Arizona farmers are angry and considering legal action against their state government for pilfering grower-paid assessment dollars that support research and promotional efforts to balance the state budget.

The Arizona legislature this spring took more than $550,000 in agricultural funds to help offset a $1.2 billion budget shortfall. Included in that total was $161,400 debited from three agricultural councils funded by grower assessments for commodity research and other programs.

The three counts of larceny include $80,000 from the Arizona Grain Research and Promotion Council (AGRPC), $41,400 from the Arizona Iceberg Lettuce Research Council, and $40,000 from the Arizona Citrus Research Council. The councils operate under the auspices of the Arizona Department of Agriculture (ADA) which collects and banks funds from growers to support the work of the three councils.

“This is not taxpayer money,” said David Sharp, AGRPC chairman and a Roll, Ariz. wheat grower. “This is money raised by farmers. Farmers have entrusted the money to council leaders to fund research and promotion. The state of Arizona is to hold the dollars but not spend them.”

Arizona wheat and barley growers pay a 40-cent per ton assessment. Eighty percent of the AGRPC funding comes from wheat and 20 percent from barley. Grower participation in the grain, citrus, and iceberg lettuce assessments is mandatory.

“At a AGRPC board meeting, the board voted to proceed with seeking legal counsel and investigating the potential of filing a lawsuit,” Sharp explained.

Jerry Driedger, Arizona Citrus Research Council chair, is frustrated by the legislature’s taking of its program dollars financed by a 1.5 cent per carton grower assessment.

“It’s frustrating when we try to do things fiscally correct and conservative with growers’ money and then the state comes along and takes the money,” Driedger said. “They didn’t ask us; they just said we’re taking the funds.”

Current citrus council-funded research supports long-term variety trials to provide growers with the latest and best varieties. Now the council is scrambling to figure out how to keep existing projects funded. Prior to the raid, the council’s account included $55,000. The new balance is $15,000.

“The citrus council is scrambling to figure out how to keep existing projects going because we operate on a cash basis; accumulating funds before authorizing research projects,” Driedger said. “These are research funds for the citrus industry paid for by the citrus industry. For the state to arbitrarily take these funds is absolutely wrong,” said Driedger, who manages a citrus operation with acreage in Eloy, Maricopa, and Yuma, Ariz.

The sweep of iceberg lettuce funds will financially hurt growers, shippers, and consumers of vegetables, according to Rick Rademacher, president, Yuma Fresh Vegetable Association. About 90 percent of the nation’s supply of winter vegetables is grown in Yuma County during the winter months.

“The most important research issue in vegetables is food safety which the general public has a great interest in,” Rademacher said. “We have proposals for food safety research to determine if industry-imposed food safety rules are truly working. These food safety issues will not be addressed if we don’t have the funds for the research.”

The Western Growers Association (WGA), which serves citrus, nut, and vegetable growers in California and Arizona equates the funding sweep to double taxation, according to WGA attorney and lobbyist Robert Shuler. In the end, individual farmers who paid the funds are in effect paying double taxes for general fund programs, Shuler said. WGA is also considering litigation and potential future legislation.

In addition to the council sweeps, lawmakers took budget-balancing dollars from other agriculture areas including $300,000 from the fertilizer materials fund, $25,000 – seed law fund, $15,000 – pesticide fund, $20,000 – aquaculture fund, and $30,000 – commodity promotion fund. Some of these funds are paid for by dealers and others, while some dollars are funded from the Arizona general fund.

The sweeps have also placed large question marks on some 2008 Arizona county fairs and the Arizona National Livestock Show, the largest livestock show in the Southwest.

“We have a mess on our hands,” said Grant Boice, executive director of the Arizona National Livestock Show. The initial state plan was to sweep $2 million from a state fair and promotion account while at the time of the sweep less than $800,000 was actually in the account, Boice said.

The state government’s accounting office had three checks in hand for 2008 local fairs when the sweeps began, but then held checks including $40,000 to the Verde Valley Fair, $30,000 to the Yavapai County Fair, and $27,000 for the Graham County Fair, Boice said. A stop-payment order was placed on a state-issued, but un-cashed $20,000 check for the Gila County Fair.

How will the fund sweep impact this year’s Arizona National Livestock Show scheduled for Dec. 28-Jan. 1 at the Arizona State Fairgrounds in Phoenix?

“We basically have no funds between now through December to operate,” Boice said. “We have about $100,000 in cash reserves, but it will take us about $300,000 to get us to the livestock show. Our plan is to keep moving forward until the money is gone in the hope that something will be worked out.”

When asked about the odds of holding the livestock show this year, Boice said it was 50-50. If funding is not restored, he said the show could be cancelled this year. The livestock show budget is about $900,000, including $540,000 from the state.

Lawmakers stripped $600,000 from general fund appropriations to the Arizona Department of Agriculture, according to a department spokesman. Other state agencies across the board were swept as well. Lawmakers collected an estimated $300 million from state agencies. The monies were taken through House Bill 2620 passed by the Arizona Legislature and signed into law by Gov. Janet Napolitano.

“The legalities of this are still in question,” said Philip Bashaw, government relations manager with the Arizona Farm Bureau. “The state has swept funds before, but it’s never been challenged.”

The old saying that what happens in California often occurs later in other states is true with funding sweeps. Facing a budget deficit in 1992, California took funds from more than 40 agriculture-related boards, commissions, and marketing orders at least partially funded by grower or industry assessments.

At the time, the California Cotton Pest Control Board and an avocado board were the only groups 100 percent funded by industry. State plans were to siphon $2-$3 million from the cotton pest board and place the money in the general fund.

“We threw a fit,” said Wally Shropshire, of Blythe, Calif., and chairman of the California Cotton Pest Control Board for the last 40 years. “We told the state you can’t do that — it’s grower money and not general fund money.”

Shropshire and others pleaded their case with the California Department of Food and Agriculture (CDFA) and members of the California Assembly, and won the right to bank its funds outside the state’s bank account. Yet, the state had already borrowed about $450,000 from the cotton pest group with intentions to eventually return the funds minus any accrued interest.

Shropshire called the administration’s taking of the group’s funds thievery; a statement that later cost him reappointment to a fair board. “In the long run though we got our money back, plus the interest,” Shropshire said. “We saved our funds.”

In addition, Shropshire and others successfully worked with lawmakers to pass legislation allowing the cotton pest control board and others to move funding dollars from CDFA accounts to commercial banks. Dollars were sent as needed to the CDFA for administration and services rendered costs.

Sharp believes the taking of grower dollars places Arizona’s wheat and barley industries in a vulnerable situation.

“We now have nothing left in reserve,” Sharp said. “If we were to face a catastrophe similar to karnal bunt that affected Arizona wheat in the 1990s, we don’t have any reserves to resolve the problem in a timely manner. The state of Arizona has left us very vulnerable and could ruin our industry by their action.”

The Arizona legislature is now negotiating the 2009 state budget. Some estimates peg the shortfall at $2 billion. Farm groups are gravely concerned over potential new sweeps.

The newly created and ADA-managed leafy green marketing agreement (ALGMA) escaped the last budget sweep. The agreement is designed to generate funds from leafy green growers and shippers to pay for industry research.

“We have concerns that we could be targeted in the future,” said C.R. Waters, ALGMA committee chair.

Another area in question is whether dollars that fund the Arizona pink bollworm eradication program could be at risk in the future. In the third year of a four-year program in 2008, the eradication program is moving forward to eradicate the cotton pest.

The Arizona Cotton Research and Protection Council (ACRPC) administers the program. It is a state agency, but receives no state dollars. Eradication funding comes from a per-bale grower assessment and from the U.S. Department of Agriculture.

Rick Lavis, ACRPC lobbyist, said, “Since the pink bollworm eradication program is funded by producer dollars, the state of Arizona should leave the pink bollworm eradication funding alone.”

email: cblake@farmpress.com