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Letter From The Editor: Regulatory Fees

By Dan Flynn and Suzanna Schreck

We think of the federal government as this mammoth money machine churning across the land with close to $4 trillion in annual spending and with a credit card lifestyle that will leave future generations to pay off the $14 trillion we've rung up.

Then there's U.S. Food and Drug Administration (FDA), an agency with a budget equal to a couple good-sized suburban school districts.  For that it must approve new drugs, make sure medical devices work, govern tobacco use, and ensure the safety of about 80 percent of the food Americans eat from sources all around the world.

FDA does all it does for $3.28 billion a year.  President Obama wants to increase that amount for 2011 by 23 percent for a total of $4.03 billion. 

A couple months back, we spoke with the manager of a food manufacturing plant who'd just had his first inspection by the FDA in five years.

H.R. 2749, the food safety bill that passed the U.S. House of Representatives, would require inspections at a frequency based on risk.  There would have to be many inspections on a schedule with more frequency than once every five years.

President Obama's "transforming food safety" initiative would add $318.3 million to FDA's annual budget.

"The FDA will set standards for safety, expand laboratory capacity, pilot track and trace technology, strengthen its import safety program, improve data collections and risk analysis and begin to establish an integrated national food safety system with strengthened inspection and response capacity," the agency said.

In Washington, D.C., they call more money for FDA part of the "domestic discretionary spending" debate.  FDA and the Obama Administration now must get some combination of H.R. 2749 and S. 510 through to the President's desk and also get enough in the 2011 budget to begin implementing the new food safety scheme.

Might we suggest something?  Take that $500 per facility fee that's in H.R. 2749, but not S. 510, and use it as a departure point for fee-based food safety regulatory system.

Purists will not like this approach.  They will say the food safety regulatory system is there to protect the public and taxpayers should pick up the bill.  All things being equal, we'd like to live in that world.

Our world, however, is one where the annual fight over "domestic discretionary spending" is going to get ugly.  We can't have food safety dependent on what falls off that table.

In other words, the agency regulating the $1.6 trillion U.S. food industry should not have to eat off the floor for its very existence.

The home building industry, largely regulated by state and local governments, has long accepted paying most of the bill for the land use and building permit system that regulates its activities.

Usually, there is a base of activity that taxpayers cover, like the regulation of public works like building roads and bridges.  Then the rest is raised through fees.

There would be a lot to work out to make an FDA fee system fair and reasonable.  The top of the scale would have to pay much more than $500 per facility, and small low-risk operations should pay a lot less.

But a structure that works would pay a lot of dividends.  Firm, fair, predictable inspections would mean safer food with fewer recalls.  With its own revenue source, FDA's top officials would not have to spend half their year bending over before Congress for money.

We know regulatory fees are passed on to consumers, and this proposal would increase prices some.   But, we think consumers would be okay with that if food safety is truly enhanced.

Full post as published by Food Safety News on February 07, 2010 (boomark / email).