Tobacco Settlement Agreement Fund Oversight Committee


Minutes of the<MeetNo1> 8th Meeting

of the 2007 Interim


<MeetMDY1> August 1, 2007


The<MeetNo2> 8th meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> August 1, 2007, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Senator Carroll Gibson, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Carroll Gibson, Co-Chair; Senators Joey Pendleton; Representatives Royce W. Adams, James R. Comer Jr, Tom McKee, and Tommy Turner.


Guests:  Mr. Keith  Rogers, Executive Director, Governor's Office of Agricultural Policy; Mr. Tim Hughes, Deputy Executive Director, Governor’s Office of Agricultural Policy; Ms. Irene Centers, Program Manager, Tobacco Prevention and Control Program.


LRC Staff:  Lowell Atchley and Lindsey Velasquez.


Senator Gibson, the presiding co-chair, called the meeting to order, but deferred approval of the July 5 minutes because a quorum was not present.


Before preceding, Co-chair Gibson informed the Committee that Representative Mike Denham, the House Co-chair, would not be attending the meeting because his mother was hospitalized for treatment of injuries sustained in a fall. Co-chair Gibson asked those attending to keep Co-chair Denham and his family in their thoughts and prayers.


Next, the presiding chair asked Mr. Keith Rogers, Executive Director, Governor’s Office of Agricultural Policy (GOAP), to address the Committee regarding agricultural development projects considered at the July Agricultural Development Board (ADB) meeting. Accompanying Mr. Rogers was Mr. Tim Hughes, Deputy Executive Director.


Before beginning, Mr. Rogers introduced GOAP’s project analysts, Kyle Day, Todd Harp, Christi Marksbury, and Nick Whobrey, and described their regions of responsibility.


Next, Mr. Rogers responded to some questions from Co-chair Gibson regarding the information that went to ADB members as they prepared for monthly meetings. According to Mr. Rogers, the board members typically had well over a month to review non-model project applications. The review for model projects was shorter because those were more routine in nature with standard requirements for their approval. Sometimes larger non-model projects would entail appointment of a committee of the board to assist staff in their review.


Mr. Rogers also explained what it costs to operate the Governor’s Office of Agricultural Policy and the local county councils. According to the GOAP Executive Director, the GOAP had a fiscal year budget of about $1.1 million. At the local level, entities administering model programs could take up to 5 percent of the funding for administration; county councils individually were allowed a one-time percentage of total county funds to cover the cost of conducting meetings, postage, and the like.


During the review of state projects, Mr. Rogers spent some time explaining and responding to questions from Committee members regarding the Sunderland Farm application. Sunderland Farm Firewood LLC had requested $102,500 in combined state and county funds to expand its firewood processing business in Harrison County. But the Agricultural Development Board approved only $5,000 in Harrison County funds and referred the applicant to the Kentucky Agricultural Finance Corporation (KAFC) for a possible loan.


Representative McKee said he was familiar with the business and had visited their facility. He noted the high rating the project had received at the local level. The representative pointed out the applicant no longer raised tobacco and the project would fill a void in his farming operation.


The representative also pointed out that other farmers would benefit by virtue of the applicant using their wood to produce the firewood products. “I would respectfully ask the board to go back and take another look at it,” Representative McKee said.


Mr. Rogers indicated the applicant had originally asked for $10,000 from the Harrison County council, but the council put the high priority on $5,000. In addition, the  the KAFC loan would be for 2 percent, he said.


Mr. Rogers likened an earlier similar recipient of a forgivable loan as a “pilot project,” with reports expected in three or four months regarding the success of the business in meeting its forgivable loan requirements. According to him, the board believed Sunderland Farm was strong enough financially to acquire a KAFC loan.


Responding to Representative Comer on the John’s Custom Meats project, Mr. Rogers explained the company had experienced cost overruns on the new facility and sought ADB and local funding. According to Mr. Rogers, at least three slaughter facilities had received agricultural development funds in the past. Those facilities processed various types of livestock and poultry.


Following his review of state and county projects, Mr. Rogers explained the new pilot farm management cost-share program and told the Committee that the application and funding process for the program would be similar to the model programs. The ADB set the program up to encourage the use of farm management services and programs.


Next, Senator Pendleton asked about the possibilities of the Agricultural Development Board and Economic Development Cabinet assisting the Field Packing Co. in Owensboro, which had experienced some problems affecting its business. He mentioned the need for a slaughter facility in Kentucky that could use beef produced in the state.


Mr. Rogers described how they had worked with Field-Fischer officials off and on for several months. He said discussions had been revived recently, with the company scheduled to make a presentation at the August ADB meeting. The company had filed an application with GOAP for agricultural development funding. According to Mr. Rogers, the project would total $17 million, with $5 million to be requested from the Agricultural Development Fund. He said it would take several months to review the request.


Senator Pendleton said he realized the project was a large one. But he said such an undertaking would provide a market for Kentucky livestock. According to the senator, there was some controversy when $6 million in agricultural development funds went to help build the ethanol plant in Hopkinsville, but the plant was paying for itself. During discussion, the senator also mentioned the tobacco economy prevalent in the Owensboro area.


As explained  by Mr. Rogers, the Owensboro Field plant was not a slaughter facility, rather a processing plant that used trimmings from beef, pork, and poultry. Raw ingredients, he said, would come from a slaughter facility. He mentioned the possibility of utilizing the Swift slaughter facility in Louisville and setting aside a day for Kentucky livestock and poultry. Those meats could then go to the Field-Fischer packing plant as well as other plants.


Following that discussion, Co-chair Gibson asked Ms. Irene Centers, Program Manager, to report on the Tobacco Prevention and Control Program, a tobacco settlement funds recipient.


Ms. Centers told the Committee that the program was funded primarily by Master Settlement Agreement funds. Plus, the program received a grant from the U.S. Centers for Disease Control. Using the combined funds, she said, they had developed and implemented a comprehensive statewide tobacco prevention and cessation program based on CDC best practices. She said Kentucky spent $3.6 million annually specifically for tobacco control (.86 cents per person) compared to the CDC recommendation that the state spend at least $25.1 million or $6.42 per person.


According to Ms. Centers’ report, state high school smoking rates declined 12 percent from 2004 to 2006, dropping from 28 percent to 24.5 percent per capita. She said the middle school smoking rate was 12 percent in 2006, down from 15 percent in 2002, a 19 percent decline.


She reported on several activities of the program, including the operation of an on-going quit line, and formation of a hospital inpatient tobacco cessation counseling protocol involving several hospitals and organizations.


Responding to Co-chair Gibson, Ms. Centers said the program received $476,252 in unanticipated funding in April from the Master Settlement Agreement, but was not able to use the funds in FY 07 because of the timing. She told the Committee they planned to carry over the funds to the next fiscal year and instead used some federal funds when they normally would have used the tobacco dollars. The program received a total of $2,868,159 in tobacco settlement funds in FY 07.


The speaker responded to a question from the co-chair about Kentucky’s adult smoking rates. According to Ms. Centers, the state continued to have the highest per capita adult smoking rate in the nation and had not seen any change in years. The cigarette excise tax increase that went into effect in the summer of 2005 probably would not have influenced adult smoking rates, although it may have impacted teen rates, according to Ms. Centers.


During the discussion, Ms. Centers said their umbrella agency, the Department of Public Health had a personnel quota cap in effect that affected their ability to hire personnel. In particular, she said they were unable to hire a registered nurse to work in the area of smoking prevention for pregnant women. According to Ms. Centers, their staff complement stood at four people.


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


The meeting ended at approximately 11:45 a.m.