BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Kevin de León, Chair
AB 199 (Holden) - Institutional Purchasers: Sale of California
Produce
Amended: July 8, 2013 Policy Vote: GO 7-0
Urgency: No Mandate: No
Hearing Date: August 26, 2013
Consultant: Robert Ingenito
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 199 would require specified state agencies to
purchase agriculture products produced in California if certain
criteria are met. The bill does not include a minimum dollar
threshold for this requirement; consequently, it would pertain
to any purchase of agricultural products.
Fiscal Impact:
The bill would result in approximately $100,000 (General
Fund and special fund) in costs to the Department of
General Services (DGS) to promulgate rules.
DGS would also incur increased administration costs
(General Fund and special funds). The amount of the
increase in unknown, but is likely to be in the range of
hundreds of thousands to low millions of dollars annually
(see Staff Comments) for bid evaluation, protests, and
compliance monitoring.
Background: California spends roughly $200 million annually on
food purchased for state institutions. Of this amount,
approximately $40 million is purchased through the Prison
Industry Authority (PIA), which operate under separate
procurement procedures and would not apply to the provisions of
this bill. The bill's provisions would also exempt the two small
CDE schools for the blind/deaf. Current estimates are that
roughly $160 million in food purchases annually would be
potentially subject to the bill's requirements.
Proposed Law: This bill would require all state-owned or
state-run institutions, except schools and universities, to
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purchase agricultural products grown in California from a
California company, to the extent possible, before those that
are grown outside California as long as (1) the bid or price is
equal to or less than the bid or price for the products grown
outside the state and (2) the availability and delivery schedule
are acceptable.
Previous Legislation:
AB 801 (Salinas) 2001-2002. Required California
state-owned or state-run institutions to purchase
agricultural products grown in California before those that
are grown outside the State, provided the prices for
California grown products do not exceed the lowest price of
products grown outside California by more than five
percent. It also included California public schools, but
only when price and quality were equal to products grown
outside California. (Vetoed)
SB 1893 (Perata) 2000-2001. Required state agencies and
school districts to purchase agricultural products produced
in California if the cost and quality are equal or superior
to those produced outside California. If California
products were not found to be equal, preference was to be
given to products produced in other states over foreign
products, if the cost and quality are equal. (Held in
Senate Appropriations)
Staff Comments:
This measure would clarify that state agencies must give
preference to agricultural products produced in California if
the cost and quality are equal to or superior to those produced
outside of this state. If California products are not equal to
those grown in other states, the same preferences will be given
to these out-of-state products over those produced outside the
United States.
Staff notes that several key terms in the bill are undefined,
including "agricultural product," "grown," and "California
company." These terms are critical to determining which bidders
and products are eligible for the preference; consequently, they
would need to be defined through the rulemaking process. One
key issue is whether, and to what extent, processing can happen
before the resulting processed or semi-processed food ceases to
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be the "agricultural product" that was "grown" in California. A
related issue is how many non-food products derived from plants
or animals would count as "agricultural products." This
analysis assumes that DGS would be responsible for the
rulemaking process, with necessary input and consultation from
the California Department of Food and Agriculture (CDFA).
For "California company," rulemaking would be needed to decide
whether the point of reference should be the company's sales
location, its distribution location, the location of the
corporate headquarters, or where the company is incorporated;
whether sole proprietors are companies for this purpose; and how
to treat subsidiaries and affiliates that are part of
multi-state corporate entities. The nation's largest
foodservice distributor has its corporate headquarters in
Houston but does business in California through California-based
subsidiaries. Also, because this bill conflicts with existing
bid preference programs (which may result in a higher-cost
out-of-state product being selected over a lower-cost in-state
product), DGS would need to resolve those conflicts through
rulemaking.
One-time rulemaking costs are estimated to be $100,000.
The administrative requirement the bill creates has many of the
same workload impacts as a specific bid preference, including
the following:
Every time the state purchases "agricultural products,"
as defined, a buyer would need to obtain, review, evaluate,
and potentially request additional information on the
origin of the products being bid.
In solicitations that include a protest process (this
includes all DGS food solicitations), disputes over the
provenance of a supplier's product could lead to bid
protests.
In all cases, there would need to be some degree of
compliance monitoring to ensure that suppliers were not
misrepresenting their products' provenance or substituting
products from out of state. This is further complicated by
the fact that agricultural products are not necessarily
labeled with the state of origin.
Staff notes that there is no minimum dollar level threshold in
the bill; consequently, it would apply even if the state were
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buying a single box of peaches.
The bill's administrative workload impacts are difficult to
estimate, but the aggregate cost to DGS and its major food
customers (the California Department of Corrections and
Rehabilitation, the Department of State Hospitals, Department of
Developmental Services, Department of Veterans Affairs, and
California Highway Patrol Academy) could run in the hundreds of
thousands to low millions of dollars when the full cost of bid
evaluation, protests, and compliance monitoring is considered.
Finally, some other states apply retaliatory preferences against
the products of states that extend a bid preference to in-state
products. These retaliatory preferences would, at a minimum,
place California's agricultural producers at a competitive
disadvantage when bidding to certain states. Sanctions in some
states could be applied to all California products, not just
agricultural products.