Public Policy & Aging Farmers

1. Public Policy & Aging Farmers Kevin B. Rund Sr. Director of Local Government Illinois Farm Bureau

2. Policy Areas • Access to Medical Care • Farm Program • Estate Transfer • Land Use • State & Local Tax • Technology

3. Background • Not all directly affect health . . . . . . but quality of life and the stresses older farmers face. • Advantage to aging . . .

4. Access toMedical Care

5. Emergency Medical Services • Aging farmers become more reliant on these services • Services are dwindling in rural areas, farther removed • Training standards/costs are forcing out the volunteers

6. EMS & Volunteers The EMS providers throughout rural areas of the state are extremely dependent on volunteers for staffing and fundraising to support the growing need for service providers, as well as equipment and supplies. At the same time, many rural communities are faced with an aging population, fewer businesses that offer local employment opportunities, and greater competition for a limited pool of community volunteers. There is increasing public expectation of what services should be available. The cost of providing services continues to increase and third-party reimbursement has not kept pace with expenses. Illinois Rural Health Association, 2005

7. Problems: Five Dominant Themes in 2005 IRHA Survey • Recruitment and retention of EMS providers; • Financial support of the EMS providers; • Public perception of service needs and provider capabilities; • Regulatory burdens facing EMS providers; and • Insufficient collaboration among EMS, public safety and health care providers. Illinois Rural Health Association, 2005

8. Recruitment & Retention • Individual’s Costs • Training: 120 hours for basic, 40 hours continuing • Cost most often must be met by the individual • Time away from their jobs • Volunteer pool suffers—out-of-town employment • Older volunteers retire due to demands • Businesses less apt to subsidize an EMS system by allowing employees to be absent.

9. Financial Support • Access to capital • Unfunded mandates • Fundraising is time consuming • Rising operating costs • Readiness costs vs. level of usership • Medicare & Medicaid inadequate

10. Physician Services • Tort laws pushing doctors out of Illinois • Physical distances increasing—especially affecting the elderly • Specialists scarce in rural areas

11. Liability for Physicians • According to the American Medical Association, Illinois is one of 19 states that is in a “full blown” medical liability insurance crisis (“The Doctors Are Leaving” 2004). • From 2001 to 2003, medical liability claims in Illinois jumped 45 percent, with a median payout for a claim increasing from $230,000 in 1993 to $520,000 in 2003. • As a result, insurance providers pulled back. In 2005, there were only four insurance companies offering medical liability insurance to physicians practicing in Illinois, compared to 16 companies in 2002.

12. Illinois Legislation 2005 • Caped non-economic damages--such as for pain and suffering--at $500,000 for physicians & $1 million for hospitals • Limits malpractice premium rate increase to 6 percent w/o hearing • Also establishes the "Sorry Works" pilot program

13. Illinois Legislation 2005 • October, 2006

14. Nurse Practitioners • Can be source of basic medical care • Limits on scope of practice

15. Nursing Homes • Stringent government regulations • Older facilities too costly to update • Scarcity of nurses, especially in rural areas • Low, slow state payments • Rural communities loosing facilities • Travel distances / costs increase for rural families

16. Farm Program

17. 2007 Farm BillShift From Direct Payments? • As retirees become more reliant on returns from investment in farmland • Less able to subsidize income with on-farm or off-farm income • Operations have evolved through decades of farm programs

18. 2007 Farm BillNew Focus on Rural Development? • Would likely benefit all rural residents • Benefits would accrue over time • Could be too late for some of today’s elder farmers

19. Estate Transfer

20. Estate Tax • Economic Growth and Tax Relief Reconciliation Act of 2001 • Current phase-in of increasing exemption • Eliminated in 2010 • In 2011, reverts to pre-2001 level of $600,000 • Uncertainty of ceiling, planning

21. Step-Up in Basis • Step-up revalues property--helps heirs when facing capital gains tax in the future • Unlimited step-up currently in-place disappears with 2010 elimination of estate tax • Could instead reset to $1.3 million • Could add $3 million more if spouse ($4.3 total) • After 2010, adjusted for inflation • Still could hurt farm families

22. Capital Gains Tax • Real value should be target • Property owners are taxed on inflation • Penalizing them for retaining investments • Discouraging long-term investment • Today, tax rate partially compensates • However, treats investors non-uniformly

23. Capital Gains Tax B 1997 for $1,800/a 2007 = $4,300/a, gain of $2,500 A 2007 = $3,000/a, gain of $2,500 1970 for $500/a

24. Capital Gains Tax B A

25. 1031 Exchange • Allows re-investment in “like kind” property and deferral of capital gains tax • Beneficial to older farmers • Tends to inflate surrounding farmland values • Detrimental to beginning or growing farmers

26. Land Use

27. Counties With County Zoning Counties Without County Zoning Zoning • Can be helpful, but not always viewed that way by farmers • Despite county prohibition from regulating agriculture

28. Rural Housing • Multi-generational need • “Single-family” limitations • Single house per lot limitation • Some make allowances for family • Rural Subdivisions • Non-farm residents • Need for reverse set-backs • Expectations

29. The Code ofCountry Living Where Expectation Meets Reality (No, the pizza place doesn’t deliver here.)

30. P.A.C.E. • Purchase of Agricultural Conservation Easements • Realize value while maintaining ownership • Alternatives: • Sell land for development value • Forego value and retain for farming • Illinois has authority but no funding • Local government in Illinois is not authorized

31. NFIP Floodplain Regulations • Generally, prohibit new construction within a floodplain • Prohibit reconstruction of significantly damaged structures—regardless of cause • Especially difficult for older residents

32. State & Local Taxes

33. Farmland Use-Value Assessment • Avoids escalating taxes based on rising development potential • Allows landowners to retain land in farming rather than being forced to sell • Maintains retirement investment for many older farmers

34. Gross Receipts Tax • Governor announced in his budget message today • Expected to raise $6 billion • Could dramatically impact farmers • High-volume, low margin business • Would apply whether or not operation is profitable

35. 3% Payroll Tax • Governor announced in his budget message today • Could dramatically impact farmers • Applies to businesses that do not offer their employees health insurance • Revenue to be used to subsidize health insurance

36. Public Policy & Aging Farmers Kevin B. Rund Sr. Director of Local Government Illinois Farm Bureau®