APPROVED MINUTES

COMMISSION REGULAR MONTHLY MEETING

TUCK LIBRARY - CONCORD, NH

April 7, 1999

Commission Members in Attendance:

CT: Richard Allen, Shirley Ferris, Robert Jacquier and Mae Schmidle,

MA: Gordon Cook, Jay Healy and Sam Shields

ME: Colon Durrell, Fred Hardy and Cynthia Masterman

NH: Powell Cabot, Debora Erb and Doug Morris

R I: Al Bettencourt, Aaron Briggs, Ron Newman and Peter Petrone

VT: Jacques Couture, Andy Dykstra, Harold Howrigan and Bobby Starr

Commission Staff Present:

Kenneth Becker, Executive Director; Dixie Henry, General Counsel; Carmen Ross, Regulations Administrator; Denise Little, Administrative Assistant; and Trish Lammott, Temporary Office Assistant

The Meeting was called to order by Chair Mae Schmidle at approximately 9:30 a.m.

Public Participation:

Members of the public introduced themselves to the Commission at the request of the Chair. New York dairy farmer Kenneth Dibbell addressed the Commission regarding the costs of milk production and mailbox milk prices and other information relative to the reauthorization of the Compact.

Consideration of Minutes - March 3, 1999 Meeting:

Harold Howrigan asked that the draft minutes be corrected to reflect that he is the Chairman of the National Dairy Promotion and Research Board and also to note that the St. Albans Cooperative Creamery meeting attended by the Executive Director was on February 27, 1999, a Saturday, and that the Executive Director was not out of the office during business hours to attend that meeting.

The Chair asked that the draft minutes be corrected on page 3, under the Treasurer's Report to reflect that the financial reports be filed for audit.

Aaron Briggs asked that the draft minutes be corrected to reflect that he was in attendance.

Ron Newman made a motion to accept the minutes of the March 3, 1999 meeting, as corrected. Fred Hardy seconded the motion. Motion to accept the minutes, as corrected, passed by unanimous vote of the six State delegations.

Communications:

There were no communications to report.

Financial and Budget Reports - Month Ending February 1999:

Ken Becker presented the financial reports for the month ending February 1999. The February balance sheet shows approximately $219,000 in the checking account. The liabilities remain the same since the first of the year. Pursuant to the agreement approved by the Commission at the December 1998 meeting, the Commission has a payment plan to repay the outstanding loans to the banks. This payment plan requires three payments during 1999 to extinguish that debt. The first payment was due March 31, 1999. That payment was made to the National Bank of Middlebury in the amount of $40,000 of principle and $8,000 to the People's Trust Company. The total of these two payments, with interest, was just over $50,000 and has reduced our checking account balance accordingly since this financial report was prepared.

The expenditures were lower on the monthly operating statement, due in part to not having a statement due from the Market Administrator for the month of February. There may be some minor errors in the income reported on this report, due to a new handler exemption petition, with associated funds placed in escrow, and also the processing of the credits for the waiving of the September and October 1998 administrative assessment payments. Mr. Becker stated that he is not fully confident that all of the entries are correct. Therefore, a corrected financial statement will be presented at the May meeting.

Reports:

Chair:

Mae Schmidle reported that she was invited to Austin, Texas to the legislature when they were meeting to approve the Dairy Compact for the State of Texas. The Compact was approved by the House Agriculture Committee while she was there and it was very exciting.

Executive Director:

Ken Becker reported that Becky Holden, Office Manager and Kelly Plastridge, Full Charge Bookkeeper both resigned during the month of March. The Commission has contracted with an accounting firm to assist with the accounting work and has also contracted for temporary office assistance.

In March, the Commission disbursed approximately $413,000 in refunds from the balance of the escrow account after making payment to the Commodity Credit Corporation (CCC) in 1998. The Commission received 947 applications for the refund. The Market Administrator's Office verified each application for accuracy and completeness. Of those who applied, 744 producers were eligible for the refund. The refund was paid on the producer's total milk production for the period October 1, 1997 through September 30, 1998 and the payment rate was $.0386 per hundredweight. Approximately 200 producers were determined ineligible, primarily due to verification that those producer's milk production had increased. A letter was sent to each producer explaining why they were determined ineligible and a few producers called to discuss the ineligibility determination. Mr. Becker thanked the Market Administrator's Office staff for their time and diligence in verifying reports.

Last week the USDA published its proposed rule on Federal Milk Market Order Reform. One of the most significant of the proposed reforms is the change to the Class I differential. The Market Administrator's Office will be holding public meetings throughout New England to explain the reforms and Federal Order I Market Administrator Erik Rasmussen is encouraging everyone to attend one of those meetings.

On March 5, 1999, the April price announcement was issued. That announcement was the greatest price reduction ever, and will mean that the Compact Commission will be making compact payments on April milk paid in May. The Compact Over-order obligation will be $3.43. The amount of the producer payments will not be known until the handler's reports are filed in early May.

The New York State Dairy Foods case is moving forward. The plaintiffs filed their brief with the First Circuit Court of Appeals on March 12, 1999. The Commission will file its brief on April 21, 1999. The Conservation Law Foundation will file an amicus brief in support of the Commission. The Attorney General of the State of Vermont is also writing an amicus brief in support of the Commission and that brief may be joined by the Attorneys General of the other five New England states, as well as the states of New York and New Jersey. Oral arguments will probably take place over the summer and a decision is not expected until the fall, at the earliest.

The U.S. District Court in Vermont issued its decision in the Organic Cow case, and Richard Cassidy, Esq. will explain that decision later in the meeting.

The University of Vermont has provided drafts of some sections of the market impact studies. Commissioner Doug Morris agreed to assist in reviewing the research.

Also in March, Ken Becker spoke about the Compact to the Boston Milk Producers Group at their annual meeting in Maine. He has also been asked to speak on April 21 to the Federal Market Administrator's Economic and Market Information Conference annual meeting in Saratoga Springs, New York. That presentation will focus on the Compact and how the Compact interfaces with the Federal Market Administrator's Office in New England.

Treasurer's Report:

Ken Becker referred to the financial report already given.

Committee on Administration:

Chair Mae Schmidle reported that the Committee met several times and will be considering the Federal Milk Market Order Reform.

Audit Committee:

The Committee had no report.

Bylaws Committee:

The Committee had no report.

Committee on Regulations & Rulemaking:

Bobby Starr reported that the Committee met on April 1, 1999 and has some proposals regarding supply management issues and the ex parte communications. The Commission will also consider the final rule on the administrative assessment and electronic funds transfer rule later in the meeting.

Old Business:

Deliberation and Decision on Proposed Rule Regarding Administrative Assessment:

Ken Becker summarized the administrative assessment and electronic funds transfer rulemaking proceedings, beginning with the subjects and issues proceeding in December 1998 and continuing with the proposed rule approved at the January 1999 meeting and the public hearing and comment period in March 1999. The Commission considered the pre-discussion draft and deliberated on the proposed rules to allow the Commission the discretion to set the rate at 3.2 cents or less and to require milk handlers who owe more than $25,000 to pay by electronic funds transfer. Following discussion and deliberation the Commission decided not to include a provision that would allow the Commission to raise the administrative assessment to a maximum of four cents per hundredweight in exceptional circumstances. The Commission also considered and deliberated on the issue of whether the electronic funds transfer rule should be made effective prior to the April pool paid in May, and whether good cause exists to do so.

Bobby Starr made a motion to adopt the amendments to the over-order price regulation to give the Commission discretion, in any given month, to waive the administrative assessment entirely, or to set the rate at 3.2 cents or less per hundredweight of fluid milk. Ron Newman seconded the motion. The motion passed by a vote of 5-1 of the state delegations, with New Hampshire voting against the motion.

Bobby Starr made a motion that the Commission find that the public interest continues to be served by establishment of minimum milk prices to dairy farmers under Article IV, as amended to permit the Commission discretion, in any given month to waive entirely or to set the rate of the administrative assessment at a rate of 3.2 cents or less of fluid milk. Ron Newman seconded the motion. The motion passed by unanimous vote of the six state delegations.

Bobby Starr made a motion to adopt a new rule to require handlers to make payment to the Compact Commission by electronic funds transfer, if the total amount due is greater than $25,000. Ron Newman seconded the motion. The motion passed by unanimous vote of the six state delegations.

Bobby Starr made a motion that the Commission find that the public interest continues to be served by establishment of minimum milk prices to dairy farmers under Article IV, as amended to require handlers to make payment to the Commission by electronic funds transfer, if the total amount due is greater than $25,000.

Bobby Starr made a motion that the Commission find that the previously established level price of $16.94 (Zone 1) to dairy farmers under Article IV, is unaffected by these amendments, and will continue to assure that producers supplying the New England market receive a price sufficient to cover their costs of production and will elicit an adequate supply of milk for the inhabitants of the regulated area and for manufacturing purposes. Ron Newman seconded the motion. The motion passed by unanimous vote of the six state delegations.

Bobby Starr made a motion that the Commission find that the major provisions of the order, other than those fixing minimum milk prices, are and continue to be, in the public interest and are reasonably designed to achieve the purposes of the order. Ron Newman seconded the motion. The motion passed by unanimous vote of the six state delegations.

Bobby Starr made a motion that the terms of the proposed amendments will be voted by producers and that the referendum procedure be certified to designate the month of December 1998 as the representative period, that ballots will be mailed to eligible producers and qualified cooperatives by April 16, 1999, that qualified cooperatives must mail notice of block votes by April 20, 1999, that all ballots must be received in the Commission office by 5:00 p.m. on April 26, 1999 and that Chair Mae Schmidle serve as referendum agent. Ron Newman seconded the motion. The motion passed by unanimous vote of the six state delegations.

Bobby Starr made a motion to promulgate the electronic funds transfer rule with an effective date of May 13, 1999 and to find that, to the extent necessary, the 30-day waiting period, in this instance, is excused for good cause because it is impracticable, unnecessary and contrary to the public interest. Ron Newman seconded the motion. The motion passed by unanimous vote of the six state delegations.

Bobby Starr asked to defer the remainder of the Committee report until after the lunch break to allow the Committee to meet.

Report by Reauthorization Tracking Committee:

Bobby Starr reported that the state of Delaware is considering compact legislation and the compact legislation has passed the Pennsylvania Senate Agriculture Committee. Missouri compact legislation has passed the House and is pending in the Senate. Texas passed the compact bill in the House Agriculture Committee. In Georgia the governor is expected to sign the compact legislation this week. This brings the total number of states that have passed the compact to 21. The reauthorization bill, soon to be introduced in Congress, now has 36 sponsors in the Senate and 128 sponsors on the House bill.

Harold Howrigan reported that Agriculture Commissioner Graves from Vermont and Agriculture Commissioner Odom from Louisiana are cosponsoring a reauthorization and fund-raising effort and hope to raise at least one million dollars for the reauthorization effort in Congress. They have received considerable support from businesses, individuals and states. Also, Maryland wants to join the Northeast Dairy Compact upon reauthorization. Senator Lott, who previously supported the compact, has now backed away from it and Senator Lugar has asked for a side-by-side review of compact conditions and Commission actions to comply with those conditions.

At the request of the Chair, Commissioner Graves reported that the States Ratification Committee continues to meet on a weekly basis and that there remains a close collaborative effort between the states in the northeast and states in the south. He co-chairs the committee with Commissioner Odom of Louisiana. Commissioner Healy and Commissioner Taylor are on the executive committee for the northeast and Commissioner Graham of North Carolina serves as the treasurer. They are close to reaching the one million dollar fund-raising goal.

Organic Cow Litigation:

This item was added to the agenda because the decision was issued by the Court on April 2, 1999. Richard Cassidy, Esq., counsel for the Commission in this litigation, summarized the history of the litigation and the Court's decision.

Jacques Couture made a motion that the Commission go into Executive Session to receive legal advice. Al Bettencourt seconded the motion. The motion passed by unanimous vote of the six state delegations.

At the conclusion of the Executive Session, Ron Newman made a motion to refer the Court's decision concerning the Organic Cow litigation to the Commission's Committee on Administration for appointment of a hearing panel or independent hearing officer. Al Bettencourt seconded the motion. The motion passed by unanimous vote of the six state delegations.

The Commission recessed for lunch.

Public Participation:

New York dairy farmer Ken Dibbell commented on the USDA 200 million dollar disbursement and milk checks for the next four months. The processor assessment at twenty cents is really a consumer assessment, paid by the consumer and we are still losing fluid sales. Mr. Dibbell also commented on relative mailbox prices in the northeast and the midwest and noted that the midwest prices are higher. He would like to see more cooperative efforts between the northeast and the midwest dairy farmers.

New Business:

Committee on Administration's Recommendations:

Ron Newman made a motion, on behalf of the Committee on Administration, to approve payment of an invoice dated March 4, 1999 in the amount of $12,240.00 to the Federal Market Administrator's Office for the January pool, February audits and verification of the CCC refund applications. Motion passed by unanimous vote of the six state delegations.

Future Meeting Date:

The next meeting will be May 5, 1999.

Committee on Regulations and Rulemaking (continued):

Bobby Starr reported that the Committee is proposing a supply management program. Carmen Ross explained the details of the proposed program. Mr. Ross explained that the proposed program is an assessment and refund program. As described in the pre-discussion draft, the CCC refund experience was used as a model. The proposal would run on a calendar year and the Commission would withhold a flat sum out of each pool to fund the program and then to refund the money in two parts. The first half of the assessment fund would be paid to all producers at an equal per producer rate who either reduced production, as compared to the prior calendar year's production, or who increased production by 1% or less. The second half of the assessment fund would be paid only to those producers who reduced production. This latter payment would be on a hundredweight basis for the amount of reduced milk production. Mr. Ross explained the charts included in the pre-discussion draft.

Mr. Ross also explained that the proposal would eliminate the current provision in the CCC escrow regulation that requires that any balance be paid back to only those producers who reduce production. Any balance would instead be returned to the producer-settlement fund for distribution to all producers. The Commission discussed the elements of the proposed supply management program and other ideas and issues regarding a Compact supply management program.

Bobby Starr made a motion that the Commission propose the supply management program as described in the pre-discussion draft and that the Commission hold a public hearing on May 5, 1999 in Concord, New Hampshire. No second was required. The motion passed by unanimous vote of the six state delegations.

Bobby Starr reported that the Committee recommends that the Commission adopt an amendment to the current ex parte provision in the Commission's rulemaking procedures as described in the pre-discussion draft. The proposed amendment would allow Commissioners to discuss the merits of a pending rulemaking after the close of the comment period. Mr. Starr recommended that this amendment be adopted prior to publication of the proposed supply management program rules.

Ken Becker explained the requirements of the current rule and how the amendment would change the restrictions on Commissioners discussions with each other. The Commission discussed the proposed amendments to the ex parte regulation.

Bobby Starr made a motion that the Commission amend section 1361.11 regarding ex parte communications to allow more communication among Commission members. No second was required. The motion passed by unanimous vote of the six state delegations.

Announcements: Opportunity for individual State comments:

Ron Newman announced that Bob Gray, who is working on the reauthorization of the compact, would like Commissioners to go to retail markets and watch milk prices since milk prices fell for April milk. Anyone interested in assisting this effort should contact him for further details and forms.

The meeting adjourned at approximately 3:20 p.m.

Respectfully submitted,

Powell Cabot

Secretary

The next Commission meeting will be held Wednesday, May 5, 1999, time to be determined by close of public hearing scheduled to commence at 9:00 a.m. and to conclude no later than 12:00 p.m. on the same day at this location:

The Wayfarer Inn, 121 S. River Road, U.S. Route 3, Bedford, New Hampshire