5.29.2020 – COVID-19 Relief Proposal for Dairy Farmers and Producers and Education Property Tax

This week the House Agriculture and Forestry Committee took testimony on the Administration’s COVID-19 relief proposal regarding dairy. It is characterized by the Secretary of Agriculture, Food, and Markets Anson Tebbetts as a “Survival” package. Indeed, that is what it would be.

Several months ago, dairy farmers were looking at $20 per hundredweight (cwt) milk for the summer. After five years of low milk prices over which farmers have no control, $20 milk was looking pretty good. That was before COVID-19 hit and major markets for dairy – restaurants, schools, universities, and other food service businesses – closed down, demand plummeted, and milk prices tanked.

As a bit of background, the price of milk is not set by the farmers who produce it but on the federal level in an almost incomprehensible way. Imagine being in a business producing something and you have no control over the cost of inputs or what you are paid for the final product! Input costs for that product might go up significantly but you have no way of recouping those increases in what you are paid. Even more frustrating is that regardless of what you are paid, the retail cost of the product on the store shelves does not seem to change.

The Scott Administration is proposing that of the $1.25 billion in Coronavirus Aid, Relief, and Economic Security Act (CARES) money coming to Vermont, $50 million of it be dedicated to grants for our dairy sector. $40 million would be allocated to dairy farmers and $10 million to the value-added sector including cheesemakers and producers of yogurt, butter, and ice cream.

A considerable amount of thought has gone into how to most fairly distribute the $40 million to dairy framers, including goat and sheep dairy farms. For the farming sector it would be allocated based on the number of cows, or sheep/goat equivalents, being milked. There are four categories of farms – Small (less than 50 cows), Small Certified (50-199 cows), Medium (200-699 cows), and Large (700 and up). Farms would receive up to $42,500, $60,000, $90,000, and $110,000, respectively to compensate for economic harm if they can prove actual losses due to COVID-19.

The calculations were weighted slightly heavily toward the Small and Small Certified farms, which represent 80% of Vermont’s dairy farms. It was an acknowledgment that the Medium and Large farms more easily accessed other federal programs like the Paycheck Protection Program to help them survive.

The grant amounts for our value-added sector are determined differently as one might expect. Our cheesemakers, many of whom are international prize winners, saw their income cut 50-70% due to the pandemic. Grants will be determined on the amount of milk processed daily. Those processing less than 500 pounds of milk per day will receive up to $56,500. Between 500 and 9,999 pounds the payment will be up to $70,000; 10,000-49,999 pounds will be up to $97,000; 50,000-99,999 pounds will be up to $127,000; 100,000-499,999 pounds will be up to $157,000; and 500,000 pounds or more will receive up to $185,000. To put this in perspective, a gallon of milk weighs approximately 8.6 pounds. Again, this money can only compensate for economic harm and actual losses due to COVID-19.

It is important to note that if we are going to do this, the money needs to be distributed quickly. It is estimated that since the pandemic struck, the average Vermont dairy farm has lost $270,000. Vendors (feed and seed dealers, equipment businesses) have been floating incredible amounts of credit to our farms. We have heard that one dealer holds $200 million in accounts receivable. It is clear that the money that goes to our dairy farmers will go directly back into the community by paying off debt.

It has been suggested that other forms of farming be compensated as well and that may be appropriate if it is warranted. We have heard of vegetable farmers who have suffered losses because of the way farmers’ markets are being run. One Tunbridge farmer returned from a farmers’ market with pounds of spinach that would normally have sold out quickly. There is still a concern that farmers’ markets are being held to a higher standard than our grocery stores are and that may need to be looked at again. We have also heard that diversified farmers are doing extremely well, that CSA shares are sold out, and that farm stores/stands are doing excellent business.

As we continue to talk about a regional food supply system, the existence of our dairy farms is critical to our future. Much of our milk supplies the rest of our region and will be of great importance when the pandemic has abated, and climate change becomes the greater challenge. If there is a silver lining to COVID-19, it is that it has revealed the weaknesses in our food supply chain and pointed us in the direction of researching how to strengthen it.

What excites me is looking forward to the work of coming years and the opportunity to explore the possibilities of a regional food supply system as well as the positive impact and mitigating factors agriculture and forestry can and do have on climate change.

I should also mention that this week the House worked on H.959, which sets some of the parameters for education funding. There was great concern that the pandemic and resulting shortfalls in the sales tax and rooms and meals tax revenues would create a deficit that would result in higher property taxes. It was determined that we could go ahead with the pre-COVID-19 levels of property taxation given that it might be possible for CARES money to be used to make up the shortfalls. This was a non-partisan decision supported on a strong 127-20 vote, multi-partisan basis.

Rep. Robin Scheu of Middlebury explained her vote by saying, “I voted yes on H.959. The $156 million projected deficit in the education fund is a COVID-19 problem, NOT a school budget problem. Communities across the state passed what they believed were responsible and appropriate school budgets this year. We cannot punish schools, students, and communities for a global pandemic that is entirely not their fault.”

It was hoped that we could have included a mechanism that would have begun to rectify the injustices in education funding indicated by the Weighting Study but at this point that seems unlikely and something that we will have to tackle next year.