March 14, 2012
An important step in the process of reauthorizing legislation that will include changes in mandatory spending, such as the farm bill, is establishing what the legislation would cost in the future if no changes were made and existing law were simply extended indefinitely. This is known as the budget “baseline” and becomes the yardstick that Congress uses to measure proposed changes to programs and spending levels.
On March 13, the Congressional Budget Office (CBO), the official scorekeepers for legislation that spends money, published its March 2012 baseline for the farm bill. All CBO baselines project costs over a ten-year period.
According to CBO, the big pots of money in the omnibus farm bill (assuming current policy with no changes) are as follows:
The child nutrition programs (including school meals but excluding SNAP) are projected to cost $237.9 billion over the next decade. The programs do not fall within the farm bill, but are the other major category of USDA mandatory spending.
The draft farm bill put together last fall by Agriculture Committee leaders for consideration by the Super Committee would have cut about $25 billion (2.5 percent) from the baseline levels, including $15 billion from commodity subsidies, $6 billion from conservation programs, and $4 billion from SNAP. That draft bill would have resulted in a net reduction of $23 billion, with approximately $2 billion being put toward renewal of programs without baseline or for new programs. It included no funding reduction for crop insurance subsidies.
Farm Program Costs
Relative to the March 2011 baseline from a year ago, the cost of conservation programs remains approximately level and commodity subsidies are down slightly as market prices remain high.
The big explosion in costs comes in the crop insurance program, where higher crop prices also mean higher taxpayer costs. The cost of the program has increased by $10 billion, or an average of $1 billion a year, just since a year ago, continuing its meteoric rise since the enactment of the major crop insurance overhaul in 2000. On average, the taxpayer covers 60 percent of the farmer’s premium cost, and this premium subsidy accounts for over 70 percent of the cost of the program.
With the vastly increased cost of crop insurance, the likely termination of direct payments, and the likely replacement of direct payments with 100 percent subsidized revenue insurance, the farm bill is approaching an important fork in the road. Historically, Congress has capped the amount of farm subsidies any one farm can receive. In addition, taxpayer support has been conditioned on farmers implementing basic conservation requirements to prevent soil erosion and to preserve wetlands. Currently, however, neither payment caps nor conservation requirements apply with respect to crop insurance, nor do they automatically apply to the new 100 percent subsidized revenue insurance options Congress is contemplating as the major new commodity program.
NSAC believes that subsidy caps and conservation requirements should apply across the board for all farm programs and will be supporting bills and amendments that contain such provisions as the farm bill legislative process heats up next month.
Conservation and Other Programs
In the conservation baseline, the major land retirement program, the Conservation Reserve Program (CRP), continues at slightly more than one-third of the total funding for all conservation programs. Many expect the size of CRP to fall as landowners make decisions about whether or not to go back into production upon expiration of their ten-year contracts. For budgeting purposes, however, CBO generally assumes USDA will take action to maintain the size of CRP.
The two primary working lands programs, the Environmental Quality Incentives Program and the Conservation Stewardship Program, together represent 55 percent of the total conservation baseline. NSAC is working to maintain funding for these key conservation programs.
The farm bill baseline for the future, by definition, does not include the many farm bill programs whose mandatory spending expires this year, the last year of the 2008 Farm Bill. These programs, which include major initiatives for beginning farmers, minority farmers, organic agriculture, farmers markets and CSAs, renewable energy, wetland restoration, and others, need to be renewed in the 2012 Farm Bill. Given that no new funds are being made available for the new farm bill, funding for these programs with expiring baselines needs to be found by savings created elsewhere in bill. If their funding is renewed, they would again show up in the CBO baseline in future years.
Through bills such as the Local Farms, Food, and Jobs Act and the Beginning Farmer and Rancher Opportunity Act, NSAC is working to make sure that critical programs that run out of funding are renewed and can continue to underpin growth in diverse sectors of agriculture.