Trade Adjustment Assistance
New Program for Farmers Provides Some Assistance, but Has Had Limited Participation and Low Program Expenditures Gao ID: GAO-07-201 December 18, 2006While tens of thousands of manufacturing workers have received services through the Trade Adjustment Assistance (TAA) program, until 2002, farmers and fishermen impacted by imports did not have access to similar assistance. The Trade Act of 2002 (Trade Act) established a new program, TAA for Farmers, administered by the U.S. Department of Agriculture (USDA) to provide technical assistance, a cash payment of up to $10,000 a year, and access to Department of Labor (Labor) training and reemployment services for farmers and fishermen who face significant price declines due to increased imports. The Trade Act provides for up to $90 million each year through fiscal year 2007 for the costs to carry out the program. Trade Act programs are due for reauthorization in 2007. To be eligible for benefits, farmers and fishermen--called producers--must complete a two-part process each year. First, a group of producers of a commodity must submit a petition to USDA on behalf of all producers in one or more states. The petition must demonstrate that the price of the commodity for the most recent marketing year declined by at least 20 percent from the average price for the previous 5 years and that imports contributed importantly to the decline in price. If USDA certifies the petition, any producer of that commodity in the region covered by the petition may then apply for benefits under the program. Individual producers must meet additional conditions to receive cash payments. For example, their net farm or fishing income must be less in the petition year than it was in the previous year. The TAA for Farmers program was first authorized in 2002, and no comprehensive review has been completed to guide reauthorizing the program. To help prepare for reauthorization, you asked us to assess the status of implementation of the TAA for Farmers program. Specifically, we examined: (1) how the USDA promotes the TAA for Farmers program and the extent to which the agency has received and certified petitions from producers, (2) the extent to which participants have received benefits, including technical assistance and cash payments, and (3) what is known about the results of the program.
In summary, we found that, while USDA uses various means to promote TAA for Farmers, the numbers of both petition submissions and certifications are lower in fiscal year 2006 than they were in 2005. USDA officials attribute the decline to the difficulty farmers and fishermen have in meeting the eligibility criteria. Out of 101 petitions submitted for the program to date, USDA reviewed the 64 that were complete, appropriate and timely. Of these, 30 petitions were certified and 34 were denied. Producers of Concord grapes, lychees, olives, wild blueberries, fresh potatoes, Florida avocados, snapdragons, shrimp, salmon, and catfish were among those that were certified under the program. The number of petitions submitted by producers declined by nearly half from fiscal year 2004 to 2006, while the number of petitions USDA denied more than doubled between 2005 and 2006. Most of the petitions that were denied were up for recertification and no longer met key program eligibility criteria. Officials attribute this to two factors--the requirement to demonstrate a 20-percent price decline and the requirement to show a further increase in imports for petitions up for recertification. For example, in 2006, 14 of the 15 petitions that were denied were up for recertification and were not recertified because imports did not increase over the previous year's level. TAA for Farmers is a new program and we have only an early view of how this program is working. While the cash benefits and technical assistance appear to assist farmers and fishermen in adjusting to the effects of import competition on a limited, short-term basis, the cash payments are relatively low and must be approved each year. Furthermore, the criteria for program eligibility are difficult for many farmers and fishermen to meet and the low cash payments may discourage others from applying. As a result, USDA spending for this program is well below the amount provided for by the Trade Act.
GAO-07-201, Trade Adjustment Assistance: New Program for Farmers Provides Some Assistance, but Has Had Limited Participation and Low Program Expenditures
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Report to the Committee on Finance, U.S. Senate:
United States Government Accountability Office:
GAO:
December 2006:
Trade Adjustment Assistance:
New Program for Farmers Provides Some Assistance, but Has Had Limited
Participation and Low Program Expenditures:
GAO-07-201:
Contents:
Letter:
Appendix I: Briefing slides:
Appendix II: Cash Payment Formula:
Appendix III: GAO Contacts and Staff Acknowledgments:
Related GAO Products:
Tables:
Table 1: Adjustment Assistance Payment Formula:
Table 2: Examples of USDA Cash Payments:
Figure:
Figure 1: Salmon and Shrimp Producers Received 92 Percent of Payment
Funds, Fiscal Years 2004 and 2005:
Abbreviations:
CSREES: Cooperative State Research, Education, and Extension Service:
ERS: Economic Research Service:
FAS: Foreign Agricultural Service:
FSA: Farm Service Agency:
PRC: Petition Review Committee:
TAA: Trade Adjustment Assistance:
USDA: United States Department of Agriculture:
United States Government Accountability Office:
Washington, DC 20548:
December 18, 2006:
The Honorable Charles E. Grassley:
Chairman:
The Honorable Max Baucus:
Ranking Minority Member:
Committee on Finance:
United States Senate:
While tens of thousands of manufacturing workers have received services
through the Trade Adjustment Assistance (TAA) program, until 2002,
farmers and fishermen impacted by imports did not have access to
similar assistance. The Trade Act of 2002 (Trade Act) established a new
program, TAA for Farmers, administered by the U.S. Department of
Agriculture (USDA) to provide technical assistance, a cash payment of
up to $10,000 a year, and access to Department of Labor (Labor)
training and reemployment services for farmers and fishermen who face
significant price declines due to increased imports. The Trade Act
provides for up to $90 million each year through fiscal year 2007 for
the costs to carry out the program. Trade Act programs are due for
reauthorization in 2007.
To be eligible for benefits, farmers and fishermen--called producers--
must complete a two-part process each year.[Footnote 1] First, a group
of producers of a commodity must submit a petition to USDA on behalf of
all producers in one or more states. The petition must demonstrate that
the price of the commodity for the most recent marketing year declined
by at least 20 percent from the average price for the previous 5 years
and that imports contributed importantly to the decline in price. If
USDA certifies the petition, any producer of that commodity in the
region covered by the petition may then apply for benefits under the
program. Individual producers must meet additional conditions to
receive cash payments. For example, their net farm or fishing income
must be less in the petition year than it was in the previous
year.[Footnote 2]
The TAA for Farmers program was first authorized in 2002, and no
comprehensive review has been completed to guide reauthorizing the
program. To help prepare for reauthorization, you asked us to assess
the status of implementation of the TAA for Farmers program.
Specifically, we examined: (1) how the USDA promotes the TAA for
Farmers program and the extent to which the agency has received and
certified petitions from producers, (2) the extent to which
participants have received benefits, including technical assistance and
cash payments, and (3) what is known about the results of the program.
To respond to these issues, we interviewed USDA program officials
involved with implementing TAA for Farmers, analyzed USDA program data
on petitions, payments, and technical assistance from fiscal years 2004-
2006, and reviewed the results from a 2006 survey of TAA for Farmers
participants conducted by Washington State University Extension for
USDA's risk management education centers.[Footnote 3] We conducted our
work from August 2006 to October 2006 in accordance with generally
accepted government auditing standards.
On October 24, 2006, we briefed your staffs on the results of our work.
This report formally conveys the information provided during that
briefing. Appendix I contains the briefing slides.
In summary, we found that, while USDA uses various means to promote TAA
for Farmers, the numbers of both petition submissions and
certifications are lower in fiscal year 2006 than they were in 2005.
USDA officials attribute the decline to the difficulty farmers and
fishermen have in meeting the eligibility criteria. Out of 101
petitions submitted for the program to date, USDA reviewed the 64 that
were complete, appropriate and timely. Of these, 30 petitions were
certified and 34 were denied. Producers of Concord grapes, lychees,
olives, wild blueberries, fresh potatoes, Florida avocados,
snapdragons, shrimp, salmon, and catfish were among those that were
certified under the program. The number of petitions submitted by
producers declined by nearly half from fiscal year 2004 to 2006, while
the number of petitions USDA denied more than doubled between 2005 and
2006. Most of the petitions that were denied were up for
recertification and no longer met key program eligibility criteria.
Officials attribute this to two factors--the requirement to demonstrate
a 20-percent price decline and the requirement to show a further
increase in imports for petitions up for recertification. For example,
in 2006, 14 of the 15 petitions that were denied were up for
recertification and were not recertified because imports did not
increase over the previous year's level.
While USDA provides technical assistance to producers, the amount of
cash payments made to producers has been relatively small and,
according to program officials, some program eligibility criteria may
limit their participation. To date, about 13,000 producers have
received technical assistance; USDA has provided about 8,000 cash
payments; and few producers--estimated at 3 percent or less--have taken
advantage of Labor's training and reemployment services. [Footnote 4],
[Footnote 5] USDA's Cooperative State Research, Education, and
Extension Service (CSREES) provides technical assistance through
various means-in person, online, and through training materials-to
producers nationwide, and has implemented a basic and an intensive
technical assistance curriculum. The basic curriculum, which is
mandatory for all certified producers who wish to receive a cash
payment, provides a brief overview of world trade, business
improvements producers can make, and other resources. The intensive
curriculum, which was implemented in 2006, is optional, and provides
individual one-on-one counseling to help producers develop and
implement changes to their business. Of those who applied to receive
cash payments, two-thirds received it. The median cash payment was
relatively low: $1,605 in fiscal year 2004 and $2,520 in 2005, but
fewer payments were made in 2005 compared to 2004. About 1,000
payments, out of a total of about 8,000 payments, were at the maximum
of $10,000. Salmon and shrimp producers received more than 90 percent
of all payments in fiscal year 2004 and 2005 (see fig. 1).
Figure 1: Salmon and Shrimp Producers Received 92 Percent of Payment
Funds, Fiscal Years 2004 and 2005:
[See PDF for image]
Source: GAO analysis of USDA data.
Note: Payments for fiscal years 2004 and 2005 totaled $28,056,454.
[End of figure]
Agency officials identified certain criteria in the legislation as
factors that may affect individual participation. In particular, the
net farm income test--that requires producers to show that income was
less in the petition year than the previous year--may disqualify some
producers who seek cash payments. In addition, the payment formula,
which resulted in most producers receiving less than $3,000, may also
discourage producers from participating.[Footnote 6] Low producer
participation and low payments have resulted in USDA spending falling
far below the $90 million provided for by the Trade Act--program
spending totaled about $16 million in fiscal year 2004 and $21 million
in 2005. Given the low expenditures, USDA only requests about one-third
of the $90 million in its annual budget request.
Producers were generally satisfied with the technical assistance and
thought applying for the cash payment was worthwhile, according to a
USDA survey of producers who applied for benefits in fiscal years 2004
and 2005. Overall, at least half of the respondents found that the
basic technical assistance training was worthwhile, and about a quarter
of the respondents reported making changes to their business as a
result of the assistance. Generally, respondents were satisfied with
the quality of technical information they received on issues such as
how to improve the marketing of their commodity. However, a substantial
number of respondents reported that the basic curriculum provided
inadequate information on some topics, such as how to evaluate other
commodities as substitutions for their own. According to USDA
officials, it was the need to provide additional assistance tailored to
a specific business that resulted in the development of the intensive
technical assistance curriculum. Regarding the cash payment, about 80-
percent of respondents said the payment was worth the effort of
applying, though slightly more than half of the producers said they
experienced some difficulty in applying for and receiving a cash
payment. However, the survey provides no insight into why some
producers did not apply for benefits at all.
In conclusion, TAA for Farmers is a new program and we have only an
early view of how this program is working. While the cash benefits and
technical assistance appear to assist farmers and fishermen in
adjusting to the effects of import competition on a limited, short-term
basis, the cash payments are relatively low and must be approved each
year. Furthermore, the criteria for program eligibility are difficult
for many farmers and fishermen to meet and the low cash payments may
discourage others from applying. As a result, USDA spending for this
program is well below the amount provided for by the Trade Act.
We provided a draft of this report to officials at USDA for their
technical review and incorporated their comments where appropriate.
As arranged with your offices, unless you publicly announce the
contents of this report earlier, we plan no further distribution of the
report until 30 days from its issue date. At that time, we will send
copies of this report to the Secretary of Agriculture, relevant
congressional committees, and other interested parties and will make
copies available to others upon request. The report will also be
available at no charge on GAO's Web site at [Hyperlink,
http://www.gao.gov].
If you or your staff have any questions about this report, please
contact me at (202) 512-7215. You may also reach me by e-mail at
nilsens@gao.gov. Key contributors may be found in appendix III.
Signed by:
Sigurd R. Nilsen:
Director, Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Briefing slides:
Trade Adjustment Assistance for Farmers:
Briefing for Staff of Senator Charles E. Grassley, Chairman Senate
Committee on Finance and Senator Max Baucus, Ranking Member Senate
Committee on Finance:
October 24, 2006:
Introduction:
Until the Trade Act of 2002, farmers and fishermen impacted by
increased imports typically could not benefit from trade adjustment
assistance (TAA) under the Department of Labor's (Labor) TAA program
for various reasons, including:
* Farmers are generally self-employed and rarely qualify for
unemployment benefits, and thus TAA benefits.
* Agricultural producers are less likely than other workers to want to
be retrained for a new occupation, which was the emphasis of Labor's
TAA program.
TAA for Farmers, established in the Trade Act of 2002, provides
limited, short-term trade adjustment assistance specifically to farmers
and fishermen through fiscal year 2007.
No comprehensive review of the program is currently available to guide
reauthorization.
Research Objectives:
How does the Department of Agriculture (USDA) promote the TAA for
Farmers program and to what extent has the agency received and
certified petitions from producers?
To what extent have participants received benefits, including technical
assistance and cash payments?
What is known about the results of the program?
Scope and Methodology:
To address our research objectives, we:
interviewed USDA program officials and Office of Inspector General
staff;
analyzed USDA program data on petitions, payments, and technical
assistance from fiscal years 2004-2006;
reviewed results from a 2006 survey of TAA for Farmers participants
conducted by Washington State University for USDA's risk management
education centers, which develop technical assistance for the program;
and:
conducted our review from August 2006 to October 2006 in accordance
with generally accepted government auditing standards:
Background:
TAA for Farmers Legislation:
The TAA Reform Act of 2002 established a new program of trade
adjustment assistance for farmers, providing technical assistance, cash
benefits, and access to training and reemployment services offered
through the Department of Labor.
To be eligible, producers (farmers and fishermen) must demonstrate
significant price declines (of at least 20 percent) as a result of
increased imports.
The statute authorizes an appropriation of not more than $90 million
for each fiscal year, from 2003 through 2007, to carry out the program.
Producers Petition for a Commodity to Be Eligible for the Program:
In order to receive benefits, a group of producers (three or more) or
their authorized representatives must submit a petition to USDA.
There may be many producers represented under one petition. Petitioners
may file on behalf of all producers in an impacted area of one or more
states in the United States.
The petition must include data showing how the price of the commodity
has declined, justification for why the producers should be eligible
for assistance, and other information.
Petitions may be considered for recertification in subsequent years.
Conditions for Certification:
USDA certifies, or approves, petitions that meet the following
criteria:
Average price of the commodity in the marketing year[Footnote 7] under
review must be at least 20 percent less than the average price over the
past 5 marketing years for which data are available:
Imports of directly competing products must have increased during the
petition period:
Increase in imports must have "contributed importantly" to the price
decrease:
Petition must be submitted to USDA between August 15 and January 31 of
the following year:
USDA Agency Roles:
USDA Agency: Foreign Agriculture Service (FAS);
Responsibilities for TAA for Farmers:
* Lead agency for administering the program;
* Receives and reviews petitions;
* Determines producers' eligibility to apply for TAA benefits.
USDA Agency: Economic Research Service (ERS);
Responsibilities for TAA for Farmers: Conducts market study of each
petition.
USDA Agency: Petition Review Committee (PRC);
Responsibilities for TAA for Farmers: Intra-agency committee that
reviews ERS study and petition and makes recommendation to FAS
administrator.
USDA Agency: farm Service Agency (FSA);
Responsibilities for TAA for Farmers:
* Assists petitioners in completing applications for cash payments;
* Provides outreach service to petitioners and producers;
* Accepts applications and determines producers' cash payment
eligibility;
* Makes payments to all eligible producers.
USDA Agency: Cooperative State Research, Education, and Extension
Service (CSREES);
Responsibilities for TAA for Farmers: Provides technical assistance to
producers.
[End of table]
USDA Petition Process:
[See PDF for Image]
Source: GAO analysis of USDA information.
[End of Figure]
Producers of Certified Commodities Must Apply to Receive Benefits:
After USDA certifies a petition, any producer of that commodity wishing
to receive benefits must apply to receive the following benefits:
* technical assistance training to improve competitiveness and
marketability of the adversely affected commodity and to assess
feasibility of substituting a new commodity and:
* annual cash payment for those who meet criteria each year:
Producers who are eligible for cash payments may also be eligible for
career training and reemployment services through Labor:
Producers Must Meet Additional Conditions to Receive Cash Payments:
Eligible producers include qualified fishermen or owners, operators,
landlords, tenants, or sharecroppers who share in the risk of producing
a commodity and are entitled to share in the crop available for
marketing from the farm:
Producers must provide documentation that:
* Net farm or net fishing g income was less than what it was in the
previous year[Footnote 8]
* Average gross revenue was less than $2.5 million for the last 3
years:
* They received the technical assistance program provided by USDA's
Cooperative State Research, Education, and Extension Service (CSREES):
Producers' Cash Benefits Are Capped:
Each producer can receive no more than $10,000 in TAA payments per
federal fiscal year.
Each producer must receive less than $65,000 a year in both TAA
payments and countercyclical payments, which are another form of
federal farm income support for certain commodities.
Payments are based on a standard formula, which is designed to replace
a portion of the lost income from a price decline.
Payment Application Process:
[See PDF for image]
Source: GAO analysis of USDA information.
[End of figure]
Objective 1: Petitions:
USDA Promotes Program through Federal Register, Local Media and Other
Means:
The Foreign Agricultural Service announces the petition process through
a Federal Register notice, prepares press releases for distribution in
local media and trade publications, and has e-mailed state secretaries
of agriculture to inform them about the program's benefits and
requirements.
The Farm Service Agency (FSA) announces certified petitions and
publicizes the application process through notification letters sent to
all known producers identified by the petitioner and FSA county
offices, holds town hall meetings to discuss the program, and publishes
information in multiple languages.
USDA Has Certified and Denied About the Same Number of Petitions to
Date:
Out of 101 petitions submitted to date, 64 petitions from fiscal years
2004-2006 were considered complete, appropriate, and timely, and were
accepted for review:
30 petitions were certified:
* Half covered shrimp producers in multiple states.
* Others generally covered niche commodities with small markets that do
not receive benefits from other USDA programs, e.g., Concord grapes,
lychees, and snapdragons.
34 petitions were denied:
* Half were up for recertification for a subsequent year. For example,
in fiscal year 2006 all 8 shrimp petitions up for recertification were
denied because they could not demonstrate a further increase in
imports.
* The remainder generally did not meet certain other program criteria.
Certified Petitions, Fiscal Years 2004-2006:
2004:
catfish(multistate);
Lychees(Florida);
Salmon(Alaska);
Salmon(Washington);
Shrimp(Alabama);
Shrimp(Arizona);
Shrimp(Florida)[A];
Shrimp(Georgia);
Shrimp(North Carolina);
Shrimp(South Carolina);
Shrimp(Texas);
Wild Blueberries(Maine).
2005:
Concord grapes(PA, NY, OH);
Fresh potatoes(Idaho);
Lychees(Florida);
Olives(California);
Salmon(Alaska);
Salmon(Washington);
Shrimp(Alabama);
Shrimp(Arizona);
Shrimp(Georgia);
Shrimp(Louisiana);
Shrimp(Mississippi);
Shrimp(North Carolina);
Shrimp(South Carolina);
Shrimp(Texas).
2006:
Avocados(Florida);
Concord grapes(Michigan);
Concord Grapes(Washington);
Snapdragons(Indiana).
[A] While the first petition submitted on behalf of Florida shrimp
producers was denied, USDA certified a revised petition submitted in
the same fiscal year.
[End of table]
Denied Petitions, Fiscal Years 2004-2006:
2004:
Alfalfa seed (regional);
Catfish (Michigan);
Crawfish (Louisiana);
Garlic (California);
Longans (Florida)
Navel oranges (California);
Olives (California);
Prawns (Kentucky);
Rice (national);
Salmon (Oregon);
Shrimp (Florida);
Shrimp (Mississippi);
York apples (Virginia).
2005:
Avocados (Florida);
Cabbages (New York);
Catfish (multistate);
Seed potatoes (Washington);
Shrimp (Florida);
Wild blueberries (Maine).
2006:
Concord grapes (PA, OH, NY);
Fresh potatoes (Idaho);
Lychees (Florida);
Olives (California);
Potatoes (Washington);
Salmon (Alaska);
Salmon (Washington);
Shrimp (Alabama);
Shrimp (Arizona);
Shrimp (Georgia);
Shrimp (Louisiana);
Shrimp (Mississippi);
Shrimp (North Carolina);
Shrimp (South Carolina);
Shrimp (Texas).
Petition Submissions Have Declined:
[See PDF for Image]
Source: GAO analysis of USDA data.
Note: The number of certified and denied petitions do not sum to the
total number of petitions submitted. Some submitted petitions are
returned without further review if FAS determines that they are not
complete, timely, or appropriate.
[End of Figure]
Many Petitions Were for Recertifications and None Were Approved in
Fiscal Year 2006:
[See PDF for Image]
Source: GAO analysis of USDA data.
[End of Figure]
Program Criteria Have Limited Producer Certification, According to USDA
Officials:
Petition denials have increased over time because commodities often
fail to meet the 20 percent price decline requirement, officials say.
Recertification is difficult in part because a petition must show that
the volume of imports has further increased and that the increase is
contributing importantly to the decline in price.
Objective 2: Benefits-Technical Assistance:
Producers Received Technical Assistance Through Various Means:
Over 13,000 producers have received technical assistance.
USDA provides technical assistance in person, online or through
training materials. For example:
* About 230 workshops were provided to Alaska salmon producers in one
year.
* Catfish producers nationwide had access to online training workshops
and referrals to other resources.
USDA's Cooperative State Research, Education, and Extension Service
(CSREES) has implemented a basic (Phase One) and recently introduced an
intensive (Phase Two) technical assistance curriculum.
Phase One: Basic Technical Assistance Curriculum:
Mandatory workshop for all certified producers who wish to apply for
cash benefits, divided into four areas:
* Overview-informs producers of program and other assistance available:
* Where am I?-includes discussions on world trade situation and
outlook, evaluating financial viability of the business, etc.
* Where do I want to be?-includes discussions on production
efficiencies, marketing opportunities, and alternative enterprises:
* How do I get there?-includes brief discussion on resources available
at Phase Two training:
Phase Two: Intensive Technical Assistance Curriculum:
Optional program available to producers since January 2006 that
provides individual counseling to improve competitiveness and
profitability, specifically addressing:
* commodity assessment-provides advice on producing a higher quality
product, reducing production costs, etc;
* assistance analyzing business and options-provides resources for
producers to develop a financial analysis of current business, new
marketing plan, etc; and:
* written technical assistance plan-includes financial projection of
selected alternatives, business and marketing plan, and an
implementation plan.
Two-Thirds of Applicants Received Cash Payments in Fiscal Years 2004
and 2005:
Producers submitted nearly 12,000 applications for cash payments for
fiscal years 2004 and 2005.
USDA provided over 8,000 cash payments to producers.
The median payment for 2004 was $1,605; for 2005, the median payment
was $2,520.
About 1,000 payments of the maximum of $10,000 were made, primarily to
shrimp and salmon producers.
About Half of Cash Payment Denials Were Attributed to the Net Income
Test in FY 2005:
USDA denied over 2,000 applications in fiscal year 2005[Footnote 9]
* Over 1,000 of the applications were denied because producers could
not document a decline in net income.
* Other key reasons applications were denied:
- Producers failed to participate in required technical assistance
training, and:
- Producers could not document that their average gross revenue was
less than $2.5 million over the last 3 years.
More Than Half of the Payments in Fiscal Years 2004 and 2005 Were
$3,000 or Less:
Payment distribution for TAA for Farmers program:
[See PDF for Image]
Source: GAO analysis of USDA data.
[End of Figure]
Salmon and Shrimp Producers Received Most Payments, in Fiscal Years
2004 and 2005:
Distribution of payments by commodity:
[See PDF for Image]
Source: GAO analysis of USDA data.
[End of Figure]
Salmon and Shrimp Producers Received 92 Percent of Payment Funds, FY
2004 and 2005:
Distribution of monies per commodity Payments for fiscal years 2004 and
2005 totaled $28,056,454:
[See PDF for image]
Source: GAO analysis of USDA data.
Others includes: Olives, Lychees, Catfish, Concord grapes, Potatoes,
and Blueberries:
[End of figure]
Lychee and Shrimp Producers Received Highest Average Payments, FY 2004
and 2005:
Average payment per commodity:
[See PDF for image]
Source: GAO analysis of USDA data.
[End of figure]
USDA Officials Identified Factors that May Affect Individual
Participation:
Net farm income test limits cash payment eligibility:
* To qualify for payment, unlike other USDA programs, producers must
show that net farm income was less in the petition year than the
previous year.
* Officials say this criterion has disqualified producers who may have
had negative net income 2 years in a row, but whose negative income in
the second year was less than in the first.
USDA officials told us that low payment rates may discourage some
producers from participating:
* Payment formula may result in low payments compared to producers'
lost income from price declines (see app II).
* For example, a grape producer who lost $74 per ton in the petition
year would receive a benefit of $9.80 per ton.
Low Participation and Payments Have Led to Low USDA Expenditures:
USDA expenditures on technical assistance and cash payments each fiscal
year are far below the $90 million annual appropriation for the TAA for
Farmers program. Unexpended appropriations are returned to the
Treasury.
* 2004 cash payments: $13.6 million:
* 2004 technical assistance: $1.1 million:
* 2005 cash payments: $14.4 million:
* 2005 technical assistance: $1.3 million:
Few Producers Have Participated in Labor Training and Reemployment
Services:
Producers approved by USDA for a cash payment under TAA for Farmers are
eligible for Department of Labor training and reemployment services.
However, producers are not eligible for other Labor benefits, such as
relocation allowances, the Health Coverage Tax Credit, or Alternative
Trade Adjustment Assistance, unless they qualify under Labor's TAA
criteria.
According to a 2006 survey, 3 percent or less of respondents in the
majority of surveyed groups reported receiving training from Labor;
although salmon and shrimp fishermen generally reported higher
participation.
Objective 3: Assessments:
One Survey of the Program Has Been Conducted to Date:
USDA's Western Center for Risk Management Education conducted a 2006
survey through the Washington State University Extension to obtain the
views of producers receiving benefits on an array of issues, including
technical assistance, cash assistance, and Labor training:
The survey included all producers who applied for benefits in fiscal
years 2004 and 2005 and placed these producers in 16 groups:
* shrimp producers in 8 states;
* salmon producers in 2 states;
* other 6 groups include producers of blueberries, catfish, Concord
grapes, lychees, olives, and potatoes:
Survey Limitations:
The number of respondents for some of the groups was small, ranging
from 902 for one group to as few as 16 for another group:
* The number of lychee producers was very small, so we excluded this
group from our analysis of the survey:
* Of the 15 remaining groups, a total of 6,413 producers were surveyed
(excluding lychee producers):
* A total of 2,960 producers (excluding lychee producers) completed the
survey:
Response rates also were relatively low for some groups, ranging from
as high as 82 percent for one group to as low as 48 percent for
another:
Despite these limitations, however, we feel that the data are of
sufficient quality that we can provide general information on the
survey results:
Respondents Generally Satisfied with Quality of Technical Information
Provided:
Generally, 60 to 85 percent of respondents in a majority of the groups
reported the technical information they received was at least somewhat
adequate for most topics, such as:
* how to improve the marketing of the producer's commodity and:
* how to increase the value of the producer's crop.
However, 20 to 40 percent of respondents in most groups found the
technical information not adequate on some topics, such as:
* how to evaluate other commodities that might be substitutions for
their current commodity and:
* how to identify a creative or innovative strategy for improving the
producer's business.
Most Found Technical Assistance Worthwhile, But Fewer Made Business
Changes:
Of the 15 groups of producers we used in our analysis:
At least half of the respondents in most groups found the technical
assistance mostly or very worthwhile, although 10 to 20 percent of
respondents in most groups found it not worthwhile.
Around a quarter of the respondents in all groups reported making
changes to their business as a result of TAA technical assistance
training, while roughly three-quarters reported they made no changes.
For almost all groups, a quarter to half of the respondents were
interested in more intensive business management assistance.
Most Respondents Said Cash Payment Worth Effort to Apply, Despite Some
Difficulties:
In most groups, slightly more producers experienced some level of
difficulty in applying for and receiving the cash payment than those
who had no difficulty.
Yet at least 80 percent of respondents in most groups who pursued the
payment said the benefit was worth the effort they put forth to apply.
However, since only producers who applied for benefits were included in
the survey, findings do not provide insight into reasons other
producers did not apply.
Concluding Observations:
TAA for Farmers is a new program just entering its third year, and we
have only an early view of how this program is working.
Current program structure appears to assist producers in adjusting to
the effects of import competition on a limited, short-term basis.
However, aspects of the program may limit participation.
To date, the number of petitions certified and median cash payments
remain low. As a result, USDA expenditures are well below the limits
established in the legislation.
[End of section]
Appendix II: Cash Payment Formula:
A cash payment is one of three benefits producers may receive through
the TAA for Farmers program. Each eligible producer may receive a cash
payment of up to $10,000 each federal fiscal year.
The amount of money a producer receives is based on how much of the
commodity he or she produced and how steeply the national price fell
from the previous 5 marketing years.[Footnote 7] One program
requirement is that the price declines at least 20 percent as a result
of imports of a like or directly competing commodity.
Specifically, payments are calculated on the basis of the following
formula:
Table 1: Adjustment Assistance Payment Formula:
Total units of the commodity produced: # Units;
Multiplied by (X): X;
Half of the difference between 80 percent of the average national price
of the commodity for the 5 previous years and the national average
price for the most recent year: [(Ave. price for 5 years x 80%) -
current price] divided by 2.
Source: GAO analysis of adjustment assistance payment formula.
[End of table]
Table 2 gives some examples of how cash payments for several
commodities may be calculated and how the payments compare to the price
decline.
Table 2: Examples of USDA Cash Payments:
Commodity: Concord grapes;
Total units produced: 100 tons;
Multiplied by (X): X;
Half of the difference in prices: [($272 x 80%) - $198] divided by 2;
=: =;
Total payment: $980.00; ($9.80 per ton);
Price decline: $74.00 per ton.
Commodity: Lychees;
Total units produced: 10,000 pounds;
Multiplied by (X): X;
Half of the difference in prices: [($2.61 x 80%) --$0.98] divided by 2;
=: =;
Total payment: $5,540.00; ($0.554 per pound);
Price decline: $1.63 per pound.
Commodity: Alaska salmon;
Total units produced: 95,000 pounds;
Multiplied by (X): X;
Half of the difference in prices: [($0.403 x 80% --$0.261)] divided by
2;
=: =;
Total payment: $2,916.50; ($0.0307 per pound);
Price decline: $0.142 per pound.
Commodity: California olives;
Total units produced: 100 tons;
Multiplied by (X): X;
Half of the difference in prices: [($598 x 80% --$432)] divided by 2;
=: =;
Total payment: $2,320.00; ($23.20 per ton);
Price decline: $166.00 per ton.
Source: GAO analysis of USDA payment rates.
[End of table]
[End of section]
Appendix III: GAO Contacts and Staff Acknowledgments:
GAO Contact:
Sigurd R. Nilsen (202) 512-7215, nilsens@gao.gov:
Staff Acknowledgments:
Dianne Blank, Assistant Director:
Kate Blumenreich, Analyst-in-Charge:
Guisseli Reyes-Turnell made significant contributions to the report in
all aspects of the work. In addition, Amy Sweet served as team member;
Wayne Sylvia served as technical advisor; David Dornisch advised on
methodology issues; Rachael Valliere advised on report preparation; and
Jessica Botsford advised on legal issues. Arthur Merriam verified our
findings.
[End of section]
Related GAO Products:
Trade Adjustment Assistance: Labor Should Take Action to Ensure
Performance Data Are Complete, Accurate, and Accessible. GAO-06-496.
Washington, D.C.: April 25, 2006.
Trade Adjustment Assistance: Most Workers in Five Layoffs Received
Services, but Better Outreach Needed on New Benefit. GAO-06-43.
Washington, D.C.: January 31, 2006.
Federal Programs with a Financial Eligibility Component. GAO-06-292R.
Washington, D.C.: December 14, 2005.
Health Coverage Tax Credit: Simplified and More Timely Enrollment
Process Could Increase Participation. GAO-04-1029. Washington, D.C.:
September 30, 2004.
Trade Adjustment Assistance: Reforms Have Accelerated Training
Enrollment, but Implementation Challenges Remain. GAO-04-1012.
Washington, D.C.: September 22, 2004.
FOOTNOTES
[1] Producers include qualified fishermen or owners, operators,
landlords, tenants, or sharecroppers who share in the risk of producing
a commodity and are entitled to share in the crop available for
marketing from the farm.
[2] For recertified petitions, the term "previous year" is the year
before the first petition was approved.
[3] USDA's Cooperative State Research, Education, and Extension Service
(CSREES) operates the risk management education centers.
[4] The estimate of participation in Labor's reemployment services is
based upon the survey of TAA for Farmers participants conducted by
Washington State University Extension for USDA's risk management
education centers. Labor does not routinely track this information.
[5] The survey collected information on all producers who applied for
benefits in fiscal years 2004 and 2005, and analyzed the data using
commodity-based groups. The estimate of 3-percent is based on
respondents in the majority of groups who reported receiving training
from Labor. Some commodity groups, for example, salmon and shrimp
fishermen generally reported higher participation.
[6] See appendix II for more information on the payment formula.
[7] "Marketing year" means the marketing season or year as defined by
the National Agriculture Statistic Service, or a [Footnote] specific
period as proposed by the petitioners and certified by the
Administrator of the Foreign Agricultural Service.
[8] For petition recertification, producers must provide documentation
that their net farm or fishing income was less than in the last year in
which no adjustment assistance was received.
[9] No information is available for cash payment applications denied
during fiscal year 2004.
[10] For petition recertification USDA uses the average of the 5 years
in the original petition. For example, the Alaska salmon 2005 petition
used the 5-year average of years 1997-2001. In addition, the "marketing
year" means the marketing season or year as defined by the National
Agriculture Statistic Service, or a specific period as proposed by the
petitioners and certified by the Administrator of the Foreign
Agricultural Service.
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