Obama budget would take chop at crop insurance

Obama budget would take chop at crop insurance

Lower commodity prices lead officials to expect crop insurance costs to taxpayers up to $1.5 billion more than expected over next 18 months. Proposed White House 2016 budget would make cuts to some crop insurance. Proposal calls for food safety inspection services to settle under single roof.  

The release of President Obama’s fiscal year 2016 budget was destined to set critics howling. And several proposals on the agriculture side -- claiming savings of $1 billion in 2016 and some $16 billion over a decade -- certainly did the trick.

On Monday afternoon, Agriculture Secretary Tom Vilsack addressed the thinking behind the budget. “I asked the staff to compare this budget to the first full budget the President submitted in fiscal year 2010. What you’ll find is (the 2016 budget amount) is below the 2010 budget.”

The USDA, he said, “identified savings. … The budget is obviously much more than just numbers. It ought to be a roadmap to a better and brighter future.”

That roadmap quickly drew loud protests. Chief among the complaints is the White House plan to cut price protection revenue insurance premium subsidies because “overly generous benefits have almost eliminated the risk in farming at a cost to taxpayers in the billions."

Vilsack said the crop insurance changes would help keep taxpayer costs down at a time when lower commodity prices are expected to mean unexpected cost overruns for agriculture programs in the new farm bill.

Consistent with an Office of Inspector General (OIG) audit, “we’re proposing some changes in the prevented planting, resources, and focus on harvest price coverage.”

When Congress passed the farm bill, “one of the challenges was to create sufficient savings to satisfy everyone. It was anticipated we’d spend a significant amount on crop insurance but less on other safety net programs compared to direct payments.

“Well, with crop and commodity prices coming down rather precipitously in the last 12 months, it’s anticipated we’re actually going to have to spend a lot more on ARC and PLC. So, if you want to stay generally within the budget savings identified for that safety net you have to make adjustments.”

Kansas Sen. Pat Roberts, chairman of the Senate Agriculture Committee, was unmoved. “The President is especially hard on farmers, proposing to cut the crop insurance program and again placing a disproportionate share of federal budget cuts on the shoulders of producers.

“Following four years of extreme drought, Kansas is living proof that the crop insurance program works for the farmer, the taxpayer and the economy.”

The White House has proposed crop insurance adjustments in the past, said Vilsack, “ranging from a reasonable rate of return – 12 percent – changes to the administrative operating expense allotment. (The OIG audit) essentially said our preventive planting payments could be adjusted a bit. Also, take a look at the harvest price loss coverage, which has received some criticism in terms of the level of subsidy and the opportunity it creates for a fairly significant payout.

“Essentially, you’d combine the two: higher payouts for ARC and slightly less for crop insurance. You end up in the same ballpark the farm bill proposed.”

Uncomfortable prognosticating on crop prices over the next decade, Vilsack wanted to stick with the next 18 months. “Clearly, there’s a possibility that payouts could be $1 billion to $1.5 billion higher than anticipated.”

Food safety

Also sure to gain much scrutiny is President Obama’s desire to consolidate food safety oversight. The White House would bring together the Food Safety Inspection Service and food safety portion of the FDA to form a single new agency under Health and Human Services.

“This is something I talked about a number of years ago,” said Vilsack. “There are 15 agencies currently involved in food safety – probably 14 too many if we want to provide the most effective and efficient system to ensure the food supplies around the United States.

“What the President is asking for is the ability to reorganize. Many Presidents have had the capacity to reorganize within the federal government. Once he has that authority it would be his intention to create a single food safety agency. … He currently doesn’t have that power.”

Vilsack stressed that the combination of food safety entities “doesn’t necessarily mean you’d change the method of inspection. It just provides for better coordination and less administrative overhead. That’s where you get a budget savings.”

Mississippi Sen. Thad Cochran, chairman of the Senate Committee on Appropriations, reacted to the budget negatively. “The President has the right to propose all manner of new spending and tax increases in his budget request, but I think a Republican-led Congress will insist on greater budget discipline.  Our country remains in a perilous fiscal situation, with debt levels projected to continue to rise to historic highs.  The President’s budget does not address that fact, and would actually increase our debt by trillions of dollars over the next 10 years.”

While pleased with portions of the budget, Roger Johnson, president of National Farmers Union, was unhappy with the crop insurance proposals. “The 2014 farm bill just included $23 billion dollars for deficit reduction, so agriculture has clearly already done its part. … When Mother Nature strikes or markets fluctuate, without crop insurance, many family farmers and ranchers could be put out of business.”

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