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Friday, March 15, 2013

Budget Issues Shaping a Farm Bill in 2013

Jim Monke
Specialist in Agricultural Policy

The desire by many to redesign farm policy and reallocate the remaining farm bill baseline—in a sequestration and deficit reduction environment—is driving much of the farm bill debate this year. Several high-profile congressional and Administration proposals for deficit reduction have specifically targeted agricultural programs with mandatory funding. The political dynamics of sequestration and broader deficit reduction goals leave open difficult questions about how much and when the farm bill baseline may be reduced. In this context, Congress faces difficult choices about how much total support to provide for agriculture, and how to allocate that support among competing constituencies.

Funding to write the next farm bill is based on Congressional Budget Office (CBO) baseline projections of the cost of farm bill programs, and on varying budgetary assumptions about whether programs will continue. The CBO baseline is an estimation (projection) at a particular point in time of what federal spending on mandatory programs likely would be under current law. In February 2013, CBO projected that the current farm bill programs, if they were to continue beyond the 2008 farm bill, would cost $976 billion over the next 10 years (FY2014-FY2023).

When new bills are proposed that affect mandatory spending, their impact (or “score”) is measured as a difference from the baseline. This baseline and scoring process sets the mandatory budget for considering a new farm bill. As a starting point for the 113
th Congress, CBO reestimated two farm bill proposals from 2012 against the new baseline and with new analysis about the provisions. The Senate-passed farm bill in the 112th Congress, S. 3240, would reduce spending by $13.1 billion (-1.3%); and the House-reported bill, H.R. 6083, would reduce it by $26.6 billion (-2.7%). Both of these estimates reflect about $10 billion less in savings than was scored last year, primarily because of the impact of drought and market prices, and because of new understandings about the implementation of nutrition programs. Thus, compared to last year, a new farm bill may cost more than expected, or additional reductions may be necessary to achieve the same deficit reduction.

Also, across-the-board reductions of about 5%, known as budget sequestration, have occurred and total $1.9 billion in FY2013 for agriculture and related agencies spending—$1.2 billion from discretionary spending and $700 million from mandatory programs. Moreover, some popular 2008 farm bill programs do not have a baseline to continue, and will require additional budgetary offsets if they are included in a new farm bill.

Date of Report: March 11, 2013
Number of Pages: 33
Order Number: R42484
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