03/01/2024 01:30 PM Senate LABOR & COMMERCE

            SB 211-AGRICULTURAL PRODUCTS/LOANS/SALES                                                                        
                                                                                                                                
3:02:24 PM                                                                                                                    
CHAIR  BJORKMAN   reconvened  the   meeting  and   announced  the                                                               
consideration  of SENATE  BILL NO.  211 "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."                                                                
                                                                                                                                
3:02:46 PM                                                                                                                    
BRENT  GOODRUM,   Deputy  Commissioner,  Department   of  Natural                                                               
Resources (DNR),  Anchorage, Alaska,  presented SB 211  on behalf                                                               
of  the administration.  He stated  that  SB 211  is intended  to                                                               
incentivize food production  in Alaska. SB 211  was introduced by                                                               
Governor Dunleavy  and boosts state policies  already in statute.                                                               
This will have  an immediate impact and will work  in tandem with                                                               
other short,  medium, and long-term recommendations  and actions.                                                               
With SB  211, Governor Dunleavy  hopes to increase  food security                                                               
and  food  independence  for  Alaskans  and  to  expand  Alaska's                                                               
agriculture economic sector.                                                                                                    
                                                                                                                                
3:03:40 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 2:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Agriculture in Alaska: Status Report                                                                                     
                                                                                                                                
   • Robust Alaska agriculture is a long-held vision                                                                          
   • Hardy Alaskans are farming                                                                                               
        o 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                                                                                                   
        o with the right support                                                                                              
   • Why grow agriculture?                                                                                                    
        o Greater food security and independence for                                                                          
          Alaskans                                                                                                            
        o Develop an economic sector (jobs, value chain                                                                       
          benefits)                                                                                                           
                                                                                                                                
MR. GOODRUM  noted that, since  creating this slide,  more recent                                                               
national census  data has been  made available. According  to the                                                               
United  States Department  of  Agriculture  (USDA) 2022  National                                                               
Agricultural Statistic  Service Census of Agriculture,  there are                                                               
nearly 1,200 Alaska  farms and ranches that  have produced around                                                               
$39.7  million  in  crop  value   and  $51.2  million  in  animal                                                               
production. He  suggested that "a  state as large and  diverse as                                                               
Alaska" has an even greater  potential for growth in this sector,                                                               
given  adequate support.  He stated  that "greater  food security                                                               
and    independence     for    Alaskans"     requires    economic                                                               
diversification.                                                                                                                
                                                                                                                                
3:04:34 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 3:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Agriculture in Alaska: Key Challenges                                                                                    
                                                                                                                              
   • 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?                                                                                                                
                                                                                                                                
MR.  GOODRUM  discussed the  many  challenges  to agriculture  in                                                               
Alaska. For  farmers, starting from scratch  often means clearing                                                               
"raw"  land.  It can  be  difficult  for  new farmers  to  access                                                               
markets  and to  meet consumer  demand -  and the  uncertainty of                                                               
markets  often precludes  farmers from  scaling up.  The lack  of                                                               
infrastructure   includes   the  following:   transportation   to                                                               
markets; access  to state lands suitable  for agriculture; access                                                               
to  cheap power;  and processing,  manufacturing, and  production                                                               
facilities.  He  added that  there  is  a  demand for  a  skilled                                                               
workforce, as  many farmers are  aging out of the  profession. He                                                               
questioned  where the  next generation  of agricultural  laborers                                                               
will come from.                                                                                                                 
                                                                                                                                
3:06:16 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 4:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     CROP Act                                                                                                                 
   • SB 211: Capital access, Revenue protection and Open                                                                      
     Procurement (CROP) Act                                                                                                   
   • Based on recommendations by task forces, division                                                                        
     experts, stakeholders' policy priorities                                                                                 
   • Selected for ability to get direct support to the                                                                        
       industry, quickly (minimal new staff, programs to                                                                      
     develop)                                                                                                                 
                                                                                                                                
MR. GOODRUM reiterated  that SB 211 draws  from existing statute.                                                               
The three main  components of the bill -  capital access, revenue                                                               
protection,  and   open  procurement   (CROP)  -  are   based  on                                                               
recommendations  of [those  in the  industry]. He  clarified that                                                               
there will be no additional programs to develop.                                                                                
                                                                                                                                
3:07:06 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 5:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Capital Access: The 'C' in CROP Act                                                                                      
                                                                                                                              
   • Board of Agriculture and Conservation responsible for                                                                    
     Agricultural Revolving Loan Fund                                                                                         
        o Key source of capital for farmers/producers                                                                         
   • SB 211 responsive to evolving industry needs                                                                             
        o More efficient Board of Agriculture process                                                                         
        o Expand eligible activities, allow refinancing                                                                       
        o $2 Million capital infusion into loan fund                                                                          
        o Revising loan caps cumulatively and for specific                                                                    
          activities (last updated in 1980s)                                                                                  
                                                                                                                                
MR. GOODRUM said the Board  of Agriculture is currently comprised                                                               
of working  citizens. While all seven  seats are full, it  can be                                                               
difficult to meet  quorum requirements; this, in  turn, can delay                                                               
the  loan application  and approval  process.  He suggested  that                                                               
statutorily  reducing the  quorum requirement  from five  to four                                                               
would increase the efficiency of  the board. He explained that SB
  would  also  expand  the list  of  activities  eligible  for                                                               
Agricultural  Revolving  Loan  Fund  (ARLF)  funding  to  include                                                               
shipping  and  transportation.  This change  was  recommended  by                                                               
recent  task  forces  and  will  potentially  pave  the  way  for                                                               
agriculture-focused transportation cooperatives.  This would help                                                               
to reduce  shipping costs into  and throughout the state.  SB 211                                                               
would also  allow for  refinancing of  ARLF loans,  provided that                                                               
both the applicant and activities  are eligible according to ARLF                                                               
requirements.  With respect  to the  proposed $2  million capital                                                               
infusion into  ARLF, he stated  that this is the  first injection                                                               
into the  fund since 1986  and would increase lending  capital by                                                               
nearly 20  percent. This increase  would enable ARLF to  meet any                                                               
additional requests for funding that  result from changes made by                                                               
SB  211. He  explained  that SB  211 also  directs  the Board  of                                                               
Agriculture  and Conservation  (BAC) to  increase loan  caps that                                                               
are difficult to  update over time to keep up  with inflation. He                                                               
noted  that, due  to  inflation, one  hundred  dollars over  four                                                               
decades ago  is roughly  equivalent to  three hundred  dollars in                                                               
today's  economy. He  added  that  the current  loan  cap is  one                                                               
million  dollars to  any one  borrower. Provisions  in Section  3                                                               
would direct  the Board  of Agriculture  and Conservation  to set                                                               
new loan limits and ceilings.  He said a thorough, public process                                                               
would be required.                                                                                                              
                                                                                                                                
3:09:29 PM                                                                                                                    
MR. GOODRUM advanced to slide  6 displaying a bar chart depicting                                                               
Capital Access  - Fund Data  Points. He explained that  there are                                                               
currently 52  active ARLF  loans. The  varied loan  types reflect                                                               
the diversity of  agriculture in Alaska. He noted  that the total                                                               
principal balance of  ARLF loans ($21.4 million) is  equal to the                                                               
sum  of  the  balance  ($9.3   million)  plus  authorized  ($12.1                                                               
million).                                                                                                                       
                                                                                                                                
3:10:09 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 7:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Revenue Protection: The 'R'                                                                                              
                                                                                                                              
   • Concept in statute (AS 03.13), never funded; bill                                                                        
     revises support formula                                                                                                  
   • Fiscal note includes capital to pay for State support                                                                    
   • Incentivizes production to boost feed supply, support                                                                    
     larger herds                                                                                                             
   • Helps offset risk and enables farmer to invest in farm                                                                   
     infrastructure, expansions                                                                                               
                                                                                                                                
MR. GOODRUM elaborated on the  above, noting that the fiscal note                                                               
includes $2 million that will  support crop insurance for current                                                               
acres under production and allow  for additional acres. He stated                                                               
that,  at  current  production   and  2022  premium  levels,  the                                                               
estimated  5-year  cost  of the  program  is  approximately  $900                                                               
thousand.  He  suggested that,  should  the  program increase  in                                                               
size, additional funding would be  available for premium support.                                                               
Alaska Farm  Bureau and  task force  reports have  indicated that                                                               
state   support  for   insurance   would  incentivize   increased                                                               
production. Access  to revenue protection policies  will likewise                                                               
increase access to capital, thereby  lowering farmers' risk while                                                               
improving  equipment -  such as  irrigation systems  - which,  in                                                               
turn,  boost production.  He  explained that  SB  211 focuses  on                                                               
three main  crops: barley, wheat,  and oats -  foundational crops                                                               
that provide food for livestock.  He said that securing access to                                                               
livestock  feed is  likely  to enable  larger  herd sizes,  which                                                               
would  then  improve  throughput  - and  therefore  the  economic                                                               
status - of slaughterhouse operations.  He explained that, in the                                                               
future, USDA  Revenue Protection  crop insurance may  be required                                                               
for feed grain farmers to qualify for ARLF loans.                                                                               
                                                                                                                                
3:12:23 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 8:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Revenue Protection: How it Works                                                                                         
                                                                                                                              
   • Eligible crops are those with revenue protection                                                                         
     policies available: currently barley, wheat, oats                                                                        
   • State covers:                                                                                                            
        o 100 percent of premium in years 1-2 sufficient to                                                                   
          obtain 85 percent revenue protection                                                                                
        o 100 percent of premium in year 3 sufficient to                                                                      
          obtain 80 percent revenue protection                                                                                
        o 100 percent of premium in year 4 sufficient to                                                                      
          obtain 75 percent revenue protection                                                                                
        o In year 5 and on the farmer needs to pay the                                                                        
          premium to obtain 55 percent revenue protection,                                                                    
          state covers additional premium to reach 70                                                                         
          percent revenue protection                                                                                          
                                                                                                                                
MR.  GOODRUM said  that  more  details would  be  fleshed out  in                                                               
regulations,  adding  that  there  would  likely  be  no  minimum                                                               
acreage requirement  for coverage - [providing  that farmers meet                                                               
the  USDA   Risk  Management   Agency  (RMA)   requirements].  He                                                               
explained  that in  years 3-5,  the state's  coverage obligations                                                               
are  stepped  down  -  and  farmers would  be  able  to  purchase                                                               
additional coverage  to reach 85  percent revenue  protection. He                                                               
clarified  that  the  USDA   risk  management  agency  subsidizes                                                               
approximately 62  percent of the  revenue protection -  the state                                                               
of Alaska would cover the remainder.                                                                                            
                                                                                                                                
3:14:32 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 9:                                                                                         
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Revenue Protection: How it Works                                                                                         
                                                                                                                              
   • 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                                                                    
     through federal Risk Management Agency (RMA)                                                                             
                                                                                                                                
MR. GOODRUM explained that RMA  has a list of "approved insurance                                                               
providers" (AIP). There  are around 14 AIPs  nationwide. RMA sets                                                               
the terms for AIP policies. He  clarified that the state will not                                                               
be  issuing  insurance   policies  but  will  be   acting  in  an                                                               
enrollment capacity and noted that  the State is not getting into                                                               
the insurance business.                                                                                                         
                                                                                                                                
3:15:21 PM                                                                                                                    
MR. GOODRUM spoke to points on slide 10:                                                                                        
                                                                                                                                
[Original punctuation provided.]                                                                                                
                                                                                                                                
     Open Procurement: The 'O' and 'P'                                                                                        
                                                                                                                              
   • Procurement preferences already in statute                                                                               
        o State     agencies,    school     districts    and                                                                  
          municipalities that receive state funds                                                                             
   • Alaska-grown   agricultural    and   Alaska   fisheries                                                                  
     products                                                                                                                 
   • Includes responsible protections                                                                                         
   • Incentivizes more production by providing access to                                                                      
     institutional markets                                                                                                    
                                                                                                                                
3:17:06 PM                                                                                                                    
MR. GOODRUM  elaborated on  the above,  pointing out  that Alaska                                                               
Grown  and Alaska  fisheries products  will be  given preference.                                                               
Protections will include providing a  full sales and pricing list                                                               
when  responding to  solicitation;  there will  be penalties  for                                                               
submitting  inaccurate   information.  Additionally,   an  annual                                                               
report  to the  legislature  will be  required.  He stated  that,                                                               
excluding Alaska fisheries products,  few producers are currently                                                               
able to  provide the quantities that  large, institutional buyers                                                               
require.  Thus,  a  significant   increase  in  spending  is  not                                                               
expected. He  said that  the DOA  will continue  to work  on more                                                               
effective ways to connect growers  and buyers, adding that SB 211                                                               
offers an immediate step in  that direction. There is support for                                                               
encouraging  retailers to  sell  more Alaska  grown products.  He                                                               
pointed  out   that  greater  access  to   local  markets  offers                                                               
producers  the  opportunity  to   scale  up  and  increases  food                                                               
security and independence in Alaska.                                                                                            
                                                                                                                                
3:17:42 PM                                                                                                                    
CHAIR BJORKMAN  opened public testimony  on SB 211;  finding none                                                               
he closed public testimony.                                                                                                     
                                                                                                                                
3:18:12 PM                                                                                                                    
CHAIR BJORKMAN held SB 211 in committee.