Montana dairy producers say their industry will suffer under the Montana Department of Livestock’s proposed increase on inspection fees.

The proposal is intended to address a shortfall in the department’s dairy inspection budget.

Mary Tuck, co-owner of Kalispell Kreamery and Hedstrom Dairy, said that while her more than 40-year-old business would likely be able to weather the higher inspection costs, smaller businesses will take a much greater hit.

“It’s about creating an environment that allows the dairy industry to thrive in Montana. This does not do that — it’s a barrier to entry and for beginning dairies, it makes it much more difficult to come into the state and start their own dairy cow operations,” Turk said.

On Thursday, the state Legislature’s Economic Affairs Interim Committee will discuss possible alternatives to the fee increase, which many small and medium-sized dairy producers in the state have said could force them out of business.

Department of Livestock Executive Officer Mike Honeycutt said the issue before the state is twofold: figuring out a way to pay inspection costs through 2017 and finding a long-term solution for the Legislature to consider when it reconvenes next year.

“Within state government, you do your budget, and you have spending authority but yet you still have to have cash to pay your bills,” Honeycutt said. “The revenues that the program is bringing in from inspections are not keeping up with the cost factors.”

As initially proposed, dairies would face an increase in the minimum inspection fee from the current $50 per month to $225 per month, based on their size. The maximum monthly fee, currently $1,050 per month, would drop slightly to $950 per month.

Tuck said she currently pays the state about $8,000 per year for inspections, licenses and other fees. The proposal would push that to more than $12,000.

“That’s a huge increase, but because of our size we would be able to absorb that,” she said. “It will impact us, but not as much as some of the small businesses. Because there’s a minimum [fee], that’s going to kill them.”

In particular, she pointed to processors like Flathead Lake Cheese Co., a small 7-year-old creamery based in Polson. Dairy processors aren’t currently charged an inspection fee, but under the original proposal would pay between $750 and $2,850 per month.

“Those were options that were presented to the Board of Livestock to give them a sense of how the revenue could be adjusted,” Honeycutt said. “But also through this process, the board has been asked to slow down and get some ideas from the public.”

Many of the 76 licensed dairy farms and processors across the state have offered their suggestions during the last two months. The public comment period, extended after a wave of opposition to the initial proposal, ends Saturday.

One possible tweak, recommended Tuck, would be to eliminate the minimum fees for small producers.

Honeycutt also acknowledged that as a possibility, as well as securing money from the state’s general fund as a long-term fix.

Tuck also said she would like to see the Department of Public Health and Human Services foot the bill, since the inspections are meant more to protect consumers than help the dairy industry.

Through the end of the fiscal year 2016, Honeycutt said the department has taken actions to trim the budget shortfall to about $45,000, or about one third of what it had projected just a couple months ago.

But still, he said, it puts too much of a strain on the state’s handful of milk inspectors to be sustainable as a long-term solution.

“It may get you through this year or next year, but long-term, you can’t ask people to do that,” he said. “You put a lot of pressure on people when you do that. You maybe take a little margin of error out of the work that you’re doing.”

Both he and Tuck agreed that work is important to the industry. Montana operates its own inspection program, but must still uphold at least the minimum standards set by the federal Food and Drug Administration.

Failing that, the state could lose federal money and Montana dairy producers may not be able to send their products across state lines.

But Tuck still believes the bill for the department’s budget shortfall shouldn’t be borne on the backs of dairy farmers.

“The state ran out of money. They over-budgeted or overspent, and they’re penalizing the industry for their lack of accountability,” she said.

Following Thursday’s hearing before the Economic Affairs Interim Committee, the Board of Livestock could take a final vote on a fee proposal as early it’s as next meeting, which takes place Feb. 18 and 19.

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