Statement of Scope
Department of
Agriculture, Trade and Consumer Protection (DATCP)
Rule No.
:
|
Ch. ATCP
99-100-101
, Wis. Adm
in
. Code (Existing)
|
Relating to
:
|
Grain dealers and grain warehouse keepers; milk contractors; vegetable contractors
|
1. Finding/nature of e
mergency (Emergency Rule only):
N/A
2
. Description of the objective of the rule:
Th
is proposed rule would
modify
Wis. Admin. Code ch.
ATCP 101
to increase vegetable contractor assessments, as required by statute, to address the portion of the Agricultural Producer Security Fund (F
und
) that is currently below its minimum t
hreshold. This proposed rule will
also amend portions of
ch.
ATCP 99
, Wis. Admin. Code, and
ch.
ATCP 100
, Wis. Admin. Code
based on
both
findings from
a
recent actuarial study of the
F
und
and discussions with the Agricultural Producer Security Council (APSC)
.
This rule
process will
explore whether
there should be changes in the
assessment
formulae and
will
implement
any
statutory changes that may
have
result
ed
from the study
or
from
recommendations
by the APSC
.
T
he Department plans to consider how
expected
future defaults and payments to and from the Fund
impact current F
und
balance thresholds
and fairness between industries.
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 Fund
, established by Wis. Stat. §
25.463
,
is a public trust administered by
the
D
epartment
. 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 F
und
annually. Funds are used to settle claims by producers in the event that a contractor defaults on
a
payment. Funds from each industry are accounted for separately and
then
deposited into the overall fund.
Wis. Stat. ch.
126
establishes detailed fund assessment requirement
s, except that it requires the Department
to establish milk contractor fund assessments by rule.
Wis. Stat. c
h. 126
.88 (1)
, sets minimum
and maximum
fund balances for each industry, as well as a minimum
and maximum
balance requirement for the overall fund.
In 2014
, a default by
Allens
Inc. caused the F
und
to pay vegetable producers more than $6 million. The resultant impact of this default is that the F
und
balance attributed to vegetable contractors is well below the
minimum statutory threshold of $800,000. The following year, a $1 million default in the
milk industr
y
further drew down the F
und
balance
.
As a result,
the Department
and the
APSC
identified the need to evaluate the entire agricultural producer security program
. An actuarial study was conducted to, in part, examine the overall sustainability of the F
und
and analyze the equitability of assessments contributed by each industry relative to anticipated losses.
The Department
adopted a number of
interim
emergency rules as a stopgap measure while it awaited the results of an actuarial study to consider possible permanent rule changes.
In December 2015, the Department
received
the
study of the F
und
and began working with the APS
C
to develop recommendations for permanent changes in the agricultural producer security program.
Proposed policies
.
The Department
is statutorily required to initiate rulemaking
to
modify Vegetable Contractor assessments as a result of its portion of the
Fund
balance being below its statutory threshold.
Conversely, without a significant increase, the vegetable contractor portion of the F
und
balance will remain negative for the foreseeable future.
Additionally, t
he actuarial study indicated that
, while the overall F
und
was sustainable long-term, adjustments may be needed
to assessments or individual F
und
balance thresholds to provide more equity across all industry segments
.
Policy Alternatives
.
The Department must take some action
to meet its statutory obligation with regard to the F
und
balance attributable to Vegetable Contractors
.
A permanent solution must be reached or the
F
und
will not be able to meet its statutory obligation of default protection as dictated by
Wis. Stat. c
h
.
126
.
While awaiting the results of the actuarial study, the Department issued emergency rules for all three affected industries
. T
he final one will lapse in February 2018
.
Due to the length of an administrative rule process, the Department may seek emergency rules in the interim. However, the Department anticipates that any emergency rule would mirror the final permanent rule that may be adopted.
4
. Statutory authority for the rule (including the statutory citation and language):
Wis. Stat. §
25.463
,
creates the Wisconsin Agricultural Producer Security Trust Fund.
Wis. Stat. §
93.07 (1
)
,
directs
Department
to make such regulations as are necessary for the discharge of all the powers and duties of the department.
Wis. Stat. §
126.19 (4) (b)
,
permits
Department
to specify form and content of disclosure in grain dealer deferred payment contracts.
Wis. Stat. §
126.46 (1)
,
directs
Department
to establish by rule annual fund assessments for milk contractors.
Wis. Stat. §
126.81 (1) (a)
,
allows
Department
to promulgate rules to interpret and implement
Wis. Stat. ch.
126
.
Wis. Stat. §
126.88 (2)
(a)
, 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
or rises above the maximum amounts
required under Wis. Stats. §
126.88 (1) (a)
through
(e)
.
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 that it will use approximately 0.
25
FTE staff to develop this rule. That includes time required for investigation and analysis, rule drafting, preparing related documents, coordinating co
uncil
meetings
with the Agricultural Producer Security Council,
holding public hearings
,
and communicating with
other
affected 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:
Milk, grain
,
and vegetable producers
also
have a stake in the health of the
Fund
,
and
could potentially be impacted by
changes to the
agricultural producer security overall fund balance.
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:
The Department will consider the Perishable Agricultural Commodities Act (PACA) provisions in any rewrite of the administrative rule. PACA is a federal program that addresses the activity of buying and selling fresh produce.
8
. Anticipated economic impact
The Department
expects the proposed rule to have minimal to no economic impact statewide
or
locally
to the general public
.
However, the three industries (grain, milk, and vegetable) will benefit from the solvency of the F
und
if
a future default
should
occur.
Contact Person:
David A. Woldseth
,
Program and Policy Analyst, Division of Trade and Consumer Protection
, DATCP; Phone
(608) 224-5164.
