Vermont will receive an extra $10.5 million this year under a settlement with the tobacco industry that was reached 22 years ago, Attorney General TJ Donovan announced Monday.
At a press conference outside the civil court in Burlington, Donovan and several representatives from the office’s Public Protection Division gave some background about the multi-million dollar settlement, which Donovan prefaced as being confusing and complicated.
Donovan said the $10.5 million stems from a 1998 “master settlement agreement” between 46 state attorneys general and five major tobacco companies under which tobacco companies make yearly payments in perpetuity.
The suit resolved years of consumer protection lawsuits over the health effects of smoking and the marketing of cigarettes to youth.
Under the deal, Vermont sees yearly payments from the tobacco industry, based on the number of cigarettes sold in Vermont. This year, those payments brought Vermont $24 million.
In exchange for the millions of dollars the five cigarette companies pay under the master settlement agreement, Vermont is required to “diligently enforce” laws against the smaller cigarette companies that did not sign the agreement.
Each year, the tobacco companies have the opportunity to challenge whether the state did diligently enforce those laws. If the state were to lose that challenge in arbitration, it would miss out on a large portion of the millions of dollars received in the master settlement agreement that year.
In 2018, the state settled the last 14 years of arbitration disputes, resulting in a $28 million payment from tobacco companies to the state.
As part of the 2018 deal, Vermont negotiated for the option to settle diligent enforcement disputes for 2018 to 2022 on “favorable terms” to Vermont if certain criteria were met — primarily, if the settlement would be tax deductible. That criteria was recently met.
As such, the disputes for 2018 to 2022 are now settled, resulting in the additional $10.5 million for the state.
Vermont, in theory, could receive more money by fighting over and winning the disputes each year, which would be a long and costly process, but instead chose to settle, for the sake of “finality, certainty, and efficiency,” according to Chris Curtis, chief of the Public Protection Division of the Attorney General’s Office.
Curtis said without a settlement, getting this money would have taken years to come through — which he said just wasn’t a good deal for Vermont, especially during a pandemic, when the state could use resources now.
“We’d have to wait potentially decades,” he said. “Arbitration periods are just so darn long.”
Donovan said his philosophy on litigation is the same.
“I’m a bird in the hand guy,” Donovan said. “We need money, let’s settle it. You want to litigate cases, we’ll be here for years. We’ve got to bring money to our state, we’ve got to do it in an efficient way, we’ve got to do it in a smart way — not just on this case, on any case. We can’t be afraid to compromise.”
The settlement gets about 75 cents on the dollar for Vermont, which Donovan said is favorable when compared to similar settlements in other states, which are often closer to 50 cents on the dollar from cigarette companies.
The money will go towards public health spending in Vermont, including education and awareness about cigarettes. Donovan said the specifics on how the money will be spent, though, are up to the Legislature.
“It’s important that Vermont continue to be a leader on tobacco enforcement to make sure that we drive down those numbers, educate youth about the dangers of tobacco use, the dangers of vaping, the dangers of opiates,” Donovan said. “It is time that we continue to say, unequivocally, loudly and clearly that public health is public safety.”
