Tobacco Settlement Agreement Fund Oversight Committee





<MeetMDY1> January 10, 2006


The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Tuesday,<MeetMDY2> January 10, 2006, upon adjournment of the House and Senate Chambers, in<Room> Room 125 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 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; Jeff Harper and Brian Alvey, Kentucky Farm Bureau.


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


Following roll call, the presiding chair, Senator McGaha, 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 Committee approved the December 2005 minutes once a quorum was established later in the meeting.)


Projects reviewed included the Lawrence County Extension Board, Southest Vintners, Purple Toed Winery, Stonebrook Winery, Kentucky Horticulture Council, Warren County Conservation District, Clinton/Cumberland Cattlemen’s Association, Appalachian Alternative Agriculture of Jackson County, Whitley County Cattlemen’s Association, Tim’s Cattle Hoof Trimming, Russell County Cattlemen’s Association, Allen County Extension District Board, Gallatin County Livestock Association, Jackson County Cattlemen’s Association, Fire on the Ridge Farm, and Lewis County Honey Products and Jackson Purchase Resource Conservation and Development, both which the ABD had denied.


During a discussion of the Kentucky Horticulture Council project, Chairman McGaha asked about the status of an on-going study of Kentucky’s produce and aquaculture cooperatives. Mr. Rogers responded that the report and recommendations, prepared by Ascendant Partners Inc., would be presented at a special ADB meeting on January 13 in Owensboro. He said representatives of the four remaining vegetable cooperatives would speak at the meeting.


Also, he said he expected the board to take some action on the West Kentucky Growers Cooperative, which had ceased operation. The cooperative owed the board more than $3 million, consisting of operating loans and a mortgage on the cooperative’s facility.


As they discussed denied projects, Senator Pendleton asked for clarification on the Jackson Purchase Resource Conservation and Development request. The applicant had sought $21,050 to administer a dark tobacco shade cloth cost-share program. Senator Pendleton pointed out the board had approved other similar projects in the past. Mr. Rogers responded that those projects had entailed the use of shade cloth in tobacco and horticulture production. But the Jackson Purchase project was meant only for tobacco. He said the board denied the application based on its recent decisions to now allow the use of county funds in support of tobacco production.


Representative Comer asked Mr. Rogers to comment on Governor Fletcher’s remarks that Kentucky had received a bad deal from the Master Settlement Agreement and was not getting its fair share of the MSA funds. According to Mr. Rogers, the Governor was reviewing options in light of projected declines in MSA funds and the impact of those declines would have on state funding obligations. Representative McKee observed the issue needed to be reviewed from all aspects.


Next, Mr. Rogers and Mr. Furnish outlined changes the ADB made to some model program guidelines. Mr. Furnish reviewed changes to the cattle genetics improvement cost-share program. According to him, the new guidelines were aimed at requiring farmers to assess more precisely their herd needs.


Mr. Rogers reviewed a new tobacco dependency policy for county councils to use when reviewing applications. Under the new policy, the ADB encouraged councils and administrators to use a scoring system in all county model programs that gave tobacco-dependent farmers a priority.  A person would be tobacco dependent if he had a tobacco buyout contract, had received Phase II payments, or was able to show proof of tobacco income from sales receipts or tobacco payment checks.


Following the GOAP presentation, Chairman McGaha asked Mr. Perry Nutt, an LRC Staff Economist, to brief the Committee on the status of Master Settlement Agreement funds (Phase I). Mr. Nutt reviewed the history of Phase I payments, the outlook for the future, and agency usage of the Phase I funds.


Mr. Nutt said the Consensus Forecasting Group had projected a decline in Phase I funds in 2006 and subsequent years. According to Mr. Nutt, the projected decline would occur when Kentucky and other states’ MSA funds were held in abeyance as tobacco companies and the National Association of Attorneys General resolved an issue of declining tobacco market share because of the impact of companies not participating in the MSA.


Based on Kentucky’s share of national MSA funds, the decline could amount to about $20 million per year, according to Mr. Nutt.


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


The meeting ended at approximately 4:30 p.m.