Sunday, January 11, 1998

Positive balance projected for agricultural finance program

By Rick Perry

A recent story in the Reporter-News discussed the Texas Agricultural Finance Authority, and I wanted to provide your readers with some additional facts about this important program.

TAFA was created by the Texas Legislature in 1987 in response to a specific need.

Approximately 90 percent of the state's agricultural production is currently sent outside of Texas to be processed. TAFA works with the private sector to provide start-up loans to small businesses and processors that add value to Texas agricultural products.

This partnership has worked to keep value-added processing opportunities and jobs here at home.

It's important to remember that TAFA loans are funded by the sale of commercial paper. No taxpayer money has ever been used to make TAFA loans.

TAFA helps agricultural entrepreneurs get started by guaranteeing loans to banks and other lending institutions. By their very nature, TAFA loans are considered higher risk. Because of this, some defaults were inevitable, and a negative balance was expected in the early years of the program.

Today, TAFA is on solid footing with a positive balance projected by the year 2010.

The recent State Auditor's report was an important and welcomed snapshot of a program that's just beginning the seventh year of its 40-year lifespan.

Even before the most recent audit report, the Texas Department of Agriculture was working closely with the State Auditor's Office to improve and strengthen the program.

In 1996, new members to the TAFA board brought in an independent accounting firm to conduct a thorough financial analysis of the program. This independent review found that most of the loans now in default resulted from some unfortunate decisions made by the previous TAFA board early in the program.

The TAFA board is an autonomous body with the majority of its members appointed by the governor. Since Jan. 1, 1996, a new nine-member board has been in place, and at least four of those members must have agriculturally related lending or investment experience. In addition, all board members are required to receive relevant financial training before serving.

The new TAFA board has initiated more stringent standards for its rules, policies and procedures. All of these significant changes were in place or being implemented before the recent State Auditor's report.

These improvements are working. This important program continues to be run well and has the support of farmers, ranchers and agriculture organizations around the state.

I appreciate the State Auditor's work and suggestions on how to make TAFA even better. Together, we will continue to look for ways to save money and make additional improvements in TAFA to help our agriculture industry and our consumers alike.

Rick Perry, a native of Haskell, is Commissioner of the Texas Department of Agriculture.