Date of Hearing: June 2, 2020

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2642

Author:(Salas) – As Amended Ver:May 5, 2020

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill requires the Department of Conservation (DOC) to establish and administer the Multibenefit Land Conversion Incentive Program (program) to provide grants to groundwater sustainability agencies, counties or their designated agents, for development of local programs supporting or facilitating multibenefit land conversion at a large scale in critically overdrafted basins. This bill sunsets on January 1, 2031.

FISCAL EFFECT:

1. Cost pressures in the tens of millions of dollars to fund the incentive program (GF, bond, special fund).
2. Ongoing DOC costs of approximately $100,000 to $120,000 for staff to administer the program (GF, bond, special fund).

COMMENTS:

1. Purpose and Background. In 2014, the Legislature approved a package of bills including AB 1739 (Dickinson, Chapter 347), SB 1168 (Pavley, Chapter 346), and SB 1319 (Pavley, Chapter 348), collectively known as the Sustainable Groundwater Management Act (SGMA). These bills established the regulation of groundwater in the state.

SGMA requires local agencies designated as groundwater sustainability agencies (GSAs) to develop groundwater sustainability plans (GSPs) for all critically overdrafted basins by January 21, 2020 and for all other high and medium priority basins by January 31, 2022. The goals of the GSPs should be for groundwater basins to reach sustainability within 20 years of implementing the plans. For critically overdrafted basins, that will be 2040. For the remaining high and medium priority basins, the deadline is 2042.

In the San Joaquin valley alone, net overdraft is estimated to be 1.8 million acre-feet of water, and as much as 750,000 acres may have to be fallowed or transitioned in order to bring groundwater use into balance.

This bill promotes land conversion on acres with the lowest soil health or the highest habitat value, aquifer recharge potential, flood protection benefits or on lands that expand habitat connectivity. It incentivizes conversion to rangeland, dryland farms, or cover crops, or uses or activities that provide multiple habitat, restoration, groundwater recharge, and/or dust control co-benefits. The goal of the incentive program is to help assist with SGMA implementation by reducing groundwater demand while maximizing cobenefits on converted land. According to the author:

In order to meet the goals of the Sustainable Groundwater Management Act (SGMA), California will need to reduce its water use and start transitioning certain agricultural land to less water intensive uses. With many Central Valley communities depending on farmland to support their families, it is important that the state plays a role to ensure that land is converted in strategic ways that provide multiple economic and environmental benefits. AB 2642 will help mitigate the economic impacts of SGMA and provide incentives to landowners so that fallowed lands will not be a liability but will deliver other economic and environmental benefits to communities throughout the state.

1. What Happened To the Money? In January, a budget surplus of $5.6 billion was projected for the 2020-21 fiscal year. Revenues through March were running $1.35 billion above projections. Compared to the January forecast, General Fund revenues are projected to decline over $41 billion. This revenue drop, combined with increased costs in health and human services programs and the added costs to address COVID-19, leads to a projected budget deficit of approximately $54 billion.

The Governor’s proposed January budget included $30 million in one-time funding in 2020-21 to support planning and water trading pilot projects across critically overdrafted basins to support the implementation of SGMA. Following the COVID 19 pandemic and the ensuing revenue shortfalls, the Governor removed this funding in his May Revision.

Analysis Prepared by: Jennifer Galehouse / APPR. / (916) 319-2081

Date of Hearing: May 14, 2020

ASSEMBLY COMMITTEE ON WATER, PARKS, AND WILDLIFE

Eduardo Garcia, Chair

ABPCA Bill Id:AB 2642 (

Author:Salas) – As Amended Ver:May 5, 2020

SUBJECT: Department of Conservation: Multibenefit Land Conversion Incentive Program: administration

SUMMARY: Establishes the Multibenefit Land Conversion Incentive Program at the Department of Conservation. Specifically, this bill:

1. Requires the Department of Conversion (DOC) to establish and administer the Multibenefit Land Conversion Incentive Program (MLCIP), which would provide grants to groundwater sustainability agencies, counties, or their designated agents, for development of local programs supporting or facilitating multibenefit land conversion at a large scale in critically overdrafted basins.
2. Establishes procedures for administration of the program.
3. Requires the DOC to develop guidelines to implement the program.
4. Specifies compliance and eligibility criteria.
5. Provides for accounting through annual reporting.
6. Sunsets on January 1, 2031.

EXISTING LAW:

The Sustainable Groundwater Management Act. (Division 6, Part 2.74 of the Water Code (WAT), commencing with § 10720:

1. Requires all groundwater basins designated as high- or medium-priority basins by the Department of Water Resources that are designated as basins subject to critical conditions of overdraft to be managed under a groundwater sustainability plan (GSP), coordinated GSPs, or approved alternative plans by January 31, 2020.
2. Requires all other groundwater basins designated as high- or medium-priority basins to be managed under a GSP, coordinated GSPs, or approved alternative plan by January 31, 2022, except as specified.
3. Requires all groundwater basins to achieve sustainability. A GSP must include measurable objectives and milestones in increments of five years to achieve sustainability within 20 years of GSP adoption.

FISCAL EFFECT: Unknown, this bill is keyed fiscal.

COMMENTS:

Author’s Statement:

In order to meet the goals of the Sustainable Groundwater Management Act (SGMA), California will need to reduce its water use and start transitioning certain agricultural land to less water intensive uses. With many Central Valley communities depending on farmland to support their families, it is important that the state plays a role to ensure that land is converted in strategic ways that provide multiple economic and environmental benefits. AB 2642 will help mitigate the economic impacts of SGMA and provide incentives to landowners so that fallowed lands will not be a liability but will deliver other economic and environmental benefits to communities throughout the state.

Background: The Sustainable Groundwater Management Act. On September 16, 2014, Governor Jerry Brown signed into law a three-bill legislative package, composed of AB 1739 (Dickinson), SB 1168 (Pavley), and SB 1319 (Pavley), collectively known as the Sustainable Groundwater Management Act (SGMA). This set of bills provides a framework for sustainable groundwater management, with the goal of management and use of groundwater in a manner that can be maintained during the planning and implementation horizon without causing undesirable results.

As part of this act, local agencies designated as Groundwater Sustainability Agencies (GSAs) are required to develop GSPs for all critically overdrafted basins by January 21, 2020 and for all other high and medium priority basins by January 31, 2022, and implement the plans to bring groundwater use into balance. Basins should reach sustainability within 20 years of implementing their sustainability plans. For critically over-drafted basins, that will be 2040. For the remaining high and medium priority basins, the deadline is 2042.

The Need for Land Conversion and Fallowing. In a recent report by the Public Policy Institute of California (PPIC), they estimate that 21 percent of GSPs emphasize demand management in order to end overdraft. In the San Joaquin valley alone, net overdraft is estimated to be 1.8 million acre-feet of water, and as much as 750,000 acres may have to be fallowed or transitioned in order to bring groundwater use into balance.

One option for continuing to keep land in working condition (working lands), is to allow for the permanent conversion of high-water use lands to lower water use lands. This may involve moving from permanent tree crops that must use specified amounts of water per year, to grazing or other uses that can be more flexible. Other options may include converting land to multibenefit uses, which means providing more than one benefit, including, but not limited to, improving water quality; increasing water supplies or water supply reliability; preserving, enhancing, or restoring wildlife habitat; and preserving or enhancing recreational opportunities. Projects achieving these goals require funding, which is the goal of the program established in this bill. Funding from the proposed MLCIP could be used to cover the costs associated with the land conversion itself, to offset decreases in revenue on a per-acre basis, or a combination of the two.

This bill acknowledges the challenges that landowners face when changing production on their land. For example, the MLCIP would ensure that fallowed lands could be minimally managed with agricultural practices to avoid the loss of existing agricultural land protections. Landowners could therefore continue to take advantage of other programs aimed at improving or protecting agricultural lands, and they would have the flexibility to return their lands to more intensive agricultural uses when the relevant local program within the MLCIP ends. The bill also specifies that a local program must continue to support and implement land conversion on each participating land parcel for at least ten years, striking a balance between the potential desires of landowners to have shorter commitments and greater flexibility, and the ability to maximize the desired benefits of land conversion. Since the bill has a ten-year sunset, the author may wish to specify that landowners would continue to receive funding for the duration of their agreements with their respective local programs.

New Program Goals – Habitat, Recharge and Flood Protection. This bill promotes land conversion on acres with the lowest soil health or the highest habitat value, aquifer recharge potential, or flood protection benefits, or on lands that expand habitat connectivity. It incentivizes conversion to rangeland, dryland farms, or cover crops, or uses or activities that provide multiple habitat, restoration, groundwater recharge, and/or dust control co-benefits. Notably, the MLCIP would include payments for converting to dryland farming or cover crops, but not to other crops that are less water-intensive than the status quo, likely to maximize the program’s impact. It is not clear whether the MLCIP would incentivize energy production through solar panel or wind turbine installation, which can be combined with pollinator habitat restoration to some degree.

The MLCIP would allow for GSAs, counties, resource conservation districts, and other local agencies or nongovernmental organizations to apply for MLCIP funds for a local program. The bill offers eligibility criteria for these applicants. For example, eligible local programs would need to have local matching funds, be consistent with existing GSPs, and be consistent with the county general plan, among other criteria. However, the bill provides the DOC with flexibility to develop guidelines, and provides potential applicants with the opportunity to coordinate with each other and develop local plans that incorporate lands within multiple GSAs or counties. This may encourage the development of local plans with more strategic, regional visions that may maximize the impact of land conversion. For example, fragmented wildlife conservation projects are less impactful than coordinated projects that link valuable habitat.

By doing the above, the intent of the legislation is to ensure that lands converted as a result of SGMA are shifted in a beneficial way, while simultaneously ensuring resources to buffer the economic impact of the change in land use.

Prior and Related Legislation:

In 2014, the Legislature approved a package of bills including AB 1739 (Dickinson, Chapter 347), SB 1168 (Pavley, Chapter 346), and SB 1319 (Pavley, Chapter 348), collectively known as the Sustainable Groundwater Management Act (SGMA). These bills set forth the governance of groundwater in the State of California.

Supporting Arguments: Supporters argue that achieving SGMA’s goal of bringing groundwater use into balance will also impact communities that are reliant on agricultural production. The state has a role to play in both mitigating the economic impacts that implementing SGMA will have on some communities, and ensuring that conversion of land to other uses occurs in the most strategic way possible to maximize ecosystem, habitat, flood protection, groundwater recharge and other public benefits.

Opposing Arguments: None on file

REGISTERED SUPPORT / OPPOSITION:

Support

Audubon California
California Association of Resource Conservation Districts
California Habitat Conservation Planning Coalition
Environmental Defense Fund

Opposition

None on file

Analysis Prepared by: May Dobosiewicz / W., P., & W. / (916) 319-2096