DATCP
Docket No.
15-R-08
Final
Draft Rule
December 9
, 2015
WISCONSIN DEPARTMENT OF AGRICULTURE,
TRADE AND CONSUMER PROTECTION
EMERGENCY RULE
The Wisconsin department of agriculture, trade and consumer protection
proposes
the following
emergency
rule
to amend
A
TCP 1
01.245 (2)
(a) 2., A
TCP 1
01.245 (2)
(b) 2., and A
TCP 1
01.245 (2)(c) 2.;
relating to
vegetable contractors
and the agricultural producer security fund assessment
.
_____________________________________________________________________________
Analysis Prepared by the
Wisconsin
Department
of Agriculture, Trade and Consumer Protection
This
emergency
rule
modifies
the Agricultural Producer Security
F
und
(ASPF)
assessment amounts of contributing vegetable contractors. Section
126.88
, Stats. requires
the Wisconsin Department of Agriculture, Trade and Consumer Protection (
the department
)
to modify fund assessments as necessary to maintain a fund balance attributable to vegetable contractors of at least $800,000, but not more than $3,000,000.
Statutes Interpreted
Statutory Authority
Exp
lanation of Statutory Authority
The Department of Agriculture, Trade and Consumer Protection (
the department
)
has broad general authority, under s.
93.07(1)
, Stats., to interpret laws under its jurisdiction.
The department
has authority under s.
93.06 (1m)
and
(1p)
, Stats., to evaluate farm products upon request for certification purposes, and to charge a fee to cover the cost of the service.
Section
126.60
permits
an annual fund assessment and specifies the ratio assessment rates and factors
.
Section
126.81 (1) (a)
, Stats. allows
The department
to promulgate rules to interpret and implement
ch.
126
, Stats.
Section
126.88 (2) (a)
, Stats., directs
The department
to
promulgate a rule modifying assessments when the fund balance or a portion of the fund balance falls below the minimum amounts required under section
126.88 (1) (a)
through
(e)
, Stats.
Related Statutes and Rules
Ch.
126
, Stats. establishes detailed fund assessment requirements and sets minimum fund balances for each of three industries, as well as a minimum balance requirement for the overall fund. ATCP 99 covers grain dealers and grain warehouse keepers, and ATCP 100 covers milk contractors.
Plain Language Analysis
Background
The
APSF
is a public trust administered by
the department
. Milk contractors, grain dealers, grain warehouse keepers
,
and vegetable contractors (
C
ontractors) must purchase a license to obtain milk, grain
,
and vegetables
from producers
and most contractors are required to contribute to the APSF annually. Funds are used to settle claims by
milk, grain, and vegetable
producers in the event that a contractor defaults on payment. Funds from each industry are accounted for separately and deposited into the overall fund. Ch.
126
, Stats. establishes detailed fund assessment requirements, except that it requires
the department
to establish milk contractor fund assessments by rule. Ch.
126
, Stats. sets minimum fund balances for each industry, as well as a minimum balance re
quirement for the overall fund.
Section
126.88
, Stats. establishes minimum and maximum balances for each of the four licenses administered under the Agricultural Producer Security Program and directs the department to modify assessments to maintain these thresholds. Assessments for contributing vegetable contractors shall be modified to maintain a fund balance attributable to vegetable contractors of at least $800,000, but not more than $3,000,000.
In 2014, the APSF paid out claims to 18 vegetable producers due to payment default by one large, out-of-state contractor that went bankrupt. The default payment totaled $6.1 million, causing the overall fund balance to drop by almost half. This resulted in a fund balance deficit attributable to the vegetable program of over $4.8 million and, furthermore, has brought the overall fund balance well below the $11 million minimum currently set in administrative code to be eligible
for fund assessment exemptions.
The department
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. This entire process, including the performance of the actuarial stu
dy, will take more than a year.
An emerge
ncy rule is required to meet
the
statutory obligation to restore the vegetable fund balance to the minimum within a reasonable time. Without this emergency rule, the fund
balance
attributable to the vegetable program will remain dramatically underfunded. An emergency rule must be in effect by February 1, 2016, in order to apply to the next license year for vegetable contractors.
This emergency rule will be in effect for
24 months
per statutory authority given the department in s.
126.88 (2)(b)
, Stats
.
Rule Content
This rule defines the vegetable procurement practices and financial standards and security for vegetable contractors in Wisconsin. This emergency rule will affect the vegetable contractors’ payments to the
APSF
. Specifically, it:
Increases assessments paid by contributing vegetable contractors; and
Assists the department in achieving the statutory minimum balance for the fund.
An emergency rule is required to meet our statutory obligation to restore the vegetable fund balance to the minimum within a reasonable time. Without this emergency rule, the fund attributable to the vegetable program will remain dramatically underfunded. An emergency rule must be in effect by February 1, 2016, in order to apply to the next license year for vegetable contractors. This emergency rule will be in effect for
24 months
per statutory authority given the
department in s.
126.88 (2)(b)
, Stats.
Fiscal Impact
By amending
ATCP
101.245
, the emergency rule sets the participation fee at the level currently paid by first-year participants.
By
amending
this rule,
the department projects
the fund will receive
approximately
$
95
,000
in additional revenue each
year
.
Business Impact
The proposed rule
will
impact
vegetable contactors who participate in the
APSF though an increase in assessments paid by contributing vegetable contractors
.
The department expects to receive approximately $95,000 in additional revenue each year from 22 contractors.
Federal and Surrounding State Programs
Federal Programs
The Noninsured Crop Disaster Assistance Program provides some coverage for losses when natural disasters affect specialty crops such as vegetables and fruits. The program offers coverage at up to 65 percent of
producers
expected production at 100 percent of the average market price.
However, this program targets the
producers
rather than the contractors.
Surrounding State Programs
Minnesota requires any wholesale dealer or food processor who contracts with other Minnesota dealers
for fresh fruits or vegetables
to be licensed as a Wholesale Produce Dealer. Dealers are required to obtain a surety bond and required to maintain trust assets so that assets are freely available to satisfy outstanding obligations.
Michigan requires producer security for all manufacturing and Grade A dairy plants that are a first receiving point for raw milk that will be processed at that faci
lity. However, they do not have a similar program for vegetable producers.
Illinois, Iowa, and Indiana
do not have
similar programs.
DATCP
Contact
David A.
Woldseth
Department of Agriculture, Trade and Consumer Protection
P.O. Box 8911
Madison, WI 53708-8911
Telephone (608) 224-
5164
Finding of emergency
No finding of emergency is necessary pursuant to s.
126.88(2)(b)
, Stats
.
Emergency rule
Section 1
.
A
TCP 1
01.245 (2)(a) 2.
is
amended to read:
2.
The sum of the amounts calculated under s.
126.60 (1) (a)
and
(b)
, Stats.
except as follows:
a.
A vegetable contractor's current ratio assessment factor under s.
126.60 (3) (a)
, Stats. is 0.00048.
b.
A vegetable contractor's current ratio assessment factor under s.
126.60 (3) (b)
, Stats. is 0.00072.
c.
A vegetable contractor's debt to equity ratio assessment factor under s.
126.60 (5) (a)
, Stats. is 0.000135.
d.
A vegetable contractor's debt to equity ratio assessment factor under s.
126.60 (5) (b)
, Stats. is 0.000203.
Section 2
.
A
TCP 1
01.245 (2)(b) 2.
is
amended to read:
2.
The sum of the amounts calculated under s.
126.60 (1) (a)
and
(b)
, Stats.
except as follows:
a.
A vegetable contractor's current ratio assessment factor under s.
126.60 (3) (a)
, Stats. is 0.00048.
b.
A vegetable contractor's current ratio assessment factor under s.
126.60 (3) (b)
, Stats. is 0.00072.
c.
A vegetable contractor's debt to equity ratio assessment factor under s.
126.60 (5) (a)
, Stats. is 0.000135.
d.
A vegetable contractor's debt to equity ratio assessment factor under s.
126.60 (5) (b)
, Stats. is 0.000203.
Section 3
.
A
TCP 1
01.245 (2)(c) 2.
is
amended to read:
2.
The sum of the amounts calculated under s.
126.60 (1) (a)
and
(b)
, Stats.
except as follows:
a.
A vegetable contractor's current ratio assessment factor under s.
126.60 (3) (a)
, Stats. is 0.00048.
b.
A vegetable contractor's current ratio assessment factor under s.
126.60 (3) (b)
, Stats. is 0.00072.
c.
A vegetable contractor's debt to equity ratio assessment factor under s.
126.60 (5) (a)
, Stats. is 0.000135.
d.
A vegetable contractor's debt to equity ratio assessment factor under s.
126.60 (5) (b)
, Stats. is 0.000203.
Section
4. E
ffective date:
This emergency rule takes effect on February 1, 2016, and remains in effect for
24 months
. The department implements this emergency rule as provi
ded in s.
126.88 (2)(b)
, Stats.
