HB 60-PROCURE PREF: AGRIC. & FISH PRODUCTS  [Contains discussion of HB 140.] 3:37:23 PM CO-CHAIR HALL announced that the final order of business would be HOUSE BILL NO. 60, "An Act 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." CO-CHAIR HALL noted that there would be a brief recap on the proposed legislation and reminded committee members that the house was also considering HB 140, a bill proposed to create a Department of Agriculture. 3:38:10 PM ANNA LATHAM, Deputy Commissioner, Department of Commerce, Community & Economic Development (DCCED), answered questions on behalf of House Rules, prime sponsor of HB 60 by request of the governor. She stated that HB 60 would make incremental changes to a Department of Administration (DOA) procurement statute that has existed since 1986. She explained that state agencies, municipalities, and school districts are currently required to purchase Alaska-grown products or fisheries products harvested in-state if they are available and within 7 percent of the cost of out-of-state products. Additionally, she explained that there is currently a permissible clause allowing state agencies, municipalities, and school districts to purchase products that are up to 15 percent higher than what is offered out-of-state. MS. LATHAM further explained that HB 60 would increase the requirement from 7 to 10 percent and would additionally change the permissible amount from 15 to 25 percent. 3:39:19 PM REPRESENTATIVE COULOMBE noted that the fiscal note is zero. She asked whether this would increase costs for state agencies, municipalities, and school districts even if there were no cost to DOA. MS. LATHAM replied that was correct if products grown in state were more expensive. She noted that she has reached out to the Department of Education and Early Development (DEED) and the Alaska Municipal League (AML) regarding costs. REPRESENTATIVE COULOMBE stated that she wanted to support Alaska-grown products but asserted that there would be impacts on local governments. 3:40:21 PM REPRESENTATIVE CARRICK commented that she saw a survey of Alaska saying that individuals are willing to pay $1.60 more on average for Alaska-grown products. She opined that it was good for the State of Alaska to take a position on Alaska-grown products. She stated that she was largely in support of the proposed legislation. She asked for clarification whether it was a requirement or a choice to purchase Alaska-grown products that fall within the threshold. MS. LATHAM responded it would be a requirement for state agencies, municipalities, and school districts if using DOA's master contract with U.S. Foods. She noted that there are currently very few items listed on the U.S. Foods contract. She reminded committee members that HB 60 was introduced by recommendation of the food security taskforce in order to provide growers in state an entry to commercial markets so that they might "ramp up their production." 3:42:46 PM REPRESENTATIVE CARRICK asked whether there are products not available at any cost she used lettuce growers as an example - or whether there are not products available in state within the current price differential. MS. LATHAM replied that there is very little data on pricing in Alaska, because there are so few products currently available. She clarified that the intent of the proposed legislation was to provide commercial entry to growers in state, who "can't necessarily sell an additional five acres of potatoes unless they know they have a buyer, and [HB 60] would provide a buyer." She noted that the Department of Corrections (DOC) was the largest purchaser of Alaska-grown products. She further noted that the state purchases very little overall. 3:44:13 PM REPRESENTATIVE SADDLER share concerns about the validity of a zero fiscal note if the proposed legislation would mandate entities to buy more expensive products, despite his support for Alaska agriculture. He referred to the first four sections of HB 60 and asked for a definition of "state money". MS. LATHAM replied that those sections referred to municipalities and school districts. She further stated that all school districts and, to her knowledge, all municipalities received state money. REPRESENTATIVE SADDLER asked for clarification that the provisions did not specify receiving state money to support purchase of food; rather, it was for any purpose. MS. LATHAM offered her belief that it was a broad definition but deferred to DOA. 3:45:48 PM BROOKE CASHEN, Deputy Chief Procurement Officer, Procurement and Property Management, Department of Administration (DOA), offered her belief that it referred to any agency that receives any state funding. She noted that she would want to double check with the Department of Law for a definitive answer. 3:46:21 PM REPRESENTATIVE COULOMBE asked if the food bank would fall under this requirement, offering her understanding that the food bank received state money. MS. CASHEN replied that she would have to check DOA's master agreement, of which she did not believe the food bank was compulsorily contracted. She additionally offered her belief that the Department of Corrections (DOC) had the only mandatory contract. In response to a follow-up question, she explained that the master agreement from DOA contracted with U.S. Foods, the vendor that provides the bulk of state food purchases, Alaska-grown or not. She noted that it was only mandatory for some agencies to use DOA's U.S. Foods contract and stated that other agencies are able to procure from other sources. She noted that [DOA's] data was sourced from U.S. Foods. She additionally offered her belief that the proposed legislation would apply to all state food purchases, not just agencies on the master agreement. 3:48:12 PM REPRESENTATIVE SADDLER asked if school districts are unable to purchase foods in-state due to the 7-percent restriction. MS. LATHAM responded that is not her understanding. She stated there has not been a lot of produce or fisheries products available. She noted that Alaska imports over 95 percent of its food. REPRESENTATIVE SADDLER commented that the 3 percent increase would make it easier to buy Alaska products even if they cost more. 3:49:25 PM REPRESENTATIVE COULOMBE asked if there had been discussions around availability of products and what would be done if products were unavailable. MS. LATHAM state that the U.S. Foods master contract has a lot of out-of-state vendors currently on the list. She stated that if HB 60 were to pass, then if a food product in-state were not within the proposed 10 percent restriction, DOC, for example, would purchase from an out-of-state vendor. She confirmed that Representative Coulombe's understanding was correct. She further noted that the majority of purchases are of out-of-state goods. 3:50:50 PM CO-CHAIR HALL asked how many growers were prepared to jump into commercial markets. MS. LATHAM responded that she did not have an exact number. She noted that she met with the Farm Bureau recently and stated that there were a handful of growers that indicated they could expand. In response to a follow-up questions, she stated she did not currently have information about a timeline. 3:51:51 PM REPRESENTATIVE SADDLER commented that the state would need to buy more freezers. 3:51:56 PM CO-CHAIR HALL asked what additional support the agricultural industry would need to sustain commercial markets under HB 60. 3:52:13 PM REPRESENTATIVE COULOMBE said she felt that the effective date was too short. She asked whether Ms. Latham would oppose an extension on the effective date. MS. LATHAM replied that there was no effective date. She explained that, as more products become available, they will be listed on the master contract. 3:53:02 PM REPRESENTATIVE BURKE asked how many municipalities and school districts use U.S. Foods. MS. CASHEN stated she could get that data for the committee members. 3:53:58 PM REPRESENTATIVE SADDLER remarked that it was his understanding that HB 60 was applicable to any agency that used state funding and was not limited to agencies participating in the U.S. Foods agreement. CO-CHAIR HALL thanked the invited testifiers. [HB 60 was held over.]