Budget Challenges Ahead for New Farm & Food Bill

The U.S. Congress has typically adopted farm, food and nutrition program policies every five years since the Great Depression.  In recent years, legislation typically dubbed, “the Farm Bill” has US CApitol on Dollare bill iStock_000002619695XSmallbecome controversial legislation due to two major contributing factors:

  1. Members of Congress reflect the continuing rural-to-urban migration of the U.S. population and now represent more urban districts. According to the U.S. Census Bureau urban areas account for about 81 percent of the U.S. population. As another gauge, there are only 43 members of Congress serving on the Congressional Rural Caucus in the U.S. House of Representatives in the 114th Congress.
  1. The state of the U.S. budget. The U.S. national debt is fast approaching $20 trillion. Moreover, the U.S. cannot make significant progress on tackling the U.S. debt as it has run consecutive annual deficits since 2001. On Friday, October 14, the White House announced that the annual U.S. deficit for FY 2016 was up $148 billion from FY 2015 totaling $587 billion.  This level of annual deficit nearly equals the amount the U.S. spends annually on its military and defense budget.

In order to timely adopt new farm and food policy for the U.S., it is highly anticipated that congressional hearings may begin in Spring 2017.  In a sense the timing could not be worse because the hearings will occur only weeks after Congress votes to increase the U.S. debt limit, or borrowing authority, above the current $20.1 trillion level. But the timing might also serve as a sobering reminder to the many farm and food constituencies of the overall U.S. financial condition and the limitation on providing future federal support.  Below are just a few considerations as we look ahead to a new farm and food bill and potential budget implications.


According to the Congressional Budget Office, May 2013 budget baseline used to estimate the cost (aka, “score”) of the 2014 Farm Bill, it was projected that over a ten-year period (FY 2014-23) total costs would be nearly $970 billion. There are five major program areas that make up total spending in a Farm & Food Bill.  Below they are listed in order of respective total costs:

  • Nutrition, 79% of total spending (Supplemental Nutrition Assistance Programs (SNAP), Emergency Food Assistance Program, After School Snack Program, Senior Farmers Market Nutrition Program).farm-bill-2014-breakdown-major-program-areas
  • Crop Insurance, 9% of total spending (more than 118,000 coverage options for 543 varieties of crops, 85 percent of planted acreage, or about 297 million acres, for major crops is now covered by crop insurance, 73 percent of planted acreage for eligible specialty crops is covered.  New programs provided in the 2014 Farm Bill include Supplemental Coverage Option (SCO) & Stacked Income Protection Plan (STAX).  Provisions were also included to allow farmers to exclude Actual Production History (APH) eligible yields which occur from exceptionally bad years (in a year which a natural disaster or other extreme weather occurs) from their production history when calculating yields used to establish their crop insurance coverage. Noninsured Crop Assistance Program (NAP) & peanut revenue insurance program continues.)
  • Commodity Credit Corporation (CCC) Price Support and Related Programs, 6% of total spending (Price Loss Coverage, Agriculture Risk Coverage, marketing loans for feedgrains, wheat, rice, upland cotton, soybeans and peanuts.  Sugar, dairy and other commodities, market access, export donations ocean transportation, foreign market development cooperator, specialty crop technical assistance).
  • Conservation, 6% of total spending (Programs providing incentives for farmers to remove environmentally sensitive land from agricultural production and planting like the Conservation Reserve Program.  Also working land programs that provide incentives to farmers who adopt and maintain conservation practices on land in production like NRCS Conservation Stewardship Program & Environmental Quality Incentive Program).
  • Research, Trade, Energy, Credit, Forestry, Rural Development, Livestock, Specialty Crops, <1% of total spending. (animal health and disease research, food and agriculture research, specialty crop research, forestry products use, beginning farmer & rancher, Biobased Market Development, Biorefinery, Renewable, Chemical and Biobased Product Assistance, Rural Housing Programs, Community Facilities, Water and Waste Disposal, Broadband, Rural Business, Micro-entrepreneur, Rural Cooperative Development, US Forestry Service ecological restoration, support to communities, and reducing the risk of wildfires, Tree Assistance Program, Specialty Crop Research Initiative (SCRI) and the Farmers Market and Local Foods Promotion programs, marketing and promotion of horticulture crops, data and information collection, plant pest and disease management, food safety education, Market Access Program and Foreign Market Development programs, Technical Assistance for Specialty Crops program addressing sanitary, phytosanitary, and technical barriers to specialty crop exports.)

The top four programs above, Nutrition, Crop Insurance, Commodity Credit Corporation Price Supports and Related Programs and Conservation account for the majority of total Farm Bill expenditures.  The May 2013 CBO budget baseline 10-yr score of these four areas respectively (FY 2014-23) was: $764.4 billion for Supplemental Nutrition Assistance Program (SNAP), $84.1 billion for total crop insurance outlays, $57.8 for total CCC Commodity Supports & $61.6 billion for Conservation Programs.

The Congressional Budget Office March 2016 Projections now indicate that the projected ten-year (FY 2017-26) cost of these Farm Bill programs is near $932 billion, with $721 billion for SNAP, $88.3 billion for total crop insurance outlays, $64.8 billion for total CCC Commodity Support and $57.7 for Conservation Programs.

CBO Projection May 2013 for FY 2014-23 CBO Projection March 2016 for FY 2017-26
Total Farm Bill

$967,973,000,000

$931,781,000,000

Suppl Nutrition Asst Prog (SNAP)

$764,431,000,000

$720,899,000,000

Total Crop Ins Outlays

$84,105,000,000

$88,299,000,000

CCC Commodity Support

$57,870,000,000

$64,809,000,000

Conservation

$61,567,000,000

$57,774,000,000

 

$ Difference between CBO May 2013 and March 2016 Projections  

% increase/reduction

Total Farm Bill

($36,192,000,000)

– 3.74%

Suppl Nutrition Asst Prog (SNAP)

($43,532,000,000)

– 5.69%

Total Crop Ins Outlays

$4,194,000,000

+4.99%

CCC Commodity Support

$6,939,000,000

+12%

Conservation

($3,793,000,000)

– 6.16%

The CBO numbers show total Farm Bill baseline projection costs are reduced by $36 billion. The numbers also show the largest single contributor to the reduction is the SNAP program.

On the other hand, the 10-year CCC Commodity Support baseline shows a significant increase of about 12% reflecting the counter-cyclical response of farm policy as U.S. net farm income has dropped $52 billion since 2013, “the steepest decline in farm income on record,” according to Dr. Bob Young, Chief Economist, American Farm Bureau Federation.

When drafting the 2014 Farm Bill many understood that both the Price Loss Protection (PLC) and Agriculture Risk Coverage (ARC) programs rely on national marketing year average prices. The PLC program provides price protection when the current national marketing year average price drops below a commodity specific reference price in the Farm Bill. Many also knew the potential for substantial government support, especially from the ARC-County (ARC-CO) program when market prices decrease.  However, since the ARC program provides revenue protection by crop/farm based on 86 percent of the 5-year Olympic average yields and prices, it is also anticipated that ARC-CO payments will decrease dramatically toward the end of the 2014 farm bill (after the 2018 crop) and when Congress is writing the next farm bill.  The same cannot be said about the PLC program that relies on a reference price in the statute.

As the first chart below indicates, the amount of 10-year baseline funding for the next Farm Bill for commodity programs is declining.  A declining commodity program budget baseline will create multiple challenges for lawmakers when trying to provide an adequate commodity safety net for farmers.  Already, cotton growers and milk producers have expressed their disappointment with an inadequate safety net provided in the 2014 Farm Bill. Also, participants in the ARC-CO program have also expressed dissatisfaction with discrepancies in payments — We will note here that the ARC-CO guarantee is based on the same average price across all counties.  It is the 5-year Olympic average yield that varies sharply.

Additional funds for a new Farm Bill are highly unlikely.  Yet, with the known challenges of current commodity programs in the 2014 Farm Bill funds to technically correct or construct a better safety net for cotton and dairy programs will likely add substantially to the cost.

commodity-budget-baseline-shrinking

crop-ins-budget-baseline-increasing

Conversely, in the second chart (above) it shows the 10-year amount of baseline funding for the crop insurance program is slightly rising.

Budget Rules May Change. What’s the Impact?

mike_enzi_official_portrait_111th_congress

U.S. Senator Mike Enzi (R-WY) Chairman, U.S. Senate Budget Committee

In an earlier blog post we relayed that both House and Senate Budget Committee Chairmen Tom Price (R-GA) and Mike Enzi (R-WY) were busy with proposals to change the budget process in the House and Senate. Notably, its been 42 years since there were changes in the federal budget process, dating back to 1974.  The Congressional Budget Act of 1974 (P.L. 93-344, as amended) created congressional procedures used each year to establish and enforce budgetary boundaries when considering legislation.  The enforcement of those budgetary boundaries were achieved through the use of budget points of order and through the reconciliation process. Points of order are raised by members of Congress and prohibit the consideration of legislation that may violate these rules.

However, even with rules on budget points of order in place since 1974, according to Chairman Enzi, “mandatory spending has climbed from 33 percent of the budget to 70 percent. Congress has also failed to pass a budget resolution in nine of the last eighteen years.  Enzi elaborated, “When it does pass a budget it routinely ignores and violates the budget resolution.

The new proposals under consideration are part of republicans plans to return the legislative chamber back to normal order.  The proposals would:

  • Establishing a biennial “funding process,”
  • Require approval of two-thirds of the Senate to take up a non-appropriations bill between when the budget passes and the August recess,
  • Link the number of votes needed to waive a budget point of order to the “size of the budget violation,”
  • Set deadlines for senators to submit amendments to the budget resolution on the floor and restricting the number of amendments that can be offered during floor consideration,
  • Provide the Budget Committee with the ability to form subcommittees to review spending,
  • Release the budget resolution before the committee markup,
  • Require committee members to submit amendments ahead of the markup,
  • Establish a nonpartisan commission to review government accounting rules,
  • Form enforceable, long-term fiscal targets, and
  • Eliminate the vote-a-rama, during which senators vote on a series of amendments until they have all been considered, a time-consuming and tiring process.

    Rep Tom Price

    U.S. Representative Tom Price (R-GA) Chairman, U.S. House of Representatives Budget Committee

Some of these concepts are gaining bipartisan support on the committee.

A renewed emphasis on budget points of order and a possible new rule tying the number of votes needed to waive a budget point of order based upon the size of the budget violation will be a huge obstacle for any new legislation that provides new spending or revenue losses. According to the proposed new budget rule, legislation with deminimis amounts of new spending or revenue losses would be automatically waived. But, for legislation with large amounts of new spending or revenue losses, like those that may be considered for a new Farm and Food Bill, it could be subject to as high as a two-thirds-vote threshold in the Senate to waive a budget point of order against legislation. The new proposed budget rule would essentially create a requirement for at least two votes with support of at least 60 Senators to proceed in the Senate; one vote to waive a budget point of order and two, a cloture vote limiting consideration of pending legislation to 30 additional hours of debate.  In the current dysfunctional state of the U.S. Congress and with the split between the Senate majority and minority parties likely tightening after the 2016 elections, attaining two votes of at least 60 Senators for support of increasing the farm safety net will present very high hurdles in the next farm & food policy debate.


To have your organization prepared for the upcoming Farm Bill, contact Cansler Consulting today.


Cansler Consulting government relations lobbyists At Cansler Consulting we understand that in Washington, D.C. change is the only constant. Advocacy in Washington is also changing and we are at the forefront using new technologies and data to help us focus on strategies that improve our client's return on investment. Our core lobbying strategies are driven by the value at stake from federal legislative & regulatory actions. Leading studies indicate that today's business value impacted by government and regulatory action, or inaction can reach as high as 30 percent of earnings for most companies. With as much as one-third of earnings at stake, it is imperative that companies, industries and organizations engage in government relations. If you need effective representation from a bipartisan, entrepreneurial government relations firm contact Cansler Consulting. We are certified by the National Institute of Lobbying and Ethics and have decades of experience assisting clients in issue areas including Agriculture, Budget & Appropriations, Food Safety, Transportation & Infrastructure, International Trade and Energy. Through our relationships established in Washington, D.C. and throughout the U.S. for over two decades we can help you the legislative and regulatory processes on Capitol Hill and inside federal agencies. You can contact us at

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