Attorney General Rob McKenna announced last Thursday that the state of Washington received $11 million in tobacco settlement funds previously withheld by tobacco companies. R.J. Reynolds, Lorillard, Kingmaker and other tobacco companies agreed to transfer the money pending the resolution of an ongoing payment dispute with the states.
"Today our state's health programs have received a multi-million dollar booster shot in the arm," McKenna said. "Just when it's needed the most, this money helps close the budget gap and bolsters vital anti-tobacco programs for kids." AG McKenna is co-chair of the National Association of Attorneys General Tobacco Committee, where he, along with Massachusetts Attorney General Martha Coakley, leads ongoing negotiations between the tobacco companies and the states.
The Master Settlement Agreement (MSA) requires tobacco manufacturers to make annual payments to the states, in part to compensate for billions of dollars in health care costs associated with treating tobacco-related diseases under state Medicaid programs. Under certain circumstances, the MSA provides for increases and decreases in the size of these payments. The states and participating manufacturers have been in dispute over whether the manufacturers are entitled to a reduction in the amount of money they must pay for certain years based on a loss of market share to firms that were not part of the MSA.
Some of the companies placed a portion of their payments into a "disputed payments account." Now, more than $540 million of that money is being released to the states that participated in the settlement. More than 70 percent of Washington's $11 million share will be used for public health programs and for tobacco prevention. The rest will be used to pay down bonds that the Legislature issued in 2003 against future MSA payments.
The Washington State Attorney General's Office played a leading role in the 1998 negotiations between tobacco companies and 46 states. The MSA imposes major restrictions on the industry's advertising and marketing machine, curtails its ability to fight anti-tobacco legislation in the political arena and provides states mechanisms to enforce the agreement. In addition, it provides states approximately $206 billion through the year 2025 – including $4.5 billion for Washington State – to help rectify the harm caused by tobacco. The tobacco settlement is the largest financial recovery in legal history.