Lawmakers Propose New Cuts in Crop Insurance
Critics of federal crop insurance are proposing to cut about $24 billion from the program, far more than what was included in a congressional budget agreement.
Bills being introduced in the House and Senate would cut $19 billion over 10 years by eliminating the Harvest Price Option on revenue policies. The rest of the savings would come from slashing returns to crop insurance companies and agents and cutting farmers' premium subsidies. The program is estimated to cost about $8 billion to $9 billion a year.
The legislation, known as the Assisting Family Farmers through Insurance Reform (AFFIRM) Act, includes a $3 billion reduction in insurers' rate of return that is contained in the budget deal President Obama signed into law on Monday, but Senate and House Republican leaders have pledged to reverse the cut before it can take effect. Under the provision, the insurers' rate of return would be reduced to 8.9%.
“The AFFIRM Act makes sensible changes to our nation's crop insurance program to reduce unnecessary subsidies directed toward our country's largest and most profitable farms and agribusinesses,” said Rep. Jim Sensenbrenner, R-WI, who is cosponsoring the House bill with Wisconsin Democrat Ron Kind.
“These important reforms not only strike a better deal for taxpayers but will have no out of pocket expense to farmers,” Kind said.
Sen. Jeff Flake, R-AZ, is introducing the Senate bill.
The bill represents a collection of cuts that have been proposed to crop insurance in Congress by Kind, Flake, and others, or by the White House in recent years. The provisions include a $40,000 cap on premium subsidies and a means test for premium subsidies that, when combined, would save $2.3 billion over 10 years. Farmers with more than $250,000 in adjusted gross income would be ineligible for premium subsidies under the bill.
A version of the AFFIRM Act introduced in 2013 was estimated to save $11 billion.
The new bill would also cap insurers' administrative and operating costs at $900 million a year, saving the government $3 billion over 10 years.
Meanwhile, another critic of the program, Sen. Jeanne Shaheen, D-NH, wrote to Majority Leader Mitch McConnell and Minority Leader Harry Reid this week to urge that they keep the $3 billion cut to insurers' rate of return.
House Agriculture Chairman Mike Conaway, R-TX, said the leadership's agreement would require the $3 billion in savings to be made up somewhere else in the federal budget outside of agriculture programs. Conaway secured the commitment with the backing of a lobbying effort by farm groups as well as crop insurers.
A Democrat on the House Agriculture Appropriations Subcommittee, Rosa DeLauro of Connecticut, expressed concern to Agri-Pulse on Wednesday that the money could be cut from nutrition assistance or other programs. "Where then does that $3 billion get made up? ... It's a real concern to me."
The $24.4 billion savings estimate for the AFFIRM Act doesn't include the $3 billion cut that's in the budget agreement, since it has been enacted.
Written by Philip Brasher for Agri-Pulse Communications, Inc.