Preproposal statement of inquiry was filed as WSR 07-04-088.
Title of Rule and Other Identifying Information: WAC 142-30-010, the purpose of the rule is to increase the current level of assessment on milk produced in Washington state by .00375 (3/8 cent).
Hearing Location(s): WA State Dairy Center, 4201 198th Street S.W., Suite 101, Lynnwood, WA 98036, (425) 672-0687, on August 7, 2007, at 10:30 a.m.; and at the WA State Department of Agriculture Building, 21 North First Avenue, 2nd Floor Conference Room, Yakima, WA 98902, (509) 225-2650, on August 8, 2007, at 10:30 a.m.
Date of Intended Adoption: September 26, 2007.
Submit Written Comments to: Steve Matzen, 4201 198th Street S.W., Suite 101, Lynnwood, WA 98036, e-mail firstname.lastname@example.org, fax (425) 672-0674, by August 17, 2007, 4:30 p.m. at agency.
Assistance for Persons with Disabilities: Contact Virginia Walsh by August 1, 2007, TDD (360) 902-1976.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The purpose of this rule amendment is to increase the amount of the maximum authorized assessment rate on milk produced in Washington state as allowed under RCW 15.44.080(2) by adding an additional assessment of three-eighths (0.00375) of one cent per hundredweight. This increased assessment is needed to more effectively carry out the powers, duties, and purposes of the Washington dairy products commission under RCW 15.44.060 and 15.44.080(2). These activities include the following: To participate in federal and state agency hearings, meetings and other proceedings in relation to the regulation of the production, manufacture, distribution, sale or use of dairy products; to develop and engage in research for developing better and more efficient production, marketing, and utilization of agricultural products; and, to protect the interest of consumers by assuring a sufficient pure and wholesome supply of milk and cream of good quality.
Statutory Authority for Adoption: RCW 15.44.060, 15.44.130, 15.44.080(2).
Statute Being Implemented: RCW 15.44.080.
Rule is not necessitated by federal law, federal or state court decision.
Agency Comments or Recommendations, if any, as to Statutory Language, Implementation, Enforcement, and Fiscal Matters: Adoption of the rule is subject to approval by the commission following hearings conducted in accordance with the Administrative Procedure Act, chapter 34.05 RCW. The increase in the current assessment level will not exceed the maximum authorized assessment rate as established by producers at the most recent referendum (1.0% of the class I price for 3.5% butterfat milk conducted March 24, 1983).
Name of Proponent: Washington state dairy products commission, governmental.
Name of Agency Personnel Responsible for Drafting and Implementation: Steve Matzen, 4201 198th Street S.W., Suite 101, Lynnwood, WA 98036, (425) 672-0687; and Enforcement: Celeste Piette, 4201 198th Street S.W., Suite 101, Lynnwood, WA 98036, (425) 672-0687.
A small business economic impact statement has been prepared under chapter 19.85 RCW.
Analysis Results: As shown in Table 2 of the report, the compliance cost for a representative small business over the analysis period is estimated to be approximately $.03 per $100.00 of sales. The compliance cost for a large business over the same time period is estimated to be $.03 per $100.00 of sales. Therefore, the compliance cost burden, from rule revisions, is equal for both large and small business, and no disproportionate compliance burden exists for small businesses. In addition, the compliance cost burden for producers, based on farm production, is in proportion to the level of production of each producer as shown in Table 3. The large producers/businesses will pay more based on their higher production levels while the small producers/businesses will pay proportionally less. There will be no additional equipment, supplies, labor, or administrative costs imposed on dairy producers as well as indirectly affected businesses. Presently assessments are being collected and staff is in place to compute and satisfy all reporting requirements. Affected parties are currently in compliance with the existing requirements.
Mitigation: As indicated above, the proposed rule revisions are not anticipated to result in a disproportionate compliance cost burden for small Washington businesses required to pay the assessment. As a result, mitigating measures are not required to reduce impacts on small businesses affected by the rule revisions.
I. Proposed Rule Revisions: This study analyzes the compliance costs associated with a proposed assessment increase and estimates whether the revised rule would place a disproportionate economic burden on Washington small businesses. The purpose of this analysis is to comply with state legislative requirements that each prospective rule be evaluated to minimize potential disproportionate impacts on small business.
A. Regulatory Context:
Regulatory Fairness Act: The purpose of this study is to ensure that the proposed revisions to WAC 142-30-010 comply with the Regulatory Fairness Act (chapter 19.85 RCW). The Regulatory Fairness Act (RFA) requires that rules promulgated by state agencies under the Administrative Procedure Act be examined for their impact on small businesses (fifty or fewer employees). The purpose of the RFA is to ensure that proposed rules do not place a disproportionate burden on small businesses relative to the burden they place on large businesses. RFA compliance analysis must be documented in a small business economic impact statement (SBEIS). This SBEIS documents the analysis and results for proposed revisions to WAC 142-30-010. Appendix A contains additional discussion of RFA requirements.
B. Summary of Rule Revisions: Chapter 15.44 RCW grants the Washington state dairy products commission (WDPC) the authority to increase or decrease the current assessment on milk provided that the current level of assessment established does not exceed the maximum authorized assessment rate established by producers in the most recent referendum. The maximum assessment rate was established by producer referendum on March 24, 1983 (1% of the class I price for 3.5% butterfat milk).
The purpose of this rule amendment is to increase the amount of the maximum authorized assessment rate on milk produced in Washington state as allowed under RCW 15.44.080(2) by adding an additional assessment of three-eighths (0.00375) of one cent per hundredweight. This increased assessment is needed to more effectively carry out the powers, duties, and purposes of the Washington dairy products commission under RCW 15.44.060 and 15.44.080(2). These activities include the following: To participate in federal and state agency hearings, meetings and other proceedings in relation to the regulation of the production, manufacture, distribution, sale or use of dairy products; to develop and engage in research for developing better and more efficient production, marketing, and utilization of agricultural products; and, to protect the interests of consumers by assuring a sufficient pure and wholesome supply of milk and cream of good quality.
C. Potentially Affected Industries: Compliance costs will be incurred by businesses operating within the agricultural production of livestock. Primary impacts would be borne by dairy producers/farms. These businesses are involved in the production of milk.
Dairy producers are categorized in the North American Industry Classification System (NAICS) and the code for this industry is 112120. According to Washington state employment security department (ESD) data from 4th quarter 2006 there are 396 business establishments in this NAICS classification within Washington.1 Of these establishments 388 are classified as small businesses with fifty or fewer employees. 2% would be classified as large businesses. In addition to dairy farms which bear the primary impact of the rule revision, a few related businesses may be indirectly affected (see Appendix B for full industry list). These businesses include producer handlers, processors/manufacturers, cooperatives or dealer/handlers of dairy products (only those businesses purchasing milk directly from the dairy producer).
1 These businesses include those with employment covered by unemployment compensation programs. Consistent with intent of RFA, only Washington businesses are reported and analyzed in this study.
II. Approach to Estimating Differential Economic Impacts on Small vs. Large Businesses: The WDPC determined that an analysis of compliance costs should be conducted for the proposed rule revisions and documented in an SBEIS, consistent with chapter 19.85 RCW. An SBEIS analysis was performed for the rule revisions and is described below.
A. Likely Industry Response to Proposed Rule: The first step was to anticipate how the industry would respond to the rule revisions. The Washington dairy products commission coordinated a series of informational meetings to provide dairy farmers an opportunity to provide input and voice their opinions on the proposed assessment increase. Dairy commission representatives and board members provided background information on the proposal and answered producer questions. The producer input was overwhelmingly supportive at the informational meetings; however, some producers questioned whether the amount of the requested increase was enough.
B. Data from Small and Large Businesses in Affected Industries: Once affected industries were identified data was computed to estimate impacts. Data was provided through the following sources: WDPC, Washington state employment security department, National Agricultural Statistics Service (NASS), and the United States Department of Agriculture AMS, Dairy Division. WDPC provided a variety of information, including related background information on the proposed rule, current requirements for assessment reporting and calculation and stakeholder information. Employment security provided employment information by business within the designated NAICS codes. NASS provided average milk production per cow for Washington and percent of production by group size. United States Department of Agriculture AMS, Dairy Division provided milk-pricing information.
C. Differential Compliance Cost for Small Versus Large Businesses: To differentiate between impacts on small versus large businesses, compliance costs were evaluated per one hundred dollars of sales. In addition, costs were evaluated for various levels of farm production within the affected industry. These costs were based on the average cow production for Washington state as well as various herd sizes. Comparison of compliance costs for various levels of farm production as well as per hundred dollars of sales were used to determine whether a disproportionate economic burden would exist for small businesses and to estimate the magnitude of any disproportionate burden.
III. Analysis Results:
A. Overview: Over the analysis period, the proposed rule revisions are not anticipated to have a disproportionate economic impact on small businesses in the affected industry. As Table 2 shows, cost impacts of proposed rule revisions are equal for both small and large businesses. The cost burden to businesses both small and large is the amount of the proposed assessment increase .00375 (three-eighths of one cent) per hundredweight. In addition, the compliance cost burden for businesses/producers, based on farm production, is in proportion to the level of production of each business/producer. The large businesses/producers will pay more based on their higher production levels while the small businesses/producers will pay proportionally less. For those businesses purchasing milk from the dairy producer (indirectly affected establishments) there will be no additional equipment, supplies, labor, or administrative costs. Presently assessments are being collected and staff is in place to compute and satisfy all reporting requirements. These indirectly affected businesses are currently in compliance with the existing requirements. A discussion of analysis methodology and assumptions is contained in Appendix A.
The analysis period for the study was chosen to be one year. Estimates for the uniform statistical milk price are forecasted out through December 2007. All businesses bear the same cost burden for the study. Compliance with the proposed rule is not likely to cause a substantive loss of sales revenues for large or small businesses.
B. Disproportionate Economic Burden Evaluation: As shown in Table 2, the compliance cost for a representative small business over the analysis period is estimated to be approximately $.03 per $100 of sales. The compliance cost for a large business over the same time period is estimated to be approximately $.03 per $100 of sales. Therefore, the compliance cost burden is equal for both small and large businesses, and no disproportionate compliance burden exists for small businesses. 2% of the farms would be classified as large businesses in Washington. All dairy farmers regardless of business size receive the same minimum uniform price for deliveries of milk to the federal order market. All Washington businesses/producers are part of the Pacific Northwest Order No. 124. The statistical uniform price is the Class III price, plus the producer price differential. This reflects a weighted average reflecting not only class prices, but the proportion of milk under the order in each class. These prices are announced on the 14th of each month. The only cost to businesses/producers is the amount of the proposed assessment increase itself ($.00375). The amended rule will impose no additional equipment, supplies, labor, or administrative costs on small or large dairy businesses/producers to comply with the rule. The assessment is collected from the first handler of the milk. In addition, the compliance cost burden for businesses/producers, based on farm production, is in proportion to the level of production of each business/producer as shown in Table 3. The large producers/businesses will pay more based on their higher production levels while the small producers/businesses will pay proportionally less.
Those businesses purchasing milk from dairy producers (indirectly affected establishments) will realize no additional equipment, supplies, labor, or administrative costs. Presently assessments are being collected and staff is in place to compute and satisfy all reporting requirements. These indirectly affected businesses are currently in compliance with the existing requirements.
IV. Mitigation: As the above analysis demonstrates, the proposed rule amendment will not result in a disproportionate impact on small Washington businesses. As a result, mitigating measures are not required to reduce impacts on small businesses affected by the proposed rule.
Appendix A: Background Information and Assumptions:
Regulatory Fairness Act: The RFA (chapter 19.85 RCW) requires that rules promulgated by state agencies under the Administrative Procedure Act be examined for their impact on small businesses. The purpose of the RFA is to ensure that proposed rules do not place a disproportionately high burden on small businesses, relative to the burden they place on large businesses. A small business is defined by the RFA as an independent, for-profit Washington business entity with fifty or fewer employees, RCW 19.85.020(1).
The RFA requires all rules that impose "more than minor costs" on industry businesses be evaluated and, if necessary, altered to minimize their impact on small business. An analysis of compliance costs must be completed and documented in a small business economic impact statement (SBEIS) if: (1) A proposed rule meets or exceeds this "more than minor" criterion, or if (2) the joint administrative rules review committee (JARRC) requests an SBEIS for a proposed rule. A state agency may independently decide to complete an SBEIS.
The RFA establishes specific analyses and necessary elements for inclusion in an SBEIS. Among other requirements, the SBEIS must include a brief description of the reporting, recordkeeping, and other compliance requirements of the rule, a description of the professional services needed by small businesses to comply with the rule, an analysis of the compliance cost for small business, and a comparison of the compliance cost for small businesses and the 10% of businesses that are the largest businesses required to comply with the proposed rule. A basis of comparison must be chosen from: Cost per employee, cost per hour of labor, cost per $100 of sales, or any combination of these three measures.
Based upon the extent any disproportionate impact is anticipated to occur for small businesses from the proposed rule, the agency must reduce the costs on small businesses (where legal and feasible in meeting the stated objective of the statutes upon which the rule is based). Mitigation can be accomplished in a number of ways, such as establishing differing compliance or reporting requirements for small businesses, clarifying or simplifying the compliance requirements for small businesses, delaying compliance timetables, exempting small businesses from any or all of the rule requirements, or similar measures.
Conservative Approach: The analysis undertaken to estimate compliance cost impacts was generally "conservative" in its approach. Specific assumptions implementing this conservative approach included (but were not limited to):
|•||Timing: Affected industries will be required to comply with the assessment increase January 1, 2008, when the rule takes effect.|
|•||Public and Industry Involvement: Potentially affected businesses, including small businesses, were involved throughout the rule-making process. A number of informational meetings provided opportunities for businesses of all sizes to provide input, as described below.|
Dairy producers were given the opportunity to attend informational meetings where WDPC explained the proposed assessment increase. Background information was given regarding the proposed assessment increase and producer input was gathered and questions addressed. Additional informational letters were sent to dairy producers and affected businesses. The proposed assessment increase was initiated by a request from the Washington State Dairy Federation, a group representing producers throughout the state.
|•||Data Characteristics: As noted in the body of the SBEIS, data used to estimate compliance costs for affected businesses came from the following sources: WDPC, ESD, National Agricultural Statistics Service (NASS), and the U.S. Department of Agriculture AMS, Dairy Division.|
List of Potentially Affected Industries
|112120||Dairy cattle and milk production|
|311512||Creamery butter manufacturing|
|311514||Dry, condensed, evaporated dairy products|
|311520||Ice cream and frozen dessert manufacturing|
|311511||Fluid milk manufacturing|
|311510||Dairy product (ex. Frozen) manufacturing|
|422430||Dairy product (except dried or canned)|
|JARRC||Joint Administrative Rules Review Committee|
|RCW||Revised Code of Washington|
|RFA||Regulatory Fairness Act|
|SBEIS||Small Business Economic Impact Statement|
|NAICS||North American Industry Classification System|
|WDPC||Washington Dairy Products Commission|
|WAC||Washington Administrative Code|
|ESD||Employment Security Department|
|NASS||National Agriculture Statistics Service|
|WSDA||Washington State Department of Agriculture|
Cost of Compliance for Small and Large Businesses
Washington Dairy Farmers/Pacific Northwest Order No. 124
|Month and Year||Statistical Uniform Price Per CWT||Producer Lbs. Equivalent to $100 in sales||Current Assessment Rate $.10625CWT - Producer Cost per $100 sales||Proposed Assessment Rate $.11CWT - Producer Cost per $100 sales||Cost Difference|
Estimated Cost of Compliance for Small and Large Businesses
Washington Dairy Farmers/Pacific Northwest Order No. 124
|Month and Year||Statistical Uniform Price Per CWT*||Producer Lbs. Equivalent to $100 in sales||Current Assessment Rate $.10625CWT - Producer Cost per $100 sales||Proposed Assessment Rate $.11 CWT - Producer Cost per $100 sales||Cost Difference|
Federal Order: Classifies milk according to its use, establishes minimum class prices monthly, determines a uniform price monthly, conducts impartial audits, verifies weights and tests milk, and provides market information.
Class III Milk: All skim milk and butterfat used to produce cream cheese and other spreadable cheeses, and hard cheese of types that may be shredded, grated, or crumbled; plastic cream; anhydrous milkfat; and butteroil.
Class III Price: The Class III price is based on the NASS surveys for cheese, butter and whey. The price is announced on or before the 5th day of the following month.
Producer Price and Statistical Uniform Price: The statistical uniform price is the Class III price, plus the producer price differential. This value represents the minimum price received by producers and cooperative associations for deliveries to a federal order market. This reflects a weighted average reflecting not only class prices, but the proportion of milk under the order in each class. These prices are announced on or before the 14th of each month.
*Estimated statistical uniform price based on futures market-data obtained from USDA AMS, Dairy Division Federal Orders 124.
Data only forecasted out through December 2007.
Annual Production and Associated Costs of Proposed Rule
Various Herd Sizes WA 2007
|Herd Size||Annual Avg
Milk Produced Per Cow (Lbs) 2006 WA*
|Total Annual Avg Farm Production (Lbs)||Current Assessment Rate $.10625CWT - Annual Producer Cost||Proposed Assessment Rate $.11 CWT - Annual Producer Cost||Total Annual Cost Difference|
A copy of the statement may be obtained by contacting Steve Matzen, Washington Dairy Products Commission, 4201 198th Street S.W., Suite 101, Lynnwood, WA 98036, phone (425) 672-0687, fax (425) 672-0674, e-mail email@example.com.
A cost-benefit analysis is not required under RCW 34.05.328. The Washington dairy products commission is not a listed agency in RCW 34.05.328 (5)(a)(i).
June 26, 2007
AMENDATORY SECTION(Amending WSR 01-21-054, filed 10/16/01, effective 1/1/02)
WAC 142-30-010 Declaration of purpose -- Effective date. To effectuate the purposes of chapter 15.44 RCW there is hereby levied upon all milk produced in this state an assessment of:
(1) 0.75 percent of the Class I price for 3.5% butterfat milk, as established in any market area by a market order in effect in that area or by the state department of agriculture in case there is no market order for that area; or
(2) While the Federal Dairy and Tobacco Adjustment Act of 1983, Title I, Subtitle B-Dairy Promotion Program, is in effect:
(a) An assessment rate not to exceed the rate approved at the most recent referendum that would achieve a ten cent per hundredweight credit to local, state or regional promotion organizations provided by Title I, Subtitle B of the Federal Dairy and Tobacco Adjustment Act of 1983; and
(b) An additional assessment of .00625 (five-eights of one cent) per hundredweight; and
(3) An additional assessment of .00375 (three-eights of one cent) per hundredweight as allowed under RCW 15.44.080(2) and the referendum dated March 24, 1983.
[Statutory Authority: RCW 15.44.060(1), 15.44.130, 15.44.080. 01-21-054, § 142-30-010, filed 10/16/01, effective 1/1/02. Statutory Authority: RCW 15.44.130. 85-15-003 (Order 85-4), § 142-30-010, filed 7/5/85. Statutory Authority: Chapter 15.44 RCW. 83-08-019 (Order 83-2), § 142-30-010, filed 3/29/83; Order 2-76, § 142-30-10 (codified as WAC 142-30-010), filed 11/15/76, effective 1/1/77.]