SB527: Bill Text

LRB-3286/1

RCT:wlj:rs

2009 - 2010 LEGISLATURE

2009 Senate BILL 527

February 9, 2010 - Introduced by Senators Vinehout, Miller, Taylor and Harsdorf, cosponsored by Representatives Vruwink, Jorgensen, Garthwaite, Smith, Hraychuck, Danou, Tauchen, Ripp, Dexter, Molepske Jr. and A. Ott. Referred to Committee on Agriculture and Higher Education.

SB527,3,2 An Act to repeal 126.06 (2) (intro.) (except 126.06 (2) (title)), 126.08, 126.11 (4) (b) 1. to 3., 126.14 (2) (b) 3. and 4., 126.16 (1) (b) 1., 126.16 (1) (c) 2. a. to c., 126.16 (2), 126.16 (3) (b) 1. and 2., 126.16 (4) (e), 126.16 (8) (c), 126.17 (3) (a) 1. and 2., 126.31 (1) (b) 2. a. to c., 126.31 (2), 126.31 (3) (b) 1. and 2., 126.31 (4) (e), 126.31 (8) (b), 126.32 (5) (a) 1. and 2., 126.45 (3) (c), 126.46 (1) (a) and (b), 126.46 (2) to (5), 126.47 (2), 126.47 (3) (a) 3., 126.47 (3) (b) 1. and 2., 126.47 (4) (e), 126.47 (7) (b), 126.59 (2) (c) 1. to 4., 126.60 (1) (c), 126.61 (1) (bm), 126.61 (2), 126.61 (3) (a) 2., 126.61 (3) (b) 1. and 2., 126.61 (4) (e), 126.61 (7) (b), 126.61 (7) (c), 126.62 (2) (a) and (b), 126.71 (1) (d) and (e), 126.71 (3) (a) 1. to 3., 126.81 (3) and 126.86 (1) (g); to renumber 126.81 (intro.) and (1) and 126.81 (4); to renumber and amend 126.11 (4) (b) (intro.), 126.16 (1) (c) 2. (intro.), 126.17 (3) (a) (intro.), 126.19 (4), 126.31 (1) (b) 2. (intro.), 126.32 (5) (a) (intro.), 126.40 (1), 126.41 (6) (b), 126.45 (3) (b), 126.46 (1) (intro.), 126.46 (5m) (a), 126.59 (2) (c) (intro.), 126.62 (2) (intro.), 126.70 (1), 126.81 (2) and 126.88; to consolidate, renumber and amend 126.16 (1) (b) (intro.) and 2., 126.16 (3) (b) (intro.) and 3., 126.31 (3) (b) (intro.) and 3., 126.47 (3) (b) (intro.) and 3., 126.61 (3) (a) (intro.) and 1. and 126.61 (3) (b) (intro.) and 3.; to amend 126.05 (2), 126.06 (1) (intro.), 126.11 (4) (intro.) and (a), 126.11 (4) (c) to (g), 126.11 (6), 126.11 (9) (a), 126.13 (1) (a) (intro.), 126.13 (1) (b) (intro.), 126.14 (2) (b) (intro.), 126.14 (2) (b) 2., 126.15 (1) (c), 126.15 (6), 126.20 (4) (intro.) and (a), 126.26 (3) (intro.) and (a), 126.26 (3) (c) to (f), 126.26 (3m), 126.26 (5), 126.34 (5) (intro.) and (a), 126.41 (3) (intro.) and (a), 126.41 (6) (a), 126.42 (6), 126.44 (1) (a), 126.44 (1) (c) 1., 126.45 (3) (a), 126.45 (4) (a), 126.46 (5m) (intro.), 126.46 (5m) (b), 126.47 (1) (a) 1., 126.47 (3) (a) (intro.), 126.47 (7) (a) 1. and 2., 126.50 (intro.), 126.56 (4), 126.56 (4m), 126.58 (1) (a) and (b), 126.60 (1) (a) and (b), 126.60 (5m) (intro.) and (a), 126.61 (1) (a) 1., 126.61 (7) (a) (intro.), 126.61 (7) (a) 1., 126.61 (7) (bm), 126.64 (intro.), 126.70 (4) (title), 126.71 (1) (a) (intro.), 126.72 (2), 126.73 (1), 126.85 (1) and 126.86 (3) (a); to repeal and recreate 126.06 (2) (a), 126.13 (1) (a) 1., 126.13 (1) (b) 1., 126.13 (3), 126.26 (3) (b), 126.28 (3), 126.41 (9), 126.44 (5), 126.47 (1) (b), 126.47 (3) (a) 1. and 2., 126.56 (12), 126.58 (3), 126.61 (1) (b), 126.63 (4) (c) and 126.86 (1) (f); and to create 126.06 (1) (c) and (d), 126.11 (9) (d) and (e), 126.14 (4) and (5), 126.19 (4) (b), 126.20 (4) (g), 126.34 (5) (g), 126.40 (1) (a) and (b), 126.41 (6) (b) (intro.), 126.41 (6) (b) 2., 126.41 (6) (bg), 126.41 (6) (br), 126.45 (3) (b) 2., 126.45 (5), 126.46 (5m) (a) 1. and 2., 126.50 (6), 126.56 (9) (am), 126.56 (9) (i), 126.59 (4), 126.64 (7), 126.70 (1) (b) and (c), 126.70 (4) (f) to (k), 126.70 (6) (g), 126.73 (3), 126.81 (1) (c), 126.81 (2m), 126.85 (2) (h) and (i) and 126.88 (2) of the statutes; relating to: the agricultural producer security program, providing an exemption from emergency rule procedures, and granting rule-making authority.

Analysis by the Legislative Reference Bureau

This bill makes changes in the agricultural producer security program, which is administered by the Department of Agriculture, Trade and Consumer Protection (DATCP). The program is designed to minimize the risk that milk contractors, grain dealers, grain warehouse keepers, and vegetable contractors (collectively referred to as contractors) will default on their financial obligations to dairy, grain, and vegetable farmers (producers) and to reimburse producers for a portion of the losses they incur when contractors do default. A milk contractor is a person who buys milk from producers. A grain dealer is a person who buys grain from 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 producers for use in food processing.

Contingent financial backing

Current law requires certain contractors to contribute to the agricultural producer security fund (fund). If a contributing contractor defaults on its financial obligations to producers, DATCP makes payments to producers from the fund, up to a maximum deductible amount per default. Current law requires DATCP to obtain "contingent financial backing" to supplement the fund in case of a large default. The contingent financial backing may be in the form of a surety bond or a contract to provide a cash loan to the fund whenever DATCP requests a loan.

Under this bill, DATCP may, but is not required to, obtain contingent financial backing for the fund. The bill also authorizes DATCP to obtain contingent financial backing in the form of trade credit insurance or in any other form that DATCP determines is appropriate.

Fund assessments

Current law specifies the amounts of contractor fund assessments, but authorizes DATCP to change the amounts by rule. DATCP has changed the amounts of fund assessments for milk contractors, and this bill eliminates the statutory amounts of those assessments.

Current law requires DATCP to modify the amounts of fund assessments as necessary to keep the overall balance in the fund, and the balance attributable to each type of contractor, within specified limits. This bill authorizes DATCP to use emergency rule-making procedures, without making the finding of emergency that is ordinarily required, to modify fund assessments when the amount in the fund falls below one of the specified minimums. Such a rule may remain in effect for up to 24 months.

Financial statements

Current law requires a contractor above a specified size threshold to file an annual financial statement with DATCP. The financial statement must be a reviewed statement or, for larger contractors, an audited statement.

This bill increases some of the thresholds above which contractors must file financial statements and above which contractors must file audited financial statements. This bill also changes the basis for determining whether a grain dealer or milk contractor must file an annual financial statement from the value of grain or milk procured to the volume of grain or milk procured.

License fees

Current law requires contractors to pay license fees in amounts specified in the statutes unless DATCP specifies a different amount by rule. DATCP has specified different amounts by rule for grain dealers, grain warehouse keepers, and vegetable contractors, and this bill eliminates the statutory amounts for those fees. Under current law, license fees for grain dealers are based on the value of grain procured. Under this bill, license fees for grain dealers are based on the volume of grain procured.

Disqualification from fund participation

Under current law, a contractor may be disqualified from participating in the fund in specified situations. If a contractor who is disqualified defaults on payments to producers, no payments may be made from the fund to compensate producers for the losses resulting from the default. Current law authorizes DATCP to issue an order requiring a contractor to remedy a violation of the agricultural producer security law.

This bill authorizes DATCP to disqualify a contractor from participation in the fund pending compliance with an order requiring the contractor to remedy a violation of the agricultural producer security law. The bill also requires a contractor who is disqualified from the fund to notify producers of the disqualification.

Related entities and default claims

Under this bill, a producer who owns a majority interest in a contractor or who is under common ownership with a contractor may waive eligibility to obtain payment from the fund if the contractor ever defaults. If a producer waives eligibility, the amount of the contractor's obligations to the producer is subtracted in determining the contractor's fund contribution and financial statement filing requirements.

The bill also requires DATCP to disallow a claim for payment from the fund, by a producer who did not waive eligibility, when a contractor defaults on payment to the producer if DATCP determines that allowing the claim would be unfair or unreasonable because the producer owns a majority interest in the contractor or is under common ownership with the contractor or because the producer had substantial management control over any of the defaulting contractor's operations involved in the default.

Other default claims disallowed

This bill disallows a default claim if a defaulting contractor paid a producer by check but the producer failed to cash the check within 30 days.

Current law authorizes grain dealers and vegetable contractors to enter into deferred payment contracts with producers under certain conditions. A deferred payment contract is a contract under which payment is delayed for some time after the producer delivers the grain or vegetables under the contract.

Under the bill, a producer who enters into a deferred payment contract with a grain dealer may not recover from the fund in case of a default by the grain dealer if the payment under the contract became due more than 120 days after the producer delivered the grain to the grain dealer. Also, under the bill, a producer who enters into a deferred payment contract with a vegetable contractor may not recover from the fund in case of a default by the vegetable contractor if payment became due after January 31 of the year after the year in which the producer delivered the vegetables.

Milk contractor security requirements

Current law requires certain milk contractors to file security with DATCP to secure payment of milk payroll obligations to producers. The determination of whether security must be filed is based in part on the milk contractor's highest amount of unpaid milk payroll obligations since the beginning of the contractor's last fiscal year.

Under this bill, a milk contractor may choose to have the determination of whether the contractor must file security based on the highest amount of the contractor's unpaid milk payroll obligations during the last 12 months or on the highest amount of milk payroll obligations incurred by the contractor in any month during the last 12 months. The bill makes related changes in the calculation of the amount of security that a milk contractor must file and in milk contractor reporting requirements.

Interfering with DATCP

This bill prohibits a contractor from assaulting, threatening, intimidating, or otherwise interfering with an officer, employee, or agent of DATCP in the performance of his or her duties.

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:

SB527, s. 1 Section 1. 126.05 (2) of the statutes is amended to read:

SB527,6,3 126.05 (2) The department shall deposit into the fund all fees, surcharges, assessments, reimbursements, and proceeds of contingent financial backing that the department collects under this chapter. The department shall keep a record by contractor and industry, of all deposits into the fund. The department shall keep a record by industry of all payments from the fund.

SB527, s. 2 Section 2. 126.06 (1) (intro.) of the statutes is amended to read:

SB527,6,9 126.06 (1) Department to may acquire. (intro.) Using moneys appropriated under s. 20.115 (1) (v), the department shall may acquire contingent financial backing to secure payment under s. 126.72 (2) of claims against contributing contractors, as defined in s. 126.68 (1). The contingent financial backing may be in one or more of the following forms:

SB527, s. 3 Section 3. 126.06 (1) (c) and (d) of the statutes are created to read:

SB527,6,11 126.06 (1) (c) Trade credit insurance.

SB527,6,12 (d) Any other form that the department determines is appropriate.

SB527, s. 4 Section 4. 126.06 (2) (intro.) (except 126.06 (2) (title)) of the statutes is repealed.

SB527, s. 5 Section 5. 126.06 (2) (a) of the statutes is repealed and recreated to read:

SB527,6,20 126.06 (2) (a) Except as provided in par. (b), the department may determine the amount of any contingent financial backing that it obtains under sub. (1), up to the amount that, in the department's judgment, is sufficient to meet reasonably foreseeable needs under s. 126.72 (2). In making this determination, the department shall consider acquisition costs and repayment liabilities.

SB527, s. 6 Section 6. 126.08 of the statutes is repealed.