NU Online News Service, Sept. 20, 2:34 p.m.EDT

Crop insurance underwriters and producers are up in arms over aproposal in the Obama administration tax plan that would furtherreduce crop-insurance subsidies by an estimated $8.3 billion over10 years.

Tom Zacharias, president of National Crop Insurance Services,Overland Park, Kan., says that "the federal crop-insurance programhas already contributed more than $4 billion towards deficitreduction, and $12 billion overall in spending reductions since2008.

"Congress needs to evaluate the economic impactof weakening the primary safety net onwhich farmers and our rural economy can rely," headds. 

Charles Symington, senior vice president of government affairsfor the Independent Insurance Agents and Brokers of America, saysthe president's decision "will drastically change the program as weknow it today and have a crippling effect on its intendedbeneficiaries—farmers and ranchers."

Symington says the program "is still reeling from the huge cuts"it sustained in both the 2008 Farm Bill and the 2010 StandardReinsurance Agreement.

"When asked, farmers have consistently stressed that ensuring astrong safety net is vital to the future ofthe nation's farming communities," Symington said. TheIIABA "urges the administration to focus on a strategy to improvethis vital program, which promotes job growth and prosperity inrural America."

The new cuts are in addition to the $6 billion in budget cutsfor the program over 10 years implemented last year. Those cutsincluded limits on commissions paid to insurance agents who sellcrop insurance.

The proposals are included in an 80-page, 10-year deficitreduction plan that includes $1.57 trillion in tax hikes, mostly onthe rich, as well as $580 billion in cuts to "mandatory" programs,including $320 billion in cuts to federal health programs such asMedicare and Medicaid. 

The 2010 standard reinsurance agreement, approved last July, wasaimed at saving $6 billion over 10 years from administrativeexpense reimbursement and underwriting gains while also improvingservice to underserved states.

The new proposal calls for lowering crop insurance companies'return on investment from the current projected 14 percent to the12 percent target of the program. This cut would save $2 billionover 10 years, President Obama says in the budget proposal.

The administration proposes to save an additional $3.7 billionover 10 years by capping administrative expenses based on 2006premiums rather than the current 2010 premiums. This is designed toneutralize the spike in commodity prices over the last fouryears.

The administration also proposes to price more accurately thepremium for catastrophic coverage policies, which will slightlylower the reimbursement to crop insurance companies.

Since the premium for Cat coverage is fully subsidized for thefarmer, farmers would not be hurt by the change, the administrationsays, adding that it will save $600 million over 10 years.

The administration also proposes changes in subsidies forproducers, which would save $2 billion over 10 years.

Farmers who have premium subsidies of 50 percent or less wouldnot be affected, the proposal says.

In a statement, Zacharias said, "The plan is devastating tothose in agriculture, particularly in a year that has seenextremely volatile commodity prices and weather events—fromdroughts in Texas and Oklahoma to floods in the Northeast andMidwest.