NACIA Washington Update
May 8, 2009

Yesterday, the Administration released the details of it Fiscal Year (FY) 2010 budget request. As you may remember, our February 26 update discussed the initial budget request sent to Congress, which included $2.05 billion in cuts to the crop insurance program over 5 years. Due to the fact that it is a new Administration, and they were still in the midst of the transition period, that request was not as specific as the typical requests. Yesterday, the details of the initial request were released. Included in those details are potential changes to the crop insurance program leading to over $5 billion in cuts over the next 10 years. If you have been listening to the nightly news, you may have heard that the President’s budget saves $17 billion this year – a mere trim of approximately one half of one percent (0.48%), considering the $3.5 trillion budget. It is very surprising to us that in difficult economic times, the President would choose to obtain such a significant portion of savings through cuts to crop insurance – a vital program directly aimed at providing a safety net to our farmers in rural America.

While the budget request is simply a request, and does not immediately make changes to the program, it serves to lay out the Administration’s priorities, identify programs to cut, and single out sources of funding. So any Member of Congress that is looking for a funding stream for his or her particular pet project now knows that they can take that money from the crop insurance program, and most likely have the support of the Administration. Basically, there is now a rather large target on the back of the crop insurance program. 

Congress has already passed the budget resolution (also non-binding, but serves as spending guidelines for Congress; details in our April 30 update). There were no cuts to the crop insurance program in the resolution, but from now on we will need to be very vigilant regarding any opportunity for the program to be tapped for money, whether it be the appropriations process, reauthorizations, or other legislation. 

The details request released today proposes $5,184,000,000 in cuts over 10 years. These cuts would come in three forms:

• Cut the premium subsidies to farmers on all coverage levels by 5 percentage points;
• Increase the portion of underwriting gains the government takes from the companies by 15 percent – from the 5 percent it is now to 20 percent; and
• Change the premium on Catastrophic Crop Insurance and charge a sliding scale fee for CAT coverage from $300 up to $5,000, depending on the crop value.

The rationalization given for theses cuts is as follows: they stated that programs created in the 2008 Farm Bill such as SURE and ACRE reduced the need for premium assistance to farmers, that the higher level of coverage that farmers have been selecting demonstrates that the higher premium subsidies to encourage participation are no longer necessary, and that the underwriting gains change would reduce a corporate subsidy that has grown disproportionately. In their explanations, they cited testimony form the Waxman-Cooper Oversight hearing held in 2007, as well as two GAO reports issued in 2005 and in 2007. 

The portion of the detailed budget request pertaining to crop insurance can be found on the NACIA website here.

As always, if you have any questions, please do not hesitate to contact us. 

Brent W. Gattis
NACIA Washington Representative
www.nacia.org