State expects $57 million net gain over three years from tobacco settlement

June 12, 2014 | | Comments 0


By Jack Brammer

FRANKFORT — Kentucky will reap an extra $57.2 million over the next three years from settling litigation involving the 1998 Master Settlement Agreement between states and tobacco companies, Gov. Steve Beshear and Attorney General Jack Conway announced Thursday.

In a joint news conference in the Capitol, Beshear said the end of the legal dispute between 23 states, including Kentucky, and tobacco manufacturers over 10 years of disputed claims and litigation is “a victory not only for Kentucky farmers, but also for critical health care and childhood services.”

Conway said the settlement his office worked on “restores certainty to Kentucky’s annual payments” from the 1998 agreement.

“Under the terms of the settlement, we avoid the possibility of costly litigation and the potential loss of the entire annual Master Settlement Agreement payment.”

Money from the settlement agreement already is designated for farm projects and health issues like lung cancer research.

Beshear acknowledged that the extra money for the state will not have an impact on a budget shortfall Kentucky expected at the end of this fiscal year on June 30.

The “first priority” with the extra settlement money, said Beshear is to fully restore $42.5 million in 2014 budget cuts in areas like lung cancer research, county agriculture funds and early childhood oral and mental health assistance, while maintaining the level of funding next year.

Through the Kentucky Agricultural Development Fund, Kentucky has invested more than $400 million in agreement funds since 2001 for more than 4,800 county, regional and state projects designed to increase net farm income.

Conwaysaid under the settlement, Kentucky will receive $110.4 million this year in disputed and related payments.

Combined with the $48.3 million in payments already received this year, the total agreement payments for fiscal year 2014 is $158.7 million.

That is $67.9 million more than budgeted for this year.

With estimated receipts for fiscal year 2015 at $26.6 million less than budgeted and $15.9 million more for fiscal year 2016, Kentucky stands to receive $57.2 million more in agreement payments over the next three years than budgeted, Conway said.

Roger Thomas, executive director of the Governor’s Office of Agricultural Policy, said the settlement “provides Kentucky with certainty and fiscal stability in vital areas for the foreseeable future.”

The 1998 agreement was between the four largest U.S. tobacco companies (Philip Morris Inc., R.J. Reynolds, Brown & Williamson and Lorillard and the attorney generals of 46 states, including Kentucky. It was worth about $229 billion.

Under the terms of the agreement, the participating tobacco manufacturers make annual payments to the states. The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health-care costs.

The companies were exempted from private liability regarding harm caused by tobacco use.

The companies also agreed to curtail or cease certain tobacco marketing practices and pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs related to smoking.


Filed Under: Jack ConwayState BudgetState GovernmentSteve Beshear

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