TOPEKA – (April 26, 2016) – Kansas has received its annual tobacco settlement payment totaling $59,124,916.31, Attorney General Derek Schmidt announced today.
The $59.1 million total is consistent with the estimate that the Attorney General provided last fall to the consensus revenue estimators.
“We continue our efforts to keep the state’s annual payment received each April from the Master Settlement Agreement as stable as possible,” Schmidt said. “However, because several variables have converged, predicting the anticipated amount of receipts over the next few years will be particularly difficult.”
On the one hand, the MSA payment the state will receive in April 2018 will mark the end of Strategic Contribution Fund payments under the original MSA. That will result in a sizeable – and permanent – reduction in the annual money received by the state. It is impossible at this time to predict with any reasonable accuracy how large that reduction will be. This variable tends to undermine the stability in the state’s annual receipts.
The ability to predict future payment amounts is further complicated because the tobacco companies involved in the MSA this year began withholding a portion of annual payments and placing those funds in a “disputed payment account” rather than sending them directly to the state. To date, the companies have not actually accused Kansas of any failure to satisfy its MSA obligations, so it is impossible to predict whether this sort of withholding will continue in future years and, if so, how much will be withheld. This variable also tends to undermine stability in the state’s annual receipts.
In addition, Kansas has reached the end of its ability to keep payments relatively stable by managing the release of funds previously set aside in a disputed payment account in a way that offsets other variables. The final release of those remaining funds will be in the April 2017 payment.
On the other hand, Schmidt noted that the Legislature this year approved compacts with two of the four resident Native American tribes in Kansas, which will strengthen tobacco enforcement on tribal lands and improve the state’s ability to “diligently enforce” its obligations under the MSA. Negotiations with the other two resident tribes are ongoing. Diligent enforcement of the state’s qualifying statute governing tobacco sales in Kansas tends to promote stability in the state’s annual receipts.
Despite concerns about the unpredictability of future-years’ payments, the just-received annual payment was relatively stable compared with previous years. As it does each year, the annual payment will reimburse the state for funds previously appropriated by the Legislature to pay the current fiscal year’s cost of programs financed from tobacco settlement proceeds. Because of the timing of the annual tobacco payment in comparison with the state budget cycle, the Legislature each year appropriates funds that will not be received until the following April and then reimburses that amount when the annual payment is received.