The 2014 farm bill included a negotiated rate of return of 14 percent for companies providing federally subsidized crop insurance to farmers. The budget compromise between congressional leaders and the White House unveiled this week would re-open that five-year agreement and reduce the rate of return to 8.9 percent. This would save approximately $3 billion over the next 10 years, but may cost the budget deal some support.
U.S. Sen. Roy Blunt, R-Mo., says that proposed change is just one reason he’s opposed to the budget plan being advanced on Capitol Hill this week. “But it’s a big enough problem that already the people who crafted the deal are saying, 'Well, it’s something we’ll have to work out later this year',” Blunt told reporters in a conference call Wednesday morning.
He says the proposal creates an unnecessary problem for lawmakers to confront. “Let’s have the fights we need to have. Why would we want to manufacture a problem that now we think we have to go back and solve?” Blunt said.
U.S. Sen. Claire McCaskill, D-Mo., sees the proposal to reduce the rate of return for insurance companies in the federally subsidized program differently. In a reply to an email query, she said, “From what I’ve seen of this provision, it’s something I would tend to support - we’re talking about saving taxpayer dollars in a way that won’t directly impact the bottom lines of farmers.”
Garrett Hawkins, director of national legislative programs for the Missouri Farm Bureau, says the immediate impact of the proposal would force crop insurance providers to renegotiate their rate of return with the U.S. Department of Agriculture. He said that forcing down the rate of return may cause some companies offering crop insurance to exit the business, making it harder for farmers to find crop insurance down the road.
Hawkins says the rate of return for those companies “hasn’t been that great anyway.” He says that while there have been a “couple of good years … when you look at disasters, we’re back down again in terms of the industry.”
Hawkins says that since 2008, Congress, has made deep cuts in the traditional safety net for farmers to save money. “But everyone agreed that crop insurance should be the main pillar, the main risk management tool for America’s farmers … and that’s what we walked away with in the 2014 farm bill.” He says “from a fundamental stand point, Congress made a commitment to farmers, and now they’re backing away.”
The chairmen and the ranking members on both the Senate and House Agriculture committees issued combined statements Tuesday sharply critical of the plan. The group says both committees were left out of the secret negotiations.
Some see a more sinister objective at work in the plan to renegotiate crop insurance rates. “Make no mistake, this is not about saving money. It is about eliminating federal crop insurance,” said Rep. K. Michael Conaway, R-Texas, chairman of the House agriculture committee. He says the provision is opposed by an “overwhelming majority of our committee members” and was defeated during the 2014 farm bill process.
Senate agriculture committee chairman Pat Roberts, R-Kan., said, farmers and ranchers “have done more than their fair share to reduce government spending. To target the number one priority for producers with additional cuts will undermine the deliver of this important protection for agriculture.”
