FREDERICTON -Manitoba agriculture minister Rosann Wowchuk says an upcoming six-month review of the Net Income Stabilization Account program is required because of problems of both perception and reality.
Federal and provincial agriculture ministers decided during their summer meeting to launch a NISA review as part of a new farm income safety net deal.
“The whole issue of farmers with large accounts still making claims for disaster funds is a problem,” she said in an interview July 6 after the ministers’ meeting ended.
“It is an issue because it looks bad to the public, but also we are just not sure that the money governments are putting into NISA is having the best impact it can. Maybe we need new rules.”
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While farmers were crying out for emergency funding during the past two years, federal minister Lyle Vanclief continued to point out that billions of dollars sat in NISA accounts and the number was growing.
Wrong purpose
Meanwhile, the government’s three percent interest bonus on farmer contributions has led many bureaucrats to argue that there are too many incentives making NISA good for retirement saving instead of an income stabilizer. The bonus makes investment in NISA more attractive than securities.
“Some bankers are advising farmers to borrow rather than take from NISA because interest rates on loans are lower than what they make in their accounts,” one federal official said last week.
The review will decide whether the incentives are too rich, whether NISA contributions by governments are the most effective way to stabilize farm income and whether the NISA program is properly “situated” within the entire safety net system.
The officials chosen to do the review will be asked to try to complete it by the end of the year.
Vanclief said one idea to be considered is whether NISA should be a program farmers can use to supplement the 70 percent of income decline covered by disaster aid.
“Maybe NISA could be something farmers buy to cover that last 30 percent,” he said. “If they don’t use NISA, they just get the 70.”
Even though the Canadian Federation of Agriculture has been campaigning to end the link of NISA to disaster funding, the ministers last week instructed that it be strengthened.
When disaster assistance money is paid out, the government deducts its three percent contribution to NISA for the previous year when it sends out the aid cheque, whether or not NISA contributions were made.
The policy rationale for deducting it even if the farmer did not make a NISA contribution is that governments have wanted to encourage farmers to invest in NISA during good years and not just look to government.
However, ministers decided to veer away from that principle, pending the results of the review and future government decisions.
The majority of provinces demanded that at least for the first year of the Canadian Farm Income Program, and possibly beyond that, NISA contributions will only be deducted if they actually were made. Farmers who chose not to make 1999 NISA contributions will not face government deductions from their year 2000 CFIP cheques.
Sources say that in the meeting, the federal government strongly opposed this proposal, arguing that it looked like an invitation to farmers not to invest for their own protection. It looked like a message that farmers should wait for and expect the government to bail them out with disaster aid.
But in a later interview, Ontario minister Ernie Hardeman offered the reasoning held by the majority of provinces. He said investment in NISA by a farmer automatically triggers a transfer of government funds to that farmer.
“We don’t think we should penalize farmers for not asking for government money when they are having a good year.”
