Explaining the House Farm Bill

May 10, 2018 | Other Spending

The 2014 farm bill expires on September 30, which means policymakers have less than five months to pass a new one. The House Agriculture Committee has already approved its own bill reauthorizing farm bill programs for five years, which according to the Congressional Budget Office (CBO) would cost about $3 billion over five years and achieve ten-year deficit neutrality if extended (as CBO assumes). This blog offers a rundown of the major changes in the farm bill.

Budgetary Effect of the House Farm Bill by Section

Section Five-Year Cost/Savings (-) Ten-Year Cost/Savings (-)
Commodities $149 million $193 million
Conservation $656 million -$795 million
Trade $225 million $450 million
Nutrition $1.7 billion -$2 million
Infrastructure/Development -$267 million -$517 million
Research $168 million $250 million
Horticulture $10 million $10 million
Crop Insurance -$70 million -$161 million
Other $553 million $566 million
Total $3.1 billion -$7 million
     
Memorandum: Discretionary budget authority increase $30.8 billion $31.5 billion

Source: Congressional Budget Office

Nutrition Programs

Farm bills generally fund both payments to farmers and nutrition programs, most significantly the Supplemental Nutrition Assistance Program (SNAP, or food stamps). This particular farm bill included some relatively significant changes to the SNAP program, though the net budgetary effect is close to $0.

Perhaps most significantly, the bill would tighten and expand SNAP work requirements – requiring most able-bodied adult beneficiaries under age 60 to work, volunteer, attend school, or participate in employment programs for at least 20 hours per week (25 hours per week starting in 2026). Many categories of beneficiaries would be exempt from this requirement (parents of young children, people with disabilities, and those 60 and over), and states would have additional flexibility to exempt some other beneficiaries. Still, CBO estimates about 1.2 million people, or 4 percent of SNAP beneficiaries, would no longer receive SNAP as a result of the requirement. Savings to the federal government would total $9.2 billion over ten years, though $6.7 billion of those savings would be used for new employment and training programs and another $0.9 billion for administrative costs, leading to net savings of roughly $1.5 billion over a decade.

In addition to the work requirement, the bill includes several other SNAP reductions. $5.3 billion of savings comes from restricting eligibility for the Standard Utility Allowances, an extra benefit increase within SNAP that goes to households receiving more than $20 in energy assistance (states often offer $21 to SNAP beneficiaries to expand receipt of these allowances). The bill would also limit categorical eligibility – where beneficiaries automatically qualify for SNAP based on receipt of other benefits – to low-income households receiving cash assistance or certain Temporary Assistance for Needy Families (TANF) services ($5 billion savings); require beneficiaries to cooperate with child support enforcement agencies, which would increase child support payments and thus reduce SNAP benefits ($4 billion savings); require states to establish a duplicative enrollment database to prevent benefits from multiple states going to the same person ($588 million savings); and repeal bonuses for states that score well on performance criteria ($432 million savings).

Over ten years, all of these savings would go toward new spending. The largest spending increase – $7.2 billion – comes from increased child support enforcement and the administrative costs necessary to identify who would no longer be SNAP-eligible as a result of new child support rules. The bill also expands SNAP benefits in ways that are meant to encourage work and saving, including by increasing the amount of earned income a person can deduct when determining eligibility from 20 to 22 percent ($4.6 billion cost) and loosening certain asset tests and offering vehicle allowances and savings exclusions ($201 million). Additional funding would go toward piloting a program that provides bonuses to beneficiaries based on the purchase of fruit, vegetables, and milk ($1.2 billion cost); increasing emergency food assistance, food insecurity initiatives, and nutrition education ($1.1 billion cost); and giving beneficiaries who leave the program five months of transitional benefits ($895 million cost).

Overall, the nutrition title of the farm bill would cost $1.7 billion over five years and roughly break even over ten years. Savings in 2028 – assuming the farm bill was extended – would total $614 million, which implies growing deficit reduction over time.

Budgetary Effect of the Nutrition Section

Provision Ten-Year Cost/Savings (-)
Expand work requirements (gross savings) -$9.2 billion
Restrict Standard Utility Allowances based on receipt of energy assistance payments -$5.3 billion
Restrict categorical eligibility -$5.0 billion
Require cooperation with child support enforcement agencies -$4.0 billion
Establish duplicative enrollment database -$588 million
Repeal state performance bonuses -$432 million
Subtotal, Savings -$24.5 billion
   
Fund employment and training program for work requirement (gross cost) $6.7 billion
Fund administrative costs for work requirement (net increase) $0.9 billion
Increase funding for child support enforcement $7.2 billion
Increase the earned income deduction $4.6 billion
Increase funding for emergency food assistance, food insecurity initiatives, and nutrition education $1.6 billion
Institute pilot program to reward healthy food choices $1.2 billion
Provide transition benefits for people who leave SNAP $895 million
Increase asset limits; provide exclusion for savings and vehicle allowances $201 million
Other costs $1.1 billion
Subtotal, Costs $24.5 billion
   
Total, Nutrition -$2 million
   
Memorandum: Net savings from work requirement -$1.5 billion
Memorandum: Net cost from child support policy $3.5 billion

Source: Congressional Budget Office

Conservation Programs

The most significant reforms in farm payments come from changes to conservation programs. Consistent with the President's FY 2019 budget, the House farm bill would eliminate the Conservation Stewardship Program (CSP), a program that allocates funding to support conservation efforts on farm land. This policy would save $12.6 billion over ten years. Unlike the President's budget, however, the bill would put most of this money back into other programs by expanding activities eligible for the Environmental Quality Incentives, Agricultural Conservation Easement, and the Regional Conservation Partnership Programs (the budget eliminated the latter), as well as other policies. As a result, the conservation section as a whole would save only $795 million over ten years, in contrast to the $13 billion saved in the budget, and it would actually cost $656 million in the first five years compared to $3 billion of savings in the budget.

Budgetary Effect of the Conservation Section

Policy Ten-Year Cost/Savings (-)
Eliminate the Conservation Stewardship Program -$12.6 billion
Increase funding for Environmental Quality Incentives Program $7.7 billion
Increase funding for Agricultural Conservation Easement Program $2.2 billion
Increase funding for Regional Conservation Partnership Program $1.3 billion
Other policies $601 billion
Total -$795 billion

Source: Congressional Budget Office

Other Policies

In large part, the farm bill extends other existing farm programs, especially in the commodity payments and crop insurance areas. However, the bill does include modest changes that would cost $790 million over ten years, erasing almost all of the savings from the conservation section. The bill adjusts the Price Loss Coverage and Agriculture Revenue Coverage commodity programs to allow for more updated baseline prices and yields in certain situations at a net cost of about $150 million. It also creates a vaccine bank to respond to animal disease and consolidates four foreign market development programs into a single one, each of which cost $450 million. In terms of spending cuts, the bill eliminates the Biorefinery Assistance and Rural Energy for America Programs ($517 million of savings), which provide financial assistance for biorefineries and rural renewable energy use.

Based on CBO's estimates, implementing the bill would also require an additional $31 billion of appropriations, most of which would occur through 2023. The largest appropriations come from trade promotion and international food assistance programs ($13 billion), research and education programs ($7.4 billion), and rural infrastructure and development ($6.7 billion). These increases, however, would not increase the deficit unless they were accompanied by discretionary spending cap increases; otherwise, the money is simply coming from the existing pool of funds.

*****

As mentioned before, the farm bill has little direct net budgetary effect overall, reducing deficits by $7 million over ten years. The savings are backloaded, though, as the bill would cost $3 billion in the first five years before the major conservation and nutrition provisions start to produce net savings. This also means that the farm bill would be a net deficit-reducer over the long term, likely saving around $10 billion in the second decade.

This limited budget effect stands in contrast to savings that previous budgets envisioned from farm bill programs. The FY 2018 House budget resolution called for over $200 billion of ten-year savings from the agriculture function and supported block granting SNAP, a policy that could save in excess of $100 billion. The President's FY 2019 budget proposed $49 billion of savings from agriculture programs in the farm bill, mostly from crop insurance and conservation, and $214 billion from SNAP changes. President Obama's final budget would have saved $5 billion, with $18 billion of agriculture savings offset by $13 billion of nutrition spending increases.

In the past, farm bills have generally been deficit-reducing, though the last one was not anywhere close to the $100 billion recently claimed. With trillion-dollar deficits approach, now is not the time to break that precedent.

Tags