Straight from D.C.: Agricultural Perspectives

By: Stephanie Mercier, Farm Journal Foundation

This blog will present the author’s perspective on a wide range of timely agricultural policy topics, touching on both domestic and international issues.

The Trump FY18 Budget--Its Message To Agriculture

On May 23, the Office of Management and Budget released the President’s full budget proposal for fiscal year 2018.  In total, it recommends that Congress spend just under $4.1 trillion for the next fiscal year, with increases for defense, homeland security, and veterans programs, and cuts almost every place else, including the Department of Agriculture. In addition, the budget proposes massive cuts to a variety of entitlement programs with an aim to provide tax cuts and balance the federal budget by fiscal year 2027.  The targeted mandatory programs include several from the farm bill, including commodity and crop insurance programs, conservation, and the Supplemental Nutrition Assistance Program (SNAP), formerly known as the food stamp program.

The President’s budget proposes a 19 percent cut to USDA’s discretionary funding as compared to enacted 2017 levels, after the Department has struggled with relatively flat funding for the last several years due to budget sequestration required under the Budget Control Act.  When that legislation was enacted during fiscal year 2010, USDA had a discretionary budget of $27 billion, which had fallen slightly in nominal terms six years later to $26 billion, although that FY17 figure represents a more substantial 13 percent decline in inflation-adjusted dollars.  Discretionary appropriations cover salaries and expenses of USDA employees, as well as important programs such as farm lending, rural housing assistance, agricultural research, WIC, fire-fighting by the Forest Service, food safety inspections, as well as conservation technical assistance outside of the farm bill programs.

Nearly all of the USDA agencies that farmers deal with at the county or state level would face cuts under this proposed FY18 budget.  The Farm Service Agency (FSA), which manages commodity and farm loan programs, as well as the Conservation Reserve, would be cut by nearly $200 million, shedding an estimated 973 staff years.  The Conservation Operations account for NRCS, which handles technical assistance for farmers not enrolled in one of the formal conservation programs, would lose $83 million.  The budget would eliminate all loan programs under the Rural Business Cooperative Service, and the water and wastewater disposal program run by the Rural Utility Service.  Appropriated funds for salaries and expenditures for the Risk Management Agency, which oversees the federal crop insurance program, would be cut by nearly $20 million, although the budget does propose to collect an additional $20 million in fees for unspecified purposes out of the FCIC fund to offset this reduction.   

In addition, funding for USDA agricultural research and economics agencies would be cut, except for the National Agricultural Statistics Service (NASS), which would receive a modest funding increase to cover the cost of administering and processing the 2017 Census of Agriculture.  The Agricultural Research Service, which conducts research at USDA labs around the country, would face more than $350 million in cuts, including the proposed closing of 17 ARS labs, locations, or worksites, including the National Center for Agricultural Utilization Research in Peoria, IL.  The National Institute for Food and Agriculture (NIFA), which manages the USDA ag research external grant programs as well as agricultural extension and education activities such as 4-H, would be cut by $72 million.

Key farm bill programs would also take significant hits under the longer-term portion of the President’s proposed budget. It would impose limits on the participation of wealthier farmers in the crop insurance, commodity and conservation programs, with a $40,000 annual cap on premium subsidies under the federal crop insurance program, restriction on premium subsidies and farm and conservation program benefits for farmers with Adjusted Gross Incomes greater than $500,000, and elimination of the subsidy for the Harvest Price Option available for revenue policies under the federal crop insurance program.  Estimated budgetary savings from these proposals would amount to $29 billion over 10 years.  

In addition, restrictions on new CRP sign-ups, freezing new enrollments under the Conservation Stewardship Program (CSP), and eliminating the Regional Conservation Partnership Program (RCP) while bolstering funding for the Environmental Quality  Program and the Agricultural Conservation Easement Program would reduce spending on conservation by a net of $5.6 billion over 10 years.

Although the Secretary’s decision to establish a new position of Under Secretary of Agriculture for Trade and Foreign Agricultural Affairs, described in my blog of May 19, drew praise from U.S. farm and commodity groups, the trade-related items in this budget will not be welcomed.  In addition to proposing a slight decline in appropriated funds for the Foreign Agricultural Service (FAS), the mandatory portion of the President’s budget proposes eliminating funding for two major U.S. export promotion programs, the Market Access Program (MAP), and the Foreign Market Development Program.  This proposal, which would generate budget savings of about $2.3 billion over ten years, comes at a time when U.S. farm and commodity groups are focused on expanding U.S. agricultural exports in order to reverse recent declines in U.S. farm income.  In fact, several farm groups have recently proposed doubling funding for these two programs in the upcoming farm bill.

The President proposes major cuts to the SNAP program, primarily through reducing benefits and eligibility for targeted portions of the population, but also requiring states to assume 25 percent of the cost of the program, the latter requirement to be phased in over several years.  Combined, the proposed changes would reduce SNAP spending by $194 billion over ten years, potentially affecting millions of U.S. families.

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