Mill Assessment SB 1161 (Costa) Amended 05/14/97

Sponsor: DPR
Contact: Steven C. Monk, Legislative Coordinator, Department of Pesticide Regulation, Phone (916) 445-4000

SUMMARY:

The Department of Pesticide Regulation (DPR) Fund receives the majority of its revenues from the mill assessment on pesticide sales in California. The mill assessment rate reverted from 22 to 9 mills due to a sunset clause that took effect on July 1, 1997. SB 1161 would consolidate and restructure the mill assessment provisions in the Food and Agricultural Code (FAC) to establish a minimum and maximum allowable rate of collection and a process for periodically adjusting that rate to match program needs.

BACKGROUND:

DPR is mandated by law to regulate the sale and use of pesticides to protect the public health and the environment. Historically, DPR received its revenues from the General Fund. Now, however, the pesticide regulatory program is funded primarily by a mill assessment on the sale of pesticides that was enacted in 1971. The initial mill assessment was set at 8 mills (approximately $8 million annually). Counties received 62.5 percent of these funds for local enforcement of pesticide laws through the county agricultural commissioners (CAC). The payments are apportioned to counties by a fixed formula. The rest of the revenues went to support the state operations of DPR. AB 2161, the Food Safety Act of 1989, increased the assessment from eight to nine mills. The bill required full pesticide use reporting and enhanced produce monitoring among other food safety measures. The increased revenue primarily went to cover the additional costs of these programs at the county level.

In 1990, DPR lost General Fund revenues as part of the effort to address a statewide budget crisis. This revenue loss was intended to be offset by an increase in the mill assessment. The mill assessment was, thus, increased from 9 to 18 mills (counties now received 31.25 percent of the total mill to keep their level of funding constant). The increased mill included a sunset provision effective on July 1, 1992. In 1992, DPR lost additional General Funds as California continued to face large budget deficits and the mill assessment was correspondingly increased to its current level of 22 mills with a sunset clause of July 1, 1997. Twenty-one mills continue to be divided between DPR and the counties. The twenty-second mill provides funding for the CACs (partial reimbursement for costs incurred for use reporting, approximately $350,000) and the Office Pesticide Consultation and Analysis Unit (OPCA) of the California Department of Food and Agriculture (CDFA). OPCA was created in 1991 when the pesticide regulatory program was transferred from CDFA to DPR within the newly created California Environmental Protection Agency (Cal/EPA).

FAC sections 12931 and 12932 require DPR to sample pesticides in order to assure the quality of the product. During analysis DPR determines whether the chemicals listed on the pesticide label are, in fact, in the pesticide and in the quantities specified on the label. This is an old program which was initiated as a result of concerns regarding consumer fraud. This program is separate from DPR's pesticide residue monitoring program where produce is sampled and tested for the presence of pesticide residues. Continued sampling of pesticide products has not indicated any problems in recent years and, therefore, was identified during DPR's Regulatory Improvement Initiative as an area that needed reform. Since DPR has already taken steps to administratively cut back this program, DPR's statutory responsibilities should be clarified.

PROBLEM:

Since 1970, the majority of DPR's funding shifted from the General Fund to the DPR Fund, the depository for mill assessment collections. The mill assessment rate reverted to a rate of nine mills on July 1, 1997. The funding reduction will result in a significant portion of the State's pesticide regulatory program being unfunded once a sizable excess fund balance has been depleted.

ANALYSIS:

DPR has undertaken an extensive reevaluation of the entire pesticide regulatory program in preparation for discussions with all stakeholders regarding the June 30, 1997, sunset on the existing rate of mill assessment on pesticide sales. Through these discussions with stakeholders affected by the pesticide regulatory program, amendments to the FAC were negotiated. The current version of the bill represents the negotiated amendments to the FAC.

SB 1161 would do the following:

1. Codify all provisions from GRP-1 of 1991 referencing the DPR Fund.

2. Consolidate all mill assessment provisions into one area of Division 7 of the FAC. Restructure the Pest Control Dealer Licensing provisions in Division 6 of the FAC and the Pesticide Broker Licensing provisions in Division 7 of the FAC. The bill cleans-up references to dealers as Pest Control Dealers, not Pesticide Dealers, to reflect a legislative change enacted a few years ago. In addition, the revised Pesticide Broker Licensing provisions are moved from Division 7 to Division 6 where the other licensing provisions are located.

3. Clarify the Director's responsibilities regarding pesticide product quality sampling.

4. Amend existing mill assessment language in Sections 12841and 12841.1 to accomplish the following:

   (a) Focus on "any person subject to these provisions" not naming just registrants, brokers, and dealers.

   (b) Authorize the Director to set the mill assessment rate between 9 and 17.5 mills per dollar of sales for all sales of pesticides for use in California. Establishment of the mill assessment rate would be accomplished by adoption of an emergency regulation exempt from the Office of Administrative Law's (OAL) review. The level of the mill assessment would be determined by comparing appropriations against all other anticipated revenues and, then, setting the appropriate mill assessment rate to derive the remaining revenues and provide for a prudent reserve, depending on the projected value of a mill. The bill requires the Director to annually review the need to adjust the mill assessment rate to compensate for under or over collection. The bill defines a "prudent reserve" as an approximate balance in the DPR Fund of $2.5 million by the end of fiscal year 2001-02.

   Under the bill, the new variable mill assessment provisions sunset after five years, at which time, a flat rate of nine mills would be collected unless another statute is enacted. The bill establishes that from January 1, 1998, to June 30, 1998, CACs will receive five-eights of the mill assessment money collected by DPR. Beginning July 1, 1998, the bill requires the Director to distribute to the CACs an amount equal to the revenue derived from six mills.

   (c) Between January 1, 1998, and January 1, 2003, the bill authorizes the Director to collect an additional assessment to fund CDFA's OPCA consultation activities. DPR may collect an additional assessment of no more than three-fourths of a mill, on dual use and agricultural products, for the purpose of funding CDFA's consultation activities. On an annual basis, the Secretary of CDFA, in consultation with the Director, is to determine the necessity for the additional assessment.

CONTACT:

Steven C. Monk, Legislative Coordinator
Department of Pesticide Regulation
Phone (916) 445-4000