RL30331: Conservation Spending in Agriculture:
Trends and Implications

Jeffrey A. Zinn

Senior Analyst in Natural Resources Policy
Resources, Science and Industry

October 6, 1999

Summary

Major changes in conservation policies for agriculture started with the 1985 Food Security Act. Prior to 1985, changes occurred less frequently, and usually were less significant. The importance of the changes in conservation policy are reflected in modifications to agricultural funding patterns. A review of federal funding since FY1983 shows that:

• Overall federal spending for conservation has grown substantially;
• Most of this growth is in programs that transfer money to producers who practice conservation;
• The number of federally funded conservation programs has increased; yet
• One program, the Conservation Reserve Program, receives about half the funding while many of the others remain very small.

This report examines conservation program funding since FY1983, when USDA started compiling detailed budget information for conservation, by function. Funding trends since 1983 are reviewed in the context of changing policies and priorities, and the components of conservation funding are reviewed to show changing emphasis. Conservation's changing role in overall agriculture funding and its use as a mechanism for distributing funds to farmers and landowners also is explored. The degree of change may not be apparent when data are compared from year to year, such as comparing last year's appropriations levels with this year's. However, it is pronounced when one sees the changes over a span of almost 2 decades. A knowledge of these trends is helpful for understanding the changing roles that conservation plays in broader farm and environmental protection efforts.

Contents

Introduction
Evolution of the Conservation Mission
Changes in Funding for Conservation
        Technical Assistance
        Cost Sharing
        Public Works
        Rental and Easement Payments
        Conservation Data and Research
Conservation Programs and Funding Today
Conservation's Role in Agriculture Funding
Funding for Conservation in the Future: Some Options

Figure 1. Conservation Funding and Agriculture Funding (FY1983-1999 in Millions)

List of Tables

Table I. USDA Funding for Conservation Activities
Table 2. Direct Payments to Farmers, by Fiscal Year Conservation Spending in Agriculture: Trends and Implications

Introduction

The evolution of priorities for federal agricultural conservation policies and activities can be viewed through changing funding allocations. This report reviews the evolution of conservation activities, and looks at conservation spending since FY1983, a span of more than 15 years, to illustrate changing conservation priorities. It concludes with a brief discussion of some options for conservation policy changes that could have major budgetary implications as the Congress prepares for a review of policy options in 2002 when the current farm act expires, or sooner.

Evolution of the Conservation Mission

Laws creating conservation programs were first enacted in the late 1930s, in response to drought and the dust bowl. Until 1985, conservation programs evolved slowly and were amended infrequently. They have always relied on voluntary participation, and used financial and technical assistance, and education to induce participation. The goal of the initial programs was to reduce soil erosion. Additional programs enacted after World War II were designed to build small water control projects, usually dams, to provide water to agriculture in quantities that would enhance farm production by reducing floods and increasing storage. Funding for this public works component of conservation fluctuated from year to year.

By the late 1970s, as agriculture boomed with "fence row to fence row" production to supply expanding international markets, concern was growing, especially among environmentalists, that erosion was occurring at unacceptably high rates. Publicized instances of these high rates of soil erosion and other environmental problems originating with agricultural practices increased awareness and stimulated debate about the most appropriate policy responses in the early 1980s. Other farm policy considerations at this time included an unanticipated "bust" in international demand and a farm financial crisis that was evidenced by rapidly declining land prices.

Congress responded by enacting four major new conservation programs in the conservation title of the 1985 Food Security Act (P.L. 99-198). The largest of these programs - the Conservation Reserve Program (CRP) - greatly increased the overall federal financial commitment to conservation. It had the multiple goals of reducing erosion (and providing other environmental benefits), reducing production to increase commodity prices, and stabilizing land values. (A much smaller reserve proposal had been approved by the House but rejected by the Senate Agriculture Committee a year earlier because of the anticipated program cost.) The other three new programs, sodbuster, conservation compliance, and swampbuster, created a new approach to conservation called compliance. This was intended to end access to most federal farm program benefits to producers who did not meet conservation program requirements. A frequent argument in support of compliance was that it would reduce federal farm program spending that was inconsistent with conservation goals. Unlike the CRP, the compliance programs do not provide funds to landowners.

The conservation agenda evolved rapidly, and conservation provisions in the 1990 Food, Agriculture, Conservation and Trade Act (P.L. 101-624) addressed a different set of issues. By 1990, Congress concluded that soil erosion was being adequately addressed and that the conservation agenda should be expanded to encompass other environmental concerns. If the main conservation theme in the 1985 farm act had been controlling soil erosion, the theme of the 1990 title was improving water quality. Among the environmental topics that the 1990 farm act addressed were groundwater pollution, water quality, wetlands protection, and sustainable agriculture. Amendments to the CRP reflected these changes, and its earlier focus on highly erodible lands was expanded to encompass other environmental concerns. Many new programs and activities were created; the only one that appears as a line item in the budget is the Wetlands Reserve Program.

Debate over priorities for conservation shifted with the change in leadership in both chambers of Congress in 1994. Before then, the two centers of interest had been how to provide more dependable funding for conservation and how to build on the initiatives that had been enacted in 1985 and 1990. After the 1994 congressional election, a third interest became finding ways to reform the compliance provisions so as to make them less intrusive on farmer activities. Both before and after the election, considerable attention was focused on the CRP, which was scheduled to expire in 1995 and enjoyed strong bipartisan support. By this time, the CRP was consuming more than half the conservation budget each year, and Congress had provided no direction on its future.

The conservation provisions that were enacted in the Federal Agricultural Improvement and Reform Act of 1996 (P.L. 104-127) responded to all of these interests. They removed more than half the conservation program funding from the direct control of the appropriators and the unpredictable annual appropriations process and made them mandatory spending governed by authorizing statute and funded through the Commodity Credit Corporation (CCC). Conservation activities were expanded with a new cost sharing program to replace four programs that were terminated, new programs for wildlife, air quality, farmland protection, and integrating conservation and commodity payments, and an expanded role for state technical committees. Compliance programs were amended to give producers more flexibility. "Through these provisions. Congress supported the past growth in conservation and the expansion of the conservation mission, but without explicitly creating expensive new programs.

Changes in Funding for Conservation

Funding for agricultural conservation programs, shown in Table I, has tripled from just over $1 billion in the early 1980s, to over $3 billion every year since FY1992. In two years, FY1994 and FY1998, it exceeded $3.6 billion. This growth is reflected in new programs and an expanded mission that includes such new areas of emphasis as water quality, wildlife, and animal agriculture. Since FY1994, funding has been relatively level, with small changes from year to year. The conservation budget can be divided into five functions, as shown in table 1.

Table 1. USDA Funding for Conservation Activities (in Millions, unadjusted for inflation)

Source: USDA, Office of Budget and Policy Analysis.

Technical Assistance

The first column of Table I includes the technical assistance, extension and administration activities of 4 USDA agencies. More than 80% of this amount each year goes to one agency, the Natural Resources Conservation Service (NRCS). The other agencies that receive funds include the Farm Service Agency (FSA), the Forest Service (FS), and the Extension Service (ES). Over the past 18 years, the total amount in this category has almost doubled (without inflation adjustments). It has been consistently increasing from year to year, dropping only twice, from FY1983 to FY1984 and FY1994 to FY1995.

The second category, cost sharing to install conservation practices, are funds that pass through the NRCS and FSA to producers. Cost sharing programs have changed over this time period, with some programs terminated and others created. The largest cost sharing program at the beginning of the period, the Agricultural Conservation Program, was terminated in 1996, and the two large programs at the end of the period, the Conservation Reserve and Environmental Quality Incentive Programs, were enacted in 1985 and 1996, respectively. The largest years for this category, FY1987 and FYI 988, are associated with the initial implementation of the CRP, when signups were large and new contract holders were installing conservation practices. Another change is that NRCS has gained more programs from FSA as a result of a 1994 reorganization, although this has not affected funding levels. Over the past 18 years, the total amount in the cost sharing category has almost doubled, like the first category.

The third category lists funding for public works projects, including emergency public works. Unlike the first two categories, the total amount here varies considerably from year to year, with no consistent pattern. It ranges from $100 million to almost $300 million. Higher funding usually occurs in response to wide- spread natural disasters, or when the programs have been used for other purposes such as to stimulate employment by providing jobs in the public sector. For example, the higher levels in FYI 993 through FY1995 are associated with responding to widespread flooding in the upper Midwest and other portions of the country. Typically, the administration, whether Republican or Democratic, proposes reduced funding for these projects, but Congress provides larger amounts.

The fourth category, rental and easement payments to landowners, has undergone the greatest change, from the smallest category in FYI 983 to the largest one in FY 1988 and every subsequent year. The dominant program has been the CRP, which has been more than 90% of the total in most years, but others, especially the Wetland Reserve Program receive significant funding as well. The estimated decline in FYI 999 is associated with lower average contract costs under the CRP.

The fifth category combines research and data collection activities of five USDA agencies. The agencies with the largest amounts are the NRCS and the Agricultural Research Service. This category shows a pattern similar to the first and second ones, and like those, has approximately doubled over the past 18 years. It, like Technical Assistance, has declined only twice from one year to the next, from FY1985 to FY1986 and from FY1995 to FY1996. The large increase from FY1993 to FY1994 is accounted for by a large jump in funding for Forest Service research, and in most other years, funding grew by less than 5% from the preceding year.

For conservation spending as a whole, the mix of the 5 categories has changed because the rate of growth in funding has not been equally distributed. Rental and easement payments were less than 1% in FY1983, but almost exactly half the total in FY1998. The other four categories declined as a portion of the total, with public works activities declining the largest percentage, from 20% in FY1983 to 4% in FY 1998. Conservation data and research declined the least, from 17% to 12% during the same time period. Perhaps these relative decreases reflects a view that larger construction projects occupy a less prominent place in conservation than they did two decades ago.

When the funding data for FY1983 and FY1998 are converted to constant dollars (the FY1999 numbers are estimates) and compared, the importance of rental and easement payments to the growth of overall conservation funding is even more apparent. In constant dollars, overall conservation funding has more than doubled, increasing by 210%. But in two categories, cost sharing and public works, funding in constant dollars decreased between these two years, declining 3% and 61% respectively. Between the same two points in time, technical assistance increased by 25% and data and research increased by almost 47%. Rental and easement payments account for the remainder of the growth.

Conservation Programs and Funding Today

Today's conservation effort includes numerous programs administered by NRCS and FSA, as well as activities by several other agencies in USDA that support the agricultural conservation effort. Conservation programs are numerous, but in terms of funding, the CRP dominates. These programs and activities are listed below, with the administering agency identified. They are listed in order of average annual funding between FY 1997 and FY 1999, to smooth out variations from year to year. Of the 25 programs, 13 received an average of $33 million or less annually, and 8 averaged less than $10 million, while only 5 averaged more than $100 million.

Most of these programs are 20 or more years old. But some of the most significant ones today originally were enacted since 1983, and some of the new programs have superceded older programs that were terminated since the early 1980s. The list below includes the three programs operating in 1983 that were terminated in the 1996 farm act, and their funding level in FY1983. These programs accounted for about 20% of all conservation funding in that year. These three programs were replaced by the Environmental Quality Incentives Program and funding was shifted from the annual appropriations process to mandatory spending through the CCC. The list does not include programs that were not terminated, but are no longer funded, such as the Water Bank Program.

Agricultural Conservation Program Great Plains Conservation Program Rural Clean Water Program $187.6 million $21.3 $1.6

While three programs have been eliminated, six programs have been added since FY1983. These six account for almost two thirds of conservation funding today. These programs are all funded through the CCC as mandatory spending rather than through the annual appropriations process. These six do not include the compliance programs (swampbuster, sodbuster, and conservation compliance), since those programs do not receive funding as line items. The list includes the year of enactment and the anticipated level of funding for FY1999. The Farmland Protection Program has already received the entire allocation authorized in the 1996 farm act, and Congress has prohibited funding the Conservation Farm Option in appropriations legislation each year since it was enacted.

Conservation's Role in Agriculture Funding

Figure I shows that funding for conservation has increased while overall funding for agriculture (not including conservation) has declined, on average, since FY1983. It shows that conservation has grown rather steadily and became increasingly important, especially between FY1995 and FY1997, while agriculture funding has been volatile. Agriculture funding could be defined many different ways. This chart uses budget function 350, "agriculture", which includes payments to producers and agricultural research and services. Most conservation funding is part of a different function, 300, which includes natural resources and environment.

Figure 1. Conservation Funding and Agriculture Funding (FY1983-1999 in Millions)

(1) Conservation is part of function 300, natural resources and environment. (2) Total outlays for budget function 350 (agriculture), which includes farm income stabilization and agricultural research and services. Source: USDA budget and program data

Funding for agriculture, by contrast, has risen and declined far more significantly from year to year. The range has been between over $30 billion and less than $10 billion. During the early part of the period, it stayed above $20 billion each year, except for FY1984. In these years, it exceeded conservation funding by about 20 times, on average. Funding generally dropped in the late 1980s and early 1990s, except for FY 1993, before the 1996 farm act limited the total amount of payments to be distributed among farmers each year. The large increases in FY 1998 and FY 1999 reflect emergency funding to provide additional income assistance. Since FY1987, conservation has never been less than a tenth the size of agriculture funding, and for each of three years (FY1995-1997) it was more than one-third of the size of the funding for agriculture. Many supporters of conservation argue that it should be made an even larger portion of payments in future years.

In this time of farm financial stress, much of the political interest in agriculture funding centers on providing federal payments to farmers. Table 2, on the next page, shows conservation payments and all payments to farmers. Conservation payments, a subset of all payments, include easement and rental payments, and cost-sharing assistance. Conservation payments have grown over the period, from just over $200 million and about 20% of all conservation spending to about $2 billion and about 60% of conservation spending. This growth is primarily from the CRP, but other programs in this category include the Wetland Reserve, Farmland Protection, and the Environmental Quality Incentives Programs. This array of programs provides money to producers for many purposes, and the newer programs have expanded the list of purposes as well as the amounts available.

Funding for Conservation in the Future: Some Options

The data show that conservation has become an increasingly important component of funding for agriculture. Many conservation supporters would like to see it become even more significant in the future. They see at least three accomplishments that they would like to build on.

Several issues revolving around conservation funding in the future are being debated today. The issue receiving the most attention as the First Session of the 106th Congress ends is a proposal to raise the CRP enrollment cap from 36.4 million acres to 40 million acres. This proposal is one element in a response to the current farm

Table 2. Direct Payments to Farmers, by Fiscal Year (in Millions, unadjusted for inflation)

* Includes easement and rental payments and cost sharing assistance. " Includes all CCC and other USDA outlays to producers.
Source: USDA budget and program data.

Further into the future, whether the CRP, or any multi-year land retirement program can be sustained indefinitely may become a major question. The reserve is expensive on a per-acre basis, and there is no guarantee that landowners will maintain the conservation benefits after their contracts expire and the payments end. In addition to questions about what happens to the land that was in the reserve, there are also questions about what will happen to the funds that were spent on the CRP. If the CRP is cut back in the future, conservation advocates would like to continue to dedicate these funds to conservation or environmental purposes that reflect changing issues and priorities. If the funds were to be applied to a next generation land retirement program, they believe that they have learned from CRP and other programs how to administer these types of programs more efficiently and effectively. Opponents may argue that future programs should provide more enduring conservation benefits, that these funds should be spent on purposes other than conservation that provide other benefits to society more generally, or that too much money is already being spent on conservation.

Funding for conservation is relatively more secure, now that the Commodity Credit Corporation is used to fund a majority of the conservation effort. Conservation supporters probably would like to move even more funding out of the annual appropriations process to ensure continuity for conservation programs. They might point out that the Farmland Protection Program, for example, has run into authorization ceilings, and new authorizing legislation is needed to meet the widespread interest and to increase participation. For two other programs, the Wetlands Reserve and the CRP, the cap on acreage enrolled raises similar questions. They might also state that appropriators can still play a significant role, as they have by limiting funds available under the Environmental Quality Incentives Program, a mandatory spending program, to $26 million less than the $200 million that was authorized in the 1996 farm act. Others who oppose these funding changes may question why any conservation programs should not go through the annual scrutiny, like most other federal programs, to ensure that they continue to meet social values and merit continued support.

Overall conservation funding has been level in recent years. Efforts to increase conservation funding have been unsuccessful when they have encountered broader efforts to reduce the federal deficit and related funding caps, or where there have been disagreements over priorities between the Clinton Administration and the Congress. Proponents would like to find opportunities for renewed growth. Various proposals have been introduced in the 106~ Congress to authorize additional funding for the farmland protection program, to raise the acreage cap on the CRP, and to provide more funding for the Environmental Quality Incentives Program. The Administration has proposed additional funding of existing programs for various initiatives associated with clean water, land protection, or animal waste management. Proponents would like to see a renewed upward trend. Many may also want to see more funding to support a larger cadre of professional conservationists to administer the programs in the field and provide a more substantial support for conservation, especially in working "one-on-one" with landowners.

More broadly, Congress has expanded the array of policy objectives for conservation since 1985. This process is likely to continue in the future. This expansion has been characterized by the creation of many new programs and activities, most of them backed by limited funding. Each of these programs is based on certain objectives and has supporters who would like to see more attention and funding to address them. This pressure was especially strong and effectively applied by wildlife interests during the 1996 farm bill debate, for example. Congress likely will be confronted by multiple pressures to add new objectives or modify existing objectives in the conservation program again in the next farm bill debate. Funding questions that are likely to be raised include whether additional programs should be removed from the annual appropriations process, whether to authorize more funding or higher caps for programs where the demand by potential participants has exceeded the resources that those programs are authorized to provide, and if conservation funding should be provided through new programs or different approaches and in larger or smaller amounts than the current level.