Statement of Scope
Department of Agriculture, Trade and Consumer Protection (DATCP)
Rule No.:
|
Ch.
ATCP 99
, Wis. Adm. Code (
Existing
)
|
Relating
to:
|
Grain Dealers and Grain Warehouse Keepers
|
1.
Finding/nature of emergency:
An emergency rule is necessary to ensure the continuation of the fund assessment exemption for
grain dealers and grain warehouse keepers
. In December
2015, the Wisconsin Department of Agriculture, Trade and Consumer Protection (
“
Department
”
) received an actuarial study detailing the need for changes to the Agriculture Producer Security Fund (
“
APSF
”
) to ensure fund stability and to mitigate the impact of large defaults in the future. Without this emergency rule, licensed
grain dealers and grain warehouse keepers
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 actuari
al study. The Department
recommends maintaining the status quo during this transitional period. An emergency rule effective date of
September
1 is necessary
since
the next license year (assessment period) for
grain dealers and grain warehouse keepers
begins
September
1, 2016.
2
. Description of the objective of the rule:
The Department
propose
s an emergency
rule
to
amend fund assessment exemption requirements for
grain dealers and grain warehouse keepers
.
The emergency rule proposes
to continue the
decrease in the
APSF
minimum
balance
from the minimum set by administrative rule to the minimum set by statute
. This change would bring the minimum balance set by rule from $11 million to $5 million, which is the minimum set in
Wis. Stat. §
126.88 (1) (a)
.
Th
e emergency
rule
is
necessitated by the
recent decrease in the
APSF balance due to
large default
s
claimed by the vegetable
and milk
contractor industr
ies
.
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 pu
blic trust administered by the Department
. Milk contractors, grain dealers, grain warehouse keepers
,
and vegetable contractors (collectively known as
“
contractors
”
) must purchase a license to obtain milk, grain
,
and vegetables, respectively, from producers, and
most contractors
are required to contribute to the APSF annually. 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.
c
h.
126
establishes detailed fund assessment requirements
for all contractors except
it requires the Department
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
99.126 (5
)
,
establishes a fund assessment exemption for
grain dealers
. To be eligible, a licensee must have been a contributing
grain dealer
in each of the preceding
five
license years. The exemption does not apply if the fund balance attributable to
grain dealers was less than $3
million on
May 31
of the preceding license year. The exemption also does not apply if the overall fund balance (which includes contributions from milk, grain
,
and vegetable industries) was less than $11 million on
May 31
of the preceding license year.
Wis. Stat. §
126.88
sets the
APSF
minimum balance at $5 million.
Wis. Admin. Code §
ATCP 99.235 (4)
,
establishes a fund assessment exemption for grain warehouse keepers with eligibility requirements
similar
to those for grain dealers. However, grain warehouse keeper licensees
are not likely to become
eligible for fund assessment exemption
for approximately
ten
years, as the fund balance attributable to grain w
arehouse keep
ers is currently
below
the minimum $
500,000
requirement.
In 2014 and 2015, defaults in the vegetable and milk industries totaled $7.2 million, causing the
APSF
balance to drop substantially.
With the
APSF
balance below the $11
million minimum currently set by
administrative
rule
, the
grain dealer and grain warehouse keeper industries
will not be eligible for fund assessment exemption
s
for
an estimated
five
to
six
years.
The Department
and the Agricultural Producer Security Council
,
a stat
utory council that advises the Department
on the administration of the program,
identified th
e 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,
the Department
received the completed actuarial study and is developing recommendations for permanent changes to the agricultural producer security program.
The proposed emergency rule would alleviate a financial burden otherwise placed upon licensed
grain dealers
. Without this change,
grain dealer
s
would no
t
be eligible for fund assessment exemption
s which have been granted to milk and vegetable contractors during this transitional period
.
The proposed emergency rule would make consistent changes to exemption eligibility requirements for both grain dealers and grain warehouse keepers
;
however
,
grain warehouse
keeper licensees will not likely be effected by the change for approximately
ten
years, as they will not meet the minimum balance requirement for funds attributable to grain warehouse keepers.
Policy Alternatives
Do nothing.
If
the Department
fails to adopt this
emergency
rule the
grain dealer
industry
will not be eligible for fund assessment exemption until the
producer security
overall fund balance exceeds $11 million
, which is estimated to take
five
to
six
years
.
If
the Department
fails to adopt this emergency rule before
September
1, 201
6
, no grain dealers 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 the Department
to make such regulations as are necessary for the discharge of al
l the powers and duties of the D
epartment.
Wis. Stat.
§
126.81 (1) (a)
allows
the Department
to promulgate rules to interpret and implement
Wis. Stat.
c
h.
126
.
Wis. Stat.
§
227.24
allows the Department
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:
The Department
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 affe
cted persons and groups. The Department
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
grain dealers
who meet fund assessment exemption requirements under
Wis. Admin. Code
§§
ATCP
99.126 (5
) (a)
and
(b)
to not pay fund assessments if the
APSF
balance is at least $5 million on
May
3
1
of the preceding license year.
The
grain dealer industry
would otherwise be required to pay an additional
$2
0
0,000 - $
25
0,000 annually
, until the
APSF
balance reaches a minimum of $11 million.
Milk, grain
,
and vegetable
producers
could potentially be impacted by the lower
agricultural producer security
overall fund 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
grain dealer
industry
would
otherwise be required to
pay an additional $2
0
0,000 - $
25
0,000 annually
, over the course of an estimated
five to six
years
.
The impact to milk, grain
,
and vegetable producers will be minimal if there are no large defaults during the next
five
to
six
years.
Contact Person:
David A.
Woldseth
, DATCP; Phone (608) 224-
5164
