tobacco settlement Archives

Judge rules Missouri is due more tobacco settlement money

May 2, 2014 By Mike Lear

A circuit judge has ruled Missouri is due nearly $50-million more in this year’s tobacco settlement payment.

The office of Attorney General Chris Koster says the St. Louis Circuit Court ruling partially vacates a 2013 arbitration panel decision that cost Missouri about $70-million from this year’s payment.

Koster has notified the independent auditor that calculates the settlement payments to Missouri and demanded that Missouri’s payment be revised to reflect the new ruling.

In a statement Koster says, “This money will provide needed support for state priorities like public education. I thank our dedicated team of attorneys, who have litigated this case for years to ensure that Missouri receives its fair share of the settlement money.”

The 2013 ruling against Missouri stemmed from the allegation by tobacco companies that participated in the 1998 Master Settlement Agreement (MSA) that many states, including Missouri, failed to diligently enforce state tobacco laws in 2003. Those companies argued they were entitled to withhold a large portion of their payment for 2003 under the terms of the agreement.

22 states settled their cases. The 3-judge panel issued its 2013 decision against Missouri and five other states that did not settle, and ruled that they were responsible not only for their own share of the loss but also for the shares of the states that had settled. Friday’s ruling stems from a suit filed by Koster last fall arguing that reallocating the liability of the settling states onto the six states that didn’t settle violated the terms of the MSA.

House holds hearing on bill in ‘big vs. little tobacco’ issue

March 12, 2014 By Mike Lear

A bill that would increase a fee some small tobacco companies pay on the sale of their cigarettes in Missouri has been heard in a House Committee.

The issue is related to a ruling in September by a 3-judge panel that Missouri would lose about $70-million of its $160-million tobacco settlement payment that is coming next month. The ruling was based on a lack of enforcement in Missouri of tobacco laws in 2003. Resolution of issues for years after 2003 could result in Missouri losing portions of tobacco settlement payments in future years.

Under legislation passed after the Tobacco Master Settlement was reached, tobacco companies that were not participating in the settlement had to pay into an escrow fund an amount based on their national share of the market. Because some companies’ percentage of the market nationally is significantly smaller than their share in Missouri, the formula related to those payments allowed them to recoup nearly all of those escrow payments. The legislation would change that formula.

Proponents, including the Attorney General’s Office and tobacco companies Phillip Morris, RJ Reynolds and Lorrillard Tobacco, say the legislation is necessary for Missouri to have a chance of losing less in future tobacco settlement payments, and say it would level the playing field between large and small tobacco companies. Opponents including small tobacco companies argue it would put them at a disadvantage to their big counterparts and force them to pay an inflated fee stemming from offenses they didn’t commit.

Budget Committee Chairman Rick Stream (R-Kirkwood) is the sponsor of the bill. He called today’s hearing an informational session to get lawmakers familiar with the issue.

Ruling cuts Missouri tobacco settlement payment by $70-million

September 19, 2013 By Mike Lear

Missouri budget planners now know how much the state budget will lose from tobacco settlement money.

The Attorney General’s Office estimates a ruling favoring tobacco companies will cost Missouri $70-million out of the Fiscal Year 2014 tobacco settlement payment. (photo courtesy; Tim Bommel, Missouri House Communications)

State Budget Director Linda Luebbering says the Attorney General’s Office estimates Missouri will only get $60-million of the $130-million tobacco settlement payment coming in April. That is the result of a 3-judge panel’s ruling that Missouri did not diligently enforce tobacco laws in 2003.

She says the $35-million that comes out of those payments for early childhood programs will be safe, but some mandatory payments to Medicaid might have to come from General Revenue.

“We’ll have to look at the General Revenue fund and make sure it can support those payments along with everything else.”

That $70-million dollar hit will be all Missouri loses as a result of this ruling, but Luebbering says more decisions could be coming.

“2004, ’05, ’06, ’07, ’08, on up … each of those will be a new decision, so we do not know if we will lose more in the future or not.”

Luebbering says the Attorney General’s Office has told her there should not be another decision in time for Missouri to lose money in the Fiscal Year 2015 budget.

She expects how that hit will be absorbed will be decided when a supplemental budget is prepared in December.

“We do an updated revenue estimate for the current fiscal year at the same time that we’re doing the consensus revenue forecast for next year.”

She says budget planners must also consider other factors, such as legislation that did or didn’t pass. Nearly $52-million was assumed to come from tax amnesty language and about $60-million for comprehensive tax credit reform. Neither of those issues passed so that revenue will not be realized. Luebbering says the administration also believes a bill that did pass, offering a new way to corporations to claim taxes, will have a negative impact on revenue at least in the short-term. One estimate placed that impact at $29-million.

Luebbering says the news that only $70-million of the tobacco money is being cut is not likely to trigger an immediate action.

“For the most part I would expect significant actions to all happen around the time of the Fiscal Year 2015 budget rollout in January, but again I do look at the budget regularly with the Governor and he could choose between now and then to do additional actions.”