NEBRASKA: Brand bill advances from committee
LINCOLN, Neb. — The Unicameral’s agriculture committee has voted to move one of three bills relating to the Nebraska Livestock Brand Act from committee to the general file where it will be debated on the floor of the legislature.
LB 572, which was introduced by Ag Committee Chairman Steve Halloran of Hastings, advanced with an amendment (AM 410) on March 4, 2021, however, it was not reported as out of committee until Tuesday, March 9, due to delays related to hearing schedules and workload for legislative staff. On March 11, it was named the committee’s priority bill.
PER HEAD FEES REDUCED
AM 410 contains a number of changes to LB 572, including dropping the brand inspection fee from the current $1 per-head to $0.85 per head from July 1, 2021, to July 1, 2023 (LB 572 originally proposed dropping the fee to $0.95). After that point the maximum inspection fee charged would be set at the current statutory cap of $1.10 per head (previously under LB 572 it would be capped at $1.50 per head).
The intent of the temporary fee reduction is to spend down the roughly $3 million balance in the Nebraska Brand Committee’s cash reserve fund. Since the Brand Committee is a cash fund agency, it receives zero dollars in general fund appropriations, and its operations are funded entirely on the fees it collects for brand inspections, brand recording and renewals, and other miscellaneous fees.
The committee’s board of directors and executive director have had a long-standing policy to keep at least 40 percent of the agency’s annual budget in reserve so that it could make payroll and continue to maintain staff during a market disruption or major catastrophe.
However, by continuing to maintain such a large cash reserve, the Brand Committee has painted a target on that money, and in past years it has been enviously eyed by the legislature’s Appropriations Committee looking to shore up shortfalls elsewhere in the state budget. As the state starts trying to figure out how it will pay for a number of voter-approved measures, (medicaid expansion, for example), the Brand Committee’s sizable reserve will only continue to tempt budget officials.
NO SWEETHEART DEALS FOR THE RFLs
A provision in Halloran’s original LB 572 would have reduced fees under the current law’s Registered Feedlot (RFL) program to 50 percent of the per-head inspection fee. However, that provision was stricken by AM 410 after testifiers complained during a Feb. 8 hearing on the bill.
Under the RFL program, participating feedlots pay an annual fee equal to the per-head inspection fee times the max one-time capacity rounded up to the nearest 1,000 head, (i.e. a 9,750 head capacity feedlot at $1 per head inspection fee would pay a $10,000 annual fee).
Instead of having cattle physically inspected for brands before shipping, RFLs undergo quarterly paperwork audits. So long as the RFL maintains proof of ownership documentation (bills of sale, health papers and/or brand inspection certificates) it can ship fattened cattle directly to slaughter without waiting on a physical brand inspection. And if an RFL “turns” the lot 2.5 times, the annual fee it pays to be a part of the program is — in reality — discounted compared to the per-head brand inspection fee cow/calf ranchers will pay.
But the main benefit of the RFL program is that it allows feedlots to avoid costly shrink and stress to livestock by not requiring those cattle to run by a brand inspector before shipping, which allows the RFL to ship at all hours (under current statute, brand inspections can only be performed during daylight hours), thus allowing the RFL to be in compliance with the brand law while also fulfilling the shipping and receiving schedules set by major packers.
Some RFL operators have complained that their sector of the industry subsidizes the brand inspection service for ranchers, and have argued that they should pay a lower fee to reflect the “audit service” they receive from the Brand Committee. While the fees for RFLs are significant on first look, participation in the program is voluntary and came about precisely because feeders approached the Brand Committee in the 1970s looking for a way to comply with the brand inspection requirement without slowing commerce.
Feedlot operators who testified against LB 572 argued that the fee reduction did not go far enough, and while their testimony largely underlined the benefits of their participation in the RFL program, the message was clear: a minority of RFL operators see brand inspection as “a tax” and they will not be satisfied until their fees are reduced to zero.
Other testifiers representing cow/calf producers argued that granting the RFL segment fee relief would only represent a shift in the fee burden onto the cow/calf sector, and the legislature’s agriculture committee appears to have sided with the cow/calf producers on that issue. If the fees are reduced for one segment, they should be reduced for all segments.
Electronic ID (EID) has been a contentious issue of past brand bills. While some producers have adopted the use of the technology to track production data, and the USDA’s Animal Plant Health Inspection Service (APHIS) has proposed transition from metal tags to EID for increased disease traceability, the cattle industry remains divided on EID technology.
The Brand Committee argues that it has to modernize to meet the needs of some of its customers in order to maintain relevance, however, many cow/calf producers feel that by opening the door to voluntary use of EID, that only cracks open the lid of the pandora’s box and leads to EID becoming a mandatory requirement.
While LB 572 provides for a method of “non-visual identification,” AM 410 strikes language in the original bill that said “a means of identifying ownership of livestock and is equal to or superior to visual methods of livestock branding.” Instead it keeps the current statutory language that allows for use of non-visual methods to prove ownership.
In the bill is a safeguard, however. Before approving any non-visual identifier, the brand committee is required to consider the degree to which such a method may be susceptible to error, failure, or fraudulent alteration. Any rule or regulation can be adopted and promulgated only after a public hearing is conducted through the Administrative Procedure Act.
If passed, LB 572 would also require that the Brand Committee provide a report to the legislature by December 2021 regarding the progress in developing or implementing an Electronic Inspection service. It remains unclear if the brand committee will have the funds appropriated to it in order to establish “E-Inspection” in place of physical brand inspections.
Nebraska Gov. Pete Ricketts’ budget recommendation denied a requested increased appropriation for technology to develop a database for registering EID numbers with the brand committee, and it appears that the appropriations committee will hold off on approving that technology budget request for the time being so it can wait to see if/when LB 572 passes.
WHAT ELSE IS IN THE LAW?
Most of the other provisions in LB 572 are kept in-tact.
The bill provides for a Registered Backgrounder program, similar to the RFL program, wherein a backgrounding lot or growyard whose sole customer is an affiliated RFL can move cattle from backgrounding to the RFL without undergoing reinspection for brands, so long as original proof of ownership and papertrail are kept in tact. This would provide a potential avenue for backgrounders who provide the supply of cattle for finishing at RFLs to ship for finishing without shrink.
LB 571, which was held in committee, would have expanded the sole customer requirement for Registered Backgrounding lots. While that bill had support from Nebraska Cattlemen (some NC members felt that the sole-customer requirement encouraged vertical integration), several other stakeholders from the brand law working group last fall expressed concerns that the bill would have compromised the integrity of the state’s brand inspection laws by providing an avenue for cattle to move through the supply chain, commingling at several points with cattle belonging to different owners, then being shipped off to an RFL without ever having been physically inspected to verify ownership. During his introduction for the hearing on Feb. 8, Halloran said that the bill, “was not ready for prime time.”
LB 572 with AM 410 retains a citation for misdemeanor brand law violations, such as shipping cattle outside of the mandatory inspection area without a brand inspection. Those violations would be subject to a $200 waivable citation (similar to a traffic ticket). Previously, brand law violations would be referred to the county attorney in the respective county where the violation occurred. However, some county attorneys may choose not to pursue charges as their dockets are loaded with other criminal cases. The ability to issue brand law citations would give the Nebraska Brand Committee Investigators “teeth” when it comes to enforcing the brand law.
Another provision would do away with the $20 service fee for inspections, and instead charge mileage for brand inspectors to travel and perform local inspections. Charging mileage undercuts one of the RFL sector’s biggest complaints that it is subsidizing the cow/calf inspection service. Charging mileage could also provide more incentive for some producers to bring cattle to the inspectors at their local livestock auction market, rather than having an inspector dispatched to the country to inspect one or two head that are destined for the local locker plant.
The reduction of per-head inspection fees is met with an increase to brand recording and renewal fees. Compared to surrounding states with brand recording agencies, Nebraska’s fees have consistently remained lower and have not kept pace with inflation. Increases to these fees may cause some heartburn among ranchers, but it needs to be put into perspective.
The current renewal fee is $50 per year to renew a brand registration for four years, but that will increase to $200 for four years (essentially $50 per year). A brand is a trademark that only the person or entity who pays to register it is permitted to apply to the hide of their livestock. No one else is allowed to use that trademark, and given the cost of registering trademarks in other industries, $50 a year to keep a brand active is not a significant expense, especially given the inspection and enforcement regime that exists to prevent others from infringing on your trademark.
Also included in LB 572 is a $50 fee for failure to request an inspection with 48 hours notice. While this idea will likely lead to some producer complaints, it underscores an old adage: “A failure to plan on your part does not necessitate an emergency on mine.”
As it stands, the brand committee has had to negotiate a prickly issue with brand inspector comp time and come under scrutiny by the legislature’s appropriations committee for the amount of comp time it pays out. A penalty for producers who fail to plan ahead and work with their local brand inspector to schedule a time for inspection could force producers to be more respectful and conscious of their brand inspector’s time, and would allow the Brand Committee as an agency to better manage man hours and keep out from under the scrutiny of the state and legislature’s bean counters.
NOT OUT OF THE WOODS
The third brand bill, LB 614, introduced by Sen. Steve Erdman of Bayard, would have striped the RFL program from the Brand Act and forced RFLs to undergo the same manner of brand inspection as non-registered feedlots and cow/calf producers in the inspection area.
During the hearing on Feb. 8, opposition testimony to Erdman’s bill underscored more the value and benefit of the RFL program to the feeder segment in the inspection area, and highlighted more the added benefit it has to feeders who participate in the program.
Testimony also underscored how vulnerable the feeder segment is to so-called “black swan” events, such as weather events, fires at packing houses, and the Coronavirus outbreak, which has disrupted the flow of fat cattle to slaughter.
Erdman’s bill was held in committee, but on March 10, he introduced AM 484 which would amend LB 572 to the same effect as LB 614.
The message is the same: LB 572 contained a generous 50 percent fee relief for RFL operators, and while it was welcomed by some in the feeder industry, the minority of RFL operators who have led litigation and legislation against the brand committee will not be satisfied unless they pay nothing.
While AM 410 seeks to keep the field level between the cow/calf producer and the Registered Feeders in the western 2/3rds of Nebraska, AM 484 would put everyone on the same standing, regardless of the size of their operation or the contracts or political connections they have.
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