Obama budget cuts USDA spending, including crop insurance funds

By Derrick Cain

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, March 5, 2014 - President Obama released a $3.9 trillion fiscal year 2015 budget to fund government departments, including USDA and EPA - and included a familiar theme: proposals to trim crop insurance. The plan would provide $23.7 billion in discretionary spending for USDA for a decrease of about $938 million from the 2014 enacted level. A summary of the USDA portion of the proposal can be viewed here.

“The president's 2015 USDA budget proposal achieves reform and results for the American taxpayer; fosters opportunity for the men and women living, working and raising families in rural America; and supports innovation through strategic, future-focused investments,” Agriculture Secretary Tom Vilsack said.

On crop insurance, Obama wants to trim the program by about $14 billion over 10 years - just a short time after the newly-passed Farm Bill increased investments in crop insurance by $5.7 billion. The bill also contains language restricting USDA's ability to make future budget cuts in crop insurance.

The administration said the crop insurance program continues to be highly-subsidized and costs the government on average $9 billion a year to run, including $3 billion for the private insurance companies to administer and underwrite the program and $6 billion per year in premium subsidies to the farmers. “These proposals will modify the structure of the crop insurance program so that it is less costly to the taxpayer yet still provides a quality safety net for farmers,” according to the budget.

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During a teleconference, Vilsack said the government has a partnership with producers and insurance companies, but insurance companies have “done very well.” Vilsack said their average rate of return is 14 percent. “This is a healthy debate to have,” he said.

Craig Cox, senior vice president for agriculture and natural resources at the Environmental Working Group, said the budget included “common sense” proposals that would cut the rate of return enjoyed by companies that sell crop insurance to 12 percent, cap payments to insurance companies to administer the program at $900 million a year, and reduce premium subsidies on the most heavily subsidized insurance policies by 3 percent, with an additional 4 percent cut on policies that “dramatically overcompensated” growers during the 2012 drought.

“Crop insurance has strayed far from its original purpose - putting a floor under growers who suffer potentially crippling losses during a disaster,” Cox said.

David Graves, president of the American Association of Crop Insurers, said the proposal was a “standard retread” from the administration, which Congress didn't pay much attention to the first time. “Companies are barely making any returns,” Graves said. “The topic of guaranteed rate of return is as bogus as a $3 bill.”

Graves said crop insurance companies are livid that the administration “keeps pounding the table on rate of return.” He said a majority of lawmakers will not be willing to take up the proposal. “It's old hat,” Graves said. “We've heard it for five years in a row.”

The budget also proposes to close or consolidate 250 Farm Service Agency offices as part of a “model service center” concept that aims to reduce redundancies, streamline processes, and modernize FSA technology.

Vilsack told reporters that 31 FSA offices have no full-time employees and these are “not fully functional offices.” “I think we can do this in a way that provides better services,” he said, noting locations to be closed have not been determined.

Overall, the budget would provide $23.7 billion in discretionary funding for USDA with the aim of investing in rural communities, providing nutritional assistance for impoverished areas, making renewable energy improvements to cut carbon pollution, and providing for climate resilience, among other goals. Obama's budget also:

•           Supports direct and guaranteed loans to assist 40,000 producers, 85 percent of which will be beginning farmers and ranchers and socially disadvantaged producers.

•           Provides $58 million for a new economic development grant program designed to target small and emerging private businesses and cooperatives in rural areas.

•           Funds plant and animal pest and disease control programs to protect $165 billion of livestock, poultry and specialty crops.

•           Provides assistance in supporting over $140 billion in agricultural trade, including nearly $4 billion in trade preserved through resolution of foreign market access issues.

•           Provides $5 billion in loans to rural electric cooperatives and utilities that will support the transition to clean-energy generation and increased energy efficiency.

•           Provides $325 million for the Agriculture and Food Research Initiative competitive research program.

•           Provides $75 million to support three multidisciplinary institutes, with one dedicated to advanced biobased manufacturing, another to focus on anti-microbial resistance research, and the third on crop science and pollinator health.

•           Provides an increase of $12 million to reduce waste, fraud and abuse in the Supplemental Nutrition Assistance Program.

•           Provides $50 million across multiple agencies within USDA to enhance research through public-private grants, strengthen pollinator habitat in core areas, double the number of acres in the Conservation Reserve Program that are dedicated to pollinator health, and increase funding for surveys to determine the impacts on pollinator losses.

The budget also would provide $7.9 billion for EPA, including funds to, among other things, support the president's Climate Action Plan to reduce carbon pollution from power plants, vehicles and other sources and prepare the nation for what the document called the unavoidable impacts of climate change.

The budget would advance the president's “all-of-the-above” strategy on energy by investing in production of natural gas; promoting cleaner-burning fossil fuel technology such as natural gas with carbon capture; supporting the development of clean energy alternatives; advancing energy efficiency in cars, trucks, homes and buildings; expanding and making permanent the tax credit for some types of renewable energy production; and eliminating $4 billion per year in taxpayer subsidies to oil, gas, and other fuel producers. Notably, it did not extend the biodiesel tax credit.

The budget also requests that Congress enact bipartisan comprehensive immigration reform based on the Senate-passed bill, which aims to provide a pathway to legal status for undocumented farm workers, as well as create a legal workforce for farms through expanded visa availability for seasonal workers. The administration said the Congressional Budget Office has found the reforms would reduce the deficit by almost $1 trillion and increase the economy by $1.4 trillion over the next 20 years.

The budget received a frosty reception from lawmakers.

Sen. Chuck Grassley, R-Iowa, said Democrats are set to mark the proposal as “Do Not Resuscitate.” Grassley noted Senate leadership has indicated they will not approve a budget this year. “Seems like a cavalier attitude when we're talking about $1 trillion in discretionary funding that will operate government agencies, including those responsible for administering military, transportation and education dollars,” Grassley said.

Sen. John Thune, R-S.D., chairman of the Senate Republican Conference, said the president has given up on addressing the nation's economic woes.

“It's long past time for the president to get serious about working with Congress to pass bipartisan reforms that will actually improve Americans' lives, like repealing the medical device tax, approving the Keystone XL pipeline, and enacting trade promotion authority,” Thune said.

Roger Johnson, president of the National Farmers Union, called the proposal “a forward-looking budget that builds on the agricultural economy's successes while investing in innovative solutions to future challenges.”

Johnson touted a proposed climate resilience fund which would provide farmers and ranchers with much-needed assistance after extreme weather events, which are occurring with increasing frequency. “I hope Congress follows the president's lead and takes action to comprehensively address global climate change in a way that engages and recognizes the valuable contributions the agricultural community can make to reduce our nation's carbon footprint,” Johnson said.

On FSA office closures, Johnson said the USDA workforce has been reduced by 5 percent in recent years. “Given this reality, it will be difficult for farmers, ranchers and rural residents to expect the same level of local services they have enjoyed before,” Johnson said. “Vilsack and his team stretch resources as far as they can, but spending cuts have consequences.”

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