Montana’s cheese makers and other businesses that process milk products will begin paying fees to the Department of Livestock under a new rule approved by the state Board of Livestock Wednesday.

The rule, which could become effective as soon as July, is intended to fix the department’s budget deficit for the next fiscal year by expanding fees to dairy processors, which previously were exempt from the fees paid by the state’s milk producers.

Department executive officer Mike Honeycutt characterized state law authorizing the fees as “muddled” on how those businesses are defined, but said the proposal passed a legal review by his department.

“This statute always contemplated that those who are in the business of manufactured dairy products would be included in this,” he told the board.

The new rule would also lower the monthly rate that dairy businesses are charged, from 15.5 cents per hundred pounds of dairy products to 14 cents per hundred. The minimum and maximum monthly fees charged will remain at $50 and $1,050, respectively.

The change in the department’s fee structure would create a budget surplus of about $16,000 next year, based on the board’s projections. It was intended as a compromise after an earlier proposal, which would have significantly raised fees for many small dairy producers and processors, was shelved after receiving sharp criticism from the industry.

“I think this is a kind of compromise that will make most people happy, or not happy, but it is a compromise,” board member Susan Brown said.

The Livestock Board unanimously approved vice chairman John Scully’s proposal, which was based on a recommendation from the Montana Milk Producers Association.

Three industry representatives, including the Montana Farm Bureau, spoke in favor of the changes, with no one opposing it during the public comment period.

The board also discussed potential long-term fixes, and Scully’s motion proposing the rule included his desire to create new fees for violations by licensed dairy producers during the next rule-making session.

“I want to make sure the fee structure of violations is something we do and not just talk about, so I want to make sure that intent is part of my motion,” he said.

Honeycutt said that change ultimately would rest in the Legislature’s hands.

The board also discussed long-term solutions, including appropriations from the state’s general fund, for which industry representatives at the meeting said they planned to lobby during the 2017 legislative session.

The milk inspection program is partially funded by a one-time appropriation approved by the 2015 Legislature, meaning future money from the general fund isn’t guaranteed.

While he proposed keeping the minimum dairy fees as-is for the time being, Scully noted he would like to raise them in the future to better reflect the minimum cost to the agency of inspecting producers.

Board member Ed Waldner noted that a previously proposed increase of $25 to the monthly minimum fee was only expected to generate an extra $150 per month for the agency.

The department will publish the new rule June 3. After a public comment period, it could become effective as soon as July 8 if no changes are made.

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