BILL ANALYSIS AB 537 Page 1 Date of Hearing: May 13, 2009 ASSEMBLY COMMITTEE ON APPROPRIATIONS Kevin De Leon, Chair AB 537 (Arambula) - As Amended: April 23, 2009 Policy Committee: AgricultureVote:8 - 0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill requires a farmers' market, a certified farmers' market, or any other open-air market selling fresh produce that does not already have a Food Stamps Electronic Benefits Transfer (EBT) system in place by January 1, 2012, to obtain the system or permit a Food and Nutrition Service (FNS) authorized third-party organization to operate an EBT system on behalf of the produce sellers. FISCAL EFFECT 1)One-time costs of approximately $1 million ($500,000 GF) for the purchase of the point of sale (POS) devices and the initial activation fee for the 733 certified farmers markets in the state that are currently are not participating in the program. 2)On-going, annual costs in excess of $600,000 ($300,000 GF) for the transaction fees and monthly charges associated with maintaining the POS devices. 3)Unknown one-time and on-going costs of several hundred thousand dollars to provide POS devices at an unknown number of open-air markets and farmers' markets that are not certified. The state does not collect data on how many of those markets exist throughout the state and therefore the fiscal impact cannot be calculated. COMMENTS 1)Rationale . According to the author, the switch from paper AB 537 Page 2 food stamps to electronic benefit transfer (EBT), essentially a debit card, rendered certified farmers' markets inaccessible to individuals using their food stamp benefits for food purchases. While many farmers' markets throughout the state have begun to use POS devices which allow food stamp recipients to use their benefits to purchase fresh fruits and vegetables at farmers' markets, not all have acquired the necessary equipment. This bill would require all open air markets selling fresh produce to obtain a POS system or allow a third-party to operate a POS system on behalf of the sellers at the market. 2)Background . There has been an on-going national policy discussion concerning the lack of fresh produce available to many people who are living on limited incomes or receiving food stamps or other forms of assistance. Many poorer urban neighborhoods lack farmers' markets or even grocery stores that sell fresh produce. An integral part of those discussions and that effort has been to allow people using EBT cards access to farmers' markets. As of the end of 2008, 753 farmers' markets were authorized nationwide to accept Supplemental Nutrition Assistance Program (SNAP) (Food Stamps in California) benefits nationwide, a 34 % increase from 2007. While the percentage of redemptions is low, the amount of funds going to small farmers has increased from about $1 million in 2007 to $2.7 million in 2008, nationwide. Over 250 farmers' markets were operating a scrip or token system nationwide. 3)Current Farmers' Market Utilization . The state has allowed farmers' markets to operate POS EBT devices for close to a decade. Currently, approximately 67 certified farmers' markets in the state allow customers to utilize their food stamp benefits when purchasing produce or other goods at the market. In 2007-08, $633,000 in food stamp benefits were redeemed at these markets, out of a total statewide food stamp benefit redemption of close to $3 billion. 4)Third-Party Access to the Federal Financial System . The bill requires a third party be allowed to provide access to EBT benefits for individuals at farmers' markets. Preliminary information suggests that it is unlikely that the federal government will allow a contracted third-party to have access to the federal financial system, which is what would likely be AB 537 Page 3 required for this provision to be operable. 5)WIC Farmers Market Programs . The Farmers' Market Nutrition Program was established by Congress in 1992, to provide fresh, unprepared, locally grown fruits and vegetables to participants in the Women, Infants, and Children Nutrition Program (WIC), and to expand the awareness, use of and sales at farmers' markets. Currently, 46 states, including California, participate in the federal program. Eligible WIC participants are issued Farmers' Market Nutrition Program (FMNP) coupons in addition to their regular WIC food instruments. These coupons can be used to buy fresh, unprepared fruits, vegetables and herbs from farmers, farmers' markets or roadside stands that have been approved by the state agency to accept FMNP coupons. The farmers, farmers' markets or roadside stands then submit the coupons to the bank or state agency for reimbursement. The Federal food benefit level for FMNP recipients may not be less than $10 and no more than $30 per year, per recipient. 6)Healthy Purchase Pilot . The pilot project is designed to strengthen California's efforts to prevent obesity by increasing access to fresh fruit and vegetables in low-income communities where fruit and vegetables typically are unavailable or costly. California, like other states, has a growing obesity problem, with approximately 60% of adults and 25% of children obese or overweight. The consequences of obesity are devastating to individuals, and include diabetes, hypertension, heart disease, cancer and other debilitating diseases. Physicians, nutritionists and other experts recognize the importance of a diet rich in fruit and vegetables as one key strategy in preventing obesity. 7)Committee Concern . Should the state focus its energy and resources on supporting farmers' markets that serve low income communities, rather than requiring that markets in all communities (including such places as Beverly Hills, Sausalito, Tiburon, Montecito that may not serve low income families) have an EBT system in place? In addition, the committee may want to consider targeting resources toward programs like the Healthy Purchase Pilot, which encourage AB 537 Page 4 store owners in low income areas to carry fresh produce and reward food stamps recipients who purchase fresh produce, rather than investing in POS EBT devices that may not be utilized. Analysis Prepared by : Julie Salley-Gray / APPR. / (916) 319-2081