The federal crop insurance program has taken on new prominence over the past year as a valuable safety net program for farmers. The Federal Crop Insurance Reform Act of 1994 increased crop insurance subsidies and repealed authority for ad hoc disaster assistance. In addition, the Department has recently broadened the scope of the program to include revenue insurance, which protects farmers from declines in market prices as well as weather related yield losses. Today, the committee meets to examine the crop insurance program.
Spending is high despite improvement in the program's actuarial soundness.
For the 1996 crop, taxpayers paid 2.5 dollars for every 1 dollar paid by farmers, an effective subsidy rate of 60 percent. The Department reimburses insurance companies for their administrative expenses based on a flat percentage of total premium. The rate has fallen in recent years and is scheduled to fall further under the Reform Act. But, total payments have nonetheless increased due to the program's growth. I am not convinced that the existing SRA, which will remain in effect for the 1997 crops, has an appropriate balance between the public and private sectors.