This could leave the state with a short-term cash flow problem for funding programs now supported by tobacco settlement dollars.
READ: MSA Update
State supreme court requires arbitration for tobacco settlement
July 17, 2007
PORTLAND — Maine?s attempt to circumvent arbitration to collect the state?s full share of the tobacco settlement was rejected by the state supreme court on Tuesday.
Attorney General Steven Rowe sued last year after the state received $44.5 million of its $50 million share from the tobacco companies, which withheld more than $700 million from states in a dispute over how much cigarette makers owe under the settlement.
Maine was among the 46 states that agreed in 1998 not to sue cigarette makers for the public health harm caused by their products, in exchange for annual payments in perpetuity.
But the tobacco companies said they did not have to pay hundreds of millions of dollars because a provision in the settlement allows cigarette makers to pay less if they have lost market share to smaller companies that weren?t part of the deal.
In its unanimous ruling, the Maine Supreme Judicial Court said state law forbids the state from seeking any declaratory judgment from the courts during arbitration. But the state is allowed to appeal the ultimate outcome of arbitration, it said.
“The Legislature explicitly determined what decisions concerning arbitration may be appealed,” Justice Warren Silver wrote.
For the time being, the tobacco companies to continue to withhold money. In April, the tobacco companies again withheld money while providing $46.3 million to the state. That?s only 75 percent of what the state is owed, officials said.
Barring a settlement during ongoing negotiations, the state will pursue arbitration pursuant to the ruling, Rowe said Tuesday.
But it remains unclear when or where the arbitration would take place. There could be one arbitration session involving all 46 states, or there could be separate arbitration sessions in individual states like Maine.
“We?re confident that in the end, the tobacco companies will not be able to reduce their payments to Maine,” Rowe said.
The state had contended it?s entitled to its full annual payment because the state has diligently enforced laws requiring cigarette manufacturers that did not participate in the settlement to pay into escrow accounts.
Rowe also contended that unlike some states, all of Maine?s money has been used for its intended purpose of reducing smoking.
The state has reduced smoking among young people by 60 percent and among adults by 20 percent, and the state won a perfect score from the American Lung Association for its tobacco-fighting efforts, said Assistant Attorney General Peter B. LaFond.
Court Brushes Aside State Appeal For Full Tobacco Settlement
July 17, 2007
PORTLAND, Maine — The Maine Supreme Judicial Court on Tuesday tossed the state’s appeal aimed at collecting its full $50 million share of a 1998 tobacco settlement.
Attorney General Steven Rowe sued last year after the state received $44.5 million of the total from the tobacco companies.
The tobacco companies said they do not have to pay hundreds of millions of dollars set aside because of a provision in the settlement that allows the cigarette makers to pay less if they have lost market share to smaller companies that weren’t part of the deal.
All told, tobacco companies set aside more than $700 million in a dispute over how much cigarette makers owe under the master settlement.
Maine files suit to protect tobacco settlement funds
April 19, 2006
AUGUSTA, Maine –Attorney General Steven Rowe on Wednesday asked a Maine court to declare that the state is entitled to its full annual $50 million share of a settlement of lawsuits against tobacco companies.
The state received $44.5 million of the total from the tobacco companies this week, Rowe said.
State attorneys filed the papers in Kennebec County Superior Court several days after tobacco companies set aside more than $700 million rather than hand it over to the states in a dispute over how much cigarette makers owe this year under the 1998 master settlement.
Maine was among the 46 states that agreed in 1998 not to sue cigarette makers for the public health harm caused by their products, in exchange for annual payments in perpetuity.
The tobacco companies say they do not have to pay hundreds of millions of dollars set aside because of a provision in the settlement that allows the cigarette makers to pay less if they have lost market share to smaller companies that weren’t part of the deal.
In his court filing, Rowe says Maine entitled to its full annual payment because the state has diligently enforced laws requiring cigarette manufacturers that did not participate in the settlement to pay into escrow accounts.
“Maine has an impeccable record of upholding our end of the settlement agreement,” Rowe said. “Our enforcement has been more than diligent; it has been dogged and determined.”
Rowe added that the Maine Legislature has allocated the tobacco money for health purposes that will have long-term benefits.
Maine eyes extra $3.2M in tobacco deal
April 05, 2006
AUGUSTA – Maine Attorney General Steven Rowe told the governor and legislative leaders Tuesday the state is getting at least $3.2 million more from the tobacco settlement this year than was expected.
Rowe acknowledged there had been concerns after an independent arbiter’s ruling on March 28 that Maine could lose $8.8 million in settlement funds.
The arbiter sided with tobacco companies in ruling that terms of the 1998 settlement between states and the tobacco firms caused them to lose market share to other companies that were not party to the agreement.
But, Rowe said, a key part of the agreement allows those states that “vigorously enforce” their tobacco laws to avoid a reduction of payments as a result of loss of market share.
“We have a very strong record of diligently enforcing the master settlement agreement,” Rowe said Tuesday. “The states have a safe harbor to these non-participating manufacturer adjustments when they enforce the agreement.”
Despite its position, Maine had been prepared to be involved in a legal battle, which would have at a minimum delayed payments to the state indefinitely and created budgetary problems.
On Tuesday, however, Rowe was pleased to announce that one of the country’s largest tobacco companies, Philip Morris, had “made its total payment for 2006. It decided not to withhold any portion of its payment this year.”
Rowe hopes the decision by Philip Morris recognizing Maine’s efforts will have an impact on the other major tobacco companies and that they too will pay what is expected this month.
“We are certainly hopeful that the other participating manufacturers will follow suit, although we have no word on that,” he said. “For the purposes of estimating how much we are going to get, we are still expecting that they will withhold a portion of their payments.”
Rowe said the state is ready to take legal action to require the full payment by any company that does withhold a portion of their payments that are due April 17.
Maine was one of the 46 states that agreed in 1998 not to sue cigarette makers for the public health costs caused by their products, in exchange for annual payments. The state has received about $448 million from the settlement since 1999 and is expecting $44.1 million this year.
“It’s certainly good news that they have paid all of the payment,” Sen. Peggy Rotundo, D-Lewiston said Tuesday of Philip Morris. “What we don’t know is whether the other companies will also make the full payment and what that means to the Fund for a Healthy Maine.”
Funds from the settlement are deposited in the Healthy Maine account and are used for a wide variety of health programs. Because the state was expecting the tobacco companies to withhold part of their payments this year, money was transferred from the state’s general fund to avoid any cash flow problems with the Healthy Maine Fund.
Rotundo was hoping that some of that general fund money could now be recouped and used to pay for other projects the Legislature was considering, “but we need more information before I can say that.”
Sen. Richard Nass, R-Acton, agreed with Rotundo. He suggested if there are additional funds, there are many potential uses for the cash that the committee has not discussed.
“I might like to see some of it go into the reserves, the rainy day fund,” he said. “I know that’s a very Republican thing to say but we have uncertainty next year with the size of the structural budget gap and it may be best to set this aside.”
But both acknowledged there will be pressure to spend any extra cash, not only on the nearly 100 measures on the appropriations table, but on programs traditionally funded by the Healthy Maine Fund that were trimmed because of budget concerns.
“I think there could be a lot of advocates wanting to see some of that funding that we cut restored,” Rotundo said.
Finance Commissioner Becky Wyke said it certainly is good news that Philip Morris decided to pay the full payment for this year and that eases the cash flow problems facing the Fund. She said it is unlikely Gov. John Baldacci would support allocating any of the additional cash for purposes outside of the Healthy Maine account.
“The governor has always been a strong advocate for keeping the tobacco funds intact and for the purposes for which the Fund for a Healthy Maine was created,” she said.
After the supplemental budget was approved, only about $700,000 was left to fund more than $300 million in funding requests still on the table.
All acknowledge there will be a strong temptation to use some portion of the unexpected cash for some of those measures.
“We are going to have to be disciplined,” Rep. Joe Brannigan, D-Portland, co-chairman of the committee said, “really disciplined.”
Maine at risk of losing millions in tobacco money Sun, Apr 2, 2006 – 12:00 pm – Associated Press
AUGUSTA – Maine state government could lose $8.8 million due to a ruling favoring the country’s largest tobacco companies.
An independent arbiter has agreed with tobacco companies that terms of the 1998 settlement between states and the tobacco companies caused them to lose market share in the United States.
Under the terms of the deal, the tobacco companies can make their case that the $6.5 billion they owe states on April 17 should be reduced by about $1.2 billion. The March 28 finding by the arbiter puts at risk about $8.8 million in Maine.
But before the tobacco companies can reduce this year’s payment, they have to show on a state-by-state basis that the terms of the settlement haven’t been met by the states. Officials in Maine say the state has met terms of the settlement.
Maine was among the 46 states that agreed in 1998 not to sue cigarette makers for the public health harm caused by their products, in exchange for annual payments of about $6.5 billion.
Maine has received about $448 million from the settlement since 1999 and is due to receive about $50 million this year.
The loss of $8.8 million could create legal and budgetary problems for the state next year because $4.45 million for the Fund for a Healthy Maine, which administers the tobacco settlement money, was included in the state’s supplemental budget that was approved last week.
Carol Kelly, director of the Maine Coalition on Smoking or Health, said it’s not clear whether the tobacco companies actually intend to withhold the money and, if they do, how the states go about defending themselves.
“No one has actually done this before,” Kelly said. “There will be a way to show that Maine is doing everything it’s supposed to do. At that point, we get the money back, with interest.”
Chuck Dow, a spokesman for the Maine Attorney General’s Office, agreed, saying the path forward is unclear and depends on what the tobacco companies do. He said the state will fight vigorously to keep its share of the tobacco money.
Not Yet Up in Smoke
March 14, 2006
News that the country’s largest tobacco companies are contesting their yearly payments to states sounds like a bad development. But because Maine has done a good job of managing its tobacco money, the worst that will happen here is that funds will have to be juggled to keep anti-smoking and other health programs going.
In 1998, major tobacco companies entered into a settlement agreement with 46 states. The companies agreed to pay the states $206 billion to compensate for expected health care costs for smokers. The states are expecting $6.5 billion this year according to a formula based roughly on cigarette sales.
The country’s largest tobacco companies, including Philip Morris and Reynolds American, are contesting $1.2 billion. They argue that the 1998 settlement agreement has reduced their market share because smaller companies can sell cigarettes at lower prices because they are not subject to the agreement. Under their argument, Maine would lose about 20 percent of its funding, or about $9 million.
In a preliminary ruling earlier this month, an arbiter ruled that the settlement agreement was a significant factor in the companies’ market share loss – their share of the cigarette market declined from 99.6 percent in 1997 to 92 percent in 2003. A final decision is due March 27. The Maine Attorney General’s Office, along with AGs from other states, has filed objections to the arbiter’s ruling.
Even if the final ruling goes against the states and the companies withhold part of their payment, Maine is likely to get its full amount after further proceedings. As part of the settlement, state were required to pass laws to collect payments from tobacco companies that did not participate in the agreement. That money was to be put in escrow accounts. Maine has received high marks for enforcing its statutes and collecting this money.
Based on this, the state could make a good case to a panel of economists and is likely to get its full payment, albeit delayed by a year or more.
This could leave the state with a short-term cash flow problem for funding programs now supported by tobacco settlement dollars. Under the terms of the settlement, Maine’s payment is set to increase by $11 million in 2008. In the meantime, a tobacco money shortfall would be partially solved by the governor’s budget proposal to restore cuts to the program’s funding made in 2005.
Even if an arbiter decided that the large tobacco companies are right and can pay less money, Maine lawmakers should not panic and cut the state’s smoking prevention programs, which have achieved good results. Instead, if there is a temporary funding shortfall, they should find ways to fill it so the programs continue as uninterrupted as possible.
