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AG Derek Schmidt: Kansas receives $62 million payment from tobacco settlement

Release Date: Apr 20, 2017

TOPEKA – (April 20, 2017) – Kansas has received its annual tobacco settlement payment totaling $62 million, Attorney General Derek Schmidt announced today.

The $62,057,021.91 total received yesterday is consistent with the estimate that the Attorney General provided last fall to the consensus revenue estimators.

However, Schmidt cautioned that predicting the anticipated amount of receipts over the next few years will be particularly difficult.

The MSA payment received by the state marks 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 in future years. It is impossible at this time to predict with any reasonable accuracy how large that reduction will be.

The ability to predict future payment amounts is further complicated because the tobacco companies involved in the MSA continued 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 or when those funds might be released to the state. This variable 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 is included in this total.

Schmidt noted that the Legislature this year approved compacts with two 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. Diligent enforcement of the state’s qualifying statute governing tobacco sales in Kansas tends to promote stability in the state’s annual receipts. The state now has agreements with all four resident tribes.

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.

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