WASHINGTON, Dec. 1, 2015 - Congressional leaders are using a compromise highway bill to reverse a $3 billion cut to crop insurers that was included in the two-year budget agreement.
The conference agreement on the transportation measure is expected to clear Congress this week to prevent programs from expiring on Friday.
“It’s a big win for agriculture,,, This is a big deal to get this thing fixed,” said House Agriculture Chairman Mike Conaway, R-Texas.
Before votes on the budget deal, House GOP leaders, including the incoming speaker, Paul Ryan of Wisconsin, and Senate Republican Leader Mitch McConnell of Kentucky, had agreed to reverse the cut but hadn't said how it would be done. A House aide said Tuesday that the $3 billion cut would be replaced through a reduction in the Federal Reserve dividend that goes to big banks.
Conaway had said a condition of his agreement with the House leadership was that the $3 billion wouldn’t be taken from any other agriculture programs.
In a joint industry statement Tuesday, the Crop Insurance and Reinsurance Bureau, American Association of Crop Insurers and the National Crop Insurance Service said the budget legislation “contained a disastrous provision that would have devastated crop insurance as we know it today, harming U.S. farmers and taxpayers alike.”
The conference report includes language that specifically repeals the insurance cut as of Nov. 2, the date the budget agreement was enacted. The back-dated repeal date was important to ensure that there was no way the existence of the language in the budget deal could ever be used to justify legally carrying out the cut, said David Graves, president of the American Association of Crop Insurers.
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The budget agreement would have required the Agriculture Department to cap the insurance companies’ rate of return at 8.9 percent, down from the current 14.5 percent.
The cut was supposed to be made through renegotiating the Federal Crop Insurance Corporation's Standard Reinsurance Agreement (SRA) with the companies. Since 2011 the rate of return has varied from a loss of 15 percent in fiscal 2012, a drought year, to a gain of 13 percent in fiscal 2014. Insurance companies argue that their real rate of return is closer to 4 percent.
If the provision is not reversed this month, USDA would technically be required to cancel the SRA as of Dec. 31, Graves said.
A leading critic of the crop insurance program, the Environmental Working Group, said that the cut wouldn’t have done nothing to hurt farmers. “Congress should reject efforts to roll back the reasonable cuts included in the budget deal. With plenty of support from the American taxpayer, crop insurance companies and agents have enjoyed $11 billion in profits over the last decade,” said Colin O’Neil, the group’s agriculture policy director.