BILL ANALYSIS 1
SENATE NATURAL RESOURCES AND WILDLIFE BILL NO: SB 557
Senator Sheila Kuehl, Chair AUTHOR: Kuehl
VERSION: As amended
Original: February 20,
2003
Amended: April 4,
2003
FISCAL: Yes
URGENCY: No
CONSULTANT: Carrie
McNeil
HEARING DATE: April 22,
2003
SUBJECT : Timber products
ISSUE : Should the Legislature increase sales tax on lumber
by one-half percent to fund timber harvest plan review,
environmental restoration, re-training for timber workers,
and watershed protection?
SUMMARY : Senate Bill 557 makes declarations concerning the
need to fund timber harvest plan review and related
forestry programs without depleting the general fund,
places a .50% sales tax on forest products, and
appropriates this generated revenue to fund a comprehensive
array of forestry programs through the Department of
Forestry and Fire Prevention (CDF) and other departments.
BACKGROUND & EXISTING LAW :
According to CDF, 17 million of the state's 85 million
acres of wild land open space are used for commercial
forestry purposes, with a harvest rate of about two billion
board feet per year. The state enacted the Z'berg-Nejedly
California Forest Practice Act in 1973, creating an
oversight process on forestry practices. The Act's intent
language states its goal is to "encourage prudent and
responsible forest resource management calculated to serve
the public's need for timber and other forest products,
while giving consideration to the public's need for
watershed protection, fisheries and wildlife, and
recreational opportunities alike in this and future
generations."
The centerpiece of the Act is the Timber Harvest Plan
(THP). The THP, submitted by the commercial timber
operator to CDF, describes how and where timber will be
harvested from a site. CDF analyzes whether the THP is
consistent with the Act and state regulations related to
fire prevention, watershed, endangered species protection
and other factors. As an on-going duty of THP review, CDF
staff conduct on-site inspections prior to and during
logging. The inspections are often done in conjunction
with biologists, geologists and water quality specialists
from other departments. THPs must be prepared by Registered
Professional Foresters and harvesting operations are
carried out by timber operators licensed by the CDF. Based
on CDF website data, the department annually reviews
approximately 1,000 THPs and performs over 7,500
inspections. CDF is the agency with final responsibility
for accepting or rejecting a THP.
The current Governor's budget proposes $23.5 million for
timber harvest plan review and enforcement from the General
Fund.
Existing law does not provide a fee or tax-based approach
to funding the timber management activities of CDF.
Related Legislation
Last week, this Committee passed SB 217 (Sher) which
requires adoption of maximum timber harvest levels within
planning watersheds and limits harvest of old growth from
ancient forests.
PROPOSED LAW :
Findings and Declarations
SB 557 contains findings that delineate the economic and
environmental importance of forest stewardship, discuss the
high costs associated with THP review, and conclude that a
user fee on timber products is the most responsible way to
fund forest management.
TPUFR Fund
The bill creates the "Timber Products User Forest
Restoration Fund" (TPUFR) within the state treasury, funded
with a .5% increase in the sales tax imposed on lumber and
related products. In order to fund the administrative costs
of the program, the bill allows suppliers to retain 3% of
the timber product revenue collected.
The tax, once collected by the retailer, will be sent
quarterly to the Board of Equalization which is also
allowed to retain 3% of the amount collected to fund
administrative costs.
The money tree
THP Review
The bill specifies the ways in which money generated in the
TPUFR Fund may be spent by the Legislature. The monies
will first pay $21 million for THP review (General Fund
appropriation in 12/2002) and the cost of any other duties
of CDF directly related to THP reviews and inspection. The
TPUFR Fund will reimburse costs expended by all associated
parties of the THP, including the Board of Forestry, CDF,
Dept. of Fish and Game, Department of Conservation, the
California Coastal Commission and the regional water
quality boards. The bill further gives these associated
agencies the ability to apply for increases from baseline
funds for the purposes of making improvements in their
review programs.
The Cost-Share Programs
The bill creates a cost-share program within CDF to fund
projects specified in the proposed law. The bill sets the
minimum contribution of matching funds at 20 percent but
allows the department to determine specific minimums on an
individual project basis. The CDF director may waive
matching funds due to economic hardship of the project
applicant or if the project is deemed extraordinarily
important to carrying out the purposes of this bill.
Applicants may include state and local agencies, private
entities, non-profits, special districts, boards,
commissions, and landowners so long as the applicant has
demonstrated the ability to carry out the project. CDF and
the Secretary of Resources will create a protocol for the
application process as well as eligibility criteria. CDF
will develop a draft expenditure plan to be re-evaluated
every five years.
Eligible projects delineated in the bill include:
Decommissioning or better maintaining roads on
timberlands to decrease sedimentation risks
Restoring wildlife habitat (may be reallocated to CDFG)
Provide watershed restoration grants (may be reallocated
to State Water Quality Control Board)
Cross-training of reviewing agencies
Expanding THP reviews and/or numbers of inspections
Purchasing fee title, conservation easements or other
land for sustainable forest management and harvest
(purchases must have funds for ongoing management)
Creating a timber worker retraining program and economic
development program for former timber workers
Hiring of policy staff for CDF, upon request of the Board
of Forestry
Undertaking public education efforts with forestland
owners about the programmatic timber environmental impact
report (PTEIR) and sustainable forest practices and
providing land owners with an incentive for paying for
half of the cost of a PTEIR.
Studying ways to reduce regulatory costs to the state and
forestland owners.
Funding (as related to timberlands) the Forest Legacy
Program, Salmon and Steelhead Recovery Program , the
California Forest Improvement Program, and the oak
woodlands conversion program.
Funding fuel reduction efforts on the urban-wildlife
interface.
Funding point-of-sale public education about forestry
management and related wildlife and watershed issues.
Reimbursing costs associated with the stakeholder group.
Funding, if money remains, miscellaneous public education
and biological study efforts.
Stakeholder Group Report
The bill creates a broad-based stakeholder group of
industry, local governments, environmental organizations,
landowners, labor, and agency representatives (as ex-oficio
members). The stakeholder group will prepare a report for
the Legislature by January 1, 2005 with follow-ups every
subsequent two years. The report will include
recommendations on reuse for closed mills, on ways to
develop milling consistent with the Forest Stewardship
Council practices, and on ways to develop and maintain
"value-added" timber processing in rural areas of the
state.
CDF's Report
CDF will be required to file a report with the Legislature
every other year documenting how the money generated by
this program has been spent.
ARGUMENTS IN SUPPORT :
The author's office states that this bill provides funding
for valuable forestry management programs by spreading a
small tax across a large number of lumber users. While
many have argued for a fee on timber operators, the author
contends that such a fee could impose to great a burden on
the industry. The author states that it is important to
improve the environmental performance of the industry but
equally important to maintain timberlands which provide
important habitat as well as an economic base for many
rural communities. Given the current fiscal crunch in the
state, this bill will give funds back to the General Fund
but, at the same time, improve the current THP review
programs.
Proponents argue that agencies with reviewing
responsibilities currently review in the field only 10-15%
of THPs received, despite the fact that forestry practices
have a significant impact on California's environment.
Proponents also argue that mitigation which has been
required is often insufficient.
Proponents also strongly support the non-THP provisions of
the bill, including a cost-share program with counties that
could decommission or maintain roads which are the single
largest cause of sedimentation into North Coast rivers and
streams. These streams are all listed as impaired under the
Clean Water Act primarily because of this sedimentation.
The author states that grants could also fund watershed
groups who are working to protect water quality or habitat
in timber country, and could fund the restoration of wild
salmon streams.
Supporters also state that the bill protects timberland
both through purchases of conservation easements from
cooperating landowners in order to ensure that timberlands
remain as timberland. The bill also helps improve logging
practices in order to minimize future water quality
problems and decline in wildlife.
Supporters state that the program would bring in up to $100
million annually and feel that this amount will help begin
to reverse the negative legacy of the forestry industry on
the environment.
ARGUMENTS IN OPPOSITION:
The majority of the opponents wrote as members of a lumber
association and expressed similar concerns about how a tax
will be determined (based on previous version of bill), how
the state will collect from out-of-state mills who ship to
the job-site, and that the tax may have a detrimental
impact on building future housing.
The concerns of some opponents, such as the $.01/board foot
and the lack of recognizing other certification systems
(beyond the Forest Stewardship Council), have been
addressed in the April 4th amendments.
Staff Comments:
The solution proposed by SB 557 will aid industry and
landowners as well as the state in forest harvest and
management activities. The bill provides "carrots" for
those in industry who perform more sustainable forestry
projects and helps protect timberlands from development.
For the first time, if this bill is enacted, THP review and
interagency inspections and reports will be able to be
completed at a rate significantly above the current review
levels.
Finally, opponents express concerns about losing lumber
sales over an increased tax. However, taking into
consideration that the latest amendments set that tax at an
additional .5%, the opponents concerns may be over just a
few pennies or dollars.
SUPPORT :
Californians Against Waste
Defenders of Wildlife
Forest Landowners of California
Harwood Products
Planning and Conservation League
OPPOSED :
American Forest and Paper Association
California Alliance For Consumer Protection
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
California Forestry Association
California Manufacturing and Technology Association
California Retailers Association
California Taxpayers' Association
Champion Lumber
Crenshaw Lumber Company
Economy Lumber
Lumber Association of California and Nevada
Mead Clark Lumber Company, Inc.
Pacific Do-At-Home Center
Pacific Wood Pacific Preserving Companies
Reliable Wholesale Lumber, Inc.
The Terry Companies
Visalia Lumber Co.
Western Wood Preservatives Institute