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Tobacco settlement not a done deal

December 16, 1998
By: Pervaiz Shallwani
State Capital Bureau

JEFFERSON CITY - The settlement that would bring $6.7 billion to Missouri may be in jeopardy if health-care officials across the state get their say in the matter.

Officials from St. Louis, St. Louis County, Kansas City, Jackson County along with 50 other hospitals across the state decided they are not getting their due share from the current tobacco deal and have filed court papers in an attempt to have a say in the matter.

A hearing for the intervening parties has been scheduled today and St. Louis Circuit Court Judge Jimmie Edwards expects to make a decision on the matter Monday. Judges in 33 of the states who signed the settlement have already approved the deal.

The question at hand is whether the settlement keeps them from pursuing separate claims against tobacco companies.

The tobacco deal, signed last month by Attorney General Jay Nixon and more than 40 other states, is awaiting final approval from Edwards, who was expected to make a decision on the settlement in a hearing that was scheduled for 1:30 p.m. Friday.

"It's going to stall Missouri enjoying the monetary benefits," said Nixon spokesperson Scott Holste. He said their is also a possibility the state could lose out on the money, and on other aspects of the deal such as tobacco advertising restrictions.

If the deal is not approved by the start of 1999, lawyers working for the state on the case are entitled to get a percentage of the settlement.

Kansas City assistant prosecuting attorney Galen Beaufort is one of the parties that has a filed a petition. Beaufort said Kansas City does not want to jeopordize the current settlement, but it also doesn't want to be bound by it.

"Their lawsuit doesn't seek the same money that we are seeking," Beaufort said. He said as far as they could tell, the document only reimburse state Medicaid expenses used to cure tobacco related diseases.

Beaufort said the city has its own expenses that are not part of Medicaid coverage and he wants the city to be able to pursue those if it desires.

Boone Hospital Center, Columbia Regional Hospital Ellis Fishel Cancer Center and University Hospital and Clinics have said they are not part of the 50 statewide hospitals seeking to intervene in the settlement.

If Edwards signs the deal Monday, the state essentially agrees to drop it's suit against the tobacco companies and would start receiving the $6.7 billion over the next 25 years. The first pay out, about $148 million, would be given to Missouri in the year 2000, Holste said. Tobacco companies would also quit targeting young people with cigarette advertising, would remove outdoor advertising and would stop sponsoring certain events, provisions that could not be gained through the litigation process.

"If he signs it, then our deal is done," Holste said. "Then begins the process for how the money is going to be used, which is up to the legislature.

What to do with money had been the hot topic of debate before the recent developments.

Thus far, a sticking point has developed regarding the settlement money -- does the refund fall under the Hancock Amendment.

According to the state auditor's office, the money falls under the Hancock Amendment and should be given back to the people, while the governor's office states that the money does not, and should be used in a beneficial way -- combating teen smoking.

"We have said all along, that we want the money to go to teen smoking," said Carnahan spokesperson Chris Sifford. "We think the purpose of the bill is to educate young people on the negative effects of smoking.

"Clearly, we think the money does not apply under the Hancock Amendment, because is it recovered funds that have already been spent by the state."

Before the governor's office can go out and save the children, though, they must overcome the opposition that wants the money to be returned.

"We have looked at it and it is pretty clear that there is no way around putting the money in the treasury," said Marc Ellinger, attorney for the state auditor. "This money is paying the state back for Medicaid costs, and the tax payers have been the ones paying that."

The first part of the settlement is to be distributed in the year 2000 and will bring approximately $200 million dollars to Missouri that year, which if put into the general revenue, would all be considered surplus under the Hancock Amendment. That would amount to about a $200 refund per person, depending on the amount of taxes paid.

The governor's office, which has been busy working with legislators, members of its own departments and with state lobbyists to come up with a bill that would allow the state to use the money for social programs, has not come to a final decision on what it plans to do in the upcoming legislative session.

"Right now we're working on a bill, but nothing has been prefiled," Sifford said. "We probably won't make a decision before the beginning of the year. We hope to make an announcement before the start of the session."

Already on the table is a proposal from Sen. David Klarich, R-Ballwin, asking that the decision be put to the vote of the people. Klarich has proposed that the people get to decide in a ballot vote if the money should be returned or given back to the legislature to be spent.

Ellinger said the state auditor's office in not opposed to the idea of the government spending the money, but said currently, not giving the money back would be breaking the law.

"Their is a voter approval on the Hancock Amendment," he said. If Kalrich's proposal is passed, then people would vote on what to do with the money.

As for Missouri residents giving the money back to the government, Ellinger said it "just depends on what type of package they come up with."