Natural disasters can wreak havoc no matter what form they take
Nov 15, 2023
By Jeff Harrison
Jeff Harrison serves as senior counsel at Combest, Sell & Associates.
WASHINGTON, DC – Over the past seven years, disaster aid provided by Congress and delivered by the U.S. Department of Agriculture (USDA) has been improving.
The 2017 program was largely designed to help producers who suffered losses due to wildfires and hurricanes, hence its name: The Wildfire and Hurricane Indemnity Program, or WHIP.
The 2018 and 2019 programs built on the WHIP model and expanded it to cover most all natural disaster causes of loss and was dubbed WHIP Plus.
One big complaint about the program was the cumbersome process where the Farm Service Agency (FSA) was expected to manually recreate the wheel when it came to producer data that the Risk Management Agency (RMA) already had on file electronically, resulting in long delays and significant burden on producers and county FSA offices alike.
The implementing law for the 2020 and 2021 program addressed that problem, too, by instructing the Secretary of Agriculture to use RMA data whenever available and simply send payments directly to producers from the Kansas City office where possible.
It took some time to get the model up and running but once established, the program worked exceptionally well. By nearly all accounts, the Phase I program for 2020 and 2021 losses was a huge success.
Farmers were assured that losses not covered by Phase I because a crop insurance claim was not triggered or due to some other anomaly would be covered under the same approach in Phase II of the program.
But that’s when things went haywire. USDA changed horses midstream, abandoning the popular and successful Phase I approach in favor of a new model that simply compared the Internal Revenue Service’s Schedule F, or the Form 1040 to report farm income and expenses, for the disaster year in question against previous Schedule Fs in order to determine if the farmer suffered a “loss” and how much he or she would receive in relief. To boot, USDA capped the initial maximum payment at $2,000.
Most full-time farmers walked away, believing the juice wasn’t worth the squeeze. When the program appeared to be faltering, with few applications, USDA took the unusual step of hiring private contractors to identify farmers who might be interested and qualify.
Oddly, the new program was designed where a farmer with no crop loss could well receive a payment while a farmer with substantial crop losses might receive no payment at all.
Now, fast forward to the recently unveiled 2022 Emergency Relief Program, which was announced on October 27. In this case, USDA offers two tracks. Track I mirrors Phase I in terms of its general design while Track II mirrors Phase II of the ERP for 2020 and 2021.
Putting aside Track II’s peculiar model, a model that was never contemplated by Congress and doesn’t comport with the implementing legislation, Track I – if totally consistent with Phase I – could still provide the relief needed to real full-time farmers.
But two key policy changes were made to Track I that guts the whole workability of the program, assuming the goal is to meaningfully indemnify farmers for crop losses.
First, USDA inserted a backdoor pay limit on the program instead of the pay limit mandated by Congress (i.e., $125,000 unless 75 percent or more of income is from farming in which case the limit is $250,000 – and $900,000 for high-valued crops/specialty crops) where the smaller the loss, the greater the loss is covered under the program and the larger the loss, the less the loss is covered. For example, losses up to $2,000 are 100 percent covered while less than 15 percent of losses of more than $100,000 are covered.
Second, USDA limited the netting out of insurance premiums paid by producers to only underserved farmers as defined by USDA.
The result of these two changes – which violate the statute and Congressional intent and do not emanate from hard-working USDA career employees – is stark: a farmer who suffered $100,000 in losses would have gotten more than $75,000 in relief back in 2020 under Phase I but the same farmer with the same loss would receive little more than $11,000 under the new Track I.
This is not only a punch in the gut to farmers suffering big losses in 2022 who have been waiting for relief – often borrowing money at high interest rates as a bridge to that help – but it is also a bad omen for future disaster programs, Farm Bill programs, and other programs implemented by USDA to help producers.
If USDA can ignore the ERP 2022 law by imposing pay limits by another name and narrow the scope of a program meant to help all producers to instead only help a select few, then USDA can do the same thing anytime and anywhere it wants. This cannot stand.
We are working all avenues to address this situation, including an administrative fix where USDA retreats from its actions and a legislative fix where Congress steps in. Judging by the level of relief involved, we would also not be surprised if legal action is taken in the absence of an administrative or legislative remedy.
Going forward, we must renew our call on Congress to be as prescriptive as possible when developing language under the Farm Bill, disaster aid programs, or any other program designed to help farmers. An Administration might still ignore the law, but not without offending Congress and the Courts.