SOURCE: USDA and TOBACCO GROWERS ASSOC. OF NC, 1/17/14

USDA Fact Sheet on 2014 TTPP  
1/5/14
Notice TB-1280
Overview
A Background  
On October 22, 2004, the American Jobs Creation Act of 2004 was passed and included the Fair and Equitable Tobacco Reform Act, commonly referred to as the “Tobacco Buyout”. To administer the program, USDA created TTPP. TTPP assesses tobacco manufacturers and importers based on their market share, receipts of those assessments go into the Tobacco Trust Fund. Those funds from the Tobacco Trust Fund, through CCC, are used to make buyout payments to the tobacco quota holders and producers, as well as, financial institutions.

The Balanced Budget and Emergency Deficit Control Act of 1985, as amended by Pub. L. 112-240, mandated that all FSA programs were subject to sequester reductions.

OMB, in coordination with USDA, has determined that pursuant to the Budget Control Act and American Jobs Creation Act of 2004, that TTPP is a trust fund. As such, funds for this program that were sequestered in FY 2013 will become available in FY 2014 without further congressional action. Additionally, funds for TTPP that will be sequestered in FY 2014 will become available in FY 2015 to complete the final year of the program.

The FY 2014 TTPP annual payments are the tenth and final payments that will be issued for the Tobacco Buyout Program.

B Purpose  
This notice provides answers to questions about FY 2014 TTPP payments (Exhibit 1), which will be disbursed as follows:
• SII accounts received 100 percent of the payment by January 15, 2014

• individual contract holders will receive 95 percent of the annual installment in February 2014 or as early as practical, and the 5 percent balance will be paid in full in October 2014.



Update Regarding the Final Buyout Payment from TGANC

1.      Is there any sequestration?   No.  You will receive full payment.
2.      When will the payments be made?  For individuals, 95% of the payment will be made now.  The balance will be made in the beginning of the government’s fiscal year 2015 which begins October 1, 2014. The balance of funds (remaining 5%) is expected in October of 2014.  For monies that were assigned to financial groups that securitized the future payments from individuals, they will receive 100% of the payment due in this month.  
3.      Why the discrepancy between the two? Why aren’t individuals also receiving 100% of payment in January?  This is a complicated answer to reach full understanding about.  Apparently not all of the monies are on account yet to pay the full obligation this month.  Language in the TTPP act grants USDA the latitude to make annual payments any time during the fiscal year it is due.  This means we could have been receiving buyout checks every September 30th instead of January 15th.  January was determined in order to help with farm operating costs at the beginning of each season.  It appears that not all of the $955 million is on hand in account for USDA to distribute at this time.  Whatever amount apportioned less than the full amount is sufficient to make about 97% of the obligation.  Because the securitized portion is regarded like a Trust Fund agreement with the January specified date, or contract deposit obligation, if the government doesn’t make the payment timely then “prompt pay interest” will attach for each day it is late.  The amount could be tens of thousands of dollars each day. Due to the language about the general payment obligation to individuals, no prompt interest is incurred until after the fiscal year window for full payment.
4.      How much is the final payment?  Approximately $955 million.  It has basically been annualized the same for each of the ten years.
5.      How much of the last payment is part to the “lump sum” or securitized arrangement between financial institutions and buyout recipients?  Approximately $ 304 million. This leaves a balance of $651 million to individual recipients. Five percent of $651 million means the government is delaying delivery on $32,555,000.00.
6.      What is SII? That is the term for “Successor In Interest”.  SII is whoever took assignment for the future payments from the government from initial buyout recipients.

SUMMARY:

•      You will receive 100% of the final buyout payment due to you.
•      You should expect to have all of it during calendar year 2014.
•      If USDA had 100% of the buyout funds on hand and in account today, I believe USDA would desire to pay everyone in full at the same time. (point here is... do not blame USDA for split payment).
•      Financial groups that will receive 100% of funds this month are not being given special treatment.  They are eligible due to additional terms in how deposits were treated as part of the approval for them to be allowed to offer farmers and quota holder’s lump sum payments when the buyout distribution began nine years ago.
•      All of this payment disruption is a consequence of the previous sequestration language.
•      TGANC believes that every eligible recipient should receive 100% of their due payment as quickly as possible and we will continue to advocate that the government make such payment promptly.  We will continue to call upon our congressional delegation to seek solutions to making the full payments prior to FY 2015 and distribute the additional $32.5 million in the near term.

Thanks,

Graham Boyd
Executive Vice President
Tobacco Growers Association of NC
919-614-0099