Budget Issues That Shaped the 2018 Farm Bill
Released: 2019-02-28T00:00:00

T he farm bill is an omnibus, multiyear law that governs an array of agricultural and food programs. It provides an opportunity for Congress to choose how much support to provide for agriculture and nutrition and how to allocate it among competing constituencies. The farm bill has typically undergone reauthorization about every five years. The current farm bill—the Agriculture Improvement Act of 2018 ( P.L. 115-334 , H.R. 2 ), often called the "2018 farm bill"—was enacted in December 2018 and expires in 2023.

From its beginning in the 1930s, farm bills have focused primarily on farm commodity programs to support a handful of staple commodities—corn, soybeans, wheat, cotton, rice, dairy, and sugar. In recent decades, farm bills have expanded in scope to include a Nutrition title since 1973 and since then Conservation, Horticulture, Bioenergy, Credit, Research, and Rural Development titles.

Budget matters increasingly influence the development of the farm bill. While other reports discuss policy issues, this report focuses on the budgetary effects across the whole farm bill.

Farm Bills from a Budget Perspective

One way to compare the activities covered by a farm bill is by the allocation of federal spending and, more specifically, by how much is spent in total and how a new law changes allocations or policy. Congressional Budget Office (CBO) estimates are the official measures when bills are considered and are grounded in long-standing budget laws and rules.

Recent Historical Perspective

Recent farm bills have faced various budget situations, including spending more under a budget surplus, cutting spending for deficit reduction, and remaining budget neutral. For example

The 2002 farm bill (the Farm Security and Rural Investment Act of 2002, P.L. 107-171 ) was enacted under a budget surplus that allowed it to make changes that were projected to increase spending by $73 billion, or 22%, over a 10-year budget window—more than half of which was for the farm commodity programs. The 2008 farm bill (the Food, Conservation, and Energy Act of 2008, P.L. 110-246 ) was officially budget neutral, though it included $10 billion of offsets over 10 years from tax-related and other provisions that allowed it to increase spending on the Nutrition, Conservation, and Disaster titles. The 2014 farm bill (the Agricultural Act of 2014, P.L. 113-79 ) was enacted under deficit reduction and budget sequestration that influenced its legislative development. It made changes that projected a net reduction of $17 billion, or 1.7%, over 10 years ($23 billion including sequestration). The 2018 farm bill (the Agriculture Improvement Act of 2018, P.L. 115-334 ) was held to a budget-neutral position over its 10-year budget window. Some budget amounts were reallocated across programs within issue areas and across titles of the farm bill, as discussed throughout this report.

Types of Spending Authorizations

Generally, farm bills authorize spending in two categories: mandatory and discretionary. From a budgetary perspective, many of the larger programs are assumed to continue beyond the end of a farm bill, even though their authorizations to operate may expire. That projection for mandatory programs, as explained below, provides funding to reauthorize programs, reallocate funding to other programs, or take offsets for deficit reduction. For other programs, funding must come by other means. This includes new programs, those without baseline, or discretionary programs.

The Supplemental Nutrition Assistance Program (SNAP) and crop insurance have their own mandatory spending sources, but most other mandatory outlays are paid through the U.S. Department of Agriculture's (USDA) Commodity Credit Corporation (CCC).

Discretionary spending is authorized throughout the farm bill, including most rural development, credit, and research programs, among others. Some smaller research, bioenergy, and rural development programs are authorized to receive both mandatory and discretionary funding. Most agency operations (salaries and expenses) are financed with discretionary funds. Discretionary appropriations are made separately through an annual agriculture appropriations act.

While both types of programs are significant, mandatory programs often dominate the farm bill debate. Therefore, the majority of this report focuses on mandatory spending

Summary of Projected Outlays in the 2018 Farm Bill

Figure 1 illustrates the distribution of the $428 billion five-year total of projected mandatory outlays at enactment for the life of the 2018 farm bill (FY2019-FY2023). Figure 2 shows program-level detail for agriculture-specific programs, particularly the Farm Commodity and Conservation titles. Table 1 presents these outlays (the fifth and 10 th columns), and how budgetary resources were reallocated across titles of the farm bill, for both the five- and 10-year budget windows. The terms baseline and score are explained in later sections of this report.

Mandatory spending is authorized throughout the farm bill, but four titles presently account for about 99% of the mandatory farm bill spending: Commodities (7.3%), Nutrition (76%), Crop Insurance (8.9%), and Conservation (6.8%).

Importance of Baseline to the Farm Bill

The Congressional Budget Office (CBO) baseline is a projection at a particular point in time of future federal spending on mandatory programs under current law. The baseline is the benchmark against which proposed changes in law are measured. The CBO develops the budget baseline under various laws and follows the supervision of the House and Senate Budget Committees.

When a new bill is proposed that would affect mandatory spending, the score (cost impact) is measured in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score.

Having a baseline essentially gives programs built-in future funding if policymakers decide that the programs should continue—that is, straightforward reauthorization would not have a scoring effect (budget neutral).

Once a new law is passed, the projected outlays at enactment equal the baseline plus the score . This sum becomes the budget foundation of the new law.

Development of the Baseline

CBO periodically projects future government spending via its budget baselines, and evaluates proposed bills via scoring estimates. The baseline incorporates domestic and international economic conditions at the time the baseline is projected.

Generally, a program with estimated mandatory spending in the last year of its authorization may be assumed to continue in the baseline as if there were no change in policy and it did not expire. This is the situation for most of the major, long-standing farm bill provisions such as the farm commodity programs or supplemental nutrition assistance. However, some programs do not continue in the baseline beyond the end of a farm bill because they are either

programs with estimated mandatory spending less than a minimum $50 million scoring threshold in the last year of the farm bill, or new programs established after 1997 for which the Budget Committees have determined that mandatory spending shall not extend beyond expiration. This decision may have been made in consultation with the Agriculture Committees for a number of reasons, such as to reduce the program's 10-year cost when a farm bill is written or to prevent the program from having a continuing baseline.

The 2014 farm bill had 39 programs without baseline beyond FY2018 that received $2.824 billion in mandatory funding over five years.

CBO Baseline: April 2018

The CBO baseline that was used to develop the 2018 farm bill was released in April 2018 (the first and sixth data columns in Table 1 ). It projected that if the 2014 farm bill were extended, as amended as of April 2018, farm bill programs would cost $426 billion over the next five years (FY2019-FY2023) and $867 billion over the next 10 years (FY2019-2028).

Most of the 10-year amount, 77%, was in the Nutrition title for the Supplemental Nutrition Assistance Program (SNAP). The remaining 23%, $203 billion baseline, was for agricultural programs, mostly in crop insurance, farm commodity programs, and conservation. Other titles of the farm bill contributed about 1% of the baseline, some of which are funded primarily with discretionary spending. Table 2 presents the April 2018 baseline by farm bill title with some program-level details for select titles.

Scores of the 2018 Farm Bill

The CBO score measures the budgetary impact of changes made by the 2018 farm bill. It is measured relative to its benchmark—the CBO baseline. Budget enforcement procedures follow an array of federal budget rules, such as "PayGo," which required budgetary offsets to balance new spending to avoid increasing the federal deficit.

Although the farm bill is a five-year authorization—the 2018 farm bill covers FY2019-FY2023—budget rules required it to be scored over a 10-year budget window. Thus, when the farm bill is discussed during legislative development, it may be more often presented by its effect over the 10-year budget window than the five-year duration of the law. Separately, statements about the total cost of the farm bill may be in terms of its five-year outlays (i.e., projected spending over the five-year life of the farm bill). Both can be accurate measures of the farm bill budget depending on the context.

CBO released several interim scores of the 2018 farm bill during the various stages of its development. These include scores of the effects of the

House-introduced bill ( H.R. 2 ), House-reported bill ( H.R. 2 ), Senate-reported bill ( S. 3042 ), House-passed bill ( H.R. 2 ) and the Senate-passed Amendment to H.R. 2 (the second, third, seventh and eighth columns in Table 1 ; see also the more detailed section-level scores in Appendix A ), Conference agreement for H.R. 2 (the fourth and ninth columns in Table 1 ; see also the more detailed section-level scores in Table 3 ).

Subsequent to the House-passed score, CBO released a more detailed assessment of the farm commodity program payment limit provisions in the House-passed bill. This score did not change the amounts but explained background for the score of those provisions in greater detail.

Summary of Title-Level Scores

Figure 3 shows the distribution of the title-level changes (scores) in the 2018 farm bill conference agreement and the House- and Senate-passed bills that preceded it.

Relative to the baseline, the overall score of the 2018 farm bill is budget neutral over a 10-year period. The House-passed bill would have decreased 10-year outlays by $1.8 billion, and the Senate-passed bill was budget neutral.

The overall relatively small or budget-neutral net scores are the result of sometimes relatively larger increases and reductions across titles.

Generally, the enacted farm bill follows the scoring approach of the Senate bill more closely than the House bill. In the new law, as in the Senate-passed bill, most of the reductions are from the Rural Development title. Six titles in the law have increased outlays over the 10-year period, including Commodities, Trade, Research, Energy, Horticulture, and Miscellaneous. The House-passed bill would have made 10-year reductions in outlays in the Conservation, Nutrition, Energy, and Crop Insurance titles that the conference agreement did not adopt.

Net Increases in Five-Year Outlays Are Followed by Net Decreases

When separated into the five- and 10-year budget windows, each version of the 2018 farm bill shows a similar pattern of changes in projected outlays. Figure 4 show the scores for the first five years, the second five years, and the 10-year total for the enacted conference agreement.

The enacted farm bill increases net outlays in the first five years by $1.8 billion, which is offset by the same amount of net reductions in outlays during the second five years. Therefore, the 10-year net score is budget neutral. In the enacted law, the Conservation and Nutrition titles—which have increases in outlays over the first five years—have decreases during the second five years. Both titles are budget-neutral over the 10-year period. This may occur because of the time needed to implement changes or to make provisions more appealing in the early years despite having less baseline for a future farm bill.

A similar pattern held for the House-passed bill ( Figure 5 ) and the Senate-passed bill ( Figure 6 ). In both of those versions, the Conservation and Nutrition titles had increases in the first five years followed by decreases in the second five years. The House-passed bill had reductions in the Nutrition title that were not retained in the conference agreement. The Senate-passed bill would have reduced baseline for the Commodities title, whereas the conference agreement is projected to increase it.

Section-by-Section Scores for Some Titles Exceed Their Net Scores

Some of the net scores for single titles presented above are the net result of increases and decreases by provisions within the same title. Sometimes, these increases or decreases are relatively large compared to the net title-level effect. These budget effects may reflect policy proposals that may not be apparent in the net title-level scores that are shown in the previous figures. For example

In the enacted law, the Conservation title has one section with a $12.4 billion reduction over 10 years (reducing the Conservation Stewardship Program) and seven sections that add to $12.4 billion in increased spending ( Figure 7 ). In the House-passed bill, the Nutrition title had six sections that summed to a $22.0 billion reduction over 10 years (including those for work requirements) and 18 sections that added to $20.6 billion in increased spending. Similarly, the Conservation title had two sections that summed to a $12.6 billion reduction and eight sections that added to $11.8 billion in increased spending ( Figure 8 ). In the Senate-passed bill, none of the titles' section-by-section scores were as large as for the Nutrition and Conservation titles in the House bill. Nonetheless, the section-by-section scores of the Senate-passed bill showed both increases and decreases in the Conservation, Nutrition, Commodities and Miscellaneous titles ( Figure 9 ).

Outcome for the Programs Without Baseline

For 23 of the 39 of the "programs without baseline" from the 2014 farm bill, the 2018 farm bill provides continuing funding and, in some cases, permanent baseline for future farm bills (see the footnotes in Table 3 ).

Fourteen of the programs without baseline received mandatory funding during FY2019-FY2023 but no baseline beyond the end of the farm bill. Nine of the programs without baseline received mandatory funding and permanent baseline beyond the end of the farm bill. Three of these programs were combined with six others into six provisions in the 2018 farm bill.

In addition, five provisions in the 2018 farm bill created new programs without baseline for the next farm bill.

Projected Outlays at Enactment

When a new law is passed, the projected cost at enactment equals the baseline plus the score . This sum becomes the foundation of the new law and may be compared to future CBO baselines as an indicator of how actual costs develop as the law is implemented and conditions change.

Table 4 shows the result of this calculation by updating the farm bill baseline ( Table 2 ) by adding the score for programs that were changed by the farm bill ( Table 3 ). The $428 billion projected five-year total for the life of the 2018 farm bill (FY2019-FY2023) is illustrated in Figure 1 . Agriculture program-level detail is illustrated in Figure 2 .

Table 1 summarizes these amounts by title for the five- and 10-year budget windows (the fifth and 10 th columns). SNAP accounts for 76% of the $428 billion five-year total. The remaining 24%, $102 billion of projected outlays, is for agricultural programs, mostly in crop insurance (8.9%), farm commodity programs (7.3%), and conservation (6.8%).

Relative to historical farm bill spending, Figure 10 shows mandatory outlays for the four largest titles—Nutrition, Crop Insurance, Farm Commodity Programs, and Conservation—that account for 99% of projected spending in the 2018 farm bill. The figure shows the following trends:

SNAP outlays, which compose most of the Nutrition title, increased markedly after the recession in 2009 and have been gradually decreasing since 2012. Crop insurance outlays increased steadily over the period, especially as higher market prices and program participation over the past decade have raised the value of insurable commodities. Farm commodity programs outlays generally rise and fall inversely with commodity markets. They were high after losses in the early 2000s, generally trended lower under the direct payment program, and tended to increase after a return to counter-cyclical programs in the 2014 farm bill. Conservation program outlays have grown steadily but have leveled off in recent years.

Appendix A. Scores of House-Passed and Senate-Passed Versions of H.R. 2

Appendix B. Discretionary Authorizations

In addition to providing mandatory spending, various sections of the farm bill authorize appropriations that may be provided in future discretionary appropriations acts. Such "authorizations for appropriation" are not actual funding but are essentially an indication from the authorizing committees to the appropriations committees about funding intentions. They are subject to budget enforcement via future appropriations bills.

Although the score of the farm bill is primarily about mandatory spending, some CBO scoring documents include an estimate of the discretionary spending that would be needed to implement provisions that have authorizations of appropriations.

The CBO score of the conference agreement did not address discretionary authorizations. However, earlier CBO scores of the House- and Senate-passed bills did summarize the authorizations for appropriation. Overall, the similarity between the scores of these bills may be an indicator of the authorization levels in the enacted farm bill.

For the House-passed version of the farm bill, CBO estimated that implementing the provisions of H.R. 2 that specified authorizations of appropriations would cost $24.5 billion over the five-year period FY2019-FY2023, assuming appropriation of the specified amounts. For the Senate-passed version, the amount was slightly smaller at $23.7 billion. These projections were for the whole bill and not by title. However, the earlier committee-reported scores did estimate the authorizations by title, as shown in Table B-1 . Because the totals of the chamber-passed versions remain nearly the same as the committee-reported totals, the earlier title-level estimates may be indicative of the conference agreement.

Three titles account for about 85% of the discretionary authorizations for appropriation in the House and Senate committee-reported farm bill scores: Trade, Research, and Rural Development ( Table B-1 ).

Actual funding in annual Agriculture appropriations acts does not necessarily correlate to the authorization for appropriation in the farm bill. The annual authorization for appropriation provided in the 2018 farm bill is between $2 billion and $6 billion ( Table B-1 ), which for this comparison is broadly similar to nearly $7 billion in authorizations for appropriation that were in the 2014 farm bill. However, actual discretionary funding in recent Agricultural appropriations acts total in excess of $20 billion.

The difference is because not all of the actual appropriations have their authorization in each farm bill. For example, the Agriculture appropriations act includes funding for salaries and expenses of USDA agencies that may be permanently authorized or is not necessarily reauthorized in the farm bill. Also, jurisdiction for appropriations acts may include agencies or programs that are not in the jurisdiction of the farm bill authorizing committees (such as the roughly $6 billion appropriation for the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children that is not in House Agriculture Committee jurisdiction).