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Commissioner Miller's Remarks at the Senate Committee on Agriculture, Water and Rural Affairs (12/8/2015)

Chairman Perry and members, good morning. I’m Sid Miller, Commissioner of Agriculture. I have been invited here to testify on proposed changes to the Texas Department of Agriculture’s fee structure. Mr. Chairman, I have prepared testimony for the committee and I also have staff from TDA with me to assist with any questions you may have:

Jason Fearneyhough – Deputy Commissioner

Diana Warner—Chief Financial Officer

You are all well aware of the budget challenges Texas faced in 2011, and the cuts to state spending that were implemented as a result. As a state representative, I supported these cuts and continue to believe they were the best option at the time.

For TDA, that meant a 40 percent reduction in taxpayer funded general revenue and a reduction of 150 FTEs. To accomplish this, the Legislature moved many of TDA’s licensing and regulatory programs into a cost recovery method of finance.

As you may recall, during this past session, I requested additional funds to restore general revenue that was cut between 2011 and today. With the exception of funding for a consumer protection initiative in weights and measures, those requests were not approved. Additionally, this session TDA’s unexpended balance and appropriation transfer authority was removed.

The Legislature’s actions this session can only be interpreted in one way: that the members intended for TDA to true up its budget and fully recover the costs associated with administering these programs.

The removal of UB and transfer authority between strategies meant TDA lost a tool for budgeting flexibility. This changed the game significantly. These two budgeting tools gave previous administrations flexibility to administer these regulatory programs without changing the fee structure. In fact, at least one fee hasn’t been touched in 20 years, some in 13 years, and the majority in 5 years.

The simple fact is that the Legislature gave previous administrations at TDA a different set of rules to live by that allowed for flexibility to keep the fee structure as low as possible. And the previous administrations operated within those rules.

But that also meant that TDA’s licensing and regulatory programs have never achieved full cost recovery.

To put it another way – even though the Legislature had designated certain functions as cost recovery programs, TDA’s fee structure never matched the actual cost of operations because it never had to. Under the guidelines given to TDA by the Legislature, the agency was able to delay raising fees because it could move funds across programs to support functions with inadequate revenue.

To run this agency, there is a decision that has to be made by the Legislature – should consumer protection programs be paid for by the consumers we are protecting, or by the industry we are protecting consumers from?

In the past TDA was allowed to meet cost recovery across strategies. Today, each individual strategy must meet its own cost recovery requirement – each essentially operating like a separate business.

In the past, certain strategies could cover the costs of those that came up short. For example, TDA was keeping 80 positions unfilled, and those savings were used to support the costs of these programs. You can do the math on how much you save by not paying for 80 salaries… that’s a lot of zeros.

That is why changes to the fee schedule have become absolutely necessary to continue operating these programs at the level expected by you, the members of the Legislature, and by Texas consumers.

Further, as the state grows, as the agriculture industry grows, and as the consumer base in Texas grows, the inadequate fee schedule must be adjusted to match those increasing needs. The agency is already struggling to meet this increase in workload after the funding and staff cuts it sustained in 2011.

For example, the Organic Program reached a critical mass in certification backlog in 2014 due to low fee revenue that prevented the hiring of additional staff to handle the workload. On January 1, 2015, the program had a backlog of nearly 100 organic certifications. With a change in fees to meet cost recovery in January 2015, staffing levels were increased and service delivery was improved. The backlog was eliminated within 6 months and the program is running smoothly and efficiently today.

In our structural pest control program over the last 4 years, more than half – 53% – of the inspections we conducted found that applicators weren’t following the regulations set in statute. That is one of the lowest compliance rates in all of our consumer protection programs, which is why we submitted an exceptional item request to address it. But that request was not approved. We know we can improve, but we need the resources to be able to do it.

Another backlog we found was in enforcement measures. More than 800 enforcement cases were dismissed without resolution before September 2013, simply because TDA didn’t have the capacity to complete them.

And with regard to weights and measures, TDA has identified more than 8,200 locations across the state that are possibly unregistered and using illegal scales that could be short-changing consumers in commercial transactions. Many of these locations have been operating unregistered scales for several years. To counter this, we’ve launched Operation Maverick, which is focused on finding locations with unlicensed scales. Seven months in, we’ve discovered 3,100 pawn shops and gold buyers that may be operating without a license.

That is where we are today.

The way I see it, there are three distinct options for the future:

The first is to true up the budget and move forward with the Legislature’s desire for full cost recovery in these consumer protection programs. Under state statute, this must be done without GR. That necessitates a change in fees, now and into the future.

The second is a more gradual approach to bring TDA into full cost recovery. Part of that is the restoration of UB and appropriation transfer authority, which I have requested from LBB. But those tools only provide budgeting flexibility – they do not generate additional revenue, which is necessary to run these programs. That revenue can only come from two places: fees or taxpayer funded GR. With an additional taxpayer-funded GR appropriation, we can more gradually implement fee changes over the long term.

The third is not to raise fees at all. But I cannot and will not operate a state agency in the red. If the Legislature does not desire a change in fees but doesn’t provide an alternative funding source, then TDA is faced with no choice other than to stop doing some of these consumer protection programs. If this is the case, you, the Legislature, just need to tell me which ones you don’t want me to do anymore.

Would you rather TDA cut the full criminal background checks we perform on structural pest control technicians? Those checks kept a dozen individuals with criminal backgrounds, including child sex offenders, out of Texans’ homes over the past two years. In fact, most of the individuals who were denied a license had multiple criminal offenses on their records.

Would you rather we cut the fuel quality inspections that make sure the gas Texans put in their cars has the proper octane rating or isn’t contaminated with water? Or that the pumps aren’t charging you for 20 gallons of gas when you’re only getting 18?

Or would you rather that we stop inspecting scales across the state? Meaning every time you use a commercial scale – from buying a ribeye steak or wholesome fruits and vegetables by the pound at the grocery store, to the farmer who weighs a growing season’s worth of grain when they deliver it to a warehouse – that those scales have gone unmonitored and unregulated.

I took an oath to serve the people of Texas and the agriculture industry. To do that, I believe the best option is to continue to maintain a safety net for the Texas producers and consumers we serve. This requires truly moving these programs into full cost recovery. The members of the Senate worked with us on these issues last session, and I look forward to working with you all and with the industry in the future to achieve that.