AUGUSTA – Legislators on the state’s Agriculture Committee were told Wednesday that “the entire country is watching what you do here” by Charleston dairy farmer Barry Higgins, vice president of the Maine Dairy Industry Association.

What other states are watching is a Maine proposal to assess a fee or tax of about 12 cents per gallon on milk. The money would go into the state’s General Fund, but from there, it would be earmarked to the Department of Agriculture to benefit the dairy industry.

The fee plan, which uses a sliding scale based on the federal price for milk, could generate about $4 million a year to help offset costs of existing dairy subsidy programs.

If all Maine dairy farms disappeared today, it would represent a loss of only one-third of 1 percent of the country’s national production. But since Maine has led the country in programs to assist dairy farmers – such as the groundbreaking Northeast Dairy Compact and the state Milk Income Loss Contract – the plan to tax milk could begin a national reform movement and help Maine’s farmers.

Robert Wellington of Agri-Mark, a cooperative that serves about one-third of Maine’s dairy farms, and Stan Millay, executive director of the Maine Milk Commission, warned the committee that although milk prices have stabilized over the past two years, there is the potential for disaster next year.

Western states are increasing production, and if the Canadian borders – closed because of mad cow disease threats – are reopened, it would create a surge in heifer replacement that could hit just as the milk industry is experiencing a natural dip in milk prices.

“It would be like three strikes,” said Wellington, who predicted that the flood of new milk would further depress prices.

The milk vendors fee was discussed at length by the legislators, who eventually passed it back to their legal analyst and Millay to rework. It originally was estimated that the fee would be 20 cents a gallon but Millay presented new figures that set the fee at 12 cents per gallon or less, depending on the federal price: The lower the federal price, the higher the fee.

At the heart of discussions were accusations from all sides that the crisis that dairy farmers are in financially relates to a failed federal pricing system.

“Because of this failed system, we are at the point of critical mass in our dairy industry,” state Rep. John Piotti, D-Unity, co-chairman of the Agriculture Committee, said. “We need to look at the big picture. Without our help, we will lose this industry.”

The legislators also voted ought to pass on LD 1070, sponsored by Piotti, that would allow a milk producer to choose which month that producer would begin receiving state subsidy payments.

LD 842, sponsored by state Sen. Peter Mills, R-Cornville, was carried over to the next session. The bill was aimed at preventing price gouging by prohibiting the sale of milk “at an unconscionably excessive price” and would allow the Maine Milk Commission to investigate any cases of suspected gouging.