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Kentucky ponders future of Ag Development Fund
Kentucky Correspondent

FRANKFORT, Ky. — For the second year in a row, the Governor’s Office of Agricultural Policy (GOAP) will host a series of round table discussions across the state giving extension agents, county agricultural development council members, agricultural leaders and GOAP staff the chance to discuss the future of the Agricultural Development Fund (ADF).

During these meetings GOAP will give updates on the ADF, share information regarding future plans and discuss the issues farmers are facing on the county level, from the use of county funds to the operation of county model programs.

The Kentucky Agriculture Development Board (ADB) is a part of GOAP that was created in 2000 by the state General Assembly to distribute 50 percent of the state’s Master Settlement Agreement money as mandated by House Bill 611.

In its “Guiding Principles for Board Action” the stated philosophy by which the board uses as a guideline for dispensing ADFs says “the Kentucky Agricultural Development Board will invest monies from the Kentucky Agricultural Development Fund in innovative proposals that increase net farm income and effect tobacco farmers, tobacco-impacted communities and agriculture across the state through stimulating markets for Kentucky agricultural products, finding new ways to add value to Kentucky agricultural products, and exploring new opportunities for Kentucky farms and farm products.”

Keith Rogers, who is GOAP’s executive director and helps oversee the process of distributing funds throughout the state said the meetings so far have been going well this year with a broader scope of attendees from the 2005 meetings.

“Last year we kept the meetings focused on the county agents and county council members. We didn’t publicize it much but this year we decided to publicize it more so other public leaders and producers could become involved,” he said. “We have had some disagreements in the meetings but that’s the good side of having more people attend. One thing you can never do enough of is communicate with these county leaders.”

In each meeting, Rogers has handed out information packets showing the breakdown of money invested in county model programs, state non-model programs and facts about the Kentucky Agricultural Finance Corp. (KAFC), which was originally created by statute in 1984.

The loan program basically remained dormant until 2002, when the ADB, as part of its “long-term plan for agriculture development, recommended that KAFC be restructured to provide capital access for agricultural diversification and infrastructure projects. KAFC was awarded ADFs in July 2003.

It has been that institution and the use of money for tobacco infrastructure that has come under fire by opponents, namely the Community Farm Alliance (CFA).

In an editorial released by the CFA and written by member Tony Herrington, the organization voiced its concern over use of MSA funds for tobacco purposes rather than diversification projects, a point they say was the original intent in HB 611.

The editorial listed a breakdown of ADB funding including money for capital access projects, which in effect helps to fund the KAFC to the tune of $23 million to date.

“The Agriculture Infrastructure Loan Program, one of four loan programs funded by the AFC, is currently being used to fund tobacco barns, confined animal feeding operation (CAFO) buildings, and biotechnology facilities,” wrote Herrington. “As an organization of nearly 2000 members in the state of Kentucky, we specifically object to any tobacco settlement funds underwriting tobacco barns, CAFOs, or biotechnology. The mandate of House Bill 611 is to help tobacco dependent communities make the transition from tobacco. Farmers need that money spent in ways that secure a new future. In our judgment, building tobacco barns and confinement operations, or funding biotechnology corporations do not keep Kentucky farmers on the land. Originally, this loan program was limited to farmers who are tobacco dependent. In January, the board of the Ag Financing Corp. changed that requirement, allowing anyone to apply for funds, although charging a two percent higher interest rate. It is not even required that the applicant be a Kentucky resident. At the last board meeting of the Ag Finance Corp., the restriction allowing only those with at least 20 percent of income from farming in the past two years be considered for the loan was lifted as well.

“By funding the Ag Finance Corp., which then disperses money through the infrastructure loan program, the Ag Development Board, is in effect making tobacco settlement funds available to anyone for purposes already deemed illegitimate by their very own board.”

Rogers said, “The CFA editorial clearly had mistakes in it. For example, we did not eliminate the 20 percent rule for ag finance loans. Basically, if you look at the long-term plan that was developed in this program, capital access is one of six areas of focus. KAFC is part of that focus. The infrastructure program does allow for tobacco barns but the ADB has clearly said in five or six votes in the last 12 or 13 months, that it will not take county ag development fund dollars and put into model programs to support the production of tobacco.

“However on the other side of that, it is an agriculture development board and the development of tobacco is a part of that. The ADB and the KAFC feel like it is a very appropriate use of loan dollars to assist producers who need to build infrastructure to remain in tobacco.

“The board feels this is a more appropriate way; the money is paid back, there are no grants just simply a low interest loan program. We’re going to have to agree to disagree with the CFA on this issue. Tobacco is in a transition but is going to play a key role for a long time to come.”

Herrington, a central Kentucky tobacco and cattle farmer, said later he wasn’t against tobacco farmers, he just thought funding for a tobacco infrastructure was not what the legislature had in mind when it passed HB611.

“Helping tobacco farmers to diversify was how the legislation was sold to the General Assembly,” he said. “Now, they’re turning it into tobacco investment. In Harrison County in ’97 we had 10 million pounds of tobacco. The last year of the quota system we had three or four million and last year maybe two million. If we could house it then, we don’t have a need for barns now. I don’t agree with it at all.”

While differences exist, both sides have worked to make agriculture better in the state. “We have put over $200 million into Kentucky agriculture in six short years with an educational component that has gone along with every model program,” said Rogers. “Without that, there’s a good chance we would have failed. Between the money and the education, we’ve helped producers see there is a better way.”

For more information about the GOAP roundtable meetings, visit their website at