Budget impasse stalls projects on farms, ranches

Issue Date: February 4, 2009

By Christine Souza
Assistant Editor

The ongoing state budget impasse has resulted in serious impacts to county governments, people and companies awaiting income tax returns and government services. On farms and ranches, one impact has been the suspension of conservation projects such as those addressing air, water and soil quality.

For Denair dairy producer Ray Prock Jr., this means that the water quality research project happening on his family's Ray-Lin Dairy will have to wait.

"We are waiting on the results from the data that has been collected during the study to tell us if we can more efficiently fertilize our crops to match the nitrogen uptake of the crops," Prock said, adding that the project aims to enhance groundwater quality. "The state requires us to meet environmental regulations. But prolonging the budget has stopped this project among others and as a result, has taken away some of the tools we need to comply."

While the Legislature and Gov. Arnold Schwarzenegger struggle over how to erase a massive budget deficit projected to reach $15 billion by the end of the fiscal year and $42 billion over the next 17 months, the state has been operating in the red. State Controller John Chiang estimates that borrowed funds will soon be exhausted.

"For months, I have warned state leaders that our cash flow will be in serious danger this spring. Without corrective action from the governor and Legislature, there is no way to make it through February unscathed," Chiang said.

The wrangling in Sacramento over the lack of funds and finalizing the state budget has resulted in the suspension of nearly all bond-funded grants and projects. California State Treasurer Bill Lockyer announced at a Dec. 17 meeting of the Pooled Money Investment Board that grants and projects paid for by bonds would be halted, with a few exceptions.

"The state is rapidly running out of cash to pay its bills, employees and bondholders," said John Gamper, California Farm Bureau Federation director of taxation and land use. "With the Pooled Money Investment Account running dry, the board's action seems prudent because if the state doesn't pay its bondholders, it will have long-term consequences on the state's credit rating and the subsequent cost of borrowing previously approved infrastructure bonds."

The investment board's move brought a halt to bond-funded work such as the project on Prock's dairy, which is funded from the Proposition 50 bond that voters approved in 2002.

The East Stanislaus Resource Conservation District has been testing water on the Ray-Lin Dairy to develop best management practices to minimize nitrogen losses to groundwater and to help improve crop uptake of nitrogen. Now, two years into the study, the budget crisis has halted the project.

Sherman Boone, chair of the East Stanislaus RCD board, said that the budget situation could put the project at Prock's dairy a year behind schedule, with no guarantee that the project will be completed.

"This could mean that we won't get the good results that we are looking for. This study is needed by the dairy producers and is something that we've been pushing for several years," Boone said. "This project will ultimately result in better water and that is what everybody wants. This is a project that benefits everyone."

When it comes to complying with state regulations, farmers and ranchers often enroll in programs and research studies to better understand how best to comply with government regulations, improve soil, air and water quality, and develop habitat for native species. Farmers partner with the resource conservation districts, the University of California and others, such as non-profit organizations, to conduct research and make improvements.

California Association of Resource Conservation Districts Executive Director Tacy Currey estimates that up to 6,000 bond-funded projects were frozen as a result of the budget impasse.

"Officials are telling us that even if they passed a budget today, they do not project that we will begin to start work on our projects again until July, because they will have to get money back into the system," Currey said. "You also have demobilization costs and mobilization costs that they aren't calculating. It is like a freight train—you can't stop on a dime, but you also can't start up on a dime."

With some of these projects, Currey added, timing is critical.

"We might be trying to do a project while the bald eagle isn't nesting or while the frogs aren't there. Or conveyance structures might be torn apart because people were installing irrigation efficiency systems," she said. "When the state gives us the go-ahead to start work, that doesn't necessarily mean that is when we can start work. Some projects won't be able to start back up easily."

Currey said the stop-work order greatly impacts RCD offices statewide.

"The huge impact for us is the liability and risk, because we do all of our work a quarter ahead and get paid by the state after we've done the work," she said. "Sometimes it takes a year to get paid, but they have stopped paying. Santa Cruz RCD right now has $3 million worth of outstanding invoices that they have submitted and are not being paid for."

At the University of California, Davis, Dean of Agriculture Neal Van Alfen said he's aware of 63 projects that have been impacted by the state's stop-work order. Many of these projects, he said, are subcontracts from groups such as the Yolo County RCD, Butte County and other universities.

"The projects affected are very diverse—many of them focused on issues related to the health of the delta and water quality and supply issues. But some projects involve organic agriculture, rice farms, aquaculture and such diverse issues," Van Alfen said. "Many millions of dollars that support graduate students and the salaries of numerous employees are now at risk. It is a shame that when the government is seeking ways to stimulate the economy that so much money, which is not part of the state's recurring budget, must be withdrawn—creating even more economic hardships."

At the Imperial Irrigation District, Steve Charlton, engineer for the Resources, Planning and Management Section, said he's waiting for a final payment of $40,000 for work completed in the district's efforts to reduce total maximum daily loads, or TMDLs, to improve water quality. He is also waiting to commence work on a four-part grant project as a result of Proposition 50 and Proposition 84 to reduce TMDLs and to stabilize banks to reduce sediment erosion.

"The efforts that we would be putting into place using those grant funds would definitely be a benefit to achieving TMDL goals. The regional board definitely wants us to be moving forward, the growers want us to be moving forward and we want it to move forward, because it is going to have positive impacts by helping to reduce the sediment loads," Charlton said. "However, we are not caught in quite the pinch that some of the other grant recipients are, even though it will delay some of the actions that could have benefited by us starting slightly early."

(Christine Souza is an assistant editor of Ag Alert. She may be contacted at csouza@cfbf.com.)

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