BONITA SPRINGS, Fla., Feb. 5, 2014 – President Barack Obama’s 2016 budget proposal includes cuts to crop insurance, but for the first time in several years the focus is on cutting farmer premiums rather than directly targeting cuts at crop insurance companies. On average, about 62 percent of the premium paid by farmers is subsidized by the federal government.
“If crop insurance is going to be cut – and we hope it won’t – the burden will likely fall on farmers, rather than on the companies,” noted Mary Kay Thatcher, senior director of congressional relations for the American Farm Bureau Federation. She said areas of particular scrutiny could be the harvest price option and means testing.
Over the past three years, Obama’s annual budget plan proposed cuts in the rate of return for insurance providers and reductions in payments to cover administrative and operating costs. This year, he called for a reduction in premium subsidies that would be targeted at farmers who select harvest-price coverage in their revenue policies and also for prevented planting benefits. Premium subsidies for harvest-price policies would be reduced by 10 percentage points.
The administration says its plan would save taxpayers nearly $16 billion over 10 years, including $1.1 billion in fiscal 2016.Speaking to participants attending the Crop Insurance and Reinsurance Bureau (CIRB) annual meeting, Thatcher pointed out that investments in crop insurance have practically eliminated the need for very expensive and sometimes erratic ad hoc disaster payments. But that doesn’t mean the criticisms and calls for further cuts in crop insurance payments will go away.
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Farm organizations and industry groups are already preparing for the budget battles. On Wednesday, they sent a letter to members of the House and Senate Budget committees, asserting that Obama's proposed cuts to the crop insurance program would be “crippling.”
Farm groups successfully fought off attempts to limit premium subsidies in the final 2014 farm bill. However, Sens. Dick Durbin, D-Illinois, and Tom Coburn, R-Oklahoma, partnered on an adjusted gross income (AGI) amendment that would reduce premium support on crop insurance by 15 percent for farmers with an AGI over $750,000. It passed as an amendment during the first Senate farm bill vote in June 2012 by a large margin: 66-33.
Almost one year later, the Senate once again approved Durbin and Coburn's AGI amendment to the farm bill, but with slightly fewer votes. It passed by 59-33.
In the 114th Congress, Thatcher said 54 senators who supported the Durbin/Coburn amendments are still in place, in addition to 25 lawmakers who opposed the amendments and 21 new members.
Earlier this week, Sens. Jeanne Shaheen, D-N.H., and Pat Toomey, R-Pa., introduced a bill that would cap crop insurance premium subsidies at $50,000 per farmer or entity. The Congressional Budget Office estimates that would reduce the deficit by about $2.2 billion over 10 years, according to the senators.
“The cost of the federal crop insurance program has dramatically increased in recent years, and the program currently contains no dollar limitation on the amount of premium subsidy an individual business can receive from the federal government,” they noted in a release. “In 2011 alone, 26 businesses received more than $1 million each in taxpayer dollars,” the senators said. According to the Government Accountability Office, just 2.5 percent of producers nationwide would have been affected by a $50,000 premium support limit in 2011.
Environmental Working Group Vice President of Government Affairs Scott Faber, who has repeatedly called for more cuts in crop insurance, commended Shaheen and Toomey for their leadership.
“The proposed cap would affect only 2.5 percent of farmers,” Faber added. “Furthermore, the Government Accountability Office has said that such reforms will not affect program participation. We thank Senators Shaheen and Toomey for their leadership.”
CIRB Chairwoman Sheri Bane, who serves as vice president, commercial agribusiness operations for COUNTRY Financial, said the association is working closely with a coalition of diverse interests to try to help lawmakers understand “the important role that crop insurance plays in Rural America.”
“Farmers and ranchers see crop insurance as their lifeline while our critics see crop insurance as just another government program they’d like to cut,” she lamented.
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