Those pushing for and against passage of a law that would make small tobacco companies pay more into an escrow account have made their cases to the House Budget Committee.
The escrow account was created for tobacco companies not participating in the Tobacco Master Settlement to pay into, and they would get their money back after 25 years. How much they paid into it was based on their sales compared to the national tobacco market.
Due to what Representative Chris Kelly (D-Columbia) calls a “very complex formula,” those companies were able to take back out most of the money paid into escrow.
The bill, HB 1242 would change that formula. It is sponsored by House Budget Committee Chairman Rick Stream (R-Kirkwood).
Andy Arnold, a lobbyist for U-Gas, Inc., tells the committee the legislation would cause small tobacco companies’ per-carton fees to the State of Missouri to increase from 14-cents to $6, while the fees paid by big tobacco companies would remain 14-cents per carton.
Kelly is a co-sponsor. He notes that the lack of money in that escrow fund is part of what a 3-judge panel cited as Missouri’s poor past enforcement of tobacco laws that has caused it to lose $70-million of its $120-million tobacco settlement payment that comes next month.
“Much of which or all of which we would not have lost had we passed this legislation,” says Kelly. “Tobacco companies settled with other states whose position was similar to ours for 43-cents on the dollar.”
Lobbyist Chuck Hatfield representing Cheyenne Cigarettes says the arbitration panel that made the decision to pull part of Missouri’s 2014 payment for poor enforcement in 2003 said that Missouri is not required to pass such legislation as part of tobacco law enforcement. He says there were eight factors that played into the decision, that would be important in future arbitrations.
Hatfield says one of those reasons is that Missouri came in last in its collection rate in 2003.
“24 percent collection rate on cigarettes,” says Hatfield. “Dead last because the Attorney General’s Office did not file lawsuits and because they did not properly communicate with the Department of Revenue.”
Another of the opponents of the bill is the Missouri Petroleum Marketers & Convenience Stores Association.
“One of the things that you need to understand,” its lobbyist Ron Leone tells the committee, “Six states lost arbitration. Five of them passed the law that’s in front of you today.”
Leone and representatives of small tobacco companies argue that the formula was intentionally designed to have companies not participating in the Master Tobacco Settlement pay less than big tobacco companies, and the bill is an effort by big tobacco companies to undo that.
Steve Carroll, representing tobacco company Excalibur, tells lawmakers, “You’ve got some corporations coming before you … that committed perjury before Congress, lied to Congress, ended up in a settlement, and are paying damages for that tort that they committed. As I view it they’re trying to shift those damages and that tort to my client, which has done nothing wrong, has always abided by the law, we’ve always been in compliance with state law. We weren’t even in existence at the time (of the settlement).”
The General Counsel for the Attorney General’s Office, Joan Gummels, dismisses the argument that the 1999 law was intended to be drafted the way it was passed. She asked lawmakers to consider two points on that matter.
“One is just the irrationality of having someone deposit a large amount of money only to refund them 97 percent of it,” says Gummels. “The second, and I think really compelling point on this is why have 45 of the 46 states that signed the agreement closed this loophole?”
No vote has been taken on the legislation. Next week is the legislative spring break and the House will take up the budget when it returns the week after. Stream says he wants lawmakers to have time to process what they heard in the hearing and says another hearing might be held before a vote is held on the bill.