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Staff Contact: \-\-- October 6, 2004

**DRAFT**

##### Policy Brief......Conference Report on H.R. 4837

#####  Military Construction Appropriations Act for FY05

**[Important Provisions]{.underline}**

-   Includes H.R. 5212, the [\$10.9 billion hurricane relief
    package]{.underline} that passed the House on October 6, 2004 by a
    vote of 410 to 0.

-   Includes an additional [\$887.4 million]{.underline} in hurricane
    relief requested on October 7^th^ and therefore not included in H.R.
    5212.

-   Includes the Neugebauer drought assistance amendment, providing
    assistance to farmers and ranchers while offsetting the cost with a
    cap on the Conservation Security Program. However, [savings from the
    offset would not be counted until 2008 because of a directed
    scorekeeping requirement]{.underline}.

-   It does **NOT** include a two-year extension of the Milk Income Loss
    Contract (MILC) program, costing \$2.4 billion in new mandatory
    spending.

-   Other items of note: \$7.2 million of hurricane assistance for
    processors would go to Hawaii, authorizes a natural gas pipeline in
    Alaska, \$9 million of hurricane assistance for oysters in AL,
    [CA]{.underline}, FL, and MS.

**[Neugebauer Drought Assistance]{.underline}:**

The Neugebauer amendment would provide an estimated ("such sums as are
necessary") \$2.86 billion in disaster assistance to farmers and
ranchers. The amendment would provide direct payments to producers who
experienced more than a 35% crop loss in expected production. The
payment would range from 60-65% of the market price for any loss in
excess of the 35% threshold depending upon if crop insurance was in
place or available. Producers could choose between either their 2003 or
2004 losses (but not both). [Producers would be eligible for these
payments even if they had failed to purchase crop
insurance]{.underline}, but they would then be required to purchase such
insurance for each of the next two crop years. Eligibility for these
payments would not require a farmer to live in a declared disaster area.

These payments would be limited to \$80,000 per producer, and each
producer would be barred from receiving such payments if their income
exceeded \$2.5 million in 2003 -- unless 75% of their income stemmed
specifically from farming. Unlike other farm disaster assistance
proposals, such as the Baucus amendment to the FY05 Homeland Security
appropriations bill (S.2537), the Neugebauer amendment ensures that
these disaster payments *would not exceed* 95% of a crop's worth in the
absence of hurricane destruction. (Under the Baucus amendment, a
producer could possibly *exceed* their losses on an expected crop's
market worth *if* the disaster payment is combined with any crop
insurance payout and the sale (at a higher price with lower demand) of
any crops that survived.)

The amendment would also provide direct payments to livestock producers
-- through the Livestock Assistance Program \-- who experienced more
than a 40% loss in grazing for three or more months in either 2003 or
2004 (but not both). The producer would have to be located in a county
declared a natural disaster. And finally, the amendment would provide
funding for the Tree Assistance Program, which was authorized by the
2002 farm bill. The program was created to assist orchard growers who
lost at least 15% of their trees as a result of a natural disaster. The
Secretary can either reimburse 75% of the cost of replanting eligible
trees lost or the cost of sufficient seedlings to reestablish the stand.
Payments per person may not exceed \$50,000 or an equivalent value in
tree seedlings. Orchard growers could choose between either their 2003
or 2004 losses (but not both).

These payments would be limited to \$80,000 per producer, and each
producer would be barred from receiving such payments if their income
exceeded \$2.5 million in 2003 -- unless 75% of their income stemmed
specifically from farming. Unlike other farm disaster assistance
proposals, such as the Baucus Amendment to the FY05 Homeland Security
appropriations bill (S.2537), H.R. 5212 ensures that these disaster
payments *would not exceed* 95% of a crop's worth in the absence of
hurricane destruction. (Under the Baucus amendment, a producer could
possibly *exceed* their losses on an expected crop's market worth *if*
the disaster payment is combined with any crop insurance payout and the
sale (at a higher price with lower demand) of any crops that survived.)

[The Neugebauer amendment offsets the cost of the package by capping the
amount of available each year for the Conservation Security Program
(CSP)]{.underline} -- a program authorized by the 2002 farm bill to
encourage farmers to practice conservation. According to CBO, this cap
would save \$2.858 over ten years. While a legitimate offset, some
conservatives may be concerned about an offset that requires ten years
to recoup the savings needed to pay for spending that will occur in the
current year. For instance, a similar cap was imposed on the FY03
omnibus appropriations bill to provide additional savings but was lifted
the following year.