Missouri budget can't count on tobacco proceeds
Thursday, June 12, 2014
Missouri’s budget concerns grew Thursday as the attorney general warned that the state may not receive $50 million of tobacco settlement proceeds in time to be used as planned in the state’s Medicaid program.
The potential budget shortfall means that the state could have to dip further into general revenues to help cover the pharmaceutical costs of Medicaid patients, leaving less money available for other state programs.
“It definitely adds to the problem,” said Linda Luebbering, budget director for Gov. Jay Nixon.
Nixon already was planning to make cuts to the $26.4 billion budget passed by lawmakers for the 2015 fiscal year, which starts July 1. State revenues have been falling short of projections upon which the budget was based, and Nixon contends lawmakers blew a large hole in the budget by passing a series of sales tax break measures for particular industries, such as electric companies, restaurants and data centers.
The Democratic governor vetoed 10 tax-law measures Wednesday but said he would nonetheless impose significant spending restrictions to guard against the potential that the Republican-led Legislature might enact the tax breaks anyway by overriding his vetoes during a September session.
The tobacco money at issue is part of the annual payment that Missouri receives under a 1998 settlement between tobacco companies and states over the costs of providing government-subsidized health care to people with tobacco-related ailments. The terms allow the annual payments to be reduced if the settling tobacco companies lose market share and states fail to diligently enforce settlement provisions intended to keep other tobacco manufacturers that didn’t join the pact from gaining sales.
Missouri was one of six states that arbitrators said failed to diligently enforce the terms of the tobacco settlement in 2003. As a penalty, Missouri received a $66 million settlement payment in April that was about $70 million less than normal.
Attorney General Chris Koster sued to try to set aside the arbitrators’ decision and recoup the money. In May, St. Louis Circuit Judge Jimmie Edwards ruled that the arbitrators wrongly calculated the amount of money Missouri should lose. Koster said at the time that Missouri could gain $50 million.
Legislators assumed that additional money would come in during the 2015 fiscal year and allocated it to pay Medicaid pharmacy costs.
But Koster’s office now says the judge’s ruling likely will be appealed by tobacco companies. It could take more than a year to resolve the appeal, making it doubtful that Missouri will receive the additional $50 million before the 2015 budget year ends, Koster’s chief of staff, James Farnsworth, wrote in a letter to Luebbering.
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