Testimony of Roger Johnson
Agriculture Commissioner
North Dakota Department of Agriculture
House Bill 1486
House Agriculture Committee
Peace Garden Room
February 13, 2003

Chairman Nicholas and members of the House Agriculture Committee, I am Agriculture Commissioner Roger Johnson. I am here today to oppose the passage of HB 1486, which would increase the wheat tax levy from ten mills to fifteen mills. The legislation calls for the Wheat Commission to forward four out of five of those mills to "not more than two trade associations that are incorporated in the state and which have as their primary purpose the representation of wheat producers."

I oppose this legislation for four primary reasons:

" Net returns on wheat have been minimal or non-existent over the past several years. This is not the right time to raise the wheat tax levy, which will only further reduce what little margin a wheat farmer receives for their product.
" This proposed increase may harm the integrity of check-off funds. This may be dangerous, particularly when check-off funds are being challenged nationwide.
" Ear-marking funds - in general - sets a bad precedent. Ear-marking funds public funds for political lobbying purposes sets an even worse precedent.
" Raising the tax without an appropriate educational campaign may cause large refund requests, thereby jeopardizing current Commission operations.

Let's examine each of these of these reasons more closely.

Net returns on wheat have been minimal or non-existent over the past several years. This is not the right time to raise the wheat tax levy, which will only further reduce what little margin a wheat farmer receives for their product.

Times are tough on many North Dakota farms. Much of our state was in a drought this past year, and there's no telling when moisture will spell the dryness in those areas. Just this past year, direct crop and livestock losses were estimated at almost $223 million, and total economic activity losses at more than $865 million. This is certainly not the time to be looking at a tax increase on our wheat farmers.

Net returns per acre of spring wheat have been minimal or negative over the past several years. The following chart, compiled from data published by the ND Farm & Ranch Business Management Program, clearly illustrates this problem:

This proposed increase may harm the integrity of check-off funds. This may be dangerous, particularly when check-off funds are being challenged nationwide.

Many check-off organizations and commodity councils (e.g. beef, pork, mushrooms) have come under fire in recent years and the establishment and use of these funds are being challenged in court on an ongoing basis. It is imperative that the integrity of the check-off funds collected by the ND Wheat Commission be maintained. The proposed check-off increase would essentially funnel dollars to two other non-public organizations to be used for political purposes, which is not a part of the mission of the Wheat Commission. Allowing this check-off increase will only increase efforts by groups who are currently challenging the legality of commodity councils.

Ear-marking funds - in general - sets a bad precedent. Ear-marking funds public funds for political lobbying purposes sets an even worse precedent.

This legislation would set a dangerous precedent with respect to ear-marking funds for specific purposes. Elected members of the various commodity councils and commissions - most of whom are elected by the farmers themselves - would lose authority to expend part of the public funds collected and would put those public funds directly in the hands of private organizations for political purposes.

If this legislation is passed, one can expect that other commodity councils would then face the same dilemma. It is not hard to imagine other commodity groups or organizations coming to the legislature in the future to do the same thing. It is an easy way to avoid the hard work of raising funds through membership dues.

We should not be confused. The Wheat Commission is a government agency that collects taxes from wheat farmers. The commodity groups are organized as non-public entities.

Raising the tax without an appropriate educational campaign may cause large refund requests, thereby jeopardizing current Commission operations.

Approval of this increase without an educational program explaining the benefits and drawbacks certainly increases the risk of an increased number of requests for refunds from North Dakota wheat producers. If that happens, Wheat Commission members and staff will have to divert some of their energies away from the mission of promoting markets for North Dakota wheat to more emphasis on educating producers in order to save existing promotional efforts. Their time needs to be spent in the most productive ways possible. I am concerned that this could provide quite a diversion that would not be healthy for the organization.

Conclusion

In summary, HB 1486 places an additional, unnecessary tax on wheat farmers, jeopardizes the integrity of the North Dakota Wheat Commission, potentially imperils the activities of the Commission and sets a bad precedent for other commodity councils and organizations. I ask you to consider these matters as you deliberate on HB 1486, and I urge you to give this legislation a "do not pass" recommendation.