Commodity and farm groups that would love to see the funding and programs contained in the 2008 farm bill duplicated in the next legislation, scheduled for 2012, may be in for a tough time.
Based on estimates and other information gathered by Informa Economics, the coming farm bill agriculture budget baseline will be at least $13.5 billion lower than was the 2008 baseline, and that is even before the House and Senate Agriculture Committees might need to find billions of dollars in cuts that could be required by Congress to begin reducing the massive US federal deficit and total debt. That instruction could come in the form of a congressional budget reconciliation that would require across-the-board spending cuts from virtually all of the federal government. Thus, a simple extension of the 2008 farm bill does not appear to be possible.
Reasons that the 2012 farm bill budget baseline is likely to be much lower include:
- Truncated programs: Around 35 programs that were in the 2008 farm bill have no permanent budget baseline. The biggest such example is the supplemental revenue assistance program (SURE), which ends in 2011, and thus SURE and other truncated programs have no out-year baselines. Some sources note that the SURE funding came via the tax-writing Senate Finance panel and thus is "not an Agriculture panel funding program." It would take around $9 billion in budget authorization (new funding above the baseline) to reauthorize those 35 programs.
- No more payment timing shifts: The two Agriculture committees got $4.5 billion in payment timing-shift savings in the 2008 farm bill but not only has the low-hanging fruit of such maneuvers been used already, under the paygo rules of the House, timing shifts cannot be used as savings.
- Don't count on additional baseline funding: During the 2008 farm bill debate, the Ag panels got $10 billion in additional funding above the agriculture baseline, offset by budget cuts elsewhere. A repeat of this is very unlikely during the 2012 farm bill cycle. However, the $10 billion in additional spending via the 2008 farm bill, most of which went to nutrition spending, is extended in the baseline, along with the budget offsets for that additional spending. But for the next farm bill, looking to other committees such as Finance in the Senate and Ways and Means in the House, is seen as having low prospects for success.
- Another budget cut ahead? President Obama's FY 2011 budget calls for $1.15 billion to help pay African American farmers for past discrimination against them by USDA. This could further lower the agriculture budget baseline.
- The child nutrition program is being reauthorized. While this is under the jurisdiction of the Senate Ag Committee, it does not fall under purview of the House Ag Committee. The Obama administration has proposed a multibillion-dollar increase for the program. Senate Ag Chairman Blanche Lincoln (D-Ark.) has proposed that around $4.5 billion of the additional funding could come via farm program and other cuts including funding cuts for the environmental quality incentives program.
- Crop insurance program funding cuts: The Obama administration currently wants to cut $6.9 billion out of the crop insurance program through its proposed standard reinsurance agreement. That amount will likely be lowered even more when USDA issues its third draft of the SRA . The Congressional Budget Office has a $3.9 billion place marker for such cuts in its latest agriculture budget baseline.
President Obama's FY 2011 budget proposed a discretionary spending cap freeze for non-defense/security programs for three years. In the past under similar strict budget spending conditions, Appropriations panel members have cut funding from various panels, including Agriculture, to fund different programs more to their liking.
While many farm-state lawmakers and commodity groups and organizations would be happy with the same amount of farm bill funding and programs as was the case with the 2008 farm bill, the above details signal that is a very unlikely situation.
The demand for more farm bill spending will still come from some groups, including calls for more funding for conservation programs, specialty crops (which viewed the 2008 farm bill as just a "down payment" for additional spending in future bills), and of course, the very likely push for still more funding for nutrition programs.
House Ag Chairman Collin Peterson (D-Minn.) has called for further reforms in farm programs, including a possible move to a whole farm revenue assurance program. Any such push would very likely need billions of dollars that would have to be found in current farm program spending, perhaps including the around $5.3 billion in direct payment spending, and likely still more cuts or other major program operation changes relative to the crop insurance program. Some of those supporting farm program reform question why there currently are so many risk management programs like SURE , the average crop revenue election ( ACRE ) program and the various revenue-based crop insurance programs. These supporters say these duplicative programs should help drive the reform debate.
Crop insurance program spending, no matter what happens as a result of USDA's latest standard reinsurance agreement, also will face budget-cutting focus during the next farm bill debate. The current crop insurance spending baseline for FY 2011-2020 is $82 billion; farm program spending baseline is $50 billion to $60 billion. Importantly, some lawmakers may make an effort to make the crop insurance program more "efficient" by moving some of the program parameters to government operation/control. Around 290 million acres would qualify for crop insurance payments by FY 2020, according to estimates — currently around 270 million acres qualify for the various programs.
For those who simply want to extend the 2008 farm legislation in a new farm bill in 2012, it will not be that simple. The farm bill budget baseline issue will bring sharp differences on how to spend what almost certainly will be far less available funding. And as previously noted, these lower spending numbers will come before the Ag panels know how much additional spending they will need to cut as the agriculture industry's contribution for future budget deficit/debt reduction.
As for crop insurance, the latest skirmish regarding the SRA is just a tip-off that the Executive and Legislative branches of government see this program as a potential multibillion-dollar funding resource. If so, watch for some major proposals regarding crop insurance that could significantly alter how the programs are operated.
