AG Schmidt: Tobacco settlement has stabilized children’s funding

Derek-Schmidt-150x150Kansas has received almost $68 million this month in its annual tobacco settlement payment, an amount higher than the typical annual payment of about $55 million, Kansas Attorney General Derek Schmidt said today.

Schmidt said the increased payment this year resulted from a legal settlement he entered into last year to resolve a decade of disputes about whether Kansas had lived up to its obligations under the 1998 tobacco Master Settlement Agreement (MSA).

“Instead of losing tens of millions of dollars from the annual payment, the resolution of these disputes brought additional funds to Kansas this year,” Schmidt said. “Importantly, the settlement should help stabilize tobacco payments for several years to come, which will allow the State more certainty in its budgeting and planning process.”

Kansas and 17 other states, Puerto Rico, and the District of Columbia entered into the settlement last year after almost two years of negotiation. In March, a three-judge panel approved the Stipulated Partial Settlement and Award, clearing the way for the payments received by Kansas this month.

The dispute, which has been pending for several years, involves allegations by the major tobacco manufacturers that Kansas and other states did not “diligently enforce” their obligations under the 1998 Master Settlement Agreement. The current dispute surrounds Kansas’ enforcement conduct in 2003, but subsequent years were almost certain to be disputed as well. The new settlement agreement resolves the disputes for enforcement years 2003 through 2012.

“This new settlement substantially reduces the risk that Kansas could lose a significant portion of its annual tobacco settlement payment starting as soon as April 2014 and continuing for many years,” Schmidt said. “While the settlement does not eliminate all risk of payment interruption, it significantly reduces that risk and increases the likelihood that funding for critical children’s programs can continue as anticipated.”

Under the settlement, funds that had been withheld from Kansas for several years and placed in a “disputed payment account” are being released. That release, coupled with the state’s regular MSA payment, a “strategic contribution” payment that was regularly scheduled, and an offset for settlement credits assigned to participating tobacco manufacturers together produced the $67,997,958 received by Kansas this month.

Going forward, Schmidt said his office will continue to work with other state agencies to strengthen Kansas’ tobacco enforcement in order to comply with the state’s obligations under the MSA. He said payments are expected to gradually decline in future years but the risk of a precipitous drop from one year to the next is now substantially reduced.

  • bluekansas

    breaking news……….

    brownback is stealing money from the children’s endowment now!

    — Gov. Sam Brownback has proposed taking $9.5 million from an endowment fund set up to pay for early-childhood programs and transferring that to the state’s all-purpose general fund to help balance the budget.

    Advocates for children are unhappy with the proposal. “We are taking money from little kids to bail the state out,” Shannon Cotsoradis, president and chief executive officer of Kansas Action for Children, said Tuesday.

    In his budget amendment, Brownback said the state recently received $68 million as part of its annual share of the landmark lawsuit with Big Tobacco companies. The amount was larger than expected, so the transfer of $9.5 million to the general fund, he said, will not affect any of the children’s programs.

    The state has budgeted $55.8 million for children’s programs from the tobacco settlement. But Cotsoradis argues that the difference between the annual tobacco settlement and what is budgeted for children’s programs, which is $12 million, should be kept in what is called the Kansas Endowment for Youth.

    The KEY fund was established in 1999 as a conduit for the state to receive money from the settlement with tobacco companies. Most of the funds are appropriated annually to a multitude of early-childhood education programs. A portion of the money was supposed to be held back over the years to ensure funding of those early-childhood programs once the tobacco settlement runs its course in 2025.

    Kansas Action for Children says that the endowment should contain $216 million at this point. It currently has a balance of $1.165 million.

    Brownback isn’t the first Kansas governor to raid the KEY, but Cotsoradis said this time is different.

    In the past, funds were diverted from the KEY because the state was suffering economic problems, she said. Now, she said, Brownback needs the funding because he signed into law tax cuts that cut too deeply.

    “This is a mess of our own making,” she said. “Tax cuts shouldn’t come at the expense of access to high-quality early-education opportunities for Kansas children.”

    Last year, Brownback signed into law cuts in the state personal income tax and the elimination of state income taxes for nearly 200,000 business owners.

    The loss of tax revenue has sent Brownback and legislators scrambling for revenue from other sources. The Legislature is set to return May 8 to write a budget and work on tax issues.

  • bluekansas

    For every 1000 preschoolers that qualify for Head Start in the state of Kansas, there are only slots for SIX of them. This ranks up there with Mississippi. Gee Kansas, we hit the big time.