The House has reached consensus on the language of a tobacco buyout, introducing a bill that would end the quota system, compensate tobacco growers, provide financial assistance for farmers during the transition and establish a safety net for farmers who continue to grow tobacco.
But the clock is ticking, winding down on this session of Congress. Supporters of a buyout believe it must happen this year if it is to happen.
The $15.7 billion legislation is a compromise forged from several different measures introduced in the House. The Senate had previously introduced a $13 billion bill that would compensate growers.
The North Carolina Farm Bureau supports the buyout legislation. “Congress is in a position to protect the farming industry in a time of devastating job losses and corporate failures without adding to the federal deficit,” says Larry Wooten, president of the North Carolina Farm Bureau.
U.S. Reps. Bob Etheridge D-N.C., Ernie Fletcher R-K, Mike McInytre D-N.C. and Virgil Goode R-Va., introduced the House legislation.
“Farm families in North Carolina have been waiting far too long for a buyout, and they can't wait much longer,” Etheridge says. “Bringing together the tobacco family in the U.S. House of Representatives on a single buyout bill shows the skeptics that we mean business. Every tobacco-state member can support this bill because we have worked with farmer leadership and health groups.”
In announcing the bill, Etheridge urged the “Republican leadership in the House and in the Administration to put this bill on the fast track.”
Buyout payments in the House bill would be based on average tobacco quota from 1997-2002. Quota owners would get $8 per pound for quota owned after July 1, 2002. Farmers would receive $4 a pound on their 2000-2002 average production.
The bill would keep tobacco types in traditional-growing areas and establish a Tobacco Advisory Board for each type of tobacco. The board would set annual limits on pounds, determine where those pounds could be produced and track production. The legislation would establish county, state and regional pools to reassign pounds to new growers or those who chose to grow more tobacco.
The bill incorporates a private price insurance system to insure a safety net for producers. If the domestic price falls below a pre-determined price, producers would get a payment for the difference. The system is financed through a fee to producers and manufacturers at the point of the sale. Some $427.5 million would be offered in incentives for private insurance companies to guarantee the domestic tobacco price.
The buyout legislation is funded through an assessment on tobacco manufacturers based on market share. Philip Morris, the nation's largest cigarette manufacturer, is the only tobacco company that supports the assessment and the trade-off of FDA regulation to get it done. R.J. Reynolds Tobacco Co. and other manufacturers believe the changes would lock in Philip Morris' dominance.
North Carolina is the largest tobacco-producing state, with more than 12,000 growers.
As part of the broader picture of getting a tobacco-buyout bill through Congress, farmers and the representatives dropped opposition to Food and Drug Administration regulation of cigarettes.
At press time, the Senate Health Committee was negotiating legislation that would bring tobacco companies under FDA regulation for the first time. The legislation would apply to the sale and marketing of cigarettes and would mandate an update of health warnings and a complete listing of ingredients. Philip Morris, which supports FDA regulation, says it would not apply to the farm.
The FDA regulation provision was dropped in the House compromise, but legislators were trying to link it to a buyout in separate legislation.
In reaching the compromise, House tobacco-state representatives changed a plan to pay farmers an additional $2 per pound to stop growing tobacco. Etheridge had backed a $19 billion buyout bill introduced by Ernie Fletcher R-Ky., that some industry observers had labeled as too expensive. According to published reports, the Republican leadership told the legislators that without the changes, the bill would be dead in the water.
The day before they introduced the bill, the tobacco-state legislators gave the buyout a 50-50 chance of passing a tobacco-buyout bill. FDA regulation is key to the fate of a tobacco buyout, they said.