June 2, 1999

Commission Members in Attendance:

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

ME: Colon Durrell and Fred Hardy

MA: William Gillmeister and Mary Kassler

NH: Debora Erb

R I: Al Bettencourt, Aaron Briggs, Ron Newman and John Smith

VT: Jacques Couture, Andy Dykstra, Millicent Rooney and Bobby Starr

Commission Staff Present:

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

The Meeting was called to order by Chair Mae Schmidle at approximately 10:25 a.m.

Public Participation:

Jim Buelow, National Farmer's Organization (NFO) Regional Dairy Director asked for the Commission's guidance regarding recent audit adjustments to NFO and the depooling of NFO milk in April 1999 pursuant to the Commission's regulation limiting Compact payments on diverted and transferred milk that was effective on January 1, 1999. At the suggestion of Commissioner Bobby Starr, and with the consensus of the Commission, the matter will be referred to the appropriate Committee for a report to the Commission.

Introduction of Guests:

The Chair introduced Leon Graves, Vermont Commissioner of Agriculture and Ex Officio member of the Vermont Compact Commission delegation, Ray Christiansen, Special Assistant to the New York State Commissioner of Agriculture and Markets, and Gabriel Moquin, Deputy Director of the Connecticut Department of Agriculture. Members of the public introduced themselves to the Commission at the request of the Chair. The Chair also introduced Richard Uncles from the New Hampshire Department of Agriculture.

Consideration of Minutes - May 5, 1999 Meeting:

Bob Jacquier made a motion to accept the minutes of the May 5, 1999 meeting. Fred Hardy seconded the motion. Motion to accept the minutes passed by unanimous vote of the six State delegations.


The Chair reported a letter was received from Bob Durand, Secretary of State of the Commonwealth of Massachusetts.

Financial and Budget Reports - Month Ending April 30, 1999

Bobby Starr recused himself from the meeting during discussions of financial matters.

Ken Becker reported that the accountant has been reviewing the Commission accounts and reconciling the books through April 30, 1999. The accountant is confident the accounts are accurate, however, the balance sheet as of April 30, 1999 and the draft profit and loss statements for April 1999 and the period January through April 1999 are marked "draft," because a few transactions have not yet been finally reconciled with the bank statements. Therefore, the reports are submitted for discussion and not approval for audit at this time.



The Chair reported that she met with the Rhode Island state delegation. In addition, the Commission's outside counsel, Richard Cassidy previously updated the Chair on the status of several matters. Based on the information from Mr. Cassidy, the Chair reported that the Organic Cow case is still pending, the joint handler exemption petition, In re Suiza, is in the process of being resolved and a matter involving former Officer Manager Becky Holden is being resolved. Finally, the Committee on Administration is involved in conducting some personnel evaluations.

Executive Director:

Ken Becker reported that the April pool, paid in May, amounted to $8.6 million and returned nearly $8 million to producers. The new rule requiring handlers, who owe more than $25,000, to make payment by electronic funds transfer was effective and all handlers complied with the new regulation. There were no complaints or difficulties. The Commission returned pooled funds by wire transfer on May 20. Funds were reserved for WIC and school milk reimbursements. The school milk reimbursements will be distributed later this summer, following the close of the 1998-1999 school year.

In addition, there were a number of audit adjustments affecting a number of handlers. The adjustments were the result of the auditing process conducted by the Federal Market Administrator's office pursuant to a contract with the Commission. The audits assure compliance with the Commission's rules and regulations. Because there has been no pool since last September, this is the first month since that date the audit adjustments were made. The adjustments resulted in debits to some handlers, and credits to others.

The diversion and transfer rule that was effective on January 1, 1999 was applied to the April pool and some milk was depooled.

Mr. Becker reported that a hearing was held in the pending joint petition proceeding, In re Suiza, on May 10, 1999. The hearing panel will issue a recommended final decision for the Commission's consideration in the near future. The substance of the petition was not discussed.

Treasurer's Report and Committee on Finance:

Mary Kassler reported that the Committee on Finance has been meeting regularly by conference call. The Committee on Finance will make a recommendation regarding the balance in the WIC account to return surplus funds to the producers at regular intervals. The Committee also recommends that additional hours be approved for the contract with Tom Lehner, who is providing legal counsel to the hearing panel in the pending joint petition In re Suiza. Finally, the Committee recommends a contract with the accounting firm Fothergill, Segale & Valley to provide accounting services for the Commission. The cost to date has been approximately $3,000 and the costs are expected to be no more than $2,000 per month between June and September.

Committee on Administration:

Chair Mae Schmidle reported that the Committee discussed the accounting contract with the Fothergill firm and the additional hours requested pursuant to the contract with Mr. Lehner. In addition, the Committee discussed the Federal Market Administrator Invoice and increasing the salary of one of the staff members. The Committee also agreed on the appointment of an independent hearing officer for the Organic Cow case.

Audit Committee:

In the absence of Chair Tom Doak, Ken Becker reported that the auditors have completed their portion of the audit. The audit will be provided to the Audit Committee later this week for their review. The Audit Committee anticipates making a recommendation to the Commission at the next meeting.

Bylaws Committee:

Deb Erb reported that the Committee met by conference call on May 18 and May 27 to discuss proposed revisions that attempt to ensure that the Bylaws unambiguously state their original intent that the entire Commission retains the ultimate authority for all actions, while still providing the flexibility that is needed. Some of the changes are housekeeping and others clarify the intent. Anyone who wishes to make suggestions for revisions or comments should contact Ms. Erb. The Bylaws Committee will meet again during the lunch break of the Commission meeting today and again on Tuesday or Thursday of next week, by conference call. The Committee plans to have proposed revisions at the next meeting. The Committee will distribute the recommended revisions to Commissioners as soon as they are available.

Committee on Regulations & Rulemaking:

Bobby Starr reported that the Committee met on May 24 to discuss the proposed supply management plan and will report under the next item on the agenda. The Committee will also meet during the lunch break to discuss the recommendation regarding the Commodity Credit Corporation issue.

Old Business:

Deliberation and Decision on Proposed Rule Regarding a Supply Management Program:

Bobby Starr reported that the Committee on Regulations and Rulemaking reviewed the testimony and comments received on the proposed supply management plan. The Committee recommends that the Commission modify the proposed program to make the assessment on a cents per hundredweight basis, instead of either a flat rate or a percentage of the pool basis. In addition, the Committee recommends putting a $12,000 cap on the per hundredweight payment. The Committee feels that additional comment and testimony is needed and proposes two additional public hearings on July 7 in the Springfield, MA area and August 4, in the Lebanon, NH area, both hearings to commence at 7:00 p.m., and an extended written comment period accordingly. The Committee intends that the additional hearings will give the farmers an additional opportunity to present their ideas and allow the Commission to put forth a better supply management plan.

Bobby Starr made a motion, on behalf of the Committee on Regulations and Rulemaking, to modify the proposed supply management program to change the assessment to five cents per hundredweight in only those months when there is a producer pool and to establish a maximum per hundredweight refund payment of $12,000 and to extend the rulemaking process to hold two additional public hearings at 7:00 p.m. on July 7 in the Springfield, MA area and August 4, 1999 in the Lebanon, NH area to receive additional comment on the modified assessment/refund program.

The Commission discussed the Committee recommendations, the extended rulemaking schedule and whether additional supply management plan options should also be noticed and proposed for public testimony and comment, in addition to the assessment/refund program.

Bill Gillmeister made a motion to amend Bobby Starr's motion to exclude the last full sentence from page 3 of the Pre-Discussion Draft. Al Bettencourt seconded the motion. Discussion followed. Two state delegations voted in favor of the motion and four state delegations, Rhode Island, Vermont, Connecticut and Maine, voted against the motion. The motion failed.

The Commission then voted on the motion of Bobby Starr, on behalf of the Committee. The motion passed with five state delegations voting in favor of the motion and one state delegation, Massachusetts, voting against the motion.

Bill Gillmeister made a motion to notice a proposed base-excess plan with the elements in Robert Wellington's comments dated May 19, 1999 and additional information from the Commission. Deb Erb seconded the motion. Discussion followed. The motion passed with four state delegations voting in favor of the motion and two state delegations, Rhode Island and Vermont, voting against the motion.

Al Bettencourt made a motion that during the months or quarters when Northeast Dairy Compact farmers produce more milk than is consumed in the compact area, no over-order price will be paid for that month or quarter. Deb Erb seconded the motion. Discussion followed. The motion failed by unanimous vote of the six state delegations.

The Commission recessed for lunch.

Public Participation:

Gabe Moquin reported that Southern Compact Committee headed by the Georgia Department of Agriculture has begun work on guidelines, rules and regulations regarding the Southern Dairy Compact, and they have approached him to provide information from the Northeast Compact to them.

Committee on Administration Recommendations:

The Chair reported that the Committee will present the Personnel Policies within the next month or two to the Commission for its consideration.

Report by Reauthorization Tracking Committee:

Bobby Starr reported that the reauthorization efforts in Washington are going reasonably well. There is no time table yet on the vote on the pending legislation. It is possible that the legislation regarding the reauthorization and expansion may proceed in separate stages

Committee on Regulations and Rulemaking Recommendations:

Bobby Starr made a motion to designate January 1999 as the representative period for the producer referendum in the school milk exemption extension regulation. Ron Newman seconded the motion. Discussion followed. The motion passed by unanimous vote of the six state delegations.

Bobby Starr reported that the Committee met to consider whether to escrow funds for any potential liability to the Commodity Credit Corporation (CCC). The staff has been monitoring the rate of increase in production in New England compared to the national rate. New England is presently almost one-half a percent under the national average. The Committee recommends that the staff continue to monitor the figures and that no funds be withheld from the next pool. The current regulation requires that if the New England rate of increase comes within .25% of the national rate of increase that the Commission determine how much to extract from the producer pool. The Committee will report again at the next meeting.

Ken Becker reported that he has spoken with the analyst at the CCC. The numbers used to calculate the rate of increase are published by National Agricultural Statistics Service (NASS). The national rate of increase for the first six months of federal fiscal year 1999 is 2.9%. The rate of increase in New England for the same period is 2.5%. The discussions with the CCC analyst

go back to the language of the condition in the compact. The condition provides that the rate of increase for the fiscal year be compared to the prior fiscal year which means that if the comparison shows the New England rate of production is higher than the national average, then the Secretary determines the amount of the Commission's obligation. Last year, the amount of the obligation was determined based on a two-year average. The analyst has stated that three different statistical methods could be employed to determine the amount of obligation based on the data for the first six months of the fiscal year. Those methods result in a potential liability of $0, $2 million or $4 million. The analyst recommended that it would be prudent to withhold five cents from the next pool. However, based on the information available, which shows the New England rate below the national average, and because there will be three additional pools in the federal fiscal year, it is recommended that the Commission continue to monitor the statistics, but that no money be withheld from the next pool. The monthly data also shows that Vermont's rate of increase for March and April 1999 is under the 20-state rate and staff will continue to monitor the data.

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 May 4, 1999 in the amount of $9,216 to the Federal Market Administrator's Office. The motion passed by unanimous vote of the six State delegations.

The next meeting of the Commission will be on July 7, 1999 in the Springfield, Massachusetts area.

The Committee approved both the Fothergill and Lehner contracts and they will be presented later under the Committee on Finance recommendations.

Committee on Bylaws Recommendations:

The Committee will have a conference call next week and plans to have recommendations for the July meeting.

Committee on Finance:

Mary Kassler reported that the Committee recommends that the $160,000 surplus in the WIC account be returned to the producer-settlement fund for distribution to farmers. Based on the nearly two years of experience, it appears that the present rate of withholding is very close to the amount claimed and there is no need to adjust the rate. Ms. Kassler made a motion on behalf of the Committee on Finance to direct the Executive Director to work with the New England State WIC programs to amend the Memorandum of Understanding to allow for a once a year return of excess monies for that year in the WIC account to the producer settlement fund, after final payments for that year are made. Discussion followed. The motion passed by unanimous vote of the six State delegations.

Mary Kassler made a motion to go into Executive Session, to discuss issues related to legal proceedings. John Smith seconded the motion. The motion passed by unanimous vote of the six State delegations. Bobby Starr and Richard Allen recused themselves from the executive session.

Prior to entering executive session, Bob Wellington invited the Commission and general public to tour the Agri-Mark plant in West Springfield, MA since the Commission meeting will be in that area on July 7, 1999.

Following the executive session, Mary Kassler made a motion, on behalf of the Committee on Finance, to amend Tom Lehner's contract to add 20 hours at $150 an hour so that the work on the Suiza petition hearing panel can be completed . The motion passed by unanimous vote of the six State delegations.

Mary Kassler made a motion, on behalf of the Committee on Finance, to accept the Fothergill Segale & Valley agreement regarding bookkeeping and accounting services. The motion passed by unanimous vote of the six State delegations.

Mary Kassler made a motion, on behalf of the Committee on Finance, to increase the salary of the office administrative assistant 15% to $25,500.80 plus overtime. The motion passed by unanimous vote of the six State delegations.


Ron Newman commended staff for the meeting location. The Chair supported Mr. Newman in commending the staff.

Ken Becker announced that the 1997 annual reports have been published and distributed to Commission members. The annual reports will be sent to the participating State Governors, Departments of Agriculture and legislatures and the United States Secretary Agriculture. Some of the state delegations will send the annual report directly to their State Governors, Departments of Agriculture and legislatures.

The Audit Committee should have a recommendation on the 1998 audit at the July meeting, and after approval of the audit, the 1998 annual report will be published.

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

Respectfully submitted,

Mae S. Schmidle

Chair, in the absence of Secretary Powell Cabot

The next Commission meeting will be held Wednesday, July 7, 1999 at 1:00 p.m. at

Eastern States Exposition, Brooks Building/Main Administration Building,

1305 Memorial Avenue, West Springfield, Massachusetts.

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