BILL ANALYSIS Ó AB 1132 Page 1 Date of Hearing: April 17, 2013 ASSEMBLY COMMITTEE ON AGRICULTURE Susan Talamantes Eggman, Chair AB 1132 (Eggman) - As Introduced: February 22, 2013 SUBJECT : Commercial feed: license fee: inspection tonnage tax. SUMMARY : Extends the sunset date to January 1, 2020, for commercial feed operations license fees and the inspection tonnage taxes. EXISTING LAW requires an annual licensure of a commercial feed operation, per site, ranging from a minimum of $100 to a maximum of $600, as determined by the Secretary of the California Department of Food and Agriculture (CDFA), based upon the recommendations of the Feed Inspection Advisory Board (Board). Requires fees to fund program reserves to a minimum of 25% of the program costs, then fees shall be used to reduce the feed tonnage tax, based upon the recommendations of the Board. This requirement will sunset on January 1, 2015 and the license cost will revert to $100. Existing statute authorizes a maximum tonnage tax on commercial feeds, except for whole grains and hays when unmixed, of fifteen cents ($0.15) per ton for any distributor of commercial feed to an in-state consumer-buyer. This includes feeds provided by a distributor to his or her own animals. This rate is established by CDFA, based upon recommendations of the Board. Based upon the Board recommendations, CDFA may designate 15% of tonnage taxes, or $200,000, whichever is greater, to be used for research and education regarding the safe manufacture, distribution and use of commercial feed. These funds may only be used for activities approved by the Board, with approval made prior to expenditure. This statute will sunset on January 1, 2015. After this date, the tonnage tax remains in effect but the use of 15% or $200,000, whichever is greater for research and education regarding the safe manufacturing, distribution and use of commercial feed, is deleted. FISCAL EFFECT : Unknown. Legislative Counsel has keyed this bill fiscal and determined that it is a "tax", as determined within the meaning of Section 3, Article XIII A, of the California Constitution, thus requires, for passage in either house, a 2/3 vote (Proposition 26). AB 1132 Page 2 COMMENTS : This program is known as the Feed Inspection Program (FIP) and was created in 1972. Its purpose is to ensure a clean and wholesome supply of milk, meat and eggs by providing clean and wholesome fodder for livestock and poultry, as well as, providing assurance that the product received by the consumer is of the quality and quantity purported by the manufacturer. Inspectors and investigators are located throughout the state to conduct routine sampling and inspections; conduct quality assurance inspections of the manufacturing facilities; respond to consumer complaints; and, enforce the laws and regulations that govern the manufacturing and distribution of animal feed. As part of the FIP, the Safe Animal Feed Education Program, promotes feed safety and security through outreach and education, and performs Voluntary Feed Quality Assurance Audits. The FIP is funded through the collection of a licensing fee and an inspection tax based upon tonnage sold. Commercial feed licensing is for a one year period, beginning July 1st and expiring June 30th of the following year. The current annual licensing fee is $300. The inspection tonnage tax is currently at eight cents ($0.08) per ton and is due on a quarterly basis. The Board advises or makes recommendations to CDFA on matters relating to inspection and enforcement, annual budget, inspection fees, and regulations required to accomplish the purposes of the law. The Board is comprised of eight members who possess a commercial feed license and one public member; all are appointed by CDFA for three-year terms. The Board currently meets at least once a year. This is the first time the sunset on the inspection tax has been considered "a tax", requiring a 2/3 vote for passage in both houses. In the past, previous to Proposition 26 of 2010, this legislation required a simple majority vote in both houses for passage. Previous Legislation : AB 547 (Mendoza), Statutes of 2009, Chapter 245. This bill extended the sunset date from January 1, 2010 to January 15, 2015 for the Secretary of the Department of Food and Agriculture to (1) set a specific fee for feed licenses, and (2) designate a specified amount of commercial feed tonnage taxes collected be provided for funding for research and education regarding the safe manufacture, distribution, and use of commercial feed. AB 1132 Page 3 AB 2958 (Agriculture), Statutes of 2006, Chapter 285. This bill allowed commercial feed to be sold by volume, in addition to weight; replaced the $100 biennial commercial feed license fee with an annual fee of at least $100, but not more than $600, upon recommendation of the Board, until January 1, 2010; required the license fee revenue to replenish FIP reserves to 25% of its expenditures, after which point the license fee revenue must be used to reduce feed tonnage taxes to a level recommended by the Board; and, increased, from $40 to $100, the penalty imposed for late renewal of a commercial feed license. AB 1071 (Matthews), Statutes of 2004, Chapter 929. This bill expanded the use of commercial feed inspection funds to include research and education until January 1, 2010; extended the sunsets to 2011 for the licensing of renderers, collection centers and the registration of transporters of inedible kitchen grease and collection centers; permitted the use of rendered products in accordance with the United States Food and Drug Administration rules and regulations; and, required a registrant to notify a county health officer when a contract is terminated or expires. REGISTERED SUPPORT / OPPOSITION : Support California Grain and Feed Association Opposition None on file. Analysis Prepared by : Jim Collin / AGRI. / (916) 319-2084