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AB-590 Milk.(2019-2020)

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Date Published: 09/23/2019 09:00 PM
AB590:v92#DOCUMENT

Assembly Bill No. 590
CHAPTER 304

An act to amend Sections 32912.5, 34301, 34302, 62521, 62540, 62541, 62542, 62543, 62560, 62561, 62563, 62565, 62566, 62567, 62568, 62569, 62570, 62571, 62572, 62573, 62574, 62580, 62580.5, 62582, 62585, 62586, 62587, 62600, 62601, 62603, 62604, 62620, 62621, 62622, 62623, 62660, 62661, 62662, 62663, 62665, 62666, 62667, 64005, 64010, 64010.1, 64010.2, 64014, 64015, 64016, 64041, 64042, 64043, 64071, 64072, 64073, 64101, 64103, 64104, 64105, 64111, 64112, 64114, 64115, 64116, 64117, 64151, 64153, 64154, 64155, 64157, 64158, 64181, 64182, 64183, 64221, 64222, 64223, 64301, 64302, 64303, 64304, 64305, 64306, 64307, 64308, 64308.5, 64309, 64310, 64311, 64312, 64320, 64321, 64321.5, and 64322 of, to amend the heading of Chapter 9 (commencing with Section 34201) of Part 1 of Division 15 of, to amend the heading of Article 4 (commencing with Section 34301) of Chapter 9 of Part 1 of Division 15 of, to add Sections 34301.5, 64005.5, 64301.5, and 64323 to, to repeal Sections 32912, 32921, 62502, 62504, 62520, 62562, 62564, 62564.5, 62602, 64004, 64008, 64009, 64011, 64282, and 64313 of, to repeal Article 9 (commencing with Section 62640) of Chapter 2.5 of Part 3 of Division 21 of, and to repeal and add Section 64017 of, the Food and Agricultural Code, relating to milk, and making an appropriation therefor.

[ Approved by Governor  September 20, 2019. Filed with Secretary of State  September 20, 2019. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 590, Mathis. Milk.
(1) Existing law confers upon the Secretary of Food and Agriculture the ability to establish and administer the Milk Producers Security Trust Fund to reimburse milk producers for milk that is shipped to a handler when the handler defaults on payment. Existing law authorizes the secretary to maintain the fund by collecting a security charge on covered milk, as defined, from handlers, and, if the value of a handler’s monthly milk purchases, as adjusted, exceeds a specified amount, requires a handler to provide an acceptable security, as defined, to the secretary. Existing law requires a transaction to meet certain criteria in order to be covered by the fund, and specifies the amount of reimbursement that is owed to a milk producer in case of default on a covered transaction. Existing law continuously appropriates any money that is collected by the secretary pursuant to these provisions, including penalty revenues, and interest from the investment, reinvestment, or deposit of that money, to reimburse milk producers and for other purposes.
Under existing federal regulations that took effect October 17, 2018, the United States Department of Agriculture established a Federal Milk Marketing Order for California that requires handlers to pay uniform minimum prices to producers, calculated as provided, for milk of various classes that is pooled under the Federal Milk Marketing Order. Existing state law, upon adoption of a federal milk marketing order, suspends the operation of provisions of existing state law authorizing establishment of stabilization and marketing plans setting uniform minimum prices for various classes of market milk, as defined, and the Gonsalves Milk Pooling Act, that are inconsistent with the Federal Milk Marketing Order.
This bill would recast and revise the provisions governing administration of the Milk Producers Security Trust Fund by, among other things, deleting obsolete references to the stabilization and marketing plans and pooling plan supplanted by the Federal Milk Marketing Order, redefining various terms for consistency with the Federal Milk Marketing Order, changing the computation of security charges and acceptable securities for which handlers are liable, including by requiring security charges to be imposed on eligible milk, as defined, and solids-not-fat contained in eligible milk, instead of covered milk, as defined, and solids-not-fat contained in covered milk, and changing the computation of amounts owed to producers upon default.
The bill would also require the secretary to collect an assessment on producers, as provided, to defray the costs of administering these provisions, except as provided. By authorizing the collection of an assessment that, with penalties for late payment and interest, would be continuously appropriated, this bill would make an appropriation.
(2) Existing law provides for various commissions to promote the production and marketing of agricultural commodities. Existing law, the Dairy Council of California Law, establishes the Dairy Council of California within the state government and prescribes the membership of the council. Existing law specifies the powers, duties, and responsibilities of the council, and requires the secretary to conduct various activities relating to research, advertising, publicity, and education. Existing law requires the secretary to establish, and to collect from producers, handlers, and producer-handlers, a fee on class 1 milk, as defined, and milk for all other usages, as defined, that contains specified percentages of milkfat or solids-not-fat. Existing law continuously appropriates these fees to the Department of Food and Agriculture to carry out the duties that are imposed upon the secretary and the council pursuant to these provisions. Existing law requires the secretary to hold a public hearing or referendum every 5 years to determine whether the council program shall continue in effect.
This bill would recast and revise the Dairy Council of California Law to, in general, refocus the secretary’s and the council’s activities on research, communication, and education regarding the nutritional role of milk products. The bill would redefine the terms “producer-handler,” “class I milk,” and “all other usages,” and add a definition for “solids-not-fat,” to be consistent with the definitions in the Federal Milk Marketing Order. Instead of the fees described above, the bill would require the secretary to establish assessments on milk and on solids-not-fat contained in milk, as provided. By creating new and higher assessments, the revenue from which is continuously appropriated, the bill would make an appropriation. The bill would also, among other things, revise provisions regarding the membership of the council and recordkeeping. The bill would make extensive technical and conforming changes.
(3) Existing law requires sample copies of labels used in connection with advertising and consumer sales of milk and certain related products to be submitted to the secretary for approval and requires any labeling requirements adopted by the secretary pursuant to this provision to be in conformity with the Federal Food, Drug, and Cosmetic Act and certain federal regulations. Existing law requires labeling requirements for modified foods, as provided, to conform to those same federal regulations.
This bill would streamline those labeling requirements to instead require the secretary to enforce the labeling requirements established under the Federal Food, Drug, and Cosmetic Act and those federal regulations in the review of labels to be used in connection with advertising and retail sales of milk, frozen and cultured dairy products, cheese, and products resembling milk products and for all dairy products sold in the state.
(4) Existing law requires the use of certain methods of analysis for determining the components of milk and certain related products and authorizes the secretary to, by regulation, adopt other acceptable methods of comparable accuracy. Existing law requires the secretary to supervise the testing of milk fat and milk solids-not-fat and the weighing and sampling of market milk delivered to handlers. Existing law authorizes the secretary to assess a fee on all producers, producer-handlers, and handlers to be used exclusively for the supervision of and checking the corrections of the milk fat, milk solids-not-fat, and bacteriological tests, and the weighing and sampling of all market milk delivered to handlers in accordance with the stabilization and marketing plans. Existing law requires a handler subject to any stabilization and marketing plan, including a producer-handler, to pay an assessment to, and requires a handler subject to the provisions of any stabilization and marketing plan that purchases or handles milk from producers to pay a fee to, the secretary that do not exceed specified amounts.
This bill would repeal the provision requiring the use of certain methods of analysis for the determination of the components of milk and certain related products, and the authorization to adopt other acceptable methods. The bill would revise the secretary’s supervisory duties described above to instead require the secretary to supervise the weighing, measuring, sampling, bacteriological testing, and sanitary loading and unloading of bulk milk delivered to handlers. The bill would require the fee assessed by the secretary on producers, producer-handlers, and handlers to be used for the supervision of, and checking the corrections of, bacteriological tests, and the weighing, measuring, sampling, and sanitary loading and unloading of all bulk milk delivered to handlers. The bill would revise the provisions imposing the assessment and fee on certain handlers described above to apply to all handlers and would authorize the secretary to increase the amounts of those assessments. The bill would add definitions for “handler,“ “producer,” and “producer-handler” for purposes of these provisions.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 32912 of the Food and Agricultural Code is repealed.

SEC. 2.

 Section 32912.5 of the Food and Agricultural Code is amended to read:

32912.5.
 (a) The secretary shall enforce the labeling requirements established under the Federal Food, Drug and Cosmetic Act (21 U.S.C. Sec. 301 et seq.) and Title 21 of the Code of Federal Regulations in the review of labels to be used in connection with advertising and retail sales of milk, frozen and cultured dairy products, cheese, and products resembling milk products and for all dairy products sold in the state.
(b) Sample copies of all labels to be used in connection with advertising and consumer sales of milk, milk products, frozen desserts, cheeses, and products resembling milk products shall be submitted to the secretary for approval prior to the use of those labels.

SEC. 3.

 Section 32921 of the Food and Agricultural Code is repealed.

SEC. 4.

 The heading of Chapter 9 (commencing with Section 34201) of Part 1 of Division 15 of the Food and Agricultural Code is amended to read:
CHAPTER  9. Weighing, Measuring, Sampling, and Loading of Milk

SEC. 5.

 The heading of Article 4 (commencing with Section 34301) of Chapter 9 of Part 1 of Division 15 of the Food and Agricultural Code is amended to read:
Article  4. Testing, Weighing, Sampling, and Loading

SEC. 6.

 Section 34301 of the Food and Agricultural Code is amended to read:

34301.
 (a) The secretary shall supervise the weighing, measuring, sampling, bacteriological testing, and sanitary loading and unloading of bulk milk delivered to handlers.
(b) Notwithstanding any other provision of this division, the secretary may, in order to effectuate the purposes of this article, assess all producers, producer-handlers, and handlers a fee which shall be used for the supervision of, and checking the corrections of, bacteriological tests, and the weighing, measuring, sampling, and sanitary loading and unloading of all bulk milk delivered to handlers.

SEC. 7.

 Section 34301.5 is added to the Food and Agricultural Code, to read:

34301.5.
 For purposes of this article, the following definitions apply:
(a) “Handler” means a person who, as owner, agent, broker, or intermediary, receives, purchases, or otherwise acquires ownership, possession, or control of milk in unprocessed or bulk form from a producer for the purpose of manufacturing, processing, selling, distributing, or other handling.
(b) “Producer” means a person who operates a dairy farm.
(c) “Producer-handler” means a person who is both a producer and a handler.

SEC. 8.

 Section 34302 of the Food and Agricultural Code is amended to read:

34302.
 (a) A handler, including a producer-handler, shall deduct an assessment from payments made to producers for milk, including the handler’s own production, of a sum not to exceed one-tenth of one cent ($0.001) per hundredweight of milk. The amount of the assessment deducted shall be paid to the secretary on or before the 45th day following the last day of the month during which the milk was received.
(b) A handler that purchases or handles milk from producers, including the handler’s own production, if any, shall pay a fee not to exceed five-hundredths of one cent ($0.0005) per hundredweight of milk. The amount of the fee shall be paid to the secretary on or before the 45th day following the last day of the month in which the milk was received.
(c) Notwithstanding the assessment and fee limits in subdivisions (a) and (b), the secretary may increase the amount of the assessment in subdivision (a) and the fee in subdivision (b) by an amount not to exceed one-hundredth of one cent ($0.0001) per hundredweight per annum.

SEC. 9.

 Section 62502 of the Food and Agricultural Code is repealed.

SEC. 10.

 Section 62504 of the Food and Agricultural Code is repealed.

SEC. 11.

 Section 62520 of the Food and Agricultural Code is repealed.

SEC. 12.

 Section 62521 of the Food and Agricultural Code is amended to read:

62521.
 For purposes of this chapter, the following terms have the following meanings:
(a) (1) “Acceptable security” means a surety bond from an admitted insurer, deposits of government securities, a letter of credit, or other form of performance guarantee acceptable to the secretary and meeting the requirements as acceptable security pursuant to law. Any instrument used as acceptable security shall contain provisions the secretary may prescribe, shall have an effective life of no less than two years, shall name the secretary as the beneficiary of the instrument, shall be clean and irrevocable if the security is a letter of credit, shall provide that the secretary may draw upon it up to the total amount in the event of the handler’s payment default, and, except as otherwise provided in paragraph (3), shall be verified to the secretary as being in effect and complying with the provisions of this chapter at the end of every six-month interval following the date on which a handler originally posts the instrument. Except as provided in paragraphs (2) and (3), acceptable securities provided to the secretary shall not be released by the secretary unless the handler’s average monthly purchases, as determined annually by the secretary, fall below thirty million dollars ($30,000,000) or the fund cash, whichever is higher. Any interest accrued by the instrument shall be the property, and for the benefit, of the handler posting the instrument.
(2) Subject to the provisions of this chapter, a handler who has posted an acceptable security shall have the right to replace that instrument with a new acceptable security meeting the requirements of this chapter at the end of every six-month interval following the date on which the handler originally posted the instrument. The secretary shall release the issuer of any acceptable security from all past, present, or future obligations secured by the acceptable security upon the secretary’s acceptance of replacement security meeting the requirements of this chapter and the secretary shall then provide written confirmation to the issuer of the original acceptable security that an acceptable replacement security had been provided.
(3) Upon receipt of an affidavit confirming that the amount paid under an acceptable security posted pursuant to this chapter was equal to the total amount of that instrument, the secretary shall release the issuer of that acceptable security from all past, present, and future liability. Upon receipt of an affidavit confirming any other amount paid by an issuer under an acceptable security posted pursuant to this chapter, the secretary shall release the issuer of that security to the extent of the issuer’s payment.
(b) “Board” means the Milk Producers Security Trust Fund Board.
(c) “Eligible milk” means milk, whether pooled or nonpooled, that meets both of the following criteria for coverage by the fund, regardless of whether the milk meets other criteria necessary for coverage:
(1) The criterion in paragraph (3) of subdivision (a) of Section 62580, relating to milk being produced and delivered within the state.
(2) The criterion in paragraph (7) of subdivision (a) of Section 62580, relating to a producer not having a beneficial ownership interest in the handler to whom shipments are made.
(d) (1) “Federal Milk Marketing Order” means the Federal Milk Marketing Order established by the final rule, effective October 17, 2018, published by the United States Department of Agriculture in Volume 83 of the Federal Register, beginning on page 26547, on Friday, June 8, 2018.
(2) References in this chapter to a section of the Federal Milk Marketing Order are references to that section of Part 1051 (commencing with Section 1051.1) of Title 7 of the Code of Federal Regulations.
(e) “Fund” means the Milk Producers Security Trust Fund created pursuant to Section 62506.
(f) “Fund cash” means the combined value of the security charges collected pursuant to Section 62560 and 62561, any amounts paid under a security posted pursuant to this chapter, amounts reimbursed to the fund, including any accrued interest collected and authorized by law to be deposited in the fund with that reimbursement, penalties collected and authorized by law to be deposited in the fund, and any increments received pursuant to Section 62573.
(g) (1) Except as provided in paragraph (2), “fund surplus” means the portion of fund cash at any particular time that consists of increments received by the fund pursuant to Section 62573.
(2) If payment of producer claims pursuant to Article 7 (commencing with Section 62620) reduces the fund cash to thirty million dollars ($30,000,000), “fund surplus” shall thereafter mean the amount by which the fund cash exceeds thirty million dollars ($30,000,000).
(h) “Handler” means any person who as owner, agent, broker, or intermediary, either directly or indirectly, receives, purchases, or otherwise acquires ownership, possession, or control of milk in unprocessed or bulk form from a producer or a producer-handler for the purpose of manufacturing, processing, selling, or other handling. It includes nonprofit cooperative associations that, either directly or indirectly, receive, purchase, or otherwise acquire ownership, possession, or control of milk from other handlers or producers who are nonmembers of the nonprofit cooperative association.
(i) “Milk” means bulk whole milk, bulk reduced-fat milk, bulk lowfat milk, bulk skim milk, bulk condensed skim, and bulk cream, and any other combination of these products that have not had nondairy ingredients added. It does not include milk that has been packaged in bottles, cartons, dispenser cans, or other consumer packages.
(j) “Nonpooled milk” means milk that is not subject to the pricing and pooling provisions of the Federal Milk Marketing Order.
(k) “Nonprofit cooperative association” means a nonprofit cooperative association, as defined in Section 1051.18 of the Federal Milk Marketing Order, of producers, as defined in Section 1051.12 of the Federal Milk Marketing Order, that is organized and existing under Chapter 1 (commencing with Section 54001) of Division 20.
(l) “Producer” means any person who produces milk from five or more cows whose bulk milk is received, acquired, or handled by a handler. It includes a nonprofit cooperative association in the sale of milk of its member producers to other handlers.
(m) “Statistical uniform price” means the Producer Price Differential (PPD), adjusted by the location of the plant of first receipt, added to the announced class III price at the standard component tests.

SEC. 13.

 Section 62540 of the Food and Agricultural Code is amended to read:

62540.
 (a) The secretary shall appoint a Milk Producers Security Trust Fund Board consisting of seven members.
(b) All appointments shall be for a term of three years, and no member shall be appointed to more than three consecutive three-year terms.
(c) Members of the board shall include three milk producers, two representatives of handlers licensed under Chapter 2 (commencing with Section 61801), and two nonproducer members representing nonprofit cooperative associations.

SEC. 14.

 Section 62541 of the Food and Agricultural Code is amended to read:

62541.
 Each member of the board shall be paid one hundred dollars ($100) per day plus travel expenses, including expenses for lodging and meals, which are incurred in the attendance at board meetings or in conducting the business of the board. All per diem and expense claims are subject to approval by the secretary.

SEC. 15.

 Section 62542 of the Food and Agricultural Code is amended to read:

62542.
 The board shall advise the secretary on the administration of the fund, including, but not limited to, the amount of the fund defaults under this chapter and the implementation of the security charge necessary to accomplish its functions.

SEC. 16.

 Section 62543 of the Food and Agricultural Code is amended to read:

62543.
 The board may, by contract, with the approval of the secretary, engage the services of an accounting firm or other consultants or agencies that the board determines to be necessary.

SEC. 17.

 Section 62560 of the Food and Agricultural Code is amended to read:

62560.
 (a) The security charges provided for in Section 62561 shall be collected until January 1, 2007. Unless otherwise permitted by this section, the secretary shall thereafter discontinue collection of the security charges. The fund shall consist of the fund cash, the value of any alternative financial instrument, and acceptable securities provided by handlers pursuant to subdivision (c).
(b) If, after January 1, 2007, payment of producer claims reduces the fund cash below thirty million dollars ($30,000,000), the secretary may resume collecting security charges in order that the fund cash is thereafter maintained at thirty million dollars ($30,000,000). Security charges necessary to return the fund cash to thirty million dollars ($30,000,000) shall, subject to subdivision (c), be collected from all handlers making purchases of eligible milk, including handlers who have posted acceptable securities pursuant to subdivision (c).
(c) If, in any month, 110 percent of any handler’s average monthly eligible milk purchases, computed over the preceding 12 months, unless the increase in value of eligible milk purchases is the result of substantial business expansion or the result of a merger or acquisition, in which case the 12-month computation requirement does not apply, exceeds the fund cash as of the end of that month, or thirty million dollars ($30,000,000), whichever is higher, the secretary shall require that handler to provide acceptable securities, as calculated consistent with subdivision (e), within 10 working days in an amount equal to the difference between the fund cash or thirty million dollars ($30,000,000), whichever is higher, and 110 percent of that handler’s average monthly eligible milk purchases. When handlers have provided acceptable securities covering the difference, the secretary shall not collect security charges from those handlers for the portion of their average monthly eligible milk purchases covered by acceptable securities. Shipments to handlers failing to provide acceptable securities within 10 working days of notice by the secretary of the obligation to post acceptable securities, as required by this subdivision, shall be listed by the secretary as ineligible for coverage under the fund pursuant to Section 62586.
(d) The secretary shall calculate the value of handlers’ average monthly eligible milk purchases at least once each year for those handlers whose previous average monthly eligible milk purchases exceed twenty million dollars ($20,000,000). If, as a result of any such calculation, the secretary determines that a handler must provide additional acceptable securities, as calculated consistent with subdivision (e), to satisfy the requirements of subdivision (c), that handler shall provide additional acceptable securities within 10 working days of notice by the secretary.
(e) In calculating the amount of an acceptable security pursuant to subdivision (c) or (d), the secretary shall not take into account milk that a handler purchases from a producer with a beneficial ownership interest in the handler, as defined for purposes of paragraph (7) of subdivision (a) of Section 62580.
(f) In the event a handler fails to comply with subdivision (d):
(1) In addition to paying all other amounts required by this chapter, including any security charges then in effect under subdivision (a) of Section 62561, that handler shall pay an enhanced security charge on all eligible milk purchased to be computed as follows:
(A) 3.2 mills ($0.0032) per pound for fat contained in eligible milk of any class referred to in Section 1051.40 of the Federal Milk Marketing Order, whether pooled or nonpooled.
(B) 1.3 mills ($0.0013) per pound for solids-not-fat contained in eligible milk of any class referred to in Section 1051.40 of the Federal Milk Marketing Order, whether pooled or nonpooled.
(2) A handler shall be liable for the enhanced security charges required by this section until the handler provides the required additional acceptable securities to the secretary. Notwithstanding subdivision (b), enhanced security charges paid pursuant to this paragraph shall be deposited into the fund and become part of the fund cash.
(g) If a handler fails to timely provide acceptable securities, or additional acceptable securities, as required by this section, the secretary shall promptly give notice of that fact to all producers who have a contract on file with the secretary, all nonprofit cooperative associations, and other interested parties. A handler failing to post acceptable securities may also be subject to revocation, suspension, or nonrenewal or placement of conditions upon the handler’s license pursuant to Sections 62146, 62149, and 62151.
(h) In consultation with the board, the secretary may consider and use alternative financial instruments, in addition to, or in lieu of, using security charges to meet the financial security requirements of this section.

SEC. 18.

 Section 62561 of the Food and Agricultural Code is amended to read:

62561.
 (a) The following security charges shall be in effect for any period for which the secretary has implemented collections under this chapter:
(1) 3.2 mills ($0.0032) per pound for fat contained in eligible milk of any class referred to in Section 1051.40 of the Federal Milk Marketing Order, whether pooled or nonpooled.
(2) 1.3 mills ($0.0013) per pound for solids-not-fat contained in eligible milk of any class referred to in Section 1051.40 of the Federal Milk Marketing Order, whether pooled or nonpooled.
(b) The secretary is only authorized by this article to collect security charges on eligible milk.

SEC. 19.

 Section 62562 of the Food and Agricultural Code is repealed.

SEC. 20.

 Section 62563 of the Food and Agricultural Code is amended to read:

62563.
 The amount of any handler’s obligation attributable to the security charges established pursuant to Section 62561 shall be remitted by the secretary to the fund by the end of the month following the month in which payment for the milk is made.

SEC. 21.

 Section 62564 of the Food and Agricultural Code is repealed.

SEC. 22.

 Section 62564.5 of the Food and Agricultural Code is repealed.

SEC. 23.

 Section 62565 of the Food and Agricultural Code is amended to read:

62565.
 Security charges shall be collected by the secretary through direct payment.

SEC. 24.

 Section 62566 of the Food and Agricultural Code is amended to read:

62566.
 The secretary may add a penalty of 10 percent to amounts that are not paid when due.

SEC. 25.

 Section 62567 of the Food and Agricultural Code is amended to read:

62567.
 If any handler or producer-handler does not provide the information necessary to determine the amount due, when required, the secretary shall estimate the amount due from the records of the department or from any other source of information that is available.

SEC. 26.

 Section 62568 of the Food and Agricultural Code is amended to read:

62568.
 The secretary may take all appropriate action against any person to recover any unpaid amounts. In any action, a declaration by the secretary that states the amount required to be paid, including penalty, is prima facie evidence of the delinquency. The presumption established by this section is a presumption affecting the burden of proof.

SEC. 27.

 Section 62569 of the Food and Agricultural Code is amended to read:

62569.
 (a) Any money that is collected by the secretary pursuant to this chapter shall be deposited in a bank or other depository that is approved by the secretary. Funds that are so collected are exempt from Sections 11270 and 11272 of the Government Code and shall be deposited and disbursed only to pay for milk produced and delivered within this state, that has not been otherwise paid for, including attorney’s fees and other costs incurred in litigation involving the fund, expenses generated by the auditing requirement imposed by Section 62570, expenses generated by the use of alternative financial instruments pursuant to Section 62560, and the costs set forth in Section 62573. The expenditure of those funds is exempt from Section 925.6 of the Government Code.
(b) Nothing in this section prevents the secretary from using the increment received from investment, reinvestment, or deposit of money specified in Section 62573, in the manner provided by Section 62574.

SEC. 28.

 Section 62570 of the Food and Agricultural Code is amended to read:

62570.
 All fund activities shall be subject to an audit at least once every two years by an auditing firm recommended by the board and selected by the secretary. A copy of the audit shall be delivered to the secretary within 30 days after completion.

SEC. 29.

 Section 62571 of the Food and Agricultural Code is amended to read:

62571.
 Notwithstanding Section 13340 of the Government Code, any money that is collected by the secretary pursuant to this chapter is hereby continuously appropriated to the secretary to carry out only those purposes provided for in Section 62569. The appropriation that is made in this section is exempt from Section 16304 of the Government Code.

SEC. 30.

 Section 62572 of the Food and Agricultural Code is amended to read:

62572.
 Any money that is deposited pursuant to Section 62569, which the secretary determines is available for investment, may be invested or reinvested by the Treasurer in any of the securities described in Article 1 (commencing with Section 16430) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code, or placed in a depository as provided in Chapter 4 (commencing with Section 16500) of that part, and handled in the same manner as money in the State Treasury. For these purposes, the money may also be combined with funds determined by the secretary to be available for investment pursuant to Section 58939.

SEC. 31.

 Section 62573 of the Food and Agricultural Code is amended to read:

62573.
 (a) Any increment that is received from investment, reinvestment, or deposit of money pursuant to Section 62572 shall be deposited to the credit of the fund. The Treasurer may deduct from this remittance an amount equal to the reasonable costs incurred in carrying out Section 62572 and this section or may bill the secretary for the costs, and the secretary shall pay the costs from money collected pursuant to this chapter.
(b) Nothing in this section prevents the secretary from using the increment in a manner provided by Section 62574.

SEC. 32.

 Section 62574 of the Food and Agricultural Code is amended to read:

62574.
 Immediately following the payment to the fund of the increment provided in Section 62573, the secretary may, after consultation with the board, transfer an amount equal to one-half of that increment to the Department of Food and Agriculture Fund to be used to reduce the producer assessments collected pursuant to Section 62660.

SEC. 33.

 Section 62580 of the Food and Agricultural Code is amended to read:

62580.
 (a) Except as otherwise provided in this chapter, milk shipped by a producer to a handler who meets all of the following criteria shall be considered for coverage pursuant to this chapter:
(1) A valid contract between the producer and handler pursuant to Chapter 1 (commencing with Section 61310) or Chapter 2 (commencing with Section 61801) has been filed with the secretary before the date the milk was shipped, unless the shipment was made in the first five days after the contract was executed. Filing may be accomplished by providing the department electronic notification of the contract.
(2) The handler was licensed and bonded as required by Chapter 1 (commencing with Section 61301) or Chapter 2 (commencing with Section 61801) when the contract was filed with the secretary.
(3) The milk was produced within the state and delivered to a plant within the state.
(4) The secretary has not issued a prior notice that the shipments would not be covered by the fund.
(5) The shipment was not made under a custom processing arrangement with the producer retaining title.
(6) (A) The producer shipping the milk had a direct contract with the handler. Milk shipped to a handler under a contract held by intermediaries, brokers, or agents is not covered.
(B) In the case of a nonprofit cooperative association, only the milk of its members shipped under the contract is covered. Notwithstanding subparagraph (A), milk shipped by a nonprofit cooperative association to a handler under a contract held by another nonprofit cooperative association, as verified by the secretary, is covered.
(7) (A) The producer does not have a beneficial ownership interest in the handler to whom shipments were made.
(B) For purposes of this paragraph, the term “beneficial ownership interest” means the holding of any ownership share in the handler to whom shipments are made, or, if the handler is a publicly traded company, an ownership share of more than 1 percent.
(8) The producer is in compliance with this chapter.
(b) Milk shall not be excluded from coverage pursuant to this chapter due to its pooled or nonpooled status.

SEC. 34.

 Section 62580.5 of the Food and Agricultural Code is amended to read:

62580.5.
 Any producer entity, including a nonprofit cooperative association that severs a disqualifying beneficial ownership interest in a handler to whom it supplies bulk milk, shall not have trust fund coverage for future milk shipments to that handler for a period of 12 months after notice is given to the secretary of termination of the beneficial ownership interest unless a waiver is granted subject to Section 62587.

SEC. 35.

 Section 62582 of the Food and Agricultural Code is amended to read:

62582.
 If future shipments to a handler are not eligible for coverage under this chapter in the event of a default, the secretary shall notify all producers who have a contract on file with the secretary, all nonprofit cooperative associations, and other interested parties. Future shipments shall not be eligible when any of the following events occur:
(a) The handler fails to maintain a valid license or bond as required under Chapter 1 (commencing with Section 61301) or Chapter 2 (commencing with Section 61801).
(b) The handler fails to pay producers as required under Section 1051.73 of the Federal Milk Marketing Order, or, in the case of nonpooled or Grade B milk, by the contract filed with the secretary pursuant to paragraph (1) of subdivision (a) of Section 62580.
(c) The handler fails to submit, when requested by the secretary, executed contracts that establish the relationship between affected parties.

SEC. 36.

 Section 62585 of the Food and Agricultural Code is amended to read:

62585.
 If the secretary issues a notice pursuant to Section 62582, the secretary may again qualify shipments to the handler if the handler has corrected the deficiency upon which the notice was originally issued and has done all of the following:
(a) Paid all amounts owed to producers, including interest. Producers are not entitled to receive interest on amounts for which they have been paid by the fund after the date of payment by the fund.
(b) Reimbursed the fund for any payments made by the fund due to a default by the handler plus interest at the rate of 12 percent per annum from the date of payment by the fund.
(c) Paid any assessments, penalties, or other amounts owed under federal, state, or local laws.

SEC. 37.

 Section 62586 of the Food and Agricultural Code is amended to read:

62586.
 The secretary shall, at least monthly, publish a current list of all handlers to whom shipments are not eligible for coverage under the fund.

SEC. 38.

 Section 62587 of the Food and Agricultural Code is amended to read:

62587.
 The secretary may waive any of the provisions of this article if, after consultation with the board, the secretary finds that a hardship would be imposed on persons subject to this chapter that is not consistent with the intent of this chapter.

SEC. 39.

 Section 62600 of the Food and Agricultural Code is amended to read:

62600.
 Any producer who does not receive payment for milk sold or delivered to a handler in the manner required by Section 1051.73 of the Federal Milk Marketing Order, or, in the case of nonpooled or Grade B milk, as required by the contract, shall immediately notify the secretary. Failure to notify the secretary within two business days of nonperformance of electronic fund transfer payments shall result in a one-day reduction in total days covered for each day of failure to notify the secretary of nonpayment.

SEC. 40.

 Section 62601 of the Food and Agricultural Code is amended to read:

62601.
 The secretary shall, upon the secretary’s own motion or upon information from a producer, producer representative, or any other person, immediately take whatever action is necessary to determine whether a payment default has occurred.

SEC. 41.

 Section 62602 of the Food and Agricultural Code is repealed.

SEC. 42.

 Section 62603 of the Food and Agricultural Code is amended to read:

62603.
 If the secretary determines that a payment default has occurred, the secretary shall notify the handler that it has one business day from receipt of the notification to correct the payment deficiency. If the secretary determines that a payment default has not occurred, the secretary shall so notify the handler and complaining party.

SEC. 43.

 Section 62604 of the Food and Agricultural Code is amended to read:

62604.
 When a payment default has occurred, which was not corrected within one business day after notification, the secretary shall issue a notice pursuant to Section 62582 which identifies the defaulting handler and informs producers of the provisions of Sections 62583 and 62584. The notice shall also inform producers of their rights to file claims pursuant to Article 7 (commencing with Section 62620).

SEC. 44.

 Section 62620 of the Food and Agricultural Code is amended to read:

62620.
 If the secretary determines that the fund is liable for any nonpayments to producers, the secretary shall provide to the producers, who have a contract with the defaulting handler on file with the secretary, a claim form. The claim form, which shall be verified, shall be returned to the secretary within 60 days from the date the claim forms are mailed by the secretary. The producer need only verify that a nonpayment has occurred. The amount of the nonpayment shall be determined by the secretary.

SEC. 45.

 Section 62621 of the Food and Agricultural Code is amended to read:

62621.
 If a verified claim form is not filed as required by Section 62620, the secretary and the fund are relieved of any further duty or liability pursuant to this chapter.

SEC. 46.

 Section 62622 of the Food and Agricultural Code is amended to read:

62622.
 Upon receipt of all verified claim forms from producers or the expiration of the time allowed to file claims, whichever occurs first, the secretary shall calculate the amount due each producer and shall notify each producer of their calculated amount and the relationship that amount bears to the total of all claims. Any producer not satisfied with the determination of the secretary may, within 30 days of receiving the notice pursuant to this section, request the secretary to review the producer’s calculated amount.

SEC. 47.

 Section 62623 of the Food and Agricultural Code is amended to read:

62623.
 For purposes of this chapter, the amounts owed to the producers shall be calculated as follows:
(a) Only shipments that occur during the first 35 days from the date of the earliest shipment for which a producer has not been paid shall be used.
(b) For all eligible milk, whether pooled or nonpooled, the price specified in the contract with the handler or the statistical uniform price, as defined in Section 62521, whichever is lower, shall be used.
(c) Deductions shall be made for those items that the handler has remitted on the producer’s behalf, and for which documentation of remittance has been presented, unless the deductions are unauthorized.
(d) The producer’s share of any bond recovery under Chapter 1 (commencing with Section 61301) or Chapter 2 (commencing with Section 61801) shall be deducted.

SEC. 48.

 Article 9 (commencing with Section 62640) of Chapter 2.5 of Part 3 of Division 21 of the Food and Agricultural Code is repealed.

SEC. 49.

 Section 62660 of the Food and Agricultural Code is amended to read:

62660.
 (a) The secretary shall collect from each producer three and three-tenths mills ($0.0033) per hundredweight of all eligible milk, whether pooled or nonpooled, to defray the reasonable costs of administering this chapter, except costs for which the fund is liable, as provided for in Section 62569.
(b) The secretary may fix the rate of the assessment authorized pursuant to subdivision (a) at a lesser or greater amount and may adjust the rate of the assessment as the secretary determines necessary to defray the reasonable costs of administering this chapter.
(c) Moneys collected pursuant to this section shall be deposited in the Department of Food and Agriculture Fund, created pursuant to Section 221, and shall be continuously appropriated to the department pursuant to Section 62571.

SEC. 50.

 Section 62661 of the Food and Agricultural Code is amended to read:

62661.
 The secretary is the instrumentality of this state for the purpose of administering and enforcing this chapter and to execute the legislative intent expressed in this chapter, and is hereby vested with the administrative authority specified in this chapter.

SEC. 51.

 Section 62662 of the Food and Agricultural Code is amended to read:

62662.
 The secretary may exercise any or all of the powers conferred by Chapter 2 (commencing with Section 11150) of Part 1 of Division 3 of Title 2 of the Government Code upon the head of a department with respect to hearings and investigations under this chapter.

SEC. 52.

 Section 62663 of the Food and Agricultural Code is amended to read:

62663.
 For purposes of enforcing this chapter, the secretary may investigate any and all transactions between producers and handlers, between nonprofit cooperative associations and producers, and among handlers. For that purpose, the secretary shall have access to, and may enter at all reasonable hours, any place where milk is being stored, bottled, or manufactured and where milk is being bought, sold, or handled, or where the books, papers, records, or documents that relate to those transactions are kept. The secretary may inspect and copy those books, papers, records, or documents at any place within the state.

SEC. 53.

 Section 62665 of the Food and Agricultural Code is amended to read:

62665.
 Any order of the secretary made pursuant to this chapter that substantially affects the rights of any directly affected party shall be subject to judicial review upon petition to the appropriate court. The petition shall be filed within 30 days after the effective date of the order.

SEC. 54.

 Section 62666 of the Food and Agricultural Code is amended to read:

62666.
 Any producer who recovers from the fund shall subrogate to the secretary all rights of recovery against any person or organization, and the producer shall execute and deliver to the secretary instruments and papers and perform any other acts necessary to carry out this section.

SEC. 55.

 Section 62667 of the Food and Agricultural Code is amended to read:

62667.
 Any payments made to producers from the fund due to a handler’s default shall accrue interest at the rate of 12 percent per annum from the date of payment. The payments and accrued interest is a judgment against the defaulting handler. The judgment shall be considered a lien on all real and personal property of the defaulting handler. The secretary may file the lien for record with any county recorder where a defaulting handler’s property is located and shall specify the amount owed, the name of the handler, the federal social security number or the federal employer tax number if known, and the last known address of the handler. The lien shall remain in full force and effect until the handler has repaid to the fund an amount equal to the default.

SEC. 56.

 Section 64004 of the Food and Agricultural Code is repealed.

SEC. 57.

 Section 64005 of the Food and Agricultural Code is amended to read:

64005.
 “Dairy products” includes milk and any derivative of milk that is in natural, processed, or manufactured form, or that constitutes a part of another article, commodity, or product.

SEC. 58.

 Section 64005.5 is added to the Food and Agricultural Code, to read:

64005.5.
 “Ex officio member” means a nonvoting member of the council.

SEC. 59.

 Section 64008 of the Food and Agricultural Code is repealed.

SEC. 60.

 Section 64009 of the Food and Agricultural Code is repealed.

SEC. 61.

 Section 64010 of the Food and Agricultural Code is amended to read:

64010.
 “Milk” means the lacteal secretion that is obtained from the udders of cows.

SEC. 62.

 Section 64010.1 of the Food and Agricultural Code is amended to read:

64010.1.
 “Class I milk” has the meaning of that term as defined in Section 1051.40 of Title 7 of the Code of Federal Regulations, and includes both pooled and nonpooled milk.

SEC. 63.

 Section 64010.2 of the Food and Agricultural Code is amended to read:

64010.2.
 “All other usages” means usages other than class I for milk, including grade B milk received by handlers.

SEC. 64.

 Section 64011 of the Food and Agricultural Code is repealed.

SEC. 65.

 Section 64014 of the Food and Agricultural Code is amended to read:

64014.
 “Processing” means separating, standardizing, pasteurizing, sterilizing, evaporating, condensing, canning, bottling, packaging, or otherwise preparing milk to manufacture or produce any dairy product. “Processing” does not, however, include separating by a producer, on the dairy where the milk is produced, and milk separated by a producer on the dairy shall not be deemed to have been processed.

SEC. 66.

 Section 64015 of the Food and Agricultural Code is amended to read:

64015.
 “Producer” means any person that produces milk and sells it, or delivers possession or control of it, to a handler, in the form of unprocessed milk or cream, or in any other unprocessed form.

SEC. 67.

 Section 64016 of the Food and Agricultural Code is amended to read:

64016.
 “Producer-handler” has the meaning of that term as defined in Section 1051.10 of Title 7 of the Code of Federal Regulations.

SEC. 68.

 Section 64017 of the Food and Agricultural Code is repealed.

SEC. 69.

 Section 64017 is added to the Food and Agricultural Code, to read:

64017.
 “Solids-not-fat” means any milk solids that are not fat, measured using the standard milk testing methods in a Federal Milk Marketing Order, established by the final rule, effective October 17, 2018, published by the United States Department of Agriculture in Volume 83 of the Federal Register, beginning on page 26547, on Friday, June 8, 2018.

SEC. 70.

 Section 64041 of the Food and Agricultural Code is amended to read:

64041.
 It is hereby declared, as a matter of legislative determination, that the provisions of this chapter are enacted in the exercise of the police power of this state for the purposes of protecting and furthering the public health and welfare. It is further declared that the dairy industry of this state is affected with a public interest, in that, among other things:
(a) The production, processing, manufacture, and distribution of milk and other dairy products constitute a paramount industry of this state which not only provides substantial and required revenues for the state and its political subdivisions, and employment and a means of livelihood for many thousands of its population, but also furnishes essential foods that are vital to the public health and welfare.
(b) The stabilization, maintenance, and expansion of the dairy industry of California, and of the state, nationwide, and foreign markets for its products, are necessary to assure the consuming public an adequate supply of foods which are indispensable in a proper human diet, to protect, for the state and its political subdivisions, a necessary source of tax revenue, to provide and maintain an adequate standard of living for a great segment of the population of this state, to maintain proper wage scales for those engaged in the dairy industry, and to maintain existing employment.
(c) Due to the significant role of milk and other dairy products in balanced human nutrition and the maintenance of public health, it is appropriate to provide for the dissemination of accurate and scientific information relative to the healthful qualities of dairy products, and to make the public thoroughly aware of that information.

SEC. 71.

 Section 64042 of the Food and Agricultural Code is amended to read:

64042.
 The purposes of this chapter are as follows:
(a) To enable the dairy industry, with the aid of the state, to develop, maintain, and expand the state, national, and international markets for dairy products that are produced, processed, or manufactured in this state, and the use and consumption of those dairy products in this state.
(b) In aid, but not in limitation, of this purpose, to authorize and enable the secretary to formulate and effectuate, directly or in cooperation with other agencies and instrumentalities specified in this chapter, consumer, or other, educational programs designed to encourage the use and consumption of milk and other dairy products as part of balanced human nutrition.
(c) To provide funds for the administration and enforcement of this chapter by assessments to be paid by producers, handlers, and producer-handlers in the manner prescribed in this chapter.

SEC. 72.

 Section 64043 of the Food and Agricultural Code is amended to read:

64043.
 This chapter shall be liberally construed. If any section, sentence, clause, or part of this chapter is, for any reason, held to be unconstitutional or invalid, that decision does not affect the remaining portion of this chapter but the unconstitutional or invalid provision is separable from the valid parts of this chapter.

SEC. 73.

 Section 64071 of the Food and Agricultural Code is amended to read:

64071.
 The secretary shall administer and enforce this chapter, and may exercise any or all of the administrative powers that are conferred by Sections 11180 to 11191, inclusive, of the Government Code upon a head of a department. In order to effectuate the declared purposes of this chapter, the secretary may contract to carry out the declared intent and purposes of this chapter.

SEC. 74.

 Section 64072 of the Food and Agricultural Code is amended to read:

64072.
 The secretary shall, from records of the department or any other reliable source, maintain a list of producers, handlers, and producer-handlers.

SEC. 75.

 Section 64073 of the Food and Agricultural Code is amended to read:

64073.
 The secretary may purchase general liability insurance for the council in an amount the secretary determines as necessary. The cost of the insurance shall be paid by the council. The insurance policy shall name the secretary, in the secretary’s official capacity, and the council as insured parties for claims made against the council in its advisory capacity to the secretary or against the secretary regarding the activities of the council. The secretary, after consultation with the Attorney General, may refer claims to the insurance carrier for appropriate action. In the alternative, the secretary may require that claims be handled in the manner otherwise specified in this chapter.

SEC. 76.

 Section 64101 of the Food and Agricultural Code is amended to read:

64101.
 There is in the state government the Dairy Council of California, which shall consist of no less than 24, nor more than 26, members. All members of the council shall be appointed by the secretary and may hold office at the pleasure of the secretary. The membership of the council shall be as follows:
(a) There shall be 12 members that are actually engaged in the production of milk. These 12 members are the producer members of the council.
(b) There shall be 12 members that are handlers or producer-handlers. These 12 members are the handler members of the council.
(c) Upon the recommendation of the council, the secretary may appoint one person as a voting member who is not a producer, handler, or producer-handler, and who shall represent the public.
(d) Upon the recommendation of the council, the secretary may appoint up to two people as nonvoting ex officio members of the council who have expertise that is beneficial to the council.

SEC. 77.

 Section 64103 of the Food and Agricultural Code is amended to read:

64103.
 Officials or members, otherwise qualified, of corporations, associations, and other business units, that are actually engaged in business as producers, handlers, or producer-handlers, are eligible to be members of the council.

SEC. 78.

 Section 64104 of the Food and Agricultural Code is amended to read:

64104.
 The term of office of a member of the council shall be three years.

SEC. 79.

 Section 64105 of the Food and Agricultural Code is amended to read:

64105.
 Any vacancy occurring on the council during an unexpired term of office may be filled by the secretary for the unexpired term. In filling a vacancy, the secretary may consider recommendations from the remaining members of the council. The secretary may remove any member of the council for cause deemed sufficient by the secretary and the vacancy caused by removal shall be filled in the manner as provided in this section for the unexpired term.

SEC. 80.

 Section 64111 of the Food and Agricultural Code is amended to read:

64111.
 The council shall select from its members, to serve at its pleasure, a chair and vice chair who, together with at least three, and no more than five, other members selected by the council, shall constitute the executive committee of the council. The executive committee shall have and exercise those powers of the council as the council may delegate to it.

SEC. 81.

 Section 64112 of the Food and Agricultural Code is amended to read:

64112.
 The council shall have two regular meetings in each year at times and places fixed by the council. The times for regular meetings shall be fixed so that there is an interval of at least four calendar months between all regular meetings. The council may meet in special meetings at any time and place at the call of the chair. The executive committee shall have four regular meetings each year at times and places fixed by it, and may meet in special meetings at any time and place at the call of the chair.

SEC. 82.

 Section 64114 of the Food and Agricultural Code is amended to read:

64114.
 The appointed members of the council shall receive one hundred dollars ($100) per day for each day spent in actual attendance at the meetings or on the business of the council and shall be reimbursed for necessary traveling and other expenses that are incurred in the performance of their official duties.

SEC. 83.

 Section 64115 of the Food and Agricultural Code is amended to read:

64115.
 No member of the council, except for a member of the executive committee, shall receive compensation for more than 10 days’ service per year. No member of the executive committee shall receive compensation for more than three days’ service per month.

SEC. 84.

 Section 64116 of the Food and Agricultural Code is amended to read:

64116.
 The members of the council who are duly appointed by the secretary, and employees of the council, shall not be held responsible individually in any way, to any person, for liability on any contract or agreement of the council. All salaries, expenses, costs, obligations, and liabilities that arise out of the administration and enforcement of this chapter are payable only from funds that are collected pursuant to the provisions of this chapter.

SEC. 85.

 Section 64117 of the Food and Agricultural Code is amended to read:

64117.
 The secretary may require any employee or agent of the council to give a fidelity bond that is executed by a surety company that is authorized to do business in this state in favor of the secretary, in a sum, and containing terms and conditions, that the secretary may prescribe. The cost of a fidelity bond required pursuant to this section shall be paid from the funds that are collected pursuant to this chapter.

SEC. 86.

 Section 64151 of the Food and Agricultural Code is amended to read:

64151.
 The duties of the council are advisory, except for those duties that may be delegated to it by the secretary. The council may, subject to the approval of the secretary, exercise any of the following powers:
(a) To recommend to the secretary administrative regulations that relate to the administration and enforcement of this chapter.
(b) To investigate all matters that affect the administration of this chapter, and to report violations of it to the secretary.
(c) To employ and, at its pleasure, discharge a manager and any clerical help and other employees that it deems necessary, and to prescribe their powers and duties and fix their compensation.
(d) To contract with, or employ, and, at its pleasure, discharge any consultants and agencies that it deems necessary, and to outline their powers and duties and fix their compensation.
(e) To establish offices and incur expenses incidental to those offices.
(f) To recommend to the secretary the making of contracts and other agreements that may be necessary to conduct nutrition research, communication, and education activities of the council.
(g) To cooperate with any other local, state, or national commission, organization, or agency, whether voluntary or created by state or national law, that is engaged in work or activities similar to the work and activities of the council, and recommend to the secretary the making of contracts and agreements with these organizations or agencies for carrying on joint campaigns of research, education, and advertising. In matters of research, the council shall, however, cooperate with organizations of recognized professional standing that are adequately equipped with facilities for the research that is contemplated.
(h) To recommend to the secretary the institution and promotion of scientific research to develop or discover, or both to develop and discover, the health, food, therapeutic, dietetic, and industrial uses of milk and its products and derivatives.
(i) To cooperate with other public and private agencies that are engaged in similar work or activities in order to avoid or minimize any overlapping or duplication of work or conflict.
(j) To receive, invest, and disburse funds, pursuant to Article 11 (commencing with Section 64300).

SEC. 87.

 Section 64153 of the Food and Agricultural Code is amended to read:

64153.
 Annually, before July 1 of each year, the council shall formulate and transmit to the secretary statements of its recommended activities and proposed budget for the coming fiscal year. The statements shall:
(a) Be based on and made after an investigation by the council of the necessities of the dairy industry and the extent of the public interest, necessity, and convenience to be served by those recommended activities.
(b) Describe the council’s recommended programs of research, education, and communication.
(c) Set forth in a proposed budget the amounts that are deemed necessary to be allocated by the secretary both to effectuate these programs and to perform the secretary’s administrative duties pursuant to this chapter. The proposed budget shall include reasonable amounts for contingencies.
(d) Be in a form, and contain detail, that the secretary, in the reasonable exercise of the secretary’s judgment, deems necessary to adequately show whether or not the activities are warranted by the facts contained in the statements and are authorized by this chapter.

SEC. 88.

 Section 64154 of the Food and Agricultural Code is amended to read:

64154.
 (a) If the activities and budgeted amounts that are recommended by the council and described in the statements provided for in Section 64153 are warranted by the facts contained in the statements and are authorized by this chapter, the secretary shall approve the activities for the council programs, in writing, within 20 days after each of the statements has been submitted to the secretary. The secretary shall also approve, in writing, the budget provided for in subdivision (c) of Section 64153 within 20 days after the budget has been submitted. If the secretary refuses or fails to give any approvals pursuant to this section within the required periods, the secretary shall notify the council promptly of the secretary’s refusal or failure to approve the activities or budget and give the secretary’s reasons, specifically, for the refusal or failure.
(b) Expenditures for political contributions or for lobbying are not authorized.

SEC. 89.

 Section 64155 of the Food and Agricultural Code is amended to read:

64155.
 The council shall keep accurate books, records, and accounts of all of its transactions, dealings, contracts, agreements, funds, and expenditure. These books, records, and accounts shall at all times be open to inspection and audit by the department.

SEC. 90.

 Section 64157 of the Food and Agricultural Code is amended to read:

64157.
 The council shall request the secretary to submit to it an annual budget that sets forth in reasonable detail the proposed expenditures that the secretary deems necessary for the performance by the secretary and by the department of the duties that are imposed upon them by this chapter. The council shall also request the secretary to submit to it an annual statement, in reasonable detail, of the secretary’s expenditures pursuant to this chapter.

SEC. 91.

 Section 64158 of the Food and Agricultural Code is amended to read:

64158.
 The council shall, annually, report to the members of the dairy industry on its activities and programs, including, but not limited to, its income and expenses, fund balance, and a report of progress in achieving program goals, as prescribed by the secretary.

SEC. 92.

 Section 64181 of the Food and Agricultural Code is amended to read:

64181.
 The council shall conduct one or more campaigns of research, communication, and education designed to accomplish the following purposes, among others:
(a) To gather, publicize, and disseminate accurate and scientific information that shows the importance of the use and consumption of dairy products in relation to public health, balanced diet, and balanced nutrition of children and adults.
(b) To provide education programs on the value and health benefits of milk and dairy products to empower stakeholders, including educators, health professionals, and communities, to elevate the health of children and families in accordance with consensus science.

SEC. 93.

 Section 64182 of the Food and Agricultural Code is amended to read:

64182.
 (a) In each fiscal year, of the money that is received under this chapter, an amount to be determined by the council shall be expended or allocated for research, with particular emphasis on the role of milk and dairy products in adult and child nutrition.
(b) The council shall select the research projects to be conducted. Those projects shall be carried out, as practicable, by the University of California, pursuant to a contract entered into between the Regents of the University of California and the council. If, however, the council determines that the college has no facilities for a particular project or that another recognized research agency has better facilities for it, the project may be carried out by the other research agency, pursuant to a contract with the council.

SEC. 94.

 Section 64183 of the Food and Agricultural Code is amended to read:

64183.
 An advertising or sales promotion program that is conducted or sponsored by the council shall not make any false or unwarranted claim, shall not disparage the quality, value, use, or sale of any commodity that is authorized by law to be marketed in this state, and shall not be conducted with reference to a brand or trade name.

SEC. 95.

 Section 64221 of the Food and Agricultural Code is amended to read:

64221.
 Every handler and producer-handler shall keep complete and accurate records of all milk in unprocessed form that the handler or producer-handler purchases, or possession or control of which it acquires from any producer or other handler. Every handler that produces milk and producer-handler shall include its own production in these records. Every handler and producer-handler shall also keep complete and accurate records of all milk that it utilizes for processing.

SEC. 96.

 Section 64222 of the Food and Agricultural Code is amended to read:

64222.
 Records kept pursuant to Section 64221 shall be all of the following:
(a) In a form, and containing all information, relevant to the purposes of this chapter, that the secretary may, by order or regulation, prescribe.
(b) Preserved for a period of two years.
(c) Open to inspection at any time on the request of the secretary.

SEC. 97.

 Section 64223 of the Food and Agricultural Code is amended to read:

64223.
 The secretary may, by order or regulation, require every handler and producer-handler subject to the recordkeeping requirements in Section 64221 to file with the secretary the information, or any part of the information, in the records, that the first handlers are required to keep pursuant to this article. The information shall be on forms that are prescribed and furnished by the secretary.

SEC. 98.

 Section 64282 of the Food and Agricultural Code is repealed.

SEC. 99.

 Section 64301 of the Food and Agricultural Code is amended to read:

64301.
 (a) Annually before the beginning of the fiscal year, the secretary shall, upon the recommendation of the council, establish and announce the assessments to be paid by producers, handlers, and producer-handlers for the coming fiscal year.
(b) These assessments shall be established at levels sufficient to finance the budget for the coming fiscal year as approved by the secretary pursuant to Sections 64153 and 64154.
(c) The rate structure of the assessments shall be as follows:
(1) The following assessments for handlers of milk:
(A) No more than 17.0 mills ($0.0170) per hundredweight for class I milk.
(B) No more than 8.5 mills ($0.0085) per hundredweight for all other usages of milk.
(C) The relationship between the handler assessment rates per hundredweight established for class I milk and for all other usages shall be at a ratio of 2 to 1.
(2) For producers of milk if a stand-alone quota program established pursuant to Section 62757 is operative, the assessments shall be as follows:
(A) No more than 2.0 mills ($0.0020) per pound for quota solids-not-fat, within the meaning given that term for purposes of the Quota Implementation Plan established pursuant to Section 62757.
(B) No more than 1.0 mills ($0.0010) per pound for all other solids-not-fat.
(C) The relationship between the producer assessment rates per pound quota solids-not-fat and per pound for all other solids-not-fat shall be at a ratio of 2 to 1.
(3) For producers of milk if a stand-alone quota program established pursuant to Section 62757 is not operative, the assessments shall be as follows:
(A) No more than 10.4 mills ($0.0104) per hundredweight of milk produced and delivered to a handler.
(B) The producer assessment shall be without regard to the milk’s usage and shall be at a level between the two handler rates.
(d) The handler and producer assessment rates established pursuant to this section shall be set at levels so that the total projected handler revenue for the year and the total projected producer revenue for the year to be generated from those assessments shall be as close to equal as reasonably possible.

SEC. 100.

 Section 64301.5 is added to the Food and Agricultural Code, to read:

64301.5.
 Maximum allowable assessments greater than those provided in Section 64301 shall not be established unless approved by producers, handlers, and producer-handlers, with at least 40 percent of all producers, handlers, and producer-handlers on record with the department submitting valid ballots during the referendum period, and either of the following:
(a) A majority of producers, handlers, and producer-handlers voting in the referendum support the increase in the proposed higher maximum assessment allowed, and those producers, handlers, and producer-handlers voting in favor represent at least 65 percent of the total voted volume represented by each category.
(b) At least 65 percent of producers, handlers, and producer-handlers voting in the referendum support the increase in the proposed higher maximum assessment allowed, and those producers, handlers, and producer-handlers voting in favor represent a majority of the total voted volume represented by each category.

SEC. 101.

 Section 64302 of the Food and Agricultural Code is amended to read:

64302.
 (a) The producer assessments shall be collected by the first handler that purchases, or otherwise acquires possession or control of, the milk by deducting the assessment from any payment that is due to the producer for the milk. Each producer-handler shall pay the assessment on the producer-handler’s own production. For the purposes of this article, a handler that sells unprocessed milk, of which the handler has the right to possession or control by contract or otherwise, to another handler, and delivers this milk in unprocessed form to the other handler or causes this milk to be delivered to the other handler directly from the producer, is the first handler of this milk.
(b) (1) When the stand-alone quota program, provided pursuant to Section 62757, is in effect, the assessment of each producer for all milk shall be determined on the total solids-not-fat of milk produced and delivered.
(2) When the stand-alone quota program, provided pursuant to Section 62757, is not in effect, the assessment of each producer for all milk shall be determined on the total hundredweight of milk produced and delivered.
(c) The collection of assessments to be paid by handlers, including producer-handlers, pursuant to Section 64303 shall be used for the handler portion of council assessments only, and shall not affect payments of producers, nor in any way change the method of producer payment for milk.

SEC. 102.

 Section 64303 of the Food and Agricultural Code is amended to read:

64303.
 Each handler and producer-handler shall pay to the secretary the assessments established for all milk used in the plant of the handler, or producer-handler, in the processing and manufacture of milk and milk products.

SEC. 103.

 Section 64304 of the Food and Agricultural Code is amended to read:

64304.
 The assessments established and assessed as prescribed in this chapter shall be billed monthly to the handler and the producer-handler, and shall be paid to the secretary no later than the 15th day of the second month following the month during which the milk was received.

SEC. 104.

 Section 64305 of the Food and Agricultural Code is amended to read:

64305.
 Assessments established and assessed under this chapter may be enforced and collected by the secretary through direct payment or through accounting procedures established by the secretary under Chapter 3.5 (commencing with Section 62750).

SEC. 105.

 Section 64306 of the Food and Agricultural Code is amended to read:

64306.
 To the amount of assessments that are unpaid when due, the secretary may add a penalty of 10 percent. In addition, the secretary may assess interest at a rate of 1 percent of the unpaid balance for each 30 days the assessment is unpaid.

SEC. 106.

 Section 64307 of the Food and Agricultural Code is amended to read:

64307.
 The secretary, by action prosecuted by the secretary, may recover any unpaid assessments. In any action, a certificate of the secretary that shows the amount, including the penalty, determined by the secretary to be required to be paid by the person required to pay this amount is prima facie evidence of the delinquency. The presumption established by this section is a presumption affecting the burden of proof.

SEC. 107.

 Section 64308 of the Food and Agricultural Code is amended to read:

64308.
 If any handler or producer-handler does not provide the information necessary to determine the amount of assessments due, when required, the secretary shall estimate the amount due from the records of the department or from any other source of information that is available. In any action by the secretary to recover assessments pursuant to this chapter, a certificate of the secretary that shows the amount determined by the secretary to be required to be paid by the person that is required to pay the assessments is prima facie evidence of the delinquency of the amount that is shown. The presumption established by this section is a presumption affecting the burden of proof.

SEC. 108.

 Section 64308.5 of the Food and Agricultural Code is amended to read:

64308.5.
 (a) Assessments paid on milk pursuant to this chapter shall be refunded to a producer that meets the following criteria:
(1) The producer was not paid, or received only partial payment, for the milk shipped.
(2) The producer has agreed to repay the refunded assessments to the affected programs if, on a subsequent date, the producer is paid for the milk.
(b) The producer shall receive a full refund of the assessments paid on milk shipped for which no payment was received. If partial payment was received, the producer shall receive a refund of the assessments paid on milk for which payment was not received.
(c) If a producer subsequently receives full or partial payment for milk for which assessments have been refunded, the producer shall repay the assessments in an amount proportionate to the portion of milk for which payment has been received.
(d) Refunds shall not be made pursuant to this section if the refund would cause a producer to incur an additional assessment obligation to the National Dairy Promotion and Research Program.
(e) The secretary shall adopt procedures for refunding assessments in accordance with this section. Those procedures shall not be subject to the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).

SEC. 109.

 Section 64309 of the Food and Agricultural Code is amended to read:

64309.
 (a) Any money that is collected by the secretary pursuant to this chapter shall be deposited in a bank or other depository that is approved by the Director of Finance. Those funds shall be deposited and disbursed in conformity with appropriate regulations prescribed by the secretary and may be allocated to pay for expenses generated by the auditing requirement imposed by subdivision (b). The expenditure of those funds shall be exempt from the provisions of Section 925.6 of the Government Code.
(b) All expenditures by the council shall be audited at least annually by one of the following means:
(1) By contract with a certified public accountant.
(2) By contract with a public accountant holding a valid permit issued by the California Board of Accountancy.
(3) By contract with a public accounting firm.
(4) By agreement with the Department of Finance.
(c) A copy of the audit shall be delivered within 30 days after its completion to the Governor, the secretary, and the Controller.

SEC. 110.

 Section 64310 of the Food and Agricultural Code is amended to read:

64310.
 (a) Notwithstanding Section 13340 of the Government Code, money that is collected by the secretary pursuant to this chapter is continuously appropriated to the department to carry out the duties that are imposed upon the secretary and the council pursuant to this chapter. The appropriation that is made in this section is exempt from the operation of Section 16304 of the Government Code.
(b) The money that is collected by the secretary pursuant to this chapter shall be disbursed by the council only for the necessary expenses incurred by the council and the secretary to carry out the purposes of this chapter, including the payment of refunds that are authorized pursuant to this chapter. The council may disburse these funds in authorized activities related to particular dairy products without reference to the branches of the dairy industry from which these funds are derived.

SEC. 111.

 Section 64311 of the Food and Agricultural Code is amended to read:

64311.
 Any money that is deposited pursuant to Section 64309 that the secretary determines is available for investment may be invested or reinvested by the Treasurer or the council in any of the securities described in Article 1 (commencing with Section 16430) of Chapter 3 of Part 2 of Division 4 of Title 2 of the Government Code, or placed in a depository as provided in Chapter 4 (commencing with Section 16500) of Part 2 of Division 4 of Title 2 of the Government Code, and handled in the same manner as money in the State Treasury. For these purposes, these moneys may also be combined with funds determined by the secretary to be available for investment pursuant to Section 58939 of Chapter 1 of Part 2 of Division 21 of the Food and Agricultural Code.

SEC. 112.

 Section 64312 of the Food and Agricultural Code is amended to read:

64312.
 Any increment that is received from investment, reinvestment, or deposit of money pursuant to Section 64311 shall be deposited to the credit of the council. The Treasurer may deduct from this remittance an amount equal to the reasonable costs incurred in carrying out the provisions of this article or may bill the secretary for the costs and the secretary shall pay the costs from moneys collected pursuant to this chapter.

SEC. 113.

 Section 64313 of the Food and Agricultural Code is repealed.

SEC. 114.

 Section 64320 of the Food and Agricultural Code is amended to read:

64320.
 (a) Between July 1 and December 31 of each year ending in the number three or eight, the secretary shall, by the public hearing procedure, and if appropriate, the referendum procedure, provided for in this article, determine whether the council program provided for in this chapter shall continue in effect.
(b) If the secretary finds from evidence received at the hearing that a substantial question exists as to whether the council program is contrary to or does not effectuate the declared purposes or provisions of this chapter, the council program shall be submitted to referendum as provided in subdivision (c).
(c) If the secretary determines that a referendum procedure is appropriate, the secretary shall establish a referendum period of not to exceed 30 days during which period ballots shall be submitted to all producers, handlers, and producer-handlers on a statewide basis. If the secretary determines that the referendum period does not provide sufficient time for the balloting, the secretary may extend the referendum for an additional period not to exceed 30 days. The ballots shall provide a “yes” or “no” voting alternative to the question:
“Shall the Dairy Council of California be continued for the next five fiscal years beginning July 1 following this referendum?”

SEC. 115.

 Section 64321 of the Food and Agricultural Code is amended to read:

64321.
 If the council program is submitted to a referendum, the secretary shall find that producers, handlers, and producer-handlers statewide have assented to the council program if the secretary finds both of the following:
(a) Sixty-five percent or more of the total number of handlers, including producer-handlers, voting approve the council program.
(b) (1) No less than 51 percent of the total number of eligible producers, including producer-handlers, in the state voted in the referendum.
(2) Sixty-five percent or more of the total number of eligible producers, including producer-handlers, who voted in the referendum and who produced 51 percent or more of the total amount of fluid milk produced during the second calendar month preceding the month of the beginning of the referendum period by all producers who voted in the referendum approve the council program, or 51 percent or more of the total number of eligible producers who voted in the referendum and who produced 65 percent or more of the total amount of fluid milk produced during the second calendar month preceding the month of the beginning of the referendum period by all producers who voted in the referendum, approve the council program.

SEC. 116.

 Section 64321.5 of the Food and Agricultural Code is amended to read:

64321.5.
 If the secretary finds that producers, handlers, and producer-handlers have not assented to the council program pursuant to Section 64321, the council program may be resubmitted to a referendum as prescribed in this article within a period of no less than 60 days and no more than 180 days after the secretary announces the plan was not approved.

SEC. 117.

 Section 64322 of the Food and Agricultural Code is amended to read:

64322.
 (a) If the secretary finds that producers, handlers, and producer-handlers have not assented to the council program pursuant to Section 64321 or, if the council program is resubmitted, Section 64321.5, operation of the provisions of this chapter and of the council shall be suspended beginning on July 1 following the referendum or, in the case of resubmission, referendums.
(b) After the effective date of suspension of the operation of the provisions of this chapter and of the council, the operations of the council shall be wound up, and any real and personal property held in the name of the council shall be liquidated and the proceeds, along with any and all remaining money held by the council, collected by assessment and not required to defray the expenses of winding up and terminating operations of the council, shall be returned upon a pro rata basis to all persons from whom assessments were collected in the immediately preceding three months. However, if the secretary finds that the amounts returnable pursuant to this subdivision are so small as to make impractical the computation and remitting of the pro rata refund to these persons, any moneys remaining after payment of all expenses of winding up and terminating operations shall be withdrawn from the approved depository and paid into the State Treasury as unclaimed trust moneys.

SEC. 118.

 Section 64323 is added to the Food and Agricultural Code, to read:

64323.
 A ballot filed with the secretary pursuant to this chapter is confidential and shall not be divulged unless necessary for the proper determination of a court proceeding or hearing before the secretary.