Bill Huffman
Director - Government Relations

The Friday Report

January 15, 2010

Health care reform continues to dominate the Congressional agenda. Negotiators from the Senate and the House leadership met several times this week to try to iron out differences between the House and Senate health care reform bills. Meetings were also held with key people from the Obama Administration including the President. Meanwhile, House Democrats will hold their annual “retreat” this weekend to discuss their priorities and legislative agenda for 2010; Republican’s will hold their “retreat” next weekend. The Senate and the House will be in session next week. We expect the health care reform conference report will taken up on the floor of each house next week with a final up or down vote sometime later in the week or the first of the following week.

Farm Program Spending

The Congressional Budget Office (CBO) recently reported that farm program spending under the 2008 Farm Bill saved taxpayers more than $30 billion compared with the 2002 Farm Bill. CBO reported that actual farm safety net spending has come in under the projected budget in seven of the last eight years. Interestingly, funding for federal farm programs was cut by $7.4 billion in the 2008 Farm Bill, with the savings being applied to nutrition (food stamps, nutrition programs) and conservation.  CBO says farm policy costs have fallen 38 percent since nearly a decade ago. Yet, there was a warning this past week by former Congressman Charles Stenholm of Texas, a fiscally conservative Democrat, that Congressional members who are “keen to cut Federal spending will look at U.S. farm supports and program spending” for further cuts. Stenholm declined to suggest specific areas where cuts could be made; however, he said it could be hard to defend biofuels supports and grain subsidies. Stenholm made the comments in a speech at the American Farm Bureau Federation’s (AFBF) annual meeting in Seattle.

It is interesting that this discussion is occurring just prior to the Obama Administration’s next fiscal budget proposal. There is beginning to be talk in Washington about a spending freeze or cuts that might be implemented on many government agencies in an effort to constrain the Federal deficit. If that is the case, you can bet that agriculture spending will be in the spotlight again!

Stenholm told AFBF delegates that “Federal budget challenges that likely will lead to farm program cuts is one reason that House Agriculture Committee Chairman Collin Peterson is planning to hold farm-bill hearings this year for a possible bill at least three years away.”

“The budget, cutting spending, means agriculture too,” Stenholm said.  “There is no defense that any of us in production agriculture could make to say we should be exempt because we’ve already paid the bill.”

Charlie Stenholm is well connected having served in Congress for over 20-years and previously serving as Chairman of the House Agriculture Committee.  He is considered one of the premier farm policy experts in Washington, now employed by a major law firm in Washington, D.C.

USDA/IRS Partnership

Agriculture Secretary Tom Vilsack has announced that USDA has partnered with the Internal Revenue Service to establish a program to verify “program payment eligibility” for farm program payments under the 2008 Farm Bill. Vilsack said USDA has finalized a “memorandum of understanding” with IRS to establish an electronic information exchange process for verifying compliance with the adjusted gross income provisions for the various programs administered by USDA’s Farm Service Agency and the Natural Resources Conservation Service. Vilsack said “This agreement will ensure that payments are not issued to producers whose adjusted gross income (AGI) exceeds certain limits.  The limits set in the 2008 Farm Bill are $500,000 non-farm average AGI for commodity and disaster programs; $750,000 farm average AGI for direct payments; and $1 million non-farm AGI for conservation programs.

USDA has also implemented a change to permit certain operations, most often family-run operations, to meet “actively engaged” rules.  These rules apply to eligibility for payments under the “Direct and Counter-cyclical Program or Average Crop Revenue Election program administered by the Farm Service Agency.

The Farm Service Agency will soon inform producers of the new eligibility provisions.  We recommend producers contact their local FSA office if there are questions about these new rules. These rules will be in effect for the 2010 crop year.