WASHINGTON,  Oct. 26, 2015 - Crop insurers will be forced to help pay for higher spending in a sweeping budget deal reached by the White House and congressional Republican leaders. 

The budget agreement would cut an estimated $3 billion from the program over 10 years by imposing a 8.9 percent cap on the rate of return for insurance companies, down from the current 14.5 percent. The cut would be made through renegotiating the Agriculture Department’s Standard Reinsurance Agreement, which determines risk sharing between insurers and the government and sets a limit on administrative and operating reimbursement. A new SRA would have to be renegotiated by the end of 2016.

Insurance agents also would see their earnings reduced to the extent that the new SRA cuts the A&O allowance.

The cut wouldn’t have much effect on farmers, but it could push some companies out of the crop insurance business, “especially if the companies have another bad year,” said Mary Kay Thatcher, a lobbyist for the American Farm Bureau Federation. “Most of them have been operating on pretty slim margins the last two years.”

Senate Agriculture Chairman Pat Roberts, R-Kan., expressed outrage at the proposed cut after emerging from a briefing Monday evening for senators on the outline of the deal. “I’m extremely disturbed that we were not even informed of this, staff-wise or otherwise” earlier, he told Agri-Pulse Monday night

Roberts said he believed the proposal "was largely coming from the White House. ... Why would they want to open up the farm bill during this budget debate?"

Sen. John Hoeven, R-N.D., said, “There will be a real concern  from the aggies, from people who come from farm country.”

The cut to crop insurance would help offset the cost of raising limits on defense and domestic spending in fiscal 2016 and 2017. House Appropriations Chairman The bill also would extend the debt ceiling for two years, pushing the next budget showdown early into the next president's administration in 2017.

For agriculture, the budget deal would essentially reverse a big victory that the insurance industry won in the 2014 farm bill when a provision was added that required that any changes to the SRA be budget neutral.

The president's 2016 budget proposed to cut crop insurance by $1.1 billion in fiscal 2016 and nearly $16 billion over the next 10 years primarily through a 10-percentage-point reduction in premium subsidies for harvest-price revenue policies. The rest of the savings in the proposed budget was to come from tightening prevented-planting coverage.

The legislative text of the budget deal is here.  The summary is here. 

(Updated 6 a.m. Oct 27) 

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