WASHINGTON — Sen. Chuck Grassley today introduced an amendment to place a hard cap on farm payments to $250,000 for a married farming couple. If passed, the amendment would be included in the Budget Reconciliation package. Grassley introduced the amendment with Sen. Byron Dorgan of North Dakota.
The President included a $250,000 cap on farm payments in his fiscal 2006 budget. Last spring, the Budget Committee also voted 15 – 7 to include a Sense of the Senate that said any reduction in agriculture spending required by the budget should primarily be achieved through strengthening farm payment limitations.
Grassley first began talking about payment limits when he was a member of the U.S. House of Representatives. His last major push for a hard cap on farm payments was during the 2002 Farm Bill debate. A version of today’s Grassley/Dorgan amendment was included in that Senate farm bill, but the amendment was taken out during negotiations with the House of Representatives. It has since been included in several budget debates, but has not made it past the conference committees.
"We need to correct the track we’re currently on and modify our farm payments before we completely erode the urban support for the farm program. Farm program payments were designed to help small and medium sized farmers get through the rough spots. They were not designed to help the big get bigger at the expense of the taxpayer," Grassley said. "
The amendment would bring nearly $1.1 billion of savings over five years. This money would be used to help restore many of the cuts taken during the agriculture budget reconciliation debate. It would delay the 2.5 percent reduction in commodity payments for the 2006 crop year. The amendment also would restore more than 50 percent of the cuts to the Conservation Reserve Program acreage and restore up to 75 percent of the Conservation Security Program money. These two programs were cut during the markup of the Ag section to reconciliation.
Here is a summary of the Grassley/Dorgan amendment.
Direct Attribution of Payments -- Payments will be tracked through entities and partnerships directly back to the individual who is the ultimate beneficiary. All payments would count toward an individual's limit, whether received directly or through a corporation or other type of entity, removing the current provision for doubling payments through multiple entities. All beneficial interests in an entity would be subject to payment limitations, making it more difficult to create "paper" farms for the purposes of exceeding the limits.
Active Personal Management - Current law attempts to target payments to working farmers. As demonstrated by the 2004 GAO Report, however, the lack of a defined active management test in law and regulation is a major loophole facilitating huge payments. The amendment requires that management be personally provided on a regular, substantial, and continuous basis through direct supervision and direction of farming activities and labor and on-site services. The combined labor and management standard is 500 hours annually or 50% of the commensurate share of the required labor and management.
Landowner Exemption -- Landowners who share rent land to a producer remain exempt from the "actively engaged" rules provided their payments are commensurate to their risk in the crop produced.
Payment Limits -- The total, combined annual limit for a family with the husband and wife both actively engaged is $250,000. Direct payments, counter cyclical payments, and marketing loan gains/loan deficiency payments are capped at $20,000, $30,000, and $75,000 annually for each actively engaged recipient. Gains due to use of commodity certificates or forfeiture of loan commodities to the government will be counted against the limitation, closing another abusive loophole.
Penalties for Fraud and Abuse -- Actions to evade payment limits will result, under the amendment, in the persons involved becoming ineligible for the programs for a five-year period. This language was included in the legislative proposal sent to Congress by the Administration.