You don’t have to spend long in the federal food and agriculture policy world before you hear the adage, “the best way to understand the farm bill is to understand the farm bill budget.” So, if your goal is to understand the farm bill, there’s no quicker way than by diving into the Congressional Budget Office’s (CBO) annual farm bill spending projection.
Every spring, CBO – Congress’s official budgetary scorekeeper – publishes its ten-year projection (or “baseline”) for government spending. CBO’s baseline covers everything funded by the federal government – including farm bill spending. Published most recently on May 12, 2023, CBO’s baseline will be adopted as the official baseline for the 2023 Farm Bill. If the farm bill is not written and enacted into law this year, a new CBO baseline will be required next year.
The CBO score is a significant part of the farm bill process because it establishes the broad budget context within which the policies of the bill can be debated. More finely put, the House & Senate Agriculture Committees – who are tasked with drafting the farm bill – are required by budget rules to remain within CBO’s overall projected spending levels.
When legislators put forward a farm bill amendment that proposes to change the cost of a program, a budget score written by CBO will be attached to it. This budget score is CBO’s best estimate of how much that amendment will increase or decrease the cost of the program over the next decade. Effectively, this means that the CBO’s annual baseline projection is a tool not only to understand the projected cost if current law (in this case, the Agriculture Improvement Act of 2018; PL 115-334) were to continue, but also for understanding potential policy changes offered during the 2023 Farm Bill reauthorization.
In this blog post, we will dig into the latest CBO changes to the four largest funding items within the farm bill – Commodity (Title 1), Conservation (Title 2), the Supplemental Nutrition Assistance Program (SNAP, in Title 4), and Crop Insurance (Title 11). We’ll also look through the Inflation Reduction Act (IRA, PL 117-169) spending projections, which are included in CBO’s most recent updates.
But before we dig in, it’s worth walking through how the CBO update might impact potential policy changes. For example, the projected cost of Title 1 spending increased by nearly $12 billion from the February 2023 baseline to the May 2023 baseline. This means that cost-saving reforms to Title 1 to limit commodity payments – such as eliminating the “actively engaged in farming” loophole – will now save even more money than they would have in February 2023. Alternatively, proposals to increase reference prices within Title 1 would now cost even more money than they would have in February 2023. This same logic can be applied across all titles and programs of the farm bill.
The topline takeaway from the May 2023 CBO baseline update is that all four of the major spending items in the farm bill – titles 1, 2, 11, and SNAP – saw an increase in projected spending from February to May 2023. In particular, title 1 projected spending saw the greatest percent increase during that time, adding nearly $12 billion to the projected cost of the title.
The increased cost of title 1 is driven mainly by the increased cost for livestock disaster aid, coupled with an expected dip in future cotton and dairy prices. The dip in cotton and dairy prices has the effect of increasing projected spending, since lower prices tend to prompt higher government payments to farmers.
Title 2 saw a relatively minor increase in projected spending of over $2 billion. This increase is almost entirely due to the Conservation Reserve Program (CRP), which may have been prompted by a recalculation of land price inflation, and perhaps lower commodity price assumptions which would have the effect of bringing more landowners to CRP.
SNAP, meanwhile, which represents the majority of farm bill spending, saw a minor uptick relative to the overall cost of the program. SNAP is now projected to cost $1.223 trillion, which is $17.67 billion higher than CBO’s February projection. Finally, title 11 saw a $4.4 billion increase in cost from February to May.
The Inflation Reduction Act
The IRA – signed into law in August 2022 – included a total of just over $18 billion in funding for a suite of agricultural conservation programs – the Conservation Stewardship Program (CSP), the Environmental Quality Incentives Program (EQIP), the Agricultural Conservation Easement Program (ACEP), and the Regional Conservation Partnership Program (RCPP). However, it is important to remember that the total amount of IRA funding is still subject to budget sequestration – which still applies both to annual appropriations (including conservation programs) and automatically reduces the $18 billion IRA conservation program investment by roughly $1 billion, down to just over $17 billion.
Nevertheless, $17 billion is a significant investment, and given the magnitude of funding, one of the primary questions since IRA’s enactment has been how effectively the Natural Resources Conservation Service (NRCS) – which oversees those programs – would be able to distribute the funds in a timely manner. The CBO’s May update answers that question.
Of the $17 billion in IRA budget authority (the amount Congress has authorized NRCS to spend), CBO’s May baseline projects that NRCS will disburse roughly $15.308 billion – nearly 90% – from FY2023-31. This projection is virtually unchanged from the February 2023 baseline, and consequently indicates CBO’s expectation that NRCS will be able to effectively spend nearly 90% of its IRA budget authority – which is good news for conservation stakeholders, and those who want to build a more climate-resilient food and farm system. Of the remaining 10%, just under half is currently allocated to the RCPP program.
As the 2023 Farm Bill reauthorization continues to heat up, policymakers will decide whether or not to move IRA resources into the farm bill baseline. In February of this year, 644 organizations sent a letter to Congress urging lawmakers to “to protect the historic $20 billion investment in climate-smart agriculture and conservation technical assistance and to ensure that this funding stays in climate-smart agriculture and Farm Bill conservation programs.”
The Take Home
As with any farm bill, there are a litany of factors that will dictate the course and ultimate outcome of the 2023 farm bill reauthorization – from the currently ongoing debt-limit negotiations to the generational investments made through the IRA. The CBO’s May 2023 baseline update is just one – albeit important – component of the overall farm bill debate, and it points toward a 2023 Farm Bill whose potential policy changes will cost – or save – more than they would have in February 2023, and perhaps ever before.