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KS: Where will tobacco money go?

Kansas is getting more than $1 million in tobacco-settlement money from a Canadian cigarette maker, the state attorney general says.

But whether the intended recipients see any of that money is unclear.

Kansas Attorney General Derek Schmidt, a Republican, announced Thursday that Grand River Enterprises, a Canadian cigarette maker, agreed to pay Kansas $1.08 million to settle two law suits. The suits stem from massive anti-tobacco settlement that big U.S. cigarette makers and the attorneys general of 46 states, including Kansas, reached in 1998.

State attorneys general in 1998 theoretically pursued big tobacco companies for money to help fund anti-smoking efforts and to help pay smokers' medical costs, but the agreement fails to specify how states must use money they actually receive.

Kansas gets about $56 million in tobacco company payments annually, according to the Kansas Legislative Research Department. That number has dropped from a peak $66 million in 2009 as tobacco sales declined. The state collects about $99 million in cigarette and tobacco tax revenues as well, department reports show.

But only about $1 million of that is spent to curb smoking, say statisticians at the Campaign for Tobacco Free Kids, an anti-smoking group in Washington, D.C. That's about 3 percent of what the U.S. Centers for Disease Control and Prevention recommends, says the Tobacco Free Kids website.

Kansas theoretically spends its tobacco money on kids.

The 1999 Legislature voted to place the expected decades of big tobacco-settlement money into a trust fund, called the Kansas Endowment for Youth, or KEY. The plan was for Kansas Public Employees Retirement System investment managers to run the KEY trust fund, providing money for a Children's Initiative Fund, and helping to bankroll children's programs around the state.

That hasn't worked, legislative researchers say in their latest Briefing Book for state lawmakers. Falling tobacco money in recent years have state legislators dipping into the fund to plug other budget holes, the briefing book reports.

"They've pulled more than $137 million out of KEYs funds over the years," said Shannon Cotsoradis, president of Kansas Action for Children, a Topeka advocate for children's programs.

"But I'm hopeful that this will change," Cotsoradis said. "According to the law, any of this money beyond the Attorney General's legal costs must go into KEY. Now the matter is in his hands."

The Kansas Attorney General's office did not return phone calls Friday.

The big tobacco agreement called for the nation's largest tobacco companies to provide more than $200 billion to help pay health-care costs for smokers and to fund a variety of anti-smoking programs. Smaller tobacco companies such as Grand River, an enterprise owned by Iroquois tribes in Ontario, were ordered to pay into 25-year escrow accounts for future distribution to states.

Grand River, a major producer of discount brand cigarettes for U.S. markets, alleged the escrow requirement violated antitrust laws and the U.S. Constitution, and declined to pay into the escrow funds. The company ended those claims with the settlement announced Thursday and agreed to make the escrow payments.

"This is a positive outcome to a long-running case," Schmidt said in a statement Thursday.

The agreement calls for Grand River to make $672,000 in back payments into a 25-year escrow account Kansas has established to pay smokers' claims for damages and to repay Kansas $336,000 in penalties and reimbursement for its legal costs. Schmidt said that money would be returned to the state general fund.



Published: Friday, July 13, 2012

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