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May 17, 2010 California Farm Bureau Federation Friday Review of bills and laws

"The longest and deepest recession in the post-Depression era is most likely over." That tenuous forecast on page 52 of the 59 page of Governor Schwarzenegger’s May Revision of his proposed January State Budget is perhaps its only source of optimism. The declaration regarding California’s economy is further tempered, however, by the following warning: "The recovery will probably be moderate and prolonged by historical standards. The national economy is forecast to return to modest growth rates in 2010 and beyond. The outlook for the California economy largely mirrors the national outlook, but with slightly less growth" So much for the good news.

In January the projected budget gap for the fiscal year 2010-11 was approximately $20 billion. Adjustments made during the most recent 8th Extraordinary Session ($8.9 billion) combined with additional federal funds and administrative actions ($2.1 billion) were off-set by changes in federal law, court decisions, population and caseload growth, as well as the need for a prudent reserve, so the May Revision projects a budget gap of $19.1 billion. This figure is comprised of a current year shortfall of $7.7 billion, a budget year shortfall of $10.2 billion and a reserve of $1.2 billion.

In the short-term State Controller John Chiang issued a statement that the state will have enough revenues on hand to meet all payment obligations through the end of June, including paying the Revenue Anticipation Notes (RAN) on time. RANs are borrowed funds from the private market that help the state bridge cash gaps.

In a statement issued prior to the release of his latest budget proposal, the governor said his hands have been tied by Appellate Court decisions forcing states to eliminate programs instead of instituting targeted cuts. He expressed his desire for the U.S. Supreme Court to grant California the flexibility needed to balance the state’s budget.

In addition to the deep program cuts and the proposed elimination of the state’s welfare program, CalWORKs, realignment of pubic safety and mental health programs with county governments, the following revisions directly affect our agricultural community:

• Proposes to replace a General Fund reduction of $6.1 million for the State Water Resources Control Board's Basin Planning program with new fees on Waste Discharge Permits. This is in addition to $6.4 million in new water fees in the governor’s proposed January budget for the Irrigated Lands Regulatory Program and the National Pollution Discharge Elimination System as well as $5.4 million new water rights fees. These fees are proposed to address increased water rights enforcement, new surface water diversion reporting requirements, the Delta Watermaster


Program and water conservation activities. This would constitute nearly $18 million in water fees.

Seeks to augment multiple Natural Resources programs by $602.7 million from the Safe, Clean and Reliable Drinking Water Supply Fund for the Department of Water Resources and the Department of Fish and Game by immediately implementing the proposed 2010 Water Bond. This proposal would fund projects related to drought relief, groundwater and conveyance, desalinization grants, urban and agricultural water management planning grants, Red Bluff Diversion Dam and Delta Sustainability projects consistent with the Bay Delta Conservation Plan.

Proposes a $5 million decrease in General Fund for the Department of Fish and Game. These cuts will come from a number of programs including the Department’s review of Timber Harvest Plans.

• Recommends a new fee for the State Board of Equalization to recover its collection costs. It would be imposed upon delinquent accounts receivable to cover the actual costs incurred by the tax agency to collect the amounts owed. This fee is expected to generate $4 million in General Fund revenues in 2010-11, increasing to $13 million in subsequent years.

The Governor's January budget proposal assumed the enactment of a 4.8 percent statewide surcharge on all residential and commercial property insurance by March 1, 2010 to fund state and local fire protection and emergency response activities. His revision augments the Department of Forestry and Fire Protection by $124 million to reflect the loss of revenues from the delay in the enactment of the Emergency Response Initiative (ERI). The governor continues to support the ERI and scores $76 million in General Fund savings associated with its enactment.

The California Department Food and Agriculture’s budget appears to have avoided any further reductions from the earlier version, but we believe internal shifts in program priorities will result in some reallocation of funds.

As a consequence of the sunset provisions of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001, a so-called "pick-up" tax was phased-out at a quicker rate and eliminated in 2005. Since the provisions of EGTRRA sunset after 2010, the state "pick-up" tax will be reinstated. This is essentially an inheritance tax equal to the amount of allowed state tax credited against the federal estate tax. The amount of additional state revenue to be received as a result of the reinstatement of the tax is $892 million in 2010-11. (Note: the overall estate tax bill was not increased or decreased due to the pick-up tax, the tax bill will simply be apportioned between the IRS and state Franchise Tax Board.)

The May Revision does not include any increase in state funding for the Williamson Act subvention program. The suspension in state funding for a second year would seriously jeopardize the continuation of this landmark conservation program. In July the Williamson Act celebrates its 45th anniversary.

SB 1303 (Lois Wolk, D-Linden) passed off the Senate floor 30-0 this week. This Farm Bureau co-sponsored bill would continue the accidental take allowance for ongoing and routine agricultural activities under the California Endangered Species Act (CESA). Current law allows accidental take of species listed under CESA during routine and ongoing agricultural activities. This provision of law is set to expire January 1, 2011 and SB 1303 will allow that provision to continue. Unfortunately, the bill


was amended in committee to only allow for a one year extension of this provision. However, Farm Bureau is working with stakeholders to craft a longer-term solution providing the necessary protections for farmers and ranchers under CESA. We are working with the California Cattlemen’s Association on the bill as it moves to the Assembly.

SB 1474, this year’s version of the agricultural card check bill, by Senate President pro-Tem Darrell Steinberg (D-Sacramento) was heard by the Senate Appropriations Committee on May 3. Ag employer representatives testified in opposition. The Appropriations Committee placed the bill temporarily on the Suspense File. California agriculture and business groups, including Farm Bureau, will continue to oppose SB 1474.

SB 1121(Dean Florez, D-Shafter) to require ag employers to pay overtime for hours worked after 8 hours in a day is pending on third reading in the Senate. A broad coalition of business and agriculture including Farm Bureau continue to oppose the bill.

AB 2774 by the Assembly Committee on Labor and Industry is pending on third reading in the Assembly. The bill would substantially broaden the definition of a "serious" injury under Cal/OSHA rules resulting in larger and more frequent penalties. Farm Bureau and a broad coalition of businesses oppose this measure.

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