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Legislative counsel outlines H.475, a bill to add tiered "over‑order" milk pricing for Vermont producers
Summary
Legislative counsel Michael Grady told the Legislative Council that H.475 would authorize a tiered, state‑level over‑order premium to ensure Vermont milk producers receive a minimum price that reflects higher local production costs and environmental compliance.
Michael Grady, legislative counsel, told the Legislative Council he would “walk you through H 4 75 enact relating to establishing an equitable pricing system for production,” a bill that would add a tiered state over‑order premium for milk to address differences in producers’ costs in Vermont and other Northeast states.
The bill would authorize an equitable minimum price that milk handlers must pay producers for milk processed and manufactured in Vermont. Grady said pricing in Vermont and much of the Northeast is currently tied to Federal Milk Marketing Order No. 1, which “has a complicated formula” and can drive prices below producers’ cost of production. “One of the things that it doesn’t necessarily address is the cost of production,” he said.
Grady said the proposal draws on Maine’s system. Under the Maine approach the state sets an over‑order premium and funds it with a fee assessed on packaged fluid milk sold in the state; he gave examples from Maine showing the per‑gallon handling fee varies as the base milk price changes (for example, 36¢ per gallon when the base price is $16.50; 12¢ when it is $19.50). Grady also described a U.S. Supreme Court decision he called the “creamery case” decision that limits dedicating a fee directly to in‑state beneficiaries and instead requires revenue to go into the general fund and then be appropriated.
To avoid creating an incentive to overproduce, H.475 would establish production tiers for small, medium and large farms. Grady said the bill would explicitly allow Vermont’s cost of environmental compliance to be included in the cost‑of‑production calculation; a task force estimate cited in the briefing added roughly $1.50 to $2.00 per hundredweight to Vermont producers’ costs to reflect Clean Water Initiative and wetlands‑related requirements.
Members discussed how to structure the assessment and collection. Grady described alternatives explored in other states, including placing an assessment on fluid retail products, assessing a percentage of retail price, or assessing earlier in the supply chain (a farm‑gate or coop assessment). He warned a farm‑gate approach could be absorbed by cooperatives and therefore fail to pass a benefit through to farmers. Committee members asked about experiences in Pennsylvania and Maine; Grady said Pennsylvania and Virginia have comparable orders and that Maine’s model, while it places fees in the general fund, dedicates the revenue through appropriations to pay over‑order premiums.
No formal vote or motion was recorded during the briefing. Members agreed to continue consideration later in the week and to move on to other bills at the end of the session.
The briefing clarified that H.475 would require decisions about (1) how to define the surcharge base (fluid milk alone or a broader set of dairy products), (2) how to calculate tier thresholds to avoid creating incentives to overproduce, and (3) how to account for Vermont‑specific environmental compliance costs in any minimum price calculation.
