Text: S.Hrg. 114-633 — AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016
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[Senate Hearing 114-633]
[From the U.S. Government Publishing Office]
S. Hrg. 114-633
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016
=======================================================================
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
ON
H.R. 3049/S. 1800
AN ACT MAKING APPROPRIATIONS FOR AGRICULTURE, RURAL DEVELOPMENT, FOOD
AND DRUG ADMINISTRATION, AND RELATED AGENCIES PROGRAMS FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 2016, AND FOR OTHER PURPOSES
__________
Department of Agriculture
Department of Health and Human Services: Food and Drug Administration
__________
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COMMITTEE ON APPROPRIATIONS
THAD COCHRAN, Mississippi, Chairman
MITCH McCONNELL, Kentucky BARBARA A. MIKULSKI, Maryland,
RICHARD C. SHELBY, Alabama Vice Chairwoman
LAMAR ALEXANDER, Tennessee PATRICK J. LEAHY, Vermont
SUSAN M. COLLINS, Maine PATTY MURRAY, Washington
LISA MURKOWSKI, Alaska DIANNE FEINSTEIN, California
LINDSEY GRAHAM, South Carolina RICHARD J. DURBIN, Illinois
MARK KIRK, Illinois JACK REED, Rhode Island
ROY BLUNT, Missouri JON TESTER, Montana
JERRY MORAN, Kansas TOM UDALL, New Mexico
JOHN HOEVEN, North Dakota JEANNE SHAHEEN, New Hampshire
JOHN BOOZMAN, Arkansas JEFF MERKLEY, Oregon
SHELLEY MOORE CAPITO, West Virginia CHRISTOPHER A. COONS, Delaware
BILL CASSIDY, Louisiana BRIAN SCHATZ, Hawaii
JAMES LANKFORD, Oklahoma TAMMY BALDWIN, Wisconsin
STEVE DAINES, Montana CHRISTOPHER MURPHY, Connecticut
Bruce Evans, Staff Director
Charles E. Kieffer, Minority Staff Director
------
Subcommittee on Agriculture, Rural Development, Food and Drug
Administration, and Related Agencies
JERRY MORAN, Kansas, Chairman
ROY BLUNT, Missouri JEFF MERKLEY, Oregon
THAD COCHRAN, Mississippi DIANNE FEINSTEIN, California
MITCH McCONNELL, Kentucky JON TESTER, Montana
SUSAN M. COLLINS, Maine TOM UDALL, New Mexico
JOHN HOEVEN, North Dakota PATRICK J. LEAHY, Vermont
STEVE DAINES, Montana TAMMY BALDWIN, Wisconsin
BARBARA A. MIKULSKI, Maryland
(ex officio)
Professional Staff
Carlisle Clarke
Patrick Carroll
Rachel Santos
Jessica Arden Schulken (Minority)
Dianne Nellor (Minority)
Administrative Support
Teri Curtin (Minority)
C O N T E N T S
----------
Thursday, March 12, 2015
Page
Department of Health and Human Services: Food and Drug
Administration................................................. 1
Tuesday, March 17, 2015
Department of Agriculture........................................ 51
Wednesday, September 16, 2015
FDA Food Supply Safety Efforts................................... 115
Wednesday, October 21, 2015
A Review of Rural Development in 21st Century America............ 159
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016
----------
THURSDAY, MARCH 12, 2015
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10 a.m. in room SD-138, Dirksen
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
Present: Senators Moran, Blunt, Hoeven, Daines, Merkley,
Tester, and Leahy.
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Food and Drug Administration
STATEMENT OF HON. DR. MARGARET A. HAMBURG,
COMMISSIONER, FOOD AND DRUG ADMINISTRATION
ACCOMPANIED BY:
JAY TYLER, CHIEF FINANCIAL OFFICER, FOOD AND DRUG
ADMINISTRATION
NORRIS COCHRAN, DEPUTY ASSISTANT SECRETARY FOR BUDGET,
DEPARTMENT OF HEALTH AND HUMAN SERVICES
opening statement of senator jerry moran
Senator Moran. Good morning, everyone. We are delighted to
have you with us. My first faux pas as new subcommittee
chairman was to fail to turn on the mike. Senator Blunt is here
to correct any of those mistakes, and I look forward to working
with Senator Merkley to see that our subcommittee does its
oversight work and its appropriations process oversight in a
very significant and meaningful way.
We are delighted to be here this morning. Today's hearing
is going to focus on one of the important aspects of our
subcommittee, the Food and Drug Administration (FDA), its
fiscal year 2016 budget request. We thank the Commissioner, as
I indicated, for being here, along with Mr. Tyler and Mr.
Cochran.
We look forward to questioning you, Dr. Hamburg, with this
being your last appearance before the subcommittee, and let me
take a moment to thank you for your public service and wish you
well. We look forward to your testimony today and we look
forward to your success and enjoyment in the future.
The agency you head has authority over approximately 20
cents of every $1 spent in America. Americans expect that the
food they eat and the drugs they take will be safe and
effective, and the FDA has vast reach.
The agency has authority over more than 300,000 foreign
establishments and 185,000 domestic establishments, ranging
from food processing plants to facilities that manufacture
life-saving medications.
In addition to the facilities themselves, FDA is tasked
with the regulatory responsibility of individual products. Just
last week, FDA approved the first biosimilar product in the
United States, enabling access to important therapies for
patients in chemotherapy and other cancer treatments.
In delivering these regulatory responsibilities, your
private sector partners expect transparency and certainty from
the FDA, and when I speak to small businesses, agriculture
producers in Kansas and across the country, their great concern
is the limits of Government and how it limits their ability to
create jobs and stifles innovation through unnecessary and
burdensome regulations.
In part, we are here to try to eliminate where possible
that unnecessary burden.
Over the past 4 years, the FDA has been given significant
new responsibilities, including the Food Safety Modernization
Act (FSMA), menu labeling legislation, and drug compounding
legislation. When implementing these laws, FDA must avoid the
trappings of one size solution fits all problems. Small
business and consumers suffer under the practices that limit
the ability to respond to new requirements and little time to
implement those changes.
The agency's final rule on menu labeling in my view is
overly broad and inflexible and lacks a great deal of
practicality, and I was disappointed to see the inclusion of
grocery stores, convenience stores, and other entities that do
not sell restaurant style food as their primary business
included in that regulation.
Under the Food Safety Modernization Act, FDA is tasked with
implementing the most sweeping changes to food safety laws in
over 70 years. I was pleased to see that the agency took many
of the concerns within the agriculture community into account
by re-proposing significant portions of the rules because they
were unworkable for farmers.
With the court mandated deadline for finalization
approaching, I encourage FDA to consider deliberate and
thoughtful implementation of this law.
I look forward to discussing with you these and other
topics this morning. We have a lot to cover. I will now turn to
Senator Merkley.
[The statement follows:]
Prepared Statement of Senator Jerry Moran
This hearing will come to order. Good morning. Today's hearing will
focus on the Food and Drug Administration's (FDA) fiscal year 2016
budget request, and thank you Commissioner Hamburg, Mr. Tootle, and Mr.
Cochran for being here today to discuss FDA's priorities for the
upcoming year. Dr. Hamburg, with this being your last appearance before
the subcommittee as FDA Commissioner, I want to thank you for your
public service and your efforts to promote the health and safety of
American consumers.
The agency you head has authority over approximately 20 cents of
every $1 spent in America. Americans expect that the food they eat and
the drugs they take will be safe and effective. FDA's reach is vast;
the agency has authority over more than 300,000 foreign establishments
and 185,000 domestic establishments, ranging from food processing
plants to facilities that manufacture lifesaving medications. In
addition to facilities themselves, FDA is tasked with the regulatory
responsibility of individual products. Just last week, FDA approved the
first biosimilar product in the United States, enabling access to
important therapies for patients in chemotherapy and other cancer
treatments.
In delivering these regulatory responsibilities, your private
sector partners expect transparency and certainty from FDA. When I
speak to small businesses and agricultural producers in Kansas, their
overwhelming concern is a government that limits their ability to
create jobs and stifles innovation through unnecessary and burdensome
regulations. We must always be mindful of these concerns.
Over the past 4 years, FDA has been given significant new
responsibilities through the Food Safety Modernization Act, menu
labeling legislation, and drug compounding legislation.
When implementing these laws, FDA must avoid the trappings of
``one-size-fits-all'' solutions. Small businesses suffer under this
practice all too frequently because they have limited capital to
respond to significant new requirements and little time to implement
these changes.
The agency's final rule on menu labeling is overly broad and
inflexible and lacks a great deal of business practicality. I was
disappointed to see the inclusion of grocery stores, convenience
stores, and other entities that do not sell restaurant style food as
their primary business.
Under the Food Safety Modernization Act, FDA is tasked with
implementing the most sweeping changes to food safety laws in over 70
years. I was pleased that the Agency took many of the concerns within
the agricultural community into account by re-proposing significant
portions of the rules because they were unworkable for farmers. With
the court-mandated deadlines for finalization approaching, I encourage
FDA to consider deliberate and thoughtful implementation of the law.
I look forward to discussing this and other topics with our
witnesses today. We have a lot to cover this morning, so I will turn it
over to Senator Merkley for his opening remarks.
STATEMENT OF SENATOR JEFF MERKLEY
Senator Merkley. Thank you very much, Mr. Chairman. I am
delighted to be here in the role of ranking member, and I am
certainly looking forward to working with you as we examine the
budgets for the Department of Agriculture and the FDA.
Commissioner Hamburg, welcome to what is your last
appearance before this subcommittee.
Senator Moran. She is smiling.
Senator Merkley. You look a little too happy. You have had
the longest tenure of any FDA Commissioner in recent history,
so thank you for your service over the last 6 years. You have
steered the FDA through a period of enormous growth in both
funding levels and responsibilities.
In 2009, FDA's budget was just over $2 billion in
appropriated funds. In 2015, $2.6 billion. If you throw in user
fees on top of that, the numbers are even higher.
Since you took the helm, Congress has passed several major
pieces of legislation including the Family Smoking Prevention
and Tobacco Control Act, the Food Safety Modernization Act,
Drug Quality and Security Act, and the FDA Safety and
Innovation Act, each of which has placed significant new
responsibilities on the agency, and each of which you are
currently implementing.
At the end of the fiscal year, multiple new food safety
rules will be finalized. I am hopeful that we will see the long
awaited tobacco deeming regulations from FDA in the next couple
of months. There is a lot going on, and your leadership will be
missed.
I am going to try to wrap this up fairly quickly so we can
get to questions. I do want to point out this is a very robust
budget request. The budget for FDA includes an increase of $147
million in appropriated funding, with much but not all directed
to food safety activities.
I know that this subcommittee has been critical of FDA
budgets in recent years that have simply proposed new user fees
to fund food safety activities, and the likelihood of approval
of those fees was minimal.
This budget does have some additional proposed user fees,
but also a significant budget authority increase of $109
million for FSMA implementation, and an increase of $15 million
for the administration's larger combating antibiotic resistance
initiative or CARB initiative regarding antimicrobial
resistance.
While the FDA's piece of this is small, the role that FDA
plays in ensuring there are new antibacterial drugs is vital.
It is a significant issue, and I am pleased to see that you are
addressing it in the budget, and look forward to your
testimony. Thank you, Senator.
Senator Moran. Senator Merkley, thank you. I, too, look
forward to working with you, and Dr. Hamburg, we are now ready
for your testimony.
Dr. Hamburg. Thank you very much, and good morning,
Chairman Moran--I have the same problem. Six years and I still
have not learned----
Senator Moran. Thank you for making me comfortable.
SUMMARY STATEMENT OF HON. DR. MARGARET A. HAMBURG
Dr. Hamburg. Thank you, Chairman Moran, Ranking Member
Merkley, and members of the subcommittee. I am pleased to be
here today to discuss the President's fiscal year 2016 budget
request for FDA. It is an important budget request, as Senator
Merkley noted.
This will be my final appearance before the subcommittee
before stepping down as Commissioner, and I want to begin by
thanking this subcommittee for your past investments in FDA.
This support has helped us address many of the demands of
our broad and ever more complex mission. I have appreciated the
constructive dialogue that we have been able to have over the
years.
During my tenure at FDA, Congress has recognized the vital
and unique role that we play in promoting and protecting public
health. Landmark new legislation has expanded FDA's authority
as was just noted.
We now regulate tobacco products, implement legislation to
dramatically transform our food safety system, and to expand
our medical product mandates, and a host of other new programs
as well, not to mention new requirements to ensure the safety
and integrity of complex global supply chains for both medical
products and for food.
Our accomplishments really demonstrate our ability to
respond to evolving public health needs and responsibilities
across the very broad spectrum of products that we regulate.
However, resources in fact have not kept pace with our new
authorities and mandates, as well as the demands of dramatic
advances in the science and technology that underpins the
products that we regulate, and the rapidly changing global
marketplace, which has enormous ramifications on the work that
we do and the people we work to protect.
Moreover, most of our growth in funding has been in user
fees provided by regulated industries, resources that can be
spent only on a limited range of FDA programs.
We certainly recognize the duty that you have to wisely
distribute taxpayer dollars among many competing priorities,
but FDA has had a great return on investment.
Last year, in terms of budget authority, FDA cost every
American only about $8 to ensure the safety of their food,
their access to safe, effective, and even life-saving medical
products, a safe blood supply, and so much more.
FDA is committed to finding efficiencies wherever they
exist. In fact, in the budget before you, we are proposing $16
million in reductions to our base resources, nonetheless,
tackling such critical challenges as food safety modernization,
antibiotic resistance, and precision medicine requires
additional investments at this time.
BUDGET REQUEST
To help meet our public health mission for fiscal year
2016, FDA is requesting $4.9 billion, $2.7 billion in budget
authority, and $2.2 billion in user fees. The increase above
fiscal year 2015 is $425 million, $148 million of which is
budget authority. Again, recognizing the larger pressures on
the Federal budget, we focused the budget request on essential
functions and urgent needs of our agency.
I would like first to address FDA's efforts to improve and
protect America's food supply. The fiscal year 2016 budget
request includes a total of $1.5 billion for food safety and
nutrition, including $109.5 million budget authority increase.
This increase will be largely dedicated to implementation of
the Food Safety Modernization Act or FSMA.
Since FSMA was passed in 2011, FDA has made extraordinary
progress, including the issuance of seven major proposed
regulations which will be finalized later this year.
Significant funding gaps still loom. The actual on the
ground implementation of these regulations will require us to
modernize inspections and retrain staff to apply the new rules
effectively and consistently, provide guidance and technical
assistance to industry to support their compliance efforts, and
invest in the capacity of our State partners to leverage their
local knowledge and capacity.
We also must address concerns about the safety of the large
and growing volume of food imported from other countries. FSMA
empowers the agency to hold foreign food producers to the same
standards we expect of food producers in the United States. We
must do so to ensure a level playing field for American firms,
and most importantly, to protect our citizens.
I cannot overstate the importance of our request to fund
continued successful implementation of FSMA. A shortfall in
funding will undermine Congress' intent to transform our
Nation's food safety program, and will harm all stakeholders.
If we invest now, I am confident that we can fulfill FSMA's
vision of a modern prevention oriented food safety system that
works collaboratively across our global food system to reduce
foodborne illness, bolstering public confidence in the food
supply, and maintaining U.S. leadership on food safety.
In the vital area of medical product safety and innovation,
the fiscal year 2016 budget request provides a program level of
$2.7 billion, including a budget authority increase of $33.2
million above fiscal year 2015.
Part of the proposed budget increase will support FDA
implementation of key initiatives of FDASIA, the Food and Drug
Administration Safety and Innovation Act, and to continue
important work on the national strategy for combating
antibiotic resistant bacteria, where we have made important
strides on both the human and the animal front, although this
remains a pressing public health challenge.
An additional $10 million is to support FDA's essential
role in personalized or precision medicine, and enable us to
continue to speed the development of promising new diagnostics
and treatments for patients with serious illnesses.
Our exciting work in medical product innovation and safety
is a testament both to the new opportunities that have been
presented by scientific knowledge and technology, as well as
our innovative approaches to expedite development and review of
medical products to address unmet medical needs while adhering
to established standards for safety and efficacy.
In fact, in 2014, FDA approved the most new drugs and
biologics in almost 20 years, and brought life-saving drugs to
market more quickly than ever. We have also made real progress
in reducing times for medical devices to reach the market.
Enhanced funding will help us to maintain our Nation's
preeminence in biomedical product innovation and safety, and
will benefit us all.
Let me close by underscoring that FDA's public health
mission is indispensable to the health and well being of every
American. We carry out our mission effectively and with
relatively few taxpayer dollars, despite tremendous expansions
in our responsibilities as a result of new legislation,
scientific and technological advances, and a globalized
marketplace.
Our budget request plans for efficient spending on programs
that are essential to providing Americans with safe foods and
safe and effective medical products that they expect and count
on.
I know that with your ongoing support, FDA will continue to
move forward in fulfilling its critical responsibilities to the
American public.
Thank you.
[The statement follows:]
Prepared Statement of Hon. Dr. Margaret A. Hamburg
introduction
Good morning Chairman Moran, Ranking Member Merkley, and members of
the subcommittee, I am Dr. Margaret Hamburg, Commissioner of the Food
and Drug Administration (FDA). Thank you for the opportunity to appear
before you today to discuss the President's fiscal year 2016 budget
request for FDA. I would like to thank the subcommittee for its past
investments in FDA, which have helped us meet the demands of our broad
and increasingly complex mission. For fiscal year 2016, FDA is
requesting $4.9 billion to support our essential functions and priority
needs.
On a personal note, I'd like to thank the Committee for its
continuing commitment to these issues during my 6 years as
Commissioner. As you know, I will be stepping down at the end of this
month, so this will be my final appearance before this subcommittee. I
will miss the constructive dialogue we have enjoyed over the years to
address matters of mutual concern. My decision to leave FDA was not an
easy one, as there is always more to be done, and I remain dedicated to
the vital work and mission of the agency. But, I am confident that I
leave the agency stronger and more effective than when I began, and
better positioned to meet the challenges of the 21st century. And, I
know that with your commitment, FDA will continue to move forward in
fulfilling its critical responsibilities to the American public.
fda plays a vital role in america's public health system
FDA is a science-based regulatory agency charged with an enormous
and significant public health mission: to promote and protect the
health of the American people. Our goal in carrying out our mission is
to ensure the safety, effectiveness, and quality of medical products,
as well as the safety and security of the vast majority of our Nation's
food supply. The agency also regulates the manufacturing, marketing,
and distribution of tobacco products and seeks to reduce the use of
tobacco products by minors. FDA plays a unique and vital role in
facilitating the availability of safe and effective products, while
also protecting citizens from products that may cause harm.
FDA's important work promotes innovation in the industries it
regulates, creates jobs, and positions domestic industries to compete
in the global marketplace. History shows that when there is public
trust in FDA's oversight, the industries we regulate flourish.
Conversely, when food and medical products cause serious harm, the
result is often severe economic damage across the industry involved.
Congress has recognized the dynamic role that FDA plays and the
increasingly complex and global environment in which we operate. As a
result, FDA has been tasked with a multitude of new responsibilities
and authorities in the public health arena, including the Drug Quality
and Security Act (DQSA); the FDA Safety and Innovation Act (FDASIA);
the FDA Food Safety Modernization Act (FSMA); and the Family Smoking
Prevention and Tobacco Control Act. While FDA has stepped up to meet
these essential public health challenges under current funding levels,
successful implementation of these new authorities requires significant
additional resources.
fda has a proven track record of success
FDA's accomplishments over the past year have been as substantial
as any in the agency's recent history. Across the areas of food safety
and nutrition, medical product safety and innovation, tobacco control,
and other areas of our work, our accomplishments demonstrate our
ability to respond to evolving needs and opportunities--including the
embrace of new approval pathways, innovative technologies, and cutting-
edge science.
Moreover, especially given the importance of our work, FDA is a
bargain. The products regulated by FDA account for more than 20 percent
of every consumer dollar spent on products in the United States but
individual Americans only pay about 2 cents per day to ensure that
those products are safe and effective. This is a small price for life-
saving medicines approved as fast or faster than anywhere in the world,
confidence in medical products that are relied on daily, and a food
supply that is among the safest in the world.
fda's innovations improve and protect america's food supply
Food Safety Modernization.--FDA published seven major proposed
rules and, based on stakeholder input, four supplemental proposals to
implement FSMA. The agency also completed 8,607 high-risk food
establishment inspections in fiscal year 2014, exceeding the target of
6,507 inspections by 32 percent. FDA also released a FSMA Operational
Strategy Document that focuses on how we can implement FSMA by
prioritizing prevention, voluntary compliance, risk-based oversight,
and expanded collaboration across the food safety community.
Genome-Based Food Pathogen Detection.--FDA established GenomeTrakr,
the first national pilot network of whole genome sequencers (WGS) for
pathogen identification to trace where outbreaks start--even at the
level of a single farm or food facility--based on whole bacterial
genomes. FDA is already utilizing this innovative technology, such as
in the identification and closure of a cheese facility connected to a
Listeria monocytogenes outbreak, to take quicker, yet more targeted,
action and likely prevent a larger number of illnesses.
Nutrition Labeling.--On December 1, 2014, FDA published two final
rules requiring that calorie information be listed on menus and menu
boards in chain restaurants and similar retail food establishments, and
on signs for vending machines. Americans eat and drink about one-third
of their calories away from home, and this is an important public
health step to help consumers make informed choices for themselves and
their families. FDA also proposed important updates to the nutrition
facts label, such as more prominent calorie declarations, to bring it
up to date with current diet and health concerns.
promoting innovative medical product development
Medical Product Application Review.--FDA's rapid drug reviews and
use of expedited programs has helped provide meaningful new products to
U.S. patients. In 2014, FDA approved 51 new molecular entities and
biological products, more than in any single year in almost 20 years.
Among the 2014 approvals are treatments for cancer, hepatitis C and
type-2 diabetes, as well as the most new drugs for ``orphan'' diseases
since Congress approved the Orphan Drug Act more than three decades
ago. Seventeen of the new approvals are ``first in class'' therapies,
which represent new approaches in the treatment of disease, and almost
two-thirds were approved first in the United States. In addition,
important biological products approved in 2014 include a number of
groundbreaking vaccines for meningitis B, the flu, and certain types of
human papillomavirus.
From 2011 to 2014, the median number of days for FDA to approve
investigational device exemption (IDE) submissions decreased from 442
to only 101, cutting the time it takes to bring a new medical device to
market by nearly a full year. In addition, improvements to the de novo
program have resulted in a 70-percent reduction in the average total
time to decision for these submissions.
These developments are a testament not just to expanding
understanding of human biology and the molecular mechanisms that drive
the disease process, but also to FDA's innovative approaches to help
expedite development and review of medical products that target unmet
medical needs, while adhering to the established standards for safety
and efficacy.
Abuse-Deterrent Opioid Medications.--FDA continues to make progress
in its efforts to help reduce prescription drug abuse, while remaining
committed to ensuring that patients with pain have appropriate access
to medicines they need. In 2014, FDA approved three new opioids with
abuse deterrent features to give physicians effective new treatment
options with less risk of abuse. To help encourage the development of
more abuse-deterrent formulations of opioids, the agency hosted a
public meeting to discuss scientific and technical issues related to
development and assessment of abuse-deterrent opioid products and is
working diligently to finalize its guidance on this topic this spring.
We also approved a new dosage form of naloxone with an autoinjector to
allow for the emergency treatment of opioid overdoses in community
settings.
Drug Quality and Security Act.--During fiscal year 2014, FDA
conducted over 90 inspections of compounding facilities, issued warning
letters, and worked with DOJ to bring criminal and civil enforcement
actions. The agency also continued to develop a framework to implement
the new law. FDA has issued numerous policy documents to implement
Federal Food, Drug, and Cosmetic Act section 503A, as amended by the
DQSA, as well as section 503B, as added by DQSA, concerning outsourcing
facilities. In addition, on February 23-24, 2015, FDA held the first
meeting of the Pharmacy Compounding Advisory Committee to provide
advice on scientific, technical, and medical issues concerning drug
compounding.
fda works to reduce the impact of tobacco on the public health
Family Smoking Prevention and Tobacco Control Act.--FDA published
the proposed ``deeming rule'' to extend FDA's tobacco authority to
additional tobacco products, including e-cigarettes, and is reviewing
over 135,000 comments the agency received in preparation of the final
rule. Public health-based regulation of these products can help reduce
the death and disease toll from tobacco use. FDA also closely monitors
retailers' compliance with restrictions on tobacco product marketing
and sales to youth--and takes strong corrective action when violations
occur. In addition, the agency launched a major public education
campaign targeting youth about the dangers of tobacco products, with
the goal of reducing or preventing use in future generations.
fda tackles emerging, unique, and complex challenges
Combating Antimicrobial Resistance.--FDA has made important strides
in confronting the growing resistance of some bacteria to antimicrobial
drugs. In 2014, FDA approved four novel systemic antibiotics to expand
the pipeline of new medical products available for identification,
prevention, treatment, and/or cure of bacterial infections. In
contrast, only five new antibiotics had been approved in the previous
10-year period. In addition to working on the human medical product
side, FDA has made great progress on its initiative to fight
antimicrobial resistance by restricting the use of medically important
antimicrobials in food animal production to legitimate animal health
purposes. All 26 drug companies with affected products have committed
in writing to remove animal production uses from their FDA-approved
labels and bring the remaining medical uses under veterinary
supervision by the end of 2016. FDA is working closely with USDA,
producers and drug companies to support implementation of these
important changes and gather data to verify their effectiveness in
reducing antimicrobial resistance.
Ebola Outbreak Response.--In response to the Ebola epidemic in West
Africa, FDA has acted aggressively to help expedite the development and
availability of investigational medical products for Ebola, including
by: providing regulatory advice and guidance to commercial developers
and U.S. agencies; helping to facilitate access to investigational
medical products for patients with Ebola when requested by clinicians;
and authorizing the use of eight investigational diagnostic tests for
Ebola under FDA's Emergency Use Authorization authority. We have
collaborated extensively with the World Health Organization, NGOs and
several international regulatory counterparts to support international
response efforts. FDA has also monitored for fraudulent products that
claim to prevent, treat, or diagnose Ebola and took action, as
warranted, to protect public health.
fda's fiscal year 2016 president's budget request
The fiscal year 2016 President's budget request for FDA is $4.9
billion for the total program level, which is $425 million above the
fiscal year 2015 enacted level. Of the total funding, $2.7 billion is
budget authority and $2.2 billion is user fees. The fiscal year 2016
increase consists of $148 million in budget authority and $277 million
in user fees. The growth in user fee funding stems from several new
programs, along with increased collection authority for many of FDA's
existing programs. Mindful of the larger pressures on the Federal
budget, we have focused our request on the most urgent needs for fiscal
year 2016.
food safety
The fiscal year 2016 budget provides a total program level of $1.5
billion for food safety, which is $301 million above the fiscal year
2015 enacted level. This total includes a $109.5 million increase in
budget authority and a $191.8 million increase in user fees. The
proposed budget authority increase will be almost exclusively dedicated
to implementation of FSMA.
FDA's successful implementation of FSMA is essential to reducing
foodborne illness, bolstering public confidence in the food supply, and
maintaining U.S. leadership on food safety internationally. With FDA
under court order to issue many key FSMA regulations in 2015, fiscal
year 2016 is an absolutely crucial year for the investments needed to
ensure timely, effective, and non-disruptive implementation. FDA's
collaborative implementation strategy requires a modernized approach to
inspection and enforcement, focusing on food safety outcomes and
encouraging voluntary compliance. To be successful, this strategy
requires retraining and retooling of FDA and State inspectors. In
keeping with FSMA's theme of collaboration and partnerships, the
largest single portion of the budget authority will go to the States to
better integrate, coordinate, and leverage Federal and State food
safety efforts.
FDA's FSMA philosophy of ``educate before and while we regulate''
also requires investing in guidance, education, and technical
assistance for industry to support their compliance efforts, especially
among smaller scale farmers and manufacturers. FDA will deliver this
assistance through collaborative alliances and training partnerships.
Finally, FDA must make crucial investments in fiscal year 2016 to
implement the new import safety system mandated by Congress. This
includes FSMA's Foreign Supplier Verification Program requirements,
which are the foundation for FSMA's new import safety system and key to
helping assure a level playing field of food safety standards and
oversight for U.S. consumers and industry.
The investments FDA can make with the fiscal year 2016 budget
authority request will enable the agency to maintain momentum toward
timely and successful implementation of FSMA. Without these
investments, implementation will be disrupted and delayed.
medical product safety and innovation
The fiscal year 2016 budget provides a program level of $2.7
billion, which is $84.8 million above the fiscal year 2015 enacted
level, to continue core medical product safety activities across FDA
programs.
With part of this increase, FDA will support implementation of
three initiatives of FDASIA: the Unique Facility Identifier; Unique
Device Identifier; and Electronic Biological Product Application
Submission programs. FDA will also continue contributing to the
National Strategy for Combating Antibiotic-Resistant Bacteria (CARB) to
help ensure the judicious use of medically important antimicrobials in
food-producing animals; to evaluate new antibacterial drugs for patient
treatments; to streamline clinical trials; and to develop better
vaccines for antibiotic resistant organisms. An increase of
approximately $1 million will support continued implementation of new
compounding oversight authorities and the evaluation of sunscreen
ingredients. Finally, $10 million of the increase will help FDA adapt
its regulatory process to developments in ``precision medicine.''
Funding this initiative will permit FDA to keep pace with scientific
advancements and help speed the development of promising new
diagnostics and treatments that will enable precision medicine to be
successful.
rent and facilities
Within the budget request, FDA requests a program level increase of
$38.9 million for infrastructure. FDA has a growing workforce of 16,000
full-time equivalents (FTEs), resulting in rising operational rent
costs. Without the requested funding, FDA cannot simultaneously support
this expanded workforce, critical facility needs, and its increasing
programmatic responsibilities. The request also includes funding for a
feasibility study to address FDA's expanded workforce and facility
needs on the White Oak campus.
current law user fees
A $78.5 million increase is requested for current law user fees,
which will help FDA fulfill its mission of protecting the public health
by assuring the safety and efficacy of human and veterinary drugs,
biological products, and medical devices, assuring the safety of our
Nation's food supply, and advancing the public health by helping to
speed innovations that will offer safer, more effective and higher
quality medical products.
conclusion
FDA's public-health mission is indispensable to the health and
well-being of every American. We carry out our broad public health
responsibilities effectively and with relatively few taxpayer dollars,
despite dramatic expansions in our responsibilities as a result of new
legislation, scientific and technological advances, and a globalized
marketplace. Our budget request plans for efficient spending on
programs that are essential to providing Americans with the safe foods
and safe and effective medical products they expect. We look forward to
answering your questions today and to working with you in the coming
year.
Senator Moran. Commissioner, thank you very much. In the
hopes that the human trafficking legislation can proceed, we
are going to allow Senator Leahy the opportunity first to ask
questions so he can get to the Floor.
DRUG SAFETY LABELING
Senator Leahy. Mr. Chairman, I appreciate especially as the
newest member of this subcommittee the courtesy of the
chairman.
A couple of questions. Commissioner, as I told you
privately before, I hate to see you leave. I understand it
reaches a point, but thank you for what you have done.
In 2013, FDA issued a proposed rule that ensures generic
drug companies can update their safety labels when they learn
new safety information. Brand-name manufacturers have that
ability now, and it is tremendously important. I have a
constituent, Diana Levine, who was able to seek justice when
she got a mislabeled brand-name drug and lost her hand as a
result of it.
The FDA's proposed rule for generics has been sitting there
for over a year, and the FDA recently reopened its rulemaking
which would allow an industry backed alternative that actually
turns the existing labeling rules on its head. Their proposal
is that no brand-name drug company nor generic drug company
could update its label immediately upon learning of adverse
side effects, and there would be no liability if something
happened.
That does not seem the way it should be. I would hope FDA
would commit to complete the rulemaking in a way that if there
are problems with a drug, that consumers would know about it
immediately, not have it delayed.
Dr. Hamburg. Thank you for those observations. Certainly,
our goal as we are working through this process is to ensure
that patients and their healthcare providers can get access to
the most recent safety information, wherever it emerges from,
whether it is from experience with an innovator drug or generic
drug, and that the systems really enable rapid and responsive
communication of information.
We have received a lot of comments on the proposed
guidelines, lots of different stakeholder perspectives. We have
tried to listen very carefully and have held a number of
meetings and are holding another public meeting on March 27.
We do plan, of course, to proceed with finalizing, but we
want to make sure the process is inclusive, but the goal is to
provide the best possible information for patients.
Senator Leahy. Best possible and the most timely.
Dr. Hamburg. And the most timely. Realistically, one of the
concerns that you may be aware of is if only the innovator can
make the change, the sponsor of the original product, then what
happens in a world where there is increasing reliance on
generics and some of the original innovator drugs are no longer
in the marketplace.
Senator Leahy. Also the warnings can be done immediately,
perhaps not the changes immediately, but the warnings could. I
will follow up with further questions on that.
MAPLE INGREDIENT LABELING
Let me go to what may sound like a parochial thing. In
Vermont, winter will end; I have been assured after having
lived there for 75 years, it does end. Then we go into maple
season. It is very, very hard work on the 30-so gallons of sap
for every 1 gallon of maple syrup, but we are able to do this
and we can sell it because people rely on it being pure maple
syrup.
Here is what is happening. More and more things are being
sold. For example, this is pure Vermont maple syrup. I would
hasten to add that it is very, very good. We go through a lot
at home. Then people have things like this that are sold, maple
and brown sugar. You go into the ingredient list, and there is
no maple whatsoever. There is caramel color and things like
that.
Are you able in your funding to go after people who are
actually mislabeling these things, because the people who have
done the work for this pure Vermont maple syrup are being badly
hurt.
Dr. Hamburg. Well, certainly the kinds of responsibilities
that FDA pursues involves ensuring the accuracy of labeling in
key areas.
This issue about the maple syrup is not unknown to us, and
in fact, we did recently pursue a criminal case where someone
took cane syrup with a little bit of maple syrup flavoring, I
guess, and labeled it as a product of Vermont when in fact it
was not, and as maple syrup. In fact, those individuals pled
guilty. That was back in 2012, I think.
We hope that actions like that send a message, but it is
the case that we have such a broad range of responsibilities,
we do have to prioritize. Certainly, the issues around being
able to pursue all of the misleading and false claims has been
one that has been challenging for us in areas that range from
food products to drugs to dietary supplements to cosmetics, and
it is one where working with industry and working with
consumers so we get reports where there are actions that we can
aggressively take are very helpful to us.
Senator Leahy. I realize you have to be selective. I can
tell you right now, unless there is really strong action
against some of these people, you are going to destroy
something that is not only part of the culture of our State,
but it is a very important industry in our State, and one in
which there are some very, very hard working people who through
no part of their own are wiped out.
Dr. Hamburg. It is very important. The more we can get
information about where problems occur, we monitor the
marketplaces well. We do inspections to enhance our enforcement
activities.
We were pleased we were able to take that action swiftly
and aggressively to protect true and authentic maple syrup from
Vermont.
Senator Leahy. Thank you, Mr. Chairman.
Senator Moran. You are certainly welcome. It is nice to see
the Senator from Vermont parochially protecting----
Senator Leahy. First time a parochial interest has ever
come up in my 40 years on this Committee.
Senator Moran. All the rest of us are certainly reluctant
to criticize that circumstance.
STATUTORY ROLE OF THE FOOD AND DRUG ADMINISTRATION
Commissioner, let me ask first, one of the areas that I
have focused some attention on in my time on the Appropriations
Committee, and Senator Blunt is now the chairman of the Labor,
Health, and Education Appropriations Subcommittee, but what is
the formal statutory as well as informal relationship between
the Centers for Disease Control (CDC), the National Institutes
of Health (NIH), the Department of Health and Human Services
(HHS), how does FDA statutorily and otherwise relate to the
healthcare issues, the health issues, associated with those
other agencies?
Dr. Hamburg. We are one of the agencies of the Public
Health Service, and we are part of the Department of Health and
Human Services. I report to the Secretary of Health and Human
Services. Many of the authorities that I have as FDA
Commissioner derive through authorities given to the Secretary.
Certainly, we work very closely with our partners in the
Public Health Service. There are many issues of overlapping
concern, whether it is food safety and the infectious disease
work that NIH does, the outbreak investigation work that CDC
does, and the product oversight that we do. We work together as
a team or in response to an emerging public health crisis like
Ebola, where we all have important roles to play in order to
support an effective and meaningful public health response.
DIETARY GUIDELINES
Senator Moran. Let me ask about one or two of those arenas.
In regard to dietary guidelines, what role will FDA have in
advising the Department of Health and Human Services?
Dr. Hamburg. For the dietary guidelines, at least as I
understand it, it is a process that ultimately involves
decisionmaking that is coordinated between the Secretary of
Health and Human Services and the Secretary of the Department
of Agriculture, USDA.
FDA does play a role in reviewing reports and information
that goes into the final determinations, and we of course bring
our science based approaches to our recommendations in terms of
nutrition science and health.
Senator Moran. What is the status of that process now at
the Department of Health and Human Services and your role?
Dr. Hamburg. I believe there is a report that is currently
under review that was developed by a group of outside
scientific experts, and we like other components of HHS have
been asked to review that report and make comments for the
Secretary.
EBOLA EMERGENCY APPROPRIATIONS
Senator Moran. You mentioned Ebola, one that the Centers
for Disease Control as well as NIH was actively engaged in.
Congress appropriated additional money to the FDA to expedite
and develop the availability of medical products related to
Ebola.
Can you bring us up to date on the status? What approval
process success have we had in the effort to combat Ebola?
Dr. Hamburg. The FDA has been very actively involved in
responding to Ebola. We are not quite as visible. We are not
the front page news on the response to the Ebola crisis, but we
have played a very meaningful role in terms of both trying to
make unapproved medical products available as needed for
diagnosis or treatment of individuals at risk for disease or
with disease.
Importantly, also working with our scientific colleagues to
really put in place the systems for scientific evaluation and
research so that we can actually learn what works and what does
not in terms of new treatments and vaccines that may have a
very important role in this continuing outbreak, but will be
absolutely crucial to have when there is a future epidemic.
Sadly, by the nature of this disease, there almost
certainly will be future problems with Ebola in Africa, and
perhaps in other places.
We also have a role in monitoring for fraudulent products
and fraudulent claims. Sadly, in the Ebola situation as we have
seen in other public health crises, there are people that
readily jumped to the opportunity to try to sell products that
offer hope but no proven value, so we also are taking action
against some fraudulent products in the marketplace.
Senator Moran. Commissioner, can you point to changes in
process, in other words, expediting the process to get medical
approval accomplished? What has happened since Congress gave
the supplemental appropriations to FDA that is different today
than it would have otherwise been?
Dr. Hamburg. Congress has been beneficial in our ability to
respond in a number of ways, certainly the supplemental funds
that were given for Ebola will make a significant difference.
As yet, those funds have not been expended. We have responded
pulling from other resources, but those dollars are going to be
very meaningful in our overall program.
Authorities that Congress has given us at earlier points
have also made a difference. The emergency use authorization
(EUA), for example, that was part of the Pandemic and All
Hazards Preparedness Act (PAHPA) legislation, has enabled us in
this context and in other settings to be able to make as yet
unapproved diagnostics available so that better assessments of
patients and their needs can be made.
In response to Ebola, we have done a significant number of
EUAs, making those products available, and certainly some of
the flexibility in terms of regulatory pathways that Congress
has given us has enabled us to move more swiftly.
Senator Moran. Thank you. Let me now turn to the ranking
member, Senator Merkley.
TOBACCO DEEMING REGULATION
Senator Merkley. Thank you very much, Mr. Chair. Thank you
for your testimony, Dr. Hamburg. It will not surprise you that
I want to start by addressing the rules controlling the
regulation of tobacco products.
It was 2009 when the United States, Congress, and the
President passed legislation giving FDA the power to regulate
these products. We are now in 2015, 6 years later. We do have a
draft deeming rule out, and comments have been turned in. At
last count, I understand the goal is to have a final deeming
rule out by June.
Can you give us assurances that we are going to have this
rule by June, 6 years since the legislation was passed?
Dr. Hamburg. I can tell you that it is my strong commitment
and that of the team at the FDA--we are shooting very hard for
that June timeframe. We feel this is an absolutely essential
regulation that is foundational for many other aspects of our
ability to meaningfully regulate tobacco products that are in
the marketplace and may be in the marketplace in the future.
I share your deep interest in this and can assure you of
the commitment of our agency. We did, as I think you know, get
an enormous number of comments on the deeming rule when we did
the proposed reg. I think it was more than 135,000. Some of
them were duplicative, I will say. Serious comments.
We are systematically going through. We knew we would get a
lot of comments. We geared up for that, and we do not feel that
will be an impediment to meeting our tentative, and publicly
indicated the goal in terms of what was put forward in the
unified agenda of June 2015.
Senator Merkley. Can you give us some sense as to whether
the final rules will prevent the tobacco industry from selling
candy-flavored products?
Dr. Hamburg. You know, I cannot comment on what is in a
rule that is still in formulation.
Senator Merkley. Do you think it would be a good idea for
the final rule to include----
Dr. Hamburg. Let me say this is an area of intense focus
and concern. One of the things that I would like to highlight
in terms of FDA activities that I think are really a
contribution has to do with the research that we are actually
supporting through our tobacco program to better understand
some of these issues about the influence of different aspects
of tobacco products on behavior and use, initiation and
succession, and also looking at subpopulations who may be using
tobacco products differently.
We are investing in some very targeted research activities
in different key areas, and also a first of its kind major
longitudinal study that we are doing in collaboration with NIH
that will give us very important insights, and the data for
regulatory decisionmaking that will be so crucial, so that when
we make regulations in key areas, they will be based on good
strong science that will meet the public health needs and also
be able to survive potential litigation, which we know in this
arena can often come.
E-CIGARETTES
Senator Merkley. Thank you for all that work. During this
timeframe, these years that have been passing, many, many new
products targeted at children have come forward. New
technologies have come forward with the E-cigarettes.
We are finding that children are finding easy access to E-
cigarettes. Just to give you an example, I know we anticipate
the deeming regulations will require minimum age and i.d.
restrictions to limit access to children, but a study funded by
the National Cancer Institute published at the beginning of
this month showed that getting E-cigarettes online by children
is quite easy, specifically found that only 5 of 98 attempts by
teens to buy E-cigarettes online were blocked by online vendor
attempts to verify customer age.
CDC has also reported the rate of teens who reported using
E-cigarettes has doubled just between 2011 and 2012. My
understanding is that is continuing to grow very rapidly
between 2012 and now.
What this means is while this vacuum exists, and I must say
when products are labeled after things like flavored gummy
bears and double dutch chocolate, so on and so forth, the
targeting for children is quite obvious, and certainly it is
well understood that addiction to nicotine occurs in your
teenage years, that addiction rarely occurs after the age of
21.
It is obvious why this is being done. This has tremendous,
huge health implications for our youth. This is why we are
expecting FDA to act as if every person in the agency has a
child who might be affected by the ulterious effects of
nicotine addiction.
It has been a little bit of a sense by many of us here in
Congress, and you know the phrase, ``While Nero fiddled, Rome
burned.'' While the FDA is fiddling around with trying to get
everything perfect, a tremendous number of our children become
addicted to products deliberately targeted at them.
It is in your power to act. If there is any way to convey a
sense of urgency that just seems to be missing over the last
now 6 years on your way out, as you wrap up, it would be so
important to the health of this Nation.
Dr. Hamburg. I can tell you we do have a sense of urgency.
We do understand this is a historic opportunity to transform
the oversight of these products and to really bring science
based public health regulation to bear.
We feel the same sense of urgency you do to get the deeming
rule completed because that is the foundation for some of the
other important actions that you are talking about. We do feel
that while deeming is one key aspect of what we are doing, we
also are making enormous strides forward in other key ways,
including limiting access of cigarettes and the other products
specified in the Family Smoking Prevention and Tobacco Control
Act to children, targeting also an educational campaign at
youth.
As you know, much of life-long smoking begins in young
people. I think sadly you can get addicted to nicotine at any
age, but it is certainly the pattern with smoking that if you
start smoking young, you are more likely to continue into
adulthood with all of the attendant and preventable health
consequences.
I can assure you that terrific important work is going to
continue to come out of our Center for Tobacco Products. It is
a commitment that extends across the whole agency in terms of
its priority. We certainly hear your concerns and want to work
with you going forward.
Senator Merkley. Thank you very much, Doctor.
Senator Moran. The Senator from Missouri, Senator Blunt.
MENU LABELING
Senator Blunt. Thank you, Chairman. I look forward to
working with you and your leadership on this subcommittee. I
have been on this subcommittee as you have, since we came to
the Senate. I find it a very encouraging subcommittee to be
part of. Certainly, Senator Pryor did a great job of leading
the subcommittee the last 2 years, and I would hope that you
and Senator Merkley have the same positive relationship that
Senator Pryor and I had as we sat in the two seats that you are
in now.
Commissioner Hamburg, while we have not agreed on
everything you have done, I think the country has benefited
from the great capacity, energy, and judgment you have brought
to this job. I am glad you have been willing to stay as long as
you have. I am sure there are lots of other opportunities out
there, and you will soon find out just how good they are, and I
hope they are good.
One of the things I have often said in your leadership
here, one of the great things you have been able to do is be so
knowledgeable in so many areas, that when there was something
you did not know, you did not hesitate to say I really do not
know and I will find out, which only verified the many things
that you did know.
Thanks for the work you have done. Good luck in what you
will do next.
Senator Moran has already brought up menu labeling, a topic
that you and I have spent a lot of time and energy talking
about over the last several years. I know it is an assignment
that took a lot more time than anybody would have ever
imagined.
I am not going to give you time to respond to it today
because we could quickly lose the 3 minutes and 29 seconds I
have left.
I do have a series of questions for the record that I am
hearing and Senator Moran is hearing, others. What is
restaurant type food, what is food on display, what is a
standard menu item. There are a number of questions and I have
about 15 of them here in front of me that we will ask you and
your staff to deal with, not only for the benefit of the
committee, but for all the people that currently believe
without those questions being answered quickly, they cannot
comply by the end of this year with what the Department is
asking them to comply with.
MOBILE MEDICAL APPLICATIONS
Senator Blunt. In terms of the new technology out there, I
think one of the challenges for the Acting Commissioner and
then the full-time Commissioner will be how to deal with
everything that is happening and Smartphone technology as a
shorthand way to discuss the many things that are going to be
out there that will be quickly improved and improvable, and
more and more affordable, unless we needlessly stand in the way
of that.
I think you are leaving a discussion in place that is a
helpful one about at what point does FDA need to be involved
and at what point does FDA not need to be involved.
I would hope that discussion goes on where we really try to
figure out what kinds of things have life threatening impact
and what kinds of things are just simply helpful for you and
others to know about your daily health that can be monitored
quickly in ways that it has not been before. That is certainly
something as a member of this subcommittee I continue to be
looking at.
GENERIC DRUGS
A couple of quick questions. One, on generic drugs, while I
think under your leadership, the approval of new drugs has
gotten quicker. The approval of generic drugs has gotten
slower. I think we are up to the point now where we have gone
from 30 months in 2011 to 42 months in 2014.
I want to talk a little about what we can do to make that
move from the more expensive drug to the generic drug happen
more quickly than it is happening now, or at least as quickly
as it used to happen.
Dr. Hamburg. I am not aware of those numbers you are
citing. I will have to go back. As you say, if I do not know, I
will say so. In fact, we have been making a major push in the
generic drug area. It is true we have had unacceptable backlogs
in approval times.
As part of FDASIA and the user fee negotiations, for the
first time in that process, we actually worked with the generic
drug industry to develop a user fee program so we could get
more adequate resources to do the job both in reviewing drug
applications and in addressing the backlog.
We have expanded the program. We have made great progress
in addressing the backlog. One of the challenges with generic
drugs, which as you note are so important in terms of people
having access to important medical care, and they now represent
a very, very large proportion of spending on prescription
drugs, but many of the generic drugs that are used in this
country are actually manufactured overseas.
There is also additional complexity in our approval process
of the need to do inspections of the facilities before
approval, and the additional time and costs of the
international component.
The fact that we have now this user fee program in place,
which has measurable goals and performance measures that are
transparent and monitored by industry and other stakeholders, I
think you are going to see enormous progress. I think we have
made enormous progress.
We have addressed 72 percent of the existing backlog that
was in place at the time that the Prescription Drug User Fee
Act (PDUFA) and FDASIA went into effect.
I think you will be pleased by the progress that has been
made and will continue to be made.
Senator Blunt. Just one follow up on that, Mr. Chairman. I
am told there are 4,000 applications pending.
Dr. Hamburg. That was the backlog at the time that FDASIA
was----
Senator Blunt. What do you think the pending number today
is?
Dr. Hamburg. As I said, I understand we have cleared/
addressed 72 percent of that backlog.
Senator Blunt. I assume other people are applying. What has
been added to that number?
Dr. Hamburg. Our commitment in the PDUFA process, the
generic drug user fee process, was that by 2017, we would have
eliminated all backlog, existing and from incoming.
Senator Blunt. You believe you will?
Dr. Hamburg. I do believe that we will.
[The information follows:]
Answer. Based on the volume of generic applications received in
previous years, the Generic Drug User Fee Act (GDUFA) [program] assumed
that the Food and Drug Administration (FDA) would receive approximately
750 original abbreviated new drug applications (ANDAs) per fiscal year.
In fact, we received significantly more in the first 2 years of GDUFA:
almost a third more applications in fiscal year 2013; and double the
expected number in fiscal year 2014.
Approximately 3,300 original ANDAs are currently pending with the
agency while 700 are pending with industry.
We are determined to make significant progress in reducing these
numbers over the next few years and achieving GDUFA performance goals.
Senator Blunt. Thank you, Chairman, for letting me follow
up.
Senator Moran. To the Senator from Montana, I do not think
I ever served on a committee in the Senate that we have not
been together on, and here you are again. I just want you to
know that this subcommittee is going to be very actively
engaged, and you are going to have plenty of opportunities to
spend your time fulfilling the senatorial responsibilities as
compared to anything outside of the United States Senate.
FOOD SAFETY
Senator Tester. I appreciate that because as you and I both
know, you coming from Kansas and myself coming from Montana,
and especially the way I look, food is pretty damn important,
okay.
We thank you for your leadership, Mr. Chairman, and Ranking
Member Merkley.
Just out of curiosity, do you know where you are going to
land when you leave?
Dr. Hamburg. No, I made my decision to step down
independent of future opportunities. I am going to rest, relax,
regroup, and then decide. I suspect that I will still be
involved in many of the kinds of issues that I have dealt with
at FDA.
Senator Tester. We wish you the best. I have a question
here that deals with food safety research. The Center for Food
Safety and Applied Nutrition is within your purview; correct?
Dr. Hamburg. Correct.
Senator Tester. I have a list. I think this came from you
guys. It shows about $4.5 million in risk analysts and
evaluation. I would assume you are talking about the budget
partially for the Center for Food Safety?
Dr. Hamburg. Which number are you referring to?
Senator Tester. I was just wondering how much money, just
to cut to the chase, how much money is dedicated towards the
Center for Food Safety and Applied Nutrition out of this
budget?
Dr. Hamburg. I am going to look to one of my helpers here.
Senator Tester. That is perfectly all right.
Dr. Hamburg. You want the Center for Food Safety and
Nutrition?
Senator Tester. Yes, I want to know how much money they
have to work with.
Dr. Hamburg. $1.2 billion.
Senator Tester. $1.2 billion?
Dr. Hamburg. You are interested in research specifically?
Senator Tester. Yes. My understanding is in research, you
are doing your research to find out what will kill you and what
will keep you healthy.
Dr. Hamburg. Yes. We cut up the budget in so many different
ways.
Senator Tester. Can you get back to me on that?
Dr. Hamburg. Yes.
[The information follows:]
Answer. $1.2 billion is the total fiscal year 2015 food safety
funding amount. In fiscal year 2016 the total food safety request is
$1.5 billion. Of the total fiscal year 2016 request, $355 million in
budget authority and user fees is for the Center for Food Safety and
Applied Nutrition (CFSAN). This is an increase of $74.5 million over
fiscal year 2015 enacted. CFSAN provides services to consumers,
domestic and foreign industry and other outside groups regarding field
programs; scientific analysis and support; and policy, planning and
handling of critical issues related to food and cosmetics.
The $4.5 million for risk analytics and evaluation in the fiscal
year 2016 President's budget request would support the development of
new tools for ranking risks, prioritizing program activities across the
FDA Foods and Veterinary Medicine Program based on opportunities to
reduce risk, and linking risk-based priorities more clearly with budget
formulation and execution. These tools, for example, will better inform
FDA about which foods, including animal foods, are most vulnerable to
which bacterial contaminants, and where it should invest its research
efforts to most effectively identify how to reduce contamination of
food.
Senator Tester. That is a very critical component to the
FDA's job. I do not know that you can tell somebody that they
can or cannot put an ingredient into food or into cosmetics or
into medicine unless you know what it is going to do.
I am curious to know how much that line item is.
Dr. Hamburg. Can I also add that I am really delighted that
we have a new Director for the Center for Food Safety and
Nutrition who brings a strong science and research background,
Dr. Susan Mayne, who is here somewhere. There she is.
One of my goals before I step down was to make sure that we
had the right leadership. That research activity is so
essential to what we do.
FOOD INSPECTIONS
Senator Tester. Very important. I want to touch on one
thing, if you want to talk parochial, we will talk really
parochial. That is how do you train your inspectors that are in
the field? Do you hire them and then just send them out or do
they go through training on how to interpret the rules that
they have to apply to the individuals on the ground?
Dr. Hamburg. No, they are hired, looking for certain
fundamental credentials, and then they are trained, and
training, of course, is an ongoing process, and certainly in a
world where there is greater specialization, that training is
increasingly important.
Senator Tester. The point I am going to get to is you have
a set of rules. Most people in business can read. Then if an
inspector comes out and interprets those rules different than
what they are, it really ping pongs that--call them
``producer'' or whatever you might want to call them.
The question is what is done to hold the inspectors
accountable? I am all about inspectors doing their job, but I
want to make sure they do their job correctly, as the rule
applies.
Dr. Hamburg. Absolutely. The work of the inspectors is then
overseen by a management structure, and there are many decision
makers before enforcement actions are actually taken. There is
considerable oversight of the inspection activities, but one
thing----
Senator Tester. Just a second, and sorry for cutting you
off, we only have about 5 minutes. If an inspector comes out
and the producer feels that those rules are being interpreted
in a way different than what they are printed, what is their
recourse?
Say a manufacturer is manufacturing widgets, and the
inspector comes out and says no, you cannot do this because the
rules say you cannot do it, and you read the rules, and the
rules do not say you cannot do it. What is that widget
producer's recourse?
Dr. Hamburg. To engage with us in a discussion. After the
inspection is done, there is a report, and that report is gone
over with the product sponsor and can be questioned.
Senator Tester. But the question is how do you notify, how
does that producer of those widgets know who to get a hold of?
They are dealing with the inspector. There is a conflict of the
way the rule was implemented. Is there somebody--are they told
of somebody within the agency that if there is a conflict here,
you get a hold of so and so and they can help remedy it? Do you
see what I am saying?
Dr. Hamburg. Yes. There is a system and people do know how
to get in touch with us, believe me.
Senator Tester. The people who are regulated know how to
get in touch with you?
Dr. Hamburg. I think one of our goals over the course of
the last few years has been to try to increase transparency and
communication to make it easier and to clarify our rules and
expectations.
One of the reasons we are asking for money in this budget
for FSMA is to be able to train our inspectors to new systems
and provide the proper oversight, and----
Senator Tester. Right. Excuse me for going over time a
little bit, Mr. Chairman. One of the reasons I want to give you
money is to make sure that those inspectors are trained and
make sure there is the kind of outreach that is going on.
What I do not want to do is give you money if that outreach
does not happen and if that inspector training does not happen.
My question to you is when it comes to outreach to folks
who are on the ground, you need to regulate them, the people
you are regulating, how do you do that outreach? You have some
additional dollars for outreach in this budget. How do you do
that outreach and where is it focused?
Dr. Hamburg. The outreach, particularly as we have been
working on FSMA, has been really very extensive. We do it by
working with both the larger organizations that represent the
different food producers and farmers, and also doing regional
meetings and on farm visits, et cetera.
I think while there is a huge need to continue those
efforts and extend them, I think we have laid a groundwork as
we have worked on the FSMA rules for what is a real
partnership.
We want to extend the work with State and local partners,
and that is part of what is in this budget request, to actually
give money to counterparts at the State and local level to help
do some of that on the ground work.
Senator Tester. Appreciate it. Thank you, Mr. Chairman. I
would just say I want you to be able to do your job, but I also
want you to be able to do it in a way that meets the needs of
the consumer and meets the needs of the business community out
there, too. Thank you very much, and I do appreciate your work
very, very much.
Dr. Hamburg. Thank you.
Senator Tester. Thank you, Mr. Chairman.
Senator Moran. Senator Daines. Welcome.
DIETARY GUIDELINES
Senator Daines. Thank you, Mr. Chairman. You are surrounded
by Montanans here this morning. You have John Tester, myself,
from both corners of Montana.
I spent 12 years working for Procter & Gamble, and I used
to work a lot with the FDA. I really appreciate all the work
that you do, and I think I have an understanding of the heavy
lift that is entailed in your job every day.
Thank you for coming to this subcommittee hearing today. As
you know, Montana is a large producer in ag, it is our number
one industry, $5 billion a year. Maintaining a high-quality
food supply is of paramount importance for our producers.
In Montana, agriculture plays an important role in the
diets of Montanans, for Americans across the country, and even
around the world.
The question I had really relates to some of the dietary
guidelines, and specifically in the fiscal year 2015 omnibus,
there was a congressional directive that expressed concern that
the advisory committee was ``Showing an interest in
incorporating environmental factors into their criteria,'' and
directed the Secretary to include ``Only nutrition and dietary
information, not extraneous factors'' in the final guidelines.
As you know, the scientific report of the 2015 Dietary
Guidelines Advisory Committee was just released last month. It
included, and I quote, ``Environmental approaches are needed to
compliment individual based efforts to improve diet and reduce
obesity and other diet related diseases.''
The question I have is do you think the advisory committee
report is compliant with the congressional directive?
Dr. Hamburg. Well, as I think you probably know, our role
in this is not a direct one, but it is advisory to the
Secretary of Health and Human Services in terms of reviewing
materials, including the report you mentioned, that then become
the basis for decisionmaking by the Secretary of HHS and the
Secretary of the Department of Agriculture.
Our role is really to provide feedback in terms of the
science of nutrition and health. The broader issues that you
were referring to, I think, were reflected in a report that was
done by an outside group of scientists, but in terms of what we
will be commenting on to the Secretary of Health and Human
Services will be on nutrition science and health.
My understanding is at the end of the day, the decisions
that are made will really focus on the dietary guidelines that
are science based.
Senator Daines. Doctor, do you believe the environmental
issues are within the purview of developing those dietary
guidelines?
Dr. Hamburg. Well, from the FDA's perspective, as I said,
that is not something that we are looking at. My understanding
is that the Secretary of Agriculture and the Secretary of
Health and Human Services understand their role in terms of
establishing the dietary guidelines.
FOOD SAFETY MODERNIZATION ACT
Senator Daines. Okay. FSMA was brought up here a minute
ago, I would like to talk about that for a moment. You
highlighted the fact that the successful implementation of FSMA
is essential to improving food safety.
I have been hearing concerns from Montana ranchers and
farmers across our State about the President's budget that is
proposing to consolidate these food safety programs currently
split between the USDA and HHS into a new agency entirely
within HHS.
They are concerned that an inevitable result of such a
significant consolidation could negatively impact FSMA, and
result in inspection delays and some logistical challenges.
Why are you removing the USDA from the food inspection
process?
Dr. Hamburg. You know, I think what was in the President's
proposed budget was really laying out the concept of trying to
find more integrated ways of addressing a very important
problem of food safety. It is fragmented, not just across USDA
and FDA, but also many other agencies of Government.
As you probably know, for a long time there have been
discussions about should there be a consolidated approach that
would really bring together different components and different
agencies.
For us, the need to implement FSMA takes a very high
priority, and as we implement FSMA, we are trying to do it in
coordination with USDA and other important players at the State
and Federal level, and we think it is a process that is working
very well, even though we are in different agencies or
departments with different legal regulatory frameworks for our
work.
The on the ground ability to coordinate has been, I think,
very successful, and we expect to build on that.
Senator Daines. One of the concerns I am hearing from the
ag community is the loss of expertise by removing the USDA from
the food safety process. Do you have concerns? The USDA has
some expertise unique to agriculture.
Dr. Hamburg. Well, I think these two programs have
historically worked quite well together, but they do have very
different approaches and different legal regulatory frameworks
and different targeted commodities in terms of the work that we
do, and certainly different areas of expertise.
As I noted, there are other components of Government that
also bear on food safety. I think that it makes sense to look
at how we can better coordinate, whether that requires creating
a new single agency or whether there are more effective ways
for coordination is, of course, a debate.
Senator Daines. Yes, I think our ag folks are concerned
about the subject matter expertise the USDA has brought to the
ag portion of that, I guess that would be the voice coming from
the ag community.
Thank you. I am out of time, Mr. Chairman.
MENU LABELING
Senator Moran. Thank you, Senator. We are going to have
another round of questions, Commissioner. Thank you very much.
I want to address menu labeling a bit more. My
understanding is that the FDA has announced something they are
calling guidance as of this morning in regard to this issue
that Senator Blunt raised about the inability of many who may
be or are regulated by FDA in menu labeling, their ability to
actually know what to do between now and December.
In cursory review of what FDA has said this morning in what
they call guidance, it appears to us that it is simply
restating things that have already been put before the public
and before this subcommittee previously, and that no real
benefit, no additional certainty or knowledge of what behavior
needs to occur, what actions need to be taken, could be
garnered by reading what you are calling guidance.
Again, I would reiterate this issue about the scope of what
you are asking many to do in menu labeling, and the significant
costs it will take to comply with those requirements, and yet
the uncertainty about if the business expends that money,
whether they will really have met the regulations.
Let me ask a couple of questions about individual or sector
of the food industry concerns. One that comes to mind, and
Kansas is a place, so I can be provincial this morning, Kansas
is a place that originates Pizza Huts, pizza delivery.
It is our understanding that the regulations do not allow
the regulations to be satisfied by posting caloric values on
the Internet despite the fact that is where most people
apparently today order a pizza.
In fact, the requirement is that the information be
provided on the box that the pizza is delivered in, and that
there are--I do not know what the number is--hundreds of
different ingredients that you could order for your pizza, and
the ability to label the caloric values on that pizza box for
that specific pizza is an impracticality.
Are those issues that you are aware of, addressing and
understand the need for common sense, if anybody is going to be
able to comply with the direction you are going, particularly
in this setting in which it is not a restaurant?
Dr. Hamburg. Well, the restaurant like establishments is
clearly the hardest part of this equation. It was hard as we
worked through what should be in the proposed rules, and as we
went to finalizing, and now as we move towards implementation,
and in particular, some of the foods on display as opposed to
the more traditional preset menu kinds of situations.
I think first we have to clarify just misinformation. The
requirement you just mentioned for calories on the pizza box is
not something that I have ever heard of, and I agree, it does
not make sense. We have tried to be quite flexible, recognizing
these new ways that foods get sold in our country, and the
complexities.
We have tried to address that, and a lot of time was spent
on pizzas and the fact that you can have different toppings and
arranging for ranges of calories and also recognizing that, at
certain places, people order it over the Internet and not where
there is a posted menu.
Grocery stores is another area that I know Senator Blunt
has been concerned about as well. We are working closely with
that industry, with the broad FMI that represents many of the
supermarkets, but also individual companies, to try to
understand what the questions are.
We have not put out guidance but we plan to propose some
guidance or put out a framework to address some of these areas
that are more confusing, particularly the food on display.
Our goal in doing this is to not disrupt practices or add
unnecessary burden. We want to be able to have a smooth and
efficient implementation of this and work with the components
of industry as needed to make that possible.
To clarify as explicitly as we can where the problems are
and what needs to be done is our goal, and we are underway
trying to achieve that, but there is more work to be done.
Senator Moran. My understanding about something called
guidance being issued by the FDA today on this topic, is that
inaccurate?
Dr. Hamburg. I am not sure what that would be referring to.
It was a plain language summary of the rule for small
businesses, so an effort to try to clarify what is in the rule
and what is not.
Senator Moran. More guidance to come, more actual guidance.
Dr. Hamburg. Yes.
Senator Moran. The rule does not require the labeling of a
box of pizza for the number of calories based upon the
ingredients included in the pizza?
Dr. Hamburg. Not to the best of my knowledge and belief,
no.
Senator Moran. Well, obviously there is uncertainty about
the direction that a business must go to comply with the
regulations, and what you described to me as your goal is a
good thing.
What it brings to my mind is that getting us from this
point to the certainty by December seems pretty far stretched
to me, and a delay in the final implementation or the final
effect of the rule is something you should consider.
Dr. Hamburg. There clearly is more work to be done. The
discussion we have just had, I think, underscores that there is
still considerable confusion about what is actually in the rule
and need to spell that out more explicitly, addressing the
individual concerns of companies and the industry more broadly,
and really narrowing in on some of these areas that are just
harder to address and more confusing as we go from the issuance
of the final rule to the actual implementation.
Senator Moran. Do you believe that FDA has the discretion
whether to include food delivery services, the pizza delivery
and the grocery stores, the salad bar at the grocery store--
that was a FDA decision to include, not a legislative
requirement?
Dr. Hamburg. I believe the salad bar issue was actually
explicitly in the law, but we were asked to look at restaurants
and restaurant like establishments, because the fact is that
the world we live in no longer revolves around traditional
restaurants, but there are many, many settings where you can
get prepared food intended for individual consumption at that
site or immediately thereafter, and the law did ask us to look
at that broader range.
Senator Moran. Let me now turn to Senator Merkley.
IRRIGATION WATER STANDARDS
Senator Merkley. Thank you very much. There is a camp song
that has a stanza of ``I lika pizza, I lika pie, I don't like
onion in my eye.'' I will use that as a transition to talk
about onions.
We have a lot of onions growing in Oregon, and in the
effort to provide guidelines for the Food Safety Modernization
Act, part of that is related to the water that is used in
irrigation. My onion growers have been very concerned about
this. The initial standard was that the water had to meet
recreational water standards.
Would it be fair to summarize that is roughly equivalent to
whether a lake is safe to swim in? Is that a fair
representation of that?
Dr. Hamburg. Yes.
Senator Merkley. It is largely expected that irrigation
water for onions would never meet that standard. The water is
precious. It is used to irrigate. It is recollected. It is
reused. It goes from irrigation ditch to the field, back to the
irrigation ditch.
The feedback, there has now been an exemption granted or at
least I think this is in the next version of the rule, that if
irrigation water has not been put on a crop for 7 days before
it is harvested, then they are exempted from having to meet
that standard. Is that a fair way to represent it?
Dr. Hamburg. Well, I think what I can say is that we heard
very clearly that some of what was put forward in the original
proposed rule would impose a lot of restrictions that would not
meaningfully improve public health and safety, and would
produce burdens.
We listened to that. We rethought. We looked at what did
the data tell us. We did a supplemental to that proposed
rulemaking in order to put forward a new model and approach,
and we are confident that as these proposed rules move to
final, that the concerns that you and the onion growers have
had will be addressed.
I would say there have been other areas where we have
learned about concerns, have looked at it in terms of what does
the data tell us, where is the evidence, what is the impact on
health, and we have tried to learn from what we have heard, to
accommodate, to try to achieve the least burdensome approach to
meaningful rulemaking that will address the goals of FSMA,
which is to improve food safety and actually support a vibrant
successful food industry.
Senator Merkley. Great. I think that is the least
burdensome approach, and certainly appropriate. If you look at
this often, I hold a town hall in every county every year and I
get a lot of feedback. The onion growers have come out to talk
about this issue. They have been very concerned.
Here is where they start the conversation, there is not a
single known case of E. coli contamination linked to an onion
bulb product in America. I believe that is correct. Is it, to
the best of your knowledge as well?
Dr. Hamburg. To the best of my knowledge.
Senator Merkley. The reason is because of the way these
onion bulbs are harvested, whatever E. coli might be there
dies. The product has a continual drying period before it gets
to the grocery store shelf. Outer layers of the onion are
peeled.
For all these reasons, that is why it has not occurred.
There has been an impact from green onions from Mexico that are
harvested in a completely different way.
I think they appreciate very much that they have been
heard, and I appreciate very much they have been heard, because
having something that creates a substantial burden without
having any public safety is the sort of thing that just drives
people nuts.
When people complain about regulations, I say well, give me
specific examples, and this is a very specific example. I
believe it is anticipated that they are still going to be asked
to test their irrigation water every week and report.
I will continue the conversation with the FDA, but if you
know in advance the irrigation water is never going to meet
that test, and if you know in advance you are going to be
exempted from having to meet that test, maybe that is also an
unnecessary burden on the industry, and maybe there is another
way to approach it that does not require the expense and
complexity of testing and reporting, especially when at the end
of the process, they are going to be exempted.
Can I just encourage the FDA to continue to take a look at
that?
Dr. Hamburg. Yes. I think that we have tried to make this a
process where we can learn from the real world experience, look
at the data and the evidence, and look at the impact on public
health. That is, I think, the goals we all share, to ensure
that we have a safe, high quality food supply, and that we do
not overly burden farmers and producers in the process.
Senator Merkley. Just to close with this specific question
because my time has run out, can you encourage me as you are
leaving the FDA to continue to look at whether the testing
requirement under this set of circumstances is still overly
burdensome?
Dr. Hamburg. Yes. In the case of the onion growers, there
is the issue of being able to demonstrate bacterial die off.
When it sits, as you said, baking in the sun. Those are
important factors in terms of what would be required.
It is challenging because number one, there are lots and
lots of different food commodities and they all have very
specialized issues and concerns as we have learned in the
process of doing this. I can tell you I have learned a whole
lot more about food, farming production, and consumer
preferences as well.
This will be a dynamic process also as we learn more and
unexpected things happen as well. We do not see when we
complete this rulemaking and implementation of FSMA that we are
done with food safety forever because we have to continue to
bring new, better science and technology to the process, but
our process is that new and better science and technology will
actually improve and modernize and streamline some of what
needs to be done and provide better monitoring and oversight of
our Nation's food supply.
Senator Merkley. Thank you.
Senator Moran. The Senator from North Dakota.
EXPANDED ACCESS REQUEST
Senator Hoeven. Thank you, Mr. Chairman. I would like to
thank all of you for being here today.
Dr. Hamburg, I would like to address my question to you. As
you are aware, we have a family in North Dakota that is
struggling with pantothenate kinase-associated
neurodegeneration (PKAN). They have youngsters in the family
that are struggling with PKAN. They made a compassionate use
application to FDA for use of the drug, RE024. You and I have
spoken about this before. The family continues to try to gain
compassionate use access to this drug.
I am wondering what you can tell me in terms of helping
make that happen.
Dr. Hamburg. You know, I have not received an update on the
status of that. I know you and I have talked, and certainly I
can go back and look at the specifics of that instance.
As you know, in terms of requests for expanded access, when
requests come to us, we generally, I think 99 percent of the
time, actually support the applications of the healthcare
provider working with families.
There were some specific issues in this case, the fact that
we generally are very supportive, and in this case, there were
some concerns. I cannot really speak to the status or the
specifics.
Senator Hoeven. As of our last meeting, at least one of the
issues was FDA wanting the manufacturer to do some additional
work, make an additional investment in some of the research on
the drug, and we were asking if you would work with the company
to do that, and also we were appealing to the company directly
to do it as well, so they could reach an agreement with you in
order to allow the compassionate use for the family.
I would ask that you check on that.
Dr. Hamburg. I do remember that discussion and we needed
the company's permission to be able to share more information
with the family and healthcare provider, and with you.
Senator Hoeven. Right.
Dr. Hamburg. I do not know--I know our lawyers spoke with
the company. Perhaps the company decided that they did not want
that information shared. I will go back and learn more.
Senator Hoeven. I would ask that you update us on that
status and anything else you can do. Would you be willing to do
that?
Dr. Hamburg. I would be.
[The information follows:]
Answer. I will be happy to follow up with you in a letter, so as to
avoid disclosure and privacy issues.
RIGHT TO TRY LAWS
Senator Hoeven. The second thing is in our State, our
legislative session is underway. They are considering passing a
``right to try'' law. I think you are familiar with ``right to
try'' laws that a number of States have now passed, which would
perhaps afford an opportunity for this family to go directly to
the manufacturer under a contractual arrangement and gain
access to the drug.
I just want your reaction to how you would handle that if
in fact North Dakota is able to pass that ``right to try''
legislation, and then how would you approach that, how would
you be able to facilitate that option for the family?
Dr. Hamburg. Well, we do feel that we play a valuable role
in the process. At the end of the day, it is the company that
has to make the decision to make the product available through
an expanded access process.
In many instances, I can tell you that the FDA has played a
very constructive role in encouraging the company to in fact
make the decision to do so, and in some instances, we may have
additional information that can help inform the decisionmaking
about whether this is the right action to be taken.
We feel that we play an important role in the system that
enables patients to get access to unapproved drugs outside of a
clinical trial process when they have a serious or life-
threatening condition, but we know many States have been
looking at the notion of expanded access, and I do not know the
specifics of what is happening in your State.
From my perspective, I would say that the FDA actually is
an important partner and makes many contributions to what
ultimately will serve the patient best.
Senator Hoeven. If the State proceeds with the ``right to
try'' law, you would be willing to help with that process?
Dr. Hamburg. As I said, I do not know anything about the
specifics in your State. We certainly would be happy to provide
technical assistance or input on aspects, but what I wanted to
really emphasize is that we do believe that if you look at
experience, FDA is not the barrier to access in the vast, vast
majority of cases, and that in fact we do play a valuable role
and can provide important information, and often support and
almost a form of advocacy for the expanded access program.
Senator Hoeven. I am asking for your help on both of those
options. You are willing to do that?
Dr. Hamburg. Yes.
Senator Hoeven. You are willing to provide help for both of
those options if we can make one of them work? That is what I
am asking.
Dr. Hamburg. I am willing to work with you to try to better
clarify the expanded access program to provide expert input in
terms of what might be under consideration, and certainly FDA
is very eager to be helpful in expanded access cases.
We actually just recently re-did the paperwork for expanded
access requests to come to us, and it was actually described in
one newspaper article as a ``breathtaking effort to diminish
bureaucratic red tape.''
We have been very hard to make this program clearer and
more accessible and to help get patients and their healthcare
providers access when it is appropriate.
Senator Hoeven. Thank you.
Senator Moran. Just a couple more questions, Commissioner.
We will do one more round, although I will submit most of my
questions for you to answer for the record.
MOBILE MEDICAL APPLICATIONS
Senator Moran. Let me just ask quickly about digital health
devices. The FDA has issued guidance that it does not intend to
enforce compliance with the standard regulatory controls for
medical devices. Let me make sure that my premise is true,
unlike my last question. That is true?
Dr. Hamburg. We have stated, I think, very clearly and put
forth a number of documents and reports indicating that we want
to take a risk-based approach. We have no need to be involved
in the regulatory oversight of the full range of mobile medical
apps that are coming into the marketplace, many of which can
provide a great deal of important information to individuals
about their health status.
We really want to focus on the mobile medical apps where
there is a very important diagnostic or medical device activity
that really bears on medical decisions, medical interventions,
and can have serious implications for health.
It is not the platform, but it is the function, and we want
to focus on the high risk.
Senator Moran. Is there any more certainty that can be
provided so that we do not stifle innovation in this arena? Can
FDA make more clear what can be created, what can be innovated,
without the threat of the regulatory burden?
Dr. Hamburg. I think as you know this is sort of an area of
a great deal of new activity really exploding in many ways, and
a lot of companies that previously had not been working with
the FDA in terms of regulatory oversight as well.
We are trying very hard in a timely way to put out
information in terms of our regulatory role and how we will
undertake the oversight of these mobile medical apps.
In addition, we have had a lot of public meetings, and will
continue to do that, meetings with individual companies and
stakeholders. I think it is going to be an ongoing process
because there are misperceptions. People are very worried that
we are going to be regulating products that we have no
intention of providing that kind of regulatory oversight.
We do want to focus on those higher risk products where
important medical decisions may be made, and if it does not
work, it is going to put the patient at risk, and if it was an
EKG device in your doctor's office, it would be regulated by
the FDA, and you would want it to be accurate so you would not
have the wrong treatment. If it is an iPhone that is doing the
same thing, you still want it to be accurate.
I think there are a lot of good examples where it really
matters. There are a lot of examples where we do not feel a
need to step in and provide regulatory oversight because the
implications of the procedure being undertaken, the function of
that mobile medical app does not carry with it the same risks
for patients and does not form the basis for the same kind of
medical decisionmaking and action.
FOOD SAFETY MODERNIZATION ACT RULES
Senator Moran. Will FDA be able to meet the court-ordered
deadline on FSMA and its regulations?
Dr. Hamburg. We are committed to that; yes.
Senator Moran. Will the FDA be able to meet its deadline as
ordered?
Dr. Hamburg. Yes. This is something that is just enormously
important, and we have been working very hard. The process took
a little bit longer than we hoped in part because of the level
of outreach that we have done, and we felt the responsibility
to go back with the supplementals to get more feedback and
clarify some of the areas that had been raised as concerns.
Yes, we are on track to meet those goals, and we have been
working closely with all of the components of the system that
have to be part of that in terms of HHS and the White House
review. We are all committed and determined to be successful.
Senator Moran. Your budget, the administration's budget
proposes substantial funding increases to modernize the food
inspection system. We talked a little bit about that in other
questions. Yet, this is considered transformational. FSMA is
considered transformational.
If it is transformational, is there something that we will
spend less money on because we are doing things in a new way?
If it is transformational, it seems to me it ought not always
be that we need more money to transform. It ought to be we are
spending less money over here doing things better and
transforming to a better system that costs less.
Dr. Hamburg. I think FSMA will be transformational in the
sense of saving money and saving lives. We are shifting from a
system that was reactive, waiting for problems to occur, and
then trying to fix them after the fact, to one that will be
preventive.
It means we will prevent foodborne outbreaks. One in six
Americans get ill from foodborne illness every year. There are
$78 billion worth of preventable costs to the healthcare system
because of foodborne illness, 3,000 deaths a year as well.
The cost to industry, every time there is a recall, even if
it is not your product, if it relates to your product, like
there was a spinach and E. coli outbreak in California a number
of years ago, it was one company, but the whole spinach
industry was affected, and not just affected during the period
of concern about the outbreak, but I am told it took years. It
may not have even occurred that spinach purchasing went back up
to the pre-outbreak levels.
To be able to have a preventive approach, to be able to
really enhance trust and confidence in the food supply, to
prevent illness, to enhance the ability of industry to be able
to excel in terms of food safety, the confidence of buyers and
consumers in this country, and frankly, for trade and exports,
all of that are going to be benefits of FSMA.
We certainly appreciate what Congress did in giving us
these new responsibilities and authorities, and I think it is
going to make a lasting difference to the benefit of all.
Senator Moran. Thank you.
Senator Merkley.
FOOD SAFETY MODERNIZATION
Senator Merkley. Thank you very much. I know it takes a lot
of work to address the seven different categories and rules
that are coming out in FSMA. There is a lot going on there in
each one of those rules.
I appreciate the enormous work that has gone in to
realizing this vision for food safety.
Back in 2009, there was a Salmonella outbreak in peanut
butter, and 700 people became significantly ill, nine people
died. Someone who almost died was a little 3-year-old boy named
Jacob Hurley. This compelled his father, Peter, to become a
major advocate of trying to tackle this challenge. I have had a
number of conversations with Peter and his family in the course
of the time we were considering this act.
Now we are down the road to having this, as you put it,
preventive approach rather than the reactive approach, which is
exactly the right framing.
What can I tell Peter and Jacob today about what will
happen, using peanut butter as an example, making it much less
likely for peanut butter to have a contamination that could
cause an illness?
Dr. Hamburg. Well, I think you can say that advocacy work
has made a difference because FSMA was passed and it is now
being implemented. We do need these additional resources now to
actually go from what is being spelled out in a set of, I
think, very thoughtful and responsible regs that have been
developed, and actually seeing the difference on the ground.
We need the money to make that happen, and I do not think
while our budget authority request is bigger than you have seen
before, that it is excessive in terms of what is needed.
You may be aware at the time the law was passed, the
Congressional Budget Office (CBO) estimated that it would take
about $580 million over 5 years to implement FSMA
appropriately. If we get the $109 million, we will be about
halfway to what they thought we needed. We are trying to
implement as efficiently as possible.
We need to do a number of things. We need to modernize our
inspections with training and education to reflect the needs of
a preventive approach. We need to work with industry to really
make sure they understand what is expected of us, the
discussion I was having with Senator Tester and some of the
others about the importance of the open communication and
understanding and technical assistance.
We need to work with our counterparts at the State level,
and actually a significant amount of our ask, I think it is $32
million, will be going to the States because they need to be
working on the ground level to make sure this new approach is
in place and working.
We have to also address the international component, which
is enormous and growing in terms of the foods that are coming
in from other countries and countries with much less stringent
oversight in terms of safety and quality, so we need to get the
resources to implement the foreign supplier verification
process, to be able to ensure an adequate number of foreign
inspections, and to really make sure that both for consumer
protection and to have a level playing field for domestic
producers that the same standards and quality approach----
Senator Merkley. I might just interrupt you here so I can
follow up a little bit before I run out of time. Would it be
appropriate for me to characterize it this way, going back to
the peanut butter example, the way the ingredients are grown,
the way they are harvested, the way they are processed,
additional testing along the way, we are changing the systems,
we are enhancing the testing all to create a system where the
potential for contamination is absolutely minimized.
Dr. Hamburg. Where the potential for contamination will be
minimized and any problems we identify as swiftly as possible
are addressed.
Senator Merkley. Thank you.
Senator Moran. Senator Merkley, thank you very much.
Commissioner, thank you very much. Doctor, we wish you well.
Thank you for your testimony. Thank you for your team's
presence with us this morning.
ADDITIONAL COMMITTEE QUESTIONS
For members of the subcommittee, any questions that you
would like to submit for the record, and I will have several
myself, should be turned in to subcommittee staff within 1
week, which is Thursday, March 19, and we would appreciate if
the FDA could respond to those questions within 4 weeks from
that.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Jerry Moran
Question. Where is the FDA in the process of approving the
backlogged applications for new sunscreen products?
Answer. As required by the Sunscreen Innovation Act (SIA), FDA has
completed several important steps in the review process for sunscreen
active ingredient applications marketed for a material time and extent
in other countries and determined eligible for review prior to
enactment of the SIA. We have reviewed all eight pending sunscreen
active ingredient applications, evaluated submitted data, and
identified the missing information we need to determine that sunscreens
containing each ingredient would be generally recognized as safe and
effective. We have issued proposed orders outlining additional data
needed in order to make a determination that each ingredient meets this
standard.
As outlined in the SIA, the data requested must be gathered and
submitted to the FDA for evaluation before the agency can proceed to a
final sunscreen order. We look forward to receiving and reviewing the
data. The agency is committed to doing its best to continue to meet
future deadlines under the SIA--and to provide American consumers with
additional options for safe and effective sunscreen ingredients.
Question. Shouldn't more focus and priority be placed on preventive
care for skin cancer? Why are Americans having to wait so long for new
sunscreen products?
Answer. Americans currently have access to numerous sunscreen
products. These include broad-spectrum products with an SPF value of 15
or higher, which, if used as directed with other sun protection
measures, decrease the risk of skin cancer and premature skin aging
caused by the sun. As described in the preceding response, FDA is
actively working to assure that sunscreens, including sunscreens that
would contain the ingredients being evaluated under the SIA, provide
safe and effective protection.
Heightened concerns about the risk of skin cancer and premature
aging have fundamentally altered consumers' use of sunscreen products
over the past few decades. Americans once applied the products in
modest amounts while at the beach or exercising during peak hours of
summer sun exposure. In contrast today, Americans--young and old, fair-
skinned and not--now routinely spread on sunscreens all year round. A
large increase in the amount and frequency of sunscreen exposure
combined with advances in scientific understanding that some sunscreen
ingredients may be absorbed into the bloodstream have raised safety
concerns. Commercial marketing experience alone is inadequate to
evaluate these concerns.
The SIA does not relax the FDA's scientific standards for
evaluating safety and effectiveness or the requirement that the agency
have adequate data on which to base a generally recognized as safe and
effective (GRAS/E) determination. FDA has proposed data requirements,
unanimously supported by an Advisory Committee panel of independent
scientific experts, to meet this standard. We look forward to receiving
and reviewing industry data--and helping American consumers make
informed decisions about these products.
Question. The agency's tentative determination on partially
hydrogenated oils represents a substantial shift from the current
framework. Why did the FDA not undergo the customary rulemaking process
and instead issue a determination?
Answer. Our action conforms to FDA regulations which set forth a
process by which the agency, on its own initiative or in response to a
petition from an interested person, may determine that a substance is
not GRAS. Specifically, title 21 of the CFR, section 170.38(b)(1),
provides that FDA may initiate this process by issuing a notice in the
Federal Register proposing to determine that a substance is not GRAS
and is a food additive subject to section 409 of the FD&C Act. Section
170.38(b)(2) requires the notice to include a period of 60 days for
comment.
Question. If the health concern is over trans fat, why focus on
PHOs and not trans fat specifically?
Answer. Partially hydrogenated oils (PHOs) are ingredients added to
food to achieve specific technical effects, and are the primary dietary
source of artificial trans fat in the United States.
Question. Given that PHOs are used globally, the agency's
determination could potentially impact trade compliance. Did the FDA
consult Federal agencies with trade oversight before issuing this
determination?
Answer. FDA is charged with protecting the U.S. food supply, and
applies its regulatory authorities to ensure that food, including all
substances added to food, is safe. We believe our tentative
determination complies with all relevant legal requirements. We further
note that a number of other countries have already placed restrictions
on the use of trans fat-containing ingredients, including Denmark,
Austria, Hungary, and Switzerland. In addition, the European Commission
is currently considering action on industrially produced trans fat in
food.
Question. This past December, Congress enacted legislation that
gives the FDA authority to expediently add diseases to the Tropical
Disease Priority Review Voucher Program to spur development of
vaccinations for neglected diseases. Are you considering adding
diseases to the program, and has FDA begun the work to make the
additions?
Answer. FDA is considering adding diseases to the list of tropical
diseases in the Priority Review Voucher program. The legislation
enacted last year expanded the voucher program to Ebola and streamlined
the process for the agency to add other qualifying diseases, if it
determines such additions are appropriate. We are working on these
issues now.
Question. Is Chagas disease under consideration?
Answer. Yes, FDA is considering adding Chagas to the list of
tropical diseases. Adding Chagas to the list was recommended by members
of Congress and stakeholders attending a public meeting on tropical
diseases that qualify for tropical disease vouchers.
Question. How long will it take FDA to complete the process to add
a new disease?
Answer. While FDA cannot specify a particular timeframe for the
designation process, the agency will follow this new, expedited process
to make any changes as quickly as possible.
Question. FDASIA was enacted by Congress 3 years ago and required
FDA to issue new regulations for medical gases. Not only has there been
no proposed rule, Congress has yet to receive the report that was due
over a year ago. What is the status of the agency issuing these
regulations?
Answer. FDASIA requires FDA to:
--Review current regulations regarding medical gases, obtain input
from medical gas manufacturers and other interested parties,
and determine if any changes are necessary.
--Provide a report to the Senate Committee on Health, Education,
Labor and Pensions and the House Committee on Energy and
Commerce on its findings.
--If changes are determined to be necessary, finalize such changes by
July 2016.
As you note, the report to Congress is past due. We apologize for
the delay and are working to complete and submit the report as soon as
possible. We have sought and received comments from medical gas
manufacturers and other interested stakeholders, and we have conducted
an extensive review of the Federal drug regulations with regard to
medical gases. We held a public meeting on this topic in December 2013.
In addition, Dr. Janet Woodcock, the Director of FDA's Center for Drug
Evaluation and Research, met with representatives of the medical gas
industry in February 2014. Following this meeting, the Compressed Gas
Association and the Gas and Welding Distributors Association submitted
a joint revised set of proposed regulatory changes for FDA's
consideration. We have completed our review of these proposed changes
and are working to finalize and submit the Report to Congress.
Question. Will the FDA have the final regulations in place by the
January 9, 2016, deadline?
Answer. FDASIA does not require regulation changes unless they are
deemed necessary as a result of the regulation review. If changes are
deemed necessary, section 1112 of FDASIA requires final regulations by
July 9, 2016, 48 months after enactment of the act. We will do our best
to meet the deadline.
Question. As you know, CFSAN has for a number of years supported
several Food Safety Centers of Excellence that help to support the food
safety research needs of the FDA through basic research and various
other tasks. The Committee has long been supportive of the work of
these Centers. Can you please provide some background on Food Safety
Center of Excellence funding for fiscal year 2015 and fiscal year 2016,
and whether or not you can provide an increase in basic research
support levels in fiscal year 2016?
Answer. The FDA Food Safety Centers of Excellence (COEs) support
critical collaboration between FDA and academic institutions to advance
regulatory science through innovative research, education, and
scientific exchanges.
In fiscal year 2014 CFSAN awarded $11.025 million in funding to the
COEs. While FDA intends to maintain strong support for these Centers,
final decisions on precise funding amounts for fiscal years 2015 and
2016 are still pending.
Question. It is my understanding that the FDA requested authority
from the Office of Management and Budget to conduct a study on the
proposed changes to the Nutrition Facts Panel (NFP) related to consumer
comprehension of an ``added sugars'' disclosure on the NFP in addition
to ``sugars.'' Additionally, FDA published in the Federal Register on
March 3, 2014, its plan to conduct a consumer study to better
understand ``how consumers would comprehend and use this new
information.'' Can you please provide me with the status of this study,
the data produced to date, including the questions and responses
specific to the declaration of added sugars on the Nutrition Facts
label, and the FDA's plans and timing for making these results
available to the public for comment?
Answer. FDA has completed the study of consumer comprehension of an
``added sugars'' disclosure on the NFP in addition to ``sugars.'' We
are in the process of preparing a report summarizing the data from this
study. We will make the report available to you and the public when it
is complete.
Question. About a month ago, the New York State Attorney General
claimed that GNC and three other retailers were selling herbal products
that did not contain the labeled ingredients. This caused and continues
to cause quite a stir inasmuch as half of all Americans take
supplements. The New York Attorney General's allegations were based on
a series of tests known as DNA barcoding. DNA barcoding, I am told, is
an inappropriate test for herbal extracts because the extraction
process tends to destroy the DNA markers. I am also told that the U.S.
Pharmacopeia and the FDA do not use this type of test to determine
whether or not certain herbal extracts are present in a product. Can
you confirm that, in fact, the FDA agrees that DNA barcoding is not an
appropriate test for herbal extracts?
Answer. Speaking generically, FDA does not use DNA sequencing for
botanical authentication. The FDA's current research and development
for DNA sequencing based methods for plants is focused on the
development of a plant species DNA library and development of validated
methods for identification of botanical materials.
We are not privy to the details of methods employed during the NY
Attorney General's investigation and, because of this, FDA has not
stated whether DNA barcode testing is an appropriate test or
examination for this investigation. Currently, if FDA were to use DNA
methods on herbal extracts, we would use them in combination with
established chemical or other acceptable methods historically used to
verify the identity of these products. At this time, FDA does not use
DNA sequencing by itself to analyze an herbal extract.
______
Questions Submitted by Senator Roy Blunt
biosimilars
Question. I want to state up front that I support the development
and marketing of biosimilars. That is why I have been incredibly
frustrated at the lack of transparency in the implementation process.
The first approval should have been well understood and considered a
real accomplishment. Instead, it has highlighted that all the policy
and implementation questions we have been asking you to answer remain
unanswered due to the lack of published guidance.
Commissioner Hamburg, you stated at a hearing just last week before
the House Appropriations Subcommittee that guidance on naming was
coming soon. Two days after that hearing FDA approved the first
biosimilar product, but we still don't have any guidance. Can you
please share your exact timeline for publishing guidance?
Answer. While the agency cannot provide a specific timeline for the
release of any guidance, FDA continues to clarify our approach to
implementation of the Biologics Price Competition and Innovation (BPCI)
Act and provide guidance and information to assist biological product
developers--sponsors/companies--with bringing biosimilar and
interchangeable products to market.
FDA has recently issued three final guidances:
--Scientific Considerations in Demonstrating Biosimilarity to a
Reference Product
--Quality Considerations in Demonstrating Biosimilarity of a
Therapeutic Protein Product to a Reference Product
--Biosimilars: Questions and Answers Regarding Implementation of the
Biologics Price Competition and Innovation Act of 2009
FDA has published the following draft guidances since 2012:
--Clinical Pharmacology Data to Support a Demonstration of
Biosimilarity to a Reference Product
--Reference Product Exclusivity for Biological Products Filed Under
Section 351(a) of the PHS Act
--Formal Meetings Between the FDA and Biosimilar Biological Product
Sponsors or Applicants
--Biosimilars: Additional Questions and Answers Regarding
Implementation of the BPCI Act of 2009
The agency is continuing to review the comments received as we move
forward in finalizing these draft guidances. In addition, FDA expects
to issue draft guidance in 2015 on the following topics identified in
CDER's Guidance Agenda:
--Considerations in Demonstrating Interchangeability to a Reference
Product
--Statistical Approaches to Evaluation of Analytical Similarity Data
to Support a Demonstration of Biosimilarity
--Labeling for Biosimilar Biological Products
--Nonproprietary Naming for Biological Products
Question. Will the guidance document on naming address the
confusion raised about labeling of biosimilars? Specifically, the label
for the biosimilar product FDA approved on March 6 appears to
contradict the agency's current draft labeling guidance. Does FDA still
believe that health professionals should have a label that includes all
the information necessary to make prescribing decisions, including a
statement that a product is a biosimilar and whether a product has been
determined to be interchangeable? The label for the product you just
approved does neither.
Answer. FDA believes that healthcare professionals should have
product labeling that includes the essential scientific information
necessary to make informed prescribing decisions for their patients.
FDA expects to issue draft guidance on labeling for biosimilar products
in 2015. The public will be provided with an opportunity to comment on
this draft guidance when it is published.
Question. Further, given the lack of clarity on the question of
extrapolation in the product's label, when exactly is the guidance on
that topic expected? How will physicians know which indications were
actually researched and validated for the biosimilar?
Answer. FDA undertakes a rigorous and thorough evaluation to ensure
that a biosimilar product meets the statutory and regulatory standards
for approval and has been determined to be safe and effective under the
conditions of use described in approved product labeling. Approval of a
biosimilar product is based on review of evidence that may include
structural and functional characterization, animal study data, human
pharmacokinetic and pharmacodynamics data, clinical immunogenicity
data, and other clinical safety and effectiveness data that
demonstrates that the product is highly similar to the reference
product (notwithstanding minor differences in clinically inactive
components) and that there are no clinically meaningful differences
between the biosimilar product and the reference product in terms of
safety, purity, and potency.
Additionally, a biosimilar application must include information
demonstrating, among other things, that the proposed biosimilar has the
same route(s) of administration, dosage form(s) and strength(s) as the
reference product, and that the condition(s) of use for the proposed
biosimilar have been previously approved for the reference product. To
determine which indications have been approved for a biosimilar
product, healthcare professionals are advised to review the labeling--
prescribing information--of the biosimilar product.
FDA has issued final guidances, ``Scientific Considerations in
Demonstrating Biosimilarity to a Reference Product,'' and
``Biosimilars: Questions and Answers [Q&A] Regarding Implementation of
the Biologics Price Competition and Innovation Act of 2009'' (Q&A
I.11), describing the potential for a biosimilar applicant to
extrapolate data derived from a clinical study sufficient to
demonstrate safety, purity, and potency in an appropriate condition of
use to one or more additional conditions of use for which licensure is
requested and for which the reference product is licensed, if
sufficient scientific justification is provided. FDA expects to issue
draft guidance on labeling for biosimilar products in 2015. The public
will be provided with an opportunity to comment on this draft guidance
when it is published.
Question. How does FDA intend to update the label for the product
with respect to the name? I understand that it was approved with a
``placeholder'' for the name. What does this mean and why did FDA
proceed this way?
Answer. The agency had an application for a biosimilar product that
was ready for approval and designated a proper name with a
distinguishing suffix for this product (filgrastim-sndz) on a product-
specific basis while continuing to consider broader policy issues
regarding the nonproprietary names of biological products. Some Agency
communications used the term ``placeholder'' to describe this
nonproprietary name. That term was intended to indicate that FDA's
designation of a nonproprietary name for this product should not be
viewed as reflective of the agency's decision on a comprehensive naming
policy for biosimilar and other biological products. FDA intends to
issue draft guidance on how current and future biological products
marketed in the United States should be named in the near future. If
the filgrastim-sndz name is inconsistent with the naming policy FDA
adopts for biological products, however, FDA would work with the
applicant to minimize the impact that labeling changes would have on
the manufacture and distribution of this product.
untitled letters
Question. I understand that the FDA uses untitled letters to
increase public accountability of firms, which may deter future
violations and increase compliance with the law. However, it has come
to my attention that the Center for Biologics Evaluation and Research
(CBER) may be systematically using untitled letters as a means to
reclassify tissue products instead of following protocol established in
the Administrative Procedure Act.
Prior to issuing each of the untitled letters, does FDA issue
guidance or regulations which provided clarity regarding the
classification of the product(s)? If so, please provide the key
citations.
Answer. CBER does not systematically use untitled letters as a
means to reclassify tissue products instead of following the
regulations that have been established under the Administrative
Procedures Act.
The requirements for FDA's regulation of human cells, tissues, and
cellular and tissue-based products--HCT/Ps--are found in 21 CFR part
1271. Subpart A contains general provisions, including the criteria
that must be met in order for an HCT/P to be regulated solely under
section 361 of the Public Health Service Act (PHS Act) (21 CFR
1271.10). In accordance with 21 CFR 1271.20, if an HCT/P does not meet
the criteria under 21 CFR 1271.10, it will be regulated as a drug,
device, and/or biological product under the Federal Food, Drug, and
Cosmetic Act (FD&C Act) and/or section 351 of the PHS Act. These
regulations were finalized after a period of public notice and comment,
consistent with the Administrative Procedures Act.
As required by law, FDA publishes regulations in the Federal
Register. FDA usually uses ``notice and comment rulemaking'' to issue
regulations. The first public step in the notice and comment rulemaking
process is for FDA to issue a proposed rule, which explains what we
intend to require, and asks for public comment. Based on the comments,
FDA will then decide to end the rulemaking process, issue a another
proposed rule, or issue a final rule. The final rule preamble responds
to comments on the proposed rule and explains the new regulatory
requirements.
FDA issues guidance documents, which describe the agency's
interpretation of or policy on a specific regulatory issue. They do
this by providing recommendations for meeting the criteria or
requirements in regulations. 21 CFR 10.115(b). Guidance documents may
relate to the processing, content, and evaluation of submissions as
well as inspection and enforcement policies. In the context of HCT/Ps,
it is anticipated that guidance documents will improve stakeholders'
understanding of the definitions in part 1271.3 and how to apply the
regulatory criterion in 21 CFR 1271.10.
An untitled letter is an advisory action that cites violations that
do not meet the threshold of regulatory significance for a warning
letter. The format and content of an untitled letter should clearly
distinguish it from a warning letter. For example, as discussed in the
FDA's Regulatory Procedures Manual, untitled letters are not titled; do
not include a warning statement that failure to take prompt correction
may result in enforcement action; do not evoke a mandated district
follow-up; and request (rather than require) a written response from
the firm within a reasonable amount of time. They are issued to address
inspectional findings or compliance issues at a specific firm.
Here is a link to FDA's Regulatory Procedures Manual for the
record: http://www.fda.gov/ICECI/ComplianceManuals/
RegulatoryProceduresManual/ucm176871.htm.
Question. Do you currently have any policies and procedures related
to how soon after you issue an untitled letter to a company you
subsequently post it on your Web site? If not, are you considering such
a policy?
Answer. CBER's policy is to post all untitled letters on its Web
site as soon as practicable after confirmation of receipt by recipient
and a review of the letter prior to disclosure to include redaction of
any trade secrets or confidential commercial information. CBER started
posting these letters in 2002; this complies with the commitment made
by the agency in the Transparency Initiative.
Question. Do you currently have any policies or procedures related
to the issuance of an untitled letter related to the appearance of the
letter? For instance, do you require that all untitled letters issued
to a company have the header ``Untitled Letter?''
Answer. As described in the FDA's Regulatory Procedures Manual,
chapter 4-2, untitled letters are not titled, and therefore do not have
the header ``Untitled Letter'' on the letter. Here is the link to FDA's
Regulatory Procedures Manual for the Record: http://www.fda.gov/ICECI/
ComplianceManuals/RegulatoryProceduresManual/ucm176871.htm.
Question. For the untitled letters in question, were any issued to
the company without the header ``Untitled Letter''? If so, when the
letter was subsequently posted on your Web site, did it include such a
header?
Answer. Untitled letters are not titled, and therefore do not
include the header, ``Untitled Letter.'' For clarity, and to
distinguish them from warning letters, untitled letters are identified
as such on CBER's Web site.
Question. Prior to issuing each of the untitled letters, did you
have any communications (formally or informally) with the company
regarding the issue that was the subject of the untitled letter?
Answer. If the untitled letter was issued subsequent to an
establishment inspection, the FDA investigator may have informally
discussed the situation, although they are not required to do so. An
untitled letter can often be the initial communication with regulated
industry concerning regulatory violations.
Question. Prior to issuing each of the untitled letters, did you
use alternative regulatory options to resolve questions related to
product classification, which may include formal inquiries (whether via
official correspondence or via telephone) or directed inspections with
appropriately qualified inspectors?
Answer. In determining whether to issue an untitled letter, FDA
officials generally consider whether evidence shows that a firm,
product, and/or individual is in violation of the law or regulations.
Such evidence may have been obtained during a routine or directed
inspection, or other means of surveillance, such as Internet Web site
surveillance. Untitled letters are often used as an initial
correspondence and can be an alternative to other regulatory options,
such as a warning letter.
Regarding jurisdictional questions, FDA's Tissue Reference Group--
also known as the TRG--was created as specified in the ``Proposed
Approach to the Regulation of Cellular and Tissue-based Products''
published by FDA in February 1997. The purpose of the TRG is to provide
a single reference point for product specific questions received by FDA
--either through the Centers, or from the Office of Combination
Products (OCP)--concerning jurisdiction and applicable regulation of
Human Cells, Tissues and Cellular and Tissue-Based Products (HCT/Ps).
FDA has publically posted information on how manufacturers can submit
inquiries to the TRG, as well as publically disclosing TRG
recommendations regarding HCT/P classification, on its Web site.
Here is a link to FDA's Tissue Reference Group's Web site: http://
www.fda.gov/biologicsbloodvaccines/tissuetissueproducts/
regulationoftissues/ucm152857.htm.
OCP issues classification and jurisdiction assignments for medical
products. Classification and jurisdiction assignments can be made
informally or formally. Informal assignment requests should be made by
directly contacting OCP. Formal assignment requests can be made by
submission of a Request for Designation Document, also known as RFD, to
OCP.
Here are links to the Office of Combination Products'
Jurisdictional and RFD Information: http://www.fda.gov/
CombinationProducts/JurisdictionalInformation/default.htm and http://
www.fda.gov/CombinationProducts/RFDProcess/default.htm.
Question. Subsequent to receiving an untitled letter, did any
company request that you post a response to such letter? If so, did you
post the response to the letter?
Answer. FDA policies and procedures do not currently include the
posting on the Internet of manufacturers' responses to FDA's untitled
letters. CBER has only rarely received a request to post the response
to an untitled letter and declined to do so. However, a company is
always able to post information on its own Web site, including its
response to the untitled letter and any other information in regards to
addressing FDA's concerns.
Question. Have you considered issuing formal ``close out'' letters,
similar to what is done for warning letters?
Answer. FDA policies and procedures do not currently call for
issuing untitled letter close-out letters.
fda food safety activities
Question. I have heard from many organizations that are requesting
appropriate funding for FDA's food safety activities in fiscal year
2016 and continue to oppose the proposed industry user fees, which have
been repeatedly rejected by Congress, to pay for food safety
activities. Commissioner Hamburg, do you still believe the user fees
are necessary and do the user fees have industry and political support?
Answer. In fiscal year 2016, FDA has requested an increase of
$301.2 million to support its FSMA implementation efforts. The request
includes a net increase of $109.5 million in Budget Authority and
$191.8 million in User Fees. The total request is critical to ensure
full implementation of FSMA. FDA continues to work with its
stakeholders to build support for the proposed food safety User Fees.
However, FDA is most concerned with having an appropriate level of
funding for successful implementation, not the funding source.
______
Questions Submitted by Senator Mitch McConnell
Question. I submitted five questions for the record last year, but
never received a response from your agency on a single question. Why
has nearly a year gone by without a response from your agency?
Answer. FDA did not receive questions for the record from
Appropriations subcommittee staff last year. While we were not aware of
your questions, we are happy to answer them this year or in a briefing
or letter.
Question. Prescription drug abuse remains a serious problem in my
home State of Kentucky where more than 80 Kentuckians die each month as
a result of this epidemic. In fact, the demand for opiates has led to a
heroin epidemic in Northern Kentucky, and heroin overdoses caused 61
deaths in this part of the State in 2012. Approving drugs with abuse-
deterrent features is one tool among many available to FDA to help
prevent prescription drug abuse. While much attention has been given to
abuse-deterrent formulations for extended-release, long-acting opioids,
what steps has FDA taken to encourage the development of these
formulations in immediate release opiates? Furthermore, what is the
rationale behind FDA's decision not to require a Risk Evaluation and
Mitigation Strategy (REMS) for immediate release opioids?
Answer. The FDA looks forward to a future in which most or all
opioid analgesic medications--not just extended-release/long-acting
(ER/LA) opioids products--are available in formulations that are less
susceptible to abuse than the formulations that are on the market
today. While ER/LA opioid analgesics typically contain larger amounts
of drug and therefore carry a higher risk for overdose and death, abuse
of immediate-release (IR) products is also a significant concern.
FDA plans to finalize guidance on the evaluation and labeling of
all abuse deterrent opioid formulations, both IR and ER/LA, in the near
future. The guidance--based, in part, on comments received during a
public meeting held to discuss the development, assessment, and
regulation of such products--will suggest the types of studies that
should be conducted to demonstrate that a given opioid formulation has
abuse-deterrent properties. The guidance will also discuss the
evaluation of those studies and the labeling that may be approved based
on the results.
FDA's focus on incentivizing development and use of all opioid drug
products with abuse-deterrent features has significantly increased
interest in producing these products. Some 30 investigational new drug
applications (INDs) have been submitted by manufacturers seeking to
conduct clinical trials on potentially abuse-deterrent products. FDA is
working with drug makers to advance the science of abuse deterrence and
navigate the regulatory path to market as quickly as possible.
Companies are exploring promising alternatives to currently marketed
abuse-deterrent formulations in an innovative array of scientific
techniques and approaches.
Additionally, abuse-deterrent opioid products, both IR and ER, may
be eligible for one or more of FDA's expedited review and approval
programs, including fast track designation and priority review
timelines, if they meet applicable criteria.
ER/LA opioid analgesics typically contain higher doses of opioids
than IR opioids or opioid/non-opioid combinations products because they
are intended to release the drug over a longer period of time. As a
result, ER/LA opioid analgesics may be more desirable to individuals
who misuse or abuse opioids--and pose a greater risk of fatality in the
event of an overdose. These concerns informed the FDA's decision to
require the ER/LA Opioid Analgesics REMS.
FDA has received a citizen petition asking the agency to require IR
opioids to include labeling changes that parallel those required of ER/
LA opioid analgesics. The agency is in the process of reviewing and
responding to that petition. If the agency determines that a REMS is
necessary to ensure that the benefits of IR opioid analgesics outweigh
the risks, we will take appropriate action.
Question. In a statement you released last year, strengthening
surveillance efforts at FDA to actively monitor the prescription drug
abuse epidemic and emerging trends was identified as a priority action
item for the agency. It is my understanding that FDA has various
surveillance methods either in place or in the pilot phase to monitor
post-marketing safety issues. Will you please explain all of the post-
marketing surveillance efforts underway at FDA related to prescription
drug abuse, including if and how the Sentinel program will be used to
support surveillance efforts related to prescription drug abuse trends?
What other agencies is FDA coordinating with on surveillance efforts,
and how is that coordination being implemented?
Answer. FDA actively monitors adverse event and medication error
reports submitted by pharmaceutical manufacturers and the general
public (e.g., doctors, nurses, patients, and family members of
patients) through the FDA Adverse Event Reporting System (FAERS).
FAERS, a key component of postmarketing surveillance, helps to identify
new drug safety issues that were not observed during the clinical
trials that served as the basis for drug approval. FDA safety
evaluators regularly screen FAERS reports.
To supplement surveillance efforts, FDA has required new
postmarketing studies for all ER/LA opioids. These studies will help to
better assess the risks of misuse, abuse, addiction, overdose and death
associated with long-term use of ER/LA opioids.
The Sentinel Program is a vital tool in FDA's surveillance efforts.
Sentinel utilizes administrative healthcare claims data from healthcare
providers and facilities and may at some point help us to understand
issues brought to medical attention by patients prescribed opioids,
once the claims for events such as overdoses are appropriately
validated. As part of the required safety studies, FDA is requiring
manufacturers to validate administrative claims that may be indicative
of opioid overdoses. We are hopeful that this effort will yield
reliable algorithms that can be used more broadly in administrative
claims data, like Sentinel, to study these types of outcomes of
prescription opioid abuse.
The agency is also collaborating in several efforts to collect more
robust and comprehensive data on opioid abuse, including ER/LA opioid
abuse. FDA is working with the National Center for Health Statistics at
the Centers for Disease Control and Prevention (CDC) to obtain detailed
national data on emergency department visits relating to drug abuse
from hospitals participating in the new National Hospital Care Survey.
FDA is also working with the National Electronic Injury Surveillance
System--Cooperative Adverse Drug Event Surveillance Project (NEISS-
CADES) to expand the data collection and abstraction process to include
abuse-related clinical encounters. In addition, the agency is leading
an ongoing collaborative project with CDC to identify and quantify
deaths related to specific drugs, including those due to overdoses
caused by prescription opioid products. Finally, FDA is exploring ways
to use data from State-based Prescription Drug Monitoring Programs to
better understand prescribing and dispensing behaviors of controlled
substances that play a role in the evaluation of prescription drug
abuse.
FDA is committed to making a difference in this epidemic. We
continue to actively partner with others to implement the
Administration's National Drug Control Strategy and Prescription Drug
Abuse Prevention Plan--and reduce prescription drug misuse, abuse and
addiction. FDA is also continuing its close participation in
surveillance efforts through the Prescription Drug Abuse Subcommittee
of the HHS Behavioral Health Coordinating Council.
Question. As you know, FDA approval of innovator drugs that lack
abuse-deterrent features is a major concern in my home State of
Kentucky. Why has FDA refrained from granting an abuse-deterrent label
to products that meet the requirements of abuse-deterrence under any
one of tiers 1, 2 and 3 of the FDA Draft Guidance for Industry on
Abuse-Deterrent Opioids? How does FDA recognize and communicate, or
plan to recognize and communicate, that although a product may not have
the ability to meet the requirements outlined under all the tiers
listed in the FDA Draft Guidance for Industry on Abuse-Deterrent
Opioids, it may still offer technology that makes the product more
difficult to abuse than others?
Answer. FDA has approved four ER/LA opioid analgesics with labeling
describing the product's abuse-deterrent properties consistent with the
draft guidance. They include: OxyContin; Targiniq ER; Embeda ER; and
Hysingla ER.
We have rejected abuse-deterrent claims for products when the data
were insufficient to support such claims. FDA will approve labeling
describing a product's abuse-deterrent properties when the data show
that a product's abuse-deterrent properties can be expected to result,
or actually have resulted, in a meaningful reduction in that product's
abuse.
We are still in the early stages of abuse-deterrent product
development--the market has a small number of products using abuse-
deterrent technologies, and the agency is assessing each opioid drug
product's safety and efficacy on a case-by-case basis. FDA expects
these technologies to improve and expects products containing them
(both innovator and generic) to become more widely used. FDA looks
forward to a time, hopefully not so far in the future, when the
majority of opioids are in effective, abuse-deterrent forms; forms that
substantially reduce abuse, including by oral, intranasal, and
intravenous routes.
FDA hopes that the final guidance, to be released soon, will
clarify abuse-deterrent labeling claims. Abuse-deterrent labeling will
be approved for products. All abuse-deterrent labeled products can be
expected to result, or will have actually resulted, in a meaningful
reduction in that product's abuse.
Question. The incidence of newborns suffering withdrawal has
tripled throughout the country since 2000. To put this in perspective,
in 2009, approximately one infant was born each hour showing signs of
drug withdrawal. In Kentucky, this condition increased more than 2,400
percent from 2000 to 2012. Babies suffering from drug dependence are
more likely than other newborns to have complications such as low birth
weight and respiratory complications, placing additional hurdles in
place to becoming healthy and adding costs to the healthcare system.
What activities is FDA involved in to address the rising number of
babies being born dependent on opioids?
Answer. The agency is also alarmed by the dramatic increase in the
number of babies born with Neonatal Opioid Withdrawal Syndrome (NOWS)
and recently augmented the labeling warnings about this risk for ER/LA
opioid analgesics. Product labeling is FDA's primary tool to inform
prescribers about approved uses of medications and to assist them in
making the best decisions for their patients.
For women with chronic pain, there are no analgesics that come
without some risk to a developing fetus. Nonsteroidal anti-inflammatory
drugs (NSAIDs) cannot be used during the third trimester. Other non-
opioid medications used for the treatment of pain also have risks.
Given the risks associated with alternative products, opioid
analgesics may be an appropriate treatment option during pregnancy. We
are committed to providing the necessary information to prescribers and
patients so that they may make informed decisions regarding appropriate
use of these drugs during pregnancy.
As noted above, FDA is also continuing its close participation in
surveillance efforts through the Prescription Drug Abuse Subcommittee
of the HHS Behavioral Health Coordinating Council.
Question. Incidence of skin cancer continues to rise in the United
States. One American dies every hour from melanoma, the deadliest form
of skin cancer. We know that sun exposure is a high risk factor for
melanoma and we know that using sunscreen effectively can reduce that
risk. Yet, Americans still do not have access to sunscreen ingredients
that have been on the market all over the world. To encourage the FDA
to review the backlog of sunscreen applications that had been pending
for more than a decade, Congress passed and I supported the Sunscreen
Innovation Act, which was signed into law by President Obama last
November. What steps are being taken by FDA to see that sunscreen
ingredients that have been on the market and used safely all over the
world are accessible to Americans?
Answer. It is very important that consumers have access to safe and
effective preventive skin care drug products. FDA is actively working
to assure that sunscreens containing the ingredients being evaluated
under the Sunscreen Innovation Act (SIA) provide such protection.
As required by the SIA, FDA has completed several important steps
in the review process for sunscreen active ingredient applications
marketed for a material time and extent in other countries and
determined eligible for review prior to enactment of the SIA. We have
reviewed all eight pending sunscreen active ingredient applications,
evaluated submitted data, and identified the missing information we
need to determine that sunscreens containing each ingredient would be
generally recognized as safe and effective. We have issued proposed
orders outlining additional data needed in order to make a
determination that each ingredient meets this standard.
As outlined in the SIA, the data requested must be gathered and
submitted to the FDA for evaluation before the agency can proceed to a
Final Sunscreen Order. We look forward to receiving and reviewing the
data. The agency is committed to doing its best to continue to meet
future deadlines under the SIA--and to provide American consumers with
additional options for safe and effective sunscreen ingredients.
Heightened concerns about the risk of skin cancer and premature
aging have fundamentally altered consumers' use of sunscreen products
over the past few decades. Americans once applied the products in
modest amounts while at the beach or exercising during peak hours of
summer sun exposure. In contrast today, Americans--young and old, fair-
skinned and not--now routinely spread on sunscreens all year round.
A significant increase in the amount and frequency of sunscreen
exposure combined with advances in scientific understanding that some
sunscreen ingredients may be absorbed into the bloodstream have raised
safety concerns.
The SIA does not relax FDA's scientific standards for evaluating
safety and effectiveness or the requirement that the agency have
adequate data on which to base a generally recognized as safe and
effective (GRAS/E) determination. FDA has proposed data requirements,
unanimously supported by an Advisory Committee panel of independent
scientific experts, to meet this standard. We look forward to receiving
and reviewing industry data--and helping American consumers make
informed decisions about these products.
______
Questions Submitted by Senator Steve Daines
Question. Earlier this month, FDA took the significant step of
approving the first biosimilar drug. It is disappointing, however, that
important guidance is still not forthcoming from the agency on issues
such as naming, interchangeability, and others. In fact, in the almost
exactly 5 years since enactment of the biosimilars law, no final
guidance on any biosimilars topic has come from FDA.
What is the anticipated timeline for these important guidance
documents, which are essential to encouraging and assisting companies
to develop biosimilars that will benefit patients?
Answer. While the agency cannot provide a specific timeline for the
release of any guidance, FDA continues to clarify our approach to
implementation of the BPCI Act and provide guidance and information to
assist biological product developers--sponsors/companies--with bringing
biosimilar and interchangeable products to market.
FDA has recently issued three final guidances:
--Scientific Considerations in Demonstrating Biosimilarity to a
Reference Product
--Quality Considerations in Demonstrating Biosimilarity of a
Therapeutic Protein Product to a Reference Product
--Biosimilars: Questions and Answers Regarding Implementation of the
Biologics Price Competition and Innovation Act of 2009
FDA has published the following draft guidances since 2012:
--Clinical Pharmacology Data to Support a Demonstration of
Biosimilarity to a Reference Product
--Reference Product Exclusivity for Biological Products Filed Under
Section 351(a) of the PHS Act
--Formal Meetings Between the FDA and Biosimilar Biological Product
Sponsors or Applicants
--Biosimilars: Additional Questions and Answers Regarding
Implementation of the BPCI Act of 2009
The agency is continuing to review the comments received as we move
forward in finalizing these draft guidances. In addition, FDA expects
to issue draft guidance in 2015 on the following topics identified in
CDER's Guidance Agenda:
--Considerations in Demonstrating Interchangeability to a Reference
Product
--Statistical Approaches to Evaluation of Analytical Similarity Data
to Support a Demonstration of Biosimilarity
--Labeling for Biosimilar Biological Products
--Nonproprietary Naming for Biological Products
Question. Within 30 days, please provide the subcommittee with a
list of biosimilars guidance documents you expect to publish this
calendar year. With respect to any draft biosimilars guidance, please
indicate when you expect to make that guidance final.
Answer. Please see the previous response.
______
Questions Submitted by Senator Jeff Merkley
state inspection standards for fsma
Question. The budget includes $32 million to train approximately
1,000 State food safety inspectors, and to help the States implement
real-time information sharing capacity with FDA. That comes out to
training about 20 inspectors in each State, which isn't that many.
What oversight will FDA provide to make certain that State
inspections are up to FDA standards, and how will they monitor the
States?
Answer. For State inspections performed under FDA food inspection
contracts, FDA will evaluate the contracted State agencies' overall
performance throughout the contract period. Inspectional performance
evaluation will include review of inspection reports, audit assessments
and joint Federal/State inspections. State inspections will be
collaboratively scheduled by the FDA district offices and each
contracted State agency. In addition, there are 40 State-manufactured
food regulatory programs enrolled in the Manufactured Food Regulatory
Program Standards (MFRPS), which represents 89 percent of contracted
inspections, which are used by the States as a guide for consistent,
continuous improvement for State food manufacturing programs. MFRPS
standards promote development of a high-quality State-manufactured food
regulatory program and include a process for continuous improvement.
The MFRPS are updated, when applicable, to facilitate compliance with
new legislation, regulations, guidance, inspection programs, and agency
rules as they are developed.
Finally, FDA recognizes the need to establish training programs for
Federal and State inspectors who will conduct inspections on behalf of
FDA for the new FSMA regulations. The expected outcome of the
evaluation is to ensure competency in the performance and quality of
inspections regardless of the regulatory entity that performs such
inspections.
imported food inspection
Question. GAO recently published a report regarding FDA's foreign
offices and made a couple of significant findings. The first was that
FDA is not conducting nearly the number of foreign inspections as FSMA
mandated. They conducted approximately 1,300 inspections in 2012, and
plan to conduct only 1,200 in fiscal year 2015. FSMA mandated 600
inspections in 2011, with a doubling of the previous years' inspection
level for the following 5 years. The second finding was that 44 percent
of foreign office positions were vacant as of October 2014.
I understand that the FDA has indicated that they don't intend to
fulfill the FSMA mandate, and don't necessarily believe that would be
useful.
However, how is FDA determining what the appropriate level of
physical foreign inspections should be?
Answer. Under the FDA Food Safety Modernization Act (FSMA), FDA was
directed to inspect at least 600 foreign food facilities in 2011 and,
for each of the next 5 years, to inspect twice the number of facilities
inspected during the previous year. FSMA provides FDA a multi-faceted
toolkit to better ensure the safety of imported food. This toolkit
includes increased foreign inspections, as foreign inspections provide
direct accountability for inspected firms, incentives for all foreign
firms exporting to the United States to comply with U.S. requirements,
and critical intelligence for FDA concerning foreign food safety
practices. The toolkit also includes sharpening private sector
accountability for import safety, leveraging private sector resources,
and taking advantage of any resources and services the foreign
governments can provide to elevate assurances that food imported into
the United States meets FSMA's prevention-oriented standards and
requirements.
Foreign inspections are an important part of the new import safety
system mandated by FSMA, but they cannot alone ensure comparable safety
of imported and domestic food. FDA has been clear in its Report to
Congress under section 110(a)(1) of FSMA that the agency does not
anticipate going significantly beyond 1,200 foreign food facility
inspections per year in the foreseeable future until after other parts
of the new import safety system have been implemented. FDA's position
is based on the enormity of the additional funding that would be needed
to meet FSMA's foreign inspection goals, coupled with FDA's view that
additional resources would be more effectively spent first on
implementing tools in the FSMA import safety toolkit that leverage both
FDA and private sector resources to ensure the safety of foods exported
to the United States by foreign firms.
FDA is committed to allocating its resources using a risk-based
inspection model for the selection of firms and the number of firms per
country. This risk-informed approach is based on the strategic
allocation of programmatic resources by integrating in a systematic
manner the relevant quantitative, qualitative, and deterministic public
health safety factors to obtain a decision to select firms and
countries. This approach better protects the safety of the U.S. food
supply and gives the agency flexibility to adjust FDA resources
effectively and efficiently as emerging issues arise.
FDA Centers and Offices work collaboratively on an inspection work
plan each year. For example, the FDA India Office works with ORA and
CFSAN to develop a work plan for food facilities inspections in India.
The FDA India Office provides information to FDA headquarters regarding
high-risk facilities and high volume facilities that have not been
inspected. The FDA India Office requests other food facilities
inspections based on local intelligence, e.g. complaints, informants,
local news, and other sources. In March 2015, FDA signed a memorandum
of understanding with the Indian competent authority that has oversight
of some food exports. The FDA India Office hopes to be able to leverage
information from this authority to further target high-risk food
facilities that export to the United States.
Another example is from the FDA China Office. The FDA China Office
develops a list of recommended firms for inspection to share with ORA
and the Centers. Similar to the FDA India Office, the FDA China Office
uses local intelligence to help select which firms should be included
on the list in addition to those higher risk food facilities that have
not had a previous inspection and are known to be active suppliers to
the United States.
FDA also is working diligently to fill vacancies within our foreign
offices. In fact, since the time of the GAO report, FDA has already
reduced the vacancy rate from 44 percent to 40 percent.
Question. Since you aren't planning to fulfill the FSMA mandate,
what is your plan?
Answer. As discussed, FSMA provides FDA a multi-faceted toolkit to
better ensure the safety of imported food. For example, the foreign
supplier verification programs mandated by FSMA will be the foundation
of a new system under which importers will take greater responsibility
for ensuring that foreign manufacturers produce food in compliance with
U.S. safety requirements. Another import-related program, the Voluntary
Qualified Importer Program (VQIP), will make it easier for participants
in the program to import items into the United States, based on
demonstrated high-performance in food safety, and enable FDA to better
focus its resources on potentially higher risk imports. FSMA also
directs FDA to establish an accredited third-party audit program, under
which third-party auditors can assure importers and FDA that foreign
producers are using effective preventive controls. Final rules
requiring foreign supplier verification programs and establishing the
accredited third-party audit program are scheduled to publish this
year.
The agency is expanding its collaborations with foreign governments
so that FDA can rely as appropriate on foreign government food safety
programs and gain knowledge about the safety of foreign exports. This
allows FDA to focus its own resources more efficiently.
FDA's current focus with respect to foreign facility inspections is
targeting them to achieve the greatest public health benefit. FDA's
selection of foreign food facilities for inspection is based on an
overall, cross-cutting risk profile. The primary factors contributing
to a facility's risk profile include: (1) the food safety risk
associated with the commodity (the type of food), (2) the manufacturing
process, and (3) the compliance history of the facility, such as
refusal rates for products that were denied entry into the United
States. In addition, section 201 of FSMA requires FDA to identify high-
risk facilities and allocate resources to inspect facilities according
to the known safety risks of the facilities, and includes several
factors to consider when making that assessment.
FDA is committed to reconfiguring import screening and field exam
activities to complement oversight of FSMA's foreign supplier
verification requirement and ensure that FDA is making strategic, risk-
based use of its import oversight resources. This initiative is
documented in FDA's Operational Strategy for the Implementation of FSMA
(http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm395105.htm). FDA is
also committed to building data integration and analysis systems to
strengthen risk-based targeting of resources. As FDA moves forward with
implementing the new FSMA toolkit for imports, FDA intends to monitor,
analyze, and reconsider a host of factors, including the number of
foreign inspections we conduct and how we target establishments. FDA
will adjust its plan as necessary, and as funding permits, to further
our public health mission. All of these activities will contribute to
FDA's ability to ensure comparable safety of imported and domestic food
and also rely on FDA receiving sufficient resources.
Question. How has a vacancy rate that high affected the ability of
the foreign offices to do their jobs, and how are you addressing this
issue?
Answer. As noted in the GAO report, FDA has undertaken efforts to
improve staffing in its foreign posts but has experienced some
challenges. For example, following expanded funding under the China
Safety Initiative, FDA's China Office has been working extensively and
over an extended period of time with Chinese counterparts to obtain
visas for an increased number of FDA staff to be based in China. In a
positive development, the FDA signed two Implementing Arrangements
(IAs) with its Chinese counterparts in November and December 2014. The
documents, signed with China's General Administration of Quality
Supervision, Inspection and Quarantine (AQSIQ) and China's Food and
Drug Administration (CFDA), frame the work of regulatory personnel
posted in each country, outline the expectations of FDA and AQSIQ
regarding inspections of food facilities, and detail the expectations
of FDA and CFDA regarding inspections of drug facilities.
As of May 2015, there are now 11 FDA FTEs in the FDA's Beijing,
China Office. This includes an additional seven staff who have recently
been issued visas and deployed to the China Office. We have one foods
investigator who is preparing to deploy, but has not yet applied for
her visa. We currently also have two drug investigators on short-term
detail. The FDA China Office is actively recruiting staff to reduce the
current vacancies and is working closely with FDA's Office of Human
Resources (OHR). FDA continues to augment the staff in China with
temporary duty details and foreign cadre inspections to complete its
inspectional work plans in China.
The FDA India Office also has faced recruitment challenges but is
working to hire additional staff. At present, the FDA India Office has
five positions filled, including two food investigators. The FDA India
Office has set an inspection target for in-country investigators to
ensure inspection performance expectations are met. For fiscal year
2014, FDA India Office food inspections met work plan goals. Fiscal
year 2015 inspectional targets are currently on track to meet
expectations. FDA will conduct inspections with temporary duty details
and foreign cadre inspectors until full staffing is achieved.
More generally, to address some of the recruitment challenges for a
foreign assignment, FDA's Office of International Programs has:
--Developed continuous vacancy announcements for multiple geographic
sites to maximize the pool of applicants.
--Developed an SOP for foreign post renewals and extensions to remove
obstacles to retaining staff.
--Created interview panels that include relevant Center involvement
to promote the selection of subject matter experts
knowledgeable about Centers' programs.
--Strengthened the OIP deployment process(es).
--Created temporary details.
--Made more strategic utilization of locally employed staff (LES) in
foreign posts.
--Leveraged other U.S. Government agencies field deployment
processes/programs.
Despite some challenges to recruit highly qualified investigators
to our foreign offices, OIP has been successful in strengthening
inspection capabilities in FDA's offices overseas. In the past year
alone, FDA's foreign offices have increased the total number of
inspections and expanded the countries in which foreign inspections are
being conducted by in-country investigators and investigators on 60-120
day detail assignments to foreign offices.
fda office of regulatory affairs (field staff) reorganization
Question. You started an initiative last year to reorganize your
field staff in order to make them more specialized. The goal appears to
be to have inspectors who are very focused on one type of inspection--
drug facility inspections, for example, instead of having inspectors
who have to play many different roles. With the increasing complexity
of drug and food manufacturing, as well as FSMA implementation, this
seems like a good idea.
Will this reorganization require additional funding and training?
If so, how much?
Answer. FDA is working to realign inspection and compliance staff
and managers by program (e.g. food, pharmaceutical, etc.). Training is
a critical component of enhancing specialization of FDA's inspectorate
and ensuring the staff has the expertise and tools needed to keep pace
with changing and advancing technology in the industries FDA regulates.
As part of FDA's program alignment efforts, ORA is working with FDA
Centers to evaluate current training programs, develop new and novel
approaches for training staff, and work toward more collaborative
training leveraging both Center and Field experts. FDA will train our
staff, State partners, and educate industry on new regulations
resulting from FSMA, FDASIA, and other recently enacted laws. At this
time, however, it is unclear whether or not the agency will require any
additional resources or training related to the realignment effort.
Question. Do you anticipate hiring additional staff as part of this
effort?
Answer. It is too early to precisely predict the Office of
Regulatory Affairs' (ORA's) future staff requirements, transitioning
from a geographically based management model to a program-based
management model, where investigations, compliance, and operational
managers are aligned by program. ORA is comparing its current staffing
level with the staffing needs for each program area. This information,
along with data from each program's inventory, will be used to
determine the gaps in staffing by program area. Once this gap analysis
is complete, ORA will begin aligning staff to the new program
management model and employ specific hiring requirements by program.
Question. How will you make sure the inspection staff is properly
allocated across the country?
Answer. As FDA works to align inspection and compliance staff and
managers, FDA is evaluating the current inventory of regulated firms
across the country and across the globe. In the past decade, FDA has
seen unparalleled growth of imported products which necessitates FDA to
allocate staff across the United States based on domestic industry and
at ports of entry and in foreign countries to ensure protection of the
American public. FDA will align current staff not only by program but
also by operational needs ensuring staff will be best positioned to
inspect, examine, and collect samples of both domestic and imported
products. In addition, FDA will target any inspectional hiring in those
specialties and locations where there is a need.
electronic drug inserts
Question. FDA recently published a rule requiring electronic-based
labeling for healthcare providers, but there have been many concerns
raised about them. The ag report last year actually included language
directing FDA not to publish a rule that would require electronic
labeling in lieu of paper inserts. Concerns raised include
cybersecurity issues, a lack of access to the Internet in parts of
rural America, and the loss of Internet access everywhere during a time
of disaster. I understand that this rule only applies to healthcare
providers and not packages provided directly to patients, but I believe
these concerns are still valid.
Why did FDA move forward on this rule, and will these issues be
addressed in the final rule?
Answer. On December 18, 2014, FDA issued a proposed rule entitled
``Electronic Distribution of Prescribing Information for Human
Prescription Drugs, Including Biological Products.'' We believe that
this proposed rule addresses the Committee's concerns about the use of
electronic labeling, while at the same time ensuring that the most up-
to-date prescribing information is available for use by healthcare
providers.
If finalized as proposed, this rule would generally require that
prescribing information intended for healthcare professionals be
distributed electronically, but also provide for continued access to
prescribing information in paper format in a number of circumstances.
For example, the proposed rule allows for drugs to be exempted from
electronic-only distribution if electronic-only distribution could
adversely affect the safety, effectiveness, purity, or potency of the
drug; is not technologically feasible; or is otherwise inappropriate.
Also, the proposed rule requires manufacturers to provide a toll-free
telephone number that healthcare providers can call 24 hours a day, 7
days a week to request a paper copy of the label.
FDA would like to emphasize that this is a proposed rule, subject
to notice-and-comment procedures. We granted a request to extend the
comment period for 60 days, until May 18, 2015. FDA will consider all
comments submitted in response to the proposal as we work to finalize
the rule. We fully expect that the concerns you have raised will be
addressed through that process.
food safety centers of excellence
Question. As you know, CFSAN has for a number of years supported
several Food Safety Centers of Excellence that help to support the food
safety research needs of the FDA through basic research and various
other tasks. The Committee has long been supportive of the work of
these Centers.
Can you please provide some background on Food Safety Center of
Excellence funding for fiscal year 2015 and fiscal year 2016, and
whether or not there will be an increase in basic research support
levels in fiscal year 2016?
Answer. The FDA Food Safety Centers of Excellence (COEs) support
critical collaboration between FDA and academic institutions to advance
regulatory science through innovative research, education, and
scientific exchanges.
In fiscal year 2014 CFSAN awarded $11.025 million in funding to the
COEs. While FDA intends to maintain strong support for these Centers,
final decisions on precise funding amounts for fiscal years 2015 and
2016 are still pending.
______
Questions Submitted by Senator Dianne Feinstein
fda oversight of antibiotic use and resistance
Question. Commissioner Hamburg, I am pleased to know that your
agency expects drug companies to fully participate in the agency's
policy for withdrawing growth-promoting uses of medically important
antibiotics in food animals. To what extent does the agency expect this
policy to reduce antibiotic use in agriculture? Does the agency have
specific performance goals for this policy?
Answer. FDA is confident that the changes outlined in Guidance for
Industry (GFI) #213 will be fully implemented by the December 2016
target date. These measures will significantly change how these drugs
have been used for decades. Production uses of medically important
antimicrobials will be eliminated as will over-the-counter access to
the remaining therapeutic uses of these products in the feed or water
of food-producing animals. In addition to tracking completion of these
changes, FDA is enhancing data sources in a number of ways to help
monitor the effects of GFI #213 over time. For example, FDA intends to
publish a proposed regulation that would enhance the quality and
utility of antimicrobial drug sales and distribution data it receives
on antimicrobial drugs intended for use in food-producing animals by
requiring reporting of such data by animal species. FDA is also working
with State partners to perform whole genome sequencing on samples
collected under the National Antimicrobial Resistance Monitoring System
(NARMS), which will provide unprecedented data on the traits of
resistant strains of foodborne bacteria from animals and animal-derived
foods. Further, FDA is working with the Centers for Disease Control and
Prevention (CDC) and the United States Department of Agriculture (USDA)
to develop a plan for collecting additional data on antibiotic use and
resistance to help provide a comprehensive, objective, and balanced
summary assessment of antibiotic drug use and resistance in animal
agriculture. FDA is continuing to work with USDA and CDC in developing
this plan and expects to hold a public meeting in the summer of 2015 to
obtain input from the public.
Question. Commissioner Hamburg, I am concerned that some
antibiotics approved for disease prevention or control do not have an
explicitly defined duration or use or may be approved for use at a sub-
therapeutic dose. What steps is the agency going to take to ensure
these antibiotics are not used inappropriately in agriculture?
Answer. As FDA moves forward with implementing the changes outlined
in Guidance for Industry (GFI) #213, FDA is also focusing on the
remaining therapeutic uses of those products and evaluating whether
additional improvements can be made to better align those uses with
current antibiotic stewardship principles. For example, concerns have
been raised about the use of medically important antibiotics for
prevention purposes. FDA considers uses that are associated with the
treatment, control, and prevention of specific diseases to be
therapeutic uses that are important for assuring the health of food-
producing animals, but would not consider the administration of a drug
to apparently healthy animals in the absence of any information that
such animals were at risk of a specific disease to be judicious. In
addition, when such uses of medically important antibiotics are deemed
necessary, it is important that the duration of administration be
appropriately limited. Therefore, as part of FDA's overall effort to
ensure the judicious use of medically important antibiotics, FDA is
currently developing a process and timeframe for evaluating and
addressing that issue.
Question. Commissioner Hamburg, I strongly support your agency's
move to bring antibiotics under veterinary oversight. In your policy on
judicious antibiotic use, you establish guidelines for veterinarians to
consider when directing that an antibiotic be used for disease
prevention, such as using antibiotics only for animals at risk of
developing an infection and when no other reasonable alternatives
exist. What steps is the agency going to take to ensure these
guidelines are followed?
Answer. In highlighting the importance of veterinary oversight of
medically important antibiotics, FDA noted in Guidance for Industry
(GFI) #213 that veterinarians in the course of their professional
practice take into consideration a number of relevant factors for
determining the risk of a specific bacterial disease and for
determining whether the use of medically important antimicrobials for
prevention purposes is appropriate in a particular situation. These
factors include whether: (1) there is evidence of effectiveness; (2)
such a preventive use is consistent with accepted veterinary practice;
(3) the use is linked to a specific etiologic agent; (4) the use is
appropriately targeted to animals at risk of developing a specific
disease; and (5) no reasonable alternatives for intervention exist.
A critical step that is being taken through implementation of GFI
#213 is to change the over-the-counter (OTC) status of these products
so that licensed veterinarians have an oversight responsibility and are
in a position to ensure that factors such as those described above are
taken into consideration. Once the feed use products are changed from
OTC to Veterinary Feed Directive (VFD) status, veterinary authorization
of these products must be done in compliance with the procedures
described in the VFD regulation. In conjunction with implementing the
updated VFD regulation, FDA intends to enhance its inspectional
activities to ensure compliance with the VFD requirements. FDA is also
directing resources towards education and training on the VFD process
and on judicious use. FDA is also engaging veterinary and producer
organizations in this issue, as they play a key role in veterinarians'
practical application of judicious use principles at the farm level.
FDA is very encouraged by the strong commitments organizations like the
American Veterinary Medical Association have made to this effort.
Question. Commissioner Hamburg, Congress provided an additional $3
million for the National Antimicrobial Resistance Monitoring System
(NARMS) in fiscal year 2015, and this increased funding level was
requested in the fiscal year 2016 budget. Can you describe how your
agency will use these increased funds to make critical improvements to
NARMS, and how these improvements will allow it to collect
statistically valid data on antibiotic resistance trends in foodborne
pathogens and to identify more outbreaks involving antibiotic-resistant
pathogens?
Answer. FDA is using the extra funds to collect additional retail
meat samples for the analysis of antimicrobial resistance and to
implement advanced technologies in molecular characterization to
improve microbial analysis.
Prior to its receipt of the additional monies, NARMS was only able
to sample approximately 6500 retail meats, resulting in the recovery of
300-500 Salmonella isolates. This did not provide enough data for
statistically valid analysis of antimicrobial resistance trends for
most products. With the additional monies NARMS is working to increase
the number of samples tested by the current participating laboratories
and expand testing to include additional geographic areas not currently
under surveillance. With these changes FDA will be able to collect
enough Salmonella isolates to improve the statistical confidence around
NARMS resistance trends, thereby making NARMS data more useful for
regulatory decisionmaking. This enhancement also meets Sub-Objective
2.4.1 of the White House's National Action Plan for Combating
Antibiotic Resistant Bacteria, ``Enhance surveillance of antibiotic
resistance in animal and zoonotic pathogens and commensal organisms by
strengthening NARMS and leveraging other field- and laboratory-based
surveillance systems.''
The advent of whole genome sequencing (WGS) is poised to vastly
improve the microbiology and epidemiology of infectious diseases. At
relatively low costs, comprehensive genetic information can be gleaned
in a short time. With the enhanced funding, NARMS has been able to
continue efforts to implement WGS, as well as the information
technology and bioinformatics infrastructure needed to sustain it,
through the purchase of additional equipment, software, and reagents.
Furthermore, NARMS now has the capacity to sequence all Salmonella
isolates collected from retail meats from 2002 (the inception of the
retail meat program) to present. By expanding the whole genome sequence
database with retail meat isolates collected through NARMS, FDA will
greatly improve the detection of foodborne outbreaks, the attribution
of resistant infections, and research on the evolution and spread of
resistant bacteria in the food supply, among other things. By the end
of the year, NARMS will publish the sequence information and
accompanying metadata for all retail Salmonella isolates tested through
2014.
______
Questions Submitted by Senator Patrick J. Leahy
food safety modernization act
Question. The premium Vermont brand depends on adhering to the
highest standards of quality and food safety. However, Vermont's
diversified farms are very concerned that implementation of the Food
Safety Modernization Act may crush them under a burden of fees, paper
work, and poorly targeted and confusing rules. I appreciate that your
food safety team, led by Mike Taylor, has visited Vermont several times
and has listened many of my constituent's concerns, resulting in better
rules, yet many questions still remain for our farmers and our State
agencies.
The budget request includes an increase of $109.5 million for a
total of a total of $1.3 billion in budget authority for FSMA
implementation. By your own estimate this leaves a gap of $166 million.
I am worried that your budget falls short on the needs for your State
partnerships, staff training, and education and technical assistance
for producers and value added agriculture.
With this gap and your current funding request, please explain to
me how you are going to educate before you regulate?
Answer. In addition to the increase of $109.5 million in Budget
Authority, FDA has also proposed an additional $191.8 million in User
Fees. Taken together, FDA believes this additional $301.2 million will
allow FDA to fully implement FSMA.
FDA intends to continue partnering with other Federal, State, and
foreign government agencies and organizations; land grant universities
and other academic institutions; produce farm and food industry
associations; and food safety professional organizations during the
implementation phase. We remain committed to increasing education and
accessibility to technical assistance to foster and facilitate
compliance. At our recent public meeting on the implementation strategy
for the FSMA rules, we received additional input from the public on the
best ways for us to help educate industry to assist in compliance and
improve public health. However, FDA's ability to complete the
activities described depends on receiving the proposed funding in the
fiscal year 2016 President's budget. Without this funding, these
activities would need to be scaled back.
dietary guidelines
Question. The FDA's Dietary Guidelines Advisory Committee (DGAC)
recommended on February 19, 2015, an update to the Dietary Guidelines
and urged the FDA to re-consider its advice that pregnant women or
those that may become pregnant eat no more than 6 ounces of albacore
tuna per week, concluding that ``for the majority of commercial wild
and farmed species, neither the risks of mercury nor organic pollutants
outweigh the health benefits of seafood consumption, such as decreased
cardiovascular disease risk and improved infant neurodevelopment,''. A
number of consumer and public health stakeholders have raised
significant concerns with the reliability of the risk/benefit risk
analysis on which the recommendation is based as compared to the
volumes of peer reviewed literature on which the current tuna
consumption advisory is based.
How will the FDA have reconcile the new risk benefit approach
recommended by the Dietary Guidelines Advisory Committee with the
established scientific literature to publish final guidelines that best
promote public health?
Answer. In developing the draft updated fish consumption advice
released in June 2014, FDA and EPA reviewed the totality of the
scientific evidence, including the research that influenced the
recommendation in the Dietary Guidelines for Americans 2010. That
totality of science included evidence on the harmful effects of
methylmercury and beneficial effects from eating fish. In addition, an
FDA analysis of seafood consumption data from over 1,000 pregnant women
in the United States found that 21 percent of them ate no fish in the
previous month. Those who ate fish ate far less than the Dietary
Guidelines for Americans recommends, with 50 percent eating fewer than
2 ounces a week.
Before issuing final advice, FDA and EPA committed to accepting and
considering public comment as well as seeking the advice of the FDA's
Risk Communication Advisory Committee (RCAC). RCAC held a public
meeting on the draft updated advice on November 3-4, 2014, which
provided a forum for open discussion of the issues. The public comment
period closed on March 26, 2015.
The agencies are now considering the public comments and whether
any modifications to the advice are needed. We expect this process to
be completed in 2015. Please be assured that completing the updated
advice remains a priority.
SUBCOMMITTEE RECESS
Senator Moran. This subcommittee will meet again at 10 a.m.
on Tuesday, March 17. Our witness will be the Secretary of
Agriculture, Secretary Vilsack.
We thank you all for your presence. Wish you well,
Commissioner, in your future endeavors.
Dr. Hamburg. Thank you.
Senator Moran. I thank everyone for their attendance. This
meeting is adjourned.
[Whereupon, at 11:34 a.m., Thursday, March 12, the
subcommittee was recessed, to reconvene at 10 a.m., Tuesday,
March 17.]
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016
----------
TUESDAY, MARCH 17, 2015
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:02 a.m. in room SD-192, Dirksen
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
Present: Senators Moran, Blunt, Cochran, Collins, Hoeven,
Daines, Merkley, Tester, and Udall.
DEPARTMENT OF AGRICULTURE
STATEMENT OF HON. THOMAS J. VILSACK, SECRETARY
ACCOMPANIED BY:
DR. ROBERT JOHANSSON, ACTING CHIEF ECONOMIST
MR. MICHAEL L. YOUNG, BUDGET OFFICER
OPENING STATEMENT OF SENATOR JERRY MORAN
Senator Moran. The subcommittee will come to order. Senator
Merkley, the ranking member, is en route. We have a time
challenge today. Two votes are scheduled at 11:00. And so we're
going to forego opening statements. Senator Merkley and I will
make no comments more than what I'm making right now. And
Secretary Vilsack, welcome.
What I think will happen at around 11 o'clock is that we
will have a rotating chairman of this subcommittee, so that
during the first vote, I will go vote and come back, and then
as the second vote is called, my hope is that we have concluded
our hearing. So we will try to keep this going, and mostly
directed toward statements.
PREPARED STATEMENT
Let me thank you for your public service, your care for
farmers and ranchers of our country. Thank you for this weekend
being at the National Farmers Union annual meeting, this time
in Wichita, Kansas. We are delighted to have you in our State.
[The statement follows:]
Prepared Statement of Senator Jerry Moran
This hearing will come to order. Good morning. The purpose of
today's hearing is to discuss the Department of Agriculture's fiscal
year 2016 budget request, and thank you to Secretary Vilsack, Dr.
Johansson, and Mr. Young for being here today. Secretary Vilsack, I
enjoyed getting to visit with you the other day and look forward to
having another discussion about the Department's budget and priorities
for the year.
Agriculture remains one of the bright spots in our nation's
economy, supporting more than 16 million jobs nationwide and forming
the backbone of our rural communities. American farmers and ranchers
are the best at what they do when given the opportunity to compete on
an even playing field.
After a long, arduous process and a great deal of economic
uncertainty, Congress enacted the Agricultural Act of 2014 one year
ago. The Farm Bill authorized sweeping changes to commodity and crop
insurance programs, consolidated and reinforced conservation efforts,
and reauthorized vital research and rural development programs.
Agriculture is Kansas's #1 industry--directly responsible for 37
percent of the state's economy. Enactment of a new Farm Bill was
welcome news for producers, research institutions, and rural
communities in my home state.
It is now the responsibility of this Committee to continue
oversight of Farm Bill implementation and provide USDA the resources it
needs to ensure its effectiveness. Producers are facing a series of
important decisions for their operations in the coming weeks, and the
Department's guidance will be vital in educating farmers to determine
which program best suits their interests.
The challenges farmers and ranchers face are not limited to factors
in their control. Unpredictable weather conditions and volatile foreign
markets wreak significant impacts on a producer's bottom line. Many
parts of the country are still suffering from persistent drought
conditions, and this year's snowpack deficit appears to offer little
relief to western states. Pests and diseases also pose significant
threats to plants and animals--and their respective industries--as we
are witnessing with citrus greening and avian influenza. Investments in
agriculture research help mitigate these impacts, both environmentally
and economically, and prepare producers for future adverse conditions.
This year's budget request for the Department of Agriculture
proposes a $900 million increase above the enacted levels in fiscal
year 2015. I support many items in the request, but we must work to
prioritize investments based in fiscal reality. As Chairman, I look
forward to working with Senator Merkley and other members of the
subcommittee to identify those priorities and make the most effective
and efficient decisions on behalf of American taxpayers.
I look forward to discussing these issues and others with our
witnesses today. I would now like to turn to our Ranking Member,
Senator Merkley, for his opening statement.
Senator Moran. And Senator Merkley, it is my understanding
we have both agreed to no opening statements, although I may
have just violated that. And I have called the meeting to
order. I would defer to the Senator from Oregon.
Senator Merkley. Well, thank you very much. I'm delighted
to be here, and I'm happy for us to expeditiously proceed.
Senator Moran. Recognize the Secretary of Agriculture,
Secretary Vilsack.
SUMMMARY STATEMENT OF HON. THOMAS J. VILSACK
Secretary Vilsack. Mr. Chairman, thank you very much, and I
certainly appreciate the opportunity to be here.
[The statement follows:]
Prepared Statement of Hon. Thomas J. Vilsack
Mr. Chairman and distinguished members of this Subcommittee, I
appreciate the opportunity to appear before you to discuss the
Administration's priorities for the Department of Agriculture (USDA)
and provide you an overview of the President's 2016 budget. Joining me
today are Robert Johansson, USDA's Acting Chief Economist, and Michael
Young, USDA's Budget Officer.
The President's budget strengthens the middle class and helps
America's hard-working families get ahead in a time of relentless
economic and technological change. Investments made by USDA work
together to support the most productive agricultural sector in the
world, attract and retain a talented labor force, improve connectivity
and access to information in rural communities, move more American-
grown products to market, and make rural communities places where
businesses--farm and non-farm alike--want to innovate, grow, and create
more good paying jobs. These investments reward hard work, generate
rising incomes, and allow everyone to share in the prosperity of a
growing America.
In the past 6 years, USDA assisted more than 900,000 rural families
to buy or refinance a home, helping 146,000 rural Americans become
homeowners in fiscal year (FY) 2014 alone. Since 2009, we have invested
a total of $48.3 billion in new or improved infrastructure in rural
areas, which helped 15.7 million rural residents get access to clean
drinking water and better waste water disposal. Modernized electrical
service was delivered to more than 5.5 million subscribers. More than
21,000 grants and loans helped approximately 89,000 rural small
businesses grow, creating or saving an estimated 418,000 jobs between
fiscal year's 2009 and 2014.
We have also continued our StrikeForce Initiative, which represents
a broad commitment to increase investments in poverty-stricken rural
communities through intensive outreach and stronger partnerships with
community organizations. Since the inception of StrikeForce in 2010,
USDA has partnered with almost 500 community and faith-based
organizations, businesses, foundations, universities and other groups
to support 109,000 projects with almost $14 billion in investments in
rural America. We are providing a pathway to success and expanding the
middle class.
Critical to our efforts is the 2014 Farm Bill, which enhanced the
array of authorities and resources to improve agricultural
productivity, to strengthen the foundation for helping rural
communities prosper, to enhance the resiliency of forests and private
working lands, and to ensure access to a safe, diverse and nutritious
food supply. Farmers, ranchers and those working in supporting
industries maintain an agriculture sector that has seen strong growth
over the past 6 years. Agriculture and agriculture-related industries
account for about $775.8 billion in economic activity, support one out
of every 11 jobs in the economy, and help to maintain vibrant, thriving
rural communities.
The Department has completed implementation of many new Farm Bill
authorities. This includes major new safety net programs providing
certainty to American agricultural producers going into the 2015 crop
year. We have made available over $5 billion in critical assistance to
producers across the country since sign-up for the disaster programs
began on April 15, 2014. Significant new crop insurance protections
were also made available. America's new and beginning farmers and
ranchers, veteran farmers and ranchers, and women and minority farmers
and ranchers were given improved access to credit.
In fiscal year 2014, exports of U.S. food and agricultural products
set a new record, reaching $152.5 billion and supporting nearly one
million jobs here at home. Agricultural exports have climbed more than
58 percent in value since 2009, totaling $771.7 billion over the past 5
years. Agricultural exports have increased in volume, demonstrating an
increasing global appetite for American-grown products. Between 2009
and 2014, more than 6,000 U.S. companies participating in USDA-endorsed
trade shows reported total on-site sales of more than $1.3 billion and
more than $7.2 billion in 12-month projected sales. Rural exports
support farm income, which translates into more economic activity in
rural areas. In 2012, each dollar of agricultural exports stimulated
another $1.27 in business activity. As requested by the President, we
need trade promotion authority to protect our workers, protect our
environment, and open new markets to products stamped ``Made in the
USA.''
USDA is also helping producers tap into growing consumer demand for
locally-grown and organic food. USDA data indicate that local food
sales totaled at least $6.1 billion in 2012. Demand for organic food
products also continues to grow and this sector now accounts for $35
billion in annual U.S. sales. In 2013, the National Organic Program
helped an additional 763 producers become certified organic, an
increase of 4.2 percent from the previous year.
USDA's investments support strong local and regional supply chains
and the rural jobs that come with them. Since 2013, USDA has made over
500 investments in local food infrastructure and direct marketing
opportunities to help connect farmers and consumers and create jobs all
along the supply chain for local food. In addition, USDA has made
expanding SNAP recipients' access to fresh fruits and vegetables
through farmers markets a priority in recent years. In 2008, about 750
farmers markets and direct marketing farmers accepted SNAP. As of
January 2015, over 5,300 participated in markets accepting SNAP.
USDA continues to work with land-grant universities to deliver
science-based knowledge and practical information to farmers, ranchers
and forest landowners to support decisionmaking, innovation and
economic opportunity. USDA leverages its research by making data more
widely available. In 2014, 60 new cooperative research and development
agreements were executed, 119 patent applications were filed, 83
patents were received, and 412 income-bearing license agreements were
in effect. As authorized by the Farm Bill, USDA created the $200
million Foundation for Food and Agriculture Research, which will
advance the research mission of the Department and foster collaboration
with public and private research efforts.
Advances in biotechnology require thorough review by USDA before
being approved, a practice commonly call deregulation. USDA needs to
complete its review in a timely manner to facilitate planning and
adoption of new technologies. To address this need, in 2012, USDA
streamlined and improved the process for making determinations on
petitions involving biotechnology. Because of the enhancements, we
reduced the length of the petition review by over 600 days for
petitions that do not require an environmental impact statement (EIS).
USDA estimates that the cumulative number of actions taken to
deregulate biotechnology products based on a scientific determination
that they do not pose a plant pest risk will increase from a cumulative
total of 87 actions in 2011 to an estimated cumulative total of 119
actions in 2016.
USDA's conservation efforts have enrolled a record number of acres
in programs that have saved millions of tons of soil, improved water
quality, preserved habitat for wildlife and protected sensitive
ecological areas. To accomplish these goals, USDA has expanded beyond
its traditional conservation programs and partnered with a record
number of farmers, ranchers and landowners on landscape-scale
conservation projects since 2009. As an example, under the newly
authorized Regional Conservation Partnership Program (RCPP), USDA
funded 115 projects that will build on the results achieved by USDA's
traditional programs. RCPP empowers communities to set priorities and
lead the way on conservation efforts important for their region. Such
partnerships also encourage private sector investment so we can make an
impact that's well beyond what the Federal government could accomplish
on its own.
USDA continues to lead the way for renewable energy by supporting
the infrastructure needed to grow the new energy economy. In 2014, more
than 500 new awards under the Rural Energy for America Program helped
USDA to reach a milestone of adding more than 8,000 projects between
2009 and 2014. Currently, REAP funds a total of 10,800 projects around
the country to help producers and rural businesses save energy and
increase their profitability. To support farmers producing biomass for
renewable energy, USDA offered insurance coverage for farmers growing
biofuel crops like switchgrass and camelina, and we are helping
identify American farmland most suitable for growing energy crops.
Under expanded authority provided by the 2014 Farm Bill, we are working
to expand the number of commercial biorefineries in operation that
produce advanced biofuels from non-food sources through the Biorefinery
Assistance Program. We also took new steps to support biobased product
manufacturing that promises to create new jobs across rural America--
including adding new categories of qualified biobased products for
Federal procurement and establishing reporting by Federal contractors
of biobased product purchases.
Combating foodborne illness is one of our top priorities. In 2013,
the Food Safety and Inspection Service (FSIS) developed the Salmonella
Action Plan that outlines the measures FSIS will employ to achieve
lower contamination rates in agency regulated products. The Plan
includes strategies, such as the newly developed performance standards
for ground poultry and chicken parts that will reduce illnesses. In
addition, the recently implemented poultry inspection system will
prevent an additional 5,000 foodborne illnesses each year through the
improved control of Salmonella and Campylobacter.
The Administration strongly supports the Supplemental Nutrition
Assistance Program (SNAP) and other critical programs that reduce
hunger and help families meet their nutritional needs. SNAP is the
cornerstone of the Nation's nutrition assistance safety net, touching
the lives of millions of low-income Americans, the majority of whom are
children, the elderly, or people with disabilities. SNAP kept over 5
million people, including nearly 2.2 million children, out of poverty
in 2013. Recent research has shown that SNAP not only helps families
put food on the table, but it has a positive long-term impact on
children's health and education outcomes. We also support the ongoing
implementation of the Healthy, Hunger-Free Kids Act. Over 90 percent of
schools report that they are successfully meeting the new nutrition
standards, serving meals with more whole grains, fruits, vegetables,
lean protein and low-fat dairy, and less sodium and fat.
We must continue our efforts to address the challenges that
continue to confront rural America. The 2016 budget builds on our
success and proposes a set of investments to spur innovation, create
new markets and job opportunities, enhance climate resiliency, improve
access to a safe, nutritious food supply, and modernize infrastructure.
USDA's total budget for 2016 we are proposing before this
Subcommittee is $144 billion, of which approximately $124 billion is
mandatory funding. The majority of these funds support crop insurance,
nutrition assistance programs, farm commodity and trade programs and a
number of conservation programs. The budget includes mandatory funds to
fully support estimated participation levels for the Supplemental
Nutrition Assistance Program (SNAP) and Child Nutrition programs. For
discretionary programs of interest to this Subcommittee, our budget
proposes $20 billion, approximately $908.5 million above the 2015
enacted level. That level fully funds expected participation in the
Special Supplemental Nutrition Program for Women, Infants, and
Children. It includes the funding needed to meet our responsibility for
providing inspection services to the Nation's meat and poultry
establishments. The budget also includes over $1 billion to renew
approximately 255,000 expiring contracts for rental assistance and
includes new authorities to ensure the long term sustainability of this
program.
Agriculture is an engine of growth and prosperity, directly or
indirectly supporting 16 million jobs. The 2016 budget provides a
strong farm safety net and makes investments to meet challenges of a
competitive global market, changing climate, and making agriculture a
reality for new and beginning farmers. The budget proposes a loan level
of about $6.145 billion for direct and guaranteed farm ownership and
operating loans, 85 percent of which will be made to beginning farmers
and ranchers and socially disadvantaged producers. The budget also
includes about $4 million to help new and beginning farmers and
ranchers overcome the barriers they face when entering agriculture. In
addition to providing funding to establish a Military Veterans
Agricultural Liaison as authorized by the 2014 Farm Bill, the budget
also establishes a $2.5 million program to help veterans develop
farming and ranching skills needed to become producers.
The rural economy will be even stronger because of the investments
in rural infrastructure made by USDA. We will make over $1 billion in
investments in rural businesses estimated to provide approximately
32,000 jobs in rural areas. Over $2.2 billion targeted to community
facilities will expand educational opportunities for students,
facilitate delivery of affordable healthcare, and ensure the
availability of reliable emergency services. Funding for broadband is
more than doubled. Through a pilot called Rural Corps, USDA will work
in partnership with local organizations to deploy highly trained staff
and increase the likelihood that investments in infrastructure and
economic development are strategic, creating jobs and long-term
economic benefits. In 2016, USDA will provide over 170,000 rural
residents the assistance needed to become homeowners by making
available nearly $25 billion in loans to increase housing opportunities
in rural area. Approximately $900 million in direct loans will ensure
that the very-low and low-income borrowers with the ability to repay
mortgage debt are provided with a vehicle to access mortgage financing
for homes located in rural areas.
Despite these investments, 85 percent of America's persistent
poverty counties are in rural areas and rural childhood poverty rates
are at their highest point since 1986. To address this need, $20
million is provided for a Rural Child Poverty initiative, which would
support innovative strategies to combat rural child poverty through a
demonstration program. Additionally, funding is more than doubled for
the Community Facilities Grant Program, which enables USDA to support
investments in high-need areas and also leverage partnerships aimed at
reducing child poverty, such as co-locating healthcare, nutrition
assistance, and job-training programs. In both cases, this funding will
be used in rural areas experiencing severe economic distress, such as
StrikeForce, Promise Zones, and Tribal areas.
Access to a plentiful supply of safe and nutritious food is
essential to the well-being and productivity of all Americans. As many
as 200,000 families with children could benefit each year, beginning in
the summer of 2016, from the proposed expansion of summer EBT
demonstration projects, including $67 million to support the second
year of the Summer Electronic Benefit Transfer (EBT) pilot to reduce
food insecurity among urban and rural children during the summer months
when school meals are not available. The budget also includes $35
million in school equipment grants to aid schools in serving healthy
meals and provides continued support for other school-based resources.
The budget proposes an additional $25 million to bolster SNAP
Employment and Training programs, which will allow some of our nation's
poorest individuals to work toward self-sufficiency and continue to
receive critical food assistance while doing so. Nationwide, USDA
estimates that 23.5 million people, including 6.5 million children,
live in low-income areas without easy access to a supermarket. To
expand access to nutritious foods, the budget invests $13 million in a
newly authorized Healthy Food Financing Initiative that will provide
funding for developing and equipping grocery stores and other small
businesses and retailers selling healthy food in communities that
currently lack these options. Americans will be better protected from
foodborne illness with nearly 23,000 fewer illnesses projected in 2016
from 2014 as a result of improved food inspection.
Food for Progress and the McGovern-Dole International Food for
Education and Child Nutrition Program will continue to provide benefits
to millions of people overseas. These programs have helped to engage
recipient countries not only by delivering food assistance, but also by
fostering stronger internal production capacity and infrastructure,
generating employment, boosting revenue, and developing new markets and
productive economic partnerships. The budget provides $20 million to
support the local and regional procurement of food aid commodities for
distribution overseas to complement existing food aid programs and to
fill in nutritional gaps for targeted populations or food availability
gaps caused by unexpected emergencies. Also, the budget proposes the
authority to use up to 25 percent of Title II resources for these types
of flexible emergency interventions that have proven to be so critical
to effective responses in complex and logistically difficult
emergencies.
USDA research plays a key role in fostering innovation and
advancing technologies that increase the efficiency, sustainability,
and profitability of American agriculture. Economic analysis finds
strong and consistent evidence that investment in agricultural research
has yielded high returns per dollar spent. The budget includes an
increase of $125 million for the Agriculture and Food Research
Initiative. Funding for USDA's role in Federal efforts combatting anti-
microbial resistant bacteria and improving pollinator health totals $77
million and $79 million, respectively. As part of the Administration's
multi-agency initiate to support continued investment and innovation in
the manufacturing sector, the budget also includes $80 million to
support two new Federal-private manufacturing institutes, with one
dedicated to advanced biomanufacturing, while the other will focus on
development of nanocellulosics. Investments to upgrade the Department's
aging laboratory infrastructure include $206 million to fully fund five
priority construction and renovation needs, as identified in the
Congressionally-mandated report issued by the Department in 2012.
To enhance resilience to climatic events, the budget provides $200
million for the Watershed and Flood Preventions Operations (WFPO) to
help communities adapt to changing natural resource conditions and
climate change, and to minimize the impacts of natural disasters,
including coastal flooding. USDA will utilize the broad authorities of
WFPO to help communities create more resilient infrastructure and
natural systems.
To protect the integrity of the programs we administer, we continue
to work aggressively to identify and eliminate waste, fraud, and abuse.
Program integrity is critical to the overall success of the programs we
administer and funds must be used properly to earn America's trust that
these programs deliver results while protecting taxpayer dollars. The
budget builds on existing efforts and provides strategic increases,
including an increase of $14.5 million to automate and streamline
reporting, increase operational efficiency, reduce improper payments,
and otherwise enhance program integrity for Child Nutrition Programs.
The budget requests an additional $4 million to ensure that States are
meeting the highest standards of program integrity in administering
SNAP. The budget also includes $2.1 million for the Risk Management
Agency to enhance regulatory compliance, with a focus on improving
error rate sampling for improper payments.
While providing record levels of service to rural America, USDA has
improved management operations. Through the Blueprint for Stronger
Service, USDA has taken proactive steps in recent years to reduce
spending, streamline operations and cut costs. Our savings and cost
avoidance results for the American taxpayer through the end of fiscal
year 2014 were recently revised upward to $1.368 billion from the
previous $1.197 billion figure reported in January 2014. I appreciate
the Subcommittee's approval of authority allowing the Department to
establish a nonrecurring expense fund for facilities infrastructure
capital acquisition. This fund will provide much needed resources in
future years for USDA's infrastructure modernization.
The President is again asking Congress for authority to submit
fast-track proposals to reorganize or consolidate Federal programs and
agencies to reduce the size of Government or cut costs. Granted the
authority, the Administration is proposing to consolidate the FSIS and
the food safety components of the Food and Drug Administration to
create a single new agency within the Department of Health and Human
Services. The President also proposes the consolidation of certain
business programs in a new department dedicated to promoting U.S.
competitiveness and exports.
The Farm Bill included several reforms to the Federal crop
insurance program; however, there remain further opportunities for
improvements and efficiencies. The President's 2016 budget includes two
proposals to reform crop insurance, which are expected to save $16
billion over 10 years. This includes reducing subsidies for revenue
insurance that insure the price at the time of harvest by 10 percentage
points and reforming prevented planting coverage, including adjustments
to payment rates. These reforms will make the program less costly to
the taxpayer while still maintaining a quality safety net for farmers.
I believe that the future is bright for America and in particular
for rural Americans. The investments we make today are having an impact
and creating a future full of opportunity. The budget presented to you
will achieve the President's vision for the middle class by restoring
the link between hard work and opportunity and ensure that every
American has the chance to share in the benefits of economic growth. At
this time, I will be glad to answer questions you may have on our
budget proposals.
Secretary Vilsack. And in the interest of time, I'm
prepared to take your first question.
DIETARY GUIDELINES
Senator Moran. Let me start with one related to dietary
guidelines, a question that you and I discussed in my office
and a question that you have not had to respond to previously.
I was looking back at the history to find out what the
purpose of the dietary guidelines, what's the statutory
authority, what are the criteria by which those dietary
guidelines are to be determined. And I have now read that, and
it talks about nutritional and dietary information.
I've been most recently interested to see what Senator Dole
had to say in February. Just a few days ago, he talked about
being the co-author of the dietary goals for the United States
with Senator McGovern and indicated his concern about the
direction that the advisory committee report is heading.
These dietary guidelines, when you and I talked, you talked
about how you're coloring within your lines, a phrase that I
remember. And I am interested in knowing whether you have the
ability to insist that others color within their lines, what
conversations you've had with Secretary Burwell, and what your
expectation is for the next step in the dietary guideline
process.
Secretary Vilsack. Mr. Chairman, we are in a comment period
right now, so we are soliciting comments from folks. I have
talked briefly with Secretary Burwell, primarily about the
request for an extension of time in terms of the comment
period. We obviously are under a deadline to get this done
before the end of the year. So we will be working with the
folks at the Department of Health and Human Services (HHS) to
determine what's best in terms of an extension if one is
granted.
I would say that we understand, or I understand, my
responsibility is to focus on diet and nutrition, and well we
should, given the challenges that we face with the obesity
epidemic among our children and some of the concerns of chronic
diseases. I have been interested in the testimony that
Commissioner Hamburg has provided in which she has indicated a
desire also to stay within the statutory guidelines, to color
within the lines, as you say.
And I think we understand and appreciate that folks can
have many recommendations and many opinions, but at the end of
the day, our decisionmaking process has to be focused on
dietary nutrition, so that we can give a general guideline to
American families, and that we can then inform our Federal
nutrition programs.
Senator Moran. So it is your understanding that what the
goal is is dietary and nutritional guidelines, nothing more or
broader.
Secretary Vilsack. That's the direction that you have given
us, and that's the direction that I intend to follow.
Senator Moran. Mr. Secretary, let me ask you then about the
public comment. You mentioned that we are in the process of
public comment right now, granting 45 days for those public
comments. The report is 571 pages long. That's not a lot of
time for stakeholders and interested parties to digest that
information. Are you considering an extension of that deadline?
Secretary Vilsack. I would point out, Mr. Chairman, that
that is longer than the last guidelines. I think the last time
we went 30 days. We have extended it to 45 days. And I
recognize that there is a lot of issues and controversy
associated with this. So I would certainly be willing to
consider lengthening that time. I'm not sure that we can afford
to go as long as some have suggested, but it may very well be
appropriate for us to extend the deadline a bit.
CONSERVATION TECHNICAL ASSISTANCE
Senator Moran. Mr. Secretary, let me turn to another topic
of importance in Kansas and across the country, conservation.
One of the confusing things to me about the President's budget
is a proposed reduction in funding of technical assistance at
the Natural Resources Conservation Service (NRCS).
And even the budget states that, in terms of environmental
outcomes, the funding reduction will result in lost
conservation opportunities and reduce natural resources
benefits. You know, it's a $74 billion budget. Why is there a
$44 million reduction in technical assistance funding?
Secretary Vilsack. Well, the challenge in this budget, Mr.
Chairman, is that 50 percent of our budget is in four areas. It
is in fire suppression and forest restoration, it is in food
safety, WIC, and in rental assistance. And unfortunately, in
several of those four line items, we have seen increases that
we believe need to be dealt with through some congressional
direction and action. So we are constrained a bit by the fact
that those increase.
We are also cognizant of the demands that you all placed on
us relative to sequester and to make sure that we stay within a
reasonable budget. This is a budget, by the way, that is less
than the first full budget that I worked with in fiscal year
2010. So we are trying to be conscious.
Let me say as far as the technical assistance, it doesn't
necessarily mean that less work is going to get done, and I say
that for two reasons. One, because I think we are going to see
significant increases in the utilization of technology that
will provide us the opportunity to expand our reach in terms of
conservation. And secondly, we are extending the number of
partnerships that we have with a variety of other organizations
and entities that can provide technical assistance as well.
So it doesn't necessarily translate to less conservation.
It just simply means that we are going to be more reliant on
technology and partnerships.
CROP INSURANCE
Senator Moran. Thank you. Let me ask about another
President's budget recommendation, this one related to crop
insurance. I am sure that you have heard as I have about the
importance of crop insurance. When they have a conversation
with the farmer, that's generally the point they would
highlight about the importance and value of crop insurance to
them.
We are seeing, in the President's budget recommendation, a
reduction in the support levels for farmer's crop insurance
premiums. I would like to have your response on that.
And then I would like to tell you that, in voting for the
farm bill, one of the things I thought was most important for
farmers, particularly Kansas farmers, was changes in crop
insurance related to the ability to have separate enterprise
units by practice, separate coverage levels by practice, and an
APH yields exclusion available to take out a year of, in our
case, drought.
What I discovered when I returned home after the farm bill
and people started looking at the farm bill and taking a look
at their crop insurance for winter wheat, elimination of that
year and the other two provisions that I thought were so
valuable were not available for winter wheat because of timing.
And my question is, can you assure me, and I can assure my
farmers, that the timing will not be a problem and that those
provisions will be updated sufficient to be used as they make
decisions and have the consequences of the new farm bill for
winter wheat?
Secretary Vilsack. I believe so on the second question, Mr.
Chairman. We are working very carefully to make sure that the
2016 crop year for winter wheat is covered under Actual
Production History (APH), and we are working diligently to get
the irrigated enterprise issues resolved.
As it relates to the budget, $8.2 billion, we believe, is
adequate and sufficient to cover the $109 billion risk that is
covered by crop insurance. There are two issues that I would
point out.
One is on the prevented planting. The Government
Accountability Office (GAO) and our own inspector general have
been critical of the way in which that program has been
utilized. It is discouraging the planting of a second crop, and
it ends up, essentially, overcompensating folks. So in response
to the GAO concerns and our own inspector general's concerns,
we made adjustments, and that is part of the reason why you see
a reduced amount.
The second area that I would point out, too, is on the
harvest price loss aspect. Crop insurance is designed to
protect against Mother Nature. The harvest price loss option
basically provides coverage not just against Mother Nature, but
also against market decisions that producers make. And so I
think it is important to ask the question, what is the nature
of the partnership between the taxpayer and the Federal
Government and the farmer as it relates to that.
When you see potential premium subsidies as high as 80
percent for some farmers in some crops in that area, you have
to ask yourself whether or not it's appropriate to adjust that
downward a bit, which is what is reflected in the budget. So I
think there are justifications for what we are proposing, but
understand and appreciate that we do understand fully the
importance of crop insurance.
Senator Moran. I will follow up that would my time returns.
Senator Merkley.
RURAL ENERGY SAVINGS PROGRAM
Senator Merkley. Thank you. Thank you, Mr. Secretary. I
wanted to start by asking you about the Energy Efficiency and
Conservation Loan Program. This program provides loans to rural
electrical co-ops, so that they can in turn provide loans to
folks for energy-saving retrofits, both residential and
commercial. It has not worked real well yet, and there have
only been a couple of loans made to rural electrical co-ops.
There is a program that has been authorized in the farm
bill, the Rural Energy Savings Program, that is designed to try
to make a more effective form of this strategy, because it's a
win-win all the way around, creates a lot of jobs in rural
areas, improves energy efficiency, and make homes more
comfortable. Have you taken a look at this program and
considered ways to improve on it and--well, I'll just stop
there.
Secretary Vilsack. Yes, we have, Senator. We basically are
focusing primarily on a major initiative in a State that is
very interested in pursuing energy efficiency, and we are very
close to getting that statewide program in place, which will, I
think, significantly increase interest in the energy efficiency
program.
One of the concerns, and I think you are well aware of this
given your advocacy for this, is the interest rate and the fact
that this is a relatively new program for the Rural Electric
Cooperatives (RECs) is to implement, so it has been a learning
curve, both for our folks and for the RECs. I think if we were
to take a look at the interest rate, it would obviously
increase the cost of the program, but it might increase the
interest as well. We would continue to work with you and
continue to work with Congress to make sure that we implement
this in an appropriate way.
But we are focused on it, and I am asking our team at the
Rural Utilities Services (RUS) to get this done.
POLLINATORS
Senator Merkley. Great. Well, I appreciate that very much.
Look forward to continuing that conversation, because done
right, it could be a powerful force for rural jobs. And as I
head to my 36 counties every year and talk to folks in the
rural counties, rural jobs would be a wonderfully welcomed
item.
Let me turn then to the concern over the loss of
pollinators. And as you are very aware, and folks in the
agricultural community are very well, we have suffered a lot of
losses of honeybee colonies. We have seen the monarch butterfly
migration collapse over the last 10 years. And this is
significant for agriculture, since pollinators contribute more
than $24 billion to the U.S. economy, and at least 90 of
America is commercially grown crops are dependent on
pollination.
So can you talk a little bit about the proposal that you're
putting forward in both be Agriculture and Food Rearch
Institute (AFRI) and the Agriculture Research Service (ARS).
Secretary Vilsack. Senator, the effort with pollinators is
a complicated one, because it involves parasites, pesticides,
pests, the stress of the travel that the pollinators undertake,
the lack of crop diversity in some areas, so what is required
is a holistic approach that involves research, and involves
public education, and also involves habitat.
In all three areas, we are working, and the request in the
budget would reflect a desire to do more work on the research
side, to understand better the stresses, to understand better
the issue of parasites and pesticides and the like, the
multiple causes. And we are also working through the Natural
Resources Conservation Service (NRCS) and our Conservation
Reserve Program (CRP) program to expand habitat, particularly
in the upper Midwestern States where 65 percent of the hives
basically end up during the summer months.
The goal here is to get down from where we've been the last
10 years, roughly 29 percent of our hives being lost, to
getting it closer to 18 percent, which is a sustainable level.
Last year, it was 23 percent, which is good news, but it's
still not good enough.
Public education is also important, and I think that's
where--effort can undertake to make sure that people understand
that they have a role to play here, from community gardens to
the plantings that they make in their own individual personal
gardens. You can create additional habitat. So it's a greater
awareness, more research, and more habitat.
Senator Merkley. So you have proposed an increase of just
over $30 million in these activities. Is that high on your list
of priorities?
Secretary Vilsack. It is certainly a significant priority,
particularly as it relates to the statistics that you provided
in terms of the importance of pollinators. I am particularly
focused on the fact that our almond crop, which is a fairly
significant crop and an export opportunity for us, is very much
dependent on us getting this right. And you mentioned the
monarchs, that's another issue as well.
RENTAL ASSISTANCE
Senator Merkley. Well, thank you, Mr. Secretary. I am going
to switch to a different challenge which is that, over the next
3 years, about 120 multifamily housing loans will mature each
year, representing over 10,000 units of affordable housing that
will be exiting the program. And this problem gets even worse
down the road.
In 2019, the number of maturing mortgages will exceed 1,100
and continue to increase thereafter. When these loans are paid
off, the projects will no longer be in USDA's affordable
housing program, and the families will not have access to
rental assistance or servicing options that the Department can
offer. This is a real substantial challenge for real
communities seeking affordable housing and I thought I would
offer you the chance to comment on the strategies to address
this.
Secretary Vilsack. Well, Senator, we really appreciate you
bringing this to the attention of the body. It is a critical
issue. Seventy-five percent of our rental units could
potentially get out of the program without access to vouchers
as a result of mortgages being paid off. We are requesting a
series of tools that would allow us to manage this more
effectively.
Those tools can include extending the life of an existing
loan, re-amortizing that loan, using the resources potentially
to improve the properties. We have also requested additional
resources for new construction, which has not been the case for
quite some time because of the rental assistance challenges
that we face. We have also asked for a consideration of the
voucher program to be available for a limited period of time as
well for these expiring mortgages.
It is a serious issue, and you are absolutely correct,
these people have no place to go, given their current status.
So we hope to be able to work with you to get a series of tools
to be able to deal with this issue and the other issue with
rental assistance in terms of the ever-increasing budget
challenge that we face with rental assistance.
Senator Merkley. Thank you very much.
Senator Moran. Senator Merkley, thank you. Senator Cochran,
the chairman of the full committee.
FARM SERVICE AGENCY FUNDING
Senator Cochran. Mr. Chairman, thank you. Welcome, Mr.
Secretary, to the hearing, and thank you for the good job you
do as Secretary.
One question occurs to me right off the bat here is why the
administration has reduced its request for funding for people
who will be used at the Department to help producers comply
with provisions of the farm bill so they will be eligible for
support in farm bill reforms that have occurred. There is
concern, I'm told, that the President's budget request, for
specific example, for the Farm Service Agency (FSA), is $12
million below the 2015 enacted level. There is concern that we
have received that this is not enough to carry out and help
producers comply with farm bill provisions enacted by Congress
and now must be implemented by producers and Department of
Agriculture (USDA) workers around the country.
My question is, would you please look at this level of
funding and let us know whether this is really adequate? Is $12
million below the enacted level for fiscal year 2015 for the
Farm Service Agency to implement and help carry out provisions
of the 2014 farm bill, there is concern that the FSA
appropriation, if we gave you what you're asking for, is not
enough to do the job. Would you look into that and tell us what
your plans are?
Secretary Vilsack. Mr. Chairman, we obviously would respect
your request. I would say that one of the reasons why we are
asking for a bit less is because there may not be quite as much
of a need for technology money as in the past, because of the
completion of the MIDAS effort. There is still an ongoing IT
need, but perhaps not at the level that we have seen in the
past.
Secondly, I would say that the performance of our folks at
FSA offices across the country in terms of the implementation
of the farm bill has been, in my view, well done, given the
fact that over 600,000 disaster payments have been made by
those FSA offices, given the fact that nearly 90 percent of
folks have made the decision to reallocate their base acres and
adjust their yields. We are now close to 70 percent of farmers
making the election of Agricultural Risk Coverage (ARC) and
Price Loss Coverage (PLC), and we are not yet at the March 31
deadline. There are series of other things that our FSA folks
have been doing, so I am confident that we will be able to get
the job done.
But these budgets are challenging, and they are challenging
in large part because of four areas that continue to increase,
or several areas that continue to increase, from rental
assistance, to fire suppression, to the WIC program, that
places a great burden when we are trying to constrain our
budget based on instructions from Congress.
Senator Cochran. Thank you. Thank you, Mr. Chairman.
Senator Moran. Mr. Chairman, thank you. Senator Tester.
ARC/PLC SIGNUPS
Senator Tester. Well, thank you, Mr. Chairman, and I want
to thank you, Mr. Secretary, for the job that you have done
over 6 years now in this position. And as a person that is
directly involved in production agriculture, I just want to
thank you. Thank you for what you've done. I think you've done
a great job in running the agency, and I think the people you
have on the ground in the Farm Service Agency, in Montana at
least, are doing a great job.
The question I have to begin with is, can you tell me--you
have got some deadlines coming up on PLC and ARC as of March
31. Computer programming has always been a concern. If the
programming is there, when the producer walks in it can meet
the needs. Can you give us a quick update on where the
programming is, if it's where it needs to be?
Secretary Vilsack. Well, Senator, I think roughly 70
percent of producers that we expect have to make an election
have already made the election. I think they are finding that
the times can be as quick as 12 minutes through the process, in
part because of the technology changes that we have made. We
had an initial glitch that arose in Kansas, which we have
addressed. So I think we are okay.
What we are concerned about, and producers have responded,
is a crush at the end of the deadline. But given the fact that
we're now at nearly 70 percent of signups in elections, I think
we are going to be just fine in terms of being able to handle
the volume.
RURAL OUTMIGRATION
Senator Tester. Good. Good. Now, I want to go up to 30,000
feet. I've been involved and run our farm for almost 40 years
now and been involved in everything from set-asides to payment
in-kind (PIK) payments to direct payments to countercyclical
payments. Now we've got ARC, and we've got PLC. All these
programs are passed by Congress, and you are asked to
administrate them. You have been doing this job, as I've said,
for over 6 years.
And over the last 30 or 40 years, I have seen a mass exodus
off the land. A mass exodus. The school where I went to school,
165 kids, now has less than a third of that directly associated
with consolidation and agriculture. We have seen consolidation
in the marketplace, not as much competition as we would like.
We are seeing consolidation in production agriculture, and I am
a big supporter of family farms.
And to be honest with you, I've been a big supporter of the
farm bill, too. I mean, my grandfather would have told me that
we would not be on the farm we have today if it wasn't for FDR
and the farm program that was out there. We wouldn't have
electricity if it wasn't for that Agriculture Department in the
1930s, in the 1940s, and many of us would not have water
without them. So it's done a lot of good things.
You have been in this position for a while. You have seen
the impacts on the ground, and I don't think Big Sandy,
Montana, is any different than any small town in Iowa as far as
depopulation and the mass exodus. As you look at this farm
bill, is it helping keeping people in rural America, or is it
encouraging more consolidation and people to move out of rural
America?
Secretary Vilsack. Senator, I think it's significant in
terms of the assistance it can provide, because I think it
supports a companion economy that can essentially combine with
production agriculture and experts to focus on local and
regional food systems and major investment in that opportunity
for smaller sized operators to have a direct line with their
consumer where they are able to negotiate a price. I think
there is significant opportunity for expanded conservation and
tying that into the development of ecosystem markets, which is
another income. And then the bio economy, I think, is also--
were going to bring manufacturing back to rural areas. So I
think this will help.
I would say that there are two issues on the horizon that
we need to be concerned about. One is this issue of the aging
nature of farmers today in America and the issue of land
tenure, who is going to own the land, who is going to operate
the land, and what is their focus going to be in the next 10 to
15 years, because I think we are going to have a significant
turnover. And then finally, just the public relations effort to
acquaint people in this country of the importance of rural
America and the need for continued investment and continued
focus. It's easy for many in America to forget about the
importance of rural America.
LOCAL FOOD SYSTEMS
Senator Tester. I agree with the local food system stuff
and the conservation. I want to get in that in a second. But I
also think that there is plenty of room for manipulation.
Farming the farm bill isn't something that is not done. It is
done regularly, and I'm not sure that's input. And by the way,
that's not your problem, that's Congress's problem. You are
there to administer it, we set the rules, and we thank you for
that.
Local food systems, can you tell me in your budget if there
are additional dollars for local food systems, or has it been
cut?
Secretary Vilsack. There are additional resources as a
result of the farm bill, and there's additional focus in rural
development on making sure that we support local and regional
food systems. Just yesterday, we announced $26 million
available for----
CONSERVATION
Senator Tester. Okay. Good. How about conservation?
Secretary Vilsack. Conservation increases over what was
spent last year, it's not as much as would have been
appropriated if we had followed the farm bill, and I'm happy to
talk about that if you wish.
Senator Tester. Well, we'll put it forth to you in writing.
But I think the conservation is important. I think it's all
important. It just depends on how it can be manipulated, quite
frankly. And I think that the conversation that we need to have
in Congress is, is the farm bill really supporting family
farms, or is it supporting agribusiness? Thank you, Mr.
Secretary.
Senator Moran. Senator Tester, thank you. Senator Collins.
BIOENERGY PROGRAM FOR ADVANCED BIOFUELS
Senator Collins. Thank you, Mr. Chairman. I think Senator
Tester just raised an absolutely essential issue that does
deserve our attention. And before I begin my questions, I also
want to associate myself with the concerns expressed by Senator
Merkley about the pollinators. They are very important to our
wild blueberry crop in Maine and the health of those bees,
which has been a real concern in the last few years.
Mr. Secretary, I appreciate the attention that you have
given to promoting the development of homegrown bio energy and
wood products which are so important to rural communities
across America but particularly to my State where the forest
products industry is such a vital part of the economy.
I have been hearing from wood pellet fuel manufacturers in
Maine who have alerted me to concerns with an interim rule that
your Department has issued for the bioenergy program for
advanced biofuels authorized by section 9005 of the 2014 farm
bill. And I believe that Virginia Manuel, who is one of your
key people in Maine, has also passed onto the Department the
same kinds of concerns that she is hearing.
Wood pellets, which are recognized by USDA as advanced
biofuels, represent a very efficient and use for material that
otherwise is a waste byproduct. I'm told however, that the
program is being implemented in a way that severely
disadvantages solid based advanced biofuels, including wood
pellets used in heating applications.
USDA has imposed deep discounts on the payments to solid
biofuel producers, it's like an 85-percent discount, and an
overall payment cap on companies in this sector, which
contrasts starkly with the payments being made to liquid
advanced biofuel producers used in the transportation sector.
And what I am told by the pellet manufacturers is that these
discounts are so steep that it's such a small amount of money
that it's barely worth participating.
I don't understand what the rationale of the Department is
in implementing the program in a way that is not fuel and
technologically neutral. It seems to me that that should be the
goal of the advanced biofuels program. I wondered if you could
comment. I realize this is just an interim rule, and I am
hoping that the Department will reconsider in issuing a final
rule.
Secretary Vilsack. Senator, when initial proposal was put
forward, we received a lot of comments from the liquid biofuel
industry indicating that their belief was that it disadvantaged
their industry and advantaged, unfairly, the wood pellet
industry. So there was an effort in the interim rule to try to
respond to those comments. The wood pellet industry didn't
initially respond to that first iteration.
But I get your point, and I think you're absolutely correct
that we ought to be looking for that sweet spot where we are
not advantaging or disadvantaging any, but we are encouraging
all. And we would be happy to continue to work with you and the
folks in the wood pellet industry to find where that sweet spot
is. I suspect that there will be some adjustments based on the
concerns that you've expressed, but I think we are still
working on trying to figure out exactly how to do it so that we
get the right balance.
Senator Collins. Thank you very much. I can assure you that
the industry is organized and aware now and weighing in, and I
will make sure they've officially communicated with you. I have
a letter from the Maine Pellet Fuels Association that explains
the problem very clearly, which I will share with you and ask
unanimous consent be included in the record as well.
Senator Moran. Without objection, so ordered.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
SCHOOL EQUIPMENT GRANTS
Senator Collins. Mr. Chairman, I see that my time has
virtually expired. I'll just raise one more issue very quickly
and ask for response for the record.
Nationwide, 88 percent of schools report that they need at
least one piece of kitchen equipment and over half need more
significant infrastructure improvements in order to comply with
the Department's guidelines for the school lunch and school
breakfast program. I'm pleased that you have announced a new
round of funding for State competitive equipment grants.
And I wanted you to know that Senator Heitkamp and I have
introduced a bill that would actually authorize the program. I
hope you will take a close look at our bill, with an eye
towards endorsing it. And for the record, I would be interested
in the impact that you're seeing as you award these grants that
participate in the school lunch and breakfast programs. Thank
you, Mr. Chairman.
[The information follows:]
Since 2009, USDA has provided $185 million in kitchen equipment
funding to states and schools participating in the National School
Lunch and School Breakfast Programs. USDA provides the funding to
states, which then competitively award grants to school districts in
order to purchase necessary equipment.
State agencies participating in the National School Lunch and
School Breakfast Programs were directed to target equipment assistance
grants to low income school districts via a competitive grant process,
giving priority to high need schools, including schools in underserved
areas, schools with limited access to other resources, the age of
current food service equipment, and where 50 percent or more of the
enrolled students are eligible for free or reduced price meals. In
addition, school districts were required to give priority to schools
that did not receive previous equipment assistance grant awards.
Based in large part on previous experience with equipment grants
and on-going discussions with States and school districts, equipment
funding has provided opportunities for purchasing new, energy efficient
equipment facilitating the production of healthier, more attractive and
tasty food for students. According to a report released by Kids' Safe
and Healthful Foods Project (Pew Charitable Trusts/Robert Wood Johnson
Foundation), most school districts in the United States (88 percent)
need at least one additional piece of kitchen equipment to serve
healthier school meals that meet the updated, science-based nutrition
standards. Therefore, the President's Budget request for fiscal year
2016 includes $35 million to provide needed funding for schools to
upgrade equipment to help support nutritious meals, better ensure food
safety, improve energy efficiency in the cafeteria, and expand
participation in school nutrition programs.
Senator Moran. Senator Collins, thank you very much.
Senator Udall.
WATER INFRASTRACTURE
Senator Udall. Thank you, Chairman Moran. And let me echo
also, Secretary Vilsack, what was said about you. I think you
have done an excellent job as Ag Secretary. I think sticking in
there for 6 years really makes the difference as a cabinet
secretary, because by doing that, you really learn the
Department, and you learn the problems, and then you focus on
them and work with us to come up with solutions.
I also just want to echo what others have said about family
farms. I think if you go back to the history of the farm bill,
the idea was helping family farms, and I think we could do a
lot more there. I see in my State a younger people going back
and doing small farming, and if we could try to work with the
farm bill to give them the support to stay there, I think that
would be a welcome thing to happen.
But let me ask you a little bit about water infrastructure,
Secretary Vilsack. Come from a State where water infrastructure
is a top priority in almost every community, it's critically
important that we have strong support for water and wastewater
disposal grant programs and the additional resources to provide
technical assistance, which is the real issue, as you know in
some communities that have no ability to do technical
assistance, and make sure that those grants go to the
communities with the most need.
We currently have many low-income communities near the
United States-Mexico border, known as colonias, that have an
urgent need for water infrastructure, no way to pay for their
water infrastructure needs, and are left to find the funding.
And according to a recent GAO report, the cost of replacing
critical infrastructure in rural communities like these is
estimated to be more than $140 billion in coming decades.
USDA is not the only agency that provides funding and
technical assistance to rural communities for water
infrastructure. Can you tell me about your interagency
cooperation to ensure that these rural communities are being
served with an all hands on deck effort by the Federal
Government?
Secretary Vilsack. Senator, I say, first of all, our budget
would support 1,300 water projects in terms of wastewater and
water treatment, and that would bring to a total of, I think,
in excess of 8,000 projects that we funded in the time that
I've been secretary. Secondly, we do work with sister agencies,
Environmental Protection Agency (EPA) and others, to make sure
that we coordinate our resources and we're using them most
efficiently.
And third, we are now encouraging the private sector to get
engaged and involved in investing in these infrastructure
projects. The challenge is that in order to get capital markets
interested, we need to figure out how to bundle these projects.
They're not interested in funding a $2 million or $3 million
project in New Mexico, but they would be very interested in
funding 100 projects around the country.
And so we are now in the process of working with the
Treasury Department and others to try to figure out how we
could potentially bundle. We've had an assessment of our own
portfolio to determine what the strengths and weaknesses of
that would be. So we are trying to look at all areas to try to
increase investment.
Senator Udall. Secretary Vilsack, you believe the USDA has
adequate resources to provide technical assistance to these
communities with the most need?
Secretary Vilsack. You asked me if I have adequate
resources. I suppose I should answer no. But let me just say
this. Whatever you all deem as appropriate, we will try to use
in the most efficient and effective way to reach as many people
as possible. That is why we're reaching out to the private
sector. It's why we've also worked with CoBank to create a $10
billion infrastructure fund so that we can figure out ways, if
we can't say yes, we've got somebody else who can.
I know that we can support 1,300 projects based on the
budget that we submitted, and I think we have the adequate
staff to be able to do that.
COLONIAS COMMUNITIES
Senator Udall. Yeah, thank you. And we want to work with
you on that. I know my time's running out, a quick question. We
have two communities in southern New Mexico that are designated
colonias, called Chaparral and Sunland Park. They have high
poverty rates, limited public sector funding, and many miles
from the New Mexico city of Las Cruces, but they are close to
the city of El Paso, but they don't get any help.
And so these communities need rural development funds for
critical housing projects and infrastructure improvements.
Would you work with me to ensure these two communities do not
fall through the cracks by granting a waiver making them
eligible for rural development assistance?
Secretary Vilsack. At this point in time, not sure I have
the permission from Congress to do that, but I would be happy
to work with folks to try to create as much assistance and
help. And if we can't provide help, then maybe we can steer
them to an agency or entity that can.
Senator Udall. Okay. Thank you very much. Appreciate it.
Senator Moran. Senator Udall, thank you. Senator Daines.
PORT OF VANCOUVER GRAIN INSPECTIONS
Senator Daines. Thank you, Mr. Chairman. Thank you, Mr.
Secretary, for being here this morning.
Last summer, the USDA failed to conduct federally mandated
grain inspections at the Port of Vancouver, the west coast's
largest grain terminal, for several weeks to the safety
concerns, the result of an ongoing labor dispute. And it was
over a month that tens of millions of dollars of wheat harvest
were put at risk.
I remember driving in my pickup across Montana, stopping in
Great Falls, our family roots are north of Great Falls, there
in the Conrad area, they were wheat farmers, homesteaders,
where you've got farmers coming off of their combines to meet
with me, desperate, looking what's going on with the back up
going on out at the port.
And I don't think anybody disputed the need for the
Secretary to have discretion in case of emergency, but it took
the USDA 5 weeks, until after the safety concerns were
resolved, to provide these following mitigations. There was a
crosswalk removed, some Jersey barriers installed, backup power
sources for surveillance video, additional parking spots, some
temporary inspectors. And to me, it's unacceptable. It took 5
weeks to produce the simple and low-cost mitigations, all the
while the livelihoods of grain growers in Montana, across much
of the West, were threatened.
As you know, the United Grain Company and others offer to
provide extensive mitigations during this disruption in
inspections, including several of these USDA ultimately put
forward. So considering UGC's willingness to address any safety
concerns, could Montana grain have been exported sooner if
USDA's analysis was completed more promptly?
Secretary Vilsack. Senator, I would like an opportunity to
delve more deeply into your question to be able to respond to
it accurately. I was not under the impression that there was a
significant delay. There was some uncertainty as to precisely
who was going to inspect the grain and how safe the
circumstances and conditions were.
But I would be more than happy to take a look at this to
determine whether or not it negatively impacted and affected
your producers. Obviously, that would be the intent.
Senator Daines. Well, I'd be happy to get our farmers
together here and chat, because it was a great concern as we're
looking at backing up here and not seeing an end as the port we
shut down for 5 weeks. And back in November 2013, 8 months
before the inspections were interrupted in July 2014, there
were several members of Congress, including myself, who urged
the Department to be prepared and have an executable plan in
place that can be implemented immediately to ensure the
inspections were not interrupted. And that was in direct
reference to the labor dispute and the situation occurring at
the port of Vancouver.
So we were just curious why they were not these plans put
in place when this disruption of inspections occurred.
Secretary Vilsack. Well, I think there are plans that are
in place. The challenge, though, is knowing precisely what is
happening on the ground at that particular time, which is why
there had to be a safety assessment to determine precisely what
needed to be done to protect our people. And there are a
variety of other options that were being looked at and examined
relative to patrols and law enforcement involvement as well. So
that's why I would like to be able to refresh my memory
specifically as it relates to that particular circumstance.
SAFETY REPORTS
Senator Daines. Sure. What I think would helpful is I know
some of my Montana producers have expressed concerns that the
Department simply played out the clock by not identifying the
mitigations until after the labor dispute was resolved.
And I guess in the interest of transparency and to help
address these concerns, I'd like to put this to bed. I'd ask if
you'd release the three safety reports that were conducted
during the duration of the lockout, and am happy to do that in
a non-public setting, if necessary. Would you be willing to
release those reports?
Secretary Vilsack. I don't know what the rules and
regulations are relative to the safety reports, Senator, so I
don't want to run afoul of any technical regulation, but I
would be more than happy to have an opportunity to talk to my
staff and see whether there is any objection. If there's not,
I'd be more than happy to provide them to you.
Senator Daines. I'd be happy to see those reports. And I
think it's relevant. To me, it's relevant to grain growers
across Montana that the USDA's decisions are transparent and
held to account, and I would ask you to release those reports
for review as soon as possible.
Secretary Vilsack. If I can, Senator, I'd be glad to
cooperate with you. I just do not want to make a commitment to
you, because I don't know what the rules and regulations are
relative to disclosing these reports, if there's some security
reason or some reason we can't do it by statute or by
regulation. But if there's not, I'm more than happy to get
those to you.
[The information follows:]
USDA acknowledges the interest in having the safety reports
available for the sake of transparency. For this reason, USDA would be
glad to meet with Members of Congress to go through the reports.
Unfortunately, we would not be able to make the safety reports
publically available as those groups that wish to disrupt operations
could use the information in the reports to contravene the measures
outlined in the reports. To make the reports publically available would
be inconsistent with Departmental Regulation 3440-2.
Regarding the impact on producers by the lockout at the United
Grain Corporation of Vancouver, Washington, the views of your
constituents are very important to us. If you have producers that are
willing to share contracts that were invalidated as a result of the
shutdown or some demonstration of harm, we would welcome the
information.
Senator Daines. I think it's important to remember that
we're here to serve the people, not the other way around.
Having transparency in that process, particularly with the
Montana farmers were gravely concerned about getting their
products to port, I think it would help restore the trust,
because I think it, frankly, has broken down. Mr. Chairman, out
of time.
Senator Moran. Senator Daines, thank you very much. Senator
Blunt.
WATERS OF THE U.S. RULE
Senator Blunt. Thank you, Chairman. And Secretary, it's
great to see you here. And I want to join others who have said
how much we appreciate the 6 years now that you've served in
the job, and I continue to see the Department benefit, and I
think Missouri and American agriculture benefit by your
leadership.
One of the things that I continue to hear about probably
most from local officials, ag interests, is the EPA's proposed
waters of the U.S. rulemaking, the interagency part of that
involves you in a significant way. I've got about three things
I want to get you here, I don't want this to become a 4-minute
answer, but a sense of where you are on your comments to EPA as
they've got that proposal out there and the impact that you
think it might have on U.S. agriculture.
Secretary Vilsack. Well, Senator, I think we have been very
specific with EPA, expressing concerns about some of the
definitions and the clarity of those definitions, especially as
it relates to ephemeral streams, is it a river, is it a bank,
is it a bed, is it a constant flow. And I think administrator
McCarthy's comments yesterday to the National Farmers Union
reflected an awareness of that concern when she acknowledged
that perhaps things could've been done a little bit better in
terms of rolling this out and that there are likely going to be
changes based on what she has heard from us and from the
countryside.
BIG DATA
Senator Blunt. Well, keep talking, because I think the idea
that somehow any water that can run into any water that can run
into any water that could be navigable meets the standards of
the Clean Water Act is a real problem.
On another area that I wonder what you're doing on is the
aircraft drone, aircraft system for drones. Many of our farmers
think there is a lot of potential here. They want to be sure,
of course, that the drones that give them advantages they
wouldn't otherwise have don't become aerial ways to look at
things on a farm that the government would otherwise have to go
to court and asked to come and see.
What's your advice on how these drones can best be used and
how that rulemaking should go about?
Secretary Vilsack. Well, I think the Federal Communications
Commission (FCC) is doing a pretty good job of trying to figure
out precisely where the sweet spot is relative to getting the
information and maintaining the secrecy or privacy of the
information. Frankly, our focus has been on sort of a larger
piece, which the drone is part of, which is this whole issue of
big data, where we been working with the businesses, and the
companies, and the farm organizations, and the Farm Bureau in
particular, to make sure that there is an understanding of the
need for tight firewalls to ensure that someone's information
is not inappropriately used or inappropriately disclosed.
The big data is important for us, because it really does
create the opportunity for us to do a better job of research, a
better job of understanding the condition of soil, the better
job of using inputs more efficiently and effectively, all of
which will help the bottom line for producers. But I know that
producers are a bit concerned about whether or not this is
going to be used to regulate them. I don't think that's the
intent.
MIDAS PROGRAM
Senator Blunt. Well, I would hope not, and I hope you
continue to make that case on the privacy issues. Certainly, if
any endeavor leads to someone's sense of individualism, in our
country, it's always been American agriculture, and the
decision of what you do and how you do it is better informed by
lots of information, but you and I both know that farmers and
farm families want that information to be tightly held. And it
can be used in a good way, and you continue to advocate for
that and understand where those privacy walls are very
important.
On another topic, Secretary, we talked several times over
the last 2 years about where the Department was with the MIDAS
program, which has been discouraging for me and probably for
you. I think the original estimate was it would cost about $305
million and be completed by March of last year. Last count I
heard, we were over $400 million. And the GAO recently said
that it is on the high-risk list of programs as to whether we
get there or not. Where do you think we are on this program?
Secretary Vilsack. We're in a better place today than we
were when this began. Unfortunately, there was not a consensus
in the offices in Kansas City and the offices in DC in terms of
where the focus should be, whether should it be on farm
records, whether it should be on integrity. There was a
mismatch of vision. I think there was a lack of a project
manager.
We now have a--MIDAS is basically now completed. The farm
records is in place. The integrity, business integrity, stuff
is in place. We have a project manager. We incrementally tested
the business integrity part of it effectively. We are now in
the process of developing, for this year, the acreage
reporting, and we are going to do this in a very systematic,
focused way. There's a project manager for that job. It's very
tightly defined.
The question will be whether or not we use existing
software and hardware, or whether we are required to do
something beyond that, but we are going to make an informed
decision. We are not going to jump into it. And when we
implement, we're going to implement it in stages so that we are
confident that it's actually going to do the job it is intended
to do.
So I think we're a much better place, but I will be the
first to admit that we didn't do as good a job on this as we
should have.
ELECTRONIC ACCESS TO RECORDS
Senator Blunt. Thirty more seconds, Mr. Chairman. On this
topic, last year at the same hearing you said that you thought
that, by sometime in 2015, farmers would be able to be at their
kitchen table and look at records and FSA programs. I assume we
no longer think that's possible.
Secretary Vilsack. Well, it's possible, but I don't want to
over commit. I think that we want to do this systematically and
thoughtfully. We are working on two separate issues here. We
are working on the farm service piece of this. We are also
working on the Natural Resources Conservation Service (NRCS).
And what we've discovered in our NRCS efforts is that we can
use that as a gateway for the farm service that will
potentially save money and save time, so we are in the process
of interfacing those two efforts.
We're going to get there, Senator. And I think we've
already created a much more convenient effort, and that's one
of the reasons why we been able to move through the farm bill
implementation as quickly as we have, because farmers can go
into one office, access all records of all land that they own,
regardless of where it's located. That's a significant
convenience. And we're also able to access records quickly so
we're going to significantly reduce mistakes, and it has really
streamlined the process.
So there has been benefit, and this year will be another
forward, if you will.
Senator Blunt. Unless we get another question in here
today, will have a couple of more questions on that for the
record. Thank you, Mr. Chairman.
AVIAN INFLUENZA
Senator Moran. Mr. Chairman, thank you. I think our
intention is short in the second set of questions, try to be
done by the end of the first vote, and then we wouldn't come
back.
Let me ask a question related to the avian influenza. It
has been detected. It is in several States, including some
represented here on this panel today. I'd like to hear what the
Department is doing to combat avian influenza and its spread.
It appears to me that the only commercial detection has been in
turkey flocks, but we have countries who are banning chicken,
poultry, chicken products as well as turkey, and is there
something that can be done to narrow the scope of any trade
disruption?
And then Dr. Johansson might be able to answer this
question in response. I wanted to give him a chance, in case
it's important for you to be able to say that you actually
testified before a Senate committee. But a K-State agricultural
economist, Dr. Glynn Tonsor, indicated that this may have
consequences for other livestock producers and pricing within
the livestock sector. As people make decisions, exports
decline, prices change, is there something for the beef side
that has a consequence to avian flu as well?
Secretary Vilsack. Senator, this is a very complicated set
of circumstances here. Fifty-eight incidences have occurred. I
think it's in 11 or 12 States in several of the flyways. It is
in both chicken and turkey. It is in both commercial
enterprises and sort of individual farming operations.
The Animal and Plant Health Inspection Service (APHIS) has
a responsibility to work with States to identify, as quickly as
possible, the fact that there is AI and what type of AI it is,
we're seeing several different types, and then work with the
States to impact and affect biological controls to try to
contain the spread of this within a flock, within a particular
area, and then to indemnify the producers for any loss that
they've incurred. And that's ongoing today. We are going to go
to the resources that are budgeted for that, and if necessary,
if we need additional resources, we have the CCC that we can
trigger.
As far as it relates to exports, there are three
classifications of countries. There are 11 or 12 countries, I
think, that have basically banned all poultry, regardless of
where it comes from, in the United States. There are somewhere
in the neighborhood of 33, 34 countries that have essentially
regionalized their bans based on where this is actually
occurred, which is more consistent with the World Organization
for Animal Health (OIE) guidelines. And there are a variety of
States and countries that don't do a lot of business with us
that have not instituted a ban of any kind.
We've focused our attention on those countries that have
created an all ban to try to encourage them to take a more
reasoned approach and look at this from a regional perspective.
That obviously requires them to be reasonable, which, in some
cases, is not easy to attain. But we are educating them through
communication with their embassies, communication with the ag
secretaries and commissioners and my counterparts, if you will,
letters, efforts and phone calls, some of which, frankly, have
not--some phone calls have actually been refused, which is
unfortunate.
But we are trying to put folks on notice that the most
appropriate way is to regionalize this. This represents roughly
14 percent or so of exports at this point in time, but its
impact on markets, I think, Dr. Johansson can elaborate, but we
are focused on this. There is no cure for this. It's
essentially the identification, containment, and
indemnification, and trying to limit the impact from an export
basis.
OIE STANDARDS
Senator Moran. Mr. Secretary, is a clear that those
countries in the first category, the ones you're now dealing
with, is a clear that they are violating the OIE standards?
Secretary Vilsack. It is clear to us that they--yes, it's
clear to us that they ought to be regionalizing their bans and
not doing a blanket ban, but this is not unusual. This happens
from time to time. We have been working with several of our
trading partners for an extended period of time on bans that
are still in place from incidents that occurred many, many,
many years ago. And in some cases, they've banned States that
aren't even connected in any way, shape, or form to an AI
incident.
DISRUPTION IN POULTRY TRADE
Senator Moran. Dr. Johansson, to my knowledge, the only
time I've ever been rude, and this was unintentional, was to
Joe Glauber, your predecessor, when he was a witness and I was
a House member, and so I want to demonstrate that I can get
along with the ag economist at USDA.
Dr. Johansson. Well, that's very kind of you. I'm sure that
Dr. Glauber would remember that exchange fondly, as you do.
Dr. Tonsor is, I think, referring to the fact that, if we
do see significant disruption in poultry trade that that would
potentially lead to lower price poultry products in the United
States and perhaps consumer, which we've seen this trend
occurring over time, the movement toward increasing consumption
of poultry in the United States relative to beef, and that's
due to a number of factors. Beef prices right now are extremely
high. But as the Secretary pointed out, we're working with our
trading partners right now, and right at this point in time,
that doesn't seem to be an issue. We seem to be able to ensure
access of our poultry products, turkey and chicken, to our
external trading partners for the most part.
And if some countries do make that more difficult, then we
have other outlets for those goods. So right now, I wouldn't
expect there to be a significant impact on the beef sector from
this current situation with the high path avian influenza.
Senator Moran. That's good to hear. And Mr. Secretary,
please let us know how we can help, either resources or
encouraging countries to comply with those OIE standards.
Senator Merkley.
SELF-HELP HOUSING PROGRAM
Senator Merkley. Well, thank you very much. I'm going to
try to quickly touch on five topics in 5 minutes. Self-help
housing program that involves sweat equity housing, empowerment
through homeownership, pretty popular program. You suggested
cutting it from $27 million to $10 million. Why?
Secretary Vilsack. Help us fix the rental assistance
account, Senator. We basically are faced by a dilemma created
by Congress. When rental assistance first came into being, you
all funded these rental units for the life of the unit. Then
budget constraints required you to lessen the amount of time,
so now we are in the process of having 20-, 15-, 10-year
projects coming on line, having to again finance them, which
puts a constraint on the budget. So you've got a trade off.
If we solve the rental assistance problem, then that would
free up resources in rural development to do self-help. It's
not an indication of the lack of importance of that program.
It's just budget numbers.
INNOVATION INSTITUTE FOR CELLULOSIC NANO-MATERIALS
Senator Merkley. Switching gears, I want to much follow-up
here, given the shortage of time. But you proposed funding in
innovation institute in cellulosic nano-materials. Anything
involving wood, cellulose, is of interest in my State. The
conversation is about potential materials that are flexible and
stronger than Kevlar. A comment?
Secretary Vilsack. We do research at the forest product
lab, but this would allow us to create an entity that would not
be run by the Department of Agriculture, but would be
implemented by the Department of Agriculture, modeled after a
similar innovations institute in Berkeley on energy.
We think nanotechnology creates enormous opportunities for
us, not only in the wood area but in the plant area as well, to
create new manufacturing jobs and to create a new bio economy
within rural America. We'd like to have this institute set up
so that, in turn, we could have greater and more quick
technology transfer, getting ideas.
And what these institutes basically do is they help small
businesses that could otherwise not have the capital to ramp up
to be able to ramp up more quickly, which means it gets the
product into the commerce more quickly, creates jobs more
quickly.
SUMMER FEEDING PROGRAM
Senator Merkley. I visited that laboratory in Berkeley a
number of years ago. Fascinating work that's being done there.
Turning to summer lunch programs for children. Last year,
the subcommittee provided $60 million for that summer program.
Can you update us on how that's working in terms of assistance
for child nutrition?
Secretary Vilsack. Certainly an important component of our
summer feeding program. We've increased the number of sites,
sponsors, and meals, 23 million more meals being served across
the program. And one of the strategies is to provide additional
resources to families that may not have the access to a
congregate site. We did this in 10 States. Eight of the 10 are
re-upping. We think that we learned from that that in remote
rural areas in particular, this is an effective way to expand
our summer feeding effort.
The reality is that we've got 21 million kids in free and
reduced lunch in the country, and we were able to feed 3.3
million in our summer feeding program, so there's still quite a
delta there, and this is the way we think that can allow us
greater tools and more flexibility to reach more kids.
PUBLIC LAW 480, TITLE I
Senator Merkley. Thank you. Public Law 480, title I, there
hasn't been any new loans since 2006. In the long-term, a lot
of these loans are eventually forgiven. We're still
administrating the old loans. Is there an effort to analyze the
255 outstanding loans and determine whether some of them should
just be forgiven and reduce administrative overhead?
Secretary Vilsack. It's a good point, Senator, and I
appreciate your raising the question. I would say that we are
collecting somewhere between $250 million to $300 million a
year, which is one of the reasons why we need some
administrative resources.
But I think your point is well taken. And by virtue of this
question, I'm going to go back and ask. We looked at our
portfolio in other areas. This is a good question to ask.
MOBILE SLAUGHTER FACILITIES
Senator Merkley. And finally, let me turn to mobile
slaughter facilities. And many of my rural counties, I hear a
lot about the difficulty of shipping livestock of various types
to a slaughter facility. Can we get your cooperation in
exploring the potential expansion and support for mobile
slaughter facilities?
Secretary Vilsack. Absolutely. We're very consistently
supportive of mobile slaughter units as a vehicle for
increasing local and regional food systems.
Senator Merkley. We have 20 seconds left. Thank you.
Senator Moran. Well done, Senator Merkley. Senator Cochran.
YAZOO RIVER BASIN
Senator Cochran. Mr. Chairman, thank you very much. Mr.
Secretary, we appreciate your leadership, and we know you've
got a lot of jurisdictional area that's affected by the
appropriations bill that this subcommittee has an opportunity
to influence. And specific programs that are in need of funding
that somehow, year in and year out, come up for review, and
people say, well, if we just had some more money. Well, the
good news is, that we got some more money.
We have money that is available and can be spent and is
authorized for funding in the Yazoo River basin in Mississippi.
And I bring this specific area of the State to the attention of
the subcommittee and the Secretary because it is a fertile area
for agriculture. The Yazoo River basin is the largest drainage
basin in Mississippi. It covers more than 13,000 square miles
and 30 counties. So it is a big deal.
And the management and conservation and thoughtful use of
these lands in this Yazoo River basin are important to our
national economy and certainly to the economies in the States
of the lower Yazoo River basin. So I invite your attention to
opportunities to use funding that, and heaven help us, is
earmarked, hello, for certain areas of the country. This is one
of those high-priority areas, and it would be almost sinful not
to provide funding for this particularly stressed area, which
has not been supported by appropriated dollars through specific
designation.
So I hope that the subcommittee will support providing some
suggestions and directions for how these funds could be used in
the Yazoo River basin. Our State has $45 million in unfunded
authorized water projects under this program, and I hope that
we can see the Department looking into the situation, and if
possible, carrying out the intentions as expressed by the
Congress with respect to appropriated dollars for these
activities.
Senator Moran. Mr. Secretary, before you respond, the vote
has been called. We're going to try to finish all questions
before the vote and not come back. So if everyone can be very
brief between now and the next 5, 6, 7 minutes, that would be a
great experience. Mr. Secretary.
Secretary Vilsack. Fifteen seconds. Mr. Chairman,
basically, I would suggest two things. One, the Regional
Conservation Partnership Program is a great opportunity for
that area to apply for resources. And secondly, this budget
does contain $200 million in watershed resources. Obviously, we
work to figure out if that's appropriated by Congress to spend
it wisely.
Senator Cochran. Thank you very much, Mr. Secretary.
Senator Moran. Mr. Chairman, thank you very much. The
Senator from North Dakota, Senator Blunt has agreed to allow
his time to go to you, and so you owe him an expression of
appreciation, but don't do it right now, we don't have time.
SCHOOL MEAL STANDARDS
Senator Hoeven. I'd like to thank the outstanding Senator
from Missouri, and also you, Mr. Chairman. Thanks for being
here, Mr. Secretary.
First question goes to the nutrition standards. We're going
to be reauthorizing the dietary guidelines. On sodium, schools
are having--you know, I mean, they're meeting the target one,
and they feel that was a reduction, that it works for them. But
as you know, we included in the ag approps legislation last
year not going to the target two and three until additional
study has been done. Has additional study been done, and what's
your view on that?
Secretary Vilsack. There have been additional studies, and
I think there is a game plan that provides for an extended
period of time before phase two and phase 3 would be
implemented.
Senator Hoeven. So I have introduced, or I will be
introducing legislation that addresses the sodium piece, and
I'd be willing to work with you on it. I'm trying to come up
with something that the School Nutrition Association supports
based on what works for them and also something that you may
feel works as well. But they are concerned about going to that
target two level and being able to meet it.
Secretary Vilsack. We obviously want to provide flexibility
where it's appropriate, Senator.
Senator Hoeven. Same thing on the whole grains requirement.
The 100-percent requirement is problematic for them with some
products and then some flexibility and discretion there. So
again, my legislation will address both, but would certainly be
willing to have a dialogue on what we can do in terms of
working with you on that.
Secretary Vilsack. Well, we had provided flexibility on
whole grain, understanding the challenges of the food
processing industry. And again, we've been willing to provide
flexibility where we think it's appropriate. We are concerned,
Senator, about taking a step back. We don't want to do that. We
think we're on the right track. We think we are headed in the
right direction. We just don't want to take a step back.
Senator Hoeven. Well, and I understand that. But we are
going to be doing reauthorization this year, so we are going
to, obviously, be reauthorizing the program. It's a logical
time to look at that and then determine what certainty we can
give the schools in terms of handling those two issues with
your recognition that they need some help on both of them.
Is there a point person in your shop we should be talking
to you on this issue?
Secretary Vilsack. Me.
BUDGET SAVINGS
Senator Hoeven. Great. Thank you. One other question. Where
do you see--as we work to the budget process and have to find
some savings, give me your thoughts on where we do that.
Secretary Vilsack. Well, actually, my thought was that you
need to be careful about the application of sequester on both
the defense and nondefense segments, so I am not sure on the
right person to ask that question.
I would point out, Senator, that this budget that we have
submitted is less than the first full budget that we submitted
in fiscal year 2010 and not too far from where we were in 2009.
We, I think, have done a good job at USDA of trying to manage
on limited resources without a lot of growth in our budget.
Secondly, we've got those four line items, several of which
are going to increase. Fire suppression, that's got to get
fixed. That's got to get fixed. Rental assistance has got to
get fixed. Otherwise we're going to continue to see an erosion
of all the other programs that you folks think are important
and that we think are important.
Senator Hoeven. Well, and I feel like we've worked hard to
find savings in the farm bill that we passed last year and that
ag has stepped up and been part of reforms and savings. And I
think we'll be called on to do more, but I also want to note
that we've worked hard to find real savings from agriculture
and still produce a good farm bill and have farmers and
ranchers out there that are producing the highest quality,
lowest cost food supply in the world. Thank you, Mr. Chairman.
Senator Moran. Thank you very much, Senator Hoeven. Mr.
Secretary, thank you. You were saved by the bell, in a sense.
We, I think, have had a satisfactory opportunity to ask you
questions. I hope this hearing is not just a benefit to us. I
hope it's a benefit to you to see what we are hearing and
thinking from across the country, what are farmers, ranchers,
or consumers are telling us. And we appreciate your testimony
and your service. I think it's been a good hearing.
ADDITIONAL COMMITTEE QUESTIONS
For members of the subcommittee, any additional questions
that you'd like to submit for the record should be turned into
the subcommittee staff within 1 week, which is Tuesday, March
24. We appreciated if the Department could respond from USDA--a
response from USDA within 4 weeks from that date.
And Mr. Secretary, on the two issues you mentioned, fire
suppression and housing, if there's something that we need to
know to help solve that problem, please make certain we do, or
other issues that need our attention.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Jerry Moran
cuba
Question. Secretary Vilsack, I have been an advocate of lifting the
economic embargo against Cuba for the past 15 years, and I am
encouraged by the newfound momentum since the President's announcement
in December. I recognize there is still a lot to be done to restore
diplomatic relations, but the potential for US agricultural exports to
Cuba is undeniably significant. U.S. wheat farmers believe they can
supply two-thirds of the wheat Cuba is already importing from other
countries.
Has USDA begun work to identify potential market access?
Answer. Although USDA does not have an on-the-ground presence in
Cuba to assess the market firsthand, USDA's Foreign Agricultural
Service monitors trade data on Cuba's agricultural imports that
provides insight into the potential of the Cuban market.
If the embargo is removed, the United States could be poised to
become a major agricultural trading partner with Cuba. Cuba depends on
imports to feed its 11 million citizens. According to the World Food
Program, Cuba imports about 80 percent of its food, which means the
potential demand for U.S. products is significant. The United States
has potentially huge advantages in exporting to Cuba, including lower
shipping costs and transit times, especially compared to our current
top competitors--Brazil and Europe.
In fiscal year (FY) 2008, U.S. agricultural exports to Cuba reached
$658 million. However, by the end of last fiscal year, they had fallen
to $300 million. At the same time, global agricultural exports to Cuba
have doubled over the past decade to approximately $2 billion. In
fiscal year 2014, the largest U.S. agricultural export to Cuba was
poultry, followed by soybean meal, soybeans, and corn.
U.S. agricultural exporters can capture the market in Cuba, but
there are factors to be considered. Cuba is a country with limited
foreign exchange. The United States is also behind foreign competitors
in market development. USDA remains prohibited from providing export
assistance and credit or guarantees for exports to Cuba. These
restrictions in law apply to USDA's successful market development
programs like the Market Access Program and the Foreign Market
Development program. Another factor is Cuba's import policy requiring
all U.S. agricultural imports be channeled through one state
corporation, called Alimport.
Question. Since the U.S. government has had no formal relationship
with Cuba for several decades, is there a lack of agricultural data
available to accurately assess their markets?
Answer. Cuba last reported its trade data to the United Nations in
2006. In order to conduct more current trade analysis on the Cuban
market USDA relies on export data to Cuba as reported by other
countries to assess the dynamics of Cuba's import market. While direct
and consistent import data from Cuba would be a preferable option, the
use of export data to Cuba serves as good proxy to understand how trade
patterns are changing in the country. However, there is very limited
information available regarding Cuba's production and consumption
trends. Elsewhere, FAS utilizes its network of overseas offices coupled
with on-site assessments by Washington-based staff to gather
comprehensive market intelligence. This type of comprehensive
assessment has not been an option in Cuba. As the United States begins
the process of re-establishing diplomatic relations with Cuba,
including the opening of an Embassy, USDA is prepared with the
expertise to provide on-the-ground assessments.
it modernization
Question. Secretary Vilsack, one issue that has been raised
repeatedly by this subcommittee in recent years is the IT modernization
effort at the Farm Service Agency. Despite significant investments by
Congress spanning several fiscal years, the MIDAS project as we
understand it has been abandoned. Your budget indicates that FSA is
conducting a Business Strategy and IT Strategy to establish new
objectives to seemingly replace MIDAS. What is the status of those
efforts?
Answer. MIDAS has not been abandoned nor are there any plans to
replace MIDAS. MIDAS remains at the core of the FSA IT modernization
strategy. With any IT modernization effort there comes a time when the
project must transition from the ``development'' stage to the
``sustainment'' stage. With the successful delivery of Product Master,
Farm Records, and Business Partner, the MIDAS system has moved into
sustainment. During sustainment MIDAS will receive incremental
improvements to the deployed functionality and, in order to keep it
operational for field office staff, ongoing maintenance of processes
and technical infrastructure, including defect resolution and minor
adjustments to maintain continuity with program business rules.
Following the Business Partner release in December 2014, the U.S.
Department of Agriculture (USDA) Executive Information Technology
Investment Review Board recommended that additional functionality, such
as the ability of agricultural producers to interact with FSA online,
be developed separately in smaller, more modular, investments that
reflect the current vision for FSA's role and opportunities to improve
service, including provisions of the 2014 Farm Bill.
The FSA Farm Programs IT Plan for Expenditure that will be
submitted in the coming weeks will provide details on the Farm Programs
IT investments for fiscal year 2015. FSA Executive Leadership, in
coordination with the Office of the Chief Information Officer,
continues to leverage the Business Strategy, IT Strategy, and Roadmap
to refine IT investment plans for fiscal year 2016. A non-USDA
independent third-party will be engaged to conduct an analysis of the
enterprise solution to determine if the current enterprise solution
provides the necessary functionality and identify a proposed strategic
direction for modernizing and ensuring the most cost-effective means
for delivery of IT Services in FSA's dynamic program environment. The
results of this third-party analysis will be used to guide the
development of additional capabilities for the current MIDAS system.
Question. While these IT challenges are ongoing for FSA, producers
will soon be enrolling in the new Farm Bill commodity programs. Can the
system currently in place handle the workload in a timely manner?
Answer. Following the deployment of MIDAS Business Partner
capabilities in December 2014, one performance-related issue was
reported and resolved. USDA recognizes modernization of the current
national telecommunications architecture is required to further improve
performance and enable efficient delivery of program services to
farmers, land owners, and agricultural partners. In March 2015, the
Service Center Agencies (FSA, RD, and NRCS) approved the USDA Client
Technology Services plan to upgrade 1,035 offices. These sites were
determined as most critical based upon bandwidth saturation thresholds
coupled with site populations and customer traffic demands. In fiscal
year 2015, 300 sites are being upgraded with an additional 735 Service
Center Agency sites planned in fiscal year 2016. Sites that have been
upgraded will be consistently monitored to ensure that the initial
upgrade is sufficient to support the customer's changing application
and data requirements. Sites not upgraded in the initial phase will be
evaluated on a continuous basis to determine if saturation thresholds
have changed based on new demands.
Question. Can producers rely on the security of the system to
protect their financial information?
Answer. Producers can rely on the security of the system to protect
their financial information. The USDA and FSA provides several layers
of information security by implementing physical, network/server,
application and business process security controls. Security controls
are compliant with the Office of Management and Budget, the National
Institute of Standards and Technology and USDA requirements for systems
that process individual's personal and financial information.
implementation of new methods of poultry slaughter inspection
Question. Where exactly do you stand now regarding implementation
of the modernized poultry slaughter program? Will implementation be
completed during fiscal year 2016?
Answer. The implementation of the New Poultry Inspection System
(NPIS) is moving forward as expected with 40-50 eligible plants
expressing an interest in converting to the new system. Agency
officials and union representatives are in ongoing negotiations at the
present time. Full implementation is expected to be completed over a 5
year period.
Question. I understand that adopting these new methods is at the
discretion of the plants. What is the level of interest in
participation that you are seeing from the industry?
Answer. The level of interest we are seeing from plants is what we
had predicted. At present, FSIS has between 40-50 eligible plants
inquiring about converting to NPIS.
biotech review in aphis
Question. One issue that has been raised by this Subcommittee is
the backlog of applications for biotech products. I am pleased at the
Department's efforts to clear out the backlog and hope those
applications can be cleared by the end of this fiscal year. Moving
forward, how can we further improve and shorten the process to put us
on an even playing field with competing countries and give companies
regulatory certainty?
Answer. Since 2012, USDA identified and implemented innovative ways
to improve the biotechnology petition review process. The goal of these
efforts was to significantly decrease the length and variability of the
process without compromising the quality of the analysis that supports
our decisions. Results of the 2012 process improvement are substantial.
For example, published petitions are currently taking, on average, 1.8
years, a time savings of approximately 1.2 years over the petitions
that did not require an environmental impact statement and were
published between 2010 and 2012. USDA ensures that its environmental
analysis and plant pest risk analysis documents are thorough, accurate,
and can withstand legal challenges. The process improvement analysis
revealed a minimum estimated timeframe of 13-15 months required to
conduct quality analysis and solicit public input to support regulatory
decisions and protect plant health. These targeted timeframes are
comparable to the average time it takes for product deregulation in
other countries around the world. USDA appreciates the efforts of
Congress to provide the necessary resources to USDA's biotechnology
program and its continuing efforts to oversee certain genetically
engineered organisms that might pose a risk to plant health. The
President's fiscal year 2016 budget proposal for biotechnology
regulatory services will provide sufficient funding to meet the new
process timelines.
rice entering china
Question. The U.S. Animal and Plant Health Inspection Service
(APHIS) has been working with the China Administration of Quality
Supervision, Inspection and Quarantine (AQSIQ) since early 2007 to
develop the mechanism to allow US rice entry into the China market. The
current negotiation centers on a phytosanitary protocol, which sets out
the technical requirements for US rice entering China. It is our
understanding that the last official communication on the draft
protocol was spring of 2014 when APHIS provided a response to the
Chinese latest offer. In the last three scheduled bilateral meetings
between APHIS and AQSIQ, one was canceled by the Chinese without
explanation and at the other two AQSIQ did not have present the
appropriate parties to negotiate on rice. It appears as though the
Chinese are dragging their feet and not negotiating in good faith on
this issue.
Since APHIS cannot compel their Chinese counterparts to negotiate,
what more is USDA prepared to do to move this issue to an amicable
solution?
Answer. To date, China has not authorized imports of U.S.-origin
milled rice, but we understand that China is an important potential
market for United States rice exports. The issue has been addressed in
bilateral meetings with both Beijing-based and Washington-based USDA
personnel. Since the spring of 2014, there were several letter
exchanges with China's General Administration of Quality Supervision,
Inspection and Quarantine (AQSIQ). The latest letter from AQSIQ,
reworked the original language in the proposed draft protocol, but did
not address a key USDA objection on the requirement of pest-free
production sites. USDA shared the information with United States
industry and rice producers, and together we are working to develop a
solid technical response. From the USDA perspective, we expect to
participate in on-going negotiations with China in fiscal year 2016,
about the AQSIQ rice storage site requirement to more accurately
reflect current pest management measures in U.S. rice storage
facilities.
______
Question Submitted by Senator Susan M. Collins
potato wart
Question. Potato wart is a serious, internationally-quarantined
disease of cultivated potato that is not known to be present in the
United States. The fungus is present, however, in Prince Edward Island,
Canada, a region that is approved to export potatoes to the United
States, which is the subject of significant concern to potato growers
in Maine.
With few effective measures to control the fungus, potato wart is
readily transmitted to new areas in a variety of ways: by tubers grown
in infected soil, by tools used in potato cultivation, by footwear, and
by manure from animals that have fed on infested tubers. Even more
problematic is that infested tubers do not always show outward signs of
infection.
Effectively controlling potato wart is possible primarily by
appropriate production and handling practices, as well as statutory
measures.
I commend APHIS for acting quickly in issuing the current Federal
Order with respect to potato wart. I am concerned, however, that it
does not address soil, machinery, or potato movement from PEI to other
areas in Canada. Unrestricted movement of these materials from PEI to
other potato producing areas of Canada is troubling because it risks
spreading disease beyond PEI, including into the United States. This
risk comes from the movement of these materials.
Will you evaluate the current Federal Order to help ensure that it
is effectively protecting the potato industry in the United States,
including in Maine, from being contaminated by this fungus that has the
potential to devastate our industry?
Answer. I recognize your concern about preventing the introduction
of potato wart into the United States. USDA has worked closely with the
U.S. potato industry, States, and our Canadian counterparts to put in
place a scientifically-based policy that allows for the safe
importation of potatoes from Canada. As a result of the recent new
detections of potato wart on Prince Edward Island (PEI), the Animal and
Plant Health Inspection Service (APHIS) issued a Federal Order
strengthening our import requirements for potatoes from that province.
The revised requirements apply to potatoes for consumption, processing,
and seed from fields outside the regulated area, and were agreed upon
by the U.S. Potato industry. The Canadian Food Inspection Agency (CFIA)
quarantines infested fields and fields associated with them and
conducts measures (monitoring, surveillance, and movement restrictions
for potatoes as well as soil) to prevent further spread of Potato Wart
within and from PEI to other parts of Canada or in exports. The
measures also include prohibition of exports of potatoes from regulated
fields to the United States and require that machinery used on
regulated fields be cleaned and disinfected according to CFIA
regulations before it can be moved. Under the Federal Order, potatoes
from non-regulated areas of PEI must meet requirements to mitigate the
risk of potato wart, such as washing to remove soil, sprouting
inhibition, and phytosanitary inspection. Seed potatoes must originate
from a field that has been tested and found free of the fungus that
causes potato wart within 1 year of harvest. The Federal Order was put
in place as an interim measure in response to concerns about possible
risks from areas of PEI not regulated by Canada. APHIS and CFIA have
committed to further technical discussions to review the current
regulatory approach and if necessary, to make changes to the regulatory
framework or other approaches to prevent the introduction of the
disease into the United States while minimizing negative impacts on
trade. Importation of PEI potatoes for non-propagative uses and for
seed plays a significant role within the U.S. economy. USDA has worked
to preserve this important import trade while protecting the U.S.
industry from the risk of potato wart.
______
Questions Submitted by Senator Steve Daines
consolidation of food safety agencies
Question. Earlier this month before this subcommittee, I voiced
concerns I've heard regarding the President's proposal to consolidate
food safety agencies into a new agency entirely within HHS. In that
hearing, FDA Commissioner Hamburg stated that FDA and USDA have ``very
different approaches'' and ``different areas of expertise'' as it
relates to food safety.
Would you agree with Dr. Hamburg's assessment and the idea that
USDA brings expertise and a unique perspective to the table regarding
food safety?
Answer. While USDA does bring expertise and a unique perspective to
food safety and while the U.S. food safety system is among the safest
in the world, consolidating food safety functions is an essential step
to reforming the Federal food safety system overall. A single Federal
food safety agency would provide focused, centralized leadership, a
primary voice on food safety standards and compliance with those
standards, and clear lines of responsibility and accountability that
will enhance both prevention of and responses to outbreaks of food-
borne illnesses. It would rationalize the food safety regulatory regime
and allow the Federal Government to better allocate resources and
responsibilities.
Question. Are you concerned about the potential loss of expertise
if USDA is removed from the food safety process?
Answer. The Budget highlights several opportunities for
reorganizing and reforming government, including the new proposal to
consolidate USDA's Food Safety and Inspection Service and the food
safety components at FDA into a single new agency responsible for food
safety inspection and enforcement, and foodborne illness outbreak
prevention and response. The new agency would be charged with pursuing
a modern, science-based food safety regulatory regime drawing on best
practices of both agencies, with strong enforcement and recall
mechanisms, expertise in risk assessment, and enforcement and research
efforts across all food types based on scientifically supportable
assessments of threats to public health.
Question. How would USDA ensure that agriculture's perspective and
concerns are accounted for should such a consolidation occur?
Answer. While the Administration believes that this is an
opportunity to drive efficiency and accountability, prevent
duplication, and make government work better and smarter for the
American people, USDA will still work to ensure that USDA and
agriculture's perspectives and concerns are taken into account when
consulting with the new agency.
environmental concerns within the dietary guidelines
Question. In the fiscal year 15 Omnibus, there was a Congressional
directive that expressed concern that the advisory committee was
``showing an interest in incorporating environmental factors into their
criteria'' and directed the Secretary to ``only include nutrition and
dietary information, not extraneous factors'' in the final guidelines.
As you know, the Scientific Report of the 2015 Dietary Guidelines
Advisory Committee was just released last month. It included, and I
quote, ``environmental approaches are needed to complement individual-
based efforts to improve diet and reduce obesity and other diet-related
diseases.''
Is the advisory committee report compliant with the Congressional
directive?
Answer. As noted above, the Congressional directive is aimed at the
Departments, not the Advisory Committee. Congress did not mandate that
HHS and USDA use an Advisory Committee to review evidence, so it does
not specifically define or limit what the Advisory Committee considers.
It's worth noting that the Committee's report is advisory in nature--it
is not a draft of the Dietary Guidelines for Americans. Additionally,
the 2015 Advisory Committee used the terms ``environment''/
``environmental'' in a variety of ways in its advisory report.
Question. In a hearing before the House Agriculture Appropriations
Subcommittee, you indicated that USDA needs to ``color inside the
lines'' with regards to the directions you've received from Congress.
Can you confirm that the final report will follow Congressional intent
and focus only on nutrient and dietary recommendations, and not factor
in environmental factors and other extraneous material?
Answer. Working with our colleagues at the US Department of Health
and Human Services, we will follow the statutory parameters for the
Dietary Guidelines for Americans, focusing on providing food-based
dietary recommendations that are grounded in the strongest body of
scientific evidence.
Question. Do you believe that environmental issues are within the
purview of developing these dietary guidelines?
Answer. While environmental issues are important overall and are a
priority for USDA elsewhere as they intersect with the food supply, I
do not believe they are within the confines of our Congressional
mandate for development of the Dietary Guidelines. As the National
Nutrition Monitoring and Related Research Act of 1990 (NNMRRA)
stipulates, the Dietary Guidelines for Americans, published by USDA and
HHS ``shall contain nutritional and dietary information and guidelines
for the general public,'' and we will focus on food-based, dietary
recommendations based on the strongest evidence on diet and health.
u.s. sheep experiment station
Question. The U.S. Sheep Experiment Station in Dubois, Idaho, has
improved the knowledge and understanding of how the interaction between
domestic and bighorn sheep may impact wild sheep herds, which has
resulted in improved health for both domestic and wild sheep. Last
year, USDA attempted to reprogram funds and would've shuttered the
program if Congress didn't intervene.
Can you commit to not attempting to reprogram funds from the USSES
or make other efforts to close the station?
Answer. ARS' ability to conduct innovative grazing research at the
U.S. Sheep Experiment Station (USSES) continues to be negatively
impacted by changes in domestic sheep access to grazing lands. This
reduction in access is the result of changes in the areas permitted for
grazing by domestic sheep to minimize contacts with expanding bighorn
sheep populations and conflicts within the grizzly bear habitat in the
Greater Yellowstone area. A variety of other factors, including a
continued lack of resources, both human and financial, and inadequate
infrastructure have contributed to the unsustainability of the ongoing
research program at the USSES. USSES will remain open and operational
during fiscal year 2015 to allow further input to be provided by
stakeholders. However, given the ongoing, serious challenges to
operating USSES, the fiscal year 2016 Budget for ARS does include a
proposal to close the USSES and reprogram the associated funding to
high priority research at other ARS locations in Idaho as the program
is not sustainable.
The proposed closure of the USSES will not, however, negatively
impact our research, knowledge, or understanding of sheep health, as
sheep research will continue elsewhere.
______
Questions Submitted by Senator Jeff Merkley
healthy foods financing initiative (hffi)
Question. Mr. Secretary, will you please discuss progress and
successes to date of the Administration's Healthy Foods Financing
Initiative (HFFI)?
In the absence of funding so far for this program, USDA has
developed background information and scoped out a path forward. USDA
has discussed this program with other Federal agencies (Treasury and
HHS) that deal with healthy foods to ensure coordination and to avoid/
minimize duplication and with stakeholders. USDA has engaged with
stakeholders and dialogue on best practices, models, ongoing policy
efforts, areas where partners and agencies can collaborate, and other
topics that would help inform the strategy for how the mission area can
effectively deliver the HFFI program. Key areas discussed to date
include:
--Process and selection of the National Fund Manager
--The role and duties of the National Fund Manager
--Process for soliciting and reviewing applications
--Contents of a regulation
What has USDA been able to do to support the HFFI under USDA's
current authorities?
Answer. Without funding explicitly provided, USDA's ability to
implement the Healthy Food Financing Initiative and to begin to finance
retail food providers in areas with limited food access through a
national fund manager has been severely restricted. The USDA and Rural
Development have used existing programs and authorities to support
efforts to increase access to healthy food. For example, in fiscal year
2014, USDA Rural Development through the Business and Industry
Guaranteed Loan Program, Rural Business Enterprise Grant Program, Rural
Business Opportunity Grant Program, Value Added Producer Grant Program,
Rural Cooperative Development Grant Program, Small Socially
Disadvantaged Producer Grant Program, and Rural Energy for America
Grant Program was able to fund 231 projects totaling over $77.4 million
which assisted rural businesses in providing healthy food.
Question. This budget requests $12.8 million for Rural
Development's participation in the initiative. Please explain how these
funds would be used and what you expect to accomplish.
Answer. The funds requested for the Healthy Food Financing
Initiative would enable Rural Development to seed a fund that through a
third-party fund-manager would provide loans, grants and technical
assistance to low-income and moderate-income communities for
investments that would increase access to healthy food. Rural
development would write the rules and regulations for the program, but
a third-party, the fund-manager would then run the program.
Ultimately, the awards made will support market planning and
promotion efforts as well as infrastructure and operational
improvements designed to stimulate consumer demand, enhance marketing,
expand demand and retail outlets for farm products, and increase
availability of locally and regionally produced foods.
Funding would be made available to the following entities with
sound strategies for addressing the healthy food needs of communities:
businesses, non-profits, public entities, and community development
financial institutions.
The funds will be targeted to severely underserved low- and
moderate-income communities. Most often low-income communities are less
attractive, under the conventional financing, to retailers of healthy
food. However, effective programs have shown that well-targeted
financing and technical assistance can create viable business outcomes
and access to healthier foods and create new markets for farmers, but
also create jobs and support broader development efforts to revitalize
distressed communities.
Organizations will use grants, below-market rate loans, loan
guarantees and tax credits to attract private sector capital for an
even greater investment in projects that increase access to fresh
produce and other healthy foods. The goal is to support efforts to
provide access to healthy foods in underserved areas, to create and
preserve quality jobs, and to revitalize low-income communities.
USDA Rural Development will work in close coordination with USDA's
Food and Nutrition Service and Agricultural Marketing Service in
crafting and administering the program to ensure the goal of expanding
healthy food access is achieved.
aphis overall budget priorities
Question. Mr. Secretary, APHIS is charged with protecting the U.S.
from invasive animal and plant pests and diseases. This budget reflects
priority funding for: antimicrobial resistance activities in the
Zoonotic Disease Management program; Agricultural Quarantine
Inspections; ``citrus greening'' (huanglongbing); and expanded
implementation of Lacey Act enforcement. These are laudatory
priorities, but I have several questions.
In this era of severe resource limitations, please explain your
review process through which these priorities rose to the top.
Answer. Our Blueprint for Stronger Service has saved American
taxpayers a total of $1.368 billion over the last several years while
ensuring that the American people receive the best service possible.
While developing the fiscal year 2016 Budget, USDA focused on areas
that would have a broad, national or international impact and improve
our nation's economy and agricultural health, assisting rural
communities and ensuring access to safe nutritious food for all
consumers. USDA is supporting a government-wide initiative to deal with
antimicrobial resistance, which affects both animal and human health.
The Animal and Plant Health Inspection Service (APHIS) will play an
important role in this effort by monitoring for antimicrobial resistant
bacteria among livestock. The other increases support APHIS' mission of
protecting the health and value of U.S. agriculture and natural
resources. These increases will allow APHIS to meet critical needs
related to its mission, and they also fit into USDA's goals of
supporting rural economies and ensuring access to safe and nutritious
foods.
Question. Within the Specialty Crops Pests program, for citrus
greening, you are requesting $3 million in new funding plus $4.5
million in redirected funding. However, total Specialty Crops Pests
support would be reduced by $10.8 million. Such a reduction would
severely curtail control and eradication efforts on a variety of
devastating pests including: European Grapevine Moths; Light Brown
Apple Moths; Medflies; glassy-winged sharpshooters; and the spotted
wing drosophila. According to your budget, in fiscal year 12 this
program protected $27 billion worth of specialty crop production in
this country.
As you know, Oregon is a major producer of specialty crops. What
assurances can you provide that this funding reduction will not impact
our fruit, vegetable, nuts, horticulture and nursery crops production?
Answer. USDA is proposing decreases to three areas of the Specialty
Crop Pests program: the Citrus Health Response Program, the glassy-
winged sharpshooter program, and the light brown apple moth program.
These proposed decreases are designed to allow for more equitable
sharing of costs between the Federal government and those who benefit
from these important programs. If cooperators are able to increase
their contributions to the programs, they will continue to operate at
their current levels. If contributions to the programs do not increase,
APHIS would focus available resources on preventing the spread of the
pests and diseases to new areas.
avian influenza
Question. Recently new cases of highly pathogenic avian influenza
have been detected in Michigan, Missouri, and Arkansas. This disease
can be transmitted by wild birds and has impacted both commercial and
backyard flocks. Selective trade restrictions have been imposed by
numerous countries affecting U.S. poultry exports. However, this budget
requests only a $55,000 increase for the Avian Health program.
In the face of these newly detected cases of bird flu do you still
believe this funding level is adequate to protect the U.S. poultry
industry and maintain poultry exports?
Answer. We developed our fiscal year 2016 budget request before the
bird flu outbreak escalated to the extent that is has today. We are
monitoring this situation closely, and are keeping our trading partners
fully informed. To address this issue, we are using appropriated and
emergency funding carried over from previous years as well as funds
appropriated in fiscal year 2015 to carry out response actions. These
actions include indemnifying producers and conducting surveillance
activities in areas near detections. If we find that we cannot
adequately address the situation through these funding sources, we will
pursue emergency funding sources.
Question. What access do you have to Commodity Credit Corporation
funds to address emergencies of this sort?
Answer. I am authorized to quickly access and transfer funds from
the Commodity Credit Corporation to any USDA agency in the event of an
agricultural emergency. As part of the process, the Office of
Management and Budget reviews the emergency funding request to ensure
consistency with Administration priorities and apportions the funding
accordingly.
implementation of new methods of poultry slaughter inspection
Question. Mr. Secretary, the Food Safety and Inspection Service is
responsible for the safety and accurate labeling of domestic and
imported meat, poultry and processed egg products. This is generally
accomplished through in-plant inspections carried out by a cadre of
FSIS inspectors. Your budget proposes to cut overall agency funding by
$4.9 million, chiefly relying on $10 million in savings to be achieved
by implementation of new methods of poultry slaughter inspection.
Mr. Secretary, you have been working toward implementing these new
methods of inspection for several years. Have you made sufficient
progress to achieve these savings in fiscal year 16?
Answer. With the publication of the final rule in August 2014, we
plan on being able begin implementation and anticipate the first plants
converting by the end of fiscal year 2015. Our fiscal year 2016
estimate is based on the timeline in the final rule which estimated
implementation going from fiscal year 2015 through fiscal year 2019.
Question. We continue to hear concerns that these new inspection
methods will sacrifice food safety for expediency. What assurances can
you provide that the safety of our food supply will not be compromised
by this new process?
Answer. As a result of the new rule, the bacterial testing
requirements for all plants, including those who elect to participate
in the new system, as well as those who retain their existing system,
will be required to perform both pre-chill and post-chill bacterial
testing, effectively doubling the testing requirements for pathogens
such as Salmonella and Campylobacter. The FSIS Risk Assessment based on
the best science available, presents estimates that industry-wide
adoption of NPIS would reduce the number of human illness, attributed
to young chicken and turkey products by an average of about 3,980
Salmonella illnesses and about 840 Campylobacter illnesses annually.
Our data has shown that the HIMP model plants, on which the New Poultry
Inspection System is based, have food safety records that are as good
as, or better than, that of the traditional slaughter plants.
Question. We also hear concerns that the accelerated carcass line
speeds will jeopardize worker safety. I understand that those plants
participating in the pilot program will continue to be allowed to move
poultry carcasses at 175 birds per minute. That is an astounding speed-
equal to three carcasses a second. What type of inspection can
conceivably take place in 1/3 of a second? What studies have you
undertaken and what information can you provide that these line speeds
will not threaten worker safety?
Answer. In response to public comment, the maximum line speeds for
plants that adopt the NPIS are capped at 140 birds per minute,
consistent with the maximum speed under existing inspection programs.
Plants that participated in the pilot program will be allowed to
maintain line speeds of 175 birds per minute. USDA received numerous
comments on the proposed rule related to work safety and has partnered
with Federal agencies responsible for worker safety to address those
concerns.
merging food safety responsibilities
Question. Mr. Secretary, there is a very brief write-up in the
budget appendix indicating the President is asking for reorganization
authority to merge all food safety responsibilities into one agency, to
be housed in the Department of Health and Human Services (DHHS).
Will you please describe, in more detail than provided in the
budget, what this proposal entails?
Answer. The Budget highlights several opportunities for
reorganizing and reforming government, including the new proposal to
consolidate USDA's Food Safety and Inspection Service and the food
safety components at FDA into a single new agency responsible for food
safety inspection and enforcement, and foodborne illness outbreak
prevention and response. The Administration believes that this is an
opportunity to drive efficiency and accountability, prevent
duplication, and make government work better and smarter for the
American people.
Question. Is a legislative proposal forthcoming on this
reorganization?
Answer. The Budget demonstrated examples of what the President
would do if Congress reenacted broad reorganization authority. The
Administration believes that this is an opportunity to drive efficiency
and accountability, prevent duplication, and make government work
better and smarter for the American people.
Question. Can you provide assurances that the food safety expertise
developed in the Food Safety and Inspection Service will not be eroded
through this reorganization?
Answer. USDA and FDA have strong collaborative ties that have
improved Federal coordination of the nation's food safety system. The
new agency would be charged with pursuing a modern, science-based food
safety regulatory regime drawing on best practices of both agencies,
with strong enforcement and recall mechanisms, expertise in risk
assessment, and enforcement and research efforts across all food types
based on scientifically supportable assessments of threats to public
health.
rental assistance
Question. Mr. Secretary, the Department's Rental Assistance program
subsidizes certain tenants of affordable rural housing to pay no more
than 30 percent of their adjusted household incomes on rent and
utilities. Recipients of Rental Assistance are, generally, the elderly,
disabled, or female-headed households, with average annual household
incomes around $10,000. This budget seeks an $83.4 million increase in
rental assistance.
In addition, the budget requests four program ``reforms'' that
would appear to severely disadvantage very low income program
participants. The Committee rejected three of these reforms in fiscal
year 15 while accepting the fourth. However, now program advocates are
voicing strong opposition to all four.
Please explain the four Rental Assistance program reforms and how
their implementation would not jeopardize the security of very low
income tenants.
Answer. The legislative changes the Administration has requested
help ensure that the Rental Assistance (RA) program will continue to
provide a safety net for the neediest rural residents and ensure the
program's long-term sustainability. Prudent program management demands
that Rural Development (RD) ask for adequate funding and seek authority
to control program costs in times of budgetary constraints. On balance,
the legislative proposals further concentrate the benefit of RA for the
most disadvantaged rural households and extend the available funding to
as many properties, and tenants, as possible.
No automatic renewals
Current statutory language requires that funding on an RA Agreement
be automatically replenished when funds are exhausted. RD's estimating
methodology on funding amounts ensures that all RA agreements have
enough funding for the full 12-month period. However, the Department
has experienced the need for a second obligation in the same 12-month
period in 3--5 percent of the renewals in a fiscal year. These
automatic renewals will need to be funded for 12 months again.
Having to fund these second renewals means some properties receive
a disproportionate share of RA funds, to the detriment of other
properties, during a fiscal year. Having this authority will allow the
Department to more efficiently utilize RA resources; these actions will
also eliminate same uncertainty of future program costs and provide
budget greater predictability for the RA Program.
Selective renewals
Selective renewals and partial year agreements are two proposals
designed to stretch available RA funding during periods of short-term
continuing resolutions or sequesters. During such uncertain funding
periods, every RA Agreement that requires full 12-months' funding
cannot be accommodated. RD seeks the selective renewals authority to
eliminate the current practice of renewing agreements on a first-come-
first-serve basis, without regard to need. Selected renewals will
provide to the Department the ability to prioritize or determine
renewals for properties where the need may surpass that of other
properties.
Partial year agreements
Current appropriation language and statutory authority requires RD
to obligate the entire 12-month estimated amount of RA funding at the
time the agreement is renewed. In times when the budget is uncertain,
such as during a short-term Continuing Resolution, providing RD with
the ability to obligate less than a full-year of funds will provide RD
with an important management tool that will help ensure RA is available
for those who need it most. The result will be that the agency is
better able to continue to meet its mission of providing affordable
housing to residents even in times of funding uncertainty.
Minimum rent
RD's proposal is to institute a minimum rent of up to $50 per
month, but plans to start with a minimum rent of $25 per month. This
authority is similar to rental assistance programs at Department of
Housing and Urban Development (HUD). RD intends to provide hardship
exemptions for applicants and tenants who cannot pay the minimum, and
eviction of tenants is prohibited if they cannot pay the minimum rent.
The Department believes this change will encourage a sense of ownership
within the rental community by tenants, as well as contribute to the
long-term availability of RA. The hardship exemption will ensure that
the minimum rent requirement does not jeopardize the security of very
low income tenants.
Question. The $50 per month minimum rent reform appears focused on
the very lowest income program participants. The budget states that
waivers would be granted in cases of extreme hardship. The budget also
contends this reform will save $5 million per year. Please explain the
situation in which $5 million could be raised without imposing
substantial hardship on tenants.
Answer. The 2016 Budget requests the authority to require a minimum
rent payment of $50 per month regardless of tenant income level. The
proposal includes hardship exemptions for tenants that can demonstrate
they are unable to pay the minimum. These hardships may include the
loss of family income due to the termination of employment, termination
of benefits from other programs, or the death of an income earner. The
proposal also prohibits the eviction of tenants if they are financially
unable to pay the minimum rent.
There are currently about 42,000 households that pay between $0 and
$50 per month as their tenant contribution toward the rent payment. The
actual number that would see their tenant contribution increase to $50
per month would depend on the number of exemptions approved.
Ensuring the long term viability of the RA program is in the best
interest of the tenants, who have come to rely on the program to help
support their ability to live in affordable housing and allow us to
stretch this much needed resource. The hardship exemption will ensure
that the minimum rent requirement does not jeopardize the security of
very low-income tenants.
Question. Is the agency working to develop other cost containment
strategies that would not endanger the security of very low income
rural residents?
Answer. The well-being of low and very-low income rural Americans
is a top priority for this Administration and the Department of
Agriculture. The cost containment strategies included in the
President's 2016 budget request are intended to provide USDA with the
tools for managing a program that provides essential support to rural
Residents during a time of reduced budgets. The legislative proposals
presented as cost containment strategies are a response to both budget
reductions due to sequestration and legislatively-mandated changes--
such as reducing the duration of RA agreements--that have forced USDA
to manage the portfolio and growing need amidst an overall reduction in
funds.
multi-family housing preservation pilot
Question. Mr. Secretary, over 16,000 affordable multi-family
housing projects in rural America have been financed using USDA loans.
These projects include over 475,000 housing units for low and very low
income rural households. However, the average age of these projects
exceeds 25 years.
With projects this old, what is the Department doing to maintain
their physical condition and to mitigate issues of deferred
maintenance?
Answer. USDA has long recognized the need to revitalize its
existing Section 515 housing. The primary means of revitalization has
been through the Multi-Family Preservation and Revitalization (MPR)
program, which provides flexible financing tools that can be tailored
to provide the best financing solution to each property's needs and
ability to repay. To stretch the Department's dollars further, MPR
revitalization is typically done through a public/private partnership
that includes Low Income Housing Tax Credits and third party financing,
along with MPR funds. The Department also works with Section 515
property owners to transfer aging properties to new owners ready and
able to invest in the modernization of the property. USDA works to
mitigate the risk of deferred maintenance by closely monitoring each
property through onsite physical inspections and review of property
financial conditions. This oversight ensures that properties are in
safe and decent condition, and financial resources are set aside to
address maintenance needs as they arise.
Question. Some years ago the Committee created a pilot program to
address property rehabilitation needs and to protect tenants if
projects prepay and leave the program. This budget indicates the
Department will submit legislation to make that pilot a permanent
program. What is the status of that proposed legislation?
Answer. The fiscal year 2016 budget request included the proposal
to make permanent the Multi-Family Preservation and Revitalization
(MPR) program. The 2016 budget follows similar requests to make the MPR
program permanent in the fiscal years 2014 and 2015 budget. USDA
believes the MPR program fills a critical need for flexible financing
that can revitalize our rental housing without the need for significant
increases in tenant rents to pay for it. The Department has delivered
the legislative proposal to OMB for their consideration and
transmission.
Question. What changes will the proposed legislation include
compared to the existing pilot?
Answer. The proposal to make the MPR program permanent will provide
the same financing tools Rural Development has been using in the pilot
program. These tools include providing zero percent loans, soft second
loans, grants for health and safety repairs, and modification of
existing loans. These tools have been very successful in meeting the
needs of properties that have participated in the MPR program.
Question. Have you worked with housing advocates, owners, and other
interested parties in the drafting of this proposal?
Answer. USDA has met frequently with housing advocates, owners, and
other interested parties over the years in relation to the MPR and
other Multi-family housing programs. I believe the proposal that has
been drafted meets the needs of our Multi-family stakeholders.
Question. One concern we frequently hear is that the Department is
unable to expedite the transfer of a property from the current owner to
a non-profit purchaser. These transactions typically take 18 months or
more, which places incredible burdens on the buyers in terms of holding
together financial packages. What is the Department doing to streamline
and accelerate this process?
Answer. RD has consulted with its customers and they have
identified the process for transferring properties as one of the most
in need of streamlining. RD has been working with stakeholders in a
Lean Six Sigma improvement process to identify barriers to making the
transfer process more efficient. Stakeholders have also recommended
process improvements that will reduce processing times, provide
transparency into the transfer process, create a consistent set of
transfer requirements, and create predictability. Currently, Rural
Development is working to implement several of these process
improvements. These include: 1) providing buyers, sellers and other
parties with a preliminary assessment tool they can use to test the
terms of their transfer prior to submission to Rural Development; 2)
developing a simpler, easier to use underwriting tool that incorporates
more industry standards in transfer underwriting; and, 3) revising
Multi-family handbooks to formalize these changes in underwriting
policy.
Question. Tenants currently residing in two Section 515 financed
properties located in Merrill and Myrtle Creek, Oregon are in danger
losing their Rental Assistance subsidized housing this summer due to
the underlying mortgages reaching maturation. Will you commit to using
your authority to extend these mortgages for a short period of time to
give the willing and qualified sellers and buyer's sufficient time to
preserve these two properties?
Answer. Rural Development is preparing to issue guidance to Multi-
family Housing staff, outlining steps to take on maturing mortgages,
including the ability to offer short-term or long-term mortgage re-
amortization to keep properties in the MFH portfolio and continue to
provide affordable housing to residents. Owners will also be encouraged
to participate in the MPR program, which would enable them to take
advantage of a long-term debt deferral. If owners decline both of those
offers, we strongly suggest they request prepayment, which would enable
the property's tenants to receive offers of an RD Voucher.
Question. Is there anything this Subcommittee can do to assist you
with these issues?
Answer. The Department currently offers portable housing vouchers
to tenants of affordable housing projects that were financed with USDA
loans, and whose owners pre-pay and leave the program. The
Administration has proposed to expand eligibility to tenants of
projects whose mortgages have matured and been paid off in the 2016
budget.
We would appreciate the support of the Subcommittee for this
proposal. In addition, constituent stakeholders interested in
purchasing a maturing project, should contact the RD State Office and
submit a transfer application. Once the State Office receives a
complete application, it can prioritize the processing. If the
potential purchaser is not familiar with RD's transfer process, our
State Office stands ready to help.
housing vouchers
Question. Mr. Secretary, the Department currently offers portable
housing vouchers to tenants of affordable housing projects that were
financed with USDA loans, and whose owners pre-pay and leave the
program. The Administration proposes to expand eligibility to tenants
of projects whose mortgages have matured and been paid off.
This budget requests $15 million in fiscal year 16. Is that
sufficient both to renew all expiring vouchers and to fund new vouchers
stemming from pre-payments and maturing mortgages?
Answer. RHS believes that the $15 million level will be sufficient
to renew all expiring vouchers and allow for funding prioritization for
new vouchers as demand warrants, including the proposed expansion of
the Voucher program to tenants in properties with maturing mortgages.
With the Department's initiative to retain as many maturing mortgage
properties as possible, we believe the proposed funding level will
accommodate the need for new vouchers for these tenants.
Question. Do you expect the demand for vouchers to grow
significantly due to including tenants in maturing mortgage properties?
Answer. There will be a small increase in demand, which we have
accounted for in our estimates. In 2015, we have focused our efforts on
outreach to owners of properties with maturing mortgages, working with
them to find ways to keep them in the program if they are willing. So
we believe going forward we will be more successful retaining our
Section 515 properties in the program.
RD's initial efforts have succeeded in 2014, where 10 of the 14
properties expected to leave have remained in RD's portfolio. As the
initiative gains momentum and visibility, we believe more owners will
take advantage of the incentives we offer.
self-help housing program
Question. The Department's self-help housing program provides
grants to non-profit organizations that coordinate small groups of
families aspiring to achieve homeownership through the self-help
method. These families jointly work on their houses, contributing sweat
equity that ultimately lowers their purchase prices.
Mr. Secretary, this is one of the most popular programs in this
bill. Please explain why this budget slashes the program by 64 percent?
Answer. The Mutual and Self-Help Housing Program has played an
important role in providing opportunities for affordable housing for
low and very low-income families in rural America for 50 years. The
requested 2016 funding level for Mutual and Self-Help housing grants
would, paired with balances from prior years, address the reduction
proposed in this program. However, because of budget constraints,
funding for this program in 2016 it would not support the anticipated
demand associated with the increased program level in Section 502
Single Family Direct.
Question. It is our understanding that these families are the stars
of your housing programs, in terms of making timely payments and
achieving successful homeownership. Do you know of any other Federal
program more effective than this in accomplishing these objectives?
Answer. The Mutual and Self-Help Housing program is unique among
Federal housing programs, serving the lowest income families who would
otherwise be unable to attain homeownership. The Mutual and Self-Help
Housing Program has played an important role in providing opportunities
for affordable housing for low and very low-income families in rural
America for 50 years. There is no other Federal program.
broadband program
Question. Mr. Secretary, USDA has had the responsibility for some
years of expanding access to high speed broadband services across rural
America.
Please discuss your view of the success the Department has achieved
to date in this effort.
Answer. The most significant success the USDA has achieved was the
delivery of the Broadband Initiatives Program (BIP), a Recovery Act
program. There are 255 active infrastructure projects and approximately
$2.7 billion has been advanced for construction. As a result of
Recovery Act funding, more than 213,000 households, 15,000 businesses,
570 public safety facilities, 460 healthcare providers and more than
700 schools and libraries are receiving new or improved broadband
service.
The Department also runs two other successful programs to deploy
broadband. The Rural Telecomm Program and the Community Connect
Program. In our infrastructure program this year, we have approved $190
million in financing that will enhance broadband service to over 65,000
customers. Community Connect provided $20.3 million to fund broadband
in unserved communities in fiscal year 2014. The rules for the 2014
Farm Bill Broadband Program are in progress and the program will start
once the new regulation is published later this year.
Question. The fiscal year 14 Farm Bill required changes to the USDA
loan program. Please let us know the status of those regulation
changes, and when you expect that revised program to be in operation.
Answer. USDA, specifically the Rural Utilities Service (RUS),
continue to work closely with OMB to finalize the regulations for the
broadband loan program. USDA anticipates this process to be finalized
in the summer of 2015 and will begin to immediately start accepting
applications once the NOSA is posted on the Federal Register.
Question. What can this Subcommittee do to help you promote high
speed broadband access in rural America?
Answer. The Subcommittee could provide funding for the Farm Bill
broadband program in line with the President's fiscal year 16 budget
request to help fund broadband in unserved and underserved rural areas.
rural child poverty pilot initiative
Question. Mr. Secretary, this budget seeks $20 million for a pilot
initiative to address severe rural youth poverty.
Please describe how this initiative will work.
Answer. The Administration's fiscal year 2016 Budget proposes $20
million for a new program to support innovative strategies that combat
rural child poverty by focusing on both children and the parents with a
bundled services approach. This approach incorporates three elements:
--Pilot program to create better coordination of current Federal
programs designed to help poor kids and families, with a focus
on helping the parents obtain employment and increase their
income;
--Human resources to perform critical coordination and outreach work;
and
--Rigorous evaluation to determine the efficacy of the approach for
broader implementation.
Eligible uses would include educational or job training instruction
for parents coupled with child-focused programming and support relating
to health and early learning. The pilot will educate families on
resources available, build local capacity for assisting families in
rural areas through Americorps or VISTA programs. Additionally, the
pilot will support development and maintenance of an integrated client
and services tracking system to instantly determine client eligibility
across Federal programs and better meet the array of client needs. The
resources in this pilot would complement other dollars in the budget
that assist communities and nonprofit organizations to finance the
physical infrastructure needed to deliver services, particularly
through the Community Facilities grants and the Distance learning
programs. Applicants could include local governments (but not States),
educational institutions (including community colleges as well as
historically black, tribal, or Hispanic institutions), and community
action agencies. Pilot program funds would be provided exclusively to
projects that are located in areas of high poverty and that have
embraced a bundled service, ``two-generation'' approach that focus on
both the children and parents of low-income rural families. The maximum
amount of the grant would be $500,000. The grants would encourage or
require collaboration and partnerships of key entities at the local
level. For example, the applicant may be a community action agency that
traditionally delivers temporary assistance to needy families (TANF)
resources and Early Head Start, and a Women, Infants, and Children
enrollment center and in its application includes the local community
college to deliver workforce development programs.
Question. What empirical metrics have you identified to evaluate
the success of the pilot?
Answer. An outside evaluator group will be contracted to:
--develop (in conjunction with Rural Development) appropriate
measures to allow an evaluation of the pilot program, and
--implement experimental and quasi-experimental impact evaluations to
evaluate the program's effectiveness.
The evaluation work will identify best practices and provide
information and recommendations on potential expansion of Federal
investment around the ``bundled'' service delivery approach.
Question. Will you have enough time to demonstrate that these
activities can be successful?
Answer. If the funding requested is provided in fiscal year 2016,
USDA plans to announce, select and fund ``bundled'' service projects in
2016. Projects will provide services in 2016 and 2017. Pilot project
evaluation will take place in 2018.
community facilities grants
Question. Community facilities loans and grants can be used for
almost any essential community facility, including; schools; hospitals;
clinics; libraries; public buildings; child and elderly day care
facilities; health and safety vehicles and equipment; etc. This budget
requests a 285 percent increase in the regular community facilities
grant program.
What is the purpose of this huge increase in these grants this
year?
Answer. Additional Community Facilities (CF) grant funds will
enable RD to support investments in critical community infrastructure
in high need, high poverty areas such as Promise Zones, the Coal
Community Revitalization initiative and Strike Force among others,
where there is limited ability to carry a loan. The increase in the
grant program is comparable to the increase the CF direct loan program
has experienced in the recent years. These additional CF grant
investments will be targeted to those communities that need help the
most.
The USDA Community Facilities program has proven a particularly
effective tool for fostering partnerships and leveraging other sources
of funding. Additional grant dollars will only increase RD's ability to
do this while ensuring that these investments are made in places where
they are needed most.
Question. Do you plan to pair these grants with the large ($2.2
billion) loan program to achieve a more effective combination loan/
grants Community Facilities program?
Answer. CF grant funds will be targeted to those communities that
need the help the most, i.e. Strike Force, Promise Zones, and other
high poverty areas. Applicants with the financial capacity to repay a
direct loan at reasonable rates and terms may leverage loans funds with
competitive grant funds to help reduce total project cost and
strengthen the financial viability and project sustainability. Some of
these grant funds may be paired with loan funds, but it is expected
that communities in high poverty areas will be unable to afford much
debt, so most of these additional grant funds may not be paired with
loan funds.
local and regional procurement
Question. According to a 2013 Cornell study of three countries,
food aid recipients were unconditionally more satisfied with LRP
compared to US shipped commodities. This sentiment was most pronounced
among the poorest ``less-well-off'' recipients.
What steps are being taken to ensure that commodity foods shipped
are compatible with local tastes and dietary needs?
Answer. The McGovern--Dole International Food for Education and
Child Nutrition Program is USDA's primary international feeding
program. The school meals and take home rations provided under
McGovern-Dole address dietary deficiencies. McGovern-Dole projects are
conducted by non-profit charitable organizations, cooperatives, the
United Nations World Food Program and other international
organizations. These implementing partners that USDA works with on the
ground are instrumental in determining the proper foods to ship. All
proposals submitted must provide a justification for the commodities
being recommended as well as a full explanation of how the commodities
meet the dietary needs of the beneficiaries.
Additionally, USDA's implementing partners and their sub-recipients
often go to the recipient country to develop and test recipes that are
suitable to the local tastes and dietary needs. USDA's implementing
partners also work with local communities and farmer grounds who
provide local commodities to add to the school meals, thereby helping
to tailor the meals to local preferences. Many schools have gardens,
with the produce used to complement the U.S. commodities in the school
meals.
Question. If U.S. shipped commodities are not found to be
compatible with local tastes and dietary needs, what steps are taken to
address this problem and ensure beneficiaries are actually utilizing
U.S. commodities?
Answer. USDA's implementing partners and their sub-recipients often
go to the recipient country to develop and test recipes that are
suitable to the local tastes and dietary needs. USDA's implementing
partners also work with local communities and farmer groups who provide
local commodities to add to the school meals, thereby helping to tailor
the meals to local preferences. Many schools have gardens, with the
produce used to complement the U.S. commodities in the school meals.
Question. When coupled with existing programs that strengthen local
community systems and infrastructure, LRP can be adopted by
knowledgeable beneficiaries with consideration given to impacting local
markets. Given that most food assistance programs include a local
capacity building component (McGovern/Dole FFE, Title II non-emergency
programming) has there been any consideration for use of LRP to help
transition to locally available products in these programs?
Answer. USDA's food aid programs, particularly McGovern-Dole, are
intended to ultimately be transitioned to host country governments. As
such, there is every hope and intention that the LRP will help in
assisting this transition by using locally available products as a
source for food aid programs that will ultimately spur economic
development in countries where these programs are implemented.
Question. If appropriated, how would the $20 million for LRP be
utilized?
Answer. The $20 million for LRP requested in the President's budget
is expected to support three to four development programs, similar to
those in Bangladesh, Nicaragua and Mozambique supported by the LRP
pilot program, and completed in 2012. The program will serve as a
complementary tool to existing food aid programs, especially the
McGovern-Dole international School Feeding Program. Under the LRP
program, grants will be provided to eligible organizations including
private voluntary organizations, cooperatives, and the World Food
Program to implement projects involving local farmers, farmer
organizations, parent groups and local governments.
Question. Besides working with McGovern-Dole programs, do you see
an opportunity to pair the new LRP program with Title II non-emergency
programs?
Answer. USDA and USAID communicate regularly on programming
decisions to avoid duplication and understand areas for potential
collaboration. For USDA's LRP funding, the two agencies will continue
to explore opportunities to leverage our respective programs. For
example, one possible area of collaboration would be if McGovern-Dole
school feeding programs bought a portion of the commodities for school
meals from associations supported by Title II non-emergency or Bureau
of Food Security programs. Such opportunities would need to be
evaluated on a country by country basis.
food for progress
Question. Please provide the subcommittee with the average time it
takes to put out a solicitation for a Food for Progress grant, review
bids and award a grant to an implementing partner.
Answer. Grants under the Food for Progress program fund non-
emergency, agricultural capacity building projects. Food for Progress
projects, which are usually multi-year, have trained farmers in animal
and plant health, improved farming methods, developed road and utility
systems, established producer cooperatives, provided microcredit, and
developed agricultural value chains. Program participants have included
private voluntary organizations, foreign governments, universities, and
intergovernmental organizations.
The average duration between publishing the Food for Progress
(FFPr) grant solicitation to signing the agreement is approximately 190
days, including 90 days for interested organizations to submit
proposals, and 100 days for USDA to review proposals and negotiate
agreements.
Question. How does the length of time between solicitation and
award for Food for Progress differ from Food for Peace?
Answer. USAID's average award time for non-emergency programs under
Food for Peace is 228 days, while the average Food for Progress (FFPr)
award time is 190 days.
Question. If there are delays of over 6 months between bids and
awards, what are the major constraints that contribute to these delays?
Answer. The typical time between proposal receipt and award is 100
days. In fiscal year 2014, FAS negotiated the proposals within that
timeframe. Complexities of projects and negotiations with implementing
partners can impact the time to complete the agreement.
Question. Does Food for Progress have a policy that grants must be
turned around in 120 days, similar to Food for Peace?
Answer. FAS is committed to ensuring that grants are turned around
as quickly as possible, but does not have a policy that grants must be
turned around in 120 days. Since these are development, not emergency,
programs, and since the requests for Food for Progress greatly exceeds
the limited resources, FAS has put in place an extensive review process
to ensure that the awards are made to the best proposals that reach the
greatest number of beneficiaries and have the highest degree of
success.
Question. How many staff work on Food for Progress programs?
Answer. There are nine full-time equivalent employees working on
Food for Progress programs. They are responsible for all aspects of
Food for Progress projects, including planning, programming,
monitoring, and grants management activities.
Question. Is there a staff shortage at Food for Progress that
causes delays in processing of grants?
Answer. In late 2014, USDA initiated a human capital assessment of
the Food Assistance Division that aimed to provide an independent
assessment of workforce requirements for Food for Progress programs.
The Foreign Agricultural Service is implementing the results of this
independent assessment to ensure efficient and effective food aid
programming.
Question. How does the number of staff at Food for Progress compare
to other grant making offices in USDA? Or USAID?
Answer. There are nine full-time equivalent employees dedicated to
planning and implementing the Food for Progress program. There are nine
full-time equivalent employees who program the McGovern-Dole Food for
Education and Child Nutrition program. And 64 full-time equivalent
employees working in USAID's Office of Food for Peace.
______
Questions Submitted by Senator Dianne Feinstein
usda assistance to california
Question. California is going into another year of drought. Ground
water, snow pack, and reservoir levels are dangerously low. Communities
like East Porterville are running out of drinking water, and both
farmers and farm workers are suffering.
Are the funds requested in your fiscal year 2016 Budget sufficient
to address California's worsening drought disaster?
Answer. The challenges facing drought-stricken areas are so severe
that we will undoubtedly need to leverage Federal dollars and find
innovative partners to help us provide as much relief as possible.
Across USDA, we are actively working to address the needs of
communities facing this historic drought. The Department is committed
to assisting rural communities and we also know our partners are being
innovative about what resources they can bring to the table.
Specific to the fiscal year 2016 request, the President's budget
requested $10 million in additional appropriated funding for Emergency
Community Water Assistance Grants. While this increase may seem small
given the magnitude of the problem, it is being coupled with
application process improvements and the granting of priority to
drought impacted communities. Collectively, these efforts should go a
long way in providing safe, reliable drinking water in drought-stricken
communities.
In addition to the increase within Rural Development, the fiscal
year 2016 President's Budget includes a continuation of many other USDA
programs that will assist producers in drought-stricken areas. For
example, the permanent livestock disaster programs provided by the 2014
Farm Bill will be continued. Targeted conservation assistance for
drought-stricken areas is another example of a successful program the
Department plans to continue.
Question. What additional steps can your Department take to address
this disaster across California?
Answer. Last year, President Obama and I travelled to Fresno,
California to outline a drought relief action plan aimed at mitigating
the impacts of this natural disaster for farmers, ranchers and
residents alike. I'm proud to say that USDA met or exceeded the
commitments we made over a year ago to these communities and I'm proud
of the progress we've made. Unfortunately, the relentlessness of the
drought has made the challenge confronting the Western U.S.
increasingly serious. We continue to collaboratively deploy the
resources made available to us and believe our budget request will
position us to do even more in the year ahead. That said, the
challenges facing these drought-stricken areas are so severe that we
will undoubtedly need to leverage these Federal dollars and find
innovative partners to help us provide as much relief as possible.
Across USDA, we are actively working to address the needs of
communities facing this historic drought.
pathogen standards
Question. I am pleased your Department proposed new pathogen
standards for poultry products in January. I believe these standards
will improve food safety.
Can you tell me what date these will be finalized and implemented?
Answer. On January 26, 2015 FSIS issued a notice and request for
comments on performance standards for chicken parts and the new
standards for comminuted chicken and turkey. While I cannot provide a
precise date when the new standards will be finalized and implemented,
let me assure you that these standards are an Agency priority, and we
will move as quickly as possible.
Question. Secretary Vilsack, I remain deeply concerned about the
persistent rates of foodborne illness. While the Department has moved
to update pathogen standards for poultry products, standards for beef
and pork products are either non-existent or outdated.
Can you commit to me that your Department will update beef and pork
pathogen standards?
Answer. The Food Safety and Inspection Service (FSIS) has taken
steps to collect the type of data necessary to conduct a risk
assessment to ascertain whether the establishment of one or more
pathogen reduction performance standards for beef and pork is likely to
result in public health protection. As with the recently proposed
standards for poultry products, any new proposed performance standards
will be designed to achieve the Healthy People 2020 (HP2020) illness
reduction goals, public health goals that FSIS and the Department of
Health and Human Services worked together to create. We continuously
strive to eliminate foodborne illness, and we will continue working
toward that goal by utilizing a stepwise approach grounded in a shared
national objective.
USDA continues to review information on how inspection and
inclusion of different lymph nodes in ground beef affects Salmonella
contamination in the product, including our agencies partnering with
each other (FSIS and ARS) to explore the potential public health
impacts of Salmonella in lymph nodes. Findings will be incorporated
into future revised slaughter guidance materials.
By May, FSIS will begin exploratory sampling of a variety of pork
products, including finished products packaged and ready to be sold to
the consumer, to determine which products (for example, intact parts or
ground) might harbor Salmonella contamination. The results of this
sampling will inform plans to collect more extensive data with which to
develop public health benefit-based performance standards in alignment
with HP2020 goals.
wildfires in california
Question. Secretary Vilsack, California is primed for a wildfire
disaster given the ongoing drought across the state. What is the Forest
Service doing to be prepared to respond quickly to wildfires in
California?
Answer. The Forest Service maintains a robust response (personnel
and equipment) capability in California at levels that ensure an
appropriate, risk informed and effective response to all wildland
fires. The Forest Service also works extensively with our partners at
CALFIRE and other local firefighting organizations, to support wildland
fire management operations and meet operational objectives. Significant
planning occurs throughout the year to establish response expectations
for when wildfires do occur, as well as establishing roles and
responsibilities for the Forest Service and our cooperators. The Forest
Service works with CALFIRE throughout the fire season to pre-position
assets where the risk of fire is highest. We also coordinate
responsibilities for asset availability and training to be sure our
response minimizes the risk to people, communities, and other high
valued resources.
air tankers
Question. Secretary Vilsack, the National Defense Authorization Act
of 2014 transferred seven C-130H tankers from the U.S. Coast Guard to
the U.S. Forest Service for use in firefighting operations. Can you
provide me an update on the transfer and retrofitting of these
aircraft, and when they will be operational for fire suppression?
Answer. One HC-130H is expected to be in limited operation for the
2015 fire season. The aircraft will be equipped with a Modular Airborne
Fire Fighting System (MAFFS). A second HC-130H may be available later
in 2015, depending on Air Force maintenance schedules. This aircraft
will be used for flight testing and evaluation only and will not be
equipped with a MAFFS unit. Ownership for both aircraft will be
retained by the Coast Guard until all required maintenance is completed
and a retardant delivery system is installed. Once that is completed
ownership will be transferred to the Forest Service.
The first aircraft with the new gravity retardant delivery system
installed is expected in 2017 and the second in late 2017. Three more
are expected in fiscal year 2018 and the final two in fiscal year 2019.
antimicrobial research
Question. Secretary Vilsack, I am pleased to see that your
Department has requested increased funding to collect data on
antibiotic use patterns and antibiotic resistance. This data will be
critical for monitoring public and animal health.
What type of studies and surveys does your Department have planned?
Answer. If funding is provided as requested in the 2016 President's
Budget, NASS proposes to develop annual surveys for Cattle on Feed,
Hogs and Pigs, and Poultry. This new data can be used to established a
baseline for these livestock and help track this growing problem. The
baseline survey will do several things to respond to Antimicrobial
Research or Combating Antibiotic Resistant Bacteria (CARB) problem:
--Establish data to measure the extent of the problem (broad
approach);
--Strengthen the knowledge and evidence base to allow for other
agencies (that do more in-depth research work) to use NASS
collected data as a starting point and go forward with more
probing type questions;
--Develop trend analysis;
--Check the status of CARB with annual data collection surveillance
to show whether the problem is growing worse, unchanged, or
improving.
NASS is working with Economic Research Service (ERS) and Animal and
Plant Health Inspection Service (APHIS)--to institute an annual,
national antibiotic use survey and to enhance the APHIS National Animal
Health Monitoring System (NAHMS) surveys. Questions could be added to
provide national, population-based estimates on antibiotic-use
practices from the voluntary NAHMS survey. In addition, a sufficient
number of operations could be sampled and tested for the presence of
zoonotic pathogens (e.g., Salmonella, Campylobacter) and commensals
(e.g., Enterococcus, E. coli) to provide national, population-based
estimates on prevalence and antimicrobial resistance in these
organisms.
ERS is collaborating with other USDA science and program agencies
through the USDA Antimicrobial Resistance Action Plan Committee to
examine the economic implications of efforts to combat antimicrobial
resistance. ERS research draws on data from the Agricultural Resource
Management Survey (ARMS) to examine how antibiotics are used in
livestock production; to estimate the effects of antibiotics used for
disease prevention and growth promotion on farm-level costs and
productivity; and to identify alternative production practices used on
operations that eschew the use of antibiotics for those purposes. In
fiscal year 2016 analysis from the farm-level ARMS will explore the
extent of use by livestock species, stage of production, and purpose,
as well as the impact of use on growth and recent policy issues.
Question. Do you have the cooperation from livestock producers
necessary to make these surveys and studies successful?
Answer. NASS has contacted the industry for broilers, cattle on
feed, and hogs & pigs. NASS needs to do more outreach to get more
cooperation from the industry, however, those contacted realize the
importance of collecting this information. NASS realizes that without
industry cooperation these surveys will not be a success.
Question. Secretary Vilsack, the Food and Drug Administration (FDA)
is implementing new policies to eliminate non-therapeutic antibiotic
use in agriculture and to move antibiotics under veterinary oversight.
What additional steps can your Department take to educate
veterinarians on these new FDA policies and to improve antibiotic
stewardship in agriculture.
Answer. USDA will continue to conduct outreach as appropriate, in
coordination with FDA, to ensure veterinarians are aware of FDA's
policies.
specialty crop pest program
Question. Secretary Vilsack, I am deeply concerned that your
Department proposed to cut the Specialty Crop Pest Program. California
continues to battle many agricultural pests and diseases, and there is
increasing risk that new pests and diseases will be introduced to the
state via international commerce. In fact, the Glassy Winged
Sharpshooter, a devastating pest to grapes, was found in Marin County
this month.
What additional steps can your Department take to combat
agricultural pests and diseases like the Glassy Winged Sharpshooter?
Answer. I certainly recognize your concern about the risks posed by
invasive pests and diseases to California agriculture. I can assure you
that preventing the entry of pests and diseases into the United States
and detecting any new introductions early remains one of USDA's highest
priorities.
In addition to using appropriated funding, APHIS is using funding
provided under Section 10007 of the 2014 Farm Bill to enhance early
detection and emergency response efforts for plant pest and disease
management and disaster prevention programs. In developing the spending
plan each year, APHIS seeks suggestions from States and U.S.
territories, universities, other Federal agencies, nongovernmental
organizations, private companies and tribal organizations for projects
that would provide a direct and meaningful impact in managing pests and
diseases, as well as disaster prevention.
In fiscal year 2014, APHIS funded 382 suggested projects across the
United States, as well as in Guam and Puerto Rico, with 30 projects in
California. The projects in California included surveys for exotic
pests that attack citrus, tomatoes, nursery stock, and a variety of
other specialty crops, training for detector dogs to find exotic pests
in mail and cargo, as well as projects focused on best practices for
nurseries in preventing the introduction and spread of diseases like
Phytophthora ramorum and other invasive pests. These efforts allow
APHIS and State partners to continue strengthening protections against
agricultural threats. APHIS will release the fiscal year 2015 spending
plan in spring 2015.
In regard to the recent detection of a live glassy-winged
sharpshooter (GWSS) on a nursery shipment that was being unloaded in
Marin County, county inspectors ordered all of the plants to be
reloaded and then sealed the trucks. The trucks returned to Ventura
County the next morning. The California Department of Food and
Agriculture (CDFA) and Marin County officials placed additional traps
at the location where the insect was found and will continue to monitor
the area for a month. Through this program, APHIS, CDFA, and the grape
industry work to prevent the spread of GWSS into the major grape-
producing counties of California. The program will continue using
proven regulatory protocols and inspections to prevent GWSS from
expanding its range. The Agency's fiscal year 2016 budget proposes a
decrease for the GWSS program to encourage cooperators to put
additional resources into this program that benefits them. If
cooperators are able to devote additional resources, programs will
continue to operate at the same level as in fiscal year 2015. If
cooperators cannot increase contributions, APHIS and CDFA will
prioritize the remaining funds to address the highest risk threats.
animal welfare act
Question. Secretary Vilsack, the Inspector General (IG) published
an audit in December that found troubling inconsistencies in
enforcement of the Animal Welfare Act. This follows a 2010 IG audit
that identified similar problems. I am also concerned that your
Department is not fully utilizing the existing enforcement authorities
provided in the Animal Welfare Act, such as seeking a temporary
restraining order or injunction against violators who place animals in
extreme danger.
What additional steps can your Department take to improve
enforcement of the Animal Welfare Act?
Answer. USDA uses all available enforcement options to ensure
licensees and registrants are appropriately penalized for their
violations of the Animal Welfare Act (AWA). USDA places special
emphasis on the investigation and enforcement of cases where alleged
animal suffering has occurred or when the lack of proper handling
causes concern for the safety of the animal.
Cases warranting formal prosecution may be resolved by license
suspensions, license revocations, issuing cease-and-desist orders,
imposing civil penalties, or combinations of these penalties.
Concurrently, APHIS continues to exercise its authority to confiscate
animals that are suffering when a licensee or registrant fails to
comply with the AWA regulations and standards. Since 2010, the Agency
has confiscated 218 animals using this authority. When appropriate,
USDA may also work with licensees to move their animals to another
facility when a licensee is unable to meet the animal welfare standards
or can no longer provide appropriate animal care. In doing so, a
licensee may agree to the suspension or revocation of their license or
permanent disqualification from engaging in AWA-regulated activities.
For example, in fiscal year 2013, APHIS issued 22 settlement agreements
that resulted in the placement of more than 2,900 animals as well as
sanctions involving AWA licensing. USDA undergoes a review process
prior to issuing a license or registration. USDA will deny or terminate
a license if the applicant or licensee is determined to be unfit and
attempting to conduct business contrary to the purposes describe in the
AWA.
Where circumstances warrant, USDA has issued penalties at or near
the $10,000 maximum authorized, particularly in cases involving
research facilities and carriers (neither of which are subject to
license suspension or revocation). Beyond seeking higher monetary
penalties, we have pursued administrative litigation against
chronically non-compliant entities, allowing us to seek strong
sanctions.
In November 2014, the Department of Justice revised the United
States Attorneys' Manual to designate a central coordinating division
to support USDA cases related to the welfare of animals regulated under
both the AWA and the Horse Protection Act. As a result of this new
collaborative relationship, USDA is better positioned to use
enforcement authorities such as temporary restraining orders or
injunctions to protect the lives of animals facing immediate danger
while other administrative or legal actions are proceeding against a
violator.
adequacy of the thrifty food plan
Question. At a time when more than one in six Americans struggle to
put food on the table, it is imperative that our nutrition assistance
programs provide access to an adequate diet. According to the Institute
of Medicine (IOM), however, current Supplemental Nutrition Assistance
Program (SNAP) benefit levels based on the thrifty eating plan are
insufficient in most circumstances and leave many households hungry by
the end of the month. Research also demonstrates that, while it is
possible for many households to shop for healthy foods using this
budget, it require an additional 6 hours per week, which is especially
challenging for low-income families.
How does USDA's 2016 budget aim to address the insufficiency of
current SNAP benefit levels based on the thrifty eating plan to provide
access to adequate nutrition?
Answer. FNS is currently addressing the sufficiency of SNAP benefit
levels through our annual research budget by initiating the research
that was recommended by the Institute of Medicine expert panel that
looked at SNAP benefit adequacy.
Last fall, FNS awarded a contract to an external organization to
conduct a study that will assess the individual, household, and the
environmental factors that limit adequacy of the SNAP allotment. This
study is developing a new data collection to survey SNAP participants
to determine these factors. The survey includes questions about cooking
skills, shopping patterns, nutritional literacy, financial literacy,
time available for preparing food, and other constraints. The final
report is expected in 2017.
In addition, before the end of fiscal year 2015, FNS anticipates
awarding another contract to an external organization to determine
whether the current parameters of the SNAP eligibility determination
and benefit level calculations adequately match the real costs that
low-income households have in regards to household budgets and food
expenditures. This study will use existing data to examine spending
patterns among low-income households to assess whether current SNAP
parameters are based on realistic assumptions regarding household
expenditures for food, shelter, medical care and dependent care. The
final report is expected in 2016.
assistance to drought impacted communities in california
Question. What additional steps can your Department take to
accommodate drought impacted communities in California, where families
are reporting spending as much as 7 percent of their SNAP benefits on
water because fresh drinking water is no longer available in their
home?
Answer. Feeding low-income families across the United States is at
the heart of USDA's mission. The USDA nutrition assistance programs,
such as the Supplemental Nutrition Assistance Program (SNAP) and The
Emergency Food Assistance Program (TEFAP), are designed to respond to
needs such as those resulting from the drought.
SNAP is USDA's primary nutrition assistance program to address the
needs of those experiencing economic difficulties. SNAP is designed to
respond to deteriorations in local economic conditions, as more people
lose jobs they become eligible for the program.
For example, in March 2015, FNS awarded an Employment and Training
Grant in the amount of $12 million to Fresno County Department of
Social Services to offer multiple career-driven services, including
education, job training, support services, subsidized and unsubsidized
employment, retention services, ongoing case management, and financial
incentives for clients for milestone achievements. The grant will
provide SNAP recipients with new or better skills to improve their
employment opportunities. This would also help residents receiving SNAP
who have been displaced because of the drought.
TEFAP is also designed to meet emergency food needs for those
experiencing hard economic times. Through TEFAP, food and
administrative funds are made available by USDA to States. States
provide the food to local agencies that they have selected, usually
food banks, which in turn, distribute the food to soup kitchens and
food pantries that directly serve the public. Each TEFAP State has the
discretion to allocate TEFAP resources to participating recipient
agencies within the State as it sees fit. Such TEFAP resources
allocated within the State are used to help individuals in need,
including individuals impacted by emergency situations, such as a
drought.
Additional information on steps the Department is taking to
accommodate drought impacted communities in California is provided for
the record.
USDA made $76.7 million available through TEFAP to food banks in
the State of California to help families, including those that may have
been economically impacted by the drought. In fiscal year 2014,
California was offered $35.2 million in food and $6.6 million in
administrative funds through TEFAP, based on a Federal funding formula
which accounts for the State's share of national poverty and
unemployment. Additionally in fiscal year 2014, California received
$34.9 million of USDA bonus (i.e., market support) purchases of USDA
Foods. In fiscal year 2015, USDA offered California $42.8 million in
foods and $6.5 million in administrative funds through TEFAP, based on
the above referenced funding formula. Additionally in fiscal year 2015,
$14.2 million worth in bonus purchases made by USDA have been received
in California year-to-date.
In 2014, USDA worked with the California Department of Education to
target efforts to expand the number of Summer Food Service Program meal
sites. Over 3,600 summer meal sites operated in California in 2014.
Also in fiscal year 2014, USDA, in collaboration with the California
Department of Education, created a goal to establish 600 summer meal
sites in drought stricken areas. The agency exceeded this target and by
summer's end had 725 sites in the region. In 2015, FNS will continue to
work with the California Department of Education and other states to
ensure summer meals are available in areas affected by the drought.
In 2014, USDA participated on the California Drought Task Force as
an advisor on USDA nutrition assistance resources available and will
continue to participate on the Task Force in 2015, as needed.
USDA continues to work with the California Departments of Social
Services, Education and Public Health as well as California's food
banks to provide referrals and information on FNS programs such as
eligibility, how and where to apply, and meal sites and hours of
operation for the Summer Food Service Program, so that children up to
the age of 18 can get a free meal.
military families receiving snap benefits
Question. The national food bank network Feeding America estimates
in their 2014 Hunger Study that 20 percent of the 15.5 million
households receiving food assistance from them nationally include
someone who has previously served in the military, and roughly 4
percent of households include someone currently serving in the
military. In San Diego, roughly 10 percent of households seeking food
assistance from the Feeding America Network contain an active duty
military member.
There are also food pantries on military bases across the country.
The 2015 Military Compensation and Retirement Modernization Commission
(MCRMC) report cites estimates from USDA that in fiscal year 12,
between 2,000 and 22,000 military service members received SNAP
benefits. Estimates of SNAP usage by military members vary widely
because states that administer these benefits are not required to
collect data on the actual number of active-duty service members in
households receiving SNAP.
Clearly there is a need for food assistance among military
families, but these numbers indicate that military families who need
Federal food assistance may not be fully served by the program. The
same MCRMC report recommends ending the military's Family Subsistence
Sustenance Allowance (FSSA) program and favors the enrollment of needy
military families in SNAP, but these families continue to face barriers
accessing SNAP. Namely, military families who live off base are
reviewed differently than military families who live on base in terms
of how their military-provided housing is recorded when determining
SNAP eligibility and benefits. In addition, military families could
face additional barriers to accessing SNAP depending on their station
location under recent proposals to convert SNAP into a block grant
program.
In order to adequately plan for the SNAP program, how does USDA's
fiscal year 16 budget assess the number of military households
currently enrolled in SNAP and the number of military households who
are potentially eligible for SNAP?
Answer. While military families not stationed overseas are eligible
to receive SNAP, few do, because their incomes at most ranks make them
ineligible for benefits. While data is limited, the best estimates
suggest only about one or 2 percent of individuals currently on active
duty receive SNAP. Our SNAP budget projections are based on total
expected caseload and benefit levels, which includes any military
families that are eligible to receive SNAP and choose to participate in
the program. FNS expects to have sufficient funds to serve any military
households that are eligible and wish to receive SNAP benefits.
food insecurity in military households
Question. How does USDA's fiscal year 16 budget make an effort to
address food insecurity in military households and increase their
access to SNAP?
Answer. SNAP continues to be a vital nutrition assistance support
program for low-income households, including those with eligible
military service men and women, and veterans. In addition, SNAP
provides employment and training (E&T) services to participating
unemployed or under-employed individuals, including veterans, that
enhance or supplement existing services. USDA provides $90 million to
States for the cost of administering and operating a SNAP E&T program
each year and reimburses States for 50 percent of additional
administrative costs and participant expenses associated with these
programs. States can design their E&T programs to meet the unique needs
of targeted populations, such as veterans and those experiencing
homelessness.
Under SNAP rules, able-bodied adults without dependents (ABAWDs)
are required to work or participate in a work program at least 20 hours
a week in order to receive SNAP for more than 3 months within a 36-
month period. The ABAWD population invariably includes some of the most
at-risk veterans. In order to serve this group, USDA allocates a
portion of an additional $20 million to each State that pledges to
provide qualifying E&T services to all at-risk ABAWDs so that they may
continue to receive SNAP benefits while searching for work,
participating in training, or gaining work experience.
Lastly, USDA's fiscal year 2016 budget request includes $25 million
in additional SNAP E&T grants to help States to offer targeted
employment and training services to ABAWDs. This additional funding
will ensure that ABAWDs continue to receive nutrition assistance while
improving their skills and preparing to enter the labor market.
summer electronic benefit transfer (ebt) demonstration projects
Question. More than one in five American children is in a household
struggling with hunger, an astonishing number. Child hunger is often
most prevalent in the summer when school is out of session.
Despite the impressive progress that USDA continues to make in
expanding access to the Summer Food Service Program (SFSP), only 2.1
million children were served in July 2003, which is only about 14
percent of those who received free or reduced-price school meals during
the previous school year.
One of the most promising programs to supplement the SFSP--
especially for rural areas like the drought-affected Central Valley,
where access to summer sites is especially difficult--is the Summer
Electronic Benefit Transfer (EBT) demonstration projects piloted by
USDA. The evaluations of this program to provide nutrition assistance
in the form of EBT cards has proven to dramatically reduce summer
hunger, including reducing the most severe forms of child hunger by
approximately one third. Moreover, this program has very low
administrative costs, and it benefits local jobs and economies through
grocery spending.
Given the existing pilot data proving the strength of summer EBT,
as well as new academic research about the lifelong impact of even one
incidence of hunger, how does USDA propose to scale up the summer EBT
program so that it is part of our national response to the summer child
hunger crisis?
Answer. While the school meal programs serve about 21 million low-
income children each school day, summer meal programs, including the
Summer Food Service Program and the National School Lunch Program
Seamless Summer Option, reach only about 3.7 million (or about 16
percent) of these children in the summer--a time of increased food
insecurity for children.
Summer Electronic Benefit Transfer for Children (SEBTC), funded by
Congress in 2010 as a demonstration project, has shown clear results in
reducing very low food security among children, the most severe form of
food insecurity. The SEBTC evaluation showed it reduced the most severe
form of childhood hunger by a third. It also showed that SEBTC can
reach a significant proportion of children eligible for free and
reduced-price school meals. Across the 14 pilot sites, SEBTC reached
between 30--75 percent of children eligible for free and reduced-price
meals in the summer. Furthermore, SEBTC children ate more healthfully.
They ate about 13 percent more fruits and vegetables, 30 percent more
whole grains, and 10 percent more dairy.
Congress provided $16 million to continue these demonstration
projects during the summer of 2015. FNS offered the 10 grantees that
previously administered the SEBTC pilots the opportunity to continue
providing benefits to children previously served and to expand the
program in rural areas. Eight grantees continued their participation in
SEBTC for summer 2015: Cherokee Nation, Chickasaw Nation, Connecticut,
Delaware, Michigan, Missouri, Nevada, and Oregon. Two grantees from
previous years, Texas and Washington, declined participation due to
prohibitive logistical constraints or implementation barriers based on
the late notice of funding. Because of uncertainties in receiving a
final 2015 budget, FNS could not inform sites until late spring that
they would receive summer funding. Combined with funds remaining from
previous years, FNS was able to provide nearly $23 million to these
eight grantees to continue and expand the program for the summer of
2015.
USDA is requesting an additional $50.9 million in fiscal year 2016,
for a total of $66.9 million to continue SEBTC demonstration projects.
Funding in fiscal year 2016 will allow FNS to continue the program in
several States, benefitting as many as 200,000 families.
Question. How, if at all, are any of these additional investments
targeted toward California, home to more poor children and homeless
children than any other state?
Answer. California was not one of the original 10 grantees selected
to participate in the SEBTC demonstration project. Due to limited
additional funding, FNS has been unable to solicit additional requests
for proposals allowing new States to participate.
However, FNS has provided targeted technical assistance to
California for the past two summers in order to increase participation
in the USDA summer meal programs. We saw increases in meals served in
both summer 2013 and 2014, with almost 825,000 more meals in 2014 than
the summer before (5.75 percent increase). California continues to
build on this success and aims to increase the number of meals served
by 5 percent in summer 2015. And, as noted in our response on the
question related to drought, we are also focusing additional attention
on drought impacted areas of the state.
______
Questions Submitted by Senator Patrick J. Leahy
budget reconciliation
Question. Do you share my concerns that a reopening of the Farm
Bill as part of budget reconciliation would be devastating to the work
your Department has been doing to implement the new Farm Bill
authorities and provide certainty to program participants, crop
insurance recipients, SNAP recipients, and agricultural producers who
are just now going into the 2015 crop year and making sign up
decisions?
Answer. The new Farm Bill builds on historic economic gains in
rural America over the past 5 years, while achieving meaningful reform
and billions of dollars in savings for the taxpayer. It has allowed
USDA to achieve record accomplishments on behalf of the American
people, while providing new opportunity and creating jobs across rural
America. It has enabled USDA to further expand markets for agricultural
products at home and abroad, strengthen conservation efforts, create
new opportunities for local and regional food systems and grow the
biobased economy. It has provided a dependable safety net for America's
farmers, ranchers and growers and maintained important agricultural
research, and ensure access to safe and nutritious food for all
Americans.
The Administration strongly supports the Supplemental Nutrition
Assistance Program (SNAP) and other critical programs that reduce
hunger and help families meet their nutritional needs. To ensure these
needs are met, the budget includes mandatory funds to fully support
estimated participation levels for the Supplemental Nutrition
Assistance Program (SNAP). SNAP is the cornerstone of the Nation's
nutrition assistance safety net, touching the lives of millions of low-
income Americans, the majority of whom are children, the elderly, or
people with disabilities. SNAP kept over 5 million people, including
nearly 2.2 million children, out of poverty in 2013.
Although the Farm Bill included several reforms to the Federal crop
insurance program; there remain further opportunities for improvements
and efficiencies. The President's 2016 budget includes two proposals to
reform crop insurance, which are expected to save $16 billion over 10
years. This includes reducing subsidies for revenue insurance that
insure the price at the time of harvest by 10 percentage points and
reforming prevented planting coverage, including adjustments to payment
rates. These reforms will make the program less costly to the taxpayer
while still maintaining a quality safety net for farmers.
agricultural research service
Question. I understand that the Agricultural Research Service has
financial needs relating to the upkeep of its facilities. While I want
the Service to have the resources it needs to maintain its facilities I
am concerned about ARS potentially shifting funds from existing
programming lines to address this need. Can you provide the Committee
with more details about the needs of its facilities and provide
reassurance that ARS is not pulling back resources from partnership
programs to fund this work?
Answer. ARS annually requests funding specifically for the repair
and maintenance (R&M) of often dilapidated facilities to ensure that no
funds are pulled back from research in order to fund R&M work. In
fiscal year 2015, ARS requested and allocated $20 million of a $1.13
billion appropriation to carry out the research mission of the agency
for repair and maintenance. This is less than 2 percent of its
appropriated budget.
The fiscal year 2016 budget request includes an increase of $20
million to help address the backlog and extend the life span of ARS
research laboratories and facilities, provide opportunities for longer
term savings, and ensure the capacity to conduct safe, quality
research. These funds will be distributed on a priority basis across
the agency's entire facility inventory. The cost for most of these
repair and maintenance projects ranges from $50,000 to $500,000.
The ARS facility infrastructure is valued at more than $3.7
billion, with many of these facilities established in the 1950s and
1960s. The backlog of repair and maintenance (R&M) needs exceeds $320
million for work such as the repair or replacement of: HVAC,
electrical, plumbing, roof, building envelope, site utility system,
fire protection system, and other safety systems. Many of these systems
and items have reached the end of their service life and no longer meet
compliance or safety requirements.
rural housing
Question. In many rural communities, the only available source of
affordable rental housing is funded through the Section 515 Rural
Rental Housing Loan Program. Today, nearly 400,000 of America's most
vulnerable families live in housing financed under Section 515 and
nearly 94 percent of Section 515 tenants earn very low incomes.
However, after years of significant budget cuts for the program, in
2012, the Department halted financing the construction of new rental
housing. Current funding for the Section 515 Rural Rental Housing
Direct Loan Program is used only for the much needed rehabilitation and
maintenance of the existing portfolio.
How does the Department's proposed budget assist the rural
Americans who are not looking to become homeowners, but are in need of
an affordable place to live with their families?
Answer. The 2016 budget seeks to assist rural Americans in need of
rental housing in a number of ways. First, it provides rental
assistance to support more than 250,000 rural residents in need of
safe, decent and affordable housing. Second, it increases funding in
the Section 515 and MPR program to help preserve and revitalize Rural
Development's existing rental housing portfolio. Third, it proposes to
increase funding in the Section 515, Section 538 Guaranteed, and Rental
Assistance programs for the construction of additional affordable
housing, particularly in persistent poverty areas such as Strike Force
and Promise Zones that are most in need of that housing. And fourth,
the 2016 budget proposes to extend housing vouchers to residents of
Section 515 properties with maturing mortgages, to the extent possible,
so eligible tenants in those properties will be given the same
protection from potentially significant rent increases that is
currently provided to tenants in Section 515 properties prepaying their
mortgage.
Question. Unfortunately, funding for new construction of rental
housing in rural America is not included in this budget. For rural
communities facing housing shortages and shrinking state budgets, what
role do you see the Department having in addressing the need for
additional units of affordable rental housing in rural America, if not
through funding?
Answer. The 2016 budget includes funding for new construction in
the Section 515 program, as well as in the Section 538 and Farm Labor
Housing programs. In recent years, the Department has focused on using
its Section 515 program to help meet the need to revitalize its
existing housing portfolio, due to the age of the 515 portfolio and the
expected preservation needs. However, the fiscal year 2016 budget
includes some funding that would help provide additional affordable
rental housing in persistent poverty areas where the housing needs are
greatest.
Rental Assistance would also be available to support tenants in
that new housing. The Section 538 guaranteed program provides another
avenue for new construction of affordable housing; nearly all of the
program's housing includes Low Income Housing Tax Credits, which
ensures that only low income residents qualify for the housing.
food safety modernization act
Question. I am very worried about the potential impact the new FDA
food safety regulations could have on our small farms in Vermont. That
is why I pushed for the authorization of the new Food Safety Outreach
Program in FSMA, because your USDA staff and extension agents are best
suited to help small and mid-size farms and small local food processing
facilities comply with the new food safety regulations. I believe that
if we do not educate before we regulate, we are just setting the FDA up
for failure.
Can you tell me how USDA will use the $2.5 million in fiscal year
15 funds to help farmers comply with this onslaught and burden of
potential fees, paper work, and confusing rules? And do you think there
are enough resources being allocated to help our produce farmers and
those involved with any value-added or on-farm processing to understand
these complex new rules?
Answer. The U.S. Food and Drug Administration (FDA) and the U.S.
Department of Agriculture's National Institute of Food and Agriculture
(NIFA) have joined in a collaborative partnership to administer a
competitive grant program designed to develop a comprehensive food
safety training, education and technical assistance program for those
affected by the Food Safety Modernization Act (FSMA). Specifically, the
program will address the needs of owners and operators of small and
medium-sized farms, beginning farmers, socially disadvantaged farmers,
small processors, or small fresh fruit and vegetable merchant
wholesalers. Although these entities will be directly impacted by new
FSMA guidelines, many lack access to the resources needed to implement
those guidelines. Both FDA and USDA recognize that food safety
training, education, and technical assistance for these entities are
critical to ensuring awareness and compliance with new produce safety
standards and preventive controls for human and animal food proposed
under FSMA future appropriation.
The joint program will award grant funds that enable awardees to
establish a National Coordination Center for Food Safety Outreach and
four Regional Food Safety Training Centers (Regional Centers). The
National Coordination Center will provide overall leadership for
support and coordination of the Regional Centers, while ensuring that
food safety training, education, outreach, and technical assistance
across the entire program are consistent with FSMA guidelines. Each
Regional Center will lead, manage, and coordinate the regional
development and implementation of food safety training, education,
outreach and technical assistance programs for the intended audiences.
Both FDA and NIFA will work with Regional Centers and the National
Coordination Center to help establish and maintain an effective and
sustainable program that will meet the ongoing needs of intended
audiences affected by new FSMA guidelines.
While the $2.5 million appropriated in fiscal year 15 will enable
NIFA, in coordination with FDA to begin building an infrastructure that
will support a national food safety training, education, extension,
outreach, and technical assistance system and provide significant
opportunities for partnerships with stakeholder groups that include
produce farmers and those involved with value-added or on-farm
processing, additional funds, such as the $2.5 million increase
requested in the President's 2016 budget, will strengthen and further
expand the infrastructure in ways that will benefit multiple
stakeholder groups.
national organic standards board recommendations
Question. This year marks 25 years since the first Organic Farm
Bill was signed in to law. At the time, many in the Senate dismissed it
as a niche activity that was never going to amount to much.
Organic product sales in the United States are now valued at $35
billion a year and have posted double-digit growth year after year
after year. The only way this growth can continue and our farmers can
benefit, is if we can assure consumers that the USDA Organic logo
stands for something strong. There is a lot of confusion among
consumers today and one area of particular interest to me is
surrounding regulations on how animals are raised and their access to
pasture. This is a basic tenet of organic production. Livestock must
have access to fresh air and sunshine whenever possible.
In 2011 the National Organic Standards Board put forward a
recommendation that the Department move forward with a rulemaking
process laying out the standards for livestock healthcare and living
conditions, including access to the outdoors.
What assurances can you give me that the Department is moving
forward to finally respond to the recommendations put forth by the
National Organic Standards Board?
Answer. The National Organic Standards Board (NOSB) has provided
over 200 recommendations regarding the National List of Allowed and
Prohibited Substances as well as over 150 recommendations concerning
other aspects of the USDA organic standards. The Department has
implemented 222 of the National List recommendations and 127 of the
general organic standards recommendations and incorporated them into
the USDA organic regulations. USDA plans to respond to the outstanding
National List recommendations from October 2014 and NOSB
recommendations regarding the prohibition of sodium nitrate in organic
production within the next 2 years. An additional 13 recommendations
will be addressed through current initiatives, which include rulemaking
on origin of livestock, aquaculture, pet food, apiculture, and animal
welfare. USDA is also establishing a Hydroponics/Aquaponics Task Force
that will report to the NOSB regarding their Greenhouse recommendation.
usda wildlife services
Question. The USDA Animal Plant Health Inspection Service (APHIS)
is the charged with, among other things, protecting agriculture and
fisheries from nuisance and invasive species. For many years APHIS was
the lead agency in controlling the double crested cormorant
(cormorants) populations on Lake Champlain in Vermont and New York as
well as across the region including the upper Saint Lawrence River, the
Finger Lakes of New York, Lake George and other large water bodies.
Cormorants are considered a nuisance species in this region and peer
reviewed scientific studies have shown that in some cases cormorant
predation can have a negative impact on commercial and sportfish
stocks. The birds also have an easily observed devastating impact on
public and private property where they roost and nest.
In recent years, however, APHIS cormorant control activity on Lake
Champlain has been greatly reduced and this correlates with an increase
in cormorant numbers. I am hearing from concerned Vermonters that in
the time since the USDA Wildlife Services has cut back on resources
being directed to reduce cormorant numbers on Lake Champlain we have
seen a dramatic spike in this migratory birds population, which has an
easily observed negative impact on terrestrial habitat and many feel is
also having a severely detrimental effect on game fish populations.
What amount of funds does the USDA propose to allocate to cormorant
control activities on Lake Champlain in New York and Vermont in fiscal
year 16?
Answer. USDA plans to spend $15,000 in fiscal year 2016 to reduce
the impact of the cormorant population in the Lake Champlain region.
Question. Will this funding be sufficient to enable APHIS to
control cormorant populations on Lake Champlain at a level that
mitigates the worst damage to private and public property and to
commercial and sportfish stocks of Lake Champlain?
Answer. If USDA funding is not sufficient to fully address the
issue, APHIS could provide additional cormorant control on a requested
basis if cooperative funding were made available through other Federal
or State sources, grants, or agreements with non-government entities.
tree and forest pests
Question. When I look at the request in your budget for the Animal
Plant Health Inspection Service (APHIS) Tree & Wood Pests work and
another massive cut in its funding I am shocked. While they may not get
the sort of news coverage that the forest fires out west often do, the
invasive pests in our forests are a critical threat to our forests and
our economy.
Despite the increasing risk and impacts, funding for the ``Tree and
Wood Pest'' account has been reduced by nearly 30 percent since fiscal
year 11. The President's budget now proposes cutting the program
further, from $54 million to $46 million. Even at current funding
levels for this budget account, APHIS cannot maintain efforts to
curtail spread of insects that are already established, much less
respond to new threats every year.
With the funding level requested in your budget will the Department
continue to focus on the eradication of the Asian longhorned beetle
that threatens Vermont's forest industry and our sugarmakers? And with
this proposed $8 million reduction in spending what work is the
Department proposing to cease related to tree and wood pests?
Answer. The Asian long-horned beetle (ALB) is a serious, invasive
tree pest that threatens roughly 30 percent of U.S. trees that are
potential hosts. APHIS continues to focus on the eradication of ALB.
Since APHIS began the ALB eradication program in 1996, the Agency has
successfully eradicated infestations from Jersey City, Middlesex
County, and Union County, New Jersey; Islip, Staten Island and
Manhattan, New York; and Boston, Massachusetts. In addition to these
northeast States, APHIS has also successfully eradicated ALB from an
infestation in Chicago, Illinois. The Agency is currently conducting
ALB eradication activities in northeast forests in New York and
Massachusetts, as well as in Ohio.
APHIS is proposing decreases to two areas of the Tree and Wood
Pests program: the ALB eradication program and emerald ash borer
program. These proposed decreases are to allow for more equitable
sharing of costs between the Federal government and those who benefit
from these important programs. If cooperators are able to increase
their contributions to the programs, they will continue to operate at
their current levels. If contributions to the programs do not increase,
APHIS would focus available resources on preventing the spread of pests
and diseases to new areas.
______
Questions Submitted by Senator Tammy Baldwin
margin protection program for dairy
Question. As we look back at the first round of signups for the new
Dairy Margin Protection Program, we saw just over half of the dairy
farmers in the country sign up, and about 55 percent of those bought up
to higher levels of coverage beyond the base, catastrophic level.
Wisconsin's sign up percentages were only slightly better than the
national average. What is USDA planning to do to make it easier for
farmers to sign up for 2016?
Answer. The Margin Protection Program for Dairy (MPP-Dairy) is a
significant change for dairy producers that were accustomed to the Milk
Income Loss Contract (MILC) program, since MILC did not require fees or
premiums to be paid. The first year enrollment for MPP-Dairy compares
very favorably to the initial enrollments for other risk protection
programs such as initial crop insurance offerings.
USDA will build on our successful outreach efforts including
partnering with Extension Services to ensure all dairy producers are
informed about the coverage options provided under MPP-Dairy. Current
participants also will receive a reminder letter providing them with
their previous coverage options and applicable forms that can be mailed
back to the Farm Service Agency (FSA) county office, along with their
applicable fees, for continuous coverage into 2016 without requiring
another trip to the local FSA office.
Question. One of the things that I am hearing from back in
Wisconsin is that it would be very helpful for USDA to allow dairy
cooperatives to deduct the premiums for the MPP program from their
producers' monthly milk checks, and submit the payments to USDA on
their behalf. Currently, farmers' options are to pay their MPP premiums
in one lump-sum annual payment or two annual payments. That can result
in some big payments and cash flow challenges that might deter some
farmers from participating fully in the program. This may be
particularly true for next year, because prices are much lower than
during the last sign up, so farmers have less cash on hand. Will USDA
be modifying the rules for the 2016 sign up to allow for monthly
payments of MPP premiums through their cooperatives?
Answer. USDA supports providing additional MPP-Dairy premium
payment options to provide more flexibility to producers. Even in the
first year, FSA provided an initial option that allowed producers to
pay premiums later in the year after coverage had begun and back loaded
the premiums so that only 25 percent was due initially. Even with this
additional producer friendly option, 60 percent of producers paid the
premium in full in 2014. With respect to cooperatives, there is no
prohibition on another party paying the fees on behalf of a producer. A
private arrangement between a cooperative and a producer would be
possible now as long as the cooperative met the same deadlines for
premiums being paid.
We understand that cooperatives may not be interested in assuming
the role of aggregating premiums and potentially prepaying for their
members. We are therefore exploring the possibility of allowing monthly
payments of premiums either directly or through cooperatives. We
believe this would be a favored enhancement to the program that would
increase participation. While this option will not likely be available
during enrollment, we are exploring the option in some form for the
2016 premiums later this year.
Question. As we think about the next sign up, one thing that would
be very helpful is to have data about what decisions farmers made for
2015. Currently, we know what percentage of farmers in every state
signed up, and what percentage bought up to higher levels of coverage.
What we don't know is a breakdown of what buy up coverage levels they
purchased. A farmer that buys up has an option of purchasing protection
for a $4.50 margin protection level, all the way up to an $8 coverage
level. This information would be extremely helpful information to have.
Is that something you could provide to us in the near future?
Answer. The coverage level breakdown for 2015 MPP-Dairy is
available at http://www.fsa.usda.gov/Internet/FSA_File/
ta_2_mpp_ct_ops_by_cvge_lev.pdf. The information is provided below for
the record.
[The information follows:]
TABLE 2--COUNT OF DAIRY OPERATIONS BY COVERAGE LEVEL FOR 2015 MARGIN
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 Total
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama....................................................... 14 ........... 1 ........... 1 ........... ........... ........... ........... 16
Alaska........................................................ 2 ........... ........... ........... ........... ........... ........... ........... ........... 2
Arizona....................................................... 46 ........... ........... ........... 33 1 ........... 1 ........... 81
Arkansas...................................................... 24 ........... 4 1 13 19 2 3 ........... 66
California.................................................... 794 5 70 14 168 42 1 18 ........... 1,112
Colorado...................................................... 59 ........... 4 1 15 9 ........... 1 4 93
Connecticut................................................... 17 ........... 1 ........... 10 48 3 11 ........... 90
Delaware...................................................... 15 ........... ........... ........... 1 4 ........... ........... ........... 20
Florida....................................................... 57 ........... 2 3 19 5 ........... 1 ........... 87
Georgia....................................................... 99 ........... 1 3 36 21 6 17 3 186
Hawaii........................................................ 1 ........... ........... ........... ........... ........... ........... ........... ........... 1
Idaho......................................................... 255 2 7 5 34 41 5 10 1 360
Illinois...................................................... 225 3 11 4 79 143 17 46 6 534
Indiana....................................................... 273 7 8 3 57 78 4 16 8 454
Iowa.......................................................... 325 4 14 14 144 315 36 100 12 964
Kansas........................................................ 96 2 2 5 28 45 1 14 3 196
Kentucky...................................................... 165 1 7 4 80 86 7 41 3 394
Louisiana..................................................... 41 ........... 2 1 10 14 3 7 1 79
Maine......................................................... 99 3 2 3 10 62 4 6 ........... 189
Maryland...................................................... 113 1 6 3 36 42 ........... 14 1 216
Massachusetts................................................. 19 ........... 1 3 9 34 12 33 1 112
Michigan...................................................... 563 9 42 38 175 173 22 42 19 1,083
Minnesota..................................................... 704 12 54 40 360 1,232 73 174 35 2,684
Mississippi................................................... 37 ........... 1 3 7 13 1 2 1 65
Missouri...................................................... 123 3 16 10 98 228 31 103 13 625
Montana....................................................... 28 ........... 6 ........... 8 8 ........... 1 ........... 51
Nebraska...................................................... 72 ........... 4 4 30 38 3 3 2 156
Nevada........................................................ 16 ........... ........... ........... 1 2 ........... ........... ........... 19
New Hampshire................................................. 13 ........... ........... ........... 12 24 5 15 ........... 69
New Jersey.................................................... 17 ........... 1 ........... 6 15 3 1 2 45
New Mexico.................................................... 73 ........... 6 1 51 3 ........... ........... 1 135
New York...................................................... 1,037 16 75 69 371 692 39 107 28 2,434
North Carolina................................................ 87 1 3 4 27 39 ........... 13 4 178
North Dakota.................................................. 30 ........... 1 1 6 22 ........... 4 1 65
Ohio.......................................................... 607 2 31 22 131 170 15 54 4 1,036
Oklahoma...................................................... 67 ........... ........... ........... 10 17 1 4 1 100
Oregon........................................................ 111 1 5 3 10 20 1 8 ........... 159
Pennsylvania.................................................. 902 12 84 53 380 570 33 111 20 2,165
Puerto Rico................................................... 32 2 3 ........... 4 1 ........... ........... ........... 42
Rhode Island.................................................. 2 ........... ........... 1 1 5 ........... 1 ........... 10
South Carolina................................................ 16 ........... ........... 1 3 3 ........... 4 ........... 27
South Dakota.................................................. 89 ........... 4 2 30 71 6 6 1 209
Tennessee..................................................... 148 ........... 4 1 22 64 3 18 2 262
Texas......................................................... 148 ........... 15 13 101 58 7 22 7 371
Utah.......................................................... 114 ........... 5 4 19 23 2 1 1 169
Vermont....................................................... 207 1 15 7 83 203 18 54 ........... 588
Virginia...................................................... 129 ........... 15 2 60 124 12 32 6 380
Washington.................................................... 129 2 8 12 58 83 7 12 1 312
West Virginia................................................. 11 ........... 1 ........... 8 3 1 4 ........... 28
Wisconsin..................................................... 2,635 47 198 147 973 1,544 118 294 69 6,025
Wyoming....................................................... 2 ........... 1 ........... ........... ........... ........... 1 ........... 4
Total......................................................... 10,888 136 741 505 3,828 6,457 502 1,430 261 24,748
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
organic research
Question. The double-digit growth in annual demand for organic
products in this country is very exciting. But that demand is far
outpacing growth in domestic production, requiring us to import greater
amounts of organic product to meet consumer needs. I believe, and I
think you would agree, that these are jobs that we can and should keep
in this country.
Organic research funding has also not kept pace with the growth in
the organic sector. One of the great things about organic research is
that much of it is useful to conventional farmers as well. For
instance, research into ways to manage livestock herd health without
the use of antibiotics may be an organic priority, but is has great
utility for conventional livestock farmers too.
Last year, USDA's National Organic Standards Board put out a list
of unmet organic research priorities, many of them to tackle issues
that have either hindered domestic organic production, or would help
increase domestic production of organic products.
I believe this makes the case for us to increase USDA funding for
organic research, either by increasing overall funding for programs
such as the Organic Transitions Program (within NIFA), or to do more
organic research within the larger AFRI program. Without adequate
research into the challenges facing U.S. organic farmers, it will be
very difficult for us to keep pace with the exploding demand.
Wisconsin is the number 2 state in the nation for organic
production and in terms of number of producers. (California is number
1). I believe there is great potential for growth in organic farms in
Wisconsin, but research is key to that goal.
Could you provide for the record an accounting of how much organic
research has been conducted through the AFRI program over the last 5
years, with the trend lines?
Answer. The information is provided for the record.
[The information follows:]
AGRICULTURE AND FOOD RESEARCH INITIATIVE ORGANIC RESEARCH
----------------------------------------------------------------------------------------------------------------
Fiscal Year NRI/AFRI Funding Amount (in dollars)
----------------------------------------------------------------------------------------------------------------
2009.................................................. $425,000
2010.................................................. $189,000
2011.................................................. $258,000
2012.................................................. $271,000
2013.................................................. $200,000
2014 \a\.............................................. $566,000
2015 \b\.............................................. $600,000
2016 \b\.............................................. $600,000
Total, AFRI Organic Research.......................... $3,109,000
----------------------------------------------------------------------------------------------------------------
\a\The amount for fiscal year (FY) 2014 is the current program estimate.
\b\The amounts for fiscal years 2015 and 2016 are straight lined based on the fiscal year 2014 current program
estimate.
trend line table
Awards are based on applications received and highly meritorious
projects recommended for award. Therefore, fluctuations will occur.
The variation represents a decline of one grant between 2009 and
2010 followed by static funding through 2013. Due to the small sample
size (i.e., one to two grants funded per year), this is a normal
variation in funding for any topic.
Question. Can you also speak about the importance of organic
agricultural research to meeting USDA's own stated goals for growing
the organic sector?
Answer. There has been double-digit growth in annual demand for
organic products. Domestic production has not been able to satisfy this
demand and imports have filled this void. While it might make sense to
import products that are typically not grown domestically like olive
oil, coffee, coconut, banana etc., large quantities of other products
like organic livestock feed and organic soybean, for instance, continue
to be imported although they could be produced domestically.
In part through research, USDA is committed to assisting the
organic sector. The recent 2014-2018 USDA strategic plan stresses the
need for USDA to ``support research and education that enables organic
production.'' (Goal 1) This emphasis in the USDA Strategic Plan is
reflected in the 2014 Research, Education, and Economics (REE) Action
plan (Goal 1A) as it calls for action to ``Develop more sustainable
production systems for conventional, organic and low input crops ...''
Goal 7 calls for the need to ``Develop and share knowledge to help
stakeholders implement successful organic production and marketing
systems in response to growing consumer demand.''
USDA, in particular NIFA and ARS, has invested in research to
achieve these goals. The two major competitive programs that support
organic agriculture research within NIFA are: ORG-Organic Transitions
and OREI--Organic Agriculture Research and Extension Initiative. Since
2001, both programs have received 1,026 proposals of which only 186
were funded within available resources. Organic agriculture research
has been encouraged in many programs within the Agriculture and Food
Research Initiative (AFRI).
ARS scientists conduct organic agriculture research focused on
understanding the scientific basis of biological and physical processes
innate to plants, soils, invertebrates, and microbes that naturally
regulate pest problems and soil fertility to improve product quality,
economic competitiveness, and supply to meet increasing demand for
organic products. Since 2008, ARS organic research activities have been
conducted as part of the Agricultural System Competitiveness and
Sustainability National Program. ARS organic research activities are
coordinated with other agencies through the USDA Organic Working Group.
There is a clear need for research in organic agriculture. This
work is critical to address the challenges facing producers and
processors who have already adopted organic standards as well as those
who are adopting organic practices. This is widely recognized by the
organic community as a major constraint to domestic production. They
maintain a long list of research priorities that are essential to meet
producers' needs, including, but not limited to, developing cultural
practices and other allowable alternatives to substances recommended
for removal from National Organic Programs' National List of Allowed
and Prohibited Substances; conducting advanced on-farm crop, livestock,
or integrated livestock-crop research; and strengthening of organic
crop seed systems, including seed and transplant production and
protection, and plant breeding for organic production, with an emphasis
on publically available releases.
national organic program sunset policy change
Question. One of the unique things about the organic sector is that
the Organic Foods Production Act (OFPA) lays out a very rigorous
process for considering what synthetic materials can be used in organic
production and handling, to make sure they meet a stringent list of
scientific, environmental and compatibility criteria. The National
Organic Standards Board (NOSB) is in charge of this process, which has
helped to build trust in the USDA organic seal.
For a synthetic material to be used in organic production, USDA's
long-standing interpretation of the law has been that at least 2/3rds
of the NOSB members must vote in favor of adding that material to the
``National List'' of allowed materials. Once on the List, the USDA
policy required that the material be reviewed every 5 years and
relisted again by a vote of at least 2/3rds of the NOSB. Most materials
have garnered the necessary votes in order to remain approved. However,
the sunset review process changed dramatically in September of 2013,
when USDA's National Organic Program announced a major shift in this
policy, without undertaking a full notice and comment process.
I am hearing a lot of concern from the organic community about both
the process and substance of this policy change for such a critical and
unique aspect of the USDA organic program, which is tied to the
integrity of the organic label.
Until USDA's policy change, the same high hurdle of scientific
scrutiny used to consider a material's usage in organic when it was
first allowed was also used to review it after 5 years. The policy
required a 2/3rds vote of the NOSB for the initial placement of a
material on the ``National List'' to allow its usage in organic, and
also required a 2/3rd vote of the NOSB after 5 years to allow the
material to be renewed and remain on the List for another 5 years. Now,
under the new policy, once a material is on the List, it stays on the
List unless 2/3rds of the Board members vote to remove it from the List
of allowed materials. This is a reversal of the previous policy and
procedure.
Can you explain why USDA would make such a big policy change in
this process, and reinterpretation of the law, without any notice and
comment process?
Answer. USDA strongly supports organic agriculture, and is
committed to establishing a level playing field that protects all
organic farms and businesses. Public participation is vital to USDA's
work in organics, and we always encourage all members of the public to
take part in opportunities to do so.
On September 16, 2013, the National Organic Program announced a
revised sunset review and renewal process that would help protect
organic farmers and consumers. We also increased public engagement and
transparency, allowing more opportunity for public comment by providing
two public comment periods for each substance undergoing sunset review.
This matter is currently under pending litigation and we are not
able to comment further.
forest management
Question. In the budget request, the Forest Service talked a lot
about ecological resiliency. This is important to Wisconsin
stakeholders, given that their livelihoods and way of life depends on a
healthy forest. But economic resiliency is also fundamentally important
in Wisconsin. In contrast to other states, in Wisconsin we are
fortunate to have a forest products industry that can partner with the
Forest Service to accomplish Federal goals for timber management,
forest restoration, ecosystem services, and infrastructure repair.
The Forest Service is not doing enough to address the economic
resiliency of our communities which are dependent on the forest. Our
industry partners, and many conservation partners, are frustrated with
the agency. They would like to see more transparent communication from
the forest and region about timber sale goals. They would like to
dialog with the agency about the content and timing of upcoming sales,
so that industry can plan other work on non-Federal land, and ensure
our hardwood and pulpwood mills have a steady supply of material. They
would like to see more work done.
What tools in the budget are most important to accelerating active
forest management in Wisconsin? What tools does the agency need to
achieve this goal?
Answer. Forest Products, Vegetation Management, and Roads budget
line items are critical in supporting all activities for the timber
program and to increase the pace and scale of restoration. Resources to
support the road system, including replacement/repair of bridges, are
critical to achieving the forest management goals. These budget line
items have been negatively impacted by increased fire suppression costs
over the years. The primary tool that the agency needs to address
accelerated forest management in Wisconsin, as elsewhere, is the fire
cap adjustment. Funding extraordinary fires outside the agency cap will
free up resource dollars under the Interior bill's currently tight
discretionary funding caps. This will help fund key restoration, fire
preparedness, and infrastructure programs, including Integrated
Resource Restoration, CFLRP, Suppression, Landscape Scale Restoration,
and it allows high levels of investment in Hazardous Fuels to be
maintained from prior years. These restoration programs help create
healthier, more resilient, and more fire-adapted landscapes where fire
can visit a site with less than devastating consequences and
communities are better able to live with fire and other disturbances.
SUBCOMMITTEE RECESS
Senator Moran. I thank everyone again for attending today's
hearing, and we are adjourned.
[Whereupon, at 11:11 a.m., Tuesday, March 17, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016
----------
WEDNESDAY, SEPTEMBER 16, 2015
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 2:06 p.m. in room SD-192, Dirksen
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
Present: Senators Moran, Daines, Merkley, and Feinstein.
FDA Food Supply Safety Efforts
STATEMENT OF HON. DR. STEPHEN OSTROFF, ACTING
COMMISSIONER, FOOD AND DRUG ADMINISTRATION,
DEPARTMENT OF HEALTH AND HUMAN SERVICES
ACCOMPANIED BY:
MICHAEL TAYLOR, DEPUTY COMMISSIONER FOR FOODS AND
VETERINARY MEDICINE; FOOD AND DRUG ADMINISTRATION
WILLIAM TOOTLE, DIRECTOR, OFFICE OF BUDGET, FOOD AND DRUG ADMIN
OPENING STATEMENT OF SENATOR JERRY MORAN
Senator Moran. Good afternoon to the witnesses, as well as
those in the audience. This hearing will come to order.
Today's hearing will focus on the Food and Drug
Administration's (FDA's) effort to improve and maintain safety
of our food supply. And I thank you, Commissioner Ostroff, for
your presence here today, Mr. Taylor and Mr. Tootle for
participating in this hearing. We are delighted for that. And,
Dr. Ostroff, I appreciate the warm working relationship that we
are developing, and I appreciate the conversations and dialogue
that we have had on a number of FDA issues over the last
several months. So thank you personally and professionally for
the way that you are treating me as the new chairman of this
subcommittee.
FSMA
You note in your testimony, Commissioner, that nearly one
in six Americans fall victim to foodborne illness each year.
Americans expect that the food they purchase at a grocery store
or restaurant will be safe. And the FDA is largely tasked with
maintaining that confidence. Passage of the Food Safety
Modernization Act (FSMA) in 2010 gave your agency significant
new responsibilities in implementing a very sweeping set of
changes to the food safety laws, certainly the largest change
in the last 70 years. Our hearing today is timely as it follows
last week's publishing of the first two final rules for
preventive controls on human and animal foods.
In delivering these new regulatory responsibilities, your
private sector partners expect transparency and certainty from
the FDA. And when I speak to small businesses and agricultural
producers in my home State, their major concern is a Government
that limits job creation and stifles innovation through
burdensome regulations. I am pleased that the agency took many
of the suggestions and comments from the agricultural community
into account by re-proposing portions of the FSMA rules because
they were unworkable for farmers. And I thank you for that.
Modernizing the FDA's regulatory controls and educating
industry and consumers are at the heart of FSMA implementation,
and the issuance of the preventive control rules starts the
compliance process. It is vital that FDA continue its
collaboration with the industry and other Federal and State
agencies and issue proper regulatory guidance throughout this
process.
FSMA FUNDING
I also recognize that successful implementation--this is
the part that you want me to say, Mr. Commissioner. I also
recognize that successful implementation does not come without
a cost. And this subcommittee remains committed to investing in
FSMA's implementation within the resources that are at our
disposal and has done so since FSMA's enactment in 2011. I
think spending in the last 5 years has increased 8 percent,
something that cannot be said for many other Federal agencies.
But we know that you face additional challenges and additional
tasks, and we are interested in exploring how we can be more
helpful. And as the process continues for appropriations this
year, FSMA funding will undoubtedly play a significant role in
our deliberations and in establishing priorities.
PREPARED STATEMENT
I look forward to discussing FSMA and other food safety
topics with our witnesses today.
[The statement follows:]
Prepared Statement of Senator Jerry Moran
This hearing will come to order. Good morning. Today's hearing will
focus on Rural Development at the Department of Agriculture and its
strategic investments in rural America. Thank you Under Secretary
Mensah, Administrator Hernandez, Administrator Rikkers, and
Administrator McBride for being here today. Under Secretary Mensah, I
enjoyed visiting with you recently in Kansas and hope you will return
soon and often.
Agriculture remains one of the bright spots in our nation's
economy, supporting more than 16 million jobs nationwide and forming
the backbone of our rural communities. For those of us who grew up in
rural areas, it is a lifestyle we cherish and hope to preserve for our
children and future generations to come. Rural Development is largely
tasked with maintaining and improving that quality of life. Whether
it's providing loans for low-income families to own their first home,
spurring economic development with grants to small businesses, or
providing communities with financing to allow customers affordable
utility rates, Rural Development continues to serve a significant role
in the nexus between need and opportunity.
In my home state of Kansas, we determine economic development by
whether or not your town has a grocery store. Many issues facing rural
communities are unique to those areas in an ever-increasing urbanized
and technologically- advanced world. I look forward to discussing the
Rural Development mission and other relevant topics with our witnesses
today. We have a lot to cover this morning, so I will turn it over to
Senator Merkley for any remarks he may wish to give.
SenatorMoran. We have a lot to cover this afternoon, and I
turn now to my colleague, Senator Merkley, for any remarks that
he may wish to give.
STATEMENT OF SENATOR JEFF MERKLEY
Senator Merkley. Thank you very much, Mr. Chairman and
thank you for holding this hearing.
I thank you, Dr. Ostroff, Mr. Taylor, Mr. Tootle, for
attending.
FOOD SAFETY
The safety of our food supply is something that most
Americans take for granted. For parents that enter the grocery
store, for the most part, they do not have to give a second
thought to whether or not the food that they are picking up for
their family will make their family sick. America has and
continues to have the safest food supply in the world.
But that, of course, does not mean that it is perfect, as
anyone who has ever had a foodborne illness will testify to.
And we need to continually work to make sure we stay ahead of a
changing global marketplace. We do not think anything about
eating strawberries or melons out of season because we have
access to food from all over the globe. To stay ahead of this
is a monumental task, and there are multiple Federal agencies
involved, including the U.S. Department of Agriculture (USDA)
which regulates about 20 percent of our food supply, and FDA
which regulates 80 percent. Outside of the Federal Government,
State agencies, private businesses, and farmers are working
continually to make sure that the processes and procedures in
place will make sure a domestic onion is always safe to eat, as
well as an imported strawberry.
The Food Safety Modernization Act, which was signed into
law in 2011, was the most sweeping update of our food safety
laws in nearly 70 years. The law changed the way we look at the
issue of food safety. Prior to FSMA, an outbreak would take
place, and we would spend our time and resources tracking it
down. Now we are working to make sure that we prevent that
outbreak from occurring in the first place and giving FDA the
tools and the teeth it needs to do just that. It is a better
way to do business.
The law had about 50 specific deliverables, no small task
for any agency. And although it took longer than many would
like, FDA published two of the seven major final rules last
week, and the rest will be out, as I understand, by next
spring. We are at the point where the rubber meets the road,
and it is going to require a new way of thinking for food
inspectors who have been trained to look for an existing
problem instead of working with industry to make sure those
problems never materialize in the first place.
It is not always smooth sailing, and I know the folks at
FDA have learned a lot about production agriculture and food
processing along the way. I think most people would agree that
you have done a good job working with industry to make sure
that these new rules are effective while minimizing the
disruption.
So, again, thank you, Mr. Chairman, for holding this
hearing. It is timely and I am very interested to hear from our
witnesses.
Senator Moran. Dr. Ostroff, again, welcome and you may
commence your testimony. It is a significant number of pages,
and I have extended the deadline from the normal 5 minutes to
10. So please proceed.
SUMMARY STATEMENT OF DR. STEPHEN OSTROFF
Dr. Ostroff. Thank you, Senator Moran and other members of
the committee.
And I share your enthusiasm for the very warm working
relationship that we have been able to develop in the last
several months, and we look forward to continuing to work with
you not only on food safety issues but all the other issues
that FDA deals with.
So I am Steve Ostroff, the acting Commissioner of Food and
Drugs, and I really very deeply appreciate the opportunity for
Mike Taylor, who is sitting to my left, and me to be here to
talk about the Food Safety Modernization Act, also known as
FSMA.
I would also like to thank you for holding this hearing and
for the committee members and their ongoing interest in this
particular topic and for the strong and growing working
relationship that has developed between the committee and the
FDA to achieve our mutual goals of assuring the safest food
supply in the world for American consumers.
FOOD SAFETY
I hope that everybody in this room knows that this is Food
Safety Month, and I cannot think of a better way to celebrate
than by starting the process of bringing FSMA's important new
rules online as we did last week and by discussing with you
today the critical next steps that must be taken to realize the
goals of FSMA.
So although I have only been working at FDA for 2 years, I
actually began my public health career considerably before that
30 years ago when I was working at the CDC on food safety and
foodborne diseases, particularly at that time the newly
recognized and deadly pathogen, E. coli O157. While working in
Washington State close to Oregon, over a 2-year period, I
personally interviewed every person or a member of their family
in the State diagnosed with that particular infection and
visited a number of them in their homes. I subsequently did the
same with people with other illnesses from foodborne pathogens.
So I can say, without question, that I have a very deep
appreciation for the suffering and consequences of foodborne
illness and have carried that perspective throughout my career
as a public health practitioner and as a physician. In fact,
food safety was the reason that I joined FDA in 2013 at the
urging of the person sitting to my left.
Despite today having much improved technical methods to
detect and investigate foodborne illness from when I started my
career 30 years ago, along with some notable successes in
reducing the incidence of certain pathogens, there simply
remains too much foodborne illness. As you mentioned, nearly
one in six Americans fall victim to foodborne illness each
year. That is 48 million people. Of these, 128,000 are
hospitalized and 3,000 die. This burden of foodborne illness is
shared by each and every one of us, consumers and food
producers alike. The economic costs are also quite sizable.
Since we know that the illnesses, hospitalizations, and deaths
can be prevented, we must also, quite frankly, acknowledge that
it is simply time to start preventing them.
So over here on this side, the Centers for Disease Control
and Prevention's (CDC's) FoodNet data has shown that for many,
many years now, the burden of illness due to the major
foodborne pathogens remains essentially unchanged. As you can
see, the illness burden from some pathogens goes up while for
others it goes down. But looking at the poster over here on the
other side of the room, in total the line remains distressingly
flat. So I say to you that it is time to make that line start
bending in the right direction. We believe that we now have the
tool to be able to do that, and that tool is called the Food
Safety Modernization Act.
FSMA
During my time at FDA, I have been thrilled to be able to
participate in the process of modernizing our food safety
system. This agency has stepped up to solve problems by
identifying the best science and risk-based solutions that can
benefit both consumers and industry. That is what we do at FDA
when we are confronted by such problems. I know that Mike and
his team have embedded this concept in their work to modernize
the Nation's food safety system through FSMA so that it can
meet the challenges of a new global era.
The enactment of FSMA was unquestionably the product of
foresight and the recognition of common interests. Members of
Congress on both sides of the aisle came together with
consumers and with food industry leaders to enhance this
ability to protect the food supply in a modern, diverse world
of free-flowing commerce. FSMA stands for the proposition that
the standard across the food system should be to have processes
in place that we have learned work to prevent food safety
problems, practices that many food safety producers are already
implementing. This means having prevention-oriented standards
in place that are equally applied to domestic and foreign
producers, reasonable verification of compliance with those
standards, and accountability for those who are unable or
unwilling to comply. FSMA directs FDA to build a modern food
safety system based on these central ideas.
FDA has fully embraced a dynamic, collaborative approach to
implementing FSMA and is working very hard to build the new
partnerships and to strengthen existing ones. This effort
includes the food industry, from farmers and manufacturers to
transporters and importers whose capacity and responsibility
under FSMA for producing safe food is the absolute foundation
of the new system. It also includes the FDA's food safety
partners in other government agencies at the Federal, State,
tribal, and local levels, and it also includes foreign
governments, which can play an important role to help assure
that the foreign supplies to the U.S. market are being produced
in safe fashion. And it includes consumers and patient
advocates who have been victims of foodborne illness because
after all, ultimately, they are the ones that we are doing this
for.
PREVENTIVE CONTROL RULES
The two final preventive control rules we issued last week
are critical linchpins for building our new food safety system.
They focus on implementing modern food manufacturing processes
for both human and animal foods, thus ensuring the food
companies are taking a 24/7 365-day a year approach and working
with the FDA to prevent problems on the front end rather than
waiting until a problem is recognized through identifying
people with foodborne illness as you know happened in your
State of Kansas earlier this year.
These rules are important in their own right, but they are
only the first in a number of steps towards building a
comprehensive food safety system. Three more rules will be
finalized by the end of this year, those being the produce
rule, foreign supplier verification process, and accredited
third-party certification. Then the final tools will be issued
this spring, sanitary transport and intentional adulteration.
Together, these rules form the integrated holistic network for
food safety called for by FSMA, all based on the principle of
prevention.
Writing the rules is clearly a big step, but it is only the
first step. Right now, they exist on paper. The bigger
challenge ahead is implementing those rules and making them
exist on the ground. We strongly believe that if we do not
implement the new FSMA-mandated food safety system in the
comprehensive way that Congress envisioned right from the
start, that we will fail to achieve the FSMA goals of food
safety, strengthen consumer confidence and a level playing
field for U.S. producers. The line mentioned earlier will not
bend as it should and it must go.
PREPARED STATEMENT
So I am very proud of this work and I am proud of our team.
Mike Taylor alone has been a force of nature when it comes to
FSMA. So please continue to work with us to achieve the level
of funding that we need to accomplish on the ground what is set
in statute and in rule. American consumers are depending on us
and they expect this of us.
So I will just end by thanking you again for your support
of FDA and for the opportunity to be here to discuss FSMA with
you.
[The statement follows:]
Prepared Statement of Dr. Stephen Ostroff
introduction
Good morning, Chairman Moran and Members of the Subcommittee, I am
Dr. Stephen Ostroff, Acting Commissioner of Food and Drugs. I am
accompanied today by Michael Taylor, FDA's Deputy Commissioner for
Foods and Veterinary Medicine. Thank you for the opportunity to appear
before you today to discuss the Food and Drug Administration's (FDA)
implementation of the FDA Food Safety Modernization Act (FSMA) and our
role in ensuring food safety. I would like to thank the Subcommittee
for its past investments in FDA, which have helped us meet the demands
of our broad and increasingly complex mission.
I would also like to acknowledge that it was Congress' vision of a
safer America that fueled the enactment of FSMA in 2011. You shared,
and responded to, a widespread concern among consumers, industry, and
your fellow legislators about the deadly foodborne illnesses
thatendanger the public health.
today's food safety challenge and fda's changing role under fsma
FDA is a science-based public health regulatory Agency with
mandates from Congress that span the human and animal food supply,
human and animal drugs, medical devices, vaccines and other biological
products, cosmetics and tobacco--products that all have profound
implications for the health of consumers and the nation's economy. Like
other areas of FDA's responsibility, our mandate to ensure the safety
of the nation's food supply is of fundamental importance to the welfare
of consumers and the industries we regulate.
FDA's responsibility for food safety dates back to 1906, when
Congress first established prohibitions on the sale of adulterated food
and gave FDA authority to enforce those prohibitions. FDA has used
those authorities, which were largely unchanged until Congress passed
FSMA, to conduct inspections and take enforcement action in response to
specific cases of insanitation in food facilities, dangerous
contamination of food products, and outbreaks of foodborne illness.
Through these efforts and the commitment of the great majority of food
producers who want to produce safe food, we have long had one of the
safest food supplies in the world. And with the implementation of FSMA,
our food supply will become safer.
According to estimates by the Centers for Disease Control and
Prevention (CDC), every year nearly one in six Americans falls victim
to foodborne illness. That's 48 million people. Of these, 128,000 are
hospitalized, and 3,000 die. This burden of foodborne illness is
damaging to consumers and food producers alike. And the tragedy
underlying the numbers is magnified by the fact that most of these
illnesses and deaths are preventable.
In the years leading up to the enactment of FSMA, a series of major
illness outbreaks, contamination incidents, and product recalls--
involving both domestic and imported food--focused the food industry
and government on how the food safety system could work more
effectively to prevent food safety problems, rather than relying so
much on response after the fact. The food industry developed best
practices, involving such measures as the implementation of preventive
controls in food facilities, and government took incremental steps to
require such controls for FDA-regulated seafood and juice processors
and in meat and poultry facilities regulated by the U.S. Department of
Agriculture (USDA).
Other than those incremental changes affecting a few food
categories, FDA's reactive approach to food safety had changed little
over the years, despite radical change in the food system. Compared to
1906, we now have a vast, complex and global food system in which
changing technology, changing consumer preferences and behavior, and
supply chains that extend around the world make food safety a bigger
challenge than ever before. We also have seen rapid expansion in the
local food movement, with many small-scale growers and processors
coming into the market in response to consumer demand for locally and
sustainably grown food.
All of this change and diversity in the food system is good for
consumers, and creates great opportunity for American business. But it
also places added pressure on our food safety system because consumers
and industry alike agree: we all want food to be as safe as we can make
it, and we all want to have confidence in the safety of our food,
whether it comes from around the corner or from the other side of the
world.
That alignment of interests is what led to the enactment of FSMA.
FSMA stands for the proposition that what we have learned works to
prevent food safety problems--practices that many food producers are
already implementing--should be the norm across the food system. This
means having prevention-oriented standards that apply equally to
domestic and foreign producers, reasonable verification of compliance
with those standards, and accountability for those who are unable or
unwilling to comply.
FSMA directs FDA to build a modern food safety system based on
these central ideas. As outlined below, this has involved developing
new regulations requiring modern preventive controls in facilities
producing all types of food commodities, not just a few, and
establishing requirements where they haven't existed before, most
notably for produce growers, food importers, and food transporters.
FSMA also directs FDA to do its food safety work in new ways, with
a heavy emphasis on collaboration and partnership. This collaboration
includes the food industry--from farmers and manufacturers to
transporters and importers--whose capacity and responsibility under
FSMA for producing safe food is the foundation of the new system. It
also includes FDA's food safety partners in other government agencies
at the Federal, state, tribal, and local levels, with which Congress
directed FDA to build upon our history of collaboration to ensure
effective and efficient implementation of FSMA. And it includes foreign
governments, which can play an important role in helping to ensure that
foreign suppliers to the U.S. market are producing safe food. FDA
strongly embraces this collaborative approach and is working hard to
build new partnerships and strengthen existing ones.
FDA recognizes, however, that part of the change that has to happen
for FSMA to succeed must happen within FDA and in how FDA conducts its
food safety oversight program. To that end, and as discussed below, FDA
has developed a strategy for implementing the new FSMA rules that is a
fundamental departure from the past.
We believe that we will achieve high rates of compliance more
quickly and efficiently by tapping into the fact that the great
majority of firms we regulate want to produce safe food and want to
comply. That's why our strategy takes an ``educate before and while we
regulate'' approach, especially in the produce area, so that, through
FDA guidance, outreach, and technical assistance, we can help food
producers understand and accomplish what is required. It entails an
approach to inspection that is aimed first at fostering and
facilitating compliance, rather than at finding and penalizing
regulatory violations. We will of course take swift regulatory action
when needed to protect consumers when we find dangerous practices, but
our focus is on prevention.
FDA is firmly committed to implementing FSMA the right way from the
start. This means investing in the food safety culture change that is
happening within FDA, but it also means being faithful to the
comprehensive, holistic vision of food safety modernization laid out in
FSMA. Congress directed FDA to build a modern food safety system,
addressing food safety challenges across the spectrum of farms,
manufacturers, and transporters of food, both domestic and foreign. The
pieces of this system are closely interconnected. We cannot credibly
hold domestic producers to the new standards if we are not doing the
same for importers and their foreign suppliers. Nor can we do the
reverse, holding importers and foreign suppliers, but not domestic
producers, to new requirements. We believe that if we do not have the
resources necessary to implement the new FSMA-mandated food safety
system in the comprehensive way Congress envisioned, from the start, we
will fail to achieve the FSMA goals of food safety, strengthened
consumer confidence, and a level playing field for U.S. producers.
In the remainder of this testimony, I will outline our achievements
to date in developing the FSMA rules and planning for their
implementation, and I will explain why the President's fiscal year 2016
budget request is so essential to the success of FSMA.
seven foundational fsma rulemakings
As a first major step toward making the promise of FSMA a reality,
FDA has proposed seven foundational rules, starting in January 2013.
Together, they will provide a modern food safety foundation that brings
to bear the most recent science, that is risk- based and focuses effort
where the hazards are reasonably likely to occur, and that is flexible
and practical given our current knowledge of food safety practices. We
have designed the rules to be both effective for food safety and
workable across the great diversity of our food system.
Last week, FDA issued the first two of the final rules listed below
and is on target for finalizing the remaining five in the coming
months.
1. Preventive Controls for Human Food. This rule will improve the
safety of manufacturing, processing, packing, and holding human food in
two key ways. First, it modernizes FDA's longstanding Current Good
Manufacturing Practice (CGMP) regulations. Second, it requires
facilities to have written plans that identify hazards, specify the
steps that will be put in place to minimize or prevent those hazards,
and specify actions to correct problems that arise. The rule is
designed to be flexible, practical, public health protective, and
consistent with industry best practices.
2. Preventive Controls for Animal Food. This rule will improve the
safety of animal food, including pet food, livestock food, and raw
materials and ingredients used in food for animals, by establishing
general CGMPs for the first time, tailored to animal food, and
establishing the same, flexible requirements for risk-based hazard
analysis and preventive controls as the Preventive Controls for Human
Food rule.
3. Produce Safety Standards. This rule will improve the safety of
produce--fruits and vegetables that are typically consumed raw--by
establishing science-based standards for growing, harvesting, packing,
and holding produce on farms. The rule addresses identified routes of
microbial contamination, including agricultural water, biological soil
amendments of animal origin, health and hygiene of farm personnel,
animals in the growing area, and equipment, tools, and buildings.
4. Foreign Supplier Verification Programs. This rule will
strengthen the oversight of foods imported for U.S. consumers by
requiring importers to perform risk-based activities to verify that
food imported into the United States has been produced in a manner that
provides the same level of public health protection as that required of
domestic food producers. This rule is the foundation for the multi-
faceted new import safety system that Congress mandated to protect food
safety, strengthen consumer confidence, and maintain a level playing
field for U.S. food producers.
5. Accredited Third Party Certification. This rule will improve the
safety of imported food and allow more efficient use of FDA resources
by providing an opportunity for foreign food producers to voluntarily
become certified by third-party certification bodies accredited under
FDA's oversight. FDA may in turn use that certification to determine
whether an importer is eligible to participate in FSMA's voluntary
qualified importer program, or whether to admit certain imported food
into the United States that FDA has determined poses a food safety
risk. Both accreditation bodies and auditors must meet standards for
legal authority, competency and capacity, impartiality/objectivity,
quality assurance, and records procedures.
6. Sanitary Transportation. This rule will help ensure the safety
of human and animal food during transportation by establishing
requirements for shippers, carriers, and receivers of food in the U.S.
Those requirements include ensuring that the design and maintenance of
vehicles and equipment does not leave foods vulnerable to
contamination, and taking measures during transportation to ensure that
food is not handled improperly or contaminated, including using
adequate temperature controls and separating food from non-food items
in the same load.
7. Intentional Adulteration. This rule will help to ensure the
safety and security of the food supply by requiring facilities to
address vulnerable processes in their operations in order to prevent
acts on food intended to cause large-scale public harm (e.g., acts of
terrorism).
fda's commitment to stakeholder engagement
Throughout the rulemaking process, outreach and stakeholder
engagement have been central to developing rules that are both
practical and protect the public health. FDA has worked intensively
with industry stakeholders, consumers, and regulatory partners to be
sure we get the rules right and to set the stage for successful
implementation of the rules once they are final.
Since FSMA was enacted in 2011, FDA has been involved in
approximately 600 engagements with stakeholders on FSMA and the
proposed rules, including public meetings, webinars, listening
sessions, farm tours, and extensive presentations and meetings with
various stakeholder groups. Even before publishing the proposed rules,
FDA held public meetings to gather input on the rules' content. Since
the release of the proposed rules beginning in early 2013, we have
continued our commitment to outreach, engaging various industry,
consumer, and other interested groups across the country and
internationally.
We have heard the concerns raised by stakeholders and have adjusted
the rules to include solutions to those concerns. As part of this
stakeholder dialogue, FDA took the unusual step of issuing four
supplemental notices of proposed rulemaking to share our current
thinking on key issues and get additional stakeholder input on revised
language. Again, after the supplemental notices were issued, we engaged
stakeholders to make sure our final rules would be where they needed to
be. As a result of this extensive public engagement, along with our
consideration of tens of thousands of formal written comments submitted
to the public dockets on the rules, we are confident the rules that
have been finalized and the five remaining final rules in development
are flexible, practical, and consistent with industry best practices,
while also being public health protective and consistent with our
statutory mandate.
As we move forward into the next phase of FSMA implementation, we
intend to continue this dialogue and collaboration with our
stakeholders through guidance, education, training, and technical
assistance, to ensure that everyone understands and successfully plays
their role in food safety. FDA believes that these seven foundational
final rules, when implemented, will fulfill the paradigm shift toward
prevention that was envisioned in FSMA and will be a major step forward
for food safety that will protect consumers into the future.
ensuring successful fsma implementation
The success of building a modernized food safety system depends on
FDA and industry working together, as well as working with State and
other regulatory and public health partners, after the final FSMA rules
are issued. In May 2014, FDA released a FSMA Operational Strategy
Document (attached as an appendix to this testimony) that focuses on
how FDA intends to implement FSMA, by prioritizing prevention,
voluntary compliance, risk-based oversight, and expanded collaboration
across the food safety community. Effective FSMA implementation will
require a sea change in how FDA, as an agency, approaches regulatory
oversight of the food industry.
Inspection and compliance will be specialized, strategic, and risk-
based. FDA isreshaping itself to oversee industry compliance in a
manner that is strategic and based on risk. We are developing a new
inspection paradigm focused on whether firms are implementing systems
that effectively prevent food contamination, requiring fundamentally
different approaches to food safety inspection and compliance. To
effectively leverage our resources, we will use more targeted, risk-
based inspection models to screen firms for food safety performance and
to guide inspection priority, frequency, depth, and approach.
Inspections will be systems-based, with noncompliance viewed in the
context of the performance of the firm's overall food safety system and
the risk to public health. In addition, FDA's inspection and compliance
staffs will be trained to be specialists in food oversight, rather than
covering the broad spectrum of FDA-regulated products. Members of these
staffs will be teamed with FDA subject matter experts to facilitate the
timely correction of problems and consistent, informed enforcement of
the new FSMA regulations. Finally, FDA intends to continuously improve
its inspection strategy through targeted data collection, timely
analysis, and regular program evaluation.
FDA will educate before and while we regulate. Stakeholder
engagement hasbeen a cornerstone of the FSMA rulemaking process, and
FDA will continue to work closely with industry and other stakeholders
to achieve widespread compliance with the rules through education and
technical assistance. We are currently drafting general guidance on
each rule, guidance for small entities, guidance for specific
commodities and sectors, and guidance on key provisions, to help
industry understand their new regulatory obligations under FSMA. We are
also developing a comprehensive training strategy to give food
producers, focusing on small and mid-size operators, the tools they
need tomeet the FSMA requirements that apply to them.
For example, FDA created three alliances, or public-private
partnerships, to develop training materials and create an education and
technical assistance network. The Food Safety Preventive Controls
Alliance and the Sprouts Safety Alliance are being coordinated by the
Illinois Institute of Technology, and the Produce Safety Alliance is
being coordinated by Cornell University. All three alliances bring
together FDA, local and state food protection agencies, the food
industry, and academia to determine what will work best to help prepare
food facilities and farms to implement FSMA.
FDA has also joined with USDA's National Institute of Food and
Agriculture to manage a competitive grant program that will provide
food safety training, education, extension, outreach, and technical
assistance to farm owners and operator, small food processors, and
small fruit and vegetable merchant wholesalers. FDA plans to fund
additional training programs through cooperative agreements.
Finally, FDA is building a technical assistance network to provide
rapid support to food producers, providing answers to any questions
they have about how to comply with the new regulations.
FDA will work closely with governmental and other stakeholder
partners. A key element of our stakeholder outreach during the
development of the FSMA rules has been outreach to our regulatory
partners. As we transition to implementation, our partnerships with
Federal, state, tribal, territorial, local, and international
regulatory and public health agencies will be even more vital. We are
continuing to build a National Integrated Food Safety System to ensure
the quality, consistency, and effectiveness of local, state, and
Federal efforts to protect the food supply. In addition, FDA will be
relying heavily on state agriculture and health departments and other
state and tribal agencies with food safety responsibilities, especially
for the new and unique challenges of implementing the forthcoming
produce safety rule on farms. We recognize the importance of harnessing
the food safety commitment, knowledge of local conditions and
practices, and local presence of these other regulatory entities to
provide training, technical assistance, and compliance oversight in an
effective manner.
Successful FSMA implementation is dependent on FDA's continued
engagement with states, industry, consumer groups, and foreign partners
throughout the process, to ensure that we continue to do our job in a
practical, effective, and risk-based way.
how fsma will make a difference
The prevention model for food safety adopted by Congress in FSMA is
widely recognized in the food industry and among government and
academic food safety experts as the optimal approach to minimizing food
safety hazards and managing problems when they do occur. FSMA also
transforms FDA's oversight by focusing us on prevention and giving us
new tools to verify and ensure that prevention is happening. Two recent
incidents from just this year illustrate why we need the preventive
system envisioned by FSMA.
Preventive Controls in Food Facilities: Blue Bell Creamery
This case involved the presence of the unusually dangerous
bacterium Listeria monocytogenes (Lm) in the manufacturing plants of an
ice cream company. The resulting contamination of products was
associated with the deaths of three people in Kansas and caused
numerous illnesses in at least three other states. Under current
industry best practices, manufacturers of ready-to-eat products like
ice cream should have a sanitation plan and standard operating
procedures that are adequate to ensure that Lm does not become
entrenched in the facility, and they should conduct sampling and
testing under an appropriate environmental monitoring program to verify
that the presence of Lm and the potential for product contamination
have been minimized.
Under the pre-FSMA food safety system, however, no such plans,
procedures or monitoring were specifically required. The burden rested
on FDA to find the problem, through inspection or, as in this case, via
reports of product contamination and illness. Moreover, during pre-FSMA
inspections, FDA could not require access to the company's production
and food safety records to look for evidence of problems or for
documentation that the firm was doing its food safety job
appropriately. FDA could only observe what the company was doing on the
days of the inspection. FDA was basically in a reactive mode, with the
burden on FDA to find problems, often investigating problems after the
harm was done, and being limited largely to finding evidence of legal
violations suitable for taking cumbersome and time consuming court
enforcement action.
Under FSMA and the preventive control rules FDA issued last week,
we now have requirements for sanitation controls, environmental
monitoring, and corrective actions that will apply to facilities making
ready-to-eat foods such as ice cream. The preventive controls rules
define the framework within which companies must put in place a food
safety program that is appropriate for the hazards in their products
and facilities. Companies will now be legally accountable to FDA for
doing the right thing to minimize hazards like Lm, and FDA will be able
not only to inspect the operations and conditions in the facility, but
also to examine, on an ongoing basis, the company's records documenting
the design and proper implementation of its food safety plan. With
these new requirements, enhanced records access, and FSMA's
administrative enforcement tools, there will be real accountability for
prevention in food manufacturing facilities.
Produce Safety and Imports: Cilantro from Mexico
Mexico is a major source of a wide range of produce commodities,
from staple fruits and vegetables to peppers and herbs, on which
Americans depend for year-round access. FDA and our Mexican
counterparts have long recognized the challenge of adequately ensuring
and verifying the safety of produce in general, and the large volume of
produce crossing the U.S.-Mexico border, a challenge exemplified by a
series of outbreaks of illness in 2012, 2013, 2014 and 2015 caused by
the parasite Cyclospora associated with fresh cilantro from the Puebla
region of Mexico. This year's outbreak has resulted in approximately
500 confirmed cases of illness in 30 states. Like most produce safety
problems, we have learned that the risk of contamination can be reduced
by following recognized practices related to water quality, employee
hygiene, biological soil amendments, animals in growing areas, and
harvesting and packing of produce.
Before FSMA, there were no regulatory standards for such preventive
practices, only voluntary guidelines. Moreover, to oversee the safety
of imported produce, prior to FSMA FDA has had to rely on computer
screening and on inspectors at the border physically checking a small
percentage of import shipments, looking for problems. If FDA can find
the problem, it can keep the problem out, but this reactive approach is
widely recognized to be inadequate for the huge volume of produce and
other commodities flowing into the United States from scores of
countries. In the case of cilantro from Mexico, the contamination has
to be prevented at its source.
Under FSMA, we will soon have prevention-oriented produce safety
requirements that apply to both domestic and imported produce,
including cilantro. Moreover, the Foreign Supplier Verification
Programs (FSVP) requirement under FSMA will, for the first time, make
importers an accountable part of the food safety system. Instead of
relying primarily on FDA and its inspectors to detect and correct
problems at the border, we will also be able to hold importers, and in
turn their foreign suppliers, accountable for preventing the problems.
This will make a big difference for food safety.
Recognizing the challenge of produce safety and the importance of
FSMA's success, in 2014 we launched with our Mexican regulatory
counterparts a Produce Safety Partnership. This partnership is grounded
in our common interest in ensuring the safety of Mexican produce, our
shared commitment to FSMA's prevention strategy, and the directive in
FSMA for FDA to collaborate on food safety with foreign governments.
The partnership with Mexico includes collaboration with the U.S. and
Mexican produce industry so that we can coordinate with and take
advantage of industry's own efforts to improve the safety of imported
produce.
Such partnerships are resource intensive for FDA, but can pay big
dividends when, as in the case of Mexico, we can leverage the efforts
of regulatory partners who are also real food safety partners. In the
current cilantro case, we are implementing jointly with Mexican
authorities a program that includes continued FDA oversight at the
border, but that also requires future shipments entering the U.S. from
Puebla to come only from farms that have been inspected and certified
by the Mexican authorities to be operating in accordance with sound
food safety practices.
fda's fiscal year 2016 president's budget request for food safety
The fiscal year 2016 President's Budget includes a $109.5 million
increase in budget authority, a total of $1.3 billion, for FSMA
implementation, and a total of $1.5 billion when accounting for all
resources requested in fiscal year 2016. Full funding of the
President's budget authority request is essential to maintaining
momentum toward the timely implementation of FSMA in the most effective
way possible. This goal could be undermined if FDA, the states and the
industry are not adequately prepared to get implementation right. The
three major program areas where successful implementation hinges
crucially on the fiscal year 2016 budget authority request are
preventive controls in food facilities, produce safety, and imports.
For preventive controls, the essential investments are for
inspector training and modernization of the inspection process, as
conducted both by FDA and the states, and essential guidance and
technical assistance for industry so firms can know what is expected
and can be supported in complying with the new requirements. This is
especially crucial for small and mid-size firms. These investments are
time sensitive because the preventive controls rules are the first to
go into effect, and FDA is mandated by FSMA to conduct inspections in
the covered food facilities at a certain frequency. If these
investments are not made, industry could experience inconsistency,
inefficiency, and potential disruption stemming from FDA staff who are
not adequately prepared for the new system.
Produce safety is one of our most important public health
priorities: we want people to consume more fresh produce, yet we
continue to experience an unacceptable number of illness outbreaks from
both domestic and imported produce. The top domestic produce safety
investment priority in fiscal year 2016 is for states to have the
capacity to be FDA's on-the-ground partner in implementing the FSMA
produce safety rule that will be issued later this fall. As Congress
envisioned in FSMA, our implementation strategy for produce is based on
the states playing a key role in working with growers to provide
education and technical assistance, and they will also be the primary
provider of inspections to verify compliance. In support of this
strategy, FDA and the National Association of State Departments of
Agriculture (NASDA) have entered into a five-year cooperative agreement
through which we are jointly planning implementation of the produce
safety rule from the ground up.
The states' role is essential to success, but they cannot perform
the role without resources. Investment is essential in 2016. We will
have a produce safety rule on the books by this November, but, because
this is a new area of regulation, we are having to build an
implementation system from the ground up. Growers, especially small and
mid-size operators, are already seeking education, training and
technical assistance, which states simply lack the capacity to provide.
States also need resources now to build the capacity they will need to
carry out meaningful on-farm compliance assessments and inspections in
2016 and 2017.
Finally, for imports, FDA must have new resources to adequately
implement FSMA's groundbreaking new FSVP requirement. There is no more
essential element of FSMA and its successful implementation than
this.FSVP is the crucial tool that FSMA provides FDA to hold importers
accountable for the safety of the food they bring into the United
States. They must meet this responsibility by verifying the adequacy of
the food safety controls being implemented by their foreign suppliers,
which means that FSVP is also the primary means of holding foreign
suppliers to the same food safety standards as domestic producers, as
FSMA intends. For the FSVP requirement to fulfill its purpose, FDA must
have funding in fiscal year 2016 to retrain existing staff, to hire new
staff with the skills needed to evaluate complex global supply chain
management systems, and to deliver education, training and technical
assistance to the importers we estimate are subject to the FSVP rule.
This funding will also provide the foundation for building the
multi-faceted new import safety system called for by FSMA, including
more foreign inspections by FDA, expanded collaboration with foreign
food safety authorities, and capacity building in countries where that
will help protect food safety in the U.S. Receiving this funding is
essential in fiscal year 2016 in order to align implementation of FSVP
with the preventive controls and produce safety rules.
In sum, FSMA directs FDA to build a comprehensive new food safety
system, based on what we know works to prevent problems--a system that
is effective regardless of where food comes from. In order for the
system to function properly, no key elements can be missing or lag
behind. And FSMA won't achieve its purpose if the program is so
inadequately funded that the system as a whole falters and fails. We
want to be very clear that we cannot successfully build the new food
safety system that Congress has called for without the new resources
requested in the President's Budget. That is what's at stake in the
fiscal year 2016 FSMA funding request.
conclusion
We appreciate your strong interest in food safety, Chairman Moran,
and this committee's support to date for FSMA and its effective
implementation. We look forward to continue working with you to make
FSMA a success. We would be happy to answer your questions.
Senator Moran. Commissioner, thank you very much.
Let me begin just by asking. You outlined the scenario by
which these rules will be announced. What was the basis for
their prioritization? Is there something about these two rules
that make them more difficult, easier, more significant to
pursue? What do we expect in the future?
Dr. Ostroff. Well, I will just say that they are all
important. The preventive control rules are probably amongst
the most important of all of these rules, and they are the ones
that are expected to be implemented first. And so these had the
priority to be issued. And the other ones will come shortly
after that.
Senator Moran. And the process you have been through will
be the same process for the next promulgation?
Dr. Ostroff. I will let Mike answer that. The essential
answer is yes, we will issue these. The deadlines for these are
set by court.
Senator Moran. Court order.
Dr. Ostroff. We are obligated to be able to meet all of
them, and we will meet all of them. I can assure you of that.
Mr. Taylor. I will just add that as the Commissioner
indicated, these rules are from a holistic package of standards
that Congress mandated to frame this comprehensive preventive
system, and so we have been through a dialogue with our
stakeholders that has really addressed all of these rules
because they have to fit together. And so we have to have a
coherent package of regulations. So we are at the end of the
process for all seven rules in terms of having gone through the
notice and comment, public meetings, dialogues, and so now we
are able to actually issue the rules in final. So the
sequencing has something to do as well with just the capacity
to get rules out the door and give a little breathing room
between rules. So we are on track to get these rules out on
that timeline, just as the Commissioner indicated.
Senator Moran. Thank you very much, Mr. Taylor.
Dr. Ostroff. So, Mr. Chairman, if I might.
Senator Moran. You may.
Dr. Ostroff. Mike just can make a couple comments about the
implementation plan, and that may help to put some of this in
context.
FSMA IMPLEMENTATION PLAN
Mr. Taylor. Well, again, this is a large topic, and I am
sure your questions will draw it out in detail. But we are
embarking on implementation and deeply cognizant of the
challenges, the hundreds of thousands of facilities, and the
complexity of supply chains. But we know that we can meet this
challenge because we have got the alignment of stakeholders, we
have done the homework, we have had the dialogue. And I think
the thing that I would just provide at the Commissioner's
suggestion is an overview. Some of the themes that we are
pursuing undergirding the implementation that we think is
crucial to success--and I think it is just crucial that we
stick with these themes.
COMPLIANCE
First is this commitment, as we implement, to provide
clarity through outreach and guidance about the new rules, what
they require, and to be supporting of the industry in achieving
what is expected through education, through technical
assistance. We have said on any number of occasions that we
will educate before and while we regulate, and we absolutely
mean that. So that is the first theme, clarity and support for
compliance.
INSPECTION
The second theme we need to do thematically, as you have
indicated and the Commissioner indicated, is just fundamentally
revamp how we conduct our inspections, how we conduct our
oversight and compliance activities so that we are targeting
our efforts based on risk and actively fostering and supporting
voluntary compliance through frontline oversight that
historically has been enforcement and reaction-oriented. Now it
needs to be prevention-oriented and supporting compliance.
I always need to add the caveat. As much as we want to work
with industry, if we encounter conditions where consumers are
being put at risk, FSMA expects and has given us new rules to
take swift action to protect consumers. But the goal has to be
compliance in food safety not just enforcement as an end in
itself.
PARTNERSHIPS
The third theme that I will emphasize, again picking up on
what the Commissioner has said, is strengthening and expanding
our partnerships with State agriculture and health departments.
This is absolutely essential. We have a mandate from Congress
to establish a national integrated food safety system. And we
fundamentally understand that FDA cannot possibly implement
this law successfully by itself. It has to work with our State
and local partners.
And finally, I just reemphasize--and I think this is
crucial--the commitment that I think we all need to have to
this integrated, comprehensive implementation of FSMA. This
system is a system. It does not work if we tease out parts or
delay parts or do not integrate this in a holistic way. I think
the import safety provisions are particularly a crucial part of
this overall system of prevention. This is how we will get a
level playing field for U.S. producers. We will meet the
expectations of consumers that the food that is imported into
this country is as safe as food that is produced here.
So these are themes that we hope to come back to, and we
want our feet held to the fire with respect to pursuing this in
this way. And I think if we do this, as daunting as it may seem
with the hundreds of thousands of folks we are seeking to bring
into a new system, we think we can do it sticking with these
themes.
Thank you, Mr. Chairman.
Senator Moran. Mr. Taylor, thank you.
Commissioner, your charts, particularly this one--what is
the explanation? What is the cycle that occurs here. You said
there were ups and downs. We have had reductions and increases
both. Is there a cause and effect that you could describe to me
why that is with one particular pathogen?
Dr. Ostroff. Yes. Well, it is a good question. I think if
you look over here, one of the other things that I think is
quite notable from this particular graph is that for many of
these pathogens, that many of the reductions, the reductions
being the ones that you see that are lower than one, occurred
during the very early years of implementation of some new food
safety activities in the late 1990s. And really if you follow
that along into the 2000s, for many of these it has really been
incredibly flat.
Now, I think it is important to recognize that food safety
and foodborne illness is an incredibly dynamic area. We have
new challenges. We have an incredibly diverse food supply. I
would venture to say it is much, more diverse than what we had
back in the 1990s when we started keeping some of these
statistics. Increasingly the proportion that comes from
overseas has grown. Sort of the locally grown phenomenon has
increased over that time period. And so there are a lot of
things that are challenging the food safety system and
influencing the occurrence of foodborne disease. But I think
the bottom line is that as these trends have changed over time,
we have basically been treading water, and it is time that we
no longer tread water, that we actually do things that we know
will work to make these numbers look different as we go
forward.
Senator Moran. And you believe FSMA will bend that curve?
Dr. Ostroff. I believe FSMA will bend that curve. I mean,
if you look at several of the major food safety problems that
we have experienced this year, including the most recent one
that we have seen with the cucumbers that were imported from
Mexico, the various provisions that are in FSMA are
specifically designed to address the challenges that we have
seen in all of those outbreaks. And so we should be able to
influence not only the outbreaks that are occurring but more
importantly I think the day in and day out sporadic foodborne
illness which forms the bulk of this particular data.
I do also think it is important to say that while we
certainly believe that all of the activities encompassed under
FSMA will work to drive these numbers down, it does not absolve
consumers of doing the right thing once this food gets into
their kitchens because a lot can happen even if the food as it
comes into the kitchens is safe. And so it is a comprehensive
approach that must be taken to assure that foodborne illness
does not occur.
Senator Moran. Let me turn now to Senator Merkley.
Senator Merkley. Thank you, Mr. Chairman.
Dr. Ostroff, in your testimony, you note that FDA's
strategy is taking an ``educate before and while you regulate''
approach. I note that you are currently working on guidance
documents. This is very important considering the first two
final rules are about 1,500 pages, so a substantial amount. And
these guidance documents will be critical for businesses to
understand and comply with the new law and they need to be
timely. So folks in Oregon are asking when these documents will
become available, and I will just give you a chance to answer
their question.
Dr. Ostroff. To best answer that question, I am going to
turn to the person who is actually writing them.
GUIDANCE
Mr. Taylor. I have a large and able team back home writing
them as we speak. Guidance is absolutely essential to the
success of implementing these rules, and we are investing a lot
of resources in that now. We have been doing that even as we
have been preparing the rules themselves.
One thing I would note in the 1,500 or so pages, this is 8
and a half by 11, double spaced, but the vast majority of those
pages are a preamble, are themselves guidance and explanation
of what the rules actually mean and how we expect them to be
applied. And so that is the first place folks should go to
really get an understanding of what the codified rule language
itself actually is intended to mean in practice. But that is
just the first step in guidance.
So as you know, we are developing a number of guidance
documents, some of which are the key foundational ones. So
there will be a comprehensive guidance on the human preventive
controls rule that will be almost kind of an operator's manual
for those who are not yet implementing modern preventive
controls like many in industry already are. For those who are
not there yet, this is going to be a very helpful operating
guide essentially for implementing the rules.
They will be doing a similar guidance for animal food, at
least a similar guidance for both the animal food preventive
controls--
Senator Merkley. I am just going to cut to the chase and
say I am glad it is going to have this guidance. When will
folks see that?
Mr. Taylor. These major guidances will be coming out early
to mid next year, well ahead of folks' obligation to comply.
Senator Merkley. Great.
Mr. Taylor. And they will be open for comment. It will be
an ongoing process of dialogue, but our best thinking will be
out there in a timely way for implementation.
Senator Merkley. Okay, great.
FSMA AND FOREIGN SUPPLIERS
I have heard from constituents and that there are concerns
that foreign businesses may not be as closely monitored as U.S.
businesses, and consequently there might be greater risks from
foreign products than from U.S. products. And additionally, it
could put U.S. businesses at an economic disadvantage because
of the clients' costs for FSMA.
In your testimony, you state that FDA cannot credibly hold
domestic producers to the new standards if we are not doing the
same for importers and their foreign suppliers and vice versa.
So I know you are aware of these concerns. And this all may get
further discussed when the foreign supplier verification rule
is finalized next month. But to the degree you can tell us now,
how will the FDA adequately ensure the safety of foreign food
products, and will that oversight be as rigorous as the
oversight for U.S. businesses?
Dr. Ostroff. Well, I am going to allow Mike to give you
some of the details. But all I can say is that one of the
fundamental tenets of FSMA is that we assure that the safety of
foreign-sourced food is equivalent to domestically produced
food. I think that we have that obligation to create that
equity. We know that to certain degrees our tools available to
us to be able to deal with imported food have been limited, but
this rule, this law will not successfully work unless we can
assure total equity between food that is produced overseas with
food that is produced domestically. And one of the critical
elements of that is that the importers that are bringing this
food into the United States assure that the procedures that
were in place to produce that food are equivalent to the
procedures that are in place for food that is produced
domestically.
Let me let Mike give you some more detail.
Mr. Taylor. So Congress did provide really a multifaceted
toolkit for strengthening import oversight, and the
Commissioner has referred to the central, really the
foundational part of that which is this foreign supplier
verification and requirements so that importers will now, for
the very first time, have a food safety responsibility to be
accountable to us for knowing their source of supply and
verifying that those foreign suppliers are producing under our
standards. That is a paradigm shift if we can implement it
well. It is combined, though, in the design of Congress with
much more overseas presence by FDA, so more foreign
inspections, more partnership with foreign governments, more
investment in foreign food safety capacity where that will
contribute to food safety here. We think this toolkit, if
implemented properly, will work to provide that equal rigor.
The question is implementation. Can we make the investments
needed to carry this out as intended?
FOREIGN INSPECTIONS
Senator Merkley. So, Mr. Taylor, you mentioned the foreign
inspections, and FSMA mandated 600 inspections in 2011, with a
doubling of the previous year's inspection level for the
subsequent 5 years, which would mean that in fiscal year 2015,
we would have about 19,000 foreign inspections. And in fact, I
believe that the Department plans to only conduct about 1,200.
So 19,000 under FSMA versus 1,200. This lack of foreign
inspections is adding to the concern that really different
standards are going to be, if you will, practiced in foreign
countries because there are not enough inspections to hold them
accountable. Your thoughts on that?
Mr. Taylor. You put your finger on a huge challenge, and
that is how do we target our resources with the resources we
get to implement this law effectively for food safety. So we
have increased our foreign inspections from less than 300
before enactment to in the 1,200 to 1,400 range currently. And
those have been very important. But they are part of the larger
system. And so the inspections are not inherently preventive in
the sense that the foreign supplier verification program
requirement is. So in terms of priorities for implementing the
import system, we have got to get 88,000 importers up to speed
in terms of doing their prevention-oriented verification. And
so that will be a priority for funding.
We would like to do more foreign inspections, but we also
think that we can leverage the inspection activity of foreign
governments through mechanisms like a systems recognition tool
that we have developed where for countries who have advanced
food safety systems, we want to recognize that and be able to
rely, engage in a mutual reliance sort of relationship where we
can rely on their inspections and not duplicate their efforts.
So there are multiple elements of this.
One of the major investments we have made over the last few
years with increased funding from Congress is to strengthen our
foreign offices overseas, which again are going to play a vital
role in us building the relationships with foreign governments,
outreach to foreign industry, all those things that we can
leverage our limited resources to maximize prevention activity
overseas. So we would love to continue the dialogue about how
we increase the inspection numbers, along with these other
activities.
Dr. Ostroff. The one thing that I do have to emphasize,
though, is that part of the request that we made in fiscal year
2016 for the full amount of funding, which was $109 million,
was to be able to assure that we could carry out the
requirements, especially for foreign-produced food. You know,
with a number that is significantly lower than that, we will be
challenged--I think that there is little question--of being
able to implement the various rules that will be coming out
over the coming months in the way that we envision that they
need to be rolled out.
Senator Merkley. And I think one of those areas that the
funding is impacting the United States is in filling those
foreign offices. You mentioned an increase, but I believe the
vacancy rate right now is 40 percent of foreign offices are
vacant. Is that primarily a funding issue or a prioritization
issue?
Dr. Ostroff I will say that it is expensive for us to be
able to place people overseas. However, actually placing people
full-time in these offices is only one of the strategies that
we have been using to carry out those responsibilities. So we
do cycle in people for short-term assignments to be able to
assure that we can carry out the things that we need to do in
those locations.
Senator Merkley. Thank you.
Senator Moran. The Senator from California, Senator
Feinstein.
Senator Feinstein. Thank you very much, Mr. Chairman. I
really appreciate the opportunity to talk with you,
Commissioner, for a few moments.
I have long been interested in this, actually before my
colleagues came on, and have tried to be helpful in getting
more ag inspectors at our border. But that is a long time ago.
California, as you know, is a huge--it is the number one
agricultural production State. Can you give me any percent or
any measurement of Salmonella and Campylobacter in California-
produced produce?
CALIFORNIA PRODUCE
Dr. Ostroff. That probably is not a number that I would
have off the top of my head. Given my extensive time at the
CDC, I am pretty familiar with the systems that they use to
collect the data, including the data that went into the FoodNet
report, in which California is one of the participants in that
system. And so there are data that are broken out by State for
the various FoodNet sites in terms of the incidence of some of
the pathogens that you see on these lists. I cannot tell you
whether or not it is done on a commodity-specific basis.
Senator Feinstein. Okay.
CUCUMBER SALMONELLA OUTBREAK
Now, the latest Salmonella outbreak for us is the cucumbers
imported from Mexico. And I gather that is 418 illnesses across
30 States, and we have seen the most illnesses of any State, 89
illnesses, 17 hospitalizations, and one death. I am concerned
that year after year, the Centers for Disease Control reports
that the United States has not made progress in reducing the
number of foodborne Salmonella infections that occur.
I was listening and also reading your comments how these
new food safety regulations, FSMA, that you are finalizing will
prevent outbreaks from happening with specific products. Take
the cucumber as an example. How will you work it both at the
border and in a foreign country with the farm operation in
Mexico that is producing these crops?
Dr. Ostroff. Well, I will preface my statement by saying
that that particular outbreak is still under investigation, and
so we do not know all of the specific details that may have led
to it happening.
But having said that, I think that if you think of two of
the major outbreaks that we have experienced this year, one of
them being the Salmonella associated with the cucumbers and a
few months earlier a parasitic pathogen, Cyclospora, that was
associated with cilantro that also was imported from Mexico,
you know, there are some themes about the quality and
implementation of measures to prevent problems from occurring
in the first place and that is at the heart of what it is that
we are trying to accomplish under the produce rule. And so that
produce rule establishes a number of standards that producers
overseas that and producers domestically need to adhere to.
Senator Feinstein. Could you give us an example of the
standards?
Dr. Ostroff. Well, you know, some of them are the water
that is being used to irrigate the crops. One of them has to do
with the access of animals to various locations. There is
another aspect that deals with the hygiene of the workers that
are working on these particular farms. And so it is a whole
variety of requirements that will be in place under the produce
rule that any producer who is importing food into the United
States will be expected to meet.
Mr. Taylor. If I just may add. The difference FSMA will
make is that we have known for years what these practices are,
and FDA has provided guidance, voluntary guidance, but there
have been no enforceable standards, whether for domestic or
foreign producers, and thus no accountability for doing the
right thing. And so what FSMA does is create enforceable
standards and then also verification that those standards are
being met. I mean, it is that simple, but it is a profound
difference from where we have been before where it was
incumbent upon FDA to find and react to the problem in the
absence of clear standards for prevention. It is a real game
change that for cucumbers, that kind of example, will make a
huge practical difference.
Senator Feinstein. Right.
FSMA COORDINATION WITH USDA
Now, I gather produce is about 46 percent of foodborne
illnesses, and that is under your jurisdiction, and the rest of
it, meat, chicken, pork, is under USDA, if I understand that
correctly. Do you coordinate in standards between the two of
you or are the standards different?
Dr. Ostroff. One of the critical requirements of being
successful with FSMA is to be able to work closely with a whole
variety of partners, and it is not only partners that are at
the Federal level, but it is also down at the State and local
level where a lot of the day in and day out work with farmers
occur. And so, yes, it is very important that we work quite
closely with USDA to ensure the success of what we do.
Senator Feinstein. With produce--for example, I have had
Campylobacter, and I know how serious it can be. And it was
from eating not thoroughly cooked chicken. And so I asked my
staff to look into it. Now, this is not your jurisdiction, but
it is interesting to me that up to 40 percent of the ground
chicken in markets may have Salmonella. And I talked to a large
chicken grower in my State, and I said, what about this? And he
said, well, everybody knows you have to cook chicken to 165
degrees until you eat it. I said, well, I did not know. And I
do not think everybody knows.
So it raises the question of how these two agencies
interact. I really think you have a good thing going in what I
have read on FSMA, and I like very much how you are going about
it. I worry very much about particularly chicken because
chicken has become such a high item for people in terms of
eating. And it does not seem to me that we make much progress
year over year, year after year.
But with respect to this, what you mentioned, cilantro,
cucumbers, ice cream, tuna, caramel apples, and these five
outbreaks alone are almost 1,000 cases of illness and 12
deaths. Do you think that there is anything that USDA can begin
to learn from FSMA? Do you think it is relevant?
Dr. Ostroff. Again, we work very closely with USDA without
question. Far be it for me to provide advice to them related to
things that we ourselves do not regulate. All I can say is that
they too are working quite arduously in putting in place
additional strategies to be able to address those products that
are under their jurisdiction. And there are a lot of
similarities to things that we are doing in FSMA to things that
USDA is doing, you know, because again, from the consumers'
perspective, if they end up with Salmonella, they end up with
Salmonella and they are not so much interested----
Senator Feinstein. That is exactly the point.
Dr. Ostroff. [continuing] In what the source is as to what
we do keep it from happening.
Senator Feinstein. Right. And we have two big agencies. One
handles the meat products and one handles the fresh produce
products. And I have often wondered is that the best way to do
it. I think you are taking action, and I am very pleased to see
that.
ANTIBIOTICS IN PRODUCTS
I am also concerned about antibiotics in products and what
has been happening in that human stream of consuming products
that have antibiotics. Could you talk a little bit about that
and what your agency is doing?
Dr. Ostroff. Sure. As you know, this is also a very
important aspect of food safety. We have had a multi-agency
activity in place called NARMS (National Antimicrobial
Resistance Monitoring System) that monitors not only the
occurrence of various pathogens in a variety of food products,
particularly meat that is sold at the retail level, but also
monitors the patterns of antimicrobial resistance. We look at
isolates that come from products that we regulate. USDA looks
at isolates that come from products that they regulate, and CDC
also incorporates information from human isolates of the same
pathogens so that we can compare those patterns and look at
those patterns over time.
As you know, we also have been working quite hard to be
able to address the issue of antimicrobial resistance from
foodborne pathogens. That is a whole other large component to
their activities, especially by reducing the use of medically
important antibiotics used in food-producing animals,
particularly when used for growth promotion purposes. And so we
have put out a number of guidances and rules specifically
designed to address reductions in the use of antibiotics for
those purposes. This has been a multi-year process to put those
rules in place. We have done this on a voluntary basis to have
all of the marketers of these antibiotics for use in food
animals make labeling changes to remove growth promotion as an
indication for the use of these antibiotics, and they have all
voluntarily complied. The phase-in period to make those changes
in the labels is to start at the end of this year. So we would
look to see changes start to occur as a result of those
practices.
And the other very important point of those requirements is
to make sure that the use of those antibiotics for other
purposes is under the direction of a veterinarian.
So both of them I think will be very helpful in terms of
addressing the problem.
Senator Feinstein. Thank you very much, Commissioner.
Thank you, Mr. Chairman.
Senator Moran. You are welcome, Senator Feinstein. Thank
you very much.
Just to educate myself in a more general way, let me raise
a couple of topics that are a result of the questions and the
testimony.
FOOD ILLNESS DEATHS
One of the things I wanted to ask about is the cause of
death. You cite the CDC statistics, the 128,000 hospitalized,
3,000 die related to foodborne illness. Is there a breakdown of
those deaths or hospitalization related to consumer preparation
versus the food that was tainted prior to preparation? Do we
know where the cause lies with the consumer versus the
provider?
Dr. Ostroff. It is not a very easy question to answer,
especially when you are sometimes talking about a relatively
long period between the time that the exposure may have
occurred and when certainly the illness occurs and when the
death occurs.
Having said that, we deal with a whole variety of different
pathogens, some of which deal with items that are supposed to
be cooked. Sometimes you are dealing with raw commodities like
in the produce space. And so ultimately in most instances what
you want to try to do--and I think what FSMA is designed to
do--is to try to keep it from being there in the first place.
And I think if you can successfully do that in many of these
commodity areas, then you will successfully be able to have an
impact in reducing these problems from occurring.
Senator Moran. So there is a reduction that could occur in
the likelihood of the problem that reduces the importance of
consumer preparation of the food item.
Dr. Ostroff. Let me just say without question that you
never want to send any suggestion that consumers can become lax
in the way that they handle their food because I do not think
that we would want to ever send such a message. I think what we
do want to do is to be able to enhance consumer confidence that
the food that comes into their kitchens does not contain
pathogens----
Senator Moran. That was very artful. I will reask my
question which would be there is no way--is there, Dr.
Ostroff--that consumer preparation is not important regardless
of what arrives in the consumer's home.
Dr. Ostroff. You said it perfectly.
Senator Moran. Thank you.
DOMESTIC AND IMPORTED FOODS
You indicate--well, first of all, I wanted to follow up on
Senator Merkley's point about imported food versus domestic
food. And he was asking for equity. An indication that you had
indicated in your testimony that there is an importance to
making sure that there is not an economic disadvantage to
domestic producers. There is not a double standard I think is
the way we would say it in Kansas. Does that double standard
exist today? Is there a difference in the nature and the
likelihood of foodborne illnesses from imported food versus
domestic food?
Dr. Ostroff. Since I have been answering those through the
questions, I am going to turn that one over to my colleague.
Mr. Taylor. I think the answer is that under current law
pre-FSMA, but also under FSMA, the standards are the same. I
mean, Congress has made it very clear in FSMA that the same
standards are to be applied. The same safety is to be achieved
whether foreign or domestic.
The real difference and where there is a different
challenge is in the ability to verify that those standards are
being met, and we have very different challenges with imports
than we do with domestic because we have an inspection force
here. We can legally go into facilities. We can directly hold
firms legally accountable. We have a whole set of relationships
with the States who go into these facilities all the time. We
can really cover that. There is no amount of foreign inspection
that Congress will ever pay for us to do that would provide a
comparable level of oversight through inspection overseas. And
so that is why we have got this multifaceted toolkit of foreign
supplier verification, more foreign inspections but very much
collaborating with foreign governments. So the difference is
really not so much the standards. They are the same standards.
The question is how do you verify. And the imports provide a
different verification and challenge than domestics.
Senator Moran. And, Mr. Taylor, under FSMA the ability to
enforce those standards is going to, in large part, rely on the
certification of those who are importing food that their
providers, their foreign suppliers, are in compliance.
Mr. Taylor. Well, that is the foundation for the new system
because the U.S.-based importer is legally directly accountable
to us. We can hold them legally accountable for doing that job
properly. So that is where we have the direct legal handle. But
then we can go over and again inspect foreign facilities. If we
see a problem, we can keep that food from coming in. We can
work with foreign governments again to foster good practices
and to rely on their inspection activity. But, yes, the direct
legal accountability for imports, in terms of private sector
responsibility, is on that U.S.-based importer. So that is why
that foreign supplier rule and its proper implementation is
just so foundational.
Senator Moran. What does that mean the importer is most
likely to do to be able to sign that certification? What is
that company going to do in a foreign country to make certain
that when they attest that standards are being met, that they
are actually being met?
Mr. Taylor. So under the regulation that we have proposed
and you will see coming forward--and I am not here announcing
the final content of the regulation, but I think the elements
of it are evident from the proposals that we have put out and a
supplemental proposal that we put out last year. But the whole
idea is that--and again, this is just following the
congressional mandate--the importer must have a program, a
documented program where they have identified their suppliers,
they have come to understand their suppliers' capabilities for
food safety, they have approved their suppliers, they know the
practices the supplier is undertaking, and they look at
records. And under some circumstances, when justified by risk,
because it is intended to be a risk-based foreign supplier
verification program, we would envision the U.S.-based importer
doing an audit, actually having an audit conducted of that
foreign supplier and on site onto that foreign producer. So it
is having a real program that we can then audit and then,
obviously, go behind that and sample product when it is coming
in, go behind that and actually inspect the foreign facility,
if we choose to. But it is that accountability for the importer
that is the new feature that is so crucial.
Senator Moran. The word ``audit'' has a different meaning
than the word ``inspect.'' Is that true?
Mr. Taylor. Yes.
Senator Moran. So when the importer is auditing, that
importer is not inspecting. They would not be doing the same
thing that an FDA inspector would be doing in a foreign
country.
Mr. Taylor. Well, it is different because when you talk
about inspection where we are used to going in and looking at
facilities and conducting a physical exam of a physical place--
the ``audit'' term that we are using applies to auditing the
program, checking the records, being able to get confidence
from examining the records and talking to the importer that
they know what they are doing and they are doing the right
thing. And so in that sense, it is a very records-intensive
audit activity that will be at least a major component of
ensuring this is being done properly.
Senator Moran. Mr. Taylor, thank you.
I have more questions, Senator Merkley, but maybe a way to
accommodate your schedule is to turn now to you, and if you are
unable to stay for my final round, I would not be offended.
Senator Merkley. Thank you very much, Chairman.
VIBRIO INCIDENCE
I wanted to draw attention to the report that you have all
displayed, the 2014 Food Safety Progress Report. For folks who
are numerically challenged, you have boiled it down to happy
faces, grim faces, and very unhappy faces. And the unhappiest
of all is the face representing Vibrio. And over on the other
chart that you have provided, you show that while every other
disease has decreased since the 1998-till-now time period,
there is one disease that has increased in incidence and that
is Vibrio. What is the story? What particulars should we know
about the challenge this disease represents?
Dr. Ostroff. Well, Vibrio can also be a significant
disease. It comes in a couple of different forms. There are
several different pathogens that are encompassed under the
label of Vibrio, and they are, in general, associated with
seafood products. Now, I think it is important to put in
context that in terms of the overall numbers, the number of
illnesses associated with Vibrio was actually quite small and
certainly a very small fraction of what we see in the United
States from either Salmonella or Campylobacter. Some of this is
associated with actual spread of Vibrio. In some instances, it
was largely confined to certain areas of the country, and
because of movements that occur with emerging diseases, it
spread to other areas where it traditionally has not been. But
it is a trend that we have been seeing particularly along the
east coast.
Senator Merkley. I was reading an article recently about
the ponds where shrimp are farmed on land in Asia and where
massive amounts of antibiotics are used to control the various
diseases that are rampant in those ponds. Is that import of
shrimp from these farms one of the factors contributing to the
Vibrio expansion?
Dr. Ostroff. I would have to get you specific information
about whether or not that is contributing, but by and large, to
my knowledge, most of the Vibrio-related illnesses are not
associated specifically with imported shrimp.
[The information follows:]
While Vibrio related illnesses have been increasing in the United
States in recent years, investigations conducted by state and local
health departments have associated these infections with consumption of
raw oysters and other raw forms of molluscan shellfish in the week
before illness. A summary of these infections, including their recent
increased recognition along the Atlantic coast, can be found on the
website of the Centers for Disease Control and Prevention at
www.cdc.gov/vibrio/investigations/index.html. Vibrio infections are
most common during warmer months when the organism is more prevalent in
the marine environment. Infections can be greatly minimized by
consuming only thoroughly cooked molluscan shellfish.
Senator Merkley. Thank you.
SALMONELLA IN PEANUT BUTTER OUTBREAK
Back when we were working on this bill, a young man and his
father came out from Oregon to testify. The father was a police
officer. The son, when he was 3--his name is Jacob Hurley. He
had experienced a life-threatening case of Salmonella from
contaminated peanut butter. And he was one among more than 700
who were sickened by contaminated peanut products in 2009. I
believe that the company involved in that was the Peanut
Corporation of America.
If we look back on that particular, well-publicized
incident, how would the preventive controls rule that we have
just passed have made a potential significant difference in the
risk of that disease?
Mr. Taylor. So that is an unusual case in many respects in
part because of the vast scale of the damage that it did and
the thousands of products that had to be recalled because this
firm was selling not only peanut butter in bulk but peanut
ingredients that went out into thousands of processed foods. It
was a catastrophic event for the food system.
It also involved intentional conduct by the owner and
operator of that facility and the well-publicized subsequent
criminal prosecution and conviction.
What FSMA will do, even in that situation, is provide a
much stronger basis for inspectors, when they go into
facilities, to not be reliant just on looking around at the
facility conditions, and pre-FSMA with no access to the records
of the facility, under FSMA we will have a much stronger
ability as investigators to go into facilities and make
assessments of the system and to be able to detect and find
records that might actually document positive analytical
results such as those that occurred in this particular case
that would reveal a problem that needs to be addressed. So
there is always going to be that rare instance where purposeful
criminal behavior happens, and there needs to be swift remedies
for that.
But I think even in these cases, we will be able to be more
effective in our investigatory role in assessing systems and
whether this sort of practice is going on in facilities that
needs to be addressed very forcefully, and FSMA gives us new
rules for addressing that sort of situation forcefully. If we
identify this sort of problem through inspection, under FSMA we
can actually suspend the registration of that facility and shut
the facility down administratively. And that is an important
tool in these sorts of extreme cases.
Senator Merkley. So as you note, there were exceptional
circumstances, leaky roof, mold, animal contamination, so on
and so forth, kind of egregious behavior regarding some known
problems. But in terms of the inspections you mentioned and the
ability to kind of have teeth, that matters.
PREVENTIVE CONTROL RULE AND TRACE ABILITY
But there is another element of the preventive controls
rule--I believe it is in the preventive controls rules--that
involves developing a tracking system for ingredients that go
into processed foods. And can you just comment on whether you
believe that is going to make a difference?
Mr. Taylor. So FDA has historically--since the Bioterrorism
Act in 2001 was enacted, it has had authority to require firms
to keep records of where their incoming materials came from and
where their finished products have gone, one up, one down
recordkeeping. FSMA adds somewhat to our authority in this area
by giving us the authority to set standards for how that firm
connects the dots between the incoming and the outgoing. And so
that will be a step, and that is a rulemaking that is underway
to put that in place.
FSMA frankly put some constraints on FDA in terms of
traceability because it precludes us from requiring essentially
a farm-to-table pedigree or the kind of tracing that is done by
UPS and FedEx. We are precluded from requiring that sort of use
of technology to improve traceability. So from our standpoint,
traceability is crucial. It is how we can investigate outbreaks
much more expeditiously and get to the cause of problems and
solve them.
But traceability is going to have to come into the modern
era fully through public-private collaboration, finding ways to
harness industry innovation with the support of us and dialogue
so we can be sure whatever they do helps our investigators, as
well as the firms themselves. But the work to be done yet is in
that area.
Senator Merkley. Thank you very much, Mr. Taylor, Dr.
Ostroff, Mr. Tootle. I appreciate it. Thank you.
FSMA COLLABORATION
Senator Moran. One of the things I read in your testimony
that I wanted to highlight and ask you to confirm to me how
serious you are about this and how confident I can be that it
will remain the policy, and that is, you indicate the approach
to inspection is aimed first at fostering and facilitating
compliance rather than finding and penalizing regulatory
violations. That is a policy, in my view, that every regulatory
Federal agency should adopt. The goal is to make improvements
in cooperation with the regulated. And it seems to me--and we
have had this in other agencies previously in which they seem
to be that was the direction they were going, but over time,
the joy of penalizing became too great and the attitude of
cooperation disappeared.
Is there some assurance that you mean what you say in your
testimony and that it will last as part of the nature of the
Food and Drug Administration as it implements and enforces
FSMA?
Dr. Ostroff. Well, all I can say is that we do believe that
the approach that is expressed in FSMA, which is to work
collaboratively with regulated industry--and when I say
``regulated industry,'' we mean from the farm to the transport
into people's homes--that we work collaboratively to encourage
them and to work with them to do it right. And we know that
ultimately doing it right has tremendous impact. That is not to
say because, you know, you always have to--and I am sure you
are quite aware. There is the carrot and the stick. And we know
that the carrot is quite an effective way to promote
improvements in food safety, but that does not mean that we are
not going to use the stick when we need to use the stick.
Mr. Taylor. If I could just add why I believe this will
remain the policy over time regardless of who happens to be
sitting in these chairs, partly we have put it in writing. We
have made this commitment to the industry and to the public,
and people support this externally. But equally important for
your purpose, the people at FDA embrace this wholeheartedly.
The people who are at the front line in our agency are public
health people. Enforcement is a tool, and that has been the
culture of the agency given the statute we have had and the
framework for food safety, which has basically been an
enforcement-oriented statute and program. But with FSMA, we are
now public health at the front line, and our front line people
love that. They would much rather be getting good food safety
outcomes and doing public health than trying to rack up
enforcement numbers. That is just not the fundamental mentality
of that cadre of people, including the young people coming into
the agency. It is an extraordinarily exciting time for them and
for the whole agency. So I think the future is here in terms of
the culture change that is going on, and we are working in many
ways to institutionalize that and embed that in the practices
of the agency.
Senator Moran. Well, would it not be fair--I mean, I
recognized when I asked that question, it may sound as if you
are trying to take care of business or farmers, but is the
reality not that we end up with a safer food supply system when
this is the attitude?
Mr. Taylor. We know and you know, and if you talk to the
people in the food business, it is just obvious the vast
majority want to produce safe food at a personal level and it
is in their intense business interest to do that. And so our
whole strategy is based upon that assumption. We need to work
with that vast majority who want to comply, support that
compliance, verify that it is happening. And for those who are
not complying, we will act swiftly and we will take whatever
action is needed to protect consumers, and in these extreme
cases like Peanut Corporation of America, invoke punitive
remedies as a deterrent. But, no, I think working with those
whose interest is aligned with ours on food safety is how we
will get the best public health----
Senator Moran. If I can respond to that before Dr. Ostroff
speaks, in the world I come from in Kansas, the rumor of food
disease or animal-borne diseases causes dramatic consequences
to farmers, to ranchers. It does not take an actual case. Just
the thought that something may be wrong. And so I am certainly
not opposed to strictly strongly enforcing penalties and
putting bad actors out of business because they have a huge
consequence certainly to the consumer and the safety of our
food supply, but for those same business men and women, those
same farmers and ranchers, they cannot afford financially to
have the rumor the reality that there is something wrong with
what they produce.
Mr. Taylor. And our strategic interests are fully aligned
on that.
Dr. Ostroff. And I think you are absolutely right. We know
that the ramifications from foodborne outbreaks that occurred
years ago still ripple through certain commodities.
The other thing that I will say is that the approach that
we will be taking under FSMA is really a fundamentally
significant change to the way that we approach food safety, and
it is really critical because a number of things that are
encompassed in the funding request that we have made to
Congress is designed to ensure that up and down the system, we
can reorient the workforce to be able to implement the things
that you were saying in terms of being able to work
collaboratively with industry, being able to educate industry,
and being able to oversee and ensure that what they are doing
is up to standards takes resources. And I do not know any other
way to say it. And we do know, without question, that unless we
receive the total amount of the request, that something is
going to have to give in some aspect of what we are doing.
Senator Moran. You could not help yourself.
Dr. Ostroff. I could not help myself.
Senator Moran. And I will be happy to visit about that
topic. Let me finish up a couple other items.
STATES ROLE IN FSMA IMPLEMENTATION
When it comes to the State of Kansas, the State of Oregon,
the State of California, what will the role be for those States
as a result of FSMA and its implementation? What happens
different at the Kansas Department of Health and Environment?
Dr. Ostroff. Well, the approaches that are being taken at
the Federal level--those same types of changes will also occur
at the State level. The States and localities are really very
critical partners in implementing FSMA as it is designed to be
implemented. They are our front line eyes and ears. They carry
a lot of the workload in not only working with their regulated
industries at the State and local level, but particularly in
certain areas. And the one that comes to mind most is the
produce rule. We will look very much towards working with the
States to be able to provide the type of front line support to
all of the farmers within their States to be able to
appropriately implement the new requirements for FSMA. And so
they are really critical to the success of this endeavor.
ANIMAL FEED RULE
Senator Moran. Let me ask one question related to the
animal feed rule and contract farmers. Doctor, you indicated--
Commissioner, you indicated to me that in advance of this
hearing, that what I was going to hear from the folks out there
in that world would be all requests to make sure that Congress
appropriated sufficient funds to implement FSMA, and that you
had worked your way through many of the challenges and had a
lot of input from stakeholders, as you described. And I
appreciate that, and it seems to me that that is in large part
the reality.
One area that I have heard concern about is the definition
of what a farm or farmer is. And you are shaking your head and
so maybe I do not need to describe the issue. Is there
something afoot that I ought to know about the direction that
you are going? What I have heard, that there is concern from
farmers who have no involvement in anything other than raising
the livestock, the animal, that FSMA will affect their
operations as well when all the processing and everything
occurs downstream. And in fact, the feed, most importantly, is
not grown or provided by them. It is provided by upstream
buyers of those they have contracted with. This is an issue--
have I described it adequately. You were once smiling. Now you
are frowning.
Dr. Ostroff. Well, no, because the specific way that a
farmer is defined is really critical to certain parts of these
rules, not only the preventive controls but also to the produce
rule. And so we have worked quite closely with those that will
be impacted by this rule to make sure we can get it about as
right as we possibly can.
I will ask Mike because I know he has been immersed in this
particular issue for the last several years.
Mr. Taylor. I do know the issue very well, and the fact
that there is presumably still some folks who have some
concerns just shows that there is an exception to every rule--
but stakeholder support for the rules.
But I think that what you are talking about is the
situation where there are vertically integrated poultry
operations where a Perdue or a Tyson will own the chickens.
They will manufacture and own the feed. They will provide it to
contract growers who own----
Senator Moran. The growers only grow.
Mr. Taylor. The growers only grow.
The growers--if they have a concern that they are affected
by this, I have not heard that and I do need to hear that. The
affected party is the operator of that feed mill, that is not
being managed on or by a farm operation but rather by this big
vertically integrated poultry enterprise. That feed mill is
subject to the animal feed preventive controls rule. The
requirement is very practical and risk-based and so do not
address issues that do not need to be addressed in terms of
ensuring the safety of animal feed. But those feed mills are
subject to preventive controls. If the poultry operator or any
farmer--and this is the common practice for poultry--is growing
or processing their own feed on their farm in their feed mill
for their animals, that is part of the farm operation and would
not be subject to the preventive controls rules.
So I would be happy to engage whoever has the concern and
connect them with our Center for Veterinary Medicine and work
through whatever the question is. But that is basically the way
the rule----
Senator Moran. You answered the question better than I
asked it, and I think that is the assurance that they were
having to hear.
Mr. Taylor. Okay. Well, again, I am happy to talk to them
if that would help.
BUDGET REQUEST
Senator Moran. Let me talk just a moment about the
appropriations process. And I indicated in my opening statement
this will continue to be a priority certainly of mine and I
think of this subcommittee. And you mentioned specifically the
amount of money that the President's budget requests and our
ability to meet that at this point has not occurred. But we
worked hard to put more money into FSMA implementation as we
prioritize within the dollars that we have within our
jurisdiction. And if those dollar amounts change, we are
interested in reviewing and reprioritizing based upon what the
needs are of FDA and others to try to make certain we make the
right priority decisions.
But let me ask a couple of things about how the money has
been spent in the past. As I indicated in my opening statement,
the number, I believe, is an 8-percent increase over the last 5
years for implementation of FSMA at FDA. Mr. Tootle, am I
saying that correctly?
Mr. Tootle. I think it is 4 percent, sir.
Senator Moran. Of course, you do.
FSMA SPENDING
Senator Moran. Well, let me ask how that money has been
spent in implementation and how has it been allocated. Is it
across food safety inspections, foodborne disease surveillance,
detection? How have you decided how to spend that money over
the past 5 years? And I will consult with my expert.
Dr. Ostroff. So the total amount since 2010 that has been
allocated specifically for FSMA--I believe the number is
approximately $162 million over that time period. It has been
used in a whole variety of ways, but as you probably recognize,
there has been a tremendous effort on our part to be able to
appropriately lay the groundwork to get these rules to a place
where those rules are both implementable and will work. And
that is no mean task. As you know, we have had tremendous
numbers of outreach activities to the various stakeholder
groups. There have been somewhere in the range of 600 or so
meetings that have occurred, either public meetings,
interactions with regulated industries, various trade
associations. As you know, we have walked facilities and farms
from one coast to the other. There has been a significant
effort to actually do all the writing that it takes to get
these rules to the place where they were. As you know, we
issued a number of supplemental rules. And so that has heavily
contributed to a lot of the resources that we have used to get
to the point where we can actually get to where we are now,
which is to start implementing.
Mr. Taylor. In addition, there are a number of programmatic
and capacity investments that we have made that I think are
very significant as well. Some of it includes technical
staffing, increasing technical staffing at the agency, so we
can support the industry, our State partners, our own
inspectors as they implement this. So this is at our Center for
Food Safety and Applied Nutrition principally. We have doubled
the investment in the States to close to $50 million over the
last few years. We have been able with the resources we got,
including these increases, to meet the FSMA mandate for high-
risk inspections, the frequency mandate, and exceed that and do
that earlier than expected. We think that has been an important
part of getting ourselves in a position to succeed under FSMA.
And then the import area has been an area of investment. We
have significantly increased the number of inspections, as I
mentioned. We have expanded the foreign offices, things we have
talked about. So there have been some significant programmatic
investments in capacity for ourselves and the States to be
ready to implement FSMA. It is part of an ongoing sort of
buildup so we can succeed going forward.
Senator Moran. Thank you, Mr. Taylor.
Mr. Tootle, it is apparently one of those circumstances in
which both are right.
The desired outcome has been achieved. Food has increased
by 8 percent, FSMA by 4.
REPRIORITIZING FUNDING
I think this is my final question. Is there any
opportunities--let me ask that differently because there has to
be. As you implement FSMA, are there opportunities for
reprioritizing existing spending that that spending is no
longer necessary because you are headed down a different path
than the way the FDA operated in the past? So are there any
savings to occur as a result of the implementation of FSMA?
Mr. Taylor. My Commissioner is looking at me, so I will say
something.
Dr. Ostroff. Because my short answer would be no.
Mr. Taylor. I think I am going give yes. That is a no
because I want to try to explain, though. If you look at the
overall funding of the foods program, about three-quarters of
it pre-FSMA goes into the field based activities that relate to
food safety but doing it the old way. What we are talking about
is adding frankly incrementally to that base resource so we can
reorient, redeploy all of that resource to doing food safety in
the way envisioned by FSMA.
Senator Moran. It is not the best answer.
Mr. Taylor. I wanted to get credit for the fact that we are
not just continuing to do all the old stuff and then add on the
new thing.
Senator Moran. That is the nature of my question.
Mr. Taylor. Yes, sir. And the answer is we are redeploying
but it does not mean we can stop spending the money that is
needed to support that workforce. We have to, in fact, invest
in it so it can work in this modern prevention-oriented way in
a much more sophisticated regulatory framework. So, yes. So it
is redeployment as opposed to adding on resources on top of
resources that are still deployed doing the old thing.
Senator Moran. That is what I want to hear. And since you,
Dr. Ostroff, wanted to answer no, I will give you the
opportunity to say yes.
Is the reality not, is the truth not that we can now--as we
do things differently, you redeploy assets, resources that were
directed in the old way of doing business to the new way of
doing business?
Dr. Ostroff. So this is not going to require fewer people
to be successful. It is just going to require that those people
do things differently than they have been doing them, but the
people that we need to be successful for FSMA will not--you
know, we are not going to have people go away. And in point of
fact, given the various responsibilities that we have under
these rules, we need every single one of those people to be
successful in implementing this. So from the standpoint of what
we have been doing with our field force and what we have been
doing with our laboratories, those responsibilities do not
disappear under FSMA.
Senator Moran. Dr. Ostroff, thank you for your testimony.
Mr. Taylor, thank you for being here. Mr. Tootle. Anything you
would like to make certain that is included in the record
before we close this hearing?
Dr. Ostroff. Well, I will just close by saying I am the
eternal optimist. The request that we made for this fiscal year
for FSMA implementation from my perspective is absolutely
critical to its success. And to make this have its maximal
impact, which we hope that it will have to change some of these
graphs that you see here on the right and the left, every
component of that request is vitally important to the success
of this endeavor. And so we will have some incredibly difficult
choices to make if we cannot get that particular request. And
so I recognize that you have been an ardent supporter of the
success of FSMA, and we certainly are totally appreciative of
the efforts that you have made to this point, and we are very,
very appreciative of the resources that did show up in the
subcommittee's and full appropriation for FSMA implementation.
All I can say is that there will be some significant shortfalls
that will result with that particular number, which will make
it very challenging for us to be able to put in place right
from the get-go what we need to do to be successful in this
endeavor.
ADDITIONAL COMMITTEE QUESTIONS
Senator Moran. Doctor, thank you very much. I appreciate
your testimony. Thank you for being here. I appreciate the
presence of my colleagues. And for members of the subcommittee,
either those that were here or who were not, any questions that
they would like to submit for the record should be turned into
the subcommittee staff within 1 week, which is Wednesday,
September the 23rd, and we would appreciate having a response
back from FDA within 4 weeks subsequent to that point in time.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Jerry Moran
produce safety
Question. Please provide a food safety risk rationale why FDA
concluded that Produce Safety provides adequate regulatory oversight
for on-farm packinghouses that pack any amount of produce not grown on
the same farm, and ``secondary activities farms'' that are majority
owned by the primary production farm(s) that provide a majority of the
produce packed, but an off-farm packinghouse that performs the same
activities on the same commodities requires the added complexity of the
Preventive Controls rule if more than a majority of fresh produce
packed is not grown by the packinghouse majority owner(s).
Answer. Produce packing houses that fall under the new farm
definition and pack covered produce would be covered by the forthcoming
produce safety rule. Produce packing houses that do not fall under the
new farm definition would be facilities covered by the preventive
controls for human food rule. We recognize that this means that
establishments performing basically the same activities will be
governed by different regulatory regimes. We are limited by our
statutory authority. FSMA sets up a dichotomy, where farms packing and
holding covered produce are subject to the produce safety rule, with
its regulatory structure, and facilities required to register are
subject to the preventive controls for human food rule, with its
regulatory structure. We have expanded the farm definition as far as we
think we can, while still reflecting what a farm is in the real world.
However, we expect that the specific steps necessary to ensure the
safety of produce would generally be the same for on-farm and off-farm
packing houses. For example, the preventive controls rule allows a
packing house, for produce covered by the produce rule, to comply with
the applicable requirements for packing and holding under the produce
rule rather than to comply with the Current Good Manufacturing Practice
(CGMP) requirements. In addition, although an off-farm packing facility
would be required to establish and implement a food safety plan and
establish preventive controls for food safety management components, we
expect that, in general, off-farm packing houses can look toward the
produce safety rule for guidance as to what to include. We expect that
an off-farm packing facility's food safety plan would focus on a few
key preventive controls with counterparts in the proposed produce
safety rule. For example, we expect that the food safety plan for an
off-farm packing facility would include preventive controls such as
maintaining and monitoring the temperature of water used during
packing. We also expect that an off-farm packing facility would
establish sanitation controls to address the cleanliness of food-
contact surfaces (including food-contact surfaces of utensils and
equipment) and the prevention of cross-contamination from insanitary
objects and from personnel to food, food packaging material, and other
food-contact surfaces. These preventive controls have counterparts in
the proposed produce safety rule.
animal feed
Question. In regard to the Rule for Preventive Controls for Animal
Feed, the FDA has indicated it did not intend to regulate farmers/
growers of animals. However, it appears that the Animal Feed rule will
cover a significant number of contract farming operations, even though
the owners of the animals have 100 percent control over feed
manufacturing.
How many feed mills and/or farm operations do you expect this rule
to cover?
Answer. The Preventive Controls for Animal Food (PCAF) rule applies
to all facilities that are required to register with FDA under section
415 of the FD&C Act because they manufacture, process, pack, or hold
animal food for consumption in the US. Farms are not required to
register and therefore are not covered by the PCAF rule. Whether a feed
mill is covered by the PCAF rule depends in part on whether it is
considered part of a farm. FDA's Food Facility Registration database
tracks the number of registered facilities. As of August 9, 2015, there
were 5,919 domestic animal food facilities registered and 9,804
domestic facilities that were registered as human and animal food
facilities. The 5,919 domestic animal food facilities are covered and
likely a portion of the facilities that are registered to produce both
human and animal food. The facilities that produce both human and
animal food may choose to follow human food current good manufacturing
practice and preventive control requirements throughout their facility
instead of following the requirements of the PCAF rule for their animal
food (as long as any hazards for the animal food are addressed). Within
the total of domestic registered facilities, there may be some
facilities that are subject to one or more exemptions from the PCAF
rule or are subject to modified requirements.
Question. Are you going to prioritize regulatory oversight on the
animal food rule, and does the agency plan provide guidance to clarify
this issue?
Answer. Full funding as requested in the fiscal year 2016
President's Budget is necessary for FDA to implement all of the FSMA
rules, including PCAF, in a holistic, risk-based way. FDA has been
developing implementation plans for the PCAF rule, and we are also
currently working on development of regulator training and guidance
documents. FDA is planning guidance documents to help industry comply
with the requirements of the PCAF rule. The first guidance will be for
implementation of the Current Good Manufacturing Practices provisions,
closely followed by a guidance document on human food by-products for
use as animal food. FDA will make available another guidance document
that will address the hazards associated with different foods and how
to apply the preventive controls requirements. There will also be a
Small Entity Compliance Guide that explains the actions a small or very
small business must take to comply with the rule.
import safety
Question. How many foreign manufacturing facilities are there and
what are the top countries that export to the United States?
Answer. There are approximately 118,104 registered foreign food
facilities. The following table provides the top ten countries that
export to the United States in order from most to least food import
lines. The top two countries are Mexico and Canada.
Question. What is the process to inspect/approve products from
these facilities? How does FDA interact with foreign governments, and
their inspection regimes?
Answer. The process of inspecting foreign food facilities begins
with the Center for Food Safety and Applied Nutrition (CFSAN), which
identifies foreign facilities for FDA inspection based on risk factors
including whether or not they produce high-risk commodities or employ
high-risk practices in the manufacturing process. Specific foreign
countries are not targeted for inspection unless there are specific
disasters, events, or country-wide practices associated with production
that may pose a unique risk. FDA foreign food facility inspections are
conducted by dedicated foreign food inspection cadre/investigators,
domestic food inspection investigator volunteers, and foreign office
investigators based overseas. The Office of Regulatory Affairs (ORA)
plans and conducts foreign inspections for U.S.-based investigators,
whereas inspections conducted by overseas-based investigators are
planned by the relevant FDA foreign office (FDA has investigators based
overseas within FDA's foreign offices in China, India, and Latin
America). Specific foreign inspections trips are planned based on firm
location, availability, reason for inspection, and commodity. After the
completion of a foreign inspection, FDA may take steps such as placing
a firm's product on Import Alert, based on observed and documented
violations. FDA regularly interacts with foreign governments and their
inspection/regulatory regimes. When FDA intends to conduct inspections
of facilities in foreign countries, CFSAN informs the foreign
government regulatory authorities and invites the foreign authorities
to observe the FDA inspections. ORA or an FDA foreign office provides
the foreign regulatory authority with information that includes the
timeframe of the inspections, the list of firms to be inspected, and
final itineraries if desired. Foreign regulatory authorities often
accept invitations to observe FDA inspections, which provide learning
experiences for the foreign authorities.
FDA's India Office and the Indian drug regulatory authority will
collect data pertaining to either regulatory agency's observations of
the other's inspections in the future. This data-gathering exercise
will facilitate data analyses for developing a better understanding of
current inspectional and regulatory practices of each regulatory agency
and developing strategies to better cooperate on matters of mutual
regulatory concern.
The Latin America Office has conducted foreign inspections and
environmental assessments accompanied by foreign counterparts. These
activities are conducted in an effort to leverage our combined
resources, ensure the application of standards, and increase regulatory
capacity. During accompanied inspections, the foreign regulatory
authority and FDA conduct concurrent inspections of an establishment.
During the inspections, there is constant communication and discussion
between the two authorities. We have seen certain foreign authorities
take regulatory action on the spot when conditions that pose a serious
risk to the health of consumers are encountered. Foreign regulatory
authorities have taken their own samples and have ordered the
destruction of potentially contaminated products. The same situation
occurs when a collaborative/joint environmental assessment in response
to a foodborne illness outbreak or a food contamination event is
performed. If FDA subject matter experts find a major violation,
foreign counterparts may be able to take immediate regulatory actions.
They may also conduct a follow-up inspection at the firm to ensure that
corrective actions were implemented.
The China, India and Latin America Offices have shared information,
as appropriate, with regulatory counterpart organizations in China,
India and Mexico after inspections in those countries. This has
resulted in actions by the regulatory counterpart organizations based
on violations observed by FDA.
In 2014, FDA signed the following arrangements with Chinese,
Indian, and Mexican regulatory authorities that affect FDA's
interactions with those authorities regarding food safety inspections:
--Two Implementing Arrangements with Chinese regulatory counterparts
that outline cooperation regarding inspections of food and drug
facilities in each other's countries. Since the signing of the
two Implementing Arrangements, cooperation and the exchange of
regulatory enforcement information have increased. The number
of FDA inspections that Chinese regulatory counterparts have
observed has also increased. Additionally, FDA received visas
for new inspectional staff whose visas had been previously
delayed.
--A Memorandum of Understanding (MOU) with Indian regulatory
authorities that will improve cooperative activities in the
area of food safety. The India Office also conducts quarterly
meetings with Export Inspection Council (EIC) to advance the
implementation of the MOU and share information for regulatory
and/or risk-based decisionmaking.
--A Statement of Intent with Mexican authorities to develop and
implement a Produce Safety Partnership that aims to achieve
mutual confidence in one another's produce safety systems.
Under the Statement of Intent, five working groups were
established. Two of these working groups have focused on
inspections: Exchange of Information and Training of Auditors/
Inspectors and Outbreak Response. These two working groups have
conducted thorough, in-depth discussions that have led to
enhanced interaction when FDA conducts inspections in Mexico.
FDA's China, India, and Latin America Offices have also engaged in
technical workshops with our foreign regulatory counterparts to
strengthen the regulatory understanding and capabilities of
inspectorates abroad.
--FDA's China Office has engaged with Chinese regulatory authorities
regarding data integrity and compliance in the area of Low-Acid
Canned Foods (LACF) by holding classroom training on FDA's
regulations and inspection training at a facility. A total of
30 Chinese inspectors attended, including one inspector from
each of the Chinese provinces that export LACF products to the
United States as well as 10 inspectors and several managers
from various Guangdong authorities' offices where the training
was held.
--FDA's India Office partners with Indian regulators to train them on
food- and drug-related issues and inspectional techniques, good
manufacturing practices, and the detection of data integrity
issues.
--The Latin America Office has facilitated participation by foreign
regulatory officials/inspectors in courses provided by FDA's
Office of Regulatory Affairs training component (ORA-U),
thereby helping enhance the knowledge, skills and capabilities
of foreign regulators, as well as helping them better
understand the U.S. food safety system.
--FDA's Europe Office does not include investigators among its staff,
yet it facilitates FDA inspections of facilities in Europe by
cultivating and maintaining relationships with regulatory
counterparts in Europe and working with U.S. governmental
agencies in-country with complementary missions, e.g., the U.
S. Department of Agriculture's Foreign Agricultural Service.
In addition, FDA's overseas offices contribute to FDA's
international inspections by analyzing reports/audits by foreign
regulatory counterparts to aid in facility selection.
Question. How do you propose to support and build upon these
efforts to open FDA offices in foreign countries? Could you provide
more detail on the types of activities these offices should be carrying
out, and what benchmarks we might use to measure the success of these
activities?
Answer. Since 2009, FDA has operated foreign posts strategically
located around the globe, including in China, India, Mexico, Belgium,
United Kingdom, Costa Rica and Chile. The India and China posts have
significant numbers of investigators in the foods/feeds and medical
areas. The goals of the foreign posts include:
--Building FDA knowledge around the foreign competent authority's
(CA's) capacity, the role industry(ies) plays in the country,
and the dynamics between these two.
--Strengthening FDA linkages with CAs and public and private
stakeholders for increased and more timely information and
collaborative approaches to tackling issues of concern to FDA.
--Increasing awareness of foreign governments, industry and others
about FDA regulatory requirements, as well as new legislation
such as the FDA Food Safety Modernization Act and the Food and
Drug Administration Safety and Innovation Act.
--Conducting FDA inspections and investigations in country, including
for-cause and surveillance inspections. FDA encourages CAs to
observe our foreign inspections, which provide learning
opportunities for foreign regulators.
Measuring impact is a complex process(es). The Office of
International Programs is developing metrics to benchmark and better
measure success of these types of activities performed at FDA foreign
posts. These could include the number of FDA inspections conducted in
the country or region, but optimally would measure the impact of FDA
inspections, workshops and other collaborative activities on the rate
of violative products from the country or region and capacity of
foreign regulators conducting inspectional work.
Question. What, specifically, are obstacles these offices face in
monitoring foreign food production and foreign food safety systems?
Answer. The food safety systems in some countries are complex and
involve multiple regulatory authorities at the central and regional/
state/local levels. Responsibility for regulatory oversight may not be
well-defined or able to be measured. Implementation of food safety
standards and enforcement activities may vary significantly by region.
Thus it can be challenging to monitor and, more importantly, understand
the regulatory systems, regulatory capacity and national policy
dynamics.
Language and cultural contexts are also challenges in building FDA
knowledge around foreign food production and food safety systems,
particularly given the difficulty of translating often nuanced policies
written in a foreign language.
Question. What types of authorities and resources will those
offices need in order to be effective?
Answer. FDA is currently evaluating if additional authorities and/
or resources will be needed in fiscal year 2017.
______
Questions Submitted by Senator Jeff Merkley
Question. How has FDA worked with NIFA at USDA on outreach and
training for FSMA? Do you expect that small local organizations will be
able to compete for FSMA training dollars, both at USDA and FDA?
Answer. FDA and USDA's National Institute of Food and Agriculture
(NIFA) have joined in a collaborative partnership to administer and
manage the National Food Safety Training, Education, Extension,
Outreach, and Technical Assistance Program using competitive grants,
with the goal of providing training and technical assistance to owners
and operators of small and medium-sized farms, beginning farmers,
socially-disadvantaged farmers, small processors, and/or small fresh
fruit and vegetable merchant wholesalers, as mandated in Section 209 of
FSMA. Community-based organizations (CBOs) are among the eligible
entities to receive grant funding, and the requests for applications
have specified that this program will provide significant opportunities
for funding through subcontracts and for partnerships with eligible
stakeholder groups who work directly with the target audiences.
The joint program will first award competitive grant funds that
enable an awardee to establish a National Coordination Center (NCC) for
Food Safety Training, Education, Extension, Outreach, and Technical
Assistance and then award grants for the establishment of four Regional
Centers (RCs) across the country. The RCs will work with local
communities to ensure that the training teams include representatives
from non-governmental organizations, CBOs, cooperative extension
services, food hubs, local farm cooperatives, and other entities that
can address the specific needs of the communities they serve.
FDA issued a request for grant applications for the establishment
of the NCC on December 31, 2014, which closed on March 16, 2015.\1\ FDA
has awarded the International Food Protection Training Institute a
grant of up to $600,000 over 3 years to establish the NCC.
---------------------------------------------------------------------------
\1\ http://grants.nih.gov/grants/guide/rfa-files/RFA-FD-15-003.html
---------------------------------------------------------------------------
NIFA published a request for grant applications for the
establishment of two of the Regional Centers--one in the Southern
Region and one in the Western Region--on May 18, 2015, which closed on
June 29, 2015.\2\ NIFA has awarded more than $2 million in grants to
establish these RCs. The University of Florida in Gainesville will
establish the Southern Regional Center, with Oregon State University in
Corvallis charged with establishing the Western Regional Center.
---------------------------------------------------------------------------
\2\ http://nifa.usda.gov/sites/default/files/rfa/
FY%2015%20FSMA%20RFA_to%20post.pdf
---------------------------------------------------------------------------
Additionally, on August 27, 2015, FDA published a request for grant
applications for the establishment of the other two Regional Centers,
one in the Northeast Region and one in the North Central Region.\3\
This request is open through November 2, 2015, and eligible applicants
can be found at the link provided.
---------------------------------------------------------------------------
\3\ http://grants.nih.gov/grants/guide/rfa-files/RFA-FD-16-005.html
---------------------------------------------------------------------------
Question. In your statement, you say that FDA plans to fund
additional training programs through cooperative agreements. Please
provide more detailed information.
Answer. FDA-funded cooperative agreements encompass a range of
actions to support implementation of the FSMA rules.
--The agency has entered into a five-year cooperative agreement with
the National Association of State Departments of Agriculture
(NASDA) that brings together a range of state partners to
collaboratively plan implementation of the forthcoming Produce
Safety rule.
--Experts from FDA and NASDA are working together to develop a
set of best practices for implementation of the produce rule. A
coalition of states with strong interest in leading this
implementation effort is actively participating in the
development of these practices.
--NASDA will help facilitate industry training and will also play
a role in the delivery of training to state regulators.
--To accommodate alternate approaches to FSMA readiness, the FDA
plans to fund development of specific training programs through
cooperative agreements. The agency's goal is to work with
groups that understand the special needs of and have direct
access to businesses that face unique circumstances and
challenges in implementing FSMA. These training programs would
include providing an awareness of the underlying reasons for
the new standards and would ensure that training addresses the
unique needs of the target audiences.
Specifically, cooperative agreements are planned to support
curricula development and dissemination among two such communities:
local food producers, including those engaged in direct marketing, and
tribes.
--The agency plans to allocate fiscal year 2016 funds for the
development of training curricula and delivery, in addition to
education and outreach, with a focus on small and mid-size
businesses involved in local food production, including those
that engage in sustainable and organic farming. Eligible
entities will include community-based organizations and other
grassroots organizations that work directly with the intended
audience.
--The FDA anticipates funding a similar cooperative agreement for
the development of training curricula and dissemination in
tribal communities. Tribal governments and community-based and/
or non-governmental organizations will be among those eligible
to receive the funding.
--The FDA will be involved in facilitating communications between
the Alliances and the participants in the new cooperative
agreements to maximize use of materials that are already
developed, when appropriate.
Question. FDA officials have stated that if FDA doesn't get its
full budget request, all of the increase provided will go toward the
two rules just published, and produce safety will have to wait. Why
shelve one very important item completely instead of taking a more pro-
rata approach?
Answer. The fiscal year 2016 President's Budget requested for each
of its six proposed FSMA funding categories is the minimum amount FDA
needs to effectively make progress on the critical implementation tasks
in each category. All of the funding categories are vital to achieving
FSMA's goals of a modern, preventive food safety system that protects
consumers, strengthens public confidence, and reduces cost to industry
from food safety problems. A significant shortfall of funding in these
categories will unavoidably disrupt and delay FDA's plans for
implementation of FSMA.
The urgency of receiving full funding in fiscal year 2016 is that
it is the year that both preventive controls regulations are scheduled
to become effective and, thus, the last year to make investments that
are crucial to orderly, effective, and timely implementation. In FDA's
own estimate of funding need, enactment of the President's request for
a budget authority increase of $109.5 million, for a total of $1.3
billion in Budget Authority, and total Program Level of $1.5 billion
when accounting for all requested resources, would make it possible for
FDA to move forward in 2016 toward successful implementation of FSMA.
If FDA were to receive less than full funding requested in the
President's Budget for FSMA implementation in fiscal year 2016, FDA
would focused on the highest priority activities. FDA's prioritization
of activities aligns with the President's Budget policies related to
FSMA. These priorities were decided with the full knowledge of the
compliance implementation dates for the FSMA regulations identified.
FDA would prioritize its focus on the FDA and state inspection
modernization, training and industry assistance investments needed to
implement preventive controls in all food facilities effectively and
efficiently.
FDA will make the best possible use of any available resources, but
failing to make the proposed investments in any of these priority areas
will force decisions to delay implementation of key elements of the new
food safety system.
Question. Will your revised proposal for irrigation standards for
fresh cured onions remain when the final rule is published?
Answer. As mentioned in the originally proposed produce safety rule
(2013), we proposed to adopt an approach focusing on the likelihood of
contamination of produce posed by the agricultural practices applied to
the crop. We conducted a qualitative assessment of risk (QAR) of
hazards related to produce production and harvesting. The draft QAR
indicated that all produce commodities are potentially subject to
similar microbiological hazard pathways: commodities can potentially
become contaminated from, for example, direct exposure to contaminated
water or soil amendments. Use of poor agricultural practices could lead
to contamination and illness, even where the potential for
contamination is otherwise relatively low. Therefore, we proposed to
adopt a regulatory approach for minimizing the risks associated with
those hazards and, as appropriate, provided flexibility for the use of
alternative measures that would provide the same level of public health
protection as the proposed standard.
We received many initial comments and questions on this approach
and on the topic of agricultural water, some of which were submitted by
the onion industry. We are considering these comments as we continue to
develop our thinking surrounding food safety on the farm. With regard
to your question on the proposal for irrigation standards and onions,
we also heard many concerns regarding the treatment of onions under the
rule during our listening sessions and meetings with growers. The
proposed rule provides a staggered compliance approach which allows an
additional two-year compliance period for farms to comply with certain
agricultural water standards.
We have also evaluated the comments received to the docket for the
Supplemental Notice and are carefully considering them in developing
final requirements. Our goal is to determine an approach to
agricultural water standards that will provide flexibility to allow the
standards to be applicable to diverse irrigation and growing
conditions, while still protecting public health.
Question. For irrigation water testing, the growers in my state
were hopeful that FDA or USDA could look into ways to identify local,
federally-approved, resources that could test irrigation waters
strategically for an entire system, instead of requiring individual
owners to test the waters of every ditch and pipe. Are you considering
ideas such as this?
Answer. As outlined in our Supplemental Notice, we proposed to
allow data sharing among farms if the farms are taking samples from the
same water source and no there is no reasonably identifiable source of
likely microbiological contamination between sampling sites and the
points at which the farms draw their water. In fact, we encourage such
sharing when appropriate. We included a proposed provision
(Sec. 112.45(e)) that would explicitly allow data sharing under certain
circumstances.
Under proposed provision Sec. 112.45(e), we are proposing that a
farm may meet the requirements related to agricultural water testing
using the farm's own test results or data collected by a third party or
parties, provided the water source(s) sampled by the third party or
parties adequately represent the farm's agricultural water source(s)
and all other applicable requirements of part 112 are met. This
provision would provide flexibility for a farm to determine the
appropriate means by which to meet the proposed testing requirements in
proposed Sec. ?1A112.45.
Under the supplemental proposed rule, farms using data collected by
a third party or parties would still need to satisfy all applicable
requirements of the proposed rule related to agricultural water
testing. For example, the proposed rule includes requirements related
to the timing of collection of samples, the number of samples
collected, and specified analytical method to be used for testing, and
recordkeeping.
We are currently evaluating the comments received on the topic and
are carefully considering them in our efforts to determine an approach
to agricultural water standards that will provide flexibility to allow
the standards to be applicable to diverse irrigation and growing
conditions, while still protecting public health.
______
Questions Submitted by Senator Patrick Leahy
First, I want to thank the Department and Deputy Commissioner for
Foods and Veterinary Medicine Michael Taylor for continuing to engage
with the state of Vermont and our farmers and specialty producers. I
hope that the Deputy Commissioner's many visits to the state have
helped you to develop the best program possible for the industry,
farmers, and consumers.
But states and farmers are nervous, and rightfully so. There are
serious price tags attached to these food safety rules, not only for
the Federal Government, but also for the states, and for our farmers of
all sizes who do not have the infrastructure in place to meet these new
rules. I think we need to acknowledge that we cannot implement these
rules without adequate funding. The FDA cannot implement FSMA on its
own without involvement from the states, and we cannot ask our states
to take on this burden on their own. Finally, we cannot expect farmers
to make such monumental changes on their farms without technical and
financial support.
state budget concerns
Question. Vermont is one of 25 states that do not have any
authority or capacity, or framework for that matter, to regulate the
produce industry. With no guarantee that there will be Federal funds to
support them in this work, I hope you can understand the reluctance
these states have to develop a new produce program ahead of that
promise of support and any funding.
What assurances can you give to this Committee and states like
Vermont that the FDA will prioritize this food safety work in your
fiscal year 2017 budget request?
Answer. The continued implementation of FSMA remains a key priority
for FDA and fiscal year 2017 will be an important year for FSMA
implementation. In particular, FDA plans are currently focused on areas
such as implementation of the Produce Safety rule and continuing to
enhance our import safety systems.
FDA is currently working with the Administration to determine the
appropriation level of food safety funding to include in the fiscal
year 2017 President's Budget. We are looking forward to discussing our
future budget needs in more detail when that determination is complete.
Question. What will you be able to do if we continue to face lean
Federal budget years and we are not able to fully fund this work
through the appropriations process?
Answer. In FDA's own estimate of funding need, enactment of the
President's budget authority request for food safety of $1.3 billion,
an increase of $109.5 million above fiscal year 2015 would make it
possible for FDA to move forward in fiscal year 2016 toward successful
implementation of FSMA. At this time, FDA would focus its efforts on
the Preventive Controls rules which were finalized in September. We
must continue our education and outreach efforts to ensure that
industry is prepared to comply with these finalized rules. Beyond
fiscal year 2016, without the additional funding requested in the
President's Budget, FDA would need to reexamine FSMA implementation
efforts.
The success of building a modernized food safety system depends on
FDA and industry working together, as well as working with State and
other regulatory and public health partners, after the final FSMA rules
are issued. Full funding of the President's budget authority request is
essential to maintaining momentum toward timely and comprehensive
implementation of FSMA and avoiding the disruption and loss of
effectiveness that would result if FDA, the states and the industry are
not adequately prepared to get implementation right. Without adequate
funding to support this strategy, FDA will be unable to perform its job
under FSMA, and the American people will not see the full public health
benefits of the law.
FDA is firmly committed to implementing FSMA the right way from the
start. This means investing in the food safety culture change that is
happening within FDA, but it also means being faithful to the
comprehensive, holistic vision of food safety modernization laid out in
FSMA. Congress directed FDA to build a modern food safety system,
addressing food safety challenges across the spectrum of farms,
manufacturers, and transporters of food, both domestic and foreign. The
pieces of this system are closely interconnected and FDA cannot
credibly hold domestic producers to the new standards if we are not
doing the same for importers and their foreign suppliers. Nor can FDA
do the reverse, holding importers and foreign suppliers, but not
domestic producers, to new requirements. FDA believes that if we do not
implement the new FSMA-mandated food safety system in the comprehensive
way Congress envisioned, from the start, we will fail to achieve the
FSMA goals of food safety, strengthened consumer confidence, and a
level playing field for U.S. producers.
Question. Are there ways to ease into the regulatory work the
states will need to do until the FDA can provide them with the
necessary amount of support?
Answer. The states will play a key role in gaining and maintaining
compliance with the produce safety rule in the farming community, if
funding permits. FDA is committed to working with our state partners to
make this a reality. FDA is aware that there may be a variety of ways
that states plan to assist and engage in facilitating and overseeing
industry compliance with the produce regulation. These activities span
from outreach and education to inspections on behalf of FDA or
enforcement of comparable state requirements. FDA is also aware that
the timeframe for states to engage in produce safety regulatory
activities may vary widely. FDA is working with state representatives
to develop implementation plans that provide for different
collaboration models consistent with individual state's level of
engagement in the produce safety regulatory paradigm. FDA is also
exploring different mechanisms to oversee industry compliance in the
event the state chooses to focus its activities solely on outreach and
education or when additional time is needed by the state to establish
an inspection program or to establish and enforce comparable state
requirements.
support for farmers
Question. In Vermont, where we are historically a dairy state,
there are a lot of new diversified produce farms that are working on
older dairy farms. That means they may not have metal processing
equipment, or equipment they can sanitize, and there are exposed beams.
Production agriculture most often takes place side-by-side with value
added processing. For these farms, some of your rules will be a real
challenge to meet as they look to modernize their operations. In a
small state like Vermont, these requirements may cost upwards of
hundreds of millions of dollars, funds these farmers simply don't have.
I am struck that we do not have a ``NRCS-like'' agency at USDA or FDA
to help the farmers to address food safety issues that are highlighted
by these new rules. Running these farms out of business because of
these costs cannot be the answer.
What partnerships can you develop with the U.S. Department of
Agriculture (USDA) to help farmers make these infrastructure
improvements?
Answer. FDA has been working with USDA for several years on all
aspects of our produce safety regulatory program. For those small
farmers that may need to add new food safety practices to their
operations, FDA, in collaboration with USDA and other stakeholders,
plans to offer guidance and other support to help them achieve
compliance. More specifically, USDA staff worked with FDA to develop
and review provisions of the produce safety regulation, and USDA staff
are working with FDA and our state partners to develop post final rule
implementation strategies and best practices that will enable state
organizations to use their resources effectively. As mentioned above,
FDA and USDA-NIFA are also co-funding one national and four regional
coordinating centers for food safety training, which will focus on
providing needed education and technical assistance to small and
medium-sized farmers. FDA and USDA also jointly fund the Produce Safety
Alliance, which is tasked with creating standardized curriculum
covering FSMA requirements and good agricultural practices. The
curriculum will include materials on understanding and performing a
risk assessment for individual farms to consider in determining if
infrastructure improvements may be needed. In addition, USDA
administers a variety of grant, loan and other financial assistance
programs for which farmers may be eligible to apply.
Question. What new programs or authorities are needed to help our
farms to modernize to comply with these new rules?
Answer. FDA is working at many levels to support programs aimed at
assisting very small and small farmers to understand and comply with
the produce safety rule. More specifically, FDA and USDA are funding
educational opportunities to provide food safety training to produce
farmers, such as training developed through the Produce Safety
Alliance, so that they understand the basis of the requirements of the
produce safety regulation and how to comply with the requirements. In
addition, FDA has established a Technical Assistance Network to serve
as a resource to respond consistently to questions from farmers and
other stakeholders about interpretation and implementation of the
produce safety regulation.\1\ FDA is also working closely with our
state partners to develop education and outreach programs that will
provide important educational resources and tools to help farmers
comply with the requirements.
---------------------------------------------------------------------------
\1\ For more information, see http://www.fda.gov/Food/
GuidanceRegulation/FSMA/ucm459719.htm.
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Question. What should we tell a farmer in Vermont who cannot afford
to make these improvements without Federal support?
Answer. It is FDA's intention to target our education efforts to
the smaller businesses that may not be as familiar with our
requirements, as well as some of the larger farms, so that they
understand the regulations and have training and tools to comply with
them.
Based on our outreach efforts and public comments, we proposed in
September 2014 revisions to several key requirements of the original
proposed rule on produce safety to be more flexible and less burdensome
in key areas. For instance, we proposed a tiered and more targeted
approach to water testing and revisions to the microbial standard for
agricultural water used during growing produce (other than sprouts)
that will be more flexible and less burdensome on farmers while still
protective of public health. We removed the nine-month proposed
minimum-time interval between the application of untreated biological
soil amendments and harvesting until the agency collects and reviews
further scientific evidence. We modified the definition of ``farm'' to
help reduce the burden on a farm that packs or holds produce grown on
another farm such that it would be subject to the produce safety rule
and not also the preventive controls rule. The proposed rule also
reduces the burden on small entities in part through the use of certain
exemptions and limitations, and provides all farms flexibility for
alternative practices to be used for certain requirements with adequate
scientific support. In addition, States (including the state of
Vermont, for example) could also submit a request for a variance for
one or more requirements of the proposed rule. Finally, we proposed to
provide farms that meet the definition of small and very small
businesses an additional two and 3 years to comply with most provisions
of the rule.
We recognize that it will take time and a concerted, community-wide
effort for the wide range of farms to come into full compliance with
the new requirements. FDA is committed to working with the produce
community and with partners in the USDA, state and local agencies, and
foreign governments to facilitate compliance through education,
technical assistance and guidance.
At the Federal level, USDA has opportunities designed to assist
farmers with developing and growing their businesses. These
opportunities come in several forms--including education; outreach; and
grant, loan and other financial assistance programs--all of which are
designed to provide farmers with resources to meet their individual
needs. Further, FDA established the Technical Assistance Network that
we intend to link to external Technical Assistance Networks; these
networks will collectively serve as a resource for anyone subject to
the regulations who needs assistance with rule interpretation and
specific technical or scientific questions. We are counting on USDA's
Cooperative Extension personnel, among others, to play a key role in
the external Technical Assistance Networks to help provide assistance
to the industry.
(Additional information to USDA's various grant programs is
available at: http://
www.ams.usda.gov/AMSv1.0/
ams.fetchTemplateData.do?template=TemplateA&
navID=AMSGrants&leftNav=AMSGrants&page=AMSGrants&acct=AMSPW;
http://www.grants.gov/search-
grants.html?agencies%3DUSDA%7CDepartment
%20of%20Agriculture).
Again, FDA's ability to achieve our goal of successfully supporting
farmers in compliance efforts is dependent on adequate funding.
The FDA is working with the USDA to establish one national and four
regional food safety training centers. I am concerned that limiting
delivery of food safety training nationwide to just these 5 centers may
not effectively reach the grass-roots level and the targeted, intended
beneficiaries.
Question. Will the FDA also provide funding for on-the-ground food
safety training to be delivered by university extension programs, non-
governmental organizations, and associations representing farms and
small food processors/wholesalers?
Answer. The Agency recently released a FSMA training strategy \2\,
which outlines training options and delivery formats as well as
introduces the partners in government, industry, and academia who are
working with FDA on the development and delivery of training to the
global community of food suppliers.
---------------------------------------------------------------------------
\2\ http://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm461513.htm
---------------------------------------------------------------------------
Industry training will be an important component of successful
implementation of FSMA. The needs of small- and mid-sized farms and
facilities are at the center of FSMA training development and will be
met through multiple efforts:
--FDA has funded the creation of public-private Alliances (e.g., the
Produce Safety Alliance, Food Safety Preventive Controls
Alliance, and Sprout Safety Alliance) as a resource for
industry and to facilitate widespread understand of the new
requirements to support compliance.
--FDA is partnering with USDA's National Institute of Food and
Agriculture (NIFA) to provide grants for food safety training,
education, extension, outreach, and technical assistance to
owners and operators of farms, small food processors, and small
fruit and vegetable merchant wholesalers. Community-based
organizations (CBOs), non-governmental organizations.
Cooperative extension programs are among the eligible entities
to receive grant funding, and the requests for applications
have specified that this program will provide significant
opportunities for funding through subcontracts and for
partnerships with eligible stakeholder groups who work directly
with the target audiences
--Recognizing the great diversity among members of the food industry,
FDA will be funding cooperative agreements that will develop
training options for local food production systems and tribal
operations.
--The agency is partnering with the National Association of State
Departments of Agriculture (NASDA) to collaboratively plan
implementation of the produce safety rule. NASDA will help
facilitate industry training while also having a role in the
delivery of training to state regulators.
It will take time and adequate resources to make these efforts
work. FDA is committed to making sure that everyone in the food supply
chain knows what training and education resources are available, and
how to gain access to them.
risk assessments for soft-ripening and raw milk cheese
Question. I have heard from many Vermont cheese producers who are
concerned about regulations the FDA may develop that will impact the
production of soft-ripening or raw milk cheese. These concerns were
highlighted in comments submitted to the FDA by Allison Hopper, CEO of
Vermont Butter & Cheese Creamery, who is a producer of soft-ripened
cheese, and a member and past president of the American Cheese Society,
and Catherine Donnelly, PhD, a University of Vermont professor and
expert on the microbiological safety of food who has developed an
extensive knowledge concerning sources of and mitigation strategies for
control of Listeria in cheese making facilities. I will also include
these comments in this hearing record.
I hope these comments will help inform the Quantitative Risk
Assessment the FDA is developing. Specifically, I would like to
highlight a point that I hope the FDA will take to heart. Your risk
assessments on soft-aged cheeses and raw milk cheeses include data
relating to illegal, unlicensed producers. These producers are
operating outside of the law, and will likely do so regardless of any
regulatory changes. However, as Deputy Commissioner Taylor has seen
first-hand, our small artisanal cheese makers in Vermont undertake
extensive quality and safety programs to ensure their cheeses are safe.
I fear that any regulatory change could have severe impacts on these
Vermont cheese makers, even though they currently meet or exceed
current regulations. These risk assessments are no doubt limited by a
lack of information, but they could also be prejudiced by these cases
of illegal or un-licensed producers.
What assurances can you give me, and to Vermont cheesemakers, that
you will work to remove any data pertaining to these illegal or un-
licensed producers from the final risk assessment so they do no create
an unfounded bias against the careful work and processes done by our
legal cheese producers?
Answer. FDA recognizes the broad diversity in cheese manufacturing
operations and approaches and has been working with the American Cheese
Society in particular to learn more about artisanal cheeses and
measures that cheesemakers take to ensure their products are safe. In
conjunction with the July 2015 release of the joint FDA/Health Canada
risk assessment on Listeria monocytogenes in soft-ripened cheeses, we
announced a request for comments that would assist our efforts to
identify and evaluate measures that might minimize the impact of
harmful bacteria in cheeses made from unpasteurized milk. The Agency is
committed to working and sharing an open dialogue with the artisanal
cheesemaking community as we work on these efforts.
The joint FDA/Health Canada risk assessment published in July 2015
was first released as a draft risk assessment in 2012, and public
comments were solicited. The public comments were considered and
incorporated in the final assessment, as appropriate. In conducting the
risk assessment, FDA followed best practices established by national
and international institutions, which include taking steps to reduce
any possible bias that could be introduced by the data used, conducting
a peer-review process, and providing an opportunity for public comment.
Question. I and others have worked hard to support and cultivate
the artisanal cheese industry here in the United States. How are you
working to harmonize our cheese regulations with the European Union so
that we do not create trade barriers or risk American jobs?
Answer. FDA is not currently undertaking efforts to harmonize its
cheese regulations with those of the European Union. As far as FDA
knows, not harmonizing our cheese regulations with those of the
European Union is not having a detrimental impact. That being said, FDA
welcomes feedback on this issue and is committed to working and sharing
an open dialogue with the artisanal cheesemaking community. The Agency
remains dedicated to ensuring a safe and wholesome food supply using
the latest science to protect human health, and promoting dialogue with
industry, consumers and other interested parties.
SUBCOMMITTEE RECESS
Senator Moran. Again, thank you for your testimony. Thank
you for the way that you have answered questions today and have
presented testimony. And please express my gratitude to the
folks at FDA for the outreach that has occurred in the
development of these orders of control.
With that, the subcommittee stands adjourned.
[Whereupon, at 3:26 p.m., Wednesday, September 16, the
subcommittee was recessed, to reconvene subject to the call of
the Chair.]
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION AND
RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2016
----------
WEDNESDAY, OCTOBER 21, 2015
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 10:01 a.m., in room SD-192, Dirksen
Senate Office Building, Hon. Jerry Moran (chairman) presiding.
Present: Senators Moran, Blunt, Cochran, Daines, Merkley,
Tester, and Udall.
A Review of Rural Development in 21st Century America
STATEMENT OF HON. LISA MENSAH, UNDER SECRETARY FOR
RURAL DEVELOPMENT
ACCOMPANIED BY:
TONY HERNANDEZ, ADMINISTRATOR, RURAL HOUSING SERVICE
BRANDON MCBRIDE, ADMINISTRATOR, RURAL UTILITIES SERVICE
SAMUEL RIKKERS, ACTING ADMINISTRATOR, RURAL BUSINESS-
COOPERATIVE SERVICE
OPENING STATEMENT OF SENATOR JERRY MORAN
Senator Moran. The subcommittee hearing will come to order.
Good morning to those in front of us and to my colleague here
at the dais.
Today, our hearing is one in a series in which we are
focusing on the appropriations process and how it affects
agencies under our jurisdiction. This one is attentive to Rural
Development (RD) at the U.S. Department of Agriculture (USDA),
and we are interested in the strategic investments that are
being made and can be made on behalf of rural America and the
people who live there.
Thank you, Under Secretary Mensah, for being here, and your
three administrators. It is a pleasure to have you here, and we
look forward to having a conversation with you about the nature
of things that you are undertaking for the benefit of our
country, but particularly the rural part of our country.
I particularly, again, would tell you in this public forum
thank you very much for your visit to Kansas, and I am glad to
hear you say that we treated you well. I would say that you are
just being kind and polite, but I know that we did. I know my
State.
Agriculture has been a bright spot and continues to be in
our Nation's economy, 16 million jobs nationwide. I would say,
Madam Secretary, that one of the primary interests in my
running for public office was a belief in rural America and
desire to see that it prospers so that we have a chance to have
our children and grandchildren raise their families in the
places that we in rural America call home. It is something that
we cherish, and it is something that we want to make certain is
preserved and future generations have that option in their
lives.
Rural Development is largely tasked with maintaining and
improving that quality of life, and it can be providing loans
for low-income families to own their first home, spurring
economic development with grants to a small business, providing
communities with financing to allow customers affordable
utility rates.
Rural Development continues to serve a significant role,
and we want to make certain that you have the necessary tools.
I always indicate that a constituency of mine is taxpayers. We
want to make certain that the money the taxpayers provide you
is well-spent, and we are anxious to hear about that today.
PREPARED STATEMENT
Often, where I come from, economic development can be
whether or not there is a grocery store in town. Many people in
Washington, DC, do not have that experience, do not know how
that could ever be an issue. But in many ways, they are some
things that are very basic.
Many rural communities today are facing unique and ever-
increasing issues related to urbanization and technology.
Again, we want to hear what you have to say and work with you
to see that good things happen.
Prepared Statement of Senator Jerry Moran
This hearing will come to order. Good morning. Today's hearing will
focus on Rural Development at the Department of Agriculture and its
strategic investments in rural America. Thank you Under Secretary
Mensah, Administrator Hernandez, Administrator Rikkers, and
Administrator McBride for being here today. Under Secretary Mensah, I
enjoyed visiting with you recently in Kansas and hope you will return
soon and often.
Agriculture remains one of the bright spots in our nation's
economy, supporting more than 16 million jobs nationwide and forming
the backbone of our rural communities. For those of us who grew up in
rural areas, it is a lifestyle we cherish and hope to preserve for our
children and future generations to come. Rural Development is largely
tasked with maintaining and improving that quality of life. Whether
it's providing loans for low-income families to own their first home,
spurring economic development with grants to small businesses, or
providing communities with financing to allow customers affordable
utility rates,
Rural Development continues to serve a significant role in the
nexus between need and opportunity.
In my home state of Kansas, we determine economic development by
whether or not your town has a grocery store. Many issues facing rural
communities are unique to those areas in an ever-increasing urbanized
and technologically-advanced world. I look forward to discussing the
Rural Development mission and other relevant topics with our witnesses
today. We have a lot to cover this morning, so I will turn it over to
Senator Merkley for any remarks he may wish to give.
Senator Moran. We have a lot to cover, and I will turn to
my ranking member, Senator Merkley.
STATEMENT OF SENATOR JEFF MERKLEY
Senator Merkley. Thank you very much, Mr. Chair. Thank you
for putting together this hearing. It is a pleasure to have all
of our witnesses here today.
USDA Rural Development provides a remarkable set of
opportunities to improve the quality of life in rural America.
Very low and low-income families can receive the assistance
they need to become first-time homeowners. Affordable
multifamily housing and rental assistance is provided,
particularly for very low-income and elderly and disabled rural
residents.
Remote rural communities can receive the help needed to
construct hospitals, schools, child and elderly daycare
facilities, and obtain health and safety vehicles and equipment
and other essential community facilities.
Other Rural Development programs include support for clean
water and sanitary waste disposal projects and the expansion of
high-speed rural broadband, which is critical for our rural
communities.
Rural Development is sustaining America's longstanding
commitment to ensure adequate and affordable electric service.
In addition, Rural Development supports opportunities for the
creation and expansion of rural businesses, increasing job
growth and income generation.
Here in the Senate, we see these functions of USDA Rural
Development as vital. There is strong support on this
subcommittee for the work that you do. Of course, not
everything always goes perfectly, and this hearing is an
occasion for us to make inquiries but also to have you let us
know of the difficulties that you are facing and the ways that
program delivery could be improved to serve rural America.
We are also pleased that we will be having a second panel,
which will provide perspectives on these issues from users,
advocates, and interest groups. I want to particularly thank
Mr. Tony Chrisman, who came here from Oregon to offer insights
from his extensive experience developing and rehabilitating
affordable housing for low-income families in Oregon.
So, again, Mr. Chairman, thank you for holding this
hearing. I look forward to the testimony.
Senator Moran. Senator Merkley, thank you very much.
Under Secretary Mensah, we are delighted to have you with
us, and we look forward to your testimony now.
SUMMARY STATEMENT OF HON. LISA MENSAH
Ms. Mensah. Thank you so much, Chairman Moran, Ranking
Member Merkley, and members of the subcommittee. Thank you for
the opportunity to discuss the program successes and challenges
of the Department of Agriculture's Rural Development mission
area.
I am accompanied this morning by Mr. Brandon McBride, Mr.
Sam Rikkers, and Mr. Tony Hernandez. They are the
administrators for Rural Development's Utilities, Business, and
Housing programs, respectively.
USDA Rural Development has a loan portfolio of more than
$210 billion. Thanks to your support, in fiscal year 2015, our
staff provided funding of more than $27.7 billion in rural
areas throughout the United States and its territories.
Rural Development is the catalyst for rural renewal. The
projects we support create jobs, attract private investment,
stimulate entrepreneurship, offer new economic opportunities,
and connect rural areas to the world. They ensure that our
rural main streets and our rural small businesses matter.
Let me give you a few examples of what Rural Development
funding does in a few States.
On my first trip to Kansas, you, Mr. Chairman, and I had
the chance to meet USDA Rural Development business development
grant recipients like Kansas Main Street. Our grants support
locally grown business development in the downtown area of
communities, which are so important to rural economies. In
Kansas, I was also impressed to hear about the Kansas Fiber
Network, a network of rural telephone companies, all rural
utilities borrowers, that provide advanced broadband services
essential to business growth and stronger rural economies.
This telephone company's network is dedicated to community
outreach and business development, but it may not have been
possible but for the low-interest loans we provide to rural
telecommunications service providers. These affordable loan
terms make financing possible for much-needed community
investments.
In Montana, we have a very close partnership with private
sector entities like community economic development
organizations. In my visit to Big Sandy, Montana, which happens
to be the hometown of Senator Tester, I had the chance to visit
Big Sandy Activities, a center we financed there that helps
developmentally disabled people build skills and allows them to
live and work in the community. I also saw firsthand how our
business and industry guaranteed loan program was used to
purchase and restore the Grand Union Hotel, strengthening the
tax base and bringing jobs to Fort Benton, Montana.
Rural Development support has enormous impact in small,
rural towns. In my home State of Oregon, Imperial Stock Ranch
in Wasco County is a family-owned and -operated business that
supplied wool for Ralph Lauren designed sweaters. Supported by
value-added producer grants, the Carver family has used these
funds since 2008 to plan and for capital assistance.
When I asked Jeanne Carver what this program is doing, she
explained that it is bringing life back to the textile industry
and creating jobs in rural communities.
Our fundamental mission is to support thriving and self-
sustaining and prosperous rural communities. The President's
2016 budget, which requests $38.9 billion for Rural
Development, proposes to continue this good work.
Every day, nearly 5,000 Rural Development professionals
work to help rural businesses provide affordable rental housing
and maintain and upgrade infrastructure investments. This work
is important to the modernization of rural America and makes
rural communities places where young people will want to stay,
start families, build businesses, and create futures.
Let me say just a little bit more about our three areas. I
want to begin with housing. This is a special point of pride,
our housing programs.
Our 2016 rural housing budget of $28.6 billion will
continue to help people in rural America, particularly those in
greatest need, put a roof over their head. The bulk of this
budget, $24 billion, supports private sector lenders in rural
America and turns moderate-income rural Americans into
homeowners.
Let me say another bit about Rural Utilities Service. Here
for over 80 years, USDA has funded basic infrastructure
services, which make a significant difference in the quality of
life in rural America. These investments keep electricity
reliable and affordable, deliver faster Internet service to
rural families, and provide clean and safe water for rural
communities.
Overcoming geographic and demographic challenges to offer
access to robust broadband service is among the reasons that
just 50 percent of those living in rural communities have high-
speed Internet service. In our fiscal year 2016 budget, the new
farm bill Broadband Program proposes $44 million to fund
broadband infrastructure, and the 2016 budget for the Electric
Program requests $6 billion to continue to provide reliable
electric service to rural consumers while making improvements
to increase efficiencies.
Let me say another word about our business and cooperative
programs. These continue to bring investments and jobs to rural
areas. The 2016 budget of just over $1 billion will help
continue rural renewal, benefiting not just our rural
communities, but growing a stronger economy for the entire
country through investment in rural businesses, energy, and
entrepreneurial support.
Our 2016 budget requests $75.7 million to provide loans and
$5 million in grants to rural small businesses, farmers, and
ranchers to purchase renewable energy systems under our Rural
Energy for America Program. Expanding investment in renewable
energy projects improves the environment and helps create jobs.
This 2016 budget also offers funding to spur development
with opportunities through the Value-Added Producer Grant
Program, the Business and Industry loan program, and the Rural
Business Development Grant Program.
Undergirding all these three programs is the investment we
make in our people and our systems. The President's 2016 budget
requests $686 million for the salaries and expenses of USDA
Rural Development. This is particularly important since Rural
Development's loan portfolio has grown to over $210 billion. It
continues to grow each month, while staffing levels to manage
this growth have not recovered from the declines of the past
year.
Congress has provided significant resources to make a real
impact in rural places. There is something extraordinary about
rural America's ability to survive and thrive. Investments in
rural America are investments in our country's future. With
your continued support, we can leverage our resources to turn
Rural Development's transactional work into transformational
work.
I appreciate this opportunity to testify, and at this time,
I am happy to answer your questions.
[The statement follows:]
Prepared Statement of Hon. Lisa Mensah
Chairman Moran, Ranking Member Merkley and members of the
committee, thank you for the opportunity to discuss the programs,
successes and challenges of the Department of Agriculture's Rural
Development mission area. I am accompanied this morning by Mr. Brandon
McBride, Mr. Sam Rikkers, and Mr. Tony Hernandez, Administrators for
the Rural Utilities Service (RUS), Rural Business-Cooperative Service
(RBS) and the Rural Housing Service, respectively.
I am pleased to represent agency mission area with the primary
responsibility of creating opportunities and improving the quality of
life in rural areas. The investments we make in rural America
contribute to rural growth, which is essential to national economic
growth. Approximately 15 percent of the population of the United States
is considered rural, while nearly 72 percent of our land mass is rural.
Rural Development works on a daily basis to support the needs of that
15 percent--the 46 million American citizens that provide the food,
fiber and fuel that the rest of the nation--and the world--depend upon.
USDA Rural Development has a loan portfolio of more than $210
billion. In fiscal year 2015 our staff made loans, loan guarantees and
grants of more than $27.7 billion in rural areas throughout the United
States and its territories. Because Congress has supported our field
based delivery structure, Rural Development has staff in every state to
make the loans and grants that help our rural communities become
stronger and more vibrant.
Rural Development assistance includes direct and guaranteed loans,
grants, and technical assistance. Rural Development's work is designed
to maximize taxpayer dollars. Often our support is leveraged with
private sector financing or is provided as a guarantee to private
banks. Recipients contribute their own resources or obtain third-party
financing, expanding the level of support we provide to rural
communities. During this past year, the total Rural Development
leverage--our use of non-Federal funds--was $7.67 billion, or 118
percent of our $6.5 billion goal.
Rural Development is the catalyst for rural renewal: the projects
we support create jobs, attract private investment and stimulate
entrepreneurship. Our investments build communities, offer new economic
opportunities, and connect rural areas to the world. They ensure that
our rural Main Streets matter and our rural small businesses matter.
On my first trip to Kansas, I had the opportunity to visit Emporia,
and along with Senator Jerry Moran, recognize USDA Rural Business
Development Grant recipients. These grants will help recipients like
Kansas Main Street Inc. with small business development in the downtown
area of communities. The work of Rural Development supports a shared
American conviction that locally-grown businesses are important to
rural economies and enhance the quality-of-life for rural residents.
In Kansas I was also impressed to hear about the Kansas Fiber
Network, a network of rural telephone companies--all borrowers from our
Rural Utilities Service Telecommunications program--which provides
advanced broadband and telecommunications services--essential to
business growth and stronger rural economies. This telephone company's
network, which is dedicated to community outreach and business
development, might not have been possible but for the types of low-
interest loans USDA provides to rural telecommunications service
providers. Rural Development's affordable loan terms make financing
possible for much-needed community investments.
Every day, 4,600 Rural Development professionals work to help rural
business, provide affordable rural housing, and maintain and upgrade
infrastructure investments. This work is so important to the
modernization of rural America; it connects citizens to broadband; it
builds a cleaner future through renewable power and energy efficiency;
it reduces child poverty by investing in businesses; it helps manage
the growing healthcare needs of an aging population; and makes rural
communities places where young people will want to stay, start
families, build businesses and create futures.
When I was in North Dakota, Sen. Hoeven and I discussed how
critical affordable, reliable infrastructure is to rural America.
Economic development investments in infrastructure, business and
housing are an important part of building strong, sustainable
communities. Oftenthese investments are simply not affordable. Loans
and loan guarantees from Rural Development make these projects--which
are so vital to rural growth--affordable to these communities.
Recovery Act funding delivered an unprecedented investment in rural
areas. Broadband and water and waste infrastructure will continue to
improve the quality of life in rural areas for generations to come. Our
successful Recovery Act broadband projects mean that Reservation
Telephone Cooperative in North Dakota can improve efficiency and
security of oil production and pumping through electronic monitoring.
Baca Valley Telephone Company in New Mexico can now provide broadband
across its 2,600 square mile service territory, serving some of the
most remote farms and ranches in the U.S.
As a result of $3 billion water and wastewater Recovery Act
investments, 820 projects are providing cleaner, safer water to
2,883,673 rural residents. This funding provided awardees like Grady
County Rural Water in Oklahoma, a new source of water to serve their
community. Previously, the water used to serve the district was sourced
through Ft. Cobb Lake and often suffered from high iron and manganese
content. In addition, several of the district's customers did not have
access to a public source of water, hauling water to their homes or
businesses or relying on private wells. As a result of Recovery Act
funding and RUS' water and wastewater programs, Grady County now has a
new water supply to provide clean, affordable water to their customers.
Access to safe, clean drinking water is essential at any time, but
especially during drought. Rural Development (RD) is actively working
to assist eligible communities facing severe drought conditions. In the
past 2 years, RUS has awarded 48 Emergency Community Water Assistance
Grants (ECWAG) totaling $18.6 million in California to assist rural
communities suffering drought impacts. In fiscal year 14, RUS awarded
25 ECWAG grants totaling $9,730,570 million to rural California
communities. The Agency also provided assistance to the City of San
Joaquin to upgrade their systems in response to the drought. In fiscal
year 15, RUS awarded 23 ECWAG grants totaling $8,870,944 for projects
in the state. In addition the Agency awarded four Household Water Well
Grants totaling $730,461 to three California non-profits to provide low
interest loans to rural residents for individual water wells,
particularly in drought- impacted areas.
Rural Development also finances large, long-term loans to develop
communities and grow businesses. We invest in smaller, specific
projects targeted at the smallest producers. Weprovide financial
support for underlying utility, housing and community facility needs of
rural communities. These investments are the building blocks for
economic development that is so critical to the future of rural areas.
Our Rural Business and Cooperatives Service (RBS), in partnership
with other public and private sector stakeholders, promotes rural
business and employment opportunities and supports key energy
investments that grow rural Americans' ability to compete in the global
economy.
One of the foundations of our work here in Rural Development is the
close partnership we've developed with private sector entities like
community and economic development organizations. Senator Tester and I
visited several Rural Development projects, including Big Sandy
Activities--a center that helps developmentally disabled people build
skills to allow them to live and work in the community. I saw firsthand
how our Business and Industry Guaranteed Loan program was used to
purchase and restore the Grand Union Hotel in Fort Benton. This loan
helped restore the Hotel, built in 1882, strengthening the tax base and
bringing jobs to Fort Benton. Rural Development support has an enormous
impact in this rural town.
The same B&I program provided DeVilbiss Healthcare, LLC with a loan
to purchase equipment and machinery and to transfer manufacturing
operations from China back to the United States. DeVilbiss manufactures
and distributes respiratory medical devices and products such as
nebulizers, oxygen concentrators, and continuous positive airway
pressure equipment. The financial assistance preserves 92 jobs and
creates 20 new jobs in rural Pennsylvania. These projects not only help
rural businesses grow, but help reverse recent rural outmigration
trends.
Loans and grants from our Rural Housing Service and Community
Facilities Programs (RHS and CF) support rural residents and the
communities in which they live. Congress has defined for us a powerful
set of housing and community development programs to ensure that rural
families can live in safe, affordable homes and thriving communities.
Rural housing programs anchor communities and play a key role in
creating and sustaining wealth through home ownership. When a mobile
home park in Shelburne, Vermont went up for sale, community leaders
came together to ensure affordable housing would still exist downtown.
Thanks to a $1 million RHS loan, the Shelburne Vermont community now
has the Wright House --one of five apartment buildings in Harrington
Village, an affordable housing community that is home to over 36 senior
citizens and persons with disabilities.
Our tribal investments support a wide range of needs in Native
American areas. At the beginning of October, I was in North Dakota on
the Spirit Lake Reservation to announce Rural Business Development
Grants to create a business incubator in a renovated mall that would
provide jobs and entrepreneurial opportunities. Rural Alaskan Village
Grants are building water and waste systems, making communities safer
and increasing the quality of life in remote Alaskan communities. High
Energy Cost Grants deliver cleaner and more cost effective energy
sources across the country. Projects announced in September will
benefit a number of Alaskan Natives and Native American areas, such as
the project to install wind turbines in the St. Francis community of
the Rosebud Sioux in South Dakota.
These are just a few of the many projects in which Rural
Development is proud to invest. Our fundamental mission is to support
thriving, self-sustaining and prosperous rural communities. Without RD
funding, many rural communities could not make the investments to help
them grow and prosper in the years ahead. Without these programs, rural
communities would lack access to basic housing, safe water, broadband,
and support for rural small business. Yet we know we have more to do.
We are committed to working with partners to best serve rural
areas. We understand that solid public-private partnerships and well-
placed intentional investments can--quite literally--mean life or death
for some communities.Because of the funding you provide to us--$38.3
billion in 2015--people who live in rural places today see historic
opportunities in sectors such as local and regional food systems,
emerging markets, the bio-economy, and manufacturing.
The President's 2016 budget, which requests $38.9 billion for Rural
Development--proposes to continue that work by giving priority to
investment in rural businesses that want to take advantage of emerging
markets as well as focus resources in areas of greatest need. Rural
Business- Cooperative Service--A Force for Rural Jobs and
Revitalization.
USDA's Rural Business-Cooperative Service (RBS) continues to bring
investments and jobs to rural areas. The 2016 budget requests over $1
billion to help continue this rural renewal--benefitting not just our
rural communities, but growing a stronger economy for the entire
country through investment in rural business, energy, and
entrepreneurial support.
The 2016 budget requests $75.7 million to provide loans and $5
million in grants to rural small businesses, farmers and ranchers to
purchase renewable energy systems and increase energy efficiency
through the Rural Energy for America program. Expanding investment in
renewable energy projects improves the environment and helps create
jobs, ultimately offering opportunities to enhance prosperity in rural
areas.
Today, we are using lessons learned from our lengthy experience in
rural America to help communities capitalize on emerging opportunities
in the 21st Century economy. Consider our work in the rapidly expanding
area of local and regional food systems. USDA's ``Know Your Farmer,
Know Your Food'' initiative provides tools and resources to farm and
food businesses, including those run by women, people of color, and
veterans as they tap into the growing market for local food. Rural
Development is helping connect these rural businesses to new market
opportunities with business planning assistance, infrastructure
development and our boots on the ground to leverage resources and get
the deals done for these businesses. In the last 3 years alone, we have
supported over 600 local food businesses as they diversify and reach
new markets.
For example, a Poplarville, Mississippi resident and veteran of the
wars in Iraq and Afghanistan, launched a hydroponic agriculture
operation. Funded in part by RBS, an ``Armed to Farm'' workshop helped
this new farmer better manage the business side of his operation. After
shadowing other agribusinesses, he says he now feels more confident
about the future of his company, SmithPonics.
This 2016 budget offers funding to spur development of products and
opportunities for rural business innovation with the Value Added
Producer Grant Program, the Business and Industry loan program and the
Rural Business Development Grant Program.
Throughout my travels to rural communities, it was clear that
addressing the challenge of outmigration and giving our rural children
opportunities to stay and use their skills to earn a living in their
communities was extremely important to local community leaders, family
members and businesses. I know this can be done. Imperial Stock Ranch
in Wasco County, Oregon is a family-owned and operated business that
supplied wool for Ralph Lauren-designed sweaters worn by United States
athletes at the Sochi Winter Olympics. They also launched a ``ranch-to-
runway'' line of clothing with award-winning fashion designer Anna
Cohen. They did all of this nearly three thousand miles removed from
the frenetic pace of New York City's fashion district. The Carvers have
benefitted from USDA's Value-Added Producer Grant (VAPG) program since
2008, using funds for planning and capital assistance. Our VAPG
program--one of nearly 50 programs and services administered by Rural
Development--is breathing life back into the textile industry and
creating jobs here in the United States.
rural housing services--anchoring communities with homes and essential
facilities
A special point of pride for Rural Development is our housing
programs. Since 2009, Rural Development has helped more than 900,000
rural families buy, repair or refinance a home and provided funding for
3,000 multi-family housing developments. Access to safe, modest,
affordable housing is vitally important to the health and growth of
rural areas. Helping to make the American Dream a reality is a
tremendous responsibility. I am delighted that through our housing
programs are often stepping stones on the journey to homeownership
which will help build wealth and security for rural families. We offer
one of the best home mortgages in the United States and boast a low
default rate.
The 2016 Rural Housing budget of $28.6 billion will continue to
help people in rural America, particularly those in greatest need, put
a roof over their heads. The bulk of this budget--$24 billion--supports
private sector lenders in rural America by guaranteeing the mortgages
they make to help moderate income rural Americans become homeowners.
Another vital part of our housing program provides rental assistance to
low-income people who live in USDA-financed multi-family housing. In
fiscal year 2016, Rental Assistance of nearly $1.2 billion will help
create a sustainable program to offer rural residents--most of whom are
seniors with fixed incomes--the security and peace of mind of a safe
and affordable place to live. We have worked hard to address challenges
of providing sustainable rental assistance to those who rely on this
program, and I am optimistic that continued efforts and investment will
lead to a stronger program to better serve rural residents.
In this, the 50th year of Rural Development's Mutual Self-Help
Housing Program, we also completed 50,000 homes through partnerships
and sweat equity. In fact, several Members of Congress and
congressional staff participated in self-help builds this year to help
us mark this important milestone.
Rural Development is committed to continually testing new ways to
address housing needs in rural America. The USDA Energy Efficiency
Manufactured Home Pilot Program was introduced this summer in New
Hampshire and Vermont. A low-income home buyer interested in purchasing
a high-performance modular home and placing it in a mobile home park
would be eligible for a 30-year mortgage at a 3.25 percent interest
rate. Very low-income home buyers may be eligible for an interest
subsidy down to 1 percent. The mortgage is the first of its kind for
residents of mobile home parks, where home buyers face high interest
rates, short loan terms and high energy costs.
The Rural Housing Service (RHS) continues to make tremendous gains
to its systems and processes--and recently took on a decade of needed
upgrades. As of this spring, our guaranteed Single Family Housing loan
program is now paperless. Not only are we saving 37,500 reams of paper
every year, we've lowered postage costs, saved printer ink, and are
moving loan guarantees out the door much more quickly and making our
programs easier for our customers to use.
We are also in the process of modernizing the delivery of the
Single Family Housing direct loan program through automation. Beginning
fiscal year 2016, RHS will implement an automated underwriting system
nationwide, permit third parties to submit applications electronically,
and move from paper-based to electronic customer files. These
improvements will provide underwriting consistency nationwide,
additional security features, and the ability to seamlessly transfer
work when states experience increases in applications.
The men and women of USDA take seriously the responsibility of
supporting those who live and work in small towns and rural
communities. They have worked hard to reduce backlogs, increase
efficiencies and reduce program costs. These successes include the
Single Family Housing Guaranteed Loan Program, which significantly
decreased the amount of time staff spends processing a guaranteed loan
request and save millions of dollars in cumulative operational and
administrative cost each year. These time and cost-saving processes
make it possible for government programs to continue manage a growing
portfolio and meet mission goals with smaller operating budgets and
reduced workforce.
From fiscal year 2012 to fiscal year 2014, Rural Development
invested in 335 Public Private Partnership community infrastructure
projects across rural America in 49 states. RHS leveraged over $3.5
billion in community facilities direct loan funds from 2012 to 2014,
with $1.2 billion from institutional investors and the capital credit
markets to strengthen investment in critical infrastructure projects,
spurring economic growth and job creation, and increasing access to
healthcare, education and other critical services. The 2016 budget
request of $2.3 billion for the Community Facilities (CF) program would
enable 13.7 million residents to benefit from improved health, safety
and educational facilities. Services such as those provided by
Pikeville Medical Center in Kentucky, which offers healthcare to
patients from persistently poor areas, can grow. Pikeville Medical
Center used the CF program to construct a new medical office building
containing research facilities, outpatient surgery suites, endoscopy
facilities, physical exam space, labs and lecture halls.
Building on this success, and working with others to understanding
the needs of the region, Rural Development partnered with the
University of Pikeville, the Appalachian Regional Commission, and the
U.S. Economic Development Administration by providing a $40 million
Community Facilities loan for the construction of a health professions
education building to provide instruction and demonstration for the new
College of Optometry, School of Nursing, and other student support
services. This funding enabled USDA to establish a Public-Private
partnership for the new facility.This partnership resulted in a
facility that added 75 jobs to the local economy and created a
distributed community-based clinic model that added an additional 25 to
30 jobs in local clinics. In addition, the facility brought new
services to the region, as previously there was no College of Optometry
serving that state or many of its neighbors.
In communities like Pikeville, public private partnerships have
bought together critical resources, innovative capacity, financial
expertise, project development skills and technical assistance, to
large complex community infrastructure projects at a time when RHS
staff resources have been reduced. They have strengthened underwriting
with another set of eyes, reducing RHS credit risk and providing a
long-term partnership for servicing loans and communication with the
borrower. Most importantly, these partnerships allow USDA to assist
more rural communities, invest in vital community facilities, and help
more rural residents.
In other rural areas, we are supporting organizations that are
addressing more basic needs and on the front lines of the fight to
alleviate poverty. Second Harvest of South Georgia is a non-profit that
feeds hungry people in 30 Georgia counties and is the largest in
Georgia outside of the Atlanta metro area. USDA provided funding
through a $5.2 million Community Facilities loan to build a
distribution facility in Thomasville that produce up to 10,000 meals a
day for South Georgia residents in need.
the rural utilities service--investing in infrastructure for a modern
rural america
For over 80 years USDA has funded basic infrastructure services,
which make a significant difference in the quality of life in rural
America. Rural Utilities Service (RUS) investments keep electricity
reliable and affordable and deliver faster Internet service to rural
families and to businesses, allowing them to compete in the global
economy. Our water and wastewater programs provide clean, safe water to
help healthy rural communities grow and prosper.
We are proud of the work of RUS to deliver much needed broadband
infrastructure in the past 5 years. Because of the Recovery Act
Broadband Improvement Program, RUS was able to successfully invest
nearly $3 billion in 254 projects in 45 states and territories to
deliver high speed Internet to rural areas unable to draw competitive
for private service. As companies build out these services 260,000
rural households, 17,500 businesses and 1,900 schools, libraries and
healthcare facilities have new service with potential for exponential
growth in the future. Loans under this program have been extremely
successful.
We know we still have work to do. Overcoming geographic and
demographic challenges to offer access to robust broadband service is
difficult and among the reasons that just 50 percent of those living in
rural communities have high speed Internet service. The fiscal year
2016 budget request for the Farm Bill broadband program seeks $44
million to fund broadband infrastructure in rural areas. RUS received
15 requests for $118 million in funding for a $55 million program,
demonstrating the need to bring high-speed Internet to rural areas.
The White House in September released a report on ways to continue
to bring broadband to unserved areas. We are beginning work on those
important next steps of getting robust broadband service available to
all who live in rural areas, not just the 50 percent who currently
benefit from access to high-speed Internet.
We believe that all RUS programs that fund broadband will be an
important resource in this effort, which is why the 2016 budget is
requesting $65 million, an increase of $30.2 million over fiscal year
2015, for broadband access in rural communities that are least likely
to have broadband infrastructure needed for economic development.
The 2016 budget request for the RUS electric programs is requesting
$6 billion to continue to provide reliable electric service to rural
consumers.
investing in the people and core services that make rural development
investments possible
All of the good work of Rural Development is only possible because
of the people who do this work. After years of retrenchment we are
carefully rebuilding or staff and making sure they have the right tools
to be strong partners in rural America. The President's 2016 budget
requests $686 million for the salaries and expenses of USDA Rural
Development to support the delivery of the direct and guaranteed loans
and grants, technical assistance and economic development strategies
outlined above. In addition, this investment in our people will help us
continue to provide quality service not just in our national office,
but in the field, where staff know rural communities because they are
part of those communities. New employee hires will fill mission-
critical skill shortages resulting from a two-year hiring freeze. This
is particularly important since Rural Development's loan portfolio has
grown to more than $210 billion, while staffing levels to manage this
growth have not recovered from declines of the past few years. This
level of funding also includes information technology investments to
the Comprehensive Loan Program, which safeguards the portfolio from
cyber threats and improves management capabilities.
Over the course of the last several years, we have chosen to be
proactive in identifying and assisting areas of greatest need in rural
America, rather than waiting for those places to find us. StrikeForce,
Promise Zones, Stronger Economies Together and other initiatives are
just a few of the many reasons that I am so fiercely proud of the 4,600
Rural Development professionals nationwide. Our Agency and its partners
are willing to help us move assistance to the places that need it most.
Congress has provided significant resources to make a real impact
in rural places. Yet the opportunities and the challenges of rural
America make it clear to all of us that more needs to be done. I am
deeply moved by seeing taxpayer dollars at work in rural communities.
There is something extraordinary about rural America's ability to
survive and thrive. It is a place where values count and where
stewardship is a meaningful obligation. Working to address rural
challenges is an amazing privilege.
In the time that I've been with USDA, I've witnessed rural
resiliency on a very personal level. I watched the town of Floresville,
Texas turn out in force to launch their improved water treatment
system. I visited the Peoples Rural Telephone Cooperative in Jackson
County, Kentucky which built a state-of-the-art, fiber-to-the-premise
network that offers isolated rural residents the same economic,
educational and social opportunities available to residents in urban
areas. I toured a condiment manufacturer in Brundidge, Alabama that is
expanding its business and market share with support from Rural
Development. Each of these investments made in rural communities is an
investment in our country's future.
I appreciate your continued interest and support of Rural
Development programs. When countries cannot make rural infrastructure
work, it impedes not only their rural places and people; it holds back
the growth of the entire Nation. USDA Rural Development and our
partners address the unique needs of communities often lacking large
populations or other support mechanisms. Together, we can coordinate
and leverage our resources to turn Rural Development's transactional
work into transformational work.
I appreciate the opportunity to testify before the Senate
Agriculture Appropriations Committee. At this time, I am happy to
answer your questions.
Senator Moran. Under Secretary, thank you very much.
We will turn to the gentleman from Montana and recognize
him.
RURAL DEVELPMENT VISIBILITY
Senator Tester. Thank you, Mr. Chairman. Thank you for
having this hearing, and thank you for your generosity in
giving me a first crack at this, because I have another
meeting.
Thank you all for being here. I appreciate it very, very
much.
I am going to go a couple different directions here. I am
also a product of rural America. You saw my hometown, Lisa, and
it was good to have you there. You guys do a lot of good work.
You talked about the Rural Utilities Service (RUS). Quite
frankly, I do not think we would have power to this day if it
was not for RUS. The same thing could be said for telephone,
and we will get to broadband in a minute.
But the question is now. I mean, that was in the days of my
grandfather and father and mother and grandmother. So they knew
it. They knew they would not have power unless we had the
cooperative movement and government support. We would not have
been able to cut the ribbon on that water processing plant in
Big Sandy without Federal Government support.
Yet, when I go talk to my neighbors, I am not sure that
they think the Federal Government had anything to do with any
of these projects. What can be done about that? Quite frankly,
we have to do something with the budget. We have to do things
that are smart to move forward. I think pulling investment from
rural America would be a mistake, but there are some who want
to do that, and some of them are my neighbors who get full
advantage of these programs.
So the question is, what can we do to educate people about
these projects that would not be done, whether it is a water
project in Big Sandy, whether it is Big Sandy activities, the
second biggest employer in the town--by the way, the first
biggest employer is the public schools, both government
agencies, both government entities, in a sense--or whether it
is revamping the private sector like the Grand Union Hotel that
you talked about, which is a jewel and brings in a lot of
business to that area. What can we do to inform people? What
can you do to inform people?
Ms. Mensah. Senator, I appreciate your passion about our
almost invisibility in some ways, and I think there are a
couple things we can do.
In part, we need our private partners to also explain our
role in supporting them. So this is a partnership. When we come
in and we do a renovation, we do it in partnership with our
private partners. So we need some help from the people whose
loans we guarantee to also say this message.
Senator Tester. Okay.
Ms. Mensah. And the other thing is the way we ourselves get
out the word. One of the best things that I think you have done
in this budget is to allow us to be a field-based agency. We
are not invisible. We have staff in all of our 50 States that
are the neighbors of these people. The more we can be the
neighbors, I think we have a special advantage in a way other
Federal agencies do not.
So I would say those two things.
Senator Tester. Thank you. It is maybe not this way all
over the country, but we have probably come off the best 6
years in agriculture we have ever had where I live. We have had
incredibly good crops and high prices. That does not happen
very often. Yet starting at about the mid-1980s, it has
happened progressively along since the homestead days, but
starting about the mid-1980s, we have seen a mass exodus off
the land, an incredible mass exodus.
My farm, for example, we are 1,800 acres. People go, wow,
that is big. No, that is about a third the size of the average
farm in Montana. And, quite frankly, because of that
consolidation both in the marketplace on inputs and the
marketplace on where we sell our products because it is very
limited, we have seen a lot of consolidation on the ground, a
lot fewer farms, a lot less people, a lot bigger farms.
The chairman could probably say it in Kansas. I mean, rural
America is de-populating in a big, big, big way. The rural
population is declining across-the-board.
So when we talk about economic recovery, and we talk about
your programs that are very important, we talk about the farm
bill, we have to look and say, are we really doing economic
development in rural America the best we can do? It could be
argued, and it is argued by some with some merit, that these
programs have all failed because the population is getting
less, it is not getting more.
We are not seeing economic growth in rural America like we
are in urban areas. We are not seeing people staying in rural
America like they once did. As that swirl keeps happening, it
gets worse. It does not get better, until we turn it around.
Now I will tell you that I appreciate the work you do, and
I support your programs. And I think we need to be doing all we
can do to empower you because I think you are the key, more
than any other thing we do in rural America, whether it is in
housing, broadband, whatever it might be, to bring it back.
BROADBAND ACCESS
But in Montana, and I would bet it is the same in eastern
Oregon, and I would bet it is the same in Kansas, our broadband
is not where it needs to be. I was going to say another word,
but I am not. It is not where it needs to be. We have a lot of
folks here being left out of the 21st century economy.
By the way, when you live in rural America, there are not a
lot of customers, so broadband gives you that ability to get to
those customers.
We just had Wheeler out, Chairman of the Federal
Communications Commission (FCC), last week. Great guy, by the
way.
Do you talk to him, Mr. McBride?
Mr. McBride. I have, yes.
Senator Tester. Do you talk about what can be done in rural
America, as far as utilizing your dollars, public-private
partnerships, or however you want to do it, to maximize those
dollars to get broadband to houses and businesses in rural
America?
Mr. McBride. Yes, sir. Thank you for the question.
The President appointed a Broadband Opportunity Council
earlier this year. What that council encouraged us to do more
than anything else was to communicate more amongst agencies,
know what other folks were working on in terms of expanding
broadband access and how we can do that. That has helped us at
RUS in terms of having regular weekly meetings with other
agencies, including the FCC, and talking about what we can do
to support the expansion of broadband access.
Senator Tester. So what does that really mean? I mean, I
got you. You are talking. And by the way, communication is
important, and we need to break down the silos, and we need to
go down that whole line. But what does that really mean as far
as getting projects on the ground to get Montana wired up?
I would bet you a dollar to a doughnut, Chairman Moran can
say the same thing about Kansas, and Heidi Heitkamp can say the
same thing about North Dakota. So this isn't just Montana.
What are we doing? What are we actually doing to be more
effective with the programs that we have, so that we know, when
we fight like hell to get you extra dollars, that that money is
actually getting to the ground and it is not getting ate up in
administration, and it is actually doing what it needs to do to
get these folks connected up?
Mr. McBride. Yes, sir. At the President's direction, what
we have done is we have looked at each of our existing
authorities and each of our programs.
Senator Tester. How do you to determine need?
Mr. McBride. I am sorry?
Senator Tester. How do you determine need?
Mr. McBride. Determine need?
Senator Tester. How do you make that call, whether that
money goes to north-central Montana, whether it goes to a place
that is a little bit more populated, or whether it goes to an
urban area?
Mr. McBride. Well, for our programs at RUS, there are loan
applications. So we try to get the word out, go to conferences
and visit with potential borrowers and the groups that are
interested in expanding broadband. But then we work with them
to see whether a loan application is possible and what would
make sense for their business case.
Senator Tester. I am not making a judgment here--and I am
sorry for going way over time. I will wrap this up.
Do you feel that you are getting that information out so
that your partners on the ground in remote frontier areas know
their options?
Mr. McBride. Yes, sir. We can always do better, but we are
doing the best that we can.
As the Under Secretary mentioned, we have a great field
operation, and they do a lot of work in terms of letting people
know about our programs. So we are doing the best that we can
to spread that message.
But you are correct. Less than 50 percent of rural America
has access to the same high-speed Internet.
Senator Tester. And I will tell you, just in closing, it
breaks my heart to see what is going on in rural America. It
really does. I mean, in my hometown, we have lost both hardware
stores. We have lost two of the three grocery stores.
We have even lost three of the five bars. That's how bad
it's getting. I mean, now we have a crisis situation.
We have to be more effective. I am not going to be here for
the second panel, but I really hope that the folks who are
going to be on these panels address the kind of communication
that you need to make sure we are doing it right from the top
end, and, quite frankly, talk about the need that is out there,
actually, if we met the need of your partners, if it would
actually do any good at keeping people around or if this is
just the trend and it is going to happen and we cannot do a
damn thing about it.
I personally do not believe that. I do not think it is just
on your shoulders, by the way. I think there are a lot of other
things that we need to be doing about developing capitalism and
the marketplace for the inputs and for our sales and all that
kind of stuff, because it is a highly noncompetitive market in
my opinion.
So thank you, Mr. Chairman. I appreciate the courtesy, and
I apologize for taking too much time.
Senator Moran. Thank you for joining us, Senator.
Senator Merkley.
PROGRAM DUPLICATION
Senator Merkley. Thank you very much, Mr. Chairman.
Thank you for your testimony.
Under Rural Development, there are approximately 50
programs. So if you were to identify two or three that need to
be looked at very closely, as perhaps ones that are weakest or
duplicates, what would you point to and say we should take a
close look at this for potential consolidation? Or perhaps
there is a more cost-effective way to achieve the same mission?
Ms. Mensah. That is a hard question, making us choose
between our children.
Senator Merkley. Yes, I know, choosing between your 50
children.
Ms. Mensah. What I can say without--speaking impromptu
here--is that there are 50 programs. Some are in statute that
are very close to each other, so there are many specifics that
tell us to work in particular areas, Alaska villages, colonias.
I think there is a reason why we were asked to look
specifically at those, even though it is broadly in the same
area.
What I really think is that our three core areas, each have
dominant players. There is no question that the Single-Family
Housing Guarantee program dominates in our housing program.
There is no question that the Business and Industry Guaranteed
Loan Program dominates in our business program. There is no
question in our Rural Utilities program, the size and scale of
our electric programs and our new farm bill broadband.
What I have seen is that our administrators know how to get
the most out of these programs. I don't feel that there is
waste and costly duplication. What I feel is that every grant
program that we have, and some of those are grant programs,
there is a group of people who take so seriously how we get
these dollars in rural America. So I would ask you not to look
at the number of those programs, but look at their impact.
Some of our programs, even modest, like the self-help
housing program of $17 million, that is just such a critical
program in the way it builds self-help housing. We have done
our 50,000th house this year.
PARTNERSHIPS
Senator Merkley. Okay, so let's take that for a moment.
Thank you very much for coming out to Oregon to visit a self-
help housing program. Of course, it is wonderful that you come
from Oregon. I was hearing the stories about Kansas and Montana
and getting a little jealous, but I knew you would come to
Oregon, and we are delighted you did.
But let's take that for example. That model of sweat
equity, build your own house, low-cost loan, is very similar to
the Habitat for Humanity model. Have we looked at whether that
model makes sense to do independently or to do through
subsidies to groups like Habitat for Humanity? Is there a more
cost-effective way to undertake it?
Ms. Mensah. Well, I will ask Tony Hernandez. I know I will
say that, actually, we have partnered with Habitat. I, in fact,
saw a property this spring where we were direct partners with
Habitat.
But, Mr. Hernandez, would you speak to our partnership with
others?
Mr. Hernandez. Thank you very much.
Senator, we are very excited to partner with lots of
organizations. What we do best is that we are a mortgage
company. We also provide technical assistance grants to help
those nonprofits.
What we are doing with Habitat is trying to get them to use
our product, which is the 502 direct loan, to help them build
more homes. They are trying to become a mortgage company as
well. We are a larger mortgage company. We can actually help
them acquire more lots and use our product so they can build
more homes.
So we are in the homeownership business, not just building
and financing. What we are trying to do is partner with other
groups, just like Habitat, across the country. We have met with
the national Habitat organization and smaller groups to say,
how can we help you do more if you use our product?
Senator Merkley. Thank you. I am going to cut you off
there, because you are talking about the partnerships, which
are wonderful.
I want to turn to another question, but I appreciate that.
RURAL ENERGY SAVING PROGRAM
The Rural Energy Savings Program is one that was authorized
in the farm bill. Secretary Vilsack pledged to implement it. We
understand that Rural Development, there is an existing
program, energy efficiency and conservation loan program, which
is similar to Rural Energy Savings Program in that it is
basically low-cost loans to do energy-saving retrofits to
buildings. However, it has not been taken up because interest
rates are higher.
Has there been any progress that can be reported at this
point in actually implementing the Rural Energy Savings
Program?
Ms. Mensah. Thank you, Senator.
I will say that you are correct that there is a similar
program, but let me ask, since the Rural Energy Savings does
work closely with our Rural Economic Development Loans and
Grants (REDLG) program. Let me ask Acting Administrator Rikkers
to tell you where we are in the process of implementing this.
Senator Merkley. Great.
Mr. Rikkers. Senator Merkley, the RESPA (Rural Energy
Savings Program Act) program, as it is referred to, we stand
with you. You have been an advocate for cost-savings through
energy efficiency both for small businesses and consumers that
RESPA is targeted toward.
We are encouraged that the Senate mark on this year's
appropriation bill provides funding for that RESPA program.
With that funding, we believe that that will help clear a path
and really help us continue to work with your staff to make and
implement that program.
[The information follows:]
Rural Energy Savings Program Act (RESPA) is a voluntary program
that will create jobs and lower energy bills for families, farms, and
small businesses by promoting energy-saving improvements to homes and
buildings in rural communities. The program will assist rural electric
co-operatives in offering low-interest loans to their consumer-members
for efficiency improvements, allowing repayment of the loan through
savings on monthly electric bills. Individual co-ops or State-based
groups of co-ops will apply to the Rural Utilities Service (RUS) within
the USDA for loans to fund local energy efficiency programs. RUS loans
to the co-op for efficiency programs will bear a zero percent interest
rate. The co-op can re-lend to consumer-members for efficiency
improvements at low-interest to defray the cost of administrating the
program.
Rural Development has developed a work plan and is currently
assessing how to best implement the program in the loan portfolio of
the Rural Economic Development Loan and Grant program.
Senator Merkley. Okay, I will look forward to future
reports. Please keep me apprised.
My time is up. Thank you so much.
Senator Moran. Senator Merkley, thank you.
RENTAL ASSISTANCE PROGRAM
Let me ask about housing, Mr. Hernandez or Madam Secretary.
Over the last 3 years, appropriations for rural rental
assistance have grown by $336 million. Yet we have indications
that the amount requested for rental assistance renewals for
fiscal year 2016 will not be adequate.
We have worried about that. In fact, our appropriation bill
language criticizes the administration, the program, and the
ability of Rural Housing Services to provide accurate
information on the amount needed to renew those existing rental
assistance agreements.
Can you provide detailed information on the amount
necessary to renew all the expiring rental assistance
agreements for fiscal year 2016?
Ms. Mensah. Thank you, Senator, for the question about
rental assistance. As you know, this drives our ability to be
in the affordable housing business in rural America, 14,000
properties, and rental assistance is crucial to it.
There is no question financing this program is a challenge
for us. We continue to be in conversation with you because it
is a challenge. Our estimates are made 2 years in advance. And
yes, they are often off.
So we acknowledge this challenge. We acknowledge that, yes,
we will likely need more than we had estimated. I do not have a
precise number for you today.
Senator Moran. We, certainly, would like that information.
Obviously, the appropriation bill requires that information be
provided. You need it to manage the program. We need it to make
certain that we do our job in a fiscally responsible way, so
there are no surprises.
With a fixed amount of money that we have to spend within
this budget, that number helps determine what other programs
within USDA, including Rural Development, might receive. That
requires us to have the best information possible to make those
decisions.
So I reiterate that request, and we look forward to having
a conversation with you to get those numbers.
Ms. Mensah. Thank you. I look forward to that as well. We
take it seriously.
[The information follows:]
When formulating its budget request, RHS uses the best estimates of
local tax, utilities, and other operating expenses. However, these
items may change and cause fluctuations above the estimate. To help
moderate the impact of cost fluctuations that the agency can account
for, RHS implemented an updated method for obligating rental assistance
(RA) in October 2015. This tool provides more accurate estimates of
future property-level funding needs. It also processes rental
assistance contract renewals more quickly and efficiently. The updated
RA obligation tool estimates RA needs on a per property basis, with the
objective of improving accuracy by using more timely data and reducing
the incidence of second renewals. The obligation tool provides as near-
real time data as possible, and the built-in inflation factor adjusts
for the time lag between budget development and receipt of the
appropriation. The revised estimate for fiscal year 2016 is
$1,389,695,000, which is $217,795,000 above the fiscal year 2016
President's budget request. The revised estimate assumes that the re-
renewal prohibition carried in the fiscal year 2015 law will not be in
the fiscal year 2016 law, including for the units with contracts
renewed during the current continuing resolution which carries the
fiscal year 2015 prohibition.
UNIVERSAL SERVICE FUND
Senator Moran. Let me ask, this could be for you Secretary
Mensah or Administrator McBride, the issues related to RUS and
the FCC, it was raised a bit by the Senator from Montana. But
it seems to me that we have set the stage in which the FCC has
made decisions related to revenues that are going to be
received that then affect the ability to repay loans.
So I have been worried for a long time, going back to the
original order of the FCC particularly related to the Universal
Service Fund, whether or not companies across Kansas and around
the country will have the necessary revenues, first of all, to
provide the service, but secondly, in the absence of adequate
compensation for the Universal Service Fund, the ability to
repay RUS.
You indicated conversations have taken place. I have tried
to get Rural Development and the FCC chairman in the same room
to have these conversations. It seems to me that there was an
unwillingness to have that occur.
So what I am looking for is I guess the degree of
coordination that is taking place. I heard you indicate to
Senator Tester that meetings occur, but can you assure me in
pretty definite terms about the assistance that RUS is making
known, the problems and challenges that will arise to your
borrowers should orders affecting the Universal Service Fund
continue down the path that they have been on.
Mr. McBride or Secretary.
Ms. Mensah. I think I will ask Administrator McBride to
speak to this issue of coordination.
And you have asked for an assurance? I can tell you we will
assure you that we will be in dialogue with our Federal
partners on this.
Senator Moran. In that regard, how serious is the issue? Am
I raising something that is relevant?
Mr. McBride. Any time that you are talking about something
that will impact one of our borrowers, I have concerns, because
we want to make sure that our portfolio is strong, and we
believe that it is.
In terms of what is happening with FCC, we do communicate
with them regularly. As they develop their proposals, we
provide some feedback. But they are a regulatory agency, so
there is a little bit of separation there. But we do try to
discuss the potential impacts of their rulemaking.
Senator Moran. They are a regulatory agency, and they are
an independent agency, but you are part of an administration.
What I am looking for is that there is an assurance that at a
higher level within the administration that the position that
Rural Utility Services is in and will be in as a result of
decisions at the FCC related to Universal Service Fund is being
communicated to the FCC.
I guess I am also interested in--you tell me that you
communicate with them, what do they say? Have you seen any
evidence that they are doing anything different, as a result of
you raising these issues?
Mr. McBride. Yes, sir. They have heard our concerns, and I
know that they have tried to take that into consideration. We
have communicated that at a high level with them.
Senator Moran. Let me go at this one more time.
Fortunately, as the chair, I get to have as many rounds as I
like, so I will see if I can ask this question perhaps for the
last time on this topic. But tell me what your concerns are.
How dramatic of a consequence could changing the Universal
Service Fund be to the ability of your borrowers to pay back
their loans they have borrowed? And what is the contingent or
possible liabilities that will accrue to your agency as a
result of FCC orders?
Mr. McBride. I do not have the answer to your second
question, because I do not know exactly how they will make
final changes to the Universal Service Fund (USF). I know that
they are aware that we are concerned about their modeling and
how that might impact our program. We have shared that
information with them and had those conversations with them.
Senator Moran. In another round, I would like to explore
further why perhaps rural telephone companies and others,
potential borrowers, are not seeking loans from RUS. My guess
is that there is a causal relationship because we do not know
what the FCC is going to do in regard to the Universal Service
Fund, so there is not only the fear of, ``Can I repay my
loan?'' but there is also the fear that I should not take out a
loan. The consequence there is that fewer Americans in rural
America will be served by broadband.
Mr. McBride. You are correct that there were some concerns
in recent years. Actually, this year, we did see a slight
increase in terms of the loan dollars that we were able to put
out from our traditional infrastructure program. We also saw an
increase in applications for our farm bill broadband loan
program. So there is an increase in interest in our programs.
Senator Moran. I look forward to exploring that. Thank you,
Mr. McBride.
The Senator from Montana, Senator Daines.
Senator Daines. Thank you, Mr. Chairman.
BROADBAND AND UNDERSERVED COMMUNITIES
I spent decades in the private sector before coming to
Washington, DC. I was, for 12 years, part of a cloud computing
company we started up in Boozman, Montana. We took the company
public. Oracle acquired us a couple years ago.
In fact, if I were to ask you where Oracle was going to put
their North America cloud command operation center for the
entire Oracle cloud, if I said, is it going to be in Silicon
Valley, Boston, New York, perhaps even Tel Aviv or Singapore,
if I told you it was the Boozman, Montana, it wouldn't have
been your first guess, anyway.
I think this is showing what is going on in technology
today, where technology has removed geography as a constraint
and this nexus of a quality of life of rural America that we
have, where the millennials say, ``I want to have my cake and
eat it, too. I don't want to have to sit in traffic for 2
hours. I want to be able to get to a trout fishing stream, get
to the mountains, and so forth. But I want a world-class
career, best in class, that relates to my business experience,
too.'' We have that now, thanks to technology.
So I've lived it. I've breathed it. I'm passionate about
ensuring that we provide connectivity here for all of America,
including rural America.
That also translates to our ag communities, where our
farmers and ranchers are now high-tech operators, in terms of
what they do. It is amazing what is going on there. Certainly,
in agriculture, we improve productivity and we not only feed
our country, we feed the world.
So a question for Under Secretary Mensah. In your
testimony, you highlight the need for more work to be done in
expanding rural access to broadband and that just 50 percent of
those living in rural communities have high-speed Internet
service.
Despite this fact, the administration's Broadband
Opportunity Council recently released a report on increasing
broadband employment and directed RUS to make funding available
in areas that already have a broadband provider.
Many communities in Montana, and I know I can speak--
Senator Tester was just here earlier and made his comments from
a Montanan's perspective.
By the way, we had Chairman Wheeler, Senator Tester and I
did, last week in Montana. It was great to have him there to
see what is going on in rural America.
But many Montanans do not have access to broadband, not
even one provider, let alone thinking about having two. We
should be focusing dollars, I think, on unserved communities,
not just improving speeds for those who already have
connectivity.
So the question is, how is RUS going to avoid duplicative
investment and make sure that funding is given to those who
need it, who virtually have no connectivity at the moment?
Ms. Mensah. Thank you, Senator, for raising this issue.
Thank you. It is, certainly, our intention to serve rural
America with broadband services and to reach those areas which
are beyond the last mile. So I want to share your seriousness
about this.
Let me ask, though, Administrator McBride to explain what
it is like within the Rural Broadband program and RUS, and
explain how we look at applications in our already-
oversubscribed farm bill Broadband Program, so that we do not
have a duplicative situation.
Mr. McBride. Thank you for the question, Senator.
What the Broadband Opportunity Council overall was trying
to look at was that there are some differences between
broadband availability in rural America versus urban, in terms
of high-speed Internet. So that was one of the issues that the
council looked at.
In terms of how we administer our programs at RUS, in the
2014 farm bill, Congress included language directing us to
require at least 15 percent of a potential application area be
unserved. So we have direction from Congress to include that
percentage of unserved residents.
And also the farm bill sets the standard in terms of how
many incumbent providers can already be there. So if there are
already three providers in a proposed service territory, that
application would be ineligible.
BROADBAND SERVICE IN TRIBAL AREAS
Senator Daines. Let me ask a follow-up on that, pivoting
over to our tribal lands. Montana is home to 12 federally
recognized tribes, plus one State-recognized tribe, the Little
Shell. Thanks to the dedication of Montana companies, like
Triangle Communications, residents of the Rocky Boy and the
Fort Belknap Indian reservations have access to broadband for
the very first time.
However, the broadband access on tribal lands continues to
be an issue. In fact, high-speed broadband on most tribal lands
in Montana is virtually nonexistent.
Since 2009, USDA has awarded nearly $20 million in funding
to provide broadband service in tribal areas. So the question
is, what does RUS plan to do going forward to connect tribal
communities?
Mr. McBride. Thank you for the question, Senator.
We are trying to expand our outreach to tribal areas and
help them understand the programs that are available to them
and potential applications.
Earlier this year, we funded our first substantially
underserved tribal area telecom application in New Mexico. That
was a great project there that brought fiber to the homes in
that area. So we are, certainly, open to this and would be
happy to work with your constituents on this.
Senator Daines. I am out of time, but the last comment, I
think these investments in broadband infrastructure are really
investments in innovation. This is really an opportunity what
we are seeing around our country that we can lead globally
here.
When I was running businesses there in Boozman, Montana, I
had an office in Tokyo and one in Sydney, but I could do it
right there from Montana. This is really the wave of the future
for our country. Thank you.
Senator Moran. Senator Daines, thank you very much.
The Senator from Mississippi, Mr. Chairman, welcome.
STATEMENT BY SENATOR THAD COCHRAN
Senator Cochran. Mr. Chairman, thank you. I am pleased to
join you in reviewing what the status of these programs are
that are administered by this panel of witnesses.
Thank you for the good work that you do and the outreach
that you undertake to help acquaint organizations out there in
the small towns and communities of rural America that there are
Federal programs that are designed to make available
fundamental ways of enjoying living out in the country, as they
say, and yet having some of the modern conveniences that so
many of us take for granted. So thank you for being here today
and helping us review and implement ways that this subcommittee
can be helpful through either legislative language suggested
for adoption by Congress or regulatory action that you would
like to modify.
We want to work with you and be helpful to you.
We are from the government. We are here to help you.
Senator Moran. Mr. Chairman, thank you. Thanks for joining
us.
The Senator from Missouri, Senator Blunt.
BROADBAND ACCESS
Senator Blunt. One other topic on the connectedness issue,
which I think we all understand is really important that we get
this done so that everybody does have capacity to compete and
to offer products and to communicate.
Mr. McBride, you mentioned a couple times unserved and
underserved, and I wondered what programs you have that address
both of those things. Frankly, several of us are on the
Commerce Committee as well, and I am much more interested in
assisting unserved areas than I am assisting a second
competitor where there is already somebody there that might
meet some definition of underserved.
So do you want to talk about that a little bit, the
difference in unserved and underserved, and what programs you
might have, what areas, in both those categories?
Mr. McBride. Yes, sir. Thank you for the question.
We have four primary programs were we fund the expansion of
broadband access. The first is our traditional infrastructure
loan program, which is targeted to communities of under 5,000.
We have a farm bill broadband loan program, which the
population goes up to 20,000.
Then we have two grant programs. One is the distance-
learning and telemedicine program, which helps improve health
care access and educational opportunities. That is a grant
program.
The program that we have that actually targets unserved
areas is called Community Connect. The subcommittee gives us
around $10 million to $15 million a year, I believe, to make
small grant awards to communities that do not have existing
broadband service. That is our primary tool in terms of getting
to communities that do not have access.
Senator Blunt. Are the other three available to both
underserved as well as unserved communities?
Mr. McBride. Yes, sir.
Senator Blunt. Then you look at those applications and
decide where you are gaining the most new service?
Mr. McBride. Yes, sir.
In terms of the distance-learning and telemedicine, and the
farm bill loan program, both of those programs are
oversubscribed, so the competition is quite difficult for both.
So certainly for the loan program, we are looking at areas
where there is not much service or it needs to be improved.
Senator Blunt. Thank you, Mr. Chairman.
Senator Moran. Thank you, Senator Blunt.
We are going to do another round of questioning. I am going
to try to limit mine to perhaps one area, and it is back to
you, Mr. McBride.
Mr. Rikkers, do you feel left out? Or pleased?
Mr. Rikkers. Happy to be here, sir.
Senator Moran. All right.
BROADBAND OPPORTUNITY COUNCIL RECOMMENDATIONS
Senator Daines talked about this, Senator Blunt talked
about this, underserved and no service. We have seen examples
of that in our State. I noticed that in the development of your
rules, you are headed toward the direction of not making loans
when there is a loan to another company who already has and is
providing service in the area, another RUS loan recipient.
Mr. McBride. Yes, sir.
Senator Moran. I did not say that very well.
Mr. McBride. I understood.
Senator Moran. Thank you for understanding. You have made
the decision that you are not going to make loans to companies
who want to provide service to a place that there is already a
company providing service with an RUS loan. Is that accurate?
Mr. McBride. Yes, sir.
Senator Moran. And the part that caught my attention was
the Broadband Opportunity Council's recent report. It seems to
go the other direction. It is an August report that says,
broadband loan eligibility should be expanded to different
providers ``even though an incumbent exists.''
How do you square what RUS's policy is versus what the
broader group of people is saying is the goal?
Mr. McBride. Certainly, with the Broadband Opportunity
Council, the good thing about the council and its
recommendations is that we were looking at all of our suite of
programs to see what we could do to support broadband access.
The council's actions would not require additional funding or
additional legislation. It was just simply to look at our
programs to see what we could possibly do.
In terms of the issue that you raised, of course, we will
have to follow what is in statute and what Congress has
directed us to do, in terms of looking at potential applicants
where there are already service providers. So that will be our
lead focus.
Senator Moran. Tell me once again what you understand
Congress' direction to be in that regard.
Mr. McBride. Well, in terms of the farm bill loan program,
if there are three existing service providers, then an
application to serve that service territory would be
ineligible.
Senator Moran. Okay. When you make a determination about an
RUS loan to provide broadband services, the subsidy that is
provided by RUS, is it what is designed to be the sufficient
amount of additional revenue to make the service available to
make it work? The question I have is, do you bring in other
territories that already have incumbent providers, a larger
community, for example, and allow a loan recipient--duplicate
service is not the right phrase, but add additional service
when there is already service being provided as part of the
revenue source, so that areas that have no service get that
additional revenue?
I will try one more time. My question is this, is the
subsidy sufficient to make this work, or do you need to have
larger population areas within that territory to further
subsidize the ability for that carrier to provide broadband?
Mr. McBride. The three basic things that we would look at
for new application are: Is the population of the area that
they want to serve under 20,000? Did they include at least 15
percent of an unserved area in their application? And then, how
will their finances work?
So we want to look at all those things to see what they do.
Some of the applications that we received in the most recent
round, they were proposing to serve up to 50 percent unserved.
So we want to make sure that there are fewer than three
existing service providers, and that they meet that target in
terms of unserved population.
Senator Moran. Fifteen percent of the proposed area of
service is the requirement for the loan? Your application is
based upon an area that has no service, that has to equal at
least 15 percent of what they are applying to serve? Is that
what you are telling me?
Mr. McBride. Yes.
Senator Moran. The other 85 percent could have an
additional provider already providing the service.
Mr. McBride. Yes.
Senator Moran. Okay.
Mr. McBride. As long as they do not have more than three.
Senator Moran. And the revenue that is generated from that
85 percent may be taken into account to determine your final
criteria of whether or not this is fiscally, financially
possible.
Mr. McBride. Yes. We have to make sure that any loan that
we make, that they will be able to repay us and be successful.
Senator Moran. Okay. Thank you.
Senator Merkley.
Senator Merkley. Thank you, Mr. Chairman.
RENTAL ASSISTANCE 2015 SHORTFALL
I want to go to rental assistance in more detail. The
chairman asked about the shortfall, and the numbers that we
have been provided for the shortfall for fiscal year 2015 was,
very precisely, we're talking basically $101.5 million,
precisely, is the number provided by your department.
In the second panel, Tony Chrisman is going to present his
story, which is typical of what has happened with that fiscal
year 2015 shortfall, which is that the individuals who are
operating multifamily projects, who own these projects, they
are paid for each unit. Each unit, the family pays 30 percent
of their income and then the balance is paid through this
rental assistance program.
But in August, mid-August, the money ran out. So the folks
who have these multifamily projects stopped receiving payments.
For example, for Mr. Chrisman, the total amount of rental
assistance not paid to date is $365,000. That is that share of
that $101.5 million shortfall.
We provided authority for those shortfalls in fiscal year
2015 to be filled back in, but the owners have not received any
notice that they are going to be compensated for that
shortfall. Are you planning to fill in the shortfall in 2015?
Or are we going to leave these owners across America just
hanging out there suffering this loss?
Ms. Mensah. Thank you, Senator Merkley. That is, certainly,
not our intention to leave owners hanging.
I am going to ask Administrator Hernandez to speak to your
specific question about how we want to catch up the shortfall
that we had in fiscal year 2015 as we head into fiscal year
2016.
We are thankful that we were able to limp across the line
into September, into our new fiscal year, and we do want to
bring that whole again.
Mr. Hernandez. Great. Thank you very much.
Senator, our goal is to try to help as many of those
property owners as we can. First of all, we are going to use
the allocation that you have given us for appropriation this
year for the continuing resolution (CR). We will fund those
property owners who have run out of money and they are into the
new fiscal year.
Senator Merkley. So be specific. Are we going to backfill
the missing payments from fiscal year 2015, the August and
September payments that we failed to pay?
Mr. Hernandez. We are trying to figure out how we can do
that, sir. Right now, we cannot use the CR money to do that by
statute, so we are trying to figure out----
Senator Merkley. My understanding is that we did enable
that to be done, but that there is reticence to do so. Is there
a legal question? This has not come back to my attention. This
is an issue we have been raising continuously. Can you please
get us exact details on how that is the case? That was fully
the intention that this was to be able to be backfilled.
Mr. Hernandez. I will find out how we can do that.
[The information follows:]
The USDA is committed to delivering a sustainable rental assistance
program and has made significant progress in addressing the challenges
in managing the statutory and funding cycles of this important program.
The fiscal year 2015 appropriations law prohibited a property from
receiving a second renewal of fiscal year 2015 Rental Assistance (RA)
agreement funding within a 12-month period. Because of this, the agency
was prohibited from providing a second renewal in fiscal year 2015 to
44 properties. Rural Development (RD) advised borrowers about steps
that could be taken in order to leave operating funds in project
accounts to pay project expenses, to the extent possible. The
prohibition on second renewals was lifted by the Agriculture, Rural
Development, Food and Drug Administration, and Related Agencies
Appropriations Act, 2016 (Continuing Resolution) for properties that
were renewed in fiscal year 2015. However, there is no additional
language in the Continuing Resolution that allows USDA to reimburse the
properties that did not receive the needed RA funding in fiscal year
2015. Funding made available during the Continuing Resolution (CR)
period allowed USDA to renew all the RA Agreements that needed a
renewal as of October 1, 2015, under the same terms and conditions as
previously authorized in fiscal year 2015 and it also included being
able to renew the contracts for those properties that were prohibited
from a second renewal in 2015. However, that prohibition remains in
place for the 2016 contracts written under the CR authority per the
same terms and conditions requirement.
Senator Merkley. Okay. Because otherwise, you have all
these owners who we made a contract with, we left them hanging.
That can bankrupt a company very, very, very quickly.
Furthermore, it sets up a real dilemma, because when
someone leaves one of these units, the owner is required to
take the family on the list who has the greatest need, which
means their 30 percent of their personal income is going to be
very little. If they're facing a situation where they are
supposed to take a family who can pay very little rent, but
then the U.S. Government is going to fail at the end of the
year to complete their contracts, that is unacceptable, isn't
it?
Mr. Hernandez. Sir, we are working with your team to try to
make sure we have more predictability, increased accuracy in
the way we do the funding, to try to understand the costs of
the buildings. That is why we have implemented new tools to
have better accuracy in forecasting what it will cost.
Senator Merkley. This is what I want to know. I want you to
come back to us, and we will work together. This is rural
affordable housing across America. We are talking about 260,000
units, 14,000 projects, which got shortchanged.
I don't think it is the intention of any of us that we
should not fulfill the vision that we laid out.
This is going to have huge repercussions for future
willingness for developers and owners to participate in this
program. Let's get this fixed.
Madam Secretary, you didn't have a number for fiscal year
2016, but the numbers that we have been provided is that we are
$120 million short by best estimates on top of the $101.5
million for fiscal year 2015. That is a huge issue.
So if we are going to be running out again this coming
August, we have to fix this. We need you all to come to us with
a proposal so we can have this subcommittee really chew on it
and say, okay, well, my understanding is it was fixed in the
continuing resolution so it could be backfilled, and then for
the start of fiscal year 2016, the authority was to be able to
kind of forward load the funds. So we still had a problem, but
at least we had fixed it for our owners for fiscal year 2015.
I am hearing it has not been fixed. When I hear that there
isn't a precise number for fiscal year 2016, I am afraid we are
going to have this crisis again at the end of this year.
Now that I have eaten up all my time, I just want to say,
let's get to the bottom of this. Propose to us plans A, B, and
C, and let's figure out how to resolve this.
Mr. Hernandez. I look forward to the partnership, sir.
Senator Merkley. Thank you.
Senator Moran. Senator Merkley describes my understanding
of the situation as well, that this was fixed, the backfill
should occur. If there is a problem within the agency, we need
to know that. My understanding is that your general counsel is
trying to figure out how to do it. We believe we gave you the
authority to do it.
That does not solve the problem at the end of the next
fiscal year, but it solves the problem at the moment. And it
reduces exacerbating the circumstances we face in the future.
Senator Blunt.
Senator Blunt. Secretary Mensah, several questions on what
the FCC might do that impacts what your agency is trying to do.
EPA RULES
On other rules and regulations, the Environmental
Protection Agency (EPA) has a couple rules now that have real
impact in rural America, the power rule, I think about 75
percent of the landmass of the country is served by rural
electric co-ops. They are more heavily coal than the rest of
the utility providers in the country. For the water rule, lots
of concern in rural America about how that jurisdiction, if
expanded as the EPA suggested, will impact what happens in
agriculture and other areas.
Some sense of your level of engagement, not necessarily the
FCC rule that we already talked about quite a bit, but are
these agencies reaching out to you in a way that you feel is
adequate to get your engagement in these important discussions
that impact rural America?
Ms. Mensah. Senator Blunt, thank you for your question.
Yes, I do feel that we are in a dialogue with our sister
agencies. You mentioned both clean power and the water rule. We
have a strong dialogue. We argue for rural communities. And we
feel that when new rules are proposed, we are going to be there
for our borrowers to help make any adjustments. So I am happy
to answer more specific questions on power or water.
Senator Blunt. Well, on power, I will ask one. On power,
they have now come up with what is the proposed final rule. Has
either USDA or your part of USDA taken a position on that final
rule?
Ms. Mensah. Let me ask Administrator McBride to describe to
you how we have been working since the final rule has been
proposed.
Senator Blunt. So back to you, Mr. McBride.
Mr. McBride. Thank you for the question, Senator.
As EPA was developing its rule, we did have conversations
with them and let them know our thoughts and how it might
impact our programs. In terms of what the final result was from
EPA, we do believe that they gave cooperatives additional time
and additional flexibility to respond to the rule, so we do
feel like they were responsive to the issues that we raised
with them. Of course, we do not know the final result until the
States developed their own plans. But we do believe that the
EPA provided additional time and additional flexibility that
will help our borrowers meet the new rule.
Senator Blunt. At the Secretary level, at Secretary
Vilsack's level, are he and the department supportive both of
that rule and the other rule I mentioned, the water rule?
Mr. McBride. The Secretary has been in contact with
Administrator McCarthy and others, and believes that we will be
able to help our borrowers meet the rules. So the Secretary has
been very engaged, and we are working to help our borrowers
meet the new requirements.
Senator Blunt. You do not know whether he has personally
endorsed the two new rules or not?
Mr. McBride. I have not spoken to him directly about that.
Senator Blunt. All right. I have not either, and I will.
Thank you.
Senator Moran. Senator Cochran, anything further?
Senator Cochran. No, but I want to thank the panel for
helping bring life and energy and imagination and hard work to
the challenge of improving opportunities for happy and healthy
lives in rural America. That is what the Rural Development Act
sought to do when Congress adopted it. You are on the
frontlines now in carrying out those ideas and suggestions when
that act was first approved by Congress.
Thank you for your good efforts.
Senator Moran. Senator Udall.
Senator Udall. Thank you, Mr. Chairman.
SEQUESTRATIONS IMPACT
Last week, I had the opportunity to travel New Mexico and
do some rural economic development meetings. Our State USDA
Rural Development State director named Terry Brunner was there
and announced some of the grants that go out. I cannot tell you
how important those grants are in terms of supporting rural
communities, supporting economic development, and really
pushing the envelope in terms of helping people be more
connected in rural communities with the rest of the State. So
we really appreciate what you are doing.
We know that the folks in rural New Mexico need support,
need budget certainty, and need adequate resources to fund
basic things like water infrastructure, housing, and high-speed
Internet, which is not a luxury nowadays. It is actually a
necessity.
So let me ask you, Madam Secretary, the USDA Rural
Development program is essential for addressing these unique
needs, and I am worried that sequestration and the proposed
cuts will further obstruct recovery and development. The
Committee-passed bill provides $83 million less for Rural
Development compared to the administration's request, and over
$300 million less than was provided in 2010 due to unequal
sequestration limits on domestic programs.
What impact will these lower numbers have on your programs
and, more importantly, on the families that rely on them?
Ms. Mensah. Thank you, Senator Udall.
Senator Udall. You bet.
Ms. Mensah. I, too, share the concern. Any reduction in our
programs hurts rural America. I see these programs. I am out
almost every week somewhere with State directors, like you have
seen. Every grant dollar that we are able to have the privilege
to spend in rural America, I feel we can do it well.
Similarly, the program levels, the loan levels, are being
spent very, very carefully. It is a strong portfolio.
So we appreciate anything you can do for our budget
request. This is just essential funding for the development of
our rural communities.
And I would also say for the kind of State operation we
have, you mentioned our State directors, you are supporting a
field-based organization in Rural Development. We are not just
a Washington organization. That layer of support in every State
makes us so unique, and it is just essential dollars for us. So
I thank you for your concern. I share it.
Senator Udall. Thank you. And you are absolutely right. One
of the things that I think really works is, with these State
directors, they work creatively with rural communities in order
to do the things that they need done, to become better
communities, to get people more hooked up, whatever it is. It
is a good program, and it is a dramatic example of why we
should be out of the sequester.
I mean, sequester hurts these rural communities, and we
need to get back to adequate funding for these important
programs.
SUSTANTIALLY UNDERSERVED TRIBAL AREAS PROGRAM
Now, Administrator McBride, I applaud your efforts in
moving forward with the Substantially Underserved Tribal Areas
(SUTA) loan program provisions in the farm bill. Thanks to this
program, the Mescalero Apache Telecom company was a recipient
of a $5.4 million loan to make telecommunication improvements
for thousands of rural customers.
This type of investment is critical to ending the digital
divide in tribal communities.
I will never forget, on this digital divide in tribal
communities, when President Clinton tried to show the digital
divide, he started out one day in Silicon Valley and ended up
the day in Shiprock, New Mexico. In Silicon, they are obviously
wired. In Shiprock, he was introduced by a young lady who was a
top student in the school in Shiprock, and she had won a
computer, but she was unable to even have access with that
computer to the Internet. So that highlighted the digital
divide in this country.
So that is why this program is so important, the
Substantially Underserved Tribal Areas program. I think we need
to keep that strong.
Can you describe for us the importance of loan programs
such as SUTA and provide suggestions on ways we can expand on
efforts to bring modern broadband infrastructure to tribal
communities?
Mr. McBride. Thank you for the question. I was in Mescalero
in August. Terry Brunner, your State director, took me around.
It was a great project, and they are doing great work there.
We are trying to increase our outreach efforts. It is,
certainly, a priority for us to make sure that the tribal areas
know about our programs and their availability. It is,
certainly, a challenge, expanding broadband into the most
rural, most remote areas, but we believe that our partnership
with the groups that we worked with before is strong, and there
may be ways that we can share some lessons learned that might
help other tribal areas expand their access.
Senator Udall. Thank you very much.
Thank you, Mr. Chairman.
Senator Moran. Thank you, Senator Udall.
Secretary Mensah, thank you very much for joining us.
Mr. Hernandez, Mr. McBride, Mr. Rikkers, thank you very
much.
We will turn to our second panel.
Madam Secretary, there are a couple things we want to
follow up with you.
Ms. Mensah. Yes, I look forward to that.
Senator Moran. I would invite Mr. Simpson, Mr. Lowry, Mr.
Boisvert, Mr. Chrisman, to the table.
We have four experts from across the country with us today.
We are delighted to have you here. I will defer in a moment to
the Senator from Mississippi, Senator Cochran, to introduce one
of our panelists. But I would welcome them all, including Mr.
Simpson.
But, Mr. Lowry, thank you very much for joining us. Mr.
Lowry is the president and chief executive officer of Sunflower
Electric Power Association in Hays, Kansas.
Brian Boisvert is the president and general manager of
Wilson Communications in Wilson, Kansas.
And Mr. Tony Chrisman is the vice president and owner of
Chrisman Development, Inc., Enterprise, Oregon.
The Senator from Mississippi.
Senator Cochran. Mr. Chairman, I am pleased to join you in
welcoming our panelists, particularly Bill Simpson, who is a
friend of longstanding. His father was legendary for getting
things done in Washington as a member of the staff for Senator
Jim Eastland, who I replaced in the U.S. Senate when he
retired.
So this is a chain of command operation here. And if it
looks like we are double-teaming you, we are, because in our
State of Mississippi, I do not know of any piece of legislation
or Federal program that has been more helpful and enriched the
lives of so many as the Rural Development Act. I mentioned it
in my questions and observations to the previous panel, when
they were here.
But this is also an indication of Congress' response and
willingness to help in a positive way enrich the lives of
people and create opportunities for economic growth and
development, and generally the well-being of those who live in
the small towns and rural communities of our great country.
So thank you for helping carry on this great tradition, and
we appreciate your good efforts. Thanks.
Senator Moran. Thank you, Senator Cochran.
We will work our way across the table, and we will begin
with the testimony of Mr. Simpson. Thank you.
STATEMENT OF WILLIAM SIMPSON, DIRECTOR OF LEGISLATIVE
AND REGULATORY AFFAIRS, NATIONAL RURAL
WATER ASSOCIATION
Mr. Simpson. Thank you, Chairman Cochran, Chairman Moran,
Ranking Member Merkley. I am delighted to be here. Good
morning. It is an honor to testify before the Subcommittee on
Agriculture, water and waste programs, and the associated
technical assistance that benefit the small rural communities
that chairman Cochran referred to.
As a native Mississippian, I am also extremely proud that
this Rural Development title has helped my home State. From the
top of the State to the bottom, you can see the tangible
effects. Thank you for that.
Before I get started, I wanted to offer a personal note
about the subcommittee. One of the great honors in my life was
to serve on this subcommittee. I was trained by a former clerk
named Galen Fountain, a brilliant, kind, and decent man. He
told me in the very beginning working on this subcommittee, you
will work in a bipartisan fashion. You will sit at the table
with the entire staff. Every word, every policy, every dollar
will be jointly agreed upon. It made the Senate bill stronger,
in my humble opinion, and it really made a difference.
In a time when people criticize Congress for not adhering
to their duties, I think that this subcommittee, in particular,
needs to get the recognition they deserve in taking that stance
and, throughout the leadership changes of this subcommittee,
continuing on that path. I think this subcommittee should be
recognized, commended, and duplicated for that activity.
We have witnessed the reduction and restructuring of Rural
Development, and its predecessor Farmers Home, field structure.
Under Secretary Mensah mentioned it. I want to reinforce her
comments. I know this budget climate is extraordinary
difficult, but that is what I saw always as one of the
strengths of Rural Development over Federal agencies is that
they are out there in the communities. They live and work there
to carry out the programs that you appropriate here, and the
policies, including the farm bill. I know that really makes a
difference.
We share a mission with our Rural Development partner. It
is a shared mission that every rural community, regardless of
income and location, deserves to be served. And no one in Rural
Development should be left behind.
Our seasoned employees at the Rural Water Association have
23 years of experience working in water and wastewater
industry. Many of these folks could get other jobs that do not
require extensive travel away from their home, but their
passion and their love for this industry, and the work, and
they get great satisfaction out of helping these rural
communities. And the communities we help, quite frankly, do not
have a lot of the capacity or expertise to do this activity
without this experienced personnel.
We accomplish this mission under three titles under the
Rural Development title program with three programs.
First is the Circuit Rider program. I hope you have all
heard about that. Since 1980, this on-the-ground assistance to
rural communities for water, wastewater infrastructure, it is
across the myriad of issues they have, complying with State and
Federal regulations, disaster response, rate studies,
operations and management. We have 117 circuit riders
throughout the country. As you all know, they also do emergency
response.
We believe there is a direct correlation with the work that
our folks do and the extraordinarily low default and
delinquency rate of the water and waste program that you
appropriate.
The second is the Wastewater Technical Assistance Program,
similar to the Circuit Rider, but it is concentrated on
wastewater treatment facilities. We help with design, upgrades,
daily operation, maintenance. We have 70 technicians around the
country in that area.
Third, we have to commend the Rural Utilities Service for
this. They started up a new energy efficiency program. The cost
of electricity for a rural utility is the second highest cost
behind labor. We started that as a demonstration. We are up to
nine States now. We have had really good results in the
beginning. We are returning $4.36 for every $1 of Federal
investment to pay for our expertise, our person out there in
the field doing this.
I close with a suggestion for the subcommittee, and it is
the current underlying statutory authority for 10,000
population for eligibility for this program. In the past, this
subcommittee could put these communities, if they had slightly
grown or exceeded the limit, in a general provision. So now we
are looking at the demographic change in rural America, people
moving out, going into suburbanized areas that are ineligible,
but these communities are still rural in characteristic. We
would suggest that this subcommittee take a serious look at
that.
In summary, rural America has been strengthened by the work
and the vision of this subcommittee. No community can grow
without sustainable resources, water and wastewater services.
We stand with our Rural Development partner to work in this
arena and do anything that you ask us to do.
Thank you, Chairman Moran, Ranking Member Merkley, Chairman
Cochran. I will answer any questions that you may have.
[The statement follows:]
Prepared Statement of William Simpson
Good Morning Chairman Moran, ranking Member Merkley and members of
the Subcommittee. It is an honor to testify before you on the
Department of Agriculture's Water and Wastewater programs and the
associated technical assistance programs that directly benefit small
rural communities. As a native Mississippian, I am proud of the work of
this Committee and specifically the impact of the Rural Development
programs that have lifted-up the quality of life for so many of the
residents in my home State from the Gulf of Mexico to our northern
border with Tennessee. Thank you.
Before I get started I would like to offer a personal note. One of
the great honors in my life was to serve on this Subcommittee. I was
trained by a former clerk named Galen Fountain who is a brilliant, kind
and decent man. I learned early on that this Subcommittee, regardless
if you are in the majority or minority, is tasked to work as a team in
a true bipartisan manner to draft and establish the policy and funding
levels within your annual allocation--with everyone at the table
throughout the entire process, every word, every policy, every dollar
would be mutually agreed upon.
In a time where it is popular to criticize Congress on their lack
of progress or inability to perform their duties, this Subcommittee is
a shining example of how Congress meets those challenges and
responsibilities even through difficult times. The entire staff,
majority and minority, are recognized as capable, approachable,
intelligent and true professionals. The fact that this tradition
continues throughout the changes in the leadership of this Subcommittee
over the years should be recognized, commended and duplicated.
The Rural Development mission area has a wide and holistic approach
necessary to enhance and protect the health and vitality of rural
America. We look at these USDA investments, especially in water and
wastewater infrastructure, and witness their tangible impact on the
quality of life in these rural communities. People take it for granted
that their water is always safe and uninterrupted. This is not just
about digging trenches and putting pipes in the ground. These
investments are the catalyst for economic and community growth. They
provide direct benefits like employment opportunities for residents.
They also provide indirect benefits like increasing the tax base to
attract new businesses and housing developments. Without the advantage
of water and wastewater services these foundations of a community would
never be put in a position to succeed.
The current water and waste disposal grant and loan programs
operated by the Department of Agriculture's Rural Utilities Service
have a long and successful history of providing critical infrastructure
assistance to meet one of the most basic needs in rural America--
providing safe and affordable water and wastewater assistance to low
and moderate-income communities. This is one of the highest rated
government programs in history, and one with a default rate that is
almost non-existent with a greater than 30 day delinquency rate of .42
percent and greater than 1 year delinquency rate of .17 percent. The
portfolio consists of over 16,000 loans that are valued at
approximately $12.5 billion dollars. We believe the technical
assistance provided by this Subcommittee to organizations like the
National Rural Water Association and others has a direct correlation
with the stability and health of this portfolio and protects the
government and community's investment.
All communities have elected and/or non-elected leaders that want
to improve the quality of life where they work and live so their family
and friends can benefit. The Rural Development staff lives and works in
many of these same communities. They are part of the fabric of that
community and also a vital Federal partner. This partnership has
tremendous benefits, whether it's by providing critical infrastructure,
securing affordable rental housing, providing broadband, telemedicine,
constructing a heath care or child care facility or attracting and
creating new businesses, it has and continues to impact lives.
We have witnessed the restructuring and reduction of employees and
offices in Rural Development and its predecessor, the Farmers Home
Administration. I know it is difficult in this budget climate, however
any efforts to preserve or enhance this field structure will make a
difference in serving remote rural areas especially ones that
experience pervasive poverty. You can see diminishing Rural Development
housing, water infrastructure and other loan and grant activities in
areas where staff and offices have been reduced, relocated or
eliminated.
The National Rural Water Association also shares a mission with our
Rural Development partner. A shared mission to serve every rural
community in need regardless of income or location. Like Rural
Development, we want to ensure no community in rural America is left
behind. Our seasoned field employees have an average of 23 years of
experience working in the water and Wastewater industry. Many could
find higher paying jobs and positions that did not require extensive
travel, but they are on a mission and receive great personal
satisfaction from their work. Many of the communities we serve simply
can't afford the individual expertise necessary to operate and maintain
their utility systems.
We accomplish this mission by using three existing programs under
the Rural Development Title.
--First, the Circuit Rider program. Since 1980, Circuit Riders have
provided on-site technical assistance to small rural
communities for water infrastructure development, compliance,
training, certification, operations, management, rate studies,
disaster response, public health protection--all necessary to
encourage local responsibility and local solutions for
protecting and enhancing water resources. This mission is
simple. At the grassroots level we deliver on-the- ground
assistance to communities in need by providing safe, affordable
and sustainable water service. We currently have 117 Circuit
Riders throughout the country. From Dec 1, 2014 to September
30, 2015, Circuit Riders directly assisted 22,143 rural water
systems through 40,788 direct contacts totaling 207,607 hours
of work. This work performed by NRWA far exceeds our contract
requirements. Rural communities also rely on our circuit riders
in emergency situations. When flooding, extreme freezing,
tornados or hurricanes hit, the circuit riders reach out to
rural systems with generators, and technical help and
assistance to get systems back online and safe water flowing to
their customers.
--Second, is the Wastewater Technical Assistance program. This
initiative provides on-the ground technical assistance directly
to communities for wastewater treatment facilities. Assistance
includes design and upgrade recommendations, daily operation
and maintenance advice, assisting with permit renewals and
helping these systems meet compliance requirements from state
and Federal regulations. We currently have 70 wastewater
Technicians throughout the nation. The wastewater Technicians,
from July 1, 2014 to June 30, 2015, provided 147,571 hours of
work directly contacting systems 35,969 times to assist 7,746
wastewater systems.
--Third, we are in our 2nd year with a new energy efficiency program
created by the Rural Utilities Service (RUS). With electricity
as the second leading operational cost after labor for a
utility, reducing this expense provides increased stability and
frees up revenue to address upgrades or deferred maintenance
and at the same time reduces the burden to shift ever
increasing operational costs to the moderate or low-income
customers. We started this initiative last year with seven
states and expanded to nine states this fiscal year. From July
1, 2014 to June 30 2015, 240 assessments were completed with a
combined energy savings of $2,615,809. This initiative returns
$4.36 in savings to the utility for every $1 of Federal
investment.
I will close with a suggestion for the Subcommittee- The current
underlying statutory authority for the Rural Development Water and
Wastewater programs is set at a 10,000 population limit. The Secretary
has little flexibility or waiver authority to address communities that
have grown or slightly exceed that limit. In the past, this Committee
was able to list these communities in general provisions in order to
continue to be eligible for the RUS Water and Wastewater programs.
With the changing demographics of rural America, we believe that
increasing the population limit to 20,000, with a priority given to
smaller communities, would provide a benefit to rural America. We also
believe this will increase the utilization rate for the Water and
Wastewater Guaranteed program especially for communities with more
resources and capacity necessary to debt service a commercial market
rate loan.
In summary, rural America has been strengthened from the work and
vision of this Subcommittee. No community can grow and improve without
the sustaining resources of water and wastewater services. Rural Water
stands willing and able to work with you and our partners at Rural
Development to accomplish this goal.
Thank you Chairman Moran and Ranking Member Merkley for allowing me
to testify and I would be happy to answers any questions that you may
have at this time.
Senator Moran. Mr. Simpson, thank you.
Mr. Lowry, before you testify, on behalf of my colleagues,
I want express my care and concern for the president and CEO of
the National Rural Electric Cooperative, Jo Ann Emerson. Her
health is a very challenging circumstance. I served in the
House of Representatives where classmates and many of my
colleagues are great friends of Jo Ann. And we express, on
behalf of all of us, to her and her family and the folks at the
Rural Electric Cooperative Association, our love and compassion
for Jo Ann.
Mr. Lowry. We will be certain to pass that on to her. I
know that it will be welcomed and well-received. Thank you very
much.
Senator Moran. Thank you.
STATEMENT OF STUART LOWRY, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, SUNFLOWER ELECTRIC POWER
ASSOCIATION
Mr. Lowry. Mr. Chairman, thank you for allowing me to be
here today. Ranking Member Merkley, Senator Cochran, I
appreciate the opportunity to be here to talk about 21st
century rural development.
As Chairman Moran mentioned, my name is Stuart Lowry. I am
the president and CEO of Sunflower Electric Power Corporation
in Hays, Kansas. We are a generation and transmission
cooperative, much like PNGC would be in the State of Oregon, or
South Mississippi would be in the State of Mississippi. We
provide wholesale services to over 350,000 Kansans.
I am also here representing the National Rural Electric
Cooperative Association, the organization that Jo Ann Emerson
heads up. That is the service organization for over 900 not-
for-profit electric cooperatives in over 47 States that provide
electricity to roughly 11 percent of the Nation's population.
The development of the electric co-ops is really a perfect
example of fostering rural economic development.
The story of the Rural Electrification Administration (REA)
effort to electrify rural America via electric cooperatives is
well-known to everybody by now. The agency is now known as the
Rural Utilities Service, and this agency and its programs have
allowed electric cooperatives to become champions for
strengthening rural America beyond just providing electric
service.
The Rural Economic Development Loan and Grant program,
commonly referred to as REDLG, is an excellent example of a
tool used by cooperatives to promote rural development.
The loan program provides zero-interest loans to local
utilities that they then pass through to small businesses for
projects that generate local revenue and jobs. The grant
program allows local cooperatives to establish revolving loan
programs for other community projects.
In 2015, the loan program directed loans to 29 cooperatives
for energy efficiency projects, rail offloading equipment,
ambulances, and renovations for retirement communities. In
addition, 27 grants went to 18 cooperatives, which renovated
schools, hospitals, financed fire equipment, purchased medical
equipment, and updated 911 communications equipment.
Kansas has many examples of REDLG success stories, but
recently, two Kansas cooperatives well-known to Chairman Moran,
Prairie Land Electric and Western Cooperative Electric, both
used their revolving loan funds to purchase a CT scanner for
the Sheridan County Health Complex. This adds a tremendous
health benefit to a community of roughly 1,200 people. Similar
examples exist in many other States, as well as the State of
Kansas.
REDLG's successes have generated a greater demand for
funding. We greatly appreciate the chairman and subcommittee
for recognizing this challenge.
One critical source of funding for the REDLG program are
the fees paid by cooperative lenders under the guaranteed
underwriter program. The fees currently deliver $13 million
annually. Two very important lenders to electric cooperatives,
the National Rural Utilities Cooperative Finance Corporation,
or CFC, and CoBank, have accessed funding through the
Guaranteed Underwriter Program and have used these funds to
help finance electric cooperatives investment in rural utility
infrastructure projects. Fees from these transactions help fund
the REDLG program.
Additionally, rural America is increasingly capitalizing on
programs for energy efficiency. Over 96 percent of cooperatives
already provide these programs to their consumer members. Both
the 2008 and 2014 farm bills included programs for RUS to help
cooperatives increase energy efficiency for the benefit of
their customers.
Much credit is owed to this subcommittee, particularly
Ranking Member Merkley, for his leadership to enact the Rural
Energy Savings Program Act.
A robust regulatory agenda in recent years, and increased
bureaucracy, have admittedly been burdensome and challenging.
In the Great Plains region Sunflower serves, we are concerned
about recent regulatory initiatives, including those under the
Endangered Species Act and the lesser prairie chicken.
While the courts are considering various appeals, we
continue to study the cost implications of listing the bird as
threatened or endangered. Costs imposed on utilities via
regulation are passed on to ratepayers, thus increasing the
affordability of the service that we provide.
This is just one more example of how rural cooperatives
must pass costs on to our members in the face of
overregulation.
RUS finances future and improved distribution,
transmission, and generating systems. We are particularly
concerned that as a result of overregulation we will be
required to spend more of these dollars on regulatory
compliance costs. As such, it is vital that utilities spend
their time providing safe, affordable, reliable electricity and
using REDLG programs to contribute to a better rural America.
Sunflower, NRECA, and the cooperatives across the country
greatly appreciate this subcommittee and the full committee
support for funding the RUS electric loan program at the $6
billion level for fiscal year 2016.
Thank you also for recognizing the value that these
programs provide the rural communities we serve.
Thank you for inviting me here to testify. I look forward
to any questions you may have.
[The statement follows:]
Prepared Statement of Stuart Lowry
introduction
Thank you, Chairman Moran, Ranking Member Merkley, and members of
this subcommittee for inviting me to testify today at your hearing on
the Importance of Rural Development and, more specifically, on USDA's
Rural Economic Development Loan and Grant (REDLG) program.
I am Stuart Lowry, president and CEO of Sunflower Electric
Corporation in Hays, Kansas. Sunflower is a not-for-profit, wholesale
electric generation and transmission utility, commonly known as a G&T.
Based on the cooperative business model, Sunflower is owned and
democratically governed by its member-owners, six distribution
cooperatives serving more than 350,000 members in central and western
Kansas. Sunflower and its Distribution Cooperative Members provide more
than 800 jobs in communities located in the western half of Kansas.
I am also here today representing the National Rural Electric
Cooperative Association (NRECA). NRECA is the service organization for
more than 900 not-for-profit electric utilities serving over 42 million
people in 47 states. NRECA's members include 67 G&T cooperatives that
generate and transmit power to 66 of the 838 distribution cooperatives
across the nation. Electric cooperative service territory makes up 75
percent of the nation's land mass. Kilowatt-hour sales by rural
electric cooperatives account for approximately 11 percent of all
electric energy sold in the United States. NRECA member cooperatives
serve over 42 million Americans, including more than 8 million member
owners and 11,839 jobs in the 12 states represented on this
subcommittee.
I would like to thank the Chairman, Ranking Member, and the entire
subcommittee on behalf of Sunflower and NRECA for their long-standing
support of rural electric co-ops and their consumer-members. We are
also grateful for Administrator McBride's leadership and service to
cooperatives.
electric co-operatives and rural development
The development of electric co-ops is a perfect example of rural
development. As many of you know, well into the 1900s, a lack of
economic incentives left much of rural America literally ``in the
dark''--unserved by private power companies. This led to President
Roosevelt's forming the Rural Electrification Administration, then
known as the REA, in 1935 to establish programs that would lead to the
electrification of rural America via electric cooperatives. Now
restructured as the Rural Utilities Service to include other rural
utilities--such as those represented on this panel--RUS continues to
operate programs that benefit rural America under the umbrella of Rural
Development at USDA. Combined, these programs have allowed electric co-
ops to play a major role in strengthening small communities that are
essential not only to the nation's economy, but also to the way of life
valued by many.
Electric co-ops continue to take seriously the seventh cooperative
principle: Concern for community. The economic development work in
Rural America is not done and we appreciate the Subcommittee focusing
its attention on this important topic.
In June, NRECA convened a Rural Summit here in Washington. The
event gathered rural experts from the Administration in various Federal
departments, non-profit groups, academia, and other rural leaders to
hold a positive conversation about how to tackle the toughest issues
facing rural communities and main street economies. The next steps are
to take the Summit on Rural America into regional discussions around
the country and to populate a guidance group that can collect and share
best practices and ideas and explore a number of themes.
One theme is harnessing the value of the multiple profiles and
changing demographics of rural America. Another is growing interest in
the assets in rural America and investing in the infrastructure and
technology to connect rural America with the world. Participants also
highlighted the need for new ways of doing business and developing
educational opportunities and a workforce to conduct that business.
Other panelists highlighted the quality of rural life and the need to
address the public's perception of ``rural.'' These regional gatherings
are expected to focus on growth and diversification of the local
economies, the expanded role for technology in the rural economy, and
the need to focus on collaboration and communication.
Twenty-five years ago, NRECA was instrumental in forming the
National Rural Economic Developers Association, an organization that
provides education and networking for professionals who work to grow
our rural communities. NREDA has been very active promoting and
providing education for USDA programs, especially the Rural Economic
Development Loan and Grant Program.
REDLG is one of the programs that co-ops have utilized to help
enhance small-town America, and Kansas is just one of the many success
stories. REDLG is a $33 million loan and $10 million grant program
available to co-ops for economic development activities. The loan
program provides zero interest loans to local utilities that serve as a
pass through to small businesses for projects that create and generate
new jobs and revenue. The grant program provides funds to local
cooperatives that use the dollars to establish revolving loan programs
for specific projects. Once the loan is repaid to the revolving loan
fund, the cooperative continues to deploy the funds for additional
rural development projects.
In 2015, the loan program directed $32.5 million in loans to 29
coops that created 288 jobs and saved 436 more. These dollars enabled
energy efficiency projects, purchased rail offloading equipment,
ambulances, a library expansion and retirement communities. In
addition, 27 grants went to 18 co-ops for $7.1 million, which renovated
schools and hospitals, financed fire equipment, built fire halls,
purchased medical equipment, and updated 911 communications equipment.
The grant program saved 151 jobs and added 112 more.
A specific example of the ways Kansas cooperatives have used this
program includes
Prairie Land Electric, headquartered in Norton, Kansas, and Western
CooperativeElectric, headquartered in WaKeeney, Kansas, using funds
from their revolving loan funds for the Sheridan County Health Complex,
located in Hoxie, Kansas (population 11,201). The funds are being used
for hospital upgrades, including the addition of a CT scanner, so this
small community can enjoy improved access to healthcare. Together the
cooperatives loaned $575,000 to the health complex for this project.
Recently, Twin Valley Electric Cooperative from Altamont, Kansas,
was awarded a $200,000 REDLG loan for RBK Manufacturing LLC in
Coffeyville, Kansas (population 10,295). This successful manufacturer
of aftermarket auto parts and equipment will purchase additional
tooling equipment for expansion. The four additional jobs provided by
this expansion are important in small communities like Coffeyville.
These are excellent examples of how the REDLG program continues to
provide benefit to rural America. Kansas cooperatives are in good
company with the many other electric cooperatives that have used this
program to improve their community.
In Iowa, Corn Belt Power Cooperative and Butler County REC each
loaned $60,000 from their respective Revolving Loan Funds to assist
Allison Family Dental. Dr. Travis Harbaugh had just graduated dental
school and purchased the existing dental practice in Allison, Iowa
(population 1,025) from a retiring dentist. The purchase allowed a
dental practice to remain open in a rural community, retain three jobs,
and create four more.
Sioux Valley Energy in South Dakota provided funding for the Lake
Area Improvement Corporation to construct the Heartland Technology
Center in the Hueners Technology Park. The technology park is in
Madison, South Dakota,--(population 6,474). The Center has office space
designed to meet the needs of businesses needing a high-tech setting
and is located adjacent to nationally recognized Dakota State
University to provide immediate access to some of the best qualified
baccalaureate and masters graduates in computer science and information
systems.
An expansion for Brownmed Inc., headquartered in Spirit Lake, Iowa,
(population 14,952), allowed the company to more than double its
existing manufacturing facility of 30,000 square feet by constructing
an additional 51,000 square feet. The company manufactures more than 85
products for medical purposes, including the Seal Tight Cast,
Plastalume finger splint and IMAK arthritis compression products. Total
expansion costs were over $3.6 million. Iowa Lakes Electric Cooperative
received a $1,000,000 Rural Economic Development Loan through USDA for
the project, while loaning an additional $250,000 from their REDLG
revolving loan fund. Corn Belt Power loaned $150,000 from their
Intermediary Relending Program (IRP) Revolving Loan Fund toward the
project as well. Brownmed employs 66 people, 50 of whom are in the
Spirit Lake location. This is an excellent example of cooperatives
using multiple USDA programs to create jobs in their communities.
Recently, the list of entities eligible for the program has
expanded, which has placed more demand on the funds. The Administration
requested a budget of $60 million, and we would like to see the REDLG
program funded as close to this recommendation as possible. We support
reducing the maximum loan level to $1 million as this approach will
allow more projects to be funded in rural areas-- where a little
funding can go a long way.
In recent years past, the REDLG program benefited from millions of
dollars in unused funds carried over from previous years, dwindling
dramatically from $57.9 million in fiscal year 15 to only $8.2 million
in fiscal year 14. We appreciate the Subcommittee's efforts to make
these funds available after the year in which they were appropriated.
Unfortunately, given the high demand on the program, all funds have
been used during the fiscal year. If in the future, any funds remain
unused at the end of the year, we hope the Subcommittee will provide
the opportunity to carry-over funds to the following year in support of
the REDLG program.
guaranteed underwriter program
One critical source of funding for the REDLG program is the fees
paid by cooperative lenders under the Guaranteed Underwriter Program.
The level of fees is currently at $13 million.
We appreciate this subcommittee's work to increase the Guaranteed
Underwriter Program to $750 million in the fiscal year 16 bill. This
increase supports electric cooperatives by helping cooperative lenders
maintain a balanced portfolio to provide loans at attractive rates as
well as increasing the level of fees paid to support the REDLG program.
Since 2005, the National Rural Utilities Cooperative Finance
Corporation (Cooperative Finance Corporation) has accessed funding
through the Guaranteed Underwriter Program and used the funds to help
finance electric cooperatives' investment in rural utility
infrastructure projects such as poles, wires and substations. As part
of its long term commitment to the Guaranteed Underwriter Program, CFC
also pays fees to help fund the REDLG program. Recently, another
lender, CoBank has also utilized this program.
energy efficiency
RUS has recognized energy efficiency as an integral component of
electric cooperatives' energy resources. Co-ops have long been leaders
among utilities in the area of energy efficiency with 96 percent of co-
ops already providing some energy efficiency program to its consumer-
members.
Both the 2008 and 2014 Farm Bills included ways that RUS could help
co-ops increase energy efficiency for the benefit of their consumers.
The Energy Efficiency and Conservation Loan Program (EECLP) and the
Rural Energy Savings Program (RESP) are designed to help co-ops promote
energy efficiency and renewable energy to their consumers, saving
energy while also saving consumers money on their energy bills. One
such example is Midwest Energy Cooperative, located in Hays, Kansas,
which was among the first co-ops in the country to provide on-bill
financing for energy efficiency improvements for their consumer-
members.
These energy efficiency programs have a positive financial impact
on communities because they create jobs in rural areas and increase
economic activity due to savings resulting from energy efficiency
improvements.
Much credit is owed to Ranking Member Merkley for his leadership on
the Rural Energy Savings Program Act (RESPA), and we look forward to
working with him and other members of this subcommittee on ways to make
these programs most successful.
concerns going forward
A robust regulatory agenda in recent years and subsequent increased
bureaucracy have admittedly been burdensome. Electric co-ops are
concerned about having to spend more time figuring out how to comply
with new costly regulations and how to avoid passing those costs onto
our consumer-owners, all of which leave less time and resources
available for innovation and strengthening our existing services.
For example, in the Great Plains region where Sunflower serves, we
are concerned about recent developments with the Endangered Species Act
and the Lesser Prairie Chicken. While the courts are considering
various appeals, we continue to study the cost implications of listing
the bird as threatened or endangered. This is just one more example of
how rural cooperatives--averaging 7.4 consumers per mile of line and
collecting annual revenue of approximately $15,000 per mile of line
versus investor-owned utilities averaging 34 customers per mile of line
and collecting $75,500 per mile--must pass costs to our members. Rural
cooperative members are older, less financially stable, and fewer in
number and thus have limited ability to pay higher electric rates
created by the increased regulatory burdens.
The RUS allows co-ops to finance future and improved electric
distribution, transmission and generating systems. We are concerned
that, as the result of overregulation, we will be required to spend
more of these dollars on compliance costs. As such, it is important
that RUS is adequately funded so that utilities can spend less time
crunching numbers related to compliance costs for providing electricity
and more time engaging in other activities and programs, such as REDLG,
that contribute to an improved economy and a better quality of life for
our members.
Sunflower, NRECA, and co-ops across the country greatly appreciate
this subcommittee and the full committee's support for funding the RUS
electric loan program at the $6 billion level for fiscal year 16. Thank
you for recognizing the value that the electric program and co-ops
provide to approximately 42 million people every day.
We look forward to providing any information that would be helpful
to the committee and improving the opportunities or addressing the
challenges that face rural America. I thank you for inviting me to
testify and look forward to any questions you may have.
Senator Moran. Mr. Lowry, thank you very much.
We now turn to Mr. Brian Boisvert. Welcome.
STATEMENT OF BRIAN BOISVERT, CHIEF EXECUTIVE OFFICER
AND GENERAL MANAGER, WILSON COMMUNICATIONS
Mr. Boisvert. Good morning. Thank you, Chairman Moran,
Ranking Member Merkley, and Senator Cochran. Thank you for this
opportunity to testify before you about rural
telecommunications and its impact on rural development.
I am Brian Boisvert, CEO and general manager at Wilson
communications in Wilson, Kansas. I have been part of the rural
telecom industry for 37 years and with Wilson for the past 15.
Wilson communications is a local telecommunications
provider serving 1,500 rural Kansans over a 1,000-square-mile
area. We have 17 employees. We provide wireline voice, high-
speed broadband, and video services over a fiber-optic-based
network. We have been an REA, RUS borrower since 1956, and we
have a current loan for our fiber to the home build.
Broadband is an integral element in the 21st century and
beyond for rural development. Well-built and maintained
broadband networks make it possible to live anywhere and obtain
a college degree, be economically successful, receive
specialized medical care, and have access to entertainment and
shopping not generally available in rural communities.
So-called smart devices are appearing every day. In the
home, they monitor and help manage energy consumption, and they
can also alert the homeowners that the kids have arrived safely
home from school. Rural farming can be more efficient and safe
with bin monitors, heat sensors, and fuel tank level alerts.
Regardless of whether it is consumer-based for business or
emergency services, it all relies on a well-built broadband
network.
As an illustration of the scale of rural broadband build
networks, the Kansas rural telecommunication companies serve
approximately 10 percent of the population, but our service
areas cover 50 percent of the State's land mass. This is
typical of rural telecommunication providers all across the
Nation.
A business model does not exist for these low-population
density areas. This is why a predictable, sufficient, and
sustainable Universal Service Fund is critical for rural
development. Updated for broadband-capable networks, USF could
have the same successful impact it had when bringing telephone
service to every American.
The FCC issued its transformation order in 2011 with the
goal to modernize the Universal Service Fund. However, the
order created uncertainty throughout the rural
telecommunications industry, adversely impacting investments in
broadband-capable infrastructure throughout areas served by
rate-of-return carriers.
Even as I sit before you today, the rural
telecommunications providers still lack certainty for a
sufficient, predictable, and sustainable Universal Service
Fund. A USF that includes support for standalone broadband
service will be a cornerstone in bringing economic benefit for
rural development in small communities across the Nation.
We see an ever-increasing connection, an interdependence
between rural and urban areas. This relationship can be seen by
considering the Nation's farms. The bulk of the Nation's food
supply is produced in rural America, but their products supply
the entire Nation.
Agriculture, Kansas's dominant economic activity, can
benefit greatly from broadband-enabled services. Ag operations
can monitor grain prices online to optimize their revenues. And
if they are in the cattle business, they can bring their herd
to a local sale barn that is now utilizing online auctions.
This expands their market to beyond buyers who could only drive
to the sale.
The rural telecom industry contributes both to rural and
urban economies. Even at the height of the recent recession in
2009, the rural telecom industry contributed $14.5 billion to
the economies in States where they operated. The majority of
this economic activity, 66 percent, went to the benefit of
urban areas. Jobs supported exceeded 70,000, with 54.3 percent
in rural areas and 45.7 percent of these jobs in urban areas.
Building and maintaining these networks is clearly
important, but so too is broadband adoption. Combined, I
believe it will not only enhance rural development, but is
critical to rural community survival.
How do we achieve this? One important factor is the
continued availability of RUS loans. Making capital available
to small companies at competitive rates is critical for the
continued investment in modern infrastructure. The ability to
keep rural consumer rates reasonably comparable to urban rates
is a key goal of universal service.
Taken together, the availability to capital and ongoing USF
support will help ensure rural development in a stronger and
connected Nation.
Thank you, Mr. Chairman, Ranking Member Merkley. I am happy
to answer your questions.
[The statement follows:]
Prepared Statement of Brian Boisvert
introduction
The Rural Telecommunications Industry
Chairman Moran, Ranking member Merkley, and members of the
subcommittee, thank you for this opportunity to testify before you
about rural telecommunications and its impact on rural development. I
am Brian Boisvert, CEO/General Manager at Wilson Communications. My
remarks today are on behalf of Wilson Communications, as well as NTCA--
The Rural Broadband Association and their several hundred small
community-based members that provide a variety of communications
services throughout the rural far reaches of the nation.
I have been part of the rural telecommunications industry for 37
years and with Wilson for the past 15 years. Wilson Communications is a
local telecommunications provider serving 1,500 rural Kansans over a
11,000 square-mile area. Wilson has 17 employees. We provide wireline
voice, high-speed broadband and video services over a fiber optic-based
network. We have been REA/RUS borrowers since 1956 and have a current
loan for our FTTH build.
Small, rural telecom providers connect rural Americans to the
world. Moreover, these rural network operators have been at the
forefront of the broadband and Internet Protocol (``IP'') evolution for
years, making every innovative effort to deploy advanced networks that
respond to consumer and business demands for cutting-edge services. In
rural America, that translates into economic development that produces
jobs, not only in agriculture, energy and other industries with a
strong rural presence, but in the healthcare sector, and just about any
other retail industry that requires broadband to operate in this day
and age. Broadband has become essential to delivering healthcare and
securing the public safety. And much of the business world is already
demanding higher broadband speeds to help it interact with and sell to
customers near and far. Broadband and other services provided by the
rural telecom industry serve as an incubator for small business ideas
in rural America to be implemented and to flourish.
Fixed and mobile broadband, video and voice are among the numerous
telecom services that rural Americans can access thanks to the rural
industry's commitment to serving sparsely populated areas--and the
rural development and other essential governmental programs that make
it possible to carry out this commitment. Broadband-capable networks
facilitate greater interconnection of the community's resources and can
enable citizens' participation in the global economy, blue-ribbon
education, first-rate healthcare, cutting-edge government services,
robust security and more efficient energy distribution and use.
The rural telecom industry has always been at the forefront of
technological innovation, being the first segment of the industry to
completely convert to digital switched systems, provide wireless
options to their hardest to reach customers, offer distance learning
and tele-health applications, provide cable-based video, then satellite
video, and now IP video to their markets, and it was a member of the
RLEC community that first deployed an all-fiber system. The rural
industry continues to lead in the deployment of broadband capable
infrastructure.
rural broadband benefits the entire u.s. economy
A series of studies confirms that significant benefits flow from
rural broadband investment to broader urban and statewide populations.
For example, the Hudson Institute has found that investment in rural
telecommunications delivers real payback for the entire nation,
generating $14.4 billion annually in economic activity as of 2011--$9.6
billion of which accrued to the benefit of urban areas, and more than
70,000 jobs, 45 percent of which were placed in urban areas.\1\ In
Colorado, rural telecom helped create 428 jobs, adding over $21 million
per year to state payrolls.\2\ North Dakota saw an additional $18
million in Federal tax revenue and $31 million in state tax revenue
arising out 1,100 direct jobs and 800 secondary jobs generated by rural
telecommunications activity.\3\
---------------------------------------------------------------------------
\1\ Kuttner, Hanns, The Economic Impact of Rural
Telecommunications: The Greater Gains, Hudson Institute, at 6, 8
(2011).
\2\ Shields, Martin, Cutler, Harvey, and Marturana, Michael, The
Impacts of Colorado Telecommunications Association Members on the
Colorado Economy, Regional Economics Institute, Colorado State
University, at 9 (Oct. 26, 2011).
\3\ McKee, Gregory, The Effect of Changes in Universal Service
Funding on the Economic Contribution of Rural Local Exchange Carriers
to the North Dakota State Economy, Department of Agribusiness and
Applied Economics, Agricultural Experiment Station, North Dakota State
University, at 16-19 (Dec. 2011) (``Like other RLECs, North Dakota
RLECs buy many specialized products and services not available in state
economies. National and international markets typically provide these
products and services.'').
---------------------------------------------------------------------------
The converse holds true, however, from adverse changes--``reforms''
that depress or cut investment in rural broadband hurt state economies.
In Kansas, for example, potential cuts in Federal rural telecom
programs were projected to result in $1.4 million in personal income
tax losses and $1.3 million in retail sales tax losses.\4\ A personal
income loss of $14.1 million was projected for 2012 alone in New Mexico
from the same proposed cuts.\5\ Studies examining the impact of rural
communications activity--including purchasing, employment figures, and
projected tax revenues--confirm rural communications to be a powerful
generator of urban economic growth and Federal and state tax revenue.
In short, rural broadband is an investment with real benefit and
returns for the nation as a whole.
---------------------------------------------------------------------------
\4\ Kansas Rural Local Exchange Carriers: Assessing the Impact of
the National Broadband Plan, W. Frank Barton School of Business, Center
for Economic Development and Business Research, Wichita State
University, at 11, 12 (2011).
\5\ Peach, James, Popp, Anthony V., and Delgado, Leo, The Potential
Economic Impact of the National Broadband Plan on the New Mexico
Exchange Carriers Group, Office of Policy Analysis, Arrowhead Center,
New Mexico State University, at 18 (2011)).
---------------------------------------------------------------------------
To not have access to high-speed Internet in this day and age is
unimaginable to most people, yet millions of Americans live in areas--
mostly in rural territory served by carriers other than small, rate-of-
return providers similar to Wilson--where there is no robust broadband
that enables meaningful access to the countless economic and
educational opportunities available through the Internet. These people
have small business ideas that need broadband to succeed and they need
jobs that small businesses can provide. Yet, as important as it is to
deliver broadband to the unserved, it's equally vital that those
already receiving broadband remain served--the benefits that flow from
broadband are ongoing. If a network is built in a rural area but then
becomes unsustainable or the services over it unaffordable or of poor
quality, such developments deny the benefits of broadband for small
businesses and all consumers. Thus, the mission of universal service--
and the economic benefits it delivers locally and to the nation as a
whole--require ongoing operations, effort, and support to be realized.
rural utilities service financing
RUS Role in Rural Telecom Deployment
USDA's Rural Utilities Service (RUS) plays a crucial role in rural
broadband deployment through its telecommunications programs that
finance network upgrades and deployment in rural areas. RUS has been
lending for broadband capable plant since the early 1990s. RUS lending
and Universal Service Fund (USF) support are inextricably linked as
more than 99 percent of RUS Telecommunications Infrastructure borrowers
receive high cost USF support. The presence of high cost recovery
through USF support is therefore crucial to the RUS telecom and
broadband loan calculus. RUS programs have helped rural providers
deploy modern networks in many rural areas where the market would
otherwise not support investment. Reliable access to capital helps
rural carriers meet the broadband needs of rural consumers at
affordable rates.
Unfortunately, the success, momentum, and economic development
achieved from the RUS's telecommunication programs were put at risk as
a result of the regulatory uncertainty arising out of USF reforms--some
enacted, some revoked, and some still pending consideration--which are
discussed in greater detail below. It will be all the more important to
continue providing RUS with the resources it needs to lend to the rural
telecom industry as demand for financing should increase when reforms
are improved and small carriers are given certainty, hopefully through
targeted updates to the existing USF programs designed to re-establish
clarity and promote broadband investment. As Congress continues to
grapple with where to best direct scarce resources, it's important to
note that the RUS Broadband Loan Program and the traditional
Telecommunication Infrastructure Loan Program make loans that must be
paid back with interest--creating a win/win situation for rural
broadband consumers and taxpayers. Rural providers look forward to
building on an already successful partnership with RUS.
Appropriations
We appreciate the Appropriations Committee's efforts to ensure the
FCC continues to receive direction with respect to USF cost recovery
support and making sure that the RUS Telecommunications Program is
adequately funded. The committee agreed as well with NTCA's request to
extend the prohibition on the FCC from subjecting USF to the Federal
Anti-Deficiency Act through December 31, 2017, and to extend the long-
running prohibition on any sort of primary-line restriction on USF
support through the end of fiscal year 2016. The committee further
agreed to reject the Administration's budget request to divert $25
million in USF funds for additional unnecessary reviews and
investigations in the wake of a series of earlier costly audits that
identified no noteworthy program issues to begin with. This
subcommittee also favorably responded to NTCA's request for report
language directing the FCC to complete the development of a fully
functional, broadband-oriented USF program for rural rate-of-return
carriers. Mirroring language was also included in both the FCC bill and
the RUS appropriations bills directing the two agencies to work
together to ensure that the USF and RUS programs operate in a
coordinated fashion rather than to the possible detriment of one
another. Clearly this subcommittee played an integral role in
developing each of these initiatives and ensuring they were a part of
the package agreed to by the full committee, and we applaud your
leadership.
universal service
The FCC's Universal Service Fund Reforms
RUS programs represent one important side of the coin--governmental
programs intended to provide capital to enable investment in
infrastructure in rural areas. As mentioned earlier, however, there is
another, equally important side of that coin--governmental programs
intended to ensure that networks, once deployed, can be maintained and
upgraded, and that services offered atop those networks will remain
affordable and of high-quality for consumer adoption and use.
No issue is perhaps more important to the fundamental capability of
small telcos to deliver services in high-cost, sparsely populated rural
markets than the availability of sufficient and predictable universal
service support. The ongoing availability of USF support is essential
to ensure that rural telcos can make the business case to invest in
robust advanced networks, to enable the operation of those networks
over many years, and to facilitate consumer use of services at
affordable rates. (USF support is, in this regard, an essential
complement to RUS programs that only serve to finance network
construction in the first instance.) NTCA has made substantial efforts
to restore regulatory certainty to the USF program, and has sought
thoughtful upgrades to the USF mechanism consistent with a broadband-
oriented world.
For rural areas like those served by Wilson Communications and
other NTCA members, FCC rules still require customers to purchase
landline voice telephone service in order for their connection to
receive USF support. The customer is thus effectively denied the option
of cutting the landline-voice cord and purchasing only broadband. Such
outdated rules that undermine consumer freedom and inhibit
technological evolution present an obstacle to the technology
transition that consumers and industry are making and the FCC is
working to expedite and facilitate in other contexts. While Universal
Service programs should certainly support and require the offering of
voice services, it should not compel consumers to buy voice to obtain
affordable broadband. The FCC should move forward immediately to adopt
and implement a carefully tailored update of USF that will provide
sufficient and predictable support for broadband-capable networks in
areas served by smaller rural carriers. Earlier this year, over 175
members of Congress (including 61 senators) wrote to FCC Chairman
Wheeler, urging him to make targeted fixes to the existing USF
mechanism to solve ``the standalone broadband problem.'' \6\
---------------------------------------------------------------------------
\6\ See US Senate letter led by Senators Thune and Klobuchar dated
May 11, 2015 and US House letter led by Representative Kevin Cramer
dated May 12, 2015, both sent to FCC Chairman Wheeler.
---------------------------------------------------------------------------
The FCC is in the midst of considering such reforms now, and has
made commitments to many in Congress to take action on ``the standalone
broadband problem'' by year's end. We have been working closely as an
industry with the FCC and other stakeholders to make this a reality. It
is key, however, to ensure at the same time that these reforms are
undertaken thoughtfully, with an understanding of the consequences of
specific changes on investment incentives, access to capital, and
ultimately consumers. As an industry that lived through a series of
reforms in 2011 that created confusion and uncertainty and ultimately
only depressed investment--until Congress helped to push the FCC to
roll back some of the worst parts of that reform--it is essential to
rural telcos that reform both gets done quickly and gets done right. We
hope that the FCC will find a way to deliver on the requests of
Congress to fix the standalone broadband problem, and we are committed
to staying at the table to come up with a solution that responds to
that call, fulfills shared principles for reform, and ultimately
comports with the statutory mandates for a sufficient and predictable
support mechanism that enables the offering of reasonably comparable
services at reasonably comparable rates in rural and urban America
both.
The broadband revolution presents major opportunities for small
businesses to innovate and grow, but the business (or entrepreneur with
an idea) must have broadband access to take full advantage. Markets
will ensure many consumers realize the full benefits of innovation at
the lowest possible prices, but in rural areas there are often no such
markets to speak of. Though small, rural providers have been leaders in
broadband investment under the current statutory and regulatory regime,
further law and policy changes will be necessary to ensure high cost
rural areas remain served. A faithful and disciplined approach to the
core Communications Act principle of universal service must therefore
ensure that, even in the event of any statutory or regulatory update,
those areas served through support from Federal and state USF
mechanisms not only ``become'' served in the first instance, but that
they ``remain'' served, and that consumers and businesses everywhere
can make full use of sustainable advanced communications services at
affordable rates.
Finally, Congress should consider an express directive to the FCC
to ensure that all who use our nation's networks--by whatever service
or technology--are responsible to contribute to the universal well-
being and availability of those networks on an equitable basis. USF is
still funded by assessing interstate and international long distance
telephone service. The pool of assessable telecommunications service
revenues is shrinking even as overall communications-related revenues
grow. As a result, the USF program effectively has an artificial
funding ceiling that lowers a bit each day due to the failure to
broaden the contribution base. This de facto cap on the USF program
will handicap severely our nation's ability to fulfill the statutory
core principles unless changes are made. Indeed, broadening the
contribution base to include the services that USF already supports has
previously received bipartisan backing in the US House.\7\
---------------------------------------------------------------------------
\7\ See H.R. 5828 Sec. 102(a), 111th Cong., 2d Sess. (2010).
---------------------------------------------------------------------------
conclusion
Entrepreneurial small rural carriers have leveraged public and
private capital, universal service support, and public-private
partnerships to lead the ongoing IP Evolution. These small businesses
play an essential role in deploying broadband to rural areas, and the
services enabled by broadband are essential to the startup, operation,
and growth of other rural small businesses. Rural America has a bright
future powered by smart technologies that promote affordability,
sustainability, and efficiency in the operation of rural industry and
the delivery of essential services such as healthcare, education, and
public safety--all key to rural population growth. The benefits that
some rural communities are already experiencing will only be possible
for all if robust broadband is available, affordable and sustainable.
Rural telecom providers and lenders such as RUS must have regulatory
certainty before they can make greater investments in the networks of
the future. One important key to regulatory certainty is a broadband-
oriented support mechanism for small, rate-of-return carriers that
gives rural consumers options in selecting the services that best fit
their needs on the networks that the mechanism helps to enable and
sustain.
Senator Moran. Thank you very much.
Mr. Chrisman, before you testify, let me recognize the
Senator from Oregon, Senator Merkley.
Senator Merkley. I am delighted that Mr. Chrisman has been
able to come and share his experience, and to be accompanied by
his wife, Julie.
Mr. Chrisman is from Enterprise, Oregon. Along with his
brother, Doug, he has been working to provide affordable
housing to Oregonians for 25 years. They have developed over 50
affordable housing projects and manage an additional 50,
serving more than 3,000 households across rural Oregon and
Washington. Their business employs about 200 people.
Mr. Chrisman is a valuable and successful user of Rural
Development programs, specifically multifamily housing programs
and USDA's rental assistance program. His insight and
experience from the frontline will point to a substantial
challenge that we have right now that needs to be addressed
urgently.
I am so delighted you could come and share your testimony.
Senator Moran. Mr. Chrisman.
STATEMENT OF TONY CHRISMAN, VICE PRESIDENT AND OWNER,
CHRISMAN DEVELOPMENT INC.
Mr. Chrisman. Thank you. Good morning, Chairman Moran,
Ranking Member Merkley. My name is Tony Chrisman. I am a rural
housing developer and property manager from Enterprise, Oregon.
It is pretty interesting to hear all the stories about
rural America. The town I live in does not even have a
stoplight. But we have been able to develop a business even in
that small community.
It is an honor to appear before you today to discuss the
urgent situation involving the USDA Rural Development
Multifamily Housing Rental Assistance Program. My company has
developed, owned, and managed affordable housing complexes for
26 years. We developed over 50 affordable housing projects and
manage an additional 50 projects, representing over 3,000
households across Oregon and Washington. We have 200 employees.
Seventy-five percent of the projects that we own and manage
have been funded through the USDA Rural Development Multifamily
Housing Program and receive project-based rental assistance
directly from USDA Rural Development. That is the payment that
is made on behalf of the low-income tenants, which pays part or
all of their monthly rent and utilities.
I am here to bring your attention to the current crisis
that has occurred. This summer, we were alerted to the fact
that the rental assistance program faced a shortfall of funding
due to language that was included in the Consolidated and
Further Continuing Appropriations Act of 2015. We received one
notice in the mail from Rural Development that one of the
projects we manage would no longer be receiving rental
assistance for the next 5 months.
We were very concerned about that. We began doing
additional research and realized the balance of our Rural
Development properties were also going to be affected.
What we discovered was alarming. Due to a change apparently
requested by USDA Rural Development, rental assistance
contracts could no longer be renewed as they had been in
previous years. In addition, due to the fact that USDA RD
budgeted each project's rental assistance based on a statewide
average and not their actual use, any project with a higher
than statewide average of rental assistance faced a shortfall.
In August of this year, Rural Development failed to provide
rental assistance to many of our properties. As of last Friday,
17 projects representing 770 low-income households have not
received rental assistance for at least 1 month. The amount of
rental assistance not paid to date is $365,000.
For a small company such as ours, the consequences of this
situation could bring an end to our business. We received no
official notice or any indication from Rural Development that
payments would not be made with one exception. These payments
generally represent about 80 percent of the monthly revenue for
each affected property.
We have no idea when payments may resume. Unfortunately,
just listening to Administrator Hernandez, it appears that they
still have not decided whether they are going to pay the back
payments or not, even after the continuing resolution.
We are left in a no-win situation with low-income tenants
who are unable to afford their rent and Rural Development
unwilling or unable to pay rental assistance on their behalf.
What is happening with our company and tenants is playing
out across the country. There are 272,000 units of affordable
housing and 14,900 properties across the United States that
receive Rural Development rental assistance.
We have talked to other affordable housing owners and
managers across the country and discovered they are
experiencing the same thing, and payments of rental assistance
are not being made. Many owners and managers of these
properties were giving the low-income tenants notice that they
need to pay much higher rents as a result of rental assistance
not being paid on their behalf.
If this situation is not remedied, significant impacts will
occur. First, without regular rental assistance payments, most
tenants cannot afford the full rent on their own. As a result,
they face displacement and possibly homelessness. The average
income of our portfolio of the tenants who receive rental
assistance is approximately $10,000. The average household
income of the families who live in the USDA Rural Development
properties is extremely low, and these tenants represent some
of the most vulnerable members of our society.
The way USDA Rural Development has dealt with this matter
will result in tenants with the lowest incomes and greatest
needs being displaced from housing that many of them have lived
in for years.
Second, the 14,900 existing USDA-funded properties across
the country will face foreclosure, bankruptcy, and possibly
default on their financial obligations.
The third consequence of the situation is that many jobs
across rural America will be in jeopardy as these projects fail
and managers, contractors, and support staff are terminated.
I am here today to ask for your help to resolve this
situation. Thank you.
[The statement follows:]
Prepared Statement of Tony Chrisman
Good morning, Chairman Moran, Ranking Member Merkley, and
distinguished Members of the Subcommittee. My name is Tony Chrisman and
I am a Rural Housing Developer and Property Manager from Enterprise,
Oregon. It is an honor to appear before you today to discuss an urgent
situation involving the USDA Rural Development Multifamily Housing
Rental Assistance Program.
My companies have developed, owned, and managed affordable housing
complexes for 26 years. We have developed over 50 affordable housing
projects and manage an additional 50 projects representing over 3000
households across rural Oregon and Washington. We currently employ
approximately 200 people.
75 percent of our housing projects have been funded through USDA
Rural Development multifamily housing programs and receive Project
Based Rental Assistance directly from USDA Rural Development. Rental
Assistance is a payment made on behalf of low income tenants which pays
part or all of their monthly rent and utilities based upon the tenants'
income.
I am here to bring your attention to the current crisis that has
occurred in the USDA Rental Assistance program. This summer, we were
alerted to the fact that the Rental Assistance Program faced a
shortfall in funding due to new language that was included in the
``Consolidated and Further Continuing Appropriations Act, 2015.'' We
received a single notice from USDA Rural Development that one project
we managed was going to run out of Rental Assistance in 30 days and
would not be eligible for further payments for 5 months. We were very
concerned. We began doing additional research on the balance of our
USDA Rural Development properties to determine if other projects would
be affected. What we discovered was alarming. Due to a change,
apparently requested by USDA Rural Development, in the language of the
``Consolidated and Further Continuing Appropriations Act, 2015'' Rental
Assistance contracts could no longer be renewed as they had been in
previous years. In addition, due to the fact that USDA RD budgeted each
project's Rental Assistance based upon a state-wide average and not
their actual budgets, any projects which had higher than the state-wide
average of Rental Assistance faced a shortage.
In August of this year, USDA Rural Development failed to provide
Rental Assistance to many of our properties. As of October 15, our
companies have 17 projects representing 770 low income households that
have not received Rental Assistance for at least 1 month. The amount of
the Rental Assistance not paid to date is $365,000. For a small
companies such as ours, the consequences of this situation could bring
an end to our business. We received no official notice or any
indication from USDA Rural Development that payments would not be made
with one exception. These payments generally represent about 80 percent
of the total monthly revenue for each affected property.
We have no idea when payments may resume and if payments will be
made in arrears. Virtually no communication has been forthcoming from
USDA Rural Development. We are left in a no win situation with tenants
who are unable to afford their rent and USDA Rural Development
unwilling or unable to pay rental assistance on their behalf.
What is happening with our companies and tenants is playing out in
other parts of the country right now. USDA RD Rental Assistance
supports 272,322 units of affordable housing in 14,900 properties
across the United States. We have talked to other affordable housing
owners and managers across the country and have discovered that they
are experiencing the same thing and payments of Rental Assistance are
not being made. Many owners and managers of these properties have given
the low income tenants notice that they need to pay the much higher
rents that result from the USDA Rental Assistance not being paid on
their behalf. Several newspapers across rural America have documented
that low income tenants are now being asked that their portion of the
rent increase dramatically.
If this situation is not remedied significant impacts will occur.
First, without regular Rental Assistance payments, most tenants cannot
afford the full rent on their own and as a result, they face being
displaced and possibly homeless. The average household income in our
portfolio is less than $10,000 per year. The average household incomes
of the families that live in USDA Rural Development properties is
extremely low and these tenants represent some of the most vulnerable
members of our society. The way USDA Rural Development has dealt with
this matter will result in tenants with the lowest incomes and the
greatest needs being displaced from housing that many of them have
lived in for years.
Second, the 14,900 existing USDA funded properties across the
country will face foreclosure, bankruptcy, and will default on their
financial obligations. In our case, since many of our projects have
been funded with Federal Low Income Housing Tax Credits and additional
funding sources such as State low income housing loans and commercial
loans, serious financial outcomes will result.
Our companies' business has primarily been to preserve older
affordable housing projects by acquiring the properties and using a
multitude of State and Federal funding mechanisms to recapitalize,
rehabilitate, and preserve the properties in order to keep the valuable
federally funded rental assistance. The state of Oregon and Washington
have funded and invested in numerous projects specifically to preserve
projects like these across rural areas. The shortage of Rental
Assistance puts all of this work at risk. State and Commercial
financing will dry up if the availability of the Rental Assistance is
lost. Banks and Investors will stop investing in the low income housing
tax credits that have been used to fund these properties. Losses will
be large.
Finally, the third consequence of this situation is that many jobs
across rural America will be in jeopardy as these projects fail and the
managers, contractors, and support staff will be terminated.
It is our understanding that several things need to happen to in
order to remedy this current situation.
First, language limiting the ability of USDA Rural Development to
renew contracts only once a year must be removed from next year's
budget. The recently passed Continuing Resolution addresses this issue
until December, but unfortunately it does not deal with the longer term
issue. We need this language removed from future budgets.
Second, according to industry groups, it appears that the USDA RD
Rental Assistance Budget is not sufficient to meet the requirements of
the program. Although the USDA has repeatedly insisted that their
budget was sufficient, it clearly was not sufficient and USDA ran out
of rental assistance funds this past summer for many projects. Industry
groups believe the budget is short by approximately $220 million. USDA
Rural Development has not been forthcoming about the exact amount of
the shortfall.
There are numerous other proposals that could make this program
more effective and return the focus to managing the properties and
supplying housing for low income rural families. However, if the
current Rental Assistance Crisis is not fixed none of these proposals
will matter.
Thank you for allowing me to testify and I look forward to
answering any questions you might have.
Senator Moran. Mr. Chrisman, thank you very much.
I thank all of our panel. We are going to take some time
now and have a conversation and ask you questions and solicit
your answers.
I would start with you, Mr. Chrisman. You heard the
conversation earlier between Senator Merkley and Rural
Development, between me and Rural Development. I would indicate
that today's hearing is the first indication that we have had
from Rural Development that the language that was included in
the omnibus bill, the legislation that you described, was
insufficient to backfill the rental assistance.
We will continue to press Rural Development for more
clarity, because we believe they have the authority to do what
needs to be done. It does not solve the problem permanently,
but it certainly solves the immediate problem. We will continue
our efforts, and I look forward to working with your Senator,
Senator Merkley, in that regard.
What is the authority by which tenants can be required to
pay additional rent in this circumstance? Is that carte
blanche? Are there restrictions? One, I understand the
financial circumstances that most if not all of those tenants
are in, so it is not a practical solution. But what is the
legal ability to raise rents in the absence of the rental
assistance?
Mr. Chrisman. In our portfolio, our lease agreement
specifically lays out, if Rural Development does not pay the
tenant's portion of the rent, it is not really a rent increase.
The rents are set by Rural Development, and then they pay a
certain percentage of the rent. So we would just go to our
lease agreement. When the rental assistance payments stop, we
are allowed to raise the rent to the level that the rent is set
at with the difference.
Senator Moran. So you have the legal ability under your
rental agreement to raise the rents. You do not have an ability
to actually accomplish those increased rents being paid.
Mr. Chrisman. The reality is most of the tenants could not
pay them even if you raised the rent on them. So what do you
do? We have been in the business of serving this population for
25 years. Now we are in a situation where, no matter what
happens, we are going to make the wrong decision. Tenant
advocates will sue us if we start charging them the additional
rent. The tenants, if we do evict them, because that is really
where you are going with this, they have no other place to
turn.
Senator Moran. Are your rental agreements approved in
advance by USDA?
Mr. Chrisman. They are.
Senator Moran. So the authority that you described, the
legal authority that you described, an ability to raise the
rent in the absence of rental assistance, is something that
USDA has approved in your rental agreement?
Mr. Chrisman. That is right.
Senator Moran. Okay. I would tell you, Mr. Chrisman, in
Kansas, the most common conversation I have with a Chamber of
Commerce executive, an economic developer, a mayor, a city
councilmember, when you are visiting a community and you want
to talk about what is going on in the community, almost without
exception the conversation turns to lack of housing.
Do you avail yourself, does your company avail yourself to
programs outside Rural Development, outside USDA? Are you
involved in the Department of Housing and Urban Development
(HUD) programs or others? And can you tell me, the Rural
Development programs, why they are useful to you? What the
problems are? Is there someplace else you could go that would
be a better source of assistance to accomplish the goal of
housing for low-income people across the country, in particular
rural America?
Mr. Chrisman. We use the HUD programs, low-income housing
tax credit programs. But the unique characteristic of the Rural
Development program is the portfolio of properties that were
built in the 1970s and 1980s that have the rental assistance,
there is just no substitute for that. These serve the lowest
income families and the most needy people in our whole
communities.
I would say most of our properties are probably 25 percent
chronically mentally ill tenants who have no alternative. They
get a disability payment and that is their only option. So
there is no substitute for these programs because rental
assistance does not exist in any other format except the Rural
Development program.
Senator Moran. Thank you.
My time has expired. We will have another round.
Senator Merkley.
Senator Merkley. I want to continue this conversation,
because this is so important.
During the more than 2.5 decades that you have been
involved, has there been another situation, another year, when
suddenly you were at the end of the fiscal year and payments
were going to stop?
Mr. Chrisman. This has never happened in the Rural
Development program. There was a short period during the
sequestration when there was a question. But in that situation,
Rural Development was notifying us, telling us what was going
on. We have never had a situation where we did not receive any
notice.
I mean, you can imagine running a business, you have lawn
mowers and people working at the project, and you get no notice
and you have no rent. Eighty percent of the revenue for that
month does not come in.
Senator Merkley. So even though there is a clause in the
contract that says, if Rural Development stops paying, the
tenant is responsible for the full amount of the rent, no one
anticipated that clause would ever have to be used. In fact, no
one would think that it could be used because these tenants
could not possibly pay the full rent.
Mr. Chrisman. That is right.
Senator Merkley. So now you are in this difficult
situation. Different owners have probably taken different
approaches. At this point, have you notified tenants that they
are responsible for the full rent? Are you holding out for us
to get a successful response from Rural Development to backfill
the hole?
Mr. Chrisman. We have not notified the tenants. We spent a
lot of time talking about it. But these are the people who we
have been serving for 25 years. These are mothers of people I
went to high school with, friends I went to high school with. I
know a lot of the tenants. I just cannot see us doing it,
unless it is the very darkest end.
We thought the continuing resolution had temporarily
resolved it, but the testimony I just heard sounds like that
may not be the case. So some of these projects that have
shortages, it looks like, according to Administrator Hernandez,
may not be getting paid.
So I am a little frustrated to hear that.
Senator Merkley. I am so glad you are here. Because of this
hearing, we learned for the first time today that the language
that we worked out with bipartisan staff involved, with Rural
Development involved, signing off on the language, that they
have some legal concern, a legal concern that we have not heard
the details of. We did not know until today that they had run
into an obstacle here.
We are going to push very hard to get to the bottom of it.
If you were to follow the contract and ask for the full
rent and your tenants would not then would not be able to pay
it, then there is just no good answer. An eviction results in
homelessness. As you put it, there is no option. We would be
putting people into the street across rural America, because
there are thousands of projects involved here. That is just
unacceptable.
You are nodding your head. I will just record that for the
record.
Mr. Chrisman. Yes.
You are telling me things I have been thinking about all
summer. It is a very frustrating situation to be in.
Senator Merkley. There are clearly changes in the way that
this program was administered internally that led to this as
well. And when I say that, you refer in your testimony to the
fact that the projects were assigned an average. Any project,
any multifamily housing complex that has very low-income
tenants who are below the average, then that average is going
to result in a shortfall at the end of the year.
Then we have the bigger issue of the missed estimate for
what the program would cost across America. That is the $110
million or so shortfall or $100 million shortfall that we
referred to earlier.
So we are going to push very, very hard to get this program
backfilled and to resolve the issue for this coming year, so
that we are not in this situation come August or July of next
year. The estimates that we have show an even larger deficit.
So I think there are mechanics that have to be fixed in the
way that funds are assigned to individual projects, and an
overall deficit that has to be addressed. My hope is that
common sense will quickly prevail and that we will get to the
bottom of this. We have been trying to. We thought we had.
Let me just say, this is a 100-percent absolutely
unacceptable way to treat the owners of these complexes who are
administering these in partnership with the U.S. Government.
But it is absolutely unacceptable that the tenants be on the
receiving end of these missteps.
So thank you so much for shedding a personal spotlight on
the problem. I think it will have helped a great deal that we
have had this conversation in public today.
Mr. Chrisman. Yes. It is my pleasure to be here.
Can I respond?
Senator Moran. You may.
Mr. Chrisman. It is hard for me to believe that the agency
cannot calculate the amount of rental assistance. This program
is a very stable program. I mean, I am terrible at math, but I
think I could do it.
The fact that they could be off by hundreds of millions of
dollars, listening to that was just unbelievable to me.
Senator Moran. Thank you for responding. I share the same
sentiments. We have never been officially notified of a
shortfall to begin with. We have never been notified that the
language in the continuing resolution designed to temporarily
resolve this issue is insufficient. And only, again, today did
I learn that there is no capability of telling us what that
number is.
So thank you for your testimony. We are glad we had this
hearing so that we now know this. Although I would assume we
would begin hearing from you and others in your circumstance as
your representatives. This would not have been something that
would go on much longer.
My impression is from your testimony is you were expecting
this problem to be resolved. You have not taken the effort to
try to collect money from tenants. You apparently had not
notified Washington, DC, us, of a problem because you assumed
that was being taken care of.
Mr. Chrisman. Well, we have actually been contacting
Washington, DC, all summer because once we found out there was
a shortage, we were so shocked, because for all these years,
the budgets that you get may be inaccurate, but the rental
assistance has always been paid. So we did not really believe
it until the first payments just stopped.
Like I said, 17 properties, only one of them received any
written notice or anyone at RD telling us that there is no
rental assistance.
Senator Moran. Tell me again, those payments stopped when?
Mr. Chrisman. In August.
Senator Moran. August.
Mr. Chrisman. We have a whole bunch more properties, and
it's our calculation they are just going to keep on stacking up
until about 75 percent of our Rural Development portfolio will
not be getting payments.
Senator Moran. Thank you very much.
Mr. Boisvert, does Wilson, Kansas, have a stoplight?
Mr. Boisvert. No, we do not.
Senator Moran. I just want to make sure that we were not
out-Kansaned the gentleman from Oregon.
Senator Moran. There has always been an excess, Mr.
Boisvert, in the demand for RUS telecommunication loan
programs. There has always been more demand than dollars
available. But that is not so true anymore.
Recently, I would say in the last 3 years, the demand for
RUS loans no longer exceeds the supply. I wonder if you could
explain why that is.
My impression would be the uncertainty that your company or
others in similar circumstances face, not knowing what the
Universal Service Fund requirements are going to be, what
revenue is going to be generated from that fund for your
company and others, means that there is less demand for the
loan program at RUS.
Does that assumption have any validity?
Mr. Boisvert. Mr. Chairman, yes, it does. I think we would
see that demand correlate to the 2011 FCC order on the
Universal Service Fund.
As you know, when we take out RUS loans, those are long-
term loans. Those are done with a certain understanding of what
is in place for universal service, consumer rates, all the
things that a company would use to operate and repay its debt.
So when the order came out, a great amount of uncertainty
did occur with the changes that were there. As I mentioned in
my comments, the new mechanism known as Connect America Fund,
or CAF, there is still not one for the rate-of-return part of
the industry, which Wilson is part of.
So clearly, I think the demand is still there. If you look
at rural companies, we are in probably one of three phases of
building out our networks to bring broadband to rural Kansans
and others across the country. They are built with debt to
repay and costs operate. They are partially built, which is our
case. But I have not felt comfortable completing the build. And
there are those who have yet make that next step in the
investment but want to and plan to, as soon as certainty does
resume with universal service.
Senator Moran. Maybe a way of saying what I was attempting
to ask is not that there is less demand, but there are less
applications for that money, waiting for certainty to arrive,
similar to Mr. Chrisman waiting for certainty to occur.
The point I would make, and ask you to agree or disagree,
is I often think of this issue of the order of 2011 as an
impediment toward a telephone company's ability to repay loans
that already are in existence to RUS. So less revenue means
that our ability to repay the loan is diminished. What you just
said reminds me of another aspect of this. With that
uncertainty or the belief that there is going to be less
revenue coming following the order of 2011, there are areas of
the country in which the desire to serve still exists. But the
ability, the uncertainty of whether or not there is going to be
the revenue, diminishes the chances.
So initially, I thought the topic of this hearing in part
would be about whether or not a phone company has the ability
to repay an existing loan. There is another damaging aspect of
FCC decisions, which is that we may not even ask for the loan
because of either the uncertainty or the revenue stream is
insufficient, which means a significant number--I do not know
what it is--hundreds, thousands of people across Kansas and
across the country will have less ability to access broadband.
Does that make sense to you?
Mr. Boisvert. Yes, it does, Mr. Chairman. I would agree
with your assessment.
Without that predictable and sufficient and sustainable
universal service, that demand may not materialize in the form
of taking our infrastructure loans to bring broadband to rural
Kansans.
Senator Moran. You indicated, in your company's
circumstance, that has occurred on two or three exchanges in
which you were prepared to borrow money to expand broadband but
as a result of that order have not made that loan application?
Mr. Boisvert. I actually have the loan but I have not drawn
the funds, resulting in the same thing. That is correct.
Senator Moran. Okay. Now, the order was modified, the FCC
modified their original 2011 order. Did that make a difference
in the types of issues that we are discussing today?
Mr. Boisvert. Well, there have been seven orders on
reconsideration since the original order. There was a good step
forward in removing one of the formulas that was very
troublesome. But as we speak, we still do not have resolution
to that. So the work is not done.
I know the industry and the National Telecommunications
Cooperative Association (NTCA), which we are part of, are
working very hard with FCC to come to a truly workable,
sustainable Universal Service Fund that will allow this work to
continue.
Senator Moran. The topic of today's hearing is Rural
Development. The concerns that you and I are talking about may
be more directed at the FCC than Rural Development, but the
consequences exist to Rural Development's ability to either
have their loans repaid or the demand necessary to provide more
money to expand broadband in rural America.
Mr. Boisvert. There is clearly a connection, yes.
Senator Moran. Let me turn to others. Now that we are down
to just me, we may have a series of rounds of questions.
I will go back to you, Brian. Is there any indication of
when that certainty may become known? When does this problem go
away? Or is it just with us for the foreseeable future?
Mr. Boisvert. We hope there is an end.
And we do thank this subcommittee and others for reaching
out to the FCC to talk about the standalone broadband. All five
commissioners I believe have made the commitment to resolve
this by the end of the year. That is rapidly approaching. So I
am still hopeful that a resolution can be made.
But as part of the industry and the association, as we work
toward this, it is really important that, essentially, we get
it right. This is a long-term solution that we are seeking, not
just trying to hit a deadline. So it really is important to us
to stay at the table to work to make sure that all things are
tried.
So if there is a potential recommendation to go to a
certain method, we want to make sure there is an opportunity
for everybody to work that method to make sure it is
sustainable and provides the resources that are needed for
rural Kansans.
Senator Moran. Do you have any sense that Rural Development
is advocating for a position beneficial to the repayment of
their loans and to the continued expansion of broadband
availability with the FCC?
Mr. Boisvert. I am not personally aware of conversations. I
do believe they are very supportive. They have a large
portfolio out there that could be at risk. They are a great
organization to work with, the RUS. So I believe they,
certainly, would like to see a successful resolution to this as
well.
Senator Moran. Thank you.
Mr. Lowry, your testimony focused significantly on REDLG. I
just want to ask you the broad question, is there any proposal,
any suggestions of needed changes to the program? Or are you
satisfied with the way it works and the way it is administered?
Mr. Lowry. Overall, I think that there is satisfaction with
the way the program is working. There is a proposal for a $1
million limit on individual loans, which would make more loan
funds available to more people. We think that is a positive
change. But overall, we are satisfied with the program.
Senator Moran. Do you know what the average loan amount is?
Mr. Lowry. I do not, but we can get that information and
pass it on to you.
Senator Moran. We talked a bit and you talked about
environmental or endangered species issues that impact the
bottom line of a utility company. You might highlight, and I am
reluctant to raise this topic because for a few days here I was
known as the lesser prairie chicken Senator, but you might
highlight for me, for my benefit and for the record, the
consequences of the listing as a threatened species to your
company or to utilities in Kansas or the region. That is five
States, generally.
Mr. Lowry. Within the context of this hearing, what it
essentially does is undermine the good work that RUS Rural
Development is doing. Those programs are all about making
services to rural residents affordable. When you have a
regulatory initiative, the lesser prairie chicken being a good
example, that layers additional costs on the service providers,
say an electric service provider, that impacts affordability.
So the needle moves in one direction with RUS program; it
moves in the other direction in a negative way with initiatives
such as the lesser prairie chicken initiative.
To that initiative specifically, there are proposals that
line construction be completed underground. Underground
construction adds, in some cases, a tenfold cost to the
construction of electric facilities. Those costs can only be
recovered from ratepayers.
So again, you are taking what would otherwise be an
affordable service and you are impacting that affordability by
requiring compliance with regulations that have, in most cases,
dubious benefits.
Senator Moran. This issue of the lesser prairie chicken or
endangered species, and now the more recent clean power plan,
what is wrong with those whose suggestion is just have the
utility companies raise the rates?
Mr. Lowry. Well, we see all the time that the two primary
drivers for an electric customer will be reliability and price.
We know, as was said earlier in this hearing, that the cost of
electricity is a key driver in determining where people locate
their business. So yes, you can have the price of electricity
go up. There will be some people, a household, who won't not
find that objectionable. But business and industry will find it
as a driving factor in their decision about where they locate.
It affects their overall profitability.
Senator Moran. I suppose, in a broad sense, today's hearing
is about rural development. I would suggest that our ability to
attract and retain business, manufacturing and others, to rural
America is in part determined by utility rates. Is that fair?
Mr. Lowry. That is a fair statement. You know, the customer
density in rural America is much, much lower than it is in
urban America, meaning we have fewer consumers per mile of line
from which we can recover our costs than do our city brethren.
So additional costs recovered from a much, much smaller pool of
ratepayers means higher rates for those ratepayers. That is a
big concern of ours.
Senator Moran. A point I would make is that while you
testify about the value of the REDLG program, which would be
assistance to an individual, generally small business and its
location or expansion in your consumers' territory, if your
rates are significantly higher than other utilities, businesses
will make decisions about where to locate.
So your REDLG is important in the micro sense, but what
your rates are is important in the macro sense to rural
America.
Mr. Lowry. You are undermining the benefit of the REDLG
program with other policies that would increase electric costs.
Senator Moran. Let me ask specifically the consequences to
Rural Development and their loan portfolio. Does that loan just
get paid? Regardless of the regulatory environment in which you
operate, you are required to pay the loan to RUS, right?
Mr. Lowry. Are you talking about on the electric side?
Senator Moran. Yes, on the electric side.
Mr. Lowry. Yes. RUS borrowers borrow money to complete
projects and construction work plans. The clean power plan is a
good example where you are making investments that are decades
long investments, and they are enormously expensive. When you
have a regulatory initiative that essentially says, for
example, we will generate less if at all from a coal resource
and instead we will generate more from some other resource.
Well, at the start, you have a power plan. And if EPA,
through the clean power plan, essentially says you cannot
utilize that power plan, then you have to have a second power
plan to provide service. So the ratepayer, instead of paying
for one plant, is now paying for two.
The loans do not go away. They are still going to be due
and owing.
So when you hear the term ``stranded investment'' used in
the context of clean power plan, that is one element of
stranded investment. You have an asset that you cannot utilize.
Senator Moran. So RUS made a loan to a utility company
expecting the life--they loaned the money to build a power
plant or to improve a power plant. They expected the life of
that plant or its improvements to be a certain amount of time.
And potential changes that are now on the horizon would mean
that the value of that plant is diminished. So the asset for
which they have made the loan is diminished in its value, and
the revenue that it will generate to repay the loan is less.
Mr. Lowry. That is true.
Senator Moran. Okay. And that does not affect necessarily
the portfolio of RUS until there are defaults. Is that true?
Mr. Lowry. Yes, that would be true. They are going to
expect repayment, as they should. But the ability to repay is
going to be hampered.
Senator Moran. A utility company cannot renegotiate their
loan with RUS based upon changing circumstances of a new clean
power plan. Is that right?
Mr. Lowry. Well, that probably remains to be seen. There is
no requirement that RUS renegotiate loans. So it would be
another example of a regulatory uncertainty.
Senator Moran. Just for the same reason that there is
assistance to utility companies serving rural America, that is
because the ability to get a return necessary to build the
plant and provide the service is less, that would mean that any
changes in the economic circumstances surrounding that plant is
all the more important because it already is so fragile, so
marginal to begin with.
We would not be making loans to rural America if it was
easy to get a sufficient return on investment in utilities. We
make those loans because it is difficult. And the change,
therefore, would be the most damaging or dramatic in a rural
setting. Does that make sense?
Mr. Lowry. Yes, that does make sense. Again, it goes back
to customer density. It is all about the taxpayer or, in our
case, the ratepayer. We have fewer of those in rural America
than our city brethren. So it is a more fragile environment.
Senator Moran. I co-chair a caucus in the Senate with one
of my Democrat colleagues. It is about competitiveness. It is
about reintroducing additional manufacturing opportunities to
the country, not just in rural America. But I would tell you,
in so many circumstances in which you look at a reason a
company has brought their employees home, bringing more
manufacturing jobs back to the United States, has had a
significant amount to with the cost of utilities. If you can
provide the utility structure, including water, at a rate that
is more affordable, the chances of manufacturing returning to
the U.S. from someplace abroad is enhanced.
Then you add that to we can never afford to have a
competitive disadvantage in the territory that you serve.
Mr. Lowry. Yes.
Senator Moran. Mr. Simpson, the way I look at this, kind of
related to this environmental issue, is that there are lots of
rules and regulations involving the quality of water,
rightfully so. We want clean water. I represent lots of
communities in which there are not enough ratepayers. You
cannot raise the water rates sufficient to raise the money
necessary to comply with regulations.
One comes to mind. There are 99 ratepayers in the
community, but they have these standards they have to meet.
They cannot raise the rates on 99 people to get the money
necessary to accomplish the requirements, to accomplish the
goal of that standard for clean water.
Therefore, the programs that help a community become even
more important, again, in rural America because you cannot
finance it with the people who are paying their water bills
each month.
I assume that that is, in a sense, your mission, how we
help people who cannot afford to do all the things that need to
be done to provide clean water in a sufficient quantity.
What works? What is the most important thing to you?
Mr. Simpson. I think the Rural Utilities Service with right
now the historically low interest rates, even with the 40-year
term, when it is coupled with the grant portion, it can make it
affordable.
You are right, Mr. Chairman, a lot of these small
communities, you are looking at a little trailer park. In my
home State, they do not meet the capacity. Or the unpaid mayor
you have to go find at his real job in the casino----
Senator Moran. We have no casinos in Kansas. That is almost
true. Not exactly.
Mr. Simpson. They do not have the capacity and the
resources to hire someone to operate the system. A lot of
times, you will have a part-time person that does several
systems.
That is where our folks that have this vast amount of
experience being former water operators and training with all
the certifications can come in and fill that void for these
communities that simply do not have the expertise and cannot
afford it.
But we think that Rural Development program with that grant
component is very unique and can make it so these low-income
communities can have affordable, clean water.
Senator Moran. I know the National Rural Water Association
well enough to know that I assume that your request would be
additional dollars put into those programs. That is a standard
reply that we would get in this subcommittee or to me as a
member of the Senate.
But I would ask you, are there program efficiencies,
program management, in addition to more money, are there ways
that we can formulate the programs to work better?
Mr. Simpson. Yes, sir, Mr. Chairman.
First of all, we are very appreciative to the Senate mark
for our programs. It was very gracious.
Senator Moran. I was fishing for a compliment. Thank you.
Mr. Simpson. You are right. I think I have to give former
Under Secretary and Administrator McBride credit. They have
done something pretty smart called RD Apply, which is really
bring in Rural Utilities Service into the modern century as far
as IT and technology is concerned, where, literally, you can
take a smart phone, your iPhone, a laptop, and you can access
their application process.
They trained our folks a couple weeks ago in Oklahoma City.
It was honestly very easy.
And another thing, why this is so good, you heard about
delays from RUS and the inconsistency with some of the
programs, the staff that got reduced during the last 5 years.
It is transparent and accountable, too. So you know your water
specialists, the program director, the State director,
everybody can see this process. I think that that is a smart
way that they are going ahead to use easy, off-the-shelf
technology to do the program more efficiently.
Senator Moran. Thank you.
There is at least talk about the existing water and waste
disposal loan program involved in a portfolio sale.
Mr. Simpson. Yes, sir.
Senator Moran. Anything that I should know about that? I
would guess we will have some specific questions to address to
you in writing.
Mr. Simpson. Yes, sir. Let me be clear. A lot of what I am
basing my response on, I do not have anything in writing from
the Department. I have had some conversations. We would be
delighted to review or comment or add our suggestions.
Yes, there have been several ideas about how you bring the
private sector in to complement the Rural Development mission
with their limited loan and grant dollars. We are for that. We
think that the guarantee program that is not very utilized,
only made a handful of guarantees last year, the private sector
can play an important role there, especially for communities
that have more capacity and resources to debt service a
private-sector loan.
That said, we do have some concerns. There are discussions
about doing a partial prepayment or participating loan to where
a utility in Kansas that has this 40-year loan, they are in
year 20 and the private sector can come in and pre-pay 50
percent of that outstanding balance to the Treasury. I would
imagine the private sector is going to look at that value, what
they think it is worth, and how the Treasury is going to look
at it, because you are cutting off that stream of payment for
the remaining 20 years, with the interest. And then the utility
in Kansas, for example, would still make their standard
payment. Nothing would change. They are making a $10,000 or
whatever it is monthly payment. But half of that would be
diverted to the private entity, the investor.
I cannot understand the public policy of that. It does not
benefit the utility. It does not impact the end-user. I do not
understand that thought process.
We have some concerns with that. Also, we would want our
utility bar common with rural folks and how they operate
business to have knowledge about their loans being modified, to
have the right to say we have to check off on it or the right
for first refusal. If there is a concern about some of the
loans that are 20 years old or longer, that they are paying a
higher interest rate, you might want to look what this
subcommittee did before as an option, the 502 guarantee
program, when you established a separate refinancing category
for the 502 guarantee program, which was at a cheaper subsidy
rate to give these existing rural utility bars the opportunity
to refinance if the direct loan rate was lower. It was a
benefit for the business model.
That I think would be a better policy because it would
lower the rate for the utility so you free up some money to do
some deferred maintenance and not pass on the cost to the user.
So, yes, sir. We do have some concerns about the public
policy benefit of an action like a partial prepaid loan.
Senator Moran. Water utilities have access to funds besides
Rural Development in what ways? The public financing of water
infrastructure, going to the bond market and the utility
issuing revenue bonds to be repaid from the revenue of sale of
water and treatment of wastewater?
Mr. Simpson. Yes, sir. A lot of them are municipalities,
quasigovernmental entities. They have a wide variety. A lot of
them will use the SRF, the EPA revolving loan fund. That varies
from State to State how they administer it.
A lot of them will use bond money. Our Kentucky entity has
their own bank, basically. There is a wide variety of different
programs they could use. The guarantee program, in my opinion,
has not been utilized very often.
Senator Moran. So the two options that a water utility in
Kansas would have would be Rural Development and the EPA, as
far as public sources of support?
Mr. Simpson. Yes, sir.
Senator Moran. Okay.
I appreciate your comments in regard to the nature of
Congress working in a bipartisan effort. I would use this as an
opportunity to highlight that the Agriculture Appropriations
Subcommittee report was passed by the full committee 28-2, the
best of any appropriation bill that worked its way through
subcommittee and into the full committee.
We welcome you back to the subcommittee. I suppose it is
significantly unusual for the circumstance to have come full
circle and you are on that side of the table.
Mr. Simpson. Yes, sir.
Senator Moran. We are glad to have you, and we appreciate
your expertise.
I think we are about ready to conclude. I would just ask
any of the witnesses if they have a point, an issue, that they
wanted to make certain that they clarify, raise, something they
want us to know before we close the hearing?
Mr. Boisvert. Mr. Chairman, I want to thank you for this
opportunity. I never want to lose sight, and we don't, that, in
the end, we want to keep consumer rates reasonable and provide
this opportunity for every rural Kansan and every rural
American. So that is why we work as hard as we do to do the
things we do. It is for that benefit, to keep our country
connected. There is so much benefit to be gained from the
rural-urban connection and very much a focus of that are
consumer rates. Thank you.
Senator Moran. Never wanting to have somebody have the last
word but me, I would say, I intended to ask you this earlier,
in the absence of Wilson Telephone Company, what difference
does it make to the people who you serve?
Mr. Boisvert. Well, I would like to believe we make a lot
of difference. We are very much a part of the community. Not
only do we provide state-of-the-art communication services, but
we also are members of the community. We live where we work. We
support our youth. We do scholarships.
Getting those millennials to come back to rural Kansas is
very much a priority. We think with some of the modern networks
and the services that they offer and the opportunities that
they offer, we hope this will be appealing, and once the
younger generation goes off to college, that they will return
back home to help on the family farms, to start new businesses,
to create new opportunities. We think that is part of it. That
is part of what we try to do as well.
Senator Moran. Mr. Boisvert, is it safe to say that, in the
absence of a company like yours and those telephone companies
similar to yours across the country, that the services that you
provide would not be provided or would not be provided at a
rate that was affordable?
Mr. Boisvert. I would agree with that. That is really how
these companies came to be in the first place. The market is
not there that the large companies are going to enter into. We
are very rural, very low population density. So I do fear that
if these companies were not there, that void would not be
filled.
Senator Moran. Thank you.
Anyone else?
I appreciate your testimony. Thank you for joining us
today. I consider it an informative hearing, and it is because
of your willingness to come and talk to us today.
ADDITIONAL COMMITTEE QUESTIONS
Senator Moran. For my colleagues on the subcommittee, any
question that they would like to submit for the hearing record
should be turned into our subcommittee staff within 1 week,
which is Wednesday, October 28.
If a question is directed to you or to Rural Development,
we would appreciate if we could have a response back within 4
weeks.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted to Hon. Lisa Mensah
Questions Submitted by Senator Jerry Moran
section 515 rural rental housing
Question. A 2004 USDA report (Rural Rental Housing Comprehensive
Property Assessment and Portfolio Analysis) indicated a 20 year $2.6
billion cost to maintain the section 515 rural rental housing
portfolio.
We are 10 years into that timeframe, how much progress has been
made?
Answer. Rural Development has been actively engaged in the
preservation of its Section 515 portfolio, but more work needs to be
done. As a result of the 2004 Comprehensive Property Assessment,
Congress authorized a demonstration program through annual
appropriations language providing RD with more flexible tools to
encourage the revitalization of its Section 515 and Farm Labor Housing
properties. The demonstration program is known as the Multi-Family
Preservation and Revitalization program (MPR). Through the end of
fiscal year 2015, RD has obligated $1.051 billion for the
rehabilitation of 982 properties and more than 33,000 units of
affordable housing. MPR has also facilitated a high level of
cooperation with state housing finance authorities by leveraging
billions of dollars in tax credits to stretch our limited appropriation
dollars.
In order to continue making progress in our revitalization efforts,
RD has requested that Congress authorize the MPR program permanently.
If the program was permanently authorized, the Agency could create
regulations to institutionalize the program's benefits and signal to
potential program participants that both the Executive and Legislative
branches of the Federal government are committed to the revitalization
of our affordable housing.
Question. What improvements have you made in procedures or
regulations to ensure that these housing developments are in adequate
condition?
Answer. MFH has made significant changes in its oversight and
monitoring of borrower compliance with program regulations.
Information technology advances have assisted the MFH field staff
in conducting more focused and comprehensive physical inspections at
properties, including the ability to obtain immediate feedback from
borrowers and management agents on corrective action timetables. The
use of a hand-held device to record, capture, and deliver results of
both physical and management oversight reviews have improved turn-
around time for follow-up to ensure that corrections are made.
MFH also uses an automated budget analysis tool that flags high
project expenses and high rent increases; such flags cause field staff
to analyze more closely repair and maintenance activities, and proposal
capital improvements to be paid for through higher rents. The
availability of field staff to be within reach of the properties
financed by the Direct Loan programs expands the agency's capability to
ensure the improvements planned are properly executed.
MFH participates in the White House Physical Inspection Alignment
Initiative, which encourages Federal housing assistance programs to
work cooperatively in areas of overlap. Physical inspections are one
such area, where properties financed by MFH may also have Low Income
Housing Tax Credits or Section 8 rent assistance support. In these
instances, the Alignment Initiative targets these joint properties to
share physical inspection information among the affected agencies--
which serves to reduce duplication while also focusing oversight on
properties with higher Federal investment dollars.
rural housing maturing mortgages
Question. Over the next several years most of the section 515 loans
outstanding will mature. By 2020, close to 75 percent of section 515
loans, totaling over 400,000 units, will have reached the end of the
loan term. Rental assistance is limited to tenants living in projects
financed with section 514 and 515 loans. As property owners pay off the
loans for the projects, the tenants lose eligibility for rental
assistance. Most of these rural rental housing projects are in small
communities and their only market is affordable housing.
What steps has USDA taken thus far to address this issue and is
there a long term plan to ensure that this housing continues to be
available for the low income and elderly households?
Answer. Rural Development is very concerned with the potential loss
of affordable housing as our Section 515 direct loans mature, because
that housing could be lost in the community and the rental assistance
support would no longer be available to the families in that property.
If that RD housing is lost, the very low income families living there
may have no other affordable housing in which to live.
In response, RD has provided a number of options for owners to keep
their RD loan and protect the families living there.
--The borrower can apply through RD's Preservation NOFA for a
deferral of their maturing mortgage for up to 20 years;
--The borrower can receive priority points if they choose to apply
for both the deferral and additional RD funding for
rehabilitation of property;
--The borrower can request a re-amortization and modification of the
maturing loan to extend the loan term up to 20 years;
--If owners go through the prepayment process to allow their tenants
may be eligible to receive housing vouchers.
In addition to these steps, the Department has also offered Letters
of Priority Entitlement to tenants in maturing mortgages. Holding this
Letter will allow the tenant to be placed at the top of the waiting
list for any RD property in order to continue living in affordable
housing. The Agency may be authorized to transfer the unused rental
assistance to a new RD property in limited circumstances. The
Department has also included in the fiscal year 2016 President's Budget
a legislative proposal to allow Rural Development housing vouchers to
be used by tenants in these maturing mortgage properties.
Current voucher program appropriations language limits use to
tenants in situations where the owner is prepaying the RD mortgage.
rural housing 502 direct loans
Question. In fiscal year 2014, approximately $100 million in the
502 direct home ownership loan program was unspent. In fiscal year 2015
USDA obligated all the funds available.
Please explain the steps you have taken to improve processing of
direct homeownership loans.
Answer. In fiscal year 2015, delivery of the 502 direct home
ownership loan program was a high priority for USDA. That priority
continues in fiscal year 2016, and will be reinforced with automated
underwriting, streamlining of the credit report process, and additional
program training. A certified packager program final rule will be
implemented provided that prohibitory ``pilot'' language is removed
from the final USDA fiscal year 2016 appropriations bill. This
regulation will enhance our partnership with certified loan packagers
and further enhance program delivery.
rural housing section 502 guaranteed
Question. The President's Budget requests authority to allow RHS to
allow direct endorsement for lenders rather than processing all
guaranteed loans in-house.
Please provide additional information on how this authority would
work.
Answer. The agency will reserve delegated underwriting authority
for select lenders meeting established criteria. Lenders will not
qualify for consideration unless they have strong loan performance
characteristics as an approved program lender for a period of 2 years
or more. Additional prerequisites will be established by the Secretary
to further determine a lender's eligibility for delegated authority.
For example, the lender would need to demonstrate a proven history of
delinquency rates below the national average for all approved lenders.
Lenders granted this authority will be required to maintain certain
credentials and training requirements to retain such status.
To implement delegated underwriting authority the Agency will need
to enhance its lender monitoring and reporting capabilities in its
Guaranteed Underwriting System. Once the agency secures funding, the
necessary IT development will take approximately 2 years.
Question. In fiscal year 15 RHS obligated roughly 78 percent of
Section 502 Guaranteed, yet managed to obligate 99 percent of 502
direct.
Please provide background on this discrepancy.
Answer. The observed discrepancy is more reflective of operational
differences than performance disparity between the Direct and
Guaranteed programs. The $24 billion program level Congress has
established for the Single Family Housing Guaranteed Loan Program
(SFHG) provides the program the capacity needed to accommodate
fluctuating market demand, which can be significantly affected by the
macro-economic environment, as in 2007. Should program funding be
exhausted, thousands of lenders and potentially tens of thousands of
prospective borrowers could be negatively affected. This would have a
tremendously detrimental effect on program credibility. The lending
capacity of this negative-subsidy program ensures that USDA can meet
the mortgage credit needs of low and moderate income borrowers during
periods of unexpected market volatility. It thereby provides a very
valuable safeguard, preserving the viability of the program for future
generations of rural Americans.
The successful obligation of all Section 502 Direct funding,
reflects the strong demand for the program's affordable financing
terms, which enable low and very-low income borrowers without access to
alternative sources of mortgage credit an opportunity for
homeownership. This program, whose funding totals approximately 3.8
percent of the guaranteed program, is vitally important to rural
America.
rural housing section 538 eligibility for housing cooperatives
Question. USDA Rural Development has a long history of supporting
agricultural cooperatives and cooperative businesses. Yet, there has
been some confusion on why Rural Development does not provide financing
for housing cooperatives. For many consumers in rural communities,
especially seniors, a housing cooperative can be an affordable option
to owning a home.
It is the Committee's understanding that housing cooperatives are
eligible for the 515 multi housing program, but not the 538 program,
which is the more ideal program for financing.
Can you explain why the 538 program is not accessible to the
financing of cooperatives? Can you provide to this Committee a solution
to this issue?
Answer. RD has determined that under Section 538 of the Housing Act
of 1949 (42 USC 1490p-2), loan guarantees under the Guaranteed Rural
Rental Housing Program are not permitted for cooperative housing. An
amendment to that section of the Act by Congress could permit an
extension of guarantees to cooperative housing.
rural in character
Question. We understand your agency is working on guidance
regarding the definition of ``rural in character''--can you tell us
where you are in that process, and what it means for homebuyers in
rural communities?
Answer. RHS is continuing to refine the agency's guidance with
respect to the definition of ``rural in character'' in order to clarify
the rural in character requirement in a manner that is sufficiently
practical for application in diverse towns and counties throughout
rural America. The agency has reviewed the matter extensively and is
currently evaluating the data and potential eligibility criteria
necessary to achieve this purpose.
In response to public concern Rural in Character determinations
were suspended. The suspension is allowing USDA Rural Development (RD)
to review the public engagement and decisionmaking processes for `rural
in character' determinations. We are communicating with stakeholders
and policy-makers about how best to ensure USDA rural housing programs
serve communities with limited access to credit and few housing
options. The temporary suspension of new RIC-related designations will
remain in effect until this evaluation process is completed.
rural utility service--existing water and waste disposal loan portfolio
Question. There are reports that the Department is considering a
possible portfolio sale, similar to the one that took place in 1987.
Given that the Department has not requested this authority, before
considering such an action, the Subcommittee would request the
following information:
Does the Department plan to discount any portion of an existing
Water or Waste Water loan to the private sector and charge the
difference to the mandatory account?
Answer. USDA is considering a participation transaction that would
offer private entities a participation interest and would not discount
any portion of existing RUS loans. The Department is working with the
Office of Management and Budget (OMB) and the Department of the
Treasury (Treasury) on how to bring such a transaction to market that
will have no impact on the program's borrowers and protects the
taxpayers' investment in USDA's program.
Question. Will the current borrower be allowed the same treatment
to have their remaining balance discounted at the same level of the
private investor?
Answer. USDA would not discount any portion of its existing loans.
Question. Will this impact the subsidy rate on the discretionary
Water and Waste Water Direct loan?
Answer. We do not anticipate any impact on the future subsidy rate.
Question. Will the current RUS borrowers have to sign off on any
modification or participating loan sale or prepayment?
Answer. A participation transaction would not require sign-off from
the program's current borrowers.
Question. Will utility borrowers have a right for first refusal?
Answer. The transaction would have no impact on the program's
borrowers, who would retain all the rights and protections that they
currently have under the terms of their loan agreements.
Question. Is this is considered a modification; the current
appropriation bill language does not include ``modification'' authority
for this portfolio?
Answer. While the transaction would constitute a Government action,
USDA is working with OMB on determining the cost of the transaction
under the Federal Credit Reform Act of 1990.
Question. If this is considered a modification where the government
takes an action to change the loan terms or conditions, wouldn't this
be paid for by the discretionary account and require approval from
Congress and most likely additional budget authority?
Answer. While the transaction would constitute a Government action,
USDA is working with OMB on determining the cost of the transaction
under the Federal Credit Reform Act of 1990.
Question. Why is the Department considering such a change without
input of organizations that represent current borrowers or though
consultations with Congress?
Answer. USDA has reached out to the National Rural Water
Association (NRWA) and looks forward to briefing Congressional staff at
the appropriate time once a proposal is completed. Secretary Vilsack
met with NRWA leadership in November 2015; NRWA supports these efforts
to bring infrastructure funding to rural America and is committed to
working with USDA as the transaction moves forward.
Question. The Department has the authority to currently leverage
loans, for example, couple a direct loan with a guarantee or private
loan. Are you pursuing this activity?
Answer. Through existing business practices, USDA is leveraging
private sector investment in this portfolio through bridge loans and
interim financing as well as with guaranteed loan authority.
The proposed transaction discussed in previous answers incentivizes
a forward commitment from the private sector to invest in rural water
and waste infrastructure in rural communities with populations of more
than 10,000, which are beyond the statutory reach of USDA's current
water program, but are served by other USDA rural loan and grant
programs. The target communities would also include those that became
ineligible for USDA's water loans when their population level exceeded
the 10,000 limit in the 2010 census.
Question. What happens in a disaster situation like with a
hurricane where a community might lose half of their customer base and
couldn't pay their full note? The Federal portion has some tools
including deferring payments that provided relief to this borrower. Can
the payment portion to the private investors be altered or deferred at
the time of a disaster?
Answer. USDA would retain all of its current tools in providing
relief to borrowers under duress. The investor would be made aware of
these tools and would be subject to the same repayment risks as the
Government in the transaction. Any losses would be shared by the
investor and the Government.
strategic economic and community development interim rule
Question. In May, the USDA--RD published the ``Strategic Economic
and Community Development'' Interim Rule for public comment. The
Interim Rule implements the ``Strategic Economic and Community
Development'' provision (Section 6025) of the Agricultural Act of 2014.
To implement Section 6025, RD will reserve 10 percent of the funds
appropriated to select RD programs each fiscal year to fund projects
that support the implementation of strategic economic and community
development plans across multi-jurisdictional areas.
Please provide an update on the implementation process for Section
6025, with emphasis on how RD has implemented the Community Economic
Development team and what the next steps are.
Answer. In fiscal year 15, CF, WEP, B&I, and RBDG did not have set
aside funds for 6025 due to time constraints. Instead, RD developed a
Regional Development Priority (RDP) policy that offered an opportunity
for project proposals submitted under the aforementioned underlying
programs which are supportive of multi-jurisdictional plan to receive
additional points. These project proposals were reviewed first and
foremost based on the underlying program's regulation and policies. If
a project was deemed eligible for the underlying program, it was then
reviewed for 6025 requirements if the applicant submitted the required
documentation for requesting RDP points.
RD received 47 total applications requesting RDP points broken down
as follows:
--By program
--28 from CF
--6 from WEP
--13 from RBDG
--0 from B&I
--By State
--CF: 18 from AR, 1 from IA, 2 from MN, 1 from NH, 1 from NJ, 1
from NJ, 2 from SC, 2 from VT
--WEP: 2 from MN, 2 from NH, 1 from SC, 1 from VT
--RBDG: 2 from AR, 1 from AZ, 1 from HI, 1 from MA, 1 from MD, 1
from MO, 1 from NC, 2 from NH, 1 from VA, 2 from VT
RD is in the process of making final awards for fiscal year 15.
Among those awards from the CF, WEP, and RBDG, 26 awards will be to
projects that received RDP points as follows:
--By program
--16 from CF
--3 from WEP
--7 from RBDG
--By State
--CF: 15 from AR, 1 from VT
--WEP: 1 from MN, 1 from NH, 1 from SC
--RBDG: 1 from AR, 1 from AZ, 1 from MA, 1 from MO, 1 from NH, 1
from VA, 1 from VT
During fiscal year 16, RD is working to implement Section 6025 as a
set aside. RD's Community Economic Development (CED) Team will help
build capacity to ensure areas of high needs have multi-jurisdictional
plans in place. This would enable these areas to identify needs,
economic development priorities, partners, and projects needing
assistance which are potential pipelines for CF, WEP, B&I, and RBDG.
Once these areas have the plans in place, they can access the 6025 set
asides from these programs in fiscal year 16. Furthermore, the CED Team
is reaching out to communities that have developed multijurisdictional
plans in place to raise awareness about 6025 set asides.
Question. The Interim Rule defines `Plan' as, ``a comprehensive
economic development or community development strategy that outlines a
region's vision for shaping its economy.'' Do HUD's Sustainable
Communities Plan, USDA's Stronger Economies Together Plans, and other
Regional Comprehensive Plans fit into that definition? More
specifically, what is covered under the Interim Rule's definition of
``plan''?
Answer. RD intends the definition of ``plan'' be inclusive rather
than exclusive, but at the same time require the plan to address
certain minimum elements in order to be effective in improving the
economies of the region addressed by the plan.
The Rule defines Plan as follows: For the purposes of this subpart,
a plan is a comprehensive economic development or community development
strategy that outlines a region's vision for shaping its economy. This
strategy would cover, as appropriate and necessary, a wide range of
aspects such as natural resources, land use, transportation, and
housing. Such plans bring together key community stakeholders to create
a roadmap to diversify and strengthen their communities and to build a
foundation to create the environment for regional economic prosperity.
To be an acceptable plan for the purposes of the subpart, the plan
must be supported by the jurisdictions affected by the plan and must
address each of the following elements:
--The economic conditions of the region;
--the economic and community strengths, weaknesses, opportunities,
and threats for the region, to include consideration of such
aspects as the environmental and social conditions;
--strategies and implementation plan that build upon the region's
strengths and opportunities and resolve the weaknesses and
threats facing the region;
--performance measures to evaluate the successful implementation of
the plan; and
--support of key community stakeholders.
RD notes that inclusion of each of the five elements does not speak
to the quality of the plan or to whether the plan has been adopted.
Generally, HUD's Sustainable Communities Plans, USDA's Stronger
Economies Together Plans, and other Regional Comprehensive Plans fit
into that definition. Additionally, EDA's Community Economic
Development Strategy plans generally fit into the definition of a plan
as well. RD is actively reaching out to agencies and organizations
which administer these plans to communicate the Section 6025
opportunity to their stakeholders with plans in place.
Question. In the scoring section of the Interim Rule, RD proposed
to award two points for projects that utilize contributions from other
Federal agencies. Are points awarded when state and local agencies
provide similar investments? If not, why are they not calculated as
part of the score for applications under the interim rule?
Answer. Points are not awarded for state and local agencies because
of the language in the authorizing statute only refers to Federal
agencies in 6025(c)(1)(C).
Question. Please explain how the implementation of Section 6025
will make it easier for rural communities to access targeted resources
to invest in long-term economic and community development efforts?
Answer. Recognizing that rural communities have limited resources
and myriad unique challenges to creating sustainable communities,
Section 6025 of the 2014 Farm Bill is an opportunity to prioritize
projects that support the implementation of a regional economic
development plan. Rural communities who engage in regional
collaboration plan and build strategically already increase their
efficiencies and outcomes. As such, these communities who have a
regional plan will further be able to utilize Section 6025 to access
set aside funding that rewards regionalism and leverage CF, WEP, RBDG,
and B&I programs--programs which provide resources which are
fundamental to creating strong and sustainable communities--for the
benefit of multiple jurisdictions.
______
Questions Submitted by Senator John Hoeven
rural utilities administrator brandon mcbride
Question. The newly-created Broadband Opportunity Council which has
been tasked with producing specific recommendations and guidance to
increase broadband deployment recently released its report with
recommendations that address regulatory barriers and encourage
investment and training.
To what extent are you following the Council's recommendations?
Answer. The main recommendation to RUS in the report asks RUS to
evaluate the long-standing Telecommunications Program to see if it
could be expanded to include companies that traditionally have not
qualified for the program.Today, the program is primarily structured
for an Independent Local Exchange Carrier, so RUS will explore whether
others, including cable companies, Competitive Local Exchange Carriers,
and wireless providers could qualify under the statutory requirements.
Question. I believe that investment in broadband connectivity is
vital to the development of our rural communities, and that
streamlining and eliminating duplicative programs is a step in the
right direction towards increased access. That being said, what
specific actions are you pursuing to break down regulatory barriers and
increase rural broadband investment?
Answer. In addition to the items mentioned above, RUS is working
with sister Rural Development Agencies to explore any synergies between
programs and make applying for broadband funding to be a one-stop-shop
for all RD programs. In addition, we are in discussions with the FCC to
be better prepared for the changes that they are making to the telecom
industry and will make modifications to our financing programs that are
in line with these changes.
Question. As well, I think it is especially important that the
regulatory processes initiated by the Council's recommendations are
transparent, fair, and open. To this extent, what steps are you taking
to improve your collaboration with the private sector and State, Local,
and Tribal governments in the rulemaking process?
Answer. Prior to new regulations being published, RUS conducts
Tribal consultations to get their input and make sure that their
concerns are addressed in any new regulation.
In addition, RUS is holding regional workshops with the focus not
only on the RUS financing program but also on how to use broadband
services for rural economic development. Attendees to these events in
Tribal representatives, local and state government, private companies
and others.
Question. How do you plan on leveraging public private partnerships
to maximize the Federal government's investment in rural broadband
services?
Answer. RUS will work with private investors to leverage the
amounts that are available for funding.Strong local support is required
for a broadband service provider to succeed.
The Broadband Opportunity Council included a proposal from the
Rural Utility Service that would provide the Secretary of the
Department of Agriculture with greater flexibility to approve financing
under the Rural Utility Service's Telecommunications Infrastructure
Loan Program for entities in areas that are determined to be
underserved or unserved.
Question. What steps will be taken with regard to this
recommendation to prevent duplication or other forms of unnecessary
overbuilding?
Answer. The Broadband Program statute and regulations already
address overbuilding within the eligibility requirements, and the
Infrastructure Program statute and regulations already require a
finding of non-duplication of facilities before a loan can be made.
______
Questions Submitted by Senator Jeff Merkley
rural energy savings program (resp)
Question. At the fiscal year 16 USDA budget hearing, Secretary
Vilsack pledged to implement the Rural Energy Savings Program (RESP)
that was authorized in the Farm Bill.We understand that Rural
Development already offers an Energy Efficiency and Conservation Loan
Program, which is similar to RESP in several respects. However, there
are key advantages to the RESP program that we believe will cause it to
be much more effective.
What progress has Rural Development made to fulfill the Secretary's
commitment to establish this program?
Answer. The Energy Efficiency and Conservation Loan Program (EECLP)
was inspired by efforts to enact the Rural Energy Savings Program
(RESP). RUS has worked to identify how we might implement RESP. The key
difference between EECLP and RESP is that EECLP offers very low
interest rates to utilities while RESP provides for a zero interest
rate. A zero interest rate would require budget authority to cover the
costs of the program. EECLP loans do not require budget authority for
the cost of the loan because of the electric program's negative subsidy
rate. RD will continue to work with the Committee to further advance
energy efficiency.
Question. When do you expect regulations to be published?
Answer. We do not have a set timeline, but we will continue to keep
the Subcommittee informed as we move forward. We will continue to work
with USDA staff and the Committee to determine how to best implement
energy efficiency programs.
Question. Please let us know if there is anything this Subcommittee
can do to help you expedite this process.
Answer. We will continue to keep the Subcommittee informed as we
work to advance energy efficiency programs for rural areas.
private investment in rural infrastructure
Question. Secretary Vilsack has long expressed an interest in
promoting private sector investment in rural infrastructure. It is
believed that private sector markets neglect rural investment
opportunities due to unfamiliarity and the relatively smaller project
sizes. He has viewed the Water and Waste Disposal direct loan portfolio
as a vehicle to educate the private sector on the excellent prospects
that can be available.
Please describe, in very specific terms, the current initiative
that is under consideration.
Answer. The United States faces costly upgrades to aging and
deteriorating drinking and wastewater infrastructure.Given the stress
on public budgets, governments are unlikely to have the capacity to
fill this funding gap. The gap is particularly problematic for rural
communities that often depend on Federal and state grant and loan
programs to finance their water infrastructure projects. While larger,
urban areas can issue public bonds to pay for major improvements, rural
communities have limited access to these financial markets, restricting
their ability to independently finance projects.
USDA recognizes the need for additional investment in rural water
infrastructure and is exploring how institutional investors (e.g.
pension funds) could play a role in filling some of the gap. The
challenge we face is that loan amounts needed to support rural water
projects are often too small for institutional investors to consider
making on a one-off basis, especially for those without prior
experience in rural water lending.
To incentivize institutional investors to enter the lending market
for rural water projects, USDA is considering offering an investor a
participation interest in a small portion of the Department's water
loan portfolio. In exchange, the investor would make a forward
commitment to a certain amount of new loans in support of rural water
projects. The policy goal of such a transaction is to create an initial
investment of scale suitable for institutional investors to consider
entering the market.
In fulfilling its forward commitment, the investor would target
rural communities with populations of more than 10,000, but less than
20,000 which are beyond the statutory reach of USDA's current water
program, but are served by other USDA rural loan and grant programs.
The target communities would also include those that became ineligible
for USDA's water loans when their population level exceeded the 10,000
limit in the 2010 decennial census.
Question. What are the administrative burdens, and how much will
they cost, to implement this initiative?
Answer. There will be no material administrative burdens as a
result of the transaction.
Question. Will Rural Development continue to be responsible for
servicing the loans?
Answer. Yes.
Question. Will Rural Development be responsible for outreach and
promotion of the initiative, and finding new projects that might be
funded?
Answer. No.
Question. What are the current and future Credit Reform costs of
this initiative? That is, what will be required in terms of current
budget authority and what will be the future effects on the program
subsidy rate?
Answer. While the transaction would constitute a Government action,
USDA is working with OMB on determining the cost of the transaction
under the Federal Credit Reform Act of 1990 (FCRA). USDA is planning to
structure this transaction to have no cost under FCRA. We do not
anticipate any impact on future subsidy rates for the water and waste
disposal loan program.
Question. Will private sector participants receive a discount on
the loans involved?
Answer. USDA would not discount any portion of its existing loans.
Question. Will current borrowers be offered the right of first
refusal, if their loan is being sold or participated out? If not, why
not?
Answer. No. At this time USDA does not anticipate offering
borrowers the right of first refusal. The transaction would have no
impact on the program's borrowers, who would retain all the rights and
protections that they currently have under the terms of their loan
agreements.
Question. Will current borrowers retain servicing options they
currently are entitled to?
Answer. Yes.
Question. Will this initiative reduce the debt burden on borrowers?
Answer. No, borrowers will continue to be responsible for their
current obligations.
Question. How many water and waste projects go to poverty areas or
areas in dire need of these services?
Answer. In fiscal year 2015 RUS funded 340 water and waste
projects, totaling $676 million, in persistent poverty counties and
rural areas where twenty percent or more of its residents are living in
poverty. These investments are part of a continuing USDA focus on
addressing the needs of market poverty communities in rural America.
rental assistance
Question. We understand that funding to renew Rental Assistance
agreements in fiscal year 15 was exhausted in August. For those
projects that did not get renewed, what protection did you provide to
the tenants against unaffordable rent increases?
Answer. Approximately 44 properties out of RD's 14,600 Multi-Family
Housing portfolio (about 0.3 percent) were affected by the prohibition
against a second renewal of Rental Assistance in fiscal year 15. RD's
field staff worked with the property owners to develop ``relief plans''
intended to keep as much money in the property's operating account as
possible, so that no change in tenant contribution would be necessary.
In our discussions with borrowers, we urged them to use all the relief
tools available, to mitigate the need for an increase in tenants'
contribution towards rent. Forty-one owners of MFH properties elected
to utilize the tools we offered (defer RD mortgage payment; suspend
deposits to reserve account; use the reserve account for operating
expenses; allow over income tenants to fill vacant units; allow for a
borrower loan to the property).
Question. Did any tenants suffer substantial rent increases?
Answer. RD did not approve any rent increases as a result of the
inability to renew these RA agreements. A few owners did notify their
tenants that their portion of the rent payment would increase. At this
time, we do not have quantified figures as properties report on a
monthly basis; however, we can get that information for you.
Question. What assistance are you providing to project owners until
Rental Assistance agreements are renewed under the Continuing
Resolution?
Answer. RA funds were received under the Continuing Resolution and
an Exception Apportionment. These funds were immediately made available
to renew Rental Assistance agreements. As of November 4, more than $478
million has been used to renew RA agreements. For properties that ran
out of funding in October or earlier, their RA agreements will provide
funds effective October 1.
Question. When a Rental Assistance unit becomes vacant, regulations
require that the unit be offered to the lowest income applicant on the
waiting list. With this requirement, how do you accurately estimate
future Rental Assistance needs?
Answer. We believe very strongly that our mission is to serve the
needs of the most vulnerable residents in rural communities. In doing
so we acknowledge the difficulty in accurately estimating future rental
assistance needs, in an effort to address the issue Rural Development
has taken the initiative to improve the accuracy of its estimation
process by updating the methodology RD has been using to calculate the
dollar amounts needed on an RA Agreement.
Question. What is the magnitude of the fiscal year 15 Rental
Assistance shortfall?
Answer. As indicated during the hearing, RD did not have sufficient
funding for the RA Agreements due for renewal in September of 2015.
There were 905 properties that requested RA that had less than a full
month's RA payment remaining in their agreement. Consequently, the RA
shortfall in September was $3,873,518. The shortfall was due to: more
RA units than expected needing renewal; and an increase in per unit
costs. The higher than expected number of renewals occurred in part due
to the need to fund a second renewal for properties that were not
subject to the re-renewal prohibition. The higher than expected per
unit costs reflected inflationary increases not anticipated in 2013
when the fiscal year 2015 budget was prepared. Harvard's Joint Center
for Housing Studies' analysis of the consumer price index (CPI) for
contract rents (a broad and therefore conservative measure) indicates
that rents are climbing at an accelerating rate. Nominal rents were up
3.5 percent during the 12 months ending September 2015, which is
considerably higher than the 1.6 percent provided by budget guidance in
2013.
Question. What is the amount that is needed in fiscal year 16 to
fund all expiring Rental Assistance contracts?
Answer. The current appropriation of $1,389,695,000 is sufficient
to fund all expiring Rental Assistance contracts in fiscal year 16.
Question. What internal changes are you making to your estimation
process to ensure more accurate budget requests in the future?
Answer. The development of the ``Rental Assistance Obligation
Tool'' in 2015 represents a huge step forward in the RA estimation
process. The Obligation Tool will calculate properties' estimated needs
based on each individual property's RA history rather than the former
method of using a state-wide estimation process. The Tool includes an
updated calculation methodology for forecasting that is based on:
--The average amount of RA the property used during the most recent
12 months;
--Higher weighting of the more recent months' RA use to reflect the
most current tenant characteristics;
--Adjustments for any implemented and planned rent increases;
--An inflation factor to adjust for any time lag between the estimate
and when funds will be needed.
The Tool became effective October 1. We are confident that this new
methodology will significantly increase the accuracy of our estimation
process.
Question. Can you assure this Subcommittee that the fiscal year 17
budget request will not understate the need to renew expiring Rental
Assistance agreements?
Answer. We are confident that the new RA Obligation Tool will
substantially reflect the most current needs of the property.
maturing mortgages
Question. The number of Rural Development-financed multi-family
housing loans maturing each year is increasing and will reach 1,100
projects per year in 2019. When these loans are paid off, the projects
will no longer be in USDA's affordable housing program, and will not
have access to Rental Assistance or loan servicing options that Rural
Development can offer.
What is Rural Development doing to keep these projects in the
affordable housing program?
Answer. RD is very concerned with the potential loss of affordable
housing as our Section 515 direct loans mature, because that housing
may be lost in the community and the rental assistance support would no
longer be available to the families in that property. If that RD
housing is lost, the very low income families living there may have no
other affordable housing in which to live.
In response, RD has provided a number of options for owners to keep
their RD loan and protect the families living there.
--The borrower can apply through RD's Preservation NOFA for a
deferral of their maturing mortgage for up to 20 years;
--The borrower can receive priority points if they choose to apply
for both the deferral and additional RD funding for
rehabilitation of property;
--The borrower can request a re-amortization and modification of the
maturing loan to extend the loan term up to 20 years;
--If owners go through the prepayment process, their tenants may be
eligible to receive housing vouchers.
--RD has also proposed legislation in the 2016 budget to extend
housing voucher protection to tenants in properties with a
mortgage that matures and the owner is not willing to extend
the affordable housing feature of that property.
Question. Do current project owners generally want to remain in the
program or graduate out?
Answer. We believe that most owners wish to remain in the program,
because of the stability that the rental assistance benefit provides
and the favorable financing available through our 515 and Preservation
and Revitalization programs. Many of these owners also share our
commitment to provide affordable housing to the low income residents
that we both serve. We thank them for their continued commitment.
Question. Have you surveyed project owners to determine what number
would like to remain in the program and where those projects are
located?
Answer. RD has not performed a survey of all of the owners of
approximately 11,500 properties with mortgages maturing through 2024.
However, RD field staff do contact individual owners of properties with
mortgages maturing in the next few years to learn those owners' plans
for the property, and to explain the options the owners may have to
keep the affordable housing in the program. RD has also had numerous
discussions with organizations active in this issue to get a general
sense about the industry's interest in opportunities to retain this
critically needed affordable housing.
Question. How are you working with owners and housing advocates to
develop new options to retain properties in the affordable housing
program?
Answer. RD recognizes the importance of our non-profit partners in
retaining our affordable housing. We have looked for ways to encourage
non-profits to take over this housing; one option that we have used is
to promote the use of Section 515 loans to finance the acquisition of a
maturing mortgage property from the existing owner. The new 515 loan
extends the availability of that housing by another 30 years.
multi-family housing preservation pilot
Question. Over 14,000 affordable multi-family housing projects in
rural America have been financed using USDA loans.These projects
include over 475,000 housing units for low and very low income rural
households. However, the average age of these projects exceeds 25
years.
With projects this old, what is Rural Development doing under the
Rural Housing Preservation Pilot to improve their physical condition
and to mitigate issues of deferred maintenance?
Answer. Since its authorization as a demonstration program in 2006,
RD has been actively engaged in the preservation of its Section 515
portfolio through its Multi-Family Preservation and Revitalization
(MPR) program. Through the end of fiscal year 2015, RD has obligated
$1.051 billion for the rehabilitation of 982 properties and more than
33,000 units of affordable housing. MPR has also facilitated a high
level of cooperation with state housing finance authorities by
leveraging billions of dollars in tax credits to stretch our limited
appropriation dollars.As part of the application process for MPR
funding, RD requires the property owner to address any immediate or
near term property physical condition issues, including deferred
maintenance. In addition, RD underwrites the loan application to ensure
sufficient funds will be available to long-term physical issues as they
arise.
In order to continue making progress in our revitalization efforts,
RD has requested that Congress authorize the MPR program permanently.
If the program was permanently authorized, the Agency could create
regulations to institutionalize the program's benefits and signal to
potential program participants that both the Executive and Legislative
branches of the Federal government are committed to the revitalization
of our affordable housing.
Question. How is Rural Development working with housing advocates,
owners, and other interested parties to develop new options to preserve
this valuable affordable housing stock.
Answer. RD recognizes the importance of our non-profit partners in
retaining our affordable housing. We have looked for ways to encourage
non-profits to take over this housing; one option that we have used is
to promote the use of Section 515 loans to finance the acquisition of a
maturing mortgage property from the existing owner. The new 515 loan
extends the availability of that housing by another 30 years.
Question. One concern we frequently hear is that Rural Development
is unable to expedite the transfer of a property from the current owner
to a non-profit purchaser. These transactions typically take 18 months
or more, which places incredible burdens on the buyers in terms of
holding together financial packages. What are you doing to streamline
and accelerate this process?
Answer. Stakeholders have expressed concerns about property
transfer processing times. Based on those concerns, RD undertook a
business process improvement to streamline the transfer process, reduce
processing times, and increase consistency and transparency in the
transfer process. In the spring of 2015, RD rolled out a transfer
assessment tool. This tool was provided to stakeholders, including
property owners, and training was provided to ease the use of the tool.
The tool created consistency in underwriting transfer applications and
increased transparency by ensuring all parties in the transfer have
access to the same review tool. In addition, RD adopted several
industry standards into its transfer policies, to ensure more
consistent approval standards that are used by all funders in the
transfer financial package.
Question. What is the average time required now to execute a
property transfer?
Answer. Based on preliminary data, the average time to process,
approve, and close a transfer from the date of receipt of a complete
application package in fiscal year 2015 was 126 days. This is a
reduction of 31 days, or nearly 20 percent, from prior years. As we
continue to make improvements to the process, we expect transfer
processing to continue to improve.
single family housing direct loan program
Question. The single family housing direct loan program is Rural
Development's flagship program providing homeownership opportunities to
low and very low income rural households. For years this program has
offered the chance for successful homeownership to thousands of rural
households who otherwise would be denied this opportunity. This has
always been one of the most popular programs of this Subcommittee and
ample funding is provided each year.
Were you able to obligate all of the funds available in fiscal year
15?
Answer. Yes, fiscal year 2015 funds were fully utilized on
September 21, 2015.
Question. What changes are you putting in place for fiscal year
2016 to ensure that the funding provided will be entirely utilized, and
not require the extraordinary efforts that were necessary in fiscal
year 2015?
Answer. In fiscal year 2015, delivery of the 502 direct home
ownership loan program was a high priority for USDA. That priority
continues in fiscal year 2016, and will be reinforced with automated
underwriting, streamlining of the credit report process, and additional
program training. A certified packager program final rule will be
implemented provided that prohibitory ``pilot'' language is removed
from the final USDA fiscal year 2016 appropriations bill. This
regulation will enhance our partnership with certified loan packagers
and further enhance program delivery.
new poverty pilot program
Question. Recently the Administration announced a new multi-agency
anti-poverty initiative, the ``Rural IMPACT'' demonstration project.
Ten rural communities were selected to receive special technical
assistance for 6 months, to develop plans to address the problems of
poverty in their communities.
Please describe the Rural IMPACT initiative and what is expected to
be accomplished.
Answer. Recognizing that every child, no matter where she is born,
should have an opportunity to succeed, the White House Rural Council
launched ``Rural Impact'', a cross-agency effort to combat poverty and
improve upward mobility in rural and tribal places. And in August, HHS
announced a new demonstration project, Rural Integration Models for
Parents and Children to Thrive (IMPACT), to help communities adopt a
two-generation approach to addressing the needs of both vulnerable
children and their parents, with the goal of increasing parents'
employment and education and improving the health and well-being of
their children and families. Often, programs are structured to serve
either adults or children, rather than focusing on the entire family to
improve outcomes. The Rural IMPACT Demonstration helps communities
adopt a comprehensive, whole-family framework for addressing child
poverty, such as through facilitating physical colocation of services,
universal ``no wrong door'' intake, referral networks, shared
measurement systems, and use of technology to deliver services.
Question. How were the ten rural communities selected?
Answer. A process was led by HHS that included communities
submitting letters of interest in participation in the
demonstration.The Demonstration is administered by HHS with support
from the Community Action Partnership and the American Academy of
Pediatrics, and implemented in collaboration with the U.S. Departments
of Agriculture, Education, and Labor, Appalachian Regional Commission,
Delta Regional Authority, and the Corporation for National and
Community Service (CNCS).
Question. Why do you think 6 months to develop local plans and then
6 months to implement those plans is adequate to produce visible
results?
Answer. We believe that with intensive technical assistance,
including individualized expert coaching, site visits, and peer
learning, as well as increased capacity in the form of AmeriCorps VISTA
volunteers, rural communities can make important program and system
adjustments to intentionally align intensive, high-quality, adult-
focused services with intensive, high-quality, child-focused programs.
Question. How will success be measured?
Answer. Over the long term, key outcomes would include: increased
enrollment in quality early childhood programs; increased high school/
GED and post-secondary credentials for parents; increased parental
employment; and increased child and family well-being. Recognizing that
we are limited in the outcomes we can expect within just 1 year, a
process evaluation will empirically describe the Rural IMPACT
intervention, its processes, the site- level activities that resulted,
and the experiences of key individuals and teams involved.
Question. What will this demonstration project cost and from where
are the funds coming?
Answer. USDA Rural Development has contributed $250,000 for
AmeriCorps VISTA volunteers to better coordinate rural development
programs of Federal, state and local governments in the designated
rural areas. The remaining resources are contributions from other
participating agencies.
loan portfolio credit quality
Question. Rural Development has the difficult task of providing
loans to rural individuals, organizations, and communities that have
limited means and often cannot obtain commercial credit. The
outstanding loan portfolio now exceeds $210 billion.
Please discuss the credit quality of the portfolio, and whether or
not delinquencies and loan losses are remaining steady or declining.
Answer. In looking at Rural Development's portfolio in its
entirety, one measure that is tracked is the percentage of delinquent
principal greater than 1 year. For fiscal year-end 2012, 2013, 2014,
and 2015, those figures were 2.19 percent, 1.91 percent, 1.96 percent
and 2.00 percent respectively. Therefore the portfolio as a whole has
been fairly consistent at the 2 percent range.
Rural Development does, however, have a vast array of programs as
represented in the portfolio reports that follow. Four years have been
provided for comparison purposes of each program.
Loan loss data has also remained consistent during the last 4
years. For 2012, 2013, 2014, and through June of 2015, percentages have
been .51 percent, .61 percent, .53 percent, and .46 percent
respectively.
The information is submitted for the record.
[The information follows:]
RURAL DEVELOPMENT LOAN PORTFOLIO AS OF SEPTEMBER 30, 2012
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Delinquent Loans > 30 days Delinquent Loans > 1 Year
Amount of ------------------------------------------------------------------------------------------------------------------
Loan Portfolio # of Loans Principal % Loan Delinquent % Delq. # Loan % Loan Delinquent % Delq.
Outstanding # Loan Delinq. Delinq. Principal balance Prin. Delinq. Delinq. Principal balance Prin.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Portfolio
Housing and Community Facilities
Single Family Housing..................... 307,883 $15,776,794,078 70,151 22.78 $3,860,545,020 24.47 20,612 6.69 $1,075,339,610 6.82
Multi-Family Housing...................... 25,488 $11,161,277,000 *321 **2.11 $206,782,018 1.85 *184 **1.21 $126,938,039 1.14
Community Facility........................ 6,164 $4,165,281,000 144 2.34 $180,241,446 4.33 66 1.07 $85,471,316 2.05
Total Housing & Community Fac........... 339,535 $31,103,352,078 ***70,295 ***22.38 $4,247,568,484 13.66 ***20,678 ***6.58 $1,287,748,965 4.14
Utilities
Water & Waste............................. 17,836 $12,004,297,000 93 0.52 $125,725,161 1.05 57 0.32 $80,159,255 0.67
Electric.................................. 3,203 $43,087,376,196 1 0.03 $1,447,861 0.00 1 0.03 $1,447,861 0.00
Telecommunications........................ 1,975 $4,656,650,125 31 1.57 $267,219,531 5.74 26 1.32 $233,892,463 5.02
Total Utilities......................... 23,014 $59,748,323,321 125 0.54 $394,392,553 0.66 84 0.36 $315,499,579 0.53
Business and Cooperative
Business and Industry..................... 55 29,854,000 23 41.82 $22,212,832 74.40 17 30.91 $20,987,391 70.30
RMAP...................................... 142 14,914,045 10 0.00 $0 0.00 0 0.00 $0 0.00
Intermediary Relending Prog/HHS........... 1,028 $453,693,800 12 1.17 $5,253,101 1.16 5 0.49 $3,575,574 0.79
Rural Economic Development................ 352 $112,564,484 2 0.57 $400,371 0.36 0 0.00 $0 0.00
Total Business & Cooperative............ 1,577 $611,026,329 37 2.35 $27,866,304 4.56 22 1.40 $24,562,965 4.02
Total Direct Portfolio...................... 364,126 $91,462,701,728 ***70,457 ***20.81 4,669,827,341 5.11 ***20,784 ***6.14 1,627,811,509 1.78
Guaranteed Portfolio
Housing and Community Facilities
Single Family Housing..................... 671,274 $75,683,366,487 88,532 13.19 $9,628,542,279 12.72 16,930 2.52 $1,883,300,769 2.49
Multi-Family Housing...................... 550 $668,204,431 3 0.55 $6,006,470 0.90 2 0.36 $4,278,232 0.64
Community Facility........................ 713 $1,173,174,000 21 2.95 $49,050,168 4.18 9 1.26 $22,274,686 1.90
Total Housing & Community Fac........... 672,537 $77,524,744,918 88,556 13.17 $9,683,598,917 12.49 16,941 2.52 $1,909,853,687 2.46
Utilities
Water & Waste............................. 69 $90,699,867 0 0.00 $0 0.00 0 0.00 $0 0.00
Electric/Other............................ 17 $289,496,096 0 0.00 $0 0.00 0 0.00 $0 0.00
Total Utilities......................... 86 $380,195,963 0 0.00 $0 0.00 0 0.00 $0 0.00
Business and Cooperative
Business and Industry..................... 3,752 $7,089,217,252 263 7.01 $549,965,422 7.76 175 4.66 $329,952,765 4.65
Total Business & Cooperative............ 3,752 $7,089,217,252 263 7.01 $549,965,422 7.76 175 4.66 $329,952,765 4.65
Total Guaranteed Portfolio.................. 676,375 $84,994,158,133 88,819 13.13 10,233,564,339 12.04 17,116 2.53 2,239,806,452 2.64
Total Loan Portfolio........................ 1,040,501 $176,456,859,861 ***159,276 ***15.69 $14,903,391,680 8.45 ***37,900 ***3.73 $3,867,617,961 2.19
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
RURAL DEVELOPMENT LOAN PORTFOLIO AS OF SEPTEMBER 30, 2013
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Delinquent Loans > 30 days Delinquent Loans > 1 Year
Amount of ------------------------------------------------------------------------------------------------------------------
Loan Portfolio # of Loans Principal % Loan Delinquent % Delq. # Loan % Loan Delinquent % Delq.
Outstanding # Loan Delinq. Delinq. Principal balance Prin. Delinq. Delinq. Principal balance Prin.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Portfolio
Housing and Community Facilities
Single Family Housing..................... 299,935 $15,593,598,443 72,565 24.19 $4,044,744,331 25.94 24,517 8.17 $1,276,738,913 8.19
Multi-Family Housing...................... 24,973 $11,060,153,000 *279 **1.87 $182,852,919 1.65 *194 **1.30 $139,950,212 1.27
Community Facility........................ 6,121 $4,708,785,000 130 2.12 $141,414,500 3.00 75 1.23 $83,623,935 1.78
Total Housing & Community Fac........... 331,029 $31,362,536,443 ***72,695 ***23.75 $4,369,011,750 13.93 ***24,592 ***8.04 $1,500,313,060 4.78
Utilities
Water & Waste............................. 17,005 $12,080,703,000 66 0.39 $86,502,160 0.72 15 0.09 $27,727,916 0.23
Electric.................................. 3,086 $45,790,844,797 12 0.06 $19,663,035 0.04 1 0.03 $1,403,971 0.00
Telecommunications........................ 1,822 $4,576,769,673 30 1.65 $292,421,343 6.39 21 1.15 $146,904,096 3.21
Total Utilities......................... 21,913 $62,448,317,470 98 0.45 $398,586,538 0.64 37 0.17 $176,035,983 0.28
Business and Cooperative
Business and Industry..................... 46 $24,954,000 18 39.13 $18,933,059 75.87 12 26.09 $18,017,166 72.20
RMAP...................................... 85 $20,331,259 3 3.53 $119,478 0.59 0 0.00 $0 0.00
Intermediary Relending Prog/HHS........... 1,048 $440,390,800 15 1.43 $6,535,033 1.48 5 0.48 $2,716,201 0.62
Rural Economic Development................ 361 $123,615,495 1 0.28 $175,000 0.14 0 0.00 $0 0.00
Total Business & Cooperative............ 1,540 $609,291,554 37 2.40 $25,762,570 4.23 17 1.10 $20,733,367 3.40
Total Direct Portfolio...................... 354,482 $94,420,145,467 ***72,830 ***22.10 $4,793,360,858 5.08 ***24,646 ***7.48 $1,697,082,410 1.80
Guaranteed Portfolio
Housing and Community Facilities
Single Family Housing..................... 775,355 $89,742,912,407 91,808 11.84 $10,210,728,503 11.38 14,048 1.81 $1,674,113,500 1.87
Multi-Family Housing...................... 615 $750,593,362 1 0.16 $294,890 0.04 0 0.00 $0 0.00
Community Facility........................ 701 $1,242,806,021 17 2.43 $27,568,610 2.22 12 1.71 $24,730,405 1.99
Total Housing & Community Fac........... 776,671 $91,736,311,790 91,826 11.82 $10,238,592,003 11.16 14,060 1.81 $1,698,843,905 1.85
Utilities
Water & Waste............................. 68 $78,665,770 0 0.00 $0 0.00 0 0.00 $0 0.00
Electric/Other............................ 17 $273,519,135 0 0.00 $0 0.00 0 0.00 $0 0.00
Total Utilities......................... 85 $352,184,905 0 0.00 $0 0.00 0 0.00 $0 0.00
Business and Cooperative
Business and Industry..................... 3,516 $6,706,971,282 219 6.23 $476,680,469 7.11 143 4.07 $299,493,509 4.47
Total Business & Cooperative............ 3,516 $6,706,971,282 219 6.23 $476,680,469 7.11 143 4.07 $299,493,509 4.47
Total Guaranteed Portfolio................ 780,272 $98,795,467,977 92,045 11.80 $10,715,272,472 10.85 14,203 1.82 $1,998,337,414 2.02
Total Loan Portfolio 1,134,754 $193,215,613,444 ***164,875 ***14.86 $15,508,633,330 8.03 ***38,849 ***3.50 $3,695,419,824 1.91
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
RURAL DEVELOPMENT LOAN PORTFOLIO AS OF SEPTEMBER 30, 2014
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Delinquent Loans > 30 days Delinquent Loans > 1 Year
Amount of ------------------------------------------------------------------------------------------------------------------
Loan Portfolio # of Loans Principal % Loan Delinquent % Delq. # Loan % Loan Delinquent % Delq.
Outstanding # Loan Delinq. Delinq. Principal balance Prin. Delinq. Delinq. Principal balance Prin.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Direct Portfolio
Housing and Community Facilities
Single Family Housing..................... 291,968 $15,415,802,962 75,432 25.84 $4,239,911,528 27.50 28,851 9.88 $1,507,234,605 9.78
Multi-Family Housing...................... 24,716 $10,914,281,000 *287 **1.94 $197,524,047 1.81 *65 **1.12 $123,347,225 1.13
Community Facility........................ 5,970 $5,049,715,000 118 1.98 $145,378,338 2.88 67 1.12 $75,895,343 1.50
Total Housing & Community Fac........... 322,654 $31,379,798,962 ***75,550 ***25.36 $4,582,813,913 14.60 ***28,918 ***9.71 $1,706,477,173 5.44
Utilities
Water & Waste............................. 16,676 $12,425,766,000 64 0.38 $82,595,959 0.66 20 0.12 $30,337,162 0.24
Electric.................................. 2,978 $46,431,536,087 3 0.10 $21,547,566 0.05 3 0.10 $21,547,566 0.05
Telecommunications........................ 1,525 $4,411,669,475 51 3.34 $369,748,850 8.38 30 1.97 $243,883,830 5.53
Total Utilities......................... 21,179 $63,268,971,562 118 0.56 $473,892,375 0.75 53 0.25 $295,768,558 0.47
Business and Cooperative
Business and Industry..................... 40 $23,569,000 17 42.50 $18,952,098 80.41 14 35.00 $18,064,832 76.65
RMAP...................................... 84 $23,914,016 4 4.76 $131,710 0.55 0 0.00 $0 0.00
Intermediary Relending Program............ 1,061 $422,227,000 11 1.04 $3,959,006 0.94 4 0.38 $2,160,790 0.51
Rural Economic Development................ 379 $158,214,456 6 1.58 $2,745,655 1.74 0 0.00 $0 0.00
Total Business & Cooperative............ 1,564 $627,924,472 38 2.43 $25,788,469 4.11 18 1.15 $20,225,622 3.22
Total Direct Portfolio...................... 345,397 $95,276,694,996 ***75,706 ***23.61 $5,082,494,757 5.33 ***28,989 ***9.04 $2,022,471,353 2.12
Guaranteed Portfolio
Housing and Community Facilities
Single Family Housing..................... 873,186 $102,281,768,559 97,688 11.19 $10,985,775,598 10.74 14,573 1.67 $1,736,154,464 1.70
Multi-Family.............................. 648 $785,939,681 1 0.15 $294,890 0.04 1 0.15 $294,890 0.04
Housing Community Facility................ 684 $1,247,462,398 15 2.19 $51,969,241 4.17 8 1.17 $18,610,338 1.49
Total Housing & Community Fac........... 874,518 $104,315,170,638 97,704 11.17 $11,038,039,729 10.58 14,582 1.67 $1,755,059,692 1.68
Utilities
Water & Waste............................. 74 $96,223,011 0 0.00 $0 0.00 0 0.00 $0 0.00
Electric/Other............................ 17 $247,912,430 0 0.00 $0 0.00 0 0.00 $0 0.00
Total Utilities......................... 91 $344,135,441 0 0.00 $0 0.00 0 0.00 $0 0.00
Business and Cooperative
Business and Industry..................... 3,331 $6,298,413,586 194 5.82 $416,411,396 6.61 117 3.51 $264,421,512 4.20
Total Business & Cooperative............ 3,331 $6,298,413,586 194 5.82 $416,411,396 6.61 117 3.51 $264,421,512 4.20
Total Guaranteed Portfolio.................. 877,940 $110,957,719,665 97,898 11.15 $11,454,451,125 10.32 14,699 1.67 $2,019,481,204 1.82
Total Loan Portfolio........................ 1,223,337 $206,234,414,661 ***173,604 ***14.48 $16,536,945,882 8.02 ***43,688 ***3.64 $4,041,952,557 1.96
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Number of projects delinquent.
** The percent of projects delinquent: Number of projects delinquent divided by number of projects outstanding. There are 14,771 projects outstanding as of September 30, 2014.
*** Exclude Multi-Family Housing Projects (Direct)
broadband
Question. Rural Development has had the responsibility for some
years of expanding access to high speed broadband services across rural
America.
How successful has Rural Development been in expanding rural access
to high speed broadband?
Answer. RUS has been very successful in expanding broadband service
in rural areas.
Over 1.9 million Rural Subscribers since 2009. Based on projections
from the project applicants in all RUS programs, 1.9 million rural
households, businesses, farms, factories, schools, libraries, and
healthcare facilities are anticipated to receive new or improved
broadband services as a result of RUS funding.
Over $6.7 Billion since 2009. RUS has provided over $6.7 billion in
loans and grants for wireline, wireless, and satellite broadband
deployment through the Infrastructure Loan program, the ARRA Broadband
Initiatives Program, and the Farm Bill Broadband Program.
Unserved Rural Communities Receive Broadband through RUS's
Community Connect Program. Since 2009, RUS has awarded over $77 million
in grants to 74 unserved communities to provide broadband service at
residences, businesses, and community centers.
Question. The fiscal year 14 Farm Bill required changes to the USDA
loan program. Please describe the significant program changes.
Answer. The Farm Bill required the following changes to be
incorporated into 7 CFR part 1738 which governs the Broadband Loan
Program.
--Evaluation Periods--establishes at least 2 evaluation periods each
year.
--Priority--requires the Agency to prioritize applications that offer
service to the greatest proportion of unserved households.
--Minimum acceptable level of broadband service--establishes a
minimum level for which Broadband Service is defined (4 Mbps
down and 1 Mbps up) and requires the Secretary to review that
definition at least once every 2 years.
--Eligible Service Area--changes the current 25 percent underserved
requirement and replaces it with a 15 percent unserved
requirement. Availability of service in an applicant's service
territory is to be validated by the National Broadband Map and
any other sources the Secretary may obtain. Determining
Priority of Applications--existing service in an applicant's
service territory is to be validated by one of three resources:
(1) information certified by the affected community, city or
county, or (2) demonstrated by the state broadband map or (3)
as shown on the National Broadband Map.
--Public Notice Regarding Applications--requires the Agency to
establish a fully searchable database that includes a notice
regarding each application for funding which includes the
applicant identity, description of proposed service area, the
amount and type of support requested, the status of the
application, the estimated number of households without
broadband service, and a listing of the census blocks that will
be served or service area map.
--Public Notice Regarding Awardees--requires the Agency to establish
a fully searchable database that includes a notice of each
entity receiving funding, including the name of the entity, the
type of assistance received, the purpose of the funding, and a
copy of the awardees semiannual report (redacting any
proprietary info).
--Semiannual Awardee Reporting--borrowers are to submit a semiannual
report for 3 years after the completion of the project which
describes the use of the assistance, the estimated number of
end users using or forecasted to use the new or upgraded
system, and the borrowers progress towards fulfilling the
objectives for which the assistance was provided (the number
and location of residents and businesses receiving new and
improved service, the speed of the broadband service, the
average price of service along with any changes to the adoption
rates).
--Term--if the project is serving an unserved area, the Agency may
establish a limited initial deferral period or other term
necessary to achieve financial feasibility and long-term
sustainability of the project.
Question. Have any loans been made under the new program?
Answer. At the end of July 2015, RUS published the new regulation
and opened up the first application window that is now required.The
application window closed on September 30, 2015 and 15 applications
were submitted for approximately $118 million.RUS is currently
reviewing the applications.
Question. What does the demand look like for the new program?
Answer. Based on the number of applications received for only a 2-
month application window, demand for the program appears to be strong.
RUS is also hearing from many potential applicants that they are
working on submitting applications during the next application window.
Question. Do you consider the BIP program a success? Why?
Answer. We consider the BIP program very successful. BIP funded 254
projects that are now providing broadband service to some of the
hardest to reach rural areas. Over $2.9 billion was expended to bring
broadband service to rural America.
Question. Rural Development has funded a lot of ``smart grid''
projects.What is smart grid technology?
Answer. Smart grid technology facilitates communications and remote
control of electric utility systems and business and residential
consumers. Smart grid technology allows utilities to better manage
loads and locate outages. Smart grid technology offers consumers the
ability to remotely control heating and air conditioning systems. For
instance, a consumer could have their AC unit connected to a smart grid
service provider and could remotely lower the temperature in the house
before they get home.
rural energy for america program (reap)
Question. The REAP program can and is used by individual farmers
and ranchers, and certain agricultural cooperatives, to increase the
efficiency of their operations or generate renewable energy on farm.
Irrigation districts apparently are not eligible to apply. However, at
least in Oregon, when irrigation districts pipe canals they are often
interested in doing renewable in-pipe hydropower generation and other
types of energy efficiency improvements for their members.
Does USDA have the ability to adjust the REAP program to allow
irrigation districts to apply, and is this something you have
considered doing? This could be an additional way to assist drought
affected communities, which is something we should all be working on.
Answer. Most irrigation districts are quasi-public districts that
were formed under State statute and would not qualify for funding under
REAP. A regulatory change would be required to make these entities
eligible recipients under REAP. There are a handful of districts,
however, that have formed irrigation cooperatives as an operating
entity. These cooperatives could be considered eligible for REAP.
To be eligible for REAP, the applicant must be a small business or
an agriculture producer, and non-profits and other public entities are
not eligible to participate in REAP.
Question. The fiscal year 14 Farm Bill provided the REAP Program
with $50 million in mandatory funding yearly. Please provide an update
on how REAP is doing.
Answer. Fiscal year 2015 Program level included $83 million of
grant funding and $208 million of guaranteed loan funding, which came
from two fiscal years of 2014 Farm Bill Funding and fiscal year 2014
Appropriations.The program utilized all of the grant funding and 75
percent of the guaranteed loan funds. The guaranteed loan funds was
twice the amount of the previous historical record which was quite a
feat as almost half the year was gone before guaranteed loans could be
obligated. Unused guaranteed loan funds will be carried over into
fiscal year 2016 and made available for lenders to access project
financing shortly after October 1st, which will continue to make the
program more accessible to applicants needing the funding.
On December 29, 2014 RD published a final rule that took into
account the 2014 Farm Bill provisions as well as comments received on
the REAP interim rule published in 2011 and the proposed rule published
in 2013.
RD has developed a new suite of outreach materials and is currently
engaged in an extensive outreach effort to potential applicants and
lenders.
rural business-cooperative service
Question. What is the status of the Biorefinery Assistance Program
(Sec. 9003)?
Answer. RD published an Interim Final Rule on June 24, 2015
implementing the 2014 Farm Bill provisions. The new rule makes the
program more accessible to facilities producing renewable chemicals and
to facilities manufacturing renewable chemicals and other biobased
outputs of biorefineries into end-user products. It also requires the
Agency to ensure diversity in the types of projects approved. A cap on
the amount of funding is provided for promoting biobased product
manufacturing (no more than 15 percent of fiscal year 2014 and fiscal
year 2015 mandatory funds). In addition to addressing the Farm Bill
provisions, the Interim Final Rule makes other programmatic changes
including an improved application process, enabling the flexibility to
assess an application on a commercial lending framework or a project
finance-based framework, simplifying the application scoring process,
and improving a number of loan guarantee terms and conditions.
RD published a Notice of Solicitation for Applications on July 6,
2015 announcing the first application cycle with a deadline of October
1, 2015. The NOSA requires all persons who intend to file an
application by October 1, 2015 to submit a Letter of Intent no later
than September 1, 2015. Application cycles are every 6 months with
applications deadlines of October 1 and April 1, which are preceded by
Letters of Intent by September 1 and March 1.
RD received letters from 23 potential applicants expressing their
intent to file an application for the application cycle ending October
1, 2015, requesting loan totaling $900 million and project costs
totaling $1 billion. Of these 23, six submitted applications by the
October 1 deadline while 11 potential applicants notified RD that they
will submit their application for the April 1, 2016 application cycle
because their lender was unable to complete the application by the
October 1, 2015 deadline.
10/01/2015 Application Cycle:
--Six applications--six Biorefineries and no Biobased Product
Manufacturing facilities.
--Loans requested range from $9 million to $250 million and total
$588 million
--Projects costs range from $12 million to $340 million and total
$895 million
--Three biorefineries will primarily produce advanced biofuels and
three will primarily produce biobased products including
renewable chemicals.
Between fiscal years 2009 and 2014, 42 applications were received.
Of these 142 applications, 30 applications were either withdrawn by the
applicant/borrower, determined by RD to be ineligible, or have had
funds deobligated. Of the remaining 12 applications, RD has issued 11
conditional commitments,--of which two loans have gone into default and
one loan was repaid in full--and one application is pending for which
RD is preparing to enter into a conditional commitment in fiscal year
2016.
Question. How do RBS programs leverage private-public partnerships
and outside funding?
Answer. While the Federal budget has increasingly been strained by
competing funding priorities, demand for RBS programs continues to
grow. Leveraging of program funds with outside (non-Federal funds) is
an important tool that RBS uses to stretch Federal funds in improving
conditions in the rural American communities that RBS serves.
RBS' success in this leveraging is enhanced by promoting
partnerships between the public and private sectors. RBS efforts to
leverage program funding includes Rural Development State and National
Office outreach efforts to discuss the equity or matching requirements
of RBS programs to stakeholders, and participation in regional and
local listening sessions, one on one meetings with stakeholders and
eligible entities, and interagency meetings or forums with other
Federal and state agencies, community development organizations, and
private foundations or investors.
In addition, at the individual project level, leveraging additional
funding sources demonstrates that others believe in the project, and it
contributes to the sustainability of a project, because those who sign
on as partners at the beginning have an incentive to continue
supporting the project after the RBS loan or grant is fully dispersed.
The following table summarizes RBS' success in leveraging from
fiscal year 2009 through fiscal year 2015.
----------------------------------------------------------------------------------------------------------------
Fiscal year 2009-2014 2015
Programs ---------------------------------------------------------------
Total Funding Leverage Obligations Leverage
----------------------------------------------------------------------------------------------------------------
B&I Guaranteed Loans............................ $8,712.99 $5,743.90 $1,044.52 $460.00
REAP............................................ 568.36 1,498.23 244.26 680.38
Biorefinery Assistance Program (9003)........... 1,037.68 1,198.96 80.00 70.48
RBOG............................................ 23.69 18.31 (see RBDG)
VAPG............................................ 108.49 47.88 44.48 50.24
RCDG............................................ 42.09 15.28 6.05 2.32
IRP............................................. 140.80 873.81 18.89 9.42
REDLoans........................................ 268.62 1,560.34 38.65 196.89
REDGrants....................................... 54.24 431.54 9.21 57.63
RBDG............................................ 223.65 283.32 27.84 29.61
RMAP............................................ 74.86 49.66 5.02 1143.71
Total RBS....................................... 11,255.46 11,721.25 1,518.92 1,600.68
----------------------------------------------------------------------------------------------------------------
NOTE: All figures are in $ millions.
Question. What is the status of the REDLG program? Why have you not
awarded funds since March?
Answer. We obligated all of the available RED loan funds by the end
of March 2015.The program is oversubscribed, and experienced a dramatic
funding cut from 2014 to 2015. In 2014, $85.6 million in loans and $9.2
million in grants were available and awarded.In 2015, less than half,
or $38.6 million in loans and $9.2 million in grants were available.
Question. How do RBS programs support local food initiatives?
Answer. Local and regional food is the strongest food trend in
decades and USDA and Rural Development are looking to build on this
trend and facilitate consumer interest in reconnecting with all
American agriculture and bridge the rural-urban divide. While limited
by geographic borders, RD has sought to identify projects that while
located in rural areas, can be used to support needs in urban and
suburban areas. For example, working to link a rural produce marketing
cooperative with an urban food retailer or market where there is a lack
of affordable fresh produce. RD has also been active in the Know Your
Farmer, Know Your Food initiative which emphasizes the need for a
fundamental and critical reconnection between producers and consumers.
RD continues to work to align existing programs with the needs of local
and regional food systems; conducting outreach activities so that the
linkages are understood; helping communities build local food systems
by providing new initiatives; and engaging the American public in
conversation about local and regional agriculture. RD has been engaged
with other Mission Areas within USDA as well as other Federal agencies
to collaborate and leverage resources and overcome these geographic and
administrative issues.
While Rural Development does not have a specific emphasis for local
food initiatives historically, the authorities governing many programs
within RD have supported local food activities. Examples of existing
programs and authorities within Rural Development currently support the
objectives of local food initiatives include: Community Facilities
Program (CF), Rural Business Development Grant (RBDG), Value Added
Producer Grant (VAPG), Rural Cooperative Development Grant (RCDG),
Small Socially Disadvantage Group Grant (SDGG), Rural Cooperative
Development Grant (RCDG), Renewable Energy for America Program (REAP),
and the Business and Industry Loan Guarantee (B&I) program.
These programs have funded a wide array of community and local food
projects. Examples include the development and implementation of food
hubs, mobile slaughter units, farm-to-school programs, farmers markets,
food banks, food cooperatives, food innovation centers, and value added
agricultural products. RD promotes a range of interventions that expand
the supply of and demand for nutritious foods, including increasing the
distribution of agricultural products, developing and equipping grocery
stores and strengthening the producer-to-consumer relationship.
Rural Development has actively promoted local and regionally
produced agricultural food products. National Office staff regularly
provide Field Office staff with information and guidance on how to
apply programs to support this effort. Rural Development has worked to
create an awareness of programs that can be used to support local and
regional food projects. Further, RD has collaborated with both
Agricultural Marketing Service and Food Safety Inspection Service to
host webinars, produce articles and reports, and make presentations
highlighting how programs can support local and regional food system
efforts across Mission Areas. Staff has participated in numerous
partner, stakeholder, and customer meetings whereprogram information is
shared and local and regional food success stories and replicable
models are discussed. RD's Rural Cooperatives magazine has also been
used to highlight multiple examples of local and regional food projects
and how RD programs were used to support them.
Question. How do RBS programs provide opportunities for socially-
disadvantaged farmers and groups?
Answer. RBS works to ensure that all eligible, rural residents are
afforded access to the business, cooperative and energy program
opportunities available through the agency.
RBS seeks to work with and assist socially disadvantaged farmers
and groups. The Socially Disadvantaged Groups Grant (SDGG) program
provides funding for cooperatives, groups of cooperatives and
cooperative development centers whose governing board is comprised of
at least 51 percent socially-disadvantaged members and whose primary
focus is to provide technical assistance to socially-disadvantage
farmers and groups. Program funds are used for developing business
plans, conducting feasibility studies, developing marketing plans and
training. For example, World Farmers Inc. (WFI) located in Lancaster,
Massachusetts, received a SDGG award to help a group of African
immigrant farmers form a food cooperative for food production,
marketing, and distribution. WFI is a nonprofit organization that
provides technical assistance to small, socially disadvantaged and
immigrant farmers. Client farmers are taught sustainable farming
production, fair marketing principles, and are mentored in the creation
and operation of independent farming enterprises. WFI partners with the
Flats Mentor Farm, also located in Lancaster, which acts as a farming
incubator and who provides individual farm plots for the farmers to
work on. At the farm, hands-on training is given in the technical
aspects of farming, including farm safety and pest, weed and irrigation
management among other farming issues.
The Value Added Producer Grant (VAPG) program also provides
priority for beginning and socially-disadvantaged agricultural
producers. The VAPG program provides planning and working capital
grants to eligible producers for marketing value-added agricultural
products. For example, Verdant Resources, Inc. in Duluth, Georgia used
VAPG funds assist producers in the processing of ginger into various
products. This VAPG project was designed to expand on an un-tapped
locally grown market. Verdant Kitchen is processing and marketing
products made from ginger and used VAPG funds to expand their base with
a mass market retail campaign. They have a commercial processing
facility in place and are working to expand the U.S. retail base for
ginger products that currently are about 95 percent imported.
While not having specific focus or priority for socially-
disadvantaged farmers and groups, RBS programs like the Rural
Cooperative Development Grant, Rural Business Development Grant,
Renewable Energy for America Program, and Delta Health Care Services
have all been used to support and assist socially-disadvantaged
producers and groups create or expand economic opportunities.
Question. How does RBS support start-up businesses, and small and
mid-sized businesses?
Answer. As we know, entrepreneurs and small businesses are the
engines of American innovation and our economic success. To maximize
our competitive advantage as a nation, we must ensure that, with hard
work, American entrepreneurs have the opportunity to find the capital,
training, and market access they need to start and grow their
businesses.
The Rural Business-Cooperative Service (RBS) supports startup,
small, and mid-sized businesses through a number of programs. For
example, the Value Added Producer Grant (VAPG) program provides
priority for operators of small or medium sized farms or ranches
structured as family farms and the Rural Microentrepreneur Assistance
Program provides assistance to businesses with 110 or fewer employees.
These and other RBS programs assisting start-ups and small to mid-sized
businesses include:
--Intermediary Relending Program
--Rural Microentrepreneur Assistance Program
--Small Disadvantaged Groups Grant program
--Rural Business Development Grant program
--Rural Economic Development Loan and Grant program
--Rural Energy for America Program
--Value-Added Producer Grant program
--Business and Industry Guaranteed Loan program
Through such programs as these, RBS provides increased access to
capital, job training, business development opportunities, strategic
community planning, and other resources. In addition to the direct
assistance we provide these businesses, our financial support is
creating lasting economic development opportunities in the rural
communities where the projects are located. Our programs, in other
words, have made, and continue to make, a significant impact on rural
communities. For example, since 2009, through over $10.9 billion in
investments, RBS programs are estimated to have helped over 103,000
rural businesses (over 60 percent of which are small businesses) start
or expand their operations with over 440,000 jobs created or saved. In
Fiscal Year 2015 alone, RBS programs are estimated to have helped over
12,500 rural businesses through $1.5 billion in loans, loan guarantees,
and grants.
Question. How does RBS support cooperatives?
Answer. Rural Development's Cooperative Programs has over 80 years
of experience successfully working with the cooperative sector and
remains the only Federal agency charged with that responsibility.
Cooperative Programs currently works to support the 2,238 U.S. farmer,
rancher, and fishery cooperatives who reported gross sales of $235
billion in 2012.
When possible, RBS staff works to deliver direct cooperative
development assistance. RBS has been also been effective in leveraging
investments through the Rural Cooperative Development Grant (RCDG)
program to build cooperative development capacity throughout the
nation. For example, the Foundation for Agriculture, Innovation and
Rural Sustainability (FAIRS) in Richmond, Virginia provides support to
cooperatives and producers in developing and advancing their
agricultural, economic and social interests to enhance their quality of
life. Virginia FAIRS has received funding from the Rural Cooperative
Development Grant program to assist individuals, cooperatives, small
businesses and other similar entities in rural areas to enable and
assist cooperative and business development. For example, the Kohala
Center, Inc. in Hawaii received a grant of $200,000 to provide
cooperative and business development technical assistance to rural
areas throughout Hawaii to combat the physical isolation and dependence
on imported food and energy. Funds will be used to provide technical
assistance to agricultural producers, emerging food hubs, and local
food distributors and linking them to local institutional buyers.
RBS continues to support Rural Cooperatives magazine, a bi-monthly
USDA publication that continues to be an important communication tool
with the cooperative community. The magazine regularly highlights
successful cooperative operations and -examples of cooperatives using
Rural Development in addition to discussing current issues and
opportunities for cooperatives.
RBS maintains a library of approximately 200 information, education
and research publications on the cooperative business model. In
addition, RBS remains the sole provider of statistics on U.S.
agricultural cooperatives. An annual survey of cooperatives allows RBS
to maintain historic data and information and supports the production
of the Directory of Cooperatives, Annual Cooperative Statistics Report
and The Top 100 Agricultural Cooperatives. Additionally, RBS staff will
regularly meet with international visitors to provide information and
discuss cooperatives in the U.S.
In October 2015, Rural Development launched the Interagency Working
Group on Cooperative Development (IWGCD). The IWGCD is comprised of
representatives from Federal departments and agencies that support
programs and services focusing on or, working with, cooperatives. The
IWGCD will address programs affecting cooperatives and their
development. The IWGCD will identify and engage key government,
private, and non-profit organizations that play a role in improving the
coordination and effectiveness of programs serving cooperative sectors.
These partnerships and collaborations provide mechanisms to obtain
feedback on how Federal initiatives are understood at the local level;
keep organizations informed about Federal funding opportunities; and
provide the IWGCD with communication channels to regional, state, and
local programs.
______
Questions Submitted by Senator Tom Udall
Question. Describe the role of your department Chief Information
Officer (CIO) in the development and oversight of the IT budget for
your department. How is the CIO involved in the decision to make an IT
investment, determine its scope, oversee its contract, and oversee
continued operation and maintenance?
Answer. The USDA CIO works closely with senior leadership both at
the Department level and within the Bureaus and Staff Offices to
consistently align USDA's budget, finance, acquisitions, human
resources, and IT communities.
In addition, the USDA CIO ensures IT budget requests are approved
by all agencies CFOs and CIOs.
The budget formulation process is focused on resource allocation
decisions which may affect current and future acquisition programs. In
order to be effective with this process, the CIO and Budget Officer
will continue to work with senior policy officials, including the
Secretary's Office, to identify resource needs in support of existing
policy priorities and the Department's strategic goals and objectives.
In addition, early engagement with the USDA Mission Areas,
understanding their lines of business (LOBs) in order to have a
cohesive synergy with the information technology communities and
incorporating the CIO into the pre-planning process along with the CFO,
and Budget Officer will ensure clear visibility into the prioritization
of programs before any final decisions are submitted to start the
approval of any budget formulation requests.
Question. Describe the existing authorities, organizational
structure, and reporting relationship of the Chief Information Officer.
Note and explain any variance from that prescribed in the newly-enacted
Federal Information Technology and Acquisition Reform Act of 2014
(FITARA, PL 113-291) for the above.
Answer. Currently the Office of the Chief Information Officer
(OCIO) is located within USDA's Departmental Management organization
under the Assistant Secretary for Administration. The Department's CIO
also reports to the Deputy Secretary in the management and oversight of
USDA's Enterprise Information Technology Investment Review Board (E-
Board) and also provides regular updates to the Secretary concerning
USDA's IT portfolio.
Question. What formal or informal mechanisms exist in your
department/agency to ensure coordination and alignment within the CXO
community (i.e., the Chief Information Officer, the Chief Acquisition
Officer, the Chief Finance Officer, the Chief Human Capital Officer,
and so on)?
Answer. USDA has developed a FITARA Common Baseline Plan that
identifies CXO roles and responsibilities, process, procedures and
policies focused on coordination and alignment within the CXO
community. USDA has diagramed these procedures and processes,
identified touch points between the CIO and existing CXO processes and
procedures and worked with the CXOs to ensure CIO involvement. The
revised processes and procedures are being captured and placed in
existing departmental regulations, departmental notices, policies
memorandums, etc.
Question. According to the Office of Personnel Management, 46
percent of the more than 80,000 Federal IT workers are 50 years of age
or older, and more than 10 percent are 60 or older. Just 4 percent of
the Federal IT workforce is under 30 years of age. Does your department
have such demographic imbalances? How is it addressing them?
Answer. Yes. The CIO, in consultation with USDA's Chief Human
Capital Officer (CHCO), is developing competency requirements and is
enhancing its workforce planning framework for the recruitment and
retention of all IT professionals.
Question. How much of the department's budget goes to
Demonstration, Modernization, and Enhancement of IT systems as opposed
to supporting existing and ongoing programs and infrastructure? How has
this changed in the last 5 years?
Answer. Over the past 5 years USDA's IT budget has not
significantly changed and as such the distribution of the IT budget
between Development, Modernization, and Enhancements (DME) to
Operations and Maintenance (O&M) has not seen a significant change.
Based upon USDA's report to OMB via the IT Portfolio Summary DME is at
14 percent and O&M is at 86 percent.
Question. What are the 10 highest priority IT investment projects
that are under development in your department? Of these, which ones are
being developed using an ``agile'' or incremental approach, such as
delivering working functionality in smaller increments and completing
initial deployment to end-users in short, six-month timeframes?
Answer. USDA considers an IT investment as high priority if it has
one or more of the following attributes: (1) Mandated by legislation or
Executive Order; (2) Requires a common infrastructure investment; (3)
Considered strategic or mandatory-use investments; (4) Differ from or
greatly impact the Department's infrastructure, enterprise architecture
or standards guidance; and (5) Involves multiple-agency funding.
However as priorities evolve and other factors enter the equation or
become mission-critical, additional attributes could become important
in our definition.
------------------------------------------------------------------------
Agile or
Investment Name Short Description Incremental
Development?
------------------------------------------------------------------------
APHIS-Certification, To ensure that the Yes, an agile
Accreditation, Registration, certification, methodology is
Permitting, and Other Licensing accreditation, being leveraged.
(CARPOL). registration,
permitting, and
other licensing
strategies and
operations of
APHIS to make the
best use of
existing and
emerging
technologies,
technology
support, and end-
user education.
DM-OCIO-Optimized Computing OCE revitalizes No, as it is not a
Environment (OCE). the Service system
Center Agency development
(SCA) IT program but
infrastructure. replaces
This multi-year hardware.
initiative
focuses on
technological
enhancements on
all levels of the
IT architecture
(e.g., network
and servers) with
the purpose of
supporting SCA
modernization
projects. The
successful
implementation of
the projects
within the
investment will
provide a more
highly secure
computing
environment and
platform allowing
USDA to monitor
events and
protect against
potential cyber
threats.
DM-OCIO-USDA Security Operations Investment to No agile
Center (SOC). maintain USDA IT methodology is
Security being leveraged
Operations Center at this time.
(SOC) focused on
achieving USDA
Security
Strategy: Achieve
proactive
security through
actionable
insight. A
successful SOC
relies upon
continuous
investment to
ensure that its
capabilities
evolve in
responseto the
evolving cyber
threat
environment. A
SOC is a major
cornerstone of a
cybersecurity
program. This
investment is in
place to upgrade,
modernize the
capabilities of
the USDA SOC.
FSA-0111 Common Farm Programs The purpose of Yes, an iterative
Systems. this investment methodology is
is to support the beingleveraged.
development and
maintenance of a
portfolio of core
Farm Program
applications and
services used by
Farm Programs,
Farm Loans and
Commodity
Operations as
well as other
USDA Agencies.
These systems
include Acreage
Reporting &
Compliance
Systems, Farms
Programs
Management
Systems, Customer
Name/Address
Systems
(including
SCIMS),
Representative
Link Manager
System,
Subsidiary
Systems and
Common Payment
Program.
FSA-103......................... Consolidated Farm Yes, an iterative
Loan Program methodology is
Information & beingleveraged.
Delivery Systems
This investment
supports FSA's
Farm Loan Program
(FLP) and its
goal of providing
capital to
American farmers
and ranchers by
providing them
with ownership,
operating, and
emergency loans
through
streamlined and
modernized
processes and
systems.
FSIS-Public Health Information PHIS established Yes, an iterative
System (PHIS). to develop an methodology is
effective food beingleveraged.
safety system
that can collect,
assess and
provide
information
enabling a
response to food
safety hazards.
FSIS adopted the
public health-
based approach
that is in line
with the core
food safety
principles of the
President's Food
Safety Working
Group. PHIS is a
modern,
coordinated food
safety system
which helps
prevents harm to
consumers and
uses good data
and analysis for
effective food
safety
inspections and
enforcements.
NRCS-Conservation Delivery NRCS has initiated Yes, an agile
Streamline Initiative (CDSI). CDSI with the methodology is
purpose of beingleveraged.
implementing a
more effective,
efficient and
sustainable
business model
for delivering
conservation
assistance across
the Nation. This
initiative has
three objectives:
1) Simplify
Conservation
Delivery for
customers and
employees; 2)
Streamline
Business
Processes to
increase
efficiency and
integration
across business
lines; and 3)
Ensure Science-
based Assistance
to reinforce the
delivery of
technically sound
products and
services.
RD-Comprehensive Loan Program... The CLP initiative Yes, an
was launched to incremental
modernize and methodology is
streamline the beingleveraged.
application
delivery
portfolio in
order to better
serve RD's
citizen
beneficiaries,
and to provide RD
employees with
the technology
and tools they
need to pursue
RD's mission. RD
offers a variety
of direct and
guaranteed loan
programs for
Single Family
(SF) and Multi-
Family (MF)
Housing,
Business,
Community
Facilities, and
Utilities
programs.
RMA-13 Emerging Information This investment Yes, an agile
Technology Architecture (EITA). houses RMA's methodology is
financial, being leveraged.
insurance, risk
management, and
actuarial
applications.
This investment
is essential to
mission critical
to the Federal
Crop Insurance
Corporation and
the Risk
Management
Program.This
investment
supports the
reengineering of
all business &
financial systems
associated with
delivery of the
crop insurance
program.
FNS-Supplemental Nutrition This investment Yes, an agile
Assistance Program (SNAP) consists of methodology is
Support. following systems/ being leveraged.
applications: (a)
Systems SNAP
Quality Control
System (SNAPQCS)
supports FNS
efforts to
determine the
error rate by
each State, to
monitor and
reduce State
error rates for
SNAP, and
minimize
erroneous
payments. Error
rate
determination is
required by
legislative
requirements. (b)
Electronic
Disqualified
Recipient
Subsystem (e-DRS)
is used to store
information on
disqualified
recipients of
SNAP benefits.
The function of e-
DRS is mandated
by legislative
requirements.
Every state must
ensure that
disqualified
recipients are
not let back into
the program. (c)
SNAP Workflow and
Information
Management
(SWIM)--SWIM is a
new system that
is currently
under
development. It
will automate the
SNAP key business
functions of
waiver processing
and policy
clarifications.
The ability to
submit SNAP
related waiver
requests, policy
clarifications,
manage work
related to
submitted
requests/
clarification,
search for
information, and
report on
information in a
user-friendly and
intuitive
interface. (d)
Treasury Offset
Program (TOP)--is
a centralized
offset program,
administered by
the Bureau of the
Fiscal Service's
(Fiscal Service)
Debt Management
Services (DMS),
to collect
delinquent debts
owed to Federal
agencies and
states. (e)
Retailer File
Solution (RFS)
(f) SNAP Retailer
Locator (g)
Healthy Access
Locator (h) SNAP
Policy WIKI.
------------------------------------------------------------------------
Question. To ensure that steady state investments continue to meet
agency needs, OMB has a longstanding policy for agencies to annually
review, evaluate, and report on their legacy IT infrastructure through
Operational Assessments. What Operational Assessments have you
conducted and what were the results?
Answer. The USDA Capital Planning and Investment Control (CPIC)
process assesses each investment's impact on mission performance, to
identify any needed investment changes or modifications, and to revise
the investment management process based on lessons learned. An
Operational Analysis (OA) is performed by the Program/Project Manager
after a year of the investment being in operations, and updated on an
annual basis. The results from these activities determine the
investment's efficiency and effectiveness in meeting performance and
financial objectives. Additionally, OCIO conducts annual portfolio
reviews on the agencies and staff offices to evaluate their portfolio
to provide further insight into legacy IT infrastructure and IT
systems.
Question. What are the 10 oldest IT systems or infrastructures in
your department? How old are they? Would it be cost-effective to
replace them with newer IT investments?
Answer.
------------------------------------------------------------------------
Investment Title Year
------------------------------------------------------------------------
Initiated FS-Automated Timber Sale Accounting.............. 1980
FSA-107 Consolidated General Sales Manager (CGSM).......... 1982
FS-Forest Service Computer Base............................ 1983
FSA-105 Conservation Systems............................... 1985
FSIS-USDA Meat & Poultry Hotline (Hotline)................. 1985
FSA-0100 Commodity Management Systems...................... 1987
FSA-0101 Price Support Systems............................. 1987
FSA-106 Consolidated Financial Management Information 1987
Systems (CFMIS)...........................................
FSA-009 Cotton Management System (CMS)..................... 1988
DM-OC-Ongoing IT Support................................... 1993
------------------------------------------------------------------------
USDA manages multiple systems in program investments and tracks
which systems are scheduled to be decommissioned as new capability
becomes available. When USDA makes modernization decisions, we look for
opportunities to create investments that will modernize or consolidate
a number of related systems. The Animal and Plant Health Inspection
Service (APHIS) CARPOL (Certificates, Accreditations, Registrations,
Permits, and Other Licenses) system, for example, will consolidate more
than eight separate systems that support the safe introduction and
movement of regulated agricultural products.
Question. How does your department's IT governance process allow
for your department to terminate or ``off ramp'' IT investments that
are critically over budget, over schedule, or failing to meet
performance goals? Similarly, how does your department's IT governance
process allow for your department to replace or ``on-ramp'' new
solutions after terminating a failing IT investment?
Answer. The USDA's Integrated Information Technology Governance
Framework (IITGF) is a holistic set of processes, procedures, and
guidelines that assist the Office of the Chief Information Officer's
(OCIO's) customers to improve mission delivery. Through this framework
the CIO actively engages with all key stakeholders involved in the
governance structure consisting of an Integrated Advisory Board that
makes recommendations on IT investments to the executive-level E-Board,
chaired by the USDA's Deputy Secretary. Composed of the Department's
senior leaders, the E-Board ensures that existing and proposed IT
investments contribute to the Secretary's strategic vision and mission
requirements, employ sound IT investment methodologies, comply with
Departmental enterprise architecture, employ sound security measures,
and provide the highest return on the investment or acceptable project
risk. The E-Board provides the Secretary with recommendations for
review and decision authority. These recommendations, based on whether
an investment is meeting value (cost), schedule, strategic alignment,
risk management, and performance goals, may well precipitate that an
investment is ``off ramped'', paused, or terminated. Similarly, this
governance structure provides the flexibility to ``on ramp'' new,
innovative solutions that are replacing investments that have been
paused or terminated.
Question. What IT projects has your department decommissioned in
the last year? What are your department's plans to decommission IT
projects this year?
Answer. The Department does not conduct decommissioning plans on IT
projects. We conduct decommissioning plans at the IT system level and
investment level. USDA has decommissioned twenty-three (23)
investments. During USDA annual portfolio reviews, it is discussed what
investments/projects will be decommissioned for the next OMB budget
year submission. All investments that will be decommissioned, complete
a Decommission Plan and get approval from the Associate Chief
Information Officer of Information Resource Management. This process is
built within our Integrated IT Governance Framework.
Question. The newly-enacted Federal Information Technology and
Acquisition Reform Act of 2014 (FITARA, PL 113-291) directs CIOs to
conduct annual reviews of their department's IT portfolio. Please
describe your department's efforts to identify and reduce wasteful,
low-value or duplicative information technology (IT) investments as
part of these portfolio reviews.
Answer. USDA currently has been annually reviewing the USDA
portfolio and all of the component portfolios for the past 3 years. The
Department's enterprise information technology governance program,
portfolio reviews, and Enterprise Architect programidentify and reduce
wasteful, low value, or duplicate information technology investments.
Question. In 2011, the Office of Management and Budget (OMB) issued
a ``Cloud First'' policy that required agency Chief Information
Officers to implement a cloud-based service whenever there was a
secure, reliable, and cost-effective option. How many of the
department's IT investments are cloud-based services (Infrastructure as
a Service, Platform as a Service, Software as a Service, etc.)? What
percentage of the department's overall IT investments are cloud-based
services? How has this changed since 2011?
Answer. The Department has an investment process to support
assessment of Cloud capability. In the recent months the USDA CIO has
promoted more adoption of Cloud solutions and movement towards a more
innovative approach leveraging the capabilities of Cloud technologies.
Of the current 202 investments, approximately 23 or 11 percent are
currently leveraging a cloud-based service and an additional 26
investments evaluated a cloud-based solution an alternative. USDA did
not track this information in 2011, but during infiscal year 2012,
USDA's percentage of investments that leverage a cloud-based solution
was 13 percent of the 308 investments.
Question. Provide short summaries of three recent IT program
successes--projects that were delivered on time, within budget, and
delivered the promised functionality and benefits to the end user. How
does your department define ``success'' in IT program management? What
``best practices'' have emerged and been adopted from these recent IT
program successes? What have proven to be the most significant barriers
encountered to more common or frequent IT program successes?
Answer. The USDA OCIO defines ``successful'' IT projects or
investments as those that 1) meet business requirements, 2) are
delivered and maintained on schedule, 3) are delivered and maintained
within budget, and 4) deliver the expected business value and return on
investment. The USDA OCIO notes that many factors contribute to a
successful project or investment, but the USDA has found that effective
project management and governance practices are particularly crucial.
The USDA differentiates between ``project management success'' (i.e.
delivering in accordance with the agreed project objectives) and
``product success'' (i.e. the amount of value the project's
deliverables bring once the project is over). USDA believes that some
key factors or barriers to success often contribute to the failure of a
project, such as:
--Lack of stakeholder/user input
--Incomplete and/or vaguely defined requirements or specifications
--Changing requirements or specifications
--Lack of executive support
--Insufficient planning
--Underestimated time and/or resources allocated for design,
development, quality assurance, and/or quality control
--Technological incompetence
--Insufficient resources
--Unrealistic expectations
--Unclear objectives
--Unrealistic timeframes
--New or untested technology
However, the USDA notes several factors that are crucial to the
success of any IT project or investment, such as:
--Clear and clearly articulated goals
--Comprehensive, long-term, and detailed planning
--Early definition of deliverable quality criteria
--Active executive support with a shared vision throughout the
project's life
--Carefully planned implementation
--Concise, consistent, complete, and unambiguous business and
technical requirements
--Realistic estimates and schedules
--Early risk analysis and ongoing risk management
--Planning for business process change management
--Adherence to a formalized IT governance approach and framework
--Proactive issue resolution
--Stakeholder involvement throughout the life cycle
--Defined and consistently executed change management to minimize
scope increases
--A skilled, certified Project Manager experienced in the execution
of project management best practices
--Execution of a formal system development methodology (such as the
Agriculture's System Development Life Cycle, AgSDLC)
--A commitment to success
These three successful investments are still continuing with their
implementations and have released incremental functionality to their
customers:
1. Animal, Plant and Health Inspection Service (APHIS)
Certification, Accreditation, Registration, Permitting and Other
Licenses (CARPOL)
a. APHIS CARPOL successfully delivered a single system, cloud-based
platform to support permitting live dog imports that is required by a
Congressional amendment to the Animal Welfare Act. The tool reduces the
processing time from days to hours and will allow anyone to apply for a
permit to bring a live dog(s) into the continental U.S. or Hawaii, for
the purpose(s) of research, resale, or veterinary treatment.
2. Natural Resource and Conservation Service (NRCS) Conversation
Delivery Streamlining Initiative (CDSI)
a. NRCS CDSI successfully released one of three modules using the
agile methodology called Conservation Client Gateway (CCG).
Conservation Client Gateway is a new NRCS public website that provides
individual landowners and land users the option to request conservation
technical and financial assistance from NRCS.
3. OCIO Identity Credential Access Management (ICAM).
a. OCIO ICAM successfully implemented the personal identification
verification (PIV) initiative by securing our applications behind the
identity access tool to enable customers to access multiple
applications with a single credential. The implementation of the PIV
provides for the use of multi-factor authentication, a key tool in our
cybersecurity program.
Question. A June 2015 Government Accountability Office (GAO) report
found that USDA spent about $423 million since 2004 to modernize IT
systems through Modernize and Innovate the Delivery of Agricultural
Systems (MIDAS) before halting the program due to poor performance and
uncertainty regarding future plans. GAO made five recommendations to
the USDA Farm Service Agency (FSA), including establishing and
implementing a plan for adopting recognized best practices for program
management. Has FSA fully implemented these five recommendations?
Please explain how USDA implemented each GAO recommendation.
Answer. GAO provided five interrelated recommendations to improve
the selection, planning, and control of IT projects results. FSA has
taken immediate steps to improve IT internal controls in the areas of
integrated capital planning, IT governance, risk management, project
management, Cybersecurity and other IT oversight initiatives. FSA
created an Investment Review Board, an executive level governance board
that meets regularly to assess and prioritize IT investments. In
addition, an external contractor has been engaged to perform an
independent third-party assessment to determine if the current
enterprise solution provides the necessary functionality and is the
most cost effective modernization solution.
Question. The Federal IT Dashboard is a website that allows the
general public to view details of Federal information technology
investments. This transparency tool shows that the USDA ``NFC Shared
Services--IT Systems'' investment as rated ``red'' or high risk. Since
August 2014, various Chief Information Officer comments published on
the Dashboard have indicated that USDA is conducting a baseline review
to improve this investment's cost and schedule performance. What
actions has USDA taken to remediate the NFC Shared Services--IT Systems
investment's troubled performance? Have these steps improved this
investment's cost and schedule performance to a point where it can be
rated ``green?''
Answer. Since June 2015, the NFC Shared Service Investments has
been rated RED due to numerous issues based on the criteria established
by OMB which is used to rate all Major Investments. The issues include
lack of program management artifacts, lack of EVM reporting, and DM&E
reporting.
On June 24, 2015, the USDA CIO and Senior Executives held a
Portfolio Review with OCFO-NFC, which included in depth analysis of the
NFC Shared Service Investments. In the portfolio review it was
determined that the USDA CIO designees would travel to New Orleans to
discuss the requirements of Earned Value Management (EVM), Capital
Planning and Investment Control (CPIC) requirements and Information
Technology Governance process. OCIO worked with the NFC Investment team
to capture performance data regarding their projects and activities
that are a part of the NFC Shared Service Investments. From 16 through
18 September 2015, the Capital Planning & IT Governance Division
(CPIGD) Director and CPIGD Analyst met with all NFC Senior Executives
and the NFC Program/Project Managers (PPMs). During the meetings the
USDA OCIO team identified the abovestated issues and developed a
corrective action plan (CAP), which was provided to the OCFO-NFC
Investment team. Once the OCFO-NFC Investment team accomplishes the
corrective actions, USDA OCIO will reevaluate the NFC Shared Service
Investments.
Since the three days of meetings, OCFO-NFC Investment team started
the following actions to improve their score to yellow for the November
2015 monthly on the Federal IT Dashboard:
1. Reporting all projects, activities, and risks within their
business case.
2. Updated the business case contract table.
3. Identified and is now reporting the line of funding for all
shared services agencies and staff offices.
4. Provided an updated Risk Management Plan and is in the process
of updating investment Acquisition Plan and Investment Charter.
On October 27, 2015 the USDA OCIO EVM Manager and CPIGD Analyst
have met with NFC Investment team to discuss how they can conduct EVM
and rebaseline the investment. USDA OCIO scheduled a series of follow-
up meetings with OCFO-NFC team to finalize and have NFC complete this
process, which include monthly major investments to discuss IT
Dashboard scores and outstanding issues in order to improve the
performance of the NFC investments and eventually achieve a green
status.
NFC will be undergoing a reorganization within their office to
better serve the mission and support of their functions. A new CIO has
now been assigned to NFC that will ensure the investment will be better
managed. NFC will be executing a Request For Proposal (RFP) thatwill
include an EVM clause for support and assist with them reporting EVM to
the USDA OCIO Department. Once EVM is being reported and they have
finalized the updates to the investment artifacts as well as continuing
to manage, monitor, track and update their projects, activities, risks
and performance metric they should be able to move to a green status.
______
Questions Submitted by Senator Patrick Leahy
Question. In many ways, Vermont highlights both the successes and
challenges of ensuring that rural America has access to affordable and
quality broadband service. Burlington has a vibrant start-up community
and is home to successful online businesses like Dealer.com.
Traditional small businesses like the Vermont Country Store have
augmented their reach and built meaningful 21st Century brands by
operating popular online stores. Unfortunately, I still hear too often
from Vermonters who lack access to broadband service and the
transformative opportunities that it brings. I worry that without
aggressive action to spur investment in rural areas, we will leave
these Americans even further behind as the next generation of broadband
service is deployed.
Do you agree that access to quality and affordable broadband is no
longer a luxury but a necessity in rural America?
Answer. Yes, we agree that broadband is now a necessity. Children
in rural America as well as children everywhere must have broadband
access to do homework and their lessons. Without easy access rural
children will fall way behind their counterparts in urban and suburban
areas as well as the rest of the world.
In addition, rural America is doing more and more ecommerce and
broadband service is necessary to facilitate this.
Farmers now use the Internet to sell their crops and auction their
cattle worldwide. They also use broadband to control how their trackers
plow and when and how much to water their fields.
The Federal Communications Commission's (FCC) 2015 broadband
progress report found that rural America is underserved at every
broadband speed, with 20 percent lacking access even to the minimum
acceptable level of broadband service Congress set for the Farm Bill
Loan Program in 2014.In contrast, the FCC's report found that 92
percent of urban Americans have access to speeds that are more than 6
times higher than that minimum standard.
Question. What more can we do to close this rural/urban broadband
divide?
Answer. Utilizing programs like the RUS Community Connect Grant
Program is one way to get broadband service to the neediest areas. The
areas with no service today are some of the most rural, low density
areas in the country. It is difficult to support a business plan in
these areas a grant funding could be a key component. We must also work
with existing service providers and help them understand that there are
ways to serve these rural areas and still make a profit.
As we have done in the past to support universal service for voice
services, we must now refocus our efforts and support mechanisms to
fully support the deployment of broadband service to every person in
the country.
______
Questions Submitted to Administrator Tony Hernandez
Questions Submitted by Senator Patrick Leahy
section 515 multifamily loan program
Question. Throughout the country, thousands of properties
participating in the Section 515 Multifamily Loan Program are
approaching their 40-year terms, resulting in maturing mortgages that
will no longer guarantee rent subsidies, threatening many low-income
tenant households with drastic rent increases. This year, the
affordability of 60 properties across the country, totaling more than
700 units, are threatened.
In my home state of Vermont, there are 79 active Section 515
properties containing 1,842 units that will expire within the next 10
years. Meanwhile, the statewide vacancy rate rests at one percent,
making every unit assuring affordability even more critical to our
housing stock.
This year, Lebanon, New Hampshire, is faced with losing 50 units of
local affordable housing due to mortgage expiration at the end of the
year. Twin Pines Housing Trust, a local affordable housing nonprofit
organization serving Vermont and New Hampshire, was committed to
continuing to serve the need for affordable housing in that area.
Thankfully, with the help of the VT-NH State Rural Development Office,
Twin Pines was able to successfully negotiate a purchase of the 50
units from the property owner, ensuring perpetual affordability to its
residents.
I commend our Vermont-based partners for their commitment to this
mission, but recognize that not all states and communities have
motivated local housing providers with the necessary tools to preserve
this critical housing stock. Looking ahead to the remaining contracts,
there is an urgent need to address the potential loss of thousands of
affordable housing units and provide necessary protections for low-
income populations at risk of homelessness.
What plan does the Department currently have in place to address
maturing mortgages in the immediate future, and over the next several
years?
Answer. RD is very concerned with the potential loss of affordable
housing as our Section 515 direct loans mature, because that housing
may be lost in the community and the rental assistance support will no
longer be available to the families in that property. If that RD
housing is lost, the very low income families living there may have no
other affordable housing in which to live.
In response, RD has provided a number of options for owners to keep
their RD loan and protect the families living there.
--The borrower can apply through RD's Preservation NOFA for a
deferral of their maturing mortgage for up to 20 years;
--The borrower can receive priority points if they choose to apply
for both the deferral and additional RD funding for
rehabilitation of property;
--The borrower can request a re-amortization and modification of the
maturing loan to extend the loan term up to 20 years;
--If owners go through the prepayment process, their tenants may be
eligible to receive housing vouchers.
--RD has also proposed legislation in the 2016 budget to extend
housing voucher protection to tenants in properties with a
mortgage that matures and the owner is not willing to extend
the affordable housing feature of that property.
Question. When should housing providers and nonprofit partners
expect to receive a plan from the Department so that they may properly
plan for necessary purchase and sales agreements?
Answer. Throughout 2015, RD has participated in a series of public
meetings with all stakeholders, including housing providers and
nonprofit partners, to inform them of our efforts to retain our
affordable housing. These sessions have included information regarding
the use of Section 515 funds to finance the nonprofit acquisition of
Section 515 properties in danger of being lost through mortgage
maturity or prepayment. Our communications with stakeholders have begun
to generate results--for example, late in fiscal year 2015, RD provided
a $6.7 million Section 515 loan to a nonprofit in New Hampshire to
retain 100 units of affordable housing.
Question. What additional resources is the Department currently
dedicating to address the immediate needs? And, will the Department be
including funding requests in future budgets to address this issue?
Answer. In fiscal year 2015, RD made the decision to prioritize the
use of Section 515 funds to finance the acquisition of Section 515
properties at risk of leaving the program through either prepayment or
maturity of the existing mortgage.In fiscal year 2015, RD received an
appropriation of $28 million. Of this amount, RD used more than $11
million to assist nonprofits in the acquisition of Section 515
properties in California, New Hampshire, and Pennsylvania. The
remainder was used for the Multi-family Preservation and Revitalization
program. RD's fiscal year 2016 proposed budget includes a request for
an additional $15 million in Section 515 funding for the preservation
or construction of affordable housing; one of the purposes of the
additional funding would be to retain existing affordable housing
through the nonprofit acquisition process.
Question. In instances when mortgages expire and properties no
longer guarantee rentals subsidies, is the Department considering
options that would allow residents to remain in their homes and
maintain the affordability, similar to the enhanced vouchers utilized
by the Department of Housing and Urban Development? If not, why?
Answer. In addition to the steps the Department has taken to
encourage property owners to remain in the RD portfolio through loan
re-amortization and modification, and use of the MPR tools, the
Department has also offered Letters of Priority Entitlement to tenants
in maturing mortgages. Holding this Letter will allow the tenant to be
placed at the top of the waiting list for any RD property in order to
continue living in affordable housing. The Agency may be authorized to
transfer the unused rental assistance to a new RDproperty in limited
circumstances. The Department has also included in the fiscal year2016
President's Budget a legislative proposal to allow Rural Development
housing vouchers to be used by tenants in these maturing mortgage
properties. Current voucher program appropriations language limits use
to tenants in situations where the owner is prepaying the RD mortgage.
CONCLUSION OF HEARINGS
Senator Moran. With that, I thank, again, everyone for
their attendance, and bring this hearing to a conclusion.
We are adjourned.
[Whereupon, at 12:15 p.m., Wednesday, October 21, the
hearings were concluded, and the subcommittee was recessed, to
reconvene subject to the call of the Chair.]
LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS
Page
Baldwin, Senator Tammy, U.S. Senator From Wisconsin, Questions
Submitted by................................................. 108
Blunt, Senator Roy, U.S. Senator From Missouri, Questions
Submitted by................................................... 35
Boisvert, Brian, Chief Executive Officer and General Manager,
Wilson
Communications:
Prepared Statement of........................................ 198
Statement of................................................. 197
Chrisman, Tony, Vice President and Owner, Chrisman Development
Inc.:
Prepared Statement........................................... 204
Statement of................................................. 203
Cochran, Norris, Deputy Assistant Secretary for Budget,
Department of Health and Human Services........................ 1
Cochran, Senator Thad, U.S. Senator From Mississippi, Statement
by............................................................. 179
Collins, Senator Susan M., U.S. Senator From Maine, Question
Submitted by................................................... 84
Daines, Senator Steve, U.S. Senator From Montana, Questions
Submitted by
Feinstein, Senator Dianne, U.S. Senator From California,
Questions
Submitted by
Hamburg, Hon. Dr. Margaret A., Commissioner, Food and Drug
Administration................................................. 1
Prepared Statement........................................... 2
Summary Statement............................................ 4
Hernandez, Tony, Administrator, Rural Housing Service............ 159
Questions Submitted to....................................... 247
Hoeven, Senator John, U.S. Senator From North Dakota, Questions
Submitted by................................................... 223
Leahy, Senator Patrick J., U.S. Senator From Vermont, Questions
Submitted by
Lowry, Stuart, President and Chief Executive Officer, Sunflower
Electric Power Association 192
Prepared Statement of........................................ 194
Statement of................................................. 192
McBride, Brandon, Administrator, Rural Utilities Service......... 159
Questions Submitted to....................................... 223
McConnell, Senator Mitch, U.S. Senator From Kentucky, Questions
Submitted by................................................... 39
Mensah, Hon. Lisa, Under Secretary for Rural Development......... 159
Prepared Statement of...................................... 164
Questions Submitted to..................................... 218
Summary Statement of....................................... 161
Merkley, Senator Jeff, U.S. Senator From Oregon:
Questions Submitted by
Statements of Moran, Senator Jerry, U.S. Senator From Kansas:
Opening Statements of
Prepared Statements of
Questions Submitted by
Johansson, Dr. Robert, Acting Chief Economist.................... 51
Ostroff, Hon. Dr. Stephen Ostroff, Acting Commissioner, Food and
Drug Administration, Department of Health and Human Services... 115
Prepared Statement........................................... 120
Summary Statement of......................................... 118
Rikkers, Samuel, Acting Administrator, Rural Business-Cooperative
Service........................................................ 159
Simpson, William, Director of Legislative and Regulatory Affairs,
National
Rural Water Association:
Prepared Statement........................................... 190
Statement of................................................. 188
Taylor, Michael, Deputy Commissioner for Foods and Veterinary
Medicine; Food and Drug Administration......................... 115
Tootle, William, Director, Office of Budget, Food and Drug
Administration................................................. 115
Tyler, Jay, Chief Financial Officer, Food and Drug Administration 1
Udall, Senator Tom, U.S. Senator from New Mexico, Questions
Submitted by................................................... 240
Vilsack, Hon. Thomas J., Secretary............................... 51
Prepared Statement.......................................... 52
Summary Statement............................................ 52
Young, Michael L., Budget Officer................................ 51
SUBJECT INDEX
----------
Page
Department of Agriculture
Additional Committee Questions................................... 81
Adequacy of the Thrifty Food Plan................................ 100
Agricultural Research Service.................................... 104
Air Tankers...................................................... 98
Animal Welfare Act............................................... 100
Antimicrobial Research........................................... 98
APHIS Overall Budget Priorities.................................. 87
ARC/PLC Signups.................................................. 63
Assistance to Drought Impacted Communities in California......... 101
Avian Influenza
Big Data......................................................... 73
Bioenergy Program for Advanced Biofuels.......................... 65
Biotech Review in APHIS.......................................... 83
Broadband Program................................................ 93
Budget:
Reconciliation............................................. 104
Savings..................................................... 80
Community Facilities Grants...................................... 94
Conservation..................................................... 64
Technical Assistance........................................ 58
Consolidation of Food Safety Agencies............................ 85
Colonias Communities............................................. 70
Crop Insurance................................................... 59
Cuba............................................................. 81
Dietary Guidelines............................................... 57
Disruption in Poultry Trade...................................... 76
Electronic Access to Records..................................... 75
Environmental Concerns Within the Dietary Guidelines............. 85
Farm Service Agency Funding...................................... 62
Food:
For Progress................................................ 96
Insecurity in Military Households.......................... 102
Safety Modernization Act................................... 105
Forest Management................................................ 113
Implementation of New Methods of Poultry Slaughter Inspection
Innovation Institute for Cellulosic Nano-Materials............... 77
IT Modernization................................................. 82
Healthy Foods Financing Initiative (HFFI)........................ 86
Housing Vouchers................................................. 92
Local Food Systems............................................... 64
Local and Regional Procurement................................... 95
Margin Protection Program for Dairy............................. 108
Merging Food Safety Responsibilities............................. 89
Military Families Receiving Snap Benefits........................ 102
Midas Program.................................................... 74
Mobile Slaughter Facilities...................................... 78
Multi-Family Housing Preservation Pilot.......................... 91
National:
Organic Program Sunset Policy Change....................... 113
Standards Board Recommendations........................ 106
OIE Standards.................................................... 76
Organic Research................................................. 111
Pathogen Standards............................................... 97
Pollinators...................................................... 60
Port of Vancouver Grain Inspections.............................. 71
Potato Wart...................................................... 84
Public Law 480, Title I.......................................... 78
Rental Assistance
Rice Entering China.............................................. 84
Rural:
Child Poverty Pilot Initiative.............................. 94
Energy Savings Program....................................... 60
Housing...................................................... 105
Outmigration................................................. 63
Safety Reports................................................... 72
School:
Equipment Grants............................................. 68
Meal Standards............................................... 80
Self-Help Housing Program
Specialty Crop Pest Program...................................... 99
Subcommittee Recess.............................................. 114
Summer:
Feeding Program.............................................. 78
Electronic Benefit Transfer (EBT) Demonstration Projects..... 103
Tree and Forest Pests...................................... 107
USDA:
Assistance to California..................................... 97
Wildlife Services............................................ 107
U.S. Sheep Experiment Station.................................... 86
Water of the U.S. Rule........................................... 73
Waters Infrastracture............................................ 69
Wildfires in California.......................................... 98
Yazoo River Basin................................................ 79
__________
A Review of Rural Development in 21st Century America
159
Additional Committee Questions................................... 218
Broadband........................................................ 235
Access
And Underserved Communities.................................. 178
Opportunity Council Recommendations.......................... 181
Service in Tribal Areas...................................... 179
EPA Rules........................................................ 185
Loan Portfolio Credit Quality.................................... 230
Maturing Mortgages............................................... 227
Multi-Family Housing Preservation Pilot.......................... 228
New Poverty Pilot Program........................................ 229
Partnerships..................................................... 173
Private Investment in Rural Infrastructure.....................
Program Duplication.............................................. 173
Rental:
Assistance................................................... 226
Program.................................................. 175
2015 Shortfall........................................... 182
Rural:
Development Visibility....................................... 169
Energy for America Program (REAP)............................ 236
Energy Saving Program (REAP)................................. 224
Housing:
Maturing Mortgages................................... 219
502 Direct Loans..................................... 219
Section 502 Guaranteed................................... 220
Section 538 Eligibility for Housing Cooperatives......... 220
Energy Savings Program (RESP)................................ 224
In Character................................................. 220
Utilities Administrator Brandon McBride...................... 223
Utility Service--Existing Water and Waste Disposal Loan
Portfolio.................................................. 221
Section:
515 Multifamily Loan Program................................. 247
515 Rural Rental Housing..................................... 218
Sequestrations Impact............................................ 186
Single Family Housing Direct Loan Program........................ 229
Strategic Economic and Community Development Interim Rule........ 222
Sustantially Underserved Tribal Areas Program.................... 187
Universal:
Service...................................................... 201
Fund..................................................... 176
__________
FDA Food Supply Safety Efforts
115
Additional Committee Questions................................... 146
Animal:
Feed......................................................... 147
Rule..................................................... 142
Antibiotics in Products.......................................... 135
Budget Request................................................... 144
California Produce............................................... 133
Compliance....................................................... 128
Cucumber Salmonella Outbreak..................................... 133
Domestic and Imported Foods...................................... 136
FSMA
And Foreign Suppliers........................................ 130
Collaboration................................................ 140
Coordination with USDA....................................... 134
Funding...................................................... 116
Implementation Plan.......................................... 128
Spending..................................................... 144
Food:
Illness Deaths............................................... 136
Safety
Foreign Inspections.............................................. 131
Guidance......................................................... 130
Import Safety.................................................... 148
Inspection....................................................... 128
Partnerships..................................................... 128
Preventive:
Control Rules................................................ 120
And Trace Ability........................................ 140
Produce Safety................................................... 146
Reprioritizing Funding........................................... 145
Risk Assessments for Soft-Ripening and Raw Milk Cheese........... 156
Salmonella in Peanut Butter Outbreak............................. 139
State Budget Concerns............................................ 153
States Role in FSMA Implementation............................... 142
Support for Farmers.............................................. 154
Vibrio Incidence................................................. 138
__________
Department of Health and Human Services
(1)
Additional Committee Questions................................... 33
Biosimilars...................................................... 35
Budget Request................................................... 5
Dietary Guidelines
Drug Safety Labeling............................................. 10
Ebola Emergency Appropriations................................... 13
E-Cigarettes..................................................... 15
Electronic Drug Inserts.......................................... 46
Expanded Access Request.......................................... 27
Imported Food Inspection......................................... 43
FDA:
Food Safety Activities....................................... 39
Office of Regulatory Affairs (Field Staff) Reorganization.... 45
Oversight of Antibiotic Use and Resistance................... 47
Food:
And Drug Administration...................................... 1
Inspections.................................................. 20
Safety
Centers of Excellence.................................... 46
Modernization
Act.................................................... 22
Rules................................................ 30
Generic Drugs.................................................... 17
Imported Food Inspection......................................... 43
Irrigation Water Standards....................................... 25
Maple Ingredient Labeling....................................... 11
Menu Labeling
Mobile Medical Applications
Right to Try Laws................................................ 28
State Inspection Standards for FSMA.............................. 43
Statutory Role of the Food and Drug Administration............... 12
Tobacco Deeming Regulation....................................... 14
Untitled Letters................................................. 37
[all]
