98-201: Appropriations for FY1999: U.S. Department of Agriculture and Related Agencies

Ralph M. Chite, Coordinator
Specialist in Agricultural Policy
Environment and Natural Resources Policy Division

Updated December 21, 1998

CONTENTS

Summary
Most Recent Developments
USDA Spending at a Glance

Mandatory vs. Discretionary Spending

Status of FY1999 Agriculture Appropriations
FY1999 Agriculture Appropriations Action

Emergency Supplemental Farm Disaster and Economic Assistance
Farm Commodity Programs

Civil Rights Provisions
Milk Marketing Order Reform

Crop Insurance
Agricultural Credit
Agricultural Trade and Food Aid Programs

CCC Export Credit Guarantees
Agricultural Trade Sanctions
Country of Origin Labeling for Agricultural Products
Market Access Program
Export Subsidies
Public Law 480 or Food for Peace
Food for Progress
Foreign Agricultural Service

Conservation

Natural Resources Conservation Service
Farm Service Agency Conservation Programs

Agricultural Research, Education, and Economics

Agricultural Research Service (ARS)
Cooperative State Research, Education, and Extension Service (CSREES)
Economic Research Service (ERS) and National Agricultural Statistics Service (NASS)

Food Safety and Inspection

Food Safety and Inspection Service

Marketing and Regulatory Programs

Agricultural Marketing Service
Animal and Plant Health Inspection Service
Grain Inspection, Packers, and Stockyards Administration

Rural Development

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

Food and Nutrition Programs

Food Stamps
Child Nutrition Programs
WIC
Commodity Donation Programs

Food and Drug Administration
Commodity Futures Trading Commission

List of Tables

1. U.S. Department of Agriculture and Related Agencies Appropriations, FY1993 to FY1999
2. Congressional Action on FY1999 Appropriations for the U.S. Department of Agriculture and Related Agencies
3. U.S. Department of Agriculture and Related Agencies Appropriations, Budget Authority

Summary

The conference agreement on the FY1999 omnibus appropriations bill (P.L. 105-277/H.R. 4328) was signed into law on October 21, 1998. The measure contains $55.9 billion in regular FY1999 appropriations for the U.S. Department of Agriculture and related agencies and $5.9 billion in emergency disaster and economic assistance for agriculture, for a total of $61.8 billion. The House and Senate earlier had approved a separate conference agreement for FY1999 USDA appropriations (H.R. 4101), but the President vetoed the measure because its emergency provisions did not authorize an increase in the loan rates, or farm price guarantees, for growers of certain crops.

Republican leadership strongly opposed any increases in the loan rates, but instead agreed to increase the total level of direct farm assistance from the $4.2 billion provided in the vetoed version of H.R. 4101, to $5.9 billion in P.L. 105-277. A budget emergency was declared for this amount, which by definition requires no budgetary offsets for the new spending. The $5.9 billion in emergency funding includes: $3.057 billion in "market loss" payments, of which $2.857 billion is for grain and cotton farmers and $200 million for dairy farmers; $1.5 billion for 1998 crop loss payments; $875 million for farmers affected by multiple years of disasters; $200 million in livestock feed assistance; and $31 million to cover the cost of making or guaranteeing $440 million in additional farm operating loans.

The $55.9 billion in regular USDA and related agencies appropriations for FY1999 in P.L. 105-277 is about equal to the House-passed level (H.R. 4101), $1.2 billion below the Senate-passed level (S. 2159), and $2.1 billion below the Administration request. Of this amount, $42.25 billion is for mandatory programs and $13.69 billion for discretionary spending. Even excluding the additional emergency aid spending, total budget authority is significantly higher than the $49.5 billion appropriated in FY1998, mainly because of a change in the formula for determining how much is required to reimburse the Commodity Credit Corporation (CCC) for its net realized losses. In order to stay within the discretionary spending allocation for the bill, P.L. 105-277 either limits or eliminates FY1999 funding for several mandatory programs. It prohibits the spending of any of the $60 million authorized for FY1999 for the Fund for Rural America, and reduces spending for commodities in the Emergency Food Assistance Program (EFAP) by $10 million. The law also concurs with a House provision to prohibit the FY1999 spending ($120 million) for a new mandatory agricultural research program; restrict the amount of acreage that can be enrolled in the Wetlands Reserve Program; and limit payments in the Environmental Quality Incentives Program (EQIP).

P.L. 105-277 also extends the statutory deadline for federal milk marketing order reform from April 4 to October 9, 1999; waives the statute of limitations on certain civil rights complaints against USDA; modifies eligibility for farm loans; and makes additional changes to trade sanction policy. A House provision to prohibit FDA from approving the abortion drug RU-486 was deleted in conference on H.R. 4101, after the President threatened a veto if the provision was included.

Most Recent Developments

The Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (P.L. 105-277, H.R. 4328) was signed into law on October 21, 1998. Contained within the measure was $55.9 billion in regular FY1999 appropriations for the U.S. Department of Agriculture (USDA) and related agencies and an additional $5.9 billion in emergency supplemental spending for farm economic and disaster assistance. USDA appropriations were folded into the omnibus bill after the President vetoed the conference agreement (H.R. 4101) on FY1999 funding for USDA and related agencies on October 7, because the emergency spending provisions in the bill did not include an increase in loan rates (price guarantees) for farmers. P.L. 105-277 does not provide for an increase in loan rates, but the $5.9 in emergency assistance provided is $1.7 billion above the amount provided in the vetoed bill.

USDA Spending at a Glance

The U.S. Department of Agriculture (USDA) carries out its widely varied responsibilities through approximately 30 separate internal agencies staffed by some 100,000 employees. USDA is responsible for many activities outside of the agriculture budget function. Hence, spending for USDA is not synonymous with spending for farmers.

USDA net outlays (after adjustment for offsetting receipts) for the most recently completed fiscal year (FY1997) were $52.5 billion. By far the largest outlay within the Department, $35.9 billion (67%) of total outlays in FY1997, was for its food and nutrition programs, primarily the food stamp program (the costliest of all USDA programs), various child nutrition programs, and the Women, Infants and Children (WIC) program. Total FY1997 outlays also included $8.9 billion (17%) for farm and foreign agricultural services. Within this mission area of USDA are the programs funded through the Commodity Credit Corporation (e.g., commodity support payments, the conservation reserve program, and certain trade programs), crop insurance, farm loans, and foreign food aid programs. Another $4.2 billion (8%) was spent on an array of natural resource and environment programs, nearly three-fourths of which funds the Forest Service (which is funded through the Interior appropriations bill, not the agriculture appropriations bill), and the balance for a number of conservation programs for farm producers.

USDA programs for research and education ($1.8 billion in outlays for FY1997), rural development ($1.35 billion), marketing and regulatory activities, $708 million), meat and poultry inspection ($574 million), and departmental activities ($309 million) accounted for the balance of USDA spending.

Mandatory vs. Discretionary Spending

Approximately three-fourths of total USDA spending is classified as mandatory, which by definition occurs outside the control of annual appropriations. Eligibility for mandatory programs is usually written into authorizing law, and any individual or entity that meets the eligibility requirements is entitled to the benefits authorized by the law. Currently accounting for the vast majority of USDA mandatory spending are the food stamp program and child nutrition programs; the farm commodity price and income support programs; the federal crop insurance program; and the conservation reserve program (CRP).

1. U.S. Department of Agriculture and Related Agencies Appropriations, FY1993 to FY1999
(budget authority in billions of dollars)

Note: Includes funding for the Food and Drug Administration and Commodity Futures Trading Commission. Excludes USDA Forest Service. Emergency supplemental spending of $5.89 billion is not included in the FY1999 total.

Sources: Congressional Budget Office and House Appropriations Committee.

Although they have mandatory status, the food and nutrition programs are funded by an annual appropriation based on projected spending needs. Supplemental appropriations generally are made if and when these estimates fall short of required spending. An annual appropriation is also made to reimburse the Commodity Credit Corporation for losses it incurs in financing the commodity support programs and the various other programs it finances. Historically, the farm commodity support programs were a larger portion of the USDA budget than they are currently. Spending levels among these programs were erratic and unpredictable, making total USDA spending highly variable. Some of this unpredictability was lessened by the enactment of the 1996 farm bill, which fixes the level of spending on direct payments to program crop producers, and no longer ties these payments to market conditions.

The other 25% of the USDA budget is for discretionary programs, which are determined by funding in annual appropriations acts. Among the major discretionary programs within USDA that are funded by the annual agriculture appropriations act are its rural development programs, research and education programs, agricultural credit, the supplemental nutrition program for women, infants, and children (WIC), the Public Law (P.L.) 480 international food aid program, meat and poultry inspection, and food marketing and regulatory programs. FY1998 funding levels for all USDA discretionary programs (except for the Forest Service) were provided by the FY1998 Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act (P.L. 105-86), and by the FY1998 Supplemental Appropriations Act (P.L. 105-174). For more information on FY1998 funding, see CRS Reports 97-201 and 98-478.

Status of FY1999 Agriculture Appropriations

Table 2 tracks the key legislative steps necessary for the enactment of the Agriculture, Rural Development, Food and Drug Administration and Related Agencies Appropriations Act for FY1999.

2. Congressional Action on FY1999 Appropriations
for the U.S. Department of Agriculture and Related Agencies

*The conference report on H.R. 4101 was vetoed by the President on October 7, 1998. FY1999 appropriations for USDA and related agencies were ultimately included in the Omnibus Consolidated and Emergency Appropriations Act, 1999 (P.L. 105-277, H.R. 4328), which was approved by the House on 10/20/98 by a 333-95 vote, by the Senate on 10/21/98 by a vote of 65-29, and signed into law on October 21, 1998.

FY1999 Agriculture Appropriations Action

The conference agreement on the FY1999 omnibus appropriations bill (P.L. 105-277/H.R. 4328) was signed into law on October 21, 1998. The measure contains $55.9 billion in regular FY1999 appropriations for USDA and related agencies and $5.9 billion in emergency funding to help farmers recover from natural disasters and low crop prices.

The House and Senate earlier had approved a separate conference agreement for FY1999 USDA appropriations (H.R. 4101) on October 2 and October 6, 1998, respectively. However, the President vetoed the measure on October 7, because the emergency spending provisions in the bill did not include a Senate Democratic leadership-supported increase in loan rates (price guarantees) for farmers. The vetoed measure included $55.9 billion in new budget authority, and $4.2 billion in emergency assistance.

Republican leadership opposed any increase in loan rates, but instead agreed to an increase in the amount of emergency farm assistance provided from $4.2 billion in the vetoed bill (H.R. 4101) to $5.9 billion in P.L. 105-277. A budget emergency was declared for this amount, which by definition requires no budgetary offsets for the new spending. (See "Emergency Supplemental Farm Assistance" below for details.

The $55.9 billion in regular (non-emergency) FY1999 appropriations for USDA and related agencies in P.L. 105-277 is about equal to the House-passed level of H.R. 4101, $1.3 billion below the Senate-passed level (S. 2159), and nearly $3 billion below the Administration request. Of this amount, $42.25 billion is for mandatory programs and $13.69 billion for discretionary spending.

With only a few exceptions, the $55.9 billion provided to USDA and related agencies in P.L. 105-277 is nearly identical to amounts provided in the vetoed conference agreement on H.R. 4101. The major differences are that P.L. 105-277 provides $23.3 million more for the President's Food Safety Initiative spread out among FDA and several USDA agencies, and $15 million more for rural empowerment zones and enterprise communities programs within USDA's rural development programs.

Total non-emergency budget authority in P.L. 105-277 for USDA and related agencies is significantly higher than the $49.55 billion appropriated in FY1998, which is mainly attributable to a change in the formula for determining how much is required to reimburse the Commodity Credit Corporation for its net realized losses. (See "Farm Commodity Programs" below for details.) A significant portion of the $1.1 billion difference between the total amounts provided in H.R. 4101 and S. 2159 is in the amount provided for food stamps. The House based its projections on more recent economic forecasts that show lower average participation and benefits than previously were projected.

The following is a review of the major USDA and related agencies provisions of P.L. 105-277, the House- and Senate-passed bills (H.R. 4101 and S. 2159), and the Administration request for FY1999 funding. (See Table 3 at the end of this report for a program-by-program comparison of P.L. 105-277 with the House and Senate bills, the FY1999 request, and actual FY1998 appropriations.)

Emergency Supplemental Farm Disaster and Economic Assistance

Several regions of the country, have been experiencing low farm commodity prices (primarily for wheat, corn, soybeans, and cotton) and/or natural disasters this year (particularly in the Northern Plains and the South). This has had the effect of significantly reducing farm income. P.L. 105-277 provides $5.893 billion in supplemental assistance, primarily to mitigate the effects of low crop prices and natural disasters. Conferees included language which declares a budget emergency for this expenditure, which by definition means that no budgetary offsets will be required for this new spending.

The amount provided for farm assistance in P.L. 105-277 is similar to a proposal announced by House Republican leadership on September 17, except that it contains an additional $1.7 billion more than what was originally proposed. Included in the final total of $5.9 billion in emergency farm assistance provided by P.L. 105-277 are:

• $3.057 billion in "market loss" payments to compensate grain, cotton and dairy farmers for loss of 1998 income caused by "regional economic dislocation, unilateral trade sanctions and the failure of the government to pursue trade opportunities aggressively." Of this amount $2.857 billion are for grain and cotton farmers who were eligible for a 1998 production flexibility contract payment, and $200 million is reserved for dairy farmers. Among contract holders, the $2.857 billion is expected to be distributed in approximately the following proportions: corn contract holders ($1.3 billion), wheat ($750 million), upland cotton ($332 million), rice ($242 million), and other feed grains ($212 million.) These additional payments are about 50% higher than the $5.6 billion in contract payments farmers are scheduled to receive in FY1999. The Secretary of Agriculture will have to determine how the $200 million in dairy payments will be distributed among dairy producers, since milk is not a contract commodity;
• $1.5 billion in disaster payments to farmers who have incurred significant losses to any crop in 1998 due to natural disasters;
• an additional $875 million in direct disaster payments to producers who have experienced multiple years of natural disasters and crop diseases, particularly those in the Northern Plains and Upper Midwest.
• $200 million in cost-share assistance for livestock growers who lost to a natural disaster a significant amount of feed grown on the farm.

Disaster payments will be made to a producer regardless of whether the farmer had an active crop insurance policy. However, if a farmer waived crop insurance coverage in 1998, he would be required to obtain crop insurance in the next two crop years as a condition for receiving a disaster payment. Because the federal government pays the entire premium for the farmer for the basic level of crop insurance coverage, this mandatory requirement to obtain insurance is estimated to cost the government an additional $66 million, which is factored into the $5.9 billion supplemental appropriation. Conditions of eligibility for the disaster payments were left to the discretion of the Secretary of Agriculture.

Other emergency farm assistance provisions in P.L. 105-277 include: $50 million in disaster assistance to help western Alaska fishermen recover from poor salmon returns; $40 million in additional salaries and expenses for the Farm Service Agency (FSA), the USDA agency that administers farm commodity, disaster and loan programs; and $31 million in budget authority to support $540 million in additional direct and guaranteed FSA farm operating loans; and $3 million in dairy disaster assistance.

A provision not included in the conference agreement, but strongly supported by the Administration and Senate Democratic leadership during the debate, was a temporary increase in the loan rate (price guarantees) for certain farm commodities. One attempt to raise the loan rates for grains and cotton was defeated during Senate floor action on S. 2159. Another attempt was defeated when the Senate tabled a similar amendment to the Interior appropriations bill (S. 2237). The President vetoed the conference agreement on FY1999 agriculture appropriations because its emergency provisions did not include an increase in the loan rates. Senate Democrats supported an increase saying it was needed to adequately address farm financial problems. Republican leadership opposed a proposed one-year increase in loan rates because of its estimated cost ($5 billion) and because it believed that it would fundamentally undermine the policy changes made by the omnibus 1996 farm law.

For more details on the implementation of the emergency provisions, see CRS Report 98-952, The Emergency Agricultural Provisions in the FY1999 Omnibus Appropriations Act.

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