FRANKFORT — Kentucky will reap an extra $57.2 million over the next three years from settling litigation involving the 1998 Master Settlement Agreement between states and tobacco companies, Gov. Steve Beshear and Attorney General Jack Conway announced Thursday.
In a Capitol news conference, Beshear said the end of a legal dispute between 23 states, including Kentucky, and tobacco manufacturers that was fought over 10 years is "a victory not only for Kentucky farmers, but also for critical health care and childhood services."
The dispute focused on big tobacco companies' claim that Kentucky was not collecting all of the taxes from other companies that were not in the agreement. In response, they withheld part of Kentucky's annual payments.
Conway said the settlement "restores certainty to Kentucky's annual payments" from the 1998 agreement.
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"Under the terms of the settlement, we avoid the possibility of costly litigation and the potential loss of the entire annual Master Settlement Agreement payment."
Money from the settlement agreement is designated for farm projects and health issues like lung cancer research.
The state had budgeted $262.9 million over the next three years from the Master Settlement Agreement. With the resolution of the legal dispute, that will increase by $57.2 million.
Beshear said the money will not have an impact on a budget shortfall Kentucky expected at the end of this fiscal year on June 30.
The first priority, said Beshear, is to fully restore $42.5 million in areas like lung cancer research, county agriculture funds and early childhood oral and mental health assistance, while maintaining the level of funding next year.
Through the Kentucky Agricultural Development Fund, Kentucky has invested more than $400 million in agreement funds since 2001 for more than 4,800 county, regional and state projects designed to increase net farm income.
Roger Thomas, executive director of the Governor's Office of Agricultural Policy, said the settlement "provides Kentucky with certainty and fiscal stability in vital areas for the foreseeable future."
The 1998 agreement was between the four largest U.S. tobacco companies (Philip Morris Inc., R.J. Reynolds, Brown & Williamson and Lorillard) and the attorneys general of 46 states, including Kentucky. It was worth $229 billion.
Under the terms of the agreement, the participating tobacco manufacturers make annual payments to the states. The states settled their Medicaid lawsuits against the tobacco industry for recovery of their tobacco-related health-care costs.
The companies were exempted from private liability regarding harm caused by tobacco use.
The companies also agreed to curtail or cease certain tobacco marketing practices and to pay, in perpetuity, various annual payments to the states to compensate them for some of the medical costs related to smoking.