BILL ANALYSIS Ó SENATE AGRICULTURE COMMITTEE Senator Anthony Cannella, Chairman BILL NO: AB 2682 HEARING: 07/03/12 AUTHOR: Assembly Agriculture CommitteeFISCAL: Yes VERSION: 06/07/12 CONSULTANT: Anne Megaro Agriculture. SUMMARY: Existing law: 1. Permits the California Science Center to establish a space-age museum in its building at Exposition Park in the City of Los Angeles. 2. Provides for a 1% assessment on gross sales of varieties and species of fruit trees, nut trees, and grapevines, with exceptions. Funds are used for research programs, specifically the University of California Foundation Plant Services program (FPS), which produces, tests, maintains and distributes premium foundation-level virus and disease-tested plant materials for use by California nurseries. 3. Provides definitions for "milk products plant" and "handler" of milk products. 4. Provides classifications for milk products for the purpose of milk marketing. 5. Establishes the Dairy Council of California which shall consist of 24-25 members, nominated by dairy producers, producer-handlers, and handlers, and appointed by the secretary of CDFA. Existing law also provides for nomination procedures and assessment fees. 6. Establishes the California Walnut Commission for the efficient development and management of a national and international advertising and promotion program that will enhance the reputation and competitiveness of the California walnut industry. In addition to an assessment fee, the commission receives export assistance funds from the federal government. If federal export assistance funds are not provided for two consecutive budget years, the funds are deemed permanently terminated and the commission becomes inoperative, unless a referendum vote by producers is conducted. AB 2682 - Page 2 This bill: 1. Permits the California Science Center to establish an air and space center in its building at Exposition Park in the City of Los Angeles. 2. Exempts certain species or varieties of olive trees (table olives), or varieties of other named agricultural produce, from a 1% annual assessment if it can be demonstrated that no benefit is derived by these species or varieties for programs relating to plant inspection, quarantine and pest control. 3. Redefines "milk products plant" to not include a properly licensed retail food facility that does either of the following: a. Packages dairy products in the presence of the consumer. b. Cuts, wraps, and packages cheese, excluding cottage cheese, that is purchased from a licensed manufacturer of milk products, labels the products pursuant to all applicable state and federal laws, and sells the product only to consumers on the premises of the retail food facility. 4. Classifies kefir from a class 1 to a class 2 milk product for the purposes of milk marketing, and to conform to federal standards. 5. Redefines "handler" of milk products to include any person who secures custom processing services on an ongoing basis. 6. Amends language relating to the Dairy Council of California: a. Authorizes the secretary of the California Department of Food and Agriculture (CDFA) to appoint all members of the Dairy Council of California. Members may hold office at the pleasure of the secretary, and members who represent producers are no longer eligible to hold office. AB 2682 - Page 3 b. Repeals language relating to Dairy Council of California member nominations to allow for alternative procedures to select new members, including but not limited to, nominations, preference voting, and district representation. Such procedures shall be recommended by the council and approved by the secretary. c. Authorizes the secretary to assess a 1% interest rate on unpaid assessment fees for each 30 days the fee is unpaid. 7. Increases from two to three consecutive budget years the time frame for which federal targeted export assistance funds are deemed permanently terminated when the federal government fails to provide these funds to the California Walnut Commission. Also provides clarification that the full process to avoid discontinuation of the commission be followed if said federal funds are permanently terminated. COMMENTS: 1.Purpose of Bill: Assembly Agriculture Committee's 2012 Omnibus bill changes designation of the California Science Center's space-age museum to an air and space center; makes a technical change to exempt certain varieties of olive trees from fee assessments; classifies kefir (comparable to a yogurt-based drink) as a class 2 milk market product; makes technical changes to exclude grocery stores who cut and wrap cheese from the definition of milk processors; makes technical changes to the appointment of members to the Dairy Council of California; makes technical changes to the rules for the California Walnut Commission to become nonoperational. No language in this bill is considered controversial. 2.Space Museum: The California Science Center (CSC) was authorized to establish a space-age museum in 1996. On April 12, 2011, the National Aeronautics and Space Administration (NASA) announced that CSC was competitively selected to receive the Endeavor, one of the three flown Space Shuttle Orbiters. By updating the name of the museum to conform to standard language used in the science and space center field, the supporters believe the new "air and space center" language will assist the CSC Foundation in its fundraising for the project. AB 2682 - Page 4 3.Olives: SB 707 (Cannella/Wolk) from 2011 included olive trees in the existing 1% gross sales fee assessment, with the intent to only include olive trees used for producing olive oil. This bill clarifies that the secretary may exempt trees that produce table olives from the assessment fee. 4.Cut and wrap cheese: CDFA requires licensing of all milk products plants which engage in the business of handling, receiving, processing, or manufacturing milk products. Therefore, any grocery store that cuts and wraps cheese in-house is considered a "milk products plant" and would need to obtain a license. Since the enactment of this provision in 1983, grocery stores are now required to obtain permits that safeguard public health and ensure consumers that food was handled safely. This bill provides technical changes to exclude retail food facilities that cut and package cheese from the definition of "milk products plant" and thus from the requirement to obtain the corresponding license. 5.Kefir: Dairy food processors pay for milk based upon the products in which is it used, such as fluid milk, butter, cheese, ice cream, etc. Existing law provides for milk product classification to categorize such products for milk marketing purposes. Most of California's milk use classifications are identical to those in the federal system; however, in 2002 federal law classified kefir, similar to drinkable yogurt, as a Class 2 product. In order for California to remain competitive in the national market, this bill aligns state law with federal law and reclassifies kefir as a Class 2 product. 6.Dairy Council of California: Established in 1919, the Dairy Council of California (DCC) serves California communities through nutrition education programs that focus on healthy eating and provides free nutrition lesson plans and programs to school children and their families. DCC is a state government entity that is solely funded by, and works on behalf of, California dairy farmers and milk processors, and is governed by industry-elected members. Upon review by DCC staff and industry members, and in working with CDFA, it was determined that definitions, election processes, and enforcement of fees would require updates and clarifications. 7.California Walnut Commission: Established in 1987, the California Walnut Commission (CWC) is an agency of the state that works in concurrence with CDFA and is funded by mandatory assessments of growers. CWC is mainly involved in health AB 2682 - Page 5 research and export market development activities. Existing law requires the secretary of CDFA to hold a hearing every six years to determine whether CWC should be continued. If, after the hearing, a substantial question exists among producers as to whether the commission should continue, the secretary shall schedule a referendum vote. A 1998 amendment to this section failed to appropriately include the hearing process as precluding the referendum vote. This bill would make the technical change to clarify that the full hearing and vote process is to be followed if the targeted export assistance funds from the federal government are permanently terminated, and increases from two years to three consecutive budget years the time allowed for federal funding to lapse before these funds are determined permanently terminated. RELATED LEGISLATION: SB 707 (Cannella/Wolk), Chapter 343, Statutes of 2011. Includes olive trees in the existing 1% gross sales fee assessment. AB 2218 (Woods), Chapter 289, Statutes of 1998. Changes the conditions under which the California Walnut Commission may exist and how a referendum vote is to be approved. PRIOR ACTIONS: Assembly Floor 72-0 Assembly Appropriations16-0 Assembly Agriculture 9-0 SUPPORT: California Grocers Association California Science Center Foundation Dairy Institute of California OPPOSITION: None received AB 2682 - Page 6