NCBA’s Federation Division Submits Comments on CBB Roles & Responsibilities Recommended Changes

14 Jun

To: Cattlemen’s Beef Board Members Ed Avalos, Under Secretary, USDA Rayne Pegg, Administrator, USDA AMS Craig Morris, Deputy Administrator, USDA AMS Craig Shackelford, USDA AMS

From: National Cattlemen’s Beef Association Executive Committee – Federation Division David Dick, Federation Chairman Craig Uden, Federation Vice Chairman

Date: June 3, 2011

The Federation Section of the National Cattlemen’s Beef Association Executive Committee met by conference call May 20, 2011 to consider and develop comments on the proposed Roles & Responsibilities document issued in March by the Cattlemen’s Beef Board executive committee.

The Federation takes great pride in the role State Beef Councils (SBCs) have played in the creation of our current national checkoff program and in serving as the foundation of the program’s state/national partnership. The coordination and efficiencies we bring, through partnership with SBCs, have been and today continue to be essential to building beef demand. Congress recognized and codified this central role in crafting the Act in 1985. Now, as in 1985, our producer leadership remains cognizant of the need for a checkoff program that is efficient, coordinated and most importantly, directed by the grassroots producers who fund it.

The implications of the proposed R&R document are best understood in context of the history of our checkoff programs. In 1976, Congress enacted legislation calling for creation of a national beef board which could:

• keep the entire dollar for itself; • as to dollars it chose to share with states, extensively regulate the specific uses the states made of them;

• conduct program implementation through its own staff; and • duplicate the functions and activities of existing state and national beef market development organizations, including state beef councils and their Federation. Producers rejected this approach in two separate referendums. The 1985 legislation, in effect today, proposed a radical redesign:• state beef councils were allowed to retain up to half the dollar checkoff and spend it at the direction of their producer boards so long as the expenditures were consistent with the requirements of the Act & Order;

• a 20-member group (with half appointed by the Federation), today’s Beef Promotion Operating Committee, was given primary decision making authority over how to spend the portion of the dollar not retained by the states and was to help assure coordination of both portions of the dollar;

• national industry organizations alone, not the new board, were to carry out those decisions through contracts with the Operating Committee; and

• in the interests of efficiency and avoidance of duplication, the new board was commanded to “use, to the extent possible, the resources, staffs, and facilities of existing organizations” and, for prevention of bureaucratic creep, was subjected to a 5% cap on administrative expenses.

Producers approved, by 79%, the new structure in a 1988 referendum.

As we review it, the R&R document is in many respects unworkably vague, leaving producers to guess at what it means and how it might be interpreted and applied. That, it seems to us, serves no one well and only opens the door to abuse, punishing checkoff participants unfairly and stifling program inventiveness and boldness.

What is clear is that the R&R document can be read, and many producers read it, to rewrite the 1985 Act to covertly introduce previously rejected aspects of the 1976 legislation. Specifically, the R&R document can be read to empower the CBB to:

• Increase, to a degree not required by law, federal government involvement in the beef industry and control of the checkoff, including State Beef Councils, and to intrude upon each SBC’s lawful ability and discretion to determine how to spend the portion of the dollar Congress allowed them to retain.

o #10c CBB rightly acknowledges that the relationship between CBB and the SBCs is not functioning well. Initiatives like the R&R document are contributors.

o #10c CBB wants to assure SBC adherence to AMS’s guidelines. This reverses CBB’s prior assurance that the newly issued Guidelines for AMS Oversight of Commodity Research and Promotion Programs do not apply to SBCs and would usher in deeper government entanglement without any demonstrated need for it.

o #10c CBB wishes, it appears, to encourage SBCs to send funds “directly to CBB to fund specific programs at the national level”. We read the Act and Order to assign to the Operating Committee, not CBB, the function of entering into and evaluating contracts for programs at the national level. Moreover, the legislation directs the Operating Committee to carry out programs through national nonprofit industry-governed organizations active and ongoing before enactment of the 1985 law and CBB does not qualify as such an organization because it did not exist prior to enactment of the new law. Even apart from these concerns, we find troublesome the appearance that CBB wishes to compete with the Operating Committee and Federation (the principal contractor for national program) for SBC dollars used in the national/state partnership and risk the dissension that initiative will provoke within industry.

#10c. Departure from the Congressional design of the checkoff aside, as a policy matter QSBCs are capable of, and in the best possible position to, determine where and how their portion of the checkoff can be spent in order to meet the needs and priorities of their state’s producers.

#18. This R&R provision states that the Operating Committee has delegated its evaluation responsibilities to the Joint Evaluation Committee. It is our understanding that CBB, on its own initiative and without consultation with or approval of the Operating Committee, has terminated that committee. This deeply troubles us because the committee was functional, useful and efficient and ably promoted coordination of effort.

#18. This R&R provision states that CBB will install its own Evaluation Committee to evaluate “all CBB and joint programs”. We understand that there are only two program categories – programs which the Operating Committee funds and programs that SBCs fund (either themselves or through their Federation). We are concerned that CBB may be creating a new program category not specified or intended by the Act.

#18. We are also concerned about the apparent intention of CBB, through its proposed new Evaluation Committee, to assess the effectiveness of SBC programs. We read the Act and Order to expressly place in the hands of the Operating Committee (not CBB), evaluation of the programs the Operating Committee funds. No comparable grant of authority to either the Operating Committee or CBB to evaluate state plans and projects appears in the Order and none is needed to assure states refrain from using the checkoff except as permitted by the Act and Order (i.e. not to influence government policy or engage in plans or projects outside the categories specific in the Act).

#18. This R&R provision also states the proposed CBB Evaluation Committee will “review current program evaluations at QSBCs and compare QSBC marketing plans and budgets to evaluations to ensure all programs are evaluated”.

We are troubled about the notion of CBB comparing one state’s budget and program choices and evaluations to those of other states (or to a CBB/federal government vision). Even if this were an authorized activity, we fear many producers will view it as an effort by the federal government to seize from SBCs the discretion and rights they (and we) believe Congress gave them. We do not understand that CBB may dictate to the states that they must change or abandon program choices which are otherwise eligible for checkoff funding or may override those choices because of a CBB/government assessment of prior program outcomes. There is a vast difference, in fact and conceptually, between a brother guarding against forbidden behavior and big brother forcing conformity and destroying local initiative and the sense and reality of grassroots involvement.

Put another way, in the 1985 Act, Congress assured money for programs conducted by the states. This R&R provision can readily be read as withdrawing this assurance by allowing CBB to control, directly or by evaluation “policing”, how that money is used, even when SBCs are using the money as permitted by the Act and Order.

#18. Better to leave evaluation of state programs in the hands of the SBCs, those best qualified to do so. This does not prevent CBB from assuring that funds have not been used for ineligible purposes.

#18. Finally, this R&R provision creates a misimpression that all programs using the checkoff are not presently evaluated. Until CBB unilaterally terminated the Joint Evaluation Committee, all Operating Committee funded programs were being evaluated by that committee and SBCs were, and currently, are, evaluating their own programs.

• Minimize and eventually eliminate the state/national coordination which has served the industry well while diminishing Federation and SBC involvement in checkoff planning; destroy the joint industry planning and committee structure which is the foundation of the 1996 beef industry merger; create two checkoff planning and committee structures, thereby reviving the inefficiency, duplication and conflict which existed prior to 1996; and insolate checkoff planning and decision-making from critically relevant market and information i.e., government trade policy and nutrition policy such as the Dietary Guidelines.

#2. CBB wants “its own” strategic and annual plans, to set “its own” budgets and priorities. That’s not what Congress prescribed or what producers voted for. There should be an “industry”, not just CBB, plan. A stand-alone CBB LRP would result in duplication of effort, conflicting rather than coordinated outcomes, isolated decision making and Operating Committee gridlock.

#2. The current joint industry planning and budget processes have successfully, effectively and efficiently increased demand in a manner utilized since the 1996 merger and whose legitimacy AMS has never questioned. These processes should be continued.

#2. This R&R provision encourages SBCs to “fund individual programs by sending funds directly to CBB”. For reasons given in the preceding point, this proposal raises questions not only regarding legality but seemingly violates the design so carefully crafted by Congress in the 1985 Act.

#2. This R&R provision complains that “NCBA staff controls the development and implementation of checkoff” programs. We do not view this as an accurate statement.

Most implementation is effectuated under contract with the Operating Committee and it is the Operating Committee with USDA signoff, not NCBA staff, which chooses the contractors. Moreover, those contracts are not awarded until after a highly inclusive planning process which involves many, many industry voices.

On the matter of staff involvement in program development, the staff at issue is the Federation’s program staff, perhaps the most valuable asset the beef industry has for market development. It is highly skilled, devoted, innovative, ethical and informed on what works and how to make things work for the beef checkoff. No one is in a better position to staff and support the program development and implementation process. No one is more responsive to producer direction and input. To suggest otherwise is simply untrue, unfair and misleading and if continued could have the unfortunate effect of driving staff to look for employment elsewhere.

#2. This R&R provision also complains that CBB’s voice in the development and implementation of checkoff programs is insufficient. This too is off the mark. We do not understand CBB to be saying that the current development and implementation staff and process are illegal in any way. Or not highly effective and rewarding for producers. Or that the process is inefficient or under inclusive in its operation. Or that the long established highly participatory planning process fails to carry out the mandates of the Act, Order and its own bylaws to utilize the resources, personnel and facilities of established organizations like the Federation and NCBA (whose contributions Congress called “invaluable”). Or that CBB’s voice, until unilaterally withdrawn from the industry process, has not been heard or inappropriately ignored, at all or in any way that harmed the beef industry. It is fair then to ask what is driving CBB’s concern.

#3. This R&R provision appears to propose a CBB-only committee structure with discretionary industry “involvement”. Any proposal to have CBB stand- alone committees destroys coordination, promotion of efficiencies and avoidance of duplication, which were foundational principles of the 1985 Act. Producers will recall the review made by Arthur Andersen on the efficiencies and savings produced by the 1996 merger and the operation of the joint industry committee system. Annual meeting costs alone were reduced by almost $700,000, at 1997 prices. We believe few producers will wish to return to the days of duplicative effort.

#3. The “joint” industry committees, established at the time of the 1996 merger and from which CBB has unilaterally withdrawn, allowed for broad and effective collaboration among producers (CBB & Federation Directors), QSBC execs, other beef organizations, etc. Apart from needlessly creating a competing committee system, the recommendation of this R&R provision does not assure that other producers (other than CBB directors) will have real input in checkoff programs. This creates a “closed” system and discourages the broader participation and input of producers in determining checkoff programs.

#7. This R&R provision appears to call for the establishment of a “CBB” rather than an “industry” LRP, annual plan and set of priorities. Many concerns expressed above about duplicative and competing operations apply equally to this proposal.

#7. This R&R provision also appears to claim CBB authority to compel SBCs to “align” their own market and planning decisions and judgments to those of the CBB. As developed above, we do not read the Act and Order to allow that.

Consolidate decision making in the hands of the CBB Executive Committee at the expense, among others, of the over 650 producers who serve on state beef councils.

#17. This R&R provision proposes that CBB should review SBC marketing plans to encourage cooperation between state and national programs. We are concerned about the direction of this proposal. Many producers already believe that in the last several years the CBB executive committee has taken actions designed to weaken the existing national-state cooperation which has been so well affected by the Federation’s operations and facilitated by the joint industry committee system. Now that CBB has dismantled the joint industry committees and, in the R&R document, proposes a large number of initiatives which seem to defeat existing industry coordination and cooperation, the Federation and most SBCs will want to hear a great deal more about the “cooperation” CBB has in mind to assure themselves that the form of cooperation proposed is not really further consolidation of top down CBB power and federalizing of producer organizations beyond what the law requires.

#17. This R&R provision also proposes to promote “industry unity” by having CBB review SBC marketing plans “carefully”. As noted above, we fear that further intrusion into SBC operations beyond the minimum legally required will divide rather than unify CBB and the SBCs/Federation. Successful integration of Operating Committee and SBC/Federation programs has been occurring for nearly 15 years through an inclusive planning process, the joint industry committee process and Federation proceedings, all within the bounds of the Act and Order and in which CBB has had strong voice. CBB’s press to change this effective structure invites inquiry about whether there is an ulterior purpose in the R&R document not revealed on its face.

#17. As stressed above, we question whether CBB has the power, through a review of state marketing plans, to force more than 650 producer members of SBC boards to alter their judgments about which programs best meet the needs of their state’s producers The 1976 Act permitted that; the 1985 doesn’t.

• Enable CBB, under the guise of exercising its review and approval power over the Operating Committee budget recommendations, to replace the Operating Committee as the budget’s primary draftsman, contrary to what producers approved in the 1988 referendum and USDA has sanctioned ever since; make the Federation members of the Operating Committee irrelevant; and destroy the important role the Operating Committee plays in coordinating the entire checkoff dollar.

#2. This R&R provision can be read to suggest an intention by CBB to take over the Operating Committee’s function. Under the Act and Order the Federation and CBB each appoint half the Operating Committee which, we believe, evidences a Congressional direction that that body serves as the draftsman of budgets for programs it funds through contracts with industry organizations. Through this structure, unique then and today among federal commodity programs, Congress, it seems to us, intended to achieve coordination, efficiency and utilization of critical SBC/Federation expertise and knowledge of existing programs. This structure has worked well, particularly in cooperation with the unifying, joint industry committee system. Introduction of a new, stand- alone CBB committee, in addition to the CBB’s own representatives on the Operating Committee and apart from a joint industry committee system, would seem to run against everything the 1985 Act sought to forestall in the area of organizational competition, inefficiency and lack of coordination.

#2. This R&R provision can also be read to imply that CBB is claiming the right to exercise its approval power over the Operating Committee budget recommendations to make arbitrary changes to those recommendations. We think Congress intended that the task of collaboratively working out and brokering program recommendations for the portion of the dollar not retained by the states (integrated with the knowledge of state expenditures Federation members of the Operating Committee possess) would take place within the Operating Committee and be honored by CBB absent compelling circumstances to the contrary.

Many producers read the R&R document as we do, share our concerns about its vagueness and implications and, for that reason, oppose adoption in its present form. Clearly, the proposal is a“game changer” regarding how the federal checkoff has successfully functioned for a generation in partnership with state beef councils and the Federation and, we think, no case has been made for the change. In summary, most of our concerns center in these four areas:

(1) Dangerous, unworkable vagueness of language and intent throughout the R&R document;

(2) Significant but unnecessary expansion of government role and influence in a producer program;

(3) Reduction/eventual elimination of the inclusive, coordinated state-national planning process which has been the foundation of the beef checkoff’s success and in which SBCs and the Federation, and its representatives on the Operating Committee, have played vital roles;

(4) Concentration of checkoff decision making in the hands of ever fewer CBB board members and reduction of the influence of the much larger and more inclusive body of SBC board members.

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Posted by on June 14, 2011 in Uncategorized


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