Straight From D.C.: The President's FY 2016 Budget Proposal

Straight From D.C.: The President's FY 2016 Budget Proposal

In early February, President Barack Obama submitted his budget proposal for fiscal year (FY) 2016, which begins on Oct. 1, 2015, to Congress. Because of the chaos that has characterized the federal budget process in recent years, this is the first budget proposal the President has presented on time since 2012. Overall, the President requests Congress spend nearly $4 trillion in FY 2016, which is 6% more than estimated spending levels for 2015. He also requests Congress terminate automatic spending cuts, or sequestration, a requirement that has been in place since 2013.

The proposal requests $148 billion for USDA programs in FY 2016, more than 80% of which is for mandatory programs, such as commodity support, crop insurance, conservation and nutrition assistance.

For the most part, the proposed budget would maintain farm and crop insurance programs in the 2014 farm bill structure. However, there are two significant changes proposed to the federal crop insurance program to improve the cost-effectiveness of the protection the program offers to farmers. In the past few years, several studies critical of the crop insurance program have focused on the substantial budgetary strain associated with providing harvest price protection to farmers insuring their crops with revenue policies.  

A 2013 study commissioned by the Environmental Working Group (EWG) found if revenue policies with harvest price protection (RP-HPO) had not been available to corn and soybean farmers affected by the 2012 drought, payouts under the crop insurance program would have been $2.8 billion to $6.7 billion lower. Critics believe RP-HPO policies overcompensate farmers for their losses in certain circumstances. The president’s budget does not propose eliminating the premium subsidy for the revenue portion of the RP-HPO policy, as recommended in the EWG study. Rather, it reduces the premium subsidy for such policies by 10 percentage points at every coverage level, making RP-HPO less attractive to farmers. This approach is estimated to save $14.6 billion over 10 years.

The second proposed change is to adjust the payment rates for the prevented planting component of the federal crop insurance program. This would end prevented planting optional coverage and require farmers who receive prevented planting payments to use a transitional yield for that crop year in their actual production history, even if they don’t replant their crop. This proposal is estimated to save $1.4 billion over 10 years.

Both proposals were rejected by the Senate and House Agriculture Committees chairmen. However, the argument about RP-HPO being too lucrative has now entered the debate. If the Committees are forced to reduce farm program spending in the future, this option is on the table. 

The president’s budget would maintain high levels of funding for farm loan programs, both direct and guaranteed lending for ownership and operating expenses. It includes $2.5 million for the Beginning Farmer and Rancher Individual Development Account, which was authorized in the 2014 farm bill. The FY 2016 budget also includes a proposal for a farmer apprenticeship program established under the USDA–Agricultural Research Service.

In the next few years, the Farm Service Agency plans to work with other USDA agencies to develop a new Customer Self-Service Portal (CSSP). Once completed, the CSSP will allow farmers and ranchers to access program information and fill out and submit applications for certain programs from their computers at home. To begin this effort, USDA is requesting $6.4 million.  

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