The White House budget proposal for Fiscal Year 2013 beginning October 1, proposes a USDA budget of $22.9 billion in discretionary budget authority, which is down $698 million from FY 2012. Additionally, mandatory programs are proposed for $127.7 billion, which is up $5.7 billion from FY 2012, primarily due to increased crop insurance outlays. While the President’s message about the USDA budget did not address crop insurance because it is proposed elsewhere for substantial cuts, the White House did indicate it was going to save $32 billion over 10 years with elimination of direct payments, cuts to crop insurance, and elimination of disaster assistance. But there were also plenty of cuts being proposed elsewhere in the FY 2013 budget.The White House budget overview for the US Department of Agriculture outlined many efforts to streamline the department, reduce expenses from duplicative programs, but also to spend more on research, promotion of biofuels, and improvement of water quality. Regarding biofuels, “This Budget provides $19 million in assistance to agricultural producers and rural small businesses to complete a variety of projects, including renewable energy systems, energy efficiency improvements, and renewable energy development. Finally, the Administration proposes over $200 million to continue support for the development of homegrown, advanced biofuels that have the potential to reduce America’s dependence on foreign oil and to bolster our rural economies.”There were several significant cuts in the budget, including trimming crop insurance, eliminating the direct payment program, and cuts to the Conservation Reserve Program. Here are the details proposed by the White House on Monday.1) Commodity Payments to Farmers would be cut $22.668 bil. over 10 years. The budget message said, “Providing income support payments to farmers that are experiencing near record incomes is not prudent. In fact, more than 50 percent of direct payments go to farmers with more than $100,000 in income. Economists have shown that direct payments have priced young Americans out of renting or owning the land needed to enter into farming. In a period of severe fiscal restraint, these payments are no longer defensible.”2) Conservation Reserve Program would be cut $997 mil. over 10 years. The budget writers proposed that, “CRP will be capped at 30 million acres by 2013 (saving an estimated $977 million in outlays over 10 years) by gradually reducing the acreage enrolled in the program through attrition. High commodity prices have lowered demand for enrollment in CRP as more farmers look to increase planted acres.”3) Crop Insurance Program would be cut $7.6 bil. over 10 years. What is proposed is a combination of cuts in premium subsidies and payments to crop insurance companies for administering the program. “The Administration is proposing to lower the crop insurance companies’ ROI to meet the 12 percent target, saving $1.2 billion over 10 years. The Administration, therefore, proposes setting the cap on administrative expenses at $0.9 billion (2006) adjusted annually for inflation, which would save $2.9 billion over 10 years.For premium subsidy changes, the Administration proposes to reduce the premium for catastrophic (CAT) coverage policies, which will slightly lower the reimbursement to crop insurance companies. The premium for CAT coverage is fully subsidized for the farmer, so the farmer is not impacted by the change. This change will save $255 million over 10 years.In addition, the Administration is proposing to reduce producers’ premium subsidy by two basis points for all but catastrophic crop insurance, where the subsidy is greater than 50 percent. This will have little impact on producers. Most producers pay only 40 percent of the cost of their crop insurance premium on average, with the Government paying for the remainder. This cost-share arrangement was implemented in 2000, when very few producers participated in the program and “ad-hoc” agricultural disaster assistance bills were passed regularly. The Congress increased the premium subsidy for buy-up coverage by over 50 percent at the time to encourage greater participation. With current participation rates, the deep premium subsidies are no longer needed. This proposal is expected to save $3.3 billion over 10 years.”Among the other budget cuts and consolidations4) $5 million is cut from the Agricultural Marketing Service by eliminating the Microbiological Data Program. “It is has a low impact and is not central to the core mission of AMS, which is to facilitate the competitive and efficient marketing of agricultural products.”5) $2 million is also cut from the Agricultural Marketing Service by eliminating the Pesticide Recordkeeping Program. “PRP is a lower-priority program because it is not central to the core mission of AMS.”6) All $1 million would be cut from the Electric Guaranteed Underwriting Loan Program. “This program is entirely duplicative of the Rural Electric and Rural Telecommunication loan programs administered by RUS. In addition, over the past several years the Electric Guaranteed Underwriting program has had only one active applicant and very few actual disbursements.”7) Cut all $20 mil from ag, forestry, and fishing programs of the National institute of Occupational Safety and health of the Centers for Disease Control. “AgFF is one of 10 sectors that CDC has been focused on over several years. There have been positive accomplishments from this program. However, given the relation to CDC’s mission and the ability to have a national impact on improved health outcomes, the AgFF program has been designated as a low priority program and proposed for elimination.”8) Farm Service Agency Discretionary Conservation Programs would lose all $5 million. “The Hardwood Tree Reforestation Pilot Program and Grassroots Sourcewater Protection Program are lower-priority programs and duplicative of other private lands conservation programs administered by the Department of Agriculture.”9) Health Care Services Grant Program would lose all $1 million. “Health care services, health education, and health care training programs are not programs that USDA has experience evaluating or implementing. HHS, however, has expertise in this area and has programs that support similar goals. For example, HHS allocates over $2 billion for a Health Center grants program that supports services to the underserved in rural as well as urban areas.”10) Pest and Disease Programs would see a cut of $54 mil of the $816 million budget. “Examples of programs that are being reduced or eliminated are: Johne’s Disease; Cotton Pest; and Chronic Wasting Disease programs. These reductions will allow the Department of Agriculture (USDA) to focus on areas where it can achieve success.”11) Public Broadcasting Grants would be cut $3 million and eliminated. “Moreover, the USDA Public Broadcasting Grants program is duplicative and significantly smaller than the digital conversion activities of Corporation for Public Broadcasting (CPB). Since CPB funds a variety of public broadcast needs, including digital conversion, future needs should be funded through CPB.”12) Research, Education and Extension Grants would see a cut of $31 million. “The Department of Agriculture (USDA) funding for research, education, extension, and integrated grants is awarded through competitive peer-reviewed grants, and formula programs largely to land grant institutions and other programs based on purposes defined in authorizing legislation. However, there are some programs that are of lower-priority, and are also relatively small in size and do not have a large impact. The 2013 Budget eliminates funding for 15 of these programs (10 in research and education, three in Extension, and two in integrated), saving about $31 million.” The grant programs targeted for elimination include: Animal health, rangeland restoration, critical agricultural markets, supplemental and alternative crops, Farm business management, capacity building for non Land Grant colleges, policy research grants, rural health and safety, forest products, food animal residue avoid database, methyl bromide transition program, sungrants, youth organizations, water quality, and potato breeding.13) Rural Business Opportunity Grants would have a cut of all $2 million. “The Administration proposes to eliminate funding for the lower-priority Rural Business Opportunity Grants (RBOG) program because many of the activities funded under RBOG can be accomplished though the Rural Business Enterprise Grants (RBEG) program.”14) High Energy Cost Grants would lose all $10 million. “The Rural Utility Services Electric Loan Program and High Energy Cost Grants program are duplicative, having similar goals to provide reasonably priced electric service to rural residents. Low-interest electric loans are available to most rural areas with more favorable rates in areas where borrowers have low revenue per kilowatt sold and the average per capita income of residents is below the State average. In contrast, only Alaska, Hawaii, the territories, and a few isolated areas within the continental United States qualify for the grant program based on their high energy costs. The areas eligible for grants are also eligible for low-cost electric loans through RUS.”15) Rural Multifamily Housing Preservation Grants would have all $4 million cut. “Since 2006, USDA has found that multifamily housing preservation is achieved more efficiently through these revitalization strategies rather than preservation grants. Collectively across multiple programs, the funding for multifamily housing preservation activities within USDA’s Rural Housing Service is increased overall by $7 million for 2013.”16) Rural Single Family Housing Grant Programs would lose $22 of $60 million. “It is expected that some of the shortfall in funding will be made up from additional funding in their related direct loan programs and the small amount of carryover balances that regularly occur in these programs.”17) Single Family Housing Direct Loans of $43 million would be cut by $4 million. “The program has struggled to make a measurable impact due to straight-lined funding levels, an allocation process that diminishes loan making ability by broadly distributing funding, and a labor-intensive review process. At the same time, USDA has effectively used the guaranteed single family housing loan program to provide needed assistance to low-income borrowers.”18) State and Volunteer Fire Assistance Grants would have a cut of $15 of $99 million. “Other programs provide support to State and local fire organizations including USDA’s community facilities program and the Department of Homeland Security Firefighter Assistance Grants programs (Assistance to Firefighter Grants and Staffing for Adequate Fire and Emergency Response Grants). These other programs can support the purchase of equipment, training of personnel and staffing.”19) Water and Wastewater and Community Facilities Loan Guarantees would be eliminated with a cut of all $6 million. “The defaults in these programs have been much higher than initially projected. In addition, there has been very limited demand for the water and wastewater loan guarantees. Meanwhile, the direct loan programs have very low defaults, while serving much lower-income communities.”20) Watershed Rehabilitation Program would lose all $15 million. “The program has provided an incentive for communities benefiting from the program to allow residential and commercial development in vulnerable floodplain areas in and around watershed structures. This increased development has contributed to the deterioration of the structures and increased the financial risk of structural failure.”21) Economic impact grants would lose all $6 million. “The Budget proposes no funding for the duplicative economic impact grant program, which are grants for communities suffering from high unemployment and out-migration to finance community projects such as fire stations, medical clinics, and day care centers. These activities can be funded with the Department of Agriculture’s (USDA’s) community facilities grant program.”22) Additionally, the White House wants to save $240 million over 5 years through USDA office consolidation. It says, “USDA reviewed all of its operations, from headquarters to field offices, to determine what offices could be closed or consolidated. In some cases these offices are no longer staffed nor have a very small staff of one or two people, and many are within 20 miles of similar USDA offices. In other cases, advances in technology have reduced the need for brick and mortar facilities. The end result is a plan that will create optimal use of USDA’s employees, better results for USDA customers, and greater efficiencies for American taxpayers.”Summary:The Fiscal Year 2013 budget proposal calls for a savings of $7.955 bil. from USDA cutbacks in 2013. Some of those were not a surprise, such as the planned elimination of the direct payment program, but there were many other cuts that were surprises. Throughout the federal budget there were many other departments with rural service programs that were being cut. The Congress has to consider the budget, and with the political dysfunction in Washington, many changes are expected, but there could be programs that are cut even further.
By Stu Ellis
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