Last night we reported to you that crop insurance cuts were going to be included in a bill to raise the debt ceiling and also to establish a two year budget governing appropriations bills. We just were not sure what the cuts would look like.
Late last night, the cuts were made public. In short, the provision in the bill would require a renegotiation of the Standard Reinsurance Agreement (SRA) – the contract between companies and the government – that would result in a cap on the rate of return equal to 8.9 percent. Keep in mind that we are told the current rate of return is about 14.5 percent gross and that this works out to be about 5 to 6 percent net. Further keep in mind that companies have already been selling out and more have been reported as considering doing so.
All of you know that crop insurance muddled along from 1936 until 1980 when the private sector took over. Since then, with private sector delivery, crop insurance has taken off. The introduction of revenue policies in the mid-1990s and the 2000 crop insurance bill helped make crop insurance what it is today. The SRA of 2011 hit private sector delivery hard. At the time, USDA projected $6 billion in cuts. These cuts came after about $6 billion in cuts under the 2008 Farm Bill.
Make no mistake, the cuts contained in the debt ceiling/budget agreement will kill Federal Crop Insurance.
The provision is said to save $3 billion. We do not know if this figure is accurate. But, rather we would note two things.
First, crop insurance has already been cut. And the Farm Bill was just cut to the tune of $23 billion. When this two year budget agreement wears off, are we to expect another round of cuts?
Second, as angry as we are that they would come after crop insurance like this, we are more angry that they chose to go around the Ag Committees and choose the most devastating cuts they could think of. The Ag Committees could come up with $3 billion in savings that are not reckless and dangerous if they had to. There would be pain but they could do it more carefully. However, the White House and OMB chose this cut specifically, pressed for it, and it was accepted.
The bill has been filed and is expected to be voted on tomorrow. That gives us today to yell like we’ve never yelled before. Everyone receiving this email needs to call their senators and their congressman and let them know in plain terms that by voting for this bill they are killing federal crop insurance.
We recommend urging them to speak to their Leadership and urge that the provision be stripped out of the bill. At bare minimum, the provision must be stripped out and replaced with responsible savings developed by the Agriculture Committees. If the provision is not stripped out, we would urge you to call on your congressman and senators to oppose the bill and work for its defeat.
Again, given the timing, we would urge that you contact the Agriculture LA by email by: going to http://capwiz.com/yo-demo/dbq/officials/. Enter the Congressman or Senator's name in the space provided and click go to find the Member. Then click on the staff tab to identify the Agriculture LA. The email format for House staffers is: email@example.com. For Senate staff it is firstname.lastname@example.org, for example John Doe in Senator Smith’s office would be John_Doe@Smith.Senate.gov. We would also urge that you call the main telephone line and leave a similar message.
In all of the years we have worked in Washington, we have never seen a more reckless move…and that is truly saying something.
Please contact us with questions.
The CSA Crew