TOPEKA – (April 19, 2018) – Kansas has received its annual tobacco settlement payment totaling $57.5 million, Attorney General Derek Schmidt announced today.
The $57,587,526.21 total received today is consistent with the estimate that the attorney general provided last fall to the consensus revenue estimators.
However, as Schmidt has cautioned in recent years, the amount of the payment is expected to decline along with the trend of decreasing tobacco sales. Last year’s annual payment was also the final Strategic Contribution Fund payment under the original Master Settlement Agreement (MSA), which further contributes to the reduction in the annual money received by the state in future years. This year’s payment is nearly $4.5 million less than last year’s $62 million payment.
The ability to predict future payment amounts is further complicated because the tobacco companies involved in the MSA continue 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 new failure to satisfy its MSA obligations since Schmidt’s office agreed in 2012 to settle more than a decade of prior disputes. It is impossible to predict how this sort of withholding will affect future years’ payments or when those funds might be released to the state.
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.
Since the first payment was made in 1999, Kansas has received more than $1.1 billion from the participating tobacco manufacturers. The settlement payments are intended to offset the costs of tobacco-related illness and disease that are borne by Kansas taxpayers through government-paid medical benefits. The payments are made each year pursuant to a legal settlement that resolved claims made by 46 states, including Kansas, against the tobacco companies in the late 1990s.