« Courts - "Roberts Court Cloaks Activism in Complexity" | Main | Ind. Decisions - Yet more on: Judge Posner has second thoughts on his voter ID decision; says he didn't know enough »

Thursday, October 17, 2013

Ind. Gov't. - "State to lose $63M in tobacco payments next year" [Updated]

Lesley Weidenbener of The Statehouse File reports today in a long story:

INDIANAPOLIS – The state is set to lose $63 million in tobacco payments next year after an arbitration panel determined it had not worked hard enough to collect funds from cigarette companies that weren’t part of the original deal.

The ruling – issued last month by a three-judge panel – will reduce Indiana’s payment from $131 million to $68 million.

And there’s the potential for the state to lose even more. The recent ruling addresses claims from payments in 2003; the years 2004 through 2012 remain in dispute.

Interestingly, Indiana Legislative Insight had a comprehensive, subscription-only story on the front-page of its Sept. 23rd edition that pointed out that since 2010 former attorney general Steve Carter has been retained by current AG Zoeller to represent the State in arbitration against the non-participating tobacco manufacturers. Indiana is one of five states that the panel found to have failed to "diligently enforce" the provisions. The story concludes by reporting that no decision has yet been made by AG Zoeller on a judicial appeal.

[Update] ILB now has permission to post the entire story from the Sept. 23rd issue of Indiana Legislative Insight:

Up in smoke: Indiana loses in a key tobacco arbitration

In January 2010, we exclusively told you about former attorney general Steve Carter (R) being retained to represent the State of Indiana in arbitration against the non-participating tobacco manufacturers (NPMs) under the 1998 Tobacco Master Settlement Agreement (MSA).

MSA terms require cigarette companies to make an annual payment to offset health care costs caused by their products. Other costs are assessed based upon an independent accounting analysis to ensure a level of fair competition between all companies. The manufacturers have sought to reduce future payments to states from the outset, and 2003 payments are being challenged over whether states were diligently enforcing certain statutes (largely related to escrow payment rules) vs. NPMs. Participating manufacturers asserted that the failure of the states to enforce the rules led to significant market erosion for their tobacco products, and thus their payments should be reduced. The arbitration ruling applies only to tobacco settlement payments for 2003; the tobacco companies continue to dispute the extent of their liability for subsequent years (to 2013).

The three-judge national arbitration panel this month ordered 30+ tobacco companies to fork out $227 million in disputed tobacco settlement payments to nine states, finding that these states had “diligently enforced” provisions related to smaller tobacco manufacturers, NPMs that were not parties to the master settlement.

However, arbitrators determined that Indiana, Kentucky, Maryland, Missouri, New Mexico, and Pennsylvania failed to “diligently enforce” the relevant MSA provision, resulting in reductions in payments to which they would otherwise have been entitled.

Fortunately, Indiana does not have any outstanding “tobacco bonds” that could be downgraded as a result of the ruling. Still, Bond Buyer observes that “States that lose in the arbitration decisions will share in a reduction in next year’s settlement payments of about $642 million.,” but just how much Indiana will lose has not yet been formalized.

No decision has been made by the Office of the Attorney General yet on a judicial appeal.

Posted by Marcia Oddi on October 17, 2013 03:09 PM
Posted to Indiana Government