TOPEKA – (April 30, 2013) – Kansas has received almost $68 million this month in its annual tobacco settlement payment, an amount higher than the typical annual payment of about $55 million, Kansas Attorney General Derek Schmidt said today.
Schmidt said the increased payment this year resulted from a legal settlement he entered into last year to resolve a decade of disputes about whether Kansas had lived up to its obligations under the 1998 tobacco Master Settlement Agreement (MSA).
“Instead of losing tens of millions of dollars from the annual payment, the resolution of these disputes brought additional funds to Kansas this year,” Schmidt said. “Importantly, the settlement should help stabilize tobacco payments for several years to come, which will allow the State more certainty in its budgeting and planning process.”
Kansas and 17 other states, Puerto Rico, and the District of Columbia entered into the settlement last year after almost two years of negotiation. In March, a three-judge panel approved the Stipulated Partial Settlement and Award, clearing the way for the payments received by Kansas this month.
The dispute, which has been pending for several years, involves allegations by the major tobacco manufacturers that Kansas and other states did not “diligently enforce” their obligations under the 1998 Master Settlement Agreement. The current dispute surrounds Kansas’ enforcement conduct in 2003, but subsequent years were almost certain to be disputed as well. The new settlement agreement resolves the disputes for enforcement years 2003 through 2012.
“This new settlement substantially reduces the risk that Kansas could lose a significant portion of its annual tobacco settlement payment starting as soon as April 2014 and continuing for many years,” Schmidt said. “While the settlement does not eliminate all risk of payment interruption, it significantly reduces that risk and increases the likelihood that funding for critical children’s programs can continue as anticipated.”
Under the settlement, funds that had been withheld from Kansas for several years and placed in a “disputed payment account” are being released. That release, coupled with the state’s regular MSA payment, a “strategic contribution” payment that was regularly scheduled, and an offset for settlement credits assigned to participating tobacco manufacturers together produced the $67,997,958 received by Kansas this month.
Going forward, Schmidt said his office will continue to work with other state agencies to strengthen Kansas’ tobacco enforcement in order to comply with the state’s obligations under the MSA. He said payments are expected to gradually decline in future years but the risk of a precipitous drop from one year to the next is now substantially reduced.