Farmers who fall on hard times after a few years of plenty may find their safety net has shrunk.
Federal and provincial agriculture ministers have agreed in principle to a new link between two safety net programs to prevent what one Agriculture Canada official called “double dipping.”
The link between the Net Income Stabilization Account program and the new disaster assistance program would see a claw back of government NISA contributions from a disaster payment.
For example, farmers who receive matching government funds for their NISA contributions in 2001, but then make a claim for the Canadian Farm Income Program in 2002, would see the 2001 payment deducted from the 2002 claim.
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The claw back is cumulative for three years.
By 2002, producers with three successive years of NISA deposits may only be eligible for 40 percent of their reference margin, rather than 70 percent.
The Canadian Federation of Agriculture has vowed to fight the proposal during an upcoming six-month review of the NISA program.
CFA analyst Bernard Basillais said the link will penalize farmers who use their NISA accounts for managing risks on the farm.
“This goes against the basic grain of the fundamental principals we’ve always had in agriculture,” said Basillais. “You really need to be pretty much broke to get into the CFIP program.”
CFA president Bob Friesen told a meeting of farm leaders last week that the government is showing “sheer contempt” for farmers by creating the link without analyzing the impact of the change.
“The bureaucrats are basically thumbing their nose at us and saying, ‘We think it’s a good policy and we don’t know what the impact is,’ ” said Friesen.
Don Dewar, who sits on the federal safety nets advisory committee, said the change will particularly affect farmers who have consecutive poor years where income drops up to 29 percent – not quite enough to trigger a disaster payment, but enough to necessitate taking money out of NISA accounts.
Farmers may have drained their NISA funds, but will still be penalized by claw backs from CFIP payments in a year when their income falls more than 30 percent.
“In the year when you need it the most, it’s taken away from you,” said Dewar, who called the link “too aggressive.”
But the director-general in charge of safety nets for Agriculture Canada said federal and provincial agriculture ministers are concerned NISA accounts continue to grow despite tough times on the farm.
Tom Richardson said ministers want to get rid of the perception of “double dipping” from the two government programs.
NISA account balances will top $3 billion this year, according to federal projections, up from $2.8 billion in 1999, and $2.5 billion in 1998.
Ministers received letters from farmers who said they needed better disaster programs because they didn’t want to use their NISA accounts to help them through years of poor income.
Balancing act
The concept behind the link is to deduct government payments during good times from disaster payments in a rough year, said Richardson. He acknowledged the link is not perfect, but said it’s up to the farm community to find a better one during the review of the NISA program.
Richardson said the change won’t penalize farmers who use NISA.
“I’ve heard that argument and I don’t understand it, it’s a puzzle.
“It’s hard to see how a producer is worse off by not using NISA,” he said, explaining farmers’ contributions are matched by government, and they can use the money as they choose.
“No other sector of the economy gets a deal like that.”
Dewar said he thinks NISA accounts continue to grow because farmers are using off-farm income rather than NISA money to compensate for losses, for tax reasons.
But NISA withdrawals and deposits don’t affect the reference margins used to calculate disaster payments, said Dewar, so double-dipping isn’t possible.
Leaving money in NISA does not result in an increase in disaster claims, said Dewar.
The CFA proposes a NISA link that would see farmers compelled to withdraw 20 percent of their triggered withdrawal from their NISA producer accounts in years when they are eligible for disaster payments.
