By Sarah Green
KHI News Service
TOPEKA, Jan. 16
Unlike some in Kansas, the administration of Gov. Kathleen Sebelius isn”t counting on an above-average check from tobacco companies anytime soon.
Estimates of a bump of at least $15 million in the April 2008 base payments to states from the tobacco companies as part of the Master Settlement Agreement have organizations such as the Kansas Public Health Association and the Tobacco Free Kansas Coalition asking that any extra money be used only for tobacco-use prevention and cessation programs.
But there”s no mention of any extra money in the governor”s proposed 2008 budget. In fact, the state budget office scaled back its expectations of what Kansas will receive from the MSA in Fiscal Year 2008 after the state received $5.6 million less than expected in Fiscal Year 2006. And the Fiscal Year 2007 check won”t come until April.
The shortfall came after two major tobacco companies R. J. Reynolds Tobacco Company and Lorillard Tobacco Company withheld all or part of their 2006 payments to the states, claiming that their market shares had decreased below a threshold established by the agreement. Other tobacco companies followed suit.
The companies have a right to do so under the terms of the settlement; however, still tied up in court is whether the participating companies have actually lost market share to companies that are not participating in the MSA. The MSA was the result of a lawsuit filed by Kansas and other states seeking compensation for the costs of treating sick smokers.
Budget documents show that in Fiscal Year 2006, Kansas” share of the payments dropped from $55 million to $49.4 million. Gov. Kathleen Sebelius transferred $4.4 million from the State General Fund to the Children”s Initiatives Fund, which distributes almost all of Kansas” MSA funds to social and health programs for children.
As a result, “we tried to be conservative in our estimates,” for Fiscal Year 2008, said Julie Thomas, principal budget analyst for the Division of the Budget.
The settlement checks arrive in April each year, paying the state an annual lump sum for its share in the suit. This April, Kansas is scheduled to receive $55 million.
The governor”s budget proposal released last week asks for $47.7 million for the Children”s Initiatives Funds, slightly more than the $47.4 million recommended in Fiscal Year 2007.
Estimates of how much money states will receive in a given year from the MSA come from a variety of sources, according to the National Association of Attorneys General, but virtually all estimates are linked to cigarette sales.
In April 2008, Kansas is scheduled to receive $75.5 million from the MSA.
The base payments were re-calculated for 2008 to 2017 under the terms of the agreement, bumping Kansas” share up by $15.5 million for the next 10 years, according to documents from the Tobacco-Free Kids Coalition.
But tobacco companies are withholding the increased payments to states, which they dispute. Instead they are placing those funds in escrow accounts until the courts decide whether the companies” market shares have actually decreased.
That means payments for the next several years could be affected, until the court cases are settled, said Eric Lindblom, who studies the Master Settlement Agreement for the Campaign for Tobacco-Free Kids.
“The state”s going to struggle through,” Lindblom said. “There will probably be a similar reduction for sure next year. But a lot of states, if not all, should get their money back.”
Kansas has allotted $1 million from the Children”s Initiatives Fund for smoking prevention and cessation programs each year. The Centers for Disease Control and Prevention recommends that to be effective, the state should spend a minimum $18.1 million yearly on those programs.
If and when extra funds are available, they should be locked into those programs, said Sen. Jim Barnett, R-Emporia, chairman of the Senate Health and Welfare Committee.
“I certainly think the state of Kansas needs to do much more in terms of smoking cessation and prevention,” he said. “It makes sense to me to spend in the range of what the CDC recommends for smoking cessation efforts in the state; $15 million more would bring us very close to that goal.”
Sarah Green is a staff writer for KHI News Service, which specializes in coverage of health issues facing Kansans. She can be reached at
sgreen@khi.org
or at 785-233-5443, ext. 118.