Two Indiana state representatives say a federal arbitration panel ruling will cost Indiana more than $60 million in tobacco settlement money. Charlie Brown (D-3) and Greg Porter (D-96) say the panel ruled the state was not in compliance with the terms of a 1998 settlement.

October 17, 2013

News Release

Indianapolis, Ind. — State Reps. Charlie Brown (D-Gary) and Gregory W. Porter (D-Indianapolis) said today that a federal arbitration panel ruling issued last month will cause Indiana to lose more than $60 million in tobacco settlement money in 2014, a decision that will have a disastrous impact upon numerous social and educational programs.

A three-member Tobacco Master Settlement Agreement Board of Arbitration found that Indiana was one of five states found not to be diligent in compelling compliance with the terms of the 1998 tobacco settlement from those cigarette manufacturers that did not sign the original agreement.

While the ruling applies to payments made in 2003, Porter and Brown said its impact will be felt in a $63 million reduction in the tobacco settlement money that Indiana was scheduled to receive at the beginning of next year. Indiana will receive $68 million from the settlement instead of $131 million.

“We were informed of this decision this week by the Indiana Attorney General’s office,” said Porter, ranking Democrat on the House Ways and Means Committee. “Obviously, this will certainly harm our state's ability to fund any number of programs designed to promote a healthy Indiana.

“Unlike other states that used tobacco settlement dollars for things like highway funding, Indiana was diligent in using these dollars on health care issues,” he continued. “Now it is safe to say many of those initiatives are at risk.”

Brown, ranking Democrat on the House Public Health Committee and author of the legislation that defined uses for the tobacco settlement allocations, said those funds have been used to pay for programs designed to stop smoking, help support community health centers, provide matching money for the Children's Health Insurance Program (CHIP), and finance sickle cell anemia research.

“What is disturbing about this decision is that it appears to be tied to our state’s complete failure to pursue compliance from those cigarette manufacturers that chose not to be a part of the original settlement,” Brown said. “Indiana was asked to make an effort to get companies that did not sign the agreement to make payments into an escrow fund if they chose to do business here. Obviously, they didn’t try hard enough.”

Porter and Brown said they have yet to hear from officials at the State Budget Agency on how they will handle the shortfall in revenue.

“What makes this even more serious is that the arbitration panel's ruling only covers payments made in 2003,” Porter noted. “The panel has yet to rule on similar sanctions from 2004 through 2012. There is a very real potential here that Indiana is facing multi-million dollar sanctions over several years, which will have a disastrous impact on many of these programs.”

Brown said, “This administration and the last one have not spent all the settlement dollars we have received, but this $60 million loss will place at risk many programs that affect the lives of thousands of Hoosiers. Our governor must tell us what he intends to do about this mess. We need to know if these federal dollars will be made up through our multi-billion dollar surplus, or whether our state will simply do nothing and watch years of good efforts go down the drain.”

Source: Offices of Indiana State Representatives Charlie Brown and Gregory Porter

Story Continues Below