FRANKFORT, Ky. — Recently Gov. Steve Beshear signed a bill passed by the Kentucky General Assembly that will help protect and preserve the state’s future Master Settlement Agreement (MSA) payments.
House Bill (HB) 512 comes in the wake of an agreement reached last year between 23 states, including Kentucky, and tobacco manufacturers, including RJ Reynolds, Lorillard and Philip Morris, settling a decade of disputed claims and litigation about an enforcement obligation under the MSA.
According to terms of the original MSA, the tobacco manufacturers that joined the agreement make annual payments to the joining states. Also, participating states have enforcement obligations against those manufacturers that are not listed as "signatories" to the MSA, which must make escrow deposits.
Beginning in 2003 tobacco companies challenged a number of states claiming they had not properly enforced their escrow statute – the law requiring the deposit of escrow by the tobacco manufacturers who have not joined the MSA.
Attorney General Jack Conway believes the state had been unfairly singled out, but he brokered a settlement that brought $110.4 million in disputed and related payments to Kentucky and avoided an even longer and expensive legal battle.
The 2014 settlement resolves those enforcement disputes starting with the 2003 payments and running through 2012.
Beshear said Kentuckians have benefited from the $1.75 billion in annual MSA payments received from tobacco manufacturers since joining the MSA.
"Those sums have helped fund cancer research projects, have provided for critical health care and early childhood development services, and have played an important role in advancing Kentucky agriculture through the Kentucky Agricultural Development Fund (KADF)," he said. "Attorney General Jack Conway’s settlement and this important legislation help preserve and protect funding for these investments in the future."
Half of Kentucky’s MSA funds have gone back to agriculture and have been distributed to a number of state and local projects by way of the KADF.
The Governor’s Office reported, "The provisions of HB 512 implement terms of the 2014 Settlement Agreement and broaden the responsibilities of all tobacco manufacturers, especially those manufacturers that are not signatories to the MSA … and also give the state new tools to enforce those enhanced and existing obligations."
Roger Thomas, executive director of the Governor’s Office of Agricultural Policy (GOAP), said HB 512 helps to ensure that Kentucky’s future MSA payments will be protected from costly litigation and provides stability to the critical programs funded by those payments.
"The bipartisan support of this legislation indicates the importance of and the need for this measure," he said.
That bipartisan effort was led by the bill’s main sponsor Rep. Rick Rand in the Kentucky House and Sen. Paul Hornback, co-chair of the Interim Agriculture Committee.
"House Bill 512 protects our agricultural development dollars which should be one of our highest priorities," said Rand. "The investment of these dollars in our agriculture communities across the commonwealth has paid tremendous dividends in the growth and development of our rural economy in Kentucky."
Hornback said of KADF programs that both county and state programs continue to transform and grow Kentucky agriculture and this legislation will be very important to the sustainability of these efforts in the future.
Shannon Morgan, a GOAP attorney and policy advisor, said HB 512 is aimed at addressing new terms reached in the 2014 settlement and affords the state more tools to continue enforcement efforts against the non-participating manufacturers.
A few of the specifics listed in the bill include: the requirement that non-participating manufacturers post a bond or financial instrument; joint and several liability for importers of foreign non-participating manufacturers; and an expansion of the requirements necessary for manufacturers to certify compliance.
