The 2024-25 Budget: Sustainable Funding for the Department of Pesticide Regulation

2024-25 BUDGET The 2024-25 Budget: Sustainable Funding for the Department of Pesticide Regulation GABRIEL PETEK | LEGISLATIVE ANALYST | MARCH 2024 SUMMARY The Governor proposes to increase the mill assessment—a tax levied on pesticides when first sold into or within the state—to address the structural deficit within the Department of Pesticide Regulation’s (DPR’s) special fund and to support various programmatic expansions for the department. Additionally, the proposal would (1) require DPR to adjust certain fees to support a portion of the programmatic expansions; (2) provide funding from the Greenhouse Gas Reduction Fund (GGRF) to support community air pollution monitoring and outreach; and (3) make several policy changes related to what entity pays the mill assessment, pesticide enforcement, and emergency pesticide use authorizations. Overall, we find the increases to the mill assessment and the programmatic expansions to be reasonable, but recommend the Legislature ensure that its spending priorities are reflected in the scope of work and associated level of funding provided. We also recommend the Legislature approve the proposed policy changes and support DPR’s community air pollution monitoring activities with the department’s special fund instead of GGRF. BACKGROUND DPR Is Responsible for Regulating Pesticides. DPR Fund Is Used to Support the Regulation DPR is charged with protecting public health and of Pesticides. The DPR Fund is a repository the environment by regulating pesticides. The of taxes and fees paid by pesticide retailers, department is responsible for evaluating and wholesalers, and businesses. The state uses the registering pesticide products at the state level. fund to support state and local activities related This includes the continuous review of pesticides to regulating pesticides. The majority of the and, if needed, the formal reevaluation of products fund’s resources are provided to DPR to support to identify actions needed to reduce or eliminate its core functions and responsibilities. Roughly adverse impacts. DPR also is responsible for one-quarter of the DPR Fund’s revenues are licensing individuals and businesses that sell, consult provided to CACs as partial reimbursement for on, or apply pesticides. Additionally, the department their pesticide enforcement activities. Expenditures tests pesticide residues on fresh produce and from the DPR Fund are expected to total roughly oversees local enforcement of pesticide use laws and $138 million in 2023-24. regulations by County Agricultural Commissioners DPR Fund Is Made Up of Revenues From Tax (CACs). DPR and CACs have the authority to on Pesticide Sales And Several Fees. The DPR discipline those who violate state pesticide laws and Fund is primarily supported by three main funding regulations, such as through levying administrative sources: the mill assessment, registration fees, and penalties. Finally, the department offers grants licensing fees: and conducts outreach activities to encourage the • Mill Assessment. The largest revenue adoption of alternative pest management practices. source for the DPR Fund—about 80 percent— Historically, about 90 percent of DPR’s budget has is the mill assessment, a tax levied on been supported by the DPR Fund—discussed next— pesticides when first sold into or within with the remaining amount coming from other special the state. In 2023-24, the mill assessment funds and federal funds. is estimated to raise about $100 million. www.lao.ca.gov 1 The mill assessment is currently set at Legislature Has Taken Some Short-Term the statutory maximum level of 21 mills, Actions in Response to DPR Fund’s Structural or 2.1 cents per dollar of sales. Revenues Deficit. In recent years, the growth in expenditures derived from 7.6 mills are statutorily directed from the DPR Fund has outpaced growth in to CACs. The remaining amount is used revenues, creating a structural deficit within the primarily to support several DPR activities, fund. This is primarily due to revenues from the such as pesticide enforcement, monitoring capped mill assessment being unable to keep and surveillance, reevaluations of potential pace with costs associated with expanded DPR pesticide impacts, and alternative pest programmatic responsibilities that have been management grants and outreach. enacted through legislation. The Governor’s • Registration Fees. Registration fees account 2021-22 budget included a proposal to increase for about 16 percent of the fund’s total and tier the mill assessment. Under that revenues. All pesticides must be registered proposal, more acutely toxic pesticides would with DPR before they can be sold or used have been charged a higher rate (or tier). in the state. Registration fees are collected The additional funding generated would have both at the time of initial product registration been used to address the fund’s structural deficit and through annual renewals. In 2023-24, and support various programmatic expansions registration fees are estimated to raise about across DPR, CDFA, and CACs. The Legislature $25 million. DPR uses these revenues to rejected the proposal and instead provided directly support its workload in registering General Fund resources of $10.3 million in 2021-22 pesticides. Statute authorizes DPR to adjust and $8.8 million in 2022-23 to DPR. The funding fees through the regulatory process to ensure provided relief to the DPR Fund and supported that revenues fully support the department’s alternative pest management grants and outreach, Registration Program. environmental monitoring, and pesticide takeback events hosted by CACs. Budget bill language also • Licensing Fees. Licensing fees—which are directed DPR to use a portion of the funding to hire paid biennially by pesticide professionals and a consultant to study tiering the mill assessment. businesses—account for about 4 percent of the fund’s total revenues. In 2023-24, licensing DPR Developed a Sustainable Pest fees are estimated to raise about $2 million. Management (SPM) Roadmap. In January 2023, DPR uses these revenues to directly support the department released its SPM Roadmap, which its workload in licensing and certifying includes strategies to transition the state to safer, pesticide professionals and businesses. more sustainable pest management. Actions in Statute authorizes DPR to adjust fees through the plan include expediting the registration of new the regulatory process to ensure that revenues pesticide products, supporting research of and fully support the department’s Licensing and outreach for alternatives to high-risk pesticides, Certification Program. and expanding monitoring and data collection. A key goal of the roadmap is to eliminate the use Additional Mill Assessment Levied on of “priority pesticides” by 2050. The plan defines Agricultural Use Pesticides. The state also levies priority pesticides as those that warrant attention an additional .75 mills on agricultural use pesticides. and planning to expedite their replacement and In 2023-24, this additional assessment is estimated elimination, but does not list any specific pesticides to raise about $2 million. These revenues go to the as falling into this category. The criteria for priority Department of Food and Agriculture Fund—not the pesticides include factors such as risk level and the DPR Fund. This funding supports the California availability of effective alternatives. The plan states Department of Food and Agriculture (CDFA) in that DPR will take future steps to identify which providing consultation services to DPR on certain pesticides should receive this categorization under regulatory actions. the advisement of a multi-stakeholder committee. 2 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET Independent Contractor Examined Funding that DPR revisit the possibility of adopting Needs for DPR and Appropriate Structure for a tiered mill assessment once it has made Mill Assessment. In August 2023, the independent progress in identifying priority pesticides contractor that DPR hired to conduct the statutorily pursuant to its SPM Roadmap. Under a tiered directed study released its final findings and model, the state would levy a higher mill recommendations. These included: assessment on products that the department categorizes as priority pesticides. The report • Set Mill Assessment at a Flat Rate in the noted that such an approach likely would not Near Term. The report recommended that the incentivize the purchase of safer alternatives, mill assessment initially be set at a flat rate— but rather would (1) signal a need for alternatives such that all pesticides are assessed the same and (2) generate additional revenues that tax rate—increasing from 21 mills to 33.9 mills could be used to support the research of and over a three- to five-year period. It also outreach for alternatives. recommended allowing the mill assessment to be adjusted up to a cap to be set in statute. • DPR Has Additional Needs. The report found that DPR’s registration and licensing • Generate Additional Funding to Expand programs—which are not supported by DPR’s Activities. The study recommended the mill assessment—also have unfunded that the mill assessment be set at a level programmatic needs. sufficient to generate revenues above what is needed to cover the structural deficit to DPR Fund Projected to Be Insolvent in enable DPR and CACs to address identified 2024-25. Because the steps the Legislature took to programmatic needs at an expanded level, provide relief to the DPR Fund relied on temporary and to provide an additional amount to CDFA General Fund support, the fund’s structural deficit to support its pesticide consultation services. remains. As shown in Figure 1, the administration • Consider Tiered Mill Assessment Structure projects that the DPR Fund will be insolvent in the in the Future. The report recommended budget year—meaning it will not have sufficient revenues to cover projected expenditures. Figure 1 DPR Fund Projected to Be Insolvent in the Budget Year (In Millions) $160 140 120 Expenditures Revenues and Transfers 100 80 60 40 Year-End Fund Balancea 20 -20 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25b a Includes prior-year adjustments. b Excludes proposed revenue increase and expanded programmatic expenditures. DPR = Department of Pesticide Regulation. www.lao.ca.gov 3 Specifically, projected expenditures of the revenues that support the fund have grown $140.5 million will exceed the anticipated available steadily in recent years, including a notable increase resources of $139.3 million from revenues and around 2019-20 resulting from pandemic-related reserves (from the prior-year end fund balance), pesticide sales (such as household disinfectants). resulting in a $1.2 million gap. The ongoing At the same time, expenditures have continued to structural gap is even larger without the fund’s increase at an even faster rate due to augmented reserves to help cover expenditures. (These totals activities related to pesticide enforcement and reflect projections of what would occur in 2024-25 additional staff approved to support the registration absent the Governor’s proposed new revenues and and reevaluation of pesticides. expenditures, which we discuss below.) As shown, GOVERNOR’S PROPOSAL The Governor proposes several changes to pesticides (as had been proposed previously) or for increase revenues into the DPR Fund which would priority pesticides. The administration estimates that generate a total of $30.4 million of new revenues in its proposed increases would generate an additional 2024-25 (growing to $43.9 million in future years). $22.1 million in 2024-25, growing to $33.8 million in Of this amount, $9.8 million would address the 2026-27 when the rate is set at 28.6 mills. structural deficit and $17.8 million would be used The Governor’s proposal also would increase to expand programs and activities (growing to the statutory cap for the additional mill assessment $32.5 million). The increased revenues would be levied on agricultural use pesticides. Specifically, generated by: (1) increasing the mill assessment the current cap of .75 mills would be raised to ($22.1 million in 2024-25, growing to $33.8 million), 1.04 mills. As under current law, CDFA would (2) increasing registration fees through regulations have the authority to increase this additional mill ($6.3 million in 2024-25, growing to $7.2 million), assessment in coordination with DPR to ensure and (3) increasing licensing fees through regulations that it is properly resourced to provide pesticide ($2 million in 2024-25, growing to $2.9 million). consultation services to DPR—as long as it does The proposal also would provide $717,000 from not exceed the cap. The administration indicates GGRF on an ongoing basis to support additional that CDFA does not anticipate raising this additional programmatic expansions for the department. mill assessment in 2024-25 even if it is granted We describe these proposals in more detail below. authority to do so. Increases Mill Assessment Over a Three-Year Utilizes Additional Revenues to Address Period, Authorizes DPR to Increase Further in Structural Deficit and Support Additional Future, Sets New Statutory Caps. The Governor Program Spending. In addition to addressing proposes budget trailer legislation that would the structural deficit within the DPR Fund, the increase the mill assessment over a three-year proposal would generate additional revenues to period from the current level of 21 mills to (1) 26 support various programmatic expansions for mills in 2024-25, (2) 27.5 mills in 2025-26, and DPR. The proposal also would provide a small (3) 28.6 mills in 2026-27. Beginning in 2027-28, the amount of ongoing GGRF to support additional proposal would authorize DPR to further adjust the programmatic expansions for the department, mill assessment as needed to align revenues with which we discuss in greater detail below. As shown expenditures approved by the Legislature in the in Figure 2, the proposal would provide DPR with annual budget act, not to exceed a new statutory an additional $18.5 million in 2024-25 beyond what cap of 33.9 mills. The proposal would maintain the is needed to address existing workload. This would structure of the assessment as a flat rate and would cover 65 new positions in 2024-25, increasing to not authorize the department to charge differential $33.2 million and 117 positions in 2026-27 and rates, such as tiering based on the acute toxicity of ongoing. (In addition to the ongoing amounts 4 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET displayed in the figure, the proposal includes about registration and licensing fees and from GGRF $100,000 from the DPR Fund on a one-time basis in (discussed below). In cases where projected 2026-27 for travel support related to inspections.) revenues exceed proposed expenditures, DPR As shown in the figure, a significant portion would use the remaining funding to address the of this funding would go towards alternative structural deficit and build sufficient reserves pest management grants and support activities. within the DPR Fund. Other major new spending includes support for DPR Would Increase Registration and (1) enforcement activities, such as investigating Licensing Fees to Align With Additional pesticide use violations and tracking pesticide Expenditure Authority. In several cases, the residue levels on fresh produce; (2) pesticide proposal would provide additional expenditure registrations, such as reducing the time needed to authority from the DPR Fund to augment the complete registrations and expediting the approval department’s Registration Program and Licensing of safer alternatives; and (3) pesticide evaluations and Certification Program. As mentioned earlier, and monitoring, such as identifying and reevaluating both programs are directly supported by their pesticides for which actions might be needed to respective regulatory fees. The proposal would reduce or eliminate adverse impacts. continue with this practice by having these Most of the programmatic expansions from the augmentations be supported by fees instead of the DPR Fund would be supported by the additional mill assessment. However, in order to fully support revenues generated from increasing the mill these proposed expansions, DPR would need to use assessment, while a smaller amount would come its existing authority to increase both registration from new revenues associated with DPR increasing and licensing fees through the regulation process. Figure 2 Governor’s Proposed Spending Increases for DPR (Dollars in Millions) 2024-25 2025-26 2026-27 and Ongoing Activity Funding Positions Funding Positions Funding Positions Process Improvements and Safer Alternatives $9.5 35 $15.7 58 $17.9 64 Alternative pest management grants and support $4.3 7 $6.7 11 $7.7 11 Administrative support 3.1 14 4.7 22 4.7 22 Pesticide registrations and reevaluations 1.1 7 1.7 10 2.2 12 Pesticide environmental evaluations 0.9 6 2.2 13 2.9 17 Pesticide human health evaluations 0.2 1 0.4 2 0.4 2 Statewide Service Improvements $5.5 18 $7.1 22 $9.1 33 Pesticide monitoring and data evaluation $3.2 7 $3.2 7 $3.9 11 Pesticide takeback events 0.6 1 1.1 1 1.1 1 Product compliance and mill auditing 0.6 5 0.6 5 1.0a 7 State pesticide enforcement actions 0.3 1 0.3 1 1.2 6 Fumigation tarp testing 0.3 — 0.3 — 0.3 — Worker Health and Safety Program 0.3 2 0.4 3 0.4 3 Regulation development 0.3 2 0.3 2 0.3 2 Licensing and Certification Program 0.1 — 1.0 3 1.0 3 Support for CACs and Outreach $3.5 12 $5.6 19 $6.3 20 Training and compliance support for CACs $2.0 5 $2.5 5 $3.2 6 Local engagement and outreach 1.5 7 3.0 14 3.1 14 Totals $18.5 65 $28.3 99 $33.2 117 a In addition to the ongoing amount, the proposal includes about $100,000 from the DPR Fund on a one-time basis for travel support related to inspections. Note: Totals may not add due to rounding. All additional spending and positions are supported by the DPR Fund, except $717,000 from GGRF to support four positions and air monitoring activities. DPR = Department of Pesticide Regulation; CACs = County Agricultural Commissioners; and GGRF = Greenhouse Gas Reduction Fund. www.lao.ca.gov 5 The department indicates the exact fee increases • Extends Statute of Limitations for Pesticide it would implement still are uncertain and that it Use Violations. Currently, enforcement would plan to hold public workshops in 2024 to actions on pesticide use violations must be discuss potential changes. Despite this uncertainty, brought by DPR or CACs within two years of the administration estimates that the forthcoming the occurrence of the violation. The proposal increases would generate an additional $8.3 million would extend this time line to three years. in 2024-25 ($6.3 million from registration fees The department indicates that this change and $2 million from licensing fees), growing to would better reflect the time needed to $10.1 million by 2026-27 and thereafter ($7.2 million investigate and bring enforcement actions for from registration fees and $2.9 million from pesticide use violations. licensing fees). • Authorizes DPR to Enforce California’s Provides Some New Funding From GGRF Laws on Out-of-State Pesticide Dealers. for Air Quality Monitoring and Outreach The proposal would authorize DPR to levy Activities. The proposal also would provide administrative penalties of up to $15,000 on $717,000 from GGRF and four positions in 2024-25 violations related to pesticide dealers, such as and ongoing to support pesticide air monitoring when entities act in this role without a license. and data evaluations and stakeholder engagement. Currently, the authority to levy administrative The department indicates that this work is related to penalties related to pesticide dealers resides the community air pollution monitoring and reduction solely with CACs. DPR indicates taking program established by Chapter 136 of 2017 enforcement actions on out-of-state pesticide (AB 617, C. Garcia). dealers would be a more appropriate role to Includes Several Policy Changes. The Governor assign to the state, since the primary role of proposes budget trailer legislation that would make CACs is to be the main enforcement authorities several changes, including the following: within their jurisdictions. • Exempts Emergency Pesticide Use • Changes Mill Assessment Payer Authorizations From California Responsibility. The proposal would require the Environmental Quality Act (CEQA) Review. mill assessment to be paid by the entity that first CEQA requires state and local agencies to sells a pesticide into the state. This contrasts consider the potential environmental impacts with current law, under which it is paid by associated with potential public or private the entity who has registered the pesticide. projects or activities. Federal law authorizes DPR indicates that this change would address the U.S. Environmental Protection Agency payment responsibility issues related to online to allow federal and state agencies (such retail and align the mill assessment with how the as DPR) to permit the unregistered use of a state collects other fees and taxes. pesticide to address emergency conditions. • Extends Statute of Limitations for Mill For example, this might occur when no other Assessment Payment Violations Found registered pesticides are available to control in Audits. The proposal would extend the a serious pest problem that would result in current statute of limitations for DPR to take significant economic losses or cause adverse enforcement actions when audits reveal mill environmental impacts. These emergency assessment payment violations. Currently, the authorizations are only permitted for a limited department must bring enforcement actions time within a defined geographical area and within four years of the occurrence of the usually involve pesticides that have been violation. The proposal would allow DPR to registered for other uses (such as for different bring enforcement actions on violations that crops). The proposal would exempt such have occurred within four years of the audit’s emergency pesticide use authorizations from commencement, but no later than two years requiring a CEQA review. after the audit’s completion. DPR indicates that this extended time line would better reflect the period it needs to complete audits and take corresponding enforcement actions. 6 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET ASSESSMENT Increasing Mill Assessment Is Justified. on an ongoing basis. Furthermore, raising the Overall, we find two key justifications for the state statutory cap and providing DPR with authority to to increase the mill assessment. First, it has not make future increases to the mill assessment also been increased since 2004. Given the considerable would add to the ongoing stability of the fund by amount of time since its last adjustment, an establishing a way for revenues to keep pace with increase is warranted to ensure that it both aligns the expenditure levels the Legislature sets through with current department expenditures and is the annual budget act. Authorizing this “room” for able to support new state priorities related to revenues to grow also can provide the Legislature pesticides going forward. Second, increasing the with greater confidence that it will be able to assign mill assessment to support these activities aligns necessary responsibilities to the department in the with the “polluter pays” principle, whereby those future without placing excessive pressure on the who produce or otherwise contribute to pollution DPR Fund. Similarly, the proposed increase in the (such as environmental impacts from pesticides) statutory cap for the mill assessment on agricultural should bear the associated regulatory costs of use pesticides would create a mechanism to managing and preventing damage to public health ensure CDFA remains sufficiently resourced to and the environment. provide consultant services to DPR. The inclusion Flat Increase to the Mill Assessment of the statutory caps also aligns with the Represents Reasonable Approach. We find recommendations in the independent contractor’s that a flat increase to the mill assessment, as report. We find the specific new caps the Governor the Governor has proposed, is a reasonable proposes for the two mill assessments—33.9 mills approach. This structure has several benefits. for all pesticides and the additional 1.04 mills For instance, a single tax rate is easier for the specifically for agricultural use pesticides—to be state to administer and offers a more predictable reasonable. However, moderately lower or higher revenue stream. It also is simpler and more statutory caps also could be justifiable. predictable for the entities that pay the tax. A flat Increasing Mill Assessment to Support increase also aligns with the recommendations in Programmatic Expansions Would Help DPR the independent contractor’s report. The report Pursue State Goals. As noted, the Governor analyzed various ways in which the state could proposes increasing the mill assessment beyond tier the mill assessment, but ultimately found that what is needed to address the DPR Fund’s existing a flat increase was the most appropriate structure operating imbalance and generating additional until the department has begun identifying priority funding to expand DPR’s activities. Overall, we pesticides. Given the department still is in the find the proposed programmatic augmentations beginning stages of identifying priority pesticides— supported by the mill assessment increases to with much of this work dependent on the expanded be reasonable given that they are targeted at staffing the Governor proposes—adopting plans to (1) enhancing the enforcement of pesticide laws and implement a tiered mill assessment structure now regulations, (2) increasing the number of pesticide would be premature. reevaluations the department can administer, Proposal Would Solve Structural Deficit and (3) encouraging the use and development Within the DPR Fund and Allow for Future of safer alternatives and practices. None of the Growth in DPR and CDFA Activities. The proposed activities seem beyond the scope of Governor’s proposal would address the structural the department’s responsibilities or extraneous imbalance within the DPR Fund on an ongoing to meeting its core mission. Furthermore, the basis. Specifically, the proposed increases to proposed augmentations largely align with the the mill assessment would provide sufficient new funding needs identified in the independent revenues for the DPR Fund to address its current contractor’s report. structural deficit and cover DPR’s existing workload www.lao.ca.gov 7 Supporting Certain Programmatic • Funding for SPM Roadmap Activities. Expansions With Fee Increases Also Is The Governor’s proposal would use funding to Appropriate. The Governor’s proposal would support activities outlined in the department’s augment the department’s registration and SPM Roadmap—such as identifying priority licensing activities by having DPR use its existing pesticides and expediting the registration of regulatory authority to increase the fees that reduced-risk pesticides. While these activities directly support these programs. Overall, we could provide some benefits, we note that find the proposed programmatic expansions to the SPM Roadmap is an administration-led be reasonable given that they would be used to initiative. The Legislature may wish to consider (1) improve the department’s registration process, whether it agrees that these are worthwhile which has experienced an increase in average activities for DPR to undertake and whether processing times in recent years and (2) provide the any statutory guidance might be needed to department with additional resources to certify and further align the proposed actions with its educate individuals and businesses applying for own priorities. pesticide licenses. We also find that the proposed • Funding for CACs. A central component of augmentations largely align with the funding needs the proposal is to ensure that sufficient state identified in the independent contractor’s report. resources are provided to uphold pesticide Furthermore, supporting these activities with fee laws and regulations. While the Governor’s increases is an appropriate approach given that it proposal includes additional enforcement tasks those who are regulated by these programs funding for DPR, it does not augment with paying the costs for the provided services. funding for CACs’ enforcement activities. However, Legislative Priorities Should This diverges from the recommendation Also Be Incorporated. While we find the made in the independent contractor’s report, administration’s proposed programmatic which identified a $10.2 million funding need augmentations to be reasonable, they do not for CACs. We also note that the last time the represent the only options for expanding DPR’s state raised the mill assessment, the portion activities. The Legislature has an important provided to CACs was also increased. While opportunity now to determine (1) the scope current allotments could be sufficient, this is of activities it wants DPR to conduct, (2) the an important opportunity for the Legislature associated level of resources required, and (3) the to ensure that CACs are properly resourced to corresponding level at which the mill assessment effectively complete their statutorily required should be set. This could involve removing or enforcement activities. refining activities proposed by the Governor or • Recently Chaptered Legislation. adding activities that are legislative priorities. The proposal does not provide resources to Ensuring that legislative priorities are reflected is implement recently chaptered legislation— particularly important given the opportunity that such as for Chapter 662 of 2023 (AB 652, adjusting taxes and fees provides in setting the Lee), which requires DPR to convene state’s overall goals for pesticide regulation and an environmental justice committee. ensuring they are well supported. Depending on This omission is consistent with the the actions taken, modifying planned programmatic administration’s overall approach in augmentations could result in higher or lower the Governor’s budget, which mostly increases to the mill assessment and registration excludes augmentations related to and licensing fees than proposed by the Governor. implementing recently chaptered legislation. Potential categories of modifications the Legislature (The administration indicates it will consider could consider include: including such resources as part of the May Revision depending on the overall budget condition.) However, given the important opportunity the Legislature has right now to 8 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET set DPR’s scope of work and corresponding in further meeting its mission and statutory funding needs, it is a key juncture responsibilities. As noted above, these include for considering whether all of its desired changing the mill assessment payer responsibility, activities are included—particularly those extending the statute of limitations for pesticide already enacted into law by the Legislature use and mill assessment payment violations, and Governor. authorizing DPR to enforce state laws and regulations on out-of-state pesticide dealers, and If Community Air Pollution Workload Is a exempting emergency pesticide use authorizations Core Department Activity, Funding It From the from CEQA. We find that these changes could DPR Fund—Rather Than GGRF—Is Appropriate. (1) improve the collection of the mill assessment, One of the primary purposes of reconsidering the (2) strengthen the enforcement of pesticide laws mill assessment is to provide sufficient resources and regulations, and (3) facilitate the authorized use for DPR’s core programs so the department is of pesticides in emergency situations. better equipped to meet its mission and statutory Incorporating Accountability Measures authorities. Historically, the department’s core Could Help Legislature Assess Effectiveness of functions and programs have been supported by Proposed Changes. The amount of funding DPR the DPR Fund. The Governor’s proposal continues would receive under this proposal would represent this approach with one notable exception—the a significant augmentation for the department. proposal to instead fund the ongoing activities The proposal (including the proposed GGRF related to AB 617 with GGRF. The ongoing spending) would increase the department’s ongoing nature of these augmentations suggests that base spending levels by about 25 percent. While we the administration views this workload as a core find the proposed augmentations to be reasonable, department function. Moreover, DPR indicates that the Legislature would benefit from conducting these activities—working with local communities oversight of how the funding is being used and on air pollution impacts caused by pesticides— the degree to which it is helping DPR meet its are needed even in areas that do not currently core objectives. Monitoring the department’s participate in the AB 617 program. Accordingly, progress in meeting state objectives—such as we find the DPR Fund to be a more appropriate improving the registration and reevaluation of ongoing fund source than GGRF to support pesticides—would inform the Legislature on these activities. DPR’s successes and challenges in implementing Policy Changes Appear to Be Reasonable. the funding augmentations and, in turn, help Overall, we find that the Governor’s proposed inform whether future programmatic modifications statutory changes align with the overall intent of the might be needed. budget proposal and would support the department RECOMMENDATIONS Approve Some Level of Flat Mill Assessment flat increase—rather than tiered—is a reasonable Increase With Statutory Caps… We recommend approach given that it is easier to administer, the Legislature approve a flat increase to the offers a more predictable charge and revenue mill assessment to address the structural deficit stream, and DPR has not yet identified a list of within the DPR Fund and to support high-priority priority pesticides that could be used to form programmatic expansions. The mill assessment tiers for differential charges. We also recommend has not been adjusted in 20 years and an increase the Legislature incorporate statutory caps for would ensure that the DPR Fund can accommodate both the mill assessment applied to all pesticides current department expenditures and is able to and the additional mill assessment levied on support new state priorities for pesticides going agricultural use pesticides—either at the levels forward. Furthermore, structuring the change as a proposed by the Governor or something close. www.lao.ca.gov 9 2024-25 BUDGET This would allow revenues within the DPR Approve Various Policy Changes. Fund to keep pace with expenditure levels We recommend the Legislature approve the set by the Legislature and provide confidence Governor’s proposed policy changes. These that the department can be tasked with future include changing the mill assessment payer responsibilities without placing excessive cost responsibility, extending the statute of limitations pressures on the fund. for pesticide use and mill assessment payment …But Consider Modifications to Ensure violations, authorizing DPR to enforce state DPR Has Sufficient Resources to Accomplish laws and regulations on out-of-state pesticide Legislative Priorities. Given the opportunity that dealers, and exempting emergency pesticide use revising the mill assessment provides in setting authorizations from CEQA. These changes align the state’s overall goals related to pesticides, we with the overall intent of the budget proposal recommend the Legislature ensure that its spending and would support the department in further priorities are reflected in the scope of work and meeting its mission and statutory responsibilities. associated level of funding that the final budget We find that these changes could (1) improve the deal provides. This could include modifying or collection of the mill assessment, (2) strengthen adding to the Governor’s proposed programmatic the enforcement of pesticide laws and regulations, augmentations. Depending on the actions taken, and (3) facilitate the authorized use of pesticides in this may require the Legislature to implement emergency situations. higher or lower increases to the mill assessment Consider Adding Accountability Measures. and registration and licensing fees than proposed We recommend the Legislature consider adding by the Governor. accountability measures as a way to conduct Support DPR’s Community Air Pollution oversight of programmatic expansions and to Workload With DPR Fund. We recommend the ensure that funding is helping DPR meet its core Legislature reject the Governor’s proposal to fund objectives. Monitoring the degree to which the DPR’s community air pollution workload with department is meeting these objectives—such GGRF and instead support these activities with the as improving the registration and reevaluation of DPR Fund. The ongoing nature of this augmentation pesticides—also would inform the Legislature on suggests that this workload is a core department the successes and challenges of implementing function, and the department indicates the needs the augmentations and, in turn, guide potential for this community engagement exist beyond future programmatic modifications. Specifically, the just AB 617 program participants. Accordingly, Legislature could require DPR to complete a report we find it reasonable to support these activities that discusses how the funding augmentations with the department’s primary funding source. are being utilized and what outcomes are being This would mean ensuring the mill assessment achieved. The Legislature could require the report is set at a level to generate revenues that can to include specific metrics that it believes are cover the associated costs ($717,000 to support important to track, such as average processing four positions and air monitoring activities), along times for pesticide registrations, the number of with whatever other modifications the Legislature pesticide reevaluations being undertaken each makes to the Governor’s proposal. This would also year, and updates on the department’s progress in align with our overall recommendation that the identifying priority pesticides. Legislature minimize out-year GGRF commitments in order to maintain legislative flexibility over the use of these funds in upcoming years, particularly given the forecasted deficits. (Please see our recent report, The 2024-25 Budget: Cap-and-Trade Expenditure Plan, for more detail on our GGRF-related recommendations.) 10 LEGISLATIVE ANALYST’S OFFICE 2024-25 BUDGET www.lao.ca.gov 11 LAO PUBLICATIONS This report was prepared by Frank Jimenez and reviewed by Rachel Ehlers. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 12 LEGISLATIVE ANALYST’S OFFICE