Legislative Analyst's Office

Analysis of the 2002-03 Budget Bill

California Department of Food and Agriculture (8750)

The California Department of Food and Agriculture (CDFA) promotes and regulates the state's agriculture industry through marketing programs and industry inspections. The department is responsible for developing California's agricultural policies and assuring accurate weights and measures in commerce. The department also provides financial oversight to county and district fairs.

The budget proposes expenditures of about $259 million and 1,936 positions in 2002-03 for the department, including $97 million from the Department of Agriculture Fund and $103 million from the General Fund. The proposed expenditures are $73 million, or 28 percent, below estimated current-year expenditures. One-time federal funds totaling $63 million that are included in the current year but do not appear in the budget year make up most of the reduction for the coming year.

Industry Should Contribute to Medfly Control

We recommend the enactment of legislation authorizing the department to assess the agricultural industry through fees for 50 percent of the state's cost of the Medfly Preventative Release Program. For 2002-03, we recommend that the General Fund support 50 percent of the program cost and that the remaining 50 percent be structured as a General Fund loan repayable on or before June 30, 2004 from fee assessments on industry. (Reduce Item 8750-001-0001 by $4.6 million.)

Background. The Governor's budget proposes $9.2 million from the General Fund and 138 positions to provide funding for Mediterranean Fruit Fly (medfly) control on an ongoing basis. The department began efforts to control the impact of the medfly on California's agricultural industry in 1975. Since 1980, the state has spent around $140 million from the General Fund to support this effort, with a similar amount provided by the federal government. The department has used aerial and ground spraying, and sterile medfly releases to fight the pest.

The current Preventative Release Program (PRP) began in 1996 and involves raising sterile medflies and releasing them throughout a 2,100 square mile area of the Los Angeles Basin. Total program costs are $18 million annually, shared equally between the state and the federal government. The Legislature approved this as a five-year program with a June 30, 2001 sunset date. The 2001-02 Budget Act extended the program for an additional year.

Department Directed to Examine Different Funding Mechanism; But Has Not Responded. During the 2001-02 budget hearings, the Legislature expressed concern over the General Fund obligation for the program and directed the department, through supplemental report language, to provide information detailing how the funding source for the PRP could be shifted in whole, or in part from the General Fund to the Agriculture Fund. This report, due January 10, 2002, is to include various funding options for the Legislature to consider. At the time this analysis was prepared, the department had not submitted the report to the Legislature.

Industries That Benefit Should Share in Cost. Field data indicate that the PRP is successfully controlling the medfly population in southern California. By preventing the establishment of medfly populations, the PRP protects a variety of fruit growing industries including peaches, pears, lemons, limes, and oranges. The CDFA estimates that in the absence of such a program the direct crop losses as a result of medfly damage could range between approximately $150 million to $300 million annually with a like amount lost to urban gardeners. Clearly, control of medfly populations and damage on agriculture generates benefits to the consumers of the state. Thus, there should be some General Fund support of this program. However, it is equally clear that specific agricultural industries benefit from this state-run program. We think that it is reasonable, therefore, that both the General Fund and the agricultural industries that most benefit from the program contribute equally to its support.

Accordingly, we recommend enactment of legislation, to direct CDFA to develop an assessment program that will equitably distribute half the cost of the PRP across those industries that most benefit from the absence of the medfly. This assessment should be distributed in such a manner as to maximize participation thereby minimizing the economic impact on any individual industry.

For 2002-03, we recommend that the General Fund provide half the amount requested for the program--$4.6 million--and the other half be structured as a General Fund loan, to be repaid from the program assessments no later than June 30, 2004.

Additional Funding for Multistate Coalition Not Warranted

We recommend deletion of $130,000 from the General Fund requested for the department's support of a multistate agricultural policy coalition because the department currently has resources for these activities. (Reduce Item 8750-001-0001 by $130,000.)

The budget requests $130,000 in General Fund money for the department to coordinate efforts with four other states in order to influence national agricultural policy.

In February 1999, the department, in conjunction with the agriculture departments in four other states--Florida, New Mexico, Texas, and Arizona--established a coalition to influence national agricultural policy in specific areas of concern to the five states. This coalition was established at a meeting of the National Association of State Departments of Agriculture (NASDA) and to date the coalition has been scheduling meetings to coincide with NASDA meetings to save on travel and other costs. Since 1999, CDFA has funded coalition-related activities from its base budget.

We believe the requested augmentation is not warranted. This is because the department has resources in its base budget to participate in a number of multistate groups to influence national agricultural policy. On an annual basis, it is up to the department to assess the priority of the various policy areas and allocate funding to participate in these meetings and conferences accordingly. Thus, coalition-related activities should be funded from the department's base budget, as it has been thus far.

Use Surplus Funds for Pierce's Disease Program

We recommend that General Fund support for the Pierce's Disease Control Program be reduced by $1.5 million and be replaced with a like amount from the reserve in the Pierce's Disease Management Account. We further recommend that the department report by the time of the May Revision on the amount of additional federal funds it has received, or anticipates receiving, for the current and budget years. Based on that information, we further recommend that the Legislature adjust the General Fund support for the program.

Background. In August 1999, an outbreak of Pierce's Disease, a bacteria that infects several plant species and can be particularly devastating to grape vines, was confirmed in the Temecula area in southern Riverside County. It was determined that the cause for the spread of the disease was due to a nonnative insect--the Glassy-Winged Sharpshooter. In response to the potential harm this disease poses to the wine grape industry, the Legislature has appropriated $25 million to combat the spread of the disease through 2001-02. In addition, the federal government has provided about $19.7 million and the wine industry has contributed about $7.2 million. Thus, through 2001-02 $52 million has been committed to this program.

Budget Proposal. The budget includes $18.8 million from the Pierce's Disease Management Account (PDMA) for support of the Pierce's Disease Control Program. Of this amount, $8 million will be supported by the General Fund and $4.9 million by federal funds. The remaining $5.9 million will come from anticipated contributions from the wine and grape industry.

Account Reserve Not Needed. Our review shows that the projected program expenditure level would leave the PDMA a reserve of $1.6 million at the end of 2002-03, about the same amount estimated to be in the account at the end of the current year and 2000-01. (This reserve has accumulated from unexpended General Fund support provided to the program in 1999-00.) We see no reason why the account needs to maintain a reserve of this magnitude on an ongoing basis. As such, we think that the budget-year request of $8 million from the General Fund could be reduced by drawing down the reserve. Accordingly we recommend the amount of General Fund transfer into the PDMA support for the program be reduced by $1.5 million, leaving a reserve of $100,000.

Additional Federal Funds May Be Forthcoming. The department indicates that it is seeking additional funding for the program and has identified other possible federal funds above the amount projected in the budget. These funds, which would be made available through the federal Animal and Plant Health Inspection Services (APHIS) in the current year, could range from $2.4 million to $8 million depending on the outcome of negotiations between CDFA and APHIS. The 2002-03 federal budget proposes to increase APHIS funding by $162 million, mainly to combat pest outbreaks. Some of this money could be directed to the state's control of Pierce's Disease. To the extent the department receives these funds, we think they should be used in place of the remaining General Fund support provided for the budget year. Therefore, we further recommend that the department report to the Legislature by the time of the May Revision on the amount of federal funds it has received in the current year, or expects to receive in the budget year, that are not included as part of the Governor's budget. We recommend that the Legislature, based on that information, further reduce the General Fund support for the program.

Return to General Government Table of Contents, 2002-03 Budget Analysis