February 2, 2015
On Monday, February 2, President Obama sent his budget proposal for fiscal year (FY) 2016 to Capitol Hill. The overall proposed spending number for the U.S. Department of Agriculture (USDA) for FY 2016 is $23.5 billion in discretionary spending, down from $23.8 billion in actual appropriated discretionary funding for FY 2015.
The President’s budget proposes to provide the Food and Drug Administration (FDA) with $4.9 billion in total resources (budget authority and user fees), a nine percent increase over FY 2015 levels. This includes $301.2 million in proposed increased funding to support food safety, including for implementation of the Food Safety Modernization Act. The proposed budget also calls for USDA’s Food Safety Inspection Service, which covers meat and poultry, to be consolidated into the FDA at a slightly reduced funding level. That startling restructuring proposal is unlikely to be acted on however.
There are some positive signs in the budget request for sustainable food and agriculture priorities, but also some very major disappointments. A full review based on NSAC priorities follows.
Our annual agricultural appropriations chart is now updated for the President’s request and available on our website.
Just four days short of the one-year anniversary of the President signing the 2014 Farm Bill, the President now proposes to cut $859 million from the 2014 Farm Bill Conservation Title, including 3 million acres from the Conservation Stewardship Program (CSP) in FY 2016 alone, which represents a five-year cut in farm bill mandatory spending of $486 million according to the White House. The budget request also includes a $373 million cut to the Environmental Quality Incentives Program (EQIP) for FY 2016.
While not cut directly, the recently created and extremely popular Regional Conservation Partnership Program (RCPP) would be impacted by the cuts to CSP and EQIP. This is because RCPP funding comes in large part from the CSP and EQIP funding baselines; the 2014 Farm Bill requires that up to 7 percent of CSP and EQIP funding be dedicated to RCPP projects. If enacted by Congress, the proposed cuts to CSP and EQIP would reduce available RCPP funding by $60 million over the next five years.
Changing farm bill mandatory spending in order to free up dollars to spend elsewhere as discretionary spending has targeted conservation programs far more than any other category of farm bill spending. We strongly oppose these backdoor raids on the farm bill that reduce the country’s capacity to address climate change, water quality and conservation, and other pressing environmental issues.
Fortunately, the budget request does not include any similar changes to mandatory spending for the Agricultural Conservation Easement Program.
On the discretionary spending side of the ledger, the Administration proposes a $15.2 million decrease to the Natural Resources Conservation Service (NRCS) Conservation Operations account. USDA’s ability to deliver conservation programs to farmers and ranchers depends heavily on on-the-ground conservation technical assistance (CTA), which is funded through the Conservation Operations account. We are disappointed that the President’s budget request proposes to reduce funding for this critical piece of conservation infrastructure.
For the second year in a row, the President has requested historic funding levels for both FSA farm loans, including $1.5 billions for direct farm ownership loans (DFO) to help farmers buy land, and $1.3 billion for direct farm operating loans (DOL) which cover annual operating expenses. About three-quarters of DFOs are made to beginning farmers, often as the loan that helps new farmers buy their first piece of farmland. DOLs can be used to cover the cost of livestock, farm equipment, feed, seed, fuel, insurance, minor improvements to buildings, land and water development, or other operating expenses. The Administration’s proposed funding level for FY 2016 matches those enacted for FY 2015 and, for DFOs represent a near tripling of prior funding levels.
Like last year, the Administration’s beginning farmer proposal includes first-time funding of $2.5 million for the farm bill’s Beginning Farmer and Rancher Individual Development Account (IDA) program. The last two farm bills have directed USDA to administer this pilot program to help beginning farmers of limited means finance their start-up agricultural endeavors through business and financial training and matched savings accounts. However, the IDA program has yet to receive an appropriation. While the Senate did agree to the President’s request for FY 2015, funding was left out of the final FY 2015 appropriations package, which Congress passed in December. The proposed funding level would be sufficient to begin pilots in about seven or eight states.
As part of a beginning farmer package, the budget request also includes funding for a new farmer apprenticeship program through the Agriculture Research Service and funding for an Economic Research Service study to analyze barriers to entry for new farmers and ranchers. We are still awaiting more details about those two initiatives, but NSAC will likely support these new proposals to grow the next generation of farmers and ranchers, including military veterans.
Overall, we are pleased with the President’s proposals for FSA credit programs initiatives and look forward to working with Congress and the Appropriations Committees to make them a reality.
We are delighted that the budget includes a significant plus up for the Rural Microentrepreneur Assistance Program (RMAP), which provides loan capital and technical assistance funding to local and regional organizations that in turn provide microloans and business development technical assistance to rural microentrepreneurs. The budget request includes $2.65 million for microlending and $2 million for grants to support microbusiness training and technical assistance. In FY 2015, Congress did not appropriate discretionary funding for RMAP. We will be strongly supporting the President’s request for RMAP funding for FY 2016.
We are deeply disappointed that the budget request includes cuts to two of the most effective and popular USDA Rural Development programs – the National Sustainable Agriculture Information Service (also known as ATTRA), which each year provides hundreds of thousands of farmers, extension agents, and other practitioners with technical information and guidance on a wide range of sustainable agriculture topics, and the Value-Added Producer Grants (VAPG) program, which provides competitively awarded grants to create or develop value-added producer-owned businesses. The budget proposes discretionary funds VAPG at $10 million, in addition to the program’s farm bill mandatory funding. This is a decrease of 9 percent from last year’s enacted discretionary level for the program. The budget proposes to cut ATTRA funding by 16 percent, from $2.5 million to $2.1 million.
The budget request includes $10 million for the Rural Energy for America Program (REAP) for farm and rural renewable energy systems and energy efficiency improvements. The funding would be divided 50/50 between loans and grants. This proposed discretionary funding would be in addition to the $50 million in mandatory funding provided by the new farm bill on an annual basis. The proposed discretionary level represents a greater than seven-fold increase over the actual FY 2015 level.
The President’s budget request includes $37.9 million in guaranteed loans for local and regional food enterprise development within the Business and Industry Guaranteed Loan Program. This is a reduction of nearly 18 percent from the actual FY 2015 appropriation. By statute, five percent of funding for the guaranteed loan program is dedicated to financing local and regional food enterprises. We will be urging Congress to reject the proposed cut.
For the second year in a row, the President’s budget fails to request an increase for the Sustainable Agriculture Research and Education (SARE) competitive grants program. In FY 2014, the President successfully requested a funding increase from $19.2 million to $22.7 million, which is where funding for the program now rests. We had hoped to see the Administration build upon this request in the FY 2016 budget by continuing the push toward the program’s full funding authorization of $60 million, especially given the almost 40 percent increase in funding being requested for the Agriculture and Food Research Initiative – USDA’s largest competitive research program. This year, the Administration requests $450 million for AFRI, which is the highest request to date and significantly higher than the $325 million requested and appropriated last year.
This is the second year in a row that the Administration has requested an increase in funding for AFRI at the expense of other innovative but equally important research programs like SARE. While NSAC supports funding for the important agricultural research funded through AFRI, we will continue to prioritize an equal increase in funding for SARE. We will now appeal to Congress to exceed the President’s request for level funding for this extremely effective and oversubscribed farmer-led competitive grant research, education, and extension program.
The president’s budget also proposes to maintain current funding levels for the Organic Transitions Integrated Research, Education, and Extension program at $4 million, a level we support.
Two new research initiatives proposed by the President include $2.5 million for a Food and Agriculture Resiliency Program for Military Veterans and $80 million for two new Innovation Institutes that would establish public-private partnerships on biomanufacturing and nanocellulosics research.
We are disappointed that the Administration did not accept a USDA proposal for a new initiative for classical public plant and animal breeding research which would help develop new varieties that meet the needs of farmers. In recent decades, public resources for classical plant and animal breeding have dwindled, while resources have shifted toward genomics and biotechnology, with a focus on a limited set of major crops. USDA must begin to prioritize research that supports the development of locally and regionally adapted agriculture, which is critical to protecting genetic diversity and addressing long-term challenges such as climate change and global food security. We will continue to press for a larger share of the overall research budget for a long overdue renewal of public breeding research.
We are pleased that the President’s budget includes a request for $5 million for food safety training and outreach to farmers, known in the budget as the Food Safety Outreach Program (FSOP). Congress funded FSOP for the first time in FY 2015 at $2.5 million. The program is intended to help small and medium-sized farms and small processors and wholesalers develop the tools they need to comply with new food safety rules, which the Food and Drug Administration (FDA) is in the process of finalizing. The increased funding request is a critical next step toward getting the training program off the ground successfully through competitive grants to community based farm organizations.
The budget request includes a very small increase of $50,000 for a total of $19.346 million for the Packers and Stockyards Program. The Packers and Stockyards Program enforces the nation’s primary fair trade practices and competition law for the livestock and poultry industries. The increase is likely too little to increase the effectiveness of USDA’s efforts to enforce the Packers and Stockyards Act.
In the 2014 Farm Bill, Congress rejected an attempt to undermine enforcement of the Packers and Stockyards Act. However, some appropriators have instead used the appropriations process to undermine the rights of livestock farmers at the behest of these large corporations. The FY 2015 appropriations bill went even farther and required the repeal of even existing final rules to implement the Act. We hope Congress will cease and desist using appropriations bills as a vehicle to prevent USDA from protecting farmers from contract abuses by powerful, vertically integrated meatpacking and poultry corporations.
The President’s budget proposal makes two crop insurance reform proposals. One is slightly different version of a reform offered last year and one is new.
The first would reduce the premium subsidy by 10 percent for purchases of buy-up coverage to the harvest price option. When a farmer purchases crop insurance they can choose to use the projected price or they can buy-up to the harvest price option for an additional premium. Because the harvest price coverage is more attractive and because it is very highly subsidized, most farmers elect it. The proposed change is projected to save $14.6 billion over 10 years. This proposal stops well short of a similar proposal made recently by Bruce Babcock and Vincent H. Smith that would save $40 billion over 10 years by eliminating the premium subsidy on the harvest price option.
The second proposed change would alter prevented planting coverage by eliminating the option to buy-up prevented planting coverage to 65 or 70 percent of the coverage level elected by the farmer. This proposal would also require that a 60 percent transitional yield be applied to the producer’s Actual Production History (APH) when they receive a prevented planting payment. Currently, if a farmer does not replant, and takes a full replant payment, their APH is not impacted. If they replant then the replanting is incorporated into their APH which serves as a disincentive to replanting. These two prevented planting proposals were developed from a September 2013 USDA Office of Inspector General audit report on the Risk Management Agencies controls over prevented planting.
Under normal circumstances, because Congress only takes up the farm bill every five years, there would be no chance for these reform proposals to see the light of day in FY 2016. However, it is possible that in the coming months Congress will pursue budget reconciliation – a process that instructs certain authorizing committees to make policy changes to reduce the deficit. If the Agriculture Committees were to be instructed to make spending cuts, crop insurance reform would certainly be on the table in FY 2016.
We commend the White House for proposing some degree of crop insurance reform. We hope that in future budgets the crop insurance reform proposals will be more progressive and far-reaching, so that they will have a real world impacts on the ability of beginning farmer to get into farming and on the reducing the distorting effects of crop insurance on planting decisions. These two proposals are at least steps in the right direction.
The 2014 Farm Bill authorized USDA to administer the Healthy Food Financing Initiative (HFFI), a priority of the First Lady’s. To date, all of the HFFI funding has been at the Treasury Department and the Department of Health and Human Services. Last year, the President’s budget request asked for $13 million to start-up HFFI loan and grant activities within USDA; however, Congress did not appropriate any funding in the FY 2015 appropriations package. The FY 2016 budget decreases this request slightly to $12.75 million. The new funding, if appropriated, would support market planning and promotion and infrastructure development to increase the availability of retail outlets in food deserts and increase the delivery of locally and regionally produced foods. USDA’s portion of the initiative would be administered through Rural Development.
What’s Next for the Budget and Appropriations?
The budget request kick starts the annual budget and appropriations process, during which the House and Senate Budget Committees write budget resolutions and following that, the House and Senate Appropriations Committees write annual spending bills.
In the coming months, the House and Senate Budget Committees will vote on their respective budget resolutions for FY 2016. A budget resolution is a non-binding agreement that guides budget and appropriations decisions in a particular fiscal year.
Budget resolutions have significant influence over the annual appropriations process because they include discretionary spending caps that dictate the total size of the discretionary spending pie that the appropriators will then carve into discrete pieces. The majority of federal spending is mandatory.
One tool that Congress may consider this year is budget reconciliation. Budget resolutions occasionally include reconciliation instructions, which direct one or more authorizing committees (e.g. the Agriculture Committees or the Transportation Committees, etc.) to cut spending to meet a certain deficit reduction target by a certain deadline. Under reconciliation, the authorizing committees are generally given wide flexibility to adjust any policies under their jurisdiction to get to the deficit-reduction target. For example, if the Agriculture Committees were to receive reconciliation instructions, they could reform commodity and crop insurance programs, or cut anti-hunger and nutrition programs, or change the size and scope of farm conservation programs, or some combination.
In addition to budget reconciliation, the Budget Committees may or may not choose to repeal or modify automatic spending cuts, known as sequestration. Sequestration was passed as part of the Budget Control Act of 2011 and requires automatic, across-the-board spending cuts each year until 2024 (originally ending in 2021, but Congress twice extended sequestration). In late 2013, Congress passed a joint budget resolution that eliminated sequestration cuts for some programs in FY 2014 and FY 2015; however, the full gamut of automatic cuts are set to resume in FY 2016, unless additional action is taken to forestall them.
Beginning in March, the various House and Senate appropriations subcommittees will hold hearings to consider the President’s FY 2016 budget request. Then, once the Budget Committees have passed their respective budget resolutions, subcommittees will begin to develop appropriations legislation for each issue area (agriculture, environment, education, etc) before bringing that legislation before the full Appropriations Committees, and the full House and Senate. It is common for the annual appropriations process to last right up until the end of the fiscal year (September 30), and not so infrequently, beyond the end of the fiscal year.
We will be providing updates and information about the appropriations and budget processes as they unfold. For now, you can download our appropriations tracking chart for more information about what the President’s budget request means for key sustainable agriculture programs.