Hoffer Report: A Review of Vermont State Spending in the Dairy Industry

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Vermont Business Magazine Vermont State Auditor Doug Hoffer today released a first-ever comprehensive account of the Vermont State Government’s total annual spending on the Vermont dairy industry. From fiscal year 2010 to 2019, the State Auditor’s Office estimates that Vermont taxpayers spent more than $ 285 million on programs and policies aimed at supporting the dairy industry and / or addressing the negative environmental impacts caused by certain dairy practices. In fiscal 2019, the last year of analysis, spending totaled over $ 35 million.

“Every Vermont resident knows the important historical contribution of dairy farming to the economy and identity of our state,” said Auditor Hoffer. “We also know that the last decades have been extremely difficult for small and medium-sized dairy farms. Payments below cost to milk processors, industry consolidation, water quality requirements – these and other pressures help explain why Vermont has gone from 4,017 farms in 1969 to less than 650 today ‘hui.

“As an office of state responsibility, my team and I undertook this analysis to provide a comprehensive overview of how taxpayer funds are used to support the dairy industry and, increasingly, to do facing the environmental impacts of dairy farming. We hope this report provides a basis for state government leaders and the public as they consider the future of Vermont’s dairy industry and the role public funds should play. “

The report describes and quantifies all government funded programs that provide direct benefits to dairy farmers (Part I) and / or mitigate the environmental impacts of certain dairy farming practices (Part II). The most significant financial benefits for dairy farmers come from tax policies and benefits, particularly sales tax exemptions and property tax reductions under the Common Use Program. Although spread across many programs, subsidies related to the environmental impacts of dairy products are also significant and have increased in recent years, particularly with the implementation of the Vermont Clean Water Initiative.

Hoffer added, “The legislature and executive branches each recognize the challenges facing Vermont dairy products and have launched a series of efforts to reimagine the future of Vermont dairy products. As they contemplate the role of the state in this future, it is essential for them and for the public to know how much taxpayers are spending. today to support the industry. My office has completed this important work to create a responsible role for the state in the future. “

The details of the report are given verbatim below. To view the full report with charts and footnotes, click HERE.

All sales by Vermont dairy farms, including milk, cattle, and crops, accounted for 74% of total Vermont agricultural sales in 2017. Woodlands were not included in the Vermont farmland analysis .

In the 2019 Vermont Rural Life Survey conducted by Vermont PBS and Vermont Public Radio, 93% of respondents said the dairy industry is very or somewhat important to Vermont’s sense of self.

The auditor’s report included data on two financial benefits associated with farming:

Current use
The Current Use Program, which was established in 1978, allows “the valuation and taxation of agricultural and forestry lands based on their agricultural or forestry use rather than market value.” 42 In other words, current use reduces taxation. property value and a lien is placed on the land to discourage future development.xvi Additionally, eligible farm buildings listed for current use are not subject to property tax.42 In 2019, $ 2.5 million acres were enrolled in the program, approximately 42% of the land in Vermont.

Using the addresses of dairy farms provided by the Agriculture Agency, we identified between 229,000 and 282,000 acres of land operated by dairy farms that were listed in current use in 2019xvii The reduction in property taxes for these plots shifts the tax burden to other taxpayers and funding sources of income for the National Education Fund. The State also calls on the General Fund to reimburse the municipalities by means of a “Hold In Harmony” payment to compensate for reductions in local property tax revenues.

We estimate that dairy farmers registered in current use received between $ 71.3 million and $ 83.5 million in tax benefits from 2010 to 2019.

In addition, we estimate that the administration of dairy related programs at the Department of Taxation cost $ 741,000 from FY10 to FY19.

VHCB Agricultural Land Conservation Program
VHCB’s Agricultural Land Conservation Program focuses on conserving the state’s quality soil and agricultural land by establishing permanent conservation easements. The VHCB uses state funding from the property transfer tax and investment fund (matched with federal funding from the Natural Resource Conservation Service) to purchase development rights on farms in order to ” permanently prevent non-agricultural development.

Since 1987, 166,400 acres of farmland on over 761 farms have been conserved with funding from the VHCB. The proceeds from the sale of development rights go to the owner of the farm and, in almost half of the projects, contribute to the transfer of land.

Like the current use program, the primary objective of this program is to conserve land and soil. In doing so, it provides financial benefits to dairy farmers through public funds.

From FY10 to FY19, the VHCB retained 121 dairy farmsxviii in Vermont, totaling 17,290 acres of farmland. To purchase these development rights, the VHCB used $ 14.4 million in public funding from FY10 to FY19.

The VHCB estimates that the program administration costs associated with the conservation of these dairy farms totaled $ 3.3 million in public funds, bringing the total state expenditure for the conservation of dairy farms to 17, $ 7 million from FY10 to FY19. Program administration costs include staff salaries and benefits, direct costs (such as travel expenses, assessment costs, and surveys), as well as payments to partner organizations, such as Vermont Land Trust, which work directly with farmers interested in conserving their land.

There are also environmental mitigation programs of over $ 30 million since 2010 and over $ 7 million in 2019 alone, including:

The Water Quality Division at the Agriculture Agency
The Water Quality Division is responsible for administering Vermont’s agricultural non-point source pollution control program, which includes technical and financial assistance, education and outreach to the farming community, as well as agricultural inspections and law enforcement activities. While these programs are not specific to dairy farming, dairy farms constitute an important part of the Division’s portfolio. Funding for these programs comes from the Equipment Fund, the Clean Water Fund and the General Fund.

The most important program within the Water Quality Division is the Best Management Practices (BMP) program, which provides technical and financial assistance for on-farm improvements and structural conservation practices to improve water quality. BMP is primarily funded by the Capital Fund. Examples of BMP conservation projects include manure storage, backyard runoff collection, and dairy waste collection and treatment.

Conclusion

From FY10 to FY19, the Vermont dairy industry received at least $ 285 million in state policies and programs designed to both support dairy farmers and mitigate the environmental impacts of dairy farming practices. The most significant financial benefits for dairy farmers came from tax policies and benefits, especially sales tax exemptions and property tax reductions through current use, which lowered the cost of production for farmers. Although spread across many programs, grants related to mitigating the environmental impact of dairy farming are also significant and have increased in recent years, particularly with the implementation of the Vermont Clean Water Initiative. This report is intended to serve as a resource for state policymakers, program managers, and the public when considering the future of dairy in Vermont and the role public funds should play.

To view the full report and a summary of the report, see the full report here and the summary here.

About investigation reports: This investigative report is intended to inform citizens and state government officials. This is not an audit and is not conducted in accordance with generally accepted government auditing standards. Therefore, its conclusions are more limited and do not contain recommendations. As the constitutional officer of the state of Vermont responsible for holding the state government to account, the auditor uses investigative reports to supplement regular performance and financial audits produced each year.

Source: State Auditor. Montpelier. May 10, 2021.



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