Farm Bill Budget and Costs: 2002 vs. 2007

Farm Bill Budget and Costs: 2002 vs. 2007

Order Code RS22694
Updated January 29, 2008
Farm Bill Budget and Costs: 2002 vs. 2007
Ralph M. Chite
Specialist in Agricultural Policy
Resources, Science, and Industry Division
Summary
Since many provisions of the current omnibus farm bill (P.L. 107-171, the Farm
Security and Rural Investment Act of 2002) expire soon, the 110th Congress is in the
process of considering a new farm bill. Unlike the 2002 farm bill, which was crafted at
a time of large budget surpluses, the current farm bill debate is being driven in part by
relatively large budget deficits and growing demands for fiscal constraint. Questions
frequently asked about farm bill spending are: What is the estimated cost of the expiring
2002 farm bill? How much more or less has actually been spent on the 2002 farm bill
than what was estimated at the time of enactment? What is the estimated cost of the
House- and Senate-passed versions of the 2007 farm bill (H.R. 2419)? This report
answers these questions in terms of the actual expenditures on current major farm bill
programs, and projections of the Congressional Budget Office (CBO) for spending
under current law and in the House- and Senate-passed 2007 farm bills.
The Cost of the 2002 Farm Bill
The total six-year (FY2002-FY2007) cost of the major provisions of the 2002 farm
bill was $270.2 billion, or an average of $45.0 billion per year. Of this amount, $178.2
billion, or nearly two-thirds, was for the food stamp program, while $92.1 billion was for
the three major categories of farm support: farm commodity programs, conservation, and
trade. (See Table 1.) All of these programs are defined as mandatory spending, which
means that eligibility is determined by their authorizing statute (the 2002 farm bill), and
any person or business that meets the eligibility requirements is entitled to the benefits
authorized by the law.1
1 Mandatory farm bill spending for research, rural development, and energy are relatively small
and are not included in this report. The farm bill also authorizes appropriations for many U.S.
Department of Agriculture (USDA) discretionary programs. Spending for these programs is
ultimately determined in annual appropriations bills, not by the farm bill, and is not part of this
analysis.

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Table 1. Actual Cost of Major Provisions of the 2002 Farm Bill
(outlays in million $)
Farm
Subtotal,
Grand Total,
Commodity
Farm
Food
Farm Support
Programs
Conservation Exports
Support
Stamps and Food Stamps
FY2002
13,164
2,286
416
15,866
22,069
37,935
FY2003
12,125
2,758
503
15,386
25,325
40,711
FY2004
8,021
2,729
13
10,763
28,621
39,384
FY2005
14,120
3,443
223
17,786
32,614
50,400
FY2006
16,903
3,420
231
20,554
34,620
55,174
FY2007
8,027
3,475
219
11,721
34,885
46,606
Total,
72,360
18,111
1,605
92,076
178,134
270,210
6-yr cost
Annual
12,060
3,019
268
15,346
29,689
45,035
Average
Source: Compiled by CRS, using actual spending data from USDA and CBO for FY2002-FY2007.
Of the six-year spending of $92.1 billion for total farm support (commodities,
conservation, and trade), $72.4 billion (79%) was for the farm commodity programs. The
commodity programs support the incomes of farmers producing grains, oilseeds, cotton,
peanuts, sugar, and milk. Commodity-related spending depends substantially on farm
market prices and so can vary widely from year to year. Although farm commodity
spending has averaged $12.1 billion per year since FY2002, actual annual spending
ranged from a high of $16.9 billion in FY2006 to lows of $8.0 billion in both FY2004 and
FY2007.
The other major category of farm support in the 2002 farm bill is conservation.
Several mandatory conservation programs compensate farmers for retiring
environmentally fragile land (primarily the Conservation Reserve Program and the
Wetlands Reserve Program) and for instituting resource stewardship practices (e.g., the
Environmental Quality Incentives Program and the Conservation Security Program),
among other things. All of the mandatory conservation programs accounted for $18.1
billion over the six-year life of the 2002 farm bill, or an average of $3.0 billion per year.
Spending for the mandatory conservation programs is less volatile and more predictable
than the commodity programs, since most of the conservation programs receive a fixed
authorized level of spending (or maximum acreage enrollment).
The 2002 farm bill also contains funding authority for several mandatory agricultural
export programs (including the Market Access Program, Export Enhancement Program,
Export Donations, and the Foreign Market Development Cooperator Program). Total
estimated six-year spending (FY2002-FY2007) for these programs is $1.6 billion, an
average of $268 million per year.

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Table 2. Cost of the 2002 Farm Bill:
Actual Cost vs. CBO Estimate at Time of Enactment

(outlays in million $)
Annual Average,
6-Year Total
Amount actual
FY2002-FY2007
spending was over
(+) or under (-) 2002
2002 CBO
Actual
2002 CBO
Actual
CBO Estimate
Estimate
Cost
Estimate
Cost
Farm Commodities
15,697
12,060
94,185
72,360
(-) 21,825
Conservation
3,132
3,019
18,794
18,111
(-) 683
Exports
296
268
1,775
1,605
(-) 170
Subtotal, Farm
19,125
15,346
114,754
92,076
(-) 22,678
Spending
Food Stamps
24,898
29,689
149,387
178,134
(+) 28,747
Grand Total,
44,023
45,039
264,141
270,210
(+) 6,069
Farm Spending &
Food Stamps
Source: Compiled by CRS. The “2002 CBO Estimate” represents the March 2002 CBO baseline combined
with the CBO estimate for new spending in the 2002 farm bill. The “actual cost” is actual USDA spending
for FY2002-FY2007 from Table 1.
2002 Farm Bill Costs: Actual Cost vs. 2002 Estimates
Each year, the Congressional Budget Office (CBO) issues a baseline budget for all
federal spending under current law over a multi-year period. Projected spending in the
baseline represents CBO’s estimate at a particular point in time of what federal spending
and revenues likely would be under current law if no policy changes were made over the
projected period. The baseline serves as a benchmark or starting point for future budget
analyses. Whenever new legislation (such as a farm bill) is introduced that affects federal
mandatory spending, its impact is measured by CBO as a difference from the baseline.
When the 2002 farm bill was enacted in May 2002, CBO estimated that the six-year
cost (FY2002-FY2007) of the major farm support programs (commodities, conservation,
and trade) would be $114.75 billion, or an average of $19.1 billion per year (see Table
2, above). Actual spending for these programs over the six-year life of the 2002 farm bill
was $92.1 billion (an average of $15.3 billion per year), or a total of $22.7 billion below
the 2002 CBO estimate. Almost all of the difference between the 2002 CBO estimate and
actual spending was accounted for within the farm commodity support programs, as
stronger than expected commodity market prices (particularly for corn) reduced the need
for counter-cyclical payments. Conversely, actual food stamp spending over the six-year
period was significantly higher than originally projected in 2002 ($178 billion actual vs.
$149 billion estimated in 2002), as program participation rates exceeded earlier estimates.
When farm spending is combined with food stamp spending, the actual six-year cost of
the major provisions of the 2002 farm bill ($270.2 billion) is relatively close to the 2002
CBO estimate ($264.1 billion).
As part of the budgetary nature of mandatory programs, whenever actual spending
is below the original cost estimate, this does not create savings that can be used to either
reduce the deficit or finance future spending. Likewise, if actual spending turns out to be
above the original budget estimate, no budgetary offsets are required.

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CBO’s March 2007 Baseline Budget Estimate
Table 3, below, summarizes CBO’s most recent (March 2007) baseline budget
estimate for the major mandatory USDA programs. It is CBO’s estimate of future
spending under current law (the 2002 farm bill) for these programs over the next five
years (the expected span of the next farm bill) given generally expected economic and
market conditions.
CBO projects that total farm support (commodities, conservation, and trade)
spending under current law over the next five years will be $59.8 billion, which is about
$16.4 billion less than the amount actually spent over the last five years (FY2003-
FY2007). This lower estimate is driven primarily by projections for sustained high
commodity prices for the foreseeable future. The $16.4 billion reduction consists of about
$22.7 billion in reduced commodity spending, but about $5.7 billion in increased
conservation spending, and $482 million in increased export spending. In contrast,
spending for food stamps under current law is expected to increase by about $30 billion
over the five-year period.
The FY2008 budget resolution (S.Con.Res. 21), adopted by Congress in 2007,
established the fiscal parameters for spending on the next farm bill. The resolution
allowed the agriculture committees to formulate legislation at the same projected cost
level as current law. Any change made to current law (both new spending and reductions)
is scored by CBO against the baseline to determine whether the new farm bill is budget-
neutral. A separate provision in the FY2008 budget resolution allocated a deficit-neutral
reserve fund of up to $20 billion over five years (FY2008-FY2012) to the agriculture
committees for the next farm bill. However, any spending from this fund would have to
be offset with comparable spending reductions elsewhere or by revenue increases.
Table 3. CBO’s March 2007 Baseline Estimates for Major Farm Bill
Programs, FY2008-FY2012, Compared with FY2003-FY2007 Actual Spending
(outlays in million $)
Farm
Conservation Exports Subtotal,
Food
Grand Total,
Commodity
Farm
Stamps
Farm Support
Programs
Support
and Food Stamps
FY2008
7,454
3,988
334
11,776
36,108
47,884
FY2009
7,560
4,159
334
12,053
36,641
48,694
FY2010
7,238
4,196
335
11,769
36,898
48,667
FY2011
7,095
4,439
334
11,868
37,635
49,503
FY2012
7,191
4,774
334
12,299
38,722
51,021
5-year total,
36,538
21,556
1,671
59,765
186,004
245,769
FY08-FY12
Previous 5-year
59,196
15,825
1,189
76,210
156,089
232,299
actual, FY03-FY07
Difference between
(22,658)
5,731
482
(16,445)
29,915
13,470
FY08-FY12 baseline
and FY03-FY07
actual
Source: Compiled by CRS using CBO’s March 2007 baseline budget estimates (FY2008-FY2012) and actual spending
data from USDA for FY2003-FY2007.

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Projected Cost of the Next Farm Bill
The House and the Senate have passed their respective versions of the next farm bill
(H.R. 2419). Over the five-year time frame (FY2008-FY2012) of the proposed farm bill,
total spending is estimated by CBO to be $286.0 billion in the House-passed bill and
$285.6 billion in the Senate-passed version. Table 4 provides a breakdown of spending
in each bill by major program area. Each bill has as its basis the March 2007 CBO
baseline budget, which contains $280.3 billion in projected spending for all farm bill-
related programs. CBO estimates new authorized spending (above the baseline) of $5.7
billion in the House-passed bill and $5.3 billion in the Senate-passed version. As required
by the FY2008 budget resolution, this new spending must be offset by comparable
reductions in spending or increases in revenue. The House bill contains $6.0 billion and
the Senate version $5.0 billion in revenue offsets that in effect make both versions close
to being budget-neutral. These offsets are outside the jurisdiction of the agriculture
committees, but were provided by actions taken in the House Ways and Means and Senate
Finance Committees.
Table 4. CBO Estimated Costs for the House and Senate 2007 Farm Bills
(FY2008-FY2012)
Commodity
Conser-
Trade/
Crop
Energy
Nutrition
Othera
Total
Support
vation
Aid
Insur.
(Outlays in Billion $)
House Farm Bill
5-Year Total (FY2008-FY2012)
March 2007 Baseline
36.5
21.6
0.0
1.7
192.2
25.7
2.6
280.3
CBO Score:House
(1.1)
3.0
2.4
0.6
4.2
(4.0)
0.6
5.7
Bill
Total Est. Spending
35.4
24.6
2.4
2.3
196.4
21.7
3.5
286.0
Offsets/Revenueb
—
—
—
—
—
—
—
(6.0)
Estimated Cost after

Offsets/Rev.
—
—
—
—
—
—
—
280.0
Senate Farm Bill
5-Year Total (FY2008-FY2012)
March 2007 Baseline
36.5
21.6
0.0
1.7
192.2
25.7
2.6
280.3
CBO Score: Senate Bill
(4.0)
4.7
1.0
0.1
5.3
(3.7)
1.9
5.3
Total Est. Spending
33.0
26.0
1.0
1.8
197.5
22.0
4.5
285.6
Offsets/Revenueb
—
—
—
—
—
—
—
(5.0)
Estimated Cost after

Offsets/Rev.
—
—
—
—
—
—
—
280.6
Source: Compiled by CRS using the Congressional Budget Office (CBO) March 2007 baseline and the CBO scores of the House-
passed farm bill (H.R. 2419) and the Senate-passed substitute amendment to H.R. 2419, as of late January 2008. Both the House
and Senate scores reflect enactment of the energy act and the Consolidated Appropriations Act, 2008.
a. In the March 2007 baseline, the “other’ category includes agricultural research, rural development, and forestry, among other
areas of spending. “Other” in the House 2007 farm bill is primarily for new specialty crop assistance, and minority and
beginning farmer assistance. “Other” in the Senate farm bill includes new spending for a permanent disaster payment
program, specialty crop assistance, and rural development.
b. “Offsets/revenue” represents offsetting receipts and increases in revenue that are included in the House and Senate farm bills,
but are outside the jurisdiction of the agriculture committees. These are included in the bill to offset the cost of new
spending in the House and Senate bills that is in excess of the budget baseline.