ANNAPOLIS – Maryland could be $54 million richer right now if New York and other populous states would pick up the pace in approving their tobacco settlement deals.
Maryland’s first check for $54 million, the amount set to cover the state’s legal costs, is sitting in an escrow account in a New York City branch of Citibank, but it won’t get here until appeals on terms are settled by states asking for more money from Big Tobacco.
The money can’t be distributed until the so-called “80-80” rule is met: 80 percent of the settling jurisdictions have to agree to 80 percent of the funds being allocated before any state can collect its share of the $2.4 billion up-front payment made by tobacco companies last year.
Maryland will collect an estimated $4.4 billion over the next 25 years, the first annual payment of which will be $145 million made in the year 2000.
States cannot collect their shares until “state-specific finality” is reached by 42 states, which is 80 percent of the 52 jurisdictions involved in last year’s tobacco deal. Finality occurs when the state attorneys general agree with the state courts on settlement terms and funding, said Maureen M. Dove, the assistant attorney general and state deputy chief of litigation for tobacco deals.
“We (Maryland) can’t get finalization until at least one of them (larger states) is final,” Dove said. “Two of them together are enough to slow things down.”
The money comes from last year’s $206 billion settlement of lawsuits the states filed against tobacco companies seeking to recover the costs of treating sick smokers.
A total of 22 states have reached finality, 13 of which have officially notified the escrow agent of their settlement status, said Laurie Loveland, a liaison between the states in tobacco deals. As of Monday, these states combined make up 28.9 percent of the total $206 billion allocation from the tobacco industry. Five other states are awaiting term confirmation from their lawyers.
Appeals are underway in three states: New Jersey, New York and California. New Jersey and California are appealing on a fine legal intervention point, which is not affecting state finality. New York is the only state with an appeal on settlement terms prolonging its finality, Loveland said. There’s disagreement between some states and the tobacco industry as to whether finality of other populous states such as Michigan and Missouri is contributing to the delay in distributing funds.
“The absolute earliest we could hit (finality) is February 15,” Loveland said, but hitting that target is unlikely.
New York is trying to resolve internal money disagreements among Erie and Westchester counties and New York City.
“We really can’t predict what’s going to happen next, but it’s important we try to resolve the issue,” said Darren Dopp, communications director for New York Attorney General Eliot Spitzer.
Dopp said he does not foresee the end of New York’s appeals process in the next year, or possibly even next year.
“Sometimes it’s easier said than done,” he said.
Meanwhile, Maryland is waiting in the wings.
Gov. Parris N. Glendening didn’t include the money in his budget this year because state officials didn’t know when to expect preliminary payments. But funding for areas such as higher education and assistance to tobacco growers hinge on receipt of settlement payments.
Even if Maryland received money this year, it would not be used in the current budget, said Glendening’s spokesman Don Vandrey.
“Any revenue received above and beyond what was anticipated once you’ve got the budget approved and set goes into the general fund to be reallocated next year,” he said. “The state has some idea how it wants to apply those funds, but nothing’s been formalized. Until the settlement money comes through, we’ll have to assume we’ll proceed to go on with business as usual.”
Until that minimum of 80 percent is reached, the money is out of reach for at least another year.
“There will be big news if 80 percent sign on, but if they don’t, the money will be distributed on June 30, 2000,” Dove said. “Besides that, there doesn’t seem to be any other particular hang-ups.”