Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> May 10, 2005


The<MeetNo2>  meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Tuesday,<MeetMDY2> May 10, 2005, at<MeetTime> 1:00 PM, in<Room> Room 149 of the Capitol Annex. Representative Carolyn Belcher, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Vernie McGaha, Co-Chair; Representative Carolyn Belcher, Co-Chair; Senators Charlie Borders, David E Boswell, Joey Pendleton, and Richie Sanders Jr; Representatives Adrian K Arnold, James R Comer Jr, Charlie Hoffman, Thomas M McKee, and Tommy Turner.


Guests:  Keith Rogers, Brian Furnish, Catherine Ball, and Tim Hughes, Governor's Office of Agriculture Policy; Shana Herron, Community Farm Alliance; Gay Dwyer, Kentucky Retail Federation; Drew Graham, University of Kentucky College of Agriculture; Laura Knoth, Kentucky Farm Bureau; Dean Wallace, Council for Burley Tobacco.


LRC Staff:  Tanya Monsanto, Biff Baker, Lowell Atchley, and Kelly Blevins.


Following roll call, Senate and House committee members chose their respective co-chairs to serve for two-year terms. Representative Hoffman made the motion to elect Representative Belcher as the House co-chair. A motion was then made and seconded that nominations cease. Senator Borders made the motion to elect Senator McGaha to the position of Senate co-chair. A motion was made and seconded that nominations cease.


The committee approved the minutes for the April meeting.


The presiding co-chair, Representative Belcher, then asked Mr. Keith Rogers and Mr. Brian Furnish, executive director and assistant director respectively of the Governor’s Office of Agricultural Policy (GOAP), to report on agricultural diversification project applications that the Agricultural Development board (ADB) considered during its April meeting.


During the project review, co-chair McGaha asked for clarification regarding how Wooden Impressions of Fleming County would be using its $355,440 forgivable loan proceeds. Mr. Furnish said the company would install equipment and erect a building to utilize excess wood, turning it into value-added products.


Next, Mr. Rogers turned to projects that did not receive funding. Referring to Candle Bee Farm, which was denied because of lack of tobacco dependency, Representative Arnold asked if the ADB had funded projects with no evidence of tobacco dependency. Mr. Rogers explained the board had tried to assure there is either tobacco dependence or a project must serve counties that are tobacco dependent. Mr. Rogers agreed that House Bill 611 stipulates the preference should be on tobacco dependency.


Referring to the denial of funding for the Kentucky Aquaculture Association, Representative Hoffman asked about the Purchase Area Aquaculture Cooperative situation. Mr. Rogers said they had not received a report from the cooperative since the board last dealt with the entity in March.


Senator Boswell then brought up a project discussed earlier – the Metcalfe County Enrichment Center, which had requested $1 million to undertake training, education and other services for farmers and others. The application was denied because it would duplicate services that Western Kentucky University and a technology center at Glasgow offered. Mr. Rogers said GOAP staff had suggested that the applicants ask additional counties to support the project.


At that point in the meeting, co-chair Belcher asked Mr. Rogers to discuss a potential tobacco model program that a Christian County agribusiness group had proposed. The co-chair said it might be premature to discuss a proposal that the committee did not have before it. But she pointed out the discussion would give the committee an opportunity to comment on the proposal and share some thoughts about House Bill 611, the language, intent, and spirit of the bill. She mentioned the debate on the original bill and the idea that tobacco settlement money would be used to help farmers diversify away from tobacco. The co-chair said she hoped the board would proceed cautiously in looking at a tobacco model program. The co-chair also indicated there could be a number of ways that such a program could be established.


Mr. Rogers explained the idea of a tobacco model program first arose after Congress enacted the tobacco buyout legislation. The Kentucky Farm Bureau had endorsed a tobacco model program. In January, he said GOAP staff told the ADB that House Bill 611 was “silent” on the issue of a tobacco model program, neither prohibiting production nor encouraging it. He said he realized it was a sensitive issue and had been talking to legislators and others about the possible creation of such a program. Mr. Rogers said some producers in Christian County had fashioned a proposal. He said he told Christian County producers that he did not believe state funds could be used in a tobacco model program.


Senator Pendleton said, had there not been a tobacco buyout, the tobacco model program discussions would not be taking place. He said tobacco production is in a transition stage. If Toyota were to leave Georgetown, the state would attempt to keep it, he said. He mentioned that burley production might be shifting to other states such as Pennsylvania and Illinois. The senator said the proposed program would benefit the entire state.

Senator Boswell predicted that tobacco companies would be major players in growing tobacco. He indicated state producers must to be creative in continuing to grow the leaf.


Representative Arnold mentioned the spirit of House Bill 611 and the fact that the legislation was sold on the idea that tobacco settlement money would be used to help farmers diversify. He said he had some concerns about using the money for tobacco farming and expressed a fear that large farmers would get most of the funds. But Mr. Rogers pointed out that, under the model program system, the maximum annual loan ceiling is $5,000.


In his remarks, Representative McKee suggested a broader input on the issue from groups such as the Farm Bureau. He mentioned that other legislators have concerns about tobacco production shifting from more traditional areas to nontraditional areas. In a similar vein, Senator Sanders mentioned possible involvement of the Burley Tobacco Growers Cooperative. He also alluded to a Farm Bureau program that provided cost-share money.


Representative Hoffman asked if the state or counties could adopt a quota system. Mr. Rogers suggested that may be contrary to interstate commerce, but he said Kentucky could limit production.


Senator Pendleton said the days of traditional and nontraditional tobacco growing areas had ended and there is no such thing as cross-county leasing.


Expressing caution in creating a tobacco program, Senator Boswell said there is a quota system and that is in the hands of tobacco companies.


Senator McGaha mentioned the diversification that has taken place under the current tobacco settlement distribution system, such as goat rearing, honey production, increased beef cattle herds. He said that by putting a tobacco model program into the hands of county councils, some may choose to participate and some may not.


Speaking again, Representative Arnold said that while he not opposed to tobacco farmers, he said he recalled that a goal of House Bill 611 was diversification.


In further business, the committee heard a report from Dr. Ron Hustedde, Director of the Kentucky Entrepreneurial Coaches Institute. Joining him were Dr. Larry Jones, co-director, and Tammy Werner, program coordinator. The ADB invested $1.28 million in the coaches institute, which is affiliated with the University of Kentucky Cooperative Extension Service. It was designed to strengthen entrepreneurship and the entrepreneurial culture in 19 northeast Kentucky counties. Dr. Hustedde summarized the accomplishments of the first class, consisting of 30 people who have taken part in training seminars, including an international study trip to Scotland. A second class will be selected in September.


Following his remarks, Dr. Hustedde introduced two class members, Mr. Jim Brown, a Grant County tobacco farmer and farm supply dealer, and Mr. Kim Strohmeier, an Owen County extension agent. Mr. Brown said he has coached three other people thus far and has others on a waiting list. Mr. Strohmeier said he entered the program because he wanted to help farmers remain in farming.


Senator Sanders said he was excited about the institute and raised the issue of continuation of the program. Dr. Hustedde said others have mentioned a similar idea, but wanted to see the work for the first classes completed. He said the University of Kentucky is committed to the two classes. According to Senator Sanders, the state needs to be more focused in fostering entrepreneurial opportunities.




With no other business, the meeting ended at approximately 2:40 p.m.