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Release No. 0031.08
Office of Communications (202) 720-4623

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Transcript: 2009 Budget Briefing

Washington, D.C. - February 04, 2008

VIDEO: FY 2009 Budget Briefing

MODERATOR: We have Scott Steele on our budget team here ready to answer your questions. So with that, I have Secretary of Agriculture Ed Schafer. I'm going to go over a few things, and then we'll have the Secretary and Deputy Secretary come up and go through a few things.

First of all, the Secretary will come up and make some brief remarks. Following that, Deputy Secretary Conner will come up and go through the charts that are in the packets that you received. After that they will take a few questions on the budget, and then depart. Following that if we did not get to your questions with them, we have Scott Steele and our budget team here ready to answer your questions.

So with that, I have Secretary of Agriculture Ed Schafer. Thanks.

SEC. ED SCHAFER: Thank you. Good afternoon, and thank you for joining us on this great day in America. We're pleased that you're here at USDA headquarters, and welcome to our presentation on the President's Budget Proposal for USDA for Fiscal Year 2009.

I am pleased to stand beside Deputy Secretary Chuck Conner today, and he will walk you through the details of the proposal, as well as other members of the subcabinet and Scott Steele, USDA's budget director. All of us will be available after this press conference to answer questions and provide any additional information that you might need.

I believe you have all been given a hard copy of some of the charts that show the major changes in the budget. And Chuck will take you through them in just a few moments. You should also have a copy of your Budget Summary and Annual Performance Plan which provides a more comprehensive review of the proposals in the budget. If you don't have one, raise your hand and we'll get one for you so you can follow along.

Let me start by saying, we are proud of the USDA's 2009 recommended budget, and as it advances the President's goal of achieving a balanced federal budget by 2012 it also encourages economic growth and enhances our security.

And I'm very pleased to have the opportunity to lead this great department at a time in history when the agriculture community has never been stronger. Market prices are at or near record levels for virtually all of our major crops, and net cash farm income for 2007 will exceed $85 billion. That's up $18 billion from last year. This is a result of the hard work and the ingenuity of thousands of farmers and ranchers and rural citizens who invest in the land every year. Because of them, we enjoy an abundant and safe food supply.

This budget provides the critical resources we need to keep our agriculture community strong. And it's in keeping with the President's policy of funding the highest priorities while restraining spending. As is often the case with budgets, some tough choices had to be made to keep spending under control to meet the President's deficit reduction guidelines. In fact, this budget proposes to terminate about $1 billion in lower priority programs, earmarks, and other activities that duplicate programs.

In addition, some programs are reduced, and we are proposing some shift in emphasis from grants to loans and from direct loans to loan guarantees. These shifts permit us to continue to address the priorities of USDA but at a lower cost to the U.S. taxpayer.

I point out that even within the tight overall budget framework there will be additional funds allocated to food safety, nutrition and high priority bioenergy research. The budget also provides support to ensure our critical program delivery systems are maintained so that the infrastructure is in place that we can build upon to meet the demands of implementing a new farm bill.

All Americans and particularly our farmers and ranchers and landowners know the importance of a healthy economy. It creates jobs, and it boosts incomes. Keeping American agriculture strong means we must continue to build on our recent successes in trade. We have worked aggressively to open new markets for American farmers and ranchers, and those efforts are showing results.

Our budget includes the funding we need to continue these critical efforts. We also need to secure that new farm bill. A little more than a year ago the administration announced a comprehensive set of farm bill proposals for strengthening our farm economy and rural America. These proposals represent a reform-minded, fiscally responsible approach to supporting America's farmers and ranchers and our rural communities.

We are still working with Congress to shape the farm bill, but as of today we don't have new legislation in place. Because of that, the President's 2009 recommended budget for USDA is based on the provisions of the 2002 Farm Bill and reflects the administration's proposals for change. We expect some changes will need to be made to the budget estimates when a new farm bill is enacted, and I must say I am increasingly confident that that will happen.

Now, Chuck will take you through the charts and the specifics of what we are proposing for our 2009 fiscal year. Chuck?

DEP. SEC. CHUCK CONNER: Secretary Schafer, thank you very much. As the Secretary has stated already, this budget proposal does fall in line with the President's overall goal of achieving a balanced federal budget by 2012. And the President delivered this package for fiscal year 2009 earlier today to the Congress, and I am going to walk you through some of the highlights, if you will, of that proposal.

Let's start if we could with slide number one. You can see that for 2009 we estimate USDA total outlays will be about the same as they were in 2008; 2008 included supplemental disaster assistance in that as well. The budget for 2009 does reflect considerable increase in food assistance costs, crop insurance increases. Some of those of course are offset by a reduction in other lower priority programs. But generally speaking about 76 percent of our outlays come in the form of the mandatory programs, 24 percent through discretionary.

Chart 2. When you do look at USDA outlays by major activities you can see that we have continued on a trend that has been ongoing at this agency for quite some time. And that is the impact of nutrition assistance. Of the total budget, 63 percent now is going to go for domestic food assistance programs including Food Stamps, School Lunch, and the Women Infants and Children program.

Spending on farm programs, including commodity payments, farm loans and crop insurance, accounts again for about 15 percent of the budget as you can see in blue. And roughly the remaining 22 percent of the department's spending is of course for conservation, rural development, research and other food safety activities.

Chart Number 3. This budget, again consistent with our own strategic plan that we have put forward in the past includes a proposal for $277 million of total new funding for the Food and Agriculture Defense Initiative. This represents an increase of almost $91 million for USDA to continue to strengthen the safety and security of our nation's food supply for agriculture. This funding request for the $91 million does include money to safeguard the nation's food supply for E.coli research to improve animal vaccines and diagnostic tests, money to enhance our activities relative to pest detection, and we also include money for the design of a bio-containment poultry research facility in Athens, Georgia, as, again, all part of this situation.

The next chart includes a request of nearly $1.1 billion for the Food Safety and Inspection Service. This is, ladies and gentlemen, a record funding level for this agency. This funding again will ensure that we have the inspection resources in place to meet the increased demand for our services because of higher demand for meat and poultry inspection services.

We will continue to support the continued development and implementation of a stronger science-based system that can increase the speed in which we detect and respond to outbreaks of various food borne illnesses. And I might add that this money is to supplement the higher request because we were the recipient of supplemental funding for FSIS last year as well. So we believe this will meet all of our needs at this stage.

Increased agricultural exports: I will tell you that we have worked very, very hard within this agency to advance the President's trade agenda, and we are seeing positive results as this chart does show. "Positive results"—I might actually amend that to say "remarkable results" in this area. In 2007 our ag exports reached a new record level for the fourth straight year. We are now of course forecasting for 2008 $91 billion, and that would be a $22 billion increase just over the last couple of years.

Our budget proposal supports the continued effort to expand access to overseas market through our own trade negotiations, compliance monitoring, and of course the development of science-based regulatory standards to back up this activity.

Our CCC outlays, you can see from this chart, with a quick explanation of this—if you look at our projected farm program spending, this chart does display the original estimate of CCC expenditures developed at the time of the passage of 2002 Farm Bill. I believe that is the line in red, along with the actual expenditures that have occurred through 2007 and our current estimates of what we expect in '08 and '09. And you can see that there's been variability in terms of the actual cost, but you can also see that our current farm program cost projections have been on a sharp decline really since 2006 as a result of poor weather in other parts of the world, rising demand in Asia, and of course because of increased demand as a result of the ethanol situation.

In 2007 of course we did submit a comprehensive set of the farm bill proposals that we believe will strengthen our farm economy, to back up this chart as well. And Secretary Schafer made mention of those. The administration's proposals, as you all know, would save about $600 million in our commodity program outlays in 2009 as compared to the current 2002 Farm Bill projected cost.

The next chart dealing with domestic nutrition assistance, the budget proposes $6.3 billion in program level to support average monthly WIC participation at 8.6 million recipients. Of course, WIC is USDA's largest discretionary program. For the Food Stamp program, the budget includes resources to fully fund estimated participation and also provide a $3 billion contingency fund should actual cost of the Food Stamp program exceed the estimated level. Average monthly Food Stamp participation in this budget is projected to increase from 27.8 million to over 28 million recipients going forward.

The budget does also propose nearly $600 million in increases for the Child Nutrition programs. This will allow us to fully fund the projected increases in participation and of course the projected increases in projected food cost.

School Lunch participation is estimated to reach a record level again in 2009, 32.1 million children fed each day. And of course that's up from under 31 million participants in 2008.

Within our Agriculture Research budget we are also proposing $12.2 million of additional spending for research to really assess the efficacy of USDA's Dietary Guidelines on healthy eating and physical activity in preventing obesity as well, in addition to the strong nutrition programs.

For our farm bill Conservation programs, the budget proposes a $4.6 billion to continue implementation of these conservation programs authorized in the 2002 Farm Bill. This also reflects an increase of $775 million to support the administration's farm bill proposals for fiscal year 2009. This increase in funding will allow us to reach we believe a record number of acres to enroll them in USDA conservation programs going forward as well.

On chart number 9 dealing with Wildland Fire, the budget continues implementation of the President's Healthy Forest Initiative to mitigate the potential adverse threat of catastrophic wildfires. The proposed funding will reduce hazardous fuels on almost 2.5 million acres of land within 2009 as we have requested.

The budget also provides increased Wildland Fire resources to protect communities and natural resources and provides for sustainable forests and communities through full funding of the Northwest Forest Plan within the dollar levels identified there.

On Rural Development, the 2009 budget proposes nearly $15 billion for Rural Development programs. The 2009 budget fully supports the Administration's policy to protect the rents of 230,000 low income tenants, many of whom are elderly, who do reside in USDA financed multi-family housing units. Further, the budget supports $4.8 billion in guaranteed loans for single family housing to provide almost 43,000 rural home ownership opportunities in 2009. I would note that in the spirit of making the maximum use of our resources that are available, we do not provide any money in our budget for direct loans for this purpose.

The 2009 budget also maintains about $1.6 billion of financial support through USDA's Water and Waste Disposal programs. More of this support, again in the interest of doing more with less, is through direct loans rather than through direct grants from our agency.

Loans for electric, telecommunications, broadband and other community facility and loan guarantees for business and industry are maintained at the level that we expect them to operate again for 2009. In addition to the highlights I've given you, you will find that we are proposing funds to support other priorities as well, including meeting our commitments for foreign food assistance, research that does combat emergency diseases in livestock and crops, high priority bioenergy research for converting cellulose materials into biofuels, and of course for strengthening our own organic standards.

Again I want to emphasize to each one of you that the President's proposed budget provides us the resources we need to continue making a positive impact on the economic well-being and the safety and the health of all Americans, while of course maintaining a very tight, fiscally responsible budget.

I appreciate all of you coming here today. We've got a big group of our budget staff here if you have very detailed questions; but also the Secretary and I are here to answer any questions you may have, generally speaking, about the budget. So again, thanks all of you for being here.

Mr. Abbott, why don't you start us off.

REPORTER: Thank you. The budget documents released by the White House are full of references to the Administration's proposal for the farm bill. The Secretary himself made a reference of how the farm programs would be adjusted to reflect the results of it whenever a new farm law is written. The comments from the White House—I have all my charts, and just like Senators you deal with—the White House comments make reference to tightening payment limits and closing farm program loopholes. Even on page 19 of your document you talk about how a review of USDA crop subsidies include suggestions to take steps to address payment limit loopholes with regulations. Has the Department set up draft legislation for the farm bill? Are you going to put out draft regulations to take care of farm program loopholes, particularly the actively engaged element which is part of the overall farm bill debate?

DEP. SEC. CONNER: You want me to take that? Chuck, as you will recall in the policy book that we did publish, we indicate—and I actually think it's on page 22 if my memory serves me correctly—that we would be proposing new regulations specifically to define what we mean today by "actively engaged in farming." And you know, this has a long history associated with it, including the Payment Limit Commission which advised us not to do anything even though technically we had the power under our own authority to do something. It said, this should be done as part of the regular farm bill debate.

We indicated in our book that we would go through rulemaking to provide a new definition of "actively engaged in farming" in order to qualify for those farm program payments. And I would expect that's going to continue to be the case going forward because there seems to be broad support in Congress for a, if you will, a tighter definition of "actively engaged in farming," which under the current definition I suspect a lot of people in this room might qualify, and you may not even know it that you qualify in that situation.

REPORTER: But you haven't done the definition. You haven't proposed the regulations yet. And we're closing out one year mark for the beginning of mark-up on the farm bill.

DEP. SEC. CONNER: So your point is, it's time to get the farm bill done, Chuck. And both of us agree with that point.

REPORTER: My point is, I'm curious what your proposals are in detail or in substance.

DEP. SEC. CONNER: In terms of the "actively engaged?"


DEP. SEC. CONNER: Well that, you know, is a process we will go through, Chuck.

SEC. SCHAFER: Let me tell you this too. During my confirmation process as I visited with senators across the Hill, you know this issue came up several times. And as you know, it's a very complex issue, who takes the risk, who's putting seed in the ground, where all those delicate or intricate details come to bear. We pledged then during my confirmation process that we would be reviewing the situation and issuing the appropriate proposed regulations if necessary.

REPORTER: Alan Bjerga from Bloomberg News. Taking a look at the budget documents that the administration put out, you see more than a 10 percent cut in the discretionary amount of money available to research. A lot of the programs that are sort of your immediate needs—your inspection, your subsidy payments—are at least solid. But research which tends to be more long-term has had a significant cut. And I'm wondering how you feel you may be meeting long-term needs while at the same time you're cutting research by so much.

DEP. SEC. CONNER: If I could, Alan, I'll take a crack at that, and then, Scott, if you want to provide anymore details on this.

As you know, we are strong proponents of research, and that was reflected in our own farm bill recommendations in terms of the amount of mandatory money that we put forth for various purposes in terms of research. In the 2009 budget, the reductions that you are going to see are primarily geared towards elimination of earmarks. And you know that this is a consistent policy across the administration that has been the subject of considerable debate on the Hill. This is something we have talked about extensively in past budgets as well.

We feel like our agricultural research should not be earmarked; it should be competitively awarded, and that's how you're going to get the most bang for the buck. And so the savings in this bill is through the elimination of those earmarks. Scott, do you have anything to add? If I've misspoken in any way, correct me. But I think that's it.

SCOTT: Earmarks, yes. We have a very large number of earmarks in research. Across the department we have over 500 earmarks in the Department of Agriculture, several hundred million dollars worth of earmarks. And those come off the top, the last several years had earmarks taken out.

REPORTER: Jamie Strawbridge from Inside U.S. Trade. I was just hoping to get a little bit of an elaboration. You highlighted the large increase in the Food and Agriculture Defense Initiative from $186 to $277 [million]. Also, related to that, FSIS has a jump of looks like $20 million or so. Could you just tell us what accounts for those, what seem like, fairly large increases: if this has to do with food safety problems, concerns from Congress, or how we should think about this? Thanks.

DEP. SEC. CONNER: I can give you the specifics here, but I've got the exact numbers here.

SCOTT: On page 13.

SEC. SCHAFER: Scott, come on up here. We'll get the expert up here.

SCOTT: I'm not necessarily the expert, but anyway on page 13 it lays out there are two initiatives here, one on food and then one on agriculture. On the food side, we're trying to enhance our laboratory response. We have what we call the Federal Food Emergency Response System called FERS. We're asking for $14 million to help beef up so to speak our laboratory network. We have $20 million in research to improve vaccines and diagnostic tests. There's $47 million in here for pest detection and monitoring and prevention activities in APHIS largely. And we have $13 million in this lab that we're building in Athens, we're proposing to build it, $13 million of planning and design money in Athens, Georgia, which would be comparable to the lab we have in Ames, Iowa, for livestock. And this would be for poultry.

So there is a write-up here, and we can talk to you more in detail afterwards.

REPORTER: Ed Maixner with Kiplinger. I was wondering about, just generally there are some major changes in the overall export and foreign program, particularly a huge increase like 20 percent in the Export Credit Program for example. Just some major shifts, so I wondered if you could give me just an idea why the big dollar shifts in those programs? It's zeroed out, for instance, on the cooperator program was zeroed out.

SCOTT: On the Export Credit Guarantee Program, that program's been sort of designed to meet the demand out there, and we've offered up to $3.5 billion of export credit guarantees and they haven't used all that money in some years. And markets are strong. We can sell a lot of just for cash. We don't need to have guaranteed programs. So those numbers do bounce around basically because of how much is being used in the market to enhance exports. So that's one factor that's going on.

We're trying also to maintain the Market Access Program here, which is a popular program for specialty crops, at around $200 million. Some of the other programs are going to be dependent on what happens in the farm bill, and following scoring conventions with the CBO programs that are not $50 million or higher are usually shown as zero in the budget, which is a technical issue; I don't want to get into it. But a lot of those actual program mils will be decided when the farm bill is enacted. Is there another part of this you need to have answered? Or did I cover, answer your question?

REPORTER: Basically, yes. You talked about programs being not used, but in fact it was –

SCOTT: I didn't say "not used." I said –

REPORTER: Oh, increased by 20 percent for the short term I think it was –

SCOTT: Yeah.

DEP. SEC. CONNER: Most of that is in the short term that Export Credit Guarantee Program, and that is we have the authority to go up to certain levels.


DEP. SEC. CONNER: We have not been using that particular level. We're estimating more of that for Fiscal Year 2009, but still obviously within the overall –

SCOTT: We're trying to show a realistic amount of money for that program, and it's a program level. And we'll put the money out there. They have to come in and actually apply for it and use it. It's a loan program so we're not giving money away here.

REPORTER: Adrian Krepps (sp) from CQ. With the exception of maybe Food Stamps and a few others, a lot of these figures look sort of flat or like there are some minor cuts, almost as if the budget is waiting for the farm bill before it reacts. What do you anticipate will see major changes after the farm bill is hopefully enacted?

SEC. SCHAFER: I think as was mentioned this is a budget that looked at priorities. And under the existing framework we were able to free up dollars by eliminating unused or overlapping programs and focus them on the priorities. So I think you can maybe look across the line and see, you know, this is a flat budget. But if you look at the priorities of the department—and I would urge you to look at the summary document that you do have because it shows how the mission, the strategy and the goals tie into the budget. And as we looked at the strategy and goals, you know, they were incorporated in the priorities. So you'll see increased spending in certain priority programs, decreased spending in other areas, so that we can deliver a program that meets the President's guidelines to help balance the budget by 2012.

REPORTER: In terms of the evolution of this proposal after the Farm Bill, what do you anticipate will most definitely change?

DEP. SEC. CONNER: Let me just add to that. Obviously much of our dollars from the farm bill are mandatory dollars. The discretionary dollars, a big chunk of that is the salaries and expenses of our employees within the Department of Agriculture. Depending upon the type of farm program that is passed, that could greatly impact the administrative cost of administering this farm bill. So those discretionary dollars, particularly salaries and expenses, could potentially be greatly impacted once we actually know what the final details of the farm bill are going to look like in terms of what it will cost, particularly for the Farm Service Agency to administer this bill.

MODERATOR: We'll take one more.

REPORTER: Philip Brasher. I wanted to follow up on Chuck (Abbott's) question earlier regarding the "actively engaged" rule. What's your timeframe? What are you doing exactly on that now? What's your timeframe for finishing it? Because, you know, you have less than a year left in your administration.

DEP. SEC. CONNER: Well again, Phil, understand that we have agreed to follow the recommendations of the Payment Limit Commission which were a key part of the 2002 bill as it relates to these types of issues. And the Payment Limit Commission strongly recommended that whatever changes be made in terms of "actively engaged" that they track passage of the new farm bill, so that this is sort of done as a complete package, which is not just about "actively engaged in farming," but it's about direct attribution; it's about whatever changes we may make, not only in terms of overall payment limits but in terms of the eligibility, the income criteria on payment limits.

So it's part of a complete package. So, the short answer to our question is, we have not proposed anything yet and are not going to propose anything until we have the farm bill done. Then we will initiate the process to look at what is an appropriate new definition for "actively engaged" at that point, but not before.

MODERATOR: We're going to do one more.

SEC. SCHAFER: Go ahead.

REPORTER: Thank you. I'm Sally Schuff of Feedstuffs.

DEP. SEC. CONNER: Nice to see you, Sally.

REPORTER: Thanks, Chuck. My question goes back to the ag research issue. The farmers I know believe that agricultural research is probably the best long-term investment the Untied States makes in agriculture. A 10 percent cut, even if it's earmarked, is still a 10 percent cut. You know, earmarks pay for real programs. Last year you proposed cutting $141 million in earmarks. How are you going to get this money back in so that real earmarks aren't real cuts? I mean, where are the dollars going to come from?

DEP. SEC. CONNER: Sally, let me just say that again in our farm bill recommendations, and I believe this was tracked in both the House and the Senate versions of the farm bill, there is a great deal of mandatory research dollars non-earmarked. And this is something we proposed as part of our own farm bill recommendations. This was a very good idea that we initiated within this debate.

Now having said that, that's a different situation than what you get into with the earmark of these discretionary dollars where we are in effect told not only what to research but probably more problematic where and in some cases how it's done. And those types of earmarks across the board have been something we have been strongly against.

We believe high priority research stands on its own, that it can obviously withstand any sort of priority test. But obviously it needs to be competitively awarded. Everybody ought to have the right to compete for those research dollars out there. If you're not, then you run the risk of getting into the inefficiencies that come about any time you don't have competitive awards being given out there. And this is not only true again in agriculture, but this has been the consistent theme throughout the President's not only this budget but past budgets as well. This is an important area; it's important enough that we ought to be awarding it competitively, getting the taxpayers the absolute biggest bang for the buck.

And we're going to continue to press that issue.

REPORTER: Thank you.

MODERATOR: Thank you.