Quota Hearing & Producer Review Board Meeting Recap

There were two meetings held about quota on Monday, May 5, 2025, in Modesto. The first meeting at 10 a.m. was a hearing called by the California Department of Food and Agriculture (CDFA) to receive testimony on the STOP QIP Petition #5, which seeks to hold a referendum to terminate the Quota Implementation Plan (QIP). The second meeting at 1 p.m. was a Producer Review Board (PRB) meeting.

The hearing started with the introduction of the hearing officer and the other state employees who made up the hearing panel. Officials from the milk marketing department of CDFA entered all of the relevant background material into the hearing the record by way of reference. Then came the opportunity for the proponents of the petition to testify. Craig Gordon, the leader of the STOP QIP organization, presented his testimony.

Gordon outlined the objections of STOP QIP to the current quota program. The first objection is that the QIP was not properly adopted. The second objection is that it is not a good program. The third objection is that QIP is a tax that non-quota holders have to pay, but receive nothing in return. The fourth objection is that the PRB is not representative of the quota holding makeup of the California producer community. Craig is a colorful character and spiced up his testimony with passion and conviction. Dairyman and PRB member Jim Vieira followed Craig’s testimony with his version of the history of quota. He pointed out that the five-year survey that was conducted to evaluate California producer’s attitudes toward the quota program showed huge divisiveness among producers toward the program. These two witnesses provided testimony as the proponents of the petition. One question that was asked by the hearing panel was, “what would happen if QIP is terminated by this referendum.”  The response by the proponents was that this is a zero sum game to the industry as a whole. But it was acknowledged that to individual producers, the quota holders would lose, and the non-quota holders would gain.

After the proponents had their time, a number of producers testified. Rodney Kamper is a producer and was the chairman of the PRB in 2017 when the QIP was developed. He shared his perspective on the context and reasons why the QIP was adopted. Dairyman Rich Wagner testified next and shared his perspective that eliminating quota without compensation is not American. Dairyman Johnnie De Jong testified about his business decision to buy quota over the past 20 years. He expressed some willingness to look at a buyout of the system. Dairyman and new member of the PRB Alex De Jager testified about his family’s decision to invest in quota as well as land. He said that quota was a critical part of the family decision to continue an operation in California while expanding their operations outside of California. He too opened the door to consider a buyout of quota as a possible path forward.

The hearing was closed and the department indicated that the ballots for the referendum will likely be distributed in early June with a 90-day voting period.

The Producer Review Board meeting started at 1 p.m. There was a roll call, and an introduction of new board members. New board members Alex De Jager from Chowchilla and Dominic Assali from Ceres were seated as was the new alternate member Darlene Lopes from Gustine. William Dyt from Corona was elected chairman and Tony Nunes III from Tulare was elected Vice-chairman. Also present were board members Fred Fagundes from Merced, James Vieira from Turlock, Jarrid Bordessa from Valley Ford and Frank Konyn from Escondido.

There are two vacancies that emerged on the PRB since the last round of nominations was completed in December. CDFA staff decided to solicit nominations at this meeting from the

current PRB members. Ten names were nominated by the PRB members and then the group voted to forward these names to the Secretary for her consideration for appointment to fill the two vacancies.

The next item was a motion to approve the minutes. That motion did pass, but not without a PRB member pointing out that he had asked a question at the December meeting about how to get out of paying the QIP assessment and the answer received was to stop producing milk. This member wanted the minutes to reflect that question and answer, but the minutes that were approved were not changed.

CDFA then gave a number of updates. They reviewed the results of the 2024 QIP referendum. That referendum failed (see referendum results here). The next item reported on was the fact that an audit of the program finances has been delayed due to a shortage of auditors at CDFA. An audit should be completed later in 2025. CDFA also reported that the computer accounting system that is being used is old and needs an update which is moving forward. CDFA legal reported that the department had won a case in lower court where a claim was made that the QIP was a “takings.”  CDFA legal said that case could be appealed, so it was not a done deal yet. On a report on correspondence, CDFA reported that the department was approached by a couple of quota holders and a banker representing them to request information about the mechanics that would be involved if the State of California were to issue a bond for the purpose of retiring quota. CDFA did some research on this question and decided to share their thinking with the PRB first before getting back to the requesters. The general steps that would be involved in having CDFA issue a state bond  would involve hiring an attorney that specializes in government bonds, hiring a municipal advisor to work on the financial details associated with the proposal, and making the required amendments to the QIP.

CDFA went on to say that it should be noted that since the issuance of a bond would involve the State of California putting its credit rating on the line, pursuing this concept would require approval by multiple agencies and levels of state government. The department’s position is that since the PRB is charged with the responsibility of assisting the department with the administration of quota, any request to formally explore this concept should be directed to the PRB for analysis and consideration. There was a brief discussion at the meeting about the idea, but no action was taken.

Next CDFA gave a financial update. The current assessment rate seems to be adequate for now in funding the payments without unduly increasing reserves. There was a discussion about having a reserve policy and CDFA was given direction by the PRB to draft a proposed reserve policy for consideration at a future meeting.

There was then a discussion about the upcoming referendum. There continues to be concerns about the transparency of the vote counting. CDFA was asked how many ballots were received but ruled invalid in the recent 2024 referendum. The answer was that there were 21 ballots that were deemed to not be valid, almost all of them because the signature did not match an eligible voter for that dairy. The question was asked if CDFA let those producers whose ballots were invalid know. The answer was no. The PRB requested CDFA to contact those producers and let them know what was wrong. There were various suggestions about how to make producers aware of a problem with their ballot so they could potentially cure the problem. CDFA did commit to contacting the 20 producers who had invalid ballots in the 2024 referendum to tell them what was wrong.

The final major topic for the PRB meeting was dealing with seven hardship requests. The first request was reconsideration of a hardship request that was turned down by the PRB in December 2024. The Secretary asked for more information from the applicant about their losses which were associated with the flooding in Tulare County in 2023. The agenda package for this meeting contained a lot more information about losses the dairyman had experienced and the PRB again considered the request. The dairyman making the request was at the meeting and able to respond to questions. A motion was made and seconded to grant 9 years and 4 months of relief from paying QIP assessments. That term was determined by a calculation of how much relief would be needed to compensate for the losses. There were lots of questions about losses and their validity and it was noted that granting this relief would set a precedent that could open the door to a lot of hardship requests, which, if granted, would undermine the financial viability of the QIP program. CDFA legal staff had provided some written guidance on hardship considerations by the PRB. You can read that document here.  A vote was taken on the motion, and it failed with 7 in opposition and to 2 in support. A subsequent motion to grant 36 months of relief was made and seconded and it too failed, 7 in opposition to 2 in the affirmative. There were six remaining hardship requests. The producers making some of those requests were present and they were passionate about their need for relief. They observed that the makeup of the PRB seems weighted strongly in favor of the those who own quota. The PRB then considered each of the first four hardship requests and for each one a motion was made to deny the request and votes were 7-1 in each case, except the request that came from a PRB member who could not vote on his own request. In that case the vote was 7-0 to deny. As for the other two hardship requests, one withdrew and the other asked for it to be tabled. Passions were running high.

Clearly producers are divided on the issue of quota. Several ideas for change have made it to referendum but have failed to receive the supermajority support necessary to be adopted. The new PRB does seem to have less sympathy for the non-quota position. But there were five absent members at the PRB meeting and there are now two vacancies as well, so it is hard to know exactly what the makeup of the whole Board will be when it is at full strength. The real challenge is that because the issue of quota is so divisive, none of the organizations that producers have created over the years to represent their interests, from cooperatives to trade associations, will get involved because of the split opinions on their governing boards. The path forward is murky at best. Clearly non-quota holders think the vague hardship language in the QIP is a loophole they would like to slip through. Those interested in upholding the integrity of the QIP program see this as well, and so far, have been able to prevent that loophole from opening. Plugging that loophole was part of the proposal that the 2024 referendum was designed to close, but that failed. So now we face another referendum, this time to terminate the QIP.

Geoff Vanden Heuvel

Director of Regulatory and Economic Affairs