Nebraska: Two brand bills introduced to legislature | TSLN.com

Nebraska: Two brand bills introduced to legislature

Spike Jordan
Tri-State Livestock News

LINCOLN, Neb. – Cattle outnumber people in Nebraska by four to one. Every cow, calf, heifer, steer or bull in the state is owned by someone, somewhere.

The surefire method for showing ownership – since long before Nebraska was even a state – has been the hot brand. And since 1941, the surefire way of knowing ownership has been the third-party inspection provided by the Nebraska Brand Committee’s brand inspectors.

Two bills introduced to the Nebraska Legislature on Jan. 23, seek to make big changes to a 79-year-old state agency which is responsible not only for recording and inspecting brands, but also for the investigation of stolen or missing cattle under Nebraska’s brand law.

The first bill, LB 1165, introduced by State Sen. John Stinner of Gering, would disband the producer-led Nebraska Brand Committee, end brand inspection in Nebraska, and transfer the committee’s responsibilities for recording livestock brands to the Nebraska Department of Agriculture.

Stinner, who chairs the legislature’s appropriations committee, said in a news release that he does not wish to end brand registration in Nebraska, but has argued that the brand committee is not financially sustainable and that the brand law is outdated. His office told TSLN that the brand committee’s current responsibility for investigating stolen and missing cattle would be turned over to the respective county’s Sheriff’s Office.

At press time Friday, The Nebraska Association of County Offices (NACO), has not yet announced its legislative positions, however, it is expected that NACO will oppose LB 1165. The association represents officials from Nebraska’s 93 counties – 49 of which are currently in the state’s brand inspection area – and sources who spoke on background said that NACO will likely see the hand-off of cattle investigations to the county government as just another unfunded mandate from the Unicameral.

Nebraska Cattlemen announced in a press release Thursday that it will be also be opposing Stinner’s bill, and is instead supporting the second brand bill, LB 1200, introduced by Sen. Tom Brewer of Gordon on behalf of the Brand Committee.

Brewer’s office said that staff is currently working on amendments to the bill, but as it was introduced, LB 1200 – for want of a better word – would “rebrand” the state’s livestock brand act and brand committee to “The Livestock Identification Act” and “Livestock Identification Agency.” Beyond the cosmetic changes, the names reflect multiple forms of identification the committee intends to use, to include forms of electronic identification (EID) technology. Brewer’s office said that including EID is a potential way of “future-proofing” the brand committee to stay ahead of what comes next, however the finer points are still being worked out with the bill, with more information hopefully available by next week.

Both LB 1165 and LB 1200 have been referred to the legislature’s agriculture committee, and while no official hearing date was available at press time, several sources told TSLN that hearing for both bills will be tentatively scheduled for either Feb. 18 or Feb. 25.

But why is there sudden legislative interest in the Nebraska Brand Committee?

That’s a little complicated.

Nothing is free

While multiple brand laws have been on the books during Nebraska’s history, different groups handled inspections and tracked down cattle thieves. The Nebraska legislature formally established the Nebraska Brand Committee under the Brand Act in 1941, which also laid the foundation for the current law. Today, the Brand Committee is responsible for recording and inspecting brands and investigating missing or stolen cattle in Nebraska.

Unlike other agencies in the Nebraska government, which receive appropriations from the state’s general fund, the Brand Committee is a self-supporting cash fund agency. Its operating funds come solely from producer fees collected for brand recordings, brand inspections and registered feedlots and dairies. Those fees go into a cash fund, which pays for its operations. In other words, it’s the producers who pay for the services they receive.

Currently, the Brand Committee charges $1 per head for local inspections (with statutory authority to increase to $1.10 per inspection with legislative approval). Inspections are required when cattle leave the state’s brand inspection area or change ownership. The inspections serve as a third-party audit that allows producers to prove their ownership and also act as a deterrent to theft, (which, to the surprise of some legislators, still occurs), and fraud (which is on the rise across the nation). For most cow/calf operators, especially in the Western end of the state, these inspections are seen as an invaluable insurance, especially when markets are tight and every stray recovered matters to an operator’s profitability. The budget sees a boost from the ownership of brands, too: A new brand costs $100 to register, there is a $40 charge to transfer ownership of a brand, and brands must be renewed every four years, for $50 apeice.

“I pay the fees just like anyone else,” said John Widdowson, a fourth-generation rancher from the Gibbon/Kearney area who serves as chairman of the Brand Committee’s five person board of directors. Widdowson said that most producers see a great deal of value in the inspection and investigative arm of the brand committee.

“But if there’s a registered feed yard that’s unhappy with us, we take that seriously,” he said.

Since 1974, the committee has been responsible for permitting and inspecting registered feedyards, which are charged $1 per head for the average one-time capacity, (so for 1,000 head, it’d be a $1,000 fee). Since local-inspection is statutorily limited to daylight hours, this permitting arrangement allows a registered feedyard to maintain its own records (which are audited quarterly by brand committee inspectors), and then ship cattle day or night at their leisure without having to wait for an inspector on scene. This arrangement also saves feedyards the costs of labor needed to clean and process cattle for inspection, as well as the lost opportunity due to shrink.

And since most registered feedyards can fill 2 to 2.3 times per year, registering means feedyards effectively pay a rate of 55 to 33 cents per head for inspections.

East versus West

The Brand Committee’s permitting arrangement has caused contention for some registered feedyard operators, especially those that operate yards both within and outside of the inspection areas. They feel that the permitting regime amounts to a tax which puts them at a competitive disadvantage, a talking point parroted by Stinner’s legislation.

The brand inspection area, which today makes up roughly 70 percent of Nebraska, was established by the same 1941 statute which created the brand committee. According to a 2018 Legislative Research Office, that area has been amended 16 times since 1941, as producers in the constituent counties petitioned the legislature to be included or excluded; however, the inspection area’s current boundaries have remained unchanged since 1993. A bill introduced in 2013 by then-Sen. Al Davis of Hyannis would have expanded the brand inspection area to include all of Nebraska’s counties, but was defeated after protest from producers in the non-inspection area.

The issue of inspection fees tends to still be a hot-button issue. In 2017, a group of feedlot owners, feeling umbrage toward having to pay the fees, formed the Nebraska Beef Producers Committee, which then sued the Brand Committee and its former director Bill Bunce, arguing that Nebraska’s brand law was unconstitutional, arbitrary and obsolete. In early 2018, a federal judge ruled in favor of the brand committee telling the beef producers committee that the answers it sought were in the halls of the legislature.

Today, some feedyard operators in Nebraska still feel that if they maintain their own records on site, there’s no value in a third-party audit agency. It would appear those operators have found a sympathetic ear with Sen. Stinner. Critics, however, argue that those complaining about the $1 per head inspection fee are often remarkably silent when it comes to the dollar per head that goes to the checkoff.

“READ THE TRANSCRIPT!”

In October 2019, the Nebraska Legislature’s appropriations and agriculture committees held a joint hearing to discuss the findings of a pair of interim legislative studies regarding the brand committee. LR 212 looked at the committee’s finances, which Stinner argues under the committee’s current budget are “unsustainable.” While the committee charges $1 per head for inspection (with statutory authority to go up to $1.10), the calculated costs associated with those inspections have risen to a projected $1.33 per head.

The second study, LR 222, looked at the progress of the committee’s quest to implement a new information technology infrastructure and to find new opportunities which the committee could use emerging technologies to better serve its constituent customers.

After a critical state audit in 2016, which found a host of bookkeeping and accounting issues that stemmed from past mismanagement and the fact the committee still recorded all transactions on paper, the brand committee was forced to undergo more change over a three year span than had occurred at any point in its 79-year history.

The committee bore the significant expense of modernizing its information technology infrastructure, including developing and fielding a new electronic brand recording and inspection software, and training more than 70 committee employees across the inspection area, most of whom tend to be handier with a rope than an iPad. The new technologies have provided better time management for inspectors, which is expected to translate to a reduction costs related to comp time.

Perhaps the biggest take away from the hearing is that there’s a difference between budgetary sustainability and real cash sustainability, Widdowson said during a phone interview. Cash fund agencies are still required to submit a budget for approval by the legislature, and when unforeseen expenses are coupled with rising costs from unfunded state mandates, those budgets tend to take a beating. However, with an agency whose revenues tend to ebb and flow along with the fluctuations of the cattle market, long-term forecasts for the Brand Committee’s income are difficult to ascertain.

The testimony from representatives of Nebraska Cattlemen, Independent Cattlemen of Nebraska, and the Brand Committee chairman and staff (which make up 44 pages of the 83-page transcript [https://bit.ly/2u6a3wA]) – as well as seven pages written responses to the questions asked of it by the appropriations committee – all paint the picture of an agency that is working to find solutions to sticky problems that can’t be solved overnight.

The brand committee has also been plagued by the lack of longevity in its leadership. Widdowson, who is currently the longest-serving member on the board, said he was appointed to the five-member brand committee Board of Directors by Gov. Pete Ricketts in 2015 shortly before the scathing audit was released. The committee has had an interim director since 2017, when the lawsuit against it coincided with Bill Bunce’s resignation. The committee had hired Bunce, who is a Nebraska native, from New Mexico’s brand agency and hoped that his budgeting and management expertise would prove useful in solving some of the agency’s issues. Since 2017, the committee has struggled to locate a permanent director due to a since-amended statutory requirement that the committee director also be law enforcement certified in order to serve as the agency’s chief investigator. A bill introduced by Brewer and passed during the 2019 legislative session finally split the chief investigator into a standalone role; a position which Widdowson said has replaced what was formerly the agency’s assistant director.

Given these facts, whatever flaws the Brand Committee has, if they are indeed flaws – are the responsibility of the legislature.

“The state of Nebraska is very divided about what they want this agency to be,” Bunce told the Scottsbluff Star-Herald [https://bit.ly/2t4jSdU] in an interview after the August 2017 meeting where he announced his resignation. Bunce said that the legislature needed to decide what it wants the Brand Committee to be, otherwise it would not succeed.

“If they want to beat us up in the Legislature, or beat them up in court, then so be it,” Bunce said. “But it works against the industry [the committee has] set forth to represent and protect.”

If it has money to sweep, it has money to keep

On a final note, it’s important to mention that during the 2017 legislative session, when the state of Nebraska faced a near $900 million spending deficit, the Brand Committee’s cash fund became an easy target for Stinner’s appropriations committee.

Stinner at first attempted to sweep $500,000 from committee’s producer-funded account in order to cover the state spending. He later reduced that amount to $100,000 after hearing protest from the Brand Committee and Bunce. The attempted cash-grab was ultimately defeated after producers and sale barn owners rallied to the Brand Committee’s defense.

That history raises a few questions – important questions which Sen. Stinner did not have time this week to answer.

If the brand committee’s producer-funded cash account is under threat of being swept anytime other state agencies need someone else to pick up the tab — what incentive is there for the brand committee to be thrifty with its checkbook?

Furthermore, which state agency is it that’s truly “unsustainable”?


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