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Judge Boosts Missouri's 2014 Tobacco Settlement Payment To $110 Million

Next month, SSM Health Care will no longer hire smokers.
Flickr | SuperFantastic
Next month, SSM Health Care will no longer hire smokers.

A St. Louis judge has boosted the amount of tobacco settlement money Missouri will receive in 2014.

Judge Jimmie Edwards ruled on Friday that an arbitration panel improperly calculated part of a penalty. The penalty was levied against Missouri because it is failing to properly enforce the 1998 settlement between the states and major tobacco companies. The ruling means Missouri should get $110 million, up from $60 million. 

Tobacco settlement money is distributed by a formula to early childhood education, the Healthy Families Trust Fund, and the Life Sciences Research Fund. Early childhood education always receives $35 million, but Edwards' ruling ruling triples what's available for the other two trust funds.

Tobacco Settlement 5-2-14 by St. Louis Public Radio

Here's how the settlement works:

  • Each state receives a yearly share of payments made by so-called "participating manufacturers" (the larger tobacco companies like Philip Morris and Lorillard.)
  • Those payments can be reduced if the large companies lose 2 percent or more of their market share to companies that did not sign onto the 1998 settlement. States can avoid a reduction if they prove they are enforcing laws designed to keep those small tobacco companies from having an advantage in the marketplace.
  • States who cannot prove they are diligently enforcing those laws can have their payments reduced twice; once because of the market share provision, and once because they have to make up the reductions that would have gone to states that are enforcing the settlement.

In 2003, the auditor overseeing the settlement ruled that even though the participating manufacturers had lost market share, the payments to states would not be reduced.  That forced the issue to arbitration, and as part of the process, each state would have to prove that it was properly enforcing the settlement.  
Those hearings took nearly a decade to complete. In 2013, before they were finished, 22 states, not including Missouri, entered into an agreement that declared their enforcement proper without the required hearing. Because of that, those states that were more lax in their enforcement or did not sign the 2013 agreement faced additional reductions in their tobacco settlement payments. Missouri was one of several who sued.

Edwards's ruling today found that the secondary settlement violated the main 1998 agreement between the states and the tobacco companies, which says that states must prove they are upholding their end of the bargain. He rejected two other arguments made by the state. A Pennsylvania judge issued a similar ruling early last month.

Legislation that would bring Missouri into compliancewith the 1998 agreement has languished over the last three legislative sessions. 

Rachel is the justice correspondent at St. Louis Public Radio.