Agriculture Committee on Nov. 7th, 2006

[The Chair, Conservative, Gerry Ritz]

Order.

Good morning, everyone. It's a pleasure to have a new group of folks before the committee.

This morning, for the first hour, we are going to be hearing from departmental officials on the Canadian farm families options program. We have Clair Gartley, director general of the agriculture transformation programs directorate--good morning, Clair--we have Charlene Kosowan, director of the Canadian farm families options program--good morning, Charlene--and we have Michèle Bergevin, deputy director of renewal regional services with Canadian agri-renewal services; great, and welcome.

You folks have a presentation for us. Then we'll open the floor to questions.

Thank you so much.

[Clair Gartley, Director General, Agriculture Transformation Programs Directorate, Department of Agriculture and Agri-Food]

Thank you, Mr. Chairman. It's a pleasure to be here this morning to appear before the committee.

I want to make a few comments. I'll try to keep them very brief. I think the committee members were provided with a package yesterday with some background to the program and details on it. I hope you have that with you.

Thank you for inviting us to speak on behalf of Agriculture and Agri-Food Canada about the Canadian farm families options program. As you know, Canada's new government committed to reducing the pressures on low-income farm families in budget 2006. This commitment involved putting in place the options program with a $550 million federal investment. The program was announced nationally on July 31 and delivery began immediately, with the exception of Quebec, where a delivery of the options program began on August 16.

While a number of business risk management programs address income drops, some farm families are continuing to experience serious and continuing income pressures. The program is designed to encourage low-income farm families to pursue options that will help them to improve their longer-term prospects for on- or off-farm income.

The options program is a pilot program, a new program comprising two components. The first part of the program provides and encourages applicants to participate in farm business assessments and skills development training services that will be available to them until 2009. The second part is an income payment component that is in operation this year, in 2006, and next year, in 2007.

A new and innovative approach was adopted in the options program by coupling the farm business assessment and training in order to develop the skills, knowledge, and tools farm families may need to earn a better living either on or off the farm. The income payment is designed to help them take advantage of this opportunity--in essence, to give them some breathing space while they consider their options.

Eligible applicants, or those eligible for an income payment, are required to commit to participating in the farm business assessment or skills development services within 24 months of their application to help them identify longer-term income opportunities. As I mentioned, these activities include completing a farm business assessment or an individual learning plan detailing skills development, training, or an equivalent activity.

While establishing the eligibility requirements for the options program, a number of parameters were examined to ensure that those in greatest need would receive assistance. Eligible applicants must meet all the eligibility requirements to receive an options income payment. They must be actively farming in the year of application, 2006 for this year; they must have a minimum gross farm income, reported in 2005, of $50,000; and the income from all sources must be less than $25,000 for a farm family or $15,000 for an unattached individual.

The $50,000 gross farm income requirement was established to direct payments to those low-income farm families whose operations are commercial farms. The $15,000 or $25,000 income threshold is designed to ensure that the options program is targeted at individuals or families most in need. When combined with the gross farm income threshold, the targeted families are trying to make a go of commercial farming but are not making very much net income.

The rural low-income cut-off levels, or the LICO levels, published by Statistics Canada were considered as we developed the program parameters, but in the options program, the income threshold for a farm family of two or more is increased to $25,000, and individuals to $15,000, slightly higher than the rural LICO levels used by Statistics Canada.

We estimate that about 26,000 farm families across the country would be eligible for the program. Corporations, cooperatives, and communes are not eligible for options payments. However, individual farmers and farm families who own at least 20% of the farm corporation are eligible to apply.

To ensure that the program addresses those in greatest need, shareholders of closely held corporations are eligible. The options payment is made to the individual shareholder rather than the corporation.

Applicants receive the difference in the payment between the threshold amount of the $25,000, or $15,000 for an individual, and their total incomes for each year from all sources, including other program payments.

The farm business assessment, administered by the Canadian farm business advisory services of Agriculture and Agri-Food Canada, helps farm families set goals for their business and develop plans to meet their goals. Eligible applicants are provided with up to five days of professional consulting services and follow-up services resulting in each family receiving a business profile, statement of assets and liabilities, and an analysis of their operation.

The CASS, Canadian agricultural skills service, is the other program that helps options participants. CASS involves a skills assessment process and the development of an individual learning plan. Financial assistance is provided to eligible clients with an approved learning plan to support training in areas such as agricultural business management, accounting, finance, human resources management, training for other employment off-farm, or training to acquire skills for starting a new business.

Eligible CASS costs include tuition fees, textbooks, and travel while attending training away from home. The level of financial assistance can be up to $16,000 per participant according to net family income levels.

Options applicants who have completed the farm business assessment or have participated in CASS within the previous 12 months of their application are deemed to have met their commitment upon evidence being submitted to the department. Based on the applications we have so far, it appears that roughly 12% of the participants in the program have already met those requirements.

Participation in these services is gradually increasing as more options applicants meet their commitment to complete the requirement. As of November 5, 2006, there have been 13,460 applications submitted and entered into our processing system, with 5,732 payments distributed already, representing $59.7 million, almost $60 million, in payments to families and individuals.

When we developed the program, we set an income payment processing standard of 30 days from the receipt of a completed application and we are successfully meeting this standard. The reason we did that was to get the payments out as quickly as we could to families who need these funds.

With that, Mr. Chair, I will close my comments. I appreciate being here and will welcome your questions. Thank you.

[The Chair, Conservative, Gerry Ritz]

Does anyone else have opening statements? Okay, great.

I had one before we started. Were any of you folks involved in the design of the program or just the administration?

[Clair Gartley]

A couple of us were involved in the design of the program, Michèle and I. Charlene joined the program as director on October 10.

[The Chair, Conservative, Gerry Ritz]

Good. Thanks.

Mr. Steckle, seven minutes, please.

[Paul Steckle, Liberal, Huron—Bruce, ON]

Okay, very quickly. I have a lot of questions this morning and probably not a lot of time to ask the questions.

First of all, how long has this program been in the works? Is this something new? Is this something that's been around for a long time or is it a creation of this government?

[Clair Gartley]

It is a creation of this government. It was a commitment made in the action plan for agriculture that was approved by cabinet in June, I believe it was, so it is a brand new innovative program.

[Paul Steckle, Liberal, Huron—Bruce, ON]

You've dedicated $550 million to this program. What portion of that $550 million is going to be used to offset accounting costs? You're asking farmers to prepare a business plan in their application processes. Obviously you're paying for that. How much of this $550 million is used for the administration of that part of it?

[Clair Gartley]

Out of the $550 million, $380 million will go to the income payment part of the program this year and next year. As I mentioned, we have that income support there for the pilot program for 2006 and then again in 2007. Then there's $126 million that will be used to provide the services--the farm business assessment, the professional consulting services to the applicants, as well as the Canadian agricultural skills services program that will be available to these participants. The rest of the money is administration funds.

I should have mentioned that the $126 million will flow out over the next few years, actually to 2009, because the applicants have 24 months to meet their commitment to participate in one of those services. There are income payments in 2006 and in 2007, but then the farm business assessment and skills services go beyond that for two more years.

[Paul Steckle, Liberal, Huron—Bruce, ON]

How do you evaluate...you said minimum gross sales of $50,000. You have a target of $25,000 and $15,000 respectively for dual and single. What constitutes $25,000? If with your farm income, along with off-farm income, your gross or your net taxable.... What are we talking about here?

[Clair Gartley]

It's the income reported on line 150 of your return. So it's income from all sources.

[Paul Steckle, Liberal, Huron—Bruce, ON]

On which you pay taxes. It's before taxes.

[Clair Gartley]

Yes, it is.

[Paul Steckle, Liberal, Huron—Bruce, ON]

If combined incomes of all sources is $25,000 or less, then you would qualify as a couple?

[Clair Gartley]

Yes. Let's say you're a family and your income was $20,000, then you would get a $5,000 payment. If you're an individual and your income is $5,000, you would get a $10,000 payment to take you up to the $15,000 level. The maximum payment we'll make is $25,000 to a family or $15,000 to an individual.

[Paul Steckle, Liberal, Huron—Bruce, ON]

I'm hearing from a number of farmers who have called me about the program, and they immediately draw their conclusion that this is an exit program from farming--getting out of agriculture. It's a welfare program. Once farmers in the business, if they call themselves truly farmers, realize that their incomes are at that level, then they're basically not farming anymore. So this is an exit program.

Certainly when you look at the second year, reducing that by a further 25% or whatever, then really it is moving that person onto the welfare rolls. I don't understand. You're saying 26,000 farmers would be eligible for the program. We can pretty much determine that 26,000 farmers are going to be off the roll of legitimate farmers probably in the next five years. If you've deemed these farmers by their income tax returns to be at that level, we're writing 26,000 off the list.

Is that an assumption we could make?

[Clair Gartley]

The goal of the program is to help that farm family that is struggling because of their income levels--give them a breather and encourage them to think about what they may do. It's up to them, their choice, whether they want to look at the operation and do a real thorough assessment, or whether they do want to consider perhaps some other training for more off-farm income or set up an off-farm business. It's to give them that option. So it really is their choice. It's a pilot program. It's not meant to be long-term income support. It really is designed to encourage them to consider participation in these programs.

The farm assessment and CASS programs have been around since the start of the agricultural policy framework in 2003. We were starting to see increased uptake and were getting some good results back from people who had used the programs. We felt that encouraging more people to use the programs would be a very positive thing. They don't have to exit farming to be eligible. They just commit to taking a look. They can make the choice of which service they use. We haven't said they have to use both--they can if they want to, though. Based on the feedback we've had on these services we felt it would be beneficial for them.

[Paul Steckle, Liberal, Huron—Bruce, ON]

A farm accountant has reminded me that in his overview or summation of the program, if there is a review and appeal of your tax application, there's no consideration for any appeals. In the final determination, it would be based on the first assessment of your taxes, not on a further appeal process. For instance, if you're doing the further appeal and looking at the negative margin, it would not go into that area where you would have an appeal and it would be reviewed. Is that correct?

[Clair Gartley]

That's correct. If there was incorrect information, for whatever reason, when the application was filled out, we would allow that to be corrected, but when you apply, whatever the Canada Revenue Agency has on file as your tax return, that's the return the program would use to calculate it.

[The Chair, Conservative, Gerry Ritz]

Thank you, Mr. Steckle.

Mr. Bellavance, seven minutes, please.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

Thank you for coming and thank you for your evidence.

When this program was created, of course the Bloc Québécois said that it was not enough to solve the farm income crisis, but one cannot be opposed to helping the producers who are the most in need.

The deadline for program application was October 31. How many farm producers applied?

[Clair Gartley]

Merci.

Actually, the minister did announce that the deadline has been extended to November 20. I'm sorry I didn't mention that in my opening comments; I should have. So applications are still rolling into our processing centre in Winnipeg.

As I mentioned, as of November 5, we have well over 13,460 applications, and we're still expecting to get quite a few more applications into the program.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

How many of the 13,000 producers in Quebec put in an application?

[Clair Gartley]

Yes, actually, participation from Quebec has been very good. As of November 5, 3,260 families and individuals have applied to the options program.

[André Bellavance, Bloc, Richmond—Arthabaska, QC]

An estimated 5,000 producers in Quebec would qualify for the program.

Have you set up a mechanism for letting the other 2,000 producers know that they might be eligible or are people expected to find out about the program on their own?