FSA Defends Farm Disaster Aid Policies

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Errors in a government computer program mean some growers must repay part of the 2008 disaster payments they received as far back as January, but USDA program managers who oversee the Supplemental Revenue Assistance Program (SURE) maintain that such glitches are the exception, not the rule, in the complex program’s administration.

“We take absolutely no pleasure in writing letters” notifying farmers to refund 2008 overpayments on SURE aid, said Brandon Willis, deputy administrator of the Farm Service Agency in a phone interview with DTN. He and other agency officials who met with DTN called problems such as overpayments and fluctuating policy “isolated incidents” and not representative of how FSA had implemented the first-ever disaster aid program using a whole-farm revenue yardstick.

Except for its handling of group-risk crop insurance policies, “the rules of the game haven’t changed” since the agency issued final regulations on the SURE program in January, Willis said in response to a DTN feature story published Aug. 2. However, Willis added that Washington had issued multiple directives to state and county offices over the last six months to help them interpret those regulations in complex or special situations.

“SURE is enormously complex. It’s one of the most complex programs FSA has ever had to administer,” Willis said. For example, SURE formulas needed to accommodate 32 insurance codes and plans in each application and pull records from the Risk Management Agency’s crop insurance files. In the rush to distribute aid for the 2008 crop, FSA hadn’t fully automated computer programs when 2008 sign-up started last January, and that led to a higher workload in county offices and some overpayments.

Only after checks had been issued did FSA discover that a software download of farmer records from the Risk Management Agency did not include an appropriate adjustment for prevented planted or replanted acres, an issue with a number of growers in Iowa and Missouri hit by floods during planting season, Willis explained. The demand for refunds is strictly due to FSA’s error, not a policy change, he stressed.

Generally, other FSA programs have a “finality” rule that forgives honest errors by FSA or the grower after a certain time, Willis said. Given the size of outlays in SURE’s case — up to $100,000 per person — FSA required growers to sign a statement agreeing to refund any overpayments. Steve Peterson, another FSA administrator who manages the disaster assistance branch, estimated such overpayments accounted for less than 1 percent of the 2008 SURE program’s total $1 billion outlays so far.

One rare reversal in USDA policy has been how to compensate farmers who purchased group-risk insurance plans. Extremely volatile commodity prices in 2008 are actually at the root of the controversy, Willis added, and why some policyholders have been frustrated with the agency’s handling of their claims.

Price guarantees for corn losses under the 2008 Group Risk Plan (GRP) — an indexed insurance policy based on county yields and not individual farm records — were set in November 2007 at $3.75 per bushel. By February 2008, price guarantees for revenue-based insurance coverage had jumped to $5.40, an unprecedented $1.65-per-bushel spread for the same crop. Farmers who paid an extra GRP premium could hike their price guarantee by a so-called “150 percent price adjuster,” equal to a net price of $6.25 per lost bushel.

In January, USDA initially calculated GRP policyholders claims at the adjusted $6.25 price. After consultation with some economists, the agency reversed itself and opted to honor the base $3.75 price outlined in the growers’ contracts. More than three dozen farmers in Iowa who bought such policies contend that decision eliminated a potential $245-per-acre payment in some cases and essentially disqualified them from collecting any payments. In contrast, if they had purchased yield-only MPCI (multi-peril crop insurance) policies they would have received $4.75-per-bushel guarantees and average payments of about $69 per acre, a compromise farmers consider fairer.


Willis is sympathetic, but doesn’t believe FSA should give GRP policyholders an exception based on wild price swings in 2007-08. “Since SURE is an individual payment, not a group payment, we don’t believe that the justification for that multiplier exists when we have to determine a SURE payment,” Willis said. In a different year, GRP might pay a higher guarantee than revenue-based plans he noted.

“I think, to be completely frank, if you look at the statute, Congress told us … to treat people with these programs equitably,” Willis said. “I think we have a lot of latitude on how we do it.” Over the four-year span of SURE, however, the FSA decision is equitable, he added.

“Every other producer in the nation we tell them the price of the crop-insurance policy you used, you purchased, is what we are going to use to figure out your SURE payment,” Willis said.

“We have just decided to stick with the price they purchased, with the realization that the way the price spiked that year there are some people who are not benefiting from SURE as they would otherwise,” he said. “The other fact is, though, is they didn’t benefit from crop insurance like their neighbors who purchased other ones, but that’s just that they chose that policy.”

So far, USDA has paid out over $1.15 billion in 2008 SURE claims. Iowa received $203.2 million, followed by North Dakota at $151.9 million and Texas at $124.9 million. Signup for the 2008 program ends Sept. 30.

See related discussion of the SURE program on DTN’s Minding Ag’s Business and Farm Policy blogs.

For more information on SURE, go to https://www.fsa.usda.gov/… and click on disaster programs.

Source: DTN AgDayta

Posted by Kaci Switzer

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