President’s 2014 Budget: Overview and Department of Agriculture
April 11th, 2013
On Wednesday, April 10, President Obama released his budget request for Fiscal Year (FY) 2014. In this year’s ongoing budget saga, the White House is billing its proposal as a step towards reaching a “grand bargain” with Republicans over taxes and spending. (For more on the “grand bargain,” see a previous blog post.) Over ten weeks late, the proposal would replace sequestration starting in FY 2014, ending the across-the-board cuts that went into effect on March 1. The budget would achieve approximately $600 billion in deficit reduction over ten years through a mix of tax increases and spending reductions. The budget would also decrease discretionary spending by $202 billion over ten years starting in 2014.
Under the President’s budget proposal, USDA would receive $22.6 billion in discretionary funding – approximately the amount enacted in 2012. In keeping with previous proposals, this year’s proposal is a real mixed bag for sustainable agriculture. The plan again includes big cuts to mandatory conservation programs, and requests level or decreased funding for other sustainable agriculture programs. The plan also eliminates direct payments and reduces crop insurance subsidies, and significantly increasing funding for renewable energy programs and for the Agriculture and Food Research Initiative (AFRI).
President Obama’s proposed budget calls for deep, permanent cuts of over $800 million to mandatory spending for farm bill conservation programs. On the discretionary side of the conservation ledger, the budget requests $808 million for the NRCS conservation operations budget, which includes conservation technical assistance. This is $20 million less than the FY 2012 funding level, but roughly $41 million more than the final funding level for FY 2013.
As in the President’s FY 2013 budget request from a year ago, targeted mandatory conservation programs include the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP), which would be permanently cut by $400 million and $288 million, respectively, in FY 2014.
The CSP cut would limit the enrollment in two ways. First, the budget proposes that the upcoming FY 2014 appropriations legislation caps enrollment at slightly less than 12 million acres, a permanent cut of 778,000 acres. Second, the budget proposes that the farm bill further lower the acreage cap to 10.35 million acres. This matches the level included in last year’s Senate-passed farm bill, and represents a permanent cut of roughly $2 billion over ten years.
The President’s FY 2014 request includes $268 million for the Wetlands Reserve Program (WRP), a slight increase relative to the program’s FY 2014 baseline. Because authority for WRP expires at the end of FY 2013, funding is limited to monitoring, restoration, and maintenance of easements enrolled before September 30. The budget does not include a funding request for the Grassland Reserve Program (GRP) because NRCS will have spent all remaining funds by the end of this fiscal year when authority for the program expires. The President requests $150 million for the Farm and Ranchland Protection Program (FRPP), a permanent rescission of $50 million relative to the program’s baseline.
The budget includes several policy proposals, including the consolidation of WRP, GRP, and FRPP into the Agricultural Conservation Enhancement Program (ACEP). This mirrors a change made in both the Senate-passed and House Committee-Passed farm bills last year.
For the Conservation Reserve Program (CRP), the President proposes that Congress in the new farm bill ratchet down the maximum allowable acreage cap to 25 million acres, down from 32 million acres in FY 2013, consistent with both the 2012 Senate-passed farm bill and the the 2012 House Agriculture Committee-passed farm bill. The budget assumes that farmers will enroll approximately 2.8 million acres in CRP 2013 through the general sign up, which has yet to begin, and another 700,000 acres through continuous CRP. As of last month, there were 27 million acres enrolled in the program.
The President requests $45 million for farm bill mandatory spending for the Wildlife Habitat Incentives Program (a permanent rescission of $40 million), $2.5 million for the NRCS portion of the Agricultural Management Assistance Program (a permanent rescission of $5 million), and level funding for the Agricultural Water Enhancement Program.
Unfortunately, the President’s FY 2014 budget continues the yearly trend of cutting mandatory conservation, this time proposing both appropriations cuts and farm bill cuts. In recent months, however, leaders in the Senate have rejected the idea that conservation should be used as a piggy bank. Both the FY 2014 Senate budget resolution and a Senate sequester-replacement package offered by the Senate Majority Leader, Senate Appropriations Committee Chairwoman, and Senate Budget Committee Chairwoman, conveyed that mandatory conservation programs have already given their fair share.
Now is not the time to do further damage to the conservation baseline. Farmer and rancher demand for conservation dollars exceeds supply by multiple factors for most programs. In the face of severe erosion, water depletion, mounting energy prices and one of the worst droughts in decades, we need a bigger, not smaller, investment in farm conservation to protect the land that is our long-term food security.
The President’s budget does not directly fund the programs left stranded by farm bill extension passed as part of the fiscal cliff deal earlier this year, but it does take two steps, one symbolic and one real, to keep the programs alive.
First, in their 2013 Farm Bill proposal, the Administration’s budget proposes that Congress allocate $1.3 billion in mandatory farm bill funding for “high priority initiatives,” including for renewable energy, organic agriculture, specialty crops, and beginning farmers. They do not provide details about what specific initiatives they have in mind, and the total funding level is less than the funding for these programs in the Senate-passed farm bill from last year, but it is nonetheless a positive sign that the White House is at least aware of the sectors of agriculture that were left high and dry by the farm bill extension that it negotiated with congressional leaders at the end of 2012.
Second, the President’s budget proposes a discretionary appropriation of $50 million for salaries and administrative activities, including technical assistance, for mandatory programs from the 2008 Farm Bill outside of the commodity title and the Food for Peace section of the trade title. This would seem to include salaries and activities related to programs that currently do not have funding for FY 2013 but that were authorized and funded in the 2008 Farm Bill — programs such as the Farmers Market Promotion Program, the Beginning Farmer and Rancher Development Program, and the Organic Agriculture Research and Extension Initiative.
The budget proposal falls short of making outright requests for mandatory funding for stranded programs, but makes the bet that Congress will have provided, through a new farm bill, new funding for those programs by FY 2014 and keeps the basic program infrastructure in place — which, once dismantled, takes some time to rebuild.
Commodity Payments and Crop Insurance
Like last year’s request, the President’s budget includes a proposal to eliminate direct payments, which was also included in both the House Committee-passed and Senate-passed farm bills debated last year. However, the President commits the savings to deficit reduction instead of proposing a replacement safety net program for farmers, such as the revenue-based program included in last year’s farm bill drafts. The budget proposes to continue current programs such as ACRE and SURE which have battled criticism from both farmers and the Hill in their implementation. It is a strange request, repeated from last year’s budget proposal, given its rejection in both the Senate and House last year.
The President’s budget also proposes to decrease subsidies paid to farmers to cover their crop insurance premiums by 3 percent, as well as to decrease the amount USDA pays to private crop insurance companies to administer and deliver the Federal Crop Insurance Program. While NSAC agrees that crop insurance reform is an issue that deserves much-needed attention in the upcoming farm bill, these reforms in our view need to be designed in a more targeted fashion (such as reducing or capping premium subsidies based on producer income, and ensuring that payments flow to working farmers).
Research, Education, and Extension
The President’s budget proposals for agricultural research, education, and extension activities is one of the few bright spots to highlight from the FY 2014 budget. In total, the requests for USDA’s research agencies and programs amount to $2.8 billion, with each agency receiving a slight increase in funding.
For the fourth year in a row, the President’s budget calls for an increase in funding for the long-standing Sustainable Agriculture Research and Education (SARE) program, which will celebrate its 25th anniversary this year. The request is for $22.7 million – the same level included in last year’s request, a 28 percent or $5 million increase over the final FY 2013 level. The budget also proposes to consolidate the various SARE research, education, and extension funding activities into a single line item. It remains unclear whether or not last year’s request to launch the SARE federal-state matching grant program is included in this year’s request. We expect to know more on this soon.
The Agriculture and Food Research Initiative got the biggest boost in the research budget, with the Administration proposing a 40 percent increase over current funding levels for a proposed funding level of $388 million for FY 2014.
The president’s budget also proposes to maintain current funding levels for the Organic Transitions Integrated Research, Education, and Extension program at $4 million, and the National Sustainable Agriculture Information Service, commonly known as ATTRA, at $2.25 million.
On the rural development front, the President proposes $15 million for the Value Added Producer Grant (VAPG) program, which is level with last year’s budget request, but a substantial decrease from previous years. VAPG has been cut by more than 32 percent since 2010 – at the precise time when we need to be increasing federal investments in our nation’s small business entrepreneurs who are our nation’s farmers and ranchers.
The President’s budget also proposes consolidating several existing rural development grant programs into a new Rural Business and Cooperative Grant program to be funded at $55 million over the next two fiscal years. This new program would provide grants to support projects that provide technical and financial assistance to small and emerging private businesses and cooperatives in rural areas, and would replace the following Rural Development programs: Rural Business Enterprise Grants, Rural Business Opportunity Grants, Rural Microentreupreneur Assistance Program Grants, and Rural Cooperative Development Grants.
Apart from the new consolidated grant program, the budget requests roughly $1.4 million in discretionary appropriations for Rural Microentrepreneur Assistance Program loans. It further provides for the use of $3 million in remaining farm bill mandatory money. NSAC does not support the splitting of the RMAP program into separate loan and grant programs, with the latter part of a bigger consolidated program. This is inconsistent with the farm bill authorization for the program and would vastly complicate the administration of the program.
Finally, the budget request includes an increase in funding for the Renewable Energy for America Program (REAP), which has become a significant rural economic development and energy priority for this Administration. The budget requests discretionary funding of $7.4 million for grants and $12.3 million for loan guarantees, as well as $70 million in mandatory funding to be distributed between loan guarantees and grants.
One particularly bright spot of the President’s budget request is the significant increase in funding for the Direct Farm Ownership and Direct Operating loan programs. The budget requests $575 million for Direct Farm Ownership loans and $1.224 billion for Direct Operating loans. This represents an increase of $136 million and $254 million, respectively, over FY 2013 levels. If provided by appropriators, the increase in funding would begin to address the enormous backlog of qualified applicants for these loan programs, many of whom are beginning farmers and ranchers.
We are disappointed to report that the President’s request does not include funding for the Beginning Farmer and Rancher Individual Development Accounts (BFRIDA) program. The 2008 Farm Bill directed USDA to administer the BFRIDA pilot program to help beginning farmers and ranchers of limited means finance their agricultural endeavors through business and financial education and matched savings accounts. Unfortunately, however, the program has never been funded in an appropriations bill.
What’s Next for the Budget?
In part because of the delay in its release, the President’s budget will likely have a minimal impact on the FY 2014 appropriations process that is already underway. Appropriators have started to hold hearings, and Congressional member letters with priorities for FY 2014 funding bills are due over the next two weeks. The House and the Senate have also already passed their respective budget resolutions for FY 2014.
The bigger question concerns the proposal’s impact on negotiations heading into the summer over the debt ceiling limit, and whether there will be a broader agreement between Democrats and Republicans on longer budget goals. The fate of the new farm bill is also closely tied to the progress and outcome of those negotiations.
NSAC will be providing updates and information about the appropriations and budget processes as they unfold. Our updated appropriations chart with information about the President’s budget request for key sustainable agriculture programs will be available soon.