HBA-JRA C.S.H.B. 2000 76(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 2000
By: Turner, Bob
Agriculture & Livestock
3/26/1999
Committee Report (Substituted)


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. 

C.S.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)  Requires the commissioner
of agriculture to appoint one delegate to this state's delegation to the
compact commission to serve at the pleasure of the commissioner.
Authorizes the commissioner to be the delegate. 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.

COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute modifies the original in SECTION 1 to require, rather than
authorize, the commissioner of agriculture to either appoint or serve as
the delegate to this state's delegation to the compact commission.  Makes
conforming changes.