2nd settlement with cigarette makers announced after decade of litigation over 1st settlement

06/12/2014 05:28 PM

Calling the process “complicated and chaotic,” Gov. Steve Beshear and Attorney General Jack Conway announced Thursday that Kentucky would get 45 percent of disputed money from tobacco companies through the 1998 master settlement agreement.

But because Kentucky had lost a legal challenge to cigarette makers, Conway and Beshear said Kentucky is coming out $57 million ahead of what the commonwealth otherwise would have gotten.

The initial settlement 16 years ago has provided Kentucky with hundreds of millions of dollars for agriculture, health care needs and early child education funding as long as people continue to smoke.

But in 2003, tobacco companies began to file suit against states over the monitoring of tobacco companies. Big cigarette companies complained in court that Kentucky and other states weren’t making sure small tobacco firms were paying into the settlement fund.

Nine years worth of those lawsuits — 2003-2012 — had piled up against Kentucky. And the commonwealth lost the case stemming from 2003, which led to a $45 million shortfall in the state’s master settlement agreement budget for 2014.

This second settlement, announced Thursday, was negotiated in private by Conway over the last seven months. This agreement secures $110 million worth of disputed payments. Overall Conway and Beshear said that Kentucky will see an additional $57 million to the state that it otherwise wouldn’t have received.

However, the settlement does come at 45 cents on the dollar in what the state originally could have been owed from the 1998 agreement. Conway said given the circumstances and uncertainty, he believed he negotiated a good deal.

Any extra money won’t help in balancing the expected budget shortfall in the current fiscal year, which ends June 30.

The money, by statute, must be spent on agriculture, early childhood education and improving health outcomes.

However, Beshear added the General Assembly could revise the statute if they wished in the next legislative session.


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