OMAHA (DTN) -- Despite being rebuked by Congress last fall for a far smaller cut to crop insurance, President Barack Obama in his final proposed federal budget calls for cutting crop insurance $18 billion over 10 years as the biggest single cut in mandatory spending in the budget.
In making the pitch to cut crop insurance, the White House budget for USDA proposes more spending on conservation, research and issues such as dealing with forest fires.
The crop insurance cuts, proposed repeatedly by the Obama administration, account for 31% out of $58 billion in proposed mandatory cuts over 10 years proposed by the administration. The plan calls for reducing the farmers' subsidy by 10 percentage points for harvest-price revenue coverage and reforming coverage for prevented planting. Effectively, the plan would call for capping the premium subsidy for these policies at 50% of the total premium.
The White House has pushed repeatedly in past budgets for crop-insurance cuts that have made it into a final budget deal. Last fall, the president brokered a deal with then-Speaker John Boehner to cut crop insurance $3 billion over 10 years by reducing the percentage of profits that crop-insurance companies could keep. Those cuts, however, drew howls from the House and Senate agriculture committees, and the farm lobbies, leading Congress to reverse the cuts just weeks later.
USDA's budget notes that lowering premium subsidies and making changes to prevented-planting coverage would require congressional action. The White House states its proposals "would incentivize farmers to choose production practices that minimize climate-change impacts, discourage farming on environmentally sensitive lands and highly-erodible soils, and enhance resiliency in the future through soil protection."
In a call Tuesday with reporters, Agriculture Secretary Tom Vilsack sought to highlight areas of the budget where spending would increase for farmers and other areas of rural America.
Vilsack said part of the proposal for crop insurance cuts comes from criticism by the Government Accountability Office over the way USDA now handles prevented-planting claims. He also said crop insurance is a public-private partnership and thus should be a 50-50 deal in cost to taxpayers and farmers when it comes to revenue policies.
"The reality is that in some of our price-harvest loss programs we are subsidizing 62% or so of the premium -- the taxpayers are," Vilsack said. "We think it makes more sense in a partnership that it be closer to 50-50. So that's the reason. The fact is, if you surveyed the population of the United States and you posed the question to them about this, I would be surprised if there wasn't support for the administration's position."
Vilsack also said the funding for crop insurance will pay for $1.5 billion in return in investment for insurers, representing an 18% return.
House Agriculture Committee Chairman Michael Conaway, R-Texas, criticized the White House for proposing increases in spending and taxes while also undermining the U.S. economy and hurting farmers and ranchers.
"The harmful changes to U.S. farm policy contained in the Obama administration budget come on the heels of attempts by the administration last year to kill federal crop insurance," Conaway said.
National Farmers Union also frowned on the proposed cuts to crop insurance, but NFU and other groups praised the budget for proposing more spending on USDA conservation programs. The National Association of Conservation Districts and National Sustainable Agriculture Coalition both highlighted that the president's budget calls for fully funding the Conservation Stewardship Program and the Environmental Quality Incentives Program.
Congress has largely given the Obama administration "dead on arrival" analysis for essentially every budget proposed, leading to protracted budget battles and government shutdowns. For fiscal year 2017, Congress could decline to engage the administration and ride out continuing resolution votes on the 2016 budget until the end of Obama's term. Vilsack said that would be a mistake because if Congress did choose to cut a program for FY 2017, an agency would have much less time to adjust if Congress waited until next January or February.
A department could also fear cuts and hold back on spending, translating into a loss of spending on jobs, research or projects in rural America, Vilsack said. "It's important to focus on the results to people that come from a budget, and every time you create confusion, you are going to compromise the results that matter to people," Vilsack said.
Under USDA's budget, 71% of funding goes to nutrition assistance, which is predominately the Supplemental Nutrition Assistance Program; 16% goes to farm and commodity programs; 7% goes to conservation and forestry; and 6% goes to everything else, including rural development and research.
Due to lower commodity prices, USDA anticipates higher spending for the Agricultural Risk Coverage and Price Loss Coverage programs for 2017. The programs were estimated to cost $5.54 billion in FY 2016, but that spending is budgeted to increase to about $9.6 billion combined for ARC and PLC in 2017.
Payments for all direct subsidies, including dairy, are projected to increase from $6.7 billion in FY 2016 to $10.2 billion in 2017.
The budget will also fund staff and office space for USDA personnel in Cuba. The goal of the budget proposal was to alert Congress to the potential for expanded trade with the island, based on the notion that Cuba imports roughly 80% of its food. That too would require approval from Congress.
"We believe having people in Cuba would help facilitate opportunities now and in the future and prepare us for a very robust effort when the embargo is lifted," Vilsack said.
In a plan promoted by Vilsack, the White House also calls for boosting funds for agricultural research and development programs, including $700 million for the Agriculture and Food Research Initiative (AFRI) of which $325 million would be mandatory funding. This would be essentially double the funding level at AFRI for 2016.
In another R&D investment, USDA would get $106 million for grains to help spur more bio-based energy sources from agricultural and forest products to further boost the production of biofuels.
Under the budget plans, USDA would also continue heavy promotion of soil health practices at the Natural Resources Conservation Service, as well as continue monitoring greenhouse-gas emissions in agriculture. The White House noted, "This network is a key component of USDA's climate strategy as it would allow USDA to verify, for the first time, the United Nations Framework on Climate Change reporting and would provide the foundation for a farm-scale database to house soil carbon data."
Regarding wildfires, the administration calls for increasing base funding at the U.S. Forest Service by 70% of the agency's 10-year spending average for fire-suppression costs. The plan would also ensure a share of that money would be reserved for the most severe fires.
Regarding water projects, USDA would get $15 million for research on water projects for agriculture production and practices that conserve water and build health soils that retain water. The White House noted that agriculture is the largest consumer of fresh water in the country.
The full budget proposal for USDA can be viewed at http://www.obpa.usda.gov/…
The full federal budget proposal can be viewed at https://www.whitehouse.gov/…
Chris Clayton can be reached at Chris.Clayton@dtn.com
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