The Farm Bill Budget Picture Gets Clearer; Supplemental Appropriation Could Affect The Farm Bill Process
Posted by: Phillip Fraas
March 31, 2007

THE BUDGET PICTURE

Late this week, the House of Representatives joined the Senate in passing a budget resolution governing federal spending and taxes for 2008 and the four succeeding fiscal years.  (Notwithstanding the resolution's five-year length, the budget process is an annual event, with fresh takes on the five-year projections made each year.)

The House budget proposal looks very similar to the Senate's when it comes to funding for the farm bill. Neither resolution will provide direct authority for new farm bill spending beyond the current programs baseline amount. The House, like the Senate however, did authorize the establishment of a "reserve fund" that the Agriculture Committee could tap as needed to craft the farm bill--the House reserve is set at $20 billion while the Senate's is $15 billion. An important caveat must be applied to both: spending from the reserve is still subject to the congressional "pay go" rules, that is, if spending is increased above the baseline, it must be offset by reduced spending elsewhere or by increased revenues.

 In effect, the creation of the budget reserve is like a credit card company increasing your spending limit. You can buy more, but you will have to "offset" those purchases, i.e., you have to pay the money back. 

The House and Senate Budget Committees will now meet in conference to resolve the differences between their resolutions, and submit their conference report to both houses for final approval. If all goes as scheduled, that process will take place over the next few weeks.

However the conference report ends up, the bottom line is that the Agriculture Committees likely will be limited to the current services baseline in funding a new farm bill. So, if any member wants to change a farm bill program in a way that increases its spending, he will have to take money from some other farm bill program. Farm bill lobby groups might end up having to spend as much time guarding their current programs from poaching as in seeking enhancements to their programs.

SUPPLEMENTAL APPROPRIATION

Moving through Congress now is a fiscal year 2007 supplemental appropriation bill to provide added funds for the Iraq war. Both houses have passed the measure, and it too will now go to conference committee for resolution of House-Senate differences.

 The bill include riders to the bill to provide disaster assistance funds for farmers and extend the MILC program, a farm bill measure which provides payments to dairy farmers when milk prices are low. There is a good chance that, once the dispute between the President and Congress on the Iraq pull-out deadline is resolved and the supplemental becomes law, the disaster assistance and MILC provisions will be in there, which will alter the course of the farm bill debate.

Currently, the MILC program expires at the end of the eleventh month of fiscal year 2007, that is, on August 31. Because it does not run to the end of the fiscal year, under congressional budget scoring protocols, MILC is not included in the farm bill baseline. So, as it stands now, if Congress wanted to extend MILC for five years in the new farm bill, it would have to find spending or revenue offsets of about $1.2 billion to avoid violating the "pay go" rule. To avoid this, a provision was included in the Senate supplemental to extend the program for one month, at an estimated cost of $31 million--a small cost indeed for getting the $1.2 billion cost of a farm bill extension into baseline. The House took a different approach, extending the program for an entire year, and switching the program from the farm bill to another baseline.

It's hard to say which version will prevail in conference. The two authors of the MILC amendments both will be key members of the conference committee--House Appropriations Committee chairman David Obey (Dem.-Wisc.) and Senator Pat Leahy (Dem.-Vt.), and both will energetically advocate their approach.

The supplemental also includes about $4 billion in emergency spending for recent farm disaster losses. If substantial disaster emergency funding stays in the bill, that might take pressure off the Agriculture Committees to fund that assistance in the farm bill and, by extension, will change the tenor of the farm bill debate on long-term reform of the disaster payment programs. The Chairman of the House Agriculture Committee, Collin Peterson (Dem.-Minn.), has spoken forcefully about the need to replace ad hoc annual disaster payment appropriations with a permanent program and, no doubt, will give serious consideration to including the permanent program authority in the farm bill. But, if this year's disaster needs are already met when Congress drafts the farm bill, there won't be the leverage created by immediate need to build support for adding disaster payments legislation. That's not a huge problem, but it does change the atmosphere in which permanent disaster payment reform will be discussed.

NOTE: Look for a discussion of the nutrition program provisions of the farm bill in my next posting.

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The Agriculture Committees Begin Work Crafting The Farm Bill
Posted by: Phillip Fraas
March 16, 2007

Most of Congress's work in crafting a new farm bill will be done by Senate and House Agriculture Committees. These two committees get handed all the work because the farm bill issues tend to be highly technical requiring specialized expertise. The rest of Congress, to a large degree, depends on the 21 Senators and 46 representatives who sit on those committees to come up with farm programs that will best serve the national interests.

The two committees have gotten off to a good start this year in developing the new farm bill. They are holding hearings, it seems like, every other day; and they have already submitted their requests for budget authority to fund what goes into the bill. Further, the committee chairmen recently sketched out an ambitious work schedule for the year.

BUDGET AUTHORITY STILL UP IN THE AIR: As noted in my last blog posting, the shape of the new farm bill will be dictated, to a considerable degree, by how much spending authority Congress allocates to the Agriculture Committees. The committees have submitted their requests to the Budget Committees and now  eagerly await their verdicts as what the Budget Committees recommend likely will be approved by the full membership of the two houses.

The House Budget Committee is expected to release its recommendations next week. On the Senate side, the Chairman of the Budget Committee, Kent Conrad (Dem.--N.D.) earlier this week recommended that a "budget-neutral" reserve fund of $15 billion be allocated to the Agriculture Committee for the farm bill in addition to the baseline amount (which is the amount farm programs would spend in the future if current programs are continued without change). "Budget neutral" means that the Agriculture Committee could tap the reserve to increase farm bill spending, but to do so would have to reduce spending in other areas so that there is no net increase in government spending overall.

While I haven't seen theCongressional Budget Office's five-year baseline for the farm bill, USDA calculates a baseline of about $61 billion a year for the next ten years. USDA, by the way, recommends an increase in spending of about $5 billion over the baseline for those ten years. And, today, The Washington Post, in an editorial, urged the Budget Committees not to approve any more than that $5 billion increase.

The budget surely will be a problem for the Agriculture Committees because the farm bill baseline simply is not big enough to accommodate all the programs recommended for inclusion in it. This is not a newly-minted problem peculiar to this year. Except in times of budget surplus, as in 2002, the Agriculture Committees have always had to fight tooth and nail for increases in farm spending. There is no surplus this year, so no one expects the Budget Committees to allocate substantial increases for the farm bill, or either house to waive budget points of order against farm bill spending in excess of the baseline.

FARM BILL SCHEDULE: Based on my discussions with people on Capitol Hill, it looks like the farm bill schedule will be as follows: Committee mark-up in June; floor debate and conference consideration in July; staff work drafting the conference report in August, and final passage in September.

If Congress adheres to those timelines, it will be the first time the farm bill will have been finished that early since 1977. For farm bills since, completion in late December has been the norm, and on occasion the debate has run over well into the following year.

The September deadline is important because farmers need to know what the price and income support rules are going to be well in advance of spring 2008 planting. Further, many other farm bill programs not tied to planting expire or need renewal by the end of this fiscal year, which is September 30. So, there is plenty of motivation for the chairmen of the two committees to meet their planned schedule.

DEVELOPING ISSUES: Increasingly, it looks as if the Agriculture Committees will not simply renew the existing the farm programs without change. As noted above, there are too many new players at the table whose needs must be accommodated with a budget that has no wiggle room for new programs. For example,

• the Committees have to deal with the need to fund increased biofuel research and development;
  
• a new permanent disaster assistance program could be considered;
  
• the needs of fruit and vegetable growers are on the front burner; and
  
• there are relatively new mandatory spending programs for rural development and research that seek additional funding.

Turning from budget issues, look too for an effort to be made to add a competition package to the farm bill to limit agribusiness consolidation.

Assuming committee mark-ups occur as scheduled in June, there will be intense jockeying among lobbyists in April and May to get their messages on the issues to the committees. In short, it looks like things will be busy from here on out.

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The Congressional Budget Process Begins; Its Effect On the Farm Bill--Yet To Be Determined--Will Be Significant
Posted by: Phillip Fraas
March 06, 2007

Early last month, Congress received the President's budget proposals for fiscal year 2008, which begins October 1 of this year; and the package is now being examined by the congressional budget committees, which have the task of putting together the congressional budget resolution for fiscal 2008 spending. This budget resolution will contain spending instructions that will affect the way the new farm bill is drafted.

THE CONGRESSIONAL BUDGET PROCESS: Here's how the congressional budget process works. The budget committees are now holding hearings and receiving the recommendations from the other committees that actually draft spending legislation. Then, the budget committees mark-up a "concurrent resolution" on the fiscal 2008 budget later this month or early April.

The concurrent resolution is not like appropriations bills or the farm bill, which actually authorize Executive Branch agencies to spend money. The concurrent resolution is just an internal document within Congress that sets limits on later spending legislation such as appropriations or the farm bill. Further, the resolution doesn't spell out precisely how much money to allocate to each piece of legislation. It just tells the committees with spending jurisdiction how much can be spent in each budget category, and leaves it to them to craft programs that meet the budget limits it imposes.

Once the budget committees come up with a proposal, the House and Senate vote on it and then meet in conference to resolve any differences they have on the resolution. Once conference is completed, the final version of the resolution is supposed to be presented for approval by both houses no later than April 15. Typically, Congress doesn't quite meet that deadline. As often than not, however, Congess does complete its work on the budget by mid May.  

THE BUDGET FOR THE FARM BILL: The President's February budget package included his recommendations for funding the new farm bill. And, just last Thursday, March 1, the House Committee on Agriculture submitted its recommendations to the House Committee on the Budget for fiscal 2008 agricultural spending legislation, including the farm bill. The Senate Committee on Agriculture, Nutrition, and Forestry can be expected to take similar action very soon.

The President's budget proposed a modest increase in spending over the current "baseline," which is the amount that budget experts estimate will be spent in the future if the current farm bill programs continue without change. The President's budget projects the 10-year baseline for the farm bill (for fiscal years 2008 through 2117) at $619 billion, and would increase that number by $5 billion if its farm bill proposals become law.

The biggest part of the farm bill spending by far is for nutrition programs, primarily food stamps. USDA projects the 10-year cost of the farm bill nutrition programs to be $436 billion.

By contrast, spending on the farm income and price support programs during this period is projected by USDA to be $75 billion, and USDA proposes cutting those programs by $4.5 billion. And, of importance to those with a direct interest in the farm bill programs, the USDA proposal would shift money among these programs--reducing spending on marketing loans and counter-cyclical payments, cutting spending further by tightening payment limits, and then funneling some of the savings into increased direct payments.

Last week's budget recommendations of the House Agriculture Committee released to the public did not include specific dollar recommendations. But, the four-page letter signed by both the Chairman and Ranking Republican did make clear the Committee's preference for just extending the the current farm bill programs without change. Also, it asks the House Budget Committee for an increase in its spending authority over the baseline to accommodate additional funding requested by the Administration in such areas as renewable energy, MILC payments, support for fruit and vegetable producers, and expanded soil and water conservation efforts.   

Assuming that the Senate Agriculture Committee seeks similar additional budget resources too (which is likely), the stage will be set for the budget committees to act on how much money the new farm bill should get. Given that the budget committees will be faced with the daunting task of reducing budget deficits, it will be no easy task for them to find the extra money the agriculture committees will want. If they do, the farm bill process will be much easier than if they keep the current baseline or even reduce it. If the latter happens, the agriculture committees will have to make tough farm bill choices: Money for renewable energy or for conservation? New funding for fruit and vegetable producers, or in the alternative keeping the current protection these growers have from grain and cotton growers who receive farm bill benefits planting their crops? The list of tough choices could go on and on.

 All the agriculture committees can do now is wait for the budget resolution to pass. Then, they can start working on the farm bill knowing how much they can spend. Then, they will know whether they are going to have a long hot summer or not. Stay tuned.   

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