AUGUSTA – A ruling favoring the country’s largest tobacco companies has put in doubt almost $9 million due Maine later this month.
In 1998, in exchange for annual payments of about $6.5 billion, 46 states agreed not to sue cigarette makers for the public health harm caused by their products.
Since 1999, Maine has received about $448 million from the settlement and should receive about $50 million this year. An arbiter’s finding on March 28 puts at risk about $8.8 million of that amount, which could create a legal and budgetary mess for the state next year.
The independent arbiter agreed with tobacco companies that the terms of the Master Settlement Agreement caused them to lose market share in the United States. Under the terms of the deal, the tobacco companies can make their case that the $6.5 billion they owe states on April 17 should be reduced by about $1.2 billion.
Before the companies can reduce this year’s payment, they have to show on a state-by-state basis that the terms of the settlement haven’t been met by the states.
“Maine has been doing every thing right,” said Carol Kelly, the director of the Maine Coalition on Smoking or Health. “We have all the statutes in place, and we are very aggressively enforcing them.”
What’s unclear, Kelly said, is whether the tobacco companies actually intend to withhold the money and, if they do, how the states go about defending themselves.
“No one has actually done this before,” Kelly said. “There will be a way to show that Maine is doing everything it’s supposed to do. At that point, we get the money back, with interest.”
Chuck Dow, a spokesman for the Maine Attorney General’s Office, agreed, saying the path forward is unclear and depends on what the tobacco companies do.
“We’ve been in this process … for a long, long time,” Dow said. “We’ve been fighting like hell every step of the way. … There’s a very vigorous defense under way here. Our plan is to continue fighting to keep the money.”
Timing, however, is everything.
Included in the state’s supplemental budget that was approved this week was $4.45 million for the Fund for a Healthy Maine, which administers the tobacco settlement money.
“The budget anticipated the possibility,” Kelly said. “The legislators and the governor, knowing that this situation was out there, set up a budget that would allow for either scenario. The Fund for a Healthy Maine programs are not going to be hurt at all if the companies decide not to make their payments on April 17.”
In 2007, it’s a different story. If the tobacco companies reduce their payments and the state’s recovery efforts are stalled, the Fund for a Healthy Maine will face a cash crunch.
“It could be bad news,” Kelly said. “If there’s no resolution found to the potential shortfall, it could be devastating to The Fund for a Healthy Maine programs.”
Maine consistently wins accolades for its anti-smoking efforts and the use of tobacco settlement money. Since 1997, the state has reduced the number of youth smokers by 50 percent and in January the American Lung Association reported that Maine is the first and only state to receive perfect grades on its State of Tobacco Control Report Card.
“Maine does great things with the money,” Dow said. “We’re a national leader in how the tobacco funds are allocated.”