Federal Report Triggers Crop Insurance Debate09/19/2017
Don’t screw it up. But just how far does that extend?
“One guy very succinctly said don’t screw it up. That would screw it up,” answered Chairman Mike Conaway, R-Texas, to a question from a reporter following the House Agriculture Committee’s farm bill listening session at the 2017 Farm Progress Show.
The reporter asked how a General Accounting Office report that suggested fixes to some crop insurance formulas that calculate how much money insurance companies receive from the federal government could impact the 2018 farm bill negotiations.
“We’re going to dig into this and look at the numbers and see what the bottom line is,” said Rep. Collin Peterson, the Ranking Member on the committee and its former chairman.
The question, directed at Conaway, asked about addressing the SRA, or Standard Reinsurance Agreement.
A GAO report, completed in July, which was requested by Sen. Dianne Feinstein, D-Calif., examined the reimbursements by the federal government to insurance companies for administrative and operating expenses. The method for determining that level of the federal crop insurance subsidy is included in the SRA.
The GAO report concluded that the U.S. Department of Agriculture could save money by limiting those administrative payments to crop insurers and by reducing the profits to crop insurance companies. The federal government pays for around 62 percent of the crop insurance premiums, with farmers paying the other 38 percent.
“To put it in perspective, we’ve reduced crop insurance by $18 billion since 2008 through a series of these kinds of events, including a previous SRA event,” Conaway said.
Conaway and Peterson, the two certified public accountants on the House ag committee, both questioned the numbers and calculations used in the GAO report.
“I’m not sure that GAO, (Senate Budget Office) and (Office of Management and Budget) have the same profit model that insurance companies do. One thing I’ve asked them to do is line them out together, what are you counting, what are you not counting,” Conaway said.
“Both Collin and I are CPAs. The first step is why are you getting to such dramatically different numbers?” he said.
By The Numbers
“One of the things I always say is figures lie and liars figure, and I’m not sure these folks who did this study knew what the heck they were doing,” he said.
They also noted that more companies are leaving the crop insurance market than are entering it.
“Those companies have moved with their feet, with their pocketbooks because they’re not making the kind of money, certainly not the kind of money that GAO and CBO talk about,” Conaway said.
Peterson said he met with representatives from those in the crop insurance business, who wanted to know the future of the crop insurance business in the U.S.
“I had all the reinsurance companies, those are the people who make this system actually work. They are the ones that take the top off the risk, and without them, we wouldn’t have crop insurance,” he said.
Call To Action
Peterson admitted to having some doubts about the report.
“I think we need to get back and see what’s in that report, but I’m very skeptical about what they came up with,” he said.
In other farm bill questions, Conaway did not dismiss the possibility of a split farm bill, with the nutrition titles being separated from the other titles, although he hinted at failure for a separated bill.
“The only people I hear talking about separating the two are the folks who want to defeat both of them, and that’s a conversation I am decidedly uninterested in having,” he said.
Rep. Glenn “GT” Thompson, R-Pa., the chairman of the House ag subcommittee on nutrition, said the commodity and nutrition titles of the farm bill are linked.
“There’s not a calorie that is consumed under the nutrition program that is not raised by a farmer or farm family. The two things I like to say when it comes to the nutrition committee are that nutrition matters and farmers feed,” he said.
Source: Jeannine Otto, Agri News