Senate Appropriations Committee budget hearing with Agriculture 

The committee held a budget hearing with Russell Redding, Pennsylvania Secretary of Agriculture, to d appropriation for the Department of Agriculture.

Sen. Vogel, chairman of the Agriculture and Rural Affairs Committee, asked what the department plans on doing with a 7.6 percent increase to its General Government Operations line item. Sec. Redding responded that there are three parts to the usage. Part will cover employee costs, part will cover investments in the Bureau of Food Safety, and part will cover information technology investments within the agency. Sen. Vogel asked for details on the IT investment and employee costs. Sec. Redding said the funds for IT will help continue deployment for laptops and so on for improved in-field communication savings, and that employee cost funds will go towards new employees for covering requirements of the federal Food Safety Modernization Act.

Stating, “We know very little,” Sen. Vogel next requested Sec. Redding to describe what, if anything, he could share about the Farm Show Complex lease-back proposal. “I’ve described it as a ‘home-equity loan,'” said Sec. Redding of the proposal to “unlock the equity” of $200 million in the complex for the state’s coffers while nonetheless retaining control of the property. “You’re basically taking a public asset and leveraging that asset in the marketplace.”

Sen. Vogel asked about the recent announcement of the dropping of state funding for the private University of Pennsylvania School of Veterinary Medicine (Penn Vet). “What can we do to try to put some funding into that program?” Sec. Redding said in response, “This is probably the most difficult decision of this budget for the Department of Agriculture.” He added, “This is not a value statement; it’s simply a recognition that we can’t afford it.” He said that the department will continue to support Penn Vet, for example, by helping with a $65 million capital project for the institution. Sec. Redding also pointed to Penn Vet’s New Bolton Center, a large equine health clinic in Kennett Square, and said that his agency will look to ensure the important work there is not compromised.

“Last year, you dodged a bullet, so to speak,” commented Sen. Vogel in relation to the fact that avian influenza did not affect Pennsylvania as was possible. He asked what will happen to the money that was reserved to the department for avian flu work. Sec. Redding affirmed that the money is still available for the assigned purpose, and added that the presence of avian flu in agricultural birds or not is akin to a “luck of the draw” depending largely on the migration of wild birds. “We’re being very diligent,” he stated.

Sen. Vogel inquired if Sec. Redding could update the committee on the status of two vacancies on the State Conservation Commission and asked if the names of the replacements were “in the hopper.” Sec. Redding answered that the two candidates’ names were indeed “in the hopper” and had been submitted to the governor for approval. He added that the same was true for some vacancies on the Animal Health & Diagnostic Commission.

Sen. Schwank, minority chair of the Agriculture and Rural Affairs Committee, asked for an overview of the legislative goals of the Department of Agriculture. Sec. Redding pointed first to the “challenge” faced by the department in that county and local governments continue to return weights and measures inspection duties to the department. He explained that county and local governments have the option of either performing the inspections themselves, or requesting the state to perform them, and that the state almost invariably is requested to do so. Only thirteen counties, he testified, have not returned the duties to the Department of Agriculture. He stated that the department will seek legislative changes to authorize the private sector to inspect fuel pumps and fuel truck meters.

Sen. Schwank asked what else Sec. Redding was “looking at.” Sec. Redding pointed to water quality, urban agriculture, animal welfare and care, and federal international trade policies as issues where the department may look for legislative aide. “It could have a huge impact on our commodity markets when you talk about changes in trade,” replied Sen. Schwank. “I hope there is enough flexibility in this budget to respond to that,” she further opined.

Sen. Schwank referred to cuts for the Center for Dairy Experience and the Hardwoods Council as “very important” programs. “To cut that out of the budget makes me question that.” Sec. Redding affirmed the importance of these programs, but stated, “We can’t afford them.” He stated, however, that the budget largely addresses the fundamental needs of dairy industry animal health, food safety, conservation, and markets. Also, while some marketing initiatives will be lost for hardwoods, the department, he said, will retain the staff experts for the industry.

Sen. Schwank asked Sec. Redding about the impact of Act 7 of 2016. Sec. Redding answered that due to Act 7 and Act 114, “It really is a new day” for the horse racing industry in Pennsylvania. He pointed to a thoroughbred farm that has recently announced it will not move from the state as it had previously declared, and to an increase in foal crops. However, Sec. Redding added that the industry is still uncertain and could require more legislative help.

“Jumping gears again” to “one of my favorite topics,” Sen. Schwank asked how many permits the state had tentatively approved for industrial hemp producers. Sec. Redding clarified that a period of testing had been declared, and that fifteen entities related to academic institutions had been selected for testing industrial hemp production. He said he is waiting “for our friends in the Drug Enforcement Agency” to approve Pennsylvania’s specific plans.

Sen. Argall said that dairy farmers in his district were concerned about the potential loss of a milk contract with area state prisons to a national competitor. Sec. Redding stated that he would be better able to address the issue after he meets with Department of Corrections (DOC) Secretary John Wetzel.

Sen. Argall thanked Sec. Redding for his support of the unsuccessful HB 1265 last session, regarding the Milk Mar an end to this dispute, or is this going to plague us until the end of time? Sec. Redding stated that the challenge of the issues surrounding the Milk Marketing Board is that the debate frequently eschews discussion of the important national dairy issues. However, he opined that in light of tight economic margins for dairy, “I’m not sure giving up state pricing authority is the right thing to do.” Sen. Argall asked where producers spend their premium finances, and how much is spent in Pennsylvania. Sec. Redding laughingly answered that this question is “really the key issue” surrounding debate over the Milk Marketing Board. “The short answer,” he said, “is that under the milk marketing co-operative law,” co-op producers can use their profits “as they desire.” Therefore, how they use their dollars depends on their status as a state or national co-op and so on.

Sen. Haywood asked what Pennsylvania will specifically be losing from its investment in Penn Vet. Half of the money, said Sec. Redding, goes toward investments in scholarships. The other two pieces were going towards supporting the New Bolton Center and various Centers of Excellence. Sen. Haywood asked if there will be any kind of substitute for these losses. No, replied Sec. Redding, because Penn Vet is the only veterinary school in Pennsylvania. He reasserted that the decision to drop the state’s funding portion is not a “value statement” but a movement of pure necessity. Sen. Haywood stated that in his arithmetic of affordability, a policy-maker asks what is the cost of the service and what is the cost of not having the service. “And the cost of not having the service seems like it may to be difficult to calculate.”

Moving on, Sen. Haywood said that at one time Pennsylvania had a Fresh Food Financing Initiative that offered grant financing to incentivize businesses to open fresh food ventures in areas that lacked fresh food. He asked if the department still had any interest in the program. Sec. Redding answered yes, but said, “The issue is funding.”

Lastly, Sen. Haywood stated that the State Food Purchase Program (SFPP) looked “fairly dynamic, but it’s new to me. Can you share what it really does and why this continued investment?” Sec. Redding answered that the SFPP was designed in the 1990s as a supplement to federal and private food assistance programs because they did not cover all of the state’s needs. The money of the program goes directly to county agencies, food banks, and the like to help supply free food, he added.

Sen. Martin inquired if the number one cost-drivers to the department’s budget are pension costs. “That is correct,” replied Sec. Redding.

Regarding dog license fees, Sen. Martin asked where the money goes. “The majority – I think it’s like 87 percent – is for personnel costs,” said Sec. Redding. About $7.2 million of the money goes to the department but, he said, there is now a cost inequity for the department due to the way the program is currently arranged. Sen. Martin asked if any of the funds go toward judicial software programs, citing concerns he had heard that some of the money goes to things that have “nothing to do” with dog licensing. “Yes,” answered Sec. Redding. “It goes to the judicial IT.” Executive Deputy Secretary of Agriculture Michael Smith said that about $5000 a year is sent to judicial IT program. Sen. Martin opined that the output of the money should be more relevant.

Sen. Martin next inquired about the specifics of the funding formula for agricultural land preservation. Sec. Redding said that the formula is based upon “the realty transfer tax, matching components, redistribution or total grants. So you take that calculus, which gives you sort of a distribution.” In terms of program requirements, Sen. Martin asked if pipeline passage through farmland affects state funding. “No,” answered Sec. Redding. He clarified that the department has no say on the issue.

Sen. Street inquired about the potential impact to veterinary sciences of the loss of state funds to Penn Vet. Although he did not have an exact calculation, Sec. Redding said that the “intangible” loss is not yet quantifiable.

Regarding industrial hemp, Sen. Street stated, “Do you have the sense of the scale of potential impact if hemp was allowed to be an agricultural product in the commonwealth?” Sec. Redding said the best indicators available are from a congressional study which estimated a possible $600 million market in the United States. “There is a real market out there for a PA product.” Sen. Street asked about outdoor production of hemp and medical marijuana and the department’s role therein. Sec. Redding clarified that the department’s role will be one of agronomy, but that it has not yet been defined for it by other, more involved agencies.

Chairman Browne asked how the Department of Health will consider outdoor growth issues – such as pest management – in evaluating medical marijuana permits. “I don’t know how that interplay will occur,” said Sec. Redding. Chairman Browne asked if this meant the Department of Health will be inspecting and approving permits without the Department of Agriculture’s input. “Correct,” replied Sec. Redding.

Citing the presence of the New Bolton Center in his district, Sen. Killion quoted previous statements by the governor and by Sec. Redding in which they emphasized the importance of Penn Vet. He wondered if the 100 percent cut to state funding is therefore too drastic. Sec. Redding responded by comparing the decision to cut state funding as being like deciding which child to support and which child to abandon. “We have to do this,” he said. He added that, in his opinion, the aforementioned capital investment project at Penn Vet constitutes a long-term investment that may make up for the short-term cut in direct state funding. But, he said, “There will be some short-term pain.” Referencing previous statements by Sec. Redding, Sen. Killion replied that he “didn’t know how” cutting state funding from $31.1 million to zero does not “compromise animal health.” He added that cutting a $10,000 scholarship for in-state students attending Penn Vet will do Pennsylvania no favors. “There are very critical trade-offs” to be made, replied Sec. Redding. He also restated his hope that Penn Vet, which, he said, receives two-thirds of its budget from “other sources,” will be able to cope. Sen. Killion thanked Sec. Redding but emphasized the “critical” need to try to restore funding in the future.

Sen. Baker asked how many new cases of Chronic Wasting Disease (CWD) have been found in the state’s captive deer herd, and if Sec. Redding was concerned about its potential spread to the wild deer population. Sec. Redding stated that he is very concerned. Sen. Baker asked if the department had taken a CWD prevention role that once belonged to the Pennsylvania Game Commission, and if better collaboration was needed between them. “The Game Commission’s a full partner in this,” said Sec. Redding. Sen. Baker requested Sec. Redding to keep the committee aware of CWD updates.

Sen. Baker encouraged Sec. Redding to continue to emphasize agricultural education. Sec. Redding said his department would do so.

The Pennsylvania Agricultural Surplus System, Sen. Baker uttered, is a “very innovative” way to get fresh food to market, and said that many food banks have leveraged tax credits through the Department of Community and Economic Development (DCED). She asked Sec. Redding if he was concerned about the potential loss of these credits. “That’s an interesting question. I think we should look at that,” answered Sec. Redding.

Sen. Blake asked Sec. Redding to provide a report on the interaction between the Department of Corrections (DOC) and Pennsylvania agricultural producers. Sec. Redding agreed. He added that his department was seeking to understand DOC standards, encourage DOC to use PA Preferred products, and invest more in helping farmers meet the contract.

Sen. Blake asked if there is continuing collaboration between DCED and the Department of Agriculture for agricultural marketing. Sec. Redding affirmed that there is, in spite of “budget pressures on both agencies.”

Although, he said, “it has been mentioned several times,” Sen. Langerholc “echoed” the concerns of others about the “closure” of Penn Vet and agricultural research centers at a time when “farmers are becoming increasingly tasked with producing safer, more affordable food on fewer acres.” Sec. Redding clarified that Penn Vet is not being closed, and that the reduction of funding for agricultural research centers was a decision that had to be made. Sen. Langerholc said that he had meant to say “funding cut” rather than “closure.”

Regarding the subject of obtaining labor for agriculture, Sen. Langerholc stated that an orchard owner in Bedford County had stated, ‘We just can’t get people to come in here and do this work. And it’s not like we’re not paying a quality wage. We just can’t get them in do the work.'” Sen. Langerholc asked if there was anything in the proposed budget to address this concern. Sec. Redding replied that the issue was why the Department of Agriculture had taken a “central role” in agricultural education and marketing. He added that there is much uncertainty about the prospect of cuts to guest worker programs by the new presidential administration. “We share the concern in Adams County and around the state,” he said.

“We’ve been at this hearing for over an hour and, unfortunately, I’ve only heard the Chesapeake Bay mentioned one time,” said Sen. Yaw. He commented that Pennsylvania, per Penn State research, should be spending more than $370 million a year to meet its Environmental Protection Agency (EPA) mandated Chesapeake Bay obligations. The EPA is “breathing down our necks,” said Sen. Yaw, “Saying, ‘If you don’t meet them, something bad’s gonna happen.” Although Pennsylvania does not know what that something bad will be, Sen. Yaw pointed out that ignoring the federal REAL ID Act did not, in his opinion, work out well for Pennsylvania. Referencing a $45 million that was said to have been allocated between involved agencies, Sen. Yaw asked, “where is that money?” Sec. Redding explained that this $45 million represents a three-year annual commitment of $15 million, of which his agency receives $5 million. It goes towards, he said, farm-level plans, technical assistance, and certifications. He also remarked that it can be used to “leverage” federal dollars. Sen. Yaw further said he would like to eventually hear what Sec. Redding wants to specifically accomplish in terms of water quality improvement. Sec. Redding said he welcomed such a discussion, but asked the committee to keep in mind that “we will need your help” in terms of funding. Sen. Yaw said he wanted such information “for my own edification.”

Sen. Vulakovich requested Sec. Redding to provide a list of all active and inactive boards under his purview, to help Sen. Vulakovich with a study with which he has been tasked. Sec. Redding said, “We’ve got like sixty of them, so I’d be happy to share that list.”

Sen. Vulakovich asked Sec. Redding to describe what will be done with proposed funds for the department’s IT system and if it will meet 100 percent of the necessary upgrades. Smith responded, “It will be close.” Sen. Vulakovich then asked what letter grade Smith would give the system. “On the whole, a solid C,” said Smith. He elaborated that new laptops and the like for workers in the field were recently improved, but that legacy department technology was still well behind the times.

Regarding the Farm Show Complex lease-back arrangement proposal, Sen. Vulakovich asked if Sec. Redding knew how close “we are to finalizing it.” Sec. Redding said that there are “multiple parties” involved and that Agriculture has not yet been engaged in the requisite large-scale conversation.

Relating to the aforementioned problem of county and local governments giving their weights and measures duties back to the state, Sen. Vulakovich asked how many of them have been “dumping” the issue on the state. Over 17 years, replied Sec. Redding, 54 counties and one city have returned these duties to Pennsylvania. Sen. Vulakovich opined that it would be better for county and local governments to perform such duties themselves so that the state government does not become overly complex. He added that Pennsylvania is struggling to handle this “jolt” to its finances, and asked Sec. Redding to provide a quantified analysis of what the duty costs the Department of Agriculture.

Sen. Mensch stated that there is “a lot of missing data” about the Farm Show Complex lease-back proposal, and asked if Sec. Redding would find and share this information with the legislature. Sec. Redding said he would.

Moving to water quality in the Chesapeake Bay region, Sen. Mensch inquired how water quality measures can be made “economically practical” for farmers. Sec. Redding replied that some practices on the land are not yet quantified as a part of the evaluation of impacts upon the Chesapeake Bay. He added that while there is a “deep culture of stewardship” among farmers, they need a sense of certainty that could be provided, he said, by legislative initiatives to introduce tax credits for water stewardship like ones he said are in place in Virginia and Minnesota. “I think we have to adopt a new watch attitude, which is reasonable regulation,” opined Sen. Mensch.

Sen. Wagner asked Sec. Redding to elsewhere provide an analysis of the department’s complement requirements.

Referring to a proposal in the budget, Sen. Vogel asked, “How is that going to impact conservation districts with flat funding in there?” Sec. Redding said, “I’m okay with the level funding as long as we get the bond funding that gets to” the program requirements.

Sen. Vogel asked Sec. Redding if he had gotten “into the weeds” regarding the possible “right” of the state to sell or lease the Farm Show Complex without legislative authority. Sec. Redding answered that legislative approval would probably be a part of the process.

Sen. Vogel wondered if Pennsylvania is close to meeting its goals regarding the Chesapeake Bay. “I think we’re doing ok,” said Sec. Redding, “But we’re feeling the pressures on nitrogen.” The nitrogen numbers in water are “so large” that it will be difficult to make a compromise between agriculture and water quality, he added.

Sen. Schwank inquired about the spread of the invasive spotted lanternfly, which began in Berks County. Sec. Redding elaborated that the species has now spread to six counties, all of which are under quarantine. He said that the department is working to “keep on top of it” and has kept it “hemmed in” so far. Sen. Schwank commented that it was “amazing” to see the damage the creatures can cause to trees. “It’s alarming,” said Sec. Redding, who added that the infestation is highly dangerous. Sen. Schwank asked if the state may receive more federal dollars to help with the problem. Sec. Redding said that Pennsylvania has so far gotten $1.8 million from the federal government, and is “having conversations” about more.

Sen. Schwank inquired about the status of farm market coupons. Sec. Redding said that the coupon redemption has not been as high as would be preferred.

Sen. Street commented on the benefits of urban agriculture in reducing carbon footprints and providing jobs and fresh food to less well-off neighborhoods, and asked about Department of Agriculture support for it. Sec. Redding said that most department programs could theoretically be applied to urban agriculture, and said that his department will be supportive. He also stated that he is interested in hearing feedback from parties with information about urban agriculture. “I’m seeing tremendous uptick in it,” retorted Sen. Street. He also mentioned that his farm-born father recreationally grows 64 different varieties in front of his Philadelphia house and has consistently encouraged Sen. Street to do more for urban farming. He said he sees a potentially “large economic opportunity.”

Pointing to a previously discussed $45 million bond for water quality of which the Department of Agriculture gets around $15 million, Sen. Vulakovich inquired “where the other 31 million goes.” Sec. Redding said that other departments involved in water quality get the rest.

Regarding pipeline infrastructure going through farmland, Sen. Vulakovich asked, “Do you know of any specific problems the farmers have related to you in regard to the aftermath of installation of infrastructure?” Sec. Redding answered in the negative. Smith said additionally that the governor had created a pipeline issue task force which had found “largely no issue” with the exception of the mixing of high-quality soils with low-quality soils and soil compaction. The task force, he said, had recommended the creation of a best practices guide. Sen. Vulakovich asked if companies had followed these best practices. “Yeah, largely,” said Smith.

As his last question, Sen. Vulakovich wondered what a previously-authorized $65 million for New Bolton Center had been slated to go towards. Sec. Redding testified that it was originally slated for the creation of a Pennsylvania Equine Toxicology Lab.

Chairman Browne said he needed Sec. Redding to do the committee “a favor” related to the tendencies, he said, of several recent governors to not provide complete information about budgets. He asked for more information about tax credits as well as about “complement cap” mentioned in the department’s request. Sec. Redding said one could be supplied.

Chairman Browne advised that the Department of Agriculture should look for “synergies” between its farmers market coupons programs and the United States Department of Agriculture’s Women, Infants, and Children special supplemental nutrition program.

Chairman Browne inquired if the PA Preferred marketing program had become self-sufficient. Sec. Redding said no. Chairman Browne asked if that meant the Department of Agriculture was “giving up” on the program. Sec. Redding said no, but that drawing sufficient retail interest had so far been difficult.

Referring to the state racing fund, Chairman Browne asked if Sec. Redding had any “initial thoughts” on the long-term picture of it, which he called problematic. Sec. Redding reiterated his previous comments that there are “undertones” driving the state racing fund’s problem such as a highly complex and competitive national horse-racing market.

Chairman Browne concluded by pointing out that Pennsylvania agencies are unable to invest in “productive assets” such as Penn Vet because of the necessity to invest in “legacy assets” such as pensions. He termed this a “vicious cycle.”