Agricultural Provisions in the FY1998 Emergency Supplemental Appropriations Act (P.L. 105-174)

Agricultural Provisions in the FY1998 Emergency Supplemental Appropriations Act (P.L. 105-174)

98-478 ENR
May 19, 1998
CRS Report for Congress
Received through the CRS Web
Agricultural Provisions in the FY1998 Emergency
Supplemental Appropriations Act (P.L. 105-174)
Ralph M. Chite
Specialist in Agricultural Policy
Environment and Natural Resources Policy Division
Summary
A $6.1 billion FY1998 supplemental appropriations bill (P.L. 105-174), signed
into law on May 1, 1998, contains $175.6 million in additional spending for agricultural
programs within the U.S. Department of Agriculture (USDA). Of this amount, $159.8
million is provided to help agricultural producers recover from various natural disasters.
Another $15.8 million is for non-emergency supplemental spending within USDA,
primarily for farm loans and the Department's civil rights activities. Virtually all of the
agricultural spending was offset by reductions in other programs.
Background
On May 1, 1998, the President signed into law an FY1998 supplemental
appropriations bill (P.L. 105-174, H.R. 3579), which provides a total of $6.1 billion in
additional spending for FY1998. Overall, P.L. 105-174 includes $2.6 billion in assistance
for regions of the U.S. affected by natural disasters, $2.86 billion in supplemental defense
spending, $550 million in new mandatory spending for veterans compensation, and $142
million in miscellaneous non-emergency discretionary spending. Almost all of the
disaster spending was offset by a $2.3 billion reduction in HUD Section 8 housing grants
and a $241 million cut in airport grants-in-aid. Total cuts of $142 million were made in
numerous federal agencies to fully compensate for the new non-emergency spending.
None of the supplemental defense spending was offset. (For a more detailed overview
of P.L. 105-174, see CRS Report Number 98-123, Supplemental Appropriations and
Rescissions for FY1998.)
Included within P.L. 105-174 is $175.6 million in supplemental spending for
agricultural programs within the U.S. Department of Agriculture (USDA).1 Most of this
1Appropriations for all USDA programs except for the Forest Service are provided through the
Agriculture Subcommittee of the House and Senate Appropriations Committees. The totals in this
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Congressional Research Service ˜ The Library of Congress

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new spending ($159.8 million) provides disaster relief to farmers affected by El Nino-
driven storms and other weather-related disasters. Severe agricultural disasters that
occurred this fiscal year included an ice storm in New England, flooding on the West
Coast, and tornadoes in the Southeast. The balance of $15.8 million in non-emergency
supplemental appropriations provides funding to other USDA programs, including farm
loans and the Department's civil rights activities. FY1998 spending reductions were made
in several USDA agencies to fully compensate for the $15.8 million in non-emergency
spending.
Emergency Provisions
The Watershed and Flood Prevention Operations Program, administered by
USDA's Natural Resources Conservation Service, receives $80 million, or nearly one-
half of the $159.8 million in emergency funding provided by P.L. 105-174 to agricultural
programs. The amount provided to the watershed program is twice the $40 million
requested by the Administration, mainly because the full extent of disaster damages was
not known when the Administration request was submitted earlier this year. Also,
subsequent disasters occurred requiring additional funding. These funds are expected to
be used to repair damage to waterways and watersheds resulting from floods and other
natural disasters, and supplements the $101 million provided in regular FY1998
appropriations. The supplemental funds will remain available until expended.
The Emergency Conservation Program (ECP), administered by the Farm Service
Agency, provides cost-sharing assistance to producers affected by floods, and receives
$34 million in P.L. 105-174, compared with the earlier Administration request for $20
million. Funds in this program are used to restore disaster-damaged farmland by
reshaping the land and for removing debris. The maximum cost-share payment under the
program is $200,000 per person per disaster. No funds were previously made available
in the regular FY1998 agricultural appropriations act. Of the $34 million provided in P.L.
105-174, $4 million is exclusively reserved for cost-sharing assistance to Northeast maple
producers to replace taps and tubing that were damaged by a severe ice storm last winter.
All FY1998 supplemental ECP funds will be available until expended.
The FY1998 supplemental appropriations act provides $4 million to USDA's
Commodity Credit Corporation (CCC) to fund a livestock indemnity program. This will
pay disaster-affected livestock growers on a somewhat similar basis to what crop
producers receive under catastrophic coverage within the federal crop insurance program.
Under the livestock indemnity program, an eligible producer can receive a payment equal
to 30 percent of the market price on all livestock losses in excess of normal mortality. For
a producer to be eligible, the disaster must have occurred between November 27, 1997
and May 1, 1998, and the producer's county had to have been declared a disaster area by
either the President or the Secretary of Agriculture. P.L. 105-174 specifically includes
ratites (ostriches, emus, rheas, etc.) as eligible livestock. The program is administered by
the Farm Service Agency. FSA officials anticipate that the $4 million appropriation
1(...continued)
report do not reflect the $60.5 million provided by P.L. 105-174 for Forest Service emergency
spending or the $1.5 million in rescissions to Forest Service programs, which are funded by the
interior subcommittee.

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might not be sufficient to make full payment to all eligible producers under the payment
formula. In that event, program payments would be adjusted downward on a
proportionate basis among all eligible recipients.
An appropriation of $6.8 million is provided to the CCC for a new dairy production
disaster assistance program, which will pay dairy farmers $4 per hundredweight of milk
for any milk that was produced but rendered unmarketable due to a disaster occurring
between November 27, 1997 and May 1, 1998. Payments can also be made for any
diminished milk production caused by the disaster, including diminished future
production caused by mastitis, an udder infection that requires milk from infected cows
to be withheld from the market during treatment with antibiotics. P.L. 105-174 requires
USDA to compare a producer's milk production during the disaster period (six months
from the date of the disaster) to production in the same period a year earlier, and pay $4
per cwt. for any shortfall in production on a per head basis. The $4 per cwt payment
represents approximately one-fourth to one-third of the market price of farm milk. Like
the livestock indemnity program, the dairy disaster payment program will be administered
by the Farm Service Agency, which will proportionately reduce the disaster payments
should the $6.8 million appropriation not be adequate.

The Tree Assistance Program (TAP) receives $14 million in emergency funds
primarily to help small, orchardists replant trees and vineyards that were damaged or
destroyed by natural disasters. TAP is a cost-sharing program that pays orchardists 65
percent of the cost of replanting or rehabilitating disaster-stricken trees on losses in excess
of 35 percent. P.L. 105-174 specifically excludes growers of trees used for pulp and
timber from receiving TAP funds.
P.L. 105-174 also provides an appropriation of $21 million to support an estimated
$87.4 million in Farm Service Agency (FSA) emergency disaster (EM) loans. 2 This
will supplement the existing authority for $63.5 million in FY1998 EM loans, which has
been virtually exhausted. These low-interest loans are designed to help disaster-stricken,
family-sized farmers, who are unable to obtain credit from a commercial lender, to
recover from production and physical losses caused by a natural disaster. A county must
be declared a disaster area by either the President or the Secretary of Agriculture in order
for farmers in that county to be eligible for an EM loan. Eligible farmers must experience
a 30 percent crop loss, and can receive a loan to cover up to 80 percent of actual losses
(not to exceed $500,000). The term of the loan is from 1 to 7 seven years to be repaid
by the borrower at a federally subsidized interest rate currently set at 3.75 percent.
Non-Emergency Provisions
Of the $15.829 million in non-emergency USDA spending provided by P.L. 105-
174, just over $11.5 million is to bolster what was already available within the various
2Under current budget law, federal agencies that administer loan programs must estimate the cost
of making or guaranteeing these loans based on any interest rate subsidy given to borrowers and
the expected default rate on the loans. The loan subsidy is the amount that is actually
appropriated, which supports a total loan level that is based on the riskiness of the loan and the
interest rate subsidy, i.e., the higher the rate of nonrepayment and the interest rate subsidy, the
lower the authorized loan level will be.

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direct and guaranteed farm loan programs within USDA's Farm Service Agency.3 The
$11.5 million subsidy can support an additional $167 million in total direct and
guaranteed farm loans. Within the farm ownership loan program, which provides credit
to family-sized farmers to purchase farm real estate, the nearly $3.4 million provided can
support an additional $18.3 million in direct loans and $25 million in guaranteed loans.
The annual agricultural appropriation act provided $45.5 million and $400 million,
respectively, for FY1998. For the farm operating loan program, which provides short-
and intermediate-term loans for the purchases of farm inputs and for other expenses, the
act provides an $8.0 million loan subsidy to support $70 million in direct loans and $35
million in guaranteed subsidized loans to supplement the $490 million and $230 million
already available. An additional $222,000 are made available by P.L. 105-174 to support
an additional $18.8 million in FSA boll weevil eradication loans. All of these credit
programs either had exhausted or were about to exhaust their regular FY1998
appropriation.
P.L. 105-174 also provides a total appropriation of $2.235 million to support
USDA's civil rights activities, compared with the Administration request for $5.035
million. USDA has been under close scrutiny in recent years for its civil rights practices,
for both its personnel actions and in the administration of its lending and other programs.
As a result, USDA established a civil rights action team which recently identified ways
to improve the Department's civil rights record. Of the $2.235 million provided by the
act, $2.0 million is for USDA Departmental Administration, compared with a request for
$4.8 million. Within this account USDA had requested $2.9 million for conflict
resolution, outreach programs, and to create a civil rights advisory committee and $1.9
million to compensate for reductions made in non-civil rights activities during the year
to fund civil rights activities. As requested by the Administration, P.L. 105-174
appropriates $235,000 to USDA's Office of the General Counsel to expedite its processing
and adjudication of civil rights complaints.
Other non-emergency supplemental appropriations for USDA include $1.5 million
to the Grain Inspection and Packers and Stockyard Administration for the agency's
grain inspection operations; and $543,000 to the Office of the Secretary to compensate
wheat producers for economic losses associated with Karnal bunt, a fungus that can
reduce crop yields and affect the flavor of wheat.
A general provision in the act allows permanent FY1998 employees of Farm Service
Agency county committees who are non-federal employees to be considered the same as
federal county committee employees when being considered for vacancies within USDA
following a reduction in force. FSA is in the midst of a downsizing as county offices are
being consolidated as part of an ongoing USDA reorganization. Prior to this provision,
federal county committee employees were given priority over the non-federal employees
for rehiring. The act also allows competitively-awarded grant funds for USDA's
Cooperative State Research, Education and Extension Service to be used to pay for peer
panel and review costs associated with that program.
3Direct FSA loans are made and serviced by FSA. Guaranteed FSA loans are made by
commercial lenders, but carry a federal guarantee of the timely repayment of principal and
interest on up to 95 percent of the loan amount.

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The conference report language accompanying the supplemental appropriations act
contains several provisions that could affect USDA programs. One such provision directs
the Secretary of Agriculture to reduce or waive collateral requirements on FY1998 FSA
emergency disaster loans for applicants who have experienced disasters over the last
several years and/or have a majority of crops grown on leased land. Report language also
directs USDA to report to Congress by July 1, 1998, on whether current law unduly
affects the distribution of funds under the noninsured assistance program (NAP), which
makes direct disaster payments to farmers who are ineligible for crop insurance. Under
current law, the area in which the producer farms must experience a 30 percent crop loss
before any farmer can become eligible for a NAP payment. Separately, the Senate version
of the supplemental bill would have eliminated a provision in current law that prohibits
a farmer from receiving a new FSA farm loan if the farmer has received any debt
forgiveness. The Senate language was struck in conference but conference report language
states the expectation that the Administration and Congress should address this issue.
Offsets and Rescissions
All of the $15.829 million in non-emergency agricultural spending in P.L. 105-174
is offset by a comparable reduction in USDA spending spread over a broad spectrum
of USDA programs and agencies. To compensate for nearly three-fourths of the
supplemental funding for the various farm loan programs, $8.273 million in loan subsidy
(approximately $700 million in loan authority) was rescinded from the FSA guaranteed
unsubsidized farm operating loan program. At the time of enactment of P.L. 105-174, this
guaranteed loan program had unobligated loan authority in excess of $1 billion and in
recent years has used only a portion of its authority each year.
A $4 million offset was made to the Conservation Farm Option Program, which
is a mandatory program that does not require an annual appropriation and is authorized
at $15 million for FY1998. P.L. 105-174 limits CFO spending to $11 million, thus
providing the $4 million offset. The CFO provides 10-year contracts to farmers who
receive a market transition program payment and also participate in the Conservation
Reserve Program. Participating farmers must implement a conservation farm plan that
addresses the management of natural resources, and in return can receive one consolidated
USDA program payment instead of separate payments from specified farm and
conservation programs.
Just over $3.5 million in total rescissions were made by P.L. 105-174 to the salaries
and expenses of numerous USDA agencies, as requested by the Administration, to
compensate for the supplemental request for civil rights activities. Although P.L. 105-174
did not fully fund the Administration's civil rights request, it did concur in full with the
requested rescissions. Agencies experiencing cuts include Farm Service Agency ($1.080
million, from expenses only), Rural Housing Service ($846,000), Food Safety and
Inspection Service ($502,000), Natural Resources Conservation Service's Conservation
Operations ($378,000), Animal Plant Health and Inspection Service ($350,000),
Agricultural Research Service ($223,000), Food and Nutrition Service Food Program
Administration ($114,000), Grain Inspection and Packers and Stockyard Administration
($38,000), and Agricultural Marketing Service ($25,000) . Requested rescissions were
based on a combination of an agency's share of the total USDA budget, and the extent of
civil rights complaints pending against the agency.

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Agricultural Provisions in the Supplemental Appropriations Act of 1998, P.L. 105-174
EMERGENCY PROVISIONS
Emergency Conservation Program:
$34,000,000
Tree Assistance Program
$14,000,000
Farm Service Agency Emergency Disaster Loans
Loan Subsidy (Appropriation)
$21,000,000
Loan Authorization
($87,400,000)
Livestock Indemnity Program
$4,000,000
Dairy Production Disaster Assistance Program
$6,800,000
Watershed and Flood Prevention Operations
$80,000,000
TOTAL EMERGENCY SPENDING
$159,800,000
NON-EMERGENCY PROVISIONS
Office of the Secretary — Karnal Bunt Payments
$543,000
Grain Inspection, Packers and Stockyards Admin.
$1,500,000
Civil Rights Activities
Departmental Administration
$2,000,000
Office of the General Counsel
$235,000
Total Farm Service Agency Loans
Loan Subsidy
$11,551,000
Loan Authorization
($167,134,000)
TOTAL NON-EMERGENCY SPENDING
$15,829,000
GRAND TOTAL SUPPLEMENTAL — USDA
$175,629,000
RESCISSIONS & OFFSETS
Salaries and Expenses (See Text for List of Agencies)
$3,556,000
FSA Loan Subsidy (Guaranteed Operating Loans)
$8,273,000
Conservation Farm Option Program
$4,000,000
TOTAL RESCISSIONS AND OFFSETS
$15,829,000