The Texas Department of Agriculture (the department) adopts amendments to §7.10, §7.20, and §7.22, concerning pesticide regulations, without changes to the proposal as published in the June 20, 2003, issue of the Texas Register (28 TexReg 4618). The amendments are adopted to increase the current fees for a pesticide product registration, pesticide applicator licenses, pesticide dealer licenses and testing fees for applicators in order to allow the department to recover more of costs of implementing the department's pesticide registration and application programs, as directed by the 78th Legislature, Regular Session, 2003. The amendment to §7.10(a)(4) increases the fee for a pesticide product registration from $350 to $420 for a two-year registration. The amendment to §7.20 (d)(1) increases the fee for a pesticide dealer license from $200 to $240. The amendments to §7.20(d)(2)(A)-(D) increase the fees for a commercial, noncommercial, noncommercial political subdivision, and private pesticide applicator licenses by 20% of the current fee. The amendment to §7.22(d)(2) increases the pesticide applicator testing fee from $20 to $24.

Comments were received on the proposal from the Texas Farm Bureau (TFB) in opposition the fee increases in general. Comments were received from the American Pet Products Manufacturers Association (APPMA), Crop Life America, Consumer Specialty Products Association (CSPA), International Sanity Supply Association, Inc. (ISSA), Responsible Industry for a Sound Environment (RISE) and four individual companies specifically in opposition to the increase in pesticide product registration fees proposed in the amendment to §7.10(a)(4). These entities primarily represent manufacturers and suppliers of institutional cleaning products. Comments were also received from the American Pet Products Manufacturers Association (APPMA) in opposition to the pesticide product registration fee increase. The APPMA represents manufacturers and distributors of pet products.

The TFB, through its president, Kenneth Dierschke, commented that it supports and appreciates the department's functions and services, but that it feels the increased fees are not appropriate and do not reflect the instructions of the state leadership not to raise taxes. The TFB further stated its belief that fees collected by the department should be used to fund the services provided to the segment of the population paying the fees and not to fund services to the general public, and that agency services should be funded by general revenue. Similar issues regarding the justification for fee increases and that fees collected should only be used to fund the pesticide programs were raised by the entities representing manufacturers and distributors of institutional cleaning products (antimicrobial pesticide products). These entities, commenting specifically on the increase of the product registration fee, generally commented that the industry would be severely impacted by the fee increase because these products are traditionally sold a low volumes and at low margins and are typically sold by small businesses that cannot absorb a fee increase in same manner as larger businesses, and because the Environmental Protection Agency (EPA) will be in the near future imposing additional disposal and labeling requirements and additional fees on the industry. They further commented that this additional burden posed by a fee increase on product could result in the reduction in the number of antimicrobial pesticide products sold in Texas, to the detriment of the sanitation and health of Texans.

The department appreciates the industry's support of the department's functions and services, and is understanding of the concern over the affect of fee increases on its members. However, the department was directed by the Legislature to increase its fees in order to recover direct and indirect costs to state government to implement state programs. Due to the large budget shortfall, during the course of the appropriations process all agencies were asked to do their part to contribute toward eliminating the budget shortfall, including cutting agency costs and raising agency fees. Moreover, in reviewing revenue generated by agency fees, the department discovered that some agency fees, such as fees assessed by the department for its pesticide licenses, had not been increased for a number of years, while costs to the state as a whole to implement programs have continued to increase.

The department does agree with the TFB that services should be funded by the General Revenue Fund. What may not be clear to all those commenting is that the department's regulatory programs are not funded directly by fees, but by general revenue. All but a small percentage of fee revenue collected by the department and other state agencies goes directly into the General Revenue Fund and from that fund is then appropriated back to agencies to cover their budgeted costs. Also, while the TFB is correct that the state leadership, including the Governor and the Legislature, were clear in their instruction not to raise taxes, the TFB is not correct in viewing license and permit fees as taxes. Such fees, by definition, are not taxes and have often been used as vehicles for the generation of state revenue, as was the case in the 78th legislative session.

Other comments, from the ISSA, argued that antimicrobial pesticide products should be considered in a different fees scale than traditional pesticide products used in agriculture due to the unique properties of the products which make their use a benefit to the public and promote health and safety and the fact that they are non-toxic and do not pose a threat to the environment because they biodegrade quickly. The APPMA submitted similar comments in regard to pet products, arguing that pet products are used in a much smaller quantity than agricultural pesticides making them more friendly to the environment and that pet products serve to benefit pet owners by reducing the number of pathogen-carrying insects that are brought into the home by pets. The APPMA also requested a registration fee scheme that distinguishes between agricultural and nonagricultural products and is based on the amount of pesticide used.

The department understands that there are differing levels of toxicity and potential harm to the environment among the various products on the market. However, the infrastructure and activities required to do all the regulatory functions required by state and federal laws is the same for all products and is not based on the attributes of each individual product. These required regulatory activities are also not based on the quantities of the products used or sold in the state. A scheme to base registration fees on quantity used or sold in the state would require the department to gather sales information and have some mechanism to verify that information. A mechanism for gathering and verifying information on use quantities does not currently exist. The costs associated with such a scheme might exceed the current cost and result in even higher registration fees.

The department conducted five regional public hearings to receive public comment on the proposal, in accordance with the Texas Agriculture Code, §76.004. No one attended any of the public hearings held on the proposal.

Subchapter B. REGISTRATION

The Texas Department of Agriculture (the department) adopts amendments to §§9.2-9.3, and §§9.4-9.5, concerning seed quality licensing fees, testing fees and tolerances for prohibited noxious weeds under the Texas Seed Law, without change to the proposed text as published in the June 27, 2003 issue of the Texas Register (28 TexReg 4759). The amendments to §§9.2-9.3, and §§9.4-9.5, are adopted to increase seed quality licensing fees and testing fees by a minimum of 20%. The fees increased by this adoption have not been increased by the department since 1986. The adopted increase in fees will allow the department to recover some of its costs associated with seed testing, as directed by the Texas Legislature, 78th Session, 2003. The adopted amendments to §9.2 increase the cost of Texas Tested Seed Labels from $.03 to $.07 per 100 pounds of seed or fraction thereof, increase the inspection fees for the same from $.06 to $.07, and increase the base penalty for the filing of late reports from $25 to $30. The adopted amendment to §9.3 increases the fee for the vegetable seed license from $100 to $120. The adopted amendments to §9.4 disallow a tolerance in enforcement of the prohibited noxious weeds; caster, field bindweed, hedge bindweed and tropical soda apple. The amendment will allow for increased enforcement thereby promoting higher quality seed for consumers. The amendments to §9.5 increase service testing fees, and clarify that testing fees are charged on a per-sample component basis.

Comments were received from Texas Farm Bureau in opposition to the proposed fee increases. The TFB, through its president, Kenneth Dierschke, commented that it supports and appreciates the department's functions and services, but that it feels the increased fees are not appropriate and do not reflect the instructions of the state leadership not to raise taxes. The TFB further stated its belief that fees collected by the department should be used to fund the services provided to the segment of the population paying the fees and not to fund services to the general public, and that agency services should be funded by general revenue.

The department appreciates the TFB's support of the department's functions and services, and is understanding of the TFB's concern over the affect of fee increases on its members. However, the department was directed by the Legislature to increase its fees in order to recover direct and indirect costs to state government to implement state programs. Due to the large budget shortfall, during the course of the appropriations process all agencies were asked to do their part to contribute toward eliminating the budget shortfall, including cutting agency costs and raising agency fees. Moreover, in reviewing revenue generated by agency fees, the department discovered that some agency fees, including seed quality licensing and testing fees, had not been increased for a number of years, while costs to the state as a whole to implement programs have continued to increase.

The department does agree with the TFB that services should be funded by the General Revenue Fund. What may not be clear is that the department's regulatory programs are not funded directly by fees, but by general revenue. All but a small percentage of fee revenue collected by the department and other state agencies goes into the General Revenue Fund and from that fund is then appropriated to agencies to cover their costs. Also, while the TFB is correct that the state leadership, including the Governor and the Legislature, were clear in their instruction not to raise taxes, the TFB is not correct in viewing license and permit fees as taxes. Such fees, by definition, are not taxes and have often been used as vehicles for the generation of state revenue, as was the case in the 78th legislative session.

Subchapter B. CLASSIFICATION OF LICENSES

The Texas Department of Agriculture (the department) and the Texas State Seed and Plant Board adopts the amendments to §§10.2, 10.5, 10.10, 10.11, 10.13, 10.21 and 10.22, concerning seed certification, without changes to the proposal published in June 27, 2003, issue of the Texas Register (28 TexReg 4760). The amendments are adopted to increase fees for certification and to include in §10.13 the category of "other kinds not listed" and the previously excluded kind "cantaloupe" which was inadvertently left out of the 2001 amendments to §10.13. The department is the certifying agency in the administration of the Seed and Plant Certification Act, and is charged with administering and enforcing the standards adopted by the Board. The fees increased by this adoption have not been increased by the department since 1987. The increase in fees will allow the department to recover costs associated with enforcing the standards adopted by the Board, as directed by the 78th Legislature, Regular Session, 2003. Sections 10.3 and 10.8 will be adopted in separate submissions at a later date.

The amendment to §10.2 increases from $75 to $100 the per lot fee for interagency certification. The amendments to §10.5 increase from $20 to $25 the late fee assessed on each field on which certification is requested after the deadline date and increase from $20 to $25 the minimum charge for a reinspection. The amendment to §10.10 increases the fee for certification labels from $.08 to $.10 per 100 pounds or fraction thereof. The amendments to §10.11 increase the bulk sales certificate fee from $.08 to $.10 per 100 pounds or fraction thereof, increase the agricultural seed inspection fee from $.06 to $.07 per one hundred pounds or fraction thereof, if on the reporting system and increase the seed inspection fee from $.03 to $.07 per one hundred pounds or fraction thereof, if using seed fee labels. The amendments to §10.13 increase by 20% the acreage inspection fees for certification, add a fee for cantaloupe, and add a category for "other kinds not listed". The amendments to §10.21 increase from $50 to $60 the per sample fee for hybrid sorghum varietal purity grow-outs. The amendments to §10.22 increase from $50 to $60 the per sample fee for sunflower varietal purity grow-outs.

Comments were received regarding the proposed fee increases from Texas Farm Bureau (TFB) and, the Texas Seed Trade Association (TSTA). The TFB, through its President, Kenneth Dierschke, commented that it supports and appreciates the department's functions and services, but that it feels the increased fees are not appropriate and do not reflect the instructions of the state leadership not to raise taxes. The TFB further stated its belief that fees collected by the department should be used to fund the services provided to the segment of the population paying the fees and not to fund services to the general public, and that agency services should be funded by general revenue. The TSTA, through its Executive Director, Charles Leamons, also voiced similar concerns regarding the fee increases, which included that fees collected exceed the department's expenses for the certification program. Mr. Leamons noted that the legislature has in past exempted seed testing from cost recovery. Mr. Leamons also noted that his organization supports and appreciates the services the department provides to the industry.

The department appreciates the TFB's and TSTA's support of the department's functions and services, and is understanding of the TFB's and TSTA's concern over the affect of fee increases on its members. However, the department was directed by the Legislature to increase its fees in order to recover direct and indirect costs to state government to implement state programs. Due to the large budget shortfall, during the course of the appropriations process all agencies were asked to do their part to contribute toward eliminating the budget shortfall, including cutting agency costs and raising agency fees. Moreover, in reviewing revenue generated by agency fees, the department discovered that some agency fees, such as fees assessed by the department for seed certification, had not been increased for a number of years, while costs to the state as a whole to implement programs have continued to increase. While seed testing fees are exempt from the requirement that program fees offset direct and indirect costs of administering a program, this exemption from the requirement does not preclude the agency from raising such fees in order to recover costs to state government.

The department does agree that services should be funded by the General Revenue Fund. What may not be clear is that the department's regulatory programs are not funded directly by fees, but by general revenue. All but a small percentage of fee revenue collected by the department and other state agencies goes into the General Revenue Fund and from that fund is then appropriated to agencies to cover their costs. Also, while the TFB is correct that the state leadership, including the Governor and the Legislature, were clear in their instruction not to raise taxes, the TFB is not correct in viewing license and permit fees as taxes. Such fees, by definition, are not taxes and have often been used as vehicles for the generation of state revenue, as was the case in the 78th legislative session.

Subchapter A. GENERAL REQUIREMENTS