The Agricultural Assistance Act of 2003 was signed into law on February 20, 2003. The law provides disaster benefits for crop producers who suffered losses in 2001 or 2002 and producers of cattle, sheep, goats, buffalo and catfish who suffered losses in 2002 that were not previously compensated under the 2002 Livestock Compensation Program (LCP).  “Payments should be received in days after the farmer has completed his signup through the Farm Service Agency office,” said USDA Under Secretary J.B. Penn on April 10, 2003 before the House Agriculture Subcommittee on General Farm Commodities and Risk Management.

Livestock Compensation Program (LCP)

To qualify for livestock benefits, the producer must live in a county which was designated a disaster area under a Presidential or Secretarial declaration between January 1, 2001 and February 20, 2003 and subsequently approved eligible for the livestock compensation program.

Producers should sign up for LCP benefits at their local Farm Service Agency office by the end of May.  Owners or lessees of eligible livestock must certify the number owned or leased as of June 1, 2002. The animals must have been owned for 90 days or more and must fall within the 90-day ownership period.

Payment rates for each type of livestock are determined based on standard feed consumption data for each eligible type of livestock. The payment rates have yet to be released.

Crop Disaster Assistance

The Agricultural Assistance Act also provides benefits to crop producers who suffered a loss in the 2001 or 2002 crop year, but not for both years.  Additionally, the producer must use the same year for all crops for all farms.  The legislation differs from previous disaster legislation, as the calculations are more complex than in the past, because of the way in which prices are established for the expected value of the crop and the value of the crop actually produced.  In addition, there are two new requirements in this disaster legislation: 1) total payments are capped at 95 percent of the expected value of the crop and 2) requirement to purchase crop insurance.   Producers who a receive disaster benefits and did not have crop insurance in the year of the loss, must purchase crop insurance above the basic catastrophic level for the next two years.    Producers may start signing up for benefits June 6 at their local Farm Service Agency office. 

Eligible Producers

A producer must have suffered a loss of more than 35 percent of the expected yield to qualify for disaster benefits.   The producer’s expected yield for the crop is defined as the higher of: the actual production history yield for the crop or the county average yield, using the National Agricultural Statistics Service data by averaging the data from 1996 through 2000,dropping the high and low yields.   The legislation bases disaster benefits on a yield guarantee of 65 percent of the expected yield. 

Payment Rate

The payment rate for the disaster benefits is set as the higher of the APH Price election for crop insurance (MPCI price) for the insurable commodities and for noninsured crops, the payment rate is the 1996-2000 average market price, after dropping the highest and lowest prices.  If the producer had crop insurance for the commodity, he may receive 50 percent of the payment rate on 65 percent of the expected yield, if the commodity was not insured, 45 percent of the payment rate would be used.  However, if the producer has crop insurance, the amount of disaster payment to be received is subject to the total payment cap of 95 percent of the expected value of the crop.

Benefits Capped at 95 Percent Value of Crop

Producers with crop insurance must be aware their disaster payment may be reduced, especially those producers with higher levels of crop insurance coverage. The disaster legislation prohibits payment on more than 95 percent of the expected value of the crop.  The value of the total payments received for disaster assistance and crop insurance cannot exceed this amount. 

To determine if the disaster payment will be reduced, it is necessary to find the sum of the value of the crop harvested (higher of the APH price election (MPCI price) or the applicable market year price for the commodity established by the National Agricultural Statistics Service [NASS]), value of the disaster payment and the net crop insurance indemnity payment received. The net crop insurance indemnity payment is the gross crop insurance indemnity less the producer paid premium.

The House Agriculture Committee Majority Staff created this example to illustrate a producer’s disaster benefits for loss suffered in 2002 for corn insured with a crop revenue coverage (CRC) at the 75 percent level. 

Congress has adjourned for its Easter recess with a budget for 2004, albeit an unusual one.   Unable to reach agreement on the size of a tax cut intended to stimulate the economy, the Republican majority instructed the House Ways and Means Committee to cut taxes $550 billion over 11 years, but also said it will not be in order for the Senate to consider a tax cut above $350 billion in the same period.  The two different numbers might seem to presage an eventual split-the-difference compromise.  However, Senate Finance Chairman Charles Grassley (R-IA) pledged that the final tax cut will be no more than the Senate’s number, in a deal that ruffled some feathers but secured two votes from moderate Senate Republicans to create a 50-50 tie vote, which Vice President Cheney broke to secure approval of the budget.

Meanwhile, earlier House plans to cut mandatory spending – including farm programs – largely evaporated, replaced by instructions to Congressional committees to locate and point out waste, fraud, and abuse.

What is the Budget Resolution?

The Congressional budget resolution does not, in and of itself, appropriate money or cut taxes.  That must be done separately.  The budget resolution expresses Congressional intentions about how much the government should spend and take in, and sets up mechanisms to prevent Congress from spending more or taxing less than the budgeted amounts.

The budget is not a law but a resolution.  Unlike almost all other major Congressional actions, it does not require signature by the President.  Therefore, no President can veto a budget resolution, although he can veto the bills that result from it, including a so-called “reconciliation” bill that implements spending and tax provisions of the budget resolution.

Instead of Reconciliation, A Report

The House budget had required some $18.6 billion (over 10 years) in mandatory spending cuts by the Agriculture Committee.  The Senate budget did not require reconciliation cuts, nor does the conference agreement.  Therefore, there is no requirement that either the House Agriculture Committee or the Senate Agriculture, Nutrition, and Forestry Committee find new savings as part of budget reconciliation legislation.  Instead, only the tax-writing committees (House Ways and Means and Senate Finance) got reconciliation “instructions.”

Waste, Fraud, and Abuse

Instead of requiring cuts, the budget resolution instructs most Congressional committees – including the two agriculture panels – to identify “changes in law within their jurisdictions that would achieve the specified level of savings through the elimination of waste, fraud, and abuse.”  The budget resolution does not identify the “specified level of savings” for any committee, except to require that the chairman of each chamber’s budget committee insert these levels in the Congressional Record by May 16.

The instructions to the committees are not written in such a way as to encourage prompt legislative action on their findings.  The committees are not required to report actual bills that would then receive floor consideration.  Instead, they are supposed to submit their “findings” to the budget committees, who “may use them in the development of future concurrent resolutions on the budget.”

At the earliest, that would mean the 2005 budget resolution, which is scheduled for approval by April 15, 2004.  However, budget resolutions themselves do not enact legislative changes.  Even if the agriculture panels were told to change laws to prevent “waste, fraud, and abuse,” and assuming the resulting bills got the procedural protection of budget reconciliation, cuts would not likely be debated by the full House and Senate before late spring or early summer 2004.  Of course, by that time the Presidential and Congressional election campaigns will be in full swing, complicating any efforts to pass controversial legislation.

To be sure, nothing would prevent the House or Senate agriculture committee from voluntarily writing a bill to enact its “waste, fraud, and abuse” findings.  Either committee could, theoretically, do this at any time, but such a bill would not have protected status as a “reconciliation” bill, and therefore would be subject to all the perils that beset any other normal legislation, including threats of a filibuster in the Senate.

A Role for GAO

Another date to watch is August 1, when the budget resolution instructs the General Accounting Office to submit “a comprehensive report” that identifies “legislative changes to improve the economy, efficiency, and effectiveness of programs” under the jurisdiction of the various Congressional committees.

GAO’s mandate is worded differently than the mandate of the committees – instead of ferreting out “waste, fraud, and abuse,” GAO is supposed to decide how Congress could “improve … economy, efficiency, and effectiveness …”  Depending on how it is interpreted, this language appears to give GAO license to look broadly at a variety of programs, and recommend changes even in programs that are not wasteful or subject to frequent abuse or fraud.

GAO’s list will be closely scrutinized, though not necessarily approved.  Farm-state lawmakers have sometimes criticized GAO’s work, alleging that some agency recommendations really call for policy changes rather than improvements in management or administration.  (GAO’s supporters, on the other hand, defend the agency as a necessary critic of entrenched USDA programs.)

Of particular interest will be what, if anything, GAO has to say about further changes to payment limitations.  The Senate Budget Committee approved a non-binding measure that assumed savings from tighter limits in order to fund future spending under a new conservation program created in the 2002 farm bill.  However, any payment limitation changes would face an uphill battle, particularly in the Senate.  In addition, the statement of managers (a conference document that corresponds to the reports that accompany bills in the House and Senate) says:  “Included in these [agricultural program] funding levels is the continuation of the 2002 farm bill.”  If one considers the current payment limitation structure basic to the 2002 farm bill, this sentence can serve as evidence (albeit not dispositive evidence) that the budget resolution implicitly rejects new limits on farm program payments.

Appropriations Season Starts Soon

Another set of numbers to watch closely in coming weeks will be the two appropriations committees’ allocation of funds to their subcommittees.  Although the budget resolution makes assumptions about discretionary spending for agriculture, the really relevant numbers are not known until the House and Senate appropriations committees divide up available money among their 13 subcommittees. 

Depending on the size of the agriculture subcommittees’ allocations, some cuts in discretionary or mandatory spending could lie ahead.  Although the conference agreement for government-wide discretionary spending closely matches the President’s requested amount, that does not negate the possible need for some reductions.  The President’s budget made assumptions about ways to generate revenue  – notably user fees for meat and poultry inspection – that are not currently authorized and seem unlikely to gain Congressional approval.  The lack of this revenue could cause Congress to look elsewhere, including some mandatory spending programs, for offsetting savings.

The Numbers

The conference report assumes slightly higher agricultural spending than either the House or the Senate resolution.  Spending levels for Function 350 (which includes farm programs and crop insurance but not conservation or nutrition programs) are set at –

•  For 2004, $24.6 billion in budget authority and $23.7 billion in outlays;
•  For the five-year period 2004-08, $130.2 billion in budget authority and $124.5 billion in outlays; and
•  For the 10-year period 2004-13, $255.7 billion in budget authority and $245.8 billion in outlays.

The overall USDA budget, of course, is much larger than Function 350.  For example, environmental programs such as the Conservation Reserve Program are counted in Function 300 (Natural Resources and Environment), while the Food Stamp Program and the National School Lunch Program are part of Function 600 (Income Security).  The House resolution had threatened some cuts in this area, but the final budget resolution does not.

One of the greatest battles of the 2002 Farm Bill was the debate over payment limitations.  When the bill went to conference, one of the major differences was the fact that the Senate had passed a payment limitation section far more restrictive than the version passed in the House.  In the end, the House version was largely adopted, including two primary provisions from the Senate bill - an adjusted gross income limitation and creation of the Commission on the Application of Payment Limitations.  This was by no means the end of the debate over payment limitations.  The debate has already reappeared in several places this session, and it seems certain to continue as a permanent part of any discussions of agricultural policy.

To fully understand this debate, it is first necessary to comprehend the payment limitation law, as it stands today - certainly not an easy task.  After describing the current law, this article will discuss new proposals for reform and explore the origins of this debate and how it relates to the future direction of agricultural policy in general. 

Current Law

Payment limitations have been an important ingredient in farm bill politics since their inception in 1970. The modern form of payment limitation was implemented in the 1987 farm bill.  Following that bill, USDA published regulations on payment limitations in 1988 that are still used today.  Farm bills since 1988 have, of course, made various changes to the payment limitation provisions, but the structure remains largely the same.

Most of the concern of the agricultural community - and thus the debate over payment limitations - lies with the limitations on direct and counter-cyclical payments, loan deficiency payments (LDP's) and marketing loan gains (hereafter, LDP's and marketing loan gains will be referred to together as "loan benefits"). Payments under other programs such as EQIP and CRP are limited in the current scheme, but this article will focus on direct and counter-cyclical payments, and loan benefits.

It is also important to note that the 2002 Farm Bill brought about a major change in the structure of agricultural subsidies.  The new bill returns counter-cyclical payments to the program.  Under the 1996 Farm Bill, the bulk of payments took the form of direct payments under production flexibility contracts or loan benefits.  Under the new law, direct payments and loan benefits are still important aspects of the payment structure, but counter-cyclical payments have been reintroduced as another important ingredient.

The new law also added an "adjusted gross income limitation."  This limitation mandates that any individual or entity that averages over $2.5 million in adjusted gross income over a 3-year period is not eligible to receive any farm program benefits unless at least 75% of that income is derived from farming, ranching, or forestry operations.  This limitation will have very little practical effect, but it does eliminate some of the most egregious examples used by some groups to criticize the structure of the farm subsidy system.  For example, the Environmental Working Group lists as one example the fact that Scottie Pippen, a very successful (and wealthy) professional basketball player, has received over $150,000 in agricultural subsidies since 1996.  Mr. Pippen would likely be one of the few individuals affected by this new limitation.

Within the payment limitation system, the determination of what is a "person" is the most important determinative factor in deciding which entities are entitled to government payments and in what amount. To qualify as a separate "person" for payment limitation purposes, an individual or entity has to be separate and independent, has to have a separate interest in the land or crop involved, and has to be "actively engaged in farming."

First, it is important to discern what is and is not a "person." An individual obviously qualifies as one "person," although two or more individuals may be considered the same person (parents and children or husbands and wives that don't have completely separate interests, for example). Generally, a corporation, limited partnership, joint stock company, or similar entity would also be considered one "person." A general partnership or joint venture, though, is not a "person" under this system. Rather, each individual partner is a separate entity (provided the other requirements are met).

The second important consideration in determining whether an individual or entity can qualify as a separate "person" is the "separate and distinct" requirement. In order to be considered a separate "person," the individual or entity in question must have a "separate and distinct" interest, exercise separate responsibility, and maintain separate funds.

Traditionally, this requirement has been most relevant to husband-wife and parent-minor child relationships. In general, a husband and wife are considered one "person." If, however, they were both separately engaged in unrelated farming activities prior to marriage and they continue to keep their respective farming operations separate, they can be treated as two separate entities. Likewise, a minor child will almost always be considered to be part of the same entity with a parent.  An exception is granted only if that child has a distinct share of the farming operation and maintains a separate residence.

More recently, though, the "separate and distinct" requirement has been used to criticize the structure of other types of farming operations and has been increasingly used as reasoning behind denying separate "person" classifications. Thus, this has become a more contentious issue in the current debate.

The final important consideration is that an individual or entity, to qualify as a separate "person" for payment limitation purposes, must be "actively engaged in farming." To be "actively engaged in farming" an individual or entity must have a share of profits or losses commensurate with their contribution to the operation, must have contributions to the operation that are at stake and must make a significant contribution to a farming operation of:

• Capital, equipment and/or land, and
• Active personal labor and/or active personal management.

• Active personal labor 
• 1,000 hours per crop year or 
• 50% of the total hours to conduct a farming operation comparable in size to the individual or entity's share in the operation.
• Active personal management 
• Critical to the profitability of the operation, considering the individual or entity's share in the operation.

Likewise, a sharecropper is considered actively engaged in farming so long as he makes a significant contribution of labor for which he receive a specified share of the crop, the share is commensurate with the contributions, and the sharecropper's contributions are at risk.

Cash-rent situations are treated somewhat differently. Generally, landlords who cash-rent their land do not receive farm program payments for that land.  The entirety of farm program payments would go to the tenant, who is taking all the risk.  The landlord, obviously, would not be considered actively engaged in farming (at least not in respect to this land) because he is guaranteed a set rental payment - thus his contribution is not at risk. The tenant, to be considered actively engaged in farming, has to meet the same requirements as farmers who own and farm their own land. 

The Three-Entity Rule

As mentioned earlier, government payments are limited on a per-"person" basis. It follows logically, then, that an individual or entity that runs into a payment limitation problem could solve that problem by creating another "person" - or, indeed, several more. This is the very problem that arose during the earliest days of payment limitations. It turned out that it was not very difficult to set up general partnerships with corporations as the partners and thus created another "person" or two to get around the payment limitation problem.

The 1987 Farm Bill addressed this by creating what is known as the "Three-Entity Rule." Basically, the rule requires that no individual may receive payments from more than three entities in which the individual holds substantial beneficial interest. A person who receives payments as an individual can receive payments from only two more entities. The statute and subsequent regulations define a "substantial beneficial interest" as at least 10% ownership.

On the surface, this rule would seem to allow an individual to receive three times the amount of the payment limitation each year. Another section of the regulations states, however, that if an individual owns more than 50% of an entity, that individual and entity are counted as the same "person." Thus, an individual can only own up to 50% of an entity and still receive a separate payment. 

If an individual owns a substantial beneficial interest in more entities than allowed by this rule, then that individual must choose "permitted entities." Those entities not chosen will have their payments reduced by the percentage ownership of the individual in question.

Put together, these rules result in a situation where an individual may receive a full payment in his individual capacity and may receive payment as a half owner in two other entities. Thus, in total, the individual may receive twice the applicable payment limitation.

Peanuts, Wool, Mohair, and Honey

The limitations described above apply to "covered commodities" or "loan commodities."  These commodities include wheat, corn, grain sorghum, barley, oats, upland cotton, rice, soybeans, and other oilseeds.  Prior to the 2002 Farm Bill, the peanut program was still a quota program administered separately from the programs for covered commodities.  The new law, however, transitions peanuts to a program similar to that for covered commodities and includes direct payment, counter-cyclical payment, and marketing loan elements.  Peanuts are still not classified as a "covered commodity," though.

The payment limitations amounts are the same for peanuts as for covered commodities.  Peanuts, however, are listed separately in the payment limitation provisions.  Thus, the peanut limitations are separate from other limitations, and a producer growing both peanuts and covered commodities can receive more than a producer growing only covered commodities (or only peanuts).

The reason for the separate limitation for peanuts is the fact that the 2002 law gave peanut growers direct payments for the first time. Peanut farmers were persuaded to give up their old program of marketing quotas and high loan rates in return for a quota buyout payment and the same system of fixed and counter-cyclical payments and loan deficiency payments as apply to other crops. Since many peanut growers were already close to their limits on payments received for other commodities, the only way the new program would work was to create a separate limitation for peanuts.

Similarly, the new bill restores some support of wool, mohair, and honey, which had been removed under previous laws.  A marketing loan element was restored for these commodities.  There is a separate provision limiting loan benfits for peanuts, wool, mohair, and honey to $75,000.  Thus, a producer raising one of these commodities in addition to covered commodities could also receive more than the total cap for covered commodities.

Generic Certificates

Another major issue in the current debate is the use of generic certificates.  Generic commodity certificates are issued to producers by the Commodity Credit Corporation and are used as a means of avoiding forfeiture of commodities pledged for marketing loans.  Generic certificates do not count as payments or loan benefits under current payment limitations rules. 

Generic certificates are a great benefit to producers and tend to be used increasingly as producers near payment limitation caps on loan benefits.  Thus, many have argued that any gain realized from the use of generic certificates is no different from a gain realized on a marketing loan and should thus be counted toward payment limitations.  Although this has long been a major source of controversy, the use of generic certificates is still exempt from the payment limitation requirements.  As a result, there is no real cap on loan benefits so long as generic certificates are available. 

Putting This all Together

So how much can a farmer get?  Under current law, a "person" may receive up to $40,000 in direct payments, up to $65,000 in counter-cyclical payments, and up to $75,000 in combined loan benefits in a single crop year.  Thus, a single entity may receive up to $180,000 in payments on covered commodities.  Using the three-entity rule, an individual could increase this amount to $360,000.

A producer growing peanuts can receive even more.  As previously mentioned, there are separate limitations for peanuts.  A peanut producer can receive the same $360,000 in payments for his peanut crop.  If that producer also grows covered commodities, he can receive up to $360,000 on the covered commodities in addition to the payments received on the peanut crop.

The loan program for wool, mohair, and honey is also separate from the payment limitation on covered commodities (although it is not separate from the peanut limitation).  Thus, a producer of covered commodities who also produces mohair could receive additional benefits from the mohair loan program on top of the $360,000 in payments on the covered commodities.  If the producer raised peanuts, however, and had already received the maximum loan benefits under the peanut program, he would not be eligible for additional benefits under the wool, mohair, or honey program.

Under current law, there is often no real cap on loan benefits because of the use of generic commodity certificates.  As a producer nears the cap on loan benefits, he can switch to using certificates and continue to receive benefits without the concern of payment limitations.  Some claim that this results in a complete elimination of payment limitations, but that is not entirely true.  There is still a very real cap on the receipt of direct and counter-cyclical payments.  This becomes a concern for producers in a year when prices are particularly low and counter-cyclical payments are particularly high.  In such a year, producers may come upon the counter-cyclical payment limitation rather quickly. 

Payment Limitations Commission

Finally, the 2002 Farm Bill created the Commission on the Application of Payment Limitations.  The Commission has a total of 10 members.  Three members appointed by the Secretary of Agriculture; three members appointed by the Senate Agriculture, Nutrition and Forestry Committee; three members appointed by the House Agriculture Committee; and USDA’s Chief Economist.  The purpose of the Commission is to study the potential impacts of further payment limitations on farm income and evaluate how further payment limitations would affect land values, rural communities, agribusiness infrastructure, planting decisions of producers, supply and prices.

The members of the Commission have been appointed.  The first meeting was held in January, during which members decided to accept comments from the public regarding these issues.  This comment period has closed, and the Commission has not yet taken further action.

New Proposals

Most proposals for overhaul of the payment limitation system in recent years have come from the Senate.  This year is not different.  Senator Charles Grassley has already brought up payment limitation reform in two different forms. 

First, on March 13, he proposed an amendment during the Senate Budget Committee markup session on the FY2004 Budget Resolution.  This amendment served to lower the spending projections for farm program payments and raise spending projections for conservation programs.  According to the Southwest Farm Press, this reallocation is based on assumptions that the total payment limitation would be lowered to $300,000, the three-entity rule would be eliminated, and a $200,000 cap would be put on the use of generic commodity certificates.  The amendment passed by a vote of 14-9.  All 11 Democrats on the committee favored the amendment, along with Republicans Grassley, Judd Gregg, and John Ensign. 

This is not, however, a binding change to the payment limitation system.  The budget resolution is not binding law, and language elsewhere in the budget resolution process seems to reject any new limits (for more details on the budget resolution, see Randy Green's article in this issue).

Senator Grassley also put some proposals in more concrete form when he filed Senate Bill 667, along with Senators Hagel, Dorgan, Johnson, and Daschle, on March 19.  This bill has four basic functions:

1. Reduce total allowable direct and counter-cyclical payments, 
2. Include commodity certificates within the loan benefit limitations, 
3. Allow an individual producer to double the limitation on individual types of payments (within the overallcap) if he is not involved in multiple entities, and
4. Set an overall limitation of $275,000 in benefits to any "individual person", including the use of certificates and the three-entity rule.

The bill also includes a clause that would allow "a person [who] participates only in a single farming operation" to receive twice the applicable payment limitations for each type of payment (essentially eliminating the incentive to establish multiple entities).  This doubling would only apply within the overall limitations.  This bill also inserts a section mandating that a husband and wife, together, may not receive more than twice the applicable payment limitations unless the separate operations provisions cover them. 

Finally, there is an overall limitation of $275,000.  Any "individual person" would be eligible to receive only $275,000 in total payments and loan benefits, regardless of how many entities the individual is involved in.  S.B. 667 was referred to the Senate Committee on Agriculture, Nutrition, and Forestry on March 19, 2003, and no further action has been taken as of this publication.

Origins of the Debate

At the root of the payment limitation debate is a great divide in philosophy regarding the purpose of farm subsidies.  Basically, it is a debate over whether we intend to subsidize agriculture in general or whether we intend agricultural subsidies to act as an income support system directed only at the "family farmer."  While many advocates of tighter payment limitations agree on the desirability of providing price and income support for American farmers, they believe this support should only be provided to small “family farmers”. They agree that farmers should be allowed to grow as large as they are able to, but they should not be enabled to do so because of government subsidies.

The opponents of tighter limitations point out the even most large farms are family owned and operated, and are thus, “family farms”. They argue that because of the slim margins in farming and high input costs, only large family farms can generate enough income for farm families to survive. Only part-time farmers or farm families who derive a substantial part of their incomes from off-farm sources can earn an acceptable standard of living on small farms. Thus, virtually all full-time farmers of the basic commodities, such as corn, cotton, soybeans, wheat, and rice, will have great difficulty in maintaining viable farming operations if payment limitations are substantially reduced.

In the Senate, especially, the debate can create some strange bedfellows.  For example, the amendment in the Senate version of the 2002 Farm Bill that would have dramatically reduced payment limitation levels had among its co-sponsors the late Senator Paul Wellstone (D-MN) and Senator John Ensign (R-NV).  Wellstone was one of the Senate's most outspoken liberals and no doubt represented the populist point of view that agricultural subsidies should be directed toward smaller operations.  Ensign, on the other hand, is a staunch fiscal conservative whose sponsorship was likely based on a desire to lower overall spending on agriculture.

Populists in the Senate believe farm payments should be directed to smaller operations.  This group would not be successful alone, however.  Success has come in the Senate because the populists have been joined by fiscal conservatives who oppose farm payments generally and welcome an opportunity to reduce overall spending.  Thus far, such a partnership has not developed in the House.

The debate is also very regional.  As a result of many factors, including crop selection, climate, and farm size, producers in the South and West run into payment limitation difficulties far more often than producers in the Midwest.  The push for reform, then, comes largely from Midwesterners who believe that large enterprises in the South receive an unduly large share of farm program benefits.

Where Does the Debate Go From Here?

There is little doubt the leaders of the charge to reform the payment limitation system will take every opportunity to try to institute some change in the program.  This has already been seen in stand-alone legislation and in the budget resolution in the Senate and will very likely come up again in the appropriations process.  At the same time, some members of the Senate, such as Agriculture Chairman Thad Cochran (R-MS), are actively putting forth that it is not the appropriate time to open up the Farm Bill.  It would come as little surprise to see another battle over payment limitations brew in the Senate this year.

The story may be somewhat different in the House, however.  As seen in the process of assuring disaster assistance, the sentiment is much stronger in the House that the Farm Bill should not be tampered with at this point.  There will surely be those in the House who push for change.  However, it does not seem that an effective coalition has been formed in the House that will be able to derail support for the current system.

Randy Green is the firm’s senior government relations representative.  Before coming to McLeod, Watkinson & Miller, he was chief of staff for the Senate Committee on Agriculture, Nutrition and Forestry, and served during 1992 as deputy under secretary of Agriculture for international affairs and commodity programs. 

Michael R. McLeod, a partner in the firm, has worked on payment limitations for a number of years.

Scott Heselmeyer is a third-year law student at Georgetown University Law Center and an intern with the firm.