Is a permanent disaster fund really the solution?

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House Agriculture Committee Chairman Collin Peterson always said he wanted a permanent disaster aid program. He abandoned those efforts and the House included a disaster provision in its bill but provided no funding for the program. The House approved bill did include an optional revenue-based assurance program which the corn growers tout as a better use of money instead of emergency disaster aid packages. The Senate Finance Committee is now requiring nearly half of extra funding given to the Senate Agriculture Committee be used for a permanent disaster fund.

The Finance Committee's tax package, The Heartland, Habitat, Harvest, and Horticulture Act of 2007, outlines funding for a permanent disaster relief trust fund, conservation, energy, beginning farmer incentives and rural development. Total the bill will provide a total of $9 billion for the farm bill, but nearly $5 billion will go to fund the disaster program. Details of the funding can be found in the estimated revenue effects of the chairman's marks.

The fund would make payments under four new disaster relief programs for crops, livestock, tree assistance and emergency help for livestock, honey bees and farm-raised fish. The fund would also pay for a new pest, disease and disaster prevention program. No producer would be able to receive more than $100,000 annually in total disaster payments. The program would expire at the end of the 2007 farm bill.

The Senate Finance Committee will hold an open session Thursday, Oct. 4 to consider the bill. The Senate Agriculture Committee had also considered holding farm bill discussions on Thursday but may have to move back the talks due to the finance committee's work.

The idea behind the revenue-assurance approach was to prevent having to continually ask Congress for funds after disasters strike. Senate Agriculture Committee Chairman Tom Harkin has gone on record stating he'd like to see a revenue-assurance option in the final bill and added it does a better job of providing a safety net than a disaster aid fund would.

Since 1998, Congress has approved 23 ad hoc disaster assistance bills and with each bill, the USDA has to develop and implement a different program. The National Farmers Union contends the current structure of providing disaster assistance on an ad hoc basis, subject to the political climate in Washington, often leaves producers waiting for years for relief.

"The single biggest hole in the current safety net is the lack of a permanent disaster assistance program," NFU President Tom Buis said. "America's family farmers and ranchers can do many things but they cannot control Mother Nature. This program would provide for assurance in the event of extreme weather conditions."

Who benefits

A new analysis out from the Environmental Working Group outlines who the greatest beneficiaries would be if the permanent disaster fund is established. In it's new report, A Disaster Waiting to Happen..Forever, EWG states the permanent trust fund will send even more agricultural subsidies to regions that already receive the lion's share of government payments.

Based on their historical share of ad hoc disaster spending, of the 20 states represented on the Senate Finance Committee, just four stand to gain over half (55%) of the committee's allocation of disaster aid expenditures under a permanent fund: North Dakota, Kansas, Iowa and Montana.

EWG review shows that most of the $5 billion would go to just a few states where agricultural disaster "emergencies" are in fact routine, virtually annual occurrences, primarily because of low rainfall. These same states are among the biggest recipients of crop subsidies, conservation aid, and federally subsidized crop insurance claims.

A review of millions of disaster aid payments since 1985 shows that the vast majority of the 2 million farmers and ranchers who have received disaster aid over the past 21 years have received it infrequently, with 75% collecting payments three years or less out of 21.

But a minority of the recipients are "chronic beneficiaries" of disaster funds, with some 21,000 of them (about 1% of recipients) collecting disaster aid more than 11 years out of 21, amounting to $2.5 billion, or almost 10% of the total payments, EWG said. These chronic beneficiaries, on average, collected payments for 12 of 21 years and received an average of $118,000 a piece in aid.

This small minority of farmers, located in a handful of states, would be the chief beneficiaries of a permanent trust fund for disaster aid because they would be applying for it almost every year.

EWG found 2,459 recipients, (0.12% of recipients) who collected $420 million, or 1.6% of the so-called "emergency" disaster payments 14 years or more out the past 21 years, or two thirds of the time.

While every state received at least some disaster payments over the period, five states--Texas, South Dakota, North Dakota, Oklahoma and Georgia--account for 67% of the "chronic beneficiaries" who collected disaster funds every other year, or more often, for two decades.

USDA in the past has questioned a permanent disaster aid fund, saying it actually encourages producers to grow on marginal lands to receive payments. The heavy concentration of chronic recipients in Texas, South Dakota, North Dakota and Oklahoma simply reflects the difficulty of raising crops and to a lesser degree livestock in a region of perennially low rainfall. It also raises the question of whether taxpayers ought to be obligated to provide a continuous stream of aid when "disaster emergency" is the rule and not the exception.

"The concentrated, predictable, repetitive nature of agricultural disaster aid among a few states with perennially poor growing conditions also raises the question of whether the time has come for states to assume a primary role in providing agricultural disaster assistance within their borders," EWG questions.

Long-term effects

I think a permanent disaster fund is a slippery path to begin down. Just as direct payments were first designed to be a move away from subsidies, now they are expected. The thought of reducing direct payments sends commodity groups in an uproar.

If this Congress approves a permanent disaster fund it does not guarantee farmers won't come asking for more money when disaster strikes. It also encourages producers to farm marginal lands.

I believe the revenue-assurance is a better way to provide the sought after protection of prices.

Let me know what you think by posting a comment below.

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