MAY-JUNE 1996



Recent action in the House of Representatives on the fiscal year 1997 (FY97) Agriculture Appropriations Bill (H.R. 3603) reveals the increasingly difficult job of maintaining funding for agricultural programs, or more appropriately, minimizing the damage caused by spending reductions. The final House bill developed under the leadership of Subcommittee Chairman Joe Skeen (R-NM) does a good job of achieving that latter objective. Final House passage of the funding measure occurred June 12 and Senate action is expected in mid July.

Appropriations Budget Pressure

Whether the Federal budget is to be balanced within seven to 12 years, one fact is certain — Federal program spending will be reduced. Agriculture is no exception. Last year, the House Agriculture Appropriations Subcommittee was allotted $13.31 billion for discretionary agriculture programs. Under the original House passed FY97 Budget Resolution, the Subcommittee was going to have to cut agriculture program spending by $987 million, or more than 7.5% below the FY96 amount.

Through efforts led by Senate Budget Committee Chairman Pete Domenici (R-NM), government-wide discretionary spending was increased from the House reduced levels. This provided the House Agriculture Appropriations Subcommittee with an additional $400 million to spend in FY97. However, even with this addition, the available funds were so tight that the Subcommittee felt compelled to reduce the amount set aside for 1997 Production Flexibility Contracts (PFCs) that form the core of the new farm program. Despite the small reduction, $98 million out of $5.385 billion — the Subcommittee action sent shockwaves through the farm community and resulted in a flurry of political activity in Washington.

Chairman Bob Livingston (R-LA), of the House Appropriations Committee, then allocated an additional $73 million to the Agriculture Subcommittee. This action, combined with further reductions in Export Enhancement Program (EEP) spending, resulted in full restoration of PFC funds during the full Committee mark up.

Thus, while the new farm program PFC payments were preserved, the House-passed FY97 bill contains $508.5 million less in discretionary funds than the 1996 measure. This is also $1.279 billion less than the Clinton Administration had requested for the USDA and FDA. The agriculture community can expect similar budget reductions as Congress continues its attempt to balance the Federal budget.

The overall agricultural appropriations bill provides $52.68 billion in funding for mandatory and discretionary programs, which is $10.4 billion less than the FY96 level and $5.76 billion less than the Administration’s budget request. Of this reduced funding, $8.9 billion comes from a reduction in the reimbursement to the Commodity Credit Corporation (CCC) for net realized losses that have not occurred due to high commodity prices and that will not occur under the new farm program.

Continued Farm Program Challenges

No agriculture appropriations debate would be complete without some attempt to alter farm policy. The FY97 bill is no exception, despite the fact Congress completed action only three months ago on the comprehensive 1996 Farm Bill.

Sugar: The House-passed bill contains an effective price cap on the statutory price support loan rate in the sugar program. It prohibits the Secretary from using the sugar program to maintain the price of raw cane sugar at more 117.5% of the statutory loan rate set in the farm bill (117.5% x $0.18/lb. = $0.2115/lb.). No attempt was made to remove this language at the full Appropriations Committee level or on the House floor. However, Sen. Thad Cochran (R-MS), Chairman of the Senate Appropriations Subcommittee on Agriculture, has stated publicly that he does not expect to include any farm program changes in the Senate FY97 bill.

Peanuts: Led by Reps. Jim Kolbe (R-AZ) and Nita Lowey (D-NY), reformers attempted to add a provision on the House floor limiting the effective price for peanuts. It would have prohibited the use of appropriated funds to administer a peanut program that maintained a season average farmer stock price greater than $640 per ton. While the 1996 Farm Bill reduced the peanut price support to $610 per ton it also eliminated the minimum national poundage quota. USDA has set the national poundage quota at only 1.1 million tons (down from old minimum of 1.35 million tons) which some argue will result in no price reduction from the previous $678/ton price support. This amendment was defeated by a vote of 189-234.

Tobacco: For the second straight year and by a close vote, Rep. Richard Durbin’s (D-IL) amendment to prohibit the expenditure of any Extension Service resources on the support of tobacco and to ban crop insurance for tobacco was narrowly defeated the vote was 210-212.

Market Assistance Program (MAP): The former Market Promotion Program (MPP), renamed the Market Assistance Program (MAP) in the 1996 Farm Bill, received its annual assault during House floor action. The 1996 assault was in the form of two unsuccessful amendments from Rep. Joseph Kennedy (D-MA) attempting to restrict any MAP funds from being used to promote the sale or export of alcohol or alcoholic beverages. However, a prohibition on any assistance to the mink industry included in last year’s legislation remains in the FY97 bill.

Planting Requirement: Rep. Marcy Kaptur (D-OH) successfully offered an amendment that was aimed at preventing a PFC payment from being received on land that is left totally idle. During the 1996 Farm Bill debate, many legislators found the freedom to farm concept (to the extent that a PFC payment could be collected without planting any crop) difficult to accept. However, the final Farm Bill did not include a planting requirement.

At the full Committee level, amendments to preclude the use of any funds to implement the Northeast Dairy Compact, to restrict the use of Extension Service or crop insurance funds for tobacco, and to increase funding for the Rural Utilities Assistance Program were defeated.

Highlights of the Bill

There were not necessarily any big winners or losers among program accounts despite the fact that more than $500 million less was appropriated in FY97 than FY96. Rather, the Subcommittee distributed the pain throughout almost all funding accounts, curtailed new program spending and utilized a number of historical techniques to reduce spending (e.g., limiting the number of acres that can be signed up for a particular program).

One of the primary goals of the Agriculture Appropria-tions Subcommittee was to maintain the nation’s commitment to agricultural research programs. The final House bill largely achieves this by the $1 million in additional funds for research to find a replacement for methyl bromide; $4 million more for food safety research projects; $5 million to complete the Beltsville, MD, USDA Agriculture Research Complex; $29.4 million in added Agriculture Research Service (ARS) buildings and facilities monies, and by maintaining FY97 funding for other projects very close to FY96 levels.

In keeping with the Administration’s drive to update USDA’s meat and poultry inspection system and counteract the negative consequences of highly publicized foodbourne illness outbreaks, the House bill fully funds the Adminis-tration’s budget request for the Food Safety and Inspection Service (FSIS). This represents a $29 million increase over FY96 and is expected to allow the agency to hire more inspectors and continue its drive to better analyze, detect and control pathogens in the food processing and distribution system.

Appropriations for a majority of historical Rural Economic and Community Development activities were consolidated and streamlined into three funding accounts — Rural Housing Assistance Program, Rural Utilities Assistance Program, and Rural Business-Cooperative Assistance Program. Altogether, $648.5 million was appropriated in the House bill, $212 million below the Administration’s budget request. In the rural housing arena, no funds were provided for funding any new construction under the Section 515 multi-family rural rental housing program, a program in which serious problems of waste and profiteering have been identified.

Funding for the Farm Service Agency (FSA), where the traditional workload has been drastically altered by the new farm program, remained fairly steady in the bill with reductions in line with those experienced by other agencies. In addition, the former Federal Crop Insurance Corporation, re-established as a separate agency in the Farm Bill, received $62 million in funding which had been part of the FSA appropriation in FY96.

The bill’s funding of child nutrition programs largely mirrored the Administration’s request; the mandatory nature of these programs did not provide the Agriculture Subcommittee with any opportunity to reap savings even if they chose to do so. Formula funding for child nutrition programs in FY97 totalled $8.65 billion, a $706.6 million increase over FY96 levels. These programs include the school breakfast and lunch programs, child and adult care food and summer food service programs, commodity procurement, and the school meals initiative. The bill does not provide $16 million requested for additional nutrition studies and surveys; funding for completing 12 ongoing studies is included.

Funding for the Women Infants and Children (WIC) Program is held constant at the FY96 level, although there is an expected carryover from FY96 of some $245 million that will allow full funding of the program — approximately 7.5-7.6 million participants. A total of $27.6 billion is provided for the Food Stamp Program, $17 million more than FY96 but $2.37 billion below the budget request. The average monthly food stamp benefit per person is expected to increase from $74.08 in FY96 to $77.30 in FY97.

The House bill increased funding for the Foreign Agriculture Service by $3.23 million, although this is $9.1 million below the budget request. As the Federal budget has gotten tighter in recent years, so has the ability to fund food aid programs. FY97 is no exception. P.L. 480 program funding under all titles was very close to the budget requests, but those requests were $75 million below FY96 levels. EEP spending was limited to not more than $100 million, although with continued strong commodity prices, the expected need for traditional EEP initiatives is very limited. Funds for the renamed Market Access Program are directly available through the Commodity Credit Corporation and are subject only to limitation in the appropriations bill. The Federal Agriculture Improvement and Reform Act (FAIR) set annual funding at $90 million.

Finally, funding for the Commodities Futures Trading Commission was increased $1.5 million; administrative expenses of the Farm Credit Administration (paid for from assessments on system institutions) were limited to $37.5 million and $3.2 million in additional funding was provided to the FDA above the FY96 level, but $3.8 million below the budget request.

Other items of interest include: limiting the detailing of agency personnel to an Under Secretary or Assistant Secretary’s office for more than 30 days; putting the Wildlife Habitat Incentives Program authorized by Section 387 of the FAIR Act on hold for a year; limiting any Wetlands Reserve Program enrollment to not more than 130,000 acres in FY97; limiting spending on the new conservation farm option (sec. 335 of FAIR) to $2 million ($7.5 million in CCC funds was provided in FAIR Act); limiting funding for the new farmland protection program to $2 million (Sec. 388 of FAIR Act provides an overall cap of $35 million in CCC funds); prohibiting the automatic extension (without rebidding and re-evaluation) of any existing or expiring CRP contract and not providing any funding for the establishment of the Safe Meat and Poultry Inspection Panel authorized by Section 918 of the FAIR Act. Michael R. McLeod is a partner in McLeod, Watkinson & Miller and specializes in agricultural and agribusiness law. He is a former General Counsel and Staff Director for the Senate Agriculture Committee.

John E. Sheeley is an associate at McLeod, Watkinson & Miller and has an extensive background in agriculture, trade, alternative fuels, farm credit, tax, environmental and transportation issues.


Environmental and Food Safety
Legislation Still Pending

This article briefly updates the status of some of the issues in the environmental and food safety legislative debates that are relevant to the food and agricultural community. They are 1) the Safe Drinking Water Act Reauthorization, 2) the Clean Water Act Reauthorization, and 3) the Delaney Clause Reform legislation.

Safe Drinking Water Act Reauthorization

First enacted in 1974, the Safe Drinking Water Act (SDWA) has regulated the quality of the nation’s drinking water through emphasis on standard setting, monitoring, treatment and enforcement of water quality flowing out of the tap.

Congressional approval of new legislation to provide regulators more flexibility in carrying out the SDWA represents the best opportunity for the 104th Congress to advance a significant piece of environmental reform.

Status of the Reform Legislation

The two major House and Senate bills to reauthorize and reform the SDWA are S. 1316 and H.R. 3604. The Senate unanimously approved S. 1316 late last fall, and the House passed H.R. 3604 by voice vote on June 25. These two bills are now headed to House-Senate conference. The Senate bill authorizes grants for State loan funds to assist communities in complying with Federal drinking water standards, allows EPA to consider overall risk reduction when setting standards, directs EPA to conduct cost-benefit analyses for new regulations and establishes a voluntary source water protection program.

The House bill authorizes $7.6 billion through year 2003 in Federal contributions to State-administered revolving loan and grant funds for water system maintenance. These new funds would be made available only on the condition that 75% of the annual authorization for the State loan fund is actually appropriated.

If the rewrite of the Federal drinking water law can survive a potentially contentious House-Senate conference, the President is likely to sign the final legislation.

Source Water Assessment and Protection

Existing SDWA authority contains provisions to encourage protection of sole source aquifers and the areas around the wellheads of public water systems. There is consensus, however, that such protection should be extended to larger “source water” areas to make better use of limited resources through greater emphasis on pollution prevention. It certainly makes more economic sense to protect the quality of the source water to avoid the greater expense of treating contaminated water.

The source water assessment and protection provisions of the House and Senate bills are the primary focus of the agriculture sector. In addition to reducing the costs of water treatment, improved management of upstream practices and measures also may reduce the risks of water contamination to the population.

However, farm operations and food processing facilities located in a watershed upstream from public drinking water supplies have reservations about the extent and scope of Environmental Protection Agency and/or State environmental agency authority to regulate their practices. Under the current SDWA, there is no authority granting Federal or State agencies jurisdiction over operations located in the source water area surrounding a public water supply.

Agricultural interests support the use of source water protection funds to facilitate implementation of voluntary incentive-based practices and measures but are concerned about the unnecessary use of funds for additional enforcement activities. In the same vein, the agriculture community believes that the use of funds in source water areas should be prioritized to address serious risks to human health and not be used merely for the sake of enforcement.

House Provisions on Source Water

As stated in the House committee report on H.R. 3604, source water protection is viewed as “a cost-effective strategy for ensuring safe drinking water supplies.” To address source water protection, the bill creates a new program in which States will conduct an assessment, coordinated with existing information and programs, to determine the vulnerability of sources of drinking water within State boundaries. H.R. 3604 requires States to delineate watersheds forming source water areas and to identify the origins of regulated or unregulated contaminants which it determines may be a threat to public health. These assessments must be completed within 4.5 years and made available to the public.

The House bill provides that if a State matches the funds, it may use up to a 10% allocation of the “State Revolving Fund” (SRF) for administration of source water assessment and protection programs or other programs. Up to 15% may be directed to communities as loans to implement “only voluntary, incentive-based” source water protection mechanisms or to determine boundary delineations and conduct vulnerability assessments. Such SRF funds may be used to acquire land or conservation easements from willing upstream sellers or grantors for source water protection, and to provide loans “to implement local, voluntary” measures designed to protect source water from threats identified during the assessment.

Unfortunately, the House-passed bill dropped the “source water petition process” designed to facilitate access to technical and financial assistance with programs outside the SRF, use of SRF funds and voluntary partnerships.

Senate Provisions on Source Water

S. 1316 authorizes a new source water protection program based on voluntary partnerships between State and local governments. States are required to delineate all source water areas and conduct vulnerability assessments on priority source water areas within five years of enactment of the legislation -- to the extent that funds are available.

The Senate bill also contains a rather creative provision that permits States to establish a source-water protection petition program. The petition process works to ensure that limited government funds are directed to legitimate source water problems. It provides a means to help overcome bureaucratic barriers which have greatly impaired consideration of and access to significant potenitial resources in programs outside the SDWA for source water protection purposes. Pursuant to this new petition process, water suppliers or municipalities would be able to petition the State for the establishment of voluntary partnerships to deal with various contaminant issues. States could provide financial or technical assistance to reduce the presence of contaminants in local drinking water supplies and to develop a long-term protection strategy for a more local water quality concern.

States may use up to 10% of their annual SRF capitalization grant for projects recommended under the petition program. The bill authorizes appropriations of such sums as may be necessary for EPA to make grants to States to fund up to 50% of the program's administrative costs.

A petition submitted to a State may address pathogenic organisms with an established or required maximum contaminant level (MCL), or other detected contaminants for which an MCL has been promulgated or proposed and “that are not consistently and reliably below the maximum contaminant level.” After providing notice and an opportunity for public comment, the State is required to “approve or disapprove the petition, in whole or in part, not later than 120 days after the date of submission of the petition.”

As stated in the Committee report on S. 1316:

"The petition program is a common-sense approach, crafted to avoid Federal and State intrusion into the relationships between local communities and their upstream neighbors and to allow source water quality concerns to be addressed in a cooperative non-adversarial process. The new program is intended to add momentum to a growing number of success stories where local communities, farmers, and other upstream entities have worked together through watershed planning to address source water concerns."

The agricultural community strongly prefers the adoption of the Senate-passed source water protection provisions in the Senate-House conference on the SDWA. The petition process is viewed as an alternative or complement to traditional treatment technologies for public water systems to use in complying with SDWA standards. Moreover, the new petition program avoids the creation of a new layer of regulatory mandates on farmers and other landowners in watersheds that are already regulated under the CWA.

Regulation of Contaminants

An unpopular provision of current law requires EPA to monitor 25 additional water contaminants every three years. Rather than directing limited resources to combat trace amounts of pollutants that pose little risk to health, H.R. 3604 calls on water regulators to set health-based standards to ensure that drinking water is free of more dangerous contaminants, such as cryptosporidium.

Pursuant to H.R. 3604, EPA must regulate all existing contaminants. By the year 2001, and every five years thereafter, it also must publish a determination whether to regulate certain contaminants known or likely to occur in public water supplies.

S. 1316 contains a similar provision requiring EPA to regulate all existing contaminants. However, EPA is provided an option to either publish a determination not to regulate certain unregulated contaminants or to propose an MCL.

“Right-To-Know” Provision

H.R. 3604 contains a new “right-to-know” provision, not included in the Senate bill, requiring drinking water systems to annually inform their consumers what contaminants have been found in their water supplies and how they might affect public health. The environmental community is concerned that this right-to-know provision will be dropped from the final version by the conference committee before the bill is sent to the President for signature.

Clean Water Act Reauthorization

The existing Federal Water Pollution Control Act, more commonly known as the “Clean Water Act” (CWA) has proven to be an extremely effective environmental law that has resulted in significant improvements in the nation’s water quality. Early on, the CWA focused on “point source” pollution (i.e. pollution coming out the end of a pipe). Not much thought was given to a “nonpoint source pollution” and a more comprehensive watershed approach to managing water quality until 1987 when Congress added Section 319 to the CWA.

Nonpoint Source Pollution

Nonpoint source pollution is caused by rainfall or snow-melt moving over and through the ground and carrying natural and human-made pollutants into lakes, rivers, wetlands, estuaries and ground water. In other words, nonpoint source pollution results from acts of nature and thousands of daily decisions ranging from fertilizing lawns and fields to livestock manure management and even to construction site management.

Section 319 of the Clean Water Act

Congressional enactment of Section 319 established a national program to control nonpoint sources of water pollution by requiring States to develop plans to control what is otherwise known as “run-off” from farms, forests, construction sites, mines and urban areas. In fact, all States have approved nonpoint source programs.

Under Section 319, States address nonpoint source pollution by developing assessment reports that identify nonpoint source pollution problems and the nonpoint sources responsible for the water quality problems. In addition, States adopt and implement management programs to control nonpoint source pollution. The EPA awards grants to States to assist them in implementing those management programs.

EPA and the agricultural community have been working over the last few years to strengthen nonpoint source management programs. This effort has yet to translate to new provisions in a reauthorized CWA, but the work on developing new approaches to nonpoint source pollution continues.

Wetlands & Section 404 of the Clean Water Act

Wetlands are special critical areas, including marshes, bogs and swamps, that can serve water filtration, flood control and habitat functions.

Section 404 of the CWA has come to represent the principal Federal mechanism to protect wetlands through its regulation of activities. The permit program aspects of Section 404 are administered by the U.S. Army Corp of Engineers, using EPA guidance. Other Federal agencies, including USDA’s Natural Resource Conservation Service and the Department of Interior’s Fish and Wildlife Service, also have significant roles in regulating wetlands activities.

Stormwater

Stormwater discharge systems are the pipes and sewer lines that carry rainwater or snow-melt away from commercial and industrial facilities and urban areas. Although stormwater can transport significant amounts of pollutants, they were largely unregulated until the 1987 CWA directed EPA to implement a specific permit program for industrial and municipal sources.

Unfortunately, delays in issuing regulations and high compliance costs have made the discharge permit program highly controversial and unpopular. Critics of the current program argue that the significant control costs and regulatory burdens have yielded marginal water quality benefits.

Status of Legislation

There appears to little political will or momentum to reauthorize the CWA this year. Last year, the House passed a comprehensive reauthorization of the CWA in H.R. 961. Although the bill is generally supported by the agricultural community and industry and is endorsed by many in State and local governments, the Clinton Administration and envi-ronmental groups have been critical of the bill, claiming it would set back progress to date on attainment of water quality goals. It also appears that the Senate is not prepared to move such legislation before Congress adjourns this year. The Senate Environment and Public Works Committee prefers a more narrowly targeted bill that simply reauthorizes program funding for Section 319 without addressing wetlands reform and an expanded nonpoint source pollution program.

Food Safety and Delaney Clause Reform Legislation

House Agriculture Committee Approved Bill

On June 19, the House Agriculture Committee reported out substitute language to H.R. 1627, the “Food Quality Protection Act.” The parts of H.R. 1627 dealing with the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) were considered by the Agriculture Committee last year but were not reported because of a number of issues, such as chemical reregistration fees.

The substitute proposed by Committee Chairman Pat Roberts (R-KS) excludes pesticide cancellation provisions but includes the Senate bill’s (S. 1166) anti-microbial language. The Committee reported bill also extends pesticide reregistration maintenance fees until Sept. 30, 2001, requiring the EPA to collect $76 million in fees to pay for the reregistration. The other provision of the committee approved bill are as follows.

Keeps minor use pesticides on the market: H.R. 1627 seeks to streamline regulatory procedures for pesticides used in the production of smaller-acreage crops. The produce industry is strongly supportive of these provisions that offer regulatory relief for the production of many fruits and vegetables.

Removal of the costly reregistration process will serve as a new incentive for chemical companies to keep compounds on the market. In addition, this special regulatory treatment would be extended to pesticides used by government officials to control pests and diseases that are injurious to public health.

Safeguards for children’s health: The bill implements recommendations of the National Research Council report on “Pesticides in the Diets of Infants and Children” to require EPA, USDA, and the Department of Health and Human Services to coordinate the development and implementation of procedures to ensure that pesticide tolerances adequately safeguard the health of infants and children.

Promotes safer crop protection products: The bill also provides for expedited registration of reduced-risk pesticides so that safer products can reach the market sooner and replace older products.

House Commerce Committee Proposal

The House Commerce Committee now is prepared to mark up the portions of H.R. 1627 that amend the Federal Food, Drug and Cosmetic Act (FFDCA). Commerce Committee Chairman Thomas Bliley (R-VA) is proposing to replace the Delaney Clause zero-tolerance standard with a “safe” standard. In other words, the EPA could set a tolerance for a pesticide chemical residue in a food if it determined that the tolerance was safe. Other key provisions are outlined below.

“Threshold” vs. “non-threshold” effects: This new language would also distinguish between “threshold” and “non-threshold” effects. Threshold effects of a pesticide chemical residue are those for which EPA can identify a level of no harm to human health. Tolerance for these pesticide residues would be set at a level lower than the threshold level by a generally accepted margin of safety.

Non-threshold effects are those for which EPA, according to the new language, cannot identify a level at which the pesticide chemical residue will not cause or contribute to any known or anticipated harm to human health. Tolerances of these residues would be set at an exposure level that presents “at most a negligible increase in the lifetime risk of experiencing such harm.”

“Special tolerance” provision: Also proposed is a special tolerance provision allowing EPA to set a tolerance for a pesticide chemical residue “if the yearly risk from such residue does not exceed 10 times the yearly risk allowed under the administrator’s determination of a negligible lifetime risk level.”

Consistency with Codex: The proposal would make it difficult for EPA to set tolerances different from the maximum residue levels set by the Codex Alimentarius Commission (Codex), the international entity charged with harmonizing countries’ maximum residue levels. The proposed language would require EPA to take a number of steps to justify a decision to adopt a tolerance different from the Codex level. For example, EPA would need to have a showing or determination that the Codex supporting data was inadequate or unreliable.

“National uniformity” in pesticide laws: Finally, the “national uniformity” of tolerances (i.e. Federal pre-emption of tolerances) is part of the proposed language that also includes a petition process for getting around it. National uniformity of pesticide laws would block States from passing their own rules that contradict federal law.

Projected Outcome

After languishing for a year in the House Health and Environment Subcommittee, H.R. 1627 was recently scheduled for mark-up. Although there is great interest in Delaney Clause reform, there are few legislative days remaining in this session of Congress. Mr. Pasco is an attorney in the firm specializing in environmental, food, agricultural, trade and property issues.

More on the FAIR Act of 1996

EDITOR’S NOTE: Due to the comprehensive nature of the final Federal Agriculture Improvement and Reform (FAIR) Act of 1996 (P.L. 104-127), we were unable to report on all aspects of the legislation in our last issue of The Agricultural Law Letter. Below are some highlights from those titles not covered last time.

Farm Credit

Title VI of the FAIR Act included changes to the government’s farm credit programs, significantly rolling back many borrower protections provided in the Agricultural Credit Act of 1987 and refocusing the mission of the former Farmers Home Administration (FmHA), now the credit division of the Farm Service Agency (FSA).

In fact, one provision denies any producer a new loan who has previously had any form of debt forgiveness. Such forgiveness is defined as reducing or terminating any loan that resulted in a loss to the government through a writedown or writeoff. The immediate implementation of this particular provision caused chaos for many producers who had loan applications pending on April 4. They were informed that the applications were rejected due to the new farm law. Congress responded through a special provision in the Omnibus Appropriations and Recision Act of 1996 (P.L. 104-134). It provided that notwithstanding any other law, USDA could make or guarantee a loan to any applicant who submitted the application prior to April 5, 1996 if the applicant was less than 90 days delinquent on any loan as of April 4, 1996.

This title also eliminated the leaseback/buyback program; it removed any priority right to purchase inventory property (except under the Homestead Protection Program as modified) by former owners as well as any priority rights previously enjoyed by spouses, children, and former operators. Significant changes also were made in the process for selling and leasing inventory property, providing beginning farmers and ranchers first priority on purchases and leases.

Other highlights of the credit title include:



Rural Development

Whether the Administration would go along with the new Freedom to Farm concept largely depended on the commitment to rural development contained in the final farm bill. Title VII of the FAIR Act represents that commitment. It contains additional funding for rural development and agriculture research through a “Fund for Rural America,” it reshapes the delivery mechanisms of historical rural development programs, and it retools other programs to make them more accessible or better targeted.

The title also repeals a number of unused rural development authorities including the Rural Investment Partnership program established by the Food, Agriculture, Conservation and Trade Act of 1990 (FACTA, P.L. 101-624) which has never been funded. Other duplicative existing authorities are consolidated and some programs such as the Distance Learning and Medical Link Program established in 1990 (now the Distance Learning and Telemedicine Loan Program) were revamped and renamed. Finally, the rural development provisions also renamed the post of Under Secretary for Rural Economic and Community Development to simply the Under Secretary for Rural Development. Fund for Rural America (FRA): The FRA was the Administration’s main proposal for boosting rural development. The FRA was to provide a pool of money that could be spent on a variety of rural development programs including rural housing, agriculture research, education and extension activities and conservation initiatives. A total of $3.5 billion over seven years was sought for the fund.

The FAIR Act did include a FRA, but it was greatly scaled down from the Administration’s original proposal. $100 million annually is to be allocated to the Secretary of Agriculture from U.S. Treasury funds on Jan. 1 of 1997, 1998 and 1999 for purposes of providing additional monies for rural development and research programs of the USDA through a FRA special account. At least one-third of the funds, but not more than two-thirds, must be spent on rural development activities, essentially leaving at least one-third for research and education expenditures. It is up to the discretion of the Secretary, within certain prescribed limits, as to which programs receive additional funding.

In the rural development arena, FRA monies may be used for such programs as rural business enterprise grants, direct or guaranteed business loans, grants to water and waste water projects, distance learning and telemedicine loans and grants, self-help housing, and rural housing preservation. However, only those rural development and housing programs which received appropriated funds in FY95 are eligible for funding from the FRA.

Research monies must be awarded on a competitive basis and these grants may be made for one or more of the following purposes: 1) increase international competitiveness, efficiency, and farm profitability; 2) reduce economic and health risks; 3) conserve and enhance natural resources; 4) develop new crops, new crop uses and new agricultural applications of biotechnology; 5) enhance animal agricultural resources; 6) preserve plant and animal germplasm; 7) increase economic opportunities in farming and rural communities; and 8) expand locally-owned value-added processing.

Finally, the FRA cannot be accessed in any fiscal year for a particular program unless the appropriations for the specific activity in that fiscal year is equal to or greater than 90% of the 1996 program level adjusted for inflation.

Rural Community Advancement Program(RCAP): The RCAP is the core of the farm bill’s rural development initiatives. It fundamentally restructures the delivery of Federal rural development programs instituting more of a bottom-up approach to funding and priorities than the historical top-down approach.

There are three categories of RCAP funds: 1) rural community facilities, 2) rural utilities and 3) rural business and cooperative development; rural housing is specifically not included. They can be used for any combination of grants, direct loans, or loan guarantees. In the past, these programs were funded on an individual basis and unused money could not be transferred from one program to another. RCAP permits transferring up to 25% of the funds it gives to States from one category to another, as long as no more than 10% of its funds are transferred from any account nationally.

However, these transfer caps may be waived if there is an approved application for a project in a category without any funding and either: there are no approved applications in the category from which the transfer is sought; or 2) the approved application needing funding is from a community with a smaller population and a lesser per capita income than any community that would benefit from funds in the account from which the transfer would be made.

The definition was changed for “rural” and “rural area” with regard those areas eligible for various programs under RCAP. Those areas now include any city, town, or unin-corporated area that has a population of 50,000 inhabitants or less, except for an urbanized area adjacent to a city or town with more than 50,000 inhabitants. However, eligibility for water and waste water facilities grants and loans remain for communities with populations under 10,000 people.

Core Program Changes. A number of amendments were included to the Consolidated Farm and Rural Develop-ment Act under which most core rural development programs are authorized. Chapter 1 of Subtitle B in Title VII: