Tobacco Settlement Agreement Fund Oversight Committee



2005 Interim


<MeetMDY1> August 9, 2005


The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Tuesday,<MeetMDY2> August 9, 2005, at<MeetTime> 1:00 PM, in<Room> Room 131 of the Capitol Annex. Senator Vernie McGaha, 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; Dr. Kim Townley and Cordelia Skolen, Division of Child Care; Marvin Miller and Sharma Klee, Department of Public Health; Berea Ernst, Community Farm Alliance; Dean Wallace, Council for Burley Tobacco; and Jeff Hall, Farm Service Agency.


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


Following the roll call and the approval of the minutes from the July meeting, the  presiding co-chair, Senator McGaha, 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 July meeting.


Before turning to the projects, Mr. Rogers mentioned a letter, enclosed in meeting packets, informing the Committee that the ADB reversed its earlier decision and awarded $15,000 in state funds to Central Kentucky Angus Sales Inc. Approval of the state funds also prompted a county to grant $2,500. The Committee voted in July to ask the ADB to reconsider its earlier decision denying the state funds to the sales facility.


During the Bracken County Agriculture Advancement Council project review, Chairman McGaha asked about shared-use equipment procedures. Mr. Rogers said the ADB occasionally allows the inclusion of new, shared-use equipment based on the applicants’ requests. He also told the co-chair that tobacco dependency is not a specific requirement in counties granting model program funds, but the board may consider adopting that requirement during its fall planning session. Mr. Furnish indicated that many counties currently have tobacco dependency stipulations in their model program guidelines.


During a subsequent discussion, Representative McKee lauded Harrison County’s commitment of $75,000 in county funds to a school-based agriculture education center.


Responding to questions from Chairman McGaha, Mr. Furnish said Hope Ridge Farm Country Ham currently buys about 2,000 hams around Christmas, but anticipates expanding the business into a year-round affair. On another question, Mr. Rogers said the company can buy hogs from out of state producers, but would not receive a premium credit enabling it to reduce the amount of its forgivable loan. Representative McKee pointed to the uniqueness of the project and said the area affected has a high tobacco dependency.


Reviewing the Blazing Blocks Firewood application, Mr. Rogers said the company is in an area that has an expanding timber industry. He said the project would be a service to farmers in the Lewis County area and coincided with the entrepreneurial training being undertaken in northeast Kentucky region.


Proceeding through his list, Mr. Rogers explained the “menu” approach of offering five model programs as a part of the Monroe County farm improvement project. Responding to Representative Belcher, Mr. Rogers said applicants in Monroe County could choose an assortment of farm practices to benefit their operations, as long as the total did not exceed $5,000. He told the Committee the menu approach reduces administration because essentially five programs are lumped under one program.


Representative Comer lauded the program. He estimated 250 to 300 people would be applying. He asked Mr. Rogers if available funds were ever redistributed from low demand to high demand counties. Mr. Rogers said there has been no discussion about increasing the county's share of the tobacco settlement funds. He said the menu approach helps extend the funds to more people.


Next, the Committee turned to a Christian County Agribusiness Association project to create a Christian County model program to assist and develop tobacco production. During its July meeting, the ADB agreed with a staff recommendation not to approve the tobacco production assistance project based on an earlier decision to table a statewide county model program.


Senator  Pendleton suggested that county fund spending decisions should be left to the counties. He said tobacco production had changed in light of the buyout.  Sen. Pendleton stated it is a global market and added that tobacco would continue to be produced in Kentucky or in other states. Pointing out that tobacco settlement funds had been approved in the past for shade cloth, the senator said there would be no difference in shade cloth and other tobacco production equipment. Sen. Pendleton said he hoped the board would reconsider its position.


Chairman McGaha asked about the Agricultural Development Board’s interpretation of the statute created by House Bill 611. Mr. Rogers said he had found there was no consensus about the issue from people he had talked with – farmers, board members, and legislators.  He said the board had taken an approach that because there is no consensus on the issue, it would not be prudent to use tobacco settlement funds at this point in time to assist tobacco production.


Senator Boswell asked about the steps needed to bring the issue back before the ADB. Mr. Rogers responded that it would be similar to the recent Central Kentucky Angus Sales issue. The Christian County Agribusiness Association would need to ask the Committee to make the formal request for reconsideration.


Representative McKee characterized it as a “very difficult issue.” After getting through the 2005 marketing year, he said an education process would be needed regarding who would be producing tobacco in 2006 and 2007. Representative McKee said he could visualize the board reconsidering the issue.


Chairman McGaha said the Christian County proponents should discuss the proposal further with the board. If an interpretation of House Bill 611 was needed, the legislature could provide one, Sen. McGaha said.


During the discussion, Mr. Furnish told the Committee that the Burley Tobacco Growers Cooperative was in the process of creating a $3.5 million program that would grant up to $5,000 for tobacco growers on a cost-share basis. The money could be used for facilities, equipment and other similar expenses. A judge overseeing some current litigation involving the co-op must approve the creation of the program, according to Mr. Furnish.


After that discussion, Chairman McGaha asked Mr. Jeff Hall, Kentucky's Farm Service Agency (FSA) director, to explain plans regarding the closing of about 30 FSA offices in the state. According to Mr. Hall, the pending closures and consolidations with other offices is a part of a national undertaking stemming from the demise of the tobacco price support program. Mr. Hall said about 50 federal workers would be affected. He explained the criteria used to decide which offices to close.  Those criteria are office operational costs, workload, and potential travel distance to relocated offices. Mr. Hall said farmers whose offices are being relocated would either be assigned an office or the farmer could choose another office.


Representative Belcher asked about potential driving distances. Mr. Hall replied the longest driving distance would be about 60 miles, but distances rarely exceeded 20 miles.

Mr. Hall then discussed options for affected employees. Representative Comer encouraged the FSA to make decisions based on what was best for producers rather than office employees.


Responding to Representative McKee, Mr. Hall said he hoped that, even with the demise of the tobacco program, FSA could still keep up with crop listings. Representative McKee asked about possible future restructurings. Mr. Hall responded that he believed Kentucky’s approach would have lasting effects. If the USDA itself undergoes a restructuring, perhaps Kentucky would be in a better position than other states.


During subsequent discussion, Mr. Hall agreed to supply a list of the FSA office closures to staff which would be forwarded to Committee members.


The final report of the meeting was from Dr. Kim Townley, Executive Director of the Office of Early Childhood Development. Dr. Townley reported on the many activities undertaken under the programs aimed at assuring good maternal and child health in the state, supporting families, and enhancing early care and education. In reviewing the agency’s budget, Dr. Townley said tobacco settlement allotments were decreasing because of a decline in smoking rates.



Representative Belcher commented the program had made tremendous progress. She asked how Kentucky stood in terms of immunizations. Dr. Townley responded the state usually ranks high. A program official said immunization rates were in the 95% range.

Responding to Representative Comer, Dr. Townley said the $900,000 spent in the substance abuse program went to pay 14 staff people. Staff received training for on-site work at facilities like comprehensive care centers and health departments. Healthy Start in Child Care funds pay for consultants located in health departments, she said.


On another question, Dr. Townley stated substance abuse information goes to health departments, family resource centers, comprehensive care centers, and high schools. STARS material also is available at business locations.


Asked about the success of the program, Dr. Townley said Kentucky is a leader nationally with its preschool programs.


She and another program official explained the immunization program further. Dr. Townley responded to Co-Chair McGaha that most funds allocated to the immunization program actually go toward vaccine purchases. In continuing discussion, Dr. Townley said most Early Childhood Initiative programs are operated under the auspices of established executive branch offices.


Senator Borders pointed out that the program, through such activities as combating smoking, is actually helping to reduce Medicaid expenditures.


Copies of Dr. Townley’s materials are on file with meeting documents in the LRC Library.


The meeting adjourned at approximately 3:20 p.m.