WASHINGTON, Feb. 2, 2015 – The chairmen of the House and Senate Agriculture committees blasted the Obama administration’s renewed proposal to slash premium subsidies for crop insurance.

Obama’s “ill-timed proposal on crop insurance would jeopardize the ability of producers to insure their crops in a climate of collapsing crop prices, major crop losses, and falling farm income,” said House Agriculture Chairman Mike Conaway, R-Texas.

The Agriculture Department’s proposed fiscal 2016 budget, released Monday, would save about $1.1 billion in fiscal 2016 and $16 billion over 10 years with the cuts to crop insurance. USDA’s overall budget would grow by $4 billion to $156 billion in fiscal 2016. Most of USDA's spending is in farm subsidies, food stamps, school meals and other entitlement programs in which the costs vary according to economic factors. 

Most of the proposed savings in crop insurance would come through a 10-percentage-point cut to premium subsidies for farmers who select harvest-price coverage in their revenue policies. Last year’s budget proposal included a similar plan to cut harvest-price policies. This year the budget also would cut prevented-planting coverage, in part by tightening payment rates.

“I have heard repeatedly from farmers in Kansas and across the country that crop insurance is the key tool in managing risks associated with drought, flood, freeze, hail, and other weather events,” said Senate Agriculture Chairman Pat Roberts, R-Kansas.

“The president’s budget again turns a deaf ear to our nation’s farmers and ranchers by directly cutting the very tool that helps growers produce a safe and affordable food supply year after year.”

The plan also would eliminate prevented-planting optional coverage and require the use of a 60-percent “transitional yield” in calculation of the farmer’s actual production history (APH) for years in which the grower receives a prevented-planting payment.

Roberts also dismissed the president’s proposal to create a single food-safety agency at the Department of Health and Human Services, eliminating USDA’s meat-inspection authority.

“Unfortunately, this administration’s track record of increasing regulations and growing the federal bureaucracy remains consistent in this budget request,” Roberts said. “In this tough economy, the last thing producers and consumers need is more red tape.”

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The budget omitted earlier attempts to cut earnings of crop insurance companies and agents. The fiscal 2015 proposal, for example, proposed to reduce the rate of return for insurance companies as well as the reimbursable rate for administrative and operating expenses. 

A long-time critic of the insurance system, the Environmental Working Group, praised the latest proposals.

“The administration’s proposed reforms to these two subsidy programs are much needed fixes that will save taxpayers billions of dollars and shield land and water from further abuse,” said Craig Cox, EWG’s senior vice president for agriculture and natural resources.

Agriculture Secretary Tom Vilsack cast the proposals as a way to deal with the automatic spending cuts, known as "sequestration," that the president is proposing to end. The reductions in crop insurance would help offset the higher cost estimates for commodity programs due to falling crop prices, he said.

"If you want to stay within that (sequestration) box you have some difficult choices to make that a lot of members aren’t interested in making,” Vilsack said.

While many Republicans would like to increase defense spending, they have resisted ending the sequestration cuts agreed to in a 2011 budget deal.

Conaway also criticized the president for including a proposal to eliminate the stepped-up basis for inherited property. Heirs would be required to pay capital gains taxes on the increase in value of an inherited asset from when it was purchased, not when the owner died.

“Under the president's proposed tax increases, including the elimination of stepped-up basis, the next generation of young producers would find it harder to take over the family farm or ranch,” Conaway said.


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