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Tobacco buyout payments at risk from sequester

SoVaNow.com / November 27, 2013


The federal budget sequester is threatening to take a chunk out of buyout payments to tobacco growers unless Congress and the White House can agree on a deal to lessen the impact of the cuts.

TTPP (Tobacco Transition Payment Program) payments from the federal government will be reduced by 7.2 percent in 2014, unless Congress can reach agreement to stave off budget sequester spending cuts and move the stalled Farm Bill forward for President Obama’s signature.

The Farm Bill is currently languishing in Congress as House and Senate members wrangle over proposed cuts to the food stamps program and a House proposal to raise price support payments to farmers.

As the debate over the Farm Bill rages on, it is unclear if the final TTPP payment will be eliminated or simply reduced. Virginia’s 31,000 participating farmers stand to lose nearly $50 million in TTPP payments this year, said Jim Jennings, President of the Mecklenburg County Farm Bureau.

Opponents of including the TIPP payments with other items subject to the sequester note that the revenues used to make the TTPP payments were not raised through federal taxes. Instead, they are funded through a settlement agreement reached with the major tobacco companies.

The Tobacco Transition Payment Program (TTPP) is a program signed into law by President Bush in 2004 to help farmers adjust to the end of a quota and price support system that had been in place since the Great Depression. Payments, which began in 2005 and continue through 2014, are funded through assessments of approximately $10 billion on tobacco product manufacturers and importers.

At the direction of U.S. Agriculture Secretary Tom Vilsack, no one at the local office of the FSA would comment on the status of the TTPP programs, aside from citing an agency press release. FSA Administrator Juan Garcia is quoted in the release as saying, “At this time, FSA is required to implement the sequester reductions. Due to the expiration of the farm bill on Sept. 30, FSA does not have the flexibility to cover these payment reductions in the same manner as in (fiscal year 2013). FSA will provide notification as early as practicable on the specific payment reductions.”

On Nov. 22, Fifth District Rep. Robert Hurt joined a bipartisan group of colleagues in sending a letter to Secretary of Agriculture Vilsack expressing concern over cuts to the final payment of the TTPP program. Hurt said, “We have called upon Secretary Vilsack to take the necessary steps to ensure that this program is carried out as written and make payment in full for the final installment of this program.”

In a follow-up comment Hurt added, “It is clear that the Tobacco Transition Payment Program should not be subject to sequester cuts for Fiscal Year 2014 payment. This program is funded entirely by private dollars, and its sole purpose is to help farmers during a difficult transition period at no expense to the taxpayer.

Sen. Richard Burr, a North Carolina Republican who also signed in the letter, wrote, “Using sequestration as a mechanism to siphon a portion of these non-tax payments and using them for the purpose of deficit reductions runs counter to Congressional intent.”

It is not only growers who are adversely affected by the reduction in TTPP payments. Some growers accepted a lump sum payment at the start of the program. Many of them entered into an agreement with lending institutions such as Farm Credit where they assigned their rights to the TTPP payments in exchange for a single lump sum payment. These lending institutions have no recourse to collect the monies paid out in good faith.

At least one local farmer said he used the TTPP payments as loan collateral. Now he is personally on the hook for the money.

The second round of budget cuts resulting from sequestration will kick in Jan. 15 unless Congress and President Obama strike a budget deal beforehand.

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I hope the idiots that voted for this jerk get a belly full of hope and change.


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