Policy: Budgets & Deficits

Last tobacco buyout payment lowered due to spending cuts

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Associated Press,Budgets and Deficits,Smoking

RALEIGH, N.C. — Jo Ann Freeman says her father told her before he died to hold on to the family's Bertie County farmland because she could always live off of it, and besides, "God's not making any more."

So tobacco was still growing there in 2004 when Congress ended the allotment system that gave people the right to farm and sell the golden leaf under a Depression-era price support program. In exchange, more than 400,000 right holders and farm operators nationwide would receive annual payments through 2014 for each pound of flue-cured, burley or other tobacco they were allowed to grow. That would be paid for by a fee on tobacco product companies.

Today, people like Freeman might not benefit fully from the last annual payments. That's because U.S. Department of Agriculture officials say the payments are subject to the next round of automatic budget cuts that take effect in mid-January. The department announced Friday what's known as sequestration cuts are poised to result in a 7.2 percent reduction — unless Congress changes its mind.

The reduction may not seem like much given that nine of the 10 years of payments already have been made. But some farmers rely on the payments to repay borrowed money. Others like Freeman use it to supplement living expenses.

"This is money that is the tobacco companies' money that was promised to me, and that promise is what I've lived on," Freeman said. The retired magistrate receives a few thousand dollars a year from the buyout. "It's completely unnecessary. We're not out here making millions of dollars. We're just trying to make it."

The Tobacco Transition Payment Program is one of several run by the U.S. Department of Agriculture's Farm Service Agency subject to "discretionary and mandatory spending limits" stemming from the 2011 debt and deficit reduction law, the farm agency said Friday. The FSA lacks flexibility as it did last year to make up for automatic reductions because previous farm legislation has expired, agency Administrator Juan Garcia said.

"With the continuing budget uncertainty, Congress still may adjust the exact percentage reduction," Garcia said in a statement.

Farm advocates are fighting the cuts.

Members of North Carolina's congressional delegation, including key 2004 buyout negotiator Sen. Richard Burr, have written to U.S. Agriculture Secretary Tom Vilsack and the Office of Management and Budget. They question how the payments are subject to sequestration since the $10 billion program isn't funded directly by tax dollars.

In the No. 1 state for flue-cured tobacco production, North Carolina's 76,000 quota holders and producers were projected to receive $3.9 billion in cumulative payments through the program, according to a 2004 University of Kentucky report. The USDA didn't provide immediate data requested last week on past annual payments. If the $3.9 billion was distributed equally over 10 years, then 7.2 percent of one year's payment would be about $28 million.

"We understand that the government is trying to balance its budget, but so are these producers and quota holders," Larry Wooten, president of the North Carolina Farm Bureau. He added in a statement, "the only acceptable payment is the full amount."

The money has been a shot in the arm to tobacco-dependent communities that had watched the leaf they could grow under the program tumble before the buyout as cigarette companies relied more on foreign tobacco. Tobacco historically has been by far the most profitable cash chop in North Carolina fields, requiring less acreage compared to other plants.

"It's very important to the economy of North Carolina when you think about the jobs that it creates for people locally" and for the tax base, said third-generation tobacco grower Jamison Eley of Hertford County.

Eley, who grew tobacco on about 15 acres at the time of the buyout, still grows the leaf. But he also farms soybeans and wheat on several times that acreage. He arranged a lump-sum payment from a farm lender — to be repaid with his annual quota payments of $9,000 — to upgrade his farming operation and pay off some debt.

Eley said he'll have to take money out of his own pocket to make up the difference for the loan if the quota payment is reduced.

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