APPROVED MINUTES

COMMISSION REGULAR MONTHLY MEETING

BROOKS BUILDING, EASTERN STATES EXPOSITION

July 7, 1999

Commission Members in Attendance:

CT: Shirley Ferris, Robert Jacquier and Mae Schmidle

ME: Colon Durrell, Fred Hardy and Linda Smith-Dyer

MA: Gordon Cook, Jim Hines, Mary Kassler and Sam Shields

NH: Powell Cabot, Debora Erb and Doug Morris

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

VT: Jacques Couture, Andy Dykstra, Harold Howrigan and Millicent Rooney

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 1:25 p.m.

Public Participation:

No members of the public chose to participate.

Introduction of Guests:

Members of the public introduced themselves to the Commission at the request of the Chair.

Consideration of Minutes - June 2, 1999 Meeting:

Motion by Andy Dykstra/Second Fred Hardy

Moved to accept the minutes of the June 2, 1999 meeting as presented.

MOTION PASSED 6 TO 0.

Communications:

There were no communications to report.

The Chair announced two adjustments to the agenda. The first adjustment is to move item VIII. C. regarding the Final Decision on HEP 99-014 to be the next item for discussion. In addition, a new item will be added at Article VII.D. to discuss personnel matters. There were no objections and the agenda was adjusted accordingly.

New Business: Final Decision on HEP 99-014 (In Re Petition of Suiza, et al)

Motion by Ron Newman/ Second Fred Hardy

Moved to go into executive session to consider the final decision in HEP 99-014.

MOTION PASSED 6 TO 0.

The Commission returned to regular session.

Motion by Ron Newman/Second Jacques Couture

Moved to adopt the proposed final decision of the Hearing Panel in In re Petition of Suiza, HEP 99-014.

MOTION PASSED 6 TO 0.

Motion by Ron Newman/ Second Bob Jacquier

Moved to go into executive session to discuss litigation.

MOTION PASSED 6 TO 0.

The Commission returned to regular session.

Financial and Budget Reports - Month Ending May 31, 1999

Mary Kassler reported that the Commission's net income is down and expenses exceed income at this point. She reviewed the Profit and Loss statements for each month of January, February, March, April and May 1999 and the Balance Sheet as of May 31, 1999.

Motion by Gordon Cook/ Second Sam Shields

Moved to acknowledge the Budget Report and place it on file for audit.

MOTION PASSED 6 TO 0.

Reports:

Chair:

The Chair reported that the producer referendum on the school milk exemption extension regulation passed by 98.6% of the vote. The Chair also went to Washington, D.C. for the public hearing on the extension of the Compact.

Harold Howrigan commented that people who were present at the public hearing in Washington reported that the Chair made an excellent presentation.

Executive Director:

Ken Becker reported that the office has received a variety of calls and requests for information regarding the legislation in Congress and the Compact regulation and the WIC and school milk regulations.

The May pool was very successful. The pool value was approximately $5 million. The over-order obligation for June will be $1.89, $2.44 for July and $2.28 for August, and there will be a sizeable Compact pool for each month through the summer.

Treasurer's Report and Committee on Finance:

Mary Kassler reported that the Committee on Finance has been meeting monthly by conference call before each Commission meeting to review and discuss the financial reports. The accounting firm of Fothergill Segale & Valley has reviewed the Commission financial procedures and are working on a procedures manual.

At the request of Ms. Kassler, Ken Becker reported that the Commission has experienced a cash flow problem during the pendency of the hearing petition HEP 99-014, In re Suiza. The Commission has obtained a line of credit to ensure it is able to meet operating expenses.

Mr. Becker then explained that the Commission financial reports, both income and expenses, are on an accrual basis. Many expenses on the May 1999 Profit and Loss are accrued expenses and represent many of the same expenses listed under accounts payable on the May 31, 1999 Balance Sheet. Most of those expenses have been paid.

Mary Kassler added that Mr. Becker did an excellent and outstanding job managing the financial circumstances and also thanked Jacques Couture, Harold Howrigan and Leon Graves for their instrumental efforts. The Chair also acknowledged Mr. Becker's efforts.

Committee on Administration:

Chair Mae Schmidle reported that the Committee has been meeting on a regular basis to discuss finances and Mr. Becker has been keeping them up to date. They have also discussed personnel issues and a contract with Richard Cassidy, Esq.

Audit Committee:

In the absence of Chair Tom Doak, Gordon Cook reported that the Committee met with the auditor, Fred Duplessis of the firm Sullivan and Powers. The Committee found no problems with the audit. However, the Committee does have four recommendations: 1) That the escrow accounts be broken out separately in the audit, provided no individual contributor can be identified; 2) That a copy of the 1998 audit be provided to our accounting firm, Fothergill Segale & Valley; 3) At our August 4 meeting, that Commission staff report on Commission Y2K status and any steps to ensure compliance; 3) That the Commission insist that the bank change the quarterly statements to match the Commission fiscal year.

Bylaws Committee:

Deb Erb reported that the Committee has met by conference call and is continuing their work. When they are finished they will bring their recommendations to the Commission.

Committee on Regulations & Rulemaking:

Ken Becker reported that he received a letter late last week from the Commodity Credit Corporation (CCC) that indicates their estimate, at the present time, of the Commission's liability for federal fiscal year 1999 is $3.5 million. This is based on preliminary data and will be adjusted as data from NASS in July and August becomes available. The Committee reviewed three specific issues: 1) That there was no compact payment from September 1998 through March 1999, so Compact payments could not have impacted milk production in those months; 2) Comparing the first six months of federal fiscal year 1998 with the same period in 1999, the current milk production data shows the New England rate of increase for fiscal year 1999 is 2.5% and the United States rate of increase in 2.9%. Therefore, the New England rate is well below the national rate of increase for the fiscal year. Mr. Becker explained that the CCC is calculating the rate of increase based on an average rate of increase for 1997 and 1998 as compared to 1999 to conclude that the New England rate of increase is higher than the national average; and 3) Through June 1999, the CCC has purchased milk from the West and Midwest, but has made no purchases from the East. NASS quarterly statistics will be out on July 15, 1999 and will allow a 9 month comparison period.

Mr. Becker recommends, consistent with his discussion with the CCC, that no funds be withheld until a final determination of liability is made in September. It appears that the August pool paid in September will be of sufficient size, approximately $5.75-6 million, to withhold the funds necessary to meet a CCC liability, if any, and that discussions regarding whether there is any liability will continue in the meantime. This would also allow the Commission, if necessary, to withhold only the exact amount required from that pool.

Old Business:

Committee on Administration Recommendations:

The Chair reported that the Committee will have some recommendations under New Business.

Report by Reauthorization Tracking Committee:

Harold Howrigan reported that the Wisconsin Senators have vowed to filibuster the Compact reauthorization bill, which includes other dairy legislation, including the authorization of the Southern Compact, and other issues. There is also a lot of support for the reauthorization. Leon Graves also reported that Senators need to hear from Compact supporters.

Committee on Regulations and Rulemaking Recommendations: CCC Escrow Recommendations

The Commission discussed the CCC escrow recommendation presented earlier in the meeting by Mr. Becker. Bob Jacquier asked the Chair to recognize Bob Wellington to provide the Commission with information relative to national milk production forecasts. The Chair recognized Mr. Wellington, who provided data regarding milk production levels in certain states.

Motion by Bob Jacquier/Second Harold Howrigan

Moved that no money be reserved from the June pool paid in July because the rate of increase in the New England states in fiscal year 1999 is below the rate of increase nationally by .4% and the Commission will revisit the issue again at the August meeting.

MOTION PASSED 6 TO 0.

Personnel:

The Commission adjusted the agenda to move this item to the end of the agenda.

New Business:

Committee on Administration's Recommendations:

Motion by Ron Newman on behalf of Committee on Administration

Moved to accept the Federal Market Administrator's invoice - April pool, and audits completed in April, referendum mailing.

MOTION PASSED 6 TO 0.

Next Meeting Date:

The next meeting will be on August 4, 1999 at the Briggs Opera House, White River Junction, Vermont at 1:00 p.m. The public hearing will convene at 7:00 p.m. on the same day.

Audit Committee:

Gordon Cook presented the four recommendations of the Audit Committee for discussion. In response to the recommendation that the Commission's individual reserve accounts be reported separately, Dixie Henry explained that the Commission's reserve accounts are reported in a single item to ensure the protection of the confidential information in court or Commission ordered escrow accounts. Ken Becker reported that the accounting firm Fothergill Segale & Valley has already received a copy of the draft audit report. Ken Becker responded that staff will report on Y2K compliance at the August meeting and that the bank will be contacted to ensure the bank statements are issued according to the Commission's fiscal year.

Motion by Gordon Cook on behalf of the Audit Committee

Moved to accept the audit report.

MOTION PASSED 6 TO 0.

Announcements:

Bob Jacquier noted that the Eastern States Exposition has made available the meeting rooms for this meeting and the public hearing this evening at no cost to the Commission. Mr. Becker will write a letter to express the appreciation of the Commission.

Personnel:

Motion by Mary Kassler/ Second Linda Smith-Dyer

Moved to go into executive session to discuss personnel matters.

MOTION PASSED 6 TO 0.

The Commission returned to regular session.

The meeting adjourned at approximately 5:40 p.m.

Respectfully submitted,

Powell Cabot

Secretary

The next Commission meeting will be held Wednesday, August 4, 1999 at 1:00 p.m. at

the Briggs Opera House, White River Junction, Vermont