As Tobacco Master Settlement Agreement Turns 20, Beshear Says Kentucky on Pace to Receive $2.5 billion Payout

Andy Beshear

As the Tobacco Master Settlement Agreement or MSA turns 20 on Nov. 23, Attorney General Andy Beshear says Kentucky is on pace to collect nearly $2.5 billion.

Since the first payment in 1999, Kentucky has already collected more than $2 billion under the agreement reached by the tobacco industry and state attorneys general in 1998.

“For 20 years the landmark Master Settlement Agreement has made a positive impact on the Commonwealth, supporting early childhood education, health programs, cancer research, and helping to aid our farmers and create sustainable farm-based businesses,” Beshear said. “These funds are critical to our state, and the MSA is a textbook example of the importance of attorneys general to hold any industry accountable that would harm our people.”

Kentucky received $102 million in April and is on pace to collect another $5 million over the next five years, Beshear said, bringing the total for Kentucky to nearly $2.5 billion.

On behalf of the state, Beshear’s office monitors and enforces the terms of the Master Settlement Agreement (MSA) and the related statutes, in cooperation with other agencies including the Department of Revenue and the Office of State Budget Director.

Each state determines how the MSA funds are distributed and spent.

In Kentucky, the General Assembly has designated half of the MSA funds be invested in agricultural diversification through grants issued by the Governor’s Office of Agriculture Policy, which administers the Kentucky Agriculture Development Fund.

Under the MSA, the tobacco companies agreed to make annual payments, in perpetuity, worth approximately $208 billion to states and territories that are signatories to the agreement.

Since 1998, tobacco companies have had to compensate states for some of the medical costs associated with tobacco-related illnesses and restrict advertising and promotion of cigarettes in the United States. The payments are determined according to a formula calculated, in part, by the number of cigarettes sold by companies that agreed to join the settlement.

The three largest cigarette manufacturers – Philip Morris USA, RJ Reynolds and Lorillard (the latter two now merged as Reynolds American) – pay most of the MSA payment. The MSA payments will continue as long as traditional cigarettes are sold by the member companies.

The Tobacco Settlement Agreement Fund Oversight Committee oversees the determinations on grant applications from the agricultural fund. Kentucky’s additional MSA revenues are used to help improve the health outcomes of Kentucky children and families.

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