California Farm Bureau Federation Friday Review of bills and laws

The state legislature returned to Sacramento this week to begin the second year of the current two-year legislative session. Returning along with the legislative session is the publication of the Friday Review.

Many difficult issues face legislators and the Governor this year including how to resolve a budget problem of $9.2 billion, public employee pension reform, new tax initiatives aimed at helping close the budget gap, high speed rail, the pending water bond ballot measure and a host of others. The Governor unveiled his 2012-13 budget proposal this week and the challenge of balancing the budget is formidable with state revenues continuing to lag behind levels that state decision makers would prefer.

January will largely be devoted to dealing with what are characterized as "two-year" bills, legislation that failed to get through the legislative process last year. The introduction deadline for any new bills is February 24.

Here is what is happening this week.

Governor Brown presented his proposed State Budget earlier than expected on Thursday, January 5th, due to the fact that an overeager staffer mistakenly posted the document early on the internet. Farm Bureau is thoroughly analyzing the document but a quick review revealed the Budget projects that the state will end 2011-12 with a deficit of $4.1 billion. Without corrective actions, the state would spend $5.1 billion more than it takes in during 2012-13, so the state faces a $9.2 billion budget problem over the next 18 months.

The proposed budget assumes the passage of the governor's tax initiative on the November ballot. This measure would temporarily increase the personal income taxes and increase the sales and use tax by one-half percent. After the constitutionally guaranteed revenues that will flow to schools ($2.2 billion) and constitutionally protections for the 2011 Realignment funds for local public safety, the proposed new taxes would generate an estimated $6.9 billion through 2012-13 with approximately $4.4 billion in net benefit to the General Fund budget.

However, the Department of Finance (DOF) estimates that these hypothetical revenues will not be sufficient to close the entire budget gap so the following cuts and changes in state programs are being proposed:

" Refocus CalWORKs and subsidized child care by increasing income support to working families and reducing assistance to families who are not meeting work requirements. (Savings of $1.4 billion) " Merge service delivery for those who are eligible for both Medi-Cal and Medicare. This will reduce costs and improve the coordination of services. Additional savings will be achieved by other changes. (Savings of $842 million) " Eliminate domestic and related In-Home Supportive Services for recipients in shared living arrangements. (Savings of $164 million) " Eliminate supplemental funding for schools associated with the elimination of the sales tax on gasoline and making other Proposition 98 adjustments. (Savings of $544 million) " Reduce grant amounts for students who attend private institutions and making other reductions to the Cal Grant program. (Savings of $302 million) " Repeal, making permissive or suspending many state mandates on local governments that are unnecessary and burdensome. (Savings of $828 million) " Expand the alternative custody program for female inmates. This will allow the state to further reduce its prison population and focus more dollars on services. (Savings of millions of dollars in future years)

Due to the fact that implementing many of these proposals will require months of lead-time to generate budget savings, the governor's spending plan assumes that some of the cuts will be adopted by the Legislature by March 1st. If they are not adopted until July 1st then less than a full year of savings would be generated in 2012-13, and additional cuts will be needed.

Other budget proposals include the continuation of the use of weight fees to offset future General Fund costs connected with transportation expenses (savings of $350 million). In addition, funds will be borrowed from the Unemployment Compensation Disability Fund to pay the federal government for interest costs on the outstanding Unemployment Insurance loan. In future years, these interest costs will be paid from a proposed surcharge on employers.

Also of special interest is a proposed cut to the California Department of Food and Agriculture (CDFA) budget of $12 million, as part of a two year effort to achieve $31 million in ongoing General Fund savings. The 2011-12 Budget Act reflected an initial decrease to the CDFA budget of $19 million. This additional reduction primarily affects various programs relating to border stations, pest prevention, and food safety activities.

Though these cuts are difficult to accept, Farm Bureau and other organizations assisted the Department in reviewing its budget in detail over the last nine months. It was determined that these cuts could be made while still maintaining the core functions of the Department - to protect against the introduction of invasive pests and diseases. The goal was to ensure that cuts were deliberate and still allowed the Department's critical infrastructure to stay intact. Stakeholders also focused on how Congress and Federal agencies could assist in funding and program changes.

The cuts to the Department include $4.38 million to the 16 border stations. It is proposed that a portion of the General Fund reduction ($1.4 million) will be replaced by the Recycling Fund for new efforts the Border Stations will be making to mitigate recycling fraud. Savings to the border stations will be realized by not filling vacancies; reducing hours of service and closing those stations that have low traffic and interceptions of high risk pests/disease. Instead of operating the border stations on a 24/7 schedule, some stations with little traffic and few interceptions of pests/diseases of concern will have reduced inspection hours. Though not all stations will be open daily there may be inspections at random times at different sites to detect for invasive pests and diseases. Though border station funding is proposed to be reduced, the remaining dollars still allow stations with high traffic volume and greater risks of potential entry of pests to remain open. The program will operate more efficiently and be cost effective.

Other cuts that are being made to the Department include reducing General Fund dollars to the Light Brown Apple Moth program, which will now rely on federal dollars to support the program. General fund support for the bio-control program will be eliminated ($700,000). The Department is still determining where to take $2.5 million in cuts that are proposed as part of the $12 million total. Other savings are realized by not filling vacancies and reducing the frequency of poultry and meat inspections ($425,000).


The governor's budget also indicates "the Administration is continuing to evaluate" the need for a per-acre charge on landowner's who reside in the State Responsibility (SRA). A $150 charge per habitable dwelling fee was adopting in 2011 as ABX 1 29 (Robert Blumenfield, D-Van Nuys) allegedly to fund "fire prevention" activities and is currently being implemented by the State Board of Forestry and Fire Protection. Please try to follow this Sacramento-style logic:

1. State Budget appropriations for "fire prevention," even when revenue was overflowing the Treasury, were about $12 million.
2. The proposed "fee" on habitable dwellings is expected to generate $88 million annually.
3. The Department of Forestry and Fire Protection (CDF) estimates that it will cost them $7.5 million to administer the new program and the State Board of Equalization (BOE) estimates its cost to collect the "fee" to be $6.4 million, for a total administrative cost of $14.0 million.
4. So that's $14 million per year to administer a fire prevention "fee" for a program that usually costs the state $12 million annually.

To summarize, the governor's budget would create 28.5 new positions in CDF at a cost of $9.3 million and 57 new positions in BOE at a cost of $6.4 million in order to implement a fire prevention program that generally costs the state $12 million. Add to that the cost of prospective pensions and lifetime healthcare benefits for all the new hires and you will understand why the State of California got itself into a $9.2 billion hole.

We will continue to review the details of the budget that was released yesterday afternoon and will provide further information on the rest next week. Also it should be noted that this is just beginning of the budget process as the Legislature has yet to weigh in with their views on the matter.

On January 5, the Assembly Labor and Employment Committee gutted and amended AB 196 (Wilmer Carter, D-Rialto) relative to payroll card regulation to transform it into new minimum wage legislation now authored by Salinas Assembly Member Luis Alejo (D). Mr. Alejo's 2011 minimum wage bill, AB 10, failed passage in the Assembly Appropriations Committee in May 2011.

Like Alejo's prior bill, AB 196, as amended, would increase the California minimum wage to $8.50 per hour, effective January 1, 2013. Each subsequent January 1st, the minimum wage would be adjusted by the rate of inflation for the prior year reflected in the California Consumer Price Index for All Urban Consumers (CPI-U), as published by the Department of Industrial Relations, Division of Labor Statistics. AB 196 would require the Industrial Welfare Commission to publish inflation-adjustment increases, and would allow the IWC to increase the minimum wage by an amount greater than the prior year's inflation. However it would not allow the IWC to revise the minimum wage downward to reflect negative movement of consumer prices.

AB 196 was pulled from the committee's agenda on January 5, and Alejo plans to gut and amend a spot bill with the same language. CFBF and other employer groups strongly opposed AB 10 in 2011, and opposition to AB 196 is expected to be strong.

The Senate Agriculture Committee heard SB 625 (Ed Hernandez, D-Los Angeles) this week that would make minor changes to the current nursery stock licensing program at the California Department of Food and Agriculture (CDFA). The bill is really a spot bill, intended to be used as a vehicle should it be determined later that additional CDFA program changes are necessary. The Committee approved the measure and it has been double-referred to Senate Committee on Governance and Finance, where it will be heard next. Farm Bureau supports the bill.

The State Water Resources Control Board held a Policy Stakeholder Meeting January 5, 2012 to review 650 public comment letters on their newly proposed Policy regulating Onsite Wastewater Treatment Systems (OWTS). AB 885 (Hannah-Beth Jackson, D-Santa Barbara), which was signed into law in 2000, required the State Water Resources Control Board to develop a statewide policy for permitting and operation of onsite wastewater treatment systems. In response to public comment on the first draft three years ago, the board directed staff to rewrite the policy. The board held eight public workshops in October 2011 on the new draft policy. Farm Bureau attended and commented at all eight workshops. The new proposed policy has a tiered approach for addressing the wide variety of conditions and septic systems throughout the state, but most importantly the draft policy leaves much of the control with the existing local agencies while giving guidance to address those systems that pose a threat to water quality. The next Policy Stakeholder Meeting to review edits to the policy is February 1st, 2012. A revised public draft will be available March 19th and public comment will be accepted March 19th through April 30. The board will hold a public workshop April 4 and expects to hold an adoption hearing June 19, 2012. Comment letters on the current proposed Policy can are posted at:

http://www.waterboards.ca.gov/water_issues/programs/owts/cmmnts122311.shtml 

Farm Bureau has been and will continue to be actively engaged in commenting throughout the process.

A measure that would reduce the funding in each chapter of the Safe, Clean, and Reliable Drinking Water Supply Act of 2012 (Water Bond) is scheduled to be heard in the Assembly Water, Parks and Wildlife Committee next week. AB 157 (Kevin Jeffries, R-Riverside) was introduced January 19th, 2011 and failed to make it out of the Assembly last year making it a two-year bill. The measure would reduce the bond by 25 percent, including reducing the $3 billion for new water storage by $750 million. Farm Bureau is opposed.