[Congressional Record Volume 140, Number 41 (Friday, April 15, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: April 15, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
     INTRODUCTION OF THE FEDERAL CROP INSURANCE REFORM ACT OF 1994

                                 ______


                           HON. E de la GARZA

                                of texas

                    in the house of representatives

                        Thursday, April 14, 1994

  Mr. de la GARZA. Mr. Speaker, I am pleased to introduce today the 
Federal Crop Insurance Reform Act of 1994, legislation developed by the 
administration to revamp the current crop insurance and disaster 
assistance programs.
  The need for reform in the way the Federal Government provides risk 
management assistance to our Nation's farmers has never been greater. 
The current system is simply not working as desired.
  The Federal Government currently operates a crop insurance program 
that loses nearly $1 billion a year because too few farmers participate 
to make it actuarially sound. For every dollar collected in premiums 
since 1981 by the Federal Crop Insurance Corporation--the U.S. 
Department of Agriculture agency that administers the program--$1.47 is 
paid out in claims. This high-loss ratio and the government costs it 
entails are a cause of growing concern to the administration and to 
Congress.
  Low farmer participation and the poor financial performance of the 
program have been attributed to several factors. There are farmers who 
say the premiums charged are too high relative to the indemnities that 
would be paid out in a claim. Others say the yield coverage is too low. 
Some farmers have found the paperwork burden and foulups not worth the 
bother. There also seems to be a willingness of some producers to just 
take a gamble on the weather.
  But most experts agree that the biggest factor dissuading farmers 
from participating in the current crop insurance program is the 
availability--or at least the probability--of emergency disaster 
payments appropriated by Congress. Ad hoc disaster payments in the wake 
of major natural disasters have been approved by Congress and signed 
into law, by Republican and Democratic Presidents alike, in each of the 
past 8 years. Over the past 6 years alone the Federal Government has 
funded an average of $1.5 billion in disaster payments to farmers.
  It is obvious that crop insurance and ad hoc disaster assistance work 
at cross purposes. It should also be obvious that adequately funding 
two separate risk management programs will become more and more 
politically difficult given the budget pressures facing Congress.
  Mr. Speaker, the U.S. Department of Agriculture recognizes the 
seriousness of these problems. They understand that our Nation's 
farmers need a workable and affordable risk management program that 
helps protect them from production losses associated with the vagaries 
of nature. The Department's proposal embodied in the legislation I am 
introducing is a comprehensive reform package designed to make crop 
insurance the primary risk management tool for farmers. This is a 
proposal which will rechannel Federal farm disaster relief spending 
into a single, more disciplined, on-budget insurance program.
  For this kind of bold and comprehensive insurance program to work, 
Congress will have to agree to provide adequate funding for the new 
insurance program. This bill also asks Congress to agree to 
parliamentary and budget changes that are designed to discourage future 
ad hoc disaster bills. While I have concerns about certain aspects of 
the administration's plan and whether the congressional budget 
resolution will allow for adequate funding, I believe the 
administration proposal merits our consideration in the event these 
issues can be addressed.
  Mr. Speaker, I ask permission to have a brief summary of the Federal 
Crop Insurance Reform Act of 1994 printed in the Congressional Record 
following this statement.

        Summary of the Federal Crop Insurance Reform Act of 1994


                  repeal of ad hoc disaster authority

       The bill repeals the current legal authorities for ad hoc 
     crop loss disaster relief. It erects a parliamentary hurdle 
     to the congressional passage of ad hoc crop loss disaster 
     relief bills by requiring that future ad hoc crop disaster 
     bills be ``on-budget.''


                  catastrophic crop insurance coverage

       The bill establishes a new catastrophic coverage level for 
     all crops covered by Federal crop insurance. This coverage 
     would be available to all farmers for a nominal processing 
     fee of $50 per crop per county, capped at $100 per farmer per 
     county. It provides protection against yield losses greater 
     than 50 percent at a payment rate of 60 percent of the 
     expected market price--a level comparable to disaster relief 
     programs in recent years. The bill waives the processing fee 
     for eligible limited resource farmers.
       The bill encourages farmers to purchase additional private 
     insurance coverage providing higher yield or price protection 
     levels. It provides targeted subsidies to encourage farmers 
     to pursue these higher coverage levels.


                        linkage to farm programs

       The bill requires participants in Federal commodity support 
     programs or Farmers Home Administration farm loans to 
     purchase at least the new catastrophic level of crop 
     insurance. This provision is designed to ensure a 
     participation sufficient in scope to achieve an actuarially-
     sound insurance program.


                    delivery system for new program

       The bill allows farmers the choice of purchasing the 
     catastrophic coverage either through a private reinsured 
     company or through a USDA county office. Higher levels of 
     insurance coverages remain available only through private 
     insurers.


                     fostering industry competition

       The bill restructures premium rates to reflect both direct 
     Federal premium subsidies and the insurers' expense 
     reimbursement allowance. It allows more-efficient insurance 
     companies to pass along lowered overhead costs in reduced 
     rates charged to farmers, creating a more competitive market 
     environment.


               disaster assistance for uninsurable crops

       The bill establishes a permanent disaster assistance 
     program for those crops not coverage by Federal crop 
     insurance. Eligibility and payments would be triggered by 
     area-wide loss levels. Protection levels are similar to those 
     under the catastrophic insurance plan.


                     fiscal and actuarial soundness

       The bill requires that the new catastrophic coverage be 
     governed by Actual Production History (APH) yields and all 
     other program changes outlined in FCIC's recently-announced 
     ``Blueprint for Financial Soundness'' initiative designed to 
     move the Federal crop insurance program toward fiscal and 
     actuarial soundness.


                   budget authority and program cost

       The bill combines congressional spending for crop insurance 
     (currently designated on-budget) and ad hoc disaster spending 
     (currently designated emergency, off-budget spending) into a 
     single unified on-budget program. Costs for operating the new 
     program are estimated at about $8.1 billion for fiscal years 
     1995 through 1999. This represents a five-year savings of 
     about $750 million compared to the projected cost of the 
     current Federal crop insurance program plus the average 
     annual cost for ad hoc crop loss disaster relief programs 
     over the past decade.

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