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PRB Has Another Meeting; Votes to Recommend Referendum on QIP Termination Petition

By Geoff Vanden Heuvel, Director of Regulatory and Economic Affairs At 11:15 a.m., Producer Review Board (PRB) chairman Art Van Beek called the November 17, 2023 meeting to order. The venue was the Tulare Ag Commissioner’s office, which does have the capacity to host virtual participation. It looked like at one point there were at least 25 participants online, including 6 PRB Board members. There were also more folks in the audience than usually attend.

The CDFA staff gave updates on various QIP budget questions. At the last PRB meeting on October 30, CDFA staff reported that the $5.5 million in leftover Equalization Funds from the State Quota program had been in the Quota Payment Fund since the start of the program in November of 2018, and that this was producer money. This fact will influence decisions about the appropriate level of assessment. CDFA said they needed more time to fully vet this and so they were not asking for any additional adjustment in the assessment at this meeting.

CDFA also gave a legal update. The Judge in the Gordon vs. Ross case issued a final ruling that the QIP is not an illegal taking of property because the producer does not have to surrender his milk. PRB member Craig Gordon gave his thoughts on this issue and obviously has a different view. The CDFA attorney was asked if all the legal authorities are in place to operate the QIP program. His answer was yes. Therefore, CDFA staff said nothing changes from the current situation in the operation of the QIP.

There was a reminder that nominations are still open for PRB positions. The deadline for submitting a nomination is November 30.

Item 6 on the agenda was the QIP 5-year Effectiveness Survey Follow Up. The main correction to the survey report was to clarify that surveys were sent to 842 eligible producers, not 930 as was reported originally. All of the responses, findings and conclusions remain the same. At the October 30 meeting, the PRB had passed a motion which acknowledged the roughly 50/50 spilt in support for the QIP from the respondents to the survey and asked the Department to provide technical assistance for financial analysis and facilitation to revisit the mechanics of the QIP. In a letter from Secretary Ross dated today, she approved that request and asked the PRB to provide additional details regarding the scope of the analysis they wish to pursue. See the letter here. This stimulated a robust discussion about the purpose and goal of the study, and the next step.

Here is a sampling of the discussion: There is an opinion by some on the PRB that the QIP is subject to the same 5-year review/referendum provision that applies to the California Milk Advisory Board (CMAB). CDFA staff pointed out that the legal authority for the QIP is in a different part of the law that does not have the same requirements as the law that authorizes the CMAB. There was then a motion to recommend to the Secretary that a reapproval referendum of the QIP be conducted, which would have to pass with a super majority to allow the QIP to continue. CDFA pointed out that if this motion passed it would still be subject to legal review and the ultimate decision would be made by the Secretary. The motion failed: 4 yes - 10 no.

There was also a discussion about what constitutes a “hardship.” In the state quota program, “hardship” was narrowly defined to pertain to the rules and regulations governing the purchase and transfer of quota. Here again some on the PRB look at the specific words in the QIP that define a hardship as: “‘Hardship’ means a challenge to the management and operation of a dairy due to the operation of this Plan” and want to expand the traditional understanding of a hardship to consider paying assessments as a hardship. CDFA attorneys have put out a memo on this issue that you can read here.

There was also a comment that there should be room for making some improvements in the QIP. There was a reminder to the group of a presentation PRB member Frank Konyn had made at the PRB meeting in July about the fact that Class I revenue in California has been on a downward trend and no longer comes anywhere close to providing differential revenue equal to what the QIP mandated $1.70 per cwt. requires. There was a suggestion by a PRB member that the survey pointed out some lack of understanding of what Regional Quota Adjusters are, what hardships are, what the rules are on quota transfers and whether there were limits on who could purchase quota. CDFA staff said they could provide more clarity on these topics on the CDFA website. Finally, there was a commitment by the PRB chairman that these issues would be further discussed at the next meeting of the PRB, which is planned for January.

Item 7 was for the PRB to review the STOP QIP petition for referendum which seeks to immediately terminate the QIP. The petition process has a signature threshold, which this petition reached. The petition had 243 valid producer signatures out of 842 producers in California (28.9%) and the signatories represented 1,299,762,945 pounds of a total produced in May 2023 of 3,626,101,504 pounds (35.8%).

There was a motion made and supported that the PRB recommends the STOP QIP termination petition goes forward to a referendum. That motion passed: 10 yes - 4 no.

Geoff Vanden Heuvel

Director of Regulatory and Economic Affairs

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