BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 152 (Fuentes) Hearing Date: 08/25/2011 Amended: 08/18/2011 Consultant: Mark McKenzie Policy Vote: H.7-0; H.S.7-0; G.&F.9-0 _________________________________________________________________ ____ BILL SUMMARY: AB 152 would establish a new tax credit for farmers who donate fresh fruits and vegetables to food banks, require the Department of Social Services (DSS) to establish and administer a State Emergency Food Assistance Program (SEFAP), and require the Department of Public Health (DPH) to apply for federal funds available for promoting healthy eating and preventing obesity. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2011-12 2012-13 2013-14 Fund New tax credit $200 $200 $400 General FTB administration $66 General DSS: SEFAP administration Minor and absorbable costsGeneral DPH: seek federal fundsMinor costs to investigate federal funding General opportunities and distribute grants _________________________________________________________________ ____ STAFF COMMENTS: SUSPENSE FILE. AS PROPOSED TO BE AMENDED. Food Bank Tax Credit Under current law, charitable donations to nonprofit organizations may be deducted against income for state and federal tax purposes. There are special rules for contributions of food inventory and the charitable contribution deduction for donations of food inventory is limited to 10 percent of a taxpayer's net income. From 1989 through 1991, state law authorized a tax credit equal to 10 percent of the inventory cost of agricultural products, both animal and vegetable, donated to a California food bank. AB 152 (Fuentes) Page 1 AB 152 would authorize crop farmers to claim a tax credit equal to 10 percent of the inventory cost of fresh fruits and vegetables donated to a California food bank through the 2016 tax year. The bill requires that in cases where both a deduction and a credit would be allowed for the same contribution, the deduction is reduced by the amount of the credit claimed. The nonprofit food bank would provide certification to the taxpayer indicating the type, quantity, and value of donated produce, the name of the donor, and the name and address of the food bank. The Franchise Tax Board (FTB) would report information on the utilization of the credit to the Legislature, as specified. The credit authorized by AB 152 is similar to the program that was operative from 1989 until 1992, except the credit in this bill is only available for donations of fresh fruits and vegetables while the previous credit included donations of agricultural products, including fowl, animal, vegetable, or other products. In addition, the definition of eligible taxpayer is much narrower in this bill. For the 1991 tax year, FTB reported food donation credit claims of $1.5 million. FTB estimates that the credit authorized by this bill would result in tax revenue losses of approximately $200,000 in 2011-12 and 2012-13, and $400,000 annually thereafter. The State Emergency Food Assistance Program Currently DSS serves as the state distributing agency for the federal Temporary Emergency Food Assistance Program (TEFAP), which was established in 1981 as a mechanism for reducing food inventories and storage costs while assisting the needy. Through TEFAP, the United States Department of Agriculture's (USDA) Food and Nutrition Service makes food products available to states for distribution to qualifying emergency food organizations, including food banks, church pantries, soup kitchens, emergency shelters, and community action agencies. These organizations in turn distribute the food directly to those in need or use it to prepare meals. The amount of food that each state receives under TEFAP is based on the number of unemployed persons and the number of people with incomes below the poverty level in the state. The amount of food distributed to California has fluctuated in recent years, from 97 million pounds of food in 2001-02, to 54 million pounds in 2007-08, to just over 95 million pounds (the equivalent of 74 million meals) AB 152 (Fuentes) Page 2 in 2008-09. In FY 2010, Congress appropriated $297.5 million for TEFAP - $248 million for food purchases and $49.5 million for administrative support for state and local agencies. Congress also provided $6 million in FY 2010 through the TEFAP infrastructure grants for emergency feeding organizations participating in TEFAP to improve and expand their capacity and infrastructure. The program is also supplemented by funds donated through the Emergency Food for Families Fund, a tax checkoff fund that appears on California income tax returns until 2014. In 2010, California taxpayers donated $487,333 for the program. AB 152 would establish the State Emergency Food Assistance Program (SEFAP), administered by DSS to provide food and funding for the provision of emergency food to food banks established under TEFAP whose primary function is to facilitate the distribution of food to low-income households. The bill would also establish the SEFAP Account in the Emergency Food Assistance Program Fund for deposits of federal funds, voluntary contributions, and General Fund moneys. SEFAP Account funds would be allocated to DSS, upon appropriation by the Legislature, and any state funds would be used for the purchase, storage, and transportation of food grown or produced in California. Funds appropriated to DSS may also be used to pay for DSS costs to administer SEFAP. DSS indicates that since they already administer the federal TEFAP, and that SEFAP would build upon that existing program that distributes food and resources through established networks, the bill would not require any new DSS staff. Staff notes, however, that the bill establishes a SEFAP Account into which state funds may be deposited, thereby creating cost pressures to fund a state program that would purchase and distribute food grown and produced in California. The magnitude of these cost pressures is unknown, but potentially significant. Healthy Eating and Obesity Prevention AB 152 would also require DPH to investigate and apply for federal funding intended to promote healthy eating and preventing obesity. The bill would authorize DPH to use available federal funds to provide in-kind support and award grants to support local assistance to local governments, AB 152 (Fuentes) Page 3 nonprofit organizations, and local education agencies deemed eligible to implement programs and initiatives for these services in underserved and urban and rural communities. DPH indicates that any costs to seek and administer federal funds in this way would be minor and absorbable. Federal funds received by DPH are currently distributed through a contract process. This bill would provide a more flexible grant mechanism, which is similar to the way DPH administers federal smoking cessation funding. PROPOSED COMMITTEE AMENDMENTS would delete "General Fund moneys" from the funds that may be deposited into the State Emergency Food Assistance Program Account, thereby eliminating cost pressures noted above.