Tobacco Settlement Agreement Fund Oversight Committee


Minutes of the<MeetNo1> 1st Meeting

of the 2005 Interim


<MeetMDY1> July 12, 2005


The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Tuesday,<MeetMDY2> July 12, 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, and Joey Pendleton; Representatives Adrian K Arnold, James R Comer Jr, Charlie Hoffman, Thomas M McKee, and Tommy Turner.


Guests:  Keith Rogers and Brian Furnish, Governor's Office of Agricultural Policy; Glenn Jennings and Chris Corbin, Kentucky Office of Insurance Kentucky Access; Irene Centers, Kentucky Tobacco Use Prevention and Cessation Program; Teresa Barton, Karen Jones, and Stacy Floden, Office of Drug Control Policy Kentucky Agency for Substance Abuse Policy; Dr. Tim Mullett and Bonnie Sigafus, Markey Cancer Center; Dr. Donald Miller and Jennifer McGehee-Marsh, Brown Cancer Center; Tony Sholar, Kentucky Farm Bureau; and James Coffey and Tim Dievert, Central Kentucky Angus Sales, Inc.


LRC Staff:  Lowell Atchley, Biff Baker, Carl Frazier, and Kelly Blevins.


Following roll call and approval of the minutes for the June meeting, the  presiding co-chair, Representative Belcher, 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 the Agricultural Development Board (ADB) considered during its June meeting.


In reporting on the Daniel Boone Lumber Industries project, Mr. Rogers noted for the record that the ADB approved only $10,000 in county funds and did not approve the allocation of state funds.


Mr. Rogers then turned to the Central Kentucky Angus Sales Inc., which had sought $30,000 in funding during the June ADB meeting, but received only $12,500 in county funds. He said another county also had initially approved funding, but on the contingency that state funds were approved. Mr. Rogers told the committee the board had declined to appropriate state funds for the project because it had a long-standing policy of not granting tobacco settlement moneys for stockyard improvement, development, or renovation. He said the board viewed the project as more in the line of a stockyard rather than a cattle sales arena or sales pavilion.


Senator Pendleton asked why the board classified the facility as a stockyard. Mr. Rogers reiterated the board’s rationale. He indicated that GOAP staff had recommended both funding levels for the facility, but the board decided otherwise, and declined to grant the state funds.

Senator Pendleton said he viewed the facility as a model sales arena. He said he was aware that dairy cattle had been sold at Central Kentucky Angus Sales. Senator Pendleton said he viewed the facility as similar to a farmers’ market that showcased cattle, rather than a stockyard.


In his response, Mr. Rogers said they understood the facility had sold only Angus cattle. But Senator Pendleton said Jersey dairy cattle had been sold there. Mr. Rogers then said the board had a concern about the facility being restricted to a single breed. They witnesses said there was general agreement that other breeds would be sold at the business, nevertheless, the board did not grant state funding.


Responding to additional questions from Senator Pendleton, Mr. Rogers said the ADB could reconsider its decision, should the committee ask. The senator then requested that the ADB be asked to reconsider the funding denial.


            Before calling for a vote, Chairman Belcher allowed additional questions and comments, the first from Representative McKee, who indicated that he had visited the sales facility and did not view it as a stockyard. He asked what was planned. Mr. Rogers then reviewed the company’s plans to expand and upgrade existing facilities, and improve a road.


            Senator McGaha said he recalled the ADB approving funds to improve a former tobacco warehouse in Barren County for cattle sales facility. Mr. Rogers said only county funds were involved. Mr. Rogers pointed out the ADB had approved moneys for cattle marketing development through the Kentucky Beef Network and Kentucky Cattleman’s Association. That funding, he said, was being used to pave the way for an animal ID process at stockyards, but not for renovation or construction. Mr. Furnish added the board had approved funds for county funds to be used for fairground additions, sales pavilions, arenas and the like.


            In subsequent discussion, Senator McGaha said he understood that most people involved in the selling operation, and those marketing their livestock, would be tobacco-dependent.


            At that point in the meeting, Chairman Belcher asked Mr. James Coffey and Mr. Tim Dievert to elaborate on their plans and give their rationale for obtaining state funds.


            Mr. Coffey said they had conducted sales in the past for breeds other than Angus. Mr. Dievert said the Hereford Association had sold at the facility, as well as other beef breeds, such as Charolais, Saler, Gelbray, Belted Galloway, and some dairy breeds.


            Mr. Coffey said it was unfair to liken the operation to a stockyard. He said a general description would be to compare their facility to a value-added cooperative. He then talked about the rigorous standards and criteria related to genetics and breeding required before certain animals had been sold. He pointed out that he told one county council that they would sell goats at the facility, should the request be made.


            Senator Boswell suggested that perhaps the corporate name of the organization might be confusing to some. In response to Representative Comer, Mr. Coffey said their forgiveness on a state loan would have required them to directly decrease any sales costs for sellers who were tobacco producers. Representative Comer, who said he had visited sales at the operation, suggested that only Kentucky producers should be allowed to receive the commission discount.

            Addressing the Committee again, Mr. Rogers asked the panel to consider that the ADB had maintained a long-standing policy of not granting funds for livestock marketing pavilions, for example, at county fairgrounds.


            But Senator Pendleton said the board had approved funds for farmers’ markets. Instead of dealing with fruits and vegetables, he said, “we are dealing with livestock.” The senator also said the board had continued to grant funds for farmers’ markets, although some had not been successful. He said the Central Kentucky Angus Sales representatives were making a single request.


            Senator Pendleton then made a motion for the committee to ask the ADB to reconsider its action in not appropriating funds for the Central Kentucky Angus Sales. Senator Boswell seconded the motion. The vote was 9-0, with one abstaining.


            Continuing with his report, Mr. Rogers responded to Senator Boswell’s question about the Jackson County Cattlemen’s Association weed eradication project, Mr. Rogers said the program would be available to any farmer who showed proof of tobacco production. On another question, Mr. Rogers noted that, even though the Department of Agriculture has a weed eradication program, the Jackson County association decided to launch its own program.


            On another project, Senator McGaha asked if tobacco settlement funds would be used to construct bathrooms as a part of a Mackville Communtiy Development certified kitchen project. Mr. Rogers said the bathrooms would be required as a part of a certified kitchen setup.


            Mr. Rogers reviewed details regarding the Agricultural Development Board’s approval of $121,961 for the Central Kentucky Growers Association.  He indicated the board had approved funds to assist other co-ops affected by financial losses and did the same for Central Kentucky Growers. Responding to a question from Co-chairman Belcher, Mr. Rogers estimated the board had granted $700,000-plus to the co-op thus far.


            He pointed out that Central Kentucky Growers was unique because it had developed a year-round business, whereas other co-ops were seasonal. He also elaborated on the impact another firm’s bankruptcy had on the co-op. Representative McKee indicated that producers believe the growers association is a good cooperative.


            Responding to a question about a Graves County Soil Association biodiesel feasibility study, Mr. Rogers said he believed that people involved were not the same ones who were associated with an aquaculture cooperative in Graves County.


            Committee members raised some questions about the John F. Dance Enterprises project in Woodford County. Mr. Rogers said the company was unsuccessful in obtaining ADB agritourism grant funds. But the county itself decided to grant some funding.


            Turning to the no-funded projects list, Mr. Rogers detailed the board’s decision to close the Northern Kentucky Regional Farmers’ Market application. The application was outdated and the applicant lacked adequate matching funds, he explained. Co-chairman Belcher pointed out that a commitment of funds from the applicant was desirable. During discussion, Mr. Furnish said that, since the application was turned in, many other farmers’ markets had opened in the region.


            Next, Mr. Rogers briefed the committee on the status of the Phase II payment process. He said over 136,000 checks had cleared the bank and that 25-30 people had contacted them about not receiving their checks. According to Mr. Rogers, the original application process for quota holders was thorough, and it was important for applicants to keep copies of their documents for future reference. He said they continued accepting applications through May. (There was no certification process for tobacco producers.) Because existing funds were divided among existing applicants, there will be no funding available for those affected by lost documentation, he said.


            Responding to a question from Co-chairman Belcher, Mr. Rogers said GOAP staff had been meeting with county council groups of late. Contrary to an allegation raised, he said, those meetings have been open to the public, although invitations were only to extension agents, county council members and the like.


            The committee then turned to reports from agencies that receive a portion of state tobacco settlement funds.


            Mr. Glenn Jennings, executive director of the Office of Insurance, reviewed Kentucky Access, a state high-risk insurance program. According to Mr. Jennings, since the General Assembly created Kentucky Access in 2000, the number of individual insurers in the state had grown from two to eight. He said more than 100,000 Kentuckians were insured in the individual market. But he said 14% of the state’s population were still uninsured. Approximately 3,300 Kentuckians are insured through Kentucky Access. The program had about $44 million in assets as of May 31, he said.


            Ms. Irene Centers reported on the Kentucky Tobacco Prevention and Cessation Program. According to Ms. Centers, 91% of tobacco settlement dollars allocated to the program are given to local health departments. She reported that more than 96% of middle and high schools in the state do not permit smoking on school grounds. But she said 24% of Kentucky women smoke during pregnancy, twice the national average.


            The committee heard from Ms. Karen Jones and Ms. Teresa Barton of the Kentucky Agency for Substance Abuse Policy. They said KY-ASAP had 69 local boards covering 110 counties. Twelve new local boards had completed strategic planning training. The start-up funding for a local board is $50,000, they reported.


            Finally, the committee heard reports from Drs. Donald M. Miller and Timothy W. Mullet, of the University of Louisville Brown Cancer Center, and the University of Kentucky Markey Cancer respectively. Both reported on cancer research projects under way at their institutions.


            Copies of their materials are on file with meeting documents in the LRC Library.


            Requests for additional information from witnesses included detailed budgetary and other information about Kentucky Access, Tobacco Prevention and Cessation, and KY-ASAP programs. The committee also requested additional information regarding the radon issue, discussed during the Brown-Markey portion after Representative Hoffman raised the issue.


            The meeting ended at approximately 3:30 p.m.