Arbitration to begin in tobacco-agreement dispute

(Editor’s Note: This is what happens when tobacco settlement funds are dumped into the General Fund instead of being used for healthcare and education.) 

by David Ress Richmond (VA) Times-Dispatch (excerpted) LINK>>>to original

Financially pressed states might have to return $1.1 billion to Big Tobacco this year, if a review finds the states aren't trying hard enough to keep a 12-year-old legal settlement from hurting the companies too much.

This summer, states and the nation's Big Three tobacco firms will begin arbitrating a dispute over 2003 payments made under the settlement, the companies have disclosed in financial filings with the U.S. Securities and Exchange Commission.

Sums ranging from $705 million to $1.1 billion for each of the subsequent years also are headed for arbitration. And that's on top of the fact that the money actually paid to the states has run as much as $2.2 billion a year less than the sums touted when the settlement was signed, a Richmond Times-Dispatch review found.

At the heart of the arbitration dispute is the roughly 54 cents a pack the settlement currently costs Big Tobacco. The money is intended to repay states for the costs of caring for sick and dying smokers over the years -- but only a few states use the money for that, or for the tobacco cessation and prevention programs public-health advocates hoped the settlement would fund.

As part of the settlement, 46 states, the District of Columbia and several territories agreed to require all other cigarette-makers to pay into special set-aside accounts, to be available to cover any future health-care costs if states find their products sicken smokers.

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The two co-chairs of the National Association of Attorneys General's tobacco committee, Martha Coakley of Massachusetts and Jon Bruning of Nebraska, and the association itself, which oversees the settlement, did not respond to repeated requests for comment over the past several weeks.

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The windfalls from the settlement have made marketplace allies of Big Tobacco and the states -- most of which have not been using their payments for health care or to help smokers quit or to keep young people from starting to smoke, (Dr. Alan) Blum, (the physician who directs the University of Alabama's Center for the Study of Tobacco and Society,) said.

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A minority of the 46 states and the District of Columbia that signed the settlement, meanwhile, have steered any tobacco settlement payments specifically to health care, or to tobacco cessation and prevention programs, a Times-Dispatch review of states' financial reports and budget documents found.

Twenty-four states and the District either put the money into their general funds, which pay for most government activities, or use it to pay interest and principal on bonds. Six states use all the money for tobacco or health problems, while 16 others use some of the money for those purposes.

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Only one state, North Dakota, funds its tobacco prevention programs at the level recommended by the Centers for Disease Control and Prevention, according to the Campaign for Tobacco-Free Kids, a public-health advocacy group. Only Alaska, Arkansas, Delaware, Hawaii, Maine, Montana, South Dakota, Vermont and Wyoming fund such programs at half the level the CDC recommends.

"It is absolutely clear that the settlement money should be allocated to tobacco control, it is very clear that that is what the purpose was," said Lindblom, at Tobacco-Free Kids.

"But the cigarette companies have no interest in money going for that, and the states want to be free to use the money as they want."

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LINK>>>to original

HB2542, raiding special funds including the Tobacco Fund, is now sitting on the governor’s desk awaiting a veto decision.

From the Conference Committee Report on HB2542:

The purpose of this bill is to help address the fiscal year 2010-2011 budget shortfall by transferring a total of $45,197,000 in excess balances from various non-general funds as follows: $7,200,000 from the Hawaii Tobacco Settlement Special Fund

This bill also:  Reduces the distributions of cigarette and tobacco tax revenues to various non-general funds for the period from July 1, 2011, to July 1, 2013;