Posted by: Phillip Fraas
September 17, 2007
Topic: REPORTS ON FARM BILL STATUS--Second Half of 2007

On September 11, Sen. Max Baucus (Dem.-Montana), Chairman of the Senate Committee on Finance (the tax-writing committee), unveiled an agricultural assistance package that effectively will complement and supplement the work the Senate Committee on Agriculture is doing on the farm bill.

BACKGROUND ON THE BUDGET PROBLEM: A serious problem both the Senate and House agriculture committees have faced since they began work crafting the new farm bill earlier this year is finding additional money beyond the 2002 farm bill base line to fully fund the 2007 farm bill they would like to see put in place.

If the House and Senate agriculture committtees were just interested in extending the 2002 farm bill, they wouldn't have these budget problems because Congress has authorized for the new farm bill an amount of money equal to that needed to keep 2002 farm bill programs going (i.e., the baseline). However, they perceive their charge in drafting the new farm bill to be to update its provisions to reflect changes in the farm landscape since 2002. As a result, they see the need to change or strengthen some existing programs, beef up funding for others, and authorize new programs, many of which actions will require new spending beyond the baseline and almost none of which will reduce spending. The result: a desperate search for money is an integral part of the 2007 farm bill process.

THIS YEAR'S APPROACH--BRING IN THE TAX COMMITTEES EARLY IN THE PROCESS: What has happened so far this year is a change from the recent past in the way the farm bills are funded. In previous years, the farm bill and budget processes moved on separate but parallel paths. The agriculture committees would draft the substantive farm policy provisions they believed should be included in the bill without budget strictures dominating the process (of course, they always kept looking over their shoulders at the budget process as they did their drafting). During the course of the year that the farm bill was being drafted, Congress would also be working on budget reconciliation measures needed to to keep Federal spending deficits in check, and would give the agriculture committees instructions to reduce farm bill spending as part of that budget reconciliation process. Then, the agriculture committees would revisit the farm bill and trim it as needed to meet the budget reduction instructions they had been given

This time, the budget and farm bill processes effectively have merged, with the funding issue to be taken care of at the same time the farm bill is passed. In the House, the agriculture committee drafted farm bill provisions that stayed within the budget baseline. By doing so, the committee had to forego some policy options they otherwise would have approved, put others on hold, and cut yet other spending to pay for new policy proposals. Then, just before the farm bill went to the House floor for debate, the House leadership prevailed on the Ways and Means Committee to find dollars in revenue offsets (that is, legislative measures that would increase government tax payments) that could be used for much of the new spending in the farm bill the Agriculture Committee would have approved but couldn't because of the budget. The Ways and Means measures, along with the desired increases in spending, were tacked onto the farm bill during the floor debate.

In the Senate, as reflected in Sen. Baucus's announcement, the Committee on Finance similarly looks to put itself in the middle of the farm bill process by finding added money for farm programs.

THE BAUCUS PROPOSAL: Sen. Baucus says that his package will take some of the budget pressure off the Agriculture Committee as it drafts the farm bill. by eliminating the need for Agriculture action on the programs covered by it. He says he will seek action by the Finance Committee very soon; and likely his committee will act in tandem with the Agriculture Committee as it marks up the farm bill.

Here is a summary of the major provisions of his package:

--Establishment of a permanent agricultural disaster assistance trust fund, paid for by changes in laws under the Finance Committee's jurisdiction (such as the tax laws).

--Authority for farmers who currently receive cash payments for participation in soil and water conservation programs to choose instead to receive tax credits.

--Creation of a new category of tax credit bonds for rural development projects.

--Creation of tax incentives for alternative energy and to encourage farmers to grow alternative crops used to produce bio-fuels (these could be handled seperately as part of the omnibus energy bill working its way through Congress now).

I haven't seen any estimates on the price tag of this package, but it likely will be in the billions.

TWO DIFFERENT APPROACHES: What House Ways and Means did is just go out and raise additional funds through revenue-enhancement measures not tied to farm policy, and turn the money over to the Agriculture Committee for use in the farm bill. What Sen. Baucus proposes to do is to fund farm policy initiatives that will have the effect of reducing the need for new spending in the farm bill, but keep jurisdiction over these initiatives at the Finance Committee. It remains to be seen if Sen. Tom Harkin, Chairman of the Senate Committee on Agriculture, will be satisfied with this approach. So far, indications are that he won't. Thus, as in the House, at the end of the day it likely will take action by the body's leadership to get the farm bill over its budget hump.

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