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Tuesday, May 25, 2010

Reductions in Mandatory Agriculture Program Spending

Jim Monke
Specialist in Agricultural Policy

Megan Stubbs
Analyst in Agricultural Conservation and Natural Resources Policy

Many agricultural programs receive mandatory funding through the U.S. Department of Agriculture's Commodity Credit Corporation (CCC). Mandatory funding is made available by multiyear authorizing legislation and does not require annual appropriations or subsequent action by Congress. However, mandatory funding can be reduced in the appropriations process or by the authorizing committees themselves. In contrast to mandatory funding, discretionary funding is made available by annual appropriations acts on a year-by-year basis through a different process originating in the appropriations committees. 

While mandatory spending in agriculture historically was reserved for the farm commodity programs, the authorizing Agriculture Committees have expanded its use to conservation, rural development, and energy programs in the recent farm bills passed by Congress. Mandatory spending creates funding stability and consistency compared to that of the appropriations process. Some argue, however, that this use of mandatory spending has moved beyond the statutory purpose of the CCC. This has created tension between authorizers and appropriators, leading to actions by appropriators that are called "changes in mandatory program spending" (CHIMPS). CHIMPS usually reduce or block mandatory outlays, but sometimes appropriators replace some of the blocked funding with discretionary appropriations. Nonetheless, CHIMPS generate savings that appropriators can use to offset increases in discretionary spending. 

Between FY2003 and FY2010, CHIMPS by appropriators to mandatory agricultural programs have totaled $7.5 billion. CHIMPS to eight conservation programs are among the most notable, accounting for $3 billion of this total. Among individual programs, the Environmental Quality Incentives Program (EQIP) has the highest multiyear total of CHIMPS, at $1.2 billion. 

Authorizing committees also have reduced mandatory program spending to generate savings after a farm bill has been enacted. The reason may be to offset spending increases for other programs within their jurisdiction or to comply with budget reconciliation directives. 

Notable among changes to authorizing laws (not CHIMPS), the Conservation Security Program was reduced in FY2003 and again in FY2005 to offset agricultural disaster assistance ($3.1 billion and $2.9 billion, respectively). Authorizers also received credit for $2.7 billion in budget reconciliation savings (over five years) across 12 programs in 2005, many of which had been reduced by appropriators in prior years through CHIMPS. 

More recently, the Senate Agriculture Committee's current funding plan for the Healthy, Hunger- Free Kids Act of 2010 (S. 3307) proposes to use $2.2 billion of reductions from EQIP over 10 years to offset the cost of increases for child nutrition. A proposed alternative to use an offset from the Conservation Stewardship Program (CSP) would have similar budgetary effects, and would likewise affect a mandatory program. 

The Administration also can take actions that reduce mandatory outlays. In renegotiating the Standard Reinsurance Agreement for the crop insurance program, the Administration has proposed changes that would reduce the baseline available for crop insurance by about $7-8 billion over 10 years. This has raised a debate over whether such reductions should wait so that Congress can get credit for any reduction, especially for future farm bills or possible budget reconciliation. 

Date of Report: May 19, 2010
Number of Pages: 18
Order Number:R41245
Price: $29.95

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