Kane seeks to restore $170 million in Pa. tobacco funds

HARRISBURG - Pennsylvania Attorney General Kathleen G. Kane on Thursday asked a Philadelphia court to overturn a ruling that stripped the state of nearly $170 million in tobacco settlement payments.

In a motion filed in Common Pleas Court, Kane argued that an arbitration panel's ruling last month that penalized the state for failing to "diligently enforce" laws requiring the collection of taxes and other payments from tobacco companies was unfair.

"The arbitration panel's decision penalizes Pennsylvania for factors the panel clearly allowed for other states," Kane said in a statement.

For instance, she said, Pennsylvania had an identical tax-collection rate to Ohio, which the panel found was diligent. The panel also penalized the commonwealth for not taxing roll-your-own tobacco, while at the same time finding that Oregon had no obligation to do so.

As a result of the panel's decision the state stands to lose roughly $170 million - or 60 percent - of the $320 million in funding that supports smoking-cessation, medical research, and other health programs.

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

The settlement with four of the largest tobacco manufacturers signed 15 years ago stipulated that 46 states and the District of Columbia were to receive an estimated $206 billion over 25 years.

The panel's ruling on settlement disputes involved 15 states. Nine won favorable decisions over the money, while the panel found six - including Pennsylvania - failed to properly enforce escrow provisions involving "nonparticipating manufacturers."