Richmond, Dec. 30, 2002 - Tammy Jackson knows firsthand the damage caused by the double hit on Southside Virginia's economy. The 33-year-old Halifax County resident has earned a living all of her life from two staples of the region's economy, tobacco and textiles.

She grew up working on a tobacco farm owned by her father and uncle. For 10 years, she worked for Tultex Corp., the apparel manufacturer that once employed thousands in Southside.

When the company filed for bankruptcy protection in December 1999 and went out of business the next year, Jackson's job and thousands of others vanished, sending ripple effects throughout the region's economy.

But nearly three years after losing her job, Jackson is back on her feet and working toward a brighter future. A wife and mother of a 4-year-old, she has earned an associate's degree and found a new job. She is now working on a four-year degree in organizational management and development from Bluefield College.

Jackson's main source of assistance in continuing her education is a $4,000 scholarship, one of 1,124 that were provided this year to Southside residents from Virginia's share of the 1998, $206 billion settlement between major cigarette manufacturers and states that sued the industry to recover the health-care costs of treating sick smokers.

In return for the financial aid, Jackson has agreed to remain in the community where she grew up and work in education. "I would like to teach classes for middle school and high school students and eventually at the community college," she said.

Now her husband, Michael is applying for a scholarship too, with hopes of studying to become a physical education teacher.

"I think education is the key," to the region's future, Jackson said. "It's a good thing that money is available."

Across Virginia's tobacco-, textiles-, furniture- and coal-producing belt, tobacco settlement money is flowing like a river with many tributaries.

The source of that river is the Tobacco Indemnification and Community Revitalization Commission, a group of 31 state legislators, farmers, business leaders and other residents of southern and Southwest Virginia.

Created in 1999 by the General Assembly, the commission controls 50 percent of the state's twice-yearly settlement payments. Virginia is slated to receive about $4 billion over 25 years from the settlement.

In the three years since it was formed, the commission has handed out hundreds of grants and loans, totaling nearly $90 million, to localities, schools, nonprofits and other entities in a 33-county region stretching from Lee County in the west to Sussex County in the east.

The sole purpose of the funding is to stop the region's economic bleeding and help diversify its economy.

"We have an opportunity to do something that has never been done, to my knowledge, in the commonwealth: to redefine and refocus an entire economy within a generation," said state Sen. Charles R. Hawkins, R-Pittsylvania, the commission's chairman and co-sponsor of the legislation that created the group.

In addition to the scholarships, which are provided to people who have relied on tobacco income, settlement money has helped pay for industrial parks and community centers, water and sewer upgrades, telecommunications infrastructure, research into potential alternative crops, job training and business recruitment, among other projects.

The commission gets no tax dollars. All of the money comes from the settlement, which means that tobacco companies are paying for it, and ultimately, smokers are paying through higher cigarette prices.

Philip Morris, the nation's top cigarette maker and one of the Richmond area's top private employers, has paid out $11.5 billion so far as its share of the settlement, a company spokesman said.

The tobacco commission, which draws its settlement dollars from a nonreverting fund in the state treasury, has received more than $220 million so far as its 50 percent share.

With such an enormous flow of money coming their way, the tobacco region's leaders have often pitched the commission's work in almost epic terms. Some have called it "a Marshall Plan" for Southside, comparing it to the plan to rebuild Europe after World War II.

Everyone seems to agree that Southside and Southwest Virginia are in desperate need of an economic shot in the arm. Even during the economic boom of the 1990s, unemployment rates in those regions were much higher than other parts of the commonwealth. With the loss of thousands of textile jobs, the rate has been in double digits in some localities for several years.

Demand for tobacco, a staple crop in rural areas of Southside and Southwest Virginia, has plunged by nearly 50 percent since 1997, and next year's crop will be the smallest ever.

Three years after the commission began its work, is it doing any good? While the commission hasn't tracked the number of new jobs created by its work, members point to the scholarships and the successful recruitment of several new businesses to the area as examples that positive results are starting to show up.

One example: In December, the city of Martinsville landed a new company, Axiom Technologies, a maker of engineered ceramics for wireless communications systems. A $250,000 grant from the tobacco commission's "deal closing" fund helped win the company, which will employ 250 people.

In the flue-cured tobacco region of Southside Virginia, much of the settlement money has been distributed based on a formula that calculates tobacco income in each locality based on quota ownership, tobacco-related jobs and auction warehouse designations.

The commission's goal has been to focus on regional needs and avoid any bickering for money among communities that have traditionally competed for jobs. To that end, most of the money has been channeled through regional industrial authorities, planning district commissions or community colleges.

The largest chunk of economic development funding, about $12 million, has gone to 12 community colleges that serve Southside and Southwest Virginia.

"The tobacco settlement money has meant a lot to us, as it has for all of the community colleges," said Mary Jane Elkins, dean of Institutional Advancement for Southside Virginia Community College.

SVCC, where enrollment is up 23 percent this year, has used its money partly for scholarships and upgrades such as new computers. Mostly, the money has benefited the school's truck driver training, heavy equipment operations and diesel technology classes held at Fort Pickett. Other beneficiaries of settlement money include the Southern Virginia Higher Education Center, or SVHEC, in South Boston, where Jackson now works as an administrative support and program specialist while she studies for her degree.

In a project symbolic of the region's efforts at change, tobacco settlement money helped transform an old tobacco processing factory into the SVHEC, a 70,000-square-foot facility full of classrooms, computer labs and branch offices for various community colleges.

Southside residents can take college-level courses at the center can take college-level courses at the center from visiting professors or distance-learning classes, a concept the commission is trying to support in communities throughout the region.

In South Hill, a town just off Interstate 85, settlement money is paying for the renovation of a building that once housed a retail store but will soon become a community education center.

The South Hill Education Center will provide computer labs and space for classes in which employers can customize their training needs.

While South Hill has benefited economically from its location along I-85, "work-force training is the one piece of the puzzle that is missing," said Joyce French, executive director of the Southside Planning Commission, which includes Brunswick, Halifax and Mecklenburg counties and a number of towns, all of which have received grants for projects ranging from education to industrial parks.

While some grants have had immediate impacts, most of the economic development funding so far has been aimed at bringing about more of a long-term transition to the economy.

Danville and Pittsylvania County have channeled much of their settlement dollars into the construction of a new research and education facility called the Institute for Advanced Learning and Research, which will operate as a partnership between Virginia Tech, Averett University and Danville Community College.

The 90,000-square-foot building, scheduled for completion next fall, will include classrooms as well as 15,000-square-feet of research labs where faculty and students will study subjects including engineering and horticultural biotechnology. Some of the research will look at developing high-value alternative crops. One crop of interest is genetically engineered orchids that produce double the number of blooms of regular orchids.

"I don't know that you will ever replace tobacco" as a major cash crop, said Tim Franklin, the institute's director. "But you certainly want to bring in other high-value crops as tobacco declines."

Franklin sees the institute becoming " an economic mini-hub" that will help the region "benefit from the knowledge economy . . . and improve the livelihood of its citizens."

"What we really are doing is moving this area from sort of a demand-side economic development strategy to a supply-side strategy. Instead of going out and getting companies to come here and use cheap labor, we instead want to supply value to companies who otherwise might not come here."

The institute in Danville will have close links with another newly formed institution for which the commission has provided about $11 million in funding, Virginia Tech's Bioinformatics Research Institute. Bioinformatics, essentially the merger of biotechnology with computer science, involves research that could lead to improved methods of raising current crops and the development of alternative crops for tobacco farmers.

Tobacco money paid for the startup of the institute in Blacksburg in July 2000, has paid for the hiring of its staff of researchers, and the construction of 18 growth chambers for plant research.

Perhaps the commission's most ambitious plan for economic development is the E58 corridor project, a plan to run a fiber optic telecommunications network from Tidewater to the Kentucky border, following the path of U.S. 58. The project, still in the planning stages, could cost about $100 million.

Economic development isn't the commission's only task. The largest chunk of the settlement money, about 64 percent so far, has gone directly to thousands of tobacco farmers and quota holders.

Those payments are intended to compensate producers for lost income caused by the steep drop in demand for U.S.-grown leaf after the settlement.

By October, the commission had paid out more than $129 million in direct payments to farmers and quota owners. Another $20 million payout is scheduled for next May, but the commission's emphasis will shift more toward economic development starting next year.

The money comes with no strings attached. Farmers can use it as they please. Commission members and farm leaders say growers have used the money mostly to pay off debts and keep their farm operations running.

"I think it has saved a lot of folks," said Andrew Shepherd, a Lunenberg County tobacco grower and a leader in the farm community. "I only know of one bankruptcy of a tobacco farming family. Without these payments we would have seen many, many more."

While other tobacco states have also used their settlement money to compensate farmers, at least one state, Maryland, has taken a different approach. Maryland has used a portion of its settlement money to wean farmers off the crop by paying them not to grow it.

Members of Virginia's tobacco commission say that approach wouldn't be practical here, because Maryland has a much smaller number of farmers than Virginia.

"They have a different philosophy" in Maryland, said Carthan F. Currin III, the commission's executive director since its inception. "They are trying to keep people from growing tobacco. I know we can't just continue to rely on tobacco, but the tobacco industry has a much greater impact here in Virginia than it does in Maryland."

Health groups have been supportive of the commission's efforts to diversify the economies of tobacco regions, and national tobacco-control groups have looked at Virginia as a model of what states can do to help farmers transition away from tobacco.

"Some of this money should be used to help [farmers] make a transition," said Amy Barkley, a regional representative for the Washington-based Campaign for Tobacco-Free Kids. "From all I've seen, it does appear that [the commission] is making an attempt to try to help the region make a transition."

The commission has quietly done its work even as the state has struggled to fill a $2 billion budget hole brought on by last year's economic recession. State agencies have had to cut their budgets and lay off employees, but lawmakers haven't touched the commission's funding.

Protecting the money from the General Assembly's groping fingers has been a concern for the commission from the beginning. Members justify their right to 50 percent of the settlement dollars, to the exclusion of other regions of the state, with the argument that Southside and Southwest Virginia have suffered more hardships.

"There are other problems in the state that need to be addressed. I'm not disputing that," Hawkins said. "But if you look at the region the tobacco commission is addressing, we have been hit with double and triple whammies. Very few sections of the state have had the problems we have had all at one time."

Del. Thomas C. Wright Jr., R-Lunenburg, said the funding "may be the last opportunity we have to really do something positive for Southside."

Wright's home town of Victoria, where he owns a grocery store, has suffered the loss of manufacturing operations over the past few years as well as significant tobacco income. A shell building constructed jointly by Lunenburg County and the city of Kenbridge five years ago remains empty today.

Tobacco commission funding, he said, has provided some much-needed infrastructure upgrades in the area. In combination with new educational opportunities, that could be the turning point.

The loss of tobacco and textiles "has left this area in a terrible position. We are still struggling to try to come out of it," he said. "But I have confidence that Southside is going to rise and the economy is going to return."

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Published by Public Relations, December 29, 2002