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.

Sign up for: Globe Headlines e-mail | Breaking News Alerts 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.
                                                        

What's the MSA?
The States get money from tobacco; tobacco gets it from raising consumer's prices on their product. So smokers pay the MSA money. States get money from taxes AND off the product. Now they are upset that they are getting less money than expected. Derr - raise taxes and drop MSA money, be HONEST about the fact that smokers are paying for the roads that everyone drives on!

RJR to cut leaf buys

Who profits by far the most from cigarettes? Government

24 October 2002

To cigarettes, of course. The golden goose of government - including the Golden State's government.

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The landmark 1998 settlement of state cigarette suits for $243 billion broke all records for civil litigation in the United States, yet it set an unfortunate precedent and remains widely misunderstood.

Faced with a series of lawsuits by state attorneys general across the country, the tobacco industry brokered the settlement in two separate deals. First, it settled with four states for $37 billion, then with the remaining 46, including Massachusetts, for $206 billion. Both the litigation and the settlement were novel in many respects.

But smokers, not tobacco companies, on several levels bear the brunt of the deal, which established penalties equivalent to an additional tax on cigarettes. In most years this tax will be about 40 cents. Whether the states get paid off at all hinges on whether people continue to smoke and how much.

With media attention focused on the $243 billion figure, an observer might have expected that this meant the cigarette industry paid off the states with either a single damages payment or a series of payments over time. However, this is not how the settlement works.

Some antismoking advocates wanted the companies' shareholders to suffer, but they also liked the idea of a higher cigarette tax to discourage smoking. They couldn't have it both ways . The tax approach was chosen because it could potentially yield a higher financial return to the states than would a fixed payment up front. Shifting the settlement cost to smokers also presumably appealed to the cigarette industry. The parties who cut the deal benefited. But the smokers, who were unrepresented at the bargaining table, were worse off.

The settlement involved high-stakes political deals among the attorneys general. To determine which states got more than their fair share, I conducted a study calculating each state's share of the country's cigarette-related medical costs and compared that amount to its settlement share. Massachusetts did well. Its share of cigarette-related medical costs was 3.2 percent, and it got 4.1 percent of the settlement. New Hampshire was not as lucky, as its medical cost share was .9 percent, and its share of the settlement was .7 percent.

The three leading tobacco-producing states all were losers. Kentucky accounts for 2.8 percent of the medical costs, but got only 1.8 percent of the settlement. North Carolina accounts for 3.5 percent of cigarette-related medical costs, but received only 2.4 percent. Virginia, which bears 2.8 percent of the medical costs, received only 2.1 percent.

The attorney general most responsible for brokering the deal was Christine Gregoire of Washington state. Her state, which accounts for 1.5 percent of the medical costs, received 2.1 percent of the settlement. In fairness, perhaps the state should have gotten a bonus given Gregoire's central role in brokering the deal. But did the other state attorneys general realize that compensation to Washington for Gregoire's coordination efforts increased the state's piece of the action from $3.1 billion to $4.3 billion?

These enormous payments are even more striking given the speculative nature of the litigation. The lawsuits did not seek to recover for harm to individual smokers. In fact, smokers get nothing from this deal. Nor were the suits about youth smoking. Although many public officials said that the money from the settlement would be used to deter smoking by young people, that has not proven to be the case and was not a concern of the lawsuits. Rather, the suits were largely an accounting exercise in which the states argued that cigarettes increased the medical costs they incurred.

But let's look at the logic. T he existence of economic costs is not a sufficient basis for giving the states a valid claim . Cars are also dangerous, but states can't recover for the costs of auto accidents. The states would also have had to show wrongful conduct on the part of the industry. That and other legal concerns combined with the unprecedented nature of the litigation to make the suits seem like longshots when they were launched.

The basic elements of the financial accounting added to the improbable prospects of the litigation. To be sure, smokers do incur higher medical costs - about five cents per pack in Massachusetts in the mid-1990s. Yet, because smokers have a shorter life expectancy than nonsmokers, smokers incur a cost of 11 cents per pack less in nursing home costs and nine cents per pack less in pension costs. On balance, smokers incur about 14 cents less per pack in costs paid by Massachusetts, while contributing an additional 51 cents per pack in excise taxes.

Any cost tally presumably should be comprehensive and recognize all cost effects of cigarettes, both positive and negative. Excise taxes also might get counted. Because the lawsuits were settled, there was never any legal resolution of which cost components get counted and which do not.

Other aspects of the settlement were equally novel and controversial. Lawyers were not paid based on hours worked, but rather were compensated through separate arrangements, most of which have remained secret. Some of the lawyers involved reaped enormous windfalls as a result of the deal, with legal fees in 21 states alone totaling $11 billion. These fees have provoked considerable controversy because many of the arrangements were a result of sweetheart deals with politically connected friends of attorneys general rather than a competitive bidding process that would have ensured that the lawyers would be paid fairly for effort expended.

Widespread concerns over the windfall gains reaped by the attorneys only touched on the most visible symptom of this flawed approach. T he settlement established a new tax on cigarettes without going through the usual legislative procedures that enable all segments of society to have political input. And the agreement included numerous regulatory provisions, such as restrictions on cigarette advertising. None of these policies underwent the usual scrutiny accorded governmental regulations.

Rather than settle the litigation, both sides should have pursued the case to its legal resolution. Doing so would have taken tax and regulatory policy out of the legal arena and established guidelines for similar litigation against other controversial products, ranging from guns to lead paint.

While most states remain enthusiastic about the incoming tobacco revenues, higher cigarette taxes, such as those being considered now by legislatures in Massachusetts and elsewhere, could have achieved the same effect without sidestepping conventional political processes.

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Hogs at the Trough.  Borrowed from Forces International site.

WASHINGTON (Reuters) - Just a fraction of some $21.3 billion that tobacco companies have paid so far as part of a national settlement is going to programs aimed at preventing smoking, a study released on Saturday says.

Forty states have allocated nearly 32 percent, or $6.7 billion, of that money for health services during fiscal years 2000-2002. But only $1.06 billion -- or 5 percent -- is earmarked for tobacco prevention programs, according to the study by the National Conference of State Legislatures.

``The states' failure to act is inexcusable in light of the growing evidence that comprehensive tobacco prevention programs are working to reduce smoking, save money and save lives in the few states that have implemented them,'' said Matthew Myers, president of the campaign.

In 1998, 46 states agreed to a master settlement with cigarette makers worth $206 billion.

Twenty states have placed $5.6 billion, or 26.1 percent, in trust funds or endowments to provide new programs with an independent revenue stream while 16 states have put $950 million, or 4.5 percent, toward long-term care, according to the study.

``Right now, it is clearly obvious that states are committed to improving the quality and access of the health care programs that they offer,'' said Lee Dixon, director of the NCSL's health policy tracing service.

SAN ANTONIO (AP) - Billions of dollars from the nation's landmark tobacco settlement are being put to use across the country, but only about 5 percent is going to smoking prevention, a report released Saturday shows.

The 1998 settlement signed by the giants of the tobacco industry was meant to compensate the states for years of smoking-related health expenses. Forty-six states signed it, and four other states settled separately for an additional $40 billion.

The state attorneys general who negotiated the settlement expected it to be used to fight the spread of smoking and prevent tobacco addiction, but the documents left it to the states to decide how their shares of the money would be spent.

The Centers for Disease Control and Prevention has said that at least 20 percent of the $206 billion settlement will have to go into prevention programs for the states to effectively cut future tobacco-related health expenses.

In a new report, the National Conference of State Legislatures analyzed the states' plans for their shares of the tobacco money during the fiscal years 2000 through 2002.

Of the $21 billion being doled out during that period, it found:

-36.1 percent had been set aside for health care.

-26.0 percent went to bolster endowments or state budget reserves.

-9.5 percent was to be spent on schools or youth programs.

-5.0 percent was to go into tobacco prevention.

-4.5 percent was to be put into research.

-3.2 percent was to be used to assist tobacco growers and communities affected by the reduced quotas from tobacco companies, in most cases by offering education and training in other fields.

More than half of the money is being used in ways unrelated to smoking, the study found.

Several states are tapping their tobacco settlement payments to make up shortfalls in their state budgets and bolster programs that have nothing to do with tobacco.

Tennessee will use its $557 million to meet budget shortfalls in 2002.

North Dakota is using 45 percent of its tobacco funds to pay for debt service on bonds financing a water allocation and flood project.

``It's moral treason to me,'' Mississippi Attorney General Michael Moore said in Saturday's editions of The New York Times. `` We got all this money, then legislatures and governors who were not even in this fight act like the money fell out of heaven and spend it on the political whim of the day.''

Lee Dixon, director of the NCSL health policy tracking service, said several states held public hearings to solicit opinions on how the funds should be used. He said about 45 percent of the money is being used for some type of health care, including long-term care, health care for the poor, biomedical research or tobacco prevention.

Washington state chose to set aside all but $32 million of its $408 million for a state-funded program for workers who don't qualify for Medicaid and can't afford health insurance.

Michigan over the past two years has put $90 million into a trust fund for biomedical research and research on illnesses affecting the elderly, and Colorado passed legislation directing 10 percent of its tobacco funds to a pharmaceutical assistance program for the elderly and the disabled.

Peter Fisher, assistant director of advocacy for Campaign for Tobacco Free Kids, said states should be spending more money stopping tobacco-related illnesses before they happen. Rather than 5 percent, 20 to 25 percent of the settlement should be used to keep people off tobacco, he said.

``Our view is that there is enough money for each state to do a comprehensive tobacco program and address other needs they feel need addressing,'' Fisher said.

Dixon said some states are concerned that the infrastructure is not in place in some communities for more money to be allocated for prevention. For instance, he said in Indiana lawmakers cut back on the amount of money they earmarked for prevention in 2002 because not all the money was used the previous year.

According to the CDC, smoking causes more than 400,000 deaths each year and results in more than $50 billion in direct medical costs annually. The center estimates that nearly 3,000 children under 18 become regular smokers every day.-