Department of Agriculture

The Administration request of $89 billion for the U.S. Department of Agriculture (USDA) budget is predicated on passage of the Administration’s version of the 2007 Farm Bill proposals. As designed, the Administration's 2007 farm bill proposals would spend approximately $10 billion less than the 2002 farm bill spent over the past five years, according to the USDA press release.



Approximately three-fourths of annual USDA budget outlays are for mandatory spending programs such as nutrition assistance, conservation, export promotion and farm commodity programs. The remaining balance of nearly $22 billion is for discretionary spending, which includes all USDA research and TBED-related programs.



The FY08 budget request includes $341 million for the USDA portion of the multi-agency Food and Agricultural Defense Initiative (FADI), an increase of $164 million or 93 percent above the levels in the FY07 Continuing Resolution passed by the House last week [Note: All FY08 comparisons below are with the CR.]



The largest line-item FADI increases within the USDA are for Enhanced Surveillance for Pest Detection/Animal Health Monitoring ($119 million; 37 percent increase) and research within the Agricultural Research Service ($87 million; 156 percent increase).



USDA’s FY08 spending of $82 million would support research for prevention or preparation for a pandemic-level outbreak of highly pathogenic avian influenza.



Tech-based and Traditional Economic Development

Economic development activities are supported through two USDA service agencies: the Rural Business-Cooperative Service and the Rural Utilities Service, both housed within Rural Development.



The bag is mixed for the TBED and economic development program in the two services: a few loan and guarantee programs would receive increases; all other programs would see level-funding, a reduction in spending, or elimination altogether in FY08 as a result of the Administration’s request.



On the growth side is:

• Business & Industry (B&I) loan guarantee program - $1 billion (46 percent increase) to provide protection against loan losses so that lenders are willing to extend credit to establish, expand, or modernize rural businesses.
• Renewable Energy/Energy Efficiency Guaranteed Loans and Grants - $195 million (27 percent increase) for guarantees and $15 million (50 percent increase) for grants to pay up to 50 percent to purchase renewable energy systems or make energy improvements from alternative and renewable energy sources.

No new funding is requested for the Rural Economic Development Loans and the Rural Economic Development Grants programs. Instead the programs are to be financed from repayments from past loans and grants. As a result, spending in two alternate financing programs is expected to increase in FY08. With $33 million (43 percent increase), the loan program would provide zero-percent interest loans to electric and telephone utilities to re-lend for the purpose of financing job creation projects and sustainable economic development within rural areas. The utility is responsible for repaying the loan if the third party defaults.



The Rural Economic Development Grant program FY08 funding of $10 million (the program is expected to receive no funding in the FY07 Continuing Resolution) would support grants to electric and telephone utilities. The programs promote sustainable rural economic development and job creation projects by enabling the selected utilities to establish a revolving loan fund program for local economic development projects.



Other programs of note include:

• Broadband & Internet Programs - $300 million for direct loans (40.4 percent) which helps finance the installation of various modes of broadband transmission capacity in rural America; no funding is provided for grants ($9 million in FY07). The reduction is because “the funding is sufficient to meet expected demand” as a result of new regulations adopted this year. The budget document explains “the new regulations will ensure that program funds are focused on rural areas that are lacking existing providers, and that applicants meet high enough standards to ensure long term success.”
• Distance Learning & Telemedicine Grants - $25 million (level funding) to support the educational and health care needs of rural America through advanced telecommunications technologies.
• Value-Added Producer Grants Program - $15 million (25 percent decrease) to support planning activities and provide working capital for marketing value-added agricultural products and for farm-based renewable energy.

Eliminated Programs

No funding is requested for the Empowerment Zones & Enterprise Community (EZ/EC) Program, nor for a line item entitled “All Other Grants” that the USDA budget document says is estimated to receive $44 million in FY07. The document says two of the programs included in the category are the Rural Business Enterprise Grants (RBEG) and Rural Business Opportunity Grants (RBOG).



The RBEG program provides grants to public bodies, private nonprofit corporations, and federally-recognized Indian tribal groups to finance and facilitate development of small and emerging private business enterprises located in any area other than a city or town that has a population of greater than 50,000 inhabitants and the urbanized area contiguous and adjacent to such a city or town.



RBOGs provide grants to rural areas of “exceptional need” to pay costs of providing economic planning for rural communities, technical assistance for rural businesses, or training for rural entrepreneurs or economic development officials.



In explaining the Administration’s justification for eliminating the two programs, the USDA budget document states, “Both programs have benefited only a limited number of rural communities.” However, immediately preceding the comment, the document reads: “The reduction in performance from 2007 to 2008 is attributable to the elimination of the Rural Business Enterprise and Rural Business Opportunity grant programs.” The projected performance is 19,405 jobs that will not be saved or created in FY08 as a result eliminating the Rural Business-Cooperative Service programs.



So in effect, despite the total budget for the Rural Business-Cooperative Service increasing from $990 million in FY07 to $1.308 billion in the Administration’s FY08 budget request, the service’s performance is expected to decline by nearly 30 percent as a result of eliminating two programs that total 3.4 percent of the budget. Of all service programs, RBEGs and RBOGs are the two most likely to be utilized in a state or local TBED strategy.



Research

USDA research activities are coordinated by the four Research, Education and Economics agencies, which oversee the discovery, application and dissemination of information and technologies spanning the biological, physical and social sciences.



The Agriculture Research Service (ARS) is the principal in-house research agency for the USDA, conducting research regarding the U.S. food supply of agricultural products and providing producers with technologies to competitively supply these products. Most ARS activities occur within 100 USDA research facilities. The service would experience an overall reduction of $160 million, most of which is a result of a $124 million cut in the building and facilities line item. That line item includes only $16 million in new spending for planning and design of one new facility, a Biocontainment Laboratory and Consolidated Poultry Research Facility in Athens, Ga.



The research and information portion of the FY08 budget request for ARS is $1.022 billion (11.4 percent increase).



The Cooperative State Research, Education, and Extension Service (CSREES), the federal partner with land-grant and non-land-grant colleges and universities in carrying out extramural research, higher education, and extension activities, would see a modest increase with the Administration’s request if congressional earmarks are not included a comparison to prior year funding levels. Excluding earmarks, the Administration actually has requested a modest $13 million increase for the service -- a total of $1.044 billion (1.4 percent increase).



The Administration’s budget request for CSREES continues to attempt to shift more of academic research from formula grants (such as the Smith-Level 3,890 Research and Extension, McIntire-Stennis and Hatch Act grant programs) toward competitive awards through the National Research Initiative. For example in FY06, formula grants represented 75.2 percent of the total CSREES spending for traditional formula grants and NRI. NRI received the balance of 24.8 percent. In the FY08 request, the shares for those formula grant programs and NRI would be 67.3 percent and 32.7 percent, respectively.



Competition also increases in the proposed shift toward granting funds for multi-state research programs instead of to individual institutions. CSREES is proposing increasing the portion of the $165 million Hatch formula program that is awarded to multi-state research programs from 25 percent to 60 percent. In addition, 38 percent of this set-aside in the Hatch program will be awarded competitively. The $20 million McIntire-Stennis formula program is slated to become entirely funded through competition, with two-thirds of its funds dedicated to multi-state awards.



The Economic Research Service (ERS), at $83 million (10.7 percent increase), provides economic and other social science research and analysis for public and private decisions on agriculture, food, natural resources and rural America.



The majority of the $28 million increase slated for the National Agricultural Statistics Service - $168 million (20 percent increase) would support the 2007 Census of Agriculture. The service also provides the official current statistics on agricultural production and indicators of the economic and environmental welfare of the farm sector.