EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET WASHINGTON, D.C. 20503

October 23, 2000
(Senate)

The Administration, while committed to securing the Act's reauthorization in the current session of Congress, nonetheless opposes objectionable provisions in H.R. 4788 that:

• Codify operating procedures pursuant to the Packers and Stockyards Act.

• Mandate the expenditure of funds for additional crop loss payments to producers who changed the legal structure of their farming entity.

• Could be read to interfere with the National Environmental Policy Act process by constraining USDA's ability to consider the decommissioning of a watershed structure; fail to require a cost-benefit analysis for each watershed structure; and do not allow loans as a means of financing the rehabilitation or decommissioning.

H.R. 4788 would potentially undermine USDA's ability to interpret and enforce the Packers and Stockyards Act by codifying certain General Accounting Office (GAO) recommendations on federal packers and stockyards programs. USDA is implementing the GAO recommendations. However, codification of internal operating procedures could make enforcement actions subject to legal challenge, based on a by-the-number analysis of investigation procedures. Moreover, H.R. 4788 could be read to require USDA to consult with the Department of Justice and the Federal Trade Commission in every enforcement of the Packers and Stockyards Act, thereby creating a barrier to USDA's enforcement activities.

In addition, the Administration objects to the provision that would permit producers who changed their business structure to qualify for higher payments under the crop insurance program to receive higher emergency crop loss payments without recalculating their crop insurance benefits. Treating business entities differently under these two programs would create the potential for moral hazard. This proposal does not distinguish between those who changed their business structure for legitimate business purposes and those who made changes in their business structure solely to increase their insurable yields under the crop insurance program. USDA has no means by which to identify the individuals who would qualify for these payments, except by manually sorting through commodity and crop insurance participation records dating back to 1994. In addition to the very significant administrative cost associated with this labor-intensive process, these payments could exceed $50 million in direct spending without offsets under pay-go provisions.

Finally, the Administration supports the principle of providing financial assistance to communities to rehabilitate existing watershed structures. However, authorization to rehabilitate these structures should require a thorough economic, technical, and environmental analysis of each structure. A prioritization of rehabilitation activities that is based on economic, technical, and environmental analysis would ensure the most effective expenditure of resources. Further, the Administration believes that the most cost-effective means of providing assistance is through subsidized loans.

Pay-As-You-Go Scoring

H.R. 4788 would increase direct spending and, therefore, is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990. The bill does not contain provisions to offset the increased direct spending and, if enacted, could contribute to a sequester of mandatory programs. OMB's preliminary scoring estimates of this bill is that it could increase direct spending by more than $50 million for fiscal year 2001. Final scoring of this legislation may deviate from these estimates.

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