Financial condition is determined on the basis of an annual financial statement filed by the contractor. Other things being equal, contractors with weaker financial statements pay higher annual fund assessments. Fund assessments are calculated according to a formula spelled out in the producer security law. However, DATCP may modify fund assessments by rule.
Refunds Authorized
In some cases, a merger or acquisition may temporarily affect a contractor's financial statement. This temporary change may in some cases cause a disproportionate increase in annual fund assessments (based on the current statutory assessment formula). In such cases, this rule authorizes DATCP to refund part of a contractor's assessment if certain conditions apply. The refund is paid as a credit against the next year's assessment.
Under this rule, DATCP may refund part of an annual fund assessment paid by a contributing contractor if all of the following apply:
•The contractor paid the full amount of the assessment, including any late penalties that may apply.
•The contractor is the surviving entity in a merger under s.
179.77,
180.1101,
183.1201 or
185.61, Stats., or has acquired property pursuant to a sale of assets under s.
180.1202, Stats.
•The assessment was based on the contractor's financial statement for the fiscal year in which the merger or acquisition took effect.
•The contractor's financial statement, for the fiscal year in which the merger or acquisition took effect, caused the sum of the contractor's current ratio assessment rate and debt to equity assessment rate (both calculated according to current statutory formulas) to increase by at least 100% compared to the preceding license year.
•The contractor's annual financial statements, for the fiscal years immediately preceding and immediately following the fiscal year in which the merger or acquisition took effect, show positive equity, a current ratio of at least 1.25 to 1.00 and a debt to equity ratio of no more than 3.0 to 1.0.
•In the license year immediately following the license year for which the contractor paid the assessment, the sum of the contractor's current ratio assessment rate and debt to equity assessment rate (both calculated according to current statutory formulas) declines by at least 50% compared to the license year for which the contractor paid the assessment.
•The contractor requests the refund in writing, by the first day of the next license year.
Refund Amount
The amount of the refund under this rule will equal 75% of the difference between the assessment amount paid by the contractor and the assessment amount required of the contractor in the next license year.
Refund Paid as Credit Against Next Year's Assessment
Whenever DATCP pays a refund under this rule, DATCP must pay the refund as a credit against the contractor's assessment for the next license year. DATCP must apportion the credit, pro rata, against the quarterly assessment installments required of the contractor in that next license year. If the credit exceeds the total assessment required of the contractor in that next license year, DATCP must credit the balance in the same fashion against assessments required of the contractor in subsequent license years (up to 2 years).
DATCP may not pay refunds except as credits against future assessments (there is no cash refund). DATCP may not pay a refund (grant a credit) to any person other than the contractor who paid the original assessment on which the refund is given.
Disclosures to Producers
Under current rules, a contractor must provide an annual written “notice to producers." The notice must disclose whether the contractor participates in the fund, or has filed security with DATCP, to secure the contractor's payment obligations to producers. The notice may take different forms, depending on the basis on which the contractor is licensed by DATCP. Current rules spell out the type of notice that each contractor must give, and exact wording that the notice must include.
2003 Wis. Act 38 modified fund assessments and security filing requirements for some contractors. This rule modifies current disclosure requirements for some contractors, so that the disclosures accurately reflect current law.
Electronic Receipts for Grain
Chapter
126, Stats. requires grain dealers and grain warehouse keepers to provide written receipts for grain received from producers and depositors. This rule authorizes grain dealers and warehouse keepers to provide those receipts in electronic form, provided that the producer or depositor can readily retrieve, view, store and print the receipt for future reference.
Federal and Surrounding State Regulations
Wisconsin's Security Program
Wisconsin has an agricultural producer security program for grain, milk and vegetables. The Wisconsin legislature has spelled out detailed statutory requirements for grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (ch.
126, Stats.). Contractors must be licensed by DATCP, and most contractors must contribute to an agricultural producer security fund administered by DATCP. A few contractors must also file security with DATCP.
DATCP cannot alter current statutory requirements, but can interpret and implement those requirements by rule. This rule makes limited changes to current rules. This rule will benefit contractors by authorizing assessment refunds and electronic grain receipts, without reducing producer security. This rule also modifies contractor disclosure requirements to implement recent statutory changes.
Federal Programs
There are no federal producer security programs related to milk. The United States department of agriculture (USDA) administers a producer security program for federally licensed grain warehouses that store grain for producers. Grain warehouses may choose whether to be licensed under state or federal law. Federally-licensed warehouses are exempt from state warehouse licensing and security requirements. State-licensed warehouses are likewise exempt from federal requirements.
The federal grain warehouse program currently provides little or no protection against financial defaults by grain dealers. Grain dealers are persons who buy and sell grain. Sometimes, grain dealers also operate grain warehouses. DATCP currently licenses grain dealers. Licensed warehouse keepers must also hold a state grain dealer license if they engage in grain dealing.
USDA proposes to regulate grain dealer activities of federally licensed warehouses, to the exclusion of state regulation. But USDA has not yet finalized its regulations. In any case, the federal regulations would not apply to state-licensed grain warehouses, or to grain dealers who do not operate a warehouse.
There is a federal security program for fresh market vegetables, but not for processing vegetables. Wisconsin's vegetable security program applies only to processing vegetables (not fresh market vegetables covered by federal regulations).
Surrounding States
In Minnesota, contractors must be licensed to procure grain, milk or processing vegetables from producers, or to operate grain warehouses. Regulated contractors must file bonds as security against default.
Neither Iowa nor Illinois have producer security programs for milk or vegetables. However, both states maintain indemnity funds to protect grain producers. Fund assessments are based solely on grain volume. In Wisconsin, by contrast, fund assessments are based on grain volume and financial condition.
Michigan has the following producer security programs:
•Potato dealers must be licensed, and must post bonds as security against defaults. (Wisconsin's vegetable security program includes, but is not limited to, potatoes.)
•Dairy plants that fail to meet minimum financial standards must file security or pay cash for milk.
•Grain producers have the option of paying premiums into a state fund. In the event of a grain default, the fund reimburses participating producers.
Fiscal Estimate
This rule will have little or no fiscal impact on the agricultural producer security fund, and no fiscal impact on the department. This rule authorizes partial refunds of fund assessments in certain cases, but the department does not anticipate many such cases. Refunds, when made, would merely eliminate unanticipated “windfalls" to the fund, and would not affect overall revenue projections for the fund. The rule will not have a significant impact on the department's operating costs.
Business Impact Analysis
This rule will have a minimal impact on regulated businesses. The Wisconsin legislature has spelled out detailed statutory requirements for grain dealers, grain warehouse keepers, milk contractors and vegetable contractors (ch.
126, Stats.). DATCP has limited authority to change these requirements by rule.
This rule will make minor changes to current rules. This rule will have a positive impact on some businesses, by authorizing assessment refunds and electronic receipts. This rule updates current disclosure requirements (per recent law changes), but the updated disclosure requirements will have a minimal impact on regulated businesses.
This rule does not impose any new regulatory requirements. This rule does not add business costs, and will reduce costs for some businesses. This rule will have little, if any, impact on small business.
Notice of Hearing
Justice
NOTICE IS HEREBY GIVEN that, pursuant to s.
895.12, Stats., and interpreting s.
895.12, Stats., the Department of Justice will hold a public hearing on proposed rules, ch.
Jus 16, relating to the enforcement of the tobacco master settlement agreement.
The hearing shall take place on:
April 30, 2004
10:00 a.m.
Risser Justice Building
Room 726
17 West Main Street
Madison, WI 53702
Interested persons are invited to appear at the hearing and offer comments on the proposed rule. Persons making oral presentations are requested to submit their comments in writing as well. The public record on this proposed rule will remain open until the close of business on the day of the hearing to permit the submission of written comments from people unable to attend the hearing. Written comments should be submitted to Charlotte Gibson, Assistant Attorney General, 17 West Main Street, Madison, Wisconsin, 53702.
Analysis of Proposed Rule
Statutes Interpreted: Wis. Stat. §
895.12.
2003 Wisconsin Act 245 gives the Department of Justice a number of new powers to enforce the tobacco master settlement agreement (“MSA"). Specifically, cigarette manufacturers must make detailed certifications concerning the products they make, and the attorney general must maintain a directory of the manufacturers who have current and accurate certifications. Manufacturers that have not signed on to the MSA must put into place certified escrow accounts and escrow a certain amount for each cigarette sold to consumers in the State of Wisconsin. The act also allows the attorney general to require certifications and escrow payments quarterly.
This proposed rule implements the powers granted under
2003 Wisconsin Act 73. The proposed rules allow the Department of Justice to require non-participating manufacturers to certify their compliance and make their escrow payments quarterly.
Fiscal Impact
The Department of Justice estimates that there will be no fiscal impact of the proposed rule.
Initial Regulatory Flexibility Analysis
The proposed rule may have an effect on small businesses. The type of small businesses that could be affected are non-participating manufacturers (“NPMs") under the MSA. Under the MSA and statutory law, NPMs (none of which are currently located in Wisconsin) are required to escrow money for possible future litigation concerning the state's health costs related to smoking. The rule gives the Department of Justice the power to require these nonparticipating manufacturers to provide certifications and escrow payments quarterly. While the Department of Justice believes that quarterly payment will assist NPMs to make appropriate marketing decisions so that they can meet these financial obligations, the quarterly reporting will require more paperwork for them.
Copies of Rule and Contact Person
Copies of the proposed rule can be obtained free of charge from, and any questions concerning the rule can be directed to:
Charlotte Gibson
Assistant Attorney General
Wisconsin Department of Justice
17 West Main Street
Madison, WI 53702
(608) 266-7656
Notice of Hearing
Public Service Commission
Hearing Date, Time and Location
Tuesday, April 27, 2004 – 10:00 a.m.
Public Service Commission, 610 North Whitney Way, Madison, WI
Comments Due:
Tuesday, May 18, 2004 – Noon
FAX Due:
Monday, May 17, 2004 – Noon
Address comments to:
Lynda L. Dorr, Secretary to the Commission
Public Service Commission
P.O. Box 7854
Madison, WI 53707-7854
FAX (608) 266-3957
