February 10, 2016
The President’s final budget proposal to Congress potentially has major implications for all aspects of our food and agriculture systems–everything from conservation to rural development, nutrition and food safety. While White House budget proposals are routinely characterized in the press as “dead on arrival” on Capitol Hill, that obscures the fact that at the level of individual government programs, the requested funding levels often have a big impact on congressional action. In turn, changes to program budgets can dramatically influence the performance and availability of sustainable agriculture programs.
On Tuesday, February 9 the Administration released its budget request for fiscal year 2017 (FY17), which includes significant proposed changes to the budgets of the U.S. Department of Agriculture (USDA) and Food and Drug Administration (FDA). Those proposals will be considered by Congress this spring and summer as they work through the process of adopting appropriations bills for FY17.
In general, NSAC views this budget request as good news for sustainable agriculture, as detailed in the sections below. Quite a few of our funding level proposals to the Administration last summer have found their way into the budget proposal.
Overall, the President’s budget is requesting $24.6 billion in discretionary funding for USDA, up from the $21.75 billion actual funding level in the current fiscal year. For FDA, the President’s budget proposes $5.1 billion in total resources, a 4 percent increase over FY16 levels. This includes an increase of $26 million to support food safety, including for implementation of the Food Safety Modernization Act. It also, however, includes proposed user fees that Congress will almost certainly reject.
A full review of the budget proposals, highlighting NSAC priorities, follows.
For the first time during the Obama Administration, the budget request includes no cuts to farm bill funding for private lands conservation programs, including the Conservation Stewardship Program (CSP) and the Environmental Quality Incentives Program (EQIP). By leaving funding for CSP and EQIP intact, the budget proposal also provides for full funding of the Regional Conservation Partnership Program (RCPP), which promotes coordination between the Natural Resources Conservation Service (NRCS) and its partners to deliver conservation assistance to farmers and producers. These voluntary conservation programs are the primary means through which farmers, ranchers, and foresters build soil health, sequester carbon, improve water quality, and enhance wildlife habitat.
NSAC has consistently advocated against re-opening the farm bill to reduce conservation program assistance to farmers and ranchers, and we applaud the Administration for recognizing the importance of these programs in the face of a changing climate, more extreme weather events, and serious water quality programs across the country.
On the discretionary spending side of the ledger, we are pleased to report that the Administration requests a small, but important, increase in funding for USDA’s Conservation Operations account. This funding ensures that the NRCS can help producers assess their operations, develop conservation plans, and enroll in conservation programs. Farmers and ranchers depend heavily on the direct, on-the-ground conservation technical assistance (CTA) that is funded through the Conservation Operations account. The President requests a 1 percent increase to the Operations account, from $851 million to $860 million, which will help provide much needed assistance to more farmers interested in adopting conservation practices on their farms.
Recognizing the challenges the next generation of farmers face, including accessing credit to finance their operations, the President’s budget request increases funding for direct farm operating loans (DOL) by 16.6 percent, from $1.25 billion to $1.46 billion. Producers use these annual loans, made by the Farm Service Agency (FSA), to cover the cost of livestock, farm equipment, feed, seed, fuel, insurance, minor improvements to buildings, land and water development, and other operating expenses.
As the lending market grew more cautious due to fluctuations in crop prices, demand for DOLs grew significantly over the last year. The President’s requested increase would help ensure that beginning farmers and other family farmers who cannot be fully serviced by commercial credit are able to secure the loans they need to stay in business.
The budget also maintains last year’s historic funding level of $1.5 billion for direct farm ownership loans (DFO), which help farmers buy land. About three-quarters of DFOs are made to beginning farmers, and these loans are often used to help new farmers buy their first piece of farmland. FSA administers both DOLs and DFO loans.
In addition to loans, the Administration’s beginning farmer proposals include what would be first-time funding in the amount of $1.5 million for the Beginning Farmer and Rancher Individual Development Account (IDA) program. The last two farm bills 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 not received an appropriation in years past, and thus, has not yet been launched. NSAC championed this authorization and is encouraged by the commitment of the Administration to continue to pursue funding for it.
The President also proposes an additional $5 million for Department-wide enhanced outreach to beginning, women, and military veteran farmers plus $3.9 million for targeted outreach by FSA to those interested in getting into farming and farmers who are just starting out. The FSA initiative will include a certification program to help veteran farmers prequalify for loans, 25 new full-time FSA staff devoted to providing outreach to beginning and veteran farmers, a pilot new farmer mentoring network that includes stipends for 200 mentors, and funding for cooperative agreements that support organizations in providing assistance and outreach to new farmers and also those that work with landowners to help them transition their farm to the next generation.
Overall, we are very pleased with the President’s proposals for beginning farmer initiatives and look forward to working with Congress and the Appropriations Committees to make them a reality.
We are very pleased that the President’s budget request includes $10 million in discretionary funding for the Outreach and Technical Assistance to Socially Disadvantaged and Veteran Farmers and Ranchers Program, also know as the “Section 2501” program. When combined with the $10 million in mandatory funding that is currently provided through the 2014 Farm Bill, the additional appropriated dollars would restore total funding for the Department’s keystone minority and veteran farmer program to its historic level of $20 million per year. With funding restored to its pre-2014 Farm Bill level, the program would be in a significantly better position to meet the increased demand for outreach and technical assistance by historically underserved producers. We will work with Congress to try to get the funding restored for minority farmers.
For a second year in a row, the budget includes an increased request for discretionary funding for the Rural Microentrepreneur Assistance Program (RMAP). This program provides loan capital and technical assistance funding to local and regional organizations, which in turn provide microloans and business development technical assistance to rural microentrepreneurs. The budget request includes $2.9 million for microlending and $2 million for grants to support small rural business training and technical assistance. In FY16, Congress did not appropriate discretionary funding for RMAP. NSAC strongly supports the President’s request for RMAP funding in FY17.
We are pleased that the Administration reversed its position and is no longer proposing 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 directly to farmers to create or develop value-added producer-owned businesses.
Last year, Congress rejected the Administration’s proposal to cut discretionary funding for VAPG by 9 percent and ATTRA by 16 percent. If funded as proposed, the FY17 budget would provide $10.75 million in discretionary funding for VAPG and $2.5 million for ATTRA, which are the final funding levels provided by Congress for FY16. While we appreciate that the Administration is no longer proposing cuts, we will be working with appropriators to increase funding so that they can build upon their existing successes in FY17.
The budget also requests $18.5 million for the Rural Energy for America Program (REAP), which supports farm and rural renewable energy systems and energy efficiency improvements. Of this $18.5 million, $15 million would be set aside for grants and $3.5 million for loan guarantees. The allocation for loan guarantees would in turn support $75.8 million in private lending. This proposed discretionary funding is made 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 37-fold increase over the actual FY16 level of $500,000.
The President’s budget request also includes $44.6 million in guaranteed loans for local and regional food enterprise development within the Business and Industry Guaranteed Loan Program. This is a three percent reduction relative to the actual FY16 appropriation, but an 18 percent increase over last year’s budget request. By statute, five percent of funding for the guaranteed loan program is dedicated to financing local and regional food enterprises.
We are very pleased that the budget request includes increased funding for both the Agriculture and Food Research Initiative (AFRI), from $350 million to $375 million in discretionary spending, and the Sustainable Agriculture Research and Education (SARE) program, from $24.7 million to $30 million.
SARE is the only USDA competitive grants research program with a clear and consistent focus on sustainability and farmer-driven research. FY17 marks the first time in several years that the Administration has requested an increase in funding for SARE, recognizing the importance of cutting-edge research that is easily accessible, regionally appropriate, and farmer-tested. The increased funding request is in part a response to the fact that, in recent years, USDA has only been able to fund 6 percent of eligible SARE proposals due to high demand and lack of sufficient funding.
AFRI is the largest of the National Institute of Food and Agriculture’s (NIFA) competitive grant programs, accounting for 60 percent of NIFA’s total competitive funding. SARE serves as an important complement to AFRI, identifying innovations and opening new lines of research that AFRI funds can further with larger and more complex projects.
NSAC appreciates the Administration’s recognition of the importance of scaling up investments for basic and applied agricultural research through programs like AFRI and SARE. We will continue to work with appropriators to secure a comprehensive investment boost for agricultural research by increasing funding for both programs.
The president’s budget also proposes to maintain current funding levels for the Organic Transitions Integrated Research, Education, and Extension competitive grants program at $4 million, a level we support. The budget also proposes a $3 million increase to support Integrated Pest Management work with respect to pollinators in its total request of $20 million for the Crop Protection and Pest Management competitive grants program.
NSAC is extremely disappointed that the President’s budget includes no increase for food safety training and outreach to farmers in FY17; known in the budget as the Food Safety Outreach Program (FSOP).
This relatively new program is intended to help small and medium-sized farms, processors and wholesalers develop the tools they need to comply with new food safety rules issued by the Food and Drug Administration (FDA) to implement the Food Safety Modernization Act.
Recognizing the importance of training and technical assistance in the face of new and comprehensive regulations, Congress funded FSOP for the first time in FY15 at $2.5 million, and doubled that funding in FY16. However, this is only a fraction of what USDA needs to reach the producers, processors, and wholesalers who will be impacted by the new regulations.
We will work with Congress to increase FSOP funding in FY17 to at least double its current funding level so that the farming community can become more prepared to understand and adapt their farms to the new and wide-ranging regulatory environment it is now facing.
The President’s budget includes two crop insurance reform proposals. The proposals are the same as those proposed last year, but with slightly different budgetary scores.
While we commend the White House for continuing to look for ways to reform the existing, unbalanced crop insurance system, we do not believe these cost cutting measures will truly address many of the structural, access, conservation, and delivery related issues currently facing the program.
The first of the President’s budget proposals would reduce the premium subsidy farmers receive by 10 percentage points for polices that include the Harvest Price Option (HPO). When a farmer purchases crop insurance they can choose to use the projected price (Harvest Price Exclusion) or they can buy-up to the Harvest Price Option for an additional premium. Because the harvest price coverage can significantly increase the indemnity (payment a farmer receives for a crop loss) and because it is highly subsidized, the vast majority of farmers elect this option. The proposed change is projected to save $16.9 billion over 10 years. That is $2.3 billion more than it was projected to save in the FY16 budget.
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 after a failed attempt at planting due to weather or other circumstances, and takes a full replant payment, their APH is not impacted. If they are able to 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. This proposal is expected to save $1.1 billion over 10 years.
The budget does not contain any proposal for the use of the savings from these two reforms to help improve conservation on insured land, diminish the distorting effects of crop insurance on land access, or expand crop insurance access to beginning farmers without adequate coverage.
It is clear that as Congress and the current and future administrations begin to contemplate the next farm bill, needed reforms to the federal crop insurance program will be at the top of the agenda. We look forward to pursuing reforms that support sustainable agriculture and family farms as we move towards 2018 and the next farm bill.
The President’s budget request kick starts the annual budget and appropriations process, during which the House and Senate Budget Committees write budget resolutions. Following that, the House and Senate Appropriations Committees will begin writing their annual spending bills.
In the coming months, the House and Senate Budget Committees will likely vote on their respective budget resolutions, non-binding agreements that guide budget and appropriations decisions, for FY17.
Budget resolutions generally 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. For FY17, however, Congress and the President have already agreed to overall spending caps as part of a major two-year budget deal last year. Some in Congress will seek to lower that agreed-to spending cap; however, it is likely to remain intact.
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. While reconciliation is possible, it seems highly unlikely, given that 2016 is a presidential election year during which the legislative calendar is compressed.
Beginning this month, the House and Senate appropriations subcommittees will hold hearings to consider the President’s FY17 budget request. 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 our updated appropriations and budget tracking chart, click here.
Categories: Budget and Appropriations