An Answer to WOTUS

February, 2018

Washington -- Last week I attended a forum on Farm Bill conservation programs, hosted by an unlikely pair of think tanks: the progressive Center for American Progress and the libertarian, free-market oriented R Street Institute. Together, they have published "Fertile Ground," a useful guide to matters of conservation and environmental quality that Congress will address in the 2018 legislation.

The session took place in the Capitol's South Congressional Meeting Room, attended mostly by congressional staff and conservation interest groups. In other words, this was a get-together of the players.

"Fertile Ground" analyzes the potential for voluntary, market-driven conservation measures through USDA programs. It finds many promising approaches and promotes pay-for-success models involving private capital, as well as flexibility for NGO and state and local government participation. It advocates for mitigation banking efforts and creation of more environmental markets. If you want to know more about these concepts, read the report. It points out that more than $1 billion of private capital has been invested in environmental markets since 2015 and another $3 billion of private capital is earmarked for conservation if the right projects are put together.

Much enabling legislation is already authorized in existing USDA law: the Regional Conservation Partnership Program (RCCP); Conservation Innovation Grants (CIG); Conservation Stewardship Program (CSP); Environmental Quality Incentives Program (EQIP); as well as the more well-known Conservation Reserve Program (CRP) and the Agricultural Conservation Easement Program (ACEP).

What the 2018 Farm Bill needs, the think tanks say, are more resources to meet demand for these programs, which are over-subscribed. Although the report does not identify a specific source of funding, many people are hoping for crop insurance reforms that would free up funds within the Farm Bill for these programs at no additonal cost. Suffice it to say that the current crop insurance program actually impedes conservation efforts as it incentivizes the largest corporate farming businesses to exploit and pollute marginal lands with little risk, as well as to drive up the price of farmland. CBO has scored a $3.4 billion savings over ten years simply by putting a meaningful cap on crop insurance eligibility.

Enough of acronyms and scoring. What would an actual effort look like in, say, Nebraska?

If I were still in Nebraska state government doing budgeting and planning, I would see how USDA's programs might stimulate partnerships with the state's Department of Natural Resources and Department of Environmental Quality. Farmers want property tax relief; they also do not want to pollute but do not want a WOTUS-style regulatory approach from the federal EPA. Perhaps the pay-for-success model is an answer. Farmers would voluntarily adopt anti-pollution practices and in exchange their property taxes would be reduced by their county.* Counties would be reimbursed by the state thorugh a fund at the DNR or DEQ. What might be the revenue source for this fund? I'd phase out the ill-advised diversion of a quarter-cent of the state sales tax that now goes for roads and move it to property tax relief, earned voluntarily. Roads have their own source of funding – user taxes – where there is more fiscal capacity for revenue. (Even the U.S. Chamber of Commerce has advocated an increase in fuel taxes.)

Many years ago, Nebraska adopted the Duis Amendment to get the state out of levying property taxes; it then put into place a sales-income tax base to fund state government and to shift more of the local property tax burden onto the broader base. Except it hasn't worked out quite that way, and nothing exemplifies this more than the robbing of the sales tax to pay for roads rather than property tax relief.

That's just an example of how a conservation program might work, with state and local government involvement. Maybe with ingenuity, Nebraska could get some of that $3 billion in private capital for conservation.

Another example is mitigation banking, although that has its downsides. As more factory livestock farms appear, bringing along their inevitable envirnonmental impacts, corporate owners will be eager to pay for mitigation programs elsewhere, where there is a market. That could be a water quality market.

Back to the forum on Capitol Hill. I was disappointed to look at the sign-in sheet and see no Republican staffers. None, at an event sponsored by R Street Institute! Lots of Democratic staffers, however.

The way the 2018 Farm Bill is shaping up, Republican interest is centered on trying to put more work requirements into SNAP eligibility (food stamps), not on efforts to help rural America (where they think they have a lock on the voter base), even through market-oriented and private capital innovations. A question is whether Democrats will take the bait, think the Farm Bill is all about food stamps, and not press forward with ideas to help rural America, where the party is so weak in places as to be almost nonexistent.

*Many farmers are already adopting anti-pollution practices, such as better targeting of fertilizer and pesticide treatments and limiting irrigation run-off. These are being done to cut costs, as farmers are incredibly squeezed by low crop prices, high input prices, and high property taxes. Additional incentives would result in even more conservation measures such as expanding the use of cover crops, crop rotation, and greater diversification.