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BUDGET TRADE-OFFS: The budget for the next farm bill starts from the 10-year baseline established by Congressional Budget Office. Against this budget baseline come calls for budget cuts, as well as calls for program reforms that would require additional spending.

Farm bill budget challenges and outlook

Policy Report: The budget is a major factor in every farm bill debate, and the next one will be about trade-offs between competing funding and program priorities.

When discussing the farm bill, a continuing theme for this column over the past several months has been the budget. Whether it is the cost of proposed program changes in commodities and conservation, or the trade-off between farm and food programs, or the overall cost of legislation, the budget is a major factor driving every farm bill debate.

Spending forecasts
In June, the Congressional Budget Office updated its economic and budget projections to estimate government revenue and expenditures over the next 10 years, for federal fiscal years 2018-27. Similar to the previous CBO estimate from January, the expected budget cost of keeping 2014 Farm Bill legislation in place for the next 10 years totals about $890 billion, or $89 billion per year. That is more than $30 billion less over 10 years than the expected level of spending when the 2014 Farm Bill was passed.

The overall savings are attributable to reduced spending on the Supplemental Nutrition Assistance Program (SNAP) due to an improving economy and reduced participation in food assistance programs. In contrast, farm income safety net programs for commodities and crop insurance are projected to cost more than originally forecast when the 2014 Farm Bill was passed, due to reduced commodity prices and increased commodity program support.

Importantly, the budget for the next farm bill starts from this 10-year baseline. The fact that overall spending is projected to be less than originally expected does not create savings to be spent on new or expanded programs. Likewise, the fact that farm income safety net programs cost more relative to original projections does not force a program cut to save money. The baseline is simply what current programs are projected to cost provided they stay in effect over the next 10 years. And the next farm bill will work from this baseline, or more likely, an updated baseline due in spring before farm bill legislation is fully considered.

Budget challenges ahead
Against this budget baseline come calls for budget cuts and, simultaneously, calls for program reforms that would require additional spending. Under current budget reconciliation rules, any program changes that would increase spending would require offsetting cuts or new revenues elsewhere to avoid an increase in the overall budget cost. Any proposed budget cuts would necessarily require program cuts as well. Thus, the next farm bill, like virtually every farm bill, will be about trade-offs between competing funding and program priorities.

Two of the larger commodity program issues are cotton and dairy. Cotton producers have been calling for assistance for cottonseed as a replacement for the cotton support programs that were dropped in the 2014 Farm Bill to satisfy the World Trade Organization conflict with Brazil. Dairy producers have been calling for improvements to the Margin Protection Program (MPP-Dairy), which was created in the 2014 Farm Bill, but ended up less supportive and less popular than originally envisioned. Both programs would require additional spending that could present major challenges in the next farm bill.

Recent work in the Senate Appropriations Committee may have at least partially addressed the issue by proposing program changes as part of the 2018 appropriations process. Normally, program changes would move through authorizing committees (in this case, the agriculture committees) as opposed to appropriations committees, but various policy riders do regularly show up in appropriations bills.

The proposed changes beginning with the 2018 program year would conveniently not cost any money before fiscal year 2019, thus avoiding the need for spending offsets in the current appropriations process. If the proposed legislation holds, it could authorize the program changes and possibly show up in the next budget baseline, avoiding a potential budget challenge during the writing of the new farm bill.

On the other side of Capitol Hill, a House budget resolution for 2018 calls for $10 billion in farm bill spending cuts, apparently targeted at SNAP. While $10 billion over 10 years is a minor fraction of the total $890 billion in farm bill spending or even the $679 billion currently projected for SNAP, it will be a major political issue. Any amount of proposed cuts to SNAP will be simultaneously described as too much by defenders of the program and too little by opponents and budget-cutters. But beyond the size of proposed cuts, the sheer fact that cuts were apparently targeted at SNAP and not at the rest of the farm bill will test the rural-urban coalition once again.

That coalition, which has been credited with helping to pass farm bills that contain farm and food spending since the early 1970s, clearly frayed during the last farm bill debate when legislation died in the House from detractors on both ends of the political spectrum. Eventually, a coalition of the middle resurrected a final bill that contained both farm and food programs, but the stage is set for another political battle in the months ahead. History and recent experience suggests the rural and urban, farm and food coalition will again be necessary to passing a full farm bill. The same experience also suggests that proposing cuts to SNAP while keeping farm programs intact is not a viable approach to sustaining the coalition.

Of note, a budget resolution only creates an overall spending target. While a budget resolution may suggest specific cuts, the work again falls to the authorizing committees and then the appropriations committees to craft legislation and spending plans in line with the budget. And one may expect the agricultural committees to bring a different perspective to the issue than the budget committees. How the spending decisions on farm and food programs play out over the next several months could be a fundamental indicator of the fate of the next farm bill and the future of the coalition.

Farm bill timeline
With all of the developments moving through the budget and appropriations processes for the moment, it is important to remember the ultimate work and resolution of farm bill issues will be addressed in the agriculture committees. While the Senate and House agriculture committees have already been at work with numerous hearings, the likelihood is that the committees have substantial work to do just to move legislation on schedule before the current farm bill expires in September 2018.

There will of course still be substantial budget challenges ahead, whether among specific commodity program reforms; among commodity, conservation and crop insurance programs; or between overall farm and food program spending. As the process unfolds and spending priorities and trade-offs become apparent, it will be important for all producers and ag policy stakeholders to keep abreast of the issues and engage in the policy process.

Lubben is an Extension policy specialist at the University of Nebraska-Lincoln.

 

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