With the Kentucky General Assembly set to reconvene in regular session on Tuesday, Feb. 7, work continues in Frankfort on an important committee that meets monthly to consider investments in the health and agricultural wealth of the Commonwealth.
As outgoing co-chair of the Tobacco Settlement Agreement Fund Oversight Committee, I've had the opportunity to work with my fellow legislators to prioritize investments from funds Kentucky receives each year through the 1998 Master Settlement Agreement (MSA). The next meeting of the committee is scheduled to meet Wednesday, Feb. 1, to hear from directors of the Governor's Office of Agricultural Policy, who will report on the projects considered for funding at the December 2016 and January 2017 meetings of the Agricultural Development Board.
Many of you are aware that under the MSA, participating states settled their Medicaid lawsuits against the tobacco industry for recovery of tobacco-related health-care costs, and at the same time exempted the companies from court liability regarding harm caused by tobacco use. In exchange, the companies agreed to curtail or cease certain tobacco marketing practices, as well as to pay in perpetuity, various annual payments to states to compensate them for some of the medical costs of treating persons with smoking-related illnesses.
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As a part of the settlement, Kentucky, like the other 46 settling states, receives a yearly tobacco settlement payment, generally in April of each year. Also, the state occasionally receives other smaller payments as subsequent manufacturers join the settlement. Payments under the MSA are based on cigarette sales in the U.S., which have declined and continue to do so.
To date, Kentucky's MSA receipts have totaled $1.905 billion. We received an MSA payment totaling over $90 million in 2016 and almost $62 million in 2015. In 2014, the state received more than $159 million, the largest amount in the 15-year history, but some of that was the result of an arbitration out-of-court agreement relating to some disputed prior payment obligations.
Kentucky is unique in the way that it appropriates its MSA funds. In 2000, the General Assembly, with HB 611 and other legislation, agreed to devote 50 percent of its MSA funds to early childhood development and health care initiatives, and 50 percent of the state's tobacco settlement funds to agricultural development initiatives aimed at helping farmers diversify away from the tobacco production that was such a prominent part of the agricultural landscape at the time. As stipulated by HB 611, on the agricultural side, 35 percent of the MSA funds are distributed to counties under a formula that takes into account the economic importance of tobacco prior to the MSA.
HB 611 also established and set out the responsibilities of the Tobacco Settlement Agreement Fund Oversight Committee, which has 12 members consisting of elected senators and representatives. The jurisdiction of the committee includes matters pertaining to the Agricultural Development Board, such as the board's consideration of grants and loans, expenditures of the Early Childhood Development Fund, and the Kentucky Health Care Improvement Fund.
MSA funds devoted to agriculture diversification and rural development flow through the board, which serves to distribute 50 percent of the state monies received from the MSA for agricultural development. A portion of those funds, however, are obligated beforehand to pay bonded indebtedness for a series of water and sewer bond issuances agreed to by the General Assembly through the years and administered by the Kentucky Infrastructure Authority.
For the remaining agricultural development funds, the board considers proposals that increase net farm income and effect tobacco farmers, former tobacco-dependent communities, and agriculture generally across the state. The idea is to stimulate markets for Kentucky agricultural products, find new ways to add value to Kentucky's agricultural products, and explore new opportunities for Kentucky farms.
To date, Kentucky has invested more than $500 million in an array of county, regional and state projects designed to increase net farm income and create sustainable new farm-based business enterprises. More than 5,200 projects that have been funded through the Kentucky Agricultural Development Fund (KADF), since the inception of the program in January 2001.
By most accounts, Kentucky's farming communities have benefited from the MSA used at the local level. A report released in November 2015 found that KADF investments from 2007 through 2014 have positively and significantly impacted agriculture and agribusiness in Kentucky. Researchers with the University of Kentucky College of Agriculture, Food and Environment estimated $2.03 in farm income was generated for every dollar invested in KADF projects.
The agricultural board invested $198 million in programs and projects from 2007 through 2014. This resulted in 465 products being created and the creation or expansion of 77 markets. The board invested $42 million in state and county projects, an investment that has resulted in an estimated $86 million in additional farm income. In addition, approximately 708 new jobs were created by the board's investments, the study found.
Additional highlights from the study included:
33,958 farmers were estimated to have been affected by KADF projects, of which approximately 17,617 were estimated to be current or former tobacco growers.
For every dollar the Kentucky Agricultural Development Fund invested, return on investment was highest for marketing and promotion ($3.07), followed by livestock ($2.81) and horticulture ($1.20).
County Agricultural Investment Programs, designed to increase net-farm income, add value to products and diversify operations, accounted for an investment of more than $100 million with over 61,000 participants.
The Kentucky Agricultural Finance Corporation's Beginning Farmer Loan program was found to be highly regarded. It was a critical component to accessing financing for recipients purchasing land to develop, expand or buy into a farm enterprise. The finance corporation completed 198 loans between January 2007 and June 2015.
While funds from the MSA might not last forever, I am thankful for the foresight our legislative leaders showed in creating a strategy that continues to invest in diversifying Kentucky's agricultural community and investing in the long-term health of its citizens.
I hope you'll contact me if you have any questions or concerns regarding this issue or any other that is set to be heard before the legislature in the weeks ahead. You can reach me at firstname.lastname@example.org or by calling the Legislative Message Line toll-free at 1-800-372-7181.
State Rep. Wilson Stone represents the state's 22nd House District in Allen, Simpson and Warren counties.