Special Federal Budget Issue: U.S. Department of Agriculture

Taking one of the largest percentage cuts of all agencies, the U.S. Department of Agriculture (USDA) FY 2006 discretionary budget level of $19.4 billion calls for an 11.8 percent reduction, or $2.6 billion below the FY 2005 level.

No funds are included in the 2006 budget for the Rural Business Enterprise ($41 million in FY05) and Rural Business Opportunity Grant ($3 million) programs or the Empowerment Zones & Enterprise Community (EZ/EC) Program ($13 million).

The FY06 budget request proposes $376 million in USDA funding for the multi-agency Food and Agriculture Defense Initiative, which is funded at nearly $600 million government-wide. This initiative began in 2004. Within USDA's oversight, the budget proposes $317 million for programs and $59 million to complete construction of the National Centers for Animal Health in Ames, Iowa. Funding for programs reflects a $140 million increase above FY05, including $35 million in increases for research to develop the means to quickly identify pathogens, develop improved vaccines and better understand the genes that provide disease resistance.

New funding requests also were made for forest and rangeland research, as well as biomass research and development (R&D). For FY06, $285 million would be available for the former, a $9 million increase, while $12 million is proposed for biomass R&D ­ $2 million less than the FY05 level. For R&D in wildland fire management, the Administration proposes decreasing funding from $22 million to $17 million. Each of the above programs fall under USDA's Natural Resources Conservation Service (NRCS).

The three USDA programs highlighted below were included in the 2002 Farm Bill. The Administration's FY06 budget request includes discretionary funding instead of mandatory funding for the value-added and renewable energy programs. All three programs are housed under the Rural Business-Cooperative Service (RBS):

• Renewable Energy and Energy Efficiency Program ­ $5 million for discretionary grants ($6 million decrease) and $286 million for discretionary loans ($324 million decrease).
• Value-Added Producer Grants Program (formerly known as Value-Added Development Grants) ­ $16 million for discretionary grants ($1 million increase).
• Rural Business Investment Program ­ no funding requested ($65 million decrease) for the venture capital program that targets investments in specific geographic elements. The program is administered by the Small Business Administration.

Other ongoing RBS and Rural Utilities Service (RUS) programs that would receive funding in FY06 include:

• Distance Learning & Telemedicine Program ­ $25 million in grants (no change) but no new funding for loans ($50 million decrease) to support the educational and health care needs of rural America through advanced telecommunications technologies.
• Broadband and Internet Services Program ­ Discretionary funding authority would support $359 million in loans to help finance the installation of various modes of broadband transmission capacity. The FY06 budget request represents a 34.2 percent decline over FY05 levels of $545 million. The 2002 Farm Bill authorized a permanent program and provided mandatory funding through 2007. Recent appropriation acts have blocked the mandatory funding, but provided discretionary funding for the program. Mandatory funding provided in 2002 and 2003 remains available to support over $1 billion in loans. No new funding is requested for FY06 for broadband grants, a $9 million decrease from FY05.
• Business and Industry Guaranteed Loans ­ $899 million ($304 million increase) to provide protection against loan losses so that private lenders are willing to extend credit to establish, expand or modernize rural businesses. Special efforts are being made to help rural communities diversify their economies, particularly into value-added processing, by focusing on cooperative ventures.
• Rural Economic Development Grants ­ $10 million (no change) for grants to electric and telephone utilities. Program promotes sustainable rural economic development and job creation projects through the operation of a revolving loan fund program.

With the budget reductions and program terminations, the Rural Business Service estimates an 11 percent reduction in its progress toward meeting the objective "Expand Economic Opportunities through USDA Financing of Business." The number of jobs created or saved through USDA financing of businesses is expected to drop from 65,856 in FY05 to 56,400 in FY06. The FY06 figure is 47 percent lower than the 2001 baseline of 105,222 jobs created or saved.

USDA research activities are coordinated by the Research, Education and Economics (REE) agencies, which oversee the discovery, application and dissemination of information and technologies spanning the biological, physical and social sciences. This is accomplished through agricultural research, education, extension activities, and economic and statistical analysis. REE's total FY06 funding of $2.44 billion ($64 million decrease) is distributed across four areas:

• Agricultural Research Service (ARS) ­ $1.079 billion ($227 million decrease), including $996 million for research in the natural and biological sciences.
• Cooperative State Research, Education and Extension Service (CSREES) ­ $1.04 billion ($143 million decrease) to support research partnerships with land-grant and non-land grant colleges and universities in carrying out extramural research, higher education and extension activities.
  • National Research Initiative ­ $250 million ($70 million increase) to help fund initiatives in agricultural genomics, and human nutrition and obesity.
  • Regional State and Local Grants Program - $75 million (new initiative) to support State Agricultural Experimentation Station-conducted research targeting regional, state and local issues. According to the USDA Budget in Brief, "This competitively-awarded grants program will support system-wide research planning and coordination and research in areas such as new products/uses, social sciences and the environment. This is the first phase of a two-year plan to shift funding from some formula-based research programs."
• Economic Research Service (ERS) ­ $81 million ($7 million increase) for economic and social science information and analysis on agriculture, food, environment and rural development.
• National Agricultural Statistics Service (NASS) ­ $145 million ($17 million increase) to conduct the Census of Agriculture and provide the official current statistics on agricultural production and indicators of the economic and environmental welfare of the farm sector.

No funds are included in the 2006 budget for Appropriate Technology Transfer for Rural Areas ($2 million), Economic Impact Initiative Grants ($18 million), and the Rural Community Development Initiative ($6 million).