A switch from less reliable general funding dollars to more customer-based fees is the path Arizona government agencies are forging to more predictably serve the needs of agriculture and other businesses.

The new fee formula is largely the result of major cuts in Arizona general funding dollars for state agencies due to the recession.

Four agency directors discussed fee-based services and other Arizona agricultural issues during the 2010 Agri-Business Council of Arizona annual meeting in Phoenix, Ariz.

The Arizona Department of Agriculture (ADA) established new fees and increased existing fees to help offset state spending cuts and continue services to farmers and ranchers. Today’s ADA budget is smaller than when the department was formed almost two decades ago.

The ADA’s 2011 fiscal year (FY) budget, which started July 1, contains about $8 million in general fund dollars. The 2010 FY budget was $9.2 million, but was adjusted lower to balance the state budget.

“We’re down to the bare bones,” Director Don Butler said. “We are learning how to do more with less.”

Budget cuts have eliminated about 40 percent of ADA’s workforce since the onset of the recession, Butler says. Mandatory furlough days across state government start in July – 12 days over the next two years. The furloughs equate to a 5 percent cut in pay — or savings to the state.

“The furloughs mean our inspectors will be a little slower,” Butler said. “Farmers and ranchers will have to adjust shipments of produce, livestock and other commodities.”

To help offset the $389,000 budget hole between the ADA’s 2010 and 2011 budgets, the ADA and farm organizations agreed to the new fees, including charges for nursery operation certificates. Some existing fees were increased; some unchanged for about 50 years.

Yet the ADA and the “aggies” are concerned about whether state lawmakers will sweep the new fees to balance future state budgets.

Arizona agriculture now sleeps with one eye open following a $161,400 legislative theft from the ADA several years ago. Lawmakers stole producer-paid funds from the Arizona Grain Research and Promotion Council, Arizona Iceberg Lettuce Research Council and the Arizona Citrus Research Council.

The ADA annually collects and holds the funds until the councils decide where to appropriate the funds. Most of the money pays for commodity-specific agricultural research conducted by the University of Arizona.

Several farm organizations filed a lawsuit against the state to force the return of the swept funds. A judge last year ruled in favor of agriculture. The state appealed the ruling. The funds have not been replaced.

Ben Grumbles, director, Arizona Department of Environmental Quality (ADEQ), says funding, air, climate and water are major agency issues which impact agriculture.

Grumbles endorses more fee-based solutions to help weather the state budget crisis.

“The key is to reduce (department size), improve agency efficiency, build partnerships with the private sector and develop a sustainable path forward,” Grumbles said.

The agency reduced its workforce from 660 to 585 employees in the last year. ADEQ receives no state general funds. Estate and permit fees fund 84 percent of the department’s budget. The U.S. Environmental Protection Agency (EPA) funds the balance.

“Fees should be fair and reasonable,” Grumbles said. “We will rely more on general permits as opposed to more costly individual permits.”

Agriculture is viewed as a major contributor to Arizona air quality problems, Grumbles says. Maricopa and Pinal counties in central Arizona are on the EPA’s radar screen for high levels of particulate matter in the air.

The American Lung Association this year named the greater Phoenix area as having the most dust-polluted air in the nation year round. The nation’s highest PM 10 level was recorded in Pinal County’s Cowtown area which has a large concentration of cattle feedlots.

Grumbles says the single monitor reading skews the overall air pollution level for the entire county.

“ADEQ is negotiating with EPA on the non-attainment issues in Pinal and Maricopa counties,” Grumbles told the agri-business crowd. “Agriculture is part of the problem and the solution. Agriculture needs to be at the table to make sure people realize that (urban) development, roads, and other aspects contribute to particulate matter and non-attainment issues.”

On climate change, Grumbles says farmers and ranchers have opportunities to make money from carbon sequestration as companies look for offsets to reduce their regulatory burden.

Arizona’s water chief, Herb Guenther, director, Arizona Department of Water Resources (ADWR), says the state budget shortfall reduced the agency’s budget by 67 percent in about one year. Employee numbers fell from 236 to 95.

ADWR has closed its five active management area offices in Prescott, Phoenix, Pinal, Tucson and Santa Cruz.

“We need to get off the (general fund) rollercoaster because we depend on professionals and professionals with institutional knowledge,” Guenther said. “If you’re on the rollercoaster you cannot hire and fire people on a regular basis and stay ahead of the (water-planning) game.”

Guenther supports a self-funded agency to maintain a quality staff to develop and maintain long-term water solutions. Several proposed funding remedies, including a bottled water fee, died in the Legislature.

Major water issues for the state include ongoing Colorado River supply concerns. The river water supply is over appropriated, Guenther says. “Water augmentation” is an agency focus including weather manipulation and water desalination to generate more usable water.

Guenther expressed the identical concern as Don Butler over potential funding sweeps of state agency funds.

“The challenge is the Legislature has the ability (to sweep funds),” Guenther said. “They make the law so they can change it to get whatever they want. The only way to sweep proof funds is to take the issue to the ballot via an initiative or referendum. That is an expensive route.”

Guenther – known for his verbal quips – says ADWR gladly accepts donations. Guenther occasionally carries a tin cup asking for spare change to support the agency.

The Arizona State Land Department is moving toward more fee-based funding, says State Land Commissioner Maria Baier.

The department manages 9.3 million acres of Arizona state trust land, including 163,000 acres leased for agricultural purposes including grazing. About 87 percent of the revenue benefits public education.

“We think self funding is better for land management purposes because it allows a steadier stream of revenue so we can better forecast our budget,” Baier said.

email: cblake@farmpress.com