WASHINGTON - The Bush administration wants to cut the budget for the crop insurance program and has ended up in a major battle with the industry, farm groups and members of Congress including Rep. Earl Pomeroy, D-N.D., about whether the program still will be able to serve all farmers, particularly those who grow higher-risk crops in riskier growing areas.

The Bush administration is renegotiating the Standard Reinsurance Agreement, which governs the regulations of the crop insurance program and the amount of money the USDA Federal Crop Insurance Corp. will pay the companies and agents to operate it. Bush administration officials have said they believe they can reduce the amount of money paid to the insurance companies and agents without damaging the program. The companies and the agents say the Bush administration has underestimated the cost of writing the policies and that companies are likely to leave the business rather than absorb the cuts.

Third draft

In the first draft of its proposal the RMA proposed cutting $75 million per year and in a second draft

$41 million per year. The third draft, which was released May 20, says the cut would be $36 million over two years, but Mike McLeod, a lobbyist who represents the American Association of Crop Insurers, told Agweek the cut really would amount to $22 million in the fiscal year 2005 that begins Oct. 1 and $36 million year after that. McLeod said Congress still might cut more from the program if across-the-board budget cuts are needed to reduce the deficit.

McLeod said insurance company executives "are very disappointed" in the third draft and that the main difference between earlier drafts and this draft is that the changes will cause companies and agencies to exit the business more slowly so that the effects may not be noticed for several years "What this proposed SRA will do is to make it harder for companies and agents to compete for farmers' business in the high-risk areas," McLeod said," reducing competition.

McLeod also said the RMA had presented the SRA to the companies "in a take it or leave it fashion." Bush administration officials, he said, "agreed to meet with the lawyers of the companies that agree with the third draft, but only to iron out minor wording changes" before it is supposed to go into effect July 1. McLeod added that he does not feel the draft responds to the specific questions raised by members of Congress seeking assurances crop insurance will continue to be available in every agricultural county in the country.

Concerns falling on deaf ears?

Cliston Brown, a lobbyist for the Independent Insurance Agents and Brokers of America, added, "We really had hoped that the influence of nearly 100 members of Congress would have more resonance than a $6 million difference. Unfortunately, it looks like the likeliest source for these budget cuts is going to be agent commissions, and we are concerned that this will mean a number of agents will stop selling crop insurance. That would be highly detrimental to farmers who require this type of insurance. We certainly have acute concerns as to how this proposed SRA will affect the livelihoods of independent agencies and brokers."

On April 28, Robert A. Rusbuldt, the crop insurance agents' CEO, also wrote White House Deputy Assistant for Legislative Affairs David Hobbs that the agents have "grave concerns with the process" under which RMA is writing the SRA.

Pomeroy and Rep. Jack Kingston, R-Ga., organized 54 House members who wrote Agriculture Secretary Ann Veneman that there might have to be additional cuts as part of budget reconciliation and asked that she provide them with "a full analysis of the proposed SRA within 10 days from the date of this letter so that we may fully evaluate provisions that could accelerate any further concentration of the crop insurance industry."

House Agriculture Committee Chairman Bob Goodlatte, R-Va., and ranking member Charles Stenholm, D-Texas, House Agriculture General Farm Commodities and Risk Management Subcommittee Chairman Jerry Moran, R-Kan., and House Agriculture Appropriations Subcommittee Chairman Henry Bonilla, R-Texas, all wrote the administration about the plan after the second draft.

Bonilla wrote Veneman that he is concerned the number of participating companies already has declined from 33 to 14 and that the plan to cut $41 million from the budget for delivering the insurance could cause further concentration in the industry. "Can you guarantee that every farmer in every state will have access to crop insurance under your proposed SRA?"

Goodlatte and Stenholm wrote Veneman that they want to "make certain you are fully aware" of the "consequences" of cutting the budget $41 million. "We believe a budget-neutral SRA should be offered the companies" or they may stop offering crop insurance.

Moran wrote noted to USDA Risk Management Administrator Ross Davidson, who is in charge of the crop insurance program, that he has "questions about the continued viability of the crop insurance (program) after re-negotiation of the SRA." Moran said agents, associations and commodity groups have told him that their ability to deliver crop insurance will be "compromised" if the budget is cut "without a corresponding reduction in the regulatory burden."

Idaho's all-Republican congressional delegation - Sens. Larry Craig and Mike Crapo and Reps. Mike Simpson and C.L. "Butch" Otter wrote that they also are worried about companies leaving the crop insurance business and about provisions they say would make it more difficult for farmer-owned cooperatives to help farmers obtain crop insurance.

McLeod and Brown said crop insurance agents and agents would continue to ask members of Congress to take action to stop USDA from completing it as written.

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