Summary: Executive Budget Recommendation

Summary: House Passed

AGRICULTURE

FY 2004-05 House Bill 5509, H-1

Analyst: Kirk Lindquist

	FY 2003-04 YTD (as of 2/12/04)					*Difference: House Passed* *from FY 2003-04 YTD*
	FY 2003-04 YTD (as of 2/12/04)	Executive	House	Senate	Enacted	*Amount*		%
IDG/IDT	$10,758,600	$10,831,700	10,831,700				$73,100	0.7
Federal	14,401,700	33,406,200	33,406,200				19,004,500	132.0
Local	0	0	0				0	0.0
Private	1,127,600	138,700	138,700				(988,900)	) (87.7)
Restricted	39,931,900	40,755,500	40,070,800				(138,900)	(0.3)
GF/GP	30,259,200	31,509,400	31,509,400				1,250,200	4.1
Gross	$96,479,000	$116,641,500	$115,956,800				*$19,477,800*	*20.2*
FTEs	569.0	715.0	739.0				170.0	29.9

Overview

The Department of Agriculture promotes Michigan agricultural products and protects the public from disease and unsanitary conditions in food production and handling. It regulates product labeling and producer practices for dairy products, animals, and plants, as well as enforcing consumer protection laws in food, standard weights/measures, animal health, plant pests, and diseases.

Summary of FY 2004-05 Major Budget Issues

Animal Health and Plant Pest Eradication

The Emerald Ash Borer grant from the Federal government would be increased by $17.7 million to $25.2 million. These funds would be used for continued monitoring and marking efforts in areas of the state affected by this infestation. Federal support for the Bovine TB and Johne’s Disease programs would be increased by $706,000.

Horse Race Revenue

Agriculture Equine Industry Development Fund support for local racing programs would be decreased by 14.4%, or by about $1.3 million. This reduction would be possible because of funding shifts in departmental programs to State Services Fee revenue.

Gas Pump Inspections

Gas tax revenue, previously earmarked for bond debt service, would be provided for gas pump inspectors: 33 positions and $3,000,000.

Major Budget Changes from FY 2003-04 YTD Appropriations:	FY 2003-04 YTD (as of 2/12/04)	House Committee Change
*1. Emerald Ash Borer Program* Includes federal funding for the third year of this program. Funds are provided for eradication efforts in affected areas of southeast Michigan and other threatened areas in the lower peninsula. No state revenue match is required for this program. Executive: $17,750,000	FTEs Gross Federal	0.0 $7,250,000 7,250,000	155.0 $17,750,000 17,750,000
*2. Michigan State Fair* Funds would be transferred to the Department of Management and Budget, if an executive order is issued during FY 2003-04, moving the program from the Department of Agriculture. Executive: $0	FTEs Gross Restricted	10.0 $5,486,100 5,486,100	(10.0) ($5,486,000) (5,486,000)
*3. Gas Pump Inspection Program* Includes 7/8 cent gas tax surcharge revenue to support an expanded gas pump inspection program. Executive: $0	FTEs Gross Restricted	0.0 $0 0	34.0 $3,000,000 3,000,000
*4. Agriculture Equine Development Fund Revenue* *Redistribution* Due to continued decline in horse race revenue, Agriculture Equine Industry Development Fund support for local racing programs would be reduced. The $2,025,000 fund transfer to the General Fund is maintained in FY 2004-05. The House substituted State Services Fee revenue in the Laboratory and Office of Racing Commissioner: $2,788,800, and increased fair and industry support line items by $1.0 million. Executive: ($1,117,000)	Gross Restricted	$12,467,000 12,467,000	$1,000,000 1,000,000
*5. Federal Grant Increases: Johne’s Disease and Bovine TB* The Animal Health and Welfare program would be increased by $356,000 to allow the State to receive and spend additional federal funding for Johne’s Disease eradication efforts in sheep and cattle, and slaughter house inspections. An additional $350,000 is provided for continuing efforts to protect livestock threatened by Bovine TB. Executive: $706,000	Gross Federal Restricted GF/GP	$6,246,600 159,000 407,200 $5,839,400	$706,000 706,000 0 $0
*6. Agriculture Laboratory: Oil and Gas Revenue* Added Gasoline Testing and Inspection Fund, $385,000, along with Oil and Gas Regulatory Fund revenue from the Department of Environmental Quality, $462,200, is provided for the service station inspection program. The State will not receive Private Oil and Gas Settlement Revenue in FY 2004-05. Executive: ($162,600)	Gross Private Restricted	$0 997,600 0	($624,800) (997,600) 372,800
*7. Plum Pox Inspections and Project GREEEN* Inspection fee revenue (Industry Support Funds) is provided for the Plum Pox Inspection program, and $90,000 is to be provided to Michigan State University – Project GREEEN. Executive: $300,000	Gross Federal Private Restricted GF/GP	$12,107,800 3,374,400 130,000 3,841,300 $4,762,100	$300,000 0 0 300,000 $0
*8. Marketing Programs* Marketing programs in Agricultural Development, Marketing and Emergency Management would be eliminated. Responsibility for new market identification and development would be assumed by the Department of Labor and Economic Growth. Executive: ($200,000)	Gross IDG Federal Restricted GF/GP	$2,441,700 500,000 100,000 845,400 $946,300	($50,000) 0 0 0 ($50,000)
*9. Commodity Inspection Fees* Inspection fee revenue is expected to fall off in FY 2004-05 due to a reduction in the workload and complexity of onsite inspections.	Gross Restricted	$991,500 991,500	($291,500) (291,500)
*10. Economic Adjustments and Employee Related Savings* Each line item supporting pay roll expenses was increased to cover the cost of scheduled pay increases and fringe benefit costs ($5,004,800). Employee salaries are to increase by 7% and health insurance premiums are to increase by 13.6%. The contribution rates for the defined benefit and defined contribution retirement programs are increasing as well, reflecting the system costs related to the recent early retirement program. Workforce related savings ($1,791,500) are recommended to offset the cost of included economic adjustments. These savings (amounting to 5% of payroll) are to be achieved through contract concessions.	Gross IDG Federal Private Restricted GF/GP		$3,213,300 73,100 548,500 8,700 1,104,500 $1,478,500

Major Budget Changes from FY 2003-04 YTD Appropriations:

FY 2003-04 YTD

(as of 2/12/04)

House Committee

Change

1. Emerald Ash Borer Program

Includes federal funding for the third year of this program. Funds are provided for eradication efforts in affected areas of southeast Michigan and other threatened areas in the lower peninsula. No state revenue match is required for this program.

Executive: $17,750,000

FTEs

Gross

Federal

0.0

$7,250,000

7,250,000

155.0

$17,750,000

17,750,000

2. Michigan State Fair

Funds would be transferred to the Department of Management and Budget, if an executive order is issued during FY 2003-04, moving the program from the Department of Agriculture.

Executive: $0

FTEs

Gross

Restricted

10.0

$5,486,100

5,486,100

(10.0)

($5,486,000)

(5,486,000)

3. Gas Pump Inspection Program

Includes 7/8 cent gas tax surcharge revenue to support an expanded gas pump inspection program.

Executive: $0

FTEs

Gross

Restricted

0.0

34.0

$3,000,000

3,000,000

4. Agriculture Equine Development Fund Revenue

Redistribution

Due to continued decline in horse race revenue, Agriculture Equine Industry Development Fund support for local racing programs would be reduced. The $2,025,000 fund transfer to the General Fund is maintained in FY 2004-05.

The House substituted State Services Fee revenue in the Laboratory and Office of Racing Commissioner: $2,788,800, and increased fair and industry support line items by $1.0 million.

Executive: ($1,117,000)

Gross

Restricted

$12,467,000

12,467,000

$1,000,000

1,000,000

5. Federal Grant Increases: Johne’s Disease and Bovine TB

The Animal Health and Welfare program would be increased by $356,000 to allow the State to receive and spend additional federal funding for Johne’s Disease eradication efforts in sheep and cattle, and slaughter house inspections. An additional $350,000 is provided for continuing efforts to protect livestock threatened by Bovine TB.

Executive: $706,000

Gross

Federal

Restricted

GF/GP

$6,246,600

159,000

407,200

$5,839,400

$706,000

706,000

6. Agriculture Laboratory: Oil and Gas Revenue

Added Gasoline Testing and Inspection Fund, $385,000, along with Oil and Gas Regulatory Fund revenue from the Department of Environmental Quality, $462,200, is provided for the service station inspection program. The State will not receive Private Oil and Gas Settlement Revenue in FY 2004-05.

Executive: ($162,600)

Gross

Private

Restricted

997,600

($624,800)

(997,600)

372,800

7. Plum Pox Inspections and Project GREEEN

Inspection fee revenue (Industry Support Funds) is provided for the Plum Pox Inspection program, and $90,000 is to be provided to Michigan State University – Project GREEEN.

Executive: $300,000

Gross

Federal

Private

Restricted

GF/GP

$12,107,800

3,374,400

130,000

3,841,300

$4,762,100

$300,000

300,000

8. Marketing Programs

Marketing programs in Agricultural Development, Marketing and Emergency Management would be eliminated. Responsibility for new market identification and development would be assumed by the Department of Labor and Economic Growth.

Executive: ($200,000)

Gross

IDG

Federal

Restricted

GF/GP

$2,441,700

500,000

100,000

845,400

$946,300

($50,000)

($50,000)

9. Commodity Inspection Fees

Inspection fee revenue is expected to fall off in FY 2004-05 due to a reduction in the workload and complexity of onsite inspections.

Gross

Restricted

$991,500

991,500

($291,500)

(291,500)

10. Economic Adjustments and Employee Related Savings

Each line item supporting pay roll expenses was increased to cover the cost of scheduled pay increases and fringe benefit costs ($5,004,800). Employee salaries are to increase by 7% and health insurance premiums are to increase by 13.6%. The contribution rates for the defined benefit and defined contribution retirement programs are increasing as well, reflecting the system costs related to the recent early retirement program.

Workforce related savings ($1,791,500) are recommended to offset the cost of included economic adjustments. These savings (amounting to 5% of payroll) are to be achieved through contract concessions.

Gross

IDG

Federal

Private

Restricted

GF/GP

$3,213,300

73,100

548,500

8,700

1,104,500

$1,478,500

Major Boilerplate Changes from FY 2003-04:
**Sec. 205. State-wide Hiring Freeze– DELETED**
**Sec. 224. Agriculture Enhancement Fund Allocations–REVISED** A new $1.0 million allocation to county fairs is provided.
**Sec. 225. “Contingency Fund Transfer” Language: Federal, Restricted, Local and Private– NEW** This is the same language included in earlier budget acts. Spending authorization may be increased through the legislative transfer process.
**Sec. 601. Energy Conservation Program Grants–DELETED** A distribution formula is required.
**Sec. 605. Aquifer Dispute Resolution Funds: Legislative Intent –DELETED** Designates $100,000 for aquifer dispute resolution activities.
**Sec. 810. State Fair Operations Spending: Limited to Level of Appropriation–DELETED** Total spending in FY 2003-04 shall not exceed the appropriation level authorized in this act.

Major Boilerplate Changes from FY 2003-04:

Sec. 205. State-wide Hiring Freeze– DELETED

Sec. 224. Agriculture Enhancement Fund Allocations–REVISED

A new $1.0 million allocation to county fairs is provided.

Sec. 225. “Contingency Fund Transfer” Language: Federal, Restricted, Local and Private– NEW

This is the same language included in earlier budget acts. Spending authorization may be increased through the legislative transfer process.

Sec. 601. Energy Conservation Program Grants–DELETED

A distribution formula is required.

Sec. 605. Aquifer Dispute Resolution Funds: Legislative Intent –DELETED

Designates $100,000 for aquifer dispute resolution activities.

Sec. 810. State Fair Operations Spending: Limited to Level of Appropriation–DELETED

Total spending in FY 2003-04 shall not exceed the appropriation level authorized in this act.