(Washington, DC)—Today, Senator Jeanne Shaheen (D-NH) wrote to Majority Leader Mitch McConnell (R-KY) and Minority Leader Harry Reid (D-NV) to request that the new budget agreement’s reforms to the federal crop insurance program not be undone in year-end legislation to fund the government. Senator Shaheen is a leading voice in the Senate in calling for changes to the crop insurance program, which cost taxpayers almost $9 billion last year. The budget deal included modest reforms that would save taxpayers $3 billion over ten years. After industry special interest groups complained about the cuts, a group of lawmakers has begun working to reverse the deficit-reducing measure.
“The costs of this program are skyrocketing unnecessarily,” said Shaheen. “We can ensure protections for farmers without putting taxpayers on the hook to subsidize excessive profit rates for insurance companies. The recent reforms that have now become law are a modest step in the right direction and those savings to the taxpayer should remain in place.”
Senator Shaheen’s letter reads in part:
“I am concerned with the reported agreement to roll back these modest reforms, not only because it will increase the deficit, but also because any commonsense efforts to reform the crop insurance program have been stymied by the insurance companies … Clearly, there is room within this wasteful program to make cuts without hurting protections for farmers, and the reforms in HR 1314 were an important first step. I strongly oppose any attempt to repeal the crop insurance savings from future legislation, including a possible omnibus appropriations bill.”
Earlier this year, Senator Shaheen and Senator Jeff Flake (R-AZ) introduced a bipartisan bill that would save taxpayers $19 billion over 10 years by eliminating subsidies for profit-guarantee policies in the crop insurance program. Senator Shaheen also introduced bipartisan legislation with Senator Pat Toomey (R-PA) this year to reform the crop insurance program by capping subsidies to farms for their insurance premiums at $50,000 per farm business per year, which would reduce the deficit by $2.2 billion over 10 years.
The full text of the letter to Senate leadership reads as follows:
Dear Majority Leader McConnell and Minority Leader Reid:
I write to express my concern with a reported agreement to undo $3 billion in taxpayer savings achieved by making modest reforms to the federal crop insurance program included in HR 1314, legislation to enact a budget agreement for Fiscal Years 2016 and 2017.
Despite the rhetoric from opponents, these reforms do not make any cuts to the subsidies that go directly to insurance companies. The reforms also do not place any limitations on the subsidies received by farmers. The legislation simply reduces the amount of underwriting gains insurance companies can receive on top of their taxpayer subsidies by moving the target “rate of return” from 14.5 percent to 8.9 percent.
Federal spending on the crop insurance program is out of control. Annual costs to taxpayers have exploded, from $2 billion in 2001 to $8.7 billion in 2014. The program is currently projected to cost $90 billion over the next ten years. This is an unnecessarily high cost for the benefit it provides, and the crop insurance program as it is currently operated requires the taxpayer to pay in a number of different and expensive ways.
Under current law, taxpayers are on the hook for an average of 62 percent of the total cost of a crop insurance policy, with no annual limit on the monetary amount of that subsidy. In addition, billions of federal dollars are used to pay private insurance companies to provide the policies.
I am concerned with the reported agreement to roll back these modest reforms, not only because it will increase the deficit, but also because any commonsense efforts to reform the crop insurance program have been stymied by the insurance companies.
The Agricultural Act of 2014 did not place any reasonable limitations on annual spending for the crop insurance program and, in fact, that legislation increased the program’s projected costs by nearly $6 billion over ten years. During debate on the bill, the Senate was blocked from voting on several proposals that would have saved taxpayer dollars without hurting the program. The bill’s increased spending on crop insurance was promoted as part of a bargain in which $23 billion in cuts would be made to other agricultural and nutrition programs.
But these touted savings have failed to materialize. The Congressional Budget Office now estimates that agricultural commodity programs will cost 50 percent more than originally anticipated. So taxpayers lose twice – they are liable for the increased spending on crop insurance, and they don’t get the savings in other farm programs that were promised.
Clearly, there is room within this wasteful program to make cuts without hurting protections for farmers, and the reforms in HR 1314 were an important first step.
I strongly oppose any attempt to repeal the crop insurance savings from future legislation, including a possible omnibus appropriations bill. Thank you for your attention to this matter.
United States Senator