October 4, 2001

Honorable Ann M. Veneman
Secretary
U.S. Department of Agriculture
14th Street & Independence Avenue, S.W.
Washington, D.C. 20250

Dear Secretary Veneman:

At our Annual Meeting in Burlington, Vermont last week we had a considerable amount of discussion regarding the state block grants for specialty crops that were recently enacted as part of the farm economic assistance package. Our members are keenly aware of the importance of ensuring that the block grant process works effectively and efficiently. We strongly believe it could serve as the model for distributing future farm assistance to a broader constituency of agricultural producers.

Following our discussion, I was directed to write to you on behalf of the commissioners, secretaries, and directors to seek further guidance. While the guidance letter you sent to the governors was helpful, there are still some areas of ambiguity.

All of the departments of agriculture have heard from specialty crop producers in our respective states about possible uses of the grant funds. Most of the states have established some type of planning or public input process to determine how best to use and distribute the grant monies. However, we want to make sure that our activities and plans are consistent with the intent and goals described by Congress and the guidance provided by USDA. We would appreciate having further guidance and clarification on several issues. Our specific questions, or areas where more detail is sought, are attached with this letter. We look forward to your response at your soonest opportunity.

In the coming months, we intend to compile and provide the Administration and Congress with a detailed report on the states' activities. We believe the benefits of using grants to state departments of agriculture as a method to provide assistance to producers will be seen in better program management and in targeting resources where they are most needed. We stand ready to work with USDA to ensure that this assistance is used to make a meaningful improvement in the economic circumstances of specialty crop producers.

Sincerely,

<signed>

Billy Ray Smith, President
Commissioner, Kentucky Department of Agriculture

c: The Commissioners, Secretaries, and Directors of State Departments of Agriculture

National Association of State Departments of Agriculture

Questions Regarding the Specialty Crop State Grants

1. We understand that each state will have a period of one year from receipt in which to "complete its own distribution of the funds," although an extension of that deadline may be granted by USDA. In some states, the funds did not go to the state departments of agriculture. In other states, the state legislature (or other entity such as a budget control board) may have to authorize, approve or transfer funds to the state departments of agriculture. With most legislatures not in session until next January, this could impact the timetable for distribution of funds.

A. If funds have been "obligated" but not yet disbursed or expended, is the requirement to complete distribution of the funds satisfied?

B. What are the circumstances and procedures under which deadline extensions will be granted?

2. Additional guidance would be helpful regarding the management of grant funds and audits.

A. Will states be required to conduct audits of multi-year projects or third party subcontractors?

B. Does USDA have more specific guidelines regarding the use of grant funds for administrative costs?

C. What are the options and rules for earned interest on the grant monies?

3. Can any of the grant money be used for capital expenses related to educational purposes that promote agriculture?

4. Can any of the grant money be used to promote grains or oilseeds with special end-use properties (such as industrial, non-food, non-feed uses)?

5. Is aquaculture considered or defined as a "specialty crop?"