Farm Bill Budget and Costs: 2002 vs. 2007

Order Code RS22694

Updated January 29, 2008

Farm Bill Budget and Costs: 2002 vs. 2007

Ralph M. Chite

Specialist in Agricultural Policy

Resources, Science, and Industry Division

Summary

Since many provisions of the current omnibus farm bill (P.L. 107-171, the Farm

Security and Rural Investment Act of 2002) expire soon, the 110th Congress is in the

process of considering a new farm bill. Unlike the 2002 farm bill, which was crafted at

a time of large budget surpluses, the current farm bill debate is being driven in part by

relatively large budget deficits and growing demands for fiscal constraint. Questions

frequently asked about farm bill spending are: What is the estimated cost of the expiring

2002 farm bill? How much more or less has actually been spent on the 2002 farm bill

than what was estimated at the time of enactment? What is the estimated cost of the

House- and Senate-passed versions of the 2007 farm bill (H.R. 2419)? This report

answers these questions in terms of the actual expenditures on current major farm bill

programs, and projections of the Congressional Budget Office (CBO) for spending

under current law and in the House- and Senate-passed 2007 farm bills.

The Cost of the 2002 Farm Bill

The total six-year (FY2002-FY2007) cost of the major provisions of the 2002 farm

bill was $270.2 billion, or an average of $45.0 billion per year. Of this amount, $178.2

billion, or nearly two-thirds, was for the food stamp program, while $92.1 billion was for

the three major categories of farm support: farm commodity programs, conservation, and

trade. (See Table 1.) All of these programs are defined as mandatory spending, which

means that eligibility is determined by their authorizing statute (the 2002 farm bill), and

any person or business that meets the eligibility requirements is entitled to the benefits

authorized by the law.1

1

Mandatory farm bill spending for research, rural development, and energy are relatively small

and are not included in this report. The farm bill also authorizes appropriations for many U.S.

Department of Agriculture (USDA) discretionary programs. Spending for these programs is

ultimately determined in annual appropriations bills, not by the farm bill, and is not part of this

analysis.

CRS-2

Table 1. Actual Cost of Major Provisions of the 2002 Farm Bill

(outlays in million $)

Farm

Subtotal,

Grand Total,

Commodity

Farm

Food

Farm Support

Programs Conservation Exports Support Stamps and Food Stamps

FY2002

13,164

2,286

416

15,866

22,069

37,935

FY2003

12,125

2,758

503

15,386

25,325

40,711

FY2004

8,021

2,729

13

10,763

28,621

39,384

FY2005

14,120

3,443

223

17,786

32,614

50,400

FY2006

16,903

3,420

231

20,554

34,620

55,174

FY2007

8,027

3,475

219

11,721

34,885

46,606

Total,

6-yr cost

72,360

18,111

1,605

92,076

178,134

270,210

Annual

Average

12,060

3,019

268

15,346

29,689

45,035

Source: Compiled by CRS, using actual spending data from USDA and CBO for FY2002-FY2007.

Of the six-year spending of $92.1 billion for total farm support (commodities,

conservation, and trade), $72.4 billion (79%) was for the farm commodity programs. The

commodity programs support the incomes of farmers producing grains, oilseeds, cotton,

peanuts, sugar, and milk. Commodity-related spending depends substantially on farm

market prices and so can vary widely from year to year. Although farm commodity

spending has averaged $12.1 billion per year since FY2002, actual annual spending

ranged from a high of $16.9 billion in FY2006 to lows of $8.0 billion in both FY2004 and

FY2007.

The other major category of farm support in the 2002 farm bill is conservation.

Several mandatory conservation programs compensate farmers for retiring

environmentally fragile land (primarily the Conservation Reserve Program and the

Wetlands Reserve Program) and for instituting resource stewardship practices (e.g., the

Environmental Quality Incentives Program and the Conservation Security Program),

among other things. All of the mandatory conservation programs accounted for $18.1

billion over the six-year life of the 2002 farm bill, or an average of $3.0 billion per year.

Spending for the mandatory conservation programs is less volatile and more predictable

than the commodity programs, since most of the conservation programs receive a fixed

authorized level of spending (or maximum acreage enrollment).

The 2002 farm bill also contains funding authority for several mandatory agricultural

export programs (including the Market Access Program, Export Enhancement Program,

Export Donations, and the Foreign Market Development Cooperator Program). Total

estimated six-year spending (FY2002-FY2007) for these programs is $1.6 billion, an

average of $268 million per year.

CRS-3

Table 2. Cost of the 2002 Farm Bill:

Actual Cost vs. CBO Estimate at Time of Enactment

(outlays in million $)

Annual Average,

FY2002-FY2007

2002 CBO

Estimate

Actual

Cost

2002 CBO

Estimate

Actual

Cost

Amount actual

spending was over

(+) or under (-) 2002

CBO Estimate

Farm Commodities

15,697

12,060

94,185

72,360

(-) 21,825

Conservation

3,132

3,019

18,794

18,111

(-) 683

296

268

1,775

1,605

(-) 170

Subtotal, Farm

Spending

19,125

15,346

114,754

92,076

(-) 22,678

Food Stamps

24,898

29,689

149,387

178,134

(+) 28,747

Grand Total,

Farm Spending &

Food Stamps

44,023

45,039

264,141

270,210

(+) 6,069

Exports

6-Year Total

Source: Compiled by CRS. The “2002 CBO Estimate” represents the March 2002 CBO baseline combined

with the CBO estimate for new spending in the 2002 farm bill. The “actual cost” is actual USDA spending

for FY2002-FY2007 from Table 1.

2002 Farm Bill Costs: Actual Cost vs. 2002 Estimates

Each year, the Congressional Budget Office (CBO) issues a baseline budget for all

federal spending under current law over a multi-year period. Projected spending in the

baseline represents CBO’s estimate at a particular point in time of what federal spending

and revenues likely would be under current law if no policy changes were made over the

projected period. The baseline serves as a benchmark or starting point for future budget

analyses. Whenever new legislation (such as a farm bill) is introduced that affects federal

mandatory spending, its impact is measured by CBO as a difference from the baseline.

When the 2002 farm bill was enacted in May 2002, CBO estimated that the six-year

cost (FY2002-FY2007) of the major farm support programs (commodities, conservation,

and trade) would be $114.75 billion, or an average of $19.1 billion per year (see Table

2, above). Actual spending for these programs over the six-year life of the 2002 farm bill

was $92.1 billion (an average of $15.3 billion per year), or a total of $22.7 billion below

the 2002 CBO estimate. Almost all of the difference between the 2002 CBO estimate and

actual spending was accounted for within the farm commodity support programs, as

stronger than expected commodity market prices (particularly for corn) reduced the need

for counter-cyclical payments. Conversely, actual food stamp spending over the six-year

period was significantly higher than originally projected in 2002 ($178 billion actual vs.

$149 billion estimated in 2002), as program participation rates exceeded earlier estimates.

When farm spending is combined with food stamp spending, the actual six-year cost of

the major provisions of the 2002 farm bill ($270.2 billion) is relatively close to the 2002

CBO estimate ($264.1 billion).

As part of the budgetary nature of mandatory programs, whenever actual spending

is below the original cost estimate, this does not create savings that can be used to either

reduce the deficit or finance future spending. Likewise, if actual spending turns out to be

above the original budget estimate, no budgetary offsets are required.

CRS-4

CBO’s March 2007 Baseline Budget Estimate

Table 3, below, summarizes CBO’s most recent (March 2007) baseline budget

estimate for the major mandatory USDA programs. It is CBO’s estimate of future

spending under current law (the 2002 farm bill) for these programs over the next five

years (the expected span of the next farm bill) given generally expected economic and

market conditions.

CBO projects that total farm support (commodities, conservation, and trade)

spending under current law over the next five years will be $59.8 billion, which is about

$16.4 billion less than the amount actually spent over the last five years (FY2003FY2007). This lower estimate is driven primarily by projections for sustained high

commodity prices for the foreseeable future. The $16.4 billion reduction consists of about

$22.7 billion in reduced commodity spending, but about $5.7 billion in increased

conservation spending, and $482 million in increased export spending. In contrast,

spending for food stamps under current law is expected to increase by about $30 billion

over the five-year period.

The FY2008 budget resolution (S.Con.Res. 21), adopted by Congress in 2007,

established the fiscal parameters for spending on the next farm bill. The resolution

allowed the agriculture committees to formulate legislation at the same projected cost

level as current law. Any change made to current law (both new spending and reductions)

is scored by CBO against the baseline to determine whether the new farm bill is budgetneutral. A separate provision in the FY2008 budget resolution allocated a deficit-neutral

reserve fund of up to $20 billion over five years (FY2008-FY2012) to the agriculture

committees for the next farm bill. However, any spending from this fund would have to

be offset with comparable spending reductions elsewhere or by revenue increases.

Table 3. CBO’s March 2007 Baseline Estimates for Major Farm Bill

Programs, FY2008-FY2012, Compared with FY2003-FY2007 Actual Spending

(outlays in million $)

Farm

Conservation Exports Subtotal, Food

Grand Total,

Commodity

Farm

Stamps Farm Support

Programs

Support

and Food Stamps

FY2008

7,454

3,988

334

11,776

36,108

47,884

FY2009

7,560

4,159

334

12,053

36,641

48,694

FY2010

7,238

4,196

335

11,769

36,898

48,667

FY2011

7,095

4,439

334

11,868

37,635

49,503

FY2012

7,191

4,774

334

12,299

38,722

51,021

5-year total,

FY08-FY12

36,538

21,556

1,671

59,765

186,004

245,769

Previous 5-year

actual, FY03-FY07

59,196

15,825

1,189

76,210

156,089

232,299

Difference between

(22,658)

5,731

482

(16,445) 29,915

13,470

FY08-FY12 baseline

and FY03-FY07

actual

Source: Compiled by CRS using CBO’s March 2007 baseline budget estimates (FY2008-FY2012) and actual spending

data from USDA for FY2003-FY2007.

CRS-5

Projected Cost of the Next Farm Bill

The House and the Senate have passed their respective versions of the next farm bill

(H.R. 2419). Over the five-year time frame (FY2008-FY2012) of the proposed farm bill,

total spending is estimated by CBO to be $286.0 billion in the House-passed bill and

$285.6 billion in the Senate-passed version. Table 4 provides a breakdown of spending

in each bill by major program area. Each bill has as its basis the March 2007 CBO

baseline budget, which contains $280.3 billion in projected spending for all farm billrelated programs. CBO estimates new authorized spending (above the baseline) of $5.7

billion in the House-passed bill and $5.3 billion in the Senate-passed version. As required

by the FY2008 budget resolution, this new spending must be offset by comparable

reductions in spending or increases in revenue. The House bill contains $6.0 billion and

the Senate version $5.0 billion in revenue offsets that in effect make both versions close

to being budget-neutral. These offsets are outside the jurisdiction of the agriculture

committees, but were provided by actions taken in the House Ways and Means and Senate

Finance Committees.

Table 4. CBO Estimated Costs for the House and Senate 2007 Farm Bills

(FY2008-FY2012)

Commodity

Support

Conservation

Energy

Trade/

Aid

Nutrition

Crop

Insur.

Othera

Total

2.6

0.6

280.3

5.7

(Outlays in Billion $)

House Farm Bill

March 2007 Baseline

CBO Score:House

Bill

Total Est. Spending

Offsets/Revenueb

Estimated Cost after

Offsets/Rev.

Senate Farm Bill

March 2007 Baseline

CBO Score: Senate Bill

Total Est. Spending

Offsets/Revenueb

Estimated Cost after

Offsets/Rev.

5-Year Total (FY2008-FY2012)

0.0

1.7

192.2

25.7

2.4

0.6

4.2

(4.0)

36.5

(1.1)

21.6

3.0

35.4

—

24.6

—

2.4

—

2.3

—

196.4

—

21.7

—

3.5

—

286.0

(6.0)

—

—

—

—

—

—

—

280.0

5-Year Total (FY2008-FY2012)

0.0

1.7

192.2

25.7

1.0

0.1

5.3

(3.7)

1.0

1.8

197.5

22.0

—

—

—

—

2.6

1.9

4.5

—

280.3

5.3

285.6

(5.0)

—

280.6

36.5

(4.0)

33.0

—

21.6

4.7

26.0

—

—

—

—

—

—

—

Source: Compiled by CRS using the Congressional Budget Office (CBO) March 2007 baseline and the CBO scores of the Housepassed farm bill (H.R. 2419) and the Senate-passed substitute amendment to H.R. 2419, as of late January 2008. Both the House

and Senate scores reflect enactment of the energy act and the Consolidated Appropriations Act, 2008.

a. In the March 2007 baseline, the “other’ category includes agricultural research, rural development, and forestry, among other

areas of spending. “Other” in the House 2007 farm bill is primarily for new specialty crop assistance, and minority and

beginning farmer assistance. “Other” in the Senate farm bill includes new spending for a permanent disaster payment

program, specialty crop assistance, and rural development.

b. “Offsets/revenue” represents offsetting receipts and increases in revenue that are included in the House and Senate farm bills,

but are outside the jurisdiction of the agriculture committees. These are included in the bill to offset the cost of new

spending in the House and Senate bills that is in excess of the budget baseline.