LC :L)~.l%;,2.. I r»;c§;.gNGER IE 7zéz> ® WK" W; 1% {xx ,.:;‘.£«‘_:<'::' 5, W ‘ -, 3 )6" *' cg ~\_‘_;_, .. ¢._;;_..,~...« :1 » ~ - ° ISSUC Br1€f rm 1? 1989 _‘____‘ ,, , .,. 3...§ 5 L" Y, 7 :1, . -. I . ‘ ' " v."-- "1 3 ' “ ‘~‘ . ' .'« 3.‘ £8. E ‘ is 9 ‘:4. A, ... 'J« - ~ .. I -_- 1. ‘. 2:9,» I gr?“ /{M-.-2 / -7 2. : ‘ _ _a .« . ? ‘ ‘ " ‘ . '- .‘ ‘ ' . E . ‘- “¢_-_(3‘.‘=‘ i. l‘».-.'- {>2 3- ‘ " ‘ ' ‘ SERVICE LIBRARY OF CONGRESS Vliirgn-Q . . AGRICULTURE: PROPOSED REVISIONS IN FEDERAL DISASTER ASSISTANCE ISSUE.‘ BRIEF NUMBER IB78076 AUTHOR: fionach , Jaspe r A . Environment and Natural Resources Policy Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE HAJOR ISSUES SYSTEH DATE OBIGINATED g§;1_1_;1§ DATE UPDATED Qzgugg FOR ADDITIONAL INFORMATION CALL 287-5700 0731 CRS- 1 IB78076 UPDATE-07/31/80 l§§Q§-§§2lEl1lQ! Extensive crop losses caused by natural disasters in 1976 and 1977 led to larger claims on agricultural disaster assistance programs than ever before witnessed. At the same time, many farmers, program administrators, and legislators asserted that existing disaster programs were inadequate, inequitable, duplicative, and administratively cumbersome. Secretary of Agriculture, Bob Bergland, repeatedly has stressed his belief that "disaster programs available to the farmer today are a disaster.“ one of the most costly programs to the Federal government, the disaster payments program for wheat, feed grains, cotton, and rice, was extended. by the Food and Agriculture Act of 1977 for only an additional two years. The Administration has recommended a Federally subsidized, allerisk crop insurance program as a replacement for several existing programs. A number of bills were introduced and hearings held but no legislation was adopted by Congress during 1978. The issue carried over into the 96th Congress and both the Senate and House passed legislation which was sent to conference in April 1980. EAQEEEQE!2-A§2-£QLl§I-A!éLZ§l§ The large size and geographic diversity of the nation's agricultural economy tend to mask the devastating effect that natural disasters can wreak upon the production of individual farmers or even entire regions. Every season farmers risk their entire crop to weather related calamities as well as to diseases and infestations that threaten biological systems. Yet, \nsumers rarely witness a shortage of food because the disaster losses on one farm are generally balanced by production from other farms. As a measure of‘ protection for individual farmers and to encourage continuing production in the future, the government has assumed part of the risk of farm losses from natural disasters. Over the years the government has created a large number of assistance programs, many developed in response to a specific disaster. Consequently, some 20 current aid programs present a confusing and complicated but fairly comprehensive response to agricultural disasters. The widespread droughts of 1976 and 1977 brought a large number of farmers to the government for assistance. Increased participation strained assistance programs to capacity. some inadequacies were publicized. Though special adninistrative_and legislative actions were taken, farmers became frustrated over what they felt to be unresponsiveness to their problems. Ineguities of existing programs were apparent as some farmers benefited from overlapping programs while others suffering damage were not eligible for any assistance. During confirmation hearings before the Senate, Secretary of Agriculture Bergland called existing disaster programs themselves a disaster. This sentiment has been repeated by hr. Bergland and numerous other critics. Widespread dissatisfaction and the high Federal cost of assistance during 1976 and 1977 created an atmosphere conducive to general revision of a ‘icultural disaster programs. During hearings on the Food and Agriculture Act of 1977, Secretary Bergland and other witnesses were particularly critical of the disaster CBS- 2 IB78076 .UPDATE‘07/31/80 payments program for wheat, feed grains, cotton, and rice. The program was revised somewhat and reauthorized, but for only two years. It was understood that Congress and the Administration would develop reform legislation before the program's expiration in 1979. Consistent with the goal of developing a more satisfactory program or disaster relief, members of the 95th Congress submitted a number of bills, the Administration developed a draft bill which was introduced, an the respective Committees on Agriculture in both the House and Senate periodically held hearings. The general focus of attention and direction of legislative reform was toward an all-risk, all-crop insurance program with premiums at least partially subsidized by the government. However, no legislation was adopted befored conclusion of the 95th Congress. Renewed consideration of expanded Federal crop insurance began early in the 96th Congress with hearings by the Agriculture Committees of the House and senate. The Administration initially supported its previous proposal but later endorsed a gradual expansion of crop insurance to more counties and additional crops (but not livestock), along with a phasing out of disaster payments and emergency loans over the next two years. This was a more modest A program and gradual transition than previously proposed. But the fundamental concept of subsidized insurance as the primary Federal response to crop disasters remained the policy goal of the Department of Agriculture. £2s2§-2f.§e!i§i2i The agricultural disaster programs that have become the focus of legislative revision and consolidation efforts include: (a) the disaster payments program for wheat, feeds grains, cotton, and rice; (b) the emergenc' loan program of the Farmers Home Administration (FmHA); (c) the disaster loan program of the Small Business Administration (SBA); and (d) the Federal crop insurance program. The disaster payments program, administered by the Agricultural Stabilization and Conservation Service, makes indemnity payments to farmers when natural conditions prevent planting or reduce the yield of wheat, feed grains, cotton, or rice. Loss levels and payment rates are specified by formulas in the law. Criticisms of this program are: it is costly to the government (outlays have averaged nearly $fl50 million per year for the last six years); it overlaps with crop insurance (farmers can purchase crop insurance and also collect full indemnity payments but no minimum insurance is needed before indemnities are paid); it is inequitable, supplying "free insurance“ to high risk areas (some areas repeatedly suffer losses and receive payments while other areas have never received indemnity payments); it is available to the producers of only a few select crops. Emergency loans are made by both FmHA and SBA at 5% interest on the amount of actual loss suffered from natural disasters. FmHA borrowers must prove they cannot borrow money elsewhere and must satisfy “major damage" criteria. Neither requirement applies to SBA loans. SBA involvement in farm loans is a recent event. Legislation passed in 1976 required that farms be classified as small businesses and therefore eligible for SBA programs. The overlapping loan programs of FmHA and SBA created confusion among farmers as well as program administrators. The less strigent eligibility requirements of 5' brought so many farm applicants in 1977 that administrative resources were greatly strained. The Administrator of SBA has testified the agency would like to get out of the agriculture loan business because it lacks farm CRS- 3 IB78076 UPDATE—0I/31/80 expertise. During FY78, emergency loans from both FmHA and SBA reached the unprecedented levels of $3.fl billion and $1.8 billion, respectively. Federal crop insurance, administered by the Federal Crop Insurance Torporation, provides for all-risk coverage on a limited number of crops and .n a limited number of geographic areas. The program is characterized by the legal reguirement that premiums be sufficient to cover claims. This, in effect, precludes making insurance available in particularly high risk areas and for higher risk crops. The program has gradually expanded over time so that there is now at least some insurance coverage being provided on 26 different crops out of the 400 produced in this country. Participation is comparatively low. Only 11% of eligible farmers participate, buying coverage for about 6% of the n.s. farmland. The cumulative record for crop years 19u8 through 1978 shows indemnities amounting to 99% of premiums. Large losses in both 1976 and 1977 made it necessary for Congress to add $50 million to the capital stock of FCIC in 1977 so that obligations could be met. 9.22;2e§ ‘There is general agreement that Federal assistance is proper and necessary to offset some of the risks of natural hazards facing farmers. Complete elimination of Federal disaster assistance has not been seriously considered by the Congress. Continuation of existing’ agricultural disaster programs (probably with technical improvements) is the simplest legislative course 1 that could be taken, but this would not remedy much of the dissatisfaction and deficiencies that became apparent in 1976 and 1977. During the 95th Congress, the USDA forwarded a proposal to establish an ll-risk crop insurance program (farm property would not be included) with -ae government paying 50% of the basic premium. Insurance would initially cover the 18 crops upon which actuarial data are available (wheat, cotton, corn, barley, grain, sorghum, rice, sunflowers, citrus, dry beans, soybeans, oats, flax, peanuts, tobacco, raisins, sugar cane, sugar beets, and rye). With additional actuarial data, the program would be extended to other crops and livestock. This expanded and subsidized insurance program was proposed to immediately replace four existing programs (the present crop insurance program, the disaster payments program, FmHA emergency loans, and SBA farm disaster loans). During the 96th Congress, a proposal favorably received by many members of both Agriculture Committees, and subsequently endorsed by the USDA, would gradually expand subsidized crop insurance and at the same time replace disaster payments in areas where the insurance is available. The USDA's projected government cost of the proposal, after full implementation, is approximately equal to the annual cost of the programs to be replaced ($555 million). Advantages of the proposed program: (1) elimination of duplicate coverage in some cases and no coverage in other cases, (2) more than twice as much protection as currently available, (3) heguitable sharing of costs and benefits among farmers, and (4) affordability to producers (due to the premium subsidy) which will encourage participation and reduce the need for future temporary disaster programs. The major problem with the proposed revision is that the farmers who have previously been covered at no direct cost to themselves will have to pay a p ice for disaster protection. These farmers will be less well off than under existing programs. In addition, there will doubtless be farmers who will not subscribe to insurance but will seek special assistance from Congress following disaster losses. There is also disagreement over the CRS- 4 IB78076 UPDATE-07/31/80 projected cost of the program with a group of independent actuaries estimating the federal cost at between $812 million and $1.1 billion, nearly twice the USDA cost estimate. Additional objection to the proposed legislation has been raised by some» private crop insurance companies and independent agents who fear a loss ix sales of crop-hail insurance. The proposed legislation would in fact include hail as a covered loss under the Federal program. However, coverage provided by the Federal program would be limited to 75% of the average yield.i supporters of the legislation think that farmers will continue and even° increasingly purchase private insurance to cover the »remaining 25% of the yield. Private insurance companies and agents are also expected to benefit from the Federal reinsurance provisions and from the comission or contract sale of Federal insurance. 0 L.F.-§l§l-£11.91! During the 95th Congress some 15 different bills were introduced that would replace, add to, revise, or eliminate aspects of current programs providing farmers with protection from natural hazards. Host of the bills presented alternative crop and/or livestock insurance proposals. All of these bills were referred to the respective Committee on Agiculture in the House and Senate. In no case did a bill receive approval from the committee and reach the floor for consideration. The Secretary resubmitted to Congress the Administration's proposal, the Farm Production Protection Act of 1979 (S. 713), which was substantially the sane as the 1978 proposal. Several alternatives to this measure have been introduced. The USDA subsequently modified its position and endorsed, wit} suggested revisions, H.B. 4119 and S. 1125. H.R. 4119 (E- Jones, uadigan) Amends the Federal Crop Insurance Act to gradually expand the federal crop insurance program to all crops in all counties in the United States, in Puerto Rico, and in other 0.3- territories. Provides for a federal subsidy (30%) of insurance premiums. Authorizes the Federal Crop Insurance Corporation to enter into agreements with state governments willing to contribute funds to additional premium subsidies. Expands the board of directors to include two farmer members from diverse geographic locations. Authorizes pilot programs for special risks not covered by private insurance. Authorizes the Corporation to use private companies in the administration of the program. Limits the Disaster Payments Program to areas where no insurance is available. Introduced Hay 16, 1979; referred to committee on Agriculture. Hearings held; bill amended and reported (H.Rept. 96-430). During floor debate two amendments were adopted. one amendment assists the private insurance industry by reducing a farmer's premium by up to 25% if he purchases private hail and fire coverage. The other amendment provides for a simple extension of the disaster payments program through 1981. The bill, as amended, passed the House by a vote of 202-140 on Feb. 13, 1980. S. 1125 (fluddleston, et al.) Amends the Federal crop Insurance Act to expand the federal crop insurance program to all crops in all counties in the United States, in Puerto Rico, and in other 0.3. territories. Provides for a federal subsifl (20-00%) of insurance premiums. Expands the Board of Directors of the‘ Federal Crop Insurance Corporation to include three active farmers from diverse geographic locations and one non-government member experienced in CBS- 5 IB78076 UPDATE—07/31/80 crop insurance. Authorizes an expanded reinsurance program for private crop insurers and federal reinsurance for state and local government entities with crop insurance programs. Phases out the disaster payment program. Authorizes specific risk protection for" risks not covered by private insurance. Introduced May 14, 1979; referred to Committee on Agriculture, utrition and Forestry. Bill anended and reported (5.Rept. 96-254). Amended and passed Senate by a vote of 64-27 on Sept. 10, 1979. Conferees were appointed from the Senate on Mar. 20, 1980, and the House appointed its conferees on Apr. 1, 1980. §1.3éB.l.11§§ 0.5. congress. House. -Committee on Agriculture. Subconnittee on Conservation and Credit. Fara Production Protection Act of 1978. Hearings, 95th Congress, 2nd session. July 27, 1978. Washington, 0.5. Govt. Print. Off., 1978. 88 p. ----- Federal crop insurance program. Hearings, 95th Congress, 1st session. Aug. 15, Sept. 22 and.23, Oct. 18 and 20, 1977. Washington, 0.5. Govt. Print. Off., 1978. 008 p. ---- Federal crop insurance program. Bearings, 96th Congress, 1st session. iashington, 0.5. Govt. Print. Off., 1979. Hearings held in Hashington, D.C., Feb. 27-28, Ear. 1, and hay 31, 1979; Hollister, Calif., Apr. 19, 1979; Enid, 0kla., Apr. 20, 1979. A 0.5.’ Congress.. Senate. Committee on Agriculture, Nutrition, and Forestry. Subconnittee on Agricultural Production, Marketing, and Stabilization of Prices. Federal crop insurance and disaster assistance programs (an administration proposal). Hearings, 95th Congress, 2nd session. may 2, 1978 (part I). Washington, 0.5. Govt. Print. Off., 1978. 52 p. —--- Federal crop insurance and disaster assistance programs. Hearings, 95th Congress, 2d session, on S. 3029. Part II. iashington, 0.5. Govt. Print. Otf., 1978. 77 p. Hearings held in Ely and Booneville, Iowa, June 2, 1978. ---- Federal crop insurance and.disaster assistance programs. Hearings, 95th Congress, 2d session. Aug. 15 and 17, 1978. (part III). Washington, 0.3. Govt. Print. Off., 1979. 99 p. -a——-Federal crop insurance and disaster assistance programs. Hearings, 95th Congress, 2d session. Aug. 30, 1978 (part IV). Washington, 0.5. Govt. Print. Off., 1978. 72 p. ----- Revisions in the Federal crop insurance program. Hearings, 96th Congress, 1st session, on S. 399, 5. sun, 5. 646, S. 647 and 5. 713. Bar. 20 and 29, 1979. Washington, 0.5. Govt. Print. Off., 1979. 190 p. cns- 6 1373075 0PDAT'3—-O 7/3 1/80 B§£QEI§-A!2-§Qfl§E§§§lQ!AL_2Q§E!§EI§ Ialmadge, Herman. Federal Crop Insurance Act of 1979, H.R. 0119. Statement of Introduction and Text of S. 713. Remarks in the Senate. Contains Administration transmittal letter accompanying draft bill known as the Farm Production Act of 1979. Congressional record [daily ed.) v. 125, Har. 21, 1979; S3082-S3085. (Debate, amendments, and vote in the House) Congressional record [daily ed.], v. 126, Feb. 13, 1980: H847-H876. Congress.8 House. Committee on Agriculture. Federal Crop Insurance Act of 1979; report to accompany H.R. 4119. Washington, 0.5. Govt. Print. Off., 1979. 95 p. (96th Congress, 1st session. House. Report no. 96-430) senate. Committee on Agriculture, Nutrition, and Forestry. Disaster assistance for farmers, current programs and 1978 policy issues. Jan. 18, 1978. Washington, 0.5. Govt. Print. Off., 1978. 291 p. At head of title: 95th Congress, Committee print. Congress. 1st session. -———- Federal Crop Insurance Act of 1979; report to accompany 5. 1125. (96th Congress, 1st session. Washington, 0.5. Govt. Print. 0ff.I 96 p. Senate. Report no. 96-2515) §§§Q!QLQ§Z-QE_§!§!!§ 00/01/80 -- House agreed to the request for conference and appointed conferees. ' 03/20/80 - Senate requested a conference and appointed conferees. 02/13/80 -- House passed H.R. 0119, with amendments, by a vote 09/10/79 -- Senate passed 8. 1125, with amendments, by a vote of 60-27. 05/04/79 -— Federal Crop Insurance Corporation transmitted its annual report for 1978. 03/20/79 -- senate Subcommittee on Agricultural Production, Marketing and Stabilization of Prices began hearings on legislation to revise the federal crop insurance program. 02/27/79 -- House subcommittee on Conservation and credit began hearings on crop insurance. 02/20/79 ——-secretary Bob Bergland resubmitted to Congress a proposal for the Farm Production Protection Act. CRS- 7 IB78076 UPDATE-07/31/80 D8/2Q/78 -- under authority of the Agricultural Credit Act of 1978 the USDA implemented a time-saving procedure for making FmHA emergency loans to farmers. Under the new system, State directors of FmHA will authorize county offices to make emergency loans to any number of farmers shoving need for credit due to a natural disaster. This eliminates the requirement for county governments and governors to request assistance, then for the secretary of Agriculture to designate disaster areas. 04/19/78 -- Federal Crop Insurance Corporation transmitted its annual report for 1977. Drought conditions or 1977 caused the largest amount of indemnities ever paid for crop losses -- $152,900,000. Indemnities exceeded premiums by about $50,000,000. 11/18/77 - The President signed H.R. 9704 (P.L. 95-181), which increased the capital stock of the Federal Crop Insurance Corporation to $200 million, an increase of $50 million. This also required the Secretary to undertake a study of alternative all-risk, all crop insurance programs. 09/29/77 - The Food and Agriculture.Act of 1977 was signed into law as P.L. 95-113. This legislation modified and extended the Disaster Payments Programs for Wheat, Feed Grains, Cotton and Rice. The disaster program provisions of the lat will expire after the 1979 crop year. A2-2-19.119.}.--§§.1i'.1§R.§.1!S3.§-§Q!!§Q§1§ Federal Crop Insurance Corporation. Annual report to Congress, 1978. Washington, U.S. Department of Agricultural, 1979. Federal Crop Insurance Corporation. Annual report to Congress, 1977. Washington, U.S. Department of Agriculture, 1978. 31 p. ----- Federal crop insurance: a description. Washington, 0.5. Department of Agriculture, September 1979. 58 p. General Accounting Offiice. The federal crop insurance program can he made more effective. A report to the Congress by the Comptroller General of the United States. Dec. 13, 1977. 50 p. (FAD-77-7) ailler, Thomas A. and Alan 5. Walter. An assessment of government programs that protect agricultural producers from natural risks. In Agricultural-Food Policy Review. Washington, 3.5. Department of Agriculture, 1977: 93-103. ----- Options for improving government programs that cover crop losses caused by natural hazards. Washington, U.S. Department of Agriculture, 1977. (ERS no. 654) CRS- 8 IB78076 UPDATE-O7/31/80 Norton, C.E. gnergency preparedness and disaster assistance: federal organization and programs. Washington, Library of Congress, congressional Research Service. Apr. 18, 1978. 119 p. (nultilith no. 78-102) U.5. Congress. Congressional Budget Office. Protecting the farmer against natural hazards: issues and options. Washington, 1978. 38 p. Wonach, Jasper. \The effects of proposed federal crop insurance on private sales of crop-hail insurance. Washington, Library of Congress, Congressional Research.Service. Dec. 5, 1979. 5 p. f"'” LseF:i:».eY 1 ea: ‘ VVf=.f$!—Ei§\!GT0N ur-.'a'vE.*-::~3r.'v r ST. LQU5.15,-?~*‘-°- . ' MU Libraries University of Missouri——Columbia Digitization Information for Congressional Research Service Digitization Project Local identifier CRSIB Source information Format Content type Notes Capture information Date captured Scanner manufacturer Scanner model Scanning system software Optical resolution Color settings File types Derivatives — Access copy Compression Editing software Resolution Color File types Notes Book Text Cover has cut—out to show title on title Page Stamped with property stamp for Washington University including deaccession stamp Some have labels on front page Some have black out markings on front page SuDoc numbers handwritten on front page Some items have very light print Some front pages have colored backgrounds Items not added to University of Missouri collection 20l7 April Ricoh MP C4503 600 dpi grayscale tiff Group 4 600 dpi bitonal tiff