Agreement Resolves Protracted Tobacco Settlement Dispute

Jun 12, 2014

State officials have settled a decade’s worth of disputed claims dealing with Kentucky’s tobacco settlement money.

Attorney General Jack Conway and Gov. Steve Beshear announce new settlement with tobacco companies
Attorney General Jack Conway and Gov. Steve Beshear announce new settlement with tobacco companies

In 1998, Kentucky entered into an agreement with major tobacco companies that required them to pay hundreds of millions of dollars to compensate the state for smoking-related healthcare costs. But a 2013 court ruling that found the state had not fulfilled its end of the bargain by properly policing nonparticipating cigarette manufacturers meant that the payments could be cut in half – robbing the state of close to $50 million a year.

Challenges to the state’s enforcement efforts began in 2003 and have since become a complex, protracted legal battle, but Thursday Attorney General Jack Conway said a new agreement will clear the way for payments to resume in full.

"Over the last seven months, I've been confidentially negotiating with the various tobacco companies to see if there was a post-arbitration resolution to the situation we both found ourselves in, and we managed to get the train back on the tracks," he said.

Under the deal, Kentucky will receive $110 million in disputed payments in addition to $48 million already received this fiscal year. By statue, tobacco settlement money can only fund agriculture, health, and early childhood education programs.

"This settlement will allow us to restore cuts requiring in the current budget when our 2014 payment was lower than expected, and it will make it more probable that the programs in the upcoming two years will be fully funded," Gov. Steve Beshear told a press conference.

Kentucky joins 22 other states that have settled similar disputes with the tobacco companies.