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The Environmental Quality Incentives Program (EQIP),
administered by USDA's Natural Resources Conservation
Service (NRCS), provides technical and financial assistance
to agricultural producers and forestry managers to adopt
conservation and environmental improvements. Payments
are provided for a wide range of practices, including
nutrient management, livestock waste handling, conservation
tillage, terraces, tree stand improvement, and filter
strips. EQIP is unique among conservation programs in
that it sets aside a portion of funding for livestock
producers.
2008 Farm Act Key Changes
Program changes in the 2008 Farm Act relate to:
- increased funding,
- eligibility requirements,
- overall payment limitations,
- payment terms for groups defined by USDA
as "traditionally underserved,"
- offer ranking procedures, and
- the ground and surface water conservation
fund.
The 2008 Farm Act also continues several changes made
in the 2002 Farm Act, including eligibility for large
confined animal feeding operations, increased fund set-asides
for livestock producers, and modified program goals and
enrollment options.
Increased funding. EQIP is slated to
receive the largest share of new conservation funding
under the 2008 Farm Act, a total of $1.15 billion. This
increase would bring EQIP spending to about $7.25 billion
for fiscal years (FY) 2008-12. The funding authorized
in the 2008 Farm Act increases from $1.2 billion in FY
2008 to $1.75 billion in FY 2012.
Eligibility requirements. The 2008 Farm
Act provides clarification regarding lands eligible for
EQIP participation. Eligible lands include cropland,
grassland, rangeland and pasture land, nonindustrial
private forestland, and other agricultural land (e.g.,
cropped woodland, marshes, incidental land that is part
of the agricultural operation, and agricultural land
used for the production of livestock) on which resource
issues could be addressed. Conservation practices related
to organic
production and transition to organic production
are also now eligible for funding. Organic practices
are subject to payment limitations of $20,000 annually
and $80,000 over 6 years to persons or legal entities.
Overall payment limitations. Aggregate
payment limitations are reduced from $450,000 to $300,000
for any individual or legal entity during the ensuing
6 years. However, the $450,000 cap established under
the 2002 Farm Act is maintained for projects of special
environmental significance.
Payment terms for groups defined by USDA as "traditionally
underserved." Payment terms are improved
and expanded for beginning, limited-resource, and
socially disadvantaged farmers and ranchers. In the
2002 Farm Act, beginning and limited-resource farmers
and ranchers benefited from a provision that provided
greater financial assistance (up to 90 percent of
the estimated cost of certain conservation practices)
than that provided to other farmers and ranchers
(up to 75 percent of the cost). The 2008 Farm Act
extends the higher payment rates to socially disadvantaged
producers as well, and establishes that the rates
for these three groups of farmers be increased no
less than 25 percent above otherwise applicable rates
(up to the 90-percent maximum rate). Another provision
eases potential liquidity constraints to conservation
program participation. EQIP payments are typically
made upon completion of the practice installation.
The 2008 Farm Act allows traditionally underserved
participants to qualify for advance payments of up
to 30 percent for purchasing materials or services.
Beginning and socially disadvantaged farmers also
benefit from the "Conservation Access" provision,
which requires that a total of 10 percent of EQIP
funds be initially set aside to enroll these targeted
individuals.
Offer ranking procedures. Changes in
EQIP's procedures for ranking contract offers under the
2008 Farm Act include consideration of how comprehensively
and completely a proposed conservation project would
address resource issues and whether the project would
improve or complete a conservation system. The legislation
encourages the grouping of "similar" contract offers
for ranking purposes.
Ground and surface water conservation fund. This
fund, established in 2002, is replaced by the Agricultural
Water Enhancement Program. The 2008 Farm
Act expands the program's purpose from ground and surface
water conservation to include improving water quality
on agricultural lands. In addition to signing contracts
with individuals, the Secretary of Agriculture may enter
into agreements with partners, including producer associations
or other groups of producers, State or local governments
and Indian tribes, to collectively address water quality
or quantity concerns on a regional basis.
Features maintained from the 2002 Farm Act. Several
changes enacted with the 2002 Farm Act are maintained,
including allocating 60 percent of funding for livestock-related
practices, relaxing the requirement to maximize environmental
benefits per dollar of program expenditure, and disallowing
the use of competitive bidding. The latter precludes
the Secretary of Agriculture from assigning higher priority
to an application based on a producer's offer to accept
a lower payment rate for installing a given practice,
when comparing contract offers that would provide similar
environmental values.
Economic Implications
Expanded funding for EQIP. The funding
increases authorized in the 2008 Farm Act will allow
more producers to enroll in EQIP but may not be sufficient
to enroll all producers who are interested in participating.
Historically, producer interest in enrolling in EQIP
has outweighed the available funding by a large margin.
Even though EQIP received a significant funding boost
in the 2002 Farm Act, so many producers applied that
in 2003, the offers exceeded the $691 million in funds
obligated that year by an estimated $3
billion. In
2007, $993 million was obligated in EQIP but an estimated $865
million in offers remained unfunded due to budget
constraints.
$300,000 payment limitation. The reduction
in the limit on EQIP payments from $450,000 to $300,000
over 6 years could impact the extent of benefits that
can be efficiently achieved in EQIP, if producers have
to reduce the type or size of a conservation practice
so total payments do not exceed the threshold. However,
the sizes of EQIP payments typically made to individuals
or entities suggest that very few producers are likely
to be affected by a $300,000/6-year limit. Analysis of
EQIP administrative data suggests that less than 0.5
percent of those receiving payments would be directly
affected by the reduced limit. About three-quarters of
those getting payments over the 2004-07 period received
them in a single year, and the vast majority—about 90
percent—received $50,000 or less.
Improved payment terms for traditionally underserved
groups. Increases in payment rates for certain
farmer groups may increase participation of those
groups in EQIP. Higher rates reduce the cost to farmers
of investing in conservation improvements. Allowing
socially disadvantaged farmers to be eligible for
higher cost share rates may encourage some farmers
to enroll in EQIP who otherwise might not have participated
because they faced financial constraints. Or some
participants may make additional conservation investments
because they are now less costly. Lastly, participants
who become eligible for the higher cost share rate
may make the same investments as they would have
without the higher rates, but shift a portion of
the costs to the Government. Analysis of the "Conservation
Access" provision suggests that the provision will not improve
participation rates for beginning farmers.
Continuation of ban on competitive bidding. In
the 2002 Farm Act, a change in EQIP bid assessment procedures
discontinued the option of competitive bidding, and the
2008 Farm Act does not restore the option. Disallowing
bidding likely reduced the overall level of environmental
benefits per dollar of program expenditure that could
be achieved in EQIP. ERS analysis of EQIP contract data
revealed that cost-sharing and incentive payments were
much lower than the maximum rates when bidding was allowed
in 1996-2002. During that period, the average bid on
cost-shared structural practices was 35 percent of practice
cost, compared with the 50-75-percent rates allowed.
For management practices, bids averaged 43 percent of
the maximum rate, which was established by practice and
by county (see
Flexible
Conservation Measures on Working Land: What Challenges
Lie Ahead?).
Continuation of fund set-aside for livestock practices. The
continuing requirement in the Farm Act that 60 percent
of EQIP funds be allocated to livestock-related practices
could impact the types of practices that get funded,
particularly if livestock-related practices would not
have received funding in the absence of the set-aside.
EQIP has always had a set aside, which makes it difficult
to discern if livestock-related practices would have
been funded in the absence of a constraint. Over the
1997-2000 period when at least 50 percent of EQIP funds
had to be devoted to addressing concerns arising from
livestock production, at least 60 percent of funds went
to livestock-related practices. In 2002, the set aside
was raised to 60 percent. Between 2004 and 2007, 65-68
percent of funds went to livestock-related practices.
While the 60-percent set-aside is specified and achieved
nationally, not all regions achieve this allocation to
livestock-related practices. The Southern Plains, Mountain,
Northeast, and Appalachia regions allocated over 70 percent
of funds to livestock-related practices in 2007, while
the Pacific and Delta regions allocated less than 50
percent. See a listing
of the States included in each region.
See Other Title II (Conservation) Program Provisions
See all ERS analysis
of program provisions...
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