State moving to implement new farm loan forgiveness law

The state Department of Natural Resources has started work on a new agricultural loan program approved by the Legislature. It will allow loans to be forgiven if borrowers fulfill a farm development plan.

Farm development loans can be made for clearing of land, and the purchase of buildings, installation improvements and maintenance of water management systems, farm buildings and structures, agricultural processing and farm equipment, livestock, feed, seeds, fertilizer and seasonal extension equipment under House Bill 298, which was passed by the state House and Senate and signed by Gov. Mike Dunleavy Aug. 26.

Bees and beekeeping equipment are also included.

“This will help support our agriculture and food producer community, and provide Alaska farmers with new tools to meet the needs of the state…It will help grow markets for locally-grown and processed foods,” Dunleavy said when signing the bill.

Mia Kirk, interim director for the state Division of Agriculture, said, “The bill directs the department to develop a new forgivable loan program to fund investments in agriculture and build resiliency in the state’s food supply.”

A $3 million capital appropriation for Food Security Agriculture Incentive Grant Program covering multiple grant programs was made in the state Fiscal Year 2023 budget, which is now in effect. “That may be the initial pot of money that the funding will come from, but meetings with legislators that sponsored the bills could lead to a separate appropriation through the legislative process.” Kirk said. The $3 million also effectively puts a cap on the program, for this year at least.

Alaska has had an agriculture loan fund since 1953, structured as a revolving fund with repayments on loans, keeping the balance of the fund intact. The state has other revolving loan funds, such as a Mariculture Revolving Loan Fund (MRLF), and another one for community-owned bulk fuel storage facilities and for tourism development.

What’s new in this is that the loans can be forgiven if borrowers fulfill commitments on farm developments.

The loan provision was tacked onto another bill in the state Senate in the final days of the session. The original version of HB 298, sponsored by Rep. Liz Synder, D-Anchorage, established an Alaska Food Strategy Task Force that will map a plan to move Alaska toward more self-sufficiency in food. Currently, over 90 percent of Alaskans’ food supplies are shipped in from the Lower 48.

The governor had earlier created a more limited Food Security and Independence Task Force through an administrative order with a sunset date of Nov. 30, 2022, but the new Alaska Food Strategy Task Force will involve an array of stakeholders and will have more clout from being established in law. Sen. Shelley Hughes, the Senate Majority Leader, coordinated an unusual strategy of authorizing the new loan program and its forgiveness feature through an amendment she offered on the Senate floor, in the final days of the legislative session, in late May. The amendment was made to HB 298, which had passed the House earlier, when that bill was on the Senate floor for a final vote. There were no objections, and the addition was approved unanimously. The new version was then approved in the House 37-2. Many of its members were similarly familiar with the loan forgiveness idea.

It’s not unusual for new language, and programs, to be added to bills by floor amendment both in the Senate and House. However, the procedure typically involves language taken from another bill that has moved part-way through the Legislature.

This language was not from another bill, however. It was brand new, and many in the public were caught by surprise when it happened because there was no documentation on the legislative record explaining its intent or how the bill would work.

When bills move through legislative committees, public hearings are held and documentation is compiled that is available to other legislators and the public.

Although approval of the new loan program came at the last minute DNR officials were aware of discussions by legislators. The department will develop the details of the program through regulations, a procedure where administrators work out the mechanics and how the directives in the new legislation will be carried out. What’s unusual is the lack of a legislative record that will guide people writing the regulations.

Deputy DNR Commissioner Brent Goodrum said it could take a year or more to develop the regulations because those will go through a public comment process followed by a review by the Department of Law.

Hughes acknowledged the unusual process: “It’s not the best way to do legislation,” to establishing new programs, she said, but the idea had been discussed for some time in a House-Senate “food caucus,” a group of legislators that were meeting informally to hash out ideas to improve agriculture and increase food security.

The caucus worked like a special committee but more informally, and it actually consisted of a majority of House and Senate members. “What that meant was that when the amendment was offered on the floor most senators were familiar with it, and there were no objections,” she said.

Meanwhile, it’s not clear how the new loan program will relate to agriculture loans from the state’s Agricultural Revolving Loan Program (ARLF), and whether those will be operated separately or also made subject to loan forgiveness allowed now in HB 298.

The estimated bequity of the ARLF was $21.9 million as of June 30 with a cash balance of $12.9 million, according to the Department of Natural Resources. There are 53 current loans totaling $12.03 million. Two of the 53 loans are in default, the department said.

Hughes said the 2022 legislative session was extraordinarily productive for agriculture. Rep. George Rauscher’s House Bill 347, long in development, was also passed and was signed by the governor Aug. 26.

The bill will promote the small but growing meat industry by providing for animal testing and containing a virus outbreak and making information public but also providing confidentiality as to locations and addresses to protect private rights.

“This legislation was five years in the making, with the support of farmers,” Rauscher said.

“The bill will make vital testing information available to the public without the (animal) owner’s personal information being disclosed as well.”

Hughes said the Legislature’s authorization in 2022 for funds to help develop the Nenana-Totchaket Agricultural Project west of Nenana, in Interior Alaska, was another major step for the state’s small farm industry.