Toomey, Shaheen Introduce Bipartisan Crop Insurance Reform Bill That Would Deliver Nearly $35 Billion in Savings to Taxpayers
Allentown, Pa. - Last week, U.S. Senators Pat Toomey (R-Pa.) and Jeanne Shaheen (D-N.H.) introduced the Assisting Family Farmers through Insurance Reform Measures (AFFIRM) Act, legislation that would reform the federal government's crop insurance program to better protect taxpayers.
The federal crop insurance program is operated through the U.S. Department of Agriculture and aims to protect American farmers from losses due to lower-than expected crop prices or low crop yields. However, the cost of the federal crop insurance program has dramatically increased in recent years, and the program currently contains practically no limitations on its federal subsidies. According to the Congressional Budget Office (CBO), the AFFIRM Act would save $34.7 billion over ten years by enacting reforms that will cut waste and reduce taxpayer subsidization of profits for insurance companies and large agri-businesses.
"There is no good reason for taxpayers to subsidize crop insurance premiums for massive agriculture operations," said Senator Toomey. "This is nothing more than corporate welfare. Enacting these bipartisan reforms would save billions in taxpayer dollars and put our country on a more sustainable fiscal path. I thank Senator Shaheen for her continued work on this issue and I look forward to working with her to get this bill into law."
"We can protect farmers without putting taxpayers on the hook for excessive subsidies to insurance companies and large agri-businesses that don't need the help," said Senator Shaheen. "By enacting much-needed and common-sense reforms, the AFFIRM Act will save taxpayers billions. I urge Congress to act on this bipartisan proposal."
The AFFIRM Act would:
- Limit federal crop insurance subsidies to $40,000 per farmer, per year. While other major federal farm subsidies have basic payment limits preventing individuals from getting huge payouts, crop insurance premium subsidies have no individual limits at all. As a result, while many farmers receive $10,000 or less per year to help them pay for their crop insurance, a small group of large agribusinesses receive as much as $1 million per year in a direct federal subsidy.
- Eliminate crop insurance premium subsidies for individuals with an adjusted gross income of more than $250,000. Crop insurance subsidies are the only major agriculture subsidy not subject to income limits. Premium subsidies should be going to smaller farms that need the support and not to large companies that can afford to manage their own risk.
- Reduce government subsidy of crop insurance company administrative and operating costs. Currently, the government spends around $1.5 billion per year on payments to insurance companies for providing crop insurance. The bill instead caps government payments to insurers for administrative and operating costs at $900 million.
- Lower insurer profits guaranteed by the government to 8.9 percent. USDA builds a profit guarantee into its agreement with crop insurers and currently guarantees crop insurance companies profits of 14.5 percent. It is unnecessary for the federal government to continue to guarantee such high profits for private companies at taxpayer expense.
- Eliminate subsidies for Harvest Price Option insurance policies. Under a traditional crop insurance plan, farmers receive a payout when they earn less money at harvest time than they were projected to make when they planted their crop. However, under Harvest Price Option plans, if that crop's price at harvest time is higher than the insured planting price, the insurance payout is recalculated based on the higher price. The bill does not prevent farmers from taking out these policies as long as they pay the premium themselves.
- Increase transparency in government spending. The bill requires the reporting of all individuals or entities that receive federally subsidized crop insurance. It also requires the reporting of the financial support received by crop insurers. Unlike other farm subsidies, the public does not currently know who receives crop insurance subsidies.