BILL ANALYSIS AB 2240 Page 1 ASSEMBLY THIRD READING AB 2240 (Ma) As Amended May 4, 2010 Majority vote AGRICULTURE 8-0 APPROPRIATIONS 12-1 ----------------------------------------------------------------- |Ayes:|Galgiani, Tom Berryhill, |Ayes:|Fuentes, Ammiano, Coto, | | |Conway, Fuller, Hill, Ma, | |Davis, Bonnie Lowenthal, | | |Mendoza, Yamada | |Hall, Nielsen, Skinner, | | | | |Solorio, Torlakson, Hill | | | | | | |-----+--------------------------+-----+--------------------------| | | |Nays:|Norby | | | | | | ----------------------------------------------------------------- SUMMARY : Makes permissive the re-evaluation of fees for the Market Enforcement Branch (MEB); deletes outdated MEB fee structures and required reporting language; increases the base fees for licenses and complaints of purchasers of agricultural commodities for processing and those as a dealer/broker; permits the Secretary (Secretary) of the California Department of Food and Agriculture (CDFA) to appoint a MEB advisory committee of producers and licensees to provide guidance in establishing the fees; and, makes technical and conforming changes. Specifically, this bill : 1)Raises the following fees for produce dealers/brokers: a) Increases the fee for an aggrieved grower or licensee to file a complaint from $60 to $100; b) Increases the fee for each agent of a licensed principal from $35 to $55; and, c) Increases the license fee for buyers of annual volumes of $20,000 or less from $100 to $150. 2)Raises the following fees for processors of farm products: a) Increases the fee for an aggrieved grower or licensee to file a complaint from $60 to $100; b) Increases the fee for each agent of a licensed principal from AB 2240 Page 2 $35 to $55; and, c) Increases the license fees for buyers of annual volumes of $20,000 or less from $100 to $150. 3)Deletes the outdated fee structure and reporting provisions. 4)Creates a statutory advisory committee, to be appointed by the Secretary of CDFA, of producers and licensee brokers and processors, to provide guidance in the establishment of fees, or permits the reliance of input by an existing similar advisory committee. EXISTING LAW requires any person engaged in the business of processing or manufacturing any farm product, that solicits, buys, contracts to buy, or otherwise takes title to, or possession or control of, any farm product from the producer of the farm product for the purpose of processing or manufacturing it and selling, reselling, or redelivering it in any dried, canned, extracted, fermented, distilled, frozen, eviscerated, or other preserved or processed form, to be licensed (Food and Agriculture Code (FAC) Section 55401, et. seq.) and establishes the following fee structure: Aggrieved grower or licensee complaint fee $60 (FAC Section 55722.5) An agent of a licensed principle$35 License fee for annual sales volumes of: $20,000 or less $100 $20,000 to $50,000 $400 until 1-1-99; $300 until 1-1-00; $200 thereafter. $50,000 to $2 million $500 until 1-1-99; $400 until 1-1-00; $300 thereafter. $2 million to and over $600 until 1-1-99; $500 until 1-1-00; $300 thereafter. (FAC Section 55861) Requires any person engaged in the business of buying, receiving on consignment, soliciting for sale on commission, or negotiating the sale of farm products from a licensee or producer for resale shall be licensed (FAC Section 56101 et. seq.) and establishes the following fee structure: AB 2240 Page 3 Aggrieved grower or licensee complaint fee $60 (FAC Section 56382.5) An agent of a licensed principle$35 License fee for annual sales volumes of: $20,000 or less $100 $20,000 to $50,000 $400 until 1-1-99; $300 until 1-1-00; $200 thereafter. $50,000 to $2 million $500 until 1-1-99; $400 until 1-1-00; $300 thereafter. $2 million to and over $600 until 1-1-99; $500 until 1-1-00; $300 thereafter. (FAC Section 56571) Provides definitions; authorizes MEB to approve, deny or discipline licensees; fine for violations of this Chapter, to investigate claims; provide alternative dispute resolution options; and, provides due process for violators. (FAC Chapters 6 and 7, of Division 20) Federal law authorizes similar definitions, claim and investigative authority, and settlements under the Packers and Stockyards Act (PASA) of 1921 (7 U.S.C., Sec. 181, et. seq.) and the Perishable Agricultural Commodities Act (PACA) of 1930 (7 U.S.C., Sec. 499a, et. seq.). FISCAL EFFECT : According to the Assembly Committee on Appropriations, this bill could generate between $250,000 and $300,000 in additional revenues for the declining MEB fund. COMMENTS : The statutes for MEB, many of which were established in the 1920s, have had few significant changes until SB 1198 (Costa), Chapter 696, Statutes of 1997, that recast provisions for license denial, suspension, and revocation; expanded the prohibitions on agent licenses; reduced fees and created a new complaint process, including a alternative dispute resolution; and, claim limits. Prior to SB 1198, MEB was the investigator, the judge, and the enforcer - taking action against a licensee, while being mandated to "effect" a settlement. Now they are the analyzers and facilitators, and while maintaining its enforcement role, the claimants have the option of an informal or a formal hearing, or to seek civil remedies in the courts. AB 2240 Page 4 There are two federal programs, the Perishable Agricultural Commodities Act (PACA) and the Packers And Stockyards Act (PASA), both dealing with similar commodities as MEB. SB 1198 conformed MEB to the federal processes where possible, giving both PACA and PASA first responsibility to handle claims. Those commodities not covered by either federal program, or that the federal programs denied action on, become the jurisdiction of MEB. The operating revenues of MEB have been reduced as expenditures have increased over the past several years. Their current year proposed budget estimates a year-end deficit causing their advisory board to recommend a draw of roughly 26%, or $200,000, from their reserves (known as the trust fund) in order to balance their budget. Without an increase in license fee revenues, this pattern will continue. The advisory board has recommended these fee increases during their December 3, 2009, meeting, as recorded in their minutes. AB 2240 reflects those recommendations. These fee increases are referenced by the affected industry parties as a "delicate compromise crafted by the MEB Advisory Committee" and should be viewed as an interim solution to prevent MEB from going into a deficit position for the fiscal year 2011-12. The opponents state their opposition is not based upon the need for increased fees, but that only one group of licensees are being increased, rather than an across the board increase to all licensee groups, making this "an inequitable" proposal. Analysis Prepared by : Jim Collin / AGRI. / (916) 319-2084 FN: 0004075