Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> May 9, 2006


The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Tuesday,<MeetMDY2> May 9, 2006, 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; Senators 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, Brian Furnish, Tim Hughes, Todd Harp, and Joel Neaveill, Governor's Office of Agricultural Policy; Steve Meredith, Agriculture Communications Foundation; Berea Ernst and Kaycie Len Carter, Community Farm Alliance; Tonya Chang, Kentucky Lung Association; Dr. Pete Dreisbach, FFA Breckenridge County; Mark Farrow, Kentucky Department of Agriculture; and Jeff Harper, Kentucky Farm Bureau.


LRC Staff:  Lowell Atchley, Tanya Monsanto, Perry Nutt, and Kelly Blevins.


Opening the meeting, 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.

Before beginning his report, Mr. Rogers introduced Mr. Todd Harp to the committee. Mr. Harp had joined the GOAP staff as a project analyst.

As he proceeded, Mr. Rogers indicated in response to Chairman McGaha that a Clark County Fiscal Court project to study a purchase of development rights program was not unique in receiving tobacco funds. Mr. Rogers said a similar project also had been funded in Shelby County.

Mr. Rogers explained a $50,000 Gateway Resource Conservation Development project to create an eco/agritourism farmer and landowner trail from the Red River Gorge to the Ohio River. Responding to Chairman McGaha, the GOAP official said the conservation district would be seeking matching funds from entities such Farm Bureau and the USDA to create the trail.

Mr. Rogers detailed the ADB grant of $1 million to the Kentucky Agricultural Finance Corporation to establish a coordinated value-added assistance loan fund, which would target businesses that contract with producers to grow, develop and add value to agricultural commodities produced on farms. Chairman McGaha asked about the status of other KAFC loan programs. According to Mr. Rogers, the other programs had attracted considerable interest from farmers.

As for the coordinated value-added assistance loan fund, Mr. Rogers told Representative McKee that loans would be repaid over five years. He said the fund would be tantamount to an assistance program that would help borrowers grow and prosper. But the funds would not be used for capital improvements. Funds would be available to in-state and out-of-state entities. He said the ADB gave the KAFC flexibility in creating a program that would be workable.

As the speaker proceeded through his report, Chairman McGaha raised a question about the ADB’s denial of funds for the Livingston County Conservation District to conduct a progressive agriculture safety day for fourth graders. Mr. Rogers said the denial was consistent with other similar requests for school-related projects. During the discussion, Mr. Mark Farrow,  Deputy Agriculture Commissioner, indicated the denial would not imperil the program because department funds would be available.

Next, Chairman McGaha recognized Representative Arnold, who called the committee’s attention to HB 669, legislation passed in the 2006 session that would require state agencies to buy Kentucky farm products if the products are available and meet quality and price requirements. Representatives Arnold and McKee sponsored the measure.

Representative Arnold asked Mr. Rogers for his assessment of the potential impact of the bill. Mr. Rogers explained that he had not talked with the Finance Secretary about the measure. He said GOAP’s goal would be to help foster agricultural production. Mr. Furnish mentioned the work that a tobacco settlement grantee, Allied Food Marketers, was doing in helping Kentucky companies to bring products to the market. Also, Berea Ernst of the Community Farm Alliance updated the committee on an alliance-sponsored project in Bath County to market locally grown produce in schools and other facilities.

Chairman McGaha recognized Representative Comer, who introduced Dr. Pete Dreisbach, Director of FFA in Breckenridge County.

Representative Comer also asked Mr. Rogers about the status of an $800,000 forgivable loan approved for PIC North America, which planned to leave Simpson County for a Tennessee location. Genus plc, a British beef and dairy cattle genetics company, acquired Sygen International, PIC North America’s parent company, in December 2005.

Mr. Rogers told the committee he met with Genus plc representatives and discussed the status of the $800,000 loan. Even though PIC would have 10 years to repay the loan, he said he anticipated they would do something “more quickly.”

Next, Mr. Perry Nutt, an LRC Staff Economist, joined Mr. Rogers at the table along with Joel Neaveill, of the GOAP staff, to discuss the appropriation of tobacco settlement moneys in the 2006 budget. In his presentation, Mr. Nutt reviewed MSA actual payments beginning in FY 2000, estimated and actual payments from FY 2000 to FY 2008, the allocation of tobacco settlement dollars under HB 380 and the 2006 final free conference report, and the GOAP’s balance sheet under the final budget.

Mr. Rogers also reviewed the status of agriculture development fund dollars. According to his report, tobacco settlement fund, general fund, and carry forward moneys amounted to $36.7 million. The FY 06 appropriation increased that to $42.3 million, but cash due commitments reduced the total by $5.5 million. Mr. Rogers told the committee that total funds available for state-level projects through June 30, 2008 would amount to $34.9-$38.9 million, depending on how much would be distributed through a Phase II amnesty program, also established in the 2006 budget.

During committee questioning, Mr. Neaveill said the deadline for people to apply for unclaimed Phase II checks from the final distribution would be June 30. Mr. Rogers indicated the remainder of those funds would escheat to the state.

Representative McKee said he saw two looming problems with the agricultural development funds --  first the need to preserve the remaining funds and discontinue using them to pay off statewide water and sewer bonds, and the continued erosion of the amount of the funds coming to the state from tobacco companies.

Finally, the committee heard a report by Mr. Steve Meredith, Executive Director of the Agriculture Communications Foundation, which was seeking to launch a television program on KET called “Kentucky Farm and Garden.” Mr.  Meredith said KET had agreed to air the farm and garden TV series and had suggested that he team with Studio-Link of Lexington to put the programming package together. According to prepared remarks, the program would have a broad-based appeal to the public television audience with topics of interest to a wide range of viewers.

Mr. Meredith had applied for $410,000 in state ADB funds, but had not received final approval.

Responding to Chairman McGaha, Mr. Meredith said Studio-Link had experience in developing programs about Kentucky, such as the bourbon industry and the horse industry. In further discussion, he said he had talked with state university representatives about gaining their assistance.

Senator Pendleton mentioned the request for $410,000 in tobacco settlement funds. He asked about other commitments. Mr. Meredith responded that some agricultural interest group and commodity groups had pledged their financial support. He said those commitments would reduce the amount sought from the ADB. He later said they would need $600,000-$700,000 to keep the program going, once it began.

He also said they would be able to archive program film footage for future use.

Documents distributed during the meeting are available with meeting materials in the LRC Library.

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