Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> December 4, 2013


Call to Order and Roll Call

The<MeetNo2> meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Wednesday,<MeetMDY2> December 4, 2013, at<MeetTime> 10:00 AM, in<Room> Room 129 of the Capitol Annex. Senator Paul Hornback, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Paul Hornback, Co-Chair; Representative Wilson Stone, Co-Chair; Senators Carroll Gibson, Jimmy Higdon, Dennis Parrett, and Robin L. Webb; Representatives Mike Denham, Tom McKee, Terry Mills, Ryan Quarles, and Jonathan Shell.


Guests: Roger Thomas, Joel Neaveill, Bill McCloskey, Brian Murphy, Kylee Palmer, Sandra Gardner, and Biff Baker, Governorís Office of Agricultural Policy; Kimberly Richardson, Division of Conservation.


LRC Staff: Lowell Atchley, Kelly Ludwig, and Kelly Blevins.


The October 30, 2013, minutes were approved without objection on a voice vote, upon a motion by Representative McKee and seconded by Senator Parrett.


Governorís Office of Agricultural Policy

Mr. Roger Thomas, Executive Director, Mr. Joel Neaveill, Chief of Staff, and Mr. Bill McCloskey, Director of Financial Services, Governorís Office of Agricultural Policy (GOAP), testified about project funding decisions made by the Agricultural Development Board (ADB) during the boardís October and November meetings.


Mr. Neaveill summarized tobacco settlement funding allocations from the November meeting under the County Agricultural Improvement (CAIP) and Deceased Farm Animal Disposal Assistance programs.


Following the summaries, Mr. Neaveill responded to questions on how county councils utilize their funds in a given year and how the funds are retained for use in subsequent years. Mr. Neaveill, responding to Senator Gibson, explained how the county funds are budgeted, based on a formula. MSA funding allocations have been reduced in recent fiscal years.


Responding to Co-chair Hornback, Mr. Neaveill and Mr. Thomas indicated that some counties can pick up deer killed on roadways as a part of their deceased farm animal removal programs. Senator Parrett urged caution on the part of counties in using funds to perform a service that normally is handled by road departments.


Mr. McCloskey summarized a project that received funding approval in the November ADB meeting, the Kentucky Center for Agriculture and Rural Development (KCARD), based in Hardin County, which was approved for $700,000 in state funds to provide technical assistance and educational opportunities to agricultural and rural businesses.


Mr. Thomas said that KCARDís new executive director wants to undertake strategic planning for the organization and ultimately have the entity become self-sustaining. KCARD recently received a $200,000 U.S. Department of Agriculture competitive grant. KCARD has begun seeking fees from businesses that are in a position to pay for KCARDís consultations.


Responding to Co-chair Stone, Mr. Thomas said KCARDís reports to the board will include information about the impact of its services, such as contacts made, businesses assisted, the status of those businesses, and timelines for services.


Mr. Neaveill said that the most valuable piece of advice that KCARD gives clients may be telling them that their endeavors will not work.


Senator Parrett lauded KCARD and said it assisted a business venture in his area.


The GOAP officials explained the rationale involved in funding denials for the Montgomery County Conservation District project, which dealt with a program administrator change, and the Jessamine County FFA Alumni Association project, which had requested $8,000 to provide financial assistance for a farmersí back-to-school program in Jessamine County. Later in the meeting, Mr. Carl Waits explained why the project should have received funding.


Responding to Senator Hornback, Mr. Thomas provided an update on a three-judge panelís ruling in an arbitration hearing regarding some disputed 2003 Master Settlement Agreement payments. The panel had ruled in favor of more than 30 cigarette makers in their individual claims against Kentucky and five other states. The companies alleged that Kentucky and other states had failed to diligently enforce state tobacco laws during 2003 and were entitled to a refund under the MSA. Some states were determined to have enforced the provisions, while others had settled the companiesí claims.


According to Mr. Thomas, the state will file a motion in Franklin Circuit Court seeking to set aside the prior settlements because they were outside the dictates of the original Master Settlement Agreement.


According to Mr. Thomas, the amount and timetable for any future MSA deductions as a result of the ruling remained unclear.


Ms. Kimberly Richardson, Director, Kentucky Division of Conservation, testified about the divisionís soil stewardship cost share and water quality program, for which the division receives tobacco settlement funds.


Ms. Richardson reviewed the history of the program, its purpose, implementation by conservation districts, funding, the process for leveraging state funds with federal funds for farmland set-aside programs, other conservation initiatives, and non-point source pollution projects. Looking ahead, Ms. Richardson indicated that the review of best management practices is a constant process. She also discussed how the division deals with budget cutbacks, and commented on funding received since the mid-1990s and landowners assisted. Over 15,000 landowners have been approved for more than $133 million during the duration of the program. The division has received almost $112 million in tobacco settlement funds for its programs.


††††††††††† Responding to Co-chair Hornback, Ms. Richardson described how division personnel deal with landowners who have received violation notices. There are some ďbad actors,Ē but others simply need assistance and guidance.


††††††††††† Responding to Representative McKee, Ms. Richardson said she could provide county-by-county funding break-downs. Funds from a state pesticide fee have totaled about $600,000.


††††††††††† In a response to Senator Higdon, Ms. Richardson described how agencies are dealing with an algae problem on Taylorsville Lake. The Division of Conservation has tried to educate adjacent landowners about water runoff.


††††††††††† Responding to Representative Mills, Ms. Richardson discussed the working relationship with GOAP in providing funding for dead farm animal removal programs.


Senator Hornback pointed out the benefit of the conservation programs.


Jessamine County FFA Alumni Association

Mr. Waits described why a project he was proposing should have received a funding commitment from the ADB. The board, acting on a committee recommendation, denied funding based on the projectís lack of producer impact. The Jessamine County Council had earlier approved the project.


Mr. Waits discussed two other earlier programs that were similar. The programs were designed to help farmers and their spouses to return to school and receive training for a new trade or occupation.


He said that KRS 248.711(2)(f) permits county funds to be used to help farmers transition from farming to another vocation. He urged the committee to ask ADB to reconsider its earlier decision to deny funding.


Co-chair Hornback explained the oversight role of the committee and its relationship with the Agricultural Development Board.


Senator Webb said she found Mr. Waitsí story compelling and emphasized the positive aspect of keeping farmers on the farm. She said county funds should be under the control of county councils and urged that the concept be preserved. She encouraged the board to review the original intent of the tobacco settlement statutes from time to time.


Documents distributed during the meeting are available with meeting materials in the LRC Library. The meeting adjourned at approximately 11 a.m.