BILL ANALYSIS
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CONSENT
Bill No: AB 1910
Author: Assembly Agriculture Committee
Amended: 6/10/10 in Senate
Vote: 21
SENATE FOOD AND AGRICULTURE COMMITTEE : 5-0, 6/15/10
AYES: Florez, Emmerson, Hancock, Hollingsworth, Wolk
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 74-0, 4/22/10 - See last page for vote
SUBJECT : Repasteurized milk: Milk Producers Security
Trust Fund
SOURCE : Dairy Institute
DIGEST : This bill makes changes to existing law
concerning repasteurized milk, the Milk Producers Security
Trust Fund, future shipment coverage, and handler default.
ANALYSIS : The Milk Producers Security Trust Fund (Fund)
was created in 1987 to protect dairy producers from handler
payment defaults. The Fund was created as a result of the
bankruptcy of the Knudsen/Foremost Company, one of the
largest dairy processors in the state. The bankruptcy
resulted in Knudsen defaulting on millions of dollars of
milk payments to dairy producers. The losses incurred by
those producers prompted state action to ensure the
security of the state's dairy industry with the creation of
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the Fund.
The Secretary of the Department of Food and Agriculture
(DFA) appoints a seven-member board of industry
representatives to administer the Fund. The Secretary
collects a security charge on Class 1 milk (fluid milk),
Class 2 milk (soft manufactured dairy products), Class 3
milk (frozen dairy products), and Class 4 milk (butter,
powdered milk, and cheese) until the Fund contains the
needed security, based on the current cash in the Fund or
$30 million, whichever is higher. The statutory fund cap
of $30 million, intended to cover defaults on a monthly
purchase basis, was put in place in order to assure
payments should a large processor default.
If DFA determines a milk handler to be in default and
future shipments are not eligible to be covered by the
Fund, DFA will notify all producers, cooperatives, and
other interested parties of the defaulting handler. DFA
may also specify that future shipments to a handler would
not be eligible for fund money if the handler fails to
maintain a valid license, fails to pay producers, fails to
pay the amount due the pool equalization fund, or fails to
submit, when requested, executed contracts that establish
the relationship between affected parties.
Current law prohibits the sale of repasteurized milk as
market milk.
The Grade A Pasteurized Milk Ordinance (PMO), published by
the Food and Drug Administration (FDA), outlines minimum
standards and requirements for Grade A milk production and
processing. Grade A standards are recommended by the
National Conference on Interstate Milk Shipments, which is
composed of voting representatives from state and local
regulatory agencies and nonvoting representatives from the
dairy industry and the FDA. As a general rule, the FDA
accepts the conference recommendations and incorporates
them into the revised PMO.
AB 2443 (Assembly Agriculture Committee), Chapter 505,
Statutes of 2006, amended the fund to reflect changes in
the California dairy industry by including the growing
cheese manufacturing sector, allowed the Fund to be
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maintained at a lower level, and required handlers to post
bonds to cover their obligations to keep the Fund solvent.
AB 2284 (Galgiani), Chapter 236, Statutes of 2008, made
further modifications to the Fund to ensure that securities
provided to DFA are valid and verified.
This bill:
1. Establishes conditions under which repasteurized milk
may be sold as market milk.
2. Provides that milk that may be repasteurized includes:
A. If maintained at 45 degrees or less: milk product
drained from processing equipment, milk collected
from a defoamer system, and milk or milk products
rinsed from equipment, containers, or pipes.
B. If maintained under 45 degrees: milk or milk
products pasteurized at another plant, handled in a
sanitary manner, and transported in a milk tank
truck.
3. Provides that milk that may not be repasteurized
includes:
A. Packaged milk that has left the premises.
B. Milk and milk products from damaged, punctured,
contaminated containers, or out of code containers.
C. Milk or milk products that have overflowed,
leaked, spilled, or been handled improperly
4. Removes DFA's discretion to notify all producers,
cooperative associations, and other interested parties
when a milk handler is in default or when future
shipments are not covered by the Fund.
5. Removes DFA's discretion to specify that future
shipments are not eligible for the Fund when a handler
fails to maintain a valid license, fails to pay
producers, fails to pay the amount due the pool
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equalization fund, or fails to submit, when requested by
DFA, executed contracts that establish the relationship
between affected parties.
6. Requires DFA to exhaust all administrative and legal
remedies against a defaulting dairy handler and execute
all judgments resulting from those remedies prior to
recommending payment from the Fund.
Comments
Supporters state that this bill is intended to address
needed changes to California milk law. Current state law
regarding repasteurized milk is in conflict with the
federal PMO. This bill brings state law in line with
federal law, which would avoid potential interstate
shipping problems for California milk handlers. This bill
ensures timely disclosure to the industry of a problem with
a handler by removing DFA's discretion to notify producers,
cooperatives, and interested parties when a handler is in
default or future shipments of milk are not eligible for
the Fund. This bill clarifies that the Fund is a payment
of last resort for defaulting handlers rather than a
catch-all for any handlers' defaulted milk pool payments.
By requiring DFA to exhaust all alternative means to
collect defaulted revenues and penalties from a handler
before payment from the Fund, this bill ensures that the
Fund is ready for its intended purpose, to ensure that in
the event of a handler bankruptcy the dairy producers still
receive payment.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/28/10)
Dairy Institute (source)
Western United Dairymen
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall,
Bill Berryhill, Tom Berryhill, Blakeslee, Block,
Bradford, Brownley, Buchanan, Charles Calderon, Carter,
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Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong,
Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick,
Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill,
Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal,
Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello,
Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Yamada, John A. Perez
NO VOTE RECORDED: Blumenfield, Caballero, Huber, Huffman,
Norby, Vacancy
TSM:mw 6/29/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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