Budget Reconciliation: The Missing Pieces
Budget Reconciliation: The Missing Pieces
October 14, 2021
A lot has changed since we last blogged on budget reconciliation, agriculture, and climate change just two weeks ago. At that point, there were still some major outstanding details about the proposed agriculture, forestry, and rural development investments the House and Senate Agriculture Committees had put together, including the entire anticipated conservation and debt relief provisions.
As you may have heard in the news, details have finally emerged about those missing pieces. There have also been new developments in the overall legislative process for both the Democrat’s partisan climate and social spending reconciliation bill, now titled the Build Back Better Act, as well as the Bipartisan Infrastructure Bill, that previously passed the Senate.
In the following post we provide an analysis of the conservation and debt relief provisions, as well as an update on the process and path forward to developing and passing the Build Back Better Act budget reconciliation bill. For more information on the budget reconciliation process in general, analysis of the research, rural development, forestry, and nutrition elements of the proposed bill, and the potential 2023 Farm Bill impacts, please visit our previous post.
This Missing Pieces
In late September, Republicans on the House Agriculture Committee leaked to the press the missing pieces from the agriculture portion of the larger budget reconciliation bill. Subsequently, the House Budget Committee marked up and passed out of committee, in a rare Saturday session, the Democrat’s budget reconciliation bill now titled the Build Back Better Act, which folded together nearly all of the recommendations put forth by the various committees that received reconciliation instructions in the concurrent budget resolution that had set in motion the reconciliation process. However, what was advanced by the budget committee still did not include the missing conservation and debt relief provisions.
What was leaked by House Agriculture Committee Republicans is a substitute amendment which includes all the previously released provisions as well as the missing pieces. The assumption that at some point further in the process it will be adopted as an amendment that strikes the entirety of the existing agriculture provisions and replaces them with the content of the substitute amendment.
In addition to the missing conservation and debt relief provisions, which are discussed below, the substitute amendment also includes a new investment related to COVID-19. This adds an additional $200 million for the Agricultural Marketing Service’s Farm and Food Worker Relief Program, earmarked specifically for assistance to front line grocery workers.
As previously reported, the overall cost of the conservation title is $28 billion. NSAC welcomes such a substantial investment that would represent about a 47% increase in funding for United States Department of Agriculture (USDA) conservation programs, relative to the 2018 Farm Bill projected cost at the time of enactment.
The vast majority of the spending in the conservation title contains what are sometimes called in policy circles “guardrails”; associated policy language that is intended to ensure the funding is targeted in a certain way.
In this case, the conservation title includes numerous “guardrails” focused on ensuring that the increased direct spending to various USDA conservation programs will go to addressing climate change. While the specific language varies slightly from program to program, most of the investments include “guardrails” targeting the funding for climate change, such as the following:
“agricultural conservation practices or enhancements that the Secretary determines directly reduce soil or nutrient losses or greenhouse gas emissions, or capture or sequester greenhouse gas emissions, associated with agricultural production.”
Of the $28 billion, the largest single allocation of funding is $9 billion in new funding for the Environmental Quality Incentives Program (EQIP). $8.2 billion of the $9 billion is allocated to Fiscal Year (FY) 2024 through FY 2026. As discussed in our previous post, the agriculture committees structured many of the investments that way, so as to create the opportunity for them to build the farm bill baseline in the 2023 Farm Bill. The overall “guardrail” for the the EQIP section funding read as follows:
“The funds shall be available for 1 or more agricultural conservation practices or enhancements that the Secretary determines directly reduce soil or nutrient losses or greenhouse gas emissions, or capture or sequester greenhouse gas emissions, associated with agricultural production.”
In addition to the language above, there is another important “guardrail” that waives the existing statutory requirement that 50% of all EQIP funds go to practices relating to livestock production.
From a climate change mitigation perspective, this is a partial win. It is not as strong as many in the sustainable agriculture community would have liked, but in combination with the specific targeting language mentioned above, it could drastically limit new funding support for concentrated animal feeding operations (CAFOs). Existing set-asides for beginning and socially disadvantaged producers are retained as part of this new funding.
The EQIP provision also increases the set-aside within EQIP for the Conservation Innovation Grants subprogram from $25 million per year to $50 million per year. However, that includes new language that directs the Secretary to prioritize “proposals that utilize diet and feed management to reduce enteric methane emissions from ruminants.” Reducing enteric methane emissions from ruminants is laudable but we will be monitoring this to ensure that the inclusion of this language does not result in the continued subsidization of certain animal agriculture production systems that are major drivers of agriculture-based greenhouse gas emissions. For the use of EQIP funds to meet the climate goals set by the Biden Administration, they must prioritize transitions to more climate-friendly systems based on grazing and perennial pastures.
Out of the $28 billion, $4 billion is allocated for the Conservation Stewardship Program (CSP). Similar to EQIP, $3.25 billion of the $4 billion is allocated to Fiscal Year (FY) 2024 through FY 2026, so as to create the opportunity for the agriculture committees to build the farm bill baseline in the 2023 Farm Bill. In addition to targeting the funding to “practices or enhancements that directly reduce soil or nutrient losses or greenhouse gas emissions, or capture or sequester greenhouse gas emissions,” the CSP investment also includes language authorizing CSP “climate bundles” as proposed in the NSAC supported Agricultural Resilience Act and Farmers Fighting Climate Change Act:
“State-specific or region-specific groupings or bundles of agricultural conservation activities for climate change mitigation appropriate for cropland, pastureland, rangeland, nonindustrial private forest land, and producers transitioning to organic or perennial production systems.”
While an increase of $4 billion is a very welcomed investment, in our opinion, CSP and its whole farm approach is one of the best options for farmers to address climate change and should have been provided a larger share of the overall $28 billion.
Most of the $28 billion worth of new conservation investments is geared towards funding existing programs and initiatives, however, the conservation title also includes funding for a new $5 billion cover crop program to be administered by the Farm Service Agency (FSA).
Under the new program, farmers would be paid $25 per acre, capped at 1,000 acres per farm, to establish “1 or more cover crop practices in advance of the applicable crop year”. Recognizing that a significant number of producers farm on land that they are not the owners of, and this can be a complication for farmers interested in cover crops, the program provides an additional payment of $5 per acre, capped at 1000 acres, to landowners to establish “1 or more cover crop practices in advance of the applicable crop year”. The new FSA cover crop program also includes a prevented planting “top-off” payment, where producers who have relevant crop insurance can get a higher payment if they plant a cover crop on land that they were prevented from planting an insured crop on because of weather conditions.
In addition to the investments above, the conservation title provides $1.5 billion for the Agricultural Conservation Easement Program, and $7.5 billion for the Regional Conservation Partnership Program (RCPP). The increased investment for RCPP includes climate change related “guardrails” and the option for the Secretary to prioritize projects that “leverage corporate supply chain sustainability commitments or utilize models that pay for outcomes from targeting methane and nitrous oxide emissions associated with agricultural production systems.”
The bill also includes a number of investments in technical assistance, such as $200 million for conservation technical assistance through the Natural Resource Conservation Service (NRCS), along with the authority for NRCS to utilize that funding for the purpose of entering into cooperative agreements with what are assumed to be private technical assistance providers. The bill also includes $50 million for NRCS work with the Regional Climate Hubs that provide information and technical assistance to agriculture and forestry stakeholders. Lastly, the technical assistance section also includes $600 million for NRCS to monitor, track, and collect data to assess and quantify carbon sequestration and greenhouse gas emissions benefits associated with the investments discussed above.
The leaked text includes debt relief provisions for small and socially disadvantaged producers in a manner designed to address concerns the courts have raised over race-specific debt relief for farmers of color included in the American Rescue Plan Act (ARPA).
The debt relief provisions are structured as an update or amendment to the aforementioned debt relief provisions in the ARPA; essentially replacing the ARPA program with a new debt relief program.
The new debt relief program would write off 100% of outstanding USDA loan indebtedness for “economically distressed borrowers”. The provision includes a long list of criteria defining “economically distressed borrowers.” For borrowers that do not fit the definition of “economically distressed,” eligible farm debt relief is also available but is capped at $200,000 per farm/ranch, minus the amount of payments (if any) the producer received from the USDA Coronavirus Food Assistance Program (CFAP) or the Market Facilitation Payment (MFP) program. Both of those options are written in a way that does not have a cap on available funding. Overall it has been estimated to cost about $11 billion, $5 billion of which comes from the original ARPA debt relief provisions that were not spent due to lawsuits and court decisions, and the remaining $6 billion is reconciliation funding.
The USDA is also provided with an additional $1 billion for payments or loan modifications focused on at-risk and limited resource farmers and ranchers. This intends to provide USDA with some flexibility and the ability to offer additional relief beyond what the previously discussed provision allowed.
In addition to the debt relief programing, this section includes a number of other related investments, most of which were included in the original ARPA version: $200 million for technical assistance and financial assistance for underserved farmers and ranchers; $255 million to address land loss and improve land access, including addressing heirs property issues; $10 million to fund the equity commission recently announced by USDA; $200 million to fund related agricultural research, education and scholarships; $350 million in financial assistance to farmers, ranchers and foresters who have suffered discrimination in USDA lending programs; and lastly, $35 million for administrative costs to implement the debt relief and related provisions discussed above.
The conservation and debt relief provisions, as well as those discussed in our previous post about budget reconciliation, would be welcome investments. However it is unclear as to whether those levels of funding will hold. The path towards completing both the Bipartisan Infrastructure Bill, and the Build Back Better Act budget reconciliation package is murky at best. The path forward has been complicated by Democratic party infighting over process and content.
For months now, House Moderate Democrats have been pushing for a vote on the bipartisan infrastructure bill regardless of what is happening with budget reconciliation. Fearing that decoupling the two bills will result in passage of the bipartisan infrastructure bill but not the Build Back Better Act budget reconciliation bill, Progressives have refused to vote yes for the Bipartisan Infrastructure Bill without ironclad commitments to moving the Build Back Better Act forward. With such slim majorities in the House and Senate, neither camp has the votes to move forward without the other, creating an impasse of sorts.
The process is further complicated by Senate moderates, Joe Manchin (D-WV) and Kristen Sinema (D-AZ). The House Democratic leadership have previously said they do not want to move forward with a bill that cannot pass the Senate and both Senators Manchin and Sinema have previously indicated they would not support a budget reconciliation bill with a top-line of $3.5 trillion, i.e.- the Build Back Better Act. Senator Sinema has provided little indication publicly on what level of funding she would support. Senator Manchin recently said that $1.5 trillion was what he was comfortable with and after further discussion with President Biden, news reports indicate he is willing to support a bill with spending levels between $1.9 to $2.3 trillion.
The procedural impasse and Manchin’s position has kicked off a scramble and debate within the Democratic caucus regarding how to cut roughly $1.5 trillion from the package. Whether the drafters of the bill will cut spending proportionally across all of the programs, eliminate some investments in their entirety, or a combination of the two has dominated nearly every conversation inside the Beltway. It is likely that it will be a mix of both approaches.
As the process moves forward, NSAC will be working to defend the agriculture, climate change, and nutrition investments that have already been proposed. If the topline is reduced, agriculture should be spared from reductions because farm programs, including conservation programs essential to addressing climate change, are already routinely cut by approximately 7% annually due to extensions of mandatory sequestration of farm programs as offsets in previous legislation.
From FY 2013 through FY 2020, mandatory sequestration has resulted in the sequestration of approximately $10.6 billion from the USDA and its various agencies, services, and programs. One of the single largest areas of sequestration has been farm bill conservation programs which have been reduced by more than $2 billion during that same period of time.
These cuts have come at the expense of water quality, soil health, climate change mitigation, and agricultural productivity. That is why it is critical that, as Congress moves forward with plans to pass the Build Back Better Act, food and agriculture investments be spared from any additional reductions. Protecting critical food and agriculture investments in the reconciliation bill will support our nation’s sustainable farmers and ranchers in tackling our nation’s response to the climate crisis.