Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1>May 2, 2007


The<MeetNo2> Tobacco Settlement Agreement Fund Oversight Committee met on<Day> Wednesday,<MeetMDY2> May 2, 2007, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Representative Mike Denham, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Carroll Gibson, Co-Chair; Representative Mike Denham, Co-Chair; Senators Dan Kelly, Joey Pendleton, and Richie Sanders Jr; Representatives Royce W. Adams, James R. Comer Jr, Charlie Hoffman, Tom McKee, and Tommy Turner.


Guests: Brian Furnish, Deputy Director, Joel Neaveill, Deputy Director of Administration, Governor's Office of Agricultural Policy; Stephen Yates, Department of Agriculture; Steve Moore, Henry County Cooperative Extension Agent; Bill Peterson, Mason County Cooperative Extension Agent; and Curt Judy, Todd County Cooperative Extension Agent; Drew Graham, Director of Advancement and Government Relations, University of Kentucky, and Joel Neaveill, Governors Office Agricultural Policy, Deputy Director of Administration.


LRC Staff:  Lowell Atchley, and Lindsey Velasquez and Susan Spoonamore, Committee Assistants.


Minutes of the April 11, 2007 meeting were approved, without objection, by voice vote upon motion by Sen. Pendleton and seconded by Sen. Gibson. 

To resolve a technical error, minutes of the February 14, 2007 meeting were approved, without objection, by voice vote upon motion by Rep. Adams and seconded by Rep. Hoffman.

The presiding co-chair, Representative Mike Denham, asked Mr. Brian Furnish, Deputy Director, Governor’s Office of Agricultural Policy (GOAP), to report on the county and state projects reviewed during the April Agricultural Development Board meeting. Before beginning, Mr. Furnish recognized Mr. Stephen Yates, who had resigned from the GOAP to assume a position with the Department of Agriculture in the area of agritourism.

During the review of state projects, Co-chair Gibson asked a series of questions regarding who were the principal parties involved in offering a $272,000 match or cost-share for the Appalachian Alternative Agriculture in Jackson County Inc. (3AJC) project. According to Mr. Furnish, matching funds will vary by project size and type and could come in the form of grants, loans, donations, federal funds, property, and the like. For example, in the case of the 3AJC project, Eastern Kentucky Power donated some land, Mr. Furnish said.

Senator Gibson stated that he would like to see an accounting of the investors who contribute matching funds on such projects. Mr. Furnish said he would work supplying that information.

During the discussion of the Lincoln County Farm Bureau project to assist youth in buying reproductive female stock for cattle, sheep, and goats, Mr. Furnish responded to Representative McKee that it was a county decision to allow non-registered stock to be used in the project. He said state animal health guidelines would be followed.

Regarding the Owen County Farm Bureau’s non-model hay handling and feeding equipment project, the speaker responded to Co-chair Denham that the applicant wanted to include some additional pieces of equipment under the project.

As he reviewed the projects, Mr. Furnish explained at length the Kentucky Forage and Grassland Council proposal. During its April meeting, the ADB had committed $650,000 in state funds to contract with the University of Kentucky College of Agriculture, Department of Plant and Soil Sciences, to conduct a biomass and hay production applied research and demonstration project. The Forage and Grassland Council would use the funds to demonstrate that the electrical generating utilities and the cellulosic ethanol industry in Northeastern Kentucky was capable of using sustainable and economical Kentucky crops, to develop markets for biomass, plus to develop and promote viable hay production and marketing strategies. Initially, the biomass portion would involve enlisting farmers in the area to raise switchgrass, and try out other potential plants to be used as biomass.

According to Mr. Furnish, the Iogen Corporation, a Canadian company, had indicated an interest in Kentucky’s biomass farm production efforts. The Maysville area of Kentucky was chosen for the research because of the proximity of the Eastern Kentucky Power plant and its ability to use biomass, plus the transportation arteries in the area.

Responding to Senator Pendleton, the speakers said that in addition to UK’s Soil Sciences Department, the Tobacco Research and Development Center also would be involved. Senator Pendleton subsequently complimented the ADB for approving the project. He also noted the Tobacco Research and Development Center was branching out into other areas of research, such as biomass.

Representative McKee thanked all those involved and asked about Iogen’s current biomass energy efforts. Mr. Furnish indicated Iogen would be developing an energy plant in Idaho and would be using wheat straw grown there.

Responding to Co-chair Gibson, Mr. Furnish said switchgrass was native to Kentucky, but had been eliminated as a grazing forage. He indicated that other crops would be investigated in addition to switchgrass. The speaker told Co-chair Denham the plant was non-invasive.

During discussion of the Leuchemix Inc. project, Co-chair Denham asked Mr. Yates to speak on the project because he had worked with it during his tenure at GOAP. According to Mr. Yates, Leuchemix would develop a cancer drug using the feverfew plant. Under the project, some farmers would raise the plant. Mr. Yates said the plant could become an alternative to tobacco, and it could be grown in much the same way as tobacco.

Following his report, Mr. Furnish brought the committee up to date on the Governor’s request to have the U.S. Department of Agriculture declare Kentucky a disaster area because of the Easter freeze. If approved, a declaration could put state farmers in line for low-interest loans. In later questioning from Senator Kelly, he explained that it would take Congressional budget action to have grant money approved for Kentucky farmers and agricultural producers.

While acknowledging that crops such as corn and wheat, and nursery trees were damaged, Senator Pendleton indicated that hay and pasture fields also were impacted. Responding, Mr. Furnish said those type reports had been coming in to their offices. He said he would inform GOAP Executive Director Keith Rogers of Senator Pendleton’s concerns about including hay and pasture losses on the disaster request list.

Next, Mr. Joel Neaveill, GOAP Deputy Director of Administration, reported on Kentucky’s Master Settlement Agreement revenue, which the state received in April. The Agricultural Development Fund received an additional $9.1 million from Kentucky’s share the MSA for the current fiscal year.

In all, Kentucky received $18.2 million more than projected. Of the additional $9.1 million going to the Agricultural Development Fund, about $5.9 million would be directed to state projects, and roughly $3.1 million to counties.

Responding to Co-chair Gibson, Mr. Furnish said the additional moneys could not be used for disaster assistance, but must be distributed in accordance with the statutes as created by House Bill 611.

Next, the committee heard a presentation from three University of Kentucky cooperative extension agents, who discussed how their individual county agricultural development councils functioned and distributed tobacco settlement funds at the local level. Speaking to the committee were Mr. Steve Moore, Henry County; Mr. Bill Peterson, Mason County; and Mr. Curt Judy, Todd County.

Generally, the agents spoke first about how their councils were made up, and how their programs functioned. They explained their popular model programs, less popular programs, trends they were seeing, areas of concern regarding the agricultural development program, and their areas of success.

During his presentation, Mr. Moore alluded to an apparent inequity that existed in relation to limiting an applicant’s total funding to $15,000. For example, he said vegetable growers who confined themselves to the many subcategories within the agricultural diversification model program would be affected by $15,000 cap. But cattle producers could participate in several model programs, each with a $15,000 cap. Mr. Peterson listed scoring issues and persistent open records requests among his concerns.

While not a concern, Mr. Judy said his county council had tried to pinpoint needs in Todd County, had initiated projects, and had asked sponsoring agencies to administer those projects.

Co-chair Denham expressed his appreciation for the work that county agents had put into the agricultural development program. He asked the speakers to describe their biggest problem and the best thing about the overall program. The speakers mentioned the considerable work that went into establishing and running the county programs. They also indicated that farmers had become more educated and business savvy. They mentioned the positive impact of the agricultural development program, and the fact that their approach to extension work had changed due to the availability of Phase I funds. As an example, Mr. Judy cited the ethanol production facilities that are being built. Those, he said, would have a lasting impact.

Co-chair Gibson asked the speakers if there were things that could be done differently, or issues that may have been overlooked. Mr. Moore mentioned a concern that he and his council had about the ever-increasing loss of farmland to development. He asked the legislative body to design programs to address the farmland decline and to “keep these communities well-farmed.”

Representative McKee said that when they created House Bill 611, they realized they were asking county agricultural agents to take on added responsibilities. He cited the way extension work had changed and the effect of the tobacco money on local communities. For instance, more fencing seemed to have been installed in his area now than before.

Senator Kelly said he was encouraged to see the intellect and energy going into the distribution and use of the tobacco funds. As for land use, the senator said agricultural leaders in his county, Washington, were worried about the loss of farmland. But he said 15-tracts with roadways were being allowed in his county. The tracts probably would not become efficient farms, he said. According to the senator, communities in transition should impose some standards related to development that account for adequate roads, water service, waste water, and the like. Mr. Peterson responded that land use and providing infrastructure was an issue in his county as well. Mr. Judy said development had not affected Todd County significantly, although he predicted that could change should Tennessee approve a state income tax and residents of that state were to look toward moving across the border into Kentucky. According to Mr. Moore, 5-acre tracts were inefficient as farms and accounted for energy consumption as well.

As the land use discussion continued, Mr. Furnish said some neighbors had started to complain about the Burton livestock operation in northeastern Kentucky, which had received tobacco funds. Representative Hoffman said considerable urban sprawl was occurring in Scott County and perhaps the General Assembly could address the issue in the form of a task force.

On other issues, Co-chair Denham asked the speakers to address the county council scoring systems. Mr. Furnish said the ADB had left scoring policies up to the counties. But, according to him, they learned early-on that a first-come, first-served system was not working. He said the board had recommended that counties include evidence of tobacco dependency in their scoring system. Mr. Moore said agricultural associations in his county came up with ideas related to scoring. He said their criteria was open for everyone to see.

Mr. Furnish said the best ideas regarding the model programs come from the counties. He said that the GOAP staff and ADB revisit the model program structure yearly and make changes where appropriate.

Responding to a question from Representative McKee about the inclusion of tobacco dependency in scoring, Mr. Judy said in his county, evidence of a Phase II payment might not apply to some tobacco growers who raised dark tobacco. Also, regarding a farmland tile drainage program, he said his council tried to prioritize allocation of the funds based on how closely one was associated with farming.

Documents distributed during the committee meeting are available with meeting materials in the LRC Library. The meeting ended at approximately 11:45 a.m.