Posted by: Phillip Fraas
March 31, 2007
Topic: REPORTS ON FARM BILL STATUS--First Half of 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 Farm Bill Budget Picture Gets Clearer; Supplemental Appropriation Could Affect The Farm Bill Process

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