Highway Bill Restores Crop Insurance Funding Cut in Budget Deal

December 4, 2015

The $305 billion highway bill that was agreed upon by the House and Senate and is on its way to President Obama’s desk has a little something for everyone, including farmers and crop insurers.

The five-year measure, called the Fixing America’s Surface Transportation Act or FAST Act, restores $3 billion in funding over 10 years for the $9 billion-a-year crop insurance program. The $3 billion was part of last year’s wide-ranging farm bill that was then cut in last month’s bipartisan budget agreement.

Top Republicans and Democrats in the House and Senate Agriculture committees opposed the $3 billion in cuts but lost in the budget negotiations.

U.S. Senate Agriculture Committee Chairman Pat Roberts, R-Kan., and Ranking Member Debbie Stabenow, D-Mich., applauded the restoration of the funds.

“I appreciate the dedication to America’s farmers shown by our leadership today in ensuring crop insurance remains the number one tool in our producers’ risk management tool box,” Roberts said. “I have worked my entire career to build crop insurance as a public-private partnership that best protects producers and taxpayers. My goal was to nip crop insurance cuts in the bud before cuts took effect to harm farmers, and I’m proud to say we’re one big step closer.”

“Crop insurance is a critical tool used by our farmers and ranchers,” said Stabenow. “The Farm Bill already made significant reforms and our farmers and ranchers need the certainty that these programs offer.”

Crop Insurers

Crop insurance companies had said the $3 billion in cuts over 10 years in their federal subsidies would be devastating to the industry. The Crop Insurance and Reinsurance Bureau, American Association of Crop Insurers and the National Crop Insurance Service welcomed the restoration of the funds.

“The crop insurance industry fully supports efforts to return crop insurance to where it was before the budget bill was passed. The budget bill contained a disastrous provision that would have devastated crop insurance as we know it today, harming U.S. farmers and taxpayers alike,” the groups said in a joint statement.

Charles Symington, senior vice president of external and government affairs of the Independent Insurance Agents and Brokers of America (Big “I”), said the the crop insurance budget cuts would have led to a “drastic reduction of services” and the possible consolidation or elimination of some crop insurance companies.

“Jeopardizing the program and its delivery system would have left farmers without adequate risk management tools to protect their land and their investments. This would have opened the door to additional taxpayer exposure should disaster strike. We applaud Congressional action to restore this critical funding to the program,” Symington said.

Crop Insurance Critics

However, environmentalists and other crop insurance critics never bought the argument that the cuts would be devastating. They argued the cuts would merely trim what they see as the “excessive profits” of insurers.

According to the Environmental Working Group (EWG), the $3 billion in cuts would have no impact on crop insurance availability or farmers’ premiums.

“The reality is that the cuts are a modest reduction in taxpayer support for crop insurance,” said Dr. Bruce Babcock, agricultural economist at Iowa State University and author of a report for EWG on crop insurance profits. The report is titled Cutting The Fat: It Won’t Kill Crop Insurance,

Babcock said the budget agreement, signed by President Obama in November, would have reduced the target rate of return for crop insurance companies from 14 percent to 8.9 percent, a margin the said is above the rate of return enjoyed by the insurance industry as a whole.

Babcock’s analysis claims that the insurers’ cost of delivering each policy has gone from an average of $628 in 2001 to $1,670 in 2013, with much of that increase due to higher wages for company personnel and higher commissions for insurance agents.

“Rhetorically, this is a Congress that applauds federal belt tightening, but in practice it hands out billions in taxpayer-funded giveaways to the crop insurance industry,” said Colin O’Neil, EWG’s director of agriculture policy.

The FAST Act, which targets $280 billion on roads, bridges and mass-transit projects, also revives the controversial Export Import Bank and addresses various auto safety, trucking and even railroad issues.

If signed into law by President Barack Obama, the FAST Act would be the first highway legislation in a decade to last longer than two years.

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