[House Report 106-300]
[From the U.S. Government Publishing Office]
106th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 106-300
======================================================================
AGRICULTURAL RISK PROTECTION ACT OF 1999
_______
August 5, 1999.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Combest, from the Committee on Agriculture, submitted the following
R E P O R T
together with
ADDITIONAL VIEWS
[To accompany H.R. 2559]
The Committee on Agriculture, to whom was referred the bill
(H.R. 2559) to amend the Federal Crop Insurance Act to
strengthen the safety net for agricultural producers by
providing greater access to more affordable risk management
tools and improved protection from production and income loss,
to improve the efficiency and integrity of the Federal crop
insurance program, and for other purposes, having considered
the same, report favorably thereon with an amendment and
recommend that the bill as amended do pass.
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Agricultural Risk
Protection Act of 1999''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--STRENGTHENING THE FARM SAFETY NET
Sec. 101. Premium schedule for additional coverage.
Sec. 102. Premium schedule for other plans of insurance.
Sec. 103. Adjustment in actual production history to establish
insurable yields.
Sec. 104. Review and adjustment in rating methodologies.
Sec. 105. Conduct of pilot programs, including livestock.
Sec. 106. Cost of production as a price election.
Sec. 107. Premium discounts for good performance.
Sec. 108. Options for catastrophic risk protection.
Sec. 109. Authority for nonprofit associations to pay fees on behalf of
producers.
Sec. 110. Elections regarding prevented planting coverage.
Sec. 111. Limitations under noninsured crop disaster assistance
program.
Sec. 112. Quality grade loss adjustment.
Sec. 113. Application of amendments.
TITLE II--IMPROVING PROGRAM INTEGRITY
Sec. 201. Limitation on double insurance.
Sec. 202. Improving program compliance and integrity.
Sec. 203. Sanctions for false information.
Sec. 204. Protection of confidential information.
Sec. 205. Records and reporting.
Sec. 206. Compliance with State licensing requirements.
TITLE III--ADMINISTRATION
Sec. 301. Board of Directors of Corporation.
Sec. 302. Promotion of submission of policies and related materials.
Sec. 303. Research and development, including contracts regarding
underserved commodities.
Sec. 304. Funding for reimbursement and research and development.
Sec. 305. Board consideration of submitted policies and materials.
Sec. 306. Contracting for rating of plans of insurance.
Sec. 307. Electronic availability of crop insurance information.
Sec. 308. Fees for use of new policies and plans of insurance.
Sec. 309. Clarification of producer requirement to follow good farming
practices.
Sec. 310. Reimbursements and negotiation of standard reinsurance
agreement.
TITLE I--STRENGTHENING THE FARM SAFETY NET
SEC. 101. PREMIUM SCHEDULE FOR ADDITIONAL COVERAGE.
(a) Premium Amounts.--Section 508(d)(2) of the Federal Crop Insurance
Act (7 U.S.C. 1508(d)(2)) is amended by striking subparagraphs (B) and
(C) and inserting the following new subparagraph:
``(B) In the case of additional coverage equal to or
greater than 50 percent of the recorded or appraised
average yield indemnified at not greater than 100
percent of the expected market price, or an equivalent
coverage, the amount of the premium shall--
``(i) be sufficient to cover anticipated
losses and a reasonable reserve; and
``(ii) include an amount for operating and
administrative expenses, as determined by the
Corporation, on an industry-wide basis as a
percentage of the amount of the premium used to
define loss ratio.''.
(b) Payment Schedule.--Section 508(e)(2) of the Federal Crop
Insurance Act (7 U.S.C. 1508(e)(2)) is amended by striking
subparagraphs (B) and (C) and inserting the following new
subparagraphs:
``(B) In the case of additional coverage equal to or
greater than 50 percent, but less than 55 percent, of
the recorded or appraised average yield indemnified at
not greater than 100 percent of the expected market
price, or an equivalent coverage, the amount shall be
equal to the sum of--
``(i) 67 percent of the amount of the premium
established under subsection (d)(2)(B)(i) for
the coverage level selected; and
``(ii) the amount determined under subsection
(d)(2)(B)(ii) for the coverage level selected
to cover operating and administrative expenses.
``(C) In the case of additional coverage equal to or
greater than 55 percent, but less than 65 percent, of
the recorded or appraised average yield indemnified at
not greater than 100 percent of the expected market
price, or an equivalent coverage, the amount shall be
equal to the sum of--
``(i) 64 percent of the amount of the premium
established under subsection (d)(2)(B)(i) for
the coverage level selected; and
``(ii) the amount determined under subsection
(d)(2)(B)(ii) for the coverage level selected
to cover operating and administrative expenses.
``(D) In the case of additional coverage equal to or
greater than 65 percent, but less than 75 percent, of
the recorded and appraised average yield indemnified at
not greater than 100 percent of the expected market
price, or an equivalent coverage, the amount shall be
equal to the sum of--
``(i) 59 percent of the amount of the premium
established under subsection (d)(2)(B)(i) for
the coverage level selected; and
``(ii) the amount determined under subsection
(d)(2)(B)(ii) for the coverage level selected
to cover operating and administrative expenses.
``(E) In the case of additional coverage equal to or
greater than 75 percent, but less than 80 percent, of
the recorded or appraised average yield indemnified at
not greater than 100 percent of the expected market
price, or an equivalent coverage, the amount shall be
equal to the sum of--
``(i) 54 percent of the amount of the premium
established under subsection (d)(2)(B)(i) for
the coverage level selected; and
``(ii) the amount determined under subsection
(d)(2)(B)(ii) for the coverage level selected
to cover operating and administrative expenses.
``(F) In the case of additional coverage equal to or
greater than 80 percent, but less than 85 percent, of
the recorded or appraised average yield indemnified at
not greater than 100 percent of the expected market
price, or an equivalent coverage, the amount shall be
equal to the sum of--
``(i) 40.6 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level selected;
and
``(ii) the amount determined under subsection
(d)(2)(B)(ii) for the coverage level selected
to cover operating and administrative expenses.
``(G) Subject to subsection (c)(4), in the case of
additional coverage equal to or greater than 85 percent
of the recorded or appraised average yield indemnified
at not greater than 100 percent of the expected market
price, or an equivalent coverage, the amount shall be
equal to the sum of--
``(i) 30.6 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level selected;
and
``(ii) the amount determined under subsection
(d)(2)(B)(ii) for the coverage level selected
to cover operating and administrative
expenses.''.
(c) Premium Payment Disclosure.--Section 508(e) of the Federal Crop
Insurance Act (7 U.S.C. 1508(e)) is amended by adding at the end the
following new paragraph:
``(5) Premium payment disclosure.--Each policy or plan of
insurance under this title shall prominently indicate the
dollar amount of the portion of the premium paid by the
Corporation under this subsection or subsection (h)(2).''.
SEC. 102. PREMIUM SCHEDULE FOR OTHER PLANS OF INSURANCE.
Section 508(h)(2) of the Federal Crop Insurance Act (7 U.S.C.
1508(h)(2)) is amended--
(1) by striking ``A policy'' and inserting the following:
``(A) Preparation.--A policy'';
(2) by striking the second sentence; and
(3) by adding at the end the following new subparagraph:
``(B) Premium schedule.--In the case of a policy
offered under this subsection (except paragraph (10))
or subsection (m)(4), the Corporation shall pay a
portion of the premium of the policy that shall be
equal to--
``(i) the percentage, specified in subsection
(e) for a similar level of coverage, of the
total amount of the premium used to define loss
ratio; and
``(ii) the dollar amount of the
administrative and operating expenses that
would be paid by the Corporation under
subsection (e) for a similar level of
coverage.''.
SEC. 103. ADJUSTMENT IN ACTUAL PRODUCTION HISTORY TO ESTABLISH
INSURABLE YIELDS.
(a) Use of Percentage of Transitional Yield.--Section 508(g) of the
Federal Crop Insurance Act (7 U.S.C. 1508(g)) is amended by adding at
the end the following new paragraph:
``(4) Adjustment in actual production history to establish
insurable yields.--
``(A) Application.--This paragraph shall apply
whenever the Corporation uses the actual production
history of the producer to establish insurable yields
for an agricultural commodity for the 2000 and
subsequent crop years.
``(B) Election to use percentage of transitional
yield.--If, for one or more of the crop years used to
establish the producer's actual production history of
an agricultural commodity, the producer's recorded or
appraised yield of the commodity was less than 60
percent of the applicable transitional yield, as
determined by the Corporation, the Corporation shall,
at the election of the producer--
``(i) exclude any of such recorded or
appraised yield; and
``(ii) replace each excluded yield with a
yield equal to 60 percent of the applicable
transitional yield.''.
(b) APH Adjustment to Reflect Participation in Major Pest Control
Efforts.--Section 508(g) of the Federal Crop Insurance Act (7 U.S.C.
1508(g)) is amended by inserting after paragraph (4), as added by
subsection (a), the following new paragraph:
``(5) Adjustment to reflect increased yields from successful
pest control efforts.--
``(A) Situations justifying adjustment.--The
Corporation shall develop a methodology for adjusting
the actual production history of a producer when each
of the following apply:
``(i) The producer's farm is located in an
area where systematic, area-wide efforts have
been undertaken using certain operations or
measures, or the producer's farm is a location
at which certain operations or measures have
been undertaken, to detect, eradicate,
suppress, or control, or at least to prevent or
retard the spread of, a plant disease or plant
pest, including a plant pest covered by the
definition in section 102 of the Department of
Agriculture Organic Act of 1944 (7 U.S.C.
147a).
``(ii) The presence of the plant disease or
plant pest has been found to adversely affect
the yield of the agricultural commodity for
which the producer is applying for insurance.
``(iii) The efforts described in clause (i)
have been effective.
``(B) Adjustment amount.--The amount by which the
Corporation adjusts the actual production history of a
producer of an agricultural commodity shall reflect the
degree to which the success of the systematic, area-
wide efforts described in paragraph (1)(A), on average,
increases the yield of the commodity on the producer's
farm, as determined by the Corporation.''.
SEC. 104. REVIEW AND ADJUSTMENT IN RATING METHODOLOGIES.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
is amended by adding at the end the following:
``(7) Review and adjustment of rates.--
``(A) Review required.--To maximize participation in
the Federal crop insurance program and to ensure equity
for producers, the Corporation shall periodically
review the methodologies employed for rating plans of
insurance under this title consistent with section
507(c)(2).
``(B) Premium adjustment.--The Corporation shall
analyze the rating and loss history of approved
policies and plans of insurance for agricultural
commodities by area. If the Corporation makes a
determination that premium rates are excessive for an
agricultural commodity in an area relative to the
requirements of subsection (d)(2)(B) for that area,
then, in the 2000 crop year or as soon as practicable
after the determination is made, the Corporation shall
make appropriate adjustments in the premium rates for
that area for that agricultural commodity.''.
SEC. 105. CONDUCT OF PILOT PROGRAMS, INCLUDING LIVESTOCK.
(a) Repeal of Obsolete Pilot Programs.--Section 508(h) of the Federal
Crop Insurance Act (7 U.S.C. 1508(h)) is amended by striking paragraphs
(6) and (8).
(b) General Requirements.--Section 508(h) of the Federal Crop
Insurance Act (7 U.S.C. 1508(h)) is amended by inserting after
paragraph (7) the following new paragraph:
``(8) General requirements applicable to pilot programs.--In
conducting any pilot program of insurance or reinsurance
authorized or required by this title, the Corporation--
``(A) may offer the pilot program on a regional,
whole State, or national basis after considering the
interests of affected producers and the interests of
and risks to the Corporation;
``(B) may operate the pilot program, including any
modifications thereof, for a period of up to 3 years;
and
``(C) may extend the time period for the pilot
program for additional periods, as determined
appropriate by the Corporation.''.
(c) Expedited Consideration.--Section 508(h)(4) of the Federal Crop
Insurance Act (7 U.S.C. 1508(h)(4)) is amended--
(1) by redesignating subparagraphs (A), (B), (C), and (D) as
clauses (i), (ii), (iii), and (iv), respectively;
(2) by moving the text of the clauses (as so designated) 2
ems to the right;
(3) by striking ``The Corporation'' in the first sentence and
inserting the following:
``(A) Guidelines required.--Not later than 180 days
after the date of the enactment of the Agricultural
Risk Protection Act of 1999, the Corporation''; and
(4) by adding at the end the following new subparagraph:
``(B) Expedited consideration of proposed pilot
programs.--The regulations required by subparagraph (A)
shall include streamlined guidelines for the
submission, and Board review, of pilot programs that
the Board determines are limited in scope and duration
and involve a reduced level of liability to the Federal
Government, and an increased level of risk to approved
insurance providers participating in the pilot program,
relative to other policies or materials submitted under
this subsection. The streamlined guidelines shall be
consistent with the guidelines established under
subparagraph (A), except as follows:
``(i) Not later than 60 days after submission
of the proposed pilot program, the Corporation
shall provide an applicant with notification of
its intent to recommend disapproval of the
proposal to the Board.
``(ii) Not later than 90 days after the
proposed pilot program is submitted to the
Board, the Board shall make a determination to
approve or disapprove the pilot program. Any
determination by the Board to disapprove the
pilot program shall be accompanied by a
complete explanation of the reasons for the
Board's decision to deny approval. In the event
the Board fails to make a determination within
the prescribed time period, the pilot program
submitted shall be deemed approved by the Board
for the initial reinsurance year designated for
the pilot program, except in the case where the
Board and the applicant agree to an
extension.''.
(d) Livestock Pilot Programs.--
(1) Programs required.--Section 508(h) of the Federal Crop
Insurance Act (7 U.S.C. 1508(h)) is amended by striking
paragraph (10) and inserting the following new paragraph:
``(10) Livestock pilot programs.--
``(A) Programs required.--The Corporation shall
conduct one or more pilot programs to evaluate the
effectiveness of risk management tools for livestock
producers, including the use of futures and options
contracts and policies and plans of insurance that
provide livestock producers with reasonable protection
from the financial risks of price or income
fluctuations inherent in the production and marketing
of livestock, provide protection for production losses,
and otherwise protect the interests of livestock
producers. To the maximum extent practicable, the
Corporation shall evaluate the greatest number and
variety of such programs to determine which of the
offered risk management tools are best suited to
protect livestock producers from the financial risks
associated with the production and marketing of
livestock.
``(B) Implementation; assistance.--The Corporation
shall begin conducting livestock pilot programs under
this paragraph during fiscal year 2001, and any policy
or plan of insurance offered under this paragraph may
be prepared without regard to the limitations contained
in this title. As part of such a pilot program, the
Corporation may provide assistance to producers to
purchase futures and options contracts or policies and
plans of insurance offered under that pilot program.
However, no action may be undertaken with respect to a
risk under this paragraph if the Corporation determines
that insurance protection for livestock producers
against the risk is generally available from private
companies.
``(C) Location.--The Corporation shall conduct the
livestock pilot programs under this paragraph in a
number of counties that is determined by the
Corporation to be adequate to provide a comprehensive
evaluation of the feasibility, effectiveness, and
demand among producers for the risk management tools
evaluated in the pilot programs.
``(D) Eligible producers; livestock.--Any producer of
a type of livestock covered by a pilot program under
this paragraph who owns or operates a farm or ranch in
a county selected as a location for that pilot program
shall be eligible to participate in that pilot program.
In this paragraph, the term `livestock' means cattle,
sheep, swine, goats, and poultry.
``(E) Relation to other laws.--The terms and
conditions of any policy or plan of insurance offered
under this paragraph that is reinsured by the
Corporation is not subject to the jurisdiction of the
Commodity Futures Trading Commission or the Securities
and Exchange Commission or considered as accounts,
agreements (including any transaction which is of the
character of, or is commonly known to the trade as, an
`option', `privilege', `indemnity', `bid', `offer',
`put', `call', `advance guaranty', or `decline
guaranty'), or transactions involving contracts of sale
of a commodity for future delivery, traded or executed
on a contract market for the purposes of the Commodity
Exchange Act (7 U.S.C. 1 et seq.). Nothing in this
subparagraph is intended to affect the jurisdiction of
the Commodity Futures Trading Commission or the
applicability of the Commodity Exchange Act to any
transaction conducted on a designated contract market
(as that term is used in such Act) by an approved
insurance provider to offset the provider's risk under
a plan or policy of insurance under this paragraph.
``(F) Limitation on expenditures.--The Corporation
shall conduct all livestock programs under this title
so that, to the maximum extent practicable, all costs
associated with conducting the livestock programs
(other than research and development costs covered by
paragraph (6) or subsection (m)(4)) are not expected to
exceed the following:
``(i) $20,000,000 for fiscal year 2001.
``(ii) $30,000,000 for fiscal year 2002.
``(iii) $40,000,000 for fiscal year 2003.
``(iv) $55,000,000 for fiscal year 2004 and
each subsequent fiscal year.''.
(2) Conforming amendment to definition of agricultural
commodity.--Section 518 of the Federal Crop Insurance Act (7
U.S.C. 1518) is amended by striking ``livestock and'' after
``commodity, excluding''.
(e) Funding of Livestock Pilot Programs.--
(1) Authorization of appropriations.--Section 516(a)(2) of
the Federal Crop Insurance Act (7 U.S.C. 1516(a)(2)) is
amended--
(A) by striking ``years--'' and inserting ``years the
following:'';
(B) by capitalizing the first letter of the first
word of each subparagraph;
(C) by striking ``; and'' at the end of subparagraph
(A) and inserting a period; and
(D) by adding at the end the following new
subparagraph:
``(C) Costs associated with the conduct of livestock
pilot programs carried out under section 508(h)(10),
subject to subparagraph (F) of such section.''.
(2) Use of insurance fund.--Section 516(b)(1) of the Federal
Crop Insurance Act (7 U.S.C. 1516(b)(1)) is amended--
(A) by striking ``including--'' and inserting
``including the following:'';
(B) by capitalizing the first letter of the first
word of each subparagraph;
(C) by striking the semicolon at the end of
subparagraph (A) and inserting a period;
(D) by striking ``; and'' at the end of subparagraph
(B) and inserting a period; and
(E) by adding at the end the following new
subparagraph:
``(D) Costs associated with the conduct of livestock
pilot programs carried out under section 508(h)(10),
subject to subparagraph (F) of such section.''.
SEC. 106. COST OF PRODUCTION AS A PRICE ELECTION.
Section 508(c)(5) of the Federal Crop Insurance Act (7 U.S.C.
1508(c)(5)) is amended--
(1) by striking ``The Corporation shall establish a price''
in the matter preceding subparagraph (A) and inserting ``For
purposes of this title, the Corporation shall establish or
approve a price'';
(2) by striking ``or'' at the end of subparagraph (A);
(3) by striking the period at the end of subparagraph (B) and
inserting ``; or''; and
(4) by adding at the end the following--
``(C) in the case of cost of production or similar
plans of insurance, shall be the projected cost of
producing the agricultural commodity (as determined by
the Corporation).''.
SEC. 107. PREMIUM DISCOUNTS FOR GOOD PERFORMANCE.
Section 508(d) of the Federal Crop Insurance Act (7 U.S.C. 1508(d))
is amended by adding at the end the following new paragraph:
``(3) Premium discounts.--
``(A) Performance-based discount.--The Corporation
may provide a performance-based premium discount for a
producer of an agricultural commodity who has good
insurance or production experience relative to other
producers of that agricultural commodity in the same
area, as determined by the Corporation.
``(B) Discount for reduced price for certain
commodities.--A producer who insured wheat, barley,
oats, or rye during at least 2 of the 1995 through 1999
crop years may be eligible to receive an additional 20
percent premium discount on the producer-paid premium
for any 2000 crop policy if the producer demonstrates
that the producer's wheat, barley, oats, or rye crop
was subjected to a discounted price due to Scab or
Vomitoxin damage, or both, during any 2 years of that
period. The 2000 insured crop or crops need not be
wheat, barley, oats, or rye to qualify for the discount
under this subparagraph. The 2 years of insurance and
the 2 years of discounted prices need not be the
same.''.
SEC. 108. OPTIONS FOR CATASTROPHIC RISK PROTECTION.
Section 508(b) of the Federal Crop Insurance Act (7 U.S.C. 1508(b))
is amended by striking paragraph (3) and inserting the following new
paragraph:
``(3) Alternative catastrophic coverage.--Beginning with the
2000 crop year, the Corporation shall offer producers of an
agricultural commodity the option of selecting either of the
following:
``(A) The catastrophic risk protection coverage
available under paragraph (2)(A).
``(B) An alternative catastrophic risk protection
coverage that--
``(i) indemnifies the producer on an area
yield and loss basis if such a plan of
insurance is offered for the agricultural
commodity in the county in which the farm is
located;
``(ii) provides, on a uniform national basis,
a higher combination of yield and price
protection than the coverage available under
paragraph (2)(A); and
``(iii) the Corporation determines is
comparable to the coverage available under
paragraph (2)(A) for purposes of subsection
(e)(2)(A).''.
SEC. 109. AUTHORITY FOR NONPROFIT ASSOCIATIONS TO PAY FEES ON BEHALF OF
PRODUCERS.
Section 508(b)(5) of the Federal Crop Insurance Act (7 U.S.C.
1508(b)(5)) is amended by adding at the end the following new
subparagraph:
``(F) Payment of fees on behalf of producers.--
``(i) Payment authorized.--Notwithstanding
any other subparagraph of this paragraph, a
cooperative association of agricultural
producers or a nonprofit trade association may
pay to the Corporation, on behalf of a member
of the association who consents to be insured
under such an arrangement, all or a portion of
the fees imposed under subparagraphs (A) and
(B) for catastrophic risk protection.
``(ii) Treatment of licensing fees.--A
licensing fee or other payment made by the
insurance provider to the cooperative
association or trade association in connection
with the issuance of catastrophic risk
protection or additional coverage under this
section to members of the cooperative
association or trade association shall not be
considered to be a rebate to the members if the
members are informed in advance of the fee or
payment.
``(iii) Selection of provider; delivery.--
Nothing in this subparagraph shall be construed
so as to limit the ability of a producer to
choose the licensed insurance agent or other
approved insurance provider from whom the
member will purchase a policy or plan of
insurance or to refuse coverage for which a
payment is offered to be made under clause (i).
A policy or plan of insurance for which a
payment is made under clause (i) shall be
delivered by a licensed insurance agent or
other approved insurance provider.
``(iv) Additional coverage encouraged.--
Cooperatives and trade associations and any
approved insurance provider with whom a
licensing fee or other arrangement under this
subparagraph is made shall encourage producer
members to purchase appropriate levels of
additional coverage in order to meet the risk
management needs of such member producers.''.
SEC. 110. ELECTIONS REGARDING PREVENTED PLANTING COVERAGE.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
is amended by inserting after paragraph (7), as added by section 104,
the following new paragraph:
``(8) Prevented planting coverage.--
``(A) Election not to receive coverage.--
``(i) Election.--A producer may elect not to
receive coverage for prevented planting of an
agricultural commodity.
``(ii) Reduction.--In the case of an election
under clause (i), the Corporation shall provide
a reduction in the premium payable by the
producer for a plan of insurance in an amount
equal to the premium for the prevented planting
coverage, as determined by the Corporation.
``(B) Equal coverage.--For each agricultural
commodity for which prevented planting coverage is
available, the Corporation shall offer an equal
percentage level of prevented planting coverage.
``(C) Area conditions required for payment.--The
Corporation shall limit prevented planting payments to
producers to those situations in which producers in the
area in which the farm is located are generally
affected by the conditions that prevent an agricultural
commodity from being planted.
``(D) Substitute commodity.--
``(i) Authority to plant.--Subject to clause
(iv), a producer who has prevented planting
coverage and who is eligible to receive an
indemnity under such coverage may plant an
agricultural commodity, other than the
commodity covered by the prevented planting
coverage, on the acreage originally prevented
from being planted.
``(ii) Nonavailability of insurance.--A
substitute agricultural commodity planted as
authorized by clause (i) for harvest in the
same crop year shall not be eligible for
coverage under a policy or plan of insurance
under this title or for noninsured crop
disaster assistance under section 196 of the
Federal Agriculture Improvement and Reform Act
of 1996 (7 U.S.C. 7333). For purposes of
subsection (b)(7) only, the substitute
commodity shall be deemed to have at least
catastrophic risk protection so as to satisfy
the requirements of that subsection.
``(iii) Effect on actual production
history.--If a producer plants a substitute
agricultural commodity as authorized by clause
(i) for a crop year, the Corporation shall
assign the producer a recorded yield, for that
crop year for the commodity that was prevented
from being planting, equal to 60 percent of the
producer's actual production history for such
commodity for purposes of determining the
producer's actual production history for
subsequent crop years.
``(iv) Effect on prevented planting
payment.--If a producer plants a substitute
agricultural commodity as authorized by clause
(i) before the latest planting date established
by the Corporation for the agricultural
commodity prevented from being planted, the
Corporation shall not make a prevented planting
payment with regard to the commodity prevented
from being planted.''.
SEC. 111. LIMITATIONS UNDER NONINSURED CROP DISASTER ASSISTANCE
PROGRAM.
(b) Limitation.--Section 196(i) of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C. 7333(i)) is amended--
(1) in paragraph (1)(B)--
(A) by striking ``gross revenues'' in the
subparagraph heading and inserting ``adjusted gross
income''; and
(B) by striking ``gross revenue'' and ``gross
revenues'' each place they appear and inserting
``adjusted gross income''; and
(2) by striking paragraph (4) and inserting the following new
paragraph:
``(4) Limitation.--A person who has qualifying adjusted gross
income in excess of $2,000,000 during the taxable year shall
not be eligible to receive any noninsured crop disaster
assistance payment under this section.''.
SEC. 112. QUALITY GRADE LOSS ADJUSTMENT.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
is amended by inserting after paragraph (8), as added by section 110,
the following new paragraph:
``(9) Quality grade loss adjustment.--Consistent with
subsection (m)(4), by the 2000 crop year, the Corporation shall
enter into a contract to analyze its quality loss adjustment
procedures and make such adjustments as may be necessary to
more accurately reflect local quality discounts that are
applied toagricultural commodities insured under this title,
taking into consideration the actuarial soundness of the adjustment and
the prevention of fraud, waste and abuse.''.
SEC. 113. APPLICATION OF AMENDMENTS.
Except where the context specifically provides otherwise, the
amendments made by this title shall apply beginning with the 2000 crop
year.
TITLE II--IMPROVING PROGRAM EFFICIENCIES
SEC. 201. LIMITATION ON DOUBLE INSURANCE.
Section 508(a) of the Federal Crop Insurance Act (7 U.S.C. 1508(a))
is amended by inserting after paragraph (9), as added by section 112,
the following new paragraph:
``(10) Limitation on double insurance.--
``(A) Restricted to catastrophic risk protection.--
Except for situations covered by subparagraph (B), no
policy or plan of insurance may be offered under this
title for more than one agricultural commodity planted
on the same acreage in the same crop year unless the
coverage for the additional crop is limited to
catastrophic risk protection available under subsection
(b).
``(B) Exception for double-cropping.--A policy or
plan of insurance may be offered under this title for
an agricultural commodity and for an additional
agricultural commodity when both agricultural
commodities are normally harvested within the same crop
year on the same acreage if the following conditions
are met:
``(i) There is an established practice of
double-cropping in the area and the additional
agricultural commodity is customarily double-
cropped in the area with the first agricultural
commodity, as determined by the Corporation.
``(ii) A policy or plan of insurance for the
first agricultural commodity and the additional
agricultural commodity is available under this
title.
``(iii) The additional commodity is planted
on or before the final planting date or late
planting date for that additional commodity, as
established by the Corporation.''.
SEC. 202. IMPROVING PROGRAM COMPLIANCE AND INTEGRITY.
(a) Additional Methods.--Section 506(q) of the Federal Crop Insurance
Act (7 U.S.C. 1506(q)) is amended--
(1) by redesignating paragraphs (1) and (2) as paragraphs (2)
and (3);
(2) by inserting after the subsection heading the following
new paragraph (1):
``(1) Purpose.--The purpose of this subsection is to improve
compliance with the Federal crop insurance program and to
improve program integrity.''; and
(3) by adding at the end the following new paragraphs:
``(4) Reconciling producer information.--The Secretary shall
develop and implement a coordinated plan for the Corporation
and the Administrator of the Farm Service Agency to reconcile
all relevant information received by the Corporation or the
Farm Service Agency from a producer who obtains crop insurance
coverage under this title. Beginning with the 2000 crop year,
the Secretary shall require that the Corporation and the Farm
Service Agency reconcile such producer-derived information on
at least an annual basis in order to identify and address any
discrepancies.
``(5) Identification and elimination of fraud, waste, and
abuse.--
``(A) FSA monitoring program.--The Secretary shall
develop and implement a coordinated plan for the Farm
Service Agency to assist the Corporation in the ongoing
monitoring of programs carried out under this title,
including--
``(i) conducting fact finding relative to
allegations of program fraud, waste, and abuse,
both at the request of the Corporation or on
its own initiative after consultation with the
Corporation;
``(ii) reporting any allegation of fraud,
waste, and abuse or identified program
vulnerabilities to the Corporation in a timely
manner; and
``(iii) assisting the Corporation and
approved insurance providers in auditing a
statistically appropriate number of claims made
under any policy or plan of insurance under
this title.
``(B) Use of field infrastructure.--The plan required
by this paragraph shall use the field infrastructure of
the Farm Service Agency, and the Secretary shall ensure
that relevant Farm Service Agency personnel are
appropriately trained for any responsibilities assigned
to them under the plan. At a minimum, such personnel
shall receive the same level of training and pass the
same basic competency tests as required of loss
adjusters of approved insurance providers.
``(C) Maintenance of provider effort; cooperation.--
The activities of the Farm Service Agency under this
paragraph do not affect the responsibility of approved
insurance providers to conduct any audits of claims or
other program reviews required by the Corporation. If
an insurance provider reports to the Corporation that
it suspects intentional misrepresentation, fraud,
waste, or abuse, the Corporation shall make a
determination and provide a written response within 90
days after receiving the report. The insurance provider
and the Corporation shall take coordinated action in
any case where misrepresentation, fraud, waste, or
abuse has occurred.
``(6) Consultation with state committees.--The Corporation
shall establish a mechanism under which State committees of the
Farm Service Agency are consulted concerning policies and plans
of insurance offered in a State under this title.
``(7) Annual report on compliance efforts.--The Secretary
shall submit to the Committee on Agriculture of the House of
Representatives and the Committee on Agriculture, Nutrition,
and Forestry of the Senate an annual report containing findings
relative to the efforts undertaken pursuant to paragraphs (4)
and (5). The report shall identify specific occurrences of
waste, fraud, and abuse and contain an outline of actions that
have been or are being taken to eliminate the identified waste,
fraud, and abuse.''.
(b) Technical Correction.--Paragraph (3) of section 506(q) of the
Federal Crop Insurance Act (7 U.S.C. 1506(q)), as redesignated by
subsection (a), is amended by striking ``this subsection'' and
inserting ``this paragraph''.
SEC. 203. SANCTIONS FOR FALSE INFORMATION.
(a) Authorized Sanctions.--Section 506(n) of the Federal Crop
Insurance Act (7 U.S.C. 1506(n)) is amended--
(1) in the subsection heading, by striking ``Penalties'' and
inserting ``Sanctions for Violations'';
(2) by redesignating paragraph (2) as paragraph (3) and, in
such paragraph, by striking ``penalty'' and ``assessing
penalties'' and inserting ``sanction'' and ``imposing a
sanction'', respectively; and
(3) by striking paragraph (1) and inserting the following new
paragraphs:
``(1) False information.--If a producer, an agent, a loss
adjuster, an approved insurance provider, or any other person
willfully and intentionally provides any false or inaccurate
information to the Corporation or to an approved insurance
provider with respect to a policy or plan of insurance under
this title, the Corporation may, after notice and an
opportunity for a hearing on the record, impose one or more of
the sanctions specified in paragraph (2).
``(2) Authorized sanctions.--The following sanctions may be
imposed for a violation under paragraph (1):
``(A) The Corporation may impose a civil fine for
each violation not to exceed the greater of--
``(i) the amount of the pecuniary gain
obtained as a result of the false or inaccurate
information provided; or
``(ii) $10,000.
``(B) If the violation is committed by a producer,
the producer may be disqualified for a period of up to
5 years from--
``(i) participating in, or receiving any
benefit provided under this title, the
noninsured crop disaster assistance program
under section 196 of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C.
7333), the Agricultural Market Transition Act
(7 U.S.C. 7201 et seq.), the Agricultural Act
of 1949 (7 U.S.C. 1421 et seq.), the Commodity
Credit Corporation Charter Act (15 U.S.C. 714
et seq.), or the Agricultural Adjustment Act of
1938 (7 U.S.C. 1281 et seq.);
``(ii) receiving any loan made, insured, or
guaranteed under the Consolidated Farm and
Rural Development Act (7 U.S.C. 1921 et. seq.);
``(iii) receiving any benefit provided, or
indemnity made available, under any other law
to assist a producer of an agricultural
commodity due to a crop loss or a decline in
commodity prices; or
``(iv) receiving any cost share assistance
for conservation or any other assistance
provided under title XII of the Food Security
Act (16 U.S.C. 3801 et seq.).
``(C) If the violation is committed by an agent, loss
adjuster, approved insurance provider, or any other
person (other than a producer), the violator may be
disqualified for a period of up to 5 years from
participating in, or receiving any benefit provided
under this title.
``(D) If the violation is committed by a producer,
the Corporation may require the producer to forfeit any
premium owed under the policy, notwithstanding a denial
of claim or collection of an overpayment, if the false
or inaccurate information was material.''.
(b) Disclosure of Sanctions.--Section 506(n) of the Federal Crop
Insurance Act (7 U.S.C. 1506(n)) is amended by adding at the end the
following new paragraph:
``(4) Disclosure of sanctions.--Each policy or plan of
insurance under this title shall prominently indicate the
sanctions prescribed under paragraph (2) for willfully and
intentionally providing false or inaccurate information to the
Corporation or to an approved insurance provider.''.
SEC. 204. PROTECTION OF CONFIDENTIAL INFORMATION.
Section 502 of the Federal Crop Insurance Act (7 U.S.C. 1502) is
amended by adding at the end the following new subsection:
``(c) Protection of Confidential Information.--
``(1) Authorized disclosure.--In the case of information
furnished by a producer to participate in or receive any
benefit under this title, the Secretary, any other officer or
employee of the Department or an agency thereof, an approved
insurance provider and its employees and contractors, and any
other person may not disclose the information to the public,
unless the information has been transformed into a statistical
or aggregate form that does not allow the identification of the
person who supplied particular information.
``(2) Violations; penalties.--Subsection (c) of section 1770
of the Food Security Act of 1985 (7 U.S.C. 2276) shall apply
with respect to the release of information collected in any
manner or for any purpose prohibited by paragraph (1).''.
SEC. 205. RECORDS AND REPORTING.
(a) Condition of Obtaining Coverage.--Section 508(f)(3)(A) of the
Federal Crop Insurance Act (7 U.S.C. 1508(f)(3)(A)) is amended by
striking ``provide, to the extent required by the Corporation, records
acceptable to the Corporation of historical acreage and production of
the crops for which the insurance is sought'' and inserting ``provide
annually records acceptable to the Secretary regarding crop acreage,
acreage yields, and production for each agricultural commodity insured
under this title''.
(b) Coordination of Records.--Section 506(h) of the Federal Crop
Insurance Act (7 U.S.C. 1506(h)) is amended--
(1) by striking ``The Corporation'' and inserting the
following:
``(1) In general.--The Corporation''; and
(2) by adding at the end the following new paragraph:
``(2) Coordination and use of records.--
``(A) Coordination between agencies.--The Secretary
shall ensure that recordkeeping and reporting
requirements under this title and section 196 of the
Federal Agriculture Improvement and Reform Act of 1996
(7 U.S.C. 7333) are coordinated by the Corporation and
the Farm Service Agency to avoid duplication of such
records, to streamline procedures involved with the
submission of such records, and to enhance the accuracy
of such records.
``(B) Use of records.--Notwithstanding section
502(c), records submitted in accordance with this title
and section 196 of the Federal Agriculture Improvement
and Reform Act of 1996 (7 U.S.C. 7333) shall be
available to agencies and local offices of the
Department, appropriate State and Federal agencies and
divisions, and approved insurance providers for use in
carrying out this title and such section 196 as well as
other agricultural programs and related
responsibilities.''.
(c) Noninsured Crop Disaster Assistance Program.--Section 196(b) of
the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C.
7333(b)) is amended--
(1) by striking paragraph (2) and inserting the following:
``(2) Records.--To be eligible for assistance under this
section, a producer shall provide annually to the Secretary,
acting through the Agency, records of crop acreage, acreage
yields, and production for each eligible crop.''; and
(2) in paragraph (3), by inserting ``annual'' after ``shall
provide''.
SEC. 206. COMPLIANCE WITH STATE LICENSING REQUIREMENTS.
Section 508 of the Federal Crop Insurance Act (7 U.S.C. 1508) is
amended by adding at the end the following new subsection:
``(o) Compliance With State Licensing Requirements.--Any person who
sells or solicits the purchase of a policy or plan of insurance under
this title, including catastrophic risk protection, in any State shall
be licensed and otherwise qualified to do business in that State.''.
TITLE III--ADMINISTRATION
SEC. 301. BOARD OF DIRECTORS OF CORPORATION.
(a) Change in Composition.--Section 505 of the Federal Crop Insurance
Act (7 U.S.C. 1505) is amended by striking the section heading, ``Sec.
505.'', and subsection (a) and inserting the following:
``SEC. 505. MANAGEMENT OF CORPORATION.
``(a) Board of Directors.--
``(1) Establishment.--The management of the Corporation shall
be vested in a Board of Directors subject to the general
supervision of the Secretary.
``(2) Composition.--The Board shall consist of only the
following members:
``(A) The manager of the Corporation, who shall serve
as a nonvoting ex officio member.
``(B) The Under Secretary of Agriculture responsible
for the Federal crop insurance program.
``(C) One additional Under Secretary of Agriculture
(as designated by the Secretary).
``(D) The Chief Economist of the Department of
Agriculture.
``(E) One person experienced in the crop insurance
business.
``(F) One person experienced in the regulation of
insurance.
``(G) Four active producers who are policy holders,
are from different geographic areas of the United
States, and represent a cross-section of agricultural
commodities grown in the United States. At least one of
the four shall be a specialty crop producer.
``(3) Appointment of private sector members.--The members of
the Board described in subparagraphs (E), (F), and (G) of
paragraph (2)--
``(A) shall be appointed by, and hold office at the
pleasure of, the Secretary; and
``(B) shall not be otherwise employed by the Federal
Government.
``(4) Chairperson.--The Board shall select a member of the
Board to serve as Chairperson.''.
(b) Effective Date.--The amendment made by subsection (a) shall take
effect 30 days after the date of the enactment of this Act.
(c) Effect on Existing Board.--A member of the Board of Directors of
the Federal Crop Insurance Corporation on the effective date specified
in subsection (b) may continue to serve as a member of the Board until
the earlier of the following:
(1) The date the replacement Board is appointed.
(2) The end of the 180-day period beginning on the effective
date specified in subsection (b).
SEC. 302. PROMOTION OF SUBMISSION OF POLICIES AND RELATED MATERIALS.
(a) Reimbursement Authority.--Section 508(h) of the Federal Crop
Insurance Act (7 U.S.C. 1508(h)), as amended by section 105(a) of this
Act, is amended by inserting after paragraph (5) the following new
paragraph:
``(6) Reimbursement of research, development, and maintenance
costs.--
``(A) Reimbursement provided.--Subject to the
conditions of this paragraph, the Corporation shall
provide a payment to reimburse an applicant for
research, development, and maintenance costs directly
related to a policy or other material that is--
``(i) submitted to, and approved by, the
Board under this subsection for reinsurance;
and
``(ii) if applicable, offered for sale to
producers.
``(B) Duration.--Payments under subparagraph (A) may
be made available beginning in fiscal year 2001.
Payments with respect to the maintenance of an approved
policy or other material may be provided for a period
of not more than 4 reinsurance years following Board
approval. Upon the expiration of that 4-year period, or
earlier upon the agreement of the Corporation and the
person receiving the payment, the Corporation shall
assume responsibility for maintenance of a successful
policy, as determined by the Corporation based on the
market share attained by the policy, the total number
of policies sold, the total amount of premium paid, and
the performance of the policy in the States where the
policy is sold.
``(C) Treatment of payment.--Payments made under
subparagraph (A) for a policy or other material shall
be considered as payment in full for the research and
development conducted with regard to the policy or
material and any property rights to the policy or
material.
``(D) Reimbursement amount.--The Corporation shall
determine the amount of the payment under subparagraph
(A) for an approved policy or other material based on
the complexity of the policy or material and the size
of the area in which the policy or material is expected
to be used.''.
(b) Issuance of Regulations.--Not later than October 1, 2000, the
Corporation shall issue final regulations to carry out the amendment
made by subsection (a).
SEC. 303. RESEARCH AND DEVELOPMENT, INCLUDING CONTRACTS REGARDING
UNDERSERVED COMMODITIES.
(a) Support for Private Research and Development.--Section 508(m) of
the Federal Crop Insurance Act (7 U.S.C. 1508(m)) is amended by adding
at the end the following new paragraph:
``(4) Private research and development of policies and other
materials.--
``(A) Use of reimbursement authority.--To encourage
and promote the necessary research and development for
policies, plans of insurance, and related materials,
including policies, plans, and materials under the
livestock pilot programs under subsection (h)(10), the
Corporation shall make full use of private resources by
providing payment for research and development for
approved policies and plans of insurance, and related
materials, pursuant to subsection (h)(6).
``(B) Contracts for underserved commodities.--
``(i) Development of products and related
materials.--In the event the Corporation
determines that an agricultural commodity,
including a specialty crop, is not adequately
served by policies and plans of insurance and
related materials submitted under subsection
(h) or any other provision of this title, the
Corporation may enter into a contract, under
procedures prescribed by the Corporation,
directly with any person or entity with
experience in crop insurance or farm or ranch
risk management, including universities,
providers of crop insurance, and trade and
research organizations, to carry out research
and development for policies and plans of
insurance and related materials for that
agricultural commodity without regard to the
limitations contained in this title.
``(ii) Types of contracts.--A contract under
this subparagraph may provide for research and
development regarding new or expanded policies
and plans of insurance and related materials,
including policies based on adjusted gross
income, cost-of-production, quality losses, and
an intermediate base program with a higher
coverage and cost than catastrophic risk
protection.
``(iii) Delayed effective date for
contracts.--A contract entered into under this
subparagraph may not take effect before October
1, 2000.
``(iv) Use of resulting policies and plans.--
The Corporation may offer any policy or plan of
insurance developed under this subparagraph
that is approved by the Board.
``(C) Contract for revenue coverage plan.--The
Corporation shall enter into a contract for research
and development regarding one or more revenue coverage
plans designed to enable producers to take maximum
advantage of fluctuations in market prices and thereby
maximize revenue realized from the sale of a crop. Such
a plan may include market instruments currently
available or may involve the development of new
instruments to achieve this goal. Not later than 15
months after the date of the enactment of this
paragraph, the Corporation shall submit to Congress a
report containing the results of the contract.''.
(b) Reliance on Private Development of New Policies.--Section
508(m)(2) of the Federal Crop Insurance Act (7 U.S.C. 1508(m)(2)) is
amended--
(1) by striking ``Exception.--No action'' and inserting--
``(2) Exceptions.--
``(A) Private availability.--No action''; and
(2) by adding at the end the following new subparagraph:
``(B) Prohibited research and development by
corporation.--Notwithstanding paragraphs (1) and (5),
on and after October 1, 2000, the Corporation shall not
conduct research and development for any new policy or
plan of insurance for an agricultural commodity offered
under this title. Any policy or plan of insurance
developed by the Corporation under this title before
that date shall, at the discretion of the Corporation,
continue to be offered for sale to producers.''.
(c) Partnerships for Risk Management Development and
Implementation.--Section 508(m) of the Federal Crop Insurance Act (7
U.S.C. 1508(m)) is amended by inserting after paragraph (4), as added
by subsection (a), the following new paragraph:
``(5) Partnerships for risk management development and
implementation.--
``(A) Purpose.--The purpose of this paragraph is to
authorize the Corporation to enter into partnerships
with public and private entities for the purpose of
increasing the availability of loss mitigation,
financial, and other risk management tools for crop
producers, with priority given to risk management tools
for producers of agricultural commodities covered by
section 196 of the Federal Agriculture Improvement and
Reform Act of 1996 (7 U.S.C. 7333) and specialty and
underserved commodity producers.
``(B) Authority.--Subject to subparagraphs (D) and
(E), the Corporation may enter into partnerships with
the Cooperative State Research, Education, and
Extension Service, the Agricultural Research Service,
the National Oceanic Atmospheric Administration, and
other appropriate public and private entities with
demonstrated capabilities in developing and
implementing risk management and marketing options for
specialty crops and underserved commodities.
``(C) Objectives.--The Corporation may enter into a
partnership under subparagraph (B)--
``(i) to enhance the notice and timeliness of
notice of weather conditions that could
negatively affect crop yields, quality, and
final product use in order to allow producers
to take preventive actions to increase end-
product profitability and marketability and to
reduce the possibility of crop insurance
claims;
``(ii) to develop a multifaceted approach to
pest management and fertilization to decrease
inputs, decrease environmental exposure, and
increase application efficiency;
``(iii) to develop or improve techniques for
planning, breeding, planting, growing,
maintaining, harvesting, storing, shipping, and
marketing that will address quality and
quantity challenges associated with year-to-
year and regional variations;
``(iv) to clarify labor requirements and
assist producers in complying with requirements
to better meet the physically intense and time-
compressed planting, tending, and harvesting
requirements associated with the production of
specialty crops and underserved commodities;
``(v) to provide assistance to State
foresters or equivalent officials for the
prescribed use of burning on private forest
land for the prevention, control, and
suppression of fire;
``(vi) to provide producers with training and
informational opportunities so that they will
be better able to use financial management,
crop insurance, marketing contracts, and other
existing and emerging risk management tools;
and
``(vii) to develop other risk management
tools to further increase economic and
production stability.
``(D) Funding source.--If the Corporation determines
that the entire amount available to provide
reimbursement payments under subsection (h) and
contract payments under paragraph (4) (in this
subparagraph referred to as `reimbursement and contract
payments') for a fiscal year is not needed for such
purposes, the Corporation may use a portion of the
excess amount to carry out this paragraph, subject to
the following:
``(i) During fiscal years 2001 through 2004,
amounts available for reimbursement and
contract payments may be used to carry out this
paragraph only if the total amount to be used
for reimbursement and contract payments is less
than $44,000,000 for fiscal year 2001,
$47,000,000 for fiscal year 2002, $50,000,000
for fiscal year 2003, and $52,000,000 for
fiscal year 2004.
``(ii) During fiscal years 2001 through 2004,
the total amount used to carry out this
paragraph for a fiscal year may not exceed the
difference between the amount specified in
clause (i) for that fiscal year and the amount
actually used for reimbursement and contract
payments.
``(E) Delayed authority.--The Corporation may not
enter into a partnership under the authority of this
paragraph before October 1, 2000.''.
SEC. 304. FUNDING FOR REIMBURSEMENT AND RESEARCH AND DEVELOPMENT.
(a) Expenditures.--Section 508(h)(6) of the Federal Crop Insurance
Act (7 U.S.C. 1508(h)(6)), as added by section 302(a) of this Act, is
amended by adding at the end the following new subparagraph:
``(E) Expenditures.--
``(i) Specialty crops.--Of the total amount
made available to provide payments under this
paragraph and subsection (m)(4)(B) for a fiscal
year, $25,000,000 shall be reserved for
research and development contracts under
subsection (m)(4)(B). The Corporation may use a
portion of the reserved amount for other
purposes under this paragraph, with priority
given to underserved commodities, if the
Corporation determines that the entire amount
is not needed for such contracts. If the
reserved amount is insufficient for a fiscal
year, the Corporation may use amounts in excess
of the reserved amount for such contracts.
``(ii) Limitation.--In providing payments
under this paragraph and subsection (m)(4)(B),
the Corporation shall not obligate or expend
more than $55,000,000 during any fiscal
year.''.
(b) Funding.--
(1) Authorization of appropriations.--Section 516(a)(2) of
the Federal Crop Insurance Act (7 U.S.C. 1516(a)(2)) is amended
by adding at the end the following new subparagraph:
``(D) Costs associated with the reimbursement for
research, development, and maintenance costs of
approved policies and other materials provided under
section 508(h)(6) and contracting for research and
development under section 508(m)(4)(B).''.
(2) Use of insurance fund.--Section 516(b)(1) of the Federal
Crop Insurance Act (7 U.S.C. 1516(b)(1)) is amended by adding
at the end the following new subparagraph:
``(E) Reimbursement for research, development, and
maintenance costs of approved policies and other
materials provided under section 508(h)(6) and
contracting for research and development under section
508(m)(4)(B).''.
SEC. 305. BOARD CONSIDERATION OF SUBMITTED POLICIES AND MATERIALS.
(a) Persons Authorized To Submit.--Section 508(h)(1) of the Federal
Crop Insurance Act (7 U.S.C. 1508(h)(1)) is amended by inserting after
``a person'' the following: ``(including an approved insurance
provider, a college or university, a cooperative or trade association,
or any other person)''.
(b) Sale by Approved Insurance Providers.--Section 508(h)(3) of the
Federal Crop Insurance Act (7 U.S.C. 1508(h)(3)) is amended by
inserting after ``for sale'' the following: ``by approved insurance
providers''.
(c) Time Periods for Approval or Disapproval.--Section 508(h)(4)(A)
of the Federal Crop Insurance Act (7 U.S.C. 1508(h)(4)(A)), as amended
by section 105(c), is amended--
(1) in clause (iii), as redesignated by section 105(c), by
striking ``of the applicant.'' and all that follows through the
end of the clause and inserting ``, and such application, as
modified, shall be considered by the Board in the manner
provided in clause (iv) within the 30-day period beginning on
the date the modified application is submitted. Any
notification of intent to disapprove a policy or other material
submitted under this subsection shall be accompanied by a
complete explanation as to the reasons for the Board's
intention to deny approval.''; and
(2) by striking clause (iv), as redesignated by section
105(c), and inserting the following new clause:
``(iv) Not later than 120 days after a policy
or other material is submitted under this
subsection, the Board shall make a
determination to approve or disapprove such
policy or material. Any determination by the
Board to disapprove any policy or other
material shall be accompanied by a complete
explanation of the reasons for the Board's
decision to deny approval. In the event the
Board fails to make a determination within the
prescribed time period, the submitted policy or
other material shall be deemed approved by the
Board for the initial reinsurance year
designated for the policy or material, except
in the case where the Board and the applicant
agree to an extension.''.
(d) Funding To Expedite Consideration.--Effective October 1, 2000,
section 516(b)(2) of the Federal Crop Insurance Act (7 U.S.C.
1516(b)(2)) is amended--
(1) by striking ``Research and development expenses.--'' and
inserting ``Policy consideration expenses.--''; and
(2) in subparagraph (A), by striking ``research and
development expenses of the Corporation'' and inserting ``costs
associated with considering for approval or disapproval
policies and other materials under subsections (h) and (m)(4)
of section 508, costs associated with implementing such
subsection (m)(4), and costs to contract out for assistance in
considering such policies and other materials''.
SEC. 306. CONTRACTING FOR RATING OF PLANS OF INSURANCE.
Section 507(c)(2) of the Federal Crop Insurance Act (7 U.S.C.
1507(c)(2)) is amended--
(1) by striking ``actuarial, loss adjustment,'' and inserting
``actuarial services, services relating to loss adjustment and
rating plans of insurance,''; and
(2) by inserting after ``private sector'' the following:
``and to enable the Corporation to concentrate on regulating
the provision of insurance under this title and evaluating new
products and materials submitted under section 508(h)''.
SEC. 307. ELECTRONIC AVAILABILITY OF CROP INSURANCE INFORMATION.
Section 508(a)(5) of the Federal Crop Insurance Act (7 U.S.C.
1508(a)(5)) is amended--
(1) by redesignating subparagraphs (A) and (B) as clauses (i)
and (ii) and moving such clauses 2 ems to the right;
(2) by striking ``The Corporation'' and inserting the
following:
``(A) Available information.--The Corporation''; and
(3) by adding at the end the following new subparagraph:
``(B) Use of electronic methods.--The Corporation
shall make the information described in subparagraph
(A) available electronically to producers and approved
insurance providers. To the maximum extent practicable,
the Corporation shall also allow producers and approved
insurance providers to use electronic methods to submit
information required by the Corporation.''.
SEC. 308. FEES FOR USE OF NEW POLICIES AND PLANS OF INSURANCE.
Section 508(h) of the Federal Crop Insurance Act (7 U.S.C. 1508(h))
is amended by adding at the end the following new paragraph:
``(11) Fees for new policies and plans of insurance.--
``(A) Authority to impose fee.--Effective beginning
with Fiscal Year 2001, if a person develops a new
policy or plan of insurance and does not apply for
reimbursement of research, development, and maintenance
costs under paragraph (6), the person shall have the
right to receive a fee from any approved insurance
provider that elects to sell the new policy or plan of
insurance. Notwithstanding paragraph (5), once the
right to collect a fee is asserted with respect to a
new policy or plan of insurance, no approved insurance
provider may offer the new policy or plan of insurance
in the absence of a fee agreement with the person who
developed the policy or plan.
``(B) Definition.--For purposes of this paragraph
only, the term `new policy or plan of insurance' means
a policy or plan of insurance that was approved by the
Board on or after October 1, 2000, and was not
available at the time the policy or plan of insurance
was approved by the Board.
``(C) Amount.--The amount of the fee that is payable
by an approved insurance provider to offer a new policy
or a plan of insurance under subparagraph (A) shall be
an amount that is determined by the person that
developed the new policy or plan of insurance, subject
to the approval of the Board under subparagraph (D).
``(D) Approval.--The Board shall approve the amount
of a fee determined under subparagraph (C) for a new
policy or plan of insurance unless the Board can
demonstrate that the fee amount--
``(i) is unreasonable in relation to the
research and development costs associated with
the new policy or plan of insurance; and
``(ii) unnecessarily inhibits the use of the
new policy or plan of insurance.''.
SEC. 309. CLARIFICATION OF PRODUCER REQUIREMENT TO FOLLOW GOOD FARMING
PRACTICES.
Section 508(a)(3)(C) of the Federal Crop Insurance Act (7 U.S.C.
1508(a)(3)(C)) is amended by inserting after ``good farming practices''
the following: ``, including scientifically sound sustainable and
organic farming practices''.
SEC. 310. REIMBURSEMENTS AND RENEGOTIATION OF STANDARD REINSURANCE
AGREEMENT.
(a) Reimbursement Rate Changes.--
(1) CAT loss adjustment.--Section 508(b)(11) of the Federal
Crop Insurance Act (7 U.S.C. 1508(b)(11)) is amended by
striking ``11 percent'' and inserting ``8 percent''.
(2) Reimbursement for administrative and operating costs.--
Section 508(k)(4)(A)(ii) of the Federal Crop Insurance Act (7
U.S.C. 1508(k)(4)(A)(ii)) is amended by striking ``24.5
percent'' and inserting ``24 percent''.
(3) Application of amendments.--The amendments made by this
subsection shall apply with respect to the 2001 and subsequent
reinsurance years.
(b) Renegotiation.--Effective for the 2002 reinsurance year, the
Federal Crop Insurance Corporation may renegotiate the Standard
Reinsurance Agreement.
Brief Explanation
H.R. 2559, the Agricultural Risk Protection Act of 1999,
contains three titles aimed at increasing participation;
improving program administration, including new procedures for
approving policies and plans of insurance; and bolstering the
compliance and enforcement program of the Risk Management
Agency (RMA).
Title I expands the levels of coverage offered to
agricultural producers by providing greater federal assistance
in buying better coverage and provides an adjustment in actual
production history for producers who have suffered multiple
losses in the 1990s. Section 102 provides the same percentage
of premium assistance for insurance policies in addition to
multi-peril insurance, including revenue insurance products.
Title I also for the first time authorizes pilot programs to be
developed for livestock risk management plans.
Title II seeks to improve the operations of the federal
crop insurance program. Beginning in crop year 2000, the
Secretary is directed to use the field staff of the Farm
Service Agency (FSA) to assist the Federal Crop Insurance
Corporation (FCIC) in maintaining program integrity. Generally,
this assistance will be accomplished through monitoring and
auditing the federal crop insurance program in the field.
Increased sanctions for false information are included in the
bill as well as new requirements for record keeping and
reporting of crop acreage, acreage yields and production.
Finally, Title III reorganizes the FCIC board of directors
and makes other improvements in the administration of the
federal crop insurance program. These improvements include a
monetary reimbursement for the development of new policies, and
the FCIC is authorized to reimburse persons for maintaining
these commercially viable contracts. The bill authorizes the
FCIC to enter contracts for the development of new insurance
products whenever the FCIC determines a crop to be inadequately
served. FCIC also is placed under strict time limits for the
approval or disapproval of policies or plans of insurance that
are submitted by private organizations or individuals.
Purpose and Need
Since expansion of the federal crop insurance program in
1980, Congress has amended the Federal Crop Insurance Act
numerous times attempting to end the need for costly and
unanticipated legislation to assist agricultural producers
through weather and related disasters. With passage of the
Federal Crop Insurance Reform Act of 1994, Congress began to
contend seriously with the lack of producer participation,
which was the main concern throughout the 1980s. Disaster bills
in 1986, 1988, 1989, and 1991 were difficult to administer and
generally required emergency declarations under the budget act
to authorize spending.
Producer acceptance and use of crop insurance are critical
to an industry totally dependent on weather, especially knowing
that Congress usually has provided disaster assistance through
ad hoc legislation. Producer acceptance also requires RMA to
encourage the development of new policies and insurance plans
for producers who now grow crops that cannot now obtain
insurance protection or are purchasing what they believe is
inadequate insurance protection. Finally, producer acceptance
requires providing RMA with the resources to find waste, fraud
and abuse in the crop insurance program and to punish violators
with meaningful penalties.
Although in some years after 1980 participation may have
reached 40 to 45 percent, national participation more generally
hovered around 30 to 35 percent of the total acreage planted to
the major field crops. Therefore, any wide-spread, national
disasters created a need for assisting agricultural producers.
So far, Congress has met that need in some fashion, but after
each disaster assistance bill was finished, Congress looked for
a better way to assist farmers in helping themselves manage the
risks inherent in farming and ranching.
Following the major reforms in 1994, the crop insurance
program was modified in the Federal Agriculture Improvement and
Reform Act of 1996, and further modifications, including major
budgetary offsets, were made in the Agricultural Research,
Extension, and Education Reform Act of 1998. Participation
increased dramatically from 38 percent of crops insured in 1994
to 67 percent insured in 1998. Many producers obviously
recognized the value of crop insurance since this rate has been
maintained even though the purchase of insurance is no longer
mandatory.
While participation increases occurred in program crops,
the same is not universally the case for many specialty crops.
Increasing the attractiveness of crop insurance to specialty
crop growers was a goal of the 1994 legislation, but progress
has not been satisfactory. Both the details of policy design
and the slow pace of program expansion are continuing concerns.
Where specialty crop growers do participate, they often neglect
any coverage levels above catastrophic. The Committee responds
to these needs by increasing RMA's research and development
resources and dedicating a portion to underserved crops like
specialty crops. The Committee expects that the bill's
provision facilitating producer association purchases of
insurance on behalf of their members will lead to improved
levels of participation in the program.
With a high percentage of agricultural producers wanting to
insure their crops against the multiple perils of farming,
producers now began to tell their congressional representatives
they needed a more responsive crop insurance program, including
the availability of insurance plans or policies for livestock
risk management. They also expressed a need for an equalization
of government assistance in revenue insurance policies;
currently, producers who purchase, for instance, crop revenue
coverage policies do not receive the same level of premium
assistance received by those buying multi-peril policies.
While producers had many different ideas about risk
management programs that would be beneficial to their specific
agricultural operations or regions of the country, a consensus
among producers developed that two specific improvements were
needed as soon as possible. The first was to provide a greater
and more affordable level of coverage. The second was to remedy
a fact of insurance: producers suffering numerous, consecutive
disasters have seen their insurable yields erode drastically.
The best buy for most producers around the country has been
the 65-100 multi-peril crop insurance policy. Under the current
program, producers can insure 65 percent of their actual
production history at 100 percent of the price offered by FCIC.
The price election is based on futures market prices. At this
coverage level, FCIC pays about 42 percent of the total
premium. Coverage levels higher than the 65-100 policy are
subsidized at the same dollar amount as 65-100, and thus, the
cost to producers risesbecause the subsidy level is effectively
frozen. In addition, rates for coverage above 65 percent rise rapidly
with the likelihood of increased indemnities at levels of 75-100 or 80-
100.
Private insurance companies deliver various crop insurance
products, most of which are reinsured by FCIC. Even though
Congress was assured that insurance companies expected to bring
more producers into the program at high levels of coverage, it
appears about one-quarter of eligible acres still are insured
under catastrophic risk protection policies (CAT). CAT coverage
is at a basic level, a 50-55 plan of coverage, which covers a
loss of one-half of a producer's actual production history.
About 40 percent of eligible acres are covered by so-called
buy-up coverage, which is described as any coverage greater
than CAT.
Responding to producers' requests for better plans of
insurance, the Committee has significantly increased the
premium assistance compared to current law. For example, FCIC
under current law provides 42 percent of the premium costs on a
65-100 policy. Under the bill, FCIC will now provide 59 percent
of the producer's cost of such coverage. Premium assistance
also is increased at each level of coverage beginning at the
50-100 coverage level. Premium levels are described in the
section-by-section analysis.
The bill also assists a producer with multiple year losses,
which have reduced the producer's APH to an extent the producer
cannot obtain adequate insurance coverage at any affordable
price. To address this problem, the bill provides for a yield
floor at 60 percent of the applicable transitional yield in a
county. If producers agree, this yield ``plug'' may be
substituted retrospectively for each of those years when yields
fell below 60 percent of the transitional yield. This plug will
apply prospectively as well. The transitional yield is based on
the historical yields established by USDA's National
Agricultural Statistics Service.
By law, FCIC has been prohibited from offering livestock
producers insurance plans or policies even though livestock are
subject to weather-related disasters and other risks. The bill
specifically mandates RMA to conduct pilot programs for
livestock, including cattle, sheep, swine, goats and poultry.
Pilot programs may begin in 2001.
The Committee has been concerned for some time about the
integrity of the crop insurance program. Anecdotal evidence
suggests the program has significant levels of fraud and abuse;
however, the RMA compliance program appears insufficiently
focused on finding abusive and fraudulent practices and
enforcing the crop insurance statute and its regulations.
Whether or not there is an inadequate response by RMA to fraud
and abuse in the program, the Committee believes the Secretary
can do more to improve the RMA compliance effort.
The bill requires the use of the Farm Service Agency field
staff to audit and monitor the program; increases sanctions for
filing or dispensing false information; requires records and
reports to be filed; and protects confidential information.
Finally, the Committee intends that RMA's management of the
program be streamlined. Again, RMA's lack of responsiveness to
new ideas in risk management and innovative insurance policies
fills the public record established by the Committee. New
policies are submitted to RMA and not processed in a timely
manner. For example, the crop revenue coverage program, which
has become a hugely successful crop insurance product,
languished within RMA for an excessive period of time before it
was finally approved on a limited basis.
Criticism of the policies and procedures of the FCIC board
of directors also has been heard from many persons familiar
with the workings of the board.
The Committee intends to correct many of these deficiencies
by taking away some of RMA's discretion in the development and
approval of new policies and insurance plans. For instance,
beginning in fiscal year 2001, FCIC is no longer authorized to
conduct its own research and development for new policies. The
bill does encourage private organizations to become involved in
researching and developing new policies to meet their specific
needs and reimburses organizations or individuals for
developing successful plans of insurance.
Section by Section Analysis and Report Language
Sec. 1. Short Title; Table of Contents
This Act may be cited as the Agricultural Risk Protection
Act of 1999.
TITLE I--STRENGTHENING THE FARM SAFETY NET
Sec. 101. Premium schedule for additional coverage
Section 101 strikes duplicative language in the law
establishing premium amounts. The section establishes a new
premium assistance schedule, as illustrated in the table below.
The section also provides that the amount of premium assistance
available is determined by coverage level selected at any price
election. Finally, the section requires that every policy bear
the amount of premium paid by the federal government. This
section is applicable beginning for the 2000 crop year.
Under this section, premium assistance is determined based
on the percentage of total premium used to define loss ratio
rather than on a fixed dollar amount. The Committee intends
that the Federal Crop Insurance Corporation (FCIC) make
continuous coverage levels available to producers as opposed to
limiting producer choices to coverage levels offered in 5
percent increments. The Committee expects FCIC to provide
continuous coverage levels for all policies of insurance
offered under the Federal Crop Insurance Act as soon as
practicable. In addition, under this section premium assistance
is determined solely on the percentage of yield a producer
elects to insure without regard to the price election selected
by the producer.
[in percent]
----------------------------------------------------------------------------------------------------------------
Coverage level 50/100 55/100 60/100 65/100 70/100 75/100 80/100 85/100
----------------------------------------------------------------------------------------------------------------
Current Law..................................... 55 46.10 37.80 41.70 31.90 23.50 17.30 13
Committee Plan.................................. 67 64 64 59 59 54 40.6 30.6
----------------------------------------------------------------------------------------------------------------
Sec. 102. Premium schedule for other plans of insurance
Section 102 requires that the percentage of premium
assistance under section 101 apply to similar levels of
coverage under policies offered for sale to producers pursuant
to section 508(h) and 508(m)(4). The section also limits the
amount of administrative and operating expenses paid to an
insurance provider for all policies to no more than the amount
the provider would receive for a traditional multi-peril policy
with a similar level of coverage. This section is applicable
beginning for the 2000 crop year.
This section is intended to make all policies of insurance
more affordable, including new and existing policies of
insurance that protect producers from revenue or price loss.
The Committee intends that the level of coverage selected is
the only relevant factor in determining that a policy of
insurance offered pursuant to sections 508(h) or 508(m)(4) is a
``similar level of coverage'' to a policy offered under section
508(e) when determining premium assistance. The fact that a
policy offered pursuant to sections 508(h) or 508(m)(4) offers
some higher level of protection or guarantee than a policy with
a ``similar level of coverage'' under section 508(e) is not
relevant in determining the amount of premium assistance.
Sec. 103. Adjustment in actual production history to establish
insurable yields
Section 103 requires FCIC to permit producers to elect to
exclude the recorded yield for an agricultural commodity in any
crop year where the yield is below 60 percent of the
transitional yield and to replace that yield with 60 percent of
the transitional yield. The section further requires the
Corporation to develop a methodology for adjusting a producer's
actual production history that reflects effective efforts to
retard plant diseases and pests. This section is applicable
beginning for the 2000 crop year.
The Committee intends for producers to have maximum
flexibility in determining whether to exclude eligible yields
under this section, as well as which and how many eligible
yields to exclude. The Committee further intends that a
producer may reverse any decision made under this section
relative to a given crop year in establishing insurable yields
for a subsequent crop year. Finally, the Committee expects FCIC
to ensure that producers understand the implications of any
election under this section relative to the impact, if any, on
insurable yields and premiums.
Sec. 104. Review and adjustment in rating methodologies
Section 104 requires FCIC to periodically review rating
methodologies employed in setting premium rates. The section
also requires FCIC to analyze the rating and loss history of
approved policies for agricultural commodities by area and
adjust premium rates in time for the 2000 crop year or as soon
as practicable where they are found to be excessive.
Specifically, the Committee is aware that FCIC has already
conducted or is in the process of conducting two studies
relative to rating methodologies applicable for cotton as well
as corn and soybeans in the Midwest and have found premium
rates to be excessive. The Committee expects FCIC to provide a
downward adjustment in premium rates beginning in the 2000 crop
year for agricultural commodities and regions where such a
determination has been made.
Sec. 105. Conduct of pilot programs, including livestock
Section 105 repeals two obsolete pilot program authorities.
The section authorizes FCIC to conduct pilot programs on a
regional, whole-State, or national basis after consideration of
the interests of affected farmers and the Corporation. The
section further provides that FCIC may offer the pilot programs
for up to 3 years and that the pilot programs can be modified
or extended where appropriate.
Section 105 also requires FCIC to promulgate regulations
for the consideration of new policies, plans of insurance, and
other material submitted for approval, including pilot programs
(See section 305 for general submissions). The section provides
for an expedited approval process for pilot programs that are
limited in scope and duration and involve a reduced level of
liability to the Federal government and greater risk to the
approved insurance provider offering the pilot program. The
section also provides that not later than 90 days after
submission of a pilot program, the Board of FCIC shall approve
or disapprove. If no determination is made, the pilot program
is approved for the initial reinsurance year.
Section 105 requires FCIC to conduct one or more livestock
pilot programs, including futures and option contracts and
policies and plans of insurance. The section authorizes FCIC to
assist producers in purchasing futures and options as well as
policies or plans of insurance offered. The section requires
that the pilot programs be conducted in numerous counties and
that any producer of cattle, sheep, swine, goats, or poultry is
eligible to participate if the program is offered in the county
and serves that particular type of livestock. The section
requires livestock pilot programs to be conducted beginning in
fiscal year 2001 and limits expenditures to $20 million in
FY2001, $30 million in FY2002, $40 million in FY2003, and $55
million in FY2004 and each of the following fiscal years.
Finally, the section provides that any livestock pilot program
offered is not intended to be subject to the jurisdiction of
the SEC or the CFTC.
In carrying out this section, the Committee expects FCIC to
conduct the greatest number and variety of livestock pilot
programs in order to test the effectiveness of each risk
management tool and to determine which are best suited to
protect the financial interests of livestock producers. While
assistance to purchase futures and option contracts is
authorized under this section, the Committee does not intend to
limit the assistance offered to livestock producers for these
risk management tools. Policies and plans of insurance are also
authorized to be offered and subsidized under this section.
The Committee further intends that, with respect to the
general pilot program authority provided under this section,
FCIC may extend the time period for pilot programs, including
programs for California and Florida citrus, for additional
periods for reasons as determined appropriate by FCIC. Such
reasons include, but are not limited to, the need for the
collection of additional data or the continuation of coverage
while the pilot program is being promulgated through the rule
making process. Finally, the Committee intends that FCIC may
extend the pilot program authorized under section 508(h)(9)
under this authority.
Sec. 106. Cost of production as a price election
Section 106 authorizes FCIC to provide a price election
under a policy or plan of insurance based on the projected cost
of producing the covered commodity. Under the section,
estimated cost of production would be determined by FCIC.
Sec. 107. Premium discounts for good performance
Section 107 authorizes FCIC to provide performance-based
discounts to producers of a commodity who have good insurance
or production experience relative to other producers in the
same area. The section also authorizes FCIC to provide a
premium discount in the 2000 crop year to producers of wheat,
barley, oats, or rye where those crops have been subject to a
discounted price due to scab or vomitoxin damage.
The Committee expects FCIC to implement both provisions of
section 107 in a way that is consistent with the law relative
to the actuarial soundness requirements set forth in section
508(d). The Committee intends that good performance discounts
be made available to producers who have participated in the
program and who have low claims or otherwise consistent
production experience relative to other producers of the same
agricultural commodity in the area. The Committee further
intends that good performance discounts be made available to
producers who are first time program participants and who can
demonstrate consistent production experience, through records
acceptable to FCIC, relative to other producers of that
commodity in the area.
The Committee encourages USDA to consider the benefits of
particular farming practices in lowering the likelihood of the
occurrence of insured events. The Department should consider
examining the extent to which conservation-based farming
systems have such an effect.
Sec. 108. Options for catastrophic risk protection
Section 108 requires FCIC to provide producers an
alternative to catastrophic risk protection insurance coverage.
The section provides that the alternative coverage shall be
based on an area yield and loss basis, offer a higher
combination of yield and price protection, and at the
determination of FCIC be equivalent to catastrophic coverage
insured on an individual yield and loss basis.
The Committee intends that FCIC offer an alternative
catastrophic risk protection insurance policy that is based on
an area yield and loss basis but that provides coverage at a
greater combination of yield and price protection than is
offered under the traditional catastrophic risk protection
policy. The Committee further expects that the coverage level
made available under the alternative catastrophic risk
protection policy be implemented on a uniform, national basis
providing all producers, areas, and agricultural commodities
with the same level of coverage. The Committee acknowledges
that there may be insufficient data in some areas to make such
an alternative policy immediately available to producers
operating in such areas. Nevertheless, the Committee fully
expects FCIC to diligently work to ensure that the necessary
data is collected for these areas in order to make the
alternative catastrophic risk protection required under this
section available to producers in such areas.
Sec. 109. Authority for nonprofit associations to pay fees on behalf of
producers
Section 109 authorizes cooperatives and other nonprofit
trade associations to pay the fees for catastrophic insurance
coverage on behalf of their producer members.
The section clarifies that any licensing fees paid to
cooperatives or trade associations by approved insurance
providers shall not be considered to be rebates as long as
producer members are notified of the fees.
The section further provides that nothing in this section
is to be construed as limiting a producer's ability to choose
any licensed insurance agent or approvedinsurance provider of
the producer's choice or refuse coverage under this arrangement. The
section provides that all policies must be delivered through a licensed
agent or an approved insurance provider. The section also provides that
cooperative associations or trade associations shall encourage producer
members to elect appropriate coverage levels to best manage their
risks.
The Committee intends this section to authorize cooperative
associations or nonprofit trade associations to pay the fees
required for the purchase of catastrophic risk protection
insurance. The Committee further intends that any fees received
by a cooperative association or nonprofit trade association in
connection with the purchase of catastrophic or additional
coverage is not to be treated as a rebate. The Committee
expressly requires in law that such fees received by a
cooperative association or trade association as a result of the
purchase of catastrophic or additional coverage by producer
members are not to be construed as a rebate, notwithstanding
any regulation of FCIC or any state law. The intention of the
Committee with respect to the issue of rebates is clear and is
not altered or affected in any way by the enactment of clause
(i) of this section.
The Committee expects that any regulations promulgated by
FCIC relative to this section be kept to a minimum so as not to
impose an undue burden on those persons or entities authorized
to engage in the activities authorized under the section.
Sec. 110. Elections regarding prevented planting coverage
Section 110 allows producers to opt out of coverage for
prevented planting and requires FCIC to provide a corresponding
discount in producer premiums. The section requires FCIC to
provide equal coverage with respect to prevented planting for
all commodities. The section further provides that prevented
planting payments to a producer should be limited to situations
where producers in the area are generally affected by the same
conditions that prevent the producer from planting.
The section provides that for producers who take prevented
planting coverage and receive and indemnity, a subsequent crop
may be planted on the failed acreage but the subsequent crop
will not be eligible for any federal crop insurance policy or
noninsured disaster assistance. However, a producer who plants
a substitute commodity before the latest planting date for the
commodity prevented from being planted shall not receive a
prevented planting payment. Finally, for purposes of
determining a producer's actual production history for the
commodity on which a prevented planting indemnity was received,
FCIC shall use 60 percent of the producer's APH for such
commodity for that crop year.
The Committee recognizes that producers should not be
required by FCIC to idle productive land that could otherwise
yield a crop and provide critical farm income. However, the
Committee also recognizes that allowing producers to plant a
second crop after a prevented planting indemnity was collected
on a first crop could foster fraud, waste, and abuse. The
Committee expects any fraud, waste, and abuse presented as a
result of this change in law to be substantially mitigated, if
not eliminated, by the four limitations in this section.
However, the Committee expects FCIC to implement such
limitations in a way that does not undermine the intention of
the Committee to eliminate the so-called black dirt policy
imposed by FCIC. Specifically, the Committee is concerned that
FCIC does not implement this paragraph, particularly
subparagraph (C), in a manner that results in hardship or
inequity to producers attempting to avail themselves of the
protections supposed to be afforded under prevented planting
coverage.
Sec. 111. Limitations under noninsured crop disaster assistance program
Section 111 modifies the eligibility provisions for
noninsured disaster assistance to be available to producers
with $2,000,000 or less of adjusted gross income annually.
The Committee intends that $2,000,000 in adjusted gross
income be defined as income after all farm expenses are paid.
In addition, the Committee expects the Secretary to reexamine
the manner in which subsection (c)(1) of section 196 of the
Federal Agriculture Improvement and Reform Act is implemented
to take full advantage of the broad flexibility Congress
intended to provide. The Committee would underscore the fact
that area is not defined under section 196 but is reserved for
the Secretary to define. Accordingly, the Committee strongly
encourages the Secretary to make the necessary adjustments in
the current definition of area that is being used by the
Department and develop a definition that is more tenable in
practice to ensure that the crop loss needs of producers are
met.
Sec. 112. Quality grade loss adjustment
Section 112 requires FCIC to analyze quality loss
adjustment procedures and make adjustments to better reflect
local quality discounts applied to agricultural commodities.
The Committee expects that FCIC will implement any changes
relative to quality grade loss adjustments in a fashion that
does not foster fraud, waste, and abuse. The Committee further
expects that any such adjustments will be made consistent with
actuarial soundness requirements of the title.
Sec. 113. Application of amendments
Section 113 requires that unless otherwise specified, the
amendments made by this Act shall be applicable for the 2000
crop year.
TITLE II--IMPROVING PROGRAM EFFICIENCIES
Sec. 201. Limitation on double insurance
Section 201 prohibits the issuing of more than one
insurance policy on the same acreage during a crop year unless
such coverage is limited to catastrophic risk protection
insurance. An exception is made for areas with customary and
established double-cropping patterns.
The Committee recognizes that it is a legitimate farming
practice to double-crop certain crops in specific regions of
the country. However, unless the outlined exceptions are
applicable, it is the Committee's intention to limit coverage
to catastrophic risk protection on the additional crop.
Since it is possible for the same crop to be planted on a
farm and subject to different plans of insurance, the Committee
intends that FCIC ensure the crop acreage and production of the
same crop that is insured under different plans of insurance is
separately reported, maintained, and identified. It is not the
Committee's intention that the acreage or production may be
prorated between the same crop with different plans of
insurance.
It is the intention of the Committee that in determining
when the additional agricultural commodity is customarily
double-cropped in the area with the first agricultural
commodity, that FCIC consider whether it is customary to
double-crop theacreage considering the farming and irrigation
practices applicable to the crops in the area.
The Committee intends that to qualify for the double-
cropping exception, both the first and additional agricultural
commodities be normally harvested within the same crop year on
the same acreage. The disposition of the first agricultural
commodity, including the loss or failure of such commodity,
should not affect the determination of whether the first and
additional crop qualifies for the double-cropping exception.
Sec. 202. Improving program compliance and integrity
Section 202 requires the Secretary to improve crop
insurance program compliance and integrity. Specifically,
beginning in the 2000 crop year, the Secretary is directed to
use the field infrastructure of FSA in five activities that are
described below.
1.--Annual reconciliation of producer data and information
between FCIC and the FSA. Currently, FCIC and FSA collect and
maintain a significant amount of data that are useful to both
FCIC and FSA but are independently collected and separately
maintained by each agency. To enhance compliance and oversight
activities, the Committee intends that FCIC and FSA share and
reconcile this information. Relevant data that should be
reconciled include but are not limited to crop acreage and
production reports, producer shares information, and producer
identification numbers. The Committee intends for the data
provided to FCIC and FSA to be reconciled not less than once
each crop year. The reconciliation of individual datum should
be conducted in a timely manner in order to identify potential
discrepancies early in the reporting cycle. In addition, the
acreage and producer share reconciliation should be completed
shortly after the final reporting dates for the crop; and other
data reconciliation should occur at appropriate dates.
The Committee expects FCIC and FSA will find discrepancies
in the applicable data as a result of the reconciliation. The
Committee intends that corrective action be taken to resolve
the discrepancies; FCIC and FSA should determine if any
overpayments or underpayments result from the reconciliation
and take appropriate action. The Committee intends that FCIC
and FSA improve their data collection methods to ensure that,
to the maximum extent possible, automated data processing, will
be utilized to perform the reconciliation.
2.--Implementation of an ongoing monitoring and auditing
program of FCIC programs. The Committee is concerned that FCIC
and insurance providers have not made sufficient progress in
controlling program abuse, waste and fraud. The personnel
resources of FCIC do not appear adequate to carry out
meaningful oversight and compliance activities. In that regard,
FSA has significant field resources that are properly
distributed, and the Committee intends that these resources be
utilized to strengthen FCIC's oversight and compliance
activities, including identifying program vulnerabilities. The
Committee intends for FSA field office employees to collect and
report information pertaining to allegations of fraud by
producers, adjusters, agents and companies, either at the
request of FCIC, or on its own initiative after consulting with
FCIC. The inclusion of these additional resources will help
FCIC make timely field inspections, assist in identifying and
monitoring situations that have the potential to lead to
program fraud or abuse and provide a local contact point where
allegations of fraud and abuse may be reported. The Committee
intends that FSA personnel have the authority to make on farm
inspections to ensure that good farming practices have been
used on the insured crops. The Committee believes the Secretary
should find other program and compliance activities in which
FSA personnel may be used as this coordinated auditing and
monitoring program between FCIC and FSA progresses and
experience is gained.
The Committee intends that FSA employees assist FCIC in the
auditing of claims, including work completed by adjusters,
agents and companies. This could include but is not limited to
random audits of crop loss appraisals, and applicable documents
completed by adjusters, agents and companies resulting from a
loss claim. The Committee intends that the Secretary exercise
this authority so that reviews and audits are completed in a
timely manner, especially those pertaining to adjusters and
agents. The Committee intends that deficiencies as well as
errors resulting from the audit are reported to FCIC, and FCIC
take appropriate action to act on the findings of the review or
audit.
The Committee intends that FCIC retain regulatory authority
for all activities pertaining to program compliance and
integrity.
3.--Proper training for FSA employees for responsibilities
under this section. The Committee intends that FSA field
employees are provided immediately with the proper training to
carry out the responsibilities associated with improving
program compliance and integrity. Any training provided by FCIC
of adjusters should also be available to FSA employees. It is
intended for FSA employees to be an additional resource for use
by FCIC in compliance and oversight activities.
The audits and reviews carried out by FSA should supplement
any activities required of the companies, agents or adjusters
by FCIC, and nothing in this section affects the responsibility
of approved insurance providers to conduct audits or other
program reviews required by FCIC. The Committee does not intend
that the audit and program review standards required of the
insured providers by FCIC are reduced because of the actions of
FSA. In an effort to deal with suspected program
misrepresentation, fraud, and abuse, the bill requires that no
later than 90 days after notice is provided of such potential
activity, FCIC will provide a written response to the insurance
provider. The Committee encourages FCIC to issue the report as
promptly as possible to avoid unnecessary delays that would
compromise the findings. Waiting the full 90 days to issue a
response should be the exception rather than the rule. The
Committee intends, that at a minimum, the report outlines the
suspected activity and the findings of FCIC with respect to
such report.
4.--Consultation with FSA state committees regarding plans
of insurance offered in a state. The Committee expects FCIC to
provide ample opportunity to state committees for the review of
existing and proposed crop insurance policies. The state
committees are expected to provide meaningful suggestions to
FCIC that strengthen program integrity, oversight and program
vulnerability. The review should concentrate on the potential
problems with crop insurance administration and should ask such
questions as: Do the offered policies insure crops that have a
reasonable chance of being harvested in the county or region?
Is it practicable to produce non-irrigated crop acreage of such
crop in the county or region? Are the insurance transitional
yields feasible in the county or region? Does the insurance
policy enhance the likelihood of insurance abuse or fraud? In
addition, FSA state committees should be used to ascertain the
adequacy and usefulness of new policies or plans of insurance
developed under Sec. 303 of the bill.
5.--Annual report to the House and Senate Agriculture
Committees with regard to activities and findings under this
section.
Sec. 203. Sanctions for false information
Section 203 clarifies that a covered ``person'' includes a
producer, agent, loss adjuster, approved insurance provider, or
any other person.
The section provides that, with respect to providing false
information, FCIC is authorized to levy the following
sanctions:
Monetary sanctions equal to the higher of the amount of the
pecuniary gain by the person or $10,000.
For producers, disqualification for up to 5 years from all
federal farm programs, including crop insurance, farm programs,
farm credit programs, and conservation cost share assistance
programs, in addition to forfeiting premiums paid for providing
materially false information.
For people other than producers, disqualification for up to
5 years of participating in or receiving benefits under FCIA.
Finally, the section requires FCIC to include information
regarding sanctions in a prominent manner on all crop insurance
policies and plans of insurance.
This section provides a substantially enhanced range of
sanctions for FCIC to impose against persons who provide false
information where such information results in program fraud,
waste, or abuse. The Committee recognizes that all violations
are not equal and intends for FCIC to administer this section
in a fair and equitable fashion where the punishment fits the
offense.
Sec. 204. Protection of confidential information
Section 204 prohibits the Secretary, any officer of USDA or
its agencies, any approved insurance provider or its employees
or contractors, or any other person from disclosing any
producer-provided information to the public, unless the
information supplied is in aggregate form that prevents
individual producers from being identified. The section
provides penalties consistent with the 1985 Food Security Act.
The Committee is concerned that information provided by a
producer to receive benefits under this title be protected. The
Committee believes that producers have every right to expect
that the information they provide to authorized persons and
entities under this title remain confidential. The Committee
expects FCIC to safeguard producer-provided information through
the vigorous enforcement of this section. The Committee would
note that the prohibition on the disclosure of any information
that would reveal the identity of a producer is absolute. As
such, the Committee intends that the protections afforded under
this section may not be waived. However, the Committee does not
intend that this section interfere in any way with the
legitimate use and dissemination of information pursuant to
section 205 of this legislation, including the use by Federal
and State agencies in carrying out their agricultural programs
and related responsibilities.
Sec. 205. Records and reporting
Section 205 requires producers participating in the crop
insurance program to each year provide records regarding crop
acreage, acreage yields, and production. The section also
requires the Secretary to ensure coordination of records
received for crop insurance purposes and those received for
purposes of NAP to eliminate duplication of record-keeping.
Such records shall be available to all agencies and local
offices of the Department as well as appropriate State and
Federal agencies to carry out program responsibilities under
this title, section 196 of the FAIR Act, and other agricultural
programs and related responsibilities. The section further
requires annual submission of crop acreage, acreage yields, and
production information to be eligible for NAP.
The Committee intends for insured producers participating
in the crop insurance program to provide records regarding crop
acreage, acreage yields, and production to the Secretary.
Producers currently report crop and yield information to both
FCIC and FSA. Inconsistent data have been reported to FCIC and
FSA and benefits have been paid on inconsistent data. The
Committee intends for insured producers to report crop acreage,
yield, production and other records in a manner that may be
easily reconciled, ensuring program and insurance benefits are
paid on consistent data.
The records collected under this authority should be
available at no cost to all federal and state agencies,
including state subdivisions, for use in carrying out
activities, including assisting state organizations in carrying
out general agricultural programs that have a federal component
(for example, boll weevil eradication activities).
The Committee intends for producers requesting noninsured
crop disaster assistance program benefits to file annually,
crop acreage reports, acreage yields and production for each
crop eligible for assistance. The annual collection of this
information should enhance information available for the
development of future insurance policies. As a result of
producers filing annual reports, USDA will have the information
provided at a time that insures appropriate program oversight
and integrity.
Sec. 206. Compliance with state licensing requirements
This section clarifies that any person who sells or
solicits the purchase of a policy under the Federal Crop
Insurance Act be licensed and qualified to do business in that
state.
TITLE III--ADMINISTRATION
Sec. 301. Board of directors of corporation
Effective 30 days after enactment, this section modifies
the composition of the FCIC Board of Directors to consist of
the following members:
The Manager of FCIC (ex officio only).
The Under Secretary of Agriculture responsible for crop
insurance.
An additional Under Secretary designated by the Secretary.
The Chief Economist.
One person with crop insurance business experience.
One person with insurance regulation experience.
4 active farmers representing different geographic regions
and a cross-section of agricultural commodities who are insured
producers, including one producer of a specialty crop.
The section also provides that the Secretary is responsible
for appointing the Members of the Board. Current Board Members
are allowed to continue to serve until new Board Members are
appointed or for six months, whichever is earlier. The Board
will elect a chairperson from among the members. The committee
expects the Secretary to follow established selection
guidelines with regard to diversity.
Sec. 302. Promotion of new policies and related materials
Section 302 requires FCIC to reimburse applicants for
research, development, and maintenance costs associated with
insurance policies that are approved and, whereapplicable,
offered for sale to producers. Maintenance costs are limited to no more
than four years, after which FCIC becomes responsible for maintenance,
provided that the policy is commercially viable. This section is
applicable beginning in the 2001 fiscal year.
Any payment under this section shall be considered as
payment in full for all research and development associated
with an insurance policy or material, including associated
property rights. FCIC is directed to determine reimbursement
amounts based on policy complexity and the size of the area in
which the policy or material would be applicable. Regulations
implementing this section are required to be completed by
October 1, 2000.
The promotion of new and innovative policies is a key
objective in this legislation and the reimbursement provisions
are critically important toward achieving this end. In
implementing the regulations concerning reimbursement, the
Committee expects FCIC to consult with and take into
consideration the views of parties likely to seek reimbursement
under this section.
Sec. 303. Research and development, including contracts regarding
underserved commodities
Section 303 provides that whenever FCIC determines that a
commodity, including a specialty crop, is not being adequately
served by existing plans of insurance or submissions under
section 302, FCIC may contract with any person or entity having
experience with crop insurance or risk management for research
and development activities. Policies researched and developed
under this provision, like those submitted for approval under
section 302, are prepared without regard to the traditional
limitations imposed on policies under the FCIA. Requires FCIC
to contract for the research and development of specific types
of policies under this section. This section is applicable
beginning in the 2001 fiscal year.
The section also provides that, effective October 1, 2000,
FCIC is no longer authorized to conduct its own research and
development for policies or plans of insurance under this
title. Nothing in the Federal Crop Insurance Act, including the
provisions in paragraphs (1) or (5) of section 508(m) may be
construed to permit FCIC to engage in such research and
development. However, this prohibition does not affect the
validity and continued availability of policies and plans
approved prior to that date.
In carrying out this section, the Committee expects FCIC to
ensure that State Committees of the Farm Service Agency are
consulted consistent with section 202 of this legislation. The
Committee further expects FCIC to consult with affected
commodity groups with respect to any policies, including
revenue policies, being developed.
The Committee expects FCIC to complete the Citrus Canker
Tree Indemnity policy in time for the 2000 crop year, using
appropriate loss calculation methodology and ensuring the
program is actuarially sound. The Committee further intends
that FCIC treat all trees ordered destroyed or quarantined by
Federal order as losses under the policy. In addition, the
Committee urges FCIC to revise the cause of loss for Florida
citrus designated ``hurricane'' to ``sustained winds in excess
of 74 miles per hour'', and consider lost that citrus fruit
that is unmarketable due to hail.
The Committee expects FCIC to reinstate the use of the
Grower's Standard Wholesale Price List for price determination
with confirmation by insurance providers and compliance
oversight by FCIC. To encourage the purchase of additional
levels of coverage, separate coverage for Field Grown and
Container Grown Nursery Stock should be considered and, to the
extent practicable, implemented beginning with the 2000 crop
year.
The Committee intends that FCIC, in consultation with
affected commodity groups, take into consideration the priority
list provided as follows in order to ensure that specific
insurance needs are met: aquaculture, citrus, forage, honey,
nursery, rice, tree fruit, milk, peaches, peanuts, sugar,
tobacco, and tropical tree fruit (including limes, mangoes,
avocados, and carambolas).
The Committee urges FCIC to study the feasibility of
allowing optional units on peanut acres and encourages FCIC to
examine differentiating between irrigated and non-irrigated
practices on policies for peanuts, tobacco and other
commodities. The Committee encourages the development of
policies that insure against losses to pasture, range and
forage used for grazing due to drought, flooding, or other
natural disasters.
The Committee encourages the Department in rating and
policy design to consider whether farming practices that
satisfy specialized market niches--such as organic farming
practices--justify the creation of policies or policy options
not currently available.
The Committee encourages FCIC to initiate a pilot program
to indemnify producers of timber for loss of yield or prevented
planting due to drought, floods, fire, or other natural
disaster.
Finally, the Committee urges FCIC to annually review the
percentage of eligible acres insured by state, county, and
crop. In areas where participation is substantially below the
aggregate national average, the Committee would encourage FCIC
to use its existing authorities as well as the new authorities
offered under this legislation to increase participation
without compromising actuarial soundness.
The Committee expects FCIC will continue and expand the
pilot project currently in effect for whole farm revenue
insurance and other similar programs.
Sec. 304. Funding for reimbursement and research and development
Section 304 provides that funding for research and
development of specialty crops and under-served commodities is
set at $25 million annually. If FCIC determines such funding is
insufficient, additional funding is available. If such funding
is not fully utilized, the excess funds shall be available for
reimbursements under section 302 with priority given to
specialty crops.
The section further provides that the maximum expenditures
in any year for sections 302 and 303 may not exceed $55
million. This section is applicable beginning in the 2001
fiscal year.
The Committee intends that policy submissions under section
508(h) of the Federal Crop Insurance Act and reimbursements
under section 302 of this legislation are to be the main
avenues for augmenting the number and variety of policies
available to producers. The contracting authority provided
under section 303 of this legislation is to be exercised only
when a specialty crop or other commodity is determined to be
under-served. While the Committee does not intend to hamstring
FCIC in its determination of when to avail itself of this
contract authority, the Committee is concerned that such
authority is used appropriately so as not to come at the
expense of reimbursement needs. In this regard, the Committee
would point out that approval of policies under section508(h)
is not discretionary where the objective conditions expressed in law
are met. Where such policies are approved and offered for sale, FCIC is
required to provide appropriate reimbursement to the party that
submitted the policy. Together, these provisions present a legal
obligation on the part of FCIC.
Sec. 305. Board consideration of new policies and materials
Section 305 clarifies who can submit policies and plans for
approval by the FCIC Board to include an approved insurance
provider, a college or university, a cooperative or trade
association, or any other person.
The section also requires absolute time limits for the
Board to approve or disapprove submitted plans or policies at
120 days. If the Board fails to meet this deadline, then the
policy or plan of insurance is approved for the initial
reinsurance year.
The Committee is aware of the chronic problems associated
with the approval process now in place relative to policies
submitted under section 508(h). The Committee would point out
that section 508(h) sets forth straightforward and objective
standards to be met by policies and other material submitted
for approval. Specifically, section 508(h) requires the Board
to consider whether the interests of producers are adequately
protected and whether the premiums charged to the producers are
actuarially appropriate. Where this two-prong test is met, the
law requires FCIC to approve the policy to be offered at
actuarially appropriate rates and under appropriate terms and
conditions. The Committee does not intend to suppress
constructive efforts by FCIC to assist applicants in the
preparation of their policies to meet the criteria in law.
However, the Committee does expect FCIC to carry out the policy
approval process as a regulator rather than measure each policy
submitted by how the regulators believe they might have
designed the policy better.
Sec. 306. Contracting for rating of plans of insurance
Section 306 requires the Corporation to contract, to the
maximum extent practicable, for rating plans of insurance.
Clarifies that the purpose of contracting for services with the
private sector is to enable FCIC to concentrate on regulating
insurance providers and evaluating new products and materials.
The Committee does not intend to entirely preclude FCIC
from engaging in its own rating of policies or plans of
insurance. The Committee only intends to re-enforce the strong
preference already in the Federal Crop Insurance Act that FCIC
commit more time and resources toward regulating insurance and
approving new policies and less time and resources creating and
re-creating what can be best achieved by the private sector.
The Committee intends that contracting for services with the
private sector also be used to assist in the evaluation of new
products and materials to both expedite and strengthen the
approval process.
Sec. 307. Electronic availability of crop insurance information
Section 307 requires FCIC to make general insurance
information electronically available to producers and approved
insurance providers. Also requires, to the maximum extent
practicable, that FCIC allow producers and approved insurance
providers to supply information to FCIC electronically.
The Committee would encourage the Secretary to study the
feasibility of establishing a National Center for Agribusiness
Excellence and Agribusiness Risk Management Analysis.
Sec. 308. Fees for use of new policies and plans of insurance
Section 308 permits an approved insurance provider that
develops a policy or plan of insurance to receive a fee from
another approved insurance provider in order for the latter to
use that policy or plan of insurance. In order to receive a
fee, the approved insurance provider must waive the right to
receive reimbursement under section 302, and the fee required
to be paid may not, at the determination of FCIC, be
unreasonable or unnecessarily inhibit the use of the policy.
This section is applicable for the 2000 reinsurance year.
Sec. 309. Clarification of producer requirement to follow good farming
practices
The section provides that scientifically sound sustainable
and organic farming practices shall be considered to be good
farming practices under the Federal Crop Insurance Act.
The Committee expects FCIC to establish specific guidelines
defining what constitutes good farming practices relative to
producers engaged in scientifically sound sustainable and
organic farming practices.
Sec. 310. Reimbursements and renogotiation of standard reinsurance
agreement
Section 310 adjusts reimbursement levels for approved
insurance providers for loss adjustment under the catastrophic
risk protection policy and for operating and administrative
expenses for additional levels of coverage. The adjustments are
applicable for the 2001 reinsurance year.
In addition, the section authorizes FCIC to renegotiate the
terms of the Standard Reinsurance Agreement codified under the
Agricultural Research Act of 1998 in the 2001 reinsurance year.
The Committee intends for RMA to review, and, if
appropriate, renegotiate the standard reinsurance agreement
(SRA). A re-negotiation should commence upon a determination by
the Agency that participating companies are able to retain
greater risk, or are unable to adequately deliver and service
polices, under the SRA as indicated by the profit and loss
experience under the existing agreement and the availability of
private reinsurance to support company retention levels.
Committee Consideration
I--Hearings
The Subcommittee on Risk Management, Research and Specialty
Crops hosted crop insurance forums for the purposes of
receiving input from producers, providers and agents regarding
improvements to the federal crop insurance program.
The Subcommittee commenced forums on February 16, 1999 in
Perry, Georgia (Serial 106-3); on February 16, 1999 in Douglas,
Georgia (Serial 106-3); on February 18, 1999 in Laurinburg,
North Carolina (Serial 106-3); on March 10, 1999 in Washington,
D.C. (Serial 106-3, Part II): on May 3, 1999 in Lexington,
Kentucky (Serial 106-3, Part III). It should also be noted that
the Subcommittee previously held a crop insurance forum on
November 12, 1998 in Sioux Falls, South Dakota (Serial 105-67).
Issues discussed at the crop insurance forums included:
increasing crop insurance premium subsidies to the farmer;
adjustment of rating policies; development of livestock
policies; incentives to encourage private development of risk
management products; equalization of administrative and
operating subsidies across the board for products; allocation
of premium discounts to producers who demonstrate a history of
participation without incurring losses; improving program
enforcement; development of cost of production policies; and
APH modifications to address multi-year disaster losses.
II--Subcommittee Consideration
Chairman Ewing called the meeting to order for the purpose
of considering H.R. 2559, the Agricultural Risk Protection Act
of 1999, sponsored by Mr. Combest, et al., to amend the Federal
Crop Insurance Act in order to strengthen the safety net for
agricultural producers by providing greater access to more
affordable risk management tools and improved protection from
production and income loss and to improve the efficiency and
integrity of the Federal crop insurance program.
Subcommittee Chairman Ewing recognized full Committee
Chairman Combest, for opening remarks. Chairman Combest thanked
all involved for the work that has been done to work to provide
a better risk management program. Chairman Combest noted that
the bill did not have an official budget score from the
Congressional Budget Office, but that the final bill reported
by the Committee would have to be within the revenue
constraints of the bill. Chairman Combest stated that the full
Committee would consider H.R. 2559 on Tuesday, July 27, 1999,
and that he hoped the bill would be considered on the House
Floor before the August recess.
Subcommittee Ranking Minority Member Condit was recognized
for an opening statement and indicated that he hoped to broaden
the bill in the area of specialty crops.
Chairman Ewing placed H.R. 2559 before the Subcommittee for
consideration and noted that it would be open for amendment at
any point.
Counsel was recognized for a brief explanation of H.R.
2559, and the Administrator of the Risk Management Agency was
recognized for brief comments on the bill.
Mr. Dooley expressed concern over the funding of the bill
and that there was no cost estimate at this time. Chairman
Combest assured Mr. Dooley that he would work with him to
ensure that the bill would be within the limits of the budget
resolution.
Mr. Condit was recognized to offer and explain an amendment
to Sec. 109, Authority for Nonprofit Associations to Pay Fees
on Behalf of Producers. Mr. Condit indicated that the amendment
would make the provision more usable for cooperatives.
Discussion occurred on the amendment, and Mr. Condit
acknowledged that the amendment may need to be revised before
full Committee to make it as workable as possible, and by a
voice vote, the amendment was adopted.
Mr. Smith was then recognized to offer and explain an
amendment regarding premium adjustment for rates that are
determined to be high relative to the anticipated losses of an
agricultural commodity before the 2000 crop year. Discussion
occurred on the amendment, and USDA representatives indicated
that the amendment would be more acceptable if certain
clarifications were made to it. Without objection, Mr. Smith
withdrew his amendment.
Mr. Bishop was recognized to offer and explain an amendment
that would provide authority for the Secretary to provide
whistle-blower type incentives to producers who bring forth
evidence of fraud that is actually used by the Department to
recover civil fines. Discussion occurred on the amendment, and
Mr. Chambliss and Mr. Everett indicated that the issue of fraud
and abuse in the program was an issue that they heard
repeatedly when they spoke to their producers. Mr. Everett was
concerned about how confidentiality could be provided to the
producer whistleblower. USDA representatives pointed out that
the amendment would need a reference to the actuarial soundness
requirement of the overall law to achieve the intent of the
amendment.
Full Committee Chairman Combest indicated his support for
the intent of Mr. Bishop's amendment, and that he would like to
cosponsor the amendment at full Committee after the issues of
confidentiality and actuarial soundness had been addressed. Mr.
Bishop agreed to withdraw his amendment and offer a revised
amendment at full Committee. Without objection, the amendment
was withdrawn.
Mr. Chambliss was then recognized to offer and explain an
amendment on recordkeeping to require coordination and to avoid
duplication of the records used by the Federal Crop Insurance
Corporation and the Farm Service Agency for NAP, purchasing
CAT, and buy-up coverage. Discussion occurred on the amendment
with Subcommittee Chairman Ewing expressing concern that
producers would not have to reprove historical records. USDA
representatives indicated they thought the amendment gave the
Department the flexibility it needed to better coordinate the
information collected from the different agencies. By voice
vote, the amendment was adopted.
Mr. Condit was recognized to offer and an amendment that
would mandate that of the $55,000,000 provided for research and
development contracts, $25,000,000 would be reserved for
specialty crops. Subcommittee Chairman Ewing noted that H.R.
2559 did not define the term ``underserved commodities.'' Mr.
Chambliss asked Mr. Condit if he could work with him before
full Committee markup of H.R. 2559 to refine the amendment to
ensure that specialty crop producers are the recipients of the
amendment. By unanimous consent, Mr. Condit requested that a
technical change be made to his amendment, and that the page
citation be ``46'' rather than ``44''. By voice vote, the
amendment, as amended, was adopted.
Mr. LaHood was then recognized to offer and explain an
amendment to mandate the electronic availability of crop
insurance information. Mr. Ewing explained that this was a
reduced version of his bill, H.R. 852, the Freedom to E-File
Act, which had been the subject of a hearing before the
Subcommittee on Department Operations, Oversight,Nutrition, and
Forestry on June 17, 1999. Brief discussion occurred, and Mr. Baldacci
expressed his concern that the confidentiality of the information would
be ensured. Mr. LaHood indicated that he would work to perfect the
amendment before full Committee markup to ensure that this concern was
met. By voice vote, the amendment was adopted.
Mr. Pomeroy was then recognized to offer and explain an en
bloc amendment on behalf of himself and Mr. Thune. Subcommittee
Chairman Ewing noted that the amendment was an en bloc
amendment and that a division of the amendment and separate
votes could be requested on the different parts of the
amendment.
Mr. Pomeroy explained his amendment and noted the
organizations supporting his amendment listed in a letter dated
July 20, 1999. Mr. Pomeroy explained the four issues addressed
in his amendment: (1) level of premium subsidy for coverage;
(2) calculation of actual production history; (3) continuation
of a provision in the disaster bill to provide an additional 20
percent premium subsidy for crops afflicted with vomitoxin,
scab and aflatoxin; and (4) quality grade loss adjustment.
Full Committee Chairman Combest said that he supported the
subsidy levels in the Pomeroy-Thune amendment, but he requested
that the Members work together to come up with the maximum
amount of assistance to be provided to the farmer and to work
through the question of Actual Production History (APH). Mr.
Pomeroy indicated that he would insist on retroactive
adjustments, and Chairman Combest noted there were retroactive
provisions in H.R. 2559.
Lengthy discussion occurred on the amendment. Mr. Everett
thanked Mr. Pomeroy for the inclusion of aflatoxin in his
amendment, but Mr. Everett noted that the APH provision in the
Pomeroy-Thune amendment would devastate his cotton farmers. Mr.
Thune explained the amendment's importance to South Dakota and
indicated his hope to make crop insurance the centerpiece of
the farm safety net.
Mr. Riley questioned the premium subsidy for aflatoxin in
the amendment and what years would be covered. There was a
discussion on whether the amendment should be crop specific,
and the USDA representative stated that the provision would be
more helpful if it were not crop specific. Full Committee
Chairman Combest cautioned the Members that this provision
likely would receive considerable discussion at the full
Committee level because other Members would be looking for
special consideration. Mr. Ewing expressed concern about
including additional insurance premiums for certain diseases
and having no money left for premium increases.
Mr. Pomeroy requested that he change his amendment and take
out aflatoxin, and that this issue would be debated at full
Committee. Mr. Pomeroy also requested other changes to his
bill, and Mr. Smith requested that the amendment be rewritten
in order for Members to understand the changes better.
Full Committee Chairman Combest again requested that Mr.
Pomeroy work with him on the amendment to come to some
agreement before full Committee consideration. Without
objection, Mr. Pomeroy withdrew his amendment in order to
revise it and bring before Members later.
Mr. Lucas was then recognized to offer and explain an
amendment regarding fees for use of new policies and plans of
insurance. Mr. Lucas explained that his amendment was cost-
neutral and that it would encourage private sector development
of products. Mr. Moran associated himself with the remarks of
Mr. Lucas in support of the amendment, and by voice vote, the
amendment was adopted.
Mr. Condit was recognized to offer and explain an amendment
concerning limitation on authority to plant substitute
commodities and requested by unanimous consent that it be
included as report language to the bill. Without objection, it
was accepted.
Mr. Condit then reserved the right to offer, at the full
Committee, an amendment concerning partnerships for risk
management development and implementation.
Mr. Condit was also recognized to offer and explain an
amendment mandating that at least one active specialty crop
producer be on the Board of Directors of the Federal Crop
Insurance Corporation. By voice vote, the amendment was
adopted.
Mr. Smith was then recognized to offer and explain an
amendment that had been revised with Departmental assistance
concerning premium adjustment to rates that are determined to
be high relative to anticipated losses of an agricultural
commodity in a certain area. By voice vote, the amendment was
adopted.
Mr. Smith also offered and explained an amendment that
mandated the Federal Crop Insurance Corporation to enter into a
contract for research and development on revenue coverage
plans. Discussion occurred and by a voice vote, the amendment
was adopted.
Mr. Pomeroy was then recognized to offer and explain a
revised en bloc on behalf of himself and Mr. Thune. Mr. Pomeroy
asked Department officials to comment on the increased costs
related to the revised APH provision. Mr. Chambliss expressed
his opposition until he had a chance to review the amendment
more carefully, and Mr. Dooley indicated his opposition because
of the unknown costs associated with the amendment. By voice
vote, the Pomeroy amendment failed. A roll call vote was
requested, and by a vote of 15 yeas-7 nays, the Pomeroy-Thune
amendment was adopted. (See Roll Call Vote #1.)
Mr. Condit then moved that H.R. 2559, as amended, be
reported favorably to the full Committee. By voice vote, the
bill, H.R. 2559, as amended, was ordered favorably reported to
the full Committee.
Mr. Gutknecht announced his intent to work with Members and
staff before full Committee markup to come up with report
language concerning effective new risk management products for
milk.
Chairman Ewing thanked everyone for their hard work on the
bill and indicated that the hard decisions really would begin
when the cost figures were available on the bill.
Without objection, staff was given permission to make such
technical, clarifying or conforming changes as are appropriate
without changing the substance of the legislation and Chairman
Ewing adjourned the meeting to reconvene at the call of the
Chair.
III--Full Committee
The Committee on Agriculture met, pursuant to notice, with
a quorum present, on July 30, 1999, to consider H.R. 2559 as
approved by the Subcommittee on Risk Management, Research, and
Specialty Crops on July 21, 1999.
Chairman Combest announced that the Committee would recess
at an appointed hour for the memorial service of the Honorable
George E. Brown, Jr., who served as a member of the House
Agriculture Committee until his death on July 16, 1999.
Chairman Combest thanked all the Members and staff for the
countless time and effort invested in this bill. He further
explained that H.R. 2559 and the en bloc amendment that he
would offer had been carefully crafted to lie within the budget
restraints of H. Con. Res. 68, the Budget Resolution for FY
2000, and to provide the greatest amount of benefit to the
greatest number of farmers in every region of the country.
Chairman Combest stated that the bill had been scored by the
Congressional Budget Office at $5.998 billion for the FY 2001
to FY 2004 period, just under the $6.0 billion allocated under
the budget resolution. The Chairman indicated that he would
oppose amendments that would upset the balance provided for in
the bill or cause cost overruns that would make H.R. 2559
subject to a point of order on the Floor of the House.
Ranking Minority Member Stenholm made opening comments and
indicated that he appreciated all the hard work and the regular
order that the legislation had taken. Mr. Stenholm pointed out
that the budget resolution provided for the funds to be made
available for income assistance or risk management, and that he
intended to offer an amendment that would address the total
revenue for program crops.
Without objection, the bill, H.R. 2559, as amended by the
Subcommittee on Risk Management, Research, and Specialty Crops,
was placed before the Committee for consideration and was open
for amendment at any point.
Chairman Combest then offered the en bloc amendment that
would make changes to the bill under consideration that would
bring the bill into conformance with the budget restraints.
Discussion occurred on the en bloc amendment and Mr.
Stenholm announced his support for the amendment, but he noted
that there were still problems with the FY 2000 budget numbers
in the bill. Chairman Combest said that he was looking at many
options to resolve the problems associated with the CBO scoring
of the budget costs for FY 2000. The Chairman also noted that
this problem would have to be addressed before the bill would
be taken to the House Floor. By voice vote, the en bloc
amendments were adopted.
Mr. Stenholm was recognized to offer and explain an
amendment regarding the Supplemental Income Payment (SIP)
Program and two amendments that would pay for the SIP
amendment. Without objection, Mr. Stenholm was allowed to offer
the three amendments en bloc and to explain.
Chairman Combest asked Mr. Stenholm about CBO scoring of
his amendment. Mr. Stenholm indicated that the SIP amendment
had not been scored by CBO, but it was an estimate provided by
USDA using methodology similar to CBO. Mr. Stenholm indicated
that CBO had scored the cost savings amendments that totaled
$550 million: $75 million from the incremental requirement
changes and $475 million from the changes in the crop revenue
coverage.
Chairman Combest stated his appreciation for Mr. Stenholm's
concept, and that he thought the issue should be addressed at a
future time. The Chairman did indicate that he had concerns
about considering the SIP proposal on a crop insurance bill.
Lengthy discussion occurred and by a voice vote, the amendment
failed.
Mr. Chambliss was then recognized to offer and explain an
amendment that would allow a second crop to be planted on the
same acreage for which the producer had received a prevented
planting indemnity. Mr. Chambliss stated that the amendment
would make true reform in the program by giving farmers more
flexibility in making decisions regarding risk management.
Lengthy discussion occurred on the amendment and by a voice
vote the amendment was adopted.
Mr. Bishop was recognized to offer and explain a ``Producer
Whistleblower'' amendment that would authorize the Secretary to
provide whistleblower-type incentives to producers who bring
forth evidence of fraud that is actually used by the Risk
Management Agency Compliance Division, the USDA Office of
Inspector General or the Office of General Counsel to recover
civil fines. Mr. Bishop explained that he had revised his
amendment to address the concerns of confidentiality and
actuarial soundness that had been raised at the Subcommittee
markup.
Discussion occurred and several Members expressed concern
that this amendment would provide an incentive for farmers to
turn in another producer, and that this could lead to malicious
complaints and by a voice vote the amendment failed.
A recess occurred in order to allow Members to attend the
memorial service for Congressman Brown. Soon after the
Committee reconvened, Chairman Combest announced that the House
would be adjourning soon after the last vote of the day, which
was scheduled for approximately 1:15 p.m. The Chairman then
adjourned the meeting at 1:31 p.m., to reconvene at 9:30 a.m.,
on Tuesday, August 3, 1999.
On August 3, 1999, Chairman Combest called the meeting to
order for the continued consideration of H.R. 2559, as amended.
Shortly after, Mr. Chambliss was recognized to offer and
explain an amendment to refine his amendment adopted by the
Committee on July 30, 1999, regarding prevented planting
payments. Mr. Chambliss stated that he had worked with USDA and
others to revise his amendment to prevent opportunities for
fraud and abuse. Mr. Chambliss explained that in his revised
amendment a producer may receive a prevented planting payment
and plant a substitute crop on the same acreage if certain
tightened conditions were met. Mr. Chambliss also indicated
that his refined amendment would change the Congressional
Budget Office (CBO) scoring of $115 million for his original
amendment accepted on July 30, 1999, to $0.
Mr. Chambliss requested by unanimous consent to strike
section 110(c)(iv), Funding Source, which had been adopted in
his amendment by the Committee on July 30, 1999. Without
objection, the Chambliss amendment was revised and by a voice
vote, the Chambliss amendment, as amended, was adopted.
Mr. Condit requested by unanimous consent to have the $115
million savings from the Chambliss amendment applied to section
109, Authority for Nonprofit Associations to Pay Fees on Behalf
of Producers. An objection was heard, and the Condit unanimous
consent request was denied.
Mr. Minge was then recognized to offer and explain an
amendment concerning clarification of producer requirements to
follow good farming practices to include scientifically sound
sustainable and organic farming practices. Discussion occurred
and by a voice vote, the amendment was adopted.
Mr. LaHood was recognized to offer and explain an amendment
that would restrict livestock pilot programs to those programs
offering insurance protection that are not generally available
from private companies. Discussion occurred and by a voice
vote, the amendment was adopted.
Mr. Minge was recognized to offer and explain an amendment
mandating a favorable level of crop insurance production
protection for beginning farmers and placing a limitation of
payments under catastrophic risk protection of $300,000. Mr.
Minge explained his amendment and acknowledged that the
amendment did not have a CBO score.
Lengthy discussion occurred on the amendment with Mr. Minge
expressing his desire to help beginning farmers and that he
thought payments under catastrophic risk protection could come
under criticism if there were not a limitation placed on them.
Administration officials indicated that the Department did not
have a formal position on the beginning farmer provision. Mr.
Stenholm noted that there had been serious problems with the
definition of ``beginning farmer'' under the loan program and
by a voice vote, the amendment failed.
Mr. Thune was then recognized to offer and explain an
amendment on behalf of himself and Mr. Pomeroy that would
mandate compliance with State licensing requirements and
mandate compliance with all State regulation of sales and
solicitation activities. Discussion occurred on the amendment
with Department officials stating that under current law, the
Federal government preempts State law to provide for a uniform
program in all 50 States. It was noted that provisions listed
through line 10 of the amendment would codify current law and
would be helpful. However, the Department had concerns about
the remainder of the amendment.
Mr. Goode suggested that language could be added to clarify
the scope of the Thune-Pomeroy amendment. Counsel stated that
there still would be some ambiguity over the exact meaning of
the amendment. Mr. Thune requested by unanimous consent that
the amendment be withdrawn, and without objection, it was
withdrawn.
Mr. Thune was then recognized to offer and explain an
amendment on behalf of himself and Mr. Pomeroy regarding
compliance with State licensing requirements. This amendment
struck the objectionable language from their previous
amendment. By voice vote, the Thune-Pomeroy amendment was
adopted.
Mr. Stenholm was then recognized and asked if anyone in the
Committee who had voted ``no'' on his SIP amendment on July 30,
1999, would request that the vote on that amendment be
reconsidered. Mr. Stenholm stated that he thought it was a rare
opportunity to provide some income protection for farmers and
producers.
Mr. Pomeroy was recognized to offer and explain an
amendment authorizing renegotiation of the standard reinsurance
agreement. Discussion occurred on the amendment and Chairman
Combest indicated that there seemed to be some dispute about
whether the amendment would be scored (by CBO) or not, but that
he did support the amendment. Chairman Combest noted once again
that because of the ambiguous reports from CBO that there could
be a need to have a Manager's Amendment when the bill goes to
the Floor to get the costs of the bill within the constraints
of the budget resolution. By voice vote, the amendment was
adopted.
Mr. Stenholm was then recognized to offer and explain an
amendment concerning actual production history (APH) adjustment
to reflect participation in major pest control efforts. Mr.
Stenholm stated that his amendment would address areas where
there were now increased yields from successful pest control
efforts, such as in bollweevil eradication efforts.
Mr. Peterson offered a clarifying amendment to the Stenholm
amendment. Mr. Stenholm indicated his support for the Peterson
second-degree amendment and said that it did not change the
structure of his amendment and that it would be a nonscored
amendment. By voice vote, the Peterson amendment to the
Stenholm amendment was adopted.
By voice vote, the Stenholm amendment, as amended, was
adopted.
Mrs. Clayton was recognized and requested that the
provision regarding the composition of the Board of Directors
of the Federal Crop Insurance Corporation include a requirement
for diversity of gender and race. Chairman Combest requested
that Mrs. Clayton work with staff to adopt appropriate report
language on this issue.
Mr. Condit was then recognized to offer and explain an
amendment that would use the funding source for section 109,
Authority for Nonprofit Association to Pay Fees on Behalf of
Producers, from funds otherwise available for loss adjustment
expenses of $115 million. Mr. Condit stated that this was the
$115 million budget offset that was available when Mr.
Chambliss refined his amendment concerning prevented planting
payments.
Chairman Combest noted that when the Committee received the
final CBO score, that some refinements might have to be made to
the Condit amendment regarding budget offsets. By voice vote,
the Condit amendment was accepted.
Mr. Condit offered and explained another amendment
authorizing the Federal Crop Insurance Corporation to enter
into partnerships for risk management development and
implementation. The Department stated their support for the
amendment. However, Chairman Combest noted for the record that
if there were CBO scoring problems with any of the accepted
amendments that the Chairman would work with the author of the
amendment to work out acceptable language for a Manager's
Amendment when the bill goes to the House Floor.
By voice vote, the Condit amendment was adopted.
Mr. Barrett was then recognized and moved that the bill,
H.R. 2559, as amended, be favorably reported to the House with
the recommendation that it do pass. Mr. Barrett's motion was
agreed to by a voice vote and in the presence of a quorum.
Mr. Barrett also moved, pursuant to clause 1 of rule XX,
that the Committee authorize the Chairman to offer such motions
as may be necessary in the House to go to conference with the
Senate on the bill H.R. 2559, or any similar Senate bill.
Mr. Stenholm noted his intention to file dissenting views
regarding the absence of a Supplemental Income Plan to the
Committee report. Chairman Combest requested all Members to
file as quickly as possible any additional views to the
Committee report accompanying the bill.
Mr. Stenholm clarified that the FY 2000 budget problems
with the bill had yet to be resolved and Chairman Combest
assured the Members that efforts and discussions were ongoing
attempting to resolve the FY 2000 budget problems with the bill
so that H.R. 2559 could be taken to the House Floor.
Without objection, the usual instructions were given to
staff to make any technical, clarifying, or conforming changes
as were appropriate without changing the substance of the
legislation.
Chairman Combest thanked all the Members for their
attentiveness and good work and adjourned the meeting subject
to the call of the Chair.
Reporting the Bill--Rollcall Votes
In compliance with clause 3(b) of rule XIII of the House of
Representatives, the Committee sets forth the record of the
following rollcall votes taken with respect to H.R. 2559.
Rollcall No. 1
Summary: En bloc amendment regarding actual production
history.
Offered By: Mr. Pomeroy on behalf of himself and Mr. Thune
on July 21, 1999.
Results: The amendment was adopted with 15 yeas, 7 nays,
and 9 not voting.
Yeas
Mr. Smith, Mr. Moran, Mr. Thune, Mr. Gutknecht, Mr. Walden,
Mr. Simpson, Mr. Ose, Mr. Condit, Mr. Pomeroy, Mr. Baldacci,
Mr. Goode, Ms. Stabenow, Mr. Etheridge, Mr. Boswell, and Mr.
Ewing.
Nays
Mr. Everett, Mr. Chambliss, Mr. Riley, Mr. Hayes, Mr.
Fletcher, Mr. Dooley, and Mr. John.
Not voting
Mr. Barrett, Mr. Lucas, OK, Mr. LaHood, Mr. Jenkins, Mr.
Hilliard, Mr. Bishop, Mr. McIntyre, Mr. Lucas, KY, and Mr.
Thompson, CA.
Congressional Budget Office Estimate, and Unfunded Mandates Statement
The Congressional Budget Office estimate and unfunded
mandate analysis required by clause 3(c)(3) of rule XIII of the
Rules of the House of Representatives and sections 402 and 423
of the Congressional Budget Act of 1974 were not available from
the Congressional Budget Office as of the date of filing of
this report. The Congressional Budget Office estimate and
accompanying materials will be contained in a supplemental
report.
New Budget Authority and Committee Cost Estimate
Based on preliminary estimates by the Congressional Budget
Office and in accordance with clause 3(d) of House Rule XIII,
the Committee estimates that enactment of H.R. 2559 would
result in no costs in fiscal year 1999. For fiscal years 2000
through 2004, the Committee estimates the costs associated with
H.R. 2559 at $7.077 billion in budget authority; $6.106 in
budget outlays. For purposes of section 204 of H. Con. Res. 68,
the Committee estimates the costs associated with H.R. 2559 for
fiscal years 2001 through 2004 to be $5.997 billion in budget
authority; $5.635 billion in budget outlays. Specifically, for
fiscal years 2000 through 2004, the Committee estimates the
budget authority associated with H.R. 2559 to be $1.080,
$1.366, $1.435, $1.512, and $1.684 billion, respectively. For
fiscal years 2000 through 2004, the Committee estimates the
budget outlays associated with H.R. 2559 to be $471 million,
$1.191, $1.393, $1.468, and $1.583 billion, respectively.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the
Constitutional authority for this legislation in Article I,
clause 8, section 18, that grants Congress the power to make
all laws necessary and proper for carrying out the powers
vested by Congress in the Government of the United States or in
any department or officer thereof.
Oversight Statement
No summary of oversight findings and recommendations made
by the Committee on Government Reform, as provided for in
clause 3(c)(4) of rule XIII of the Rules of the House of
Representatives, was available to the Committee with reference
to the subject matter specifically addressed by H.R. 2559, as
amended.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee on Agriculture's
oversight findings and recommendations are reflected in the
body of this report.
Advisory Committee Statement
No advisory committee within the meaning of section 5(b) of
the Federal Advisory Committee Act was created by this
legislation.
Applicability to the Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of section
102(b)(3) of the Congressional Accountability Act (Public Law
104-1).
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
FEDERAL CROP INSURANCE ACT
* * * * * * *
SEC. 502. PURPOSE AND DEFINITIONS.
(a) * * *
* * * * * * *
(c) Protection of Confidential Information.--
(1) Authorized disclosure.--In the case of
information furnished by a producer to participate in
or receive any benefit under this title, the Secretary,
any other officer or employee of the Department or an
agency thereof, an approved insurance provider and its
employees and contractors, and any other person may not
disclose the information to the public, unless the
information has been transformed into a statistical or
aggregate form that does not allow the identification
of the person who supplied particular information.
(2) Violations; penalties.--Subsection (c) of section
1770 of the Food Security Act of 1985 (7 U.S.C. 2276)
shall apply with respect to the release of information
collected in any manner or for any purpose prohibited
by paragraph (1).
* * * * * * *
[management of corporation
[Sec. 505. (a) The management of the Corporation shall be
vested in a Board subject to the general supervision of the
Secretary. The Board shall consist of the manager of the
Corporation, the Under Secretary responsible for the Federal
crop insurance program, one additional Under Secretary of
Agriculture (as designated by the Secretary of Agriculture),
one person experienced in the crop insurance business who is
not otherwise employed by the Federal Government, and three
active farmers who are not otherwise employed by the Federal
Government. The Board shall be appointed by, and hold office at
the pleasure of, the Secretary. The Secretary shall not be a
member of the Board. The Secretary, in appointing the three
active farmers who are not otherwise employed by the Federal
Government, shall ensure that such members are policy holders
and are from different geographic areas of the United States,
in order that diverse agricultural interests in the United
States are at all times represented on the Board.]
SEC. 505. MANAGEMENT OF CORPORATION.
(a) Board of Directors.--
(1) Establishment.--The management of the Corporation
shall be vested in a Board of Directors subject to the
general supervision of the Secretary.
(2) Composition.--The Board shall consist of only the
following members:
(A) The manager of the Corporation, who shall
serve as a nonvoting ex officio member.
(B) The Under Secretary of Agriculture
responsible for the Federal crop insurance
program.
(C) One additional Under Secretary of
Agriculture (as designated by the Secretary).
(D) The Chief Economist of the Department of
Agriculture.
(E) One person experienced in the crop
insurance business.
(F) One person experienced in the regulation
of insurance.
(G) Four active producers who are policy
holders, are from different geographic areas of
the United States, and represent a cross-
section of agricultural commodities grown in
the United States. At least one of the four
shall be a specialty crop producer.
(3) Appointment of private sector members.--The
members of the Board described in subparagraphs (E),
(F), and (G) of paragraph (2)--
(A) shall be appointed by, and hold office at
the pleasure of, the Secretary; and
(B) shall not be otherwise employed by the
Federal Government.
(4) Chairperson.--The Board shall select a member of
the Board to serve as Chairperson.
* * * * * * *
SEC. 506. GENERAL POWERS.
(a) * * *
* * * * * * *
(h) Data Collection.--[The Corporation]
(1) In general.--The Corporation shall assemble data
for the purpose of establishing sound actuarial bases
for insurance on agricultural commodities.
(2) Coordination and use of records.--
(A) Coordination between agencies.--The
Secretary shall ensure that recordkeeping and
reporting requirements under this title and
section 196 of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C.
7333) are coordinated by the Corporation and
the Farm Service Agency to avoid duplication of
such records, to streamline procedures involved
with the submission of such records, and to
enhance the accuracy of such records.
(B) Use of records.--Notwithstanding section
502(c), records submitted in accordance with
this title and section 196 of the Federal
Agriculture Improvement and Reform Act of 1996
(7 U.S.C. 7333) shall be available to agencies
and local offices of the Department,
appropriate State and Federal agencies and
divisions, and approved insurance providers for
use in carrying out this title and such section
196 as well as other agricultural programs and
related responsibilities.
* * * * * * *
(n) [Penalties] Sanctions for Violations.--
[(1) False information.--If a person willfully and
intentionally provides any false or inaccurate
information to the Corporation or to any insurer with
respect to an insurance plan or policy under this
title, the Corporation may, after notice and an
opportunity for a hearing on the record--
[(A) impose a civil fine of not to exceed
$10,000 on the person; and
[(B) disqualify the person from purchasing
catastrophic risk protection or receiving
noninsured assistance for a period of not to
exceed 2 years, or from receiving any other
benefit under this title for a period of not to
exceed 10 years.]
(1) False information.--If a producer, an agent, a
loss adjuster, an approved insurance provider, or any
other person willfully and intentionally provides any
false or inaccurate information to the Corporation or
to an approved insurance provider with respect to a
policy or plan of insurance under this title, the
Corporation may, after notice and an opportunity for a
hearing on the record, impose one or more of the
sanctions specified in paragraph (2).
(2) Authorized sanctions.--The following sanctions
may be imposed for a violation under paragraph (1):
(A) The Corporation may impose a civil fine
for each violation not to exceed the greater
of--
(i) the amount of the pecuniary gain
obtained as a result of the false or
inaccurate information provided; or
(ii) $10,000.
(B) If the violation is committed by a
producer, the producer may be disqualified for
a period of up to 5 years from--
(i) participating in, or receiving
any benefit provided under this title,
the noninsured crop disaster assistance
program under section 196 of the
Federal Agriculture Improvement and
Reform Act of 1996 (7 U.S.C. 7333), the
Agricultural Market Transition Act (7
U.S.C. 7201 et seq.), the Agricultural
Act of 1949 (7 U.S.C. 1421 et seq.),
the Commodity Credit Corporation
Charter Act (15 U.S.C. 714 et seq.), or
the Agricultural Adjustment Act of 1938
(7 U.S.C. 1281 et seq.);
(ii) receiving any loan made,
insured, or guaranteed under the
Consolidated Farm and Rural Development
Act (7 U.S.C. 1921 et. seq.);
(iii) receiving any benefit provided,
or indemnity made available, under any
other law to assist a producer of an
agricultural commodity due to a crop
loss or a decline in commodity prices;
or
(iv) receiving any cost share
assistance for conservation or any
other assistance provided under title
XII of the Food Security Act (16 U.S.C.
3801 et seq.).
(C) If the violation is committed by an
agent, loss adjuster, approved insurance
provider, or any other person (other than a
producer), the violator may be disqualified for
a period of up to 5 years from participating
in, or receiving any benefit provided under
this title.
(D) If the violation is committed by a
producer, the Corporation may require the
producer to forfeit any premium owed under the
policy, notwithstanding a denial of claim or
collection of an overpayment, if the false or
inaccurate information was material.
[(2)] (3) Assessment of [penalty] sanction.--In
[assessing penalties] imposing a sanction under this
subsection, the Corporation shall consider the gravity
of the violation.
(4) Disclosure of sanctions.--Each policy or plan of
insurance under this title shall prominently indicate
the sanctions prescribed under paragraph (2) for
willfully and intentionally providing false or
inaccurate information to the Corporation or to an
approved insurance provider.
* * * * * * *
(q) Program Compliance.--
(1) Purpose.--The purpose of this subsection is to
improve compliance with the Federal crop insurance
program and to improve program integrity.
[(1)] (2) Timeliness.--The Corporation shall work
actively with approved insurance providers to address
program compliance and integrity issues as the issues
develop.
[(2)] (3) Notification of compliance problems.--The
Corporation shall notify in writing any approved
insurance provider with whom the Corporation has an
agreement under this title of any error, omission, or
failure to follow Corporation regulations or procedures
for which the approved insurance provider may be
responsible and which may result in a debt owed the
Corporation. The notice shall be given within 3 years
of the end of the insurance period during which the
error, omission, or failure is alleged to have
occurred, except that this time limit shall not apply
with respect to errors, omissions, or procedural
violations that are willful or intentional. The failure
to timely provide the notice required under this
subsection shall relieve the approved insurance
provider from the debt owed the Corporation.
(4) Reconciling producer information.--The Secretary
shall develop and implement a coordinated plan for the
Corporation and the Administrator of the Farm Service
Agency to reconcile all relevant information received
by the Corporation or the Farm Service Agency from a
producer who obtains crop insurance coverage under this
title. Beginning with the 2000 crop year, the Secretary
shall require that the Corporation and the Farm Service
Agency reconcile such producer-derived information on
at least an annual basis in order to identify and
address any discrepancies.
(5) Identification and elimination of fraud, waste,
and abuse.--
(A) FSA monitoring program.--The Secretary
shall develop and implement a coordinated plan
for the Farm Service Agency to assist the
Corporation in the ongoing monitoring of
programs carried out under this title,
including--
(i) conducting fact finding relative
to allegations of program fraud, waste,
and abuse, both at the request of the
Corporation or on its own initiative
after consultation with the
Corporation;
(ii) reporting any allegation of
fraud, waste, and abuse or identified
program vulnerabilities to the
Corporation in a timely manner; and
(iii) assisting the Corporation and
approved insurance providers in
auditing a statistically appropriate
number of claims made under any policy
or plan of insurance under this title.
(B) Use of field infrastructure.--The plan
required by this paragraph shall use the field
infrastructure of the Farm Service Agency, and
the Secretary shall ensure that relevant Farm
Service Agency personnel are appropriately
trained for any responsibilities assigned to
them under the plan. At a minimum, such
personnel shall receive the same level of
training and pass the same basic competency
tests as required of loss adjusters of approved
insurance providers.
(C) Maintenance of provider effort;
cooperation.--The activities of the Farm
Service Agency under this paragraph do not
affect the responsibility of approved insurance
providers to conduct any audits of claims or
other program reviews required by the
Corporation. If an insurance provider reports
to the Corporation that it suspects intentional
misrepresentation, fraud, waste, or abuse, the
Corporation shall make a determination and
provide a written response within 90 days after
receiving the report. The insurance provider
and the Corporation shall take coordinated
action in any case where misrepresentation,
fraud, waste, or abuse has occurred.
(6) Consultation with state committees.--The
Corporation shall establish a mechanism under which
State committees of the Farm Service Agency are
consulted concerning policies and plans of insurance
offered in a State under this title.
(7) Annual report on compliance efforts.--The
Secretary shall submit to the Committee on Agriculture
of the House of Representatives and the Committee on
Agriculture, Nutrition, and Forestry of the Senate an
annual report containing findings relative to the
efforts undertaken pursuant to paragraphs (4) and (5).
The report shall identify specific occurrences of
waste, fraud, and abuse and contain an outline of
actions that have been or are being taken to eliminate
the identified waste, fraud, and abuse.
* * * * * * *
personnel
Sec. 507. (a) * * *
* * * * * * *
(c) In the administration of this title, the Board shall,
to the maximum extent possible, (1) establish or use committees
or associations of producers and make payments to them to cover
the administrative and program expenses, as determined by the
Board, incurred by them in cooperating in carrying out this
title, (2) contract with private insurance companies, private
rating bureaus, and other organizations as appropriate for
[actuarial, loss adjustment,] actuarial services, services
relating to loss adjustment and rating plans of insurance, and
other services to avoid duplication by the Federal Government
of services that are or may readily be available in the private
sector and to enable the Corporation to concentrate on
regulating the provision of insurance under this title and
evaluating new products and materials submitted under section
508(h), and reimburse such companies for the administrative and
program expenses, as determined by the Board, incurred by them,
under terms and provisions and rates of compensation consistent
with those generally prevailing in the insurance industry, and
(3) encourage the sale of Federal crop insurance through
licensed private insurance agents and brokers and give the
insured the right to renew such insurance for successive terms
through such agents and brokers, in which case the agent or
broker shall be reasonably compensated from premiums paid by
the insured for such sales and renewals recognizing the
function of the agent or broker to provide continuing services
while the insurance is in effect: Provided, That such
compensation shall not be included in computations establishing
premium rates. The Board shall provide such agents and brokers
with indemnification, including costs and reasonable attorney
fees, from the Corporation for errors or omissions on the part
of the Corporation or its contractors for which the agent or
broker is sued or held liable, except to the extent the agent
or broker has caused the error or omission. Nothing in this
subsection shall permit the Corporation to contract with other
persons to carry out the responsibility of the Corporation to
review and approve policies, rates, and other materials
submitted under section 508(h).
* * * * * * *
SEC. 508. CROP INSURANCE.
(a) Authority To Offer Insurance.--
(1) * * *
* * * * * * *
(3) Exclusions.--Insurance provided under this
subsection shall not cover losses due to--
(A) * * *
* * * * * * *
(C) the failure of the producer to follow
good farming practices, including
scientifically sound sustainable and organic
farming practices (as determined by the
Secretary).
* * * * * * *
(5) Dissemination of crop insurance information.--
[The Corporation]
(A) Available information.--The Corporation
shall make available to producers through local
offices of the Department--
[(A)] (i) current and complete
information on all aspects of Federal
crop insurance; and
[(B)] (ii) a listing of insurance
agents and companies offering to sell
crop insurance in the area of the
producers.
(B) Use of electronic methods.--The
Corporation shall make the information
described in subparagraph (A) available
electronically to producers and approved
insurance providers. To the maximum extent
practicable, the Corporation shall also allow
producers and approved insurance providers to
use electronic methods to submit information
required by the Corporation.
* * * * * * *
(7) Review and adjustment of rates.--
(A) Review required.--To maximize
participation in the Federal crop insurance
program and to ensure equity for producers, the
Corporation shall periodically review the
methodologies employed for rating plans of
insurance under this title consistent with
section 507(c)(2).
(B) Premium adjustment.--The Corporation
shall analyze the rating and loss history of
approved policies and plans of insurance for
agricultural commodities by area. If the
Corporation makes a determination that premium
rates are excessive for an agricultural
commodity in an area relative to the
requirements of subsection (d)(2)(B) for that
area, then, in the 2000 crop year or as soon as
practicable after the determination is made,
the Corporation shall make appropriate
adjustments in the premium rates for that area
for that agricultural commodity.
(8) Prevented planting coverage.--
(A) Election not to receive coverage.--
(i) Election.--A producer may elect
not to receive coverage for prevented
planting of an agricultural commodity.
(ii) Reduction.--In the case of an
election under clause (i), the
Corporation shall provide a reduction
in the premium payable by the producer
for a plan of insurance in an amount
equal to the premium for the prevented
planting coverage, as determined by the
Corporation.
(B) Equal coverage.--For each agricultural
commodity for which prevented planting coverage
is available, the Corporation shall offer an
equal percentage level of prevented planting
coverage.
(C) Area conditions required for payment.--
The Corporation shall limit prevented planting
payments to producers to those situations in
which producers in the area in which the farm
is located are generally affected by the
conditions that prevent an agricultural
commodity from being planted.
(D) Substitute commodity.--
(i) Authority to plant.--Subject to
clause (iv), a producer who has
prevented planting coverage and who is
eligible to receive an indemnity under
such coverage may plant an agricultural
commodity, other than the commodity
covered by the prevented planting
coverage, on the acreage originally
prevented from being planted.
(ii) Nonavailability of insurance.--A
substitute agricultural commodity
planted as authorized by clause (i) for
harvest in the same crop year shall not
be eligible for coverage under a policy
or plan of insurance under this title
or for noninsured crop disaster
assistance under section 196 of the
Federal Agriculture Improvement and
Reform Act of 1996 (7 U.S.C. 7333). For
purposes of subsection (b)(7) only, the
substitute commodity shall be deemed to
have at least catastrophic risk
protection so as to satisfy the
requirements of that subsection.
(iii) Effect on actual production
history.--If a producer plants a
substitute agricultural commodity as
authorized by clause (i) for a crop
year, the Corporation shall assign the
producer a recorded yield, for that
crop year for the commodity that was
prevented from being planting, equal to
60 percent of the producer's actual
production history for such commodity
for purposes of determining the
producer's actual production history
for subsequent crop years.
(iv) Effect on prevented planting
payment.--If a producer plants a
substitute agricultural commodity as
authorized by clause (i) before the
latest planting date established by the
Corporation for the agricultural
commodity prevented from being planted,
the Corporation shall not make a
prevented planting payment with regard
to the commodity prevented from being
planted.
(9) Quality grade loss adjustment.--Consistent with
subsection (m)(4), by the 2000 crop year, the
Corporation shall enter into a contract to analyze its
quality loss adjustment procedures and make such
adjustments as may be necessary to more accurately
reflect local quality discounts that are applied to
agricultural commodities insured under this title,
taking into consideration the actuarial soundness of
the adjustment and the prevention of fraud, waste and
abuse.
(10) Limitation on double insurance.--
(A) Restricted to catastrophic risk
protection.--Except for situations covered by
subparagraph (B), no policy or plan of
insurance may be offered under this title for
more than one agricultural commodity planted on
the same acreage in the same crop year unless
the coverage for the additional crop is limited
to catastrophic risk protection available under
subsection (b).
(B) Exception for double-cropping.--A policy
or plan of insurance may be offered under this
title for an agricultural commodity and for an
additional agricultural commodity when both
agricultural commodities are normally harvested
within the same crop year on the same acreage
if the following conditions are met:
(i) There is an established practice
of double-cropping in the area and the
additional agricultural commodity is
customarily double-cropped in the area
with the first agricultural commodity,
as determined by the Corporation.
(ii) A policy or plan of insurance
for the first agricultural commodity
and the additional agricultural
commodity is available under this
title.
(iii) The additional commodity is
planted on or before the final planting
date or late planting date for that
additional commodity, as established by
the Corporation.
(b) Catastrophic Risk Protection.--
(1) * * *
* * * * * * *
[(3) Yield and loss basis.--A producer shall have the
option of basing the catastrophic coverage of the
producer on an individual yield and loss basis or on an
area yield and loss basis, if both options are offered
by the Corporation.]
(3) Alternative catastrophic coverage.--Beginning
with the 2000 crop year, the Corporation shall offer
producers of an agricultural commodity the option of
selecting either of the following:
(A) The catastrophic risk protection coverage
available under paragraph (2)(A).
(B) An alternative catastrophic risk
protection coverage that--
(i) indemnifies the producer on an
area yield and loss basis if such a
plan of insurance is offered for the
agricultural commodity in the county in
which the farm is located;
(ii) provides, on a uniform national
basis, a higher combination of yield
and price protection than the coverage
available under paragraph (2)(A); and
(iii) the Corporation determines is
comparable to the coverage available
under paragraph (2)(A) for purposes of
subsection (e)(2)(A).
* * * * * * *
(5) Administrative fee.--
(A) * * *
* * * * * * *
(F) Payment of fees on behalf of producers.--
(i) Payment authorized.--
Notwithstanding any other subparagraph
of this paragraph, a cooperative
association of agricultural producers
or a nonprofit trade association may
pay to the Corporation, on be-half of a
member of the association who consents to be insured under such an
arrangement, all or a portion of the fees imposed under subparagraphs
(A) and (B) for catastrophic risk protection.
(ii) Treatment of licensing fees.--A
licensing fee or other payment made by
the insurance provider to the
cooperative association or trade
association in connection with the
issuance of catastrophic risk
protection or additional coverage under
this section to members of the
cooperative association or trade
association shall not be considered to
be a rebate to the members if the
members are informed in advance of the
fee or payment.
(iii) Selection of provider;
delivery.--Nothing in this subparagraph
shall be construed so as to limit the
ability of a producer to choose the
licensed insurance agent or other
approved insurance provider from whom
the member will purchase a policy or
plan of insurance or to refuse coverage
for which a payment is offered to be
made under clause (i). A policy or plan
of insurance for which a payment is
made under clause (i) shall be
delivered by a licensed insurance agent
or other approved insurance provider.
(iv) Additional coverage
encouraged.--Cooperatives and trade
associations and any approved insurance
provider with whom a licensing fee or
other arrangement under this
subparagraph is made shall encourage
producer members to purchase
appropriate levels of additional
coverage in order to meet the risk
management needs of such member
producers.
* * * * * * *
(11) Loss adjustment.--The rate for reimbursing an
approved insurance provider or agent for expenses
incurred by the approved insurance provider or agent
for loss adjustment in connection with a policy of
catastrophic risk protection shall not exceed [11
percent] 8 percent of the premium for catastrophic risk
protection that is used to define loss ratio.
(c) General Coverage Levels.--
(1) * * *
* * * * * * *
(5) Price level.--[The Corporation shall establish a
price] For purposes of this title, the Corporation
shall establish or approve a price level for each
commodity on which insurance is offered that--
(A) shall not be less than the projected
market price for the commodity (as determined
by the Corporation); [or]
(B) at the discretion of the Corporation, may
be based on the actual market price at the time
of harvest (as determined by the
Corporation)[.]; or
(C) in the case of cost of production or
similar plans of insurance, shall be the
projected cost of producing the agricultural
commodity (as determined by the Corporation).
* * * * * * *
(d) Premiums.--
(1) * * *
* * * * * * *
(2) Premium amounts.--The premium amounts for
catastrophic risk protection under subsection (b) and
additional coverage under subsection (c) shall be fixed
as follows:
(A) * * *
[(B) In the case of additional coverage below
65 percent of the recorded or appraised average
yield indemnified at 100 percent of the
expected market price, or an equivalent
coverage, but greater than 50 percent of the
recorded or appraised average yield indemnified
at 100 percent of the expected market price, or
an equivalent coverage, the amount of the
premium shall--
[(i) be sufficient to cover
anticipated losses and a reasonable
reserve; and
[(ii) include an amount for operating
and administrative expenses, as
determined by the Corporation.
[(C) In the case of additional coverage equal
to or greater than 65 percent of the recorded
or appraised average yield indemnified at 100
percent of the expected market price, or an
equivalent coverage, the amount of the premium
shall--
[(i) be sufficient to cover
anticipated losses and a reasonable
reserve; and
[(ii) include an amount for operating
and administrative expenses, as
determined by the Corporation, on an
industry-wide basis as a percentage of
the amount of the premium used to
define loss ratio.]
(B) In the case of additional coverage equal
to or greater than 50 percent of the recorded
or appraised average yield indemnified at not
greater than 100 percent of the expected market
price, or an equivalent coverage, the amount of
the premium shall--
(i) be sufficient to cover
anticipated losses and a reasonable
reserve; and
(ii) include an amount for operating
and administrative expenses, as
determined by the Corporation, on an
industry-wide basis as a percentage of
the amount of the premium used to
define loss ratio.
(3) Premium discounts.--
(A) Performance-based discount.--The
Corporation may provide a performance-based
premium discount for a producer of an
agricultural commodity who has good insurance
or production experience relative to other
producers of that agricultural commodity in the
same area, as determined by the Corporation.
(B) Discount for reduced price for certain
commodities.--A producer who insured wheat,
barley, oats, or rye during at least 2 of the
1995 through 1999 crop years may be eligible to
receive an additional 20 percent premium
discount on the producer-paid premium for any
2000 crop policy if the producer demonstrates
that the producer's wheat, barley, oats, or rye
crop was subjected to a discounted price due to
Scab or Vomitoxin damage, or both, during any 2
years of that period. The 2000 insured crop or
crops need not be wheat, barley, oats, or rye
to qualify for the discount under this
subparagraph. The 2 years of insurance and the
2 years of discounted prices need not be the
same.
(e) Payment of Portion of Premium by Corporation.--
(1) * * *
(2) Amount of payment.--The amount of the premium to
be paid by the Corporation shall be as follows:
(A) * * *
[(B) In the case of coverage below 65 percent
of the recorded or appraised average yield
indemnified at 100 percent of the expected
market price, or an equivalent coverage, but
greater than 50 percent of the recorded or
appraised average yield indemnified at 100
percent of the expected market price, or an
equivalent coverage, the amount shall be
equivalent to the amount of premium established
for catastrophic risk protection coverage and
the amount of operating and administrative
expenses established under subsection
(d)(2)(B).
[(C) In the case of coverage equal to or
greater than 65 percent of the recorded or
appraised average yield indemnified at 100
percent of the expected market price, or an
equivalent coverage, on an individual or area
basis, the amount shall be equivalent to an
amount equal to the premium established for 50
percent loss in yield indemnified at 75 percent
of the expected market price and the amount of
operating and administrative expenses
established under subsection (d)(2)(C).]
(B) In the case of additional coverage equal
to or greater than 50 percent, but less than 55
percent, of the recorded or appraised average
yield indemnified at not greater than 100
percent of the expected market price, or an
equivalent coverage, the amount shall be equal
to the sum of--
(i) 67 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level
selected; and
(ii) the amount determined under
subsection (d)(2)(B)(ii) for the
coverage level selected to cover
operating and administrative expenses.
(C) In the case of additional coverage equal
to or greater than 55 percent, but less than 65
percent, of the recorded or appraised average
yield indemnified at not greater than 100
percent of the expected market price, or an
equivalent coverage, the amount shall be equal
to the sum of--
(i) 64 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level
selected; and
(ii) the amount determined under
subsection (d)(2)(B)(ii) for the
coverage level selected to cover
operating and administrative expenses.
(D) In the case of additional coverage equal
to or greater than 65 percent, but less than 75
percent, of the recorded or appraised average
yield indemnified at not greater than 100
percent of the expected market price, or an
equivalent coverage, the amount shall be equal
to the sum of--
(i) 59 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level
selected; and
(ii) the amount determined under
subsection (d)(2)(B)(ii) for the
coverage level selected to cover
operating and administrative expenses.
(E) In the case of additional coverage equal
to or greater than 75 percent, but less than 80
percent, of the recorded or appraised average
yield indemnified at not greater than 100
percent of the expected market price, or an
equivalent coverage, the amount shall be equal
to the sum of--
(i) 54 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level
selected; and
(ii) the amount determined under
subsection (d)(2)(B)(ii) for the
coverage level selected to cover
operating and administrative expenses.
(F) In the case of additional coverage equal
to or greater than 80 percent, but less than 85
percent, of the recorded or appraised average
yield indemnified at not greater than 100
percent of the expected market price, or an
equivalent coverage, the amount shall be equal
to the sum of--
(i) 40.6 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level
selected; and
(ii) the amount determined under
subsection (d)(2)(B)(ii) for the
coverage level selected to cover
operating and administrative expenses.
(G) Subject to subsection (c)(4), in the case
of additional coverage equal to or greater than
85 percent of the recorded or appraised average
yield indemnified at not greater than 100
percent of the expected market price, or an
equivalent coverage, the amount shall be equal
to the sum of--
(i) 30.6 percent of the amount of the
premium established under subsection
(d)(2)(B)(i) for the coverage level
selected; and
(ii) the amount determined under
subsection (d)(2)(B)(ii) for the
coverage level selected to cover
operating and administrative expenses.
* * * * * * *
(5) Premium payment disclosure.--Each policy or plan
of insurance under this title shall prominently
indicate the dollar amount of the portion of the
premium paid by the Corporation under this subsection
or subsection (h)(2).
* * * * * * *
(f) Eligibility.--
(1) * * *
* * * * * * *
(3) Records and reporting.--To obtain catastrophic
risk protection under subsection (b) or additional
coverage under subsection (c), a producer shall--
(A) [provide, to the extent required by the
Corporation, records acceptable to the
Corporation of historical acreage and
production of the crops for which the insurance
is sought] provide annually records acceptable
to the Secretary regarding crop acreage,
acreage yields, and production for each
agricultural commodity insured under this title
or accept a yield determined by the
Corporation; and
* * * * * * *
(g) Yield Determinations.--
(1) * * *
* * * * * * *
(4) Adjustment in actual production history to
establish insurable yields.--
(A) Application.--This paragraph shall apply
whenever the Corporation uses the actual
production history of the producer to establish
insurable yields for an agricultural commodity
for the 2000 and subsequent crop years.
(B) Election to use percentage of
transitional yield.--If, for one or more of the
crop years used to establish the producer's
actual production history of an agricultural
commodity, the producer's recorded or appraised
yield of the commodity was less than 60 percent
of the applicable transitional yield, as
determined by the Corporation, the Corporation
shall, at the election of the producer--
(i) exclude any of such recorded or
appraised yield; and
(ii) replace each excluded yield with
a yield equal to 60 percent of the
applicable transitional yield.
(5) Adjustment to reflect increased yields from
successful pest control efforts.--
(A) Situations justifying adjustment.--The
Corporation shall develop a methodology for
adjusting the actual production history of a
producer when each of the following apply:
(i) The producer's farm is located in
an area where systematic, area-wide
efforts have been undertaken using
certain operations or measures, or the
producer's farm is a location at which
certain operations or measures have
been undertaken, to detect, eradicate,
suppress, or control, or at least to
prevent or retard the spread of, a
plant disease or plant pest, including
a plant pest covered by the definition
in section 102 of the Department of
Agriculture Organic Act of 1944 (7
U.S.C. 147a).
(ii) The presence of the plant
disease or plant pest has been found to
adversely affect the yield of the
agricultural commodity for which the
producer is applying for insurance.
(iii) The efforts described in clause
(i) have been effective.
(B) Adjustment amount.--The amount by which
the Corporation adjusts the actual production
history of a producer of an agricultural
commodity shall reflect the degree to which the
success of the systematic, area-wide efforts
described in paragraph (1)(A), on average,
increases the yield of the commodity on the
producer's farm, as determined by the
Corporation.
* * * * * * *
(h) Submission of Policies and Materials to Board.--
(1) In general.--In addition to any standard forms or
policies that the Board may require be made available
to producers under subsection (c), a person (including
an approved insurance provider, a college or
university, a cooperative or trade association, or any
other person) may prepare for submission or propose to
the Board--
(A) * * *
* * * * * * *
(2) Submission of policies.--[A policy]
(A) Preparation.--A policy or other material
submitted to the Board under this subsection
may be prepared without regard to the
limitations contained in this title, including
the requirements concerning the levels of
coverage and rates and the requirement that a
price level for each commodity insured must
equal the expected market price for the
commodity as established by the Board. [In the
case of such a policy, the payment by the
Corporation of a portion of the premium of the
policy may not exceed the amount that would
otherwise be authorized under subsection (e).]
(B) Premium schedule.--In the case of a
policy offered under this subsection (except
paragraph (10)) or subsection (m)(4), the
Corporation shall pay a portion of the premium
of the policy that shall be equal to--
(i) the percentage, specified in
subsection (e) for a similar level of
coverage, of the total amount of the
premium used to define loss ratio; and
(ii) the dollar amount of the
administrative and operating expenses
that would be paid by the Corporation
under subsection (e) for a similar
level of coverage.
(3) Review and approval by the board.--A policy or
other material submitted to the Board under this
subsection shall be reviewed by the Board and, if the
Board finds that the interests of producers are
adequately protected and that any premiums charged to
the producers are actuarially appropriate, shall be
approved by the Board for reinsurance and for sale by
approved insurance providers to producers as an additional
choice at actuarially appropriate rates and under appropriate
terms and conditions. The Corporation may enter into more
than 1 reinsurance agreement with the approved insurance
provider simultaneously to facilitate the offering of the new
policies.
(4) Guidelines for submission and review.--[The
Corporation]
(A) Guidelines required.--Not later than 180
days after the date of the enactment of the
Agricultural Risk Protection Act of 1999, the
Corporation shall issue regulations to
establish guidelines for the submission, and
Board review, of policies or other material
submitted to the Board under this subsection.
At a minimum, the guidelines shall ensure the
following:
[(A)] (i) A proposal submitted to the
Board under this subsection shall be
considered as confidential commercial
or financial information for purposes
of section 552(b)(4) of title 5, United
States Code, until approved by the
Board. A proposal disapproved by the
Board shall remain confidential
commercial or financial information.
[(B)] (ii) The Board shall provide an
applicant with the opportunity to
present the proposal to the Board in
person if the applicant so desires.
[(C)] (iii) The Board shall provide
an applicant with notification of
intent to disapprove a proposal not
later than 30 days prior to making the
disapproval. An applicant that receives
the notification may modify the
application [of the applicant. Any
modification shall be considered an
original application for purposes of
this paragraph.], and such application,
as modified, shall be considered by the
Board in the manner provided in clause
(iv) within the 30-day period beginning
on the date the modified application is
submitted. Any notification of intent
to disapprove a policy or other
material submitted under this
subsection shall be accompanied by a
complete explanation as to the reasons
for the Board's intention to deny
approval.
[(D) Specific guidelines shall
prescribe the timing of submission of
proposals under this subsection and
timely consideration by the Board so
that any approved proposal may be made
available to all persons reinsured by
the Corporation in a manner permitting
the persons to participate, if the
persons so desire, in offering such a
proposal in the first crop year in
which the proposal is approved by the
Board for reinsurance, premium subsidy,
or other support offered by this
title.]
(iv) Not later than 120 days after a
policy or other material is submitted
under this subsection, the Board shall
make a determination to approve or
disapprove such policy or material. Any
determination by the Board to
disapprove any policy or other material
shall be accompanied by a complete
explanation of the reasons for the
Board's decision to deny approval. In
the event the Board fails to make a
determination within the prescribed
time period, the submitted policy or
other material shall be deemed approved
by the Board for the initial
reinsurance year designated for the
policy or material, except in the case
where the Board and the applicant agree
to an extension.
(B) Expedited consideration of proposed pilot
programs.--The regulations required by
subparagraph (A) shall include streamlined
guidelines for the submission, and Board
review, of pilot programs that the Board
determines are limited in scope and duration
and involve a reduced level of liability to the
Federal Government, and an increased level of
risk to approved insurance providers
participating in the pilot program, relative to
other policies or materials submitted under
this subsection. The streamlined guidelines
shall be consistent with the guidelines
established under subparagraph (A), except as
follows:
(i) Not later than 60 days after
submission of the proposed pilot
program, the Corporation shall provide
an applicant with notification of its
intent to recommend disapproval of the
proposal to the Board.
(ii) Not later than 90 days after the
proposed pilot program is submitted to
the Board, the Board shall make a
determination to approve or disapprove
the pilot program. Any determination by
the Board to disapprove the pilot
program shall be accompanied by a
complete explanation of the reasons for
the Board's decision to deny approval.
In the event the Board fails to make a
determination within the prescribed
time period, the pilot program
submitted shall be deemed approved by
the Board for the initial reinsurance
year designated for the pilot program,
except in the case where the Board and
the applicant agree to an extension.
* * * * * * *
[(6) Pilot cost of production risk protection plan.--
[(A) In general.--The Corporation shall
offer, to the extent practicable, a cost of
production risk protection plan of insurance
that indemnifies producers (including new
producers) for insurable losses as provided in
this paragraph.
[(B) Pilot basis.--The cost of production
risk protection plan shall--
[(i) be established as a pilot
project for each of the 1996 and 1997
crop years; and
[(ii) be carried out in a number of
counties that is determined by the
Corporation to be adequate to provide a
comprehensive evaluation of the
feasibility, effectiveness, and demand
among producers for the plan.
[(C) Insurable loss.--An insurable loss shall
be incurred by a producer if the gross income
of the producer (as determined by the
Corporation) is less than an amount determined
by the Corporation, as a result of a reduction
in yield or price resulting from an insured
cause.
[(D) Definition of new producer.--As used in
this paragraph, the term ``new producer'' means
a person that has not been actively engaged in
farming for a share of the production of the
insured crop for more than 2 crop years, as
determined by the Secretary.]
(6) Reimbursement of research, development, and
maintenance costs.--
(A) Reimbursement provided.--Subject to the
conditions of this paragraph, the Corporation
shall provide a payment to reimburse an
applicant for research, development, and
maintenance costs directly related to a policy
or other material that is--
(i) submitted to, and approved by,
the Board under this subsection for
reinsurance; and
(ii) if applicable, offered for sale
to producers.
(B) Duration.--Payments under subparagraph
(A) may be made available beginning in fiscal
year 2001. Payments with respect to the
maintenance of an approved policy or other
material may be provided for a period of not
more than 4 reinsurance years following Board
approval. Upon the expiration of that 4-year
period, or earlier upon the agreement of the
Corporation and the person receiving the
payment, the Corporation shall assume
responsibility for maintenance of a successful
policy, as determined by the Corporation based
on the market share attained by the policy, the
total number of policies sold, the total amount
of premium paid, and the performance of the
policy in the States where the policy is sold.
(C) Treatment of payment.--Payments made
under subparagraph (A) for a policy or other
material shall be considered as payment in full
for the research and development conducted with
regard to the policy or material and any
property rights to the policy or material.
(D) Reimbursement amount.--The Corporation
shall determine the amount of the payment under
subparagraph (A) for an approved policy or
other material based on the complexity of the
policy or material and the size of the area in
which the policy or material is expected to be
used.
(E) Expenditures.--
(i) Specialty crops.--Of the total
amount made available to provide
payments under this paragraph and
subsection (m)(4)(B) for a fiscal year,
$25,000,000 shall be reserved for
research and development contracts
under subsection (m)(4)(B). The
Corporation may use a portion of the
reserved amount for other purposes
under this paragraph, with priority
given to underserved commodities, if
the Corporation determines that the
entire amount is not needed for such
contracts. If the reserved amount is
insufficient for a fiscal year, the
Corporation may use amounts in excess
of the reserved amount for such
contracts.
(ii) Limitation.--In providing
payments under this paragraph and
subsection (m)(4)(B), the Corporation
shall not obligate or expend more than
$55,000,000 during any fiscal year.
* * * * * * *
[(8) Pilot program of assigned yields for new
producers.--
[(A) Program required.--For each of the 1995
and 1996 crop years, the Corporation shall
carry out a pilot program to assign to eligible
new producers higher assigned yields than would
otherwise be assigned to the producers under
subsection (g). The Corporation shall include
in the pilot program 30 counties that are
determined by the Corporation to be adequate to
provide a comprehensive evaluation of the
feasibility, effectiveness, and demand among
new producers for increased assigned yields.
[(B) Increased assigned yields.--In the case
of an eligible new producer participating in
the pilot program, the Corporation shall assign
to the new producer a yield that is equal to
not less than 110 percent of the transitional
yield otherwise established by the Corporation.
[(C) Eligible new producer.--The Secretary
shall establish a definition of new producer
for purposes of determining eligibility to
participate in the pilot program.]
(8) General requirements applicable to pilot
programs.--In conducting any pilot program of insurance
or reinsurance authorized or required by this title,
the Corporation--
(A) may offer the pilot program on a
regional, whole State, or national basis after
considering the interests of affected producers
and the interests of and risks to the
Corporation;
(B) may operate the pilot program, including
any modifications thereof, for a period of up
to 3 years; and
(C) may extend the time period for the pilot
program for additional periods, as determined
appropriate by the Corporation.
* * * * * * *
[(10) Time limits for response to submission of new
policies.--
[(A) In general.--The Board shall establish a
reasonable time period within which the Board
shall approve or disapprove a proposal from a
person regarding a new policy submitted in
accordance with this subsection.
[(B) Effect of failure to meet time limits.--
Except as provided in subparagraph (C), if the
Board fails to provide a response to a proposal
described in subparagraph (A) in accordance
with subparagraph (A), the new policy shall be
deemed to be approved by the Board for purposes
of this subsection for the initial reinsurance
year designated for the new policy in the
request.
[(C) Exceptions.--Subparagraph (B) shall not
apply to a proposal submitted under this
subsection if the Board and the person
submitting the request agree to an extension of
the time period.]
(10) Livestock pilot programs.--
(A) Programs required.--The Corporation shall
conduct one or more pilot programs to evaluate
the effectiveness of risk management tools for
livestock producers, including the use of
futures and options contracts and policies and
plans of insurance that provide livestock
producers with reasonable protection from the
financial risks of price or income fluctuations
inherent in the production and marketing of
livestock, provide protection for production
losses, and otherwise protect the interests of
livestock producers. To the maximum extent
practicable, the Corporation shall evaluate the
greatest number and variety of such programs to
determine which of the offered risk management
tools are best suited to protect livestock
producers from the financial risks associated
with the production and marketing of livestock.
(B) Implementation; assistance.--The
Corporation shall begin conducting livestock
pilot programs under this paragraph during
fiscal year 2001, and any policy or plan of
insurance offered under this paragraph may be
prepared without regard to the limitations
contained in this title. As part of such a
pilot program, the Corporation may provide
assistance to producers to purchase futures and
options contracts or policies and plans of
insurance offered under that pilot program.
However, no action may be undertaken with
respect to a risk under this paragraph if the
Corporation determines that insurance
protection for livestock producers against the
risk is generally available from private
companies.
(C) Location.--The Corporation shall conduct
the livestock pilot programs under this
paragraph in a number of counties that is
determined by the Corporation to be adequate to
provide a comprehensive evaluation of the
feasibility, effectiveness, and demand among
producers for the risk management tools
evaluated in the pilot programs.
(D) Eligible producers; livestock.--Any
producer of a type of livestock covered by a
pilot program under this paragraph who owns or
operates a farm or ranch in a county selected
as a location for that pilot program shall be
eligible to participate in that pilot program.
In this paragraph, the term ``livestock'' means
cattle, sheep, swine, goats, and poultry.
(E) Relation to other laws.--The terms and
conditions of any policy or plan of insurance
offered under this paragraph that is reinsured
by the Corporation is not subject to the
jurisdiction of the Commodity Futures Trading
Commission or the Securities and Exchange
Commission or considered as accounts,
agreements (including any transaction which is
of the character of, or is commonly known to
the trade as, an ``option'', ``privilege'',
``indemnity'', ``bid'', ``offer'', ``put'',
``call'', ``advance guaranty'', or ``decline
guaranty''), or transactions involving
contracts of sale of a commodity for future
delivery, traded or executed on a contract
market for the purposes of the Commodity
Exchange Act (7 U.S.C. 1 et seq.). Nothing in
this subparagraph is intended to affect the
jurisdiction of the Commodity Futures Trading
Commission or the applicability of the
Commodity Exchange Act to any transaction
conducted on a designated contract market (as
that term is used in such Act) by an approved
insurance provider to offset the provider's
risk under a plan or policy of insurance under
this paragraph.
(F) Limitation on expenditures.--The
Corporation shall conduct all livestock
programs under this title so that, to the
maximum extent practicable, all costs
associated with conducting the livestock
programs (other than research and development
costs covered by paragraph (6) or subsection
(m)(4)) are not expected to exceed the
following:
(i) $20,000,000 for fiscal year 2001.
(ii) $30,000,000 for fiscal year
2002.
(iii) $40,000,000 for fiscal year
2003.
(iv) $55,000,000 for fiscal year 2004
and each subsequent fiscal year.
(11) Fees for new policies and plans of insurance.--
(A) Authority to impose fee.--Effective
beginning with Fiscal Year 2001, if a person
develops a new policy or plan of insurance and
does not apply for reimbursement of research,
development, and maintenance costs under
paragraph (6), the person shall have the right
to receive a fee from any approved insurance
provider that elects to sell the new policy or
plan of insurance. Notwithstanding paragraph
(5), once the right to collect a fee is
asserted with respect to a new policy or plan
of insurance, no approved insurance provider
may offer the new policy or plan of insurance
in the absence of a fee agreement with the
person who developed the policy or plan.
(B) Definition.--For purposes of this
paragraph only, the term ``new policy or plan
of insurance'' means a policy or plan of
insurance that was approved by the Board on or
after October 1, 2000, and was not available at
the time the policy or plan of insurance was
approved by the Board.
(C) Amount.--The amount of the fee that is
payable by an approved insurance provider to
offer a new policy or a plan of insurance under
subparagraph (A) shall be an amount that is
determined by the person that developed the new
policy or plan of insurance, subject to the
approval of the Board under subparagraph (D).
(D) Approval.--The Board shall approve the
amount of a fee determined under subparagraph
(C) for a new policy or plan of insurance
unless the Board can demonstrate that the fee
amount--
(i) is unreasonable in relation to
the research and development costs
associated with the new policy or plan
of insurance; and
(ii) unnecessarily inhibits the use
of the new policy or plan of insurance.
* * * * * * *
(k) Reinsurance.--
(1) * * *
* * * * * * *
(4) Rate.--
(A) In general.--Except as provided in
subparagraph (B), the rate established by the
Board to reimburse approved insurance providers
and agents for the administrative and operating
costs of the providers and agents shall not
exceed--
(i) * * *
(ii) for each of the 1999 and
subsequent reinsurance years, [24.5
percent] 24 percent of the premium used
to define loss ratio.
* * * * * * *
(m) Research.--
(1) * * *
[(2) Exception.--No action]
(2) Exceptions.--
(A) Private availability.--No action may be
undertaken with respect to a risk under
paragraph (1) if insurance protection against
the risk is generally available from private
companies.
(B) Prohibited research and development by
corporation.--Notwithstanding paragraphs (1)
and (5), on and after October 1, 2000, the
Corporation shall not conduct research and
development for any new policy or plan of
insurance for an agricultural commodity offered
under this title. Any policy or plan of
insurance developed by the Corporation under
this title before that date shall, at the
discretion of the Corporation, continue to be
offered for sale to producers.
* * * * * * *
(4) Private research and development of policies and
other materials.--
(A) Use of reimbursement authority.--To
encourage and promote the necessary research
and development for policies, plans of
insurance, and related materials, including
policies, plans, and materials under the
livestock pilot programs under subsection
(h)(10), the Corporation shall make full use of
private resources by providing payment for
research and development for approved policies
and plans of insurance, and related materials,
pursuant to subsection (h)(6).
(B) Contracts for underserved commodities.--
(i) Development of products and
related materials.--In the event the
Corporation determines that an
agricultural commodity, including a
specialty crop, is not adequately
served by policies and plans of
insurance and related materials
submitted under subsection (h) or any
other provision of this title, the
Corporation may enter into a contract,
under procedures prescribed by the
Corporation, directly with any person
or entity with experience in crop
insurance or farm or ranch risk
management, including universities,
providers of crop insurance, and trade
and research organizations, to carry
out research and development for
policies and plans of insurance and
related materials for that agricultural
commodity without regard to the
limitations contained in this title.
(ii) Types of contracts.--A contract
under this subparagraph may provide for
research and development regarding new
or expanded policies and plans of
insurance and related materials,
including policies based on adjusted
gross income, cost-of-production,
quality losses, and an intermediate
base program with a higher coverage and
cost than catastrophic risk protection.
(iii) Delayed effective date for
contracts.--A contract entered into
under this subparagraph may not take
effect before October 1, 2000.
(iv) Use of resulting policies and
plans.--The Corporation may offer any
policy or plan of insurance developed
under this subparagraph that is
approved by the Board.
(C) Contract for revenue coverage plan.--The
Corporation shall enter into a contract for
research and development regarding one or more
revenue coverage plans designed to enable
producers to take maximum advantage of
fluctuations in market prices and thereby
maximize revenue realized from the sale of a
crop. Such a plan may include market
instruments currently available or may involve
the development of new instruments to achieve
this goal. Not later than 15 months after the
date of the enactment of this paragraph, the
Corporation shall submit to Congress a report
containing the results of the contract.
(5) Partnerships for risk management development and
implementation.--
(A) Purpose.--The purpose of this paragraph
is to authorize the Corporation to enter into
partnerships with public and private entities
for the purpose of increasing the availability
of loss mitigation, financial, and other risk
management tools for crop producers, with
priority given to risk management tools for
producers of agricultural commodities covered
by section 196 of the Federal Agriculture
Improvement and Reform Act of 1996 (7 U.S.C.
7333) and specialty and underserved commodity
producers.
(B) Authority.--Subject to subparagraphs (D)
and (E), the Corporation may enter into
partnerships with the Cooperative State
Research, Education, and Extension Service, the
Agricultural Research Service, the National
Oceanic and Atmospheric Administration, and
other appropriate public and private entities
with demonstrated capabilities in developing
and implementing risk management and marketing
options for specialty crops and underserved
commodities.
(C) Objectives.--The Corporation may enter
into a partnership under subparagraph (B)--
(i) to enhance the notice and
timeliness of notice of weather
conditions that could negatively affect
crop yields, quality, and final product
use in order to allow producers to take
preventive actions to increase end-
product profitability and marketability
and to reduce the possibility of crop
insurance claims;
(ii) to develop a multifaceted
approach to pest management and
fertilization to decrease inputs,
decrease environmental exposure, and
increase application efficiency;
(iii) to develop or improve
techniques for planning, breeding,
planting, growing, maintaining,
harvesting, storing, shipping, and
marketing that will address quality and
quantity challenges associated with
year-to-year and regional variations;
(iv) to clarify labor requirements
and assist producers in complying with
requirements to better meet the
physically intense and time-compressed
planting, tending, and harvesting
requirements associated with the
production of specialty crops and
underserved commodities;
(v) to provide assistance to State
foresters or equivalent officials for
the prescribed use of burning on
private forest land for the prevention,
control, and suppression of fire;
(vi) to provide producers with
training and informational
opportunities so that they will be
better able to use financial
management, crop insurance, marketing
contracts, and other existing and
emerging risk management tools; and
(vii) to develop other risk
management tools to further increase
economic and production stability.
(D) Funding source.--If the Corporation
determines that the entire amount available to
provide reimbursement payments under subsection
(h) and contract payments under paragraph (4)
(in this subparagraph referred to as
``reimbursement and contract payments'') for a
fiscal year is not needed for such purposes,
the Corporation may use a portion of the excess
amount to carry out this paragraph, subject to
the following:
(i) During fiscal years 2001 through
2004, amounts available for
reimbursement and contract payments may
be used to carry out this paragraph
only if the total amount to be used for
reimbursement and contract payments is
less than $44,000,000 for fiscal year
2001, $47,000,000 for fiscal year 2002,
$50,000,000 for fiscal year 2003, and
$52,000,000 for fiscal year 2004.
(ii) During fiscal years 2001 through
2004, the total amount used to carry
out this paragraph for a fiscal year
may not exceed the difference between
the amount specified in clause (i) for
that fiscal year and the amount actually
used for reimbursement and contract payments.
(E) Delayed authority.--The Corporation may
not enter into a partnership under the
authority of this paragraph before October 1,
2000.
* * * * * * *
(o) Compliance With State Licensing Requirements.--Any person
who sells or solicits the purchase of a policy or plan of
insurance under this title, including catastrophic risk
protection, in any State shall be licensed and otherwise
qualified to do business in that State.
* * * * * * *
SEC. 516. FUNDING.
(a) Authorization of Appropriations.--
(1) * * *
(2) Mandatory expenses.--There are authorized to be
appropriated such sums as are necessary to cover for
each of the 1999 and subsequent reinsurance [years--]
years the following:
(A) [the] The administrative and operating
expenses of the Corporation for the sales
commissions of agents[; and].
(B) [premium] Premium subsidies, including
the administrative and operating expenses of an
approved insurance provider for the delivery of
policies with additional coverage.
(C) Costs associated with the conduct of
livestock pilot programs carried out under
section 508(h)(10), subject to subparagraph (F)
of such section.
(D) Costs associated with the reimbursement
for research, development, and maintenance
costs of approved policies and other materials
provided under section 508(h)(6) and
contracting for research and development under
section 508(m)(4)(B).
(b) Payment of Corporation Expenses From Insurance Fund.--
(1) Expenses generally.--For each of the 1999 and
subsequent reinsurance years, the Corporation may pay
from the insurance fund established under subsection
(c) all expenses of the Corporation (other than
expenses covered by subsection (a)(1) and expenses
covered by paragraph (2)(A)),
[including--] including the following:
(A) [premium] Premium subsidies and
indemnities[;].
(B) [administrative] Administrative and
operating expenses of the Corporation necessary
to pay the sales commissions of agents[; and].
* * * * * * *
(D) Costs associated with the conduct of
livestock pilot programs carried out under
section 508(h)(10), subject to subparagraph (F)
of such section.
(E) Reimbursement for research, development,
and maintenance costs of approved policies and
other materials provided under section
508(h)(6) and contracting for research and
development under section 508(m)(4)(B).
(2) [Research and development expenses.--] Policy
consideration expenses.--
(A) In general.--For each of the 1999 and
subsequent reinsurance years, the Corporation
may pay from the insurance fund established
under subsection (c) [research and development
expenses of the Corporation] costs associated
with considering for approval or disapproval
policies and other materials under subsections
(h) and (m)(4) of section 508, costs associated
with implementing such subsection (m)(4), and
costs to contract out for assistance in
considering such policies and other materials,
but not to exceed $3,500,000 for each fiscal
year.
(B) * * *
* * * * * * *
agricultural commodity
Sec. 518. ``Agricultural commodity'', as used in this
title, means wheat, cotton, flax, corn, dry beans, oats,
barley, rye, tobacco, rice, peanuts, soybeans, sugar beets,
sugar cane, tomatoes, grain sorghum, sunflowers, raisins,
oranges, sweet corn, dry peas, freezing and canning peas,
forage, apples, grapes, potatoes, timber and forests, nursery
crops, citrus, and other fruits and vegetables, nuts, tame hay,
native grass, aquacultural species (including, but not limited
to, any species of finfish, mollusk, crustacean, or other
aquatic invertebrate, amphibian, reptile, or aquatic plant
propagated or reared in a controlled or selected environment),
or any other agricultural commodity, excluding [livestock and]
stored grain, determined by the Board under subsection (a) or
(m) of section 508 of this title, or any one or more of such
commodities, as the context may indicate.
* * * * * * *
----------
SECTION 196 OF THE FEDERAL AGRICULTURE IMPROVEMENT AND REFORM ACT OF
1996
SEC. 196. ADMINISTRATION AND OPERATION OF NONINSURED CROP ASSISTANCE
PROGRAM.
(a) * * *
(b) Application for Noninsured Crop Disaster Assistance.--
(1) * * *
[(2) Records.--A producer shall provide records, as
required by the Secretary, of crop acreage, acreage
yields, and production.]
(2) Records.--To be eligible for assistance under
this section, a producer shall provide annually to the
Secretary, acting through the Agency, records of crop
acreage, acreage yields, and production for each
eligible crop.
(3) Acreage reports.--A producer shall provide annual
reports on acreage planted or prevented from being
planted, as required by the Secretary, by the
designated acreage reporting date for the crop and
location as established by the Secretary.
* * * * * * *
(i) Payment and Income Limitations.--
(1) Definitions.--In this subsection:
(A) * * *
(B) Qualifying [gross revenues] adjusted
gross income.--The term ``qualifying [gross
revenues] adjusted gross income'' means--
(i) if a majority of the [gross
revenue] adjusted gross income of the
person is received from farming,
ranching, and forestry operations, the
[gross revenue] adjusted gross income
from the farming, ranching, and
forestry operations of the person; and
(ii) if less than a majority of the
[gross revenue] adjusted gross income
of the person is received from farming,
ranching, and forestry operations, the
[gross revenue] adjusted gross income
of the person from all sources.
* * * * * * *
[(4) Income limitation.--A person who has qualifying
gross revenues in excess of the amount specified in
section 2266(a) of the Food, Agriculture, Conservation,
and Trade Act of 1990 (7 U.S.C. 1421 note) (as in
effect on November 28, 1990) during the taxable year
(as determined by the Secretary) shall not be eligible
to receive any noninsured assistance payment under this
section.]
(4) Limitation.--A person who has qualifying adjusted
gross income in excess of $2,000,000 during the taxable
year shall not be eligible to receive any noninsured
crop disaster assistance payment under this section.
* * * * * * *
Additional Views
H.R. 2559 as reported by the Agriculture Committee is a
defective effort in at least two respects: (1) its scope is too
modest in the context of the problems American agriculture
faces today, and (2) it overspends considerably when compared
to the amount allotted to the Committee under the terms of the
Congressional Budget Resolution. We believe that a tremendous
opportunity to address the needs of agriculture comprehensively
and responsibly is being wastefully squandered with the
approach taken in this bill.
The clear purpose of H.R. 2559 is to exploit the authority
provided under the Budget Resolution for the Agriculture
Committee to report increases in agriculture spending. The
Resolution specifically provides for an increase in the
Agriculture Committee's allocation of budget authority when it
reports a bill providing risk management or income assistance.
The allocation is increased as long as the bill does not
provide a net increase in budget authority in fiscal year 2000,
does not provide more than $6 billion total in fiscal years
2001 through 2004, and does not increase budget authority in
any one of those years by more than 42 billion.
In spite of the very broad purposes permitted under the
resolution--for example, income assistance alone could justify
changes in nearly any agriculture program--the Committee has
chosen to limit the increase in spending entirely to an
expansion of the crop insurance program. Within the crop
insurance program, nearly all of the effort will be dedicated
to yield protection rather than more comprehensive farm revenue
protection.
During the past year, Congress has recognized that our
current mix of farm programs and risk management tools are
simply not adequate. In the Agriculture Appropriations bill for
fiscal year 1999 (included as part of the Omnibus
Appropriations Bill), Congress provided $6 billion in emergency
assistance to farm and ranch producers. Of the emergency fund
provided, $2.375 billion were made available for producers who
lost crops in 1998 or over the course of multiple years. As
such, they constituted the kind of emergency aid that Congress
has traditionally provided to meet the needs caused by natural
disasters. Most of the remaining funds were provided (in an
unprecedented manner) ostensibly as emergency compensation for
the low prices that were having such a devastating impact on
the incomes of producers throughout the nation--including areas
not affected by weather-related disasters. These funds came in
the form of supplemental Agricultural Market Transition Act
(AMTA) payments. Since the AMTA contract does not require a
producer to plant a crop, it is likely that a significant
portion went to individuals not producing the commodity for
which the assistance was being provided.
During field hearings held by the Subcommittee on Risk
Management, Research, and Specialty Crops regarding risk
management programs, witnesses made clear that the problems are
broader than crop insurance. During his testimony, Phil Cyre,
who operates a diversified 3,000 acre farm in South Dakota,
testified of his ``belief in the need for risk management
insurance,'' and stated:
``We have before us the FAIR Act, which in my opinion can
best be related as the current version of the Titanic. It's a
beautiful ship. * * * But it doesn't have enough lifeboats on
it because there are a lot of people who think it's unsinkable.
I was present when the Agriculture Committee did not pass the
FAIR Act. It didn't pass that day, and I doubt seriously in its
present form and under our current conditions that it world
pass today without some modification. I encourage this
committee to share with us and to agree perhaps with me that
crop insurance in its truest form is designed to provide
insurance when we fail to produce. It is a very difficult
challenge then to encompass in that in an actuarially sound
manner coverage for when we overproduce, or when world
economies fail and falter.''
Billy Griggs, a cotton farmer in Dooly County, Georgia,
offered the following testimony:
``Finally, what do we believe we must do to keep American
agriculture alive until such time as we can address the trade
agreements and the farm bill with more position long-term
solution? First, this Nation and its leaders must recognize the
tremendous benefits of providing a safety net for agriculture
that works. Obviously what we have today is not working, and if
allowed to continue as is then this Nation and its leaders will
surely see the tremendous cost of this inaction.''
In his testimony, Roy Baxley of North Carolina said:
``Under the current farm law that we have now we basically
have no safety net.''
As a general matter, Congress has often followed ad hoc
weather-related disaster spending with an effort to reform and
improve the crop insurance program. The theory is that
taxpayers and producers are better off if they don't have to
rely on after-the-fact, unpredictable levels of assistance when
disasters occur. H.R. 2559, coming as it does after Congress
provided $2.375 billion in yield-related emergency assistance,
attempts to improve the crop insurance program and to stave off
the future need for emergency assistance.
The bill as reported by the Committee, however, ignores the
fact that to the same degree that last year's yield emergency
aid points to the need for improvements in the crop insurance
program, the emergency aid to compensate for the price disaster
also points to the need for improvements in our basic farm
income assistance programs.
We also note that when Congress passed the 1996 Farm Bill,
there was much concern in the countryside. The House leadership
promised that the bill's provisions would be revisited if
Congress failed to take action to open world markets, to reduce
dramatically regulations on agricultural production, and to
provide deep tax relief to agricultural producers. Since that
time, no action has been taken to authorize U.S. participation
in multilateral trade negotiations that are needed if markets
are to be opened, the tax relief provided has been modest at
best, and no apparent effort has been made to provide the
promised regulatory relief. To the contrary, in some instances,
such as the Food Quality Protection Act (FQPA), Congress
provided the Environmental Protection Agency with even more
discretion to restrict production practices that are required
by our producers competing in a global marketplace. On the
whole, our current farm policy is backed by broken promises,
and there is no indication that agriculture's unmet needs will
be addressed anytime soon.
In this regard, when Congress put the Freedom to Farm Act
in place, cautions were raised that the needs of producers and
the food security of our nation would not be met if prices
fell. The need for emergency assistance last year bore out
those concerns. Unfortunately, it appears we are once again
facing a similar situation.
Our nation deserves a long-term, reliable farm policy.
Taxpayers and agricultural producers alike should be able to
know up front what kind of assistance can be expected and what
the rules will be for distributing it. In terms of yield
insurance, this bill makes some progress. Higher subsidy rates,
for example, will lead to higher levels of participation in
crop insurance, and better indemnity performance for the
producers who participate. This will help take care of needs
that otherwise would most likely be met annually through
disaster legislation.
Absent from H.R. 2559 is the other half of the picture.
Last year, U.S. farm programs left producers overexposed to
price and weather disasters. This bill pushes the Committee
toward addressing yield disaster, but what about price
disaster? How much more will our government spend on ad hoc,
supplemental payments before we realize that a more rational,
predictable policy needs to be in force?
During the Committee's debate on H.R. 2559, an amendment
offered by Representative Stenholm would have addressed the
shortfalls under our current farm program. It would establish a
program of Supplemental Income Payments (SIP) for producers of
wheat, feed grains, cotton, rice, and oilseeds.
Under that program, a producer who plants a crop would
receive a payment for a crop year if national revenue for the
crop falls significantly below the most recent five-year
average level. Payouts could occur if national prices are low
or if national production is low.
A Supplemental Income Payment program can work for our
producers and for taxpayers as well. It is a simple program
under which payments would go directly to actual producers in
times of need. It's the kind of long-term approach we should be
using to address agriculture's cyclical problems. If adopted,
the program would serve as the key policy for managing the risk
associated with dramatic revenue declines that affect producers
from year to year, and would complement programs currently in
effect. This approach also lends itself to expansion as a
safety net for livestock and specialty crops as needs arise--
commodities otherwise left behind by current approaches to farm
revenue disaster. The following illustrates how the program
would work in a particular situation:
SIP versus Crop Revenue Coverage (CRC) with lower subsidy
Consider a Mclean, Illinois corn farm insured with CRC. The
insured yield is 120 bushels per acre and the CRC price is
$2.40. At 65% coverage, the farmer's revenue guarantee is
$187.20 per acre. He would pay a premium of $4.11 per acre for
that coverage under the bill. With the Stenholm amendment, his
premium is $5.47, $1.36 higher, but still less than the $7.40
cost paid in 1998 or the $6.20 cost paid in 1999.
A recent futures close for December corn was $2.11 per
bushel. If this were the harvest time price under the CRC
contract and there was no reduction or increase in yield, the
harvest time CRC revenue per acre would be $253.20, and no
indemnity would be paid. In fact, the futures price would have
to decline to $1.56, if yield doesn't change, before any
revenue indemnities would be paid.
With SIP, using the latest USDA supply and demand estimates
of a season average corn price of $1.85 per bushel, the payment
per bushel will be 23 cents. Multiplied by a 120 bushel yield,
the payment would be $27.60 per acre. This is the gain from the
increased CRC cost of $1.36 per acre.
Because the Committee turned down the Stenholm amendment,
the House is presented with a Committee bill that only
addresses half of the problem exposed in 1998. This flaw will
become acutely apparent in the weeks ahead as Congress and the
Administration once againscramble to appropriate emergency ad
hoc assistance to meet commodity price conditions that continue to
devastate farm income. It is unwise to move this bill forward,
virtually guaranteeing that Congress will be forced to continue to
respond to price disasters with off-budget emergency spending. Every
missed opportunity to correct our farm income policy will lead to more
disaster spending and greater uncertainty for producers and taxpayers
alike.
In addition to failing to address the long-term needs of
agriculture, the Committee has reported a bill that violates
the requirements of the Concurrent Resolution on the Budget and
of the Congressional Budget Act. The Budget Resolution
specifically prohibits the Agriculture Committee from bringing
to the House floor a bill that increases net budget authority
in fiscal year 2000. While the Committee adopted an amendment
designed to meet the $6 billion limit on the bill's spending
over 4 years, no effort was made to address the FY 2000
restriction. As a result, the bill contains approximately $1
billion of budget authority for FY 2000 in violation of this
restriction. This is another unwise element of the bill and is
of great concern from our point of view. We believe that the
Committee should have addressed the restriction head-on, rather
than reporting the bill and hoping for a cure to materialize.
In years when the Agriculture Committee was called upon to
reduce spending under budget reconciliation instructions, it
never failed to do so. In this situation, the Committee should
have been able to restrain new spending in a manner that was in
compliance with the Budget Resolution and the Congressional
Budget Act.
By engaging in piecemeal spending that is over budget or
off budget through emergency designations or budget waivers, we
are doing a disservice not only to our farmers but to all of
our rural citizens. To the extent we do not adhere to budget
discipline, programs that serve all of rural America, such as
Social Security and Medicare, are endangered. Because our aging
population is disproportionately represented in rural America,
rural areas will be disproportionately hurt by over-budget
spending that short-changes our ability to put these programs
on a sound footing.
While we feel strongly about or concerns with the omissions
of H.R. 2559, we are not opposed to its overall approach to
making short-term improvements in crop insurance. We believe
that continued consideration of the bill will provide Congress
with the chance to embrace opportunities ignored by the
Agriculture Committee. We intend to continue to work towards
broadening the scope of the bill to address more broadly the
needs of our agricultural producers, and to do so in a manner
that is fiscally sound and in compliance with budget rules.
Charles W. Stenholm.
Marion Berry.
Christopher John.
Mike McIntyre.
Leonard L. Boswell.
Bob Etheridge.
John Elias Baldacci.
Gary A. Condit.
Sanford D. Bishop, Jr.
Bennie G. Thompson.
Calvin M. Dooley.