1. MSA Payments and Impacts on Programs Governor’s Office of Agricultural Policy July 16, 2014

2. Tobacco Master Settlement Agreement (MSA) 1998 agreement between 46 states Attorneys General that compensated states for the costs associated with the treatment of smoking- related illnesses Written for the first 25 years, but agreement is in perpetuity States were left to decided how they wanted to allocate this new source of revenue

3. Kentucky MSA Revenue (in Millions)

4. Kentucky’s MSA Distribution MSA Revenue Ky Ag Development FundState Fund Direct Appropriations County Fund 118 County accounts Early Childhood Fund Healthcare Fund

5. Kentucky’s MSA Distribution State Fund Remaining for Regional & State Project Investment Special Projects Debt Service Cost share

6. What is Debt Service? Bonds issued backed by full faith and credit of the Commonwealth Cash now for projects in exchange for repayment of debt over time Debt Service - Cash needed to pay interest and principal on a loan / debt

7. Kentucky’s MSA Debt Service Debt Service Farmland Preservation 2000 Water and Sewer 2000, 2004, 2008 UK Diagnostic Center 2008 Breathitt Vet Center 2008 4-H Camp Renovations 2008 FFA Leadership Center Renovations 2008

8. Kentucky’s MSA Debt Service Debt Service Farmland Preservation 2000 Farmland Preservation 2000 Water and Sewer 2000, 2004, 2008 Water and Sewer 2000, 2004, 2008 UK Diagnostic Center 2008 UK Diagnostic Center 2008 Breathitt Vet Center 2008 Breathitt Vet Center 2008 4-H Camp Renovations 2008 4-H Camp Renovations 2008 FFA Leadership Center Renovations 2008 FFA Leadership Center Renovations 2008 $28.4 Million each year to support $379,000,000 in Bonds

9. Agricultural Development Fund Appropriations (FY 2001-2014)

10. Agricultural Development Fund Appropriations (FY 2004 vs. FY2014) Debt Service Conservation 155.5%72.2% County Fund 26.2% State Fund 97.8%

11. Fiscal Year 2014

12. Recent Tobacco Settlement Actions DPrevents $42.5 million in Budget Cuts to Tobacco Programs in FY 14 DEnsures that the Enacted Appropriations for FY 15 & 16 will be fully funded (Agriculture the biggest beneficiary) DProvides an Estimated $57.9 million in Additional Tobacco Funds over the 3 Fiscal Years DProvides an Estimated $42.0 million in Additional Tobacco Funds over 2 Fiscal Years (FY 14 and 15) DRemoves the biggest element of uncertainty to Tobacco Fund receipts over the next 10 years DSaves the costly annual expense of litigation/arbitration

13. Prevents Budget Cuts to Tobacco Programs in FY 14 DEnacted Appropriations$90,800,000 DCFG Revised Estimate (Dec 2013)$45,400,000 DBudget Reduction Plan to Cut $45.4 million enacted in HB 235 to be prepared if the CFG Revised Estimate came true Agricultural Development Fund($23,124,200) Early Childhood Development Fund($6,261,300) Health Care Improvement Fund($15,985,800)

14. FY 2014 Budget Reduction Plan-Agricultural Development – Cuts that Won’t Take Place Planned Budget Cuts in Reduction Plan: * Includes Shifting $5.7 million in GOAP Grant Funds Just to Pay Debt Service and $6 million to County Accounts Without the Settlement: County Accounts would only have $6,000,000 and the statewide Agricultural Development grant program would be bare-bones Agricultural Development County Accounts($8,083,600) Gov’s Office for Agricultural Policy Grants*(12,046,700) Conservation/Cost Share Program(2,938,600) Agricultural Development Total($23,124,200)

15. Tobacco Fund Revenue Estimates in the 2014-16 Enacted Budget Two-Year Difference: FY 14 & 15 Three-Year Difference: FY14,15 & 16 $42.0 $57.9 Fiscal YearFY14FY15FY16 Enacted$90.8$99.7$72.4 Estimate with Settlement$159.4$73.1$88.3 Difference$68.6($26.6)$15.9

16. Ensures that the Enacted Appropriations for FY 15 and 16 will be fully funded D Extra Funds received in FY 14 will be used to offset the estimated shortfall in FY 15 Tobacco Receipts DFY 14 Receipts in Excess of Appropriations = $68.6 million DExpected FY 15 Shortfall = $26.6 million DThe remaining $42.0 million from the FY 14 receipts will be reserved until the General Assembly takes future actions

17. Tobacco Settlement Appropriations for FY 15 and FY 16 FY 2015FY 2016 (millions $) $72.40 Official Revenue Estimate$99.70 Agricultural Development$37.70$12.82 less State Enforcement (Revenue Dept)0.250.250.250.25 less Debt Service28.3928.48 $71.06$43.67 County Accounts19.359.859.85 Gov’s Office for Agricultural Policy Grants11.752.372.37 Conservation/Cost Share Program6.006.000.000.00 Farms to Food Banks0.600.600.600.60

18. Other GOAP Reminders County Council Membership August 1, 2014 – deadline 44 Counties to date County Council Administrative Funds Due to delayed 2014 payment, this process has been delayed

19. 404 Ann Street Frankfort, KY 40601 (502) 564-4627 agpolicy.ky.gov govkyapolicy@ky.gov Governor’s Office of Agricultural Policy Roger Thomas Executive Director Visit our Flickr site for recent event photos: www.flickr.com/photos/agpolicy.www.flickr.com/photos/agpolicy Joel Neaveill Chief of Staff