World Perspectives, Inc. / Dave Juday / April 4, 2001
The annual budget process that determines the ultimate outcome of federal farm support programs has gotten underway in earnest in Washington. Though the Administration's budget will soon be detailed, Agriculture Secretary Ann Veneman provided testimony before the House Budget Committee a couple of weeks ago and broadly outlined the Administration's budget priorities. According to the Secretary, the Administration's "crown jewel" of legislative priorities, the tax cuts, provide great benefits for farmers and ranchers. The tax cuts also constrain the money that the Administration has to pencil in for farm programs.
The House passed a plan that provides a window of opportunity for the House Agriculture Committee to report on reforms to the farm bill. The Senate is likely to approve its budget resolution this week and the Agriculture Committee has submitted a broad outline of priorities that may also lead to farm bill reforms. The following is a summary of the action on these three fronts: the Administration, the House and the Senate.
Administration plan
Highlights of the Administration's spending plan for Fiscal Year 2002:
Reduces the U.S. Department of Agriculture's discretionary spending to $17.9 billion, down from $19.4 billion in FY 2001, a level that the Administration deems "unsustainable over the longer term." The FY 2002 amount is still about 5% more than the FY 2000 level.
Eliminates approximately $1.1 billion in one-time spending funds, mostly for emergencies. It also eliminates approximately 300 earmarked research projects, saving about $150 million, and it proposes savings of almost $200 million by reducing or eliminating programs that are of lower priority or need to be better targeted.
Encourages expansion of overseas markets by funding efforts to strengthen USDA's market intelligence capabilities and the department's expertise for resolving technical trade issues with foreign trading partners. The department will also strengthen analytical capabilities in agencies such as the Foreign Agricultural Service, Food Safety and Inspection Service, Agricultural Marketing Service, and the Grain Inspection, Packers and Stockyards Administration.
Redirects USDA research to give new emphasis to key areas such as biotechnology, the development of new agricultural products, and improving protection against emerging exotic plant and animal diseases, and pests of crops and animals.
Provides funds for the continued implementation of other key initiatives, including crop insurance reform and livestock price reporting.
The President's overall federal budget has a nearly $1 trillion contingency fund "in reserve for unforeseen needs." According to Secretary Veneman, "potential farm crises" are "exactly the type of unanticipated emergencies" that the contingency fund is for. Critics of the plan, like Ranking Democratic Member of the Senate Budget Committee Sen. Kent Conrad (D-ND), charge that Social Security and Medicare will eat up the contingency fund before agriculture has a shot at the funds.
House budget
The House Budget Committee passed, mostly on party lines, its version of the FY 2002 federal budget on March 21. Essentially, the plan reduces the Congressional Budget Office (CBO) baseline of budget authority by $1.5 billion on the assumption crop prices will increase enough to lower support program payments. This is an assumption that the Senate Agriculture Committee calls into question, however.
It should be noted that the House is almost always stingier with agricultural spending than the Senate. The House is apportioned by population; therefore farm states have much less representation as a percent of the House membership than they do in the Senate, which is apportioned by geography, that is, the states, giving farms states a greater presence.
The House budget does not address emergency payments, which is perfectly routine as emergency payments are by nature off-budget. Over the past three years, emergency payments have totaled $27 billion but have been off-budget and therefore are not incorporated into the baseline. However, the House budget also creates a "strategic reserve fund" similar to the Administration's contingency fund concept, totaling $513.9 billion that can be tapped for increased agricultural spending in FYs 2002-11. In fact, defense and agriculture are the only categories of spending that have explicit authority under the budget language to dip into the fund. For agriculture to access the monies, however, the House Agriculture Committee must report out a bill that authorizes and allocates the new spending by 11 July. If the committee does report such a bill, which would be the fruits of the ongoing policy hearings with the various commodity groups, then the House Budget Committee would adjust agriculture's budget.
Senate Priorities
The Senate Agriculture Committee leadership -- Chairman Richard Lugar (R-IN) and Ranking Minority Member Tom Harkin (D-IA) -- submitted the committee's views on the agriculture budget to the Senate Budget Committee in a letter on 19 March. The letter was short on specific requests but laid out the probability that farm spending would be higher than the CBO baseline. The senators noted that USDA projects FY 2001 net farm income to fall 9%, to $41.3 billion, but that is an "early projection" and is "uncertain and may mask conditions in individual commodity markets."
Other priorities outlined by Sens Lugar and Harkin on behalf of the Committee:
The agriculture committee is "hopeful that the Budget Committee will provide the Agriculture Committee with the necessary flexibility to craft needed policy changes" in light of the cumulative $25 billion in emergency aid the last three years.
CBO's baseline for Commodity Credit Corporation spending and crop insurance average a combined $13.1 billion over the 2002-2011 period, which is $3.6 billion lower than actual spending averaged for these programs over the past five years.
The agriculture committee "strongly supports voluntary incentive-based conservation programs" and strongly hints at the need for more money, though it does not make an outright request/proposal.
Like the Administration, the Senate committee recognizes that changes in tax law could help farmers "manage their finances in times of volatile markets."
Because of high energy costs, "we also support substantially increasing our funding of competitive research on renewable sources of fuel."
The most interesting point in the committee's letter is its desire "that the Budget Committee will provide the Agriculture Committee with the necessary flexibility to craft needed policy changes." This very much fits into the mold of the House Budget Committee's strategic fund, which gives the Senate Agriculture Committee until July 11 to come up with a plan to increase the baseline.:
