HB 238-PROCUREMENT PREF: AK GROWN FISH/AG PRODS  9:10:30 AM CO-CHAIR LEDOUX announced that the next order of business would be the SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 238, "An Act relating to the state and municipal procurement preferences for agricultural products harvested in the state and fisheries products harvested or processed in the state; relating to legislative oversight of those procurement preferences; and providing for an effective date." 9:11:21 AM REPRESENTATIVE FOSTER moved to adopt the CS to SSHB 238, labeled 28-LS1167/N, as the working document. CO-CHAIR LEDOUX objected for purposes of discussion. REPRESENTATIVE GERAN TARR, Alaska State Legislature, said the bill in front of the committee contains the changes that were adopted at the last meeting. She said that the first change to HB 238 removes the audit section, and the second change moves the effective date up. She noted that there is a handout related to the fiscal note. 9:12:46 AM REPRESENTATIVE FOSTER said he totally supports the idea of supporting Alaska industries. He asked if a school district would be required to purchase [Alaska] products, as long as the price did not exceed the price of Outside goods by 12 percent, and then that would increase school costs. He pointed out the issues of [base student allocations] and school funding. REPRESENTATIVE TARR said that school food purchases are funded by the Farms-to-School program, and HB 238 merely provides purchasing flexibility. She added, "We would hope that with that additional price flexibility that for products that are available, they would purchase them." 9:14:15 AM REPRESENTATIVE FOSTER asked if the [Farms-to-School program] fund needs to be increased. REPRESENTATIVE TARR noted that the timeline she just provided to the committee will show where the costs might show up. In May or June of this year, she said, the bill could be signed into law, and then in the summer and fall, "we" would work with the Department of Agriculture Farm Service Agency and its networks. There are electronic newsletters and the Alaska Grown Booklet to communicate with purchasers and sellers, she said. As budgets are finalized in the fall-and if new products and vendors come in through the program-that is when there might be changes in the budget. But, she added, "it could be true that it's just a shifting in costs, where some of the purchasing is now Alaska- grown products that replace products that were purchased Outside." There may not be an overall increase from HB 238, it just might be that [the state] is paying a little bit more for Alaska products, she explained. 9:15:45 AM CO-CHAIR LEDOUX said if [the state] is paying a little more for the products, why would there not be an increase? REPRESENTATIVE TARR said it would be part of overall food purchasing, and the buyers could shift purchases so that there would not be an overall increase. 9:16:36 AM CO-CHAIR LEDOUX asked about the school districts, because they would be required to buy those Alaska items that are less than 12 percent over the cost of non-Alaska foods-so it would impact those budgets. REPRESENTATIVE TARR said it would for those particular items, but it would not necessarily impact the overall budget. "It may mean that they are buying Alaska-grown products that they weren't buying before, because the price was a limiting factor. It doesn't necessarily mean that they didn't find efficiencies in their other purchases that allowed them to just essentially cost shift around in their overall items that they buy." 9:17:26 AM REPRESENTATIVE FOSTER inquired as to the position of the school districts regarding HB 238. REPRESENTATIVE TARR said she worked with the Division of Agriculture, which is the sponsor of the Farm-to-School program, and it has been supportive of the bill. REPRESENTATIVE HERRON asked if the calculation is pre or post FOB. If a school district wants to buy a product "and it is bid FOB-in other words, you have to deliver it to us.... " REPRESENTATIVE TARR said she assumes it would be pre FOB. REPRESENTATIVE HERRON said there is a significant difference. 9:18:41 AM REPRESENTATIVE HERRON asked if Representative Tarr has "actually looked at what it costs to buy product outside of the delivery system of agricultural products harvested in the state and fisheries products harvested in the state comparing when we buy it from outside. Is that comparable?" REPRESENTATIVE TARR said large-scale purchases tend to be less expensive through the large companies like Cisco. It has been a challenge for Alaskan farmers to get into those distribution chains and be able to provide that reliable amount each week. She recalled the comments that were made [in the last hearing] that the hope is to build more reliability in the food system. 9:20:16 AM CO-CHAIR LEDOUX said this is not a new program, it just changes the percentage from 7 percent to 12 percent, "so whatever it's doing with the FOB, et cetera, it's no change." She asked where the 12 percent figure came from. REPRESENTATIVE TARR said it came from conversations with farmers regarding prices, and this is a 5 percent increase, which seemed to be a reasonable first step. This was a priority of the Alaska Food Policy Council, because it views HB 238 as a way to achieve the goal of strengthening food systems and security in Alaska and to increase Alaska-grown purchases. REPRESENTATIVE HERRON asked if Representative Tarr would consider HB 238 as Alaskan-hire legislation. REPRESENTATIVE TARR said she had not thought about it, but she does believe there are great opportunities and more Alaska hire. 9:22:11 AM REPRESENTATIVE REINBOLD said she does not want to increase school budgets. She said she is a huge supporter of Alaska Grown, especially if Alaska encounters a food crisis. She noted that Alaska food is a lot fresher and healthier-and tastes better. She said she thinks HB 238 could decrease shipping, and that is important. The legislation may increase jobs in Alaska. Her understanding of the bill, she said, is it just allows 5 percent more flexibility to purchase Alaska-grown products. REPRESENTATIVE TARR agreed, and it allows for that increased price flexibility, and we will see if the market can meet that demand, otherwise, foods will keep being purchased from Outside. 9:23:35 AM REPRESENTATIVE REINBOLD stated that if the program works, there is potential for the prices to decrease. REPRESENTATIVE FOSTER noted that HB 238 is supposed to provide more flexibility, but on page 1, Section 1(a), it says "shall". REPRESENTATIVE TARR said, "shall to the extent that those products are available," and "that's what we're trying to accomplish here is creating more product availability that would fulfill the needs of those larger institutional purchasers and by having additional price flexibility that can help accomplish that goal." 9:24:37 AM CO-CHAIR LEDOUX gave an example of a limited budget, like $100, and Alaska-grown sweet potatoes are 12 percent over the market price, and then she suggested prices might increase if Alaska- grown food can be sold at 12 percent over market price. Then municipalities might buy less Alaska-grown products, she surmised. REPRESENTATIVE TARR said she had not considered that as a potential outcome. The Alaska-grown produce that is available has established prices, and to increase prices would work against those sellers. She believes there will be market pressure to keep prices reasonable, but the prices reflect that Alaska-grown products come from smaller farms, she said. REPRESENTATIVE KITO III said that it seems like HB 238 will provide an opportunity for smaller Alaska businesses to be competitive. 9:27:50 AM DANNY CONSENSTEIN, State Director, Department of Agriculture, Farm Service Agency Alaska and member of the Alaska Food Policy Council, said the Alaska Food Policy Council has the goal of strengthening food stability in the state. He noted that probably 95 percent of foods Alaskans eat come from Outside. If Alaska purchased more Alaskan food, the economic benefits would include job opportunities, supporting small entrepreneurs who are in the food business, and keeping more food dollars in the community, he added. He noted the health benefits and spoke of the costs of health-related diseases and the lack of fresh vegetables in village markets. He said the bill will have educational benefits as school children can see that food comes from the ground, not from a package. He said that one out of five children go to school hungry, and Alaska is not prepared for emergencies, so there is lack of food security because of the lack of a food system. The bill is just one little piece of building a stronger food system by having the state play a larger role as a purchaser, he noted. If the state can become more of a driver, then it can create more of a market for Alaska-grown food, and, thus, there will be incentive to expand and to add new entrants. As the supply increases, there will be an economy of scale, he said, and prices will come down. The larger vegetable producers in Alaska will currently match outside prices, and "so why wouldn't a state agency or a school district purchase that?" 9:34:45 AM REPRESENTATIVE CHRIS TUCK, Alaska State Legislature, recalled some of the past agricultural resolutions in the legislature, and on this subject alone, every single member in the House spoke, because it is a passionate issue and something where all Alaskans want to see more done. He said this is a step in right direction, to sustain the state and to provide better nutrition in Alaska schools. He noted that attempts for local hire preferences have been found unconstitutional, but one thing that has been successful is Alaska's procurement policies for Alaska businesses. This step is to make sure that products grown and produced in Alaska have a preference with state procurement, and such policies have been proven and tested. He said he likes HB 238; Alaska needs to be self-reliant with food. 9:37:20 AM CO-CHAIR LEDOUX closed public testimony and removed her objection, therefore Version N was before the committee. CO-CHAIR NAGEAK moved to report the committee substitute to SSHB 238, labeled 28-LS1167/N, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSSSHB 238(CRA) was reported from the House Community and Regional Affairs Standing Committee.