Assembly Budget Subcommittee No. 4 on Climate Crisis, Resources, Energy, and Transportation

Good morning. Like to welcome you to Assembly Budget Subcommittee four. Today we'll be hearing from three departments under the California Environmental Protection Agency, Cal Recycle, the Department of Toxic Substances Control, and Department of Pesticide Regulation. We'll also hear from the Department of Food and Agriculture. We have six items that are planned for discussion. For each presentation item, I'll ask each of the witnesses in the agenda to introduce themselves before they begin their testimony.

At the end of the presentation items Members of this Subcommittee at the end of the presentation items, Members of the Subcommittee may ask questions, make comments, or request a presentation on any of the 13 non presentation items. We will not be taking a vote on any of the items on the agenda. After all the items are heard, we'll take public comment. For Members of the public who wish to provide public comment, please limit your testimony to items on the agenda.

If you have comments on specific budget solutions not related to the departments before us, please refer to the daily file for which Subcommittee hearing the pertinent Department will be before the Committee. Each member of the public will have 1 minute to speak. There will be no remote testimony. Could we please take role?

[Roll Call].

All right, and so we'll move on to our first issue panel. Cal EPA Departments, General Fund solutions and implementation update.

Good morning Chair Bennett and Assemblymembers. My name is Brandon Merritt with the Department of Finance here today to open for issue #1 which is the California Environmental Protection Agency Department's General Fund solutions and implementation related to the Department of Pesticide Regulation, Department of Toxic Substances Control and Department of Resources Recycling and Recovery, also known as CalRecycle. I'm joined today by both my Finance and Department colleagues that I will refer any specific questions to. Starting off with CalRecycle, the Governor's Budget proposes to reduce CalRecycle's 2023/24 appropriation for the compost permitting pilot program by $6.7 million, or an 84% reduction and $800,000 maintained.

The Administration made the difficult decision to reduce funding for this program based on it being a pilot program that was still early in its implementation with most of its dollars being unspent. The budget also includes a budgetary loan of $125,000,000 along with a one year retainment deferral.

Thank you. $25 million budgetary loan from the beverage container recycling fund to the General Fund from resources that were not projected to be used for operational needs. Consistent with a similar loan that was included in the current year budget, the budget includes provisional language for the new loan requiring the Administration to repay the loan early in the event that there would be any projected programmatic impacts.

However, as noted in the agenda, the Administration repaid the current year $100 million loan on February 26, making the $25 million repayment deferral no longer needed. As such, the Administration is also continuing to assess the viability of the proposed budget year loan and will address this during the May revision. For Department of Pesticide Regulation, the budget proposes to reduce the Department Pesticide Regulation's 2023/24 appropriation for the pesticide notification system by $2.6 million and maintain 7.4 million, or 74%.

The $2.6 million reflects actual savings from the project and thus will have no programmatic impact. Lastly, for Department of Toxic Substances Control, the budget proposes Trailer Bill Language that would delay $175,000,000 General Fund from DTSC's 2023/24 appropriation for the vulnerable community toxic cleanup program. Specifically, the Trailer Bill Language delays $85 million until 25/26 and $90 million until 2026/27. This is a high priority program that supports equity and targets and disadvantaged communities that are impacted by contamination.

The Administration is proposing to protect all program funding, but is proposing to delay 35% to out years to address the budget deficit while minimizing program disruption. With that, happy to work with my colleagues to answer any specific questions the Committee may have.

Thank you very much. LAO.

Good morning Mr. Chair. Frankie Mendez with the Legislative Analyst Office. Overall, we find that the solutions in this discussion item have merit. The reductions target one time funding that has not yet been committed, which represents a reasonable approach that is less disruptive than reducing funding that has already been awarded or reducing ongoing base spending. As we have noted in prior budget hearings within this Subcommittee, while delays provide short term benefits, they also complicate the state's future budget situation.

For funding within this discussion item and across the recent onetime funding provided through the thematic packages, we provide the Legislature with additional options it could consider to the extent that additional alternative solutions are needed, which we note in our climate report. These are not recommendations for immediate reductions, but additional options the Legislature could consider as it weighs the merits of various alternatives in solving the budget problem which we believe could be worse come May revision. I'm happy to take any questions.

Thank you very much. I'd like to start with the cleanup in vulnerable communities initiative funding. First, I'd like to get an idea of just how are we evaluating the effectiveness of those programs in terms of delivery, et cetera. Could you help us? What are the reporting requirements, et cetera, for people receiving these grants?

Yeah, thank you. Mr. Chair, my name is Brian Brown. I'm the Chief Financial Officer for DTSC. Happy to be with you this morning. So we do have for the CVCI program, specifically ECRG, which is our cleanup grant program, have a number of.

You know, we need these things are like, these things remind me of those. No matter what you do, you're going. To end up with a microphone in the same spot. You can try it this way or this way. But I'm being requested to get my microphone down. Like taming a tiger. All right, go ahead. Back to you.

For each of the CVCI programs, we do have a number of data points that we collect. So just as one example, the ECRG grant program. This is a grant that goes out to local entities and nonprofit groups to do local site assessments, investigations, and ultimately cleanup activities. For each of those grants, there are requirements that they report back to us on a quarterly basis on their progress or status at meeting for that individual site and type of activity, what their progress and outcomes are.

And LAO has one suggestion in there. Instead of delaying the 175,000,000, instead to just reduce it, knowing that we could put it back in if we do have sufficient funds later, what would be the impact of reduction instead of a delay of that funding?

Yeah, so CVCI is a brand new program that we've been standing up just in the last couple of years, and so we are now well underway for each of those programs. So under the Governor's proposal, the delay allows us to kind of continue the progress we've made. An actual reduction of the 175,000,000 would have pretty severe impacts on our future planned activities. So roughly, of the 175, about 90 million of it currently would be slated for ECRG. So again, that's the grant program to local communities.

If that funding was removed instead of just delayed, that's probably the equivalent of 40 or 60 projects, cleanup projects in local disadvantaged communities that wouldn't be able to occur. Another 80 or so million is for our discovering enforcement program, where we're out there identifying sites that need to be cleaned up. And if that funding was no longer available, that'd be the equivalent to probably 400 sites, give or take, that wouldn't be evaluated.

So have the grant opportunity applications. Are they out there now already?

Yeah. In fact, just in the last couple of weeks, we made the announcements for a second round of grant awards.

So people are aware that with this funding being delayed, it's not certain that the grants are going to be coming in well.

So we made the second round of awards. There's some funding still available in the remaining funds that are not delayed. That would allow us to do another round in the next year or so, and then that would allow us by 25/26 to then can do a subsequent round.

Communities are not then working on grants for the delayed funding yet, is that correct?

No, I don't believe they're looking that far out.

That's what I wanted to be certain on. Thank you. And then my next question, lets move over to the CalRecycle program on organic waste Infrastructure grant program.

Good morning. Krystal Acierto. I'm the Acting Director of CalRecycle. And so you're specifically asking about the Organic Waste Infrastructure Grant Program? Yeah. So the average award amount for the program is about seven million dollars.

Okay. Thank you. And when factoring in the applicant's contributions, what percentage of the total cost of the project is the state providing with this grant on average? What's our--

Yeah. So on average, the state is generally providing through the grant program about 70 percent of the funding for the project. So while there's not actually a match requirement for the grant program, it does require that the jurisdictions, the grantees have additional funding to support the remainder of the project. So as part of our process, we ensure that those grantees are able to cover the remaining balance of the project to make sure that our grants are going out and are successful.

And the breakdown between public and private?

Yes. So it's about 35 percent that go to public grantees and about 65 percent that go to private.

Okay. And what kind of feedback are you getting from counties in terms of this program?

Yeah. I think generally we're receiving a lot of good feedback. Obviously we're in the early stages, but jurisdictions have generally been providing positive feedback regarding the grants. I think for many of them, this funding covers a significant gap in implementation of 1383. So we hear a lot of examples about the types of projects that they are able to support by spending this funding and have definitely heard from them that there's interest in continuing availability of this funding. So I think it's definitely a critical piece for implementation on the local side.

Yeah. And the number of grants made?

I think the total number that we awarded is about 130.6 million for the Organic Grant Recycling Program. I think we received--I believe it's 32, and someone will come up and correct me if I'm wrong--we had 32 eligible applications that we received for this last solicitation.

You don't have any data on Ventura County specifically, do you?

I don't have that information available, but I can definitely provide that to your staff after.

I would appreciate that. Thank you.

Of course.

And before we move on to Issue Two, I know Assembly Member just arrived, but do you have any questions on Issue One? Great. Thank you. Welcome. All right. Glad you're here, and thank you very much, staff. We'll move on to Issue Two: Department of Food and Agriculture, CDF General Fund Solutions and Implementation Update.

Good morning, Chair and Members. I'm Julianne Rolf from the Department of Finance. So, as you know, California is currently facing a significant budget deficit and the Administration worked hard to reduce the commitment of current year General Fund dollars without impacting ongoing operation of essential programs, and over the last three years, CDFA has been appropriated nearly one billion dollars in one-time funding for a wide range of programs.

So this includes historic investments in climate-smart agriculture, nutrition, and community resilience, specifically 155 million for the Healthy Soils Program, 120 million for the State Water Efficiency and Enhancement Program, 80 million for the Livestock Methane Reduction Program, 90 million for the California Farm to School Program, 55 million for the California Nutrition Incentive Program or CNIP, and 150 million for the Fairs and Exposition Resiliency Program. And the climate-smart agriculture investments have funded nearly 3,000 projects across 300,000 acres in California.

These projects have resulted in 26.5 million metric tons of CO2 emission reductions, the equivalent of taking 5.9 million cars off the road. These projects have also saved 1.5 million acre feet of water. To date, the investments in the Farm to School Program have served 1.5 million public school students, feeding them and empowering them with the knowledge about nutrition and food systems that they take home.

Other investments in the Office of Farm to Fork through the Healthy Refrigeration Program and the California Nutrition Incentive Program have provided farm fresh, nutritious food to hungry community members at 543 corner stores and farmers markets in historically underserved communities across the state. We are proud of the investments this Administration has made in climate resiliency and nutrition.

However, in an effort to help balance California's General Fund deficit, the Governor's Budget includes 142.6 million in reductions to one-time General Fund investments in the current year--or that are being eliminated--and 44.6 million that's being shifted from General Fund to GGRF. The following programs will be impacted by these reductions and the first one is the Farm to Community Food Hubs Program with the reduction of 14.4 million dollars.

And this is due to the fact that no grants have been advertised yet, so no current grantees will be impacted by these cuts, and while the need certainly exists for this type of food system infrastructure, the program would support the development or the ongoing funds will support the development of the development of these types of programs so that new programs can be developed in the future. And then there's a proposed reduction of 8.5 million dollars for the Healthy Registration Grant Program, and this is because no funds will be committed until fall of this year and so they're available to be reduced without impacting existing awards.

And then there is a proposed reduction of the CNIP program by 33 million dollars, and these funds have not been committed so they're available to be reduced without impacting existing awardees. And then the Enteric Methane Incentives Program, the proposed reduction for that program is 23 million dollars.

And while this is important for us reaching our methane reduction goals, there are other programs that we are still funding, and so this program, because there's so much that still needs to be done to help make sure it's successful, we're maintaining a certain portion of the funds so that the FDA can approve an additive that can help us achieve the goals of this program, and so currently this program, which the Department can talk more about why this makes sense to cut, but essentially, we're working hard to make sure that we don't cut any existing programs.

Thank you very much. Anybody else from Department of Finance before we go to LAO? LAO?

Thank you, Mr. Chair. Frank Jimenez again, with the Legislative Analyst Office. Overall, we find that the proposed reductions are reasonable given that they target one-time expenditures where funds have not yet been committed. As I mentioned in the earlier discussion item, our office has identified additional solutions that the Legislature could consider. This includes options within CDFA but also across the thematic one-time augmentations for other resources, environment departments. Happy to answer any questions.

Great. Thank you very much. I have a number of questions here. I'll try to move quickly with them. How many applications were there awarded in the first round of funding? Talking about the small family farms weren't able to get all their funding to the California Underserved Producer Program because it was so oversubscribed. How oversubscribed was it? How many applications were there?

I'd be happy to take that. Thank you. Thank you for the question, Chair Bennett, and good morning to the Chair and Members of the Committee. My name is Arima Kozina. I'm Deputy Secretary at the California Department of Food and Agriculture. If you recall, CDFA received funds to provide the economic and technical assistance relief related to the drought impacts. Kind of two tranches of funding, but both within the 22-23 budget. So we received some amount of funding.

And to disperse the initial tranche of funding quickly, CDFA granted funds to third party entities to administer the direct to farmer grant programs and technical assistance programs that would help farmers recover from specifically drought. And then that appropriation was augmented to a total pot of 25 million dollars. And so when that drought funding was increased, we also increased the contracts to provide additional funds to our existing third party administrators.

So there were seven qualified applicants that applied for that program for a total of about 8.4 million dollars in requested projects. So it was a little bit undersubscribed, and we were able to work with those, with those qualified applicants to assess any additional capacity that they had, any additional demand that they had in their area, again, for those specifically drought-related impacts, and that we were able to increase those projects to about 12 million dollars in direct farmer grant programs.

But I would note that many of those kind of third party administrators were also providing technical support for farmers and ranchers looking to apply for the GO-Biz program as well, so we can assume that their capacity was somewhat limited with two significant drought programs moving at the same time. That said, we haven't heard from our current third party administrators that they have additional demand for the specific drought relief program, and I keep emphasizing that because it was a weird year in 22-23, right?

We swung really rapidly, and I think this is something that we're going to see a lot more moving forward with the impacts of climate change. We swung so rapidly from drought to flood that it was really difficult for farmers or really anyone to parse out which of these impacts were from drought and which were from flood. They really compounded one another. And so with each successive extreme weather event, it was really difficult for folks to apply just for the drought portion of these funds. And we do expect that there will be higher demand for the amount that we had later that was more flexible for both flood and drought.

Great. Thank you. I have one other quick question, if I can, and then I have to go over and vote in elections, and I'll ask you to just continue any questions you have, but I have further questions here. So if you don't have questions, I'd just like to pause. It's going to take me about 60 seconds to go over.

But my other question before I leave is that Assembly Member Connolly and myself last fall, we sent a letter to Secretary Ross requesting the 15 million dollars for the Farm Community Food Hubs Program be allocated quickly and the program by Bloom, maybe 1009, was signed into law in 2021, but the Administration has not moved the program and now is cutting 96 percent of it. Why did the program not get allocated from 2021 until the present, even with our request to try to move that program funding forward?

That's a really wonderful question. CDFA has really done everything in its power to implement the Farm to Community Food Hubs Program as quickly as possible. The program's run into some hurdles getting the program started. The most significant hurdle has been that the program is required to establish a formal advisory board, which has really limited our ability to implement the program expeditiously. We have to establish the advisory board before we can move forward with the grant program, and we've opened the advisory board applications twice.

Both times we've directly invited key stakeholders to join the board. We've done as much outreach as we can. Unfortunately, CDFA has not received enough applications either time to fill the required roles, and so the program could not move forward as quickly as we anticipated. We would note even if we were able to fill the advisory board, there's another hurdle, which is that the program requires two phases of grants to be made, the first phase focusing on planning and the second phase focusing on implementation.

I think we can see where the intention of that program was, but by splitting the program into two, it would also delay the implementation of those grants once we are able to establish this advisory board.

And is a justification for the cut the fact that there has not been enough interest to fill the advisory board?

Yes. Because we haven't been able to fill the advisory board, we wouldn't be able to move forward with the incentive program, and I believe that's where that intention was. I don't want to speak out of turn for my DOF colleagues, but we will say that while the majority of funding is proposed in the General Fund solution, we are still committed to moving Food Hubs forward as intended. The Farm to School Incubator Grant Program directly funded for food hubs in its most recent round of awards.

And then we would hope to maintain some amount of administrative funding so that we continue to coordinate with the University of California's Food Hub Network. We can provide training and support to food hub partners, and we can leverage federal grant opportunities. I believe we have one in the books right now with USDA, the Resilient Food Systems Infrastructure funding, which has food hub development as part of that. Sorry, I was trying to move quickly for you.

No, I understand. I will recognize Assembly Member Petrie-Norris as I walk out.

Okay. You go.

Two minutes. And I apologize. I'll be able to come back after that, so it's all you after this. Yeah. No, really, I want to emphasize the Farm to Community Food Hub Program. We're going to continue to focus on that. Assembly Member Bennett asked my question on that, but let's keep that moving. More broadly, can the Administration explain the decision to cut some programs almost completely like the one we were just talking about and the California Nutrition Incentive Program? Why these programs and not others that have higher costs and aren't directly focused on helping vulnerable residents?

I'll defer to my colleagues on that.

So some of the cuts were because funds hadn't been spent yet or the grants haven't been advertised yet, so they were available more easily than for existing programs, and so the priority was to focus on keeping existing important programs and then allowing for the administrative costs for newer programs like the Farm to Community Food Hubs and whatnot, to maintain the administrative purposes so that those programs can continuously be developed and so that when there is funding available, they're ready to expedite the implementation process much more quickly.

Has the Administration verified the financial health of small farmers that have asked for this relief and not received it? i.e. is there any way of reaching to those folks and finding out what are the impacts of withholding the money or cutting?

Absolutely. So due to the nature of the program, with us funding third party administrators so that they can administer those direct to farmer grant programs--and we did that to make sure that we were more flexible and nimble to the needs, more flexible with the needs of small farmers and ranchers--and so due to the nature of that, the financial health of applicants is not verified through CDFA's program specifically.

However, the technical assistance programs that are supported with CDFA funding and that administer these third party grant programs, they also provide technical assistance such as education and workshops related to business planning, marketing, and risk management, which are intended to provide resources necessary for small businesses to maintain their financial health in addition to administering those direct to farmer grants. All qualified, I will say there was a piece of that about have all the folks who received funding or who have asked for funding received funding.

So on the CDFA side, in terms of the request that we've received, all qualified third party administrators who applied to CUSP were fully funded, more than fully funded because of the budget augmentation. And to our knowledge, none have reported oversubscription or requested additional funds. Again, for that specific drought relief pot, we are receiving requests for the more flexible pot of funding.

And just to follow up on that, what has been the Department's grant distribution schedule for awards to small, underserved farmers?

That's a great question. So the drought funding from fiscal year 21-22 was fully awarded, and that includes the additional augmentation and adjustments to the contracts by the spring of 2023. CDFA anticipates awarding the entire five million dollars for the 23-24 Drought and Flood Relief funding by April of this year. So in the coming months. And then we will note that just as our partners in our GO-Biz Program, Drought and Flood Relief Program, that piece that was more flexible was oversubscribed anecdotally, and because of that oversubscription, we're anticipating high demand for that program that's going to roll out in the coming months.

Great. Just a couple more. Committee staff noted that funds have been extremely slow to get out of the door for small farmers who experience losses during the big drought of 2018 to 2022. Is there a reason it's taken so long to allocate these funds? Are there barriers that can be reduced to help these funds get out the door faster in the future?

I can jump in.

Yeah. Please.

So thank you for that question, Assembly Member Connolly. So I think there's two things to note here. First and foremost, I think what you're hearing from the community is kind of a general consensus of how they're feeling related to two different programs. So there's the GO-Biz Program, and then there's the CDFA Program.

I think, as my colleague had mentioned for the CDFA Program, there was kind of the limiting factors associated which is the drought pot of money, and then there was also kind of the other impacts on the GO-Biz side that specifically had kind of a slower rollout for a multiple of different issues, but since we don't have GO-Biz here to kind of answer that question, I don't want to get ahead of their reasoning, but we're happy to follow up with them and get you some additional context there.

Yeah, that'd be great. Would love that.

If I could just provide one, because around barriers that we're looking to address, we did note that the GO-Biz Program and the CUSP Program, they each fill really different niches, but they rely on a lot of the same technical assistance providers.

And so in this newest round of funding, we are trying to coordinate with them more and stagger those applications which is why you saw that GO-Biz funding go out, and then you'll see our funding go out again to reduce those barriers so that at least there's not competing interests that are making it more complex than it needs to be.

Great, and then finally, stakeholders have shared that the state has already lost access to 15 million dollars in federal match to the California Nutrition Incentive Program in 2024 due to the proposed cuts in the Governor's Budget. Given the timing of the federal match program's RFA, is that correct? First? Yes. What level of funding do we need to maintain to draw down on federal funds? And is there an argument to be made that we should prioritize maintaining programs that can bring in those kind of federal investments?

I can start with the initial question around the timeline for the federal funds, and then I'll defer to my colleagues at DOF about the second piece about prioritizing programs. So, yes. Unfortunately, due to the timing of the federal GusNIP Incentive application, the federal funding is already off the table for this year. So the federal application period is currently open and it closes May 14th, which might be leading to some confusion, right? It's still open. It hasn't closed yet.

However, the federal program requires two elements at the timing of proposal submission. The first is that the state matching funds must be fully secured at the time of submission, and the second is that the application must clearly identify our partners and their planned activities so that the federal program can evaluate the diversity of partnership, the uniqueness of our program, and the reach that the program will have.

And so to identify partners, CDFA needs to issue its own competitive grant program, and there's no longer time to issue that request for applications, receive the application, score them, make awards, et cetera, in time to meet that May 14th deadline. And I'll defer to my partner on--

Yeah. Christian Beltran with the Department of Finance. I know you have to get going, Assembly Member, so I'll just make it quick. So essentially, the federal match was a one-to-one match. So depending on how much you are trying to leverage, we obviously can work with the Legislature in terms of landing on a dollar amount moving forward as we go through budget hearings and negotiations. So if the Legislature would like to prioritize that, I think the Administration would be open to discussing it with you.

Sorry. I know you have to go. That's for current year. I want to clarify that was for current year funds. For budget year, we would need funding secured when their GusNIP Program opens next year, which would be January 2025, to put a finer point of that. Yeah.

Yeah. Thank you.

Assembly Member Petrie-Norris.

Thank you. Good morning. Thanks for being here. I want to ask a couple of questions about the Farm to School Incubator Grant Program, which I think in the LAO analysis you highlighted that 50 million--you've yet to solicit grant applications or make awards for roughly 50 million dollars. Okay. So given that we've got investments in the Universal Meal Program, the Kitchen Infrastructure Grants Program, the Farm to Community Hubs Program, as was mentioned earlier, what does this program accomplish that's not already provided under these other programs?

Thank you for your question, and honestly, thank you for the opportunity to let us brag about our Farm to School Program because if it were Secretary Ross up here, you'd be here for the rest of the day. It's something that we all feel very passionate about. So each of the partner programs that you named help with kind of one piece of the infrastructure needed to get healthy, local foods onto our kids' plates. But they don't fill all the gaps, right? No program can.

So Universal Free Meals funding ensures California school children have access to two nutritious meals a day, but it doesn't require schools to source produce from California food producers. The Kitchen Infrastructure and Training Program helps transform equipment and general skill level in our school to kitchens, but the program doesn't help schools navigate the local food supply, the supply chain to open access to new local food products from California farmers.

And then the Farm to Community Food Hubs, as we've discussed, is a really essential program that, if it's recovered, would help support the creation of three new Food Hubs in California, but it doesn't help existing Food Hubs or individual producers to access new school markets or invest in the necessary infrastructure or staffing to improve the Farm to School programs across the state.

So what the Farm to School Incubator Program does, it's the only initiative that really connects all of the dots regarding equitable food system transformation, so local sourcing, food aggregation infrastructure, kitchen infrastructure, and staff capacity. For example, the Farm to School Incubator Grant Program allows farms and food hubs to apply for funding, meaning that the programs fund both the supply and the demand side of school food.

So by providing funding to farms and food hubs working in partnership with schools, the Incubator Grant Program empowers supply chain experts to scale up their work to match the demand of school food buyers, and related, the California Farm to School Incubator Program is the only program that focuses resources on small farmers and ranchers, socially disadvantaged farmers and ranchers, and farmers that utilize climate-smart agricultural production practices. So we talked about sourcing in those other programs. This helps connect the dots to those food supply chains.

In the most recent round of funding, 50 farmers and four food hubs received awards in addition to educational agencies. 94 percent of those producer grantees are small to midsize farmers, over a half are women, 42 percent are people of color, and 100 percent of them use climate-smart agriculture practices. I think that the piece that gets us all so excited about Farm to School is it really takes that holistic approach related to the supply side and it extends it to the necessary next step of student involvement and education.

So that last piece is really unique and it's pivotal to ensure that students take their knowledge of food, nutrition, and their local farms home to their communities and then with them for the rest of their lives. Every school district or Early Care and Education Program that receives funding via the Farm to School Incubator Grant Program is required to provide hands-on food education for students and procure whole or minimally processed foods from local California food producers. I know that's more than you bargained for, but we do love Farm to School at the Department of Food and Ag, so--

So just let me ask a couple of follow-up questions. And I appreciate that, you know, kind of articulation of all those sorts of pieces of the puzzle, but I do wonder if there is an opportunity to consolidate some of these different programs. As I think you said, the Farm to Community Food Hubs Program can't even get off the ground because you can't get enough people interested in being part of the advisory board.

Is there a way to more efficiently accomplish all of the goals, the important goals that you articulated by consolidating this and removing some of the administrative silos? I guess that's just a question and perhaps a question I'd ask of a number of these programs. The other question I do want to ask and point I want to make the Universal Meal Program is not within the purview of this Budget Sub, correct? But it is in your purview? No it's not. All right.

CDFA.

I shall make that point to someone else then, because I think some of these programs are super well-intentioned, but I know in the case of the Universal Meal Program, we are throwing millions of dollars into the garbage each and every day because there's millions of kids across the state who need this. There's a lot that don't. I do think in this budget environment--and understanding it's not in your purview--we got to take a closer look at stuff, even if it's stuff that feels really good if we're just wasting money. So I'll leave it at that.

I had questions when we were visited by the school educators just yesterday, specifically about the milk. I agree with you. The milk, it is not being used as efficiently as we would like it to be.

There's just a lot of schools where my kids report everyone gets their thing and just dumps it in the trash. So I think it's a good thing for us to take a closer look at. We'll share that with our fellow Budget Subs.

May I clarify one item? I'm so sorry. As my colleague reminded me, I think we talked about the timing of those grant programs and how much is still available in the Farm to School Program. I would note that that program is currently open for applications, and the application period will be closing soon for Farm to School Program applications.

Okay. So you have opened the programs? There's kind of 50 million outstanding--but applications have been received?

Yes. It's been open for a few months. I would defer to my colleagues on the exact timing, but a few months.

In the conversations I had yesterday with school officials, I pointed out that whenever you have a completely free resource, it doesn't get allocated well. And that's, I think, exactly what Assembly Member and I are referring to, the reports, particularly at the junior high level, of the amount of waste that is going on.

And the reason I'm really concerned about that is because I think that schools are one of the few places where we can actually get good habits into some young people who are not getting exposed to good eating habits. So it's a tremendously valuable program that we don't want to tarnish with constant reports of the amount of waste that's going on at the same time.

So because you're passionate about the program, because Secretary Ross is passionate about the program, I want you to try to partner with us to specifically deal with the things that I was talking with the educators about yesterday. We have to find a way to make sure that we get the benefits of the program and not the excess that comes with generally any resource that is identified as free. It changes your mentality in terms of what you do with that particular resource.

I'd like to switch over to methane quickly here and go through the--basically, I'm just trying to get a read from you guys in terms of the dairies and the methane with the dairies, and that is, what percentage of the methane is being captured? What is the amount that we're expecting to have captured? How are we measuring the fugitive? What kind of verification do we have that we're actually capturing? All of that. We submitted some questions to you in advance, so why don't you just fill me in on that topic overall? Okay? Thank you.

Absolutely. I will do my best, and then I'm sure we will have more opportunities to discuss this and we'll follow-up on any kind of very technical questions you have in writing. So out of the total--this is one of the few moments I really wish I'd had a degree in science--so out of the total greenhouse gas emissions from all of California agriculture, CDFA-funded dairy digesters are reducing emissions by 7.9 percent from dairies and ranches.

So on participating dairies, the CDFA Dairy Digester Research and Development Program reduces methane formation and captures emitted methane for the generation of renewable energy. Digester projects reduce methane emissions in the atmosphere by approximately 80 percent on participating dairies. 80. Correct. And then measuring and monitoring: we talked about measuring and monitoring a little bit in those questions. Measuring and monitoring methane emissions on each individual grantee's farm would be prohibitively expensive using current methods.

So instead, CDFA uses a science and database quantification methodology developed in collaboration with the California Air Resources Board to calculate expected emissions reductions from digester projects and when applying for DDRDP or Dairy Digester Research and Development Program Grants, each application uses the tool to estimate the emissions reductions and then CDFA verifies that each project is completed as expected as part of our fiduciary responsibilities.

In terms of expected outcomes, CDFA provides reports to CARB that detail the biomethane or electricity produced by each completed project over a five-year period, and these numbers are directly correlated with methane capture. In CARB's recent remote sensing flyovers to look for methane emission plumes, none of CDFA's DDRDP-funded projects showed leaks indicating that they're working as intended.

They showed no leaks?

No leaks.

So you have an 80 percent capture? There must be a 20 percent leakage?

So it's as intended. So no leaks from the dairy digesters themselves. That's not to say that the dairy digesters can capture all of the methane that's created on the dairy as a whole. That's just after the waste enters the system.

Okay. So no leak from the digester, but in terms of the total capture of the methane, we're estimating that's 80 percent?

80 percent.

20 percent of it is fugitive, right? Okay. Thank you.

Thank you, Mr. Chair. Christian Beltran with the Department of Finance again. I just wanted to also flag for you that we could definitely provide your staff with the annual report that was referred to by my colleague at the Department of Food and Agriculture that is generated by the Air Resources Board on an annual basis that specifically highlights the amount of metric tons of carbon dioxide that's reduced annually or holistically from the programs that were mentioned.

That would be helpful. I'd appreciate that. All right.

And I would say that not having my degree as a scientist, if I need to correct any of those items, we'll do so in writing, but I'm fairly certain that's how dairy digesters work.

Great. All right, thank you. All right, thank you very much. We have no other questions. We're ready to move on to Issue Three.

Thank you.

Thank you. And give me a moment before you start.

The continuing saga of the mill fee. We've been talking about this for a long time, but go ahead, introduce yourself and begin.

Good morning, Chair Bennett. I'm Julie Henderson.

Bring that microphone a little bit closer, Julie. Yeah?

Does this work?

A little closer still a little closer.

All right. Okay. Is that better? Okay. Good morning, Chair Bennett. I'm Julie Henderson, the Director of the Department of Pesticide Regulation, and Dr. Karen Morrison is to my left. She is our Chief Deputy Director. Happy to be here this morning. As I think you know, our mission at the Department is to protect people and the environment by fostering sustainable pest management and by regulating pesticides. Pest management plays an integral role in the stability of California's healthy food supply.

It supports growers and agricultural sustainability, and it protects the health of our communities and our environment. Pesticides are one form of pest management. They are substances that are intended to control, destroy, repel or attract insects, weeds, rodents, diseases and other pests. They include insecticides, herbicides, rodenticides, fungicides, disinfectants, pheromones, and plant growth regulators.

Sustainable pest management is an approach that builds on the decades long practice of integrated pest management, or IPM, which is an ecosystem based approach that focuses on pest prevention and uses pesticides only when necessary. Sustainable pest management builds on integrated pest management by incorporating broader considerations of human health and social equity and environmental and economic impacts.

The Department's role in supporting sustainable pest management is increasingly critical as climate change and severe weather introduce new and increasing pest pressures and as current tools, particularly those that are lower risk, lose their efficacy, and as scientific studies show that additional risks are present with high risk pesticides that require increasing restrictions on their use. Over the last several decades, the Department has experienced an expansion in its statutory requirements and programmatic responsibilities.

Those include the scientific evaluation and registration of pesticides and mitigation of their risks, support for the development of safe pest management alternatives, and the enforcement of pesticide laws and regulations in partnership with county agricultural commissioners and increased collaboration with all of our stakeholders. To holistically address the dynamic pest pressures and pest management needs.

The Department needs stable, sustainable funding to continue our foundational functions to protect people and the environment and to support the safe, effective pest management tools to bring those tools to market faster, and also to encourage the kind of collaborations that broadly expand technical assistance for the adoption of sustainable pest management practices.

Our primary funding source, the mill assessment, comes from the first sale of pesticides in California, and that has been fixed in statute for the last 20 years, and it no longer adequately supports the department's statutory and programmatic responsibilities, and as a result, we're operating with a structural imbalance.

About 80% of our funding comes from the mill assessment, and those are pesticide registration fees account for about 15% and licensing fees account for about 3%, and those registration and licensing fees support both of those programs, and these fees are set by TBR in regulation.

Revenue generated from the mill assessment supports our core functions that include the continuous evaluation of pesticide risks following registration and the development of mitigation measures to address those risks, pesticide use enforcement and compliance, grants that support the development of safe alternatives, our engagement with stakeholders, and other actions that are part of the pesticide regulatory program. The mill revenue also supports our local partners, the county agricultural commissioners, and their local enforcement, as well as the Department of Food and AG's Office of Pesticide Consultation and Analysis.

The Legislature last increased the mill assessment in 2004, and that level has not kept pace with the expansion of our programs and statutory responsibilities. And to support a thorough evaluation of our programmatic needs, the Legislature funded through the 2021 Budget Act, an independent stakeholder engaged mill assessment study. We released that study last Fall, and it found that the Department is critically underfunded. To provide the Department with stable long term funding.

The study recommended a flat fee phased in increase of the mill assessment from the current 2.1 cents per dollar of sales, or 21 mils up to 3.39 cents per dollar in sales, or 33.9 mils. The Governor's proposed budget includes legislation to phase in a more conservative increase in the mill assessment at both DPR and the Department of Food and Agriculture. Specifically, the legislation proposes a flat fee increase to the mill over a three year period. From 2.6 cents per dollar of sales or 26 mils in fiscal year 24/25 to 2.75 cents or 27.5 mils in fiscal year 25/26 and 2.86 cents or 28.6 mils in fiscal year 26/27.

As part of that proposal, we're requesting 117.4 positions and $33.3 million. 32.6 of that is in the DPR Fund, 700,000 in the Greenhouse Gas Reduction Fund, and that would be phased in over three years to support our essential work. More specifically, the budget would provide 17.9 million in DPR Fund and 64.2 positions to streamline processes to support alternatives, and that includes accelerating our pesticide evaluation and registration timelines to bring safer, more sustainable products to market faster, as well as expanding our grant programs to fund the development of safer alternatives and also expanding the adoption of sustainable pest management.

The proposal also includes 8.6 million in DPR Fund and 592,000 in GGRF, as well as 33.2 positions to strengthen our statewide services and those support statewide enforcement and cross jurisdictional pesticide use enforcement and compliance, pesticide monitoring and data evaluation and risk mitigation and regulation development and that will allow the Department to strengthen our pesticide use compliance, including around schools, as well as establishing ongoing ecosystem monitoring and a community informed pesticide monitoring program, and also address gaps in worker health and safety.

We also are requesting 6.1 million in DPR Fund and 125,000 in GGRF and 20 positions to provide critical support to our local partners and communities and all other stakeholders, and that includes pesticide use enforcement, training and compliance support for the ag commissioners and local engagement with all of our stakeholders, as well as increased transparency. And this will allow us to improve our multilingual and language access needs, improve transparent and equitable access to information, as well as incorporating visual data sharing tools.

In summary, the proposed budget provides the Department with essential, long term, stable funding that we need to support statewide pest management that is safe, effective and sustainable for everyone, and I'd now like to turn it over to my colleague at the Department of Finance for additional context.

Mr. Chair, Christian Beltran with the Department of Finance. Just wanted to kind of underscore a couple of the points that my colleague at the Department of Pesticides Regulation noted. The mill fee has not changed for the past couple decades and has since led to a fund imbalance over the last few years. It's critical to note that over the budget projected in the budget year, that the DPR Fund is projected to go into a structural deficit, which is pretty critical to address at this point in time. So, having said that, happy to answer any questions from the Committee.

LAO.

When it comes to this proposal, we recommend that the Legislature approve a flat increase to the mill assessment that addresses the structural deficit within the DPR Fund and supports high priority programmatic expansions. We find that a flat increase, as the Governor has proposed, is a reasonable approach and has several benefits, such as providing a more predictable revenue stream and being easier to administer.

A flat increase to the mill assessment also aligns with the recommendations provided by the independent contractor that DPR hired to assess the appropriate rate and structure of the mill assessment. Along with the flat increase, we also recommend that the Legislature incorporate statutory caps to the mill assessment. This will provide a mechanism to ensure that revenues align with expenditures authorized in a budget act each year by the Legislature.

The caps proposed by the Governor appear to be reasonable, but lower or higher caps identified by the Legislature could be just as reasonable as well. When it comes to the programmatic expansions, we recommend that the Legislature ensure that its priorities are reflected in the scope of work and the associated funding provided. This could include modifying or adding to the governor's proposal.

In our report, we identified three areas the Legislature could explore further during the Spring budget process, the first being funding to implement the Department's sustainable pest management roadmap. These activities for the roadmap include accelerating the registration of lower risk pesticides and identifying priority pesticides, which the Department aims to eliminate the use of by 2050. While there could be benefits to funding these activities, we note that the sustainable pest management roadmap is an Administration led initiative.

The Legislature will want to ensure that these activities are among its highest priorities and whether further statutory guidance is needed to align these activities with legislative priorities. Second, we also note that the proposal doesn't include additional funding for county agricultural commissioners in their local enforcement of pesticide use laws and regulations.

We note that the independent contractors report found there to be a $10 million need across the state and also the last time the Legislature increased the mill assessment in 2004, additional funding was provided to county agricultural commissioners. While current allotments could be sufficient, the opportunity around these conversations around adjusting the mill assessment we find that it provides an opportunity for the Legislature to really ensure whether county agricultural commissioners are sufficiently resourced to carry out their statutory duties.

The proposal also doesn't include funding for recently chaptered legislation. The Legislature will want to ensure that in the final budget package that funding for these activities are included. We find this to be important given that these conversations are around ensuring that DPR is sufficiently resourced to accomplish statutory requirements. We note that nearly all of the programmatic expansions are funded by the DPR Fund. However, the Governor proposes a small amount of ongoing funding from the Greenhouse Gas Reduction Fund to support community air monitoring and outreach.

We find that given that these are core Department functions and provide larger statewide services, it's reasonable, and we recommend to fund them with the DPR Fund instead. We also note that this proposal represents a significant increase in the Department's total spending. Overall, it represents a 25% increase in the Department's ongoing baseline spending. Given the large increase, we recommend that the Legislature consider adding accountability measures as a way to conduct oversight to ensure that funding is supporting DPR and meeting core outcomes. And then finally, we recommend that the Legislature approve the various policy changes proposed. We find that they align with the intent of the proposal and could improve state processes. Happy to answer any questions.

Very much appreciate LAO's analysis and appreciate the Department's efforts, particularly with regards to the mill fee and trying to better align revenues with that. I'd like to go to accountability first, and particularly the issue of the registration and reevaluation of pesticides in the budget change proposal. And what are the accountability measures to make sure we're actually following the timelines in terms of doing those evaluations? And what happens if you don't meet the registration and the reevaluation timelines? Are there any consequences for the Department?

Thank you for the question, Chair Bennett. So we believe that the proposal, with the funding and resources that we've requested, will enable us to achieve the outcomes that we've identified in the proposal. And with specific respect to the registration process, there's a huge effort focused on streamlining that process and being able to report out on timeline projections and also to be able to get rid of the backlog that currently exists and be able to begin scientific evaluations within 30 days of receiving the information that we need.

So the way in which that would work is that we would be able to better predict timelines and report out on those timelines to registrants, to applicants, as well as to, once we've been able to clear the backlog with the additional resources, to be able to report out on or to begin the scientific evaluation within 30 days. One of the other key pieces of accountability with respect to registration is being able to develop a framework for evaluating new, novel and emerging technologies like biologicals, which don't fit neatly into the current evaluation system for chemical products.

In terms of the evaluation of pesticides, which takes place both before registration as well as after. What we're looking at in terms of that ongoing evaluation is establishing a public science based process that would prioritize the risks associated with high risk pesticides and be able to provide reporting out on our evaluation on those pesticides that are prioritized.

Question for both Finance and the Department of Finance and LAO, are there any consequences if these timelines have not been met in the past?

So there are no statutory impacts to the Department relative to timelines. I'll say that the work that we do, we have to ensure, for example, in registration, that when we register a product, that the requirements on the label are sufficient to mitigate risks to human health and the environment. And so we recognize that there is an urgency around having products available to be able to manage pests. But we also need to ensure that we are completing our scientific review to be able to make that determination. And so we are continuing to look at various methods to make sure that we can do the procedural work that we need to do in as timely of a fashion as we can.

LAO aware of any consequences?

Not aware of any consequences, but I think to our recommendation for the Legislature to implement reporting requirements for outcomes. This helps the Legislature and track some of the key outcomes that are important to the Legislature and ensuring that funding is having its intended outcomes.

And also, it's a way for the Department to describe to the Legislature any successes and challenges that it's been facing in meeting those outcomes, and that would help guide the Legislature in determining if any other programmatic or policy changes are needed to improve programs.

I think increasing the awareness of where we are in the process of reevaluation would be helpful for everybody. It would have the Department realize they have to report to us that this is how far behind they are. We can have better conversations about why that's happening. What do we need in terms of resources, et cetera? Let me go to AB 652 as an example. That's recently signed legislation, and the Department, the Administration does not include resources dedicated to implementing AB 652. Can you tell us why? And then I'm going to want to engage that answer.

Christian Beltran with Department of Finance again, so I just wanted to kind of look kind of broader picture at the budget. The Administration didn't include any of the specific chapter legislation with very few limited circumstances. So this kind of follows that same broad approach where we do not include any resources associated with any of the chapter legislation that impacts this particular Department, and thus we're just following suit.

But the bills funded by the mill fee assessment, they won't be impacted by whether the General Fund does better or doesn't do better.

Correct. And that's consistent, though, with other chapter legislation that impacts other departments. For example, the California Air Resources Board, SB 253, SB 261, those are not funded necessarily by the General Fund either. So that's just another kind of illustrative example of how the Administration is not proposing anything at this point in time related to any chapter legislation broadly across the spectrum.

Even if we do support this increase in the mill fee. And the funding will be there.

Well, so to clarify, the Governor's Budget did include it in the Fall, but we look forward to looking at and prioritizing specific chapter legislation with the Legislature as we move forward through the May revision process. And so we will kind of tackle that at that point in time.

And a final question. We've been chasing this mill fee increase issue. And I think the Department's made an excellent case for why it's time, after decades of not changing the fee for us to move forward. But could you just identify for us if the Legislature chose not to move forward with the mill fee increase, what would be the additional steps you'd have to take to reduce staff responsibilities, expenditures, follow through on the issues we've been talking about? What would happen?

Thank you for the question, Chair Bennett. Maybe I'll just start by what we've had to do so far with the expansion in our responsibilities without sufficient funding. We've basically had to redirect resources and either delay or scale back our execution of responsibilities. And that would only be further compounded if we're not able to get the funding that the Governor has proposed. And so if we were not to get the additional funding, we would end up having to continue to redirect resources, continue to scale back our execution of responsibilities, extend timelines, and not fill open positions.

And that would have a negative impact on our ability to improve registration timelines, to be able to support the development of alternative, safer alternative products, and also delay timelines on pesticide reevaluations and other risk assessments, as well as developing mitigation measures and additional improvements to our regulations, whether it's around schools or with our pesticide use enforcement.

I'd like to use this opportunity to just remind all of us that we have an important responsibility in this issue of pesticides, and that is we want to have the proper use of pesticides. It benefits the farmers and it can benefit the community. But that, quote, proper use of pesticides, relies on the proper regulation and application and reevaluation of those pesticides as the science gets better. And if we don't follow through on our responsibility to fund that proper regulation, we are letting down both sides.

Because when you start to have problems, and I've seen this in our community, when you have a pesticide problem, it affects the community, it affects the community's health. It also affects the growers who then get the backlash. And so confidence in our pesticide regulation system is sort of a sacred responsibility that the Department has, and we, as I think the legislative leaders have a responsibility to make sure the resources are there. So put that out there because I think this has been a very important and controversial issue for us, the whole issue of the mill fee as we go forward. So Members other?

just one comment, I think build on Chair your point around accountability and the importance of us ensuring that we build in some robust accountability measures as part of this. So thank you for that.

Thank you. Assemblymember.

Thank you, Chair. Thank you to Department for being here. I do have a couple of questions, and just briefly, my family has been farming in California since the 20s. They came from South Dakota, farm from Stanislaus County all the way into Kern County. So AG is very much something that is in my blood, something that we care about. So I do want to dig in just a little bit further. And the Chair was on the right path, quite frankly, of kind of some of our concerns. But first question, I guess you mentioned that the resources were redirected because of a staffing issue. Right? I'm curious, where were they redirected to?

Thank you for the ..., Assemblymember. That's a broad question. I'll just take our reevaluations, for example. If we have multiple different reevaluations or risk assessments that are happening over the same time, we'll have staff covering multiple different assessments at the same time. And so that just ends up delaying. As we've had, for example, in AB 617 in the Community Air Protection Program. We've taken staff from our environmental monitoring division, for example, to attend community meetings as part of the community air protection programs.

And so those resources have been directed to support that program without additional resources. And so it's just, as programs have expanded, resources have just been spread more thinly. But I'll turn it over to Director Morrison if there's anything else.

Just to provide a specific example to that. We had specific timelines we needed to meet relative to a reevaluation for neonicotinoids back in 2018, and had to redirect staff who were doing registration evaluations specifically to complete that reevaluation on the timelines that we were mandated by statute. And so that created backlogs in registration that we have then been continuing to work through as we maintain our programs. A lot of our resourcing is at levels to maintain flow. But if we develop backlogs, it's very hard to move through those backlogs while continuing to process the day to day work.

And I appreciate that because we do have some concerns. I mean, September 26 of 2003, a couple of our colleagues sent out a letter requesting - the cotton industry has got a major issue. Right? And so we're very, very concerned about this. But to this day, they still haven't received a response on their concerns. Assemblymember Vince Fong and Jasmeet Bains both put this letter together. It was a bipartisan letter to the Department trying to figure out a timeline.

And the Chair asked, like, what are the consequences to this. And to the Department, there isn't particularly a consequence, but there's a huge consequence to the Ag Business Community. And so when we are talking about in your proposal, 65 new positions, 117 in the following year, I guess what confidence do we have that some of these timelines are actually going to be, in a way? Because I get it, departments do department things and you are overworked and probably underpaid. Right.

In a lot of ways, and I respect and understand that. But if we're going to approve this budget, we as an ag community, desperately need some sort of - waiting four years. Since chlorpyrifos has been banned for four years, we still haven't had anything approved to take the place of that. And our ag community is just trying to sort that out. Cotton is going to have major issues. Right.

So I guess if this gets approved, we need some sort of just assurance that the Department is going to do what the Department needs to do so our ag community can move forward. One of the biggest killers of the business community in the State of California is a lack of certainty. Businessmen and women that own business in the state are really, really smart at what they do, but they can only do their jobs if there is certainty and stability. Right.

And right now, there's not a lot within the Department from the ag community. So I would just encourage us as this thing moves forward. There are many examples that I don't want to take the Chair's time, but we'd love to have some conversations with you moving forward. I'm new to budget, new to budget sub four, but it is great to meet with you, but let's continue this conversation.

And I would just ask from a personal perspective, from a Central Valley perspective, please help us help you, help us be a partner with us. And we can't be a partner if we're put on ice for four years. And there's absolutely no certainty in what the Department is doing. Thank you.

Thank you so much, Assemblymember. And maybe if I can just respond to a couple of the issues that you highlighted, because I think they're really emblematic of what we grapple with. And I think the cotton issue that you identified was one that we tried to respond to very quickly. And we heard from the industry that there was a lack of a tool to be able to respond to this invasive pest.

And so we worked very closely with Members of the industry, as well as with our partners at UC to identify potential alternatives. Part of the challenge is that the one product that would have been able to be effective is tied up in litigation. And so part of the challenge that we have in moving products through a registration process is we can get it through to a certain point. And if it's challenged legally, we have to go through the litigation process.

And so what we did against that landscape was work with UC and with members of the industry to look at other alternatives and then work together to get exemptions, to be able to use another product quickly, to be able to respond to that crisis. In the case of chlorpyrifos, one of the things that we recognize is that it's very challenging, to your point, to have a product canceled and not immediately have alternatives available.

And so part of what the sustainable pest management workgroup looked at as part of the roadmap that my colleague referred to in his remarks is developing a process that could, as we identify that there are risks, signaling that very early so that we can make investments in alternatives if they don't exist. So recognize that this is an imperfect process, but also very much understand the challenges and pressures that agriculture faces and the need that agriculture has in having tools to manage that process.

So we really tried to develop a process that would support that. In terms of accountability, I think being able to report, as we referred to a little bit earlier, reporting on timelines so that there's a better sense of predictability of where we are in the process. And that's something that we believe we can do with the funds that we've requested and then being able to report out on how we're doing on the outcomes that we've identified.

So do you anticipate the Department maybe being a little more open to transparency and not necessarily in a negative way, but just to your point of reporting where things are at, because it's hard to get information right. It really is. It's challenging, even for us at times. I mean we're four years into - and I understand, and that's sort of why I asked the question, like, where were these resources moved around to?

Because if we do identify a problem, like we ban a substance, right, the product, there's nothing really an alternative available. Do we just put that product on ice, or do we double down with our partners in the system and find one? Right. And I think that that's where we would like to see - if something does get banned that we use and there is no other alternative. We're kind of hosed.

And so we would love to see more of a commitment from the Department, like doubling down on those efforts. Okay, like, fine, we're going to take this out of the system. This is what we're going to put in place of it. Right. Instead of just four years later, we still have nothing. That's not a great solution.

Absolutely. And we very much are committed to that transparency and part of this public evaluation process is looking at what alternatives do exist and where we need to invest in developments for alternatives and evaluating if there are no alternatives, evaluating what mitigation looks like. So all of that would be part of a public, transparent process. The one other thing I'll just note quickly, and I think it's just another element of transparency, and that is public engagement.

Last Summer, I, along with my colleague, the undersecretary at the Food and Agriculture Department, went out and met with a lot of folks across the state and talked about develop the need for alternatives and what sustainable pest management could look like. And that kind of engagement and understanding what challenges are on the ground is incredibly valuable. And I think also an opportunity for us to be able to talk about risks that we're seeing. So that's, I think, another element of the transparency that we're trying to achieve through this budget proposal.

I appreciate it very much. Thank you.

Thank you. Assemblymember.

Just one quick follow up question. So as a result of actions taken by the Legislature, your statutory requirements increase every year? We always sort of add stuff. We never take stuff away. And I don't know the answer to this, but are there any programs, are there any things that you're being asked to do that after 20 or 30 years on the books are no longer necessary and are obsolete? And as part of this evaluation, we should consider removing.

Thank you, Assemblymember. Very good question. Part of what I think we've been experiencing more is that staff have just been spread thin. And as part of assessing how to most effectively use resources with limited resources, if there are responsibilities that are no longer effective or necessary, we're really pulling people away from that.

One of the places that I think we are looking at, we have a number of advisory committees that were created many years ago and are looking at what their current makeup is, what their current purpose is to make sure that we're aligning those with what we've advocated for in the budget change proposal. So I think that's just one example of looking at where existing resources may not be perfectly aligned and how we can better align those moving forward.

Okay, great. And I think we're certainly, to the extent that statutory changes are required to make good on those opportunities. Please, let's continue that conversation. Thank you.

Thank you.

Thank you very much. Important issue in terms of pesticide regulations all the way around. And again, we see from both sides, and we wish you well. As we all try to get this problem solved. We're ready to move on to issue number four.

Thank you very much.

Thank you. Give us one moment before you start, please. Here.

All right. Ready.

Hi, Chair and members, Craig Scholer. I'm the Chief Deputy Director at Department of Toxic Substances Control. I just wanted to start us off with the Governor's Budget of 399,000,000. I know that the item here to focus on is hazardous waste or the generator and handling fee, but I just want to note that part of the Governor's Budget proposal includes, over half of it, is for cleanup sites, which I know has been a focus of this Subcommittee.

And the Legislature has been a wonderful partner in that sense. And the budget also includes an additional 27 million for parkway cleanup in the former Exide residential community, which I know, again, was something that was a priority for this Committee. So I wanted to acknowledge that here. SB 158 was our reform measure several years ago, and that has been an ambitious reform. We're learning a lot through that.

Last year, we released our hazardous waste management report, and next year we'll be releasing our hazardous waste management plan. And I just mentioned those things because I think those will be incredibly informative for the rest of what this conversation and further conversations around our Department are going to be. And when it comes to the generator and handling fee, which is the item here, I just want to acknowledge that is a place where we're learning a lot more.

Brian, my colleague will speak more to that, and I just wanted to also acknowledge the stakeholders who've been providing us feedback and have been active partners in helping us apply this fee. So with that, I will turn over to Brian Brown.

Before you turn it over, just could you highlight. I'm particularly interested in, if you have any insights, as you do, your presentation with regard to the whole issue of the generating of revenue and the self-reporting aspect of that, and whether that is affecting the actual charges that we're collecting relative to what we should be collecting. Thank you.

Yes, good morning again. My name is Brian Brown. I'm the Chief Financial Officer for DTSC. Yeah, so the issue four on your agenda is an update on the hazardous waste control account and specifically the shortfall caused by the lower revenues coming in from the generation and handling fee. Since this is an informational item, I thought I'd just give kind of a little bit of background and then describe kind of where we are and where we're going on this topic.

So, as Mr. Scholer noted, in 2021, SB 158 was approved by the Governor and the Legislature with an overall governance and fiscal reform bill for DTSC. So it did a number of things, like creating the Board of Environmental Safety, and also amended a number of our core fees. Among these fee-related changes, it created the generation and handling fee. So this is a brand new fee under SB 158. And the way it's established is it's a flat rate per ton of hazardous waste generated.

It's currently at $49.25. That's what was established in SB 158, and then it's allowed to be adjusted annually by the Board of Environmental Safety. The fee was created and structured the way it was for a couple of different reasons. One, it was to simplify the overall structure. Previously, we had four different fees that fed into the HWCA. Those were consolidated and replaced or eliminated and replaced with a single fee. Probably more importantly, though, the fee was designed to generate more revenue for the HWCA.

Those old four fees all generated around $40 million a year. The intention was the new generation and handling fee was going to create about twice that amount. $81 million was the estimate for last year.

This was really important because it was both meant to eliminate General Fund backfills that had been necessary to keep the fund solvent prior to reform, and it was meant to increase our overall appropriation authority to meet our statutory requirements and the mission to provide effective oversight and the safe management of hazardous waste in the state.

And then lastly, the structure itself, by having that flat rate per ton, that was really done to be a more equitable way to distribute those oversight management costs across the generator community. The most analogous and the largest of the previous fees was the generator fee, but it was structured such that it was tiered and then capped at $100,000, even for the largest generator.

So that had the effect of, for any individual generator, their effective rate per ton could vary quite a bit, anywhere from $100 per ton, depending on where they've sat in one of those tiers, to less than $5 per ton. So by having this flat rate, it better ensures that generators paying an amount that is more consistent with their contribution to the overall waste stream.

So, with that little bit of background, kind of the problem statement is last year was the first year of this new fee, and we identified as the year went along, that it was generating significantly less revenue than what had been projected. So, in fact, it generated, I think, our estimates, $43 million per year. So, really much closer to those old fees, the total revenue from those old fees, than what had been intended in fee reform.

So the Legislature and the Governor approved $55 million in loans to keep us solvent, to balance the books for last year and keep us solvent for this year. And we don't really have firm numbers yet on what our revenues are going to be in the current year. Those final fee payments were due to our collection agency, the Department of Tax and Fee Administration. Those were due just a couple of weeks ago.

So we're still waiting to get the numbers in, but we're anticipating, based on the prepayments, that the level of revenue will be probably more consistent with what we got last year than what had been originally hoped for. And so what that really means, of course, is we identify that this is a structural, ongoing problem that we need to address.

So there have been several things that we've been doing over the course of this fiscal year already to try to improve our overall management and the returns that we're likely to see. Part of it is we've been doing the analysis of prior year data, looking both at our data on manifested waste as well as CDTFA's data on fee payment, trying to reconcile those different data sets to identify what are some of the key contributors to the shortfall.

And some of the things that we identified preliminarily last year, I think, are bearing out as we've done more analysis. So, for example, we know that there is a subset of generators that have not been in compliance, have not paid their fee or not paid on time. We also know that from what we can see, there are a handful, there are about 10 exemptions and exclusions that are in statute. Those appear to be utilized quite a bit and sometimes not very consistently.

So we're still looking at some of those issues more closely. But as we do that, we do have also recognized that we have data challenges. The data that we rely on is not really meant for this kind of analysis. For example, the CDTFA data set and the DTSC manifest data aren't meant to kind of talk to each other.

And so we're trying to build in some improvements so that we can do that kind of analysis and comparison of generation and fee payment so that going forward, we can do more and better oversight with our CDTFA partners. It's also, some of the data is incomplete. It doesn't include unmanifested data, for example, or unmanifested waste. It also doesn't include reporting historically on whether generator thinks they apply, whether their waste applies for an exemption or not.

So we've been working with CDTFA to make some improvements in those areas, and we've also been doing more outreach. So, recognizing this is a new fee, new structure, and we have thousands of generators across the state from different industries and with different levels of familiarity with what happens at the state level. So we've done more direct communications to all the registered fee payers and generators. We've updated our websites to make sure that the information we put out is consistent with CDTFA.

And we had our first-ever webcast in January before the final payments were due. That was attended by about 3000 different participants. So with that, given that we do think this is an ongoing shortfall, we do anticipate having a proposal in the May revision that identifies some solutions for going forward. Given that's still under development and review, it'd be premature to say too much about that.

But I do think it's helpful, perhaps to just note that from the Department's perspective, we do think that it's important to try to stay consistent with the underlying principles of fee reform in SB 158.

Obviously, it's important to have a fund that is in balance going forward and provide the revenue necessary to deliver our mission for the people and environment of California, and also to maintain that principle of fee-payer equity so that we have generator community that where no single generator or group of generators aren't able to bear their kind of fair share of those oversight costs.

So with that, we're committed to continuing to work with the Legislature, with stakeholders, with the board, to identify solutions and improvements that we can make.

Before we go to LAO, could you define for me a little bit better the term you just used, generator equity?

Yeah. As I was describing earlier, part of the intention in creating that flat ton, rate per ton, is to ensure that those generators that produce a larger amount of hazardous waste are bearing cone of a proportional share of the overall oversight cost that the Department faced. And so we think that's sort of an important fundamental principle versus going back to the old tiered and cap system that resulted in a much wider discrepancy in the effective cost per ton.

Thank you, LAO.

When it comes to this discussion item, we recommend the Legislature use the spring budget process to weigh its options in addressing the shortfalls within HWCA, either on a one-time or ongoing basis. This would put the Legislature in a better position to weigh the merits of the Governor's forthcoming May revision proposal and would provide the Legislature an opportunity to make adjustments to the proposal to align with its overall priorities going forward.

Thank you. This is an important issue for us to get right this spring, and so my comments are partially directed to our staff that this is one we really want to roll our sleeves up and make sure we're prepared as the Administration comes forward with their solution. But the fundamental concept that we have a responsibility to do from the government side of this is to try to match, wherever possible, match the generator of the expense with the revenue that needs to solve that problem.

So if people are benefiting from doing anything at the expense of the public, then it's either the public who consumes the product or the people that are benefiting or profit. We need to make sure that the revenue stream matches the expenses that they are creating for the public. We just, in our last issue item just went through the same thing with the mill fee. And what should the mill fee be to try to support the toxic substance? It's even more important here with this hazardous waste.

So the combination of the generators of hazardous waste, myself, as a consumer of hazardous waste, if I want to use hazardous waste products, I have to make sure I'm paying for the damage I'm doing out there. But we have to get this in balance and we have to get this right. And we tried once, we swung and missed essentially, we didn't get the revenue out there.

So a few things I'd like to make sure that we particularly focus on, and that is self-reporting, is a formula for underreporting.

And so to the extent that the Administration is going to look carefully at that as we go forward, the responsibility we have as a Legislature and as the Executive Branch is to look at all of the government fee exemptions that we're putting out there, we need to evaluate those exemptions and make sure if we're going to do exemptions, that there's really a firm public policy justification for that exemption.

Because the minute we do that exemption, we're passing on to a bunch of other people the responsibility for that. And so I think we do best when we can match the person generating the expense with the responsibility to address that particular expense. And the fewer times we transfer that on to the General Fund or the general public, the better off we're going to be in terms of creating the right incentives to decrease the generation of the waste in the first place.

If we don't send the right market signals, we will continue to generate waste because people will say, hey, you don't really have to pay to pollute. You don't have to pay the proper amount to be able to pollute in that particular situation. So those are two areas in particular. So I'm willing to sit there and let BES offer some things, but I want to go on record as we're going to try to be proactive on this and really carefully evaluate what you come up with.

And if there's a partnership that we can come up with, particularly on government fee exemptions. I'd love to have that conversation, too. Any questions or comments?

Yeah, just one quick comment. So, as you mentioned, you're in the midst of fine-tuning some of this analysis. You pointed to some of the challenges that you've had, and I think it's just really important before we contemplate raising a fee structure, that we close any loopholes that are related to a lack of compliance or possibly like some bogus exemptions before we raise fees on the folks who are actually already paying their share.

So I think that's really, really important for us to figure out how to get that analysis right in the course of the next couple of months before we're being asked to take decisions on this issue. Thanks.

So I'm going to go through some specific questions here just to make sure that we get it out on the record. But what's the current process for fee collection? Take us through that some. And how much is self-reporting part of it?

Absolutely. So the way the process works now. So again, CDTFA, the Department of Tax and Fee Administration, is our fee collection agency. And so generators are required to register with CDTFA and then they make a prepayment, is what we call it. Historically, it's basically just 50% of their estimated cost. They make that by the end of November and then they have to make the final payment by the end of February.

So that was just a couple of weeks ago with their final return. With respect to self-reporting, that's right. Historically, the way this has worked is that generators they've registered and then they pay the amount that they believe they owe based on their records of what they've generated and what they believe, and if they believe they qualify for any exemptions, what exemptions they believe they qualify for.

How much do we audit that information?

Well, so that's in CDTFA's purview and they do have funding for auditing. I don't at my fingertips know exactly how many they do, but their process is once those final returns are due, they do a comparison as best they can with the data on what they've collected from folks, do that comparison to our manifest database. But like I said before, there's some gaps in what information is collected and the systems don't tie very well.

So those are some areas we're trying to rectify even now with our existing authority. But based on that, if they identify either generators that haven't registered with them, or if they identify registered fee payers, whose the amount that they've paid appears to be significantly less than what they think would be owed based in the manifest data. Then they will issue letters to those individuals and they could even follow up with an audit.

And they issue letters. What are the penalties?

So the penalty for late and nonpayment is 10% of the amount of fee owed plus interest. And again, that can be assessed either once they've identified that someone has not paid what they voted, if they made that determination, or if they pay late.

So there's a 10% penalty if you grossly under report. The worst that happens is a 10% penalty. Are you considering modifying those penalty fees in your spring modifications?

So I think we're looking at all kind of facets of the collection process. I will note that that particular provision, if I understand correctly, is in statute right now.

It strikes me as a fairly low penalty for, if you can get away with it, kind of charge out there. And again, going back to the Assemblymember's comments, we want to try to have the true generators making sure that they're paying before we raise the rates to everybody else. So that may be something we need to consider in terms of what those penalties are, particularly with something as serious as hazardous waste.

If you're on a self-reporting set up, and that's the other question I have, can we come up with a better system than a self-reporting system, or at least a system that has much more structural auditing so that the sense of compliance, that complying properly is the wiser business decision than to go, hey, what's the worst that can happen? We pay 10% more, but doesn't seem like a serious enough problem. So how about, you've identified some of those reasons.

I guess we look forward to more of those reasons, but anything, what's the biggest reason why you think fees came in lower than you estimated?

So I think largely what I spoke to already and kind of we had identified preliminarily last year, is that the noncompliance and non and late payment and then the kind of broad use of exemptions, those I think have validated, we've done a couple additional years of data reconciliation that seems to validate that those are kind of key contributing factors consistently.

Where are we on the $40 million loan?

You're referring to the $40 million from BCRF. Maybe I'll defer to finance on this one.

So the Governor's Budget doesn't propose to specifically repay that in the budget year, however it is planned to be repaid. I believe in budget year plus one, which is 25-26.

Yeah.

Thank you. All right. And I think that's it in terms of my questions. Anything else? All right, issue five. Thank you very much, gentlemen.

Good morning. Krystal Acierto. I'm Acting Director of Cal Recycle, and I'm joined today with my Chief Deputy Director, Mindy McIntyre. I just want to start off by highlighting some of the work on 1013, as it's very relevant to the proposal, and then kind of dive into the specific BCP that's on the agenda today. Super excited to announce that we kicked off our formal rulemaking process for the dealer registration and dealer cooperative regulations just on Friday.

And so these regulations establish a registration process for beverage dealers and establish a product stewardship framework for dealers to form dealer cooperatives in unserved convenience zones to collect back from consumers the beverage containers sold into their local markets. We're also working very diligently to stand up several new grant programs associated with both SB 1013 as well as AB 179, which included several investments that are kind of couched within the circular economy package.

And we're happy to report that we are on track to encumber most, if not all, of those funds in the next several months and over this year. I want to specifically highlight one grant solicitation that is open right now, and that's 40 million in the recycling innovation grants we anticipate releasing. So that's open. I think we're open through April, and then we have about 35 million then that's remaining from that pot of funding that we anticipate in early 2025 that we would release.

And that's to allow time for the 1013 regulations to go through process and make sure that we still have funding available once the dealer cooperatives are in place and they've had time to develop their required plans on consumer redemption opportunities. So with that little bit of context, that brings us to the budget request that's on the agenda today, I think as important context, our staff currently oversees over 950 grants awarded under 26 different grant programs, amounting to over 255,000,000.

However, with just the new grants that are coming in under SB 1013 and AB 179 alone, we are about doubling the amount of grants that the Department is overseeing and responsible for moving out into our communities. And so between those two, we're adding about 220,000,000. So again, about double.

So, obviously, this is an exciting level of investment in some really critical programs, but it's also an incredible amount of workload to develop grant criterion applications and manage those solicitations and grant awards, providing technical assistance, which is a really important component, obviously, in seeing these grants be successful in our communities and also implementing and overseeing the grant programs.

And so given our shared, I think, high priority and accelerating awarding and implementing these essential programs, the BCP on the agenda today, we're requesting six additional positions, and the cost of those positions would be absorbed within existing resources, both from BCRF and also there was an administrative allowance included in AB 179. So this is for position authority only. So with that, I'm happy to answer any questions.

Great, appreciate it. Program is important and particularly trying to get this industry sort of off the ground and structured properly and get the proper incentives and all of that. Can you tell me about the commingled rate and your desire to wait a year before you start to do reimbursements? In terms of that, what's the rationale for Cal Recycle?

Yeah, absolutely. So every year, Cal Recycle engages in a rate determination study, and that is to set rates for recycling centers, community programs, and our various kind of collection programs. The study, however, takes approximately a year.

And part of that is because as part of determining whether we're recalculating the commingled rate, in addition to engaging with each of those different kind of collection types, the survey is also taking into consideration location and seasonality and program size, and ultimately looking at the proportions of CRV containers to non CRV containers. So the purpose of that kind of timeline is to ensure that we have accurate information about consumer behavior.

And so in December, we sort of looked at looking ahead into our next year because we used the prior 12 months to make that determination. There's a couple factors that are influencing our ability to provide an accurate commingled rate. And 1013, as we just discussed, is one of those factors. Obviously, it's a big change to the program to be bringing wine and distilled spirits into it.

And at this point, we don't have a year's worth of information or anywhere close to a year's information on what that means for consumer behavior. I think also SB 353, which added the large fruit and vegetable juices. Also, again, that's new legislation. We haven't had time at this point to evaluate over kind of the study period, and so we don't have accurate information, again, to make a determination about updating the commingled rate.

So we are in the midst of collecting that information and we fully intend on continuing that evaluation and ultimately updating the rate in early 2025.

So, updating rates in early 2025, are people receiving payments based on the old rates at this point in time?

Correct. So the commingled rate was last recalculated in July 2023. So we still have payments that are going out based off of kind of the rates that are in place, but it just wouldn't be recalculated until we're able to provide accurate information to ensure the integrity of the program.

And then my other question is you're in a different spot than others and that you do have this improved revenue stream and stuff. But what's the biggest challenge for Cal Recycle right now? And I appreciate that you're in the acting position and so new in this leadership role, but what's the biggest challenge for Cal Recycle from your perspective,

Particularly with this or just in general?

In General with Cal Recycle.

My Chief Deputy can feel free to add anything. I mean, I think we've had a lot of really exciting new legislation that's passed recently. So with SB 54, with SB 1013, and so that's really exciting. I think it's a really good opportunity and a great point in time at Cal Recycle where we're really moving the ball forward on reaching our goals and movement towards circular economy.

But it also means that there's a lot of workload. This is sort of unprecedented for a lot of this legislation. And so we're really at the forefront of trying to work through what some of these programs look like and broadly extended producer responsibility programs. I think we have a lot of knowledge at the Department that puts us in a good position to be moving forward and be the leaders not just in this state but nationwide on this.

But obviously that poses a lot of challenges that we have to work through. And so I think fortunately, we have a really good system set up where we do a lot of public engagement and a lot of engagement with our stakeholders and completely understand that a lot of these aren't going to be perfect. Right. Since we're kind of leading the way on establishing these new programs. So there are challenges, of course, and I think that just broadly those are the challenges that we're working through.

But it's also a really incredible opportunity for us, like I said, to move the state forward on circular economy.

And with these two programs, what's the biggest challenge?

On 1013 in particular?

And 179, both of them.

Yeah. So on 1013, I would say, I think the legislation itself is very ambitious. Right. And it sets timelines for us in order to move forward in implementing the program, however, because we also have ambitious timelines and then there's the reality of kind of the process that we have to go through. So in some cases, there's not a perfect alignment between requirements that are in the legislation versus our regulatory process, which has to go through kind of the full year cycle.

So there are cases where they're not perfectly aligning. I think we're seeing this, for example, on labeling requirements for wine in particular, where there's a requirement that collection is happening. But we also don't have the regulations in place on some of the labeling requirements. And so I think that's posing challenges and confusion, frankly, for our stakeholders, and it's something we're definitely aware of.

And I think we're trying to be not just with this program, but programs more generally, trying to be flexible where we can, knowing that there's going to be some hiccups as we're kind of trying to move forward in process.

Great. LAO, did you have any other comments?

The proposal raised no concerns for us. The six positions seem justified.

Assemblymember?

Yeah, I just do have a couple of questions, and I think I kind of want to take maybe a little bit of a step back. So if I understood you correctly, did you say you're managing 96 different grant programs?

There are 26 different grant programs with 950 grants.

All right, I did a little. Okay. 950 grants and 26 grant programs. And I guess, how are you evaluating the cost-effectiveness or the cost-benefit of these 26 programs and what accountability measures do you have in place for the grantees?

Yeah, and I might have my Chief Deputy Director weigh in on this, but I think just at a high level. Well, that doesn't include all of the additional grants that are going to be coming in right through 1013 and that sort of thing. But I think as we're developing criteria and as we have developed criteria, it kind of goes into the program development of the program criteria.

We put in kind of measures for different requirements for grantees to provide additional information so we can ensure that they're meeting the ultimate goals of the appropriation that was provided. But I don't know if,

Yeah just to add, we have grants across the spectrum. We have very small grants where we're working with community compost, and then we have very large infrastructure grants within those 900, et cetera grants.

So each of the accountability, it's a little bit different for each of the programs, but it is written into the grants, and our grants team is very good at working with our grantees, and there's a lot of communication that goes back and forth to make sure that we are hitting numbers on each of our grants so we can provide more detail if you have questions.

Yeah, I would be very interested in understanding how we're evaluating that. I think this point is not relevant just for Cal Recycle. I think it's relevant for some of our agencies more broadly. As in any household, when you have something new that you want to do, you usually don't just add it onto the pile of stuff you're doing. You've got to stop doing something else.

And I know that sometimes you're just responding to requests from the Legislature and statutory requirements, but I think particularly in this budget environment, it's a really good opportunity for us all to take a step back and ask, of those 26 grant programs, are there some that really just don't make sense for us to continue doing? Like where are we actually seeing a good return on investment and where are we not?

And are there opportunities, therefore, rather than us adding new staff to staff these programs, for us to do things a little bit more efficiently with the current staff that you have? Because how many staff members are working on bottle bill-type programs? It's several hundred, right?

Beverage container total? Yes. We can get the exact number for you. I believe it's 280.

That seems like a lot. That seems like a lot of people. And I know that there are some comparisons to staffing levels for very successful programs in other states and countries where, for example, in Vancouver, I think they run their entire recycling program with like four people.

So while I kind of understand why you need these new people, I would really, really challenge you to take a step back and take a look at what are those several hundred people doing and how can we deploy that staff more effectively to meet the goals that you're being asked to meet? And equally, where are the things where statutory requirements that have been given to you by the Legislature over the last 20 years perhaps need to be reconsidered.

Because I think that that's really the conversation that we all need to be having in this budget environment. Not, gosh, we just have to keep doing all this stuff. We don't have to keep doing all this stuff. So I would challenge you to take a step back and figure out how do you deploy the resources that you have more efficiently.

Yeah, I appreciate that comment. I will just say a couple of things, and I think your point's well taken. I think, one, we definitely evaluate and sort of make determinations about whether our grant programs are successful, whether there's interest in it, whether our local communities and our local jurisdictions are benefiting from it, and whether that's really kind of where their needs are at. And I think even this last year, I think we redirected funding from one of the programs to another.

I think we did that for a couple of them where we were saying that we really weren't getting kind of the bang for the buck and the interest that we would hope to be getting from local jurisdictions. And so we definitely move things around when there's flexibility for us to do that.

I think on the position side, and with this proposal in particular, we took a really hard look because I agree with you, especially in this budget environment, we want to be really thoughtful about the proposals that we're coming to you with. And so, one, we looked for ways that we could cover the costs within existing resources, and we're able to do that. And so I'm happy that we're coming forward with just a position-only, authority-only request.

But also our need is larger than the six positions. It's actually 18 positions. And so what we did is an internal evaluation to determine where do we have vacancies, where can we move people around so that we can limit expansion of the program when we can. And so I know that doesn't fully address kind of your comments, but wanted to share that additional information.

Yeah, no, and I appreciate that and appreciate that context. I think I would find it super helpful as we're considering this, I think, to have kind of two things in follow-up.

Number one is the list of the 26 grant programs and the, I guess, metrics by which you're evaluating kind of the success of those, and a brief summary of that, as well as just a breakdown of what the 200 plus or however many hundred people that are currently working on the bottle bill program, what their roles actually are. So both of those things, I think would be really helpful for me as we consider this proposal for additional staffing.

Department of Finance?

Yeah, Assemblymember I also just wanted to note that last year, the Administration, the Legislature, also kind of acknowledged the challenge that Cal Recycle's posed with in terms of the overall amount of legislation that has been just recently enacted and impacting the Department.

And really, we pursued a proposal and actually funded a proposal to develop kind of a zero waste plan on a statewide level that's really going to kind of help guide the Department in terms of looking at the regulatory frameworks that they're dealing with in addition to all this additional new chapter legislation that they're having to implement.

And so really that plan is going to kind of help guide the Department forward in kind of a higher level and so that was just some additional context I wanted to provide.

Yeah, and I appreciate that. And I recognize this has to be a two way conversation because I recognize that oftentimes the reason that you're having to staff up, the reason that costs are growing, are because of bills that we're passing in the Legislature. And so I think particularly in this moment in time, we've got to be really frank and honest with one another and make some hard choices about things that we simply cannot afford to do moving forward.

So both for your Department and for the others that are going to come before this Committee, I really welcome that two-way conversation. Thank you.

Would you be able to get the Assemblymember the information that she just asked for, which is the responsibility of the 200 people and the 26 grants?

Yeah, I think so. It might take a little bit of time, but we'll definitely follow up.

That would be helpful. We'd appreciate that. I do want to further this conversation by pointing out one thing that as you bring up Vancouver, and I think it fits exactly with what you're trying to talk about. But part of why Vancouver can get away with only four people in their program is because they have a very comprehensive producer responsibility program.

So what you're not seeing is how many employees are being employed by the producers to do the things so that you only need to have four people managing it in Vancouver. But the advantage of that is if it's a producer responsibility, then the producers have an incentive to as efficiently as possible manage their recycling program so that they're going to do a cost-benefit analysis on each employee that they bring in.

But you have a disconnect when you don't have producers responsible for, for example, the recycling that they in other countries say they should be responsible for. Then when you try to do that at the government level, now you have this disconnect because you have government agencies trying to figure out how to sort of pick up the waste that was generated by somebody else and trying to create the right incentives.

And you're less likely, as soon as you make that disconnect, you're less likely to be as efficient in terms of managing that. And so one of the things for us to look at in the long run is to expand our producer responsibility side of it because we will have more efficient collection. And you see that up there, they're just much more efficient rather than having a number of bureaucrats out there. So welcome this continued look at this. So thank you very much.

And we're on to our last issue, and that's issue six and the Blythe Border Patrol station replacement. Thanks. Yeah. Good job. Thank you.

Go ahead.

Welcome. Well, thank you.

Thank you. Introduce yourself.

Hi. My name is Arima Kozina. I'm with the Department of Food and Agriculture. I'm deputy secretary for finance and administration. Thank you so much, Chair Bennett, and members of the committee for having me here today.

You're welcome.

All right. Would you like a brief introduction to Blythe? Absolutely.

In terms of.

So CDFA is requesting a one time increase of approximately $99.1 million in public building construction fund, or bond funds to begin the construction phase. This is the final phase for the Blythe Border Protection Station relocation project. So the existing Blythe border protection station, it's where my family sprung. So I've been through there a few times. And it was built in 1958, and it was originally designed to accommodate about 600,000 vehicles, which is, as you might imagine, inadequate for modern traffic levels.

So in 1959, its first full year in operation, the total traffic surpassed the design capacity at more than 747,000 vehicles. In 2021, traffic measured at more than 4 million vehicles, almost seven times the traffic volume the station was designed to accommodate. And if you've ever been through there, it's right across the river. So there's a bridge right there. So it's a safety concern to have traffic backed up in that manner.

So a new border protection station designed to accommodate the current and future traffic volumes is essential to accomplish the program's mission of promoting and protecting California's agriculture through the exclusion of destructive agricultural pests entering the state via major roadways. The construction fees is anticipated to be completed in November of 2027.

Thank you. The $100 million to replace the station. Just give us the major reasons why. And is that the total cost or is that the beginning cost?

Absolutely. That's the construction phase. So CDFAs received $9.3 million in General Fund for the acquisition of the land that's just down the property that's just down the road in 2018-2019, $2.1 million General Fund for preliminary plans in 22-23 and 2.7 million for working drawings in 23-24. And based on those working drawings, that's what that $99.1 million is based on.

That will be the construction phase. What will be the other expenses after the construction phase?

This should be the last phase of the process.

Great. Okay, good. Thank you. All right, LAO?

No concerns with the proposal. We've been tracking it through its development phase, and we find that the funding for construction is reasonable.

Okay, good. Thank you very much. We have no other committee members here, and so we appreciate you being here today. Thank you very much. Good luck with the project.

Thank you.

And we are done with our presentation items. We're at non presentation items. We have no committee members here to ask questions on the non presentation items. And so we will now move to public comment. And please come up, identify yourself and you have 1 minute for your public comments.

Good morning Chair Bennett. My name is Minni Forman and I'm the food and farming program director at the Ecology Center in Berkeley. I'm here today to in support of the California Nutrition Incentive Program. As you are aware of, it is a statewide program that serves more than 500,000 Californians, low income Californians with fresh fruits and vegetables. Every year we distribute through our program about 38 million servings of fruits and vegetables. So it's a big impact.

But this cut, I want to be very clear, would be a killing cut to the program. Although there is a little money left to keep the CDFA staff, they wouldn't have a program to administer. So that means that programs like the Akazu Center, which is a sub awardee of the CDFA to administer this, run this program, it would be irreparable. So if this is not funded, it truly means a killing cut. So I just want to be very clear about that.

And again, as you know, there's federal mass dollars available. So thank you.

Thank you very much.

Mr. Chairman, members, Mark Murray with the environmental group California's Against Waste regarding the Cal Recycle Budget and issue item that you brought up, I guess the first point is to state the obvious that this is a 100% self funded program. There are no General Fund dollars that go into funding the beverage container recycling program. And in fact this program has been a contributor for good or ill to other environmental programs.

So what Cal Recycle does with their money has zero impact on the General Fund. We think the staff of Cal Recycle is doing a pretty good job in terms of their mission in terms of the beverage container recycling program. But we do have a concern about the commingled rate issue which you raised. Cal Recycle does surveying of curbside recycling programs year round. They don't have to do a new survey. They're constantly doing surveys of curbside recycling programs.

They have the survey that they would normally have used to establish a new commingled rate. On January 1 they completed the survey and they chose not to use that survey. That survey breaks down the new containers that were added as a result of 1013. It shows precisely how many of those containers are in the waste stream, in the curbside recycling stream. And they are choosing not to apply that number now. They hope. They believe that that number may change over time.

They can change that number anytime they want. The legislation provides them with the authority to change that number as frequently as they would like. Thanks.

Good morning, chair. Michael Jared, on behalf of NextGen California and over 160 organizations. We urgently request that you reject the governor's proposed cut of $33 million to the California Nutrition Incentive Program and maintain the program. We wish that the administration had applied for the federal funding that was available this year.

CNEP is a very powerful tool to fight food insecurity by providing incentives to California's most vulnerable low income families to purchase local fresh fruits and vegetables. We, as well as our partners at the Center for Equal Literacy, also support protecting the farm to school program and thank you for your time.

Good morning chair. My name is Elizabeth Fisher. I'm an attorney with Earth Justice. Supplementing my written comments, why is a policy that would make it more difficult for farm worker families to seek review of pesticide permits part of a budget trailer bill? Section 14 of the Mill Fee Bill would change existing law by narrowing who can participate in the review process for the most dangerous category of pesticides, including toxic cancer causing fumigants that can drift well beyond 1 mile from application sites.

There would be no right to appeal permitting decisions unless someone has a residence, crops, property or water source within half a mile from an application site, thereby excluding farm workers, teachers, schoolchildren, and residents affected at greater distances. As the burden of pesticide exposure falls predominantly on Latino farm worker communities, limiting their voice in pesticide permitting matters is simply wrong.

Please remove the definition of directly affected from the trailer bill or line through directly affected and replace it with interested person and consider our written comments as well. Thank you very much.

Thank you very much. Appreciate that.

Morning, Mr. Chair. Christopher Finarelli, on behalf of the Household and Commercial Products Association, speaking to the item relative to DPR. Today, our industry includes manufacturers of non agricultural pesticides like disinfectants used in homes and schools and hospitals, pet care products like flea tick products, and lawn and garden care. This non agricultural universe of products contributes roughly half of the total mill assessment collected by DPR each year.

First, we want to underscore that it is important to our members that the Department of Pesticide Regulation is well resourced so they can carry out their duties. We support a well functioning department. What we would like to see as part of the budget process are measures put in place to improve the registration process where timeframes to get product approved by DPR have continuously increased, making it exceedingly difficult for our members to predict when they will be able to deliver products to consumers.

We would like to see statutory registration timelines, which is something that is done at the federal level, because if you recall all pesticides.

Thank you very much. Your time is up.

Thank you so much.

Hello, my name is Asha Sharma speaking on behalf of Pesticide Action Network on issue three. First, wanted to align ourselves with Earth Justice's comments that you just heard. We also support LA's assessment to include funding for AB 652, the Environmental Justice Advisory Committee, in the mill fee proposal. We also agree with LAO that the legislature should review the sustainable pest management activities that would be funded.

Specifically, the fund should be used to establish a sustainable Pest Management grant program at CDFA to get resources directly to farmers to adopt safer pest management. And lastly, the Legislature appropriated $1 million to fund a study on the mill fee, which recommended that it be increased to 33.9 mils by 2027. What's been recommended by DPR is to only increase it by 28.6 mils. So we recommend that instead the increase align with what the third party study recommended.

We also urge you to please reject cuts to organic transition, the California Nutrition Incentive program, farm to community hub.

Your time is up. I didn't catch your organization.

Pesticide Action Network.

Thank you.

Thank you.

Next speaker.

Mr. Chair, Louis Brown here today on behalf of the California Grocers Association. Simply put, we're asking you to reject the administration's proposal to loan 125,000,000 from the Beverage Container Recycling Fund. You heard the expansion of the bottle bill that's occurring, including the development of dealer cooperatives. We saw this happen in 2009 when a loan was made.

The administration didn't think it would have any impact on the operational functions of the department, and that resulted in a proportional reduction to the fund, impacting all stakeholders with the expansion of these new programs. We need this fund to remain healthy and ask for you to reject that proposal. Thank you.

Thank you very much. Appreciate it. I am concerned about proportional getting to proportional reduction also and trying to make sure that doesn't happen. Thank you.

Good morning, Mr. Chair. Taylor Roschen, on behalf of a variety of agricultural associations, including California Citrus Mutual and the California Strawberry Commission, we'd like to speak on issue three. AG supports a strong, properly resourced DPR, but we'd like to highlight the department is requesting a significant amount of new resources and staff without accountability and transparency measures, which you've already highlighted. To that end, we object to the legislature ceding its authority to dictate the mill maximum above year three to DPR.

Though the mill is flat, it is indexed to dollar sales, so the mill rate at year three will provide additional buffer resources above what the BCP projects to cover. New legislative mandates and some of the scientific discoveries that you noted in your comments. We believe if after a 30% increase in their budget and staff as they've requested, they should return to the legislature, demonstrate what they've done and substantiate that they need more.

Additionally, we support many of the comments today to incorporate accountability and timelines into registration. Your question was instructive, Mr. Chair. There are no timelines imposed and no consequences for delay. So we would encourage the legislature to condition this new funding on registration timelines and transparency measures. Thank you.

Thank you.

Mr. Chairman. Good morning. My name is Chris Reardon and I represent the California Farm Bureau Federation. We're here to talk as well about the Department of Pestile Regulations Budget change proposal. As you might imagine. Look, we support a strong and vibrant DPR. However, when you're looking at least their proposal, $33.3 million, 117 positions, half of that mill the gentleman just talked about on the consumer side, we pay the other half of that mill. We represent primarily small and medium sized farmers. That is a tax. This is clear.

It is a mill tax that we have to pay. So we understand that there's some challenges within the department in terms of needs. But look, I think our focus primarily and advise you to look at both the imbalance that department currently faces. Then secondly, the whole issue of registration, efficient, effective registration in the state. And so we would support that.

And the last thing I would say to you as it relates to this new program SPM let's fix what we currently are facing within an apartment instead of creating a new program that no one else has had policy discussions within this body.

Thank you. Thank you for your testimony.

Good morning, Mr. Chair. I'm Matthew Allen with Western Growers Association. I really would just associate my comments with Taylor Roschen on some of the ad comments and just say the accountability measures are critically important for the department. And we have a special focus on making sure that the registration process itself is much more timely because we definitely want to maintain as many tools in the toolboxes as we can as new products come online.

And we appreciate your attention to that issue. Thank you.

Good morning. Michael Claiborne with Leadership Council for Justice and Accountability. In a deficit year, we're surprised and disappointed with the proposal to fully preserve funding for livestock methane reduction funding for climate resilience centers transformative climate communities equitable building decarb a number of other EJ priorities are on the chopping block this year.

It adds insult to injury to fully fund the livestock methane reduction program, which incentivizes the concentration of ever larger herds near disadvantaged communities and harms the drinking water and air quality of communities nearby. One last note in response to chair Bennett's insightful questions. The response that dairy digesters capture 80% of dairy methane is misleading and inaccurate because it ignores enteric emissions from dairies, which is approximately 50% of the emissions. We'd urge the committee to zero out this funding and thank you for your time.

Good afternoon. Mike Robeson on behalf of the Glass Packaging Institute regarding the beverage container recycling program, I want to associate my comments with the comments made by Louis Brown for the grocers on the concerns about the loan and the possibility of proportion reduction. Appreciate your response on that. I want to disagree with the testimony provided by California's against waste on the commingled rate and the questions you asked that the chair asked on the commingled rate.

The Glass Packaging Institute would actually agree with calorie cycle that to proceed with caution on making any changes as a commingled rate. And if you're going to make changes at the commingled rate, we want to make sure that there's changes to how glass is processed coming out of a material recovery facility. There has to be a standard for quality of glass moving from a Murph to a processor before you start making changes to the combing rate.

And we're happy to work with you, your staff calorie cycle.

Hi, Jane Sellen, Californians for Pesticide Reform on issue three, I align myself with the comments of Pesticide Action Network and Earth Justice. Our coalition is united in opposing the inclusion of language that would prevent impacted community members from requesting review of permits for restricted material pesticides, which would exclude farm workers, students, teachers and many more from eligibility.

We agree with the LAO assessment and your staff comments that the policy implications of this proposal are substantive enough that it should properly go through the policy process via AB 20113. We also strongly agree with the LAO assessment on page 30 that DPR must have accountability via enforceable targets for completing and not just managing reevaluations and risk assessments. As you chair, thank you for pointing that out. There are chemicals that have been in reevaluation since the 1990s.

The governor's proposal does include ambitious targets for increasing registration actions. Our coalition supports expedited registration only for pesticides already certified for organic use. Thank you.

I missed your organization.

Californians for Pesticide Reform.

Thank you.

Thank you.

Go ahead.

Good morning, Mr. Chair. Emily Garcia, on behalf of NRDC. NRDC supports increased funding for DPR in line with the recommendations of the Krause study, provided a significant portion of the funds support commitments and increase funding for oversight of pesticide use, including reevaluations and risk assessment, and initiating oversight for pesticide treated seeds. We align with CPR on the need for funding and commitments on risk assessment and reevaluation and with PAN on the need for SPM grant funding. We also support funding for Environmental Justice Advisory Committee.

In addition, we respectfully ask the legislature reinstate adequate funding for the Nutrition and Incentives program, Farm to Community Food Hubs program, and the California Underserved and Small Producers program. We also recommend that the planned funding for the Livestock Methane Reproduction program be shifted instead to the Alternative Management program at CDFA, which helps farmers adopt proven methane reduction strategies. Lastly, we must continue to invest in the entire suite of environmental funding programs for CDFA to help fight climate change and drought. Thank you.

Thank you.

Good morning. Good morning. Chair Jamie Fanous on behalf of the Community Alliance Family Farmers, or CAF, regarding CUSP, we dispute the administration's assertions about the lack of demand for CUSP drought funding. In particular, we've been clear that our farmers, including many small organic dairies, still need relief and CUSP funds would get the funding to farmers faster. These are emergency funds and should never be cut.

Regarding the farm to Community Food Hubs program, in the three years CDFA has been responsible for standing up this program, they haven't asked for a single amendment to address the challenges around the Advisory Committee. However, we're very willing to work with them to address these challenges. California has less food hubs than many smaller states and they are essential to support our local farmers. With that said, we respectfully request the Legislature reject the proposed cuts to the CUSP program and the food hubs program.

CAF also supports the mill fee increase with requests for several amendments to support farmers transition to sustainable pest management.

Thank you.

Good afternoon chair. My name is Beth Smoker. I'm with the California Food and Farming Network. We're a network of about 50 organizations that represent small farmers, farm workers and anti hunger communities, and we ask that you please reject the governor's proposals that disproportionately disinvest in our regional small farmers food insecure communities, including rejecting cuts to the California Nutrition Incentive program and align our comments with the Ecology Center, who spoke first during public comment, reject cuts to the farm to community food hub program.

Aligning our comments with Jamie Fanous at calf who just spoke, as well as rejecting cuts to the California underserved and small producer program. We also support with amendments the governor's proposed pesticide mill fee and align our comments with pesticide Action Network and Californians for pesticide reform who just provided comments and especially ask that the mill fee provide funding and investment for the establishment of an environmental justice Advisory Committee that was passed last year. And lastly, we ask that you maintain funding for the farm to school grant program.

Thank you very much.

Thank you Chair Bennett. Michael Boccadoro on behalf of the AG Energy Consumers. I want to just add a little context to CDFA's comments on the successful dairy methane reduction programs. Put it in context. We're trying to get a 40% reduction in manure methane by 2030. We have achieved with the programs at CDFA and the reduction in dairy herd size in California 35% towards the 40%. So we're almost there on the manure side.

Which brings me to my second point on interic replenishing the funds at Senator Becker, your counterpart on the Senate side was successful in getting in for the interic program. Will be critical because less progress has been made on the interic side. But we're going to have our first feed additive product available later this year approved by FDA at the federal level. So we have an opportunity to make progress on interic to match the progress on manure side so critical that that funding get restored this year. Thank you.

Thank you.

Thank you. Don Kepke with Mchugh Kepke Pedrone on the first item, item number three for the California Manufacturers and Technology Association with regard to pest management and the mill tax fee. We would align our comments with the Household and Commercial Products Association and our Ag colleagues in terms of interest in kind of ongoing discussions on the issue of the beverage Container Fund on behalf of Strategic Materials, Inc. Largest glass processor recycler in California.

We would also echo concerns about loans from the beverage container program for non beverage container purposes. And then finally on behalf of the California Council for Environmental and Economic Balance, SIEB. We would also just like to suggest and appreciate the comments by the chair by Member Petrie Norris related to the hazardous waste control account concerns about the gap in fees received. SIEB was at the table with that negotiation on SB 158.

Our members have seen and understood there would be increases in fees to the tune of two to 300%.

But we do remain very concerned about continuing to increase those fees across those fee payers and would welcome the opportunity to also talk about. Thank you.

Rebecca Marcus, representing the Center for Food Safety and the California Certified Organic Farmers, speaking in support of issue three, pesticide mill fee as DPR works to reduce the use of the most toxic pesticides, we need to ensure farmers have access to safer alternatives.

CCOF, though, is disappointed to see that the Milfee proposal includes a flat fee rather than tiering so the most toxic pesticides are assessed at a higher rate. We strongly urge the state to fast track organic approved active ingredients to ensure farmers have these safer alternatives. Also, on behalf of the California Climate and Ag Network, CCOF and CFS, we support the administration's proposal to retain funding for sweep healthy soils and organic transition.

We also urge you to consider investing in the alternative Manure Management program, which is a cost effective way to remove dairy methane at small and medium sized farms and restore funding to the food hubs. Thank you.

Thank you.

Hi, I'm Jan Yung with Hunger Action Los Angeles. I'm a market metro operator for Pomona and downtown Los Angeles. I'm here today to protest the proposed 33.2 million in cut to the California Nutrition incentive program under the Department of Food and Agriculture. Market Match benefit both the farmer vendors and the Low Income Californian market Match program is cost effective.

Market Match Program makes sure that the government funded food money will stay in California towards the farmers and everything the secretary of the Agricultural Department said defending their goal is all wrong. Everything she said is wrong and please keep our program around for the people and do I still have time?

You have 5 seconds.

Bye bye.

Thank you.

Hello, my name is Elinor Crescenzi. I represent the Ecofarm Initiative of the Integrative Development Initiative. So ecological, community oriented farming and resource mobilization. I am the lead steward at the Samius Community Farm and Cultural Center. We also participate at the Pomona Farmers market and this cut would deeply impact our programs to market match. 27% of our sales come from EBT and market match transactions and we only exist in the community because we are specifically targeting low income communities for supporting.

We are also applicants, planned applicants for the farm to community hub program and farm to school programs. We serve a community at the 96 percentile poverty. These programs are absolutely essential for our existence. Our model relies on programs like market match. It is not an unfunded program that could just be pulled. It has 15 years of history that has built up from 14 markets to almost 300. This will dismantle a network that has been built up over 15 years. It's not just a program.

You could pull $33 million out.

Your time's up. But tell me your organization again, please.

My organization is called the Integrative Development Initiative, and the program is the Ecological and Community Oriented Farming and Resource Mobilization.

Thank you. Next. Speaker.

Good afternoon, Mr. Chair and members. Alexa Norstad, representing the Center for Eco Literacy and 47 other organizations in support of the farm to School Incubator Grant program. Farm to school is an essential complement to the other investments in school nutrition because it is the only program that directly funds student education and farms, creating powerful and lasting connections between classrooms, cafeterias, and gardens. We respectfully request that you support the governor's January budget that fully funds the farm to school incubator grant program.

Lastly, the Center for Eco Literacy is in support of protecting the California Nutrition Incentive program. Thank you.

Hello, Mr. Chair. Andrew Antoine here today on behalf of the American Heart Association. The American Heart Association got it here to join the chorus of testifiers who've already spoken in detail urging that this subcommitee reject the governor's proposed cuts to the California Nutrition Incentive program and the Market Match program, which is supported by that overall program. I've prepared remarks here, but the points have already been made very well about the benefits of the program.

I just maybe end with request that this not be included in any package of early budget actions coming out of this house. We've been led to believe that the Senate has not included this cut in their package of early budget actions. And with that, thank you for the opportunity to testify.

Thank you for your comments.

Hello, I'm Amber Stott. I am the CEO of the Sacramento based nonprofit Food Literacy Center, where we inspire kids to eat their vegetables. I'm here asking for the continued funding of CDFA's farm to School incubator grant program in 2017. I advocated for this program to be created because California has a massive need. Our cooking and nutrition program at Sacramento City Unified School District is the number one most requested program in our district. We reach 20 title one elementary schools, and we cannot keep up with demand.

The rate of food and nutrition insecurity tripled in families with kids during the pandemic and remains high. We can't do this work alone, and we need the support of the state's farm to school grants to support not only our program, but many programs like ours that are across the state. Thank you.

Thank you very much. And with that, we're done with our public testimony, and I will adjourn this meeting. Thank you, everybody.