Anchorage Daily News

WASILLA -- The beleaguered state-owned Matanuska Maid dairy, which appeared to be turning around with a reported profit in June, lost about $300,000 in July, according to the state creamery board.

Board chairwoman Kristan Cole said the losses stunned board members, who as recently as a week ago believed Mat Maid would be in the black for a second month in a row. This could be the worst monthly loss suffered by the dairy since the state took it over a little more than 20 years ago, she said.

"It was a shock to all of us, honestly, on Saturday to find this out," she said.

Board members met Saturday in Palmer with company officials.

Cole said the company also needs to correct a June report that showed a profit of more than $60,000. The actual profit was only a couple of thousand dollars because of expenses mistakenly omitted, she said. Those expenses, which totaled about $60,000, were instead accounted for in July, she said. She said she did not know what those expenses were.

Cole cited several reasons for the July losses, including skyrocketing milk prices, decreased sales, supply expenses and legal costs associated with an earlier plan to shut down the dairy. But she said she was mystified why board members weren't told sooner of the potential loss. The board oversees operation of the Anchorage-based dairy.

"I would love to know the answer to the question you are asking," she said. She said the creamery board at a special meeting decided Monday to hire an independent auditor to scrutinize Mat Maid finances.

Board member Ralph Carney, a certified accountant, said the dairy has an antiquated accounting system, but also agreed the losses shouldn't have been a surprise.

Cole said she was particularly frustrated because the board has worked hard to keep the public informed of its work.

She said she was also stunned that former gubernatorial candidate Andrew Halcro apparently heard about the loss before board members. Halcro posted a note about it Saturday on his Daily News online blog. Halcro is not connected to the dairy, but said Monday he takes a personal interest in it because he believe it exemplifies the struggles of the state's agriculture industry. He would not reveal who told him about the loss.

Cole said the board has relied on company officials, including chief executive Joe Van Treeck and accountant Bob Sramek, for financial reports. Neither returned calls left Monday at their offices.

The immediate impact of the July loss was not clear, but Cole said the company will have to increase the price it charges retailers for milk. She said the board has not tapped a $600,000 state grant allocated for the dairy and hopes not to.

"Our goal has been to not touch those state funds," she said. "(But) honestly, I can tell you that milk prices are completely out of our control. We can't cut costs fast enough ..."

She said milk prices have shot up in the last 2½ months from $21 per 100 pounds to $30 per 100 pounds and are expected to keep rising.

BOARD IS CRITICIZED

Critics said the losses should not have been a surprise and should prompt board members to take a harder line in making decisions about the dairy's future.

Janet Kincaid chairs a gubernatorial dairy task force that recommends the state focus on selling the dairy. She said board members have good intentions, but it's clear the dairy is "not sustainable in the long run."

She also criticized the board for allowing Carney, a voting member of the creamery board, to work at the dairy.

"It's a huge conflict of interest," she said.

Carney said he has been paid $85 an hour since July as interim vice president for sales and marketing, which includes helping re-establish contacts with customers. He described the position as part-time and said he works about 20 hours a week.

He said he does not consider the job a conflict of interest.

"I try to separate it and operate with a level of professionalism so that it isn't an issue," he said.

Cole also defended the position. The board was making do in a crunch and Carney was highly qualified for the work, she said. She said the board cleared the job with a state attorney and noted that Carney offered to work for half the lowest price proposed by three other potential applicants.

"We don't think it does (pose a conflict) because specifically it's very part time, and we asked him to do it. He didn't come to us and say, I'll do it for you."

THE DAIRY'S FATE

State officials have been trying to figure out what to do with Mat Maid since mid-June, when Gov. Sarah Palin acted to reverse a decision by previous creamery board members to shutter the dairy. The dairy, taken over by the state in the mid-1980s, was doing well but in the last two years has reported losses of more than $700,000 brought on by declining sales and rising costs.

Previous board members said it's impossible to reverse that trend. But current board members, buoyed in part by the June profit, said they hoped to keep the dairy open for as long as another year.

Palin spokeswoman Sharon Leighow said Monday the governor had no immediate comment on the dairy's loss. But she said Palin had "complete faith and trust in the board" and was awaiting its recommendation on what to do with Mat Maid. That recommendation is expected in the next few weeks, she said.

Reporter S.J. Komarnitsky can be reached at www.adn.com/contact/skomarnitsky or in Wasilla at 1-907-352-6714.