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Tobacco Trust Fund grants are supposed to help more than just one farmer, and recipients are expected to pass on what they learn.

N.C. House budget would eliminate Tobacco Trust Fund farm grants 

George O'Neal of Lil' Farm in Hillsborough established the Sustainable Agriculture Tool Lending Library for 10 local farms with a $30,000 grant from the Tobacco Trust Fund.

Photo by D.L. Anderson

George O'Neal of Lil' Farm in Hillsborough established the Sustainable Agriculture Tool Lending Library for 10 local farms with a $30,000 grant from the Tobacco Trust Fund.

North Carolina farmers are the latest target of the Legislature, where the Republican majority is trying to eliminate a grant program that has enabled many farmers to survive.

At a family farm where profit margins are thin and unforgiving, a $9,000 grant for a fence can be the difference between operating next year and not.

And a $27,000 tool-sharing program doesn't just help farmers share a tiller. It creates a community where farmers teach their colleagues about the tools and their techniques.

North Carolina's Tobacco Trust Fund was created after the country's biggest tobacco companies reached a settlement in 1998 with 46 states over the medical costs of smoking cigarettes. The fund was intended to take 25 percent of North Carolina's estimated $4.6 billion share of the dough over a quarter century and distribute it through grants. This money would help economically distressed communities that had relied on tobacco, as well as farmers who would grow alternative crops.

However, farmers haven't received nearly their full share of that money, because $380 million has been diverted to help balance the state budget, leaving just $83 million for grant projects, according to the Trust Fund Commission.

But that fund could be nearly eliminated after the House voted this month to defund the commission and use that money to fill the budget hole and avoid a tax increase. Under the House plan, all that would remain of the Tobacco Trust Fund is $1 million for grants overseen by the N.C. Department of Agriculture.

"It was a lifesaver to us," said McRay Greene Jr., who hopes his $30,000 grant will help a handful of farmers turn the Stokes County Purple Sweet Potato into a household name.

"Tobacco built North Carolina," Greene added. Money from his grandparents' farm helped put him through college. "But the farms are getting smaller and smaller, and our political clout is just disappearing."

Greene said he transitioned from tobacco about four years ago, moving into sweet potatoes, grains and "anything that's legal to hustle a buck right now."

The budget goes after cash flow from other parts of the tobacco master settlement, too, cutting off money for Golden Leaf, an economic development fund that invests in the places where tobacco once was king. It would also eliminate the state's Health and Wellness Fund, which tells children why they shouldn't smoke.

Golden Leaf has more than $600 million in reserves—an endowment it uses to generate enough interest to make annual grants. But the other funds have little money in the bank and would essentially be defunct without funding from the Legislature or a transfer that would begin draining Golden Leaf's reserves.

None of this is certain, though. The state Senate is working on the House budget and hasn't targeted the settlement money specifically. But Senate leaders have said they want deeper cuts than the House proposed, leaving many to assume that the only thing standing between Republicans and this money is Gov. Bev Perdue, who seems poised to veto the Legislature's budget.

Perdue wants to maintain a three-quarter-cent temporary sales tax to avoid these cuts and many others. It's an easy choice for farmers who see the long-term effects even relatively small amounts of money can have.

"I can't afford no $10,000 security system," said Joseph Thompson, who received money for a camera and sensor system that protects his Cedar Grove prawn farm from vandals, as well as from faulty valves and falling oxygen levels. "But I can afford a penny sales tax."

Farmers have also used money to innovate and share resources. George O'Neal, who owns Lil' Farm in Hillsborough, said he got into farming about seven years ago. He looked at nearby farms and wondered "Man, why do we all need to own a tiller?"

So O'Neal and his wife wrote a grant proposal and got $27,500 to buy basic tractor hook-ons, a bush hog, a manure spreader, a wood splitter and other tools farmers need but don't use every day. Nine area farmers use a Google calendar to reserve the tools, and they gather for what's supposed to be a routine social hour. Instead it's turned into "the best farming class" O'Neal has ever taken.

That's a key to tobacco grants: They're supposed to help more than just one farmer, and recipients are expected to pass on what they learn. A little money multiplies fast, recipients said.

Thompson's prawn farm, for example, will eventually supply baby shrimp to farmers in North Carolina and Virginia. That wouldn't be realistic without an advanced system to monitor the shrimping tanks. But with the grant paying for that system, other farmers can get their baby shrimp from North Carolina instead of Texas, Thompson said.

Then that's one more product that doesn't have to be trucked in from out of state.

"We need that grant money," said Thompson who, at 62, is fighting health problems as he tries to keep his farm going. "Just can't hardly make it without it, be frankly honest with you."

"I tell you what," he said. "You put (farmers) out of business, how are you gonna live?"


Cutting Golden Leaf

The latest state budget proposal diverts tens of millions of dollars from specific line items into the larger budget to balance it without a tax increase.

The Republican majority controlling the House would take $2.3 million from the state's scrap tire fund, $8.4 million from a trust fund for parks and $1.9 million from a "white goods management" account that, among other things, helps clean up illegal dumps that have old refrigerators in them.

But the biggest diversion would come from the state's Golden Leaf Fund, which provides economic development grants and is meant to help poor communities recover from North Carolina's waning tobacco economy.

That fund is supposed to get $67.5 million next year from the master settlement agreement. The Legislature would take that money for other budget priorities next year, including tax cuts and increases to the state's general fund reserve and employee pension fund.

Golden Leaf's $600 million reserve essentially functions as an endowment, earning interest to fund grants. Since 2000, Golden Leaf has used that interest and new cash infusions to distribute 1,042 grants totaling more than $484 million, according to the fund's website. Golden Leaf President Dan Gerlach said the grants have created 4,307 jobs in North Carolina since October 2008.

"If (legislators are) serious that the No. 1 issue in the state is jobs, then they should let us go," Gerlach said.

But Golden Leaf has been a whipping boy for critics on the right. The Carolina Journal, which is tied to Art Pope's Civitas Institute, considers it a "political slush fund," noting that its board is full of political appointees.

"So is every other board that gives away money in North Carolina," Gerlach said.

Some Golden Leaf projects have been labeled boondoggles, including the now-closed Sparta Teapot Museum, which was exactly what it sounds like. "We've given away $500 million, and there are questions about a few hundred thousand," Gerlach said.

Gerlach resisted the suggestion that Golden Leaf could turn to its endowment to fund grants in the coming year. That would allow Golden Leaf to continue operating and perhaps help fund farming grants and the state's anti-smoking and anti-obesity health and wellness programs. Also funded by the master settlement, these programs are slated for cuts this year.

Gerlach said Golden Leaf should leave the reserve alone because the fund is supposed to exist "in perpetuity. Once the endowment is tapped, Gerlach said, he'd worry the Legislature would keep on tapping it until there's nothing left.

Other states have done something similar, spending more of their settlement money up front. Steve Tate, a Randolph County farmer who benefitted from a tobacco fund grant, said he's been proud that North Carolina wasn't one of them. "We were the state that didn't rob that fund," Tate said. "And I see no reason for us to go against that."

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