HBA-JRA H.B. 2000 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2000 By: Turner, Bob Agriculture & Livestock 3/16/1999 Introduced BACKGROUND AND PURPOSE In the past four years Texas has lost over 34 percent of its dairy farms and 10 percent of its milk production. The volatility of cheese markets in California and Wisconsin, which dictates the price paid for fluid milk in Texas, is not correlated to the supply of fluid milk in Texas markets. Texas dairy farmers have been unsuccessful in decoupling fluid milk prices and the cheese markets in the federal milk pricing formula. H.B. 2000 establishes the Southern Dairy Compact, allowing Texas to join eleven other southern states that have passed compact legislation. Texas is one of four states that is eligible to join the compact and has yet to pass compact legislation. The Southern Dairy Compact provides stabilization of the dairy marketplace while preserving a local supply of milk at less cost than imported milk by overseeing the marketing of Class I fluid milk sold in the compact region. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subtitle D, Title 6, Agriculture Code, by adding Chapter 182, as follows: CHAPTER 182. SOUTHERN DAIRY COMPACT Sec. 182.001. DEFINITIONS. Defines "compact" to mean the Southern Dairy Compact, "compact commission" to mean the Southern Dairy Compact Commission, and "delegate" to mean a member of the delegation from this state to the Southern Dairy Compact Commission. Sec. 182.002. DELEGATES; QUALIFICATIONS. (a) Authorizes the commissioner of agriculture (commissioner) to be a delegate or appoint another person to serve as a delegate in the commissioner's place at the pleasure of the commissioner. Provides that the commissioner's appointee must be an employee of the Department of Agriculture (department), preferably with experience with milk marketing and stabilization. Provides that the delegate serving under this subsection will serve as chair of the delegation from this state. (b) Sets forth the composition of the delegation, to be appointed by the governor. (c) Provides that each delegate must be a resident and registered voter of this state. (d) Establishes that a delegate is not an officer of this state by virtue of holding the position of delegate. Sec. 182.003. TERMS; REMOVAL; VACANCY. Provides that each delegate serves a four-year term, is required to serve from the date of appointment until a successor is appointed and qualified, is prohibited from serving more than three consecutive terms, and may be removed for cause. Sec. 182.004. EFFECTIVE DATE OF COMPACT. (a) Requires the compact to become effective when executed on behalf of this state and filed with the secretary of state by the governor, consented to by the United States Congress, and ratified by two or more of the other states named in Section 20, Article VII, of the compact in a form substantially similar to that contained in Section 182.005. (b) Requires the governor to take such action as may be necessary to complete the exchange of official documents between this state and any other states ratifying the compact. Sec. 182.005. COMPACT TO BE ENTERED; TEXT. Provides that the Southern Dairy Compact is hereby entered into and enacted into law, subject to Section 182.004, as follows: ARTICLE I. STATEMENT OF PURPOSE, FINDINGS, AND DECLARATION OF POLICY Sec. 1. STATEMENT OF PURPOSE, FINDING, AND DECLARATION OF POLICY. Sets forth the purpose of this compact and the findings and policy of the participating states. ARTICLE II. DEFINITIONS AND RULES OF CONSTRUCTION Sec. 2. DEFINITIONS. Defines "class I milk," "commission," "commission marketing order," "compact," "compact over-order price," "milk," "partially regulated plant," "participating state," "pool plant," "region," "regulated area," and "state dairy regulation" for the purposes of this compact. Sec. 3. RULES OF CONSTRUCTION. (a) Prohibits this compact from being construed to displace existing federal milk marketing orders or state dairy regulation in the region. Requires the compact to be construed to provide the commission the option to replace any federal orders in the region that are discontinued with one or more commission marketing orders pursuant to this compact. (b) Requires this compact to be construed liberally in order to achieve the purposes and intent enunciated in Section 1 of this compact. Sets forth the intent of this compact and authorizes the commissioner to further define technical terms associated with market order regulation which have acquired commonly understood general meanings. Authorizes the commission to develop additional concepts and define additional terms as it may find appropriate to achieve its purposes. ARTICLE III. COMMISSION ESTABLISHED Sec. 4. COMMISSION ESTABLISHED. Establishes the Southern Dairy Compact Commission composed of delegations from each state in the region to administer the compact. Sets forth the composition of a delegation. Sets forth eligibility and service requirements and compensation for delegation members. Sec. 5. VOTING REQUIREMENTS. Requires all actions taken by the commission to be by majority vote of the delegation present, except for the establishment or termination of an over-order price or commission marketing order, and the adoption, amendment, or rescission of the commission's bylaws. Entitles each state delegation to one vote in the conduct of the commission's affairs. Requires at least a two-thirds vote of the delegations present to establish or terminate an over-order price or commission. Requires at least a two-thirds vote of the delegations present and the affirmative vote of that state's delegation to establish a regulated area which covers all or part of a participating state. Establishes that a majority of the delegations from the participating states constitutes a quorum for the conduct of the commission's business. Sec. 6. ADMINISTRATION AND MANAGEMENT. (a) Requires the commission to annually elect a chairperson, a vice-chairperson, and a treasurer. Requires the commission to appoint an executive director and fix the executive director's duties and compensation. Requires the executive director to serve at the pleasure of the commission. Requires the executive director and the treasurer to be bonded in an amount determined by the commission. Authorizes the commission to establish through its bylaws an executive committee composed of one member elected by each delegation. (b) Requires the commission to adopt bylaws for the conduct of its business and have the power to amend and rescind these bylaws by a two-thirds vote. Requires the commission to publish its bylaws with the appropriate agency or officer in each of the participating states. Requires the bylaws to provide for appropriate notice to the delegations and other agencies or officers of participating states as provided by the laws of those states of all commission meetings, hearings, and business. (c) Requires the commission to file an annual report with the secretary of agriculture of the United States, the governor of each participating state, both houses of the legislature, and the head of the state department having responsibilities for agriculture. (d) Establishes that the commission has the power to sue and be sued in any state or federal court; have and alter a seal; acquire, hold, and dispose of real property for its corporate purposes; borrow money and issue notes; appoint and prescribe the powers of officers, agents, and employees; create and abolish offices, employments and positions and provide for the removal, term, tenure, compensation, fringe benefits, pension, and retirement rights of its officers and employees; and retain personal services on a contract basis. Sec. 7. RULEMAKING POWER. Empowers the commission to make and enforce rules and regulations it deems necessary to implement any provision of this compact, in addition to creating a compact over-order price or commission marketing order. ARTICLE IV. POWERS OF THE COMMISSION Sec. 8. POWERS TO PROMOTE REGULATORY UNIFORMITY, SIMPLICITY, AND INTERSTATE COOPERATION. Empowers the commission to research the laws and regulations of the participating states to consider their administration, costs, impact on the production and marketing of milk, and effects on the shipment of milk; study and recommend to the participating states programs for administering such laws and regulations and prepare estimates of cost savings and benefits of such programs; conduct conferences to improve industry relations or a better understanding of problems; prepare and release to the participating states progress reports; review and recommend changes to the existing marketing system for milk and milk products; investigate costs and charges for services performed with respect to milk; and examine current economic forces affecting producers, probable trends in production and consumption, price levels in relation to costs, financial conditions of dairy farmers, and the need for an emergency order to relieve critical conditions on dairy farms. Sec. 9. EQUITABLE FARM PRICES. (a) Provides that the powers granted in this section and Section 10 of this compact apply only to the establishment of a compact overorder price, as long as federal milk marketing orders remain in effect in the region. Requires this article to authorize to commission to establish one or more commission marketing orders in the region or parts of the region if any or all such orders are terminated. (b) Provides that a compact over-order price established under this section applies only to Class I milk. Prohibits a compact over-order price from exceeding $1.50 per gallon at Atlanta, Georgia. Requires the price to adjusted at other locations in the region to reflect differences in minimum federal order prices. Requires the $1.50 per gallon maximum to be adjusted annually by the rate of change in the Consumer Price Index beginning in 1990 and using that year as a base. Sets forth the values of milk used in other use classifications and unregulated milk to be used for the purposes of the pooling and equalization of an over-order price. (c) Requires a commission marketing order to apply to all classes and uses of milk. (d) Empowers the commission to establish a compact over-order price for milk to be paid by pool plants, partially regulated plants, and all other handlers receiving milk from producers located in a regulated area. Requires this price to be established either as a compact over-order price or by one or more commission marketing orders. Requires the legal obligation to pay such a price to be determined solely by the terms and purpose of the regulation. Provides that a producer-handler is not subject to a compact over-order price. Requires the commission to provide for similar treatment of producer-handlers under commission marketing orders. (e) Requires the commission to consider certain specified conditions in determining the price. (f) Requires the commission to take such other action as is necessary and feasible to help ensure that the over-order price does not result in local production of milk in excess of the quantity necessary to assure consumers of an adequate supply. (g) Requires the commission to enter into agreements with state or federal agencies for exchange of information or services for the purpose of reducing regulatory burden and cost of administering the compact whenever possible. Authorizes the commission to reimburse other agencies for the reasonable cost of providing these services. Sec. 10. OPTIONAL PROVISIONS FOR PRICING ORDER. Provides that regulations establishing a compact over-order price or a commission marketing order may contain, but are not limited to, any of the following: (1) provisions classifying milk in accordance with use or creating a flat pricing program; (2) with respect to a commission marketing order only, provisions establishing separate minimum prices for each use classification or a single minimum price for milk purchased from producers; (3) with respect to an over-order minimum price, provisions establishing a minimum price for Class I milk; (4) provisions for establishing either an over-order price or a commission marketing order using flat pricing or formula pricing, as well as for location adjustments, zone differentials, and for competitive credits with respect to regulated handlers who market outside the regulated area; (5) provisions for the payment to all producers and associations of producers delivering milk to all handlers of uniform prices for the milk, irrespective of the handler's use of the milk, and for establishing an equalization pool; (6) provisions requiring persons who bring Class I milk into the regulated area to make compensatory payments to equalize the cost of milk purchased by handlers subject to a compact over-order price or commission marketing order. Prohibits a provision from discriminating against milk producers outside the regulated area; (7) provisions specially governing the pricing and pooling of milk handled by partially regulated plants; (8) provisions requiring the account of any person regulated under the compact overorder price to be adjusted for payments made to or received by such persons with respect to a producer settlement fund of any federal or state milk marketing order or other state dairy regulation within the regulated area; (9) provisions requiring the payment by handlers of an assessment to cover the costs of the administration and enforcement of such order; (10) provisions for reimbursement to participants of the Women, Infants and Children Special Supplemental Food Program of the United States Child Nutrition Act of 1966; and (11) other provisions and requirements as the commission may find are necessary or appropriate to accomplish the purpose of this compact and provide for the payment of fair and equitable minimum prices to producers. ARTICLE V. RULEMAKING PROCEDURE Sec. 11. RULEMAKING PROCEDURE. Requires the commission to conduct an informal rulemaking proceeding, governed by Section 4, federal Administrative Procedure Act (5 U.S.C. Section 553), before creating any regulations establishing a compact overorder price or commission marketing order to provide interested persons with an opportunity to present data and views. Requires the commission to publish notice of rulemaking proceeding in the official register of each participating state to the extent practicable. Requires the commission to hold a public hearing before the initial adoption or amendment with regard to prices or assessments. Authorizes the commission to begin a rulemaking proceeding or act on the petition of any person on its own initiative. Sec. 12. FINDINGS AND REFERENDUM. Requires the commission, in addition to the required concise general statement of basis and purpose, to make findings of fact with respect to whether the public interest will be served by the establishment of minimum milk prices to dairy farmers, the level of prices that will assure that producers receive a price sufficient to cover their costs of production and will result in an adequate supply of milk for the inhabitants of the regulated area and for manufacturing purposes, whether the other major provisions in the order are in the public interest and reasonably designed to achieve the purposes of the order, and whether the terms of the proposed regional order or amendment are approved by producers. Sec. 13. PRODUCER REFERENDUM. (a) Requires the commission, for the purpose of ascertaining whether the issuance or amendment of regulations establishing a compact over-order price or a commission marketing order is approved by producers, to conduct a referendum among producers in a timely manner. Requires the commission to describe the terms and conditions of the proposed order or amendment in the ballot, but prohibits the nature, content, or extent of such description from being a basis for attacking the legality of the order or any related action. (b) Requires an order or amendment to be deemed approved by producers if it is approved by at least two-thirds of the voting producers who have been engaged in the production of milk, the price of which would be regulated under the proposed order or amendment. (c) Requires the commission to consider the approval or disapproval by any cooperative association of producers qualified under the Capper-Volstead Act that are engaged in marketing milk or in rendering services for or advancing the interests of producers of such commodity as the approval or disapproval of the producers who are members or stockholders in, or under contract with, such cooperative association of producers. (1) Prohibits a cooperative which has been formed to act a common marketing agency for both cooperatives and individual producers from being qualified to block vote for either. (2) Requires any cooperative which is qualified to block vote to give prior written notice to each of its members as to whether and how it intends to cast its vote before submitting its approval or disapproval in any referendum. (3) Authorizes any producer to obtain a ballot from the commission in order to register approval or disapproval of the proposed order. (4) Requires a producer to notify the commission as to the name of the cooperative of which the producer is a member if the producer chooses to express approval or disapproval of the proposed order directly rather than through the cooperative. Requires the commission to remove such a producer's name from the list certified by the cooperative with its corporate vote. (5) Requires the commission to notify all milk producers that an order is being considered and that each producer may register approval or disapproval with the commission either directly or through the producer's cooperative. Sec. 14. TERMINATION OF OVER-ORDER PRICE OR MARKETING ORDER. (a) Requires the commission to terminate any regulations establishing an over-order price or commission marketing order issued under this article whenever it finds that such an order or price obstructs or does not tend to accomplish the declared policy of this compact. (b) Requires the commission to terminate any regulations establishing an over-order price or commission marketing order issued under this article if it is opposed by a majority of the producers who have been engaged in the production of milk, the price of which is regulated by the order. Establishes that the termination is effective only if announced on or before the date specified in the marketing agreement or order. (c) Prohibits the termination or suspension of any order or provision of an order from being considered an order within the meaning of this article. Provides that the termination or suspension to comply with requirements for informal rulemaking and does not require a hearing. ARTICLE VI. ENFORCEMENT Sec. 15. RECORDS, REPORTS, ACCESS TO PREMISES. Authorizes the commission, by rule and regulation, to prescribe record keeping and reporting requirements for all regulated persons. Authorizes the commission to examine the books and records of any regulated person relating to the person's milk business. Requires the commission's properly designated officers, employees, or agents to have full access to the premises and records of all regulated persons during normal business hours. (b) Requires information furnished to or acquired by the commission under this section to be confidential and prohibits its disclosure unless it is necessary in an enforcement proceeding, over-order price, compact marketing order, or other regulation of the commission. Authorizes the commission to issue regulations further defining the confidentiality of information under this section. Establishes that nothing in this section prohibits the issuance of general statements based upon the reports of a number of handlers which do not identify the information furnished by any person or the publication by direction of the commission of the name of any person violating any regulation of the commission with a statement of the particular provisions violated by such person. (c) Prohibits an officer, employee, or agent of the commission from intentionally disclosing information, by inference or otherwise, which is made confidential pursuant to this section. Requires a person violating the provisions of this section to be subject to a fine of less than $1,000 or to imprisonment for less than one year, or both, and be removed from office. Requires the commission to refer any allegation of a violation of this section to the appropriate state enforcement authority or the United States Attorney. Sec. 16. SUBPOENA, HEARINGS, AND JUDICIAL REVIEW. (a) Authorizes the commission to administer oaths and issue subpoenas throughout all participating states to compel the attendance of witnesses, the giving of testimony, and the production of other evidence. (b) Authorizes any handler subject to an order to file a written petition with the commission stating that the order, a provision of the order, or an obligation imposed in connection with the order is illegal and asking for a modification or exemption. Requires the petitioner to be given an opportunity for a hearing and the commission to make a final ruling on the petition. (c) Provides that the district courts of the United States in any district in which such handler is an inhabitant or in which the handler principally resides has jurisdiction to review the commission's ruling if a complaint is filed within 30 days of the ruling. Provides that delivery to the commission of a copy of the complaint constitutes service of process in such proceedings. Requires the court, if it determines that the ruling is not in accordance with law, to remand the proceedings to the commission with directions either to make a ruling the court determines to be in accordance with law or to take such further proceedings as, in its opinion, the law requires. Prohibits the pendency of proceedings under this subsection from impeding, hindering, or delaying the commission from obtaining relief under Section 17 (Enforcement with Respect to Handlers) of this compact. Requires any proceedings brought under Section 17 of this compact, except where brought by way of counterclaim in proceedings instituted under this section, to abate whenever a final decree has been rendered in proceedings between the same parties, and covering the same subject matter. Sec. 17. ENFORCEMENT WITH RESPECT TO HANDLERS. (a) Establishes that a violation by a handler of the provisions of regulations establishing an over-order price or a commission marketing order, or other regulations adopted pursuant to this compact constitutes a violation of the laws of each of the signatory states and is grounds for the revocation of a license or permit to engage in the milk business under the applicable laws of the participating states. (b) Requires the commission, with respect to handlers, to enforce the provisions of this compact, regulations establishing an over-order price, a commission marketing order, or other regulations adopted by commencing an action for legal or equitable relief brought in the name of the commission in any state or federal court of competent jurisdiction or by referral to the state agency for enforcement by judicial or administrative remedy with the agreement of the appropriate state agency of a participating state. (c) Authorizes the commission, with respect to handlers, to bring an action for injunction to enforce the provisions of this compact or the order or regulation adopted under this compact without being compelled to allege or prove that an adequate remedy of law does not exist. ARTICLE VII. FINANCE Sec. 18. FINANCE OF START-UP AND REGULAR COSTS. (a) Authorizes the commission to borrow money to provide for its start-up costs. Empowers the commission to collect an assessment from each handler who purchases milk from producers within the region in order to finance the costs of administration and enforcement of this compact, including payback of start-up costs. Requires this assessment to be collected on a monthly basis for up to one year from the date the commission convenes, in an amount less than $.015 per hundredweight of milk purchased from producers during the period of the assessment. Authorizes the initial assessment to apply to the projected purchases of handlers for the two-month period following the date the commission convenes. Authorizes regulations establishing an over-order price or a compact marketing order to include an assessment for the specific purpose of their administration. Requires these regulations to provide for establishment of a reserve for the commission's ongoing operating expenses. (b) Prohibits the commission from pledging the credit of any participating state or of the United States. Requires notes issued by the commission and all other financial obligations incurred by it to be its sole responsibility. Sec. 19. AUDIT AND ACCOUNTS. (a) Requires the commission to keep accurate accounts of all receipts and disbursements, which are subject to the audit and accounting procedures established under its rules. Requires all receipts and disbursements of funds handled by the commission to be audited yearly by a qualified public accountant and the report of the audit to be included in and become part of the annual report of the commission. (b) Requires the accounts of the commission to be open at any reasonable time for inspection by duly constituted officers of the participating states and by any persons authorized by the commission. (c) Prohibits anything in this article from being construed to prevent commission compliance with laws relating to audit or inspection of accounts by or on behalf of any participating state or of the United States. ARTICLE VIII. ENTRY INTO FORCE; ADDITIONAL MEMBERS AND WITHDRAWAL Sec. 20. ENTRY INTO FORCE; ADDITIONAL MEMBERS. Provides that the compact shall enter into force effective when enacted into law by any three states of the group of states composed of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia and when the consent of the United States Congress has been obtained. Sec. 21. WITHDRAWAL FROM COMPACT. Authorizes any participating state to withdraw from this compact by enacting a statute repealing the compact, but prohibits a withdrawal from taking effect until one year after notice in writing of the withdrawal is given to the commission and the governors of all other participating states. Prohibits a withdrawal from affecting any liability already incurred by or chargeable to a participating state before the time of such withdrawal. Sec. 22. SEVERABILITY. Provides that the parts and provisions of this compact are severable. Prohibits the validity of this compact from being impaired in the event the United States Congress consents to this compact subject to conditions if the conditions are accepted by three or more compacting states. Authorizes a compacting state to accept the conditions of the United States Congress by implementation of this compact. SECTION 2. Amends Section 12.020(c), Agriculture Code, to include Chapter 182 among the provisions for which the maximum penalty is $500. Makes conforming changes. SECTION 3.Emergency clause. Effective date: upon passage.