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Bill 3828

                    Current Status

Bill Number:                      3828
Type of Legislation:              General Bill GB
Introducing Body:                 House
Introduced Date:                  19990406
Primary Sponsor:                  Witherspoon
All Sponsors:                     Witherspoon, Sharpe and Hayes
Drafted Document Number:          l:\council\bills\bbm\9190som99.doc
Companion Bill Number:            714
Residing Body:                    House
Current Committee:                Ways and Means Committee 30 HWM
Subject:                          Tobacco Indemnification and Community 
                                  Revitalization Commission, Fund created; 
                                  Agriculture, Tobacco Settlement


                        History

Body    Date      Action Description                     Com     Leg Involved
______  ________  ______________________________________ _______ ____________
House   20000302  Referred to Committee on Point of      30 HWM
                  Order
House   20000301  Committee report: Favorable with       20 HANR
                  amendment
House   19990406  Introduced, read first time,           20 HANR
                  referred to Committee


              Versions of This Bill
Revised on March 1, 2000 - Word format

Indicates Matter Stricken

Indicates New Matter

COMMITTEE REPORT

March 1, 2000

H. 3828

S. Printed 3/1/00--H.

Read the first time April 6, 1999.

To whom was referred a Bill (H. 3828), to amend Title 46, Code of Laws of South Carolina, 1976, relating to agriculture, by adding Chapter 30, so as to establish the Tobacco Indemnification and Community Revitalization Commission and Fund, etc., respectfully

That they have duly and carefully considered the same, and recommend that the same do pass with amendment:

Amend further, by striking all after the enacting words and inserting:

/ SECTION 1. Article 1, Chapter 11, Title 11 of the 1976 Code is amended by adding:

"Section 11-11-170(A) There is established in the State Treasury a fund separate and distinct from all other funds styled the 'Tobacco Settlement Fund' (fund) into which must be deposited all revenues payable to this State pursuant to the Master Settlement Agreement as described in Section 11-47-20(e). Earnings on the fund must be credited to the fund.

(B)(1) Fund revenues must be used as provided in this subsection.

(2)(a) Sixty percent of fund revenues in a fiscal year for health care, including in order of priority:

(i) the South Carolina Senior's Drug Program, under the administration of the Office of Insurance Services of the State Budget and Control Board in consultation with the Office of Senior Services of the Department of Health and Human Services. Eligibility criteria for the program must be prescribed by the State Budget and Control Board;

(ii) home and community-based programs for seniors coordinated by the Department of Health and Human Services;

(iii) Partners for Healthy Children Program coordinated by the Department of Health and Human Services;

(iv) youth smoking cessation and prevention program coordinated by the Department of Health and Environmental Control and the Department of Alcohol and Other Drug Abuse Services;

(v) newborn infants hearing and child lead poisoning screening initiatives coordinated by the Department of Health and Environmental Control;

(b) Remaining revenues after the programs provided in item (2)(a) must be used for initiatives:

(i) that improve the overall health status of South Carolinians, including providing health insurance coverage;

(ii) targeted at reducing disparities in providing health care; and

(iii) providing other preventive care programs affecting seniors, children, and other vulnerable populations.

To administer and direct the initiatives provided in this subitem there is created the South Carolina Prevention and Health Improvement Board, consisting of the Governor who shall serve as chairman, the Speaker of the House, the President Pro Tempore of the Senate, the chairman of the Medical, Military, Public and Municipal Affairs Committee of the House of Representatives, the chairman of the Senate Medical Affairs Committee, the dean of the College of Medicine at the Medical University of South Carolina, the dean of the College of Medicine at the University of South Carolina, and the directors of the Department of Health and Environmental Control, the Department of Health and Human Services, the Department of Alcohol and Other Drug Abuse Services, the Department of Insurance, and the Department of Social Services. All of these officials serve ex officio, and any of them may substitute a designee to serve in his place, except that a designee of a legislative member must be a member of the house of the General Assembly of the designator. Primary staff support for this board must be provided by the Department of Health and Environmental Control.

(3) Twenty percent of fund revenues in a fiscal year for tobacco community programs including:

(a) as a first priority, reimbursement to tobacco growers, tobacco quota holders, and tobacco warehousemen for actual losses due to reduced quotas. For purposes of this subitem, 'tobacco quota owner' and 'tobacco grower' have the meaning provided in Section 46-30-210, and the reimbursement is for losses incurred in reduced cultivation of tobacco in this State. Reimbursements must be made pursuant to eligibility requirements established by the South Carolina Tobacco Community Development Board created pursuant to Section 46-30-230;

(b) after the reimbursements provided pursuant to subitem (a), the balance must be held in an escrow account through June 30, 2012, and used as provided in subitem (a). After June 30, 2012, any balance after the reimbursements provided pursuant to subitem (A) must be used by the Department of Commerce for economic revitalization of tobacco communities.

(4) Twenty percent of fund revenues in a fiscal year must be used for economic development activities, including:

(a) five hundred thousand dollars to promote small business for the South Carolina Small Business Technology Seed Capital Fund, which is established under the administration of the Jobs Economic Development Authority;

(b) of the remaining revenue:

(i) two-thirds must be transferred to the state account of the South Carolina Water and Wastewater Infrastructure Fund; and

(ii) one-third must be credited to the economic development account of the Coordinating Council for Economic Development and used as provided in Section 12-28-2910, except that the Department of Commerce may use a portion of these additional funds for technology related infrastructure grants for local units of government."

B. All revenues received from the Master Settlement Agreement before July 1, 2000, must be deposited in the fund established by this section but are subject to the following special distributions:

(1) from the percentage allocated for health care, twenty-six million dollars must be used to fund the unanticipated growth in the Medicaid program for fiscal year 1999-2000. If this portion of the Medicaid budget is funded before the enactment of this section, the distribution to the three accounts in this fund must be made as if the funds for this Medicaid item had been received and distributed through this fund;

(2) the percentage of revenues allocated for the Tobacco Community Fund is limited to fifteen million dollars with any excess directed to the economic development account established pursuant to Section 11-11-170(B)(4)(b)(ii) of the 1976 Code as added by subsection A of this section;

(3) the revenue in the economic development account must be distributed as follows:

(a) two million five hundred thousand dollars to the Department of Health and Environmental Control for beach renourishment,

(b) five million dollars to Parks, Recreation and Tourism for a competitive matching grant program to establish and preserve open space in urban areas, and

(c) the remainder of these initial revenues to the State Ports Authority for the harbor dredging project.

SECTION 3. Article 1, Chapter 1, Title 13 of the 1976 Code is amended by adding:

"Section 13-1-45. There is established under the direction and control of the Secretary of Commerce the South Carolina Water and Wastewater Infrastructure Fund for the purposes of selecting, assisting, and financing major qualified projects by providing financing assistance to governmental units and private entities for constructing and improving water and wastewater facilities that are necessary for public purposes, including economic development.

(A) As used in this section:

(1) 'fund' means the South Carolina Water and Wastewater Infrastructure Fund;

(2) 'department' means the Department of Commerce;

(3) 'financing agreement' means any agreement entered into between the department and a qualified borrower pertaining to financing assistance. This agreement may contain, in addition to financing terms, provisions relating to the regulation and supervision of a qualified project, or other provisions as the department determines. The term 'financing agreement' includes, without limitation, a loan or grant agreement, trust indenture, security agreement, reimbursement agreement, guarantee agreement, ordinance or resolution, or similar instrument;

(4) 'government unit' means a municipal corporation, county, special purpose district, special service district, commissioners of public works, or another public body, instrumentality or agency of this State including combinations of two or more of these entities acting jointly to construct, own, or operate a qualified project, and any other state or local authority, board, commission, agency, department, or other political subdivision created by the General Assembly or pursuant to the Constitution and laws of this State which may construct, own, or operate a qualified project;

(5) 'loan obligation' means a note or other evidence of an obligation issued by a qualified borrower;

(6) 'financing assistance' means, but is not limited to, grants, contributions, credit enhancement, capital or debt reserves for debt instrument financing, interest rate subsidies, provision of letters of credit and credit instruments, provision of debt financing instrument security, and other lawful forms of financing and methods of leveraging funds that are approved by the department, and in the case of federal funds, as allowed by federal law;

(7) 'project revenues' means all rates, rents, fees, assessments, charges, and other receipts derived or to be derived by a qualified borrower from a qualified project or made available from a special source, and as provided in the applicable financing agreement, derived from any system of which the qualified project is a part of, from any other revenue producing facility under the ownership or control of the qualified borrower including, without limitation, proceeds of grants, gifts, appropriations, including the proceeds of financing made by the department, investment earnings, reserves for capital and current expenses, proceeds of insurance or condemnation, and proceeds from the sale or other disposition of property and from any other special source as may be provided by the qualified borrower;

(8) 'qualified borrower' means any government unit, public or private nonprofit entity approved by the department that is authorized to construct, operate, or own a qualified project and receives financing assistance pursuant to this section;

(9) 'qualified project' means an eligible project that has been selected by the department to receive financing assistance pursuant to this section;

(10) 'revenues' means any receipts, fees, income, or other payments received or to be received by the department, expressly for the fund including, without limitation, receipts and other payments deposited for the fund and investment earnings on any monies and accounts established for the fund.

(B) The department shall provide the required staff and may add additional staff or contract for services, if necessary, to administer the fund in accordance with this section. The compensation, costs, and expenses incurred incident to administering the fund may be paid from revenues. If the department requests, the South Carolina Public Service Authority and the State Budget and Control Board may provide legal, technical, planning, and other assistance through intergovernmental agreement. Costs incurred by the authority or the board pursuant to such a request must be reimbursed to them by the department from revenues.

(C) In addition to the powers and authority granted in this chapter, the department has the powers and authority necessary to carry out the purposes of this section including, but not limited to:

(1) establish procedures and guidelines necessary for the administration of this section;

(2) offer any form of financing assistance that the department considers necessary to any qualified borrower for a qualified project;

(3) provide loans or other financing assistance to qualified borrowers to finance the eligible costs of qualified projects and to acquire, hold, and sell loans or other obligations at prices and in the manner the department determines advisable;

(4) provide qualified borrowers with other financing assistance necessary to defray eligible costs of a qualified project;

(5) enter into contracts, arrangements, and agreements with qualified borrowers, governmental units, or other otherwise eligible entities, and execute and deliver all financing agreements and other instruments necessary or convenient to the exercise of the powers granted in this chapter;

(6) enter into agreements with a department, agency or instrumentality of the United States or of this State or another state for the purpose of planning and providing for the financing of qualified projects;

(7) establish fiscal controls and accounting procedures to ensure proper accounting and reporting by qualified borrowers;

(8) acquire by purchase, lease, donation, or other lawful means and sell, convey, pledge, lease, exchange, transfer, and dispose of all or part of its properties and assets of every kind and character or any interest in it to further the public purpose of the fund, without further approval or authorization;

(9) procure insurance, guarantees, letters of credit, and other forms of collateral or security or credit support from any public or private entity, including any department, agency, or instrumentality of the United States or this State, for the payment of any debt issued by a qualified borrower or other entity receiving assistance pursuant to this section, including the power to pay premiums or fees on insurance, guarantees, letters of credit, and other forms of collateral or security or credit support, without further approval or authorization;

(10) collect fees and charges in connection with financing assistance and expend such funds to effectuate the purposes of this section;

(11) apply for, receive and accept from any source, aid, grants, and contributions of money, property, labor, or other things of value to be used to carry out the purposes of this section;

(12) do all other things necessary or convenient to exercise powers granted or reasonably implied by this chapter.

(D) The department shall establish accounts and subaccounts within the state accounts and any federal accounts to receive and disburse funds to effectuate the purposes of this section. Earnings on the balances in these state accounts must be expended to effectuate the purposes of this section. Earnings on balances in the federal accounts must be credited and invested according to federal law. All accounts must be held in trust by the State Treasurer and the unexpended funds in these accounts carry forward from year to year. All earnings on state accounts must be retained in those accounts and used for the same purposes.

(E) The department shall determine which projects are eligible projects and then select from among the eligible projects those qualified to receive financing assistance under this section. Priority in funding must be given to projects in the following order:

(1) located along the I-95 corridor;

(2) that serve local economies adversely impacted by tobacco industry changes;

(3) located in underdeveloped areas of the State.

A project meeting more than one of the criteria categories may receive funding priority.

(F) In selecting qualified projects, the department shall consider the projected feasibility of the project and the amount of financial risk. The department also may consider, but is not limited to, the following criteria in making its determination that an eligible project is a qualified project:

(1) local support of the project, expressed by resolutions by the governing bodies in the areas in which the project will be located;

(2) economic benefit of the project;

(3) readiness of the project to proceed;

(4) ability of the applicant to repay financial assistance obtained;

(5) financial or in-kind contributions to the project;

(6) development status of the county in which the project is located; and

(7) whether the governing bodies of the county or the incorporated municipality in which the project is located provide to the department a resolution that makes a finding that the project is essential to economic development in the political subdivisions, or the department receives a resolution or certificate from the Coordinating Council for Economic Development that the project is essential to economic development in this State, or both, at the option of the department.

(G) Qualified borrowers may obtain financing assistance pursuant to this section through financing or grant agreements. Qualified borrowers entering into financing or grant agreements or issuing debt obligations may perform any acts, take any action, adopt any proceedings, or make and carry out any contracts or agreements with the department as may be agreed to by the department and any qualified borrower and necessary for effectuating the purposes of this section.

(H) In addition to the authorizations contained in this section, all other statutes or provisions permitting government units to borrow money and issue obligations including, but not limited to, the Revenue Bond Act for Utilities and the Revenue Bond Refinancing Act of 1937, may be utilized by any government unit in obtaining financing assistance from the department pursuant to this section. Notwithstanding the foregoing, obligations secured by ad valorem taxes may be issued by a government unit and purchased by the department or its agent without regard to any public bidding requirement.

(I) A qualified borrower may receive, apply, pledge, assign, and grant security interest in project revenues; and, in the case of a governmental unit, its project revenues, revenues derived from a special source or ad valorem taxes, to secure its obligations as provided in this section, and may fix, revise, charge, and collect fees, rates, rents, assessments, and other charges of general or special application for the operation or services of a qualified project, the system of which it is a part, and any other revenue producing facilities from which the qualified borrower derives project revenues, to meet its obligations under a financing agreement or to provide for the construction and improving of a qualified project.

(J) If a qualified borrower fails to collect and remit in full all amounts due under any related financing agreement, note, or other obligation, the department may, on or after the date these amounts are due, notify the State Treasurer who shall withhold all or a portion of the state funds and all funds administered by this State, its agencies, boards, and instrumentalities allotted or appropriated to the government unit and apply an amount necessary to the payment of the amount due; or in the case of a private entity, the department may pursue recovery pursuant to Chapter 56 of Title 12; or the department may pursue any other remedy provided by law.

(K) Nothing contained in this section mandates the withholding of funds allocated to a government unit or private entity which would violate contracts to which this State is a party, the requirements of federal law imposed on this State, or judgments of a court binding on this State.

(L) Notice, proceeding, or publication, except those required in this section, are not necessary to the performance of any act authorized in this section nor is any act of the department subject to any referendum.

(M) Following the close of each state fiscal year, the department shall submit an annual report of its activities pursuant to this section for the preceding year to the Governor and to the General Assembly."

SECTION 4.A. That portion of the first paragraph of Section 58-31-30 preceding item (1) and items (22) and (23) in the first paragraph of the 1976 Code, as last amended by Act 283 of 1996, are amended to read:

"The Public Service Authority has power to develop the Cooper River, the Santee River, and the Congaree River in this State, as instrumentalities of intrastate, interstate, and foreign commerce and navigation; to produce, distribute, and sell electric power; to acquire, treat, distribute, and sell water at wholesale; to collect, treat, and dispose of sewage; to reclaim and drain swampy and flooded lands; and to reforest the watersheds of rivers in this State; and also has all powers which may be necessary or convenient for the exercise of these powers, including without limiting the generality of the foregoing, the following powers:

(22) To acquire or purchase, if requested to do so, or to construct, operate, and maintain all structures and facilities necessary, useful, or customarily used and employed in the treatment and distribution of water for industrial, commercial, domestic, or agricultural purposes and for the collection, treatment, or disposal of sewage within the counties of Berkeley, Calhoun, Charleston, Clarendon, Colleton, Dorchester, Orangeburg, and Sumter. The provisions of this section do not apply to the acquisition or purchase of existing electric systems.

(23) To acquire, treat, transmit, distribute, and sell water at wholesale and to collect, treat, and dispose of sewage within the counties of Berkeley, Calhoun, Charleston, Clarendon, Colleton, Dorchester, Orangeburg, and Sumter if requested in writing to do so by the governing body of any incorporated municipality, by the governing body of any special purpose district providing water or sewer service in the unincorporated areas of each county, or by the governing body of each county for those unincorporated areas not so provided water or sewer service by a special purpose district. The authority may not transfer water from one river basin to another except for those located in the counties specified in this item. However, the authority shall prepare and maintain its books and records for its water supply and wastewater operations separate and apart from its books and records for the generation, transmission, and distribution of electric power. The costs of water supply operations, including the loss of the generation of hydroelectric power, may not affect rates and charges for electric service. Water must be offered for sale by the authority on a nondiscriminatory basis without regard to whether electricity is also purchased from the authority."

B. The first paragraph of Section 58-31-30 of the 1976 Code, as last amended by Act 283 of 1996, is further amended by adding at the end:

"(24) To establish, in addition to any entities previously established, such entities as necessary or appropriate to sell water at wholesale, to collect, treat, and dispose of sewage, and to carry out the other purposes of this chapter."

SECTION 5. Section 58-31-80 of the 1976 Code, as last amended by Act 156 of 1987, is further amended to read:

"Section 58-31-80. The Public Service Authority is created primarily for the purpose of developing the Cooper River, the Santee River, the Congaree River, and their tributaries upstream to the confluence of the Broad and Saluda Rivers and upstream on the Wateree River to a point at or near Camden and other similar projects as instrumentalities of intrastate, interstate, and foreign commerce and navigation; of reclaiming wastelands by the elimination or control of flood waters, reforesting the watersheds of the rivers and improving public health conditions in those areas. It is found that the project authorized by this chapter is for the aid of intrastate, interstate, and foreign commerce and navigation, and that the aid and improvement of intrastate, interstate, and foreign commerce and navigation, the development, sale, and distribution of hydroelectric power, and the treatment, sale, and distribution of water at wholesale, and the collection, treatment, and disposal of sewage, are in all respects for the benefit of all the people of the State, for the improvement of their health and welfare and material prosperity, and are public purposes, and being a corporation owned completely by the people of the State, the Public Service Authority is required to pay no taxes or assessments upon any of the property acquired by it for this project or upon its activities in the operation and maintenance of the project, except as provided in this section. The securities and other obligations issued by the Public Service Authority, their transfer and the income from them at all times are free from taxation. However, unless otherwise provided in any contract with an agency of the United States Government as assists in financing the projects contemplated in this section or any other agency from which the funds may be secured, all electrical energy developed by the authority must be sold at rates in the determination of which the taxes which the project would pay if privately owned, to the extent provided in this section, as well as other rate-making factors properly entering into the manufacture and distribution of the energy must be considered. After payment of necessary operating expenses and all annual debt requirements on bonds, notes, or other obligations at any time outstanding and the discharge of all annual obligations arising under finance agreements with the United States or any agency or corporation of the United States and indentures or other instruments under which bonds have been, or may be issued, the authority shall pay annually to the various counties of the State a sum of money equivalent to the amount paid for taxes on properties at the time of their acquisition by the authority, acquired, or to be acquired, in the counties, and the authority shall pay to all municipalities and school districts in the counties in which the authority has acquired, or may acquire properties, a sum of money equivalent to the amount paid for taxes to the school districts and municipalities on the properties at the time of their acquisition by the authority; and no other taxes may be considered in the fixing of the rates of the authority. From the funds to be paid under this section the counties, school districts, and municipalities annually shall apply a sum sufficient for the debt requirements for bonds and other obligations of the counties, school districts, and municipalities for which the properties were taxed at the time of their acquisition by the authority, with the remainder of the funds to be expended in accordance with law."

SECTION 6. This act takes effect July 1, 2000. /

Amend title to read:

/ TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 11-11-170 SO AS TO CREATE THE TOBACCO SETTLEMENT FUND IN THE STATE TREASURY SEPARATE FROM ALL OTHER FUNDS AND TO CREDIT TO THIS FUND ALL REVENUE RECEIVED BY THIS STATE FROM THE MASTER SETTLEMENT AGREEMENT; TO PROVIDE THAT EARNINGS ON THIS FUND ARE CREDITED TO IT, TO PROVIDE FOR THE USE OF FUND PROCEEDS, INCLUDING HEALTH PROGRAMS, LOSS REIMBURSEMENTS TO TOBACCO QUOTA OWNERS AND REVITALIZATION OF TOBACCO COMMUNITIES, AND ECONOMIC DEVELOPMENT, TO PROVIDE SPECIAL DISTRIBUTIONS FOR MASTER SETTLEMENT AGREEMENT REVENUES RECEIVED BEFORE JULY 1, 2000; AND BY ADDING SECTION 13-1-45 ESTABLISHING THE SOUTH CAROLINA WATER AND WASTEWATER INFRASTRUCTURE FUND AND PROVIDING FOR ITS OPERATION, INCLUDING THE DETERMINATION OF ELIGIBILITY FOR PROJECTS TO BE FUNDED AND THE MANNERS OF FUNDING; AND TO AMEND SECTIONS 58-31-30 AND 58-31-80, BOTH AS AMENDED, RELATING TO DEFINITIONS FOR PURPOSES OF THE SOUTH CAROLINA PUBLIC SERVICE AUTHORITY AND THE PURPOSES OF THE AUTHORITY AND VARIOUS PAYMENTS REQUIRED FROM IT, SO AS TO INCLUDE IN ITS FUNCTIONS THE DUTIES WITH REGARD TO SEWAGE COLLECTION, TREATMENT, AND DISPOSAL ASSIGNED IT UNDER THE SOUTH CAROLINA WATER AND WASTEWATER INFRASTRUCTURE FUND ESTABLISHED BY THIS SECTION. /

CHARLES R. SHARPE, for Committee.

REVENUE IMPACT1

This bill would reduce state revenues by $95 million in FY 1999-2000 and $70 million in FY 2000-2001, by allocating the Tobacco Settlement funds from the general fund to special funds, provided it takes effect on or before June 30, 2000. If it becomes effective after June 30, 2000, the bill would have an impact of $70 million in FY 2000-2001. It would be funded entirely from South Carolina's share of the Master Settlement Agreement with Tobacco Product Manufacturers (M.S.A.).

Explanation

This bill would use money from the M.S.A. The M.S.A., sometimes called "Phase I" of the "Tobacco Settlement," provides for the distribution of payments to the states that are part of the settlement. Latest available data indicates revenue for the state of $95 million for fiscal year 1999-2000 from the settlement and of $70 million from the settlement for fiscal year 2000-2001. The National Tobacco Grower Settlement Trust Agreement, sometimes called "Phase II," is a separate agreement stemming from the M.S.A., whose payments do not pass through the state but rather go directly to the affected flue-cured (cigarette) tobacco growers and quota owners. This bill would base some of its expenditures of Phase I money upon allocations under Phase II.

This bill would create a "Tobacco Indemnification and Community Revitalization Commission" and a "South Carolina Tobacco Settlement Foundation." The commission would administer a "Tobacco Indemnification and Community Revitalization Fund" that this bill would create. This bill would require the foundation to create a "South Carolina Tobacco Settlement Fund." The bill would require the commission to place 60% of the money transferred to the State of South Carolina under Phase I of the M.S.A. into the Tobacco Indemnification and Community Revitalization Fund ("Tobacco Fund") and an additional 16.7% (one-sixth) into the South Carolina Tobacco Settlement Fund ("Settlement Fund"). Of the $95 million from the settlement for FY 1999-2000, $57 million would be allocated to the Tobacco Fund and $15.9 million to the Settlement Fund. In FY 1999-2000, these allocations would be $42 million and $11.7 million, respectively.

The purposes of the commission would be to revitalize tobacco dependent communities and to indemnify farmers for their "total lost asset value" and "for the economic loss resulting from quota reduction" due to the tobacco settlement. To accomplish this second purpose the bill would require the commission to pay tobacco farmers and warehouses compensation from the Tobacco Fund, after taking into account payments made to the tobacco farmers under Phase II. The bill would exempt such payments to farmers from state taxes. This exemption does not constitute an additional revenue loss since money distributed from the Tobacco Settlement would not otherwise be taxed. Projections based on allocations-to-date indicate a compensation of $16,420,928.17 this fiscal year to flue-cured tobacco quota-owners under Phase II. This projected amount is 17.3% of estimated revenue from Phase I for this fiscal year. Although data to determine possible compensation to warehouses is not available, tax exemption of payments to warehouses would not produce an additional revenue loss for the same reason as the contemplated payments to farmers of flue-cured tobacco.

Approved By:

William C. Gillespie

Board of Economic Advisors

1/ This statement meets the requirement of Section 2-7-71 for a state revenue impact, Section 2-7-76 for a local revenue impact, and Section 6-1-85(B) for an estimate of the shift in local property tax incidence.

TO AMEND TITLE 46, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO AGRICULTURE, BY ADDING CHAPTER 30, SO AS TO ESTABLISH THE TOBACCO INDEMNIFICATION AND COMMUNITY REVITALIZATION COMMISSION AND FUND, AND TO PROVIDE FOR ITS MEMBERSHIP, DUTIES, AND TO PROVIDE FOR THE DISTRIBUTION OF THE MONIES RECEIVED BY THE STATE PURSUANT TO THE MASTER SETTLEMENT AGREEMENT WITH TOBACCO PRODUCT MANUFACTURERS; AND TO AMEND TITLE 44, RELATING TO HEALTH, BY ADDING CHAPTER 126, SO AS TO ESTABLISH THE SOUTH CAROLINA TOBACCO SETTLEMENT FOUNDATION AND FUND AND TO PROVIDE FOR ITS MEMBERSHIP, DUTIES, AND THE DISTRIBUTION OF MONIES RECEIVED BY THE STATE PURSUANT TO THE MASTER SETTLEMENT AGREEMENT WITH THE TOBACCO PRODUCT MANUFACTURERS.

Whereas, tobacco is the largest dollar farm-produced crop in South Carolina with production of 101,500,000 pounds; and

Whereas, farms in the South Carolina production area and in the tobacco producing belt of the southeast cannot survive with a drastic change in the tobacco program; and

Whereas, farms in the tobacco belt are historically small because of the income intensity per acre of tobacco; and

Whereas, these small family farms do not own the land acreage to survive on the income from grains, soybeans, or other farm commodities without tobacco; and

Whereas, with the loss of the family farm producing tobacco, America would also lose the production of other farm commodities on this farm as well; and

Whereas, the loss of farm production would likely increase the cost of food and fiber for every American consumer; and

Whereas, reduction of farm commodities will have a negative impact on our nation's international trade balance; and

Whereas, America could ultimately lose adequate food and fiber production from American soil to assure nutrition and clothing for a healthy nation at an affordable price; and

Whereas, many tobacco producers recognize there may be a health-related problem with the use of tobacco products; and

Whereas, the proposed cure of the health-related problem with no financial consideration of the farmers could effectively and eventually put them completely out of business; and

Whereas, the tobacco industry is now negotiating a settlement with the federal government as well as the attorneys general from several states. Now, therefore,

Be it enacted by the General Assembly of the State of South Carolina:

SECTION 1. Title 46 of the 1976 Code is amended by adding:

Section 46-30-10. As used in this chapter:

(1) 'Active tobacco producer' means a person who is the actual producer, as determined by the United States Department of Agriculture (USDA), of tobacco on a farm where tobacco is produced pursuant to a tobacco farm marketing quota or farm acreage allotment for the 1998 crop year as established under the Agriculture Adjustment Act of 1938, 7 U.S.C., Section 1281, and other provisions of law.

(2) 'Commission' means the Tobacco Indemnification and Community Revitalization Commission created pursuant to Section 46-30-20.

(3) 'Economic loss' means a loss of investment in specialized equipment and barns and lost tobacco production opportunities associated with a decline in quota.

(4) 'Fund' means the Tobacco Indemnification and Community Revitalization Fund established pursuant to Section 46-30-60.

(5) 'Master Settlement Agreement' means the settlement agreement and related documents between the State and leading United States tobacco product manufacturers dated November 23, 1998.

(6) 'Quota holder' means a farm owner or the person who has an equitable interest in the farm on January 1, 1998 or later, for which a tobacco farm marketing quota or farm acreage allotment was established under the Agriculture Adjustment Act of 1938, 7 U.S.C., Section 1281, and other provisions of law.

(7) 'Tobacco farmer' means a person who is an active flue-cured tobacco producer, a quota holder, or both.

(8) 'Tobacco growing regions' means any county in South Carolina that has tobacco production or tobacco marketing quotas.

(9) 'Warehouse' means a suitable building, structure, or other protected enclosure for which a license under federal law has been issued for the sale of domestic United States produced tobacco for the current marketing year.

Section 46-30-20. There is created the Tobacco Indemnification and Community Revitalization Commission. The commission is vested with all of the politic and corporate powers as provided in this chapter. The commission is established for the purposes of administering the monies in the Tobacco Indemnification and Community Revitalization Fund and distributing the monies for the purposes provided in this chapter, including using monies in the fund to:

(1) indemnify tobacco growers and warehouses from the adverse economic effects of the Master Settlement Agreement; and

(2) revitalize tobacco dependent communities. The commission has only those powers enumerated in Section 46-30-40.

Section 46-30-30. (A) Notwithstanding the provisions of Section 8-13-770, the commission is composed of eleven members as follows:

(1) two members of the House of Representatives to be appointed by the Speaker of the House of Representatives;

(2) two members of the Senate to be appointed by the President Pro Tempore of the Senate;

(3) four active flue-cured tobacco farmers, two to be appointed by the Speaker and two to be appointed by the President Pro Tempore;

(4) the Commissioner of Agriculture or his designee;

(5) a representative of the South Carolina Farm Bureau Federation appointed by the Farm Bureau; and

(6) one member of the general public appointed by the Governor.

With the exception of the Commissioner of Agriculture, all members of the commission shall reside in the tobacco growing regions of the State.

(B) Members serve for a term of four years and until their successors are appointed and qualify. A vacancy in the commission must be filled in the same manner as the original appointment for the remainder of the unexpired term. No member is eligible to serve more than two successive four-year terms; however, two additional terms may be served by a member appointed to fill a vacancy when the remainder of that term was three years or less.

(C) The members of the commission shall elect a chairman and vice chairman. The chairman shall be a legislative member. A majority of members of the commission serving at any one time constitutes a quorum for the transaction of business.

(D) Members of the commission serve without pay but are allowed the usual mileage, per diem, and subsistence as provided by law for members of state boards, committees, and commissions.

(E) Members of the commission and its employees are subject to the provisions of the Ethics, Government Accountability and Campaign Reform Act, Chapter 13 of Title 8 of the 1976 Code and the Lobbyist Reform Act, Chapter 17 of Title 2 of the 1976 Code.

Section 46-30-40. (A) The commission has the following powers:

(1) adopt and use an official seal;

(2) make bylaws for the management and regulation of its affairs;

(3) maintain its office in Columbia;

(4) accept, hold, and administer monies distributed to the commission pursuant to the Master Settlement Agreement and other money, securities, or other property appropriated, given, or bequeathed to the commission, absolutely or in trust, for the purposes for which the commission is created;

(5) distribute the monies in the fund for the purposes provided in this chapter;

(6) make and execute contracts and all other instruments and agreements necessary or convenient for the exercise of its powers and functions;

(7) invest its funds as provided in this chapter or permitted by applicable law; and

(8) do any lawful act necessary or appropriate to carry out the powers granted or reasonably implied in this chapter.

(B) The commission shall distribute one-sixth of the monies deposited in the fund, concurrently with the deposit of monies into the fund under the Master Settlement Agreement, to the South Carolina Tobacco Settlement Fund established pursuant to Section 44-126-70.

(C) The commission shall distribute the remaining available monies in the fund as follows:

(1) indemnify tobacco farmers in the State for the decline or elimination of tobacco quota based on the basic flue-cured quota as allocated by the USDA for the crop year 1997. The commission shall compensate these tobacco farmers in an amount equal to the total lost asset value in quota incurred annually by them. The commission also shall compensate an active tobacco farmer for the economic loss resulting from any annual quota reduction. The compensation for loss is personal to the tobacco farmer who actually suffers the loss and does not attach to the farm or to the quota. The total asset loss in quota and economic losses for active tobacco producers in South Carolina is estimated to be 1.4 billion dollars. The commission shall make the payments from settlement dollars received into the fund, after taking into account on a dollar-for-dollar basis funds received for this purpose by the tobacco farmer from Phase II of the Master Settlement Agreement;

(2) indemnify the tobacco warehouses in the State by setting aside a pro rata share of all monies that go to the tobacco farmer from the tobacco settlement for the warehouses' compensation;

(3) subject to the affirmative vote of two-thirds of the membership of the commission, promote economic growth and development in tobacco dependent communities, in order to assist these communities in reducing their dependency on tobacco and tobacco-related business; and

(4) monies distributed to tobacco farmers and warehouses are exempt from state taxes.

(D) The commission shall undertake studies and gather information and data in order to determine:

(1) the economic consequences of the reduction in or elimination of quota for tobacco growers,

(2) the potential for alternative cash crops, and

(3) other matters the commission believes will affect tobacco growers in the State.

Section 46-30-50. The commission is authorized to employ an executive director who also shall be the secretary and who shall administer, manage, and direct the affairs and business of the commission, in accordance with the provisions of this chapter and subject to the policies, control, and direction of the commission. The commission may employ technical experts and other officers, agents, and employees, permanent and temporary, as it may require, and shall determine their qualifications, duties, and compensation. The actual expenses incurred in the performance of these duties must be paid from the fund.

Section 46-30-60. The commission shall establish a fund to be known as the Tobacco Indemnification and Community Revitalization Fund. The commission shall deposit into the fund sixty percent of the monies earmarked for use in the State under Phase I of the Master Settlement Agreement. Money in the fund must be used solely to implement the provisions of Section 46-30-40. The fund also consists of other monies received by the commission, from any source, for the purpose of implementing the provisions of Section 46-30-40.

Section 46-30-70. (A) The accounts and records of the commission showing the receipt and disbursement of funds from whatever source derived must be in the form as the Comptroller General prescribes.

(B) The accounts of the commission must be audited annually by the Comptroller General or his designee. Copies of the annual audit must be distributed to the Governor and to the chairmen of the House Ways and Means Committee and the Senate Finance Committee.

Section 46-30-80. The commission shall submit a report annually to the Governor and the General Assembly."

SECTION 2. Title 44 of the 1976 Code is amended by adding:

Section 44-126-10. As used in this chapter, unless the context clearly indicates otherwise:

(1) 'Board' means the Board of Trustees of the foundation appointed pursuant to Section 44-126-40.

(2) 'Director' means the director of the foundation appointed pursuant to Section 44-126-50.

(3) 'Foundation' means the South Carolina Tobacco Settlement Fund established pursuant to Section 44-126-20.

(4) 'Fund' means the South Carolina Tobacco Settlement Foundation created pursuant to Section 44-126-70.

Section 44-126-20. There is created the South Carolina Tobacco Settlement Foundation. The foundation is vested with all of the politic and corporate powers as provided in this chapter. The foundation is established for the purpose of administering the monies received pursuant to subsection (B) of Section 46-30-40 and distributing the monies for the purposes provided in this chapter, including using monies in the South Carolina Tobacco Settlement Fund to assist in financing efforts to restrict the use of tobacco products by minors through such means as educational and awareness programs on the health effects of tobacco use on minors and enforcement of laws restricting the distribution of tobacco products to minors. The foundation has only the powers enumerated in Section 44-126-30.

Section 44-126-30. The foundation is granted all powers necessary or appropriate to carry out and effectuate its corporate purposes including, without limitation, the following:

(1) adopt and use an official seal;

(2) have succession until dissolved by the General Assembly, in which event title to the properties of the foundation, both real and personal, insofar as consistent with existing contractual obligations and subject to all other legally enforceable claims or demands by or against the foundation, must pass to and become vested in the State;

(3) maintain its office in Columbia;

(4) accept, hold, and administer monies distributed to the foundation pursuant to subsection (B) of Section 46-30-40 and other money, securities, or other property appropriated, given, or bequeathed to the foundation, absolutely or in trust, for the purposes for which the foundation is created;

(5) distribute the monies in the fund to entities for use in restricting the use of tobacco products by minors in the State, on terms and in amounts as determined by the board;

(6) make and execute contracts and all other instruments and agreements necessary or convenient for the exercise of its powers and functions;

(7) appoint and prescribe the duties of officers, agents, employees, advisors, and consultants as are necessary to carry out its functions, and to fix and pay compensation to them for their services as the foundation determines;

(8) make bylaws for the management and regulations of its affairs;

(9) receive and accept aid, grants, contributions, and cooperation of any kind from any source for the purposes of this chapter subject to the conditions, acceptable to the foundation, upon which the aid, grants, contributions, and cooperation may be made;

(10) invest its funds as provided in this chapter or permitted by applicable law; and

(11) do any lawful act necessary or appropriate to carry out the powers granted or reasonably implied.

Section 44-126-40. (A) The foundation shall be governed and administered by a board of trustees. Notwithstanding the provisions of Section 8-13-770, the membership of the board is as follows:

(1) two members appointed by the Speaker of the House of Representatives from the membership of the House of Representatives, one representing rural interests and one representing urban interests;

(2) two members appointed by the President Pro Tempore of the Senate from the membership of the Senate, one representing rural interests and one representing urban interests; and

(3) eleven members appointed by the Governor subject to confirmation by the General Assembly, as follows:

(a) five designated representatives of public health agencies, such as, but not limited to: the American Cancer Society of South Carolina, the American Heart Association of South Carolina, the American Lung Association of South Carolina, the South Carolina Medical Association, and the South Carolina Nurses' Association; (b) four health professionals in the fields of oncology, cardiology, pulmonary medicine, and pediatrics; and

(c) two youths under the age of twenty-one.

(B) Members serve for a term of four years and until their successors are appointed and qualify. A vacancy in the board must be filled in the same manner as the original appointment for the remainder of the unexpired term. No member is eligible to serve more than two successive four-year terms; however, two additional terms may be served by a member appointed to fill a vacancy when the remainder of that term was three years or less.

(C) The members of the board shall elect a chairman and vice chairman. A majority of members of the board serving at any one time constitute a quorum for the transaction of business.

(D) Members of the board serve without pay but are allowed the usual mileage, per diem, and subsistence as provided by law for members of state boards, committees, and commissions.

(E) Members of the board and employees of the foundation are subject to the provisions of the Ethics, Government Accountability and Campaign Reform Act, Chapter 13 of Title 8 of the 1976 Code and the Lobbyist Reform Act, Chapter 17 of Title 2 of the 1976 Code.

Section 44-126-50. The foundation is authorized to employ a director, who shall also be the secretary of the board. The director is appointed by and serves at the pleasure of the board. The director administers, manages, and directs the affairs and business of the foundation in accordance with the provisions of this chapter, subject to the control and direction of the board. The board may employ technical experts and other officers, agents, and employees, permanent and temporary, as it may require, and shall determine their qualifications, duties, and compensation. The board may delegate to one or more of its agents or employees the administrative duties as it considers proper. The actual expenses incurred in the performance of these duties shall be paid from the fund.

Section 44-126-60. The board has the following duties:

(1) establish specific criteria and procedures governing decisions by the foundation to distribute the monies in the fund to entities for use in restricting the use of tobacco products by minors;

(2) establish requirements that every recipient of money distributed from the fund establish and maintain policies that restrict the use of tobacco products by minors, as provided in Section 44-126-80;

(3) evaluate the proposals for the use of the assets of the fund in accordance with the criteria established by the board and the provisions of this chapter; and

(4) evaluate the implementation and results of all efforts receiving support from the foundation.

Section 44-126-70. The foundation shall create a fund to be known as the South Carolina Tobacco Settlement Fund. The fund shall consist of the monies deposited to the fund pursuant to subsection (B) of Section 46-30-40. The fund also shall consist of monies appropriated by the General Assembly to the foundation, grants, and donations received by the foundation, and other monies received by the foundation and designated for deposit in the fund. Monies in the fund shall be used for the purposes of restricting the use of tobacco products by minors including, but not limited to, educational and awareness programs on the health effects of tobacco use on minors and enforcement of laws restricting the distribution of tobacco products to minors.

Section 44-126-80. The recipient of monies distributed from the fund pursuant to this chapter for the purpose of restricting the use of tobacco products by minors is required, as a condition precedent to the release of the monies to the entity, to establish and maintain policies restricting or preventing tobacco use by minors. The foundation shall:

(1) establish criteria for determining whether an entity's policies support the restriction of tobacco use by minors; and

(2) monitor the distribution of the monies to ensure that the recipients are in compliance with the provisions of this section.

Section 44-126-90. (A) The accounts and records of the foundation showing the receipt and disbursement of funds from whatever source derived must be in the form as the Comptroller General prescribes.

(B) The accounts of the foundation must be audited annually by the Comptroller General or his designee. Copies of the annual audit must be distributed to the Governor and to the chairmen of the House Ways and Means Committee and the Senate Finance Committee.

Section 44-126-100. The foundation shall submit a report annually to the Governor and the General Assembly. The report must include information regarding programs supported by the foundation and expenditures from the fund.

Section 44-126-110. (A) The exercise of the powers granted by this chapter must be in all respects for the benefit of the inhabitants of the State and for the promotion of their safety, health, welfare, knowledge, convenience, and prosperity.

(B) The foundation is performing an essential governmental function in the exercise of the powers conferred upon it by this chapter, and the property of the foundation and its income and operations are exempt from taxation or assessments upon property acquired or used by the foundation under the provisions of this chapter."

SECTION 3. This act takes effect upon approval by the Governor.

This web page was last updated on Wednesday, December 9, 2009 at 9:25 A.M.