Commissioner Tom Peterson of the Minnesota Department of Agriculture told a Senate committee on Feb. 17 that about 10% of the department’s nearly $400 million biennial budget comes from federal funds and that a recent freeze and federal personnel changes are creating “real concern” for inspection, grant and emergency programs. "We are working with our congressional delegation," Peterson said. "But the positions, you know, I will say are concerning, and we'll see how this plays out."

The department and the Minnesota Board of Animal Health described several programs affected or at risk, including meat and poultry inspection, laboratory grants, invasive pest control and grants tied to climate and conservation work. Michelle Medina, director of government relations for the Department of Agriculture and the Board of Animal Health, told the committee that roughly 70% of the board’s fiscal 2024 budget came from federal cooperative agreements with USDA APHIS and that cuts or delays would sharply reduce staffing and disease-response capabilities. "If this funding was eliminated or reduced, the board would have a rather large budget deficit, particularly in staffing and diminished disease response capabilities," Medina said.

Why this matters: inspection and cooperative grants support plant operations, public and animal health surveillance, and rapid response to outbreaks. Peterson said cuts to inspection funding have already reduced the federal share of state inspection costs from roughly a 50% match to about 31%, which could reduce inspection hours at small, state-inspected plants. That would affect local locker plants, restaurants and direct-to-consumer sales that rely on state inspection capacity.

Most important facts first: Peterson said the Department of Agriculture is watching several specific federal programs. The Local Food Purchase Assistance (LFPA) program has about $1.5–$2 million in payments to grantees on hold. The department applied for roughly $18 million for LFPA and a related Local Food for Schools cooperative agreement. The Resilient Food Systems Infrastructure (RFSI) cooperative agreement funded multiple processing projects; Peterson said some contracts began moving again last week. A USDA-funded $15 million meat processing intermediate loan program and a $1.5 million grant to an oat-processing project were also discussed.

Inspection and labs: Peterson and Medina emphasized concern about meat and poultry inspection funding from USDA FSIS, which subsidizes roughly half of inspection costs historically but now covers a smaller share. Medina said the Board of Animal Health relies on cooperative agreements with USDA APHIS, field staff collaboration and shared veterinarians and technicians; she also highlighted pressure on veterinary diagnostic labs. Peterson said the department’s current cooperative agreement with USDA ends March 31 and he expects to work on signing a new agreement in Washington.

Emergency account and outbreak response: Peterson reviewed the state ag emergency account balance and said the fund has been drawn down over recent years. He described past use of federal CARES funds and other emergency appropriations to respond to large depopulations during 2020, and said the state may need to ask the legislature to act if a large outbreak or other emergency arises. Medina and Peterson noted federal staff layoffs and probationary-period dismissals have already reduced USDA field staff in Minnesota.

Other federal-funded programs at risk: Peterson cited the climate pollution reduction grant (roughly $9.8 million to the Department for the Ag Water Quality Certification Program), specialty crop grants, an anaerobic digestion nutrient recovery project (~$500,000), invasive pest control programs (spongy moth) and wolf depredation payments coordinated with U.S. Fish and Wildlife Service. Many of these are cooperative or reimbursement grants, and the department has paused some hiring and slowed payments while it assesses federal commitments.

Committee follow-up and next steps: Peterson and Medina said they are coordinating with the governor’s office and the federal delegation, are monitoring cooperative-agreement signings, and are evaluating whether to reallocate state funds to cover critical functions. Medina warned the committee that if federal reimbursements cease, the board and department would face budget deficits and potential staffing reductions that would affect disease response and inspections.

Ending: Committee members pressed agency leaders about contingency planning for inspections and disease outbreaks and suggested legislators consider bolstering state emergency accounts or other backstops while federal funding remains uncertain.