Judge orders re-figuring of Missouri tobacco loss
Friday, May 2, 2014
By DAVID A. LIEB
JEFFERSON CITY, Mo. (AP) -- A state court ruling Friday could allow Missouri to avoid most of a $70 million penalty for its lackluster enforcement of a legal settlement with tobacco companies, Attorney General Chris Koster said.
St. Louis Circuit Judge Jimmie Edwards ruled that an arbitration panel wrongly calculated the amount of settlement payments Missouri should lose this year for failing to diligently enforce the tobacco settlement terms in 2003.
As a result of that arbitration decision, Missouri's $130 million tobacco settlement payment was reduced this year by about $70 million.
Koster said $50 million of that should be wiped out as a result of Friday's court decision, leaving Missouri with a $20 million loss in its tobacco settlement proceeds.
State lawmakers already had accounted for the $70 million hit to the state budget by approving the use of general state revenues to make up for the lost tobacco settlement funds that had been designated for the Medicaid health care program.
Missouri received $66 million of tobacco settlement payments in April. If the state gains an additional $50 million as a result of the court ruling, that money could available to be spent either in the current or upcoming budget, which takes effect July 1.
"This money will provide needed support for state priorities like public education," Koster said in a written statement.
The court battle stems from a 1998 settlement of lawsuits alleging tobacco products were driving up states' health care costs. Major tobacco manufacturers agreed to make annual payments to be divided among the 46 states participating in the settlement. Missouri gets about 2.3 percent of that money.
The settlement allows the payments to be reduced if the tobacco companies suffer a loss in their market share and states fail to diligently enforce settlement provisions intended to keep manufacturers that didn't join the pact from gaining sales.
Missouri was one of six states -- along with Indiana, Kentucky, Maryland, New Mexico and Pennsylvania -- that arbitrators said failed to diligently enforce the terms of the tobacco settlement in 2003.
Twenty-two other states, including 20 that tobacco companies claimed had not been diligent, struck an agreement with the companies that avoided arbitration.
Edwards ruled that Missouri's penalty had been wrongly enhanced by redistributing the share of the penalty that otherwise would have been paid by those 20 states that settled their cases before arbitration. Edwards' ruling was similar to one issued last month on behalf of Pennsylvania.
Koster's office sent a letter Friday to the independent auditing firm handling the tobacco settlement asking that it recalculate Missouri's 2014 settlement payment and restore about $50 million.
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