Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> January 6, 2010


The<MeetNo2> 1st meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> January 6, 2010, during a recess of the Senate and House Chambers, 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 Dottie Sims, Co-Chair; Senators David E. Boswell, David Givens, Vernie McGaha, Joey Pendleton, and Damon Thayer; and Representative McKee.


Guests:  Roger Thomas, Joel Neaveill, Angela Blank, Kylie Palmer, and Michael Tobin, Governor’s Office of Agricultural Policy.


LRC Staff:  Lowell Atchley, Stefan Kasacavage, Biff Baker, Morgan Whitney, and Kelly Blevins.


The December 2, 2009, minutes were approved by voice vote and without objection on a motion made by Rep. McKee, seconded by Rep. Sims.


 The presiding co-chair, Senator Gibson, invited Mr. Joel Neaveill, Chief of Staff, Governor’s Office of Agricultural Policy, to appear before the committee and report on the Agricultural Development Board’s (ADB) actions from the previous month. Mr. Roger Thomas, GOAP Executive Director, joined him later in the meeting, as did GOAP staff members Kylie Palmer and Michael Tobin.


During the discussion of the Marksbury Farm Food LLC project, Mr. Neaveill explained the responsibilities of the partners involved. Later in the meeting, they responded to Co-chair Gibson’s observations about LLCs, saying that they routinely check the business organization of those applying for state tobacco settlement funds. They indicated they could not recall of an LLC that had failed after receiving the funding.


The Marksbury Farm Foods project, along with two other projects, J & Sons Meat and Processing LLC, and Bluegrass Lamb and Goat LLC, prompted committee discussion about the availability of food animals to supply the meat processors’ needs. Mr. Neaveill observed that, in looking at projects funded from 2001 to 2007, there were some unintended consequences occurred because competitors for the same type business were awarded funding.


As the review of the projects list continued, they explained to Senator McGaha that Marshall County Conservation District received a funding approval to set up a welding program for area producers even though the custom of directing the funds toward those with ties to the tobacco industry was not followed. Mr. Thomas explained to the senator that this was not indicative of a “new direction” but reflected the fact Marshall County was not historically a significant tobacco producing county. According to Mr. Thomas, there are many young farmers who need assistance, but who may not have been involved in tobacco production. He pointed out that state funds had been awarded in the past for projects that were not related to current or prior tobacco production, such as the funding for the Kentucky Proud program.


A Kentucky Community and Technical College System Foundation project that was denied $252,000 in funding to teach basic computer skills to farm families led to committee discussion about the notion of affected counties contributing to such endeavors.


Senator Gibson indicated he could see the merits of using the tobacco funds to help train people for career opportunities. According to Mr. Thomas, the adequacy of funds at this point in time also is a factor in no-funding decisions.


Following the projects review, Mr. Thomas and GOAP staff highlighted the ADB’s actions on 2010 program/policy revisions within the County Agricultural Investment Program.


Some of the changes led to extended committee discussion. According to Mr. Thomas, the board considered the changes after receiving consultation and input from a panel made up of county extension agents, who administer the County Agricultural Investment Programs (CAIP) and after receiving input from a committee of the board.


GOAP officials presented the committee with a detailed list of policy revisions affecting individual programs. Mr. Thomas highlighted some of those in particular, including decisions to: remove fertilizers, pesticides, and soil amendments from the list of eligible cost-share items; to remove all transport equipment (trailers and wagons) from the cost-share item list; to include hired labor as an eligible cost-share item; and to set the maximum cost-share producer at $5,000, a reduction from the previous $7,500.


Following Mr. Thomas’ summary, several committee members asked questions and commented on the merits and timing of the changes.


Senator Givens wondered aloud if the GOAP had given counties enough notice regarding the policy changes, even allowing a year to elapse before the changes took effect. Mr. Thomas responded that extension agents had been informed and that the changes would not be effective until March or April.


Responding to Senator Givens, Mr. Thomas said the board thought that fertilizer and pesticide costs were part of a normal farming operation. But Senator Givens observed that those cost-share items allowed farmers to be better consumers and required them to be trained on fertilizer usage and the merits of soil testing.


Senator Givens expressed his concerns that “local control” was being taken away from county councils. In his response, Mr. Thomas indicated that, under the CAIP system, counties can focus on investment areas aimed at producers in their county.


Testimony showed the CAIP system was undertaken to put some uniformity into the way counties dispense the tobacco settlement funds.


Mr. Thomas told the committee that, under the CAIP, they were hopeful counties would devote the funds they administer to unique programs, but that has not happened. He told Co-chair Sims that producers were not losing interest in the local program; rather there is “tremendous interest.”


According to the GOAP officials, who was responding to Senator Givens about whether local producers were becoming complacent in their use of the funds, GOAP staff were hopeful that counties examine what is important at the local level and tailor agricultural investment programs to meet those needs. The senator asked if the CAIP system had created a dependency under which a county council would be a rubber stamp body. But the witnesses indicated that was not the case, reiterating the notion that they wanted the local councils to think about new approaches. Mr. Thomas again mentioned that, under the CAIP system, counties can prioritize how they grant the funds. He also mentioned the increased accountability of the CAIP system.


In continuing discussion about the CAIP system and how often county councils meeting, Senator Givens requested from GOAP staff a comparison of how the funds were granted under the old “model program” system versus the CAIP.


Responding to Co-chair Sims, who referred to the cost-share change from $7,500 to $5,000, Ms. Palmer indicated that few counties granted up to the $7,500 cost-share limit. According to Mr. Rogers, smaller counties with fewer farmers tended to be the ones that granted the larger cost-share amount.


Next, Representative McKee discussed some of the history of the program. He observed that changes have occurred in agriculture since 2001, some good and some bad. He said they wanted to make sure that local control in the use of the funds was evident. The representative indicated that county councils do have input in the utilization of the funds. He noted that councils can place a low priority on individual project fund requests. According to Representative McKee, Kentucky’s tobacco settlement program is recognized nationally. If changes are made in the program and they do not work, those changes can be reversed. The challenge, he indicated, will be to retain funds in the program in light of the current budget situation.


After some discussion about the differences between the tobacco settlement funds coal severance funds, discussion returned to the policy changes.


Senator McGaha observed that, in some areas, county councils are delighted just to help farmers to continue farming.


Senator Givens agreed with Mr. Rogers’ observation that it would have been acceptable if the ADB had take a difference approach of allowing county councils to decide how they want to handle the use of funds for fertilizers and pesticides.


As the meeting was ending, Co-chair Gibson suggested that the committee revisit the issue in the future, once all the members were able to attend a meeting.


Documents distributed during the committee meeting are available with meeting materials in the LRC Library. The meeting adjourned at approximately 5 p.m.