The federal government is proposing a major overhaul of the Net Income
Stabilization Account program that would change the formula that
triggers withdrawals, add a disaster and investment component and offer
matching government contributions only when money is withdrawn.
In a discussion paper on proposed program design under the agricultural
policy framework, Ottawa is suggesting an expanded crop insurance that
would offer “whole farm” insurance packages and varying levels of
government contributions, depending on the type of coverage.
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Ottawa is proposing that NISA and production insurance programs be
linked, perhaps by requiring a farmer to take part in both if benefits
are to be taken from either. They would be the only two programs under
the APF.
The federal government plans to phase in the new program over three
years, beginning with transition steps next year. There will be no need
for a massive program overhaul before the 2003 crop year.
At the end of three years, provincial “companion programs” would end.
“In response to the results of extensive consultations with producers,
governments are proposing to keep the best of what currently exists
while addressing the problems identified in the program review,”
Agriculture Canada said as it introduced the discussion paper.
The paper amounts to the most detailed glimpse yet of what Ottawa would
like to do under the APF.
It sets the stage for an expected stormy federal-provincial ministers’
meeting Dec. 4 when discussion centres on program design and whether
there is enough time to create new programs before March 31, 2003 when
the $500 million Canadian Farm Income Program expires.
Many of the federal ideas will be controversial.
Proposals to expand NISA to include disaster and investment funds draw
criticism that the program’s original intent, to stabilize income, is
being undermined. Some provinces, including Quebec, will likely protest
the federal suggestion that provincial companion programs be dropped.
As key components of the proposed program, Ottawa is suggesting:
- Farmers unable to make contributions one year would be able to carry
forward the contribution room to a future year. The government says it
will help beginning farmers.
- The allowable contribution level would be calculated as a combination
of eligible net sales and the margin (revenue left after expenses).
Withdrawal triggers could be based on margin declines.
- NISA calculations would be based on accrual accounting principles
rather than cash accounting. Producers who use cash accounting for
income tax would be able to use a modified accrual accounting system
for NISA purposes.
- To encourage farmer use of NISA funds, the government’s matching
contribution might be paid only when farmer funds are withdrawn.
Retiring farmers would be able to withdraw only their own contributions
and interest, while government contributions would stay in NISA.
- Some NISA account funds could be withdrawn “for investments that
could improve the long-term profitability of the farming business.”
The proposed changes to crop insurance include varying government
contributions – from 100 percent for “infrequent catastrophic loss
situation” and wildlife crop damage, to 60 percent for comprehensive
production loss insurance, to 33 percent for high-cost production
losses.
An option would be added to provide crop-specific insurance.
Ottawa also suggests the cash advance program be extended for at least
five more years.
