WSR 21-21-114

PROPOSED RULES

DEPARTMENT OF AGRICULTURE

[Filed October 20, 2021, 11:16 a.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 21-08-089.

Title of Rule and Other Identifying Information: Chapter 16-303 WAC, Seed assessment, fees for seed services and seed certification. The department is proposing the following amendments:

Hearing Location(s): On December 21, 2021, at 9:00 a.m., Microsoft Teams conference line https://teams.microsoft.com/dl/launcher/launcher.html?url=%2F_%23%2Fl%2Fmeetup-join%2F19%3Ameeting_OTU2ZGY1ZDktNzM4Yi00YmE0LWExZDgtOWEyYjBmNzA4NDZj%40thread.v2%2F0%3Fcontext%3D%257b%2522Tid%2522%253a%252211d0e217-264e-400a-8ba0-57dcc127d72d%2522%252c%2522Oid%2522%253a%2522838c55c7-c187-44ae-8de0-2be684ce5d4a%2522%257d%26anon%3Dtrue&type=meetup-join&deeplinkId=692bf511-52e0-49af-b0a0-d392d93284ec&directDl=true&msLaunch=true&enableMobilePage=true&suppressPrompt=true; join by phone +1 564-999-2000, Phone Conference ID 243 579 647#. Due to the ongoing COVID-19 pandemic, the public hearing will be held solely over video and teleconference.

Date of Intended Adoption: December 28, 2021.

Submit Written Comments to: Gloriann Robinson, Agency Rules Coordinator, P.O. Box 42560, Olympia, WA 98504-2560, email wsdarulescomments@agr.wa.gov, fax 360-902-2092, by December 21, 2021.

Assistance for Persons with Disabilities: Contact Reanna McNamara, phone 360-902-1931, fax 360-902-2085, TTY 800-833-6388,email rmcnamara@agr.wa.gov, by December 14, 2021.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The department certifies, inspects, samples, tests, and analyzes agricultural, vegetable, or flower seed sold or offered for sale in Washington state.

The department is proposing the following changes:

Reasons Supporting Proposal: Currently, the program's financial operating reserve is fully depleted and will continue to deplete into the negative. The proposed fee increase and restructure is needed to allow the program to rebuild and then maintain the recommended six month reserve, as well as maintain the current staffing level. Without rebuilding the financial reserve and covering current costs, the program will need to reduce staffing and services to industry.

Without the proposed amendments, the department will be forced to eliminate the laboratory and maintain only seed certification and the phytosanitary inspections and certificates. The necessary laboratory analysis for final seed certification for purity and viability would be outsourced to a different lab. This would not be in the best interest of industry because the Washington state department of agriculture (WSDA) would be reliant on outside lab knowledge, skills, and abilities without regulatory oversight, as well as turnaround times. Additionally, the industry is subject to a free market and price increases at will by a private laboratory without industry review or input. Lastly, the current volume of seed samples the WSDA laboratory intakes annually would go elsewhere in the market and create an unknown backlog among other seed testing laboratories. In all cases, the loss of the department seed laboratory is a hindrance to the body of work industry desires.

The program identified a need to add necessary laboratory succession planning in order to cover an increase in workload. In 2017, the average days behind in laboratory rush samples of grain was six days. The performance expectation by industry and by the quarterly performance management system for rush samples is that rush samples are to be started in three or less days during the busy season. The sample volume from 2017 has been over 8,000 samples per year and over 22,000 individual seed tests. Previously, the requests had been under 11,000 samples per year. The industry requested lab tests have more than doubled in the last five years. Looking into the future, the program has four seasoned purity staff whom are eligible for retirement. To maintain the skill level of the laboratory, it is necessary to succession plan now. It is required by AOSA that an analyst has two years of prior experience to test for accreditation. In order for new purity staff to gain adequate experience, we have initiated an in-training program with performance benchmarks to build crop specific skills. The industry benefits from building the skillset of analysts over time to be proficient in all crops and maintain the program legacy knowledge.

From 2013 - 2018, the amount of certified acreage applied for inspection increased by 35,828 and is close to a 40 percent increase. The field locations have dispersed to further remote and rural locations than prior years causing more drive time. The additional drive times make reaching each location multiple times during the active growing season difficult with the prior field staffing level. Starting in 2018, the program had to increase the number of staff because the average overtime hours over the entire season was reaching 250 - 300 hours per person. The risk of burnout and accident rate increases by having tired staff. Lack of staff causes an increase in the number of late inspections. It benefits industry to have adequate field staffing and field inspections completed in time to make harvest decision.

Through analysis, the program has restructured the way revenue will be generated by eliminating the cwt production field fee. The production fee by cwt is currently based upon the assumption that each field inspection will generate one laboratory sample to bill the production fee. This kept the per acre cost down and collected revenue at the end of the season when the sample was billed by weight. The program has not seen a one to one relationship and thus is not collecting all the potential revenue. Therefore, for every field inspection conducted the program is spending more on transportation and salaries than generating in revenue. Industry benefits by having the field work billed and paid for in the earlier part of the year and not having a large production fee due when the lab sample arrives for analysis.

The increase of laboratory fees is designed to support the body of work the lab staff conducts instead of relying on the field production fees to fill the void. The fee increase proposal is designed to cover all the laboratory overhead, staffing, and supplies supported by lab fees. This will no longer make the laboratory expenditure dependent upon the revenue collected by the production fees designed to support field costs. The benefit to industry is having a fully self-sufficient laboratory that is not depend[ent] upon field harvest yields and cwt production charges.

Establishing new service fees that are not included in the current fee schedule will allow customers to know what the testing cost will be prior to submitting the request. This change will also ensure that all customers are being charged the same fee for services.

Addressing the inconsistencies in WAC 16-303-200 and 16-303-210 will provide clarity for program customers regarding purity, germination, and TZ testing fees associated with their specific crop type.

Statutory Authority for Adoption: RCW 15.49.005 and [15.49].310.

Statute Being Implemented: Chapter 15.49 RCW.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: WSDA, governmental.

Name of Agency Personnel Responsible for Drafting: Reanna McNamara, 1111 Washington Street S.E., Olympia, WA 98504, 360-902-1931; Implementation and Enforcement: Paula Moore, 21 North 1st Avenue, Suite 203, Yakima, WA 98902, 509-249-6950.

A school district fiscal impact statement is not required under RCW 28A.305.135.

A cost-benefit analysis is not required under RCW 34.05.328. WSDA is not a listed agency under RCW 34.05.328 (5)(a)(i).

The proposed rule does impose more-than-minor costs on businesses.

Chapter 16-303 WAC

Seed Assessment, Fees for Seed Services and Seed Certification

History and Overview: WSDA seed program conducts preharvest field inspections and laboratory testing of agricultural, vegetable, and flower seeds grown under the seed certification program. Field inspection services are performed according to the requirements of the national Association of Official Seed Certifying Agencies (AOSCA) and when requested, the international OECD. The program tests seed samples submitted by seed growers and companies to determine compliance with purity and germination standards, and to certify seed for domestic and international marketing. Seed testing services are performed under the auspices of AOSA, International Seed Testing Association (ISTA), and the Canadian Methods and Procedures for Testing Seed. The program operates Washington state's only official seed testing laboratory and official seed samplers. This is a self-supporting, fee for service program that is fully funded by the fees received from businesses seeking certification and testing services.

In addition to field inspection and seed testing services, the seed program is responsible for overseeing and enforcing seed packaging requirements for seed sold within Washington state. The purpose is to provide uniformity and consistency in the packing of agricultural, vegetable, and flower seeds to facilitate the interstate movement of seed to protect consumers.

Services provided by the program include:

Why the Rule Change is needed: In 2017, the seed program began assessing the need for a possible fee increase. Utilizing the first month of the fiscal year, the monthly program operating expense increased a total of 93.79 percent from 2013 to 2020, in the amount of $19,214 to $37,229. The program cannot reduce operating expenses without imperiling its ability to meet its statutory directives and to provide services desired by the industry. The projected budget in 2017 showed the program was solvent and in good standing, but the recommended six month reserve started to deplete in 2019. From 2017 through 2019, the industry placed a higher demand on program services and requests increased over time. The number of lab test requests increased, as well as the requests for field services, such as phytosanitary field inspections and acreage. The program responded by increasing the number of field staff to meet the demand. The added cost of the additional field staff, the in-training staff, along with a rising cost of goods and services, and agency overhead costs finally caught up with the old fee schedule. In March of 2019, the need for the fee increase was identified and outreach to stakeholders to express the need for the program to increase fees began. At that time, the program's projected budget indicated a possible negative fund balance by the end of May 2021.

In 2019, the program began gathering data and developing ideas for how chapter 16-303 WAC might be changed to meet the needs of the program as well as provide more clarity and transparency for industry. The fee schedule that is currently in rule does not allow WSDA to maintain operations since this fee structure has not seen an increase in nearly 13 years. The program attended commodity commission meetings, as well as local and regional seed meetings to express the need for a fee increase. At that time, the program remained solvent and in good standing with a positive balance. The program continued to engage industry at local and regional meetings to explain the rising cost of goods and services, and the need for additional staffing. These costs increased by a total of 64.58 percent from 2013 to 2020 in the amount of $147,978 to $243,539. In this same time frame, the number of annual staffing for the program increased, including seasonal staff, from 29.6 to 37.5 FTEs. The additional staffing started in 2018 to meet the needs of industry for laboratory turnaround time, to address the backlog of samples, and field inspections. The program also started a staff in-training project in 2020 to address succession planning for natural staff attrition due to expected staff retirements. The field staffing increased by four through the inspection season to meet the needs of increased acreage and the geographic distance of inspection locations. The succession planning for accredited lab analyst was identified as a need with the aging of current staff. To become an accreditation lab analyst, it requires a staff member to have two years prior experience before allowed to test with the national organizations to become either an AOSA or Society of Commercial Seed Technologists (SCST) analyst. In the meantime, the agency overhead costs increased by 93.79 percent and the reserve dropped below the required six months operating expenses.

WSDA is proposing to restructure the existing fees in this rule to ensure the cost of providing services is recovered. The necessary increase in fees will allow WSDA to maintain program operations. Once a six-month operating balance has been reached, the program will use the revenue to add laboratory, field, and office staff for succession planning and to reduce overtime hours worked by current staff. There have been several new services offered since the last time this rule was amended, and since these services are not listed in the current fee schedule, the fees for these services have been charged based on staff time and other expenses. Establishing fees for these new services would increase transparency for customers using these services.

The department is also proposing to make clerical changes, including adding native species not previously included, and modifying crop groupings to ensure that all crops are listed under the correct groupings. These changes are for clarification only and do not change the effect of the current rule or impose any additional costs on businesses in order to comply with the rule.

Changes for clarification that do not change the effect of the current rule:

The following table shows an overview of how the fees are being amended:

Probable compliance requirements: The only probable compliance requirement will be paying the updated fees for seed certification and testing. Section 3 provides a detailed overview of what the cost of compliance will look like with the proposed changes. WSDA performed an in-depth analysis to determine the proposed fee structure and that information is also provided in Section 3. No professional services will be required by businesses in order to comply with the proposed rule amendments.

The proposed revisions to chapter 16-303 WAC do not result in an across-the-board increase for all fees. An in-depth analysis of the fees collected by the different types of operations allowed WSDA to develop a new structure that will better recover costs per service. The result of the restructure is an increase in some fees and a reduction or removal for others. Table 3.1 shows the proposed new fee schedule as it compares to the current fees. The probable cost of compliance will be dependent on services that each business requests. Table 3.2 provides an overview of how businesses will be impacted based on the proposed fees as compared to the fees they paid in 2019.

In addition, the proposed revisions to this rule are not likely to have an appreciable impact on the cost of equipment, supplies, labor, professional services, or administrative costs. Compliance with the proposed rule will not likely cause businesses to lose sales or revenue. However, it will likely increase overall expenses for each business. In contrast, if the program was not able to continue providing the current level of service, or had to shut down completely due to lack of funds, the businesses it serves would likely lose sales due to the inability to have their seeds tested and certified.

While the proposed revision aims to restructure the existing fee structure for seed certification and testing, it does not impose any additional recordkeeping or administrative costs beyond those currently present in the existing rule.

Table 3.1 - WSDA proposed fees compared to current fees.

In 2019, an estimated 187 small businesses and 49 large businesses paid fees to the WSDA seed program. The program analyzed 2019 fees instead of 2020 fees because the applications for acreage by crop and lab samples did not follow historic trend due to COVID-19. Table 3.2 shows the total fees paid by each business, as well as the estimated cost under the proposed fee increase.

Table 3.2 - Estimated cost for each business that paid fees in 2019.

Total fees paid by each business in 2019 were compared with estimated costs under the proposed fee increase and the minor cost thresholds identified in Section 2. Businesses expected to experience an increase that exceeds the minor cost threshold for their industry are shown in Table 4.1. Businesses that are not expected to experience more-than-minor costs for their industry are shown in Table 4.2.

Table 4.1 - Businesses with estimated cost increases expected to exceed the minor cost threshold.

Table 4.1 indicates that of the 236 businesses which paid fees in 2019, 25 are expected to have costs exceeding the minor cost threshold. Nineteen of these businesses are considered to be small and six are considered to be large.

However, not all businesses that paid fees in 2019 are expected to have costs exceeding the minor cost threshold. Table 4.2 shows that 211 businesses are expected to have cost increases less than the minor cost threshold. 168 of these businesses are considered small and 43 are considered to be large.

Table 4.2 - Businesses with estimated cost increases expected to be less than the minor cost threshold.