EXECUTIVE OFFICE OF THE PRESIDENT OFFICE OF MANAGEMENT AND BUDGET WASHINGTON, D.C. 20503

STATEMENT OF ADMINISTRATION POLICY
(THIS STATEMENT HAS BEEN COORDINATED BY OMB WITH THE CONCERNED AGENCIES.)

September 20, 1999 (House)

H.R. 1402 - Consolidation of Milk Marketing Orders (Rep. Blunt (R) MO and 227 others)

The Administration strongly opposes H.R. 1402 because the bill would prevent the Department of Agriculture from proceeding with reforms that would modernize the federal milk marketing order system. If H.R. 1402 is presented to the President, the Secretary of Agriculture will recommend that he veto the bill. The 1996 Federal Agriculture Improvement and Reform Act directed the Secretary of Agriculture to consolidate the 31 federal milk marketing orders that, in part, establish the method by which minimum prices are established for fluid milk in different regions of the country. In addition, the 1996 Act authorized the Secretary to review the differentials -- the amount added to the price of milk in a given region -- and the resulting minimum prices processors pay dairy farmers. Based on information gathered from hundreds of meetings, comments on several reports, and thousands of public comments, the Secretary has concluded that the price structure, as embodied in the Department's final rule, best reflects the economics of supplying the milk markets. H.R. 1402, however, would require the Department to impose a price structure similar to the status quo. Such a price structure will stimulate excessive milk production, reduce fluid milk consumption, and depress prices for milk used in manufactured dairy products. The bill will saddle dairy farmers, processors, and consumers with a system that has prompted virtually everyone to call for the very modernizations that the Department has already developed for the federal milk marketing order system. While the federal milk order provisions of H.R. 1402 have been justified as an effort to support the incomes of dairy farmers, the federal milk order program cannot substitute for a meaningful national safety net for dairy farmers. The most effective and modernized milk marketing order system, such as the one the Department has adopted, ensures the orderly and efficient movement of milk to supply fluid markets. In addition, the Administration stands ready to work with Congress to develop sound, effective assistance for dairy farmers. Finally, H.R. 1402 contains provisions that would extend the dairy price support program for one year. The Administration supports an extension. This is particularly urgent since the 1996 Act, in marked departure from how other major commodities are treated, ends the dairy price support program two years before the rest of the programs expire. Pay-As-You-Go Scoring H.R. 1402 would affect direct spending and, therefore, is subject to the pay-as-you-go requirement of the Omnibus Budget Reconciliation Act of 1990. OMB's preliminary scoring estimates are presented in the table below. Final scoring of this legislation may deviate from this estimate.   PAY-AS-YOU-GO ESTIMATES (dollars in millions)   2000 2001 2002 2003 2004 Total Outlays -254 418 0 0 0 164