White House Wants Ag Cuts

Trump Budget Highlights Proposals to Ratchet Down Farm Programs, Crop Insurance

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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The White House proposed budget for next year recommends several changes to USDA farm programs and crop insurance, including a $500,000 income cap for such programs and lower premium subsidies for insurance. (DTN file photo)

OMAHA (DTN) -- Farmers would pay a larger share of crop-insurance premiums and a range of ag industries would have to pony up fees for USDA services under the Trump administration's latest budget proposal released Monday.

The White House proposed budget for Fiscal Year 2019 includes 10-year farm-bill cuts of $47 billion for farmer programs. The White House also sees $213.5 billion in potential savings from overhauling the Supplemental Nutrition Assistance Program to include commodity box shipments to SNAP recipients.

The White House budget proposal is somewhat convoluted considering Congress just last week passed a two-year budget deal to boost domestic and defense spending by $300 billion. The White House proposed budget would still lead to $3 trillion in higher deficit spending over the next decade despite calling for cuts in major federal medical programs and other safety nets such as SNAP.

The Trump administration budget proposal recommends several legislative changes to farm programs, making it timely as Congress drafts a new farm bill this year. The major cuts that would affect farmers are proposals to cap crop insurance premium subsidies, which would reduce federal spending on insurance by roughly $22.4 billion over 10 years. Cuts to conservation programs would reduce spending $13 billion over 10 years.

USDA did not issue any statement about the budget proposal from Agriculture Secretary Sonny Perdue, who is touring western states this week. However, USDA did issue comments from Perdue praising President Trump's infrastructure proposal.

The chairmen of the House and Senate Agriculture Committees issued a joint statement Monday on the budget proposal that wasn't filled with the normal praise. Sen. Pat Roberts, R-Kan., and Rep. Mike Conaway, R-Texas, said they will write a farm bill, but don't expect the president's budget to be reflected in that final legislation.

"As chairmen of the Agriculture Committees, the task at hand is to produce a Farm Bill for the benefit of our farmers, ranchers, consumers and other stakeholders. This budget, as with every other president's budget before, will not prevent us from doing that job. We are committed to maintaining a strong safety net for agricultural producers during these times of low prices and uncertain markets and continuing to improve our nation's nutrition programs," the two lawmakers said.

Some agriculture groups weren't exactly jumping to praise the budget. The National Sustainable Agriculture Coalition called the proposal "the most anti-rural, anti-farmer proposal the agriculture community has seen in years." Sen. Debbie Stabenow, D-Mich., ranking member of the Senate Agriculture Committee, also criticized the proposal as "out of touch with our farmers, families and rural communities."

The White House wants to cap commodity conservation and insurance payments for farmers with adjusted gross incomes above $500,000. In 2013, when farm income was a record high nationally, the White House stated this would affect just 2.1% of farmers. As the White House Office of Management and Budget wrote in its proposal, "It is hard to justify to hardworking taxpayers why the government should provide assistance to wealthy farmers with incomes over $500,000. Doing so undermines the credibility and purpose of farm programs."

Besides lowering the AGI cap for farmers, the budget proposal also calls for eliminating commodity certificates and the special, separate $125,000 payment limit for peanuts. Further, the Trump administration wants to limit all farms to a single farm manager collecting farm-program payments. The Obama administration spent years on rules regarding actively engaged farmers to limit payments to three farm managers and some trade associations have sought to get that rule overturned.

Looking at insurance, the Trump administration also wants to see insurance premium subsidies limited to farmers with $500,000 AGI or lower, and reduce the premium subsidy for the Harvest Price Option by 15 percentage points. The White House wants the average premium subsidy lowered from 62% for an insurance policy down to 48%. The White House also wants to cap underwriting gains under the federal crop insurance programs to 12% of return on retained premiums, saving about $2.99 billion over 10 years.

In another set of conservation proposals tied directly to the farm bill, the Trump administration proposes eliminating the Conservation Stewardship Program and eliminating funding for the Regional Conservation Partnership Program (RCPP). The White House pointed to a USDA Inspector General report on CSP stating that some producers should have been ineligible while others receive too much. "These indicators demonstrate that CSP funding is not always spent in the taxpayers' best interest," the White House stated.

To offset some of those conservation cuts, the White House proposes boosting the Environmental Quality Incentives Program by $60 million annually, but capping conservation participation to farmers making $500,000 a year or lower AGI.

The Trump administration also calls for better targeting the Conservation Reserve Program to more specific environmentally sensitive areas and limiting the enrollment of whole farms. Further, CRP payments should be limited to 80% of the average county rental rate determined by the National Agricultural Statistics Service.

National Resources Conservation Service technical assistance, both discretionary and mandatory under farm programs, would be reduced a total of $229 million, with most of the burden going to cutting discretionary conservation technical assistance. USDA expects more technical assistance would be picked up by the private sector.

Looking at SNAP, the Trump administration believes there is an average of $21.4 billion a year in annual savings on the program that can be shaken out. That would include eliminating SNAP payments for people to no more than $90 a month in benefits and instead sending SNAP recipients a USDA Foods package instead with staple items in it such as "shelf-stable milk, ready to eat cereals, pasta, peanut butter, beans and canned fruit, vegetables, and meat, poultry or fish." The White House states this is a cost-effective approach that would provide significant savings to taxpayers. Further reforms would seek to reduce SNAP benefits for people considered able-bodied adults.

The Trump administration also again proposes dropping the McGovern-Dole International Food for Education program, which would eliminate $202 million. In the State Department, the budget also calls for eliminating an international food aid program that spends $166 million annually.

The Trump budget also calls for several new user fees for industries using USDA services. The big one would be $680 million a year to cover costs for inspection, import inspection and operation costs at the Food Service and Inspection Service for programs overseeing inspection of meat, poultry and eggs. The "inspected by USDA" stamp on meat and poultry labels provides industry with a special government service which justifies their payment because "this increases consumer confidence, potentially increasing sales," the budget document states.

On top of that, USDA wants livestock markets, dealers and packers to pay $23 million annually to fund the Packers and Stockyards Act program. Further, a $20 million annual user fee program would be set up for companies needing the testing and measuring services offered by the Federal Grain Inspection Service. Another new fee would cover $23 million in USDA spending on the Animal and Plant Health Inspection Service programs, including oversight of biotechnology.

The Trump administration also wants USDA checkoff programs to pony up $20 million a year in user fees to fund the Agricultural Marketing Service's oversight of marketing orders.

The budget for FY 2019 would lead to $300 million less in salary for Farm Service Agency staff, some of which would be due to transfers to the Agricultural Marketing Service and a new USDA computer business center. USDA plans to realign headquarters and field staff and make "strategic reductions in staff years throughout FSA." Referring to staff years, USDA's budget calls for cutting federal and non-federal FSA employment by roughly 19%.

The budget proposes $938 million in eliminated funding programs for USDA in 2019, including eliminating $509 million in Rural Water and Wastewater grants, but maintaining the $1.2 billion loan program.

The administration also calls for eliminating interest payments in the accounts of the Rural Utilities Service. That would generate about $129 million in savings annually. The White House notes USDA pays nearly twice the interest rate to rural utilities in that program than the current prime interest rate.

In the budget addendum because of the congressional agreement, the White House proposed keeping $192 million at USDA for a facilities account mainly going to research labs.

White House budget https://www.whitehouse.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton