July 11, 2017
Editor’s Note: This is the first of a four-part series of blog examining the funding outlook for the 2018 Farm Bill. In an effort to simplify the complex subject of farm bill funding, we will present these blogs in FAQ format. Part two of this series will answer questions related to agricultural spending in the farm bill, part three will focus on programs that will need to have their funding renewed in the next farm bill, and in part four we will give more attention to the bill’s Nutrition Title.
Every year, usually in March but this year delayed until late June, the Congressional Budget Office (CBO) publishes its ten-year projection (baseline) for government spending – including farm bill spending. CBO, Congress’ official scorekeeper, typically publishes a preliminary projection in January, an official projection in March (June this year), and then a mid-year projection update in August. CBO’s March (June this year) projection is generally the one that rules budget scoring for all bills considered by Congress during the year. It is not yet clear whether the most recently issued CBO baseline will be the one used for 2018 Farm Bill purposes, or if it will be the one issued next March. In either event, however, the current baseline can provide us with important insights into the coming farm bill debate.
Who Cares About the CBO Score and Why?
CBO farm bill scores are always followed closely by policy wonks and budget nerds, but every four or five years the CBO-watching crowd grows larger as an array of food and farm interests start tuning in. The CBO score is a significant part of the farm bill sausage making process because it establishes the broad budget parameters for the ensuing policy debate. Essentially, the score sets the field on which Congress and food/farm interest groups will “play,” aka debate and craft the programs and policies that make up the farm bill.
Why Every Ten Years?
Ten years is the long-held scoring convention for determining the cost of any authorization bill before Congress that directs (mandates) the government to spend money. Farm bill authorizations are generally for about five years, or just half a decade, but all farm bill programs are nonetheless scored and debated relative to their cost over ten years. Therefore, when legislators put forward a farm bill amendment that changes the cost of a program, it will have a budget score attached to it that is CBO’s best estimate of how much that particular amendment will increase (or decrease) the cost of the program over the next ten years.
What’s the Most Important Figure in the CBO Score for the Farm Bill?
The biggest slice of the farm bill pie, and therefore the most important figure to look at in the CBO score, is taken by the bill’s Nutrition Title – these programs represented 80 percent of spending in the 2014 Farm Bill. The most significant portion of the Nutrition Title is in turn represented by the Supplemental Nutrition Assistance Program or SNAP (formerly known as “food stamps”). As has been the case for several years, the June CBO score showed the cost of SNAP steadily declining as the national economy continues to improve. Participation in the program has dropped from a high of nearly 48 million people to less than 42 million people today. It is important to remember that the improving economy and subsequent reduction in the number of Americans relying on SNAP is the primary reason the 2014 Farm Bill has come in under initial CBO spending projections.
What’s the Big Picture?
In order to keep things simple, we’ll focus here on the four big money titles of the farm bill – nutrition, commodities, crop insurance, and conservation – which together represent nearly 99 percent of total farm bill spending.
CBO’s new 10-year (2018-2027) prediction for those four farm bill titles is $876.5 billion, which is down by $71.8 billion from the 2014 Farm Bill’s spending projection of $948.3 billion (over 2014-2023). Of the projected $876.5 billion, $679.2 billion is the projected cost of nutrition (primarily SNAP) programs – a reduction of $77.3 billion compared to 2014 projection. In other words, over 100 percent of the “savings,” or reduced costs of the upcoming farm bill as compared to the 2014 bill, are due to the declining SNAP budget outlays.
On the commodity subsidy side of the equation, the new CBO score shows a continuation of another economic and budget trend since passage of the 2014 Farm Bill: a decline in commodity prices and resulting increase in the cost of the farm bill’s commodity title. When the cost of the commodity title increases (due to overall commodity price decline), this results in a decrease in the cost of the crop insurance title. The CBO’s 10-year projection for the commodity title is $13.2 billion higher than the 2014 projection, whereas the projection for crop insurance subsidies is $11.1 billion lower.
For conservation programs, the new spending projections represent a combination of cuts that Congress has imposed since passage of the 2014 Farm Bill plus increases in program costs associated with increasing total enrollment and rising land, equipment, and labor costs. Overall, CBO projects the cost of conservation programs will increase by about $3.4 billion as compared to the 10-year projections from the 2014 Farm Bill.
In sum, on a net basis, the “farm side” of farm bill spending (commodity, crop insurance, and conservation) is running a bit higher ($5.5 billion) relative to the 2014 projection, but the farm bill as a whole is costing considerably less due to reduced SNAP costs.
Will the Farm Bill Have “Less Money to Spend?”
Most farm bill policy observers are operating under the assumption that new, additional funding will not be in the cards for the next farm bill. At best, it is thought, the congressional budget process will allow for level funding, which means no net increases or decreases. Proposals are on the table, however, to cut overall farm bill spending — more on that in part three of this series.
Based on the new CBO projections, it is not uncommon to hear policymakers and others say that the next farm bill “will have less money to spend.” However, this is only true at a superficial level.
CBO bases its projections on there being no changes in policy. With the economy in recovery (resulting in lower SNAP costs) and farm commodity prices dipping (meaning higher commodity program costs but lower crop insurance subsidies), the net cost of the current farm bill is going down. It does not really follow, however, that Congress will have “less money to spend” for the new farm bill, at least not as that phrase would be generally understood by the public. Congress could do nothing at all in 2018 except extend the current bill with no changes and total spending would still go down.
So what is the impact of the new CBO baseline? Rather than saying Congress has less money to spend, it would be more accurate to say that policy changes included in the 2018 Farm Bill to improve SNAP benefits would cost less than would have been the case in 2014, and that any policy changes to cut SNAP benefits or participation rates would save less than would have been the case in 2014. By the same token, policy changes to enhance the commodity title will cost more and proposed changes to tighten the program will save more than would have been the case using the same economic assumptions developed for the 2014 bill.
The cost projections of potential policy changes, based on the new CBO farm bill budget baseline, will be extremely important in determining what might be possible or not possible in terms of policy changes in the 2018 bill – especially under a level or declining funding assumption.
Look for parts two and three of our “Numbers Behind the Bill” series to be published later this week.
 As a general rule, the costs associated with commodity program subsidies and crop insurance premium subsidies move in contrary motion. If commodity prices are relatively low, the taxpayer is called upon to help bail commodity farmers out, raising commodity title spending. In that same situation, however, the cost of crop insurance premiums (which are based in part on price) go down. Since taxpayers pay for a majority of farmers’ crop insurance premiums, the government share of the premium payments goes down in the declining price situation, helping to offset the increase in outlays for commodity title programs.