The ripple effects of inflation have been felt by all in agriculture, and the Idaho Brand Department is no different.
According to Idaho’s state brand inspector Cody Burlile, the department closed its fiscal year on July 1 with a $85,000 deficit. This is the third year in a row the department has seen inflationary expense increases, causing board members to question the sustainability of its current fee structure.
“We’ve actually had between 6 percent and 7 percent expense increases each year," Burlile says, explaining that personnel, vehicles, fuel and other operating expenses are among those costs.
But inflation isn’t the only reason the brand department is seeing the deficit, Burlile says. Because the Idaho Brand Department is a dedicated fund agency, it operates solely off dollars brought in for brand inspections and brand renewals, and that number fluctuates based on the number of cattle inspected each year.
“Going forward, we know our expenses are going to be higher again, and we don’t anticipate our inspection numbers to go up,” Burlile explains. “In fact, we’re anticipating those may decline in the next couple of years just because of the way the cattle market has gone. You know, it’s been a tough few years with drought and stuff, so a lot of those [beef] producers have sold out. The dairy industry is having a tough time right now with milk prices, so we’re expecting to see a decline in numbers in the next couple of years.”
In search of a solution, the brand board assembled a stakeholder group about a year ago. The purpose of this group was to initiate discussions within the livestock industry and to evaluate the department’s operations, looking for any efficiencies that could be taken advantage of. After several meetings, it was determined that the brand department is already operating pretty lean in terms of how they spend producer dollars.
“We can’t work our way out of this just with efficiencies,” says Rick Naerebout, chief executive officer at the Idaho Dairymen’s Association and member of the stakeholder group. “There’s going to have to be additional revenue somewhere, so we’re trying to figure out a way that we can do that where the totality of that revenue doesn’t just come from fee increases that hit ranchers and dairymen.”
A new fee structure
Burlile explains that the only fee that could increase right now without the need for legislative action to amend statutory limits is the per-head brand inspection fee, since all other fees are already restricted by the existing caps and statutes.
Currently, the brand inspection fee is $1.19 per head with the statutory limit set at $1.25. The most recent adjustment to the inspection fee was in 2017, when it increased from 94 cents per head to $1.19. “So, really the discussion has been ‘OK, do we raise that fee up to the cap and then look for a long-term sustainable plan? Do we need to adjust those caps and statutes? And if so, what's that look like or what are they going to end up at?’” Burlile says.
After receiving input from the industry, it was decided that the department would increase the brand inspection fee up to the cap. Steps were taken this summer to begin the process of negotiated rulemaking, with the final day for written comment the first week of August. Once it goes through the rules process and is approved by the state legislature, it will likely be July 1, 2024, before the new brand inspection fee goes into effect.
Speaking on behalf of the Idaho Cattle Association, Cameron Mulroney, executive vice president and member of the stakeholder group says, “The brand board was given that authority through statute, and if that's what they feel will best bridge the gap, then they need to do what they've got to do to keep their business functioning. That's the only avenue they have at this time under statutory authority to help bridge some of those costs is that per-head fee. Our only other option is to reduce service, and I don’t think our industry is ready to reduce service.”
Even with the brand inspection fee increasing, Burlile says that’s still not going to be enough to cover the deficit. Raising fees that have not been adjusted in a while, such as brand renewal fees and licensing fees, are being considered as a potential long-term solution.
“For instance, the brand renewal fee hasn't been changed in quite some time,” Mulroney says. “Is that an option to help kind of look at a long-term like maybe a 10-year fix? What change can we make that will get us through 10 years without having to go back and make more changes? I don't know that we've come to a concrete answer on what that is. It'll probably be a multitude of things.”
For example, in these discussions, the group learned that many people renew sentimental brands that have been in the family for generations, even though they don’t own cattle. This presents an opportunity to generate revenue by raising fees for brand renewals. The benefit, however, is this additional revenue source wouldn’t only come from the agricultural community.
“I do think some of those brand renewal fees and things that affect everybody that benefits from and utilizes the brand department is good,” Mulroney says. “The per-head fee affects a small producer differently than it affects a larger producer. You get more service, you pay a little more, but that fee hasn’t been adjusted for 20 years or more. So that’s why I think looking at just updating our fee schedule on some of those things that are non-per-head assessments is a good place to start.”
With the next legislative session around the corner, Mulroney is hopeful that there will be a proposal ready for discussion during the ICA's annual convention in November. “I think most everybody’s on the same page that we need to support Idaho’s brand department; just how we do it is not always in the same vein."
Naerebout emphasized that the group would still like to see the brand department modernize and leverage technology to benefit the industry. Nonetheless, the brand department has been affected by inflation, and the methods of funding will need to adapt with it.
“If we want good service from the brand department, they have to have reliable equipment and they have to have reliable employees to come out and provide the service of brand inspection so we can continue to move cattle within our operations and within our businesses and not have lack of service be an encumbrance to our dairymen,” Naerebout says. “So, if we do come with fee increases – it's as a last resort, not as a first option.”
Producers interested in submitting comments can reach Cody Burlile at P.O. Box 1177, Meridian, ID 83680-1177 or (208) 884-7097.