State wins ruling on tobacco accord

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HARRISBURG -- A Philadelphia court Thursday reduced by two-thirds the loss in tobacco settlement payments Pennsylvania would sustain this year under an arbitration panel decision.

The arbitration panel found that in 2003 Pennsylvania did not "diligently enforce" laws requiring the collection of taxes and other payments from tobacco companies that did not sign the Tobacco Master Settlement Agreement, a 1998 accord between the attorneys general of 46 states and four of the largest cigarette manufacturers.

The panel also held that Pennsylvania would be responsible for financial obligations of states that had entered into a 2013 settlement agreement, according to the state Office of Attorney General. On Thursday, the Philadelphia Court of Common Pleas found the 1998 agreement does not permit such a transfer of financial obligation.

"Effectively, we're getting a credit that we wouldn't have to carry their liability," first deputy attorney general Adrian King said.

The attorney general's office estimated Pennsylvania would have lost approximately $180 million from a payment this year of about $335 million. Instead, the state's payment will only be reduced by about $60 million.

Brian May, a spokesman for cigarette manufacturer Philip Morris USA, said: "We disagree with the court's decision today to interfere with the arbitration panel's decision." He said he could not comment further.

In November 2013, when Attorney General Kathleen Kane filed a challenge to the arbitration decision, Gov. Tom Corbett's budget office said it would freeze discretionary funds from the settlement, reducing funding for health research and for uncompensated-care payments to hospitals.

Jay Pagni, spokesman for Mr. Corbett, said the ruling Thursday is a "positive first step" toward restoring funding for the health-related programs paid for through the tobacco settlement agreement.

"We will be closely watching any further legal proceedings and make a determination following the completion of those," he said.

Karen Langley: or 717-787-2141 or on Twitter @karen_langley.

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