This proposal would phase out the federal government's support for the production and marketing of tobacco, with fair compensation for quota owners, growers, and affected communities.
- Elimination of the Quota Program for the 1999 Crop. The quota program would end in 1999 and the price support program would be phased out over a three-year period, starting in 1999.
- Buyout Payments: Quota owners would be eligible for buyout compensation at the rate of $8.00 per average quantity of quota owned by the owner during the 1995-1997 crop years. This would be paid out in three equal installments during 1999-2001.
- Transition Payments: Those who lease quota and tenant farm tobacco will be compensated $4.00 per average quantity of quota produced during the 1995-1997 crop years. This would be paid out in three equal installments during 1999-2001.
- Phaseout of Price Support Program During the 1999, 2000 and 2001 Crop Years:
- Price support rate will be reduced by 25% in 1999, 10% in 2000, and 10% in 2001.
- Tobacco companies will pay for all financial losses incurred by the federal government with respect to price support loan activity during and after the phase-out period until all the tobacco that is collateral for price support loans is sold.
- Producers will not be liable for "no net cost assessments" during the phaseout period; assessments will be paid by the tobacco manufacturers.
- Rural Economic Assistance Block Grants
- $1 billion over 5 years will be available to states that are dependent on tobacco. This will be used for on-farm diversification, off-farm activities such as education and retraining and assistance to tobacco warehouse owners or operators.
- States will be eligible based on the number of tobacco-dependent counties, taking into account a county's gross tobacco sales and its total farm income.
- Recipient states will have the flexibility to determine the areas most in need and the purposes for which the money should be used.
- Reimbursement for Certain Federal Costs: The tobacco companies will reimburse the federal government for certain costs related to the production of tobacco, such as agricultural extension, weighing, grading and inspection and crop insurance subsidies. Also, the tobacco companies will pick up the cost of administering the price support program during the 1999-2001 phaseout period.
- Cost: The estimated cost of this buyout program is $18 billion over five years.
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