The state should tap $18.7 million due from tobacco companies in April 2008 to cover a possible $20.7 million loss this year, Colorado Treasurer Cary Kennedy said Tuesday.
Because of an ongoing legal dispute, big tobacco companies are threatening to withhold that amount from an $88.1 million payment they owe the state. The $88.1 million payment is due this April.
“All we’re proposing to do is get tobacco-settlement funds into the hands of health care providers and the hospitals and the families and children that benefit from these health care services faster,” she said in a news conference at the state Capitol on Tuesday.
Kennedy’s proposal takes the upcoming $18.7 million payment and lets the state use it in the upcoming fiscal year, which begins July 1.
That payment – called the Strategic Contribution Fund Payment – is one stream of the funds tobacco companies owe the state under the so-called “Master Settlement Agreement,” a landmark 1998 legal agreement between the states and big tobacco companies.
The payment would maintain funding for at least nine state programs that depend on tobacco-settlement dollars.
“It deserves a close study,” said Rep. Cory Gardner, R-Yuma. “The legislature makes spending decisions and we have to make sure that whatever we do is not a fiscal Ponzi scheme.”
If the Kennedy plan is adopted, the state would be able to provide in-home nurse visits for 340 first-time mothers, drug treatments for 25 more HIV/AIDS patients and state-subsidized health insurance for as many as 5,000 low-income children.
Under the terms of the settlement agreement, tobacco companies are paying Colorado and the rest of the states billions of dollars. In exchange for the payments, states agreed not to sue the manufacturers to recover the public health costs of treating smoking-related illnesses.
But the settlement agreement is a complicated legal document with many provisions.
One of those provisions allows the companies to withhold payments if they can prove states aren’t diligently enforcing some rules on companies that didn’t sign the agreement.
R.J. Reynolds Tobacco Co., Lorillard Tobacco Co. and some smaller manufacturers withheld about $800 million of $6.5 billion that was due last April. Colorado’s payment was $10.9 million less than the expected $91.1 million.
State budget experts are expecting those companies – and perhaps Philip Morris USA, which paid last year – to withhold part of their payments this year.
The money goes into an escrow account until the legal issues are resolved.
“I would like to commend Treasurer Kennedy for a really creative, thoughtful solution that doesn’t cost the taxpayers any money and doesn’t take money out of any other program,” said Rep. Bernie Bues cher, D-Grand Junction, the vice chairman of the Joint Budget Committee.
Nate Strauch, spokesman for Republican Attorney General John Suthers, said the state expects to prevail in its fight with the tobacco companies.
Staff writer Mark P. Couch can be reached at 303-954-1794 or mcouch@denverpost.com.
