on weather and crop growing conditions and farmer
participation rates.
The Administration estimates that the mandatory funded Federal Crop Insurance
Fund will require an FY2004 appropriation of $3.368 billion, compared with an
estimated FY2003 appropriation of $2.886 billion. Legislative enhancements (P.L.
106-224) made to the program in 2000 greatly increased the federal subsidy of
insurance premiums. The increased subsidy coupled with large program losses
associated with the extended drought in various parts of the country have contributed
to increased program costs in recent years. For the discretionary component of the
crop insurance program, the salaries and expenses of USDAâ€™s Risk Management
Agency, the Administration requests an appropriation of $78.5 million, up $8.2
million from the FY2003 enacted level of $70.25 million. Much of the requested
increase would cover proposed information technology initiatives within RMA.
The Administration request also contains a legislative proposal to limit the
amount of subsidy that accrues to the private insurance companies participating in
the program. The Administration maintains that the increased farmer participation
in the program following the 2000 legislative enhancements has resulted in windfall
profits for the private insurance companies. Hence, the FY2004 budget request
contains a proposal to cap the reimbursement that the private companies receive from
the federal government for their delivery expenses at 20% of premium for FY2004
and subsequent years, instead of the current cap of 24.5%. According to
Congressional Budget Office estimates, enactment of this proposal would save $81
million in FY2004.
Farm Service Agency
While the Commodity Credit Corporation serves as the funding mechanism for
the farm income support and disaster assistance programs, the administration of these
and other farmer programs is charged to USDAâ€™s Farm Service Agency (FSA). In
addition to the commodity support programs and most of the emergency assistance
provided in recent supplemental spending bills, FSA also administers USDAâ€™s direct
and guaranteed farm loan programs, certain conservation programs and domestic and
international food assistance and international export credit programs.
FSA Salaries and Expenses. This account funds the expenses for program
administration and other functions assigned to the FSA. These funds consist of
appropriations and transfers from CCC export credit guarantees, from P.L. 480 loans,
and from the various direct and guaranteed farm loan programs. All administrative
funds used by FSA are consolidated into one account. For FY2004, the
Administration requests a total appropriation of $1.02 billion for FSA salaries and
expenses. The requested amount is $46 million above the regular annual
appropriation of $970.4 million for FY2003. However it is $24 million below the
total FY2003 level that includes supplemental authority for FSA to tap the CCC for
$70 million to cover the administrative costs associated with implementing ad hoc
disaster assistance authorized in the emergency provisions of P.L. 108-7.

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FSA Farm Loan Programs.
Through FSA farm loan programs, USDA
serves as a lender of last resort for family farmers unable to obtain credit from a
commercial lender. USDA provides direct farm loans and also guarantees the timely
repayment of principal and interest on qualified loans to farmers from commercial
lenders. FSA farm loans are used to finance the purchase of farm real estate, help
producers meet their operating expenses, and help farmers financially recover from
natural disasters. Some of the loans are made at a subsidized interest rate. An
appropriation is made to FSA each year to cover the federal cost of making direct and
guaranteed loans, referred to as a loan subsidy. Loan subsidy is directly related to
any interest rate subsidy provided by the government, as well as a projection of
anticipated loan losses caused by farmer non-repayment of the loans.
The Administration requests an appropriation of $210.7 million for FY2004 to
subsidize the cost of making $3.52 billion in direct and guaranteed FSA loans. The
enacted FY2003 loan subsidy was $226.8 million to support FSA loans totaling $3.94
billion. Most of the proposed $420 million decline in requested loan authority is
accounted for in a proposed $300 million reduction in unsubsidized guaranteed farm
operating loans (from $1.7 billion authorized in FY2003 to an estimated $1.4 billion
in FY2004). The Administration contends that the proposed reduction in funding for
this program, which finances farmersâ€™ purchases of feed, seed, fertilizer, livestock
and machinery, is consistent with historical demand.
Natural Resources and Environment
The natural resources and environment mission area within USDA is
implemented through the programs of the Natural Resources Conservation Service
(NRCS), the Farm Service Agency (FSA), and the Forest Service. (Funding for the
Forest Service is provided in the annual Interior appropriations bill.) Conservation
spending combines discretionary spending, which is more then $1 billion annually
in recent years, and mandatory funding, which is funded through the Commodity
Credit Corporation and is estimated to total just under $3 billion in budget authority
in FY2004, according to the March 2003 Congressional Budget Office baseline.
Discretionary Programs. The Administration is requesting $1.241 billion
for all discretionary conservation programs administered by NRCS, which is an
increase of $220 million from FY2003. As part of this request, the Administration
is proposing to create a new discretionary line item of $432 million to pay for
technical assistance in support of the mandatory conservation programs. It is also
requesting decreases from FY2003 funding levels in all the existing discretionary
programs, including decreases of: $116 million in Conservation Operations (to $703
million); $69 million from Watershed and Flood Prevention Operations (to $40
million); $20 million from Watershed Rehabilitation (to $10 million); $5 million
from watershed planning (to $6 million); and less than $1 million from Resource
Conservation and Development (to $50 million). The FY2004 request is not
accompanied by any proposals for major conservation policy changes, unlike earlier
Bush Administration requests. The decrease in Conservation Operations can be
viewed as being closer to level funding, since NRCS estimates that it spends more
than $100 million now out of the Conservation Operations account to pay for
technical assistance in support of the mandatory programs, and all those costs would

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be covered through the new line item under this proposal. (For more on this issue, see
â€œTechnical Assistance Fundingâ€ below.)
In addition to the proposed funding levels, another possible issue is the growing
use of earmarks within the discretionary conservation program accounts. The
FY2003 appropriation included 214 congressional earmarks with a total value of
more than $200 million, according to a compilation prepared by the NRCS budget
office. Most earmarks are in the Conservation Operations and Watershed and Flood
Prevention Operations accounts. Both the number and total value of earmarks have
been growing in recent years, and for some programs, the growth in earmarks has
exceeded the growth in overall program funding some years. Some conservation
supporters have expressed concern that the increased use of earmarks means that less
money is available for the most pressing conservation priorities, unless they happen
to coincide with the earmarked projects and activities.
Mandatory Programs. Annual funding levels for each of the mandatory
conservation programs was set in the 2002 farm bill. (For two of the programs, the
Conservation Reserve and the Wetlands Reserve, limits are set in enrolled acres
rather than dollars.) The budget submission includes proposals to limit funding in
six of these programs to a total of $285 million below the authorized levels. The
reduction would offset part of the cost of establishing a proposed new line item to
fund technical assistance in support of mandatory programs. Proposed reductions
include: $150 million from the Environmental Quality Incentive Program (to $850
million); no funding for the Conservation Security Program (it has no annual
authorized funding levels, but was scored at $19 million); $95 million from the
Watershed Rehabilitation Program (to $0); $9 million from the Ground and Surface
Water Conservation Programs (to $51 million); $18 million from the Wildlife
Habitat Incentives Program (to $42 million); and $13 million from the Farmland
Protection Program (to $112 million).
Regardless of whether Congress acts on these proposed reductions, the
Conservation Reserve Program will remain the largest conservation program, with
a budget authority of $1.92 billion, according to the Congressional Budget Officeâ€™s
March 2003 estimates. The next largest program will be the Environmental Quality
Incentive Program. If Congress rejects the Administration proposal, budget authority
for this program will be $1.0 billion, an increase of $300 million from FY2003.
Other smaller programs would all increase, with the total budget authority rising from
$533 million (for 6 programs) in FY2003 to $729 million (for 7 programs) in
FY2004.
Technical Assistance Funding. The rapid expansion in funding for
conservation programs and activities resulted in increased requests for technical
assistance. A statutory cap on the use of Commodity Credit Corporation (mandatory)
funds to provide such assistance for mandatory conservation programs has created
a funding shortfall. Congress had addressed these funding concerns in the 2002 farm
bill. However, in late 2002, the Office of Management and Budget, later supported
by a Department of Justice opinion, ruled that the farm bill did not remove the CCC
cap and the Administration would continue to limit mandatory technical assistance
funding through the CCC.

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The Administration sought to address this problem in the FY2003 budget
proposal by creating a new farm bill technical assistance line item, funded at $333
million. This would support eight mandatory programs (authorized at a total of $1.2
billion), plus the Conservation Reserve Program, a mandatory program authorized
in acres rather than dollars. Congress rejected this proposal, and specifically
prohibited the use of discretionary funds to implement any mandatory conservation
programs. This prohibition, combined with other limits in law for some of the
discretionary programs, means that some of the mandatory programs will have to be
significant â€œdonor programsâ€ by funding technical assistance for other programs,
thereby leaving less money available to implement their activities. USDA estimates
that four programs will be donor programs, with the largest donations being made
from the Environmental Quality Incentives Program (EQIP) ($107.9 million) and the
Farmland Protection Program (FPP) ($27.6 million). The Administration has again
proposed a new discretionary technical assistance line item for FY2004, as discussed
above.
Representative Lucas, chair of the House Agriculture Committeeâ€™s
subcommittee responsible for conservation, has proposed legislation (H.R. 1907),
that would not allow money in three of the mandatory programs (EQIP, the
Grasslands Reserve Program, and FPP), to be spent for technical assistance for any
of the other mandatory programs. Congress might address this issue through the
appropriations process, or might act through separate authorizing legislation.
Agricultural Trade and Food Aid
USDAâ€™s international activities include both discretionary and mandatory
programs which, combined, have a program value estimated by the Administration
at $6.2 billion for FY2004, about $200 million less than estimated for the current
fiscal year. Of that amount, approximately $1.4 billion would require an
appropriation, and the balance is mandatory spending that is funded through the
borrowing authority of the Commodity Credit Corporation (CCC). Both the
discretionary and mandatory international programs are authorized in the 2002 farm
bill (P.L. 107-171). Food aid donations are permanently authorized under section
416(b) of the Agricultural Act of 1949.
Foreign Agricultural Service. The Foreign Agricultural Service (FAS), for
which the Administration requests an FY2004 appropriation of $140.8 million, up
$11.7 million from FY2003, administers all of USDAâ€™s international activities with
the exception of P.L. 480 Title II which is administered by the U.S. Agency for
International Development (USAID). Elsewhere in its budget proposal, the
Administration has requested $6.6 million for the Office of the Secretary to support
a number of trade-related biotechnology activities.
Food Aid. Commodity sales and humanitarian donations under P.L. 480 or
Food for Peace and a new program, the McGovern-Dole International Food for
Education Program (IFEP), authorized in the 2002 farm bill, are discretionary
programs. P.L. 480 historically has been the main vehicle for providing U.S.
agricultural commodities as food aid overseas. For P.L. 480, the Presidentâ€™s budget
estimates a program level of $1.345 billion for FY2004. Of that amount, an

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appropriation of $1.185 billion is requested for P.L. 480 Title II commodity
donations to meet humanitarian needs for development and relief in food deficit
countries. The requested amount for Title II is $255 million less than the $1.44
billion enacted in the regular FY2003 appropriations measure. IFEP will provide
commodity donations and associated finance and technical assistance to carry out
school and child feeding programs in foreign countries. The 2002 farm bill
authorized $100 million of CCC funding for IFEP in FY2003. Beginning in FY2004,
however, IFEP will be funded by appropriations, for which the President has
requested $50 million in FY2004.
Other food aid programs, for which funding is mandatory, are Food for Progress
(FFP) which provides commodities to countries that are introducing and expanding
free enterprise in their agricultural economies; Section 416(b) commodity donations;
and the Bill Emerson Humanitarian Trust, primarily a commodity reserve. The
Presidentâ€™s budget envisions $151 million of CCC funding for FFP. That program
level (plus some funding from P.L. 480 Title I) is expected to provide the minimum
400,000 tons of commodities in FFP required by the 2002 farm bill. The Presidentâ€™s
budget assumes that around $119 million of surplus nonfat dry milk will be made
available under Section 416(b) in FY2004.
So far in FY2003, the Secretary has announced releases from the Emerson Trust
of 200,000 tons of wheat for emergency relief in the Horn of Africa (Ethiopia and
Eritrea) and 600,000 tons of wheat for emergency relief in Iraq. Around 1 million
metric tons of wheat are available in the Trust, which is authorized to hold up to 4
million metric tons of wheat, corn, sorghum, and rice.
The Emergency Wartime Supplemental Appropriations Act of 2003 (P.L. 108-
11) included an appropriation of $369 million for P.L. 480 Title II commodity
donations. Some of the funds are to be used to restore funding to previously
approved FY2003 Title II non-emergency programs, for which funding was not
available, and to replenish partially the Emerson Trust for commodities released to
meet urgent food needs in Africa and Iraq. With the supplemental, FY2003
appropriations for P.L. 480 Title II emergency and non-emergency food aid total
more than $1.8 billion.
The Presidentâ€™s FY2004 budget includes a number of proposed reforms in U.S.
international food aid programs. The Administration announced its intent to reduce
the number of programs through which food aid is provided and to redefine roles to
eliminate overlap. Consequently, USDA would carry out government-to-government
programs, essentially P.L. 480 Title I direct loans, while USAID would assume
responsibility for programs carried out in cooperation with private voluntary
organizations, cooperatives and the UN World Food Program (WFP). The
Administration also would reduce the reliance of food aid on the year-to-year
availability of surplus commodities. Thus, section 416(b) donations which rely on the
purchase of surplus commodities by the CCC would be phased out by the end of
FY2003, while funding for P.L. 480 Title II would be increased to compensate
partially for reduced section 416(b) food aid.
The 2002 farm bill and the FY2003 consolidated appropriations act (P.L. 108-7)
essentially countermanded the Administrationâ€™s announced reforms. The farm bill

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authorized FFP, administered by USDA, and also IFEP, for which the President
subsequently assigned implementing authority to USDA. FFP and IFEP continue
USDA involvement in food aid programs that are implemented with private
volunteer organizations (PVOs), cooperatives, and the WFP. Although section
416(b) food aid was substantially reduced in FY2003, the Administration has
indicated that surplus nonfat dry milk will be provided via section 416(b) in FY2004.
Furthermore, the Presidentâ€™s FY2004 budget indicates that commodities acquired by
CCC in the normal course of its domestic support operations will be available for
donation under section 416(b) authority.
Policy discussions about food aid in FY2003 were dominated by concerns about
the adequacy of food aid resources to respond to simultaneous food crises in Africa,
Afghanistan, North Korea, and Iraq. To meet food needs generated by these crises,
Congress provided larger food aid appropriations than requested in both the regular
FY2003 appropriations and the Emergency Wartime Supplemental. The need for
additional food aid resources may also become an issue in FY2004 if food crises
continue or reoccur. The Emerson Trust proved to be a critical component of the
U.S. response to humanitarian food crises in FY2003. Further replenishment of the
Trust, which has been rapidly drawn-down to one-fourth of its 4-million ton
maximum, may also be discussed in Congress.
Export Programs. Mandatory programs to promote exports include the
Export Enhancement Program (EEP), the Dairy Export Incentive Program (DEIP),
CCC Export Credit Guarantee Programs, the Market Access Program (MAP), and
the Foreign Market Development Program (FMDP), also known as the â€œCooperatorâ€
Program. In the EEP and DEIP programs, USDA makes cash bonus payments to
exporters of U.S. agricultural commodities to enable them to be price competitive
when U.S. prices are above world market prices. EEP has been little used in recent
years and no EEP bonuses were provided in FY2002. Reflecting this program
experience, the Presidentâ€™s budget assumes a program level of $28 million in both
FY2003 and FY2004, compared with $478 million authorized by the 2002 farm bill.
Consequently, USDA retains some flexibility to increase the level of EEP subsidies.
For DEIP, the budget expects a program level of $57 million for FY2004.
The Presidentâ€™s budget projects an overall program level of $4.2 billion in
FY2004 for CCC export credit programs, which provide payment guarantees for the
commercial financing of U.S. agricultural exports. While this projection is virtually
the same as for FY2003, the actual level of guarantees will depend on demand for
credit, market conditions, and other factors. Of the amount of guarantees expected
to be issued in FY2004, $4 billion would be made available for GSM (for General
Sales Manager)-102 short-term guarantees of up to 3 years, while GSM-103
intermediate-term guarantees (3 to 10 years) would be allocated $18 million.
For export market development, the budget proposes $125 million for the
Market Access Program and $34.5 million for the Foreign Market Development
Program, as required by the 2002 farm bill. Both programs support the development
and maintenance of export markets for U.S. agricultural products. However, MAP
mainly promotes high value products, including brand-name products, while FMDP
promotes generic commodities.

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Funding for U.S. agricultural export and food aid programs could be affected
by ongoing WTO agricultural trade negotiations. The United States has proposed
that agricultural export subsidies be eliminated, while the European Union, which
opposes complete elimination of such subsidies, has conditioned its willingness to
negotiate reductions in export subsidies on the inclusion of export credit programs
(such as CCC export credit guarantees) and food aid based on surpluses (such as
section 416(b)) on the WTO agriculture negotiating agenda. The EU and other
trading partners charge that the U.S. credit program has a subsidy element (although
it is much less than the subsidy represented by the EUâ€™s own export subsidy
program) and gives the United States an unfair competitive advantage in exporting
certain agricultural commodities.
The EU and other U.S. trading partners, such as Australia, Brazil, and a number
of agricultural exporting developing countries, also have raised the issue of large
U.S. food aid shipments in ongoing WTO agriculture negotiations. They have
suggested that the United States is using food aid to get around its export subsidy
reduction commitments made in the 1994 Uruguay Round Agriculture Agreement.
The United States has countered that its food aid shipments, though large, are made
in conformity with WTO rules, and are being made available to countries with food
needs or used for development programs.
Agricultural Research, Extension, and Economics
Four agencies carry out USDAâ€™s research, education, and economics (REE)
function. The Departmentâ€™s intramural science agency is the Agricultural Research
Service (ARS), which performs research in support of USDAâ€™s action and regulatory
agencies, and conducts long term, high risk, basic and applied research on subjects
of national and regional importance. The National Agricultural Library merged with
ARS in the 1994 USDA reorganization. The Cooperative State Research, Education,
and Extension Service (CSREES) is the agency through which USDA sends federal
funds to land grant Colleges of Agriculture for state-level research, education and
extension programs. The Economic Research Service (ERS) provides economic
analysis of agriculture issues using its databases as well as data collected by the
National Agricultural Statistics Service (NASS).
With the exception of recent years in which USDA research agencies have
received supplemental funds for antiterrorism activities, the agricultural research
budget, when adjusted for inflation, has remained flat for almost 30 years.
Furthermore, current financial difficulties at the state level are causing some states
to reduce the amounts they appropriate to match the USDA formula funds (block
grants) for research, extension, and education (100% matching is required, but most
states have regularly appropriated two to three times that amount). A combination
of cuts at the state and federal levels can result in program cuts as far down as the
county level. In 1998 and 2002 legislation authorizing agricultural research
programs, the House and Senate Agriculture Committees tapped sources of available
funds from the mandatory side of USDAâ€™s budget and elsewhere (e.g., the U.S.
Treasury) to find new money to boost the availability of competitive grants in the
REE mission area. From FY1999 through FY2003, the Appropriations Committees
have blocked the use of those mandatory funds for the purposes the Agriculture
Committees intended; however, from FY1999 through FY2002, the appropriations

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conference committees have allocated more funding for ongoing REE programs than
the House and Senate bills have contained. Nonetheless, agricultural scientists,
stakeholders, and others currently are concerned that higher military spending and
lower tax revenues may return the REE mission area to a period of static or shrinking
appropriations.
Agricultural Research Service. The Administration requests an FY2004
appropriation of $1.011 billion in total for ARS. Of that amount, $987.3 million
would support ARSâ€™s research programs ($47.8 million below the FY2003 level),
and $24 million would support the modernization and construction of ARS facilities
($95 million less than the FY2003 level; or $205 million less, when one counts the
$110 million ARS received in the FY2003 supplemental appropriation act (P.L. 108-
11) for construction at the National Animal Disease Laboratory in Ames, Iowa). As
in past years, the Administration assumes the discontinuation of several
congressionally earmarked research and construction projects and directs the savings
to other research priority areas. Congress has never accepted the discontinuation of
these earmarks. The total $142.5 million reduction for ARS in the Administration
request also assumes that a portion of funding that normally would be appropriated
under USDA for ARS science and facilities work at the Foreign Animal Disease
Laboratory on Plum Island, New York, will be appropriated under the authority of
the new Department of Homeland Security, now that this laboratory has been
transferred to the new Department.
Cooperative State Research, Education, and Extension Service. The
Administration requests $1.003 billion in total for FY2004 for CSREES. This
represents a $113.9 million reduction from the enacted FY2003 appropriation. The
Administration proposes a $102.6 million reduction in research and education
funding for the states, and a $28.3 million reduction in federal funds for state
extension programs, but an increase of $16.4 million for a fairly new category (1998)
of multi-state research projects that have both research and extension components (up
from $46.4 million), and an increase of $533,000 for an outreach program for socially
disadvantaged farmers ($3.5 million in FY2003).
As in past years, the Administration proposes to eliminate all but about $3
million in earmarked research and extension grants to specified land grant schools
($130 million in FY2003). In past years, Congress has never adopted such
proposals. For USDAâ€™s major competitive, peer-reviewed grant program, the
National Research Initiative (NRI), the Administration proposes a substantially
higher FY2004 appropriation ($240 million) than any it has received to date. The
FY2003 appropriation for the NRI currently is the highest in the programâ€™s history,
($167.1 million).
Economic Research Service (ERS) and National Agricultural
Statistics Service (NASS). The Administration requests $76.7 million for ERS,
($8 million more than the FY2003 appropriation), and $136.2 million for NASS for
FY2004, ($2.3 less than FY2003).

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Food Safety
USDAâ€™s Food Safety and Inspection Service (FSIS) conducts mandatory
inspection of meat, poultry, and processed egg products to insure their safety and
proper labeling. The Administration requests a $797.1 million appropriation for
FSIS. Of the proposed $42.3 million increase over FY2003, the Administration
would allocate $25.6 million toward hiring more inspectors and increasing laboratory
capacity for analyzing food samples for possible acts of bioterrorism, among other
things.
For many years, FSIS also has had access to user fees collected from industry
for laboratory accreditation and for overtime and holiday inspection. Approximately
$101 million is made available annually from this account to support the inspection
program. The Presidentâ€™s budget request contained a proposal to change the
definition of â€œovertimeâ€ to mean any hours that a firm might be operating beyond one
8-hour daytime shift. This would significantly raise the amount of fees collected
from industry and diminish the proportion of inspection paid for by tax dollars.
Congress has never agreed to similar proposals in the past, saying that assuring the
safety of the food supply is an appropriate function of the federal government.
Marketing and Regulatory Programs
Animal and Plant Health Inspection Service (APHIS). APHIS, the
USDA agency that protects U.S. agriculture from domestic and foreign pests and
diseases, would receive $699.9 million in FY2004 under the Administration request,
an increase of $7.2 million from the FY2003 enacted appropriation of $692.7
million.2 The Administration request would increase the appropriation for APHISâ€™
workforce by $12.1 million, from $682.8 million in FY2003 to $694.9 in FY2004.
The increased funding for program activities would come in part from a $4.9 million
reduction in APHIS buildings and facilities (from $9.9 million in FY2003). The
Presidentâ€™s budget request contains a proposal to create a new user fee for APHIS
regulatory activities under the Animal Welfare Act. The Administration calculated
that approximately $7 million in revenue from the user fees would partly offset the
proposed increase in APHIS salaries and expenses.
APHIS also has authority to tap funds from the CCC in cases of extraordinary
emergency related to plant or animal disease outbreaks. In FY2002, $200 million in
CCC funds were transferred for APHIS program use.
Agricultural Marketing Service. AMS is responsible for promoting U.S.
agricultural products in domestic and international markets, and for facilitating the
marketing and distribution of agricultural products. The Administration requested
FY2004 appropriations of $91.8 million for AMS, compared with $91.5 million in
2The actual FY2003 appropriation for APHIS was $730.7 million. However, $38 million
of the appropriation was transferred to the Department of Homeland Security, as APHIS
border security and its foreign animal disease laboratory were transferred to the new
Department.

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FY2003. These levels include annual appropriations for marketing services and for
payments to states and territories, as well as funds transferred from the permanent
Section 32 account, which funds government purchases of surplus farm commodities
that are not supported by ongoing farm price support programs. Not included in
these levels are approximately $195 million in various user fees that also fund
numerous AMS activities. The Presidentâ€™s FY2004 request for AMS contained no
new initiatives or shifts in current program emphases.
Grain Inspection, Packers, and Stockyards Administration. GIPSA
establishes the official U.S. standards, inspection and grading for grain and other
commodities, and ensures fair-trading practices. GIPSA has also been working to
improve its understanding and oversight of livestock markets, where increasing
concentration and other changes in business relationships have raised concerns
among some producers about the impacts of competition on farm prices. Congress
appropriated $39.7 million for GIPSA in FY2003; another $42.5 million was
expected to be collected through existing user fees. For FY2004, the Administration
proposed that new user fees be enacted to replace $28.8 million in appropriations
(without the new user fees, the FY2004 appropriation would be $41.7 million under
the Administration budget). Approximately $5 million of the proposed new fees
would come from charges for the costs of developing, reviewing, and maintaining
official U.S. grain standards; the other $24 million would come from new license
fees imposed on packers, live poultry dealers, poultry processors, stockyard owners,
market agencies, dealers and swine contractors covered by the Packers and
Stockyards Act (PSA).
The Administration requested that $1 million in FY2004 GIPSA funds be used
to implement a new pilot program to audit the four largest beef packers, intended for
â€œbetter financial protection to the regulated industries through heightened financial
scrutiny of the Top Four.â€ Also, $500,000 was proposed to conduct a
comprehensive, industry-wide review of the PSA and its regulations. The Act has
not undergone a comprehensive review since its enactment in 1921 despite â€œdramatic
structural changesâ€ in the industry since then, USDA observed. After receiving
industry participant input, â€œGIPSA will clarify its views on competition in the
industries it regulates. These activities may result in future increases in the number
and complexity of investigations conducted by GIPSA and the monies recovered or
returned to the regulated industries,â€ the Department added. The budget summary
also noted that some of the new funds, proposed for the Secretaryâ€™s office for
â€œcrosscuttingâ€ trade and biotechnology activities, may be provided to GIPSA for its
expanded biotechnology activities.
Rural Development
USDAâ€™s rural development mission is to enhance rural communities by
targeting financial and technical resources in areas of greatest need. Three agencies
are responsible for the mission area: the Rural Housing Service (RHS), the Rural
Business-Cooperative Service (RBS), and the Rural Utilities Service (RUS). An
Office of Community Development provides community development support
through Rural Developmentâ€™s field offices. The mission area also administers the
rural portion of the Empowerment Zones and Enterprise Communities Initiative and
the National Rural Development Partnership.

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The FY2003 enacted appropriation for rural development programs was $2.77
billion, which in part supports a loan authorization level of $12.02 billion. For
FY2004, the Administration is requesting an appropriation of $2.29 billion for all
rural development programs, which in part would support $7.75 billion in loan
authorization. The FY2004 budget request is $484.4 million below the enacted
FY2003 appropriation, and supports $4.27 billion less in loan authorization than the
FY2003 revised enacted appropriation.
The Administration proposes cancelling most mandatory authorization for rural
development programs in the 2002 farm bill (see below) and requests that some
funding be shifted to discretionary authorization.
Rural Community Advancement Program (RCAP). The RCAP,
authorized by the 1996 farm bill (P.L. 104-127), consolidates funding for 13 rural
development loan and grant programs into three accounts: Community Facilities,
Rural Utilities, and Business and Cooperative Services. RCAP was designed to
provide greater flexibility in targeting financial assistance to local needs. It permits
a portion of the various accountsâ€™ funds to be shifted from one funding stream to
another. The FY2004 budgetary authority request of $477.9 million for RCAP would
support $2.61 billion in loans and grants. While this budget authority request is
slightly more than half the amount in the FY2003 revised enacted appropriation
($901.8 million), the FY2004 request supports nearly the same program level as
FY2003 ($2.74 billion). Negative subsidy rates were calculated for some RCAP
direct and guaranteed loans in FY2004. Thus, corresponding budget authority is not
required to support a given program level.
The Administration requests a program level of $477 million for the Community
Facilities account; approximately $1.5 billion for the Rural Utilities account; and
$649.5 million for the Rural Business and Cooperative Development account.
Budget authority for these 3 accounts is $17 million, $384.5 million, and $76.3
million respectively. Program levels for direct loans in the Rural Utilities account
would increase by approximately $241 million over FY2003 levels to $1.05 billion
under a $57 million reduction in budget authority. Water and waste water grants
would decline from $587 million in FY2003 to $346 million in FY2004. At a
requested program level of $3.5 million, solid waste management grants would
remain close to the FY2003 enacted level.
Direct and guaranteed FY2003 loan levels for the Community Facility account
are established at $250 million and $210 million respectively. A negative subsidy
rate calculated for FY2004 means that no appropriation is required to support either
the direct or guaranteed loan program. Guaranteed loans for the Business and
Industry Loan account would decrease to $602 million, $130 million less than the
program level for FY2003. There is no funding requested for High Energy Cost
grants, Hazardous Weather Early Warning grants or Economic Impact Initiative
grants. FY2004 requests for the Rural Business Opportunity grants and Rural
Business Enterprise grants, which support small and emerging business start-ups and
expansion, are approximately the same as estimated for FY2003, $3 million and $44
million respectively.

CRS-17
Rural Business-Cooperative Service (RBS). In addition to the RCAP
programs administered by the RBS, appropriations are made for several other RBS
loan and grant accounts. The Administration requests an appropriation of $38.9
million for RBS loan and grant programs. This is $11.4 million less than enacted for
FY2003, but supports virtually the same loan authorization level ($55 million) as
FY2003. The Rural Development Loan Fund account, which supports the Rural
Intermediary Relending program, would receive an FY2004 appropriation of $17.3
million ($1.9 million less than the FY2003 enacted level), but the authorized loan
level would remain constant at $40 million.
The 2002 farm bill authorized several new programs that also are being
implemented by RBS. The Administration proposes cancelling in FY2004 the
mandatory funding provided for the Value-Added Agricultural Product Market
Development ($10 million) and the Renewable Energy program ($23 million). The
Administration proposes that $3 million for the Renewable Energy Program and $2
million for the Value-added Product grants be made discretionary. The
Administration requests no funding for the Rural Empowerment Zones and
Enterprise Community (EZ/EC) grants program, which supports projects in very poor
designated areas. In FY2003, $14.8 million was appropriated for the program.
Funding, however, is earmarked for the EZ/EC program under several RCAP
accounts.
Rural Housing Service (RHS). For USDA rural housing programs, the
Administration requests an appropriation of $1.55 billion for FY2004 to support a
loan authorization level of $4.3 billion. Almost all the requested authorization is for
the Rural Housing Insurance Fund account (RHIF). The FY2004 budget request is
$21.4 million less than enacted for FY2003 and the loan authorization level is $1.52
billion less than enacted for FY2003. The Administration request would support
approximately $166 million in direct and guaranteed loan subsidies for the Section
502 single family housing program, the RHIFâ€™s largest account. This is $67 million
less than enacted for FY2003.
Direct loans for multi-family Section 515 rural rental housing projects would
decline to $30 million from $54 million in FY2003, and, as in FY2003, be limited
to repair and rehabilitation. USDA is conducting an evaluation of the physical
condition of existing Section 515 housing projects and the extent that loans for repair
and rehabilitation would be needed. Many projects built in the 1980s are, or soon
will be, eligible for prepayment and departure from the program. Rental Assistance
payments for Section 521 housing would increase to $734 million in FY2004, from
$715 million in FY2003. Budget authority for Farm Labor Housing loans (Section
514) and grants (Section 516), Rural Mutual Housing Assistance grants, and Mutual
and Self-Help Housing grants would remain at or near the levels enacted for FY2003.
The RHS also administers several mandatory programs authorized by the 2002
farm bill: the Rural Firefighters and Emergency Personnel Program, the Rural
Strategic Investment Program, and the Rural Business Investment Program. As with
several programs in the RBS, the Administration proposes cancelling the funding for
these programs in FY2004. Funding for the Rural Business Investment Program was
requested in FY2003, but to date, none of the available funds has been allocated. A

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provision in the FY2003 appropriations also prohibits the expenditure of any funds
to carry out the programs of the Rural Strategic Investment Program.

Rural Utilities Service (RUS). The Administration requests an
appropriation of $81.3 million for RUS to support a program level of $3.38 billion.
The loan authorization level request for FY2004 is $2.74 billion less and the
appropriation request is $30.7 million less than that for FY2003. The difference in
program level between FY2003 and FY2004 is largely accounted for by the farm bill
authorization. For FY2004, the Administration proposes cancelling $40 million in
mandatory funding and making it discretionary for the Enhancement of Access to
Broadband Service authorized in the 2002 farm bill. Budget authority for grants and
loan subsidies for the Distance Learning and Telemedicine grants is $36.1 million,
approximately $20 million less than enacted for FY2003. This authority would
support a loan authorization level of $246.5 million, about $36 million less than
authorized for FY2003. Most of the budget authority is requested for grants. No
funding is requested for the Local Television Loan Guarantee account.
Program levels for all electric and telecommunication loan expenditures would
rise slightly over FY2003 levels to $3.13 billion in FY2004. No funds are requested
for the Rural Telephone Bank loans. To assess future priorities, the Administration
will conduct a program evaluation of RUS loans made in FY2002 and FY2003 to
determine the characteristics of communities receiving loans, the benefits derived
from the loans, and the extent to which RUS loans go to support poverty areas.
Food and Nutrition Programs
The Administration has requested a total FY2004 appropriation of $44.25
billion for USDA food and nutrition programs. These programs include the food
stamp program, child nutrition programs (e.g., school lunch, breakfast, summer food,
child care, special milk, etc.), the special supplemental nutrition program for women,
infants and children (WIC), and various commodity donation programs for low
income persons. The Administration request reflects an increase of $2.35 billion
over the $41.89 billion appropriated for these programs in FY2003.
The food stamp program, the largest of the federal nutrition programs is
expected to serve an estimated average of 20.7 million persons in FY2003. For
FY2004, the Administration estimates that its FY2004 request of $24.2 billion will
provide food stamp benefits to an average of 21.6 million persons. This does not
include those who will be served with some $3.6 billion in food stamp funds that are
set aside for Nutrition Assistance for Puerto Rico, the Food Distribution Program on
Indian Reservations, American Samoa and the Northern Marianas, and the
emergency food assistance program. The Food Distribution Program on Indian
Reservations (FDPIR) is slated to receive $82.2 million for FY2004 under the
Administration proposal. This program operates in lieu of the food stamp program
on or near Indian Reservations. The Administration also proposes that $140 million
of food stamp budget authority (the same as for FY2003) be used to buy commodities
for the Emergency Food Assistance Program, which provides commodities and
administrative funds to state agencies for food distribution to emergency feeding
outlets. The request also includes a $2 billion food stamp contingency reserve for
FY2004, the same level as appropriated in FY2003.

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Child Nutrition programs would receive a total budget authority of $11.4 billion
(excluding $400 million from Section 32 commodities) under the Administrationâ€™s
FY2004 budget. This would be used to assist with the costs of meal service
programs in schools, child and adult care, summer and after-school programs, and
related nutrition and administrative support. The largest of these programs, the
school lunch program, is expected to serve subsidized meals to some 28.7 million
children in FY2003. For FY2004 it would receive an estimated $6.7 billion and serve
29.1 million children, according to USDA estimates. No major program changes are
outlined in the Administration budget request, although $6 million is requested to
fund a new system to tighten free and reduced price meal eligibility determinations.
An appropriation of $4.77 billion is recommended by the Administration for the
WIC program, which provides monthly food packages for low-income pregnant and
postpartum mothers, and children under age 5. The Presidentâ€™s request is $73
million more than the FY2003 appropriation, and is expected to serve a monthly
average of 7.8 million women and children in FY2004. Included in the total is a
contingency reserve of $25 million. According to the Administration, this will be
added to $125 million in unexpended reserve funds from FY2003.
Additionally, the Administration proposes to remove funding for the Farmers
Market Nutrition Program from the WIC program account and fund this program at
$20 million under the so-called Commodity Assistance Program (CAP), which is a
combination of various commodity donation programs so designated by
appropriators. This proposal has been rejected by the Congress in the past.
The Administration proposes to fund CAP at a total of $166.1 million in
FY2004 -- $2.6 million more than the FY2003 level. This would include an
estimated $95 million for the commodity supplemental food program (CSFP); $20
million for the Farmers Market Nutrition program (formerly funded under the WIC
account); $50 million in administrative funds for the emergency food assistance
program; and $1.1 million in food donations for disasters and nuclear affected
islands. No funding would be provided for the Senior Farmers Market program for
FY2004 (it received $10 million in FY2002). The largest of the CAPs, the CSFP,
provides monthly food packages to some 488,000 low income mothers, children age
5 and under, and elderly persons in projects located in 28 states, two Indian
reservations, and the District of Columbia.
Food and Drug Administration (FDA)
The Food and Drug Administration (FDA), an agency of the Department of
Health and Human Services (DHHS), is responsible for regulating the safety of
foods, drugs, biologics (e.g., vaccines), and medical devices. The agency is funded
by a combination of congressional appropriations and user fee revenues, charged
primarily for the pre-market review of drug and medical device applications. The
total amount of user fees to be collected each year is set in FDAâ€™s annual
appropriations act. For FY2004, the Administration requests a total program level
of $1.71 billion for the FDA, an increase of 3.2% over the $1.66 billion appropriated
for FY2003. This amount includes requested appropriations of $1.395 billion for
salaries and expenses and $11.5 million for maintenance of buildings and facilities;

CRS-20
and $307.2 million in total user fees, 13.6 % more than the $270.5 million set for
FY2003.
The Prescription Drug User Fee Act (PDUFA), enacted as part of the 2002
Public Health Security and Bioterrorism Preparedness and Response Act (P.L. 107-
188), reauthorizes FDA to collect user fees for the review of drug and biologic
applications. The Presidentâ€™s FY2004 budget sets these fees at $249.8 million, an
increase of $26.9 million over the $222.9 million for FY2003. Also, the new
Medical Device User Fee and Modernization Act (MDUFA) of 2002 (P.L. 107-250)
allows the agency to charge user fees for medical device applications as well. The
FY2004 request includes $29.2 million in medical device user fee assessments, an
increase over the $25.1 million for FY2003. User fee revenues also come from
mammography clinics and export certificates, and the request sets their total at $23.2
million. In addition, the FY2004 budget includes $5 million in proposed new user
fees for animal drugs. Legislation (H.R. 1260) authorizing a new user fee for animal
drugs was introduced on March 13, 2003. Total user fee revenues, which have risen
steadily since the law was passed in 1992, now stand at $307.2 million, nearly 18%
of FDAâ€™s total budget request.
The budget request consolidates most of FDAâ€™s FY2004 counter-terrorism
activities under the category of food safety as part of the Department of Health and
Human Serviceâ€™s overall strategy to protect the nationâ€™s food supply. The $20.5
million requested for counter-terrorism activities includes $5 million for grants to
states, $5 million for laboratory protection, and another $10.5 million for FDAâ€™s new
food facility registration system. The facility registration requirement, mandated by
the Bioterrorism Act of June 2002, requires all food facilities, both domestic and
foreign, to register with the FDA before December 12, 2003.
The Administrationâ€™s request calls for increased funding in a number of specific
budget categories. Among them are $23.3 million in additional funds to cover
estimated cost-of-living increases in FY2004, including the hundreds of inspectors
hired since 2002, mainly for counter-terrorism activities related to the safety of food
products. Further, the FDA is seeking an additional $13 million for its generic drugs
program, $4 million for monitoring patient safety, $6 million to move its drug center
to White Oak, MD, and $10 million in rental increases to accommodate the 800
counter-terrorism personnel. However, the proposal also includes several savings
categories described by the agency as â€œmanagement savings.â€ Among these are $26
million by realigning and reorganizing functions, and nearly $30 million through
improving and consolidating its information technology infrastructure. Some critics
of the latter category have intimated that, given FDAâ€™s new statutory responsibility
for registering food facilities and other mandates called for by the Bioterrorism Act,
consolidating information technology systems could be difficult, especially if the
agency is in the process of expanding other functions simultaneously.
Commodity Futures Trading Commission (CFTC)
The Commodity Futures Trading Commission (CFTC) is the independent
regulatory agency charged with oversight of derivatives markets. The CFTC's
functions include oversight of trading on the futures exchanges, registration and
supervision of futures industry personnel, prevention of fraud and price manipulation,

CRS-21
and investor protection. Although most futures trading is now related to financial
variables (interest rates, currency prices, and stock indexes), Congressional oversight
is vested in the Agricultural Committees because of the market's historical origins as
an adjunct to agricultural trade. For FY2004, the Administration has requested an
appropriation of $88.435 million for the operations of CFTC, an increase of $3
million, or 3.5 %, from the FY2003 appropriation of $85.426 million.

CRS-22
Table 2. USDA and Related Agencies Appropriations,
FY2004 Budget Request vs. FY2003 Enacted
(Budget Authority, in Millions of $)
FY2004
FY2003
FY2004
Admini-
FY2004
FY2004
Agency or Major Program
Enacted
House
stration
Senate Bill
Enacted
(1)
Bill
Request
Title I â€” Agricultural Programs
Agric. Research Service (ARS)
Regular Appropriation (P.L. 108-7)
1,153.8
1,011.3
***
***
***
Supplemental (P.L. 108-11)
110.0
0
Coop. State Research Education and
Extension Service (CSREES)
1,117.2
1,003.4
***
***
***
Economic Research Service (ERS)
68.7
76.7
***
***
***
National Agric. Statistics Serv.(NASS)
138.4
136.2
***
***
***
Animal and Plant Health Inspection
Service (APHIS)
692.7
699.9
***
***
***
Agric. Marketing Service (AMS)
91.5
91.8
***
***
***
Grain Inspection , Packers and
Stockyards Admin. (GIPSA)
39.7
41.7
***
***
***
Food Safety & Inspection Serv. (FSIS)
754.8
797.1
***
***
***
Farm Service Agency (FSA) Salaries
and Expenses
970.4
1,016.8
***
***
***
FSA Farm Loans - Subsidy Level
226.8
210.7
***
***
***
*Farm Loan Authorization
3,937.0
3,518.4
***
***
***
FSA Farm Loans- Salaries and
Administrative Expenses
285.3
298.1
***
***
***
Risk Management Agency (RMA)
Salaries and Expenses
70.2
78.5
***
***
***
Federal Crop Insur. Corp. Fund (2)
2,886.0
3,368.0
***
***
***
Commodity Credit Corp. (CCC) (2)
16,285.0
17,275.0
***
***
***
Other Agencies and Programs
656.1
514.9
***
***
***
Total, Agricultural Programs
Regular Appropriation
25,346.7
26,770.8
***
***
***
Supplemental Appropriations
110.0
---
Title II â€” Conservation Programs
Conservation Operations
819.6
703.6
***
***
***
Watershed Surveys and Planning
11.1
5.0
***
***
***
Watershed & Flood Prevention
109.3
40.0
***
***
***
Watershed Rehabilitation Program
29.8
10.0
***
***
***
Resource Conservation & Development
50.7
49.9
***
***
***

CRS-23
FY2004
FY2003
FY2004
Admini-
FY2004
FY2004
Agency or Major Program
Enacted
House
stration
Senate Bill
Enacted
(1)
Bill
Request
Farm Bill Technical Assistance
0
432.2
***
***
***
Total, Conservation
1,021.3
1,241.6
***
***
***
Title III â€” Rural Development
Rural Community Advancement
Program (RCAP)
901.8
477.9
***
***
***
Salaries and Expenses
144.8
147.5
***
***
***
Rural Housing Service (RHS)
1,567.4
1,546.1
***
***
***
* RHS Loan Authority
5,844.9
4,319.0
***
***
***
Rural Business-Cooperative Service
50.3
39.0
***
***
***
* RBCS Loan Authority
55.0
55.0
***
***
***
Rural Utilities Service (RUS)
112.0
81.3
***
***
***
* RUS Loan Authority
6,120.7
3,381.0
***
***
***
Total, Rural Development
2,777.0
2,292.6
***
***
***
* Rural Development, Total Loan
***
***
***
Authority
12,020.6
2,292.6
Title IV â€” Domestic Food Programs
Child Nutrition Programs
10,580.1
11,418.4
***
***
***
WIC Program
4,696.0
4,769.2
***
***
***
Food Stamp Program
26,313.7
27,746.0
***
***
***
Commodity Assistance Program
163.4
166.1
***
***
***
Food Donation Programs
1.1
0
***
***
***
Food Program Administration
135.7
144.8
***
***
***
Total, Food Programs
41,890.6
44,245.4
***
***
***
Title V â€” Foreign Assistance
Foreign Agric. Service (FAS)
129.1
140.8
***
***
***
Public Law (P.L.) 480
Regular Appropriation (P.L. 108-7)
1,334.7
1,370.9
***
***
***
Supplemental (P.L. 108-11)
369.0
0
CCC Export Loan Salaries
4.0
4.3
***
***
***
Total, Foreign Assistance
Regular Appropriation
1,467.8
1,516.0
***
***
***
Supplemental
369.0
0
Title VI â€” FDA & Related Agencies
Food and Drug Administration
1,381.7
1,406.1
***
***
***

CRS-24
FY2004
FY2003
FY2004
Admini-
FY2004
FY2004
Agency or Major Program
Enacted
House
stration
Senate Bill
Enacted
(1)
Bill
Request
Commodity Futures Trading
Commission (CFTC)
85.4
88.4
***
***
***
Total, FDA & CFTC
1,467.1
1,494.6
***
***
***
Title VII â€“ General Provisions (3)
273.7
0
***
***
***
Total, before adjustments:
Regular Appropriations
74,244.2
77,561.1
***
***
***
Supplemental Appropriations
479.0
0
Grand Total
74,723.2
77,561.1
***
***
***
CBO Scorekeeping Adjustments (4)
-141.2
68.0
***
***
***
Grand Total, Including CBO
Scorekeeping Adjustments and
74,582.0
77,629.1
***
***
***
Emergency Spending
Addendum:
Division N, Title II (P.L. 108-7)
Disaster Assistance Provisions (5)
3,084.0
0
***
***
***
Source: Based on spreadsheets provided by the House Appropriations Committee
An item with a single asterisk (*) represents the total amount of direct and guaranteed loans that can be made given
the requested or appropriated loan subsidy level. Only the subsidy level is included in the total appropriation.
*** = Action Pending
(1) FY2003 enacted levels include amounts appropriated for USDA and related agencies in the Consolidated
Appropriations Act, 2003 (P.L. 108-7) adjusted for the 0.65% across-the-board rescission in all discretionary
programs (with the exception of the WIC program which was specifically exempted from the rescission), and the
$479 million in supplemental FY2003 agriculture appropriations provided by the Wartime Supplemental
Appropriations Act, 2003.
(2) Under current law, the Commodity Credit Corporation and the Federal Crop Insurance Fund each receive
annually an indefinite appropriation (â€œsuch sums, as may be necessaryâ€). The amounts shown for both FY2003
and FY2004 are USDA estimates of the necessary appropriations.
(3) Among the enacted FY2003 â€œgeneral provisionsâ€ are $284.4 million in emergency foreign food assistance
through P.L. 480 Title II (in addition to what was provided in the regular annual appropriation to P.L. 480 in Title
V); $21.9 million for the Child and Adult Care Feeding program; $2.98 million for Hunger Fellowships; and
$496,000 for the National Sheep Industry Improvement Center.
(4) Scorekeeping adjustments reflect the savings or cost of provisions that affect mandatory programs, plus the
permanent annual appropriation made to USDAâ€™s Section 32 program.
(5) P.L. 108-7 includes $3.1 billion in farm disaster assistance for 2000 and 2001 crop livestock losses. The cost
of this assistance in the final law was offset by a limitation placed on mandatory spending for the Conservation
Security Program over a ten-year period (FY2004-2013). This additional spending does not appear in the grand
total listed above.