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President’s Budget Targets FCIP and NFIP

On Monday, the Office of Management and Budget released a proposed budget for FY2019 that includes cuts to the Federal Crop Insurance Program, as well as changes to the NFIP.
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On Monday, the Office of Management and Budget (OMB) released a proposed budget for FY2019 that includes cuts to the Federal Crop Insurance Program (FCIP), as well as changes to the NFIP.

For crop insurance, the proposed budget creates an adjusted gross income limit of $500,000, reduces the premium discount farmers receive between 10 and 15 percentage points, and sets a 12% cap on underwriting gains for the companies that participate in the FCIP.

The Big “I” opposes any cuts to the crop insurance program, including limiting the assistance that farmers receive and proposals that take away from private-sector delivery of crop insurance. The FCIP is an example of a successful private-public partnership and is a critical safety net for the rural economy.

The Big “I” also opposes efforts to means test the FCIP. The FCIP is actuarially sound and benefits from a large and diverse risk pool. Means testing would only serve to destabilize the risk pool and increase every farmer’s premium. Furthermore, means testing unfairly penalizes regions with high-value crops such as fruits and vegetables, and regions with larger-acreage farms.

The crop insurance proposals are expected to gain little traction on Capitol Hill and run counter to positive crop insurance statements from the White House and U.S. Department of Agriculture earlier this year. Nevertheless, attacks on the FCIP and the private-sector delivery system are expected to continue during negotiations for the 2018 Farm Bill.

For flood insurance, the budget proposes an affordability program to offer premium assistance based on income or ability to pay, rather than property location or date of construction; recommends reducing the appropriation for the NFIP's flood mapping program by $78 million; and recommends FEMA continue to purchase reinsurance.

The Big “I” supports efforts by FEMA to purchase private reinsurance. In 2017, FEMA received nearly $7 for every $1 of reinsurance coverage it purchased. The Big “I” also supports improving maps and utilizing more advanced flood mapping technologies is imperative to helping property owners better understand their risk. Finally, while affordability of flood insurance is important, any potential subsidies should not detract from efforts toward risk-based rating.

The NFIP was originally set to be reauthorized by Sept. 30, 2017. However, because Congress did not reach a consensus on reforming the program, it reauthorized the NFIP on a short-term basis. The program is currently funded through March 23. The Big “I” believes a long-term reauthorization is necessary to ensure stability in the marketplace.

The Big “I” will discuss the FCIP and NFIP, among other issues on Capitol Hill, at the 2018 Big “I” Legislative Conference, to take place in Washington, D.C. April 18-20.

Jennifer Webb is Big “I” federal government affairs counsel.