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S 2251 -- 03/22/2000

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Office of Management and Budget


March 22, 2000

S. 2251 - Risk Management for the 21st Century Act
(Sen. Lugar (R) Indiana)

The Administration would support S. 2251, a bill to reform the federal crop insurance program, if the provisions that would modify the composition of the Federal Crop Insurance Corporation's Board of Directors, permit premium reductions for certain producers, and remove the sales closing dates for specialty crops are deleted; and if the bill is amended to ensure its effective implementation.

The Administration strongly supports crop insurance reform legislation that would best serve the interests of farmers, rural communities, and federal taxpayers, and S. 2251 represents significant progress toward that end. Specifically, the bill would make crop insurance more affordable, address the impact of multi-year losses on future insurance coverage, and provide for crop insurance expansion, research and development, and education and outreach -- issues of particular importance to growers of specialty crops. As well, the bill's pilot insurance program for livestock and the Noninsured Crop Disaster Assistance Program are compatible with the Administration's reform proposals.

Nevertheless, the Administration strongly opposes the bill's provisions that would restructure the Federal Crop Insurance Corporation's Board of Directors. Increasing the number of members who are agriculture producers or active in either the crop insurance or reinsurance industries, requiring that one of these members serve as the Board's chairperson, and establishing separate policy staff for the Board could hinder effective management of the crop insurance program. In addition, the bill would permit premium reductions for producers who opt-out of quality loss and prevented planting coverage, and would effectively remove sales closing dates for specialty crops, thus adding significantly to the cost of the bill and complexity of the program. The Administration therefore strongly recommends that the Senate delete these provisions.

To ensure the effective implementation of the bill's provisions, the Administration urges the Senate to: (1) require mandatory participation in the crop insurance program as a prerequisite for other federal farm program benefits; (2) authorize the Risk Management Agency (RMA) to renegotiate the Standard Reinsurance Agreement that defines the financial relationships between the RMA and private insurance providers; (3) provide for the RMA administrative expenses related to the bill by providing that such expenses be taken from the insurance fund; and (4) clarify the mission and personnel provisions of the proposed Crop Insurance Improvement Commission and provide an appropriate level of funding.

Pay-As-You-Go Scoring

S. 2251 would increase direct spending and, therefore, is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990. The bill does not contain provisions to offset the increased direct spending and, if enacted, could contribute to a sequester of mandatory programs. The Administration supports enactment of a crop insurance reform bill and will work with Congress to identify offsets. OMB's preliminary scoring estimates of this bill are presented in the table below. Final scoring of this legislation may deviate from these estimates.

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