Published on 12/22/04

Tobacco settlement money may not get to farmers

By Brad Haire
University of Georgia

Georgia tobacco farmers' share of money from a 1998 tobacco settlement that compensates states for smoking-related health problems will be late -- if it comes at all.

About 300 farmers and industry representatives met to discuss this and other tobacco issues at a meeting Dec. 21 at the University of Georgia's Rural Development Center in Tifton, Ga.

Since 1999, Phase II checks have been issued on Dec. 30. They usually arrive in the mailboxes of eligible U.S. farmers or quota owners by the first of the year. But not this year, said Lamar DeLoach, president of the Tobacco Growers Association of Georgia.

These payments from tobacco companies are intended to offset farmers' income losses to reduced U.S. tobacco consumption stemming from the Master Settlement Agreement that awarded states $206 billion. The companies agreed to pay U.S. farmers and quota owners $5.15 billion over 12 years.

The tobacco companies say they should no longer be required to pay farmers this money, since legislation signed Oct. 22 by President George Bush signaled the end of the Depression-era U.S. tobacco quota program.

The companies will pay about $10 billion in compensation to U.S. farmers for the end of this program, something most farmers wanted.

A North Carolina business court is expected to rule on the Phase II money case later this week. An appeal is expected regardless of the ruling. The appeal could take three months to six months to resolve, said Donnie Smith, executive director of the Georgia Tobacco Community Development Board, which oversees the distribution of the money in Georgia.

Either way, Smith said, payments will be, at the least, delayed.

"We know this situation puts tobacco growers and quota owners in a difficult situation," Smith said. He noted that many farmers depend on the money to make payments on equipment, supplies, loans or taxes.

Georgia's 2004 Phase II payment would be about $25 million, he said.

Language in the national settlement says tobacco companies can reduce their Phase II payments by any amount taxed against them in order to make other payments to farmers and quota owners, said J. Michael Moore, a tobacco agronomist with the UGA Extension Service.

The money that will go to farmers and quota owners for the end of the tobacco program can be considered this type of tax.

But when does the federal program end? The bill that abolishes the program doesn't take effect until June 30, 2005. Tobacco companies haven't paid any money to farmers or quota owners for the end of the program, yet, DeLoach said.

The companies should be made to pay their 2004 Phase II payment, DeLoach said.

"It seems pretty cut-and-dried to me," he said.

The companies have paid three-quarters of the 2004 Phase II money. It sits now in a trust held by JPMorgan Chase Bank.

Brad Haire is the former news editor with the University of Georgia College of Agricultural and Environmental Sciences.