In June, I joined Gov. Steve Beshear in announcing a crucial settlement that restores certainty to Kentucky’s annual payments from the tobacco Master Settlement Agreement (MSA), providing essential funding to our farmers, childhood development programs, and public health initiatives for the foreseeable future.
Kentucky joined the historic MSA in 1998 with the country’s four largest tobacco manufacturers, and many other smaller tobacco companies subsequently agreed to sign on. The tobacco companies entered into the MSA with states and their attorneys general to repay hundreds of millions of dollars that the states had spent in the past to pay for the smoking-related illnesses of their citizens. It was the result of the largest class action lawsuit in the history of the United States. The MSA also placed certain restrictions on the way tobacco products could be advertised and branded, specifically to children. Gone are the images of Joe Camel, the Virginia Slims Tennis Tournament, and the Winston Cup.
Each year, the companies make payments to the states, and in turn, the states have the duty to enforce the terms of the MSA agreement by policing non-participating manufacturers – the tobacco companies operating outside of the MSA framework. More than a decade ago, the participating tobacco companies decided to challenge each state’s enforcement efforts, and since that time, there has been a complex legal battle between the tobacco companies and the states over portions of the payments.
An arbitration panel ruled last year that Kentucky did not diligently enforce the MSA in 2003, during a previous governor and attorney general’s terms. This arbitration decision resulted in a reduction to the MSA payment for 2014. While I disagree with that ruling, continuing to litigate this decade-long issue would have put the Commonwealth in grave danger of losing half of our $100 million payment for this year, and it would have left our payments in limbo for years to come, costing Kentucky millions of dollars in litigation fees with no resolution in sight. This wasn’t going to work for Kentucky.
That’s why I reached out to the tobacco companies to determine how we could get the train back on the tracks and work together to end the litigation and find an agreement that was suitable for all parties. The result is an agreement that fully restores Kentucky’s MSA payment for 2014 and will result in a net gain of $57.2 million for Kentucky.
To date, Kentucky has invested more than $400 million of MSA funds to increase farm income, diversify crops, and create business opportunities for farmers. We have also funded early child development programs and devoted a significant portion of this fund to public health initiatives, including anti-smoking campaigns and cancer research. This settlement ends a long-running dispute, and it will allow our Commonwealth to continue supporting these imperative programs and services.
The settlement is one Kentucky can be proud of. This is great news for our farmers, communities, and health advocates, and the settlement will continue to have a positive impact on the Commonwealth. These funds are critical to Kentucky, and we can’t afford to lose them. I appreciate Governor Beshear and his staff working diligently with my staff to hammer out a settlement that is good for Kentucky and will ensure our tobacco payments for decades to come.