ANNAPOLIS – In an effort to protect cigarette makers involved in last year’s national tobacco settlement, key legislators have proposed a bill that would set up an emergency fund to cover payments to the state if the tobacco industry’s profits drop.
The bill protects tobacco companies by requiring non-settling cigarette makers to contribute to a rainy day fund and ensures payments to states in the event cigarette sales and profits fall.
If the General Assembly does not pass this legislation, Maryland could receive up to 65 percent less in settlement money than anticipated, according to the state comptroller’s office.
The deal struck by 46 state attorneys general and Big Tobacco last November mandated that state governments pass legislation to protect settling companies from competitors. Philip Morris, Lorillard, Brown & Williamson and R.J. Reynolds agreed to pay the states about $206 billion over the next 25 years as long as their market shares do not drop below 99 percent of current levels.
“If shares of tobacco companies go down, that’s less money states will get,” said Susak Koniak, a law professor at Boston University. Koniak said requiring this legislation in the master deal is a type of blackmail, and states are pressured into passing such bills if they don’t want to lag behind in receiving their share of settlement money.
“Once they got them over the line where they’re (states) hooked on tobacco money … then every other state has an interest in making sure that the other state doesn’t back down,” Koniak said.
Maryland’s bill requires non-settling cigarette companies to make deposits into an escrow account. The amounts vary by how many cigarettes the company sells per year.
“I think every state will pass this legislation – that’s my guess, because there’s blackmail in there,” said Dick Daynard, executive director of Northeastern University’s Tobacco Liability Project. States that decline to pass such laws would likely be penalized should tobacco company market share decline, he said.
“Since the dollar amount would be large, this could wipe the states out of any money they would receive,” he said.
On March 8, the National Association of Attorneys General awarded Maryland a $268 million bonus for its efforts to settle the deal. That’s in addition to the expected $4.4 billion the state should receive over the next 25 years. Figured into that bonus was whether states would pass legislation to protect cigarette manufacturers.
Maryland is passing such a law, said Assistant Attorney General and tobacco litigator Maurine M. Dove in an earlier interview.
The House bill, sponsored by Speaker Casper R. Taylor, D-Allegany, was passed with amendments last Wednesday, 123-11. All opposed were Republicans.
“What it means now, is we’re in bed with the big tobacco companies and we have an obligation to protect them, so they can protect our interests,” said Minority Leader Robert H. Kittleman, R-Montgomery. “That’s a fact of life, but somehow I don’t like it.”
Kittleman said it’s protectionism and the idea of a tax that most Republicans don’t like.
“Whenever the government gets involved in free trade and starts milking it here, then there … then you get all kinds of problems,” he said. “It’s a consequence of that tobacco settlement. I just don’t like the whole thing.” Meanwhile, companion legislation in the Senate is still forging ahead.
Sen. Leo Green, D-Prince George’s, introduced an identical bill in the House Environmental Matters Committee Tuesday. Green’s bill received a favorable vote from the Senate Friday, 42 to 1.
“A majority of the participating states have introduced and are considering … the legislation at this time,” Green said in a prepared statement. “It is crucial that we enact this legislation to protect Maryland’s interests.”