HomeMy WebLinkAboutMINUTES - 06142005 - C24 TO: BOARD OF SUPERVISORS
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Contra
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• GLOVER, SUPERVISOR DIST. V _
FROM. FEDERAL D. G O
DATE: June 14 2005 ''• Costa
SrA- K� County
SUBJECT: California State Association of Counties Board v
Of Directors Meeting
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS:
ACCEPT the report on the June 2, 2005 Board of Directors meeting of the California State Association
of Counties (CSAC).
FINANCIAL IMPACT:
There is no financial impact.
BACKGROUND/REASONS FOR RECOMMENDATION
The June 2"d CSAC Board of Directors meeting considered several issues of interest to Contra Costa
County, including a resolution on agricultural biotechnology, California's hospital financing waiver, and
the initiative proposal entitled "California Live Within our Means Act."
Resolution on Biotechnology in Agriculture
After a lively debate the Board of Directors adopted the attached resolution entitled "Resolution in
Support of Life Sciences and its Contributions to World Health and Agricultural Improvement." The
resolution states that CSAC recognizes the importance of the life sciences and supports the current and
future economic, medical and agricultural opportunities presented by biotechnology, as regulated by the
U.S. Food and Drug Administration, the Environmental Protection Agency and the U.S. Department of
Food and Agriculture.
I abstained from voting on the resolution since the Board has not adopted a position on this issue.
The CSAC Board also requested staff to conduct a workshop on biotechnology in agriculture at the
November annual conference.
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BY UTY
Prior to the CSAC Board meeting I consulted with Ed Meyer, Director of the County Agriculture
Department, on the proposed resolution. He confirmed that the Board of Supervisors does not have a
position on this issue and that the growers in Contra Costa County have not taken a stance either. He
said that his department would support such a resolution.
Basically, the resolution supports genetically modified organisms (GMO), which is the leading edge of
biotechnology for agriculture. GMO involves taking a gene from one plant source and implanting it into
the seed of another plant, or modifying a gene of a plant. For example, scientists have developed a
strain of corn that includes a bacterium that prevents worm infestations. Modifications have also fortified
the vitamin and/or mineral content of plants.
The issue of using technology in agriculture is not without controversy, however. Some groups are
opposed to genetically modified crops. Organic growers are particularly concerned about
"contamination" of their crops from neighboring GMO crops. Mendocino has adopted an ordinance
against GMO crops. Marin County has either done so or is considering an ordinance. There is a group
in Alameda County that is promoting such an ordinance, and Sonoma County has a measure on the
ballot in November on the issue. Typically, these ordinances require the Agricultural Commission to
enforce them. Enforcement is both difficult and expensive since it requires taking samples, creating
labs, etc.
California Live Within Our Means Act(CALWOMA) Initiative
CSAC staff provided an update on the status of the initiative. We should know by mid-June whether or
not enough signatures have been collected to qualify it for the ballot. CSAC staff distributed a County
discussion paper on CALWOMA, indicating that their analysis concluded that there could be significant
unintended consequences that could have considerable financial impacts on counties and services if
the initiative is approved.
The Board of Directors debated whether or not to take a position of opposition on the proposed initiative
at the meeting. It has been a longstanding policy of CSAC not to take a position on ballot measures until
they qualify. However, the Board of Directors is not scheduled to meet again until November, which
would be after the election if a special election is held.
The Board of Directors agreed to hold a special meeting on September 8th if necessary to consider a
position on the CALWOMA initiative.
Hospital Financing Waiver
Kim Belshe, Secretary of the Health and Human Services Agency, briefed the Board on the S1113
waiver on hospital financing. She emphasized that it could be catastrophic for California if the current
waiver is allowed to expire on June 30th. She also said that California needs to strike a deal now with the
federal government and close this phase of the negotiations, bringing it back to the California
Legislature to discuss the issue of distribution of the funds.
The California Hospital Association, California Association of Public Hospitals and Health Systems, the
Private Essential Access Community Hospitals, the University of California and the California Children's
Hospital Association have sent a letter urging the state to refrain from agreeing to a waiver until what
they consider fundamental problems are resolved (letter and background materials attached). On May
24th, the Board of Supervisors also took a similar position of opposition to approval of the current waiver
agreement.
RESOLUTION IN SUPPORT OF LIFE SCIENCES AND ITS CONTRIBUTIONS
TO WORLD HEALTH AND AGRICULTURAL IMPROVEMENTS
WHEREAS,over its history, the character of California agriculture has been in a state of
perpetual transition and adjustment evolving to today's highly sophisticated,
technologically advanced,management-intensive agricultural industry with a 2003 farm
gate value in excess of$27 billion; and
WHEREAS, California agriculture has always been on the technological frontier in
developing or modifying new technologies such as large scale mechanical technology,
irrigation equipment,horticulture/plant varieties,pest control, food processing, and wine
making; and
WHEREAS,the use of biotechnology in medicine and other sciences has provided
unique innovations and products to the benefit of society; and
WHEREAS,biotechnology has been used in medical research for enhanced treatments
for life threatening diseases, such as Alzheimer's,HIV/AIDS,diabetes,cancer and a
myriad of diseases that currently have no cure; and
WHEREAS,the use of biotechnology in agriculture has enhanced the well-being and
environmental stewardship of con iunities through reduced pesticide use,reduced soil
erosion, lower water consumption and greater yield, and
WHEREAS, agricultural biotechnology can make the food we eat safer,more nutritious
and free from allergens, and the technology holds the key to development of crops that
can be used to create new energy sources; and
WHEREAS, the field.of biotechnology has created.over 230,000 high paying jobs with a
$14 billion payroll in California and many businesses in several counties are on the
"cutting edge"by creating a challenging business environment for start-up and
established biotechnology companies; and
WHEREAS, the current and future developments of this technology in field crops
represent a significant leap in addressing the hunger and nutritional needs of the world's
more than 8.3 billion people by the year 2025, and
WHEREAS,biotechnology is being used to develop food and fiber crops that are salt
tolerant,drought resistant,have enhanced nutritional properties, contain trans-fat free
oils, and resist viral infections like Pierce's disease; and
WHEREAS, the University of California and the California State University Systems are
world leaders in biotechnology research,recognizing that science is the driving force
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behind innovation,and that technological advancements in medicine and agriculture have
been at the root of California's success,and
NOW,THEREFORE BE IT RESOLVER,the California State Association of Counties
reco es*the importance of the life sciences and supports the current and future
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economic,medical and agricultural opportunities presented by biotechnology as regulated
by the U.S.Food and Drug Administration,the Environmental Protection Agency, and _
the U.S.Department of Food and Agriculture.
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WHAT THE EXPERTS SAY ABOUT AGRICULTURAL BIOTECHNOLOGY
"Biotechnology provides powerful tools for the sustainable development of agriculture, fisheries
and forestry, as well as the food industry. When appropriately integrated with other technologies
for the production of food, agricultural products and services, biotechnology can be of significant
assistance in meeting the needs of an expanding and increasingly urbanized population in the
next millennium." Food and Agriculture organization of the United Nations (March 2000)
"The affluent nations can afford to adopt elitist positions and pay more for food produced by the
so-called natural methods; the I billion chronically poor and hungry people of this world cannot.
New technology will be their salvation, freeing them from obsolete, low-yielding, and more
costly production technology." Dr. Norman E. Borlaug,Nobel Prize Winner('2000)
"It is the position of The American Dietetic Association that biotechnology techniques have the
potential to be useful in enhancing the quality, nutritional value, and variety of food available for
human cons'umption and in increasing the efficiency of food production, food processing, food
distribution, and waste management." American Dietetic Association (reaffirmed 2000)
"The American Medical Association(AMA) recognizes the many potential benefits offered by
aenetically modified crops and foods, does not sup-port a moratorium on planting genetically-
modified crops, and ongoing fg
encourages oing research developments in food biotechnology."
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American Medical Association Council on Scientific Affairs (.2.000)
"Foods can be produced through the use of GM technology that are more nutritious, stable in
storage and in principle, health promoting-bringing benefits to consumers in both industrialized
and developing nations. . . . GM technology, coupled with important developments in other
areas, should be used to increase the production of main food staples, improve the efficiency of
production, reduce the environmental impact of agriculture, and provide access to food for small-
scale farmers." Royal Society of London, U.S. National Academy of Sciences,Brazilian
Academy of Sciences, Chinese Academy of Sciences, Indian National Science Academy,
Mexican Academy of Sciences, and Third World Academy of Sciences,(2000)
[M]olecular biology and other tools of modern biotechnology add elegance and precision to the
pursuit of solutions to thwart poverty,malnutrition and food insecurity in too many countries..
around the world. In agriculture these enemies are manifest as pests, diseases, drought and other
biotic and abiotic, stresses that limit the productivity of plants and animals." 4
Consultative Group on International Agricultural Research (CGIAR), G.J. Persley,(2000
".,.Commercialization of genetically engineered (GE) crops will have a dramatic and positive
impact on people the world over. We believe the current oversight of these crops by the federal
regulatory agencies (FDA, USDA, EPA) is adequate'and'that these crops are as safe, if not safer,
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than traditionally bred crops." Society for In Vitro Biology (2000)
AgriBusiness Presidents' Council
Biotechnology Resolution
Whereas, individual county ordinances banning agricultural biotechnology threatens to put growers at an
economic disadvantage with others located in areas unaffected by such action;and
Whereas, the creation of a patchwork of conflicting county ordinances threatens to disrupt private and
public research that may provide solutions to critical issues impacting regions around the world such as
drought, salt tolerance and disease resistance; and
Whereas,the widespread adoption of biotechnology in major commodity crops in the United States has
resulted in significant yield increases, savings for growers and reductions in pesticide use, In 2001,the
eight biotechnology crops grown in the United States *increased crop yields by 4 billion pounds, saved
growers$1.5 billion and reduced pesticide use by 46 million pounds. Future environmental benefits will
include animal feeds with increased digestibility resulting in the veneration of less manure; and
Whereas,genetically improved foods and crops receive a more extensive level of regulatory review than
any other foods or crops,undergoing scrutiny for health,safety and environmental impact by three federal
regulatory agencies-USDA,FDA and EPA. It takes approximately eight to ten years at a cost of$50 to
$100 million for new genetically improved food to reach the market; and
whereas,these ordinances prevent growers from exercising their right to grow federally approved crops
based upon market demands,economics and personal considerations;and
Whereas,the use of food biotechnology has been supported by major health organizations, including the
American Medical Association(AMA)and the American Dietetic Association(ADA).
Therefore be it resolved that the undersigned members of the AariBusiness Presidents' Council oppose
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county by county initiatives that seek to ban biotechnology and restrict a grower's right to fully utilize
their property.
Almond Hullers and Processors Association California Agricultural Aircraft Association
California Association of Nurseries and Garden Centers California Citrus Mutual
California Cotton Ginners Association California Cotton Growers Association 4
California Grain and Feed Association California Grape and Tree Fruit League
Califomia League of Food Processors ?,CA11'fornia Seed Association
California State Floral Association Far West Equipment Dealers Association
Milk Producers Council Nisei Farmers League
Western.Plant Health Association
'S CKCalifornia State univerSR9 Pragratn Ear
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Education and Research in Siatethnvlog..9
The Biotechnology Pro-gram of the.Nation's Largest University System
Opposes Anti-GIIIO Initiatives
The 23-campus California State University system-wide biotechnology program
(CSUPERB)opposes the anti-GM initiatives in Butte,San Luis Obispo, Humboldt, and Marin
counties that would prohibit the cultivation of biotech crops. These initiatives narrowly and
selfishly serve the purposes of the anti-biotech community by attempting to prohibit the cultivation
of biotech crops that have been proven to be beneficial to agriculture in general, and farmers and
the environment in particular.
The United States has well-established science-based regulatory requirements that
assure the food and feed and environmental safety of biotech crops. indeed, extensive safety
` data have been generated-for each specific-biotech crop and,U.S.and International regulatory
agencies have ranted regulatory approvals. Most importantly, no case has been documented of `
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` harm to humans, animals,or the environment from any of the biotech crops currently being '
marketed.
The institute of Food Technologists,the nonprofit scientific society with 28,000 members
working in food science, approves of the current system of regulating biotech foods.The highly
respected American Dietetic Association approves of biotech foods as well.
Crops improved through biotechnology are responsible for Increased agricultural
production and crop values and decreased farmer costs,with cost-saving estimates exceeding$2
billion to farmers in 2003. Because California farmers compete in a worldwide market,where
lower production costs are the norm, it is important that our farmers have the best crop production
technologies available to them. Biotechnology has allowed California farmers to lower their cost
of production thereby increasing net return on the sale of their crops.
Making the propagation of biotech crops illegal In a county would likely result in farmers
growing them illegally to ensure they reap the same economic and environmental rewards of
farmers in adjacent counties. Around the world,farmers desire and in some cases demand the
benefits that can come from the improved biotech varieties. For example, large numbers of
Brazilian farmers smuggled in biotech soybean seeds even though Brazilian courts held up their
use despite governmental approval. In India,.extensive precommercialization field trials of
biotech cotton found average yield increases of 80%along with a 58%reduction in insecticide
use. In 2002, Indian farmers saw the value of biotech cotton and planted 25,000 acres of biotech
cotton prior to government approval.
Importantly,biotech crops that are resistant to certain specific insect.pests have allowed
farmers to dramatically reduce the use of highly toxic, broad-spectrum insecticides. It has been
reported that the adoption of i c�ht current biotech cultivars resulted in a 46 million pound
reduction in pesticide use in 200'1.
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The use of herbicide tolerant biotech crops has resulted in farmers switching from older
generation herbicides--many of which have become water contaminants--to newer, cleaner,
more environmentally benign herbicides. In fact, in watersheds where herbicide tolerant crops
have been grown,studies have shown a decrease In ground and surface water contamination by
r these older herbicides. The concept is evident: If a water-contaminating herbicide is not used--
in favor of the new, safer herbicide--then it doesn't have the opportunity to leach into our water
resources.
Plant biotechnology will provide answers to many of California's toughest agriculture
problems. Farmers all know that water is a precious commodity in California. Many of our
agriculture areas have salt-levels so high that crops cannot grow. Crops that use less water, that
can groin in salty soil, and that use fertilizer more efficiently all are promising techniques that will
improve.productivity and protect the environment of California agriculture lands. We expect to
see all of these ideas commercialized in the near future.
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What would happen if Pierce's disease were to break out in a county where biotech is
banned?Would grape producers be prohibited from planting disease-resistant strains developed �
through biotechnology? A Pierce's disease task force appointed by the University of California
Extension is convinced that.disease resistance through biotechnology will provide the only long- I
term protection for grapes. {
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PERB believes in the value and promise of plant biotechnology.'CSU campuses
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across the state, including Cal State Chico, Cal Poly San Luis-Obispo,and Cal State Humboldt,
have all invested in and resourced for this science. CSU have laboratories and field research
farms committed to further refining crop technologies and ensuring that our students are on the
cutting edge of the best agriculture production methods. We have hundreds of student's
statewide who are studying plant biotechnology. These students are some of the most highly '
sought CSU graduates.
In August of this year,the CSUPERB Faculty Consensus Group with 60 representatives
from the 23 campuses met*in Los Angeles and passed the following statement:
'Science is the driving force behind innovation and technology advancement
and has been a key driver for California's agricultural success. As deans,
administrative heads and research scientists'in the California State University
System,we are alarmed by the extent of incomplete information and false statements
regarding agricultural biotechnology that are prevalent in California today. There is
no credible scientific evidence to question the health and environmental safety of
approved,commercial biotech crops,yet opponents of agricultural biotechnology
routinely challenge their safety. More than 7 million farmers In 18 countries planted a
total of 167.2 million acres in 2003, up 16 percent from 2002. Countries with more
than one-half the world's population now are utilizing biotech crops in their
agricultural systems. We have a fundamental responsibility to the communities we !
serve to provide factual information that is understandable and informative so that the
public can make informed decisions about agricultural biotechnology.
There is an immediate and critical need for accurate information on.both the
critical role that new technologies have played in improving food production over the
past centdry of American agriculture,and on the extensive scientific knowledge base
supporting the food,feed and environmental safety of biotechnology-derived crops f
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and foods,as well as the econom1c, health and environmental and benefits to j
farmers and consumers around the world. Only with this information and in this
context can consumers, legislators, and other decision makers separate fact from
fiction when confronted by sensational risk allegations made by groups that oppose
biotechnology-derived crops.
We recognize that some Californians from various walks of life are skeptical
about the safety of potential impacts of agricultural biotechnology—even though
these crops have been rigorously examined according to state,federal and
internationally accepted methods and standards. Confidence in food and
environmental safety is achieved through rigorous and comprehensive testing
programs. Biotechnology-derived crops are among the most extensively tested,well
characterized,and regulated food,feed and fiber products ever developed. All
commercial biotech crops have been thoroughly assessed for human and animal
f d have been found to be wholesome
. health and environmental safety an ,nutritious,
and as safe as conventional crops,food and feed by the U.S. Department of
Agriculture(USDA),the U.S.Food and Drug Administration (FDA)and,where the
plant produces a pesticidal material,the U.S. Environmental Protection Agency
(EPA). Notwithstanding nearly two decades of extensive governmental, academic
and industry oversight, not a single instance of actual harm to health, safety or the
environment has ever been confirmed for any biotechnology-derived crop placed on
the market. Just last week,the United States National Academy of Sciences Institute
of Medicine published a report stating,"To date, no adverse health effects attributed
to genetic engineering have been documented in the human population."
We are committed to work jointly with local, state and federal government
agencies and institutions to provide a strong foundation of information for sound
decision making based on knowledge and reason. We are confident that together we
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can better serve the Interests of Californians and ensure that we continue to pursue `
the most effective and safe technologies,which could include GMC's for enhancing
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human health,farming,food quality and the environment."
CSUPERB is.a multi-campus program created in 1987 designed to channel system-wide
resources and catalyze interdisciplinary, inter--campus,synergistic endeavors involving Biology
and Chemistry departments as well as Engineering,Agriculture and Computer Sciences. The
interdisciplinary nature of biotechnology includes areas such as bioengineering;agricultural t
biotechnology..; human pharmaceutical and health applications;environmental and natural
resource biotechnology;gy; molecular ecology; marine biotechnology;and bioinformatics and.the
computational sciences as they are applied to molecular questions. CSUPERB also recognizes
basic research in the chemical and molecular and cellular life sciences as the underpinning of
! biotechnology.
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Contact Person:
A. Stephen Dahms, Ph.D.
Executive Director '
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CSUPERB
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'619-594-2822
sdahms@sciences,sdsu.edu
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Costs Associated with County Biotech Ordinances
Butte County-$185,000
"Unfunded mandate running as high as $185,000 for the costs of a basic program."
"No funding currently available in county budget or no state dollars available."*
* Comments by Richard Price, Butte County Agricultural Commissioner to Butte County Board of Supervisors,
July 13,2004
San Luis Obispo County-$200,000
FISCAL IMPACT STATEMENT FOR MEASURE Q-04*
If the County relies primarily on farmers and biotechnology firms("producers")to voluntarily comply,then costs
could be minimal. However, should the level of compliance prove unacceptable,then the Agricultural
Commissioner's Office would need additional funding to monitor producers and search for violations. This cost is
estimated at$200,000 per year initially, and more in the future. There are no known existing revenues to offset this
cost. County general revenues would be utilized,thus reducing funding available for Public Safety, Health and
Social Services, Parks,Roads,and other services provided by the County.
*November 2004 Voter Information Pamphlet. Analysis prepared by Gere Sibbach, San Luis Obispo County
Auditor-Controller.
Mendocino County
"There are several enforcement issues. First of all,there is the lack of a funding mechanism."
"The CRCs(county agricultural commissioners)are funded primarily through two funds from the state. One of the
funds compensates us in arrears for our work in eleven major programs."..."Regulating GMOs is not one of the
eleven major functions,and thus does not qualify for revenue."
"If our staff size were kept the same that it is now,we would actually lose revenue because GMO enforcement
would take staff away from normal mandated duties, and we would be doing less than we can be compensated for
under the law."*
*November 19,2003 report to County Board of Supervisors from David Bengston, Mendocino County
Agricultural Commissioner/Sealer
Sonoma County-$200,000 - $250,000
The Agricultural Commissioner has estimated the first year cost of an additional deputy agricultural commissioner,
for GMM enforcement, to be$112, 826, with a recurring annual cost of$93,098. Depending upon the level of
activity, it may not require a full time person to manage this program,but we must be prepared to act very quickly
given the guidelines of the ordinance.
We believe that it would be prudent to anticipate and budget for$250,000 per year for additional staffing, legal
and investigation costs. This amount is consistent with vector control program costs, such as the glassy-winged
sharpshooter. It does not include any of the cleanup,restoration or legal costs to the county, if required.*
* Review of Genetically Modified Organisms(GMO)Initiative Petition,March 1,2005,Office of County
Administrator
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AGRICULTURAL BIOTECHNOLOGY
A SAFE AND PROMISING TOOL FOR CALIFORNIA'S AGRICULTURE, ECONOMY,
ENVIRONMENT AND CITIZENS
For centuries, humankind has made improvements to plants through selective breeding and
hybridization -the controlled pollination of plants. Plant biotechnology is an extension of
traditional plant breeding with one very important difference -biotechnology ensures the transfer
of beneficial traits in a precise, controlled manner.
Safety: The research and development process for a new genetically modified plant variety can
take as long as six to 12 years at a cost of$50 to $300 million.' Biotech crops are subject to
testing and monitoring at three levels of the federal government:
• The U.S. Department of Agriculture makes sure the products are safe to grow
• The U.S. Food and Drug Administration makes sure the products are safe to eat
• The U.S. Environmental Protection Agency regulates crop protection characteristics
The American Medical Association,American Dietetic Association and World Health
Organization support biotechnology.
Promise: Biotechnology is being used to develop food and fiber crops that are salt water
tolerant, drought resistant, have enhanced antioxidant properties, contain trans-fat free oils,
possess increased protein and resist viral infections like Pierce's disease. Plant biotechnology
also provides new options for Integrated Pest Management programs (IPM) and soil-
conservation practices. In California, future approval and adoption of biotech varieties of key
crops could increase food and fiber production by 29 million pounds and reduce pesticide use by
66 million pounds.2 California universities conduct more biotech field studies than any other
state and are identifying beneficial agronomic properties, as well as further research related to
herbicide tolerance and bacterial resistance in corn and rice.3
"Almost all the seeds planted on my own farm have been genetically
modified to protect the plants from disease, insects and weeds, and to
provide higher nutrition. My own yields have increased greatly."
Former President Jimmy Carter
From agriculture to healthcare, biotechnology is an essential contributor to California's position
as a business and technology leader. In the past two years, California universities conducted
more agricultural biotech field studies than any other state.4 Through advances in healthcare
biotechnology, more than 2,500 b' medical companies and 87 public and private research
institutions are targeting major unmet medical needs through advances in biotechnology.
agricultural Biotechnology at the Crossroads,Bio Economic Research Associates,2003
Plant Biotechnology: Current and Potential Impact for Improving Pest Management in U.S.Agriculture an Analysis of 40 Case
Studies,National Center for Food&Agricultural Policy,2002
6 Runge 2003
3 The Economic Status and Performance of Plant Biotechnology in 2003: Adoption,Research and Development in the United
States,C.Ford Runge,Ph.D.,2003
4 Runge,2003
Biomedicine: The Next Wave for California's Economy,California Healthcare Institute,2002
To bolster the state's position on the cutting edge of science and innovation, California
government needs to adopt a policy that will both encourage and protect the biotechnology
industry statewide. If California fails to do this, consequences could include:
• The disruption of University research that utilizes the cooperation of farmers and
ranchers on private property in order to obtain"real world"results
• The prohibition of select, geographic groups of California's farmers to utilize every
available tool to protect crops from diseases and pests
• Further degradation of California's natural resources due to rejection of biotechnology
benefits including improved environmental quality
• A loss of California's "tech edge"by creating a challenging business environment for
start-up and established biotechnology companies
• The additional economic burden to counties for the creation of a new bureaucracy for
county-wide enforcement,testing and regulation of a federally approved product
"Counties have their hands full protecting children, running
jails, providing health care for the poor and monitoring local
crooks on probation. They shouldn't be saddled with chasing
down tips about genetically tweaked tomatoes."
Sacramento Bee March 7
California State Association of Counties
May 24, 2005
TO: Members, CSAC Board of Directors
FROM: James Keene, Executive Director
1100 K Sheet SUBJECT: California Live Within Our Means Act (CALWOMA)
Suite 101
Sacramento
(orifornia The California Chamber of Commerce and the California Business Roundtable are in
95814 the process of turning in signatures to qualify the California Live Within our Means Act
Tdow (CALWOMA). The Governor has endorsed this measure and has made it a part of his
916.327.75oo reform package that he may place before voters in a special election to be held in
Fac** November.
916.441.5507
The CALWOMA contains a number of issues of concern to counties. We have been
working with the Governor's office to identify problems with some of the initiative's
language and what we believe are "unintended consequences" to local government. At
this point, the language in CALWOMA cannot be changed, and it appears that the
signatures will be turned in. The special election has not yet been called and the
Governor has until June 13 to decide whether or not to proceed.
We should assume that the special election will be called. We are hopeful that we can
continue to work with the Governor's office and the legislature to make legislative
changes that can reduce or eliminate the consequences to counties of some of the
language as proposed.
Our main concerns with CALWOMA are the inclusion of special funds dedicated to local
governments included under the spending cap, and the potential for cost shifting to
counties even in the face of the protections of Proposition 1 A.
On the spending cap, revenues dedicated by voters, such as for law enforcement under
Proposition 172, transportation under Propositions 42 and 111, and mental health
services under proposition 63, as well as Realignment funds could be frozen—even
though funds are being collected—and shifted into reserves for future spending. There
are some legislative-remedies to these concerns and we are seeking the Governor's
office's help in advancing some of those changes with the legislature.
The potential for cost shifting arises from providing executive authority to make mid-
year reductions without the ability to change the underlying state laws which dictate
most of the programs that we run on behalf of the state. Cuts could be made that
reduce needed revenues to run a program, creating an inadequate level of funding to
perform all tasks we are required to perform. Although this could trigger a mandate
claim, counties would be in the pre-Prop. 1 A world of having to fund programs on behalf
of the state until a determination is made that a mandate in fact exists. We need to
work out language that corrects that potential.
Attached is a more detailed analysis of our concerns as well as a brief analysis of the
measure and a copy of the language. If the Board takes action, we would recommend
that you direct staff to continue our work with the Governor's Office to clarify the
initiative's language through subsequent legislative alterations.
County Disc
ussion about the California Live Within Our
Means Act (CALWOMA)
CSAC believes that CALWOMA contains language that could result in unintended
consequences that could have a significant fiscal impact on counties and the services we
provide to California residents. We should pursue legislative remedies to the language with
the assistance of the Governor's office.
First,we are concerned that the inclusion of special funds in the spending cap could
undermine the foundation of the Realignment program. When this program was created in 1991
with two dedicated funding sources, it also included (poison pills)to prevent counties from going to
the Commission on State Mandates and making claims. As the economy has ebbed and flowed over
the years Realignment revenues have been up and down and no claim has ever been filed. But, on
the other hand,the state has never withheld funds that have been collected and are available. It is
quite possible that if the state were to withhold these dedicated funds from counties,one or more
counties could make a mandate claim. Once a determination of a mandate occurs, by operation of
law,,-the dedicated sales tax for Realia ment ceases to exist. Reimposing this tax would of course
trigger a two-thirds vote that would be characterized as a tax increase.
The"poison pill"problem could be remedied by a future legislature.
Including special funds within the spending cap could also lock up funds for Law
Enforcement under Proposition 172,gas tax revenues under Propositions 111 and 42,mental
health funds under Proposition 63 and Proposition 10 funds. These dedicated funds would fall
under the spending cap and be placed in reserve in any year the spending cap was in place.
Governor Schwarzenegger was our strong partner in the passage of Proposition 1 A last year,a
significant provision of which was to end the practice of unfunded mandates. It was a vital selling
point for the initiative and was of critical importance to counties. We believe the impacts of
CALWOMA are unintentional, but as explained herein the CALWOMA nevertheless potentially
undermines some of those protections.We need to work together to correct that language.
In addition to the realignment mandate issue,there is also the issue,of allowing executive
authority to make midyear cuts in programs without the ability to make accompanying
statutory changes.These could constitute unfunded mandates, because our programs are dictated
by statute and must be implemented regardless of the resources that are available. In the case of
programs that have not previously been determined by the Commission as mandates, if we are
forced to advance funds for the state in these cases,reimbursement could take up to seven or more
years. Under these circumstances (long a time frame for mandate determination process)there is a
potential for significant costs to be shifted to counties,which may amount to hundred's of millions of
dollars or more. This unpredictability is what we were trying to prevent with the passage of
Proposition IA. Language clarification is needed to correct this.
Moreover,there is yet an additional mandate issue—language in the measure indicates that if
mandate payments are cut mid-year,the mandate Is suspended for the entire fiscal year.
While some of our county counsels believe that the Courts would not uphold the state withholding of
reimbursement for services that have already been rendered,the language Is not clear. Additionally,
and purely from a practical perspective, if these reductions occur late in the year,there is likely going
to be an implementation delay. Mandates are not easily turned on and off. If the mandate is
suspended with insufficient lead-time,the net result is that the county will have to continue to pay for
the mandate and be precluded from claiming reimbursement after the mid-year suspension. This
contravenes the intent of Proposition 1 A. Language clarification is needed.
Could the inclusion of the provisions to put prior year budgets in place In the event of the
failure to pass a timely budget have exactly the opposite of the stated purpose,which Is to
put pressure on the Legislature to pass a budget on time? As long as California retains 2/3rds
vote requirement for the budget and new revenues (which is likely to be for a long time)this provision
-14-
could take much of thepressure off to adopt a timely budget. One of the major forces at play in the
passage of a delayed budget is the hue and cry from those not being paid. If California simply puts in
place last year's budget could be less pressure on those who have not put up a vote on the budget to
do so?
Why should counties care? First,we generally must wait for the state to pass a budget before
we can pass a county budget. Particularly if we need to make employment related decisions
based on the state budget, it is imperative that we have that information as soon as possible. For
many programs with costs or caseloads on the increase,funding at the prior year level would result in
reductions,which could be in place for many months.Those local decisions could be subsequently
countered with final adoption of a delayed state budget,creating confusion for citizens and service
recipients.
We are also very concerned about the provisions regarding cuts which exempt items required
by federal law or regulation. We think that without further definition,this will most certainly result in
counties ending up in court(along With the state)to the extent that cuts fall within the services we
provide on behalf of the state. Counties are struggling with the limited resources we currently have.
Defending ourselves against these actions could divert those resources.
We appreciate the Governor's willingness to listen to our concerns and we need to continue
to work with the Governor's staff on language changes.Since the language in CALWOMA is
unchangeable,we prefer to focus our attention on ACA 4x,or some other legislative vehicle,where
these concerns could be addressed. We have not yet taken an official position on CALWOMA,but if
signatures are turned in and it is qualified,our Board of Directors will need to review and discuss the
initiative.We, like the Governor,think the best approach to address these problems is in the
Legislature and we are anxious to work with the Governor's Office and the Legislature on this
proposal.
The Governor has shown how much he values the services provided by local governments. We can
work together to make the needed language changes as a result of CALWOMA that will continue to
provide local government with the protections against unfunded mandates and protect local
government services.
-15-
r
Summary Analysis
"The California Live Within Our Means"Initiative
This proposal contains a number of major modifications to the Constitution relating to the budget
process. The proponents are Alan Zaremberg of the California Chamber of Commerce and Bill
Hauck of the California Business Roundtable.
Summary of Provisions
Beginning in 2006-07,the maximum amount of total expenditures allowed for the current year shall
be computed by multiplying the prior year expenditures by one, plus the average annual fund growth
in General funds and special fund revenues for the previous three years.
If actual amounts are unavailable, the estimate will be prepared by the Department of Finance.
The definition of General Fund and Special Fund does not include non-governmental cost funds,
federal funds,trust or agency funds,enterprise funds or selected bond funds.
This new spending limit may only be exceeded in case of emergency such as the occurrence of a
natural or other disaster or the state being in dire peril.
If expenditures exceed the limit,the following year's limit is reduced by any amount of excess.This is
applied proportionally to both the General Fund and Special Funds resulting in spending limit
reductions in special funds for General Fund overages.
If revenues exceed the limit the amount of excess shall be proportionally attributed to the general
fund and each special fund. The excess attributed to each special fund shall be held in reserve for
expenditures in subsequent years. Excess in the General fund shall be allocated as follows: 25%to
the Budget Stabilization Account(which was created by last year's Proposition 58); 50%to the
repayment of the Proposition 98 maintenance factor, Prop.42 repayments and deficit bond
retirement;and,25%to a newly created trust fund for schools and roads construction.
If, during any quarter, General Fund revenues are projected by the Department of Finance to fall by
1 Y2%, or if the Budget Stabilization Fund will decline to Y2 the balance at the beginning of the year,
then the Governor may call a special session of the Legislature. If the Governor calls the special
session,and bills to address the crisis have not been enacted within 15 days,the Governor may then
reduce items of appropriation either across the board or at his or her discretion.
There may be no reductions for debt service, items required as a result of federal laws or regulations
or in violation of state contracts.
If no budget is enacted by July 1,the prior year's budget is put in place until a new budget is enacted.
No funds may be transferred to the General fund as a loan (exception for short term cash-flow
borrowing, repaid within the same fiscal year). All existing loans must be repaid by 2021.
Unpaid mandate claims to local-governments other than schools must be paid within five years.
The measure eliminates Test 3 in Proposition 98,which currently allows the state to reduce funding
to K-14 education and then repay those funds in later years, and eliminates the ability for the General
Fund to borrow funds from Proposition 42.
Prop. 42 repayment is set up on a 1115'per year basis and is funded by a special fund in the
treasury in order to allow for securitization of these funds.
-16-
Official CALWOMA Title and Summary from the Attorney
General and the Legislative Analyst
School Funding. State Spending. Initiative Constitutional
Amendment.
Summary Date:04101105 Circulation Deadline:08129105 Signatures Required:598,105
Proponents.- William Hauck and Allan Zaremberg x'916)444-6670
Changes state minimum school funding requirements(Proposition 98), permitting
suspension of minimum funding, but terminating repayment requirement, and
eliminating I authority to reduce funding when state revenues decrease. Excludes
above-minimum appropriations from schools'funding base. Limits state spending
to prior year total plus revenue growth. Shifts excess revenues from schools/tax
relief to budget reserve, specified construction, debt repayment. Requires
Governor to reduce state appropriations, under specified circumstances,
including employee compensation, state contracts.Continues prior year
appropriations if new state budget delayed. Prohibits state special funds
borrowing. Requires payment of local government mandates. Summary of
estimate by Legislative Analyst and Director of Finance of fiscal impact on state
and local governments: Spending limit could constrain state expenditures over
time. Other provisions would have major impacts on state budget decision
making,which could lead to varying outcomes regarding the level of state
spending and on the composition of that spending among education,
transportation, and other state programs. Provisions allowing Governor to reduce
appropriations could result in lower state spending in certain years when the state
was facing unresolved budget shortfalls.
-17-
� 4
C A L I F 0 R N I A ` Y-,0V44S
urn HOSPITAL
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ASSOCIATION � � � :_Y �
PEACH., INC. CALIFORNIA ASSOCIATION of N O ' " T "
H\ate Essent d,access Community Hospi td s PUB LIC HOSPITALS AND-HEALTH SYSTEMS A : S o C I ^ 7 1 o N-
June 1, 2005
S. Kimberly Belshe
Secretary
Health and Duman Services Agency
1600 9th Street, boom 460
Sacramento,CA 95814
Dear Secretary Belshe,
This letter follows the May 26th meeting between the CHA DSH Task Force, California's Health
and Human Services Agency,representatives of Governor Schwarzenegger's office and the
California Department of Health Services,-regarding the State's proposed five-year 1115
Medicaid waiver to restructure safety net hospital financing.
We appreciate the State's position that the current version of the waiver is the final and best deal
available, and we acknowledge its efforts in negotiations with the federal government. However,
we do not share the assessment that the May 19th waiver proposal is satisfactory. It appears that
the Centers for Medicare and Medicaid Services(CMS) are moving negotiations in the wrong
direction, and that the waiver is getting worse for safety net hospitals,despite the May 6th
request of California's bipartisan Congressional delegation. As it stands,we cannot validate the
claim that the waiver is worth$3.3 billion in new federal money to our hospitals, as several
major components of that grand total are in doubt.That uncertainty means that we still cannot
determine how the waiver impacts individual hospitals.
A successful waiver would stabilize safety net hospital financing,preserve each public and
private safety net hospital's payments and create growth in funding to allow these hospitals to
meet the demand for care by the uninsured, indigent, Medi-Cal and other patients.
After careful consideration and reflection upon our discussion of last week, we would like to
share our conclusion. The current waiver proposal contains fundamental problems that prevent it
from realizing the goal of stabilizing the safety net:
> It bifurcatesp ublic and private safety net hospitals, disconnecting their funding and
destabilizing the delicate workload-sharing relationship established between both groups.
We support a consolidated financing pool.
> It does not deliver growth in federal funding for the five-year life of the waiver. For
public hospitals,there is no growth after the first year,resulting in a four-year freeze in
funding, which is equivalent to a cut, given the rising costs of health care. We believe
adequate growth must be included.
S. Kimberly Belshe Page 2
June 1,2005
➢ It lacks an identified and secured state match to fund the private safety net hospitals.
Instead, it makes them reliant on the State General Fund, which spells instability. We
support an entitlement approach that does not rely on an annual appropriation.
➢ The incorporation of managed care requirements into the waiver-- linked to $180 million
per year for the first two years of the five-year term-- is a new development that casts
doubt on where the money would go, and if it would be fully realized. We support the
direction of all funds to safety net hospitals and public clinics in counties with public
hospitals.
➢ The CPE structure is an inadequate source of non-federal share to fully fund safety net
hospitals. Further, it creates a negative impact on public hospitals, representing a cost
shift to counties. The current proposal does not assure that the federal funding available
in the waiver will be accessible to public and private safety net hospitals. The budget
neutrality limit may not be reached,if the source of adequate non-federal share is not
confirmed.
Without resolution of these issues,we will have no choice but to oppose the waiver. The
problems outlined here cannot be sorted out in the implementation process, as many of them are
structural and cannot be solved after the fact. For instance, a safety net pool with no growth, a
requirement to expand managed care and the separation of public and private hospital funding
are all aspects of the deal which could not be fixed at the state level.
It is incumbent upon us, as representatives of safety net hospitals,to articulate the analysis laid
out above and the grave implications for California's hospital safety net inherent in the current
proposal. We are very concerned about the ability of the state's 13 million uninsured, Medi-Cal
and indigent residents to access quality health care under the proposed system. Safety net
hospitals already are in crisis, and if they are not adequately funded for the next five years,
services that all Californians rely on—such as trauma care and doctor training—will suffer. In
fact,under the current proposal, we are certain that some public and private safety net hospitals
would close.
We respectfully request the State to refrain from agreeing to a waiver that contains the problems
described in this letter. As always, we stand ready to work with the State to improve the waiver
and assure a stable future for public and private safety net hospitals.
We thank you for your careful consideration of our concerns and position.
S. Kimberly Belshe Page 3
June 1, 2005
Sincerely,
Mimi& --MAL
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