Senate Opens Crop Insurance Debate

March 23, 2000

The Senate began debating a crop insurance reform bill Wednesday afternoon. Included in the bill is an expansion in premium subsidies, new coverage for farmers with multi-year losses and a pilot program provision for $500 million in direct risk management assistance to farmers who choose to forgo crop insurance subsidies in a particular year.

The pilot was part of a proposal by Senate Agriculture Committee Chairman Richard Lugar (R-IN), much of which was turned back by the committee in its March 2 approval of the legislation proposed by Sens. Pat Roberts (R-KS) and Bob Kerrey (D-NE). A producer would receive a risk management payment for using two of twelve risk management options.

The legislation also increases premium subsidies to make crop and revenue insurance policies more affordable for farmers, especially at higher levels of coverage. It eases the actual production history (APH) rules so a farmer's insurance coverage is less likely to be depressed artificially by successive years of bad weather.

It also encourages the development of coverage for specialty crops and revenue insurance on a whole farm rather than on a commodity-by-commodity basis. It eliminates the requirement of an area-wide loss before disaster payments can be made to producers of currently non-insurable crops, and it reduces the potential for insurance fraud and abuse with program compliance provisions.

In a letter Tuesday to Lugar and Sen. Tom Harkin (D-IA), the committee's ranking Democrat, Agriculture Secretary Dan Glickman had mostly praise for the legislation as reported by the committee.

He noted it makes crop insurance more affordable at buy-up levels that are "most useful" to farmers; addresses the problem of multiyear losses and the effect on insurance coverages; makes "an important financial commitment to crop insurance expansion, research and development, and education and outreach -- issues particularly important to the specialty crop community"; authorizes a pilot program for livestock and improves the Non-insured Crop Disaster Assistance Program (NAP).

However, Glickman insisted that the bill provide sufficient funding for USDA and the Risk Management Agency for implementation. Like the House version, the Senate bill "mandates many large and complex new programs," he said, "and significantly re-tools existing program systems and infrastructure support."

There are costs for greater computer capacity, implementing program infrastructure to support revised actuarial information for new insurance terms and conditions, administering the contracts for research and development, finalizing and converting proposals into final insurance policies, providing systems application development costs and data validation support, conducting various studies and analyses, implementing the livestock program and increased compliance requirements.

"Unless the bill authorizes sufficient funding, USDA and RMA will not be able to implement key provisions of the bill effectively or in a timely manner," said Glickman.

He also insisted that the Federal Crop Insurance Corporation Board be chaired by a USDA official and that the membership not be overly weighted with non-governmental representatives with financial interests in the operation of the program. The bill specifies that the board chairman be a part-time member from the private sector. The staff answers only to the board and the board, while under "the titular supervision of the office of the secretary, can be controlled only by removal from office. The administration strongly objects to this provision," he told Lugar and Harkin.

Consideration of the bill was held up temporarily by objections from Democratic Sens. Charles Schumer of New York and Bob Torricelli of New Jersey, who sought additional aid for Northeast farms. This morning, Senators are scheduled to vote at 11:00am on a resolution by Sen. Paul Wellstone (D-MN) that applauds the recent Washington rally by family farm advocates. This will be followed by a vote on final passage.