Statement of Scope
Department of Agriculture, Trade and Consumer Protection (DATCP)
Rule No.:
|
Wis. Adm
in
. Code
c
h.
ATCP 100
(
Existing
)
|
Relating to:
|
Milk Contractors
|
1.
Finding/nature of emergency:
An emergency rule is necessary to ensure the continuation of the fund assessment exemption for milk contractors.
In December 2015, t
he Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) received
an
actuarial study detailing the need for changes to the Agr
iculture Producer Security Fund
(APSF)
to ensure fund stability and to mitigate the impact of large defaults in the future.
Without this emergency rule, licensed milk contractors will take on the burden of repaying a large portion of the
APSF
overall fund balance
while new policies are developed and implemented based on the findings of the actuarial study
.
DATCP recommends maintaining the status quo during this transitional period.
An emergency rule effective date of May 1 is necessary, as the next license year
(assessment period)
for milk contractors begins May 1, 2016.
2.
Description of the objective of the rule:
DATCP
propose
s an emergency
rule that will
reduce the APSF minimum balance from $11 million set by rule to $5 million which is the minimum set by statute
.
See
Wis. Stat. §
126.88 (1
)(
a)
.
This decrease will allow the continuation of the fund assessment exemption for milk contractors.
Th
e
emergency rule
is
necessitated by the
decrease in the
APSF
overall fund balance due to a default
by a
large vegetable contractor
(see history and background section below).
3
.
Description of existing policies relevant to the rule and of new policies proposed to be included in the rule and an analysis of policy alternatives; the history, background and justification for the proposed rule:
History and background
.
The APSF
is a public trust administered by DATCP. Milk contractors, grain dealers, grain warehouse keepers
,
and vegetable contractors
(collectively known as contractors) must purchase a license to obtain milk, grain
,
or
vegetables
from producers, and
most contractors
are required to contribute to
the
APSF
annual
ly. Funds are used to settle claims by
producers
in the event that a
contractor
defaults on payment. Funds from each industry are accounted for separately and deposited into the overall fund.
Wis. Stat.
ch.
126
,
establishes detailed fund assessment requirements
, except that it requires DATCP to establish milk
contractor fund assessments by rule.
Wis. Stat.
ch.
126
,
sets
minimum fund balances for each industry, as well as a minimum balance requirement for the overall fund.
Wis. Admin. Code §
ATCP 100.135 (10)
, establishes a fund assessment exemption for milk contractors. To be eligible, a
licensee
must have been a contributing milk contractor in each of the preceding
five
license years. The exemption does not apply if the fund balance attributable to milk
contractors was less than $6 million on February 28 of the preceding license year. The exemption also does not apply if the overall fund balance (which includes contributions from milk, grain and vegetable
contractors
) was less than $11 million on February 28 of the preceding license year.
Wis. Stat. §
126.88
, sets the overall fund minimum balance at $5 million.
In 2014, the
APSF
paid out
claims to 1
8
vegetable
producers
due to
payment default by
one
large, out-of-state
contractor
. The
APSF
payment
s
totaled $6.
1
million, causing the overall fund balance to drop by more than half.
With the overall fund balance well below the $11 million minimum
balance
currently set
by rule
, the milk contractor industry
would
not be eligible for fund assessment exemption
s
for
an estimated 6-7
years.
DATCP and the Agricultural
Producer Security Council have identified the need to
evaluate
the entire agricultural producer security program, so that changes can be made to mitigate the impact of large defaults in the future.
In December 2015,
DATCP
received the completed
actuarial study
and is developing recommendations for permanent changes to the
agricultural producer security program
based on the findings in the actuarial study
.
The proposed emergency rule would alleviate a financial burden otherwise placed upon licensed milk contractors
during this transitional period
. Without this change, milk contractor
s
would no
t
be eligible for fund assessment exemption
until permanent changes to the agricultural producer security program are implemented.
Policy Alternatives
Do nothing.
If
DATCP fails to adopt this
emergency
rule the milk contractor industry will not be eligible for fund assessment exemption until the
producer security
overall fund balance exceeds $11 million
.
License years for milk contractors begin May 1. If DATCP fails to adopt this emergency rule
before May 1,
2016
, no milk contractors will be eligible for exemption during the next license year.
4
.
Statutory authority for the rule (including the statutory citation and language):
Wis. Stat. §
93.07 (1)
, directs DATCP to make such regulations as are necessary for the discharge of all the powers and duties of the department.
Wis. Stat. §
126.46 (1)
, directs DATCP to establish by rule annual fund assessments for milk contractors.
Wis. Stat. §
126.81 (1) (a)
, allows DATCP to promulgate rules to interpret and implement
Wis. Stat.
c
h.
126
.
Wis. Stat.
§
227.24
, allows DATCP to promulgate a rule as an emergency rule without complying with the notice, hearing and publication requirements under
Wis. Stat.
ch.
227
.
5
. Estimate of the amount of time that state employees will spend to develop the rule and of other resources necessary to develop the rule:
DATCP estimates tha
t it will use approximately 0.10
FTE staff to develop this rule. This includes time required for the investigation and analysis, financial assistance criteria, rule drafting, preparing related documents, and communicating with affected persons and groups. DATCP will use existing staff to develop this rule.
6
. Description of all entities that may be impacted by the rule:
The proposed rule will allow milk contractors who meet fund assessment exemption requirements under
Wis. Admin. Code §§
ATCP
100.135 (10) (a)
and
(b)
,
to not pay fund assessments if the
producer security
overall fund balance is at least $5 million on February 28 of the preceding license year.
The
milk contractor industry
would otherwise be required to pay an
estimated
$4
2
0,000 - $800,000 annually
, until the overall fund balance reaches a minimum
balance
of $11 million.
Milk, grain
,
and vegetable
producer
s could potentially be impacted by the
overall
lower
APSF
balance
, in the event of future
large
defaults.
7
.
Summary and preliminary comparison of any existing or proposed federal regulation that is intended to address the activities to be regulated by the rule:
There is no existing or proposed federal regulation that is int
ended to address the activities regulated by this
rule.
8
.
Anticipated economic impact
The proposed rule will slow the growth of the overall fund balance, as the
milk contrac
tor industry
would
otherwise be required to
pay an additional $4
2
0,000 - $800,000 annually.
The impact to milk, grain
,
and vegetable producers will be minimal if there are no large defaults during the next 6-7 years.
Contact Person:
David A. Woldseth
, DATCP; Phone (608) 224-
5164
