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

July 18, 2000
(Senate)

The President's FY 2001 Budget is based on a balanced approach that maintains fiscal discipline, eliminates the national debt, extends the solvency of Social Security and Medicare, provides for an appropriately sized tax cut, establishes a new voluntary Medicare prescription drug benefit in the context of broader reforms, expands health care coverage to more families, and funds critical investments for our future. An essential element of this approach is ensuring adequate funding for discretionary programs. To this end, the President has proposed discretionary spending limits at levels that we believe are necessary to serve the American people.

Unfortunately, the FY 2001 congressional budget resolution provides inadequate resources for discretionary investments. We need realistic levels of funding for critical government functions that the American people expect their government to perform well, including education, national security, law enforcement, environmental protection, preservation of our global leadership, air safety, food safety, economic assistance for the less fortunate, research and technology, and the administration of Social Security and Medicare. Based on the inadequate budget resolution, this bill fails to address critical needs of the American people.

The bill includes inadequate funding for food safety, conservation and environmental programs, farm loans, bioterrorism, agricultural research through competitive grants and other important programs. In addition, there are a number of objectionable language provisions in the Committee bill.

It is our understanding that a substitute will be offered to the supplemental title of the bill that will include a number of highly objectionable environmental and other riders, including a provision to facilitate construction of the Oregon Inlet jetties prior to completion of a pending environmental impact statement, restrictions that would attempt to weaken pending hardrock mining regulations, and other objectionable provisions. The Administration opposes the bill in its current form. If such riders are included in the bill, the President's senior advisers would recommend that he veto the bill.

Food Safety

While the Administration appreciates the Committee's support for the President's Food Safety Initiative, we strongly urge the Senate to fully fund the Administration's request for the initiative and base funding. In particular, we appreciate the full increase included in the bill for the Department of Agriculture (USDA), but object to language prohibiting the Food Safety and Inspection Service (FSIS) from conducting egg shell surveillance, an important part of the Egg Safety Action Plan. In addition, we strongly urge the Senate to make up the $6 million shortfall in FDA's portion of the initiative and enable the FDA to achieve annual inspection of 100 percent of high-risk food establishments. Salmonella illness from contaminated eggs and egg products continues to be a significant health problem, especially for the elderly, our Nation's youth, and those with compromised immune systems. The Administration strongly urges the Congress to move forward aggressively to address this problem by supporting the President's Food Safety Initiative and Egg Safety Action Plan.

To maintain the food safety gains we have achieved to date, however, also requires full funding of the base budget for food safety, and the Administration is concerned about the Committee bill in this regard. In particular, the bill is $10 million below the request for FSIS of $688 million. The bill's funding level is inadequate to cover the minimum salary and benefit increases required to maintain the requested level of inspection staffing and the expansion of the risk-based Hazard Analysis-Critical Control Points (HACCP) inspection model. The bill would, therefore, not provide sufficient resources to fund all FSIS activities important to the safety of the Nation's meat and poultry supply.

Further, a recent court decision involving the Service's test of new slaughter procedures, called the HACCP Inspection Models Project (HIMP), may further add to the significant funding difficulties for FSIS in FY 2001. The U.S. Court of Appeals ruled on June 30 that FSIS' application of the HIMP system violates the Federal Meat Inspection Act and the Poultry Inspection Act. This new inspection system, if successfully implemented, would provide increased food safety checks as well as additional flexibility in staffing slaughter plants and increased industry production within base resources. If a revised court ruling or legislation is not forthcoming that would permit the new system to go forward, FSIS will require additional resources above the Senate Committee funding level. These additional resources would be necessary to staff slaughter assignments adequately under the current, traditional system that would have been staffed by redeployed inspectors from HIMP plants, and to cover the projected six-percent growth in poultry production in FY 2001.

The Administration is still analyzing the full impact of the Appeals Court decision and will provide additional information to the Congress as soon as it is available. In order to fully fund FSIS food safety activities, and to release resources needed for priority programs as discussed elsewhere in this letter, we urge the Congress to enact the Administration's proposed meat and poultry inspection user fees, which would cost consumers less than one cent per pound of inspected meat.

FDA Prescription Drug Enforcement Provisions

The House has passed two amendments that change the FDA's authority related to prescription drugs brought into the United States from other countries. The inadequacy of access to affordable prescription drugs in this country has left many Americans with no other option other than to go abroad to obtain affordable medications. This situation is unacceptable and we should take steps to address it by passing an optional Medicare prescription drug benefit for older Americans and eligible people with disabilities. However, the House-passed amendments go too far by severely limiting FDA oversight of prescription drugs imported by wholesalers and other large companies. This could result in seniors purchasing drugs that are counterfeit, mislabeled, or otherwise adulterated. We urge the Senate not to adopt provisions that strip FDA of important tools to help ensure patient safety, but will continue to work with Congress on ways to both make prescriptions affordable and ensure public health and safety.

Conservation and Environmental Programs

The Administration strongly opposes a number of the Committee bill's reductions to important conservation and environmental programs administered by the Natural Resources Conservation Service (NRCS). The bill provides $33 million less than the President's request for the NRCS Conservation Operations program, reducing the technical assistance available to landowners for activities such as animal waste management, highly erodible land conservation, and soil carbon sequestration. This reduction would slow efforts to improve farmers' and ranchers' stewardship capabilities at a time when they face increasing pressure at the Federal, State, and local level to reduce polluted run-off from their land.

The Committee bill provides less than half of the $28 million requested increase for the Climate Change initiative and does not fund the Climate Change Technology Initiative. U.S. agriculture has a large stake in climate change, both in terms of helping to mitigate against global warming and in understanding the potential impacts of climate change on the sector. The requested funds are vital to understanding these issues. We urge the Senate to provide the requested increase for this important initiative.

The Administration strongly objects to the Committee's reduction in authorized mandatory funding for the Environmental Quality Incentives Program (EQIP) to $174 million. This represents a cut of $26 million from current law, which would result in 2,900 fewer farmers and ranchers receiving financial and technical assistance, and is $151 million below the President's request for EQIP. This program is vitally important to help farmers and ranchers improve their agricultural operations while benefitting all Americans through cleaner water and air. It is also a vital component of the Clean Water Action Plan and, when coupled with the Committee's funding only $20 million of the $48 million requested in discretionary funds for the Plan, would severely impede progress on cleaning up our Nation's waters. We urge the Senate to eliminate the EQIP reduction and fully fund the request for the Clean Water Action Plan.

The Administration is concerned that the Committee has not adopted the President's proposal to provide subsidized loans to State and local governments to rehabilitate dams built with NRCS assistance. These loans, which are included in the House bill, will safeguard the Federal investment as well as protect local citizens and property from flooding. The Administration urges the Senate to adopt the loan proposal in lieu of earmarking Emergency Watershed Protection Program (EWP) funds for dam rehabilitation, enabling EWP funds to be used for natural disaster recovery, as intended.

Bioterrorism

We urge the Senate to fund the requested $11.5 million for the FDA and $41 million for USDA activities to counter bioterrorism. Among other needs, FDA requires these funds to ensure that the Department of Defense can obtain an adequate, safe, and effective supply of the current anthrax vaccine. FDA must also work with private and government researchers on efforts to develop and approve next-generation vaccines and pharmaceuticals for smallpox, anthrax, tularaemia, Q-fever, and other infectious diseases to help ensure our Nation's readiness for threats involving weapons of mass destruction. USDA funds would increase research on plants and animals, and construct higher-level biological containment facilities, to improve the ability of the U.S. to prepare for and respond to acts of biological terrorism.

Farm Loans

The Administration objects to the bill's funding farm loans at $1.5 billion below the President's request. The cut would result in 2,500 fewer farmers receiving farm ownership loans and 8,000 fewer receiving farm operating loans. Given the continuing financial difficulties in the Nation's agricultural sector, many more farmers are being rejected by their regular lenders for these type of loans, and producers are turning to USDA as the "lender of last resort" to stay in farming. This is not the time to reduce assistance to American farm families, and we urge the Senate to restore farm loan authority to the Administration's request level.

Outreach for Socially-Disadvantaged Farmers

The Committee bill provides $3 million for the Outreach for Socially-Disadvantaged Farmers program, $7 million less than the request and more than $5 million below the FY 2000 level. This reduction would severely disrupt the important services being provided to minority farmers. This program has aided over 9,000 borrowers, improving USDA default rates in areas where the program operates. It has also helped over 100,000 families and has proven to be effective in mitigating the decline in the number of minority farmers by increasing their participation in agricultural programs, assisting them in marketing and production, and improving the profitability of their farming operations. Reducing program resources at this critical juncture, when USDA has begun improving its civil rights record, would stymie progress USDA is making to further minority farmers' equal opportunity. We urge the Committee to restore funding to the requested level.

Rural Development Programs

The Administration appreciates the funding increases provided for the Mississippi Delta Region and for Native Americans through the Rural Community Advancement Program (RCAP). However, we are concerned by the $14 million reduction for RCAP in the bill, which could deprive 240,000 rural residents of access to safe, affordable drinking water if applied to water and wastewater loans and grants. In addition, the bill cuts rural housing loans by over $800 million, or 15 percent, from the request, which would prevent over 9,000 very-low to moderate-income rural residents from receiving the opportunity to live in decent, safe, affordable housing. Funding for the Intermediary Relending Program would also be reduced by $26 million, or 41 percent, from the requested level, resulting in an estimated 20,000 fewer jobs created or preserved.

We urge the Senate to restore funding for these programs to the level requested by the President, as well as to fund the $5 million request to finance emergency weather radio transmitters in rural areas. These increases could be offset by reducing electric and telephone loans that have been provided in the bill at $1.1 billion above the requested level. In addition, we recommend the Senate adopt the two-percent guarantee fee proposed for single-family rural housing guaranteed loans.

International Programs and Trade Sanctions

The President believes that commercial exports of food and other human necessities should not be used as a tool of foreign policy except under the most compelling circumstances. On April 28, 1999, the Administration announced that the United States would exempt commercial sales of agricultural commodities and products for humanitarian purposes, as well as medicine and medicinal equipment, from future unilateral Executive Branch economic sanctions regimes -- unless the President determines that our national interest requires otherwise. The President has extended this policy to existing sanctions on a case-by-case basis. The Administration would support codification of our current policy in legislation and views favorably certain legislative proposals in this spirit, such as S. 566, The Agriculture Trade Freedom Act, authored by Senator Lugar. However, the Administration strongly objects to the specific provisions of Title IV of the bill as currently drafted because they would seriously limit the President's ability to implement foreign policy and would have grave implications for our nonproliferation, counter-terrorism, and counter-narcotics initiatives.

Tobacco

In light of the Supreme Court's conclusion that the Food and Drug Administration (FDA) does not have the authority under current law to continue its efforts to reduce underage use of tobacco products, the President has called on the Congress to enact legislation to provide FDA with the authority to protect our nation's children. As the Supreme Court noted, tobacco is "perhaps the single most significant threat to public health in the United States." The Administration strongly encourages the Senate to include the $39 million in the President's request to support the proposed legislation, making it clear to the American people that Congress plans to protect our nation's children.

Plant Pests and Diseases

The Administration places a high priority on fighting plant pests and diseases, especially when they are invasive species that may be eradicated before becoming an established threat. To combat sudden outbreaks of invasive species, the Administration has used emergency transfers through the Commodity Credit Corporation (CCC) at a level that is much higher than the two previous Administrations combined, and we continue to support the use of CCC funds in cases of unforeseen emergencies. However, where eradication efforts extend over several seasons, costs are predictable and should be incorporated into the discretionary appropriations process. Therefore, to address ongoing plant pest and disease outbreaks, the Administration has proposed substantial appropriations in the FY 2001 Budget. The Committee bill has not provided these appropriations, therefore requiring a greater increase in emergency spending from CCC for activities that can no longer be considered unforeseen.

The issue of proper compensation to producers for losses due to invasive plant pests and diseases has grown more complex recently as the variety and complexity of outbreaks have increased. Legislative and administrative actions to provide compensation for invasive species losses would be better guided by a policy that distinguishes between compensation as part of infestations rather than through event-specific supplemental provisions. The Administration believes there should be a more systematic approach to making these decisions and has recently sent to Congress a set of recommendations that it hopes can be used as a framework for discussion with Congress on this issue.

Internet Drug Sales and Adverse Event Reporting

The Administration is concerned that the Committee has not funded FDA's $16 million request for Adverse Event Reporting Systems to reduce deaths from medical errors. A recent National Academy of Sciences report concluded that up to 98,000 Americans die needlessly each year, and that improving adverse event reporting and evaluation is essential to reducing these avoidable deaths. The Administration urges the Senate to include this funding, as well as the $10 million requested for FDA's initiative to protect Americans -- especially the elderly -- from illicit and fraudulent Internet drug sales. Without FDA's presence in this new and burgeoning market, there can be no guarantees that pharmaceuticals purchased on-line are safe and effective.

Ft. Reno, Oklahoma, Research Facility

The bill includes an objectionable rider that would prohibit the Secretary of Agriculture under the Federal Property and Administrative Services Act of 1949, as amended, from transferring certain Agricultural Research Service (ARS) lands in Oklahoma without congressional authorization. This provision would unnecessarily restrict the transfer of these lands for higher-priority purposes (including to the Interior Department to be held in trust for an Indian tribe), should the Secretary of Agriculture determine the lands are in excess of ARS needs. The report of the Department's Strategic Planning Task Force on USDA research facilities is still pending, and this provision would unduly limit USDA's flexibility in implementing the Task Force's recommendations.

Agricultural Research and Education Programs

The Committee bill would severely reduce high-priority agricultural research that is needed to improve farm productivity and benefit all Americans. Funding for competitive grants through the National Research Initiative would be cut by $29 million, or 19 percent, from the request. Furthermore, only a small portion of the $98 million in requested increases for priority research through the Agricultural Research Service would be funded, while the bill includes over $100 million for hundreds of unrequested, lower-priority research projects. The Administration appreciates the needed increases provided for grants to Native American, Hispanic Education, and capacity building programs, but we urge funding of other requested increases for high-priority agricultural research and higher education programs.

Biobased Products and Bioenergy

The Administration objects to the bill's under-funding of programs that advance the use of biobased products made from agricultural commodities. The bill includes only $2.3 million of the $36 million increase requested for these purposes. Increased investment in the development of biobased products and bioenergy will help to strengthen farm income, create new jobs in rural communities, broaden opportunities for rural businesses, enhance U.S. energy security by providing alternatives to foreign oil sources, and reduce air pollution and greenhouse gas emissions. Expansion of bioproducts, including biofuels, is an essential part of improving the farm safety net and diversifying the rural economy, and we urge increased funding for these purposes.

Special Supplemental Nutrition Program for Women, Infants, and Children

The Administration is concerned that the small increase provided by the Committee would not allow the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to provide supplemental food packages, nutrition education, and health care referrals to all women, infants, and children who are eligible to participate in the program.

Community Food Security

The Administration objects to the Committee bill's provision that limits the Department's ability to carry out Community Food Security activities administered by faith-based organizations and other nonprofit groups. We also note that the Committee bill does not provide the $5.25 million requested to help such groups build their infrastructure to provide assistance to local governments and organizations to address food insecurity faced by low-income families.

Common Computing Environment

The Committee bill provides only $25 million of the requested $75 million for USDA's common computing environment initiative. Congress and the Administration agree that in the area of information technology, USDA needs to break down its stove-piped systems and implement a common system that takes advantage of efficiencies and new internet capabilities. The Administration has asked for funding to meet this common objective, which has consistently been funded at levels far below the amount requested. Without the requested funding, the common computing environment will continue to suffer delays, increasing the total costs since legacy systems must be maintained until the new system is operational. In addition, USDA will be unable to implement the requirements of the Freedom to E-File legislation that Congress has passed, reducing and delaying customer benefits. Without a common information technology staff to support the shared system, the investment made to date to improve customer service will be lost.

In addition, Section 734 of the bill would block USDA from implementing a common information technology support staff to service the entire county-based field organization. This provision would require the over 6,000 county offices of the FSA, NRCS, and RD mission areas to maintain separate and redundant administrative support units for information technology, accounting, and personnel services. This provision maintains the "stove-piped" culture of the separate agencies and would result in increased costs and inefficiencies.

Food Quality Protection Act

The Administration appreciates the Committee's support and increased funding for Pesticide Use Surveys and the Pesticide Data Program. Several other program increases, as requested in the President's budget, are essential for carrying out the Department's responsibilities under the 1996 Food Quality Protection Act (FQPA). Adequate funding is needed for the Office of Pest Management Policy (OPMP) within the Agricultural Research Service. OPMP is the focal point for the Department's FQPA implementation activities, and adequate staffing is essential to ensure a coordinated response and grower involvement in the decision process. Second, a key activity in FQPA implementation is the focused research to assist growers in the development and implementation of alternative safer pest management practices and strategies. Three Cooperative State Research, Education, and Extension Service (CSREES) grant programs -- the Pest management Alternatives program, the Crops at Risk Program, and the Risk Avoidance and Mitigation Program -- are designed to help develop such alternatives to ease the burden on growers faced with the potential loss of older chemicals during FQPA-driven transitions. The Administration strongly urges the Senate to fully fund these programs at the requested levels.

Agricultural Biotechnology

Agricultural biotechnology holds major promise for improving the productivity and environmental sustainability of food and fiber production. As part of the Administration's biotechnology initiative, USDA, working with farmers and industry, will facilitate the standardization of methods to differentiate between biotech and conventional commodities and develop a quality assurance program to provide quality and value information the market needs to market grains and related products effectively and fairly. The Administration urges the Senate to fully fund the proposal as requested in the budget for methods development activities in the Grain Inspection, Packers, and Stockyards Administration, including funding to establish and operate a biotech reference laboratory.

Language/Other Issues

• USDA Headquarters Modernization. The Administration strongly supports the bill's continued funding for the renovation now in progress of USDA's downtown D.C. headquarters building. A ten-year renovation plan was approved by Congress in 1995 for the sixty-year-old building to address health and safety problems. The building will house 6,800 employees, and USDA is solely responsible for its repair and maintenance. Since the renovation project was approved by Congress in 1995, only 15 percent of the total planned cost has been appropriated, and no funding was provided in FY 2000. The Administration strongly urges the Senate to retain this funding level, as continued delays will leave the renovation progress only partially complete, resulting in higher long-term costs for the needed renovation and continued exposure of USDA employees to health and safety risks.

• Partnership for Change -- Colonias Initiative. The Administration is disappointed that the bill does not provide funding for an intergovernmental partnership led by the Food and Nutrition Service that would increase use of already authorized assistance programs, such as nutrition and housing assistance, by impoverished citizens of border areas known as Colonias.

• Concentration in the Livestock Sector. The Administration has made a strong commitment to address the problems of concentration and anti-competitive behavior in the livestock sector and objects to the insufficient funding in the bill for these purposes. The Committee bill does not provide any of the $3.7 million increase requested to address this problem through the Grain Inspection, Packers, and Stockyards Administration. The bill's funding level would not allow USDA to develop the modeling and analytic capability necessary to identify anti-competitive actions by livestock companies, ensure that time-sensitive, priority cases are investigated promptly, and establish the swine contract library required by last year's mandatory price reporting legislation. These activities are crucial to ensuring more effectively that family farmers have a level playing field in which to market their livestock.

• National Sheep Industry Improvement Center (NSIIC). The Administration urges the Senate to fund the requested $5 million for the NSIIC. The NSIIC provided $5 million in FY 2000 to USDA's Agricultural Marketing Service for market promotion activities as part of USDA's efforts to help U.S. lamb growers adjust to competition from foreign imports. NSIIC agreed to provide this help following the President's Section 201 safeguard relief decision, and the replenishment of the Center's capital would benefit the broader sheep industry.

• Food and Nutrition Service Research. The Administration is concerned that the Committee has not provided funds to the Food and Nutrition Service (FNS) for research and evaluation and objects to any provision of the bill that would prohibit the use of FNS funds for these activities. These funds are essential so that FNS can effectively and promptly address program integrity and performance issues facing nutrition assistance programs as well as continue critical updates of basic program information.

• Infringement on Executive Authority. The Administration objects to a number of provisions in the bill that would require congressional approval before Executive Branch execution. The Administration will interpret these provisions to require only notification of Congress, since any other interpretation would contradict the Supreme Court ruling in INS v. Chadha.

• Section 719. The Act provides that no funds appropriated or otherwise made available to the Department of Agriculture may be used "to transmit or otherwise make available to any non-Department of Agriculture employee questions or responses to questions that are a result of information requested for the appropriations hearing process." This provision could impede communications within the Executive Branch to a degree that would undercut the President's ability to exercise his constitutional responsibilities as the Nation's Chief Executive Officer to enforce the laws. Accordingly, this section is constitutionally objectionable.

• Recommendations Clause. Section 730 of the bill provides that no funds appropriated or otherwise made available to the Department of Agriculture may be used to pay the salaries of personnel who prepare or submit appropriations language as part of the President's budget submission that "assumes revenues or reflects a reduction...due to user fees proposals...". Under the Recommendations Clause, Congress can neither require, nor prohibit, the President from making particular legislative or policy recommendations to Congress. Therefore, this section is constitutionally objectionable because it would undermine the President's ability to fulfill his constitutional duties under the Recommendations Clause.

FY 2000 SUPPLEMENTAL APPROPRIATIONS CONTAINED IN THIS BILL

Objectionable Legislative Riders

The Administration opposes the environmental and other authorization provisions contained in the bill, which are inappropriate for inclusion in an appropriations act. Such riders rarely receive the level of congressional and public review required of authorization language, and they often override existing environmental protections or impose unjustified micro-management restrictions on agency activities.

More detailed views will be provided when the text of the substitute is made available. Therefore, the views expressed here are necessarily preliminary.

• Oregon Inlet (NC) Jetties. The Administration strongly opposes the provision to remove lands from the Cape Hatteras National Seashore and the Pea Island National Wildlife Refuge, prior to completion of a pending environmental impact statement (EIS) on proposals to maintain navigation through Oregon Inlet, N.C. This rider would undermine the EIS process by selecting one option -- the construction of a dual jetty and sand transfer system -- before a decision on alternatives can be made. There remain significant questions about the long-term environmental impacts and the economic justifications of the dual jetty option, and those questions need to be answered before considering any legislation to remove land from a national park and a national wildlife refuge.

• Restrictions on Hardrock Mining Regulations. The Administration strongly objects to the bill's attempt to weaken pending final regulations on the management of hardrock mining on public lands. These overdue regulations are needed to address the major changes in technology and mining industry practices since the regulations were last updated in 1980. The proposed rider would also attempt to re-open an agreement reached in negotiations on the FY 2000 Interior and Related Agencies Appropriations bill to allow the final rule to go forward, as long as it was "not inconsistent" with the recommendations of a recent National Research Council (NRC) report. The rider would now attempt to limit the rule to only a specific subset of the NRC report's recommendations. By doing so, the rider could hinder the effective regulation of industry practices (such as large-scale cyanide leaching for gold on public lands) that have become increasingly prevalent over the past 20 years.

• Community Builders, Sec. 2602. The Administration urges deletion of the highly objectionable, micro-management language in Section 2602, which would prohibit the Department of Housing and Urban Development from hiring replacement staff for 350 community builder positions. Because HUD is well along in this hiring process and expects to complete it by the end of May, this language would effectively block civil servants from being promoted to these positions and extinguish the hopes of the thousands of external applicants who have applied to fill these positions. HUD has downsized its staff substantially in recent years, but it cannot operate effectively with 350 fewer positions -- nearly a 3 percent staff reduction -- or without the increased customer service that the community builders provide. The community builder issue was addressed during last year's appropriation process; those agreements should not be undone by cutting these critical employees.

• Homeless Assistance Grants. The Administration opposes making amounts under Homeless Assistance Grants available first to renew all expiring rental assistance contracts under the Supportive Housing and Shelter Plus Care programs. The provision as drafted is unworkable, would adversely impact the competition for homeless funds, would interfere with local decision-making, and would result in unwarranted delays and costs to assist homeless persons.

• Federal Communications Commission (FCC). The Administration opposes Section 3106 because it would adversely affect the FCC's ability to prepare for auctions of commercial broadcast spectrum.

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