Hard Times Keep Getting Harder in Tobacco Patch

The old tin warehouse on Goldsboro Street, as big as two football fields, is heavy with the sweet aroma of tobacco. Farmers wait there, tidying up their piles of golden, ripe leaves, stretched out in neat, seemingly endless rows. It is not yet 9 a.m. and their shirts are already sweat-soaked. They sip coffee and talk about quotas and drought and changing times full of uncertainty.

Glen Turnage wipes perspiration from his brow. He yanks several dark, crisp leaves from a 200-pound pile, tossing them aside as the buyers approach. “That’d make a harsh smoke,” he said. “Nobody but the Japanese would want it.” But this--and he picks another leaf, smelling it and touching it as though examining a piece of fine silk--”this is top-grade. Ripe, mature, full of flavor. This is America’s best.”

For 113 years, farmers like Turnage have gathered every August for the annual auction in a county once known as “the tobacco marketing capital of the world.” But Wilson County’s 28 auction warehouses have shrunk over the years to two, including the Liberty on Goldsboro, North Carolina’s tobacco production has been cut in half since 1998 and the crop that financed the Revolutionary War--and still provides taxes that plug the budget shortfalls of many states--is viewed with disdain by much of America. Smoking has declined overall as it has become more expensive and its risks more widely publicized.

Never, farmers say, has the future seemed so capricious or a life of labor so unappreciated.

“We were asleep at the wheel,” said Pender Sharp, a fourth-generation tobacco man who farms 200 acres outside Wilson, 45 miles east of Raleigh. “Tobacco had been so good to so many generations, has pumped so many billions of dollars in taxes into the economy, we thought surely no one would let this happen. We were wrong.”

What happened was the growth of the anti-tobacco movement, culminating in the Master Settlement Agreement in 1997 and ’98. In an effort to stop states from suing to recoup health-care costs for smoking-related disease, the tobacco industry agreed to pay 46 states $246 billion over 25 years. Growing quotas were reduced as a result, hitting top producer North Carolina the hardest, and manufacturers added 45 cents to a pack of cigarettes, 28 cents more than industry watchers said was necessary to cover the costs of the settlement.

State budgets were flush with cash in the booming 1990s, but now, with the national economy flirting with a double-dip recession and tax revenue plunging, 40 states and the District of Columbia are facing budget shortfalls. Much to the consternation of the men gathered at the Liberty Warehouse, many of these governments have decided, as Graham Boyd, vice president of the North Carolina Tobacco Growers Assn., put it, “to milk the cow without feeding it.” They are looking to tobacco to help bail them out.

Gov. Gray Davis, facing a $23.6-billion shortfall in California, has proposed increasing tobacco taxes, a move at least 15 other states recently have taken. In New York City, the cost of a pack of cigarettes jumped to $7 when taxes per pack were increased from 8 cents to $1.50. Connecticut picked up an estimated $1 billion with its 61-cent-per pack tax increase on tobacco, the only tax increase many politicians dare support in a year when 36 governors are on the November ballot.

Some states want to plug their budget gaps with windfall money from the master settlement. Wisconsin is considering issuing bonds secured by the settlement, which in effect would spend its entire 25-year share of the payout this year and next. North Carolina Gov. Mike Easley, the son of a tobacco farmer, has diverted--farmers use the word “stolen”--$50 million from a trust fund set up with settlement money to help tobacco farmers and rural counties in an effort to balance the state budget. Farmers have asked him to return the funds and to abandon plans to take an additional $40 million.

For the states, the $246-billion settlement bonanza was found money that came with no strings attached. A report by the National Conference of State Legislatures says that, from 2000 to 2002, states budgeted only 5% of the initial $21-billion payout to anti-smoking efforts. Only seven states spent the minimum amount recommended by the federal Centers for Disease Control and Prevention for health-related programs.

Alaska used some of its settlement funds for harbor repairs. Alabama spent $11 million to lure new industries and $600,000 on smoking prevention. Tennessee spent most of its settlement to balance the budget and Connecticut put $260 million into its general fund so it could cut taxes. North Carolina allocated $42 million to modernize the tobacco-curing process and build a tobacco-marketing center and less than $1 million on health.

On the outskirts of Wilson, Marion Pridgen stands amid the stalks of ripening tobacco in his fields. Each of his plants will fetch him 60 to 70 cents--or about $1.80 a pound--and each, by the time it is transformed into cigarettes, will generate $20 in taxes. No crop comes close to producing the revenue and taxes that tobacco does, but like his neighbors, Pridgen has already started diversifying into soybeans, cotton and sweet potatoes--aware that the golden age of tobacco is fast fading.

Pridgen, once a landless tenant farmer, quit smoking three years ago after finding himself constantly short of breath. Now, he says, he feels good again. Like most farmers, he supports measures to prevent teenagers from smoking but says for adults it is a matter of choice.

He believes he has led--and few would dispute it--an honorable, hard-working life, producing a legal commodity that is used by 51 million Americans and typically contributes $34 billion a year to the U.S. economy.

“Five years down the road, I don’t know if I’m going to be growing tobacco or outlawed, so it’s pretty hard to make a sensible business decision,” he said. “But as far as being mad at society or the world, I’m not. Things change in life, and this is just one of them. You’ve got to adjust, though I do know that anyone who thinks people aren’t going to smoke in the world is naive.”

North Carolina has the infrastructure to produce 1 billion pounds of tobacco a year. Its yield this year will be about half that. Some pundits say if the state hadn’t lost the revenue from 500 million pounds not grown, it wouldn’t be facing a $2-billion shortfall, the highest since the 1930s, and Easley wouldn’t be in a position of including $250 million from lottery revenue to balance the budget of a state that has no lottery.

“My feeling is we’d have a shortfall even without” the master settlement, said Blake Brown, an agro-economist at North Carolina State University in Raleigh. “The budget problems involve more than a decline in tobacco.”

But in a study he co-authored, Brown attributes 125 million to 147 million pounds of North Carolina’s 274-million-pound decline in annual purchases of flue-cured tobacco to the effect of the settlement.

So, beset by declining quotas, health concerns over smoking, a four-year drought, the effects of two devastating hurricanes in the 1990s and the same stagnant prices affecting most agricultural commodities, the small, family-owned farms that dominated the North Carolina tobacco industry are slowly disappearing. Their demise is reflected in Wilson County’s tobacco-auction sales: a record 102 million pounds in 1975, an estimated 12 million pounds this year.

“Used to be the opening of the auction was the big event in the county,” said farmer Allan Barnes. “Every politician showed up to make a speech. Even the governor. We’d walk out with a pocket of cash. You’d settle up with the fertilizer dealer, pay your bills, maybe buy your boy a bike. But that’s the old days. This year there’s just not the buzz there used to be.”