BILL ANALYSIS SENATE RULES COMMITTEE SB 1334 Office of Senate Floor Analyses 1020 N Street, Suite 524 (916) 445-6614 Fax: (916) 327-4478 . THIRD READING . Bill No: SB 1334 Author: Costa (D), et al Amended: As introduced Vote: 21 . SENATE AG. & WATER RESOURCES COMMITTEE : 8-0, 4/1/97 AYES: Costa, Ayala, Johannessen, Kelley, Kopp, Monteith, Thompson, Peace NOT VOTING: Craven, Johnston, Wright SENATE APPROPRIATIONS COMMITTEE : 12-0, 4/21/97 AYES: Johnston, Alpert, Burton, Calderon, Dills, Johnson, Karnette, Kelley, Lee, Leslie, McPherson, Mountjoy NOT VOTING: Vasconcellos . SUBJECT : Department of Food and Agriculture SOURCE : Author . DIGEST : This bill requires the Department of Food and Agriculture to prepare an economic analysis of the impact of false or disparaging statements about California agricultural products have had on the state's economy over the past 10 years. The bill also makes related findings, such as the importance of agriculture to the state's economy. ANALYSIS : Existing law provides that one who intentionally disparages the quality of property, resulting in a financial loss to an injured party, may be open to the tort of "trade libel". Some states, such as Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Louisiana, Mississippi, and South Dakota, have enacted special protections for perishable agricultural commodities. Efforts to do so in California (SB 492 of 1995) were met with skepticism as to the scope of the problem in this state. Comments (according to the Senate Agriculture and Water Resources Committee analysis): Those dependent on agricultural income are more susceptible to injury from false claims than many other industries because of the perishable nature of their product (market demand may recover after a crop has decayed). Annual crop cycles, when combined with a short-term erosion of the market at harvest time, may mean loss of all income for the year. This damage would then be aggravated by the loss of year-long financial inputs such as labor, seed, water, equipment, fertilizers, and packaging. Anecdotal evidence supplied by industry suggests a significant financial impact to the economy as a result of false or misleading statements made about perishable products. Apple growers in California and Washington estimate $500 million in recent losses as a result of what they perceive as unfounded allegations about a crop protection product. Grape growers cite similar experience from unsubstantiated reports that their product was tainted by chemicals, while strawberry and egg producers have recently lost markets to claims of bacterial contamination. The industry estimates these losses to be quite high, but to date there has been no comprehensive government study of this issue in California. Assembly bill is AB 1311 (Bordonaro), which is in the Assembly Appropriations Committee. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No Fiscal Impact (in thousands) Major Provisions 1997-98 1998-99 1999-2000 Fund Department $36 to $75 one time General Food and Agriculture report The Senate Appropriations Committee analysis indicates that the Department of Food and Agriculture indicates it cannot absorb the cost of the report. One cost estimate developed by the Agricultural Issues Center at the University of California, Davis identified a cost of $36,000 for such a report. However, this estimate is based on staffing costs e.g., undergraduate assistants at $8.00 an hour (10 hours a week) for 25 weeks and graduate assistants at $5,000 per quarter for two quarters, that are unavailable to the department and are inconsistent with the report deadline. It is unclear what record of events is available for the Department of Food and Agriculture that can be used to determine the number of false or disparaging statements made over the past 10 years about California agricultural products and the impact of those statements on the state's economy. Due to the short time-line between the effective date of the bill and the due date of the report increases the cost of the report by forcing a more intensive staffing effort. Authorizing the department to issue a contract for the report would, in part, address this impact. If it is the intent of the Legislature that the department author the report, the Appropriations Committee may wish to consider extending the due date for the report to June 30, 1998 as a way of reducing this impact and making an appropriation to cover the department's costs. SUPPORT : (Verified 4/23/97) Agricultural Council of California California Cattlemen's Association California Citrus Mutual California Cotton Growers Association California Egg Commission California Farm Bureau Federation California Fisheries and Seafood Institute California Grain and Feed Association California Grape and Tree Fruit League California Rice Industry Association California Seed Association California State Floral Association California Strawberry Commission Pacific Egg and Poultry Association Western Growers Association Western United Dairymen OPPOSITION : (Verified 4/23/97) Department of Finance ARGUMENTS IN SUPPORT : The Western Growers Association states, "Over the years, producers of perishable agricultural commodities have been periodically battered by scientifically unsupported claims about the safety of food products they produce. Perishable good products are at the greatest risk if false statements are made about them as these commodities, by their very nature, have a fixed and often short window of time in which they can be marketed at their peak quality. More often than not here is no time to sort out the veracity of allegations prior to significant negative market impact, and the producers of the commodity have no recourse but to absorb the losses. In addition, twelve other states, including California's major competitors, already have in place laws which provide protection against false and disparaging statements. This bill does not go that far." Other supporters state, "The primary differences with this proposal and SB 492 is two-fold. First, it calls for a thorough and independent analysis of the problem prior to asking the Legislature to approve SB 492-type legislation. (As you may recall, this is the same approach used to obtain approval of the methyl bromide bill, where the California Department of Food and Agriculture was charged with having a similar economic analysis done on the loss of that product.)" ARGUMENTS IN OPPOSITION : The Department of Finance is "opposed to this bill for the following reasons: 1. There is no appropriation in the bill. 2. There is no funding source identified. 3. It remains unclear whether DFA can redirect existing resources. 4. The need for the study is unclear. "A related bill, AB 1311 (Bordonaro), contains identical provisions." TSM:ctl 4/23/97 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****