REPORT TITLE:
Tobacco Settlement Trust Fund


DESCRIPTION:
Creates trust fund to receive Hawaii's share of the attorneys
general master tobacco settlement agreement.  Prohibits
expenditures of principal; allows expenditures from trust income
for tobacco use prevention and education, and for tobacco-related
health needs.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
HOUSE OF REPRESENTATIVES                H.B. NO.1589       
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO HAWAII'S SHARE OF THE ATTORNEYS GENERAL MASTER
   TOBACCO SETTLEMENT AGREEMENT.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  On November 23, 1998, the attorneys general and
 
 2 other representatives of forty-six states, Puerto Rico, the U.S.
 
 3 Virgin Islands, the Northern Mariana Islands, Guam, and the
 
 4 District of Columbia signed an agreement with the five largest
 
 5 tobacco manufacturers (Brown & Williamson Tobacco Corporation,
 
 6 Lorillard Tobacco Company, Philip Morris Incorporated, R.J.
 
 7 Reynolds Tobacco Company, and Liggett & Myers), ending a four-
 
 8 year legal battle between the states and the industry that began
 
 9 in 1994 when Mississippi became the first state to file suit.
 
10 Four states (Florida, Minnesota, Mississippi and Texas) had
 
11 previously settled with tobacco manufacturers for
 
12 $40,000,000,000.  The agreement settles all antitrust, consumer
 
13 protection, common law negligence, statutory, common law, and
 
14 equitable claims for monetary, restitutionary, equitable, and
 
15 injunctive relief alleged by any of the settling states with
 
16 respect to the year of payment or earlier years and cannot be
 
17 modified in any way unless all the parties agree to the
 
18 modification.  The signing of the settlement agreement is just
 
19 the beginning of the rest of this story about tobacco, youth
 

 
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 1 access, and health.
 
 2      Over the next twenty-five years, states will receive over
 
 3 $206,000,000,000 from the settlement, but funds will not be
 
 4 available to states until June 2000.  Under the provisions of the
 
 5 agreement, states must begin implementation of the settlement
 
 6 agreement immediately.  States that had suits pending were
 
 7 required to begin actions to settle the suits and to get the
 
 8 consent decree implementing the settlement agreement filed by
 
 9 December 11, 1998.  The settlement establishes eight areas of
 
10 state legislation/regulation that the industry is prohibited from
 
11 lobbying against.
 
12      Federal legislation is not required to implement the
 
13 settlement agreement.  Among other things, the settlement
 
14 provides for:
 
15      (1)  Prohibiting youth targeting in advertising, marketing,
 
16           and promotions by:
 
17           (A)  Banning cartoon characters in advertising;
 
18           (B)  Restricting brand-name sponsorships of events with
 
19                significant youth audiences;
 
20           (C)  Banning outdoor advertising;
 
21           (D)  Banning youth access to free samples;
 
22           (E)  Setting minimum cigarette package size at twenty;
 
23           (F)  Creating a National Foundation ($250,000,000 over
 

 
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                                     H.B. NO.1589       
                                                        
                                                        

 
 1                next ten years) and a Public Education Fund
 
 2                ($1,450,000,000 between 2000-2003);
 
 3      (2)  Changing corporate culture by:
 
 4           (A)  Requiring the industry to make a commitment to
 
 5                reducing youth access and consumption;
 
 6           (B)  Disbanding tobacco trade associations;
 
 7           (C)  Restricting industry lobbying; and
 
 8           (D)  Opening industry records and research to the
 
 9                public;
 
10      (3)  Providing enforcement by:
 
11           (A)  Providing court jurisdiction for implementation
 
12                and enforcement; and
 
13           (B)  Establishing a state enforcement fund ($50,000,000
 
14                one-time payment);
 
15      (4)  Providing for attorneys' fees separate from the
 
16           payments to states;
 
17      (5)  Making financial payments of $206,000,000,000 to the
 
18           states over twenty-five years as follows:
 
19           (A)  Up-front payments - $12,742,000,000;
 
20           (B)  Annual payments, beginning April 15, 2000:
 
21                $183,177,000,000 through 2025;
 
22           (C)  Strategic contribution fund, 2008-2017:
 
23                $8,610,000,000;
 

 
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 1           (D)  National foundation ($250,000,000 over next ten
 
 2                years); 
 
 3           (E)  Public education fund (at least $1,450,000,000
 
 4                from 2000-2003);
 
 5           (F)  State enforcement fund ($50,000,000, one-time
 
 6                payment); and
 
 7           (G)  National Association of Attorneys General
 
 8                ($1,500,000,000 over the next ten years).
 
 9      According to an analysis by the National Conference of State
 
10 Legislatures, if there is any question about the legislative
 
11 appropriation of the settlement funds, the legislatures may want
 
12 to enact laws to clarify the treatment of the funds under state
 
13 law.  The settlement agreement is silent on that issue.  The
 
14 master settlement agreement does not earmark or restrict the
 
15 settlement funds; states will determine how the funds will be
 
16 spent.
 
17      Hawaii is scheduled to receive a total of $1,179,165,923.07
 
18 as its part of the settlement over the next twenty-five years.
 
19 The purpose of this Act is ensure that these moneys will be
 
20 expended prudently, and ensure against the temptation to use the
 
21 State's discretion to direct large amounts of the settlement
 
22 funds for various immediate uses given the State's current
 
23 depressed economic situation, by placing all settlement moneys
 

 
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 1 into a trust fund, prohibiting the expenditure of any of the
 
 2 settlement money principal for any purpose, and allowing only the
 
 3 expenditure of income from the trust fund.
 
 4      SECTION 2.  Chapter 321, Hawaii Revised Statutes, is amended
 
 5 by adding a new section to be appropriately designated and to
 
 6 read as follows:
 
 7      "321-     Hawaii tobacco settlement agreement trust fund;
 
 8 no expenditure of principal; duration; expenditure of trust fund
 
 9 income for tobacco-related health needs; rules.  (a)  There is
 
10 created within the treasury of the State, the Hawaii tobacco
 
11 settlement agreement trust fund, placed within the department of
 
12 health for administrative purposes to receive the State's share
 
13 of the attorneys general master tobacco settlement agreement of a
 
14 projected amount of $1,179,165,923.07 over twenty-five years.
 
15      (b)  Any other law to the contrary notwithstanding, no part
 
16 of the principal amount deposited into the trust fund shall be
 
17 expended for any purpose for a period of        years.  Only the
 
18 interest income from the trust fund shall be available for
 
19 expenditure for tobacco use prevention and education, and for
 
20 tobacco-related health needs."
 
21      SECTION 3.  New statutory material is underscored.
 

 
 
 
 
 
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 1      SECTION 4.  This Act shall take effect upon its approval.
 
 2 
 
 3                           INTRODUCED BY:  _______________________