State AG Files Motion Seeking $170M in Tobacco Funds

Attorney General Kathleen G. Kane announced her filing of a motion to maintain full funding from the multi-state Tobacco Master Settlement Agreement (MSA).  An arbitration panel recently ruled that tobacco companies could withhold a significant portion of the funding from Pennsylvania.

The motion, filed in the Philadelphia Court of Common Pleas, seeks to overturn an arbitration panel decision which found that in 2003 Pennsylvania did not "diligently enforce" certain laws requiring the collection of taxes and other payments from certain tobacco companies that did not sign the 1998 MSA.

If the panel's decision stands, Pennsylvania's 2014 MSA payment could be reduced by more than $170 million, forcing cutbacks to a wide variety of smoking cessation, medical research and health programs across the Commonwealth.

"Tobacco settlement funds assist with promoting and sustaining a large variety of health initiatives for the benefit of all Pennsylvanians," said Attorney General Kane. "We will aggressively pursue all avenues - both in court and through legislation - to avoid the unjust reduction of MSA funding so that the Commonwealth can continue to deliver these essential programs."

The Commonwealth's motion notes that Pennsylvania had an identical collection rate to Ohio, which the panel found was diligent. Moreover, the panel penalized the Commonwealth for its decision to not tax roll-your-own tobacco, while at the same time finding that Oregon had no obligation to do so.

"The arbitration panel's decision penalizes Pennsylvania for factors the panel clearly allowed for other states," said Attorney General Kane. "Whether the panel failed to follow a common set of standards, or exhibited bias against the Commonwealth, it was wrong and we cannot permit this unjust decision to stand."

The Commonwealth will be represented in the court proceeding by Orrick, Herrington & Sutcliffe, LLP, which has been retained following consultation with the Governor's office and the leadership of each of the four caucuses in the General Assembly.

"I am gratified by the level of strong, bipartisan support my office has received from the Governor's office and the House and Senate leadership teams," Attorney General Kane said. "We will work together closely to keep the citizens of this Commonwealth updated on our coordinated effort to keep our MSA funding intact."

The Commonwealth's motion to vacate the final arbitration award can be read in full here.