On Thursday, Governor Brown signed a budget with $96.3 billion general fund expenses.  The budget is advertised as "balanced, on-time and one that directs additional resources to California's neediest students and continues the implementation of federal health care reform, while continuing to pay down debt and build a significant reserve to prepare for future uncertainties."  The budget is projected to provide long-term fiscal balance with operating reserves.  

  

The budget builds on significant progress in chipping away at the state's "Wall of Debt." This year's budget commits $2.6 billion to continue to pay down budgetary borrowing of prior years. From its peak of $34.7 billion at the end of 2010-11, the outstanding debt is $26.9 billion at the end of 2012-13; under the budget the debt will be paid down to $4.7 billion over the next four fiscal years.

 

Most of the actions by the Governor were predictable.  Significant action impacting agriculture includes:

 

Water Board: The Governor reduced the budget augmentation by $319,000 and two positions.  In his statement he said, "This reduction is necessary to prevent an excessive fee increase on farmers. However, I am sustaining $650,000 and 5 positions to develop greater expertise in agricultural production at the Central Coast Regional Water Quality Control Board and the Central Valley Regional Water Quality Control Board. The two largest agricultural regions of the state will benefit from the regional boards having greater internal expertise in agroecology, and agricultural soil and plant science.

 

Pesticide Regulation: The Governor reduced the augmentation to increase enforcement of state pesticide regulations by $250,000 and 2 positions. This reduction is necessary to help bring ongoing expenditures in line with ongoing revenues in the Department of Pesticide Regulation Fund. However, I am sustaining $383,000 and 3 positions to develop mitigation measures for toxic air contaminants. I will be working with the Legislature over the next few months to enact legislation that requires the development of control measures on pesticides.

 

Ag Education: I am sustaining funding for the Agricultural Career Technical Education Incentive Program for the 2013-14 fiscal year. This program was eliminated in my Local Control Funding Formula proposal consistent with my belief that local education agencies are in the best position to allocate their funding to meet local needs and priorities. Given the Legislature's support of this program, I will direct my Administration to examine whether this funding should continue as a separate categorical program into the future.
 

• Click here for the Governor's Press Release....

 

Throughout this year we have been reporting on a series of bills introduced to address the nitrate in groundwater issue.  Last week, AB 69 (Perea) was introduced to establish the Nitrate at Risk Area Fund to assist economically disadvantaged communities in developing and implementing sustainable solutions to supply clean drinking water.  AB 69 would establish a one percent tax on all agricultural or urban fertilizer sales and give the Department of Public Health the authority to increase the tax to four percent on or after January 1, 2016. The measure is scheduled to be heard in the Senate Environmental Quality Committee on July 3rd. The association is working with a coalition of ag interests to manage the measure stating that it is not needed in light of the industry's proactive approach to the nitrate issue and identifying other funding sources such as $455 million of federal funds at the Department of Public Health and a potential water bond currently under consideration.

 

Fourteen Republicans joined all Senate Democrats this week in approving a comprehensive immigration reform bill 68-32.  Meanwhile, the House continues to eschew a comprehensive package.  More than 125 national, state and regional agriculture groups sent a letter to the Senate prior to the vote supporting passage.

 

House Speaker John Boehner (R, OH) said the House will not take up the Senate bill, and his party will meet July 10 to plot the House path on immigration reform. He warned any reform bill offered in the House must garner support of the majority GOP up front. He's directed committee chairs to take a look at individual components of immigration law reform based on their jurisdictions. The House Judiciary Committee has already approved its version of agriculture guest worker changes, and this week approved another bill increasing the number of visas granted to foreign graduates of U.S. universities in science, technology and engineering, so-called STEM workers.     

 

The nearly 1,300-page Senate package, which made it across the goal line when GOP Senators late last week stepped up and offered a much tougher border security amendment that requires border security increases prior to any path to citizenship for undocumented workers.  The bill retains, however, the agreement reached between ag growers and the United Farm Workers union. Senate approval garnered praise from fruit, vegetable and dairy groups.

 

Sen. Charles Grassley (R, IA) spoke against the bill, saying it doesn't go far enough on illegal immigrant enforcement measures. Grassley voted against the bill, as did Senate Minority Leader Mitch McConnell (R, KY) and Sens. Saxby Chambliss (R, GA) and Thad Cochran (R, MS), the Senate Agriculture Committee's ranking member. Others criticized the bill for the number of "sweeteners" included; language not related to immigration reform but designed to win votes from Senators.  Examples include what's been referred to as the "Alaskan seafood special" allowing seafood processors to hire temporary workers through a summer work/travel program, and another authorizing a summer jobs program for the states.  Sen. Patrick Leahy (D, VT), chair of the Judiciary Committee, said the bill has so many industry amendments, "it reads like a Christmas wish list for Halliburton."

 

The heart of the farmworker agreement is a reinvention of the current "guest worker" or H-2A visa program. The current H-2A program is limited to seasonal workers and is overseen by the Department of Labor. It will be replaced by a much broader program, run by USDA, and which expands the kind of operations covered to include livestock and dairy farms in addition to fruit, vegetable and crop operations.  

 

However, an amendment by Sen. Rob Portman (R, OH) to modify the mandatory universal employer use of the E-Verify program, which uses an applicant's Social Security number to check citizenship status of prospective workers, did not get a floor vote.  Sought by meat packers, the amendment would allow companies to alert the federal government to applicants who obtain an E-Verify okay using stolen or fraudulent identification.  The current E-Verify requirement doesn't go far enough, industry says, to protect against stolen identification.  Portman's language, which supporters say will be in the final version is approved by Congress, would allow employers to access a "knowledge-based" ID system that would allow an employer to ask the applicant a series of questions based on information collected from various government sources.

 

President Obama intends to nominate Krysta Hardin to be deputy secretary of agriculture, the department's number two spot, replacing Kathleen Merrigan who resigned three months ago. Hardin, chief of staff to Secretary Tom Vilsack since 2011, is a long-time industry veteran and well-respected. She's the former chief of staff on the House Agriculture Committee's peanut and tobacco subcommittee, and held several positions with former Rep. Charles Hatcher (D, GA).  Hardin served as CEO of the National Association of Conservation Districts from 2004-2009, and was vice president of a Washington, DC lobbying firm from 1993-2004.

 

In the wake of the House Farm Bill's historic floor defeat, House Agriculture Committee Chair Frank Lucas (R, OK), the panel's ranking member, Rep. Collin Peterson (D, MN), subcommittee chairs and House leadership huddled this week, weighing options in getting the bill finally approved. Lucas' goal remains the same: Get the bill to conference committee with the Senate.

 

House Speaker John Boehner (R, OH) said no decision has been made; Majority Leader Eric Cantor (R, VA), who shoulders much of the blame for the Farm Bill's demise according to farm state House members, says he wants a vote after Congress' July 4 week-long break because the bill must be done before the August recess.   

 

The uncertainty of how the Farm Bill will be handled upended this week's scheduled consideration of the FY2014 ag/FDA spending bill, which also seeks deep cuts in ag spending, as well as reductions in Commodity Futures Trading Commission (CFTC) and FDA funding.  Leadership did not want to bring up ag spending while the memories of the bloody Farm Bill floor fight over spending cuts were fresh in members' minds. It's expected the $19.45-billion spending bill will be on the floor "sometime after we get back" from the July 4 recess, said one senior appropriations committee staffer.

 

Farm Bill discussions have boiled down to two primary options. First, Lucas has publicly stated he believes the Farm Bill would have been approved as amended on the floor - by a slim margin - if the only action it took on cuts to the Supplemental Nutrition Assistance Program (SNAP) was the underlying bill's $20.1 billion over 10 years.  He told an Oklahoma farm radio show this week he could ask the Rules Committee to take the bill as amended on the House floor, drop out a couple of deal-breaking amendments, and move the bill to the floor under a closed rule - it would be debated, a yea-or-nay vote, but no amendments could be offered.

 

A second option pushed by conservative GOP members is to strip out the nutrition title of the bill and move the two pieces of legislation separately.  Cantor is driving this option at the behest of conservative members, but Lucas and Peterson say the option is not viable. Traditional strategy holds the nutrition title of the bill is part of the omnibus farm package to give urban members a reason to vote for farm program spending, and ag members a reason to vote for food stamps and other federal assistance.

 

Legislation that creates a new cause of action against employers for violations regarding immigration status passed the Senate Labor Relations Committee this week.  AB 263 (Hernandez) passed out of the Committee on a vote of 3-0 with two abstentions.  The bill creates a series of penalties including the 14 day suspension of business licenses for the first penalty, down to permanent revocation of licenses after the fourth violation.  The association is opposing the bill and working with a broad coalition of employer groups to stop or significantly amend the bill. 

 

The energy and power subcommittee of the House Committee on Energy & Commerce this week held an oversight hearing on the federal Renewable Fuels Standard (RFS), hearing only from government experts, including USDA Chief Economist Joe Glauber, Adam Sieminski, administrator of the U.S. Energy Information Agency (EIA) and Christopher Grundler, director of the EPA's Office of Transportation & Air Quality/Office of Air & Radiation.

 

In a related development, the U.S. Supreme Court this week announced it will not hear a case in which the petroleum and industries sued EPA over its authority and methods in increasing the ethanol/gasoline blend rate from 10% to 15%, or E15.  The oil and ag groups had petitioned the court to overturn a lower court decision that the groups have no legal standing to challenge the EPA blend decision.  Today, only about 20 stations nationally sell E15, according to one report.   

 

Subcommittee chair Rep. Ed Whitfield (R, KY) said the hearing was necessary to take a "hard look" at the five-year old federal requirement on the blending of biofuels with gasoline, adding in some cases the RFS works well, while there are "emerging issues and room for improvement in other areas." He said much has changed in five years, including a decline in domestic oil use and a drastic reduction in U.S. corn supplies, the basic feedstock for ethanol.  Subcommittee member Rep. Joe Barton (R, TX) - former full committee chair - called for a full repeal of the RFS, while ranking subcommittee member Rep. Bobby Rush (D, IL) and former committee chair Rep. Henry Waxman (D, CA) voiced full support for the federal program.

 

Calling the RFS "broken", the National Turkey Federation (NTF) released a statement prior to the hearing in which it claims the RFS is responsible for a $1.9-billion rise in feed costs "as corn continues to be siphoned off to ethanol." The government witnesses acknowledged the RFS has impacted feed costs through competition for corn, a situation exacerbated by last summer's drought.  

 

However, USDA's Glauber reiterated the Administration's position that corn price increases are due to several factors, including record exports and higher overall fuel costs, but acknowledged a study showing about 30% of the increase can be traced to the RFS.

 

The bill's author says 375 groups support the bill, including the American Medical Assn., the American Public Health Assn., the Infectious Diseases Society of America, the Humane Society of the U.S. and the Humane Society Veterinary Medical Assn.The HSUS vet group has also signed up 125 individual veterinarians in support of the bill.

Mike Taylor, CPCU

Vice President

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