Primer

Farm Bill Reauthorization

Overview

The 110th Congress is expected to adopt major farm and food legislation in an omnibus multi-year authorizing law, commonly called the “farm bill.” Federal farm support, food assistance, agricultural trade, marketing, and rural development policies are governed by a variety of separate laws. However, many of these laws periodically are evaluated, revised, and renewed through an omnibus, multi-year farm bill.

These policies can be, and sometimes are, modified or overhauled as freestanding authorizing legislation, or as part of other laws. However, periodic farm bills have provided Congress, the Administration, and interest groups with an opportunity to reexamine agriculture and food issues more carefully, and address them more comprehensively.

The most recent omnibus farm bill, the Farm Security and Rural Investment Act of 2002 (P.L. 107-171), and many of its provisions expire in 2007.  Without new legislation, notably in the area of farm income and commodity price support programs, permanent statutes will take effect. Most of these statutes were enacted decades ago and are no longer compatible with current national economic objectives, global trading rules, and federal budgetary or regulatory policies. (In fact, these largely outdated permanent laws have been kept on the books by Congress in part to compel increasingly urban and suburban future Congresses to pay attention to national agricultural policy).

The heart of every omnibus farm bill is farm income and commodity price support policy — namely the methods and levels of support that the federal government provides to agricultural producers. However, farm bills typically include titles on agricultural trade and foreign food aid, conservation and environment, forestry, domestic food assistance (primarily food stamps), agricultural credit, rural development, agricultural research and education, and forestry programs. Often, such “miscellaneous” provisions as farm marketing, energy, food safety, and animal health and welfare are added.

This omnibus nature of the farm bill creates a broad coalition of support among sometimes conflicting interests for policies that, individually, might not survive the legislative process. Among the groups lobbying Congress will be farm and commodity organizations; input suppliers; commodity handlers, processors, exporters, retailers, foreign customers and competitors; universities and scientific organizations; domestic consumers and food assistance advocates; environmentalists; and rural communities. So, for example, farm state lawmakers look to urban legislators’ support for commodity price supports in exchange for their votes on domestic food aid — and vice versa.

Farm bills and the programs they encompass are complex, tightly intertwined, and intensely interactive. Changes to one program often have unintended consequences for others. For example, a legislative change that raises cornprices must be examined for how it might change the planting decisions of those who grow other crops such as soybeans, and, in turn, the cost of the support program for soybeans.

* Information taken from CRS Report for Congress, “Previewing a 2007 Farm Bill” by Jasper Womach, January 30, 2006. (RL33037)

Domestic Nutrition Assistance

The farm bill traditionally reauthorizes expiring authorities and appropriations for several domestic nutrition assistance initiatives.  It also is the major vehicle for revising rules that govern how programs operate and how much they will cost. They include:

1) the Food Stamp program in the 50 states, the District of Columbia,
Guam, and the Virgin Islands;

2) programs operating in lieu of the regular Food Stamp program —
nutrition assistance block grants for Puerto Rico, American Samoa,
and the Northern Mariana Islands, along with the Food Distribution
Program on Indian Reservations (FDPIR);

3) The Emergency Food Assistance Program (TEFAP);

4) the Commodity Supplemental Food Program (CSFP); and

5) Community Food Projects.

In addition, the 2002 farm bill incorporated changes affecting commodity purchases for the School Lunch program, provided statutory authority and funding ($15 million a year through FY2007) for a new Seniors Farmers’ Nutrition Market Program (SFMNP), and established a pilot program to distribute free fresh fruits and vegetables in schools (later expanded and made permanent in the 2004 child nutrition reauthorization law). These initiatives will likely be up for review in the next farm bill.

All farm bill domestic nutrition assistance programs, except for the CSFP and TEFAP storage and distribution grants are treated as mandatory entitlements for budget purposes. Taken together they form a large proportion of the USDA budget, estimated at about $34 billion for FY2005.

The 2002 farm bill made extensive changes to Food Stamp program rules and relatively minor revisions to those for the other programs. Using its March 2002 “baseline,” the Congressional Budget Office estimated that the total additional cost of the provisions in the nutrition assistance title of the 2002 farm bill would be about $3 billion over the six-year life of the bill.

Issues to be considered for a 2007 farm bill likely will depend on experience with the revisions made by the 2002 farm bill, cost and participation trends for the covered programs, decisions taken to meet budget reconciliation targets over the next few years, and whether any new funding will be available.

Food Stamps

The largest of the nutrition assistance programs in the farm bill is the Food Stamp program. The level of food stamp spending varies with participation, which is closely linked to economic conditions and eligibility rules, and benefit levels, which are indexed to food costs and also reflect recipients’ income. Since the 2002 farm bill, participation has increased substantially, from some 19 million persons per month in FY2002 to 25.4 million (May 2005), and the average monthly benefit level has jumped from $80 a person in FY2002 to $92 in May 2005. Costs have grown from $20.6 billion in FY2002 to in excess of an estimated $32 billion for FY2005. The degree to which increased food stamp enrollment and cost has been due to 2002 farm bill provisions (to open access to the program and increase benefits (noted below), as opposed to economic conditions) is unclear, and probably will not be known until USDA completes participation studies.

The regular Food Stamp program provides inflation-indexed monthly benefits to low-income households that supplement their own spending on food. Program costs are shared with the states. The federal government pays the cost of benefits and about half the cost of administration and operating work/training programs for recipients. States, and in some cases localities, pay the remainder.

The Food Stamp program has a “quality control” system that measures the degree to which eligibility and benefit decisions are erroneously made. The most recent national quality control statistics show historically low error rates — 4.5% of benefits over-issued and just under 1.5% under-issued. States with persistently high error rates can be assessed financial sanctions; those with very low error rates can receive bonus payments.

In addition to supporting food stamp benefits and costs associated with administration and work/training efforts for recipients, the Food Stamp program provides matching funding for nutrition education and outreach activities by states — over $200 million in FY2004.

The 2002 farm bill reauthorized expiring Food Stamp program authorities and appropriations through FY2007. It also expanded eligibility for noncitizens (most notably noncitizen children and those who meet a five-year legal residence requirement), raised benefits modestly for larger households (by counting less of their income), allowed states to provide “transitional” food stamps for families leaving the Temporary Assistance for Needy Families (TANF) program, set up a number of state options to ease access to the program and administrative burdens on applicants/recipients and program operators (e.g., allowing states to reduce recipient reporting requirements, simplify benefit calculations, conform some food stamp rules to those used in the TANF and Medicaid programs), and revamped the quality control system to reduce the number of states subject to financial sanctions and grant bonus payments to states demonstrating exemplary administrative performance.

Programs in Lieu of Food Stamps

Four programs authorized under the Food Stamp Act operate in lieu of food stamp assistance. The 2002 farm bill extended expiring authorities for all the programs in lieu of food stamps through FY2007 and instituted inflation indexing for the annual nutrition assistance grants for Puerto Rico and American Samoa. In addition, recent appropriations laws have required that bison meat be purchased from Indian cooperatives for the FDPIR.

1) Puerto Rico receives an inflation-indexed annual block grant ($1.5 billion in FY2005, serving about 1 million persons per month) to operate a nutrition assistance program that works much like the regular Food Stamp program — including delivery of benefits through Electronic Benefit (EBT) cards. The major feature distinguishing Puerto Rico’s program from the regular Food Stamp program (other than more restrictive financial eligibility tests and lower benefit levels) is that 75% of a household’s benefit must be used for food purchases, as opposed to 100% in the regular Food Stamp program.

2) American Samoa receives an inflation-indexed annual nutrition assistance grant ($6 million in FY2005) and has designed a program that serves low-income elderly and disabled persons.

3) The Commonwealth of the Northern Mariana Islands gets an annual grant (negotiated with the USDA, with an estimated $8.4 million available for FY2005) to operate a food-stamp-like program with some benefits earmarked for locally produced food items.

4) Indian tribal organizations may choose to operate the Food Distribution Program on Indian Reservations (FDPIR), instead of offering regular food stamp benefits; the full cost of benefits and administration is covered by the federal government. This option operates on nearly 250 Indian reservations in 22 states. The program offers monthly food packages of USDA-provided commodities to those meeting eligibility rules close to those used for food stamps. In FY2004, it served just over 100,000 persons per month at a cost
of $81 million; the monthly value of the food packages averaged $39 a person.

The Emergency Food Assistance Program (TEFAP)

The 2002 farm bill extended expiring TEFAP authorities through FY2007 and raised mandatory commodity support for TEFAP from $100 million to $140 million a year. TEFAP is governed by provisions of law in both the Food Stamp Act (mandating the provision of commodities) and the Emergency Food Assistance Act (authorizing administrative/distribution cost grants and setting up the rules governing the program).

Under TEFAP, the federal government provides food commodities to states along with grants for administrative and distribution costs. This assistance supplements other sources of food aid for needy persons and often is provided in concert with food bank and homeless shelter projects. Eligibility decisions for TEFAP assistance are made by states. They may direct their TEFAP commodities directly to (state-defined) needy households and meals served to (state-defined) needy persons at congregate meal sites. Local TEFAP administering agencies also are chosen by states.

In addition to state allocations of the $140 million in commodities, each state receives a share of the $50 million appropriated as discretionary money to fund expenses associated with administration and distribution (storage, transportation) of the commodities. Moreover, state entitlement to TEFAP commodities is supplemented with “bonus” commodities (over $200 million in FY2004) that the USDA has acquired in its agriculture support programs.

Commodity Supplemental Food Program (CSFP)

The 2002 farm bill extended the authorization for the CSFP through FY2007 and increased the proportion of appropriations to be earmarked for administrative costs. The program is authorized by Section 4(a) of the Agriculture and Consumer Protection Act of 1973. The CSFP is a discretionary program dependent on annual appropriations, and is not nationwide (or statewide in participating states). It operates at about 140 sites in over 30 states.

CSFP projects receive USDA commodities, and funds for administrative costs, for food packages provided to low-income elderly persons (over 85% of participants) and women, infants and children. Commodities and administrative funding generally are apportioned by the number of persons served in the prior year, to the extent that funds are made available. In FY2004, $108 million was available, and some 500,000 persons were served food packages worth about $17 per month.

Community Food Projects

The Food Stamp Act provides $5 million per year, extended through FY2007 by the 2002 farm bill, for a Community Food Projects competitive grant program administered through the USDA’s Cooperative State Research, Education, and Extension Service.

Community project grants provide one-time infusions of federal dollars for local projects designed to increase the food self-reliance of communities; promote comprehensive responses to local food, farm, and nutrition issues; develop innovative linkages among the public, for-profit, and nonprofit food sectors; encourage long-term planning and multi-agency approaches; or improve the availability of locally or regionally produced foods to low-income people.

Titles and Subtitles of the 2002 Farm Bill (Farm Security and Rural Investment Act of 2002, P.L. 107-171)

I. Commodity Programs
A. Direct Payments and Counter-Cyclical Payments
B. Marketing Assistance Loans and Loan Deficiency Payments
C. Peanuts
D. Sugar
E. Dairy
F. Administration

II. Conservation
A. Conservation Security
B. Conservation Reserve
C. Wetlands Reserve Program
D. Environmental Quality Incentives
E. Grassland Reserve
F. Other Conservation Programs
G. Conservation Corridor Demonstration Program
H. Funding and Administration

III. Trade
A. Agricultural Trade Development and Assistance Act of 1954 and Related Statutes
B. Agricultural Trade Act of 1978
C. Miscellaneous

IV. Nutrition Programs
A. Food Stamp Program
B. Commodity Distribution
C. Child Nutrition and Related Programs
D. Miscellaneous

V. Credit
A. Farm Ownership Loans
B. Operating Loans
C. Emergency Loans
D. Administrative Provisions
E. Farm Credit
F. General Provisions

VI. Rural Development
A. Consolidated Farm and Rural Development Act
B. Rural Electrification Act of 1936
C. Food, Agriculture, Conservation, and Trade Act of 1990
D. SEARCH Grants for Small Communities
E. Miscellaneous

VII. Research and Related Matters
A. Extensions
B. Modifications
C. Repeal of Certain Activities and Authorities
D. New Authorities
E. Miscellaneous

VIII. Forestry
A. Cooperative Forestry Assistance Act of 1978
B. Amendments to Other Laws
C. Miscellaneous Provisions

IX. Energy

X. Miscellaneous
A. Crop Insurance
B. Disaster Assistance
C. Tree Assistance Program
D. Animal Welfare
E. Animal Health Protection
F. Livestock
G. Specialty Crops
H. Administration
I. General Provisions
J. Miscellaneous Studies and Reports