Federal Crop Insurance Program in Crosshairs during Farm Bill Consideration

By: williamjones
July 1, 2012

By: Margarita Tapia

Congress is currently debating the 2012 Farm Bill, which would spend about $970 billion on federal agriculture and food programs over the next decade and may greatly impact the Federal Crop Insurance Program (FCIP).

Last month, Senate Committee on Agriculture Chairman Debbie Stabenow (D-Mich.) introduced S. 3240, the “Agriculture Reform, Food & Jobs Act of 2012.” Prior to the bill’s introduction, the Big “I” testified on the merits of the crop program at both Senate and House Agriculture Committee hearings.

As of press time, the legislation was being considered on the Senate floor where numerous amendments, including those impacting crop insurance, were expected. These amendments are expected to focus on additional cuts to nutrition programs, payment limits on premium subsidies for crop insurance and reductions to the crop insurance program baseline.

The Big “I” is particularly concerned about an amendment offered by Sens. Dick Durbin (D-Ill.) and Tom Coburn (R-Okla.) that would use an adjusted gross income means test to cap farmer subsidies. The unique potential for very large losses in farming means that without a federal backstop, the premium rate for farmers and ranchers who have to pay for insurance coverage would be exorbitantly high. Without adequate premium subsidies, many farmers may be forced to reduce insurance coverage. With less protection, a large natural disaster could result in such substantial farm losses that the government would be called upon to intervene with ad hoc disaster assistance at taxpayer expense. In addition, the association is concerned with an amendment offered by Sen. Kirsten Gillibrand (D-N.Y.) that would cut the crop program baseline by $4.5 billion to pay for proposed cuts to the Supplemental Nutrition Assistance Program, or food stamps.

S. 3240 is a $23 billion reduction from current agriculture spending levels. The savings in the bill are mostly derived from direct payment commodity programs, as well as from consolidating conservation programs and tightening guidelines in the food stamp program.

The legislation eliminates direct payments to farmers and instead offers subsidized revenue protection crop insurance to shield against poor yields and price drops. The bill also attempts to enhance the FCIP by increasing the budget baseline to allow the program to provide coverage to a broader range of crops that are no longer receiving direct payments.

At press time, the House had not introduced its version of a farm bill, but House Agriculture Committee leaders had indicated that their version will be quite different from the Senate language. While the removal of direct payments for commodity programs is inevitable, the House bill is expected to hold onto the target price—counter cyclical payment system for some crops—and look for deeper cuts to the food and nutrition programs.

The time constraints for moving a bill through the House and then conferencing the two versions before the summer recess is a huge hurdle. The current Farm Bill will expire on Sept. 30 if the House and Senate are unable to come up with a compromise.

The crop insurance program has sustained more than $12 billion in cuts over the past four years. The Big “I” has continuously urged Congress to limit any further cuts to the program as they consider the 2012 Farm Bill. The association also continues to advocate for a legislative fix to the agent commission caps implemented in the 2011 SRA.

For the latest developments on the Farm Bill, please read the Big “I” weekly enewsletter, Insurance News & Views.

Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.

Tax Debate Revs Up
Senate Finance Committee Chairman Max Baucus (D-Mont.) recently announced his principles for tax reform before the Bipartisan Policy Center. He outlined the broad strokes of a plan and his objectives for the anticipated lame duck Congress.

In proposing a rewriting of the tax code, Chairman Baucus stated objectives such as increasing the growth and competitiveness of the American economy, as well as maintaining the country’s role as a worldwide center for innovation.

The Senate Finance Committee has held numerous hearings this Congress on tax reform, and the Chairman promised to hold more throughout the balance of the year. However, due to the limited legislative calendar and the hyperpartisan environment created by the presidential election, passage of a comprehensive tax code overhaul in 2012 will be an uphill climb.

In the context of a potential comprehensive tax code overhaul, the Big “I” has continued to urge members of Congress to address individual tax rates along with corporate rates noting that most of the association’s small business members are organized as pass-through entities. If comprehensive tax code reform fails, the Big “I” supports extending the 2001–2003 tax rates beyond 2012. The association also supports the current estate tax rates and exemptions to be extended beyond 2012 given their impact on family-owned small businesses like many Big “I” agencies and their clients.

—M.T.