April 2011
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Federal Budget Battle to Affect USDA Spending

What programs and how much remain unanswered amid political wrangling

Few, if any, doubt the U.S. Department of Agriculture (USDA) will wind up with a smaller budget in Fiscal 2012 than the current year’s spending level. Much less certain is which of USDA’s myriad of programs ultimately will face cutbacks or elimination.

The Obama Administration, through Secretary of Agriculture Tom Vilsack, has proposed a budget of $130 billion for Fiscal 2012. In a hearing before the House Appropriations subcommittee dealing with agriculture, rural development, the Food and Drug Administration and related agencies, Vilsack testified the spending plan "reflects the difficult choices we need to make to reduce the deficit while supporting targeted investments that are critical to long-term economic growth and job creation."

According to Vilsack, the budget represents a reduction of $3 billion from the Fiscal Year 2011 annualized continuing resolution. The federal government has been using a continuing resolution as the authority for its various outlays because Congress failed to pass a budget for the current year. Discretionary program spending accounts for $18.8 billion of proposed 2012 spending, a reduction of $1.3 billion from the current year.

In addition, Vilsack said the Administration is proposing legislative changes to cut farm program payments, an approach predicted to save $2.5 billion over 10 years while affecting only two percent of participants. The strategy will be to reduce the cap on direct payments and, over a three-year period, to scale back the adjusted gross income eligibility limits.

However, the Secretary emphasized, "Our budget preserves a strong farm safety net" while making "difficult cuts to programs the President and I care about. It also reflects savings from a number of efficiency improvements and other actions to streamline and reduce our administrative costs."

Among other things, Vilsack noted the efficiency improvements include a reduced error-rate in farm program payments from 2 percent to less than 0.1 percent.

There are doubts the Admini-stration’s USDA budget will be approved as proposed. Other farm-related programs may be in harm’s way as well. One of the primary reasons is members of the House and Senate are interpreting the last election as a strong sign voters expect Congress to rein-in government spending that has sent the nation’s debt soaring.

For example, after years of supporting ethanol production to help achieve the goal of energy independence, Congress is eyeing subsidies for the fuel with more skepticism as pressures on food prices have increased and spending cuts have taken a higher priority.

One of the more telling indicators of legislators’ changing mood was the reaction of Sen. Charles Grassley (R-Iowa), a staunch, long-time ethanol supporter. Grassley was reported as saying he would have to "bite the bullet" if it comes to a decision between cutting the deficit and supporting House-passed amendments to a spending bill attempting to slow ethanol use.

The farm state senator said, in light of last November’s election results, his priority is to show voters legislators are heeding the call for fiscal responsibility

Other spending proposals and related actions in the Administration’s budget include the following:

• Rural development programs – $535 million in cuts, including a reduction of $390 million for housing programs, $62 million less for the water and waste loan and grant program, and savings from reduced administrative funding and staffing. At the same time, USDA is budgeting $5 million more for its Rural Business Opportunity Grant program to encourage rural communities to collaborate on regional strategic economic planning. Also, an additional $2.1 million is included for the Rural Community Development Initiative to provide technical assistance for housing or community facilities projects.

• Administrative expenses – $80 million in cuts from across the Department, affecting travel, shipping, printing, supplies and advisory contracts. Vilsack also said USDA will seek "to recover the cost of operating a number of programs by collecting user fees from those directly benefiting from services being provided."

• Trade expansion – $20 million more for the Foreign Agricultural Service to spur economic growth and employment activities via a doubling of U.S. exports over the next five years. The money would go for more trade monitoring and enforcement activities, exporter assistance and education efforts, support for state-organized trade missions, and in-country market access and promotion programs.

• Conservation, water programs – A reduction of $168 million and related staff-years through the elimination of watershed operations and rehabilitation programs, earmarks for conservation operations, and the Resource Conservation and Development program. However, the 2012 budget also includes $5.8 billion, an increase of eight percent, in mandatory funding to support conservation programs authorized in the 2008 Farm Bill.

• Research – A net reduction of $183 million by eliminating all earmarks and lower priority projects in budgets for the Agricultural Research Service and the National Institute for Food and Agriculture, while increasing funds for the Agriculture and Food Research Initiative and other high-priority research.

• School lunch and other nutrition, feeding programs – The Administration budget funds the expected higher spending required for these programs. Increases are projected to total $239 million for the school lunch; Women, Infants and Children (WIC); and Supplemental Nutrition Assistance Program (SNAP).

• Animal and Plant Health Inspection Service – A reduction of $76 million by cutting funds for activities where eradication programs have been successful, and other efficiencies.

Vilsack also said USDA will work closely with Congress to implement settlement of discrimination claims and lawsuits against the Department filed by black, Native American and Hispanic farmers and ranchers, and women.

"The Department remains committed to taking these actions as part of our commitment to create a new era of civil rights in USDA," he stated.