Perspectives Online

College helps North Carolinians deal with the tobacco buyout

Steve Watt, Ted Feitshans and Dr. Arnie Oltmans (left to right) were among the faculty members who presented workshops on the tobacco buyout.
Photo by Dave Caldwell

For North Carolinians with any connection to tobacco, the world changed Oct. 22, 2004.

That's when President George W. Bush signed legislation creating the Tobacco Transition Payment Program, better known as the tobacco buyout. The legislation eliminated a federal tobacco program that had been in existence since the 1930s. Beginning with the 2005 crop year, there would be no restrictions on tobacco production, and price supports and quotas would no longer exist. Also tobacco growers and quota holders would be paid for tobacco quota grown or owned.

It may not have been immediately apparent last fall how much change the buyout would bring, but now, well into the 2005 crop year, it is apparent that the world of tobacco will never be the same.

The College of Agriculture and Life Sciences is working on several fronts, primarily through North Carolina Cooperative Extension, to help North Carolinians adapt to and prosper in the new world the buyout is bringing.

Beginning this year, approximately $3.9 billion will pour into North Carolina over a 10-year period, says Dr. Blake Brown, Hugh C. Kiger Distinguished Professor of Agricultural and Resource Economics. The money, raised through quarterly assessments on tobacco product manufacturers and importers, will come to tobacco growers and tobacco quota owners. Approximately 75,000 North Carolinians will receive payments, which will be made in 10 equal, annual installments. Nationwide, the buyout will pay tobacco growers and quota holders approximately $9.6 billion over 10 years.

"This is a lot of money coming into our state," says Brown. Indeed, he believes the amount to be unprecedented.

Brown, a tobacco policy expert who jokes that the buyout has eliminated his job, was instrumental in organizing a series of informational events designed to help North Carolinians receiving buyout checks.

First, on March 11, Brown organized a workshop designed for Extension agents covering wise investing, tax implications, legal issues and charitable giving. The half-day workshop was televised and broadcast from the College's Department of Communication Services on the N.C. State University campus and made available to agents at locations across the state.

Dr. Celvia Stovall, Extension specialist in Family and Consumer Sciences, covered avoiding con artists out to bilk buyout recipients of their money, while Dr. Arnie Oltmans, a tax expert in the Department of Agricultural and Resource Economics, talked about tax implications for buyout recipients. Ted Feitshans, an attorney and Extension specialist in Agricultural and Resource Economics, covered the legal implications of the buyout, and Dr. Mike Walden, William Neal Reynolds Distinguished Professor and Extension economist, talked about investing. Steve Watt, director of gift planning in the CALS Foundations Office, talked about charitable giving opportunities.

Brown, Oltmans, Feithsans and Watt then took to the road with a series of workshops designed for tax preparers and other financial consultants, the people who will advise buyout recipients. Workshops were held May 5 in Winston-Salem, May 6 in Fletcher at the Mountain Horticultural Crops Research and Extension Center just outside Asheville, May 10 in Lumberton and May 11 in Wilson. With the exception of Fletcher, the events drew standing-room-only crowds. A Web site with buyout information was also developed:

The workshops were an effort to reach an audience that was a manageable size. Providing information to all 75,000 buyout recipients was seen as an impossible task, Brown says, but it was possible to reach the people who are likely to advise recipients.

Yet in the end, Brown was able to reach all North Carolina buyout recipients. The information provided in the workshops was distilled into a pamphlet, and Brown engineered a partnership with the North Carolina offices of Secretary of State, Treasurer and Attorney General and the state Department of Agriculture and Consumer Services to send the pamphlet in early June to every buyout recipient.

As Oltmans said repeatedly in his tax presentations, virtually every recipient's financial situation will be different and may require a different approach, which is why recipients should seek sound financial advice. Thanks to Extension, buyout recipients now are acquainted with the issues and know what questions to ask.

Agricultural and Resource Economics faculty also conducted 11 regional tobacco grower meetings between December and February that addressed the buyout and provided growers with business tools to help them decide whether to keep growing tobacco. Last November the faculty held a two-day training session in Raleigh on the buyout and related issues for Extension agents with tobacco responsibilities.

- Dave Caldwell

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