State brand department warns of low funds

DAVENPORT – A package of changes to the Washington State Brand Department’s fee structure last year have not helped to solve the department’s cash flow issues, despite cost increases to producers.

In a report to the legislature this fall, brand department officials noted that projections made during the 2019 legislative session have not been realized and fee increases have not helped to level the department’s budget.

The brand department, which started the fiscal year 2020 with an account balance of $77, anticipates being below their two-month operating reserve as early as June 2021.

It was hoped that an increase in brand inspection fees would help bring in the revenue the department needs to support its 19 member staff.

Per-head fees jumped from $1.10 for branded cattle to $1.21 and inspection fees for unbranded cattle, or slicks, rose from $1.60 to $4 per head.

In response, a number of producers opted to record a brand and start branding their animals, creating a $121,284 drop in revenue. Along with the brand, cattle producers also had the option of using an electronic ear tag, known as an 840 tag, in order to qualify for the $1.21 per head fee.

Operations handling large numbers of animals, including slaughter facilities like Tyson Fresh Meats and Washington Beef, also chose to implement cost-saving measures by sourcing their animals from “certified feedlots.” Animals from certified feedlots do not have to be reinspected by the brand dept. at the slaughter plant. This shift to certified feedlot sourcing dropped brand dept. revenues by $256,820. Historically, the brand department would inspect over 120,000 cattle annually at these two facilities but are now inspecting less than 15,000, according to the brand dept. report.

A certified feedlot pays a $300 annual fee and only .28 cents per head for inspections instead of the $1.21 per head.

Expense increase

Along with a decline in revenue, the brand department experienced two expense increases in 2020. One was a mandatory salaries and benefits increase last July that cost the dept. an “un-forecasted expense” of $36,926. A $91,979 technology upgrade also threw the budget forecast out of balance.

“Plug the holes”

Now that the 2019 changes to the brand department fee structure have shown to need adjustment, many are calling for a renewed commitment to finding a solution.

“The program we have isn’t working,” said 13th legislative district representative Tom Dent. “Let’s plug the holes and find a way to provide the service.”

Washington Cattlemen’s Association Executive Vice President Ashley House said she knew the changes last session wouldn’t be “quick fix.”

“We knew the fee changes wouldn’t be a quick fix, unilateral solution to the brand program, but we had hoped the trend would be better than it’s showing” House said. “There have been some challenges for sure, which are pretty well outlined in the report. Feedlots transitioning to certified at a cost of 28 cents per head for inspection is one hard constraint on the overall financial picture. I don’t blame them. It’s understandably within their right. It’s just a hard financial hit to the livestock inspection program.”

House mentioned the increase in costs were a surprise.

“The expenses from the [department] that we didn’t count on or were able to project are hard to take. Spending $90k for computer system upgrade and mandatory salary increases, plus more expenses outlined in the report. It’s tough,” she said. “We know the economy has been good to some sectors of the beef industry, but the cow-calf producers haven’t been the biggest winners.”

House said one of the bright spots of the report has been the increased use of electronic ear tags.

“Over 2,500 head of cattle have been moved through the agencies electronic system. Small victories to be sure, but a helpful and encouraging trend nonetheless,” she noted.

“Obviously, we’ll continue to monitor this along with the rest of the industry that’s invested in the outcome.”

Brand Dept. Program Manger Robbie Park said the department is committed to finding solutions to the financial situation.

“We want the industry to know we are working hard to make this right,” Parke said. “The brand department has been around for a long time, since 1936, and it is not something I am willing to forget about.”