DATCP Docket No. 16-R-01
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 three 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 (“Department”) is adopting this temporary emergency rule. At this time, the Department has not yet determined if it will adopt a permanent rule on the same subject. This emergency rule will take effect May 1, 2016, 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, Stats.
Explanation of Statutory Authority
The Department has broad general authority, under s. 93.07 (1), Stats., to interpret laws under its jurisdiction. The Department has specific authority under s. 126.81 (1) (a), Stats., to interpret and implement Ch. 126, Stats. The Department also has specific authority under s. 126.88 (1), Stats., to modify agricultural producer security assessments prescribed under Ch. 126, Stats. The Department is required under s. 126.81 (2m) (b), Stats., to promulgate rules which specify fund assessments under s. 126.46 (1), Stats. The Department 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 Ch. 126, Stats. 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 Ch. 126, Stats., as it relates to milk contractors. The Department 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 the Department. 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 the Department 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. Section ATCP 100.135 (10) of the Wisconsin Administrative 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 five 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 and 2015, defaults in the vegetable and milk industries totaled $7.2 million, causing the overall fund balance to drop substantially. 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 5-6 years.
The Department and the Agricultural Producer Security Council (APS Council) 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. In December 2015, the Department received an actuarial study of the APSF and began working with the APS Council to develop recommendations for permanent changes to the APSF.
The proposed emergency rule would alleviate a financial burden otherwise placed upon licensed milk contractors. Without this emergency rule, licensed milk contractors would not be eligible for fund assessment exemption for the 2016 license year and would take on the burden of repaying a large portion of the APSF overall fund balance.
Under this rule, the annual fund assessment exemption requirement regarding the overall fund balance minimum would decrease from $11 million to $5 million.
Summary of, and Comparison with Existing or Proposed Federal Statutes and Regulations
No federal programs currently exist offering milk producer security from contractor payment defaults.
Surrounding State Programs