Senate OKs cap on crop insurance subsidies

  • Article by: JIM SPENCER
  • Star Tribune
  • June 20, 2012 - 9:19 PM

WASHINGTON - With the support of Minnesota's two U.S. senators, the Senate agreed Wednesday to place limits on government crop insurance subsidies for farmers with adjusted gross incomes of more than $750,000.

The vote, which came as an amendment to the farm bill that will govern agriculture policy from 2013 to 2017, represented an unexpected victory for critics of a program that applied no income test to farmers receiving public payments for a portion of their insurance premiums.

The powerful farm lobby did not want limits applied to the program, and neither did the crop insurance industry. Indeed, before voting to impose the income test, senators had to defeat another amendment that would have forced a study and done away with premium subsidy reductions if they added any administrative costs.

But concerns with the national budget deficit had focused attention on the program.

"It's a big win for taxpayers and a big loss for crop insurance agents and giant farming operations," said Scott Faber, vice president of government affairs at the Environmental Working Group (EWG), which had targeted crop insurance.

Cost of the subsidies

EWG says the crop insurance program now has the government paying an average of 62 percent of farmers' premiums, as well as administrative costs and sales commissions to crop insurance companies.

In total, crop insurance cost the government more than $11 billion in 2011, according to EWG.

Sen. Tom Coburn, R-Okla., and Sen. Dick Durbin, D-Ill., sponsored the amendment, which cuts 15 percent from the amount of premium subsidies going to farmers with adjusted gross incomes over $750,000. Coburn said crop insurance is the only agriculture program not subject to income limits.

Numerous farm groups, including those in Minnesota, lined up against cutting premium subsidies.

The Minnesota Farm Bureau was concerned that changing the crop insurance program could increase the costs for everyone, not just to farmers making more than $750,000, said the group's president, Kevin Paap.

Franken's, Klobuchar's votes

Minnesota Democrats Al Franken and Amy Klobuchar both voted for the Coburn-Durbin amendment.

"I fought hard to make sure that this farm bill includes a strong safety net for Minnesota farmers," Franken said in a statement. "But we still need to make sure this legislation does its part to reduce the deficit, and this provision helps do that."

Klobuchar first voted to study the premium subsidy reductions. Once that measure lost, she joined an overwhelming majority that supported the Coburn-Durbin initiative 66-33.

"I voted for this [Coburn-Durbin] amendment because it will help focus the crop insurance program on farmers and ranchers who most need the support while maintaining a strong safety net for all our producers," Klobuchar said in a statement.

Even with the income limitations, which Coburn said would save taxpayers $1 billion, crop insurance still expands in the new farm bill that the Senate is expected to pass this week and send on to the House.

The expansion is meant to replace traditional farm subsidies, which were direct payments not tied to natural disasters or market swings.

After the success in the Senate, EWG's Faber said, "I expect the House to go further to limit crop insurance subsidies."

Jim Spencer • 202-383-6123

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