Legislature(2023 - 2024)BARNES 124
02/12/2024 01:00 PM House RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB296 | |
| HB257 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 257 | TELECONFERENCED | |
| *+ | HB 296 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 281 | TELECONFERENCED | |
HB 296-AGRICULTURAL PRODUCTS/LOANS/SALES
1:23:36 PM
CHAIR MCKAY announced that the first order of business would be
HOUSE BILL NO. 296, "An Act relating to the powers of the board
of agriculture and conservation; relating to loans and
limitations under the Alaska Agricultural Loan Act; relating to
federal crop insurance contributions; relating to municipal and
state procurement preferences for agricultural products
harvested in the state and fisheries products harvested or
processed in the state; and providing for an effective date."
1:24:10 PM
BRENT GOODRUM, Deputy Commissioner, Office of the Commissioner,
Department of Natural Resources (DNR), introduced HB 296 via a
PowerPoint presentation titled "HB 296 CROP Act," on behalf of
the House Rules Committee by request of the governor, sponsor.
He stated that the governor's goals with HB 296 are to increase
food security and independence for Alaskans and to grow and
expand Alaska's agriculture economic sector. The bill is part
of a series of immediate steps boosting state policies already
in statute while work continues on short-, medium-, and long-
term recommendations and actions.
MR. GOODRUM spoke to slide 2, "Agriculture in Alaska: Status
Report," which read as follows [original punctuation provided
with some formatting changes]:
• Robust Alaska agriculture is a long-held vision
• Hardy Alaskans are farming
- 2017 national census: Nearly 1,000 Alaska farms
and ranches produced about $29.6 M in crop value
and $40.8 M in animal production
• So much more potential with the right support
• Why grow agriculture?
- Greater food security and independence for
Alaskans
- Develop an economic sector (jobs, value chain
benefits)
1:26:17 PM
MR. GOODRUM read from slide 3, "Agriculture in Alaska: Key
Challenges," which read as follows [original punctuation
provided with some formatting changes]:
• High cost, high risk business
• Often starting from scratch
• Market access, supply/demand
• Lack of infrastructure
• Human challenges: more farmers, laborers
• Chicken and egg dynamic where can State be a
catalyst?
1:27:58 PM
MR. GOODRUM displayed slide 4, "CROP Act." He said HB 296
considers structure already found in existing statutes and
builds on three major components, forming the acronym CROP Act:
Capital access, Revenue protection, and Open Procurement. These
components, he continued, are based on recommendations by task
forces, division experts, stakeholders, and policy priorities.
These components were selected for their ability to quickly get
direct support to the industry with minimal new staff or new
programs to be developed.
1:28:38 PM
MR. GOODRUM reviewed slide 5, "Capital Access The 'C' in CROP
Act." The Board of Agriculture and Conservation, he explained,
is responsible for managing the Agricultural Revolving Loan Fund
(ARLF), a key source of capital for farmers and producers. He
said HB 296 seeks to be responsive to the agriculture industry's
evolving needs. Comprised of seven working citizen members, the
board finds it difficult at times to meet the five-person quorum
statutory requirement, which can unnecessarily delay action on
loan applications and approvals. Reducing the quorum from five
to four members would help increase efficiency of the board. As
recommended by task forces, HB 296 would expand activities
eligible for ARLF loans by adding shipping as an eligible
activity to qualify for an ARLF loan, paving the way for new
agricultural transportation focused cooperatives to help reduce
shipping costs into and around Alaska. The bill would also
allow refinancing of ARLF and other loans, assuming applicants
and activities are ARLF eligible. A $2 million capital infusion
into ARLF would be the first capital injection to the fund since
1986, boosting available capital to lend by almost 20 percent to
ensure ARLF has resources to meet the anticipated additional
demand due to the bill's attractive provisions. To keep pace
with inflation, HB 296 would also revise the current statutory
cap of $1 million in total loans to any one borrower. The board
would set new loan limits and ceilings in regulation, a process
that requires public notice and public input.
1:31:01 PM
MR. GOODRUM discussed slide 6, "Capital Access Fund Data
Points." He said ARLF currently has 52 active loans and that
the graph depicts the types of activities for which those loans
are being used [barley, flour; meat processing; other; flower
fields; livestock, not cattle; dairy; cannabis cattle; oysters;
produce-Greenhouses; hay].
1:31:43 PM
MR. GOODRUM moved to slide 7, "Revenue Protection The 'R'."
The concept of state funding of the premiums for federal crop
insurance, he related, is already in statute [AS 03.13], but it
was never funded; HB 296 would revise the support formula. The
fiscal note includes capital to pay for the state support; $2
million would support crop insurance premiums for current acres
under production and allow for additional acres in the program.
The state financed revenue protection would incentivize
production to boost feed supply and support larger livestock
herds, which would help offset risk and enable farmers,
particularly new farmers, to invest in agricultural
infrastructure and the expansion of production. At current
production in 2023 premium levels, the five-year cost to the
program is about $900,000. Should participation grow in the
program as desired, which would mean more acres under
production, additional capital can be provided for premium
support. The Alaska Farm Bureau and task force reports indicate
state support for insurance would help move the needle. Access
to revenue protection policies will help increase access to
capital and lower a farmer's risk while improving equipment like
irrigation systems that boost production. Mr. Goodrum said HB
296 focuses on barley, wheat, and oats because these are the
foundational crops of Alaska's livestock food chain. More
secure livestock feed should enable greater herd size, which in
turn improves the throughput at slaughterhouses, improving the
economics of those operations. Federal crop insurance revenue
protection is important because it covers price and crop risks
and could in the future be required for feed grain crops under
the ARLF loan eligibility.
1:33:58 PM
MR. GOODRUM continued to slide 8, "Revenue Protection How it
Works." He explained that eligible crops are those with revenue
protection policies available, currently barley, wheat, and
oats. In years one and two under the program the state would
pay 100 percent of the premium [sufficient for the] farmer to
achieve 85 percent revenue protection. There would be step
downs in years three, four, and five. In year three, the state
would pay 100 percent of the premium [sufficient for] the farmer
to achieve 80 percent revenue protection and in year four that
would step down to 75 revenue production. In year five and
beyond the farmer would need to pay the premium to attain a [55]
percent revenue protection and the state would pay the
additional 15 percent to reach 70 percent revenue protection.
The farmer would pay for any additional amount that he or she
wants above that.
1:35:07 PM
MR. GOODRUM spoke to slide 9, "Revenue Protection - How it
Works," which read as follows [original punctuation provided
with some formatting changes]:
• Through federal Risk Management Agency (RMA)
• State role: accept applications, verify eligible
producers, submit verification to RMA, send funds to
RMA
• Producer role: selects coverage at desired level
from an approved provider, reports acreage, pays any
premium not covered by state
• State does not adjudicate loss claims or cover
losses
1:36:09 PM
CHAIR MCKAY surmised there is an established metric for how many
bushels per acre can be expected in Alaska for barley, wheat,
and oats and that that is the basis for the insurance.
MR. GOODRUM confirmed that the RMA has been tracking these
numbers and productions in Alaska for several years, so from an
insurance perspective is comfortable in its understanding of
production in Alaska.
1:37:24 PM
MR. GOODRUM resumed his presentation. He turned to slide 10,
"Open Procurement - The 'O' and 'P'." He explained that the
procurement preferences already in statute apply to state
agencies and to school districts and municipalities that receive
state funds. Procurements that have preferences include Alaska-
grown agricultural products and fishery products harvested or
processed in waters over which the state has jurisdiction. A
protection included within HB 296 is that when responding to
solicitations, sellers of eligible products must provide their
current wholesale pricing lists, and debarment or civil
penalties are possible for submitting inaccurate price
information. As well, HB 296 directs that an annual report [be
submitted] to the legislature with specific data requirements.
Other than fishery products, only a very small number of Alaska
producers can provide the quantities needed by institutional
buyers, which is why increased spending is expected. Task
forces, the [Alaska] Farm Bureau, and others have recommended
more work on getting retailers to offer more Alaska-grown
products, creating more opportunity for producers to scale up
and to increase Alaska's local food security and independence.
1:39:19 PM
RENA MILLER, Special Assistant II, Office of the Commissioner,
Department of Natural Resources (DNR), provided a sectional
analysis of HB 296 on behalf of the House Rules Committee by
request of the governor, sponsor. She spoke to slides 11-16 in
Mr. Goodrum's PowerPoint presentation. She reviewed slide 11,
"HB 296 - Sectional Overview," which read as follows [original
punctuation provided with some formatting changes]:
• Capital access Sections 1-6
• Revenue protection Sections 7-10, 23
• Open Procurement Sections 11-22, 24-25
• Four effective dates
MS. MILLER moved to slide 12, "HB 296 Sectional Analysis
(version \A)." She discussed sections 1-7: Section 1 would
reduce the seven-member Board of Agriculture and Conservation
(Board) quorum from five to four. Section 2 would allow the
Board to refinance debt and to make loans for shipping costs to
and within the state. Section 3 would remove the $1 million
maximum amount of cumulative Board loans to any one borrower,
and Board would set maximums in regulation; and would update
loan security requirements. Section 4 would remove statutory
cap to borrowers in farm disaster areas for short-term loans
(less than one year) and Board would set maximums in regulation;
would increase cap for borrowers not in farm disaster area.
Section 5 would increase the cap on farm product processing
loans from $250,000 to $500,000 and would make corresponding
adjustments related to loan priority and security. Section 6
would remove $250,000 statutory cap on loans for clearing land
and Board would set maximum in regulation. Section 7 would
increase the state contribution toward producers' federal crop
insurance revenue protection policy premiums, and state support
would step down after year two.
1:43:15 PM
REPRESENTATIVE RAUSCHER asked whether he is correct in
understanding that HB 296 would remove the $1 million ceiling
for loans and the ceiling would be addressed through regulation.
MS. MILLER replied yes and explained that the Board of
Agriculture and Conservation has authority to promulgate
regulations and would do so to set that cap.
REPRESENTATIVE RAUSCHER asked whether the idea of having [the
ceiling] in regulation is to lower or to raise [the ceiling].
MS. MILLER offered her belief that it is to allow flexibility
and to raise that [ceiling].
REPRESENTATIVE RAUSCHER asked whether flexibility means [the
ceiling] could be one amount for one person or farm and not for
another.
MS. MILLER responded that the flexibility is in updating that as
conditions require year after year should it be needed. With it
currently set in statute, an act of the legislature is required
to revise [the ceiling]. The bill would provide the Board of
Agriculture and Conservation with the flexibility to revise it
by regulation.
1:44:30 PM
MS. MILLER resumed the sectional analysis for HB 296. She
explained that Section 7 starts into those sections relating to
the revenue protection of the federal crop insurance premium
support. Section 7 would increase the state's contribution
towards the producers' federal crop insurance policy premiums
and go to the tiered system outlined by Mr. Goodrum; it would be
on a percentage of revenue protection defined in Section 10.
Section 7 would also replace provisions that are repealed by
Section 23 of the bill relating to statutory language from the
1980s.
1:45:58 PM
MS. MILLER continued to slide 13, "HB 296 Sectional Analysis
(continued)." She said Section 8 would provide conforming
changes to align with Section 7. Section 9 would allow DNR to
adopt regulations for the crop insurance program described in
Section 7. Section 10 would define the term revenue protection
in reference to the Code of Federal Regulations. Section 11
would, for a five-year period, require that municipalities which
receive state funds to buy in-state agricultural products no
matter how much more they cost compared to outside products,
providing that the product is available in similar quality.
Section 12 would, at the end of the five-year period, revert to
current statute which says that municipalities "must" buy an in-
state product if it's no more than 7 percent more expensive than
out-of-state products and "may" buy it if it's up to 15 percent
more expensive. Section 13 would, for a five-year period, would
do the same as Section 11 in relation to the purchase of in-
state fisheries products. Section 14 would, at the end of the
five-year period, revert to the current preference for those
fisheries products. Section 15 would, during the five-year
period of broadening procurement preferences, require sellers of
these agricultural or fisheries products to submit their
wholesale price lists when responding to a municipality's
solicitation for purchase. A seller providing inaccurate
pricing information would receive penalties for doing so.
1:48:04 PM
CHAIR MCKAY remarked that the public might be concerned about
the Section 11 provision that municipalities must buy in-state
agricultural products no matter the cost. There could be market
manipulation, he said, such as someone outrageously overpricing
a product and yet cornering the market on that product.
MS. MILLER replied that current statute provides a preference
for in-state agricultural or fisheries products that says if
there is a similar quality product in-state to out-of-state,
then the in-state product gets a 7 percent preference. The
preference applies to municipalities receiving state money that
are also procuring these products to local school districts and
to any agencies of the state. That preference would be expanded
by HB 296 to say that for a five-year trial period the
preference won't stop at 7 percent; rather, if there is an in-
state version of the product that is available, then the
municipality with the state's institutional buying power must
purchase it. [The bill includes] protections to be responsible
with this public money, reporting being a key protection aspect.
The five-year trial period combined with the reporting
requirement is intended to provide the legislature with data and
information to determine how this procurement preference is
working, and whether to extend that preference or to revert to
the 7 percent or to take some other approach.
CHAIR MCKAY said he likes incentives to buy in-state but that
this provision seems to be a bit non-free market.
1:50:56 PM
REPRESENTATIVE SADDLER asked whether evidence is available which
shows that the 7 percent preference isn't effective. He further
asked whether information is available regarding having no cap
for buying Alaska, and whether most of the Alaska-grown product
would be captured if the preference was raised to 10, 20, or 50
percent.
MS. MILLER answered that DNR doesn't have much data right now.
It is known that there is a limited amount of Alaska-grown
agricultural products that are being produced in quantity and in
a form that conforms with the needs of the potential buyers.
Sometimes there is variation in the form of the product, such as
an institution may require cut broccoli versus a head of
broccoli. Relating to the drive toward food security and
independence, the administration is looking with this preference
to open doors for producers to expand their markets and in this
instance to leverage the state's institutional buying power to
do so. While more work is needed on longer term solutions to
expand market access, this preference is a step to take an
immediate action and perhaps see some immediate gain.
REPRESENTATIVE SADDLER stated he supports food security but is
concerned about writing a blank check. He said he would prefer
to have some parameters to protect the exchequer if 7 percent
isn't effective.
MS. MILLER offered her understanding.
1:53:45 PM
MS. MILLER resumed the sectional analysis. She proceeded to
slide 14, "HB 296 Sectional Analysis (continued)". She stated
that Section 16 would, at the end of the five-year period,
remove the protection of submitting wholesale pricelists for
those municipal contracts. Section 17 would go into different
statute, the procurement preference for state agencies and
school districts, and would do the exact same thing. Section 18
would, at the end of the five-year period for Section 17, revert
to current statute. Section 19 would put in a five-year pilot
period regarding municipalities and fisheries products. Section
20 would, [at the end of the five-year period for Section 19],
revert to current statute. Section 21 would provide protection
by requiring that wholesale pricelists [be submitted] when
responding to a state or school district's solicitation for
agriculture products. Section 22 would, [at the end of the
five-year period], revert to the current statute that doesn't
require the submission of wholesale pricelists.
1:55:17 PM
MS. MILLER displayed slide 15, "HB 296 Sectional Analysis
(continued)". She said Section 23, which relates to the federal
crop insurance contributions, would prescribe the state's
contribution towards crop insurance for each covered producer,
with Section 7 establishing the new formula. Section 24 would
require the Department of Administration and the Department of
Commerce, Community, and Economic Development to put together an
annual report to the legislature. Section 25 would provide
transitional language for how pending procurements would be
addressed while transitioning to the new preference. Section 26
would allow the Board of Agriculture and Conservation and the
Department of Natural Resources to implement regulations related
to the bill. Section [27] would set an immediate effective date
for Section 1 relating to the Board of Agriculture and
Conservation quorum and Section 26 allowing regulations.
Section 28 would set a 7/1/24 effective date for the five-year
pilot procurement preference increase. Section 29 would set a
7/1/25 effective date for the sections related to the state
support for the federal crop insurance premiums; this effective
date would provide a year for the [Division of Agriculture] and
the Department of Law to work together on regulations for that
program. Section 30 would set a 6/30/29 effective date for
those procurement sections to revert to current statute at the
end of that five-year trial.
1:57:02 PM
CHAIR MCKAY asked whether there is currently a problem with loan
defaults given that HB 296 would expand the program.
1:57:33 PM
BRYAN SCORESBY, Director, Division of Agriculture, Department of
Natural Resources (DNR), answered that of the 52 loans, five are
currently in default. He said [the division] is working with
those five on a regular basis to bring those loans current and
paid off and the division is confident that that process will
continue to work. He expressed his opinion that the performance
is high on the kind of loans the division does.
CHAIR MCKAY concurred.
1:58:41 PM
REPRESENTATIVE MCCABE asked what DNR is doing to increase the
number of U.S. Department of Agriculture (USDA) approved meat
processing plants, given they are the end of the supply chain
that is being talked about.
MR. SCORESBY replied that Alaska has three USDA slaughterhouses
which are in Delta Junction, North Pole, and Palmer. A
livestock grower can sell live animals to anyone at an agreed
price without a USDA inspection at slaughter. There are some
mobile slaughterers that kill animals on site and deliver them
to a processor where they are processed and packaged for someone
to take home. It is legal by all standards. To get into the
retail chain, it must go through a USDA slaughterer; there is
some protection for the rancher as well as the buyer when an
animal gets slaughtered through a USDA inspected facility.
REPRESENTATIVE MCCABE offered his understanding that there is a
need in Alaska for USDA processors because the state's prisons
and schools must use USDA meat. So, he continued, the state
must ensure there is end processing for those products.
MR. SCORESBY responded that the state was once down to two USDA
processors. He explained that the problem with slaughterhouses
in Alaska is the shortage of animals for slaughter capacity.
Increased animals on the farm and their being killed and
processed in a USDA facility would make all of them more
successful and maybe even profitable.
2:02:12 PM
REPRESENTATIVE SADDLER asked whether there is an estimate of the
amount of loans held by private borrowers that might be
refinanced under Section 2.
MR. SCORESBY answered that it is unknown who would come to the
division with a refinance request. He said there are farm loans
from other institutions at a higher interest rate than what the
division is currently charging, and the division would entertain
some business from those. A refinance loan, he noted, would
still need to meet all ARLF criteria as per a new loan would.
REPRESENTATIVE SADDLER pointed out that the Alaska Commercial
Fishing and Agriculture Bank (CFAB) makes similar kinds of
loans. He asked whether there are CFAB loans that might be
refinanced at a lower rate through ARLF.
MR. SCORESBY replied that [the division] has some mariculture
loans within its portfolio. However, until an application is
seen, it is unknown whether it meets [ARLF's] criteria.
REPRESENTATIVE SADDLER asked whether there is any idea on what
the demand might be for loans to cover shipping expenses.
MR. GOODRUM responded that DNR doesn't have that information yet
as this is a new concept brought forth by some of the
stakeholder groups that said forming transportation cooperatives
would be good for the industry.
2:04:47 PM
REPRESENTATIVE MEARS stated that she wishes to engage with DNR
in further discussion on three topics. The first topic, she
related, is the inclusion of manufacturers in the revolving loan
fund, which would require addressing the part of the statute
that limits the power of the board [to] just farmers and
homesteaders. The second topic is loan repayment and that the
State of Alaska should be first priority, which is a change that
is included in Section 3. The third topic pertains to having
different guardrails on the procurement because, she argued, an
unlimited dollar amount constitutes an unfunded mandate to a lot
of departments.
MR. GOODRUM offered his understanding that Representative Mears
is saying she wants to engage DNR in further discussing these
topics. He said DNR is willing and wants to learn more.
2:06:41 PM
REPRESENTATIVE SADDLER noted that Section 1 would change the
quorum for the Board of Agriculture and Conservation (BAC) from
five of seven to four of seven. He asked how often properly
noticed BAC meetings are inhibited or cancelled due to an
absence of quorum.
MR. SCORESBY replied that last week three members of the BAC
attended a scheduled work session, but without a quorum the work
session couldn't be conducted at all. He further related that a
year ago when he applied for his current position as director of
the division he was a member of the BAC and therefore could not
participate in the interviews, which created a conflict [with
trying to reach a quorum].
2:08:05 PM
REPRESENTATIVE SADDLER inquired about the difficulty in finding
people willing to serve on the BAC.
MR. SCORESBY responded that one of the first tasks he did as
director of the division was to fill the vacancies on the board.
It isn't easy, he said, because members are volunteers and
aren't paid. While their travel to board meetings is paid for,
most of the meetings are via Teams. He pointed out that a
conflict in recruiting board members from the farming community
is that members are ineligible to get operating loans.
2:09:16 PM
REPRESENTATIVE SADDLER observed that sections 4 and 5 expand the
loan amount to $500,000 and Section 3 gets rid of the $1 million
hard cap on loans and lets the BAC set a cap by regulation. He
asked why some proposals in HB 296 would double the cap, but the
$1 million cap would be discarded.
MR. GOODRUM answered that the cap of $1 million would not be
done away with, it would later be set in regulation by the BAC.
When the bill was being drafted, it was thought that these
numbers made sense while allowing flexibility for the board to
consider other caps that are better done in regulation.
2:10:33 PM
CHAIR MCKAY announced that HB 296 was held over.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB 296 Transmittal Letter 01.24.24.pdf |
HRES 2/12/2024 1:00:00 PM |
HB 296 |
| HB 296 Sectional Analysis 02.01.24.pdf |
HRES 2/12/2024 1:00:00 PM |
HB 296 |
| HB 296 Fiscal Note 1 (DCCED).pdf |
HRES 2/12/2024 1:00:00 PM |
HB 296 |
| HB 296 Fiscal Note 2 (ASMI).pdf |
HRES 2/12/2024 1:00:00 PM |
HB 296 |
| HB 296 Fiscal Note 3 (Fund Cap).pdf |
HRES 2/12/2024 1:00:00 PM |
HB 296 |
| HB 296 Fiscal Note 4 (DNR).pdf |
HRES 2/12/2024 1:00:00 PM |
HB 296 |
| HB 296 DNR Presentation HRES 2.12.2024.pdf |
HRES 2/12/2024 1:00:00 PM |
HB 296 |
| HB 257 - Fiscal Note 1 - DNR (updated).pdf |
HRES 2/12/2024 1:00:00 PM |
HB 257 |