The Missouri General Assembly has been a great protector of a select group of cigarette manufacturers.
The state’s lowest-in-the-nation tax on cigarette sales is only the beginning. Lawmakers have long allowed the makers of off-brand smokes to maintain a competitive advantage over larger cigarette producers.
The legislators now appear ready to sacrifice a hefty amount of funding for schools, mental health and other state services so their friendly manufacturers can continue to sell cheap cigarettes.
This coddling of off-brand tobacco manufacturers shines an ugly light on a legislature plagued by weak leadership and unwilling to put the good of the state above even the most unhealthy of special interests.
The problem dates back to 1998, when four “Big Tobacco” companies agreed to make annual payments to most states in exchange for being exempt from future lawsuits over the health risks of smoking. Other tobacco companies signed on later.
Manufacturers that chose not to participate are required to pay into state escrow accounts, in anticipation of a future legal judgment. But those manufacturers quickly learned they could reduce their obligation, and even get money back, by concentrating sales in just a few states.
Most states passed legislation closing that loophole, which raised the prices of the off-brand cigarettes. But not Missouri.
Big Tobacco, of course, objects to making annual payments to a settlement fund when competitors are paying less in escrow fees and underselling their products.
Last fall, a three-judge arbitration panel ruled in favor of 30 cigarette makers who had made claims against Missouri and several other states.
Paying for mistake
Now the state will have to atone for its cowardly legislature. Officials expect Missouri’s annual tobacco settlement payment to be cut by more than 50 percent when it is received next month.
That’s about $69 million that will go to Big Tobacco instead of into Missouri’s Medicaid program. Budget writers in the legislature are trying to figure out how to cover that loss, contemplating cuts to education and social services.
It gets worse. The arbitration ruling was only for 2003. Multiplied over the ensuing 10 years, the damages to the state budget could be huge.
Attorney General Chris Koster has warned lawmakers for years of this day of reckoning. Unless it closes the loophole allowing small manufacturers to avoid full escrow payments, Missouri is likely to lose future arbitration, he said.
The arbitration panel found that tobacco manufacturers who weren’t part of the master settlement sold 432 million cigarettes in Missouri in 2003, but deposited escrow funds for only 201 million cigarettes.
The judges criticized Gov. Jay Nixon, the attorney general at the time, for not filing a single lawsuit to compel the payments. To his credit, though, Nixon as attorney general consistently urged lawmakers to come up with a permanent legislative fix.
But legislators apparently can’t bring themselves to take an action that would result in a price hike for some cigarettes and disappoint some reliable campaign contributors.
Their impotence is so pronounced that a group with ties to St. Louis multimillionaire Rex Sinquefield is working on a statewide ballot issue to fix the loophole. That would be one of the more constructive measures Team Sinquefield has put forth.
However, it shouldn’t take a ballot issue to do the right thing in Missouri. The legislature’s job is to solve problems.
Members need to stop placing the interests of cigarette companies above the fiscal and physical health of the state they represent.
Copyright The Kansas City Star. Reprinted with permission.