Rural Policy Initiatives

Tobacco-Dependent Communities Research Initiative

This article was posted in 2000.

Background

Tobacco has been closely tied to North Carolina's history, politics and economy for more than two centuries. It brings in $1 billion annually and is second only to hogs and poultry in farm sales. On the national level, North Carolina accounts for more than a third of the tobacco grown in the United States and more than half of the flue-cured tobacco.

Yet, tobacco communities in North Carolina are facing a number of challenges that will forever change tobacco's place in the state's economic and social landscape. Among these challenges are several multi-billion-dollar lawsuits either decided or pending against the tobacco industry - in particular, the $206 billion settlement signed in November 1998 between the cigarette manufacturers and the states' attorneys general.

Along with the lawsuits have come additional federal cutbacks in tobacco allotments (the right to grow tobacco), a decline in cigarette exports, an increase in federal and state cigarette excise taxes, and an increasingly tough regulatory environment. Added to this situation are closures and layoffs at cigarette plants, warehouses, and stemming and redrying facilities.

To determine what these challenges will mean to North Carolina's tobacco-dependent communities, the Rural Center launched the North Carolina Tobacco-Dependent Communities Project in 1999 in collaboration with the state's leading tobacco and economic experts.

Project Plan

The purpose of this three-step project is to identify changes taking place in the industry, to look at the impact of the 1998 Tobacco Settlement on rural communities and to develop recommendations for state and local action.

Step I. The first step, which began in May 1999, was to collect data and develop a model to analyze the changing economics of tobacco in North Carolina. The purpose of this work has been to provide policy leaders and others with the information they need to plan for the future and develop responses to changes as they unfold.

Step II. The second phase of the project, which began in the summer of 2000, focuses on outreach and public input. A series of regional workshops in August and September provided farmers, tobacco workers, community leaders, economic development specialists, health advocates and interested citizens an opportunity to help develop the plans and responses they feel are most appropriate and effective. The recommendations gathered at the workshops are to be presented to legislators, North Carolina's congressional delegation and local government leaders. They will also be presented to the boards of the Phase I tobacco settlement funds, including Golden LEAF Foundation, a non-profit organization that will administer half of the state's tobacco settlement monies, which were set aside to aid tobacco-affected areas.

Step III. This phase, under way in fall of 2000, focuses on the development and analysis of policy options for local, regional, state and federal leadership, as well as North Carolina's leading philanthropic organizations and the newly created 1998 Tobacco Settlement organizations, including Golden LEAF Foundation, the Tobacco Trust Fund and the Health and Wellness Trust Fund.

Funding

Funding for the North Carolina Tobacco-Dependent Communities Project comes from the Z. Smith Reynolds Foundation and the United States Economic Development Administration.

Progress to Date

Step I. In the wake of the 1998 settlement and other tobacco-related factors such as Hurricane Floyd's destruction of tobacco fields, the Rural Center study found that the state's tobacco communities could face the following economic impacts over the next three to five years:

Within the context of the state's overall economy, the negative economic impact of the 1998 Tobacco Settlement is relatively small -- less than one percent in many areas. In areas where tobacco remains a significant part of the local economy, however, the outlook is grimmer. Areas that are most dependent on tobacco leaf production, tobacco processing and cigarette manufacturing will experience significant declines in their economies. The impact of the settlement on these towns and communities will be painful and recovery will be difficult and long-term.

Step II. The workshops drew crowds of farmers, local residents and government officials who voiced some strong concerns, including the need to keep small farms strong, to care for older tobacco farmers and workers, and to maintain much-needed governmental services for local citizens. The concern for older tobacco workers and farmers centered around the challenge of retraining for new jobs in agriculture or other businesses. The average age of tobacco farmers in North Carolina is 56.

Economic development and local government officials who attended the sessions expressed their desire to help farmers who want to leave farming to move into other kinds of work. Some officials said they're worried about the possibility of declining local tax bases while many residents of tobacco-dependent communities are going to need increased governmental services.

Comments during the Ahoskie workshop, which addressed issues facing African-American and minority farmers and communities, focused on the possibility of co-ops, other crop development, and new approaches to local and regional marketing.

In western counties where tobacco is grown mainly as a secondary income source, farmers were interest in finding reasonable alternative crops or converting to organic production techniques. Another possibility that was discussed in the western workshops was "buy-local" initiatives, which through marketing and co-ops, local grocery stores would be encouraged to purchase from local farmers.

Those attending the workshop in Winston-Salem expressed their concern for preserving the cultural and historical legacy of tobacco through heritage tourism. Another concern for the Triad area is that because of its historic reliance on an old economy structure, including tobacco farming and furniture manufacturing, it will be difficult to convert to a new economy structure, including high technology jobs.

Next Steps

Step III. Information gathered during the workshops will be presented in report form to the North Carolina General Assembly, local government officials, the state's congressional delegation and to the trust funds that will administer the state's tobacco settlement monies. Reports on the workshops also will be sent to workshop participants.

The Rural Center is also working with economists and economic development experts at UNC-Chapel Hill and agriculture economists at North Carolina State University to develop economic models, which will form the basis of tobacco-related policy options. This work is slated to be finished by February 2001.

Tobacco Advisory Committee

The tobacco advisory committee was formed in 1999 to examine the changes facing the tobacco industry, specifically the impacts of the 1998 Tobacco Settlement. Members include:

W. David Austin, Research Triangle Institute; Betty Bailey, RAFI; Johnny Bailey, N.C. Department of Revenue; Rolf Blizzard, Office of the President Pro Tem, N.C. Senate; Richard Bostic, Fiscal Research Division of the N.C. General Assembly; A. Blake Brown, NCSU Department of Agricultural and Resource Economics; Michael Brown, RAFI; Billy Caldwell, Cooperative Extension Service; W.K. Collins, N.C. Agricultural Extension Service; Kevin Cook, Governor's Policy Office; Harry Daniel, N.C. Department of Agriculture; Peter Daniel, N.C. Farm Bureau; LeAnn Davis, N.C. Department of Commerce; Ferrel Guillory, School of Journalism and Mass Communications at UNC-CH; Arnold Hamm, Flu-Cured Tobacco Stabilization; Ed Jones, NCSU; Akhtar Khan, Employment Security Commission; Mike Kiltie, State Budget and Management; Don Liner, Institute of Government; Donald McDowell, N.C. A&T University; Bill McNeil, N.C. Department of Commerce; Norma Ware Mills, Office of the President Pro Tem of the N.C. Senate; Thomas A. Sabel, U.S. Department of Agriculture; David J. Sullivan, N.C. Community College System; Rebecca Troutman, N.C. Association of County Commissioners; and William Upchurch, N.C. Department of Agriculture.

Click here for the Rural Center's report, "Tobacco in North Carolina: What's in store for our economy, our communities?"