As California climbs out of a $45 billion state budget deficit, Gov. Gavin Newsom is proposing no new funding for incentive programs critical to agriculture. Farm groups and regional air districts that rely on the grants to meet clean air mandates are closely watching state and federal policy discussions in search of other funding opportunities. It has renewed focus on major decisions ahead for the state’s cap-and-trade program and, on the federal side, the Trump administration’s spending cuts as well as the ongoing farm bill negotiations.
The industry has pressed lawmakers to maintain support for the incentive-based approach and lobbyists frequently point to the progress achieved through that pathway. In just five years, California is likely be the world’s first government to achieve a methane reduction goal. Passed in 2016, Senate Bill 1383 requires the state to reduce livestock emissions 40% by 2030.
While the state is on track to hit the target, the complex budget maneuvering at play is raising anxiety among farm groups. For the second year in a row, programs for building anaerobic dairy digesters and for incorporating alternative manure management practices at smaller operations are on life support, as previous allocations run out and policymakers try to buy time until the state’s economic situation improves.
The nonpartisan Legislative Analyst’s Office warns those programs could be waiting a few more years. While Newsom’s budget proposal is roughly balanced, the state must continue the belt tightening for at least a couple more years to avoid further deficits, according to an LAO report last week.
Farmers in the San Joaquin Valley, meanwhile, have long been pressing for more state investment in grants to upgrade tractors to cleaner emission models under the state program known as FARMER. The new budget plan is silent on that front as well.
For two decades, the state has gradually phased in limits to open agricultural burning, leading up to a complete ban that took effect this month. Many vineyard and orchard managers are now relying on costly air curtain burners to dispose of vines entwined with metal trellis wires or diseased trees. The state dedicated $180 million in 2021 to fund alternatives, but that money has now dried up, according to the San Joaquin Valley Air Pollution Control District.
During a governing board hearing last week, Lynn Jacquez, a senior advisor at Husch Blackwell Strategies, the district’s federal lobbying firm, reassured the board that more opportunities exist for more incentive dollars.
It’s easy to be “in the know” about what’s happening in Washington, D.C. Sign up for a FREE month of Agri-Pulse news! Simply click here
“It's a bit unknown still as we move into this new era,” said Jacquez, describing her approach to engaging new administrations, which has evolved through six presidents. “It's not rocket science, just perseverance.”
Lynn Jacquez, Husch BlackwellJacquez explained that she figures out how to navigate the policies and objectives of the administration and then develops her messaging to mirror its language.
“You're a real veteran,” replied Fresno County Supervisor Buddy Mendes. “You've seen it all, but you're probably going to see stuff you've never seen before.”
While the district has logged more than $7 billion in public and private investments to reduce emissions, resulting in significant progress over the years, the valley “cannot meet air quality mandates and goals without strong state and federal support,” according to Tom Jordan, the district’s director of policy and government affairs. Most of the remaining emissions come from cars, trucks, trains and other mobile sources.
The district oversees stationary sources and, while the California Air Resources Board has some authority over this area, they need approval from U.S. EPA to do so, explained Jordan.
CARB was unable to secure two of its waivers before President Joe Biden left office this week. That has deflated the state’s hopes for banning the sale of new diesel-powered trucks and for transitioning trains to zero emissions.
“Even with that [federal approval] — both from an equity perspective and from an effectiveness perspective — we're better off with strong national standards, rather than one-off standards here,” said Jordan. “We get a lot of traffic from other states.”
Executive Director Samir Sheikh said the district has always been nimble when operating within a changing federal environment and will continue to seek out collaborative solutions.
“We do want to make sure we work in a very constructive way and build an early and effective engagement with the new EPA to move forward the board's priorities,” said Sheikh. “We do have to meet air quality standards. There are serious consequences in not doing so.”
He referred to the public health impacts that would result from failing to meet the federal attainment standards and pointed to the economic sanctions “that are always there looming under the Clean Air Act.” Sheikh hopes U.S. EPA will continue to review the district’s plans in a timely fashion and “not put the region in peril as we face some of these serious consequences.”
The state budget environment has left little room for new expenditures. But Sheikh has spotted “a major opportunity” with the Greenhouse Gas Reduction Fund, the state’s spending account for cap-and-trade revenues. Following the trend of recent years, Newsom’s initial budget plan did not spell out allocations for the fund, and Sheikh expects that process to play out through negotiations with the Legislature.
In total the district has secured $2 billion from the fund since cap-and-trade began in 2013. Going forward, the revenue stream is less certain, since the Legislature is due to reauthorize the program to continue it beyond 2030.
“There's a lot of conversation around the program needing stability,” said Sheikh.
The district’s Sacramento lobbyist, Silvia Solis Shaw, who is a partner at Shaw Yoder Antwih Schmelzer & Lange, said Newsom has acknowledged the need to make that decision sooner rather than later to provide certainty to the grantees as well as the market participants.
With 29 new lawmakers in the Capitol and seven who have ascended from the Assembly to the Senate, Shaw described the hard work ahead to educate policymakers on the importance of the district’s clean air grants.
With cap-and-trade funding for FARMER and alternatives to open burning, Sheik said the district has “a growing and strong coalition” behind it. He lamented that the state has increasingly dipped into the pot to shore up programs unrelated to climate change, suggesting policymakers will be again eyeing the fund this year to offset other spending reductions.
The district plans to send comments to budget committees as they consider spending the $2.7 billion Newsom plans to spend from the new $10 billion climate bond. The measure sets aside $200 million for the state’s multibenefit land repurposing program and $300 million for improving climate resilience and the sustainability of agricultural lands. Sheik plans to work with Karen Ross, secretary of the California Department of Food and Agriculture, to ensure the spending is effective in the region.
The district plans to weigh in on a new CARB program assisting small agricultural operations with transitioning to clean trucks, after Newsom signed Assembly Bill 2900 into law last year. Assemblymember Esmeralda Soria of Fresno sought to ensure “the state’s transition away from polluting vehicles does not leave behind the small farmers.” According to the district’s legislative platform, the state’s aggressive timelines for replacing aging heavy-duty trucks are not economically viable for the industry’s seasonal operations.
The increased competition over a shrinking pot of money at the state level has shifted more of the district’s attention to Washington, D.C.
Jacquez is already scrolling through her contacts list to reestablish relationships with carryovers from the first Trump administration. While Lee Zeldin is new to EPA, the incoming nominee for deputy administrator, David Fotouhi, previously served as the agency’s general counsel. Acknowledging the contentious debate over Project 2025, the Heritage Foundation’s blueprint for remaking the federal government, Jacquez noted it was written by Trump’s previous chief of staff, Mandy Gunasekara, who is likely to join EPA and is someone Jacquez and her team have built a connection with.
Though Republicans have taken control of Congress, Jacquez felt optimistic that both California senators have been appointed to the Environment and Public Works Committee. During the committee’s confirmation hearing last week, Senator Adam Schiff asked Zeldin if he supports federal air quality investments for the San Joaquin Valley.
“In the breadbasket of America, unfortunately, we have some of the worst air quality in the nation,” said Schiff. “Last summer, residents of Fresno had just 10 days of healthy air.”
Zeldin deferred to Congress, telling Schiff he would welcome the opportunity to work with him on any funding EPA is obligated to spend. Soon after taking the oath of office on Monday, however, Trump signed a slew of executive orders, some taking direct aim at California’s clean air efforts.
Schiff will also serve on the Agriculture Committee, which has several funding items on its docket that are important to the valley. The farm bill reauthorization is at the top of the list, with the potential for climate-smart agriculture grants. Newly elected Representative Adam Gray of Merced adds to California’s roster on the ag committees, alongside Reps. Jim Costa of Fresno and Doug LaMalfa of Richvale.
With the farm bill conversation, Nisei Farmers League President Manuel Cunha said a California coalition is pushing for an additional $37 million to expand the scope of a USDA task force from water to air quality improvement. The coalition hopes to seed the Natural Resources Conservation Service with $50 million to support open burning alternatives in severe nonattainment areas.
Silvia Solis Shaw, Shaw Yoder Antwih Schmelzer & Lange“Ag is doing its part,” said Cunha, who was apprehensive of the federal support. “If the state doesn't give us any money, we have a serious problem.”
Jacquez is also watching for disaster aid for the Los Angeles wildfires, since that will likely have policy considerations attached for air quality impacts.
The district has benefited from climate spending in the Inflation Reduction Act. But John Assini, a principal at Husch Blackwell, expects House Republicans and the Trump administration to roll back items provided to EPA as well as to the Treasury Department in the form of tax credits.
Assini said the district had “a very aggressive grant program” last year, with funding from EPA, USDA and the Defense Department, including a $9 million grant for clean heavy-duty vehicles. He anticipates more funding will arrive through advanced appropriations under the Biden administration’s infrastructure law.
Cunha, however, pointed out that the $9 million only supported 20 electric trucks, since they cost about $500,000 each. Hydrogen trucks, by comparison, run for $970,000 per truck.
“What type of farmers or businesses can afford that?” asked Cunha.
Assini is also watching as Congress reconsiders the surface transportation reauthorization, which expires in September next year. He plans to advocate for more incentives through the Low or No Emission Grant Program, which supports transit agencies and communities in purchasing low-emission vehicles. Assini is keeping tabs on CRISI, or Consolidated Rail Infrastructure and Safety Improvements, which helps short-line railroads used to transport livestock feed with converting diesel engines to low- or zero-emission models.
Kevin Abernathy, general manager of the Milk Producers Council, applauded the district’s efforts to secure state and federal grant funding. He said the “very, very laser-focused direction” has led to hundreds of millions of incentive dollars “that we wouldn't have otherwise.”
For more news, go to Agri-Pulse.com.
