DATCP Docket No. 15-R-02
WISCONSIN DEPARTMENT OF AGRICULTURE,
TRADE AND CONSUMER PROTECTION
The Wisconsin department of agriculture, trade and consumer protection hereby adopts the following emergency rule to amend s. ATCP 100.135 (10) (c) relating to milk contractor agricultural producer security fund assessments.
Analysis Prepared by the Department
of Agriculture, Trade and Consumer Protection
This emergency rule amends one of 3 fund assessment exemption requirements for milk contractors, reducing the overall fund minimum balance requirement from $11 million to $5 million.
The Wisconsin department of agriculture, trade and consumer protection (DATCP) is adopting this temporary emergency rule. At this time, DATCP has not yet determined if it will adopt a permanent rule on the same subject. This emergency rule will take effect May 1, 2015, and will remain in effect for 150 days. The legislature’s joint committee for review of administrative rules may extend the emergency rule for up to 120 additional days.
Statutes Interpreted: s. 126.46, Wis. Stats.
Statutory Authority: ss. 93.07(1), 126.81(1)(a) and (2m) (b), 126.88(1), and 227.24, Stats.
Explanation of Statutory Authority
DATCP has broad general authority, under s. 93.07(1), Stats., to interpret laws under its jurisdiction. DATCP has specific authority under s. 126.81(1)(a), Stats., to interpret and implement Chapter 126, Stats. DATCP also has specific authority under s. 126.88(1), Stats., to modify agricultural producer security assessments prescribed under Chapter 126, Stats. DATCP is required under s. 126.81 (2m) (b), Stats., to promulgate rules which specify fund assessments under s. 126.46 (1). DATCP is adopting this temporary emergency rule under authority of s. 227.24, Stats.
Related Statutes and Rules
The Agricultural Producer Security Program is governed under Chapter 126 of the Wisconsin Statutes. More specifically, assessments into the producer security fund are calculated pursuant to s. 126.46, Stats., for milk contractors. Chapter ATCP 100 of the Wisconsin Administrative Code interprets and implements Chapter 126, Stats., as it relates to milk contractors. DATCP has explicit authority to implement administrative rules modifying the milk contractor keeper assessments prescribed in the statutes.
Plain Language Analysis
The Agricultural Producer Security Fund (APSF) is a public trust administered by DATCP. 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 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 or fails to return grain held in storage. 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 DATCP to establish milk contractor fund assessments by rule. Ch. 126, Stats., sets minimum fund balances for each industry, as well as a minimum balance requirement for the overall fund. ATCP 100.135 (10), Admin. Code., establishes a fund assessment exemption for milk contractors. To be eligible, a licensee must have been a contributing milk contractor in each of the preceding 5 license years. The exemption does not apply if the fund balance attributable to milk contractors was less than $6 million on February 28 of the preceding license year. The exemption also does not apply if the overall fund balance (which includes contributions from milk, grain and vegetable contractors) was less than $11 million on February 28 of the preceding license year. Section 126.88, Stats., sets the overall fund minimum balance at $5 million.
In 2014, the APSF paid out claims to 19 vegetable producers due to payment default by one large, vegetable contractor that went bankrupt. The default totaled $6.1 million, causing the overall fund balance to drop by almost half. With the overall fund balance well below the $11 million minimum currently set in administrative code, the milk contractor industry will not be eligible for fund assessment exemptions for an estimated 6-7 years.
DATCP and the Agriculture 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 an actuarial study, will take more than a year.
The proposed emergency rule would alleviate a financial burden otherwise placed upon licensed milk contractors. Without this change, milk contractors would not be eligible for fund assessment exemption for many years, and would ultimately repay a large portion of the fund balance lost in the default to vegetable producers.
Under this rule, the annual fund assessment exemption requirement regarding the overall fund balance minimum would decrease from $11 million to $5 million.
The proposed rule will slow the growth of the overall fund balance, as the milk contractor industry would otherwise be required to pay an additional $420,000 - $800,000 annually, over the course of an estimated 6-7 years.
This will result in fewer funds available to producers in milk, grain and vegetable industries in the event of future large defaults.