PDF _ RL34207 - Crop Insurance and Disaster Assistance in the 2008 Farm Bill
20-Jun-2008; Ralph M. Chite; 17 p.

Update: Previous Editions:
June 20, 2008

Abstract: The federal government has relied primarily on two policy tools in recent years to help mitigate the financial losses experienced by crop farmers as a result of natural disasters — a federal crop insurance program and congressionally mandated ad-hoc crop disaster payments. Congress has made several modifications to the crop insurance program since the 1980s, in an effort to forestall the demand for supplemental disaster payments. Although the scope of the crop insurance program has widened significantly over the past 25 years, the anticipated goal of crop insurance replacing disaster payments has not been achieved.

Although the federal crop insurance program is permanently authorized and hence does not require periodic reauthorization, modifications to the crop insurance program were made in the context of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, the 2008 farm bill). Some policymakers viewed the crop insurance program as a potential target for program cost reductions, and proposed using these savings to fund new initiatives in various titles of the farm bill. Consequently, many of the crop insurance provisions are cost-saving measures. According to Congressional Budget Office estimates, the crop insurance provisions (Title XII) in the 2008 farm bill will reduce program outlays by $3.9 billion over the five-year period of the bill (FY2008-FY2012). Much of the savings ($2.8 billion) is achieved through a change in the timing of crop insurance payments and receipts that will not directly affect the final monetary amounts for participating farmers or insurance companies. The rest of the savings is generated through increased fees paid by farmers for catastrophic coverage and a reduction in reimbursements to the participating insurance companies for their operating expenses, among many other provisions. To address concerns about program waste, fraud, and abuse, the farm bill also authorizes up to $4 million annually for data mining activities beginning in FY2009.

Separately, Title XV of the 2008 farm bill authorizes a new $3.8 billion trust fund to cover the cost of making agricultural disaster assistance available on an ongoing basis over the next four years through five new programs. The largest program is a supplemental revenue assistance payment program for crop producers that is designed to compensate eligible producers for a portion of crop losses that are not eligible for an indemnity payment under the crop insurance program. To be eligible for a payment, a producer must be either in or contiguous to a county that has been declared a disaster area by either the President or the Secretary of Agriculture. An eligible producer also is required to have purchased crop insurance in advance of a disaster. However, the statute makes an exception for the 2008 crop year by allowing uninsured producers to be eligible, as long as they pay the equivalent administrative fee for coverage within 90 days of enactment.

For a description of all crop insurance provisions in the enacted 2008 farm bill, and a comparison of the provisions with the House- and Senate-passed versions of the bill and previous law, see Appendix A at the end of this report.

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Topics: Agriculture, Government, Risk & Reform

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