Costs are top of mind for state and federal policymakers this year. California is struggling to rein in an affordability crisis, while the Trump administration is aggressively rolling back regulations posing costs to businesses and consumers. With that political backdrop, a new study is adding yet more pressure for policy solutions to stabilize California’s business landscape.
Researchers at California Polytechnic State University, San Luis Obispo, have issued a paper showing Central Coast farmers have faced a nearly 1,400% increase in regulatory costs since 2006. Crop values rose just 44% in that time.
Agribusiness Professor Lynn Hamilton compared agriculture to a frog slowly boiling alive, except farmers are aware and nobody else in the pot seems to be. Hamilton has also taken her research to the San Joaquin Valley, with a broader segment of growers and similar results.
“Our numbers show California is an increasingly expensive place to do business,” Hamilton told Agri-Pulse.
She has not seen any indications the regulatory pressure will decline any time soon, though it could plateau if emerging technologies can keep pace with the stream of new reporting requirements and the costly labor shortage.
“None of that surprises anybody who farms or ranches in California,” said Western Growers President and CEO Dave Puglia in an interview. “It's almost too late to say I hope this is a wakeup call in Sacramento.”
Puglia feels agriculture has been echoing this message for decades in the halls of the Capitol and in regulatory hearings to no effect.
CalChamber CEO Jennifer BarreraThe study confirms major retailers increasingly have options beyond California for purchasing high-quality fruits and vegetables, owing in part to improvements in breeding varieties, he explained. That leaves little incentive to pay for the increased regulatory costs placed on California farmers and it has pushed more farming operations to other states as well as to Mexico and South America.
“California has lost control of its vision of agriculture's future in the state by loading regulatory mandates and costs to the degree that they are now actively contributing to consolidation of farms and the loss of multigenerational family farmers,” said Puglia. “We see more and more private equity groups acquiring farms and farmland.”
In a statement to Agri-Pulse, California Farm Bureau President Shannon Douglass emphasized the state’s producers take pride in growing a third of the nation’s produce while shouldering the highest wages and stringent labor standards, along with clean energy mandates, environmental protections and workplace safety rules.
“California policymakers spend considerable time focusing on sustainability, but the current situation is unsustainable,” said Douglass. “Producers cannot continue to bear the burden of ever-increasing costs while their ability to remain competitive erodes.”
Without policy solutions to stem the crisis, the state “risks losing its ability to produce high-quality food, sustain jobs and preserve green rural spaces that benefit everyone.”
While the numbers may differ, the message behind the study is the same for businesses across sectors, according to Jennifer Barrera, CEO of the California Chamber of Commerce. She pointed to major companies, like Tesla, that have swept headlines for moving to a more business-friendly state. Others have maintained their footprint but scrapped expansion plans. And many are simply adapting as best they can by finding ways to cut costs.
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Barrera, however, cautioned that the Golden State remains an attractive market for many companies to continue to invest, being the world's fifth-largest economyand home to 40 million consumers.
She found recent signs of optimism in Sacramento as well. A deal last year to reform PAGA, the Private Attorneys General Act, should reduce the number of “frivolous” lawsuits against businesses and, as a result, litigation costs for employers. She saw further promising signs with Governor Gavin Newsom’s order last month to waive permitting requirements under the California Environmental Quality Act for rebuilding homes destroyed by the LA wildfires. She hopes that could catalyze discussion in the Legislature this session around broader CEQA reforms.
The key takeaway from the November election, she explained, is that voters are concerned about the economy and costs. One indicator was the rejection of Proposition 32, which would have raised minimum wage another two dollars to $18 per hour.
“I do believe that existing regulations — pending regulations, new ideas that are pending in the Legislature — are going to be reviewed and analyzed from that affordability perspective,” said Barrera. “The voters generally understand that if you add more cost to business, those are ultimately going to show up in higher prices and contribute to the higher cost of living here in California.”
She hopes that reality will deflate any proposed labor or environmental mandates or new tax initiatives.
Puglia similarly hoped for a four-year moratorium on new regulatory burdens.
“I guarantee you that would unleash a tidal wave of new investment in production and increased capabilities for farming in California,” he said.
But he recognized a blanket moratorium is a big ask and narrowed his sights to the state’s agricultural overtime law. He pointed to a 2023 study from the University of California, Berkeley, that found the law, under Assembly Bill 1066, roughly cut in half the number of farmworkers gaining overtime hours.
New York and Oregon have addressed that issue in their overtime laws through a refundable tax credit that compensates employers for the increased labor cost. Assembly Republican leader James Gallagher proposed to do the same last year but Democrats shot down his measure in its first committee hearing and dismissed the independent study.
Western Growers President and CEO Dave PugliaIn 2020, just before his appointment to chair the Agriculture Committee and three years before assuming the speakership, Assemblymember Robert Rivas, D-Hollister, unsuccessfully attempted the same legislation. As speaker today, Rivas has set affordability and regulatory oversight as priorities for the chamber. His office declined to comment on the Cal Poly study and potential policy solutions, though he said in Monday’s floor session that the cost of living is an issue deserving urgency this year.
The study did gain traction with Democratic Senator John Laird, who also represents the Salinas Valley and was California Natural Resources secretary under Gov. Jerry Brown’s administration, when many of the regulations at issue took effect. Laird said in a statement that the study “raises timely questions about the impact of increasing state and federal regulations on California's agricultural sector.” He vowed to listen to all stakeholders “to meet these concerns” and called it essential to collaborate with them to ensure agriculture’s continued success, “while upholding our commitment to fair wages, climate resilience and worker safety.”
The response was more critical for Representative Adam Gray, D-Merced, who flipped a battleground district last year and had spent years in the Legislature raising alarms over regulatory decisions that have cost farmers, taking aim specifically at the California Department of Water Resources and the State Water Resources Control Board.
“As a member of the State Assembly, I regularly called out Sacramento bureaucrats who did nothing but push paper and throw up roadblocks to success for San Joaquin Valley farms,” said Gray in a statement. “I intend to do the same here in Washington as a member of the House Agriculture Committee.”
The study also mentioned the California Air Resources Board. In response, spokesperson Lynzie Lowe stressed the need to improve the San Joaquin Valley’s unhealthy air and applauded the industry for being an important partner, investing more than $1 billion in turning over legacy diesel equipment. She highlighted a finding in the study that air quality regulations had the smallest impact on costs, at less than 1%, and noted the paper does not reflect the savings in avoided healthcare costs from reducing pollution and the improved worker productivity.
The agency also pointed out that the lettuce grower examined in the paper had more than a decade to comply with the Truck and Bus Regulation on diesel emissions and “only faced a penalty of $1,900” for noncompliance.
The water board and the California Department of Food and Agriculture did not comment on the study, though the two agencies have collaborated on a program to streamline reporting requirements to lower stakeholder fees.
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