Tobacco Settlement Agreement Fund Oversight Committee



<MeetMDY1> April 9, 2008


The<MeetNo2> Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> April 9, 2008, 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; Representative Rick Rand, Co-Chair; Senators Charlie Borders; Representatives Royce W. Adams, Charlie Hoffman, and Tom McKee.


Guests:  Mr. Roger Thomas, Executive Director, Mr. Joel Neaveill, Chief of Staff, and Angela Blank, Director of Communications, Governor's Office of Agricultural Policy; Mr. Dave Maples, Executive Vice President, Kentucky Cattleman's Association; Mr. John Stevenson, Director, Kentucky Beef Network; Mr. Charles Miller, Kentucky Beef Network; Dr. Jack Kimbrough, Kentucky Cattlemen's Association Board; Dr. Roy Burris, University of Kentucky Research and Education Center at Princeton; Dr. Les Anderson, Beef Cattle Extension Specialist, University of Kentucky.


LRC Staff:  Mr. Lowell Atchley and Lindsey Murphy, Committee Assistant


A quorum was not present.


Co-chair Gibson began the meeting by inviting representatives of the Governor's Office of Agricultural Policy (GOAP) to come before the committee. They included Mr. Roger Thomas and Mr. Joel Neaveill, GOAP Executive Director and Chief of Staff respectively.


Mr. Neaveill began his presentation with a review of the model projects. Hearing no questions, he turned to the report of state projects presented to the Agricultural Development Board (ADB) at its March meeting.


Responding to Co-chair Gibson regarding the Waterworks Farm Inc., project, Mr. Neaveill said county councils who contribute funds for projects are not required to contribute a specific percentage of a project. He said applicants are required to put up 50 percent of the total funds required for an undertaking. Mr. Thomas pointed out that they like to see a degree of support from counties affected, which would indicate that counties also are committed to the projects.


Mr. Neaveill told Representative Rand that Waterworks Farm was an existing company, but the line of business made possible with the help of the agricultural development funds would be new. Waterworks requested the funding to establish an egg production business in association with Shelby County area producers of locally grown, free-range eggs. Responding to other committee questions, they said such operations require small acreages. They said the firm would be purchasing feed from a local mill.


Committee members raised questions on another project, a South Kentucky Rural Electric Cooperative Cooperation (SKRECC) study on the feasibility of a beef processing plant to be located in the state. Mr. Thomas indicated to Representative Rand the study would look at the need for a beef processing plant, with the next step being the securing of a company that could build the facility. Representative McKee commended the SKRECC for being "proactive in that area."


The speakers next described the Kentucky Center for Agriculture and Rural Development (KCARD) project, which received $410,000 in state funds to continue to provide business support services and technical assistance to rural agribusinesses across Kentucky.


Co-chair Gibson asked how KCARD reports its expenditures to the GOAP. Mr. Thomas said the organization reports its expenditures to the board. He said he would provide some additional information to the co-chair.


Following that report, the speakers reported on the Kentucky Agricultural Relief Effort (KARE), an $8.15 million initiative aimed at helping farmers whose crops were damaged by severe spring freeze and summertime drought conditions last year. KARE was funded with Agricultural Development Fund moneys.


Mr. Thomas said the ADB had made some changes to model programs and created an education program aimed at drought relief, but the KARE program represented an important next step. The KARE program would last for eight months and offer funding in three broad areas -- water, forage, and other general enhancements.  Mr. Thomas said the program was designed, not to make up for what occurred in 2007, but to be more proactive in providing help in the future.


In particular, Mr. Thomas talked about the water projects that could be undertaken with KARE funds, such as drilling for subsurface aquifers, developing and piping on-farm springs, establishing and enhancing ponds, constructing small stream water basins, hooking to city/county water lines, and installing irrigation systems.


According to the GOAP official, some funds would even be made available to counties that receive little or no agricultural development funds.


He said that, overall, they had received "positive reviews" on the program. He mentioned, in particular, those counties that traditionally receive little agricultural development fund.


Representative McKee complimented Mr. Thomas in getting the program under way, and he lauded the Governor for his support.


Responding to Representative McKee about the adequacy of the funding, Mr. Thomas said the program would "get us to a five" on a scale of one to 10. He noted that Agriculture Commissioner Richie Farmer had stressed the need for more water retention facilities in the state.


As discussion continued, Mr. Neaveill noted that county councils can opt to add even more of their 2008 tobacco funds to their part of the program if they desire to do so.


On a related issue, Senator Borders asked the speakers what would account for the hay shortage reported in the media of late. Mr. Thomas said the drought of 2007 was a factor in less hay production, Kentucky is a large cow production state, thus would use hay. Also less acreage may be devoted to hay at this time, with more acres devoted to corn and soybeans. But he said overall, last year's drought was the main reason for less hay production.


The senator congratulated all those responsible for getting the KARE program launched. Mr. Thomas also complimented the work that GOAP staff did in creating and setting up the program.


As discussion about the KARE program ended, Co-chair Gibson also complimented those involved in setting up the program, and further for making some funds available to counties that generally receive little or no agricultural development funds.


The senator then asked Mr. Thomas to comment on the FY 2009-FY 2010 budget. Mr. Thomas responded that the Free Conference Committee report to HB 406 basically "flat-lined our operations." He said they would receive $12.5 million in FY 2009 and $11.5 million in FY 2010. Mr. Thomas reiterated his goal to shift additional funds to the Kentucky Agricultural Finance Corporation (KAFC), where they would remain in a revolving loan pool. But he said they would be limited on how much money they could move to the KAFC.


Representative McKee responded to Mr. Thomas' remarks that he had a "great concern on what this budget process did to the Agricultural Development Fund." According to Representative McKee, Kentucky no longer allots 50 percent of its Master Settlement Agreement funds to agricultural development. "The bond funds that we're supporting, if we don't change the trend, I'm not sure that five years from now, we'll be sitting here, because the money will be gone," the representative said.


Representative Rand said he had received calls regarding the status of the agricultural development funds. He likened the use to tobacco funds to pay for bonded indebtedness to "unlocking the box." He added that the recent budget "blew the lid off the box." Representative Rand mentioned the importance of the agricultural development funds to farmers in the state.


Senator Borders said the Legislature needs to be "very cautious that we don't habitually do things that we do in these times." He said these are "unprecedented times."


Next, the committee heard a presentation from the Kentucky Beef Network. Appearing before the committee were: Mr. Dave Maples, Executive Vice President, Kentucky Cattleman's Association; Mr. John Stevenson, Director, Kentucky Beef Network (KBN); Mr. Charles Miller, KBN Market Development Chair; Dr. Jack Kimbrough, a veterinarian and member of the Kentucky Cattlemen's Association Board; and Dr. Roy Burris, an animal science specialist with the University of Kentucky Research and Education Center at Princeton.


Mr. Miller made the presentation to the committee. According to Mr. Miller, Kentucky's beef industry had grown in recent years to 38,000 farms generating some $607 million in cash receipts. Kentucky was the largest beef producing state east of the Mississippi River, according to Mr. Miller.


He described the KBN as a cooperative effort working with beef producers, UK and the regional universities, the Department of Agriculture, Farm Bureau, Kentucky Livestock Marketing Association, and county organizations.


KBN's 2008-2010 programs included the Master Cattlemen Program, the Applied Master Cattleman, an integrated resource management program, promotion, assistance to producers in data management system and records management, value-added targeted marketing, the Master Grazer Program, the CPH-45 Program, youth mentoring, and general administration.


As he elaborated on each program, Mr. Miller noted the Master Cattleman Program had touched producers in 115 counties. According to him, marketing was conducted on a national basis. He said CPH-45 calves represent "our Kentucky Proud product," a reference to the Department of Agriculture's marketing logo. He said 13,500 producers have been beef quality assurance certified. Mr. Miller also described the data management assistance offered and market development.


In addition, Mr. Miller noted that the KBN manages the Southeastern Livestock Network, consisting of 10 states in the Southeast.


Following the formal presentation, Mr. Miller told the committee that in 1998, he raised 120 acres of tobacco. But in the last three years, he has not raised tobacco, rather has increased his cattle herd numbers. He said a "vast number of farmers in Kentucky" are in a similar position.


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