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By Colleen Quinn

State House News Service

BOSTON — Milk farmers could be reimbursed up to $20,000 from an insurance fund created during the Dukakis administration to protect farmers when dairy processors go out of business.

The Massachusetts House last week gave initial approved to legislation that returns nearly half the money in the account to farmers. Approximately $1 million will remain in the fund if the money is returned to nearly 100 small, independent farmers around the state.

Farmers can expect to receive an average of $10,000 to $15,000, according to a farmer pushing the legislation.

The fund acted as a self-insurance policy, with the funds held by the state in a trust for the farmers. No state funds were deposited, according to Henry Gillet, a former House lawmaker from Fall River and Westport who now lobbies for the dairy farmers.

During the Dukakis era, some large dairy processors went out of business without notice before paying farmers for milk they processed and sold, according to Rep. Stephen Kulik, D-Worthington, who sponsored the legislation to reimburse the farmers. Small independent milk farmers around the state lost a lot of money, Kulik said.

David Shepard, a dairy farmer from Warren, said his family farm suffered in 1981 when the Derrary Brothers processing plant went bankrupt and later closed. That served as the catalyst for the creation of the fund, he said.

If the farmers’ money is returned it will be a big help, Shepard said.

“Any help, at any time, is a good thing,” he said. “It is obviously the dairy farmers’ money. It was never intended to be the state’s money.”

In the early 1980s, a group of independent farmers asked the state Department of Agriculture to help them establish an insurance fund that each farmer would pay into, depending on the amount of milk they produced. The money was used to reimburse any farmer who was affected when a dairy producer shut down, Kulik said.

Over the years, the fund grew substantially. By the mid-1990s, there was well over $1 million. Farmers stopped paying into the account because there was more money than was needed to protect the farmers from loss.

Now they are asking the state to give them back their money.

To small farmers with less than 100 cows, the money “means an awful lot,” Gillet said.

Gillet said farmers say they will use the money to invest in their farms, making improvements they have been unable to make to barns and milk houses.