The subcommittee met at 8 a.m., in room 1318, Everett McKinley Dirksen Office Building, Hon. Thomas F. Eagleton (chairman) presiding.

Present: Senators Eagleton, Proxmire, Burdick, Bellmon, Young, and Hatfield.

NONDEPARTMENTAL WITNESSES

LIVESTOCK MARKETING ASSOCIATION

STATEMENT OF WILLIAM B. DEAS

OPENING REMARKS

Senator EAGLETON. Good morning, ladies and gentlemen. The Agriculture Subcommittee of the Senate Appropriations Committee is now in session. Again this is a hearing on the administration's budget for the Department of Agriculture for fiscal year 1979. This morning we will have a group of witnesses from various production associations. This hearing will go from now until 9 o'clock, and then we will recess and reconvene this session of public witnesses this afternoon around 4:30 p.m. in this same room. I will ask each witness to highlight his testimony; his full statement will appear in the record. It is more beneficial to the witness if he just gives us the highlights than if he takes us through a laborious statement.

We will start with Mr. William B. Deas, who represents the Livestock Marketing Association. Mr. Deas has an early plane reservation; thus, we are going to accommodate him. We will then go back to our already announced schedule.

Good morning, Mr. Deas. You may proceed.

Mr. DEAS. Thank you, Mr. Chairman. My name is William B. Deas. I am appearing in lieu of Mr. C. T. Sanders, general manager of the Livestock Marketing Association, situated in Kansas City, Mo. Due to intervening circumstances, Mr. Sanders was precluded from being present before this subcommittee.

This will be a joint statement in conjunction with Mr. Loran Casey, president, Livestock Marketing Association and Mr. J. D. Branscome, chairman, Livestock Marketing Forum.

In summarizing my statement I will delete material, but will concentrate with particularity on the more salient issues. This, however, is part of a statement which must be read in complete context in order to convey the import and maintain the proper tone. Accordingly, those portions will be addressed verbatim.

This joint statement has as its main concern those 1979 budget items relative to the Agricultural Marketing Service, particularly the Packers and Stockyards-AMS, the Animal and Plant Health Inspection Service, and the Office of the General Counsel. First, it is our intention to review the proposed increases with respect to the aforesaid budget items.

AGRICULTURAL MARKETING SERVICE: PACKERS AND STOCKYARDS

AMS

Perhaps it can be readily explained, and we apologize if it can be, but, at the outset, we feel compelled to point out some apparent discrepancies set forth in the 1979 budget summary, vis-a-vis the individual appropriations requests from the various agencies or items contained in the respective budgets. For example, and in recognition that there has been a reorganization of the Agricultural Marketing Service since 1977, we still do not understand the figures as set forth on page 6 of the U.S. Department of Agriculture 1979 budget summary, which we assume is a part of the record of this subcommittee. With respect to this item regarding Agricultural Marketing Service, it is pointed out that, in 1977, actual expenditures were $43.3 million, the 1978 estimate was $48.3 million, and in 1979, the estimate is $45.1 million; thus, the 1979 estimate compared with the 1978 estimate for the Agricultural Marketing Service shows a minus $3.2 million. Those figures simply do not jibe with the summary of increases and decreases on the basis of adjusted appropriation for Agricultural Marketing Service. In this regard for the 1978 estimate, the summary of increases and decreases for 1978 estimated shows a bottom line total of $43,095,000, not $48.3 million as pointed out on page 6 of the U.S. Department of Agriculture 1979 budget summary.

Moreover, the 1979 estimate as set forth on page 47 of the Budget Request for Agricultural Marketing Service shows the amount of $49,231,000. This again does not jibe with the 1979 estimate set forth on page 6 of the U.S. Department of Agriculture 1979 budget summary of $45.1 million.

These apparent discrepancies become even more significant when one considers that, pursuant to the U.S. Department of Agriculture 1979 budget summary, the 1979 estimate compared with the 1978 estimate shows a decrease in expenditure of $3.2 million for Agricultural Marketing Service. However, again on page 47 of the proposed budget for Agricultural Marketing Service, we see a proposed increase in the 1979 estimate as opposed to the 1978 estimate of plus $6.1 million.

The problem becomes further compounded when one reads the paragraph relative to Agricultural Marketing Service set forth on

page 16 of the U.S Department of Agriculture 1979 budget summary. Please permit me to quote you that paragraph:

An increase of $4.5 million is proposed in the fiscal year 1979 budget for the marketing services programs of AMS to cover the marketing agreements and orders, regulatory activities, and administration of the Packers and Stockyards Act. Of this amount, $4.7 million will cover the marketing agreements and orders previously funded under section 32; $0.8 million increase in the administration of Packers and Stockyards Act; and $0.6 million for additional seed variety testing and warehouse inspection. Offsetting this increase is a reduction of $1.6 million in grants made by AMS to State marketing agencies.

Careful reading of this paragraph at the first suggests that an increase of $4.5 million is proposed in the fiscal year 1979 budget to cover regulatory activities, marketing agreements and orders, and administration of the Packers and Stockyards Act.

What is confusing is that in the second sentence of this paragraph, remembering that the last antecedent is $4.5 million, it is noted that $4.7 million, which is already $0.2 million over the proposed budget increase, will cover the marketing agreements and orders, $0.8 million will be the increase for the administration of the Packers and Stockyards Act and $0.6 million for regulatory activities. Then we are left with the last sentence which blithely suggests that offsetting the increase is a reduction in the amount of $1.6 million in grants made by Agricultural Marketing Service to State marketing agencies. I suppose that it is fair to state that what is intended by the budget summary is that a total increase of $6.1 million is proposed in the fiscal year 1979 budget for Agricultural Marketing Service, less $1.6 million in grants made by Agricultural Marketing Service to State marketing agencies, leaving a total proposed increase of $4.5 million.

However, this is not explained in the "Summary of Increases and Decreases" on the basis of adjusted appropriation as set forth on page 47 of the budget request from Agricultural Marketing Service which shows a proposed increase of $6.1 million. It must be noted that, on page 75 of the budget request for Agricultural Marketing Service, there is a reference to "Payments to States and Possessions" which does indirectly reflect an increase in the appropriation of $1.6 million. We believe that this figure of $1.6 million should be reflected in the summary of increases and decreases at the outset of the budget request for Agricultural Marketing Service.

Be that as it may, we are preceeding under the assumption that only $4.5 million is being requested for fiscal year 1979 budget for the marketing service programs of Agricultural Marketing Service. Obviously, our primary concern is with respect to the proposed increase in the administration of the Packers and Stockyards Act in the amount of $818,000. The 1979 estimated budget for the administration of the Packers and Stockyards Act is $7,497,000 as compared with the 1978 budget of $6,679,000.

Although we have not been able to understand the rationale for past expenditures for individual items under the supervision of the Packers and Stockyards-AMS, we draw no issue with respect to the proposed increase so long as such increase is utilized in accordance with the statement set forth on page 68 of the proposed budget for the Agricultural Marketing Service, which provides as follows:

Program exphasis has been placed on implementing the provisions of the 1976 amendments which included packer bonding, statutory trust, prompt payment of livestock, temporary injunctions, civil penalties, and expanded jurisdiction to wholesale meat packers, dealers, and distributors.

One has to only look at the recent increasing number of defaults in the packing industry to show the compelling need for greater program emphasis in this area of regulatory activity. In this regard, our records reflect that within very recent times, the following packers have either become insolvent, bankrupt, or are in serious financial trouble, some without bonds and most with vast amounts due and owing our subscribers and others. To summarize, in recent days, the following packers have suffered the consequences just pointed out: Borden Packing Co., Trenton, N.J.; Frosty Morn Packing Co., Kinston, N.C.; Edwards Bros. Packing Co., Fleetville, Pa; Enterprise Meats Co., Petal, Miss.; Pleasant Unity Packing Co., Pleasant Unity, Pa.; Millwood Packing Co., Baton Rouge, La.; National Packing House, Miami, Fla.; Corn County Pork, Inc., Worthington, Ind.; G. & L. Packing Co., New York Mills, N.Y.; Southwestern Packing Co., Houston, Tex.; Eastern Dressed Pork, Inc., Bergen, N.J.; American Kosher Provisions, Inc., Brooklyn, N.Y.; Interstate Meat Co., Union City, Tenn.; and Penn Packing Co., Philadelphia, Pa.

This highlights the need for primary emphasis in the proposed increase to be expanded upon the enforcement of the packer provisions of the present act.

There is one final item remaining which will be discussed later in regard to Agricultural Marketing Service.

ANIMAL AND PLANT HEALTH INSPECTION SERVICE

We must commend the Animal and Plant Health Inspection Service, commonly referred to as APHIS, for its attempts to eradicate disease in this country. In this respect, the Livestock Health Council in coordination with the Livestock Marketing Association, has worked with APHIS and assumed a leading role in the livestock marketing sector in connection with animal health. We particularly commend the APHIS request for the $8.1 million increase in Brucellosis eradication and the proposed $8.5 million increase for Agricultural Quarantine Inspection. Our only word of caution in this respect, however, is that these eradication programs be conducted in accordance with commonsense, respect for the problems involved with livestock marketing businesses, livestock dealers, and livestock producers, and that the eradication programs be directed toward the entire merchandising of cattle and hogs.

OFFICE OF THE GENERAL COUNSEL

In this respect, we do not believe that the U.S. Government, including the U.S. Department of Agriculture, needs any more lawyers. The budget increase of $295,000 raises the 1979 estimate to $10,325,000 to fund the Office of the General Counsel as compared to the $10,030,000 1978 budget estimate. This increase in the 1979 budget estimate is uncalled for and unwarranted. We are not unaware of the increasing costs in the legal field. We do not feel

that the Office of the General Counsel needs six additional manyears of legal services in order to reduce the backlog.

With respect to the Office of the General Counsel and its association with the Packers and Stockyards Act, we note on page 78 of the green attachment sheets to the budget request, the following statement:

In fiscal year 1977, 143 disciplinary and 9 reparation proceedings were instituted, as compared with 179 and 24 respectively, instituted in the fiscal year 1976. At the end of the year, 175 disciplinary cases were on hand for institution or other action and 25 reparation cases, compared with 212 and 36, respectively, on hand at the end of fiscal year 1976. In fiscal year 1977, 22 criminal and 50 civil enforcement cases were submitted to the Department of Justice, and at the end of the year, 73 such cases were pending in the office, compared with fiscal year 1976 figures of 26 criminal, 62 civil, and 77 pending.

Frankly, we do not consider that, in light of the number of lawyers specifically assigned to the Packers and Stockyards Act that a caseload of 143 disciplinary actions and 9 reparation proceedings being instituted or that 175 disciplinary cases are on hand for institution and 25 reparation cases at the end of fiscal year 1976 is either relative or impressive. Nor can we be particularly impressed with the referral of 22 criminal and 50 civil enforcement cases which have been submitted to the Department of Justice, which should take the responsibility away from the Office of the General Counsel, although we are aware that, in fact, it does not. Therefore, we conclude that not only is the increase of $295,000 for the Office of the General Counsel unwarranted but rather that the entire 1979 estimate of $10,325,000 should be reduced substantially. The easy answer in this regard is always to hire another lawyer, but the more sensible approach is to get more out of the lawyers that you have already hired. Every law firm, every group legal service program, and every private practitioner recognizes this fact.

Indeed, President Carter has recognized that the 20,000 attorneys hired by the Government should be more carefully utilized. As the result of his reorganization project and the study which resulted therefrom, President Carter stated that:

This study is designed to improve the way governmental units use the legal resources at their disposal, which include their own legal offices and the services of the Department of Justice, including U.S. attorneys. Better use of these resources should help prevent unnecessary litigation and administrative delay by enabling the Federal Government to do a better job of complying with its own rules and regulations.

A second objective will be to improve the way litigation is conducted in order to insure better and more uniform application of the law. I consider the effective use of legal resources to be a vital part of my administration's effort to improve the performance of the Federal Government.

RATES, SERVICES, AND FACILITIES BRANCH OF THE PACKERS AND STOCKYARDS-AMS

Certainly this subcommittee is aware of the congressional concern regarding rate regulation by the Rates, Services, and Facilities Branch of the Packers and Stockyards-AMS. For example, several bills have been introduced which would eliminate rate regulation in this country. These include bills introduced by Congressman Thornton of Arkansas, Senator Eastland of Mississippi,

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