LRB-2265/2
RCT:cjs:pg
2003 - 2004 LEGISLATURE
May 20, 2003 - Introduced by Representatives Ott, Ainsworth, Bies, Gronemus,
Gunderson, Hahn, Hines, Kestell, Krawczyk, Loeffelholz, Musser, Owens,
Pettis, Suder, Towns, Townsend, Ward, Freese and Petrowski, cosponsored
by Senators Brown, Schultz and Lassa. Referred to Committee on
Agriculture.
AB349,2,2
1An Act to repeal 126.07 and 126.72 (4);
to renumber 126.31 (1) and 126.47 (1);
2to renumber and amend 126.16 (3), 126.31 (3), 126.47 (3) and 126.61 (3);
to
3amend 20.115 (1) (v), 20.115 (1) (wb), 25.463, 126.05 (2), 126.08, 126.14 (2) (b)
43. and 4., 126.15 (1) (intro.), 126.16 (8) (a) (intro.), 126.16 (8) (b) (intro.), 126.29
5(2) (a), 126.30 (1) (intro.), 126.31 (8) (a) (intro.), 126.45 (3) (a), 126.45 (3) (c) 3.
6and 4., 126.46 (1) (intro.), 126.46 (2) (c), 126.46 (2) (e), 126.46 (4) (c), 126.46 (4)
7(e), 126.47 (7) (a) (intro.), 126.59 (2) (c) 3. and 4., 126.60 (1) (intro.), 126.61 (1)
8(c) (intro.), 126.61 (7) (a) (intro.), 126.61 (7) (b) (intro.), 126.71 (1) (d), 126.71 (1)
9(e), 126.72 (1), 126.73, 126.86 (1) (f) and (g) and 126.90;
to repeal and recreate
10126.06 and 126.72 (2) and (3); and
to create 20.115 (1) (wc), 126.15 (6m), 126.16
11(1) (c), 126.16 (3) (b), 126.16 (8) (bm), 126.30 (5m), 126.31 (1) (b), 126.31 (3) (b),
12126.31 (8) (am), 126.46 (5m), 126.47 (1) (b), 126.47 (3) (b), 126.47 (7) (am),
13126.60 (5m), 126.61 (1) (bm), 126.61 (3) (b) and 126.61 (7) (bm) of the statutes;
1relating to: the agricultural producer security program, granting
2rule-making authority, and making an appropriation.
Analysis by the Legislative Reference Bureau
This bill makes changes in the agricultural producer security program that is
administered by the Department of Agriculture, Trade and Consumer Protection
(DATCP). The program is designed to reimburse milk, grain, and vegetable
producers for a portion of the losses they incur when milk contractors, grain dealers,
grain warehouse keepers, and vegetable contractors (collectively referred to as
contractors) default on their financial obligations. A milk contractor is a person who
buys milk from milk producers or who markets milk on behalf of producers. A grain
dealer is a person who buys grain from grain producers or who markets grain on
behalf of producers. A grain warehouse keeper is a person who operates a warehouse
for the storage of grain that belongs to others. A vegetable contractor is a person who
buys vegetables from vegetable producers for use in food processing or who markets
vegetables for use in food processing on behalf of producers.
Contingent financial backing
Current law requires certain contractors to contribute to the agricultural
producer security fund. Some contractors are disqualified from the fund because of
their financial conditions. If a contributing contractor defaults on its financial
obligations to producers, DATCP makes payments from the fund, up to a maximum
deductible amount per default. The deductible varies by industry. The law requires
DATCP to buy surety bonds to provide contingent financial backing, that is, to make
payments to producers when the total amount of payments that are authorized to be
made to producers because of a default exceeds the deductible. The law requires
DATCP to buy three bonds, in the amount of $5,000,000 to $20,000,000 each, one for
the benefit of milk producers, one for the benefit of grain producers, and one for the
benefit of vegetable producers. DATCP is also required to buy a bond in the amount
of $20,000,000 to $40,000,000 to be used if one of the industry-specific bonds is not
large enough to make authorized payments in case of a large default.
This bill authorizes DATCP to acquire a contract to provide a cash loan to the
fund whenever DATCP requests a loan rather than, or in addition to, a surety bond
in order to provide contingent financial backing for the agricultural producer
security fund. If DATCP obtains a loan, it would repay the principal and interest
from the payments made to the fund by contractors. The bill changes the
requirements about the amount of contingent financial backing that DATCP must
obtain. Under the bill, DATCP is to acquire the amount of contingent financial
backing that it determines is sufficient to meet reasonably foreseeable needs for
payments to producers, except that DATCP may acquire a smaller amount if
necessary to avoid excessive acquisition costs or repayment liabilities and except
that DATCP may not acquire contingent financial backing in an amount that exceeds
$17,000,000 unless DATCP establishes a different maximum amount by rule.
The bill also changes the deductible amounts (the amounts that are paid to
producers from the agricultural producer security fund, above which payments are
made from the contingent financial backing). The current deductibles range from
$500,000 to $1,500,000. Under the bill, the deductible is 60% of the balance in the
fund on the last day of the month before the month in which the default necessitating
the payments occurs.
Security filed by contractors
Under current law, contractors who are disqualified from the agricultural
producer security program because of their financial conditions are required to file
security with DATCP to provide payment to producers in case the contractors default
on their financial obligations to producers. The security may be in a form such as a
surety bond or a certificate of deposit. Some grain dealers and vegetable contractors
who contribute to the fund and who use deferred payment contracts are also required
to file security.
This bill requires some additional contractors who contribute to the fund to file
security with DATCP to provide an additional source of payment in case the
contractors default. A contractor must file security if it does not satisfy financial
criteria specified in the bill and it does more than a specified amount of business. The
larger the contractor, the more security it must file. The financial criteria vary
according to industry. The amount of the contribution to the fund that must be paid
by a contractor who is required to file security under this bill is reduced by an amount
that varies according to the amount of security that must be filed. The higher the
amount of security, the more the contribution is reduced.
Repayment of start-up loan to fund
The legislation creating the agricultural producer security program
transferred $2,000,000 from the agrichemical management fund to the agricultural
producer security fund. Under current law, DATCP must repay that amount, plus
interest compounded at 5% annually, from the agricultural producer security fund
by July 1, 2006. This bill changes the interest rate to 2%, beginning on July 1, 2003.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB349, s. 1
1Section
1. 20.115 (1) (v) of the statutes is amended to read:
AB349,3,52
20.115
(1) (v)
Agricultural producer security; bonds contingent financial
3backing. From the agricultural producer security fund, a sum sufficient to acquire
4the
surety bonds contingent financial backing required under
ss. s. 126.06
and
5126.07.
AB349, s. 2
1Section
2. 20.115 (1) (wb) of the statutes is amended to read:
AB349,4,52
20.115
(1) (wb)
Agricultural producer security; bond proceeds of contingent
3financial backing. From the agricultural producer security fund, all moneys received
4under s. 126.72 (2)
and (3) to be used to make default claim payments under s. 126.71
5(1).
AB349, s. 3
6Section
3. 20.115 (1) (wc) of the statutes is created to read:
AB349,4,97
20.115
(1) (wc)
Agricultural producer security; repayment of contingent
8financial backing. From the agricultural producer security fund, a sum sufficient to
9make payments under s. 126.06 (3).
AB349, s. 4
10Section
4. 25.463 of the statutes is amended to read:
AB349,4,15
1125.463 Agricultural producer security fund. There is established a
12separate nonlapsible trust fund designated as the agricultural producer security
13fund, to consist of all fees, surcharges, assessments, reimbursements, and proceeds
14of
surety bonds contingent financial backing received by the department of
15agriculture, trade and consumer protection under ch. 126.
AB349, s. 5
16Section
5. 126.05 (2) of the statutes is amended to read:
AB349,4,2017
126.05
(2) The department shall deposit into the fund all fees, surcharges,
18assessments, reimbursements, and proceeds of
surety bonds contingent financial
19backing that the department collects under this chapter. The department shall keep
20a record by contractor and industry, of all deposits.
AB349, s. 6
21Section
6. 126.06 of the statutes is repealed and recreated to read:
AB349,5,2
22126.06 Contingent financial backing.
(1) Department to acquire. Using
23moneys appropriated under s. 20.115 (1) (v), the department shall acquire contingent
24financial backing to secure payment under s. 126.72 (2) of claims against
1contributing contractors, as defined in s. 126.68 (1). The contingent financial
2backing may be in one or more of the following forms:
AB349,5,33
(a) A surety bond.
AB349,5,54
(b) A contract to provide a cash loan to the fund whenever the department
5requests a loan.
AB349,5,8
6(2) Amount. The department shall acquire contingent financial backing under
7sub. (1) in the amount that, in the department's judgment, is sufficient to meet
8reasonably foreseeable needs under s. 126.72 (2), except as follows:
AB349,5,119
(a) The department may acquire a smaller amount of contingent financial
10backing if, in the department's judgment, that is necessary to avoid excessive
11acquisition costs or repayment liabilities.
AB349,5,1412
(b) The department may not acquire contingent financial backing in an amount
13that exceeds $17,000,000, unless the department establishes a different maximum
14amount by rule.
AB349,5,16
15(3) Repayment. The department shall pay principal and interest costs of any
16loan provided under sub. (1) (b) from the appropriation under s. 20.115 (1) (wc).
AB349, s. 7
17Section
7. 126.07 of the statutes is repealed.
AB349, s. 8
18Section
8. 126.08 of the statutes is amended to read:
AB349,6,2
19126.08 Start-up loan to fund; repayment. On January 1, 2002, $2,000,000
20is transferred as a loan from the agrichemical management fund, to the agricultural
21producer security fund. The department shall repay this loan principal, plus interest
22compounded at 5% annually, from the agricultural producer security fund by July 1,
232006.
Interest shall be compounded at 5% annually before July 1, 2003, and at 2%
24annually beginning on July 1, 2003. The department shall transfer at least $250,000
25from the agricultural producer security fund to the agrichemical management fund
1on July 1 of each year, beginning on July 1, 2003. The department may accelerate
2the loan repayment, at its discretion.
AB349, s. 9
3Section
9. 126.14 (2) (b) 3. and 4. of the statutes are amended to read:
AB349,6,84
126.14
(2) (b) 3. The grain dealer fails to reimburse the department, within 60
5days after the department issues a reimbursement demand under s. 126.73 (1), for
6the full amount that the department pays to claimants under s. 126.72 (1)
or under
7s. 126.72 (2) with the proceeds of a loan under s. 126.06 (1) (b) because of that grain
8dealer's default.
AB349,6,129
4. The grain dealer fails to reimburse a bond surety, within 60 days after the
10bond surety issues a reimbursement demand under s. 126.73 (2), for the full amount
11that the surety pays to the department under s. 126.72 (2)
or (3) for the benefit of
12claimants affected by that grain dealer's default.
AB349, s. 10
13Section
10. 126.15 (1) (intro.) of the statutes is amended to read:
AB349,6,1714
126.15
(1) General. (intro.) A contributing grain dealer shall pay an annual
15fund assessment for each license year.
The Except as provided in sub. (6m), the 16assessment equals $20 or the sum of the following, whichever is greater, unless the
17department by rule specifies a different assessment:
AB349, s. 11
18Section
11. 126.15 (6m) of the statutes is created to read:
AB349,6,2219
126.15
(6m) Reduced assessment for certain grain dealers filing security. 20If a grain dealer files security under s. 126.16 (1) (c), the grain dealer's assessment
21is the amount determined under sub. (1) reduced by an amount determined as
22follows:
AB349,6,2523
(a) Divide the amount of security that the grain dealer is required to file as
24determined under s. 126.16 (3) (b) by the amount of the grain dealer's estimated
25default exposure, as defined in s. 126.16 (1) (c) 1.
AB349,7,2
1(b) Multiply the amount of the assessment determined under sub. (1) by the
2amount determined under par. (a).
AB349, s. 12
3Section
12. 126.16 (1) (c) of the statutes is created to read:
AB349,7,54
126.16
(1) (c) 1. In this paragraph, "estimated default exposure" means the sum
5of the following:
AB349,7,86
a. Thirty-five percent of the grain dealer's average monthly payment for the
73 months, during the preceding 12 months, in which the grain dealer made the
8largest monthly payments for producer grain procured in this state.
AB349,7,119
b. The grain dealer's highest total, at any time during the preceding 12 months,
10of unpaid obligations for producer grain procured in this state under deferred
11payment contracts.
AB349,7,1712
2. A grain dealer shall file security with the department, and maintain that
13security until the department releases it under sub. (8) (bm), if the grain dealer files
14an annual financial statement under s. 126.13 (1) that shows negative equity, a
15current ratio of less than 1.25 to 1.0, or a debt to equity ratio of more than 4.0 to 1.0
16and the grain dealer's estimated default exposure is greater than the following
17amount:
AB349,7,1818
a. For the license year beginning on September 1, 2003, $18,000,000.
AB349,7,1919
b. For the license year beginning on September 1, 2004, $19,000,000.
AB349,7,2020
c. For a license year that begins on September 1, 2005, or later, $20,000,000.
AB349, s. 13
21Section
13. 126.16 (3) of the statutes is renumbered 126.16 (3) (a), and 126.16
22(3) (a) (intro.) and 1., as renumbered, are amended to read:
AB349,7,2523
126.16
(3) (a) (intro.)
A Except as provided in par. (b), a grain dealer who is
24required to file or maintain security under this section shall at all times maintain
25security that is at least equal to the sum of the following:
AB349,8,5
11.
An amount equal to 35% Thirty-five percent of the grain dealer's average
2monthly payment for the 3 months, during the preceding 12 months, in which the
3grain dealer made the largest monthly payments for producer grain procured in this
4state, except that this amount is not required of a contributing grain dealer
after
5December 1, 2002.
AB349, s. 14
6Section
14. 126.16 (3) (b) of the statutes is created to read:
AB349,8,97
126.16
(3) (b) A grain dealer who is only required to file or maintain security
8under sub. (1) (c) shall at all times maintain security equal to the grain dealer's
9estimated default exposure, as defined in sub. (1) (c) 1., less the following amount:
AB349,8,1010
1. For the license year beginning on September 1, 2003, $18,000,000.
AB349,8,1111
2. For the license year beginning on September 1, 2004, $19,000,000.
AB349,8,1212
3. For a license year that begins on September 1, 2005, or later, $20,000,000.
AB349, s. 15
13Section
15. 126.16 (8) (a) (intro.) of the statutes is amended to read:
AB349,8,1614
126.16
(8) (a) (intro.) The department may release security filed under sub. (1)
15(a), except for any amount of security that the grain dealer is required to file because
16sub. (1) (b)
or (c) applies to the grain dealer, if any of the following applies: