Tobacco Settlement Agreement Fund Oversight Committee


2005 Interim


<MeetMDY1> December 13, 2005


The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Tuesday,<MeetMDY2> December 13, 2005, at<MeetTime> 1:00 PM, in<Room> Room 131 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, and David E Boswell; Representatives Adrian K Arnold, James R Comer Jr, Charlie Hoffman, Thomas M McKee, and Tommy Turner.


Guests:  Keith Rogers, Brian Furnish, Joel Neaville, Bill McCloskey, Governor's Office of Agricultural Policy; Berea Ernst, Community Farm Alliance; Jeff Harper, Kentucky Farm Bureau; and Linda Magee, Alliant Association.


LRC Staff:  Lowell Atchley and Kelly Blevins.


Following roll call and approval of the minutes, the presiding chair, Representative Belcher, asked Mr. Keith Rogers and Mr. Brian Furnish, executive director and deputy director respectively of the Governor’s Office of Agricultural Policy (GOAP), to present their monthly report of state and county projects reviewed at the previous Agricultural Development Board (ADB) meeting.  The officials also reported on the board’s planning session and retreat, conducted in conjunction with their regular November meeting.


After reviewing model projects, Mr. Rogers turned to one project considered at the previous ADB meeting, Kentucky Community and Technical College System, which received $182,500 in state tobacco settlement funds to teach farmers how to effectively use computer technology. Mr. Rogers noted the project was an outgrowth of an earlier computer instruction project.


Chairman Belcher said she had heard positive comments about the earlier project.

Mr. Furnish told Representative McKee that certain counties were targeted for the program based on sign-ups at the local level. Also, Mr. Rogers said the KCTCS would need to secure federal dollars and assure a local in-kind match to receive the tobacco settlement dollars.


In discussion later in the meeting, Mr. Rogers pointed out to Representative McKee that individuals wanting to take part in the KCTCS computer courses must show a tobacco dependency, either having grown the plant or having received a buyout check. He said the board had been using tobacco dependency as an “adopted precedent” and may require that at the county level as well.


Next, Mr. Rogers referred to a listing in members’ folders of projects and their reported and projected impact.


In subsequent discussion, Senator Boswell commended the GOAP and the board on their stewardship of tobacco settlement moneys. He pointed out that projects were situated in 51 counties. The senator asked what they were doing to aggressively and actively promote usage of the agriculture development funds.


Mr. Rogers said only 118 of Kentucky’s 120 counties could receive the funds. In the summer, he said, the GOAP conducted a series of roundtable listening sessions throughout the state. The ADB had an annual meeting with invited guests from counties. GOAP project analysts also attend various meetings in the state.


Mr. Rogers said that while state-funded projects may be situated in one county, they must affect multiple counties.


The GOAP executive director reviewed some of the goals the Agricultural Development Board accomplished during its November planning retreat.


After mentioning the presentations from various agriculture-related groups and industries, he turned to changes the board made to its guiding principles. During the November meeting, the board reduced from 21 to 15 the number of guiding principles. Mr. Rogers said he believed the new principles presented a more focused and refined statement.


Representative Hoffman said he was pleased to see references in the guiding principles to young farmers and part-time farmers. Mr. Rogers said that particular guiding principle was meant to assist producers. In addition, he said he had come to recognize the importance of education and training for farmers.


Representative Hoffman commented on the General Assembly’s commitment to use half the tobacco settlement funds for agricultural development. Mr. Rogers noted his optimism in that regard, but said some in the agricultural industry in the state were worried that the agricultural development funds were dwindling and being used for other purposes. He alluded to the use of Phase I funds to help meet the Phase II obligation for tobacco producers. Mr. Rogers said budget analysts have projected a significant decline in tobacco settlement funds in 2007 and 2008.


Mr. Rogers turned to a summary of policy changes the Agricultural Development Board adopted. The changes dealt with application procedures and deadlines, application review processes, the establishment of a recipient review committee for certain projects, loan collateral requirements, and the referral of some projects to the Kentucky Agricultural Finance Corporation.


Responding to Representative Hoffman, Mr. Rogers said the Allied Foods project is progressing. The company had assisted small businesses in producing and marketing their products. He also mentioned Allied is working with the Department of Agriculture in promoting products.


Mr. Rogers told Representative Comer that collateral requirements set out by the board were in compliance with banking standards.


Next, the GOAP executive director outlined the 2006 agritourism awards and farmers’ market competitive awards programs, which received commitments respectively of $1 million and $2 million.


Senator Boswell asked if the board could match state tobacco settlement funds with funds appropriated by the General Assembly, for example for the proposed Kentucky agricultural museum. Mr. Rogers said the board would be considering “what role” the board could play in the proposal, which was on the board’s December 16, 2005 agenda.


Some committee members commented on the success of various farmers’ markets. Mr. Rogers said there had been considerable growth in local farmers’ markets.


The GOAP executive director turned to a progress report on the Kentucky Agricultural Finance Corporation. He said an agricultural infrastucture loan program had been successful, with over $1 million in the program’s loan portfolio. He also mentioned a $5 million loan to Owensboro Grain to build a biodiesel facility in Daviess County.


Responding to Representative McKee, Mr. Rogers said the KAFC had made some loans for tobacco barn construction under the infrastructure loan program.


Mr. Rogers reported on the status of the Phase II payments. During the discussion, he pointed out that about 5,000 checks to certified recipients remained unclaimed. The checks were worth about $1.82 million. He said the GOAP would be making a concerted effort to publicize the existence of the payments through press releases and a posting on their Web site.


In addition, Mr. Rogers said the remaining funds received from tobacco companies after the tobacco-producing states’ successful court proceedings in North Carolina would be distributed to eligible recipients by the end of the year. Recipients were anticipated to receive an amount equal to 13 percent of their June payment.


            Responding to Chairman Belcher, Mr. Rogers said the interest on bonds sold to make the 2004 Phase II payment to growers would amount to $1.5-$1.6 million.


            The General Assembly’s action to assure the Phase II payment while the issue remained in litigation sent a “good message” to farmers, Senator Borders commented.


            In other business, Representative Arnold suggested that the committee look into establishing a monthly compensation for Agricultural Development Board members that would be in addition to board members’ expense allowance.


Materials distributed at the meeting are on file in the LRC Library.


The meeting ended at approximately 2:30 p.m.