July 30, 2020
On Monday, July 27, 2020, Senator Mitch McConnell (R-KY) introduced the highly anticipated HEALS Act. This $1 trillion bill is the Senate Majority proposal for the fourth coronavirus response package (C4), which will serve as the starting point for Senate negotiations.
In this post we will examine the farm and food systems provisions of the HEALS Act, provide some legislative context, and discuss how Senate negotiations may shape a final package.
Agriculture Provisions of the HEALS Act
To begin, it must be mentioned that the HEALS Act contains very few provisions relating to farming, food supply chains, nutrition programs, farm and food system workers, racial equity, or any of the other priorities for NSAC and its partners. While dozens of relevant marker bills containing real, meaningful aid and reform measures have been introduced this year, few were included. In fact, the HEALS Act includes only a single paragraph intended to address the most significant impacts of the coronavirus pandemic on our food systems. The lack of specific provisions makes analysis difficult, but also means that every word and sentence has great significance, so the following discussion will be quite granular and take individual sentences, or phrases, in turn.
Title I – Agricultural Programs – Office of the Secretary – For an additional amount for the ‘‘Office of the Secretary’’, $20,000,000,000, to remain available until expended, to prevent, prepare for, and respond to coronavirus…..
This would provide the Secretary of Agriculture with $20 billion in funds to continue USDA responses to the pandemic. It is certain that this money is intended to replenish the Commodity Credit Corporation (CCC) , the Government Sponsored Entity (GSE) that Secretary has used to pay for both direct aid to farmers and to establish the Farmers to Families Food Box Programs, the two components of USDA’s Coronavirus Food Assistance Program (CFAP). What is interesting is that there is no mention of expanding the spending authority for the CCC, currently capped at $30 billion, which was widely expected to be a part of the bill and remains a priority for many Republican members of the Senate Agriculture Committee and several Appropriators. Funding for existing CFAP programs is complicated – drawing on several spending authorities – but is roughly $19 billion (a large portion of the total $23.5 billion in agricultural support programs in the CARES Act) of which only $9 – $10 billion has been expended. The addition of $20 billion to CCC would provide the Secretary with roughly $30 billion to spend on the second phase of the CFAP and other aid programs.
…..by providing support for agricultural producers, growers, and processors impacted by coronavirus,…..
The meaning of this phrase is unclear but may be significant. To date, only farmers and producers are eligible for direct payment support from USDA and this could make food processors eligible as well. Alternatively, it could be referring to ongoing support for the role that some processors have played in aggregating farm products and assembling food boxes for the Farmers to Families Food Box Program.
…..including producers, growers, and processors of specialty crops, non-specialty crops, dairy, livestock and poultry, including livestock and poultry depopulated due to insufficient processing access…..
This phrase is notable in two ways. First it excludes any specific mention of producers that supply local food systems. The CARES Act (C3) which became law on March 27, 2020, contained the following language related to eligibility:
…..including producers of specialty crops, producers that supply local food systems, including farmers markets, restaurants, and schools, and livestock producers, including dairy producers…..(emphasis added)
During C3 negotiations, NSAC advocated for farmers who rely on direct markets and supply their local and regional food systems to be included in the CFAP program because they faced extraordinary market disruptions, and that they receive fair aid payments that reflected the premium prices they often obtain by selling directly to their customers. USDA did not make any concessions to account for the impacts of the pandemic on direct market farmers, or local food systems, in the design or implementation of the CFAP program despite letters from Congress and comments submitted by NSAC. The omission of direct marketing farmers from the list of eligible producers in the HEALS Act is a concerning sign in that it could give USDA justification for the continued exclusion of many smaller, diversified farms from CFAP and is counter to NSAC efforts to ensure more aid, and better targeted aid, reaches farmers who need it most.
Second, the phrase includes poultry growers as eligible for support from USDA which marks a dramatic change. Previously, poultry growers were deemed ineligible for direct CFAP payments because their products did not meet the program threshold, experiencing a commodity price decline of more than 5 percent during a specific time period near the beginning of the pandemic. Recognizing the losses experienced by poultry growers, and by specifying that they should be compensated for animals that had to be euthanized because they could not be slaughtered, could fundamentally shift the structure of the CFAP program. Euthanizing animals affects a farmer’s revenue – not commodity prices which are the basis of USDA direct payment calculations. If USDA chooses to pay farmers based on revenue rather than price declines it could create an opportunity for other farmers to be paid based on their revenue losses which could benefit direct marketing farmers. This language in this phrase parallels the Responding to Epidemic Losses and Investing in the Economic Future for Producers Act (RELIEF Act – S. 4156), a bill supported by several Republican Senators including members of the Agriculture Committee.
……and growers who produce livestock or poultry under a contract for another entity……
The inclusion of contract growers as eligible for support is a potentially welcome addition to any coronavirus response package as they have been excluded from payment under the current CFAP program. For a farmer to qualify for CFAP direct payments they must be able to demonstrate that they bear a ‘price risk’ in that their revenue is affected by the price decline of the commodity they produce. In theory, farmers that have a contract with fixed prices should not feel the impact of a price decline but in reality, they may lose income if the integrator chooses to decrease the number of birds shipped to a grower, increases the time between new shipments of birds, or requires that birds be grown out over longer periods of time. Again, there is little specificity in this phrase but if it were to be included in a final bill and implemented well by USDA, this could be a lifeline for struggling contract poultry growers and hog farmers.
…..: Provided, That such amount is designated by the Congress as being for an emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and Emergency Deficit Control Act of 1985.
This is technical language that authorizes spending in a way that does not require the normal appropriations process and is not subject any programs funded to sequestration.
Paycheck Protection Program
There is another significant, farmer-focused change to the Paycheck Protection Program proposed as part of the Senate Majority package contained within the Continuing Small Business Recovery and Paycheck Protection Program Act, a separate companion bill to the HEALS Act. The provision is identical to the language in the Paycheck Protection for Producers Act (S. 3918) offered by Senators Thune (R-SD) and Baldwin (D-WI) and supported by NSAC.
If enacted, this change would allow farmers who have no net income in 2019 as reported on their Schedule F to use their gross income, or receipts, instead to calculate their total loan amount. This has been a major issue that has prevented many farmers, while eligible for PPP, from receiving any emergency assistance through the program. Farmers who were previously deemed ineligible for PPP would be able to apply using the new calculation with their gross receipts.
The Senate bill would also expand PPP loans to other types of non-profit organizations beyond just 501(c)3, which is likely to open up this program to more, though not all, community-based organizations who support farmers – including farmers markets associations.
While there are many other significant changes to PPP, one final change would allow farmers who bank with Farm Credit institutions to better utilize PPP loans.
Funding for Agency Functions
As with the CARES Act before it, the HEALS Act proposes to extend funding to support USDA salaries and functions, including:
The two most notable lines are the very small amount that is provided for FNS, which continues to work diligently to expand online SNAP pilot programs to nearly every state and accommodate state requests for pandemic – Electronic Benefits Programs (EBT) waivers, and the large amount provided to APHIS to continue operations despite a significant decrease in inspection fees – more than double the amount allotted previously in CARES.
Significant differences in scope and scale between the HEALS Act and the HEROES Act, the House version of a coronavirus response bill that was passed more than two months ago (May 15, 2020), mean efforts to reconcile these bills would be a challenge. The fact that the HEALS Act was introduced in an incomplete form – it was put forward with several other bills, some without legislative text, only brief descriptions, and much of it hastily drafted – shows that there is little consensus within the Majority about what the next coronavirus bill should contain which further dims the prospects for a successful negotiation and uninterrupted benefits for Americans who are still grappling with the effects of a pandemic that shows few signs of abating.
Negotiations between Senate Majority and Minority leadership have begun but the sides are starting from vastly different positions separated by a chasm of roughly $2 trillion. Startling reports of dramatic economic contraction since start of the pandemic points to the very real need to arrive a significant spending package, but it is uncertain what path the negotiations will take. It is likely that the ‘4 corners’ – Senators McConnell and Schumer, and Representatives Pelosi and McCarthy – will negotiate amongst themselves, pulling in Committee Chairs and Ranking Members to discuss specific provisions as they have done in the past.
Moving forward, now is the time to make sure that farmers, ranchers, and the innovative food and farm businesses building resilient local and regional food systems get the support they need to continue feeding our communities, paying their employees, and responding rapidly to emergency needs – join us in taking action here! As always, NSAC will advocate for federal agriculture and food policies to advance sustainable and equitable food systems at every opportunity to provide: