MILK MARKETING BOARD [7 PA. CODE CH. 151] Calculation of Bonding Obligation [30 Pa.B. 4253] The Milk Marketing Board (Board) proposes to amend § 151.9 (relating to calculation of bonding obligation) to read as set forth in Annex A.
Purpose of Proposed Amendment
The purpose of the amendment is to adjust the calculation of milk dealers' bonding obligations to reflect more accurately the volume of producer purchases during a 12-month period--thus providing greater economic protection for dairy farmers. The proposed amendment also updates the regulation by replacing a citation to the repealed Milk Producers' and Cooperative Security Funds Act with a citation to the successor act. The Board recognizes that other provisions in Chapter 151 have been superseded or otherwise affected by statutory changes and is preparing a comprehensive amendatory package. Section 151.9 has been given priority so that the adjusted bond calculation is in place for the 2000-01 license year.
Summary of Proposed Amendment
Section 7(c) of the Milk Producers' Security Act (act) (31 P. S. § 626.7(c)), provides that a milk dealer's bonding obligation is based on ''the highest aggregate amount owed by the dealer to producers for a 40-day period during the preceding 12 months.'' Under the existing regulation, the Board uses the highest amount owed in any month during the preceding license year, adds the amount owed in the succeeding month, divides the sum by the number of days in those 2 months and multiplies the quotient by 40. This methodology is not entirely satisfactory since the highest volume month may be succeeded by one of the lowest volume months.
Under the proposed amendment, the Board would use the 2 consecutive months in which the sum of the amounts owed was the highest and then perform the division and multiplication operations described previously. The 2 consecutive months would be drawn from the preceding calendar year instead of the preceding license year. The license year for milk dealers runs from July 1--June 30. License renewal applications, accompanied by bond calculations, shall be mailed several weeks before a new license year begins. It is therefore not possible to base the bond calculation on the preceding license year. Using the preceding calendar year allows time for the auditing and administrative work associated with license renewal.
The amendment also adds a subsection (b) which sets out the two meanings of ''amount owed.'' The amount owed for milk regulated by the Board is the Board-established minimum price, even though the dealer may have paid the producer a higher price--for example, a quality premium. The amount owed for milk not regulated by the Board is the actual amount the milk dealer lawfully paid the producer. For example, if the milk is priced under a Federal milk marketing order, the Federal minimum price is the lawful price.
Statutory Authority
Section 8 of the act (31 P. S. § 626.8) requires milk dealers to file bonds before the beginning of each license year. Section 7(c) of the act provides that the bond be based on the highest amount a dealer owed for milk for a 40-day period during the preceding 12 months.
Public Hearing
On August 3, 1999, the Board, after due notice, conducted a public hearing to receive comments on the proposed amendment. The attendees included representatives of the Pennsylvania Farm Bureau, the Pennsylvania Association of Milk Dealers, the Middle Atlantic Milk Marketing Agency (a group of dairy cooperatives), the Pennsylvania Farmers Union and the Pennsylvania Food Merchants Association. The only person to offer comments was the chief of the Board's Support Services Division, who manages licensing and bonding. This commentator spoke in favor of the proposed amendment as a means of providing greater protection to dairy farmers. No objections to the amendment were received.
Fiscal Impact
The use of the two highest consecutive months may result in higher bonding obligations for some milk dealers. The exact dollar impact will not be known until bonds are calculated for the 2000-01 license year. As part of her testimony at the August 3 hearing, however, the Board's Chief of Support Services reported the results of an analysis of a random selection representing 15% of bonded milk dealers. The analysis compared bond calculations based on the proposed amendment with calculations under the existing regulations. The analysis covered two license periods: July 1, 1998--June 30, 1999, and July 1, 1999--June 30, 2000. For the 1998-99 license year, 40% of the dealers in the survey would have experienced no change in their bonding obligation, 40% would have experienced bonding increases ranging from 1--10%, and 20% would have experienced bonding decreases of less than 4%. For the 1999-00 license year, 80% would have experienced no change in their bonding obligation, and 20% would have experienced increases of less than 4%. The negligible impact of the proposed amendment on bonds for the 1999-00 license year is owing to exceptionally high milk prices in November and December 1998. For most milk dealers, those 2 months would have been the basis for bonding calculations under both the existing regulation and the amended regulation.
Paperwork Requirements
There are no paperwork requirements.
Effective Date; Sunset Date
The amendment will become effective upon publication in the Pennsylvania Bulletin as final rulemaking. There is no sunset date.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on June 27, 2000, a copy of this proposal was submitted to the Independent Regulatory Review Commission (IRRC) and to the Chairpersons of the House and Senate Committees on Agriculture and Rural Affairs. In addition to submitting the proposed amendment, the Board has provided IRRC and the Committees with a copy of a detailed regulatory analysis form. A copy of this material is available to the public upon request.
Under section 5(g) of the Regulatory Review Act, if IRRC has objections to any portion of the proposed amendment, it will notify the Board within 10 days of the close of the Committees' review period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review by the Board, the General Assembly and the Governor of objections raised before final publication of the regulation.
Public Comment
Interested persons are invited to submit written comments, suggestions or objections concerning the proposed amendment to Chief Counsel, Pennsylvania Milk Marketing Board, 2301 North Cameron Street, Harrisburg, PA 17110, within 30 days following publication in the Pennsylvania Bulletin.
BEVERLY R. MINOR,
ChairpersonFiscal Note: 47-7. No fiscal impact; (8) recommends adoption.
Annex A TITLE 7. AGRICULTURE PART VI. MILK MARKETING BOARD CHAPTER 151. SECURITY FUNDS, BONDING AND ALTERNATIVE SECURITY § 151.9. [Number of days for bond in lieu of payment to Security Fund] Calculation of bonding obligation.
[For the purpose of section 9(d) of the Milk Producers' and Cooperative Security Funds Act (31 P. S. § 625.9(d)) (Repealed), the highest aggregate amount owed for milk by a dealer or handler to producers means the highest amount owed for milk in any 1 month during the preceding licensing year plus the amount owed for milk in the next succeeding month divided by the number of days in those 2 months and multiplied by 40.]
(a) Under sections 7(c) and 8 of the Milk Producers' Security Act (Security Act) (31 P. S. §§ 626.7(c) and 626.8), the bond a milk dealer shall file before the beginning of each license year is based on ''the highest aggregate amount owed by the dealer to producers for a 40-day period during the preceding 12 months.'' The Board will ascertain the highest aggregate amount owed for the applicable period by:
(1) Reviewing the amount owed by the milk dealer to all its producers for each month in the preceding calendar year.
(2) Identifying the 2 consecutive months in which the sum of the amounts owed was the highest.
(3) Dividing the sum of the amounts owed from paragraph (2) by the total number of days in the 2 consecutive months.
(4) Multiplying the quotient from paragraph (3) by 40.
(b) As used in sections 7(c) and 8 of the Security Act and in subsection (a), the term ''amount owed'' has the following meanings:
(1) For a purchase subject to minimum pricing fixed by the Board, ''amount owed'' means the amount the milk dealer was required to pay the producer under the applicable Board order, even though the actual amount paid exceeded the Board-established minimum price.
(2) For a purchase not subject to minimum pricing fixed by the Board, ''amount owed'' means the actual amount the milk dealer lawfully paid the producer.
[Pa.B. Doc. No. 00-1387. Filed for public inspection August 11, 2000, 9:00 a.m.]
