State board still working on dairy fees

Still without a plan to fund its dairy inspection program, the Montana Board of Livestock will hold a work session Friday in Helena to discuss how to keep the program afloat until a long-term fix can be established during the next legislative session.

In February, the Department of Livestock’s proposal to cover the budget gap by increasing inspection fees failed after dairy business owners from around the state protested the substantial cost increases, which many said could put them out of business.

That left the department without a clear path toward keeping its costs within the lower-than-projected revenues while keeping the program compliant with U.S. Food and Drug Administration health regulations.

“We’ve got to make sure we’re protecting the individuals. If we had any sort of sickness that came, it would hit everybody in the industry equally,” said Mike Honeycutt, the department’s executive officer. “The question is, how do we uphold and ensure compliance without regulating people out of business? It’s a fine line you try to walk.”

The inspection budget covers the costs of operating the state milk lab in Bozeman and employing a dwindling handful of sanitarians to visit the state’s 64 dairies and dairy processors.

While the department’s budget — approved over a two-year period during each legislative session — calls for employing 4.75 full-time-equivalent milk inspectors, the agency has been cutting costs by keeping just 2.5 inspectors on staff.

Honeycutt said the remaining inspectors are left to carve up massive territories, racking up unpaid overtime, comp time, vacation days and sick days. The state’s inspector based in Polson covers an area extending from Northwest Montana to the Gallatin Valley, which has the highest concentration of dairy businesses in the state.

“Right now we’re saving money, but in the long run, when people leave the state or retire, we’ll have much larger payouts due to them,” Honeycutt said.

Combined with other cost-cutting measures, those savings have brought the program’s projected expenses to within $20,000 of meeting the nearly $400,000 budget for the current fiscal year. Earlier projections had revenues falling more than $145,000 short.

The budget for fiscal year 2017, beginning July 1, calls for spending about $520,000 if a new inspector is added to the staff and assumes the cost of running the milk lab would remain at around $130,000. The projected revenue is $373,000.

While Friday’s work session will focus on the program’s current obligations and temporary solutions to keep it afloat through the end of the next fiscal year, Honeycutt is also looking for a longer-term fix in the next biennial budget.

“Is there a way to publicly fund it through the state general fund and say, ‘This is something we do in the interest of public health?’” he asked, noting that food manufacturers and restaurants in Montana are not required to pay for health inspections. “I think there are some long-term solutions beyond this coming year that have to be dealt with in the legislative session coming up.”

Further complicating a long-term fix is the recent trend in Montana’s dairy industry toward artisan dairy producers and processors concentrated in the western part of the state.

The overall number of dairies in the state has continued to decline in recent years, and Honeycutt noted the state total has dropped by three in just the past year. But new ones that pop up tend to focus on niche products.

Wendy Arnold, co-owner of Flathead Lake Cheese Co. in Polson, testified in February against a provision in the failed proposal that would have charged all dairy processors a minimum of $750 per month for inspections. Currently, processors don’t pay inspection fees if they use milk produced elsewhere.

“Paying a fee is one thing, but paying an astronomical fee is another,” she told the Economic Affairs Interim Committee, adding that she already pays the state health department for a license to sell her product.

Honeycutt said charging processors isn’t necessarily off the table, but agreed that the minimum inspection fees had been set too high and suggested they could be phased in over time.

“The trend had been less dairies but bigger dairies, and that trend has been reducing our workload,” Honeycutt said. “But now you see more growth on the small dairy side — organic businesses that take place within a community. We don’t want too much of a burden that those kinds of businesses can’t find enough oxygen to survive and grow.”

The work session is open to the public and will not include any final action. It begins April 29 at 10 a.m. in the Department of Livestock’s third-floor conference room at 301 N. Roberts St. in Helena.

Reporter Sam Wilson can be reached at 758-4407 or by email at swilson@dailyinterlake.com.