SB 128-CREATE DEPARTMENT OF AGRICULTURE  4:10:06 PM CHAIR GIESSEL announced the consideration of SENATE BILL NO. 128 "An Act establishing the Department of Agriculture; relating to the establishment of the Department of Agriculture; transferring functions of the Department of Natural Resources related to agriculture to the Department of Agriculture; and providing for an effective date." 4:10:38 PM SENATOR WIELECHOWSKI, speaking as Chair of the Senate Rules Committee, sponsor of SB 128, said that the governor recently pursued Executive Order (EO) 136, which would create a Department of Agriculture. At that time, there were concerns related to the cost of the new department, what it would include, its mission, and its focus. He opined that one overriding issue was that the legislature should have a say in the creation of a new department. He stated that SB 128 allows the legislature to have discussions and to hear input from Alaskans on this topic (which would not be possible with an executive order). 4:11:38 PM CHAIR GIESSEL asked for an overview of SB 128. 4:11:57 PM HUNTER LOTTSFELDT, Staff, Senator Bill Wielechowski, Alaska State Legislature, Juneau, Alaska, explained that SB 128 was modeled after EO 136. SB 128 would take the Division of Agriculture from the Department of Natural Resources (DNR) and create a Department of Agriculture. He noted that the sectional analysis would be considered at a future meeting. He stated that SB 128 includes conforming changes that provide clarification (e.g. distinguishing between the Alaska Department of Agriculture and the US Department of Agriculture). He said that the conforming changes also ensure that the commissioner is the head of the department and the point of contact for interdepartmental interactions. He noted concerns that SB 128 would eliminate the Board of Agriculture. He clarified that SB 128 does not eliminate the board. He stated that the commissioner would be the executive of the Board of Agriculture. He explained that agricultural issues would be brought to the commissioner, who would then report to the board. 4:13:50 PM CHAIR GIESSEL noted upcoming invited testimony from the Alaska Farm Bureau. She confirmed that the sectional analysis and any questions would be considered at a future meeting. 4:14:25 PM AMY SEITZ, Policy Director, Alaska Farm Bureau, Soldotna, Alaska, expressed appreciation for the discussions and hearings on this topic. She noted positive feedback from the farming industry. She noted that much of the structure is already in place, which can help guide the discussion of SB 128. 4:15:48 PM MS. SEITZ advanced to slide 2 and discussed the mission and vision of the proposed Department of Agriculture: [Original punctuation provided.] Mission and Vision  Support, promote and encourage development of an agriculture (and mariculture) industry in Alaska that is viable, profitable and sustainable. Promote an economically stable agriculture (and mariculture) industry for Alaska that can enhance the quality of life for its people, create sustainability of its communities and environment, and encourages new business development opportunities for all Alaskans. MS. SEITZ said this mission and vision is essentially the same as the current mission of the Division of Agriculture. She noted that she included "mariculture" as this could be included in the Department of Agriculture. She opined that, ultimately, the mission of the department should be to build a strong agriculture (and perhaps also mariculture) industry for the benefit of Alaskans. 4:16:39 PM MS. SEITZ advanced to slide 3 and provided an overview of some of the goals a Department of Agriculture should have. She noted that these are goals of the current Division of Agriculture: [Original punctuation provided.] Goals  • Increase production • Market development - promote buying local at all market levels • Increase economic viability in all types and sizes of farm and food businesses • Improve transportation system • Improve food security • Assist with expanding infrastructure • Increase access to capital • Expand support programs statewide • Improve access to and protect lands and waters suitable for farming MS. SEITZ stated that the Division of Agriculture does not have the capacity or funding required to meet these goals. In addition to the high-level goals, there are resources for more specific goals. She referred to reports from the Alaska Food Security and Independence Task Force and the Alaska Food Strategy Task Force (AFSTF), which include goals and steps that can focus and guide the new department. She noted that, if mariculture is added to the department, there is also a Mariculture Task Force report. She added that there is a significant amount of feedback from industry organizations that can help guide the department. CHAIR GIESSEL commented that it sounds as though an additional task force is not needed. 4:18:09 PM MS. SEITZ agreed and added that AFSTF developed a Department of Agriculture white paper, with goals for expanding programs. She suggested that a working group may be unnecessary, as the work is already done. She opined that the decision simply needs to be made. 4:18:36 PM SENATOR CLAMAN said that he did not support EO 136. He asked whether the Division of Agriculture with its current budget - or a Department of Agriculture with half of the funding - would be more effective at accomplishing the goals on slide 3. 4:19:02 PM MS. SEITZ said the division currently receives $5 million. She indicated that, with its current funding level, the division does not have the capacity to do the work required to meet those goals. She clarified that she does not support cutting the current budget. She emphasized that the division needs the voice [of a commissioner] to bring Alaska's agriculture industry to a new level. She said an upcoming slide would discuss the history of the division and why the voice of a commissioner is needed. She acknowledged that it is always possible to reduce the budget, but emphasized that a lower budget would be ineffective, as the current budget is not adequate. 4:20:03 PM SENATOR CLAMAN clarified that he is not suggesting that the department should start with a smaller budget than the division currently has. However, he expressed concern that splitting the division into its own department might overextend limited resources. He recalled instances when large departments were split into smaller departments and suggested that the first step should be to grow the division and make these changes within the existing structure before spending the time, effort, and money to create a new department. He surmised that the division would likely get the same amount done with the same amount of money [as a Department of Agriculture would]. He expressed skepticism and opined that, without the necessary resources, it does not matter whether the title is "division" or "department." 4:20:55 PM MS. SEITZ indicated that the Alaska Farm Bureau has repeatedly requested a strong division; however, those efforts have been unsuccessful. She expressed skepticism that providing additional funding now would build a strong division that would continue, as the level of future support is unknown. She emphasized that it would be difficult to rely on increased funding knowing that there is the potential to lose legislative support and funding in the future. 4:21:53 PM SENATOR WIELECHOWSKI posed a hypothetical example and asked if creating a department with the same amount of funding - but with a need for additional employees - would create a better situation than the current Division of Agriculture. 4:22:18 PM MS. SEITZ replied that it would not immediately create an improved situation; however, it could create the structure needed for improvements over time. She suggested that if SB 92 passes, it may be possible to find additional funding. She pointed out that it would take $300,000 from each department to double the budget for the Division of Agriculture. She clarified that she is not recommending this; however, this would double the division's capacity. 4:23:10 PM SENATOR WIELECHOWSKI indicated that if unlimited financial resources were available, it would be an easy decision to support the increase. He pointed out that the growing budget deficit increases competition for available financial resources. He asked how much funding is needed to make the proposed Department of Agriculture effective. 4:23:41 PM MS. SEITZ replied that she does not know the ideal number. She referred to the AFSTF Department of Agriculture white paper, which includes steps for moving forward, additional staffing requirements, and recommended funding amounts. She noted that there are also recommendations for agricultural development. She recalled $1 million in program funding, $3 million for forgivable loans, and an additional $1 million for mariculture program development. She acknowledged the current budget deficit and suggested taking incremental steps toward the goals presented in the white paper. She suggested creating the department now and building the programs out more in the future when funding is available. MS. SEITZ emphasized that she is aware that a large amount of funding is needed and expressed confidence that agriculture has much to offer Alaska in terms of economic development and food security. She listed several opportunities for economic development, including in-state fertilizer development (via mariculture). This would support both the mariculture farmers and land-based farmers, create new agriculture enterprises, and keep money in-state. 4:26:10 PM SENATOR MYERS briefly commented on the budget approval process and opined that it will always be acrimonious. He asked what a Department of Agriculture would offer and how that differs from what the Division of Agriculture offers. 4:26:47 PM MS. SEITZ replied that agricultural land leasing is one issue that a department could more easily address. She briefly explained that the Division of Agriculture (which is a part of the Department of Natural Resources (DNR)) must seek approval from the DNR commissioner in order for issues to receive legislative attention. She acknowledged that the current DNR commissioner is friendly to agricultural issues and shared her understanding that upcoming legislation may resolve the aforementioned leasing issues. She stated that the Alaska Farm Bureau has pushed for years to make these changes; however, the request never rises above the Division of Agriculture. She stated that a commissioner of agriculture would be able to bring those needs directly to the legislature. In addition, a commissioner would be able to work directly with executives at large-scale retail outlets and to work with in-state procurement across multiple departments. She emphasized that discussions between department commissioners flow more smoothly than those between a commissioner and a division director. She indicated that there are additional ways a department would better serve agriculture in the state. 4:28:43 PM CHAIR GIESSEL observed that slide 6 contains an organizational chart. 4:29:00 PM MS. SEITZ advanced to slide 6, containing a flow chart illustrating the proposed organization of the Department of Agriculture. She explained that AFSTF produced the Department of Agriculture white paper over time and with industry feedback. She stated that this is a starting point to illustrate what is possible and could be done over time. She opined that a commissioner of agriculture would be more successful at carrying out some of the necessary conversations and offered examples. She said that the organizational chart provides some structure and opined that it makes sense to take small steps to start. She noted the interest in combining agriculture and mariculture and said that some program expansion would be beneficial, particularly with respect to development. She suggested that the commissioner could focus on priority areas. She briefly discussed expanding grant capacity and evaluating external funding sources. She reiterated that it would be possible to begin with a limited capacity and focus on growth over time. 4:31:33 PM CHAIR GIESSEL commented on the high price of poultry and shell eggs. She opined that expanding local production would increase food security. She shared her understanding that Alaska's seed potatoes - and other varieties of seed - are sought after. 4:32:01 PM MS. SEITZ confirmed that Alaska's seed potatoes are sought internationally because of the high quality. She said a commissioner would be better positioned to communicate with other countries and navigate the export market. In addition to seed potatoes, there may be a potential export market for raw canola seeds and peonies. She emphasized the need for someone who can coordinate and expand those markets. She said poultry and eggs is an area that could quickly expand with the right support. 4:33:24 PM MS. SEITZ returned to slide 5 and discussed the department focus. Slide 5 indicates that the Department of Agriculture should neither include fisheries nor be renamed the Department of Food Security. She emphasized that the Department of Agriculture should focus on the industries that are cultivating agricultural products. She expressed confusion about the suggestion to include fisheries in the Department of Agriculture, although recent conversations have helped to clarify the reasoning. She explained that from farming standpoint, there are concerns that including fisheries in the department would push agriculture issues aside in favor of fisheries issues. MS. SEITZ emphasized that the intention behind creating a Department of Agriculture is to make agriculture a priority, whereas fisheries is already a high priority for the State of Alaska. She opined that fisheries and agriculture should not be placed in the same department; however, she expressed interest in continuing conversations around the reasoning behind the suggestion. With respect to renaming the department to reflect a focus on food security, she acknowledged that that food security is important. However, food security is a broad topic that reaches well beyond the scope of agriculture. She indicated that renaming the proposed Department of Agriculture the Department of Food Security would reduce the department's intended agricultural focus. It would also leave out farms that do not produce food (e.g. peony farms). She reiterated that it is important to ensure that the department name reflects its focus. 4:36:27 PM SENATOR DUNBAR agreed that a Department of Food Security would focus on Electronic Benefit Transfer (EBT) and Supplemental Nutrition Assistance Program (SNAP) funding and the Port of Alaska, which is not what the Farm Bureau is requesting. He recalled from discussions of EO 136 that cannabis is the largest cash crop grown in Alaska. He asked what role the Department of Agriculture would have in promoting or regulating the growth of cannabis products. 4:36:58 PM MS. SEITZ emphasized that she is speaking for the Alaska Farm Bureau, not for the state. She stated that cannabis is not federally approved and is therefore not a federal agricultural product. She surmised that the current division protocols would continue to apply and shared her understanding that this requires the reporting of any hemp that does not meet the tetrahydrocannabinol (THC) threshold. She noted that SB 128 would move cannabis over to the department. She surmised that it is not the goal to have the Department of Agriculture regulate cannabis. She reiterated her understanding that the current protocol is for hemp growers to report any THC that is above the legal limit. 4:38:05 PM SENATOR DUNBAR asked whether a change to federal law would change the Department of Agriculture's role. He also asked if, in the event of federal legalization of cannabis, cannabis growers would have access to Alaska Farm Bureau's services. 4:38:27 PM MS. SEITZ said the Alaska Farm Bureau has not discussed this. She surmised that cannabis growers would meet the definition of a farmer (i.e. someone who is cultivating a crop) and would therefore qualify as a potential member of Alaska Farm Bureau. She emphasized that this is conjecture, and the issue would ultimately be determined by the department and would likely include input from the legislature. 4:39:14 PM MS. SEITZ advanced to slide 7: [Original punctuation provided.] Program Expansion  • Market Development • Grants and Loans • Lands and waters • Inspection Services • Alaska FFA • Mariculture Increased staff capacity and program funding = increased reach, resources and ability to build industry Details in Department of Agriculture White Paper MS. SEITZ stated that there are many years' worth of input from organizations and industry available regarding areas for program expansion. She suggested beginning with program development. CHAIR GIESSEL noted that the Department of Agriculture white paper is available online and in committee members' packets. MS SEITZ stated that there is opportunity for the department to work with the University of Alaska and with the mariculture industry. She said there is a great deal of opportunity for industry growth. 4:40:22 PM MS. SEITZ advanced to slide 8 and discussed the need for a Department of Agriculture. She opined that Alaska needs a Department of Agriculture to see growth in the agriculture industry. She emphasized the need for an organization that can focus on and prioritize agriculture in the state. She said that the Division of Agriculture has been a low priority for the state since statehood in 1959. She acknowledged that some projects have received funding; however, the division has not consistently operated at a capacity that would allow for industry growth. She added that the focus has been on starting - rather than building - agriculture. She opined that creating a Department of Agriculture would provide the focus needed for industry growth. 4:41:15 PM CHAIR GIESSEL shared her perspective that the agriculture industry in Alaska has shrunk since statehood. 4:41:30 PM MS. SEITZ advanced to slide 9, containing agriculture data from the United States Department of Agriculture (USDA) National Agricultural Statistics Service (NASS) census for the years 1982, 2002, and 2022, and discussed the positive impacts of momentum and support. She acknowledged that the data is limited to the farmers responding and indicated that Alaska has good response numbers. She stated that agriculture in Alaska has experienced growth over the years, though the production percentage has decreased. She noted that Alaska's population has also expanded. She directed attention to the data on slide 9 and said that the growth of Alaska's agricultural industry is increasing momentum. 4:42:57 PM SENATOR DUNBAR asked the average size of farms. He acknowledged that crops often determine farm size and wondered if the new farms tend to be small or large. 4:43:20 PM MS. SEITZ said there are many small-acreage farms, with half being 9 acres or under. She emphasized that small acreage does not mean a farm is unsuccessful and added that a lot can be done with a small parcel that is diversified. She noted that Alaska is unique in that small farms have been very successful. 4:44:04 PM SENATOR MYERS observed that the interest in Alaska's agricultural sector has waxed and waned over the years, which may have had the impact of beginning projects without the long- term focus needed for continued growth. He asked if this is a fair characterization of the industry over time. 4:44:29 PM MS. SEITZ agreed with this observation. She offered an example to illustrate how the State of Alaska has offered financial support for projects in the past and then later pulled project funding. This has been a challenge for growers. 4:45:04 PM SENATOR CLAMAN directed attention to the data on slide 9 and said this suggests that the agriculture industry has been successful and is making significant progress under the Division of Agriculture. 4:45:34 PM MS. SEITZ said that, despite recent growth, the agriculture industry in Alaska remains relatively small. She suggested that a Department of Agriculture would significantly increase the number of farms in the state. She explained that the past decade has seen an increase in interest from organizations such as the Alaska Food Policy Council; however, this support may not be enough to sustain the level of growth that would be possible under a Department of Agriculture. She emphasized that the division has not had significant success entering larger markets. In cases (such as with Alaska Range Dairy) that have seen success, it has required additional support (such as the governor's involvement in the process). She clarified that slide 9 illustrates that the momentum is there; however, support is necessary for additional expansion. 4:46:32 PM SENATOR WIELECHOWSKI asked whether the fundamental argument for creating a Department of Agriculture is that the free market is insufficient and thus government intervention is required. 4:46:47 PM MS. SEITZ suggested that one way to look at the issue is to consider what industries the State of Alaska has not supported. 4:47:02 PM SENATOR WIELECHOWSKI asked what type of help the Alaska Farm Bureau is looking for. 4:47:09 PM MS. SEITZ replied that the AFSTF Department of Agriculture white paper proposes help in building markets. She pointed out that the fisheries industry has help from the Alaska Seafood Marketing Institute (ASMI). The agriculture industry does not have this type of help. 4:47:27 PM SENATOR WIELECHOWSKI repeated his earlier question about the fundamental argument. He asked if the argument is that the free market is insufficient. 4:47:39 PM MS. SEITZ asked for suggestions. She expressed uncertainty about who to turn to for market development, including state procurement and larger retail markets. She questioned whether Alaska has the free market necessary to build the industry. 4:48:04 PM SENATOR WIELECHOWSKI asked whether cooperatives and farmer- funded inspectors could perform those tasks. 4:48:11 PM MS. SEITZ asked who would guide that process and emphasized the need for state support. She asked for an example of where this process has been successful without government support. She asked who would perform the inspections and pointed out the need for USDA slaughter facilities. She reiterated the need for government agencies. 4:48:42 PM SENATOR WIELECHOWSKI recalled that a government-owned slaughter facility that was sold to private industry. He asked the status of that facility. 4:48:51 PM MS. SEITZ replied that the slaughter facility is still in operation. She said there are currently two slaughter facilities in Alaska. She acknowledged that the State of Alaska provided some support for those facilities; however, she emphasized that the State of Alaska did not help build the livestock industry. She explained that the slaughter facilities continue to struggle due to a lack of assistance. She reiterated that the State of Alaska has not helped build the necessary large-scale agricultural markets. She acknowledged that the Division of Agriculture helped to create the Alaska Farmers Market Association (AMFA) and assisted with the peony industry. She said Alaska is the only state that does not provide dedicated assistance to the agriculture industry. She pointed out that the State of Alaska helps the fishing and oil and gas industries. She questioned the perception that the State of Alaska is not supposed to help the state's agriculture industry. 4:49:55 PM SENATOR DUNBAR agreed that the government should provide industries with the necessary infrastructure and support. He disagreed that the fishing industry is analogous to the agriculture industry and offered examples to illustrate the differences. He opined that the administration has not adequately funded ASMI and asserted that the State of Alaska has not done a good job promoting the fishing industry. He agreed that the State of Alaska has done a good job providing support to the oil and gas industry. He asked to return to slide 9 and pointed out that in 2022, the agriculture industry sold close to $40 million in crops and had 1,173 farms. He estimated that this is around $40,000 per farm. 4:50:54 PM MS. SEITZ clarified that slide 9 contains the total crop value and does not include livestock. She said the total (including livestock) is $90 million. 4:51:09 PM SENATOR DUNBAR said this is roughly $90,000 per farm. He surmised that, considering the acreage and the cost of farming, many farms are not the family's primary income source. He asked if this is accurate. He asked for information on the number of farms that are the primary source of income versus those that are a side project or secondary income source. 4:51:44 PM MS. SEITZ said she would provide that census data to the committee. She said this data would indicate that many farms do require additional, off-farm income. She indicated that health insurance is one reason for this. She noted an increase in the number farmers for whom the farm is the primary income source. She estimated the total to be roughly 900 farmers. She clarified that there are around 2000 farmers for the 1,173 farms. 4:52:49 PM SENATOR DUNBAR shared his understanding that Grow North Farm is the only large-scale, industrial farm in Anchorage. He said there are multiple farmers (including refugees) with different plots on the farm. He asked if this counts as a single farm or if it is considered multiple farms, as there are multiple units (with separate farmers) within that location. 4:53:20 PM MS. SEITZ said she does not know. She expressed uncertainty about the criteria used to make that determination. She said she would research how the USDA census of agriculture determines this and provide the answer. SENATOR DUNBAR expressed support for Grow North Farm, which is in his district. 4:54:06 PM SENATOR HUGHES said she worked with Ms. Seitz on the Alaska Food Strategy Task Force and expressed support for her work. She noted that the task force provided a letter of support for SB 128, which included several points related to the inadequacy of the Division of Agriculture. This includes a lack of a robust agriculture industry; a lack of food security; overdependence on outside sources; and a lack of in-state food processing facilities. She shared that she chaired the subcommittee that created the white paper. During that process, it became clear that the primary issue was not related to employees or funding, but to leadership. She explained that there is a need to have a seat at the cabinet table, in order to move projects forward. SENATOR HUGHES then addressed Senator Wielechowski's question about free markets. She offered an analogy to illustrate that the government is responsible for creating infrastructure that farmers cannot create by themselves. She said that across the country, departments of agriculture support the agriculture industry. Departments of agriculture provide the infrastructure needed to build and navigate markets, coordinate transportation, address production issues, conduct research, and provide education. She emphasized that the departments coordinate many things that farmers cannot do on their own. She expressed excitement about the growing trend of small acreage farms, as newer technologies allow farmers to produce more on smaller parcels of land. She offered an example to illustrate this. She stated that the goal is for the free-market principles to thrive in the agriculture industry; however, she opined that it makes sense for state government to take on certain roles. 4:57:26 PM SENATOR KAWASAKI asked about other ways the state can support the agriculture industry, particularly in light of recent discussions of federal farm subsidies and the debt ceiling. He offered several examples, including crop insurance, agriculture risk coverage, conservation programs, among others. He asked what other things a department and/or a division could do to support the industry. 4:58:27 PM MS. SEITZ indicated that the list Senator Kawasaki provided includes many good suggestions. She said that providing technical assistance - whether for navigating the federal government in order to obtain crop insurance or assistance for beginning farmers. She briefly discussed the challenges faced by new farmers in Alaska and the various areas where a Department of Agriculture could work with the University of Alaska Cooperative Extension to provide assistance. 5:00:04 PM MS. SEITZ advanced to slide 10, containing a chart with budget data from fiscal year (FY) 06 through FY 26 (proposed), and emphasized the need for additional funding and support. She recalled Senator Dunbar's earlier comments related to state funding and support for ASMI and indicated that the Division of Agriculture's funding has likewise been insufficient. She said it would be helpful to have a marketing arm to provide additional support. She emphasized that the agriculture industry in Alaska could be much larger with the appropriate support. She acknowledged that the fisheries industry is larger and inferred that this is partly due to the level of support that industry has received from the State of Alaska. She suggested that agriculture could be in-line with fisheries with an equal amount of support. 5:01:16 PM CHAIR GIESSEL thanked Ms. Seitz for her presentation. She highlighted past calls from the governor that successfully placed local milk and tomatoes in stores. She noted that fewer local stores are carrying those products and suggested that an additional call from the governor - or a commissioner - could be helpful. She expressed hope that Alaskans will utilize the upcoming farmers markets. 5:02:09 PM [CHAIR GIESSEL held SB 128 in committee.]