The following is the statement of John E. Frydenlund Food and Agricultural Policy Fellow Council for Citizens Against Government Waste Washington, D.C. before the Massachusetts House Committee on Natural Resources and Agriculture, today.

            “Mr. Chairman, my name is John Frydenlund.  I am the Food and Agricultural Policy Fellow at the Council for Citizens Against Government Waste (CCAGW).  CCAGW is a nonprofit, nonpartisan organization which grew out of President Reagan’s Private Sector Survey on Cost Control, better known as the Grace Commission.  The organization’s mission is to work for the elimination of waste, mismanagement, and inefficiency in the federal government with the goal of creating a government that manages its programs with the same eye to innovation, productivity, and economy that is dictated by the private sector.”

“On behalf of CCAGW’s 600,000 members, and particularly our 11,000 Massachusetts members, I appreciate this opportunity to testify before the House  Committee on Natural Resources and Agriculture on the subject of the Northeast Interstate Dairy Compact.  It is both timely and appropriate that this committee investigate the impact of the Compact on the citizens of Massachusetts and consider  Massachusetts’ continued participation in the Compact.  The ramifications of the Compact were less widely understood a number of years ago when this committee approved Massachusetts’ participation.  Now, however, you can benefit from the evident impact of the last seven months’ experience with the Compact.”

“CCAGW has made reform of the complex federal milk-pricing system a high priority.  We recently released a special report titled Milk Marketing Order Reform: Watered Down or Real?  This in-depth look at the 60-year-old federal dairy program demonstrates how it hinders an evolving industry, artificially inflates the price of dairy products, and costs consumers and taxpayers billions of dollars per year.”

“The Northeast Interstate Dairy Compact exacerbates this situation to the further detriment of consumers and taxpayers in the participating states.  This Compact ¾ as would similar such compacts being considered for other regions ¾ arbitrarily raises milk prices, distorts milk production and marketing in this country, and further complicates a convoluted milk-pricing system which already suffers from far too much government intervention.”      

            “Since the Compact was implemented, New England consumers have been paying almost twenty cents more for every gallon of milk ¾ the Northeast Dairy Compact “milk tax.”  This milk tax amounts to about $50 million annually for New England’s consumers.”

“Massachusetts consumers buy about half of the beverage milk sold in the six states and are thus paying a disproportionate share of the milk tax.  The Compact adds $25 million a year to the grocery bills of Massachusetts’ working families, children, senior citizens and the 500,000 people in the state living below the poverty line.  Most of that money is going into the pockets of farmers outside of Massachusetts.”

“In fact, contrary to the propaganda that was used to sell the Compact in the first place, the milk tax will do little to help the state’s small, family dairy farmers.  Instead, it helps the wealthiest farmers the most.  The largest farms, which produce the most milk, receive the bulk of the tax at the expense of the 6 million consumers in Massachusetts.  However, the amount of the tax that flows to the smallest farmers is relatively insignificant, and thus insufficient to ensure the success of their businesses.”

“There is also no basis to the contention that this milk tax is needed to ensure a stable, fresh supply of milk.  There is certainly no crisis in milk production to justify this extraordinary tax on Massachusetts consumers.  There is plenty of milk in New England and higher prices are simply not needed to ensure an adequate fresh milk supply in Massachusetts or in any of the other five states participating in the Compact.”

“Connecticut and Rhode Island, where there are also few dairy farmers, but large numbers of consumers, are also hit hard by the milk tax.  Combined, Massachusetts, Connecticut and Rhode Island shell out 80 percent of the revenue which flows to farmers in other states, especially Vermont, which has 55 percent of the region’s dairy farmers.”

“CCAGW has taken a leading position in opposition to the imposition of the Northeast Compact milk tax.  Last year, 6,000 CCAGW members from the Compact states ¾ about half of them from Massachusetts ¾ signed petitions to the U.S. Secretary of Agriculture urging him to prevent the Northeast Dairy Compact milk tax from being imposed on them. As you are aware, however, the Secretary ignored these concerns and allowed this newly created milk cartel to impose a higher price for milk in the six-state region, effective July 1, 1997.”

“Further, a three-judge panel for the United States Court of Appeals recently upheld a lower court ruling allowing the Compact to continue to impose a higher price for fluid milk than is required by federal law.  As further opportunities for redress have been limited, CCAGW is now concentrating its efforts on stemming the cancerous spread of the Northeast Compact to other states and preventing the creation of additional regional compacts.”

“The Northeast Interstate Dairy Compact needlessly interferes with interstate commerce, setting a dangerous precedent for future regional pricing schemes.  The Compact allows dairy producers in one region to charge a higher price for fluid milk, yet shields them from competing producers in neighboring states by means of a tariff.  This creates an artificial economic barrier around New England dairy producers.”

“The Compact also sets a dangerous precedent that may lead to regional pricing schemes not only for milk but also for other commodities.  This could eventually lead to a complicated patchwork of state and regional pricing laws and balkanization of some segments of the U.S. economy.  This is entirely inconsistent with the historic nature of compact agreements, which have been primarily used to allow states and regions to band together to promote economic cooperation through development of waterways, bridges and other transportation systems.  It is also inconsistent with the trend toward freer markets in U.S. agriculture and the trend toward removal of trade barriers between countries.” 

“CCAGW, along with a coalition of many other public policy and citizen groups, has urged Congress to repeal authority for the Northeast Interstate Dairy Compact.  In the event that such a vote occurs in either the House or the Senate in the near future, it will be crucial that New England’s Senators and Representatives are made aware of the number of individuals in their states that are being hurt by the milk tax.  In 1996, most of the region’s Senators, in voting for the Compact, opted to represent the narrow special interests rather than the public interest.  Representatives were not even given an opportunity to vote on the Compact.”

“On behalf of CCAGW’s Massachusetts members, we urge this committee to face up to the reality of the Northeast Interstate Dairy Compact ¾ this is a milk tax that is hurting the overwhelming majority of Massachusetts citizens while benefiting a relative handful of wealthy dairy farmers outside of Massachusetts.  You should not wait for Congress to clean up the mess they created when you can correct the problem yourself.  We urge you to enact legislation to withdraw from the Compact now.”

“At the very least, you should provide Massachusetts citizens an opportunity, by holding a public referendum, to decide whether they want to remain in the Compact.  After all, this is milk taxation without representation ¾ a sad irony in the state where the battle for independence from tyranny began.”

“Mr. Chairman, thank you again for the opportunity to present this testimony.  I will be happy to respond to any questions.”